As filed on April 11, 1996
File No. 33-70154
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
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Post-Effective Amendment No. 4 [X]
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 5 [X]
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INVESCO VARIABLE INVESTMENT FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
7800 E. Union Avenue, Denver, Colorado 80237
(Address of Principal Executive Offices)
P.O. Box 173706, Denver, Colorado 80217-3706
(Mailing Address)
(303) 930-6300
(Registrant's Telephone Number)
Glen A. Payne, Esq.
7800 E. Union Avenue
Denver, Colorado 80237
(Name and Address of Agent for Service)
Copies to:
W. Randolph Thompson, Esq.
Of Counsel, Jones & Blouch L.L.P.
1025 Thomas Jefferson St., N.W., Suite 405 West
Washington, D.C. 20007
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Approximate Date of Proposed Public Offering: As soon after the effective date
of this registration statement as is practicable.
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
- ---
X on May 1, 1996, pursuant to paragraph (b)
- ---
60 days after filing pursuant to paragraph (a)(1) on __________,
- --- pursuant to paragraph (a)(1).
75 days after filing pursuant to paragraph (a)(2) ___ on _______
- --- pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
- --- previously filed post-effective amendment.
Registrant has previously elected to register an indefinite number of shares of
its common stock pursuant to Rule 24f-2 under the Investment Company Act.
Registrant's Rule 24f-2 Notice for the fiscal year ended December 31, 1995, was
filed on or about February 23, 1996.
Page 1 of 167
Exhibit index is located at page 95
<PAGE>
INVESCO VARIABLE INVESTMENT FUNDS, INC.
CROSS-REFERENCE SHEET
Form N-1A
Item Caption
--------- -------
Part A Prospectus
1.............................. Cover Page
2.............................. Summary
3.............................. Financial Highlights; Performance
Information
4.............................. Cover Page; Summary; Investment
Objectives and Policies; Risk
Factors; Investment Restrictions
5.............................. Summary; Management; Risk Factors
5A............................. Not Applicable
6.............................. Cover Page; Summary; Tax Status,
Dividends and Distributions;
Additional Information
7.............................. Purchases and Redemptions
8.............................. Purchases and Redemptions
9.............................. Not Applicable
Part B Statement of Additional Information
10.............................. Cover Page
11.............................. Table of Contents
12.............................. Not Applicable
13.............................. Investment Policies; Investment
Restrictions; Appendix A
14.............................. Management
15.............................. Additional Information
16.............................. Management; Additional
Information
17.............................. Portfolio Brokerage
18.............................. Additional Information
-i-
<PAGE>
Form N-1A
Item Caption
19.............................. How Shares are Valued;
Redemptions; Financial Statements
20.............................. (Prospectus: Tax Status,
Dividends and Distributions)
21.............................. (Prospectus: Purchases and
Redemptions; Management)
22.............................. Performance
^
Part C Other Information
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
-ii-
<PAGE>
Prospectus May 1, 1996
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO Variable Investment Funds, Inc. (the "Company"), a Maryland
corporation, is an open-end management investment company that offers shares of
common stock of four diversified investment portfolios (the "Funds"): the
INVESCO VIF - Industrial Income Portfolio (the "Industrial Income Fund"), the
INVESCO VIF - Total Return Portfolio (the "Total Return Fund"), the INVESCO VIF
- - High Yield Portfolio (the "High Yield Fund"), and the INVESCO VIF -Utilities
Portfolio (the "Utilities Fund"). The Company'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
Participating Insurance Companies. The Funds have the following investment
objectives:
Industrial Income Fund:
to seek the best possible current income while following sound investment
practices. Capital growth potential is an additional, but secondary,
consideration in the selection of portfolio securities. The Industrial
Income Fund seeks to achieve its investment objective by investing in
securities which will provide a relatively high yield and stable return and
which, over a period of years, also may provide capital appreciation.
Total Return Fund:
to seek a high total return on investment through capital appreciation and
current income. The Total Return Fund seeks to achieve its investment
objective by investing in a combination of equity securities (consisting of
common stocks and, to a lesser degree, securities convertible into common
stock) and fixed income securities.
High Yield Fund:
to seek a high level of current income by investing substantially all of its
assets in lower rated bonds and other debt securities and in preferred
stock. See "Risk Factors" for a description of the risks involved in
investing in lower rated bonds. The Fund pursues its investment objective
through investment in a variety of long-term, intermediate-term, and
short-term bonds. Potential capital appreciation is a factor in the
selection of investments, but is secondary to the Fund's primary objective.
<PAGE>
Utilities Fund:
to seek capital appreciation and income. The assets of the Utilities Fund
are invested primarily in equity securities of companies principally engaged
in business as public utilities.
This Prospectus sets forth concisely the information about the Funds that a
prospective purchaser should know before purchasing a variable contract from a
Participating Insurance Company or allocating contract values to one or more of
the Funds. Please read this Prospectus and retain it for future reference.
Additional information about the Funds has been filed with the Securities and
Exchange Commission and is available upon request by writing INVESCO Funds
Group, Inc., Post Office Box 173706, Denver, Colorado 80217-3706, by calling
1-800-525-8085, or by contacting a Participating Insurance Company and
requesting the "Statement of Additional Information for INVESCO Variable
Investment Funds, Inc." (the "Statement of Additional Information"). The
Statement of Additional Information dated May 1, 1996, is incorporated by
reference into this Prospectus.
THE HIGH YIELD FUND INVESTS PRIMARILY IN LOWER RATED BONDS, COMMONLY KNOWN AS
"JUNK BONDS." INVESTMENTS OF THIS TYPE ARE SUBJECT TO GREATER RISKS, INCLUDING
DEFAULT RISKS, THAN THOSE FOUND IN HIGHER RATED SECURITIES. PURCHASERS SHOULD
CAREFULLY ASSESS THE RISKS ASSOCIATED WITH AN INVESTMENT IN THE HIGH YIELD FUND.
SEE "INVESTMENT OBJECTIVES AND POLICIES" AND "RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. THE SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION. THE SHARES
OF THE FUNDS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY..................................................................... 7
FINANCIAL HIGHLIGHTS........................................................ 9
INVESTMENT OBJECTIVES AND POLICIES.......................................... 13
RISK FACTORS................................................................ 18
INVESTMENT RESTRICTIONS..................................................... 27
MANAGEMENT.................................................................. 27
PURCHASES AND REDEMPTIONS................................................... 32
TAX STATUS, DIVIDENDS AND DISTRIBUTIONS..................................... 33
PERFORMANCE INFORMATION..................................................... 34
ADDITIONAL INFORMATION...................................................... 36
APPENDIX.................................................................... 38
<PAGE>
SUMMARY
The Company is a registered, open-end management investment company that was
organized as a Maryland corporation on August 19, 1993, and is currently
comprised of four diversified investment portfolios ("Funds"), the INVESCO VIF-
Industrial Income Portfolio, the INVESCO VIF - Total Return Portfolio, the
INVESCO VIF - High Yield Portfolio, and the INVESCO VIF - Utilities Portfolio.
Additional portfolios may be created from time to time. The overall
supervision of each Fund is the responsibility of the Company's board of
directors.
The Company is intended to be a funding vehicle for variable annuity
contracts and variable life insurance contracts to be offered by separate
accounts of certain life insurance companies ("Participating Insurance
Companies"). Fund shares are not available for purchase other than through the
purchase of such contracts. The variable annuity and variable life insurance
contracts are described in separate prospectuses of the Participating Insurance
Companies (the "Separate Account Prospectuses"). The Company assumes no
responsibility for the Separate Account Prospectuses. A contract owner should
refer to the Separate Account Prospectuses for information on how to purchase or
surrender a contract, make partial withdrawals of contract values, allocate
contract values to one or more of the Funds, or change existing allocations
among investment alternatives, including the Funds.
Each Fund has its own distinct investment objective. There is, of course, no
guarantee that any Fund will achieve its investment objective. The Industrial
Income Fund seeks to attain its investment objective by investing in securities
which will provide a relatively high yield and stable return and which, over a
period of years, also may provide capital appreciation, including
dividend-paying common stocks, convertible bonds, preferred stocks and debt
securities. The Total Return Fund seeks to attain its investment objective by
investing in a combination of equity securities and fixed income securities;
ordinarily, its investment portfolio will be comprised of at least 30% equity
securities and at least 30% debt securities, with the remaining 40% allocated
according to business, economic and market conditions. The High Yield Fund seeks
to attain its investment objective by investing substantially all of its assets
in lower rated bonds and other debt securities and in preferred stock. See "Risk
Factors" for a description of the risks involved in investing in lower rated
bonds. The Utilities Fund seeks to attain its investment objective by investing
primarily in securities of companies principally engaged in business as public
utilities, which may be either established, well-capitalized companies or newly
formed, small capitalization companies. A discussion of each Fund's investment
objective and policies is provided below under the caption "Investment
Objectives and Policies."
Various types of risks are involved with each Fund. Each Fund may lend
portfolio securities and may enter into repurchase agreements with respect to
debt instruments eligible for investment by that Fund. Each Fund may invest up
to 15% of its net assets in illiquid securities. Each Fund also may invest up to
25% of its total assets directly in foreign securities, which present certain
additional risks not associated with investments in domestic companies and
markets. Securities of Canadian issuers and securities purchased by means of
American Depository Receipts ("ADRs") are not subject to this 25% limitation.
The High Yield Fund may invest without limit, and the Industrial Income Fund may
invest up to 15% of its total assets, in lower-rated debt securities ^ that
<PAGE>
present a greater risk of default and have prices ^ that fluctuate more than
those of higher-rated securities. The Utilities Fund is subject to risks related
to the uncertainties to which the gas and electric public utilities industries
are subject, including difficulties in obtaining adequate financing, government
regulation of investment return, environmental issues, prices of fuel for
electric generation, availability of natural gas, and risks associated with
nuclear power facilities. Each of the Funds may invest in options and futures
contracts, each of which presents special risks. These and other risks are
discussed below under the caption "Risk Factors."
INVESCO Funds Group, Inc. ("INVESCO"), the Funds' investment adviser, is
primarily responsible for providing the Company with various administrative
services and supervising the Company's daily business affairs. Portfolio
management is provided to each Fund by its sub- adviser (referred to
collectively with INVESCO as ^"Fund Management"). INVESCO Trust Company
("INVESCO Trust") serves as sub-adviser to the Industrial Income, High Yield and
Utilities Funds. INVESCO Capital Management, Inc. ("ICM") serves as sub-adviser
to the Total Return Fund. Each Fund pays INVESCO an advisory fee for the
management of its investments and business affairs. A discussion of these fees
and additional information about INVESCO, INVESCO Trust and ICM are provided
below under the caption "Fund Management."
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
The following information has been audited by Price Waterhouse LLP,
independent accountants. This information should be read in conjunction with the
audited financial statements and the Report of Independent Accountants thereon
appearing in the Company's 1995 annual report to shareholders which is
incorporated by reference into the Statement of Additional Information. Both
are available without charge by contacting INVESCO Funds Group, Inc. at the
address or telephone number shown on the cover page of this Prospectus, or by
contacting a Participating Insurance Company.
<TABLE>
<CAPTION>
Year Period Year Period
Ended Ended Ended Ended
December 31 December 31 December 31 December 31
----------------------------------- -----------------------------
1995 1994^ 1995 1994
High Yield Fund Industrial Income Fund
PER SHARE DATA
<S> <C> <C> <C> <C>
Net Asset Value - Beginning of Period $10.01 $10.00 $10.09 $10.00
----------------------------------- -----------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.55 0.05 0.19 0.03
Net Gains on Securities
(Both Realized and Unrealized) 1.43 0.01 2.76 0.09
----------------------------------- -----------------------------
Total from Investment Operations 1.98 0.06 2.95 0.12
----------------------------------- -----------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.55 0.05 0.20 0.03
Distributions from Capital Gains 0.40 0.00 0.26 0.00
----------------------------------- -----------------------------
Total Distributions 0.95 0.05 0.46 0.03
----------------------------------- -----------------------------
Net Asset Value - End of Period $11.04 $10.01 $12.58 $10.09
=================================== =============================
TOTAL RETURN 19.76% 0.60%* 29.25% 1.23%*
RATIOS
Net Assets - End of Period ($000 Omitted) $5,233 $624 $8,362 $525
Ratio of Expenses to Average Net Assets# 0.97%@ 0.74%~ 1.03%@ 0.79%~
Ratio of Net Investment Income to
Average Net Assets# 8.79% 2.72%~ 3.50% 1.69%~
<PAGE>
Portfolio Turnover Rate 310% 23%* 97% 0%*
<FN>
^For the High Yield and Industrial Income Funds, from May 27, 1994 and
August 10, 1994, respectively, commencement of investment operations, to
December 31, 1994.
> Total return does not reflect expenses that apply to the related insurance
policies, and inclusion of these charges would reduce the total return for the
periods shown.
* These amounts are based on operations for the period shown and, accordingly,
are not representative of a full year.
# Various expenses of the High Yield and Industrial Income Funds were
voluntarily absorbed by INVESCO for the year ended December 31, 1995 and the
period ended December 31, 1994. If such expenses had not been voluntarily
absorbed, the ratio of expenses to average net assets would have been 2.71% and
30.38% for High Yield Fund and 2.31% and 32.55% for Industrial Income Fund,
respectively, and the ratio of net investment income to average net assets would
have been 7.05% and (26.92%) for High Yield Fund and 2.22% and (30.07%)for
Industrial Income Fund, respectively.
@ Ratio reflects Total Expenses, less expenses absorbed by INVESCO, prior to a
reduction of custodian fees pursuant to an expense offset arrangement.
~ Annualized
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Period Year Period
Ended Ended Ended Ended
December 31 December 31 December 31 December 31
---------------------------------- --------------------------------
<S> <C> <C> <C> <C>
1995 1994^ 1995 1994+
Total Return Fund Utilities Fund
PER SHARE DATA
Net Asset Value - Beginning of Period $10.09 $10.00 $10.00 $10.00
---------------------------------- --------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.25 0.09 0.07 0.00
Net Gains on Securities
(Both Realized and Unrealized) 2.05 0.09 0.84 0.00
---------------------------------- ---------------------------------
Total from Investment Operations 2.30 0.18 0.91 0.00
---------------------------------- ---------------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.24 0.09 0.07 0.00
Distributions from Capital Gains 0.01 0.00 0.00 0.00
---------------------------------- ---------------------------------
Total Distributions 0.25 0.09 0.07 0.00
---------------------------------- ---------------------------------
Net Asset Value - End of Period $12.14 $10.09 $10.84 $10.00
================================== =================================
TOTAL RETURN > 22.79% 1.75%* 9.08% 0.00%
RATIOS
Net Assets - End of Period ($000 Omitted) $6,553 $1,055 $290 $25
Ratio of Expenses to Average Net Assets# 1.01%@ 0.86%~ 1.80%@ 0.00%
Ratio of Net Investment Income to
Average Net Assets# 3.91% 3.86%~ 2.47% 0.00%
Portfolio Turnover Rate 5% 0%* 24% 0%
</TABLE>
^ For the Total Return Fund, from June 2, 1994, commencement of investment
operations, to December 31, 1994.
+ All of the expenses for the Utilities Fund were voluntarily absorbed by
INVESCO for the period ended December 31, 1994, since investment operations did
not commence during 1994.
> Total return does not reflect expenses that apply to the related insurance
policies, and inclusion of these charges would reduce the total return for the
periods shown.
<PAGE>
* These amounts are based on operations for the period shown and, accordingly,
are not representative of a full year.
# Various expenses of the Total Return and Utilities Funds were voluntarily
absorbed by INVESCO for the year ended December 31, 1995 and the period ended
December 31, 1994. If such expenses had not been voluntarily absorbed, ratio of
expenses to average net assets would have been 2.51% and 16.44% for Total
Return Fund and 57.13% for Utilities Fund, respectively, and ratio of net
investment income to average net assets would have been 2.41% and (11.72%) for
Total Return Fund and (52.86%) for Utilities Fund, respectively.
@ Ratio reflects Total Expenses, less expenses absorbed by INVESCO, prior to a
reduction of custodian fees pursuant to an expense offset arrangement.
~ Annualized
Further information about the performance of the Funds is contained in the
Company's annual report to shareholders, which may be obtained without charge by
contacting INVESCO Funds Group, Inc. at the address or telephone number set
forth on the cover page of this Prospectus, or by contacting a Participating
Insurance Company.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each Fund, as described below, is fundamental
and may be changed only by vote of a majority of the outstanding shares of that
Fund. There is no assurance that any Fund will achieve its investment objective.
Any investment policy of a Fund may be changed by the Company's board of
directors without shareholder approval unless the policy is one required by the
Fund's fundamental investment restrictions set forth in the Statement of
Additional Information.
Industrial Income Fund
The investment objective of the Industrial Income Fund is to seek the best
possible current income while following sound investment practices. Capital
growth potential is an additional, but secondary, consideration in the selection
of portfolio securities. The Fund seeks to achieve its objective by investing in
securities which will provide a relatively high yield and stable return and
which, over a period of years, also may provide capital appreciation.
The Industrial Income Fund normally invests between 60% and 75% of its
assets in dividend-paying common stocks. The Fund also may invest in convertible
bonds, preferred stocks and straight debt securities ("debt securities"). In
periods of uncertain market and economic conditions, as determined by Fund
Management, the Fund may depart from its basic investment objective and assume a
defensive position with up to 100% of its total assets temporarily invested in
high quality corporate bonds, or notes and government issues, or held in cash.
The Industrial Income Fund may invest no more than 15% of its total assets
in debt securities that are rated below BBB by Standard & Poor's ("Standard &
Poor's"), or Baa by Moody's Investors Service, Inc. ("Moody's"), and in no event
will the Fund ever invest in a debt security rated below CCC by Standard &
Poor's or Caa by Moody's. Generally, bonds rated in one of the top four rating
categories are considered "investment grade." However, those in the fourth
highest category (Standard & Poor's BBB or Moody's Baa) may have speculative
characteristics and a weaker ability to pay interest or repay principal under
adverse economic conditions or changing circumstances. The risks of investing in
debt securities rated lower than BBB by Standard & Poor's or Baa by Moody's are
discussed below under the caption "Risk Factors." See the Appendix to this
Prospectus for a specific description of each corporate bond rating category.
Total Return Fund
The investment objective of the Total Return Fund is to seek a high total
return on investment through capital appreciation and current income. The Fund
seeks to accomplish its objective by investing in a combination of equity
<PAGE>
securities and fixed income securities. Although there is no limitation on the
maturity of the Total Return Fund's investments in fixed income securities, the
dollar-weighted average maturity of such investments normally will be from 3 to
15 years.
The equity securities to be acquired by the Total Return Fund consist of
common stocks and, to a lesser extent, securities convertible into common
stocks. Such securities generally will be issued by companies that are listed on
a national securities exchange (such as the New York Stock Exchange) and that
usually pay regular dividends. However, the Fund also may invest in securities
traded on regional stock exchanges or in the over-the-counter market. The
Company has not established any minimum investment standards (such as an
issuer's asset level, earnings history, type of industry, dividend payment
history, etc.) with respect to the Fund's investments in common stocks. Because
smaller companies may be subject to more significant losses, as well as have the
potential for more substantial growth, than larger, more established companies,
the Fund's investments may consist in part of securities that may be deemed to
be speculative.
The income securities to be acquired by the Total Return Fund will include
obligations of the U.S. government and government agencies. These U.S.
government obligations consist of direct obligations of the U.S. government,
such as U.S. Treasury Bills, Notes and Bonds, obligations guaranteed by the U.S.
government, such as Government National Mortgage Association obligations, and
obligations of U.S. government authorities, agencies and instrumentalities,
which are supported only by the assets of the issuer, such as the Federal
National Mortgage Association, Federal Home Loan Bank, Federal Financing Bank
and Federal Farm Credit Bank. In the case of securities not backed by the full
faith and credit of the United States, the Fund must look principally to the
agency issuing or guaranteeing the obligation for ultimate repayment, and may
not be able to assert a claim against the United States itself in the event the
agency or instrumentality does not meet its commitments. The Fund will invest in
securities of such instrumentalities only when Fund Management is satisfied that
the credit risk with respect to any such instrumentality is minimal.
The Total Return Fund also may invest in corporate debt obligations that
are rated in one of the four highest ratings of corporate obligations by
Standard & Poor's (AAA, AA, A and BBB) or by Moody's (Aaa, Aa, A and Baa), or,
if not rated, that in Fund Management's opinion have investment characteristics
similar to those described in such ratings. The investment characteristics of
the securities rated Baa by Moody's or BBB by Standard & Poor's are discussed
above in the description of the investment policies of the Industrial Income
Fund. See the Appendix to this Prospectus for a specific description of each
corporate bond rating category.
<PAGE>
Typically, at least 30% of the Total Return Fund's investment portfolio
will be comprised of equities and at least 30% fixed and variable income
securities. The remaining 40% of the portfolio will vary in asset allocation
according to Fund Management's assessment of business, economic, and market
conditions. The analytical process associated with making allocation decisions
is based upon a combination of demonstrated historic financial results, current
prices for stocks, and the current yield to maturity available in the market for
bonds. The return available from one category relative to the other determines
the actual asset deployment. Fund Management's asset allocation process is
systematic and is based on current information rather than forecasted change.
The Fund seeks reasonably consistent returns over a variety of market cycles.
High Yield Fund
The investment objective of the High Yield Fund is to seek a high level of
current income by investing substantially all of its assets in lower rated bonds
and other debt securities and in preferred stock. Accordingly, the Fund invests
primarily in bonds and other debt securities, including convertible and
non-convertible issues, and in preferred stocks rated in medium and lower
categories by Standard & Poor's or Moody's (BB or lower by Standard &
Poor's or Ba or lower by Moody's). The Fund does not invest in securities
rated lower than CCC by Standard & Poor's or Caa by Moody's; these ratings are
applied to issues that are predominantly speculative and may be in default or
as to which there may be present elements of danger with respect to principal or
interest. The Fund does not invest in issues that are in default. The Fund may
invest in unrated securities where Fund Management believes that the financial
condition of the issuer or the protection afforded by the terms of the
securities limits risk to a level similar to that of securities eligible for
purchase by the Fund rated in medium and lower categories by Standard & Poor's
or Moody's (between BB and CCC ratings by Standard & Poor's and between Ba
and Caa ratings by Moody's). The Fund also may invest in state and local
municipal obligations when Fund Management believes that the potential total
return on the investment is better than the return that otherwise would be
achieved by investing in securities issued by private issuers. See the Appendix
to this Prospectus for a specific description of each corporate bond rating
category.
The High Yield Fund also may hold cash or invest all or a portion of its
assets in securities issued or guaranteed by the U.S. government or its agencies
(which may or may not be backed by the full faith and credit of the United
States) and bank certificates of deposit, if Fund Management determines it to be
appropriate for purposes of preserving liquidity or capital in light of
prevailing market or economic conditions. The Fund also may invest in corporate
short-term notes rated at the time of purchase at least A-1 by Standard & Poor's
or Prime-1 by Moody's, and municipal short-term notes rated at the time of
purchase at least SP-1 by Standard & Poor's or MIG-1 by Moody's (the highest
<PAGE>
rating category for such notes, indicating a very strong capacity to make timely
payments of principal and interest).
Potential capital appreciation is a factor in the selection of
investments, but is secondary to the High Yield Fund's primary objective. The
securities in which the Fund invests offer a wide range of maturities (from less
than one year to thirty years) and yields. These securities include short-term
bonds or notes (maturing in less than three years), intermediate-term bonds or
notes (maturing in three to ten years), and long-term bonds (maturing in more
than ten years). Fund Management will seek to adjust the portfolio of securities
held by the Fund to maximize current income consistent with the preservation of
principal.
There are no limitations on the average maturity of the securities in the
High Yield Fund. Securities will be selected on the basis of Fund Management's
assessment of interest rate trends and the liquidity of various instruments
under prevailing market conditions. As a matter of policy, which may be changed
without a vote of shareholders, under normal circumstances, at least 65% of the
value of the total assets of the Fund will be invested in debt securities having
maturities at the time of issuance of at least three years. As a temporary
defensive measure, the Fund may hold cash or invest more than 35%, and up to
100%, of its total assets in debt securities having maturities of less than
three years at the time of issuance if Fund Management determines it to be
appropriate for purposes of enhancing liquidity or preserving capital in light
of prevailing market or economic conditions. The investment return to
shareholders of the Fund is based solely upon the income earned and gains
realized on the securities held by the Fund.
Securities in which the High Yield Fund invests may at times be purchased
or sold on a delayed delivery or a when-issued basis (i.e., securities may be
purchased or sold by the Fund with settlement taking place in the future, often
a month or more later). The High Yield Fund may invest up to 10% of its net
assets in when-issued securities. The payment obligation and the interest rate
that will be received on the securities are fixed at the time the Fund enters
into a purchase commitment. Between the date of purchase and the settlement
date, the value of the securities is subject to market fluctuations, and no
interest is payable to the Fund prior to the settlement date. When the Fund
purchases securities on a when-issued basis, its custodian bank will place cash
or liquid debt securities in a separate account of the Fund in an amount equal
to the amount of the purchase obligation.
Utilities Fund
The investment objective of the Utilities Fund is to seek capital
appreciation and income. The assets of the Utilities Fund are invested primarily
in securities of companies principally engaged in business as public utilities,
which may be either established, well-capitalized companies or newly-formed,
<PAGE>
small capitalization companies. The public utilities business includes the
following industries: companies which manufacture, produce, generate, transmit,
or sell gas or electric energy; and companies engaged in various aspects of
communications, such as telephone, telegraph, satellite, microwave, and the
provision of other communication facilities, excluding broadcasting, for public
use and benefit. Uncertainties to which the gas and electric public utilities
industries are subject include difficulties in obtaining adequate financing and
investment return, environmental issues, prices of fuel for electric generation,
availability of natural gas, and risks associated with nuclear power facilities.
Under normal conditions, the Utilities Fund will invest at least 80% of
its total assets in the equity securities (common stocks and securities
convertible into common stocks, including convertible debt obligations and
convertible preferred stock) of companies that are principally engaged in
business as public utilities, and that are traded on regional or national
stock exchanges or on the over-the-counter market. A particular company is
deemed to be principally engaged in the public utilities business if, in the
determination of Fund Management, more than 50% of its gross income or net sales
is derived from activities in that business or more than 50% of its assets are
dedicated to the production of revenues from that business. In circumstances
where, based on available financial information, a question exists whether a
company meets one of these standards, the Utilities Fund may invest in equity
securities of the company only if Fund Management determines, after review of
information describing the company and its business activities, that the
company's primary business is within the public utilities business.
The balance of the Utilities Fund's assets may be held as cash or invested
in debt securities issued by companies principally engaged in the public
utilities business, debt or equity securities issued by companies outside the
public utilities sector, or in short-term debt obligations maturing no later
than one year from the date of purchase, which are determined by Fund Management
to be of high grade, including U.S. government and agency securities, domestic
bank certificates of deposit, commercial paper rated A-2 or higher by Standard &
Poor's or P-2 or higher by Moody's, and repurchase agreements with banks and
securities dealers. The equity securities purchased may be issued by either
established, well-capitalized companies or newly-formed, small cap companies,
and may be traded on national or regional stock exchanges or in the
over-the-counter market. In addition, the Fund may hold cash or invest
temporarily in the short-term securities described above in an amount ^ up to
100% of its total assets as a temporary defensive measure if Fund Management
determines it to be appropriate for purposes of enhancing liquidity or
preserving capital in light of prevailing market or economic conditions. While
the Utilities Fund is in a defensive position, the opportunity to achieve
capital growth will be limited, and, to the extent that Fund Management's
<PAGE>
assessment of market conditions is incorrect, the Fund will be foregoing the
opportunity to benefit from capital growth resulting from increases in the value
of equity investments.
RISK FACTORS
Contract owners should consider the special factors associated with the
policies discussed below in determining the appropriateness of allocating
contract values to one or more of the Funds. See the Statement of Additional
Information for a discussion of additional risk factors.
Potential Conflicts
The Company has received an exemptive order of the Securities and Exchange
Commission that permits the sale of Fund shares to variable annuity separate
accounts and variable life insurance separate accounts of affiliated and
unaffiliated Participating Insurance Companies. The Company currently does not
foresee any disadvantages to the owners of variable annuity or variable life
insurance contracts arising from the fact that the interests of those owners may
differ. Nevertheless, the Company's board of directors will monitor events in
order to identify any material irreconcilable conflicts which may possibly arise
due to differences of tax treatment or other considerations and to determine
what action, if any, should be taken in response thereto.
Credit and Market Risks
All securities, including those purchased by each Fund, are subject to
some degree of credit risk and market risk. Credit risk refers to the ability of
an issuer of a debt security to pay its principal and interest, and to the
earnings stability and overall financial soundness of an issuer of an equity
security. Market risk refers to the volatility of a security's price in response
to changes in conditions in securities markets in general and, particularly in
the case of debt securities, changes in the overall level of interest rates. An
increase in interest rates will tend to reduce the market values of debt
securities, whereas a decline in interest rates will tend to increase their
values.
To limit exposure to credit risks, each Fund, as a matter of fundamental
policy, will be diversified. With respect to 75% of each Fund's total assets, no
more than 5% of the purchasing Fund's total assets will be invested in the
securities of any one issuer. In addition, with the exception of the Utilities
Fund, no more than 25% of a Fund's total assets will be invested in any one
industry. These percentage limitations apply immediately after a purchase or
initial investment. Any subsequent change in a percentage resulting from
fluctuations in value will not require elimination of any security from a Fund.
The credit risk exposure of the Utilities Fund may be increased by its policy of
concentrating its investments in the public utilities sector. See
"Concentration."
<PAGE>
Portfolio Lending
Each Fund may make loans of its portfolio securities to broker-dealers or
other institutional investors under contracts requiring such loans to be
callable at any time and to be secured continuously by collateral in cash, cash
equivalents, high quality short-term government securities or irrevocable
letters of credit maintained on a current basis at an amount at least equal to
the market value of the securities loaned. This practice permits a Fund to earn
income, which, in turn, can be invested in additional securities to pursue the
Fund's investment objective. The lending Fund will continue to collect the
equivalent of the interest or dividends paid by the issuer on the securities
loaned and will also receive either interest (through investment of cash
collateral) or a fee (if the collateral is government securities). A lending
Fund may pay finder's and other fees in connection with its securities loans.
Lending securities involves certain risks, the most significant of which
is the risk that a borrower may fail to return a portfolio security. Fund
Management monitors the creditworthiness of borrowers in order to minimize such
risks. A Fund will not lend any security if, as a result of that loan, the
aggregate value of securities then on loan would exceed 331/3% of the Fund's
total assets (taken at market value).
Repurchase Agreements
Each Fund may enter into repurchase agreements with respect to debt
instruments eligible for investment by that Fund. These agreements are entered
into with member banks of the Federal Reserve System, registered broker-dealers,
and registered government securities dealers which are deemed creditworthy by
Fund Management (subject to review by the Company's board of directors). A
repurchase agreement is a means of investing monies for a short period. In a
repurchase agreement, the Fund acquires a debt instrument (generally a security
issued by the U.S. government or an agency thereof, a banker's acceptance or a
certificate of deposit) subject to resale to the seller at an agreed upon price
and date (normally the next business day). If the other party defaults on its
obligation to repurchase the security, a Fund could incur costs or delays in
seeking to sell the security.
To minimize risks associated with repurchase agreements, the securities
underlying each repurchase agreement will be maintained with the Company's
custodian in an amount at least equal to the repurchase price under the
agreement (including accrued interest), and such agreements will be effected
only with parties that meet certain creditworthiness standards established by
the Company's board of directors. No Fund will enter into a repurchase
agreement maturing in more than seven days if as a result more than 15% of that
Fund's net assets would be invested in such repurchase agreements and other
illiquid securities.
<PAGE>
Portfolio Turnover
There are no fixed limitations regarding portfolio turnover for any of the
Funds. Although the Funds do not trade for short-term profits, securities may be
sold without regard to the time they have been held in a Fund when, in the
opinion of Fund Management, market considerations warrant such action. ^
Therefore, the portfolio turnover rates of the Funds may be higher than those
of other investment companies with comparable investment objectives. Increased
portfolio turnover would cause a Fund to incur greater brokerage costs than
would otherwise be the case. The Funds' portfolio turnover rates are set forth
under "Financial Highlights." The Company's brokerage allocation policies,
including the consideration of sales of Participating Life Insurance Companies'
variable annuity and variable life insurance contracts when selecting among
qualified brokers offering comparable best price and execution on Fund
transactions, are discussed in the Statement of Additional Information.
Illiquid and Rule 144A Securities
The Funds are authorized to invest in securities that are illiquid
because they are subject to restrictions on their resale ("restricted
securities") or because, based upon their nature or the market for such
securities, they are not readily marketable. However, a Fund will not purchase
any such security if the purchase would cause the Fund to invest more than 15%
of its net assets in illiquid securities. Repurchase agreements maturing in
more than seven days will be considered illiquid for purposes of this
restriction. Investments in illiquid securities involve certain risks to the
extent that a Fund may be unable to dispose of such a security at the time
desired or at a reasonable price. In addition, in order to resell a restricted
security, a Fund might have to bear the expense and incur the delays associated
with effecting registration.
Certain restricted securities that are not registered for sale to the
general public, but that can be resold to institutional investors ("Rule 144A
Securities"), may be purchased without regard to the foregoing 15% limitation if
a liquid institutional trading market exists. The liquidity of a Fund's
investments in Rule 144A Securities could be impaired if dealers or
institutional investors become uninterested in purchasing these securities. The
Company's board of directors has delegated to Fund Management the authority to
determine the liquidity of Rule 144A Securities pursuant to guidelines approved
by the board. For more informaiton concerning Rule 144A Securities, see the
Statement of Additional Information.
Foreign Securities
Each Fund may invest up to 25% of its total assets directly in foreign
securities. Investments in securities of foreign companies (including Canadian
<PAGE>
securities, which are not subject to the 25% limitation) and in foreign markets
involve certain additional risks not associated with investments in domestic
companies and markets. For U.S. investors, the returns on foreign securities are
influenced not only by the returns on the foreign investments themselves, but
also by currency fluctuations. That is, when the U.S. dollar generally rises
against foreign currencies, returns on foreign securities for a U.S. investor
may decrease. By contrast, in a period when the U.S. dollar generally
declines, those returns may increase.
