PROSPECTUS
January 1, 1998
INVESCO GROWTH FUND, INC.
INVESCO Growth Fund, Inc. (the "Fund") is actively managed to seek
long-term capital growth, with the secondary goal of current income. Most of its
investments are in U.S. common stocks, but the Fund has the flexibility to
invest in other types of securities.
This Prospectus provides you with the basic information you should know
before investing in the Fund. You should read it and keep it for future
reference. A Statement of Additional Information containing further information
about the Fund, dated January 1, 1998, has been filed with the Securities and
Exchange Commission, and is incorporated by reference into this Prospectus. To
obtain a free copy, write to INVESCO Distributors, Inc., P.O. Box 173706,
Denver, Colorado 80217-3706; call 1-800- 525-8085; or visit our web site at
http://www.invesco.com.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION. THE SHARES
OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
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TABLE OF CONTENTS Page
ESSENTIAL INFORMATION.......................................................2
ANNUAL FUND EXPENSES........................................................3
FINANCIAL HIGHLIGHTS........................................................4
INVESTMENT OBJECTIVE AND STRATEGY...........................................5
INVESTMENT POLICIES AND RISKS...............................................5
THE FUND AND ITS MANAGEMENT.................................................8
FUND PRICE AND PERFORMANCE..................................................9
HOW TO BUY SHARES..........................................................10
FUND SERVICES..............................................................12
HOW TO SELL SHARES.........................................................13
TAXES, DIVIDENDS AND OTHER DISTRIBUTIONS...................................14
ADDITIONAL INFORMATION.....................................................15
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ESSENTIAL INFORMATION
Investment Objective And Strategy: INVESCO Growth Fund, Inc. is a
diversified, actively managed mutual fund that seeks long- term capital growth
with a secondary goal of current income. It invests primarily in U.S. common
stocks. The Fund may also invest in other securities, such as corporate bonds
and preferred stocks. There is no guarantee that the Fund will meet its
objective. See "Investment Objective And Strategy."
The Fund is Designed For: Investors seeking a combination of capital growth
plus current income. While not intended as a complete investment program, the
Fund may be a valuable element of your investment portfolio. You also may wish
to consider the Fund as part of a Uniform Gift/Transfer To Minors Act Account or
systematic investing strategy. The Fund may be a suitable investment for many
types of retirement programs, including ^ various individual retirement accounts
("IRAs"), 401(k), Profit Sharing, Money Purchase Pension, and 403(b) plans.
Time Horizon: Because the value of its holdings varies, the Fund's price
per share will fluctuate. Investors should consider this a medium- to long-term
investment.
Risks: The Fund's investments in fixed-income securities are subject to
credit risk and market risk. Its returns on foreign investments may be
influenced by currency fluctuations and other risks of investing overseas. Rapid
portfolio turnover may result in higher brokerage commissions and the
acceleration of taxable capital gains. These policies make the Fund unsuitable
for the portion of your savings dedicated to preservation of capital or current
income over the short term. See "Investment Objective And Strategy" and
"Investment Policies And Risks."
Organization and Management: The Fund is owned by its shareholders. It
employs INVESCO Funds Group, Inc. ("IFG"), founded in 1932, to serve as
investment adviser, administrator and transfer agent. INVESCO Trust Company
(INVESCO Trust), founded in 1969, serves as sub-adviser. Together, IFG and
INVESCO Trust constitute "Fund Management." Prior to September 30, 1997, IFG
served as the Fund's distributor. Effective September 30, 1997, INVESCO
Distributors, Inc. ("IDI"), founded in 1997 as a wholly-owned subsidiary of IFG,
became the Fund's distributor.
The Fund's investments are selected by two INVESCO portfolio managers:
INVESCO Senior Vice President Timothy J. Miller and portfolio manager Trent E.
May. ^
IFG, INVESCO Trust and IDI are subsidiaries of AMVESCAP PLC, an
international investment management company^ that manages approximately $177.5
billion of assets. AMVESCAP PLC is based in London, with money managers located
in Europe, North America and the Far East.
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This Fund offers all of the following services at no charge:
Telephone purchases
Telephone exchanges
Telephone redemptions
Automatic reinvestment of distributions
Regular investment plans, such as EasiVest (the Fund's automatic
monthly investment program), Direct Payroll Purchase, and Automatic Monthly
Exchange Periodic withdrawal plans
See "How To Buy Shares" and "How To Sell Shares."
Minimum Initial Investment: $1,000, which is waived for regular investment
plans, including EasiVest and Direct Payroll Purchase.
Minimum Subsequent Investment: $50 (Minimums are lower for certain retirement
plans.)
ANNUAL FUND EXPENSES
The Fund is no-load; there are no fees to purchase, exchange or redeem
shares. The Fund is authorized to pay a Rule 12b-1 distribution fee of one
quarter of one percent of the Fund's average net assets each year. (See "How To
Buy Shares --Distribution Expenses.")
Like any company, the Fund has operating expenses -- such as portfolio
management, accounting, shareholder servicing, maintenance of shareholder
accounts, and other expenses. We calculate annual operating expenses as a
percentage of the Fund's average annual net assets. These expenses are paid from
the Fund's assets. Lower expenses therefore benefit investors by increasing the
Fund's total return.
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Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fee 0.57%
12b-1 Fees 0.25%
Other Expenses(1) 0.25%
Total Fund Operating Expenses(1) 1.07%
(1) It should be noted that the Fund's actual total operating expenses were
lower than the figures shown, because the Fund's custodian, transfer agent and
distribution fees were reduced under expense offset arrangements. However, as a
result of an SEC requirement for mutual funds to state their total operating
expenses without crediting any such expense offset arrangement, the figures
shown above do not reflect these reductions. In comparing expenses for different
years, please note that the ratios of Expenses to Average Net Assets shown under
"Financial Highlights" do reflect any reductions for periods including and prior
to the fiscal year ended August 31, 1995. See "The Fund And Its Management."
Example
A shareholder would pay the following expenses on a $1,000 investment for
the periods shown, assuming a hypothetical 5% annual return and redemption at
the end of each time period. (Of course, actual operating expenses are paid from
the Fund's assets, and are deducted from the amount of income available for
distribution to shareholders; they are not charged directly to shareholder
accounts.)
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$11 $34 $59 $131
The purpose of this table is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly. THE EXAMPLE SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE OR EXPENSES,
AND ACTUAL ANNUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
For more information on the Fund's expenses, see "The Fund and Its Management"
and "How To Buy Shares -- Distribution Expenses."
Because the Fund pays a distribution fee, investors who own Fund shares for
a long period of time may pay more than the economic equivalent of the maximum
front-end sales charge permitted for mutual funds by the National Association of
Securities Dealers, Inc.
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FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
The following information has been audited by Price Waterhouse LLP,
independent accountants. This information should be read in conjunction with the
audited financial statements and the independent accountant's report thereon
appearing in the Fund's 1997 Annual Report to Shareholders which is incorporated
by reference into the Statement of Additional Information, both of which are
available without charge by contacting IDI at the address or telephone number on
the cover of this Prospectus. The Annual Report also contains more information
about the Fund's performance.
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Year Ended August 31
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1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
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PER SHARE DATA
Net Asset Value -
Beginning of Period $5.44 $5.33 $5.34 $5.28 $4.72 $5.26 $4.37 $4.54 $3.48 $4.64
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INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.01 0.03 0.05 0.03 0.04 0.05 0.07 0.10 0.10 0.07
Net Gains or (Losses) on
Securities (Both
Realized and Unrealized) 1.39 0.95 0.49 0.11 1.00 0.05 1.28 (0.14) 1.06 (1.16)
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Total from Investment
Operations 1.40 0.98 0.54 0.14 1.04 0.10 1.35 (0.04) 1.16 (1.09)
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LESS DISTRIBUTIONS
Dividends from Net
Investment Income+ 0.01 0.03 0.05 0.03 0.04 0.05 0.08 0.11 0.10 0.07
Distributions from
Capital Gains 0.77 0.84 0.50 0.05 0.44 0.59 0.38 0.02 0.00 0.00
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Total Distributions 0.78 0.87 0.55 0.08 0.48 0.64 0.46 0.13 0.10 0.07
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Net Asset Value -
End of Period $6.06 $5.44 $5.33 $5.34 $5.28 $4.72 $5.26 $4.37 $4.54 $3.48
============================================================================================
TOTAL RETURN 28.14% 20.23% 12.05% 2.52% 22.17% 2.04% 31.16% (1.01%) 33.70% (23.43%)
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RATIOS
Net Assets - End of
Period ($000 Omitted) $709,220 $596,726 $501,285 $488,411 $483,957 $408,218 $428,564 $339,927 $383,099 $328,043
Ratio of Expenses to
Average Net Assets 1.07%@ 1.05%@ 1.06% 1.03% 1.04% 1.04% 1.00% 0.78% 0.82% 0.81%
Ratio of Net Investment
Income to Average
Net Assets 0.22% 0.64% 1.07% 0.47% 0.72% 0.93% 1.52% 2.17% 2.60% 1.84%
Portfolio Turnover Rate 286% 207% 111% 63% 77% 77% 69% 86% 90% 116%
Average Commission Rate
Paid^^ $0.0697 $0.0286 - - - - - - - -
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+ Distributions in excess of net investment income for the year ended August 31,
1995, aggregated less than $0.01 on a per share basis.
@ Ratio is based on Total Expenses of the Fund, which is before any expense
offset arrangements.
^^ The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the total
number of related shares purchased or sold which is required to be disclosed
effective for fiscal years beginning September 1, 1995 and thereafter.
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INVESTMENT OBJECTIVE AND STRATEGY
The Fund seeks long-term capital growth, with a secondary goal of current
income. This investment objective is fundamental and may not be changed without
the approval of the Fund's shareholders. Normally, the Fund seeks to achieve
this objective by investing primarily in U.S. common stocks (including
securities convertible into common stocks). There is no guarantee that the
Fund's investment objective will be met.
For the equity holdings, we look for companies that we believe have
better-than-average earnings growth potential, as well as companies within
industries we believe are well-positioned for the current and expected economic
climate.
In addition to common stocks, the Fund also may hold preferred stocks and
investment grade corporate debt obligations. The Fund also may hold cash and
cash-equivalent securities as cash reserves. The amount invested in stocks,
bonds and cash securities may be varied from time to time depending upon Fund
Management's assessment of business, economic and market conditions. For a
description of each corporate bond rating category please refer to Appendix A to
the Statement of Additional Information.
The Fund's investment portfolio is actively traded. There are no
limitations regarding portfolio turnover for either the equity or fixed income
portions of the Fund's portfolio. Although the Fund does not trade for
short-term profits, securities may be sold without regard to the time they have
been held when, in the opinion of Fund Management, investment considerations
warrant such action. The Fund's portfolio turnover rate therefore may be higher
than other mutual funds with similar objectives. Increased portfolio turnover
may result in greater brokerage commissions and acceleration of capital gains
which are taxable when distributed to shareholders. The Statement of Additional
Information includes an expanded discussion of the Fund's portfolio turnover
rate, its brokerage practices and certain federal income tax matters.
When we believe market or economic conditions are unfavorable, the Fund may
assume a defensive position by temporarily investing up to 100% of its assets in
high quality money market instruments, such as short-term U.S. government
obligations, commercial paper or repurchase agreements, seeking to protect its
assets until conditions stabilize.
INVESTMENT POLICIES AND RISKS
Investors generally should expect to see their price per share and income
levels vary with movements in the stock and fixed-income markets, changes in
economic conditions and other factors. The Fund invests in many different
companies in a variety of securities and industries; this diversification
reduces the Fund's overall exposure to investment and market risks, but cannot
eliminate these risks.
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Debt Securities. When we assess an issuer's ability to meet its interest
rate obligations and repay its debt when due, we are referring to "credit risk."
Debt obligations are rated based on their credit risk as estimated by
independent services such as Standard & Poor's ^, a division of The McGraw-Hill
Companies, Inc. ("S&P") or Moody's Investors Service, Inc. ("Moody's"). "Market
risk" for debt securities principally refers to sensitivity to changes in
interest rates: for instance, when interest rates go up, the market value of a
bond issued previously generally declines; on the other hand, when interest
rates go down, the prices of bonds generally increase.
The lower a bond's quality, the more it is subject to credit risk and
market risk and the more speculative it becomes. This is also true of most
unrated debt securities. The Fund seeks to reduce these risks by investing only
in investment grade debt securities (those rated BBB or above by S&P and/or Baa
or above by Moody's or, if unrated, are judged by Fund Management to be of
equivalent quality). These bonds enjoy strong to adequate capacity to pay
principal and interest. Securities rated Baa by Moody's are considered to be of
medium grade and may have speculative characteristics. Securities rated BBB by
S&P are considered to be in the lowest "investment grade" security rating and
may have speculative characteristics as well. While Fund Management continuously
monitors all of the debt securities in the Fund's portfolio for the issuer's
ability to make required principal and interest payments and other quality
factors, it may retain a bond whose rating is changed to one below the minimum
rating required for purchase of the security.
Foreign Securities. Up to 25% of the Fund's total assets, measured at the
time of purchase, may be invested directly in foreign equity or corporate debt
securities. Securities of Canadian issuers and American Depository Receipts
("ADRs") are not subject to this 25% limitation. ADRs are receipts representing
shares of a foreign corporation held by a U.S. bank that entitle the holder to
all dividends and capital gains. ADRs are denominated in U.S. dollars and trade
in the U.S. securities markets.
For U.S. investors, the returns on foreign securities are influenced not
only by the returns on the foreign investments themselves, but also by currency
fluctuations. That is, when the U.S. dollar generally rises against a foreign
currency, returns for a U.S. investor on foreign securities denominated in that
foreign currency may decrease. By contrast, in a period when the U.S. dollar
generally declines, those returns may increase.
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Other aspects of international investing to consider include:
-less publicly available information than is generally available about U.S.
issuers;
-differences in accounting, auditing and financial reporting standards;
-generally higher commission rates on foreign portfolio transactions and
longer settlement periods;
-smaller trading volumes and generally lower liquidity of foreign stock
markets, which may cause greater price volatility; and
-investments in certain countries may be subject to foreign withholding
taxes, which may reduce dividend or interest income or capital gains payable to
shareholders.
There is also the possibility of expropriation or confiscatory taxation;
adverse changes in investment or exchange control regulations; political
instability; potential restrictions on the flow of international capital; and
the possibility of the Fund experiencing difficulties in pursuing legal remedies
and collecting judgments.
ADRs are subject to some of the same risks as direct investments in foreign
securities, including the risk that material information about the issuer may
not be disclosed in the United States and the risk that currency fluctuations
may adversely affect the value of the ADR.
Rule 144A Securities. The Fund may not purchase securities that are not
readily marketable. However, the Fund may purchase certain securities that are
not registered for sale to the general public but that can be resold to
institutional investors ("Rule 144A Securities"), if a liquid institutional
trading market exists. The Fund's board of directors has delegated to Fund
Management the authority to determine the liquidity of Rule 144A Securities
pursuant to guidelines approved by the board. In the event that a Rule 144A
Security held by the Fund is subsequently determined to be illiquid, the
security will be sold as soon as that can be done in an orderly fashion
consistent with the best interests of the Fund's shareholders. For more
information concerning Rule 144A Securities, see "Investment Policies And
Restrictions" in the Statement of Additional Information.
Repurchase Agreements. The Fund may invest money, for as short a time as
overnight, using repurchase agreements ("repos"). With a repo, the Fund buys a
debt instrument, agreeing simultaneously to sell it back to the prior owner at
an agreed-upon price and time. The Fund could incur costs or delays in seeking
to sell the instrument if the prior owner defaults on its repurchase obligation.
To reduce that risk, the securities that are the subject of each repurchase
agreement will be maintained with the Fund's custodian in an amount at least
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equal to the repurchase price under the agreement (including accrued interest).
These agreements are entered into only with member banks of the Federal Reserve
System, registered broker-dealers, and registered U.S. government securities
dealers that are deemed creditworthy under standards established by the Fund's
board of directors.
Futures and Options. A futures contract is an agreement to buy or sell a
specific amount of a financial instrument or commodity at a particular price on
a particular date. The Fund will use futures contracts only to hedge against
price changes in the value of its current or intended investments in securities.
In the event that an anticipated decrease in the value of portfolio securities
occurs as a result of a general decrease in prices, the adverse effects of such
changes may be offset, at least in part, by gains on the sale of futures
contracts. Conversely, the increased cost of portfolio securities to be
acquired, caused by a general increase in prices, may be offset, at least in
part, by gains on futures contracts purchased by the Fund. Brokerage fees are
paid to trade futures contracts, and the Fund is required to maintain margin
deposits.
