As filed on May 2, 2000 File No. _______________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. ____ ___
Post-Effective Amendment No. ____ ___
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. ____ ___
INVESCO ADVANTAGE SERIES FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
7800 E. Union Avenue, Denver, Colorado 80237
(Address of Principal Executive Offices)
P.O. Box 173706, Denver, Colorado 80217-3706
(Mailing Address)
Registrant's Telephone Number, including Area Code: (303) 930-6300
Glen A. Payne, Esq.
7800 E. Union Avenue
Denver, Colorado 80237
(Name and Address of Agent for Service)
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Copies to:
Clifford J. Alexander, Esq. Ronald M. Feiman, Esq.
Kirkpatrick & Lockhart LLP Mayer, Brown & Platt
1800 Massachusetts Avenue, N.W. 1675 Broadway
Second Floor New York, New York 10019-5820
Washington, D.C. 20036-1800
------------
Approximate Date of Proposed Public Offering: As soon as practicable after this
Registration Statement becomes effective.
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay the effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
Title of Securities Being Registered: Class A, B and C Shares of Beneficial
Interest of INVESCO Advantage Fund.
<PAGE>
PROSPECTUS | ____________, 2000
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YOU SHOULD KNOW WHAT INVESCO KNOWS (TM)
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INVESCO ADVANTAGE SERIES FUNDS, INC.
INVESCO ADVANTAGE FUND - CLASSES A, B AND C
A MUTUAL FUND SEEKING LONG-TERM CAPITAL APPRECIATION. SHARES ARE SOLD PRIMARILY
THROUGH THIRD PARTIES, SUCH AS BROKERS, BANKS AND FINANCIAL PLANNERS.
TABLE OF CONTENTS
Investment Goals, Strategies And Risks .............
Fees And Expenses...................................
Investment Risks....................................
Risks Associated With Particular Investments........
Temporary Defensive Positions.......................
Portfolio Turnover..................................
Fund Management.....................................
Portfolio Manager...................................
Potential Rewards...................................
Share Price.........................................
How To Buy Shares...................................
How To Sell Shares..................................
Taxes...............................................
Dividends And Capital Gain Distributions............
No dealer, sales person, or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and you should not rely on such other information or
representations.
[INVESCO ICON] INVESCO
The Securities and Exchange Commission has not approved or disapproved the
shares of this Fund. Likewise, the Commission has not determined if this
Prospectus is truthful or complete. Anyone who tells you otherwise is committing
a federal crime.
<PAGE>
This Prospectus will tell you more about:
[KEY ICON] Investment Goals & Strategies
[ARROWS ICON] Potential Investment Risks
[GRAPH ICON] Past Performance
[INVESCO ICON] Working With INVESCO
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[KEY ICON][ARROWS ICON] INVESTMENT GOALS, STRATEGIES AND RISKS
INVESCO Funds Group, Inc. ("INVESCO") is the investment adviser for the Fund.
Together with our affiliated companies, we at INVESCO direct all aspects of the
management of the Fund.
This Prospectus contains important information about the Fund's Class A, B and C
shares, which are sold primarily through third parties, such as brokers, banks,
and financial planners. Each of the classes of shares have varying expenses,
with resulting effects on their performance. You can choose the class of shares
that is best for you, based on how much you plan to invest and other relevant
factors discussed in How To Buy Shares.
The Fund attempts to make your investment grow. It is actively managed. Although
the Fund may invest in debt securities, it invests primarily in equity
securities that INVESCO believes will rise in price faster than other
securities, as well as in options, futures and other investments whose values
are based upon the values of equity securities. The Fund also engages in short
selling and may engage in borrowing to fund the purchase of securities, a
practice known as "leveraging."
The Fund is managed in the growth style. At INVESCO, growth investing starts
with research from the "bottom up," and focuses on company fundamentals and
growth prospects.
We require that securities purchased for the Fund meet the following standards:
o EXCEPTIONAL GROWTH: The markets and industries they represent are growing
significantly faster than the economy as a whole.
o LEADERSHIP: They are leaders - or emerging leaders - in these markets,
securing their positions through technology, marketing, distribution or
some other innovative means.
<PAGE>
o FINANCIAL VALIDATION: Their returns - in the form of sales unit growth,
rising operating margins, internal funding and other factors - demonstrate
exceptional growth and leadership.
The Fund uses an aggressive strategy. It invests primarily in the securities of
companies that INVESCO believes will give the Fund an investment advantage,
i.e., an unusual development in a company or group of companies which INVESCO
believes have the potential for above-average growth in revenues and earnings
and have favorable prospects for future growth. The Fund is not restricted to
investing in companies of any particular market capitalization. Advantageous
situations may involve:
o a technological advance or discovery, the offering of a new or unique
product or service, or changes in consumer demand or consumption forecasts;
o changes in the competitive outlook or growth potential of an industry or a
company within an industry, including changes in scope or nature of foreign
competition or development of an emerging industry;
o new or changed management, or material changes in management policies or
corporate structure;
o significant economic or political occurrences, including changes in foreign
or domestic import and tax laws or other regulations; or
o other events, including a major change in demographic patterns, favorable
litigation settlements, or natural disasters.
The Fund may invest in "special situations." INVESCO believes a special
situation may exist when it believes that the securities of a particular company
will, within a reasonable period of time, be accorded market recognition at an
appreciated value solely by reason of a development applicable to that company,
and regardless of general business conditions or movements of the market as a
whole. Developments that can create special situations might include, among
others: liquidations, reorganizations, recapitalizations, mergers, material
litigation, technical breakthroughs, and new management or management policies.
Although large and well-known companies may be involved, special situations more
often involve comparatively small or unseasoned companies. Investments in
unseasoned companies and special situations often involve much greater risk than
exists in investing in ordinary securities.
The Fund intends to participate strongly in the initial public offering ("IPO")
market, and a significant portion of the Fund's returns may be attributable to
IPO investments, which could have a magnified impact on the Fund's performance
if the Fund has a smaller asset base. Although the IPO market recently has been
robust, there is no guarantee that it will continue to be so, and, as the Fund's
assets grow, there is no guarantee that the impact of IPO investing will produce
similar performance.
Due to sometimes limited availability of companies that meet the investment
criteria for the Fund, the Fund may discontinue public sales of its shares to
new investors at some point. Existing shareholders of the Fund who maintain open
accounts would be permitted to make additional investments in the Fund. During
<PAGE>
any closed period, the Fund may impose different standards for additional
investments. Also, during a closed period, the Fund will continue to pay Rule
12b-1 fees. The Fund may resume sales of shares to new investors at some future
date if the board of directors determines that it would be in the best interest
of shareholders to do so.
Although the Fund is subject to a number of risks that could affect its
performance, its principal risk is market risk - that is, that the price of the
securities in its portfolio will rise and fall due to price movements in the
securities markets, and that the securities held in the Fund's portfolio may
decline in value more than the overall securities market.
The Fund is subject to other principal risks such as those associated with less
diversification, leveraging, short selling, market, liquidity, derivatives,
options and futures, counterparty, interest rate, duration, foreign securities,
lack of timely information and credit risks. These risks are described and
discussed later in the Prospectus under the headings "Investment Risks" and
"Risks Associated With Particular Investments." An investment in the Fund is not
a deposit of any bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation ("FDIC") or any other government agency. As with any
mutual fund, there is always a risk that you may lose money on your investment
in the Fund.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund:
SHAREHOLDER FEES PAID DIRECTLY FROM YOUR ACCOUNT
Class A Class B Class C
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage of
offering price) 5.50% None None
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase
price or redemption proceeds, whichever
is less) None(1) 5.00% 1.00%
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS
Class A Class B Class C
Management Fees(2) 1.50% 1.50% 1.50%
Distribution and Service(12b-1) Fees(3) 0.35% 1.00% 1.00%
Other Expenses(4) ____% ____% ____%
Total Other Expenses(4) ____% ____% ____%
Total Annual Fund
Operating Expenses(4) ____% ____% ____%
Net Expenses ____% ____% ____%
<PAGE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) The Fund's base management fee is 1.50% of the Fund's daily average net
assets. On a monthly basis, the base fee will be (i) adjusted upward at the
rate of 0.20%, on a pro rata basis, for each percentage point the
investment performance of the Fund exceeds the sum of 2.00% and the
investment performance of the Russell 3000 Index (the "Index") or (ii)
adjusted downward at the rate of 0.20%, on a pro rata basis, for each
percentage point the performance of the Index less 2.00% exceeds the
investment performance of the Fund. As a result, the Fund could pay a
management fee that ranges from 0.50% to 2.50% of the Fund's average daily
net assets based on its performance.
(3) Because the Fund pays a 12b-1 distribution fee which is based upon the
Fund's assets, if you own shares of the Fund for a long period of time, you
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.
(4) Based on estimated expenses for the current fiscal year which may be more
or less than actual expenses. Actual expenses are not provided because the
Fund shares are not offered until ___________.
EXAMPLE
The Example is intended to help you compare the cost of investing in the Fund to
the cost of investing in other mutual funds.
The Example assumes that you invested $10,000 in the Fund for the time periods
indicated. The first Example assumes that you redeem all of your shares at the
end of those periods. The second Example assumes that you keep your shares. Both
Examples also assume that your investment had a hypothetical 5% return each year
and that the Fund's operating expenses remained the same. Although the actual
costs and performance of the Fund may be higher or lower, based on these
assumptions your costs would have been:
IF SHARES ARE REDEEMED 1 year 3 years
Class A $____ $____
Class B ____ ____
Class C ____ ____
IF SHARES ARE NOT REDEEMED 1 year 3 years
Class A $____ $____
Class B ____ ____
Class C ____ ____
[ARROWS ICON] INVESTMENT RISKS
You should determine the level of risk with which you are comfortable before you
invest. The principal risks of investing in any mutual fund, including the Fund,
are:
BEFORE INVESTING IN THE FUND, YOU SHOULD DETERMINE THE LEVEL OF RISK WITH WHICH
YOU ARE COMFORTABLE. TAKE INTO ACCOUNT FACTORS LIKE YOUR AGE, CAREER, INCOME
LEVEL, AND TIME HORIZON.
<PAGE>
NOT INSURED. Mutual funds are not insured by the FDIC or any other agency,
unlike bank deposits such as CDs or savings accounts.
NO GUARANTEE. No mutual fund can guarantee that it will meet its investment
objectives.
POSSIBLE LOSS OF INVESTMENT. A mutual fund cannot guarantee its performance, nor
assure you that the market value of your investment will increase. You may lose
the money you invest, and the Fund will not reimburse you for any of these
losses.
VOLATILITY. The price of your mutual fund shares will increase or decrease with
changes in the value of a Fund's underlying investments and changes in the
equity markets as a whole.
NOT A COMPLETE INVESTMENT PLAN. An investment in any mutual fund does not
constitute a complete investment plan. The Funds are designed to be only a part
of your personal investment plan.
[ARROWS ICON] RISKS ASSOCIATED WITH PARTICULAR INVESTMENTS
You should consider the special factors associated with the policies discussed
below in determining the appropriateness of investing in the Fund. See the
Statement of Additional Information for a discussion of additional risk factors.
NON-DIVERSIFICATION RISK
A non-diversified fund is allowed to invest, with respect to 50% of its assets,
more than 5% of its assets in the securities of any one issuer. Because the Fund
is non-diversified, it may invest in fewer issuers than if it were a diversified
fund. The value of the Fund's shares may vary more widely, and the Fund may be
subject to greater market and credit risk than if the Fund invested more
broadly.
LEVERAGE RISK
When the Fund borrows money to buy securities, it is engaging in a practice
known as "leveraging." Leveraging may result from ordinary borrowings, or may be
inherent in the structure of certain Fund investments. If the prices of those
securities decrease, or if the cost of borrowing exceeds any increases in the
prices of those securities, the net asset value of the Fund's shares will
decrease faster than if the Fund has not used leverage. To repay borrowings, the
Fund may have to sell securities at a time and at a price that is unfavorable to
the Fund. Interest on borrowings is an expense the Fund would not otherwise
incur.
SHORT SALES RISK
A principal investment technique of the Fund is to "sell short" significant
amounts of securities. In a short sale, the Fund sells a security it does not
own in expectation that its price will decline by the time the Fund closes out
the short position by purchasing the security at the then-prevailing market
price.
When the Fund sells a security short, it borrows the security in order to enter
into the short sale transaction, and the proceeds of the sale may be used by the
Fund as collateral for the borrowing to the extent necessary to meet margin
requirements. The Fund may also be required to pay a premium to borrow the
security.
<PAGE>
Moreover, the Fund is required to maintain a segregated account with a broker or
a custodian consisting of cash or highly liquid securities. Until the borrowed
security is replaced, the Fund will maintain this account at a level so that the
amount deposited in the account, plus the collateral deposited with the broker,
will equal the current market value of the securities sold short.
MARKET RISK
Equity stock prices vary and may fall, thus reducing the value of the Fund's
investments.Certain stocks selected for the Fund's portfolio may decline in
value more than the overall stock market. In general, the securities of large
businesses with outstanding securities worth $15 billion or more are less
volatile than those of mid-size businesses with outstanding securities worth
more than $2 billion, or small businesses with outstanding securities worth less
than $2 billion. The Fund is free to invest in companies with small market
capitalizations or those that may otherwise be more volatile.
LIQUIDITY RISK
The Fund's portfolio is liquid if the Fund is able to sell the securities it
owns at a fair price within a reasonable time. Liquidity is generally related to
the market trading volume for a particular security. Investments in smaller
companies or in foreign companies or companies in emerging markets are subject
to a variety of risks, including potential lack of liquidity.
DERIVATIVES RISK
A derivative is a financial instrument whose value is "derived," in some manner,
from the price of another security, index, asset or rate. Derivatives include
options and futures contracts, among a wide range of other instruments. The
principal risk of investments in derivatives is that the fluctuations in their
values may not correlate perfectly with the overall securities markets. Some
derivatives are more sensitive to interest rate changes and market price
fluctuations than others, and thus may increase market risk. Also, derivatives
are subject to counterparty risk as described below.
OPTIONS AND FUTURES RISK
Options and futures are common types of derivatives that the Fund will use as an
investment strategy as well as to hedge other positions in the Fund. An option
is the right to buy or sell a security or other instrument, index or commodity
at a specific price on or before a specific date. A future is an agreement to
buy or sell a security or other instrument, index or commodity at a specific
price on a specific date. The use of options and futures may increase the
performance of the Fund, but may also increase market risk.
COUNTERPARTY RISK
This is a risk associated primarily with repurchase agreements and some
derivatives transactions. It is the risk that the other party in the transaction
will not fulfill its contractual obligation to complete the transaction with the
Fund.
INTEREST RATE RISK
Changes in interest rates will affect the resale value of debt securities that
may be held in the Fund's portfolio. In general, as interest rates rise, the
resale value of debt securities decreases; as interest rates decline, the resale
value of debt securities generally increases. Debt securities with longer
maturities usually are more sensitive to interest rate movements.
<PAGE>
CREDIT RISK
The Fund may invest in debt instruments, such as notes, bonds and commercial
paper. There is a possibility that the issuers of these instruments will be
unable to meet interest payments or repay principal. Changes in the financial
strength of an issuer may reduce the credit rating of its debt instruments and
may affect their value.
DURATION RISK
Duration is a measure of a debt security's sensitivity to interest rate changes.
Duration is usually expressed in terms of years, with longer durations usually
more sensitive to interest rate movements.
FOREIGN SECURITIES RISKS
Investments in foreign and emerging markets carry special risks, including
currency, political, regulatory and diplomatic risks. The Fund may invest up to
25% of its assets in securities of non-U.S. issuers. Securities of Canadian
issuers and American Depository Receipts are not subject to this 25% limitation.
CURRENCY RISK. A change in the exchange rate between U.S. dollars and a
foreign currency may reduce the value of the Fund's investment in a
security valued in the foreign currency, or based on that currency value.
POLITICAL RISK. Political actions, events or instability may result in
unfavorable changes in the value of a security.
REGULATORY RISK. Government regulations may affect the value of a security.
In foreign countries, securities markets that are less regulated than those
in the U.S. may permit trading practices that are not allowed in the U.S.
DIPLOMATIC RISK. A change in diplomatic relations between the U.S. and a
foreign country could affect the value or liquidity of investments.
EUROPEAN ECONOMIC AND MONETARY UNION. Austria, Belgium, Finland, France,
Germany, Ireland, Italy, Luxembourg, The Netherlands, Portugal and Spain
are presently members of the European Economic and Monetary Union (the
"EMU") which as of January 1, 1999, adopted the euro as a common currency.
The national currencies will be sub-currencies of the euro until July 1,
2002, at which time these currencies will disappear entirely. Other
European countries may adopt the euro in the future.
The introduction of the euro presents some uncertainties and possible
risks, which could adversely affect the value of securities held by the
Fund.
<PAGE>
EMU countries, as a single market, may affect future investment decisions
of the Fund. As the euro is implemented, there may be changes in the
relative strength and value of the U.S. dollar and other major currencies,
as well as possible adverse tax consequences. The euro transition by EMU
countries - present and future - may affect the fiscal and monetary levels
of those participating countries. There may be increased levels of price
competition among business firms within EMU countries and between
businesses in EMU and non-EMU countries. The outcome of these uncertainties
could have unpredictable effects on trade and commerce and result in
increased volatility for all financial markets.
LACK OF TIMELY INFORMATION RISK
Timely information about a security or its issuer may be unavailable, incomplete
or inaccurate. This risk is more common to securities issued by foreign
companies and companies in emerging markets than it is to the securities of
U.S.-based companies.
------------------------------------------------
The Fund generally invests in equity securities of companies involving a special
opportunity. However, in an effort to diversify its holdings and provide some
protection against the risk of other investments, the Fund also may invest in
other types of securities and other financial instruments, as indicated in the
chart below. These investments, which at any given time may constitute a
significant portion of the Fund's portfolio, have their own risks.
<TABLE>
<CAPTION>
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INVESTMENT RISKS
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<S> <C>
AMERICAN DEPOSITORY RECEIPTS (ADRS)
These are securities issued by U.S. banks that represent shares Market, Information,
of foreign corporations held by those banks. Although traded in Political, Regulatory,
U.S. securities markets and valued in U.S. dollars, ADRs carry Diplomatic, Liquidity
most of the risks of investing directly in foreign securities. and Currency Risks
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DEBT SECURITIES
Securities issued by private companies or governments Market, Credit,
representing an obligation to pay interest and to repay Interest Rate and
principal when the security matures. Duration Risks
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<PAGE>
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INVESTMENT RISKS
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DELAYED DELIVERY OR WHEN-ISSUED SECURITIES
Ordinarily, the Fund purchases securities and pays for them in Market and
cash at the normal trade settlement time. When the Fund purchases Interest Rate Risks
a delayed delivery or when-issued security, it promises to
pay in the future - for example, when the security is actually
available for delivery to the Fund. The Fund's obligation to pay
and the interest rate it receives, in the case of debt securities,
usually are fixed when the Fund promises to pay. Between the
date the Fund promises to pay and the date the securities are
actually received, the Fund receives no interest on its
investment, and bears the risk that the market value of the
when-issued security may decline.
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FORWARD FOREIGN CURRENCY CONTRACTS
A contract to exchange an amount of currency on a date in the Currency, Political
future at an agreed-upon exchange rate might be used by the Diplomatic,
Fund to hedge against changes in foreign currency exchange Counterparty and
rates when the Fund invests in foreign securities. Does not Regulatory Risks
reduce price fluctuations in foreign securities, or
prevent losses if the prices of those securities decline.
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Futures
A futures contract is an agreement to buy or sell a specific amount Market, Liquidity and
of a financial instrument (such as an index option) at a Options and Futures
stated price on a stated date. The Fund may use futures Risks
contracts to provide liquidity and to hedge portfolio value.
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OPTIONS
The obligation or right to deliver or receive a security or Credit, Information,
other instrument, index or commodity, or cash payment Liquidity and Options
depending on the price of the underlying security or the and Futures Risks
performance of an index or other benchmark. Includes options
on specific securities and stock indices, and options on stock
index futures. May be used in the Fund's portfolio to
provide liquidity, hedge portfolio value, or, as substitutes
for investing in the underlying security, index, asset, or
interest rate.
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<PAGE>
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INVESTMENT RISKS
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OTHER FINANCIAL INSTRUMENTS
These may include forward contracts, swaps, caps, floors and Counterparty, Credit,
collars. They may be used to try to manage the Fund's Currency, Interest
foreign currency exposure and other investment risks, which can Rate, Liquidity,
cause its net asset value to rise or fall. The Fund may use Market and
these financial instruments, commonly known as "derivatives," Regulatory Risks
to increase or decrease its exposure to changing securities
prices, interest rates, currency exchange rates or other
factors.
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REPURCHASE AGREEMENTS
A contract under which the seller of a security agrees to buy Credit and
it back at an agreed-upon price and time in the future. Counterparty Risks
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RESTRICTED SECURITIES/PRIVATE PLACEMENTS
Securities that are not registered, but which are bought and Liquidity Risk
sold solely by institutional investors. The Fund considers
many Rule 144a securities to be "liquid," although the market
for such securities typically is less active than the public
securities markets.
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</TABLE>
<PAGE>
[ARROWS ICON] TEMPORARY DEFENSIVE POSITIONS
When securities markets or economic conditions are unfavorable or unsettled, we
might try to protect the assets of the Fund by investing in securities that are
highly liquid, such as high quality money market instruments like short-term
U.S. government obligations, commercial paper or repurchase agreements, even
though that is not the normal investment strategy of the Fund. We have the right
to invest up to 100% of the Fund's assets in these securities, although we are
unlikely to do so. Even though the securities purchased for defensive purposes
often are considered the equivalent of cash, they also have their own risks.
Investments that are highly liquid or comparatively safe tend to offer lower
returns. Therefore, the Fund's performance could be comparatively lower if it
concentrates in defensive holdings.
[ARROWS ICON] PORTFOLIO TURNOVER
We actively manage and trade the Fund's portfolio. Therefore, the Fund may have
a higher portfolio turnover rate compared to many other mutual funds. The Fund's
average portfolio turnover rate may exceed 200%.
A portfolio turnover rate of 200% is equivalent to the Fund buying and selling
all of the securities in its portfolio two times in the course of a year. A
comparatively high turn-over rate may result in higher brokerage commissions and
taxable capital gain distributions to the Fund's shareholders.
[INVESCO ICON] FUND MANAGEMENT
INVESCO IS A SUBSIDIARY OF AMVESCAP PLC, AN INTERNATIONAL INVESTMENT MANAGEMENT
COMPANY THAT MANAGES MORE THAN $___ BILLION IN ASSETS WORLDWIDE. AMVESCAP IS
BASED IN LONDON, WITH MONEY MANAGERS LOCATED IN EUROPE, NORTH AND SOUTH AMERICA,
AND THE FAR EAST.
INVESTMENT ADVISER
INVESCO, located at 7800 East Union Avenue, Denver, Colorado, is the investment
adviser of the Fund. INVESCO was founded in 1932 and manages over $__ billion
for more than _______ shareholders of 45 INVESCO mutual funds. INVESCO performs
a wide variety of other services for the Fund, including administrative and
transfer agency functions (the processing of purchases, sales and exchanges of
Fund shares).
A wholly owned subsidiary of INVESCO, IDI is the Fund's distributor and is
responsible for the sale of the Fund's shares.
INVESCO and IDI are subsidiaries of AMVESCAP PLC.
INVESCO receives a management fee from the Fund that is comprised of two
components. The first component is an annual base fee equal to 1.50% of the
Fund's average daily net assets. The second component is a performance
adjustment that either increases or decreases the base fee, depending on how the
Fund has performed relative to the Index. The maximum performance adjustment
upward or downward is 1.00% annually. Depending on the performance of the Fund,
during any fiscal year INVESCO may receive as much as 2.50% or as little as
0.50% in management fees.
<PAGE>
[INVESCO ICON] PORTFOLIO MANAGER
The following individual is primarily responsible for the day-to-day management
of the Fund's portfolio holdings:
Thomas R. Samuelson, vice president of INVESCO, is the portfolio manager of the
Fund. Before rejoining INVESCO in 2000, Mr. Samuelson was president of Denver
Energy Advisors and managing director of Eastgate Management, both energy hedge
funds. He is a Chartered Financial Analyst. Tom received an M.B.A. and B.S. from
the University of Tulsa.
Mr. Samuelson is a member of the INVESCO Growth Team, which is led by Timothy J.
Miller.
[INVESCO ICON] POTENTIAL REWARDS
NO SINGLE FUND SHOULD REPRESENT YOUR COMPLETE INVESTMENT PROGRAM NOR SHOULD YOU
ATTEMPT TO USE THE FUND FOR SHORT-TERM TRADING PURPOSES.
The Fund offers shareholders the potential to increase the value of their
capital over time. Like most mutual funds, the Fund seeks to provide higher
returns than the market or its competitors, but cannot guarantee that
performance.
SUITABILITY FOR INVESTORS
Only you can determine if an investment in the Fund is right for you based upon
your own economic situation, the risk level with which you are comfortable and
other factors. In general, the Fund is most suitable for investors who:
o have obtained the advice of an investment professional or who themselves
are experienced investors.
o are willing to accept the additional risks entailed in the investment
policies of the Fund.
o understand that shares of the Fund can, and likely will, have daily price
fluctuations.
o are investing tax-deferred retirement accounts, such as traditional and
Roth Individual Retirement Accounts ("IRAs"), as well as employer-sponsored
qualified retirement plans, including 401(k)s and 403(b)s, all of which
have longer investment horizons.
You probably do not want to invest in the Fund if you are:
o unaccustomed to investing in potentially volatile securities.
o primarily seeking current dividend income.
o unwilling to accept the additional risks entailed in the investment
policies of the Fund and potentially significant changes in the price of
Fund shares as a result of those policies.
o speculating on short-term fluctuations in the stock markets.
<PAGE>
[INVESCO ICON] SHARE PRICE
CURRENT MARKET VALUE OF FUND ASSETS
+ ACCRUED INTEREST AND DIVIDENDS
- - FUND DEBTS,
INCLUDING ACCRUED EXPENSES
- --------------------------
/ NUMBER OF SHARES
= YOUR SHARE PRICE (NAV).
The value of your Fund shares is likely to change daily. This value is known as
the Net Asset Value per share, or NAV. INVESCO determines the market value of
each investment in the Fund's portfolio each day that the New York Stock
Exchange ("NYSE") is open, at the close of the regular trading day on that
exchange (normally 4:00 p.m. Eastern time). Therefore, shares of the Funds are
not priced on days when the NYSE is closed, which generally is on weekends and
national holidays in the U.S.
NAV is calculated by adding together the current market price of all of the
Fund's investments and other assets, including accrued interest and dividends;
subtracting the Fund's debts, including accrued expenses; and dividing that
dollar amount by the total number of the Fund's outstanding shares.
All purchases, sales and exchanges of Fund shares are made by INVESCO at the NAV
next calculated after INVESCO receives proper instructions from you to purchase,
redeem or exchange shares of the Fund. Your instructions must be received by
INVESCO no later than the close of the NYSE to effect transactions at that day's
NAV. If INVESCO hears from you after that time, your instructions will be
processed at the NAV calculated at the end of the next day that the NYSE is
open.
Foreign securities exchanges, which set the prices for foreign securities held
by the Fund, are not always open the same days as the NYSE, and may be open for
business on days the NYSE is not. For example, Thanksgiving Day is a holiday
observed by the NYSE and not by overseas exchanges. In this situation, the Fund
would not calculate NAV on Thanksgiving Day (and INVESCO would not buy, sell or
exchange shares for you on that day), even though activity on foreign exchanges
could result in changes in the value of investments held by the Fund on that
day.
<PAGE>
[INVESCO ICON] HOW TO BUY SHARES
TO BUY SHARES AT THAT DAY'S CLOSING PRICE, YOU MUST CONTACT US BEFORE THE CLOSE
OF THE NYSE, NORMALLY 4:00 P.M. EASTERN TIME.
The Fund offers multiple classes of shares. The chart in this section shows
several convenient ways to invest in the Fund. Each class represents an
identical interest in the Fund and has the same rights, except that each class
bears its own distribution and shareholder servicing charges, and other
expenses. The income attributable to each class and the dividends payable on the
shares of each class will be reduced by the amount of the distribution fee or
service fee, if applicable, and the other expenses payable by that class.
With respect to Class A shares held 18 months or less (if you purchase
$1,000,000 or more, and other than Class A shares acquired through reinvestment
of dividends or other distributions, or Class A shares exchanged for Class A
shares of another INVESCO Fund), a contingent deferred sales charge of 1% of the
current net asset value of the respective shares will be assessed. When you
invest in the Fund through a securities broker, including a broker affiliated
with INVESCO, you may be charged a commission or transaction fee for either
purchases or sales of Fund shares. For all new accounts, please send a completed
application form, and specify the fund or funds you wish to purchase.
INVESCO reserves the right to increase, reduce or waive the Fund's minimum
investment requirements in its sole discretion, if it determines this action is
in the best interests of the Fund's shareholders. INVESCO also reserves the
right in its sole discretion to reject any order to buy Fund shares, including
purchases by exchange.
MINIMUM INITIAL INVESTMENT. $10,000, which is waived for regular investment
plans, including EasiVest and Direct Payroll Purchase, and certain retirement
plans, including IRAs.
MINIMUM SUBSEQUENT INVESTMENT. $1,000 (Minimums are lower for certain retirement
plans.)
EXCHANGE POLICY. You may exchange your shares in the Fund for shares of the same
class of another INVESCO mutual fund on the basis of their respective NAVs at
the time of the exchange.
FUND EXCHANGES CAN BE A CONVENIENT WAY FOR YOU TO DIVERSIFY YOUR INVESTMENTS, OR
TO REALLOCATE YOUR INVESTMENTS WHEN YOUR OBJECTIVES CHANGE.
Before making any exchange, be sure to review the prospectuses of the funds
involved and consider the differences between the funds. Also, be certain that
you qualify to purchase certain classes of shares in the new fund. An exchange
is the sale of shares from one fund immediately 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, you or your
account qualifies as tax-deferred under the Internal Revenue Code). If the
shares of the fund you are selling have gone up in value since you bought them,
the sale portion of an exchange may result in taxable income to you.
<PAGE>
You may be required to pay an initial sales charge when exchanging from a Fund
with a lower initial sales charge than the one which you are exchanging. If you
exchange from Class A shares not subject to a CDSC into Class A shares subject
to those charges, you will be charged a CDSC when you redeem the exchanged
shares. The CDSC charged on redemption of those shares will be calculated
starting on the date you acquired those shares through exchange. You will not
pay a sales charge when exchanging Class B shares for other Class B shares or
Class C shares for other Class C shares. If you make an exchange involving Class
B or Class C shares, the amount of time you held the original shares will be
added to the holding period of the Class B or Class C shares, respectively, into
which you exchanged for the purpose of calculating the CDSC if you later redeem
the exchanged shares.
We have the following policies governing all exchanges:
o Both fund accounts involved in the exchange must be registered in exactly
the same name(s) and Social Security or federal tax I.D. number(s).
o You may make up to four exchanges out of the Fund per 12-month period, but
you may be subject to the contingent deferred sales charge, described
below.
o The Fund reserves the right to reject any exchange request, or to modify or
terminate the exchange policy, if it is in the best interests of the Fund
and its shareholders. Notice of all such modifications or terminations that
affect all shareholders of the Fund will be given at least 60 days prior to
the effective date of the change, except in unusual instances, including a
suspension of redemption of the exchanged security under Section 22(e) of
the Investment Company Act of 1940.