Other risks of international investing to consider include:
-less publicly available information than is generally
available about U.S. issuers;
-differences in accounting, auditing and financial reporting
standards;
-generally higher commission rates on foreign portfolio
transactions and longer settlement periods;
-smaller trading volumes and generally lower liquidity of foreign stock
markets, which may cause greater price volatility;
-less government regulation of stock exchanges, brokers and
listed companies abroad than in the United States; and
-investments in certain countries may be subject to foreign withholding
taxes, which may reduce dividend income or capital gains payable to
shareholders.
There is also the possibility of expropriation or confiscatory taxation;
adverse changes in investment or exchange control regulations; political
instability; potential restrictions on the flow of international capital; and
the possibility of a Fund experiencing difficulties in pursuing legal remedies
and collecting judgments.
Securities purchased by means of ADRs also are not subject to the 25%
limitation. ADRs are receipts, typically issued by a U.S. bank or trust company,
evidencing ownership of the underlying foreign securities. ADRs are denominated
in U.S. dollars and trade in the U.S. securities markets. ADRs may be issued in
sponsored or unsponsored programs. In sponsored programs, the issuer makes
arrangements to have its securities traded in the form of ADRs; in unsponsored
programs, the issuer may not be directly involved in the creation of the
program. Although the regulatory requirements with respect to sponsored and
unsponsored programs are generally similar, the issuers of unsponsored ADRs are
not obligated to disclose material information in the United States and,
therefore, such information may not be reflected in the market value of the
ADRs. ADRs are subject to certain of the same risks as direct investments in
<PAGE>
foreign securities, including the risk that changes in the value of the currency
in which the security underlying an ADR is denominated relative to the U.S.
dollar may adversely affect the value of the ADR.
Forward Foreign Currency Contracts
Each of the Funds may enter into contracts to purchase or sell foreign
currencies at a future date ("forward contracts") as a hedge against
fluctuations in foreign exchange rates pending the settlement of transactions in
foreign securities or during the time the Funds hold foreign securities. A
forward contract is an agreement between contracting parties to exchange an
amount of currency at some future time at an agreed upon rate. Although the
Funds have not adopted any limitations on their ability to use forward contracts
as a hedge against fluctuations in foreign exchange rates, the Funds do not
attempt to hedge all of their foreign investment positions and will enter into
forward contracts only to the extent, if any, deemed appropriate by Fund
Management. The Funds will not enter into forward contracts for a term of more
than one year or for purposes of speculation. Hedging against a decline in the
value of a currency in the foregoing manner does not eliminate fluctuations in
the prices of portfolio securities or prevent losses if the prices of such
securities decline. Furthermore, such hedging transactions preclude the
opportunity for gain if the value of the hedged currency should rise. ^ No
predictions can be made with respect to whether the total of such transactions
will result in a better or worse position than had the Fund not entered into any
forward contracts. Forward contracts may, from time to time, be considered
illiquid, in which case they would be subject to the Funds' limitation on
investing in illiquid securities, discussed above. For additional information
regarding forward contracts, see the Statement of Additional Information.
Zero Coupon and Pay-In-Kind Bonds (High Yield Fund Only)
The High Yield Fund may invest in zero coupon bonds and pay- in-kind
bonds, provided that Fund Management determines that the risk of a default on
the security, which could result in adverse tax consequences is not significant.
A zero coupon bond ("zero") does not make cash interest payments during the life
of the bond. Instead, it is sold at a discount to face value, and the interest
consists of the gradual appreciation in price as the bond approaches maturity.
Zeros can be an attractive financing method for issuers with near-term cash flow
problems. Pay-in-kind ("PIK") bonds pay interest in cash or additional
securities, at the issuer's option, for a specified period. Like zeros, they may
help a corporation economize on cash. PIK prices reflect the market value of the
underlying debt plus any accrued interest. Zeros and PIKs can be higher or lower
quality debt, and may be more speculative and subject to greater fluctuation in
value due to changes in interest rates than coupon bonds. To maintain the High
Yield Fund's qualification as a regulated investment company, it may be required
to distribute income recognized on these bonds, even though no cash may be paid
<PAGE>
to the Fund until the maturity or call date of the bond, and such distribution
could reduce the amount of cash available for investment by the Fund.
High-Risk, High-Yield Securities (High Yield and Industrial Income
Funds Only)
Although Fund Management limits the High Yield and Industrial Income
Funds' debt security investments to securities it believes are not highly
speculative, both credit and market risks are increased by those Funds'
investments in debt securities rated below the top four grades by Standard &
Poor's or Moody's (high-risk, high-yield securities commonly known as "junk
bonds") and comparable unrated debt securities. Lower rated bonds by Moody's
(categories Ba, B, Caa) are of poorer quality and may have speculative
characteristics. Bonds rated Caa may be in default or there may be present
elements of danger with respect to principal or interest. Lower rated bonds by
Standard & Poor's (categories BB, B, CCC) include those which are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with their terms; BB indicates
the lowest degree of speculation and CCC a high degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
Because investment in medium and lower rated securities involves both
greater credit risk and market risk, achievement of the High Yield Fund's (and,
to a lesser extent, the Industrial Income Fund's) investment objectives may be
more dependent on Fund Management's credit analysis than is the case for funds
investing in higher quality securities. In addition, the share price and yield
of the High Yield Fund may be expected to fluctuate more than in the case of
funds investing in higher quality, shorter term securities. Moreover, a
significant economic downturn or major increase in interest rates may result in
issuers of lower rated securities experiencing increased financial stress, which
would adversely affect their ability to service their principal, dividend and
interest obligations, meet projected business goals, and obtain additional
financing. In this regard, it should be noted that while the market for high
yield corporate bonds has been in existence for many years and from time to time
has experienced economic downturns in recent years, this market has involved a
significant increase in the use of high yield corporate debt securities to fund
highly leveraged corporate acquisitions and restructurings. Past experience may
not, therefore, provide an accurate indication of future performance of the high
yield bond market, particularly during periods of economic recession.
Furthermore, expenses incurred to recover an investment by a Fund in a defaulted
security may adversely affect the Fund's net asset value. Finally, while Fund
Management attempts to limit purchases of medium and lower rated securities to
securities having an established secondary market, the secondary market for such
securities may be less liquid than the market for higher quality securities. The
<PAGE>
reduced liquidity of the secondary market for such securities may adversely
affect the market price of, and ability of the High Yield or Industrial Income
Funds to value, particular securities at certain times, thereby making it
difficult to make specific valuation determinations.
While Fund Management continuously monitors all of the debt securities
held by the Funds for the issuers' ability to make required principal and
interest payments and other quality factors, a Fund may retain in the portfolio
a debt security whose rating is changed to one below the minimum rating required
for purchase. More information on debt securities is contained in the Statement
of Additional Information.
The following table shows the composition of the Industrial Income Fund's
and the High Yield Fund's investments in corporate (and municipal) bonds by
rating category for the fiscal year ended December 31, 1995. All of these
percentages were determined on a dollar-weighted basis, calculated by averaging
the Funds' month-end portfolio holdings during the fiscal year. These figures do
not represent actual holdings of the Funds as of December 31, 1995, nor do
they imply that the overall quality of portfolio holdings is fixed.
<PAGE>
Percentage of Total Assets
---------------------------------------------
Rating Category Industrial Income Fund High Yield Fund
- --------------- ---------------------- ---------------
AAA 11.26% 0.00%
AA 0.00% 0.00%
A 2.00% 0.68%
BBB 4.13% 0.73%
BB 4.74% 23.09%
B 2.34% 54.54%
CCC 0.00% 4.55%
Unrated 0.00% 2.23%
Concentration (Utilities Fund Only)
While the Utilities Fund, like the other Funds, diversifies its
investments by investing, with respect to 75% of its total assets, not more than
5% of its total assets in the securities of any one issuer, its assets normally
will be invested primarily in companies engaged in the group of industries
constituting the public utilities sector. As a result of this investment policy,
an investment in this Fund may be subject to greater fluctuations in value than
generally would be the case if an investment were made in an investment company
which did not concentrate its investments in a similar manner. For example,
certain economic factors or specific events may exert a disproportionate impact
upon the prices of equity securities of companies within a particular industry
relative to their impact on the prices of securities of companies engaged in
other industries. Additionally, changes in the market price of the equity
securities of a particular company which occupies a dominant position in an
industry may tend to influence the market prices of other companies within the
same industry. As a result of the foregoing factors, the net asset value of the
Utilities Fund may be more susceptible to change than those of investment
companies which spread their investments over many different industries.
Options and Futures Contracts
The Funds may enter into futures contracts for hedging or other
non-speculative purposes within the meaning and intent of applicable rules of
the Commodity Futures Trading Commission ("CFTC"). For example, futures
contracts may be purchased or sold to attempt to hedge against the effects of
interest or exchange rate changes on a Fund's current or intended investments.
If an anticipated decrease in the value of portfolio securities occurs as a
result of a general increase in interest rates or a change in exchange rates,
the adverse effects of such changes may be offset, in whole or part, by gains on
the sale of futures contracts. Conversely, an increase in the cost of portfolio
securities to be acquired caused by a general decline in interest rates or a
change in exchange rates may be offset, in whole or part, by gains on futures
contracts purchased by a Fund. A Fund will incur brokerage fees when it
purchases and sells futures contracts, and it will be required to maintain
margin deposits.
<PAGE>
The Funds also may use options to buy or sell futures contracts or debt
securities. Such investment strategies will be used as a hedge and not for
speculation.
Put and call options on futures contracts or securities may be traded by a
Fund in order to protect against declines in the values of portfolio securities
or against increases in the cost of securities to be acquired. Purchases of
options on futures contracts may present less dollar risk in hedging the Fund's
portfolio than the purchase and sale of the underlying futures contracts,
since the potential loss is limited to the amount of the premium plus related
transaction costs. The premium paid for such a put or call option plus any
transaction costs will reduce the benefit, if any, realized by the Fund upon
exercise or liquidation of the option, and, unless the price of the underlying
futures contract changes sufficiently, the option may expire without value to
the Fund. The writing of covered options, however, does not present less risk
than the trading of futures contracts, and will constitute only a partial hedge,
up to the amount of the premium received, and, if an option is exercised, the
Fund may suffer a loss on the transaction.
A Fund may purchase put or call options in anticipation of changes in
interest rates or other factors which may adversely affect the value of its
portfolio or the prices of securities which the Fund anticipates purchasing at a
later date. The Fund may be able to offset such adverse effects on its
portfolio, in whole or in part, through the options purchased. The premium paid
for a put or call option plus any transaction costs will reduce the benefit, if
any, realized by the Fund upon exercise or liquidation of the option, and,
unless the price of the underlying security changes sufficiently, the option may
expire without value to the Fund.
A Fund may, from time to time, also sell ("write") covered call options or
cash secured puts in order to attempt to increase the yield on its portfolio or
to protect against declines in the value of its portfolio securities. By writing
a covered call option, the Fund, in return for the premium income realized from
the sale of the option, gives up the opportunity to profit from a price increase
in the underlying security above the option exercise price, where the price
increase occurs while the option is in effect. In addition, the Fund's ability
to sell the underlying security will be limited while the option is in effect.
By writing a cash secured put, the Fund, which receives the premium, has the
obligation during the option period, upon assignment of an exercise notice, to
buy the underlying security at a specified price. A put is secured by cash if
the Fund maintains at all times cash, Treasury bills or other high grade
short-term obligations with a value equal to the option exercise price in a
segregated account with its custodian.
<PAGE>
Although the Funds will enter into options and futures contracts solely
for hedging or other non-speculative purposes, within the meaning and intent of
applicable rules of the CFTC, their use does involve certain risks. For example,
a lack of correlation between the value of an instrument underlying an option or
futures contract and the assets being hedged, or unexpected adverse price
movements, could render a Fund's hedging strategy unsuccessful and could result
in losses. In addition, there can be no assurance that a liquid secondary market
will exist for any contract purchased or sold, and the Fund may be required to
maintain a position until exercise or expiration, which could result in losses.
Transactions in futures contracts and options are subject to other risks as
well.
The risks related to transactions in options and futures to be entered
into by the Funds are set forth in greater detail in the Statement of Additional
Information, which should be reviewed in conjunction with the foregoing
discussion.
INVESTMENT RESTRICTIONS
Each Fund is subject to certain fundamental restrictions regarding its
investments which may not be altered without the approval of the Fund's
shareholders. Those restrictions include, among others, limitations with respect
to the percentages of the value of the Fund's total assets which may be invested
in any one company or, with the exception of the Utilities Fund, in one
industry. A list of each Fund's fundamental investment restrictions and a list
of additional, non-fundamental investment restrictions of each Fund (which can
be changed by the Company's board of directors without shareholder approval) are
contained in the Statement of Additional Information.
MANAGEMENT
Pursuant to an agreement with the Company, INVESCO, 7800 E. Union Avenue,
Denver, Colorado, serves as the Funds' investment adviser. INVESCO is primarily
responsible for providing the Funds with various administrative services and
supervising the Funds' daily business affairs. These services are subject to
review by the Company's board of directors.
INVESCO is an indirect wholly-owned subsidiary of INVESCO PLC, a financial
holding company that, through its subsidiaries, engages in the business of
investment management on an international basis. INVESCO was established in 1932
and, as of December 31, 1995, managed 14 mutual funds, consisting of 38
separate portfolios, with combined assets of approximately $11.8 billion on
behalf of over 713,000 shareholders.
Pursuant to agreements with INVESCO, INVESCO Trust serves as the
sub-adviser of the Industrial Income, High Yield and Utilities Funds and ICM
<PAGE>
serves as the sub-adviser of the Total Return Fund. Although the Company is not
a party to either sub-advisory agreement, each agreement has been approved for
each Fund affected by that agreement by the Company's board of directors. In
addition, each agreement has been approved as to each affected Fund by the
initial shareholder of that Fund. The address of INVESCO Trust is 7800 E. Union
Avenue, Denver, Colorado and the address of ICM is 1315 Peachtree Street, N.E.,
Atlanta, Georgia. Subject to the supervision of INVESCO and review by the
Company's board of directors, INVESCO Trust is primarily responsible for
selecting and managing the investments of the Industrial Income, High Yield and
Utilities Funds and ICM is primarily responsible for selecting and managing the
investments of the Total Return Fund.
INVESCO Trust, a trust company founded in 1969, is a wholly-owned
subsidiary of INVESCO that served as adviser or sub-adviser to 41 investment
portfolios as of December 31, 1995 , including 27 portfolios in the INVESCO
group. These 41 portfolios had aggregate assets of approximately $11.0
billion as of December 31, 1995. In addition, INVESCO Trust provides
investment management services to private clients, including employee benefit
plans that may be invested in a collective trust sponsored by INVESCO Trust.
The following persons serve as portfolio managers of the respective Funds:
Industrial Income Fund
- ----------------------
Charles P. Mayer Co-portfolio manager of the INVESCO
VIF - Industrial Income Portfolio
since 1993; co-portfolio manager of
INVESCO Industrial Income Fund;
portfolio manager (since 1993),
senior vice president (since 1994)
and vice president (1993 to 1994) of
INVESCO Trust; formerly (1984 to
1993), portfolio manager with
Westinghouse Pension; began
investment career in 1969; B.A., St.
Peter's College; M.B.A., St. John's
University.
Donovan J. (Jerry) Paul, CFA Co-portfolio manager of the INVESCO
VIF - Industrial Income Portfolio
since 1994; co-portfolio manager of
INVESCO Industrial Income Fund ,
INVESCO Balanced Fund and INVESCO
Short-Term Bond Fund; portfolio
manager of INVESCO VIF - High Yield
Portfolio, INVESCO High Yield Fund
and INVESCO Select Income Fund;
portfolio manager and senior vice
president of INVESCO Trust since
1994; formerly, senior vice
<PAGE>
president and director of fixed income
research (1989 to 1992) and portfolio
manager (1987 to 1992) with Stein, Roe &
Farnham Inc.; and president (1993 to 1994)
of Quixote Investment Management, Inc.;
began investment career in 1976; B.B.A.
University of Iowa; M.B.A. University of
Northern Iowa; Chartered Financial Analyst;
Certified Public Accountant.
High Yield Fund
- ---------------
Donovan J. (Jerry) Paul, CFA Portfolio manager of the INVESCO VIF
- High Yield Portfolio since 1994;
portfolio manager of INVESCO High
Yield Fund and INVESCO Select Income
Fund; co-portfolio manager of
INVESCO Industrial Income Fund,
INVESCO VIF - Industrial Income
Portfolio , INVESCO Balanced Fund
and INVESCO Short-Term Bond Fund;
portfolio manager and senior vice
president of INVESCO Trust since
1994; formerly, senior vice
president and director of fixed
income research (1989 to 1992) and
portfolio manager (1987 to 1992)
with Stein, Roe & Farnham Inc.; and
president (1993 to 1994) of Quixote
Investment Management, Inc.; began
investment career in 1976; B.B.A.
University of Northern Iowa; M.B.A.
University of Northern Iowa;
Chartered Financial Analyst;
Certified Public Accountant.
Utilities Fund
- --------------
Jeffrey G. Morris, CFA Portfolio manager of the INVESCO
VIF - Utilities Portfolio since
1996; portfolio manager of the
INVESCO Strategic Utilities
Portfolio and Environmental
Services Portfolio; portfolio
manager of INVESCO Trust Company
since 1995; joined INVESCO in 1991
and served as a research analyst
from 1994 to 1995; formerly, loan
processor for Norwest Mortgage
(1991); B.S. Colorado State
University. Chartered Financial
Analyst.
ICM is an indirect, wholly-owned subsidiary of INVESCO PLC that, as of
December 31, 1995, managed approximately $32 billion of tax-exempt
accounts (such as pension and profit-sharing funds for corporations and state
<PAGE>
and local governments) and acted as investment adviser or sub-adviser to 17
investment portfolios of eight investment companies (including the Company) with
combined assets of approximately $3.1 billion.
The following persons serve as portfolio managers of the Total Return
Fund:
Edward C. Mitchell, Jr., CFA Portfolio manager of the INVESCO VIF
- Total Return Portfolio since 1993;
portfolio manager of INVESCO Value
Trust Total Return Fund since 1987
and of the EBI Flex Fund since 1988;
president (1992 to present), vice
president (1979 to 1991) and
director (1979 to present) of ICM;
began investment career in 1969;
B.A., University of Virginia;
M.B.A., University of Colorado;
Chartered Financial Analyst;
Chartered Investment Counselor; past
president, Atlanta Society of
Financial Analysts.
David S. Griffin, CFA Co-portfolio manager of the INVESCO
VIF - Total Return Portfolio since
1993; co-portfolio manager of
INVESCO Value Trust Total Return
Fund and of the EBI Flex Fund since
1993; portfolio manager of ICM since
1991; mutual fund sales
representative with INVESCO
Services, Inc. (1986 to 1991); began
investment career in 1982; B.A.,
Ohio Wesleyan University; M.B.A.,
William and Mary; Chartered
Financial Analyst.
Each Fund pays INVESCO a monthly advisory fee which is based upon a
percentage of the Fund's average net assets, determined daily. For the
Industrial Income and Total Return Funds, the advisory fees are each computed at
the annual rate of 0.75% on the first $500 million of the Fund's average net
assets; 0.65% on the next $500 million of the Fund's average net assets; and
0.55% on the Fund's average net assets in excess of $1 billion. For the High
Yield and Utilities Funds, the advisory fees are each computed at the annual
rate of 0.60% on the first $500 million of the Fund's average net assets;
0.55% on the next $500 million of the Fund's average net assets and 0.45% on
the Fund's average net assets in excess of $1 billion. While the portion of
INVESCO's fees which is equal to 0.75% of average net assets is higher than
those generally charged by investment advisers to mutual funds, it is not
higher than those charged by many other investment advisers to funds with
investment objectives and asset levels comparable to those of the Industrial
<PAGE>
Income and Total Return Funds. For the fiscal period ended December 31, 1995,
the investment advisory fees paid by the Industrial Income Fund, Total Return
Fund, High Yield Fund, and Utilities Fund were 0.75%, 0.75%, 0.60%, and 0.60%,
respectively, of each Fund's average net assets. Out of the advisory fee
received from each Fund, INVESCO pays that Fund's sub-adviser a monthly
subadvisory fee. No fee is paid by any Fund to its sub-adviser. The sub-advisory
fees for the Industrial Income and Total Return Funds are each computed at the
annual rate of 0.375% on the first $500 million of the Fund's average net
assets; 0.325% on the next $500 million of the Fund's average net assets; and
0.275% on the Fund's average net assets in excess of $1 billion. The
sub-advisory fees for the High Yield and Utilities Funds are each computed at
the annual rate of 0.30% on the first $500 million of the Fund's average net
assets; 0.275% on the next $500 million of the Fund's average net assets; and
0.225% on the Fund's average net assets in excess of $1 billion.
The Company also has entered into an Administrative Services Agreement
with INVESCO dated October 20, 1993 (the "Administrative Agreement"). Pursuant
to the Administrative Agreement, INVESCO performs certain administrative,
recordkeeping and internal accounting services, including without limitation,
maintaining general ledger and capital stock accounts, preparing a daily trial
balance, calculating net asset value daily, providing selected general ledger
reports and providing certain sub-accounting and recordkeeping services for
shareholder accounts. For such services, the Company pays INVESCO a fee
consisting of a base fee of $10,000 per year for each Fund, plus an additional
incremental fee computed at the annual rate of 0.015% per year of the average
net assets of each Fund. INVESCO also is paid a fee by the Company for providing
transfer agent services. See "Additional Information."
Each Fund's expenses, which are accrued daily, are generally deducted
from its total income before dividends are paid. Total expenses of the
Industrial Income Fund, Total Return Fund, High Yield Fund, and Utilities Fund
(prior to expense offsets) for the fiscal year ended December 31, 1995,
including investment advisory fees (but excluding brokerage commissions, which
are a cost of acquiring securities), amounted to 1.03%, 1.01%, 0.97% and
1.80%, respectively, of each Fund's average net assets. Certain Fund expenses
are absorbed voluntarily by INVESCO pursuant to a commitment to the Company.
This commitment may be changed following consultation with the Company's board
of directors. If such voluntary expense limits were not in effect, the total
operating expenses, as a percentage of each Fund's average net assets, of the
Industrial Income, Total Return, High Yield and Utilities Funds for the fiscal
year ended December 31, 1995, would have been 2.31%, 2.51%, 2.71%, and
57.13%, respectively.
<PAGE>
Fund Management permits investment and other personnel to purchase and
sell securities for their own accounts, subject to a compliance policy governing
personal investing. This policy requires Fund Management's personnel to conduct
their personal investment activities in a manner that Fund Management believes
is not detrimental to the Funds or Fund Management's other advisory clients. See
the Statement of Additional Information for more detailed information.
PURCHASES AND REDEMPTIONS
Investors may not purchase or redeem shares of the Funds directly, but
only through variable annuity and variable life insurance contracts offered
through the separate accounts of Participating Insurance Companies. A contract
owner should refer to the applicable Separate Account Prospectus for information
on how to purchase or surrender a contract, make partial withdrawals of contract
values, allocate contract values to one or more of the Funds, or change existing
allocations among investment alternatives, including the Funds. Shares of the
Funds are sold on a continuous basis to separate accounts of Participating
Insurance Companies by INVESCO, as the Funds' Distributor. No sales charge is
imposed upon the sale of shares of the Funds. Sales charges for the variable
annuity or variable life insurance contracts are described in the Separate
Account Prospectuses. INVESCO may from time to time make payments from its
revenues to Participating Insurance Companies, broker dealers and other
financial institutions that provide administrative services for the Funds.
The Participating Insurance Companies place orders for their separate
accounts to purchase and redeem shares of each Fund based on, among other
things, the amount of premium payments to be invested and transfer and surrender
requests to be effected on that day pursuant to variable annuity and variable
life insurance contracts. Fund shares are purchased or redeemed at the net asset
value per share next computed after receipt of a purchase or redemption order in
good form. Payment for redemptions ordinarily will be made on behalf of the
Company and the relevant Fund by the Company's transfer agent (INVESCO) within
seven days after the redemption request is received. However, payment may be
postponed under unusual circumstances, such as when normal trading is not taking
place on the New York Stock Exchange or an emergency as defined by the
Securities and Exchange Commission exists.
Net asset value per share is computed for each Fund once each day that the
New York Stock Exchange is open, as of the close of regular trading on that
Exchange (usually 4:00 p.m., New York time), and also may be computed on other
days under certain circumstances. Net asset value per share for each Fund is
calculated by dividing the market value of the Fund's securities plus the value
of its other assets (including dividends and interest accrued but not
collected), less all liabilities (including accrued expenses), by the number of
<PAGE>
outstanding shares of the Fund. If market quotations are not readily available,
a security will be valued at fair value as determined in good faith by the board
of directors. Debt securities with remaining maturities of 60 days or less at
the time of purchase will be valued at amortized cost, absent unusual
circumstances, so long as the Company's board of directors believes that such
value represents fair value.
TAX STATUS, DIVIDENDS AND DISTRIBUTIONS
Taxes
The Internal Revenue Code of 1986, as amended (the "Code"), provides that
each investment portfolio of a series fund is to be treated as a separate
taxpayer. Accordingly, each Fund of the Company intends to continue to qualify
as a separate regulated investment company under Subchapter M of the Code.
Each Fund intends to comply with the diversification requirements of Code
Section 817(h). By meeting this and other requirements, the Participating
Insurance Companies, rather than the owners of variable annuity or variable life
insurance contracts, should be subject to tax on distributions received with
respect to Fund shares. For further information concerning federal income tax
consequences for the owners of variable annuity or variable life insurance
contracts, a contract owner should consult his or her Separate Account
Prospectus.
As a regulated investment company, each Fund generally will not be subject
to tax on its ordinary income and net realized capital gains to the extent such
income and gains are distributed in conformity with applicable distribution
requirements under the Code to the separate accounts of the Participating
Insurance Companies which hold its shares. Distributions of income and the
excess of net short-term capital gain over net long-term capital loss will be
treated as ordinary income, and distributions of the excess of net long-term
capital gain over net short-term capital loss will be treated as long-term
capital gain by the Participating Insurance Companies. Participating Insurance
Companies should consult their own tax advisers concerning whether such
distributions are subject to federal income tax if they are retained as part of
contract reserves.
Dividends
In addition to any increase in the value of a Fund's shares which may
occur from increases in the value of the Fund's investments, the Fund may earn
income in the form of dividends and interest on its investments. Dividends paid
by each Fund will be based solely on the income earned by that Fund. The
Company's policy with respect to each Fund is to distribute substantially all of
this income, less expenses, to shareholders of that Fund. At the discretion of
the board of directors, distributions are customarily made annually to
<PAGE>
shareholders of the Funds. Dividends are automatically reinvested in additional
shares of the Fund making the dividend distribution at its net asset value on
the ex-dividend date, unless an election is made on behalf of a separate
account to receive distributions in cash.
Capital Gains
Capital gains or losses are the result of a Fund selling its portfolio
securities at prices that are higher or lower than the prices paid by it to
purchase such securities. Total gains from such sales, less any losses from such
sales (including losses carried forward from prior years) represent net realized
capital gains. Each Fund distributes its net realized capital gains, if any, to
its shareholders at least annually, usually in December. Capital gains
distributions are automatically reinvested in additional shares of the Fund
making the distribution at its net asset value per share on the ex-dividend
date, unless an election is made on behalf of a separate account to receive
distributions in cash.
PERFORMANCE INFORMATION
From time to time, a Fund's total return and/or yield may be included in
advertisements, sales literature, shareholder reports or Separate Account
Prospectuses. A Fund's total return and yield include the effect of deducting
that Fund's expenses, but do not include charges and expenses attributable to
a particular variable annuity or variable life insurance contract. Because
shares of the Funds can be purchased only through a variable annuity or variable
life insurance contract, the Funds' total return and yield data should be
reviewed along with the description of contract charges and expenses contained
in the applicable Separate Account Prospectus. Total return or yield for a Fund
must always be accompanied by, and reviewed with, comparable total return or
yield data for an associated variable annuity separate account, or data that
would permit evaluation of the magnitude of variable life insurance charges and
expenses not reflected in the Fund's total return or yield. Fund total return
and yield figures are based upon historical results and are not intended to
indicate future performance.
The "total return" of a Fund refers to the average annual rate of return
of an investment in the Fund. This figure is computed by calculating the
percentage change in value of an investment of $1,000, assuming reinvestment of
all income dividends and capital gain distributions, to the end of a specified
period. "Total return" quotations reflect the performance of the Fund and
include the effect of capital changes.
The total return performance for the Industrial Income Fund, Total Return
Fund, High Yield Fund and Utilities Fund for the fiscal period ended December
31, 1995, was 29.25%, 22.79%, 19.76% and 9.08%, respectively.
<PAGE>
The yield of a Fund refers to the income generated by an investment in
the Fund over a 30-day or one-month period, and is computed by dividing the net
investment income per share earned during the period by the net asset value per
share at the end of the period, then adjusting the result to provide for
semi-annual compounding.
In conjunction with performance reports and/or analyses of shareholder
service for the Fund, comparisons of the Fund's performance for a given period
to the performance of recognized indices and for the same period may be made.
Such indices include ones provided by Dow Jones & Company, Standard & Poor's,
Lipper Analytical Services, Inc., Lehman Brothers, National Association of
Securities Dealers, Inc., Frank Russell Company, Value Line Investment Survey,
the American Stock Exchange, Morgan Stanley Capital International, Wilshire
Associates, the Financial Times- Stock Exchange, the New York Stock Exchange,
the Nikkei Stock Average and the Deutcher Aktienindex, all of which are
unmanaged market indicators. Such comparisons can be a useful measure of the
quality of the Funds' investment performance. However, because Fund performance
data does not reflect separate account and contract charges, Fund performance
data is not an appropriate measure of the performance of a contract owner's
investment in the variable annuity and variable life insurance contracts.
In addition, rankings, ratings, and comparisons of investment performance
and/or assessments of the quality of shareholder service appearing in
publications such as Money, Forbes, Kiplinger's Personal Finance, Morningstar,
and similar sources which utilize information compiled (i) internally; (ii) by
Lipper Analytical Services, Inc.; or (iii) by other recognized analytical
services, may be used in sales literature. The Lipper Analytical Services, Inc.
rankings and comparisons, which may be used by the Funds in performance reports,
will be drawn from the "Equity Income Funds" variable insurance product grouping
for the Industrial Income Fund, the "Flexible Portfolio Funds" grouping for the
Total Return Fund, the "High Current Yield Funds" grouping for the High Yield
Fund and the "Utility Funds" grouping for the Utility Fund. In addition, the
broad-based Lipper variable insurance product groupings may be used for
comparison to any of the Funds. A more complete list of publications that may be
quoted in sales literature is contained in the Statement of Additional
Information.
ADDITIONAL INFORMATION
Voting Rights
The Participating Insurance Companies and their separate accounts, rather
than individual contract owners, are the shareholders of the Funds. However,
each Participating Insurance Company will vote shares held by its separate
accounts as required by law and interpretations thereof, as amended or changed
from time to time. In accordance with current law and interpretations
<PAGE>
thereof, a Participating Insurance Company is required to request voting
instructions from its contract owners and must vote Fund shares held by each of
its separate accounts in proportion to the voting instructions received.
Additional information about voting procedures (including a discussion, where
applicable, of circumstances under which some Participating Insurance Companies
may vote Fund shares held by variable life insurance separate accounts other
than in accordance with contract owner instructions) is contained in the
applicable Separate Account Prospectuses.
All shares of the Funds have equal voting rights. When shareholders are
entitled to vote upon a matter, each shareholder is entitled to one vote for
each share owned and a corresponding fractional vote for each fractional share
owned. Voting with respect to certain matters, such as ratification of
independent accountants and the election of directors, will be by all Funds of
the Company voting together. In other cases, such as voting upon an investment
advisory contract, voting is on a Fund-by-Fund basis. To the extent permitted by
law, when not all Funds are affected by a matter to be voted upon, only
shareholders of the Fund or Funds affected by the matter will be entitled to
vote thereon. The Company is not generally required and does not expect to hold
regular annual meetings of shareholders. However, the board of directors will
call special meetings of shareholders for the purpose, among other reasons, of
voting upon the question of removal of a director or directors when requested to
do so in writing by the holders of 10% or more of the outstanding shares of the
Company or as may be required by applicable law or the Company's Articles of
Incorporation. The Company will assist shareholders in communicating with other
shareholders as required by the Investment Company Act of 1940. Directors may be
removed by action of the holders of a majority or more of the outstanding shares
of the Company.
Shareholder Inquiries
Inquiries regarding the Funds may be directed to the Company at the
telephone number or mailing address set forth on the cover page of this
Prospectus or to a Participating Insurance Company.
Transfer and Disbursing Agent
INVESCO acts as registrar, transfer agent, and dividend disbursing agent
for the Company pursuant to a Transfer Agency Agreement that provides for an
annual fee of $5,000 per Fund.
Master/Feeder Option
The Company may in the future seek to achieve any Fund's investment
objective by investing all of that Fund's assets in another investment company
having the same investment objective and substantially the same investment
policies and restrictions as those applicable to that Fund. It is expected that
any such investment company would be managed by INVESCO in substantially the
<PAGE>
same manner as the existing Fund. If permitted by applicable laws and policies
then in effect, any such investment may be made in the sole discretion of the
Company's board of directors without further approval of the Funds'
shareholders. However, Fund shareholders will be given at least 30 days prior
notice of any such investment. Such investment would be made only if the
Company's board of directors determines it to be in the best interests of a Fund
and its shareholders. In making that determination, the board will consider,
among other things, the benefits to shareholders and/or the opportunity to
reduce costs and achieve operational efficiencies. No assurance is given that
costs will be materially reduced if this option is implemented.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
PRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE COMPANY IN ANY
JURISDICTION IN WHICH SUCH AN OFFERING MAY NOT LAWFULLY BE MADE.
