File No. 2-57151
As filed on October ^ 30, 1996
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No. ________
Post-Effective Amendment No. ^ 36 X
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. ^ 25 X
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INVESCO INCOME 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:
Ronald M. Feiman, Esq.
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 W. 47th Street
New York, New York 10036
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Approximate Date of Proposed Public Offering: As soon as practicable after this
post-effective amendment becomes effective.
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
on _____________, pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
X on ^ December 31, 1996 pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on _____________, pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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Registrant has previously elected to register an indefinite number of shares of
its common stock pursuant to Rule 24f-2 under the Investment Company Act.
Registrant's Rule 24f-2 Notice for the fiscal year ended August 31, ^ 1996 was
filed on or about October ^ 23, 1996.
Page 1 of 295
Exhibit index is located at page 179
<PAGE>
INVESCO INCOME FUNDS, INC.
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CROSS-REFERENCE SHEET
Form N-1A
Item Caption
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Part A Prospectus
1....................... Cover Page
2....................... Annual Fund Expenses;
Essential Information
3....................... Financial Highlights; Fund
Price and Performance
4....................... Investment Objective and
Strategy; Investment Policies
and Risks; The Fund and Its
Management
5....................... The Fund and Its Management
5A...................... Not Applicable
6....................... Fund Services; Taxes,
Dividends and Capital Gain
Distributions; Additional
Information
7....................... How to Buy Shares; Fund Price
and Performance; Fund
Services; The Fund and Its
Management
8....................... Fund Services; How to Sell
Shares
9....................... Not Applicable
Part B Statement of Additional
Information
10....................... Cover Page
11....................... Table of Contents
-i-
<PAGE>
Form N-1A
Item Caption
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12....................... The Fund and Its Management
13....................... Investment Practices;
Investment Policies and
Restrictions
14....................... The Fund and Its Management
15....................... The Fund and Its Management;
Additional Information
16....................... The Fund and Its Management;
Additional Information
17....................... Investment Practices;
Investment Policies and
Restrictions
18....................... Additional Information
19....................... How Shares Can Be Purchased;
How Shares Are Valued;
Services Provided by the Fund;
Tax-Deferred Retirement Plans;
How to Redeem Shares
20....................... Dividends, Capital Gain
Distributions and Taxes
21....................... How Shares Can Be Purchased
22....................... Fund Performance
23....................... Additional Information
Part C Other Information
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
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<PAGE>
PROSPECTUS
^ December 31, 1996
INVESCO SELECT INCOME FUND
INVESCO Select Income Fund (the "Fund") is actively managed to seek as high
a level of current income as is consistent with the risk involved in investing
substantially all of its assets in bonds and other debt securities. Potential
capital appreciation is a factor in the selection of investments, but is
secondary to the Fund's primary objective. The Fund's holdings ordinarily
consist of corporate bonds plus U.S. government and U.S. government agency and
instrumentality debt obligations.
This prospectus provides you with the basic information you should know
before investing in the Fund. You should read it and keep it for future
reference. A Statement of Additional Information containing further information
about the Fund, dated ^ December 31, 1996, has been filed with the Securities
and Exchange Commission and is incorporated by reference into this prospectus.
To obtain a free copy, write to INVESCO Funds Group, Inc., P.O. Box 173706,
Denver, Colorado 80217-3706; or call 1-800-525-8085.
THE FUND MAY INVEST UP TO 50% OF ITS TOTAL ASSETS IN LOWER RATED BONDS,
COMMONLY KNOWN AS "HIGH YIELD" OR "JUNK BONDS." THESE INVESTMENTS ARE SUBJECT TO
GREATER RISKS, INCLUDING THE RISK OF DEFAULT, THAN HIGHER RATED SECURITIES. YOU
SHOULD CAREFULLY ASSESS THE RISKS ASSOCIATED WITH AN INVESTMENT IN THE FUND. SEE
"INVESTMENT OBJECTIVE AND STRATEGY" AND "INVESTMENT POLICIES AND RISKS."
