INVESCO VARIABLE INVESTMENT FUNDS INC, 485BPOS, 1999-08-30

INVESCO VARIABLE INVESTMENT FUNDS INC
485BPOS, 1999-08-30

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As filed on August 30, 1999 File No. 033-70154

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No.
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Post-Effective Amendment No. 17 X
--- ---

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. 18 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)
Registrant's Telephone Number, including Area Code: (303) 930-6300
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 LLP
1025 Thomas Jefferson St., NW
Suite 405 West
Washington, D.C. 20007
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Approximate Date of Proposed Public Offering: As soon as practicable after
this post-effective amendment becomes effective.
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.

<PAGE>

PROSPECTUS | August 31, 1999

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YOU SHOULD KNOW WHAT INVESCO KNOWS (TM)
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INVESCO VARIABLE INVESTMENT FUNDS, INC.

INVESCO VIF-
FINANCIAL SERVICES FUND

A MUTUAL FUND SOLD EXCLUSIVELY TO INSURANCE COMPANY SEPARATE ACCOUNTS FOR
VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE CONTRACTS.

TABLE OF CONTENTS

Investment Goals And Strategies....................3
Fund Performance...................................4
Fees And Expenses..................................4
Investment Risks...................................5
Risks Associated With Particular Investments.......6
Temporary Defensive Positions......................10
Fund Management....................................10
The Portfolio Manager..............................10
Share Price........................................10
Taxes..............................................11
Dividends And Capital Gain Distributions...........11
Voting Rights......................................11

[INVESCO ICON]
INVESCO

The Securities and Exchange Commission has not approved or disapproved the
shares of this Fund. Likewise, the Commission has not determined if this
Prospectus is truthful or complete. Anyone who tells you otherwise is
committing a federal crime.

<PAGE>

THIS PROSPECTUS WILL TELL YOU MORE ABOUT:

[KEY ICON] Investment Objectives & Strategies

[ARROW ICON] Potential Investment Risks

[GRAPH ICON] Past Performance & Potential Advantages

[INVESCO ICON] Working With INVESCO
================================================================================

[KEY ICON] INVESTMENT GOALS AND STRATEGIES

FOR MORE DETAILS ABOUT THE FUND'S CURRENT INVESTMENTS AND MARKET OUTLOOK, PLEASE
SEE THE MOST RECENT ANNUAL OR SEMIANNUAL REPORT.

INVESCO Funds Group, Inc. ("INVESCO") is the investment adviser for the Fund.
Together with our affiliated companies, we at INVESCO direct all aspects of
the management of the Fund.

The Fund is used solely as an investment vehicle for variable annuity or
variable life insurance contracts issued by certain life insurance companies.
You cannot purchase shares of the Fund directly. As an owner of a variable
annuity or variable life insurance contract that offers the Fund as an
investment option, however, you may allocate your contract values to a separate
account of the insurance company that invests in shares of the Fund.

Your variable annuity or variable life insurance contract is offered through its
own prospectus, which contains information about that contract, including how to
purchase the contract and how to allocate contract values to the Fund.

The Fund is aggressively managed. It invests primarily in equity securities that
INVESCO believes will rise in price - and increase in value - faster than other
investments, as well as options and other investments whose value is based upon
the values of equity securities. It can also invest in debt securities.

The Fund normally invests primarily in the equity securities of companies
involved in the financial services sector. This sector includes, among others,
banks (regional and money-centers), insurance companies (life, property and
casualty, and multiline), and investment and miscellaneous industries (asset
managers, brokerage firms, and government-sponsored agencies). The remainder of
the Fund's assets are not required to be invested in the sector. To determine
whether a potential investment is truly doing business in the financial services
sector, a company must meet at least one of the following tests:

o At least 50% of its gross income or its net sales must come from activities
in the financial services sector;
o At least 50% of its assets must be devoted to producing revenues from the
financial services sector; or
o Based on other available information, we determine that its primary
business is within the financial services sector.

INVESCO uses a bottom-up investment approach to create the Fund's investment
portfolio, focusing on company fundamentals and growth prospects when selecting
securities. In general, the Fund emphasizes strongly managed companies that
INVESCO believes will generate above-average growth rates for the next three to
five years. We prefer markets and industries where leadership is in a few hands,
and we tend to avoid slower-growing markets or industries.

We place a greater emphasis on companies that are increasing their revenue
streams along with their earnings. We seek companies that we believe can grow
their revenues and earnings regardless of the interest rate environment -
although securities prices of financial services companies generally are
interest rate-sensitive. We prefer companies that have both marketing expertise
and superior technology, because INVESCO believes these companies are more
likely to deliver products that match their customers' needs. We attempt to keep
the portfolio holdings well diversified across the entire financial services
sector. We adjust portfolio weightings depending on current economic conditions
and relative valuations of securities.

[ARROW ICON] The Fund's investments are diversified across the financial
services sector. However, because the Fund's investments are limited to a
comparatively narrow segment of the economy, the portfolio is not as diversified
as most mutual funds, and far less diversified than the broad securities
markets. This means the Fund tends to be more volatile than many other mutual
funds, and the value of its portfolio investments may tend to go up and down
more rapidly. As a result, the value of your investment in the Fund may rise or
fall rapidly.

<PAGE>

Regulatory changes can significantly affect the sector and the Fund. In
addition, the profitability of businesses in these industries depends heavily
upon the availability and cost of money, and may fluctuate significantly in
response to changes in interest rates, as well as changes in general economic
conditions. From time to time, severe competition may also affect the
profitability of these industries, and the insurance industry in particular.

Other principal risks involved in investing in the Fund are market, credit, debt
securities, foreign securities, interest rate, duration, liquidity, derivatives,
options and futures, counterparty and lack of timely information risks. These
risks are described and discussed later in this Prospectus under the headings
"Investment Risks" and "Risks Associated With Particular Investments." As with
any other mutual fund, there is always a risk that you can lose money on your
investment in the Fund.

[GRAPH ICON] FUND PERFORMANCE

The Fund is initially offered by this Prospectus, and therefore has no
historical performance.

FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS

VIF-FINANCIAL SERVICES FUND
Management Fees 0.75%
Distribution and Service (12b-1) Fees None
Other Expenses(1) 0.59%
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Total Annual Fund Operating Expenses(1) 1.34%
=======

(1)Based on estimated expenses for the current fiscal year which may be
more or less than actual expenses. Actual expenses are not provided
because the Fund did not begin a public offering of its shares until
August 31, 1999. If necessary, certain Fund expenses will be absorbed by
INVESCO for at least the first fiscal year of the Fund's operations in
order to ensure that expenses for the Fund will not exceed 1.25% of the
Fund's average net assets pursuant to an agreement between the Fund and
INVESCO. After absorption, the Fund's "Other Expenses" and "Total Annual
Fund Operating Expenses" for the fiscal year ending December 31, 1999
are estimated to be 0.50% and 1.25%, respectively, of the Fund's average
net assets.

INVESCO has voluntarily agreed to absorb certain expenses of the Fund so that
the Fund's total operating expenses do not exceed 1.25% of the Fund's average
net assets. This commitment may be changed at any time following consultation
with the board of directors.

EXAMPLE

This Example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds.

This Example assumes a $10,000 allocation to the Fund for the time periods
indicated and does NOT reflect any of the fees or expenses of your variable
annuity or variable insurance contract. The Example also assumes a hypothetical
5% return each year, and assumes that the Fund's operating expenses remain the
same. Although the Fund's actual costs and performance may be higher or lower,
based on these assumptions your costs would have been:

The following reflects the costs without the absorption of expenses:(1)

1 Year 3 Years
- ------ -------
$136 $425

(1)THE FOLLOWING REFLECTS THE COSTS WITH THE ABSORPTION OF EXPENSES:

1 Year 3 Years
- ------ -------
$127 $397

<PAGE>
[ARROW ICON] INVESTMENT RISKS

BEFORE ALLOCATING CONTRACT VALUES TO THE FUND, YOU SHOULD DETERMINE THE LEVEL OF
RISK WITH WHICH YOU ARE COMFORTABLE. TAKE INTO ACCOUNT FACTORS LIKE YOUR AGE,
CAREER, INCOME LEVEL, AND TIME HORIZON.

You should determine the level of risk with which you are comfortable before you
allocate contract values to the Fund. The principal risks of any mutual fund,
including the Fund, are:

NOT INSURED. Mutual funds are not insured by the Federal Deposit Insurance
Corporation ("FDIC") or any other agency, unlike bank deposits such as CDs or
savings accounts.

NO GUARANTEE. No mutual fund can guarantee that it will meet its investment
objectives.

POSSIBLE LOSS OF INVESTMENT. A mutual fund cannot guarantee its performance, nor
assure you that the market value of your investment will increase. You may lose
the money you invest, and the Fund will not reimburse you for any of these
losses.

VOLATILITY. The price of Fund shares will increase or decrease with changes in
the value of the Fund's underlying investments and changes in the equity markets
as a whole.

YEAR 2000. Many computer systems in use today may not be able to recognize any
date after December 31, 1999. If these systems are not fixed by that date, it is
possible that they could generate erroneous information or fail altogether.
INVESCO has committed substantial resources in an effort to make sure that its
own major computer systems will continue to function on and after January 1,
2000. Of course, INVESCO cannot fix systems that are beyond its control. If
INVESCO's own systems, or the systems of third parties upon which it relies, do
not perform properly after December 31, 1999, the Fund could be adversely
affected.

In addition, the markets for, or values of, securities in which the Fund invests
may possibly be hurt by computer failures affecting portfolio investments or
trading of securities beginning January 1, 2000. For example, improperly
functioning computer systems could result in securities trade settlement
problems and liquidity issues, production issues for individual companies and
overall economic uncertainties. Individual issuers may incur increased costs in
making their own systems Year 2000 compliant. The combination of market
uncertainty and increased costs means that there is a possibility that Year 2000
computer issues may adversely affect the Fund's investments.
<PAGE>

[ARROW ICON] RISKS ASSOCIATED WITH PARTICULAR INVESTMENTS

You should consider the special factors associated with the policies discussed
below in determining the appropriateness of allocating your contract values to
the Fund. See the Statement of Additional Information for a discussion of
additional risk factors.

POTENTIAL CONFLICTS
Although it is unlikely, there potentially may be differing interests involving
the Fund among owners of variable annuity and variable life insurance contracts
issued by different insurance companies, or even the same insurance company.
INVESCO will monitor events for any potential conflicts.

MARKET RISK
Equity stock prices vary and may fall, thus reducing the value of the Fund's
investments. Certain stocks selected for the Fund's portfolio may decline in
value more than the overall stock market.

CREDIT RISK
The Fund may invest in debt instruments, such as notes, bonds and commercial
paper. There is a possibility that the issuers of these instruments will be
unable to meet interest payments or repay principal. Changes in the financial
strength of an issuer may reduce the credit rating of its debt instruments and
may affect their value.

DEBT SECURITIES Risk
Debt securities include bonds, notes and other securities that give the holder
the right to receive fixed amounts of principal, interest, or both, on a date in
the future or on demand. Debt securities also are often referred to as
fixed-income securities, even if the rate of interest varies over the life of
the security.

Debt securities are generally subject to credit risk and market risk. Credit
risk is the risk that the issuer of the security may be unable to meet interest
or principal payments, or both, as they come due. Market risk is the risk that
the market value of the security may decline for a variety of reasons, including
interest rate risks.

Moody's Investor Services, Inc. ("Moody's") and Standard & Poor's ("S&P")
ratings provide a useful but not certain guide to the credit risk of many debt
securities. The lower the rating of a debt security, the greater the credit risk
the rating service assigns to the security. To compensate investors for
accepting that greater risk, lower-rated securities tend to offer higher
interest rates. Lower-rated debt securities are often referred to as "junk
bonds." A debt security is considered lower grade if it is rated Ba or less by
Moody's or BB or less by S&P and is usually considered to be speculative.

In addition to poor individual company performance in the marketplace or in its
internal management, a significant economic downturn or increase in interest
rates may cause issuers of debt securities to experience increased financial
problems which could hurt their ability to pay principal and interest
obligations, to meet projected business goals, and to obtain additional
financing. These conditions more severely affect issuers of lower-rated debt
securities. The market for lower-rated straight debt securities may not be as
liquid as the market for higher-rated straight debt securities. Therefore,
INVESCO attempts to limit purchases of lower-rated securities to securities
having an established secondary market.

Debt securities rated Caa by Moody's may be in default or may present risks of
non-payment of principal or interest. Lower-rated securities by S&P (categories
BB, B and CCC) include those which are predominantly speculative because of the
issuer's perceived 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 usually outweighed by large uncertainties
or major risk exposures to adverse conditions.

FOREIGN SECURITIES RISK

Investments in foreign and emerging markets carry special risks, including
currency, political, regulatory and diplomatic risks. The Fund may invest up to
25% of its assets in securities of non-U.S. issuers.

CURRENCY RISK. A change in the exchange rate between U.S. dollars and a
foreign currency may reduce the value of the Fund's investment in a
security valued in the foreign currency, or based on that currency value.

POLITICAL RISK. Political actions, events or instability may result in
unfavorable changes in the value of a security.

REGULATORY RISK. Government regulations may affect the value of a security.
In foreign countries, securities markets that are less regulated than those
in the U.S. may permit trading practices that are not allowed in the U.S.

DIPLOMATIC RISK. A change in diplomatic relations between the U.S. and a
foreign country could affect the value or liquidity of investments.

EUROPEAN ECONOMIC AND MONETARY UNION. Austria, Belgium, Finland, France,
Germany, Ireland, Italy, Luxembourg, The Netherlands, Portugal and Spain
are presently members of the European Economic and Monetary Union (the
"EMU") which, as of January 1, 1999 adopted the euro as a common currency.
The national currencies will be sub-currencies of the euro until July 1,
2002, at which time the old currencies will disappear entirely. Other
European countries may adopt the euro in the future.

The introduction of the euro presents some uncertainties and possible
risks, which could adversely affect the value of securities held by the
Fund.

EMU countries, as a single market, may affect future investment decisions
of the Fund. As the euro is implemented, there may be changes in the
relative strength and value of the U.S. dollar and other major currencies,
as well as possible adverse tax consequences. The euro transition by EMU
countries - present and future - may affect the fiscal and monetary levels
of those participating countries. There may be increased levels of price
competition among business firms within EMU countries and between
businesses in EMU and non-EMU countries. The outcome of these uncertainties
could have unpredictable effects on trade and commerce and result in
increased volatility for all financial markets.

INTEREST RATE RISK

Changes in interest rates will affect the resale value of debt securities held
in the Fund's portfolio. In general, as interest rates rise, the resale value of
debt securities decreases; as interest rates decline, the resale value of debt
securities generally increases. Debt securities with longer maturities usually
are more sensitive to interest rate movements.

<PAGE>

DURATION RISK

Duration is a measure of a debt security's sensitivity to interest rate changes.
Duration is usually expressed in terms of years, with longer durations usually
more sensitive to interest rate fluctuations.

LIQUIDITY RISK

The Fund's portfolio is liquid if the Fund is able to sell the securities it
owns at a fair price within a reasonable time. Liquidity is generally related to
the market trading volume for a particular security. Investments in smaller
companies or in foreign companies or companies in emerging markets are subject
to a variety of risks, including potential lack of liquidity.

DERIVATIVES RISK

A derivative is a financial instrument whose value is "derived," in some manner,
from the price of another security, index, asset or rate. Derivatives include
options and futures contracts, among a wide range of other instruments. The
principal risk of investments in derivatives is that the fluctuations in their
values may not correlate perfectly with the overall securities markets. Some
derivatives are more sensitive to interest rate changes and market price
fluctuations than others. Also, derivatives are subject to counterparty risk.

OPTIONS AND FUTURES RISK

Options and futures are common types of derivatives that the Fund may
occasionally use to hedge its investments. An option is the right to buy or sell
a security or other instrument, index or commodity at a specific price on or
before a specific date. A future is an agreement to buy or sell a security or
other instrument, index or commodity at a specific price on a specific date.

COUNTERPARTY RISK

This is a risk associated primarily with repurchase agreements and some
derivatives transactions. It is the risk that the other party in the transaction
will not fulfill its contractual obligation to complete the transaction with the
Fund.

LACK OF TIMELY INFORMATION RISK

Timely information about a security or its issuer may be unavailable, incomplete
or inaccurate. This risk is more common to securities issued by foreign
companies and companies in emerging markets than it is to the securities of
U.S.-based companies.

The Fund generally invests in equity securities of companies that are related to
financial services. However, in an effort to diversify its holdings and provide
some protection against the risk of other investments, the Fund also may invest
in other types of securities and other financial instruments, as indicated in
the chart below. These investments, which at any given time may constitute a
significant portion of the Fund's portfolio, have their own risks.

<PAGE>

<TABLE>
<CAPTION>
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INVESTMENT RISKS
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<S> <C>
AMERICAN DEPOSITORY RECEIPTS (ADRS) Market, Information,
These are securities issued by U.S. banks that represent Political,Regulatory,
shares of foreign corporations held by those Diplomatic, Liquidity,
banks. Although traded in U.S. securities markets and and Currency Risks
valued in U.S. dollars, ADRs carry most of the risks
of investing directly in foreign securities.
- -----------------------------------------------------------------------------------------
DEBT SECURITIES
Securities issued by private companies or governments Market, Credit,
representing an obligation to pay interest and Interest Rate and
to repay principal when the security Duration Risks
matures.
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FUTURES
A futures contract is an agreement to buy or sell a Market, Liquidity,
specific amount of a financial instrument (such as an and Options and
index option) at a stated price on a stated date. The Futures Risks
Fund may use futures contracts to provide liquidity
and to hedge portfolio value.
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ILLIQUID SECURITIES
Securities that cannot be sold quickly at fair value. Liquidity Risk
- -----------------------------------------------------------------------------------------

OPTIONS
The obligation or right to deliver or receive a security Credit, Information,
or other instrument, index or commodity or cash payment Liquidity and
depending on the price of the underlying security or the Options and Futures
performance of an index or other benchmark. Includes Risks
options on specific securities and stock indices, and
stock index futures. May be used in the Fund's
portfolio to provide liquidity and hedge port folio
value.

- -----------------------------------------------------------------------------------------
OTHER FINANCIAL INSTRUMENTS
These may include forward contracts, swaps, caps, floors Counterparty, Credit,
and collars. They may be used to try to manage the Fund's Currency, Interest Rate,
foreign currency exposure and other investment risks, Liquidity, Market,
which can cause its net asset value to rise or fall. The and Regulatory Risks
Fund may use these financial instruments, commonly known as
"derivatives," to increase or decrease its exposure to
changing securities prices, interest rates, currency exchange
rates or other factors.
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REPURCHASE AGREEMENT
A contract under which the seller of a security agrees Credit and Counterparty
to buy it back at an agreed-upon price and time in the Risks
future.
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RULE 144A SECURITIES
Securities that are not registered, but which are bought Liquidity Risk
and sold solely by institutional investors. The Fund
considers many Rule 144A securities to be "liquid,"
although the market for such securities typically is
less active than the public securities markets.
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</TABLE>

<PAGE>

[ARROW ICON] TEMPORARY DEFENSIVE POSITIONS

When securities markets or economic conditions are unfavorable or unsettled, we
might try to protect the assets of the Fund by investing in securities that are
highly liquid such as high quality money market instruments, like short-term
U.S. government obligations, commercial paper or repurchase agreements. We have
the right to invest up to 100% of the Fund's assets in these securities,
although we are unlikely to do so. Even though the securities purchased for
defensive purposes often are considered the equivalent of cash, they also have
their own risks. Investments that are highly liquid or comparatively safe tend
to offer lower returns. Therefore, the Fund's performance could be comparatively
lower if it concentrates in defensive holdings.

[INVESCO ICON] FUND MANAGEMENT

INVESCO IS A SUBSIDIARY OF AMVESCAP PLC, AN INTERNATIONAL INVESTMENT MANAGEMENT
COMPANY THAT MANAGES MORE THAN $296 BILLION IN ASSETS WORLDWIDE. AMVESCAP IS
BASED IN LONDON, WITH MONEY MANAGERS LOCATED IN EUROPE, NORTH AND SOUTH AMERICA,
AND THE FAR EAST.

THE INVESTMENT ADVISER

INVESCO, located at 7800 East Union Avenue, Denver, Colorado, is the investment
adviser of the Fund. INVESCO was founded in 1932 and manages over $24 billion
for more than 924,000 shareholders of 42 INVESCO mutual funds. INVESCO performs
a wide variety of other services for the Funds, including administrative and
transfer agency functions (the processing of purchases, sales and exchanges of
Fund shares).

A wholly owned subsidiary of INVESCO, INVESCO Distributors, Inc. ("IDI"), is the
Fund's distributor and is responsible for the sale of the Fund's shares.

INVESCO and IDI are subsidiaries of AMVESCAP PLC.

The Fund had not paid any advisory fees as of December 31, 1998, as it did not
commence operations until August 31, 1999.

[INVESCO ICON] THE PORTFOLIO MANAGER

The following individual is responsible for the day-to-day management of the
Fund's portfolio holdings:

JEFFREY G. MORRIS, a Chartered Financial Analyst, has been the portfolio manager
of the Fund since 1999. Jeff also manages INVESCO Financial Services Fund and is
a vice president of INVESCO. He joined INVESCO in 1992 and served as a research
analyst from 1994 to 1995. Jeff received an M.S. in Finance from the University
of Colorado-Denver and a B.S. in Business Administration from Colorado State
University.

Jeff Morris is a member of INVESCO's Sector Team, which is co-led by William R.
Keithler and John R. Schroer.

[INVESCO ICON] SHARE PRICE

CURRENT MARKET VALUE OF FUND ASSETS
+ ACCRUED INTEREST AND DIVIDENDS
- - FUND DEBTS,
INCLUDING ACCRUED EXPENSES
- --------------------------
/ NUMBER OF SHARES
= YOUR SHARE PRICE (NAV).

The value of Fund shares is likely to change daily. This value is known as the
Net Asset Value per share, or NAV. INVESCO determines the market value of each
investment in the Fund's portfolio each day that the New York Stock Exchange
("NYSE") is open, at the close of trading on that exchange (normally, 4:00 p.m.
Eastern time). Therefore, shares of the Fund are not priced on days when the
NYSE is closed, which generally is on weekends and national holidays in the U.S.

NAV is calculated by adding together the current market price of all of the
Fund's investments and other assets, including accrued interest and dividends;
subtracting the Fund's debts, including accrued expenses; and dividing that
dollar amount by the total number of the Fund's outstanding shares. Share price
is based on the next calculation of NAV after the order is received in proper
form by the Fund.
<PAGE>

Foreign securities exchanges, which set the prices for foreign securities held
by the Fund, are not always open the same days as the NYSE, and may be open for
business on days the NYSE is not. For example, Thanksgiving Day is a holiday
observed by the NYSE and not by overseas exchanges. In this situation, the Fund
would not calculate NAV on Thanksgiving Day (and INVESCO would not buy, sell or
exchange shares on that day), even though activity on foreign exchanges could
result in changes in the value of investments held by the Fund on that day.

[GRAPH ICON] TAXES

The Fund has elected to be taxed as a "regulated investment company" under the
provisions of Subchapter M of the Internal Revenue Code of 1986, as amended
("the Code"). If the Fund continues to qualify as a regulated investment company
and complies with the appropriate provisions of the Code, it will pay no federal
income taxes on the amounts it distributes.

Because the shareholders of the Fund are insurance companies (such as the one
that issues your contract), no discussion of the federal income tax consequences
to shareholders is included here. For information about the federal tax
consequences of purchasing the contracts, see the prospectus for your contract.

[GRAPH ICON] DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS

NET INVESTMENT INCOME AND NET REALIZED CAPITAL GAINS ARE DISTRIBUTED TO
SHAREHOLDERS AT LEAST ANNUALLY.

The Fund intends to distribute substantially all of its net investment income,
if any, in dividends to its shareholders. For dividend purposes, net investment
income consists of all dividends or interest earned by the Fund's investments,
minus the Fund's expenses (including the advisory fee). All of the Fund's net
realized capital gains, if any, are distributed periodically, at least once a
year. All dividends and distributions of the Fund are reinvested in additional
shares of the Fund at net asset value.

[INVESCO ICON] VOTING RIGHTS

Since the shares of the Fund are owned by your insurance company and not by you
directly, you will not vote shares of the Fund. Your insurance company will vote
the shares that it holds as required by state and federal law. Your contract
prospectus contains more information on your rights to instruct your insurance
company how to vote Fund shares held in connection with your contract.

<PAGE>

AUGUST 31, 1999

INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF-FINANCIAL SERVICES FUND

You may obtain additional information about the Fund from several sources:

FINANCIAL REPORTS. Although this Prospectus describes the Fund's anticipated
investments and operations, the Fund also prepares annual and semiannual reports
that detail the Fund's actual investments at the report date. These reports
include discussion of the Fund's recent performance, as well as market and
general economic trends affecting the Fund's performance. The annual report also
includes the report of the Fund's independent accountants.

STATEMENT OF ADDITIONAL INFORMATION. The SAI, dated August 31, 1999, is a
supplement to this Prospectus, and has detailed information about the Fund and
its investment policies and practices. A current SAI for the Fund is on file
with the Securities and Exchange Commission and is incorporated in this
Prospectus by reference; in other words, the SAI is legally a part of this
Prospectus, and you are considered to be aware of the contents of the SAI.

INTERNET. The current Prospectus of the Fund may be accessed through the INVESCO
Web site at www.invesco.com. In addition, the Prospectus, SAI, annual report and
semiannual report of the Fund are available on the SEC Web site at www.sec.gov.

To obtain a free copy of the current Prospectus, SAI, annual report or
semiannual report, write to INVESCO Distributors, Inc., P.O. Box 173706, Denver,
Colorado 80217-3706; or call 1-800-525-8085. Copies of these materials are also
available (with a copying charge) from the SEC's Public Reference Section at 450
Fifth Street, N.W., Washington, D.C. Information on the Public Reference Section
can be obtained by calling 1-800-SEC-0330. The SEC file numbers for the Fund are
811-8038 and 033-70154.

811-8038
<PAGE>

PROSPECTUS | August 31, 1999

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YOU SHOULD KNOW WHAT INVESCO KNOWS (TM)
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INVESCO VARIABLE INVESTMENT FUNDS, INC.

INVESCO VIF-
MARKET NEUTRAL EQUITY FUND

A MUTUAL FUND SOLD EXCLUSIVELY TO INSURANCE COMPANY SEPARATE ACCOUNTS FOR
VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE CONTRACTS.

TABLE OF CONTENTS

Investment Goals And Strategies...............................................14
Fund Performance..............................................................15
Fees And Expenses.............................................................15
Investment Risks..............................................................16
Risks Associated With Particular Investments..................................16
Temporary Defensive Positions.................................................18
Fund Management...............................................................18
The Portfolio Manager.........................................................18
Share Price...................................................................18
Taxes.........................................................................19
Dividends And Capital Gain Distributions......................................19
Voting Rights.................................................................19

[INVESCO ICON]
INVESCO

<PAGE>

THIS PROSPECTUS WILL TELL YOU MORE ABOUT:

[KEY ICON] Investment Objectives & Strategies

[ARROW ICON] Potential Investment Risks

[GRAPH ICON] Past Performance & Potential Advantages

[INVESCO ICON] Working With INVESCO
================================================================================

[KEY ICON] INVESTMENT GOALS AND STRATEGIES

FOR MORE DETAILS ABOUT THE FUND'S CURRENT INVESTMENTS AND MARKET OUTLOOK, PLEASE
SEE THE MOST RECENT ANNUAL OR SEMIANNUAL REPORT.

INVESCO Funds Group, Inc. ("INVESCO") is the investment adviser for the Fund.
Together with our affiliated companies, we at INVESCO direct all aspects of
the management of the Fund.