<PAGE>
APPENDIX
BOND RATINGS
The following is a description of Standard & Poor's and Moody's
Investors Service, Inc. ("Moody's") bond rating categories:
Standard & Poor's Corporate Bond Ratings
AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA - Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority of
instances they differ from AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB - Bonds rated BBB are regarded as having an adequate capability to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
BB - Bonds rated BB have less near-term vulnerability to default than
other speculative issues. However, they face major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments.
B - Bonds rated B have a greater vulnerability to default but currently
have the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal.
CCC - Bonds rated CCC have a currently identifiable vulnerability to
default and are dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial, or economic conditions, they are not
likely to have the capacity to pay interest and repay principal.
<PAGE>
Moody's Investors Service, Inc. Corporate Bond Ratings
Aaa - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa - Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risk appear somewhat larger than in Aaa securities.
A - Bonds rated A possess many favorable investment attributes, and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds rated Ba are judged to have speculative elements. Their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B - Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of other
terms of the contract over any longer period of time may be small.
Caa - Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
<PAGE>
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF - Industrial Income Portfolio
INVESCO VIF - Total Return Portfolio
INVESCO VIF - High Yield Portfolio
INVESCO VIF - Utilities Portfolio
Prospectus
May 1, 1996
To receive additional information about the Funds,
call toll free: 1-800-525-8085
or write to: INVESCO Funds Group, Inc.
Post Office Box 173706
Denver, Colorado 80217-3706
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1996
INVESCO VARIABLE INVESTMENT FUNDS, INC.
Address: Mailing Address:
7800 E. Union Avenue Post Office Box 173706
Denver, Colorado 80237 Denver, Colorado 80217-3706
Telephone:
In continental U.S., 1-800-525-8085
- --------------------------------------------------------------------------------
INVESCO Variable Investment Funds, Inc. (the "Company") was incorporated
under the laws of Maryland on August 19, 1993. The Company is an open-end
management investment company which offers shares of four diversified investment
portfolios (the "Funds"): the INVESCO VIF - Industrial Income Portfolio (the
"Industrial Income Fund"), the INVESCO VIF - Total Return Portfolio (the "Total
Return Fund"), the INVESCO VIF - High Yield Portfolio (the "High Yield Fund")
and the INVESCO VIF - Utilities Portfolio (the "Utilities Fund"). Additional
Funds may be offered in the future. The Company'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
Participating Insurance Companies. The Funds have the following investment
objectives:
Industrial Income Fund:
to seek the best possible current income while following sound investment
practices. Capital growth potential is an additional, but secondary,
consideration in the selection of portfolio securities. The Industrial
Income Fund seeks to achieve its investment objective by investing in
securities which will provide a relatively high yield and stable return
and which, over a period of years, also may provide capital appreciation.
Total Return Fund:
to seek a high total return on investment through capital appreciation and
current income. The Total Return Fund seeks to achieve its investment
objective by investing in a combination of equity securities (consisting
of common stocks and, to a lesser degree, securities convertible into
common stock) and fixed income securities.
<PAGE>
High Yield Fund:
to seek a high a level of current income by investing substantially all of
its assets in lower rated bonds and other debt securities and in preferred
stock. The Fund pursues its investment objective through investment in a
variety of long-term, intermediate-term, and short-term bonds. Potential
capital appreciation is a factor in the selection of investments, but is
secondary to the Fund's primary objective.
Utilities Fund:
to seek capital appreciation and income through investments primarily in
equity securities of companies principally engaged in the public utilities
business.
A prospectus for the Company dated May 1, 1996 (the "Prospectus"), which
provides the basic information a variable annuity or variable life insurance
contract owner should know about the Company and the Funds before allocating
variable annuity or variable life insurance contract values to one or more of
the Funds, may be obtained without charge from INVESCO Funds Group, Inc., Post
Office Box 173706, Denver, Colorado 80217-3706 or by contacting a Participating
Insurance Company. This Statement of Additional Information is not a prospectus,
but contains information in addition to and more detailed than that set forth in
the Prospectus. It is intended to provide additional information regarding the
activities and operations of the Funds and should be read in conjunction with
the Prospectus and with the prospectus and statement of additional information
for the applicable variable annuity or variable life insurance contract.
Investment Adviser and Distributor: INVESCO Funds Group, Inc.
("INVESCO")
<PAGE>
TABLE OF CONTENTS
Page
INVESTMENT POLICIES........................................................ 44
INVESTMENT RESTRICTIONS.................................................... 50
MANAGEMENT................................................................. 55
Investment Adviser................................................... 55
Investment Sub-Advisers.............................................. 55
Advisory Agreement................................................... 57
Sub-Advisory Agreements.............................................. 58
Administrative Services Agreement.................................... 60
Transfer Agency Agreement............................................ 61
Officers and Directors of the Company................................ 62
HOW SHARES ARE VALUED...................................................... 68
PERFORMANCE................................................................ 69
Total Return Calculations............................................ 69
Yield Calculations................................................... 70
Comparison of Fund Performance....................................... 70
PORTFOLIO TURNOVER......................................................... 72
PORTFOLIO BROKERAGE........................................................ 72
REDEMPTIONS................................................................ 75
ADDITIONAL INFORMATION..................................................... 75
Common Stock......................................................... 75
Principal Shareholders............................................... 77
Independent Accountants.............................................. 78
Custodian............................................................ 78
Transfer Agent....................................................... 79
Reports to Shareholders.............................................. 79
Legal Counsel........................................................ 79
Prospectus........................................................... 79
Registration Statement............................................... 79
APPENDIX A................................................................. 80
^
<PAGE>
INVESTMENT POLICIES
Reference is made to the section entitled "Investment Objectives and
Policies" in the Prospectus for a discussion of the investment objectives and
policies of the Funds. In addition, set forth below is further information
relating to the Funds. Portfolio management is provided to each Fund by its
sub-adviser (referred to collectively with INVESCO as ^"Fund Management").
Loans of Portfolio Securities
As described in the section entitled "Risk Factors" in the Prospectus,
each Fund may lend its portfolio securities to brokers, dealers, and other
financial institutions, provided that such loans are callable at any time by the
Funds and are at all times secured by collateral consisting of cash, cash
equivalents, high-quality short-term government securities or irrevocable
letters of credit, or any combination thereof, equal to at least the market
value, determined daily, of the loaned securities. The advantage of such loans
is that the Funds continue to earn income on the loaned securities, while at the
same time receiving interest from the borrower of the securities. Loans will be
made only to firms deemed by INVESCO or the applicable Fund's subadviser (under
procedures established by the Company's board of directors) to be creditworthy,
and when the amount of interest to be received justifies the inherent risks. A
loan may be terminated by the borrower on one business day's notice, or by the
Fund at any time. If at any time the borrower fails to maintain the required
amount of collateral, the Fund will require the deposit of additional collateral
not later than the business day following the day on which a collateral
deficiency occurs or the collateral appears inadequate. If the deficiency is not
remedied by the end of that period, the Fund will use the collateral to replace
the securities while holding the borrower liable for any excess of replacement
cost over collateral. Upon termination of the loan, the borrower is required to
return the securities to the Fund. Any gain or loss during the loan period would
inure to the Fund.
While voting rights may pass with the loaned securities, if a material
event (e.g., proposed merger, sale of assets, or liquidation) is to occur
affecting an investment on loan, the loan must be called and the securities
voted. Loans of securities made by the Fund will comply with all other
applicable regulatory requirements, including the rules of the New York Stock
Exchange and the requirements of the Investment Company Act of 1940, as amended
(the "1940 Act"), and rules thereunder.
Futures, Options on Futures and Options on Securities
As discussed in the section entitled "Risk Factors" in the Prospectus, the
Funds may enter into futures contracts, and purchase and sell ("write") options
to buy or sell futures contracts and other securities. These instruments are
sometimes referred to as "derivatives." The Funds will comply with and
<PAGE>
adhere to all limitations in the manner and extent to which they effect
transactions in futures and options on such futures currently imposed by the
rules and policy guidelines of the Commodity Futures Trading Commission (the
"CFTC") as conditions for exemption of a mutual fund, or investment advisers
thereto, from registration as a commodity pool operator. Under those
restrictions, a Fund will not, as to any positions, whether long, short or a
combination thereof, enter into futures and options thereon for which the
aggregate initial margins and premiums exceed 5% of the fair market value of the
Fund's total assets after taking into account unrealized profits and losses on
options it has entered into. In the case of an option that is "in-the-money" (as
defined in the Commodities Exchange Act (the "CEA")), the in-the-money amount
may be excluded in computing such 5%. (In general a call option on a future is
"in-the-money" if the value of the future exceeds the exercise ("strike") price
of the call; a put option on a future is "in-the-money" if the value of the
future which is the subject of the put is exceeded by the strike price of the
put.) The Funds may use futures and options thereon solely for bona fide hedging
or for other non-speculative purposes within the meaning and intent of the
applicable provisions of the CEA. As to long positions which are used as part of
the Funds' portfolio strategies and are incidental to their activities in the
underlying cash market, the "underlying commodity value" of the Funds' futures
and options thereon must not exceed the sum of (i) cash set aside in an
identifiable manner, or short-term U.S. debt obligations or other dollar-
denominated high-quality, short-term money instruments so set aside, plus sums
deposited on margin; (ii) cash proceeds from existing investments due in 30
days; and (iii) accrued profits held at the futures commission merchant. The
"underlying commodity value" of a future is computed by multiplying the size of
the future by the daily settlement price of the future. For an option on a
future, that value is the underlying commodity value of the future underlying
the option.
Unlike when a Fund purchases or sells a security, no price is paid or
received by a Fund upon the purchase or sale of a futures contract. Instead, the
Fund will be required to deposit in a segregated asset account with the broker
an amount of cash or qualifying securities (currently U.S. Treasury bills),
currently in a minimum amount of $15,000. This is called "initial margin." Such
initial margin is in the nature of a performance bond or good faith deposit on
the contract. However, since losses on open contracts are required to be
reflected in cash in the form of variation margin payments, the Fund may be
required to make additional payments during the term of the contracts to its
broker. Such payments would be required, for example, where, during the term of
an interest rate futures contract purchased by the Fund, there was a general
increase in interest rates, thereby making the Fund's portfolio securities less
valuable. In all instances involving the purchase of financial futures contracts
by a Fund, an amount of cash together with such other securities as permitted by
applicable regulatory authorities to be utilized for such purpose, at least
equal to the market value of the futures contracts, will
<PAGE>
be deposited in a segregated account with the Funds' custodian to collateralize
the position. At any time prior to the expiration of a futures contract, the
Fund may elect to close its position by taking an opposite position which will
operate to terminate the Fund's position in the futures contract. For a more
complete discussion of the risks involved in interest rate futures and options
on interest rate futures and other debt securities, refer to Appendix A
("Description of Futures and Options Contracts").
Where futures are purchased to hedge against a possible increase in the
price of a security before a Fund is able in an orderly fashion to invest in the
security, it is possible that the market may decline instead. If the Fund, as a
result, concluded not to make the planned investment at that time because of
concern as to possible further market decline or for other reasons, the Fund
would realize a loss on the futures contract that is not offset by a reduction
in the price of securities purchased.
In addition to the possibility that there may be an imperfect correlation
or no correlation at all between movements in the futures and the portion of the
portfolio being hedged, the price of futures may not correlate perfectly with
movements in interest rates or exchange rates due to certain market distortions.
All participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between interest rates
or exchange rates and the value of a future. Moreover, the deposit requirements
in the futures market are less onerous than margin requirements in the
securities market and may therefore cause increased participation by speculators
in the futures market. Such increased participation also may cause temporary
price distortions. Due to the possibility of price distortion in the futures
market and because of the imperfect correlation between movements in interest
rates or exchange rates and movements in the prices of futures contracts, the
value of futures contracts as a hedging device may be reduced.
In addition, if a Fund has insufficient available cash, it may at times
have to sell securities to meet variation margin requirements. Such sales may
have to be effected at a time when it may be disadvantageous to do so.
Options on Futures Contracts
The Funds may buy and write options on futures contracts for hedging
purposes. The purchase of a call option on a futures contract is similar in some
respects to the purchase of a call option on an individual security. Depending
on the pricing of the option compared to either the price of the futures
contract upon which it is based or the price of the underlying instrument,
ownership of the option may or may not be less risky than ownership of the
futures contract or the underlying instrument. As with the purchase of futures
<PAGE>
contracts, when a Fund is not fully invested it may buy a call option on a
futures contract to hedge against a market advance.
The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the security or foreign currency which is
deliverable under, or the index comprising, the futures contract. If the futures
price at the expiration of the option is below the exercise price, a Fund will
retain the full amount of the option premium, which provides a partial hedge
against any decline that may have occurred in the Fund's portfolio holdings. The
writing of a put option on a futures contract constitutes a partial hedge
against increasing prices of the security or foreign currency which is
deliverable under, or of the index comprising, the futures contract. If the
futures price at expiration of the option is higher than the exercise price, the
Fund will retain the full amount of the option premium which provides a partial
hedge against any increase in the price of securities which the Fund is
considering buying. If a call or put option the Fund has written is exercised,
the Fund will incur a loss which will be reduced by the amount of the premium it
received. Depending on the degree of correlation between change in the value of
its portfolio securities and changes in the value of the futures positions, the
Fund's losses from existing options on futures may to some extent be reduced or
increased by changes in the value of portfolio securities.
The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities. For
example, a Fund may buy a put option on a futures contract to hedge the Fund's
portfolio against the risk of falling prices.
The amount of risk a Fund assumes when it buys an option on a futures
contract is the premium paid for the option plus related transaction costs. In
addition to the correlation risks discussed above, the purchase of an option
also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the options bought.
Forward Foreign Currency Contracts
The Funds may enter into forward currency contacts to purchase or sell
foreign currencies (i.e., non-U.S. currencies) as a hedge against possible
variations in foreign exchange rates. These instruments are sometimes referred
to as "derivatives." A forward foreign currency exchange contract is an
agreement between the contracting parties to exchange an amount of currency at
some future time at an agreed upon rate. The rate can be higher or lower than
the spot rate between the currencies that are the subject of the contract. A
forward contract generally has no deposit requirement, and such transactions do
not involve commissions. By entering into a forward contract for the purchase or
sale of the amount of foreign currency invested in a foreign security
<PAGE>
transaction, a Fund can hedge against possible variations in the value of the
dollar versus the subject currency either between the date the foreign security
is purchased or sold and the date on which payment is made or received or during
the time the Fund holds the foreign security. Hedging against a decline in the
value of a currency in the foregoing manner does not eliminate fluctuations in
the prices of portfolio securities or prevent losses if the prices of such
securities decline. Furthermore, such hedging transactions preclude the
opportunity for gain if the value of the hedged currency should rise. The Funds
will not speculate in forward currency contracts. ^ Although the Funds have not
adopted any limitations on their ability to use forward contracts as a hedge
against fluctuations in foreign exchange rates, the Funds do not attempt to
hedge all of their non-U.S. portfolio positions and will enter into such
transactions only to the extent, if any, deemed appropriate by Fund Management.
The Funds will not enter into forward contracts for a term of more than one
year. Forward contracts may from time to time be considered illiquid, in which
case they would be subject to the Funds' limitation on investing in illiquid
securities, discussed in the Prospectus.
Restricted/144A Securities
In recent years, a large institutional market has developed for certain
securities that are not registered under the Securities Act of 1933, as amended
(the "1933 Act"). Institutional investors generally will not seek to sell these
instruments to the general public, but instead will often depend on an efficient
institutional market in which such unregistered securities can readily be resold
or on an issuer's ability to honor a demand for repayment. Therefore, the fact
that there are contractual or legal restrictions on resale to the general public
or certain institutions is not dispositive of the liquidity of such investments.
Rule 144A under the 1933 Act establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. Institutional markets for restricted securities
that might develop as a result of Rule 144A could provide both readily
ascertainable values for restricted securities and the ability to liquidate an
investment in order to satisfy share redemption orders. An insufficient number
of qualified institutional buyers interested in purchasing Rule 144A-eligible
securities held by a Fund, however, could affect adversely the marketability of
such portfolio securities and the Fund might be unable to dispose of such
securities promptly or at reasonable prices.
When-Issued and Delayed Delivery Securities
The Funds may purchase and sell securities on a when-issued or delayed
delivery basis. When-issued or delayed delivery transactions arise when
securities (normally, debt obligations of issuers eligible for investment by the
Funds) are purchased or sold by a Fund with payment and delivery taking place in
<PAGE>
the future in order to secure what is considered to be an advantageous price and
yield. However, the yield on a comparable security available when delivery takes
place may vary from the yield on the security at the time that the when-issued
or delayed delivery transaction was entered into. When a Fund engages in
when-issued and delayed delivery transactions, it relies on the seller or buyer,
as the case may be, to consummate the sale. Failure to do so may result in the
Fund missing the opportunity of obtaining a price or yield considered to be
advantageous. When-issued and delayed delivery transactions may generally be
expected to settle within one month from the date the transactions are entered
into, but in no event later than 90 days. However, no payment or delivery is
made by the Fund until it receives delivery or payment from the other party to
the transaction.
To the extent that a Fund remains substantially fully invested at the same
time that it has purchased when-issued securities, as it would normally expect
to do, there may be greater fluctuations in its net assets than if the Fund set
aside cash to satisfy its purchase commitments.
When a Fund purchases securities on a when-issued basis, it will maintain
in a segregated account cash, U.S. government securities or other high-grade
debt obligations readily convertible into cash having an aggregate value equal
to the amount of such purchase commitments, until payment is made. If necessary,
additional assets will be placed in the account daily so that the value of the
account will equal or exceed the amount of the Fund's purchase commitments.
U.S. Government Obligations
Each Fund may, from time to time, purchase U.S. government obligations.
These securities consist of treasury bills, treasury notes, and treasury bonds,
which differ only in their interest rates, maturities, and dates of issuance.
Treasury bills have a maturity of one year or less. Treasury notes generally
have a maturity of one to ten years, and treasury bonds generally have
maturities of more than ten years. U.S. government obligations also include
securities issued or guaranteed by agencies or instrumentalities of the U.S.
government.
Some obligations of United States government agencies, which are
established under the authority of an act of Congress, such as Government
National Mortgage Association (GNMA) participation certificates, are supported
by the full faith and credit of the United States Treasury. GNMA certificates
are mortgage-backed securities representing part ownership of a pool of mortgage
loans. These loans -- issued by lenders such as mortgage bankers, commercial
banks and savings and loan associations -- are either insured by the Federal
Housing Administration or guaranteed by the Veterans Administration. A "pool" or
group of such mortgages is assembled and, after being approved by GNMA, is
offered to investors through securities dealers. Once approved by GNMA, the
<PAGE>
timely payment of interest and principal on each mortgage is guaranteed by GNMA
and backed by the full faith and credit of the United States government. The
market value of GNMA certificates is not guaranteed. GNMA certificates differ
from bonds in that principal is paid back monthly by the borrower over the term
of the loan rather than returned in a lump sum at maturity. GNMA certificates
are called "pass-through" securities because both interest and principal
payments (including prepayments) are passed through to the holder of the
certificate. Upon receipt, principal payments will be used by each Fund to
purchase additional securities under its investment objective and investment
policies.
Other United States government obligations, such as securities of the
Federal Home Loan Banks, are supported by the right of the issuer to borrow from
the Treasury to repay its obligations. Still others, such as bonds issued by the
Federal National Mortgage Association, a federally chartered private
corporation, are supported only by the credit of the instrumentality.
INVESTMENT RESTRICTIONS
As described in the section of the Prospectus entitled "Investment
Restrictions," the Funds operate under certain investment restrictions that
are fundamental and may not be changed with respect to a particular Fund without
the prior approval of the holders of a majority of the outstanding voting
securities of that Fund, as defined in the 1940 Act. For purposes of the
following limitations, all percentage limitations apply immediately after a
purchase or initial investment. Any subsequent change in a particular percentage
resulting from fluctuations in value does not require elimination of any
security from a Fund.
Each Fund may not:
1. With respect to seventy-five percent (75%) of its total
assets, purchase the securities of any one issuer (except
cash items and "government securities" as defined under
the 1940 Act), if the purchase would cause the Fund to
have more than 5% of the value of its total assets
invested in the securities of such issuer or to own more
than 10% of the outstanding voting securities of such
issuer;
2. Borrow money, except that the Fund may borrow money for
temporary or emergency purposes (not for leveraging or
investment) and may enter into reverse repurchase
agreements in an aggregate amount not exceeding 33 1/3%
of the value of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any
borrowings that come to exceed 33 1/3% of the value of
the Fund's total assets by reason of a decline in net
assets will be reduced within three business days to the
extent necessary to comply with the 33 1/3% limitation.
<PAGE>
This restriction shall not prohibit deposits of assets to margin
or guarantee positions in futures, options, swaps or forward
contracts, or the segregation of assets in connection with
such contracts.
3. Invest more than 25% of the value of its total assets in any
particular industry (other than government securities), except that
the Utilities Fund may invest more than 25% of the value of its
total assets in public utilities industries.
4. Invest directly in real estate or interests in real estate; however,
the Fund may own debt or equity securities issued by companies
engaged in those businesses.
5. Purchase or sell physical commodities other than foreign currencies
unless acquired as a result of ownership of securities (but this
shall not prevent the Fund from purchasing or selling options,
futures, swaps and forward contracts or from investing in securities
or other instruments backed by physical commodities).
6. Lend any security or make any other loan if, as a result, more than
33 1/3% of its total assets would be lent to other parties (but this
limitation does not apply to purchases of commercial paper, debt
securities or to repurchase agreements.)
7. Act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the
disposition of portfolio securities of the Fund.
Each Fund may, notwithstanding any other investment policy or limitation
(whether or not fundamental), invest all of its assets in the securities of a
single open-end management investment company with substantially the same
fundamental investment objectives, policies and limitations as the Fund.
Furthermore, the board of directors has adopted additional investment
restrictions for each Fund. These restrictions are operating policies of each
Fund and may be changed by the board of directors without shareholder approval.
The additional investment restrictions adopted by the board of directors to date
include the following:
(a) The Fund's investments in warrants, valued at the lower
of cost or market, may not exceed 5% of the value of its
net assets. Included within that amount, but not to
exceed 2% of the value of the Fund's net assets, may be
warrants that are not listed on the New York or American
Stock Exchanges. Warrants acquired by the Fund in units
or attached to securities shall be deemed to be without
value.
<PAGE>
(b) The Fund will not (i) enter into any futures contracts or
options on futures contracts if immediately thereafter
the aggregate margin deposits on all outstanding futures
contracts positions held by the Fund and premiums paid on
outstanding options on futures contracts, after taking
into account unrealized profits and losses, would exceed
5% of the market value of the total assets of the Fund,
or (ii) enter into any futures contracts if the aggregate
net amount of the Fund's commitments under outstanding
futures contracts positions of the Fund would exceed the
market value of the total assets of the Fund.
(c) The Fund does not currently intend to sell securities short, unless
it owns or has the right to obtain securities equivalent in kind and
amount to the securities sold short without the payment of any
additional consideration therefor, and provided that transactions in
options, swaps and forward futures contracts are not deemed to
constitute selling securities short.
(d) The Fund does not currently intend to purchase securities on margin,
except that the Fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that
margin payments and other deposits in connection with transactions
in options, futures, swaps and forward contracts shall not be deemed
to constitute purchasing securities on margin.
(e) The Fund does not currently intend to (i) purchase
securities of closed end investment companies, except in
the open market where no commission except the ordinary
broker's commission is paid, or (ii) purchase or retain
securities issued by other open-end investment companies.
Limitations (i) and (ii) do not apply to money market
funds or to securities received as dividends, through
offers of exchange, or as a result of a reorganization,
consolidation, or merger. If the Fund invests in a money
market fund, the Fund's investment adviser will reduce
its advisory fee by the amount of any investment advisory
and administrative services fees paid to the investment
manager of the money market fund.
(f) The Fund may not mortgage or pledge any securities owned
or held by the Fund in amounts that exceed, in the
aggregate, 15% of the Fund's net asset value, provided
that this limitation does not apply to reverse repurchase
agreements or in the case of assets deposited to margin
or guarantee positions in futures, options, swaps or
forward contracts or placed in a segregated account in
connection with such contracts.
<PAGE>
(g) The Fund does not currently intend to purchase securities
of any issuer (other than U.S. government agencies and
instrumentalities or instruments guaranteed by an entity
with a record of more than three years' continuous
operation, including that of predecessors) with a record
of less than three years' continuous operation (including
that of predecessors) if such purchase would cause the
Fund's investments in all such issuers to exceed 5% of
the Fund's total assets taken at market value at the time
of such purchase.
(h) The Fund does not currently intend to invest directly in oil, gas,
or other mineral development or exploration programs or leases;
however, the Fund may own debt or equity securities of companies
engaged in those businesses.
(i) The Fund does not currently intend to purchase any
security or enter into a repurchase agreement if, as a
result, more than 15% of its net assets would be invested
in repurchase agreements not entitling the holder to
payment of principal and interest within seven days and
in securities that are illiquid by virtue of legal or
contractual restrictions on resale or the absence of a
readily available market. The board of directors, or the
Fund's investment adviser acting pursuant to authority
delegated by the board of directors, may determine that
a readily available market exists for securities eligible
for resale pursuant to Rule 144A under the Securities Act
of 1933, or any successor to such rule, and therefore
that such securities are not subject to the foregoing
limitation.
(j) The Fund may not invest in companies for the purpose of exercising
control or management, except to the extent that exercise by the
Fund of its rights under agreements related to portfolio securities
would be deemed to constitute such control.
(k) The Fund may not invest more than 25% of the value of its total
assets directly in foreign securities. Securities of Canadian
issuers and securities purchased by means of American Depository
Receipts ("ADRs") are not subject to this 25% limitation.
In applying the industry concentration investment restriction (no. 3,
above) the Funds use an industry classification system based on the O'Neil
Database published by William O'Neil & Co., Inc.
With respect to investment restriction (i) above, the board of directors
has delegated to Fund Management the authority to determine whether a liquid
<PAGE>
market exists for securities eligible for resale pursuant to Rule 144A under the
1933 Act, or any successor to such rule^ and ^ that such securities are not
subject to this restriction. Under guidelines established by the board of
directors, Fund Management will consider the following factors, among others,
in making this determination: (1) the unregistered nature of a Rule 144A
security, (2) the frequency of trades and quotes for the security; (3) the
number of dealers willing to purchase or sell the security and the number of
other potential purchasers; (4) dealer undertakings to make a market in the
security; and (5) the nature of the security and the nature of marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of transfer).
In order to enable California investors to allocate variable annuity or
variable life insurance contract values to one or more of the Funds, the Company
has committed to comply with the following guidelines: (i) the borrowing limits
for any Fund are (a) 10% of net asset value when borrowing for any general
purpose and (b) 25% of net asset value when borrowing as a temporary measure to
facilitate redemptions (for purposes of this clause, the net asset value of a
Fund is the market value of all investments or assets owned less outstanding
liabilities of the Fund at the time that any new or additional borrowing is
undertaken); and (ii) if a Fund invests in foreign companies, the foreign
country diversification guidelines to be followed by the Fund are as follows:
(a) The Fund will be invested in a minimum of five different foreign
countries at all times. However, this minimum is reduced to four
when foreign country investments comprise less than 80% of the
Fund's net asset value, to three when less than 60% of such value,
to two when less than 40% and to one when less than 20%.
(b) Except as set forth in items (c) and (d) below, the Fund will have
no more than 20% of its net asset value invested in securities of
issuers located in any one country.
(c) The Fund may have an additional 15% of its net asset value invested
in securities of issuers located in any one of the following
countries: Australia, Canada, France, Japan, the United Kingdom, or
Germany.
(d) The Fund's investments in United States issuers are not subject to
the foreign country diversification guide lines.
State insurance laws and regulations may impose additional limitations on
lending securities and the use of options, futures and other derivative
instruments.
<PAGE>
MANAGEMENT
Investment Adviser
INVESCO Funds Group, Inc., a Delaware corporation ("INVESCO"), is
employed as the Company's investment adviser. INVESCO was established in 1932
and also serves as an investment adviser to INVESCO Diversified Funds, Inc.,
INVESCO Dynamics Fund, Inc., INVESCO Emerging Opportunity Funds, Inc., INVESCO
Growth Fund, Inc., INVESCO Income Funds, Inc., INVESCO Industrial Income Fund,
Inc., INVESCO International Funds, Inc., INVESCO Money Market Funds, Inc.,
INVESCO Multiple Asset Funds, Inc., INVESCO Specialty Funds, Inc., INVESCO
Strategic Portfolios, Inc., INVESCO Tax-Free Income Funds, Inc., and INVESCO
Value Trust.
Investment Sub-Advisers
Pursuant to agreements with INVESCO, INVESCO Trust Company ("INVESCO
Trust") serves as the sub-adviser to the Industrial Income, High Yield and
Utilities Funds and INVESCO Capital Management, Inc. ("ICM") serves as
sub-adviser to the Total Return Fund. INVESCO Trust, a trust company founded in
1969, is a wholly-owned subsidiary of INVESCO that, as of December 31, 1995,
managed 41 other investment portfolios, including 27 portfolios in the INVESCO
group.
ICM is an indirect wholly-owned subsidiary of INVESCO PLC whose business
is the management of institutional investment portfolios, consisting primarily
of discretionary employee benefit plans for corporations and state and local
governments, and endowment funds. In addition, ICM serves as investment adviser
or sub-adviser to 17 investment portfolios of 8 investment companies
(including the Company). ICM is the sole shareholder of INVESCO Services, Inc.,
a registered broker-dealer whose primary business is the distribution of shares
of two registered investment companies.
INVESCO is an indirect, wholly-owned subsidiary of INVESCO PLC, a
publicly-traded holding company organized in 1935. Through subsidiaries located
in London, Denver, Atlanta, Boston, Louis- ville, Dallas, Tokyo, Hong Kong, and
the Channel Islands, INVESCO PLC provides investment services around the world.
INVESCO was acquired by INVESCO PLC in 1982 and as of December 31, 1995, managed
14 mutual funds, consisting of 38 separate portfolios, on behalf of over 713,000
shareholders. INVESCO PLC's other North American subsidiaries include the
following:
--INVESCO Capital Management, Inc. of Atlanta, Georgia, manages
institutional investment portfolios, consisting primarily of discretionary
employee benefit plans for corporations and state and local governments, and
endowment funds. INVESCO Capital Management, Inc. is the sole shareholder of
<PAGE>
INVESCO Services, Inc., a registered broker-dealer whose primary business is the
distribution of shares of two registered investment companies.
--INVESCO Management & Research, Inc. of Boston, Massachu-
setts, primarily manages pension and endowment accounts.
--PRIMCO Capital Management, Inc. of Louisville, Kentucky,
specializes in managing stable return investments, principally on
behalf of Section 401(k) retirement plans.
--INVESCO Realty Advisors of Dallas, Texas, is responsible for providing
advisory services in the U.S. real estate markets for INVESCO PLC's clients
worldwide. Clients include corporate plans, public pension funds as well as
endowment and foundation accounts.
The corporate headquarters of INVESCO PLC are located at 11 Devonshire
Square, London, EC2M 4YR, England.
As indicated in the Prospectus, INVESCO permits investment and other
personnel to purchase and sell securities for their own accounts in accordance
with a compliance policy governing personal investing by directors, officers and
employees of INVESCO and its North American affiliates. The policy requires
officers, inside directors, investment and other personnel of INVESCO, INVESCO
Trust and ICM to pre-clear all transactions in securities not otherwise exempt
under the policy. Requests for trading authority will be denied when, among
other reasons, the proposed personal transaction would be contrary to the
provisions of the policy or would be deemed to adversely affect any transaction
then known to be under consideration for or to have been effected on behalf of
any client account, including the Funds.
In addition to the pre-clearance requirement described above, the policy
subjects officers, inside directors, investment and other personnel of INVESCO
and its North American affiliates to various trading restrictions and reporting
obligations. All reportable transactions are reviewed for compliance with the
policy. The provisions of this policy are administered by and subject to
exceptions authorized by INVESCO, INVESCO Trust and ICM.
Advisory Agreement
INVESCO serves as investment adviser pursuant to an investment advisory
agreement (the "Agreement") with the Company which was approved on October 20,
1993, by a vote cast in person by a majority of the directors of the Company,
including a majority of the directors who are not "interested persons" of the
Company, INVESCO, INVESCO Trust or ICM (the "Independent Directors") at a
meeting called for such purpose. The initial shareholder of the Company approved
the Agreement, on December 17, 1993 for an initial term expiring April 30, 1995.
The Agreement has been continued by action of the board of directors through
April 30, 1997. Thereafter, the Agreement may be continued from year to year as
to each Fund as long as each such continuance is specifically approved at
<PAGE>
least annually by the board of directors of the Company, or by a vote of the
holders of a majority, as defined in the 1940 Act, of the outstanding shares of
the Fund. Any such continuance also must be approved by vote of a majority of
the Independent Directors, cast in person at a meeting called for the purpose of
voting on such continuance. The Agreement may be terminated at any time without
penalty by either party upon sixty (60) days' written notice and terminates
automatically in the event of an assignment to the extent required by the ^ 1940
Act and the rules thereunder. Shareholder approval of any continuance of the
Agreement, or of the sub-advisory agreements discussed below, shall be effective
with respect to any Fund if a majority of the outstanding voting securities of
the series of shares of that Fund vote to approve the continuance,
notwithstanding that the continuance may not have been approved by a majority of
the outstanding voting securities of (i) any other Fund affected by the
Agreement or (ii) all of the Funds.
