As filed on ^ November 12, 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. [ ]
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Post-Effective Amendment No. ^ 7 [X]
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. ^ 8 [X]
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INVESCO VARIABLE INVESTMENT FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
7800 E. Union Avenue, Denver, Colorado 80237
(Address of Principal Executive Offices)
P.O. Box 173706, Denver, Colorado 80217-3706
(Mailing Address)
(303) 930-6300
(Registrant's Telephone Number)
---------------------------------------------------------
Glen A. Payne, Esq.
7800 E. Union Avenue
Denver, Colorado 80237
(Name and Address of Agent for Service)
Copies to:
W. Randolph Thompson, Esq.
Of Counsel, Jones & Blouch L.L.P.
1025 Thomas Jefferson St., N.W., Suite 405 West
Washington, D.C. 20007
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Approximate Date of Proposed Public Offering: As soon after the effective date
of this registration statement as is practicable.
It is proposed that this filing will become effective (check appropriate
box)
X 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)
- --- ^ on -------------, pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box:
- ---- This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has previously elected to register an indefinite number of shares of
its common stock pursuant to Rule 24f-2 under the Investment Company Act.
Registrant's Rule 24f-2 Notice for the fiscal year ended December 31, ^ 1996,
was filed on ^ February ^ 21, 1997.
Page 1 of 300
Exhibit index is located at page 116
<PAGE>
NOTE
This Post-Effective Amendment (Form N-1A) is being filed to ^ comply with
an undertaking contained in Post-Effective Amendment No. 5 to the Registration
Statement to file an amendment containing unaudited financial statements for
four new series, VIF-Dynamics Portfolio, VIF-Health Sciences Portfolio,
VIF-Small Company Growth Portfolio, and VIF-Technology Portfolio, within four to
six months from the effective date of the Post-Effective Amendment (December 9,
1996). Because the VIF-Health Sciences and VIF-Technology Funds did not commence
operations until May 22, 1997 and May 21, 1997, respectively, the four to six
month financials are not due until November 30, 1997. The unaudited financial
statement for the VIF-Dynamics Portfolio and VIF-Small Company Growth Portfolio
will not be due until February, 1998. Please note that the unaudited Financial
Highlights for the VIF-Health Sciences and VIF-Technology Funds are being filed
as a supplement to the Funds' Prospectus and the unaudited financial statements
for the VIF-Health Sciences and VIF-Technology Funds are being filed as a
supplement to the INVESCO Variable Investment Funds, ^ Inc.'s Statement of
Additional Information. The audited financial statements for the VIF-Industrial
Income ^, VIF-Total Return, VIF-High Yield and VIF-Utilities Funds are
incorporated by reference into the Statement of Additional Information from
INVESCO Variable Investment Funds, Inc.'s Annual Report to Shareholders.
<PAGE>
INVESCO VARIABLE INVESTMENT FUNDS, INC.
--------------------------------------
CROSS-REFERENCE SHEET
Form N-1A
Item Caption
--------- -------
Part A Prospectus
1.............................. Cover Page
2.............................. Summary; Supplement to Prospectus
3.............................. Financial Highlights; Performance
Information; Supplement to
Prospectus
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;
Supplement to Statement of Additional
Information
<PAGE>
10.............................. Cover Page
11.............................. Table of Contents
12.............................. Not Applicable
13.............................. Investment Policies; Investment
Restrictions; Appendix A
14.............................. Management
15.^............................ Additional Information
-i-
<PAGE>
Form N-1A
Item Caption
--------- -------
16.............................. Management; Additional
Information
17.............................. Portfolio Brokerage
18.^............................ Additional Information
^
19.............................. How Shares are Valued;
Redemptions
20.............................. (Prospectus: Tax Status,
Dividends and Distributions)
21.............................. (Prospectus: Purchases and
Redemptions; Management)
22.............................. Performance
23.............................. Unaudited Financial Statements
for INVESCO VIF - Health Sciences
and INVESCO VIF - Technology
Funds
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>
INVESCO Variable Investment Funds, Inc.
INVESCO VIF - Health Sciences Fund
INVESCO VIF - Technology Fund
Supplement to Prospectus Dated May 1, 1997
The following information, which is included in the Fund's registration
statement filed with the Securities and Exchange Commission, supplements the
Funds' Prospectus dated May 1, 1997.
The section of the Funds' Prospectus entitled "Financial Highlights" is
amended to add the following information to the end of the section:
Financial Highlights
(For a Fund Share Outstanding Throughout the Period) Period Ended September 30,
1997 (Note 1)
UNAUDITED
Health Sciences Portfolio
PER SHARE DATA
Net Asset Value - Beginning of Period $10.00
----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.03
Net Gains on Securities
(Both Realized and Unrealized) 0.58
----------
Total from Investment Operations 0.61
----------
Net Asset Value - End of Period $10.61
==========
TOTAL RETURN 6.10%*
RATIOS+
Net Assets - End of Period ($000 Omitted) $356
Ratio of Expenses to Average Net Assets 0.00%~
Ratio of Net Investment Income to
Average Net Assets 2.24%~
Portfolio Turnover Rate 460%*
<PAGE>
Average Commission Rate Paid^^ $0.0600*
+ All of the expenses of the Portfolio were voluntarily absorbed by IFG for the
period ended September 30, 1997, since investment operations began May 22, 1997.
~ Annualized
* Based on operations for the period shown and, accordingly, are not
representative of a full year.
^^ 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.
<PAGE>
Financial Highlights (Continued) (For a Fund Share Outstanding Throughout the
Period) Period Ended September 30, 1997 (Note 1)
UNAUDITED
Technology Portfolio
PER SHARE DATA
Net Asset Value - Beginning of Period $10.00
----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.03
Net Gains on Securities
(Both Realized and Unrealized) 2.48
----------
Total from Investment Operations 2.51
----------
Net Asset Value - End of Period $12.51
==========
TOTAL RETURN 25.10%*
RATIOS+
Net Assets - End of Period ($000 Omitted) $469
Ratio of Expenses to Average Net Assets 0.00%~
Ratio of Net Investment Income to
Average Net Assets 1.81%~
Portfolio Turnover Rate 26%*
Average Commission Rate Paid^^ $0.1583*
+ All of the expenses of the Portfolio were voluntarily absorbed by IFG for the
period ended September 30, 1997, since investment operations began May 21, 1997.
~ Annualized
* Based on operations for the period shown and, accordingly, are not
representative of a full year.
^^ 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.
The date of this Supplement is November 10, 1997.
<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.
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."
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. THE SHARES OF THE FUNDS ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER FINANCIAL
INSTITUTION. THE SHARES OF THE FUNDS ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
TABLE OF CONTENTS
Page
SUMMARY......................................................................2
FINANCIAL HIGHLIGHTS.........................................................4
INVESTMENT OBJECTIVES AND POLICIES...........................................6
RISK FACTORS.................................................................11
INVESTMENT RESTRICTIONS......................................................16
MANAGEMENT...................................................................16
PURCHASES AND REDEMPTIONS....................................................20
TAX STATUS, DIVIDENDS AND DISTRIBUTIONS......................................21
PERFORMANCE INFORMATION......................................................21
ADDITIONAL INFORMATION.......................................................22
APPENDIX.....................................................................23
<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
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,
<PAGE>
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% of its total assets, 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 Health Sciences, Small Company
Growth, Technology, Dynamics and Growth Funds had not commenced operations as of
May 1, 1997, no financial information is provided for those Funds.
<TABLE>
<CAPTION>
High Yield Fund Industrial Income Fund
------------------------------------ ------------------------------------
Period Period
Ended Ended
Year Ended December 31 December 31 Year Ended December 31 December 31
---------------------- ----------- ----------------------- ----------
1996 1995 1994^ 1996 1995 1994^
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value -
Beginning of Period $11.04 $10.01 $10.00 $12.58 $10.09 $10.00
---------------------- ----------- ----------------------- ----------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.72 0.55 0.05 0.28 0.19 0.03
Net Gains on Securities (Both
Realized and Unrealized) 1.11 1.43 0.01 2.52 2.76 0.09
---------------------- ----------- ----------------------- ----------
Total from Investment
Operations 1.83 1.98 0.06 2.80 2.95 0.12
---------------------- ----------- ----------------------- ----------
LESS DISTRIBUTIONS
Dividends from Net
Investment Income 0.71+ 0.55 0.05 0.28 0.20 0.03
<PAGE>
Distributions from
Capital Gains 0.38 0.40 0.00 0.77 0.26 0.00
--------------------- ------------ ------------------------ ---------
Total Distributions 1.09 0.95 0.05 1.05 0.46 0.03
--------------------- ------------ ------------------------ ---------
Net Asset Value -
End of Period $11.78 $11.04 $10.01 $14.33 $12.58 $10.09
===================== ============ ======================== =========
TOTAL RETURN>> 16.59% 19.76% 0.60%* 22.28% 29.25% 1.23%*
RATIOS
Net Assets - End of
Period ($000 Omitted) $14,033 $5,233 $624 $22,342 $8,362 $525
Ratio of Expenses to Average
Net Assets# 0.87%@ 0.97%@ 0.74%~ 0.95%@ 1.03%@ 0.79%~
Ratio of Net Investment Income
to Average Net Assets# 9.19% 8.79% 2.72%~ 2.87% 3.50% 1.69%~
Portfolio Turnover Rate 380% 310% 23%* 93% 97% 0%*
Average Commission
Rate Paid^^ $0.0867 - - $0.0867 - -
^ For the High Yield and Industrial Income Funds, from May 27, 1994 and August
10, 1994, respectively, 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 High Yield and Industrial Income Funds were
voluntarily absorbed by INVESCO 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% for the High Yield Fund and 1.19%, 2.31% and 32.55% for
the Industrial Income Fund, respectively, and ratio of net investment income to
average net assets would have been 8.74%, 7.05% and (26.92%) for the High Yield
Fund and 2.63%, 2.22% and (30.07%) for the Industrial Income Fund, respectively.
@ Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
~ Annualized
<PAGE>
^^ 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.
</TABLE>
<PAGE>
Financial Highlights (continued)
(For a Fund Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
Total Return Fund Utilities Fund
------------------------------------ -----------------------------------
Period Period
Ended Ended
Year Ended December 31 December 31 Year Ended December 31 December 31
---------------------- ----------- ---------------------- -----------
1996 1995 1994^ 1996 1995 1994+
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value -
Beginning of Period $12.14 $10.09 $10.00 $10.84 $10.00 $10.00
---------------------- ----------- ---------------------- -----------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.36 0.25 0.09 0.13 0.07 0.00
Net Gains on Securities (Both
Realized and Unrealized) 1.12 2.05 0.09 1.26 0.84 0.00
---------------------- ----------- ---------------------- -----------
Total from Investment
Operations 1.48 2.30 0.18 1.39 0.91 0.00
---------------------- ----------- ---------------------- -----------
LESS DISTRIBUTIONS
Dividends from Net
Investment Income 0.36 0.24 0.09 0.13 0.07 0.00
In Excess of Net
Investment Income 0.05 0.00 0.00 0.01 0.00 0.00
Distributions from
Capital Gains 0.00 0.01 0.00 0.14 0.00 0.00
---------------------- ----------- ---------------------- -----------
Total Distributions 0.41 0.25 0.09 0.28 0.07 0.00
---------------------- ----------- ---------------------- -----------
Net Asset Value -
End of Period $13.21 $12.14 $10.09 $11.95 $10.84 $10.00
====================== =========== ====================== ===========
TOTAL RETURN> 12.18% 22.79% 1.75%* 12.76% 9.08% 0.00%
RATIOS
Net Assets - End of
Period ($000 Omitted) $13,513 $6,553 $1,055 $2,660 $290 $25
Ratio of Expenses to
Average Net Assets# 0.94%@ 1.01%@ 0.86%~ 1.16%@ 1.80%@ 0.00%
Ratio of Net Investment
Income to Average
<PAGE>
Net Assets# 3.44% 3.91% 3.86%~ 2.92% 2.47% 0.00%
Portfolio Turnover Rate 12% 5% 0%* 48% 24% 0%
Average Commission
Rate Paid^^ $0.0890 - - $0.1055 - -
^ From June 2, 1994, commencement of operations, to December 31, 1994.
+ All expenses for the Utilities Fund were voluntarily absorbed by INVESCO for
the period ended December 31, 1994, since investment operations did not commence
during 1994.
> Total return does not reflect expenses that apply to the related insurance
policies, and inclusion of these charges would reduce the total return for the
periods shown.
* Based on operations for the period shown and, accordingly, are not
representative of a full year.
# Various expenses of the Total Return and Utilities Funds were voluntarily
absorbed by INVESCO for the 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% for the Total Return Fund and 5.36% and 57.13% for the Utilities
Fund, respectively, and ratio of net investment income to average net assets
would have been 3.08%, 2.41% and (11.72%) for the Total Return Fund and (1.28%)
and (52.86%) for the Utilities Fund, respectively.
@ Ratio is based on Total Expenses of the Fund, 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.
</TABLE>
<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
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.
<PAGE>
Dynamics Fund
The investment objective of the Dynamics Fund is to seek appreciation of
capital through aggressive investment policies. 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.
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
<PAGE>
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 investment objective of the Small Company Growth Fund is to seek
long-term capital growth. 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-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.
<PAGE>
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.
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
<PAGE>
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.
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.
<PAGE>
Health Sciences Fund
The investment objective of the Health Sciences Fund is to seek 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.
Technology Fund
The investment objective of the Technology Fund is to seek 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.
<PAGE>
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.
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.
<PAGE>
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.
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.
<PAGE>
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 Fund's investment objective. The lending Fund will continue to
collect the equivalent of the interest or dividends paid by the issuer on the
securities loaned and will also receive either interest (through investment of
cash collateral) or a fee (if the collateral is government securities). A
lending Fund may pay finder's and other fees in connection with its securities
loans.
Lending securities involves certain risks, the most significant of which
is the risk that a borrower may fail to return a portfolio security. Fund
Management monitors the creditworthiness of borrowers in order to minimize such
risks. A Fund will not lend any security if, as a result of that loan, the
aggregate value of securities then on loan would exceed 331/3% of the Fund's
total assets (taken at market value).
Repurchase Agreements. Each Fund may enter into repurchase agreements with
respect to debt instruments eligible for investment by that Fund. These
agreements are entered into with member banks of the Federal Reserve System,
registered broker-dealers, and registered government securities dealers which
are deemed creditworthy by Fund Management (subject to review by the Company's
board of directors). A repurchase agreement is a means of investing monies for a
short period. In a repurchase agreement, the Fund acquires a debt instrument
(generally a security issued by the U.S. government or an agency thereof, a
banker's acceptance or a certificate of deposit) subject to resale to the seller
at an agreed upon price and date (normally the next business day). If the other
party defaults on its obligation to repurchase the security, a Fund could incur
costs or delays in seeking to sell the security.
<PAGE>
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 the
High Yield, Industrial Income, Total Return and Utilities Funds 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.
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.
<PAGE>
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;
-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.
<PAGE>
Forward Foreign Currency Contracts. Each of the Funds may enter into contracts
to purchase or sell foreign currencies at a future date ("forward contracts") as
a hedge against fluctuations in foreign exchange rates pending the settlement of
transactions in foreign securities or during the time the Funds hold foreign
securities. A forward contract is an agreement between contracting parties to
exchange an amount of currency at some future time at an agreed upon rate.
Although the Funds have not adopted any limitations on their ability to use
forward contracts as a hedge against fluctuations in foreign exchange rates, the
Funds do not attempt to hedge all of their foreign investment positions and will
enter into forward contracts only to the extent, if any, deemed appropriate by
Fund Management. The Funds will not enter into forward contracts for a term of
more than one year or for purposes of speculation. Hedging against a decline in
the value of a currency in the foregoing manner does not eliminate fluctuations
in the prices of portfolio securities or prevent losses if the prices of such
securities decline. Furthermore, such hedging transactions preclude the
opportunity for gain if the value of the hedged currency should rise. No
predictions can be made with respect to whether the total of such transactions
will result in a better or worse position than had the Fund not entered into any
forward contracts. Forward contracts may, from time to time, be considered
illiquid, in which case they would be subject to the Funds' limitation on
investing in illiquid securities, discussed above. For additional information
regarding forward contracts, see "Investment Policies" in the Statement of
Additional Information.
Zero Coupon and Pay-In-Kind Bonds (High Yield Fund Only). The High Yield Fund
may invest in zero coupon bonds and pay-in-kind bonds, provided that Fund
Management determines that the risk of a default on the security, which could
result in adverse tax consequences is not significant. A zero coupon bond
("zero") does not make cash interest payments during the life of the bond.
Instead, it is sold at a discount to face value, and the interest consists of
the gradual appreciation in price as the bond approaches maturity. Zeros can be
an attractive financing method for issuers with near-term cash flow problems.
Pay-in- kind ("PIK") bonds pay interest in cash or additional securities, at the
issuer's option, for a specified period. Like zeros, they may help a corporation
economize on cash. PIK prices reflect the market value of the underlying debt
plus any accrued interest. Zeros and PIKs can be higher or lower quality debt,
and may be more speculative and subject to greater fluctuation in value due to
changes in interest rates than coupon bonds. To maintain the High Yield Fund's
qualification as a regulated investment company, it may be required to
distribute income recognized on these bonds, even though no cash may be paid 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
<PAGE>
rated bonds by Moody's (categories Ba, B, Caa) are of poorer quality and may
have speculative characteristics. Bonds rated Caa may be in default or there may
be present elements of danger with respect to principal or interest. Lower rated
bonds by Standard & Poor's (categories BB, B, CCC) include those which are
regarded, on balance, as predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance with their terms; BB
indicates the lowest degree of speculation and CCC a high degree of speculation.
While such bonds will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to adverse
conditions.
Because investment in medium and lower rated securities involves both
greater credit risk and market risk, achievement of the High Yield Fund's (and,
to a lesser extent, the Industrial Income Fund's) investment objectives may be
more dependent on Fund Management's credit analysis than is the case for funds
investing in higher quality securities. In addition, the share price and yield
of the High Yield Fund may be expected to fluctuate more than in the case of
funds investing in higher quality, shorter term securities. Moreover, a
significant economic downturn or major increase in interest rates may result in
issuers of lower rated securities experiencing increased financial stress, which
would adversely affect their ability to service their principal, dividend and
interest obligations, meet projected business goals, and obtain additional
financing. In this regard, it should be noted that while the market for high
yield corporate bonds has been in existence for many years and from time to time
has experienced economic downturns in recent years, this market has involved a
significant increase in the use of high yield corporate debt securities to fund
highly leveraged corporate acquisitions and restructurings. Past experience may
not, therefore, provide an accurate indication of future performance of the high
yield bond market, particularly during periods of economic recession.
Furthermore, expenses incurred to recover an investment by a Fund in a defaulted
security may adversely affect the Fund's net asset value. Finally, while Fund
Management attempts to limit purchases of medium and lower rated securities to
securities having an established secondary market, the secondary market for such
securities may be less liquid than the market for higher quality securities. The
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, 1996. All of these
percentages were determined on a dollar-weighted basis, calculated by averaging
<PAGE>
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.
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.
<PAGE>
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 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 March 3, 1997 as a part of a merger between INVESCO
PLC and A I M Management Group Inc., thus creating one of the largest
independent investment management businesses in the world. Subject to obtaining
shareholder approval at its regular Annual Shareholder Meeting, the board of
directors of AMVESCO PLC has concluded that the corporate name should be changed
to AMVESCAP PLC effective May 8, 1997. INVESCO, INVESCO Trust and ICM will
<PAGE>
continue to operate under their existing names. AMVESCO PLC has
approximately $165 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 Fund since 1994; co-
portfolio manager of the INVESCO Industrial Income Fund since 1993; co-
portfolio manager of the INVESCO Balanced Fund since 1996; director (since
1997), portfolio manager (since 1993), senior vice president (since 1994) and
vice president (1993 to 1994) of INVESCO Trust; director of INVESCO since 1997;
formerly (1984 to 1993), portfolio manager with Westinghouse Pension; began
investment career in 1969; B.A., St. Peter's College; M.B.A., St. John's
University.
Donovan J. (Jerry) Paul - Co-portfolio manager of the Fund since 1994;
co-portfolio manager of the INVESCO Industrial Income Fund since 1994, INVESCO
Balanced Fund since 1996 and INVESCO Short-Term Bond Fund since 1996; portfolio
manager of the INVESCO VIF - High Yield Portfolio since 1994, INVESCO High Yield
Fund since 1994 and INVESCO Select Income Fund since 1994; 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
<PAGE>
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 Fund since 1996; portfolio
manager for the INVESCO Dynamics Fund since 1993; co-portfolio manager of the
INVESCO Growth Fund since 1996; co-portfolio manager of the INVESCO Growth Fund
since 1996 and the INVESCO Small Company Growth Fund since 1997; 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 Fund since 1994;
portfolio manager of the INVESCO High Yield Fund and the INVESCO Select Income
Fund since 1994; co-portfolio manager of INVESCO Industrial Income Fund since
1994, INVESCO VIF - Industrial Income Fund since 1994, INVESCO Balanced Fund
since 1994 and INVESCO Short-Term Bond Fund since 1996; 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 Fund
Timothy J. Miller - Co-portfolio manager of the Fund since 1997;
co-portfolio manager of the INVESCO Small Company Growth Fund since 1997; the
INVESCO Growth Fund, Inc. since 1996 and the INVESCO VIF Growth Fund since 1997;
portfolio manager of INVESCO Dynamics Fund, Inc. since 1993; senior vice
president (since 1995), vice president (1993 to 1995) and portfolio manager
(since 1992) of INVESCO Trust Company. 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. He is a Chartered Financial Analyst.
Trent E. May - Co-portfolio manager of the Fund since 1997; co- portfolio
manager of the INVESCO Small Company Growth Fund since 1997 and of the INVESCO
Growth Fund, Inc. since 1996; portfolio manager (since 1996) and vice president
(since 1997) of INVESCO Trust Company. Formerly, senior equity fund
manager/equity analyst at Munder Capital Management in Detroit. B.S.,
Engineering, Florida Institute of Technology, M.B.A., Rollins College. He is a
Chartered Financial Analyst.
Stacie Cowell - Co-portfolio manager of the Fund since 1997; co- portfolio
manager of the INVESCO Small Company Growth Fund since 1997; portfolio manager
(since 1996) of INVESCO Trust Company. Formerly, senior equity analyst with
Founders Asset Management; capital markets and trading analyst with Chase
Manhattan Bank in New York. B.A., Economics, Colgate University. She is a
Chartered Financial Analyst.
<PAGE>
Health Sciences Fund
John Schroer - Co-portfolio manager of the Fund since 1996; portfolio
manager of the INVESCO Strategic Health Sciences Portfolio 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.
Carol A. Werther - Co-portfolio manager of the Fund since 1996 and
co-portfolio manager of the INVESCO Strategic Health Sciences Portfolio since
1996. Previously, Ms. Werther was a portfolio manager specializing in
biotechnology stock with Rothschild Asset Management Ltd. (1995 to 1996); a vice
president and biotechnology analyst with Cowen & Company (1992 to 1994); and an
analyst with Lehman Brothers (1990 to 1992). Ms. Werther earned an M.B.A. from
New York University, an M.S. from the University of Alabama in Birmingham and a
B.S. from Cornell University.
Technology Fund
Daniel B. Leonard - Co-portfolio manager of the Fund since 1996;
co-portfolio manager (since 1996) and formerly portfolio manager (1985- 1996) of
the INVESCO Strategic Technology Portfolio; co-portfolio manager of the INVESCO
Strategic Financial Services Portfolio since 1997 and portfolio manager of that
Fund from 1996 to 1997; portfolio manager of the INVESCO Strategic Gold
Portfolio 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 (1977-1983)
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 the Fund since 1996;
co-portfolio manager of the INVESCO Strategic Technology Portfolio since 1996;
portfolio manager of the INVESCO Strategic Environmental Portfolio since 1996;
joined INVESCO Trust Company in 1994, served as a research analyst from 1994 to
1995 and became a vice president in 1995; formerly, 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 Fund since 1996; portfolio
manager of the INVESCO Strategic Utilities Portfolio since 1996 and INVESCO
Strategic Environmental Services Portfolio since 1996; co-portfolio manager of
the INVESCO Strategic Financial Services Portfolio since 1997; 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.
<PAGE>
Total Return Fund
Edward C. Mitchell, Jr. - Portfolio manager of the Fund since 1993;
portfolio manager of INVESCO Value Trust Total Return Fund since 1987 and of the
INVESCO Advisors Funds Flex Fund since 1988; president (1992 to present), vice
president (1979 to 1991) and director (1979 to present) of ICM; began investment
career in 1969; B.A., University of Virginia; M.B.A., University of Colorado;
Chartered Financial Analyst; Chartered Investment Counselor; past president,
Atlanta Society of Financial Analysts.
David S. Griffin - Co-portfolio manager of the Fund since 1993; co-
portfolio manager of the INVESCO Value Trust Total Return Fund and of the
INVESCO Advisor Funds 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
Timothy J. Miller - Co-portfolio manager of the Fund since 1997;
co-portfolio manager of the INVESCO Growth Fund, Inc. since October 1996 and
portfolio manager of that Fund from June to October 1996; co- portfolio manager
of the INVESCO Small Company Growth Fund since 1997 and of the INVESCO VIF -
Small Company Growth Fund since 1997; portfolio manager of the INVESCO Dynamics
Fund, Inc. since 1993; senior vice president (since 1995), vice president (1993
to 1995) and portfolio manager (since 1992) of INVESCO Trust Company. 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. He is a
Chartered Financial Analyst.
Trent E. May - Co-portfolio manager of the Fund since 1997; co- portfolio
manager of the INVESCO VIF - Growth Fund since 1996, the INVESCO Small Company
Growth Fund since 1997 and the INVESCO VIF - Small Company Growth Fund since
1997; portfolio manager (since 1996) of INVESCO Trust company. Formerly, senior
equity fund manager/equity analyst at Munder Capital Management in Detroit. B.S.
in Engineering, Florida Institute of Technology; M.B.A., Rollins College. He is
a 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
<PAGE>
0.45% on the Fund's average net assets in excess of $1 billion. 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 .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. No advisory fees are provided
for the Health Sciences, Small Company Growth, Technology, Dynamics and Growth
Funds as they had not commenced operations as of the date of this prospectus.
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
<PAGE>
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. Total Operating Expenses are not provided for the Health Sciences,
Small Company Growth, Technology, Dynamics and Growth Funds as they had not
commenced operations as of the date of this prospectus.
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,
<PAGE>
a security will be valued at fair value as determined in good faith by the board
of directors. Debt securities with remaining maturities of 60 days or less at
the time of purchase will be valued at amortized cost, absent unusual
circumstances, so long as the Company's board of directors believes that such
value represents fair value.
TAX STATUS, DIVIDENDS AND DISTRIBUTIONS
Taxes. The Internal Revenue Code of 1986, as amended (the "Code"), provides that
each investment portfolio of a series fund is to be treated as a separate
taxpayer. Accordingly, each Fund of the Company intends to continue to qualify
as a separate regulated investment company under Subchapter M of the Code.
Each Fund intends to comply with the diversification requirements of Code
Section 817(h). By meeting this and other requirements, the Participating
Insurance Companies, rather than the owners of variable annuity or variable life
insurance contracts, should be subject to tax on distributions received with
respect to Fund shares. For further information concerning federal income tax
consequences for the owners of variable annuity or variable life insurance
contracts, a contract owner should consult his or her Separate Account
Prospectus.
As a regulated investment company, each Fund generally will not be subject
to tax on its ordinary income and net realized capital gains to the extent such
income and gains are distributed in conformity with applicable distribution
requirements under the Code to the separate accounts of the Participating
Insurance Companies which hold its shares. Distributions of income and the
excess of net short-term capital gain over net long-term capital loss will be
treated as ordinary income, and distributions of the excess of net long-term
capital gain over net short-term capital loss will be treated as long-term
capital gain by the Participating Insurance Companies. Participating Insurance
Companies should consult their own tax advisers concerning whether such distribu
tions are subject to federal income tax if they are retained as part of contract
reserves.
Dividends. In addition to any increase in the value of a Fund's shares which may
occur from increases in the value of the Fund's investments, the Fund may earn
income in the form of dividends and interest on its investments. Dividends paid
by each Fund will be based solely on the income earned by that Fund. The
Company's policy with respect to each Fund is to distribute substantially all of
this income, less expenses, to shareholders of that Fund. At the discretion of
the board of directors, distributions are customarily made annually to
shareholders of the Funds. Dividends are automatically reinvested in additional
shares of the Fund making the dividend distribution at its net asset value on
the ex-dividend date, unless an election is made on behalf of a separate account
to receive distributions in cash.
Capital Gains. Capital gains or losses are the result of a Fund selling its
portfolio securities at prices that are higher or lower than the prices paid by
it to purchase such securities. Total gains from such sales, less any losses
from such sales (including losses carried forward from prior years) represent
net realized capital gains. Each Fund distributes its net realized capital
gains, if any, to its shareholders at least annually, usually in December.
<PAGE>
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.
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.
<PAGE>
In addition, rankings, ratings, and comparisons of investment performance
and/or assessments of the quality of shareholder service appearing in
publications such as Money, Forbes, Kiplinger's Personal Finance, 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 shareholders of the
Funds. However, each Participating Insurance Company will vote shares held by
its separate accounts as required by law and interpretations thereof, as amended
or changed from time to time. In accordance with current law and interpretations
thereof, a Participating Insurance Company is required to request voting
instructions from its contract owners and must vote Fund shares held by each of
its separate accounts in proportion to the voting instructions received.
Additional information about voting procedures (including a discussion, where
applicable, of circumstances under which some Participating Insurance Companies
may vote Fund shares held by variable life insurance separate accounts other
than in accordance with contract owner instructions) is contained in the
applicable Separate Account Prospectuses.
All shares of the Funds have equal voting rights. When shareholders are
entitled to vote upon a matter, each shareholder is entitled to one vote for
each share owned and a corresponding fractional vote for each fractional share
owned. Voting with respect to certain matters, such as ratification of
independent accountants and the election of directors, will be by all Funds of
the Company voting together. In other cases, such as voting upon an investment
advisory contract, voting is on a Fund-by-Fund basis. To the extent permitted by
law, when not all Funds are affected by a matter to be voted upon, only
shareholders of the Fund or Funds affected by the matter will be entitled to
vote thereon. The Company is not generally required and does not expect to hold
regular annual meetings of shareholders. However, the board of 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
<PAGE>
Company or as may be required by applicable law or the Company's Articles of
Incorporation. The Company will assist shareholders in communicating with other
shareholders as required by the Investment Company Act of 1940. Directors may be
removed by action of the holders of a majority or more of the outstanding shares
of the Company.
Shareholder Inquiries. Inquiries regarding the Funds may be directed to the
Company at the telephone number or mailing address set forth on the cover page
of this Prospectus or to a Participating Insurance Company.
Transfer and Disbursing Agent. INVESCO acts as registrar, transfer agent, and
dividend disbursing agent for the Company pursuant to a Transfer Agency
Agreement that provides for an annual fee of $5,000 per Fund.