The objective of the Fund is to seek a total rate of return greater than that of
the Standard & Poor's 500 Composite Stock Price Index, an unmanaged index
consisting of the stocks of large companies. The Fund attempts to achieve its
investment objective by using a management style known as "market neutral."

Under this management style, the Fund constructs two portfolios of common
stocks. Each portfolio consists of stocks of approximately 100 large companies
that trade on U.S. exchanges. INVESCO purchases stocks which it expects will
increase in price for one portfolio, and borrows and sells stocks that it
expects will decline in price relative to the average owned stock position. The
process of borrowing and selling the borrowed securities is known as "shorting"
or "selling short" a security. The performance of the portfolio of owned stocks
relative to the performance of the portfolio of borrowed and sold stocks
provides the Fund with its return relative to the S&P 500.

In a rising market, the value of the securities owned by the Fund should
increase. Although the value of the short portfolio should also increase, if the
value of the owned securities rises more than the value of the short portfolio,
the Fund should generate a better return than the S&P 500 Index. In a falling
market, both owned and borrowed stocks should decline in price, but if the owned
stocks decline less than the borrowed stocks, the Fund should also generate a
better return than the S&P 500 Index.

The Fund diversifies the two portfolios by market exposure, industry and
economic sector. INVESCO seeks to manage the two portions of the Fund's
portfolio so that securities owned by the Fund have similar risk characteristics
to the stocks borrowed and sold short. The Fund has a portion of its assets in
short-term reserves, primarily U.S. Treasury bills. Some of the cash held by the
Fund will be used as initial margin for purchases of S&P 500 Stock index futures
contracts.

In attempting to determine which stocks will outperform and which will
underperform, INVESCO evaluates more than 500 large companies on a weekly basis.
INVESCO analyzes the earnings momentum, value, fundamental stability and price
strength of each company. The result is an estimate of the expected monthly
return of each stock.

[ARROW ICON] The principal risk involved in investing in the Fund is that
INVESCO will not be able to predict accurately which stocks will outperform and
which ones will underperform. Due to market activity, the portfolio of owned
securities and the portfolio of borrowed and sold securities may produce a
complete loss of Fund capital. Such a loss could occur, for example, if the
portfolio of owned securities rapidly lost value and the portfolio of securities
sold short rapidly grew in value without an opportunity for INVESCO to rebalance
the portfolio. To the extent that the characteristics of the stocks the Fund
buys and those it borrows do not match at any given time, the Fund will not be
neutral to market movements and the price movements of specific industries and
sectors within the markets, and the Fund's losses may exceed those of other
mutual funds. In addition, because the practice of selling short has an inherent
risk and because any specific short sale has the potential for unlimited loss,
INVESCO seeks to minimize this potential risk by diversifying the two
portfolios.
<PAGE>

Other principal risks involved in investing in the Fund are short sales, S&P 500
futures contracts, counterparty and market risks. These risks are described and
discussed later in this Prospectus under the headings "Investment Risks" and
"Risks Associated With Particular Investments." As with any other mutual fund,
there is always a risk that you can lose money on your investment in the Fund.

[GRAPH ICON] FUND PERFORMANCE

The Fund is initially offered by this Prospectus, and therefore has no
historical performance.

FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS

VIF- MARKET NEUTRAL EQUITY FUND
Management Fees 0.75%
Distribution and Service (12b-1) Fees None
Other Expenses(1) 0.59%
-----
Total Annual Fund Operating Expenses(1) 1.34%
=====

(1) Based on estimated expenses for the current fiscal year which may be more
or less than actual expenses. Actual expenses are not provided because the
Fund did not begin a public offering of its shares until AUGUST 31, 1999.
If necessary, certain Fund expenses will be absorbed by INVESCO for at
least the first fiscal year of the Fund's operations in order to ensure
that expenses for the Fund will not exceed 1.25% of the Fund's average net
assets pursuant to an agreement between the Fund and INVESCO. After
absorption, the Fund's "Other Expenses" and "Total ANNUAL Fund Operating
Expenses" for the fiscal year ending December 31, 1999 are estimated to be
0.50% and 1.25%, respectively, of the Fund's average net assets.

EXAMPLE

This Example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds.

The following reflects the costs without the absorption of expenses:(1)

1 Year 3 Years
- ------ -------
$136 $425

(1)The following reflects the costs with the absorption of expenses:

1 Year 3 Years
- ------ -------
$127 $397

<PAGE>

[ARROW ICON] INVESTMENT RISKS

BEFORE ALLOCATING CONTRACT VALUES TO THE FUND, YOU SHOULD DETERMINE THE LEVEL OF
RISK WITH WHICH YOU ARE COMFORTABLE. TAKE INTO ACCOUNT FACTORS LIKE YOUR AGE,
CAREER, INCOME LEVEL, AND TIME HORIZON.

You should determine the level of risk with which you are comfortable before you
allocate contract values to the Fund. The principal risks of any mutual fund,
including the Fund, are:

NOT INSURED. Mutual funds are not insured by the Federal Deposit Insurance
Corporation ("FDIC") or any other agency unlike bank deposits such as CDs or
savings accounts.

NO GUARANTEE. No mutual fund can guarantee that it will meet its investment
objectives.

VOLATILITY. The price of Fund shares will increase or decrease with changes in
the value of the Fund's underlying investments and changes in the equity markets
as a whole.

[ARROW ICON] RISKS ASSOCIATED WITH PARTICULAR INVESTMENTS

POTENTIAL CONFLICTS

Although it is unlikely, there potentially may be differing interests involving
the Fund among owners of variable annuity and variable life insurance contracts
issued by different insurance companies, or even the same insurance company.
INVESCO will monitor events for any potential conflicts.

SHORT SALES RISK

A principle investment technique of the Fund is to "sell short" significant
amounts of securities. In a short sale, the Fund sells a security it does not
own in expectation that its price will decline relative to the average owned
position by the time it closes out a short position. The Fund borrows the
security from a third party, and is obligated to replace the borrowed security.

<PAGE>

When the Fund sells a security short, it borrows the security in order to enter
into the short sale transaction and the proceeds of the sale may be used by the
Fund as security for the borrowing, to the extent necessary to meet margin
requirements. The Fund may also be required to pay a premium to borrow the
security.

Moreover, the Fund is required to maintain a segregated account with a broker or
a custodian consisting of cash or highly liquid securities. Until the borrowed
security is replaced, the Fund will maintain this account at a level so that the
amount deposited in the account, plus the collateral deposited with the broker,
will equal the current market value of the securities sold short.

S&P 500 FUTURES CONTRACTS RISK

The Fund normally invests in S&P 500 Index futures contracts and the Fund will
be fully exposed to price movements in the S&P 500. Although investments in S&P
500 Index futures contracts are made for hedging purposes, they involve certain
risks. The hedging strategy may not be succesful and the Fund may lose money on
its futures positions. Although there presently is a significant market for S&P
500 Index futures contracts, if in the future there is no market for a futures
contract, the Fund may have to hold the contract until exercise or expiration,
which could result in losses. S&P 500 futures contracts are settled in cash.

<PAGE>

COUNTERPARTY RISK

The Fund trades its owned securities on the basis of "blind principal" bids.
This type of trading involves stock price guarantees by brokers that trades will
be implemented at closing market prices. Although stock guarantees are usually
met, there is a possibility that they may not be.

MARKET RISK

Equity stock prices vary. Variations in stock prices could have a significant
impact on the Fund's overall portfolio, because of the Fund's futures positions
and fluctuations in the valuation of the portfolio of owned securities compared
to the portfolio of securities sold short.

[ARROW ICON] TEMPORARY DEFENSIVE POSITIONS

[INVESCO ICON] FUND MANAGEMENT

THE INVESTMENT ADVISER

INVESCO (NY), Inc. ("INY"), 1166 Avenue of the Americas, New York, New York
10036, is the sub-adviser to the Fund.

A wholly owned subsidiary of INVESCO, INVESCO Distributors, Inc. ("IDI"), is the
Fund's distributor and is responsible for the sale of the Fund's shares.

INVESCO, INY and IDI are subsidiaries of AMVESCAP PLC.

The Fund had not paid any advisory fees as of December 31, 1998, as it did not
commence operations until August 31, 1999.

[INVESCO ICON] THE PORTFOLIO MANAGER

The Fund is managed on a day to day basis by INY, which serves as sub-adviser to
the Fund. INY uses a team management approach, which means that a group of
portfolio managers makes collective investment decisions for the Fund.

[INVESCO ICON] SHARE PRICE

CURRENT MARKET VALUE OF FUND ASSETS
+ ACCRUED INTEREST AND DIVIDENDS
- - FUND DEBTS,
INCLUDING ACCRUED EXPENSES
- ---------------------------
/ NUMBER OF SHARES
= YOUR SHARE PRICE (NAV).

<PAGE>

NAV is calculated by adding together the current market value of all of the
Fund's investments and other assets, including accrued interest and dividends;
subtracting the Fund's debts, including accrued expenses; and dividing that
dollar amount by the total number of the Fund's outstanding shares. Share price
is based on the next calculation of NAV after the order is received in proper
form by the Fund.

[GRAPH ICON] TAXES

[GRAPH ICON] DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS

NET INVESTMENT INCOME AND NET REALIZED CAPITAL GAINS ARE DISTRIBUTED TO
SHAREHOLDERS AT LEAST ANNUALLY.

[INVESCO ICON] VOTING RIGHTS

<PAGE>

AUGUST 31, 1999

INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF-MARKET NEUTRAL EQUITY FUND

You may obtain additional information about the Fund from several sources:

811-8038

<PAGE>

PROSPECTUS | August 31, 1999

INVESCO VARIABLE INVESTMENT FUNDS, INC.

INVESCO VIF-
TELECOMMUNICATIONS FUND

A MUTUAL FUND SOLD EXCLUSIVELY TO INSURANCE COMPANY SEPARATE ACCOUNTS FOR
VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE CONTRACTS.

TABLE OF CONTENTS

Investment Goals And Strategies...............................................22
Fund Performance..............................................................23
Fees And Expenses.............................................................23
Investment Risks..............................................................24
Risks Associated With Particular Investments..................................24
Temporary Defensive Positions.................................................29
Fund Management...............................................................29
The Portfolio Manager.........................................................29
Share Price...................................................................30
Taxes.........................................................................30
Dividends And Capital Gain Distributions......................................30
Voting Rights.................................................................30

[INVESCO ICON]
INVESCO

<PAGE>

THIS PROSPECTUS WILL TELL YOU MORE ABOUT:

[KEY ICON] Investment Objectives & Strategies

[ARROW ICON] Potential Investment Risks

[GRAPH ICON] Past Performance & Potential Advantages

[INVESCO ICON] Working With INVESCO
================================================================================

[KEY ICON] INVESTMENT GOALS AND STRATEGIES

FOR MORE DETAILS ABOUT THE FUND'S CURRENT INVESTMENTS AND MARKET OUTLOOK, PLEASE
SEE THE MOST RECENT ANNUAL OR SEMIANNUAL REPORT.

INVESCO Funds Group, Inc. ("INVESCO") is the investment adviser for the Fund.
Together with our affiliated companies, we at INVESCO direct all aspects of
the management of the Fund.

The Fund is aggressively managed. It invests primarily in equity securities that
INVESCO believes will rise in price -- and increase in value -- faster than
other investments, as well as options and other investments whose value is based
upon the values of equity securities. It can also invest in debt securities.
Above-average current income is an additional consideration in the Fund's
investments.

The Fund normally invests primarily in the equity securities of companies that
are engaged in the design, development, manufacture, distribution, or sale of
communications services and equipment, and companies that are involved in
developing, constructing, or operating communications infrastructure projects
throughout the world, or in supplying equipment or services to such companies.

The telecommunications sector includes companies that offer telephone services,
wireless communications, satellite communications, television and movie
programming, broadcasting, internet access and are involved in infrastructure
projects. Infrastructure projects may include communications, as well as
utilities, natural gas and oil pipelines, and transportation projects such as
airports, railroads and highways. To determine whether a potential investment is
doing business in the telecommunications sector, a company must meet at least
one of the following tests:

o At least 50% of its gross income or its net sales must come from activities
in the telecommunications sector;
o At least 50% of its assets must be devoted to producing revenues from the
telecommunications sector; or
o Based on other available information, we determine that its primary
business is within the telecommunications sector.

INVESCO uses a bottom-up investment approach to create the Fund's investment
portfolio, focusing on company fundamentals and growth prospects when selecting
securities. We select stocks based on projected total return for individual
companies, while also analyzing country-specific factors that might affect stock
performance or influence company valuation. Normally, the Fund will invest
primarily in companies located in at least three different countries, although
U.S. issuers will often dominate the portfolio.

We prefer markets and industries where leadership is in a few hands, and we tend
to avoid slower-growing markets or industries. The Fund's portfolio emphasizes
strongly managed market leaders, with a lesser weighting on smaller,
faster-growing companies which offer new products or services and/or are
increasing their market shares.
<PAGE>

[ARROW ICON] The Fund's investments are diversified across the
telecommunications sector. However, because the Fund's investments are limited
to a comparatively narrow segment of the economy, the portfolio is not as
diversified as most mutual funds, and far less diversified than the broad
securities markets. This means the Fund tends to be more volatile than many
other mutual funds, and the value of its portfolio investments may tend to go up
and down more rapidly. As a result, the value of your investment in the Fund may
rise or fall rapidly. The telecommunications sector is highly regulated, and
changes in government regulation can play a significant role in the prospects of
the sector or specific markets within the telecommunications sector.

Other principal risks involved in investing in the Fund are market, credit, debt
securities, foreign securities, interest rate, liquidity, derivatives,
counterparty and lack of timely information risks. These risks are described and
discussed later in this Prospectus under the headings "Investment Risks" and
"Risks Associated With Particular Investments." As with any other mutual fund,
there is always a risk that you can lose money on your investment in the Fund.

[GRAPH ICON] FUND PERFORMANCE

The Fund is initially offered by this Prospectus, and therefore has no
historical performance.

FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS

VIF-TELECOMMUNICATIONS FUND
Management Fees 0.75%
Distribution and Service (12b-1) Fees None
Other Expenses(1) 0.59%
-----
Total Annual Fund Operating Expenses(1) 1.34%
=====

(1) Based on estimated expenses for the current fiscal year which may be more
or less than actual expenses. Actual expenses are not provided because the
Fund did not begin a public offering of its shares until August 31, 1999.
If necessary, certain Fund expenses will be absorbed by INVESCO for at
least the first fiscal year of the Fund's operations in order to ensure
that expenses for the Fund will not exceed 1.25% of the Fund's average net
assets pursuant to an agreement between the Fund and INVESCO. After
absorption, the Fund's "Other Expenses" and "Total Annual Fund Operating
Expenses" for the fiscal year ending December 31, 1999 are estimated to be
0.50% and 1.25%, respectively, of the Fund's average net assets.

EXAMPLE

This Example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds.

The following reflects the costs without the absorption of expenses:(1)

1 Year 3 Years
- ------ -------
$136 $425

(1)The following reflects the costs with the absorption of expenses:

1 Year 3 Years
- ------ -------
$127 $397

<PAGE>

[ARROW ICON] INVESTMENT RISKS

BEFORE ALLOCATING CONTRACT VALUES TO THE FUND, YOU SHOULD DETERMINE THE LEVEL OF
RISK WITH WHICH YOU ARE COMFORTABLE. TAKE INTO ACCOUNT FACTORS LIKE YOUR AGE,
CAREER, INCOME LEVEL, AND TIME HORIZON.

You should determine the level of risk with which you are comfortable before you
allocate contract values to the Fund. The principal risks of any mutual fund,
including the Fund, are:

NOT INSURED. Mutual funds are not insured by the Federal Deposit Insurance
Corporation ("FDIC") or any other agency, unlike bank deposits such as CDs or
savings accounts.

NO GUARANTEE. No mutual fund can guarantee that it will meet its investment
objectives.

VOLATILITY. The price of Fund shares will increase or decrease with changes in
the value of the Fund's underlying investments and changes in the equity markets
as a whole.

[ARROW ICON] RISKS ASSOCIATED WITH PARTICULAR INVESTMENTS

POTENTIAL CONFLICTS

MARKET RISK

Equity stock prices vary and may fall, thus reducing the value of the Fund's
investments. Certain stocks selected for the Fund's portfolio may decline in
value more than the overall stock market. In general, the securities of large
businesses with outstanding securities worth $5 billion or more have less
volatility than those of mid-size businesses with outstanding securities worth
more than $1 billion or small businesses with outstanding securities worth less
than $1 billion.

CREDIT RISK

The Fund may invest in debt instruments, such as notes, bonds and commercial
paper. There is a possibility that the issuers of these instruments will be
unable to meet interest payments or repay principal. Changes in the financial
strength of an issuer may reduce the credit rating of its debt instruments and
may affect their value.

<PAGE>

DEBT SECURITIES RISK

Debt securities include bonds, notes and other securities that give the holder
the right to receive fixed amounts of principal, interest, or both, on a date in
the future or on demand. Debt securities also are often referred to as
fixed-income securities, even if the rate of interest varies over the life of
the security.

<PAGE>

FOREIGN SECURITIES RISK

Investments in foreign and emerging markets carry special risks, including
currency, political, regulatory and diplomatic risks. The Fund may invest in
securities of non-U.S. issuers.

CURRENCY RISK. A change in the exchange rate between U.S. dollars and
a foreign currency may reduce the value of the Fund's investment in a
security valued in the foreign currency, or based on that currency
value.

POLITICAL RISK. Political actions, events or instability may result in
unfavorable changes in the value of a security.

REGULATORY RISK. Government regulations may affect the value of a
security. In foreign countries, securities markets that are less
regulated than those in the U.S. may permit trading practices that are
not allowed in the U.S.

DIPLOMATIC RISK. A change in diplomatic relations between the U.S. and
a foreign country could affect the value or liquidity of investments.

EUROPEAN ECONOMIC AND MONETARY UNION. Austria, Belgium, Finland, France,
Germany, Ireland, Italy, Luxembourg, The Netherlands, Portugal and Spain
are presently members of the European Economic and Monetary Union (the
"EMU") which, as of January 1, 1999 adopted the euro as a common
currency. The national currencies will be sub-currencies of the euro
until July 1, 2002, at which time the old currencies will disappear
entirely. Other European countries may adopt the euro in the future.

The introduction of the euro presents some uncertainties and possible
risks, which could adversely affect the value of securities held by the
Fund.

EMU countries, as a single market, may affect future investment decisions
of the Fund. As the euro is implemented, there may be changes in the
relative strength and value of the U.S. dollar and other major
currencies, as well as possible adverse tax consequences. The euro
transition by EMU countries - present and future - may affect the fiscal
and monetary levels of those participating countries. There may be
increased levels of price competition among business firms within EMU
countries and between businesses in EMU and non-EMU countries. The
outcome of these uncertainties could have unpredictable effects on trade
and commerce and result in increased volatility for all financial
markets.

INTEREST RATE RISK

DURATION RISK

LIQUIDITY RISK

DERIVATIVES RISK

COUNTERPARTY RISK

LACK OF TIMELY INFORMATION RISK

The Fund generally invests in equity securities of companies that are related to
telecommunications. However, in an effort to diversify its holdings and provide
some protection against the risk of other investments, the Fund also may invest
in other types of securities and other financial instruments, as indicated in
the chart below. These investments, which at any given time may constitute a
significant portion of the Fund's portfolio, have their own risks.

<PAGE>

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INVESTMENT RISKS
- --------------------------------------------------------------------------------
AMERICAN DEPOSITORY RECEIPTS (ADRS)
These are securities issued by U.S. banks Market, Information,
that represent shares of foreign Political, Regulatory,
corporations held by those banks. Although Diplomatic, Liquidity, and
traded in U.S. securities markets and Currency Risks
valued in U.S. dollars, ADRs carry most of
the risks of investing directly in foreign
securities.
- --------------------------------------------------------------------------------
DEBT SECURITIES
Securities issued by private companies or Market, Credit, Interest
governments representing an obligation to Duration Risks
pay interest and to repay Rate, and
principal when the security matures.
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS
A contract to exchange an amount of currency Currency, Political,
on a date in the future at an agreed-upon Diplomatic, and Regulatory
exchange rate might be used by the Fund to Risks
hedge against changes in foreign currency
exchange rates when the Fund invests in
foreign securities. Does not reduce price
fluctua tions in foreign securities, or
prevent losses if the prices of those
securities decline.
- --------------------------------------------------------------------------------
ILLIQUID SECURITIES
Securities that cannot be sold quickly at Liquidity Risk
fair value.

- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
A contract under which the seller of a Credit and Counterparty
security agrees to buy it back at an Risks
agreed-upon price and time in the future.
- --------------------------------------------------------------------------------
RULE 144A SECURITIES
Securities that are not registered, but Liquidity Risk
which are bought and sold solely by
institutional inves tors. The Fund considers
many Rule 144A securities to be "liquid,"
although the market for such securities
typically is less active than the public
securities markets.
- --------------------------------------------------------------------------------
<PAGE>
[ARROW ICON] TEMPORARY DEFENSIVE POSITIONS

[INVESCO ICON] FUND MANAGEMENT

THE INVESTMENT ADVISER

INVESCO, located at 7800 East Union Avenue, Denver, Colorado, is the investment
adviser of the Fund. INVESCO was founded in 1932 and manages over $24 billion
for more than 924,000 shareholders of 42 INVESCO mutual funds. INVESCO performs
a wide variety of other services for the Funds, including ADMINISTRATIVE and
transfer agency functions (the processing of purchases, sales and exchanges of
Fund shares). A wholly owned subsidiary of INVESCO, INVESCO Distributors, Inc.
("IDI"), is the Fund's distributor and is responsible for the sale of the Fund's
shares.

INVESCO and IDI are subsidiaries of AMVESCAP PLC.

The Fund had not paid any advisory fees as of December 31, 1998, as it did not
commence operations until August 31, 1999.

[INVESCO ICON] THE PORTFOLIO MANAGER

The following individual is responsible for the day-to-day management of the
Fund's portfolio holdings:

BRIAN B. HAYWARD, a Chartered Financial Analyst, has been the portfolio manager
of the Fund since 1999. Brian also manages INVESCO Telecommunications Fund,
INVESCO Utilities Fund and INVESCO VIF Utilities Fund and is a vice president of
INVESCO. Brian began his investment career in 1985, and before joining INVESCO
was senior equity analyst with Mississippi Valley Advisors. He received an M.A..
in Economics and a B.A. in Mathematics from the University of Missouri.

Brian Hayward is a member of the INVESCO Sector Team, which is co-led by William
R. Keithler and John R. Schroer.
<PAGE>

[INVESCO ICON] SHARE PRICE

CURRENT MARKET VALUE OF FUND ASSETS
+ ACCRUED INTEREST AND DIVIDENDS
- - FUND
DEBTS, INCLUDING ACCRUED EXPENSES
- ----------------------------------
/ NUMBER OF SHARES
= YOUR SHARE PRICE (NAV).

NAV is calculated by adding together the current market price of all of the
Fund's investments and other assets, including accrued interest and dividends;
subtracting the Fund's debts, including accrued expenses; and dividing that
dollar amount by the total number of the Fund's outstanding shares. Share price
is based on the next calculation of nav after the order is received in proper
form by the fund.

[GRAPH ICON] TAXES

[GRAPH ICON] DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS

NET INVESTMENT INCOME AND NET REALIZED CAPITAL GAINS ARE DISTRIBUTED TO
SHAREHOLDERS AT LEAST ANNUALLY.

[INVESCO ICON] VOTING RIGHTS

<PAGE>

AUGUST 31, 1999

INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF-TELECOMMUNICATIONS FUND

You may obtain additional information about the Fund from several sources:

811-8038
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

INVESCO VARIABLE INVESTMENT FUNDS, INC.

INVESCO VIF -- Blue Chip Growth Fund
(formerly, INVESCO VIF - Growth Portfolio)
INVESCO VIF -- Dynamics Fund
INVESCO VIF -- Equity Income Fund
(formerly, INVESCO VIF - Industrial Income Fund)
INVESCO VIF -- Financial Services Fund
INVESCO VIF -- Health Sciences Fund
INVESCO VIF -- High Yield Fund
INVESCO VIF -- Market Neutral Equity Fund
INVESCO VIF -- Realty Fund
INVESCO VIF -- Small Company Growth Fund
INVESCO VIF -- Technology Fund
INVESCO VIF -- Telecommunications Fund
INVESCO VIF -- Total Return Fund
INVESCO VIF -- Utilities Fund

Address: Mailing Address:

7800 E. Union Ave., Denver, CO 80237 P.O. Box 173706, Denver, CO 80217-3706

Telephone:

In continental U.S., 1-800-525-8085

August 31, 1999

- --------------------------------------------------------------------------------

Prospectuses for INVESCO VIF - Blue Chip Growth, INVESCO VIF - Dynamics, INVESCO
VIF - Equity Income, INVESCO VIF - Health Sciences, INVESCO VIF High Yield,
INVESCO VIF - Realty, INVESCO VIF - Small Company Growth, INVESCO VIF -
Technology, INVESCO VIF - Total Return and INVESCO VIF - Utilities Funds dated
May 1, 1999, and Prospectuses for INVESCO VIF - Financial Services, INVESCO VIF
- - Market Neutral Equity and INVESCO VIF - Telecommunications Funds dated August
31, 1999, provide the basic information you should know before investing in a
Fund. This Statement of Additional Information ("SAI") is incorporated by
reference into the Funds' Prospectuses; in other words, this SAI is legally part
of the Funds' Prospectuses. Although this SAI is not a prospectus, it contains
information in addition to that set forth in the Prospectuses. It is intended to
provide additional information regarding the activities and operations of the
Funds and should be read in conjunction with the Prospectuses.

You may obtain, without charge, copies of the current Prospectuses of the Funds,
SAI and current annual and semiannual reports by writing to INVESCO
Distributors, Inc., P.O. Box 173706, Denver, CO 80217-3706 , or by calling
1-800-525-8085.

<PAGE>

TABLE OF CONTENTS

The Company...................................................................34

Investments, Policies and Risks...............................................34

Management of the Funds.......................................................55

Other Service Providers.......................................................83

Brokerage Allocation and Other Practices......................................84

Capital Stock.................................................................87

Tax Consequences of Owning Shares of a Fund...................................88

Performance...................................................................89

Financial Statements..........................................................92

Appendix A....................................................................93

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THE COMPANY

The Company was incorporated under the laws of Maryland as INVESCO Variable
Investment Funds, Inc. on August 19, 1993.

The Company is an open-end, diversified, no-load management investment company
currently consisting of thirteen portfolios of investments: INVESCO VIF -- Blue
Chip Growth, INVESCO VIF -- Dynamics, INVESCO VIF -- Equity Income, INVESCO VIF
- - Financial Services, INVESCO VIF -- Health Sciences, INVESCO VIF -- High Yield,
INVESCO VIF - Market Neutral Equity, INVESCO VIF -- Realty, INVESCO VIF -- Small
Company Growth, INVESCO VIF -- Technology, INVESCO VIF - Telecommunications,
INVESCO VIF -- Total Return and INVESCO VIF -- Utilities Funds (the "Funds").
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.

"Open-end" means that each Fund issues an indefinite number of shares which it
continuously offers to redeem at net asset value per share ("NAV"). A
"management" investment company actively buys and sells securities for each
portfolio at the direction of a professional manager. Open-end management
investment companies (or one or more series of such companies, such as the
Funds) are commonly referred to as mutual funds.

INVESTMENTS, POLICIES AND RISKS

The principal investments and policies of Market Neutral Equity Fund are
discussed in the Fund's Prospectus. Market Neutral Equity Fund may invest in
equity securities of companies traded on U.S. stock exchanges and U.S. Treasury
bills. In addition, Market Neutral Equity Fund will engage in short sales.
Please see below for additional disclosure regarding equity securities and short
sales.

