As filed on ^ February 14, 1997
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. [ ]
-----
Post-Effective Amendment No. ^ 6 [X]
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. ^ 7 [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)
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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)
- --- on ---------------, 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)
X on ^ May 1, 1997, 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, ^
will be filed on or about February ^ 20, 1997.
Page 1 of 220
Exhibit index is located at page 105
<PAGE>
NOTE
This Post-Effective Amendment (Form N-1A) is being filed to add ^ the INVESCO
VIF-Growth Portfolio to the Registrant, INVESCO Variable Investment Funds, Inc.,
and does not affect the other series of the Registrant: INVESCO VIF-High Yield
Portfolio, INVESCO VIF-Industrial Income Portfolio, ^ INVESCO VIF-Total Return
Portfolio, INVESCO VIF-Dynamics Portfolio, INVESCO VIF-Small Company Portfolio,
INVESCO VIF-Health Sciences Portfolio, INVESCO VIF-Technology Portfolio and
INVESCO VIF-Utilities Portfolio.
<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
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, 1997
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 ^ nine 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 - Dynamics Portfolio (the ^"Dynamics Fund"), the INVESCO VIF - High Yield
Portfolio (the ^"High Yield Fund"), the INVESCO VIF - Growth Portfolio (the
"Growth Fund"), the INVESCO VIF - Small Company Growth Portfolio (the ^"Small
Company Growth ^ Fund"), the INVESCO VIF - Health Sciences Portfolio (the
^"Health Sciences ^ Fund"), the INVESCO VIF - Technology Portfolio (the
^"Technology Fund"), 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 consideration in the
selection of portfolio securities. The Fund normally invests at least 65% of
its total assets in dividend-paying common stocks. Up to 10% of the Fund's
total assets may be invested in equity securities that do not pay regular
dividends. The remaining assets are invested in other income-producing
securities, such as corporate bonds. The Fund also has the flexibility to
invest in other types of securities.
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.
Dynamics Fund:
to seek appreciation of capital through aggressive investment policies. The
Dynamics Fund invests primarily in common stocks of U.S. companies traded
on national securities exchanges and over-the-counter.
<PAGE>
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.
Small Company Growth Fund:
to seek long-term capital growth. The Small Company Growth Fund invests
primarily in equity securities of ^ small-capitalization U.S. companies
traded "over-the-counter."
Health Sciences Fund:
to seek capital appreciation. The Health Sciences Fund normally invests at
least 80% of its total assets in equity securities of companies that
develop, produce, or distribute products or services related to health care.
Technology Fund:
to seek capital appreciation. The Technology Fund normally invests at least
80% of its total assets in equity securities of companies in
technology-related industries such as computers, communications, video,
electronics, oceanography, office and factory automation, and robotics.
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.
Growth Fund:
to seek long-term capital growth. The Fund also seeks, as a secondary
objective, to obtain investment income through the purchase of securities of
carefully selected companies representing major fields of business and
industrial activity. In pursuing its objectives, the Fund invests primarily
in common stocks, but may also invest in other kinds of securities,
including convertible and straight issues of debentures and preferred stock.
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, 1997, is incorporated by
reference into this Prospectus.
<PAGE>
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.
TABLE OF CONTENTS
Page
SUMMARY.................................................................... 8
FINANCIAL HIGHLIGHTS....................................................... 10
INVESTMENT OBJECTIVES AND POLICIES......................................... 18
RISK FACTORS............................................................... 26
INVESTMENT RESTRICTIONS.................................................... 34
MANAGEMENT................................................................. 34
PURCHASES AND REDEMPTIONS.................................................. 41
TAX STATUS, DIVIDENDS AND DISTRIBUTIONS.................................... 42
PERFORMANCE INFORMATION.................................................... 43
ADDITIONAL INFORMATION..................................................... 44
APPENDIX................................................................... 46
<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 ^ nine diversified investment portfolios ("Funds"), the INVESCO VIF
- - Industrial Income Portfolio, the INVESCO VIF - Total Return Portfolio, the
INVESCO VIF - Dynamics Portfolio, the INVESCO VIF - High Yield Portfolio, the
INVESCO VIF - Small Company Growth Portfolio, the INVESCO VIF - Health Sciences
Portfolio, the INVESCO VIF - Technology Portfolio ^, the INVESCO VIF - Utilities
Portfolio and the INVESCO VIF - Growth 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 at least 65%
of its total assets in dividend-paying common stocks, with up to 10% of its
total assets invested in equity securities that do not pay regular dividends and
the remainder invested in other income-producing securities, such as corporate
bonds. 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 Dynamics Fund seeks
to attain its investment objective by investing aggressively in common stocks of
U.S. companies traded on national securities exchanges and over-the-counter. 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 Small Company Growth Fund seeks
to attain its investment objective by investing primarily in
small-capitalization equity securities of U.S. companies traded
over-the-counter. The Health Sciences Fund seeks to attain its investment
objective by investing at least 80% of its total assets in equity securities of
companies which develop, produce, or distribute products or services related to
health care. The Technology Fund seeks to attain its investment objective by
investing at least 80% of its total assets in equity securities of companies in
<PAGE>
technology-related industries such as computers, communications, video,
electronics, oceanography, office and factory automation, and robotics. 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. The Growth Fund seeks to attain its investment
objective by investing primarily in common stocks, but may also invest in other
kinds of securities, including convertible and straight issues of debentures and
preferred stock. 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, the Industrial Income Fund may
invest up to 15%, and the Small Company Growth Fund may invest up to 5% of its
total assets, in lower-rated debt securities that present a greater risk of
default and have prices that fluctuate more than those of higher-rated
securities. Many securities purchased by the Small Company Growth Fund will not
be listed on exchanges, may trade less frequently and in smaller volume than
exchange-listed securities and may have greater price volatility and less
liquidity than exchange-listed securities. The Technology and Health Sciences
Funds will each be concentrated in a specific business sector. Compared to the
broad market, an individual sector may be more strongly affected by changes in
the economic climate, broad market shifts, moves in a particular, dominant
stock, or regulatory changes. 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 Capital Management,
Inc. ^("ICM") serves as sub-adviser to the Total Return Fund and INVESCO Trust
Company ^("INVESCO Trust") serves as sub-adviser to each of the other 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, INVESCO Trust and ICM are provided below under the caption
^"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 1996 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. Because the Growth Fund had not commenced
operations prior to the date of this Prospectus, no financial information is
provided for that Fund.
Period
Ended Dec-
Year Ended December 31 ember 31
--------------------------- ---------
1996 1995 1994^
High Yield Portfolio
PER SHARE DATA
Net Asset Value -
Beginning of Period $11.04 $10.01 $10.00
--------------------------- ---------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.72 0.55 0.05
Net Gains on Securities
(Both Realized and
Unrealized) 1.11 1.43 0.01
--------------------------- --------
Total from Investment
Operations 1.83 1.98 0.06
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LESS DISTRIBUTIONS
Dividends from Net
Investment Income 0.71 0.55 0.05
Distributions from
Capital Gains 0.38 0.40 0.00
--------------------------- --------
Total Distributions 1.09 0.95 0.05
--------------------------- --------
Net Asset Value -
End of Period $11.78 $11.04 $10.01
=========================== ========
TOTAL RETURN> 16.59% 19.76% 0.60%*
<PAGE>
RATIOS
Net Assets -- End of
Period ($000 Omitted) $14,033 $5,233 $624
Ratio of Expenses to
Average Net Assets# 0.87%@ 0.97%@ 0.74%~
Ratio of Net Investment
Income to Average
Net Assets# 9.19% 8.79% 2.72%~
Portfolio Turnover Rate 380% 310% 23%*
^ From May 27, 1994, commencement of 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.
* Based on operations for the period shown and, accordingly, are not
representative of a full year.
# Various expenses of the Portfolio were voluntarily absorbed by IFG for the
years ended December 31, 1996 and 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 1.32%, 2.71% and 30.38% , respectively, and
ratio of net investment income to average net assets would have been 8.74%,
7.05% and (26.92%) , respectively.
@ Ratio is based on Total Expenses of the Portfolio, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
~ Annualized
<PAGE>
Period
Ended Dec-
Year Ended December 31 ember 31
--------------------------- ----------
1996 1995 1994^
Industrial Income Portfolio
PER SHARE DATA
Net Asset Value -
Beginning of Period $12.58 $10.09 $10.00
--------------------------- ---------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.28 0.19 0.03
Net Gains on Securities
(Both Realized and
Unrealized) 2.52 2.76 0.09
--------------------------- ---------
Total from Investment
Operations 2.80 2.95 0.12
--------------------------- ----------
LESS DISTRIBUTIONS
Dividends from Net
Investment Income+ 0.28 0.20 0.03
Distributions from
Capital Gains 0.77 0.26 0.00
--------------------------- --------
Total Distributions 1.05 0.46 0.03
--------------------------- --------
Net Asset Value -
End of Period $14.33 $12.58 $10.09
=========================== ========
TOTAL RETURN> 22.28% 29.25% 1.23%*
RATIOS
Net Assets -
End of Period
($000 Omitted) $22,342 $8,362 $525
Ratio of Expenses to
Average Net Assets# 0.95%@ 1.03%@ 0.79%~
Ratio of Net Investment
Income to Average
Net Assets# 2.87% 3.50% 1.69%~
Portfolio Turnover Rate 93% 97% 0%*
Average Commission
Rate Paid^^ $0.0867 - -
<PAGE>
^ From August 10, 1994, commencement of operations, to December 31, 1994.
+ Distributions in excess of net investment income for the year ended December
31, 1996, aggregated less than $0.01 on a per share basis.
> 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.
* Based on operations for the period shown and, accordingly, are not
representative of a full year.
# Various expenses of the Portfolio were voluntarily absorbed by IFG for the
years ended December 31, 1996 and 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 1.19%, 2.31% and 32.55%, respectively, and ratio of
net investment income to average net assets would have been 2.63%, 2.22% and
(30.07%), respectively.
@ Ratio is based on Total Expenses of the Portfolio, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
~ Annualized
^^ The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the total
number of related shares purchased or sold which is required to be disclosed for
fiscal years beginning September 1, 1995 and thereafter.
<PAGE>
Period
Ended Dec-
Year Ended December 31 ember 31
-------------------------- -----------
1996 1995 1994^
Total Return Portfolio
PER SHARE DATA
Net Asset Value -
Beginning of Period $12.14 $10.09 $10.00
-------------------------- ---------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.36 0.25 0.09
Net Gains on Securities
(Both Realized and
Unrealized) 1.12 2.05 0.09
-------------------------- ---------
Total from Investment
Operations 1.48 2.30 0.18
-------------------------- ---------
LESS DISTRIBUTIONS
Dividends from Net
Investment Income 0.36 0.24 0.09
In Excess of Net
Investment Income 0.05 0.00 0.00
Distributions from
Capital Gains 0.00 0.01 0.00
-------------------------- ---------
Total Distributions 0.41 0.25 0.09
-------------------------- ---------
Net Asset Value -
End of Period $13.21 $12.14 $10.09
========================== =========
TOTAL RETURN> 12.18% 22.79% 1.75%*
RATIOS
Net Assets -
End of Period
($000 Omitted) $13,513 $6,553 $1,055
Ratio of Expenses to
Average Net Assets# 0.94%@ 1.01%@ 0.86%~
Ratio of Net Investment
Income to Average
Net Assets# 3.44% 3.91% 3.86%~
Portfolio Turnover Rate 12% 5% 0%*
Average Commission
Rate Paid^^ $0.0890 - -
^ From June 2, 1994, commencement of operations, to December 31, 1994.
<PAGE>
> 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.
* Based on operations for the period shown and, accordingly, are not
representative of a full year.
# Various expenses of the Portfolio were voluntarily absorbed by IFG for the
years ended December 31, 1996 and 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 1.30%, 2.51% and 16.44%, respectively, and ratio of
net investment income to average net assets would have been 3.08%, 2.41% and
(11.72%), respectively.
@ Ratio is based on Total Expenses of the Portfolio, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
~ Annualized
^^ The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the total
number of related shares purchased or sold which is required to be disclosed for
fiscal years beginning September 1, 1995 and thereafter.
<PAGE>
Period
Ended Dec-
Year Ended December 31 ember 31
------------------------ ----------
1996 1995 1994+
Utilities Portfolio
PER SHARE DATA
Net Asset Value -
Beginning of Period $10.84 $10.00 $10.00
------------------------ ----------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.13 0.07 0.00
Net Gains on Securities
(Both Realized and
Unrealized) 1.26 0.84 0.00
------------------------ -----------
Total from Investment
Operations 1.39 0.91 0.00
------------------------ -----------
LESS DISTRIBUTIONS
Dividends from Net
Investment Income 0.13 0.07 0.00
In Excess of Net
Investment Income 0.01 0.00 0.00
Distributions from
Capital Gains 0.14 0.00 0.00
------------------------ -----------
Total Distributions 0.28 0.07 0.00
------------------------ -----------
Net Asset Value -
End of Period $11.95 $10.84 $10.00
======================== ===========
TOTAL RETURN> 12.76% 9.08% 0.00%
RATIOS
Net Assets -
End of Period
($000 Omitted) $2,660 $290 $25
Ratio of Expenses to
Average Net Assets# 1.16%@ 1.80%@ 0.00%
Ratio of Net Investment
Income to Average
Net Assets# 2.92% 2.47% 0.00%
Portfolio Turnover Rate 48% 24% 0%
Average Commission Rate
Paid^^ $0.1055 - -
<PAGE>
+ All of the expenses for the Portfolio were voluntarily absorbed by IFG 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.
# Various expenses of the Portfolio were voluntarily absorbed by IFG for the
years ended December 31, 1996 and 1995. If such expenses had not been
voluntarily absorbed, ratio of expenses to average net assets would have been
5.36% and 57.13%, respectively, and ratio of net investment income to average
net assets would have been (1.28%) and (52.86%), respectively.
@ Ratio is based on Total Expenses of the Portfolio, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
^^ The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the total
number of related shares purchased or sold which is required to be disclosed for
fiscal years beginning September 1, 1995 and thereafter.
<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. When Fund Management believes market or economic
conditions are unfavorable, each of the Funds may assume a defensive position by
temporarily investing up to 100% of its total assets in high quality money
market instruments, such as short-term U.S. government obligations, commercial
paper or repurchase agreements, high quality corporate bonds or notes, or by
holding cash.
Because prices of stocks fluctuate from day to day, the value of an
investment in any of the Funds will vary based upon the specific Fund's
investment performance. Many of the Funds invest in different companies in a
variety of industries in order to attempt to reduce its overall exposure to
investment and market risks. There is no assurance that any Fund will attain its
objectives.
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 consideration in the selection of portfolio
securities.
The Industrial Income Fund normally invests at least 65% of its total
assets in dividend-paying common stocks. Up to 10% of the Fund's total assets
may be invested in equity securities that do not pay regular dividends. The
remaining assets are invested in other income-producing ^ securities, such as
corporate bonds and other straight debt securities ^("debt securities"). The
Fund also has the flexibility to invest in preferred stock and convertible
bonds. There is no maximum limit on the amount of equity or debt securities in
which the Fund may invest.^
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 ^ Ratings
Services, a division of The McGraw-Hill Companies, Inc. ("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
<PAGE>
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.
Dynamics Fund
The Dynamics Fund seeks appreciation of capital through aggressive
investment policies. This investment objective is fundamental and may not be
changed without the approval of the Fund's shareholders. The Fund seeks to
achieve this objective through the investment of its assets in a variety of
securities that are believed to present opportunities for capital enhancement --
primarily common stocks of companies traded on U.S. securities exchanges, as
well as over-the-counter. The Fund also has the flexibility to invest in
preferred stocks and convertible or straight issues of debentures, as well as
foreign securities.
The Dynamics Fund may invest in illiquid securities, including securities
that are subject to restrictions on resale and securities that are not readily
marketable. The Fund may also invest in restricted securities that may be resold
to institutional investors, known as "Rule 144A Securities." See "Risk Factors
- -- Illiquid and Rule 144A Securities" below.
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
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.
<PAGE>
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.
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.
Small Company Growth Fund
The Small Company Growth Fund seeks long-term capital growth. This
investment objective is fundamental and may not be changed without the approval
of the Fund's shareholders. The Fund seeks to achieve this objective through the
investment of 65% or more of its total assets in equity securities of companies
with market capitalizations of $1 billion or less at the time of purchase
("small-cap companies"). The balance of the Fund's assets may be invested in the
equity securities of companies with market capitalizations in excess of $1
billion, debt securities and short
<PAGE>
- -term investments. With respect to small-cap companies, Fund Management
primarily looks for companies in the developing stages of their life cycle,
which are believed to be currently undervalued in the marketplace, have earnings
which may be expected to grow faster than the U.S. economy in general, and/or
offer the potential for accelerated earnings growth due to rapid growth of
sales, new products, management changes, or structural changes in the economy.
The majority of the Small Company Growth Fund's holdings consist of common
stocks traded over-the-counter. The Fund also has the flexibility to invest in
other U.S. and foreign securities.
The Small Company Growth Fund's investments in debt securities include
U.S. government and corporate debt securities. Investments in U.S. government
securities may consist of securities issued or guaranteed by the U.S. government
and any agency or instrumentality of the U.S. government. In some cases, these
securities are direct obligations of the U.S. government, such as U.S. Treasury
bills, notes and bonds. In other cases, these securities are obligations
guaranteed by the U.S. government, consisting of Government National Mortgage
Association obligations, or obligations of U.S. government authorities, agencies
or instrumentalities, consisting of the Federal National Mortgage Association,
Federal Home Loan Bank, Federal Financing Bank and Federal Farm Credit Bank,
which are supported only by the assets of the issuer. The Fund may invest in
both investment grade and lower-rated corporate debt securities. However, the
Fund will not invest more than 5% of its total assets (measured at the time of
purchase) in corporate debt securities that are rated below BBB by Standard &
Poor's or Baa by Moody's or, if unrated, are judged by Fund Management to be
equivalent in quality to debt securities having such ratings. In no event will
the Fund invest in a debt security rated below CCC by Standard & Poor's or Caa
by Moody's. The risks of investing in below-investment grade debt securities are
discussed below under ^"Risk Factors.^" For a description of each corporate bond
rating category, please refer to the Appendix to this Prospectus.
The short-term investments of the Small Company Growth Fund may consist of
U.S. government and agency securities, domestic bank certificates of deposit and
bankers' acceptances, and commercial paper rated A-1 by Standard and Poor's or
P-1 by Moody's, as well as repurchase agreements with banks and registered
broker-dealers and registered government securities dealers with respect to the
foregoing securities. The Fund's assets invested in U.S. government securities
and short-term investments will be used to meet current cash requirements, such
as to satisfy requests to redeem shares of the Fund and to preserve investment
flexibility.
The Small Company Growth Fund may invest in illiquid securities, including
securities that are subject to restrictions on resale and securities that are
not readily marketable. The Fund may also invest in Rule 144A Securities. For
more information concerning illiquid and Rule 144A Securities, see "Investment
Policies" in the Statement of Additional Information.
<PAGE>
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 ^ 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
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.
<PAGE>
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.
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.
Health Sciences Fund
The Health Sciences Fund seeks capital appreciation. The investment
strategy used in attempting to attain this investment objective is aggressive;
holdings are focused on equity securities whose price appreciation is expected
to outpace that of the health sciences business sector. These stocks may not pay
regular dividends. The Fund normally invests at least 80% of its total assets in
the equity securities (common and preferred stocks, and convertible bonds) of
companies which develop, produce, or distribute products or services related to
health care.
The health sciences business sector consists of numerous industries. In
deciding whether a company is principally engaged in that business sector, Fund
Management must determine that the company derives more than 50% of its gross
income or net sales from activities in that sector or that the company dedicates
more than 50% of its assets to the production of revenues from that sector. If,
based on available financial information, a question exists whether a company
meets one of these standards, Fund Management determines whether the company's
primary business is within the health sciences business sector.
The remainder of the Health Sciences Fund's assets may be invested in any
securities or other instruments deemed appropriate by Fund Management,
consistent with the Fund's investment policies and restrictions. These
investments include debt securities issued by companies principally engaged in
the health sciences business sector, debt or equity securities issued by
companies outside that business sector, short-term high grade debt obligations
maturing no later than one year from the date of purchase (including U.S.
government and agency securities, domestic bank certificates of deposit,
commercial paper rated at least A-2 by Standard & Poor's or P-2 by Moody's
Investors Service, Inc., and repurchase agreements) and cash.
<PAGE>
Technology Fund
The Technology Fund seeks capital appreciation. The investment strategy
used in attempting to attain this investment objective is aggressive. Holdings
are focused on equity securities whose price appreciation is expected to outpace
that of the overall technology business sector. These stocks may not pay regular
dividends. The Fund normally invests at least 80% of its total assets in the
equity securities (common and preferred stocks, and convertible bonds) of
companies in technology-related industries such as computers, communications,
video, electronics, oceanography, office and factory automation, and robotics.
The technology business sector consists of numerous industries. In
deciding whether a company is principally engaged in the technology business
sector, Fund Management must determine that the company derives more than 50% of
its gross income or net sales from activities in that sector; or that the
company dedicates more than 50% of its assets to the production of revenues from
that sector. If, based on available financial information, a question exists
whether a company meets one of these standards, Fund Management determines
whether the company's primary business is within that sector.
The remainder of the Technology Fund's assets may be invested in any
securities or other instruments deemed appropriate by Fund Management,
consistent with the Fund's investment policies and restrictions. These
investments include debt securities issued by companies principally engaged in
the technology business sector, debt or equity securities issued by companies
outside that business sector, short-term high grade debt obligations maturing no
later than one year from the date of purchase (including U.S. government and
agency securities, domestic bank certificates of deposit, commercial paper rated
at least A-2 by Standard & Poor's or P-2 by Moody's Investors Service, Inc., and
repurchase agreements), and cash.
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,
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.
<PAGE>
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 ^ in 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.
Growth Fund
The investment objective of the Growth Fund is to seek long-term capital
growth. The Fund also seeks, as a secondary objective, to obtain investment
income through the purchase of securities of carefully selected companies
representing major fields of business and industrial activity. The Fund normally
holds common stocks (including securities convertible into common stocks)
although it may invest in the following other types of securities: commercial
paper and convertible debentures and straight debt securities having an
investment grade rating (Baa or above by Moody's or BBB or above by Standard &
Poor's) and preferred stocks. In each instance, the Fund endeavors to invest in
securities offering the possibility of capital enhancement and some current
income. 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.
In selecting securities for investment, Fund Management will seek to
identify companies that have a better than average earnings growth potential and
those industries that stand to enjoy the greatest benefit from the predicted
economic environment. The Growth Fund seeks to purchase the securities of
companies that are thought to be best situated in those industry groupings.
While dividends are of secondary consideration, dividend payment records of
companies are also considered.
<PAGE>
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 Health
Sciences, Technology and Utilities Funds, 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 Health Sciences,
Technology and Utilities Funds may be increased by their policy of concentrating
investments in specific business sectors. See "Risk Factors -- Concentration."
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
<PAGE>
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 signifi cant 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 govern ment 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.
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 actual portfolio turnover rates for those Funds
that have been in operation are set forth under "Financial Highlights." Each of
the other Funds is actively traded and is expected to have a portfolio turnover
rate that could exceed 200%. 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.
<PAGE>
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 information concerning Rule 144A Securities, see the
Statement of Additional Information.
Foreign Securities
Each Fund may invest up to 25% of its total assets, measured at the time of
purchase, directly in foreign securities. Investments in securities of foreign
companies (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;
<PAGE>
-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
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 ^ party 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 "Investment Policies" in the Statement of
Additional Information.
<PAGE>
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
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, Industrial Income and
Small Company Growth Funds Only)
Although Fund Management limits the High Yield, Industrial Income and
Small Company Growth 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
<PAGE>
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 High Yield, Industrial Income or
Small Company Growth 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, ^ 1996, 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 ^ 11.69% 0.00%
AA 0.00% 0.00%
A ^ 0.69% 0.00%
BBB 2.59% 0.53%
BB 3.92% 15.62%
B 2.18% 62.16%
CCC 0.21% 6.98%
Unrated 0.00% 3.40%
Concentration (Health Sciences, Technology and Utilities Funds
Only)
While each of the Health Sciences, Technology and Utilities Funds, like
the other Funds, diversifies its investments by investing, with respect to at
least 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 a single business sector. As a result of this investment
policy, an investment in those Funds 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 Health Sciences, Technology and Utilities Funds may be
more susceptible to change than those of investment companies which spread their
investments over many different business sectors.
The Technology Fund may not invest more than 25% of its total assets in a
single industry (e.g., computer software) within the technology business sector.
The Health Sciences and Utilities Funds do not operate under this restriction.
Options and Futures Contracts
Each of the Funds other than the Dynamics, Health Sciences and Technology
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
<PAGE>
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.
Each of the Funds other than the Dynamics, Health Sciences and Technology
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.
^ For hedging or other non-speculative purposes, 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
<PAGE>
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.
Although those Funds that may enter into options and futures contracts
will do so 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 Health Sciences and Utilities ^
Funds, 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 ^ AMVESCO PLC, a ^
publicly-traded holding company that, through its subsidiaries, engages in the
business of investment management on an international basis. INVESCO PLC changed
its name to AMVESCO PLC on February 28, 1997 as a part of a merger between
INVESCO PLC and AIM Management Group, Inc., thus creating one of the largest
independent investment management businesses in the world. INVESCO, INVESCO
Trust and ICM will continue to operate under their existing names. AMVESCO PLC
<PAGE>
has approximately $150 billion in assets under management. INVESCO was
established in 1932 and, as of ^ December 31, 1996, managed 14 mutual funds,
consisting of ^ 44 separate portfolios, with combined assets of approximately ^
$13.8 billion on behalf of over ^ 826,000 shareholders.
Pursuant to agreements with INVESCO, INVESCO Trust serves as the
sub-adviser of the Industrial Income, High Yield, Utilities, Dynamics, Small
Company Growth, Health Sciences ^, Technology and Growth Funds and ICM serves as
the sub-adviser of the Total Return Fund. Although the Company is not a party to
^ any sub-advisory agreement, ^ the agreements have 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 ^ shareholders
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, Dynamics, High Yield, Small Company
Growth, Health Sciences, Technology ^, Utilities and Growth 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 ^ 55 investment
portfolios as of ^ December 31, 1996, including ^ 31 portfolios in the INVESCO
group. These ^ 55 portfolios had aggregate assets of approximately ^ $12.7
billion as of ^ December 31, 1996. 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.
ICM is an indirect, wholly-owned subsidiary of AMVESCO PLC that currently
manages in excess of $39 billion of assets on behalf of tax-exempt accounts
(such as pension and profit-sharing funds for corporations and state and local
governments) and investment companies.
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.
<PAGE>
Donovan J. (Jerry) Paul 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.
University of Iowa; M.B.A.
University of Northern Iowa;
Chartered Financial Analyst;
Certified Public Accountant.
Dynamics Fund
Timothy J. Miller Portfolio Manager of the INVESCO VIF
- Dynamics Portfolio ^ 1996;
portfolio manager for the INVESCO
Dynamics Fund since 1993; senior
vice president since 1995, vice
president (1993 to 1995) and
portfolio manager (1992 to present)
of INVESCO Trust. Formerly (1979 to
1992), analyst and portfolio manager
with Mississippi Valley Advisors.
B.S.B.A., St. Louis University;
M.B.A., University of Missouri;
Chartered Financial Analyst.
High Yield Fund
Donovan J. (Jerry) Paul 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 INVES-
CO Industrial Income Fund, INVESCO
VIF - Industrial Income Portfolio,
<PAGE>
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.
Small Company Growth and Health Sciences Funds
John Schroer Portfolio manager of INVESCO VIF -
Small Company Growth Portfolio and
INVESCO VIF - Health Sciences
Portfolio since 1996, portfolio
manager of INVESCO Emerging Growth
Fund since 1995; portfolio manager
of the Health Sciences Portfolio of
INVESCO Strategic Portfolios since
^ 1996 and co-portfolio manager of
that Portfolio from 1994 to 1996;
vice president and portfolio manager
of The Global Health Sciences Fund
since 1996; assistant vice president
with Trust Company of the West from
1990 to 1992; M.B.A. and B.S. from
the University of Wisconsin-Madison;
Chartered Financial Analyst.
Technology Fund
Daniel B. Leonard Co-portfolio manager of INVESCO VIF
- Technology Portfolio since ^ 1996
; co-portfolio manager (since 1996)
and formerly portfolio manager
(1985-1996) of the Technology
Portfolio of INVESCO Strategic
Portfolios; portfolio manager of
Gold Portfolio of INVESCO Strategic
Portfolios since 1989; joined
INVESCO in 1975, and was appointed
successively portfolio manager
(1977-1983; 1985-1991) and senior
vice president (1975-1983; 1985-
1991) of INVESCO Funds Group, Inc.,
as well as vice president (1977-
<PAGE>
1983) and senior vice president
(1991 to present) of INVESCO Trust
Company; B.A. from Washington & Lee
University; began his investment
career in 1960.