Master/Feeder Option. The Company may in the future seek to achieve any
Fund's investment objective by investing all of that Fund's assets in another
investment company having the same investment objective and substantially the
same investment policies and restrictions as those applicable to that Fund. It
is expected that any such investment company would be managed by INVESCO in
substantially the same manner as the existing Fund. If permitted by applicable
laws and policies then in effect, any such investment may be made in the sole
discretion of the Company's board of directors without further approval of the
Funds' shareholders. However, Fund shareholders will be given at least 30 days
prior notice of any such investment. Such investment would be made only if the
Company's board of directors determines it to be in the best interests of a Fund
and its shareholders. In making that determination, the board will consider,
among other things, the benefits to shareholders and/or the opportunity to
reduce costs and achieve operational efficiencies. No assurance is given that
costs will be materially reduced if this option is implemented.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
PRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE COMPANY IN ANY
JURISDICTION IN WHICH SUCH AN OFFERING MAY NOT LAWFULLY BE MADE.
<PAGE>
APPENDIX
BOND RATINGS
The following is a description of Standard & Poor's and Moody's 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 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>
Prospectus
May 1, 1997
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF - Industrial Income Fund
INVESCO VIF - Health Sciences Fund
INVESCO VIF - Small Company Growth Fund
INVESCO VIF - Total Return Fund
INVESCO VIF - Technology Fund
INVESCO VIF - High Yield Fund
INVESCO VIF - Utilities Fund
INVESCO VIF - Dynamics Fund
INVESCO VIF - Growth Fund
To receive additional information and prospectuses on any of INVESCO's funds or
retirement plans, or to obtain current account or price information, call
toll-free: 1-800-525-8085.
To reach PAL(R), your 24-hour Personal Account Line, call:
1-800-424-8085.
You can find us on the World Wide Web:
http://www.invesco.com
Or write to:
INVESCO Funds Group. Inc.(SM), Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
If you're in Denver, please visit one of our convenient Investor
Centers:
Cherry Creek, 155-B Fillmore Street
Denver Tech Center,
7800 East Union Avenue, Lobby Level
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>
INVESCO Variable Investment Funds, Inc.
INVESCO VIF - Health Sciences Fund
INVESCO VIF - Technology Fund
Supplement to Statement of Additional Information
dated May 1, 1997
The following unaudited financial statements of the INVESCO VIF Health
Sciences and INVESCO VIF - Technology Funds supplement the Company's 1996 Annual
Report to Shareholders which is incorporated by reference into the Company's
Statement of Additional Information.
Statement of Investment Securities
September 30,1997
UNAUDITED
Shares
or Principal
Description Amount Value
- --------------------------------------------------------------------------------
HEALTH SCIENCES Portfolio
COMMON STOCKS 67.56%
BIOTECHNOLOGY 3.53%
Genentech Inc* 215 $12,497
----------
DRUGS 38.77%
Abbott Laboratories 200 12,787
American Home Products 170 12,410
Bristol-Myers Squibb 160 13,240
Glaxo Wellcome PLC Sponsored ADR
Representing 2 Ord Shrs 300 13,481
Johnson & Johnson 100 5,763
Lilly (Eli) & Co 115 13,850
Merck & Co 130 12,992
Pfizer Inc 215 12,913
Schering-Plough Corp 250 12,875
SmithKline Beecham PLC Sponsored ADR
Representing 5 Ord Shrs 278 13,587
Warner-Lambert Co 100 13,494
-----------
137,392
-----------
ELECTRONICS 3.30%
Perkin-Elmer Corp 160 11,690
-----------
<PAGE>
HEALTH MAINTENANCE ORGANIZATIONS 6.75%
Oxford Health Plans* 160 11,980
PacifiCare Health Systems Class B* 175 11,922
-----------
23,902
-----------
INFORMATION MANAGEMENT 3.62%
HBO & Co 340 12,835
-----------
MEDICAL EQUIPMENT & DEVICES 7.87%
Guidant Corp 280 15,680
Medtronic Inc 260 12,220
-----------
27,900
-----------
PRIMARY CARE 3.72%
Quorum Health Group* 540 13,196
-----------
TOTAL COMMON STOCKS (Cost $227,689) 239,412
-----------
SHORT-TERM INVESTMENTS -
US GOVERNMENT AGENCY OBLIGATIONS 32.44%
Federal Home Loan Mortgage
5.550%, 10/3/1997 65,000 64,980
Federal National Mortgage Association
5.550%, 10/3/1997 50,000 49,985
-----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $114,965) 114,965
-----------
TOTAL INVESTMENT SECURITIES
AT VALUE 100.00%
(Cost $342,654)
(Cost for Income Tax Purposes $344,669) 354,377
===========
TECHNOLOGY Portfolio
COMMON STOCKS 92.64%
BIOTECHNOLOGY 0.53%
Aviron* 100 2,513
-----------
COMMUNICATIONS - EQUIPMENT &
MANUFACTURING 9.95%
PairGain Technologies* 500 14,250
Pittway Corp Class A 300 19,481
Scientific-Atlanta Inc 600 13,575
-----------
47,306
-----------
<PAGE>
COMPUTER SOFTWARE & SERVICES 29.77%
America Online* 200 15,087
American Software Class A* 1,600 23,400
CBT Group PLC Sponsored ADR* 200 16,050
CIENA Corp* 100 4,953
Edwards (J D) & Co* 500 16,750
Learning Co* 1,500 22,125
Novell Inc* 600 5,381
Peritus Software Services* 200 5,125
PLATINUM technology* 300 6,450
Rational Software* 300 4,800
SEEC Inc* 100 2,925
VIASOFT Inc* 300 14,850
Wonderware Corp* 200 3,675
-----------
141,571
-----------
COMPUTER SYSTEMS 2.60%
GEAC Computer Ltd* 200 12,381
-----------
COMPUTERS - HARDWARE 11.39%
Compaq Computer* 200 14,950
Data General* 500 13,312
HMT Technology* 300 4,706
International Business Machines 200 21,187
-----------
54,155
-----------
ELECTRICAL EQUIPMENT 5.20%
PCD Inc* 1,000 24,750
-----------
ELECTRONICS - INSTRUMENTS 3.89%
Sawtek Inc* 400 18,500
-----------
ELECTRONICS - SEMICONDUCTOR 9.11%
Cypress Semiconductor* 1,000 15,500
MRV Communications* 200 7,300
National Semiconductor* 500 20,500
-----------
43,300
-----------
<PAGE>
EQUIPMENT - SEMICONDUCTOR 3.90%
Kulicke & Soffa Industries* 400 18,525
-----------
LEISURE TIME 5.10%
International Game Technology 800 18,200
WMS Industries* 200 6,038
-----------
24,238
-----------
MANUFACTURING 0.82%
Flanders Corp* 500 3,875
-----------
POLLUTION CONTROL 1.69%
Laidlaw Environmental Services* 1,400 8,050
-----------
RETAIL 2.12%
Tandy Corp 300 10,088
-----------
SERVICES 0.68%
CORESTAFF Inc* 100 3,238
-----------
TELECOMMUNICATIONS - LONG DISTANCE 5.89%
Bell Canada International* 400 7,550
Premiere Technologies* 600 20,475
-----------
28,025
-----------
TOTAL COMMON STOCKS (Cost $411,688) 440,515
-----------
<PAGE>
SHORT-TERM INVESTMENTS -
US GOVERNMENT AGENCY OBLIGATIONS 7.36%
Federal Home Loan Mortgage
5.500%, 10/1/1997
(Cost $35,000) 35,000 35,000
-----------
TOTAL INVESTMENT SECURITIES
AT VALUE 100.00%
(Cost $446,688)
(Cost for Income Tax Purposes $447,057) 475,515
===========
* Security is non-income producing.
See Notes to the Financial Statements
<PAGE>
Statement of Assets and Liabilities
September 30, 1997
UNAUDITED
Health Sciences Technology
Portfolio Portfolio
--------------------------------
ASSETS
Investment Securities:
At Cost $342,654 $446,688
=========== ===========
At Value $354,377 $475,515
Cash 3,455 34,607
Receivables:
Fund Shares Sold 0 50
Dividends and Interest 83 55
----------- -----------
TOTAL ASSETS 357,915 510,227
----------- -----------
LIABILITIES
Payables:
Investment Securities Purchased 0 16,623
Fund Shares Repurchased 1,416 25,014
----------- -----------
TOTAL LIABILITIES 1,416 41,637
----------- -----------
Net Assets at Value $356,499 $468,590
=========== ===========
NET ASSETS
Paid-in Capital* $347,453 $437,384
Accumulated Undistributed Net
Investment Income 915 1,171
Accumulated Undistributed Net
Realized Gain (Loss) on
Investment Securities (3,592) 1,208
Net Appreciation of Investment
Securities 11,723 28,827
----------- -----------
Net Assets at Value $356,499 $468,590
=========== ===========
Shares Outstanding 33,595 37,468
Net Asset Value, Offering and
Redemption Price per Share $10.61 $12.51
=========== ===========
* The Fund has 900 million authorized shares of common stock, par value of $0.01
per share. Of such shares, 100 million have been allocated to each individual
Portfolio.
See Notes to Financial Statements
<PAGE>
Statement of Operations
Period Ended September 30, 1997 (Note 1)
UNAUDITED
Health Sciences Technology
Portfolio Portfolio
---------------------------------
INVESTMENT INCOME
INCOME
Dividends $113 $64
Interest 802 1,107
----------- -----------
TOTAL INCOME 915 1,171
----------- -----------
EXPENSES
Investment Advisory Fees 0 0
Transfer Agent Fees 0 0
Administrative Fees 0 0
Custodian Fees and Expenses 0 0
Directors' Fees and Expenses 0 0
Professional Fees and Expenses 0 0
Registration Fees and Expenses 0 0
Other Expenses 0 0
----------- -----------
TOTAL EXPENSES 0 0
Fees and Expenses Absorbed by
Investment Adviser 0 0
----------- -----------
NET EXPENSES 0 0
----------- -----------
NET INVESTMENT INCOME 915 1,171
----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Gain (Loss) on
Investment Securities (3,592) 1,208
Change in Net Appreciation of
Investment Securities 11,723 28,827
----------- -----------
NET GAIN ON INVESTMENT SECURITIES 8,131 30,035
----------- -----------
Net Increase in Net Assets
from Operations $9,046 $31,206
=========== ===========
See Notes to Financial Statements
<PAGE>
Statement of Changes in Net Assets Period Ended September 30, 1997 (Note 1)
UNAUDITED
Health Sciences Technology
Portfolio Portfolio
-----------------------------------
OPERATIONS
Net Investment Income $915 $1,171
Net Realized Gain (Loss) on
Investment Securities (3,592) 1,208
Change in Net Appreciation
of Investment Securities 11,723 28,827
----------- -----------
NET INCREASE IN NET
ASSETS FROM OPERATIONS 9,046 31,206
----------- -----------
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 661,866 1,088,589
Amounts Paid for Repurchases
of Shares (315,413) (652,205)
----------- -----------
NET INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 346,453 436,384
----------- -----------
Total Increase in Net Assets 355,499 467,590
NET ASSETS
Initial Subscription (Note 1) 1,000 1,000
Beginning of Period 0 0
----------- -----------
End of Period $356,499 $468,590
=========== ===========
Accumulated Undistributed Net
Investment Income Included in
Net Assets At End of Period $915 $1,171
FUND SHARE TRANSACTIONS
Initial Subscription (Note 1) 100 100
Shares Sold 64,773 97,380
----------- -----------
64,873 97,480
Shares Repurchased (31,278) (60,012)
----------- -----------
Net Increase in Fund Shares 33,595 37,468
=========== ===========
See Notes to Financial Statements
<PAGE>
Notes to Financial Statements
UNAUDITED
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Variable
Investment Funds, Inc. (the "Fund") was incorporated in Maryland and presently
consists of nine separate Portfolios: Dynamics Portfolio, Growth Portfolio,
Health Sciences Portfolio, High Yield Portfolio, Industrial Income Portfolio,
Small Company Growth Portfolio, Technology Portfolio, Total Return Portfolio and
Utilities Portfolio. Health Sciences Portfolio and Technology Portfolio, (the
"Portfolios") are presented herein. The investment objective of the Portfolios
is to seek capital appreciation and income on securities principally engaged in
specific business sectors. Health Sciences and Technology Portfolios commenced
investment operations on May 22, 1997 and May 21, 1997, respectively. On August
26, 1997, INVESCO Funds Group, Inc. ("IFG") invested an additional $250,000 in
each Portfolio. The Fund is registered under the Investment Company Act of 1940
(the "Act") as a diversified, open-end management investment company. The Fund's
shares are not offered directly to the public but are sold exclusively to life
insurance companies ("Participating Insurance Companies") as a pooled funding
vehicle for variable annuity and variable life insurance contracts issued by
separate accounts of the Participating Insurance Companies.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
A. SECURITY VALUATION - Equity securities traded on national securities
exchanges or in the over-the-counter market are valued at the last sales price
in the market where such securities are primarily traded. If last sales prices
are not available, securities are valued at the highest closing bid price
obtained from one or more dealers making a market for such securities or by a
pricing service approved by the Fund's board of directors.
If market quotations or pricing service valuations are not readily
available, securities are valued at fair value as determined in good faith by
the Fund's board of directors.
Short-term securities are stated at amortized cost (which approximates
market value) if maturity is 60 days or less at the time of purchase, or market
value if maturity is greater than 60 days.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security
transactions are accounted for on the trade date and dividend income is recorded
on the ex dividend date. Interest income, which may be comprised of stated
coupon rate, market discount, original issue discount and amortized premium, is
recorded on the accrual basis. Cost is determined on the specific identification
basis.
C. FEDERAL AND STATE TAXES - The Fund has complied, and continues to
comply, with the provisions of the Internal Revenue Code applicable to regulated
investment companies and, accordingly, has made or intends to make sufficient
distributions of net investment income and net realized capital gains, if any,
to relieve it from all federal and state income taxes and federal excise taxes.
<PAGE>
To the extent future capital gains are offset by capital loss carryovers,
such gains will not be distributed to shareholders.
Dividends paid by the Fund from net investment income and distributions of
net realized short-term capital gains are, for federal income tax purposes,
taxable as ordinary income to shareholders. D. DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS - Dividends and distributions to shareholders are recorded by the
Fund on the ex dividend/distribution date. The Fund distributes net realized
capital gains, if any, to its shareholders at least annually, if not offset by
capital loss carryovers. Income distributions and capital gain distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily due to
differing treatments for nontaxable dividends, net operating losses and expired
capital loss carryforwards. E. EXPENSES - Each of the Portfolios bears expenses
incurred specifically on its behalf and, in addition, each Portfolio bears a
portion of general expenses, based on the relative net assets of each Portfolio.
NOTE 2 - INVESTMENT ADVISORY AND OTHER AGREEMENTS. IFG serves as the Fund's
investment adviser. As compensation for its services to the Fund, IFG receives
an investment advisory fee which is accrued daily at the applicable rate and
paid monthly. The fee is based on the annual rate of each Portfolio's average
net assets as follows:
AVERAGE NET ASSETS
-------------------------------------
$0 to $350 to Over
$350 $700 $700
Portfolio Million Million Million
- --------------------------------------------------------------------------------
Health Sciences Portfolio 0.75% 0.65% 0.55%
Technology Portfolio 0.75% 0.65% 0.55%
In accordance with a Sub-Advisory Agreement between IFG and INVESCO Trust
Company ("ITC"), a wholly owned subsidiary of IFG, investment decisions of the
Portfolios are made by ITC. Fees for such sub-advisory services are paid by IFG.
In accordance with an Administrative Agreement, each Portfolio pays IFG an
annual fee of $10,000, plus an additional amount computed at an annual rate of
0.015% of average net assets to provide administrative, accounting and clerical
services. The fee is accrued daily and paid monthly.
IFG receives a transfer agent fee of $5,000 per Portfolio per year.
The fee is paid monthly at one-twelfth of the annual fee.
IFG has voluntarily agreed, in some instances, to absorb certain fees and
expenses incurred by each Portfolio. NOTE 3 - PURCHASES AND SALES OF INVESTMENT
SECURITIES. For the four months ended September 30, 1997, the aggregate cost of
purchases and proceeds from sales of investment securities (excluding all U.S.
Government securities and short-term securities) were as follows:
Portfolio Purchases Sales
- --------------------------------------------------------------------------------
Health Sciences Portfolio $354,972 $123,691
Technology Portfolio 445,927 35,451
<PAGE>
There were no purchases or sales of U.S. Government securities.
NOTE 4 - APPRECIATION AND DEPRECIATION. At September 30, 1997, the gross
appreciation of securities in which there was an excess of value over tax cost,
the gross depreciation of securities in which there was an excess of tax cost
over value and the resulting net appreciation by Portfolio were as follows:
Gross Gross Net
Portfolio Appreciation Depreciation Appreciation
- --------------------------------------------------------------------------------
Health Sciences Portfolio $11,205 $ 1,497 $ 9,708
Technology Portfolio 41,994 13,536 28,458
NOTE 5 - TRANSACTIONS WITH AFFILIATES. Certain of the Fund's officers and
directors are also officers and directors of IFG or ITC.
The Fund has adopted an unfunded deferred compensation plan covering all
independent directors of the Fund who will have served as an independent
director for at least five years at the time of retirement.
Benefits under this plan are based on an annual rate equal to 40% of the
retainer fee at the time of retirement.
Pension expenses for the four months ended September 30, 1997, included in
Directors' Fees and Expenses in the Statement of Operations, and unfunded
accrued pension costs and pension liability included in Prepaid Expenses and
Accrued Expenses, respectively, in the Statement of Assets and Liabilities were
insignificant.
NOTE 6 - LINE OF CREDIT. The Fund has available a Redemption Line
of Credit Facility ("LOC"), from a consortium of national banks, to be used for
temporary or emergency purposes to fund redemptions of investor shares. The LOC
permits borrowings to a maximum of 10% of the Net Assets at Value of each
respective Portfolio. Each Portfolio agrees to pay annual fees and interest on
the unpaid principal balance based on prevailing market rates as defined in the
agreement. At September 30, 1997, there were no such borrowings.
<PAGE>
Financial Highlights
(For a Fund Share Outstanding Throughout the Period) Period Ended September 30,
1997 (Note 1)
UNAUDITED
Health Sciences Portfolio
PER SHARE DATA
Net Asset Value - Beginning of Period $10.00
----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.03
Net Gains on Securities
(Both Realized and Unrealized) 0.58
----------
Total from Investment Operations 0.61
----------
Net Asset Value - End of Period $10.61
==========
TOTAL RETURN 6.10%*
RATIOS+
Net Assets - End of Period ($000 Omitted) $356
Ratio of Expenses to Average Net Assets 0.00%~
Ratio of Net Investment Income to
Average Net Assets 2.24%~
Portfolio Turnover Rate 460%*
Average Commission Rate Paid^^ $0.0600*
+ All of the expenses of the Portfolio were voluntarily absorbed by IFG for the
period ended September 30, 1997, since investment operations began May 22, 1997.
~ Annualized
* Based on operations for the period shown and, accordingly, are not
representative of a full year.
^^ 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.
<PAGE>
Financial Highlights (Continued) (For a Fund Share Outstanding Throughout the
Period) Period Ended September 30, 1997 (Note 1)
UNAUDITED
Technology Portfolio
PER SHARE DATA
Net Asset Value - Beginning of Period $10.00
----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.03
Net Gains on Securities
(Both Realized and Unrealized) 2.48
----------
Total from Investment Operations 2.51
----------
Net Asset Value - End of Period $12.51
==========
TOTAL RETURN 25.10%*
RATIOS+
Net Assets - End of Period ($000 Omitted) $469
Ratio of Expenses to Average Net Assets 0.00%~
Ratio of Net Investment Income to
Average Net Assets 1.81%~
Portfolio Turnover Rate 26%*
Average Commission Rate Paid^^ $0.1583*
+ All of the expenses of the Portfolio were voluntarily absorbed by IFG for the
period ended September 30, 1997, since investment operations began May 21, 1997.
~ Annualized
* Based on operations for the period shown and, accordingly, are not
representative of a full year.
^^ 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.
The section entitled "Principal Shareholders" is amended to delete the
entire section and replace it with the following section:
<PAGE>
PRINCIPAL SHAREHOLDERS
As of November 1, 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
Great-West Life & Annuity 851,386.0150 42.127
Unit Valuations 2T2
8515 E. Orchard Road
Englewood, CO 80111
Security Life 408,312.8410 20.055
Separate Account A1 Record
Unit Valuations 2T2
8515 E. Orchard Road
Englewood, CO 80111
Security Life 290,444.7710 14.371
Separate Account L1 record
Attn: Debra Bechtel
Unit Valuations 272
8515 E. Orchard Road
Englewood, CO 80111
Separate Account VA-5NLNY 267,254.5860 13.224
of First Transamerica record
Life Insurance Company
Attn: Variable Annuity Dept.
P.O. Box 33849
Charlotte, NC 28233
Total Return Fund
Great-West Life & Annuity 656,666.3350 51.109
Unit Valuations 2T2
8515 E. Orchard Road
Englewood, CO 80111
Security Life 405,312.8410 20.055
Separate Account A1
Attn: Debra Bechtel
Unit Valuations 272
8515 E. Orchard Road
Englewood, CO 80111
<PAGE>
Wachovia Bank NA7R 2,083,754.8280 10.107
National Services
Attn: B. McKinnis Trust PRCSG
301 N. Main St. MO NC 31057
P.O. Box 3073
Winston-Salem, NC 27199
High Yield Fund
Great-West Life & Annuity 820,305.5670 46.081
Unit Valuations 2T2 Record
8515 E. Orchard Road
Englewood, CO 80111
Security Life 382,991.4240 21.515
Separate Account A1 Record
Unit Valuations 2T2
8515 E. Orchard Road
Englewood, CO 80111
Security Life 339,120.4550 19.050
Separate Account L1 Record
Unit Valuations 2T2
8515 E. Orchard Road
Englewood, CO 80111
Separate Account VA-5 of 176,145.3950
Transamerica Occidental Record
Life Insurance Company
Variable Annuity Dept B-100
1150 S. Olive
Los Angeles, CA 90015
Utilities Fund
Security Life 222,889.7100 76.257
Separate Account A1 Record
Unit Valuations 2T2
8515 E. Orchard Road
Englewood, CO 80111
Security Life 65,076.4970 22.264
Separate Account L1 Record
Unit Valuations 2T2
8515 E. Orchard Road
Englewood, CO 80111
<PAGE>
Dynamics Fund
INVESCO Trust Co. 24,490.2440 56.084
P.O. Box 173706
Denver, CO 80201
Fortis Benefits Ins. Co. 19,176.8480 43.916
P.O. Box 64284 Record
St. Paul, MN 55164
Health Sciences Fund
INVESCO Trust Co. 24,490.2440 56.084
P.O. Box 173706
Denver, CO 80201
Fortis Benefits Ins. Co. 12,176.3890 36.262
P.O. Box 64284
St. Paul, MN 55164
Technology Fund
INVESCO Trust Co. 21,358.5030 63.606
P.O. Box 173706
Denver, CO 80201
Fortis Benefits Ins. Co. 12,176.3890 36.262
P.O. Box 64284
St. Paul, MN 55164
Small Company Growth
INVESCO Trust Co. 25,100.0000 100.00%
P.O. Box 173706
Denver, CO 80201
The date of this Supplement is November 10, 1997.
<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.
^
<PAGE>
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.
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. 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.
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.
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
<PAGE>
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.
<PAGE>
TABLE OF CONTENTS
Page
INVESTMENT POLICIES..........................................................5
INVESTMENT RESTRICTIONS......................................................11
MANAGEMENT...................................................................16
Investment Adviser.....................................................16
Investment Sub-Advisers................................................16
Advisory Agreement.....................................................18
Sub-Advisory Agreements................................................20
Administrative Services Agreement......................................22
Transfer Agency Agreement..............................................25
Officers and Directors of the Company..................................25
HOW SHARES ARE VALUED........................................................31
PERFORMANCE..................................................................32
Total Return Calculations..............................................33
Yield Calculations.....................................................33
Comparison of Fund Performance.........................................34
PORTFOLIO TURNOVER...........................................................35
PORTFOLIO BROKERAGE..........................................................36
REDEMPTIONS..................................................................37
ADDITIONAL INFORMATION.......................................................38
Common Stock...........................................................38
Principal Shareholders.................................................40
Independent Accountants................................................42
Custodian........................................................42
Transfer Agent.........................................................42
Reports to Shareholders................................................42
Legal Counsel..........................................................42
Prospectus.............................................................42
Registration Statement.................................................43
APPENDIX A...................................................................44
<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 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
<PAGE>
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
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.
<PAGE>
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
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.
<PAGE>
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 contracts 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
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.
<PAGE>
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
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
<PAGE>
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.
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 331/3% limitation. This restriction shall not prohibit deposits
<PAGE>
of assets to margin or guarantee positions in futures, options,
swaps or forward contracts, or the segregation of assets in
connection with such contracts.
3. Invest more than 25% of the value of its total assets in any
particular industry (other than government securities), except that:
(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.
(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
<PAGE>
(ii) enter into any futures contracts if the aggregate net
amount of the Fund's commitments under outstanding futures
contracts positions of the Fund would exceed the market value of
the total assets of the Fund.
(c) The Fund does not currently intend to sell securities short, unless
it owns or has the right to obtain securities equivalent in kind and
amount to the securities sold short without the payment of any
additional consideration therefor, and provided that transactions in
options, swaps and forward futures contracts are not deemed to
constitute selling securities short.
(d) The Fund does not currently intend to purchase securities on margin,
except that the Fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that
margin payments and other deposits in connection with transactions
in options, futures, swaps and forward contracts shall not be deemed
to constitute purchasing securities on margin.
(e) The Fund does not currently intend to (i) purchase securities of
closed end investment companies, except in the open market where no
commission except the ordinary broker's commission is paid, or (ii)
purchase or retain securities issued by other open-end investment
companies. Limitations (i) and (ii) do not apply to money market
funds or to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or
merger. If the Fund invests in a money market fund, the Fund's
investment adviser will reduce its advisory fee by the amount of
any investment advisory and administrative services fees paid to the
investment manager of the money market fund.
(f) The Fund may not mortgage or pledge any securities owned or held by
the Fund in amounts that exceed, in the aggregate, 15% of the Fund's
net asset value, provided that this limitation does not apply to
reverse repurchase agreements or in the case of assets deposited to
margin or guarantee positions in futures, options, swaps or forward
contracts or placed in a segregated account in connection with such
contracts.
(g) The Fund does not currently intend to purchase securities of
any issuer (other than U.S. government agencies and
instrumentalities or instruments guaranteed by an entity with
a record of more than three years' continuous operation,
including that of predecessors) with a record of less than
three years' continuous operation (including that of
predecessors) if such purchase would cause the Fund's
investments in all such issuers to exceed 5% of the Fund's
total assets taken at market value at the time of such
purchase.
(h) The Fund does not currently intend to invest directly in oil, gas,
or other mineral development or exploration programs or leases;
however, the Fund may own debt or equity securities of companies
engaged in those businesses.
<PAGE>
(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, 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
<PAGE>
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.
Investment Sub-Advisers
Pursuant to agreements with INVESCO, INVESCO Capital Management, 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 in the business
of investment management on an international basis. INVESCO PLC changed its name
to AMVESCO PLC on March 3, 1997, as part of a merger between a direct subsidiary
of INVESCO PLC and A I M Management Group Inc., thus creating one of the largest
<PAGE>
management businesses in the world. Subject to obtaining shareholder approval at
its Regular Annual Shareholder Meeting, the board of directors of AMVESCO PLC
has concluded that the corporate name should be changed to AMVESCAP PLC
effective May 8, 1997. INVESCO, INVESCO Trust and ICM will continue to operate
under their existing names. AMVESCO has approximately $165 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
distribution of shares of two registered investment companies.
--INVESCO Management & Research, Inc. of Boston, Massachusetts, 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.
--A I M Advisors, Inc. of Houston, Texas provides investment advisory and
administrative services for retail and institutional mutual funds.
--A I M Capital Management, Inc. of Houston, Texas provides investment
advisory services to individuals, corporations, pension plans and other private
investment advisory accounts and also serves as a sub- advisor to certain retail
and institutional mutual funds, one Canadian mutual fund and one portfolio of an
open-end registered investment company that is offered to separate accounts of
variable insurance companies.
--A I M Distributors, Inc. and Fund Management Company of Houston, Texas
are registered broker-dealers that act as the principal underwriters for retail
and institutional mutual funds.
The corporate headquarters of AMVESCO PLC are located at 11 Devonshire
Square, London, EC2M 4YR, England.
As indicated in the Prospectus, INVESCO permits investment and other
personnel to purchase and sell securities for their own accounts in accordance
with a compliance policy governing personal investing by directors, officers and
employees of INVESCO and its North American affiliates. The policy requires
officers, inside directors, investment and other personnel of INVESCO and its
North American affiliates to pre- clear all transactions in securities not
<PAGE>
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 transac tions 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 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 May 1, 1997, for an initial term expiring
May 1, 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.
The Agreement provides that INVESCO shall manage the investment portfolios
of the Funds in conformity with the Funds' investment objectives and policies
(either directly or by delegation to a sub-adviser, which may be a party
affiliated with INVESCO). Further, INVESCO shall perform all administrative,
internal accounting (including computation of net asset value), clerical,
statistical, secretarial and all other services necessary or incidental to the
administration of the affairs of the Funds excluding, however, those services
that are the subject of separate agreement between the Company and INVESCO or
any affiliate thereof, including the distribution and sale of Fund shares and
provision of transfer agency, dividend disbursing agency, and registrar
<PAGE>
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.
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
<PAGE>
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 May 1,
1997, for an initial term expiring May 1, 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
reinvestment 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.
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;
<PAGE>
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.
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)
Dynamics Fund(2) $0 $0 $0 $0 $0 $0
Health Sciences Fund(2) $0 $0 $0 $0 $0 $0
Small Company Growth Fund(2) $0 $0 $0 $0 $0 $0
Technology Fund(2) $0 $0 $0 $0 $0 $0
Growth Fund(2) $0 $0 $0 $0 $0 $0
(1) The Utilities Fund did not commence operations until January 1, 1995.
(2) The Dynamics, Health Sciences, Small Company Growth and Technology Funds had
not commenced operations as of the date of this Statement of Additional
Information.
<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 continu ance 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 automati cally 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 American Holdings Company and First ING Life Insurance Company
of New York. Address: Security Life Center, 1290 Broadway, Denver, Colorado.
Born: January 12, 1928.
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, from 1966 to 1988. Director of the
INVESCO Advisor Funds, Inc. and Trustee of INVESCO Treasurers Series Trust.
Address: 15 Sterling Road, Armonk, New York. Born: August 1, 1923.
DAN J. HESSER,+* President, CEO and Director. Chairman of the Board,
President, and Chief Executive Officer of INVESCO Funds Group, Inc.; Director
and President 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.