The principal investments and policies of the remaining Funds are also discussed
in the Prospectuses of the Funds. The remaining Funds also may invest in the
following securities and engage in the following practices.

ADRS -- American Depository Receipts, or ADRs, are securities issued by American
banks. ADRs are receipts for the shares of foreign corporations that are held by
the bank issuing the receipt. An ADR entitles its holder to all dividends and
capital gains on the underlying foreign securities, less any fees paid to the
bank. Purchasing ADRs gives a Fund the ability to purchase the functional
equivalent of foreign securities without going to the foreign securities markets
to do so. ADRs are bought and sold in U.S. dollars, not foreign currencies. An
ADR that is "sponsored" means that the foreign corporation whose shares are
represented by the ADR is actively involved in the issuance of the ADR, and
generally provides material information about the corporation to the U.S.
market. An "unsponsored" ADR program means that the foreign corporation whose

<PAGE>

shares are held by the bank is not obligated to disclose material information in
the United States, and, therefore, the market value of the ADR may not reflect
important facts known only to the foreign company. Since they mirror their
underlying foreign securities, ADRs generally have the same risks as investing
directly in the underlying foreign securities.

DEBT SECURITIES -- Debt securities include bonds, notes and other securities
that give the holder the right to receive fixed amounts of principal, interest,
or both on a date in the future or on demand. Debt securities also are often
referred to as fixed-income securities, even if the rate of interest varies over
the life of the security.

Debt securities are generally subject to credit risk and market risk. Credit
risk is the risk that the issuer of the security may be unable to meet interest
or principal payments or both as they come due. Market risk is the risk that the
market value of the security may decline for a variety of reasons, including
changes in interest rates. An increase in interest rates tends to reduce the
market values of debt securities in which a Fund has invested. A decline in
interest rates tends to increase the market values of debt securities in which a
Fund has invested.

Moody's Investor Services, Inc. ("Moody's") and Standard & Poor's ("S&P")
ratings provide a useful guide to the credit risk of many debt securities. The
lower the rating of a debt security, the greater the credit risk the rating
service assigns to the security. To compensate investors for accepting that
greater risk, lower-rated debt securities tend to offer higher interest rates.
Lower-rated debt securities are often referred to as "junk bonds." Increasing
the amount of Fund assets invested in unrated or lower-grade straight debt
securities may increase the yield produced by a Fund's debt securities but will
also increase the credit risk of those securities. A debt security is considered
lower-grade if it is rated Ba or less by Moody's or BB or less by S&P. Although
a Fund may invest in debt securities assigned lower grade ratings by S&P or
Moody's, the Funds' investments have generally been limited to debt securities
rated B or higher by either S&P or Moody's. Debt securities rated lower than B
by either S&P or Moody's are usually considered to be highly speculative.
INVESCO Funds Group, Inc. ("INVESCO"), investment adviser to the Funds, and/or
the sub-adviser will limit a Fund's investments to debt securities which the
adviser believes are not highly speculative and which are rated at least CCC by
S&P or Caa by Moody's. Lower-rated and non-rated debt securities of comparable
quality are subject to wider fluctuations in yields and market values than
higher-rated debt securities and may be considered speculative.

A significant economic downturn or increase in interest rates may cause issuers
of debt securities to experience increased financial problems which could
adversely affect their ability to pay principal and interest obligations, to
meet projected business goals, and to obtain additional financing. These
conditions more severely impact issuers of lower-rated debt securities. The
market for lower-rated debt securities may not be as liquid as the market for
higher-rated debt securities. Therefore, INVESCO attempts to limit purchases of
lower-rated securities to securities having an established secondary market.

Debt securities rated Caa by Moody's may be in default or may present risks of
non-payment of principal or interest. Lower-rated securities by S&P (categories
BB, B, CCC) include those which are predominantly speculative because of the
issuer's perceived 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 usually outweighed by large uncertainties
or major risk exposures to adverse conditions.

<PAGE>

The Funds expect that most emerging country debt securities in which they invest
will not be rated by U.S. rating services. Although bonds in the lowest
investment grade debt category (those rated BBB by S&P, Baa by Moody's or the
equivalent) are regarded as having adequate capability to pay principal and
interest, they have speculative characteristics. Adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than is the case for higher-rated bonds.
Lower-rated bonds by Moody's (categories Ba, B, or Caa) are of poorer quality
and also 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 S&P (categories BB, B, or CCC) include those that 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 likely will have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to adverse
conditions. Bonds having equivalent ratings from other ratings services will
have characteristics similar to those of the corresponding S&P and Moody's
ratings. For a specific description of S&P and Moody's corporate bond rating
categories, please refer to Appendix A.

EQUITY SECURITIES -- As discussed in the Prospectuses, the Funds may invest in
common, preferred and convertible preferred stocks, and securities whose values
are tied to the price of stocks, such as rights, warrants and convertible debt
securities. Common stocks and preferred stocks represent equity ownership in a
corporation. Owners of stock, such as the Funds, share in a corporation's
earnings through dividends which may be declared by the corporation, although
the receipt of dividends is not the principal benefit that the Funds seek when
they invest in stocks and similar instruments.

Instead, the Funds seek to invest in stocks that will increase in market value
and may be sold for more than a Fund paid to buy them. Market value is based
upon constantly changing investor perceptions of what the company is worth
compared to other companies. Although dividends are a factor in the changing
market value of stocks, many companies do not pay dividends, or pay
comparatively small dividends. As discussed in the Prospectuses, the principal
risk of investing in equity securities is that their market values fluctuate
constantly, often due to factors entirely outside the control of the Funds or
the company issuing the stock. At any given time, the market value of an equity
security may be significantly higher or lower than the amount paid by a Fund to
acquire it.

Owners of preferred stocks are entitled to dividends payable from the
corporation's earnings, which in some cases may be "cumulative" if prior
dividends on the preferred stock have not been paid. Dividends payable on
preferred stock have priority over distributions to holders of common stock, and
preferred stocks generally have a priority on the distribution of assets in the
event of the corporation's liquidation. Preferred stocks may be "participating,"
which means that they may be entitled to dividends in excess of the stated
dividend in certain cases. The holders of a company's debt securities generally

<PAGE>

are entitled to be paid by the company before it pays anything to its
stockholders.

Rights and warrants are securities which entitle the holder to purchase the
securities of a company (usually, its common stock) at a specified price during
a specified time period. The value of a right or warrant is affected by many of
the same factors that determine the prices of common stocks. Rights and warrants
may be purchased directly or acquired in connection with a corporate
reorganization or exchange offer.

The Funds also may purchase convertible securities including convertible debt
obligations and convertible preferred stock. A convertible security entitles the
holder to exchange it for a fixed number of shares of common stock (or other
equity security), usually at a fixed price within a specified period of time.
Until conversion, the owner of convertible securities usually receives the
interest paid on a convertible bond or the dividend preference of a preferred
stock.

A convertible security has an "investment value", which is a theoretical value
determined by the yield it provides in comparison with similar securities
without the conversion feature. Investment value changes are based upon
prevailing interest rates and other factors. It also has a "conversion value,"
which is the market value the convertible security would have if it were
exchanged for the underlying equity security. Convertible securities may be
purchased at varying price levels above or below their investment values or
conversion values.

Conversion value is a simple mathematical calculation that fluctuates directly
with the price of the underlying security. However, if the conversion value is
substantially below investment value, the market value of the convertible
security is governed principally by its investment value. If the conversion
value is near or above investment value, the market value of the convertible
security generally will rise above investment value. In such cases, the market
value of the convertible security may be higher than its conversion value, due
to the combination of the convertible security's right to interest (or dividend
preference) and the possibility of capital appreciation from the conversion
feature. However, there is no assurance that any premium above investment value
or conversion value will be recovered because prices change and, as a result,
the ability to achieve capital appreciation through conversion may be
eliminated.

FOREIGN SECURITIES -- Investments in the securities of foreign companies, or
companies that have their principal business activities outside the United
States, involve certain risks not associated with investment in U.S. companies.
Non-U.S. companies generally are not subject to the same uniform accounting,
auditing and financial reporting standards that apply to U.S. companies.
Therefore, financial information about foreign companies may be incomplete, or
may not be comparable to the information available on U.S. companies. There may
also be less publicly available information about a foreign company.

Although the volume of trading in foreign securities markets is growing,
securities of many non-U.S. companies may be less liquid and have greater swings
in price than securities of comparable U.S. companies. The costs of buying and
selling securities on foreign securities exchanges are generally significantly
higher than similar costs in the United States. There is generally less
government supervision and regulation of exchanges, brokers and issuers in
foreign countries than there is in the United States. Investment in non-U.S.

<PAGE>

securities may also be subject to other risks different from those affecting
U.S. investments, including local political or economic developments,
expropriation or nationalization of assets, confiscatory taxation, and
imposition of withholding taxes on dividends or interest payments. If it becomes
necessary, it may be more difficult for a Fund to obtain or to enforce a
judgment against a foreign issuer than against a domestic issuer.

Securities traded on foreign markets are usually bought and sold in local
currencies, not in U.S. dollars. Therefore, the market value of foreign
securities acquired by a Fund can be affected -- favorably or unfavorably -- by
changes in currency rates and exchange control regulations. Costs are incurred
in converting money from one currency to another. Foreign currency exchange
rates are determined by supply and demand on the foreign exchange markets.
Foreign exchange markets are affected by the international balance of payments
and other economic and financial conditions, government intervention,
speculation and other factors, all of which are outside the control of each
Fund. Generally, a Fund's foreign currency exchange transactions will be
conducted on a cash or "spot" basis at the spot rate for purchasing or selling
currency in the foreign currency exchange markets.

FUTURES, OPTIONS AND OTHER FINANCIAL INSTRUMENTS

GENERAL. As discussed in the Prospectuses, the adviser and/or sub-adviser may
use various types of financial instruments, some of which are derivatives, to
attempt to manage the risk of a Fund's investments or, in certain circumstances,
for investment (E.G., as a substitute for investing in securities). These
financial instruments include options, futures contracts (sometimes referred to
as "futures"), forward contracts, swaps, caps, floors and collars (collectively,
"Financial Instruments"). The policies in this section do not apply to other
types of instruments sometimes referred to as derivatives, such as indexed
securities, mortgage-backed and other asset-backed securities, and stripped
interest and principal of debt.

Hedging strategies can be broadly categorized as "short" hedges and "long" or
"anticipatory" hedges. A short hedge involves the use of a Financial Instrument
in order to partially or fully offset potential variations in the value of one
or more investments held in a Fund's portfolio. A long or anticipatory hedge
involves the use of a Financial Instrument in order to partially or fully offset
potential increases in the acquisition cost of one or more investments that the
Fund intends to acquire. In an anticipatory hedge transaction, the Fund does not
already own a corresponding security. Rather, it relates to a security or type
of security that the Fund intends to acquire. If the Fund does not eliminate the
hedge by purchasing the security as anticipated, the effect on the Fund's
portfolio is the same as if a long position were entered into. Financial
Instruments may also be used, in certain circumstances, for investment (E.G., as
a substitute for investing in securities).

Financial Instruments on individual securities generally are used to attempt to
hedge against price movements in one or more particular securities positions
that a Fund already owns or intends to acquire. Financial Instruments on
indexes, in contrast, generally are used to attempt to hedge all or a portion of
a portfolio against price movements of the securities within a market sector in
which the Fund has invested or expects to invest.

<PAGE>

The use of Financial Instruments is subject to applicable regulations of the
Securities and Exchange Commission ("SEC"), the several exchanges upon which
they are traded, and the Commodity Futures Trading Commission ("CFTC"). In
addition, the Funds' ability to use Financial Instruments will be limited by tax
considerations. See "Tax Consequences of Owning Shares of a Fund."

In addition to the instruments and strategies described below, the adviser
and/or sub-adviser may use other similar or related techniques to the extent
that they are consistent with a Fund's investment objective and permitted by its
investment limitations and applicable regulatory authorities. The Funds'
Prospectuses or Statement of Additional Information ("SAI") will be supplemented
to the extent that new products or techniques become employed involving
materially different risks than those described below or in the Prospectuses.

Special Risks. Financial Instruments and their use involve special
considerations and risks, certain of which are described below.

(1) Financial Instruments may increase the volatility of a Fund. If the adviser
and/or sub-adviser employs a Financial Instrument that correlates imperfectly
with a Fund's investments, a loss could result, regardless of whether or not the
intent was to manage risk. In addition, these techniques could result in a loss
if there is not a liquid market to close out a position that a Fund has entered.

(2) There might be imperfect correlation between price movements of a Financial
Instrument and price movement of the investment(s) being hedged. For example, if
the value of a Financial Instrument used in a short hedge increased by less than
the decline in value of the hedged investment(s), the hedge would not be fully
successful. This might be caused by certain kinds of trading activity that
distorts the normal price relationship between the security being hedged and the
Financial Instrument. Similarly, the effectiveness of hedges using Financial
Instruments on indexes will depend on the degree of correlation between price
movements in the index and price movements in the securities being hedged.

The Funds are authorized to use options and futures contracts related to
securities with issuers, maturities or other characteristics different from the
securities in which it typically invests. This involves a risk that the options
or futures position will not track the performance of a Fund's portfolio
investments.

The direction of options and futures price movements can also diverge from the
direction of the movements of the prices of their underlying instruments, even
if the underlying instruments match a Fund's investments well. Options and
futures prices are affected by such factors as current and anticipated
short-term interest rates, changes in volatility of the underlying instrument,
and the time remaining until expiration of the contract, which may not affect
security prices the same way. Imperfect correlation may also result from
differing levels of demand in the options and futures markets and the securities
markets, from structural differences in how options and futures and securities
are traded, or from imposition of daily price fluctuation limits or trading
halts. A Fund may take positions in options and futures contracts with a greater
or lesser face value than the securities it wishes to hedge or intends to
purchase in order to attempt to compensate for differences in volatility between

<PAGE>

the contract and the securities, although this may not be successful in all
cases.

(3) If successful, the above-discussed hedging strategies can reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable price
movements of portfolio securities. However, such strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements. For example, if a Fund entered into a short hedge because the adviser
and/or sub-adviser projected a decline in the price of a security in the Fund's
portfolio, and the price of that security increased instead, the gain from that
increase would likely be wholly or partially offset by a decline in the value of
the short position in the Financial Instrument. Moreover, if the price of the
Financial Instrument declined by more than the increase in the price of the
security, the Fund could suffer a loss.

(4) A Fund's ability to close out a position in a Financial Instrument prior to
expiration or maturity depends on the degree of liquidity of the market or, in
the absence of such a market, the ability and willingness of the other party to
the transaction (the "counterparty") to enter into a transaction closing out the
position. Therefore, there is no assurance that any position can be closed out
at a time and price that is favorable to a Fund.

(5) As described below, the Funds are required to maintain assets as "cover,"
maintain segregated accounts or make margin payments when they take positions in
Financial Instruments involving obligations to third parties (I.E., Financial
Instruments other than purchased options). If a Fund is unable to close out its
positions in such Financial Instruments, it might be required to continue to
maintain such assets or segregated accounts or make such payments until the
position expired. These requirements might impair a Fund's ability to sell a
portfolio security or make an investment at a time when it would otherwise be
favorable to do so, or require that the Fund sell a portfolio security at a
disadvantageous time.

Cover. Positions in Financial Instruments, other than purchased options, expose
the Funds to an obligation to another party. A Fund will not enter into any such
transaction unless it owns (1) an offsetting ("covered") position in securities,
currencies or other options, futures contracts or forward contracts, or (2) cash
and liquid assets with a value, marked-to-market daily, sufficient to cover its
obligations to the extent not covered as provided in (1) above. The Funds will
comply with SEC guidelines regarding cover for these instruments and will, if
the guidelines so require, designate cash or liquid assets as segregated in the
prescribed amount as determined daily.

Assets used as cover or held as segregated cannot be sold while the position in
the corresponding Financial Instrument is open unless they are replaced with
other appropriate assets. As a result, the commitment of a large portion of a
Fund's assets to cover or to hold as segregated could impede portfolio
management or the Fund's ability to meet redemption requests or other current
obligations.

Options. Each Fund may engage in certain strategies involving options to attempt
to manage the risk of its investments or, in certain circumstances, for
investment (E.G., as a substitute for investing in securities). A call option
gives the purchaser the right to buy, and obligates the writer to sell the
underlying investment at the agreed-upon exercise price during the option
period. A put option gives the purchaser the right to sell, and obligates the

<PAGE>

writer to buy the underlying investment at the agreed-upon exercise price during
the option period. Purchasers of options pay an amount, known as a premium, to
the option writer in exchange for the right under the option contract. See
"Options on Indexes" below with regard to cash settlement of option contracts on
index values.

The purchase of call options can serve as a hedge against a price rise of the
underlier and the purchase of put options can serve as a hedge against a price
decline of the underlier. Writing call options can serve as a limited short
hedge because declines in the value of the hedged investment would be offset to
the extent of the premium received for writing the option. However, if the
security or currency appreciates to a price higher than the exercise price of
the call option, it can be expected that the option will be exercised and a Fund
will be obligated to sell the security or currency at less than its market
value.

Writing put options can serve as a limited long or anticipatory hedge because
increases in the value of the hedged investment would be offset to the extent of
the premium received for writing the option. However, if the security or
currency depreciates to a price lower than the exercise price of the put option,
it can be expected that the put option will be exercised and a Fund will be
obligated to purchase the security or currency at more than its market value.

The value of an option position will reflect, among other things, the current
market value of the underlying investment, the time remaining until expiration,
the relationship of the exercise price to the market price of the underlying
investment, the price volatility of the underlying investment and general market
and interest rate conditions. Options that expire unexercised have no value.

A Fund may effectively terminate its right or obligation under an option by
entering into a closing transaction. For example, the Fund may terminate its
obligation under a call or put option that it had written by purchasing an
identical call or put option, which is known as a closing purchase transaction.
Conversely, the Fund may terminate a position in a put or call option it had
purchased by writing an identical put or call option, which is known as a
closing sale transaction. Closing transactions permit a Fund to realize profits
or limit losses on an option position prior to its exercise or expiration.

Risks of Options on Securities. Options embody the possibility of large amounts
of exposure, which will result in a Fund's net asset value being more sensitive
to changes in the value of the related investment. A Fund may purchase or write
both exchange-traded and OTC options. Exchange-traded options in the United
States are issued by a clearing organization affiliated with the exchange on
which the option is listed that, in effect, guarantees completion of every
exchange-traded option transaction. In contrast, OTC options are contracts
between a Fund and its counterparty (usually a securities dealer or a bank) with
no clearing organization guarantee. Thus, when a Fund purchases an OTC option,
it relies on the counterparty from whom it purchased the option to make or take
delivery of the underlying investment upon exercise of the option. Failure by
the counterparty to do so would result in the loss of any premium paid by a Fund
as well as the loss of any expected benefit from the transaction.

<PAGE>

The Funds' ability to establish and close out positions in options depends on
the existence of a liquid market. However, there can be no assurance that such a
market will exist at any particular time. Closing transactions can be made for
OTC options only by negotiating directly with the counterparty, or by a
transaction in the secondary market if any such market exists. There can be no
assurance that a Fund will in fact be able to close out an OTC option position
at a favorable price prior to expiration. in the event of insolvency of the
counterparty, a Fund might be unable to close out an OTC option position at any
time prior to the option's expiration. If a Fund is not able to enter into an
offsetting closing transaction on an option it has written, it will be required
to maintain the securities subject to the call or the liquid assets underlying
the put until a closing purchase transaction can be entered into or the option
expires. However, there can be no assurance that such a market will exist at any
particular time.

If a Fund were unable to effect a closing transaction for an option it had
purchased, it would have to exercise the option to realize any profit. The
inability to enter into a closing purchase transaction for a covered call option
written by a Fund could cause material losses because the Fund would be unable
to sell the investment used as cover for the written option until the option
expires or is exercised.

Options on Indexes. Puts and calls on indexes are similar to puts and calls on
securities or futures contracts except that all settlements are in cash and
changes in value depend on changes in the index in question. When a Fund writes
a call on an index, it receives a premium and agrees that, prior to the
expiration date, upon exercise of the call, the purchaser will receive from the
Fund an amount of cash equal to the positive difference between the closing
price of the index and the exercise price of the call times a specified multiple
("multiplier"), which determines the total dollar value for each point of such
difference. When a Fund buys a call on an index, it pays a premium and has the
same rights as to such call as are indicated above. When a Fund buys a put on an
index, it pays a premium and has the right, prior to the expiration date, to
require the seller of the put to deliver to the Fund an amount of cash equal to
the positive difference between the exercise price of the put and the closing
price of the index times the multiplier. When a Fund writes a put on an index,
it receives a premium and the purchaser of the put has the right, prior to the
expiration date, to require the Fund to deliver to it an amount of cash equal to
the positive difference between the exercise price of the put and the closing
level of the index times the multiplier.

The risks of purchasing and selling options on indexes may be greater than
options on securities. Because index options are settled in cash, when a Fund
writes a call on an index it cannot fulfill its potential settlement obligations
by delivering the underlying securities. A Fund can offset some of the risk of
writing a call index option by holding a diversified portfolio of securities
similar to those on which the underlying index is based. However, a Fund cannot,
as a practical matter, acquire and hold a portfolio containing exactly the same
securities as underlie the index and, as a result, bears a risk that the value
of the securities held will vary from the value of the index.

Even if a Fund could assemble a portfolio that exactly reproduced the
composition of the underlying index, it still would not be fully covered from a
risk standpoint because of the "timing risk" inherent in writing index options.
When an index option is exercised, the amount of cash that the holder is
entitled to receive is determined by the difference between the exercise price
and the closing index level. As with other kinds of options, a Fund as the call

<PAGE>

writer will not learn what it has been assigned until the next business day. The
time lag between exercise and notice of assignment poses no risk for the writer
of a covered call on a specific underlying security, such as common stock,
because in that case the writer's obligation is to deliver the underlying
security, not to pay its value as of a moment in the past. In contrast, the
writer of an index call will be required to pay cash in an amount based on the
difference between the closing index value on the exercise date and the exercise
price. By the time a Fund learns what it has been assigned, the index may have
declined. This "timing risk" is an inherent limitation on the ability of index
call writers to cover their risk exposure.

If a Fund has purchased an index option and exercises it before the closing
index value for that day is available, it runs the risk that the level of the
underlying index may subsequently change. If such a change causes the exercised
option to fall out-of-the-money, the Fund nevertheless will be required to pay
the difference between the closing index value and the exercise price of the
option (times the applicable multiplier) to the assigned writer.

OTC Options. Unlike exchange-traded options, which are standardized with respect
to the underlying instrument, expiration date, contract size, and strike price,
the terms of OTC options (options not traded on exchanges) generally are
established through negotiation with the other party to the option contract.
While this type of arrangement allows a Fund great flexibility to tailor the
option to its needs, OTC options generally involve greater risk than
exchange-traded options, which are guaranteed by the clearing organization of
the exchange where they are traded.

Generally, OTC foreign currency options used by a Fund are European-style
options. This means that the option is only exercisable immediately prior to its
expiration. This is in contrast to American-style options, which are exercisable
at any time prior to the expiration date of the option.

Futures Contracts and Options on Futures Contracts. When a Fund purchases or
sells a futures contract, it incurs an obligation respectively to take or make
delivery of a specified amount of the obligation underlying the contract at a
specified time and price. When a Fund writes an option on a futures contract, it
becomes obligated to assume a position in the futures contract at a specified
exercise price at any time during the term of the option. If a Fund writes a
call, on exercise it assumes a short futures position. If it writes a put, on
exercise it assumes a long futures position.

The purchase of futures or call options on futures can serve as a long or an
anticipatory hedge, and the sale of futures or the purchase of put options on
futures can serve as a short hedge. Writing call options on futures contracts
can serve as a limited short hedge, using a strategy similar to that used for
writing call options on securities or indexes. Similarly, writing put options on
futures contracts can serve as a limited long or anticipatory hedge.

In addition, futures strategies can be used to manage the "duration" (a measure
of anticipated sensitivity to changes in interest rates, which is sometimes
related to the weighted average maturity of a portfolio) and associated interest
rate risk of a Fund's fixed-income portfolio. If the adviser and/or sub-adviser
wishes to shorten the duration of a Fund's fixed-income portfolio (i.e., reduce
anticipated sensitivity), the Fund may sell an appropriate debt futures contract
or a call option thereon, or purchase a put option on that futures contract. If
the adviser and/or sub-adviser wishes to lengthen the duration of a Fund's
fixed-income portfolio (i.e., increase anticipated sensitivity), the Fund may

<PAGE>

buy an appropriate debt futures contract or a call option thereon, or sell a put
option thereon.

At the inception of a futures contract, a Fund is required to deposit "initial
margin" in an amount generally equal to 10% or less of the contract value.
Initial margin must also be deposited when writing a call or put option on a
futures contract, in accordance with applicable exchange rules. Subsequent
"variation margin" payments are made to and from the futures broker daily as the
value of the futures or written option position varies, a process known as
"marking-to-market." Unlike margin in securities transactions, initial margin on
futures contracts and written options on futures contracts does not represent a
borrowing on margin, but rather is in the nature of a performance bond or
good-faith deposit that is returned to the Fund at the termination of the
transaction if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, a Fund may be required to
increase the level of initial margin deposits. If the Fund has insufficient cash
to meet daily variation margin requirements, it might need to sell securities in
order to do so at a time when such sales are disadvantageous.

Purchasers and sellers of futures contracts and options on futures can enter
into offsetting closing transactions, similar to closing transactions on
options, by selling or purchasing, respectively, an instrument identical to the
instrument purchased or sold. However, there can be no assurance that a liquid
market will exist for a particular contract at a particular time. In such event,
it may not be possible to close a futures contract or options position.

Under certain circumstances, futures exchanges may establish daily limits on the
amount that the price of a futures contract or an option on a futures contract
can vary from the previous day's settlement price; once that limit is reached,
no trades may be made that day at a price beyond the limit. Daily price limits
do not limit potential losses because prices could move to the daily limit for
several consecutive days with little or no trading, thereby preventing
liquidation of unfavorable positions.

If a Fund were unable to liquidate a futures contract or an option on a futures
contract position due to the absence of a liquid market or the imposition of
price limits, it could incur substantial losses. The Fund would continue to be
subject to market risk with respect to the position. In addition, except in the
case of purchased options, the Fund would continue to be required to make daily
variation margin payments and might be required to continue to maintain the
position being hedged by the futures contract or option or to continue to
maintain cash or securities in a segregated account.

To the extent that a Fund enters into futures contracts, options on futures
contracts and options on foreign currencies traded on a CFTC-regulated exchange,
in each case that is not for BONA FIDE hedging purposes (as defined by the
CFTC), the aggregate initial margin and premiums required to establish these
positions (excluding the amount by which options are "in-the-money" at the time
of purchase) may not exceed 5% of the liquidation value of the Fund's portfolio,
after taking into account unrealized profits and unrealized losses on any
contracts the Fund has entered into. This policy does not limit to 5% the
percentage of the Fund's assets that are at risk in futures contracts, options
on futures contracts and currency options.

<PAGE>

Risks of Futures Contracts and Options Thereon. The ordinary spreads at a given
time between prices in the cash and futures markets (including the options on
futures markets), due to differences in the natures of those markets, are
subject to the following factors. First, 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 the cash and futures markets. Second, the liquidity of the futures
market depends on participants entering into offsetting transactions rather than
making or taking delivery. To the extent participants decide to make or take
delivery, liquidity in the futures market could be reduced, thus producing
distortion. Due to the possibility of distortion, a hedge may not be successful.
Although stock index futures contracts do not require physical delivery, under
extraordinary market conditions, liquidity of such futures contracts also could
be reduced. Additionally, the adviser and/or sub-adviser may be incorrect in its
expectations as to the extent of various interest rates, currency exchange rates
or stock market movements or the time span within which the movements take
place.