Gerard F. Hallaren, Jr. Co-portfolio manager of INVESCO VIF
- Technology Portfolio since ^ 1996;
co-portfolio manager since 1996 of the
Technology Portfolio of INVESCO Strategic
Portfolios; joined INVESCO Trust Company in
1994, served as a research analyst from 1994
to 1995 and became a vice president in 1995;
vice president and research analyst with
Hanifen Imhoff (1992 to 1994); retail
broker with Merrill Lynch (1991); director
of business planning for MiniScribe
Corporation (1989 to 1990); and research
analyst with various firms beginning in
1978; B.A.from the University of
Massachusetts, Amherst; Chartered Financial
Analyst.
Utilities Fund
Jeffrey G. Morris 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.
^ Total Return Fund
Edward C. Mitchell, Jr. 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;
<PAGE>
M.B.A., University of Colorado;
Chartered Financial Analyst;
Chartered Investment Counselor; past
president, Atlanta Society of
Financial Analysts.
David S. Griffin Co-portfolio manager of the INVESCO
VIF - Total Return Portfolio since
1993; co-portfolio manager of INVES
CO 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.
Growth Fund
Douglas Pratt Portfolio manager of the INVESCO VIF
- Growth Fund since 1997; portfolio
manager of the INVESCO Growth Fund,
Inc. since 1995; portfolio manager
of the Financial Services Portfolio
of INVESCO Strategic Portfolios,
Inc.; vice president (1993 to
present) and portfolio manager (1992
to present) of INVESCO Trust
Company. Formerly (1987 to 1992),
equity analyst with Loomis, Sayles &
Company; began financial and
analytical research career in 1982;
A.B., Brown University; M.B.A.,
Columbia 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 and Total Return Funds, the advisory fees are each computed at
the annual ^ rates 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 Small
Company Growth, Health Sciences and Technology Funds, the advisory fees are each
computed at the ^ annual rates of 0.75% on the first $350 million of the Fund's
average net assets; 0.65% on the next $350 million of the Fund's average net
assets; and 0.55% on the Fund's average net assets in excess of $700 million.
For the High Yield and Utilities Funds, the advisory fees are each computed at
the annual ^ rates 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. For the Dynamics
<PAGE>
Fund, the advisory fees are computed at the annual ^ rates of 0.60% on the first
$350 million of the Fund's average net assets; 0.55% on the next $350 million;
and 0.50% on the Fund's average net assets in excess of $700 million. ^ For the
Growth Fund, the advisory fees are computed at the annual rate of .85% of the
Fund's average net assets. For the fiscal period ended December 31, ^ 1996, 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 ^ rates 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 Dynamics, Small Company Growth,
Health Sciences and Technology Funds are each computed at the annual ^ rates of
0.25% for the first $200 million of the Fund's average net assets and 0.20% on
the Fund's average net assets in excess of $200 million. 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 sub-advisory fee for the Growth
Fund is 0.25% of the Fund's average net assets.
The Company also has entered into an Administrative Services Agreement
with INVESCO dated ^ February 28, 1997 (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, ^ 1996, including
investment advisory fees (but excluding brokerage commissions, which are a cost
of acquiring securities), amounted to ^ 0.95%, 0.94%, 0.87% and ^ 1.16%,
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, ^ 1996, would have been ^ 1.19%, 1.30%, 1.32%, and
5.36%, 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
"Management" in 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
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.
<PAGE>
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 require ments of Code
Section 817(h). By meeting this and other require ments, 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 invest ments, 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.
<PAGE>
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, ^ 1996, was 22.28%, 12.18%, 16.59% and 12.76%, respectively.
The yield of ^ the Fund is calculated by utilizing the Fund's calculated
income, expenses and average outstanding shares for the most recent 30-day or
one-month period, ^ dividing it by the month end net asset value and annualizing
the resulting number.
<PAGE>
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, Kip- linger's Personal Finance, Financial
World, 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 "Growth
Funds" grouping for the Growth Fund, the "High Current Yield Funds" grouping for
the High Yield Fund and the "Utility Funds" grouping for the Utility Fund, the
Capital Appreciation Funds grouping for the Dynamics Fund, the Small Company
Growth Funds grouping for the Small Company Growth Fund, the
Health/Biotechnology Funds grouping for the Health Sciences Fund and the Science
and Technology Funds grouping for the Technology 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 under the caption "Performance" 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 share holders 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,
<PAGE>
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
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.
<PAGE>
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.
APPENDIX
BOND RATINGS
The following is a description of Standard & Poor's Ratings Services
("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 - Health Sciences Portfolio
INVESCO VIF - Small Company Growth Portfolio
INVESCO VIF - Total Return Portfolio
INVESCO VIF - Technology Portfolio
INVESCO VIF - High Yield Portfolio
INVESCO VIF - Utilities Portfolio
INVESCO VIF - Dynamics Portfolio
INVESCO VIF - Growth Portfolio
Prospectus
^ May 1, 1997
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
In addition, all documents filed by the Company with the Securities and
Exchange Commission can be located on a web site maintained by the
Commission at http://www.sec.gov.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
^ May 1, 1997
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 ^ nine 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 - Dynamics Portfolio
(the ^"Dynamics Fund"), the INVESCO VIF - High Yield Portfolio (the ^ "High
Yield ^ Fund"), the INVESCO VIF - Small Company Growth Portfolio (the ^"Small
Company Growth ^ Fund"), the INVESCO VIF Health Sciences Portfolio (the ^"Health
Sciences ^ Fund"), the INVESCO VIF - Technology Portfolio (the ^"Technology
Fund"), the INVESCO VIF - Utilities Portfolio (the ^"Utilities Fund") and the
INVESCO VIF - Growth Portfolio (the "Growth 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 Fund normally
invests at least 65% of its total assets in dividend-paying common stocks.
Up to 10% of the Fund's total assets may be invested in other
income-producing securities, such as corporate bonds. The Fund also has
the flexibility to invest in other types of securities.
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.
Dynamics Fund:
to seek appreciation of capital through aggressive investment
policies. The Dynamics Fund invests primarily in common
stocks of U.S. companies traded on national securities
exchanges and over-the-counter.
<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.
Small Company Growth Fund:
to seek long-term capital growth. The Small Company Growth
Fund invests primarily in equity securities of small-
capitalization ^ U.S. companies traded ^"over -the-counter.^"
Health Sciences Fund:
to seek capital appreciation. The Health Sciences Fund normally invests at
least 80% of its total assets in equity securities of companies which
develop, produce, or distribute products or services related to
health-care.
Technology Fund:
to seek capital appreciation. The Technology Fund normally invests at
least 80% of its total assets in equity securities of companies in
technology-related industries such as computers, communications, video,
electronics, oceanography, office and factory automation, and robotics.
Utilities Fund:
to seek capital appreciation and income through investments primarily in
equity securities of companies principally engaged in the public utilities
business.
<PAGE>
Growth Fund:
to seek long-term capital growth. The Fund also seeks, as a secondary
objective, to obtain investment income through the purchase of securities
of carefully selected companies representing major fields of business and
industrial activity. In pursuing its objectives, the Fund invests
primarily in common stocks, but may also invest in other kinds of
securities, ncluding convertible and straight issues of debentures
and preferred stock.
A prospectus for the Company dated ^ May 1, 1997 (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...................................................... ^ 53
INVESTMENT RESTRICTIONS.................................................. ^ 59
MANAGEMENT............................................................... ^ 63
Investment Adviser................................................. ^ 63
Investment Sub-Advisers............................................ ^ 64
Advisory Agreement................................................. ^ 65
Sub-Advisory Agreements............................................ ^ 67
Administrative Services Agreement.................................. ^ 68
Transfer Agency Agreement.......................................... ^ 71
Officers and Directors of the Company.............................. ^ 71
HOW SHARES ARE VALUED.................................................... ^ 77
PERFORMANCE.............................................................. ^ 78
Total Return Calculations.......................................... ^ 78
Yield Calculations................................................. ^ 79
Comparison of Fund Performance..................................... ^ 79
PORTFOLIO TURNOVER....................................................... ^ 81
PORTFOLIO BROKERAGE...................................................... ^ 81
REDEMPTIONS.............................................................. ^ 83
ADDITIONAL INFORMATION................................................... ^ 83
Common Stock....................................................... ^ 83
Principal Shareholders............................................. ^ 85
Independent Accountants............................................ ^ 87
Custodian................................................................ ^ 87
Transfer Agent..................................................... ^ 87
Reports to Shareholders............................................ ^ 87
Legal Counsel...................................................... ^ 88
Prospectus......................................................... ^ 88
Registration Statement............................................. ^ 88
APPENDIX A............................................................... ^ 89
<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 Sub-Adviser (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 ^ liquid securities 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 be deposited in a
<PAGE>
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
transaction, a Fund can hedge against possible variations in the value of the
<PAGE>
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
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
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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^ or liquid securities 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
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.
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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.
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.
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3. Invest more than 25% of the value of its total assets in any
particular industry (other than government securities), except that:
(i) the Utilities Fund may invest more than 25% of the value of its
total assets in public utilities industries; and (ii) the Health
Sciences Fund may invest more than 25% of the value of its total
assets in one or more industries relating to health care.
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.
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(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 securi ties 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.
(g) The Fund does not currently intend to purchase securities
of any issuer (other than U.S. government agencies and
<PAGE>
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
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,
<PAGE>
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 guidelines.
State insurance laws and regulations may impose additional limitations on
lending securities and the use of options, futures and other derivative
instruments.
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.
<PAGE>
Investment Sub-Advisers
Pursuant to agreements with INVESCO, INVESCO Capital Manage ment, Inc.
("ICM") serves as sub-adviser to the Total Return Fund and INVESCO Trust Company
("INVESCO Trust") serves as the sub- adviser to the ^ other Funds. INVESCO
Trust, a trust company founded in 1969, is a wholly-owned subsidiary of INVESCO
that, as of ^ December 31, 1996, managed ^ 55 other investment portfolios,
including ^ 31 portfolios in the INVESCO group.
ICM is an indirect wholly-owned subsidiary of ^ AMVESCO 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 19 investment portfolios of 4 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 ^ AMVESCO PLC, a
publicly ^ traded holding company ^ that, through its subsidiaries, engages on
an international basis in the business of investment management. INVESCO PLC
changd its name to AMVESCO PLC on February 28, 1997 as part of a merger between
INVESCO PLC and AIM Management Group, Inc., thus creating one of the largest
independent investment management businesses in the world, with approximately
$150 billion in assets under management. INVESCO was established in 1932 and, as
of December 31, 1996, managed 14 mutual funds, consisting of ^ 44 separate
portfolios, with combined assets of approximately $13.8 billion on behalf of
over ^ 826,000 shareholders.
^ AMVESCO 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 INVESCO Services, Inc.,
a registered broker-dealer whose primary business is the distribu-
tion 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 ^ AMVESCO PLC's clients
worldwide. Clients include corporate plans^ and public pension funds as well as
endowment and foundation accounts.
The corporate headquarters of ^ AMVESCO PLC are located at 11 Devonshire
Square, London, EC2M 4YR, England.
<PAGE>
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 and its
North American affiliates 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 ^ by the
board of directors on November 6, 1996, in each case 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.
^ Shareholders of the Industrial Income, Total Return, High Yield and Utilities
Funds approved the Agreement^ on January 31, 1997 for an initial term expiring ^
February 28, 1999. The initial shareholder of the Dynamics, Small Company
Growth, Health Sciences and Technology Funds approved the Agreement on January
31, 1997 for an initial term expiring February 28, 1999, and the initial
shareholder of the Growth Fund approved the Agreement on , 1997, for an initial
term expiring ----------, 1999. Thereafter, the Agreement may be continued from
year to year as to each 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 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.
<PAGE>
The Agreement provides that INVESCO shall manage the invest ment
portfolios of the Funds in conformity with the Funds' investment objectives and
policies (either directly or by delega tion 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 ^ rates of 0.75% of the
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 ^ rates 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. For the Small Company Growth, Health Sciences and Technology
Funds, the advisory fees are each computed at the ^ rates of 0.75% on the first
$350 million of the Fund's average net assets; 0.65% on the next $350 million of
the Fund's average net assets; and 0.55% on the Fund's average net assets in
excess of $700 million. For the Dynamics Fund, the advisory fees are computed at
the annual ^ rates of 0.60% on the first $350 million of the Fund's average net
assets; 0.55% on the next $350 million; and 0.50% on the Fund's average net
assets in excess of $700 million. For the Growth Fund, the advisory fees are
computed at the annual rate of 0.85% of the Fund's average net assets.
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.
<PAGE>
Sub-Advisory Agreements
ICM serves as sub-adviser to the Total Return Fund pursuant to a
sub-advisory agreement with INVESCO (the "ICM Sub-Agreement," and INVESCO Trust
serves as sub-adviser to the other Funds pursuant to ^ sub-advisory ^ agreements
with INVESCO (the "INVESCO Trust Sub-Agreement,") collectively with the ICM
Sub-Agreement, the "Sub-Agreements"). Each Sub-Agreement initially was approved
^ by the board of directors on November 6, 1996, in each case by a vote cast in
person by a majority of the Independent Directors ^ at a meeting called for such
purpose. ^ Shareholders of the Industrial Income, Total Return, High Yield and
Utilities Funds approved the applicable ^ INVESCO Trust Agreement on January 31,
1997. The initial shareholder of the Dynamics, Small Company, Growth, Health
Sciences and Technology Funds approved the INVESCO Trust Agreement, on December
9, 1996, for an initial term expiring ^ December 9, 1999, and the initial
shareholder of ^ the Growth Fund approved the INVESCO Trust Agreement on , 1997,
for an initial term expiring _____________, 1999. Thereafter, each Sub-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,
ICM shall manage the investment portfolio of the Total Return Fund and INVESCO
Trust shall manage the investment portfolio of the other Funds, in conformity
with the respective Funds' investment objectives and policies. In each case,
these management services would include: (a) managing the investment and
reinvest- ment of all the assets, now or hereafter 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.
<PAGE>
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 sub-advisory fee for the Industrial Income Fund is computed at the annual ^
rates 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 ^ rates 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 sub-advisory fees for the
Dynamics, Small Company Growth, Health Sciences and Technology Funds are each
computed at the annual ^ rates of 0.25% for the first $200 million of the Fund's
average net assets and 0.20% on the Fund's average net assets in excess of $200
million. The sub-advisory fee for the Growth Fund is computed at the annual rate
of 0.25% of the Fund's average net assets.
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.
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 record keeping services to the Company
pursuant to an Administrative Services Agreement dated ^ February 28, 1997 (the
"Administrative Agreement"). The Administrative Agreement was approved on ^
November 6, 1996, 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 ^ Agreements were for an initial term expiring ^ February 28,
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.
<PAGE>
The Administrative Agreement provides that INVESCO shall provide the
following services to the Funds: (a) such accounting and record keeping services
and functions as are reasonably necessary for the operation of the Funds; and
(b) such accounting, record keeping, 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.
<PAGE>
For the fiscal ^ years ended December 31, 1996 and 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:
<TABLE>
<CAPTION>
^ Year ended Year Ended Period Ended
^ December 31, 1996 December 31, 1995 December 31, 1994
-------------------------- -------------------------- ------------------------
Adminis- Adminis- Adminis-
trative trative trative
Advisory Services Advisory Services Advisory Services
Fees Fees Fees Fees Fees Fees
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Industrial Income Fund $105,932 $12,119 ^ $27,073 $10,541 $848 $ ^ 10,017
Total Return Fund $77,890 $11,558 ^ $24,649 $10,493 $1,753 $ ^ 10,035
High Yield Fund $50,693 $11,267 ^ $16,298 $10,407 $735 $ ^ 10,018
Utilities Fund $5,716 $10,143 ^ $467 $10,011 $0(1) $0(1) ^
</TABLE>
(1) The Utilities Fund did not commence operations until January 1, 1995. ^
<PAGE>
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 ^ November 6, 1996, for an initial term expiring ^
February 28, 1998. 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 adminis tered. 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 ICM in the case of the Total Return Fund and INVESCO Trust in the case of
the other Funds) 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 also are directors of INVESCO Advisor Funds, Inc. (formerly known as The
EBI Funds, Inc.); and^ trustees of INVESCO Treasurer's Series Trust. 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.
<PAGE>
CHARLES W. BRADY,*+ Chairman of the Board. Chief Executive
Officer and Director of ^ AMVESCO 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 and INVESCO Advisor
Funds, Inc. Trustee of The Global Health Sciences Fund and
INVESCO Treasurer's Series Trust. 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); since October
1984, Director of the Center for the Study of Regulated Industry at
Georgia State University; 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 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.
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,
<PAGE>
from 1966 to 1988. Address: 15 Sterling Road, Armonk, New York.
Born: August 1, 1923.
A. D. FRAZIER, JR.*,** Director. Executive Vice President of AMVESCO PLC
(since November 1996). Formerly, Senior Executive Vice President and 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^.
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.
HUBERT L. HARRIS, JR.*, Director. Chairman (since May 1996), President
(January 1990 to April 1996) of INVESCO Services, Inc. Director of ^ AMVESCO PLC
and Chief ^ Executive Officer of INVESCO Individual Services Group. Member of
the Executive Committee of the Alumni Board of Trustees of Georgia Institute of
Technology. Address: 1315 Peachtree St., NE, Atlanta, Georgia. Born: July 15,
1943.
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 Trust.
Address: 7 Piedmont Center, Suite 100, Atlanta, Georgia. Born: September 14,
1930.
GLEN A. PAYNE, Secretary. Senior Vice President (since 1995), General
Counsel and Secretary of INVESCO Funds Group, Inc. and INVESCO Trust Company ^;
Vice President (May 1980 to April 1995), 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.
<PAGE>
WILLIAM J. GALVIN, JR., Assistant Secretary. Senior Vice President of
INVESCO Funds Group, Inc. and Trust Officer of INVESCO Trust Company since July
1995 and formerly (August 1992 to July 1995) 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.
As of ^ January 31, 1997, 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, ^
1996: 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, ^ 1996. As of December 31, ^ 1996, there were
49 funds in the INVESCO Complex.
<PAGE>
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 Company(1) Expenses(2) Retirement(3) Directors(1)
- -------- ---------- ---------- ------------- -----------
Fred A.Deering, $ ^ 4,096 $ ^ 83 $ ^ 81 $ ^ 98,850
Vice Chairman of
the Board
Victor L. Andrews ^ 4,089 78 93 84,350
Bob R. Baker ^ 4,091 70 125 84,850
Lawrence H. Budner ^ 4,080 78 93 80,350
Daniel D. Chabris ^ 4,091 89 66 84,850
A. D. Frazier, Jr.(4) ^ 4,057 0 0 ^ 81,500
Kenneth T. King ^ 4,051 86 73 71,350
John W. ^ McIntyre 4,078 0 0 ^ 90,350
------ --- --- ---------
Total ^ $32,633 $484 $531 $676,450
% of Net Assets ^ 0.0621%(5) 0.0009%(5) 0.0044%(6)
(1)The 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.
(2)Represents benefits accrued with respect to the Defined Benefit Deferred
Compensation Plan discussed below, and not compensation deferred at the election
of the directors.
(3)These 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
<PAGE>
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.
^(4)Because it was possible that Mr. Frazier would become employed with
AMVESCO PLC effective May 1, 1996, he was deemed to be an "interested person" of
the Company and of the other funds in the INVESCO Complex ^. Effective November
1, 1996, Mr. Frazier will no longer receive any director's fees or other
compensation from the Company or other funds in the INVESCO Complex for his
services as a director.
^(5)Totals as a percentage of the Company's net assets as of
December 31, ^ 1996.
^(6)Total as a percentage of the net assets of the INVESCO Complex as of
December 31, ^ 1996.
Messrs. Brady, Harris and Hesser, and, effective November 1, 1996,
Frazier, 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
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 ^ 40% 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
<PAGE>
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.
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
<PAGE>
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. ^ Because 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
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 the indicated periods ended
December 31, ^ 1996, for each Fund that had commenced operations by that date
were as follows:
<PAGE>
^ Portfolio 1 Year Life of Fund
- ----------- ------ ------------
Industrial Income Portfolio 22.28% 21.46%
Total Return Portfolio 12.18% 13.96%
High Yield Portfolio 16.59% 13.59%
Utilities Portfolio 12.76% 10.90%
(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.
Yield Calculations
The yields of the Industrial Income Fund, Total Return Fund, High Yield
Fund and Utilities Fund for the month ended December 31, ^ 1996 were ^ 2.38%,
3.20%, 9.70% and ^ 2.87%, 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
<PAGE>
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.
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
<PAGE>
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
PORTFOLIO TURNOVER
There are no fixed limitations regarding portfolio turnover for any of the
Funds. Brokerage costs to the Funds are commensu rate with the rate of portfolio
activity. Portfolio turnover rates for the fiscal ^ years ended December 31,
1996 and 1995 and the fiscal period ended December 31, 1994 were as follows:
Fund 1996 1995 1994
---- ---- ---- ----
Industrial Income Fund 93% 97% 0%
Total Return Fund 12% 5% 0%
High Yield Fund 380% 310% 23%
Utilities Fund ^ 48% 24% 0%
^
In computing these portfolio turnover rates, all ^ investments 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 ^ increase
in the High Yield Fund's portfolio turnover rate in 1996 was primarily due to a
doubling in size of the Fund and an effort to take advantage of attractive
opportunities in the bond market. The primary reason for the increase in all of
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 reason ableness
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
<PAGE>
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.
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 ^ years ended December 31, 1996 and 1995 and the fiscal period
ended December 31, 1994^ were ^ 283,949, 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 ^ 1996 breaks down as
follows: Industrial Income Fund, ^ $151,867; Total Return Fund, ^ $7,686; High
Yield Fund, ^ $114,443; and Utilities Fund, ^ $9,953. for the year ended
December 31, ^ 1996 , brokers providing research services received ^ $16,378,
$0, $0, and ^ $3,274 in commissions on portfolio transactions effected for the
Industrial Income Fund, Total Return Fund, High Yield Fund and Utilities Fund, ^
respectiely, on aggregate portfolio transactions of ^ $11,104,765, $0, $0, and
$1,811,519, respectively. The Company paid ^ $7 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, ^ 1996.
<PAGE>
At December 31, ^ 1996, the Funds then in operation held securities of
their regular brokers or dealers, or their parents, as follows:
Value of Securities
Fund Broker or Dealer at ^ 12/31/96
- ---- ---------------- ---------------------
Industrial Income Fund ^ None
^ Total Return Fund Morgan Stanley Group ^,
^ Incorporated 108,537.50
State Street Boston
Corporation 135,450.00
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.
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 ^ 900 ^
million shares of common stock, par value of $0.01 per share. The shares of
common stock are currently divided into ^ nine classes (or series), INVESCO VIF
- - Total Return Portfolio common stock, INVESCO VIF - Industrial Income Portfolio
common stock, INVESCO VIF - High Yield Portfolio common stock, INVESCO VIF -
Utilities Portfolio common stock, INVESCO VIF Dynamics Portfolio common stock,
INVESCO VIF - ^ Small Company Growth Portfolio common stock, INVESCO VIF -
Health Sciences Portfolio common stock ^ INVESCO VIF - Technology Portfolio
common stock and INVESCO VIF - Growth Portfolio common stock. As of December 31,
<PAGE>
^ 1996, 1,559,051 shares of the Industrial Income Fund, ^ 1,023,019 shares of
the Total Return Fund, ^ 1,191,508 shares of the High Yield Fund ^, 222,570
shares of the Utilities Fund, -0- shares of the Technology Fund, -0- shares of
the Small Company Growth Fund, -0-of the Health Sciences Fund, -0- shares of the
Dynamics Fund and -0- of the Growth 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^ . All shares issued and
outstanding are, and all shares offered hereby, when issued, will be, fully paid
and nonassessable.
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 ratifica tion 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
<PAGE>
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.
Principal Shareholders
As of ^ January 31, 1997, 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 ^ 859,763.9160 57.998%
Transamerica Occidental Record
Life Insurance Company
Variable Annuity Dept B-100
1150 S. Olive
Los Angeles, CA 90015
Security Life 318,482.2190 21.48%
Separate Account A1 ^ Record
Unit Valuations 2T2 ^
8515 E. Orchard Road
Englewood, CO 80111
Security Life 118,498.6110 7.994%
Separate Account L1 Record
Attn: Debra Bechtel
Unit Valuations 272
8515 E. Orchard Road
Englewood, CO 80111
Separate Account VA-5NLNY 82,794.2260 5.585%
of First Transamerica Record
Life Insurance Company
Attn: Variable Annuity Dept.
P.O. Box 33849
Charlotte, NC 28233
Great West Life & Annuity 77,586.2200 5.234%
Unit Valuations 2T2
8515 e. Orchard Road
Englewood, CO 80111
<PAGE>
Total Return Fund
- -----------------
Separate Account VA-5 of ^ 703,173.4310 66.552%
Transamerica Occidental Record
Life Insurance Company
Variable Annuity Dept B-100
1150 S. Olive
Los Angeles, CA 90015
Security Life ^ 225,140.6560 21.309%
Separate Account A1 Record
Unit Valuations 2T2
8515 E. Orchard Road
Englewood, CO 80111
Security Life ^ 81,135.8840 7.679%
Separate Account L1 Record
Attn: Debra Bachtel
Unit Valuations 2T2
8515 E. Orchard Rd.
Englewood, CO 80111
High Yield Fund
Separate Account VA-5 of ^ 597,317.9310 50.552%
Transamerica Occidental Record
Life Insurance Company
Variable Annuity Dept B-100
1150 S. Olive
Los Angeles, CA 90015
Security Life ^ 330,025.8410 27.930%
Separate Account A1 Record
Unit Valuations 2T2
8515 E. Orchard Road
Englewood, CO 80111
Security Life ^ 127,102.7110 10.757%
Separate Account L1 Record
Unit Valuations 2T2
8515 E. Orchard Road
Englewood, CO 80111
<PAGE>
^ Great-West Life & Annuity 75,014.2530 6.349%
Unit Valuations 2T2
8515 E. Orchard Road
Englewood, CO 80111
Utilities Fund
Security Life 206,505.6210 88.547%
Separate Account A1 Record
Unit Valuations 2T2
8515 E. Orchard Road
Englewood, CO 80111
Security Life 24,137.9860 10.350% ^
Separate Account L1 Record
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.
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.
<PAGE>
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, ^ 1996, 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, ^ 1996.
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 possible to effect closing
transactions in a particular option with the result that a Fund would have to
<PAGE>
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 intermedi- ation 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 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
<PAGE>
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 equivalents, 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 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.
<PAGE>
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 ^ for the 10-18
period ended December 31, 1994 and
each of the two years in the period
ended December 31, 1996. ^
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, ^ 1996 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, ^ 1996: Statement
of Investment Securities as of
December 31, ^ 1996; Statement of
Assets and Liabilities as of December 31,
^ 1996; Statement of Operations for
the fiscal year ended December 31, ^
1996; Statement of Changes in Net
Assets for each of the two years in the
period ended December 31, ^ 1996;
Financial Highlights for the period ended
December 31, 1994 and each of the two years
in the period ended December 31, 1996. ^
<PAGE>
(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.
(b) Articles of Amendment to Articles
of ^ Incorporation dated October 21,
1993.
(c) Articles Supplementary to Articles
of ^ Incorporation dated October 22,
1993.
^(d) Articles Supplementary to Articles
of Incorporation dated February 11,
1997.
(2) Bylaws. (4)
(3) Not applicable.
(4) Not ^ required to be filed on EDGAR.
(5) (a) Investment Advisory Agreement^
dated October ^ 23, 1993^ between
Registrant and INVESCO Funds Group, ^
Inc.
^(i) Amendment dated December 9,
1996 to Investment Advisory
Agreement.
(b) Investment Advisory Agreement,
dated February 28, 1997, between
Registrant and INVESCO Funds Group, Inc.
(c) Sub-Advisory Agreement, dated ^
February 28, 1997, between INVESCO Funds
Group, Inc. and INVESCO Trust Company.
(d) Sub-Advisory Agreement, dated
February 28, 1997, between INVESCO Funds
Group, Inc. and INVESCO Capital Manage-
ment, ^ Inc.
<PAGE>
^(e) Sub^-Advisory Agreement^ between
INVESCO Funds Group, Inc. and INVESCO
Trust Company dated December 9, 1997. ^
(6) Distribution Agreement, dated ^ February
28, 1997, between Registrant and INVESCO
Funds Group, ^ Inc.
(7) Defined Benefit Deferred Compensation
Plan for Non-Interested Directors and ^
Trustees.
(8) Custodian Contract, dated October 20,
1993, between Registrant and State
Street Bank and Trust Company.(3)
Amendment to Custody Agreement dated
October 25, 1995.(1)
(9) (a) Transfer Agency Agreement, dated ^
February 28, 1997, between Registrant and
INVESCO Funds Group, ^ Inc.
(b) Administrative Service Agreement,
dated ^ February 28, 1997, between Registrant
and INVESCO Funds Group, ^ Inc.