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.
<PAGE>
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.
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.
<PAGE>
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
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.
<PAGE>
(4)Mr. Frazier resigned as a Trustee of the Trust effective February 4,
1997. Effective November 1, 1996 Mr. Frazier was employed by AMVESCO PLC, a
company affiliated with INVESCO. Because it was possible that Mr. Frazier would
become employed with AMVESCO PLC, he was deemed to be an "interested person" of
the Company and of the other funds in the INVESCO Complex effective May 1, 1996.
Effective November 1, 1996, Mr. Frazier ceased to 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 and Hesser, 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 retire ment 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
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 adminis tered 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
<PAGE>
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 manage ment 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 responsibili ties 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 collect ed), less the Fund's liabilities
(including accrued expenses), by the number of outstanding shares of that Fund.
Securities traded on national securities exchanges, the NASDAQ National Market
System, the NASDAQ Small Cap Market and foreign markets are valued at their last
sale prices on the exchanges or markets where such securities are primarily
traded. Securities traded in the over-the-counter market for which last sale
prices are not available, and listed securities for which no sales are reported
on a particular date, are valued at their highest closing bid prices (or, for
debt securities, yield equivalents thereof) obtained from one or more dealers
making markets for such securities. If market quotations are not readily
available, securities will be valued at fair values as determined in good faith
by the Company's board of directors or pursuant to procedures adopted by the
board of directors. The above procedures may include the use of valuations
furnished by a pricing service which employs a matrix to determine valuations
for normal institutional-size trading units of debt securities. Prior to
utilizing a pricing service, the board of directors of the Company reviews the
methods used by such service to assure itself that securities will be valued at
<PAGE>
their fair values. The Company's board of directors also periodically
monitors the methods used by such pricing services. Debt securi ties 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:
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) exponent n = ERV where:
P = initial payment of $1000
T = average annual total return
<PAGE>
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 deter mined by computing the yield to maturity (or yield to
call, if applicable) of each obligation held by the Fund, based upon the market
value of each obligation (including actual accrued interest) at the close of
business on the last business day of the month or, with respect to an obligation
purchased during the month, the purchase price plus accrued interest. The
resultant yield to maturity is divided by 360 and multiplied by the market value
of the obligation (including actual accrued interest), and the result is
multiplied by the number of days in the subsequent month that the obligation is
in the Fund (assuming that each month has 30 days). Dividends received on the
stocks held by the Funds are recognized, for purposes of yield calculations, on
a daily accrual basis.
Comparison of Fund Performance
In conjunction with performance reports, comparative data between a Fund's
performance for a given period and other types of investment vehicles may be
provided to prospective investors and shareholders. A Fund's performance is
based upon amounts available for investment under variable annuity or variable
life insurance contracts of Participating Insurance Companies rather than upon
premiums paid for variable annuity or variable life insurance contracts. Thus,
the Fund's total return data does not reflect the impact of sales loads (whether
front-end or deferred) or contract charges deducted from premiums or from the
assets of the Partici pating 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. Accord ingly, 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
<PAGE>
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
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:
<PAGE>
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
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.
<PAGE>
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, respectively, 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.
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
<PAGE>
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. Securi ties 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, 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 sharehold ers 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.
<PAGE>
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.
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.
<PAGE>
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
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
<PAGE>
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 insuffi cient trading interest
in certain options; (ii) restrictions may be imposed by an exchange on opening
transactions or closing transac tions or both; (iii) trading halts, suspensions
or other restric tions 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
<PAGE>
currency, or for the making and acceptance of a cash settlement, at a
stated time in the future, for a fixed price. By its terms, a futures contract
provides for a specified settlement date on which, in the case of the majority
of interest rate and foreign currency futures contracts, the fixed income
securities or currency underlying the contract are delivered by the seller and
paid for by the purchaser, or on which, in the case of stock index futures
contracts and certain interest rate and foreign currency futures contracts, the
difference between the price at which the contract was entered into and the
contract's closing value is settled between the purchaser and seller in cash.
Futures Contracts differ from options in that they are bilateral agree ments,
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 terminat ed 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 period
ended December 31, 1994 and each of the
two years in the period ended
December 31, 1996 for the INVESCO
VIF - High Yield, INVESCO VIF Industrial
Income, INVESCO VIF Total Return and
INVESCO VIF Utilities Funds.
Unaudited Financial Highlights for the
INVESCO VIF - Health
Sciences Fund for the period
May 22, 1997 (inception) through
September 30, 1997.
Unaudited Financial Highlights
for the INVESCO VIF -
Technology Fund for the period
May 21, 1997 (inception)
through September 30, 1997.
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 ^ for INVESCO VIF -
High Yield, INVESCO VIF - Industrial Income, INVESCO VIF -
Total Return and INVESCO VIF - Utilities Funds 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;
<PAGE>
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.
(a) (i) With respect to
INVESCO VIF - Health
Sciences Fund, an
unaudited Statement of
Investment Securities and
unaudited Statement of
Assets and Liabilities,
both dated as of
September 30, 1997, an
unaudited Statement of
Operations and unaudited
Statement of Changes in
Net Assets, both for the
period May 22, 1997
(inception) through
September 30, 1997, and
unaudited Financial
Highlights for the above
period.
(ii) With respect to INVESCO
VIF - Technology Fund, an
unaudited Statement of
Investment Securities and
unaudited Statement of Assets
and Liabilities, both
dated as of September 30, 1997,
an unaudited Statement
of Operations and unaudited
Statement of Changes in Net
Assets, both for the period
May 21, 1997 (inception)
through September 30, 1997,
and unaudited Financial
Highlights for the above period.
<PAGE>
(3) Financial statements and schedules
included in Part C:
None: Schedules have been omitted as all
information has been presented in the finan
cial statements.
(b) Exhibits:
(1) (a) Articles of ^ Incorporation.(2)
(b) Articles of Amendment to
Articles of Incorporation dated
October 21, ^ 1993.(2)
(c) Articles Supplementary to
Articles of Incorporation dated
October 22, ^ 1993.(2)
(d) Articles Supplementary to
Articles of Incorporation dated
February 11, ^ 1997.(2)
(2) ^ Bylaws.
(3) Not applicable.
(4) Not required to be filed on
EDGAR.
(5) (a) Investment Advisory
Agreement, dated ^ February 28, 1997,
between Registrant and
INVESCO Funds Group, ^ Inc.(2)
^(b) Sub-Advisory Agreement,
dated February 28, 1997, between
^ INVESCO Funds Group, Inc. and
INVESCO Trust Company.(2)
(c) Sub-Advisory Agreement,
dated February 28, 1997, between
INVESCO Funds Group, Inc. ^ and
INVESCO Capital Management, ^
Inc.(2)
<PAGE>
^(d) Sub-Advisory Agreement
between INVESCO Funds Group,
Inc. and INVESCO Trust Company
dated December 9, ^ 1997.(2)
(6) (a) Distribution Agreement,
dated February 28, 1997, between
Registrant and INVESCO Funds
Group, Inc.(2)
(b) Distribution Agreement,
dated September 30, 1997, between
Registrant and INVESCO Distributors, Inc.
(7) Defined Benefit Deferred
Compensation Plan for Non-
Interested Directors and ^
Trustees.(2)
(8) Custodian Contract, dated
October 20, 1993, between
Registrant and State Street Bank
and Trust ^ Company.
(a) Amendment to Custody
Agreement dated October 25,
^ 1995.
(b) Data Access Services
Addendum dated May 19,
1997.
(9) (a) Transfer Agency Agreement,
dated February 28, 1997,
between Registrant and INVESCO
Funds Group, ^ Inc.(2)
(b) Administrative Service Agreement,
dated February 28, 1997,
between Registrant and
INVESCO Funds Group, ^ Inc.(2)
(c) Participation Agreement,
dated March 22, 1994, among
Registrant, INVESCO Funds Group,
Inc., Transamerica Occidental
Life Insurance Company and
Charles Schwab & Co., ^ Inc.(3)
(d) Participation Agreement,
dated August 26, 1994, among
Registrant, INVESCO Funds Group,
Inc. and Security Life of Denver
Insurance ^ Company.
<PAGE>
(e) Participation Agreement,
dated September 19, 1994, among
Registrant, INVESCO Funds Group,
Inc. and First ING Life
Insurance Company of New ^ York.(3)
(f) Participation Agreement,
dated December 1, 1994, among
Registrant, INVESCO Funds Group,
Inc., First Transamerica Life
Insurance Company and Charles
Schwab & Co., ^ Inc.(3)
(g) Participation Agreement,
dated September 14, 1995, among
Registrant, INVESCO Funds Group,
Inc. and Southland Life
Insurance Company.(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.(2)
(j) Participation
Agreement, dated December
4, 1996, among Registrant,
INVESCO Funds Group, Inc.
and American Centurion Life
Assurance Company.
(k) Participation
Agreement, dated April 15,
1997, among Registrant,
INVESCO Funds Group, Inc.
and Prudential Insurance
Company of America.
<PAGE>
(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.
(11) Consent of Independent Accountants.
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
(15) Not applicable.
(16) (a) Schedule for computation of
performance data for Industrial
Income ^ Fund.(1)
(b) Schedule for computation of
performance data for Total Return
^ Fund.(1)
(c) Schedule for computation of
performance data for High Yield ^
Fund.(1)
(d) Schedule for computation of
yield data.(1)
(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.
<PAGE>
(d) Financial Data Schedule
for the year ended December 31,
1995 for INVESCO VIF-Utilities Portfolio.
(e) Financial Data Schedule
for period from May 22, 1997
(inception) through
September 30, 1997 for
INVESCO VIF - Health Sciences Portfolio.
(f) Financial Data Schedule
for period from May 21, 1997
(inception) through
September 30, 1997 for
INVESCO VIF - Technology 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 on EDGAR with ^ Post-Effective Amendment No. ^ 6 to the
^ Registrant's Registration Statement on February 14, 1997 ^, and herein
incorporated by reference.
(3) Previously filed with Post-Effective Amendment No. 2 to the
Registrant's Registration Statement on January 30, 1996 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.
<PAGE>
Item 26. Number of Holders of Securities
Number of Record
Holders as of
Title of Class ^ October 31, 1997
-------------- ------------------
INVESCO VIF - Industrial Income Portfolio --^15
INVESCO VIF - Total Return Portfolio --^10
INVESCO VIF - High Yield Portfolio --^ 8
INVESCO VIF - Utilities Portfolio -- 5
INVESCO VIF - Health Sciences Portfolio -- 2
INVESCO VIF - Technology Portfolio --^ 3
INVESCO VIF - Dynamics Portfolio -- 1
INVESCO VIF - Small Company Growth Portfolio -- 1
INVESCO VIF - Growth Portfolio -- 1
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.
<PAGE>
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
employment 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 Capital Appreciation Funds, Inc.
INVESCO Diversified Funds, 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
- ------------------ -------------- -------------
^ William J. Galvin, Jr. Senior Vice Assistant
7800 E. Union Avenue President Secretary
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.
Off.
Dan J. Hesser Chairman of President, ^
7800 E. Union Avenue ^ the Board, CEO & Dir.
Denver, CO 80237 President ,
Chief Executive
Officer, &
Director
Gregory E. Hyde ^ Vice President
7800 E. Union Avenue
Denver, CO 80237
^ Charles P. Mayer Director
7800 E. Union Avenue
Denver, CO 80237
^
Glen A. Payne Senior Vice Secretary
7800 E. Union Avenue President,
Denver, CO 80237 Secretary &
General Counsel
^
Judy P. Wiese Vice President Asst. Treas.
^ 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 communicating 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 share holders, upon request and
without charge.
^
<PAGE>
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
post-effective amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Denver, County of Denver, and State of
Colorado, on the ^ 10th day of ^ November, 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 capacities indicated on this ^ 10th day of ^
November, 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/ ^ Larry Soll
- ------------------------------------ ------------------------------------
Bob R. Baker, Director ^ Larry Soll, 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
/s/ Wendy L. Gramm
- ------------------------------------
Wendy L. Gramm, Director
<PAGE>
By*--------------------------------- By*/s/ Glen A. P
---------------------------------
Edward F. O'Keefe Glen A. Payne
Attorney in Fact Attorney in Fact
* Original Powers of Attorney authorizing Edward F. O'Keefe and Glen A. Payne,
and each of them, to execute this post-effective amendment to the Registration
Statement of the Registrant on behalf of the above-named directors and officers
(with the exception of Larry Soll and Wendy L. Gramm) of the Registrant have
been filed with the Securities and Exchange Commission on October 8, 1993,
December 22, 1993, March 22, 1994, January 30, 1995 and February 28, 1995 and
October 7, 1996.
<PAGE>
Exhibit Index
Page in
Exhibit Number Registration Statement
- -------------- ----------------------
^ 2 117
6(b) 134
8 146
8(a) 173
8(b) 174
9(d) 194
9(j) 226
9(k) 258
10 290
11 292
17(a) 293
17(b) 294
17(c) 295
17(d) 296
17(e) 297
17(f) 298
EX99.POA GRAMM 299
EX99.POA SOLL 300
</TABLE>
BYLAWS
OF
INVESCO VARIABLE FUNDS, INC.
AS OF AUGUST 19, 1993
ARTICLE I.
SHAREHOLDERS
Section 1. Annual Meeting. Unless otherwise determined by the board of
directors or required by applicable law, no annual meeting of
shareholders shall be required to be held in any year in which
the election of directors is not required under the Investment
Company Act of 1940. If the corporation is required to hold
a meeting of shareholders to elect directors, the meeting
shall be designated as the annual meeting of shareholders for
that year, and shall be held no later than 120 days after
occurrence of the event requiring the meeting at a place
within or without the State of Maryland.
Section 2. Special Meetings. Special meetings of the shareholders
entitled to vote shall be called upon the request in writing
of the president or, in his absence, a vice president, or by a
vote of a majority of the board of directors, or upon the
request in writing of shareholders of the Company representing
not less than ten percent (10%) of the votes entitled to be
cast at the meeting.
Section 3. Place of Meetings. Each annual and any special meeting of
the shareholders shall be held at the principal office of the
corporation in Denver, Colorado, or at such alternate site as
may be determined by the board of directors.
Section 4. Notices. Notices of every meeting, annual or special, shall
specify the place, day and hour of the meeting and shall be
mailed not less than ten (10) days nor more than ninety (90)
days before such meeting. Such notice shall be given by the
Secretary of the Corporation to each shareholder entitled to
notice of and entitled to vote at the meeting. In the event
that a special meeting is called by the shareholders entitled
to vote, the Secretary of the Corporation shall inform the
shareholders who make the request of the reasonably estimated
cost of preparing and mailing a notice of the meeting, and
upon payment of these costs to the Corporation, shall notify
each shareholder entitled to notice of the meeting. Notice of
every special meeting shall indicate briefly its purpose.
Notice shall be deemed delivered where it is personally
delivered to the individual, left at the individual's usual
place of business, or mailed to the individual at the
individual's address as it appears on the records of the
Corporation.
Section 5. Quorum. At every meeting of the shareholders, the presence in
person or by proxy of the holders of one-third of all of the
<PAGE>
shares of stock of the corporation issued and outstanding and
entitled to vote without regard to class shall constitute a
quorum, 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; provided, however, that at every meeting of the
shareholders, the representation of a larger number of
shareholders shall constitute a quorum if required by the
Investment Company Act of 1940, as amended, other applicable
law, or by the Articles of Incorporation.
Section 6. Voting. At every meeting of the shareholders at which a
quorum is present, each shareholder entitled to vote shall be
entitled to vote in person, or by proxy appointed by
instrument in writing subscribed by such shareholder, or his
duly authorized attorney, and he shall have one (1) vote for
each share of stock standing registered in his name on each
matter submitted at the meeting on which such share is
entitled to vote and for each director to be elected.
Fractional shares shall be entitled to proportionate
fractional votes. Every proxy shall be dated and no proxy
shall be valid after eleven (11) months from its date unless
otherwise provided in the proxy. There shall be no cumulative
voting in the election of directors. Except as otherwise
provided by law, by the charter of the corporation, or by
these bylaws, at each meeting of stockholders at which a
quorum is present, all matters shall be decided by a majority
of the votes cast by the stockholders present in person or
represented by proxy and entitled to vote with respect to any
such matter.
Section 7. Qualification of Voters. At every meeting of shareholders,
unless the voting is conducted by inspectors, the proxies and
ballots shall be received, and all questions with respect to
the qualification of voters and the validity of proxies and
the acceptance or rejection of votes shall be decided by the
chairman of the meeting. If demanded by shareholders present
in person or by proxy entitled to cast twenty-five per cent
(25%) in number of votes, or if ordered by the chairman of the
meeting, the vote upon any election or question shall be taken
by ballot and, upon such demand or order, the voting shall be
conducted by two (2) inspectors appointed by the chairman, in
which event the proxies and ballots shall be received and all
questions with respect to the qualification of votes and the
validity of proxies and the acceptance or rejection of votes
shall be decided by such inspectors. Unless so demanded or
ordered, no vote need be by ballot and the voting need not be
conducted by inspectors.
Section 8. Waiver of Notice. A waiver of notice of any meeting of
shareholders signed by any shareholder entitled to such notice
filed with the records of the meeting, whether before or after
the holding thereof or actual attendance at the meeting in
<PAGE>
person or by proxy, shall be deemed equivalent to the giving
of notice to such shareholder.
Section 9. Adjournment. A meeting of shareholders convened on the date
for which it was called may be adjourned from time to time
without further notice to a date not more than 120 days after
the original record date of the meeting.
Section 10. Action by Shareholders Without Meeting. Except as
otherwise provided by law, the provisions of these bylaws
relating to notices and meetings to the contrary
notwithstanding, any action required or permitted to be taken
at any meeting of shareholders may be taken without a meeting
if a consent in writing setting forth the action shall be
signed by all the shareholders entitled to vote upon the
action and such consent shall be filed with the records of the
corporation.
ARTICLE II.
BOARD OF DIRECTORS
Section 1. Powers. The business and property of the corporation shall
be conducted and managed by its board of directors, which may
exercise all of the powers of the corporation, except such as
are by statute, by the charter or by the bylaws, conferred
upon or reserved to the shareholders. The board of directors
shall keep full and complete records of its transactions.
Section 2. Number. By vote of a majority of the entire board of
directors, the number of directors may be increased or
decreased from time to time; provided that, in no event, may
the number be decreased to less than three.
Section 3. Election. The members of the board of directors shall be
elected by the shareholders by plurality vote at the annual
meeting, or at any special meeting called for such purpose.
Each director shall hold office until his successor shall have
been duly chosen and qualified, or until he shall have
resigned or shall have been removed in the manner provided by
law. Any vacancy, including one created by an increase in the
number of directors on the board (except where such vacancy is
created by removal by the shareholders), may be filled by the
vote of a majority of the remaining directors, although such
majority is less than a quorum; provided, however, that
immediately after filling any vacancy by such action of the
board of directors, at least two-thirds (2/3) of the directors
then holding office shall have been elected by the
shareholders at an annual or special meeting.
Section 4. Regular Meetings. The board of directors shall schedule an
Annual Meeting at such place and time as they may designate
for the purpose of organization, the election of officers, and
the transaction of other business. Other regular meetings may
be held as scheduled by a majority of the directors.
<PAGE>
Section 5. Special Meetings. Special meetings of the board of directors
may be called at any time by the president or by a majority of
the directors or by a majority of the executive committee.
Section 6. Notice of Meetings. Notice of the place, day and hour of
every special meeting shall be given to each director at least
two (2) days before the meeting, by written announcement,
telephone, telegraph and/or mail addressed to him at his post
office address, according to the records of the corporation.
Unless required by resolution of the board of directors, no
notice of any meeting of the board of directors need state the
business to be transacted thereat. No notice of any meeting
of the board of directors need be given to any director who
attends, or to any director who, in writing executed and filed
with the records of the meeting either before or after the
holding thereof, waives such notice. Any meeting of the board
of directors may adjourn from time to time to reconvene at the
same or some other place, and no notice need be given of any
such adjourned meeting other than by announcement.
Section 7. Quorum. At all meetings of the board of directors, one-third
of the total number of directors or not less than two (2)
directors shall constitute a quorum for the transaction of
business. In the absence of a quorum, the directors present
by a majority vote and without notice other than by
announcement may adjourn the meeting from time to time until
a quorum shall be present. At any such adjourned meeting, any
business may be transacted which might have been transacted at
the meeting as originally notified.
Section 8. Compensation of Directors. Directors shall be entitled to
receive such compensation from the corporation for their
services as may from time to time be voted by the board of
directors. All directors shall be reimbursed for their
reasonable expenses of attendance, if any, at the board and
committee meetings. Any director of the corporation may also
serve the corporation in any other capacity and receive
compensation therefor.
Section 9. Vacancies. Any vacancy occurring in the board of directors
may be filled by the affirmative vote of a majority of the
remaining directors though less than a quorum of the board of
directors. A director elected to fill a vacancy shall be
elected for the unexpired term of his predecessor in office.
Any directorship to be filled by reason of an increase in the
number of directors may be filled by election by the board of
directors for a term of office continuing only until the next
election of directors by the shareholders.
Section 10. Resignation and Removal of Directors. Any director or
member of any committee may resign at any time. Such
resignation shall be made in writing and shall take effect at
the time specified therein. If no time is specified, it shall
take effect from the time of its receipt by the Secretary, who
shall record such resignation, noting the day and hour of its
<PAGE>
reception. The acceptance of a resignation shall not be
necessary to make it effective. Notwithstanding anything to
the contrary in Article I, Section 2 hereof, a meeting for
removing a director shall be called in accordance with the
procedures specified in Section 16(c) of the Investment
Company Act of 1940, and the shareholder communications
provisions of said Section 16(c) shall be following by the
corporation. At any meeting of shareholders, duly called and
at which a quorum is present, the shareholders may, by
affirmative vote of the holders of a majority of the votes
entitled to be cast thereon, remove any director or directors
from office and may elect a successor or successors to fill
any resulting vacancies to hold office until the next annual
meeting of shareholders or until a successor or successors are
elected and qualify.
Section 11. Telephone Meetings. Any member or members of the board of
directors or of any committee designated by the board of
directors, may participate in a meeting of the board, or any
such committee, as the case may be, by means of a conference
telephone or similar communications equipment if all persons
participating in the meeting can hear each other at the same
time. Participation in a meeting by these means constitutes
presence in person at the meeting. This Section 11 shall not
be applicable to meetings held for the purpose of voting in
respect of approval of contracts or agreements whereby a
person undertakes to serve or act as investment adviser of, or
principal underwriter for, the corporation or in respect to
other matters as to which the Investment Company Act of 1940
or the rules thereunder require that votes be cast in person.
Section 12. Action by Directors Without Meeting. The provisions of
these bylaws covering notices and meetings to the contrary
notwithstanding, and except as required by law (including
Section 15 of the Investment Company Act of 1940), any action
required or permitted to be taken at any meeting of the board
of directors may be taken without a meeting if a consent in
writing setting forth the action shall be signed by all of the
directors entitled to vote upon the action and such written
consent is filed with the minutes of proceedings of the board
of directors.
ARTICLE III.
COMMITTEES
Section 1. Executive Committee. The board of directors, by resolution
adopted by a majority of the whole board of directors, may
provide for an executive committee of three (3) or more
directors. If provision be made for an executive committee,
the members thereof shall be elected by the board of directors
to serve during the pleasure of the board of directors.
Unless otherwise provided by resolution of the board of
directors, the president shall be a member and the chairman of
<PAGE>
the executive committee shall preside at all meetings thereof.
During the intervals between the meetings of the board of
directors, the executive committee shall possess and may
exercise all of the powers of the board of directors in the
management of the business and affairs of the corporation
conferred by the bylaws or otherwise, to the extent authorized
by the resolution providing for such executive committee or by
subsequent resolution adopted by a majority of the whole board
of directors, in all cases in which specific directions shall
not have been given by the board of directors. Notwithstanding
the foregoing, the executive committee shall not have the
power to: (i) declare dividends or distributions on stock;
(ii) issue stock other than as provided by the Maryland
General Corporation Law; (iii) recommend to the shareholders
any action which requires shareholder approval; (iv) amend
these bylaws; or (v) approve any merger or share exchange
which does not require shareholder approval. The executive
committee shall maintain written records of its transactions.
All action by the executive committee shall be reported to the
board of directors at its meeting next succeeding such action,
and shall be subject to ratification, with or without revision
or alteration, by such vote of the board of directors as would
have been required under Article II, Section 7, hereof, had
such action been taken by the board of directors. Vacancies in
the executive committee shall be filled by the board of
directors.
Section 2. Meetings of the Executive Committee. The executive committee
shall fix its own rules of procedure and shall meet as
provided by such rules or by resolution of the board of
directors, and it shall also meet at the call of the chairman
or of any two (2) members of the committee. A majority of the
executive committee shall constitute a quorum. Except in
cases in which it is otherwise provided by resolution of the
board of directors, the vote of a majority of such quorum at
a duly constituted meeting shall be sufficient to elect and to
pass any measure, subject to ratification by the board of
directors as provided in Section 1 of this Article III.
Section 3. Other Committees. The board of directors may by resolution
provide for such other standing or special committees as it
deems desirable, and discontinue the same at its pleasure.
Each such committee shall have such powers and perform such
duties as may be assigned to it by the board of directors.
Section 4. Committee Action Without Meeting. The provisions of these
bylaws covering notices and meetings to the contrary
notwithstanding, and except as required by law, any action
required or permitted to be taken at any meeting of any
committee of the board of directors appointed pursuant to
these bylaws may be taken without a meeting if a consent in
writing setting forth the action shall be signed by all
members of the committee entitled to vote upon the action, and
such written consent is filed with the records of the
proceedings of the committee.
<PAGE>
ARTICLE IV.
OFFICERS
Section 1. Numbers; Qualifications; Term of Office; Vacancies. The board
of directors may select one of their number as chairman of the
board and may select one of their number as vice chairman of
the board (neither of which positions shall be considered to
be the designation of a position as an officer of the
corporation), and shall choose as officers a president from
among the directors and a treasurer and a secretary who need
not be directors. The board of directors may also choose one
or more vice presidents, one or more assistant secretaries and
one or more assistant treasurers, none of whom need be a
director. Any two or more of such offices, except those of
president and vice president, may be held by the same person,
but no officer shall execute, acknowledge or verify any
instrument in more than one capacity if such instrument is
required by law or by the certificate of incorporation or by
these bylaws or by resolution of the board of directors to be
executed, acknowledged or verified by any two or more
officers. Each such officer shall hold office until the first
meeting of the board of directors after the annual meeting of
the shareholders next following his election or, if no such
annual meeting of the shareholders is held, until the annual
meeting of the board of directors in the year following his
election, and, until his successor is chosen and qualified or
until he shall have resigned or died, or until he shall have
been removed as hereinafter provided in Section 3 of this
Article IV. Any vacancy in any of the above offices may be
filled by the board of directors at any regular or special
meeting. All officers and agents of the corporation, as
between themselves and the corporation, shall have such
authority and perform such duties in the management of the
corporation as may be provided in or pursuant to these bylaws,
or, to the extent not so provided, as may be prescribed by the
board of directors; provided, that no rights of any third
party shall be affected or impaired by any such bylaws or
resolution of the board unless the third party has knowledge
thereof.
Section 2. Subordinate Officers. The board of directors, or any
officer thereunto authorized by it, may appoint from time to
time such other officers and agents for such terms of office
and with such powers and duties as may be prescribed by the
board of directors or the officer making such appointment.
Section 3. Removal. Any officer or agent may be removed by the board
of directors whenever, in its judgment, the best interests of
the corporation will be served thereby, but such removal shall
be without prejudice to the contractual rights, if any, of the
person so removed.
<PAGE>
Section 4. Chairman of the Board. The chairman of the board, if one
shall be elected, shall preside at all meetings of the board
of directors, and shall appoint all committees except such as
are required by statute, these bylaws or a resolution of the
board of directors or of the executive committee to be
otherwise appointed, and shall have other such duties as may
be assigned to him from time to time by the board of
directors. In recognition of notable and distinguished
services to the corporation, the board of directors may
designate one of its members as honorary chairman, who shall
have such duties as the board may, from time to time, assign
him by appropriate resolution, excluding, however, any
authority or duty vested by law or these bylaws in any other
officer.
Section 5. Vice Chairman of the Board. The vice chairman of the board,
if one shall be elected, shall preside at all meetings of the
board of directors at which the chairman of the board is not
present, shall call at his discretion and shall preside at
meetings of those directors of the corporation who are not
affiliated with the corporation's investment adviser,
distributor, or affiliates thereof, and shall perform such
other duties as may be assigned to the vice chairman from time
to time by the board of directors.
Section 6. President. The president shall preside at all meetings of the
shareholders and, in the absence of the chairman and the vice
chairman of the board or if a chairman and vice chairman of
the board are not elected, at all meetings of the board of
directors. Unless otherwise provided by the board of
directors, he shall have direct control of and any authority
over the business and affairs and over the officers of the
corporation, and shall preside at all meetings of the
executive committee. The president shall also perform all
such other duties as are incident to his office and as may be
assigned to him from time to time by the board of directors.
Section 7. Vice Presidents. The vice president or vice presidents, at
the request of the president or in his absence or inability to
act, shall perform the duties and exercise the functions of
the president in such manner as may be directed by the
president, the board of directors or the executive committee.
The vice president or vice presidents shall have such other
powers and perform all such other duties as may be assigned to
them by the board of directors, the executive committee, or
the president.
Section 8. Secretary. The secretary shall see that all notices are duly
given in accordance with these bylaws; he shall keep the
minutes of all meetings of the shareholders and, if directed
to do so by the chairman of the meeting, of meetings of the
board of directors and of the executive committee at which he
shall be present; he shall have charge of the books and
records and the corporate seal or seals of the corporation; he
shall see that the corporate seal is affixed to all documents,
<PAGE>
the execution of which under the seal of the corporation is
duly authorized and is necessary; and he shall make such
reports and perform all such other duties as are incident to
his office and as may be assigned to him from time to time by
the board of directors or by the president.
Section 9. Treasurer. The treasurer shall be the chief financial officer
of the corporation, and as such shall have supervision of the
custody of all funds, securities and valuable documents of the
corporation, subject to such arrangements as may be authorized
or approved by the board of directors with respect to the
custody of assets of the corporation; shall receive, or cause
to be received, and give, or cause to be given, receipts for
all funds, securities or valuable documents paid or delivered
to, or for the account of, the corporation, and cause such
funds, securities or valuable documents to be deposited for
the account of the corporation with such banks or trust
companies as shall be designated by the board of directors;
shall pay or cause to be paid out of the funds of the
corporation all just debts of the corporation upon their
maturity; shall maintain, or cause to be maintained, accurate
records of all receipts, disbursements, assets, liabilities,
and transactions of the corporation; shall see that adequate
audits thereof are regularly made; shall, when required by the
board of directors, render accurate statements of the
condition of the corporation; and shall perform all such other
duties as are incident to his office and as may be assigned to
him by the board of directors or by the president.