Index Futures. The risk of imperfect correlation between movements in the price
of index futures and movements in the price of the securities that are the
subject of a hedge increases as the composition of a Fund's portfolio diverges
from the index. The price of the index futures may move proportionately more
than or less than the price of the securities being hedged. If the price of the
index futures moves proportionately less than the price of the securities that
are the subject of the hedge, the hedge will not be fully effective. Assuming
the price of the securities being hedged has moved in an unfavorable direction,
as anticipated when the hedge was put into place, the Fund would be in a better
position than if it had not hedged at all, but not as good as if the price of
the index futures moved in full proportion to that of the hedged securities.
However, if the price of the securities being hedged has moved in a favorable
direction, this advantage will be partially offset by movement of the price of
the futures contract. If the price of the futures contract moves more than the
price of the securities, the Fund will experience either a loss or a gain on the
futures contract that will not be completely offset by movements in the price of
the securities that are the subject of the hedge.

Where index futures are purchased in an anticipatory hedge, it is possible that
the market may decline instead. If a Fund then decides not to invest in the
securities at that time because of concern as to possible further market decline
or for other reasons, it will realize a loss on the futures contract that is not
offset by a reduction in the price of the securities it had anticipated
purchasing.

Foreign Currency Hedging Strategies--Special Considerations. A Fund may use
options and futures contracts on foreign currencies, as mentioned previously,
and forward currency contracts, as described below, to attempt to hedge against
movements in the values of the foreign currencies in which the Fund's securities
are denominated or, in certain circumstances, for investment (e.g., as a
substitute for investing in securities denominated in foreign currency).
Currency hedges can protect against price movements in a security that a Fund
owns or intends to acquire that are attributable to changes in the value of the
currency in which it is denominated.

A Fund might seek to hedge against changes in the value of a particular currency
when no Financial Instruments on that currency are available or such Financial
Instruments are more expensive than certain other Financial Instruments. In such
cases, a Fund may seek to hedge against price movements in that currency by

<PAGE>

entering into transactions using Financial Instruments on another currency or a
basket of currencies, the value of which the adviser and/or sub-adviser believes
will have a high degree of positive correlation to the value of the currency
being hedged. The risk that movements in the price of the Financial Instrument
will not correlate perfectly with movements in the price of the currency subject
to the hedging transaction may be increased when this strategy is used.

The value of Financial Instruments on foreign currencies depends on the value of
the underlying currency relative to the U.S. dollar. Because foreign currency
transactions occurring in the interbank market might involve substantially
larger amounts than those involved in the use of such Financial Instruments, a
Fund could be disadvantaged by having to deal in the odd-lot market (generally
consisting of transactions of less than $1 million) for the underlying foreign
currencies at prices that are less favorable than for round lots.

There is no systematic reporting of last sale information for foreign currencies
or any regulatory requirement that quotations available through dealers or other
market sources be firm or revised on a timely basis. Quotation information
generally is representative of very large transactions in the interbank market
and thus might not reflect odd-lot transactions where rates might be less
favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Financial Instruments until they reopen.

Settlement of hedging transactions involving foreign currencies might be
required to take place within the country issuing the underlying currency. Thus,
a Fund might be required to accept or make delivery of the underlying foreign
currency in accordance with any U.S. or foreign regulations regarding the
maintenance of foreign banking arrangements by U.S. residents and might be
required to pay any fees, taxes and charges associated with such delivery
assessed in the issuing country.

Forward Currency Contracts and Foreign Currency Deposits. The Funds may enter
into forward currency contracts to purchase or sell foreign currencies for a
fixed amount of U.S. dollars or another foreign currency. A forward currency
contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days (term) from the date of the
forward currency contract agreed upon by the parties, at a price set at the time
the forward currency contract is entered. Forward currency contracts are
negotiated directly between currency traders (usually large commercial banks)
and their customers.

Such transactions may serve as long or anticipatory hedges. For example, a Fund
may purchase a forward currency contract to lock in the U.S. dollar price of a
security denominated in a foreign currency that the Fund intends to acquire.
Forward currency contracts may also serve as short hedges. For example, a Fund
may sell a forward currency contract to lock in the U.S. dollar equivalent of
the proceeds from the anticipated sale of a security or a dividend or interest
payment denominated in a foreign currency.

<PAGE>

The Funds may also use forward currency contracts to hedge against a decline in
the value of existing investments denominated in foreign currency. Such a hedge
would tend to offset both positive and negative currency fluctuations, but would
not offset changes in security values caused by other factors. A Fund could also
hedge the position by entering into a forward currency contract to sell another
currency expected to perform similarly to the currency in which the Fund's
existing investments are denominated. This type of hedge could offer advantages
in terms of cost, yield or efficiency, but may not hedge currency exposure as
effectively as a simple hedge against U.S. dollars. This type of hedge may
result in losses if the currency used to hedge does not perform similarly to the
currency in which the hedged securities are denominated.

The Funds may also use forward currency contracts in one currency or a basket of
currencies to attempt to hedge against fluctuations in the value of securities
denominated in a different currency if the adviser anticipates that there will
be a positive correlation between the two currencies.

The cost to a Fund of engaging in forward currency contracts varies with factors
such as the currency involved, the length of the contract period and the market
conditions then prevailing. Because forward currency contracts are usually
entered into on a principal basis, no fees or commissions are involved. When a
Fund enters into a forward currency contract, it relies on the counterparty to
make or take delivery of the underlying currency at the maturity of the
contract. Failure by the counterparty to do so would result in the loss of some
or all of any expected benefit of the transaction.

As is the case with futures contracts, purchasers and sellers of forward
currency contracts can enter into offsetting closing transactions, similar to
closing transactions on futures contracts, by selling or purchasing,
respectively, an instrument identical to the instrument purchased or sold.
Secondary markets generally do not exist for forward currency contracts, with
the result that closing transactions generally can be made for forward currency
contracts only by negotiating directly with the counterparty. Thus, there can be
no assurance that a Fund will in fact be able to close out a forward currency
contract at a favorable price prior to maturity. In addition, in the event of
insolvency of the counterparty, the Fund might be unable to close out a forward
currency contract. In either event, the Fund would continue to be subject to
market risk with respect to the position, and would continue to be required to
maintain a position in securities denominated in the foreign currency or to
segregate cash or liquid assets.

The precise matching of forward currency contract amounts and the value of the
securities, dividends or interest payments involved generally will not be
possible because the value of such securities, dividends or interest payments,
measured in the foreign currency, will change after the forward currency
contract has been established. Thus, a Fund might need to purchase or sell
foreign currencies in the spot (cash) market to the extent such foreign
currencies are not covered by forward currency contracts. The projection of
short-term currency market movements is extremely difficult, and the successful
execution of a short-term hedging strategy is highly uncertain.

Forward currency contracts may substantially change a Fund's investment exposure
to changes in currency exchange rates and could result in losses to the Fund if
currencies do not perform as the adviser anticipates. There is no assurance that

<PAGE>

the adviser's and/or sub-adviser's use of forward currency contracts will be
advantageous to a Fund or that it will hedge at an appropriate time.

The Funds may also purchase and sell foreign currency and invest in foreign
currency deposits. Currency conversion involves dealer spreads and other costs,
although commissions usually are not charged.

Combined Positions. A Fund may purchase and write options or futures in
combination with each other, or in combination with futures or forward currency
contracts, to manage the risk and return characteristics of its overall
position. For example, a Fund may purchase a put option and write a call option
on the same underlying instrument, in order to construct a combined position
whose risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at one
strike price and buying a call option at a lower price, in order to reduce the
risk of the written call option in the event of a substantial price increase.
Because combined options positions involve multiple trades, they result in
higher transaction costs.

Turnover. The Funds' options and futures activities may affect their turnover
rates and brokerage commission payments. The exercise of calls or puts written
by a Fund, and the sale or purchase of futures contracts, may cause it to sell
or purchase related investments, thus increasing its turnover rate. Once a Fund
has received an exercise notice on an option it has written, it cannot effect a
closing transaction in order to terminate its obligation under the option and
must deliver or receive the underlying securities at the exercise price. The
exercise of puts purchased by a Fund may also cause the sale of related
investments, increasing turnover. Although such exercise is within the Fund's
control, holding a protective put might cause it to sell the related investments
for reasons that would not exist in the absence of the put. A Fund will pay a
brokerage commission each time it buys or sells a put or call or purchases or
sells a futures contract. Such commissions may be higher than those that would
apply to direct purchases or sales.

Swaps, Caps, Floors and Collars. The Funds are authorized to enter into swaps,
caps, floors and collars. Swaps involve the exchange by one party with another
party of their respective commitments to pay or receive cash flows, E.G., an
exchange of floating rate payments for fixed rate payments. The purchase of a
cap or a floor entitles the purchaser, to the extent that a specified index
exceeds in the case of a cap, or falls below in the case of a floor, a
predetermined value, to receive payments on a notional principal amount from the
party selling such instrument. A collar combines elements of buying a cap and
selling a floor.

ILLIQUID SECURITIES -- Securities which do not trade on stock exchanges or in
the over the counter market, or have restrictions on when and how they may be
sold, are generally considered to be "illiquid." An illiquid security is one
that a Fund may have difficulty -- or may even be legally precluded from --
selling at any particular time. The Funds may invest in illiquid securities,
including restricted securities and other investments which are not readily
marketable. A Fund will not purchase any such security if the purchase would
cause the Fund to invest more than 15% of its net assets, measured at the time
of purchase, in illiquid securities. Repurchase agreements maturing in more than
seven days are considered illiquid for purposes of this restriction.

<PAGE>

The principal risk of investing in illiquid securities is that a Fund may be
unable to dispose of them 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 registering the securities with
the SEC, and otherwise obtaining listing on a securities exchange or in the over
the counter market.

INVESTMENT COMPANY SECURITIES -- To manage their daily cash positions, the Funds
may invest in securities issued by other investment companies that invest in
short-term debt securities and seek to maintain a net asset value of $1.00 per
share ("money market funds"). The Funds also may invest in SPDRs and shares of
other investment companies. SPDRs are investment companies whose portfolios
mirror the compositions of specific S&P indices, such as the S&P 500 and the S&P
400. SPDRs are traded on the American Stock Exchange. SPDR holders such as a
Fund are paid a "Dividend Equivalent Amount" that corresponds to the amount of
cash dividends accruing to the securities held by the SPDR Trust, net of certain
fees and expenses. The Investment Company Act of 1940 limits investments in
securities of other investment companies, such as the SPDR Trust. These
limitations include, among others, that, subject to certain exceptions, no more
than 10% of a Fund's total assets may be invested in securities of other
investment companies and no more than 5% of its total assets may be invested in
the securities of any one investment company. As a shareholder of another
investment company, a Fund would bear its pro rata portion of the other
investment company's expenses, including advisory fees, in addition to the
expenses the Fund bears directly in connection with its own operations.

REPURCHASE AGREEMENTS -- A Fund may enter into repurchase agreements, or REPOs,
on debt securities that the Fund is allowed to hold in its portfolio. This is a
way to invest money for short periods. A REPO is an agreement under which the
Fund acquires a debt security and then resells it to the seller at an agreed
upon price and date (normally, the next business day). The repurchase price
represents an interest rate effective for the short period the debt security is
held by the Fund, and is unrelated to the interest rate on the underlying debt
security. A repurchase agreement is often considered as a loan collateralized by
securities. The collateral securities acquired by the Fund (including accrued
interest earned thereon) must have a total value in excess of the value of the
repurchase agreement. The collateral securities are held by the Fund's custodian
bank until the repurchase agreement is completed.

The Funds may enter into repurchase agreements with commercial banks, registered
broker-dealers or registered government securities dealers, that are
creditworthy under standards established by the Company's board of directors.
The Company's board of directors has established standards that the investment
adviser and sub-adviser must use to review the creditworthiness of any bank,
broker or dealer that is party to a REPO. REPOs maturing in more than seven days
are considered illiquid securities. A Fund will not enter into repurchase
agreements maturing in more than seven days if as a result more than 15% of the
Fund's net assets would be invested in these repurchase agreements and other
illiquid securities.

As noted above, the Funds use REPOs as a means of investing cash for short
periods of time. Although REPOs are considered to be highly liquid and
comparatively low-risk, the use of REPOs does involve some risks. For example,
if the other party to the agreement defaults on its obligation to repurchase the
underlying security at a time when the value of the security has declined, the
Fund may incur a loss on the sale of the collateral security. If the other party

<PAGE>

to the agreement becomes insolvent and subject to liquidation or reorganization
under the Bankruptcy Code or other laws, a court may determine that the
underlying security is collateral for a loan by the Fund not within the control
of the Fund and therefore the realization by the Fund on such collateral may
automatically be stayed. Finally, it is possible that the Fund may not be able
to substantiate its interest in the underlying security and may be deemed an
unsecured creditor of the other party to the agreement.

RULE 144A SECURITIES -- A Fund also may invest in securities that can be resold
to institutional investors pursuant to Rule 144A under the Securities Act of
1933, as amended (the "1933 Act"). In recent years, a large institutional market
has developed for many Rule 144A Securities. Institutional investors generally
cannot sell these securities to the general public but instead will often depend
on an efficient institutional market in which Rule 144A Securities can readily
be resold to other institutional investors, 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 does not
necessarily mean that a Rule 144A Security is illiquid. Institutional markets
for Rule 144A Securities may provide both reliable market values for Rule 144A
Securities and enable a Fund to sell a Rule 144A investment when appropriate.
For this reason, the Company's board of directors has concluded that if a
sufficient institutional trading market exists for a given Rule 144A security,
it may be considered "liquid," and not subject to a Fund's limitations on
investment in illiquid securities. The Company's board of directors has given
INVESCO the day-to-day authority to determine the liquidity of Rule 144A
Securities, according to guidelines approved by the board. The principal risk of
investing in Rule 144A Securities is that there may be an insufficient number of
qualified institutional buyers interested in purchasing a Rule 144A Security
held by a Fund, and the Fund might be unable to dispose of such security
promptly or at reasonable prices.

SECURITIES LENDING -- The Funds may lend their portfolio securities. The
advantage of lending portfolio securities is that a Fund continues to have the
benefits (and risks) of ownership of the loaned securities, while at the same
time receiving interest from the borrower of the securities. The primary risk in
lending portfolio securities is that a borrower may fail to return a portfolio
security.

SHORT SALES (Market Neutral Equity Fund only) -- This discussion relates solely
to Market Neutral Fund; no other Fund intends to sell securities short (except
to sell short "against the box."). Market Neutral Equity Fund will sell a
security short and borrow the same security from a broker or other institution
to complete the sale. Market Neutral Equity Fund will lose money on a short sale
transaction if the price of the borrowed security increases between the date of
the short sale and the date on which the Fund closes the short position;
conversely, the Fund may realize a gain if the price of the borrowed security
declines between those dates.

There is no guarantee that Market Neutral Equity Fund will be able to close out
a short position at any particular time or at an acceptable price. During the
time that the Fund is short the security, it is subject to the risk that the
lender of the security will terminate the loan at a time when the Fund is unable
to borrow the same security from another lender. If that occurs, the Fund may be
"bought in" at the price required to purchase the security needed to close out
the short position.

<PAGE>

In short sale transactions, Market Neutral Fund's gain is limited to the price
at which it sold the security short; its loss is limited only by the maximum
price it must pay to acquire the security less the price at which the security
was sold. In theory, losses from short sales may be unlimited. Further, because
the Fund will attempt to remain market neutral, if the Fund must close out a
short position at a time or price not of its choosing, it may also have to sell
a corresponding security it owns at an unfavorable time or price in order to
maintain market neutrality. Until a security that is sold short is acquired by
the Fund, the Fund must pay the lender any dividends that accrue during the loan
period. In order to borrow the security, the Fund usually is required to pay
compensation to the lender. Short sales also cause the Fund to incur brokerage
fees and other transaction costs. Therefore, the amount of any gain the Fund may
receive from a short sale transaction is decreased - and the amount of any loss
increased -- by the amount of compensation to the lender, dividend and expenses
Market Neutral Equity Fund may be required to pay.

Until Market Neutral Equity Fund replaces a borrowed security, it must segregate
liquid securities or other collateral with a broker or other custodian in an
amount equal to the current market value of the security sold short. The Fund
expects to receive interest on the collateral it deposits. The use of short
sales may result in Market Neutral Equity Fund realizing more short-term capital
gains than it would if the Fund did not engage in short sales.

U.S. GOVERNMENT SECURITIES -- Each Fund may, from time to time, purchase debt
securities issued by the U.S. government. These securities include Treasury
bills, notes and bonds. 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 debt securities also include securities issued or guaranteed by
agencies or instrumentalities of the U.S. government. Some obligations of U.S.
government agencies, which are established under the authority of an act of
Congress, such as Government National Mortgage Association ("GNMA")
participation certificates, are supported by the full faith and credit of the
U.S. 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 U.S. government. The market value of GNMA Certificates is not guaranteed.
GNMA Certificates are different from bonds because principal is paid back
monthly by the borrower over the term of the loan rather than returned in a lump
sum at maturity, as is the case with a bond. GNMA Certificates are called
"pass-through" securities because both interest and principal payments
(including prepayments) are passed through to the holder of the GNMA
Certificate.

Other United States government debt securities, such as securities of the
Federal Home Loan Banks, are supported by the right of the issuer to borrow from
the Treasury. Others, such as bonds issued by Fannie Mae, a federally chartered
private corporation, are supported only by the credit of the corporation. 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 in the event the agency or instrumentality does not meet its

<PAGE>

commitments. A Fund will invest in securities of such instrumentalities only
when its investment adviser and sub-advisers are satisfied that the credit risk
with respect to any such instrumentality is comparatively minimal.

WHEN-ISSUED/DELAYED DELIVERY -- Ordinarily, the Funds buy and sell securities on
an ordinary settlement basis. That means that the buy or sell order is sent, and
a Fund actually takes delivery or gives up physical possession of the security
on the "settlement date," which is three business days later. However, the Funds
also may purchase and sell securities on a when-issued or delayed delivery
basis.

When-issued or delayed delivery transactions occur when securities are purchased
or sold by a Fund and payment and delivery take place at an agreed-upon time in
the future. The Funds may engage in this practice in an effort to secure an
advantageous price and yield. However, the yield on a comparable security
available when delivery actually takes place may vary from the yield on the
security at the time 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 to consummate the sale at the future date. If the
seller or buyer fails to act as promised, that failure may result in the Fund
missing the opportunity of obtaining a price or yield considered to be
advantageous. No payment or delivery is made by a Fund until it receives
delivery or payment from the other party to the transaction. However,
fluctuation in the value of the security from the time of commitment until
delivery could adversely affect a Fund.

INVESTMENT RESTRICTIONS

The Funds operate under certain investment restrictions. For purposes of the
following restrictions, 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.

The following restrictions are fundamental and may not be changed with respect
to a Fund without prior approval of a majority of the outstanding voting
securities of a Fund, as defined in the Investment Company Act of 1940, as
amended (the "1940 Act"). Each Fund, unless otherwise indicated, may not:

1. purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities or municipal securities) if, as a result, more than 25%
of the Fund's total assets would be invested in the securities of companies
whose principal business activities are in the same industry, except that:
(i) Utilities Fund may invest more than 25% of the value of its total
assets in one or more industries relating to the utilities industry; (ii)
Health Sciences Fund may invest more than 25% of the value of its total
assets in one or more industries relating to health care; (iii) Technology
Fund may invest more than 25% of the value of its total assets in the one
or more industries relating to technology; (iv) Realty Fund may invest more
than 25% of the value of its total assets in one or more industries

<PAGE>

relating to the real estate industry; (v) Financial Services Fund may
invest more than 25% of the value of its total assets in one or more
industries relating to financial services; (vi) Telecommunications Fund may
invest more than 25% of the value of its total assets in one or more
industries relating to telecommunications; and (vii) the investments in the
combined long and short portfolios of Market Neutral Equity Fund may exceed
25% of the value of its total assets in one or more industries;

2. with respect to 75% of the Fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities, or securities of
other investment companies) if, as a result, (i) more than 5% of a Fund's
total assets would be invested in the securities of that issuer, or (ii) a
Fund would hold more than 10% of the outstanding voting securities of that
issuer;

3. underwrite securities of other issuers, except insofar as it may be
deemed to be an underwriter under the Securities Act of 1933, as amended,
in connection with the disposition of the Fund's portfolio securities;

4. borrow money, except that the Fund may borrow money in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings); with respect to Market Neutral Equity
Fund, short sales and related borrowings of securities and cash to satisfy
margin requirements are not subject to this restriction;

5. issue senior securities, except as permitted under the 1940 Act;

6. lend any security or make any 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 the purchase of debt securities or to repurchase agreements;

7. purchase or sell physical commodities; however, this policy shall not
prevent the Fund from purchasing and selling foreign currency, futures
contracts, options, forward contracts, swaps, caps, floors, collars and
other financial instruments; or

8. purchase or sell real estate unless acquired as a result of ownership of
securities or other instruments (but this shall not prevent the Fund from
investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business). This
restriction shall not prohibit the Realty Fund from directly holding real
estate if such real estate is acquired by the Fund as a result of a default
on debt securities held by the Fund.

9. Each Fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company managed by INVESCO or an affiliate
or a successor thereof, with substantially the same fundamental investment
objective, policies and limitations as the Fund.

<PAGE>

In addition, each Fund has the following non-fundamental policies, which may be
changed without shareholder approval:

A. The Fund (with the exception of Market Neutral Fund), may not sell
securities short (unless it owns or has the right to obtain securities
equivalent in kind and amount to the securities sold short) or purchase
securities on margin, except that (i) this policy does not prevent the Fund
from entering into short positions in foreign currency, futures contracts,
options, forward contracts, swaps, caps, floors, collars and other
financial instruments, (ii) the Fund may obtain such short-term credits as
are necessary for the clearance of transactions, and (iii) the Fund may
make margin payments in connection with futures contracts, options, forward
contracts, swaps, caps, floors, collars and other financial instruments.

B. The Fund may borrow money only from a bank or from an open-end
management investment company managed by INVESCO or an affiliate or a
successor thereof for temporary or emergency purposes (not for leveraging
or investing) or by engaging in reverse repurchase agreements with any
party (reverse repurchase agreements will be treated as borrowings for
purposes of fundamental limitation (4)). This limitation shall not prevent
Market Neutral Equity Fund from borrowing money from brokers from time to
time to meet margin requirements on the securities it sells short. Any such
borrowings will be short-term in nature.

C. The Fund does not currently intend to purchase any security if, as a
result, more than 15% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.

D. The Fund may invest in securities issued by other investment companies
to the extent that such investments are consistent with the Fund's
investment objective and policies and permissible under the 1940 Act.

E. With respect to fundamental limitation (1), domestic and foreign banking
will be considered to be different industries.

In addition, with respect to a Fund that may invest in municipal obligations,
the following non-fundamental policy applies, which may be changed without
shareholder approval:

Each state (including the District of Columbia and Puerto Rico), territory
and possession of the United States, each political subdivision, agency,
instrumentality and authority thereof, and each multi-state agency of which
a state is a member is a separate "issuer." When the assets and revenues of
an agency, authority, instrumentality or other political subdivision are
separate from the government creating the subdivision and the security is
backed only by assets and revenues of the subdivision, such subdivision
would be deemed to be the sole issuer. Similarly, in the case of an
Industrial Development Bond or Private Activity bond, if that bond is

<PAGE>

backed only by the assets and revenues of the non-governmental user, then
that non-governmental user would be deemed to be the sole issuer. However,
if the creating government or another entity guarantees a security, then to
the extent that the value of all securities issued or guaranteed by that
government or entity and owned by a Fund exceeds 10% of the Fund's total
assets, the guarantee would be considered a separate security and would be
treated as issued by that government or entity.

In order to enable California investors to allocate variable annuity or
variable life insurance contract values to one or more of the Funds, the Company
has committed to comply with the following guidelines: (i) the borrowing limits
for any Fund are (a) 10% of net asset value when borrowing for any general
purpose and (b) 25% of net asset value when borrowing as a temporary measure to
facilitate redemptions (for purposes of this clause, the net asset value of a
Fund is the market value of all investments or assets owned less outstanding
liabilities of the Fund at the time that any new or additional borrowing is
undertaken); and (ii) if a Fund invests in foreign companies, the foreign
country diversification guidelines to be followed by the Fund are as follows:

(a) The Fund will be invested in a minimum of five different foreign
countries at all times. However, this minimum is reduced to four when foreign
country investments comprise less than 80% of the Fund's net asset value, to
three when less than 60% of such value, to two when less than 40% and to one
when less than 20%.

(b) Except as set forth in items (c) and (d) below, the Fund will have no
more than 20% of its net asset value invested in securities of issuers located
in any one country.

(c) The Fund may have an additional 15% of its net asset value invested in
securities of issuers located in any one of the following countries: Australia,
Canada, France, Japan, the United Kingdom, or Germany.

(d) The Fund's investments in United States issuers are not subject to the
foreign country diversification guidelines.

State insurance laws and regulations may impose additional limitations on
lending securities and the use of options, futures and other derivative
instruments.

MANAGEMENT OF THE FUNDS

THE INVESTMENT ADVISER

INVESCO, located at 7800 East Union Avenue, Denver, Colorado, is the Company's
investment adviser. INVESCO was founded in 1932 and serves as an investment
adviser to:

INVESCO Bond Funds, Inc. (formerly, INVESCO Income Funds, Inc.)
INVESCO Combination Stock & Bond Funds, Inc. (formerly, INVESCO
Flexible Funds, Inc.)

<PAGE>

INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Sector Funds, Inc. (formerly, INVESCO Strategic Portfolios, Inc.)
INVESCO Specialty Funds, Inc.
INVESCO Stock Funds, Inc. (formerly, INVESCO Equity Funds, Inc.)
INVESCO Treasurer's Series Funds, Inc. (formerly, INVESCO Treasurer's
Series Trust)
INVESCO Variable Investment Funds, Inc.

As of July 31, 1999, INVESCO managed 42 mutual funds having combined assets of
$24 billion, on behalf of more than 924,000 shareholders.

INVESCO is an indirect wholly owned subsidiary of AMVESCAP PLC, a publicly
traded holding company. Through its subsidiaries, AMVESCAP PLC engages in the
business of investment management on an international basis. AMVESCAP PLC is one
of the largest independent investment management businesses in the world, with
approximately $296 billion in assets under management on June 30, 1999.

AMVESCAP PLC's North American subsidiaries include:

INVESCO Retirement and Benefit Services, Inc. ("IRBS"), Atlanta, Georgia,
develops and provides domestic and international defined contribution
retirement plan services to plan sponsors, institutional retirement plan
sponsors, institutional plan providers and foreign governments.

INVESCO Retirement Plan Services ("IRPS"), Atlanta, Georgia, a division of
IRBS, provides record keeping and investment selection services to defined
contribution plan sponsors of plans with between $2 million and $200 million
in assets. Additionally, IRPS provides investment consulting services to
institutions seeking to provide retirement plan products and services.

Institutional Trust Company, doing business as INVESCO Trust Company
("ITC"), Denver, Colorado, a division of IRBS, provides retirement account
custodian and/or trust services for individual retirement accounts ("IRAs")
and other retirement plan accounts. This includes services such as record
keeping, tax reporting and compliance. ITC acts as trustee or custodian to
these plans. ITC accepts contributions and provides, through INVESCO,
complete transfer agency functions: correspondence, sub-accounting,
telephone communications and processing of distributions.

INVESCO Capital Management, Inc., Atlanta, Georgia, manages institutional
investment portfolios, consisting primarily of discretionary employee
benefit plans for corporations and state and local governments, and
endowment funds.

INVESCO Management & Research, Inc., Boston, Massachusetts, primarily
manages pension and endowment accounts.

PRIMCO Capital Management, Inc., Louisville, Kentucky, specializes in

<PAGE>

managing stable return investments, principally on behalf of Section 401(k)
retirement plans.