In addition, the ability to exchange may be temporarily suspended at any time
that sales of the fund into which you wish to exchange are temporarily stopped.
Please remember that if you pay by check, Automated Clearing House ("ACH"), or
wire and your funds do not clear, you will be responsible for any related loss
to the Fund or INVESCO. If you are already an INVESCO funds shareholder, the
Fund may seek reimbursement for any loss from your existing account(s).
CHOOSING A SHARE CLASS. The Fund has multiple classes of shares, each class
representing an interest in the same portfolio of investments. In deciding which
class of shares to purchase, you should consider, among other things, (i) the
length of time you expect to hold your shares, (ii) the provisions of the
distribution plan applicable to that class, if any, (iii) the eligibility
requirements that apply to purchases of a particular class, and (iv) any
services you may receive in making your investment determination.
<PAGE>
In addition you should also consider the factors below:
CLASS A CLASS B CLASS C
Initial sales charge No initial sales charge No initial sales charge
CDSC on redemptions CDSC on redemptions
within six years within one year
Lower 12b-1 fee than 12b-1 fee of 1.00% 12b-1 fee of 1.00%
Class B or Class C
shares
No conversion Converts to Class A Does not convert to
shares after eight years Class A shares
along with a pro rata
portion of its reinvested
dividends and distributions
Generally more [Purchase orders limited Generally more
appropriate for long- to amounts less than appropriate for short-
term investors $________.] term investors
Your investment representative can help you decide. Contact your investment
representative for several convenient ways to invest in the Fund. Shares of the
Fund are available only through your investment representative.
SALES CHARGES
- -------------
Sales charges on Class A Shares of the Fund are detailed below. As used below,
the term "offering price" with respect to Class A shares includes the initial
sales charge.
INITIAL SALES CHARGES. Class A Shares of the Fund are subject to the following
initial sales charges:
Investor's
Sales Charge
------------
Amount of Investment As a % of As a % of
in a single transaction offering price investment
- ----------------------- -------------- ----------
Less than $ 25,000 5.50 5.82
$25,000 but less than $ 50,000 5.25 5.54
$50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
Over $1,000,000 NAV NAV
<PAGE>
CONTINGENT DEFERRED SALES CHARGE (CDSC) FOR CLASS A SHARES. You can purchase
$1,000,000 or more of Class A shares at net asset value. However, if you
purchase shares of that amount, they will be subject to a CDSC of 1% if you
redeem or exchange them prior to eighteen months after the date of purchase. The
distributor may pay a dealer concession and/or a service fee for purchases of
$1,000,000 or more. We will use the "first-in, first-out" method to determine
your holding period. Under this method, the date of redemption or exchange will
be compared with the earliest purchase date of shares held in your account. If
your holding period is less than eighteen months, the CDSC will be assessed on
the current net asset value of those shares.
CDSC FOR CLASS B AND CLASS C SHARES. You can purchase Class B and Class C shares
at their net asset value per share. However, when you redeem them, they are
subject to a CDSC in the following percentages:
Year since
purchase made Class B Class C
- ------------- ------- -------
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS. You may qualify for reduced
sales charges or sales charge exceptions. To qualify for these reductions or
exceptions, you or your financial consultant must provide sufficient information
at the time of purchase to verify that your purchase qualifies for such
treatment.
REDUCED SALES CHARGES. You may be eligible to buy Class A shares at reduced
initial sales charge rates under Rights of Accumulation or Letters of
Intent under certain circumstances.
RIGHTS OF ACCUMULATION. You may combine your new purchases of Class A
shares with Class A shares currently owned for the purpose of
qualifying for the lower initial sales charge rates that apply to
larger purchases. The applicable initial sales charge for the new
purchase is based on the total of your current purchase and the
current value of all Class A shares you own.
LETTERS OF INTENT. Under a Letter of Intent (LOI), you commit to
purchase a specified dollar amount of Class A shares of the Fund [AIM
prospectus has "of the AIM Funds"] during a 13-month period. The
amount you agree to purchase determines the initial sales charge you
pay. If the full face amount of the LOI is not invested by the end of
the 13-month period, your account will be adjusted to the higher
initial sales charge level for the amount actually invested.
<PAGE>
INITIAL SALES CHARGE/CDSC EXCEPTIONS
You will not pay initial sales charges
o on shares purchased by reinvesting dividends and distributions
o when exchanging shares among certain INVESCO Funds
o when using the reinstatement privilege; and
o when a merger, consolidation, or acquisition of assets of an INVESCO
Fund occurs.
You will not pay a CDSC
o if you purchase $1,000,000 or more of Class A shares and hold those
shares for more than 18 months;
o if you redeem Class B shares you held for more than six years;
o if you redeem Class C shares you held for more than one year;
o if you redeem shares acquired through reinvestment of dividends and
distributions;
o on increases in the net asset value of your shares.
o to pay account fees
o for IRA distributions due to death, disability or periodic distributions
based on life expectancy;
o to return excess contributions (and earnings, if applicable) from
retirement plan accounts; or
o for redemptions following the death of a shareholder or beneficial owner.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the Fund's Statement of Additional
Information.
INTERNET TRANSACTIONS. Investors may open new accounts, exchange and redeem
shares of any INVESCO fund through the INVESCO Web site. To use this service,
you will need a web browser (presently Netscape version 4.0 or higher, Internet
Explorer version 4.0 or higher, or AOL version 5.0 or higher) and the ability to
utilize the INVESCO Web site. INVESCO will accept Internet purchase instructions
only for exchanges or if the purchase price is paid to INVESCO through debiting
your bank account, and any Internet cash redemptions will be paid only to the
same bank account form which the payment to INVESCO originated. INVESCO
currently imposes a limit of $25,000 on Internet purchase and redemption
transactions. You may also download an application to open an account from the
Web site, complete it by hand and mail it to INVESCO, along with a check.
INVESCO employs reasonable procedures to confirm that transactions entered into
over the Internet are genuine. If INVESCO follows these procedures, neither
INVESCO, its affiliates nor any Fund will be liable for any loss, liability,
cost or expense for following instructions communicated via the Internet that
are reasonably believed to be genuine or that follow INVESCO's security
procedures. These procedures include the use of alphanumeric passwords, secure
socket layering, encryption and other precautions reasonably designed to protect
the integrity, confidentiality and security of shareholder information. In order
to enter into a transaction on the INVESCO Web site, you will need an account
number, your Social Security Number and an alphanumeric password. By entering
into the user's agreement with INVESCO to open an account through our Web site,
you lose certain rights if someone gives fraudulent or unauthorized instructions
to INVESCO that result in a loss to you.
<PAGE>
<TABLE>
<CAPTION>
METHOD INVESTMENT MINIMUM PLEASE REMEMBER
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BY CHECK $10,000 for regular accounts;
Mail to: $250 for an IRA; $1,000
INVESCO Funds Group, Inc., minimum for each subsequent
P.O. Box _________, investment.
Denver, CO __________.
You may send your check
by overnight courier to:
7800 E. Union Ave.
Denver, CO 80237.
- --------------------------------------------------------------------------------------------------------------
BY WIRE $10,000
You may send your payment by
bank wire (call 1-800-___-____
for instructions).
- --------------------------------------------------------------------------------------------------------------
BY TELEPHONE WITH ACH $50 You must forward your bank
Call 1-800-___-____ to request your account information to
purchase. Upon your telephone INVESCO prior to using
instructions, INVESCO will move money this option.
from your designated bank/credit union
checking or savings account in order to
purchase shares, whenever you wish.
- --------------------------------------------------------------------------------------------------------------
BY INTERNET $10,000 for regular accounts; You will need a web browser
Go to the INVESCO Web site at $250 for an IRA; $1,000 to use this service. Internet
www.invesco.com minimum for each subsequestent purchase transactions are
investment. limited to $25,000.
<PAGE>
METHOD INVESTMENT MINIMUM PLEASE REMEMBER
- --------------------------------------------------------------------------------------------------------------
REGULAR INVESTING WITH EASIVEST $50 per month for EasiVest; Like all regular investment
OR DIRECT PAYROLL PURCHASE $50 per pay period for Direct plans, neither EasiVest nor
You may enroll on your fund Payroll Purchase. You may Direct Payroll Purchase ensures
application, or call us for a separate start or stop your regular a profit or protects against loss
form and more details. Investing the investment plan at any time, in a falling market. Because
same amount on a monthly basis with two weeks' notice to you'll invest continually,
allows you to buy more shares when INVESCO. regardless of varying price
prices are low and fewer shares when levels, consider your financial
prices are high. This "dollar cost ability to keep buying through
averaging" may help offset market low price levels. And
fluctuations. Over a period of time, remember that you will lose
your average cost per share may be less money is you redeem your
than the actual average market value per shares when the market value
share. of all your shares is less than
their cost.
- --------------------------------------------------------------------------------------------------------------
BY PERSONAL ACCOUNT LINE $10,000 (The exchange Be sure to write down the
Your Personal Account Line is minimum is $250 for subsequent confirmation number provided by
available for subsequent purchases purchases requested by PAL(R). You must forward your
and exchanges 24 hours a day. telephone.) bank account information to
Simply call 1-800-___-____. INVESCO prior to using this
option.
- --------------------------------------------------------------------------------------------------------------
BY EXCHANGE $10,000 to open a new See "Exchange Policy."
Between two INVESCO funds. Call account; $1,000 for written
1-800-___-____ for prospectuses of requests to purchase
other INVESCO funds. Exchanges additional shares for an
may be made by phone or at our existing account. (The exchange
Web site at www.invesco.com. You minumun is $250 for
may also establish an automatic exchanges requested by
montly exchange service between telephone.)
two INVESCO funds; call us for
further details and the correct form.
</TABLE>
DISTRIBUTION EXPENSES. We have adopted a Master Distribution Plan and Agreement
(commonly known as a "12b-1 Plan") for each class of shares of the Fund. The
12b-1 fees paid by the Fund's classes of shares are used to pay distribution
fees to IDI for the sale and distribution of the Fund's shares and for services
provided to shareholders, all or a substantial portion of which are paid to the
dealer of record. Because the Fund's shares pay these fees out of their assets
on an ongoing basis, these fees increase the cost of your investment.
HOUSEHOLDING. To save money for the Fund, INVESCO will send only one copy of a
prospectus or financial report to each household address. This process, known as
"householding," is used for most required shareholder mailings. It does not
apply to account statements. You may, of course, request an additional copy of a
prospectus or financial report at any time by calling or writing INVESCO. You
may also request that householding be eliminated from all your required
mailings.
<PAGE>
[INVESCO ICON] HOW TO SELL SHARES
The following chart shows several convenient ways to sell your Fund shares.
Shares of the Fund may be sold at any time at the next NAV calculated after your
request to sell in proper form is received by INVESCO. Depending on Fund
performance, the NAV at the time you sell your shares may be more or less than
the price you paid to purchase your shares.
TO SELL SHARES AT THAT DAY'S CLOSING PRICE, YOU MUST CONTACT US BEFORE 4:00 P.M.
EASTERN TIME.
If you own shares in more than one INVESCO fund, please specify the fund whose
shares you wish to sell. Remember that any sale or exchange of shares in a
non-retirement account will likely result in a taxable gain or loss.
While INVESCO attempts 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.
INVESCO usually mails you the proceeds from the sale of Fund shares within seven
days after we receive your request to sell in proper form. However, payment may
be postponed under unusual circumstances - for instance, if normal trading is
not taking place on the NYSE, or during an emergency as defined by the
Securities and Exchange Commission. If your INVESCO fund shares were purchased
by a check which has not yet cleared, payment will be made promptly when your
purchase check does clear; that can take up to 15 days.
If you participate in EasiVest, the Fund's automatic monthly investment program,
and sell all of the shares in your account, we will not make any additional
EasiVest purchases unless you give us other instructions.
Because of the Fund's expense structure, it costs as much to handle a small
account as it does to handle a large one. If the value of your account in the
Fund falls below $250 as a result of your actions (for example, sale of your
Fund shares), the Fund reserves the right to sell all of your shares, send the
proceeds of the sale to you and close your account. Before this is done, you
will be notified and given 60 days to increase the value of your account to $250
or more.
REDEMPTION FEES. We will not charge you any fees to redeem your shares; however,
your broker or financial consultant may charge service fees for handling these
transactions. Your shares may be subject to a CDSC.
REINSTATEMENT PRIVILEGE (Class A shares only). You may, within 90 days after you
sell Class A shares, reinvest all or part of your redemption proceeds in Class A
shares in the Fund at net asset value in an identically registered account. You
will not pay any sales charges on the amount reinvested. In addition, if you
paid a CDSC on any reinstated amount, you will not be subject to a CDSC if you
later redeem that amount. You must notify the transfer agent in writing at the
time you reinstate that you are exercising your reinstatement privilege. You may
exercise this privilege only once per year.
<PAGE>
<TABLE>
<CAPTION>
METHOD REDEMPTION MINIMUM PLEASE REMEMBER
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BY TELEPHONE $250 (or, if less, full INVESCO's telephone
Call us toll-free at: liquidation of the account) for redemption privileges may be
1-800-___-____. a redemption check; $1,000 for modified or terminated in the
a wire to your bank of record. future at INVESCO's discretion.
The maximum amount which may be
redeemed by telephone is
generally $25,000.
- --------------------------------------------------------------------------------------------------------------
IN WRITING Any amount. The redemption request must be
Mail your request to INVESCO signed by all registered account
Funds Group, Inc., P.O. Box ____, owners. Payment will be mailed
Denver, CO ____. You to your address as it appears on
may also send your request by INVESCO's records, or to a bank
overnight courier to 7800 E. designated by you in writing.
Union Ave., Denver, CO 80237.
- --------------------------------------------------------------------------------------------------------------
BY TELEPHONE WITH ACH $250 You must forward your bank
Call 1-800-___-____ to request your account information to
redemption. INVESCO will INVESCO prior to using
automatically pay the proceeds into this option.
your designated bank account.
- --------------------------------------------------------------------------------------------------------------
BY INTERNET None You will need a web browser
Go to the INVESCO Web site at IRA redemptions are not to use this service. Internet
www.invesco.com permitted. redemtpion transactions are
limited to $25,000.
- --------------------------------------------------------------------------------------------------------------
BY EXCHANGE $250 for exchanges requested See "Exchange Policy." When
Between two INVESCO funds. Call by telephone. opening a new account,
1-800-___-____ for prospectuses of investment minimums apply.
other INVESCO funds. Exchanges
may be made by phone or at our
Web site at www.invesco.com. You
may also establish an automatic
montly exchange service between
two INVESCO funds; call us for
further details and the correct form.
<PAGE>
METHOD INVESTMENT MINIMUM PLEASE REMEMBER
- --------------------------------------------------------------------------------------------------------------
PERIODIC WITHDRAWL PLAN $100 per payment on a monthly You must have at least $10,000
You may call us to request the or quarterly basis. The total invested with the INVESCO
appropriate form and more information redemption check may be made funds with at least $5,000 of
at 1-800___-____. payable to any party you that total invested in the fund
designate. from which withdrawls will
be made.
- --------------------------------------------------------------------------------------------------------------
PAYMENT TO THIRD PARTY Any amount. All registered account owners
Mail your request to INVESCO must sign the request, with
Funds Group, Inc., P.O. Box ____, signature guarantees from an
Denver, CO _____. eligible guarantor financial
institution, such as a
commercial bank or a recognized
national or regional securities
firm.
</TABLE>
[GRAPH ICON] TAXES
Everyone's tax status is unique. We encourage you to consult your own tax
adviser on the tax impact to you of investing in the Fund.
TO AVOID BACKUP WITHHOLDING, BE SURE WE HAVE YOUR CORRECT SOCIAL SECURITY OR
TAXPAYER IDENTIFICATION NUMBER.
The Fund customarily distributes to its shareholders substantially all of its
net investment income, net capital gains and net gains from foreign currency
transactions, if any. You receive a proportionate part of these distributions,
depending on the percentage of the Fund's shares that you own. These
distributions are required under federal tax laws governing mutual funds. It is
the policy of the Fund to distribute all investment company taxable income and
net capital gains. As a result of this policy and the Fund's qualification as a
regulated investment company, it is anticipated that the Fund will not pay any
federal income or excise taxes. Instead, the Fund will be accorded conduit or
"pass through" treatment for federal income tax purposes.
However, unless you are (or your account is) exempt from income taxes, you must
include all dividends and capital gain distributions paid to you by the Fund in
your taxable income for federal, state and local income tax purposes. You also
may realize capital gains or losses when you sell shares of the Fund at more or
less than the price you originally paid. An exchange is treated as a sale, and
is a taxable event. Dividends and other distributions usually are taxable
whether you receive them in cash or automatically reinvest them in shares of the
Fund or other INVESCO funds.
If you have not provided INVESCO with complete, correct tax information, the
Fund is required by law to withhold 31% of your distributions and any money that
you receive from the sale of shares of the Fund as a backup withholding tax.
<PAGE>
We will provide you with detailed information every year about your dividends
and capital gain distributions. Depending on the activity in your individual
account, we may also be able to assist with cost basis figures for shares you
sell.
[GRAPH ICON] DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
The Fund earns ordinary or investment income from dividends and interest on its
investments. The Fund expects to distribute substantially all of this investment
income, less Fund expenses, to shareholders annually or at such other times as
the Fund may elect.
NET INVESTMENT INCOME AND NET REALIZED CAPITAL GAINS ARE DISTRIBUTED TO
SHAREHOLDERS AT LEAST ANNUALLY. DISTRIBUTIONS ARE TAXABLE WHETHER REINVESTED IN
ADDITIONAL SHARES OR PAID TO YOU IN CASH (EXCEPT FOR TAX-EXEMPT ACCOUNTS).
The Fund also realizes capital gains or losses when it sells securities in its
portfolio for more or less than it had paid for them. 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, are
distributed to shareholders at least annually, usually in November or December.
Under present federal income tax laws, capital gains may be taxable at different
rates, depending on how long the Fund has held the underlying investment.
Short-term capital gains which are derived from the sale of assets held one year
or less are taxed as ordinary income. Long-term capital gains which are derived
from the sale of assets held for more than one year are taxed at up to the
maximum capital gains rate, currently 20% for individuals.
Dividends and capital gain distributions are paid to you if you hold shares on
the record date of the distribution regardless how long you have held your
shares. The Fund's NAV will drop by the amount of the distribution on the day
the distribution is declared. If you buy shares of the Fund just before a
distribution is declared, you may wind up "buying a distribution." This means
that if the Fund declares a dividend or capital gain distribution shortly after
you buy, you will receive some of your investment back as a taxable
distribution. Most shareholders want to avoid this. And, if you sell your shares
at a loss for tax purposes and purchase a substantially identical investment
within 30 days before or after that sale, the transaction is usually considered
a "wash sale" and you will not be able to claim a tax loss.
Dividends and capital gain distributions paid by the Fund are automatically
reinvested in additional Fund shares at the NAV on the ex-distribution date,
unless you choose to have them automatically reinvested in another INVESCO fund
or paid to you by check or electronic funds transfer. If you choose to be paid
by check, the minimum amount of the check must be at least $10; amounts less
than that will be automatically reinvested. Dividends and other distributions,
whether received in cash or reinvested in additional Fund shares, may be subject
to federal income tax.
<PAGE>
______________, 2000
INVESCO ADVANTAGE SERIES FUNDS, INC.
INVESCO ADVANTAGE FUND - CLASSES A, B AND C
You may obtain additional information about the Fund from several sources:
FINANCIAL REPORTS. Although this Prospectus describes the Fund's anticipated
investments and operations, the Fund also prepares annual and semiannual reports
that detail the Fund's actual investments at the report date. These reports
include discussion of the Fund's recent performance, as well as market and
general economic trends affecting the Fund's performance. The annual report also
includes the report of the Fund's independent accountants.
STATEMENT OF ADDITIONAL INFORMATION. The SAI dated ____________, 2000 is a
supplement to this Prospectus and has detailed information about the Fund and
its investment policies and practices. A current SAI for the Fund is on file
with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference; in other words, the SAI is legally a part of this
Prospectus, and you are considered to be aware of the contents of the SAI.
INTERNET. The current Prospectus of the Fund may be accessed through the INVESCO
Web site at www.invesco.com. In addition, the Prospectus and SAI of the Fund are
available on the SEC Web site at www.sec.gov.
To obtain a free copy of the current Prospectus and SAI, write to INVESCO
Distributors, Inc., P.O. Box _____, Denver, Colorado 80217-3706; or call
1-800-___-____. Copies of these materials are also available (with a copying
charge) from the SEC's Public Reference Section at 450 Fifth Street, N.W.,
Washington, D.C., 20549-0102. This information can be obtained by electronic
request at the following E-mail address: [email protected], or by calling
1-202-942-8090. The SEC file numbers for the Funds are ________ and
____________.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
INVESCO ADVANTAGE SERIES FUND, INC.
INVESCO Advantage Fund - Classes A, B and C
Address: Mailing Address:
7800 E. Union Ave., Denver, CO 80237 P.O. Box 173706, Denver, CO 80217-3706
Telephone:
In continental U.S., 1-800-_____-_____
______________, 2000
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A Prospectus for Classes A, B and C shares of INVESCO Advantage Fund dated
_____________ provides the basic information you should know before investing in
the Fund. This Statement of Additional Information ("SAI") is incorporated by
reference into the Fund's Prospectus; in other words, this SAI is legally part
of the Fund's Prospectus. Although this SAI is not a prospectus, it contains
information in addition to that set forth in the Prospectus. It is intended to
provide additional information regarding the activities and operations of the
Fund and should be read in conjunction with the Prospectus.
You may obtain, without charge, the current Prospectus and SAI of the Fund by
writing to INVESCO Distributors, Inc., P.O. Box _________, Denver, CO________,
or by calling 1-800-____-________. The Prospectus is also available through the
INVESCO Web site at www.invesco.com.
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TABLE OF CONTENTS
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments, Policies and Risks. . . . . . . . . . . . . . . . . . . . . . . . .
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Service Providers . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brokerage Allocation and Other Practices . . . . . . . . . . . . . . . . . . . .
Capital Stock .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax Consequences of Owning Shares of the Fund . . . . . . . . . . . . . . . . .
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Appendix A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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THE COMPANY
The Company was incorporated under the laws of Maryland on April 24, 2000. The
Company is an open-end, non-diversified, management investment company currently
consisting of one portfolio of investments in three classes: INVESCO Advantage
Fund - Class A shares, Class B shares and Class C shares (the "Fund").
Additional funds may be offered in the future.
"Open-end" means that the Fund issues an indefinite number of shares which it
continuously offers to redeem at net asset value per share ("NAV"). A
"management" investment company actively buys and sells securities for the
portfolio of the Fund at the direction of a professional manager. Open-end
management investment companies (or one or more series of such companies, such
as the Fund) are commonly referred to as mutual funds. Each class of shares of
the Fund pays a 12b-1 distribution fee which is computed and paid monthly at the
following annual rates:
Class A 0.35% of average net assets attributable to Class A shares
Class B 1.00% of average net assets attributable to Class B shares
Class C 1.00% of average net assets attributable to Class C shares
INVESTMENTS, POLICIES AND RISKS
The principal investments and policies of the Fund are discussed in the
Prospectus of the Fund. The Fund also may invest in the following securities and
engage in the following practices.
BORROWINGS AND LEVERAGE - The Fund may borrow money from banks (including the
Fund's custodian bank), subject to the limitations under the 1940 Act. The Fund
will limit borrowings and reverse repurchase agreements to an aggregate of
33 1/3% of the Fund's total assets at the time of the transaction.
The Fund may employ "leverage" by borrowing money and using it to purchase
additional securities. Leverage increases both investment opportunity and
investment risk. If the investment gains on the securities purchased with
borrowed money exceed the interest paid on the borrowing, the net asset value of
the Fund's shares will rise faster than would otherwise be the case. On the
other hand, if the investment gains fail to cover the cost (including interest
on borrowings), or if there are losses, the net asset value of the Fund's shares
will decrease faster than would otherwise be the case. The Fund will maintain
asset coverage of at least 300% for all such borrowings, and should such asset
coverage at any time fall below 300%, the Fund will be required to reduce its
borrowings within three days to the extent necessary to satisfy this
requirement. To reduce its borrowings, the Fund might be required to sell
securities at a disadvantageous time. Interest on money borrowed is an expense
the Fund would not otherwise incur, and the Fund may therefore have little or no
investment income during periods of substantial borrowings.
CERTIFICATES OF DEPOSIT IN FOREIGN BANKS AND U.S. BRANCHES OF FOREIGN BANKS --
The Fund may maintain time deposits in and invest in U.S. dollar denominated CDs
issued by foreign banks and U.S. branches of foreign banks. The Fund limits
investments in foreign bank obligations to U.S. dollar denominated obligations
of foreign banks which have more than $10 billion in assets, have branches or
agencies in the U.S., and meet other criteria established by the board of
directors. Investments in foreign securities involve special considerations.
There is generally less publicly available information about foreign issuers
since many foreign countries do not have the same disclosure and reporting
requirements as are imposed by the U.S. securities laws. Moreover, foreign
issuers are generally not bound by uniform accounting and auditing and financial
reporting requirements and standards of practice comparable to those applicable
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to domestic issuers. Such investments may also entail the risks of possible
imposition of dividend withholding or confiscatory taxes, possible currency
blockage or transfer restrictions, expropriation, nationalization or other
adverse political or economic developments, and the difficulty of enforcing
obligations in other countries.
The Fund may also invest in bankers' acceptances, time deposits and certificates
of deposit of U.S. branches of foreign banks and foreign branches of U.S. banks.
Investments in instruments of U.S. branches of foreign banks will be made only
with branches that are subject to the same regulations as U.S. banks. An
investment in instruments issued by a foreign branch of a U.S. bank will be made
only if the investment risk associated with such investment is the same as that
involving an investment in instruments issued by the U.S. parent, with the U.S.
parent unconditionally liable in the event that the foreign branch fails to pay
on the investment for any reason.
COMMERCIAL PAPER -- Commercial paper is the term for short-term promissory notes
issued by domestic corporations to meet current working capital needs.
Commercial paper may be unsecured by the corporation's assets but may be backed
by a letter of credit from a bank or other financial institution. The letter of
credit enhances the paper's creditworthiness. The issuer is directly responsible
for payment but the bank "guarantees" that if the note is not paid at maturity
by the issuer, the bank will pay the principal and interest to the buyer.
INVESCO Funds Group, Inc. ("INVESCO"), the Fund's investment adviser, will
consider the creditworthiness of the institution issuing the letter of credit,
as well as the creditworthiness of the issuer of the commercial paper, when
purchasing paper enhanced by a letter of credit. Commercial paper is sold either
in an interest-bearing form or on a discounted basis, with maturities not
exceeding 270 days.
DEBT SECURITIES -- Debt securities include bonds, notes and other securities
that give the holder the right to receive fixed amounts of principal, interest,
or both on a date in the future or on demand. Debt securities also are often
referred to as fixed-income securities, even if the rate of interest varies over
the life of the security.
Debt securities are generally subject to credit risk and market risk. Credit
risk is the risk that the issuer of the security may be unable to meet interest
or principal payments or both as they come due. Market risk is the risk that the
market value of the security may decline for a variety of reasons, including
changes in interest rates. An increase in interest rates tends to reduce the
market values of debt securities in which the Fund has invested. A decline in
interest rates tends to increase the market values of debt securities in which
the Fund has invested.
Moody's Investor Services, Inc. ("Moody's") and Standard & Poor's, Inc. ("S&P")
ratings provide a useful guide to the credit risk of many debt securities. The
lower the rating of a debt security, the greater the credit risk the rating
service assigns to the security. To compensate investors for accepting that
greater risk, lower-rated debt securities tend to offer higher interest rates.
The Fund may invest up to 25% of its portfolio in lower-rated debt securities,
which are often referred to as "junk bonds." Increasing the amount of Fund
assets invested in unrated or lower-grade straight debt securities may increase
the yield produced by the Fund's debt securities but will also increase the
credit risk of those securities. A debt security is considered lower-grade if it
is rated Ba or less by Moody's or BB or less by S&P. Lower-rated and non-rated
debt securities of comparable quality are subject to wider fluctuations in
yields and market values than higher-rated debt securities and may be considered
speculative. Although the Fund may invest in debt securities assigned lower
grade ratings by S&P or Moody's, at the time of purchase the Fund is not
permitted to invest in bonds that are in default or are rated CCC or below by
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S&P or Caa or below by Moody's or, if unrated, are judged by INVESCO to be of
equivalent quality. Debt securities rated lower than B by either S&P or Moody's
are usually considered to be speculative. At the time of purchase, INVESCO will
limit Fund investments to debt securities which INVESCO believes are not highly
speculative and which are rated at least B by S&P and Moody's.
A significant economic downturn or increase in interest rates may cause issuers
of debt securities to experience increased financial problems which could
adversely affect their ability to pay principal and interest obligations, to
meet projected business goals, and to obtain additional financing. These
conditions more severely impact issuers of lower-rated debt securities. The
market for lower-rated straight debt securities may not be as liquid as the
market for higher-rated straight debt securities. Therefore, INVESCO attempts to
limit purchases of lower-rated securities to securities having an established
secondary market.
Debt securities rated Caa by Moody's may be in default or may present risks of
non-payment of principal or interest. Lower-rated securities by S&P (categories
BB and B) include those which are predominantly speculative because of the
issuer's perceived capacity to pay interest and repay principal in accordance
with their terms; BB indicates the lowest degree of speculation and B a higher
degree of speculation. While such bonds will likely have some quality and
protective characteristics, these are usually outweighed by large uncertainties
or major risk exposures to adverse conditions.
Although bonds in the lowest investment grade debt category (those rated BBB by
S&P, Baa by Moody's or the equivalent) are regarded as having adequate
capability to pay principal and interest, they have speculative characteristics.
Adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to make principal and interest payments than is the case for
higher-rated bonds. Lower-rated bonds by Moody's (categories Ba, B or Caa) are
of poorer quality and also have speculative characteristics. Bonds rated Caa may
be in default or there may be present elements of danger with respect to
principal or interest. Lower-rated bonds by S&P (categories BB, B or CCC)
include those that are regarded, on balance, as predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal in
accordance with their terms; BB indicates the lowest degree of speculation and
CCC a high degree of speculation. While such bonds likely will have some quality
and protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions. Bonds having equivalent ratings from
other ratings services will have characteristics similar to those of the
corresponding S&P and Moody's ratings. For a specific description of S&P and
Moody's corporate bond rating categories, please refer to Appendix A.
The Fund may invest in zero coupon bonds and step-up bonds. Zero coupon bonds do
not make regular interest payments. Zero coupon bonds are sold at a discount
from face value. Principal and accrued discount (representing interest earned
but not paid) are paid at maturity in the amount of the face value. Step-up
bonds initially make no (or low) cash interest payments but begin paying
interest (or a higher rate of interest) at a fixed time after issuance of the
bond. The market values of zero coupon and step-up bonds generally fluctuate
more in response to changes in interest rates than interest-paying securities of
comparable term and quality. The Fund may be required to distribute income
recognized on these bonds, even though no cash may be paid to the Fund until the
maturity or call date of a bond, in order for the Fund to maintain its
qualification as a regulated investment company. These required distributions
could reduce the amount of cash available for investment by the Fund.