Section 10. Assistant Secretaries, Assistant Treasurers. The assistant
secretaries and assistant treasurers shall have such duties as
from time to time may be assigned to them by the board of
directors, or by the president.
Section 11. Compensation. The board of directors shall have the power
to fix the compensation of all officers and agents of the
corporation, but may delegate to any officer or committee the
power of determining the amount of salary to be paid to any
officer or agent of the corporation other than the chairman of
the board, the president, the vice presidents, the secretary
and the treasurer.
Section 12. Contracts. Except as otherwise provided by law or by the
charter, no contract or transaction between the corporation
and any partnership or corporation, and no act of the
corporation, shall in any way be affected or invalidated by
the fact that any officer or director of the corporation is
pecuniarily or otherwise interested therein or is a member,
officer or director of such other partnership or corporation
if such interest shall be known to the board of directors of
the corporation. Specifically, but without limitation of the
foregoing, the corporation may enter into one or more
contracts appointing INVESCO Funds Group, Inc. investment
adviser of the corporation, and may otherwise do business with
INVESCO Funds Group, Inc., notwithstanding the fact that one
<PAGE>
or more of the directors of the corporation and some or all of
its officers are, have been or may become directors, officers,
members, employees, or shareholders of INVESCO Funds Group,
Inc. and may deal freely with each other, and neither such
contract appointing INVESCO Funds Group, Inc. investment
adviser to the corporation nor any other contract or
transaction between the corporation and INVESCO Funds Group,
Inc. shall be invalidated or in any way affected thereby, nor
shall any director or officer of the corporation by reason
thereof be liable to the corporation or to any shareholder or
creditor of the corporation or to any other person for any
loss incurred under or by reason of any such contract or
transaction. For purposes of this paragraph, any reference to
"INVESCO Funds Group, Inc." shall be deemed to include said
company and any parent, subsidiary or affiliate of said
company and any successor (by merger, consolidation or
otherwise) to said company or any such parent, subsidiary or
affiliate.
Section 13. Delegation of Duties. Whenever an officer is absent or
disabled, or whenever for any reason the board of directors
may deem it desirable, the board may delegate the powers and
duties of an officer to any other officer or officers or to
any director or directors.
ARTICLE V.
CAPITAL STOCK
Section 1. Issuance of Stock. The corporation shall not issue its shares
of capital stock except as approved by the board of directors.
Upon the sale of each share of its common stock, except as
otherwise permitted by applicable laws and regulations, the
corporation shall receive in cash or in securities valued as
provided in Article VIII of these bylaws, not less than the
current net asset value thereof, exclusive of any distributing
commission or discount, and in no event less than the par
value thereof.
Section 2. Certificates. Certificates for the Corporation's classes of
Common Stock shall be issued only upon the specific request of
a shareholder. If certificates are requested, they shall be
issued in such a form as may be approved by the board of
directors, they shall be respectively numbered serially for
each class of shares, or series thereof, as they are issued,
and shall be signed by, or bear a facsimile of the signatures
of, the president or a vice president, and shall also be
signed by, or bear a facsimile of the signature of some other
person who is one of the following: the treasurer, an
assistant treasurer, the secretary, or an assistant secretary;
and shall be sealed with, or bear a facsimile of, the seal of
the corporation. In case any officer of the corporation whose
signature or facsimile signature appears on such certificates
shall cease to be such officer, whether because of death,
<PAGE>
resignation or otherwise, certificates may nevertheless be
issued and delivered as though such person had not ceased to
be an officer.
Section 3. Transfers. Subject to the Maryland General Corporation Law,
the board of directors shall have power and authority to make
all such rules and regulations as it may deem expedient
concerning the issue, transfer and registration of
certificates of stock; and may appoint transfer agents and
registrars thereof. The duties of transfer agent and registrar
may be combined.
Section 4. Stock Ledgers. Original or duplicate stock ledgers,
containing the names and addresses of the shareholders of the
corporation and the number of shares of each class held by
them respectively, shall be kept at an office or agency of the
corporation in such city or town as may be designated by the
board of directors.
Section 5. Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining shareholders entitled to notice of or
to vote at any meeting of shareholders or any adjournment
thereof, or shareholders entitled to receive payment of any
dividend, or in order to make a determination of shareholders
for any other purpose, the board of directors of the
Corporation may provide that the share transfer books shall be
closed for a stated period but not to exceed, in any case,
twenty days. If the share transfer books shall be closed for
the purpose of determining shareholders entitled to notice of
or to vote at a meeting of shareholders, such books shall be
closed for at least ten days immediately preceding such
meeting. In lieu of closing the share transfer books, the
board of directors may fix in advance a date as the record
date for any such determination of shareholders, such date in
any case to be not more than ninety days and, in case of a
meeting of shareholders, not less than ten days prior to the
date on which the particular action, requiring such
determination of shareholders, is to be taken. If the share
transfer books are not closed and no record date is fixed for
the determination of shareholders entitled to notice of or to
vote at a meeting of shareholders, the later of the close of
business on the date on which notice of the meeting is mailed
or the thirtieth day before the meeting shall be the record
date for determining shareholders entitled to notice of or to
vote at a meeting of shareholders. The record date for
determining shareholders entitled to receive payment of a
dividend or an allotment of any rights shall be the close of
business on the day on which the resolution of the board of
directors declaring such dividend or allotment of rights is
adopted. But the payment or allotment may not be made more
than 60 days after the date on which the resolution is
adopted. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided
in this section, such determination shall apply to any
adjournment thereof.
<PAGE>
Section 6. New Certificates. In case any certificate of stock is lost,
stolen, mutilated or destroyed, the board of directors may
authorize the issue of a new certificate in place thereof upon
such terms and conditions as it may deem advisable; or the
board of directors may delegate such power to any officer or
officers of the corporation; but the board of directors or
such officer or officers, in their discretion, may refuse to
issue such new certificate, save upon the order of some court
having jurisdiction in the premises.
Section 7. Registered Owners of Stock. The corporation shall be entitled
to recognize the exclusive right of a person registered on its
books as the owner of shares of stock to receive dividends,
and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of
shares of stock, and shall not be bound to recognize any
equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it
shall have express or other notice thereof, except as
otherwise provided by the laws of Maryland.
Section 8. Fractional Denominations. Subject to any applicable
provisions of law and the charter of the corporation, the
corporation may issue shares of its capital stock in
fractional denominations, provided that the transactions in
which and the terms and conditions upon which shares in
fractional denominations may be issued from time to time be
limited or determined by or under the authority of the board
of directors.
ARTICLE VI.
FINANCES
Section 1. Checks, drafts, etc. All instruments, documents, and other
papers shall be executed in the name and on behalf of the
corporation, and all drafts, checks, notes and other
obligations for the payment of money by the corporation shall,
unless otherwise provided by resolution of the board of
directors, be signed by the president or vice president and
countersigned by the secretary or treasurer.
Section 2. Annual Reports. A statement of the affairs of the corporation
shall be submitted at the annual meeting of the shareholders
and, within twenty (20) days after the meeting, shall be
placed on file at the corporation's principal office. If the
corporation is not required to hold an annual meeting of
shareholders, the corporation's statement of affairs shall be
placed on file at the corporation's principal office within
one hundred and twenty (120) days after the end of its fiscal
year. Such statement shall be prepared by such executive
officer of the corporation as may be designated by resolution
of the board of directors. If no other executive officer is
<PAGE>
so designated, it shall be the duty of the president to
prepare such statement.
Section 3. Fiscal Year. The fiscal year of the corporation shall begin
on the 1st day of January in each year and end on the 31st day
of December following.
Section 4. Dividends and Distributions. Subject to any applicable
provisions of law and the charter of the corporation,
dividends and distributions upon the common stock of the
corporation may be declared at such intervals as the board of
directors may determine, in cash, in securities or other
property, or in shares of stock of the corporation, from any
sources permitted by law, all as the board of directors shall
from time to time determine.
Section 5. Location of Books and Records. The books and records of the
corporation may be kept outside the State of Maryland at the
principal office of the corporation or at such place or places
as the board of directors may from time to time determine,
except as otherwise required by law.
ARTICLE VII.
REDEMPTION OF STOCK
The registered owner of the outstanding stock of the corporation shall
have the right to require the corporation to redeem his shares at the asset
value thereof, as hereinafter defined in Article VIII of these bylaws, upon
delivery to the corporation of any certificate, or certificates, properly
endorsed, which have been issued as evidence of ownership of such stock, and a
written request for redemption in a form satisfactory to the corporation.
Stock of the corporation shall be redeemed at the current net asset value
per share next determined after a request in proper form has been received from
the registered owner or owner's designee at the office of the corporation
designated to receive redemption requests. Any certificates delivered at the
designated principal place of business of the corporation on a day which is not
a business day as herein defined, shall be deemed to have been received on the
business day next succeeding the day of such delivery. Subject to the
limitations of the Investment Company Act of 1940, the board of directors shall
have authority to fix a reasonable service charge for redemption of its stock,
including redemption pursuant to any periodic withdrawal or variable payment
plan or contract.
ARTICLE VIII.
DETERMINATION OF ASSET VALUE
Section 1. Net Asset Value. The net asset value of a share of common
stock of the corporation shall be determined in accordance
with applicable laws and regulations under the supervision of
such persons and at such time or times, including the close of
<PAGE>
business on each business day, as shall be prescribed by the
board of directors. Each such determination shall be made by
subtracting from the value of the assets of the corporation
(as determined pursuant to Section 2 of this Article of the
bylaws) the amount of its liabilities, dividing the remainder
by the number of shares of common stock issued and
outstanding, and adjusting the results to the nearest full
cent per share.
Section 2. Valuation of Portfolio Securities and Other Assets. Except
as otherwise required by any applicable law or regulation of
any regulatory agency having jurisdiction over the activities
of the corporation, the corporation shall determine the value
of its portfolio securities and other assets as follows:
(a) securities for which market quotations are readily
available shall be valued at current market value
determined in such manner as the board of directors may
from time to time prescribe;
(b) all other securities and assets shall be valued at
amounts deemed best to reflect their fair value as
determined in good faith by 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;
All quotations, sale prices, bid and asked prices and other
information shall be obtained from such sources as the persons
making such determination believe to be reliable, and any
determination of net asset value based thereon shall be
conclusive.
ARTICLE IX.
PERIOD OF EMERGENCY
During any period of emergency, the board of directors, at its option, may
suspend the computation of asset value for the purpose of issuing or redeeming
it stock, and may suspend any obligation to accept payments for the acquisition
of additional stock of the corporation and may suspend the obligation of the
corporation to redeem stock. A period of emergency is defined to be:
(a) A period during which the New York Stock Exchange is closed other
than customary weekend and holiday closings, or during which trading
on the New York Stock Exchange is restricted;
(b) A period during which disposal by the corporation of securities
owned by it is not reasonably practicable, or during which it is not
reasonably practicable for the corporation to fairly to determine
the value of its net assets; or
(c) Such other periods as the Securities and Exchange Commission
pursuant to the provisions of the Investment Company Act of 1940 may
by order declare as an emergency period or periods.
<PAGE>
ARTICLE X.
MISCELLANEOUS PROVISIONS
Section 1. Seal. The board of directors shall provide a suitable seal,
bearing the name of the corporation, which shall be in the
charge of the secretary. The board of directors may authorize
one or more duplicate seals and provide for the custody
thereof.
Section 2. Bonds. The board of directors may require any officer,
agent or employee of the corporation to give a bond to the
corporation, conditioned upon the faithful discharge of his
duties, with one or more sureties and in such amount as may be
satisfactory to the board of directors.
Section 3. Voting upon Stock in Other Corporations. Any stock in other
corporations or associations, which may from time to time be
held by the corporation, may be voted at any meeting of the
shareholders thereof by the president or a vice president of
the corporation or by proxy or proxies appointed by the
president or one of the vice presidents of the corporation.
The board of directors, however, may by resolution appoint
some other person or persons to vote such stock, in which
case, such person or persons shall be entitled to vote such
stock upon the production of a certified copy of such
resolution.
Section 4. Bylaws. The board of directors shall have the power to make,
amend and repeal the bylaws of the corporation which may
contain any provision for regulation and management of the
affairs of the corporation not inconsistent with law or the
certificate of incorporation; provided that any and all
provisions of the bylaws, notwithstanding the power of the
directors to act with respect thereto, may be altered or
repealed, and new provisions may be adopted by the
shareholders or at any annual meeting or any special meeting
called for that purpose.
Section 5. Appointment and Duties of Custodian. The corporation shall
at all times employ a bank or trust company having the
qualifications specified by the Investment Company Act of
1940, as amended, as custodian with authority as its agent,
but subject to such restrictions, limitations and other
requirements, if any, as may be contained in these bylaws and
the Investment Company Act of 1940, as amended:
(1) to receive and hold the securities owned by the
corporation and deliver the same upon written order;
(2) to receive and receipt for any moneys due to the
corporation and deposit the same in its own banking
department or elsewhere as the board of directors may
direct;
<PAGE>
(3) to disburse such funds upon orders or vouchers;
(4) and to provide such additional services as may be
requested by the corporation;
all upon such basis of compensation as may be agreed upon
between the board of directors and the custodian.
The board of directors may also authorize the custodian to employ one or
more sub-custodians from time to time to perform such of the acts and
services of the custodian, and upon such terms and conditions, as may be
agreed upon between the custodian and such sub-custodian and approved by
the board of directors.
Section 6. Central Certification System. Subject to such rules,
regulations and orders as the U.S. Securities and Exchange
Commission may adopt, the board of directors may direct the
custodian to deposit all or any part of the securities owned
by the corporation in a system for the central handling of
securities established by a national securities exchange or a
national securities association registered with the SEC under
the Securities Exchange Act of 1934, or such other person as
may be permitted by the SEC or its staff in accordance with
the Investment Company Act of 1940, as amended, and any rule
or staff interpretation thereof, pursuant to which system all
securities of any particular class or series of any issuer
deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical
delivery of such securities, provided that all such deposits
shall be subject to withdrawal only upon the order of the
corporation.
Section 7. Compliance with Federal Regulations. The board of directors
is hereby empowered to take such action as it may deem to be
necessary, desirable or appropriate so that the corporation is
or shall be in compliance with any federal or state statute,
rule or regulation with which compliance by the corporation is
required.
Section 8. Waiver of Notice. Whenever any notice of the time, place or
purpose of any meeting of shareholders, directors, or of any
committee is required to be given under the provisions of
statute or under the provisions of the charter of the
corporation or these bylaws, a waiver thereof in writing,
signed by the person or person entitled to such notice and
filed with the records of the meeting, whether before or after
the holding thereof, or actual attendance at the meeting of
directors or committee in person, shall be deemed equivalent
to the giving of such notice to such person.
Section 9. Offices. The principal office of the corporation in the State
of Maryland shall be in the City of Baltimore. In addition to
its principal office in the State of Maryland, the corporation
may have an office or offices in the City of Denver, State of
Colorado, and at such other places as the board of directors
<PAGE>
may from time to time designate or the business of the
corporation may require.
Section 10. Definitions. For all purposes of the certificate of
incorporation and these bylaws, the terms:
(a) "business day" shall be defined as a day with respect to
which the New York Stock Exchange is open for business,
and with respect to which the actual time of closing of
such exchange is that time which shall have been
scheduled for such closing in advance of the opening of
such exchange;
(b) "the close of business" shall be defined as the time of
closing of the New York Stock Exchange.
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made this 30th day of September, 1997 between INVESCO
VARIABLE INVESTMENT FUNDS, INC., a Maryland corporation (the "Fund"), and
INVESCO DISTRIBUTORS, 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
<PAGE>
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,
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
<PAGE>
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.
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
<PAGE>
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.
<PAGE>
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 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
<PAGE>
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
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
<PAGE>
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
<PAGE>
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.
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
<PAGE>
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 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.
<PAGE>
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 September 30, 1998, 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
<PAGE>
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.
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.
<PAGE>
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:
/s/ Glen A. Payne By:/s/ Dan J. Hesser
- -------------------- --------------------------------
Glen A. Payne Dan J. Hesser
Secretary President
INVESCO DISTRIBUTORS, INC.
ATTEST:
By:/s/ Ronald L. Grooms
------------------------------
Ronald L. Grooms
Senior Vice President
Glen A. Payne
Secretary
CUSTODIAN CONTRACT
Between
INVESCO VARIABLE INVESTMENT FUNDS, INC.
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
----
1. Employment of Custodian and Property to be Held by
It..........................................................1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian in the United States......3
2.1 Holding Securities.................................3
2.2 Delivery of Securities.............................3
2.3 Registration of Securities.........................8
2.4 Bank Accounts......................................9
2.5 Availability of Federal Funds.....................10
2.6 Collection of Income..............................10
2.7 Payment of Fund Monies............................11
2.8 Liability for Payment in Advance of
Receipt of Securities Purchased...................14
2.9 Appointment of Agents.............................15
2.10 Deposit of Fund Assets in Securities System.......15
2.10A Fund Assets Held in the Custodian's Direct
Paper Sytem.......................................18
2.11 Segregated Account................................20
2.12 Ownership Certificates for Tax Purposes...........21
2.13 Proxies...........................................22
2.14 Communications Relating to Portfolio
Securities........................................22
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States.................23
3.1 Appointment of Foreign Sub-Custodians.............23
3.2 Assets to be Held.................................23
3.3 Foreign Securities Depositories...................24
3.4 Agreements with Foreign Banking Institutions......24
3.5 Access of Independent Accountants of the Fund.....25
3.6 Reports by Custodian..............................25
3.7 Transactions in Foreign Custody Account...........26
3.8 Liability of Foreign Sub-Custodians...............27
3.9 Liability of Custodian............................27
3.10 Reimbursement for Advances........................28
3.11 Monitoring Responsibilities.......................29
3.12 Branches of U.S. Banks............................29
3.13 Tax Law...........................................30
4. Payments for Sales or Repurchase or Redemptions
of Shares of the Funds.....................................31
5. Proper Instructions........................................32
6. Actions Permitted Without Express Authority................33
7. Evidence of Authority......................................33
<PAGE>
8. Duties of Custodian With Respect to the Books of Account
and Calculation of Net Asset Value and Net Income........34
9. Records..................................................34
10. Opinion of Fund's Independent Accountants................35
11. Reports to Fund by Independent Public Accountants........35
12. Compensation of Custodian................................36
13. Responsibility of Custodian..............................36
14. Effective Period, Termination and Amendment..............38
15. Successor Custodian......................................40
16. Interpretive and Additional Provisions...................41
17. Additional Funds.........................................42
18. Massachusetts Law to Apply...............................42
19. Prior Contracts..........................................42
20. Shareholder Communications...............................43
<PAGE>
CUSTODIAN CONTRACT
This Contract between INVESCO Variable Investment Funds, Inc., a
corporation organized and existing under the laws of Maryland, having its
principal place of business at 7800 East Union Avenue, Denver, Colorado 80237,
hereinafter called the "Fund", and State Street Bank and Trust Company, a
Massachusetts trust company, having its principal place of business at 225
Franklin Street, Boston, Massachusetts, 02110, hereinafter called the
"Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Fund intends to initially offer shares in four series,
INVESCO VIF - Industrial Income Portfolio, INVESCO VIF - Total Return Portfolio,
INVESCO VIF - High Yield Portfolio and INVESCO VIF - Utilities Portfolio (such
series together with all other series subsequently established by the Fund and
made subject to this Contract in accordance with paragraph 17, being herein
referred to as the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants
and agreements hereinafter contained, the parties hereto agree as
follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of the assets of
the Portfolios of the Fund, including securities which the Fund, on behalf of
the applicable Portfolio desires to be held in places within the United States
("domestic securities") and securities it desires to be held outside the United
States ("foreign securities") pursuant to the provisions of the Articles of
Incorporation. The Fund on behalf of the Portfolio(s) agrees to deliver to the
Custodian all securities and cash of the Portfolios, and all payments of income,
payments of principal or capital distributions received by it with respect to
all securities owned by the Portfolio(s) from time to time, and the cash
consideration received by it for such new or treasury shares of capital stock of
the Fund representing interests in the Portfolios, ("Shares") as may be issued
or sold from time to time. The Custodian shall not be responsible for any
property of a Portfolio held or received by the Portfolio and not delivered to
the Custodian. Upon receipt of "Proper Instructions" (within the meaning of
Article 5), the Custodian shall on behalf of the applicable Portfolio(s) from
time to time employ one or more sub-custodians, located in the United States but
only in accordance with an applicable vote by the Board of Directors of the Fund
on behalf of the applicable Portfolio(s), and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as sub-custodian
for the Fund's foreign securities on behalf of the applicable Portfolio(s) the
foreign banking institutions and foreign securities depositories designated in
Schedule A hereto but only in accordance with the provisions of Article 3.
<PAGE>
2. Duties of the Custodian with Respect to Property of the
Fund Held By the Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of each Portfolio all non-cash property, to be held
by it in the United States including all domestic securities owned
by such Portfolio, other than (a) securities which are
maintained pursuant to Section 2.10 in a clearing agency which acts as
a securities depository or in a book-entry system authorized by the
U.S. Department of the Treasury, collectively referred to herein as
"Securities System" and (b) commercial paper of an issuer for which
State Street Bank and Trust Company acts as issuing and paying agent
("Direct Paper") which is deposited and/or maintained in the Direct
Paper System of the Custodian pursuant to Section 2.10A.
2.2 Delivery of Securities. The Custodian shall release and deliver
domestic securities owned by a Portfolio held by the Custodian or in a
Securities System account of the Custodian or in the Custodian's Direct
Paper book entry system account ("Direct Paper System Account") only
upon receipt of Proper Instructions from the Fund on behalf of the
applicable Portfolio, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of the
Portfolio and receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such
securities entered into by the Portfolio;
3) In the case of a sale effected through a Securities
System, in accordance with the provisions of Section 2.10
hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the
name of the Portfolio or into the name of any nominee or
nominees of the Custodian or into the name or nominee name
of any agent appointed pursuant to Section 2.9 or into the
name or nominee name of any sub-custodian appointed
pursuant to Article 1; or for exchange for a different
number of bonds, certificates or other evidence
representing the same aggregate face amount or number of
units; provided that, in any such case, the new
securities are to be delivered to the Custodian;
<PAGE>
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street
delivery" custom; provided that in any such case, the
Custodian shall have no responsibility or liability for any
loss arising from the delivery of such securities prior to
receiving payment for such securities except as may arise
from the Custodian's own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights
or similar securities or the surrender of interim receipts
or temporary securities for definitive securities; provided
that, in any such case, the new securities and cash, if
any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities
made by the Portfolio, but only against receipt of adequate
collateral as agreed upon from time to time by the
Custodian and the Fund on behalf of the Portfolio, which
may be in the form of cash or obligations issued by the
United States government, its agencies or
instrumentalities, except that in connection with any loans
for which collateral is to be credited to the Custodian's
account in the book-entry system authorized by the U.S.
Department of the Treasury, the Custodian will not be held
liable or responsible for the delivery of securities owned
by the Portfolio prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings
by the Fund on behalf of the Portfolio requiring a pledge
of assets by the Fund on behalf of the Portfolio, but only
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the
Securities Exchange Act of 1934 (the "Exchange Act") and a
member of The National Association of Securities Dealers,
Inc. ("NASD"), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national
securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions by the Portfolio of the Fund;
<PAGE>
13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian, and a Futures Commission Merchant registered
under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading Commission
and/or any Contract Market, or any similar organization or
organizations, regarding account deposits in connection
with transactions by the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Fund, for delivery to such
Transfer Agent or to the holders of shares in connection
with distributions in kind, as may be described from time
to time in the currently effective prospectus and statement
of additional information of the Fund, related to the
Portfolio ("Prospectus"), in satisfaction of requests by
holders of Shares for repurchase or redemption; and
15) For any other proper corporate purpose, but only upon
receipt of, in addition to Proper Instructions from the
Fund on behalf of the applicable Portfolio, a certified
copy of a resolution of the Board of Directors or of the
Executive Committee signed by an officer of the Fund and
certified by the Secretary or an Assistant Secretary,
specifying the securities of the Portfolio to be delivered,
setting forth the purpose for which such delivery is to be
made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery
of such securities shall be made.
2.3 Registration of Securities. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, unless the Fund has authorized
in writing the appointment of a nominee to be used in common with other
registered investment companies having the same investment adviser as
the Portfolio, or in the name or nominee name of any agent appointed
pursuant to Section 2.9 or in the name or nominee name of any
sub-custodian appointed pursuant to Article 1. All securities accepted
by the Custodian on behalf of the Portfolio under the terms of this
Contract shall be in "street name" or other good delivery form. If,
however, the Fund directs the Custodian to maintain securities in
"street name", the Custodian shall utilize its best efforts only to
timely collect income due the Fund on such securities and to notify the
Fund on a best efforts basis only of relevant corporate actions
including, without limitation, pendency of calls, maturities, tender or
exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Portfolio
of the Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Contract, and shall hold in such account
or accounts, subject to the provisions hereof, all cash received by it
<PAGE>
from or for the account of the Portfolio, other than cash maintained by
the Portfolio in a bank account established and used in accordance with
Rule 17f-3 under the Investment Company Act of 1940. Funds held by the
Custodian for a Portfolio may be deposited by it to its credit as
Custodian in the Banking Department of the Custodian or in such other
banks or trust companies as it may in its discretion deem necessary or
desirable; provided, however, that every such bank or trust company
shall be qualified to act as a custodian under the Investment Company
Act of 1940 and that each such bank or trust company and the funds to
be deposited with each such bank or trust company shall on behalf of
each applicable Portfolio be approved by vote of a majority of the
Board of Directors of the Fund. Such funds shall be deposited by the
Custodian in its capacity as Custodian and shall be withdrawable by the
Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between the Fund
on behalf of each applicable Portfolio and the Custodian, the Custodian
shall, upon the receipt of Proper Instructions from the Fund on behalf
of a Portfolio, make federal funds available to such Portfolio as of
specified times agreed upon from time to time by the Fund and the
Custodian in the amount of checks received in payment for Shares of
such Portfolio which are deposited into the Portfolio's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to registered domestic securities held hereunder to which
each Portfolio shall be entitled either by law or pursuant to custom in
the securities business, and shall collect on a timely basis all income
and other payments with respect to bearer domestic securities if, on
the date of payment by the issuer, such securities are held by the
Custodian or its agent thereof and shall credit such income, as
collected, to such Portfolio's custodian account. Without limiting the
generality of the foregoing, the Custodian shall detach and present for
payment all coupons and other income items requiring presentation as
and when they become due and shall collect interest when due on
securities held hereunder. Income due each Portfolio on securities
loaned pursuant to the provisions of Section 2.2 (10) shall be the
responsibility of the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the Fund
with such information or data as may be necessary to assist the Fund in
arranging for the timely delivery to the Custodian of the income to
which the Portfolio is properly entitled.
<PAGE>
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions from the
Fund on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian
shall pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account
of the Portfolio but only (a) against the delivery of such
securities or evidence of title to such options, futures
contracts or options on futures contracts to the Custodian
(or any bank, banking firm or trust company doing business
in the United States or abroad which is qualified under the
Investment Company Act of 1940, as amended, to act as a
custodian and has been designated by the Custodian as its
agent for this purpose) registered in the name of the
Portfolio or in the name of a nominee of the Custodian
referred to in Section 2.3 hereof or in proper form for
transfer; (b) in the case of a purchase effected through a
Securities System, in accordance with the conditions set
forth in Section 2.10 hereof; (c) in the case of a purchase
involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.10A; (d) in
the case of repurchase agreements entered into between the
Fund on behalf of the Portfolio and the Custodian, or
another bank, or a broker-dealer which is a member of NASD,
(i) against delivery of the securities either in
certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with such
securities or (ii) against delivery of the receipt
evidencing purchase by the Portfolio of securities owned by
the Custodian along with written evidence of the agreement
by the Custodian to repurchase such securities from the
Portfolio or (e) for transfer to a time deposit account of
the Fund in any bank, whether domestic or foreign; such
transfer may be effected prior to receipt of a confirmation
from a broker and/or the applicable bank pursuant to Proper
Instructions from the Fund as defined in Article 5;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section
2.2 hereof;
3) For the redemption or repurchase of Shares issued by the
Portfolio as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following
payments for the account of the Portfolio: interest, taxes,
management, accounting, transfer agent and legal fees, and
operating expenses of the Fund whether or not such expenses
are to be in whole or part capitalized or treated as
deferred expenses;
<PAGE>
5) For the payment of any dividends on Shares of
the Portfolio declared pursuant to the governing
documents of the Fund;
6) For payment of the amount of dividends received
in respect of securities sold short;
7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions from the Fund on behalf of
the Portfolio, a certified copy of a resolution of the
Board of Directors or of the Executive Committee of the
Fund signed by an officer of the Fund and certified by its
Secretary or an Assistant Secretary, specifying the amount
of such payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a
proper purpose, naming the person or persons to whom such
payment is to be made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of a Portfolio is made by the Custodian in advance of receipt
of the securities purchased in the absence of specific written
instructions from the Fund on behalf of such Portfolio to so pay in
advance, the Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received by
the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of
1940, as amended, to act as a custodian, as its agent to carry out such
of the provisions of this Article 2 as the Custodian may from time to
time direct; provided, however, that the appointment of any agent shall
not relieve the Custodian of its responsibilities or liabilities
hereunder.
2.10 Deposit of Fund Assets in Securities Systems. The Custodian may deposit
and/or maintain securities owned by a Portfolio in a clearing agency
registered with the Securities and Exchange Commission under Section
17A of the Securities Exchange Act of 1934, which acts as a securities
depository, or in the book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies,
collectively referred to herein as "Securities System" in
accordance with applicable Federal Reserve Board and Securities and
Exchange Commission rules and regulations, if any, and subject to
the following provisions:
1) The Custodian may keep securities of the Portfolio in a
Securities System provided that such securities are
represented in an account ("Account") of the Custodian in
the Securities System which shall not include any assets of
the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
<PAGE>
2) The records of the Custodian with respect to securities of
the Portfolio which are maintained in a Securities System
shall identify by book-entry those securities belonging to
the Portfolio;
3) The Custodian shall pay for securities purchased for the
account of the Portfolio pon (i) receipt of advice from the
Securities System that such securities have been
transferred to the Account, and (ii) the making of an entry
on the records of the Custodian to reflect such payment and
transfer for the account of the Portfolio. The Custodian
shall transfer securities sold for the account of the
Portfolio upon (i) receipt of advice from the Securities
System that payment for such securities has been
transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such
transfer and payment for the account of the Portfolio.
Copies of all advices from the Securities System of
transfers of securities for the account of the
Portfolio shall identify the Portfolio, be maintained
for the Portfolio by the Custodian and be provided
to the Fund at its request. Upon request, the
Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the
Portfolio in the form of a written advice or notice and
shall furnish to the Fund on behalf of the Portfolio copies
of daily transaction sheets reflecting each day's
transactions in the Securities System for the account of
the Portfolio.