INVESCO Realty Advisors, Inc., Dallas, Texas, is responsible for providing
advisory services in the U.S. real estate markets for AMVESCAP PLC's clients
worldwide. Clients include corporate pension plans and public pension funds
as well as endowment and foundation accounts.

INVESCO (NY), Inc., New York, is an investment adviser for separately
managed accounts, such as corporate and municipal pension plans,
Taft-Hartley Plans, insurance companies, charitable institutions and
private individuals. INVESCO NY further serves as investment adviser to
several closed-end investment companies, and as sub-adviser with respect to
certain commingled employee benefit trusts.

A I M Advisors, Inc., Houston, Texas, provides investment advisory and
administrative services for retail and institutional mutual funds.

A I M Capital Management, Inc., Houston, Texas provides investment
advisory services to individuals, corporations, pension plans and other
private investment advisory accounts and also serves as a sub-adviser 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, Houston, Texas are
registered broker-dealers that act as the principal underwriters for retail
and institutional mutual funds.

The corporate headquarters of AMVESCAP PLC are located at 11 Devonshire Square,
London, EC2M4YR, England.

THE INVESTMENT ADVISORY AGREEMENT

INVESCO serves as investment adviser to the Funds under an investment advisory
agreement dated February 28, 1997 (the "Agreement") with the Company.

The Agreement requires that INVESCO manage the investment portfolio of each Fund
in a way that conforms with each Fund's investment policies. INVESCO may
directly manage a Fund itself, or may hire a sub-adviser, which may be an
affiliate of INVESCO, to do so. Specifically, INVESCO is responsible for:

o managing the investment and reinvestment of all the assets of the Funds,
and executing all purchases and sales of portfolio securities;

o maintaining a continuous investment program for the Funds, consistent with
(i) each Fund's investment policies as set forth in the Company's 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

<PAGE>

the Funds, 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;

o determining what securities are to be purchased or sold for the Funds,
unless otherwise directed by the directors of the Company, and executing
transactions accordingly;

o providing the Funds the benefit of all of the investment analysis and
research, the reviews of current economic conditions and trends, and the
consideration of a long-range investment policy now or hereafter generally
available to the investment advisory customers of the Adviser or any
Sub-Adviser;

o determining what portion of each Fund's assets should be invested in the
various types of securities authorized for purchase by the Fund; and

o making recommendations as to the manner in which voting rights, rights to
consent to Fund action and any other rights pertaining to a Fund's
portfolio securities shall be exercised.

INVESCO also performs all of the following services for the Funds:

o administrative

o internal accounting (including computation of net asset value)

o clerical and statistical

o secretarial

o all other services necessary or incidental to the administration of the
affairs of the Funds

o supplying the Company with officers, clerical staff and other employees

o furnishing office space, facilities, equipment, and supplies; providing
personnel and facilities required to respond to inquiries related to
shareholder accounts

o 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 or in conjunction with
independent attorneys and accountants (including the prospectus, statement
of additional information, proxy statements, shareholder reports, tax
returns, reports to the SEC, and other corporate documents of the Funds)

o supplying basic telephone service and other utilities

o preparing and maintaining certain of the books and records required to be
prepared and maintained by the Funds under the 1940 Act
<PAGE>

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 from each
Fund. The fee is calculated at the annual rate of:

Equity Income and Total Return Funds

o 0.75% on the first $500 million of each Fund's average net assets;

o 0.65% on the next $500 million of each Fund's average net assets;

o 0.55% of each Fund's average net assets in excess of $1 billion;

o 0.45% of each Fund's average net assets in excess of $2 billion;

o 0.40% of each Fund's average net assets in excess of $4 billion;

o 0.375% of each Fund's average net assets in excess of $6 billion; and

o 0.35% of each Fund's average net assets in excess of $8 billion.

High Yield and Utilities Funds

o 0.60% on the first $500 million of each Fund's average net assets;

o 0.55% on the next $500 million of each Fund's average net assets;

o 0.45% of each Fund's average net assets in excess of $1 billion;

o 0.40% of each Fund's average net assets in excess of $4 billion;

o 0.375% of each Fund's average net assets in excess of $6 billion; and

o 0.35% of each Fund's average net assets in excess of $8 billion.

Small Company Growth, Health Sciences and Technology Funds

o 0.75% on the first $350 million of each Fund's average net assets;

o 0.65% on the next $350 million of each Fund's average net assets;

o 0.55% of each Fund's average net assets in excess of $700 million;

o 0.45% of each Fund's average net assets in excess of $2 billion;

o 0.40% of each Fund's average net assets in excess of $4 billion;

<PAGE>

o 0.375% of each Fund's average net assets in excess of $6 billion; and

o 0.35% of each Fund's average net assetes in excess of $8 billion.

Dynamics Fund

o 0.75% on the first $1 billion of the Fund's average net assets;

o 0.60% on the next $1 billion of the Fund's average net assets;

o 0.45% of the Fund's average net assets in excess of $2 billion;

o 0.40% of the Fund's average net assets in excess of $4 billion;

o 0.375% of the Fund's average net assets in excess of $6 billion; and

o 0.35% of the Fund's average net assets in excess of $8 billion;

Blue Chip Growth Fund

o 0.85% on the first $500 million of the Fund's average net assets;

o 0.75% on the next $500 million of the Fund's average net assets;

o 0.65% of the Fund's average net assets in excess of $1 billion;

o 0.45% of the Fund's average net assets in excess of $2 billion;

o 0.40% of the Fund's average net assets in excess of $4 billion;

o 0.375% of the Fund's average net assets in excess of $6 billion; and

o 0.35% of the Fund's average net assets in excess of $8 billion.

Realty Fund

o 0.90% on the first $500 million of the Fund's average net assets;

o 0.75% on the next $500 million of the Fund's average net assets;

o 0.65% of the Fund's average net assets in excess of $1 billion;

o 0.45% of the Fund's average net assets in excess of $2 billion;

o 0.40% of the Fund's average net assets in excess of $4 billion;

<PAGE>

o 0.375% of the Fund's average net assets in excess of $6 billion; and

o 0.35% of the Fund's average net assets in excess of $8 billion.

Financial Services, Market Neutral Equity and Telecommunications Funds

o 0.75% of each Fund's average net assets;

During the fiscal years ended December 31, 1998, 1997 and 1996, the Funds paid
INVESCO advisory fees in the dollar amounts shown below. If applicable, the fees
were offset by credits in the amounts shown below, so that INVESCO's fees were
not in excess of the expense limitations shown below, which have been
voluntarily agreed to by the Company and INVESCO.

Advisory Total Expense Total Expense
Fee Dollars Reimbursements Limitations
----------- -------------- -------------
Blue Chip Growth Fund
1998 $ 2,589 $32,023 1.50%
1997 781 26,170 1.25%
1996 N/A N/A N/A

Dynamics Fund
1998 1,652 $36,773 1.15%
1997 554 31,429 0.90%
1996 N/A N/A N/A

Equity Income Fund
1998 $377,741 $ 245 1.15%
1997 223,880 16,285 0.90%
1996 105,932 34,295 0.90%

Health Sciences Fund
1998 $ 9,945 $39,165 1.25%
1997 1,191 33,488 1.00%
1996 N/A N/A N/A

High Yield Fund
1998 $224,864 $ 0 1.05%
1997 117,624 20,919 0.80%
1996 50,693 38,708 0.80%

Realty Fund
1998 $ 2,558 $18,881 1.35%
1997 N/A N/A N/A
1996 N/A N/A N/A

<PAGE>

Small Company Growth Fund
1998 $ 2,726 $39,139 1.25%
1997 684 32,621 1.00%
1996 N/A N/A N/A

Technology Fund
1998 $ 5,670 $38,752 1.25%
1997 1,318 33,352 1.00%
1996 N/A N/A N/A

Total Return Fund
1998 $219,888 $ 196 1.15%
1997 126,159 30,247 0.90%
1996 77,890 37,492 0.90%

Utilities Fund
1998 $ 32,195 $28,048 1.15%
1997 19,549 35,201 0.90%
1996 5,716 39,955 0.90%

Financial Services, Market Neutral Equity and Telecommunications Funds did
not commence operations until August 31, 1999, and thus paid no advisory fees in
the periods shown above.

THE SUB-ADVISORY AGREEMENT

With respect to Market Neutral Equity Fund, INVESCO (NY), Inc. ("INY") serves as
sub-adviser to Market Neutral Equity Fund pursuant to a sub-advisory agreement
dated August 30, 1999 (the "Market Neutral Equity Sub-Agreement") with INVESCO.

With respect to Realty Fund, INVESCO Realty Advisors, Inc. ("IRAI") serves as
sub-adviser to Realty Fund pursuant to a sub-advisory agreement dated February
28, 1997 (the " Realty Sub-Agreement") with INVESCO.

With respect to Total Return Fund, INVESCO Capital Management ("ICM") serves as
sub-adviser to Total Return Fund pursuant to a sub-advisory agreement dated
February 28, 1997 (the "Total Return Sub-Agreement") with INVESCO.

The Sub-Agreements provide that INY, IRAI and ICM, as applicable, subject to the
supervision of INVESCO, shall manage the investment portfolios of Market Neutral
Equity , Realty and Total Return Funds in conformity with each Fund's investment
policies. These management services include: (a) managing the investment and
reinvestment of all the assets, now or hereafter acquired, of each Fund, and
executing all purchases and sales of portfolio securities; (b) maintaining a
continuous investment program for the Funds, consistent with (i) each Fund's
investment policies as set forth in the Company's Articles of Incorporation,

<PAGE>

Bylaws and Registration Statement, as from time to time amended, under the 1940
Act, as amended, 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 each Fund, unless otherwise directed by the
directors of the Company or INVESCO, and executing transactions accordingly; (d)
providing the Funds the benefit of all of the investment analysis and research,
the reviews of current economic conditions and trends, and the consideration of
long-range investment policy now or hereafter generally available to investment
advisory customers of INY, IRAI or ICM; (e) determining what portion of each
applicable Fund's assets should be invested in the various types of securities
authorized for purchase by such 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 each applicable Fund shall be
exercised.

The Sub-Agreements provide that, as compensation for their services, INY, IRAI
and ICM shall receive from INVESCO, at the end of each month, a fee based upon
the average daily value of the applicable Fund's net assets. With respect to
Market Neutral Equity Fund, the fee is calculated at the annual rate of 0.30% of
the Fund's average net assets. With respect to Realty Fund, the fee is
calculated at the following annual rates: prior to January 1, 1998, 0.30% on the
first $500 million of the Fund's average net assets; 0.25% on the next $500
million of the Fund's average net assets; and 0.2167% on the Fund's average net
assets in excess of $1 billion; and effective January 1, 1998, 0.36% on the
first $500 million; 0.30% on the next $500 million and 0.26% on the Fund's net
assets in excess of $1 billion. In addition, effective May 13, 1999, the
following additional contractual breakpoints are in effect: 0.18% on the Fund's
average net assets from $2 billion; 0.16% on the Fund's average net assets from
$4 billion, 0.15% on the Fund's average net assets from $6 billion, 0.14% on the
Fund's average net assets from $8 billion. With respect to Total Return Fund,
the fee is computed at the following annual rates: prior to January 1, 1998,
0.25% on the first $500 million of the Fund's average net assets; 0.2167% on the
next $500 million of the Fund's average net assets; and 0.1833% on the Fund's
average net assets in excess of $1 billion; and effective January 1, 1998, 0.30%
on the first $500 million; 0.26% on the next $500 million and 0.22% on the
Fund's average net assets in excess of $1 billion. In addition, effective May
13, 1999, the following additional contractual breakpoints are in effect: 0.18%
on the Fund's average net assets from $2 billion; 0.16% on the Fund's average
net assets from $4 billion, 0.15% on the Fund's average net assets from $6
billion, 0.14% on the Fund's average net assets from $8 billion. The
sub-advisory fees are paid by INVESCO, not the Funds.

ADMINISTRATIVE SERVICES AGREEMENT

INVESCO, either directly or through affiliated companies, provides certain
administrative, sub-accounting, and recordkeeping services to the Funds pursuant
to an Administrative Services Agreement.

<PAGE>

The Administrative Services Agreement requires INVESCO to provide the following
services to the Funds:

o such sub-accounting and recordkeeping services and functions as are
reasonably necessary for the operation of the Funds; and

o such sub-accounting, recordkeeping, and administrative services and
functions, which may be provided by affiliates of INVESCO, as are
reasonably necessary for the operation of Fund shareholder accounts
maintained by certain retirement plans and employee benefit plans for the
benefit of participants in such plans.

As full compensation for services provided under the Administrative Services
Agreement, each Fund pays a monthly fee to INVESCO consisting of a base fee per
Fund of $10,000 per year, plus an additional incremental fee computed daily and
paid monthly by each Fund, at an annual rate of 0.015% of the average net assets
of each Fund, plus an additional 0.25% per year of new assets acquired after
July 8, 1998.

TRANSFER AGENCY AGREEMENT

INVESCO also performs transfer agent, dividend disbursing agent, and registrar
services for the Funds pursuant to a Transfer Agency Agreement.

The Transfer Agency Agreement provides that each Fund pay INVESCO an annual fee
of $5,000. This fee is paid monthly at the rate of 1/12 of the annual fee.

FEES PAID TO INVESCO

For the fiscal years ended December 31, 1998, 1997 and 1996, the Funds paid the
following fees to INVESCO (prior to the voluntary absorption of certain Fund
expenses by INVESCO):

BLUE CHIP GROWTH FUND

TYPE OF FEE 1998 1997 1996
- ----------- ---- ---- ----
Advisory $ 2,589 $ 781 N/A
Administrative Services 10,047 6,680 N/A
Transfer Agency 5,000 3,333 N/A

DYNAMICS FUND

TYPE OF FEE 1998 1997 1996
- ----------- ---- ---- ----
Advisory $ 1,652 $ 554 N/A
Administrative Services 10,042 10,014 N/A
Transfer Agency 5,000 5,000 N/A

<PAGE>

EQUITY INCOME FUND

TYPE OF FEE 1998 1997 1996
- ----------- ---- ---- ----
Advisory $ 377,741 $223,880 $105,932
Administrative Services 25,519 14,478 12,119
Transfer Agency 5,000 5,000 5,000

HEALTH SCIENCES FUND

TYPE OF FEE 1998 1997 1996
- ------------ ---- ----- ----
Advisory $ 9,945 $ 1,191 N/A
Administrative Services 11,874 10,024 N/A
Transfer Agency 5,000 5,000 N/A

HIGH YIELD FUND

TYPE OF FEE 1998 1997 1996
- ----------- ---- ---- ----
Advisory $ 224,864 $117,624 $ 50,693
Administrative Services 26,312 12,941 11,267
Transfer Agency 5,000 5,000 5,000

REALTY FUND

TYPE OF FEE 1998 1997 1996
- ----------- ---- ---- -----
Advisory $ 2,558 N/A N/A
Administrative Services 7,669 N/A N/A
Transfer Agency 3,750 N/A N/A

SMALL COMPANY GROWTH FUND

TYPE OF FEE 1998 1997 1996
- ----------- ---- ---- ----
Advisory $ 2,726 $ 684 N/A
Administrative Services 10,192 10,014 N/A
Transfer Agency 5,000 5,000 N/A

TECHNOLOGY FUND

TYPE OF FEE 1998 1997 1996
- ----------- ---- ---- ----
Advisory $ 5,670 $ 1,318 N/A
Administrative Services 11,005 10,026 N/A
Transfer Agency 5,000 5,000 N/A

<PAGE>

TOTAL RETURN FUND

TYPE OF FEE 1998 1997 1996
- ----------- ---- ---- ----
Advisory $219,888 $126,159 $ 77,890
Administrative Services 19,501 12,534 11,558
Transfer Agency 5,000 5,000 5,000

UTILITIES FUND

TYPE OF FEE 1998 1997 1996
- ----------- ---- ---- ----
Advisory $ 5,716 $19,549 $5,716
Administrative Services 11,535 10,489 10,143
Transfer Agency 5,000 5,000 5,000

Financial Services, Market Neutral Equity and Telecommunications Funds did not
commence operations until August 31, 1999, and thus paid no fees to INVESCO in
the periods shown above.

DIRECTORS AND OFFICERS OF THE COMPANY

The overall direction and supervision of the Company come from the board of
directors. The board of directors is responsible for making sure that the Funds'
general investment policies and programs are carried out and that the Funds are
properly administered.

The board of directors has an audit committee comprised of four of the directors
who are not affiliated with INVESCO (the "Independent Directors"). The committee
meets quarterly with the Company's independent accountants and officers to
review accounting principles used by the Company, the adequacy of internal
controls, the responsibilities and fees of the independent accountants, and
other matters.

The Company has a management liaison committee which meets quarterly with
various management personnel of INVESCO in order to facilitate better
understanding of management and operations of the Company, and 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.

The Company has a soft dollar brokerage committee. The committee meets
periodically to review soft dollar and other brokerage transactions by the
Funds, and to review policies and procedures of INVESCO with respect to
brokerage transactions. It reports on these matters to the Company's board of
directors.

The Company has a derivatives committee. The committee meets periodically to
review derivatives investments made by the Funds. It monitors derivatives usage
by the Funds and the procedures utilized by INVESCO to ensure that the use of
such instruments follows the policies on such instruments adopted by the
Company's board of directors. It reports on these matters to the Company's board
of directors.

<PAGE>

The officers of the Company, all of whom are officers and employees of INVESCO,
are responsible for the day-to-day administration of the Company and the Funds.
The officers of the Company receive no direct compensation from the Company or
the Funds for their services as officers. INVESCO 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
the following funds, which, with the Company, are collectively referred to as
the "INVESCO Funds":

INVESCO Bond Funds, Inc. (formerly, INVESCO Income Funds, Inc.)
INVESCO Combination Stock & Bond Funds, Inc. (formerly, INVESCO Flexible
Funds, Inc.)
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Sector Funds, Inc. (formerly, INVESCO Strategic Portfolios, Inc.)
INVESCO Specialty Funds, Inc.
INVESCO Stock Funds, Inc. (formerly, INVESCO Equity Funds, Inc.)
INVESCO Treasurer's Series Funds, Inc. (formerly, INVESCO Treasurer's
Series Trust)
INVESCO Variable Investment Funds, Inc.

The table below provides information about each of the Company's directors and
officers. Unless otherwise indicated, the address of the directors and officers
is P.O. Box 173706, Denver, CO 80217-3706 . Their affiliations represent their
principal occupations.

<PAGE>

Position(s) Held Principal Occupation(s)
Name, Address, and Age With Company During Past Five Years

Charles W. Brady *+ Director and Chairman of the Board of
1315 Peachtree St., N.E. Chairman of the Board INVESCO Global Health
Atlanta, Georgia Sciences Fund; Chief
Age: 64 Executive Officer and
Director of AMVESCAP PLC,
London, England and
various subsidiaries of
AMVESCAP PLC.

Fred A. Deering +# Director and Vice Trustee of INVESCO Global
Security Life Center Chairman of the Board Health Sciences Fund;
1290 Broadway formerly, Chairman of the
Denver, Colorado Executive Committee and
Age: 71 Chairman of the Board of
Security Life of Denver
Insurance Company;
Director of ING American
Holdings Company and
First ING Life Insurance
Company of New York.

Mark H. Williamson *+ President, Chief President, Chief
7800 E. Union Avenue Exec utive Officer Executive Officer and
Denver, Colorado and Director Director of INVESCO
Age: 48 Distributors, Inc.;
President, Chief
Executive Officer and
Director of INVESCO Funds
Group, Inc.; President,
Chief Operating Officer
and Trustee of INVESCO
Global Health Sciences
Fund; formerly, Chairman
and Chief Executive
Officer of NationsBanc
Advisors, Inc.; formerly,
Chairman of NationsBanc
Investments, Inc.

<PAGE>

Position(s) Held Principal Occupation(s)
Name, Address, and Age With Company During Past Five Years

Victor L. Andrews, Ph.D. Director Professor Emeritus, Chair
**! 34 Seawatch Drive man Emeritus and Chairman
Savannah, Georgia of the CFO Roundtable of
Age: 69 the Department of Finance
of Georgia State
University; President,
Andrews Financial
Associates, Inc.
(consulting firm);
formerly, member of the
faculties of the Harvard
Business School and the
Sloan School of
Management of MIT;
Director of The Sheffield
Funds, Inc.

Bob R. Baker +** AMC Director President and Chief
Cancer Research Center Executive Officer of AMC
1600 Pierce Street Cancer Research Center,
Denver, Colorado Denver, Colorado, since
Age: 62 January 1989; until
mid-December 1988, Vice
Chairman of the Board of
First Columbia Financial
Corporation, Englewood,
Colorado; formerly,
Chairman of the Board and
Chief Executive Officer
of First Columbia
Financial Corporation.

Lawrence H. Budner # @ Director Trust Consultant; prior
7608 Glen Albens Circle to June 30, 1987, Senior
Dallas, Texas Vice President and Senior
Age: 69 Trust Officer of
InterFirst Bank, Dallas,
Texas.

<PAGE>

Position(s) Held Principal Occupation(s)
Name, Address, and Age With Company During Past Five Years

Wendy L. Gramm, Ph.D.**! Director Self-employed (since
4201 Yuma Street, N.W. 1993); Professor of
Washington, DC Economics and Public
Age: 54 Administration,
University of Texas at
Arlington; formerly,
Chairman, Commodity
Futures Trading
Commission; Administrator
for Information and
Regulatory Affairs at the
Office of Management and
Budget; Executive
Director of the
Presidential Task Force
on Regulatory Relief; and
Director of the Federal
Trade Commission's Bureau
of Economics; also,
Director of Chicago
Mercantile Exchange,
Enron Corporation, IBP,
Inc., State Farm
Insurance Company,
Independent Women's
Forum, International
Republic Institute, and
the Republican Women's
Federal Forum. Also,
Member of Board of
Visitors, College of
Business Administration,
University of Iowa, and
Member of Board of
Visitors, Center for
Study of Public Choice,
George Mason University.

<PAGE>

Position(s) Held Principal Occupation(s)
Name, Address, and Age With Company During Past Five Years

Kenneth T. King +#@ Director Retired. Formerly,
4080 North Circulo Chairman of the Board of
Manzanillo The Capitol Life
Tucson, Arizona Insurance Company,
Age: 73 Providence Washington
Insurance Company and
Director of numerous U.S.
subsidiaries thereof;
formerly, Chairman of the
Board of The Providence
Capitol Companies in the
United Kingdom and
Guernsey; Chairman of the
Board of the Symbion
Corporation until 1987.

John W. McIntyre + #@ Director Retired. Formerly, Vice
7 Piedmont Center Chairman of the Board of
Suite 100 Directors of the Citizens
Atlanta, Georgia and Southern Corporation
Age: 68 and Chairman of the Board
and Chief Executive
Officer of the Citizens
and Southern Georgia
Corp. and the Citizens
and Southern National
Bank; Trustee of INVESCO
Global Health Sciences
Fund, Gables Residential
Trust, Employee's
Retirement System of GA,
Emory University and J.M.
Tull Charitable
Foundation; Director of
Kaiser Foundation Health
Plans of Georgia, Inc.

<PAGE>

Position(s) Held Principal Occupation(s)
Name, Address, and Age With Company During Past Five Years

Larry Soll, Ph.D.!** Director Retired. Formerly,
345 Poorman Road Chairman of the Board
Boulder, Colorado (1987 to 1994), Chief
Age: 57 Executive Officer (1982
to 1989 and 1993 to 1994)
and President (1982 to
1989) of Synergen Inc.;
Director of Synergen
since incorporation in
1982; Director of Isis
Pharmaceuticals, Inc.;
Trustee of INVESCO Global
Health Sciences Fund.

Glen A. Payne Secretary Senior Vice President,
7800 E. Union Avenue General Counsel and
Denver, Colorado Secretary of INVESCO
Age: 51 Funds Group, Inc.; Senior
Vice President, Secretary
and General Counsel of
INVESCO Distributors,
Inc.; Secretary, INVESCO
Global Health Sciences
Fund; formerly, General
Counsel of INVESCO Trust
Company (1989 to 1998);
formerly, employee of a
U.S. regulatory agency,
Washington, D.C. (1973 to
1989).

<PAGE>

Position(s) Held Principal Occupation(s)
Name, Address, and Age With Company During Past Five Years

Ronald L. Grooms Chief Accounting Senior Vice President and
7800 E. Union Avenue Officer, Chief Treasurer of INVESCO
Denver, Colorado Financial Officer Funds Group, Inc.; Senior
Age: 52 and Treasurer Vice President and
Treasurer of INVESCO
Distributors, Inc.;
Treasurer, Principal
Financial and Accounting
Officer of INVESCO Global
Health Sciences Fund;
formerly, Senior Vice
President and Treasurer
of INVESCO Trust Company
(1988 to 1998).

William J. Galvin, Jr. Assistant Secretary Senior Vice President of
7800 E. Union Avenue INVESCO Funds Group,
Denver, Colorado Inc.; Senior Vice
Age: 42 President of INVESCO
Distributors, Inc.;
formerly, Trust Officer
of INVESCO Trust Company.

Pamela J. Piro Assistant Treasurer Vice President of INVESCO
7800 E. Union Avenue Funds Group, Inc.;
Denver, Colorado formerly, Assistant Vice
Age: 39 President (1996 to 1997),
Director - Portfolio
Accounting (1994 to
1996), Portfolio Account
ing Manager (1993 to
1994) and Assistant
Accounting Manager (1990
to 1993).

Alan I. Watson Assistant Secretary Vice President of INVESCO
7800 E. Union Avenue Funds Group, Inc.;
Denver, Colorado formerly, Trust Officer
Age: 57 of INVESCO Trust Company.

<PAGE>

Position(s) Held Principal Occupation(s)
Name, Address, and Age With Company During Past Five Years

Judy P. Wiese Assistant Secretary Vice President of INVESCO
7800 E. Union Avenue Funds Group, Inc.;
Denver, Colorado formerly, Trust Officer
Age: 51 of INVESCO Trust Company.

# Member of the audit committee of the Company.

+ Member of the executive committee of the Company. 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 1940
Act.

**Member of the management liaison committee of the Company.

@ Member of the soft dollar brokerage committee of the Company.

! Member of the derivatives committee of the Company.

The following table shows the compensation paid by the Company to its
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, all for the fiscal year ended December 31, 1998.

In addition, the table sets forth the total compensation paid by all of the
INVESCO Funds and INVESCO 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, 1998. As of December
31, 1998, there were 53 funds in the INVESCO Complex.

<PAGE>

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Name of Person Aggregate Benefits Accrued Estimated Annual Total Compensation
and Position Compensation As Part of Benefits Upon From INVESCO Complex
From Company(1) Company Expenses(2) Retirement(3) Paid To Directors(6)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fred A. Deering, $ 8,748 $ 386 $ 261 $ 103,700
Vice Chairman of
the Board
- ---------------------------------------------------------------------------------------------------------------
Victor L. Andrews 8,714 369 287 80,350
- ---------------------------------------------------------------------------------------------------------------
Bob R. Baker 8,738 330 385 84,000
- ---------------------------------------------------------------------------------------------------------------
Lawrence H. Budner 8,708 369 287 79,350
- ---------------------------------------------------------------------------------------------------------------
Daniel D. Chabris(4) 6,437 377 236 70,000
- ---------------------------------------------------------------------------------------------------------------
Wendy L. Gramm 8,705 0 0 79,000
- ---------------------------------------------------------------------------------------------------------------
Kenneth T. King 8,697 394 236 77,050
- ---------------------------------------------------------------------------------------------------------------
John W. McIntyr 8,709 0 0 98,500
- ---------------------------------------------------------------------------------------------------------------
Larry Soll 8,699 0 0 96,000
- ---------------------------------------------------------------------------------------------------------------
Total 76,155 2,225 1,692 767,950
- ---------------------------------------------------------------------------------------------------------------
% of Net Assets 0.0505%(5) 0.0015%(5) 0.0035%(6)
- ---------------------------------------------------------------------------------------------------------------
</TABLE>

[FN]
(1) The vice chairman of the board, the chairmen of the Funds' committees who
are Independent Directors and the members of the Funds' committees who are
Independent Directors, 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 amounts represent the Company's share of the estimated annual benefits
payable by the INVESCO Funds upon the directors' retirement, calculated using
the current method of allocating director compensation among the INVESCO Funds.
These estimated benefits assume retirement at age 72 and further assume that the
basic retainer payable to the directors will be adjusted periodically for
inflation, for increases in the number of funds in the INVESCO Funds, 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 Drs. Soll and
Gramm, each of these directors has served as a director of one or more of the

<PAGE>

funds in the INVESCO Funds for the minimum five-year period required to be
eligible to participate in the Defined Benefit Deferred Compensation Plan.
Although Mr. McIntyre became eligible to participate in the Defined Benefit
Deferred Compensation Plan as of November 1, 1998, he will not be included in
the calculation of retirement benefits until November 1, 1999.