(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)
<PAGE>
(g) Participation Agreement, dated
September 14, 1995, among Registrant,
INVESCO Funds Group, Inc. and Southland
Life Insurance Company.(1)
(h) Participation Agreement, dated
October 31, 1995, among Registrant,
INVESCO Funds Group, Inc. and American
Partners Life Insurance Company.(1)
(i) Participation Agreement, dated
April 15, 1996, among Registrant,
INVESCO Funds Group, Inc. and Allmerica
Financial Life Insurance and Annuity
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.
(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.(1)
<PAGE>
(17) (a) Financial Data Schedule for the year
ended December 31, ^ 1996 for INVESCO
VIF-Industrial Income Portfolio.
(b) Financial Data Schedule for the year
ended December 31, ^ 1996 for INVESCO
VIF-Total Return Portfolio.
(c) Financial Data Schedule for the year
ended December 31, ^ 1996 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.
------------------
(1)Previously filed on EDGAR with Post-Effective
Amendment No. 4 to the Registrant's
Registration Statement on April 11, 1996, and
herein incorporated by reference.
(2)Previously^ filed with Pre-Effective
Amendment No. 1 to the Registrant's
Registration Statement on December 22, 1993,
and herein incorporated by reference.
^ (3)Previously filed with Post-Effective Amend-
ment No. 2 to the Registrant's Registration
Statement on January 30, 1995, and herein
incorporated by reference.
(4)Previously filed with the Registrant's
original Registration Statement on Form N-1A
on October 8, 1993, 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
<PAGE>
Number of Record
Holders as of
^ January 31, ^ 1997
----------------------
Title of Class
---------------
INVESCO VIF -Industrial Income Portfolio ^ 9
INVESCO VIF - Total Return Portfolio ^ 7
INVESCO VIF - High Yield Portfolio ^ 6
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.
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
- ------------------ ------------- -------------
^
Charles W. Brady Chairman of
1315 Peachtree Street NE the Board
Atlanta, GA 30309
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
^
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
^
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
<PAGE>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
Hubert L. Harris, Jr. Director Director
1315 Peachtree Street, NE
Atlanta, GA 30309
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
James F. Lummanick Vice President;
7800 E. Union Avenue Assistant General
Denver, CO 80237 Counsel
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
^
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
<PAGE>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------ ------------- -------------
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
Gary J. Ruhl Vice President
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
Tane T. Tyler Assistant
7800 E. Union Avenue Vice President
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.
(c) The Registrant hereby undertakes to file a post-effective
amendment, containing reasonably current financial statements
for VIF-^ Growth Portfolio within four to six months from the
effective date of Post-Effective Amendment No. ^ 6.
<PAGE>
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the registrant certifies that it 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 ^ 14th day of ^ February, 1997.
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 capaci-
ties indicated on this ^ 14th day of ^ February, 1997.
/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/ Hubert L. Harris, Jr. /s/ Kenneth T. King, Director
- ------------------------------------ ------------------------------------
Hubert L. Harris, Jr., Director Kenneth T. King, Director
/s/ Charles W. Brady /s/ John W. McIntyre
- ------------------------------------ ------------------------------------
Charles W. Brady, Director John W. McIntyre, Director
By*
- --------------------------------- By*/s/ Glen A. Payne
---------------------------------
Edward F. O'Keefe Glen A. Payne
Attorney in Fact Attorney in Fact
<PAGE>
* 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,
February 28, 1995 and October 7, 1996.
<PAGE>
Exhibit Index
Page in
Exhibit Number Registration Statement
- -------------- ----------------------
^ 1(a)
^ 1(b)
1(c)
1(d)
2
5(a)
5(a)(i)
5(b)
5(c)
5(d)
5(e)
6
7
9(a)
9(b)
9(i)
11
17(a)
17(b)
17(c)
17(d)
^
ARTICLES OF INCORPORATION
OF
INVESCO VARIABLE FUNDS, INC.
THIS IS TO CERTIFY to the Maryland State Department of Assessments that the
undersigned, Dan J. Hesser, whose post office address is 7800 E. Union Avenue,
Suite 800, Denver, Colorado 80237, and being at least 18 years of age, does
hereby declare that he is an incorporator intending to form a corporation under
and by virtue of the general laws of the State of Maryland authorizing the
formation of corporations.
ARTICLE I
NAME AND TERM
The name of the corporation is INVESCO Variable Funds, Inc. The corporation
shall have perpetual existence.
ARTICLE II
POWERS AND PURPOSES
The nature of the business and the objects and purposes to be transacted,
promoted and carried on by the corporation are as follows:
1. To engage in the business of an incorporated investment company of
open-end management type and to engage in all legally permissible
activities and operations usual, customary, or necessary in
connection therewith.
2. In general, to engage in any other business permitted to
corporations by the laws of the State of Maryland and to have and
exercise all powers conferred upon or permitted to corporations by
the Maryland General Corporation Law and any other laws of the State
of Maryland; provided, however, that the corporation shall be
restricted from engaging in any activities or taking any actions
which would preclude its compliance with applicable provisions of
the Investment Company Act of 1940, as amended, applicable to open-
end management type investment companies or applicable rules
promulgated thereunder.
ARTICLE III
CAPITALIZATION
Section 1. The aggregate number of shares the corporation shall have the
authority to issue is five hundred million (500,000,000) shares of Common Stock,
having a par value of one cent ($0.01) per share. The aggregate par value of all
shares which the corporation shall have the authority to issue is five million
dollars ($5,000,000). Such stock may be issued as full shares or as fractional
shares.
In the exercise of the powers granted to the board of directors pursuant
to Section 3 of this Article III, the board of directors initially designates
two classes of shares of Common Stock of the corporation, to be designated as
<PAGE>
the Industrial Income Fund and the Total Return Fund, respectively. Initially,
one hundred million (100,000,000) shares of the corporation's Common Stock are
classified as and are allocated to each such designated class.
Unless otherwise prohibited by law, so long as the corporation is
registered as an open-end investment company under the Investment Company Act of
1940, as amended, the total number of shares which the corporation is authorized
to issue may be increased or decreased by the board of directors in accordance
with the applicable provisions of the Maryland General Corporation Law.
Section 2. No holder of stock of the corporation shall be entitled as a
matter of right to purchase or subscribe for any shares of the capital stock of
the corporation which it may issue or sell, whether out of the number of shares
authorized by these articles of incorporation, or out of any shares of the
capital stock of the corporation acquired by it after the issue thereof.
Section 3. The corporation is authorized to issue its stock in one or more
series or one or more classes of shares, and, subject to the requirements of the
Investment Company Act of 1940, as amended, particularly Section 18(f) thereof
and Rule 18f-2 thereunder, the different series and classes, if any, shall be
established and designated, and the variations in the relative preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption as between the
different series or classes shall be fixed and determined and may be classified
and reclassified by the board of directors; provided that the board of directors
shall not classify or reclassify any of such shares into any class or series of
stock which is prior to any class or series of stock then outstanding with
respect to rights upon the liquidation, dissolution or winding up of the affairs
of, or upon any distribution of the general assets of, the corporation, except
that there may be variations so fixed and determined between different series or
classes as to investment objective, purchase price, right of redemption, special
rights as to dividends and on liquidation with respect to assets and income
belonging to a particular series or class, voting powers and conversion rights.
All references to shares in these articles of incorporation shall be deemed to
be shares of any or all series and classes of shares of the corporation's
capital stock as the context may require.
(a) The number of authorized shares allocated to each series or class
and the number of shares of each series or of each class that may be
issued shall be in such number as may be determined by the board of
directors. The directors may classify or reclassify any unissued
shares or any shares previously issued and reacquired of any series
or class into one or more series or one or more classes that may be
established and designated by the board of directors from time to
time. The directors may hold as treasury shares (of the same or
some other series or class), reissue for such consideration and on
such terms as they may determine, or cancel any shares of any series
or any class reacquired by the corporation at their discretion from
time to time.
(b) All consideration received by the corporation for the issue or sale
of shares of a particular series or class, together with all assets
in which such consideration is invested or reinvested, all income,
earnings, profits and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets, and
<PAGE>
any funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, shall irrevocably belong to that
series or class for all purposes, subject only to the rights of
creditors of that series or class, and shall be so recorded upon the
books of account of the corporation. In the event that there are
any assets, income, earnings, profits and proceeds thereof, funds,
or payments which are not readily identifiable as belonging to any
particular series or class, the directors shall allocate them among
any one or more of the series or classes established and designated
from time to time in such manner and on such basis as they, in their
sole discretion, deem fair and equitable. Each such allocation by
the corporation shall be conclusive and binding upon the
stockholders of all series or classes for all purposes. The
directors shall have full discretion, to the extent not inconsistent
with the Investment Company Act of 1940, as amended, and the
Maryland General Corporation Law to determine which items shall be
treated as income and which items shall be treated as capital; and
each such determination and allocation shall be conclusive and
binding upon the stockholders.
(c) The assets belonging to each particular class or series shall be
charged with the liabilities of the corporation in respect to that
class or series and all expenses, costs, charges and reserves
attributable to that class or series, and any general liabilities,
expenses, costs, charges or reserves of the corporation which are
not readily identifiable as belonging to any particular class or
series shall be allocated and charged by the directors to and among
any one or more of the classes or series established and designated
from time to time in such manner and on such basis as the directors
in their sole discretion deem fair and equitable. Each allocation
of liabilities, expenses, costs, charges and reserves by the
directors shall be conclusive and binding upon the stockholders of
all series and classes for all purposes.
(d) Dividends and distributions on shares of a particular series or
class may be paid with such frequency as the directors may
determine, which may be daily or otherwise, pursuant to a standing
resolution or resolutions adopted only once or with such frequency
as the board of directors may determine, to the holders of shares of
that series or class, from such of the income and capital gains,
accrued or realized, from the assets belonging to that series or
class, as the directors may determine, after providing for actual
and accrued liabilities belonging to that series or class. All
dividends and distributions on shares of a particular series or
class shall be distributed pro rata to the holders of that series or
class in proportion to the number of shares of that series or class
held by such holders at the date and time of record established for
the payment of such dividends or distributions except that in
connection with any dividend or distribution program or procedure,
the board of directors may determine that no dividend or
distribution shall be payable on shares as to which the
stockholder's purchase order and/or payment have not been received
by the time or times established by the board of directors under
such program or procedure.
<PAGE>
The corporation intends to have each series that may be established
to represent interests of a separate investment portfolio qualify as
a "regulated investment company" under the Internal Revenue Code of
1986, or any successor comparable statute thereto, and regulations
promulgated thereunder. Inasmuch as the computation of net income
and gains for federal income tax purposes may vary from the
computation thereof on the books of the corporation, the board of
directors shall have the power, in its sole discretion, to
distribute in any fiscal year as dividends, including dividends
designated in whole or in part as capital gains distributions,
amounts sufficient, in the opinion of the board of directors, to
enable the respective series to qualify as regulated investment
companies and to avoid liability of such series for federal income
tax in respect of that year. However, nothing in the foregoing shall
limit the authority of the board of directors to make distributions
greater than or less than the amount necessary to qualify the series
as regulated investment companies and to avoid liability of such
series for such tax.
(e) Dividends and distributions may be made in cash, property or
additional shares of the same or another class or series, or a
combination thereof, as determined by the board of directors or
pursuant to any program that the board of directors may have in
effect at the time for the election by each stockholder of the mode
of the making of such dividend or distribution to that stockholder.
Any such dividend or distribution paid in shares will be paid at the
net asset value thereof as defined in section (4) below.
(f) In the event of the liquidation or dissolution of the corporation or
of a particular class or series, the stockholders of each class or
series that has been established and designated and is being
liquidated shall be entitled to receive, as a class or series, when
and as declared by the board of directors, the excess of the assets
belonging to that class or series over the liabilities belonging to
that class or series. The holders of shares of any particular class
or series shall not be entitled thereby to any distribution upon
liquidation of any other class or series. The assets so
distributable to the stockholders of any particular class or series
shall be distributed among such stockholders in proportion to the
number of shares of that class or series held by them and recorded
on the books of the corporation. The liquidation of any particular
class or series in which there are shares then outstanding may be
authorized by vote of a majority of the board of directors then in
office, subject to the approval of a majority of the outstanding
securities of that class or series, as defined in the Investment
Company Act of 1940, as amended, and without the vote of the holders
of any other class or series. The liquidation or dissolution of a
particular class or series may be accomplished, in whole or in part,
by the transfer of assets of such class or series to another class
or series or by the exchange of shares of such class or series for
the shares of another class or series.
<PAGE>
(g) On each matter submitted to a vote of the stockholders, each holder
of a share shall be entitled to one vote for each share standing in
his name on the books of the corporation, irrespective of the class
or series thereof, and all shares of all classes or series shall
vote as a single class or series ("single class voting"); provided,
however that (i) as to any matter with respect to which a separate
vote of any class or series is required by the Investment Company
Act of 1940, as amended, or by the Maryland General Corporation Law,
such requirement as to a separate vote by that class or series shall
apply in lieu of single class voting as described above; (ii) in the
event that the separate vote requirements referred to in (i) above
apply with respect to one or more but not all classes or series,
then, subject to (iii) below, the shares of all other classes or
series shall vote as a single class or series; and (iii) as to any
matter which does not affect the interest of a particular class or
series, only the holders of shares of the one or more affected
classes shall be entitled to vote. Holders of shares of the stock
of the corporation shall not be entitled to exercise cumulative
voting in the election of directors or on any other matter.
(h) The establishment and designation of any series or class of shares,
in addition to the initial class of shares which has been
established in section (1) above, shall be effective upon the
adoption by a majority of the then directors of a resolution setting
forth such establishment and designation and the relative rights and
preferences of such series or class, or as otherwise provided in
such instrument and the filing with the proper authority of the
State of Maryland of Articles Supplementary setting forth such
establishment and designation and relative rights and preferences.
Section 4. The corporation shall, upon due presentation of a share or
shares of stock for redemption, redeem such share or shares of stock at a
redemption price prescribed by the board of directors in accordance with
applicable laws and regulations; provided that in no event shall such price be
less than the applicable net asset value per share of such class or series as
determined in accordance with the provisions of this section (4), less such
redemption or other charge as is determined by the board of directors. Subject
to applicable law, the corporation may redeem shares, not offered by a
stockholder for redemption, held by any stockholder whose shares of a class or
series had a value less than such minimum amount as may be fixed by the board of
directors from time to time or prescribed by applicable law, other than as a
result of a decline in value of such shares because of market action; provided
that before the corporation redeems such shares it must notify the shareholder
by first-class mail that the value of his shares is less than the required
minimum value and allow him 60 days to make an additional investment in an
amount which will increase the value of his account to the required minimum
value. Unless otherwise required by applicable law, the price to be paid for
shares redeemed pursuant to the preceding sentence shall be the aggregate net
asset value of the shares at the close of business on the date of redemption,
and the shareholder shall have no right to object to the redemption of his
shares. The corporation shall pay redemption prices in cash, except that the
corporation may at its sole option pay redemption prices in kind in such manner
as is consistent with and not in contravention of Section 18(f) of the
<PAGE>
Investment Company Act of 1940, as amended, and any Rules or Regulations
thereunder. Redemption prices shall be paid exclusively out of the assets of the
class or series whose shares are being redeemed.
Notwithstanding the foregoing, the corporation may postpone payment of
redemption proceeds and may suspend the right of the holders of shares of any
class or series to require the corporation to redeem shares of that class or
series during any period or at any time when and to the extent permissible under
the Investment Company Act of 1940, as amended, or any rule or order thereunder.
The net asset value of a share of any class or series of common stock of
the corporation shall be determined in accordance with applicable laws and
regulations or under the supervision of such persons and at such time or times
as shall from time to time be prescribed by the board of directors.
Section 5. The corporation may issue, sell, redeem, repurchase and
otherwise deal in and with shares of its stock in fractional denominations and
such fractional denominations shall, for all purposes, be shares having
proportionately to the respective fractions represented thereby all the rights
of whole shares, including without limitation, the right to vote, the right to
receive dividends and distributions, and the right to participate upon
liquidation of the corporation; provided that the issue of shares in fractional
denominations shall be limited to such transactions and be made upon such terms
as may be fixed by or under authority of the bylaws.
Section 6. The corporation shall not be obligated to issue certificates
representing shares of any class or series unless it shall receive a written
request therefor from the record holder thereof in accordance with procedures
established in the bylaws or by the board of directors.
ARTICLE IV
PREEMPTIVE RIGHTS
No stockholder of the corporation of any class or series, whether now or
hereafter authorized, shall have any preemptive or preferential or other right
of purchase of or subscription to any share of any class or series of stock, or
shares convertible into, exchangeable for or evidencing the right to purchase
stock of any class or series whatsoever, whether or not the stock in question be
of the same class or series as may be held by such stockholder, and whether now
or hereafter authorized and whether issued for cash, property, services or
otherwise, other than such, if any, as the board of directors in its discretion
may from time to time fix.
ARTICLE V
PRINCIPAL OFFICE AND REGISTERED AGENT
The post office address of the principal office of the corporation in the
State of Maryland is 32 South Street, Baltimore, Maryland 21202. The resident
agent of the corporation is The Corporation Trust Incorporated, whose post
office address is 32 South Street, Baltimore, Maryland 21202. Said resident
agent is a corporation of the State of Maryland.
<PAGE>
ARTICLE VI
DIRECTORS
Section 1. The initial board of directors shall consist of three members
who need not be residents of the State of Maryland or stockholders of the
corporation.
Section 2. The names of the persons who shall act as directors until the
first meeting of stockholders or until their successors shall have been elected
and qualified are as follows:
Charles W. Brady 1315 Peachtree Street, N.E., Atlanta, Georgia
John M. Butler 7800 E. Union Avenue, Denver, Colorado
Dan J. Hesser 7800 E. Union Avenue, Denver, Colorado
Section 3. The number of directors may be increased or decreased in
accordance with the bylaws, provided that the number shall not be reduced to
less than three.
Section 4. A majority of the directors shall constitute a quorum for the
transaction of business, unless the bylaws shall provide that a different number
shall constitute a quorum; provided, however, that in no case shall a quorum be
less than one-third (1/3) of the total number of directors or less than two (2)
directors.
Section 5. Except for the initial board of directors designated in Section
2 of this Article VI, no person shall serve as a director unless elected by the
stockholders at an annual meeting or a special meeting called for such purpose;
provided, however, that vacancies occurring between such meetings may be filled
by the directors in accordance with the bylaws, and subject to such limitations
as may be set forth by applicable laws and regulations.
Section 6. The board of directors of the corporation is hereby empowered to
authorize the issuance from time to time of shares of stock, whether of a class
or series now or hereafter authorized, for such consideration as it deems
advisable, subject to such limitations as may be set forth herein, in the
bylaws, in the Maryland General Corporation Law, and in the Investment Company
Act of 1940, as amended.
Section 7. The board of directors of the corporation may make, alter or
repeal from time to time any of the bylaws of the corporation except any
particular bylaw which is specified as not subject to alternation or repeal by
the board of directors.
ARTICLE VII
LIABILITY AND INDEMNIFICATION
Section 1. Directors and officers of the corporation, including persons who
formerly have served in such capacities, shall have limitations on, and/or
immunity from, liability of such directors and officers to the fullest extent
permitted by the Maryland General Corporation Law, subject only to such
<PAGE>
restrictions as may be required by the Investment Company Act of 1940, as
amended, and the rules thereunder. Such limitations and/or immunity will apply
to acts or omissions occurring at the time an individual serves as a director or
officer of the corporation, whether such person is a director or officer of the
corporation at the time of any proceeding in which liability is asserted against
the director or officer. No amendment to these Articles of Incorporation or
repeal of any of its provisions shall limit or eliminate the benefits provided
to directors and officers under this provision with respect to any act or
omission which occurred prior to such amendment or repeal.
Section 2. The corporation shall indemnify and advance expenses to its
directors and officers, including persons who formerly have served in such
capacities, to the fullest extent permitted to directors by the Maryland General
Corporation Law and the bylaws of the corporation, as such Law and bylaws now or
in the future may be in effect, subject only to such limitations as may be
required by the Investment Company Act of 1940, as amended, and the rules
thereunder.
ARTICLE VIII
SPECIAL VOTING AND MEETING PROVISIONS
Section 1. Notwithstanding any provision of Maryland law requiring a
greater proportion than a majority of the votes of all classes or of any class
of stock entitled to be cast to take or authorize any action, the corporation
may take or authorize any such action upon the concurrence of a majority of the
aggregate number of the votes entitled to be cast thereon.
Section 2. The presence in person or by proxy of the holders of one-third
of the shares of stock of the corporation entitled to vote without regard to
class shall constitute a quorum at any meeting of stockholders, except with
respect to any matter which by law requires the separate approval of one or more
classes of stock, in which case the presence in person or by proxy of the
holders of one-third of the shares of stock of each class entitled to vote on
the matter shall constitute a quorum for that class.
Section 3. So long as the corporation is registered pursuant to the
Investment Company Act of 1940, as amended, the corporation will not be required
to hold annual shareholder meetings in years in which the election of directors
is not required to be acted upon under the Investment Company Act of 1940, as
amended.
ARTICLE IX
AMENDMENT
The corporation reserves the right from time to time to make any amendment
of its articles of incorporation now or hereafter authorized by law, including
any amendment which alters the contract rights, as expressly set forth in such
articles, of any outstanding stock by classification, reclassification or
otherwise, but no such amendment which changes the terms or rights of any of its
outstanding shares shall be valid unless such amendment shall have been
authorized by not less than a majority of the aggregate number of votes entitled
to be cast thereon, by a vote at a meeting or in writing with or without a
meeting.
<PAGE>
IN WITNESS WHEREOF, I have signed these articles of incorporation on this
17th day of August, 1993.
/s/ Dan J. Hesser
-------------------------
Dan J. Hesser
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
I hereby certify that on the 17th day of August, 1993, before me, the
subscriber, a Notary Public of the State of Colorado, in and for the City and
County of Denver, personally appeared Dan J. Hesser who acknowledged the
foregoing articles of incorporation to be his act.
WITNESS my hand and notarial seal, the day and year first above written.
/s/ Terri L. Smedra
------------------------------
Notary Public
My commission expires: March 2, 1996
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
INVESCO VARIABLE FUNDS, INC.
INVESCO Variable Funds, Inc., a corporation organized and existing under
the General Corporation Law of the State of Maryland, registered as an open-end
investment company under the Investment Company Act of 1940, and having its
registered office in Baltimore, Maryland (hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: Article I of the Articles of Incorporation of the Corporation is
hereby amended to read as follows:
ARTICLE I
NAME AND TERM The name of the corporation is INVESCO Variable Funds, Inc.
The corporation shall have perpetual existence.
SECOND: The foregoing amendment, in accordance with the requirements of
Section 2-408 of the General Corporation Law of the State of Maryland, was
unanimously approved by the Corporation's board of directors by consent
resolution effective October 4, 1993. No shares of capital stock entitled to
vote on the foregoing amendment were outstanding or subscribed for at the time
of director approval of the said amendment.
THIRD: The foregoing amendment was duly adopted in accordance with the
provisions of Section 2-603 of the General Corporation Law of the State of
Maryland.
FOURTH: The undersigned, the president of the Corporation, who is
executing on behalf of the Corporation the foregoing Articles of Amendment, of
which this paragraph is a part, hereby acknowledges, in the name of and on
behalf of the Corporation, that the foregoing Articles of Amendment are the
corporate act of the Corporation and further verifies under oath that, to the
best of his knowledge, information and belief, the matters and facts set forth
herein are true in all material respects, under the penalties of perjury.
IN WITNESS WHEREOF, INVESCO Variable Funds, Inc. has caused these Articles
of Amendment to be signed in its name and on its behalf by its president and
witnessed by its secretary on the 21st day of October, 1993.
These Articles of Amendment shall be effective upon acceptance by the
Maryland State Department of Assessments and Taxation.
<PAGE>
INVESCO Variable Funds, Inc.
By: /s/ Dan J. Hesser
-------------------------
Dan J. Hesser, President
ATTEST:
By: /s/ Glen A. Payne
------------------------
Glen A. Payne, Secretary
I, Terri L. Smedra, a notary public in and for the City and County of
Denver, and State of Colorado, do hereby certify that Dan J. Hesser, personally
known to me to be the person whose name is subscribed to the foregoing Articles
of Amendment, appeared before me this date in person and acknowledged that he
signed, sealed and delivered said instrument as his full and voluntary act and
deed for the uses and purposes therein sst forth.
Given my hand and official seal this 21st day of October, 1993.
/s/ Terri L. Smedra
----------------------------
Notary Public
Address: 7800 E. Union Avenue
Denver, Colorado 80237
My Commission expires: March 2, 1996
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO Variable Investment Funds, Inc., a corporation organized and
existing under the General Corporation Law of the State of Maryland, registered
as an open-end investment company under the Investment Company Act of 1940, and
having its registered office in Baltimore, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: By unanimous approval of a consent resolution effective October 4,
1993, the board of directors of the Corporation has changed the names of the two
classes of shares of common stock of the Corporation initially designated as the
Industrial Income Fund and the Total Return Fund and has designated such initial
classes of shares as the INVESCO VIF-Industrial Income Portfolio and the INVESCO
VIF-Total Return Portfolio, respectively, has created two additional classes of
shares of common stock of the Corporation designated as the INVESCO VIF-High
Yield Portfolio and INVESCO VIF-Utilities Portfolio, respectively, and has
classified and allocated shares of the Corporation's common stock among each of
its designated classes, including the two new designated classes, as follows:
Class Shares of Common Stock
INVESCO VIF-Industrial Income Portfolio 100,000,000
INVESCO VIF-Total Return Portfolio 100,000,000
INVESCO VIF-High Yield Portfolio 100,000,000
INVESCO VIF-Utilities Portfolio 100,000,000
SECOND: Shares of each class have been duly classified by the board of
directors pursuant to authority and power contained in the Articles of
Incorporation of the Corporation.
THIRD: A description of the common stock so classified, including the
powers, preferences, participating, voting or other special rights and
qualifications, restrictions and limitations thereof, is as outlined in the
Articles of Incorporation of the Corporation.
FOURTH: The Corporation is registered as an open-end management investment
company under the Investment Company Act of 1940.
FIFTH: The undersigned, the president of the Corporation, who is executing
on behalf of the Corporation the foregoing Articles Supplementary, of which this
paragraph is a part, hereby acknowledges, in the name of and on behalf of the
Corporation, that the foregoing Articles Supplementary are the corporate act of
the Corporation and further verifies under oath that, to the best of his
knowledge, information and belief, the matters and facts set forth herein are
true in all material respects, under the penalties of perjury.
IN WITNESS WHEREOF, INVESCO Variable Investment Funds, Inc. has caused
these Articles Supplementary to be signed in its name and on its behalf by its
president and witnessed by its secretary on the 22nd day of October, 1993.
<PAGE>
These Articles Supplementary shall be effective upon acceptance by the
Maryland State Department of Assessments and Taxation.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
By: /s/ Dan J. Hesser
-------------------------
Dan J. Hesser, President
ATTEST:
By: /s/ Glen A. Payne
------------------------
Glen A. Payne, Secretary
I, Terri L. Smedra, a notary public in and for the City and County of
Denver, and State of Colorado, do hereby certify that Dan J. Hesser, personally
known to me to be the person whose name is subscribed to the foregoing Articles
Supplementary, appeared before me this date in person and acknowledged that he
signed, sealed and delivered said instrument as his full and voluntary act and
deed for the uses and purposes therein set forth.
Given my hand and official seal this 22nd day of October, 1993.
/s/ Terri L. Smedra
-------------------------
Notary Public
Address: 7800 E. Union Avenue
Denver, Colorado 80237
My Commission Expires: March 2, 1996.
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO Variable Investment Funds, Inc., a corporation organized and
existing under the General Corporation Law of the State of Maryland, registered
as an open-end investment company under the Investment Company Act of 1940, and
having its registered office in Baltimore, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: By unanimous approval the board of directors of the Corporation has
created five additional classes of shares of common stock of the Corporation
designated as the INVESCO VIF-Dynamics Portfolio, INVESCO VIF-Small Company
Growth Portfolio, INVESCO VIF-Health Sciences Portfolio, INVESCO VIF-Technology
Portfolio and INVESCO VIF-Growth Portfolio, and has allocated the remaining
100,000,000 shares and authorized 400,000,000 additional shares of stock to be
allocated as follows:
Class Shares of Common Stock
INVESCO VIF-Dynamics Portfolio 100,000,000
INVESCO VIF-Small Company Growth Portfolio 100,000,000
INVESCO VIF-Health Sciences Portfolio 100,000,000
INVESCO VIF-Technology Portfolio 100,000,000
INVESCO VIF-Growth Portfolio 100,000,000
The aggregate number of shares of stock of all series which the Corporation
shall have the authority to issue after creation of the new series of Common
stock, is nine hundred million (900,000,000) shares of one cent ($.01) par value
Common Stock.
SECOND: Shares of each class have been duly classified by the board of
directors pursuant to authority and power contained in the Articles of
Incorporation of the Corporation.
THIRD: A description of the common stock so classified, including the
powers, preferences, participating, voting or other special rights and
qualifications, restrictions and limitations thereof, is as outlined in the
Articles of Incorporation of the Corporation.