4) The Custodian shall provide the Fund for the Portfolio with
any report obtained by the Custodian on the Securities
System's accounting system, internal accounting control and
procedures for safeguarding securities deposited in the
Securities System;
5) The Custodian shall have received from the Fund
on behalf of the Portfolio the initial or annual
certificate, as the case may be, required by
Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding,
the Custodian shall be liable to the Fund for the benefit
of the Portfolio for any loss or damage to the Portfolio
resulting from use of the Securities System by reason of
any negligence, misfeasance or misconduct of the Custodian
or any of its agents or of any of its or their employees or
from failure of the Custodian or any such agent to enforce
effectively such rights as it may have against the
Securities System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian
with respect to any claim against the Securities System or
any other person which the Custodian may have as a
consequence of any such loss or damage if and to the extent
that the Portfolio has not been made whole for any such
loss or damage.
2.10A Fund Assets Held in the Custodian's Direct Paper System. The Custodian
may deposit and/or maintain securities owned by a Portfolio in the
Direct Paper System of the Custodian subject to the following
provisions:
<PAGE>
1) No transaction relating to securities in the
Direct Paper System will be effected in the
absence of Proper Instructions from the Fund on
behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the
Direct Paper System only if such securities are represented
in an account ("Account") of the Custodian in the Direct
Paper System which shall not include any assets of the
Custodian other than assets held as a fiduciary, custodian
or otherwise for customers;
3) The records of the Custodian with respect to securities
of the Portfolio which are maintained in the Direct Paper
System shall identify by book-entry those securities
belonging to the Portfolio;
4) The Custodian shall pay for securities purchased for the
account of the Portfolio upon the making of an entry on the
records of the Custodian to reflect such payment and
transfer of securities to the account of the Portfolio. The
Custodian shall transfer securities sold for the account of
the Portfolio upon the making of an entry on the records of
the Custodian to reflect such transfer and receipt of
payment for the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the
account of the Portfolio, in the form of a written advice
or notice, of Direct Paper on the next business day
following such transfer and shall furnish to the Fund on
behalf of the Portfolio copies of daily transaction sheets
reflecting each day's transaction in the Securities System
for the account of the Portfolio;
6) The Custodian shall provide the Fund on behalf of the
Portfolio with any report on its system of internal
accounting control as the Fund may reasonably request from
time to time.
2.11 Segregated Account. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on
behalf of each such Portfolio, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
an account by the Custodian pursuant to Section 2.10 hereof, (i) in
accordance with the provisions of any agreement among the Fund on
behalf of the Portfolio, the Custodian and a broker-dealer registered
under the Exchange Act and a member of the NASD (or any futures
<PAGE>
commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange
(or the Commodity Futures Trading Commission or any registered contract
market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Portfolio, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by the
Portfolio or commodity futures contracts or options thereon purchased
or sold by the Portfolio, (iii) for the purposes of compliance by the
Portfolio with the procedures required by Investment Company Act
Release No. 10666, or any subsequent release or releases of the
Securities and Exchange Commission relating to the maintenance of
segregated accounts by registered investment companies and (iv) for
other proper corporate purposes, but only, in the case of clause (iv),
upon receipt of, in addition to Proper Instructions from the Fund on
behalf of the applicable Portfolio, a certified copy of a resolution of
the Board of Directors or of the Executive Committee signed by an
officer of the Fund and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such segregated
account and declaring such purposes to be proper corporate purposes.
2.12 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of each Portfolio held by
it and in connection with transfers of securities.
2.13 Proxies. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities are registered otherwise than in
the name of the Portfolio or a nominee of the Portfolio, all proxies,
without indication of the manner in which such proxies are to be voted,
and shall promptly deliver to the Portfolio such proxies, all proxy
soliciting materials and all notices relating to such securities.
2.14 Communications Relating to Portfolio Securities. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to the
Fund for each Portfolio all written information (including, without
limitation, pendency of calls and maturities of domestic securities and
expirations of rights in connection therewith and notices of exercise
of call and put options written by the Fund on behalf of the Portfolio
and the maturity of futures contracts purchased or sold by the
Portfolio) received by the Custodian from issuers of the securities
<PAGE>
being held for the Portfolio. With respect to tender or
exchange offers, the Custodian shall transmit promptly to the Portfolio
all written information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the party (or
his agents) making the tender or exchange offer. If the Portfolio
desires to take action with respect to any tender offer, exchange offer
or any other similar transaction, the Portfolio shall notify the
Custodian at least three business days prior to the date on which the
Custodian is to take such action.
3. Duties of the Custodian with Respect to Property of the
Fund Held Outside of the United States
3.1 Appointment of Foreign Sub-Custodians. The Fund hereby
authorizes and instructs the Custodian to employ as sub-custodians for
the Portfolio's securities and other assets maintained outside the
United States the foreign banking institutions and foreign securities
depositories designated on Schedule A hereto ("foreign
sub-custodians"). Upon receipt of "Proper Instructions", as defined in
Section 5 of this Contract, together with a certified resolution of the
Fund's Board of Directors, the Custodian and the Fund may agree to
amend Schedule A hereto from time to time to designate additional
foreign banking institutions and foreign securities depositories to act
as sub-custodian. Upon receipt of Proper Instructions, the Fund may
instruct the Custodian to cease the employment of any one or more such
sub-custodians for maintaining custody of the Portfolio's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5
under the Investment Company Act of 1940, and (b) cash and cash
equivalents in such amounts as the Custodian or the Fund may determine
to be reasonably necessary to effect the Portfolio's foreign securities
transactions. The Custodian shall identify on its books as belonging to
the Fund, the foreign securities of the Fund held by each foreign
sub-custodian.
3.3 Foreign Securities Depositories. Except as may otherwise be agreed upon
in writing by the Custodian and the Fund, assets of the Portfolios
shall be maintained in foreign securities depositories only through
arrangements implemented by the foreign banking institutions serving as
sub-custodians pursuant to the terms hereof. Where possible, such
arrangements shall include entry into agreements containing the
provisions set forth in Section 3.4 hereof.
<PAGE>
3.4 Agreements with Foreign Banking Institutions. Each agreement with a
foreign banking institution shall be substantially in the form set
forth in Exhibit 1 hereto and shall provide that: (a) the assets of
each Portfolio will not be subject to any right, charge, security
interest, lien or claim of any kind in favor of the foreign banking
institution or its creditors or agent, except a claim of payment for
their safe custody or administration; (b) beneficial ownership for
the assets of each Portfolio will be freely transferable without
the payment of money or value other than for custody or
administration; (c) adequate records will be maintained
identifying the assets as belonging to each applicable Portfolio;
(d) officers of or auditors employed by, or other representatives
of the Custodian, including to the extent permitted under
applicable law the independent public accountants for the Fund,
will be given access to the books and records of the foreign banking
institution relating to its actions under its agreement with the
Custodian; and (e) assets of the Portfolios held by the foreign
sub-custodian will be subject only to the instructions of the Custodian
or its agents.
3.5 Access of Independent Accountants of the Fund. Upon request of the
Fund, the Custodian will use its best efforts to arrange for the
independent accountants of the Fund to be afforded access to the books
and records of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate to the
performance of such foreign banking institution under its agreement
with the Custodian.
3.6 Reports by Custodian. The Custodian will supply to the Fund from time
to time, as mutually agreed upon, statements in respect of the
securities and other assets of the Portfolio(s) held by foreign
sub-custodians, including but not limited to an identification of
entities having possession of the Portfolio(s) securities and other
assets and advices or notifications of any transfers of securities to
or from each custodial account maintained by a foreign banking
institution for the Custodian on behalf of each applicable Portfolio
indicating, as to securities acquired for a Portfolio, the identity of
the entity having physical possession of such securities.
3.7 Transactions in Foreign Custody Account (a) Except as otherwise
provided in paragraph (b) of this Section 3.7, the provision of
Sections 2.2 and 2.7 of this Contract shall apply, mutatis mutandis to
the foreign securities of the Fund held outside the United States by
foreign sub-custodians. (b) Notwithstanding any provision of this
Contract to the contrary, settlement and payment for securities
received for the account of each applicable Portfolio and delivery of
securities maintained for the account of each applicable Portfolio may
be effected in accordance with the customary established securities
trading or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs, including,
<PAGE>
without limitation, delivering securities to the purchaser thereof
or to a dealer therefor (or an agent for such purchaser or dealer)
against a receipt with the expectation of receiving later payment
for such securities from such purchaser or dealer. (c) Securities
maintained in the custody of a foreign sub-custodian may be maintained
in the name of such entity's nominee to the same extent as set forth in
Section 2.3 of this Contract, and the Fund agrees to hold any such
nominee harmless from any liability as a holder of record of such
securities.
3.8 Liability of Foreign Sub-Custodians. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable care
in the performance of its duties and to indemnify, and hold harmless,
the Custodian and each Fund from and against any loss, damage, cost,
expense, liability or claim arising out of or in connection with the
institution's performance of such obligations. At the election of the
Fund, it shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims against a foreign banking
institution as a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that the Fund has not been made
whole for any such loss, damage, cost, expense, liability or claim.
3.9 Liability of Custodian. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a
U.S. bank as contemplated by paragraph 3.12 hereof, the Custodian shall
not be liable for any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency restrictions,
or acts of war or terrorism or any loss where the sub-custodian has
otherwise exercised reasonable care. Notwithstanding the foregoing
provisions of this paragraph 3.9, in delegating custody duties to State
Street London Ltd., the Custodian shall not be relieved of any
responsibility to the Fund for any loss due to such delegation, except
such loss as may result from (a) political risk (including, but not
limited to, exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed hostilities) or
(b) other losses (excluding a bankruptcy or insolvency of State Street
London Ltd. not caused by political risk) due to Acts of God, nuclear
incident or other losses under circumstances where the Custodian and
State Street London Ltd. have exercised reasonable care.
3.10 Reimbursement for Advances. If the Fund requires the Custodian to
advance cash or securities for any purpose for the benefit of a
Portfolio including the purchase or sale of foreign exchange or of
contracts for foreign exchange, or in the event that the Custodian or
its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance
of this Contract, except such as may arise from its or its nominee's
own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the applicable
Portfolio shall be security therefor and should the Fund fail to repay
the Custodian promptly, the Custodian shall be entitled to utilize
available cash and to dispose of such Portfolios assets to the extent
necessary to obtain reimbursement.
<PAGE>
3.11 Monitoring Responsibilities. The Custodian shall furnish annually to
the Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection
with the initial approval of this Contract. In addition, the Custodian
will promptly inform the Fund in the event that the Custodian learns of
a material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in the
case of any foreign sub-custodian not the subject of an exemptive
order from the Securities and Exchange Commission is notified by
such foreign sub-custodian that there appears to be a substantial
likelihood that its shareholders' equity will decline below $200
million (U.S. dollars or the equivalent thereof) or that its
shareholders' equity has declined below $200 million (in each case
computed in accordance with generally accepted U.S. accounting
principles).
3.12 Branches of U.S. Banks
(a) Except as otherwise set forth in this Contract, the provisions
hereof shall not apply where the custody of the Portfolios assets are
maintained in a foreign branch of a banking institution which is a
"bank" as defined by Section 2(a)(5) of the Investment Company Act of
1940 meeting the qualification set forth in Section 26(a) of said Act.
The appointment of any such branch as a sub-custodian shall be governed
by paragraph 1 of this Contract. (b) Cash held for each Portfolio of
the Fund in the United Kingdom shall be maintained in an interest
bearing account established for the Fund with the Custodian's London
branch, which account shall be subject to the direction of the
Custodian, State Street London Ltd. or both.
3.13 Tax Law
The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on the Fund or the Custodian as
custodian of the Fund by the tax law of the United States of America or
any state or political subdivision thereof. It shall be the
responsibility of the Fund to notify the Custodian of the obligations
imposed on the Fund or the Custodian as custodian of the Fund by the
tax law of jurisdictions other than those mentioned in the above
sentence, including responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and
governmental reporting. The sole responsibility of the Custodian with
regard to such tax law shall be to use reasonable efforts to assist the
Fund with respect to any claim for exemption or refund under the tax
law of jurisdictions for which the Fund has provided such information.
4. Payments for Sales or Repurchases or Redemptions of Shares
of the Fund
The Custodian shall receive from the distributor for the
Shares or fromthe Transfer Agent of the Fund and deposit into the account of the
appropriate Portfolio such payments as are received for Shares of that Portfolio
issued or sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund on behalf of each such Portfolio and the Transfer
<PAGE>
Agent of any receipt by it of payments for Shares of such Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Articles of Incorporation and any applicable votes of the
Board of Directors of the Fund pursuant thereto, the Custodian shall, upon
receipt of instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer Agent a request
for redemption or repurchase of their Shares. In connection with the redemption
or repurchase of Shares of a Portfolio, the Custodian is authorized upon receipt
of instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares of the Fund, the Custodian shall honor checks drawn on
the Custodian by a holder of Shares, which checks have been furnished by the
Fund to the holder of Shares, when presented to the Custodian in accordance with
such procedures and controls as are mutually agreed upon from time to time
between the Fund and the Custodian.
5. Proper Instructions
Proper Instructions as used throughout this Contract means a writing signed
or initialled by one or more person or persons as the Board of Directors shall
have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with respect
to the transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of Directors of the
Fund accompanied by a detailed description of procedures approved by the Board
of Directors, Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the Board of
Directors and the Custodian are satisfied that such procedures afford adequate
safeguards for the Portfolios' assets. For purposes of this Section, Proper
Instructions shall include instructions received by the Custodian pursuant to
any three- party agreement which requires a segregated asset account in
accordance with Section 2.11.
6. Actions Permitted without Express Authority
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under
this Contract, provided that all such payments shall be accounted
for to the Fund on behalf of the Portfolio;
<PAGE>
2) surrender securities in temporary form for securities
in definitive form;
3) endorse for collection, in the name of the Portfolio,
checks, drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and
other dealings with the securities and property of the Portfolio
except as otherwise directed by the Board of Directors of the
Fund.
7. Evidence of Authority
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the Fund.
The Custodian may receive and accept a certified copy of a vote of the Board of
Directors of the Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Board of Directors pursuant to the Articles of Incorporation as described
in such vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board of Directors of the Fund to keep the
books of account of each Portfolio and/or compute the net asset value per share
of the outstanding shares of each Portfolio or, if directed in writing to do so
by the Fund on behalf of the Portfolio, shall itself keep such books of account
and/or compute such net asset value per share. If so directed, the Custodian
shall also calculate daily the net income of the Portfolio as described in the
Fund's currently effective prospectus related to such Portfolio and shall advise
the Fund and the Transfer Agent daily of the total amounts of such net income
and, if instructed in writing by an officer of the Fund to do so, shall advise
the Transfer Agent periodically of the division of such net income among its
various components. The calculations of the net asset value per share and the
daily income of each Portfolio shall be made at the time or times described from
time to time in the Fund's currently effective prospectus related to such
Portfolio.
9. Records
The Custodian shall with respect to each Portfolio create and maintain all
records relating to its activities and obligations under this Contract in such
manner as will meet the obligations of the Fund under the Investment Company Act
of 1940, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder. All such records shall be the property of the Fund and shall
at all times during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the Fund
<PAGE>
and employees and agents of the Securities and Exchange Commission. The
Custodian shall, at the Fund's request, supply the Fund with a tabulation of
securities owned by each Portfolio and held by the Custodian and shall, when
requested to do so by the Fund and for such compensation as shall be agreed upon
between the Fund and the Custodian, include certificate numbers in such
tabulations.
10. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the Fund on behalf of
each applicable Portfolio may from time to time request, to obtain from year to
year favorable opinions from the Fund's independent accountants with respect to
its activities hereunder in connection with the preparation of the Fund's Form
N-1A, and Form N-SAR or other annual reports to the Securities and Exchange
Commission and with respect to any other requirements of such Commission.
11. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, on behalf of each of the Portfolios
at such times as the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian under this Contract;
such reports, shall be of sufficient scope and in sufficient detail, as may
reasonably be required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and, if there are
no such inadequacies, the reports shall so state.
12. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its services
and expenses as Custodian, as agreed upon from time to time between the Fund on
behalf of each applicable Portfolio and the Custodian.
13. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties, including any
futures commission merchant acting pursuant to the terms of a three-party
futures or options agreement. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Contract, but shall be
kept indemnified by and shall be without liability to the Fund for any action
taken or omitted by it in good faith without negligence. It shall be entitled to
rely on and may act upon advice of counsel (who may be counsel for the Fund) on
all matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
<PAGE>
The Custodian shall be liable for the acts or omissions of a foreign
banking institution appointed pursuant to the provisions of Article 3 to the
same extent as set forth in Article 1 hereof with respect to sub-custodians
located in the United States (except as specifically provided in Article 3.9)
and, regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a U.S. bank
as contemplated by paragraph 3.12 hereof, the Custodian shall not be liable for
any loss, damage, cost, expense, liability or claim resulting from, or caused
by, the direction of or authorization by the Fund to maintain custody of any
securities or cash of the Fund in a foreign country including, but not limited
to, losses resulting from nationalization, expropriation, currency restrictions,
or acts of war or terrorism.
If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund or the Portfolio being liable for the payment
of money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it.
<PAGE>
If the Fund requires the Custodian, its affiliates, subsidiaries or agents,
to advance cash or securities for any purpose (including but not limited to
securities settlements, foreign exchange contracts and assumed settlement) for
the benefit of a Portfolio including the purchase or sale of foreign exchange or
of contracts for foreign exchange or in the event that the Custodian or its
nominee shall incur or be assessed any taxes, charges, expenses, assessments,
claims or liabilities in connection with the performance of this Contract,
except such as may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct, any property at any time held
for the account of the applicable Portfolio shall be security therefor and
should the Fund fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of such Portfolio's assets to
the extent necessary to obtain reimbursement.
14. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; provided,
however that the Custodian shall not with respect to a Portfolio act under
Section 2.10 hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of Directors of the Fund
has approved the initial use of a particular Securities System by such
Portfolio, as required by Rule 17f-4 under the Investment Company Act of 1940,
as amended and that the Custodian shall not with respect to a Portfolio act
under Section 2.10A hereof in the absence of receipt of an initial certificate
of the Secretary or an Assistant Secretary that the Board of Directors has
approved the initial use of the Direct Paper System by such Portfolio; provided
further, however, that the Fund shall not amend or terminate this Contract in
contravention of any applicable federal or state regulations, or any provision
of the Articles of Incorporation, and further provided, that the Fund on behalf
of one or more of the Portfolios may at any time by action of its Board of
Directors (i) substitute another bank or trust company for the Custodian by
giving notice as described above to the Custodian, or (ii) immediately terminate
this Contract in the event of the appointment of a conservator or receiver for
the Custodian by the Comptroller of the Currency or upon the happening of a like
event at the direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
<PAGE>
15. Successor Custodian
If a successor custodian for the Fund, of one or more of the Portfolios
shall be appointed by the Board of Directors of the Fund, the Custodian shall,
upon termination, deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all securities of each
applicable Portfolio then held by it hereunder and shall transfer to an account
of the successor custodian all of the securities of each such Portfolio held in
a Securities System.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board of
Directors of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian on behalf of each applicable Portfolio and all
instruments held by the Custodian relative thereto and all other property held
<PAGE>
by it under this Contract on behalf of each applicable Portfolio and to
transfer to an account of such successor custodian all of the securities of each
such Portfolio held in any Securities System. Thereafter, such bank or trust
company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Directors to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
16. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and the
Fund on behalf of each of the Portfolios, may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of this
Contract. Any such interpretive or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any applicable federal or
state regulations or any provision of the Articles of Incorporation of the Fund.
<PAGE>
No interpretive or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Contract.
17. Additional Funds
In the event that the Fund establishes one or more series of Shares in
addition to INVESCO VIF - Industrial Income Portfolio, INVESCO VIF - Total
Return Portfolio, INVESCO VIF - High Yield Portfolio and INVESCO VIF - Utilities
Portfolio with respect to which it desires to have the Custodian render services
as custodian under the terms hereof, it shall so notify the Custodian in
writing, and if the Custodian agrees in writing to provide such services, such
series of Shares shall become a Portfolio hereunder.
18. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
19. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund on behalf of each of the Portfolios and the Custodian
relating to the custody of the Fund's assets.
20. Shareholder Communications Election
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether it authorizes the
Custodian to provide the Fund's name, address, and share position to requesting
companies whose stock the Fund owns. If the Fund tells us "no", the Custodian
will not provide this information to requesting companies. If the Fund tells us
"yes" or does not check either "yes" or "no" below, the Custodian is required by
the rule to treat the Fund as consenting to disclosure of this information for
all securities owned by the Fund or any funds or accounts established by the
Fund. For the Fund's protection, the Rule prohibits the requesting company from
using the Fund's name and address for any purpose other than corporate
communications. Please indicate below whether the Fund consents or objects by
checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name,
address, and share positions.
NO [X] The Custodian is not authorized to release the Fund's
name, address, and share positions.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 1st day of July, 1993.
ATTEST INVESCO VARIABLE INVESTMENT FUNDS, INC.
/s/ Glen A. Payne By /s/ Dan J. Hesser
- -------------------------- ----------------------------------
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ Glen A. Payne /s/ Ronald E. Logue
- -------------------------- --------------------------------
Assistant Secretary Executive Vice President
<PAGE>
Schedule A
The following foreign banking institutions and foreign securities
depositories have been approved by the Board of Directors of INVESCO Variable
Investment Fund,s Inc. for use as sub-custodians for the Fund's securities and
other assets:
(Insert banks and securities depositories)
Certified:
/s/ Dan J. Hesser
- ---------------------------------
Fund's Authorized Officer
Date: October 20, 1993
AMENDMENT TO CUSTODIAN CONTRACT
Agreement made by and between State Street Bank and Trust
Company (the "Custodian") and INVESCO Variable Investment Funds,
Inc. (the "Fund").
WHEREAS, the Custodian and the Fund are parties to a custodian contract
dated October 20, 1993 (the "Custodian Contract") governing the terms and
conditions under which the Custodian maintains custody of the securities and
other assets of the Fund; and
WHEREAS, the Custodian and the Fund desire to amend the terms and
conditions under which the Custodian maintains the Fund's securities and other
non-cash property in the custody of certain foreign sub-custodians in conformity
with the requirements of Rule 17f-5 under the Investment Company Act of 1940, as
amended;
NOW THEREFORE, in consideration of the premises and covenants contained
herein, the Custodian and the Fund hereby amend the Custodian Contract by the
addition of the following terms and provisions;
1. Notwithstanding any provisions to the contrary set forth in the
Custodian Contract, the Custodian may hold securities and other non-cash
property for all of its customers, including the Fund, with a foreign
sub-custodian in a single account that is identified as belonging to the
Custodian for the benefit of its customers, provided however, that (i) the
records of the Custodian with respect to securities and other non-cash property
of the Fund which are maintained in such account shall identify by bookentry
those securities and other non-cash property belonging to the Fund and (ii) the
Custodian shall require that securities and other non-cash property so held by
the foreign sub-custodian be held separately from any assets of the foreign
sub-custodian or of others.
2. Except as specifically superseded or modified herein, the terms and
provisions of the Custodian Contract shall continue to apply with full force and
effect.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed as a sealed instrument in its name and behalf by its duly authorized
representative this 25th day of October, 1995.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
By: /s/ Glen A. Payne
------------------------------
Title: Secretary
STATE STREET BANK AND TRUST COMPANY
By: /s/ Charles R. Whittemore, Jr.
------------------------------
Title: Vice President
DATA ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT
AGREEMENT between each Fund listed on Appendix A,
(individually a "Customer" and collectively, the "Customers") and
State Street Bank and Trust Company ("State Street").
PREAMBLE
WHEREAS, State Street has been appointed as custodian of certain assets of
each Customer pursuant to a certain Custodian Agreement (the "Custodian
Agreement") for each of the respective Customers;
WHEREAS, State Street has developed and utilizes proprietary accounting
and other systems, including State Street's proprietary Multicurrency HORIZONR
Accounting System, in its role as custodian of each Customer, and maintains
certain Customer-related data ("Customer Data") in databases under the control
and ownership of State Street (the "Data Access Services"); and
WHEREAS, State Street makes available to each Customer certain Data Access
Services solely for the benefit of the Customer, and intends to provide
additional services, consistent with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the parties
agree as follows:
1. SYSTEM AND DATA ACCESS SERVICES
a. System. Subject to the terms and conditions of this
Agreement, State Street hereby agrees to provide each Customer
with access to State Street's Multicurrency HORIZONR Accounting
System and the other information systems (collectively, the
"System") as described in Attachment A, on a remote basis for the
<PAGE>
purpose of obtaining reports, solely on computer hardware, system software and
telecommunication links, as listed in Attachment B (the "Designated
Configuration") of the Customer, or certain third parties approved by State
Street that serve as investment advisors or investment managers (the "Investment
Advisor") or independent auditors (the "Independent Auditors") of a Customer and
solely with respect to the Customer or on any designated substitute or back-up
equipment configuration with State Street's written consent, such consent not to
be unreasonably withheld.
b. Data Access Services. State Street agrees to make available to each
Customer the Data Access Services subject to the terms and conditions of this
Agreement and data access operating standards and procedures as may be issued by
State Street from time to time. The ability of each Customer to originate
electronic instructions to State Street on behalf of each Customer in order to
(i) effect the transfer or movement of cash or securities held under custody by
State Street or (ii) transmit accounting or other information (such transactions
are referred to herein as "Client Originated Electronic Financial
Instructions"), and (iii) access data for the purpose of reporting and analysis,
shall be deemed to be Data Access Services for purposes of this Agreement.
c. Additional Services. State Street may from time to time agree to make
available to a Customer additional Systems that are not described in the
attachments to this Agreement. In the absence of any other written agreement
concerning such additional systems, the term "System" shall include, and this
Agreement shall govern, a Customer's access to and use of any additional System
made available by State Street and/or accessed by the Customer.
2. NO USE OF THIRD PARTY SOFTWARE
State Street and each Customer acknowledge that in connection with the Data
Access Services provided under this Agreement, each Customer will have access,
through the Data Access Services, to Customer Data and to functions of State
Street's proprietary systems; provided, however that in no event will the
Customer have direct access to any third party systems-level software that
retrieves data for, stores data from, or otherwise supports the System.
3. LIMITATION ON SCOPE OF USE
a. Designated Equipment; Designated Location. The System
and the Data Access Services shall be used and accessed solely on
and through the Designated Configuration at the offices of a
Customer or the Investment Advisor or Independent Auditor located
in Denver, C lorado ("Designated Location").
<PAGE>
b. Designated Configuration; Trained Personnel. State Street shall be
responsible for supplying, installing and maintaining the Designated
Configuration at the Designated Location. State Street and each Customer agree
that each will engage or retain the services of trained personnel to enable both
State Street and the Customer to perform their respective obligations under this
Agreement. State Street agrees to use commercially reasonable efforts to
maintain the System so that it remains serviceable, provided, however, that
State Street does not guarantee or assure uninterrupted remote access use of the
System.
c. Scope of Use. Each Customer will use the System and the Data Access
Services only for the processing of securities transactions, the keeping of
books of account for the Customer and accessing data for purposes of reporting
and analysis. Each Customer shall not, and shall cause its employees and agents
not to (i) permit any third party to use the System or the Data Access Services,
(ii) sell, rent, license or otherwise use the System or the Data Access Services
in the operation of a service bureau or for any purpose other than as expressly
authorized under this Agreement, (iii) use the System or the Data Access
Services for any fund, trust or other investment vehicle without the prior
written consent of State Street, (iv) allow access to the System or the Data
Access Services through terminals or any other computer or telecommunications
facilities located outside the Designated Locations, (v) allow or cause any
information (other than portfolio holdings, valuations of portfolio holdings,
and other information reasonably necessary for the management or distribution of
the assets of the Customer) transmitted from State Street's databases, including
data from third party sources, available through use of the System or the Data
Access Services to be redistributed or retransmitted to another computer,
terminal or other device for other than use for or on behalf of the Customer or
(vi) modify the System in any way, including without limitation, developing any
software for or attaching any devices or computer programs to any equipment,
system, software or database which forms a part of or is resident on the
Designated Configuration.
d. Other Locations. Except in the event of an emergency or of a planned
System shutdown, each Customer's access to services performed by the System or
to Data Access Services at the Designated Location may be transferred to a
different location only upon the prior written consent of State Street. In the
event of an emergency or System shutdown, each Customer may use any back-up site
included in the Designated Configuration or any other back-up site agreed to by
State Street, which agreement will not be unreasonably withheld. Each Customer
may secure from State Street the right to access the System or the Data Access
Services through computer and telecommunications facilities or devices complying
with the Designated Configuration at additional locations only upon the prior
written consent of State Street and on terms to be mutually agreed upon by the
parties.
e. Title. Title and all ownership and proprietary rights to the System,
including any enhancements or modifications thereto, whether or not made by
State Street, are and shall remain with State Street.
f. No Modification. Without the prior written consent of State Street, a
Customer shall not modify, enhance or otherwise create derivative works based
upon the System, nor shall the Customer reverse engineer, decompile or otherwise
attempt to secure the source code for all or any part of the System.
<PAGE>
g. Security Procedures. Each Customer shall comply with data access
operating standards and procedures and with user identification or other
password control requirements and other security procedures as may be issued
from time to time by State Street for use of the System on a remote basis and to
access the Data Access Services. Each Customer shall have access only to the
Customer Data and authorized transactions agreed upon from time to time by State
Street and, upon notice from State Street, the Customer shall discontinue remote
use of the System and access to Data Access Services for any security reasons
cited by State Street; provided, that, in such event, State Street shall, for a
period not less than 180 days (or such other shorter period specified by the
Customer) after such discontinuance, assume responsibility to provide accounting
services under the terms of the Custodian Agreement.
h. Inspections. State Street shall have the right to inspect the use of the
System and the Data Access Services by the Customer and the Investment Advisor
to ensure compliance with this Agreement. The on-site inspections shall be upon
prior written notice to Customer and the Investment Advisor and at reasonably
convenient times and frequencies so as not to result in an unreasonable
disruption of the Customer's or the Investment Advisor's business.
4. PROPRIETARY INFORMATION
a. Proprietary Information. Each Customer acknowledges and State Street
represents that the System and the databases, computer programs, screen formats,
report formats, interactive design techniques, documentati n and other
information made available to the Customer by State Street as part of the Data
Access Services and through the use of the System constitute copyrighted, trade
secret, or other proprietary information of substantial value to State Street.