(4) Mr. Chabris retired as a director of the Company on September 30, 1998.

(5) Totals as a percentage of the Company's net assets as of December 31, 1998.

(6) Total as a percentage of the net assets of the INVESCO Complex as of
December 31, 1998.
</FN>

Messrs. Brady and Williamson, as "interested persons" of the Company, and the
INVESCO Funds, 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 Funds for their
service as directors.

The boards of directors of the mutual funds in the INVESCO Funds have adopted a
Defined Benefit Deferred Compensation Plan (the "Plan") for the Independent
Directors of the funds. Under this Plan, each director who is not an interested
person of the funds (as defined in Section 2(a)(19) of the 1940 Act) and who has
served for at least five years (a "Qualified Director") is entitled to receive,
upon termination of service as a director (normally, at the retirement age of 72
or the retirement age of 73 or 74, if the retirement date is extended by the
boards for one or two years, but less than three years), continuation of payment
for one year (the "First Year Retirement Benefit") of the annual basic retainer
and annualized board meeting fees payable by the funds to the Qualified Director
at the time of his/her retirement (the "Basic Benefit"). Commencing with any
such director's second year of retirement, and commencing with the first year of
retirement of any director whose retirement has been extended by the board for
up to three years, a Qualified Director shall receive quarterly payments at an
annual rate equal to 50% of the Basic Benefit. These payments will continue for
the remainder of the Qualified Director's life or ten years, whichever is longer
(the "Reduced Benefit 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 Reduced Benefit Payments will be made to
him/her or to his/her beneficiary or estate. If a Qualified Director becomes
disabled or dies either prior to age 72 or during his/her 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 Benefit Payments will be made to
his/her beneficiary or estate. The Plan is administered by a committee of three
directors who are also participants in the Plan and one director who is not a
Plan participant. The cost of the Plan will be allocated among the INVESCO Funds
in a manner determined to be fair and equitable by the committee. The Company
began making payments under the Plan to Mr. Chabris as of October 1, 1998. The
Company has no stock options or other pension or retirement plans for management
or other personnel and pays no salary or compensation to any of its officers. A
similar plan has been adopted by INVESCO Global Health Sciences Fund's board of
trustees. All trustees of INVESCO Global Health Sciences Fund are also directors
of the INVESCO Funds.

<PAGE>

The Independent Directors have contributed to a deferred compensation plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of certain of the INVESCO
Funds. Certain of the deferred amounts have been invested in the shares of all
INVESCO Funds, except Funds offered by the Company in which the directors are
legally precluded from investing. Each Independent Director may, therefore, be
deemed to have an indirect interest in shares of each such INVESCO Fund, in
addition to any INVESCO Fund shares the Independent Director may own either
directly or beneficially.

CONTROL PERSONS AND PRINCIPAL SHAREHOLDER

As of July 31, 1999, the following persons owned more than 5% of the outstanding
shares of the Funds indicated below. This level of share ownership is considered
to be a "principal shareholder" relationship with a Fund under the 1940 Act.
Shares that are owned "of record" are held in the name of the person indicated.
Shares that are owned "beneficially" are held in another name, but the owner has
the full economic benefit of ownership of those shares:

Blue Chip Growth Fund

Dynamics Fund

<PAGE>

Equity Income Fund

- --------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage Owned
(Record/Beneficial)
================================================================================
Great-West Life & Annuity Record 40.55%
Unit Valuations 2T2
1475 Dunwoody Dr
West Chester, PA 19380-1478
- --------------------------------------------------------------------------------
Security Life Record 17.81%
Separate Account L1
Attn. Chris Smythe
Unit Valuations 2T2
1475 Dunwoody Dr
West Chester, PA 19380-1478
- --------------------------------------------------------------------------------
Security Life Record 12.26%
Separate Account A1
Attn. Chris Smythe
Unit Valuations 2T2
1475 Dunwoody Dr
West Chester, PA 19380-1478
- --------------------------------------------------------------------------------
Annuity Investors Life Record 7.85%
Insurance Company
250 East Fifth Street
Cincinnati, OH 45202-4119
- --------------------------------------------------------------------------------
Separate Account VA5 of
Transamerica Occidental Record 5.50%
Life Insurance Company
Attn. Variable Annuity Dept.
P.O. Box 33849
Charlotte, NC 28233-3849
- --------------------------------------------------------------------------------

<PAGE>

Financial Services Fund

- --------------------------------------------------------------------------------
None
- --------------------------------------------------------------------------------

Health Sciences Fund

High Yield Fund

<PAGE>

- --------------------------------------------------------------------------------
Conseco Variable Insurance Co. Record 8.90%
Attn. Separate Accounts C1B
11825 North Pennsylvania Street
Carmel, IN 46032-4555
- --------------------------------------------------------------------------------

Market Neutral Equity Fund

- --------------------------------------------------------------------------------
None
- --------------------------------------------------------------------------------

Realty Fund

<PAGE>

Small Company Growth Fund

Telecommunications Fund

- --------------------------------------------------------------------------------
None
- --------------------------------------------------------------------------------

Technology Fund

- --------------------------------------------------------------------------------

<PAGE>

Total Return Fund

- --------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage Owned
(Record/Beneficial)
================================================================================
Great-West Life & Annuity Record 36.14%
Unit Valuations 2T2
1475 Dunwoody Dr
West Chester, PA 19380-1478
- --------------------------------------------------------------------------------
Security Life Record 30.34%
Separate Account L1
Attn. Chris Smythe
Unit Valuations 2T2
1475 Dunwoody Dr
West Chester, PA 19380-1478
- --------------------------------------------------------------------------------
Security Life Record 18.84%
Separate Account A1
Attn. Chris Smythe
Unit Valuations 2T2
1475 Dunwoody Dr
West Chester, PA 19380-1478
- --------------------------------------------------------------------------------
Annuity Investors Life Record 8.97%
Insurance Company
250 East Fifth Street
Cincinnati, OH 45202-4119
- --------------------------------------------------------------------------------

<PAGE>

Utilities Fund

- --------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage Owned
(Record/Beneficial)
================================================================================
Security Life Record 48.10%
Separate Account A1
Attn. Chris Smythe
Unit Valuations 2T2
1475 Dunwoody Dr
West Chester, PA 19380-1478
- --------------------------------------------------------------------------------
Security Life Record 40.85%
Separate Account L1
Attn. Chris Smythe
Unit Valuations 2T2
1475 Dunwoody Dr
West Chester, PA 19380-1478
- --------------------------------------------------------------------------------
Southland Life Insurance Co. Record 6.47%
Southland Separate Account L1
Attn Dir Mkt Support Services
1475 Dunwoody Dr
West Chester, PA 19380-1478
- --------------------------------------------------------------------------------

As of August 10, 1999, the officers and directors of the Company, as a group,
beneficially owned 0% of any Fund's outstanding shares. Such officers and
directors are precluded by law from owning any Fund's shares.

DISTRIBUTOR

INVESCO Distributors, Inc. ("IDI"), a wholly owned subsidiary of INVESCO, is the
distributor of the Funds. IDI receives no compensation and bears all expenses,
including the cost of printing and distributing prospectuses, incident to
marketing of the Funds' shares.

OTHER SERVICE PROVIDERS

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP, 950 Seventeenth Street, Suite 2500, Denver,
Colorado, are the independent accountants of the Company. The independent
accountants are responsible for auditing the financial statements of the Funds.

<PAGE>

CUSTODIAN

State Street Bank and Trust Company, P.O. Box 351, Boston, Massachusetts, is the
custodian of the cash and investment securities of the Company. The custodian is
also responsible for, among other things, receipt and delivery of each Fund's
investment securities in accordance with procedures and conditions specified in
the custody agreement with the Company. The custodian is authorized to establish
separate accounts in foreign countries and to cause foreign securities owned by
the Funds to be held outside the United States in branches of U.S. banks and, to
the extent permitted by applicable regulations, in certain foreign banks and
securities depositories.

TRANSFER AGENT

INVESCO, 7800 E. Union Avenue, Denver, Colorado, is the Company's transfer
agent, registrar, and dividend disbursing agent. Services provided by INVESCO
include the issuance, cancellation and transfer of shares of the Funds, and the
maintenance of records regarding the ownership of such shares.

LEGAL COUNSEL

The firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., 2nd
Floor, Washington, D.C., is legal counsel for the Company. The firm of Moye,
Giles, O'Keefe, Vermeire & Gorrell LLP, 1225 17th Street, Suite 2900, Denver,
Colorado, acts as special counsel to the Company.

BROKERAGE ALLOCATION AND OTHER PRACTICES

As the investment adviser to the Funds, INVESCO places orders for the purchase
and sale of securities with broker-dealers based upon an evaluation of the
financial responsibility of the broker-dealers and the ability of the
broker-dealers to effect transactions at the best available prices.

While INVESCO seeks reasonably competitive commission rates, the Funds do not
necessarily pay the lowest commission or spread available. INVESCO is permitted
to, and does, consider qualitative factors in addition to price in the selection
of brokers. Among other things, INVESCO considers the quality of executions
obtained on a 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. INVESCO has found that a broker's
consistent ability to execute transactions is at least as important as the price
the broker charges for those services.

In seeking to ensure that the commissions charged a Fund are consistent with
prevailing and reasonable commissions, INVESCO monitors brokerage industry
practices and commissions charged by broker-dealers on transactions effected for
other institutional investors like the Funds.

Consistent with the standard of seeking to obtain favorable execution on
portfolio transactions, INVESCO may select brokers that provide research
services to INVESCO and the Company, as well as other INVESCO mutual funds and
other accounts managed by INVESCO. Research services include statistical and
analytical reports relating to issuers, industries, securities and economic
factors and trends, which may be of assistance or value to INVESCO in making
informed investment decisions. Research services prepared and furnished by

<PAGE>

brokers through which a Fund effects securities transactions may be used by
INVESCO in servicing all of its accounts and not all such services may be used
by INVESCO in connection with a particular Fund. Conversely, a Fund receives
benefits of research acquired through the brokerage transactions of other
clients of INVESCO.

In order to obtain reliable trade execution and research services, INVESCO may
utilize brokers that charge higher commissions than other brokers would charge
for the same transaction. This practice is known as "paying up." However, even
when paying up, INVESCO is obligated to obtain favorable execution of a Fund's
transactions.

Portfolio transactions also may be effected through broker-dealers that
recommend the Funds to their clients, or that act as agent in the purchase of a
Fund's shares for their clients. When a number of broker-dealers can provide
comparable best price and execution on a particular transaction, INVESCO may
consider the sale of a Fund's shares by a broker-dealer in selecting among
qualified broker-dealers.

Market Neutral Equity Fund depends upon a prime broker for a variety of services
related to its short sales. If the prime broker becomes insolvent, there will be
delays in enforcing the Fund's rights, which may subject the Fund to additional
losses. Certain of these losses may be covered by insurance.

The aggregate dollar amount of brokerage commissions paid by each Fund for the
fiscal years ended December 31, 1998, 1997 and 1996 were:

Name of Fund 1998 1997 1996
- ------------ ---- ---- ----

Blue Chip Growth Fund $ 1,746 $ 267 N/A

Dynamics Fund 574 335 N/A

Equity Income Fund 278,819 239,249 151,867

Financial Services Fund N/A N/A N/A

Health Sciences Fund 5,650 563 N/A

High Yield Fund 178,000 143,282 114,443

Market Neutral Equity Fund N/A N/A N/A

Realty Fund 179 N/A N/A

Small Company Growth Fund 4,907 712 N/A

Technology Fund 14,920 5,012 N/A

<PAGE>

Telecommunications Fund N/A N/A N/A

Total Return Fund 484 6,797 7,686

Utilities Fund 9,136 13,372 9,953

For the fiscal year ended December 31, 1998, brokers providing research services
received $83,245 in commissions on portfolio transactions effected for the
Funds. The aggregate dollar amount of such portfolio transactions was
$51,987,166. Commissions totaling $78 were allocated to certain brokers in
recognition of their sales of shares of the Funds on portfolio transactions of
the Funds effected during the fiscal year ended December 31, 1998.

At December 31, 1998, each Fund held debt and/or equity securities of its
regular brokers or dealers, or their parents, as follows:

- --------------------------------------------------------------------------------
Fund Broker or Dealer Value of Securities
================================================================================
Blue Chip Growth State Street Capital $3,000
Markets
- --------------------------------------------------------------------------------
Dynamics State Street Capital $3,000
Markets
- --------------------------------------------------------------------------------
Equity Income State Street Capital $3,159,000
Markets
Chase Securities $653,000
- --------------------------------------------------------------------------------
Financial Services N/A N/A
- --------------------------------------------------------------------------------
Health Sciences State Street Capital $337,000
Markets
- --------------------------------------------------------------------------------
High Yield State Street Capital $1,883,000
Markets
- --------------------------------------------------------------------------------
Market Neutral Equity N/A N/A
- --------------------------------------------------------------------------------
Realty N/A N/A
- --------------------------------------------------------------------------------
Small Company Growth State Street Capital $216,000
Markets
- --------------------------------------------------------------------------------
Technology State Street Capital $206,000
Markets
- --------------------------------------------------------------------------------
Telecommunications N/A N/A
- --------------------------------------------------------------------------------

<PAGE>

- --------------------------------------------------------------------------------
Fund Broker or Dealer Value of Securities
at December 31, 1998
================================================================================
Total Return State Street Capital $3,474,000
Markets
Morgan Stanley & Co., $223,000
Inc.
NationsBanc/Montgomery $105,000
Securities
- --------------------------------------------------------------------------------
Utilities State Street Capital $857,000
Markets
- --------------------------------------------------------------------------------

Neither INVESCO nor any affiliate of INVESCO receives any brokerage commissions
on portfolio transactions effected on behalf of the Funds, and there is no
affiliation between INVESCO or any person affiliated with INVESCO or the Funds
and any broker-dealer that executes transactions for the Funds.

CAPITAL STOCK

The Company is authorized to issue up to one billion five hundred million shares
of common stock with a par value of $0.01 per share. As of July 31, 1999, the
following shares of each Fund were outstanding:

Blue Chip Growth Fund 28,142
Dynamics Fund 27,875
Equity Income Fund 3,539,585
Financial Services Fund N/A
Health Sciences Fund 144,166
High Yield Fund 4,179,725
Marke Neutral Equity Fund N/A
Realty Fund 71,110
Small Company Growth Fund 178,123
Technology Fund 206,925
Telecommunications Fund N/A
Total Return Fund 1,769,553
Utilities Fund 468,024

All shares of each Fund are of one class with equal rights as to voting,
dividends and liquidation. All shares issued and outstanding are, and all shares
offered hereby, when issued will be fully paid and nonassessable. The board of
directors has the authority to designate additional classes of common stock
without seeking the approval of shareholders and may classify and reclassify any
authorized but unissued shares.

<PAGE>

Shares have no preemptive rights and are freely transferable on the books of
each Fund.

All shares of the Company have equal voting rights based on one vote for each
share owned. The Company is not generally required, and does not expect, to hold
regular annual meetings of shareholders. However, when requested to do so in
writing by the holders of 10% or more of the outstanding shares of the Company
or as may be required by applicable law or the Company's Articles of
Incorporation, the board of directors will call special meetings of
shareholders.

Directors may be removed by action of the holders of a majority of the
outstanding shares of the Company. The Funds will assist shareholders in
communicating with other shareholders as required by the 1940 Act.

Fund shares have noncumulative voting rights, which means that the holders of a
majority of the shares of the Company voting for the election of directors of
the Company can elect 100% of the directors if they choose to do so. If that
occurs, the holders of the remaining shares voting for the election of directors
will not be able to elect any person or persons to the board of directors.
Directors may be removed by action of the holders of a majority of the
outstanding shares of the Company.

TAX CONSEQUENCES OF OWNING SHARES OF A FUND

Each Fund intends to continue to conduct its business and satisfy the applicable
diversification of assets, distribution and source of income requirements to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. Each Fund qualified as a regulated investment
company, and intends to continue to qualify during its current fiscal year. It
is the policy of each Fund to distribute all investment company taxable income
and net capital gains. As a result of this policy and the Funds' qualification
as regulated investment companies, it is anticipated that none of the Funds will
pay federal income or excise taxes and that all of the Funds will be accorded
conduit or "pass through" treatment for federal income tax purposes. Therefore,
any taxes that a Fund would ordinarily owe are paid by its shareholders on a
pro-rata basis. If a Fund does not distribute all of its net investment income
or net capital gains, it will be subject to income tax on the amount that is not
distributed. If a Fund does not qualify as a regulated investment company, it
will be subject to corporate tax on its net investment income and net capital
gains at the corporate tax rates.

If it invests in foreign securities, a Fund may be subject to the withholding of
foreign taxes on dividends or interest it receives on foreign securities.
Foreign taxes withheld will be treated as an expense of the Fund unless the Fund
meets the qualifications and makes the election to enable it to pass these taxes
through to shareholders for use by them as a foreign tax credit or deduction.
Tax conventions between certain countries and the United States may reduce or
eliminate such taxes.

<PAGE>

Certain Funds may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation that, in general, meets either of the
following tests: (1) at least 75% of its gross income is passive or (2) an
average value of at least 50% of its assets produce, or are held for the
production of, passive income. Each Fund intends to "mark to market" its stock
in any PFIC. In this context, "marking to market" means including in ordinary
income for each taxable year the excess, if any, of the fair market value of the
PFIC stock over the Fund's adjusted basis in the PFIC stock as of the end of the
year. In certain circumstances, a Fund will also be allowed to deduct from
ordinary income the excess, if any, of its adjusted basis in PFIC stock over the
fair market value of the PFIC stock as of the end of the year. The deduction
will only be allowed to the extent of any PFIC mark-to-market gains recognized
as ordinary income in prior years (for tax years beginning after December 31,
1997). A Fund's adjusted tax basis in each PFIC stock for which it makes this
election will be adjusted to reflect the amount of income included or deduction
taken under the election.

Gains or losses (1) from the disposition of foreign currencies, (2) from the
disposition of debt securities denominated in foreign currencies that are
attributable to fluctuations in the value of the foreign currency between the
date of acquisition of each security and the date of disposition, and (3) that
are attributable to fluctuations in exchange rates that occur between the time a
Fund accrues interest, dividends or other receivables or accrues expenses or
other liabilities denominated in a foreign currency and the time the Fund
actually collects the receivables or pays the liabilities, generally will be
treated as ordinary income or loss. These gains or losses may increase or
decrease the amount of a Fund's investment company taxable income to be
distributed to its shareholders.

You should consult your contract prospectus and your own tax adviser regarding
specific questions about federal, state and local tax issues relating to your
contract.

PERFORMANCE

THE FUNDS' TOTAL RETURNS DO NOT REFLECT FEES AND EXPENSES APPLICABLE TO YOUR
VARIABLE ANNUITY OR VARIABLE LIFE INSURANCE CONTRACT. If those fees and expenses
were reflected, the returns would be lower. Consult your contract prospectus for
the amounts of those contract fees and charges. To keep shareholders and
potential investors informed, INVESCO will occasionally advertise the Funds'
total return for one-, five-, and ten-year periods (or since inception). Total
return figures show the rate of return on a $10,000 investment in a Fund,
assuming reinvestment of all dividends and capital gain distributions for the
periods cited.

Cumulative total return shows the actual rate of return on an investment for the
period cited; average annual total return represents the average annual
percentage change in the value of an investment. Both cumulative and average
annual total returns tend to "smooth out" fluctuations in a Fund's investment
results, because they do not show the interim variations in performance over the
periods cited. More information about the Funds' recent and historical
performance is contained in the Company's Annual Report to Shareholders. You can

<PAGE>

get a free copy by calling or writing to INVESCO using the phone number or
address on the back cover of the Funds' Prospectuses.

When we quote mutual fund rankings published by Lipper, Inc., we may compare a
Fund to others in its appropriate Lipper category, as well as the broad-based
Lipper general fund groupings. These rankings allow you to compare a Fund to its
peers. Other independent financial media also produce performance- or
service-related comparisons, which you may see in our promotional materials.

Performance figures are based on historical earnings and are not intended to
suggest future performance.

Average annual total return performance for the one-, five-, and since inception
periods ended December 31, 1998, was:

Name of Fund 1 Year 5 Year Since Inception*

Blue Chip Growth Fund 38.99% N/A 33.98%*
Dynamics Fund 19.35% N/A 16.81%*
Equity Income Fund 15.30% N/A 21.63%*
Financial Services Fund N/A N/A N/A
Health Sciences Fund 42.85% N/A 32.62%*
High Yield Fund 1.42% N/A 11.82%*
Market Neutral Equity Fund N/A N/A N/A
Realty Fund (15.88%) N/A (20.51%)*
Small Company Growth Fund 16.38% N/A 11.11%*
Technology Fund 25.69% N/A 25.46%*
Telecommunications Fund N/A N/A N/A
Total Return Fund 9.56% N/A 14.87%*
Utilities Fund 25.48% N/A 17.50%*

*Inception dates were as follows:

Blue Chip Growth August 25, 1997
Dynamics August 25, 1997
Equity Income August 10, 1994
Financial Services August 31, 1999
Health Sciences May 22, 1997
High Yield May 27, 1994
Market Neutral Equity August 31, 1999
Realty April 1, 1998
Small Company Growth August 25, 1997

<PAGE>

Technology May 21, 1997
Telecommunications August 31, 1999
Total Return June 2, 1994
Utilities January 3, 1995

Average annual total return performance for each of the periods indicated was
computed by finding the average annual compounded rates of return that would
equate the initial amount invested to the ending redeemable value, according to
the following formula:

P(1 + T)n = ERV

where: P = a hypothetical initial payment of $10,000
T = average annual total return
n = number of years
ERV = ending redeemable value of initial payment

The average annual total return performance figures shown above were determined
by solving the above formula for "T" for each time period indicated.

In conjunction with performance reports, comparative data between a Fund's
performance for a given period and other types of investment vehicles, including
certificates of deposit, may be provided to prospective investors and
shareholders.

In conjunction with performance reports and/or analyses of shareholder services
for a Fund, comparative data between that Fund's performance for a given period
and recognized indices of investment results for the same period, and/or
assessments of the quality of shareholder service, may be provided to
shareholders. Such indices include indices provided by Dow Jones & Company,
Standard & Poor's, Lipper Inc., Lehman Brothers, National Association of
Securities Dealers Automated Quotations, 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 Deutcher Aktienindex, all of
which are unmanaged market indicators. In addition, rankings, ratings, and
comparisons of investment performance and/or assessments of the quality of
shareholder service made by independent sources may be used in advertisements,
sales literature or shareholder reports, including reprints of, or selections
from, editorials or articles about the Fund. These sources utilize information
compiled (i) internally; (ii) by Lipper Inc.; or (iii) by other recognized
analytical services. The Lipper Inc. mutual fund rankings and comparisons which
may be used by the Fund in performance reports will be drawn from the following
mutual fund groupings, in addition to the broad-based Lipper general fund
groupings:

Lipper Mutual
Fund Fund Category
- ---- -------------

Blue Chip Growth Growth
Dynamics Capital Appreciation

<PAGE>

Equity Income Equity Income
Financial Services Financial Services
Health Sciences Health Biotechnology
High Yield High Current Yield
Market Neutral Equity Variable Specialty/Miscellaneous
Realty Real Estate
Small Company Growth Small Company Growth
Technology Science and Technology
Telecommunications Global Funds
Total Return Flexible Portfolio
Utilities Utility

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 INC.'S MUTUAL FUND PERFORMANCE ANALYSIS
MONEY
MORNINGSTAR
MUTUAL FUND FORECASTER
NO-LOAD ANALYST
NO-LOAD FUND X
PERSONAL INVESTOR
SMART MONEY
THE NEW YORK TIMES
THE NO-LOAD FUND INVESTOR
U.S. NEWS AND WORLD REPORT
UNITED MUTUAL FUND SELECTOR
USA TODAY
THE WALL STREET JOURNAL
WIESENBERGER INVESTMENT COMPANIES SERVICES
WORKING WOMAN
WORTH

FINANCIAL STATEMENTS

The financial statements for the Company for the fiscal year ended December 31,
1998, are incorporated herein by reference from the Company's Annual Report to
Shareholders dated
December 31, 1998.

<PAGE>

APPENDIX A

BOND RATINGS

The following is a description of Moody's and S&P's bond ratings:

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>

S&P 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>

PART C. OTHER INFORMATION

ITEM 23. EXHIBITS

(a) (1) Articles of Incorporation filed August 19, 1993.(2)

(2) Articles of Amendment of the Articles of
Incorporation filed October 21, 1993.(2)

(3) Articles Supplementary to Articles of Incorporation
filed October 22, 1993.(2)

(4) Articles Supplementary to Articles of Incorportion filed
February 11, 1997.(2)

(5) Articles Supplementary to Articles of Incorporation
dated January 5, 1998.(5)

(6) Articles of Amendment to Articles of Incorporation
regarding Equity Income Fund filed August 13, 1999.

(7) Articles of Amendment to Articles of Incorporation
regarding Blue Chip Growth Fund filed August 13, 1999.

(8) Articles Supplementary to Articles of Incorporation
filed August 13, 1999.

(b) Bylaws as of July 21, 1993.3

(d) (1)Investment Advisory Agreement between Company and
INVESCO Funds, Group, Inc. dated August 30, 1999.

(2)Sub-Advisory Agreement between INVESCO Funds Group, Inc.
Group, Inc. and INVESCO Capital Management, Inc. dated
February 28, 1997.(2)

(i) Amendment dated January 1, 1998 to Sub-Advisory
Agreement dated February 28, 1997.(7)

(ii) Amendment dated May 13, 1999 to Sub-Advisory
Agreement.

(3) Sub-Advisory Agreement between INVESCO Funds Group, Inc.
and INVESCO Realty Advisors, Inc. dated February 28,
1997.(7)

(i) Amendment dated January 1, 1998 to Sub-Advisory
Agreement dated February 28, 1997.(7)

(ii) Amendment dated May 13, 1999 to Sub-Advisory
Agreement.

(4) Form of Sub-Advisory Agreement between INVESCO Funds
Group, Inc. and INVESCO (NY) dated August 30, 1999.

<PAGE>

(e)(1) General Distribution Agreement between Company and
INVESCO Funds Group, Inc. dated February 28, 1997.(2)

(2) General Distribution Agreement between Company
and INVESCO Funds Group, Inc. dated September 30, 1997.(3)

(f)(1) Defined Benefit Deferred Compensation Plan for
Non-InterestedDirectors and Trustees.(2)

(2) Amended Defined Benefit Deferred Compensation Plan
for Non-Interested Directors and Trustees.(6)

(g)(1) Custody Agreement between Company and State Street Bank
and Trust Company dated October 20, 1993.(3)

(2) Amendment to Custody Agreement dated October 25, 1995.(2)

(3) Data Access Services Addendum.(3)

(4) Additional Fund Letter dated Novemeber 13, 1997.(5)

(5) Additional Fund Letter dated August 18, 1999.