The Agreement provides that INVESCO shall manage the investment portfolios
of the Funds in conformity with the Funds' investment objectives and policies
(either directly or by delegation to a sub-adviser, which may be a party
affiliated with INVESCO). Further, INVESCO shall perform all administrative,
internal accounting (including computation of net asset value), clerical,
statistical, secretarial and all other services necessary or incidental to the
administration of the affairs of the Funds excluding, however, those services
that are the subject of separate agreement between the Company and INVESCO or
any affiliate thereof, including the distribution and sale of Fund shares and
provision of transfer agency, dividend disbursing agency, and registrar
services, and services furnished under an Administrative Services Agreement with
INVESCO ^ discussed below. Services provided under the Agreement include, but
are not limited to: supplying the Company with officers, clerical staff and
other employees, if any, who are necessary in connection with the Funds'
operations; furnishing office space, facilities, equipment, and supplies;
providing personnel and facilities required to respond to inquiries related to
shareholder accounts; conducting periodic compliance reviews of the Funds'
operations; preparation and review of required documents, reports and filings by
INVESCO's in-house legal and accounting staff (including the Prospectus,
Statement of Additional Information, proxy statements, shareholder reports, tax
returns, reports to the SEC, and other corporate documents of the Funds), except
insofar as the assistance of independent accountants or attorneys is necessary
or desirable; supplying basic telephone service and other utilities; and
preparing and maintaining certain of the books and records required to be
prepared and maintained by the Funds under the 1940 Act. Expenses not assumed by
INVESCO are borne by the Funds.
As full compensation for its advisory services to the Company, INVESCO
receives a monthly fee. The fee is based upon a percentage of each Fund's
average net assets determined daily. For the Industrial Income and Total Return
Funds, the advisory fees are each computed at the annual rate of 0.75% of the
<PAGE>
first $500 million of the Fund's average net assets; 0.65% of the next $500
million of the Fund's average net assets; and 0.55% of the Fund's average net
assets in excess of $1 billion. For the High Yield and Utilities Funds, the
advisory fees are each computed at the annual rate of 0.60% of the first $500
million of the Fund's average net assets, 0.55% of the next $500 million of the
Fund's average net assets and 0.45% of the Fund's average net assets in excess
of $1 billion.
^
Any amendment of the Agreement requires approval of a majority of the
Company's board of directors, including a majority of the Independent Directors,
by votes cast in person at a meeting called for such purpose and (other than
amendments that can become effective without shareholder approval under
applicable law) also requires approval of a majority of the outstanding voting
securities of any Fund affected by such amendment.
Sub-Advisory Agreements
INVESCO Trust serves as sub-adviser to the Industrial Income, High Yield
and Utilities Funds pursuant to a sub-advisory agreement with INVESCO (the
"INVESCO Trust Sub-Agreement") and ICM serves as sub-adviser to the Total Return
Fund pursuant to a sub-advisory agreement with INVESCO (the "ICM Sub-Agreement,"
collectively with the INVESCO Trust Sub-Agreement, the "Sub-Agreements"). Each
Sub- Agreement was approved on October 20, 1993, by a majority of the
Independent Directors by votes cast in person at a meeting called for such
purpose. The initial shareholder of each Fund approved the applicable
Sub-Agreement on December 17, 1993, for an initial term expiring April 30, 1995.
Each Agreement has been continued by action of the board of directors until
April 30, 1997. Thereafter, each Agreement may be continued from year to year
as to a particular Fund as long as each such continuance is specifically
approved at least annually by the board of directors of the Company, or by a
vote of the holders of a majority, as defined in the 1940 Act, of the
outstanding shares of that Fund. Each such continuance also must be approved by
a majority of the Independent Directors, cast in person at a meeting called
for the purpose of voting on such continuance. Each Sub-Agreement may be
terminated at any time without penalty by either party or the Company upon sixty
(60) days' written notice, and terminates automatically in the event of an
assignment to the extent required by the 1940 Act and the rules thereunder.
The Sub-Agreements provide that, subject to the supervision of INVESCO,
INVESCO Trust shall manage the investment portfolios of the Industrial Income,
High Yield and Utilities Funds and ICM shall manage the investment portfolio of
the Total Return Fund, in conformity with the respective Funds' investment
objectives and policies. In each case, these management services would include:
(a) managing the investment and reinvestment of all the assets, now or hereafter
<PAGE>
acquired, of the Fund, and executing all purchases and sales of portfolio
securities; (b) maintaining a continuous investment program for the Fund,
consistent with (i) the Fund's investment objective and policies as set forth in
the Company's Articles of Incorporation, Bylaws, and Registration Statement, as
from time to time amended, under the 1940 Act, and in any prospectus and/or
statement of additional information of the Company, as from time to time amended
and in use under the 1933 Act, and (ii) the Company's status as a regulated
investment company under the Internal Revenue Code of 1986, as amended; (c)
determining what securities are to be purchased or sold for the Fund, unless
otherwise directed by the directors of the Company or INVESCO, and executing
transactions accordingly; (d) providing the Fund the benefit of all of the
investment analysis and research, the reviews of current economic conditions and
trends, and the consideration of long-range investment policy now or hereafter
generally available to investment advisory customers of the Fund's sub-adviser;
(e) determining what portion of the Fund should be invested in the various types
of securities authorized for purchase by that Fund; and (f) making
recommendations as to the manner in which voting rights, rights to consent to
Company action and any other rights pertaining to the portfolio securities of
the Fund shall be exercised.
Any amendment of a Sub-Agreement, in order to be applicable to a Fund,
requires approval of a majority of the Company's board of directors, including a
majority of the Independent Directors, by votes cast in person at a meeting
called for such purpose and (other than amendments that can become effective
without shareholder approval under applicable law) also requires approval of a
majority of the outstanding voting securities of that Fund.
The INVESCO Trust Sub-Agreement provides that as compensation for its
services, INVESCO Trust shall receive from INVESCO, at the end of each month, a
fee based upon the average daily value of the net assets of each Fund managed.
The subadvisory fee for the Industrial Income Fund is computed at the annual
rate of 0.375% on the first $500 million of the Fund's average net assets;
0.325% on the next $500 million of the Fund's average net assets; and 0.275%
on the Fund's average net assets in excess of $1 billion. The subadvisory fees
for the High Yield and Utilities Funds are each computed at the annual rate of
0.30% on the first $500 million of the Fund's average net assets; 0.275% on
the next $500 million of the Fund's average net assets and 0.225% on the
Fund's average net assets in excess of $1 billion.
The ICM Sub-Agreement provides that as compensation for its services, ICM
shall receive from INVESCO, at the end of each month, a fee based upon the
average daily value of the Total Return Fund's net assets at the following
annual rates: 0.375% on the Fund's average net assets up to $500 million;
0.325% on the Fund's average net assets in excess of $500 million but not more
than $1 billion; and 0.275% on the Fund's average net assets in excess of $1
billion.
<PAGE>
Each sub-advisory fee is paid by INVESCO, NOT the Funds.
Administrative Services Agreement
INVESCO, either directly or through affiliated companies, provides certain
administrative, sub-accounting, and recordkeeping services to the Company
pursuant to an Administrative Services Agreement dated October 20, 1993 (the
"Administrative Agreement"). The Administrative Agreement was approved on
October 20, 1993, by all of the directors of the Company, including all of the
Independent Directors, by votes cast at a meeting called for such purpose. The
Administrative Agreement was for an initial term expiring April 30, 1994 and has
been continued by action of the board of directors until April 30, 1997. The
Administrative Agreement may be continued from year to year thereafter as long
as each such continuance is specifically approved by the board of directors of
the Company, including a majority of the directors, cast in person at a
meeting called for the purpose of voting on such continuance. The Administrative
Agreement may be terminated at any time without penalty by INVESCO on sixty (60)
days' written notice, or by the Company upon thirty (30) days' written notice,
and terminates automatically in the event of an assignment unless the Company's
board of directors approves such assignment.
The Administrative Agreement provides that INVESCO shall provide the
following services to the Funds: (a) such accounting and recordkeeping services
and functions as are reasonably necessary for the operation of the Funds; and
(b) such accounting, recordkeeping, and administrative services and functions,
which may be provided by affiliates of INVESCO, as are reasonably necessary for
the operation of Fund shareholder accounts. As full compensation for services
provided under the Administrative Agreement, each Fund pays a monthly fee to
INVESCO consisting of a base fee of $10,000 per year, plus an additional
incremental fee computed daily and paid monthly at an annual rate of 0.015% per
year of the average net assets of the Fund.
For the fiscal year ended December 31, 1995 and the fiscal period ended
December 31, 1994, prior to the voluntary absorption of certain Fund expenses
by INVESCO, the Funds paid INVESCO advisory fees and administrative services
fees in the following amounts:
Fiscal Year Ended Advisory Administrative
December 31 Fee Services Fee
- ----------------- -------- --------------
Industrial Income Fund
- ----------------------
1995 $27,073 $10,541
1994 848 10,017
<PAGE>
Total Return Fund
- -----------------
1995 $24,649 $10,493
1994 1,753 10,035
High Yield Fund
- ---------------
1995 $16,298 $10,407
1994 735 10,018
Utilities Fund
- --------------
1995 $467 $10,011
1994(1) 0 0
(1) The Utilities Fund did not commence operations until January 1, 1995.
Transfer Agency Agreement
INVESCO also performs transfer agent, dividend disbursing agent, and
registrar services for the Company pursuant to a Transfer Agency Agreement which
was approved by the board of directors of the Company, including a majority of
the Independent Directors, on October 20, 1993, for an initial term expiring
April 30, 1994 and has been continued by action of the board of directors until
April 30, 1997. The Transfer Agency Agreement may be continued thereafter from
year to year as to each Fund as long as such continuance is specifically
approved at least annually by the board of directors of the Company, or by a
vote of the holders of a majority of the outstanding shares of the Fund. Any
such continuance also must be approved by a majority of the Independent
Directors by votes cast in person at a meeting called for the purpose of voting
on such continuance. The Transfer Agency Agreement may be terminated at any time
without penalty by either party upon sixty (60) days' written notice and
terminates automatically in the event of assignment.
The Transfer Agency Agreement provides that the Company shall pay to
INVESCO an annual fee of $5,000 per Fund. This fee is paid monthly at 1/12 of
the annual fee.
Officers and Directors of the Company
The overall direction and supervision of the Company is the responsibility
of the board of directors, which has the primary duty of seeing that the
Company's general investment policies and programs are carried out and that the
Funds are properly administered. The officers of the Company, all of whom are
officers and employees of, and are paid by, INVESCO, are responsible for the
day-to-day administration of the Company and each of the Funds. INVESCO (along
with INVESCO Trust in the case of the Industrial Income, High Yield and
<PAGE>
Utilities Funds and ICM in the case of the Total Return Fund) has the primary
responsibility for making investment decisions on behalf of the Funds. These
investment decisions are reviewed by the investment committee of INVESCO.
All of the officers and directors of the Company hold comparable positions
with INVESCO Diversified Funds, Inc., INVESCO Dynamics Fund, Inc., INVESCO
Emerging Opportunity Funds, Inc., INVESCO Growth Fund, Inc., INVESCO Income
Funds, Inc., INVESCO Industrial Income Fund, Inc., INVESCO International Funds,
Inc., INVESCO Money Market Funds, Inc., INVESCO Multiple Asset Funds, Inc.,
INVESCO Specialty Funds, Inc., INVESCO Strategic Portfolios, Inc., and INVESCO
Tax-Free Income Funds, Inc. All of the directors of the ^ Company also serve as
trustees of INVESCO Value Trust. In addition, all of the directors of the
Company ^, with the exception of Messrs. Hesser and Sim, ^ also are trustees of
INVESCO Treasurer's Series Trust and directors of INVESCO Advisor Funds, Inc.
All of the officers of the Fund also hold comparable positions with INVESCO
Value Trust. Set forth below is information with respect to each of the
Company's officers and directors. Unless otherwise indicated, the address of the
directors and officers is Post Office Box 173706, Denver, Colorado 80217-3706.
Their affiliations represent their principal occupations during the past five
years.
CHARLES W. BRADY,*+ Chairman of the Board. Chief Executive
Officer and Director of INVESCO PLC, London, England, and of
various subsidiaries thereof. Chairman of the Board of INVESCO
Advisor Funds, Inc., INVESCO Treasurer's Series Trust and The
Global Health Sciences Fund. Address: 1315 Peachtree Street, NE,
Atlanta, Georgia. Born: May 11, 1935.
FRED A. DEERING,+# Vice Chairman of the Board. Vice Chairman
of INVESCO Advisor Funds, Inc., and INVESCO Treasurer's Series
Trust. Trustee of The Global Health Sciences Fund. Formerly,
Chairman of the Executive Committee and Chairman of the Board of
Security Life of Denver Insurance Company, Denver, Colorado;
Director of ING America Life Insurance Company, Urbaine Life
Insurance Company and Midwestern United Life Insurance Company.
Address: Security Life Center, 1290 Broadway, Denver, Colorado.
Born: January 12, 1928.
DAN J. HESSER,+* President and Director. Chairman of the
Board, President, and Chief Executive Officer of INVESCO Funds
Group, Inc.; Director of INVESCO Trust Company. Trustee of The
Global Health Sciences Fund. Born: December 27, 1939.
VICTOR L. ANDREWS,** Director. Professor Emeritus,
Chairman Emeritus and Chairman of the CFO Roundtable of the
Department of Finance of Georgia State University, Atlanta,
Georgia; President, Andrews Financial Associates, Inc. (consulting
firm); formerly, member of the faculties of the Harvard Business
School and the Sloan School of Management of MIT. Dr. Andrews is
also a Director of The Southeastern Thrift and Bank Fund, Inc. and
<PAGE>
The Sheffield Funds, Inc. Address: 4625 Jettridge Drive, Atlanta, Georgia.
Born: June 23, 1930.
BOB R. BAKER,+** Director. President and Chief Executive
Officer of AMC Cancer Research Center, Denver, Colorado, since
January 1989; until mid-December 1988, Vice Chairman of the Board
of First Columbia Financial Corporation (a financial institution),
Englewood, Colorado. Formerly, Chairman of the Board and Chief
Executive Officer of First Columbia Financial Corporation.
Address: 1775 Sherman Street, #1000, Denver, Colorado. Born:
August 7, 1936.
FRANK M. BISHOP*, Director. President and Chief Operating
Officer of INVESCO Inc. since February, 1993; Director of INVESCO
Funds Group, Inc. since March 1993; Director (since February 1993),
Vice President (since December 1991), and Portfolio Manager (since
February 1987), of INVESCO Capital Management, Inc. (and predeces-
sor firms), Atlanta, Georgia. Address: 1315 Peachtree Street,
N.E., Atlanta, Georgia. Born: December 7, 1943.
LAWRENCE H. BUDNER,# Director. Trust Consultant; prior to
June 30, 1987, Senior Vice President and Senior Trust Officer of
InterFirst Bank, Dallas, Texas. Address: 7608 Glen Albens
Circle, Dallas, Texas. Born: July 25, 1930.
DANIEL D. CHABRIS,+# Director. Financial Consultant;
Assistant Treasurer of Colt Industries Inc., New York, New York,
from 1966 to 1988. Address: 15 Sterling Road, Armonk, New York.
Born: August 1, 1923.
A. D. FRAZIER, JR.,** Director. Chief Operating Officer of
the Atlanta Committee for the Olympic Games. From 1982 to 1991,
Mr. Frazier was employed in various capacities by First Chicago
Bank, most recently as Executive Vice President of the North
American Banking Group. Trustee of The Global Health Sciences
Fund. Director of Magellan Health Services, Inc. and of Charter
Medical Corp. Address: 250 Williams Street, Suite 6000, Atlanta,
Georgia. Born: June 23, 1944.
KENNETH T. KING,** Director. Formerly, Chairman of the Board
of The Capitol Life Insurance Company, Providence Washington
Insurance Company, and Director of numerous subsidiaries thereof in
the U.S. Formerly, Chairman of the Board of The Providence Capitol
Companies in the United Kingdom and Guernsey. Chairman of the
Board of the Symbion Corporation (a high technology company) until
1987. Address: 4080 North Circulo Manzanillo, Tucson, Arizona.
Born: November 16, 1925.
JOHN W. McINTYRE,# Director. Retired. Formerly, Vice
Chairman of the Board of Directors of The Citizens and Southern
Corporation and Chairman of the Board and Chief Executive Officer
of The Citizens and Southern Georgia Corp. and Citizens and
Southern National Bank. Director of Golden Poultry Co., Inc.
Trustee of The Global Health Sciences Fund and Gables Residential
<PAGE>
Trust. Address: 7 Piedmont Center, Suite 100, Atlanta, Georgia. Born: September
14, 1930.
R. DALTON SIM*, Director. Chairman of the Board (since March
1993) and President (since January 1991) of INVESCO Trust Company;
Director since June 1987 and, formerly, Executive Vice President
and Chief Investment Officer (June 1987 to January 1991) of INVESCO
Funds Group, Inc.; President (since 1994) and Trustee (since 1991)
of The Global Health Sciences Fund. Born: July 18, 1939.
GLEN A. PAYNE, Secretary. Senior Vice President, General
Counsel and Secretary of INVESCO Funds Group, Inc. and INVESCO
Trust Company. Formerly, employee of a U.S. regulatory agency,
Washington, D.C., (June 1973 through May ^ 1989.) Born: September
25, 1947.
RONALD L. GROOMS, Treasurer. Senior Vice President and
Treasurer of INVESCO Funds Group, Inc. and INVESCO Trust Company
since January 1988. Born: October 1, 1946.
WILLIAM J. GALVIN, JR., Assistant Secretary. Senior Vice
President of INVESCO Funds Group, Inc. and Trust Officer of INVESCO
Trust Company. Formerly, Vice President of 440 Financial Group
from June 1990 to August 1992; Assistant Vice President of Putnam
Companies from November 1986 to June 1990. Born: August 21, 1956.
ALAN I. WATSON, Assistant Secretary. Vice President of
INVESCO Funds Group, Inc. and Trust Officer of INVESCO Trust
Company. Born: September 14, 1941.
JUDY P. WIESE, Assistant Treasurer. Vice President of INVESCO
Funds Group, Inc. and Trust Officer of INVESCO Trust Company.
Born: February 3, 1948.
#Member of the audit committee of the Company's board of
directors.
+Member of the executive committee of the Company's board of directors. On
occasion, the executive committee acts upon the current and ordinary business of
the Company between meetings of the board of directors. Except for certain
powers which, under applicable law, may only be exercised by the full board of
directors, the executive committee may exercise all powers and authority of the
board of directors in the management of the business of the Company. All
decisions are subsequently submitted for ratification by the board of Directors.
*These directors are "interested persons" of the Company as defined in the
Investment Company Act of 1940.
**Member of the management liaison committee of the Company's
board of directors.
<PAGE>
As of April 4, 1996, officers and directors of the Company, as a group,
beneficially owned 0% of each Fund's outstanding shares.
Director Compensation
The following table sets forth, for the fiscal period ended December 31,
1995: the compensation paid by the Company to its eight independent directors
for services rendered in their capacities as directors of the Company; the
benefits accrued as Company expenses with respect to the Defined Benefit
Deferred Compensation Plan discussed below; and the estimated annual benefits to
be received by these directors upon retirement as a result of their service to
the Company. In addition, the table sets forth the total compensation paid by
all of the mutual funds distributed by INVESCO Funds Group, Inc. (including the
Company), INVESCO Advisor Funds, Inc., INVESCO Treasurer's Series Trust and The
Global Health Sciences Fund (collectively, the "INVESCO Complex") to these
directors for services rendered in their capacities as directors or trustees
during the year ended December 31, 1995. As of December 31, 1995, there were 48
funds in the INVESCO Complex.
Total
Compensa-
Benefits Estimated tion From
Aggregate Accrued As Annual INVESCO
Compensa- Part of Benefits Complex
Name of Person, tion From Company Upon Paid To
Position Company1 Expenses2 Retirement3 Directors1
Fred A.Deering, $ 4,023 $ 25 $ 21 $ 87,350
Vice Chairman of
the Board
Victor L. Andrews 4,017 22 23 68,000
Bob R. Baker 4,021 23 31 73,000
Lawrence H. Budner 4,018 24 23 68,350
Daniel D. Chabris 4,021 27 17 73,350
A. D. Frazier, Jr.4 3,013 0 0 63,500
Kenneth T. King 4,018 26 19 70,000
John W. McIntyre4 3,016 0 0 67,850
------ --- --- -------
Total $30,147 $147 $134 $571,400
% of Net Assets 0.1475%5 0.0007%5 0.0043%6
<PAGE>
1The vice chairman of the board, the chairmen of the audit, management
liaison and compensation committees, and the members of the executive and
valuation committees each receive compensation for serving in such capacities in
addition to the compensation paid to all independent directors.
2Represents benefits accrued with respect to the Defined Benefit Deferred
Compensation Plan discussed below, and not compensation deferred at the election
of the directors.
3These figures represent the Company's share of the estimated annual
benefits payable by the INVESCO Complex (excluding the Global Health Sciences
Fund which does not participate in any retirement plan) upon the directors'
retirement, calculated using the current method of allocating director
compensation among the funds in the INVESCO Complex. These estimated benefits
assume retirement at age 72 and that the basic retainer payable to the directors
will be adjusted periodically for inflation, for increases in the number of
funds in the INVESCO Complex, and for other reasons during the period in which
retirement benefits are accrued on behalf of the respective directors. This
results in lower estimated benefits for directors who are closer to retirement
and higher estimated benefits for directors who are further from retirement.
With the exception of Messrs. Frazier and McIntyre, each of these directors has
served as a director/trustee of one or more of the funds in the INVESCO Complex
for the minimum five-year period required to be eligible to participate in the
Defined Benefit Deferred Compensation Plan.
4Messrs. Frazier and McIntyre began serving as directors of the Company on
April 19, 1995.
5Totals as a percentage of the Company's net assets as of December 31,
1995.
6Total as a percentage of the net assets of the INVESCO Complex as of
December 31, 1995.
Messrs. Bishop, Brady, Hesser, and Sim, as "interested persons" of the
Company and the other funds in the INVESCO Complex, receive compensation as
officers or employees of INVESCO or its affiliated companies, and do not receive
any director's fees or other compensation from the Company or the other funds in
the INVESCO Complex for their service as directors.
The boards of directors/trustees of the mutual funds managed by INVESCO, ^
INVESCO Advisor Funds, Inc. and INVESCO Treasurer's Series Trust have adopted a
Defined Benefit Deferred Compensation Plan for the non-interested directors and
trustees of the funds. Under this plan, each director or trustee who is not an
<PAGE>
interested person of the funds (as defined in the 1940 Act) and who has served
for at least five years (a "qualified director") is entitled to receive, upon
retiring from the boards at the mandatory retirement age of 72 (or the
retirement age of 73 to 74, if the retirement date is extended by the boards for
one or two years but less than three years), continuation of payments for one
year (the "first year retirement benefit") of the annual basic retainer payable
by the funds to the qualified director at the time of his retirement (the
"basic retainer"). Commencing with any such director's second year of
retirement, and commencing with the first year of retirement of a director whose
retirement has been extended by the board for three years, a qualified director
shall receive quarterly payments at an annual rate equal to 25% of the basic
retainer. These payments will continue for the remainder of the qualified
director's life or ten years, whichever is longer (the ^"reduced retainer
payments^ "). If a qualified director dies or becomes disabled after age 72 and
before age 74 while still a director of the funds, the first year retirement
benefit and the reduced retainer payments will be made to him or to his
beneficiary or estate. If a qualified director becomes disabled or dies either
prior to age 72 or during ^his 74th year while still a director of the funds,
the director will not be entitled to receive the first year retirement benefit;
however, the reduced retainer payments will be made to his beneficiary or
estate. The plan is administered by a committee of three directors who are also
participants in the plan and one director who is not a plan participant. The
cost of the plan will be allocated among the INVESCO, INVESCO Advisor Funds,
Inc. and Treasurer's Series funds in a manner determined to be fair and
equitable by the committee. The Company is not making any payments to directors
under the plan as of the date of this Statement of Additional Information. The
Company has no stock options or other pension or retirement plans for management
or other personnel and pays no salary or compensation to any of its officers.
The Company has an audit committee which is comprised of four of the
directors who are not interested persons of the Company. The committee meets
periodically with the Company's independent accountants and officers to review
accounting principles used by the Company, the adequacy of internal controls,
the responsibilities and fees of the independent accountants, and other matters.
The Company also has a management liaison committee which meets quarterly
with various management personnel of INVESCO in order (a) to facilitate better
understanding of management and operations of the Company, and (b) to review
legal and operational matters which have been assigned to the committee by the
board of directors, in furtherance of the board of directors' overall duty of
supervision.
<PAGE>
HOW SHARES ARE VALUED
As described in the section of the Prospectus entitled "Purchases and
Redemptions," the net asset value of shares of each Fund of the Company is
computed once each day that the New York Stock Exchange is open, as of the close
of regular trading on that Exchange ^(usually 4:00 p.m., New York time) and
applies to purchase and redemption orders received prior to that time. Net asset
value per share is also computed on any other day on which there is a sufficient
degree of trading in the securities held by a Fund that the current net asset
value per share might be materially affected by changes in the value of the
securities held, but only if on that day the Company receives a request to
purchase or redeem shares of that Fund. Net asset value per share is not
calculated on days the New York Stock Exchange is closed, such as federal
holidays including New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving, and Christmas.
The net asset value per share of each Fund is calculated by dividing the
value of all securities held by the Fund and its other assets (including
dividends and interest accrued but not collected), less the Fund's liabilities
(including accrued expenses), by the number of outstanding shares of that Fund.
Securities traded on national securities exchanges, the NASDAQ National Market
System, the NASDAQ Small Cap Market and foreign markets are valued at their last
sale prices on the exchanges or markets where such securities are primarily
traded. Securities traded in the over-the-counter market for which last sale
prices are not available, and listed securities for which no sales are reported
on a particular date, are valued at their highest closing bid prices (or, for
debt securities, yield equivalents thereof) obtained from one or more dealers
making markets for such securities. If market quotations are not readily
available, securities will be valued at fair values as determined in good faith
by the Company's board of directors or pursuant to procedures adopted by the
board of directors. The above procedures may include the use of valuations
furnished by a pricing service which employs a matrix to determine valuations
for normal institutional-size trading units of debt securities. Prior to
utilizing a pricing service, the board of directors of the Company reviews the
methods used by such service to assure itself that securities will be valued at
their fair values. The Company's board of directors also periodically monitors
the methods used by such pricing services. Debt securities with remaining
maturities of 60 days or less at the time of purchase are normally valued at
amortized cost.
The values of securities held by the Funds, and other assets used in
computing net asset value, generally are determined as of the time regular
trading in such securities or assets is completed each day. Since regular
trading in most foreign securities markets is completed simultaneously with, or
prior to, the close of regular trading on the New York Stock Exchange, closing
prices for foreign securities usually are available for purposes of computing
the Funds' net asset values. However, in the event that the closing price of a
foreign security is not available in time to calculate a Fund's net asset value
<PAGE>
on a particular day, the Company's board of directors has authorized the use of
the market price for the security obtained from an approved pricing service at
an established time during the day which may be prior to the close of regular
trading in the security. The value of all assets and liabilities initially
expressed in foreign currencies will be converted into U.S. dollars at the spot
rate of such currencies against U.S. dollars provided by an approved pricing
service.
PERFORMANCE
As discussed in the section of the Prospectus entitled "Performance
Information," average annual total return and/or yield data for each of the
Funds may from time to time be included in advertisements, sales literature or
shareholder reports. All presentations of Fund total return and yield data will
conform to applicable requirements of the Securities and Exchange Commission and
the National Association of Securities Dealers, Inc.
Total Return Calculations
Average annual total return performance for each Fund for the indicated
periods ended December 31, 1995, were as follows:
Fund 1 Year Life of Fund(1)
---- ------ ---------------
Industrial Income Fund 29.25% 20.89%
Total Return Fund 22.79% 15.10%
High Yield Fund 19.76% 11.83%
Utilities Fund 9.08% 9.08%
(1) The dates on which the Industrial Income Fund, Total Return Fund, High
Yield Fund and Utilities Fund commenced operations were August 10, 1994, June 2,
1994, May 27, 1994 and January 1, 1995, respectively.
Average annual total return performance for each of the periods
indicated was computed by finding the average annual compounded rates of return
that would equate the initial amount invested to the ending redeemable value,
according to the following formula:
P(1 + T)n = ERV
where:
P = initial payment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of initial payment
The average annual total return performance figures shown above were
determined by solving the above formula for "T" for each time period and Fund
indicated.
<PAGE>
Yield Calculations
The yields of the Industrial Income Fund, Total Return Fund, High Yield
Fund and Utilities Fund for the month ended December 31, 1995 were 3.00%, 3.15%,
9.83% and 2.86%, respectively. In calculating yield quotations for a Fund,
interest earned is determined by computing the yield to maturity (or yield to
call, if applicable) of each obligation held by the Fund, based upon the market
value of each obligation (including actual accrued interest) at the close of
business on the last business day of the month or, with respect to an obligation
purchased during the month, the purchase price plus accrued interest. The
resultant yield to maturity is divided by 360 and multiplied by the market value
of the obligation (including actual accrued interest), and the result is
multiplied by the number of days in the subsequent month that the obligation is
in the Fund (assuming that each month has 30 days). Dividends received on the
stocks held by the Funds are recognized, for purposes of yield calculations, on
a daily accrual basis.
Comparison of Fund Performance
In conjunction with performance reports, comparative data between a Fund's
performance for a given period and other types of investment vehicles may be
provided to prospective investors and shareholders. A Fund's performance is
based upon amounts available for investment under variable annuity or variable
life insurance contracts of Participating Insurance Companies rather than upon
premiums paid for variable annuity or variable life insurance contracts. Thus,
the Fund's total return data does not reflect the impact of sales loads (whether
front-end or deferred) or contract charges deducted from premiums or from the
assets of the Participating Insurance Companies' separate accounts that invest
in the Fund. Such sales loads and contract charges may be substantial and may
vary widely among Participating Insurance Companies. Accordingly, the total
return data for the Funds is most useful for comparison with comparable data for
other investment options under the same variable annuity or variable life
insurance contract.
Comparisons of the Funds' total returns to those of other investment
vehicles are useful in evaluating the historical portfolio management
performance of the Funds' investment adviser and sub-advisers. However, such
comparisons should not be mistaken for comparisons of the returns on a purchase
of a variable annuity or variable life insurance contract of a Participating
Insurance Company and a purchase of another investment vehicle. Owners or
prospective owners of variable annuity contracts of Participating Insurance
Companies should review performance data for the Funds in conjunction with
comparable total return data for the associated variable annuity separate
account to be provided with the Fund data. Owners or prospective owners of
variable life insurance contracts of Participating Insurance Companies should
review the performance data for the Funds in conjunction with data (such as the
data contained in personalized, hypothetical illustrations of variable life
insurance contracts) that permits an evaluation of the magnitude of variable
life insurance charges and expenses and the life insurance benefits not
reflected in the Funds' total return data.
<PAGE>
From time to time, evaluations of performance made by independent sources
may also be used in advertisements, sales literature or shareholder reports,
including reprints of, or selections from, editorials or articles about the
Funds. Sources for Fund performance information and articles about the Funds
include, but are not limited to the following:
American Association of Individual Investors' Journal
Banxquote
Barron's
Business Week
CDA Investment Technologies
CNBC
CNN
Consumer Digest
Financial Times
Financial World
Forbes
Fortune
Ibbotson Associates, Inc.
Institutional Investor
Investment Company Data, Inc.
Investor's Business Daily
Kiplinger's Personal Finance
Lipper Analytical Services, Inc.'s Mutual Fund Performance
Analysis
Money
Morningstar
Mutual Fund Forecaster
The New York Times
No-Load Analyst
The No-Load Fund Investor
No-Load Fund*X
Personal Investor
Smart Money
United Mutual Fund Selector
USA Today
U.S. News and World Report
Wall Street Journal
Wiesenberger Investment Companies Services
Working Woman
Worth
<PAGE>
PORTFOLIO TURNOVER
There are no fixed limitations regarding portfolio turnover for any of the
Funds. Brokerage costs to the Funds are commensurate with the rate of portfolio
activity. Portfolio turnover rates for the fiscal year ended December 31, 1995
and the fiscal period ended December 31, 1994 were as follows:
Fund 1995 1994
---- ---- ----
Industrial Income Fund 97% 0%
Total Return Fund 5% 0%
High Yield Fund 310% 23%
Utilities Fund 24% 0%
In computing these portfolio turnover rates, all investment with
maturities or expiration dates at the time of acquisition of one year or less
were excluded. Subject to this exclusion, the turnover rate is calculated by
dividing (a) the lesser of purchases or sales of portfolio securities for the
fiscal year by (b) the monthly average of the value of portfolio securities
owned by the Fund during the fiscal year. The primary reason for the increases
in the Funds' portfolio turnover rates in 1995 was the fact that 1995 was the
Funds' first full year of operations.
PORTFOLIO BROKERAGE
Fund Management places orders for the purchase and sale of securities
with brokers and dealers based upon its evaluation of the broker-dealers'
financial responsibility subject to the broker-dealers' ability to effect
transactions at the best available prices. Fund Management evaluates the overall
reasonableness of brokerage commissions paid by reviewing the quality of
executions obtained on each Fund's portfolio transactions, viewed in terms of
the size of transactions, prevailing market conditions in the security purchased
or sold, and general economic and market conditions. In seeking to ensure that
the commissions charged the Funds are consistent with prevailing and reasonable
commissions, Fund Management also endeavors to monitor brokerage industry
practices with regard to the commissions charged by brokers and dealers on
transactions effected for other comparable institutional investors. While Fund
Management seeks reasonably competitive rates, the Funds do not necessarily pay
the lowest commissions or spread available.
<PAGE>
Consistent with the standard of seeking to obtain the best execution on
portfolio transactions, Fund Management may select brokers that provide research
services to effect such transactions. Research services consist of statistical
and analytical reports relating to issuers, industries, securities and economic
factors and trends, which may be of assistance or value to Fund Management in
making informed investment decisions. Research services prepared and furnished
by brokers through which the Funds effect securities transactions may be used by
Fund Management in servicing all of their respective accounts and not all such
services may be used by Fund Management in connection with the Funds.
In recognition of the value of the above-described brokerage and research
services provided by certain brokers, Fund Management, consistent with the
standard of seeking to obtain the best execution on portfolio transactions, may
place orders with such brokers for the execution of Fund transactions on which
the commissions are in excess of those which other brokers might have charged
for effecting the same transactions.