Any and all such information provided by State Street to each Customer shall be
<PAGE>
deemed proprietary and confidential information of State Street
(hereinafter "Proprietary Information"). Each Customer agrees that it will hold
such Proprietary Information in confidence and secure and protect it in a manner
consistent with its own procedures for the protection of its own confidential
information and to take appropriate action by instruction or agreement with its
employees who are permitted access to the Proprietary Information to satisfy its
obligations hereunder. Each Customer further acknowledges that State Street
shall not be required to provide the Investment Advisor or the Investment
Auditor with access to the System unless it has first received from the
Investment Advisor of the Investment Auditor an undertaking with respect to
State Street's Proprietary Information in the form of Attachment C and/or
Attachment C-1 to this Agreement. Each Customer shall use all commercially
reasonable efforts to assist State Street in identifying and preventing any
unauthorized use, copying or disclosure of the Proprietary Information or any
portions thereof or any of the logic, formats or designs contained therein.
b. Cooperation. Without limitation of the foregoing, each Customer shall
advise State Street immediately in the event the Customer learns or has reason
to believe that any person to whom the Customer has given access to the
Proprietary Information, or any portion thereof, has violated or intends to
violate the terms of this Agreement, and each Customer will, at its expense,
cooperate with State Street in seeking injunctive or other equitable relief in
the name of the Customer or State Street against any such person.
c. Injunctive Relief. Each Customer acknowledges that the disclosure of any
Proprietary Information, or of any information which at law or equity ought to
remain confidential, will immediately give rise to continuing irreparable injury
to State Street inadequately compensable in damages at law. In addition, State
Street shall be entitled to obtain immediate injunctive relief against the
breach or threatened breach of any of the foregoing undertakings, in addition to
any other legal remedies which may be available.
<PAGE>
d. Survival. The provisions of this Section 4 shall survive the termination
of this Agreement.
5. LIMITATION ON LIABILITY
a. Limitation on Amount and Time for Bringing Action. Each Customer agrees
any liability of State Street to the Customer or any third party arising out of
State Street's provision of Data Access Services or the System under this
Agreement shall be limited to the amount paid by the Customer fo the preceding
24 months for such services. In no event shall State Street be liable to the
customer or any other party for any special, indirect, punitive or consequential
damages even if advised of the possibility of such damages. No action,
regardless of form, arising out of this Agreement may be brought by the Customer
more than two years after the Customer has knowledge that the cause of action
has arisen.
b. NO OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE MADE BY
STATE STREET. IN NO EVENT WILL STATE STREET BE LIABLE TO THE
CUSTOMER OR ANY OTHER PARTY FOR ANY CONSEQUENTIAL OR INCIDENTAL
DAMAGES WHICH MAY ARISE FROM THE CUSTOMER'S ACCESS TO THE SYSTEM
OR USE OF INFORMATION OBTAINED THEREBY.
c. Third-Party Data. Organizations from which State Street may obtain
certain data included in the System or the Data Access Services are solely
responsible for the contents of such data, and State Street shall have no
liability for claims arising out of the contents of such third-party data,
including, but not limited to, the accuracy thereof.
d. Regulatory Requirements. As between State Street and each Customer, the
Customer shall be solely responsible for the accuracy of any accounting
statements or reports produced using the Data Access Services and the System and
the conformity thereof with any requirements of law.
<PAGE>
e. Force Majeure. Neither State Street or a Customer shall be liable for
any costs or damages due to delay or nonperformance under this Agreement arising
out of any cause or event beyond such party's control, including without
limitation, cessation of services hereunder or any damages resulting therefrom
to the other party, or the Customer as a result of work stoppage, power or other
mechanical failure, computer virus, natural disaster, governmental action, or
communication disruption.
6. INDEMNIFICATION
Each Customer agrees to indemnify and hold State Street harmless from any
loss damage or expense including reasonable attorney's fees, (a "loss") suffered
by State Street arising from (i) the negligence or willful misconduct in the use
by the Customer of the Data Access Services or the System, including any loss
incurred by State Street resulting from a security breach at the Designated
Location or committed by the Customer's employees or agents or the Investment
Advisor or the Independent Auditor of the Customer and (ii) any loss resulting
from incorrect Client Originated Electronic Financial Instructions. State Street
shall be entitled to rely on the validity and authenticity of Client Originated
Electronic Financial Instructions without undertaking any further inquiry as
long as such instruction is undertaken in conformity with security procedures
established by State Street from time to time.
7. FEES
Fees and charges for the use of the System and the Data Access Services and
related payment terms shall be as set forth in the Custody Fee Schedule in
effect from time to time between the parties (the "Fee Schedule"). Any tariffs,
duties or taxes imposed or levied by any government or governmental agency by
reason of the transactions contemplated by this Agreement, including, without
limitation, federal, state and local taxes, use, value added and personal
property taxes (other than income, franchise or similar taxes which may be
imposed or assessed against State Street) shall be borne by each Customer. Any
claimed exemption from such tariffs, duties or taxes shall be supported by
proper documentary evidence delivered to State Street.
<PAGE>
8. TRAINING, IMPLEMENTATION AND CONVERSION
a. Training. State Street agrees to provide training, at a designated
State Street training facility or at the Designated Location, to the Customer's
personnel in connection with the se of the System on the Designated
Configuration. Each Customer agrees that it will set aside, during regular
business hours or at other times agreed upon by both parties, sufficient time to
enable all operators of the System and the Data Access Services, designated by
the Customer, to receive the training offered by State Street pursuant to this
Agreement.
b. Installation and Conversion. State Street shall be responsible for the
technical installation and conversion ("Installation and Conversion") of the
Designated Configuration. Each Customer shall have the following
responsibilities in connection with Installation and Conversion of the System:
(i) The Customer shall be solely responsible for the timely acquisition
and maintenance of the hardware and software that attach to the Designated
Configuration in order to use the Data Access Services at the Designated
Location.
(ii) State Street and the Customer each agree that they will assign
qualified personnel to actively participate during the Installation and
Conversion phase of the System implementation to enable both parties to perform
their respective obligations under this Agreement.
9. SUPPORT
During the term of this Agreement, State Street agrees to provide the
support services set out in Attachment D to this Agreement.
10. TERM OF AGREEMENT
a. Term of Agreement. This Agreement shall become
effective on the date of its execution by State Street and shall
remain in full force and effect until term nated as herein
provided.
b. Termination of Agreement. Any party may terminate this Agreement (i)
for any reason by giving the other parties at least one-hundred and eighty days'
prior written notice in the case of notice of termination by State Street to the
Customer or thirty days' notice in the case of notice from the Customer to State
Street of termination; or (ii) immediately for failure of the other party to
comply with any material term and condition of the Agreement by giving the other
party written notice of termination. In the event the Customer shall cease doing
business, shall become subject to proceedings under the bankruptcy laws (other
<PAGE>
than a petition for reorganization or similar proceeding) or shall be
adjudicated bankrupt, this Agreement and the rights granted hereunder shall, at
the option of State Street, immediately terminate with notice to the Customer.
Termination of this Agreement with respect to any given Customer shall in no way
affect the continued validity of this Agreement with respect to any other
Customer. This Agreement shall in any event terminate as to any Customer within
90 days after the termination of the Custodian Agreement applicable to such
Customer.
c. Termination of the Right to Use. Upon termination of this Agreement for
any reason, any right to use the System and access to the Data Access Services
shall terminate and the Customer shall immediately cease use of the System and
the Data Access Services. Immediately upon termination of this Agreement for any
reason, the Customer shall return to State Street all copies of documentation
and other Proprietary Information in its possession; provided, however, that in
the event that either State Street or the Customer terminates this Agreement
or the Custodian Agreement for any reason other than the Customer's
breach, State Street shall provide the Data Access Services for a period
of time and at a price to be agreed upon by State Street and the Customer.
11. MISCELLANEOUS
a. Assignment; Successors. This Agreement and the rights and obligations
of each Customer and State Street hereunder shall not be assigned by any party
without the prior written consent of the other parties, except that State Street
may assi n this Agreement to a successor of all or a substantial portion of its
business, or to a party controlling, controlled by, or under common control with
State Street.
b. Survival. All provisions regarding indemnification, warranty, liability
and limits thereon, and confidentiality and/or protection of proprietary rights
and trade secrets shall survive the termination of this Agreement.
c. Entire Agreement. This Agreement and the attachments hereto constitute
the entire understanding of the parties hereto with respect to the Data Access
Services and the use of the System and supersedes any and all prior or
contemporaneous representations or agreements, whether oral or written, between
the parties as such may relate to the Data Access Services or the System, and
cannot be modified or altered except in a writing duly executed by the parties.
This Agreement is not intended to supersede or modify the duties and liabilities
of the parties hereto under the Custodian Agreement or any other agreement
between the parties hereto except to the extent that any such agreement
specifically refers to the Data Access Services or the System. No single waiver
or any right hereunder shall be deemed to be a continuing waiver.
<PAGE>
d. Severability. If any provision or provisions of this Agreement shall be
held to be invalid, unlawful, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired.
e. Governing Law. This Agreement shall be interpreted and construed in
accordance with the internal laws of The Commonwealth of Massachusetts without
regard to the conflict of laws provisions thereof.
<PAGE>
IN WITNESS WHEREOF, each of the undersigned Funds severally has
caused this Agreement to be duly executed in its name and through its duly
authorized officer as of the date hereof.
STATE STREET BANK AND TRUST COMPANY
By:/s/ Ronald E. Logue
-----------------------------------
Title: Executive Vice President
Date:
EACH FUND LISTED ON APPENDIX A
By:/s/ Glen A. Payne
-------------------------------------
Title: Secretary
Date: May 19, 1997
<PAGE>
APPENDIX A
INVESCO FUNDS
INVESCO Diversified Funds, Inc.
INVESCO Small Company Value Fund
INVESCO Dynamics Fund, Inc.
INVESCO Dynamics Fund, Inc.
INVESCO Emerging Opportunity Funds, Inc.
INVESCO Small Company Growth Fund
INVESCO Worldwide Emerging Markets Fund
INVESCO Growth Fund, Inc.
INVESCO Growth Fund, Inc.
INVESCO Income Funds, Inc.
INVESCO High Yield Fund
INVESCO Select Income Fund
INVESCO Short-Term Bond Fund
INVESCO U.S. Government Bond Fund
INVESCO Industrial Income Fund, Inc.
INVESCO Industrial Income Fund, Inc.
INVESCO International Funds, Inc.
INVESCO European Fund
INVESCO International Growth Fund
INVESCO Pacific Basin Fund
INVESCO Money Market Funds, Inc.
INVESCO Cash Reserves Fund
INVESCO Tax-Free Money Fund
INVESCO U.S. Government Money Fund
INVESCO Multiple Asset Funds, Inc.
INVESCO Balanced Fund
<PAGE>
INVESCO Multi-Asset Allocation Fund
INVESCO Specialty Funds, Inc.
INVESCO Asian Growth Fund
INVESCO European Small Company Fund
INVESCO Latin American Growth Fund
INVESCO Realty Fund
INVESCO Worldwide Capital Goods Fund
INVESCO Worldwide Communications Fund
INVESCO Strategic Portfolios, Inc.
Energy Portfolio
Environmental Services Portfolio
Financial Services Portfolio
Gold Portfolio
Health Sciences Portfolio
Leisure Portfolio
Technology Portfolio
Utilities Portfolio
INVESCO Tax-Free Income Funds, Inc.
INVESCO Tax-Free Intermediate Bond Fund
INVESCO Tax-Free Long-Term Bond Fund
INVESCO Treasurer's Series Trust
INVESCO Treasurer's Money Market Reserve Fund
INVESCO Treasurer's Prime Reserve Fund
INVESCO Treasurer's Special Reserve Fund
INVESCO Treasurer's Tax-Exempt Reserve Fund
INVESCO Value Trust
INVESCO Intermediate Government Bond Fund
INVESCO Total Return Fund
INVESCO Value Equity Fund
INVESCO Variable Investment Funds, Inc.
INVESCO VIF-Dynamics Portfolio
INVESCO VIF-Health Sciences Portfolio
INVESCO VIF-High Yield Portfolio
INVESCO VIF-Industrial Income Portfolio
<PAGE>
INVESCO VIF-Small Company Growth Portfolio
INVESCO VIF-Technology Portfolio
INVESCO VIF-Total Return Portfolio
INVESCO VIF-Utilities Portfolio
INVESCO VIF-Growth Portfolio*
*Effective May 1, 1997.
<PAGE>
ATTACHMENT A
Multicurrency HORIZONR Accounting System
System Product Description
I. The Multicurrency HORIZONR Accounting System is designed to provide lot
level portfolio and general ledger accounting for SEC and ERISA type
requirements and includes the following services: 1) recording of general ledger
entries; 2) calculation of daily income and expense; 3) reconciliation of daily
activity with the trial balance, and 4) appropriate automated feeding mechanisms
to (i) domestic and international settlement systems, (ii) daily, weekly and
monthly evaluation services, (iii) portfolio performance and analytic services,
(iv) customer's internal computing systems and (v) various State Street provided
information services products.
II. GlobalQuestR GlobalQuestR is designed to provide customer access to the
following information maintained on The Multicurrency HORIZONR Accounting
System: 1) cash transactions and balances; 2) purchases and sales; 3) income
receivables; 4) tax refund receivables; 5) daily priced positions; 6) open
trades; 7) settlement status; 8) foreign exchange transactions; 9) trade
history; and 10) daily, weekly and monthly evaluation services.
III. HORIZONR Gateway. HORIZONR Gateway provides customers with the ability
to (i) generate reports using information maintained on the Multicurrency
HORIZONR Accounting System which may be viewed or printed at the customer's
location; (ii) extract and download data from the Multicurrency HORIZONR
Accounting System; and (iii) access previous day and historical data. The
following information which may be accessed for these purposes: 1) holdings; 2)
holdings pricing; 3) transactions, 4) open trades; 5) income; 6) general ledger
and 7) cash.
<PAGE>
ATTACHMENT B
Designated Configuration
<PAGE>
ATTACHMENT C
Undertaking
The undersigned understands that in the course of its employment as
Investment Advisor to each of the Funds (individually a, "Customer" ,
collectively, the "Customers") it will have access to State Street Bank and
Trust Company's ("State Street") Multicurrency HORIZON Accounting System and
other information systems (collectively, the "System").
The undersigned acknowledges that the System and the databases, computer
programs, screen formats, report formats, interactive design techniques,
documentation, and other information made available to the Undersigned by State
Street as part of the Data Access Services provided to the Customer and through
the use of the System constitute copyrighted, trade secret, or other proprietary
information of substantial value to State Street. Any and all such information
provided by State Street to the Undersigned shall be deemed proprietary and
confidential information of State Street (hereinafter "Proprietary
Information"). The Undersigned agrees that it will hold such Proprietary
Information in confidence and secure and protect it in a manner consistent with
its own procedures for the protection of its own confidential information and to
take appropriate action by instruction or agreement with its employees who are
permitted access to the Proprietary Information to satisfy its obligations
hereunder.
The Undersigned will not attempt to intercept data, gain access to data in
transmission, or attempt entry into any system or files for which it is not
authorized. It will not intentionally adversely affect the integrity of the
System through the introduction of unauthorized code or data, or through
unauthorized deletion.
<PAGE>
Upon notice by State Street for any reason, any right to use the System and
access to the Data Access Services shall terminate and the Undersigned shall
immediately cease use of the System and the Data Access Services. Immediately
upon notice by State Street for any reason, the Undersigned shall return to
State Street all copies of documentation and other Proprietary Information in
its possession.
By: /s/ Glen A. Payne
---------------------------------
Title: Secretary
Date: May 19, 1997
<PAGE>
ATTACHMENT D
Support
During the term of this Agreement, State Street agrees to provide the
following on-going support services:
a. Telephone Support. The Customer Designated Persons may contact State
Street's HORIZONR Help Desk and Customer Assistance Center between the hours of
8 a.m. and 6 p.m. (Eastern time) on all business days for the purpose of
obtaining answers to questions about the use of the System, or to report
apparent problems with the System. From time to time, the Customer shall provide
to State Street a list of persons, not to exceed five in number, who shall be
permitted to contact State Street for assistance (such persons being referred to
as "the Customer Designated Persons").
b. Technical Support. State Street will provide technical support to
assist the Customer in using the System and the Data Access Services. The total
amount of technical support provided by State Street shall not exceed 10
resource days per year. State Street shall provide such additional technical
support as is expressly set forth in the fee schedule in effect from time to
time between the parties (the "Fee Schedule"). Technical support, including
during installation and testing, is subject to the fees and other terms set
forth in the Fee Schedule.
c. Maintenance Support. State Street shall use commercially reasonable
efforts to correct system functions that do not work according to the System
Product Description as set forth on Attachment A in priority order in the next
scheduled delivery release or otherwise as soon as is practicable.
d. System Enhancements. State Street will provide to the Customer any
enhancements to the System developed by State Street and made a part of the
System; provided that, sixty (60) days prior to installing any such enhancement,
State Street shall notify the Customer and shall offer the Customer reasonable
<PAGE>
training on the enhancement. Charges for system enhancements shall be as
provided in the Fee Schedule. State Street retains the right to charge for
related systems or products that may be developed and separately made available
for use other than through the System.
e. Custom Modifications. In the event the Customer desires custom
modifications in connection with its use of the System, the Customer shall make
a written request to State Street providing specifications for the desired
modification. Any custom modifications may be undertaken by State Street in its
sole discretion in accordance with the Fee Schedule.
f. Limitation on Support. State Street shall have no obligation to support
the Customer's use of the System: (1) for use on any computer equipment or
telecommunication facilities which does not conform to the Designated
Configuration or (ii) in the event the Customer has modified the System in
breach of this Agreement.
PARTICIPATION AGREEMENT
Among
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO FUNDS GROUP, INC.
and
SECURITY LIFE OF DENVER INSURANCE COMPANY
THIS AGREEMENT, made and entered into this 26th day of August, 1994 by and
among SECURITY LIFE OF DENVER INSURANCE COMPANY, (hereinafter the "Insurance
Company"), a Colorado 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
1
<PAGE>
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
WHEREAS, the Insurance Company has registered under the 1933 Act, or will
register under the 1933 Act, certain variable annuity and variable life
insurance contracts identified by the form number(s) listed on Schedule B to
this Agreement, as amended from time to time hereafter by mutual written
agreement of all the parties hereto (the "Contracts"); and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the board of directors of the
Insurance Company on the date shown for that Account on Schedule A hereto, to
set aside and invest assets attributable to the Contracts; and
WHEREAS, the Insurance Company has registered or will register each
Account as a unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Insurance Company intends to purchase shares in the Funds on
behalf of the Accounts to fund the Contracts and INVESCO is authorized to sell
such shares to unit investment trusts such as the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Insurance
Company, the Company and INVESCO agree as follows:
ARTICLE I. Sale of Company Shares
1.1. INVESCO agrees to sell to the Insurance Company those shares of the
Company which each Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Company or its designee of
the order for the shares of the Company. For purposes of this Section 1.1, the
Insurance Company shall be the designee of the Company for receipt of such
orders from the Accounts and receipt by such designee shall constitute receipt
by the Company; provided, that the Company receives notice of such order by 8:00
a.m., Mountain Time, on the next following Business Day. "Business Day" shall
<PAGE>
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.
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
<PAGE>
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 net redemption proceeds (aggregate
redemptions of a Fund's shares by an Account minus aggregate purchases of that
Fund's shares by that Account) of less than $1 million for a given Business Day
will be made by wiring federal funds to the Insurance Company on the next
Business Day after receipt of the redemption request. Payment of net redemption
proceeds of $1 million or more will be by wiring federal funds within seven days
after receipt of the redemption request. Notwithstanding the foregoing, in the
event that one or more Funds has insufficient cash on hand to pay net
redemptions on the next Business Day, and if such Fund has determined to settle
redemption transactions for all of its shareholders on a delayed basis (more
than one Business Day, but in no event more than seven calendar days, after the
date on which the redemption order is received, unless otherwise permitted by an
order of the Commission under Section 22(e) of the 1940 Act), the Company shall
be permitted to delay sending redemption proceeds to the Insurance Company by
the same number of days that the Company is delaying sending redemption proceeds
to the other shareholders of the Fund. Redemptions of up to the lesser of
$250,000 or 1% of the net asset value of the Fund whose shares are to be
redeemed in any 90-day period will be made in cash. Redemptions in excess of
that amount in any 90-day period may, in the sole discretion of the Company, be
in-kind redemptions, with the securities to be delivered in payment of
redemptions selected by the Company and valued at the value assigned to them in
computing the Fund's net asset value per share.
1.8. Issuance and transfer of the Company's shares will be by book entry
only. Stock certificates will not be issued to the Insurance Company or any
Account. Shares ordered from the Company will be recorded in an appropriate
title for each Account or the appropriate subaccount of each Account.
<PAGE>
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 Colorado Revised Statutes Section 10-7-402 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 or life insurance contracts, under applicable
provisions of the Code and that it will make every effort to maintain such
treatment and that it will notify the Company and INVESCO immediately upon
having a reasonable basis for believing that the Contracts have ceased to be so
treated or that they might not be so treated in the future.
2.5. The Company currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. To the extent that it decides
to finance distribution expenses pursuant to Rule 12b-1, the Company undertakes
to have a board of directors, a majority of whom are not interested persons of
the Company, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.6. The Company makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.
2.7. INVESCO represents and warrants that it is a member in good standing
of the NASD and is registered as a broker-dealer with the Commission. INVESCO
further represents that it will sell and distribute the Company shares in
accordance with the laws of the State of Maryland 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.
<PAGE>
2.10. The Company and INVESCO represent and warrant that all of their
officers, employees, investment advisers, investment sub-advisers, and other
individuals or entities described in Rule 17g-1 under the 1940 Act are, and
shall continue to be at all times, covered by a blanket fidelity bond or similar
coverage for the benefit of the Company in an amount not less than the minimum
coverage required currently by Rule 17g-1 under the 1940 Act or related
provisions as may be promulgated from time to time. That fidelity bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
2.11. The Insurance Company represents and warrants that all of its
officers, employees, investment advisers, and other individuals or entities
described in Rule 17g-1 under the 1940 Act are and shall continue to be at all
times covered by a blanket fidelity bond or similar coverage for the benefit of
the Company, in an amount not less than the minimum coverage required currently
for entities subject to the requirements of Rule 17g-1 under the 1940 Act or
related provisions or may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.12. The Insurance Company represents and warrants that it will not
purchase Company shares with Account assets derived from tax-qualified
retirement plans except indirectly, through Contracts purchased in connection
with such plans.
2.13. The Insurance Company represents and warrants that the allocation of
expenses between the Insurance Company and the Company and/or INVESCO in this
Agreement is substantially similar to the allocation provisions in the majority
of the Insurance Company's current participation agreements with other funds.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Company will bear the printing costs (or duplicating costs with
respect to the statement of additional information) and mailing costs associated
with the delivery of the following Company (or individual Fund) documents, and
any supplements thereto, to existing Contract owners of the Insurance Company
whose Contract values are invested in the Company:
(i) prospectuses and statements of additional information;
(ii) annual and semi-annual reports; and
(iii) proxy materials.
<PAGE>
3.2. The Insurance Company will submit any bills for printing, duplicating
and/or mailing costs, relating to the Company documents described above, to
Company for reimbursement by the Company. The Insurance Company shall monitor
such costs and shall use its best efforts to control these costs. The Insurance
Company will provide the Company (or INVESCO) on a semi-annual basis, or more
frequently as reasonably requested by the Company (or INVESCO), with a current
tabulation of the number of existing Contract owners of the Insurance Company
whose Contract values are invested in the Company. This tabulation will be sent
to the Company (or INVESCO) in the form of a letter signed by a duly authorized
officer of the Insurance Company attesting to the accuracy of the information
contained in the letter. If requested by the Insurance Company, the Company
shall provide such documentation (including a final copy of the Company's
prospectus as set in type or in camera-ready copy) and other assistance as is
reasonably necessary in order for the Insurance Company to print together in one
document the current prospectus for the Company, the current prospectus for the
Contracts issued by the Insurance Company and/or the prospectuses of other
investment companies available for purchase by the Accounts. In the event that
such prospectuses are printed together in one document, the costs of printing
and mailing copies of the document shall be allocated based on the Company's
share of the total costs determined according to the number of pages of the
parties' and other investment companies' respective portions of the document.
3.3. The Company will provide, at its expense, the Insurance Company with
the following Company (or individual Fund) documents, and any supplements
thereto, with respect to prospective Contract owners of the Insurance Company,
and Insurance Company shall bear the expense of printing and mailing such
documents:
(i) camera ready copy of the current prospectus for printing by
the Insurance Company;
(ii) a copy of the statement of additional information suitable for
duplication; and
(iii) camera ready copy of the annual and semi-annual reports for
printing by the Insurance Company.
3.4. If and to the extent required by law, the Insurance Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Company shares in accordance with instructions
received from Contract owners; and
<PAGE>
(iii) vote Company shares for which no instructions have been
received in the same proportion as Company shares of such Fund
for which instructions have been received:
so long as and to the extent that the Commission continues to interpret the 1940
Act to require pass-through voting privileges for variable contract owners. The
Insurance Company reserves the right to vote Company shares held in any
segregated asset account in its own right, to the extent permitted by law.
Participating Insurance Companies shall be responsible for assuring that each of
their separate accounts participating in the Company calculates voting
privileges in a manner consistent with the standards set forth on Schedule C
attached hereto and incorporated herein by this reference, which standards will
also be provided to the other Participating Insurance Companies. The Insurance
Company shall fulfill its obligations under, and abide by the terms and
conditions of, the Mixed and Shared Funding Exemptive Order.
3.5. The Company will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Company will either provide for
annual meetings (except insofar as the Commission may interpret Section 16 of
the 1940 Act not to require such meetings) or, as the Company currently intends,
comply with Section 16(c) of the 1940 Act (although the Company is not one of
the trusts described in Section 16(c) of that Act) as 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, prospectus or statement
of additional information for the Company's shares, as such registration
statement, prospectus and statement of additional information may be amended or
<PAGE>
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
objects to such use within ten calendar days after receipt of that material.
4.4. The Company and INVESCO shall not give any information or make any
representations on behalf of the Insurance Company or concerning the Insurance
Company, the Account, or the Contracts other than the information or
representations contained in a registration statement, prospectus or statement
of additional information for the Contracts, as that registration statement,
prospectus and statement of additional information may be amended or
supplemented from time to time, or in published reports for the Account which
are in the public domain or approved by the Insurance Company for distribution
to Contract owners, or in sales literature or other promotional material
approved by the Insurance Company or its designee, except with the permission of
the Insurance Company.
4.5. The Company will provide to the Insurance Company at least one
complete copy of each registration statement, prospectus, statement of
additional information, report, proxy statement, piece of sales literature or
other promotional material, application for exemption, request for no-action
letter, and any amendment to any of the above, that relate to the Company or its
shares, contemporaneously with the filing of the document with the Commission,
the NASD, or other regulatory authorities.
4.6. The Insurance Company will provide to the Company at least one
complete copy of each registration statement, prospectus, statement of
additional information, report, solicitation for voting instructions, piece of
sales literature and other promotional material, application for exemption,
request for no action letter, and any amendment to any of the above, that
relates to the Contracts or the Account, contemporaneously with the filing of
the document with the Commission, the NASD, or other regulatory authorities.
4.7. For purposes of this Agreement, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements,
newspaper, magazine, or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures, or other
public media,
<PAGE>
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.
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.
<PAGE>
5.3. The Insurance Company shall bear the expenses of printing and
distributing to Contract owners the Contract prospectuses and, except as
provided in Section 3.1, of distributing to Contract owners the Company's
prospectus, proxy materials and reports.
ARTICLE VI. Diversification
6.1. The Company will, at the end of each calendar quarter, comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5 relating to the
diversification requirements for variable annuity, endowment, modified endowment
or life insurance contracts and any amendments or other modifications to that
Section or Regulation.
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Company for the existence of any material
irreconcilable conflict between the interests of the variable contract owners of
all separate accounts investing in the Company. An irreconcilable material
conflict may arise for a variety of reasons, including: (a) an action by any
state insurance regulatory authority; (b) a change in applicable federal or
state insurance, tax, or securities laws or regulations, or a public ruling,
private letter ruling, no-action or interpretive letter, or any similar action
by insurance, tax, or securities regulatory authorities; (c) an administrative
or judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Fund are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by a Participating Insurance Company to
disregard the voting instructions of variable contract owners. The Board shall
promptly inform the Insurance Company if it determines that an irreconcilable
material conflict exists and the implications thereof. The Board shall have sole
authority to determine whether an irreconcilable material conflict exists and
such determination shall be binding upon the Insurance Company.
7.2 The Insurance Company will report promptly any potential or existing
conflicts of which it is aware to the Board. The Insurance Company will assist
the Board in carrying out its responsibilities under the Mixed and Shared
Funding Exemptive Order, by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is not
limited to, an obligation by the Insurance Company to inform the Board whenever
Contract owner voting instructions are to be disregarded. Such responsibilities
shall be carried out by Insurance Company with a view only to the interests of
the Contract owners.
<PAGE>
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.
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
<PAGE>
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Company's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the registration
statement or prospectus for the Contracts or contained in the
Contracts or sales literature for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made
in reliance upon and in conformity with information furnished in
writing to the Insurance Company by or on behalf of the Company for
use in the registration statement or prospectus for the Contracts or
in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Contracts or shares of the Company;
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature of the
Company not supplied by the Insurance Company, 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
<PAGE>
(iv) arise as a result of any failure by the Insurance Company to
provide the services and furnish the materials under the terms of
this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Insurance Company in this
Agreement or arise out of or result from any other material breach
of this Agreement by the Insurance Company,
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b). The Insurance Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party that
may arise from that Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of that Indemnified Party's duties or by reason of
that Indemnified Party's reckless disregard of obligations or duties under this
Agreement or to the Company, whichever is applicable.
8.1(c). The Insurance Company shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless that Indemnified Party shall have notified the Insurance Company in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon that
Indemnified Party (or after the Indemnified Party shall have received notice of
such service on any designated agent). Notwithstanding the foregoing, the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Insurance Company of its obligations hereunder except to the extent
that the Insurance Company has been prejudiced by such failure to give notice.
In addition, any failure by the Indemnified Party to notify the Insurance
Company of any such claim shall not relieve the Insurance Company from any
liability which it may have to the Indemnified Party against whom the action is
brought otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, the Insurance Company
shall be entitled to participate, at its own expense, in the defense of the
action. The Insurance Company also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action; provided,
however, that if the Indemnified Party shall have reasonably concluded that
there may be defenses available to it which are different from or additional to
those available to the Insurance Company, the Insurance Company shall not have
the right to assume said defense, but shall pay the costs and expenses thereof
(except that in no event shall the Insurance Company be liable for the fees and
<PAGE>
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, 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
<PAGE>
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.
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
<PAGE>
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.