(h)(1) Transfer Agency Agreement between Company and
INVESCO Funds Group, Inc. dated February 28, 1997.(2)

(2) Administrative Services Agreement between Company and
INVESCO Funds Group, Inc. dated February 28, 1997.(2)

(i) Amendment to Administrative Services
Agreement dated July 1, 1998.(6)

(3) Participation Agreement, dated March 22, 1994, among
Registrant, INVESCO Funds Group, Inc., Transamerica Occidental
Life Insurance Company and Charles Schwab & Co., Inc.(4)

(4) Participation Agreement, dated August 26, 1994, among
Registrant, INVESCO Funds Group, Inc. and Security Life of
Denver Insurance Company.(3)

(5) Participation Agreement, dated September 19, 1994 among
Registrant, INVESCO Funds Group, Inc. and First ING Life
Insurance Company of New York.(4)

(i) Second Amendment to Participation Agreement.(6)

(6) Participation Agreement, dated December 1, 1994, among
Registrant, INVESCO Funds Group, Inc., First Transamerica Life
Insurance Company and Charles Schwab & Co., Inc.(4)

<PAGE>

(7) Participation Agreement, dated September 14, 1995,
among Registrant, INVESCO Funds Group, Inc. and Southland
Life Insurance Company.(1)

(8) Participation Agreement, dated October 31, 1995, among
Registrant, INVESCO Funds Group, Inc. and American Partners
Life Insurance Company.(1)

(9) Participation Agreement, dated April 15, 1996, among
Registrant, INVESCO Funds Group, Inc. and Allmerica Financial
Life Insurance and Annuity Company.(2)

(10) Participation Agreement, dated December 4, 1996, among
Registrant, INVESCO Funds Group, Inc. and American Centurion
Life Assurance Company.(3)

(11) Participation Agreement, dated April 15, 1997, among
Registrant, INVESCO Funds Group, Inc. and Prudential Insurance
Company of America.(3)

(12) Participation Agreement, dated May 30, 1997, among
Registrant, INVESCO Funds Group, Inc. and Annuity Investors
Life Insurance Company.(3)

(13) Participation Agreement, dated August 17, 1998, among
Registrant, INVESCO Funds Group, Inc. and Metropolitan Life
Insurance Company.(6)

(14) Participation Agreement, dated October 1, 1998, among
Registrant, INVESCO Funds Group, Inc. and Business Mens'
Assurance Company of America.(6)

(15) Service Agreement dated September 28, 1998, among
Registrant, INVESCO Funds Group, Inc. and Security life of
Denver Insurance Company.(6)

(16) Participation Agreement dated July 8, 1997, among
Registrant, INVESCO Funds Group, Inc., First Great-West Life &
Annuity Insurance Company and Charles Schwab & Co. Inc.(6)

(17) Participation Agreement dated February 8, 1999, among
Registrant, INVESCO Funds Group, Inc., INVESCO Distributors,
Inc. and Nationwide Life Insurance Company and/or
Nationwide Life and Annuity Insurance Company.(6)

(18) Participation Agreement dated June 19, 1996, among
Registrant, INVESCO Funds Group and Great American Reserve
Insurance Company.(6)

(i) 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.(3)

<PAGE>

(j) Consent of Independent Accountants.

(k) Not applicable.

(l) Not applicable.

(m) Not Applicable.

(n) Not Applicable.

(o) Not Applicable.

(1) Previously filed on EDGAR with Post-Effective Amendment No. 4 to the
Registration Statement on April 11, 1996, and incorporated by reference herein.

(2) Previously filed on EDGAR with Post-Effective Amendment No. 6 to the
Registration Statement on February 14, 1997, and incorporated by reference
herein.

(3) Previously filed on EDGAR with Post-Effective Amendment No. 7 to the
Registration Statement on November 12, 1997, and incorporated by reference
herein.

(4) Previously filed on EDGAR with Post-Effective Amendment No. 8 to the
Registration Statement on November 24, 1997, and incorporated by reference
herein.

(5) Previously filed on EDGAR with Post-Effective Amendment No. 10 to the
Registration Statement on February 27, 1998, and incorporated by reference
herein.

(6) Previously filed on EDGAR with Post-Effective Amendment No. 13 to the
Registration Statement on February 22, 1999, and incorporated by reference
herein.

(7) Previously filed on EDGAR with Post-Effective Amendment No. 14 to the
Registration Statement on April 30, 1999, and incorporated by reference herein.

<PAGE>

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND

No person is presently controlled by or under common control with the Fund.

ITEM 25. INDEMNIFICATION

Indemnification provisions for officers, directors and employees of Registrant
are set forth in Article VII of the Articles of Incorporation, and are hereby
incorporated by reference. See Item 23(a) above. Under these Articles, directors
and officers will be indemnified to the fullest extent permitted to directors by
the Maryland General Corporation 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, Fund directors and
officers cannot be protected against liability to the Fund or its shareholders
to which they would be subject because of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties of their office. The Company also
maintains liability insurance policies covering its directors and officers.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

See "Fund Management" in the Funds' Prospectuses and "Management of the Funds"
in the Statement of Additional Information for information regarding the
business of the investment adviser, INVESCO.

Following are the names and principal occupations of each director and officer
of the investment adviser, INVESCO. Certain of these persons hold positions with
IDI, a subsidiary of INVESCO.

- --------------------------------------------------------------------------------
Position with Principal Occupation and
Name Adviser Company Affiliation
- --------------------------------------------------------------------------------
Mark H. Williamson Chairman, President & Chief Executive
Director and Officer
Officer INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Raymond Roy Cunningham Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
William J. Galvin, Jr. Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Ronald L. Grooms Officer Senior Vice President & Treasurer
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Richard W. Healey Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------

<PAGE>

- --------------------------------------------------------------------------------
William R. Keithler Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Charles P. Mayer Officer & Senior Vice President
Director INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Timothy J. Miller Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Donovan J. (Jerry) Paul Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Glen A. Payne Officer Senior Vice President, Secretary
INVESCO Funds Groups, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
John R. Schroer, II Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Marie E. Aro Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Ingeborg S. Cosby Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Stacie Cowell Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Dawn Daggy-Mangerson Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Elroy E. Frye, Jr. Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------

<PAGE>

- --------------------------------------------------------------------------------
Linda J. Gieger Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Mark D. Greenberg Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Brian B. Hayward Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Richard R. Hinderlie Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Thomas M. Hurley Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Patricia F. Johnston Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Campbell C. Judge Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Peter M. Lovell Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
James F. Lummanick Officer Vice President & Assistant
General Counsel
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Thomas A. Mantone, Jr. Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Trent E. May Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------

<PAGE>

- --------------------------------------------------------------------------------
Corey M. McClintock Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Douglas J. McEldowney Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Frederick R. (Fritz) Meyer Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Stephen A. Moran Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Jeffrey G. Morris Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Laura M. Parsons Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Jon B. Pauley Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Pamela J. Piro Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Anthony R. Rogers Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Gary L. Rulh Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
James B. Sandidge Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------

<PAGE>

- --------------------------------------------------------------------------------
John S. Segner Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Terri B. Smith Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Tane T. Tyler Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Thomas R. Wald Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Alan I. Watson Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Judy P. Wiese Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Thomas H. Scanlan Officer Regional Vice President
INVESCO Funds Group, Inc.
12028 Edgepark Court
Potomac, MD 20854
- --------------------------------------------------------------------------------
Reagan A. Shopp Officer Regional Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Michael D. Legoski Officer Assistant Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Donald R. Paddack Officer Assistant Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Kent T. Schmeckpeper Officer Assistant Vice President
Account Relationship Manager
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------

<PAGE>

- --------------------------------------------------------------------------------
Jeraldine E. Kraus Officer Assistant Secretary
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------

ITEM 27. A) PRINCIPAL UNDERWRITERS

INVESCO Bond Funds, Inc.
INVESCO Combination Stock & Bond Funds, Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Sector Funds, Inc.
INVESCO Specialty Funds, Inc.
INVESCO Stock Funds, Inc.
INVESCO Treasurer's Series Funds, Inc.
INVESCO Variable Investment Funds, Inc.

Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter the Fund
- ---------------- ----------- -------------

William J. Galvin, Jr. Senior Vice
7800 E. Union Avenue President &
Denver, CO 80237 Asst. Secretary

Ronald L. Grooms Senior Vice Treasurer,
7800 E. Union Avenue President, Chief Fin'l
Denver, CO 80237 Treasurer, & Officer, and
Director Chief Acctg. Off.

Richard W. Healey Senior Vice
7800 E. Union Avenue President &
Denver, CO 80237 Director

Charles P. Mayer Director
7800 E. Union Avenue
Denver, CO 80237

Timothy J. Miller 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

<PAGE>

Pamela J. Piro Assistant Treasurer Assistant Treasurer
7800 E. Union Avenue
Denver, CO 80237

Judy P. Wiese Vice President and Asst. Secretary
7800 E. Union Avenue Assistant Secretary
Denver, CO 80237

Mark H. Williamson Chairman of the Board, President,
7800 E. Union Avenue President, & Chief CEO & Director
Denver, CO 80237 Executive Officer

c) Not applicable.

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS

Mark H. Williamson
7800 E. Union Avenue
Denver, CO 80237

ITEM 29. MANAGEMENT SERVICES

Not applicable.

ITEM 30. UNDERTAKINGS

Not applicable.

<PAGE>

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Fund certifies that it meets all the requirements for
effectiveness of this Registration Statement under Rule 485(b) under the
Securities Act 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 30th day of August, 1999.

INVESCO Variable Investment Funds, Inc.

/s/ Mark H. Williamson
Attest: -----------------------------
Mark H. Williamson, President
/s/ Glen A. Payne
- --------------------------------
Glen A. Payne, Secretary

Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities and
on the date indicated.

/s/ Mark H. Williamson /s/ Lawrence H. Budner
------------------------------- -----------------------------
Mark H. Williamson, President & Lawrence H. Budner, Director
Director (Chief Executive Officer)

/s/ Ronald L. Grooms /s/ John W. McIntyre
- ---------------------------- -----------------------------
Ronald L. Grooms, Treasurer John W. McIntyre, 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/ Charles W. Brady /s/ Kenneth T. King
- ------------------------------- -----------------------------
Charles W. Brady, Director Kenneth T. King, Director

/s/ Wendy L. Gramm
- -------------------------------
Wendy L. Gramm, Director
/s/ Glen A. Payne
By* --------------------------- By* ------------------------
Edward F. O'Keefe Glen A. Payne
Attorney in Fact Attorney in Fact

* Original Powers of Attorney authorizing Edward F. O'Keefe and Glen A. Payne,
and each of them, to execute this post-effective amendment to the Registration
Statement of the Registrant on behalf of the above-named directors and officers
of the Registrant have been filed with the Securities and Exchange Commission on
July 20, 1989, January 9, 1990, May 22, 1992, September 1, 1993, December 1,
1993, December 21, 1995, December 30, 1996, December 24, 1997 and May 4, 1998.

<PAGE>

Exhibit Index

Page in
EXHIBIT NUMBER Registration Statement
- -------------- ----------------------

a(6) 108
a(7) 110
a(8) 112
d(1) 115
d(2)(ii) 124
d(3)(ii) 126
d(4) 128
g(5) 135
j 136

ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
INVESCO VARIABLE INVESTMENT FUNDS, INC.

INVESCO Variable Investment Funds, Inc., a corporation organized and
existing under the General Corporation Law of the State of Maryland (the
"Company"), hereby certifies to the State Department of Assessments and Taxation
of Maryland that:

The name INVESCO VIF - Industrial Income Fund, a series of the Company,
has been changed to INVESCO VIF - Equity Income Fund.

The foregoing amendment, in accordance with the requirements of Section
2-605 of the General Corporation Law of Maryland, was unanimously approved by
the board of directors of the Company on February 3, 1999.

The undersigned, President of the Company, who is executing on behalf of
the Company the foregoing Articles of Amendment, of which this paragraph is made
a part, hereby acknowledges, in the name and on behalf of the Company, the
foregoing Articles of Amendment to be the corporate act of the Company and
further verifies under oath that, to the best of his knowledge, information and
belief, the matters and facts set forth herein are true in all material
respects, under the penalties of perjury.

IN WITNESS WHEREOF, INVESCO Variable Investment Funds, Inc. has caused
these Articles of Amendment to be signed in its name and on its behalf by its
President and witnessed by its President on the 10th day of August, 1999.

These Articles of Amendment shall be effective as accepted as of the 13th
day of August, 1999 by the Maryland State Department of Assessments and
Taxation.

INVESCO VARIABLE INVESTMENT FUNDS, INC.

By: /s/ Ronald L. Grooms
-----------------------------------
Ronald L. Grooms, Treasurer & Chief
Financial & Accounting Officer

WITNESSED:

By: /s/ Glen A. Payne
------------------------
Glen A. Payne, Secretary

<PAGE>

CERTIFICATION
-------------

I, Ruth A. Christensen, a notary public in and for the City and County of
Denver, and State of Colorado, do hereby certify that Ronald L. Grooms,
personally known to me to be the person whose name is subscribed to the
foregoing Articles of Amendment, appeared before me this date in person and
acknowledged that he signed, sealed and delivered said instrument as his full
and voluntary act and deed for the uses and purposes therein set forth.

Given my hand and official seal this 10th day of August, 1999.

/s/ Ruth A. Christensen
------------------------------------
Notary Public

My Commission Expires: March 16, 2002

ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
INVESCO VARIABLE INVESTMENT FUNDS, INC.

The name INVESCO VIF - Growth Fund, a series of the Company, has been
changed to INVESCO VIF - Blue Chip Growth Fund.

These Articles of Amendment shall be effective as accepted as of the 13th
day of August, 1999 by the Maryland State Department of Assessments and
Taxation.

INVESCO VARIABLE INVESTMENT FUNDS, INC.

By: /s/ Ronald L. Grooms
------------------------------------
Ronald L. Grooms, Treasurer &
Chief Financial & Accounting Officer

WITNESSED:

By: /s/ Glen A. Payne
------------------------
Glen A. Payne, Secretary

<PAGE>

CERTIFICATION
-------------

Given my hand and official seal this 10th day of August, 1999.

/s/ Ruth A. Christensen
------------------------------------
Notary Public

My Commission Expires: March 16, 2002

ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
INVESCO VARIABLE INVESTMENT FUNDS, INC.

INVESCO Variable Investment Funds, Inc., a corporation organized and
existing under the General Corporation Law of the State of Maryland,
registered as an open-end investment company under the Investment Company Act
of 1940, and having its registered office in Baltimore, Maryland (hereinafter
called the "Company"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:

FIRST: By unanimous approval the board of directors of the Company has
created three additional classes of shares of common stock of the Company
designated as INVESCO VIF - Financial Services Fund, INVESCO VIF - Market
Neutral Fund and INVESCO VIF - Telecommunications Fund and has authorized the
allocation of 100,000,000 shares to be allocated to each of INVESCO VIF -
Financial Services Fund and INVESCO VIF - Telecommunications Fund and
200,000,000 shares to be allocated to INVESCO VIF - Market Neutral Fund. The
aggregate number of shares of stock of all series which the Company had the
authority to issue before creation of the new series of common stock was one
billion (1,000,000,000) shares of common stock with a par value of $0.01 per
share. The aggregate number of shares of stock of all series which the
Company shall have the authority to issue after creation of the new series of
common stock is one billion five hundred million (1,500,000,000) shares of
one cent ($0.01) par value common stock.

SECOND: Shares of each class have been duly classified by the board of
directors pursuant to authority and power contained in the Articles of
Incorporation of the Company.

THIRD: A description of the common stock so classified, including the
powers, preferences, participating, voting or other special rights and
qualifications, restrictions and limitations thereof, is as outlined in the
Articles of Incorporation of the Company.

FOURTH: The Company is registered as an open-end management investment
company under the Investment Company Act of 1940.

FIFTH: The undersigned, the Treasurer & Chief Financial & Accounting
Officer of the Company, who is executing on behalf of the Company the
foregoing Articles Supplementary, of which this paragraph is a part, hereby
acknowledged, in the name of and on behalf of the Company, that the foregoing
Articles Supplementary are the corporate act of the Company and further
verifies under oath that, to the best of his knowledge, information and
belief, the matters and facts set forth herein are true in all material
respects, under the penalties of perjury.

IN WITNESS WHEREOF, INVESCO Variable Investment Funds, Inc. has caused
these Articles Supplementary to be signed in its name and on its behalf by
its Treasurer & Chief Financial & Accounting Officer and witnessed by its
Secretary on the 12th day of August, 1999.

<PAGE>

These Articles of Amendment shall be effective as accepted as of the
16th day of August, 1999 by the Maryland State Department of Assessments and
Taxation.

INVESCO VARIABLE INVESTMENT FUNDS, INC.

By: /s/ Ronald L. Grooms
-----------------------------------
Ronald L. Grooms, Treasurer & Chief
Financial & Accounting Officer

WITNESSED:

By: /s/ Glen A. Payne
------------------------
Glen A. Payne, Secretary

<PAGE>

CERTIFICATION
-------------

I, Ruth A. Christensen, a notary public in and for the City and County
of Denver, and State of Colorado, do hereby certify that Ronald L. Grooms,
personally known to me to be the person whose name is subscribed to the
foregoing Articles of Amendment, appeared before me this date in person and
acknowledged that he signed, sealed and delivered said instrument as his full
and voluntary act and deed for the uses and purposes therein set forth.

Given my hand and official seal this 12th day of August, 1999.

/s/ Ruth A. Christensen
--------------------------------
Notary Public

My Commission Expires: March 16, 2002

INVESTMENT ADVISORY AGREEMENT

THIS AGREEMENT is made this 30th day of August, 1999, Denver, Colorado, by
and between INVESCO FUNDS GROUP, INC. (the "Adviser"), a Delaware corporation,
and INVESCO Variable Investment Funds, Inc., a Maryland corporation (the
"Company").

WITNESSETH:

WHEREAS, the Company is a corporation organized under the laws of the
State of Maryland; and

WHEREAS, the Company is registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"), as a diversified, open-end
management investment company and has one class of shares (the "Shares"), which
is divided into ten series, each representing an interest in a separate
portfolio of investments (such series initially being the INVESCO VIF-Blue Chip
Growth Fund, INVESCO VIF- Dynamics Fund, INVESCO VIF-Equity Income Fund, INVESCO
VIF-Health Sciences Fund, INVESCO VIF-High Yield Fund, INVESCO VIF-Market
Neutral Equity Fund, INVESCO VIF-Realty Fund, INVESCO VIF- Small Company Growth
Fund, INVESCO VIF-Technology Fund, INVESCO VIF-Total Return Fund and INVESCO
VIF-Utilities Fund (the "Funds")); and

WHEREAS, the Company desires that the Adviser manage its investment
operations and the Adviser desires to manage said operations;

NOW, THEREFORE, in consideration of these premises and of the mutual
covenants and agreements hereinafter contained, the parties hereto agree as
follows:

1. INVESTMENT MANAGEMENT SERVICES. The Adviser hereby agrees to manage the
investment operations of the Company and its Funds, subject to the terms of this
Agreement and to the supervision of the Company's directors (the "Directors").
The Adviser agrees to perform, or arrange for the performance of, the following
specific services for the Company:

(a) to manage the investment and reinvestment of all the assets, now or
hereafter acquired, of the Company and the Funds of the Company;

(b) to maintain a continuous investment program for the Company and each
Fund of the Company, consistent with (i) the Company's and each Fund's
investment policies as set forth in the Company's Registration Statement, as
from time to time amended, under the Investment Company Act of 1940, as
amended (the "1940 Act"), and in any prospectus and/or statement of
additional information of the Company or any Fund of the Company, as from
time to time amended and in use under the Securities Act of 1933, as amended,

<PAGE>

and (ii) the Company's status as a regulated investment company under the
Internal Revenue Code of 1986, as amended;

(c) to determine what securities are to be purchased or sold for the
Company and its Funds, unless otherwise directed by the Directors of the
Company, and to execute transactions accordingly;

(d) to provide to the Company and the Funds of the Company the benefit of
all of the investment analyses and research, the reviews of current economic
conditions and trends, and the consideration of long-range investment policy
now or hereafter generally available to investment advisory customers of the
Adviser;

(e) to determine what portion of the Company and each Fund of the Company
should be invested in common stocks, preferred stocks, Government
obligations, commercial paper, certificates of deposit, bankers' acceptances,
variable amount notes, corporate debt obligations, and any other authorized
securities;

(f) to make recommendations as to the manner in which voting rights, rights
to consent to Company and/or Fund action and any other rights pertaining to
the Company's portfolio securities shall be exercised; and

(g) to calculate the net asset value of the Company and each Fund, as
applicable, as required by the 1940 Act, subject to such procedures as may be
established from time to time by the Company's Directors, based upon the
information provided to the Adviser by the Company or by the custodian,
co-custodian or sub-custodian of the Company's or any of the Funds' assets
(the "Custodian") or such other source as designated by the Directors from
time to time.

With respect to execution of transactions for the Company and for the Funds,
the Adviser shall place, or arrange for the placement of, all orders for the
purchase or sale of portfolio securities with brokers or dealers selected by the
Adviser. In connection with the selection of such brokers or dealers and the
placing of such orders, the Adviser is directed at all times to obtain for the
Company and the Funds the most favorable execution and price; after fulfilling
this primary requirement of obtaining the most favorable execution and price,
the Adviser is hereby expressly authorized to consider as a secondary factor in
selecting brokers or dealers with which such orders may be placed whether such
firms furnish statistical, research and other information or services to the
Adviser. Receipt by the Adviser of any such statistical or other information and
services should not be deemed to give rise to any requirement for adjustment of
the advisory fee payable pursuant to paragraph 4 hereof. The Adviser may follow
a policy of considering sales of variable annuity or variable life insurance
contracts for which the Company serves as an investment vehicle as a factor in
the selection of broker/dealers to execute portfolio transactions, subject to
the requirements of best execution discussed above.

<PAGE>

The Adviser shall for all purposes herein provided be deemed to be an
independent contractor.

2. ALLOCATION OF COSTS AND EXPENSES. The Adviser shall reimburse the Fund
monthly for any salaries paid by the Company to officers, Directors, and
full-time employees of the Company who also are officers, general partners or
employees of the Adviser or its affiliates. Except for such sub-accounting,
recordkeeping, and administrative services which are to be provided by the
Adviser to the Company under the Administrative Services Agreement between the
Company and the Adviser dated February 28, 1997, which was approved on November
5, 1996, by the Company's board of directors, including all of the independent
directors, at the Company's request the Adviser shall also furnish to the
Company, at the expense of the Adviser, such competent executive, statistical,
administrative, internal accounting and clerical services as may be required in
the judgment of the Directors of the Company. These services will include, among
other things, the maintenance (but not preparation) of the Company's accounts
and records, and the preparation (apart from legal and accounting costs) of all
requisite corporate documents such as tax returns and reports to the Securities
and Exchange Commission and Company shareholders. The Adviser also will furnish,
at the Adviser's expense, such office space, equipment and facilities as may be
reasonably requested by the Company from time to time.

Except to the extent expressly assumed by the Adviser herein and except to
the extent required by law to be paid by the Adviser, the Company shall pay all
costs and expenses in connection with the operations and organization of the
Company. Without limiting the generality of the foregoing, such costs and
expenses payable by the Company include the following:

(a) all brokers' commissions, issue and transfer taxes, and other costs
chargeable to the Company and any Fund in connection with securities
transactions to which the Company or any Fund is a party or in connection
with securities owned by the Company or any Fund;

(b) the fees, charges and expenses of any independent public accountants,
custodian, depository, dividend disbursing agent, dividend reinvestment
agent, transfer agent, registrar, independent pricing services and legal
counsel for the Company or for any Fund;

(d) the taxes, including franchise, income, issue, transfer, business
license, and other corporate fees payable by the Company or any Fund to
federal, state, county, city, or other governmental agents;

(e) the fees and expenses involved in maintaining the registration and
qualification of the Company and of its shares under laws administered by the

<PAGE>

Securities and Exchange Commission or under other applicable regulatory
requirements, including the preparation and printing of prospectuses and
statements of additional information;

(f) the compensation and expenses of its Directors;

(g) the costs of printing and distributing reports, notices of
shareholders' meetings, proxy statements, dividend notices, prospectuses,
statements of additional information and other communications to the
Company's shareholders, as well as all expenses of shareholders' meetings and
Directors' meetings;

(h) all costs, fees or other expenses arising in connection with the
organization and filing of the Company's Articles of Incorporation, including
its initial registration and qualification under the 1940 Act and under the
Securities Act of 1933, as amended, the initial determination of its tax
status and any rulings obtained for this purpose, the initial registration
and qualification of its securities under the laws of any state and the
approval of the Company's operations by any other federal or state authority;

(i) the expenses of repurchasing and redeeming shares of the Company;

(j) insurance premiums;

(k) the costs of designing, printing, and issuing certificates representing
shares of beneficial interest of the Company;

(l) extraordinary expenses, including fees and disbursements of Company
counsel, in connection with litigation by or against the Company or any Fund;

(m) premiums for the fidelity bond maintained by the Company pursuant to
Section 17(g) of the 1940 Act and rules promulgated thereunder (except for
such premiums as may be allocated to the Adviser as an insured thereunder);

(n) association and institute dues; and

(o) the expenses, if any, of distributing shares of the Company paid by the
Company pursuant to a Plan and Agreement of Distribution adopted under Rule
12b-1 of the Investment Company Act of 1940.

3. USE OF AFFILIATED COMPANIES. In connection with the rendering of the
services required to be provided by the Adviser under this Agreement, the
Adviser may, to the extent it deems appropriate and subject to compliance with
the requirements of applicable laws and regulations, and upon receipt of written
approval of the Company, make use of its affiliated companies and their
employees; provided that the Adviser shall supervise and remain fully
responsible for all such services in accordance with and to the extent provided

4
<PAGE>

by this Agreement and that all costs and expenses associated with the providing
of services by any such companies or employees and required by this Agreement to
be borne by the Adviser shall be borne by the Adviser or its affiliated
companies.