Put and call options on futures contracts or securities may be traded by
the Fund in order to protect against declines in the value of portfolio
securities or against increases in the cost of securities to be acquired. The
purchaser of an option purchases the right to effect a transaction in the
underlying future or security at a specified price (the "strike price") before a
specified date (the "expiration date"). In exchange for the right, the purchaser
pays a "premium" to the seller, which represents the price of the right to buy
or to sell the underlying instrument. In exchange for the premium, the seller of
the option becomes obligated to effect a transaction in the underlying future or
security, at the strike price, at any time prior to the expiration date, should
the buyer choose to exercise the option. A call option contract grants the
purchaser the right to buy the underlying future or security, at the strike
price, before the expiration date. A put option contract grants the purchaser
the right to sell the underlying future or security, at the strike price, before
the expiration date. Purchases of options on futures contracts may present less
dollar risk in hedging the Fund's portfolio than the purchase and sale of the
underlying futures contracts, since the potential loss is limited to the amount
of the premium plus related transaction costs. The premium paid for such a put
or call option plus any transaction costs will reduce the benefit, if any,
realized by the Fund upon exercise or liquidation of the option, and, unless the
price of the underlying futures contract or security changes sufficiently, the
option may expire without value to the Fund.
Although the Fund will enter into futures contracts and options on
futures contracts and securities solely for hedging or other nonspeculative
purposes, their use does involve certain risks. For example, a lack of
correlation between the value of an instrument underlying an option or futures
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contract and the assets being hedged, or unexpected adverse price movements,
could render a Fund's hedging strategy unsuccessful and could result in losses.
In addition, there can be no assurance that a liquid secondary market will exist
for any contract purchased or sold, and the Fund may be required to maintain a
position until exercise or expiration, which could result in losses.
Transactions in futures contracts and options are subject to other risks as
well, which are set forth in greater detail in the Statement of Additional
Information and Appendix B therein.
Securities Lending. The Fund may seek to earn additional income by lending
securities to qualified brokers, dealers, banks, or other financial
institutions, on a fully collateralized basis. For further information on this
policy, see "Investment Policies And Restrictions," in the Statement of
Additional Information.
For a further discussion of risks associated with an investment in the
Fund, see "Investment Policies and Restrictions" and "Investment Practices" in
the Statement of Additional Information.
Investment Restrictions. Certain restrictions, which are set forth in the
Statement of Additional Information, may not be altered without the approval of
the Fund's shareholders. For example, the Fund limits to 5% the portion of its
total assets that may be invested in any one issuer (other than cash items and
U.S. government securities). In addition, the Fund limits to 25% the portion of
its total assets that may be invested in any one industry (other than U.S.
government securities). Other fundamental restrictions prohibit the Fund from
lending more than 33-1/3% of its total assets to other parties and from
borrowing money, except that the Fund may borrow amounts up to 33-1/3% of its
total assets for temporary or emergency purposes. Except where indicated to the
contrary, the investment policies described in this Prospectus are not
considered fundamental and may be changed without a vote of the Fund's
shareholders.
THE FUND AND ITS MANAGEMENT
The Fund is a no-load mutual fund, registered with the Securities and
Exchange Commission as a diversified, open-end management investment company. It
was incorporated on July 8, 1935, under the laws of Maryland.
The Fund's board of directors has responsibility for overall supervision of
the Fund and reviews the services provided by the adviser and sub-adviser. Under
an agreement with the Fund, IFG, 7800 E. Union Avenue, Denver, Colorado 80237,
serves as the Fund's investment manager; it is primarily responsible for
providing the Fund with various administrative services. IFG's wholly-owned
subsidiary, INVESCO Trust, is the Fund's sub-adviser and is primarily
responsible for managing the Fund's investments.
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The Fund is managed by two members of the INVESCO Growth Team which is
headed by Timothy J. Miller. The following individuals are primarily responsible
for the day-to-day management of the Fund's portfolio holdings:
Trent E. May has served as lead portfolio manager of the Fund since October
1997 and co-portfolio manager of the Fund since 1996; portfolio manager of
INVESCO Trust since 1996. Formerly, senior equity fund manager/equity analyst at
Munder Capital Management in Detroit. B.S. in Engineering, Florida Institute of
Technology; M.B.A., Rollins College. He is a Chartered Financial Analyst.
Timothy J. Miller has served as co-portfolio manager for the Fund since
1996; lead portfolio manager of INVESCO Dynamics Fund since October 1997 and
portfolio manager of INVESCO Dynamics Fund since 1993; co-portfolio manager of
INVESCO Small Company Growth Fund since 1997; senior vice president (1995 to
present), vice president (1993 to 1995) and portfolio manager (1992 to present)
of INVESCO Trust. Formerly (1979 to 1992), analyst and portfolio manager with
Mississippi Valley Advisors. M.B.A., University of Missouri -- St. Louis;
B.S.B.A., St. Louis University. He is a Chartered Financial Analyst.
Fund Management permits investment and other personnel to purchase and sell
securities for their own accounts, subject to a compliance policy governing
personal investing. This policy requires Fund Management's personnel to conduct
their personal investment activities in a manner that Fund Management believes
is not detrimental to the Fund or Fund Management's other advisory clients. See
the Statement of Additional Information for more detailed information.
The Fund pays IFG a monthly management fee that is based upon a percentage
of the Fund's average net assets determined daily. The management fee is
computed at the annual rate of 0.60% on the first $350 million of the Fund's
average net assets; 0.55% on the next $350 million of the Fund's average net
assets; and 0.50% on the Fund's average net assets over $700 million. For the
fiscal year ended August 31, 1997, investment advisory fees paid by the Fund
amounted to 0.57% of the Fund's average net assets. Out of this advisory fee,
IFG paid to INVESCO Trust, as a sub- advisory fee, an amount equal to 0.21% of
the Fund's average net assets. No fee is paid by the Fund to INVESCO Trust.
Under a Transfer Agency Agreement, IFG acts as registrar, transfer agent,
and dividend disbursing agent for the Fund. The Fund pays an annual fee of
$20.00 per shareholder account or, where applicable, per participant in an
omnibus account. Registered broker-dealers, third party administrators of
tax-qualified retirement plans and other entities, including affiliates of IFG,
may provide equivalent services to the Fund. In these cases, IFG may pay, out of
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the fee it receives from the Fund, an annual sub-transfer agency or
recordkeeping fee to the third party.
In addition, under an Administrative Services Agreement, IFG handles
additional administrative, recordkeeping, and internal sub-accounting services
for the Fund. For such services, IFG was paid, for the fiscal year ended August
31, 1997, a fee equal to $10,000 plus an additional amount computed at an annual
rate of 0.02% of the Fund's average net assets.
The Fund's expenses, which are accrued daily, are deducted from total
income before dividends are paid. Total expenses of the Fund for the fiscal year
ended August 31, 1997, including investment management fees (but excluding
brokerage commissions, which are a cost of acquiring securities), amounted to
1.07% of the Fund's average net assets.
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of
their financial responsibility coupled with their ability to effect transactions
at the best available prices. As discussed under "How To Buy Shares --
Distribution Expenses," the Fund may market its shares through intermediary
brokers or dealers that have entered into dealer agreements with IFG or IDI, as
the Fund's ^ distributor. The Fund may place orders for portfolio transactions
with qualified broker-dealers which recommend the Fund, or sell shares of the
Fund, to clients, or act as agent in the purchase of Fund shares for clients, if
Fund Management believes that the quality of the execution of the transaction
and level of commission are comparable to those available from other qualified
brokerage firms. For further information, see "Investment Practices -- Placement
of Portfolio Brokerage" in the Statement of Additional Information.
IFG, INVESCO Trust and IDI are indirect wholly-owned subsidiaries of
AMVESCAP PLC. AMVESCAP PLC is a publicly-traded holding company that, through
its subsidiaries, engages in the business of investment management on an
international basis. INVESCO PLC changed its name to AMVESCO PLC on March 3,
1997, and to AMVESCAP PLC on May 8, 1997, as part of a merger between a direct
subsidiary of INVESCO PLC and A I M Management Group Inc., that created one of
the largest independent investment management businesses in the world. IFG and
INVESCO Trust continued to operate under their existing names. AMVESCAP PLC has
approximately $177.5 billion in assets under management. IFG was established in
1932 and, as of August 31, 1997, managed 14 mutual funds, consisting of 46
separate portfolios, with combined assets of approximately $15.9 billion on
behalf of over 854,000 shareholders. INVESCO Trust, founded in 1969, served as
adviser or sub-adviser to 59 investment portfolios as of August 31, 1997,
including 32 portfolios in the INVESCO group. These 59 portfolios had aggregate
assets of approximately $14.7 billion as of August 31, 1997. In addition,
INVESCO Trust provides investment management services to private clients
including employee benefit plans that may be invested in a collective trust
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sponsored by INVESCO Trust. IDI was established in 1997 and is the distributor
for 14 mutual funds consisting of 46 separate portfolios.
FUND PRICE AND PERFORMANCE
Determining Price. The value of your investment in the Fund will vary
daily. The price per share is also known as the Net Asset Value ("NAV"). IFG
prices the Fund every day that the New York Stock Exchange is open, as of the
close of regular trading ^(generally, 4:00 p.m., New York time). NAV is
calculated by adding together the current market value of all of the Fund's
assets, including accrued interest and dividends; then subtracting liabilities,
including accrued expenses; and finally dividing that dollar amount by the total
number of shares outstanding.
Performance Data. To keep shareholders and potential investors informed, we
will occasionally advertise the Fund's total return. Total return figures show
the average annual rate of return on a $1,000 investment in the Fund, assuming
reinvestment of all dividends and other distributions for one-, five-, and
ten-year periods (or since inception). Cumulative total return shows the actual
rate of return on an investment over the stated periods; 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 the Fund's investment results, because they do not show the
interim variations in performance over the periods cited. More information about
the Fund's recent and historical performance is contained in the Fund's Annual
Report to Shareholders. You can get a free copy by calling or writing to IDI
using the phone number or address on the cover of this Prospectus.
When we quote mutual fund rankings published by Lipper Analytical
Services, Inc., we may compare the Fund to others in its category of Growth
Funds, as well as the broad-based Lipper general fund groupings. These rankings
allow you to compare the Fund to its peers. Other independent financial media
also produce performance-or service-related comparisons, which you may see in
our promotional materials. For more information see "Fund Performance" in the
Statement of Additional Information.
Performance figures are based on historical investment results and are not
intended to suggest future performance.
<PAGE>
HOW TO BUY SHARES
The following chart shows several convenient ways to invest in the Fund.
Your new Fund shares will be priced at the NAV next determined after your order
is received in proper form. There is no charge to invest, exchange, or redeem
shares when you make transactions directly through IDI. However, if you invest
in the Fund through a securities broker, you may be charged a commission or
transaction fee. For all new accounts, please send a completed application form.
Please specify which fund's shares you wish to purchase.
Fund Management reserves the right to increase, reduce or waive the minimum
investment requirements in its sole discretion, where it determines this action
is in the best interests of the Fund. Further, Fund Management reserves the
right in its sole discretion to reject any order for the purchase of Fund shares
(including purchases by exchange) when, in its judgment, such rejection is in
the Fund's best interests.
HOW TO BUY SHARES
================================================================================
Method Investment Minimum Please Remember
- --------------------------------------------------------------------------------
By Check
Mail to: $1,000 for regular If your check does
INVESCO Funds account; not clear, you will
Group, Inc. $250 for an ^ IRA; be responsible for
P.O. Box 173706 $50 minimum for any related loss
Denver, CO 80217- each subsequent the Fund or IFG
3706. investment. incurs. If you are
Or you may send already a
your check by shareholder in the
overnight courier INVESCO funds, the
to: 7800 E. Union Fund may seek
Ave., Denver, CO 80237. reimbursement from
your existing
account(s) for any
loss incurred.
- --------------------------------------------------------------------------------
By Telephone or
Wire
Call 1-800-525-8085 $1,000. Payment must be
to request your received within 3
purchase. Then send business days, or
your check by the transaction may
overnight courier be cancelled. If a
to our street telephone purchase
address: is cancelled due to
7800 E. Union Ave., nonpayment, you
Denver, CO 80237. will be responsible
Or you may transmit for any related
<PAGE>
your payment by loss the Fund or
bank wire (call IFG IFG incurs. If you
for instructions). are already a
shareholder in the
INVESCO funds, the Fund
may seek reimbursement
from your existing
account(s) for any loss
incurred.
- --------------------------------------------------------------------------------
With EasiVest or
Direct Payroll
Purchase
You may enroll on $50 per month for Like all regular
the fund EasiVest; $50 per investment plans,
application, or pay period for neither EasiVest
call us for the Direct Payroll nor Direct Payroll
correct form and Purchase. You may Purchase ensures a
more details. start or stop your profit or protects
Investing the same regular investment against loss in a
amount on a monthly plan at any time, falling market.
basis allows you to with two weeks' Because you'll
buy more shares notice to IFG. invest continually,
when prices are low regardless of
and fewer shares varying price
when prices are levels, consider
high. This "dollar- your financial
cost averaging" may ability to keep
help offset market buying through low
fluctuations. Over price levels. And
a period of time, remember that you
your average cost will lose money if
per share may be you redeem your
less than the shares when the
actual average market value of all
price per share. your shares is less
than their cost.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
By PAL
Your "Personal $1,000. Be sure to write
Account Line" is down the
available for confirmation number
subsequent provided by PAL.
purchases and Payment must be
exchanges 24-hours received within 3
a day. Simply call business days, or
1-800-424-8085. the transaction may
be cancelled. If a
telephone purchase
is cancelled due to
nonpayment, you
will be responsible
for any related
loss the Fund or
IFG incurs. If you are
already a shareholder in
the INVESCO funds, the
Fund may seek
reimbursement from your
existing account(s) for
any loss incurred.
- --------------------------------------------------------------------------------
By Exchange
Between this and $1,000 to open a See "Exchange
another of the new account; $50 Policy" below.
INVESCO funds. Call for written
1-800-525-8085 for requests to
prospectuses of purchase additional
other INVESCO shares for an
funds. You may also existing account.
establish an (The exchange
Automatic Monthly minimum is $250 for
Exchange service purchases requested
between two INVESCO by telephone.)
funds; call IFG for
further details and
the correct form.
================================================================================
Exchange Policy. You may exchange your shares in this Fund for those in
another INVESCO fund, on the basis of their respective net asset values at the
time of the exchange. Before making any exchange, be sure to review the
prospectuses of the funds involved and consider their differences.
Please note these policies regarding exchanges of fund shares:
1. The fund accounts must be identically registered.
2. You may make four exchanges out of each fund during each calendar
year.
3. An exchange is the redemption of shares from one fund followed by
the purchase of shares in another. Therefore, any gain or loss
realized on the exchange is recognizable for federal income tax
purposes (unless, of course, your account is tax-deferred).
<PAGE>
4. The Fund reserves the right to reject any exchange request, or to
modify or terminate the exchange policy, when it is in the best
interests of the Fund and its shareholders. Notice of all such
modifications or termination will be given at least 60 days prior
to the effective date of the change in privilege, except for
unusual instances (such as when redemptions of the exchanged
shares are suspended under Section 22(e) of the Investment
Company Act of 1940, or when sales of the fund into which you are
exchanging are temporarily stopped).
Distribution Expenses. The Fund is authorized under a Plan and
Agreement of Distribution pursuant to Rule 12b-1 under the Investment Company
Act of 1940 (the "Plan") to use its assets to finance certain activities
relating to the distribution of its shares to investors. Under the Plan, monthly
payments may be made by the Fund to IDI to permit IDI, at its discretion, to
engage in certain activities, and provide certain services approved by the board
of directors of the Fund in connection with the distribution of the Fund's
shares to investors. These activities and services may include the payment of
compensation (including incentive compensation and/or continuing compensation
based on the amount of customer assets maintained in the Fund) to securities
dealers and other financial institutions and organizations, which may include
IDI-affiliated companies, to obtain various distribution-related and/or
administrative services for the Fund. Such services may include, among other
things, processing new shareholder account applications, preparing and
transmitting to the Fund's transfer agent computer-processable tapes of all
transactions by customers, and serving as the primary source of information to
customers in answering questions concerning the Fund and their transactions with
the Fund.
In addition, other permissible activities and services include
advertising, the preparation, printing and distribution of sales literature,
printing and distribution of prospectuses to prospective investors and such
other services and promotional activities for the Fund as may from time to time
be agreed upon by the Fund and its board of directors, including public
relations efforts and marketing programs to communicate with investors and
prospective investors. These services and activities may be conducted by the
staff of IDI or its affiliates or by third parties.
Under the Plan, the Fund's payments to IDI are limited to an amount
computed at an annual rate of 0.25% of the Fund's average net assets. IDI is not
entitled to payment for overhead expenses under the Plan, but may be paid for
all or a portion of the compensation paid for salaries and other employee
benefits for the personnel of IDI or IFG whose primary responsibilities involve
marketing shares of the INVESCO funds, including the Fund. Payment amounts by
the Fund under the Plan, for any month, may be made to compensate IDI for
permissible activities engaged in and services provided by IDI during the
rolling 12-month period in which that month falls. Therefore, any obligations
incurred by IDI in excess of the limitations described above will not be paid by
the Fund under the Plan, and will be borne by IDI. In addition, IDI and its
affiliates may from time to time make additional payments from its revenues to
securities dealers ^, financial advisers and financial institutions that provide
<PAGE>
distribution-related and/or administrative services for the Fund. No further
payments will be made by the Fund under the Plan in the event of its
termination. ^ Payments made by the Fund may not be used to finance directly the
distribution of shares of any other mutual fund advised by IFG. However,
payments received by IDI which are not used to finance the distribution of
shares of the Fund become part of IDI's revenues and may be used by IDI for only
permissible activities for all of the mutual funds advised by IFG subject to
review by the Fund's directors. Payments made by the Fund under the Plan for
compensation of marketing personnel, as noted above, are based on an allocation
formula designed to ensure that all such payments are appropriate. IDI will bear
any distribution and service related expenses in excess of the amounts which are
compensated pursuant to the Plan. The Plan also authorizes any financing of
distribution which may result from IDI's use of its own resources, including
profits from investment advisory fees received by the Fund provided that such
fees are legitimate and not excessive. For more information see "How Shares Can
Be Purchased -- Distribution Plan" in the Statement of Additional Information.