<PAGE>
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,
damages, liabilities or expenses (or actions in respect thereof) or settlements
result from the gross negligence, bad faith or willful misconduct of the Board
or any member thereof, are related to the operations of the Company and:
(i) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement
(including a failure to comply with the diversification requirements
specified in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Company;
as limited by, and in accordance with the provisions of, 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
<PAGE>
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
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
<PAGE>
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
(d) at the option of the Insurance Company in the event that formal
administrative proceedings are instituted against the Company or
INVESCO by the NASD, the Commission, or any state securities or
insurance department or any other regulatory body, provided,
however, that the Insurance Company determines in its sole judgement
exercised in good faith, that any such administrative proceedings
will have a material adverse effect upon the ability of the Company
or INVESCO to perform its obligations under this Agreement; or
(e) with respect to any Account, upon requisite vote of the Contract
owners having an interest in that Account (or any subaccount)
to substitute the shares of another investment company
<PAGE>
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
<PAGE>
the subject of material adverse publicity and that material adverse
change or material adverse publicity will have a material adverse
impact upon the business and operations of the Insurance Company,
(2) the Insurance Company shall notify the Company and INVESCO in
writing of the determination and its intent to terminate the
Agreement, and (3) after considering the actions taken by the
Company and/or INVESCO and any other changes in circumstances since
the giving of such a notice, the determination shall continue to
apply on the sixtieth (60th) day following the giving of the notice,
which sixtieth day shall be the effective date of termination; or
(k) at the option of either the Company or INVESCO, if the Insurance
Company gives the Company and INVESCO the written notice specified
in Section 1.6(b) hereof and at the time that notice was given there
was no notice of termination outstanding under any other provision
of this Agreement; provided, however any termination under this
Section 10.1(k) shall be effective forty five (45) days after the
notice specified in Section 1.6(b) was given.
10.2. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 10.1(a) may be exercised for any
reason or for no reason.
10.3 Notice Requirement. No termination of this Agreement shall be
effective unless and until the party terminating this Agreement gives prior
written notice to all other parties to this Agreement of its intent to
terminate, which notice shall set forth the basis for the termination.
Furthermore,
(a) in the event that any termination is based upon the provisions
of Article VII, or the provisions of Section 10.1(a), 10.1(i),
10.1(j), or 10.1(k) of this Agreement, the prior written notice
shall be given in advance of the effective date of termination as
required by those provisions; and
(b) in the event that any termination is based upon the provisions
of Section 10.1(c) or 10.1(d) of this Agreement, the prior written
notice shall be given at least ninety (90) days before the effective
date of termination.
10.4. Effect of Termination. Notwithstanding any termination of this
Agreement, the Company and INVESCO shall at the option of the Insurance Company,
continue to make available additional shares of the Company pursuant to the
terms and conditions of this Agreement, for all Contracts in effect on the
<PAGE>
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.
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:
1290 Broadway
Denver, Colorado 80203-5699
Attention: Bonnie Dailey
If to INVESCO:
P.O. Box 173706
Denver, Colorado 80217-3706
Attention: General Counsel
ARTICLE XII. Miscellaneous
<PAGE>
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.
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:
SECURITY LIFE OF DENVER INSURANCE COMPANY
By its authorized officer,
By: /s/ Steve Largent
----------------------------
Title: Vice President
Date: August 26, 1994
Company:
INVESCO VARIABLE INVESTMENT FUNDS, INC.
By its authorized officer,
By: /s/ Ronald L. Grooms
----------------------------
Title: Treasurer
Date: August 26, 1994
INVESCO:
INVESCO FUNDS GROUP, INC.
By its authorized officer,
By: /s/ Ronald L. Grooms
-----------------------------
Title: Senior Vice President
Date: August 26, 1994
<PAGE>
Schedule A
Accounts
Date Established
Separate Account A1 November 3, 1993
Separate Account L1 November 3, 1993
<PAGE>
Schedule B
Contracts
1. The Exchequer Variable Annuity (Flexible Premium Deferred
Combination Fixed and Variable
Annuity Contract)
2. First Line (Flexible Premium Variable Life
Insurance Policy)
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Company by INVESCO, the Company and the
Insurance Company. The defined terms herein shall have the meanings assigned in
the Participation Agreement except that the term "Insurance Company" shall also
include the department or third party assigned by the Insurance Company to
perform the steps delineated below.
1. The number of proxy proposals is given to the Insurance Company by INVESCO
as early as possible before the date set by the Company for the
shareholder meeting to facilitate the establishment of tabulation
procedures. At this time INVESCO will inform the Insurance Company of the
Record, Mailing and Meeting dates. This will be done verbally
approximately two months before meeting.
2. Promptly after the Record Date, the Insurance Company will perform a "tape
run", or other activity, which will generate the names, addresses and
number of units which are attributed to each contractowner/policyholder
(the "Customer") as of the Record Date. Allowance should be made for
account adjustments made after this date that could affect the status of
the Customers' accounts of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Insurance Company will use its 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 Company's Annual Report must be sent to each Customer by the Insurance
Company either before or together with the Customers' receipt of a proxy
statement. INVESCO will provide at least one copy of the last Annual
Report to the Insurance Company.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card")
is provided to the Insurance Company by the Company. The Insurance
Company, at its expense, shall produce and personalize the Voting
Instruction cards. The Legal Department of INVESCO ("INVESCO Legal") must
approve the Card before it is printed. Allow approximately 2-4 business
days for printing information on the Cards. Information commonly found on
the Cards includes:
a. name (legal name as found on account registration)
<PAGE>
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.)
5. During this time, INVESCO Legal will develop, produce, and the Company
will pay for the Notice of Proxy and the Proxy Statement (one document).
Printed and folded notices and statements will be sent to Insurance
Company for insertion into envelopes (envelopes and return envelopes are
provided and paid for by the Insurance Company). Contents of envelope sent
to customers by Insurance Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. Return 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.
6. The above contents should be received by the Insurance Company
approximately 3-5 business days before mail date. Individual in charge at
Insurance Company reviews and approves the contents of the mailing package
to ensure correctness and completeness. Copy of this approval sent to
INVESCO Legal.
7. Package mailed by the Insurance Company.
* The Company must allow at least a 15-day solicitation
time to the Insurance Company as the shareowner. (A 5-week period is
recommended.) Solicitation time is calculated as calendar days from
(but not including) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An
often used procedure is to sort cards on arrival by proposal into vote
categories of all yes, no, or mixed replies, and to begin data entry.
<PAGE>
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal
procedure.
9. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to the Customer with an explanatory letter, a
new Card and return 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.
10. There are various control procedures used to ensure proper tabulation of
votes and accuracy of the tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
11. The actual tabulation of votes is done in units which are then converted
to shares. (It is very important that the Company receives the tabulations
stated in terms of a percentage and the number of shares.) INVESCO Legal
must review and approve tabulation format.
12. Final tabulation in shares is verbally given by the Insurance Company to
INVESCO Legal on the morning of the meeting not later than 10:00 a.m.
Denver time. INVESCO Legal may request an earlier deadline if required to
calculate the vote in time for the meeting.
13. A Certificate of Mailing and Authorization to Vote Shares will be required
from the Insurance Company as well as an original copy of the final vote.
INVESCO Legal will provided a standard form for each Certification.
14. The Insurance Company will be required to box and archive the Cards
received from the Customers. In the event that any vote is challenged or
if otherwise necessary for legal, regulatory, or accounting purposes,
INVESCO Legal will be permitted reasonable access to such Cards.
15. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
PARTICIPATION AGREEMENT
Among
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO FUNDS GROUP, INC.
and
AMERICAN CENTURION LIFE ASSURANCE COMPANY
THIS AGREEMENT, made and entered into this 4th day of December, 1996 by
and among AMERICAN CENTURION LIFE ASSURANCE COMPANY, (hereinafter the "Insurance
Company"), a New York corporation, on its own behalf and on behalf of each
separate account of the Insurance Company set forth on Schedule A hereto as may
be amended from time to time (each such account hereinafter referred to as the
"Account"), INVESCO VARIABLE INVESTMENT FUNDS, INC., a Maryland corporation (the
"Company") and INVESCO FUNDS GROUP, INC. ("INVESCO"), a Delaware corporation.
WHEREAS, the Company engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable annuity and life insurance contracts
to be offered by insurance companies which have entered into participation
agreements substantially identical to this Agreement ("Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Company is divided into several
series of shares, each designated a "Fund" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Company has obtained an order from the Securities and
Exchange Commission (the "Commission"), dated December 29, 1993 (File No.
812-8590), granting Participating Insurance Companies and their separate
accounts exemptions from the provisions of sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended, (the "1940 Act") and
Rules 6e-2(b)(15) and 6e- 3(T)(b)(15) thereunder, to the extent necessary to
permit shares of the Company to be sold to and held by variable annuity and
variable life insurance separate accounts of life insurance companies that may
or may not be affiliated with one another (the "Mixed and Shared Funding
Exemptive Order"); and
WHEREAS, the Company is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, INVESCO is duly registered as an investment adviser under the
Investment Advisers Act of 1940 and any applicable state securities law and as a
broker dealer under the Securities Exchange Act of 1934, as amended, (the "1934
<PAGE>
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Insurance Company has registered under the 1933 Act, or will
register under the 1933 Act, certain variable annuity contracts identified by
the form number(s) listed on Schedule B to this Agreement, as amended from time
to time hereafter by mutual written agreement of all the parties hereto (the
"Contracts"); and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the board of directors of the
Insurance Company on the date shown for that Account on Schedule A hereto, to
set aside and invest assets attributable to the Contracts; and
WHEREAS, the Insurance Company has registered or will register each
Account as a unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Insurance Company intends to purchase shares in the Funds
designated on Schedule C to this Agreement, as it may be amended from time to
time, on behalf of the Accounts to fund the Contracts and INVESCO is authorized
to sell such shares to unit investment trusts such as the Account at net asset
value;
NOW, THEREFORE, in consideration of their mutual promises, the Insurance
Company, the Company and INVESCO agree as follows:
ARTICLE I. Sale of Company Shares
1.1. INVESCO agrees to sell to the Insurance Company those shares of the
Company which each Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Company or its designee of
the order for the shares of the Company. For purposes of this Section 1.1, the
Insurance Company shall be the designee of the Company for receipt of such
orders from the Accounts and receipt by such designee shall constitute receipt
by the Company; provided that the Company receives notice of such order by 9:00
a.m., Mountain Time, on the next following Business Day. "Business Day" shall
mean any day on which the New York Stock Exchange is open for trading and on
which the Company calculates its net asset value pursuant to the rules of the
Commission.
1.2. The Company agrees to make its shares available for purchase at the
applicable net asset value per share by the Insurance Company and its Accounts
on those days on which the Company calculates its Funds' net asset values
pursuant to rules of the Commission and the Company shall use reasonable efforts
to calculate its Funds' net asset values on each day on which the New York Stock
Exchange is open for trading. Notwithstanding the foregoing, the board of
directors of the Company (hereinafter the "Board") may refuse to sell shares of
any Fund to any person, or suspend or terminate the offering of shares of any
Fund if such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Board acting in good faith and
<PAGE>
in light of their fiduciary duties under federal and any applicable state laws,
necessary in the best interests of the shareholders of that Fund.
1.3. The Company and INVESCO agree that shares of the Company will be sold
only to Participating Insurance Companies and their separate accounts. No shares
of any Fund will be sold to the general public.
1.4. The Company and INVESCO will not sell Company shares to any insurance
company or separate account unless an agreement containing provisions
substantially the same as Sections 2.1, 3.4, 3.5 and Article VII of this
Agreement is in effect to govern such sales.
1.5. The Company agrees to redeem, on the Insurance Company's request, any
full or fractional shares of the Company held by the Insurance Company,
executing such requests on a daily basis at the net asset value next computed
after receipt by the Company or its designee of the request for redemption. For
purposes of this Section 1.5, the Insurance Company shall be the designee of the
Company for receipt of requests for redemption from each Account and receipt by
that designee shall constitute receipt by the Company; provided that the Company
receives notice of the request for redemption by 9:00 a.m., Mountain Time, on
the next following Business Day.
1.6. The Insurance Company agrees to purchase and redeem the shares of
each Fund offered by the then-current prospectus of the Company in accordance
with the provisions of that prospectus.
1.7. The Insurance Company shall pay for Company shares by 9:00 a.m.,
Mountain Time, on the next Business Day after an order to purchase Company
shares is made in accordance with the provisions of Section 1.1 hereof. Payment
shall be in federal funds transmitted by wire. For the purpose of Sections 2.10
and 2.11, upon receipt by the Company of the federal funds so wired, such funds
shall cease to be the responsibility of the Insurance Company and shall become
the responsibility of the Company. Payment of aggregate redemption proceeds
(aggregate redemptions of a Fund's shares by an Account) for a given Business
Day will be made by wiring federal funds to the Insurance Company on the next
Business Day after receipt of the redemption request. Notwithstanding the
foregoing, in the event that one or more Funds has insufficient cash on hand to
pay aggregate redemptions on the next Business Day, and if such Fund has
determined to settle redemption transactions for all of its shareholders on a
delayed basis (more than one Business Day, but in no event more than seven
calendar days, after the date on which the redemption order is received, unless
otherwise permitted by an order of the Commission under Section 22(e) of the
1940 Act), the Company shall be permitted to delay sending redemption proceeds
to the Insurance Company by the same number of days that the Company is delaying
sending redemption proceeds to the other shareholders of the Fund.
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
<PAGE>
Account. Shares ordered from the Company will be recorded in an appropriate
title for each Account or the appropriate subaccount of each Account.
1.9. The Company shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Insurance Company of any income,
dividends or capital gain distributions payable on the Funds' shares. The
Insurance Company hereby elects to receive all income dividends and capital gain
distributions payable on a Fund's shares in additional shares of that Fund. The
Insurance Company reserves the right to revoke this election and to receive all
such income, dividends and capital gain distributions in cash. The Company shall
notify the Insurance Company of the number of shares issued as payment of
dividends and distributions.
1.10. The Company shall make the net asset value per share for each Fund
available to the Insurance Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make those per-share net asset values available by 4:00 p.m.,
Mountain Time. If there are dividends or capital gain distributions payable on
the Funds' Shares, the Company will use its best efforts to make the per share
net asset values and dividend or distribution amounts available by 5:00 p.m.,
Mountain Time, but in no event later than 6:00 p.m., Mountain Time. In the event
adjustments are required to correct any error in the computation of the net
asset value of Fund shares made by the Company or INVESCO, INVESCO shall notify
the Insurance Company as soon as possible after discovering the need for such
adjustments. The parties shall negotiate in good faith to develop a reasonable
method for effecting such adjustments.
ARTICLE II. Representations and Warranties
2.1. The Insurance Company represents and warrants that the Contracts are,
or will be, registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable federal and
state laws and that the sale of the Contracts shall comply in all material
respects with applicable state insurance suitability requirements. The Insurance
Company further represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that it has legally and
validly established the Account prior to any issuance or sale thereof as a
segregated asset account under Section 4240 of the New York Insurance Law 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
<PAGE>
laws of the various states only if and to the extent deemed advisable by
the Company or INVESCO.
2.3. The Company represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will make every effort to maintain that
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Insurance Company immediately upon having a reasonable
basis for believing that it has ceased to so qualify or that it might not so
qualify in the future.
2.4. The Insurance Company represents and warrants that the Contracts are
currently treated as annuity contracts under applicable provisions of the Code
and that it will make every effort to maintain such treatment and that it will
notify the Company and INVESCO immediately upon having a reasonable basis for
believing that the Contracts have ceased to be so treated or that they might not
be so treated in the future.
2.5. The Company currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. To the extent that it decides
to finance distribution expenses pursuant to Rule 12b-1, the Company undertakes
to have a board of directors, a majority of whom are not interested persons of
the Company, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.6. The Company makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of any state.
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 New York 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
<PAGE>
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.
2.11. The Insurance Company represents and warrants that all of its
officers, employees, investment advisers and other individuals/entities dealing
with the money and/or securities of the Company are covered by a blanket
fidelity bond or similar coverage for the benefit of the Company, in an amount
not less than $5 million. The aforesaid includes coverage for larceny and
embezzlement and is issued by a reputable bonding company. The Insurance Company
agrees to make all reasonable efforts to see that this bond or another bond
containing these provisions is always in effect, and agrees to notify the
Company and INVESCO in the event that such coverage no longer applies. The
Insurance Company further represents and warrants that the employees of
Insurance Company, or such other persons designated by Insurance Company, listed
on Schedule D have been authorized by all necessary action of Insurance Company
to give directions, instructions and certifications to the Company and INVESCO
on behalf of Insurance Company. The Company and INVESCO are authorized to act
and rely upon any directions, instructions and certifications received from such
persons unless and until they have been notified in writing by the Insurance
Company of a change in such persons, and the Company and INVESCO shall incur no
liability in doing so.
2.12. The Insurance Company represents and warrants that it will not
purchase Company shares with Account assets derived from tax-qualified
retirement plans except indirectly, through Contracts purchased in connection
with such plans.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. INVESCO shall provide the Insurance Company (at INVESCO's expense)
with as many copies of the Company's current prospectus as the Insurance Company
may reasonably request for distribution, at the Insurance Company's expense, to
prospective Contract owners and applicants. The Company will provide, at the
Company's expense, as many copies of said prospectus as necessary for
distribution, at the Company's expense, to existing Contract owners whose
Contract values are invested in the Company. INVESCO (or the Company) will
provide the copies of said prospectus to the Insurance Company or to its mailing
agent. The Insurance Company will distribute the prospectus to existing Contract
owners and will bill the Company for the reasonable cost of such distribution.
If requested by the Insurance Company in lieu thereof, the Company shall provide
such documentation (including a final copy of the new prospectus as set in type
at the Company's expense) and other assistance as is reasonably necessary in
order for the Insurance Company once each year (or more frequently if the
prospectus for the Company is amended) to have the Company's prospectus and the
prospectuses of other mutual funds in which assets attributable to the Contracts
<PAGE>
may be invested printed together in one document, in which case the Company or
INVESCO will bear its reasonable share of expenses as described above, allocated
based on the proportionate number of pages of the Company's and other funds'
respective portions of the document.
3.2. The Company's prospectus shall state that the Statement of Additional
Information for the Company (the "SAI") is available from INVESCO (or in the
Company's discretion, the Prospectus shall state that the SAI is available from
the Company), and INVESCO, at its expense, shall print and provide the SAI free
of charge to the Insurance Company for distribution, at INVESCO's expense, to
prospective Contract owners and applicants. The Company will provide, at the
Company's expense, as many copies of said SAI as necessary for distribution, at
the Company's expense, to any existing Contract owner whose Contract values are
invested in the Company who requests such SAI or whenever state or federal law
otherwise requires that such SAI be provided. INVESCO (or the Company) will
provide the copies of said SAI to the Insurance Company or to its mailing agent.
The Insurance Company will distribute the SAI as requested or required and will
bill the Company or INVESCO for the reasonable cost of such distribution.
3.3. The Company, at its expense, shall provide the Insurance Company or
its mailing agent with copies of its proxy material, reports to stockholders and
other communications to stockholders in such quantity as the Insurance Company
shall reasonably require for distributing to Contract owners. The Insurance
Company will distribute this proxy material, reports and other communications to
existing Contract owners and tabulate the votes and will bill the Company for
the reasonable cost of such distribution and tabulation.
3.4. If and to the extent required by law, the Insurance Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Company shares in accordance with instructions
received from Contract owners; and
(iii) vote Company shares for which no instructions have been
received in the same proportion as Company shares of such portfolio for which
instructions have been received:
so long as and to the extent that the Commission continues to interpret the 1940
Act to require pass-through voting privileges for variable contract owners. The
Insurance Company reserves the right to vote Company shares held in any
segregated asset account in its own right, to the extent permitted by law.
Participating Insurance Companies shall be responsible for assuring that each of
their separate accounts participating in the Company calculates voting
privileges in a manner consistent with the standards agreed to by the parties,
which standards will also be consistent with those of the other Participating
Insurance Companies. The Insurance Company shall fulfill its obligations under,
and abide by the terms and conditions of, the Mixed and Shared Funding Exemptive
Order.
<PAGE>
3.5. The Company will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Company will either provide for
annual meetings (except insofar as the Commission may interpret Section 16 of
the 1940 Act not to require such meetings) or, as the Company currently intends,
comply with Section 16(c) of the 1940 Act (although the Company is not one of
the trusts described in Section 16(c) of that Act) as well as with Sections
16(a) and, if and when applicable, 16(b). Further, the Company will act in
accordance with the Commission's interpretation of the requirements of Section
16(a) with respect to periodic elections of directors and with whatever rules
the Commission may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Insurance Company shall furnish, or shall cause to be furnished,
to the Company or its designee, each piece of sales literature or other
promotional material in which the Company, a sub-adviser of one of the Funds, or
INVESCO is named, at least ten calendar days prior to its use. No such material
shall be used if the Company or its designee objects to such use within five
calendar days after receipt of such material.
4.2. The Insurance Company shall not give any information or make any
representations or statements on behalf of the Company or concerning the Company
in connection with the sale of the Contracts other than the information or
representations contained in the registration statement, prospectus or SAI for
the Company's shares, as such registration statement, prospectus or SAI may be
amended or supplemented from time to time, or in reports or proxy statements for
the Company, or in published reports for the Company which are in the public
domain and approved by the Company or INVESCO for distribution, or in sales
literature or other promotional material approved by the Company or its designee
or by INVESCO, except with the permission of the Company or INVESCO. The Company
and INVESCO agree to respond to any request for approval on a reasonably prompt
and timely basis. Nothing in this Section 4.2 will be construed as preventing
the Insurance Company or its employees or agents from giving advice on
investment in the Company.
4.3. The Company, INVESCO, or its designee shall furnish, or shall cause
to be furnished, to the Insurance Company or its designee, each piece of sales
literature or other promotional material in which the Insurance Company and/or
its separate account(s), is named at least ten calendar days prior to its use.
No such material shall be used if the Insurance Company or its designee object
to such use within five calendar days after receipt of that material.
4.4. The Company and INVESCO shall not give any information or make any
representations on behalf of the Insurance Company or concerning the Insurance
Company, the Account, or the Contracts other than the information or
representations contained in a registration statement, prospectus or statement
of additional information for the Contracts, as that registration statement,
prospectus or statement of additional information may be amended or supplemented
from time to time, or in published reports for the Account which are in the
public domain and approved by the Insurance Company for distribution to Contract
<PAGE>
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. The Insurance Company agrees to respond to any request for approval on
a reasonably prompt and timely basis.
4.5. The Company will provide to the Insurance Company at least one
complete copy of each registration statement, prospectus, SAI, report, proxy
statement, piece of sales literature or other promotional material, application
for exemption, request for no-action letter, and any amendment to any of the
above, that relate to the Company or its shares, contemporaneously with the
filing of the document with the Commission, the NASD, or other regulatory
authorities.
4.6. The Insurance Company will provide to the Company at least one
complete copy of each registration statement, prospectus, statement of
additional information, report, solicitation for voting instructions, piece of
sales literature and other promotional material, application for exemption,
request for no action letter, and any amendment to any of the above, that
relates to the Contracts or the Account, contemporaneously with the filing of
the document with the Commission, the NASD, or other regulatory authorities.
4.7. For purposes of this Agreement, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements,
newspaper, magazine, or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures, or other
public media (e.g., on-line networks such as the Internet or other electronic
messages), sales literature (i.e., any written communication distributed or made
generally available to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar texts, reprints or
excerpts of any other advertisement, sales literature, or published article),
educational or training materials or other communications distributed or made
generally available to some or all agents or employees, and registration
statements, prospectuses, statements of additional information, shareholder
reports, and proxy materials.
4.8. At the request of any party to this Agreement, each other party will
make available to the other party's independent auditors and/or representative
of the appropriate regulatory agencies, all records, data and access to
operating procedures that may be reasonably requested. However, Company and
INVESCO shall own and control all of their respective records pertaining to
their performance of the services under this Agreement.
<PAGE>
4.9. The Company and INVESCO hereby consent to the Insurance Company's use
of the names INVESCO and INVESCO VIF-Industrial Income Portfolio in connection
with marketing the Contracts, subject to Sections 4.1 and 4.2 of this Agreement.
Such consent will terminate with the termination of this Agreement.
ARTICLE V. Fees and Expenses
5.1. The Company and INVESCO shall pay no fee or other compensation to the
Insurance Company under this Agreement, except that if the Company or any Fund
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then INVESCO may make payments to the Insurance Company if and in
amounts agreed to by INVESCO in writing, subject to review by the board of
directors of the Company. No such payments shall be made directly by the
Company.
5.2. All expenses incident to performance by the Company under this
Agreement shall be paid by the Company. The Company shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Company or
INVESCO, in accordance with applicable state laws prior to their sale. The
Company shall bear the expenses for the cost of registration and qualification
of the Company's shares, preparation and filing of the Company's prospectus, SAI
and registration statement, proxy materials and reports, setting the prospectus
in type, setting in type and printing the proxy materials and reports to
shareholders (including the costs of printing a prospectus that constitutes an
annual report), the preparation of all statements and notices required by any
federal or state law, all taxes on the issuance or transfer of the Company's
shares and other typesetting, printing and distribution expenses set forth in
Article III of this Agreement.
5.3. The Insurance Company shall bear the expenses of printing and
distributing to Contract owners the Contract prospectuses.
ARTICLE VI. Diversification
6.1. The Company will, at the end of each calendar quarter, comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5 relating to the
diversification requirements for variable annuity, endowment, modified endowment
or life insurance contracts and any amendments or other modifications to that
Section or Regulation. In the event of a breach of this Article VI by the
Company, it will take all reasonable steps to: (i) notify the Insurance Company
of such breach; and (ii) adequately diversify the Company so as to achieve
compliance within the grace period afforded by Treasury Regulation 1.817-5.
<PAGE>
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Company for the existence of any material
irreconcilable conflict between the interests of the variable contract owners of
all separate accounts investing in the Company. An irreconcilable material
conflict may arise for a variety of reasons, including: (a) an action by any
state insurance regulatory authority; (b) a change in applicable federal or
state insurance, tax, or securities laws or regulations, or a public ruling,
private letter ruling, no-action or interpretive letter, or any similar action
by insurance, tax, or securities regulatory authorities; (c) an administrative
or judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Fund are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by a Participating Insurance Company to
disregard the voting instructions of variable contract owners. The Board shall
promptly inform the Insurance Company if it determines that an irreconcilable
material conflict exists and the implications thereof. The Board shall have sole
authority to determine whether an irreconcilable material conflict exists and
such determination shall be binding upon the Insurance Company.
7.2 The Insurance Company will report promptly any potential or existing
conflicts of which it is aware to the Board. The Insurance Company will assist
the Board in carrying out its responsibilities under the Mixed and Shared
Funding Exemptive Order, by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is not
limited to, an obligation by the Insurance Company to inform the Board whenever
Contract owner voting instructions are to be disregarded. Such responsibilities
shall be carried out by Insurance Company with a view only to the interests of
the Contract owners.
7.3. If it is determined by a majority of the Board, or a majority of its
directors who are not interested persons of the Company, INVESCO, or any sub-
adviser to any of the Funds (the "Independent Directors"), that a material
irreconcilable conflict exists, the Insurance Company and/or other Participating
Insurance Companies shall, at their expense and to the extent reasonably
practicable (as determined by a majority of the Independent Directors), take
whatever steps are necessary to remedy or eliminate the irreconcilable material
conflict, up to and including: (1), withdrawing the assets allocable to some or
all of the separate accounts from the Company or any Fund and reinvesting those
assets in a different investment medium, including (but not limited to) another
Fund of the Company, or submitting the question whether such segregation should
be implemented to a vote of all affected variable contract owners and, as
appropriate, segregating the assets of any appropriate group (e.g., annuity
contract owners, life insurance contract owners, or variable contract owners of
one or more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected variable contract owners the option of
making such a change; and (2), establishing a new registered management
investment company or managed separate account and obtaining approval thereof by
the Commission.
<PAGE>
7.4. If a material irreconcilable conflict arises because of a decision by
the Insurance Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Insurance Company may be required, at the Company's election, to withdraw the
affected Account's investment in the Company and terminate this Agreement with
respect to that Account; provided, however that such withdrawal and termination
shall be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the Independent Directors. No charge or
penalty will be imposed as a result of such withdrawal. Any such withdrawal and
termination must take place within six (6) months after the Company gives
written notice that this provision is being implemented, and until the end of
that six month period INVESCO and the Company shall continue to accept and
implement orders by the Insurance Company for the purchase (and redemption) of
shares of the Company.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Insurance Company
conflicts with the majority of other state regulators, then the Insurance
Company will withdraw the affected Account's investment in the Company and
terminate this Agreement with respect to that Account within six months after
the Board informs the Insurance Company in writing that it has determined that
the state insurance regulator's decision has created an irreconcilable material
conflict; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the Independent Directors. No charge or penalty
will be imposed as a result of such withdrawal. Until the end of the foregoing
six month period, INVESCO and the Company shall continue to accept and implement
orders by the Insurance Company for the purchase (and redemption) of shares of
the Company.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the Independent Directors shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Company be required to establish a new funding medium for the
Contracts. The Insurance Company shall not be required by Section 7.3 to
establish a new funding medium for the Contracts if an offer to do so has been
declined by vote of a majority of Contract owners materially adversely affected
by the irreconcilable material conflict. In the event that the Board determines
that any proposed action does not adequately remedy any irreconcilable material
conflict, then the Insurance Company will withdraw the Account's investment in
the Company and terminate this Agreement within six (6) months after the Board
informs the Insurance Company in writing of the foregoing determination,
provided, however, that the withdrawal and termination shall be limited to the
extent required by the material irreconcilable conflict, as determined by a
majority of the Independent Directors.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Mixed and Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Mixed and Shared Funding
<PAGE>
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.
<PAGE>
ARTICLE VIII. Indemnification
8.1. Indemnification By The Insurance Company
8.1(a). The Insurance Company agrees to indemnify and hold harmless the
Company and each person, if any, who controls the Company within the meaning of
Section 15 of the 1933 Act and any director, officer, employee or agent of the
foregoing (collectively, the "Indemnified Parties" for purposes of this Section
8.1) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Insurance Company) or
litigation (including reasonable legal and other expenses), to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to the sale
or acquisition of the Company's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the registration statement,
prospectus or statement of additional information for the Contracts or contained
in the Contracts or sales literature for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information furnished in writing to
the Insurance Company by or on behalf of the Company for use in the registration
statement, prospectus or statement of additional information for the Contracts
or in the Contracts or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or shares of the
Company;
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the registration
statement, prospectus, SAI or sales literature of the Company (or any amendment
or supplement) not supplied by the Insurance Company, or persons under its
control) or wrongful conduct of the Insurance Company or persons under its
control, with respect to the sale or distribution of the Contracts or Company
Shares; or
<PAGE>
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, SAI 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
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
<PAGE>
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 person, if any, who controls the Insurance Company within the
meaning of Section 15 of the 1933 Act and any director, officer, employee or
agent of the foregoing (collectively, the "Indemnified Parties" for purposes of
this Section 8.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of INVESCO) or
litigation (including reasonable legal and other expenses) to which the
Indemnified Parties may become subject under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Company's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration statement,
prospectus, SAI or sales literature of the Company (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to any Indemnified
Party if the statement or omission or alleged statement or omission was made in
reliance upon and in conformity with information furnished in writing to INVESCO
or the Company by or on behalf of the Insurance Company for use in the
<PAGE>
registration statement, prospectus or SAI 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, statement of additional information or sales literature
for the Contracts (or any amendment or supplement) not supplied by INVESCO or
persons under its control) or wrongful conduct of the Company, INVESCO or
persons under their control, with respect to the sale or distribution of the
Contracts or shares of the Company; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement, prospectus, statement
of additional information or sales literature covering the Contracts, or any
amendment thereof or supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statement or statements therein not misleading, if such statement or
omission was made in reliance upon information furnished in writing to the
Insurance Company by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement (including
a failure, whether unintentional or in good faith or otherwise, to comply with
the diversification requirements specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by INVESCO in this Agreement or arise out of
or result from any other material breach of this Agreement by INVESCO; as
limited by and in accordance with the provisions of Sections 8.2(b) and 8.2(c)
hereof.