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DOMESTIC BANK OBLIGATIONS -- U.S. banks (including their foreign branches) issue
certificates of deposit (CDs) and bankers' acceptances which may be purchased by
the Fund if an issuing bank has total assets in excess of $5 billion and the
bank otherwise meets the Fund's credit rating requirements. CDs are issued
against deposits in a commercial bank for a specified period and rate and are
normally negotiable. Eurodollar CDs are certificates issued by a foreign branch
(usually London) of a U.S. domestic bank, and, as such, the credit is deemed to
be that of the domestic bank. Bankers' acceptances are short-term credit
instruments evidencing the promise of the bank (by virtue of the bank's
"acceptance") to pay at maturity a draft which has been drawn on it by a
customer (the "drawer"). Bankers' acceptances are used to finance the import,
export, transfer, or storage of goods and reflect the obligation of both the
bank and the drawer to pay the face amount. Both types of securities are subject
to the ability of the issuing bank to meet its obligations, and are subject to
risks common to all debt securities. In addition, banker's acceptances may be
subject to foreign currency risk and certain other risks of investment in
foreign securities.
EQUITY SECURITIES -- The Fund invests in common, preferred and convertible
preferred stocks, and securities whose values are tied to the price of stocks,
such as rights, warrants and convertible debt securities. Common stocks and
preferred stocks represent equity ownership in a corporation. Owners of stock,
such as the Fund, share in a corporation's earnings through dividends which may
be declared by the corporation, although the receipt of dividends is not the
principal benefit that the Fund seeks when it invests in stocks and similar
instruments.
Instead, the Fund seeks to invest in stocks that will increase in market value
and may be sold for more than the Fund paid to buy them. Market value is based
upon constantly changing investor perceptions of what a company is worth
compared to other companies. Although dividends are a factor in the changing
market value of stocks, many companies do not pay dividends, or pay
comparatively small dividends. The principal risk of investing in equity
securities is that their market values fluctuate constantly, often due to
factors entirely outside the control of the Fund or the company issuing the
stock. At any given time, the market value of an equity security may be
significantly higher or lower than the amount paid by the Fund to acquire it.
Owners of preferred stocks are entitled to dividends payable from the
corporation's earnings, which in some cases may be "cumulative" if prior
dividends on the preferred stock have not been paid. Dividends payable on
preferred stock have priority over distributions to holders of common stock, and
preferred stocks generally have a priority on the distribution of assets in the
event of the corporation's liquidation. Preferred stocks may be "participating,"
which means that they may be entitled to dividends in excess of the stated
dividend in certain cases. The holders of a company's debt securities generally
are entitled to be paid by the company before it pays anything to its
stockholders.
Rights and warrants are securities which entitle the holder to purchase the
securities of a company (usually, its common stock) at a specified price during
a specified time period. The value of a right or warrant is affected by many of
the same factors that determine the prices of common stocks. Rights and warrants
may be purchased directly or acquired in connection with a corporate
reorganization or exchange offer.
The Fund also may purchase convertible securities including convertible debt
obligations and convertible preferred stock. A convertible security entitles the
holder to exchange it for a fixed number of shares of common stock (or other
equity security), usually at a fixed price within a specified period of time.
Until conversion, the owner of convertible securities usually receives the
interest paid on a convertible bond or the dividend preference of a preferred
stock.
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A convertible security has an "investment value" which is a theoretical value
determined by the yield it provides in comparison with similar securities
without the conversion feature. Investment value changes are based upon
prevailing interest rates and other factors. It also has a "conversion value,"
which is the market value the convertible security would have if it were
exchanged for the underlying equity security. Convertible securities may be
purchased at varying price levels above or below their investment values or
conversion values.
Conversion value is a simple mathematical calculation that fluctuates directly
with the price of the underlying security. However, if the conversion value is
substantially below the investment value, the market value of the convertible
security is governed principally by its investment value. If the conversion
value is near or above the investment value, the market value of the convertible
security generally will rise above the investment value. In such cases, the
market value of the convertible security may be higher than its conversion
value, due to the combination of the convertible security's right to interest
(or dividend preference) and the possibility of capital appreciation from the
conversion feature. However, there is no assurance that any premium above
investment value or conversion value will be recovered because prices change
and, as a result, the ability to achieve capital appreciation through conversion
may be eliminated.
FOREIGN SECURITIES -- Investments in the securities of foreign companies, or
companies that have their principal business activities outside the United
States, involve certain risks not associated with investments in U.S. companies.
Non-U.S. companies generally are not subject to the same uniform accounting,
auditing and financial reporting standards that apply to U.S. companies.
Therefore, financial information about foreign companies may be incomplete, or
may not be comparable to the information available on U.S. companies. There may
also be less publicly available information about a foreign company.
Although the volume of trading in foreign securities markets is growing,
securities of many non-U.S. companies may be less liquid and have greater swings
in price than securities of comparable U.S. companies. The costs of buying and
selling securities on foreign securities exchanges are generally significantly
higher than similar costs in the United States. There is generally less
government supervision and regulation of exchanges, brokers and issuers in
foreign countries than there is in the United States. Investments in non-U.S.
securities may also be subject to other risks different from those affecting
U.S. investments, including local political or economic developments,
expropriation or nationalization of assets, confiscatory taxation, and
imposition of withholding taxes on dividends or interest payments. If it becomes
necessary, it may be more difficult for the Fund to obtain or to enforce a
judgment against a foreign issuer than against a domestic issuer.
Securities traded on foreign markets are usually bought and sold in local
currencies, not in U.S. dollars. Therefore, the market value of foreign
securities acquired by the Fund can be affected -- favorably or unfavorably --
by changes in currency rates and exchange control regulations. Costs are
incurred in converting money from one currency to another. Foreign currency
exchange rates are determined by supply and demand on the foreign exchange
markets. Foreign exchange markets are affected by the international balance of
payments and other economic and financial conditions, government intervention,
speculation and other factors, all of which are outside the control of the Fund.
Generally, the Fund's foreign currency exchange transactions will be conducted
on a cash or "spot" basis at the spot rate for purchasing or selling currency in
the foreign currency exchange markets.
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ADRs -- American Depository Receipts, or ADRs, are securities issued by American
banks. ADRs are receipts for the shares of foreign corporations that are held by
the bank issuing the receipt. An ADR entitles its holder to all dividends and
capital gains on the underlying foreign securities, less any fees paid to the
bank. Purchasing ADRs gives the Fund the ability to purchase the functional
equivalent of foreign securities without going to the foreign securities markets
to do so. ADRs are bought and sold in U.S. dollars, not foreign currencies. An
ADR that is "sponsored" means that the foreign corporation whose shares are
represented by the ADR is actively involved in the issuance of the ADR, and
generally provides material information about the corporation to the U.S.
market. An "unsponsored" ADR program means that the foreign corporation whose
shares are held by the bank is not obligated to disclose material information in
the United States, and, therefore, the market value of the ADR may not reflect
important facts known only to the foreign company. Since they mirror their
underlying foreign securities, ADRs generally have the same risks as investing
directly in the underlying foreign securities. [AIM prospectus describes EDRs
which I have not seen referenced in our SAIs]
EUROBONDS AND YANKEE BONDS -- Bonds issued by foreign branches of U.S. banks
("Eurobonds") and bonds issued by a U.S. branch of a foreign bank and sold in
the United States ("Yankee bonds"). These bonds are bought and sold in U.S.
dollars, but generally carry with them the same risks as investing in foreign
securities.
FUTURES, OPTIONS AND OTHER FINANCIAL INSTRUMENTS
GENERAL. As discussed in the Prospectus, the adviser may use various types of
financial instruments, some of which are derivatives, to attempt to manage the
risk of the Fund's investments or, in certain circumstances, for investment
(e.g., as a substitute for investing in securities). These financial instruments
include options, futures contracts (sometimes referred to as "futures"), forward
contracts, swaps, caps, floors and collars (collectively, "Financial
Instruments"). The policies in this section do not apply to other types of
instruments sometimes referred to as derivatives, such as indexed securities,
mortgage-backed and other asset-backed securities, and stripped interest and
principal of debt.
Hedging strategies can be broadly categorized as "short" hedges and "long" or
"anticipatory" hedges. A short hedge involves the use of a Financial Instrument
in order to partially or fully offset potential variations in the value of one
or more investments held in the Fund's portfolio. A long or anticipatory hedge
involves the use of a Financial Instrument in order to partially or fully offset
potential increases in the acquisition cost of one or more investments that the
Fund intends to acquire. In an anticipatory hedge transaction, the Fund does not
already own a corresponding security. Rather, it relates to a security or type
of security that the Fund intends to acquire. If the Fund does not eliminate the
hedge by purchasing the security as anticipated, the effect on the Fund's
portfolio is the same as if a long position were entered into. Financial
Instruments may also be used, in certain circumstances, for investment (e.g., as
a substitute for investing in securities).
Financial Instruments on individual securities generally are used to attempt to
hedge against price movements in one or more particular securities positions
that the Fund already owns or intends to acquire. Financial Instruments on
indexes, in contrast, generally are used to attempt to hedge all or a portion of
a portfolio against price movements of the securities within a market sector in
which the Fund has invested or expects to invest.
The use of Financial Instruments is subject to applicable regulations of the
Securities and Exchange Commission ("SEC"), the several exchanges upon which
they are traded, and the Commodity Futures Trading Commission ("CFTC"). In
addition, the Fund's ability to use Financial Instruments will be limited by tax
considerations. See "Tax Consequences of Owning Shares of the Fund."
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In addition to the instruments and strategies described below, the adviser may
use other similar or related techniques to the extent that they are consistent
with the Fund's investment objective and permitted by its investment limitations
and applicable regulatory authorities. The Fund's Prospectus or Statement of
Additional Information ("SAI") will be supplemented to the extent that new
products or techniques become employed involving materially different risks than
those described below or in the Prospectus.
SPECIAL RISKS. Financial Instruments and their use involve special
considerations and risks, certain of which are described below.
(1) Financial Instruments may increase the volatility of the Fund. If the
adviser employs a Financial Instrument that correlates imperfectly with the
Fund's investments, a loss could result, regardless of whether or not the intent
was to manage risk. In addition, these techniques could result in a loss if
there is not a liquid market to close out a position that the Fund has entered.
(2) There might be imperfect correlation between price movements of a Financial
Instrument and price movement of the investment(s) being hedged. For example, if
the value of a Financial Instrument used in a short hedge increased by less than
the decline in value of the hedged investment(s), the hedge would not be fully
successful. This might be caused by certain kinds of trading activity that
distorts the normal price relationship between the security being hedged and the
Financial Instrument. Similarly, the effectiveness of hedges using Financial
Instruments on indexes will depend on the degree of correlation between price
movements in the index and price movements in the securities being hedged.
The Fund is authorized to use options and futures contracts related to
securities with issuers, maturities or other characteristics different from the
securities in which it typically invests. This involves a risk that the options
or futures position will not track the performance of the Fund's portfolio
investments.
The direction of options and futures price movements can also diverge from the
direction of the movements of the prices of their underlying instruments, even
if the underlying instruments match the Fund's investments well. Options and
futures prices are affected by such factors as current and anticipated
short-term interest rates, changes in volatility of the underlying instrument,
and the time remaining until expiration of the contract, which may not affect
security prices the same way. Imperfect correlation may also result from
differing levels of demand in the options and futures markets and the securities
markets, from structural differences in how options and futures and securities
are traded, or from imposition of daily price fluctuation limits or trading
halts. The Fund may take positions in options and futures contracts with a
greater or lesser face value than the securities it wishes to hedge or intends
to purchase in order to attempt to compensate for differences in volatility
between the contract and the securities, although this may not be successful in
all cases.
(3) If successful, the above-discussed hedging strategies can reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable price
movements of portfolio securities. However, such strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements. For example, if the Fund entered into a short hedge because the
adviser projected a decline in the price of a security in the Fund's portfolio,
and the price of that security increased instead, the gain from that increase
would likely be wholly or partially offset by a decline in the value of the
short position in the Financial Instrument. Moreover, if the price of the
Financial Instrument declined by more than the increase in the price of the
security, the Fund could suffer a loss.
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(4) The Fund's ability to close out a position in a Financial Instrument prior
to expiration or maturity depends on the degree of liquidity of the market or,
in the absence of such a market, the ability and willingness of the other party
to the transaction (the "counterparty") to enter into a transaction closing out
the position. Therefore, there is no assurance that any position can be closed
out at a time and price that is favorable to the Fund.
(5) As described below, the Fund is required to maintain assets as "cover,"
maintain segregated accounts or make margin payments when they take positions in
Financial Instruments involving obligations to third parties (i.e., Financial
Instruments other than purchased options). If the Fund is unable to close out
its positions in such Financial Instruments, it might be required to continue to
maintain such assets or segregated accounts or make such payments until the
position expired. These requirements might impair the Fund's ability to sell a
portfolio security or make an investment at a time when it would otherwise be
favorable to do so, or require that the Fund sell a portfolio security at a
disadvantageous time.
COVER. Positions in Financial Instruments, other than purchased options, expose
the Fund to an obligation to another party. The Fund will not enter into any
such transaction unless it owns (1) an offsetting ("covered") position in
securities, currencies or other options, futures contracts or forward contracts,
or (2) cash and liquid assets with a value, marked-to-market daily, sufficient
to cover its obligations to the extent not covered as provided in (1) above. The
Fund will comply with SEC guidelines regarding cover for these instruments and
will, if the guidelines so require, designate cash or liquid assets as
segregated in the prescribed amount as determined daily.
Assets used as cover or held as segregated cannot be sold while the position in
the corresponding Financial Instrument is open unless they are replaced with
other appropriate assets. As a result, the commitment of a large portion of the
Fund's assets to cover or to hold as segregated could impede portfolio
management or the Fund's ability to meet redemption requests or other current
obligations.
OPTIONS. The Fund may engage in certain strategies involving options to attempt
to manage the risk of its investments or, in certain circumstances, for
investment (e.g., as a substitute for investing in securities). A call option
gives the purchaser the right to buy, and obligates the writer to sell the
underlying investment at the agreed-upon exercise price during the option
period. A put option gives the purchaser the right to sell, and obligates the
writer to buy the underlying investment at the agreed-upon exercise price during
the option period. Purchasers of options pay an amount, known as a premium, to
the option writer in exchange for the right under the option contract. See
"Options on Indexes" below with regard to cash settlement of option contracts on
index values.
The purchase of call options can serve as a hedge against a price rise of the
underlier and the purchase of put options can serve as a hedge against a price
decline of the underlier. Writing call options can serve as a limited short
hedge because declines in the value of the hedged investment would be offset to
the extent of the premium received for writing the option. However, if the
security or currency appreciates to a price higher than the exercise price of
the call option, it can be expected that the option will be exercised and the
Fund will be obligated to sell the security or currency at less than its market
value.
Writing put options can serve as a limited long or anticipatory hedge because
increases in the value of the hedged investment would be offset to the extent of
the premium received for writing the option. However, if the security or
currency depreciates to a price lower than the exercise price of the put option,
it can be expected that the put option will be exercised and the Fund will be
obligated to purchase the security or currency at more than its market value.
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The value of an option position will reflect, among other things, the current
market value of the underlying investment, the time remaining until expiration,
the relationship of the exercise price to the market price of the underlying
investment, the price volatility of the underlying investment and general market
and interest rate conditions. Options that expire unexercised have no value.
The Fund may effectively terminate its right or obligation under an option by
entering into a closing transaction. For example, the Fund may terminate its
obligation under a call or put option that it had written by purchasing an
identical call or put option, which is known as a closing purchase transaction.
Conversely, the Fund may terminate a position in a put or call option it had
purchased by writing an identical put or call option, which is known as a
closing sale transaction. Closing transactions permit the Fund to realize
profits or limit losses on an option position prior to its exercise or
expiration.
RISKS OF OPTIONS ON SECURITIES. Options embody the possibility of large amounts
of exposure, which will result in the Fund's net asset value being more
sensitive to changes in the value of the related investment. The Fund may
purchase or write both exchange-traded and OTC options. Exchange-traded options
in the United States are issued by a clearing organization affiliated with the
exchange on which the option is listed that, in effect, guarantees completion of
every exchange-traded option transaction. In contrast, OTC options are contracts
between the Fund and its counterparty (usually a securities dealer or a bank)
with no clearing organization guarantee. Thus, when the Fund purchases an OTC
option, it relies on the counterparty from whom it purchased the option to make
or take delivery of the underlying investment upon exercise of the option.
Failure by the counterparty to do so would result in the loss of any premium
paid by the Fund as well as the loss of any expected benefit from the
transaction.
The Fund's ability to establish and close out positions in options depends on
the existence of a liquid market. However, there can be no assurance that such a
market will exist at any particular time. Closing transactions can be made for
OTC options only by negotiating directly with the counterparty, or by a
transaction in the secondary market if any such market exists. There can be no
assurance that the Fund will in fact be able to close out an OTC option position
at a favorable price prior to expiration. In the event of insolvency of the
counterparty, the Fund might be unable to close out an OTC option position at
any time prior to the option's expiration. If the Fund is not able to enter into
an offsetting closing transaction on an option it has written, it will be
required to maintain the securities subject to the call or the liquid assets
underlying the put until a closing purchase transaction can be entered into or
the option expires. However, there can be no assurance that such a market will
exist at any particular time.
If the Fund were unable to effect a closing transaction for an option it had
purchased, it would have to exercise the option to realize any profit. The
inability to enter into a closing purchase transaction for a covered call option
written by the Fund could cause material losses because the Fund would be unable
to sell the investment used as cover for the written option until the option
expires or is exercised.
OPTIONS ON INDEXES. Puts and calls on indexes are similar to puts and calls on
securities or futures contracts except that all settlements are in cash and
changes in value depend on changes in the index in question. When the Fund
writes a call on an index, it receives a premium and agrees that, prior to the
expiration date, upon exercise of the call, the purchaser will receive from the
Fund an amount of cash equal to the positive difference between the closing
price of the index and the exercise price of the call times a specified multiple
("multiplier"), which determines the total dollar value for each point of such
difference. When the Fund buys a call on an index, it pays a premium and has the
same rights as to such call as are indicated above. When the Fund buys a put on
an index, it pays a premium and has the right, prior to the expiration date, to
require the seller of the put to deliver to the Fund an amount of cash equal to
<PAGE>
the positive difference between the exercise price of the put and the closing
price of the index times the multiplier. When the Fund writes a put on an index,
it receives a premium and the purchaser of the put has the right, prior to the
expiration date, to require the Fund to deliver to it an amount of cash equal to
the positive difference between the exercise price of the put and the closing
level of the index times the multiplier.
The risks of purchasing and selling options on indexes may be greater than
options on securities. Because index options are settled in cash, when the Fund
writes a call on an index it cannot fulfill its potential settlement obligations
by delivering the underlying securities. The Fund can offset some of the risk of
writing a call index option by holding a diversified portfolio of securities
similar to those on which the underlying index is based. However, the Fund
cannot, as a practical matter, acquire and hold a portfolio containing exactly
the same securities as underlie the index and, as a result, bears a risk that
the value of the securities held will vary from the value of the index.
Even if the Fund could assemble a portfolio that exactly reproduced the
composition of the underlying index, it still would not be fully covered from a
risk standpoint because of the "timing risk" inherent in writing index options.
When an index option is exercised, the amount of cash that the holder is
entitled to receive is determined by the difference between the exercise price
and the closing index level. As with other kinds of options, the Fund as the
call writer will not learn what it has been assigned until the next business
day. The time lag between exercise and notice of assignment poses no risk for
the writer of a covered call on a specific underlying security, such as common
stock, because in that case the writer's obligation is to deliver the underlying
security, not to pay its value as of a moment in the past. In contrast, the
writer of an index call will be required to pay cash in an amount based on the
difference between the closing index value on the exercise date and the exercise
price. By the time the Fund learns what it has been assigned, the index may have
declined. This "timing risk" is an inherent limitation on the ability of index
call writers to cover their risk exposure.
If the Fund has purchased an index option and exercises it before the closing
index value for that day is available, it runs the risk that the level of the
underlying index may subsequently change. If such a change causes the exercised
option to fall out-of-the-money, the Fund nevertheless will be required to pay
the difference between the closing index value and the exercise price of the
option (times the applicable multiplier) to the assigned writer.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with respect
to the underlying instrument, expiration date, contract size, and strike price,
the terms of OTC options (options not traded on exchanges) generally are
established through negotiation with the other party to the option contract.
While this type of arrangement allows the Fund great flexibility to tailor the
option to its needs, OTC options generally involve greater risk than
exchange-traded options, which are guaranteed by the clearing organization of
the exchange where they are traded.
Generally, OTC foreign currency options used by the Fund are European-style
options. This means that the option is only exercisable immediately prior to its
expiration. This is in contrast to American-style options, which are exercisable
at any time prior to the expiration date of the option.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. When the Fund purchases or
sells a futures contract, it incurs an obligation respectively to take or make
delivery of a specified amount of the obligation underlying the contract at a
specified time and price. When the Fund writes an option on a futures contract,
it becomes obligated to assume a position in the futures contract at a specified
exercise price at any time during the term of the option. If the Fund writes a
call, on exercise it assumes a short futures position. If it writes a put, on
exercise it assumes a long futures position.
<PAGE>
The purchase of futures or call options on futures can serve as a long or an
anticipatory hedge, and the sale of futures or the purchase of put options on
futures can serve as a short hedge. Writing call options on futures contracts
can serve as a limited short hedge, using a strategy similar to that used for
writing call options on securities or indexes. Similarly, writing put options on
futures contracts can serve as a limited long or anticipatory hedge.
In addition, futures strategies can be used to manage the "duration" (a measure
of anticipated sensitivity to changes in interest rates, which is sometimes
related to the weighted average maturity of a portfolio) and associated interest
rate risk of the Fund's fixed-income portfolio. If the adviser wishes to shorten
the duration of the Fund's fixed-income portfolio (i.e., reduce anticipated
sensitivity), the Fund may sell an appropriate debt futures contract or a call
option thereon, or purchase a put option on that futures contract. If the
adviser wishes to lengthen the duration of the Fund's fixed-income portfolio
(i.e., increase anticipated sensitivity), the Fund may buy an appropriate debt
futures contract or a call option thereon, or sell a put option thereon.
At the inception of a futures contract, the Fund is required to deposit "initial
margin" in an amount generally equal to 10% or less of the contract value.
Initial margin must also be deposited when writing a call or put option on a
futures contract, in accordance with applicable exchange rules. Subsequent
"variation margin" payments are made to and from the futures broker daily as the
value of the futures or written option position varies, a process known as
"marking-to-market." Unlike margin in securities transactions, initial margin on
futures contracts and written options on futures contracts does not represent a
borrowing on margin, but rather is in the nature of a performance bond or
good-faith deposit that is returned to the Fund at the termination of the
transaction if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, the Fund may be required to
increase the level of initial margin deposits. If the Fund has insufficient cash
to meet daily variation margin requirements, it might need to sell securities in
order to do so at a time when such sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures can enter
into offsetting closing transactions, similar to closing transactions on
options, by selling or purchasing, respectively, an instrument identical to the
instrument purchased or sold. However, there can be no assurance that a liquid
market will exist for a particular contract at a particular time. In such event,
it may not be possible to close a futures contract or options position.
Under certain circumstances, futures exchanges may establish daily limits on the
amount that the price of a futures contract or an option on a futures contract
can vary from the previous day's settlement price; once that limit is reached,
no trades may be made that day at a price beyond the limit. Daily price limits
do not limit potential losses because prices could move to the daily limit for
several consecutive days with little or no trading, thereby preventing
liquidation of unfavorable positions.
If the Fund were unable to liquidate a futures contract or an option on a
futures contract position due to the absence of a liquid market or the
imposition of price limits, it could incur substantial losses. The Fund would
continue to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Fund would continue to be required
to make daily variation margin payments and might be required to continue to
maintain the position being hedged by the futures contract or option or to
continue to maintain cash or securities in a segregated account.
<PAGE>
To the extent that the Fund enters into futures contracts, options on futures
contracts and options on foreign currencies traded on a CFTC-regulated exchange,
in each case that is not for bona fide hedging purposes (as defined by the
CFTC), the aggregate initial margin and premiums required to establish these
positions (excluding the amount by which options are "in-the-money" at the time
of purchase) may not exceed 5% of the liquidation value of the Fund's portfolio,
after taking into account unrealized profits and unrealized losses on any
contracts the Fund has entered into. This policy does not limit to 5% the
percentage of the Fund's assets that are at risk in futures contracts, options
on futures contracts and currency options.
RISKS OF FUTURES CONTRACTS AND OPTIONS THEREON. The ordinary spreads at a given
time between prices in the cash and futures markets (including the options on
futures markets), due to differences in the natures of those markets, are
subject to the following factors. First, all participants in the futures market
are subject to margin deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through offsetting transactions, which could distort the normal relationship
between the cash and futures markets. Second, the liquidity of the futures
market depends on participants entering into offsetting transactions rather than
making or taking delivery. To the extent participants decide to make or take
delivery, liquidity in the futures market could be reduced, thus producing
distortion. Due to the possibility of distortion, a hedge may not be successful.
Although stock index futures contracts do not require physical delivery, under
extraordinary market conditions, liquidity of such futures contracts also could
be reduced. Additionally, the adviser may be incorrect in its expectations as to
the extent of various interest rates, currency exchange rates or stock market
movements or the time span within which the movements take place.
INDEX FUTURES. The risk of imperfect correlation between movements in the price
of index futures and movements in the price of the securities that are the
subject of a hedge increases as the composition of the Fund's portfolio diverges
from the index. The price of the index futures may move proportionately more
than or less than the price of the securities being hedged. If the price of the
index futures moves proportionately less than the price of the securities that
are the subject of the hedge, the hedge will not be fully effective. Assuming
the price of the securities being hedged has moved in an unfavorable direction,
as anticipated when the hedge was put into place, the Fund would be in a better
position than if it had not hedged at all, but not as good as if the price of
the index futures moved in full proportion to that of the hedged securities.
However, if the price of the securities being hedged has moved in a favorable
direction, this advantage will be partially offset by movement of the price of
the futures contract. If the price of the futures contract moves more than the
price of the securities, the Fund will experience either a loss or a gain on the
futures contract that will not be completely offset by movements in the price of
the securities that are the subject of the hedge.
Where index futures are purchased in an anticipatory hedge, it is possible that
the market may decline instead. If the Fund then decides not to invest in the
securities at that time because of concern as to possible further market decline
or for other reasons, it will realize a loss on the futures contract that is not
offset by a reduction in the price of the securities it had anticipated
purchasing.
FOREIGN CURRENCY HEDGING STRATEGIES--SPECIAL CONSIDERATIONS. The Fund may use
options and futures contracts on foreign currencies, as mentioned previously,
and forward currency contracts, as described below, to attempt to hedge against
movements in the values of the foreign currencies in which the Fund's securities
are denominated or, in certain circumstances, for investment (e.g., as a
substitute for investing in securities denominated in foreign currency).
Currency hedges can protect against price movements in a security that the Fund
owns or intends to acquire that are attributable to changes in the value of the
currency in which it is denominated.
<PAGE>
The Fund might seek to hedge against changes in the value of a particular
currency when no Financial Instruments on that currency are available or such
Financial Instruments are more expensive than certain other Financial
Instruments. In such cases, the Fund may seek to hedge against price movements
in that currency by entering into transactions using Financial Instruments on
another currency or a basket of currencies, the value of which the adviser
believes will have a high degree of positive correlation to the value of the
currency being hedged. The risk that movements in the price of the Financial
Instrument will not correlate perfectly with movements in the price of the
currency subject to the hedging transaction may be increased when this strategy
is used.
The value of Financial Instruments on foreign currencies depends on the value of
the underlying currency relative to the U.S. dollar. Because foreign currency
transactions occurring in the interbank market might involve substantially
larger amounts than those involved in the use of such Financial Instruments, the
Fund could be disadvantaged by having to deal in the odd-lot market (generally
consisting of transactions of less than $1 million) for the underlying foreign
currencies at prices that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign currencies
or any regulatory requirement that quotations available through dealers or other
market sources be firm or revised on a timely basis. Quotation information
generally is representative of very large transactions in the interbank market
and thus might not reflect odd-lot transactions where rates might be less
favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Financial Instruments until they reopen.
Settlement of hedging transactions involving foreign currencies might be
required to take place within the country issuing the underlying currency. Thus,
the Fund might be required to accept or make delivery of the underlying foreign
currency in accordance with any U.S. or foreign regulations regarding the
maintenance of foreign banking arrangements by U.S. residents and might be
required to pay any fees, taxes and charges associated with such delivery
assessed in the issuing country.
FORWARD CURRENCY CONTRACTS AND FOREIGN CURRENCY DEPOSITS. The Fund may enter
into forward currency contracts to purchase or sell foreign currencies for a
fixed amount of U.S. dollars or another foreign currency. A forward currency
contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days (term) from the date of the
forward currency contract agreed upon by the parties, at a price set at the time
the forward currency contract is entered. Forward currency contracts are
negotiated directly between currency traders (usually large commercial banks)
and their customers.
Such transactions may serve as long or anticipatory hedges. For example, the
Fund may purchase a forward currency contract to lock in the U.S. dollar price
of a security denominated in a foreign currency that the Fund intends to
acquire. Forward currency contracts may also serve as short hedges. For example,
the Fund may sell a forward currency contract to lock in the U.S. dollar
equivalent of the proceeds from the anticipated sale of a security or a dividend
or interest payment denominated in a foreign currency.
The Fund may also use forward currency contracts to hedge against a decline in
the value of existing investments denominated in foreign currency. Such a hedge
would tend to offset both positive and negative currency fluctuations, but would
not offset changes in security values caused by other factors. The Fund could
also hedge the position by entering into a forward currency contract to sell
another currency expected to perform similarly to the currency in which the
<PAGE>
Fund's existing investments are denominated. This type of hedge could offer
advantages in terms of cost, yield or efficiency, but may not hedge currency
exposure as effectively as a simple hedge against U.S. dollars. This type of
hedge may result in losses if the currency used to hedge does not perform
similarly to the currency in which the hedged securities are denominated.
The Fund may also use forward currency contracts in one currency or a basket of
currencies to attempt to hedge against fluctuations in the value of securities
denominated in a different currency if the adviser anticipates that there will
be a positive correlation between the two currencies.
The cost to the Fund of engaging in forward currency contracts varies with
factors such as the currency involved, the length of the contract period and the
market conditions then prevailing. Because forward currency contracts are
usually entered into on a principal basis, no fees or commissions are involved.
When the Fund enters into a forward currency contract, it relies on the
counterparty to make or take delivery of the underlying currency at the maturity
of the contract. Failure by the counterparty to do so would result in the loss
of some or all of any expected benefit of the transaction.
As is the case with futures contracts, purchasers and sellers of forward
currency contracts can enter into offsetting closing transactions, similar to
closing transactions on futures contracts, by selling or purchasing,
respectively, an instrument identical to the instrument purchased or sold.
Secondary markets generally do not exist for forward currency contracts, with
the result that closing transactions generally can be made for forward currency
contracts only by negotiating directly with the counterparty. Thus, there can be
no assurance that the Fund will in fact be able to close out a forward currency
contract at a favorable price prior to maturity. In addition, in the event of
insolvency of the counterparty, the Fund might be unable to close out a forward
currency contract. In either event, the Fund would continue to be subject to
market risk with respect to the position, and would continue to be required to
maintain a position in securities denominated in the foreign currency or to
segregate cash or liquid assets.