FUND SERVICES
Shareholder Accounts. IFG will maintain a share account that reflects
your current holdings. Share certificates will be issued only upon specific
request. You will have greater flexibility to conduct transactions if you do not
request certificates.
Transaction Confirmations. You will receive detailed confirmations of
individual purchases, exchanges, and redemptions. If you choose certain
recurring transaction plans (for instance, EasiVest), your transactions will be
confirmed on your quarterly Investment Summary.
Investment Summaries. Each calendar quarter, shareholders receive a
written statement which consolidates and summarizes account activity and value
at the beginning and end of the period for each of their INVESCO funds.
Reinvestment of Distributions. Dividends and other distributions are
automatically reinvested in additional Fund shares at the NAV on the ex-dividend
or ex-distribution date, unless you choose to have dividends and/or other
distributions automatically reinvested in another INVESCO fund or paid by check
(minimum of $10.00).
Telephone Transactions. All shareholders may exchange and redeem Fund
shares by telephone, unless they expressly decline these privileges. By signing
the new account Application, a Telephone Transaction Authorization Form, or
otherwise using these privileges, the investor has agreed that, if the Fund has
followed reasonable procedures, such as recording telephone instructions and
sending written transaction confirmations, it will not be liable for following
<PAGE>
telephone instructions that it believes to be genuine. As a result of this
policy, the investor may bear the risk of any loss due to unauthorized or
fraudulent instructions.
Retirement Plans And IRAs. Fund shares may be purchased for ^ IRAs and
many types of tax-deferred retirement plans. IFG can supply you with information
and forms to establish or transfer your existing plan or account.
HOW TO SELL SHARES
The following chart shows several convenient ways to redeem your Fund
shares. Shares of the Fund may be redeemed at any time at their current NAV next
determined after a request in proper form is received at the Fund's office. The
NAV at the time of the redemption may be more or less than the price you paid to
purchase your shares, depending primarily upon the Fund's investment
performance.
Please specify from which fund you wish to redeem shares. Shareholders
have a separate account for each fund in which they invest.
<PAGE>
HOW TO SELL SHARES
================================================================================
Method Minimum Redemption Please Remember
================================================================================
By Telephone
Call us toll-free $250 (or, if less, This option is not
at 1-800-525-8085. full liquidation of available for
the account) for a shares held in
redemption check; IRAs.
$1,000 for a wire
to bank of record.
The maximum amount
which may be
redeemed by
telephone is
generally $25,000.
These telephone
redemption
privileges may be
modified or
terminated in the
future at the
discretion of IFG.
- --------------------------------------------------------------------------------
In Writing
Mail your request Any amount. The If the shares to be
to INVESCO Funds redemption request redeemed are
Group, Inc., P.O. must be signed by represented by
Box 173706 all registered stock certificates,
Denver, CO 80217- owners of the the certificates
3706. You may also account. Payment must be sent to
send your request will be mailed to IFG.
by overnight your address of
courier to 7800 E. record or to a pre-
Union Ave., Denver, designated bank.
CO 80237.
- --------------------------------------------------------------------------------
By Exchange
Between this and $1,000 to open a See "Exchange
another of the new account; $50 Policy," page 10.
INVESCO funds. Call for written
1-800-525-8085 for requests to
prospectuses of purchase additional
other INVESCO shares for an
funds. You may also existing account.
establish an (The exchange
Automatic Monthly minimum is $250 for
Exchange service exchanges requested
between two INVESCO by telephone.)
funds; call IFG for
further details and
the correct form.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Periodic Withdrawal
Plan
You may call us to $100 per payment, You must have at
request the on a monthly or least $10,000 total
appropriate form quarterly basis. invested with the
and more The redemption INVESCO funds, with
information at 1- check may be made at least $5,000 of
800-525-8085. payable to any that total invested
party you in the fund from
designate. which withdrawals
will be made.
- --------------------------------------------------------------------------------
Payment To Third
Party
Mail your request Any amount. All registered
to INVESCO Funds owners of the
Group, Inc., P.O. account must sign
Box 173706 the request, with a
Denver, CO 80217- signature guarantee
3706. from an eligible
guarantor financial
institution, such
as a commercial
bank or recognized
national or
regional securities
firm.
================================================================================
While the Fund will attempt to process telephone redemptions promptly,
there may be times -- particularly in periods of severe economic or market
disruption -- when you may experience delays in redeeming shares by phone.
Payments of redemption proceeds will be mailed within seven days
following receipt of the redemption request in proper form. However, payment may
be postponed under unusual circumstances -- for instance, if normal trading is
not taking place on the New York Stock Exchange or during an emergency as
defined by the Securities and Exchange Commission. If your shares were purchased
by a check which has not yet cleared, payment will be made promptly upon
clearance of the purchase check (which will take up to 15 days).
If you participate in EasiVest, the Fund's automatic monthly investment
program, and redeem all of the shares in your account, we will terminate any
further EasiVest purchases unless you instruct us otherwise.
Because of the high relative costs of handling small accounts, should
the value of any shareholder's account fall below $250 as a result of
shareholder action, the Fund reserves the right to involuntarily redeem all
shares in such account, in which case the account would be liquidated and the
proceeds forwarded to the shareholder. Prior to any such redemption, a
<PAGE>
shareholder will be notified and given 60 days to increase the value of the
account to $250 or more.
TAXES, DIVIDENDS AND OTHER DISTRIBUTIONS
Taxes. The Fund intends to distribute to shareholders all of its net
investment income, net capital gains and net gains from foreign currency
transactions, if any, in order to continue to qualify for tax treatment as a
regulated investment company. Thus, the Fund does not expect to pay any federal
income or excise taxes.
Unless shareholders are exempt from income taxes, they must include all
dividends and other distributions in taxable income for federal, state and local
income tax purposes. Dividends and other distributions are taxable whether they
are received in cash or automatically reinvested in shares of the Fund or
another fund in the INVESCO group.
Net realized capital gains of the Fund are classified as short-term and
long-term gains depending upon how long the Fund held the security that gave
rise to the gains. Short-term capital gains are included in income from
dividends and interest as ordinary income and are taxed at the taxpayer's
marginal tax rate. The Taxpayer Relief Act of 1997 (the "Tax Act"), enacted in
August 1997, changed the taxation of long-term capital gains for individuals by
applying different capital gains rates depending on the taxpayer's holding
period and marginal rate of federal income tax. Long-term gains realized on the
sale of securities held for more than one year but not for more than 18 months
are taxable at a rate of 28%. This category of long-term gains is often referred
to as "mid-term" gains but is technically termed "28% rate gains". Long-term
gains realized on the sale of securities held for more than 18 months are
taxable at a rate of 20%.^ At the end of each year, information regarding the
tax status of dividends and other distributions is provided to shareholders.
Shareholders should consult their tax advisers as to the effect of the Tax Act
on distributions by the Fund of net capital gain.
Shareholders also may realize capital gains or losses when they sell
their Fund shares at more or less than the price originally paid. Capital gain
on shares held for more than one year will be long-term capital gain, in which
event it will be subject to federal income tax at the rates indicated above.
The Fund may be subject to 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.
Individuals and certain other non-corporate shareholders may be subject
to backup withholding of 31% on dividends, capital gain and other distributions
and redemption proceeds. Unless you are subject to backup withholding for other
<PAGE>
reasons, you can avoid backup withholding on your Fund account by ensuring that
we have a correct, certified tax identification number.
We encourage you to consult a tax adviser with respect to these
matters. For further information see "Dividends, Other Distributions and Taxes"
in the Statement of Additional Information.
Dividends and Other Distributions. The Fund earns ordinary or net
investment income in the form of dividends and interest on its investments.
Dividends paid by the Fund will be based solely on the income earned by it. The
Fund's policy is to distribute substantially all of this income, less Fund
expenses, to shareholders on a quarterly basis, at the discretion of the Fund's
board of directors. Dividends are automatically reinvested in additional shares
of the Fund at the net asset value on the payable date unless otherwise
requested.
In addition, the Fund realizes capital gains and losses when it sells
securities for more or less than it paid. If total gains on sales exceed total
losses (including losses carried forward from previous years), the Fund has a
net realized capital gain. Net realized capital gains, if any, together with
gains, if any, realized on foreign currency transactions, are distributed to
shareholders at least annually, usually in December. Capital gain distributions
are automatically reinvested in shares of the Fund at the net asset value on the
payable date unless otherwise requested.
Dividends and other distributions are paid to holders of shares on the
record date of distribution regardless how long the Fund shares have been held
by the shareholder. The Fund's share price will then drop by the amount of the
distribution on the ex- dividend or ex-distribution date. If a shareholder
purchases shares immediately prior to the distribution, the shareholder will, in
effect, have "bought" the distribution by paying the full purchase price, a
portion of which is then returned in the form of a taxable distribution.
ADDITIONAL INFORMATION
Voting Rights. All shares of the Fund have equal voting rights based on
one vote for each share owned and a corresponding fractional vote for each
fractional share owned. The Fund 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
Fund or as may be required by applicable law or the Fund'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 Fund. The Fund will assist shareholders in
communicating with other shareholders as required by the Investment Company Act
of 1940.
<PAGE>
Master/Feeder Option. As a matter of fundamental policy, the Fund may, in the
future, seek to achieve the Fund's investment objective by investing all of the
Fund's assets in another investment company having substantially the same
fundamental investment objective, policies and limitations. It is expected that
any such investment company would be managed by IFG in substantially the same
manner as the Fund. If permitted by applicable law, any such investment may be
made in the sole discretion of the Fund's board of directors without a vote of
the Fund's shareholders. However, shareholders will be given at least 30 days
prior notice of any such investment. Such an investment would be made only if
the board of directors determines it to be in the best interests of the Fund and
its shareholders based on potential cost savings, operational efficiencies or
other factors. No assurance can be given that costs would be materially reduced
if this option were implemented.
<PAGE>
INVESCO GROWTH FUND
A no-load mutual fund seeking
capital appreciation and
current income.
PROSPECTUS
January 1, 1998
INVESCO FUNDS
INVESCO Distributors, Inc.
Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
1-800-525-8085
PAL(R): 1-800-424-8085
http://www.invesco.com
In Denver, visit one of our
convenient Investor Centers:
Cherry Creek
155-B Fillmore Street;
Denver Tech Center
7800 East Union Avenue
Lobby Level
In addition, all documents filed by the Company with the Securities & Exchange
Commission can be located on a Web site maintained by the Commission at
http://www.sec.gov.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
January 1, 1998
INVESCO GROWTH FUND, INC.
A no-load mutual fund seeking long-
term capital growth and current income
Address: Mailing Address:
7800 East Union Avenue Post Office Box 173706
Denver, Colorado 80237 Denver, Colorado 80217-3706
Telephone:
In Continental U.S., 1-800-525-8085
- --------------------------------------------------------------------------------
INVESCO GROWTH FUND, INC. (the "Fund") is a mutual fund that seeks
long-term capital growth. The Fund also seeks, as a secondary objective, to
obtain investment income through the purchase of securities of carefully
selected companies representing major fields of business and industrial
activity. In pursuing its objectives, the Fund invests primarily in common
stocks but may also invest in other kinds of securities, including convertible
and straight issues of debentures and preferred stock.
A Prospectus for the Fund dated January 1, 1998, which provides the
basic information you should know before investing in the Fund, may be obtained
without charge from INVESCO Distributors, Inc., Post Office Box 173706, Denver,
Colorado 80217-3706. This Statement of Additional Information is not a
prospectus but contains information in addition to and more detailed than that
set forth in the Prospectus. It is intended to provide you with additional
information regarding the activities and operations of the Fund and should be
read in conjunction with the Prospectus.
Investment Adviser: INVESCO FUNDS GROUP, INC.
Investment Distributor: INVESCO DISTRIBUTORS, INC.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
INVESTMENT POLICIES AND RESTRICTIONS........................................3
THE FUND AND ITS MANAGEMENT................................................11
HOW SHARES CAN BE PURCHASED................................................23
HOW SHARES ARE VALUED......................................................27
FUND PERFORMANCE...........................................................28
SERVICES PROVIDED BY THE FUND..............................................29
TAX-DEFERRED RETIREMENT PLANS..............................................30
HOW TO REDEEM SHARES.......................................................31
DIVIDENDS,OTHER DISTRIBUTIONS AND TAXES....................................31
INVESTMENT PRACTICES.......................................................34
ADDITIONAL INFORMATION.....................................................37
APPENDIX A.................................................................40
APPENDIX B.................................................................43
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
Equity Securities. Equity securities include common stocks, preferred
stocks and debt or equity securities that are convertible into them, including
common stock purchase warrants and rights, equity interests in trusts,
partnerships, joint ventures or similar enterprises and depository receipts.
Common stocks, the most familiar type, represent an equity (i.e., ownership)
interest in a corporation. Preferred stock has certain fixed income features,
like a bond, but is actually equity in a company, like common stock. Depository
receipts typically are issued by banks or trust companies and evidence ownership
of underlying securities.
While past performance does not guarantee future results, equity securities
historically have provided the greatest long-term growth potential in a company.
However, their prices generally fluctuate more than other securities, and
reflect changes in a company's financial condition and overall market and
economic conditions. Common stocks generally represent the riskiest investment
in a company.
Debt Securities. As discussed in the sections of the Fund's Prospectus
entitled "Investment Objective And Strategy" and "Investment Policies And
Risks," the debt securities in which the Fund invests generally are subject to
two kinds of risk: credit risk and market risk. Credit risk relates to the
ability of the issuer to meet interest or principal payments or both as they
come due. The ratings given a debt security by Moody's Investors Service, Inc.
("Moody's") and/or Standard & Poor's Ratings Group, a division of The
McGraw-Hill Companies, Inc. ("S&P") provide a generally useful guide as to such
credit risk. Market risk relates to the fact that the market values of debt
securities in which the Fund invests generally will be affected by changes in
the level of interest rates. An increase in interest rates will tend to reduce
the market values of such debt securities, whereas a decline in interest rates
will tend to increase their values.
Restricted/144A Securities. As discussed in the section of the Fund's
Prospectus entitled "Investment Policies And Risks," the Fund may invest in
restricted securities that can be resold to institutional investors pursuant to
Rule 144A under the Securities Act of 1933 ("Rule 144A Securities"). In recent
years, a large institutional market has developed for Rule 144A Securities.
Institutional investors generally will not seek to sell these instruments to the
general public but instead will often depend on an efficient institutional
market in which Rule 144A Securities can readily be resold or on an issuer's
ability to honor a demand for repayment. Therefore, the fact that there are
contractual or legal restrictions on resale to the general public or certain
institutions is not dispositive of the liquidity of such investments.
<PAGE>
Rule 144A under the 1933 Act establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. Institutional markets for Rule 144A Securities
may provide both readily ascertainable values for Rule 144A Securities and the
ability to liquidate an investment in order to satisfy share redemption orders.
An insufficient number of qualified institutional buyers interested in
purchasing a Rule 144A Security held by a Fund^ could affect adversely the
marketability of such security, and the Fund might be unable to dispose of such
security promptly or at reasonable prices.
Repurchase Agreements. As discussed in the section of the Fund's
Prospectus entitled "Investment Policies And Risks," the Fund may invest in
repurchase agreements with respect to debt instruments eligible for investment
by the Fund with member banks of the Federal Reserve System, registered
broker-dealers and registered U.S. government securities dealers. A repurchase
agreement may be considered a loan collateralized by securities. The resale
price reflects an agreed upon interest rate effective for the period the
instrument is held by the Fund and is unrelated to the interest rate on the
underlying instrument. In these transactions, the securities acquired by the
Fund (including accrued interest earned thereon) must have a total value at
least equal to the value of the repurchase agreement and are held as collateral
by the Fund's custodian bank until the repurchase agreement is completed.
The use of repurchase agreements involves certain 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 upon disposition of the security. If the other party to
the agreement becomes insolvent and subject to liquidation or reorganization
under the Bankruptcy Code or other laws, the Fund may experience costs and
delays in realizing on the collateral. 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. While the
Fund's management acknowledges these risks, it is expected that the risks can
be minimized through careful monitoring procedures.