8.2(b) INVESCO shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party that may arise from the Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of the Indemnified Party's duties or by reason of the Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to the
Insurance Company or the Account, whichever is applicable.
<PAGE>
8.2(c) INVESCO shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless the
Indemnified Party shall have notified INVESCO in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Indemnified Party (or after
the Indemnified Party shall have received notice of such service on any
designated agent). Notwithstanding the foregoing, the failure of any Indemnified
Party to give notice as provided herein shall not relieve INVESCO of its
obligations hereunder except to the extent that INVESCO has been prejudiced by
such failure to give notice. In addition, any failure by the Indemnified Party
to notify INVESCO of any such claim shall not relieve INVESCO from any liability
which it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any such
action is brought against the Indemnified Parties, INVESCO will be entitled to
participate, at its own expense, in the defense thereof. INVESCO also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action; provided, however, that if the Indemnified Party shall have
reasonably concluded that there may be defenses available to it which are
different from or additional to those available to INVESCO, INVESCO shall not
have the right to assume said defense, but shall pay the costs and expenses
thereof (except that in no event shall INVESCO be liable for the fees and
expenses of more than one counsel for Indemnified Parties in connection with any
one action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances). After notice from
INVESCO to the Indemnified Party of INVESCO's election to assume the defense
thereof, and in the absence of such a reasonable conclusion that there may be
different or additional defenses available to the Indemnified Party, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and INVESCO will not be liable to that party under this
Agreement for any legal or other expenses subsequently incurred by that party
independently in connection with the defense thereof other than reasonable costs
of investigation.
8.2(d) The Insurance Company agrees to notify INVESCO promptly of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
<PAGE>
8.3 Indemnification By the Company
8.3(a). The Company agrees to indemnify and hold harmless the Insurance
Company, and each person, if any, who controls the Insurance Company within the
meaning of Section 15 of the 1933 Act and any director, officer, employee or
agent of the foregoing (collectively, the "Indemnified Parties" for purposes of
this Section 8.3) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Company)
or litigation (including reasonable legal and other expenses) to which the
Indemnified Parties may become subject under any statute, at common law or
otherwise, insofar as those losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements result from the gross negligence, bad
faith or willful misconduct of the Board or any member thereof, are related to
the operations of the Company and:
(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
<PAGE>
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
available to the Indemnified Party, the Indemnified Party shall bear the fees
and expenses of any additional counsel retained by it, and the Company will not
be liable to that party under this Agreement for any legal or other expenses
subsequently incurred by that party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). The Insurance Company and INVESCO agree promptly to notify the
Company of the commencement of any litigation or proceedings against it or any
of its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Company.
8.4. A successor by law of the parties to this Agreement shall be entitled
to the benefits of indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and provisions hereof interpreted
under and in accordance with the laws of the State of Colorado.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934,
and 1940 acts, and the rules and regulations and rulings thereunder, including
any exemptions from those statutes, rules and regulations the Commission may
grant (including, but not limited to, the Mixed and Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party upon ninety (90) days' advance
written notice to the other parties or, if later, upon receipt of any
<PAGE>
required exemptive relief or orders from the SEC, unless otherwise agreed among
the 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
(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
<PAGE>
(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 change or material adverse publicity will
have a material adverse impact upon the business and operations of the Insurance
Company, (2) the Insurance Company shall notify the Company and INVESCO in
writing of the determination and its intent to terminate the Agreement, and (3)
after considering the actions taken by the Company and/or INVESCO and any other
changes in circumstances since the giving of such a notice, the determination
shall continue to apply on the sixtieth (60th) day following the giving of the
notice, which sixtieth day shall be the effective date of termination; or
(k) at the option of any party to this Agreement upon another
party's material breach of any provision of this Agreement.
10.2. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 10.1(a) may be exercised for any
reason or for no reason.
10.3 Notice Requirement. No termination of this Agreement shall be
effective unless and until the party terminating this Agreement gives prior
<PAGE>
written notice to all other parties to this Agreement of its intent to
terminate, which notice shall set forth the basis for the termination.
Furthermore,
(a) in the event that any termination is based upon the provisions
of Article VII, or the provisions of Section 10.1(a), 10.1(i), or 10.1(j) of
this Agreement, the prior written notice shall be given in advance of the
effective date of termination as required by those provisions; and
(b) in the event that any termination is based upon the provisions
of Section 10.1(c) or 10.1(d) of this Agreement, the prior written notice shall
be given at least ninety (90) days before the effective date of termination.
10.4. Effect of Termination. Notwithstanding any termination of this
Agreement, the Company and INVESCO shall at the option of the Insurance Company,
continue to make available additional shares of the Company pursuant to the
terms and conditions of this Agreement, for all Contracts in effect on the
effective date of termination of this Agreement ("Existing Contracts").
Specifically, without limitation, the owners of the Existing Contracts shall be
permitted to reallocate investments in the Company, redeem investments in the
Company and/or invest in the Company upon the making of additional purchase
payments under the Existing Contracts. The parties agree that this Section 10.4
shall not apply to any terminations under Article VII and the effect of Article
VII terminations shall be governed by Article VII of this Agreement. In
addition, with respect to Existing Contracts, all provisions of this Agreement
will survive and not be affected by any termination of this Agreement.
ARTICLE XI. Notices.
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of that other party set forth
below or at such other address as the other party may from time to time specify
in writing.
If to the Company:
P.O. Box 173706
Denver, Colorado 80217-3706
Attention: General Counsel
If to the Insurance Company:
American Centurion Life Assurance Company
c/o American Express Financial Advisors Inc.
IDS Tower 10
Minneapolis, MN 55440
Attention: Jim Mortensen
Manager - Product Development
with a simultaneous copy to:
American Centurion Life Assurance Company
c/o American Express Financial Advisors Inc.
IDS Tower 10
Minneapolis, MN 55440
Attention: Mary Ellyn Minenko Counsel
<PAGE>
If to INVESCO:
P.O. Box 173706
Denver, Colorado 80217-3706
Attention: General Counsel
ARTICLE XII. Miscellaneous
12.1. The Company and INVESCO acknowledge that the identities of the
customers of the Insurance Company or any of its affiliates (collectively, the
"Insurance Company Protected Parties" for purposes of this Section 12.1),
information maintained regarding those customers, and all computer programs and
procedures or other information developed or used by the Insurance Company
Protected Parties or any of their employees or agents in connection with the
Insurance Company's performance of its duties under this Agreement are the
valuable property of the Insurance Company Protected Parties. The Company and
INVESCO agree that if they come into possession of any list or compilation of
the identities of or other information about the Insurance Company Protected
Parties' customers, or any other information or property of the Insurance
Company Protected Parties, other than such information as may be independently
developed or compiled by the Company or INVESCO from information supplied to
them by the Insurance Company Protected Parties' customers who also maintain
accounts directly with the Company, INVESCO or other mutual funds advised by
INVESCO, the Company and INVESCO shall hold such information or property in
confidence and refrain from using, disclosing or distributing any of such
information or other property except: (i) with the Insurance Company's prior
written consent; or (ii) as required by law or judicial process. The Insurance
Company acknowledges that all computer programs, procedures and other
information developed or used by the Company or INVESCO (collectively, the
"INVESCO Protected Parties" for purposes of this Section 12.1) or any of their
employees or agents in connection with the Company's or INVESCO's performance of
their respective duties under this Agreement are the valuable property of the
INVESCO Protected Parties. The Insurance Company agrees that if it comes into
possession of any information or property of the INVESCO Protected Parties,
other than such information as may be independently developed or compiled by the
Insurance Company, the Insurance Company shall hold such information or property
in confidence and refrain from using, disclosing or distributing any of such
information or other property except: (i) with the prior written consent of
INVESCO and the Company; or (ii) as required by law or judicial process. Each
party acknowledges that any breach of the agreements in this Section 12.1 would
result in immediate and irreparable harm to the other parties for which there
would be no adequate remedy at law and agree that in the event of such a breach,
the other parties shall be entitled to equitable relief by way of temporary and
permanent injunctions, as well as such other relief as any court of competent
jurisdiction deems appropriate.
12.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
<PAGE>
12.3. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.4. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.5. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Commission, the NASD and state insurance regulators) and shall permit those
authorities reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
12.6. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.7. No party may assign this Agreement without the prior written
consent of the others.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
Insurance Company:
AMERICAN CENTURION LIFE ASSURANCE COMPANY
By its authorized officer,
By: /s/
Title: Vice President, Variable Product Development
Date: 10/18/96
ATTEST:
By: /s/Glen A. Payne
-----------------------------------
Title: General Counsel and Secretary
Date: 10/22/96
Company:
INVESCO VARIABLE INVESTMENT FUNDS, INC.
By its authorized officer,
By: /s/ Glen A. Payne
-----------------------------------
Title: Secretary
Date: December 4, 1996
<PAGE>
INVESCO:
INVESCO FUNDS GROUP, INC.
By its authorized officer,
By: /s/ Ronald L. Grooms
-------------------------------
Title: Senior Vice President
Date: December 4, 1996
<PAGE>
Schedule A
Accounts
Name of Account Date of Resolution of Insurance Company's
Board which Established the Account
ACL Variable Annuity Account 1 October 12, 1995
<PAGE>
Schedule B
Contracts
American Centurion Life Assurance Company Deferred Annuity Contract
1. Contract Form 38501
2. Certificate Form 38502-NY
3. Certificate Form 38503-IRA-NY
<PAGE>
Schedule C
Funds
INVESCO VIF - Industrial Income Portfolio
<PAGE>
Schedule D
Persons Authorized to Give Instructions to the Company and INVESCO
NAME ADDRESS AND PHONE NUMBER
(1) Hope Jaecks T11/1438
Print or Type Name
/s/ Hope Jaecks 612/671-1175
--------------------
Signature Phone
(2) Dean Reznecheck T11/125
Print or Type Name
/s/ Dean Reznecheck 612/671-3182
-------------------
Signature Phone
(3) Richard Taliaferro T11/125
Print or Type Name
/s/ Richard Taliaferro 612/671-2748
----------------------
Signature Phone
(4) Mary Berger T11/125
Print or Type Name
/s/ Mary Berger 612/671-5003
----------------------
Signature Phone
(5) Joe Lardy T11/1438
Print or Type Name
/s/ Joe Lardy 612/671-6165
----------------------
Signature Phone
(6) Patrick Jacobson T11/125
Print or Type Name
/s/ Patrick Jacobson 612/671-1978
--------------------
Signature Phone
(7) Chad Callahan T11-125
Print or Type Name
/s/ Chad Callahan 612/671-2037
--------------------
Signature Phone
<PAGE>
(8) Kathy Rothstein T11/125
Print or Type Name
/s/ Kathy Rothstein 612/671-3843
--------------------
Signature Phone
(9) Sheila Ranum T11/1438
Print or Type Name
/s/ Sheila Ranum 612/671-1148
-------------------
Signature Phone
(10 Kenneth Montague T11/125
Print or Type Name
/s/ Kenneth Montague 612/671-0495
--------------------
Signature Phone
(9) Dan Retzer T11/125
Print or Type Name
/s/ Dan Retzer 612/671-3616
--------------------
Signature Phone
All addresses are IDS Tower 10, Minneapolis, MN 55440.
<PAGE>
PARTICIPATION AGREEMENT
Among
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO FUNDS GROUP, INC.
and
Prudential Insurance Company of America
THIS AGREEMENT, made and entered into this 15th day of April, 1997 by and
among Prudential Insurance Company of America, (hereinafter the "Insurance
Company"), an insurance company organized under the laws of the State of New
Jersey, 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
<PAGE>
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
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
<PAGE>
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.
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
<PAGE>
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.
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.
<PAGE>
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 applicable Sections of the New Jersey 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 of 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.
<PAGE>
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.
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)
<PAGE>
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
(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
<PAGE>
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.
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.
<PAGE>
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.
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
<PAGE>
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
<PAGE>
investments of any Fund are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by a Participating Insurance Company to
disregard the voting instructions of variable contract owners. The Board shall
promptly inform the Insurance Company if it determines that an irreconcilable
material conflict exists and the implications thereof. The Board shall have sole
authority to determine whether an irreconcilable material conflict exists and
such determination shall be binding upon the Insurance Company.
7.2 The Insurance Company will report promptly any potential or existing
conflicts of which it is aware to the Board. The Insurance Company will assist
the Board in carrying out its responsibilities under the Mixed and Shared
Funding Exemptive Order, by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is not
limited to, an obligation by the Insurance Company to inform the Board whenever
Contract owner voting instructions are to be disregarded. Such responsibilities
shall be carried out by Insurance Company with a view only to the interests of
the Contract owners.
7.3. If it is determined by a majority of the Board, or a majority of its
directors who are not interested persons of the Company, INVESCO, or any sub-
adviser to any of the Funds (the "Independent Directors"), that a material
irreconcilable conflict exists, the Insurance Company and/or other Participating
Insurance Companies shall, at their expense and to the extent reasonably
practicable (as determined by a majority of the Independent Directors), take
whatever steps are necessary to remedy or eliminate the irreconcilable material
conflict, up to and including: (1), withdrawing the assets allocable to some or
all of the separate accounts from the Company or any Fund and reinvesting those
assets in a different investment medium, including (but not limited to) another
Fund of the Company, or submitting the question whether such segregation should
be implemented to a vote of all affected variable contract owners and, as
appropriate, segregating the assets of any appropriate group (e.g., annuity
contract owners, life insurance contract owners, or variable contract owners of
one or more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected variable contract owners the option of
making such a change; and (2), establishing a new registered management
investment company or managed separate account and obtaining approval thereof by
the Commission.
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
<PAGE>
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
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
<PAGE>
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,
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
<PAGE>
(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
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
<PAGE>
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, 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:
<PAGE>
(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
<PAGE>
Agreement or arise out of or result from any other material breach
of this Agreement by INVESCO; as limited by and in accordance with
the provisions of Sections 8.2(b) and 8.2(c) hereof.
8.2(b) INVESCO shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party that may arise from the Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of the Indemnified Party's duties or by reason of the Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to the
Insurance Company or the Account, whichever is applicable.
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
<PAGE>
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,
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
<PAGE>
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
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.
<PAGE>
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
(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
<PAGE>
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
<PAGE>
(60th) day following the giving of that notice, which sixtieth day
shall be the effective date of termination; or
(j) at the option of the Insurance Company, if (1) the Insurance
Company shall determine, in its sole judgment reasonably exercised
in good faith, that either the Company or INVESCO has suffered a
material adverse change in its business or financial condition or is
the subject of material adverse publicity and that material adverse
change or material adverse publicity will have a material adverse
impact upon the business and operations of the Insurance Company,
(2) the Insurance Company shall notify the Company and INVESCO in
writing of the determination and its intent to terminate the
Agreement, and (3) after considering the actions taken by the
Company and/or INVESCO and any other changes in circumstances since
the giving of such a notice, the determination shall continue to
apply on the sixtieth (60th) day following the giving of the notice,
which sixtieth day shall be the effective date of termination; or
(k) at the option of 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
<PAGE>
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.
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:
Prudential Insurance Company
751 Broad St., Newark, NJ 07102
Attention: Mary Cavanaugh, Esq.
If to INVESCO:
<PAGE>
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.
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:
Prudential Insurance Company of America
By its authorized officer,
By:
Title: VP Marketing
Date: April 11, 1997
Company:
INVESCO VARIABLE INVESTMENT FUNDS, INC.
By its authorized officer,
By: Dan J. Hesser
Title: President, CEO & Director
Date: April 15, 1997
INVESCO:
INVESCO FUNDS GROUP, INC.
By its authorized officer,
By: Ronald L. Grooms
Title: Senior Vice President & Treasurer
Date: April 15, 1997
<PAGE>
Schedule A
Accounts
Name of Account Date of Resolution of Insurance Company's
Board which Established the Account
The Prudential Variable Est. 6/24/88
Contract Account GI-2
<PAGE>
Schedule B
Contracts
1. Contract Form
Group Variable Universal Life Insurance Contracts
Series: 89759
<PAGE>
Schedule C
Persons Authorized to Give Instructions to the Company and INVESCO
To be determined as agreed upon by the parties.
<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).
<PAGE>
(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:
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,
<PAGE>
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.
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.
MOYE, GILES, O KEEFE, VERMEIRE & GORRELL
A LAW PARTNERSHIP
INCLUDING PROFESSIONAL CORPORATIONS
29TH FLOOR
1225 SEVENTEENTH STREET
EDWARD F.O'KEEFE, P.C. DENVER, COLORADO 80Z02-5629
TELEPHONE (303) 292-2900
TELECOPIER (303} 292-4510
November 2, 1993
INVESCO Variable Investment Funds, Inc.
P.O. Box 173706 Denver,
Colorado 80217-3706
Gentlemen:
This is in response to your request for our opinion as to the legality of
the registration of an indefinite number of shares of capital stock ($0.01 par
value per share) of INVESCO Variable Investment Funds, Inc., being registered
with the Securities and Exchange Commission under the Investment Company Act of
1940 and the Securities Act of 1933, as amended (Form N-1A). This share
registration is being requested pursuant to the provisions of Rule 24f-2 under
Section 24(f) of the Investment Company Act of 1940.
We have examined the articles of incorporation of INVESCO Variable
Investment Funds, Inc. as filed for record with the State Department of
Assessments and Taxation of the State of Maryland on August 19, 1993; articles
of amendment and articles supplementary to the articles of incorporation as
filed on October 29, 1993; the bylaws; the minute book setting forth, among
other things, the actions taken by the board of directors authorizing the
issuance and sale of the corporation's capital stock and related acts and
procedures; the registration statement including all exhibits thereto; and have
made such other examination as deemed necessary in the premises.
Based upon our examination, we are of the opinion that INVESCO Variable
Investment Funds, Inc. is a corporation duly organized and existing under and by
virtue of the laws of the State of Maryland, with full power to issue its shares
of capital stock. Said shares, up to the maximum amount hereinafter indicated,
when issued and sold in the manner and on the terms set forth in the
registration statement, will be legally and validly issued, fully paid and
non-assessable shares of the corporation of the par value of $0.01 per share.
The maximum number of shares which has been authorized by the Corporation, and
thus the maximum number which may legally and validly be issued, is five hundred
million shares of such capital stock.
<PAGE>
MOYE, GILES, O KEEFE, VERMEIRE & GORRELL
INVESCO Variable Investment Funds, Inc.
November 2, 1993
Page 2
We hereby consent to the use of this opinion in the registration statement
and further consent to the reference to our name therein.
Very truly yours,
MOYE, MOYE, GILES, O'KEEFE,
VERMEIRE & GORRELL
By: Edward F. O'Keefe, P.C.
/s/ Edward F. O'Keefe, P.C.
----------------------------
Edward F. O'Keefe, President
EFO/ljc
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 7 to the registration statement on Form N-1A (the "Registration
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 the INVESCO Variable Investment Funds, Inc., which is
also incorporated by reference into the Registration Statement. We also consent
to the references to us under the heading "Financial Highlights" in the
Prospectus and under the headings "Independent Accountants" and "Financial
Statements" in the Statement of Additional Information.
/s/ Price Waterhouse LLP
- -------------------------
Price Waterhouse LLP
Denver, Colorado
November 10, 1997
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<CIK> 0000912744
<NAME> INVESCO VARIABLE INVESTMENT FUNDS, INC.
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<NUMBER> 2
<NAME> INVESCO VIF-INDUSTRIAL INCOME PORTFOLIO
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<PERIOD-END> DEC-31-1996
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<TOTAL-ASSETS> 22410279
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<OTHER-ITEMS-LIABILITIES> 68012
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<PAID-IN-CAPITAL-COMMON> 20308654
<SHARES-COMMON-STOCK> 1559051
<SHARES-COMMON-PRIOR> 664722
<ACCUMULATED-NII-CURRENT> 330
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2033283
<NET-ASSETS> 22342267
<DIVIDEND-INCOME> 244513
<INTEREST-INCOME> 290332
<OTHER-INCOME> (2198)
<EXPENSES-NET> 127119
<NET-INVESTMENT-INCOME> 405528
<REALIZED-GAINS-CURRENT> 1122522
<APPREC-INCREASE-CURRENT> 1369048
<NET-CHANGE-FROM-OPS> 2491570
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 405842
<DISTRIBUTIONS-OF-GAINS> 1121678
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1070184
<NUMBER-OF-SHARES-REDEEMED> 282515
<SHARES-REINVESTED> 106660
<NET-CHANGE-IN-ASSETS> 13979969
<ACCUMULATED-NII-PRIOR> (200)
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<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-EXPENSE> 168414
<AVERAGE-NET-ASSETS> 14284013
<PER-SHARE-NAV-BEGIN> 12.58
<PER-SHARE-NII> 0.28
<PER-SHARE-GAIN-APPREC> 2.52
<PER-SHARE-DIVIDEND> 0.28
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<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000912744
<NAME> INVESCO VARIABLE INVESTMENT FUNDS, INC.\
<SERIES>
<NUMBER> 3
<NAME> INVESCO VIF-TOTAL RETURN PORTFOLIO
<S> <C>
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<OTHER-ITEMS-ASSETS> 8601
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<OTHER-ITEMS-LIABILITIES> 14345
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<PAID-IN-CAPITAL-COMMON> 12143988
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<DIVIDEND-INCOME> 180891
<INTEREST-INCOME> 274106
<OTHER-INCOME> (4149)
<EXPENSES-NET> 93468
<NET-INVESTMENT-INCOME> 357380
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<APPREC-INCREASE-CURRENT> 888821
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<DISTRIBUTIONS-OF-INCOME> 405530
<DISTRIBUTIONS-OF-GAINS> 781
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 616196
<NUMBER-OF-SHARES-REDEEMED> 163597
<SHARES-REINVESTED> 30758
<NET-CHANGE-IN-ASSETS> 6960106
<ACCUMULATED-NII-PRIOR> 4449
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<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-EXPENSE> 135505
<AVERAGE-NET-ASSETS> 10390536
<PER-SHARE-NAV-BEGIN> 12.14
<PER-SHARE-NII> 0.36
<PER-SHARE-GAIN-APPREC> 1.12
<PER-SHARE-DIVIDEND> 0.41
<PER-SHARE-DISTRIBUTIONS> 0.00
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<AVG-DEBT-PER-SHARE> 0
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<TABLE> <S> <C>
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<CIK> 0000912744
<NAME> INVESCO VARIABLE INVESTMENT FUNDS, INC.
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<NUMBER> 1
<NAME> INVESCO VIF-HIGH YIELD PORTFOLIO
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<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 13076434
<INVESTMENTS-AT-VALUE> 13392907
<RECEIVABLES> 625232
<ASSETS-OTHER> 7938
<OTHER-ITEMS-ASSETS> 36872
<TOTAL-ASSETS> 14062949
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 24598
<TOTAL-LIABILITIES> 24598
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13708907
<SHARES-COMMON-STOCK> 1191508
<SHARES-COMMON-PRIOR> 473935
<ACCUMULATED-NII-CURRENT> 8383
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4588
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 316473
<NET-ASSETS> 14038351
<DIVIDEND-INCOME> 399
<INTEREST-INCOME> 843895
<OTHER-INCOME> 0
<EXPENSES-NET> 67590
<NET-INVESTMENT-INCOME> 776704
<REALIZED-GAINS-CURRENT> 412110
<APPREC-INCREASE-CURRENT> 260801
<NET-CHANGE-FROM-OPS> 672911
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 768178
<DISTRIBUTIONS-OF-GAINS> 407604
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1101791
<NUMBER-OF-SHARES-REDEEMED> 484030
<SHARES-REINVESTED> 99812
<NET-CHANGE-IN-ASSETS> 8805304
<ACCUMULATED-NII-PRIOR> (143)
<ACCUMULATED-GAINS-PRIOR> 82
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 50693
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 111888
<AVERAGE-NET-ASSETS> 8600315
<PER-SHARE-NAV-BEGIN> 11.04
<PER-SHARE-NII> 0.72
<PER-SHARE-GAIN-APPREC> 1.11
<PER-SHARE-DIVIDEND> 0.71
<PER-SHARE-DISTRIBUTIONS> 0.38
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.78
<EXPENSE-RATIO> 1
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
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<CIK> 0000912744
<NAME> INVESCO VARIABLE INVESTMENT FUNDS, INC.
<SERIES>
<NUMBER> 4
<NAME> INVESCO VIF-UTLITIES PORTFOLIO
<S> <C>
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<INVESTMENTS-AT-VALUE> 2886109
<RECEIVABLES> 6306
<ASSETS-OTHER> 7613
<OTHER-ITEMS-ASSETS> 38873
<TOTAL-ASSETS> 2938901
<PAYABLE-FOR-SECURITIES> 263926
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 14727
<TOTAL-LIABILITIES> 278653
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2560194
<SHARES-COMMON-STOCK> 222570
<SHARES-COMMON-PRIOR> 26744
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<OVERDISTRIBUTION-NII> (1508)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 101562
<NET-ASSETS> 2660248
<DIVIDEND-INCOME> 31028
<INTEREST-INCOME> 5433
<OTHER-INCOME> (119)
<EXPENSES-NET> 8574
<NET-INVESTMENT-INCOME> 27768
<REALIZED-GAINS-CURRENT> 30198
<APPREC-INCREASE-CURRENT> 87087
<NET-CHANGE-FROM-OPS> 117285
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 29393
<DISTRIBUTIONS-OF-GAINS> 30023
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 201321
<NUMBER-OF-SHARES-REDEEMED> 10467
<SHARES-REINVESTED> 4972
<NET-CHANGE-IN-ASSETS> 2370456
<ACCUMULATED-NII-PRIOR> 117
<ACCUMULATED-GAINS-PRIOR> (175)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 51040
<AVERAGE-NET-ASSETS> 993262
<PER-SHARE-NAV-BEGIN> 10.84
<PER-SHARE-NII> 0.13
<PER-SHARE-GAIN-APPREC> 1.26
<PER-SHARE-DIVIDEND> 0.14
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<PER-SHARE-NAV-END> 11.95
<EXPENSE-RATIO> 1
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> VIF-HEALTH SCIENCES FUND
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> MAY-22-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 342654
<INVESTMENTS-AT-VALUE> 354377
<RECEIVABLES> 83
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 3455
<TOTAL-ASSETS> 357915
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1416
<TOTAL-LIABILITIES> 1416
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 347453
<SHARES-COMMON-STOCK> 33595
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 915
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3592)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11723
<NET-ASSETS> 356499
<DIVIDEND-INCOME> 113
<INTEREST-INCOME> 802
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 915
<REALIZED-GAINS-CURRENT> (3592)
<APPREC-INCREASE-CURRENT> 11723
<NET-CHANGE-FROM-OPS> 8131
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 64873
<NUMBER-OF-SHARES-REDEEMED> 31278
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 356499
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 166128
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.58
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.61
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> VIF-TECHNOLOGY FUND
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> MAY-21-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 446688
<INVESTMENTS-AT-VALUE> 475515
<RECEIVABLES> 105
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 34607
<TOTAL-ASSETS> 510227
<PAYABLE-FOR-SECURITIES> 16623
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 25014
<TOTAL-LIABILITIES> 41637
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 437384
<SHARES-COMMON-STOCK> 37468
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 1171
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1208
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 28827
<NET-ASSETS> 468590
<DIVIDEND-INCOME> 64
<INTEREST-INCOME> 1107
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 1171
<REALIZED-GAINS-CURRENT> 1208
<APPREC-INCREASE-CURRENT> 28827
<NET-CHANGE-FROM-OPS> 30035
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 97480
<NUMBER-OF-SHARES-REDEEMED> 60012
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 468590
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 192376
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 2.48
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.51
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
POWER OF ATTORNEY
The person executing this Power of Attorney hereby appoints Edward F.
O'Keefe and Glen A. Payne, or either of them, as his attorney-in-fact to execute
and to file such Registration Statements under federal and state securities laws
and such Post-Effective Amendments to such Registration Statements of the
hereinafter described entities as such attorney-in-fact, or either of them, may
deem appropriate:
INVESCO Capital Appreciation Funds, Inc.
NVESCO Diversified Funds, Inc.
INVESCO Emerging Opportunity Funds, Inc.
INVESCO Growth Fund, Inc.
INVESCO Income Funds, Inc.
INVESCO Industrial Income Fund, Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Multiple Asset Funds, Inc.
INVESCO Specialty Funds, Inc.
INVESCO Strategic Portfolios, Inc.
INVESCO Tax-Free Income Funds, Inc.
INVESCO Value Trust
INVESCO Variable Investment Funds, Inc.
This Power of Attorney, which shall not be affected by the disability of
the undersigned, is executed and effective as of the 25th day of August, 1997.
/s/ Wendy L. Gramm
------------------------------------------
Wendy L. Gramm
STATE OF District of )
Columbia )
COUNTY OF )
SUBSCRIBED, SWORN TO AND ACKNOWLEDGED before me by Wendy L.
Gramm, as a director or trustee of each of the above-described entities, this
25th day of August, 1997.
Margaret Foster
------------------------------------------
Notary Public
My Commission Expires: Feb. 14, 2000
POWER OF ATTORNEY
The person executing this Power of Attorney hereby appoints Edward F.
O'Keefe and Glen A. Payne, or either of them, as his attorney-in-fact to execute
and to file such Registration Statements under federal and state securities laws
and such Post-Effective Amendments to such Registration Statements of the
hereinafter described entities as such attorney-in-fact, or either of them, may
deem appropriate:
INVESCO Diversified Funds, Inc.
INVESCO Dynamics Fund, Inc.
INVESCO Emerging Opportunity Funds, Inc.
INVESCO Growth Fund, Inc.
INVESCO Income Funds, Inc.
INVESCO Industrial Income Fund, Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Multiple Asset Funds, Inc.
INVESCO Specialty Funds, Inc.
INVESCO Strategic Portfolios, Inc.
INVESCO Tax-Free Income Funds, Inc.
INVESCO Treasurer's Series Trust
INVESCO Value Trust
INVESCO Variable Investment Funds, Inc.
This Power of Attorney, which shall not be affected by the disability of
the undersigned, is executed and effective as of the 4th day of June, 1997.
/s/ Larry Soll
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Larry Soll
STATE OF WASHINGTON )
)
COUNTY OF SAN JUAN )
SUBSCRIBED, SWORN TO AND ACKNOWLEDGED before me by Larry Soll, as a
director or trustee of each of the above-described entities, this 4th day of
June, 1997.
Mary Paulette Weaver
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Notary Public
My Commission Expires: 1-27-99