FOURTH: The Corporation is registered as an open-end management investment
company under the Investment Company Act of 1940.
FIFTH: The undersigned, the president of the Corporation, who is executing
on behalf of the Corporation the foregoing Articles Supplementary, of which this
paragraph is a part, hereby acknowledges, in the name of and on behalf of the
Corporation, that the foregoing Articles Supplementary are the corporate act of
the Corporation and further verifies under oath that, to the best of his
knowledge, information and belief, the matters and facts set forth herein are
true in all material respects, under the penalties of perjury.
<PAGE>
IN WITNESS WHEREOF, INVESCO Variable Investment Funds, Inc. has caused
these Articles Supplementary to be signed in its name and on its behalf by its
president and witnessed by its secretary on the 11th day of February, 1997.
These Articles Supplementary shall be effective upon acceptance by the
Maryland State Department of Assessments and Taxation.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
By: /s/ Dan J. Hesser
--------------------------
Dan J. Hesser, President
ATTEST:
By: /s/ Glen A. Payne
------------------------
Glen A. Payne, Secretary
I, Ruth Christensen, a notary public in and for the City and County of
Denver, and State of Colorado, do hereby certify that Dan J. Hesser, personally
known to me to be the person whose name is subscribed to the foregoing Articles
Supplementary, appeared before me this date in person and acknowledged that he
signed, sealed and delivered said instrument as his full and voluntary act and
deed for the uses and purposes therein set forth.
Given my hand and official seal this 11th day of February, 1997.
/s/ Ruth Christensen
------------------------------------
Notary Public
My Commission Expires: 3/16/98
---------
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made this 20th day of October 1993, Denver, Colorado, by
and between INVESCO Funds Group, Inc. (the "Adviser"), a Delaware corporation,
and INVESCO Variable Investment Funds, Inc., a Maryland Corporation (the
"Fund").
W I T N E S S E T H :
WHEREAS, the Fund is a corporation organized under the laws of the State of
Maryland; and
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), as a diversified, open-end management
investment company and has one class of shares (the "Shares"), which is divided
into eight series, each representing an interest in a separate portfolio of
investments (such series being the INVESCO VIF-Industrial Income Portfolio,
INVESCO-VIF Total Return Portfolio, INVESCO VIF-High Yield Portfolio, INVESCO
VIF-Utilities Portfolio, INVESCO VIF-Dynamics Portfolio, INVESCO VIF-Small
Company Growth Portfolio, INVESCO VIF-Health Sciences Portfolio and INVESCO VIF-
Technology Portfolio (the "Portfolios")); and
WHEREAS, the Fund desires that the Adviser manage its investment operations
and the Adviser desires to manage said operations;
NOW, THEREFORE, in consideration of these premises and of the mutual
covenants and agreements hereinafter contained, the parties hereto agree as
follows:
1. Investment Management Services. The Adviser hereby agrees to manage
the investment operations of the Fund and its Portfolios, subject to
the terms of this Agreement and to the supervision of the Fund's
directors (the "Directors"). The Adviser agrees to perform, or
arrange for the performance of, the following specific services for
the Fund:
(a) to manage the investment and reinvestment of all the assets,
now or hereafter acquired, of the Fund and the Portfolios of
the Fund;
(b) to maintain a continuous investment program for the Fund and
each Portfolio of the Fund, consistent with (i) the Fund's and
each Portfolio's investment policies as set forth in the
Fund's Registration Statement, as from time to time amended,
under the Investment Company Act of 1940, as amended (the
"1940 Act"), and in any prospectus and/or statement of
additional information of the Fund or any Portfolio of the
Fund, as from time to time amended and in use under the
Securities Act of 1933, as amended, and (ii) the Fund's status
as a regulated investment company under the Internal Revenue
Code of 1986, as amended;
(c) to determine what securities are to be purchased or sold for
the Fund and its Portfolios, unless otherwise directed by the
Directors of the Fund, and to execute transactions
accordingly;
<PAGE>
(d) to provide to the Fund and the Portfolios of the Fund the
benefit of all of the investment analyses 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
Adviser;
(e) to determine what portion of the Fund and each Portfolio of
the Fund should be invested in common stocks, preferred
stocks, Government obligations, commercial paper, certificates
of deposit, bankers' acceptances, variable amount notes,
corporate debt obligations, and any other authorized
securities;
(f) to make recommendations as to the manner in which voting
rights, rights to consent to Fund and/or Portfolio action and
any other rights pertaining to the Fund's portfolio securities
shall be exercised; and
(g) to calculate the net asset value of the Fund and each
Portfolio, as applicable, as required by the 1940 Act, subject
to such procedures as may be established from time to time by
the Fund's Directors, based upon the information provided to
the Adviser by the Fund or by the custodian, co-custodian or
sub-custodian of the Fund's or any of the Portfolios' assets
(the "Custodian") or such other source as designated by the
Directors from time to time.
With respect to execution of transactions for the Fund and for the
Portfolios, the Adviser shall place, or arrange for the placement
of, all orders for the purchase or sale of portfolio securities with
brokers or dealers selected by the Adviser. In connection with the
selection of such brokers or dealers and the placing of such orders,
the Adviser is directed at all times to obtain for the Fund and the
Portfolios the most favorable execution and price; after fulfilling
this primary requirement of obtaining the most favorable execution
and price, the Adviser is hereby expressly authorized to consider as
a secondary factor in selecting brokers or dealers with which such
orders may be placed whether such firms furnish statistical,
research and other information or services to the Adviser. Receipt
by the Adviser of any such statistical or other information and
services should not be deemed to give rise to any requirement for
adjustment of the advisory fee payable pursuant to paragraph 4
hereof. The Adviser may follow a policy of considering sales of
variable annuity or variable life insurance contracts for which the
Fund serves as an investment vehicle as a factor in the selection of
broker/dealers to execute portfolio transactions, subject to the
requirements of best execution discussed above.
The Adviser shall for all purposes herein provided be deemed to be
an independent contractor.
<PAGE>
2. Allocation of Costs and Expenses. The Adviser shall reimburse the
Fund monthly for any salaries paid by the Fund to officers,
Directors, and full-time employees of the Fund who also are
officers, general partners or employees of the Adviser or its
affiliates. Except for such subaccounting, recordkeeping, and
administrative services which are to be provided by the Adviser to
the Fund under the Administrative Services Agreement between the
Fund and the Adviser dated October 20, 1993, which was approved on
October 20, 1993, by the Fund's board of directors, including all of
the independent directors, at the Fund's request the Adviser shall
also furnish to the Fund, at the expense of the Adviser, such
competent executive, statistical, administrative, internal
accounting and clerical services as may be required in the judgment
of the Directors of the Fund. These services will include, among
other things, the maintenance (but not preparation) of the Fund's
accounts and records, and the preparation (apart from legal and
accounting costs) of all requisite corporate documents such as tax
returns and reports to the Securities and Exchange Commission and
Fund shareholders. The Adviser also will furnish, at the Adviser's
expense, such office space, equipment and facilities as may be
reasonably requested by the Fund from time to time.
Except to the extent expressly assumed by the Adviser herein and
except to the extent required by law to be paid by the Adviser, the
Fund shall pay all costs and expenses in connection with the
operations and organization of the Fund. Without limiting the
generality of the foregoing, such costs and expenses payable by the
Fund include the following:
(a) all brokers' commissions, issue and transfer taxes, and other
costs chargeable to the Fund and any Portfolio in connection
with securities transactions to which the Fund or any
Portfolio is a party or in connection with securities owned by
the Fund or any Portfolio;
(b) the fees, charges and expenses of any independent public
accountants, custodian, depository, dividend disbursing agent,
dividend reinvestment agent, transfer agent, registrar,
independent pricing services and legal counsel for the Fund or
for any Portfolio;
(c) the interest on indebtedness, if any, incurred by the Fund or
any Portfolio;
(d) the taxes, including franchise, income, issue, transfer,
business license, and other corporate fees payable by the Fund
or any Portfolio to federal, state, county, city, or other
governmental agents;
(e) the fees and expenses involved in maintaining the registration
and qualification of the Fund and of its shares under laws
administered by the Securities and Exchange Commission or
under other applicable regulatory requirements, including the
preparation and printing of prospectuses and statements of
additional information;
<PAGE>
(f) the compensation and expenses of its Directors;
(g) the costs of printing and distributing reports, notices of
shareholders' meetings, proxy statements, dividend notices,
prospectuses, statements of additional information and other
communications to the Fund's shareholders, as well as all
expenses of shareholders' meetings and Directors' meetings;
(h) all costs, fees or other expenses arising in connection with
the organization and filing of the Fund's Articles of
Incorporation, including its initial registration and
qualification under the 1940 Act and under the Securities Act
of 1933, as amended, the initial determination of its tax
status and any rulings obtained for this purpose, the initial
registration and qualification of its securities under the
laws of any state and the approval of the Fund's operations by
any other federal or state authority;
(i) the expenses of repurchasing and redeeming shares of the Fund;
(j) insurance premiums;
(k) the costs of designing, printing, and issuing certificates
representing shares of beneficial interest of the Fund;
(l) extraordinary expenses, including fees and disbursements of
Fund counsel, in connection with litigation by or against the
Fund or any Portfolio;
(m) premiums for the fidelity bond maintained by the Fund pursuant
to Section 17(g) of the 1940 Act and rules promulgated
thereunder (except for such premiums as may be allocated to
the Adviser as an insured thereunder);
(n) association and institute dues; and
(o) the expenses, if any, of distributing shares of the Fund paid
by the Fund pursuant to a Plan and Agreement of Distribution
adopted under Rule 12b-1 of the Investment Company Act of
1940.
3. Use of Affiliated Companies. In connection with the rendering of
the services required to be provided by the Adviser under this
Agreement, the Adviser may, to the extent it deems appropriate and
subject to compliance with the requirements of applicable laws and
regulations, and upon receipt of written approval of the Fund, make
use of its affiliated companies and their employees; provided that
the Adviser shall supervise and remain fully responsible for all
such services in accordance with and to the extent provided by this
Agreement and that all costs and expenses associated with the
providing of services by any such companies or employees and
required by this Agreement to be borne by the Adviser shall be borne
by the Adviser or its affiliated companies.
<PAGE>
4 . Compensation of the Adviser. For the services to be rendered and
the charges and expenses to be assumed by the Adviser hereunder, the
Fund shall pay to the Adviser an advisory fee which will be computed
on a daily basis and paid as of the last day of each month, using
for each daily calculation the most recently determined net asset
value of each Portfolio of the Fund, as determined by valuations
made in accordance with the Fund's procedure for calculating the
Portfolios' net asset value as described in the Fund's Prospectus
and/or Statement of Additional Information. On an annual basis the
advisory fee applicable to each Portfolio shall be as follows: For
the INVESCO VIF-Industrial Income Portfolio and the INVESCO VIF-
Total Return Portfolio, the advisory fee is computed at the annual
rate of 0.75% of the first $500 million of the Portfolio's average
net assets; 0.65% of the next $500 million of the Portfolio's
average net assets; and 0.55% of the Portfolio's average net assets
in excess of $1 billion. For the INVESCO VIF - High Yield Portfolio
and the INVESCO VIF - Utilities Portfolio, the advisory fee is
computed at the annual rate of 0.60% of the first $500 million of
the Portfolio's average net assets; 0.55% of the next $500 million
of the Portfolio's average net assets; and 0.45% of the Portfolio's
average net assets in excess of $1 billion.
During any period when the determination of the Portfolios' net
asset value is suspended by the Directors of the Fund, the net asset
value of a share of the Portfolios as of the last business day prior
to such suspension shall, for the purpose of this Paragraph 4, be
deemed to be the net asset value at the close of each succeeding
business day until it is again determined. However, no such fee
shall be paid to the Adviser with respect to any assets of the Fund
or any Portfolio thereof which may be invested in any other
investment company for which the Adviser serves as investment
adviser. The fee provided for hereunder shall be prorated in any
month in which this Agreement is not in effect for the entire month.
If, in any given year, the sum of a Portfolio's expenses exceeds the
most restrictive state imposed annual expense limitation (if, and to
the extent that, any such limitation is applicable to the Fund), the
Adviser will be required to reimburse the Portfolio for such excess
expenses promptly. Interest, taxes and extraordinary items such as
litigation costs are not deemed expenses for purposes of this
paragraph and shall be borne by the Fund or such Portfolio in any
event. Expenditures, including costs incurred in connection with the
purchase or sale of portfolio securities, which are capitalized in
accordance with generally accepted accounting principles applicable
to investment companies, are accounted for as capital items and
shall not be deemed to be expenses for purposes of this paragraph.
5. Avoidance of Inconsistent Positions and Compliance with Laws.
In connection with purchases or sales of securities for the
investment portfolio of the Fund or any Portfolio, neither the
Adviser nor its officers or employees will act as a principal or
agent for any party other than the Fund or any Portfolio or
<PAGE>
receive any commissions. The Adviser will comply with all
applicable laws in acting hereunder including, without
limitation, the 1940 Act; the Investment Advisers Act of 1940,
as amended; and all rules and regulations duly promulgated under
the foregoing.
6. Duration and Termination. This Agreement shall become effective as
of the date it is approved by a majority of the outstanding voting
securities of the Portfolios of the Fund, and unless sooner
terminated as hereinafter provided, shall remain in force for an
initial term expiring April 30, 1995, and from year to year
thereafter, but only as long as such continuance is specifically
approved at least annually (i) by a vote of a majority of the
outstanding voting securities of the Portfolios of the Fund or by
the Directors of the Fund, and (ii) by a majority of the Directors
of the Fund who are not interested persons of the Adviser or the
Fund by votes cast in person at a meeting called for the purpose of
voting on such approval. In the event of the disapproval of this
Agreement, or of the continuation hereof, by the shareholders of a
particular Portfolio (or by the Directors of the Fund as to a
particular Portfolio), the parties intend that such disapproval
shall be effective only as to such Portfolio, and that such
disapproval shall not affect the validity or effectiveness of the
approval of this Agreement, or of the continuation hereof, by the
shareholders of any other Portfolio (or by the Directors, including
a majority of the disinterested Directors) as to such other
Portfolio; in such case, this Agreement shall be deemed to have been
validly approved or continued, as the case may be, as to such other
Portfolio.
This Agreement may, on 60 days' prior written notice, be terminated
without the payment of any penalty, by the Directors of the Fund, or
by the vote of a majority of the outstanding voting securities of
the Fund or, with respect to a particular Portfolio, by a majority
of the outstanding voting securities of that Portfolio, as the case
may be, or by the Adviser. This Agreement shall immediately
terminate in the event of its assignment, unless an order is issued
by the Securities and Exchange Commission conditionally or
unconditionally exempting such assignment from the provisions of
Section 15(a) of the 1940 Act, in which event this Agreement shall
remain in full force and effect subject to the terms and provisions
of said order. In interpreting the provisions of this paragraph 6,
the definitions contained in Section 2(a) of the 1940 Act and the
applicable rules under the 1940 Act (particularly the definitions of
"interested person," "assignment" and "vote of a majority of the
outstanding voting securities") shall be applied.
The Adviser agrees to furnish to the Directors of the Fund such
information on an annual basis as may reasonably be necessary to
evaluate the terms of this Agreement.
Termination of this Agreement shall not affect the right of the
Adviser to receive payments on any unpaid balance of the
compensation described in paragraph 4 earned prior to such
termination.
<PAGE>
7. Non-Exclusive Services. The Adviser shall, during the term of this
Agreement, be entitled to render investment advisory services to
others, including, without limitation, other investment companies
with similar objectives to those of the Fund or any Portfolio of the
Fund. The Adviser may, when it deems such to be advisable,
aggregate orders for its other customers together with any
securities of the same type to be sold or purchased for the Fund or
any Portfolio in order to obtain best execution and lower brokerage
commissions. In such event, the Adviser shall allocate the shares
so purchased or sold, as well as the expenses incurred in the
transaction, in the manner it considers to be most equitable and
consistent with its fiduciary obligations to the Fund or any
Portfolio and the Adviser's other customers.
8. Liability. The Adviser shall have no liability to the Fund or any
Portfolio or to the Fund's shareholders or creditors, for any error
of judgment, mistake of law, or for any loss arising out of any
investment, nor for any other act or omission, in the performance of
its obligations to the Fund or any Portfolio not involving willful
misfeasance, bad faith, gross negligence or reckless disregard of
its obligations and duties hereunder.
9. Miscellaneous Provisions.
Notice. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other
party at such address as such other party may designate for the
receipt of such notice.
Amendments Hereof. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument
in writing signed by the Fund and the Adviser, and no material
amendment of this Agreement shall be effective unless approved by
(1) the vote of a majority of the Directors of the Fund, including a
majority of the Directors who are not parties to this Agreement or
interested persons of any such party cast in person at a meeting
called for the purpose of voting on such amendment, and (2) the vote
of a majority of the outstanding voting securities of any Portfolio
of the Fund affected by such amendment; provided, however, that this
paragraph shall not prevent any immaterial amendment(s) to this
Agreement, which amendment(s) may be made without shareholder
approval, if such amendment(s) are made with the approval of (1) the
Directors and (2) a majority of the Directors of the Fund who are
not interested persons of the Adviser or the Fund. In the event of
the disapproval of an amendment of this Agreement by the
shareholders of a particular Portfolio (or by the Directors of the
Fund as to a particular Portfolio), the parties intend that such
disapproval shall be effective only as to such Portfolio, and that
such disapproval shall not affect the validity or effectiveness of
the approval of the amendment by the shareholders of any other
Portfolio (or by the Directors, including a majority of the
disinterested Directors) as to such other Portfolio; in such case,
this Agreement shall be deemed to have been validly amended as to
such other Portfolio.
<PAGE>
Severability. Each provision of this Agreement is intended to be
severable. If any provision of this Agreement shall be held illegal
or made invalid by a court decision, statute, rule or otherwise,
such illegality or invalidity shall not affect the validity or
enforceability of the remainder of this Agreement.
Headings. The headings in this Agreement are inserted for
convenience and identification only and are in no way intended to
describe, interpret, define or limit the size, extent or intent of
this Agreement or any provision hereof.
Applicable Law. This Agreement shall be construed in accordance with
the laws of the State of Colorado and the applicable provisions of
the 1940 Act. To the extent that the applicable laws of the State of
Colorado, or any of the provisions herein, conflict with applicable
provisions of the 1940 Act, the latter shall control.
IN WITNESS WHEREOF, the Adviser and the Fund each has caused this Agreement
to be duly executed on its behalf by an officer thereunto duly authorized, the
day and year first above written.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
ATTEST:
By:/s/ Dan J. Hesser
--------------------------
Dan J. Hesser
/s/ Glen A. Payne President
- --------------------
Glen A. Payne
Secretary
INVESCO FUNDS GROUP, INC.
ATTEST:
By:/s/ Ronald L. Grooms
--------------------------
Ronald L. Grooms
/s/ Glen A. Payne Senior Vice President
- --------------------
Glen A. Payne
Secretary
Amendment to Investment Advisory Agreement
This is an Amendment to the Investment Advisory Agreement made and entered
into between INVESCO Funds Group, Inc., a Delaware corporation (the "Company")
and INVESCO Variable Investment Funds, Inc., a Delaware corporation, as of the
20th day of October, 1993.
WHEREAS, the Company desires to have ITC perform investment advisory,
statistical, research, and certain administrative and clerical services with
respect to management of the assets of the Company allocable to the INVESCO-VIF
Dynamics Fund, INVESCO VIF-Small Company Growth Fund, INVESCO VIF-Health
Sciences Fund and INVESCO VIF-Technology Fund, and ITC is willing and able to
perform such services on the terms and conditions set forth in the Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in the Agreement, it is agreed that the terms and conditions of the
Agreement shall be applicable to the Company's assets allocable to the INVESCO
VIF-Dynamics Fund, the INVESCO VIF-Small Company Growth Fund, the INVESCO
VIF-Health Sciences Fund and the INVESCO VIF-Technology Fund, to the same extent
as if the Funds were to be added to the definition of "Funds" as utilized in the
Agreement, and that each Fund shall pay to ITC a fee for services provided to it
by ITC under the Agreement based on an annual rate of 0.25% for the first $200
million of each Fund's average net assets and 0.20% on each Fund's average net
assets in excess of $200 million.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to
Agreement on this 9th day of December, 1996.
INVESCO Funds Group, Inc.
By: /s/ Ronald L. Grooms
-----------------------
Ronald L. Grooms
Senior Vice President
ATTEST:
/s/ Glen A. Payne
- -----------------------------
Glen A. Payne, Secretary
INVESCO Variable Investment Funds, Inc.
By: /s/ Dan J. Hesser
------------------------
Dan J. Hesser, President
ATTEST:
/s/ Glen A. Payne
- --------------------------------
Glen A. Payne, Secretary
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made this 28th day of February, 1997, Denver, Colorado, by
and between INVESCO FUNDS GROUP, INC. (the "Adviser"), a Delaware corporation,
and INVESCO Variable Investment Funds, Inc., a Maryland corporation (the
"Fund").
WITNESSETH:
WHEREAS, the Fund is a corporation organized under the laws of the State of
Maryland; and
WHEREAS, the Fund is registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), as a diversified, open-end management
investment company and has one class of shares (the "Shares"), which is di-
vided into four series, each representing an interest in a separate portfolio
of investments (such series initially being the INVESCO VIF-Industrial Income
Portfolio, INVESCO VIF-Total Return Portfolio, INVESCO VIF-High Yield Portfo-
lio and INVESCO VIF-Utilities Portfolio (the "Portfolios")); and
WHEREAS, the Fund desires that the Adviser manage its investment operations
and the Adviser desires to manage said operations;
NOW, THEREFORE, in consideration of these premises and of the mutual cove-
nants and agreements hereinafter contained, the parties hereto agree as fol-
lows:
1. Investment Management Services. The Adviser hereby agrees to manage the
investment operations of the Fund and its Portfolios, subject to the terms of
this Agreement and to the supervision of the Fund's directors (the "Direc-
tors"). The Adviser agrees to perform, or arrange for the performance of, the
following specific services for the Fund:
(a) to manage the investment and reinvestment of all the assets, now or
hereafter acquired, of the Fund and the Portfolios of the Fund;
(b) to maintain a continuous investment program for the Fund and each
Portfolio of the Fund, consistent with (i) the Fund's and each Portfolio's
investment policies as set forth in the Fund's Registration Statement, as
from time to time amended, under the Investment Company Act of 1940, as
amended (the "1940 Act"), and in any prospectus and/or statement of addi-
tional information of the Fund or any Portfolio of the Fund, as from time
to time amended and in use under the Securities Act of 1933, as amended,
and (ii) the Fund's status as a regulated investment company under the In-
ternal Revenue Code of 1986, as amended;
(c) to determine what securities are to be purchased or sold for the
Fund and its Portfolios, unless otherwise directed by the Directors of the
Fund, and to execute transactions accordingly;
(d) to provide to the Fund and the Portfolios of the Fund the benefit of
all of the investment analyses and research, the reviews of current eco-
nomic conditions and trends, and the consideration of long-range invest-
ment policy now or hereafter generally available to investment advisory
customers of the Adviser;
<PAGE>
(e) to determine what portion of the Fund and each Portfolio of the Fund
should be invested in common stocks, preferred stocks, Government
obligations, commercial paper, certificates of deposit, bankers'
acceptances, variable amount notes, corporate debt obligations, and any
other authorized securities;
(f) to make recommendations as to the manner in which voting rights,
rights to consent to Fund and/or Portfolio action and any other rights
pertaining to the Fund's portfolio securities shall be exercised; and
(g) to calculate the net asset value of the Fund and each Portfolio, as
applicable, as required by the 1940 Act, subject to such procedures as may
be established from time to time by the Fund's Directors, based upon the
information provided to the Adviser by the Fund or by the custodian, co-
custodian or sub-custodian of the Fund's or any of the Portfolios' assets
(the "Custodian") or such other source as designated by the Directors from
time to time.
With respect to execution of transactions for the Fund and for the Portfo-
lios, the Adviser shall place, or arrange for the placement of, all orders for
the purchase or sale of portfolio securities with brokers or dealers selected
by the Adviser. In connection with the selection of such brokers or dealers
and the placing of such orders, the Adviser is directed at all times to obtain
for the Fund and the Portfolios the most favorable execution and price; after
fulfilling this primary requirement of obtaining the most favorable execution
and price, the Adviser is hereby expressly authorized to consider as a second-
ary factor in selecting brokers or dealers with which such orders may be
placed whether such firms furnish statistical, research and other information
or services to the Adviser. Receipt by the Adviser of any such statistical or
other information and services should not be deemed to give rise to any re-
quirement for adjustment of the advisory fee payable pursuant to paragraph 4
hereof. The Adviser may follow a policy of considering sales of variable annu-
ity or variable life insurance contracts for which the Fund serves as an in-
vestment vehicle as a factor in the selection of broker/dealers to execute
portfolio transactions, subject to the requirements of best execution dis-
cussed above.
The Adviser shall for all purposes herein provided be deemed to be an inde-
pendent contractor.
2. Allocation of Costs and Expenses. The Adviser shall reimburse the Fund
monthly for any salaries paid by the Fund to officers, Directors, and full-
time employees of the Fund who also are officers, general partners or employ-
ees of the Adviser or its affiliates. Except for such sub-accounting, record-
keeping, and administrative services which are to be provided by the Adviser
to the Fund under the Administrative Services Agreement between the Fund and
the Adviser dated October 20, 1993, which was approved on October 20, 1993, by
the Fund's board of directors, including all of the independent directors, at
the Fund's request the Adviser shall also furnish to the Fund, at the expense
of the Adviser, such competent executive, statistical, administrative, inter-
nal accounting and clerical services as may be required in the judgment of the
Directors of the Fund. These services will include, among other things, the
maintenance (but not preparation) of the Fund's accounts and records, and the
<PAGE>
preparation (apart from legal and accounting costs) of all requisite corporate
documents such as tax returns and reports to the Securities and Exchange Com-
mission and Fund shareholders. The Adviser also will furnish, at the Adviser's
expense, such office space, equipment and facilities as may be reasonably re-
quested by the Fund from time to time.
Except to the extent expressly assumed by the Adviser herein and except to
the extent required by law to be paid by the Adviser, the Fund shall pay all
costs and expenses in connection with the operations and organization of the
Fund. Without limiting the generality of the foregoing, such costs and ex-
penses payable by the Fund include the following:
(a) all brokers' commissions, issue and transfer taxes, and other costs
chargeable to the Fund and any Portfolio in connection with securities
transactions to which the Fund or any Portfolio is a party or in connec-
tion with securities owned by the Fund or any Portfolio;
(b) the fees, charges and expenses of any independent public accoun-
tants, custodian, depository, dividend disbursing agent, dividend rein-
vestment agent, transfer agent, registrar, independent pricing services
and legal counsel for the Fund or for any Portfolio;
(c) the interest on indebtedness, if any, incurred by the Fund or any
Portfolio;
(d) the taxes, including franchise, income, issue, transfer, business
license, and other corporate fees payable by the Fund or any Portfolio to
federal, state, county, city, or other governmental agents;
(e) the fees and expenses involved in maintaining the registration and
qualification of the Fund and of its shares under laws administered by the
Securities and Exchange Commission or under other applicable regulatory
requirements, including the preparation and printing of prospectuses and
statements of additional information;
(f) the compensation and expenses of its Directors;
(g) the costs of printing and distributing reports, notices of share-
holders' meetings, proxy statements, dividend notices, prospectuses,
statements of additional information and other communications to the
Fund's shareholders, as well as all expenses of shareholders' meetings and
Directors' meetings;
(h) all costs, fees or other expenses arising in connection with the or-
ganization and filing of the Fund's Articles of Incorporation, including
its initial registration and qualification under the 1940 Act and under
the Securities Act of 1933, as amended, the initial determination of its
tax status and any rulings obtained for this purpose, the initial regis-
tration and qualification of its securities under the laws of any state
and the approval of the Fund's operations by any other federal or state
authority;
<PAGE>
(i) the expenses of repurchasing and redeeming shares of the Fund;
(j) insurance premiums;
(k) the costs of designing, printing, and issuing certificates repre-
senting shares of beneficial interest of the Fund;
(l) extraordinary expenses, including fees and disbursements of Fund
counsel, in connection with litigation by or against the Fund or any Port-
folio;
(m) premiums for the fidelity bond maintained by the Fund pursuant to
Section 17(g) of the 1940 Act and rules promulgated thereunder (except for
such premiums as may be allocated to the Adviser as an insured thereun-
der);
(n) association and institute dues; and
(o) the expenses, if any, of distributing shares of the Fund paid by the
Fund pursuant to a Plan and Agreement of Distribution adopted under Rule
12b-1 of the Investment Company Act of 1940.
3. Use of Affiliated Companies. In connection with the rendering of the
services required to be provided by the Adviser under this Agreement, the Ad-
viser may, to the extent it deems appropriate and subject to compliance with
the requirements of applicable laws and regulations, and upon receipt of writ-
ten approval of the Fund, make use of its affiliated companies and their em-
ployees; provided that the Adviser shall supervise and remain fully responsi-
ble for all such services in accordance with and to the extent provided by
this Agreement and that all costs and expenses associated with the providing
of services by any such companies or employees and required by this Agreement
to be borne by the Adviser shall be borne by the Adviser or its affiliated
companies.