Lending of Securities. As described in the section of the Fund's
Prospectus entitled "Investment Policies And Risks," the Fund may lend its
portfolio securities to qualified brokers, dealers, banks or other financial
institutions, provided that such loans are callable at any time by the Fund and
are at all times secured by collateral consisting of cash or securities issued
or guaranteed by the United States government or its agencies, or any
combination thereof, equal to at least the market value, determined daily, of
the loaned securities. The advantage of such loans is that the Fund continues to
<PAGE>
have the benefits (and risks) of ownership of the loaned securities, while at
the same time receiving income from the borrower of the securities. Loans will
be made only to firms deemed by the adviser or sub-adviser (under procedures
established by the Company's board of directors) to be creditworthy and when the
amount of interest income to be received justifies the inherent risks. A loan
may be terminated by the borrower on one business day's notice, or by the Fund
at any time. If at any time the borrower fails to maintain the required amount
of collateral (at least 100% of the market value of the borrowed securities,
plus accrued interest and dividends), the Fund will require the deposit of
additional collateral not later than the business day following the day on which
a collateral deficiency occurs or the collateral appears inadequate. If the
deficiency is not remedied by the end of that period, the Fund will use the
collateral to replace the securities while holding the borrower liable for any
excess of replacement cost over collateral. Upon termination of the loan, the
borrower is required to return the securities to the Fund. Any gain or loss
during the loan period would inure to the Fund.
Futures and Options on Futures. As described in the Fund's Prospectus,
the Fund may enter into futures contracts, and purchase and sell ("write")
options to buy or sell futures contracts. The Fund will comply with and adhere
to all limitations in the manner and extent to which it effects transactions in
futures and options on such futures currently imposed by the rules and policy
guidelines of the Commodity Futures Trading Commission as conditions for
exemption of a mutual fund, or the investment advisers thereto, from
registration as a commodity pool operator. The Fund will not, as to any
positions, whether long, short or a combination thereof, enter into futures and
options thereon for which the aggregate initial margins and premiums exceed 5%
of the fair market value of its assets after taking into account unrealized
profits and losses on options it has entered into. In the case of an option that
is "in-the-money," as defined in the Commodity Exchange Act (the "CEA"), the
in-the-money amount may be excluded in computing such 5%. (In general a call
option on a future is "in-the-money" if the value of the future exceeds the
exercise ("strike") price of the call; a put option on a future is
"in-the-money" if the value of the future which is the subject of the put is
exceeded by the strike price of the put.) The Fund may use futures and options
thereon solely for bona fide hedging or for other non-speculative purposes
within the meaning and intent of the applicable provisions of the CEA.
Unlike when the Fund purchases or sells a security, no price is paid or
received by the Fund upon the purchase or sale of a futures contract. Instead,
the Fund will be required to deposit in its segregated asset account an amount
of cash or qualifying securities (currently U.S. Treasury bills), currently in a
minimum amount of $15,000. This is called "initial margin." Such initial margin
<PAGE>
is in the nature of a performance bond or good faith deposit on the contract.
However, since losses on open contracts are required to be reflected in cash in
the form of variation margin payments, the Fund may be required to make
additional payments during the term of the contracts to its broker. Such
payments would be required, for example, where, during the term of an interest
rate futures contract purchased by the Fund, there was a general increase in
interest rates, thereby making the Fund's portfolio securities less valuable. In
all instances involving the purchase of financial futures contracts by the Fund,
an amount of cash together with such other securities as permitted by applicable
regulatory authorities to be utilized for such purpose, at least equal to the
market value of the futures contracts, will be deposited in a segregated account
with the Fund's custodian to collateralize the position. At any time prior to
the expiration of a futures contract, the Fund may elect to close its position
by taking an opposite position which will operate to terminate the Fund's
position in the futures contract. For a more complete discussion of the risks
involved in futures and options on futures and other securities, refer to
Appendix B ("Description of Futures, Options and Forward Contracts").
Where futures are purchased to hedge against a possible increase in the
price of a security before the Fund is able in an orderly fashion to invest in
the security, it is possible that the market may decline instead. If the Fund,
as a result, concluded not to make the planned investment at that time because
of concern as to possible further market decline or for other reasons, the Fund
would realize a loss on the futures contract that is not offset by a reduction
in the price of securities purchased.
In addition to the possibility that there may be an imperfect
correlation or no correlation at all between movements in the futures contracts
and the portion of the portfolio being hedged, the price of futures may not
correlate perfectly with movements in the prices due to certain market
distortions. All participants in the futures market are subject to margin
deposit and maintenance requirements. Rather than meeting additional margin
deposit requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between underlying
instruments and the value of the futures contract. Moreover, the deposit
requirements in the futures market are less onerous than margin requirements in
the securities market and may therefore cause increased participation by
speculators in the futures market. Such increased participation may also cause
temporary price distortions. Due to the possibility of price distortion in the
futures market and because of the imperfect correlation between movements in the
underlying instrument and movements in the prices of futures contracts, the
value of futures contracts as a hedging device may be reduced.
<PAGE>
In addition, if the Fund has insufficient available cash, it may at
times have to sell securities to meet variation margin requirements. Such
sales may have to be effected at a time when it may be disadvantageous to do so.
Options on Futures Contracts. The Fund may buy and write options on
futures contracts for hedging purposes; options are also included in the types
of instruments sometimes known as derivatives. The purchase of a call option on
a futures contract is similar in some respects to the purchase of a call option
on an individual security. Depending on the pricing of the option compared to
either the price of the futures contract upon which it is based or the price of
the underlying instrument, ownership of the option may or may not be less risky
than ownership of the futures contract or the underlying instrument. As with the
purchase of futures contracts, when the Fund is not fully invested it may buy a
call option on a futures contract to hedge against a market advance.
The writing of a call option on a futures contract constitutes a
partial hedge against declining prices of the security or foreign currency which
is deliverable under, or of the index comprising, the futures contract. If the
futures price at the expiration of the option is below the exercise price, the
Fund will retain the full amount of the option premium which provides a partial
hedge against any decline that may have occurred in the Fund's portfolio
holdings. The writing of a put option on a futures contract constitutes a
partial hedge against increasing prices of the security or foreign currency
which is deliverable under, or of the index comprising, the futures contract. If
the futures price at expiration of the option is higher than the exercise price,
the Fund will retain the full amount of the option premium which provides a
partial hedge against any increase in the price of securities which the Fund is
considering buying. If a call or put option which the Fund has written is
exercised, the Fund will incur a loss which will be reduced by the amount of the
premium it received. Depending on the degree of correlation between changes in
the value of its portfolio securities and changes in the value of the futures
positions, the Fund's losses from existing options on futures may to some extent
be reduced or increased by changes in the value of portfolio securities.
The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities. For
example, the Fund may buy a put option on a futures contract to hedge the Fund's
portfolio against the risk of falling prices.
The amount of risk the Fund assumes when it buys an option on a futures
contract is the premium paid for the option plus related transaction costs. In
addition to the correlation risks discussed above, the purchase of an option
also entails the risk that changes in the value of the underlying futures
contract will not be reflected fully in the value of the options bought.
<PAGE>
Forward Foreign Currency Contracts
The Fund may enter into forward currency contracts, which are included
in the types of instruments sometimes known as derivatives, to purchase or sell
foreign currencies (i.e., non-U.S. currencies) as a hedge against possible
variations in foreign exchange rates. A forward foreign currency contract is an
agreement between the contracting parties to exchange an amount of currency at
some future time at an agreed upon rate. The rate can be higher or lower than
the spot rate between the currencies that are the subject of the contract. A
forward contract generally has no deposit requirement, and such transactions do
not involve commissions. By entering into a forward contract for the purchase or
sale of the amount of foreign currency invested in a foreign security
transaction, the Fund can hedge against possible variations in the value of the
dollar versus the subject currency either between the date the foreign security
is purchased or sold and the date on which payment is made or received or during
the time the Fund holds the foreign security. Hedging against a decline in the
value of a currency in the foregoing manner does not eliminate fluctuations in
the prices of portfolio securities or prevent losses if the prices of such
securities decline. Furthermore, such hedging transactions preclude the
opportunity for gain if the value of the hedged currency should rise. The Fund
will not speculate in forward currency contracts. Although the Fund has not
adopted any limitations on its ability to use forward contracts as a hedge
against fluctuations in foreign exchange rates, the Fund does not attempt to
hedge all of its non-U.S. portfolio positions and will enter into such
transactions only to the extent, if any, deemed appropriate by its investment
adviser or sub-adviser. The Fund will not enter into forward contracts for a
term of more than one year.
Investment Restrictions. As described in the section of the Fund's
Prospectus entitled "Investment Policies and Risks," the Fund operates under
certain investment restrictions. The following restrictions are fundamental and
may not be changed with respect to the Fund without the prior approval of the
holders of a majority, as defined in the Investment Company Act of 1940 (the
"1940 Act"), of the outstanding voting securities of the Fund. For purposes of
the Fund's investment 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 the Fund.
Under these restrictions, the Fund will not:
(1) issue preference shares or create any funded debt;
(2) sell short or buy on margin, except for the Fund's purchase or
sale of options or futures, or writing, purchasing or selling
puts or calls options;
<PAGE>
(3)* borrow money in excess of 5% of the value of its total assets
and then only from banks, and when borrowing, it is a
temporary measure for emergency purposes;
(4) invest in the securities of any other investment company
except for a purchase or acquisition in accordance with a plan
of reorganization, merger or consolidation;
(5) purchase securities if the purchase would cause the Fund, at
the time, to have more than 5% of the value of its total
assets invested in the securities of any one company or to own
more than 10% of the voting securities of any one company
(except obligations issued or guaranteed by the U.S.
Government);
(6) make loans to any person, except through the purchase
of debt securities in accordance with the Fund's
investment policies, or the lending of portfolio
securities to broker-dealers or other institutional
investors, or the entering into repurchase agreements
with member banks of the Federal Reserve System,
registered broker-dealers and registered government
securities dealers. The aggregate value of all
portfolio securities loaned may not exceed 33-1/3% of
the Fund's total assets (taken at current value). No
more than 10% of the Fund's total assets may be
invested in repurchase agreements maturing in more than
seven days;
(7) buy or sell commodities, commodity contracts or real
estate (however, the Fund may purchase securities of
companies investing in real estate). This restriction
shall not prevent the Fund from purchasing or selling
options on individual securities, security indexes, and
currencies, or financial futures or options on
financial futures, or undertaking forward foreign
currency contracts.
(8) invest in any company for the purpose of exercising
control or management;
(9) buy other than readily marketable securities;
(10) engage in the underwriting of any securities;
(11) purchase securities of any company in which any officer or
director of the Fund or its investment adviser owns more than
1/2 of 1% of the outstanding securities, or in which all of
the officers and directors of the Fund and its investment
adviser, as a group, own more than 5% of such securities;
<PAGE>
(12) invest more than 25% of the value of the Fund's total assets
in one particular industry.
*The Fund has never borrowed money for other than temporary cash flow purposes
and has no intention of doing so in the foreseeable future unless unexpected
developments make borrowing of money by the Fund under this fundamental
investment restriction desirable in order to allow the Fund to meet its
obligation (e.g., processing redemptions in a timely manner).
With respect to investment restriction (9) above, the board of
directors has delegated to the Funds' investment adviser the authority to
determine whether a liquid market exists for securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933, or any successor to such
rule, and whether or not such securities are subject to restriction (9) above.
Under guidelines established by the board of directors, the adviser will
consider the following factors, among others, in making this determination: (1)
the unregistered nature of a Rule 144A security; (2) the frequency of trades and
quotes for the security; (3) the number of dealers willing to purchase or sell
the security and the number of other potential purchasers; (4) dealer
undertakings to make a market in the security; and (5) the nature of the
security and the nature of marketplace trades (e.g., the time needed to dispose
of the security, the method of soliciting offers and the mechanics of transfer).
In applying restriction (12) above, the Fund uses a modified S&P
industry code classification schema which uses various sources to classify.
The following non-fundamental investment restrictions have been adopted
by the Fund. These investment restrictions may be changed by the directors at
their discretion, without shareholder approval:
(1) The Fund will not enter into any futures contracts,
options on futures, puts and calls if immediately
thereafter the aggregate margin deposits on all
outstanding derivatives positions held by the Fund and
premiums paid on outstanding positions, after taking
into account unrealized profits and losses, would
exceed 5% of the market value of the total assets of
the Fund.
(2) The Fund will not enter into any derivatives positions if the
aggregate net amount of the Fund's commitments under
outstanding derivatives positions of the Fund would exceed the
market value of the total assets of the Fund.
<PAGE>
Under the 1940 Act, 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 duties of their office.
THE FUND AND ITS MANAGEMENT
The Fund. The Fund was incorporated under the laws of Maryland on
January 8, 1935. On December 2, 1994, the Fund's name was changed from
"Financial Industrial Fund, Inc." to "INVESCO Growth Fund, Inc."
The Investment Adviser. INVESCO Funds Group, Inc., a Delaware
corporation ("IFG"), is employed as the Fund's investment adviser. IFG was
established in 1932 and also serves as an investment adviser to INVESCO Capital
Appreciation Funds, Inc. (formerly, INVESCO Dynamics Fund, Inc.), INVESCO
Diversified Funds, Inc., INVESCO Emerging Opportunity Funds, Inc., INVESCO
Income Funds, Inc., INVESCO Industrial Income Fund, Inc., INVESCO International
Funds, Inc., INVESCO Money Market Funds, Inc., INVESCO Multiple Asset Funds,
Inc., INVESCO Specialty Funds, Inc., INVESCO Strategic Portfolios, Inc., INVESCO
Tax-Free Income Funds, Inc., INVESCO Value Trust, and INVESCO Variable
Investment Funds, Inc.
The Sub-Adviser. IFG, as investment adviser, has contracted with
INVESCO Trust Company ("INVESCO Trust") to provide investment advisory and
research services to the Fund. INVESCO Trust has the primary responsibility for
providing portfolio investment management services to the Fund. INVESCO Trust, a
trust company founded in 1969, is a wholly-owned subsidiary of IFG.
The Distributor. Effective September 30, 1997, INVESCO Distributors,
Inc. ("IDI") became the Fund's distributor. IDI, established in 1997, is a
registered broker-dealer that acts as distributor for all retail mutual funds
advised by IFG. Prior to September 30, 1997, IFG served as the Fund's
distributor.
IFG, INVESCO Trust and IDI are indirect wholly-owned subsidiaries of
AMVESCAP PLC, a publicly traded holding company that, through its subsidiaries,
engages in the business of investment management on an international basis.
INVESCO PLC changed its name to AMVESCO PLC on March 3, 1997 and to AMVESCAP PLC
on May 8, 1997, as part of a merger between a direct subsidiary of INVESCO PLC
and A I M Management Group, Inc. that created one of the largest investment
management businesses in the world with approximately $177.5 billion in assets
under management. IFG was established in 1932, and, as of August 31, 1997,
managed 14 mutual funds, consisting of 46 separate portfolios, on behalf of over
854,000 shareholders. AMVESCAP PLC's other North American subsidiaries include
the following:
<PAGE>
--INVESCO Capital Management, Inc. of Atlanta, Georgia manages
institutional investment portfolios, consisting primarily of discretionary
employee benefit plans for corporations and state and local governments, and
endowment funds. INVESCO Capital Management, Inc. is the sole shareholder of
INVESCO Services, Inc., a registered broker-dealer ^.
--INVESCO Management & Research, Inc. of Boston, Massachusetts primarily
manages pension and endowment accounts.
--PRIMCO Capital Management, Inc. of Louisville, Kentucky specializes in
managing stable return investments, principally on behalf of Section 401(k)
retirement plans.
--INVESCO Realty Advisors, Inc. of Dallas, Texas is responsible for
providing advisory services in the U.S. real estate markets for pension plans
and public pension funds, as well as endowment and foundation accounts.
--A I M Advisors, Inc. of Houston, Texas provides investment advisory and
administrative services for retail and institutional mutual funds.
--A I M Capital Management, Inc. of Houston, Texas provides investment
advisory services to individuals, corporations, pension plans and other private
investment advisory accounts and also serves as a sub-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 of 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, EC2M 4YR, England.
As indicated in the Fund's Prospectus, IFG and INVESCO Trust permit
investment and other personnel to purchase and sell securities for their own
accounts in accordance with a compliance policy governing personal investing by
directors, officers and employees of IFG, INVESCO Trust and their North American
affiliates. The policy requires officers, inside directors, investment and other
personnel of IFG, INVESCO Trust and their North American affiliates to pre-clear
all transactions in securities not otherwise exempt under the policy. Requests
for trading authority will be denied when, among other reasons, the proposed
personal transaction would be contrary to the provisions of the policy or would
be deemed to adversely affect any transaction then known to be under
consideration for or to have been effected on behalf of any client account,
including the Fund.
<PAGE>
In addition to the pre-clearance requirement described above, the policy
subjects officers, inside directors, investment and other personnel of IFG,
INVESCO Trust and their North American affiliates to various trading
restrictions and reporting obligations. All reportable transactions are reviewed
for compliance with the policy. The provisions of this policy are administered
by and subject to exceptions authorized by IFG.