The precise matching of forward currency contract amounts and the value of the
securities, dividends or interest payments involved generally will not be
possible because the value of such securities, dividends or interest payments,
measured in the foreign currency, will change after the forward currency
contract has been established. Thus, the Fund might need to purchase or sell
foreign currencies in the spot (cash) market to the extent such foreign
currencies are not covered by forward currency contracts. The projection of
short-term currency market movements is extremely difficult, and the successful
execution of a short-term hedging strategy is highly uncertain.
Forward currency contracts may substantially change the Fund's investment
exposure to changes in currency exchange rates and could result in losses to the
Fund if currencies do not perform as the adviser anticipates. There is no
assurance that the adviser's use of forward currency contracts will be
advantageous to the Fund or that it will hedge at an appropriate time.
The Fund may also purchase and sell foreign currency and invest in foreign
currency deposits. Currency conversion involves dealer spreads and other costs,
although commissions usually are not charged.
COMBINED POSITIONS. The Fund may purchase and write options or futures in
combination with each other, or in combination with futures or forward currency
contracts, to manage the risk and return characteristics of its overall
position. For example, the Fund may purchase a put option and write a call
option on the same underlying instrument, in order to construct a combined
position whose risk and return characteristics are similar to selling a futures
contract. Another possible combined position would involve writing a call option
at one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial price
increase. Because combined options positions involve multiple trades, they
result in higher transaction costs.
<PAGE>
TURNOVER. The Fund's options and futures activities may affect their turnover
rates and brokerage commission payments. The exercise of calls or puts written
by the Fund, and the sale or purchase of futures contracts, may cause it to sell
or purchase related investments, thus increasing its turnover rate. Once the
Fund has received an exercise notice on an option it has written, it cannot
effect a closing transaction in order to terminate its obligation under the
option and must deliver or receive the underlying securities at the exercise
price. The exercise of puts purchased by the Fund may also cause the sale of
related investments, increasing turnover. Although such exercise is within the
Fund's control, holding a protective put might cause it to sell the related
investments for reasons that would not exist in the absence of the put. The Fund
will pay a brokerage commission each time it buys or sells a put or call or
purchases or sells a futures contract. Such commissions may be higher than those
that would apply to direct purchases or sales.
SWAPS, CAPS, FLOORS AND COLLARS. The Fund is authorized to enter into swaps,
caps, floors and collars. Swaps involve the exchange by one party with another
party of their respective commitments to pay or receive cash flows, e.g., an
exchange of floating rate payments for fixed rate payments. The purchase of a
cap or a floor entitles the purchaser, to the extent that a specified index
exceeds in the case of a cap, or falls below in the case of a floor, a
predetermined value, to receive payments on a notional principal amount from the
party selling such instrument. A collar combines elements of buying a cap and
selling a floor.
ILLIQUID SECURITIES -- Securities which do not trade on stock exchanges or in
the over the counter market, or have restrictions on when and how they may be
sold, are generally considered to be "illiquid." An illiquid security is one
that the Fund may have difficulty -- or may even be legally precluded from --
selling at any particular time. The Fund may invest in illiquid securities,
including restricted securities and other investments which are not readily
marketable. The Fund will not purchase any such security if the purchase would
cause the Fund to invest more than 15% of its net assets, measured at the time
of purchase, in illiquid securities. Repurchase agreements maturing in more than
seven days are considered illiquid for purposes of this restriction.
The principal risk of investing in illiquid securities is that the Fund may be
unable to dispose of them at the time desired or at a reasonable price. In
addition, in order to resell a restricted security, the Fund might have to bear
the expense and incur the delays associated with registering the security with
the SEC, and otherwise obtaining listing on a securities exchange or in the over
the counter market.
INVESTMENT COMPANY SECURITIES -- To manage its daily cash positions, the Fund
may invest in securities issued by other investment companies that invest in
short-term debt securities and seek to maintain a net asset value of $1.00 per
share ("money market funds"). The Fund also may invest in Standard & Poor's
Depository Receipts ("SPDRs") and shares of other investment companies. SPDRs
are investment companies whose portfolios mirror the compositions of specific
S&P indices, such as the S&P 500 and the S&P 400. SPDRs are traded on the
American Stock Exchange. SPDR holders such as the Fund are paid a "Dividend
Equivalent Amount" that corresponds to the amount of cash dividends accruing to
the securities held by the SPDR Trust, net of certain fees and expenses. The
Investment Company Act of 1940, as amended (the "1940 Act"), limits investments
in securities of other investment companies, such as the SPDR Trust. These
limitations include, among others, that, subject to certain exceptions, no more
than 10% of the Fund's total assets may be invested in securities of other
investment companies and no more than 5% of its total assets may be invested in
the securities of any one investment company. As a shareholder of another
investment company, the Fund would bear its pro rata portion of the other
investment company's expenses, including advisory fees, in addition to the
expenses the Fund bears directly in connection with its own operations.
<PAGE>
REAL ESTATE INVESTMENT TRUSTS - To the extent consistent with its investment
objectives and policies, the Fund may invest in securities issued by real estate
investment trusts ("REITs"). Such investments will not exceed 25% of the total
assets of the Fund.
REITs are trusts which sell equity or debt securities to investors and use the
proceeds to invest in real estate or interests therein. A REIT may focus on
particular projects, such as apartment complexes, or geographic regions, such as
the Southeastern United States, or both. By investing in REITs indirectly
through the Fund, a shareholder will bear not only his/her proportionate share
of the expenses of the Fund, but also, indirectly, similar expenses of the REIT.
To the extent that the Fund has the ability to invest in REITs, the Fund could
conceivably own real estate directly as a result of a default on the securities
it owns. The Fund, therefore, may be subject to certain risks associated with
the direct ownership of real estate including difficulties in valuing and
trading real estate, declines in the value of real estate, risks related to
general and local economic conditions, adverse changes in the climate for real
estate, environmental liability risks, increases in property taxes and operating
expenses, changes in zoning laws, casualty or condemnation losses, limitations
on rents, changes in neighborhood values, the appeal of properties to tenants,
and increases in interest rates.
In addition to the risks described above, REITs may be affected by any changes
in the value of the underlying property in their portfolios. REITs are dependent
upon management skill, are not diversified, and are therefore subject to the
risk of financing single or a limited number of projects. REITs are also subject
to heavy cash flow dependency, defaults by borrowers, self-liquidation, and the
possibility of failing to maintain an exemption from the 1940 Act. Changes in
interest rates may also affect the value of debt securities held by the Fund. By
investing in REITs indirectly through the Fund, a shareholder will bear not only
his/her proportionate share of the expenses of the Fund, but also, indirectly,
similar expenses of the REITs.
REPURCHASE AGREEMENTS -- The Fund may enter into repurchase agreements, or
REPOs, on debt securities that the Fund is allowed to hold in its portfolio.
This is a way to invest money for short periods. A REPO is an agreement under
which the Fund acquires a debt security and then resells it to the seller at an
agreed-upon price and date (normally, the next business day). The repurchase
price represents an interest rate effective for the short period the debt
security is held by the Fund, and is unrelated to the interest rate on the
underlying debt security. A repurchase agreement is often considered as a loan
collateralized by securities. The collateral securities acquired by the Fund
(including accrued interest earned thereon) must have a total value in excess of
the value of the repurchase agreement. The collateral securities are held by the
Fund's custodian bank until the repurchase agreement is completed.
The Fund may enter into repurchase agreements with commercial banks, registered
broker-dealers or registered government securities dealers that are creditworthy
under standards established by the Company's board of directors. The Company's
board of directors has established standards that INVESCO must use to review the
creditworthiness of any bank, broker or dealer that is party to a REPO. REPOs
maturing in more than seven days are considered illiquid securities. The Fund
will not enter into repurchase agreements maturing in more than seven days if as
a result more than [15%] of the Fund's net assets would be invested in these
repurchase agreements and other illiquid securities.
As noted above, the Fund uses REPOs as a means of investing cash for short
periods of time. Although REPOs are considered to be highly liquid and
comparatively low-risk, the use of REPOs does involve some risks. For example,
if the other party to the agreement defaults on its obligation to repurchase the
underlying security at a time when the value of the security has declined, the
<PAGE>
Fund may incur a loss on the sale of the collateral security. If the other party
to the agreement becomes insolvent and subject to liquidation or reorganization
under the Bankruptcy Code or other laws, a court may determine that the
underlying security is collateral for a loan by the Fund not within the control
of the Fund and therefore the realization by the Fund on such collateral may
automatically be stayed. Finally, it is possible that the Fund may not be able
to substantiate its interest in the underlying security and may be deemed an
unsecured creditor of the other party to the agreement.
RULE 144A SECURITIES -- Securities that can be resold to institutional investors
pursuant to Rule 144A under the Securities Act of 1933, as amended (the "1933
Act"). In recent years, a large institutional market has developed for many Rule
144A Securities. Institutional investors generally cannot sell these securities
to the general public but instead will often depend on an efficient
institutional market in which Rule 144A Securities can readily be resold to
other institutional investors, or on an issuer's ability to honor a demand for
repayment. Therefore, the fact that there are contractual or legal restrictions
on resale to the general public or certain institutions does not necessarily
mean that a Rule 144A Security is illiquid. Institutional markets for Rule 144A
Securities may provide both reliable market values for Rule 144A Securities and
enable the Fund to sell a Rule 144A investment when appropriate. For this
reason, the Company's board of directors has concluded that if a sufficient
institutional trading market exists for a given Rule 144A security, it may be
considered "liquid," and not subject to the Fund's limitations on investment in
restricted securities. The Company's board of directors has given INVESCO the
day-to-day authority to determine the liquidity of Rule 144A Securities,
according to guidelines approved by the board. The principal risk of investing
in Rule 144A Securities is that there may be an insufficient number of qualified
institutional buyers interested in purchasing a Rule 144A Security held by the
Fund, and the Fund might be unable to dispose of such security promptly or at
reasonable prices.
SECURITIES LENDING -- The Fund may lend its portfolio securities. The advantage
of lending portfolio securities is that the Fund continues to have the benefits
(and risks) of ownership of the loaned securities, while at the same time
receiving interest from the borrower of the securities. The primary risk in
lending portfolio securities is that a borrower may fail to return a portfolio
security.
SHORT SALES -- The Fund may sell a security short and borrow the same security
from a broker or other institution to complete the sale. The Fund will lose
money on a short sale transaction if the price of the borrowed security
increases between the date of the short sale and the date on which the Fund
closes the short position by purchasing the security; conversely, the Fund may
realize a gain if the price of the borrowed security declines between those
dates.
There is no guarantee that the Fund will be able to close out a short position
at any particular time or at an acceptable price. During the time that the Fund
is short the security, it is subject to the risk that the lender of the security
will terminate the loan at a time when the Fund is unable to borrow the same
security from another lender. If that occurs, the Fund may be "bought in" at the
price required to purchase the security needed to close out the short position.
In short sale transactions, the Fund's gain is limited to the price at which it
sold the security short; its loss is limited only by the maximum price it must
pay to acquire the security less the price at which the security was sold. In
theory, losses from short sales may be unlimited. Until a security that is sold
short is acquired by the Fund, the Fund must pay the lender any dividends that
accrue during the loan period. In order to borrow the security, the Fund usually
is required to pay compensation to the lender. Short sales also cause the Fund
to incur brokerage fees and other transaction costs. Therefore, the amount of
any gain the Fund may receive from a short sale transaction is decreased - and
the amount of any loss increased -- by the amount of compensation to the lender,
dividends and expenses the Fund may be required to pay.
<PAGE>
Until the Fund replaces a borrowed security, it must segregate liquid securities
or other collateral with a broker or other custodian in an amount equal to the
current market value of the security sold short. The Fund expects to receive
interest on the collateral it deposits. The use of short sales may result in the
Fund realizing more short-term capital gains than it would if the Fund did not
engage in short sales.
SOVEREIGN DEBT -- In certain emerging countries, the central government and its
agencies are the largest debtors to local and foreign banks and others.
Sovereign debt involves the risk that the government, as a result of political
considerations or cash flow difficulties, may fail to make scheduled payments of
interest or principal and may require holders to participate in rescheduling of
payments or even to make additional loans. If an emerging country government
defaults on its sovereign debt, there is likely to be no legal proceeding under
which the debt may be ordered repaid, in whole or in part. The ability or
willingness of a foreign sovereign debtor to make payments of principal and
interest in a timely manner may be influenced by, among other factors, its cash
flow, the magnitude of its foreign reserves, the availability of foreign
exchanges on the payment date, the debt service burden to the economy as a
whole, the debtor's then current relationship with the International Monetary
Fund and its then current political constraints. Some of the emerging countries
issuing such instruments have experienced high rates of inflation in recent
years and have extensive internal debt. Among other effects, high inflation and
internal debt service requirements may adversely affect the cost and
availability of future domestic sovereign borrowing to finance government
programs, and may have other adverse social, political and economic
consequences, including effects on the willingness of such countries to service
their sovereign debt. An emerging country government's willingness and ability
to make timely payments on its sovereign debt also are likely to be heavily
affected by the country's balance of trade and its access to trade and other
international credits. If a country's exports are concentrated in a few
commodities, such country would be more significantly exposed to a decline in
the international prices of one or more of such commodities. A rise in
protectionism on the part of its trading partners, or unwillingness by such
partners to make payment for goods in hard currency, could also adversely affect
the country's ability to export its products and repay its debts. Sovereign
debtors may also be dependent on expected receipts from such agencies and others
abroad to reduce principal and interest arrearages on their debt. However,
failure by the sovereign debtor or other entity to implement economic reforms
negotiated with multilateral agencies or others, to achieve specified levels of
economic performance, or to make other debt payments when due, may cause third
parties to terminate their commitments to provide funds to the sovereign debtor,
which may further impair such debtor's willingness or ability to service its
debts.
The Fund may invest in debt securities issued under the "Brady Plan" in
connection with restructurings in emerging country debt markets or earlier
loans. These securities, often referred to as "Brady Bonds," are, in some cases,
denominated in U.S. dollars and collateralized as to principal by U.S. Treasury
zero coupon bonds having the same maturity. At least one year's interest
payments, on a rolling basis, are collateralized by cash or other investments.
Brady Bonds are actively traded on an over-the-counter basis in the secondary
market for emerging country debt securities. Brady Bonds are lower-rated bonds
and highly volatile.
SPECIAL SITUATIONS - The Fund will invest in "special situations." A special
situation arises when, in the opinion of the Fund's management, the securities
of a particular company will, within a reasonably estimable period of time, be
accorded market recognition at an appreciated value solely by reason of a
development applicable to that company, and regardless of general business
conditions or movements of the market as a whole. Developments creating special
situations might include, among others: liquidations, reorganizations,
<PAGE>
recapitalizations, mergers, material litigation, technical breakthroughs, and
new management or management policies. Although large and well-known companies
may be involved, special situations more often involve comparatively small or
unseasoned companies. Investments in unseasoned companies and special situations
often involve much greater risk than is inherent in ordinary investment
securities.
UNSEASONED ISSUERS - The Fund may purchase securities in unseasoned issuers.
Securities in such issuers may provide opportunities for long term capital
growth. Greater risks are associated with investments in securities of
unseasoned issuers than in the securities of more established companies because
unseasoned issuers have only a brief operating history and may have more limited
markets and financial resources. As a result, securities of unseasoned issuers
tend to be more volatile than securities of more established companies.
U.S. GOVERNMENT SECURITIES -- The Fund may, from time to time, purchase debt
securities issued by the U.S. government. These securities include Treasury
bills, notes, and bonds. Treasury bills have a maturity of one year or less,
Treasury notes generally have a maturity of one to ten years, and Treasury bonds
generally have maturities of more than ten years.
U.S. government debt securities also include securities issued or guaranteed by
agencies or instrumentalities of the U.S. government. Some obligations of U.S.
government agencies, which are established under the authority of an act of
Congress, such as Government National Mortgage Association ("GNMA")
Participation Certificates, are supported by the full faith and credit of the
U.S. Treasury. GNMA Certificates are mortgage-backed securities representing
part ownership of a pool of mortgage loans. These loans -- issued by lenders
such as mortgage bankers, commercial banks and savings and loan associations --
are either insured by the Federal Housing Administration or guaranteed by the
Veterans Administration. A "pool" or group of such mortgages is assembled and,
after being approved by GNMA, is offered to investors through securities
dealers. Once approved by GNMA, the timely payment of interest and principal on
each mortgage is guaranteed by GNMA and backed by the full faith and credit of
the U.S. government. The market value of GNMA Certificates is not guaranteed.
GNMA Certificates are different from bonds because principal is paid back
monthly by the borrower over the term of the loan rather than returned in a lump
sum at maturity, as is the case with a bond. GNMA Certificates are called
"pass-through" securities because both interest and principal payments
(including prepayments) are passed through to the holder of the GNMA
Certificate.
Other United States government debt securities, such as securities of the
Federal Home Loan Banks, are supported by the right of the issuer to borrow from
the Treasury. Others, such as bonds issued by Fannie Mae, a federally chartered
private corporation, are supported only by the credit of the corporation. In the
case of securities not backed by the full faith and credit of the United States,
the Fund must look principally to the agency issuing or guaranteeing the
obligation in the event the agency or instrumentality does not meet its
commitments. The Fund will invest in securities of such instrumentalities only
when INVESCO is satisfied that the credit risk with respect to any such
instrumentality is comparatively minimal.
WHEN-ISSUED/DELAYED DELIVERY -- The Fund normally buys and sells securities on
an ordinary settlement basis. That means that the buy or sell order is sent, and
the Fund actually takes delivery or gives up physical possession of the security
on the "settlement date," which is three business days later. However, the Fund
also may purchase and sell securities on a when-issued or delayed delivery
basis.
<PAGE>
When-issued or delayed delivery transactions occur when securities are purchased
or sold by the Fund and payment and delivery take place at an agreed-upon time
in the future. The Fund may engage in this practice in an effort to secure an
advantageous price and yield. However, the yield on a comparable security
available when delivery actually takes place may vary from the yield on the
security at the time the when-issued or delayed delivery transaction was entered
into. When the Fund engages in when-issued and delayed delivery transactions, it
relies on the seller or buyer to consummate the sale at the future date. If the
seller or buyer fails to act as promised, that failure may result in the Fund
missing the opportunity of obtaining a price or yield considered to be
advantageous. No payment or delivery is made by the Fund until it receives
delivery or payment from the other party to the transaction. However,
fluctuation in the value of the security from the time of commitment until
delivery could adversely affect the Fund.
INVESTMENT RESTRICTIONS
The Fund operates under certain investment restrictions. For purposes of the
following restrictions, all percentage limitations apply immediately after a
purchase or initial investment. Any subsequent change in a particular percentage
resulting from fluctuations in value does not require elimination of any
security from the Fund.
The following restrictions are fundamental and may not be changed without prior
approval of a majority of the outstanding voting securities of the Fund, as
defined in the 1940 Act. The Fund may not:
1. purchase the securities of any issuer (other than securities issued
or guaranteed by the U.S. government or any of its agencies or
instrumentalities or municipal securities) if, as a result, more than
25% of the Fund's total assets would be invested in the securities of
companies whose principal business activities are in the same industry
(domestic and foreign banking will be considered to be different
industries.;
2. with respect to 50% of the Fund's total assets, purchase the
securities of any issuer (other than securities issued or guaranteed
by the U.S. government or any of its agencies or instrumentalities, or
securities of other investment companies) if, as a result, (i) more
than 5% of the Fund's total assets would be invested in the securities
of that issuer, or (ii) the Fund would hold more than 10% of the
outstanding voting securities of that issuer;
3. underwrite securities of other issuers, except insofar as it may be
deemed to be an underwriter under the 1933 Act in connection with the
disposition of the Fund's portfolio securities;
4. borrow money, except that the Fund may borrow money in an amount
not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings);
5. issue senior securities, except as permitted under the 1940 Act;
6. lend any security or make any loan if, as a result, more than
33 1/3% of its total assets would be lent to other parties, but
this limitation does not apply to the purchase of debt securities or
to repurchase agreements;
7. purchase or sell physical commodities; however, this policy shall
not prevent the Fund from purchasing and selling foreign currency,
futures contracts, options, forward contracts, swaps, caps, floors,
collars and other financial instruments; or
<PAGE>
8. purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not
prevent the Fund from investing in securities or other instruments
backed by real estate or securities of companies engaged in the real
estate business).
9. the Fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company managed by INVESCO or an
affiliate or a successor thereof, with substantially the same
fundamental investment objective, policies and limitations as the
Fund.
In addition, the Fund has the following non-fundamental policies, which may be
changed without shareholder approval:
A. The Fund does not currently intend to purchase any security if, as
a result, more than [15%] of its net assets would be invested in
securities that are deemed to be illiquid because they are subject to
legal or contractual restrictions on resale or because they cannot be
sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
B. The Fund may invest in securities issued by other investment
companies to the extent that such investments are consistent with the
Fund's investment objective and policies and permissible under the
1940 Act.
MANAGEMENT OF THE FUND
THE INVESTMENT ADVISER
INVESCO, located at 7800 East Union Avenue, Denver, Colorado, is the Company's
investment adviser. INVESCO was founded in 1932 and serves as an investment
adviser to:
INVESCO Advantage Series Funds, Inc.
INVESCO Bond Funds, Inc. (formerly, INVESCO Income Funds, Inc.)
INVESCO Combination Stock & Bond Funds, Inc.
(formerly, INVESCO Flexible Funds, Inc.)
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Sector Funds, Inc.(formerly, INVESCO Strategic Portfolios, Inc.)
INVESCO Stock Funds, Inc. (formerly, INVESCO Equity Funds, Inc.)
INVESCO Treasurer's Series Funds, Inc.
(formerly, INVESCO Treasurer's Series Trust)
INVESCO Variable Investment Funds, Inc.
As of ____________________, 2000, INVESCO managed 45 mutual funds having
combined assets of over $_____ billion, on behalf of more than ______________
shareholders.
INVESCO is an indirect wholly owned subsidiary of AMVESCAP PLC, a publicly
traded holding company. Through its subsidiaries, AMVESCAP PLC engages in the
business of investment management on an international basis. AMVESCAP PLC is one
of the largest independent investment management businesses in the world, with
approximately $___ billion in assets under management on __________________.
AMVESCAP PLC's North American subsidiaries include:
INVESCO Retirement and Benefit Services, Inc. ("IRBS"), Atlanta, Georgia,
develops and provides domestic and international defined contribution
retirement plan services to plan sponsors, institutional retirement plan
sponsors, institutional plan providers and foreign governments.
<PAGE>
INVESCO Retirement Plan Services ("IRPS"), Atlanta, Georgia, a
division of IRBS, provides recordkeeping and investment selection
services to defined contribution plan sponsors of plans with between
$2 million and $200 million in assets. Additionally, IRPS provides
investment consulting services to institutions seeking to provide
retirement plan products and services.
Institutional Trust Company, doing business as INVESCO Trust Company
("ITC"), Denver, Colorado, a division of IRBS, provides retirement
account custodian and/or trust services for individual retirement
accounts ("IRAs") and other retirement plan accounts. This includes
services such as recordkeeping, tax reporting and compliance. ITC acts
as trustee or custodian to these plans. ITC accepts contributions and
provides complete transfer agency functions: correspondence,
sub-accounting, telephone communications and processing of
distributions.
INVESCO, Inc., Atlanta, Georgia, manages individualized investment
portfolios of equity, fixed-income and real estate securities for
institutional clients, including mutual funds and the collective investment
entities. INVESCO, Inc. includes the following Divisions:
INVESCO Capital Management Division, Atlanta, Georgia, manages
institutional investment portfolios, consisting primarily of
discretionary employee benefit plans for corporations and state and
local governments, and endowment funds.
INVESCO Management & Research Division, Boston, Massachusetts,
primarily manages pension and endowment accounts.
PRIMCO Capital Management Division, Louisville, Kentucky, specializes
in managing stable return investments, principally on behalf of
Section 401(k) retirement plans.
INVESCO Realty Advisors Division, Dallas, Texas, is responsible for
providing advisory services in the U.S. real estate markets for
AMVESCAP PLC's clients worldwide. Clients include corporate pension
plans and public pension funds as well as endowment and foundation
accounts.
INVESCO (NY) Division, New York, is an investment adviser for
separately managed accounts, such as corporate and municipal pension
plans, Taft-Hartley Plans, insurance companies, charitable
institutions and private individuals. INVESCO NY further serves as
investment adviser to several closed-end investment companies, and as
sub-adviser with respect to certain commingled employee benefit
trusts.
AIM Advisors, Inc., Houston, Texas, provides investment advisory and
administrative services for retail and institutional mutual funds.
AIM Capital Management, Inc., Houston, Texas, provides investment
advisory services to individuals, corporations, pension plans and other
private investment advisory accounts and also serves as a sub-adviser to
certain retail and institutional mutual funds, one Canadian mutual fund and
one portfolio of an open-end registered investment company that is offered
to separate accounts of variable insurance companies.
AIM Distributors, Inc. and Fund Management Company, Houston, Texas, are
registered broker-dealers that act as the principal underwriters for retail
and institutional mutual funds.
The corporate headquarters of AMVESCAP PLC are located at 11 Devonshire Square,
London, EC2M4YR, England.
<PAGE>
THE INVESTMENT ADVISORY AGREEMENT
INVESCO serves as investment adviser to the Fund under a Master Advisory
Agreement dated __________ (the "Agreement") with the Company.
The Agreement requires that INVESCO manage the investment portfolio of the Fund
in a way that conforms with the Fund's investment policies. INVESCO may directly
manage the Fund itself, or may hire a sub-adviser, which may be an affiliate of
INVESCO, to do so. Specifically, INVESCO is responsible for:
o managing the investment and reinvestment of all the assets of the
Fund, and executing all purchases and sales of portfolio securities;
o maintaining a continuous investment program for the Fund, consistent
with (i) the Fund's investment policies as set forth in the Company's
Articles of Incorporation, Bylaws and Registration Statement, as from
time to time amended, under the 1940 Act, and in any prospectus and/or
statement of additional information of the Fund, as from time to time
amended and in use under the 1933 Act, and (ii) the Company's status
as a regulated investment company under the Internal Revenue Code of
1986, as amended;
o determining what securities are to be purchased or sold for the Fund,
unless otherwise directed by the directors of the Company, and
executing transactions accordingly;
o providing the Fund the benefit of the investment analysis and
research, the reviews of current economic conditions and trends, and
the consideration of a long-range investment policy now or hereafter
generally available to the investment advisory customers of the
adviser or any sub-adviser;
o determining what portion of the Fund's assets should be invested in
the various types of securities authorized for purchase by the Fund;
and
o making recommendations as to the manner in which voting rights, rights
to consent to Fund action and any other rights pertaining to the
Fund's portfolio securities shall be exercised.
INVESCO also performs all of the following services for the Fund:
o administrative;
o internal accounting (including computation of net asset value);
o clerical and statistical;
o secretarial;
o all other services necessary or incidental to the administration of
the affairs of the Fund;
o supplying the Company with officers, clerical staff and other
employees;
o furnishing office space, facilities, equipment, and supplies;
providing personnel and facilities required to respond to inquiries
related to shareholder accounts;
<PAGE>
o conducting periodic compliance reviews of the Fund's operations;
preparation and review of required documents, reports and filings by
INVESCO's in-house legal and accounting staff or in conjunction with
independent attorneys and accountants (including prospectus(es),
statements of additional information, proxy statements, shareholder
reports, tax returns, reports to the SEC, and other corporate
documents of the Fund);
o supplying basic telephone service and other utilities; and
o 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 INVESCO are borne by the Fund. For the advisory services
it provides to the Fund, INVESCO is entitled to receive a base management fee
calculated at the annual rate of 1.50% of the Fund's daily net assets (the "Base
Fee"). This Base Fee will be adjusted, on a monthly basis (i) upward at the rate
of 0.20%, on a pro rata basis, for each percentage point the investment
performance of the Class A Shares of the Fund exceeds the sum of 2.00% and the
investment record of the Russell 3000 Index (the "Index"), or (ii) downward at
the rate of 0.20%, on a pro rata basis, for each percentage point the investment
record of the Index less 2.00% exceeds the investment performance of the Class A
Shares of the Fund (the "Fee Adjustment"). The maximum or minimum adjustment, if
any, will be 1.00% annually. Therefore, the maximum annual fee payable to
INVESCO will be 2.50% of average daily net assets and the minimum annual fee
will be 0.50%.
In determining the Fee Adjustment, if any, applicable during any month, INVESCO
will compare the investment performance of the Class A Shares of the Fund for
the twelve-month period ending on the last day of the prior month (the
"Performance Period") to the investment record of the Index during the
Performance Period. The investment performance of the Fund will be determined by
adding together (i) the change in the net asset value of the Class A Shares
during the Performance Period, (ii) the value of cash distributions made by the
Fund to holders of Class A Shares to the end of the Performance Period, and
(iii) the value of capital gains per share, if any, paid or payable on
undistributed realized long-term capital gains accumulated to the end of the
Performance Period, and will be expressed as a percentage of its net asset value
per share at the beginning of the Performance Period. The investment record of
the Index will be determined by adding together (i) the change in the level of
the Index during the Performance Period and (ii) the value, computed
consistently with the Index, of cash distributions made by companies whose
securities comprise the Index accumulated to the end of the Performance Period,
and will be expressed as a percentage of the Index at the beginning of such
Period.
After it determines any Fee Adjustment, INVESCO will determine the dollar amount
of additional fees or fee reductions to be accrued for each day of a month by
multiplying the Fee Adjustment by the average daily net assets of the Class A
Shares of the Fund during the Performance Period and dividing that number by the
number of days in the Performance Period. The management fee, as adjusted, is
accrued daily and paid monthly.
If the directors determine at some future date that another securities index is
a better representative of the composition of the Fund than is the Russell 3000
Index, the directors may change the securities index used to compute the Fee
Adjustment. If the directors do so, the new securities index (the "New Index")
will be applied prospectively to determine the amount of the Fee Adjustment. The
Index will continue to be used to determine the amount of the Fee Adjustment for
that part of the Performance Period prior to the effective date of the New
Index. A change in the Index will be submitted to shareholders for their
approval unless the SEC determines that shareholder approval is not required.
The amount the Fund will pay to INVESCO in performance fees is not susceptible
to estimation, since it depends upon the future performance of the Fund and the
Index.
<PAGE>
ADMINISTRATIVE SERVICES AGREEMENT
INVESCO, either directly or through affiliated companies, provides certain
administrative, sub-accounting, and recordkeeping services to the Fund pursuant
to an Administrative Services Agreement dated _____________ with the Company.
The Administrative Services Agreement requires INVESCO to provide the following
services to the Fund:
o such sub-accounting and recordkeeping services and functions as are
reasonably necessary for the operation of the Fund; and
o such sub-accounting, recordkeeping, and administrative services and
functions, which may be provided by affiliates of INVESCO, as are
reasonably necessary for the operation of Fund shareholder accounts
maintained by certain retirement plans and employee benefit plans for
the benefit of participants in such plans.
As full compensation for services provided under the Administrative Services
Agreement, the Fund pays a monthly fee to INVESCO consisting of a base fee of
$10,000 per year, plus an additional incremental fee computed daily and paid
monthly at an annual rate of 0.045% per year of the average net assets of the
Fund.
TRANSFER AGENCY AGREEMENT
INVESCO also performs transfer agent, dividend disbursing agent and registrar
services for the Fund pursuant to a Transfer Agency Agreement dated
_____________ with the Company.
The Transfer Agency Agreement provides that the Fund pays INVESCO an annual fee
of [$22.50] per shareholder account, or, where applicable, per participant in an
omnibus account. This fee is paid monthly at the rate of 1/12 of the annual fee
and is based upon the actual number of shareholder accounts and omnibus account
participants in the Fund at any time during each month.