4. Compensation of the Adviser. For the services to be rendered and the
charges and expenses to be assumed by the Adviser hereunder, the Fund shall pay
to the Adviser an advisory fee which will be computed on a daily basis and paid
as of the last day of each month, using for each daily calculation the most
recently determined net asset value of each Portfolio of the Fund, as de-
termined by valuations made in accordance with the Fund's procedure for calcu-
lating the Portfolios' net asset value as described in the Fund's Prospectus
and/or Statement of Additional Information. On an annual basis the advisory fee
ap- plicable to each Portfolio shall be as follows: For the INVESCO
VIF-Industrial Income Portfolio and the INVESCO VIF-Total Return Portfolio, the
advisory fee is computed at the annual rate of 0.75% of the first $500 million
of the Port- folio's average net assets; 0.65% of the next $500 million of the
Portfolio's average net assets; and 0.55% of the Portfolio's average net assets
in excess of $1 billion. For the INVESCO VIF-High Yield Portfolio and the
INVESCO VIF- Utilities Portfolio, the advisory fee is computed at the annual
rate of 0.60% of the first $500 million of the Portfolio's average net assets;
0.55% of the next $500 million of the Portfolio's average net assets; and 0.45%
of the Portfolio's average net assets in excess of $1 billion.
<PAGE>
During any period when the determination of the Portfolios' net asset value
is suspended by the Directors of the Fund, the net asset value of a share of
the Portfolios as of the last business day prior to such suspension shall, for
the purpose of this Paragraph 4, be deemed to be the net asset value at the
close of each succeeding business day until it is again determined. However,
no such fee shall be paid to the Adviser with respect to any assets of the
Fund or any Portfolio thereof which may be invested in any other investment
company for which the Adviser serves as investment adviser. The fee provided
for hereunder shall be prorated in any month in which this Agreement is not in
effect for the entire month.
If, in any given year, the sum of a Portfolio's expenses exceeds the most
restrictive state imposed annual expense limitation (if, and to the extent
that, any such limitation is applicable to the Fund), the Adviser will be re-
quired to reimburse the Portfolio for such excess expenses promptly. Interest,
taxes and extraordinary items such as litigation costs are not deemed expenses
for purposes of this paragraph and shall be borne by the Fund or such Portfo-
lio in any event. Expenditures, including costs incurred in connection with
the purchase or sale of portfolio securities, which are capitalized in accor-
dance with generally accepted accounting principles applicable to investment
companies, are accounted for as capital items and shall not be deemed to be
expenses for purposes of this paragraph.
5. Avoidance of Inconsistent Positions and Compliance with Laws. In connec-
tion with purchases or sales of securities for the investment portfolio of the
Fund or any Portfolio, neither the Adviser nor its officers or employees will
act as a principal or agent for any party other than the Fund or any Portfolio
or receive any commissions. The Adviser will comply with all applicable laws
in acting hereunder including, without limitation, the 1940 Act; the Invest-
ment Advisers Act of 1940, as amended; and all rules and regulations duly
promulgated under the foregoing.
6. Duration and Termination. This Agreement shall become effective as of the
date it is approved by a majority of the outstanding voting securities of the
Portfolios of the Fund, and unless sooner terminated as hereinafter provided,
shall remain in force for an initial term ending two years from the date of
execution, and from year to year thereafter, but only as long as such contin-
uance is specifically approved at least annually (i) by a vote of a majority
of the outstanding voting securities of the Portfolios of the Fund or by the
Directors of the Fund, and (ii) by a majority of the Directors of the Fund who
are not interested persons of the Adviser or the Fund by votes cast in person
at a meeting called for the purpose of voting on such approval. In the event
of the disapproval of this Agreement, or of the continuation hereof, by the
shareholders of a particular Portfolio (or by the Directors of the Fund as to
a particular Portfolio), the parties intend that such disapproval shall be ef-
fective only as to such Portfolio, and that such disapproval shall not affect
the validity or effectiveness of the approval of this Agreement, or of the
continuation hereof, by the shareholders of any other Portfolio (or by the Di-
rectors, including a majority of the disinterested Directors) as to such other
Portfolio; in such case, this Agreement shall be deemed to have been validly
approved or continued, as the case may be, as to such other Portfolio.
<PAGE>
This Agreement may, on 60 days' prior written notice, be terminated without
the payment of any penalty, by the Directors of the Fund, or by the vote of a
majority of the outstanding voting securities of the Fund or, with respect to a
particular Portfolio, by a majority of the outstanding voting se- curities of
that Portfolio, as the case may be, or by the Adviser. This Agree- ment shall
immediately terminate in the event of its assignment, unless an or- der is
issued by the Securities and Exchange Commission conditionally or un-
conditionally exempting such assignment from the provisions of Section 15(a) of
the 1940 Act, in which event this Agreement shall remain in full force and
effect subject to the terms and provisions of said order. In interpreting the
provisions of this paragraph 6, the definitions contained in Section 2(a) of the
1940 Act and the applicable rules under the 1940 Act (particularly the
definitions of "interested person," "assignment" and "vote of a majority of the
outstanding voting securities") shall be applied.
The Adviser agrees to furnish to the Directors of the Fund such information
on an annual basis as may reasonably be necessary to evaluate the terms of
this Agreement.
Termination of this Agreement shall not affect the right of the Adviser to
receive payments on any unpaid balance of the compensation described in para-
graph 4 earned prior to such termination.
7. Non-Exclusive Services. The Adviser shall, during the term of this Agree-
ment, be entitled to render investment advisory services to others, including,
without limitation, other investment companies with similar objectives to
those of the Fund or any Portfolio of the Fund. The Adviser may, when it deems
such to be advisable, aggregate orders for its other customers together with
any securities of the same type to be sold or purchased for the Fund or any
Portfolio in order to obtain best execution and lower brokerage commissions.
In such event, the Adviser shall allocate the shares so purchased or sold, as
well as the expenses incurred in the transaction, in the manner it considers
to be most equitable and consistent with its fiduciary obligations to the Fund
or any Portfolio and the Adviser's other customers.
8. Liability. The Adviser shall have no liability to the Fund or any Portfo-
lio or to the Fund's shareholders or creditors, for any error of judgment,
mistake of law, or for any loss arising out of any investment, nor for any
other act or omission, in the performance of its obligations to the Fund or
any Portfolio not involving willful misfeasance, bad faith, gross negligence
or reckless disregard of its obligations and duties hereunder.
9. Miscellaneous Provisions.
Notice. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as
such other party may designate for the receipt of such notice.
Amendments Hereof. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed
by the Fund and the Adviser, and no material amendment of this Agreement shall
be effective unless approved by (1) the vote of a majority of the Directors of
the Fund, including a majority of the Directors who are not parties to this
<PAGE>
Agreement or interested persons of any such party cast in person at a meeting
called for the purpose of voting on such amendment, and (2) the vote of a ma-
jority of the outstanding voting securities of any Portfolio of the Fund af-
fected by such amendment; provided, however, that this paragraph shall not
prevent any immaterial amendment(s) to this Agreement, which amendment(s) may
be made without shareholder approval, if such amendment(s) are made with the
approval of (1) the Directors and (2) a majority of the Directors of the Fund
who are not interested persons of the Adviser or the Fund. In the event of the
disapproval of an amendment of this Agreement by the shareholders of a partic-
ular Portfolio (or by the Directors of the Fund as to a particular Portfolio),
the parties intend that such disapproval shall be effective only as to such
Portfolio, and that such disapproval shall not affect the validity or effec-
tiveness of the approval of the amendment by the shareholders of any other
Portfolio (or by the Directors, including a majority of the disinterested Di-
rectors) as to such other Portfolio; in such case, this Agreement shall be
deemed to have been validly amended as to such other Portfolio.
Severability. Each provision of this Agreement is intended to be severable.
If any provision of this Agreement shall be held illegal or made invalid by a
court decision, statute, rule or otherwise, such illegality or invalidity
shall not affect the validity or enforceability of the remainder of this
Agreement.
Headings. The headings in this Agreement are inserted for convenience and
identification only and are in no way intended to describe, interpret, define
or limit the size, extent or intent of this Agreement or any provision hereof.
Applicable Law. This Agreement shall be construed in accordance with the
laws of the State of Colorado and the applicable provisions of the 1940 Act.
To the extent that the applicable laws of the State of Colorado, or any of the
provisions herein, conflict with applicable provisions of the 1940 Act, the
latter shall control.
<PAGE>
IN WITNESS WHEREOF, the Adviser and the Fund each has caused this Agreement
to be duly executed on its behalf by an officer thereunto duly authorized, the
day and year first above written.
INVESCO VARIABLE INVESTMENT FUNDS,
INC.
By: /s/ Dan J. Hesser
---------------------------
President
ATTEST:
/s/ Glen A. Payne
- ------------------------
Secretary
INVESCO FUNDS GROUP, INC.
By: /s/ Ronald L. Grooms
--------------------------
Senior Vice President
ATTEST:
/s/ Glen A. Payne
- -----------------------
Secretary
SUB-ADVISORY AGREEMENT
AGREEMENT made this 28th day of February, 1997, by and between INVESCO Funds
Group, Inc. ("INVESCO"), a Delaware corporation, and INVESCO TRUST COMPANY, a
Colorado corporation ("the Sub-Adviser").
WITNESSETH:
WHEREAS, INVESCO VARIABLE INVESTMENT FUNDS, INC. (the "Company") is engaged
in business as a diversified, open-end management investment company regis-
tered under the Investment Company Act of 1940, as amended (hereinafter re-
ferred to as the "Investment Company Act") and has one class of shares (the
"Shares"), which is divided into series, each representing an interest in a
separate portfolio of investments, with three such series being designated the
INVESCO VIF-Industrial Income Portfolio, the INVESCO VIF-High Yield Portfolio
and the INVESCO VIF-Utilities Portfolio (the "Funds"); and
WHEREAS, INVESCO and the Sub-Adviser are engaged in rendering investment ad-
visory services and are registered as investment advisers under the Investment
Advisers Act of 1940; and
WHEREAS, INVESCO has entered into an Investment Advisory Agreement with the
Company (the "INVESCO Investment Advisory Agreement"), pursuant to which
INVESCO is required to provide investment advisory services to the Company,
and, upon receipt of written approval of the Company, is authorized to retain
companies which are affiliated with INVESCO to provide such services; and
WHEREAS, the Sub-Adviser is willing to provide investment advisory services
to the Company on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants hereinaf-
ter contained, INVESCO and the Sub-Adviser hereby agree as follows:
ARTICLE I
DUTIES OF THE SUB-ADVISER
INVESCO hereby employs the Sub-Adviser to act as investment adviser to the
Company and to furnish the investment advisory services described below, sub-
ject to the broad supervision of INVESCO and Board of Directors of the Compa-
ny, for the period and on the terms and conditions set forth in this Agree-
ment. The Sub-Adviser hereby accepts such assignment and agrees during such
period, at its own expense, to render such services and to assume the obliga-
tions herein set forth for the compensation provided for herein. The Sub-Ad-
viser shall for all purposes herein be deemed to be an independent contractor
and, unless otherwise expressly provided or authorized herein, shall have no
authority to act for or represent the Company in any way or otherwise be
deemed an agent of the Company.
The Sub-Adviser hereby agrees to manage the investment operations of the
Funds, subject to the supervision of the Company's directors (the "Directors")
and INVESCO. Specifically, the Sub-Adviser agrees to perform the following
services:
<PAGE>
(a) to manage the investment and reinvestment of all the assets, now or
hereafter acquired, of the Funds, and to execute all purchases and sales
of portfolio securities;
(b) to maintain a continuous investment program for the Funds, consis-
tent with (i) the Funds' investment policies as set forth in the Company's
Registration Statement, as from time to time amended, under the Investment
Company Act of 1940, as amended (the "1940 Act"), and in any prospectus
and/or statement of additional information of the Funds, as from time to
time amended and in use under the Securities Act of 1933, as amended, and
(ii) the Company's status as a regulated investment company under the In-
ternal Revenue Code of 1986, as amended;
(c) to determine what securities are to be purchased or sold for the
Funds, unless otherwise directed by the Directors of the Company or
INVESCO, and to execute transactions accordingly;
(d) to provide to the Funds the benefit of all of the investment analy-
sis 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 Sub-Adviser;
(e) to determine what portion of the Funds should be invested in the
various types of securities authorized for purchase by the Funds; and
(f) to make recommendations as to the manner in which voting rights,
rights to consent to Fund action and any other rights pertaining to the
Funds' portfolio securities shall be exercised.
With respect to execution of transactions for the Funds, the Sub-Adviser is
authorized to employ such brokers or dealers as may, in the Sub-Adviser's best
judgment, implement the policy of the Funds to obtain prompt and reliable exe-
cution at the most favorable price obtainable. In assigning an execution or
negotiating the commission to be paid therefor, the Sub-Adviser is authorized
to consider the full range and quality of a broker's services which benefit
the Funds, including but not limited to research and analytical capabilities,
reliability of performance, and financial soundness and responsibility. Re-
search services prepared and furnished by brokers through which the Sub-Ad-
viser effects securities transactions on behalf of the Funds may be used by
the Sub-Adviser in servicing all of its accounts, and not all such services
may be used by the Sub-Adviser in connection with the Funds. The Sub-Adviser
may follow a policy of considering sales of variable annuity or variable life
insurance contracts for which the Funds serve as investment vehicles as a fac-
tor in the selection of broker/dealers to execute portfolio transactions, sub-
ject to the requirements of best execution discussed above. In the selection
of a broker or dealer for execution of any negotiated transaction, the Sub-Ad-
viser shall have no duty or obligation to seek advance competitive bidding for
the most favorable negotiated commission rate for such transaction, or to se-
lect any broker solely on the basis of its purported or "posted" commission
rate for such transaction, provided, however, that the Sub-Adviser shall con-
sider such "posted" commission rates, if any, together with any other informa-
tion available at the time as to the level of commissions known to be charged
on comparable transactions by other qualified brokerage firms, as well as all
other relevant factors and circumstances, including the size of any contempo-
<PAGE>
raneous market in such securities, the importance to the Funds of speed, effi-
ciency, and confidentiality of execution, the execution capabilities required
by the circumstances of the particular transactions, and the apparent knowl-
edge or familiarity with sources from or to whom such securities may be pur-
chased or sold. Where the commission rate reflects services, reliability and
other relevant factors in addition to the cost of execution, the Sub-Adviser
shall have the burden of demonstrating that such expenditures were bona fide
and for the benefit of the Funds.
ARTICLE II
ALLOCATION OF CHARGES AND EXPENSES
The Sub-Adviser assumes and shall pay for maintaining the staff and person-
nel necessary to perform its obligations under this Agreement, and shall, at
its own expense, provide the office space, equipment and facilities necessary
to perform its obligations under this Agreement. Except to the extent ex-
pressly assumed by the Sub-Adviser herein and except to the extent required by
law to be paid by the Sub-Adviser, INVESCO and/or the Company shall pay all
costs and expenses in connection with the operations of the Funds.
ARTICLE III
COMPENSATION OF THE SUB-ADVISER
For the services rendered, facilities furnished, and expenses assumed by the
Sub-Adviser, INVESCO shall pay to the Sub-Adviser a fee, computed daily and
paid as of the last day of each month, using for each daily calculation the
most recently determined net asset value of the Funds, as determined by a val-
uation made in accordance with the Funds' procedures for calculating its net
asset value as described in the Funds' Prospectus and/or Statement of Addi-
tional Information. The advisory fee to the Sub-Adviser with respect to the
INVESCO VIF-Industrial Income Portfolio shall be computed at the annual rate
of 0.375% of the first $500 million of such Fund's average net assets, 0.325%
of the next $500 million of such Fund's average net assets, and 0.275% of such
Fund's average net assets in excess of $1 billion. The advisory fee to the
Sub-Adviser with respect to each of the INVESCO VIF-High Yield Portfolio and
the INVESCO VIF-Utilities Portfolio shall be computed at the annual rate of
0.30% of the first $500 million of such Fund's average net assets, 0.275% of
the next $500 million of such Fund's average net assets, and 0.225% of such
Fund's average net assets in excess of $1 billion. During any period when the
determination of the Funds' net asset value is suspended by the Directors of
the Company, the net asset value of a share of the Funds as of the last busi-
ness day prior to such suspension shall, for the purpose of this Article III,
be deemed to be the net asset value at the close of each succeeding business
day until it is again determined. However, no such fee shall be paid to the
Sub-Adviser with respect to any assets of the Funds which may be invested in
any other investment company for which the Sub-Adviser serves as investment
adviser or sub-adviser. The fee provided for hereunder shall be prorated in
any month in which this Agreement is not in effect for the entire month. The
Sub-Adviser shall be entitled to receive fees hereunder only for such periods
as the INVESCO Investment Advisory Agreement remains in effect.
<PAGE>
ARTICLE IV
LIMITATION OF LIABILITY OF SUB-ADVISER
The Sub-Adviser shall not be liable for any error of judgment, mistake of
law or for any loss arising out of any investment or for any act or omission
in the performance of sub-advisory services rendered with respect to the Com-
pany or the Funds, except for willful misfeasance, bad faith or gross negli-
gence in the performance of its duties or by reason of reckless disregard of
its obligations and duties hereunder. As used in this Article IV, "Sub-Advis-
er" shall include any affiliates of the Sub-Adviser performing services con-
templated hereby and directors, officers and employees of the Sub-Adviser and
such affiliates.
ARTICLE V
ACTIVITIES OF THE SUB-ADVISER
The services of the Sub-Adviser to the Funds are not to be deemed to be ex-
clusive, the Sub-Adviser and any person controlled by or under common control
with the Sub-Adviser (for purposes of this Article V referred to as "affili-
ates") being free to render services to others. It is understood that direc-
tors, officers, employees and shareholders of the Company are or may become
interested in the Sub-Adviser and its affiliates, as directors, officers, em-
ployees and shareholders or otherwise, and that directors, officers, employees
and shareholders of the Sub-Adviser, INVESCO and their affiliates are or may
become interested in the Company as directors, officers and employees.
ARTICLE VI
AVOIDANCE OF INCONSISTENT POSITIONS AND
COMPLIANCE WITH APPLICABLE LAWS
In connection with purchases or sales of securities for the investment port-
folio of the Funds, neither the Sub-Adviser nor any of its directors, officers
or employees will act as a principal or agent for any party other than the
Funds or receive any commissions. The Sub-Adviser will comply with all appli-
cable laws in acting hereunder including, without limitation, the 1940 Act;
the Investment Advisers Act of 1940, as amended; and all rules and regulations
duly promulgated under the foregoing.
ARTICLE VII
DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall become effective as of the date it is approved by a ma-
jority of the outstanding voting securities of the Funds, and shall remain in
force for an initial term ending two years from the date of execution and from
year to year thereafter until its termination in accordance with this Article
VII, but only so long as such continuance is specifically approved at least
annually by (i) the Directors of the Company, or by the vote of a majority of
the outstanding voting securities of the Funds, and (ii) a majority of those
<PAGE>
Directors who are not parties to this Agreement or interested persons of any
such party cast in person at a meeting called for the purpose of voting on
such approval. In the event of the disapproval of this Agreement, or of the
continuation hereof, by the shareholders of a particular Fund (or by the Di-
rectors of the Company as to a particular Fund), the parties intend that such
disapproval shall be effective only as to such Fund, and that such disapproval
shall not affect the validity or effectiveness of the approval of this Agree-
ment, or of the continuation hereof, by the shareholders of any other Fund (or
by the Directors, including a majority of the disinterested Directors) as to
such other Fund; in such case, this Agreement shall be deemed to have been
validly approved or continued, as the case may be, as to such other Fund.
This Agreement may be terminated at any time, without the payment of any
penalty, by INVESCO; the Funds by vote of the Directors of the Company, by
vote of a majority of the outstanding voting securities of the Funds or, with
respect to a particular Fund, by a majority of the outstanding voting securi-
ties of that Fund, as the case may be; or by the Sub-Adviser. A termination by
INVESCO or the Sub-Adviser shall require sixty days' written notice to the
other party and to the Company, and a termination by the Company shall require
such notice to each of the parties. This Agreement shall automatically termi-
nate in the event of its assignment to the extent required by the Investment
Company Act of 1940 and the Rules thereunder.
The Sub-Adviser agrees to furnish to the Directors of the Company such in-
formation on an annual basis as may reasonably be necessary to evaluate the
terms of this Agreement.
Termination of this Agreement shall not affect the right of the Sub-Adviser
to receive payments on any unpaid balance of the compensation described in Ar-
ticle III hereof earned prior to such termination.
ARTICLE VIII
AMENDMENTS OF THIS AGREEMENT
No provision of this Agreement may be orally changed or discharged, but may
only be modified by an instrument in writing signed by the Sub-Adviser and
INVESCO. In addition, no amendment to this Agreement shall be effective unless
approved by (1) the vote of a majority of the Directors of the Company, in-
cluding a majority of the Directors who are not parties to this Agreement or
interested persons of any such party cast in person at a meeting called for
the purpose of voting on such amendment and (2) the vote of a majority of the
outstanding voting securities of the Funds (other than an amendment which can
be effective without shareholder approval under applicable law). In the event
of the disapproval of an amendment of this Agreement by the shareholders of a
particular Fund (or by the Directors of the Company as to a particular Fund),
the parties intend that such disapproval shall be effective only as to such
Fund, and that such disapproval shall not affect the validity or effectiveness
<PAGE>
of the approval of the amendment by the shareholders of any other Fund (or by
the Directors, including a majority of the disinterested Directors) as to such
other Fund; in such case, this Agreement shall be deemed to have been validly
amended as to such other Fund.
ARTICLE IX
DEFINITIONS OF CERTAIN TERMS
In interpreting the provisions of this Agreement, the terms "vote of a ma-
jority of the outstanding voting securities," "assignments," "affiliated per-
son" and "interested person," when used in this Agreement, shall have the re-
spective meanings specified in the Investment Company Act and the Rules and
Regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under said Act.
ARTICLE X
GOVERNING LAW
This Agreement shall be construed in accordance with the laws of the State
of Colorado and the applicable provisions of the Investment Company Act. To
the extent that the applicable laws of the State of Colorado, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
ARTICLE XI
MISCELLANEOUS
Notice. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as
such other party may designate for the receipt of such notice.
Severability. Each provision of this Agreement is intended to be severable.
If any provision of this Agreement shall be held illegal or made invalid by a
court decision, statute, rule or otherwise, such illegality or invalidity
shall not affect the validity or enforceability of the remainder of this
Agreement.
Headings. The headings in this Agreement are inserted for convenience and
identification only and are in no way intended to describe, interpret, define
or limit the size, extent or intent of this Agreement or any provision hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
INVESCO FUNDS GROUP, INC.
By: /s/ Ronald L. Grooms
---------------------
Senior Vice President
ATTEST:
/s/ Glen A. Payne
- -----------------------
Secretary
INVESCO TRUST COMPANY
By: /s/ Dan J. Hesser
--------------------
President
ATTEST:
/s/ Glen A. Payne
- -----------------------
Secretary
SUB-ADVISORY AGREEMENT
AGREEMENT made this 28th day of February, 1997, by and between INVESCO Funds
Group, Inc. ("INVESCO"), a Delaware corporation, and INVESCO CAPITAL MANAGE-
MENT, INC., a Georgia corporation ("the Sub-Adviser").
WITNESSETH:
WHEREAS, INVESCO VARIABLE INVESTMENT FUNDS, INC. (the "Company") is engaged
in business as a diversified, open-end management investment company regis-
tered under the Investment Company Act of 1940, as amended (hereinafter re-
ferred to as the "Investment Company Act") and has one class of shares (the
"Shares"), which is divided into series, each representing an interest in a
separate portfolio of investments, with one such series being designated the
INVESCO VIF-Total Return Portfolio (the "Fund"); and
WHEREAS, INVESCO and the Sub-Adviser are engaged in rendering investment ad-
visory services and are registered as investment advisers under the Investment
Advisers Act of 1940; and
WHEREAS, INVESCO has entered into an Investment Advisory Agreement with the
Company (the "INVESCO Investment Advisory Agreement"), pursuant to which
INVESCO is required to provide investment advisory services to the Company,
and, upon receipt of written approval of the Company, is authorized to retain
companies which are affiliated with INVESCO to provide such services; and
WHEREAS, the Sub-Adviser is willing to provide investment advisory services
to the Company on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants hereinaf-
ter contained, INVESCO and the Sub-Adviser hereby agree as follows:
ARTICLE I
DUTIES OF THE SUB-ADVISER
INVESCO hereby employs the Sub-Adviser to act as investment adviser to the
Company and to furnish the investment advisory services described below, sub-
ject to the broad supervision of INVESCO and Board of Directors of the Compa-
ny, for the period and on the terms and conditions set forth in this Agree-
ment. The Sub-Adviser hereby accepts such assignment and agrees during such
period, at its own expense, to render such services and to assume the obliga-
tions herein set forth for the compensation provided for herein. The Sub-Ad-
viser shall for all purposes herein be deemed to be an independent contractor
and, unless otherwise expressly provided or authorized herein, shall have no
authority to act for or represent the Company in any way or otherwise be
deemed an agent of the Company.
The Sub-Adviser hereby agrees to manage the investment operations of the
Fund, subject to the supervision of the Company's directors (the "Directors")
and INVESCO. Specifically, the Sub-Adviser agrees to perform the following
services:
<PAGE>
(a) to manage the investment and reinvestment of all the assets, now or
hereafter acquired, of the Fund, and to execute all purchases and sales of
portfolio securities;
(b) to maintain a continuous investment program for the Fund, consistent
with (i) the Fund's investment policies as set forth in the Company's Reg-
istration Statement, as from time to time amended, under the Investment
Company Act of 1940, as amended (the "1940 Act"), and in any prospectus
and/or statement of additional information of the Fund, as from time to
time amended and in use under the Securities Act of 1933, as amended, and
(ii) the Company's status as a regulated investment company under the In-
ternal Revenue Code of 1986, as amended;
(c) to determine what securities are to be purchased or sold for the
Fund, unless otherwise directed by the Directors of the Company or
INVESCO, and to execute transactions accordingly;
(d) to provide to 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 gener-
ally available to investment advisory customers of the Sub-Adviser;
(e) to determine what portion of the Fund should be invested in the var-
ious types of securities authorized for purchase by the Fund; and
(f) to make recommendations as to the manner in which voting rights,
rights to consent to Fund action and any other rights pertaining to the
Fund's portfolio securities shall be exercised.
With respect to execution of transactions for the Fund, the Sub-Adviser is
authorized to employ such brokers or dealers as may, in the Sub-Adviser's best
judgment, implement the policy of the Fund to obtain prompt and reliable exe-
cution at the most favorable price obtainable. In assigning an execution or
negotiating the commission to be paid therefor, the Sub-Adviser is authorized
to consider the full range and quality of a broker's services which benefit
the Fund, including but not limited to research and analytical capabilities,
reliability of performance, and financial soundness and responsibility. Re-
search services prepared and furnished by brokers through which the Sub-Ad-
viser effects securities transactions on behalf of the Fund may be used by the
Sub-Adviser in servicing all of its accounts, and not all such services may be
used by the Sub-Adviser in connection with the Fund. The Sub-Adviser may fol-
low a policy of considering sales of variable annuity or variable life insur-
ance contracts for which the Fund serves as an investment vehicle as a factor
in the selection of broker/dealers to execute portfolio transactions, subject
to the requirements of best execution discussed above. In the selection of a
broker or dealer for execution of any negotiated transaction, the Sub-Adviser
shall have no duty or obligation to seek advance competitive bidding for the
most favorable negotiated commission rate for such transaction, or to select
any broker solely on the basis of its purported or "posted" commission rate
for such transaction, provided, however, that the Sub-Adviser shall consider
such "posted" commission rates, if any, together with any other information
available at the time as to the level of commissions known to be charged on
comparable transactions by other qualified brokerage firms, as well as all
<PAGE>
other relevant factors and circumstances, including the size of any contempo-
raneous market in such securities, the importance to the Fund of speed, effi-
ciency, and confidentiality of execution, the execution capabilities required
by the circumstances of the particular transactions, and the apparent knowl-
edge or familiarity with sources from or to whom such securities may be pur-
chased or sold. Where the commission rate reflects services, reliability and
other relevant factors in addition to the cost of execution, the Sub-Adviser
shall have the burden of demonstrating that such expenditures were bona fide
and for the benefit of the Fund.
ARTICLE II
ALLOCATION OF CHARGES AND EXPENSES
The Sub-Adviser assumes and shall pay for maintaining the staff and person-
nel necessary to perform its obligations under this Agreement, and shall, at its
own expense, provide the office space, equipment and facilities necessary to
perform its obligations under this Agreement. Except to the ex- tent expressly
assumed by the Sub-Adviser herein and except to the extent re- quired by law to
be paid by the Sub-Adviser, INVESCO and/or the Company shall pay all costs and
expenses in connection with the operations of the Fund.