Investment Advisory Agreement. IFG serves as investment adviser to the Fund
pursuant to an investment advisory agreement dated February 28, 1997 (the
"Agreement") with the Fund which was approved by the board of directors on
November 6, 1996, by vote cast in person by a majority of the directors of the
Fund, including a majority of the directors of the Fund who are not "interested
persons" of the Fund or IFG at a meeting called for such purpose. The Agreement
was approved by the Fund's shareholders on January 31, 1997, for an initial term
expiring February 28, 1999. Thereafter, the Agreement may be continued from year
to year as long as each such continuance is specifically approved at least
annually by the board of directors of the Fund, or by a vote of the holders of a
majority, as defined in the 1940 Act, of the outstanding shares of the Fund. Any
such continuance also must be approved by a majority of the Fund's directors who
are not parties to the Agreement or interested persons (as defined in the 1940
Act) of any such party, cast in person at a meeting called for the purpose of
voting on such continuance. The Agreement may be terminated at any time without
penalty by either party upon sixty (60) days' written notice and terminates
automatically in the event of an assignment to the extent required by the 1940
Act and the Rules thereunder.
The Agreement provides that IFG shall manage the investment portfolio of
the Fund in conformity with the Fund's investment policies (either directly or
by delegation to a sub-adviser which may be a company affiliated with IFG).
Further, IFG shall perform all administrative, internal accounting (including
computation of net asset value), clerical, statistical, secretarial and all
other services necessary or incidental to the administration of the affairs of
the Fund excluding, however, those services that are the subject of separate
agreement between the Fund and IFG or any affiliate thereof, including the
distribution and sale of Fund shares and provision of transfer agency, dividend
disbursing agency and registrar services, and services furnished under an
Administrative Services Agreement with IFG discussed below. Services provided
under the Agreement include but are not limited to: supplying the Fund with
officers, clerical staff and other employees, if any, who are necessary in
connection with the Fund's operations; furnishing office space, facilities,
equipment and supplies; providing personnel and facilities required to respond
to inquiries related to shareholder accounts; conducting periodic compliance
reviews of the Fund's operations; preparation and review of required documents,
reports and filings by IFG's in-house legal and accounting staff (including the
prospectus, statement of additional information, proxy statements, shareholder
<PAGE>
reports, tax returns, reports to the SEC and other corporate documents of the
Fund), except insofar as the assistance of independent accountants or attorneys
is necessary or desirable; supplying basic telephone service and other
utilities; and preparing and maintaining certain of the books and records
required to be prepared and maintained by the Fund under the 1940 Act. Expenses
not assumed by IFG are borne by the Fund.
As full compensation for its advisory services provided to the Fund, IFG is
entitled to receive a monthly fee. The fee is calculated daily at an annual rate
of: 0.60% on the first $350 million of the average net assets of the Fund;
reduced to 0.55% on the next $350 million of the average net assets of the Fund;
and further reduced to 0.50% on the Fund's average net assets exceeding $700
million. For the fiscal years ended August 31, 1997, 1996 and 1995, the Fund
paid INVESCO advisory fees of $3,922,981, $3,196,929 and $2,757,404,
respectively.
Sub-Advisory Agreement. INVESCO Trust serves as sub-adviser to the Fund
pursuant to a sub-advisory agreement dated February 28, 1997 (the
"Sub-Agreement") with IFG which was approved by the board of directors on
November 6, 1996., by a vote cast in person by a majority of the directors of
the Fund, including a majority of the directors who are not "interested persons"
of the Fund, IFG or INVESCO Trust at a meeting called for such purpose.
Shareholders of the Fund approved the Sub-Agreement on January 31, 1997, for an
initial term expiring February 28, 1999. Thereafter, the Sub-Agreement may be
continued from year to year as long as each such continuance is specifically
approved by the board of directors of the Fund, or by a vote of the holders of a
majority, as defined in the 1940 Act, of the outstanding shares of the Fund.
Each such continuance must also be approved by a majority of the directors who
are not parties to the Sub- Agreement or interested persons (as defined in the
1940 Act) of any such party, cast in person at a meeting called for the purpose
of voting on such continuance. The Sub-Agreement may be terminated at any time
without penalty by either party or the Fund upon sixty (60) days' written notice
and terminates automatically in the event of an assignment to the extent
required by the 1940 Act and the rules thereunder.
The Sub-Agreement provides that INVESCO Trust, subject to the supervision
of IFG and the Fund's board of directors, shall manage the investment portfolio
of the Fund in conformity with the Fund's investment policies. These management
services include: (a) managing the investment and reinvestment of all the
assets, now or hereafter acquired, of the Fund and executing all purchases and
sales of portfolio securities; (b) maintaining a continuous investment program
for the Fund, consistent with (i) the Fund's investment policies as set forth in
the Fund's Articles of Incorporation, 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 Fund, as from time to time
amended and in use under the Securities Act of 1933, as amended, and (ii) the
<PAGE>
Fund's status as a regulated investment company under the Internal Revenue Code
of 1986, as amended; (c) determining what securities are to be purchased or sold
for the Fund, unless otherwise directed by the directors of the Fund or IFG, and
executing transactions accordingly; (d) providing the Fund the benefit of all of
the investment analysis and research, the reviews of current economic conditions
and trends, and the consideration of long-range investment policy now or
hereafter generally available to investment advisory customers of the
Sub-Adviser; (e) determining what portion of the Fund should be invested in the
various types of securities authorized for purchase by the Fund; and (f) making
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.
The Sub-Agreement provides that as compensation for its services,
INVESCO Trust shall receive from IFG, at the end of each month, a fee based upon
the average daily value of the Fund's net assets at the following annual rates:
prior to January 1, 1998, 0.25% on the first $200 million of the average net
assets of the Fund and 0.20% on the Fund's average net assets in excess of $200
million. Effective January 1, 1998, INVESCO Trust shall receive a fee based on
the following rates: 0.20% on the first $350 million of the average net assets
of the Fund; 0.1833% on the second $350 million of the average net assets of the
Fund and 0.1667% on the Fund's average net assets over $700 million. The
Sub-Advisory fee is paid by IFG, NOT the Fund.
Administrative Services Agreement. IFG, either directly or through
affiliated companies, provides certain administrative, sub-accounting and
recordkeeping services to the Fund pursuant to an Administrative Services
Agreement dated February 28, 1997 (the "Administrative Agreement"). The
Administrative Agreement was approved by the board of directors on November 6,
1996, by a vote cast in person by all of the directors of the Fund, including
all of the directors who are not "interested persons" of the Fund or IFG at a
meeting called for such purpose. The Administrative Agreement is for an initial
term expiring February 28, 1998, and has been continued by action of the board
of directors until May 15, 1998. The Administrative Agreement may be continued
from year to year as long as each such continuance is specifically approved by
the board of directors of the Fund, including a majority of the directors who
are not parties to the Administrative Agreement or interested persons (as
defined in the 1940 Act) of any such party, cast in person at a meeting called
for the purpose of voting on such continuance. The Administrative Agreement may
be terminated at any time without penalty by IFG on sixty (60) days' written
notice, or by the Fund upon thirty (30) days' written notice, and terminates
automatically in the event of an assignment unless the Fund's board of directors
approves such assignment.
<PAGE>
The Administrative Agreement provides that IFG shall provide the following
services to the Fund: (A) such sub-accounting and recordkeeping services and
functions as are reasonably necessary for the operation of the Fund; and (B)
such sub-accounting, recordkeeping and administrative services and functions,
which may be provided by affiliates of IFG, 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
Agreement, the Fund pays a fee to IFG consisting of a base fee of $10,000 per
year, plus an additional incremental fee computed daily and paid monthly at an
annual rate of 0.015% per year of the average net assets of the Fund. For the
fiscal years ended August 31, 1997, 1996 and 1995, the Fund paid IFG
administrative services fees in the amount of $112,386, $92,412 and $80,433,
respectively.
Transfer Agency Agreement. IFG also performs transfer agent, dividend
disbursing agent and registrar services for the Fund pursuant to a Transfer
Agency Agreement dated February 28, 1997, which was approved by the board of
directors of the Fund, including a majority of the Fund's directors who are not
parties to the Transfer Agency Agreement or "interested persons" of any such
party, on November 6, 1996, for an initial term expiring February 28, 1998 and
has been extended by action of the board of directors until May 15, 1998.
Thereafter, the Transfer Agency Agreement may be continued from year to year as
long as such continuance is specifically approved at least annually by the board
of directors of the Fund, or by a vote of the holders of a majority of the
outstanding shares of the Fund. Any such continuance also must be approved by a
majority of the Fund's directors who are not parties to the Transfer Agency
Agreement or interested persons (as defined by the 1940 Act) of any such party,
cast in person at a meeting called for the purpose of voting on such
continuance. The Transfer Agency Agreement may be terminated at any time without
penalty by either party upon sixty (60) days' written notice and terminates
automatically in the event of assignment.
The Transfer Agency Agreement provides that the Fund shall pay to IFG an
annual fee of $20.00 per shareholder account or, where applicable, per
participant in an omnibus account. This fee is paid monthly at a rate of 1/12 of
the annual fee and is based upon the number of shareholder accounts and omnibus
account participants in existence during each month.
For the fiscal years ended August 31, 1997, 1996 and 1995, the Fund paid
IFG transfer agency fees of $1,066,438, $751,390 and $681,911, respectively.
Officers and Directors of the Fund. The overall direction and supervision
of the Fund is the responsibility of the board of directors, which has the
primary duty of seeing that the Fund's general investment policies and programs
<PAGE>
of the Fund are carried out and that the Fund's portfolio is properly
administered. The officers of the Fund, all of whom are officers and employees
of, and are paid by, IFG, are responsible for the day-to-day administration of
the Fund. The investment adviser for the Fund has the primary responsibility for
making investment decisions on behalf of the Fund. These investment decisions
are reviewed by the investment committee of IFG.
All of the officers and directors of the Fund hold comparable positions
with INVESCO Capital Appreciation Funds, Inc. (formerly, INVESCO Dynamics Fund,
Inc.), INVESCO Diversified Funds, Inc., INVESCO Emerging Opportunity Funds,
Inc., INVESCO Income Funds, Inc., INVESCO Industrial Income Fund, Inc., INVESCO
International Funds, Inc., INVESCO Money Market Funds, Inc., INVESCO Multiple
Asset Funds, Inc., INVESCO Specialty Funds, Inc., INVESCO Strategic Portfolios,
Inc., INVESCO Tax-Free Income Funds, Inc., and INVESCO Variable Investment
Funds, Inc. All of the directors of the Fund also serve as trustees of INVESCO
Value Trust. In addition, all of the directors of the Fund, with the exception
of Mr. Hesser, serve as trustees of INVESCO Treasurer's Series Trust. All of the
officers of the Fund also hold comparable positions with INVESCO Value Trust.
Set forth below is information with respect to each of the Fund's officers and
directors. Unless otherwise indicated, the address of the directors and officers
is Post Office Box 173706, Denver, Colorado 80217-3706. Their affiliations
represent their principal occupations during the past five years.
CHARLES W. BRADY,*+** Chairman of the Board. Chief Executive Officer and
Director of AMVESCAP PLC, London, England, and of various subsidiaries thereof.
Chairman of the Board of INVESCO Treasurer's Series Trust. Address: 1315
Peachtree Street, NE, Atlanta, Georgia. Born: May 11, 1935.
FRED A. DEERING,+# Vice Chairman of the Board. Vice Chairman of INVESCO
Treasurer's Series Trust. Trustee of INVESCO Global Health Sciences Fund.
Formerly, Chairman of the Executive Committee and Chairman of the Board of
Security Life of Denver Insurance Company, Denver, Colorado; Director of ING
America Life Insurance Company, Urbaine Life Insurance Company and Midwestern
United Life Insurance Company. Address: Security Life Center, 1290 Broadway,
Denver, Colorado. Born: January 12, 1928.
DAN J. HESSER,+* President, CEO and Director. Chairman of the Board,
President, and Chief Executive Officer of INVESCO Funds Group, Inc. and INVESCO
Distributors, Inc; President and Director of INVESCO Trust Company; President
and Chief Operating Officer of INVESCO Global Health Sciences Fund. Born:
December 27, 1939.
VICTOR L. ANDREWS,** Director. Professor Emeritus, Chairman Emeritus and
Chairman of the CFO Roundtable of the Department of Finance at Georgia State
University, Atlanta, Georgia; President, Andrews Financial Associates, Inc.
<PAGE>
(consulting firm); since October 1984, Director of the Center for the Study of
Regulated Industry at Georgia State University; formerly, member of the
faculties of the Harvard Business School and the Sloan School of Management of
MIT. Dr. Andrews is also a Director of the Southeastern Thrift and Bank Fund,
Inc. and The Sheffield Funds, Inc. Address: 4625 Jettridge Drive, Atlanta,
Georgia. Born: June 23, 1930.
BOB R. BAKER,+** Director. President and Chief Executive Officer of AMC
Cancer Research Center, Denver, Colorado, since January 1989; until mid-December
1988, Vice Chairman of the Board of First Columbia Financial Corporation (a
financial institution), Englewood, Colorado. Formerly, Chairman of the Board and
Chief Executive Officer of First Columbia Financial Corporation. Address: 1775
Sherman Street, #1000, Denver, Colorado. Born: August 7, 1936.
LAWRENCE H. BUDNER,# Director. Trust Consultant; prior to June 30, 1987,
Senior Vice President and Senior Trust Officer of InterFirst Bank, Dallas,
Texas. Address: 7608 Glen Albens Circle, Dallas, Texas. Born: July 25, 1930.
DANIEL D. CHABRIS,+# Director. Financial Consultant; Assistant Treasurer of
Colt Industries Inc., New York, New York, from 1966 to 1988. Address: 19
Kingsbridge Way, Madison, Connecticut. Born: August 1, 1923.
WENDY L. GRAMM, Ph.D.,** Director. Self-employed (since 1993); Professor of
Economics and Public Administration, University of Texas at Arlington. Formerly,
Chairman, Commodity Futures Trading Commission from 1988 to 1993, administrator
for Information and Regulatory Affairs at the Office of Management and Budget
from 1985 to 1988, Executive Director of the Presidential Task Force on
Regulatory Relief and Director of the Federal Trade Commission's Bureau of
Economics. Dr. Gramm is also a director of the Chicago Mercantile Exchange,
Enron Corporation, IBP, Inc., State Farm Insurance Company, State Farm Life
Insurance Company, ^ Independant Women's Forum, International Republic
Institute, and the Republican Women's Federal Forum. Dr. Gramm is also a member
of the Board of Visitors, College of Business Administration, University of
Iowa, and a member of the Board of Visitors, Center for Study of Public Choice,
George Mason University. Address: 4201 Yuma Street, N.W., Washington, D.C. Born:
January 10, 1945.
HUBERT L. HARRIS, JR.,* Director. Chairman (since 1996) and President
(January 1990 to May 1996) of INVESCO Services, Inc.; Chief Executive Officer of
INVESCO Individual Services Group. Member of the Executive Committee of the
Alumni Board of Trustees of Georgia Institute of Technology. Address: 1315
Peachtree Street, NE, Atlanta, Georgia. Born: July 15, 1943.
<PAGE>
KENNETH T. KING,# Director. Formerly, Chairman of the Board of The Capitol
Life Insurance Company, Providence Washington Insurance Company, and Director of
numerous subsidiaries thereof in the U.S. Formerly, Chairman of the Board of The
Providence Capitol Companies in the United Kingdom and Guernsey. Chairman of the
Board of the Symbion Corporation (a high technology company) until 1987.
Address: 4080 North Circulo Manzanillo, Tucson, Arizona. Born: November 16,
1925.
JOHN W. MCINTYRE,# Director. Retired. Formerly, Vice Chairman of the Board
of Directors of the Citizens and Southern Corporation and Chairman of the Board
and Chief Executive Officer of the Citizens and Southern Georgia Corporation and
Citizens and Southern National Bank. Director of Golden Poultry Co., Inc.
Trustee of INVESCO Global Health Sciences Fund and Gables Residential Trust.
Address: 7 Piedmont Center, Suite 100, Atlanta, Georgia. Born: September 14,
1930.
LARRY SOLL, Ph.D.,** Director. Formerly, Chairman of the Board (1987 to
1994), Chief Executive Officer (1982 to 1989 and 1993 to 1994) and President
(1982 to 1989) of Synergen Corp. Director of Synergen since incorporation in
1982. Director of ISD Pharmaceuticals, Inc.^; Trustee of INVESCO Global Health
Sciences Fund. Address: 345 Poorman Road, Boulder, Colorado. Born: April
26, 1942.
GLEN A. PAYNE, Secretary. Senior Vice President (since 1995), General
Counsel and Secretary of INVESCO Funds Group, Inc. and INVESCO Trust Company
(since 1989) and INVESCO Distributors, Inc. (since 1997); Vice President (May
1989 to April 1995), Secretary and General Counsel of INVESCO Funds Group, Inc.;
formerly, employee of a U.S. regulatory agency, Washington, D.C., (June 1973
through May 1989). Born: September 25, 1947.
RONALD L. GROOMS, Treasurer. Senior Vice President and Treasurer of INVESCO
Funds Group, Inc. and INVESCO Trust Company (since 1988). Senior Vice President
and Treasurer of INVESCO Distributors, Inc. (since 1997). Born: October 1, 1946.
