Prospectus May 1, 1996
As Supplemented 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. This Prospectus relates
to shares of two of the Portfolios: the INVESCO VIF - Industrial Income
Portfolio (the "Industrial Income 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.
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.
<PAGE>
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.............................................................. 2
FINANCIAL HIGHLIGHTS................................................. 3
INVESTMENT OBJECTIVES AND POLICIES................................... 4
RISK FACTORS......................................................... 5
INVESTMENT RESTRICTIONS.............................................. 9
MANAGEMENT........................................................... 10
PURCHASES AND REDEMPTIONS............................................ 11
TAX STATUS, DIVIDENDS AND DISTRIBUTIONS.............................. 12
PERFORMANCE INFORMATION.............................................. 13
ADDITIONAL INFORMATION............................................... 13
<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. This Prospectus relates to
shares of two of the portfolios: the INVESCO VIF- Industrial Income 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 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 Industrial Income Fund may invest up to 15% of its total assets in
lower-rated debt securities that present a greater risk of default and have
<PAGE>
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 Funds. 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 and INVESCO Trust 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>
<S> <C> <C> <C> <C>
Year Period Year Period
Ended Ended Ended Ended
December 31 December 31 December 31 December 31
-------------------------------- -----------------------------
1995 1994^ 1995 1994+
Industrial Income 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 0.19 0.03 0.07 0.00
Net Gains on Securities
(Both Realized and Unrealized) 2.76 0.09 0.84 0.00
-------------------------------- -----------------------------
Total from Investment Operations 2.95 0.12 0.91 0.00
-------------------------------- -----------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.20 0.03 0.07 0.00
Distributions from Capital Gains 0.26 0.00 0.00 0.00
-------------------------------- -----------------------------
Total Distributions 0.46 0.03 0.07 0.00
-------------------------------- -----------------------------
Net Asset Value - End of Period $12.58 $10.09 $10.84 $10.00
================================ =============================
TOTAL RETURN> 29.25% 1.23%* 9.08% 0.00%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
RATIOS
Net Assets - End of Period ($000 Omitted) $8,362 $525 $290 $25
Ratio of Expenses to Average Net Assets# 1.03%@ 0.79%~ 1.80%@ 0.00%
Ratio of Net Investment Income to
Average Net Assets# 3.50% 1.69%~ 2.47% 0.00%
Portfolio Turnover Rate 97% 0%* 24% 0%
</TABLE>
^ For the Industrial Income Fund, from August 10, 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.
* These amounts are based on operations for the period shown and, accordingly,
are not representative of a full year.
# Various expenses of the Industrial Income 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, the ratio
of expenses to average net assets would have been 2.31% and 32.55% for the
Industrial Income Fund and 57.13% for the Utilities Fund, respectively, and the
ratio of net investment income to average net assets would have been 2.22% and
(30.07%) for the Industrial Income Fund and (52.86%) for the 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.
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,
<PAGE>
which may be either established, well-capitalized companies or newly-formed,
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, no more than 25% of the Industrial
Income 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
<PAGE>
(including Canadian 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.
High-Risk, High-Yield Securities (Industrial Income Fund Only)
Although Fund Management limits the Industrial Income Fund's debt security
investments to securities it believes are not highly speculative, both credit
and market risks are increased by the Fund's 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.
<PAGE>
Because investment in medium and lower rated securities involves both
greater credit risk and market risk, achievement of the Industrial Income Fund's
investment objective may be more dependent on Fund Management's credit analysis
than is the case for funds investing substantially all of their assets in higher
quality 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 reduced liquidity of the secondary
market for such securities may adversely affect the market price of, and ability
of the Industrial Income Fund 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 Industrial Income Fund 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
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 Fund's month-end portfolio
holdings during the fiscal year. These figures do not represent actual holdings
of the Fund as of December 31, 1995, nor do they imply that the overall quality
of portfolio holdings is fixed.
<PAGE>
Rating Category Percentage of Total Assets
- --------------- --------------------------
AAA 11.26%
AA 0.00%
A 2.00%
BBB 4.13%
BB 4.74%
B 2.34%
CCC 0.00%
Unrated 0.00%
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 an agreement with INVESCO, INVESCO Trust serves as the
sub-adviser of the Funds. Although the Company is not a party to the
sub-advisory agreement, the agreement has been approved by
<PAGE>
the Company's board of directors. In addition, the agreement has been approved
by the initial shareholder of that Fund. The address of INVESCO Trust is 7800 E.
Union Avenue, Denver, Colorado. 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 Funds.
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
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.
<PAGE>
University of 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.
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 Fund, the advisory fee is 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 Utilities Fund, the advisory fee is
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 fee 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
Income Fund. For the fiscal period ended December 31, 1995, the investment
advisory fees paid by the Industrial Income Fund and Utilities Fund were 0.75%
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 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 sub-
advisory fee for the Utilities Fund is 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.
<PAGE>
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 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% 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 and Utilities Funds for the fiscal year ended
December 31, 1995, would have been 2.31% and 57.13%, respectively.
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
<PAGE>
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
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
<PAGE>
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
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.
<PAGE>
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 and Utilities
Fund for the fiscal period ended December 31, 1995, was 29.25% and 9.08%,
respectively.
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
<PAGE>
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 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 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
<PAGE>
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
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 - 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