4. COMPENSATION OF THE ADVISER. For the services to be rendered and the
charges and expenses to be assumed by the Adviser hereunder, the Company shall
pay to the Adviser an advisory fee which will be computed on a daily basis and
paid as of the last day of each month, using for each daily calculation the most
recently determined net asset value of each Fund of the Company, as determined
by valuations made in accordance with the Company's procedure for calculating
the Funds' net asset value as described in the Fund's Prospectus and/or
Statement of Additional Information. On an annual basis the advisory fee
applicable to each Fund shall be as follows: For the INVESCO VIF-Equity Income
Fund and the INVESCO VIF-Total Return Fund, the advisory fee is computed at the
annual rate of 0.75% of the first $500 million of each Fund's average net
assets; 0.65% of the next $500 million of each Fund's average net assets; 0.55%
of the Fund's average net assets from $1 billion; 0.45% of each Fund's average
net assets from $2 billion; 0.40% of each Fund's average net assets from $4
billion; 0.375% of each Fund's average net assets from $6 billion; and 0.35% of
each Fund's average net assets from $8 billion. For the INVESCO VIF-Financial
Services Fund, INVESCO VIF-Market Neutral Equity Fund and INVESCO
VIF-Telecommunications Fund, the advisory fee is computed at the actual rate of
0.75% of each Fund's average net assets. For the INVESCO VIF-High Yield Fund and
the INVESCO VIF-Utilities Fund, the advisory fee is computed at the annual rate
of 0.60% of the first $500 million of each Fund's average net assets; 0.55% of
the next $500 million of each Fund's average net assets; 0.45% of each Fund's
average net assets from $1 billion; 0.40% of each Fund's average net assets from
$4 billion; 0.375% of each Fund's average net assets from $6 billion; and 0.35%
of each Fund's average net assets from $8 billion. For the INVESCO VIF-Small
Company Growth Fund, INVESCO VIF-Health Sciences Fund and INVESCO VIF-Technology
Fund, the advisory fee is computed at the annual rate of 0.75% of the first $350
million of each Fund's average net assets; 0.65% of the next $350 million of
each Fund's average net assets; 0.55% of each Fund's average net assets from
$700 million; 0.45% of each Fund's average net assets from $2 billion; 0.40% of
each Fund's average net assets from $4 billion; 0.375% of each Fund's average
net assets from $6 billion; and 0.35% of each Fund's average net assets from $8
billion. For the INVESCO VIF-Dynamics Fund, the advisory fee is computed at the
annual rate of 0.75% of the first $1 billion of the Fund's average net assets;
0.60% of the next $1 billion of the Fund's average net assets; 0.45% of the
Fund's average net assets from $2 billion; 0.40% of the Fund's average net
assets from $4 billion; 0.375% of the Fund's average net assets from $6 billion;
and 0.35% of the Fund's average net assets from $8 billion. For the INVESCO
VIF-Blue Chip Growth Fund, the advisory fee is computed at the annual rate of
0.85% of the first $500 million of the Fund's average net assets; 0.75% of the
next $500 million of the Fund's average net assets; 0.65% of the Fund's average
net assets from $1 billion; 0.45% of the Fund's average net assets from $2
billion; 0.40% of the Fund's average net assets from $4 billion; 0.375% of the
Fund's average net assets from $6 billion; and 0.35% of the Fund's average net
assets from $8 billion. For the INVESCO VIF-Realty Fund, the advisory fee is
computed at the annual rate of 0.90% of the first $500 million of the Fund's

<PAGE>

average net assets; 0.75% of the next $500 million of the Fund's average net
assets; 0.65% of the Fund's average net assets from $1 billion; 0.45% of the
Fund's average net assets from $2 billion; 0.40% of the Fund's average net
assets from $4 billion; 0.375% of the Fund's average net assets from $6 billion;
and 0.35% of the Fund's average net assets from $8 billion.

During any period when the determination of the Funds' net asset value is
suspended by the Directors of the Company, the net asset value of a share of the
Funds as of the last business day prior to such suspension shall, for the
purpose of this Paragraph 4, be deemed to be the net asset value at the close of
each succeeding business day until it is again determined. However, no such fee
shall be paid to the Adviser with respect to any assets of the Company or any
Fund thereof which may be invested in any other investment company for which the
Adviser serves as investment adviser. The fee provided for hereunder shall be
prorated in any month in which this Agreement is not in effect for the entire
month.

If, in any given year, the sum of a Fund's expenses exceeds the most
restrictive state imposed annual expense limitation (if, and to the extent that,
any such limitation is applicable to the Company), the Adviser will be required
to reimburse the Fund for such excess expenses promptly. Interest, taxes and
extraordinary items such as litigation costs are not deemed expenses for
purposes of this paragraph and shall be borne by the Company or such Fund in any
event. Expenditures, including costs incurred in connection with the purchase or
sale of portfolio securities, which are capitalized in accordance with generally
accepted accounting principles applicable to investment companies, are accounted
for as capital items and shall not be deemed to be expenses for purposes of this
paragraph.

5. AVOIDANCE OF INCONSISTENT POSITIONS AND COMPLIANCE WITH LAWS. In
connection with purchases or sales of securities for the investment portfolio of
the Company or any Fund, neither the Adviser nor its officers or employees will
act as a principal or agent for any party other than the Company or any Fund or
receive any commissions. The Adviser will comply with all applicable laws in
acting hereunder including, without limitation, the 1940 Act; the Investment
Advisers Act of 1940, as amended; and all rules and regulations duly promulgated
under the foregoing.

6. DURATION AND TERMINATION. This Agreement shall become effective as of the
date it is approved by a majority of the outstanding voting securities of the
Funds of the Company, and unless sooner terminated as hereinafter provided,
shall remain in force for an initial term ending two years from the date of
execution, and from year to year thereafter, but only as long as such
continuance is specifically approved at least annually (i) by a vote of a
majority of the outstanding voting securities of the Funds of the Company or by
the Directors of the Company, and (ii) by a majority of the Directors of the
Company who are not interested persons of the Adviser or the Company by votes
cast in person at a meeting called for the purpose of voting on such approval.

<PAGE>

In the event of the disapproval of this Agreement, or of the continuation
hereof, by the shareholders of a particular Fund (or by the Directors of the
Company as to a particular Fund), the parties intend that such disapproval shall
be effective only as to such Fund, and that such disapproval shall not affect
the validity or effectiveness of the approval of this Agreement, or of the
continuation hereof, by the shareholders of any other Fund (or by the Directors,
including a majority of the disinterested Directors) as to such other Fund; in
such case, this Agreement shall be deemed to have been validly approved or
continued, as the case may be, as to such other Fund.

This Agreement may, on 60 days' prior written notice, be terminated without
the payment of any penalty, by the Directors of the Company, or by the vote of a
majority of the outstanding voting securities of the Company or, with respect to
a particular Fund, by a majority of the outstanding voting securities of that
Fund, as the case may be, or by the Adviser. This Agreement shall immediately
terminate in the event of its assignment, unless an order is issued by the
Securities and Exchange Commission conditionally or unconditionally exempting
such assignment from the provisions of Section 15(a) of the 1940 Act, in which
event this Agreement shall remain in full force and effect subject to the terms
and provisions of said order. In interpreting the provisions of this paragraph
6, the definitions contained in Section 2(a) of the 1940 Act and the applicable
rules under the 1940 Act (particularly the definitions of "interested person,"
"assignment" and "vote of a majority of the outstanding voting securities")
shall be applied.

The Adviser agrees to furnish to the Directors of the Company such
information on an annual basis as may reasonably be necessary to evaluate the
terms of this Agreement.

Termination of this Agreement shall not affect the right of the Adviser to
receive payments on any unpaid balance of the compensation described in
paragraph 4 earned prior to such termination.

7. NON-EXCLUSIVE SERVICES. The Adviser shall, during the term of this
Agreement, be entitled to render investment advisory services to others,
including, without limitation, other investment companies with similar
objectives to those of the Company or any Fund of the Company. The Adviser may,
when it deems such to be advisable, aggregate orders for its other customers
together with any securities of the same type to be sold or purchased for the
Company or any Fund in order to obtain best execution and lower brokerage
commissions. In such event, the Adviser shall allocate the shares so purchased
or sold, as well as the expenses incurred in the transaction, in the manner it
considers to be most equitable and consistent with its fiduciary obligations to
the Company or any Fund and the Adviser's other customers.

8. LIABILITY. The Adviser shall have no liability to the Company or any Fund
or to the Company's shareholders or creditors, for any error of judgment,
mistake of law, or for any loss arising out of any investment, nor for any other
act or omission, in the performance of its obligations to the Company or any

<PAGE>

Fund not involving willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties hereunder.

9. MISCELLANEOUS PROVISIONS.

NOTICE. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for the receipt of such notice.

AMENDMENTS HEREOF. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the Company and the Adviser, and no material amendment of this Agreement shall
be effective unless approved by (1) the vote of a majority of the Directors of
the Company, including a majority of the Directors who are not parties to this
Agreement or interested persons of any such party cast in person at a meeting
called for the purpose of voting on such amendment, and (2) the vote of a
majority of the outstanding voting securities of any Fund of the Company
affected by such amendment; provided, however, that this paragraph shall not
prevent any immaterial amendment(s) to this Agreement, which amendment(s) may be
made without shareholder approval, if such amendment(s) are made with the
approval of (1) the Directors and (2) a majority of the Directors of the Company
who are not interested persons of the Adviser or the Company. In the event of
the disapproval of an amendment of this Agreement by the shareholders of a
particular Fund (or by the Directors of the Company as to a particular Fund),
the parties intend that such disapproval shall be effective only as to such
Fund, and that such disapproval shall not affect the validity or effectiveness
of the approval of the amendment by the shareholders of any other Fund (or by
the Directors, including a majority of the disinterested Directors) as to such
other Fund; in such case, this Agreement shall be deemed to have been validly
amended as to such other Fund.

SEVERABILITY. Each provision of this Agreement is intended to be severable.
If any provision of this Agreement shall be held illegal or made invalid by a
court decision, statute, rule or otherwise, such illegality or invalidity shall
not affect the validity or enforceability of the remainder of this Agreement.

HEADINGS. The headings in this Agreement are inserted for convenience and
identification only and are in no way intended to describe, interpret, define or
limit the size, extent or intent of this Agreement or any provision hereof.

APPLICABLE LAW. This Agreement shall be construed in accordance with the laws
of the State of Colorado and the applicable provisions of the 1940 Act. To the
extent that the applicable laws of the State of Colorado, or any of the
provisions herein, conflict with applicable provisions of the 1940 Act, the
latter shall control.

8
<PAGE>

IN WITNESS WHEREOF, the Adviser and the Company each has caused this
Agreement to be duly executed on its behalf by an officer thereunto duly
authorized, the day and year first above written.

INVESCO VARIABLE INVESTMENT FUNDS, INC.

By: /s/ Mark H. Williamson
----------------------------------------
Mark H. Williamson, President

ATTEST:

/s/ Glen A. Payne
- --------------------------
Glen A. Payne, Secretary

INVESCO FUNDS GROUP, INC.

By: /s/ Ronald L. Grooms
---------------------------------------
Ronald L. Grooms, Senior Vice President

ATTEST:

/s/ Glen A. Payne
- --------------------------
Glen A. Payne, Secretary

AMENDMENT TO SUB-ADVISORY AGREEMENT

This is an Amendment to the Sub-Advisory Agreement made and entered into
between INVESCO Funds Group, Inc., a Delaware corporation ("INVESCO") and
INVESCO Capital Management, a Georgia corporation (the "Sub-Adviser"), as of the
28th day of February, 1997 (the "Agreement").

WHEREAS, INVESCO and the Sub-Adviser are affiliated companies; and

WHEREAS, INVESCO desires to add additional breakpoints to the existing
advisory fee that it pays to the Sub-Adviser for the management of INVESCO
VIF-Total Return Fund (the "Fund"), a series of INVESCO Variable Investment
Funds, Inc.;

NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in the Agreement, it is agreed that the provisions of Article III of
the Agreement entitled "Compensation of the Sub-Adviser" are hereby amended to
read as follows:

For the services rendered, facilities furnished, and expenses
assumed by the Sub-Adviser, INVESCO shall pay to the Sub-Adviser an annual
fee, computed daily and paid as of the last day of each month, using for
each daily calculation the most recently determined net asset value of the
Fund, as determined by a valuation made in accordance with the Fund's
procedures for calculating its net asset value as described in the Fund's
Prospectus and/or Statement of Additional Information. The advisory fee to
the Sub-Adviser shall be computed at the annual rate of 0.30% of the
Fund's average net assets on the first $500 million, 0.26% of the Fund's
average net assets on the next $500 million, 0.22% of the Fund's average
net assets from $1 billion, 0.18% of the Fund's average net assets from $2
billion, 0.16% of the Fund's average net assets from $4 billion, 0.15% of
the Fund's average net assets from $6 billion, and 0.14% of the Fund's
average net assets over $8 billion. During any period when the
determination of the Fund's net asset value is suspended by the Directors
of the Company, the net asset value of a share of the Fund as of the last
business day prior to such suspension shall, for the purpose of this
Article III, be deemed to be the net asset value at the close of each
succeeding business day until it is again determined. However, no such fee
shall be paid to the Sub-Adviser with respect to any assets of the Fund,
which may be invested in any other investment company for which the
Sub-Adviser serves as investment adviser or sub-adviser. The fee provided
for hereunder shall be prorated in any month in which this Agreement is
not in effect for the entire month. The Sub-Adviser shall be entitled to
receive fees hereunder only for such periods as the INVESCO Investment
Advisory Agreement remains in effect.

<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement effective as of
the 13th day of May, 1999.

INVESCO FUNDS GROUP, INC.

By: /s/ Mark H. Williamson
--------------------------------------
Mark H. Williamson
President
ATTEST:

/s/ Glen A. Payne
- --------------------------------
Glen A. Payne
Secretary
INVESCO CAPITAL MANAGEMENT

By: /s/ Terrence Miller
--------------------------------------
President
ATTEST:

/s/ Julie A. Skaggs
- --------------------------------
Secretary

AMENDMENT TO SUB-ADVISORY AGREEMENT

This is an Amendment to the Sub-Advisory Agreement made and entered into
between INVESCO Funds Group, Inc., a Delaware corporation ("INVESCO") and
INVESCO Realty Advisors, Inc., a Colorado corporation (the "Sub-Adviser"), as of
the 28th day of February, 1997 (the "Agreement").

WHEREAS, INVESCO and the Sub-Adviser are affiliated companies; and

WHEREAS, INVESCO desires to add additional breakpoints to the existing
advisory fee that it pays to the Sub-Adviser for the management of INVESCO
Realty Fund (the "Fund"), a series of INVESCO Specialty Funds, Inc.;

For the services rendered, facilities furnished, and expenses
assumed by the Sub-Adviser, INVESCO shall pay to the Sub-Adviser an annual
fee, computed daily and paid as of the last day of each month, using for
each daily calculation the most recently determined net asset value of the
Fund, as determined by a valuation made in accordance with the Fund's
procedures for calculating its net asset value as described in the Fund's
Prospectus and/or Statement of Additional Information. The advisory fee to
the Sub-Adviser shall be computed at the annual rate of 0.30% of the
Fund's average net assets of the first $500 million, 0.26% of the Fund's
net assets of the next $500 million, 0.22% of the Fund's average net
assets from $1 billion, 0.18% of the Fund's average net assets from $2
billion, 0.16% of the Fund's average net assets from $4 billion, 0.15% of
the Fund's average net assets from $6 billion, and 0.14% of the Fund's
average net assets over $8 billion. During any period when the
determination of the Fund's net asset value is suspended by the Directors
of the Company, the net asset value of a share of the Fund as of the last
business day prior to such suspension shall, for the purpose of this
Article III, be deemed to be the net asset value at the close of each
succeeding business day until it is again determined. However, no such fee
shall be paid to the Sub-Adviser with respect to any assets of the Fund,
which may be invested in any other investment company for which the
Sub-Adviser serves as investment adviser or sub-adviser. The fee provided
for hereunder shall be prorated in any month in which this Agreement is
not in effect for the entire month. The Sub-Adviser shall be entitled to
receive fees hereunder only for such periods as the INVESCO Investment
Advisory Agreement remains in effect.

<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement effective as of
the 13th day of May, 1999.

INVESCO FUNDS GROUP, INC.

By: /s/ Mark H. Williamson
----------------------------------
Mark H. Williamson
President
ATTEST:

/s/ Glen A. Payne
- ----------------------------
Glen A. Payne
Secretary
INVESCO REALTY ADVISORS, INC.

By: /s/ David Ridley
----------------------------------
President
ATTEST:

/s/ Dinah Monger
- ----------------------------
Assistant Secretary

SUB-ADVISORY AGREEMENT

AGREEMENT made this 30th day of August, 1999, by and between INVESCO Funds
Group, Inc. ("INVESCO"), a Delaware corporation, and INVESCO (NY), Inc. a
New York corporation ("the Sub-Adviser").

WITNESSETH:

WHEREAS, INVESCO Variable Investment Funds, Inc. (the "Company") is engaged
in business as a diversified, open-end management investment company registered
under the Investment Company Act of 1940, as amended (hereinafter referred to as
the "Investment Company Act") and has one class of shares (the "Shares"), which
is divided into series, each representing an interest in a separate portfolio of
investments, one such series being designated the INVESCO VIF-Market Neutral
Equity (the "Fund"); and

WHEREAS, INVESCO and the Sub-Adviser are engaged in rendering investment
advisory services and are registered as investment advisers under the Investment
Advisers Act of 1940; and

WHEREAS, INVESCO has entered into an Investment Advisory Agreement with the
Company (the "INVESCO Investment Advisory Agreement"), pursuant to which INVESCO
is required to provide investment advisory services to the Company, and, upon
receipt of written approval of the Company, is authorized to retain companies
which are affiliated with INVESCO to provide such services; and

WHEREAS, the Sub-Adviser is willing to provide investment advisory services
to the Company on the terms and conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, INVESCO and the Sub-Adviser hereby agree as follows:

ARTICLE I

DUTIES OF THE SUB-ADVISER

INVESCO hereby employs the Sub-Adviser to act as investment adviser to the
Company and to furnish the investment advisory services described below, subject
to the broad supervision of INVESCO and Board of Directors of the Company, for
the period and on the terms and conditions set forth in this Agreement. The
Sub-Adviser hereby accepts such assignment and agrees during such period, at its
own expense, to render such services and to assume the obligations herein set
forth for the compensation provided for herein. The Sub-Adviser shall for all
purposes herein be deemed to be an independent contractor and, unless otherwise
expressly provided or authorized herein, shall have no authority to act for or
represent the Company in any way or otherwise be deemed an agent of the Company.

<PAGE>

The Sub-Adviser hereby agrees to manage the investment operations of the
Fund, subject to the supervision of the Company's directors (the "Directors")
and INVESCO. Specifically, the Sub-Adviser agrees to perform the following
services:

(a) to manage the investment and reinvestment of all the assets, now or
hereafter acquired, of the Fund, and to execute all purchases and sales of
portfolio securities;

(b) to maintain a continuous investment program for the Funds, consistent
with (i) the Fund's investment policies as set forth in the Company's
Registration Statement, as from time to time amended, under the Investment
Company Act of 1940, as amended (the "1940 Act"), and in any prospectus
and/or statement of additional information of the Fund, as from time to time
amended and in use under the Securities Act of 1933, as amended, and (ii) the
Company's status as a regulated investment company under the Internal Revenue
Code of 1986, as amended;

(c) to determine what securities are to be purchased or sold for the Fund,
unless otherwise directed by the Directors of the Company or INVESCO, and to
execute transactions accordingly;

(d) to provide to the Fund the benefit of all of the investment analysis
and research, the reviews of current economic conditions and trends, and the
consideration of long range investment policy now or hereafter generally
available to investment advisory customers of the Sub-Adviser;

(e) to determine what portion of the Fund should be invested in the various
types of securities authorized for purchase by the Fund; and

(f) to make recommendations as to the manner in which voting rights, rights
to consent to Fund action and any other rights pertaining to the Fund's
portfolio securities shall be exercised.

With respect to execution of transactions for the Fund, the Sub-Adviser is
authorized to employ such brokers or dealers as may, in the Sub-Adviser's best
judgment, implement the policy of the Fund to obtain prompt and reliable
execution at the most favorable price obtainable. In assigning an execution or
negotiating the commission to be paid therefor, the Sub-Adviser is authorized to
consider the full range and quality of a broker's services which benefit the
Fund, including but not limited to research and analytical capabilities,
reliability of performance, and financial soundness and responsibility. Research
services prepared and furnished by brokers through which the Sub-Adviser effects
securities transactions on behalf of the Fund may be used by the Sub-Adviser in
servicing all of its accounts, and not all such services may be used by the
Sub-Adviser in connection with the Fund. The Sub-Adviser may follow a policy of
considering sales of shares of the Fund as a factor in the selection of

<PAGE>

broker/dealers to execute portfolio transactions, subject to the requirements of
best execution discussed above. In the selection of a broker or dealer for
execution of any negotiated transaction, the Sub-Adviser shall have no duty or
obligation to seek advance competitive bidding for the most favorable negotiated
commission rate for such transaction, or to select any broker solely on the
basis of its purported or "posted" commission rate for such transaction,
provided, however, that the Sub-Adviser shall consider such "posted" commission
rates, if any, together with any other information available at the time as to
the level of commissions known to be charged on comparable transactions by other
qualified brokerage firms, as well as all other relevant factors and
circumstances, including the size of any contemporaneous market in such
securities, the importance to the Fund of speed, efficiency, and confidentiality
of execution, the execution capabilities required by the circumstances of the
particular transactions, and the apparent knowledge or familiarity with sources
from or to whom such securities may be purchased or sold. Where the commission
rate reflects services, reliability and other relevant factors in addition to
the cost of execution, the Sub-Adviser shall have the burden of demonstrating
that such expenditures were bona fide and for the benefit of the Fund.

ARTICLE II

ALLOCATION OF CHARGES AND EXPENSES

The Sub-Adviser assumes and shall pay for maintaining the staff and personnel
necessary to perform its obligations under this Agreement, and shall, at its own
expense, provide the office space, equipment and facilities necessary to perform
its obligations under this Agreement. Except to the extent expressly assumed by
the Sub-Adviser herein and except to the extent required by law to be paid by
the Sub-Adviser, INVESCO and/or the Company shall pay all costs and expenses in
connection with the operations of the Funds.

ARTICLE III

COMPENSATION OF THE SUB-ADVISER

<PAGE>

business day until it is again determined. However, no such fee shall be paid to
the Sub-Adviser with respect to any assets of the Fund which may be invested in
any other investment company for which the Sub-Adviser serves as investment
adviser or sub-adviser. The fee provided for hereunder shall be prorated in any
month in which this Agreement is not in effect for the entire month. The
Sub-Adviser shall be entitled to receive fees hereunder only for such periods as
the INVESCO Investment Advisory Agreement remains in effect.

ARTICLE IV

LIMITATION OF LIABILITY OF SUB-ADVISER

The Sub-Adviser shall not be liable for any error of judgment, mistake of law
or for any loss arising out of any investment or for any act or omission in the
performance of sub-advisory services rendered with respect to the Company or the
Fund, except for willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of reckless disregard of its obligations
and duties hereunder. As used in this Article IV, "Sub-Adviser" shall include
any affiliates of the Sub-Adviser performing services contemplated hereby and
directors, officers and employees of the Sub-Adviser and such affiliates.

ARTICLE V

ACTIVITIES OF THE SUB-ADVISER

The services of the Sub-Adviser to the Funds are not to be deemed to be
exclusive, the Sub-Adviser and any person controlled by or under common control
with the Sub-Adviser (for purposes of this Article V referred to as
"affiliates") being free to render services to others. It is understood that
directors, officers, employees and shareholders of the Company are or may become
interested in the Sub-Adviser and its affiliates, as directors, officers,
employees and shareholders or otherwise and that directors, officers, employees
and shareholders of the Sub-Adviser, INVESCO and their affiliates are or may
become interested in the Company as directors, officers and employees.

ARTICLE VI

AVOIDANCE OF INCONSISTENT POSITIONS AND
COMPLIANCE WITH APPLICABLE LAWS

In connection with purchases or sales of securities for the investment
portfolios of the Fund, neither the Sub-Adviser nor any of its directors,
officers or employees will act as a principal or agent for any party other than
the Fund or receive any commissions. The Sub-Adviser will comply with all
applicable laws in acting hereunder including, without limitation, the 1940 Act;
the Investment Advisers Act of 1940, as amended; and all rules and regulations
duly promulgated under the foregoing.

<PAGE>

ARTICLE VII

DURATION AND TERMINATION OF THIS AGREEMENT

This Agreement shall become effective as of the date it is approved by a
majority of the outstanding voting securities of the Fund, and shall remain in
force for an initial term of two years from the date of execution, and from year
to year thereafter until its termination in accordance with this Article VII,
but only so long as such continuance is specifically approved at least annually
by (i) the Directors of the Company, or by the vote of a majority of the
outstanding voting securities of the Fund, and (ii) a majority of those
Directors who are not parties to this Agreement or interested persons of any
such party cast in person at a meeting called for the purpose of voting on such
approval. In the event of the disapproval of this Agreement, or of the
continuation hereof, by the shareholders of the Fund (or by the Directors of the
Company as to a particular Fund), the parties intend that such disapproval shall
be effective only as to such Fund.

This Agreement may be terminated at any time, without the payment of any
penalty, by INVESCO; the Fund by vote of a majority of the Directors of the
Company; or by the Sub-Adviser. A termination by INVESCO or the Sub-Adviser
shall require sixty days' written notice to the other party and to the Company,
and a termination by the Company shall require such notice to each of the
parties. This Agreement shall automatically terminate in the event of its
assignment to the extent required by the Investment Company Act of 1940 and the
Rules thereunder.

The Sub-Adviser agrees to furnish to the Directors of the Company such
information on an annual basis as may reasonably be necessary to evaluate the
terms of this Agreement.

Termination of this Agreement shall not affect the right of the Sub-Adviser
to receive payments on any unpaid balance of the compensation described in
Article III hereof earned prior to such termination.

<PAGE>

ARTICLE VIII

AMENDMENTS OF THIS AGREEMENT

No provision of this Agreement may be orally changed or discharged, but may
only be modified by an instrument in writing signed by the Sub-Adviser and
INVESCO. In addition, no amendment to this Agreement shall be effective unless
approved by (1) the vote of a majority of the Directors of the Company,
including a majority of the Directors who are not parties to this Agreement or
interested persons of any such party cast in person at a meeting called for the
purpose of voting on such amendment and (2) the vote of a majority of the
outstanding voting securities of the Fund (other than an amendment which can be
effective without shareholder approval under applicable law). In the event of
the disapproval of an amendment of this Agreement by the shareholders of a
particular Fund (or by the Directors of the Company as to the Fund), the parties
intend that such disapproval shall be effective only as to such Fund.

ARTICLE IX

DEFINITIONS OF CERTAIN TERMS

In interpreting the provisions of this Agreement, the terms "vote of a
majority of the outstanding voting securities," "assignments," "affiliated
person" and "interested person," when used in this Agreement, shall have the
respective meanings specified in the Investment Company Act and the Rules and
Regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under said Act.

ARTICLE X

GOVERNING LAW

This Agreement shall be construed in accordance with the laws of the State of
Colorado and the applicable provisions of the Investment Company Act. To the
extent that the applicable laws of the State of Colorado, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.

<PAGE>

ARTICLE XI

MISCELLANEOUS

IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.

INVESCO FUNDS GROUP, INC.

By:
--------------------------
Senior Vice President

ATTEST:

- --------------------------
Secretary

INVESCO (NY), INC.

By:
---------------------------
President

ATTEST:

- ---------------------------
Secretary

[INVESCO ICON] INVESCO FUNDS INVESCO FUNDS GROUP, INC.
7800 East Union Avenue
Denver, Colorado 80237
Post Office Box 173706
Denver, Colorado 80217-3706
Telephone: 303-930-6300

August 18, 1999

Mr. Christopher J. Meyers
Assistant Vice President
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171

RE: INVESCO Variable Investment Funds, Inc.

Dear Mr. Meyers:

This is to advise you that INVESCO Variable Investment Funds, Inc. (the
"Company") has established three new series of shares to be known as INVESCO VIF
- - Financial Services Fund, INVESCO VIF - Market Neutral Fund and INVESCO VIF -
Telecommunications Fund. In accordance with the Additional Funds provision in
Paragraph 17 of the Custodian Contract dated October 20, 1993 between the
Company and State Street Bank and Trust Company, the Company hereby requests
that you act as Custodian for the new series under the terms of the Contract.

Please indicate your acceptance of the foregoing by executing two copies of this
Letter Agreement, returning one to the Company and retaining one copy for your
records.

Sincerely,

/s/ Alan I. Watson
- --------------------
Alan I. Watson
Assistant Secretary

Agreed to this 19th day of August, 1999.

STATE STREET BANK AND TRUST COMPANY

By: /s/ Charles M. Whittemore
-------------------------
Vice President

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Statement of
Additional Information constituting part of this Post-Effective Amendment No. 16
to the registration statement on Form N-1A (the "Registration Statement") of our
report dated January 29, 1999, relating to the financial statements and
financial highlights appearing in the December 31, 1998 Annual Report to
Shareholders of INVESCO Variable Investment Funds, Inc., which is also
incorporated by reference into the Registration Statement. We also consent to
the reference to us under the heading "Independent Accountants" in the Statement
of Additional Information.

PricewaterhouseCoopers LLP

Denver, Colorado
August 25, 1999