WILLIAM J. GALVIN, JR., Assistant Secretary. Senior Vice President of
INVESCO Funds Group, Inc. (since 1995) and of INVESCO Distributors, Inc. (since
1997) and Trust Officer of INVESCO Trust Company (since July 1995) and formerly
(August 1992 to July 1995), Vice President of INVESCO Funds Group, Inc. and
Trust Officer of INVESCO Trust Company. Formerly, Vice President of 440
Financial Group from June 1990 to August 1992; Assistant Vice President of
Putnam Companies from November 1986 to June 1990. Born: August 21, 1956.
ALAN I. WATSON, Assistant Secretary. Vice President of INVESCO Funds Group,
Inc. (since 1984) and Trust Officer of INVESCO Trust Company. Born: September
14, 1941.
JUDY P. WIESE, Assistant Treasurer. Vice President of INVESCO Funds Group,
Inc. (since 1984) and of INVESCO Distributors, Inc. (since 1997) and Trust
Officer of INVESCO Trust Company. Born: February 3, 1948.
<PAGE>
#Member of the audit committee of the Fund.
+Member of the executive committee of the Fund. On occasion, the executive
committee acts upon the current and ordinary business of the Fund 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 Fund. All decisions are
subsequently submitted for ratification by the board of directors.
*These directors are "interested persons" of the Fund as defined in the
1940 Act.
**Member of the management liaison committee of the Fund.
As of October 9, 1997, officers and directors of the Fund, as a group,
beneficially owned less than 1% of the Fund's outstanding shares.
Director Compensation
The following table sets forth, for the fiscal year ended August 31, 1997^,
the compensation paid by the Fund to its independent directors for services
rendered in their capacities as directors of the Fund; the benefits accrued as
Fund 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 Fund. In addition,
the table sets forth the total compensation paid by all of the mutual funds
distributed by INVESCO Distributors, Inc. (including the Fund), INVESCO Advisor
Funds, Inc., INVESCO Treasurer's Series Trust 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, 1996. As of December 31, 1996, there were 49 funds in the INVESCO
Complex. Dr. Soll became an independent director of the Fund effective May 15,
1997. Dr. Gramm became an independent director of the Fund effective July 29,
1997.
<PAGE>
Total
Retirement Compensa-
Benefits Estimated tion From
Aggregate Accrued As Annual INVESCO
Compensa- Part of Benefits Complex
tion From Fund Upon Paid To
Fund(1) Expenses(2) Retirement(3) Directors(1)
Fred A.Deering, ^ $2,914 $1,264 $1,230 $98,850
Vice Chairman of
the Board
Victor L. Andrews ^ 2,879 1,194 1,424 84,350
Bob R. Baker ^ 2,978 1,066 1,909 84,850
Lawrence H. Budner ^ 2,761 1,194 1,424 80,350
Daniel D. Chabris 2,865 1,363 1,012 84,850
A. D. Frazier, Jr.(4) 566 0 0 81,500
Wendy L. Gramm 544 0 0 0
Kenneth T. King 2,357 1,312 1,116 71,350
John W. McIntyre 2,645 0 0 90,350
Larry Soll 1,030 0 0 17,500
------- ------ ------ --------
Total $21,539 $7,393 $8,115 $693,950
% of Net Assets 0.0030%(5) 0.0010%(5) 0.0045%(6)
(1)The vice chairman of the board, the chairmen of the audit, management
liaison and compensation committees, and the members of the executive and
valuation committees, and the members of specially ^ appointed task forces of
the board of 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.
<PAGE>
(3)These figures represent the Fund's share of the estimated annual
benefits payable by the INVESCO Complex (excluding INVESCO Global Health
Sciences Fund which does not participate in any retirement plan) upon the
directors' retirement, calculated using the current method of allocating
director compensation among the funds in the INVESCO Complex. These estimated
benefits assume retirement at age 72 and that the basic retainer payable to the
directors will be adjusted periodically for inflation, for increases in the
number of funds in the INVESCO Complex and for other reasons during the period
in which retirement benefits are accrued on behalf of the respective directors.
This results in lower estimated benefits for directors who are closer to
retirement and higher estimated benefits for directors who are further from
retirement. With the exception of Messrs. Frazier and McIntyre and Drs. Soll and
Gramm, each of these directors has served as a director/trustee of one or more
of the funds in the INVESCO Complex for the minimum five-year period required to
be eligible to participate in the Defined Benefit Deferred Compensation Plan.
(4)Effective February 28, 1997, Mr. Frazier resigned as a director of the
Fund. Effective November 1, 1996, Mr. Frazier was employed by INVESCO PLC (the
predecessor to AMVESCAP PLC), a company affiliated with IFG and did not receive
any director's fees or other compensation from the Fund or other funds in the
INVESCO Complex for his service as a director.
(5)Total as a percentage of the Fund's net assets as of August 31, 1997.
(6)Total as a percentage of the net assets of the INVESCO Complex as of
December 31, 1996.
Messrs. Brady, Harris and Hesser as "interested persons" of the Fund and of
the other funds in the INVESCO Complex, receive compensation as officers or
employees of IFG or its affiliated companies and do not receive any director's
fees or other compensation from the Fund or other funds in the INVESCO Complex
for their service as directors.
The boards of directors/trustees of the mutual funds managed by IFG and
INVESCO Treasurer's Series Trust have adopted a Defined Benefit Deferred
Compensation Plan for the non-interested directors and trustees of the funds.
Under this plan, each director or trustee who is not an interested person of the
funds (as defined in the 1940 Act) and who has served for at least five years (a
"qualified director") is entitled to receive, upon retiring from the boards at
the retirement age of 72 (or the retirement age of 73 to 74, if the retirement
date is extended by the boards for one or two years but less than three years)
continuation of payment for one year (the "first year retirement benefit") of
the annual basic retainer payable by the funds to the qualified director at the
time of his retirement (the "basic retainer"). Commencing with any such
director's second year of retirement, and commencing with the first year of
retirement of a director whose retirement has been extended by the board for
three years, a qualified director shall receive quarterly payments at an annual
rate equal to 40% of the basic retainer. These payments will continue for the
remainder of the qualified director's life or ten years, whichever is longer
(the "reduced retainer payments"). If a qualified director dies or becomes
disabled after age 72 and before age 74 while still a director of the funds, the
first year retirement benefit and the reduced retainer payments will be made to
<PAGE>
him or to his beneficiary or estate. If a qualified director becomes disabled or
dies either prior to age 72 or during his 74th year while still a director of
the funds, the director will not be entitled to receive the first year
retirement benefit; however, the reduced retainer payments will be made to his
beneficiary or estate. The plan is administered by a committee of three
directors who are also participants in the plan and one director who is not a
plan participant. The cost of the plan will be allocated among the INVESCO and
INVESCO Treasurer's Series Trust Funds in a manner determined to be fair and
equitable by the committee. The Fund is not making any payments to directors
under the plan as of the date of this Statement of Additional Information. The
Fund has no stock options or other pension or retirement plans for management or
other personnel and pays no salary or compensation to any of its officers.
The Fund has an audit committee that is comprised of five of the directors
who are not interested persons of the Fund. The committee meets periodically
with the Fund's independent accountants and officers to review accounting
principles used by the Fund, the adequacy of internal controls, the
responsibilities and fees of the independent accountants, and other matters.
The Fund also has a management liaison committee which meets quarterly with
various management personnel of IFG in order (a) to facilitate better
understanding of management and operations of the Fund, and (b) to review legal
and operational matters which have been assigned to the committee by the board
of directors, in furtherance of the board of directors' overall duty of
supervision.
HOW SHARES CAN BE PURCHASED
The Fund's shares are sold on a continuous basis at the net asset value per
share of the Fund next calculated after receipt of a purchase order in good
form. Net asset value per share of the Fund is computed once each day that the
New York Stock Exchange is open as of the close of regular trading on that
Exchange but may also be computed at other times. See "How Shares Are Valued."
IDI acts as the Fund's distributor under a distribution agreement with the Fund
under which it receives no compensation and bears all expenses, including the
costs of printing and distributing prospectuses, incident to marketing of the
Fund's shares, except for such distribution expenses which are paid out of Fund
assets under the Fund's Plan of Distribution which has been adopted by the Fund
in accordance with Rule 12b-1 under the 1940 Act.
Distribution Plan. As described in the section of the Fund's Prospectus
entitled "How To Buy Shares - Distribution Expenses," the Fund has adopted a
Plan and Agreement of Distribution (the "Plan") pursuant to Rule 12b-1 under the
1940 Act. The initial Plan was approved on April 17, 1990, at a meeting called
for such purpose by a majority of the directors of the Fund, including a
majority of the directors who neither are "interested persons" of the Fund nor
have any financial interest in the operation of the Plan ("12b-1 directors").
The board of directors, on February 4, 1997, approved amending the Plan to a
compensation type 12b-1 plan. This amendment of the Plan did not result in
increasing the amount of the Fund's payments thereunder. The Plan was continued
by action of the board of directors until May 15, 1998. Pursuant to
<PAGE>
authorization granted by the Company's board of directors on September 2, 1997,
a new Plan became effective on September 29, 1997, under which IDI assumed all
obligations related to distribution which were previously performed by IFG.
The Plan provides that the Fund may make monthly payments to IDI of
amounts computed at an annual rate no greater than 0.25% of the Fund's average
net assets to permit IDI, at its discretion, to engage in certain activities and
provide services in connection with the distribution of the Fund's shares to
investors. Payment amounts by the Fund under the Plan, for any month, may be
made to compensate IDI for permissible activities engaged in and services
provided by IDI during the rolling 12- month period in which that month falls.
For the fiscal year ended August 31, 1997 the Fund made payments to IFG (the
predecessor of IDI as distributor of shares of the Fund) under the 12b-1 Plan in
the amount of $2,526,261. In addition, as of August 31, 1997, $164,646 of
additional distribution accruals had been incurred under the Plan for the Fund
and will be paid to IDI during the fiscal year ended August 31, 1998. As noted
in the Prospectus, one type of expenditure permitted by the Plan is the payment
of compensation to securities companies, and other financial institutions and
organizations, which may include IDI-affiliated companies, in order to obtain
various distribution-related and/or administrative services for the Fund. The
Fund is authorized by the Plan to use its assets to finance the payments made to
obtain those services. Payments will be made by IDI to broker-dealers who sell
shares of the Fund and may be made to banks, savings and loan associations and
other depository institutions. Although the Glass-Steagall Act limits the
ability of certain banks to act as underwriters of mutual fund shares, the Fund
does not believe that these limitations would affect the ability of such banks
to enter into arrangements with IDI, but can give no assurance in this regard.
However, to the extent it is determined otherwise in the future, arrangements
with banks might have to be modified or terminated, and, in that case, the size
of the Fund possibly could decrease to the extent that the banks would no longer
invest customer assets in the Fund. Neither the Fund nor its investment adviser
will give any preference to banks or other depository institutions which enter
into such arrangements when selecting investments to be made by the Fund.
For the fiscal year ended August 31, 1997, allocations of 12b-1 amounts
paid by the Fund for the following categories of expenses were: advertising --
$1,055,078; sales literature, printing and postage -- $374,167; direct mail --
$177,504 public relations/promotion -- $514,484; compensation to securities
dealers and other organizations -- $200,805; marketing personnel --$204,223.
The nature and scope of services which are provided by securities
dealers and other organizations may vary by dealer but include, among other
things, processing new stockholder account applications, preparing and
transmitting to the Fund's Transfer Agent computer-processable tapes of the
Fund's transactions by customers, serving as the primary source of information
to customers in answering questions concerning the Fund, and assisting in other
customer transactions with the Fund.
<PAGE>
The Plan provides that it shall continue in effect with respect to the
Fund for so long as such continuance is approved at least annually by the vote
of the board of directors of the Fund cast in person at a meeting called for the
purpose of voting on such continuance. The Plan can also be terminated at any
time with respect to the Fund, without penalty, if a majority of the 12b-1
directors, or shareholders of the Fund, vote to terminate the Plan. The Fund
may, in its absolute discretion, suspend, discontinue or limit the offering of
its shares of the Fund at any time. In determining whether any such action
should be taken, the board of directors intends to consider all relevant factors
including, without limitation, the size of the Fund, the investment climate for
the Fund, general market conditions, and the volume of sales and redemptions of
the Fund's shares. The Plan may continue in effect and payments may be made
under the Plan following any such temporary suspension or limitation of the
offering of the Fund's shares; however, the Fund is not contractually obligated
to continue the Plan for any particular period of time. Suspension of the
offering of the Fund's shares would not, of course, affect a shareholder's
ability to redeem his or her shares. So long as the Plan is in effect, the
selection and nomination of persons to serve as independent directors of the
Fund shall be committed to the independent directors then in office at the time
of such selection or nomination. The Plan may not be amended to increase
materially the amount of the Fund's payments thereunder without approval of the
shareholders of the Fund, and all material amendments to the Plan must be
approved by the board of directors of the Fund, including a majority of the
12b-1 directors. Under the agreement implementing the Plan, IDI or the Fund, the
latter by vote of a majority of the 12b-1 directors, or of the holders of a
majority of the Fund's outstanding voting securities, may terminate such
agreement without penalty upon 30 days' written notice to the other party. No
further payments will be made by the Fund under the Plan in the event of its
termination.
To the extent that the Plan constitutes a plan of distribution adopted
pursuant to Rule 12b-1 under the 1940 Act, it shall remain in effect as such, so
as to authorize the use of the Fund's assets in the amounts and for the purposes
set forth therein, notwithstanding the occurrence of an assignment, as defined
by the 1940 Act, and rules thereunder. To the extent it constitutes an agreement
pursuant to a plan, the Fund's obligation to make payments to IDI shall
terminate automatically, in the event of such "assignment," in which case the
Fund may continue to make payments pursuant to the Plan to IDI or another
organization only upon the approval of new arrangements, which may or may not be
with IDI, regarding the use of the amounts authorized to be paid by it under the
Plan, by the directors, including a majority of the 12b-1 directors, by a vote
cast in person at a meeting called for such purpose.
Information regarding the services rendered under the Plan and the
amounts paid therefor by the Fund are provided to, and reviewed by, the
directors on a quarterly basis. On an annual basis, the directors consider the
continued appropriateness of the Plan and the level of compensation provided
therein.
<PAGE>
The only directors or interested persons, as that term is defined in
Section 2(a)(19) of the 1940 Act, of the Fund who have a direct or indirect
financial interest in the operation of the Plan are the officers and directors
of the Fund listed herein under the section entitled "The Fund And Its
Management--Officers and Directors of the Fund" who are also officers either of
IDI or companies affiliated with IDI. The benefits which the Fund believes will
be reasonably likely to flow to it and its shareholders under the Plan include
the following:
(1) Enhanced marketing efforts, if successful, should result in an
increase in net assets through the sale of additional shares
and afford greater resources with which to pursue the
investment objective of the Fund;
(2) The sale of additional shares reduces the likelihood that
redemption of shares will require the liquidation of
securities of the Fund in amounts and at times that are
disadvantageous for investment purposes;
(3) The positive effect which increased Fund assets will have on
its revenues could allow IDI and its affiliated companies:
(a) To have greater resources to make the financial
commitments necessary to improve the quality and
level of the Fund's shareholder services (in both
systems and personnel),
(b) To increase the number and type of mutual funds
available to investors from IDI and its affiliated
companies (and support them in their infancy), and
thereby expand the investment choices available to
all shareholders, and
(c) To acquire and retain talented employees who desire
to be associated with a growing organization; and
(4) Increased Fund assets may result in reducing each investor's
share of certain expenses through economies of scale (e.g.
exceeding established breakpoints in the advisory fee schedule
and allocating fixed expenses over a larger asset base),
thereby partially offsetting the costs of the Plan.
HOW SHARES ARE VALUED
As described in the section of the Fund's Prospectus entitled "How To Buy
Shares," the net asset value of shares of the Fund is computed once each day
that the New York Stock Exchange is open as of the close of regular trading on
the New York Stock Exchange (generally 4:00 p.m. New York time) and applies to
purchase and redemption orders received prior to that time. Net asset value per
share is also computed on any other day on which there is a sufficient degree of
trading in the securities held by the Fund that the current net asset value per
<PAGE>
share might be materially affected by changes in the value of the securities
held, but only if on such day the Fund receives a request to purchase or redeem
shares. Net asset value per share is not calculated on days the New York Stock
Exchange is closed, such as federal holidays, including New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas. The net asset value per share of the
Fund is calculated by dividing the value of all securities held by the Fund plus
its other assets (including dividends and interest accrued but not collected),
less the Fund's liabilities (including accrued expenses), by the number of
outstanding shares of the Fund.
Securities traded on national securities exchanges, the NASDAQ National
Market System, the NASDAQ Small Cap Market and foreign markets are valued at
their last sale prices on the exchanges or markets where such securities are
primarily traded. Securities traded in the over-the-counter market for which
last sale prices are not available and listed securities for which no sales are
reported on a particular date, are valued at their highest closing bid prices
(or, for debt securities, yield equivalents thereof) obtained from one or more
dealers making markets for such securities. If market quotations are not readily
available, securities will be valued at fair value as determined in good faith
by the Fund's board of directors or pursuant to procedures adopted by the board
of directors. The above procedures may include the use of valuations furnished
by a pricing service which employs a matrix to determine valuations for normal
institutional-size trading units of debt securities. Prior to utilizing a
pricing service, the board of directors of the Fund will review the methods used
by such service to assure itself that securities will be valued at their fair
values. The Fund's Board of Directors also periodically monitors the methods
used by such pricing services. Debt securities with remaining maturities of 60
days or less at the time of purchase are normally valued at amortized cost.