ARTICLE III
COMPENSATION OF THE SUB-ADVISER
For the services rendered, facilities furnished, and expenses assumed by the
Sub-Adviser, INVESCO shall pay to the Sub-Adviser an annual fee, computed
daily and paid as of the last day of each month, using for each daily calcula-
tion the most recently determined net asset value of the Fund, as determined
by a valuation made in accordance with the Fund's procedures for calculating
its net asset value as described in the Fund's Prospectus and/or Statement of
Additional Information. The advisory fee to the Sub-Adviser shall be computed
at the annual rate of 0.375% of the Fund's average net assets up to $500 mil-
lion; 0.325% of the Fund's average net assets in excess of $500 million but
not more than $1 billion; and 0.275% of the Fund's average net assets in ex-
cess of $1 billion. During any period when the determination of the Fund's net
asset value is suspended by the Directors of the Company, the net asset value
of a share of the Fund as of the last business day prior to such suspension
shall, for the purpose of this Article III, be deemed to be the net asset
value at the close of each succeeding business day until it is again deter-
mined. However, no such fee shall be paid to the Sub-Adviser with respect to
any assets of the Fund which may be invested in any other investment company
for which the Sub-Adviser serves as investment adviser or sub-adviser. The fee
provided for hereunder shall be prorated in any month in which this Agreement
is not in effect for the entire month. The Sub-Adviser shall be entitled to
receive fees hereunder only for such periods as the INVESCO Investment Advi-
sory Agreement remains in effect.
<PAGE>
ARTICLE IV
LIMITATION OF LIABILITY OF SUB-ADVISER
The Sub-Adviser shall not be liable for any error of judgment, mistake of
law or for any loss arising out of any investment or for any act or omission
in the performance of sub-advisory services rendered with respect to the Com-
pany or the Fund, except for willful misfeasance, bad faith or gross negli-
gence in the performance of its duties or by reason of reckless disregard of
its obligations and duties hereunder. As used in this Article IV, "Sub- Advis-
er" shall include any affiliates of the Sub-Adviser performing services con-
templated hereby and directors, officers and employees of the Sub-Adviser and
such affiliates.
ARTICLE V
ACTIVITIES OF THE SUB-ADVISER
The services of the Sub-Adviser to the Fund are not to be deemed to be ex-
clusive, the Sub-Adviser and any person controlled by or under common control
with the Sub-Adviser (for purposes of this Article V referred to as "affili-
ates") being free to render services to others. It is understood that direc-
tors, officers, employees and shareholders of the Company are or may become
interested in the Sub-Adviser and its affiliates, as directors, officers, em-
ployees and shareholders or otherwise and that directors, officers, employees
and shareholders of the Sub-Adviser, INVESCO and their affiliates are or may
become interested in the Company as directors, officers and employees.
ARTICLE VI
AVOIDANCE OF INCONSISTENT POSITIONS AND
COMPLIANCE WITH APPLICABLE LAWS
In connection with purchases or sales of securities for the investment port-
folio of the Fund, neither the Sub-Adviser nor any of its directors, officers
or employees will act as a principal or agent for any party other than the
Fund or receive any commissions. The Sub-Adviser will comply with all applica-
ble laws in acting hereunder including, without limitation, the 1940 Act; the
Investment Advisers Act of 1940, as amended; and all rules and regulations
duly promulgated under the foregoing.
ARTICLE VII
DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall become effective as of the date it is approved by a ma-
jority of the outstanding voting securities of the Fund, and shall remain in
force for an initial term ending two years from the date of execution, and
from year to year thereafter until its termination in accordance with this Ar-
ticle VII, but only so long as such continuance is specifically approved at
<PAGE>
least annually by (i) the Directors of the Company, or by the vote of a major-
ity of the outstanding voting securities of the Fund, and (ii) a majority of
those Directors who are not parties to this Agreement or interested persons of
any such party cast in person at a meeting called for the purpose of voting on
such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by INVESCO, the Fund by vote of the Directors of the Company, or by
vote of a majority of the outstanding voting securities of the Fund, or by the
Sub-Adviser. A termination by INVESCO or the Sub-Adviser shall require sixty
days' written notice to the other party and to the Company, and a termination
by the Company shall require such notice to each of the parties. This Agree-
ment shall automatically terminate in the event of its assignment to the ex-
tent required by the Investment Company Act of 1940 and the Rules thereunder.
The Sub-Adviser agrees to furnish to the Directors of the Company such in-
formation on an annual basis as may reasonably be necessary to evaluate the
terms of this Agreement.
Termination of this Agreement shall not affect the right of the Sub-Adviser
to receive payments on any unpaid balance of the compensation described in Ar-
ticle III hereof earned prior to such termination.
ARTICLE VIII
AMENDMENTS OF THIS AGREEMENT
No provision of this Agreement may be orally changed or discharged, but may
only be modified by an instrument in writing signed by the Sub-Adviser and
INVESCO. In addition, no amendment to this Agreement shall be effective unless
approved by (1) the vote of a majority of the Directors of the Company, in-
cluding a majority of the Directors who are not parties to this Agreement or
interested persons of any such party cast in person at a meeting called for
the purpose of voting on such amendment and (2) the vote of a majority of the
outstanding voting securities of the Fund (other than an amendment which can
be effective without shareholder approval under applicable law).
ARTICLE IX
DEFINITIONS OF CERTAIN TERMS
In interpreting the provisions of this Agreement, the terms "vote of a ma-
jority of the outstanding voting securities," "assignments," "affiliated per-
son" and "interested person," when used in this Agreement, shall have the re-
spective meanings specified in the Investment Company Act and the Rules and
Regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under said Act.
ARTICLE X
GOVERNING LAW
This Agreement shall be construed in accordance with the laws of the State
of Colorado and the applicable provisions of the Investment Company Act. To
the extent that the applicable laws of the State of Colorado, or any of the
<PAGE>
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
ARTICLE XI
MISCELLANEOUS
Notice. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as
such other party may designate for the receipt of such notice.
Severability. Each provision of this Agreement is intended to be severable.
If any provision of this Agreement shall be held illegal or made invalid by a
court decision, statute, rule or otherwise, such illegality or invalidity
shall not affect the validity or enforceability of the remainder of this
Agreement.
Headings. The headings in this Agreement are inserted for convenience and
identification only and are in no way intended to describe, interpret, define
or limit the size, extent or intent of this Agreement or any provision hereof.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
INVESCO FUNDS GROUP, INC.
By: /s/ Dan J. Hesser
---------------------
President
ATTEST:
/a/ Glen A. Payne
- ----------------------
Secretary
INVESCO CAPITAL MANAGEMENT, INC.
By: /s/ Edward C. Mitchell, Jr.
---------------------------
President
ATTEST:
/s/ Glen A. Payne
- ----------------------
Secretary
SUB-ADVISORY AGREEMENT
AGREEMENT made this 9th day of December, 1996, by and between INVESCO Funds
Group, Inc. ("INVESCO"), a Delaware corporation, and INVESCO TRUST COMPANY, a
Colorado corporation ("the Sub-Adviser").
WITNESSETH:
WHEREAS, INVESCO VARIABLE INVESTMENT FUNDS, INC. (the "Company") is engaged
in business as a diversified, open-end management investment company registered
under the Investment Company Act of 1940, as amended (hereinafter referred to as
the "Investment Company Act") and has one class of shares (the "Shares"), which
is divided into series, each representing an interest in a separate portfolio of
investments, with four such series being designated the INVESCO VIF-Dynamics
Portfolio, the INVESCO VIF-Small Company Growth Portfolio, the INVESCO
VIF-Health Sciences Portfolio and the INVESCO VIF- Technology Portfolio (the
"Funds"); and
WHEREAS, INVESCO and the Sub-Adviser are engaged in rendering investment
advisory services and are registered as investment advisers under the Investment
Advisers Act of 1940; and
WHEREAS, INVESCO has entered into an Investment Advisory Agreement with the
Company (the "INVESCO Investment Advisory Agreement"), pursuant to which INVESCO
is required to provide investment advisory services to the Company, and, upon
receipt of written approval of the Company, is authorized to retain companies
which are affiliated with INVESCO to provide such services; and
WHEREAS, the Sub-Adviser is willing to provide investment advisory services
to the Company on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, INVESCO and the Sub-Adviser hereby agree as follows:
ARTICLE I
DUTIES OF THE SUB-ADVISER
INVESCO hereby employs the Sub-Adviser to act as investment adviser to the
Company and to furnish the investment advisory services described below, subject
to the broad supervision of INVESCO and Board of Directors of the Company, for
the period and on the terms and conditions set forth in this Agreement. The
Sub-Adviser hereby accepts such assignment and agrees during such period, at its
own expense, to render such services and to assume the obligations herein set
forth for the compensation provided for herein. The Sub-Adviser shall for all
purposes herein be deemed to be an independent contractor and, unless otherwise
expressly provided or authorized herein, shall have no authority to act for or
represent the Company in any way or otherwise be deemed an agent of the Company.
<PAGE>
The Sub-Adviser hereby agrees to manage the investment operations of the
Funds, subject to the supervision of the Company's directors (the "Directors")
and INVESCO. Specifically, the Sub-Adviser agrees to perform the following
services:
(a) to manage the investment and reinvestment of all the assets, now or
hereafter acquired, of the Funds, and to execute all purchases and sales of
portfolio securities;
(b) to maintain a continuous investment program for the Funds, consistent
with (i) the Funds' investment policies as set forth in the Company's
Registration Statement, as from time to time amended, under the Investment
Company Act of 1940, as amended (the "1940 Act"), and in any prospectus
and/or statement of additional information of the Funds, as from time to time
amended and in use under the Securities Act of 1933, as amended, and (ii) the
Company's status as a regulated investment company under the Internal Revenue
Code of 1986, as amended;
(c) to determine what securities are to be purchased or sold for the Funds,
unless otherwise directed by the Directors of the Company or INVESCO, and to
execute transactions accordingly;
(d) to provide to the Funds 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 Sub-Adviser;
(e) to determine what portion of the Funds should be invested in the
various types of securities authorized for purchase by the Funds; and
(f) to make recommendations as to the manner in which voting rights, rights
to consent to Fund action and any other rights pertaining to the Funds'
portfolio securities shall be exercised.
With respect to execution of transactions for the Funds, the Sub-Adviser is
authorized to employ such brokers or dealers as may, in the Sub-Adviser's best
judgment, implement the policy of the Funds to obtain prompt and reliable
execution at the most favorable price obtainable. In assigning an execution or
negotiating the commission to be paid therefor, the Sub-Adviser is authorized to
consider the full range and quality of a broker's services which benefit the
Funds, including but not limited to research and analytical capabilities,
reliability of performance, and financial soundness and responsibility. Research
services prepared and furnished by brokers through which the Sub- Adviser
effects securities transactions on behalf of the Funds may be used by the
Sub-Adviser in servicing all of its accounts, and not all such services may be
used by the Sub-Adviser in connection with the Funds. The Sub-Adviser may follow
a policy of considering sales of variable annuity or variable life insurance
contracts for which the Funds serve as investment vehicles as a factor in the
selection of broker/dealers to execute portfolio transactions, subject to the
requirements of best execution discussed above. In the selection of a broker or
dealer for execution of any negotiated transaction, the Sub-Adviser shall have
no duty or obligation to seek advance competitive bidding for the most favorable
negotiated commission rate for such transaction, or to select any broker solely
on the basis of its purported or "posted" commission rate for such transaction,
provided, however, that the Sub-Adviser shall consider such "posted" commission
rates, if any, together
<PAGE>
with any other information available at the time as to the level of commissions
known to be charged on comparable transactions by other qualified brokerage
firms, as well as all other relevant factors and circumstances, including the
size of any contemporaneous market in such securities, the importance to the
Funds of speed, efficiency, and confidentiality of execution, the execution
capabilities required by the circumstances of the particular transactions, and
the apparent knowledge or familiarity with sources from or to whom such
securities may be purchased or sold. Where the commission rate reflects
services, reliability and other relevant factors in addition to the cost of
execution, the Sub-Adviser shall have the burden of demonstrating that such
expenditures were bona fide and for the benefit of the Funds.
ARTICLE II
ALLOCATION OF CHARGES AND EXPENSES
The Sub-Adviser assumes and shall pay for maintaining the staff and
personnel necessary to perform its obligations under this Agreement, and shall,
at its own expense, provide the office space, equipment and facilities necessary
to perform its obligations under this Agreement. Except to the extent expressly
assumed by the Sub-Adviser herein and except to the extent required by law to be
paid by the Sub-Adviser, INVESCO and/or the Company shall pay all costs and
expenses in connection with the operations of the Funds.
ARTICLE III
COMPENSATION OF THE SUB-ADVISER
For the services rendered, facilities furnished, and expenses assumed by
the Sub-Adviser, INVESCO shall pay to the Sub-Adviser a fee, computed daily and
paid as of the last day of each month, using for each daily calculation the most
recently determined net asset value of the Funds, as determined by a valuation
made in accordance with the Funds' procedures for calculating its net asset
value as described in the Funds' Prospectus and/or Statement of Additional
Information. The advisory fee to the Sub-Adviser shall be computed at the annual
rate of 0.25% of the first $200 million of each Fund's average net assets and
0.20% of the Fund's average net assets in excess of $200 million. During any
period when the determination of the Funds' net asset value is suspended by the
Directors of the Company, the net asset value of a share of the Funds as of the
last business day prior to such suspension shall, for the purpose of this
Article III, be deemed to be the net asset value at the close of each succeeding
business day until it is again determined. However, no such fee shall be paid to
the Sub-Adviser with respect to any assets of the Funds which may be invested in
any other investment company for which the Sub-Adviser serves as investment
adviser or sub-adviser. The fee provided for hereunder shall be prorated in any
month in which this Agreement is not in effect for the entire month. The
Sub-Adviser shall be entitled to receive fees hereunder only for such periods as
the INVESCO Investment Advisory Agreement remains in effect.
<PAGE>
ARTICLE IV
LIMITATION OF LIABILITY OF SUB-ADVISER
The Sub-Adviser shall not be liable for any error of judgment, mistake of
law or for any loss arising out of any investment or for any act or omission in
the performance of sub-advisory services rendered with respect to the Company or
the Funds, except for willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of reckless disregard of its obligations
and duties hereunder. As used in this Article IV, "Sub- Adviser" shall include
any affiliates of the Sub-Adviser performing services contemplated hereby and
directors, officers and employees of the Sub-Adviser and such affiliates.
ARTICLE V
ACTIVITIES OF THE SUB-ADVISER
The services of the Sub-Adviser to the Funds are not to be deemed to be
exclusive, the Sub-Adviser and any person controlled by or under common control
with the Sub-Adviser (for purposes of this Article V referred to as
"affiliates") being free to render services to others. It is understood that
directors, officers, employees and shareholders of the Company are or may become
interested in the Sub-Adviser and its affiliates, as directors, officers,
employees and shareholders or otherwise, and that directors, officers, employees
and shareholders of the Sub-Adviser, INVESCO and their affiliates are or may
become interested in the Company as directors, officers and employees.
ARTICLE VI
AVOIDANCE OF INCONSISTENT POSITIONS AND
COMPLIANCE WITH APPLICABLE LAWS
In connection with purchases or sales of securities for the investment
portfolio of the Funds, neither the Sub-Adviser nor any of its directors,
officers or employees will act as a principal or agent for any party other than
the Funds or receive any commissions. The Sub-Adviser will comply with all
applicable laws in acting hereunder including, without limitation, the 1940 Act;
the Investment Advisers Act of 1940, as amended; and all rules and regulations
duly promulgated under the foregoing.
ARTICLE VII
DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall become effective as of the date it is approved by a
majority of the outstanding voting securities of the Funds, and shall remain in
force for an initial term ending two years from the date of execution and from
year to year thereafter until its termination in accordance with this Article
VII, but only so long as such continuance is specifically approved at least
annually by (i) the Directors of the Company, or by the vote of a majority of
the outstanding voting securities of the Funds, and (ii) a majority of those
Directors who are not parties to this Agreement or interested persons of any
such party cast in person at a meeting called for the purpose of voting on such
approval. In the event of the disapproval of this Agreement, or of the
continuation hereof, by the shareholders of a particular Fund (or by the
<PAGE>
Directors of the Company as to a particular Fund), the parties intend that such
disapproval shall be effective only as to such Fund, and that such disapproval
shall not affect the validity or effectiveness of the approval of this
Agreement, or of the continuation hereof, by the shareholders of any other Fund
(or by the Directors, including a majority of the disinterested Directors) as to
such other Fund; in such case, this Agreement shall be deemed to have been
validly approved or continued, as the case may be, as to such other Fund.
This Agreement may be terminated at any time, without the payment of any
penalty, by INVESCO; the Funds by vote of the Directors of the Company, by vote
of a majority of the outstanding voting securities of the Funds or, with respect
to a particular Fund, by a majority of the outstanding voting securities of that
Fund, as the case may be; or by the Sub-Adviser. A termination by INVESCO or the
Sub-Adviser shall require sixty days' written notice to the other party and to
the Company, and a termination by the Company shall require such notice to each
of the parties. This Agreement shall automatically terminate in the event of its
assignment to the extent required by the Investment Company Act of 1940 and the
Rules thereunder.
The Sub-Adviser agrees to furnish to the Directors of the Company such
information on an annual basis as may reasonably be necessary to evaluate the
terms of this Agreement.
Termination of this Agreement shall not affect the right of the Sub-Adviser
to receive payments on any unpaid balance of the compensation described in
Article III hereof earned prior to such termination.
ARTICLE VIII
AMENDMENTS OF THIS AGREEMENT
No provision of this Agreement may be orally changed or discharged, but may
only be modified by an instrument in writing signed by the Sub-Adviser and
INVESCO. In addition, no amendment to this Agreement shall be effective unless
approved by (1) the vote of a majority of the Directors of the Company,
including a majority of the Directors who are not parties to this Agreement or
interested persons of any such party cast in person at a meeting called for the
purpose of voting on such amendment and (2) the vote of a majority of the
outstanding voting securities of the Funds (other than an amendment which can be
effective without shareholder approval under applicable law). In the event of
the disapproval of an amendment of this Agreement by the shareholders of a
particular Fund (or by the Directors of the Company as to a particular Fund),
the parties intend that such disapproval shall be effective only as to such
Fund, and that such disapproval shall not affect the validity or effectiveness
of the approval of the amendment by the shareholders of any other Fund (or by
the Directors, including a majority of the disinterested Directors) as to such
other Fund; in such case, this Agreement shall be deemed to have been validly
amended as to such other Fund.
<PAGE>
ARTICLE IX
DEFINITIONS OF CERTAIN TERMS
In interpreting the provisions of this Agreement, the terms "vote of a
majority of the outstanding voting securities," "assignments," "affiliated
person" and "interested person," when used in this Agreement, shall have the
respective meanings specified in the Investment Company Act and the Rules and
Regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under said Act.
ARTICLE X
GOVERNING LAW
This Agreement shall be construed in accordance with the laws of the State
of Colorado and the applicable provisions of the Investment Company Act. To the
extent that the applicable laws of the State of Colorado, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
ARTICLE XI
MISCELLANEOUS
Notice. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for the receipt of such notice.
Severability. Each provision of this Agreement is intended to be severable.
If any provision of this Agreement shall be held illegal or made invalid by a
court decision, statute, rule or otherwise, such illegality or invalidity shall
not affect the validity or enforceability of the remainder of this Agreement.
Headings. The headings in this Agreement are inserted for convenience and
identification only and are in no way intended to describe, interpret, define or
limit the size, extent or intent of this Agreement or any provision hereof.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
INVESCO FUNDS GROUP, INC.
By: /s/ Dan J. Hesser
---------------------------
Dan J. Hesser
President
ATTEST:
/s/ Glen A. Payne
- --------------------------
Secretary
INVESCO TRUST COMPANY
By:/s/ R. Dalton Sim
---------------------------
President
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made this 28th day of February, 1997 between INVESCO
VARIABLE INVESTMENT FUNDS, INC., a Maryland corporation (the "Fund"), and
INVESCO FUNDS GROUP, INC., a Delaware corporation (the "Underwriter").
W I T N E S S E T H:
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), as a diversified, open-end management
investment company and currently proposes to have one class of shares (the
"Shares") which is divided into eight series, and which may be divided into
additional series (the "Series"), each representing an interest in a separate
portfolio of investments, and it is in the interest of the Fund to offer the
Shares for sale continuously to life insurance companies that have entered into
participation agreements with the Fund and the Underwriter ("Participating
Insurance Companies") and separate accounts of Participating Insurance
Companies; and
WHEREAS, the Underwriter is engaged in the business of selling shares of
investment companies either directly to investors or through other securities
dealers; and
WHEREAS, the Fund and the Underwriter wish to enter into an agreement with
each other with respect to the continuous offering of the Shares of each Series
in order to promote growth of the Fund and facilitate the distribution of the
Shares;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto as follows:
1. The Fund hereby appoints the Underwriter its agent for the
distribution of Shares of each Series in jurisdictions wherein such
Shares legally may be offered for sale; provided, however, that the
Fund in its absolute discretion may (a) issue or sell Shares of each
Series directly to eligible purchasers, or (b) issue or sell Shares
of a particular Series to the shareholders of any other Series or to
the shareholders of any other investment company, for which the
Underwriter or any affiliate thereof shall act as exclusive
distributor, who wish to exchange all or a portion of their
investment in Shares of such Series or in shares of such other
investment company for the Shares of a particular Series, provided
that such shareholders are eligible to purchase shares.
Notwithstanding any other provision hereof, the Fund may terminate,
suspend or withdraw the offering of Shares whenever, in its sole
discretion, it deems such action to be desirable. The Fund reserves
the right to reject any subscription in whole or in part for any
reason.
2. The Underwriter hereby agrees to serve as agent for the distribution
of the Shares and agrees that it will use its best efforts with
reasonable promptness to sell such part of the authorized Shares
remaining unissued as from time to time shall be effectively
registered under the Securities Act of 1933, as amended (the "1933
Act"), at such prices and on such terms as hereinafter set forth,
<PAGE>
all subject to applicable federal and state securities laws and
regulations. Nothing herein shall be construed to prohibit the
Underwriter from engaging in other related or unrelated businesses.
3. In addition to serving as the Fund's agent in the distribution of
the Shares, the Underwriter shall also provide to the holders of the
Shares certain maintenance, support or similar services
("Shareholder Services"). Such services shall include, without
limitation, answering routine shareholder inquiries regarding the
Fund, arranging for bank wires, and providing such other services as
the Fund may reasonably request from time to time. It is expressly
understood that the Underwriter or the Fund may enter into one or
more agreements with third parties pursuant to which such third
parties may provide the Shareholder Services provided for in this
paragraph. Nothing herein shall be construed to impose upon the
Underwriter any duty or expense in connection with the services of
any registrar, transfer agent or custodian appointed by the Fund,
the computation of the asset value or offering price of Shares, the
preparation and distribution of notices of meetings, proxy
soliciting material, annual and periodic reports, dividends and
dividend notices, or any other responsibility of the Fund.
4. Except as otherwise specifically provided for in this Agreement, the
Underwriter shall sell the Shares directly to Participating
Insurance Companies, or separate accounts of Participating Insurance
Companies, in such manner, not inconsistent with the provisions
hereof and the then effective Registration Statement of the Fund
under the 1933 Act (the "Registration Statement") and related
Prospectus (the "Prospectus") and Statement of Additional
Information ("SAI") of the Fund as the Underwriter may determine
from time to time.
5. The Shares of each Series offered for sale or sold by the
Underwriter shall be offered or sold at the net asset value per
share determined in accordance with the then current Prospectus
and/or SAI relating to the sale of the Shares of the appropriate
Series except as departure from such prices shall be permitted by
the then current Prospectus and/or SAI of the Fund, in accordance
with applicable rules and regulations of the Securities and Exchange
Commission. The price the Fund shall receive for the Shares of each
Series purchased from the Fund shall be the net asset value per
share of such Share, determined in accordance with the Prospectus
and/or SAI applicable to the sale of the Shares of such Series.
6. Except as may be otherwise agreed to by the Fund, the Underwriter
shall be responsible for issuing and delivering such confirmations
of sales made by it pursuant to this Agreement as may be required;
provided, however, that the Underwriter or the Fund may utilize the
services of other persons or entities believed by it to be competent
to perform such functions. Shares shall be registered on the
transfer books of the Fund in such names and denominations as the
Underwriter may specify.
<PAGE>
7. The Fund will execute any and all documents and furnish any and all
information which may be reasonably necessary in connection with the
qualification of the Shares for sale (including the qualification of
the Fund as a broker-dealer where necessary or advisable) in such
states as the Underwriter may reasonably request (it being
understood that the Fund shall not be required without its consent
to comply with any requirement which in the opinion of the Directors
of the Fund is unduly burdensome). The Underwriter, at its own
expense, will effect all qualifications of itself as broker or
dealer, or otherwise, under all applicable state or Federal laws
required in order that the Shares may be sold in such states or
jurisdictions as the Fund may reasonably request.
8. The Fund shall prepare and furnish to the Underwriter from time to
time the most recent form of the Prospectus and/or SAI of the Fund
and/or of each Series of the Fund. The Fund authorizes the
Underwriter to use the Prospectus and/or SAI, in the forms furnished
to the Underwriter from time to time, in connection with the sale of
the Shares of the Fund and/or of each Series of the Fund. The Fund
will furnish to the Underwriter from time to time such information
with respect to the Fund, each Series, and the Shares as the
Underwriter may reasonably request for use in connection with the
sale of the Shares. The Underwriter agrees that it will not use or
distribute or authorize the use, distribution or dissemination by
others in connection with the sale of the Shares any statements,
other than those contained in a current Prospectus and/or SAI of the
Fund or applicable Series, except such supplemental literature or
advertising as shall be lawful under Federal and state securities
laws and regulations, and that it will promptly furnish the Fund
with copies of all such material, including any such material
provided to the Underwriter by Participating Insurance Companies
that mentions the Fund by name.
9. The Underwriter will not make, or authorize others to make, any
short sales of the Shares of the Fund or otherwise make any sales of
the Shares unless such sales are made in accordance with a then
current Prospectus and/or SAI relating to the sale of the applicable
Shares.
10. The Underwriter, as agent of and for the account of the Fund, may
cause the redemption of the Shares at such prices and upon such
terms and conditions as shall be specified in a then current
Prospectus and/or SAI. In selling or redeeming the Shares for the
account of the Fund, the Underwriter will in all respects conform to
the requirements of all state and federal laws and the Rules of Fair
Practice of the National Association of Securities Dealers, Inc.,
relating to such sale or redemption, as the case may be. The
Underwriter will observe and be bound by all the provisions of the
Articles of Incorporation or Bylaws of the Fund and of any
provisions in the Registration Statement, Prospectus and SAI, as
such may be amended or supplemented from time to time, notice of
which shall have been given to the Underwriter, which at the time in
<PAGE>
any way require, limit, restrict or prohibit or otherwise regulate
any action on the part of the Underwriter.
11. (a) The Fund shall indemnify, defend and hold harmless the
Underwriter, its officers and directors and any person who
controls the Underwriter within the meaning of the 1933 Act,
from and against any and all claims, demands, liabilities and
expenses (including the cost of investigating or defending
such claims, demands or liabilities and any attorney fees
incurred in connection therewith) which the Underwriter, its
officers and directors or any such controlling person, may
incur under the federal securities laws, the common law or
otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in the Registration
Statement or any related Prospectus and/or SAI or arising out
of or based upon any alleged omission to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading.
Notwithstanding the foregoing, this indemnity agreement, to
the extent that it might require indemnity of the Underwriter
or any person who is an officer, director or controlling
person of the Underwriter, shall not inure to the benefit of
the Underwriter or officer, director or controlling person
thereof unless a court of competent jurisdiction shall
determine, or it shall have been determined by controlling
precedent, that such result would not be against public policy
as expressed in the federal securities laws and in no event
shall anything contained herein be so construed as to protect
the Underwriter against any liability to the Fund, the
Directors or the Fund's shareholders to which the Underwriter
would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of its duties
or by reason of its reckless disregard of its obligations and
duties under this Agreement.