<PAGE>
^CONTENTS
ESSENTIAL INFORMATION................................................... 6
ANNUAL FUND EXPENSES.................................................... 7
FINANCIAL HIGHLIGHTS.................................................... 9
INVESTMENT OBJECTIVE AND STRATEGY....................................... 11
INVESTMENT POLICIES AND RISKS........................................... 11
THE FUND AND ITS MANAGEMENT............................................. 16
FUND PRICE AND PERFORMANCE.............................................. 18
HOW TO BUY SHARES....................................................... 19
FUND SERVICES........................................................... 24
HOW TO SELL SHARES...................................................... 24
TAXES, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS......................... 27
ADDITIONAL INFORMATION.................................................. 28
APPENDIX - RATINGS SERVICES............................................. 29
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION. THE SHARES
OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
ESSENTIAL INFORMATION
Investment Goal And Strategy. INVESCO Select Income Fund is a diversified
mutual fund that seeks as high a level of current income as is consistent with
the risk involved in investing in the types of securities in which the Fund
invests. The maturity of the securities in which the Fund invests will vary with
interest rates. In selecting investments, we consider potential capital
appreciation as a secondary factor . There is no guarantee that the Fund will
meet its objective. See "Investment Objective And Strategy."
Designed For: Investors primarily seeking daily income, paid monthly. While
not a complete investment program, the Fund may be a valuable element of your
investment portfolio. You may also wish to consider the Fund as part of a
Uniform Gifts/Transfers to Minors Account or systematic investment strategy. The
Fund may be a suitable investment for tax-sheltered retirement programs such as
the IRA, SEP-IRA, SARSEP, 401(k), Profit Sharing, Money Purchase Pension, or
403(b) plans.
Time Horizon. The Fund is primarily managed for current income, with the
secondary potential for capital growth. Investors should not consider this Fund
for the portion of their savings devoted to capital appreciation, or for that
portion focused on liquidity and stable principal value.
Risks. The Fund's investments in debt securities are subject to credit risk
and market risk, both of which are increased by investing in lower rated
securities. The returns on foreign investments may be influenced by the risks of
investing overseas. The Fund uses a moderate investment strategy, but may invest
up to 50% of its total assets in securities rated below investment grade and up
to 25% of its total assets in dollar-denominated foreign debt securities. The
Fund may experience rapid portfolio turnover that may result in higher brokerage
commissions and the acceleration of taxable capital gains. See "Investment
Policies and Risks."
Organization and Management. The Fund is a series of INVESCO Income Funds,
Inc. (the "Company"), a diversified, managed, no-load mutual fund. The Fund is
owned by its shareholders. It employs INVESCO Funds Group, Inc. ("IFG"), founded
in 1932, to serve as investment adviser, administrator, distributor, and
transfer agent; and INVESCO Trust Company ("INVESCO Trust"), founded in 1969, as
sub-adviser. Together, IFG and INVESCO Trust constitute "Fund Management."
The Fund's investments are selected by INVESCO senior vice president
Donovan "Jerry" Paul. A Chartered Financial Analyst, Mr. Paul earned his MBA
from the University of Northern Iowa and a BBA from the University of Iowa. See
"The Fund And Its Management."
<PAGE>
IFG and INVESCO Trust are part of a global firm that managed approximately
^ $90 billion as of June 30, ^ 1996. The parent company, INVESCO PLC, is based
in London, with money managers located in Europe, North America, and the Far
East.
This Fund ^ offers all of the following services at no charge:
Telephone purchases
Telephone exchanges
Telephone redemptions
Automatic reinvestment of distributions
Regular investment plans ^ such as EasiVest (the Fund's
automatic monthly investment program), Direct Payroll
Purchase, and Automatic Monthly Exchange)
Periodic withdrawal plans
See "How To Buy Shares" and "How To Sell Shares."
Minimum Initial Investment: $1,000, which is waived for regular investment
plans, including EasiVest and Direct Payroll Purchase, and certain retirement
plans.
Minimum Subsequent Investment: $50 (minimums are lower for certain
retirement plans).
ANNUAL FUND EXPENSES
The Fund is no-load; there are no fees to purchase, exchange or redeem
shares. The Fund^ is authorized to pay a Rule 12b-1 distribution fee up to one
quarter of one percent of the Fund's average net assets each year. (See "How To
Buy Shares --Distribution Expenses.")