The value of securities held by the Fund and other assets used in computing
net asset value generally is determined as of the time regular trading in such
securities or assets is completed each day. Because regular trading in most
foreign securities markets is completed simultaneously with, or prior to,
the close of regular trading on the New York Stock Exchange, closing prices for
foreign securities usually are available for purposes of computing the Fund's
net asset value. However, in the event that the closing price of a foreign
security is not available in time to calculate a Fund's net asset value on a
particular day, the Fund's board of directors has authorized the use of the
market price for the security obtained from an approved pricing service at an
established time during the day, which may be prior to the close of regular
trading in the security. The value of all assets and liabilities initially
expressed in foreign currencies will be converted into U.S. dollars at the spot
rates of such currencies against the U.S. dollar provided by an approved pricing
service.
FUND PERFORMANCE
As described in the section of the Fund's Prospectus entitled "Fund
Price And Performance," the Fund advertises its total return performance. The
average annual total return performance for the one-, five- and ten-year periods
ended August 31, 1997 was 28.14%, 16.68% and 11.36%, respectively. Average
<PAGE>
annual total return performance for each of the periods indicated was computed
by finding the average annual compounded rates of return that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:
P(1 + T) exponent n = ERV
where: P = initial payment of $1000
T = average annual total return
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.
In conjunction with performance reports, comparative data between the
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.
From time to time, evaluations of performance made by independent
sources may also be used in advertisements, sales literature or shareholder
reports, including reprints of, or selections from, editorials or articles about
the Funds. Sources for Fund performance information and articles about the Funds
include, but are not limited to, the following:
American Association of Individual Investors' Journal
Banxquote
Barron's
Business Week
CDA Investment Technologies
CNBC
CNN
Consumer Digest
Financial Times
Financial World
Forbes
Fortune
Ibbotson Associates, Inc.
Institutional Investor
Investment Company Data, Inc.
Investor's Business Daily
Kiplinger's Personal Finance
Lipper Analytical Services, Inc.'s Mutual Fund Performance
Analysis
Money
Morningstar
Mutual Fund Forecaster
No-Load Analyst
No-Load Fund X
Personal Investor
Smart Money
<PAGE>
The New York Times
The No-Load Fund Investor
U.S. News and World Report
United Mutual Fund Selector
USA Today
Wall Street Journal
Wiesenberger Investment Companies Services
Working Woman
Worth
SERVICES PROVIDED BY THE FUND
Periodic Withdrawal Plan. As described in the section of the Fund's
Prospectus entitled "How To Sell Shares," the Fund offers a Periodic Withdrawal
Plan. All dividends and distributions on shares owned by shareholders
participating in this Plan are reinvested in additional shares. Because
withdrawal payments represent the proceeds from sales of shares, the amount of
shareholders' investments in the Fund will be reduced to the extent that
withdrawal payments exceed dividends and other distributions paid and
reinvested. Any gain or loss on such redemptions must be reported for tax
purposes. In each case, shares will be redeemed at the close of business on or
about the 20th day of each month preceding payment and payments will be mailed
within five business days thereafter.
The Periodic Withdrawal Plan involves the use of principal and is not a
guaranteed annuity. Payments under such a Plan do not represent income or a
return on investment.
Participation in the Periodic Withdrawal Plan may be terminated at any time
by sending a written request to IFG. Upon termination, all future dividends and
capital gain distributions will be reinvested in additional shares unless a
shareholder requests otherwise.
Exchange Policy. As discussed in the section of the Prospectus entitled
"How To Buy Shares -- Exchange Policy," the Fund offers shareholders the ability
to exchange shares of the Fund for shares of certain other mutual funds advised
by IFG. Exchange requests may be made either by telephone or by written request
to IFG using the telephone number or address on the cover of this Statement of
Additional Information. Exchanges made by telephone must be in an amount of at
least $250, if the exchange is being made into an existing account of one of the
INVESCO funds. All exchanges that establish a new account must meet the fund's
applicable minimum initial investment requirements. Written exchange requests
into an existing account have no minimum requirements. Any gain or loss realized
on an exchange is recognized for federal income tax purposes. This privilege is
not an option or right to purchase securities but is a revocable privilege
permitted under the present policies of each of the funds and is not available
in any state or other jurisdiction where the shares of the mutual fund into
which transfer is to be made are not qualified for sale, or when the net asset
value of the shares presented for exchange is less than the minimum dollar
purchase required by the appropriate prospectus.
<PAGE>
TAX-DEFERRED RETIREMENT PLANS
As described in the section of the Fund's Prospectus entitled "Fund
Services," shares of the Fund may be purchased as the investment medium for
various tax-deferred retirement plans. Persons who request information regarding
these plans from IFG will be provided with prototype documents and other
supporting information regarding the type of plan requested. Each of these plans
involves a long-term commitment of assets and is subject to possible regulatory
penalties for excess contributions, premature distributions or for insufficient
distributions after age 70-1/2. The legal and tax implications may vary
according to the circumstances of the individual investor. Therefore, the
investor is urged to consult with an attorney or tax adviser prior to the
establishment of such a plan.
HOW TO REDEEM SHARES
Normally, payments for shares redeemed will be mailed within seven (7) days
following receipt of the required documents as described in the section of the
Fund's Prospectus entitled "How To Sell Shares." The right of redemption may be
suspended and payment postponed when: (a) the New York Stock Exchange is closed
for other than customary weekends and holidays; (b) trading on that exchange is
restricted; (c) an emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund fairly to determine the value of its net assets; or (d)
the Securities and Exchange Commission by order so permits.
It is possible that in the future conditions may exist which would, in
the opinion of the Fund's investment adviser, make it undesirable for the Fund
to pay for redeemed shares in cash. In such cases, the investment adviser may
authorize payment to be made in portfolio securities or other property of the
Fund. However, the Fund is obligated under the 1940 Act to redeem for cash all
shares of the Fund presented for redemption by any one shareholder having a
value up to $250,000 (or 1% of the Fund's net assets if that is less) in any
90-day period. Securities delivered in payment of redemptions are selected
entirely by the investment adviser based on what is in the best interests of the
Fund and its shareholders and are valued at the value assigned to them in
computing the Fund's net asset value per share. Shareholders receiving such
securities are likely to incur brokerage costs on their subsequent sales of the
securities.
DIVIDENDS,OTHER DISTRIBUTIONS AND TAXES
The Fund intends to continue to conduct its business and satisfy the
applicable diversification of assets and source of income requirements to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). The Fund so qualified for the
taxable year ended August 31, 1997, and intends to continue to qualify during
its current taxable year. As a result, because the Fund intends to distribute
all of its income and recognized gains, it is anticipated that the Fund will pay
no federal income or excise taxes and will be accorded conduit or "pass through"
treatment for federal income tax purposes.
<PAGE>
Dividends paid by the Fund from net investment income as well as
distributions of net realized short-term capital gains and net realized gains
from certain foreign currency transactions are, for federal income tax purposes,
taxable as ordinary income to shareholders. After the end of each calendar year,
the Fund sends shareholders information regarding the amount and character of
dividends paid in the year.
Distributions by the Fund of net capital gain (the excess of net
long-term capital gain over net short-term capital loss) are, for federal income
tax purposes, taxable to the shareholder as long-term capital gains regardless
how long a shareholder has held shares of the Fund. The Taxpayer Relief Act of
1997 (the "Tax Act"), enacted in August 1997, changed the taxation of long-term
capital gains by applying different capital gains rates depending on the
taxpayer's holding period and marginal rate of federal income tax. Long-term
gains realized on the sale of securities held for more than one year but not for
more than 18 months are taxable at a rate of 28%. This category of long-term
gains is often referred to as "mid-term" gains but is technically termed "28%
rate gains". Long-term gains realized on the sale of securities held for more
than 18 months are taxable at a rate of 20%. The Tax Act, however, does not
address the application of these rules to distributions of net capital gain
(excess of long-term capital gain over short-term capital losses) by a regulated
investment company, including whether such distributions may be treated by its
shareholders in accordance with the Fund's holding period for the assets it sold
that generated the gain. The application of the new capital gain rules must be
determined by further legislation or future regulations that are not available
as this Prospectus is being prepared. At the end of each year, information
regarding the tax status of dividends and other distributions is provided to
shareholders. Shareholders should consult their tax advisers as to the effect of
the Tax Act on distributions by the Fund of net capital gain.
All dividends and other distributions are regarded as taxable to the
investor, regardless whether such dividends and distributions are reinvested in
additional shares of the Fund. The net asset value of Fund shares reflects
accrued net investment income and undistributed realized capital and foreign
currency gains; therefore, when a distribution is made, the net asset value is
reduced by the amount of the distribution. If the net asset value of Fund shares
were reduced below a shareholder's cost as a result of a distribution, such
distribution would be taxable to the shareholder although a portion would be, in
effect, a return of invested capital. However, the net asset value per share
will be reduced by the amount of the distribution, which would reduce any gain
or increase any loss for tax purposes on any subsequent redemption of shares by
the shareholder.
IFG may provide Fund shareholders with information concerning the
average cost basis of their shares in order to help them prepare their tax
returns. This information is intended as a convenience to shareholders and will
not be reported to the Internal Revenue Service (the "IRS"). The IRS permits the
use of several methods to determine the cost basis of mutual fund shares. The
cost basis information provided by IFG will be computed using the
single-category average cost method, although neither IFG nor the Fund
recommends any particular method of determining cost basis. Other methods may
result in different tax consequences. If a shareholder has reported gains or
losses with respect to shares of the Fund in past years, the shareholder must
continue to use the cost basis method previously used unless the shareholder
applies to the IRS for permission to change the method.
<PAGE>
If Fund shares are sold at a loss after being held for six months or
less, the loss will be treated as a long-term, instead of short-term, capital
loss to the extent of any capital gain distributions received on those shares.
The Fund will be subject to a non-deductible 4% excise tax to the
extent it fails to distribute by the end of any calendar year substantially all
of it ordinary income for that year and net capital gains for the one-year
period ending on October 31 of that year, plus certain other amounts.
Dividends and interest received by the Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not imposes taxes on capital gains in
respect of investments by foreign investors. Foreign taxes withheld will be
treated as an expense of the Fund.
The Fund may invest in the stock of "passive foreign investment
companies" (PFICs). A PFIC is a foreign corporation (other than a controlled
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 of at least 50% of
its assets produce, or are held for the production of, passive income. Under
certain circumstances, the Fund will be subject to federal income tax on a
portion of any "excess distribution" received on the stock of a PFIC or of any
gain on disposition of the stock (collectively "PFIC income"), plus interest
thereon, even if the Fund distributes the PFIC income as a taxable dividend to
its shareholders. The balance of the PFIC income will be included in the Fund's
investment company taxable income and, accordingly, will not be taxable to the
Fund to the extent that income is distributed to its shareholders.
The Fund may elect to "mark-to-market" its stock in any PFIC.
Marking-to-market, in this context, 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 tax basis therein as of the end of that year. Once the
election has been made, the Fund also will be allowed to deduct from ordinary
income the excess, if any, of its adjusted basis in PFIC stock over the fair
market value thereof as of the end of the year, but only to the extent of any
net mark-to-market gains with respect to that PFIC stock included by the Fund
for prior taxable years. The Fund's adjusted tax basis in each PFIC's stock
with respect to which it makes this election will be adjusted to reflect the
amounts of income included and deductions taken under the election.
Gains or losses (1) from the disposition of foreign currencies, (2)
from the disposition of debt securities denominated in foreign currency that are
attributable to fluctuations in the value of the foreign currency between the
<PAGE>
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
the 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 the Fund's investment company taxable income to be
distributed to its shareholders.
Shareholders should consult their own tax advisers regarding specific
questions as to federal, state and local taxes. Dividends and other
distributions generally will be subject to applicable state and local taxes.
Qualification as a regulated investment company under the Code for federal
income tax purposes does not entail government supervision of management or
investment policies.
INVESTMENT PRACTICES
Portfolio Turnover. There are no fixed limitations regarding the Fund's
portfolio turnover. The rate of portfolio turnover can fluctuate under
constantly changing economic conditions and market circumstances. Securities
initially satisfying basic policies and objectives of the Fund may be disposed
of when they are no longer suitable. Brokerage costs to the Fund are
commensurate with the rate of portfolio activity. Portfolio turnover rates for
the fiscal years ended August 31, 1997, 1996 and 1995 were 286%, 207% and 111%,
respectively. In computing the portfolio turnover rate, all investments with
maturities or expiration dates at the time of acquisition of one year or less
are excluded. Subject to this exclusion, the turnover rate is calculated by
dividing (A) the lesser of purchases or sales of portfolio securities for the
fiscal year by (B) the monthly average of the value of portfolio securities
owned by the Fund during the fiscal year. The portfolio turnover rate increased
in fiscal 1997 over 1996 and over fiscal 1995 primarily as a result of a
restructuring of the Fund's portfolio that occurred during those years.
Placement of Portfolio Brokerage. Either IFG, as the Fund's investment
adviser, or INVESCO Trust, as the Fund's sub-adviser, places orders for the
purchase and sale of securities with brokers and dealers based upon IFG's or
INVESCO Trust's evaluation of their financial responsibility subject to their
ability to effect transactions at the best available prices. IFG or INVESCO
Trust evaluates the overall reasonableness of brokerage commissions or
underwriting discounts (the difference between the full acquisition price to
acquire the new offering and the discount offered to members of the underwriitng
syndicate) paid by reviewing the quality of executions obtained on the Fund's
portfolio transactions, viewed in terms of the size of transactions, prevailing
market conditions in the security purchased or sold, and general economic and
market conditions. In seeking to ensure that any commissions or discounts
<PAGE>
charged the Fund are consistent with prevailing and reasonable commissions or
discounts, IFG or INVESCO Trust also endeavors to monitor brokerage industry
practices with regard to the commissions or discounts charged by broker-dealers
on transactions effected for other comparable institutional investors. While IFG
or INVESCO Trust seeks reasonably competitive rates, the Fund does not
necessarily pay the lowest commission, spread or discount available.
Consistent with the standard of seeking to obtain the best execution on
portfolio transactions, IFG or INVESCO Trust may select brokers that provide
research services to effect such transactions. Research services consist of
statistical and analytical reports relating to issuers, industries, securities
and economic factors and trends, which may be of assistance or value to IFG or
INVESCO Trust in making informed investment decisions. Research services
prepared and furnished by brokers through which the Fund effects securities
transactions may be used by IFG or INVESCO Trust in servicing all of its
accounts and not all such services may be used by IFG or INVESCO Trust in
connection with the Fund.
In recognition of the value of the above-described brokerage and research
services provided by certain brokers, IFG or INVESCO Trust, consistent with the
standard of seeking to obtain the best execution on portfolio transactions, may
place orders with such brokers for the execution of Fund transactions on which
the commissions or discounts are in excess of those which other brokers might
have charged for effecting the same transactions.
Fund transactions may be effected through qualified broker-dealers that
recommend the Fund to their clients, or who act as agent in the purchase of the
Fund's shares for their clients. When a number of brokers and dealers can
provide comparable best price and execution on a particular transaction, the
Fund's adviser or sub-adviser may consider the sale of Fund shares by a broker
or dealer in selecting among qualified broker-dealers.