Fund transactions may be effected through qualified broker/dealers who
recommend the variable annuity or variable life insurance contracts of
Participating Insurance Companies to their clients, or who act as agent in the
purchase of such contracts for their clients. When a number of brokers and
dealers can provide comparable best price and execution on a particular
transaction, Fund Management may consider the sale of such contracts by a broker
or dealer in selecting among qualified broker/dealers.
The aggregate dollar amounts of brokerage commissions paid by the Company
for the fiscal year ended December 31, 1995 and the fiscal period ended December
31, 1994, were $94,602 and $2,388, respectively. This increase was primarily due
to the increased size of the Funds. On a Fund basis, the aggregate amount of
brokerage commissions paid in 1995 breaks down as follows: Industrial Income
Fund, $55,370; Total Return Fund, $7,661; High Yield Fund, $30,966; and
Utilities Fund, $605. For the year ended December 31, 1995, brokers providing
research services received $6,257, $1,321, $98 and $350 in commissions on
portfolio transactions effected for the Industrial Income Fund, Total Return
Fund, High Yield Fund and Utilities Fund, respectively, on aggregate portfolio
transactions of $37,401, $3,140,502, $550,389 and $124,542, respectively. The
Company paid $107 in compensation to brokers for the sale of Participating Life
Insurance Company's variable annuity and variable life insurance contracts
utilizing the Funds during the fiscal year ended December 31, 1995.
<PAGE>
At December 31, 1995, the Funds held securities of their regular brokers
or dealers, or their parents, as follows:
Value of Securities
Fund Broker or Dealer at 12/31/95
- ---- ---------------- -------------------
Industrial Income Fund State Street Bank and
Trust $150,000.00
Ford Motor 66,700.00
Morgan Stanley Group 56,437.50
Total Return Fund None
High Yield Fund None
Utilities Fund None
Neither INVESCO, INVESCO Trust nor ICM receives any brokerage commissions
on portfolio transactions effected on behalf of any of the Funds, and there is
no affiliation between INVESCO, INVESCO Trust, ICM, or any person affiliated
with INVESCO, INVESCO Trust, ICM, or the Company and any broker or dealer that
executes transactions for the Funds.
<PAGE>
REDEMPTIONS
It is possible that in the future conditions may exist which would, in the
opinion of INVESCO, make it undesirable for one or more of the Funds to pay for
redeemed shares in cash. In such cases, INVESCO may authorize payment to be made
in portfolio securities or other property of the Fund. However, the Company is
obligated under the Investment Company Act of 1940 to redeem for cash all shares
of a Fund presented for redemption by any one shareholder having a value up to
$250,000 (or 1% of the applicable Fund's net assets if that is less) in any
90-day period. Securities delivered in payment of redemptions are selected
entirely by Fund Management based on what is in the best interests of the
Company and its shareholders, and are valued at the value assigned to them in
computing the Fund's net asset value per share. Shareholders receiving such
securities are likely to incur brokerage costs on their subsequent sales of the
securities.
ADDITIONAL INFORMATION
Common Stock
The Company was incorporated under the laws of the state of Maryland on
August 19, 1993. The authorized capital stock of the Company consists of 500
million shares of common stock, par value of $0.01 per share. The shares of
common stock are currently divided into four classes (or series), INVESCO VIF -
Total Return Portfolio common stock, INVESCO VIF - Industrial Income Portfolio
common stock, INVESCO VIF - High Yield Portfolio common stock and INVESCO VIF -
Utilities Portfolio common stock. As of December 31, 1995, 664,722 shares of
the Industrial Income Fund, 539,662 shares of the Total Return Fund, 473,935
shares of the High Yield Fund and 26,744 shares of the Utilities Fund were
outstanding. Each class consists of 100 million shares. The Company reserves the
right to issue additional classes of shares without the consent of shareholders,
and may allocate its 100 million unclassified shares either to such new classes
or to one or more of the four existing classes. All shares issued and
outstanding are, and all shares offered hereby, when issued, will be, fully paid
and nonassessable.
<PAGE>
Shares of each class represent the interests of the shareholders of that
class in a particular portfolio of investments of the Company. Each class of the
Company's shares is preferred over all other classes with respect to the assets
specifically allocated to that class, and all income, earnings, profits and
proceeds from those assets, subject only to the rights of creditors, are
allocated to shares of that class. The assets of each class are segregated on
the books of account and are charged with the liabilities of that class and with
a share of the Company's general liabilities. The board of directors determines
those assets and liabilities deemed to be general assets or liabilities of the
Company and those items are allocated among classes in a manner deemed by the
board to be fair and equitable. Generally, such allocation will be made based
upon the relative total net assets of each class. In the unlikely event that a
liability allocable to one class exceeds the assets belonging to the class, all
or a portion of such liability may have to be borne by the holders of shares of
the Company's other classes.
All dividends on shares of a particular class shall be paid only out of
the income belonging to that class, pro rata to the holders of that class. In
the event of the liquidation or dissolution of the Company or of a particular
class, the shareholders of each class that is being liquidated shall be entitled
to receive, as a class, when and as declared by the board of directors, the
excess of the assets belonging to that class over the liabilities belonging to
that class. The holders of shares of any class shall not be entitled to any
distribution upon liquidation of any other class. The assets so distributable to
the shareholders of any particular class shall be distributed among those
shareholders in proportion to the number of shares of that class held by them
and recorded on the books of the Company.
All Fund shares, regardless of class, have equal voting rights. Voting
with respect to certain matters, such as ratification of independent accountants
or election of directors, will be by all classes of the Company. When not all
classes are affected by a matter to be voted upon, such as approval of an
investment advisory contract or changes in a Fund's investment policies, only
shareholders of the class affected by the matter will be entitled to vote.
Company shares have noncumulative voting rights, which means that the holders of
a majority of the shares voting for the election of directors of the Company can
elect 100% of the directors if they choose to do so. In such event, the holders
of the remaining shares voting for the election of directors will not be able to
elect any person or persons to the board of directors. After they have been
elected by shareholders, the directors will continue to serve until their
successors are elected and have qualified or they are removed from office, in
either case by a shareholder vote, or until death, resignation, or retirement. ^
Directors may appoint their own successors, provided that always at least a
majority of the directors have been elected by the Company's shareholders. It is
the intention of the Company not to hold annual meetings of shareholders. The
directors may call annual or special meetings of shareholders for action by
shareholder vote as may be required by the ^ 1940 Act or the Company's Articles
of Incorporation, or at their discretion.
<PAGE>
Principal Shareholders
As of April 1, 1996, the following persons held more than 5% of the
Funds' outstanding equity securities.
Amount and Nature
Name and Address of Ownership Percent of Class
- ---------------- ----------------- ----------------
Industrial Income Fund
Separate Account VA-5 of 589,331.9640 73.943
Transamerica Occidental
Life Insurance Company
Variable Annuity Dept B-100
1150 S. Olive
Los Angeles, CA 90015
Security Life 133,438.6920 16.742
Separate Account A1
Unit Valuations 2T2
8515 E. Orchard Road
Englewood, CO 80111
Separate Account VA-5NLNY of 46,437.1320 5.826
First Transamerica Life
Insurance Company
Variable Annuity Dept. B-100
1150 S. Olive
Los Angeles, CA 90015
Total Return Fund
Separate Account VA-5 of 577,081.7790 81.743
Transamerica Occidental
Life Insurance Company
Variable Annuity Dept B-100
1150 S. Olive
Los Angeles, CA 90015
Security Life 96,507.6070 13.670
Separate Account A1
Unit Valuations 2T2
8515 E. Orchard Road
Englewood, CO 80111
<PAGE>
High Yield Fund
Separate Account VA-5 of 330,394.7690 64.695
Transamerica Occidental
Life Insurance Company
Variable Annuity Dept B-100
1150 S. Olive
Los Angeles, CA 90015
Security Life 96,858.0790 18.966
Separate Account A1
Unit Valuations 2T2
8515 E. Orchard Road
Englewood, CO 80111
Security Life 55,814.3950 10.929
Separate Account L1
Unit Valuations 2T2
8515 E. Orchard Road
Englewood, CO 80111
Utilities Fund
Security Life 46,560.8880 89.853
Separate Account A1
Unit Valuations 2T2
8515 E. Orchard Road
Englewood, CO 80111
Security Life 2,742.1070 5.292
Separate Account L1
Unit Valuations 2T2
8515 E. Orchard Road
Englewood, CO 80111
Independent Accountants
Price Waterhouse LLP, 950 Seventeenth Street, Denver, Colorado, has been
selected as the independent accountants of the Company. The independent
accountants are responsible for auditing the financial statements of the
Company.
Custodian
State Street Bank and Trust Company, P.O. Box 351, Boston, Massachusetts,
has been designated as custodian of the cash and investment securities of the
Funds. The custodian bank is also responsible for, among other things, receipt
and delivery of the Funds' investment securities in accordance with procedures
and conditions specified in the custody agreement.
<PAGE>
Transfer Agent
INVESCO, 7800 E. Union Avenue, Denver, Colorado 80237, acts as registrar,
dividend disbursing agent, and transfer agent for the Company pursuant to the
Transfer Agency Agreement described above under the caption, "Management." Such
services include the issuance, cancellation and transfer of shares of the
Company and the maintenance of records regarding the ownership of such shares.
Reports to Shareholders
The Company's fiscal year ends on December 31 of each year. The Company
distributes reports at least semiannually to its shareholders. Financial
statements regarding the Company, audited by the independent accountants, are
sent to shareholders annually.
Legal Counsel
The firm of Kirkpatrick & Lockhart LLP, Washington, D.C., is legal counsel
for the Company. The firm of Moye, Giles, O'Keefe, Vermeire & Gorrell, Denver,
Colorado, acts as special counsel to the Company.
Financial Statements
The Company's audited financial statements and the notes thereto for the
fiscal year ended December 31, 1995, and the report of Price Waterhouse LLP
with respect to such financial statements, are incorporated herein by reference
from the Company's Annual Report to Shareholders for the fiscal year ended
December 31, 1995.
Prospectus
The Company will furnish, without charge, a copy of the Prospectus upon
request. Such requests should be made to the Company at the mailing address or
telephone number set forth on the first page of this Statement of Additional
Information.
Registration Statement
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Company has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.
<PAGE>
APPENDIX A
DESCRIPTION OF FUTURES AND OPTIONS CONTRACTS
Options on Securities
An option on a security provides the purchaser, or "holder," with the
right, but not the obligation, to purchase, in the case of a "call" option, or
sell, in the case of a "put" option, the security or securities underlying the
option, for a fixed exercise price up to a stated expiration date. The holder
pays a non-refundable purchase price for the option, known as the "premium." The
maximum amount of risk the purchaser of the option assumes is equal to the
premium plus related transaction costs, although the entire amount may be lost.
The risk of the seller, or "writer," however, is potentially unlimited, unless
the option is "covered," which is generally accomplished through the writer's
ownership of the underlying security, in the case of a call option, or the
writer's segregation of an amount of cash or securities equal to the exercise
price, in the case of a put option. If the writer's obligation is not so
covered, it is subject to the risk of the full change in value of the underlying
security from the time the option is written until exercise.
Upon exercise of the option, the holder is required to pay the purchase
price of the underlying security, in the case of a call option, or to deliver
the security in return for the purchase price, in the case of a put option.
Conversely, the writer is required to deliver the security, in the case of a
call option, or to purchase the security, in the case of a put option. Options
on securities which have been purchased or written may be closed out prior to
exercise or expiration by entering into an offsetting transaction on the
exchange on which the initial position was established, subject to the
availability of a liquid secondary market.
Options on securities are traded on national securities exchanges, such as
the Chicago Board of Options Exchange and the New York Stock Exchange, which are
regulated by the Securities and Exchange Commission. The Options Clearing
Corporation ("OCC") guarantees the performance of each party to an
exchange-traded option, by in effect taking the opposite side of each such
option. A holder or writer may engage in transactions in exchange-traded options
on securities and options on indices of securities only through a registered
broker/dealer which is a member of the exchange on which the option is traded.
An option position in an exchange-traded option may be closed out only on
an exchange which provides a secondary market for an option of the same series.
Although the Funds generally will purchase or write only those options for which
there appears to be an active secondary market, there is no assurance that a
liquid secondary market on an exchange will exist for any particular option at
any particular time. In such event it might not be
<PAGE>
possible to effect closing transactions in a particular option with the result
that a Fund would have to exercise the option in order to realize any profit.
This would result in the Fund incurring brokerage commissions upon the
disposition of underlying securities acquired through the exercise of a call
option or upon the purchase of underlying securities upon the exercise of a put
option. If the Fund, as a covered call option writer, is unable to effect a
closing purchase transaction in a secondary market, unless the Fund is required
to deliver the securities pursuant to the assignment of an exercise notice, it
will not be able to sell the underlying security until the option expires.
Reasons for the potential absence of a liquid secondary market on an
exchange include the following: (i) there may be insufficient trading interest
in certain options; (ii) restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular classes or
series of options or underlying securities; (iv) unusual or unforeseen
circumstances may interrupt normal operations on an exchange; (v) the facilities
of an exchange or a clearing corporation may not at all times be adequate to
handle current trading volume; or (vi) one or more exchanges could, for economic
or other reasons, decide or be compelled at some future date to discontinue the
trading of options (or particular class or series of options) in which event the
secondary market on that exchange (or in the class or series of options) would
cease to exist, although outstanding options on that exchange which had been
issued by a clearing corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms. There is no assurance
that higher than anticipated trading activity or other unforeseen events might
not, at a particular time, render certain of the facilities of any of the
clearing corporations inadequate and thereby result in the institution by an
exchange of special procedures which may interfere with the timely execution of
customers' orders. However, the OCC, based on forecasts provided by the U.S.
exchanges, believes that its facilities are adequate to handle the volume of
reasonably anticipated options transactions, and such exchanges have advised
such clearing corporation that they believe their facilities will also be
adequate to handle reasonably anticipated volume.
In addition, options on securities may be traded over-the-counter ("OTC")
through financial institutions dealing in such options as well as the underlying
instruments. OTC options are purchased from or sold (written) to dealers or
financial institutions which have entered into direct agreements with the
Company on behalf of a Fund. With OTC options, such variables as expiration
date, exercise price and premium will be agreed upon between the Fund and the
transacting dealer, without the intermediation of a third party such as the
OCC. If the transacting dealer fails to make or take delivery of the securities
underlying an option it has written, in accordance with the terms of that option
as written, the Fund would lose the premium paid for the option as
<PAGE>
well as any anticipated benefit of the transaction. The Fund will engage in OTC
option transactions only with primary U.S. government securities dealers
recognized by the Federal Reserve Bank of New York.
Futures Contracts
A futures contract is a bilateral agreement providing for the purchase
and sale of a specified type and amount of a financial instrument or foreign
currency, or for the making and acceptance of a cash settlement, at a stated
time in the future, for a fixed price. By its terms, a futures contract
provides for a specified settlement date on which, in the case of the majority
of interest rate and foreign currency futures contracts, the fixed income
securities or currency underlying the contract are delivered by the seller and
paid for by the purchaser, or on which, in the case of stock index futures
contracts and certain interest rate and foreign currency futures contracts, the
difference between the price at which the contract was entered into and the
contract's closing value is settled between the purchaser and seller in cash.
Futures Contracts differ from options in that they are bilateral agreements,
with both the purchaser and the seller equally obligated to complete the
transaction. In addition, futures contracts call for settlement only on the
expiration date, and cannot be "exercised" at any other time during their term.
The purchase or sale of a futures contract also differs from the
purchase or sale of a security or the purchase of an option in that no purchase
price is paid or received. Instead, an amount of cash or cash equivalent, which
varies but may be as low as 5% or less of the value of the contract, must be
deposited with the broker as "initial margin." Subsequent payments to and from
the broker, referred to as "variation margin," are made on a daily basis as the
value of the index or instrument underlying the futures contract fluctuates,
making positions in the futures contract more or less valuable, a process
known as "marking to market."
A futures contract may be purchased or sold only on an exchange, known
as a "contract market," designated by the Commodity Futures Trading Commission
for the trading of such contract, and only through a registered futures
commission merchant which is a member of such contract market. A commission must
be paid on each completed purchase and sale transaction. The contract market
clearing house guarantees the performance of each party to a futures contract,
by in effect taking the opposite side of such contract. At any time prior to
the expiration of a futures contract, a trader may elect to close out its
position by taking an opposite position on the contract market on which the
position was entered into, subject to the availability of a secondary market,
which will operate to terminate the initial position. At that time, a final
determination of variation margin is made and any loss experienced by the trader
<PAGE>
is required to be paid to the contract market clearing house while any profit
due to the trader must be delivered to it.
Interest rate futures contracts currently are traded on a variety of fixed
income securities, including long-term U.S. Treasury Bonds, Treasury Notes,
Government National Mortgage Association modified pass-through mortgage-backed
securities, U.S. Treasury Bills, bank certificates of deposit and commercial
paper. In addition, interest rate futures contracts include contracts on indices
of municipal securities. Foreign currency futures contracts currently are traded
on the British pound, Canadian dollar, Japanese yen, Swiss franc, West German
mark and on Eurodollar deposits.
Options on Futures Contracts
An option on a futures contract provides the holder with the right to
enter into a "long" position in the underlying futures contract, in the case
of a call option, or a "short" position in the underlying futures contract, in
the case of a put option, at a fixed exercise price to a stated expiration date.
Upon exercise of the option by the holder, the contract market clearing house
establishes a corresponding short position for the writer of the option, in the
case of a call option, or a corresponding long position, in the case of a put
option. In the event that an option is exercised, the parties will be subject to
all the risks associated with the trading of Futures Contracts, such as payment
of variation margin deposits. In addition, the writer of an option on a
futures contract, unlike the holder, is subject to initial and variation margin
requirements on the option position.
A position in an option on a futures contract may be terminated by the
purchaser or seller prior to expiration by effecting a closing purchase or sale
transaction, subject to the availability of a liquid secondary market, which is
the purchase or sale of an option of the same series (i.e., the same exercise
price and expiration date) as the option previously purchased or sold. The
difference between the premiums paid and received represents the trader's profit
or loss on the transaction.
An option, whether based on a futures contract, a stock index or a
security, becomes worthless to the holder when it expires. Upon exercise of an
option, the exchange or contract market clearing house assigns exercise notices
on a random basis to those of its members which have written options of the same
series and with the same expiration date. A brokerage firm receiving such
notices then assigns them on a random basis to those of its customers which have
written options of the same series and expiration date. A writer therefore has
no control over whether an option will be exercised against it, nor over the
time of such exercise.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Page in
Prospectus
----------
(1) Financial statements and schedules
included in Prospectus (Part A):
Financial Highlights with respect 9
to the High Yield Fund and
Industrial Income Fund for each
of the two years ended
December 31, 1995.
Financial Highlights with respect 11
to the Total Return Fund for
each of the two years ended
December 31, 1995 and the
Utilities Fund for the year ended
December 31, 1995.
Page in
Statement
of Addi-
tional In-
formation
----------
(2) Financial statements and schedules
included in Statement of
Additional Information (Part B):
The following audited financial
statements of the Company
and the notes thereto for the
fiscal year ended December 31,
1995 and the report of Price
Waterhouse LLP with respect to
such financial statements are
incorporated in the Statement of
Additional Information by reference
from the Company's Annual
Report to Shareholders for the
fiscal year ended December 31,
1995: Statement of Investment
Securities as of December 31,
1995; Statement of Assets and
Liabilities as of December 31,
1995; Statement of Operations
for the fiscal year ended
December 31, 1995; Statement of
Changes in Net Assets for
each of the two years in the
<PAGE>
period ended December 31, 1995;
Financial Highlights
for each of the two years in
the period ended
December 31, 1995.
(3) Financial statements and schedules
included in Part C:
None: Schedules have been omitted
as all information has been pre-
sented in the financial
statements.
(b) Exhibits:
(1) (a) Articles of Incorporation.1
(b) Articles of Amendment to Articles
of Incorporation.2
(c) Articles Supplementary to Articles
of Incorporation.2
(2) Bylaws.1
(3) Not applicable.
(4) Not applicable.
(5) (a) Investment Advisory Agreement,
dated October 20, 1993,
between Registrant and INVESCO Funds
Group, Inc.2
(b) Sub-Advisory Agreement, dated Octo-
ber 20, 1993, between INVESCO Funds
Group, Inc. and INVESCO Capital Manage-
ment, Inc.2
(c) Sub-Advisory Agreement, dated Octo-
ber 20, 1993, between INVESCO Funds
Group, Inc. and INVESCO Trust Company.2
(6) Distribution Agreement, dated October
20, 1993, between Registrant and INVESCO
Funds Group, Inc.2
(7) Defined Benefit Deferred Compensation
Plan for Non-Interested Directors and
Trustees.2
(8) Custodian Contract, dated October 20, 1993,
between Registrant and State Street Bank
and Trust Company.2 Amendment to Custody
Agreement dated October 25, 1995.
<PAGE>
(9) (a) Transfer Agency Agreement, dated
October 20, 1993, between Registrant and
INVESCO Funds Group, Inc.2
(b) Administrative Service Agreement, dated
October 20, 1993, between Registrant and
INVESCO Funds Group, Inc.2
(c) Participation Agreement, dated
March 22, 1994, among Registrant,
INVESCO Funds Group, Inc., Transamerica
Occidental Life Insurance Company and
Charles Schwab & Co., Inc.3
(d) Participation Agreement, dated Au-
gust 26, 1994, among Registrant, INVESCO
Funds Group, Inc. and Security Life of
Denver Insurance Company.3
(e) Participation Agreement, dated Sep-
tember 19, 1994, among Registrant,
INVESCO Funds Group, Inc. and First ING
Life Insurance Company of New York.3
(f) Participation Agreement, dated De-
cember 1, 1994, among Registrant,
INVESCO Funds Group, Inc., First
Transamerica Life Insurance Company and
Charles Schwab & Co., Inc.3
(g) Participation Agreement, dated
September 14, 1995, among Registrant,
INVESCO Funds Group, Inc. and Southland
Life Insurance Company.
(h) Participation Agreement, dated
October 31, 1995, among Registrant,
INVESCO Funds Group, Inc. and American
Partners Life Insurance Company.
(10) Opinion and consent of counsel as to
the legality of the securities being
registered, indicating whether they will,
when sold, be legally issued, fully paid
and non-assessable.2
(11) Consent of Independent Accountants.
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
<PAGE>
(15) Not applicable.
(16) (a) Schedule for computation of perfor-
mance data for Industrial Income Fund.3
(b) Schedule for computation of perfor-
mance data for Total Return Fund.3
(c) Schedule for computation of perfor-
mance data for High Yield Fund.3
(d) Schedule for computation of yield
data.
(17) (a) Financial Data Schedule for the
year ended December 31, 1995 for
INVESCO VIF- Industrial Income Portfolio.
(b) Financial Data Schedule for the
year ended December 31, 1995 for
INVESCO VIF- Total Return Portfolio.
(c) Financial Data Schedule for the
year ended December 31, 1995 for
INVESCO VIF- High Yield Portfolio.
(d) Financial Data Schedule for the
year ended December 31, 1995 for
INVESCO VIF- Utilities Portfolio.
(18) Not Applicable.
------------------
1Previously fled with the Registrant's
original Registration Statement on Form
N-1A on October 8, 1993, and herein
incorporated by reference.
2Previously filed with Pre-Effective Amendment
No. 1 to the Registrant's Registration State-
ment on December 22, 1993, and herein incorpo-
rated by reference.
<PAGE>
3Previously filed with Post-Effective Amend-
ment No. 2 to the Registrant's Registration
Statement on January 30, 1995, and herein
incorporated by reference.
Item 25. Persons Controlled by or Under Common Control with
Registrant No person is presently controlled
by or under common control with the Company.
Item 26. Number of Holders of Securities
Number of Record
Holders as of
Title of Class March 31, 1996
-------------- ----------------
INVESCO VIF - Industrial Income Portfolio 6
INVESCO VIF - Total Return Portfolio 5
INVESCO VIF - High Yield Portfolio 5
INVESCO VIF - Utilities Portfolio 3
Item 27. Indemnification
Indemnification provisions for officers, directors and employees of
Registrant are set forth in Article VII, Section 2 of the Articles of
Incorporation, and are hereby incorporated by reference. See Item 24(b)(1) and
(2) above. Under these Articles, officers and directors will be indemnified to
the fullest extent permitted by law, subject only to such limitations as may be
required by the Investment Company Act of 1940, as amended, and the rules
thereunder. Under the Investment Company Act of 1940, the directors and officers
of the Company cannot be protected against liability to the Company or its
shareholders to which they would be subject because of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties of their office. The
Company also maintains liability insurance policies covering its directors and
officers.
Item 28. Business and Other Connections of Investment Adviser
See "Management" in the Prospectus and Statement of Additional
Information for information regarding the business of the investment adviser and
sub-advisers. For information as to the business, profession, vocation or
employments of a substantial nature of each of the officers and directors of
INVESCO Funds Group, Inc., INVESCO Trust Company and INVESCO Capital Management,
Inc., reference is made to the Schedule Ds to the Form ADVs filed under the
Investment Advisers Act of 1940 by these companies, which schedules are herein
incorporated by reference.
<PAGE>
Item 29. Principal Underwriters
(a) INVESCO Diversified Funds, Inc.
INVESCO Dynamics Fund, Inc.
INVESCO Emerging Opportunity Funds, Inc.
INVESCO Growth Fund, Inc.
INVESCO Income Funds, Inc.
INVESCO Industrial Income Fund, Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Multiple Asset Funds, Inc.
INVESCO Specialty Funds, Inc.
INVESCO Strategic Portfolios, Inc.
INVESCO Tax-Free Income Funds, Inc.
INVESCO Value Trust
<PAGE>
(b)
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------- ------------- --------------
Frank M. Bishop Director Director
1315 Peachtree Street NE
Atlanta, GA 30309
Charles W. Brady Chairman of
1315 Peachtree Street NE the Board
Atlanta, GA 30309
Kenneth R. Christoffersen Vice President
7800 E. Union Avenue Asst. General Counsel
Denver, CO 80237
M. Anthony Cox Senior Vice
1315 Peachtree Street NE President
Atlanta, GA 30309
Steven T. Cox, Jr. Regional Vice
7800 E. Union Avenue President
Denver, CO 80237
Robert D. Cromwell Regional Vice
7800 E. Union Avenue President
Denver, CO 80237
Samuel T. DeKinder Director
1315 Peachtree Street NE
Atlanta, GA 30309
Douglas P. Dohm Regional Vice
1315 Peachtree Street NE President
Atlanta, GA 30309
William J. Galvin, Jr. Senior Vice Asst. Sec.
7800 E. Union Avenue President
Denver, CO 80237
Linda J. Gieger Vice President
7800 E. Union Avenue
Denver, CO 80237
<PAGE>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------ ------------- -------------
Ronald L. Grooms Senior Vice Treasurer-
7800 E. Union Avenue President Chief Fin'l
Denver, CO 80237 & Treasurer Officer, and
Chief Acctg.
Officer
Wylie G. Hairgrove Vice President
7800 E. Union Avenue
Denver, CO 80237
Hubert L. Harris Director
1315 Peachtree Street, NE
Atlanta, GA 30309
Leon K. Haydon, Jr. Vice President-
7800 E. Union Ave. Database
Denver, CO 80239 Marketing and
Research
Dan J. Hesser Chairman of the President
7800 E. Union Avenue Board, President, & Director
Denver, CO 80237 CEO & Director
Mark A. Jones Regional Vice
1315 Peachtree Street NE President
Atlanta, GA 30309
Jeraldine E. Kraus Assistant Secretary
7800 E. Union Avenue
Denver, CO 80237
Michael D. Legoski Assistant Vice
7800 E. Union Avenue President
Denver, CO 80237
Brian N. Minturn Executive Vice
7800 E. Union Avenue President
Denver, CO 80237 & Director
Robert J. O'Connor Director
1315 Peachtree Street NE
Atlanta, GA 30309
<PAGE>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------ ------------- -------------
Donald R. Paddack Assistant Vice
7800 E. Union Avenue President
Denver, CO 80237
Laura M. Parsons Vice President
7800 E. Union Avenue
Denver, CO 80237
Glen A. Payne Senior Vice Secretary
7800 E. Union Avenue President,
Denver, CO 80237 Secretary &
General Counsel
Pamela J. Piro Assistant Vice
7800 E. Union Avenue President
Denver, CO 80237
R. Dalton Sim Director Director
7800 E. Union Avenue
Denver, CO 80237
James S. Skesavage Regional Vice
1315 Peachtree Street NE President
Atlanta, GA 30309
Terri Berg Smith Vice President
7800 E. Union Avenue
Denver, CO 80237
Alan I. Watson Vice President Asst. Sec.
7800 E. Union Avenue
Denver, CO 80237
Judy P. Wiese Vice President Asst. Treas.
7800 E. Union Avenue
Denver, CO 80237
Allyson B. Zoellner Vice President
7800 E. Union Avenue
Denver, CO 80237
<PAGE>
(c) Not applicable.
Item 30. Location of Accounts and Records
Dan J. Hesser
7800 E. Union Avenue
Denver, CO 80237
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) The Registrant hereby undertakes that its board of
directors will call such meetings of shareholders
of the Funds, for action by shareholder vote,
including acting on the question of removal of a
director or directors, as may be requested in
writing by the holders of at least 10% of the
outstanding shares of a Fund or as may be required
by applicable law or the Company's Articles of
Incorporation, and to assist shareholders in commu-
nicating with other shareholders as required by the
Investment Company Act of 1940.
(b) The Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of Registrant's
latest annual report to shareholders, upon request and without
charge.
<PAGE>
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
post-effective amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Denver, County of Denver, and State of
Colorado, on the 11th day of April, 1996.
Attest: INVESCO Variable Investment
Funds, Inc.
/s/ Glen A. Payne /s/ Dan J. Hesser
- ------------------------------------ ------------------------------------
Glen A. Payne, Secretary Dan J. Hesser, President
Pursuant to the requirements of the Securities Act of 1933, this
post-effective amendment to Registrant's Registration Statement has been signed
by the following persons in the capacities indicated on this 11th day of April,
1996.
/s/ Dan J. Hesser /s/ Lawrence H. Budner
- ------------------------------------ ------------------------------------
Dan J. Hesser, President & Lawrence H. Budner, Director
Director, (Chief Executive Officer)
/s/ Ronald L. Grooms /s/ Daniel D. Chabris
- ------------------------------------ ------------------------------------
Ronald L. Grooms, Treasurer Daniel D. Chabris, Director
(Chief Financial and Accounting
Officer)
/s/ Victor L. Andrews /s/ Fred A. Deering
- ------------------------------------ ------------------------------------
Victor L. Andrews, Director Fred A. Deering, Director
/s/ Bob R. Baker /s/ A. D. Frazier, Jr.
- ------------------------------------ ------------------------------------
Bob R. Baker, Director A. D. Frazier, Jr., Director
/s/ Frank M. Bishop /s/ Kenneth T. King, Director
- ------------------------------------ -----------------------------------
Frank M. Bishop, Director Kenneth T. King, Director
/s/ Charles W. Brady /s/ John W. McIntyre
- ------------------------------------ ------------------------------------
Charles W. Brady, Director John W. McIntyre, Director
/s/ R. Dalton Sim
------------------------------------
R. Dalton Sim, Director
By* By* /s/ Glen A. Payne
--------------------------------- ---------------------------------
Edward F. O'Keefe Glen A. Payne
Attorney in Fact Attorney in Fact
* Original Powers of Attorney authorizing Edward F. O'Keefe and Glen A. Payne,
and each of them, to execute this post-effective amendment to the Registration
Statement of the Registrant on behalf of the above-named directors and officers
of the Registrant have been filed with the Securities and Exchange Commission on
October 8, 1993, December 22, 1993, March 22, 1994, January 30, 1995 and
February 28, 1995.
<PAGE>
Exhibit Index
Page in
Exhibit Number Registration Statement
- -------------- ----------------------
8 96
9(g) 97
9(h) 127
11 157
16(d) 158
17(a) 159
17(b) 160
17(c) 161
17(d) 162
AMENDMENT TO CUSTODIAN CONTRACT
Agreement made by and between State Street Bank and Trust Company (the
"Custodian") and Variable Investment Funds, Inc. (the "Fund").
WHEREAS, the Custodian and the Fund are parties to a custodian contract
dated October 20, 1993 (the "Custodian Contract") governing the terms and
conditions under which the Custodian maintains custody of the securities and
other assets of the Fund; and
WHEREAS, the Custodian and the Fund desire to amend the terms and
conditions under which the Custodian maintains the Fund's securities and other
non-cash property in the custody of certain foreign sub-custodians in conformity
with the requirements of Rule 17f-5 under the Investment Company Act of 1940, as
amended;
NOW THEREFORE, in consideration of the premises and covenants contained
herein, the Custodian and the Fund hereby amend the Custodian Contract by the
addition of the following terms and provisions;
1. Notwithstanding any provisions to the contrary set forth in the
Custodian Contract, the Custodian may hold securities and other non-cash
property for all of its customers, including the Fund, with a foreign
sub-custodian in a single account that is identified as belonging to the
Custodian for the benefit of its customers, provided however, that (i) the
records of the Custodian with respect to securities and other non-cash property
of the Fund which are maintained in such account shall identify by bookentry
those securities and other non-cash property belonging to the Fund and (ii) the
Custodian shall require that securities and other non-cash property so held by
the foreign sub-custodian be held separately from any assets of the foreign
sub-custodian or of others.
2. Except as specifically superseded or modified herein, the terms and
provisions of the Custodian Contract shall continue to apply with full force and
effect.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed as a sealed instrument in its name and behalf by its duly authorized
representative this 25th day of October, 1995.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
By: /s/ Glen A. Payne
--------------------------------------------
Title: Secretary
STATE STREET BANK AND TRUST COMPANY
By: /s/ Charles R. Whittemore, Jr.
--------------------------------------------
Title: Vice President
PARTICIPATION AGREEMENT
Among
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO FUNDS GROUP, INC.
and
SOUTHLAND LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into this day of 14th day of September, 1995 by
and among SOUTHLAND LIFE INSURANCE COMPANY, (hereinafter the "Insurance
Company"), , 1995 by and a Texas corporation, on its own behalf and on behalf of
each segregated asset account of the Insurance Company set forth on Schedule A
hereto as may be amended from time to time (each such account hereinafter
referred to as the "Account"), INVESCO VARIABLE INVESTMENT FUNDS, INC., a
Maryland corporation (the "Company") and INVESCO FUNDS GROUP, INC. ("INVESCO"),
a Delaware corporation.