Like any company, the Fund has operating expenses -- such as portfolio
management, accounting, shareholder servicing, maintenance of shareholder
accounts, and other expenses. These expenses are paid from the Fund's assets.
Lower expenses therefore benefit investors by increasing the Fund's total
return.
We calculate annual operating expenses as a percentage of the Fund's
average annual net assets. To keep expenses competitive, the Fund's manager
voluntarily reimburses the Fund for amounts in excess of 1.00% of average net
assets.
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fee 0.55%
12b-1 Fees 0.25%
Other Expenses ^ 0.21%
Total Fund Operating Expenses ^(1)(2) 1.01%
<PAGE>
^(1) Portions of the brokerage commissions paid by the Fund were used to reduce
Fund expenses, and the Fund's custodian fees were reduced under an expense
offset arrangement. However, as a result of a new regulatory requirement, the
figures shown above do not reflect these reductions. In comparing expenses for
different years, please note that the ratios of Expenses to Average Net Assets
shown under "Financial Highlights" do reflect reductions for periods prior to
the fiscal year ended August 31, 1996.
(2) Certain Fund expenses are being voluntarily absorbed by INVESCO
Funds Group, Inc. ("INVESCO"). In the absence of such absorbed
expenses, the Fund's "Other Expenses" and "Total Fund Operating
Expenses" would have been ^ 0.36% and ^ 1.16%, respectively, based
on the Fund's actual expenses for the fiscal year ended August 31,
^ 1996. See "The Fund and Its Management."
Example
A shareholder would pay the following expenses on a $1,000 investment for
the periods shown, assuming a hypothetical 5% annual return and redemption at
the end of each time period. (Of course, actual operating expenses are paid from
the Fund's assets, and are deducted from the amount of income available for
distribution to shareholders; they are not charged directly to shareholder
accounts.)
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$10 $32 ^ $56 $124
The purpose of this table is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly. THE EXAMPLE SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE OR EXPENSES,
AND ACTUAL ANNUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
For more information on the Fund's expenses, see "The Fund and Its Management"
and "How to Buy Shares - Distribution Expenses."
Since the Fund pays a distribution fee, investors who own Fund shares for
a long period of time may pay more than the economic equivalent of the maximum
front-end sales charge permitted for mutual funds by the National Association of
Securities Dealers, Inc. ^
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout ^ Each Period)
The following information has been audited by Price Waterhouse LLP,
independent accountants. This information should be read in conjunction with the
audited financial statements and the independent accountant's report thereon
appearing in the Fund's ^ 1996 Annual Report to Shareholders, which is
incorporated by reference into the Statement of Additional Information. Both are
available without charge by contacting IFG at the address or telephone number on
the cover of this prospectus. The Annual Report also contains more information
about the Fund's performance.
<TABLE>
<CAPTION>
Period
^ Ended
Year Ended August 31 August 31 Year Ended December 31
--------------------------- --------- ------------------------------------------------------------
^ 1996 1995 1994 1993> ^ 1992 1991 1990 1989 1988 1987 1986 ^
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value -
Beginning of Period $6.54 $6.18 $6.80 $6.53 $6.50 $5.96 $6.26 $6.39 $6.36 $7.10 $6.84 ^
--------------------------- --------- ------------------------------------------------------------
INCOME FROM
INVESTMENT ^ OPERATIONS
Net Investment Income 0.47 0.47 0.47 0.33 0.52 0.53 0.59 0.63 0.61 0.63 0.67 ^
Net Gains or (Losses) on
Securities (Both Realized
and Unrealized) (0.17) 0.36 (0.43) 0.27 0.13 0.53 (0.30) (0.13) 0.03 (0.74) 0.60 ^
--------------------------- --------- ------------------------------------------------------------
Total from Investment
Operations 0.30 0.83 0.04 0.60 0.65 1.06 0.29 0.50 0.64 (0.11) 1.27 ^
--------------------------- --------- ------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net
Investment ^ Income 0.46 0.47 0.47 0.33 0.52 0.52 0.59 0.63 0.61 0.63 0.68
^ In Excess of Net