Certain financial institutions (including brokers who may sell shares of
the Fund, or affiliates of such brokers) are paid a fee (the "Services Fee") for
recordkeeping, shareholder communications and other services provided by the
brokers to investors purchasing shares of the Fund through no transaction fee
programs ("NTF Programs") offered by the financial institution or its affiliated
broker (an "NTF Program Sponsor"). The Services Fee is based on the average
daily value of the investments in the Fund made in the name of such NTF Program
Sponsor and held in omnibus accounts maintained on behalf of investors
participating in the NTF Program. With respect to certain NTF Programs, the
Fund's directors have authorized the Fund to apply dollars generated from the
Fund's Plan and Agreement of Distribution pursuant to Rule 12b-1 under the 1940
Act (the "Plan") to pay the entire Services Fee, subject to the maximum Rule
<PAGE>
12b-1 fee permitted by the Plan. With respect to other NTF Programs, the Fund's
directors have authorized the Fund to pay transfer agency fees to IFG based on
the number of investors who have beneficial interests in the NTF Program
Sponsor's omnibus accounts in that Fund. IFG, in turn, pays these transfer
agency fees to the NTF Program Sponsor as a sub-transfer agency or recordkeeping
fee in payment of all or a portion of the Services Fee. In the event that the
sub-transfer agency or recordkeeping fee is insufficient to pay all of the
Services Fee with respect to these NTF Programs, the directors of the Fund have
authorized the Fund to apply dollars generated from the Plan to pay the
remainder of the Services Fee, subject to the maximum Rule 12b-1 fee permitted
by the Plan. IFG itself pays the portion of the Fund's Services Fee, if any,
that exceeds the sum of the sub-transfer agency or recordkeeping fee and Rule
12b-1 fee. The Fund's directors have further authorized IFG to place a portion
of the Fund's brokerage transactions with certain NTF Program Sponsors or their
affiliated brokers, if IFG reasonably believes that, in effecting the Fund's
transactions in portfolio securities, the broker is able to provide the best
execution of orders at the most favorable prices. A portion of the commissions
earned by such a broker from executing portfolio transactions on behalf of the
Fund may be credited by the NTF Program Sponsor against its Services Fee. Such
credit shall be applied first against any sub-transfer agency or recordkeeping
fee payable with respect to the Fund, and second against any Rule 12b-1 fees
used to pay a portion of the Services Fee, on a basis which has resulted from
negotiations between IFG or IDI and the NTF Program Sponsor. Thus, the Fund pays
sub-transfer agency or recordkeeping fees to the NTF Program Sponsor in payment
of the Services Fee only to the extent that such fees are not offset by the
Fund's credits. In the event that the transfer agency fee paid by the Fund to
IFG with respect to investors who have beneficial interests in a particular NTF
Program Sponsor's omnibus accounts in the Fund exceeds the Services Fee
applicable to that Fund, after application of credits, IFG may carry forward the
excess and apply it to future Services Fees payable to that NTF Program Sponsor
with respect to the Fund. The amount of excess transfer agency fees carried
forward will be reviewed for possible adjustment by IFG prior to each fiscal
year-end of the Fund. The Fund's board of directors has also authorized the Fund
to pay to IDI the full Rule 12b-1 fees contemplated by the Plan to compensate
IDI for expenses incurred by IDI in engaging in the activities and providing the
services on behalf of the Fund contemplated by the Plan, subject to the maximum
Rule 12b-1 fee permitted by the Plan, notwithstanding that credits have been
applied to reduce the portion of the 12b-1 fee that would have been used to
compensate IDI for payments to such NTF Program Sponsor absent such credits.
The aggregate dollar amounts of brokerage commissions paid by the Fund
for the fiscal years ended August 31, 1997, 1996 and 1995 were $5,300,030,
$2,703,470 and $1,775,478, respectively. For the fiscal year ended August 31,
1997, brokers providing research services received $2,491,383 in commissions on
<PAGE>
portfolio transactions effected for the Fund. The aggregate dollar amount of
such portfolio transactions was $2,094,249,377. As a result of selling shares of
the Fund, brokers received $4,200 in commissions on portfolio transactions
effected for the Fund during the fiscal year ended August 31, 1997.
At August 31, 1997, the Fund held securities of its regular brokers or
dealers, or their parents, as follows:
Value of Securities
Broker or Dealer at 8/30/97
- ---------------- -------------------
American Express Credit $ 3,887,000
General Electric Capital 29,375,000
Neither IFG nor INVESCO Trust receives any brokerage commissions on
portfolio transactions effected on behalf of the Fund, and there is no
affiliation between IFG, INVESCO Trust or any person affiliated with IFG,
INVESCO Trust or the Fund and any broker or dealer that executes transactions
for the Fund.
ADDITIONAL INFORMATION
Common Stock. The Fund has 200,000,000 authorized shares of common
stock with a par value of $0.01 per share. As of August 31, 1997, 117,112,178 of
those shares were outstanding. All shares currently outstanding and being
offered are of one class with equal rights as to voting, dividends and
liquidation. All shares offered hereby, when issued, will be fully paid and
nonassessable. Shares have no preemptive rights and are fully tradeable on the
books of the Fund.
Fund shares have noncumulative voting rights, which means that the
holders of a majority of the shares voting for the election of directors of the
Fund can elect 100% of the directors if they choose to do so. In such event, the
holders of the remaining shares voting for the election of directors will not be
able to elect any person or persons to the board of directors. After they have
been elected by shareholders, the directors will continue to serve until their
successors are elected and have qualified or they are removed from office, in
either case by a shareholder vote, or until death, resignation or retirement.
They may appoint their own successors, provided that always at least a majority
of the directors have been elected by the Fund's shareholders. It is the
intention of the Fund not to hold annual meetings of shareholders. The directors
may call annual or special meetings of shareholders for action by shareholder
vote as may be required by the 1940 Act or the Fund's Articles of Incorporation
or at their discretion.
Principal Shareholders. As of September 30 1997, no entities held more
than 5% of the outstanding securities of the Fund.
<PAGE>
Independent Accountants. Price Waterhouse LLP, 950 Seventeenth Street,
Denver, Colorado, has been selected as the independent accountants of the Fund.
The independent accountants are responsible for auditing the financial
statements of the Fund.
Custodian. State Street Bank and Trust Company, P.O. Box 351, Boston,
Massachusetts, has been designated as custodian of the cash and investment
securities of the Fund. The bank is also responsible for, among other things,
receipt and delivery of the Fund's investment securities in accordance with
procedures and conditions specified in the custody agreement. Under the contract
with the Fund, the custodian is authorized to establish separate accounts in
foreign countries and to cause foreign securities owned by the Fund 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. The Fund is provided with transfer agent services by
INVESCO Funds Group, Inc., 7800 E. Union Avenue, Denver, Colorado, pursuant to
the Transfer Agency Agreement described herein. Such services include the
issuance, cancellation and transfer of shares of the Fund and the maintenance of
records regarding the ownership of such shares.
Reports to Shareholders. The Fund's fiscal year ends on August 31. The Fund
distributes reports at least semiannually to its shareholders. Financial
statements regarding the Fund, audited by the independent accountants, are sent
to shareholders annually.
Legal Counsel. The firm of Kirkpatrick & Lockhart LLP, Washington, D.C. is
legal counsel for the Fund. The firm of Moye, Giles, O'Keefe, Vermeire &
Gorrell, Denver, Colorado, acts as special counsel to the Fund.
Financial Statements. The Fund's audited financial statements and the notes
thereto for the fiscal year ended August 31, 1997, and the report of Price
Waterhouse LLP with respect to such financial statements are incorporated herein
by reference from the Fund's Annual Report to Shareholders for the fiscal year
ended August 31, 1997.
Prospectus. The Fund will furnish, without charge, a copy of the Prospectus
upon request. Such requests should be made to the Fund at the mailing address or
telephone number set forth on the first page of this Statement of Additional
Information.
Registration Statement. This Statement of Additional Information and the
Prospectus do not contain all of the information set forth in the Registration
Statement the Fund has filed with the Securities and Exchange Commission. The
complete Registration Statement may be obtained from the Securities and Exchange
Commission upon payment of the fee prescribed by the rules and regulations of
the Commission.
<PAGE>
APPENDIX A
BOND RATINGS
Description of Moody's corporate bond ratings:
Aaa--Bonds which are 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 which are 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 risks appear somewhat larger than in Aaa securities.
A--Bonds which are 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 which are 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 have
speculative characteristics as well.
Rating Refinements: Moody's may apply the numerical modifier "1", for
municipally-backed bonds, and modifiers "1", "2" and "3" for corporate-backed
municipals. The modifier 1 indicates that the security ranks in the higher end
of its generic rating category; the modifier 2 indicates a mid-range ranking;
and modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
Description of S&P's corporate bond ratings:
AAA--This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.
<PAGE>
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 a 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.
BBB--Bonds rated BBB are regarded as having an adequate capacity 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 the A category.
Plus (+) or Minus (-): The ratings may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
Description of Moody's preferred stock ratings:
"aaa"--An issue which is rated "aaa" is considered to be a top- quality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of preferred stocks.
"aa"--An issue which is rated "aa" is considered a high-grade preferred stock.
This rating indicates that there is a reasonable assurance that earnings and
asset protection will remain relatively well maintained in the foreseeable
future.
"a"--An issue which is rated "a" is considered to be an upper- medium grade
preferred stock. While risks are judged to be somewhat greater than in the "aaa"
and "aa" classification, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.
"baa"--An issue which is rated "baa" is considered to be a medium-grade
preferred stock, neither highly protected nor poorly secured. Earnings and asset
protection appear adequate at present but may be questionable over any great
length of time.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each rating
classification: the modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range ranking
and the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
<PAGE>
Description of S&P's preferred stock ratings:
"AAA"--This is the highest rating that may be assigned by S&P to a preferred
stock issue and indicates an extremely strong capacity to pay the preferred
stock obligations.
"AA"--A preferred stock issue rated "AA" also qualifies as a high-quality fixed
income security. The capacity to pay preferred stock obligations is very strong,
although not as overwhelming as for issues rated "AAA."
"A"--An issue rated "A" is backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
"BBB"--An issue rated "BBB" is regarded as backed by an adequate capacity to pay
the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the "A" category.
Plus (+) or Minus (-): To provide more detailed indications of preferred stock
quality, the ratings from "AA" to "CCC" may be modified by the addition of a
plus or minus sign to show relative standing within the major rating categories.
<PAGE>
APPENDIX B
DESCRIPTION OF FUTURES, OPTIONS AND FORWARD CONTRACTS
Options on Securities
An option on a security provides the purchaser, or "holder," with the
right, but not the obligation, to purchase, in the case of a "call" option, or
sell, in the case of a "put" option, the security or securities underlying the
option, for a fixed exercise price up to a stated expiration date. The holder
pays a non-refundable purchase price for the option, known as the "premium." The
maximum amount of risk the purchaser of the option assumes is equal to the
premium plus related transaction costs, although the entire amount may be lost.
The risk of the seller, or "writer," however, is potentially unlimited, unless
the option is "covered," which is generally accomplished through the writer's
ownership of the underlying security, in the case of a call option, or the
writer's segregation of an amount of cash or securities equal to the exercise
price, in the case of a put option. If the writer's obligation is not so
covered, it is subject to the risk of the full change in value of the underlying
security from the time the option is written until exercise.
Upon exercise of the option, the holder is required to pay the purchase
price of the underlying security, in the case of a call option, or to deliver
the security in return for the purchase price, in the case of a put option.
Conversely, the writer is required to deliver the security, in the case of a
call option, or to purchase the security, in the case of a put option. Options
on securities which have been purchased or written may be closed out prior to
exercise or expiration by entering into an offsetting transaction on the
exchange on which the initial position was established, subject to the
availability of a liquid secondary market.
Options on securities are traded on national securities exchanges, such as
the Chicago Board of Options Exchange and the New York Stock Exchange, which are
regulated by the Securities and Exchange Commission. The Options Clearing
Corporation guarantees the performance of each party to an exchange-traded
option, by in effect taking the opposite side of each such option. A holder or
writer may engage in transactions in exchange-traded options on securities and
options on indices of securities only through a registered broker/dealer which
is a member of the exchange on which the option is traded.
An option position in an exchange-traded option may be closed out only on
an exchange which provides a secondary market for an option of the same series.
Although the Fund will generally purchase or write only those options for which
there appears to be an active secondary market, there is no assurance that a
liquid secondary market on an exchange will exist for any particular option at
<PAGE>
any particular time. In such event it might not be possible to effect closing
transactions in a particular option with the result that the Fund would have to
exercise the option in order to realize any profit. This would result in the
Fund incurring brokerage commissions upon the disposition of underlying
securities acquired through the exercise of a call option or upon the purchase
of underlying securities upon the exercise of a put option. If the Fund as
covered call option writer is unable to effect a closing purchase transaction in
a secondary market, unless the Fund is required to deliver the securities
pursuant to the assignment of an exercise notice, it will not be able to sell
the underlying security until the option expires.
Reasons for the potential absence of a liquid secondary market on an
exchange include the following: (i) there may be insufficient trading interest
in certain options; (ii) restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular classes or
series of options or underlying securities: (iv) unusual or unforeseen
circumstances may interrupt normal operations on an exchange; (v) the facilities
of an exchange or a clearing corporation may not at all times be adequate to
handle current trading volume or (vi) one or more exchanges could, for economic
or other reasons, decide or be compelled at some future date to discontinue the
trading of options (or particular class or series of options) in which event the
secondary market on that exchange (or in the class or series of options) would
cease to exist, although outstanding options on that exchange which had been
issued by a clearing corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms. There is no assurance
that higher than anticipated trading activity or other unforeseen events might
not, at a particular time, render certain of the facilities of any of the
clearing corporations inadequate and thereby result in the institution by an
exchange of special procedures which may interfere with the timely execution of
customers' orders. However, the Options Clearing Corporation, based on forecasts
provided by the U.S. exchanges, believes that its facilities are adequate to
handle the volume of reasonably anticipated options transactions, and such
exchanges have advised such clearing corporation that they believe their
facilities will also be adequate to handle reasonably anticipated volume.
In addition, options on securities may be traded over-the-counter
through financial institutions dealing in such options as well as the underlying
instruments. OTC options are purchased from or sold (written) to dealers or
financial institutions which have entered into direct agreements with the Fund.
With OTC options, such variables as expiration date, exercise price and premium
will be agreed upon between the Fund and the transacting dealer, without the
intermediation of a third party such as the OCC. If the transacting dealer fails
to make or take delivery of the securities underlying an option it has written,
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in accordance with the terms of that option as written, the Fund would lose the
premium paid for the option as well as any anticipated benefit of the
transaction. The Fund will engage in OTC option transactions only with primary
U.S. Government securities dealers recognized by the Federal Reserve Bank of New
York.
Futures Contracts
A Futures Contract is a bilateral agreement providing for the purchase
and sale of a specified type and amount of a financial instrument or foreign
currency, or for the making and acceptance of a cash settlement, at a stated
time in the future, for a fixed price. By its terms, a Futures Contract provides
for a specified settlement date on which, in the case of the majority of
interest rate and foreign currency futures contracts, the fixed income
securities or currency underlying the contract are delivered by the seller and
paid for by the purchaser, or on which, in the case of stock index futures
contracts and certain interest rate and foreign currency futures contracts, the
difference between the price at which the contract was entered into and the
contract's closing value is settled between the purchaser and seller in cash.
Futures Contracts differ from options in that they are bilateral agreements,
with both the purchaser and the seller equally obligated to complete the
transaction. In addition, Futures Contracts call for settlement only on the
expiration date, and cannot be "exercised" at any other time during their term.
The purchase or sale of a Futures Contract also differs from the
purchase or sale of a security or the purchase of an option in that no purchase
price is paid or received. Instead, an amount of cash or cash equivalent, which
varies but may be as low as 5% or less of the value of the contract, must be
deposited with the broker as "initial margin." Subsequent payments to and from
the broker, referred to as "variation margin," are made on a daily basis as the
value of the index or instrument underlying the Futures Contract fluctuates,
making positions in the Futures Contract more or less valuable, a process known
as "marking to market."
A Futures Contract may be purchased or sold only on an exchange, known
as a "contract market," designated by the Commodity Futures Trading Commission
for the trading of such contract, and only through a registered futures
commission merchant which is a member of such contract market. A commission must
be paid on each completed purchase and sale transaction. The contract market
clearing house guarantees the performance of each party to a Futures Contract,
by in effect taking the opposite side of such Contract. At any time prior to the
expiration of a Futures Contract, a trader may elect to close out its position
by taking an opposite position on the contract market on which the position was
entered into, subject to the availability of a secondary market, which will
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operate to terminate the initial position. At that time, a final determination
of variation margin is made and any loss experienced by the trader is required
to be paid to the contract market clearing house while any profit due to the
trader must be delivered to it.
Interest rate futures contracts currently are traded on a variety of
fixed income securities, including long-term U.S. Treasury Bonds, Treasury
Notes, Government National Mortgage Association modified pass-through
mortgage-backed securities, U.S. Treasury Bills, bank certificates of deposit
and commercial paper. In addition, interest rate futures contracts include
contracts on indices of municipal securities. Foreign currency futures contracts
currently are traded on the British pound, Canadian dollar, Japanese yen, Swiss
franc, West German mark and on Eurodollar deposits.
Options on Futures Contracts
An Option on a Futures Contract provides the holder with the right to
enter into a "long" position in the underlying Futures Contract, in the case of
a call option, or a "short" position in the underlying Futures Contract, in the
case of a put option, at a fixed exercise price to a stated expiration date.
Upon exercise of the option by the holder, the contract market clearing house
establishes a corresponding short position for the writer of the option, in the
case of a call option, or a corresponding long position, in the case of a put
option. In the event that an option is exercised, the parties will be subject to
all the risks associated with the trading of Futures Contracts, such as payment
of variation margin deposits. In addition, the writer of an Option on a Futures
contract, unlike the holder, is subject to initial and variation margin
requirements on the option position.
A position in an Option on a Futures Contract may be terminated by the
purchaser or seller prior to expiration by effecting a closing purchase or sale
transaction, subject to the availability of a liquid secondary market, which is
the purchase or sale of an option of the same series (i.e., the same exercise
price and expiration date) as the option previously purchased or sold. The
difference between the premiums paid and received represents the trader's profit
or loss on the transaction.
An option, whether based on a Futures Contract, a stock index or a
security, becomes worthless to the holder when it expires. Upon exercise of an
option, the exchange or contract market clearing house assigns exercise notices
on a random basis to those of its members which have written options of the same
series and with the same expiration date. A brokerage firm receiving such
notices then assigns them on a random basis to those of its customers which have
written options of the same series and expiration date. A writer therefore has
no control over whether an option will be exercised against it, nor over the
time of such exercise.