This indemnity agreement is expressly conditioned upon the
Fund's being notified of any action brought against the
Underwriter, its officers or directors or any such controlling
person, which notification shall be given by letter or by
telegram addressed to the Fund at its principal address in
Denver, Colorado and sent to the Fund by the person against
whom such action is brought within ten (10) days after the
summons or other first legal process shall have been served
upon the Underwriter, its officers or directors or any such
controlling person. The failure to notify the Fund of any such
action shall not relieve the Fund from any liability which it
may have to the person against whom such action is brought by
reason of any such alleged untrue statement or omission
otherwise than on account of the indemnity agreement contained
in this paragraph. The Fund shall be entitled to assume the
defense of any suit brought to enforce such claim, demand, or
liability, but in such case the defense shall be conducted by
counsel chosen by the Fund and approved by the Underwriter,
which approval shall not be unreasonably withheld. If the Fund
<PAGE>
elects to assume the defense of any such suit and retain
counsel approved by the Underwriter, the defendant or
defendants in such suit shall bear the fees and expenses of an
additional counsel obtained by any of them. Should the Fund
elect not to assume the defense of any such suit, or should
the Underwriter not approve of counsel chosen by the Fund, the
Fund will reimburse the Underwriter, its officers and
directors or the controlling person or persons named as
defendant or defendants in such suit, for the reasonable fees
and expenses of any counsel retained by the Underwriter or
them. In addition, the Underwriter shall have the right to
employ counsel to represent it, its officers and directors and
any such controlling person who may be subject to liability
arising out of any claim in respect of which indemnity may be
sought by the Underwriter against the Fund hereunder if in the
reasonable judgment of the Underwriter it is advisable for the
Underwriter, its officers and directors or such controlling
person to be represented by separate counsel, in which event
the reasonable fees and expenses of such separate counsel
shall be borne by the Fund. This indemnity agreement and the
Fund's representations and warranties in this Agreement shall
remain operative and in full force and effect and shall
survive the delivery of any of the Shares as provided in this
Agreement. This indemnity agreement shall inure exclusively to
the benefit of the Underwriter and its successors, the
Underwriter's officers and directors and their respective
estates and any such controlling person and their successors
and estates. The Fund shall promptly notify the Underwriter of
the commencement of any litigation or proceeding against it in
connection with the issue and sale of the Shares.
(b) The Underwriter agrees to indemnify, defend and hold harmless
the Fund, its Directors and any person who controls the Fund
within the meaning of the 1933 Act, from and against any and
all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or
liabilities and any attorney fees incurred in connection
therewith) which the Fund, its Directors or any such
controlling person may incur under the Federal securities
laws, the common law or otherwise, but only to the extent that
such liability or expense incurred by the Fund, its Directors
or such controlling person resulting from such claims or
demands shall arise out of or be based upon (a) any alleged
untrue statement of a material fact contained in information
furnished in writing by the Underwriter to the Fund
specifically for use in the Registration Statement or any
related Prospectus and/or SAI or shall arise out of or be
based upon any alleged omission to state a material fact in
connection with such information required to be stated in the
Registration Statement or the related Prospectus and/or SAI or
necessary to make such information not misleading and (b) any
alleged act or omission on the Underwriter's part as the
Fund's agent that has not been expressly authorized by the
Fund in writing.
<PAGE>
Notwithstanding the foregoing, this indemnity agreement, to
the extent that it might require indemnity of the Fund or any
Director or controlling person of the Fund, shall not inure to
the benefit of the Fund or Director or controlling person
thereof unless a court of competent jurisdiction shall
determine, or it shall have been determined by controlling
precedent, that such result would not be against public policy
as expressed in the federal securities laws and in no event
shall anything contained herein be so construed as to protect
any Director of the Fund against any liability to the Fund or
the Fund's shareholders to which the Director would otherwise
be subject by reason of willful misfeasance, bad faith or
gross negligence or reckless disregard of the duties involved
in the conduct of his office.
This indemnity agreement is expressly conditioned upon the
Underwriter's being notified of any action brought against the
Fund, its Directors or any such controlling person, which
notification shall be given by letter or telegram addressed to
the Underwriter at its principal office in Denver, Colorado,
and sent to the Underwriter by the person against whom such
action is brought, within ten (10) days after the summons or
other first legal process shall have been served upon the
Fund, its Directors or any such controlling person. The
failure to notify the Underwriter of any such action shall not
relieve the Underwriter from any liability which it may have
to the person against whom such action is brought by reason of
any such alleged untrue statement or omission otherwise than
on account of the indemnity agreement contained in this
paragraph. The Underwriter shall be entitled to assume the
defense of any suit brought to enforce such claim, demand, or
liability, but in such case the defense shall be conducted by
counsel chosen by the Underwriter and approved by the Fund,
which approval shall not be unreasonably withheld. If the
Underwriter elects to assume the defense of any such suit and
retain counsel approved by the Fund, the defendant or
defendants in such suit shall bear the fees and expenses of an
additional counsel obtained by any of them. Should the
Underwriter elect not to assume the defense of any such suit,
or should the Fund not approve of counsel chosen by the
Underwriter, the Underwriter will reimburse the Fund, its
Directors or the controlling person or persons named as
defendant or defendants in such suit, for the reasonable fees
and expenses of any counsel retained by the Fund or them. In
addition, the Fund shall have the right to employ counsel to
represent it, its Directors and any such controlling person
who may be subject to liability arising out of any claim in
respect of which indemnity may be sought by the Fund against
the Underwriter hereunder if in the reasonable judgment of the
Fund it is advisable for the Fund, its Directors or such
controlling person to be represented by separate counsel, in
which event the reasonable fees and expenses of such separate
counsel shall be borne by the Underwriter. This indemnity
agreement and the Underwriter's representations and warranties
<PAGE>
in this Agreement shall remain operative and in full force and
effect and shall survive the delivery of any of the Shares as
provided in this Agreement. This indemnity agreement shall
inure exclusively to the benefit of the Fund and its
successors, the Fund's Directors and their respective estates
and any such controlling person and their successors and
estates. The Underwriter shall promptly notify the Fund of the
commencement of any litigation or proceeding against it in
connection with the issue and sale of the Shares.
12. The Fund will pay or cause to be paid (a) expenses (including the
fees and disbursements of its own counsel) of any registration of
the Shares under the 1933 Act, as amended, (b) expenses incident to
the issuance of the Shares, and (c) expenses (including the fees and
disbursements of its own counsel) incurred in connection with the
preparation, printing and distribution of the Fund's Prospectuses,
SAIs, and periodic and other reports sent to holders of the Shares
in their capacity as such. The Underwriter shall prepare and
provide necessary copies of all sales literature subject to the
Fund's approval thereof.
13. This Agreement shall become effective as of the date it is approved
by a majority vote of the Directors of the Fund, as well as a
majority vote of the Directors who are not "interested persons" (as
defined in the Investment Company Act) of the Fund, and shall
continue in effect for an initial term expiring April 30, 1995, and
from year to year thereafter, but only so long as such continuance
is specifically approved at least annually (a)(i) by a vote of the
Directors of the Fund or (ii) by a vote of a majority of the
outstanding voting securities of the Fund, and (b) by a vote of a
majority of the Directors of the Fund who are not "interested
persons," as defined in the Investment Company Act, of the Fund cast
in person at a meeting for the purpose of voting on this Agreement.
Either party hereto may terminate this Agreement on any date,
without the payment of a penalty, by giving the other party at least
60 days' prior written notice of such termination specifying the
date fixed therefor. In particular, this Agreement may be terminated
at any time, without payment of any penalty, by vote of a majority
of the members of the Directors of the Fund or by a vote of a
majority of the outstanding voting securities of the Fund on not
more than 60 days' written notice to the Underwriter.
Without prejudice to any other remedies of the Fund provided for in
this Agreement or otherwise, the Fund may terminate this Agreement
at any time immediately upon the Underwriter's failure to fulfill
any of the obligations of the Underwriter hereunder.
14. The Underwriter expressly agrees that, notwithstanding anything to
the contrary herein, or in any applicable law, it will look solely
to the assets of the Fund for any obligations of the Fund hereunder
and nothing herein shall be construed to create any personal
liability on the part of any Director or any shareholder of the
Fund.
<PAGE>
15. This Agreement shall automatically terminate in the event of its
assignment. In interpreting the provisions of this Section 15, the
definition of "assignment" contained in the Investment Company Act
shall be applied.
16. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate for the receipt of such
notice.
17. No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by
the Fund and the Underwriter and, if applicable, approved in the
manner required by the Investment Company Act.
18. Each provision of this Agreement is intended to be severable. If any
provision of this Agreement shall be held illegal or made invalid by
a court decision, statute, rule or otherwise, such illegality or
invalidity shall not affect the validity or enforceability of the
remainder of this Agreement.
19. This Agreement and the application and interpretation hereof shall
be governed exclusively by the laws of the State of Colorado.
IN WITNESS WHEREOF, the Fund and the Underwriter have each caused this
Agreement to be executed on its behalf by an officer thereunto duly authorized
and the Underwriter has caused its corporate seal to be affixed as of the day
and year first above written.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
ATTEST:
By:/s/ Dan J. Hesser
---------------------------
Dan J. Hesser
/s/ Glen A. Payne President
- --------------------------
Glen A. Payne
Secretary
INVESCO FUNDS GROUP, INC.
ATTEST:
By:/s/ Ronald L. Grooms
---------------------------
Ronald L. Grooms
/s/ Glen A. Payne Senior Vice President
- --------------------------
Glen A. Payne
Secretary
DEFINED BENEFIT DEFERRED COMPENSATION PLAN
FOR NON-INTERESTED DIRECTORS AND TRUSTEES
The registered, open-end management investment companies referred to on
Schedule A as the Schedule may hereafter be revised by the addition and deletion
of investment companies (the "Funds") have adopted this Defined Benefit Deferred
Compensation Plan ("Plan") for the benefit of those directors and trustees of
the Funds who are not interested directors or trustees thereof as defined in
Section 2(a)(19) of the Investment Company Act of 1940, as amended ("Independent
Directors").
1. Eligibility
Each Independent Director who has served as such ("Eligible Service") on
the boards of any of the Funds and their predecessor and successor entities, if
any, or as an Independent Director of the now-defunct investment management
company known as FG Series for an aggregate of at least five years at the time
of his Service Termination Date (as defined in paragraph 2) will be entitled to
receive benefits under the Plan. An Independent Director's period of Eligible
Service commences on the date of election to the board of directors or trustees
of any one or more of the Funds ("Board"). Hereafter, references in this Plan to
Independent Directors shall be deemed to include only those Directors who have
met the Eligible Service requirement for Plan participation.
2. Service Termination and Service Termination Date
a. Service Termination. Service Termination means termination of service
(other than by disability or death) of an Independent Director which results
from the Director's having reached his Service Termination Date.
b. Service Termination Date. An Independent Director's Service Termination
Date is normally the last day of the calendar quarter in which such Director's
seventy-second birthday occurs. A majority of the Board of a Fund may annually
extend a Director's Service Termination Date for a maximum period of three
years, through the date not later than the last day of the calendar quarter in
which such Director's seventy-fifth birthday occurs.
As used in this Plan unless otherwise stipulated, Service Termination Date
shall mean an Independent Director's normal Service Termination Date, or the
Director's extended Service Termination Date, whichever may be applicable to the
Independent Director.
3. Defined Payments and Benefit
a. Payments. If an Independent Director's Service Termination Date occurs
on a date not later than the last day of the calendar quarter in which such
Director's seventy-fourth birthday occurs, the Independent Director will receive
four quarterly payments during the first twelve months subsequent to his Service
Termination Date (the "First Year Retirement Payments"), with each payment to be
equal to 25 percent of the annual basic retainer payable by each Fund to the
Independent Director on his Service Termination Date (excluding any fees
relating to attending meetings or chairing committees).
<PAGE>
b. Benefit. Commencing with the first anniversary of the Service
Termination Date of any Independent Director who has received the First Year
Retirement Payments, and commencing as of the Service Termination Date of an
Independent Director whose Service Termination Date is subsequent to the date of
the last day of the calendar quarter in which such Director's seventy-fourth
birthday occurred, the Independent Director will receive, for the remainder of
his life, a benefit (the "Benefit"), payable quarterly, with each quarterly
payment to be equal to 10 percent of the annual basic retainer payable by each
Fund to the Independent Director on his Service Termination Date (excluding any
fees relating to attending meetings or chairing committees).
c. Death Provisions. If an Independent Director's service as a Director is
terminated because of his death subsequent to the last day of the calendar
quarter in which such Director's seventy-second birthday occurred and prior to
the last day of the calendar quarter in which such Director's seventy-fourth
birthday occurs, the designated beneficiary of the Independent Director shall
receive the First Year Retirement Payments and shall, commencing with the
quarter following the quarter in which the last First Year Retirement Payment is
made, receive the Benefit for a period of ten years, with quarterly payments to
be made to the designated beneficiary.
If an Independent Director's service as a Director is terminated because of
his death prior to the last day of the calendar quarter in which such Director's
seventy-second birthday occurs or subsequent to the last day of the calendar
quarter in which such Director's seventy-fourth birthday occurred, the
designated beneficiary of the Independent Director shall receive the Benefit for
a period of ten years, with quarterly payments to be made to the designated
beneficiary commencing in the first quarter following the Director's death.
d. Disability Provisions. If an Independent Director's service as a
Director is terminated because of his disability subsequent to the last day of
the calendar quarter in which such Director's seventy-second birthday occurred
and prior to the last day of the calendar quarter in which such Director's
seventy-fourth birthday occurs, the Independent Director shall receive the First
Year Retirement Payments and shall, commencing with the quarter following the
quarter in which the last First Year Retirement Payment is made, receive the
Benefit for the remainder of his life, with quarterly payments to be made to the
disabled Independent Director. If the disabled Independent Director should die
before the First Year Retirement Payments are completed and before forty
quarterly Benefit payments are made, such payments will continue to be made to
the Independent Director's designated beneficiary until the aggregate of the
First Year Retirement Payments and forty quarterly Benefit payments have been
made to the disabled Independent Director and the Director's designated
beneficiary.
If an Independent Director's service as a Director is terminated because of
his disability prior to the last day of the calendar quarter in which such
Director's seventy-second birthday occurs or subsequent to the last day of the
calendar quarter in which such Director's seventy-fourth birthday occurred, the
Independent Director shall receive the Benefit for the remainder of his life,
with quarterly payments to be made to the disabled Independent Director
commencing in the first quarter following the Director's termination for
disability. If the disabled Independent Director should die before forty
quarterly payments are made, payments will continue to be made to the
<PAGE>
Independent Director's designated beneficiary until the aggregate of forty
quarterly payments has been made to the disabled Independent Director and the
Director's designated beneficiary.
e. Death of Independent Director and Beneficiary. If the Independent
Director and his designated beneficiary should die before the First Year
Retirement Payments and/or a total of forty quarterly Benefit payments are made,
the remaining value of the Independent Director's First Year Retirement Payments
and/or Benefit shall be determined as of the date of the death of the
Independent Director's designated beneficiary and shall be paid to the estate of
the designated beneficiary in one lump sum or in periodic payments, with the
determinations with respect to the value of the First Year Retirement Payments
and/or Benefit and the method and frequency of payment to be made by the
Committee (as defined in paragraph 8.a.) in its sole discretion.
4. Designated Beneficiary
The beneficiary referred to in paragraph 3 may be designated or changed by
the Independent Director without the consent of any prior beneficiary on a form
provided by the Committee (as defined in paragraph 8.a.) and delivered to the
Committee before the Independent Director's death. If no such beneficiary shall
have been designated, or if no designated beneficiary shall survive the
Independent Director, the value or remaining value of the Independent Director's
First Year Retirement Payments and/or Benefit shall be determined as of the date
of the death of the Independent Director by the Committee and shall be paid as
promptly as possible in one lump sum to the Independent Director's estate.
5. Disability
An Independent Director shall be deemed to have become disabled for the
purposes of paragraph 3 if the Committee shall find on the basis of medical
evidence satisfactory to it that the Independent Director is disabled, mentally
or physically, as a result of an accident or illness, so as to be prevented from
performing each of the duties which are incumbent upon an Independent Director
in fulfilling his responsibilities as such.
6. Time of Payment
The First Year Retirement Payments and/or the Benefit for each year will be
paid in quarterly installments that are as nearly equal as possible.
7. Payment of First Year Retirement Payments and/or Benefit: Allocation of
Costs
Each Fund is responsible for the payment of the amount of the First Year
Retirement Payments and/or Benefit applicable to the Fund, as well as its
proportionate share of all expenses of administration of the Plan, including
without limitation all accounting and legal fees and expenses and fees and
expenses of any Actuary. The obligations of each Fund to pay such First Year
Retirement Payments and/or Benefit and expenses will not be secured or funded in
any manner, and such obligations will not have any preference over the lawful
<PAGE>
claims of each Fund's creditors and shareholders. To the extent that the First
Year Retirement Payments and/or Benefit is paid by more than one Fund, such
costs and expenses will be allocated among such Funds in a manner that is
determined by the Committee to be fair and equitable under the circumstances. To
the extent that one or more of such Funds consist of one or more separate
portfolios, such costs and expenses allocated to any such Fund will thereafter
be allocated among such portfolios by the Board of the Fund in a manner that is
determined by such Board to be fair and equitable under the circumstances.
8. Administration
a. The Committee. Any question involving entitlement to payments under or
the administration of the Plan will be referred to a four-person committee (the
"Committee") composed of three Independent Directors designated by all of the
Independent Directors of the Funds and one director of the Funds who is not an
Independent Director, designated by the non-Independent Directors. Except as
otherwise provided herein, the Committee will make all interpretations and
determinations necessary or desirable for the Plan's administration, and such
interpretations and determinations will be final and conclusive. Committee
members will be elected annually.
b. Powers of the Committee. The Committee will represent and act on behalf
of the Funds in respect of the Plan and, subject to the other provisions of the
Plan, the Committee may adopt, amend or repeal bylaws or other regulations
relating to the administration of the Plan, the conduct of the Committee's
affairs, its rights or powers, or the rights or powers of its members. The
Committee will report to the Independent Directors and to the Boards of the
Funds from time to time on its activities in respect of the Plan. The Committee
or persons designated by it will cause such records to be kept as may be
necessary for the administration of the Plan.
9. Miscellaneous Provisions
a. Rights Not Assignable. Other than as is specifically provided in
paragraph 3, the right to receive any payment under the Plan is not transferable
or assignable, and nothing in the Plan shall create any benefit, cause of
action, right of sale, transfer, assignment, pledge, encumbrance, or other such
right in any heirs or the estate of any Independent Director.
b. Amendment, etc. The Committee, with the concurrence of the Board of any
Fund, may as to the specific Fund at any time amend or terminate the Plan or
waive any provision of the Plan; provided, however, that subject to the
limitations imposed by paragraph 7, no amendment, termination or waiver will
impair the rights of an Independent Director to receive the payments which would
have been made to such Independent Director had there been no such amendment,
termination, or waiver.
c. No Right to Reelection. Nothing in the Plan will create any obligation
on the part of the Board of any Fund to nominate any Independent Director for
reelection.
<PAGE>
d. Consulting. Subsequent to his Service Termination Date, an Independent
Director may render such services for any Fund, for such compensation, as may be
agreed upon from time to time by such Independent Director and the Board of the
Fund which desires to procure such services.
e. Effectiveness. The Plan will be effective for all Independent Directors
who have Service Termination Dates occurring on and after October 20, 1993.
Periods of Eligible Service shall include periods commencing prior and
subsequent to such date. Upon its adoption by the Board of a Fund, the Plan will
become effective as to that Fund on the date when the Committee determines that
any regulatory approval or advice that may be necessary or appropriate in
connection with the Plan have been obtained.
Adopted October 20, 1993. Amended October 19, 1994.
Amended May 1, 1996, effective July 1, 1996.
<PAGE>
SCHEDULE A
TO
DEFINED BENEFIT DEFERRED COMPENSATION PLAN
FOR NON-INTERESTED DIRECTORS AND TRUSTEES
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.
The INVESCO Advisor Funds, Inc.
INVESCO Treasurer's Series Trust
TRANSFER AGENCY AGREEMENT
AGREEMENT made as of this 28th day of February, 1997, between INVESCO
Variable Investment Funds, Inc., a Maryland corporation, having its principal
office and place of business at 7800 East Union Avenue, Denver, Colorado, 80237
(hereinafter referred to as the "Fund") and INVESCO Funds Group, Inc., a
Delaware corporation, having its principal place of business at 7800 E. Union
Avenue, Denver, CO 80237 (hereinafter referred to as the "Transfer Agent").
WITNESSETH:
That for and in consideration of mutual promises hereinafter set forth, the
Fund and the Transfer Agent agree as follows:
1. Definitions. Whenever used in this Agreement, the following words
and phrases, unless the context otherwise requires, shall have the
following meanings:
(a) "Authorized Person" shall be deemed to include the President,
any Vice President, the Secretary, Treasurer, or any other
person, whether or not any such person is an officer or
employee of the Fund, duly authorized to give Oral
Instructions and Written Instructions on behalf of the Fund as
indicated in a certification as may be received by the
Transfer Agent from time to time;
(b) "Certificate" shall mean any notice, instruction or other
instrument in writing, authorized or required by this
Agreement to be given to the Transfer Agent, which is actually
received by the Transfer Agent and signed on behalf of the
Fund by any two officers thereof;
(c) "Commission" shall have the meaning given it in the 1940 Act;
(d) "Custodian" refers to the custodian of all of the securities
and other moneys owned by the Fund;
(e) "Oral Instructions" shall mean verbal instructions actually
received by the Transfer Agent from a person reasonably
believed by the Transfer Agent to be an Authorized Person;
(f) "Prospectus" shall mean the currently effective prospectus
relating to the Fund's Shares registered under the Securities
Act of 1933;
(g) "Shares" refers to the shares of common stock, $.01 par value,
of the Fund;
(h) "Shareholder" means a record owner of Shares;
(i) "Written Instructions" shall mean a written communication
actually received by the Transfer Agent where the receiver is
able to verify with a reasonable degree of certainty the
authenticity of the sender of such communication; and
<PAGE>
(j) The "1940 Act" refers to the Investment Company Act of 1940
and the Rules and Regulations thereunder, all as amended from
time to time.
2. Representation of Transfer Agent. The Transfer Agent does hereby
represent and warrant to the Fund that it has an effective
registration statement on SEC Form TA-1 and, accordingly, has duly
registered as a transfer agent as provided in Section 17A(c) of the
Securities Exchange Act of 1934.
3. Appointment of the Transfer Agent. The Fund hereby appoints and
constitutes the Transfer Agent as transfer agent for all of the
Shares of the Fund authorized as of the date hereof, and the
Transfer Agent accepts such appointment and agrees to perform the
duties herein set forth. If the board of directors of the Fund
hereafter reclassifies the Shares, by the creation of one or more
additional series or otherwise, the Transfer Agent agrees that it
will act as transfer agent for the Shares so reclassified on the
terms set forth herein.
4. Compensation.
(a) The Fund will initially compensate the Transfer Agent for its
services rendered under this Agreement in accordance with the
fees set forth in the Fee Schedule annexed hereto and
incorporated herein.
(b) The parties hereto will agree upon the compensation for acting
as transfer agent for any series of Shares hereafter
designated and established at the time that the Transfer Agent
commences serving as such for said series, and such agreement
shall be reflected in a Fee Schedule for that series, dated
and signed by an authorized officer of each party hereto, to
be attached to this Agreement.
(c) Any compensation agreed to hereunder may be adjusted from time
to time by attaching to this Agreement a revised Fee Schedule,
dated and signed by an authorized officer of each party
hereto, and a certified copy of the resolution of the board of
directors of the Fund authorizing such revised Fee Schedule.
(d) The Transfer Agent will bill the Fund as soon as practicable
after the end of each calendar month, and said billings will
be detailed in accordance with the Fee Schedule for the Fund.
The Fund will promptly pay to the Transfer Agent the amount of
such billing.
5. Documents. In connection with the appointment of the Transfer
Agent, the Fund shall, on or before the date this Agreement goes
into effect, file with the Transfer Agent the following documents:
<PAGE>
(a) A certified copy of the Articles of Incorporation of the Fund,
including all amendments thereto, as then in effect;
(b) A certified copy of the Bylaws of the Fund, as then in effect;
(c) Certified copies of the resolutions of the board of directors
authorizing this Agreement and designating Authorized Persons
to give instructions to the Transfer Agent;
(d) A specimen of the certificate for Shares of the Fund in the
form approved by the board of directors, with a certificate of
the Secretary of the Fund as to such approval;
(e) All account application forms and other documents relating to
Shareholder accounts;
(f) A certified list of Shareholders of the Fund with the name,
address and tax identification number of each Shareholder, and
the number of Shares held by each, certificate numbers and
denominations (if any certificates have been issued), lists of
any accounts against which stops have been placed, together
with the reasons for said stops, and the number of Shares
redeemed by the Fund;
(g) Copies of all agreements then in effect between the Fund and
any agent with respect to the issuance, sale, or cancellation
of Shares; and
(h) An opinion of counsel for the Fund with respect to the
validity of the Shares.
6. Further Documentation. The Fund will also furnish from time to time
the following documents:
(a) Each resolution of the board of directors authorizing the
original issue of Shares;
(b) Each Registration Statement filed with the Commission, and
amendments and orders with respect thereto, in effect with
respect to the sale of Shares of the Fund;
(c) A certified copy of each amendment to the Articles of
Incorporation and the Bylaws of the Fund;
(d) Certified copies of each resolution of the board of directors
designating Authorized Persons to give instructions to the
Transfer Agent;
(e) Certificates as to any change in any officer, director, or
Authorized Person of the Fund;
<PAGE>
(f) Specimens of all new certificates for Shares accompanied by
the Fund's resolutions of the board of directors approving
such forms; and
(g) Such other certificates, documents or opinions as may mutually
be deemed necessary or appropriate for the Transfer Agent in
the proper performance of its duties.
7. Certificates for Shares and Records Pertaining Thereto.
(a) At the expense of the Fund, the Transfer Agent shall maintain
an adequate supply of blank share certificates to meet the
Transfer Agent's requirements therefor. Such share
certificates shall be properly signed by facsimile. The Fund
agrees that, notwithstanding the death, resignation, or
removal of any officer of the Fund whose signature appears on
such certificates, the Transfer Agent may continue to
countersign certificates which bear such signatures until
otherwise directed by the Fund.
(b) The Transfer Agent agrees to prepare, issue and mail
certificates as requested by the Shareholders for Shares of
the Fund in accordance with the instructions of the Fund and
to confirm such issuance to the Shareholder and the Fund or
its designee.
(c) The Fund hereby authorizes the Transfer Agent to issue
replacement share certificates in lieu of certificates which
have been lost, stolen or destroyed, without any further
action by the board of directors or any officer of the Fund,
upon receipt by the Transfer Agent of properly executed
affidavits or lost certificate bonds, in form satisfactory to
the Transfer Agent, with the Fund and the Transfer Agent as
obligees under any such bond.
(d) The Transfer Agent shall also maintain a record of each
certificate issued, the number of Shares represented thereby
and the holder of record. The Transfer Agent shall further
maintain a stop transfer record on lost and/or replaced
certificates.
(e) The Transfer Agent may establish such additional rules and
regulations governing the transfer or registration of
certificates for Shares as it may deem advisable and
consistent with such rules and regulations generally adopted
by transfer agents.
8. Sale of Fund Shares.
(a) Whenever the Fund or its authorized agent shall sell or cause
to be sold any Shares, the Fund or its authorized agent shall
provide or cause to be provided to the Transfer Agent
information including: (i) the number of Shares sold, trade
<PAGE>
date, and price; (ii) the amount of money to be delivered to
the Custodian for the sale of such Shares; (iii) in the case
of a new account, a new account application or sufficient
information to establish an account.
(b) The Transfer Agent will, upon receipt by it of a check or
other payment identified by it as an investment in Shares of
the Fund and drawn or endorsed to the Transfer Agent as agent
for, or identified as being for the account of, the Fund,
promptly deposit such check or other payment to the
appropriate account postings necessary to reflect the
investment. The Transfer Agent will notify the Fund, or its
designee, and the Custodian of all purchases and related
account adjustments.
(c) Upon receipt of the notification required under paragraph (a)
hereof and the notification from the Custodian that such money
has been received by it, the Transfer Agent shall issue to the
purchaser or his authorized agent such Shares as he is
entitled to receive, based on the appropriate net asset value
of the Fund's Shares, determined in accordance with applicable
federal law or regulation, as described in the Prospectus for
the Fund. In issuing Shares to a purchaser or his authorized
agent, the Transfer Agent shall be entitled to rely upon the
latest written directions, if any, previously received by the
Transfer Agent from the purchaser or his authorized agent
concerning the delivery of such Shares.
(d) The Transfer Agent shall not be required to issue any Shares
of the Fund where it has received Written Instructions from
the Fund or written notification from any appropriate federal
or state authority that the sale of the Shares of the Fund has
been suspended or discontinued, and the Transfer Agent shall
be entitled to rely upon such Written Instructions or written
notification.
(e) Upon the issuance of any Shares of the Fund in accordance with
the foregoing provision of this Article, the Transfer Agent
shall not be responsible for the payment of any original issue
or other taxes required to be paid by the Fund in connection
with such issuance.
9. Returned Checks. In the event that any check or other order for the
payment of money is returned unpaid for any reason, the Transfer
Agent will: (i) give prompt notice of such return to the Fund or
its designee; (ii) place a stop transfer order against all Shares
issued or held on deposit as a result of such check or order; (iii)
in the case of any Shareholder who has obtained redemption checks,
place a stop payment order on the checking account on which such
checks are issued; and (iv) take such other steps as the Transfer
Agent may, in its discretion, deem appropriate or as the Fund or its
designee may instruct.