WHEREAS, the Company engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established for variable annuity and life insurance contracts to be offered by
insurance companies which have entered into participation agreements
substantially identical to this Agreement ("Participating Insurance Companies");
and
WHEREAS, the beneficial interest in the Company is divided into several series
of shares, each designated a "Fund" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Company has obtained an order from the Securities and Exchange
Commission (the "Commission"), dated December 29, 1993 (File No. 812-8590),
granting Participating Insurance Companies and their separate accounts
exemptions from the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the
Investment Company Act of 1940, as amended, (the "1940 Act") and Rules
6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit
shares of the Company to be sold to and held by variable annuity and variable
life insurance separate accounts of life insurance companies that may or may not
be affiliated with one another (the "Mixed and Shared Funding Exemptive Order");
and
WHEREAS, the Company is registered as an open-end management investment company
under the 1940 Act and its shares are registered under the Securities Act of
1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, INVESCO is duly registered as an investment adviser under the
Investment Advisers Act of 1940 and any applicable state securities law and as a
broker dealer under the Securities Exchange Act of 1934, as amended, (the "1934
<PAGE>
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Insurance Company has registered under the 1933 Act, or will
register under the 1933 Act, certain variable annuity and variable life
insurance contracts identified by the form number(s) listed on Schedule B to
this Agreement, as amended from time to time hereafter by mutual written
agreement of all the parties hereto (the "Contracts"); and
WHEREAS, each Account is a duly organized, validly existing segregated asset
account, established by resolution of the board of directors of the Insurance
Company on the date shown for that Account on Schedule A hereto, to set aside
and invest assets attributable to the Contracts; and
WHEREAS, the Insurance Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and regulations,
the Insurance Company intends to purchase shares in the Funds on behalf of the
Accounts to fund the Contracts and INVESCO is authorized to sell such shares to
unit investment trusts such as the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Insurance
Company, the Company and INVESCO agree as follows:
ARTICLE I. Sale of Company Shares
1.1 INVESCO agrees to sell to the Insurance Company those shares of the Company
which each Account orders, executing such orders on a daily basis at the net
asset value next computed after receipt by the Company or its designee of the
order for the shares of the Company. For purposes of this Section 1.1, the
Insurance Company shall be the designee of the Company for receipt of such
orders from the Accounts and receipt by such designee shall constitute receipt
by the Company; provided, that the Company receives notice off such order by
10:00 a.m., Eastern Time, on the next following Business Day. "Business Day"
shall mean any day on which the New York Stock Exchange is open for trading and
on which the Company calculates its net asset value pursuant to the rules of the
Commission.
1.2 The Company agrees to make its shares available for purchase at the
applicable net asset value per share by the Insurance Company and its Accounts
on those days on which the Company calculates its Funds' net asset values
pursuant to rules of the Commission and the Company shall use reasonable efforts
to calculate its Funds' net asset values on each day on which the New York Stock
Exchange is open for trading. Notwithstanding the foregoing, the board of
directors of the Company (hereinafter the "Board") may refuse to sell shares of
any Fund to any person, or suspend or terminate the offering of shares of any
Fund is such action is required by law or by regulatory authorities having
<PAGE>
jurisdiction or is, in the sole discretion of the Board acting in good faith and
in light of their fiduciary duties under federal and any applicable state laws,
necessary in the best interests of the shareholders of that Fund.
1.3 The Company and INVESCO agree that shares of the Company will be sold only
to Participating Insurance Companies and their separate accounts. No shares of
any Fund will be sold to the general public.
1.4 The Company and INVESCO will not sell Company shares to any insurance
company or separate account unless an agreement containing provisions
substantially the same as Sections 2.1, 3.4, 3.5 and Article VII of this
Agreement is in effect to govern such sales.
1.5 The Company agrees to redeem, on the Insurance Company's request, any full
or fractional shares of the Company held by the Insurance Company, executing
such requests on a daily basis at the net asset value next computed after
receipt by the Company or its designee of the request for redemption. For
purposes of this Section 1.5, the Insurance Company shall be the designee of the
Company for receipt of requests for redemption from each Account and receipt by
that designee shall constitute receipt by the Company; provided that the Company
receives notice of the request for redemption by 10:00 a.m., Eastern Time, on
the next following Business Day.
1.6 The Insurance Company agrees to purchase and redeem the shares of each Fund
offered by the then-current prospectus of the Company in accordance with the
provisions of that prospectus. The Insurance Company agrees that all net amounts
available under the Contracts shall be invested in the Company, in such other
Funds advised by INVESCO as may be mutually agreed to in writing by the parties
hereto, or in the Insurance Company's general account, provided that such
amounts may also be invested in an investment company other than the Company if
(a) the other investment company, or series thereof, has investment objectives
or policies that are substantially different from the investment objectives and
policies of all the Funds of the Company; or (b) the Insurance Company gives the
Company and INVESCO forty-five (45) days written notice of its intention to make
the other investment company available as a funding vehicle for the Contracts;
or (c) the other investment company was available as a funding vehicle for the
Contracts prior to the date of this Agreement and the Insurance Company so
informs the Company and INVESCO prior to their signing this Agreement; or (d)
the Company or INVESCO consents to the use of the other investment company.
1.7 The Insurance Company shall pay for Company shares by 11:00 a.m., Eastern
Time, on the next Business Day after an order to purchase Company shares is made
in accordance with the provisions of Section 1.1 hereof. Payment shall be in
federal funds transmitted by wire. For the purpose of Sections 2.10 and 2.11,
upon receipt by the Company of the federal funds so wired, such funds shall
cease to be the responsibility of the Insurance Company and shall become the
responsibility of the Company. Payment of net redemption proceeds (aggregate
redemptions of a Fund's shares by an Account minus aggregate purchases of that
Fund's shares by that Account) of less than $1 million for a given Business Day
<PAGE>
will be made by wiring federal funds to the Insurance Company on the next
Business Day after receipt of the redemption request. Payment of net redemption
proceeds of $1 million or more will be by wiring federal funds within seven days
after receipt of the redemption request. Notwithstanding the foregoing, in the
event that one or more Funds has insufficient cash on hand to pay net
redemptions on the next Business Day, and if such Fund has determined to settle
redemption transactions for all of its shareholders on a delayed basis (more
than one Business Day, but in no event more than seven calendar days, after the
date on which the redemption order is received, unless otherwise permitted by an
order of the Commission under Section 22(e) of the 1940 Act), the Company shall
be permitted to delay sending redemption proceeds to the Insurance Company by
the same number of days that the Company is delaying sending redemption proceeds
to the other shareholders of the Fund. Redemptions of up to the lesser of
$250,000 or 1% of the net asset value of the Fund whose shares are to be
redeemed in any 90-day period will be made in cash. Redemptions in excess of
that amount in any 90-day period may, in the sole discretion of the Company, be
in-kind redemptions, with the securities to be delivered in payment of
redemptions selected by the Company and valued at the value assigned to them in
computing the Fund's net asset value per share.
1.8 Issuance and transfer of the Company's shares will be by book entry only.
Stock certificates will not be issued to the Insurance Company or any Account.
Shares ordered from the Company will be recorded in an appropriate title for
each Account or the appropriate subaccount of each Account.
1.9 The Company shall furnish same day notice (by wire or telephone, followed by
written confirmation) to the Insurance Company of any income, dividends or
capital gain distributions payable on the Funds' shares. The Insurance Company
hereby elects to receive all income dividends and capital gain distributions
payable on a Fund's shares in additional shares of that Fund. The Insurance
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Company shall
notify the Insurance Company of the number of shares issued as payment of
dividends and distributions.
1.10 The Company shall make the net asset value per share for each Fund
available to the Insurance Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make those per-share net asset values available by 8:00 p.m.,
Eastern Time.
ARTICLE II. Representations and Warranties
2.1 The Insurance Company represents and warrants that the Contracts are, or
will be, registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable federal and
state laws and that the sale of the Contracts shall comply in all material
respects with applicable state insurance suitability requirements. The Insurance
Company further represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that is has legally and
<PAGE>
validly established the Account prior to any issuance or sale thereof as a
segregated asset account under the laws of the State of Texas and has
registered, or prior to any issuance or sale of the Contracts will register, the
Account as a unit investment trust in accordance with the provisions of the 1940
Act to serve as a segregated investment account for the Contracts.
2.2 The Company represents and warrants that Company shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sale in compliance with the laws of the State of Maryland and all
applicable federal securities laws and that the Company is and shall remain
registered under the 1940 Act. The Company shall amend the registration
statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The
Company shall register and qualify the shares for sale in accordance with the
laws of the various states only if and to the extent deemed advisable by the
Company or INVESCO.
2.3 The Company represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will made every effort to maintain that
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Insurance Company immediately upon having a reasonable
basis for believing that it has ceased to so qualify or that it might not so
qualify in the future.
2.4 The Insurance Company represents and warrants that the Contracts are
currently treated as annuity or life insurance contracts, under applicable
provisions of the Code and that it will make every effort to maintain such
treatment and that it will notify the Company and INVESCO immediately upon
having a reasonable basis for believing that the Contracts have ceased to be so
treated or that they might not be so treated in the future.
2.5 The Company currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. To the extent that it decides
to finance distribution expenses pursuant to Rule 12b-1, the Company undertakes
to have a board of directors, a majority of whom are not interested persons of
the Company, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.6 The Company makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.
2.7 INVESCO represents and warrants that it is a member in good standing of the
NASD and is registered as a broker-dealer with the Commission. INVESCO further
represents that it will sell and distribute the Company shares in accordance
with the laws of the Sate of Maryland and all applicable state and federal
securities laws, including without limitation the 1933 Act, the 1934 Act, and
the 1940 Act.
<PAGE>
2.8 The Company represents that it is lawfully organized and validly existing
under the laws of the State of Maryland and that it does and will comply in all
material respects with the 1940 Act.
2.9 INVESCO represents and warrants that it is and shall remain duly registered
in all material respects under all applicable federal and state securities laws
and that it shall perform its obligations for the Company in compliance in all
material respects with the laws of the State of Colorado and any applicable
state and federal securities laws.
2.10 The Company and INVESCO represent and warrant that all of their officers,
employees, investment advisers, investment sub-advisers, and other individuals
or entities described in Rule 17g-1 under the 1940 Act are, and shall continue
to be at all times, covered by a blanket fidelity bond or similar coverage for
the benefit of the Company in an amount not less than the minimum coverage
required currently by Rule 17g-1 under the 1940 Act or related provisions as may
be promulgated from time to time. That fidelity bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable bonding company.
2.11 The Insurance Company represents and warrants that all of its officers,
employees, investment advisers, and other individuals or entities described in
Rule 17g-1 under the 1940 Act are and shall continue to be at all times covered
by a blanket fidelity bond or similar coverage for the benefit of the Company,
in an amount not less than the minimum coverage required currently for entities
subject to the requirements of Rule 17g-1 under the 1940 Act or related
provisions or may be promulgated from time to time. The aforesaid Bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
2.12 The Insurance Company represents and warrants that it will not purchase
Company shares with Account assets derived from tax-qualified retirement plans
except indirectly, through Contracts purchased in connection with such plans.
2.13 The Insurance Company represents and warrants that the allocation of
expenses between the Insurance Company and the Company and/or INVESCO in this
Agreement is substantially similar to the allocation provisions in the majority
of the Insurance Company's current participation agreements with other funds.
ARTICLE III. Prospectuses and Proxy Statements: Voting
3.1 The Company will bear the printing costs (or duplicating costs with respect
to the statement of additional information) and mailing costs associated with
the delivery of the following Company (or individual Fund) documents, and any
supplements thereto, to existing Contract owners of the Insurance Company whose
Contract values are invested in the Company:
(i) prospectuses and statements of additional information;
<PAGE>
(ii) annual and semi-annual reports; and
(iii) proxy materials.
3.2 The Insurance Company will submit any bills for printing, duplicating and/or
mailing costs, relating to the Company documents described above, to Company for
reimbursement by the Company. The Insurance Company shall monitor such costs and
shall use its best efforts to control these costs. The Insurance Company will
provide the Company (or INVESCO) on a semi-annual basis, or more frequently as
reasonably requested by the Company (or INVESCO), with a current tabulation of
the number of existing Contract owners of the Insurance Company whose Contract
values are invested in the Company. The tabulation will be sent to the Company
(or INVESCO) in the form of a letter signed by a duly authorized officer of the
Insurance Company attesting to the accuracy of the information contained in the
letter. If requested by the Insurance Company, the Company shall provide such
documentation (including a final copy of the Company's prospectus as set in type
or in camera-ready copy) and other assistance as is reasonably necessary in
order for the Insurance Company to print together tin one document the current
prospectus for the Company, the current prospectus for the Contracts issued by
the Insurance Company and/or the prospectuses of other investment companies
available for purchase by the Accounts. In the event that such prospectuses are
printed together in one document, the costs of printing and mailing copies of
the document shall be allocated based on the Company's share of the total costs
determined according to the number of pages of the parties' and other investment
companies' respective portions of the document.
3.3 The Company will provide, at its expense, the Insurance Company with the
following Company (or individual Fund) documents, and any supplements thereto,
with respect to prospective Contract owners of the Insurance Company, and
Insurance Company shall bear the expense of printing and mailing such documents:
(i) camera-ready copy of the current prospectus for printing by the Insurance
Company;
(ii) a copy of the statement of additional information suitable for duplication;
and
(iii) camera-ready copy of the annual and semi-annual reports for printing by
the Insurance Company.
3.4 If and to the extent required by law, the Insurance Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Company shares in accordance with instructions received from
Contract owners; and
<PAGE>
(iii) vote Company shares for which no instructions have been received in the
same proportion as Company shares of such Fund for which instructions have
been received:
so long as and to the extent that the Commission continues to interpret the 1940
Act to require pass-through voting privileges for variable contract owners. The
Insurance Company reserves the right to vote Company shares held in any
segregated asset account in its own right, to the extent permitted by law.
Participating Insurance Companies shall be responsible for assuring that each of
their separate accounts participating in the Company calculates voting
privileges in a manner consistent with the standards set forth on Schedule C
attached hereto and incorporated herein by this reference, which standards will
also be provided to the other Participating Insurance Companies. The Insurance
Company shall fulfill its obligations under, and abide by the terms and
conditions of, the Mixed and Shared Funding Exemptive Order.
3.5 The Company will comply with all provisions of the 1940 Act requiring voting
by shareholders, and in particular the Company will either provide for annual
meetings (except insofar as the Commission may interpret Section 16 of the 1940
Act not to require such meetings) or, as the Company currently intends, comply
with Section 16(c) of the 1940 Act (although the Company is not one of the
trusts described in Section 16(c) of that Act) as will as with Sections 16(a)
and, if and when applicable, 16(b). Further, the Company will act in accordance
with the Commission's interpretation of the requirements of Section 16(a) with
respect to periodic elections of directors and with whatever rules the
commission may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1 The Insurance Company shall furnish, or shall cause to be furnished to the
Company or its designee, each piece of sales literature or other promotional
material in which the Company, a subadviser of one of the Funds, or INVESCO is
named, at least fifteen (15) calendar days prior to its use. No such material
shall be used if the Company or its designee objects to such use within ten (10)
calendar days after receipt of such material.
4.2 The Insurance Company shall not give any information or make any
representations or statements on behalf of the Company or concerning the Company
in connection with the sale of the Contracts other than the information or
representations contained in the registration statement, prospectus or statement
of additional information for the Company's shares, as such registration
statement, prospectus and statement of additional information may be amended or
supplemented from time to time, or in reports or proxy statements for the
Company, or in sales literature or other promotional material approved by the
Company or its designee or by INVESCO, except with the permission of the Company
or INVESCO.
4.3 The Company, INVESCO, or its designee shall furnish, or shall cause to be
furnished, to the Insurance Company or its designee, each piece of sales
literature or other promotional material in which the Insurance Company and/or
its separate account(s), is named at least fifteen (15) calendar days prior to
<PAGE>
its use. No such material shall be used if the Insurance Company or its designee
objects to such use within ten (10) calendar days after receipt of that
material.
4.4 The Company and INVESCO shall not give any information or make any
representations on behalf of the Insurance Company or concerning the Insurance
Company, the Account, or the Contracts other than the information or
representations contained in a registration statement, prospectus or statement
of additional information for the Contracts, as that registration statement,
prospectus and statement of additional information may be amended or
supplemented from time to time, or in published reports for the Account which
are in the public domain or approved by the Insurance Company for distribution
to Contract owners, or in sales literature or other promotional material
approved by the Insurance Company or its designee, except with the permission of
the Insurance Company.
4.5 The Company will provide to the Insurance Company at least one complete copy
of each registration statement, prospectus, statement of additional information,
report, proxy statement, piece of sales literature or other promotional
material, application for exemption, request for no- action letter, and any
amendment to any of the above, that relate to the Company or its shares,
contemporaneously with the filing of the document with the Commission, the NASD,
or other regulatory authorities.
4.6 The Insurance Company will provide to the Company at least one complete copy
of each registration statement, prospectus, statement of additional information,
report, solicitation for voting instructions, piece of sales literature and
other promotional material, application for exemption, request for no action
letter, and any amendment to any of the above, that relates to the Contracts or
the Account, contemporaneously with the filing of the document with the
Commission, the NASD, or other regulatory authorities.
4.7 For purposes of this Agreement, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements,
newspaper, magazine, or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures, or other
public media, sales literature (i.e., any written communication distributed or
made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts,
reprints or excerpts of any other advertisement, sales literature, or published
article), educational or training materials or other communications distributed
or made generally available to some or all agents or employees, and registration
statements, prospectuses, statements of additional information, shareholder
reports, and proxy materials.
4.8 At the request of any party to this Agreement, each other party will make
available to the other party's independent auditors and/or representative of the
appropriate regulatory agencies, all records, data and access to operating
procedures that may be reasonably requested. Company agrees that Insurance
Company shall have the right to inspect, audit and copy all records pertaining
to the performance of services under this Agreement pursuant to the requirements
of applicable state laws. However, Company and INVESCO shall own and control
<PAGE>
all of their respective records pertaining to their performance of the services
under this Agreement.
ARTICLE V. Fees and Expenses
5.1 The Company and INVESCO shall pay no fee or other compensation to the
Insurance Company under this agreement, except that if the Company or any Fund
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then INVESCO may make payments to the Insurance Company if and in
amounts agreed to by INVESCO in writing, subject to review by the board of
directors of the Company. No such payments shall be made directly by the
Company.
5.2 All expenses incident to performance by the Company under this Agreement
shall be paid by the Company. The Company shall see to it that all its shares
are registered and authorized for issuance in accordance with applicable federal
law and, if and to the extent deemed advisable by the Company or INVESCO, in
accordance with applicable state laws prior to their sale. The Company shall
bear the expenses for the cost of registration and qualification of the
Company's shares, preparation and filing of the Company's prospectus and
registration statement, proxy materials and reports, setting the prospectus in
type, setting in type and printing the proxy materials and reports to
shareholders (including the costs of printing a prospectus that constitutes an
annual report), the preparation of all statements and notices required by any
federal or state law, and all taxes on the issuance or transfer of the Company's
shares.
5.3 The Insurance Company shall bear the expenses of printing and distributing
to Contract owners the Contract prospectuses and, except as provided in Section
3.1, of distributing to Contract owners the Company's prospectus, proxy
materials and reports.
ARTICLE VI. Diversification
6.1 The Company will, at the end of each calendar quarter, comply with Section
817(h) of the Code and Treasury Regulation 1.817-5 relating to the
diversification requirements for variable annuity, endowment, modified endowment
or life insurance contracts and any amendments or other modifications to that
Section or Regulation.
ARTICLE VII. Potential Conflicts
7.1 The Board will monitor the Company for the existence of any material
irreconcilable conflict between the interests of the variable contract owners of
all separate accounts investing in the Company. An irreconcilable material
conflict may arise for a variety of reasons, including: (a) an action by any
state insurance regulatory authority; (b) a change in applicable federal or
state insurance, tax, or securities laws or regulations, or a public ruling,
private letter ruling, no- action or interpretive letter, or any similar action
by insurance, tax or securities regulatory authorities; (c) an administrative or
<PAGE>
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Fund are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by a Participating Insurance Company to
disregard the voting instructions of variable contract owners. The Board shall
promptly inform the Insurance Company if it determines that an irreconcilable
material conflict exists and the implications thereof. The Board shall have sole
authority to determine whether an irreconcilable material conflict exists and
such determination shall be binding upon the Insurance Company.
7.2 The Insurance Company will report promptly any potential or existing
conflicts of which it is aware to the Board. The Insurance Company will assist
the Board in carrying out its responsibilities under the Mixed and Shared
Funding Exemptive Order, by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is not
limited to, an obligation by the Insurance Company to inform the Board whenever
Contract owner voting instructions are to be disregarded. Such responsibilities
shall be carried out by Insurance Company with a view only to the interests of
the Contract owners.
7.3 If it is determined by a majority of the Board, or a majority of its
directors who are not interested persons of the Company, INVESCO, or any
subadviser to any of the Funds (the "Independent Directors"), that a material
irreconcilable conflict exists, the Insurance Company and/or other Participating
Insurance Companies shall, at their expense and to the extent reasonably
practicable (as determined by a majority of the Independent Directors), take
whatever steps are necessary to remedy or eliminate the irreconcilable material
conflict, up to and including: (1), withdrawing the assets allocable to some or
all of the separate accounts from the Company or any Fund and reinvesting those
assets in a different investment medium, including (but not limited to) another
Fund of the Company, or submitting the question whether such segregation should
be implemented to a vote of all affected variable contract owners and, as
appropriate, segregating the assets of any appropriate group (e.g., annuity
contract owners, life insurance contract owners, or variable contract owners of
one or more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected variable contract owners the option of
making such a change; and (2), establishing a new registered management
investment company or managed separate account.
7.4 If a material irreconcilable conflict arises because of a decision by the
Insurance Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Insurance company may be required, at the Company's election, to withdraw the
affected Account's investment in the Company and terminate this Agreement with
respect to that Account; provided, however that such withdrawal and termination
shall be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the Independent Directors. Any such
withdrawal and termination must take place within six (6) months after the
Company gives written notice that this provision is being implemented, and until
the end of that six month period INVESCO and the Company shall continue to
accept and implement orders by the Insurance Company for the purchase (and
redemption) of shares of the Company.
<PAGE>
7.5 If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Insurance Company conflicts
with the majority of other state regulators, then the Insurance Company will
withdraw the affected Account's investment in the Company and terminate this
Agreement with respect to that Account within six months after the Board informs
the Insurance Company in writing that it has determined that the state insurance
regulator's decision has created an irreconcilable material conflict; provided,
however, that such withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as determined by a
majority of the Independent Directors. Until the end of the foregoing six month
period, INVESCO and the Company shall continue to accept and implement orders by
the Insurance Company for the purchase (and redemption) of shares of the
Company.
7.6 For purposes of Sections 7.3 through 7.6 of this Agreement, a majority of
the Independent Directors shall determine whether any proposed action adequately
remedies any irreconcilable material conflict, but in no event will the Company
be required to establish a new funding medium for the Contracts. The Insurance
Company shall not be required by Section 7.3 to establish a new funding medium
for the Contracts if an offer to do so has been declined by vote of a majority
of Contract owners materially adversely affected by the irreconcilable material
conflict. In the event that the Board determines that any proposed action does
not adequately remedy any irreconcilable material conflict, then the Insurance
Company will withdraw the Account's investment in the Company and terminate this
Agreement within six (6) months after the Board informs the Insurance Company in
writing of the foregoing determination, provided, however, that the withdrawal
and termination shall be limited to the extent required by the material
irreconcilable conflict, as determined by a majority of the Independent
Directors.
7.7 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or Rule
6e-3 is adopted, to provide exemptive relief from any provision of the Act or
the rules promulgated thereunder this respect to mixed or shared funding (as
defined in the Mixed and Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Mixed and Shared Funding
Exemptive Order, then (a) the Company and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent those rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4
and 7.5 of this Agreement shall continue in effect only to the extent that terms
and conditions substantially identical to those Sections are contained in the
Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1 Indemnification By The Insurance Company
8.1(a). The Insurance Company agrees to indemnify and hold harmless the Company
and each director of the Board and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
<PAGE>
(collectively, the "Indemnified Parties" for purposes of this Section 8.1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Insurance Company) or litigation
(including legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Company's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in the registration statement or
prospectus for the Contracts or contained in the Contracts or sales literature
for the Contracts (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reliance upon and in conformity
with information furnished in writing to the Insurance Company by or on behalf
of the Company for use in the registration statement or prospectus for the
Contracts or in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the Contracts or
shares of the Company;
(ii) arise out of or as a result of statements or representations (other than
statements or representations contained in the registration statement,
prospectus or sales literature of the Company not supplied by the Insurance
Company, ro persons under its control) or wrongful conduct of the Insurance
Company or persons under its control, with respect to the sale or distribution
of the Contracts or Company Shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, or sales
literature of the Company or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading if
such a statement or omission was made in reliance upon information furnished in
writing to the Company by or on behalf of the Insurance Company; or
(iv) arise as a result of any failure by the Insurance Company to provide the
services and furnish the materials under the terms of this Agreement; or
(v) arise out of or result from any material breach of any representation and/or
warranty made by the Insurance Company in this Agreement or arise out of or
result from any other material breach of this Agreement by this Insurance
Company, as limited by and in accordance with the provisions of Sections 8.1(b)
and 8.1(c) hereof.
8.1(b) The Insurance Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
<PAGE>
incurred or assessed against an Indemnified Party that may arise from that
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of that Indemnified Party's duties or by reason of that Indemnified
Party's reckless disregard of obligations or duties under this Agreement or to
the Company, whichever is applicable.
8.1(c) The Insurance Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
that Indemnified Party shall have notified the Insurance Company in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon that
Indemnified Party (or after the Indemnified Party shall have received notice of
such service on any designated agent). Notwithstanding the foregoing, the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Insurance Company of its obligations hereunder except to the extent
that the Insurance company has been prejudiced by such failure to give notice.
In addition, any failure by the Indemnified Party to notify the Insurance
Company of any such claim shall not relieve the Insurance Company from any
liability which it may have to the Indemnified Party against whom the action is
brought otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, the Insurance Company
shall be entitled to participate, at its own expense, in the defense of the
action. The Insurance Company also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action; provided,
however, that if the Indemnified Party shall have reasonably concluded that
there may be defenses available to it which are different from or additional to
those available to the Insurance Company, the Insurance Company shall not have
the right to assume said defense, but shall pay the costs and expenses thereof
(except that in no event shall the Insurance Company be liable for the fees and
expenses of more than one counsel for Indemnified Parties in connection with any
one action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances). After notice from
the Insurance Company to the Indemnified Party of the Insurance Company's
election to assume the defense thereof, and in the absence of such a reasonable
conclusion that there may be different or additional defenses available to the
Indemnified Party, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Insurance Company will not be liable
to that party under this Agreement for any legal or other expenses subsequently
incurred by the party independently in connection with the defense thereof other
than reasonable costs of investigation.
8.1(d) The Indemnified Parties will promptly notify the Insurance Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Company's shares or the Contracts or the operation
of the Company.
8.2 Indemnification by INVESCO
8.2(a) INVESCO agrees to indemnify and hold harmless the Insurance Company and
each of its directors and officers and each person, if any, who controls the
Insurance Company within the meaning of Section 15 of the 1933 Act
<PAGE>
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of INVESCO) or litigation (including
legal and other expenses) to which the Indemnified Parties may become subject
under any statute, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Company's shares or the Contracts
and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement or
prospectus or sales literature of the Company (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if the
statement or omission or alleged statement or omission was made in reliance upon
and in conformity with information furnished in writing to INVESCO or the
Company by or on behalf of the Insurance Company for use in the registration
statement or prospectus for the Company or in sales literature (or any amendment
or supplement) or otherwise for use in connection with the sale of the Contracts
or Company shares: or
(ii) arise out of or as a result of statements or representations (other than
statements or representations contained in the registration statement,
prospectus or sales literature for the Contracts not supplied by INVESCO or
persons under its control) or wrongful conduct of the Company, INVESCO or
persons under their control, with respect to the sale or distribution of the
Contracts or shares of the Company; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, or sales
literature covering the Contracts, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in reliance upon
information furnished in writing to the Insurance Company by or on behalf of the
Company; or
(iv) arise as a result of any failure by the Company to provide the services and
furnish the materials under the terms of this Agreement (including a failure,
whether unintentional or in good faith or otherwise, to comply with the
diversification requirements specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any representation and/or
warranty made by INVESCO in this Agreement or arise out of or result from any
other material breach of this Agreement by INVESCO; as limited by and in
accordance with the provisions of Sections 8.2(b) and 8.2(c) hereof.
<PAGE>
8.2(b) INVESCO shall not be liable under this indemnification provision with
respect to any losses, claims, damages, liabilities or litigation incurred or
assessed against an Indemnified Party that may arise from the Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of the Indemnified Party's duties or by reason of the Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to the
Insurance Company or the Account, whichever is applicable.
8.2(c) INVESCO shall not be liable under this indemnification provision with
respect to any claim made against an Indemnified Party unless the Indemnified
Party shall have notified INVESCO in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
claim shall have been served upon the Indemnified Party (or after the
Indemnified Party shall have received notice of such service on any designated
agent). Notwithstanding the foregoing, the failure of any Indemnified Party to
give notice as provided herein shall not relieve INVESCO of its obligations
hereunder except to the extent that INVESCO has been prejudiced by such failure
to give notice. In addition, any failure by the Indemnified Party to notify
INVESCO of any such claim shall not relieve INVESCO from any liability which it
may have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, INVESCO will be entitled to
participate, at its own expense, in the defense thereof. INVESCO also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action; provided, however, that if the Indemnified Party shall have
reasonably concluded that there may be defenses available to it which are
different from or additional to those available to INVESCO, INVESCO shall not
have the right to assume said defense, but shall pay the costs and expenses
thereof (except that in no event shall INVESCO be liable for the fees and
expenses of more than one counsel for Indemnified Parties in connection with any
on action or separate but similar or related accounts in the same jurisdiction
arising out of the same general allegations or circumstances). After notice from
INVESCO to the Indemnified Party of INVESCO's election to assume the defense
thereof, and in the absence of such a reasonable conclusion that there may be
different or additional defenses available to the Indemnified Party, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and INVESCO will not be liable to that party under this
Agreement for any legal or other expenses subsequently incurred by that party
independently in connection with the defense thereof other than reasonable costs
of investigation.
8.2(d) The Insurance Company agrees to notify INVESCO promptly of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
8.3 Indemnification By the Company
8.3(a) The Company agrees to indemnify and hold harmless the Insurance Company,
and each of its directors and officers and each person, if any, who controls the
Insurance Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.3)
against any and all losses, claims, damages, liabilities (including amounts paid
<PAGE>
in settlement with the written consent of the Company) or litigation (including
legal and other expenses) to which the Indemnified Parties may become subject
under any statute, at common law or otherwise, insofar as those losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
result from the gross negligence, bad faith or willful misconduct of the Board
or any member thereof, are related to the operations of the Company and:
(i) arise as a result of any failure by the Company to provide the services and
furnish the materials under the terms of this Agreement (including a failure to
comply with the diversification requirements specified in Article VI of this
Agreement); or
(ii) arise out of or result from any material breach of any representation
and/or warranty made by the Company in this Agreement or arise out of or result
from any other material breach of this Agreement by the Company; as limited by,
and in accordance with the provisions of, Section 8.3(b) and 8.3(c) hereof.
8.3(b) The Company shall not be liable under this indemnification provision with
respect to any losses, claims, damages, liabilities or litigation incurred or
assessed against an Indemnified Party unless the Indemnified Party that may
arise from the Indemnified Party's willful malfeasance, bad faith, or gross
negligence in the performance of the Indemnified Party's duties or by reason of
the Indemnified Party's reckless disregard of obligations and duties under this
Agreement or to the Insurance Company, the Company, INVESCO or the Account,
whichever is applicable.
8.3(c). The Company shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless the
Indemnified Party shall have notified the Company in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Indemnified Party (or after
the Indemnified Party shall have received notice of such service on any
designated agent). Notwithstanding the foregoing, the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Company of its
obligations hereunder except to the extent that the Company has been prejudiced
by such failure to give notice. In addition, any failure by the Indemnified
Party to notify the Company of any such claim shall not relieve the Company from
any liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification provision.
In case any such action is brought against the Indemnified Parties, the Company
will be entitled to participate, at its own expense, in the defense thereof. The
Company also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action; provided, however, that if the
Indemnified Party shall have reasonably concluded that there may be defenses
available to it which are different from or additional to those available to the
Company, the Company shall not have the right to assume said defense, but shall
pay the costs and expenses thereof (except that in no event shall the Company be
liable for the fees and expenses of more than one counsel for Indemnified
Parties in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general allegations or
<PAGE>
circumstances). After notice from the Company to the Indemnified Party of the
Company's election to assume the defense thereof, and in the absence of such a
reasonable conclusion that there may be different or additional defenses
available to the Indemnified Party, the Indemnified Party shall bear the fees
and expenses of any additional counsel retained by it, and the Company will not
be liable to that party under this Agreement for any legal or other expenses
subsequently incurred by that party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d) The Insurance Company and INVESCO agree promptly to notify the Company of
the commencement of any litigation or proceedings against it or any of its
respective officers or directors in connection with this Agreement, the issuance
or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Company.
ARTICLE IX. Applicable Law
9.1 This Agreement shall be construed and provisions hereof interpreted under
and in accordance with the laws of the State of Colorado.