DIRECTORS AND OFFICERS OF THE COMPANY
The overall direction and supervision of the Company come from the board of
directors. The board of directors is responsible for making sure that the Funds'
general investment policies and programs are carried out and that the Funds are
properly administered.
The board of directors has an audit committee comprised of four of the directors
who are not affiliated with INVESCO (the "Independent Directors"). The committee
meets quarterly with the Company's independent accountants and officers to
review accounting principles used by the Company, the adequacy of internal
controls, the responsibilities and fees of the independent accountants, and
other matters.
The Company has a management liaison committee which meets quarterly with
various management personnel of INVESCO in order to facilitate better
understanding of management and operations of the Company, and to review legal
and operational matters which have been assigned to the committee by the board
of directors, in furtherance of the board of directors' overall duty of
supervision.
<PAGE>
The Company has a brokerage committee. The committee meets periodically to
review soft dollar and other brokerage transactions by the Funds, and to review
policies and procedures of INVESCO with respect to brokerage transactions. It
reports on these matters to the Company's board of directors.
The Company has a derivatives committee. The committee meets periodically to
review derivatives investments made by the Funds. It monitors derivatives usage
by the Funds and the procedures utilized by INVESCO to ensure that the use of
such instruments follows the policies on such instruments adopted by the
Company's board of directors. It reports on these matters to the Company's board
of directors.
The Company has a legal committee and an insurance committee. These committees
meet when necessary to review legal and insurance matters of importance to the
directors of the Company.
The Company has a nominating committee. The committee meets periodically to
review and nominate candidates for positions as independent directors to fill
vacancies on the board of directors.
The officers of the Company, all of whom are officers and employees of INVESCO,
are responsible for the day-to-day administration of the Company and the Funds.
The officers of the Company receive no direct compensation from the Company or
the Funds for their services as officers. INVESCO has the primary responsibility
for making investment decisions on behalf of the Funds. These investment
decisions are reviewed by the investment committee of INVESCO.
All of the officers and directors of the Company hold comparable positions with
the following funds, which, with the Company, are collectively referred to as
the "INVESCO Funds":
INVESCO Advantage Series Funds, Inc.
INVESCO Bond Funds, Inc. (formerly, INVESCO Income Funds, Inc.)
INVESCO Combination Stock & Bond Funds, Inc.
(formerly, INVESCO Flexible Funds, Inc.)
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Sector Funds, Inc. (formerly, INVESCO Strategic Portfolios, Inc.)
INVESCO Stock Funds, Inc. (formerly, INVESCO Equity Funds, Inc.)
INVESCO Treasurer's Series Funds, Inc.
(formerly, INVESCO Treasurer's Series Trust)
INVESCO Variable Investment Funds, Inc.
The table below provides information about each of the Company's directors and
officers. Their affiliations represent their principal occupations.
<PAGE>
Name, Address and Age Position(s) Held Principal, Occupation(s)
With Company During Past Five Years
Mark H. Williamson(2)(3) President, Chief President, Chief Executive
7800 E. Union Avenue Executive Officer Officer and Chairman of the
Denver, Colorado Chairman of the Board of INVESCO Funds
Age: 48 Board Group,Inc.; President, Chief
Executive Officer and
Chairman of the Board of
INVESCO Distributors, Inc.;
President, Chief Operating
Officer and Trustee of
INVESCO Global Health
Sciences Fund; formerly,
Chairman and Chief Executive
Officer of NationsBanc
Advisors, Inc.; formerly,
Chairman of NationsBanc
Investments, Inc.
Fred A. Deering(1)(2)(7)(8) Vice Chairman of Trustee of INVESCO Global
Security Life Center the Board Health Sciences Fund;
1290 Broadway formerly, Chairman of the
Denver, Colorado Executive Committee and
Age: 72 Chairman of the Board
of Security Life of Denver
Insurance Company;
Director of ING American
Holdings Company and First
ING Life Insurance
Company of New York.
<PAGE>
Name, Address and Age Position(s) Held Principal, Occupation(s)
With Company During Past Five Years
Victor L. Andrews, Director Professor Emeritus,
Ph.D.(4)(6) Chairman Emeritus and
34 Seawatch Drive Chairman of the CFO
Savannah, Georgia Roundtable of the Department
Age: 69 of Finance of Georgia State
University; President,
Andrews Financial
Associates, Inc.
(consulting firm); Director
of The Sheffield Funds,
Inc.; formerly, member of
the faculties of the Harvard
Business School and the
Sloan School of Management
of MIT
Bob R. Baker(2)(4)(5)(9) Director Consultant (since 2000);
37 Castle Pines Dr., North formerly, President and
Castle Rock, Colorado Chief Executive Officer
Age: 63 (1989 to 2000) of AMC
Cancer Research Center,
Denver, Colorado; until
mid-December 1988, Vice
Chairman of the Board of
First Columbia Financial
Corporation, Englewood,
Colorado; formerly,
Chairman of the Board and
Chief Executive Officer of
First Columbia Financial
Corporation.
Charles W. Brady(3) Director Chairman of the Board
1315 Peachtree St., N.E. of INVESCO Global
Atlanta, Georgia Health Sciences Fund;
Age: 64 Chief Executive Officer
and Chairman of AMVESCAP
PLC, London, England and
various subsidiaries of
AMVESCAP PLC.
<PAGE>
Name, Address and Age Position(s) Held Principal, Occupation(s)
With Company During Past Five Years
Lawrence H. Budner(1)(5) Director Trust Consultant; prior to
7608 Glen Albens Circle June 30, 1987, Senior Vice
Dallas, Texas President and Senior Trust
Age: 69 Officer of InterFirst
Bank, Dallas, Texas.
James T. Bunch(4)(5)(9) Director Principal and Founder of
3600 Republic Plaza Green Manning & Bunch Ltd.,
370 Seventeenth Street Denver, Colorado, since
Denver, Colorado August 1988; Director and
Age: 57 Secretary of Green
Manning & Bunch Securities,
Inc., Denver, Colorado since
September 1993; Vice
President and Director
of Western Golf
Association and Evans
Scholars Foundation;
formerly, General
Counsel and Director of
Boettcher & Co., Denver,
Colorado; formerly, Chairman
and Managing Partner of
Davis Graham & Stubbs,
Denver, Colorado.
<PAGE>
Name, Address and Age Position(s) Held Principal, Occupation(s)
With Company During Past Five Years
Wendy L. Gramm, Director Self-employed (since
Ph.D.(4)(6)(9) 1993); Professor of
4201 Yuma Street, N.W. Economics and Public
Washington, DC Administration,
Age: 55 University of Texas at
Arlington; formerly,
Chairman, Commodity
Futures Trading
Commission; Administrator
for Information and
Regulatory Affairs at the
Office of Management and
Budget; Executive Director
of the Presidential Task
Force on Regulatory Relief;
and Director of the Federal
Trade Commission's Bureau
of Economics. Also, Director
of Chicago Mercantile
Exchange, Enron Corporation,
IBP, Inc., State Farm
Insurance Company,
Independent Women's Forum,
International Republic
Institute, and the
Republican Women's Federal
Forum.
Richard W. Healey(3) Director Director and Senior
7800 E. Union Avenue Vice President of
Denver, Colorado INVESCO Distributors,
Age: 45 Inc. since 1998;
formerly, Senior Vice
President of GT
Global-North America
(1996 to 1998) and The
Boston Company (1993
to 1996).
<PAGE>
Name, Address and Age Position(s) Held Principal, Occupation(s)
With Company During Past Five Years
Gerald J. Lewis(1)(6)(7) Director Chairman of Lawsuit
701 "B" Street Resolution Services,
Suite 2100 San Diego, California
San Diego, California since 1987; Director
Age: 66 of General Chemical
Group, Inc., Hampdon, New
Hampshire, since 1996;
formerly, Associate
Justice of the California
Court of Appeals; Director
of Wheelabrator
Technologies, Inc.,
Fisher Scientific, Inc.,
Henley Manufacturing, Inc.,
and California Coastal
Properties, Inc.; Of
Counsel, Latham & Watkins,
San Diego, California
(1987 to 1997).
John W. McIntyre Director Retired. Formerly,
(1)(2)(5)(7) Vice Chairman of the
7 Piedmont Center Board of Directors of
Suite 100 The Citizens and
Atlanta, Georgia Southern Corporation and
Age: 69 Chairman of the Board and
Chief Executive Officer
of The Citizens and
Southern Georgia Corp. and
The Citizens and Southern
National Bank; Trustee of
INVESCO Global Health
Sciences Fund, Gables
Residential Trust,
Employee's Retirement
System of GA, Emory
University, and J.M. Tull
Charitable Foundation;
Director of Kaiser
Foundation Health Plans of
Georgia, Inc.
<PAGE>
Name, Address and Age Position(s) Held Principal, Occupation(s)
With Company During Past Five Years
Larry Soll, Director Retired. Formerly,
Ph.D.(4)(6)(9) Chairman of the Board
345 Poorman Road (1987 to 1994), Chief
Boulder, Colorado Executive Officer
Age: 57 (1982 to 1989 and 1993 to
1994) and President (1982
to 1989) of Synergen Inc.;
Director of Synergen since
incorporation in 1982;
Director of Isis
Pharmaceuticals, Inc.;
Trustee of INVESCO Global
Health Sciences Fund.
Glen A. Payne Secretary Senior Vice President,
7800 E. Union Avenue General Counsel and
Denver, Colorado Secretary of INVESCO Funds
Age: 52 Group, Inc.; Senior Vice
President, Secretary
and General Counsel of
INVESCO Distributors, Inc.;
Secretary of INVESCO
Global Health Sciences
Fund; formerly, General
Counsel of INVESCO Trust
Company (1989 to 1998) and
employee of a U.S.
regulatory agency,
Washington, D.C.
(1973 to 1989).
<PAGE>
Name, Address and Age Position(s) Held Principal, Occupation(s)
With Company During Past Five Years
Ronald L. Grooms Chief Accounting Senior Vice President,
7800 E. Union Avenue Officer, Chief Treasurer and Director
Denver, Colorado Financial Officer of INVESCO Funds Group,
Age: 53 and Treasurer Inc.; Senior Vice President,
Treasurer and Director of
INVESCO Distributors, Inc.;
Treasurer and Principal
Financial and Accounting
Officer of INVESCO Global
Health Sciences Fund;
formerly, Senior Vice
President and Treasurer of
INVESCO Trust Company (1988
to 1998).
William J. Galvin, Jr. Assistant Secretary Senior Vice President
7800 E. Union Avenue and Assistant
Denver, Colorado Secretary of INVESCO
Age: 43 Funds Group, Inc.;
Senior Vice President and
Assistant Secretary of
INVESCO Distributors, Inc.;
formerly, Trust Officer of
INVESCO Trust Company
(1995 to 1998).
Pamela J. Piro Assistant Treasurer Vice President and
7800 E. Union Avenue Assistant Treasurer of
Denver, Colorado INVESCO Funds Group, Inc.;
Age: 39 Assistant Treasurer of
INVESCO Distributors, Inc.;
formerly, Assistant Vice
President (1996 to 1997),
Director - Portfolio
Accounting (1994 to 1996),
Portfolio Accounting
Manager (1993 to 1994)
and Assistant
Accounting Manager
(1990 to 1993).
<PAGE>
Name, Address and Age Position(s) Held Principal, Occupation(s)
With Company During Past Five Years
Alan I. Watson Assistant Secretary Vice President of INVESCO
7800 E. Union Avenue Funds Group, Inc.; formerly,
Denver, Colorado Trust Officer of INVESCO
Age: 58 Trust Company.
Judy P. Wiese Assistant Secretary Vice President and
7800 E.Union Avenue Assistant Secretary of
Denver, Colorado INVESCO Funds Group, Inc.;
Age: 51 Assistant Secretary of
INVESCO Distributors, Inc.;
formerly, Trust Officer of
INVESCO Trust Company.
(1) Member of the audit committee of the Company.
(2) Member of the executive committee of the Company. On occasion, the executive
committee acts upon the current and ordinary business of the Company between
meetings of the board of directors. Except for certain powers which, under
applicable law, may only be exercised by the full board of directors, the
executive committee may exercise all powers and authority of the board of
directors in the management of the business of the Company. All decisions are
subsequently submitted for ratification by the board of directors.
(3) These directors are "interested persons" of the Company as defined in the
1940 Act.
(4) Member of the management liaison committee of the Company.
(5) Member of the brokerage committee of the Company.
(6) Member of the derivatives committee of the Company.
(7) Member of the legal committee of the Company.
(8) Member of the insurance committee of the Company.
(9) Member of the nominating committee of the Company.
The boards of directors of the mutual funds in the INVESCO Funds have adopted a
Defined Benefit Deferred Compensation Plan (the "Plan") for the Independent
Directors of the funds. Under this Plan, each director who is not an interested
person of the funds (as defined in Section 2(a)(19) of the 1940 Act) and who has
served for at least five years (a "Qualified Director") is entitled to receive,
if the Qualified Director retires upon reaching age 72 (or the retirement age of
73 or 74, if the retirement date is extended by the boards for one or two years,
but less than three years), continuation of payment for one year (the "First
Year Retirement Benefit") of the annual basic retainer and annualized board
meeting fees payable by the funds to the Qualified Director at the time of
his/her retirement (the "Basic Benefit"). Commencing with any such director's
second year of retirement, commencing with the first year of retirement of any
<PAGE>
Qualified Director whose retirement has been extended by the board for three
years, and commencing with attainment of age 72 by a Qualified Director who
voluntarily retires prior to reaching age 72, a Qualified Director shall receive
quarterly payments at an annual rate equal to 50% of the Basic Benefit. These
payments will continue for the remainder of the Qualified Director's life or ten
years, whichever is longer (the "Reduced Benefit Payments"). If a Qualified
Director dies or becomes disabled after age 72 and before age 74 while still a
director of the funds, the First Year Retirement Benefit and Reduced Benefit
Payments will be made to him/her or to his/her beneficiary or estate. If a
Qualified Director becomes disabled or dies either prior to age 72 or during
his/her 74th year while still a director of the funds, the director will not be
entitled to receive the First Year Retirement Benefit; however, the Reduced
Benefit Payments will be made to him/her or his/her beneficiary or estate. The
Plan is administered by a committee of three directors who are also participants
in the Plan and one director who is not a Plan participant. The cost of the Plan
will be allocated among the INVESCO Funds in a manner determined to be fair and
equitable by the committee. The Company began making payments under the Plan to
Mr. Chabris as of October 1, 1998 and to Mr. King as of January 1, 2000. The
Company has no stock options or other pension or retirement plans for management
or other personnel and pays no salary or compensation to any of its officers. A
similar plan has been adopted by INVESCO Global Health Sciences Fund's board of
trustees. All trustees of INVESCO Global Health Sciences Fund are also directors
of the INVESCO Funds.
The Independent Directors have contributed to a deferred compensation plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of certain of the INVESCO
Funds. Certain of the deferred amounts have been invested in the shares of all
INVESCO Funds, except Funds offered by INVESCO Variable Investment Funds, Inc.,
in which the directors are legally precluded from investing. Each Independent
Director may, therefore, be deemed to have an indirect interest in shares of
each such INVESCO Fund, in addition to any INVESCO Fund shares the Independent
Director may own either directly or beneficially.
DISTRIBUTOR
INVESCO Distributors, Inc. ("IDI"), a wholly owned subsidiary of INVESCO, is the
distributor of the Fund. IDI receives no compensation and bears all expenses,
including the cost of printing and distributing prospectuses, incident to
marketing of the Fund's shares, except for such distribution expenses as are
paid out of Fund assets under the Company's Plans of Distribution, which have
been adopted by the Fund pursuant to Rule 12b-1 under the 1940 Act.
CLASS A. The Company has adopted a Master Distribution Plan and Agreement -
Class A pursuant to Rule 12b-1 under the 1940 Act relating to the Class A Shares
of the Fund (the "Class A Plan"). Under the Class A Plan, Class A Shares of the
Fund pay compensation to IDI at an annual rate of 0.35% per annum of its average
daily net assets attributable to Class A Shares for the purpose of financing any
activity which is primarily intended to result in the sale of Class A Shares.
During any period that the Fund is closed to new investors, the Fund will reduce
this payment for Class A shares from 0.35% to 0.25% per annum. Activities
appropriate for financing under the Class A Plan include, but are not limited
to, the following: printing of prospectuses and statements of additional
information and reports for other than existing shareholders; overhead;
preparation and distribution of advertising material and sales literature;
expenses of organizing and conducting sales seminars; supplemental payments to
dealers and other institutions such as asset-based sales charges or as payments
of service fees under shareholder service arrangements; and costs of
administering the Class A Plan.
<PAGE>
The Class A Plan is designed to compensate IDI, on a [quarterly] basis, for
certain promotional and other sales-related costs, and to implement a dealer
incentive program which provides for periodic payments to selected dealers who
furnish continuing personal shareholder services to their customers who purchase
and own Class A Shares of the Fund. Payments can also be directed by IDI to
selected institutions that have entered into service agreements with respect to
Class A shares of the Fund and that provide continuing personal services to
their customers who own Class A Shares of the Fund. The service fees payable to
selected institutions are calculated at the annual rate of 0.25% of the average
daily net asset value of those Fund shares that are held in such institution's
customers' accounts which were purchased on or after a prescribed date set forth
in the Plan.
Of the aggregate amount payable under the Class A Plan, payments to dealers and
other financial institutions that provide continuing personal shareholder
services to their customers who purchase and own Class A Shares of the Fund, in
amounts up to 0.25% of the average daily net assets of the Class A shares of the
Fund attributable to the customers of such dealers or financial institutions,
are characterized as a service fee. Payments to dealers and other financial
institutions in excess of such amount and payments to IDI would be characterized
as an asset-based sales charge pursuant to the Class A Plan. The Class A Plan
also imposes a cap on the total amount of sales charges, including asset-based
sales charges, that may be paid by the Company with respect to the Fund.
CLASS B. The Company has also adopted a Master Distribution Plan and Agreement-
Class B pursuant to Rule 12b-1 under the 1940 Act relating to Class B Shares of
the Fund (the "Class B Plan"). Under the Class B Plan, Class B Shares of the
Fund pay compensation to IDI at an annual rate of 1.00% per annum of the average
daily net assets attributable to Class B Shares for the purpose of financing any
activity which is primarily intended to result in the sale of Class B Shares. Of
such amount, the Fund pays a service fee of 0.25% of the average daily net
assets attributable to Class B shares to selected dealers and other institutions
which furnish continuing personal shareholder services to their customers who
purchase and own Class B Shares. Any amounts not paid as a service fee would
constitute an asset-based sales charge. Activities appropriate for financing
under the Class B Plan include, but are not limited to, the following: printing
of prospectuses and statements of additional information and reports for other
than existing shareholders; overhead; preparation and distribution of
advertising material and sales literature; expenses of organizing and conducting
sales seminars; supplemental payments to dealers and other institutions such as
asset-based sales charges or as payments of service fees under shareholder
service arrangements; and costs of administering the Class B Plan.
CLASS C. The Company has also adopted a Master Distribution Plan and Agreement-
Class C pursuant to Rule 12b-1 under the 1940 Act relating to the Class C Shares
of the Fund (the "Class C Plan"). Under the Class C Plan, Class C Shares of the
Fund pay compensation to IDI at an annual rate of 1.00% per annum of the average
daily net assets attributable to Class C Shares for the purpose of financing any
activity which is primarily intended to result in the sale of Class C shares.
Activities appropriate for financing under the Class C Plan include, but are not
limited to, the following: printing of prospectus and statements of additional
information and reports for other than existing shareholders; preparation and
distribution of advertising material and sales literature; expenses of
organizing and conducting sales seminars; supplemental payments to dealers and
other institutions such as asset-based sales charges or as payments of service
fees under shareholder service arrangements; and costs of administering the
Class C Plan.
The Class C Plan is designed to compensate IDI, on a [quarterly] basis, for
certain promotional and other sales-related costs, and to implement a dealer
incentive program which provides for periodic payments to selected dealers who
furnish continuing personal shareholder services to their customers who purchase
and own Class C Shares of the Fund. Payments can also be directed by IDI to
selected institutions that have entered into service agreements with respect to
<PAGE>
Class C Shares of the Fund and that provide continuing personal services to
their customers who own Class C Shares of the Fund. The service fees payable to
selected institutions are calculated at the annual rate of 0.25% of the average
daily net asset value of those Fund shares that are held in such institution's
customers' accounts which were purchased on or after a prescribed date set forth
in the Plan.
Of the aggregate amount payable under the Class C Plan, payments to dealers and
other financial institutions that provide continuing personal shareholder
services to their customers who purchase and own Class C Shares of the Fund, in
amounts up to 0.25% of the average daily net assets of the Class C Shares of the
Fund attributable to the customers of such dealers or financial institutions,
are characterized as a service fee. Payments to dealers and other financial
institutions in excess of such amount and payments to IDI would be characterized
as an asset-based sales charge pursuant to the Class C Plan. Payments pursuant
to the Class C Plan are subject to any applicable limitations imposed by rules
of the National Association of Securities Dealers, Inc. ("NASD"). The Class C
Plan conforms to rules of the NASD by limiting payments made to dealers and
other financial institutions who provide continuing personal shareholder
services to their customers who purchase and own Class C Shares of the Fund to
no more than 0.25% per annum of the average daily net assets of the Class C
Shares of the Fund attributable to the customers of such dealers or financial
institutions, and by imposing a cap on the total sales charges, including
asset-based sales charges, that may be paid by the Fund.
ALL PLANS. Pursuant to an incentive program, IDI may enter into agreements
("Shareholder Service Agreements") with investment dealers selected from time to
time by IDI for the provision of distribution assistance in connection with the
sale of the Fund's shares to such dealers' customers, and for the provision of
continuing personal shareholder services to customers who may from time to time
directly or beneficially own shares of the Fund. The distribution assistance and
continuing personal shareholder services to be rendered by dealers under the
Shareholder Service Agreements may include, but shall not be limited to, the
following: preparing and distributing advertising materials and sales
literature; answering routine customer inquiries concerning the Fund, assisting
customers in changing dividend options, account designations and addresses, and
in enrolling in any of several special investment plans in connection with the
purchase of the Fund's shares; assisting in the establishment and maintenance of
customer accounts and in arranging for any capital gains distributions
automatically to be invested in the Fund's shares; and providing such other
information and services as the Fund or the customer may reasonably request.
Under the Plans, in addition to the Shareholder Service Agreements authorizing
payments to selected dealers, banks may enter into Shareholder Service
Agreements authorizing payments under the Plans to be made to banks which
provide services to their customers who have purchased Fund shares. Services
provided pursuant to Shareholder Service Agreements with banks may include some
or all of the following: answering shareholder inquiries regarding the Fund and
the Company; performing sub-accounting; establishing and maintaining shareholder
accounts and records; processing customer purchase and redemption transactions;
providing period statements showing a shareholder's account balance and the
integration of such statements with those of other transactions and balances in
the shareholder's other accounts serviced by the bank; forwarding applicable
prospectuses, proxy statements, reports and notices to bank clients who hold
Fund shares; and such other administrative services as the Fund reasonably may
request, to the extent permitted by applicable statute, rule or regulation.
Similar agreements may be permitted under the Plans for institutions which
provide recordkeeping for and administrative services to 401(k) plans.
Financial intermediaries and any other person entitled to receive compensation
for selling shares of the Fund may receive different compensation for selling
shares of one particular class over another.
<PAGE>
Under a Shareholder Service Agreement, the Fund agrees to pay periodically fees
to selected dealers and other institutions who render the foregoing services to
their customers. The fees payable under a Shareholder Service Agreement
generally will be calculated at the end of each payment period for each business
day of the Fund during such period at the annual rate of 0.25% of the average
daily net asset value of the Fund's shares purchased or acquired through the
exchange. Fees calculated in this manner shall be paid only to those selected
dealers or other institutions who are dealers or institutions of record at the
close of business on the last business day of the applicable payment period for
the account in which the Fund's shares are held.
IDI may from time to time waive or reduce any portion of its 12b-1 for Class A
Shares and Class C Shares. Voluntary fee waivers or reductions may be rescinded
at any time without further notice to investors. During periods of voluntary fee
waivers or reductions, IDI will retain its ability to be reimbursed for such fee
prior to the end of each fiscal year.
Payments pursuant to the Plans are subject to any applicable limitations imposed
by the rules of the National Association of Securities Dealers, Inc. ("NASD").
The Plans conform to rules of the NASD by limiting payments made to dealers and
other financial institutions who provide continuing personal shareholder
services to their customers who purchase and own shares of the Fund to no more
than 0.25% per annum of the average daily net assets of the Fund attributable to
the customers of such dealers or financial institutions, and by imposing a cap
on the total sales charges, including asset based sales charges, that may be
paid by the Fund and its classes.
Each Plan provides that no provision of the Plan will be interpreted to prohibit
payments during periods when sales of shares of the Fund have been discontinued,
suspended or otherwise limited.
Under the Plans, certain financial institutions which have entered into
services agreements and which sell shares of the Fund on an agency basis
may receive payments from the Fund pursuant to the respective Plan. IDI
does not act as principal, but rather as agent for the Fund, in making
dealer incentive and shareholder servicing payments under the Plans. These
payments are an obligation of the Fund and not of IDI.
Since the Fund did not begin operation until ___________, the Fund has not made
any payments to IDI under the Plans as of the date of the Statement of
Additional Information.
The Plans require IDI to provide the board of directors at least quarterly with
a written report of the amounts expended pursuant to the Plans and the purposes
for which such expenditures were made. The board of directors reviews these
reports in connection with their decisions with respect to the Plans.
The Class B and Class C Plans require that the Distribution Agreements provide
that IDI (or dealers of financial institutions who offer and sell Class C
Shares) will be deemed to have performed all services required to be performed
in order to receive an asset-based sales charge on the average daily net assets
attributable to Class B or Class C Shares upon settlement of each sale of a
Class B or Class C Shares.
As required by Rule 12b-1, the Plans and related forms of Shareholder Service
Agreements were approved by the board of directors, including a majority of the
directors who are not "interested persons" (as defined in the 1940 Act) of the
Company and who have no direct or indirect financial interest in the operation
of the Plans or in any agreements related to the Plans ("Independent
Directors"). In approving the Plans in accordance with the requirements of Rule
12b-1, the directors considered various factors and determined that there is a
reasonable likelihood that the Plans would benefit each affected class of the
Fund and its respective shareholders.
<PAGE>
The Plans do not obligate the Fund to reimburse IDI for the actual expenses IDI
may incur in fulfilling its obligations under the Plans. Thus, even if IDI's
actual expenses exceed the fee payable to IDI thereunder at any given time, the
Fund will not be obligated to pay more than that fee. If IDI's expenses are less
than the fee it receives, IDI will retain the full amount of the fee.
Unless the Plans are terminated earlier in accordance with their terms, they
continue as long as such continuance is specifically approved at least annually
by the board of directors, including a majority of the Independent Directors.
The Plans may be terminated with respect to a class by the vote of a majority of
the Independent Directors, or by the vote of a majority of the outstanding
voting securities of such class of the Fund.
Any change in the Plans that would increase materially the distribution expenses
paid by the applicable class requires shareholder approval; otherwise, they may
be amended by the directors, including a majority of the Independent Directors,
by votes case in person at a meeting called for the purpose of voting upon such
amendment. As long as the Plans are in effect, the selection or nomination of
the Independent Directors is committed to the discretion of the Independent
Directors. In the event the Class A Plan is amended in a manner which the board
of directors determines would materially increase the charges paid by holders of
Class A Shares under the Class A Plan, the Class B Shares of the Fund will no
longer convert into Class A Shares of the Fund unless the Class B Shares, voting
separately, approve such amendment. If the Class B shareholder do not approve
such amendment, the board of directors will (i) create a new class of shares of
the Fund which is identical in all material respects to the Class A Shares as
they existed prior to the implementation of the amendment, and (ii) ensure that
the existing Class B Shares of the Fund will be exchanged or converted into such
new class of shares no later than the date the Class B shares were scheduled to
convert into Class A Shares.
The principal difference between the Class A Plan, the Class B Plan and the
Class C Plan are: (i) the Class A Plan pays to IDI or to dealers or financial
institutions of up to 0.35% of average daily net assets of the Fund's Class A
Shares and the Class B Plan allows payments of up to 1.00% of the average daily
net assets of the Class B Shares and the Class C Plan allows payments of up to
1.00% of the average daily net assets of the Class C Shares; (ii) the Class B
Plan obligates the Class B shares to continue to make payments to IDI following
termination of the Class B Shares Distribution Agreement with respect to Class B
Shares sold by or attributable to the distribution efforts of IDI unless there
has been a complete termination of the Class B Plan (as defined in such Plan);
and (iii) the Class B Plan expressly authorized IDI to assign, transfer or
pledge its rights to payments pursuant to the Class B Plan.
SALES CHARGES AND DEALER CONCESSIONS
Class A shares of the Fund are currently sold with a sales charge ranging from
5.50% to 2.00% of the offering price on purchases of less than $1,000,000.
Dealer
Concession
Investor's Sales Charge As a
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment in Offering Amount Offering
Single Transaction(1) Price Invested Price
--------------------- ----- -------- -----
Less than $ 25,000 5.50% 5.82% 4.75%
$ 25,000 but less than $ 50,000 5.25 5.54 4.50
$ 50,000 but less than $ 100,000 4.75 4.99 4.50
<PAGE>
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 3.00 3.09 2.50
$500,000 but less than $1,000,000 2.00 2.04 1.60
There is no sales charge on purchases of $1,000,000 or more; however, IDI may
pay a dealer concession and/or advance a service fee on such transactions as set
forth below.
IDI may elect to re-allow the entire initial sales charge to dealers for all
sales with respect to which orders are placed with IDI during a particular
period. Dealers to whom substantially the entire sales charge is re-allowed may
be deemed to be "underwriters" as that term is defined under the Securities Act
of 1933.
In addition to amounts paid to dealers as a dealer concession out of the initial
sales charge paid by investors, IDI may, from time to time, at its expense or as
an expense for which it may be compensated under a distribution plan, if
applicable, pay a bonus or other consideration or incentive to dealers who sell
a minimum dollar amount of the shares of the INVESCO Funds during a specified
period of time. At the option of the dealer, such incentives may take the form
of payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives and their families to
places within or outside the United States. The total amount of such additional
bonus payments or other consideration shall not exceed 0.25% of the public
offering price of the shares sold. Any such bonus or incentive programs will not
change the price paid by investors for the purchase of the applicable INVESCO
Fund's shares or the amount that any particular INVESCO Fund will receive as
proceeds from such sales. Dealers may not use sales of the INVESCO Funds' shares
to qualify for any incentives to the extent that such incentives may be
prohibited by the laws of any state.
IDI may make payments to dealers and institutions that are dealers of record for
purchases of $1 million or more of Class A Shares (or shares which normally
involve payment of initial sales charges), which are sold at net asset value and
are subject to a contingent deferred sales charge, for all INVESCO Funds as
follows: 1.00% of the first $2 million of such purchase, plus 0.80% of the next
$1 million of such purchases, plus 0.50% of the next $17 million of such
purchases, plus 0.25% of amounts in excess of $20 million of such purchases.