<PAGE>
10. Redemptions.
(a) Redemptions By Mail or In Person. Shares of the Fund will be
redeemed upon receipt by the Transfer Agent of: (i) a written
request for redemption, signed by each registered owner
exactly as the Shares are registered; (ii) certificates
properly endorsed for any Shares for which certificates have
been issued; (iii) signature guarantees to the extent required
by the Transfer Agent as described in the Prospectus for the
Fund; and (iv) any additional documents required by the
Transfer Agent for redemption by corporations, executors,
administrators, trustees and guardians.
(b) Wire Orders or Telephone Redemptions. The Transfer Agent
will, consistent with procedures which may be established by
the Fund from time to time for redemption by wire or
telephone, upon receipt of such a wire order or telephone
redemption request, redeem Shares and transmit the proceeds of
such redemption to the redeeming Shareholder as directed. All
wire or telephone redemptions will be subject to such
additional requirements as may be described in the Prospectus
for the Fund. Both the Fund and the Transfer Agent reserve
the right to modify or terminate the procedures for wire order
or telephone redemptions at any time.
(c) Processing Redemptions. Upon receipt of all necessary
information and documentation relating to a redemption, the
Transfer Agent will issue to the Custodian an advice setting
forth the number of Shares of the Fund received by the
Transfer Agent for redemption and that such shares are valid
and in good form for redemption. The Transfer Agent shall,
upon receipt of the moneys paid to it by the Custodian for the
redemption of Shares, pay such moneys to the Shareholder, his
authorized agent or legal representative.
11. Transfers and Exchanges. The Transfer Agent is authorized to review
and process transfers of Shares of the Fund and to the extent, if
any, permitted in the Prospectus for the Fund, exchanges between the
Fund and other mutual funds advised by INVESCO Funds Group, Inc., on
the records of the Fund maintained by the Transfer Agent. If Shares
to be transferred are represented by outstanding certificates, the
Transfer Agent will, upon surrender to it of the certificates in
proper form for transfer, and upon cancellation thereof, countersign
and issue new certificates for a like number of Shares and deliver
the same. If the Shares to be transferred are not represented by
outstanding certificates, the Transfer Agent will, upon an order
therefor by or on behalf of the registered holder thereof in proper
form, credit the same to the transferee on its books. If Shares are
to be exchanged for Shares of another mutual fund, the Transfer
Agent will process such exchange in the same manner as a redemption
and sale of Shares, except that it may in its discretion waive
requirements for information and documentation.
<PAGE>
12. Right to Seek Assurances. The Transfer Agent reserves the right to
refuse to transfer or redeem Shares until it is satisfied that the
requested transfer or redemption is legally authorized, and it shall
incur no liability for the refusal, in good faith, to make transfers
or redemptions which the Transfer Agent, in its judgment, deems
improper or unauthorized, or until it is satisfied that there is no
basis for any claims adverse to such transfer or redemption. The
Transfer Agent may, in effecting transfers, rely upon the provisions
of the Uniform Act for the Simplification of Fiduciary Security
Transfers or the Uniform Commercial Code, as the same may be amended
from time to time, which in the opinion of legal counsel for the
Fund or of its own legal counsel protect it in not requiring certain
documents in connection with the transfer or redemption of Shares of
the Fund, and the Fund shall indemnify the Transfer Agent for any
act done or omitted by it in reliance upon such laws or opinions of
counsel to the Fund or of its own counsel.
13. Distributions.
(a) The Fund will promptly notify the Transfer Agent of the
declaration of any dividend or distribution. The Fund shall
furnish to the Transfer Agent a resolution of the board of
directors of the Fund certified by the Secretary authorizing
the declaration of dividends and authorizing the Transfer
Agent to rely on Oral Instructions or a Certificate specifying
the date of the declaration of such dividend or distribution,
the date of payment thereof, the record date as of which
Shareholders entitled to payment shall be determined, the
amount payable per share to Shareholders of record as of that
date, and the total amount payable to the Transfer Agent on
the payment date.
(b) The Transfer Agent will, on or before the payable date of any
dividend or distribution, notify the Custodian of the
estimated amount of cash required to pay said dividend or
distribution, and the Fund agrees that, on or before the
mailing date of such dividend or distribution, it shall
instruct the Custodian to place in a dividend disbursing
account funds equal to the cash amount to be paid out. The
Transfer Agent, in accordance with Shareholder instructions,
will calculate, prepare and mail checks to, or (where
appropriate) credit such dividend or distribution to the
account of, Fund Shareholders, and maintain and safeguard all
underlying records.
(c) The Transfer Agent will replace lost checks upon receipt of
properly executed affidavits and maintain stop payment orders
against replaced checks.
(d) The Transfer Agent will maintain all records necessary to
reflect the crediting of dividends which are reinvested in
Shares of the Fund.
<PAGE>
(e) The Transfer Agent shall not be liable for any improper
payments made in accordance with the resolution of the board
of directors of the Fund.
(f) If the Transfer Agent shall not receive from the Custodian
sufficient cash to make payment to all Shareholders of the
Fund as of the record date, the Transfer Agent shall, upon
notifying the Fund, withhold payment to all Shareholders of
record as of the record date until such sufficient cash is
provided to the Transfer Agent.
14. Other Duties. In addition to the duties expressly provided for
herein, the Transfer Agent shall perform such other duties and
functions as are set forth in the Fee Schedules(s) hereto from time
to time.
15. Taxes. It is understood that the Transfer Agent shall file such
appropriate information returns concerning the payment of dividends
and capital gain distributions with the proper federal, state and
local authorities as are required by law to be filed by the Fund and
shall withhold such sums as are required to be withheld by
applicable law.
16. Books and Records.
(a) The Transfer Agent shall maintain records showing for each
investor's account the following: (i) names, addresses, tax
identifying numbers and assigned account numbers; (ii) numbers
of Shares held; (iii) historical information regarding the
account of each Shareholder, including dividends paid and date
and price of all transactions on a Shareholder's account; (iv)
any stop or restraining order placed against a Shareholder's
account; (v) information with respect to withholdings in the
case of a foreign account; (vi) any capital gain or dividend
reinvestment order, plan application, dividend address and
correspondence relating to the current maintenance of a
Shareholder's account; (vii) certificate numbers and
denominations for any Shareholders holding certificates; and
(viii) any information required in order for the Transfer
Agent to perform the calculations contemplated or required by
this Agreement.
(b) Any records required to be maintained by Rule 31a-1 under the
1940 Act will be preserved for the periods prescribed in Rule
31a-2 under the 1940 Act. Such records may be inspected by
the Fund at reasonable times. The Transfer Agent may, at its
option at any time, and shall forthwith upon the Fund's
demand, turn over to the Fund and cease to retain in the
Transfer Agent's files, records and documents created and
maintained by the Transfer Agent in performance of its
services or for its protection. At the end of the six-year
retention period, such records and documents will either be
turned over to the Fund, or destroyed in accordance with the
Fund's authorization.
<PAGE>
17. Shareholder Relations.
(a) The Transfer Agent will investigate all Shareholder inquiries
related to Shareholder accounts and respond promptly to
correspondence from Shareholders.
(b) The Transfer Agent will address and mail all communications to
Shareholders or their nominees, including proxy material and
periodic reports to Shareholders.
(c) In connection with special and annual meetings of
Shareholders, the Transfer Agent will prepare Shareholder
lists, mail and certify as to the mailing of proxy materials,
process and tabulate returned proxy cards, report on proxies
voted prior to meetings, and certify to the Secretary of the
Fund Shares to be voted at meetings.
18. Reliance by Transfer Agent; Instructions.
(a) The Transfer Agent shall be protected in acting upon any paper
or document believed by it to be genuine and to have been
signed by an Authorized Person and shall not be held to have
any notice of any change of authority of any person until
receipt of written certification thereof from the Fund. It
shall also be protected in processing Share certificates which
it reasonably believes to bear the proper manual or facsimile
signatures of the officers of the Fund and the proper
countersignature of the Transfer Agent.
(b) At any time the Transfer Agent may apply to any Authorized
Person of the Fund for Written Instructions, and, at the
expense of the Fund, may seek advice from legal counsel for
the Fund, with respect to any matter arising in connection
with this Agreement, and it shall not be liable for any action
taken or not taken or suffered by it in good faith in
accordance with such Written Instructions or with the opinion
of such counsel. In addition, the Transfer Agent, its
officers, agents or employees, shall accept instructions or
requests given to them by any person representing or acting on
behalf of the Fund only if said representative is known by the
Transfer Agent, its officers, agents or employees, to be an
Authorized Person. The Transfer Agent shall have no duty or
obligation to inquire into, nor shall the Transfer Agent be
responsible for, the legality of any act done by it upon the
request or direction of Authorized Persons of the Fund.
(c) Notwithstanding any of the foregoing provisions of this
Agreement, the Transfer Agent shall be under no duty or
obligation to inquire into, and shall not be liable for: (i)
the legality of the issue or sale of any Shares of the Fund,
or the sufficiency of the amount to be received therefor; (ii)
the legality of the redemption of any Shares of the Fund, or
the propriety of the amount to be paid therefor; (iii) the
legality of the declaration of any dividend by the Fund, or
<PAGE>
the legality of the issue of any Shares of the Fund in payment
of any stock dividend; or (iv) the legality of any
recapitalization or readjustment of the Shares of the Fund.
19. Standard of Care and Indemnification.
(a) The Transfer Agent may, in connection with this Agreement,
employ agents or attorneys in fact, and shall not be liable
for any loss arising out of or in connection with its actions
under this Agreement so long as it acts in good faith and with
due diligence, and is not negligent or guilty of any willful
misconduct.
(b) The Fund hereby agrees to indemnify and hold harmless the
Transfer Agent from and against any and all claims, demands,
expenses and liabilities (whether with or without basis in
fact or law) of any and every nature which the Transfer Agent
may sustain or incur or which may be asserted against the
Transfer Agent by any person by reason of, or as a result of:
(i) any action taken or omitted to be taken by the Transfer
Agent in good faith in reliance upon any Certificate,
instrument, order or stock certificate believed by it to be
genuine and to be signed, countersigned or executed by any
duly Authorized Person, upon the Oral Instructions or Written
Instructions of an Authorized Person of the Fund or upon the
opinion of legal counsel for the Fund or its own counsel; or
(ii) any action taken or omitted to be taken by the Transfer
Agent in connection with its appointment in good faith in
reliance upon any law, act, regulation or interpretation of
the same even though the same may thereafter have been
altered, changed, amended or repealed. However,
indemnification hereunder shall not apply to actions or
omissions of the Transfer Agent or its directors, officers,
employees or agents in cases of its own gross negligence,
willful misconduct, bad faith, or reckless disregard of its or
their own duties hereunder.
20. Affiliation Between Fund and Transfer Agent. It is understood that
the directors, officers, employees, agents and Shareholders of the
Fund, and the officers, directors, employees, agents and
shareholders of the Fund's investment adviser, INVESCO Funds Group,
Inc. (the "Adviser"), are or may be interested in the Transfer Agent
as directors, officers, employees, agents, shareholders, or
otherwise, and that the directors, officers, employees, agents or
shareholders of the Transfer Agent may be interested in the Fund as
directors, officers, employees, agents, shareholders, or otherwise,
or in the Adviser as officers, directors, employees, agents,
shareholders or otherwise.
<PAGE>
21. Term.
(a) This Agreement shall become effective on February 28, 1997
after approval by vote of a majority (as defined in the 1940
Act) of the Fund's board of directors, including a majority
of the directors who are not interested persons of the Fund
(as defined in the 1940 Act), and shall continue in effect for
an initial term expiring February 28, 1998 and from year to
year thereafter, so long as such continuance is specifically
approved at least annually both: (i) by either the board of
directors or the vote of a majority of the outstanding voting
securities of the Fund; and (ii) by a vote of the majority of
the directors who are not interested persons of the Fund (as
defined in the 1940 Act) cast in person at a meeting called
for the purpose of voting upon such approval.
(b) Either of the parties hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the
date of such termination, which shall not be less than 60 days
after the date of receipt of such notice. In the event such
notice is given by the Fund, it shall be accompanied by a
resolution of the board of directors, certified by the
Secretary, electing to terminate this Agreement and
designating a successor transfer agent.
22. Amendment. This Agreement may not be amended or modified in any
manner except by a written agreement executed by both parties with
the formality of this Agreement, and (i) authorized or approved by
the resolution of the board of directors, including a majority of
the directors of the Fund who are not interested persons of the Fund
as defined in the 1940 Act, or (ii) authorized and approved by such
other procedures as may be permitted or required by the 1940 Act.
23. Subcontracting. The Fund agrees that the Transfer Agent may, in its
discretion, subcontract for certain of the services to be provided
hereunder; provided, however, that the transfer agent will be liable
to the Fund for any loss arising out of or in connection with the
actions of any subcontractor, if the subcontractor fails to act in
good faith and with due diligence or is negligent or guilty of any
willful misconduct.
24. Miscellaneous.
(a) Any notice and other instrument in writing, authorized or
required by this Agreement to be given to the Fund or the
Transfer Agent, shall be sufficiently given if addressed to
that party and mailed or delivered to it at its office set
forth below or at such other place as it may from time to time
designate in writing.
<PAGE>
To the Fund:
INVESCO Strategic Portfolios, Inc.
Post Office Box 173706
Denver, Colorado 80217-3706
Attention: Dan J. Hesser, President
To the Transfer Agent:
INVESCO Funds Group, Inc.
Post Office Box 173706
Denver, Colorado 80217-3706
Attention: Ronald L. Grooms, Senior Vice President
(b) This Agreement shall not be assignable and in the event of its
assignment (in the sense contemplated by the 1940 Act), it
shall automatically terminate.
(c) This Agreement shall be construed in accordance with the laws
of the State of Colorado.
(d) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original; but such
counterparts shall, together, constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate officers thereunder duly authorized and
their respective corporate seals to be hereunto affixed, as of the day and year
first above written.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
By:/s/ Dan J. Hesser
--------------------------
Dan J. Hesser, President
ATTEST:
/s/ Glen A. Payne
- -------------------------
Glen A. Payne, Secretary
INVESCO FUNDS GROUP, INC.
By:/s/ Ronald L. Grooms
--------------------------
Ronald L. Grooms, Senior Vice
ATTEST: President
/s/ Glen A. Payne
- ------------------------
Glen A. Payne, Secretary
<PAGE>
FEE SCHEDULE
for
Services Pursuant to Transfer Agency Agreement, dated February 28, 1997,
between INVESCO Variable Investment Funds, Inc. (the "Fund") and INVESCO Funds
Group, Inc. as Transfer Agent (the "Agreement").
Account Maintenance Charges. The Fund shall pay the Transfer Agent an
annual fee of $5,000.00 per series of the Fund, billable monthly at the rate of
one-twelfth (1/12) of the annual fee. A charge is made for a series in the month
that it commences or ceases operation, as well as in each month which the series
is in operation regardless of the number of shareholders of the series.
Expenses. The Fund shall not be liable for reimbursement to the Transfer
Agent of expenses incurred by it in the performance of services pursuant to the
Agreement, provided, however, that nothing herein or in the Agreement shall be
construed as affecting in any manner any obligations assumed by the Fund with
respect to expense payment or reimbursement pursuant to a separate written
agreement between the Fund and the Transfer Agent or any affiliate thereof.
Effective this 28th day of February, 1997.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
By:/s/Dan J. Hesser
-------------------------
Dan J. Hesser, President
ATTEST:
/s/ Glen A. Payne
- ------------------------
Glen A. Payne, Secretary
INVESCO FUNDS GROUP, INC.
By:/s/ Ronald L. Grooms
-----------------------
Ronald L. Grooms,
ATTEST: Senior Vice President
/s/ Glen A. Payne
- ------------------------
Glen A. Payne, Secretary
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT made as of the 28th day of February, 1997, in Denver, Colorado,
by and between INVESCO Variable Investment Funds, Inc., a Maryland corporation
(the "Fund"), and INVESCO Funds Group, Inc., a Delaware corporation (hereinafter
referred to as "INVESCO").
WHEREAS, the Fund is engaged in business as an open-end management
investment company, is registered as such under the Investment Company Act of
1940, as amended (the "Act"), and is authorized to issue shares representing
interests in the following separate portfolios of investments: INVESCO VIF-
Industrial Income Portfolio, INVESCO VIF-Total Return Portfolio, INVESCO
VIF-High Yield Portfolio, INVESCO VIF-Utilities Portfolio, INVESCO VIF-Dynamics
Portfolio, INVESCO VIF-Small Company Growth Fund, INVESCO VIF-Health Sciences
Fund and INVESCO VIF-Technology Fund and which may be authorized to issue shares
representing interests in additional portfolios of investments (collectively,
the "Portfolios"); and
WHEREAS, INVESCO is registered as an investment adviser under the
Investment Advisers Act of 1940, and engages in the business of acting as
investment adviser and providing certain other administrative, sub-accounting,
and recordkeeping services to certain investment companies, including the
Portfolios; and
WHEREAS, the Fund desires to retain INVESCO to render certain
administrative, sub-accounting, and recordkeeping services (the "Services") in
the manner and on the terms and conditions hereinafter set forth; and
WHEREAS, INVESCO desires to be retained to perform such services on said
terms and conditions;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the Fund and INVESCO agree as follows:
1. The Fund hereby retains INVESCO to provide, or, upon receipt of
written approval of the Fund arrange for other companies, including
affiliates of INVESCO, to provide to the Portfolios such
sub-accounting and recordkeeping services and functions as are
reasonably necessary for the operation of the Portfolios. Such
services shall include, but shall not be limited to, preparation and
maintenance of the following required books, records and other
documents: (1) journals containing daily itemized records of all
purchases and sales, and receipts and deliveries of securities and
all receipts and disbursements of cash and all other debits and
credits, in the form required by Rule 31a-1(b)(1) under the Act; (2)
general and auxiliary ledgers reflecting all asset, liability,
reserve, capital, income and expense accounts, in the form required
by Rules 31a-1(b)(2)(i) - (iii) under the Act; (3) a securities
record or ledger reflecting separately for each portfolio security
as of trade date all "long" and "short" positions carried by the
Portfolios for the account of the Portfolios, if any, and showing
the location of all securities long and the off-setting position to
all securities short, in the form required by Rule 31a-1(b)(3) under
the Act; (4) a record of all portfolio purchases or sales, in the
<PAGE>
form required by Rule 31a-1(b)(6) under the Act; (5) a record of all
puts, calls, spreads, straddles and all other options, if any, in
which the Portfolios have any direct or indirect interest or which
the Portfolios have granted or guaranteed, in the form required by
Rule 31a-1(b)(7) under the Act; (6) a record of the proof of money
balances in all ledger accounts maintained pursuant to this
Agreement, in the form required by Rule 31a-1(b)(8) under the Act;
and (7) price make-up sheets and such records as are necessary to
reflect the determination of the Portfolios' net asset value. The
foregoing books and records shall be maintained and preserved by
INVESCO in accordance with and for the time periods specified by
applicable rules and regulations, including Rule 31a-2 under the
Act. All such books and records shall be the property of the Fund
and, upon request therefor, INVESCO shall surrender to the Fund such
of the books and records so requested.
2. INVESCO shall, at its own expense, maintain such staff and employ or
retain such personnel and consult with such other persons as it
shall from time to time determine to be necessary or useful to the
performance of its obligations under this Agreement. Without
limiting the generality of the foregoing, such staff and personnel
shall be deemed to include officers of INVESCO and persons employed
or otherwise retained by INVESCO to provide or assist in providing
the Services to the Portfolios.
3. INVESCO shall, at its own expense, provide such office space,
facilities and equipment (including, but not limited to, computer
equipment, communication lines and supplies) and such clerical help
and other services as shall be necessary to provide the Services to
the Portfolios. In addition, INVESCO may arrange on behalf of the
Portfolios to obtain pricing information regarding the Portfolios'
investment securities from such company or companies as are approved
by a majority of the Fund's board of directors; and, if necessary,
the Fund shall be financially responsible to such company or
companies for the reasonable cost of providing such pricing
information.
4. The Fund will, from time to time, furnish or otherwise make
available to INVESCO such information relating to the business and
affairs of the Portfolios as INVESCO may reasonably require in order
to discharge its duties and obligations hereunder.
5. For the services rendered, facilities furnished, and expenses
assumed by INVESCO under this Agreement, the Fund shall pay to
INVESCO a $10,000 per year per Portfolio base fee, plus an
additional fee, computed on a daily basis and paid on a monthly
basis. For purposes of each daily calculation of this additional
fee, the most recently determined net asset value of each Portfolio,
as determined by a valuation made in accordance with the Fund's
procedure for calculating each Portfolio's net asset value as
described in each Portfolio's Prospectus and/or Statement of
Additional Information, shall be used. The additional fee to
INVESCO under this Agreement shall be computed at the annual rate of
0.015% of each Portfolio's daily net assets as so determined.
During any period when the determination of a Portfolio's net asset
<PAGE>
value is suspended by the directors of the Fund, the net asset value
of a share of that Portfolio as of the last business day prior to
such suspension shall, for the purpose of this Paragraph 5, be
deemed to be the net asset value at the close of each succeeding
business day until it is again determined.
6. INVESCO will permit representatives of the Fund, including the
Fund's independent auditors, to have reasonable access to the
personnel and records of INVESCO in order to enable such
representatives to monitor the quality of services being provided
and the level of fees due INVESCO pursuant to this Agreement. In
addition, INVESCO shall promptly deliver to the board of directors
of the Fund such information as may reasonably be requested from
time to time to permit the board of directors to make an informed
determination regarding continuation of this Agreement and the
payments contemplated to be made hereunder.
7. This Agreement shall remain in effect until no later than February
28, 1998 and from year to year thereafter provided such continuance
is approved at least annually by the vote of a majority of the
directors of the Fund who are not parties to this Agreement or
"interested persons" (as defined in the Act) of any such party,
which vote must be cast in person at a meeting called for the
purpose of voting on such approval; and further provided, however,
that (a) the Fund may, at any time and without the payment of any
penalty, terminate this Agreement upon thirty days written notice to
INVESCO; (b) the Agreement shall immediately terminate in the event
of its assignment (within the meaning of the Act and the Rules
thereunder) unless the Board of Directors of the Fund approves such
assignment; and (c) INVESCO may terminate this Agreement without
payment of penalty on sixty days written notice to the Fund. Any
notice under this Agreement shall be given in writing, addressed and
delivered, or mailed postage prepaid, to the other party at the
principal office of such party.
8. This Agreement shall be construed in accordance with the laws of the
State of Colorado and the applicable provisions of the Act. To the
extent the applicable law of the State of Colorado or any of the
provisions herein conflict with the applicable provisions of the
Act, the latter shall control.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
By:/s/ Dan J. Hesser
-------------------------
Dan J. Hesser
President
INVESCO FUNDS GROUP, INC.
By:/s/ Ronald L. Grooms
-------------------------
Ronald L. Grooms
Senior Vice President
PARTICIPATION AGREEMENT
Among
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO FUNDS GROUP, INC.
and
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
THIS AGREEMENT, made and entered into this 15th day of April, 1996 by and
among Allmerica Financial Life Insurance and Annuity Company (hereinafter the
"Insurance Company"), a Delaware 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
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (the "NASD"); and
<PAGE>
WHEREAS, the Insurance Company has registered under the 1933 Act, or will
register under the 1933 Act, certain variable [annuity / 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 of such order by 8:00
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
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.
<PAGE>
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 8:00 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. 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 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 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) of less than $1 million
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.
Payment of aggregate 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 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>
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 6:00 p.m.,
Mountain 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 it has legally and
validly established the Account prior to any issuance or sale thereof as a
segregated asset account under Section 2932 of the Delaware Insurance Code 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.
<PAGE>
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 / life insurance / endowment / modified endowment]
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 Delaware 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
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.
<PAGE>
2.11. The Insurance Company represents and warrants that all of its
officers, employees, investment advisers, and other individuals or entities
dealing with the money and/or securities of the Company 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 of 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. The Insurance Company further represents
and warrants that the employees of Insurance Company, or such other persons
designated by Insurance Company, listed on Schedule C 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 the Insurance
Company's expense) with as many copies of the Company's current prospectus as
the Insurance Company may reasonably request. 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 prospectus for the Contracts and the Company's prospectus printed
together in one document (at the Insurance Company's expense).
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 (or the Company), at its expense, shall print and
provide the SAI free of charge to the Insurance Company and to any owner of a
Contract or prospective owner who requests the SAI.
3.3. The Company, at its expense, shall provide the Insurance Company 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.
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
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 set forth on Schedule D
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 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 fifteen calendar days prior to its use. No such
material shall be used if the Company or its designee objects to such use within
ten 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 or prospectus for the
Company's shares, as such registration statement and prospectus 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 calendar days prior to its
use. No such material shall be used if the Insurance Company or its designee
object to such use within ten calendar days after receipt of that material.
<PAGE>
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 or prospectus for the
Contracts, as that registration statement and prospectus 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 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.
<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 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 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 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.
<PAGE>
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.
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.
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
<PAGE>
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
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
(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,
<PAGE>
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, 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, 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 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
<PAGE>
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
(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,
<PAGE>
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
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 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
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,
<PAGE>
damages, liabilities or expenses (or actions in respect thereof) or settlements
result from the gross negligence, bad faith, willful misconduct, or reckless
disregard of duty 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, 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
reasonable conclusion that there may be different or additional defenses
<PAGE>
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 material adverse effect upon the ability of the
Insurance Company to perform its obligations under this Agreement;
or
<PAGE>
(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
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
<PAGE>
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:
440 Lincoln Street
Worcester, MA 01653
Attention: Abigaill M. Armstrong, Secretary
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.
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.
<PAGE>
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:
ALLMERICA FINANCIAL LIFE INSURANCE
AND ANNUITY COMPANY
By its authorized officer,
By:/s/ Jerome F. Weiks
-------------------------
Title: Vice-President
---------------------
Date: April 15, 1996.
----------------------
Company:
INVESCO VARIABLE INVESTMENT FUNDS, INC.
By its authorized officer,
By:/s/ Ronald L. Grooms
--------------------------
Title: Treasurer
-----------------------
Date: April 17, 1996
------------------------
INVESCO:
INVESCO FUNDS GROUP, INC.
By its authorized officer,
By:/s/ Ronald L. Grooms
--------------------------
Title:Senior Vice President
-----------------------
Date: April 17, 1996
-----------------------
<PAGE>
Schedule A
Accounts
Name of Account Date of Resolution of Insurance Company's Board
which Established the Account
Group VEL Account November 22, 1993
<PAGE>
Schedule B
Contracts
1. Contract Form 1029-94
<PAGE>
Schedule C
Persons Authorized to Give Instructions to the Company and INVESCO
ALLMERICA FINANCIAL
SEPARATE ACCOUNTS S 134
NAME ADDRESS AND PHONE NUMBER
(1)DANIEL J. MAHONEY 440 Lincoln Street
------------------------ Worcester, MA 01653
-----------------------
Print or Type Name
/s/Daniel J. Mahoney Phone:508-855-4330
------------------------ ------------------
Signature
(2)SEBRINA M. DEBERADINIS SAME
------------------------ -----------------------
Print or Type Name
/s/Sebrina M. Deberadinis Phone:508-855-6447
------------------------- -------------------
Signature
(3)VICTORIA A. ABBOTT SAME
------------------------- -----------------------
Print or Type Name
/s/Victoria A. Abbott Phone:508-855-2124
------------------------- --------------------
Signature
(4)DONNA M. MURPHY SAME
------------------------- -----------------------
Print or Type Name
/s/ Donna M. Murphy Phone:508-855-2126
------------------------- ---------------------
Signature
<PAGE>
Schedule D
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 best
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 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 may occur later in the chronological process due
to possible uncertainties relating to the proposals.)
4. 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:
<PAGE>
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. Return envelope (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.
5. 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.
6. 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.
7. 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.
8. 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 envelope. 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.
9. 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 actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
10. 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.
11. 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.
<PAGE>
12. 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 provided a standard form for each Certification.
13. 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.
14. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectuses and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 6 to the registration statement on Form N-1A (the "registraiton
Statement") of our report dated January 24, 1997, relating to the financial
statements and financial highlights appearing in the December 31, 1996 Annual
Report to Shareholders of 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 heading "Financial Highlights" in the
Prospectuses and under the headings "Independent Accountants" and "Financial
Statements" in the Statement of Additional Information.
/s/ Price Waterhouse LLP
- ------------------------
Price Waterhouse LLP
Denver, Colorado
February 14, 1997
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<EXPENSES-NET> 127119
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<DISTRIBUTIONS-OF-INCOME> 405842
<DISTRIBUTIONS-OF-GAINS> 1121678
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<SHARES-REINVESTED> 106660
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<OTHER-ITEMS-ASSETS> 8601
<TOTAL-ASSETS> 13527448
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<DISTRIBUTIONS-OF-INCOME> 405530
<DISTRIBUTIONS-OF-GAINS> 781
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<NUMBER-OF-SHARES-SOLD> 616196
<NUMBER-OF-SHARES-REDEEMED> 163597
<SHARES-REINVESTED> 30758
<NET-CHANGE-IN-ASSETS> 6960106
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<GROSS-EXPENSE> 135505
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<PER-SHARE-NII> 0.36
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</TABLE>