9.2 This Agreement shall be subject to the provisions of the 1933, 1934, and
1940 Acts, and the rules and regulations and rulings thereunder, including any
exemptions from those statutes, rules and regulations the Commission may grant
(including, but not limited to, the Mixed and Shared Funding Exemptive Order)
and the terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE X. Termination
10.1 This Agreement shall terminate:
(a) at the option of any party upon one year advance written notice to the other
parties; provided, however such notice shall not be given earlier than one year
following the date of this Agreement; or
(b) at the option of the Insurance Company to the extent that shares of Funds
are not reasonably available to meet the requirements of the Contracts as
determined by the Insurance Company, provided however, that such a termination
shall apply only to the Fund(s) not reasonably available. Prompt written notice
of the election to terminate for such cause shall be furnished by the Insurance
Company; or
(c) at the option of the Company in the event that formal administrative
proceedings are instituted against the Insurance Company by the NASD, the
Commission, an insurance commissioner or any other regulatory body regarding the
Insurance Company's duties under this Agreement or related to the sale of the
Contracts, the operation of any Account, or the purchase of the Company's
shares, provided, however, that the Company determines in its sole judgment
exercised in good faith, that any such administrative proceedings will have a
<PAGE>
material adverse effect upon the ability of the Insurance Company to perform its
obligations under this Agreement; or
(d) at the option of the Insurance Company in the event that formal
administrative proceedings are instituted against the Company or INVESCO by the
NASD, the Commission, or any state securities or insurance department or any
other regulatory body, provided, however, that the Insurance Company determines
in its sole judgement exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the ability of the Company
or INVESCO to perform its obligations under this Agreement; or
(e) with respect to any Account, upon requisite vote of the Contract owners
having an interest in that Account (or any subaccount) to substitute the shares
of another investment company for the corresponding Fund shares in accordance
with the terms of the Contracts for which those Fund shares had been selected to
serve as the underlying investment media. The Insurance Company will give at
least 30 days' prior written notice to the Company of the date of any proposed
vote to replace the Company's shares; or
(f) at the option of the Insurance Company, in the event any of the Company's
shares are not registered, issued or sold in accordance with applicable state
and/or federal law or exemptions therefrom, or such law precludes the use of
those shares as the underlying investment media of the Contracts issued or to be
issued by the Insurance Company; or
(g) at the option of the Insurance Company, if the Company ceases to qualify as
a regulated investment company under Subchapter M of the Code or under any
successor or similar provision, or if the Insurance Company reasonably believes
that the Company may fail to so qualify; or
(h) at the option of the Insurance Company, if the Company fails to meet the
diversification requirements specified in Article VI hereof; or
(i) at the option of either the Company or INVESCO, if (1) the Company or
INVESCO, respectively, shall determine, in their sole judgment reasonably
exercised in good faith, that the Insurance Company has suffered a material
adverse change in its business or financial condition or is the subject of
material adverse publicity and that material adverse change or material adverse
publicity will have a material adverse impact upon the business and operations
of either the Company or INVESCO, (2) the Company or INVESCO shall notify the
Insurance Company in writing of that determination and its intent to terminate
this Agreement, and (3) after considering the actions taken by the Insurance
Company and any other changes in circumstances since the giving of such a
notice, the determination of the Company or INVESCO shall continue to apply on
the sixtieth (60th) day following the giving of that notice, which sixtieth day
shall be the effective date of termination; or
<PAGE>
(j) at the option of the Insurance Company, if (1) the Insurance Company shall
determine, in its sole judgment reasonably exercised in good faith, that either
the Company or INVESCO has suffered a material adverse change in its business or
financial condition or is the subject of material adverse publicity and that
material adverse change or material adverse publicity will have a material
adverse impact upon the business and operations of the Insurance Company, (2)
the Insurance Company shall notify the Company and INVESCO in writing of the
determination and its intent to terminate the Agreement, and (3) after
considering the actions taken by the Company and/or INVESCO and any other
changes in circumstances since the giving of such a notice, the determination
shall continue to apply on the sixtieth (60th) day following the giving of the
notice, which sixtieth day shall be the effective date of termination; or
(k) at the option of either the Company or INVESCO, if the Insurance Company
gives the Company and INVESCO the written notice specified in Section 1.6(b)
hereof and at the time that notice was given there was no notice of termination
outstanding under any other provision of this Agreement; provided, however any
termination under this Section 10.1(k) shall be effective forty five (45) days
after the notice specified in Section 1.6(b) was given.
10.2 It is understood and agreed that the right of any party hereto to terminate
this Agreement pursuant to Section 10.1(a) may be exercised for any reason or
for no reason.
10.3 Notice Requirement. No termination of this Agreement shall be effective
unless and until the party terminating this Agreement gives prior written notice
to all other parties to this Agreement of its intent to terminate, which notice
shall set forth the basis for the termination.
Furthermore,
(a) in the event that any termination is based upon the provisions of Article
VII, or the provisions of Section 10.1(a), 10.1(i), 10.1(j), or 10.1(k) of this
Agreement, the prior written notice shall be given in advance of the effective
date of termination as required by those provisions; and
(b) in the event that any termination is based upon the provisions of Section
10.1(c) or 10.1(d) of this Agreement, the prior written notice shall be given at
least ninety (90) days before the effective date of termination.
10.4 Effect of Termination. Notwithstanding any termination of this Agreement,
the Company and INVESCO shall at the option of the Insurance Company, continue
to make available additional shares of the Company pursuant to the terms and
conditions of this Agreement, for all Contracts in effect on the effective date
of termination of this Agreement ("Existing Contracts"). Specifically, without
limitation, the owners of the Existing Contracts shall be permitted to
reallocate investments in the Company, redeem investments in the Company and/or
invest in the Company upon the making of additional purchase payments under the
Existing Contracts. The parties agree that this Section 10.4 shall not apply to
any terminations under Article VII and the effect of Article VII terminations
shall be governed by Article VII of this Agreement.
<PAGE>
10.5 The Insurance Company shall not redeem Company shares attributable to the
Contracts (as opposed to Company shares attributable to the Insurance Company's
assets held in the Account) except (i) as necessary to implement
Contract-owner-initiated transactions, or (ii) as required by state and/or
federal laws or regulations or judicial or other legal precedent of general
application (a "Legally Required Redemption"). Upon request, the Insurance
Company will promptly furnish to the Company and INVESCO the opinion of counsel
for the Insurance Company (which counsel shall be reasonably satisfactory to the
Company and INVESCO) to the effect that any redemption pursuant to clause (ii)
above is a legally Required Redemption.
ARTICLE XI. Notices.
Any notice shall be sufficiently given when sent by registered or certified mail
to the other party at the address of that other party set forth below or at such
other address as the other party may from time to time specify in writing.
If to the Company:
P.O. Box 173706
Denver, Colorado 80217-3706
Attention: General Counsel
If to the Insurance Company:
5780 Powers Ferry Road
Atlanta, Georgia 30327-4390
Attention: Director, Marketing Support Services
If to INVESCO:
P.O. Box 173706
Denver, Colorado 80217-3706
Attention: General Counsel
ARTICLE XII. Miscellaneous
12.1 Subject to the requirements of legal process and regulatory authority, each
party hereto shall treat as confidential the names and addresses of the owners
of the Contracts and all information reasonably identified as confidential in
writing by any other party hereto and, except as permitted by this Agreement,
shall not disclose, disseminate or utilize such names and addresses and other
confidential information without the express written consent of the affected
party unless and until that information may come into the public domain.
12.2 The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or otherwise
affect their construction or effect.
<PAGE>
12.3 This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together shall constitute one and the same instrument.
12.4 If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Agreement shall not
be affected thereby.
12.5 Each party hereto shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the Commission, the NASD
and state insurance regulators) and shall permit those authorities reasonable
access to its books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
12.6 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.7 No party may assign this Agreement without the prior written consent of the
others.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed in its name and on its behalf by its duly authorized representative and
its seal to be hereunder affixed hereto as of the date specified below.
Insurance Company:
SOUTHLAND LIFE INSURANCE COMPANY
By its authorized officer,
By: /s/ P. Thomas Chester
-------------------------
Title: Sr. Vice President and CMO
--------------------------
Date: September 14, 1995
--------------------------
Company:
INVESCO VARIABLE INVESTMENT
FUNDS, INC.
By its authorized officer,
By: /s/ Ronald L. Grooms
-------------------------
Title: Treasurer
-----------------------
Date: September 21, 1995
-----------------------
<PAGE>
INVESCO:
INVESCO FUNDS GROUP, INC.
By its authorized officer,
By: /s/ Ronald L. Grooms
-------------------------
Title: Senior Vice President
----------------------
Date: September 21, 1995
----------------------
<PAGE>
SCHEDULE A
ACCOUNTS
<PAGE>
SCHEDULE B
CONTRACTS
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Company by INVESCO, the Company and the
Insurance Company. The defined terms herein shall have the meanings assigned in
the Participation Agreement except that the term "Insurance Company" shall also
include the department or third party assigned by the Insurance Company to
perform the steps delineated below.
1. The number of proxy proposals is given to the Insurance Company by INVESCO as
early as possible before the date set by the Company for the shareholder meeting
to facilitate the establishment of tabulation procedures. At this time INVESCO
will inform the Insurance Company of the Record, Mailing and Meeting dates. This
will be done verbally approximately two months before meeting.
2. Promptly after the Record Date, the Insurance Company will perform a "tape
run", or other activity, which will generate the names, addresses and number of
units which are attributed to each contractowner/policyholder (the "Customer")
as of the Record Date. Allowance should be made for account adjustments made
after this date that could affect the status of the Customers' accounts of the
Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Insurance Company will use its bests efforts to call
in the number of Customers to INVESCO, as soon as possible, but no later than
one week after the Record Date.
3. The Company's Annual Report must be sent to each Customer by the Insurance
Company either before or together with the Customers' receipt of a proxy
statement. INVESCO will provide at least one copy of the last Annual Report to
the Insurance Company.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Insurance Company by the Company. The Insurance Company, at its
expense, shall produce and personalize the Voting Instruction cards. The Legal
Department of INVESCO ("INVESCO Legal") must approve the Card before it is
printed. Allow approximately 2-4 business days for printing information on the
Cards. Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Company.)
(This and related steps my occur later in the chronological process due to
possible uncertainties relating to the proposals.)
<PAGE>
5. During this time, INVESCO Legal will develop, produce, and the Company will
pay for the Notice of Proxy and the Proxy Statement (one document). Printed and
folded notices and statements will be sent to Insurance Company for insertion
into envelopes (envelopes and return envelopes are provided and paid for by the
Insurance Company). Contents of envelope sent to customers by Insurance Company
will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. Return envelop (postage pre-paid by Insurance Company)
addressed to the Insurance Company or its tabulation agent
d. "Urge buckslip" - optional, but recommended. (This is a
small, single sheet of paper that requests Customers to vote
as quickly as possible and that their vote is important.
One copy will be supplied by the Company.)
e. Cover letter - optional, supplied by Insurance Company and
reviewed and approved in advance by INVESCO Legal.
6. The above contents should be received by the Insurance Company approximately
3-5 business days before mail date. Individual in charge at Insurance Company
reviews and approves the contents of the mailing package to ensure correctness
and completeness. Copy of this approval sent to INVESCO Legal.
7. Package mailed by the Insurance Company.
* The Company must allow at least a 15-day solicitation time to the
Insurance Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but not including) the
meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place in
another department or another vendor depending on process used. An often used
procedure is to sort cards on arrival by proposal into vote categories of all
yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure.
9. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to the Customer with an explanatory letter, a new
Card and return envelop. The mutilated or illegible Card is disregarded and
considered to be not received for purposes of vote tabulation. Such mutilated or
illegible Cards are "hand verified," i.e., examined as to why they did not
complete the system. Any questions on those Cards are usually remedied
individually.
10. There are various control procedures used to ensure proper tabulation of
votes and accuracy of the tabulation. The most prevalent is to sort the Cards as
they first arrive into categories depending upon their vote; an estimate of how
the vote is progressing may then be calculated. If the initial estimates and the
<PAGE>
actual vote do not coincide, then an internal audit of that vote should occur.
This may entail a recount.
11. The actual tabulation of votes is done in units which are then converted to
shares. (It is very important that the Company receives the tabulations stated
in terms of a percentage and the number of shares.) INVESCO Legal must review
and approve tabulation format.
12. Final tabulation in shares is verbally given by the Insurance Company to
INVESCO Legal on the morning of the meeting not later than 10:00 a.m. Denver
time. INVESCO Legal may request an earlier deadline if required to calculate the
vote in time for the meeting.
13. A Certificate of Mailing and Authorization to Vote Shares will be required
from the Insurance Company as well as an original copy of the final vote.
INVESCO Legal will provide a standard form for each Certification.
14. The Insurance Company will be required to box and archive the Cards received
from the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, INVESCO Legal will be
permitted reasonable access to such Cards.
15. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
PARTICIPATION AGREEMENT
Among
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO FUNDS GROUP, INC.
and
AMERICAN PARTNERS LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into this 31st day of October, 1995 by and
among AMERICAN PARTNERS LIFE INSURANCE COMPANY, (hereinafter the "Insurance
Company"), an Arizona corporation, on its own behalf and on behalf of each
separate account of the Insurance Company set forth on Schedule A hereto as may
be amended from time to time (each such account hereinafter referred to as the
"Account"), INVESCO VARIABLE INVESTMENT FUNDS, INC., a Maryland corporation (the
"Company") and INVESCO FUNDS GROUP, INC. ("INVESCO"), a Delaware corporation.
WHEREAS, the Company engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable annuity and life insurance contracts
to be offered by insurance companies which have entered into participation
agreements substantially identical to this Agreement ("Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Company is divided into several
series of shares, each designated a "Fund" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Company has obtained an order from the Securities and
Exchange Commission (the "Commission"), dated December 29, 1993 (File No. 812-
8590), granting Participating Insurance Companies and their separate accounts
exemptions from the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the
Investment Company Act of 1940, as amended, (the "1940 Act") and Rules 6e-
2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares
of the Company to be sold to and held by variable annuity and variable life
insurance separate accounts of life insurance companies that may or may not be
affiliated with one another (the "Mixed and Shared Funding Exemptive Order");
and
WHEREAS, the Company is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, INVESCO is duly registered as an investment adviser under the
Investment Advisers Act of 1940 and any applicable state securities law and as a
broker dealer under the Securities Exchange Act of 1934, as amended, (the
<PAGE>
"1934 Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Insurance Company has registered under the 1933 Act, or will
register under the 1933 Act, certain variable annuity contracts identified by
the form number(s) listed on Schedule B to this Agreement, as amended from time
to time hereafter by mutual written agreement of all the parties hereto (the
"Contracts"); and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the board of directors of the
Insurance Company on the date shown for that Account on Schedule A hereto, to
set aside and invest assets attributable to the Contracts; and
WHEREAS, the Insurance Company has registered or will register each
Account as a unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Insurance Company intends to purchase shares in the Funds
designated on Schedule C to this Agreement, as it may be amended from time to
time, on behalf of the Accounts to fund the Contracts and INVESCO is authorized
to sell such shares to unit investment trusts such as the Account at net asset
value;
NOW, THEREFORE, in consideration of their mutual promises, the Insurance
Company, the Company and INVESCO agree as follows:
ARTICLE I. Sale of Company Shares
1.1. INVESCO agrees to sell to the Insurance Company those shares of the
Company which each Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Company or its designee of
the order for the shares of the Company. For purposes of this Section 1.1, the
Insurance Company shall be the designee of the Company for receipt of such
orders from the Accounts and receipt by such designee shall constitute receipt
by the Company; provided that the Company receives notice of such order by 9:00
a.m., Mountain Time, on the next following Business Day. "Business Day" shall
mean any day on which the New York Stock Exchange is open for trading and on
which the Company calculates its net asset value pursuant to the rules of the
Commission.
1.2. The Company agrees to make its shares available for purchase at the
applicable net asset value per share by the Insurance Company and its Accounts
on those days on which the Company calculates its Funds' net asset values
pursuant to rules of the Commission and the Company shall use reasonable efforts
to calculate its Funds' net asset values on each day on which the New York Stock
Exchange is open for trading. Notwithstanding the foregoing, the board of
directors of the Company (hereinafter the "Board") may refuse to sell shares of
any Fund to any person, or suspend or terminate the offering of shares of any
Fund if such action is required by law or by regulatory authorities having
<PAGE>
jurisdiction or is, in the sole discretion of the Board acting in good faith and
in light of their fiduciary duties under federal and any applicable state laws,
necessary in the best interests of the shareholders of that Fund.
1.3. The Company and INVESCO agree that shares of the Company will be sold
only to Participating Insurance Companies and their separate accounts. No shares
of any Fund will be sold to the general public.
1.4. The Company and INVESCO will not sell Company shares to any insurance
company or separate account unless an agreement containing provisions
substantially the same as Sections 2.1, 3.4, 3.5 and Article VII of this
Agreement is in effect to govern such sales.
1.5. The Company agrees to redeem, on the Insurance Company's request, any
full or fractional shares of the Company held by the Insurance Company,
executing such requests on a daily basis at the net asset value next computed
after receipt by the Company or its designee of the request for redemption. For
purposes of this Section 1.5, the Insurance Company shall be the designee of the
Company for receipt of requests for redemption from each Account and receipt by
that designee shall constitute receipt by the Company; provided that the Company
receives notice of the request for redemption by 9:00 a.m., Mountain Time, on
the next following Business Day.
1.6. The Insurance Company agrees to purchase and redeem the shares of
each Fund offered by the then-current prospectus of the Company in accordance
with the provisions of that prospectus.
1.7. The Insurance Company shall pay for Company shares by 9:00 a.m.,
Mountain Time, on the next Business Day after an order to purchase Company
shares is made in accordance with the provisions of Section 1.1 hereof. Payment
shall be in federal funds transmitted by wire. For the purpose of Sections 2.10
and 2.11, upon receipt by the Company of the federal funds so wired, such funds
shall cease to be the responsibility of the Insurance Company and shall become
the responsibility of the Company. Payment of aggregate redemption proceeds
(aggregate redemptions of a Fund's shares by an Account) for a given Business
Day will be made by wiring federal funds to the Insurance Company on the next
Business Day after receipt of the redemption request. Notwithstanding the
foregoing, in the event that one or more Funds has insufficient cash on hand to
pay aggregate redemptions on the next Business Day, and if such Fund has
determined to settle redemption transactions for all of its shareholders on a
delayed basis (more than one Business Day, but in no event more than seven
calendar days, after the date on which the redemption order is received, unless
otherwise permitted by an order of the Commission under Section 22(e) of the
1940 Act), the Company shall be permitted to delay sending redemption proceeds
to the Insurance Company by the same number of days that the Company is delaying
sending redemption proceeds to the other shareholders of the Fund.
<PAGE>
1.8. Issuance and transfer of the Company's shares will be by book entry
only. Stock certificates will not be issued to the Insurance Company or any
Account. Shares ordered from the Company will be recorded in an appropriate
title for each Account or the appropriate subaccount of each Account.
1.9. The Company shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Insurance Company of any income,
dividends or capital gain distributions payable on the Funds' shares. The
Insurance Company hereby elects to receive all income dividends and capital gain
distributions payable on a Fund's shares in additional shares of that Fund. The
Insurance Company reserves the right to revoke this election and to receive all
such income, dividends and capital gain distributions in cash. The Company shall
notify the Insurance Company of the number of shares issued as payment of
dividends and distributions.
1.10. The Company shall make the net asset value per share for each Fund
available to the Insurance Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make those per-share net asset values available by 4:00 p.m.,
Mountain Time. If there are dividends or capital gain distributions payable on
the Funds' Shares, the Company will use its best efforts to make the per share
net asset values and dividend or distribution amounts available by 5:00 p.m.,
Mountain Time, but in no event later than 6:00 p.m., Mountain Time. In the event
adjustments are required to correct any error in the computation of the net
asset value of Fund shares made by the Company or INVESCO, INVESCO shall
notify
the Insurance Company as soon as possible after discovering the need for such
adjustments. The parties shall negotiate in good faith to develop a reasonable
method for effecting such adjustments.
ARTICLE II. Representations and Warranties
2.1. The Insurance Company represents and warrants that the Contracts are,
or will be, registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable federal and
state laws and that the sale of the Contracts shall comply in all material
respects with applicable state insurance suitability requirements. The Insurance
Company further represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that it has legally and
validly established the Account prior to any issuance or sale thereof as a
segregated asset account under A.R.S. Section 20-651 of the Arizona Insurance
Laws and has registered, or prior to any issuance or sale of the Contracts will
register, the Account as a unit investment trust in accordance with the
provisions of the 1940 Act to serve as a segregated investment account for the
Contracts.
2.2. The Company represents and warrants that Company shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sale in compliance with the laws of the State of Maryland and all
applicable federal securities laws and that the Company is and shall remain
registered under the 1940 Act. The Company shall amend the registration
statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The
<PAGE>
Company shall register and qualify the shares for sale in accordance with the
laws of the various states only if and to the extent deemed advisable by the
Company or INVESCO.
2.3. The Company represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will make every effort to maintain that
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Insurance Company immediately upon having a reasonable
basis for believing that it has ceased to so qualify or that it might not so
qualify in the future.
2.4. The Insurance Company represents and warrants that the Contracts are
currently treated as annuity contracts under applicable provisions of the Code
and that it will make every effort to maintain such treatment and that it will
notify the Company and INVESCO immediately upon having a reasonable basis for
believing that the Contracts have ceased to be so treated or that they might not
be so treated in the future.
2.5. The Company currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. To the extent that it decides
to finance distribution expenses pursuant to Rule 12b-1, the Company undertakes
to have a board of directors, a majority of whom are not interested persons of
the Company, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.6. The Company makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.
2.7. INVESCO represents and warrants that it is a member in good standing
of the NASD and is registered as a broker-dealer with the Commission. INVESCO
further represents that it will sell and distribute the Company shares in
accordance with the laws of the State of Minnesota and all applicable state and
federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.8. The Company represents that it is lawfully organized and validly
existing under the laws of the State of Maryland and that it does and will
comply in all material respects with the 1940 Act.
2.9. INVESCO represents and warrants that it is and shall remain duly
registered in all material respects under all applicable federal and state
securities laws and that it shall perform its obligations for the Company in
compliance in all material respects with the laws of the State of Colorado and
any applicable state and federal securities laws.
2.10. The Company and INVESCO represent and warrant that all of their
officers, employees, investment advisers, investment sub-advisers, and other
individuals or entities dealing with the money and/or securities of the Company
<PAGE>
are, and shall continue to be at all times, covered by a blanket fidelity bond
or similar coverage for the benefit of the Company in an amount not less than
the minimum coverage required currently by Section 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. That fidelity bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11. The Insurance Company represents and warrants that all of its
officers, employees, investment advisers and other individuals/entities dealing
with the money and/or securities of the Company are covered by a blanket
fidelity bond or similar coverage for the benefit of the Company, in an amount
not less than $5 million. The aforesaid includes coverage for larceny and
embezzlement and is issued by a reputable bonding company. The Insurance Company
agrees to make all reasonable efforts to see that this bond or another bond
containing these provisions is always in effect, and agrees to notify the
Company and INVESCO in the event that such coverage no longer applies. The
Insurance Company further represents and warrants that the employees of
Insurance Company, or such other persons designated by Insurance Company, listed
on Schedule D have been authorized by all necessary action of Insurance Company
to give directions, instructions and certifications to the Company and INVESCO
on behalf of Insurance Company. The Company and INVESCO are authorized to act
and rely upon any directions, instructions and certifications received from such
persons unless and until they have been notified in writing by the Insurance
Company of a change in such persons, and the Company and INVESCO shall incur no
liability in doing so.
2.12. The Insurance Company represents and warrants that it will not
purchase Company shares with Account assets derived from tax-qualified
retirement plans except indirectly, through Contracts purchased in connection
with such plans.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. INVESCO shall provide the Insurance Company (at INVESCO's expense)
with as many copies of the Company's current prospectus as the Insurance Company
may reasonably request for distribution, at the Insurance Company's expense, to
prospective Contract owners and applicants. The Company will provide, at the
Company's expense, as many copies of said prospectus as necessary for
distribution, at the Company's expense, to existing Contract owners whose
Contract values are invested in the Company. INVESCO (or the Company) will
provide the copies of said prospectus to the Insurance Company or to its mailing
agent. The Insurance Company will distribute the prospectus to existing Contract
owners and will bill the Company for the reasonable cost of such distribution.
If requested by the Insurance Company in lieu thereof, the Company shall provide
such documentation (including a final copy of the new prospectus as set in type
at the Company's expense) and other assistance as is reasonably necessary in
order for the Insurance Company once each year (or more frequently if the
prospectus for the Company is amended) to have the Company's prospectus and the
prospectuses of other mutual funds in which assets attributable to the Contracts
may be invested printed together in one document, in which case the Company or
<PAGE>
INVESCO will bear its reasonable share of expenses as described above, allocated
based on the proportionate number of pages of the Company's and other funds'
respective portions of the document.
3.2. The Company's prospectus shall state that the Statement of Additional
Information for the Company (the "SAI") is available from INVESCO (or in the
Company's discretion, the Prospectus shall state that the SAI is available from
the Company), and INVESCO, at its expense, shall print and provide the SAI free
of charge to the Insurance Company for distribution, at INVESCO's expense, to
prospective Contract owners and applicants. The Company will provide, at the
Company's expense, as many copies of said SAI as necessary for distribution, at
the Company's expense, to any existing Contract owner whose Contract values are
invested in the Company who requests such SAI or whenever state or federal law
otherwise requires that such SAI be provided. INVESCO (or the Company) will
provide the copies of said SAI to the Insurance Company or to its mailing agent.
The Insurance Company will distribute the SAI as requested or required and will
bill the Company or INVESCO for the reasonable cost of such distribution.
3.3. The Company, at its expense, shall provide the Insurance Company or
its mailing agent with copies of its proxy material, reports to stockholders and
other communications to stockholders in such quantity as the Insurance Company
shall reasonably require for distributing to Contract owners. The Insurance
Company will distribute this proxy material, reports and other communications to
existing Contract owners and tabulate the votes and will bill the Company for
the reasonable cost of such distribution and tabulation.
3.4. If and to the extent required by law, the Insurance Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Company shares in accordance with instructions
received from Contract owners; and
(iii) vote Company shares for which no instructions have been
received in the same proportion as Company shares of such
portfolio for which instructions have been received:
so long as and to the extent that the Commission continues to interpret the 1940
Act to require pass-through voting privileges for variable contract owners. The
Insurance Company reserves the right to vote Company shares held in any
segregated asset account in its own right, to the extent permitted by law.
Participating Insurance Companies shall be responsible for assuring that each of
their separate accounts participating in the Company calculates voting
privileges in a manner consistent with the standards agreed to by the parties,
which standards will also be consistent with those of the other Participating
Insurance Companies. The Insurance Company shall fulfill its obligations under,
and abide by the terms and conditions of, the Mixed and Shared Funding Exemptive
Order.
<PAGE>
3.5. The Company will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Company will either provide for
annual meetings (except insofar as the Commission may interpret Section 16 of
the 1940 Act not to require such meetings) or, as the Company currently intends,
comply with Section 16(c) of the 1940 Act (although the Company is not one of
the trusts described in Section 16(c) of that Act) as well as with Sections
16(a) and, if and when applicable, 16(b). Further, the Company will act in
accordance with the Commission's interpretation of the requirements of Section
16(a) with respect to periodic elections of directors and with whatever rules
the Commission may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Insurance Company shall furnish, or shall cause to be furnished,
to the Company or its designee, each piece of sales literature or other
promotional material in which the Company, a sub-adviser of one of the Funds, or
INVESCO is named, at least ten calendar days prior to its use. No such material
shall be used if the Company or its designee objects to such use within five
calendar days after receipt of such material.
4.2. The Insurance Company shall not give any information or make any
representations or statements on behalf of the Company or concerning the Company
in connection with the sale of the Contracts other than the information or
representations contained in the registration statement, prospectus or SAI for
the Company's shares, as such registration statement, prospectus or SAI may be
amended or supplemented from time to time, or in reports or proxy statements for
the Company, or in published reports for the Company which are in the public
domain and approved by the Company or INVESCO for distribution, or in sales
literature or other promotional material approved by the Company or its designee
or by INVESCO, except with the permission of the Company or INVESCO. The
Company
and INVESCO agree to respond to any request for approval on a reasonably prompt
and timely basis. Nothing in this Section 4.2 will be construed as preventing
the Insurance Company or its employees or agents from giving advice on
investment in the Company.
4.3. The Company, INVESCO, or its designee shall furnish, or shall cause to
be furnished, to the Insurance Company or its designee, each piece of sales
literature or other promotional material in which the Insurance Company and/or
its separate account(s), is named at least ten calendar days prior to its use.
No such material shall be used if the Insurance Company or its designee object
to such use within five calendar days after receipt of that material.
4.4. The Company and INVESCO shall not give any information or make any
representations on behalf of the Insurance Company or concerning the Insurance
Company, the Account, or the Contracts other than the information or
representations contained in a registration statement, prospectus or statement
of additional information for the Contracts, as that registration statement,
prospectus or statement of additional information may be amended or supplemented
from time to time, or in published reports for the Account which are in the
public domain and approved by the Insurance Company for distribution to Contract
owners, or in sales literature or other promotional material approved by the
<PAGE>
Insurance Company or its designee, except with the permission of the Insurance
Company. The Insurance Company agrees to respond to any request for approval on
a reasonably prompt and timely basis.
4.5. The Company will provide to the Insurance Company at least one
complete copy of each registration statement, prospectus, SAI, report, proxy
statement, piece of sales literature or other promotional material, application
for exemption, request for no-action letter, and any amendment to any of the
above, that relate to the Company or its shares, contemporaneously with the
filing of the document with the Commission, the NASD, or other regulatory
authorities.
4.6. The Insurance Company will provide to the Company at least one
complete copy of each registration statement, prospectus, statement of
additional information, report, solicitation for voting instructions, piece of
sales literature and other promotional material, application for exemption,
request for no action letter, and any amendment to any of the above, that
relates to the Contracts or the Account, contemporaneously with the filing of
the document with the Commission, the NASD, or other regulatory authorities.
4.7. For purposes of this Agreement, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements,
newspaper, magazine, or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures, or other
public media (e.g., on-line networks such as the Internet or other electronic
messages), sales literature (i.e., any written communication distributed or made
generally available to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar texts, reprints or
excerpts of any other advertisement, sales literature, or published article),
educational or training materials or other communications distributed or made
generally available to some or all agents or employees, and registration
statements, prospectuses, statements of additional information, shareholder
reports, and proxy materials.
4.8. At the request of any party to this Agreement, each other party will
make available to the other party's independent auditors and/or representative
of the appropriate regulatory agencies, all records, data and access to
operating procedures that may be reasonably requested. Company agrees that
Insurance Company shall have the right to inspect, audit and copy all records
pertaining to the performance of services under this Agreement pursuant to the
requirements of the California Insurance Department. However, Company and
INVESCO shall own and control all of their respective records pertaining to
their performance of the services under this Agreement.
4.9. The Company and INVESCO hereby consent to the Insurance Company's
use
of the names INVESCO and INVESCO VIF-Industrial Income Portfolio in connection
with marketing the Contracts, subject to Sections 4.1 and 4.2 of this Agreement.
Such consent will terminate with the termination of this Agreement.
<PAGE>
ARTICLE V. Fees and Expenses
5.1. The Company and INVESCO shall pay no fee or other compensation to the
Insurance Company under this Agreement, except that if the Company or any Fund
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then INVESCO may make payments to the Insurance Company if and in
amounts agreed to by INVESCO in writing, subject to review by the board of
directors of the Company. No such payments shall be made directly by the
Company.
5.2. All expenses incident to performance by the Company under this
Agreement shall be paid by the Company. The Company shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Company or
INVESCO, in accordance with applicable state laws prior to their sale. The
Company shall bear the expenses for the cost of registration and qualification
of the Company's shares, preparation and filing of the Company's prospectus, SAI
and registration statement, proxy materials and reports, setting the prospectus
in type, setting in type and printing the proxy materials and reports to
shareholders (including the costs of printing a prospectus that constitutes an
annual report), the preparation of all statements and notices required by any
federal or state law, all taxes on the issuance or transfer of the Company's
shares and other typesetting, printing and distribution expenses set forth in
Article III of this Agreement.
5.3. The Insurance Company shall bear the expenses of printing and
distributing to Contract owners the Contract prospectuses.
ARTICLE VI. Diversification
6.1. The Company will, at the end of each calendar quarter, comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5 relating to the
diversification requirements for variable annuity, endowment, modified endowment
or life insurance contracts and any amendments or other modifications to that
Section or Regulation. In the event of a breach of this Article VI by the
Company, it will take all reasonable steps to: (i) notify the Insurance Company
of such breach; and (ii) adequately diversify the Company so as to achieve
compliance within the grace period afforded by Treasury Regulation 1.817-5.
<PAGE>
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Company for the existence of any material
irreconcilable conflict between the interests of the variable contract owners of
all separate accounts investing in the Company. An irreconcilable material
conflict may arise for a variety of reasons, including: (a) an action by any
state insurance regulatory authority; (b) a change in applicable federal or
state insurance, tax, or securities laws or regulations, or a public ruling,
private letter ruling, no-action or interpretive letter, or any similar action
by insurance, tax, or securities regulatory authorities; (c) an administrative
or judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Fund are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by a Participating Insurance Company to
disregard the voting instructions of variable contract owners. The Board shall
promptly inform the Insurance Company if it determines that an irreconcilable
material conflict exists and the implications thereof. The Board shall have sole
authority to determine whether an irreconcilable material conflict exists and
such determination shall be binding upon the Insurance Company.
7.2 The Insurance Company will report promptly any potential or existing
conflicts of which it is aware to the Board. The Insurance Company will assist
the Board in carrying out its responsibilities under the Mixed and Shared
Funding Exemptive Order, by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is not
limited to, an obligation by the Insurance Company to inform the Board whenever
Contract owner voting instructions are to be disregarded. Such responsibilities
shall be carried out by Insurance Company with a view only to the interests of
the Contract owners.