IDI may pay sales commissions to dealers and institutions that sell Class B
Shares of the INVESCO Funds at the time of such sales. Payments with respect to
Class B Shares will equal 4.00% of the purchase price of the Class B Shares sold
by the dealer or institution, and will consist of a sales commission equal to
3.75% of the purchase price of the Class B Shares sold plus an advance of the
first year service fee of 0.25% with respect to such shares. The portion of the
payments to IDI under the Class B Plan which constitutes an asset-based sales
charge (0.75%) is intended in part to permit IDI to recoup a portion of such
sales commissions plus financing costs.
IDI may pay sales commissions to dealers and institutions who sell Class C
Shares of the INVESCO Funds at the time of such sales. Payments with respect to
Class C Shares will equal 1.00% of the purchase price of the Class C Shares sold
by the dealer or institution, and will consist of a sales commission of 0.75% of
the purchase price of the Class C Shares sold plus an advance of the first year
service fee of 0.25% with respect to such shares. IDI will retain all payments
received by it relating to Class C Shares for the first year after they are
purchased. The portion of the payments to IDI under the Class C Plan which
constitutes an asset-based sales charge (0.75%) is intended in part to permit
IDI to recoup a portion of on-going sales commissions to dealers plus financing
costs, if any. After the first full year, IDI will make such payments quarterly
to dealers and institutions based on the average net asset value of Class C
Shares which are attributable to shareholders for whom the dealers and
institutions are designated as dealers of record. These commissions are not paid
on sales to investors exempt from the CDSC and in circumstances where IDI grants
an exemption on particular transactions.
<PAGE>
IDI may pay investment dealers or other financial service firms for share
purchases (measured on an annual basis) of Class A Shares of all Funds sold at
net asset value to an employee benefit plan as follows: 1.00% of the first $2
million of such purchases, plus 0.80% of the next $1 million of such purchases,
plus 0.50% of the next $17 million of such purchases, plus 0.25% of amounts in
excess of $20 million of such purchases.
REDUCTIONS IN INITIAL SALES CHARGES
Reductions in the initial sales charges shown in the sales charges table
(quantity discounts) apply to purchases of shares of the INVESCO Funds that are
otherwise subject to an initial sales charge, provided that such purchases are
made by a "purchaser" as hereinafter defined.
The term "purchaser" means:
o an individual and his or her spouse and children, including any trust
established exclusively for the benefit of any such person; or a
pension, profit-sharing, or other benefit plan established exclusively
for the benefit of any such person, such as an IRA, Roth IRA, a
single-participant money-purchase/profit sharing plan or an individual
participant in a 403(b) Plan (unless such 403(b) plan qualifies as the
purchaser as defined below);
o a 403(b) plan, the employer/sponsor of which is an organization
described under Section 501(c)(3) of the Internal Revenue Code of
1986, as amended (the "Code"), if:
a. the employer/sponsor must submit contributions for all
participating employees in a single contribution transmittal
(i.e., the Funds will not accept contributions submitted with
respect to individual participants);
b. each transmittal must be accompanied by a single check or wire
transfer; and
c. all new participants must be added to the 403(B) plan by
submitting an application on behalf of each new participant with
the contribution transmittal;
o a trustee or fiduciary purchasing for a single trust, estate or single
fiduciary account (including a pension, profit-sharing or other
employee benefit trust created pursuant to a plan qualified under
Section 401 of the Code) and 457 plans, although more than one
beneficiary or participant is involved;
o a Simplified Employee Pension (SEP), Salary Reduction and other
Elective Simplified Employee Pension account (SAR-SEP) or a Savings
Incentive Match Plans for Employees IRA (SIMPLE IRA), where the
employer has notified the distributor in writing that all of its
related employee SEP, SAR-SEP or SIMPLE IRA accounts should be linked;
or
o any other organized group of persons, whether incorporated or not,
provided the organization has been in existence for at least six
months and has some purpose other than the purchase at a discount of
redeemable securities of a registered investment company.
<PAGE>
Investors or dealers seeking to qualify orders for a reduced initial sales
charge must identify such orders and, if necessary, support their qualification
for the reduced charge. IDI reserves the right to determine whether any
purchaser is entitled, by virtue of the foregoing definition, to the reduced
sales charge. No person or entity may distribute shares of the INVESCO Funds
without payment of the applicable sales charge other than to persons or entities
that qualify for a reduction in the sales charge as provided herein.
1. LETTERS OF INTENT. A purchaser, as previously defined, may pay reduced
initial sales charges by completing the appropriate section of the account
application and by fulfilling a Letter of Intent ("LOI"). The LOI confirms such
purchaser's intention as to the total investment to be made in shares of the
INVESCO Funds (except for Class B and Class C Shares of INVESCO Funds within the
following 13 consecutive months. By marking the LOI section on the account
application and by signing the account application, the purchaser indicates that
he/she understands and agrees to the terms of the LOI and is bound by the
provisions described below.
Each purchase of fund shares normally subject to an initial sales charge made
during the 13-month period will be made at the public offering price applicable
to a single transaction of the total dollar amount indicated by the LOI, as
described under "Sales Charges and Dealer Concessions." It is the purchaser's
responsibility at the time of purchase to specify the account numbers that
should be considered in determining the appropriate sales charge. The offering
price may be further reduced as described under "Rights of Accumulation" if the
Transfer Agent is advised of all other accounts at the time of the investment.
Shares acquired through reinvestment of dividends and capital gains
distributions will not be applied to the LOI. At any time during the 13-month
period after meeting the original obligation, a purchaser may revise his or her
intended investment amount upward by submitting a written and signed request.
Such a revision will not change the original expiration date. By signing an LOI,
a purchaser is not making a binding commitment to purchase additional shares,
but if purchases made within the 13-month period do not total the amount
specified, the investor will pay the increased amount of sales charge as
described below. Purchases made within 90 days before signing an LOI will be
applied toward completion of the LOI. The LOI effective date will be the date of
the first purchase within the 90-day period. The transfer agent will process
necessary adjustments upon the expiration or completion date of the LOI.
Purchases made more than 90 days before signing an LOI will be applied toward
completion of the LOI based on the value of the shares purchased calculated at
the public offering price on the effective date of the LOI.
To assure compliance with the provisions of the 1940 Act, out of the initial
purchase (or subsequent purchases if necessary) the transfer agent will escrow
in the form of shares an appropriate dollar amount (computed to the nearest full
share). All dividends and any capital gain distributions on the escrowed shares
will be credited to the purchaser. All shares purchased, including those
escrowed, will be registered in the purchaser's name. If the total investment
specified under this LOI is completed within the 13-month period, the escrowed
shares will be promptly released. If the intended investment is not completed,
the purchaser will pay the transfer agent the difference between the sales
charge on the specified amount and the amount actually purchased. If the
purchaser does not pay such difference within 20 days of the expiration date,
he/she irrevocably constitutes and appoints the transfer agent as his/her
attorney to surrender for redemption any or all shares, to make up such
difference within 60 days of the expiration date.
If at any time before completing the LOI Program, the purchaser wishes to cancel
the agreement, he/she must give written notice to IDI. If at any time before
completing the LOI Program the purchaser requests the transfer agent to
liquidate or transfer beneficial ownership of his/her total shares, a
cancellation of the LOI will automatically be effected. If the total amount
purchased is less than the amount specified in the LOI, the transfer agent will
redeem an appropriate number of escrowed shares equal to the difference between
the sales charge actually paid and the sales charge that would have been paid if
the total purchases had been made at a single time.
<PAGE>
2. RIGHTS OF ACCUMULATION. A "purchaser" as previously defined, may also qualify
for reduced initial sales charges based upon such purchaser's existing
investment in shares of any of the INVESCO Funds (except for Class B and Class C
Shares of the INVESCO Funds) at the time of the proposed purchase. To determine
whether or not a reduced initial sales charge applies to a proposed purchase,
IDI takes into account not only the money which is invested upon such proposed
purchase, but also the value of all shares of the INVESCO Funds (except for
Class B and Class C Shares of the INVESCO Funds) owned by such purchaser,
calculated at their then current public offering price. If a purchaser so
qualifies for a reduced sales charge, the reduced sales charge applies to the
total amount of money then being invested by such purchaser, calculated at their
then current public offering price. If a purchaser so qualifies for a reduced
sales charge, the reduced sales charge applies to the total amount of money then
being invested by such purchaser and not just to the portion that exceeds the
breakpoint above which a reduced sales charge applies. For example, if a
purchaser already owns qualifying shares of any INVESCO Fund with a value of
$20,000 and wishes to invest an additional $20,000 in a fund, with a maximum
initial sales charge of 5.50%, the reduced initial sales charge of 5.25% will
apply to the full $20,000 purchase and not just to the $15,000 in excess of the
$25,000 breakpoint. To qualify for obtaining the discount applicable to a
particular purchase, the purchaser or his dealer must furnish IDI with a list of
the account numbers and the names in which such accounts of the purchaser are
registered at the time the purchase is made.
PURCHASES AT NET ASSET VALUE. Purchases of shares of any of the INVESCO Funds at
net asset value (without payment of an initial sales charge) may be made in
connection with: (a) the reinvestment of dividends and distributions from the
Fund; (b) exchanges of shares of certain funds; (c) use of the reinstatement
privilege; or (d) a merger, consolidation or acquisition of assets of a fund.
The following purchasers will not pay initial sales charges on purchases of
Class A shares because there is a reduced sales effort involved in sales to
these purchasers:
o INVESCO and its affiliates, or their clients;
o Any current or retired officer, director or employee (and members of
their immediate family) of INVESCO, its affiliates or the INVESCO
Funds and any foundation, trust or employee benefit plan established
exclusively for the benefit of, or by, such persons;
o Sales representatives and employees (and members of their immediate
family) of selling group members or financial institutions that have
arrangements with such selling group members;
o Purchases through approved fee-based programs;
o Employee benefit plans designated as purchasers as defined above, and
non-qualified plans offered in conjunction therewith, provided the
initial investment in the plan(s) is at least $1 million; the sponsor
signs a $1 million LOI; the employer-sponsored plan(s) has at least
100 eligible employees; or all plan transactions are executed through
a single omnibus account and the financial institution or service
organization has entered into the appropriate agreements with the
distributor. Section 403(b) plans sponsored by public educational
institutions are not eligible for a sales charge exception based on
the aggregate investment made by the plan or the number of eligible
employees. Purchases of the Fund by such plans are subject to initial
sales charges;
o A shareholder of a fund that merges or consolidates with an INVESCO
Fund or that sells its assets to an INVESCO Fund in exchange for
shares of an INVESCO Fund;
As used above, immediate family includes an individual and his or her spouse,
children, parents and parents of spouse.
<PAGE>
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS
CDSCs will not apply to the following:
o Redemptions following the death or post-purchase disability of (1) any
registered shareholders on an account or (2) a settlor of a living
trust, of shares held in the account at the time of death or initial
determination of post-purchase disability;
o Certain distributions from individual retirement accounts, Section
403(b) retirement plans, Section 457 deferred compensation plans and
Section 401 qualified plans, where redemptions result from (i)
required minimum distributions to plan participants or beneficiaries
who are age 70-1/2 or older, and only with respect to that portion of
such distributions that does not exceed 12% annually of the
participant's or beneficiary's account value in a particular INVESCO
Fund; (ii) in kind transfers of assets where the participant or
beneficiary notifies the distributor of the transfer not later than
the time the transfer occurs; (iii) tax-free rollovers or transfers of
assets to another plan of the type described above invested in Class B
or Class C Shares of one or more of the INVESCO Funds; (iv) tax-free
returns of excess contributions or returns of excess deferral amounts;
and (v) distributions on the death or disability (as defined in the
Internal Revenue Code of 1986, as amended) of the participant or
beneficiary;
o Liquidation by the Fund when the account value falls below the minimum
required account size of $250;
o Investment account(s) of INVESCO; and
o Class C Shares if the investor's dealer of record notifies IDI prior
to the time of investment that the dealer waives the payment otherwise
payable to him.
Upon the redemption of Class A Shares purchased in amounts of $1 million or
more, no CDSC will be applied in the following situations:
o Shares held more than 18 months;
o Redemptions from employee benefit plans designated as qualified
purchasers, as defined above, where the redemptions are in connection
with employee terminations or withdrawals, provided the total amount
invested in the plan is at least $1,000,000; the sponsor signs a $1
million LOI; or the employer-sponsored plan has at least 100 eligible
employees; provided, however, that 403(b) plans sponsored by public
educational institutions shall qualify for the CDSC waiver on the
basis of the value of each plan participant's aggregate investment in
the INVESCO Funds, and not on the aggregate investment made by the
plan or on the number of eligible employees;
o Private foundations or endowment funds;
o Redemption of shares by the investor where the investor's dealer
waives the amounts otherwise payable to it by the distributor and
notifies the distributor prior to the time of investment; and
o Shares acquired by exchange from Class A Shares of the Fund unless the
shares acquired are redeemed within 18 months of the original purchase
of Class A Shares.
<PAGE>
HOW TO PURCHASE AND REDEEM SHARES
A complete description of the manner by which shares of the Fund may be
purchased appears in the Prospectus under the caption "How To Buy Shares."
The sales charge normally deducted on purchases of Class A Shares of the Fund is
used to compensate IDI and participating dealers for their expenses incurred in
connection with the distribution of such shares. Since there is little expense
associated with unsolicited orders placed directly with IDI by persons, who
because of their relationship with the Fund or with INVESCO and its affiliates,
are familiar with the Fund, or whose programs for purchase involve little
expense (e.g., because of the size of the transaction and shareholder records
required), IDI believes that it is appropriate and in the Fund's best interests
that such persons be permitted to purchase Class A shares of the Fund through
IDI without payment of a sales charge. The persons who may purchase Class A
Shares of the Funds without a sales charge are set forth herein under the
Caption "Reductions in Initial Sales Charges - Purchases at Net Asset Value."
The following formula may be used by an investor to determine the public
offering price per Class A share of an investment:
Net Asset Value/(1-Sales Charge as % of Offering Price) = Offering Price
Information concerning redemption of the Fund's shares is set forth in the
Prospectus under the caption "How To Sell Shares." Shares of the Fund may be
redeemed directly through IDI or through any dealer who has entered into an
agreement with IDI. In addition to the Fund's obligation to redeem shares, IDI
may also repurchase shares as an accommodation to the shareholders. To effect a
repurchase, those dealers who have executed Selected Dealer Agreements with IDI
must phone orders to the order desk of the Fund at (800) ___________________ and
guarantee delivery of all required documents in good order. A repurchase is
effected at the net asset value of the Fund next determined after such order is
received. Such arrangement is subject to timely receipt by AFS of all required
documents in good order. If such documents are not received within a reasonable
time after the order is placed, the order is subject to cancellation. While
there is no charge imposed by the Fund or by IDI (other than any applicable
CDSC) when shares are redeemed or repurchased, dealers may charge a fair service
fee for handling the transaction. INVESCO intends to redeem all shares of the
Fund in cash.
The right of redemption may be suspended or the date of payment postponed when
(a) trading on the New York Stock Exchange ("NYSE") is restricted, as determined
by applicable rules and regulations of the SEC, (b) the NYSE is closed for other
than customary weekend and holiday closings, (c) the SEC has by order permitted
such suspension, or (d) an emergency as determined by the SEC exists making
disposition of portfolio securities or the valuation of the net assets of the
Fund not reasonably practicable.
OTHER SERVICE PROVIDERS
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 1670 Broadway, Suite 1000, Denver, Colorado, are the
independent accountants of the Company. 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, is the
custodian of the cash and investment securities of the Company. The custodian is
also responsible for, among other things, receipt and delivery of the Fund's
investment securities in accordance with procedures and conditions specified in
the custody agreement with the Company. The custodian is authorized to establish
<PAGE>
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
INVESCO, 7800 E. Union Avenue, Denver, Colorado, is the Company's transfer
agent, registrar, and dividend disbursing agent. Services provided by INVESCO
include the issuance, cancellation and transfer of shares of the Fund, and the
maintenance of records regarding the ownership of such shares.
LEGAL COUNSEL
The firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., 2nd
Floor, Washington, D.C., is legal counsel for the Company. The firm of Moye,
Giles, O'Keefe, Vermeire & Gorrell LLP, 1225 17th Street, Suite 2900, Denver,
Colorado, acts as special counsel to the Company.
BROKERAGE ALLOCATION AND OTHER PRACTICES
As the investment adviser to the Fund, INVESCO places orders for the purchase
and sale of securities with broker-dealers based upon an evaluation of the
financial responsibility of the broker-dealers and the ability of the
broker-dealers to effect transactions at the best available prices.
While INVESCO seeks reasonably competitive commission rates, the Fund does not
necessarily pay the lowest commission or spread available. INVESCO is permitted
to, and does, consider qualitative factors in addition to price in the selection
of brokers. Among other things, INVESCO considers the quality of executions
obtained on 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. INVESCO has found that a broker's
consistent ability to execute transactions is at least as important as the price
the broker charges for those services.
In seeking to ensure that the commissions charged the Fund are consistent with
prevailing and reasonable commissions, INVESCO monitors brokerage industry
practices and commissions charged by broker-dealers on transactions effected for
other institutional investors like the Fund.
Consistent with the standard of seeking to obtain favorable execution on
portfolio transactions, INVESCO may select brokers that provide research
services to INVESCO and the Company, as well as other INVESCO mutual funds and
other accounts managed by INVESCO. Research services include statistical and
analytical reports relating to issuers, industries, securities and economic
factors and trends, which may be of assistance or value to INVESCO in making
informed investment decisions. Research services prepared and furnished by
brokers through which the Fund effects securities transactions may be used by
INVESCO in servicing all of its accounts and not all such services may be used
by INVESCO in connection with a particular Fund. Conversely, the Fund receives
benefits of research acquired through the brokerage transactions of other
clients of INVESCO.
In order to obtain reliable trade execution and research services, INVESCO may
utilize brokers that charge higher commissions than other brokers would charge
for the same transaction. This practice is known as "paying up." However, even
when paying up, INVESCO is obligated to obtain favorable execution of the Fund's
transactions.
<PAGE>
Portfolio transactions also may be effected through broker-dealers that
recommend the Fund to their clients, or that act as agent in the purchase of the
Fund's shares for their clients. When a number of broker-dealers can provide
comparable best price and execution on a particular transaction, INVESCO may
consider the sale of the Fund's shares by a broker-dealer in selecting among
qualified broker-dealers.
Certain of the INVESCO Funds utilize fund brokerage commissions to pay custody
fees for each respective fund. This program requires that the participating
funds receive favorable execution.
Neither INVESCO nor any affiliate of INVESCO receives any brokerage commissions
on portfolio transactions effected on behalf of the Fund, and there is no
affiliation between INVESCO or any person affiliated with INVESCO or the Fund
and any broker-dealer that executes transactions for the Fund.
CAPITAL STOCK
The Company is authorized to issue up to two billion shares of common stock with
a par value of $0.01 per share. As of ___________, the following shares of the
Fund were outstanding:
Advantage Fund - Class A 0
Advantage Fund - Class B 0
Advantage Fund - Class C 0
A share of each class of the Fund represents an identical interest in the Fund's
investment portfolio and has the same rights, privileges and preferences.
However, each class may differ with respect to sales charges, if any,
distribution and/or service fees, if any, other expenses allocable exclusively
to each class, voting rights on matters exclusively affecting that class, and
its exchange privilege, if any. The different sales charges and other expenses
applicable to the different classes of shares of the Fund will affect the
performance of those classes. Each share of the Fund is entitled to participate
equally in dividends for that class, other distributions and the proceeds of any
liquidation of a class of that Fund. However, due to the differing expenses of
the classes, dividends and liquidation proceeds on Class A, Class B and Class C
shares will differ. All shares of the Fund will be voted together, except that
only the shareholders of a particular class of the Fund may vote on matters
exclusively affecting that class, such as the terms of a Rule 12b-1 Plan as it
relates to the class. All shares issued and outstanding are, and all shares
offered hereby when issued will be, fully paid and non assessable. Other than
the automatic conversion of Class B Shares to Class A Shares, there are no
conversion rights. The board of directors has the authority to designate
additional classes of common stock without seeking the approval of shareholders
and may classify and reclassify any authorized but unissued shares.
Shares have no preemptive rights and are freely transferable on the books of the
Fund.
All shares of the Company have equal voting rights based on one vote for each
share owned. The Company is not generally required and does not expect to hold
regular annual meetings of shareholders. However, when requested to do so in
writing by the holders of 10% or more of the outstanding shares of the Company
or as may be required by applicable law or the Company's Articles of
Incorporation, the board of directors will call special meetings of
shareholders.
Directors may be removed by action of the holders of a majority of the
outstanding shares of the Company. The Fund will assist shareholders in
communicating with other shareholders as required by the 1940 Act.
<PAGE>
Fund shares have noncumulative voting rights, which means that the holders of a
majority of the shares of the Company voting for the election of directors of
the Company can elect 100% of the directors if they choose to do so. If that
occurs, the holders of the remaining shares voting for the election of directors
will not be able to elect any person or persons to the board of directors.
Directors may be removed by action of the holders of a majority of the
outstanding shares of the Company.
TAX CONSEQUENCES OF OWNING SHARES OF THE FUND
The Fund intends to conduct its business and satisfy the applicable
diversification of assets, distribution and source of income requirements to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. The Fund intends to qualify as a regulated
investment company during its current fiscal year. It is the policy of the Fund
to distribute all investment company taxable income and net capital gains. As a
result of this policy and the Fund's qualification as a regulated investment
company, it is anticipated that none of the classes of the Fund will pay federal
income or excise taxes and that all of the classes of the Fund will be accorded
conduit or "pass through" treatment for federal income tax purposes. Therefore,
any taxes that the Fund would ordinarily owe are paid by its shareholders on a
pro-rata basis. If the Fund does not distribute all of its net investment income
or net capital gains, it will be subject to income and excise taxes on the
amount that is not distributed. If the Fund does not qualify as a regulated
investment company, it will be subject to income tax on all of its net
investment income and net capital gains at the corporate tax rates.
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 taxable for federal income tax purposes 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, including the dividends eligible for the dividends-received
deduction for corporations. Dividends eligible for the dividends-received
deduction will be limited to the aggregate amount of qualifying dividends that
the Fund derives from its portfolio investments.
The Fund realizes a capital gain or loss when it sells a portfolio security for
more or less than it paid for that security. Capital gains and losses are
divided into short-term and long-term, depending on how long the Fund held the
security which gave rise to the gain or loss. If the security was held one year
or less the gain or loss is considered short-term, while holding a security for
more than one year will generate a long-term gain or loss. A capital gain
distribution consists of long-term capital gains which are taxed at the capital
gains rate. Short-term capital gains are included with income from dividends and
interest as ordinary income and are paid to shareholders as dividends, as
discussed above. If total long-term gains on sales exceed total short-term
losses, including any losses carried forward from previous years, the Fund will
have a net capital gain. Distributions by the Fund of net capital gains are, for
federal income tax purposes, taxable to the shareholder as a long-term capital
gain regardless of how long a shareholder has held shares of the particular
Fund. Such distributions are not eligible for the dividends-received deduction.
After the end of each calendar year, the Fund sends information to shareholders
regarding the amount and character of distributions paid during the year.
All dividends and other distributions are taxable income to the shareholder,
whether or not such dividends and distributions are reinvested in additional
shares or paid in cash. If the net asset value of the Fund's shares should be
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 a
return of invested capital. The net asset value of shares of the Fund reflects
accrued net investment income and undistributed realized capital and foreign
currency gains; therefore, when a distribution is declared, the net asset value
<PAGE>
is reduced by the amount of the distribution. If shares of the Fund are
purchased shortly before a distribution, the full price for the shares will be
paid and some portion of the price may then be returned to the shareholder as a
taxable dividend or capital gain. 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.
If it invests in foreign securities, the Fund may be subject to the withholding
of foreign taxes on dividends or interest it receives on foreign securities.
Foreign taxes withheld will be treated as an expense of the Fund unless the Fund
meets the qualifications and makes the election to enable it to pass these taxes
through to shareholders for use by them as a foreign tax credit or deduction.
Tax conventions between certain countries and the United States may reduce or
eliminate such taxes.
The Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation that, in general, meets either of the
following tests: (1) at least 75% of its gross income is passive or (2) an
average value of at least 50% of its assets produce, or are held for the
production of, passive income. The Fund intends to "mark-to-market" its stock in
any PFIC. In this context, "marking-to-market" means including in ordinary
income for each taxable year the excess, if any, of the fair market value of the
PFIC stock over the Fund's adjusted basis in the PFIC stock as of the end of the
year. In certain circumstances, the Fund will also be allowed to deduct from
ordinary income the excess, if any, of its adjusted basis in PFIC stock over the
fair market value of the PFIC stock as of the end of the year. The deduction
will only be allowed to the extent of any PFIC mark-to-market gains recognized
as ordinary income in prior years. The Fund's adjusted tax basis in each PFIC
stock for which it makes this election will be adjusted to reflect the amount of
income included or deduction taken under the election.
Gains or losses (1) from the disposition of foreign currencies, (2) from the
disposition of debt securities denominated in foreign currencies that are
attributable to fluctuations in the value of the foreign currency between the
date of acquisition of each security and the date of disposition, and (3) that
are attributable to fluctuations in exchange rates that occur between the time
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.
INVESCO 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 INVESCO will be computed using the single-category
average cost method, although neither INVESCO nor the Fund recommend any
particular method of determining cost basis. Other methods may result in
different tax consequences. If you have reported gains or losses for the Fund in
past years, you must continue to use the method previously used, unless you
apply to the IRS for permission to change methods.
If you sell Fund shares at a loss after holding them for six months or less,
your loss will be treated as long-term (instead of short-term) capital loss to
the extent of any capital gain distributions that you may have received on those
shares.
The Fund will be subject to a nondeductible 4% excise tax to the extent it fails
to distribute by the end of any calendar year substantially all of its ordinary
income for that year and its net capital gains for the one-year period ending on
October 31 of that year, plus certain other amounts.
<PAGE>
You should consult your own tax adviser regarding specific questions as to
federal, state and local taxes. Dividends and capital gain distributions will
generally be subject to applicable state and local taxes. Qualification as a
regulated investment company for income tax purposes under the Internal Revenue
Code of 1986, as amended, does not entail government supervision of management
or investment policies.
PERFORMANCE
To keep shareholders and potential investors informed, INVESCO will occasionally
advertise the Fund's total return for one-, five-, and ten-year periods (or
since inception). All advertisements of the Fund will disclose the maximum sales
charge (including deferred sales charges) imposed on purchases of the Fund's
shares. If any advertised performance data does not reflect the maximum sales
charge (if any), such advertisement will disclose that the sales charge has not
been deducted in computing the performance data, and that, if reflected, the
maximum sales charge would reduce the performance quoted.
The Fund's total return is calculated in accordance with a standardized formula
for computation of annualized total return. Standardized total return for Class
A Shares reflects the deduction of the maximum initial sales charge at the time
of purchase. Standardized total return for Class B and Class C Shares reflects
the deduction of the maximum applicable contingent deferred sales charge on a
redemption of shares held for the period. Total returns quoted in advertising
reflect all aspects of the Fund's return, including the effect of reinvesting
dividends and capital gain distributions, and any change in the Fund's net asset
value per share over the period. Average annual returns are calculated by
determining the growth or decline in value of a hypothetical investment in the
Fund over a stated period, and then calculating the annually compounded
percentage rate that would have produced the same result if the rate of growth
or decline in value has been constant over the period. Because average annual
returns tend to even out variations in the Fund's returns, investors should
realize that the Fund's performance is not constant over time, but changes from
year to year, and that average annual returns do not represent the actual
year-to-year performance of the Fund.
In addition to average annual returns, the Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Cumulative total return shows the actual rate of return on
an investment for the period cited; average annual total return represents the
average annual percentage change in the value of an investment. Both cumulative
and average annual total returns tend to "smooth out" fluctuations in the Fund's
investment results, because they do not show the interim variations in
performance over the periods cited. Total returns may be quoted with or without
taking the Fund's maximum applicable Class A front-end sales charge or Class B
or Class C contingent deferred sales charge into account. Excluding sales
charges from a total return calculation produces a higher total return figure.
More information about the Fund's recent and historical performance is contained
in the Company's Annual Report to Shareholders. You can get a free copy by
calling or writing to INVESCO using the telephone number or address on the back
cover of the Fund's Prospectus.
The Fund may participate in the Initial Public Offering ("IPO") market, and a
significant portion of the Fund's returns may be attributable to its investment
in IPOs, which have a magnified impact due to the Fund's small asset base. If
this occurs, there is no guarantee that as the Fund's assets grow, they will
continue to experience substantially similar performance by investing in IPOs.
When we quote mutual fund rankings published by Lipper Inc., we may compare the
Fund to others in its appropriate Lipper category, 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.
<PAGE>
Performance figures are based on historical earnings and are not intended to
suggest future performance.
Average annual total return performance is not provided for the Fund's shares
since they are not offered until ____________. Average annual total return
performance is 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) exponential n] = ERV
where: P = a hypothetical initial payment of $10,000
T = average annual total return
n = number of years
ERV = ending redeemable value of initial payment
The average annual total return performance figures shown above were determined
by solving the above formula for "T" for each time period indicated.
In conjunction with performance reports, comparative data between 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.
In conjunction with performance reports and/or analyses of shareholder services
for the Fund, comparative data between the Fund's performance for a given period
and recognized indices of investment results for the same period, and/or
assessments of the quality of shareholder service, may be provided to
shareholders. Such indices include indices provided by Dow Jones & Company, S&P,
Lipper Inc., Lehman Brothers, National Association of Securities Dealers
Automated Quotations, Frank Russell Company, Value Line Investment Survey, the
American Stock Exchange, Morgan Stanley Capital International, Wilshire
Associates, the Financial Times Stock Exchange, the New York Stock Exchange, the
Nikkei Stock Average and Deutcher Aktienindex, all of which are unmanaged market
indicators. In addition, rankings, ratings, and comparisons of investment
performance and/or assessments of the quality of shareholder service made by
independent sources may be used in advertisements, sales literature or
shareholder reports, including reprints of, or selections from, editorials or
articles about the Fund. These sources utilize information compiled (i)
internally; (ii) by Lipper Inc.; or (iii) by other recognized analytical
services. The Lipper Inc. mutual fund rankings and comparisons which may be used
by the Fund in performance reports will be drawn from the following mutual fund
groupings, in addition to the broad-based Lipper general fund groupings:
Advantage Fund _______________________
Sources for Fund performance information and articles about the Fund 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.
<PAGE>
INSTITUTIONAL INVESTOR
INVESTMENT COMPANY DATA, INC.
INVESTOR'S BUSINESS DAILY
KIPLINGER'S PERSONAL FINANCE
LIPPER INC.'S MUTUAL FUND PERFORMANCE ANALYSIS
MONEY
MORNINGSTAR
MUTUAL FUND FORECASTER
NO-LOAD ANALYST
NO-LOAD FUND X
PERSONAL INVESTOR
SMART MONEY
THE NEW YORK TIMES
THE NO-LOAD FUND INVESTOR
U.S. NEWS AND WORLD REPORT
UNITED MUTUAL FUND SELECTOR
USA TODAY
THE WALL STREET JOURNAL
WIESENBERGER INVESTMENT COMPANIES SERVICES
WORKING WOMAN
WORTH
FINANCIAL STATEMENTS
No financial statements for the Fund are available as of the date of this
Statement of Additional Information as the Fund did not commence operations
until ________________, 2000.
<PAGE>
APPENDIX A
BOND RATINGS
The following is a description of Moody's and S&P's bond ratings:
Moody's Corporate Bond Ratings
Aaa - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa - Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group, they comprise what are generally known as high grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the long
term risk appear somewhat larger than in Aaa securities.
A - Bonds rated A possess many favorable investment attributes, and are to be
considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds rated Baa are considered as medium grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba - Bonds rated Ba are judged to have speculative elements. Their future cannot
be considered as well assured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class.
B - Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or maintenance of other terms of
the contract over any longer period of time may be small.
Caa - Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
<PAGE>
S&P Corporate Bond Ratings
AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB - Bonds rated BBB are regarded as having an adequate capability to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
BB - Bonds rated BB have less near-term vulnerability to default than other
speculative issues. However, they face major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments.
B - Bonds rated B have a greater vulnerability to default but currently have the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal.
CCC - Bonds rated CCC have a currently identifiable vulnerability to default and
are dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, they are not likely to have
the capacity to pay interest and repay principal.
<PAGE>
PART C. OTHER INFORMATION
ITEM 23. EXHIBITS
(a) Articles of Incorporation filed April 25, 2000 (filed
herewith)
(b) Bylaws (filed herewith)
(c) Instruments defining the rights of holders of Registrant's
securities of beneficial interest.(1)
(d) (1) Investment Advisory Agreement(2)
(e) (1) General Distribution Agreement(2)
(2) Exclusive Dealer Agreement(2)
(f) (1) Defined Benefit Deferred Compensation Plan for
Non-Interested Directors and Trustees.(2)
(g) Custody Agreement(2)
(h) (1) Transfer Agency Agreement(2)
(2) Administrative Services Agreement(2)
(i) Opinion and consent of counsel as to the legality of the
securities being registered, indicating whether they will,
when sold, be legally issued, fully paid and non-assessable(2)
(j) Consent of Independent Accountants (filed herewith)
(k) Not applicable.
(l) Letter of Investment Intent.(2)
(m) (1) Master Plan and Agreement of Distribution pursuant to
Rule 12b-1 under the Investment Company Act of 1940 with respect
to Class A shares.(2)
(2) Master Plan and Agreement of Distribution pursuant to
Rule 12b-1 under the Investment Company Act of 1940 with respect
to Class B shares.(2)
(3) Master Plan and Agreement of Distribution pursuant to
Rule 12b-1 under the Investment Company Act of 1940 with respect
to Class C shares.(2)
(n) Financial Date Schedule - not applicable
(o) Plan Pursuant to Rule 18f-3 under the Investment Company
Act of 1940.(2)
<PAGE>
(1) Incorporated by reference from Articles III, IV, VII and VIII of
Registrant's Articles of Incorporation and from Articles V, VII, and X of
Registrant's Bylaws.
(2) To be filed.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH INVESCO ADVANTAGE
SERIES FUNDS, INC. (THE "COMPANY")
No person is presently controlled by or under common control with the Company.
ITEM 25. INDEMNIFICATION
Indemnification provisions for officers, directors and employees of the Company
are set forth in Article Seventh of the Articles of Incorporation, and are
hereby incorporated by reference. See Item 24 above. Under these Articles,
directors and officers will be indemnified to the fullest extent permitted to
directors by the Maryland General Corporation Law, subject only to such
limitations as may be required by the Investment Company Act of 1940, as
amended, and the rules thereunder. Under the Investment Company Act of 1940,
directors and officers of the Company cannot be protected against liability to a
Fund or its shareholders to which they would be subject because of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties of
their office. The Company also maintains liability insurance policies covering
its directors and officers.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
See "Fund Management" in the Fund's Prospectus and "Management of the Fund" in
the Statement of Additional Information for information regarding the business
of the investment adviser, INVESCO.
Following are the names and principal occupations of each director and officer
of the investment adviser, INVESCO. Certain of these persons hold positions with
IDI, a subsidiary of INVESCO.
- --------------------------------------------------------------------------------
Position with Principal Occupation and
Name Advisor Company Affiliation
- --------------------------------------------------------------------------------
Mark H. Williamson Chairman and Chairman of the Board, President
Officer & Chief Executive Officer
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Raymond R. Cunningham Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
William J. Galvin, Jr. Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Ronald L. Grooms Officer & Senior Vice President & Treasurer
Director INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Richard W. Healey Officer & Senior Vice President
Director INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
William R. Keithler Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Trent E. May Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Charles P. Mayer Officer & Senior Vice President
Director INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Timothy J. Miller Officer & Senior Vice President
Director INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Donovan J. (Jerry) Paul Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Glen A. Payne Officer Senior Vice President, Secretary
& General Counsel
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
John R. Schroer, II Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Marie E. Aro Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Ingeborg S. Cosby Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Stacie Cowell Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Linda J. Gieger Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Mark D. Greenberg Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Brian B. Hayward Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Richard R. Hinderlie Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Stuart Holland Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Thomas M. Hurley Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Patricia F. Johnston Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Campbell C. Judge Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Steve King Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Thomas A. Kolbe Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Peter M. Lovell Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
James F. Lummanick Officer Vice President & Assistant
General Counsel
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Thomas A. Mantone, Jr. Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
George A. Matyas Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Corey M. McClintock Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Douglas J. McEldowney Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Frederick R. (Fritz) Meyer Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Stephen A. Moran Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Jeffrey G. Morris Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Laura M. Parsons Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Jon B. Pauley Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Pamela J. Piro Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Anthony R. Rogers Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Gary L. Rulh Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
James B. Sandidge Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Thomas H. Scanlan Officer Regional Vice President
INVESCO Funds Group, Inc.
12028 Edgepark Court
Potomac, MD 20854
- --------------------------------------------------------------------------------
John S. Segner Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Reagan A. Shopp Officer Regional Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Terri B. Smith Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Tane T. Tyler Officer Vice President & Assistant
General Counsel
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Thomas R. Wald Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Alan I. Watson Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Judy P. Wiese Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Michael D. Legoski Officer Assistant Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
William S. Mechling Officer Assistant Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Donald R. Paddack Officer Assistant Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Kent T. Schmeckpeper Officer Assistant Vice President
Account Relationship Manager
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
Jeraldine E. Kraus Officer Assistant Secretary
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------
ITEM 27. A) PRINCIPAL UNDERWRITERS
INVESCO Advantage Series Funds, Inc.
INVESCO Bond Funds, Inc.
INVESCO Combination Stock & Bond Funds, Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Sector Funds, Inc.
INVESCO Stock Funds, Inc.
INVESCO Treasurer's Series Funds, Inc.
INVESCO Variable Investment Funds, Inc.
B)
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter the Fund
- ------------------ ------------ -------------
Raymond R. Cunningham Senior Vice
7800 E. Union Avenue President
Denver, CO 80237
<PAGE>
William J. Galvin, Jr. Senior Vice Assistant
7800 E. Union Avenue President & Secretary
Denver, CO 80237 Asst. Secretary
Ronald L. Grooms Senior Vice Treasurer,
7800 E. Union Avenue President, Chief Fin'l
Denver, CO 80237 Treasurer, & Officer, and
Director Chief Acctg.Off.
Richard W. Healey Senior Vice
7800 E. Union Avenue President &
Denver, CO 80237 Director
Charles P. Mayer Director
7800 E. Union Avenue
Denver, CO 80237
Timothy J. Miller Director
7800 E. Union Avenue
Denver, CO 80237
Glen A. Payne Senior Vice Secretary
7800 E. Union Avenue President,
Denver, CO 80237 Secretary &
General Counsel
Pamela J. Piro Assistant Treasurer Assistant Treasurer
7800 E. Union Avenue
Denver, CO 80237
Judy P. Wiese Assistant Secretary Assistant Secretary
7800 E. Union Avenue
Denver, CO 80237
Mark H. Williamson Chairman of the Board, Chairman of the Board,
7800 E. Union Avenue President, & Chief President & CEO
Denver, CO 80237 Executive Officer
(c) Not applicable.
<PAGE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
Mark H. Williamson
7800 E. Union Avenue
Denver, CO 80237
ITEM 29. MANAGEMENT SERVICES
Not applicable.
ITEM 30. UNDERTAKINGS
Not applicable
<PAGE>
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Company has duly caused this initial registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Denver, County of Denver, and State of Colorado, on
the 2nd day of May, 2000.
Attest: INVESCO Advantage Series Funds, Inc.
/s/ Glen A. Payne /s/ Mark H. Williamson
- -------------------------------- ----------------------------------
Glen A. Payne, Secretary Mark H. Williamson, President
Pursuant to the requirements of the Securities Act of 1933, this registraton
statement has been signed below by the following persons in the capacities and
on the date indicated.
/s/ Mark H. Williamson /s/ Richard W. Healey
- ------------------------------- -----------------------------
Mark H. Williamson, President & Richard W. Healey, Director
Director (Chief Executive Officer)
/s/ Ronald L. Grooms /s/ Glen A. Payne
- -------------------------------- -----------------------------
Ronald L. Grooms, Treasurer Glen A. Payne, Director
(Chief Financial and Accounting
Officer)
<PAGE>
Exhibit Index
Page in
Exhibit Number Registration Statement
- --------------- ----------------------
a 95
b 103
j 117
ARTICLES OF INCORPORATION
OF
INVESCO ADVANTAGE SERIES FUNDS, INC.
THIS IS TO CERTIFY to the Maryland State Department of Assessments that
the undersigned, Mark H. Williamson, whose address is 7800 E. Union Avenue,
Suite 800, Denver, Colorado 80237, and being at least 18 years of age, does
hereby declare that he is an incorporator intending to form a corporation under
and by virtue of the general laws of the State of Maryland authorizing the
formation of corporations.
ARTICLE I
---------
NAME AND TERM
-------------
The name of the corporation is INVESCO Advantage Series Funds, Inc. (the
"Company"). The corporation shall have perpetual existence.
ARTICLE II
----------
POWERS AND PURPOSES
-------------------
The nature of the business and the objects and purposes to be transacted,
promoted and carried on by the Company are as follows:
1. To engage in the business of an incorporated investment company of
open-end management type and to engage in all legally permissible
activities and operations usual, customary, or necessary in connection
therewith.
2. In general, to engage in any other business permitted to corporations
by the laws of the State of Maryland and to have and exercise all
powers conferred upon or permitted to corporations by the Maryland
General Corporation Law and any other laws of the State of Maryland;
provided, however, that the Company shall be restricted from engaging
in any activities or taking any actions which would preclude its
compliance with applicable provisions of the Investment Company Act of
1940, as amended, applicable to open-end management type investment
companies or applicable rules promulgated thereunder.
ARTICLE III
-----------
CAPITALIZATION
--------------
SECTION 1. The aggregate number of shares of stock of all series that the
Company shall have the authority to issue is one billion (1,000,000,000) shares
of Common Stock, having a par value of one cent ($0.01) per share of all
authorized shares, having an aggregate par value of ten million dollars
($10,000,000.00). Such stock may be issued as full shares or as fractional
shares.
In the exercise of the powers granted to the board of directors pursuant to
Section 3 of this Article III, the board of directors designates one series of
shares of common stock of the Company, with two classes of shares of common
stock for the series, designated as follows:
<PAGE>
FUND NAME & CLASS ALLOCATED SHARES
----------------- ----------------
INVESCO Advantage Fund - Two hundred million shares (200,000,000)
Class A
INVESCO Advantage Fund - Two hundred million shares (200,000,000)
Class B
INVESCO Advantage Fund - Two hundred million shares (200,000,000)
Class C
Unless otherwise prohibited by law, so long as the Company is registered as
an open-end investment company under the Investment Company Act of 1940, as
amended, the total number of shares that the Company is authorized to issue may
be increased or decreased by the board of directors in accordance with the
applicable provisions of the Maryland General Corporation Law.
SECTION 2. No holder of stock of the Company shall be entitled as a matter
of right to purchase or subscribe for any shares of the capital stock of the
Company which it may issue or sell, whether out of the number of shares
authorized by these articles of incorporation, or out of any shares of the
capital stock of the Company acquired by it after the issue thereof.
SECTION 3. The Company is authorized to issue its stock in one or
moreseries or one or more classes of shares, and, subject to the requirements of
the Investment Company Act of 1940, as amended, particularly Section 18(f)
thereof and Rule 18f-2 thereunder, the different series and classes, if any,
shall be established and designated, and the variations in the relative
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption as between the different series or classes shall be fixed and
determined and may be classified and reclassified by the board of directors;
provided that the board of directors shall not classify or reclassify any of
such shares into any class or series of stock which is prior to any class or
series of stock then outstanding with respect to rights upon the liquidation,
dissolution or winding up of the affairs of, or upon any distribution of the
general assets of, the Company, except that there may be variations so fixed and
determined between different series or classes as to investment objective,
purchase price, right of redemption, special rights as to dividends and on
liquidation with respect to assets and income belonging to a particular series
or class, voting powers and conversion rights. All references to shares in these
articles of incorporation shall be deemed to be shares of any or all series and
classes of shares of the Company's capital stock as the context may require.
(a) The number of authorized shares allocated to each series or class and
the number of shares of each series or of each class that may be
issued shall be in such number as may be determined by the board of
directors. The directors may classify or reclassify any unissued
shares or any shares previously issued and reacquired of any series or
class into one or more series or one or more classes that may be
established and designated by the board of directors from time to
time. The directors may hold as treasury shares (of the same or some
other series or class), reissue for such consideration and on such
terms as they may determine, or cancel any shares of any series or any
class reacquired by the Company at their discretion from time to time.
(b) All consideration received by the Company for the issue or sale of
shares of a particular series or class, together with all assets in
which such consideration is invested or reinvested, all income,
earnings, profits and proceeds thereof, including any proceeds derived
from the sale, exchange or liquidation of such assets, and any funds
or payments derived from any reinvestment of such proceeds in whatever
form the same may be, shall irrevocably belong to that series or class
for all purposes, subject only to the rights of creditors of that
<PAGE>
series or class, and shall be so recorded upon the books of account of
the Company. In the event that there are any assets, income, earnings,
profits and proceeds thereof, funds, or payments which are not readily
identifiable as belonging to any particular series or class, the
directors shall allocate them among any one or more of the series or
classes established and designated from time to time in such manner
and on such basis as they, in their sole discretion, deem fair and
equitable. Each such allocation by the Company shall be conclusive and
binding upon the stockholders of all series or classes for all
purposes. The directors shall have full discretion, to the extent not
inconsistent with the Investment Company Act of 1940, as amended, and
the Maryland General Corporation Law to determine which items shall be
treated as income and which items shall be treated as capital; and
each such determination and allocation shall be conclusive and binding
upon the stockholders.
(c) The assets belonging to each particular class or series shall be
charged with the liabilities of the Company in respect to that class
or series and all expenses, costs, charges and reserves attributable
to that class or series, and any general liabilities, expenses, costs,
charges or reserves of the Company which are not readily identifiable
as belonging to any particular class or series shall be allocated and
charged by the directors to and among any one or more of the classes
or series established and designated from time to time in such manner
and on such basis as the directors in their sole discretion deem fair
and equitable. Each allocation of liabilities, expenses, costs,
charges and reserves by the directors shall be conclusive and binding
upon the stockholders of all series and classes for all purposes.
(d) Dividends and distributions on shares of a particular series or class
may be paid with such frequency as the directors may determine, which
may be daily or otherwise, pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the board of
directors may determine, to the holders of shares of that series or
class, from such of the income and capital gains, accrued or realized,
from the assets belonging to that series or class, as the directors
may determine, after providing for actual and accrued liabilities
belonging to that series or class. All dividends and distributions on
shares of a particular series or class shall be distributed pro rata
to the holders of that series or class in proportion to the number of
shares of that series or class held by such holders at the date and
time of record established for the payment of such dividends or
distributions except that in connection with any dividend or
distribution program or procedure, the board of directors may
determine that no dividend or distribution shall be payable on shares
as to which the stockholder's purchase order and/or payment have not
been received by the time or times established by the board of
directors under such program or procedure.
The Company intends to have each series that may be established to
represent interests of a separate investment portfolio qualify as a
"regulated investment company" under the Internal Revenue Code of
1986, or any successor comparable statute thereto, and regulations
promulgated thereunder. Inasmuch as the computation of net income and
gains for federal income tax purposes may vary from the computation
thereof on the books of the Company, the board of directors shall have
the power, in its sole discretion, to distribute in any fiscal year as
dividends, including dividends designated in whole or in part as
capital gains distributions, amounts sufficient, in the opinion of the
board of directors, to enable the respective series to qualify as
<PAGE>
regulated investment companies and to avoid liability of such series
for federal income tax in respect of that year. However, nothing in
the foregoing shall limit the authority of the board of directors to
make distributions greater than or less than the amount necessary to
qualify the series as regulated investment companies and to avoid
liability of such series for such tax.
(e) Dividends and distributions may be made in cash, property or
additional shares of the same or another class or series, or a
combination thereof, as determined by the board of directors or
pursuant to any program that the board of directors may have in effect
at the time for the election by each stockholder of the mode of the
making of such dividend or distribution to that stockholder. Any such
dividend or distribution paid in shares will be paid at the net asset
value thereof as defined in section (4) below.
(f) In the event of the liquidation or dissolution of the Company or of a
particular class or series, the stockholders of each class or series
that has been established and designated and is being liquidated shall
be entitled to receive, as a class or series, when and as declared by
the board of directors, the excess of the assets belonging to that
class or series over the liabilities belonging to that class or
series. The holders of shares of any particular class or series shall
not be entitled thereby to any distribution upon liquidation of any
other class or series. The assets so distributable to the stockholders
of any particular class or series shall be distributed among such
stockholders in proportion to the number of shares of that class or
series held by them and recorded on the books of the Company. The
liquidation of any particular class or series in which there are
shares then outstanding may be authorized by vote of a majority of the
board of directors then in office, subject to the approval of a
majority of the outstanding securities of that class or series, as
defined in the Investment Company Act of 1940, as amended, and without
the vote of the holders of any other class or series. The liquidation
or dissolution of a particular class or series may be accomplished, in
whole or in part, by the transfer of assets of such class or series to
another class or series or by the exchange of shares of such class or
series for the shares of another class or series.
(g) On each matter submitted to a vote of the stockholders, each holder of
a share shall be entitled to one vote for each share standing in his
name on the books of the Company, irrespective of the class or series
thereof, and all shares of all classes or series shall vote as a
single class or series ("single class voting"); provided, however that
(i) as to any matter with respect to which a separate vote of any
class or series is required by the Investment Company Act of 1940, as
amended, or by the Maryland General Corporation Law, such requirement
as to a separate vote by that class or series shall apply in lieu of
single class voting as described above; (ii) in the event that the
separate vote requirements referred to in (i) above apply with respect
to one or more but not all classes or series, then, subject to (iii)
below, the shares of all other classes or series shall vote as a
single class or series; and (iii) as to any matter which does not
affect the interest of a particular class or series, only the holders
of shares of the one or more affected classes shall be entitled to
vote. Holders of shares of the stock of the Company shall not be
entitled to exercise cumulative voting in the election of directors or
on any other matter.
<PAGE>
(h) The establishment and designation of any series or class of shares, in
addition to the initial class of shares which has been established in
section (1) above, shall be effective upon the adoption by a majority
of the then directors of a resolution setting forth such establishment
and designation and the relative rights and preferences of such series
or class, or as otherwise provided in such instrument and the filing
with the proper authority of the State of Maryland of Articles
Supplementary setting forth such establishment and designation and
relative rights and preferences.
SECTION 4. The Company shall, upon due presentation of a share or shares of
stock for redemption, redeem such share or shares of stock at a redemption price
prescribed by the board of directors in accordance with applicable laws and
regulations; provided that in no event shall such price be less than the
applicable net asset value per share of such class or series as determined in
accordance with the provisions of this section (4), less such redemption or
other charge as is determined by the board of directors. Subject to applicable
law, the Company may redeem shares, not offered by a stockholder for redemption,
held by any stockholder whose shares of a class or series had a value less than
such minimum amount as may be fixed by the board of directors from time to time
or prescribed by applicable law, other than as a result of a decline in value of
such shares because of market action; provided that before the Company redeems
such shares it must notify the shareholder by first-class mail that the value of
his shares is less than the required minimum value and allow him 60 days to make
an additional investment in an amount which will increase the value of his
account to the required minimum value. Unless otherwise required by applicable
law, the price to be paid for shares redeemed pursuant to the preceding sentence
shall be the aggregate net asset value of the shares at the close of business on
the date of redemption, and the shareholder shall have no right to object to the
redemption of his shares. The Company shall pay redemption prices in cash,
except that the Company may at its sole option pay redemption prices in kind in
such manner as is consistent with and not in contravention of Section 18(f) of
the Investment Company Act of 1940, as amended, and any Rules or Regulations
thereunder. Redemption prices shall be paid exclusively out of the assets of the
class or series whose shares are being redeemed.
Notwithstanding the foregoing, the Company may postpone payment of
redemption proceeds and may suspend the right of the holders of shares of any
class or series to require the Company to redeem shares of that class or series
during any period or at any time when and to the extent permissible under the
Investment Company Act of 1940, as amended, or any rule or order thereunder.
The net asset value of a share of any class or series of common stock of
the Company shall be determined in accordance with applicable laws and
regulations or under the supervision of such persons and at such time or times
as shall from time to time be prescribed by the board of directors.
SECTION 5. The Company may issue, sell, redeem, repurchase and otherwise
deal in and with shares of its stock in fractional denominations and such
fractional denominations shall, for all purposes, be shares having
proportionately to the respective fractions represented thereby all the rights
of whole shares, including without limitation, the right to vote, the right to
receive dividends and distributions, and the right to participate upon
liquidation of the Company; provided that the issue of shares in fractional
denominations shall be limited to such transactions and be made upon such terms
as may be fixed by or under authority of the bylaws.
<PAGE>
SECTION 6. The Company shall not be obligated to issue certificates
representing shares of any class or series in accordance with procedures
established in the bylaws or by the board of directors.
ARTICLE IV
----------
PREEMPTIVE RIGHTS
-----------------
No stockholder of the Company of any class or series, whether now or
hereafter authorized, shall have any preemptive or preferential or other right
of purchase of or subscription to any share of any class or series of stock, or
shares convertible into, exchangeable for or evidencing the right to purchase
stock of any class or series whatsoever, whether or not the stock in question be
of the same class or series as may be held by such stockholder, and whether now
or hereafter authorized and whether issued for cash, property, services or
otherwise, other than such, if any, as the board of directors in its discretion
may from time to time fix.
ARTICLE V
---------
PRINCIPAL OFFICE AND REGISTERED AGENT
-------------------------------------
The address of the principal office of the Company in the State of Maryland
is 300 East Lombard Street, Baltimore, Maryland 21202. The resident agent of the
Company is The Corporation Trust Incorporated, whose address is 300 East Lombard
Street, Baltimore, Maryland 21202. Said resident agent is a corporation of the
State of Maryland. The Company owns no interest in land located in the State of
Maryland.
ARTICLE VI
----------
DIRECTORS
---------
SECTION 1. The initial board of directors shall consist of three members
who need not be residents of the State of Maryland or stockholders of the
Company.
SECTION 2. The names of the persons who shall act as directors until the
first meeting of stockholders or until their successors are duly elected and
qualified are as follows:
Mark Hurst Williamson 7800 East Union Avenue, Denver, Colorado
Glen Alan Payne 7800 East Union Avenue, Denver, Colorado
Richard William Healey 7800 East Union Avenue, Denver, Colorado
SECTION 3. The number of directors may be increased or decreased in
accordance with the bylaws, provided that the number shall not be reduced to
less than three.
<PAGE>
SECTION 4. A majority of the directors shall constitute a quorum for the
transaction of business, unless the bylaws shall provide that a different number
shall constitute a quorum; provided, however, that in no case shall a quorum be
less than one-third (1/3) of the total number of directors or less than two (2)
directors.
SECTION 5. Except for the initial board of directors designated in Section
2 of this Article VI, no person shall serve as a director, unless elected by the
stockholders at an annual meeting or a special meeting called for such purpose;
except that vacancies occurring between such meetings may be filled by the
directors in accordance with the bylaws, and subject to such limitations as may
be set forth by applicable laws and regulations.
SECTION 6. The board of directors of the Company is hereby empowered to
authorize the issuance from time to time of shares of stock, whether of a class
or series now or hereafter authorized, for such consideration as it deems
advisable, subject to such limitations as may be set forth herein, in the
bylaws, in the Maryland General Corporation Law, and in the Investment Company
Act of 1940, as amended.
SECTION 7. The board of directors of the Company may make, alter or repeal
from time to time any of the bylaws of the Company except any particular bylaw
that is specified as not subject to alternation or repeal by the board of
directors.
ARTICLE VII
-----------
LIABILITY AND INDEMNIFICATION
-----------------------------
SECTION 1. Directors and officers of the Company, including persons who
formerly have served in such capacities, shall have limitations on, and/or
immunity from, liability of such directors and officers to the fullest extent
permitted by the Maryland General Corporation Law, subject only to such
restrictions as may be required by the Investment Company Act of 1940, as
amended, and the rules thereunder. Such limitations and/or immunity will apply
to acts or omissions occurring at the time an individual serves as a director or
officer of the Company, whether such person is a director or officer of the
Company at the time of any proceeding in which liability is asserted against the
director or officer. No amendment to these Articles of Incorporation or repeal
of any of its provisions shall limit or eliminate the benefits provided to
directors and officers under this provision with respect to any act or omission
which occurred prior to such amendment or repeal.
SECTION 2. The Company shall indemnify and advance expenses to its
directors and officers, including persons who formerly have served in such
capacities, to the fullest extent permitted to directors by the Maryland General
Corporation Law and the bylaws of the Company, as such Law and bylaws now or in
the future may be in effect, subject only to such limitations as may be required
by the Investment Company Act of 1940, as amended, and the rules thereunder.
ARTICLE VIII
------------
SPECIAL VOTING AND MEETING PROVISIONS
-------------------------------------
SECTION 1. Notwithstanding any provision of Maryland law requiring a
greater proportion than a majority of the votes of all classes or of any class
of stock entitled to be cast to take or authorize any action, the Company may
take or authorize any such action upon the concurrence of a majority of the
aggregate number of the votes entitled to be cast thereon.
<PAGE>
SECTION 2. The presence in person or by proxy of the holders of one-third
of the shares of stock of the Company entitled to vote without regard to class
shall constitute a quorum at any meeting of stockholders, except with respect to
any matter which by law requires the approval of one or more classes of stock,
in which case the presence in person or by proxy of the holders of one-third of
the shares of stock of each class entitled to vote on the matter shall
constitute a quorum.
SECTION 3. So long as the Company is registered pursuant to the Investment
Company Act of 1940, as amended, the Company will not be required to hold annual
shareholder meetings in years in which the election of directors is not required
to be acted upon under the Investment Company Act of 1940, as amended.
ARTICLE IX
----------
AMENDMENT
---------
The Company reserves the right from time to time to make any amendment of
its articles of incorporation now or hereafter authorized by law, including any
amendment which alters the contract rights, as expressly set forth in such
articles, of any outstanding stock by classification, reclassification or
otherwise, but no such amendment which changes the terms or rights of any of its
outstanding shares shall be validunless such amendment shall have been
authorized by not less than a majority of the aggregate number of votes entitled
to be cast thereon, by a vote at a meeting or in writing with or without a
meeting.
IN WITNESS WHEREOF, I have signed these Articles of Incorporation on this
19th day of April, 2000.
INVESCO ADVANTAGE SERIES FUNDS, INC.
By: /s/ Mark H. Williamson
----------------------
Mark H. Williamson
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
I, Ruth A. Christensen, a Notary Public in the City and County of Denver,
State of Colorado, do hereby certify that Mark H. Williamson, personally known
to me to be the person whose name is subscribed to the foregoing Articles of
Incorporation, appeared before me this date in person and acknowledged that he
signed, sealed and delivered said instrument as his full and voluntary act and
deed for the uses and purposes therein set forth.
Witness my hand and official seal this 19th day of April, 2000.
/s/ Ruth A. Christensen
-----------------------
Notary Public
My commission expires March 16, 2002.
BYLAWS
OF
INVESCO ADVANTAGE SERIES FUNDS, INC.
AS OF APRIL 24, 2000
ARTICLE I.
----------
SHAREHOLDERS
------------
SECTION 1. ANNUAL MEETING. Unless otherwise determined by the board of
directors or required by applicable law, no annual meeting of
shareholders shall be required to be held in any year in which
the election of directors is not required under the Investment
Company Act of 1940. If INVESCO Advantage Series Funds, Inc. (the
"Corporation") is required to hold a meeting of shareholders to
elect directors, the meeting shall be designated as the annual
meeting of shareholders for that year, and shall be held no later
than 120 days after occurrence of the event requiring the meeting
at a place within or without the State of Maryland.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders entitled
to vote shall be called upon the request in writing of the
president or, in his absence, a vice president, or by a vote of a
majority of the board of directors, or upon the request in
writing of shareholders of the Corporation representing not less
than ten percent (10%) of the votes entitled to be cast at the
meeting.
SECTION 3. PLACE OF MEETINGS. Each annual and any special meeting of the
shareholders shall be held at the principal office of the
Corporation in Denver, Colorado, or at such alternate site as may
be determined by the board of directors.
SECTION 4. NOTICES. Notices of every meeting, annual or special, shall
specify the place, day and hour of the meeting and shall be
mailed not less than ten (10) days nor more than ninety (90) days
before such meeting. Such notice shall be given by the Secretary
of the Corporation to each shareholder entitled to notice of and
entitled to vote at the meeting. In the event that a special
meeting is called by the shareholders entitled to vote, the
Secretary of the Corporation shall inform the shareholders who
make the request of the reasonably estimated cost of preparing
and mailing a notice of the meeting, and upon payment of these
costs to the Corporation, shall notify each shareholder entitled
to notice of the meeting. Notice of every special meeting shall
indicate briefly its purpose. Notice shall be deemed delivered
where it is personally delivered to the individual, left at the
individual's usual place of business, or mailed to the individual
at the individual's address as it appears on the records of the
Corporation.
SECTION 5. QUORUM. At every meeting of the shareholders, the presence in
person or by proxy of the holders of one-third (1/3) of all of
the shares of stock of the Corporation issued and outstanding and
entitled to vote without regard to class shall constitute a
quorum, except with respect to any matter which by law requires
the separate approval of one or more classes of stock, in which
case the presence in person or by proxy of the holders of
one-third (1/3) of the shares of stock of each class entitled to
vote on the matter shall constitute a quorum for that class;
provided, however, that at every meeting of the shareholders, the
representation of a larger number of shareholders shall
constitute a quorum if required by the Investment Company Act of
1940, as amended, other applicable law, or by the Articles of
Incorporation.
<PAGE>
SECTION 6. VOTING. At every meeting of the shareholders at which a quorum is
present, each shareholder entitled to vote shall be entitled to
vote in person, or by proxy appointed by instrument in writing
subscribed by such shareholder, or his duly authorized attorney,
and he shall have one (1) vote for each share of stock standing
registered in his name on each matter submitted at the meeting on
which such share is entitled to vote and for each director to be
elected. Fractional shares shall be entitled to proportionate
fractional votes. Every proxy shall be dated and no proxy shall
be valid after eleven (11) months from its date unless otherwise
provided in the proxy. There shall be no cumulative voting in the
election of directors. Except as otherwise provided by law, by
the charter of the Corporation, or by these bylaws, at each
meeting of stockholders at which a quorum is present, all matters
shall be decided by a majority of the votes cast by the
stockholders present in person or represented by proxy and
entitled to vote with respect to any such matter.