7.3. If it is determined by a majority of the Board, or a majority of its
directors who are not interested persons of the Company, INVESCO, or any
sub-adviser to any of the Funds (the "Independent Directors"), that a material
irreconcilable conflict exists, the Insurance Company and/or other Participating
Insurance Companies shall, at their expense and to the extent reasonably
practicable (as determined by a majority of the Independent Directors), take
whatever steps are necessary to remedy or eliminate the irreconcilable material
conflict, up to and including: (1), withdrawing the assets allocable to some or
all of the separate accounts from the Company or any Fund and reinvesting those
assets in a different investment medium, including (but not limited to) another
Fund of the Company, or submitting the question whether such segregation should
be implemented to a vote of all affected variable contract owners and, as
appropriate, segregating the assets of any appropriate group (e.g., annuity
contract owners, life insurance contract owners, or variable contract owners of
one or more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected variable contract owners the option of
making such a change; and (2), establishing a new registered management
investment company or managed separate account and obtaining approval thereof by
the Commission.
<PAGE>
7.4. If a material irreconcilable conflict arises because of a decision by
the Insurance Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Insurance Company may be required, at the Company's election, to withdraw the
affected Account's investment in the Company and terminate this Agreement with
respect to that Account; provided, however that such withdrawal and termination
shall be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the Independent Directors. No charge or
penalty will be imposed as a result of such withdrawal. Any such withdrawal and
termination must take place within six (6) months after the Company gives
written notice that this provision is being implemented, and until the end of
that six month period INVESCO and the Company shall continue to accept and
implement orders by the Insurance Company for the purchase (and redemption) of
shares of the Company.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Insurance Company
conflicts with the majority of other state regulators, then the Insurance
Company will withdraw the affected Account's investment in the Company and
terminate this Agreement with respect to that Account within six months after
the Board informs the Insurance Company in writing that it has determined that
the state insurance regulator's decision has created an irreconcilable material
conflict; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the Independent Directors. No charge or penalty
will be imposed as a result of such withdrawal. Until the end of the foregoing
six month period, INVESCO and the Company shall continue to accept and implement
orders by the Insurance Company for the purchase (and redemption) of shares of
the Company.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the Independent Directors shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Company be required to establish a new funding medium for the
Contracts. The Insurance Company shall not be required by Section 7.3 to
establish a new funding medium for the Contracts if an offer to do so has been
declined by vote of a majority of Contract owners materially adversely affected
by the irreconcilable material conflict. In the event that the Board determines
that any proposed action does not adequately remedy any irreconcilable material
conflict, then the Insurance Company will withdraw the Account's investment in
the Company and terminate this Agreement within six (6) months after the Board
informs the Insurance Company in writing of the foregoing determination,
provided, however, that the withdrawal and termination shall be limited to the
extent required by the material irreconcilable conflict, as determined by a
majority of the Independent Directors.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Mixed and Shared Funding Exemptive Order) on terms and conditions
<PAGE>
materially different from those contained in the Mixed and Shared Funding
Exemptive Order, then (a) the Company and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent those rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3,
7.4, and 7.5 of this Agreement shall continue in effect only to the extent that
terms and conditions substantially identical to those Sections are contained in
the Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Insurance Company
8.1(a). The Insurance Company agrees to indemnify and hold harmless the
Company and each person, if any, who controls the Company within the meaning of
Section 15 of the 1933 Act and any director, officer, employee or agent of the
foregoing (collectively, the "Indemnified Parties" for purposes of this Section
8.1) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Insurance Company) or
litigation (including reasonable legal and other expenses), to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to the sale
or acquisition of the Company's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the registration
statement, prospectus or statement of additional information for the
Contracts or contained in the Contracts or sales literature for the
Contracts (or any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity
with information furnished in writing to the Insurance Company by or
on behalf of the Company for use in the registration statement,
prospectus or statement of additional information for the Contracts
or in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Contracts or shares of the Company;
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, SAI or sales literature of the
Company (or any amendment or supplement) not supplied by the
Insurance Company, or persons under its control) or wrongful conduct
of the Insurance Company or persons under its control, with respect
to the sale or distribution of the Contracts or Company Shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement,
prospectus, SAI or sales
<PAGE>
literature of the Company or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading if such a statement or omission
was made in reliance upon information furnished in writing to the
Company by or on behalf of the Insurance Company: or
(iv) arise as a result of any failure by the Insurance Company to
provide the services and furnish the materials under the terms of
this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Insurance Company in this
Agreement or arise out of or result from any other material breach
of this Agreement by the Insurance Company, as limited by and in
accordance with the provisions of Sections 8.1(b) and 8.1(c) hereof.
8.1(b). The Insurance Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party that
may arise from that Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of that Indemnified Party's duties or by reason of
that Indemnified Party's reckless disregard of obligations or duties under this
Agreement or to the Company, whichever is applicable.
8.1(c). The Insurance Company shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless that Indemnified Party shall have notified the Insurance Company in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon that
Indemnified Party (or after the Indemnified Party shall have received notice of
such service on any designated agent). Notwithstanding the foregoing, the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Insurance Company of its obligations hereunder except to the extent
that the Insurance Company has been prejudiced by such failure to give notice.
In addition, any failure by the Indemnified Party to notify the Insurance
Company of any such claim shall not relieve the Insurance Company from any
liability which it may have to the Indemnified Party against whom the action is
brought otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, the Insurance Company
shall be entitled to participate, at its own expense, in the defense of the
action. The Insurance Company also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action; provided,
however, that if the Indemnified Party shall have reasonably concluded that
there may be defenses available to it which are different from or additional to
those available to the Insurance Company, the Insurance Company shall not have
the right to assume said defense, but shall pay the
<PAGE>
costs and expenses thereof (except that in no event shall the Insurance Company
be liable for the fees and expenses of more than one counsel for Indemnified
Parties in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances). After notice from the Insurance Company to the Indemnified Party
of the Insurance Company's election to assume the defense thereof, and in the
absence of such a reasonable conclusion that there may be different or
additional defenses available to the Indemnified Party, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Insurance Company will not be liable to that party under this Agreement for
any legal or other expenses subsequently incurred by the party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.1(d). The Indemnified Parties will promptly notify the Insurance Company
of the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Company's shares or the Contracts or the
operation of the Company.
8.2. Indemnification by INVESCO
8.2(a). INVESCO agrees to indemnify and hold harmless the Insurance
Company and each person, if any, who controls the Insurance Company within the
meaning of Section 15 of the 1933 Act and any director, officer, employee or
agent of the foregoing (collectively, the "Indemnified Parties" for purposes of
this Section 8.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of INVESCO) or
litigation (including reasonable legal and other expenses) to which the
Indemnified Parties may become subject under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Company's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement, prospectus, SAI or sales literature of the Company (or
any amendment or supplement to any of the foregoing), or arise out
of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party
if the statement or omission or alleged statement or omission was
made in reliance upon and in conformity with information furnished
in writing to INVESCO or the Company by or on behalf of the
Insurance Company for use in the registration statement, prospectus
or SAI for the Company or in sales literature (or any amendment or
supplement) or
<PAGE>
otherwise for use in connection with the sale of the Contracts or
Company shares: or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature for the Contracts (or any amendment
or supplement) not supplied by INVESCO or persons under its control)
or wrongful conduct of the Company, INVESCO or persons under their
control, with respect to the sale or distribution of the Contracts
or shares of the Company; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement,
prospectus, statement of additional information or sales literature
covering the Contracts, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statement or statements therein not misleading, if such statement or
omission was made in reliance upon information furnished in writing
to the Insurance Company by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or
otherwise, to comply with the diversification requirements specified
in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by INVESCO in this Agreement or
arise out of or result from any other material breach of this
Agreement by INVESCO; as limited by and in accordance with the
provisions of Sections 8.2(b) and 8.2(c) hereof.
8.2(b) INVESCO shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party that may arise from the Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of the Indemnified Party's duties or by reason of the Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to the
Insurance Company or the Account, whichever is applicable.
<PAGE>
8.2(c) INVESCO shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless the
Indemnified Party shall have notified INVESCO in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Indemnified Party (or after
the Indemnified Party shall have received notice of such service on any
designated agent). Notwithstanding the foregoing, the failure of any Indemnified
Party to give notice as provided herein shall not relieve INVESCO of its
obligations hereunder except to the extent that INVESCO has been prejudiced by
such failure to give notice. In addition, any failure by the Indemnified Party
to notify INVESCO of any such claim shall not relieve INVESCO from any liability
which it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any such
action is brought against the Indemnified Parties, INVESCO will be entitled to
participate, at its own expense, in the defense thereof. INVESCO also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action; provided, however, that if the Indemnified Party shall have
reasonably concluded that there may be defenses available to it which are
different from or additional to those available to INVESCO, INVESCO shall not
have the right to assume said defense, but shall pay the costs and expenses
thereof (except that in no event shall INVESCO be liable for the fees and
expenses of more than one counsel for Indemnified Parties in connection with any
one action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances). After notice from
INVESCO to the Indemnified Party of INVESCO's election to assume the defense
thereof, and in the absence of such a reasonable conclusion that there may be
different or additional defenses available to the Indemnified Party, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and INVESCO will not be liable to that party under this
Agreement for any legal or other expenses subsequently incurred by that party
independently in connection with the defense thereof other than reasonable costs
of investigation.
8.2(d) The Insurance Company agrees to notify INVESCO promptly of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
8.3 Indemnification By the Company
8.3(a). The Company agrees to indemnify and hold harmless the Insurance
Company, and each person, if any, who controls the Insurance Company within the
meaning of Section 15 of the 1933 Act and any director, officer, employee or
agent of the foregoing (collectively, the "Indemnified Parties" for purposes of
this Section 8.3) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Company)
or litigation (including reasonable legal and other expenses) to which the
Indemnified Parties may become subject under any statute, at common law or
otherwise, insofar as those losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements result from the gross negligence, bad
faith or willful misconduct of the Board or any member thereof, are related to
the operations of the Company and:
<PAGE>
(i) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement
(including a failure to comply with the diversification requirements
specified in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Company; as limited by, and in accordance with the
provisions of, Sections 8.3(b) and 8.3(c) hereof.
8.3(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party that may arise from the
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of the Indemnified Party's duties or by reason of the Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Insurance Company, the Company, INVESCO or the Account, whichever is
applicable.
8.3(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless the
Indemnified Party shall have notified the Company in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Indemnified Party (or after
the Indemnified Party shall have received notice of such service on any
designated agent). Notwithstanding the foregoing, the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Company of its
obligations hereunder except to the extent that the Company has been prejudiced
by such failure to give notice. In addition, any failure by the Indemnified
Party to notify the Company of any such claim shall not relieve the Company from
any liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification provision.
In case any such action is brought against the Indemnified Parties, the Company
will be entitled to participate, at its own expense, in the defense thereof. The
Company also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action; provided, however, that if the
Indemnified Party shall have reasonably concluded that there may be defenses
available to it which are different from or additional to those available to the
Company, the Company shall not have the right to assume said defense, but shall
pay the costs and expenses thereof (except that in no event shall the Company be
liable for the fees and expenses of more than one counsel for Indemnified
Parties in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances). After notice from the Company to the Indemnified Party of the
Company's election to assume the defense thereof, and in the absence of such a
<PAGE>
reasonable conclusion that there may be different or additional defenses
available to the Indemnified Party, the Indemnified Party shall bear the fees
and expenses of any additional counsel retained by it, and the Company will not
be liable to that party under this Agreement for any legal or other expenses
subsequently incurred by that party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). The Insurance Company and INVESCO agree promptly to notify the
Company of the commencement of any litigation or proceedings against it or any
of its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Company.
8.4. A successor by law of the parties to this Agreement shall be entitled
to the benefits of indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and provisions hereof interpreted
under and in accordance with the laws of the State of Colorado.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934,
and 1940 acts, and the rules and regulations and rulings thereunder, including
any exemptions from those statutes, rules and regulations the Commission may
grant (including, but not limited to, the Mixed and Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party upon one year advance written notice
to the other parties; provided, however such notice shall not be
given earlier than one year following the date of this Agreement; or
(b) at the option of the Insurance Company to the extent that shares
of Funds are not reasonably available to meet the requirements of
the Contracts as determined by the Insurance Company, provided
however, that such a termination shall apply only to the Fund(s) not
reasonably available. Prompt written notice of the election to
terminate for such cause shall be furnished by the Insurance
Company; or
(c) at the option of the Company in the event that formal
administrative proceedings are instituted against the Insurance
Company by the NASD, the Commission, an insurance commissioner or
any other regulatory body regarding the Insurance Company's duties
<PAGE>
under this Agreement or related to the sale of the Contracts, the
operation of any Account, or the purchase of the Company's shares,
provided, however, that the Company determines in its sole judgment
exercised in good faith, that any such administrative proceedings
will have a material adverse effect upon the ability of the
Insurance Company to perform its obligations under this Agreement;
or
(d) at the option of the Insurance Company in the event that formal
administrative proceedings are instituted against the Company or
INVESCO by the NASD, the Commission, or any state securities or
insurance department or any other regulatory body, provided,
however, that the Insurance Company determines in its sole judgment
exercised in good faith, that any such administrative proceedings
will have a material adverse effect upon the ability of the Company
or INVESCO to perform its obligations under this Agreement; or
(e) with respect to any Account, upon requisite vote of the Contract
owners having an interest in that Account (or any subaccount) to
substitute the shares of another investment company for the
corresponding Fund shares in accordance with the terms of the
Contracts for which those Fund shares had been selected to serve as
the underlying investment media. The Insurance Company will give at
least 30 days' prior written notice to the Company of the date of
any proposed vote to replace the Company's shares; or
(f) at the option of the Insurance Company, in the event any of the
Company's shares are not registered, issued or sold in accordance
with applicable state and/or federal law or exemptions therefrom, or
such law precludes the use of those shares as the underlying
investment media of the Contracts issued or to be issued by the
Insurance Company; or
(g) at the option of the Insurance Company, if the Company ceases to
qualify as a regulated investment company under Subchapter M of the
Code or under any successor or similar provision, or if the
Insurance Company reasonably believes that the Company may fail to
so qualify; or
(h) at the option of the Insurance Company, if the Company fails
to meet the diversification requirements specified in Article VI
hereof; or
(i) at the option of either the Company or INVESCO, if (1) the
Company or INVESCO, respectively, shall determine, in their sole
judgment reasonably exercised in good faith, that the Insurance
Company has suffered a material adverse change in its business or
financial condition or is the subject of material adverse publicity
and that material adverse change or material adverse publicity will
have a material adverse impact upon the business and operations of
<PAGE>
either the Company or INVESCO, (2) the Company or INVESCO shall
notify the Insurance Company in writing of that determination and
its intent to terminate this Agreement, and (3) after considering
the actions taken by the Insurance Company and any other changes in
circumstances since the giving of such a notice, the determination
of the Company or INVESCO shall continue to apply on the sixtieth
(60th) day following the giving of that notice, which sixtieth day
shall be the effective date of termination; or
(j) at the option of the Insurance Company, if (1) the Insurance
Company shall determine, in its sole judgment reasonably exercised
in good faith, that either the Company or INVESCO has suffered a
material adverse change in its business or financial condition or is
the subject of material adverse publicity and that material adverse
change or material adverse publicity will have a material adverse
impact upon the business and operations of the Insurance Company,
(2) the Insurance Company shall notify the Company and INVESCO in
writing of the determination and its intent to terminate the
Agreement, and (3) after considering the actions taken by the
Company and/or INVESCO and any other changes in circumstances since
the giving of such a notice, the determination shall continue to
apply on the sixtieth (60th) day following the giving of the notice,
which sixtieth day shall be the effective date of termination; or
(k) at the option of any party to this Agreement upon another
party's material breach of any provision of this Agreement.
10.2. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 10.1(a) may be exercised for any
reason or for no reason.
10.3 Notice Requirement. No termination of this Agreement shall be
effective unless and until the party terminating this Agreement gives prior
written notice to all other parties to this Agreement of its intent to
terminate, which notice shall set forth the basis for the termination.
Furthermore,
(a) in the event that any termination is based upon the provisions
of Article VII, or the provisions of Section 10.1(a), 10.1(i), or
10.1(j) of this Agreement, the prior written notice shall be given
in advance of the effective date of termination as required by those
provisions; and
(b) in the event that any termination is based upon the provisions
of Section 10.1(c) or 10.1(d) of this Agreement, the prior written
notice shall be given at least ninety (90) days before the effective
date of termination.
<PAGE>
10.4. Effect of Termination. Notwithstanding any termination of this
Agreement, the Company and INVESCO shall at the option of the Insurance
Company,
continue to make available additional shares of the Company pursuant to the
terms and conditions of this Agreement, for all Contracts in effect on the
effective date of termination of this Agreement ("Existing Contracts").
Specifically, without limitation, the owners of the Existing Contracts shall be
permitted to reallocate investments in the Company, redeem investments in the
Company and/or invest in the Company upon the making of additional purchase
payments under the Existing Contracts. The parties agree that this Section 10.4
shall not apply to any terminations under Article VII and the effect of Article
VII terminations shall be governed by Article VII of this Agreement. In
addition, with respect to Existing Contracts, all provisions of this Agreement
will survive and not be affected by any termination of this Agreement.
ARTICLE XI. Notices.
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of that other party set forth
below or at such other address as the other party may from time to time specify
in writing.
If to the Company:
P.O. Box 173706
Denver, Colorado 80217-3706
Attention: General Counsel
If to the Insurance Company:
American Partners Life Insurance Company
c/o American Express Financial Advisors Inc.
IDS Tower 10
Minneapolis, MN 55440
Attention: Jim Mortensen
Manager - Product Development
with a simultaneous copy to:
American Partners Life Insurance Company
c/o American Express Financial Advisors Inc.
IDS Tower 10
Minneapolis, MN 55440
Attention: Mary Ellyn Minenko
Counsel
<PAGE>
If to INVESCO:
P.O. Box 173706
Denver, Colorado 80217-3706
Attention: General Counsel
ARTICLE XII. Miscellaneous
12.1. The Company and INVESCO acknowledge that the identities of the
customers of the Insurance Company or any of its affiliates (collectively, the
"Insurance Company Protected Parties" for purposes of this Section 12.1),
information maintained regarding those customers, and all computer programs and
procedures or other information developed or used by the Insurance Company
Protected Parties or any of their employees or agents in connection with the
Insurance Company's performance of its duties under this Agreement are the
valuable property of the Insurance Company Protected Parties. The Company and
INVESCO agree that if they come into possession of any list or compilation of
the identities of or other information about the Insurance Company Protected
Parties' customers, or any other information or property of the Insurance
Company Protected Parties, other than such information as may be independently
developed or compiled by the Company or INVESCO from information supplied to
them by the Insurance Company Protected Parties' customers who also maintain
accounts directly with the Company, INVESCO or other mutual funds advised by
INVESCO, the Company and INVESCO shall hold such information or property in
confidence and refrain from using, disclosing or distributing any of such
information or other property except: (i) with the Insurance Company's prior
written consent; or (ii) as required by law or judicial process. The Insurance
Company acknowledges that all computer programs, procedures and other
information developed or used by the Company or INVESCO (collectively, the
"INVESCO Protected Parties" for purposes of this Section 12.1) or any of their
employees or agents in connection with the Company's or INVESCO's performance of
their respective duties under this Agreement are the valuable property of the
INVESCO Protected Parties. The Insurance Company agrees that if it comes into
possession of any information or property of the INVESCO Protected Parties,
other than such information as may be independently developed or compiled by the
Insurance Company, the Insurance Company shall hold such information or property
in confidence and refrain from using, disclosing or distributing any of such
information or other property except: (i) with the prior written consent of
INVESCO and the Company; or (ii) as required by law or judicial process. Each
party acknowledges that any breach of the agreements in this Section 12.1 would
result in immediate and irreparable harm to the other parties for which there
would be no adequate remedy at law and agree that in the event of such a breach,
the other parties shall be entitled to equitable relief by way of temporary and
permanent injunctions, as well as such other relief as any court of competent
jurisdiction deems appropriate.
12.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
<PAGE>
12.3. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.4. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.5. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Commission, the NASD and state insurance regulators) and shall permit those
authorities reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
12.6. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.7. No party may assign this Agreement without the prior written consent
of the others.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
Insurance Company:
AMERICAN PARTNERS LIFE INSURANCE COMPANY
By its authorized officer,
By: /s/ Stuart A. Sedlacek
-------------------------------------
Title: President
---------------------------------
Date: October 27, 1995
---------------------------------
Company:
INVESCO VARIABLE INVESTMENT FUNDS, INC.
By its authorized officer,
By: /s/ Ronald L. Grooms
-----------------------------------
Title: Treasurer
--------------------------------
Date: October 31, 1995
--------------------------------
<PAGE>
INVESCO:
INVESCO FUNDS GROUP, INC.
By its authorized officer,
By: /s/ Ronald L. Grooms
---------------------------------
Title: Senior Vice President
------------------------------
Date: October 31, 1995
------------------------------
<PAGE>
Schedule A
Accounts
Name of Account Date of Resolution of Insurance Company's Board
which Established the Account
- ------------------------------------------------------------------------------
APL Variable Annuity Account 1 February 9, 1995
<PAGE>
Schedule B
Contracts
American Partners Life Insurance Company Deferred Annuity Contract
1. Contract Form 32028
2. Contract Form 32034-IRA
In addition, there are a number of state variations of these forms.
<PAGE>
Schedule C
Funds
INVESCO VIF - Industrial Income Portfolio
<PAGE>
Schedule D
Persons Authorized to Give Instructions to the Company and INVESCO
NAME ADDRESS AND PHONE NUMBER
(1) Julie Kiel T11/229
Print or Type Name
612/671-1725
Signature Phone
(2) Sheila Ranum T11/1438
Print or Type Name
612/671-1148
Signature Phone
(3) Sherry Trebus T11/125
Print or Type Name
612/671-4019
Signature Phone
(4) Dean Reznecheck T11/125
Print or Type Name
612/671-3182
Signature Phone
(5) Richard Taliaferro T11/125
Print or Type Name
612/671-2748
Signature Phone
(6) Keith Halen T11/125
Print or Type Name
612/671-4059
Signature Phone
(7) Mary Berger T11-125
Print or Type Name
612/671-5003
Signature Phone
(8) Theresa Sjerven T11/125
Print or Type Name
<PAGE>
612/671-3842
Signature Phone
All addresses are IDS Tower 10, Minneapolis, MN 55440.
legal\ivar\amer-ex1.agr
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Statement of
Additional Information constituting part of this Post-Effective Amendment No. 4
to the registration statement on Form N-1A (the "Registration Statement") of our
report dated January 31, 1996, relating to the financial statements and
financial highlights appearing in the December 31, 1995 Annual Report to
Shareholders of the INVESCO Variable Investment Funds, Inc. which is also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the headings "Independent Accountants" and "Financial
Statements" in the Statement of Additional Information.
PRICE WATERHOUSE LLP
/s/ Price Waterhouse LLP
- ------------------------
Denver, Colorado
April 11, 1996
EXHIBIT 16
COMPUTATION OF PERFORMANCE DATA
The yield of a Fund refers to the income generated by an investment in the
Fund over a 30-day or one-month period, and is computed by dividing the net
investment income per share earned during the period by the net asset value per
share at the end of the period, then adjusting the result to provide for
semi-annual compounding.
Formula is as follows, where:
a = dividends and interest earned during the period b = expenses accrued
for the period (net of reimbursements) c = the average daily number of
shares outstanding during the period that were
entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
YIELD = 2[(a - b + 1) to the 6th power - 1)]
------
cd
The following formulas are used in calculating yield for the VIF-High Yield,
VIF-Industrial Income, VIF-Total Return and VIF-Utilities Funds:
VIF-HIGH YIELD FUND:
2[(41,578.86 - 3,371.21 + 1) to the 6th power - 1)] = 9.83%
--------------------------
430,991.95(11.04)
VIF-INDUSTRIAL INCOME FUND
2[(24,314.51 - 5,21.56 + 1) to the 6th power - 1)] = 3.00%
--------------------------
597,301.114 (12.58)
VIF-TOTAL RETURN FUND
2[(20,397.35 - 4,541.71 + 1) to the 6th power - 1)] = 3.15%
---------------------------
500,568.593(12.14)
VIF-UTILITIES FUND
2[( 623.45 - 189.70 + 1) to the 6th power - 1)] = 1.99%
-------------------------
24,253.85 (10.8357)
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 17(A)
<ARTICLE> 6
<CIK> 0000912744
<NAME> INVESCO VARIABLE INVESTMENT FUNDS, INC.
<SERIES>
<NUMBER> 2
<NAME> VIF-INDUSTRIAL INCOME PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 7631863
<INVESTMENTS-AT-VALUE> 8296098
<RECEIVABLES> 68032
<ASSETS-OTHER> 472
<OTHER-ITEMS-ASSETS> 160339
<TOTAL-ASSETS> 8524941
<PAYABLE-FOR-SECURITIES> 93500
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 69143
<TOTAL-LIABILITIES> 162643
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7698263
<SHARES-COMMON-STOCK> 664722
<SHARES-COMMON-PRIOR> 52008
<ACCUMULATED-NII-CURRENT> (200)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 664235
<NET-ASSETS> 8362298
<DIVIDEND-INCOME> 61377
<INTEREST-INCOME> 97682
<OTHER-INCOME> (225)
<EXPENSES-NET> 32488
<NET-INVESTMENT-INCOME> 126346
<REALIZED-GAINS-CURRENT> 170187
<APPREC-INCREASE-CURRENT> 660022
<NET-CHANGE-FROM-OPS> 830209
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 126762
<DISTRIBUTIONS-OF-GAINS> 170179
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 764485
<NUMBER-OF-SHARES-REDEEMED> 175375
<SHARES-REINVESTED> 23604
<NET-CHANGE-IN-ASSETS> 7837714
<ACCUMULATED-NII-PRIOR> 208
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 27073
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 83252
<AVERAGE-NET-ASSETS> 3648830
<PER-SHARE-NAV-BEGIN> 10.09
<PER-SHARE-NII> 0.19
<PER-SHARE-GAIN-APPREC> 2.76
<PER-SHARE-DIVIDEND> 0.20
<PER-SHARE-DISTRIBUTIONS> 0.26
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.58
<EXPENSE-RATIO> 1
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 17(B)
<ARTICLE> 6
<CIK> 0000912744
<NAME> INVESCO VARIABLE INVESTMENT FUNDS, INC.
<SERIES>
<NUMBER> 1
<NAME> VIF-HIGH YIELD PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 5014857
<INVESTMENTS-AT-VALUE> 5070529
<RECEIVABLES> 127995
<ASSETS-OTHER> 11549
<OTHER-ITEMS-ASSETS> 40188
<TOTAL-ASSETS> 5250261
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17214
<TOTAL-LIABILITIES> 17214
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5177436
<SHARES-COMMON-STOCK> 473935
<SHARES-COMMON-PRIOR> 62319
<ACCUMULATED-NII-CURRENT> (143)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 82
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 55672
<NET-ASSETS> 5233047
<DIVIDEND-INCOME> 469
<INTEREST-INCOME> 259999
<OTHER-INCOME> 0
<EXPENSES-NET> 21730
<NET-INVESTMENT-INCOME> 238738
<REALIZED-GAINS-CURRENT> 171439
<APPREC-INCREASE-CURRENT> 55093
<NET-CHANGE-FROM-OPS> 226532
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 239112
<DISTRIBUTIONS-OF-GAINS> 171439
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 657306
<NUMBER-OF-SHARES-REDEEMED> 282878
<SHARES-REINVESTED> 37188
<NET-CHANGE-IN-ASSETS> 4609408
<ACCUMULATED-NII-PRIOR> 231
<ACCUMULATED-GAINS-PRIOR> 82
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 16298
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 73678
<AVERAGE-NET-ASSETS> 2799512
<PER-SHARE-NAV-BEGIN> 10.01
<PER-SHARE-NII> 0.55
<PER-SHARE-GAIN-APPREC> 1.43
<PER-SHARE-DIVIDEND> 0.55
<PER-SHARE-DISTRIBUTIONS> 0.40
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.04
<EXPENSE-RATIO> 1
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 17(C)
<ARTICLE> 6
<CIK> 0000912744
<NAME> INVESCO VARIABLE INVESTMENT FUNDS, INC.
<SERIES>
<NUMBER> 3
<NAME> VIF-TOTAL RETURN FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 6168740
<INVESTMENTS-AT-VALUE> 6697280
<RECEIVABLES> 295080
<ASSETS-OTHER> 11460
<OTHER-ITEMS-ASSETS> 4462
<TOTAL-ASSETS> 7008282
<PAYABLE-FOR-SECURITIES> 438089
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17196
<TOTAL-LIABILITIES> 455285
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6020008
<SHARES-COMMON-STOCK> 539662
<SHARES-COMMON-PRIOR> 104487
<ACCUMULATED-NII-CURRENT> 4449
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 528540
<NET-ASSETS> 6552997
<DIVIDEND-INCOME> 52476
<INTEREST-INCOME> 106486
<OTHER-INCOME> (1031)
<EXPENSES-NET> 29579
<NET-INVESTMENT-INCOME> 128352
<REALIZED-GAINS-CURRENT> 2985
<APPREC-INCREASE-CURRENT> 529556
<NET-CHANGE-FROM-OPS> 532541
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 124147
<DISTRIBUTIONS-OF-GAINS> 2985
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 684722
<NUMBER-OF-SHARES-REDEEMED> 260017
<SHARES-REINVESTED> 10470
<NET-CHANGE-IN-ASSETS> 5498353
<ACCUMULATED-NII-PRIOR> 244
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 24649
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 82582
<AVERAGE-NET-ASSETS> 3334699
<PER-SHARE-NAV-BEGIN> 10.09
<PER-SHARE-NII> 0.25
<PER-SHARE-GAIN-APPREC> 2.05
<PER-SHARE-DIVIDEND> 0.24
<PER-SHARE-DISTRIBUTIONS> 0.01
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.14
<EXPENSE-RATIO> 1
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 17(D)
<ARTICLE> 6
<CIK> 0000912744
<NAME> INVESCO VARIABLE INVESTMENT FUNDS, INC.
<SERIES>
<NUMBER> 4
<NAME> VIF-VARIABLE UTILITIES FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 231097
<INVESTMENTS-AT-VALUE> 245572
<RECEIVABLES> 695
<ASSETS-OTHER> 72
<OTHER-ITEMS-ASSETS> 97853
<TOTAL-ASSETS> 344192
<PAYABLE-FOR-SECURITIES> 37571
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 16829
<TOTAL-LIABILITIES> 54400
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 275375
<SHARES-COMMON-STOCK> 26744
<SHARES-COMMON-PRIOR> 2500
<ACCUMULATED-NII-CURRENT> 117
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (175)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14475
<NET-ASSETS> 289792
<DIVIDEND-INCOME> 1547
<INTEREST-INCOME> 1046
<OTHER-INCOME> 0
<EXPENSES-NET> 669
<NET-INVESTMENT-INCOME> 1924
<REALIZED-GAINS-CURRENT> (175)
<APPREC-INCREASE-CURRENT> 14475
<NET-CHANGE-FROM-OPS> 14300
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1807
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 27466
<NUMBER-OF-SHARES-REDEEMED> 3389
<SHARES-REINVESTED> 167
<NET-CHANGE-IN-ASSETS> 264792
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 467
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 44537
<AVERAGE-NET-ASSETS> 83727
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> 0.84
<PER-SHARE-DIVIDEND> 0.07
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.84
<EXPENSE-RATIO> 1
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</TABLE>
POWER OF ATTORNEY
The person executing this Power of Attorney hereby appoints Edward F.
O'Keefe and Glen A. Payne, or either of them, as his attorney-in-fact to execute
and to file such Registration Statements under federal and state securities laws
and such Post-Effective Amendments to such Registration Statements of the
hereinafter described entities as such attorney-in-fact, or either of them, may
deem appropriate:
INVESCO Diversified Funds, Inc.
INVESCO Dynamics Fund, Inc.
INVESCO Emerging Opportunity Funds, Inc.
INVESCO Growth Fund, Inc.
INVESCO Income Funds, Inc.
INVESCO Industrial Income Fund, Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Multiple Asset Funds, Inc.
INVESCO Specialty Funds, Inc.
INVESCO Strategic Portfolios, Inc.
INVESCO Tax-Free Income Funds, Inc.
INVESCO Value Trust
INVESCO Variable Investment Funds, Inc.
This Power of Attorney, which shall not be affected by the disability of
the undersigned, is executed and effective as of the 9th day of June, 1995.
/s/ John W. McIntyre
--------------------------
John W. McIntyre
STATE OF GEORGIA )
)
COUNTY OF Gwinett )
SUBSCRIBED, SWORN TO AND ACKNOWLEDGED before me by John W. McIntyre, as a
director or trustee of each of the above-described entities, this 9th day of
June, 1995.
/s/ Sue S. Shore
--------------------------
Notary Public,
Gwinett County Georgia.
My Commission Expires December 15, 1995
POWER OF ATTORNEY
The person executing this Power of Attorney hereby appoints Edward F.
O'Keefe and Glen A. Payne, or either of them, as his attorney-in-fact to execute
and to file such Registration Statements under federal and state securities laws
and such Post-Effective Amendments to such Registration Statements of the
hereinafter described entities as such attorney-in-fact, or either of them, may
deem appropriate:
INVESCO Diversified Funds, Inc.
INVESCO Dynamics Fund, Inc.
INVESCO Emerging Opportunity Funds, Inc.
INVESCO Growth Fund, Inc.
INVESCO Income Funds, Inc.
INVESCO Industrial Income Fund, Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Multiple Asset Funds, Inc.
INVESCO Specialty Funds, Inc.
INVESCO Strategic Portfolios, Inc.
INVESCO Tax-Free Income Funds, Inc.
INVESCO Value Trust
INVESCO Variable Investment Funds, Inc.
This Power of Attorney, which shall not be affected by the disability of
the undersigned, is executed and effective as of the 10th a day of June, 1995.
/s/ A. D. Frazier, Jr.
--------------------------
A. D. Frazier, Jr.
STATE OF GEORGIA )
)
COUNTY OF Cobb )
SUBSCRIBED, SWORN TO AND ACKNOWLEDGED before me by A. D. Frazier, Jr., as a
director or trustee of each of the above-described entities, this 12th day of
June, 1995.
/s/ B. Sharron Smith
--------------------------
Notary Public,
Cobb County Georgia.
My Commission Expires January 21, 1997