SECTION 7. QUALIFICATION OF VOTERS. At every meeting of shareholders, unless
the voting is conducted by inspectors, the proxies and ballots
shall be received, and all questions with respect to the
qualification of voters and the validity of proxies and the
acceptance or rejection of votes shall be decided by the chairman
of the meeting. If demanded by shareholders present in person or
by proxy entitled to cast twenty-five per cent (25%) in number of
votes, or if ordered by the chairman of the meeting, the vote
upon any election or question shall be taken by ballot and, upon
such demand or order, the voting shall be conducted by two (2)
inspectors appointed by the chairman, in which event the proxies
and ballots shall be received and all questions with respect to
the qualification of votes and the validity of proxies and the
acceptance or rejection of votes shall be decided by such
inspectors. Unless so demanded or ordered, no vote need be by
ballot and the voting need not be conducted by inspectors.
SECTION 8. WAIVER OF NOTICE. A waiver of notice of any meeting of
shareholders signed by any shareholder entitled to such notice
filed with the records of the meeting, whether before or after
the holding thereof or actual attendance at the meeting in person
or by proxy, shall be deemed equivalent to the giving of notice
to such shareholder.
SECTION 9. ADJOURNMENT. A meeting of shareholders convened on the date for
which it was called may be adjourned from time to time without
further notice to a date not more than 120 days after the
original record date of the meeting.
SECTION 10. ACTION BY SHAREHOLDERS WITHOUT MEETING. Except as otherwise
provided by law, the provisions of these bylaws relating to
notices and meetings to the contrary notwithstanding, any action
required or permitted to be taken at any meeting of shareholders
may be taken without a meeting if a consent in writing setting
forth the action shall be signed by all the shareholders entitled
to vote upon the action and such consent shall be filed with the
records of the Corporation.
<PAGE>
ARTICLE II.
-----------
BOARD OF DIRECTORS
------------------
SECTION 1. POWERS. The business and property of the Corporation shall be
conducted and managed by its board of directors, which may
exercise all of the powers of the Corporation, except such as are
by statute, by the charter or by the bylaws, conferred upon or
reserved to the shareholders. The board of directors shall keep
full and complete records of its transactions.
SECTION 2. NUMBER. By vote of a majority of the entire board of directors,
the number of directors may be increased or decreased from time
to time; provided that, in no event, may the number be decreased
to less than three (3).
SECTION 3. ELECTION. The members of the board of directors shall be elected
by the shareholders by plurality vote at the annual meeting, or
at any special meeting called for such purpose. Each director
shall hold office until his successor shall have been duly chosen
and qualified, or until he shall have resigned or shall have been
removed in the manner provided by law. Any vacancy, including one
created by an increase in the number of directors on the board
(except where such vacancy is created by removal by the
shareholders), may be filled by the vote of a majority of the
remaining directors, although such majority is less than a
quorum; provided, however, that immediately after filling any
vacancy by such action of the board of directors, at least
two-thirds (2/3) of the directors then holding office shall have
been elected by the shareholders at an annual or special meeting.
SECTION 4. REGULAR MEETINGS. The board of directors shall schedule an Annual
Meeting at such place and time as they may designate for the
purpose of organization, the election of officers, and the
transaction of other business. Other regular meetings may be held
as scheduled by a majority of the directors.
SECTION 5. SPECIAL MEETINGS. Special meetings of the board of directors may
be called at any time by the president or by a majority of the
directors or by a majority of the executive committee.
SECTION 6. NOTICE OF MEETINGS. Notice of the place, day and hour of every
special meeting shall be given to each director at least two (2)
days before the meeting, by written announcement, telephone,
telegraph and/or mail addressed to him at his post office
address, according to the records of the Corporation. Unless
required by resolution of the board of directors, no notice of
any meeting of the board of directors need state the business to
be transacted thereat. No notice of any meeting of the board of
directors need be given to any director who attends, or to any
director who, in writing executed and filed with the records of
the meeting either before or after the holding thereof, waives
such notice. Any meeting of the board of directors may adjourn
from time to time to reconvene at the same or some other place,
and no notice need be given of any such adjourned meeting other
than by announcement.
<PAGE>
SECTION 7. QUORUM. At all meetings of the board of directors, one-third
(1/3) of the total number of directors or not less than two (2)
directors shall constitute a quorum for the transaction of
business. In the absence of a quorum, the directors present by a
majority vote and without notice other than by announcement may
adjourn the meeting from time to time until a quorum shall be
present. At any such adjourned meeting, any business may be
transacted which might have been transacted at the meeting as
originally notified.
SECTION 8. COMPENSATION OF DIRECTORS. Directors shall be entitled to receive
such compensation from the Corporation for their services as may
from time to time be voted by the board of directors. All
directors shall be reimbursed for their reasonable expenses of
attendance, if any, at the board and committee meetings. Any
director of the Corporation may also serve the Corporation in any
other capacity and receive compensation therefore.
SECTION 9. VACANCIES. Any vacancy occurring in the board of directors may be
filled by the affirmative vote of a majority of the remaining
directors though less than a quorum of the board of directors. A
director elected to fill a vacancy shall be elected for the
non-expired term of his predecessor in office. Any directorship
to be filled by reason of an increase in the number of directors
may be filled by election by the board of directors for a term of
office continuing only until the next election of directors by
the shareholders.
SECTION 10. RESIGNATION AND REMOVAL OF DIRECTORS. Any director or member of
any committee may resign at any time. Such resignation shall be
made in writing and shall take effect at the time specified
therein. If no time is specified, it shall take effect from the
time of its receipt by the Secretary, who shall record such
resignation, noting the day and hour of its reception. The
acceptance of a resignation shall not be necessary to make it
effective. Notwithstanding anything to the contrary in Article I,
Section 2 hereof, a meeting for removing a director shall be
called in accordance with the procedures specified in Section
16(c) of the Investment Company Act of 1940, and the shareholder
communications provisions of said Section 16(c) shall be
following by the Corporation. At any meeting of shareholders,
duly called and at which a quorum is present, the shareholders
may, by affirmative vote of the holders of a majority of the
votes entitled to be cast thereon, remove any director or
directors from office and may elect a successor or successors to
fill any resulting vacancies to hold office until the next annual
meeting of shareholders or until a successor or successors are
elected and qualify.
SECTION 11. TELEPHONE MEETINGS. Any member or members of the board of
directors or of any committee designated by the board of
directors, may participate in a meeting of the board, or any such
committee, as the case may be, by means of a conference telephone
or similar communications equipment if all persons participating
in the meeting can hear each other at the same time.
Participation in a meeting by these means constitutes presence in
person at the meeting. Section 11 of these bylaws shall not be
applicable to meetings held for the purpose of voting in respect
of approval of contracts or agreements whereby a person
undertakes to serve or act as investment adviser of, or principal
underwriter for, the Corporation or in respect to other matters
as to which the Investment Company Act of 1940 or the rules there
under require that votes be cast in person.
<PAGE>
SECTION 12. ACTION BY DIRECTORS WITHOUT MEETING. The provisions of these
bylaws covering notices and meetings to the contrary
notwithstanding, and except as required by law (including Section
15 of the Investment Company Act of 1940), any action required or
permitted to be taken at any meeting of the board of directors
may be taken without a meeting if a consent in writing setting
forth the action shall be signed by all of the directors entitled
to vote upon the action and such written consent is filed with
the minutes of proceedings of the board of directors.
ARTICLE III.
------------
COMMITTEES
----------
SECTION 1. EXECUTIVE COMMITTEE. The board of directors, by resolution
adopted by a majority of the whole board of directors, may
provide for an executive committee of three (3) or more
directors. If provision be made for an executive committee, the
members thereof shall be elected by the board of directors to
serve during the pleasure of the board of directors. Unless
otherwise provided by resolution of the board of directors, the
president shall be a member and the chairman of the executive
committee shall preside at all meetings thereof. During the
intervals between the meetings of the board of directors, the
executive committee shall possess and may exercise all of the
powers of the board of directors in the management of the
business and affairs of the Corporation conferred by the bylaws
or otherwise, to the extent authorized by the resolution
providing for such executive committee or by subsequent
resolution adopted by a majority of the whole board of directors,
in all cases in which specific directions shall not have been
given by the board of directors. Notwithstanding the foregoing,
the executive committee shall not have the power to: (i) declare
dividends or distributions on stock; (ii) issue stock other than
as provided by the Maryland General Corporation Law; (iii)
recommend to the shareholders any action which requires
shareholder approval; (iv) amend these bylaws; or (v) approve any
merger or share exchange which does not require shareholder
approval. The executive committee shall maintain written records
of its transactions. All action by the executive committee shall
be reported to the board of directors at its meeting next
succeeding such action, and shall be subject to ratification,
with or without revision or alteration, by such vote of the board
of directors as would have been required under Article II,
Section 7, hereof, had such action been taken by the board of
directors. Vacancies in the executive committee shall be filled
by the board of directors.
SECTION 2. MEETINGS OF THE EXECUTIVE COMMITTEE. The executive committee
shall fix its own rules of procedure and shall meet as provided
by such rules or by resolution of the board of directors, and it
shall also meet at the call of the chairman or of any two (2)
members of the committee. A majority of the executive committee
shall constitute a quorum. Except in cases in which it is
otherwise provided by resolution of the board of directors, the
vote of a majority of such quorum at a duly constituted meeting
shall be sufficient to elect and to pass any measure, subject to
ratification by the board of directors as provided in Section 1
of this Article III.
<PAGE>
SECTION 3. OTHER COMMITTEES. The board of directors may by resolution
provide for such other standing or special committees as it deems
desirable, and discontinue the same at its pleasure. Each such
committee shall have such powers and perform such duties as may
be assigned to it by the board of directors.
SECTION 4. COMMITTEE ACTION WITHOUT MEETING. The provisions of these bylaws
covering notices and meetings to the contrary notwithstanding,
and except as required by law, any action required or permitted
to be taken at any meeting of any committee of the board of
directors appointed pursuant to these bylaws may be taken without
a meeting if a consent in writing setting forth the action shall
be signed by all members of the committee entitled to vote upon
the action, and such written consent is filed with the records of
the proceedings of the committee.
ARTICLE IV.
-----------
OFFICERS
--------
SECTION 1. NUMBERS; QUALIFICATIONS; TERM OF OFFICE; VACANCIES. The board of
directors may select one of their number as chairman of the board
and may select one of their number as vice chairman of the board
(neither of which positions shall be considered to be the
designation of a position as an officer of the Corporation), and
shall choose as officers a president from among the directors and
a treasurer and a secretary who need not be directors. The board
of directors may also choose one or more vice presidents, one or
more assistant secretaries and one or more assistant treasurers,
none of whom need be a director. Any two or more of such offices,
except those of president and vice president, may be held by the
same person, but no officer shall execute, acknowledge or verify
any instrument in more than one capacity if such instrument is
required by law or by the Certificate of Incorporation or by
these bylaws or by resolution of the board of directors to be
executed, acknowledged or verified by any two or more officers.
Each such officer shall hold office until the first meeting of
the board of directors after the annual meeting of the
shareholders next following his election or, if no such annual
meeting of the shareholders is held, until the annual meeting of
the board of directors in the year following his election, and,
until his successor is chosen and qualified or until he shall
have resigned or died, or until he shall have been removed as
hereinafter provided in Section 3 of this Article IV. Any vacancy
in any of the above offices may be filled by the board of
directors at any regular or special meeting. All officers and
agents of the Corporation, as between themselves and the
Corporation, shall have such authority and perform such duties in
the management of the Corporation as may be provided in or
pursuant to these bylaws, or, to the extent not so provided, as
may be prescribed by the board of directors; provided, that no
rights of any third party shall be affected or impaired by any
such bylaws or resolution of the board unless the third party has
knowledge thereof.
SECTION 2. SUBORDINATE OFFICERS. The board of directors, or any officer
thereunto authorized by it, may appoint from time to time such
other officers and agents for such terms of office and with such
powers and duties as may be prescribed by the board of directors
or the officer making such appointment.
<PAGE>
SECTION 3. REMOVAL. Any officer or agent may be removed by the board of
directors whenever, in its judgment, the best interests of the
Corporation will be served thereby, but such removal shall be
without prejudice to the contractual rights, if any, of the
person so removed.
SECTION 4. CHAIRMAN OF THE BOARD. The chairman of the board, if one shall be
elected, shall preside at all meetings of the board of directors,
and shall appoint all committees except such as are required by
statute, these bylaws or a resolution of the board of directors
or of the executive committee to be otherwise appointed, and
shall have other such duties as may be assigned to him from time
to time by the board of directors. In recognition of notable and
distinguished services to the Corporation, the board of directors
may designate one of its members as honorary chairman, who shall
have such duties as the board may, from time to time, assign him
by appropriate resolution, excluding, however, any authority or
duty vested by law or these bylaws in any other officer.
SECTION 5. VICE CHAIRMAN OF THE BOARD. The vice chairman of the board, if
one shal be elected, shall preside at all meetings of the board
of directors at which the chairman of the board is not present,
shall call at his discretion and shall preside at meetings of
those directors of the Corporation who are not affiliated with
the Corporation's investment adviser, distributor, or affiliates
thereof, and shall perform such other duties as may be assigned
to the vice chairman from time to time by the board of directors.
SECTION 6. PRESIDENT. The president shall preside at all meetings of the
shareholders and, in the absence of the chairman and the vice
chairman of the board or if a chairman and vice chairman of the
board are not elected, at all meetings of the board of directors.
Unless otherwise provided by the board of directors, he shall
have direct control of and any authority over the business and
affairs and over the officers of the Corporation, and shall
preside at all meetings of the executive committee. The president
shall also perform all such other duties as are incident to his
office and as may be assigned to him from time to time by the
board of directors.
SECTION 7. VICE PRESIDENTS. The vice president or vice presidents, at the
request of the president or in his absence or inability to act,
shall perform the duties and exercise the functions of the
president in such manner as may be directed by the president, the
board of directors or the executive committee. The vice president
or vice presidents shall have such other powers and perform all
such other duties as may be assigned to them by the board of
directors, the executive committee, or the president.
SECTION 8. SECRETARY. The secretary shall see that all notices are duly
given in accordance with these bylaws; he shall keep the minutes
of all meetings of the shareholders and, if directed to do so by
the chairman of the meeting, of meetings of the board of
directors and of the executive committee at which he shall be
present; he shall have charge of the books and records and the
corporate seal or seals of the Corporation; he shall see that the
corporate seal is affixed to all documents, the execution of
which under the seal of the Corporation is duly authorized and is
necessary; and he shall make such reports and perform all such
other duties as are incident to his office and as may be assigned
to him from time to time by the board of directors or by the
president.
<PAGE>
SECTION 9. TREASURER. The treasurer shall be the chief financial officer of
the Corporation, and as such shall have supervision of the
custody of all funds, securities and valuable documents of the
Corporation, subject to such arrangements as may be authorized or
approved by the board of directors with respect to the custody of
assets of the Corporation; shall receive, or cause to be
received, and give, or cause to be given, receipts for all funds,
securities or valuable documents paid or delivered to, or for the
account of, the Corporation, and cause such funds, securities or
valuable documents to be deposited for the account of the
Corporation with such banks or trust companies as shall be
designated by the board of directors; shall pay or cause to be
paid out of the funds of the Corporation all just debts of the
Corporation upon their maturity; shall maintain, or cause to be
maintained, accurate records of all receipts, disbursements,
assets, liabilities, and transactions of the Corporation; shall
see that adequate audits thereof are regularly made; shall, when
required by the board of directors, render accurate statements of
the condition of the Corporation; and shall perform all such
other duties as are incident to his office and as may be assigned
to him by the board of directors or by the president.
SECTION 10. ASSISTANT SECRETARIES, ASSISTANT TREASURERS. The assistant
secretaries and assistant treasurers shall have such duties as
from time to time may be assigned to them by the board of
directors, or by the president.
SECTION 11. COMPENSATION. The board of directors shall have the power to fix
the compensation of all officers and agents of the Corporation,
but may delegate to any officer or committee the power of
determining the amount of salary to be paid to any officer or
agent of the Corporation other than the chairman of the board,
the president, the vice presidents, the secretary and the
treasurer.
SECTION 12. CONTRACTS. Except as otherwise provided by law or by the charter,
no contract or transaction between the Corporation and any
partnership or another corporation, and no act of the
Corporation, shall in any way be affected or invalidated by the
fact that any officer or director of the Corporation has a
pecuniary investment or otherwise interest therein or is a
member, officer or director of such other partnership or
corporation if such interest shall be known to the board of
directors of the Corporation. Specifically, but without
limitation of the foregoing, the Corporation may enter into one
or more contracts appointing INVESCO Funds Group, Inc.
("INVESCO") investment adviser of the Corporation, and may
otherwise do business with INVESCO, notwithstanding the fact that
one or more of the directors of the Corporation and some or all
of its officers are, have been or may become directors, officers,
members, employees, or shareholders of INVESCO and may deal
freely with each other, and neither such contract appointing
INVESCO investment adviser to the Corporation nor any other
contract or transaction between the Corporation and INVESCO shall
be invalidated or in any way affected thereby, nor shall any
director or officer of the Corporation by reason thereof be
liable to the Corporation or to any shareholder or creditor of
the Corporation or to any other person for any loss incurred
under or by reason of any such contract or transaction. For
purposes of this paragraph, any reference to INVESCO Funds Group,
Inc. shall be deemed to include said Company and any parent,
subsidiary or affiliate of said Company and any successor (by
merger, consolidation or otherwise) to said Company or any such
parent, subsidiary or affiliate.
<PAGE>
SECTION 13. DELEGATION OF DUTIES. Whenever an officer is absent or disabled,
or whenever for any reason the board of directors may deem it
desirable, the board may delegate the powers and duties of an
officer to any other officer or officers or to any director or
directors.
ARTICLE V.
----------
CAPITAL STOCK
-------------
SECTION 1. ISSUANCE OF STOCK. The Corporation shall not issue its shares of
capital stock except as approved by the board of directors. Upon
the sale of each share of its common stock, except as otherwise
permitted by applicable laws and regulations, the Corporation
shall receive in cash or in securities valued as provided in
Article VIII of these bylaws, not less than the current net asset
value thereof, exclusive of any distributing commission or
discount, and in no event less than the par value thereof.
SECTION 2. CERTIFICATES. Certificates for the Corporation's classes of
common stock shall be issued only upon the specific request of a
shareholder. If certificates are requested, they shall be issued
in such a form as may be approved by the board of directors, they
shall be respectively numbered serially for each class of shares,
or series thereof, as they are issued, and shall be signed by, or
bear a facsimile of the signatures of, the president or a vice
president, and shall also be signed by, or bear a facsimile of
the signature of some other person who is one of the following:
the treasurer, an assistant treasurer, the secretary or an
assistant secretary; and shall be sealed with, or bear a
facsimile of, the seal of the Corporation. In case any officer of
the Corporation whose signature or facsimile signature appears on
such certificates shall cease to be such officer, whether because
of death, resignation or otherwise, the certificates may
nevertheless be issued and delivered as though such person had
not ceased to be an officer.
SECTION 3. TRANSFERS. Subject to the Maryland General Corporation Law, the
board of directors shall have power and authority to make all
such rules and regulations as it may deem expedient concerning
the issue, transfer and registration of certificates of stock;
and may appoint transfer agents and registrars thereof. The
duties of transfer agent and registrar may be combined.
SECTION 4. STOCK LEDGERS. Original or duplicate stock ledgers, containing
the names and addresses of the shareholders of the Corporation
and the number of shares of each class held by them respectively,
shall be kept at an office or agency of the Corporation in such
city or town as may be designated by the board of directors.
SECTION 5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the
purpose of determining shareholders entitled to notice of or to
vote at any meeting of shareholders or any adjournment thereof,
or shareholders entitled to receive payment of any dividend, or
in order to make a determination of shareholders for any other
purpose, the board of directors of the Corporation may provide
that the share transfer books shall be closed for a stated period
but not to exceed, in any case, twenty (20) days. If the share
transfer books shall be closed for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least ten (10)
days immediately preceding such meeting. In lieu of closing the
<PAGE>
share transfer books, the board of directors may fix in advance a
date as the record date for any such determination of
shareholders, such date in any case to be not more than ninety
(90) days and, in case of a meeting of shareholders, not less
than ten (10) days prior to the date on which the particular
action, requiring such determination of shareholders, is to be
taken. If the share transfer books are not closed and no record
date is fixed for the determination of shareholders entitled to
notice of or to vote at a meeting of shareholders, the later of
the close of business on the date on which notice of the meeting
is mailed or the thirtieth (30TH) day before the meeting shall be
the record date for determining shareholders entitled to notice
of or to vote at a meeting of shareholders. The record date for
determining shareholders entitled to receive payment of a
dividend or an allotment of any rights shall be the close of
business on the day on which the resolution of the board of
directors declaring such dividend or allotment of rights is
adopted. But the payment or allotment may not be made more than
60 days after the date on which the resolution is adopted. When a
determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof.
SECTION 6. NEW CERTIFICATES. In case any certificate of stock is lost,
stolen, mutilated or destroyed, the board of directors may
authorize the issue of a new certificate in place thereof upon
such terms and conditions as it may deem advisable; or the board
of directors may delegate such power to any officer or officers
of the Corporation; but the board of directors or such officer or
officers, in their discretion, may refuse to issue such new
certificate, save upon the order of some court having
jurisdiction in the premises.
SECTION 7. REGISTERED OWNERS OF STOCK. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books
as the owner of shares of stock to receive dividends, and to vote
as such owner, and to hold liable for calls and assessments a
person registered on its books as the owner of shares of stock,
and shall not be bound to recognize any equitable or other claim
to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of Maryland.
SECTION 8. FRACTIONAL DENOMINATIONS. Subject to any applicable provisions of
law and the charter of the Corporation, the Corporation may issue
shares of its capital stock in fractional denominations, provided
that the transactions in which and the terms and conditions upon
which shares in fractional denominations may be issued from time
to time be limited or determined by or under the authority of the
board of directors.
ARTICLE VI.
-----------
FINANCES
--------
SECTION 1. CHECKS, DRAFTS, ETC. All instruments, documents and other papers
shall be executed in the name and on behalf of the Corporation,
and all drafts, checks, notes and other obligations for the
payment of money by the Corporation shall, unless otherwise
provided by resolution of the board of directors, be signed by
the president or vice president and countersigned by the
secretary or treasurer.
<PAGE>
SECTION 2. ANNUAL REPORTS. A statement of the affairs of the Corporation
shall be submitted at the annual meeting of the shareholders and,
within twenty (20) days after the meeting, shall be placed on
file at the Corporation's principal office. If the Corporation is
not required to hold an annual meeting of shareholders, the
Corporation's statement of affairs shall be placed on file at the
Corporation's principal office within one hundred and twenty
(120) days after the end of its fiscal year. Such statement shall
be prepared by such executive officer of the Corporation as may
be designated by resolution of the board of directors. If no
other executive officer is so designated, it shall be the duty of
the president to prepare such statement.
SECTION 3. FISCAL YEAR. The fiscal year of the Corporation shall begin on
the 1st day of September in each year and end on the 31st day of
August of the following.
SECTION 4. DIVIDENDS AND DISTRIBUTIONS. Subject to any applicable provisions
of law and the charter of the Corporation, dividends and
distributions upon the common stock of the Corporation may be
declared at such intervals as the board of directors may
determine, in cash, in securities or other property, or in shares
of stock of the Corporation, from any sources permitted by law,
all as the board of directors shall from time to time determine.
SECTION 5. LOCATION OF BOOKS AND RECORDS. The books and records of the
Corporation may be kept outside the State of Maryland at the
principal office of the Corporation or at such place or places as
the board of directors may from time to time determine, except as
otherwise required by law.
ARTICLE VII.
------------
REDEMPTION OF STOCK
-------------------
The registered owner of the outstanding stock of the Corporation shall have the
right to require the Corporation to redeem his shares at the asset value
thereof, as hereinafter defined in Article VIII of these bylaws, upon delivery
to the Corporation of any certificate, or certificates, properly endorsed, which
have been issued as evidence of ownership of such stock, and a written request
for redemption in a form satisfactory to the Corporation.
Stock of the Corporation shall be redeemed at the current net asset value per
share next determined after a request in proper form has been received from the
registered owner or owner's designee at the office of the Corporation designated
to receive redemption requests. Any certificates delivered at the designated
principal place of business of the Corporation on a day which is not a business
day as herein defined, shall be deemed to have been received on the business day
next succeeding the day of such delivery. Subject to the limitations of the
Investment Company Act of 1940, the board of directors shall have authority to
fix a reasonable service charge for redemption of its stock, including
redemption pursuant to any periodic withdrawal or variable payment plan or
contract.
<PAGE>
ARTICLE VIII.
-------------
DETERMINATION OF ASSET VALUE
----------------------------
SECTION 1. NET ASSET VALUE. The net asset value of a share of common stock
of the Corporation shall be determined in accordance with
applicable laws and regulations under the supervision of such
persons and at such time or times, including the close of
business on each business day, as shall be prescribed by the
board of directors. Each such determination shall be made by
subtracting from the value of the assets of the Corporation (as
determined pursuant to Section 2 of Article VIII of these bylaws)
the amount of its liabilities, dividing the remainder by the
number of shares of common stock issued and outstanding, and
adjusting the results to the nearest full cent per share.
SECTION 2. VALUATION OF PORTFOLIO SECURITIES AND OTHER ASSETS. Except as
otherwise required by any applicable law or regulation of any
regulatory agency having jurisdiction over the activities of the
Corporation, the Corporation shall determine the value of its
portfolio securities and other assets as follows:
(a) securities for which market quotations are readily available
shall be valued at current market value determined in such
manner as the board of directors may from time to time
prescribe;
(b) all other securities and assets shall be valued at amounts
deemed best to reflect their fair value as determined in
good faith by or under the supervision of such persons and
at such time or times as shall from time to time be
prescribed by the board of directors;
all quotations, sale prices, bids and asked prices and other
information shall be obtained from such sources as the persons
making such determination believe to be reliable, and any
determination of net asset value based thereon shall be
conclusive.
ARTICLE IX.
-----------
PERIOD OF EMERGENCY
-------------------
During any period of emergency, the board of directors, at its option, may
suspend the computation of asset value for the purpose of issuing or redeeming
it stock, and may suspend any obligation to accept payments for the acquisition
of additional stock of the Corporation and may suspend the obligation of the
Corporation to redeem stock. A period of emergency is defined to be:
(a) A period during which the New York Stock Exchange is closed other
than customary weekend and holiday closings, or during which trading
on the New York Stock Exchange is restricted;
(b) A period during which disposal by the Corporation of securities
owned by it is not reasonably practicable, or during which it is not
reasonably practicable for the Corporation to fairly to determine
the value of its net assets; or
<PAGE>
(c) Such other periods as the Securities and Exchange Commission
pursuant to the provisions of the Investment Company Act of 1940 may
by order declare as an emergency period or periods.
ARTICLE X.
----------
MISCELLANEOUS PROVISIONS
------------------------
SECTION 1. SEAL. The board of directors shall provide a suitable seal,
bearing the name of the Corporation, which shall be in the charge
of the secretary. The board of directors may authorize one or
more duplicate seals and provide for the custody thereof.
SECTION 2. BONDS. The board of directors may require any officer, agent or
employee of the Corporation to give a bond to the Corporation,
conditioned upon the faithful discharge of his duties, with one
or more sureties and in such amount as may be satisfactory to the
board of directors.
SECTION 3. VOTING UPON STOCK IN OTHER CORPORATIONS. Any stock in other
corporations or associations, which may from time to time be held
by the Corporation, may be voted at any meeting of the
shareholders thereof by the president or a vice president of the
Corporation or by proxy or proxies appointed by the president or
one of the vice presidents of the Corporation. The board of
directors, however, may by resolution appoint some other person
or persons to vote such stock, in which case, such person or
persons shall be entitled to vote such stock upon the production
of a certified copy of such resolution.
SECTION 4. BYLAWS. The board of directors shall have the power to make,
amend and repeal the bylaws of the Corporation which may contain
any provision for regulation and management of the affairs of the
Corporation not inconsistent with law or the Certificate of
Incorporation; provided that any and all provisions of the
bylaws, notwithstanding the power of the directors to act with
respect thereto, may be altered or repealed, and new provisions
may be adopted by the shareholders or at any annual meeting or
any special meeting called for that purpose.
SECTION 5. APPOINTMENT AND DUTIES OF CUSTODIAN. The Corporation shall at all
times employ a bank or trust company having the qualifications
specified by the Investment Company Act of 1940, as amended, as
custodian with authority as its agent, but subject to such
restrictions, limitations and other requirements, if any, as may
be contained in these bylaws and the Investment Company Act of
1940, as amended:
(1) to receive and hold the securities owned by the Corporation
and deliver the same upon written order;
(2) to receive and receipt for any moneys due to the Corporation
and deposit the same in its own banking department or
elsewhere as the board of directors may direct;
(3) to disburse such funds upon orders or vouchers;
(4) and to provide such additional services as may be requested
by the Corporation;
all upon such basis of compensation as may be agreed upon between
the board of directors and the custodian.
<PAGE>
The board of directors may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian, and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian and approved by the board of directors.
SECTION 6. CENTRAL CERTIFICATION SYSTEM. Subject to such rules, regulations
and orders as the U.S. Securities and Exchange Commission may
adopt, the board of directors may direct the custodian to deposit
all or any part of the securities owned by the Corporation in a
system for the central handling of securities established by a
national securities exchange or a national securities association
registered with the SEC under the Securities Exchange Act of
1934, or such other person as may be permitted by the SEC or its
staff in accordance with the Investment Company Act of 1940, as
amended, and any rule or staff interpretation thereof, pursuant
to which system all securities of any particular class or series
of any issuer deposited within the system are treated as fungible
and may be transferred or pledged by bookkeeping entry without
physical delivery of such securities, provided that all such
deposits shall be subject to withdrawal only upon the order of
the Corporation.
SECTION 7. COMPLIANCE WITH FEDERAL REGULATIONS. The board of directors is
hereby empowered to take such action as it may deem to be
necessary, desirable or appropriate so that the Corporation is or
shall be in compliance with any federal or state statute, rule or
regulation with which compliance by the Corporation is required.
SECTION 8. WAIVER OF NOTICE. Whenever any notice of the time, place or
purpose of any meeting of shareholders, directors, or of any
committee is required to be given under the provisions of statute
or under the provisions of the charter of the Corporation or
these bylaws, a waiver thereof in writing, signed by the person
or person entitled to such notice and filed with the records of
the meeting, whether before or after the holding thereof, or
actual attendance at the meeting of directors or committee in
person, shall be deemed equivalent to the giving of such notice
to such person.
SECTION 9. OFFICES. The principal office of the Corporation in the State of
Maryland shall be in the City of Baltimore. In addition to its
principal office in the State of Maryland, the Corporation may
have an office or offices in the City of Denver, State of
Colorado, and at such other places as the board of directors may
from time to time designate or the business of the Corporation
may require.
SECTION 10. DEFINITIONS. For all purposes of the Certificate of Incorporation
and these bylaws, the terms:
(a) "business day" shall be defined as a day with respect to
which the New York Stock Exchange is open for business, and
with respect to which the actual time of closing of such
exchange is that time which shall have been scheduled for
such closing in advance of the opening of such exchange;
(b) "the close of business" shall be defined as the time of
closing of the New York Stock Exchange.
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the reference to us under the heading "Independent
Accountants" in the Statement of Additional Information constituting part of
this Registration Statement on Form N-1A of INVESCO Advantage Series Funds, Inc.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Denver, Colorado
April 28, 2000