Investment Income+ 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Distributions from
Capital Gains 0.02 0.00 0.09 0.00 0.10 0.00 0.00 0.00 0.00 0.00 0.33
<PAGE>
^ In Excess of Capital
^ Gains 0.00 0.00 0.10 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
--------------------------- --------- -----------------------------------------------------------
Total Distributions 0.49 0.47 0.66 0.33 0.62 0.52 0.59 0.63 0.61 0.63 1.01 ^
Net Asset Value -
End of Period $6.35 $6.54 $6.18 $6.80 $6.53 $6.50 $5.96 $6.26 $6.39 $6.36 $7.10
=========================== ========= ===========================================================
TOTAL RETURN 4.78% 14.01% 0.47% 9.42%* 10.38% 18.57% 4.86% 8.17% 10.52% (1.63%) 18.99% ^
RATIOS
Net Assets -
End of Period
($000 Omitted) $258,093 $216,597 $138,337 $158,780 $123,036 $93,827 $46,423 $32,783 $29,902 $19,751$24,724 ^
Ratio of Expenses to
Average Net Assets# 1.01%@ 1.00% 1.11% 1.15%~ 1.14% 1.15% 1.01% 0.99% 1.00% 0.99% 0.85% ^
Ratio of Net Investment
Income to Average
Net Assets# 7.14% 7.38% 7.22% 7.40%~ 7.97% 8.57% 9.67% 9.92% 9.47% 9.36% 9.19% ^
Portfolio Turnover ^ Rate 210% 181% 135% 105%* 178% 117% 38% 121% 143% 131% 153% ^
^> From January 1, 1993 to August 31, 1993, the Fund's current fiscal year-end.
+ Distributions in excess of net investment income for the year ended August 31,
1995, aggregated less than $0.01 on a per share basis.
* ^ Based on operations for the period shown and, accordingly, are not
representative of a full year.
# Various expenses of the Fund were voluntarily absorbed by IFG for the years
ended August 31, 1996, 1995 and 1994. If such expenses had not been voluntarily
absorbed, ratio of expenses to average net assets would have been 1.16%, 1.22%
and 1.15%, respectively, and ratio of net investment income to average net
assets would have been 6.99%, 7.16% and 7.18%, respectively.
^@ Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
^~ Annualized
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE AND STRATEGY
The Fund seeks as high a level of current income as is consistent with the
risk involved in investing in the types of securities in which the Fund invests.
This investment objective is fundamental and cannot be changed without the
approval of the Fund's shareholders. There is no assurance that the Fund's
investment objective will be met.
The Fund normally invests at least 90% of its assets in bonds and
marketable debt securities (including convertible issues) of established
companies which Fund Management believes may provide high current income and
which, consistent with this objective, may have the potential to provide capital
appreciation. Under normal circumstances, at least 50% of the Fund's assets are
invested in investment grade debt securities -- those rated Baa or higher by
Moody's Investors Service, Inc. ("Moody's") or BBB or higher by Standard &
Poor's ("S&P"). No more than 50% of the Fund's assets may consist of corporate
bonds rated below investment grade. (See the Appendix to this Prospectus for a
description of bond ratings.)
The Fund also may invest in securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities (which may or may not be backed by
the full faith and credit of the United States) and bank certificates of
deposit. In addition, the Fund may invest in municipal obligations when we
believe that their potential returns are better than those that might be
achieved by investing in securities of corporate or U.S. governmental issuers.
As a matter of policy, which may be changed without a vote of
shareholders, at least 65% of the Fund's total assets normally will be invested
in debt securities maturing at least three years after they are issued. However,
there are no limitations on the maturities of the securities held by the Fund,
and the Fund's average maturity will vary as Fund Management responds to changes
in interest rates.
When we believe market or economic conditions are adverse, the Fund may
act defensively -- that is, temporarily invest up to 100% of its total assets in
cash and debt securities having maturities of less than three years at the time
of issuance, seeking to protect its assets until conditions stabilize.
INVESTMENT POLICIES AND RISKS
Investors should expect to see their price per share vary with moves in
the fixed-income market, economic conditions and other factors. The Fund invests
in many different companies in a variety of industries; this diversification
reduces the Fund's overall exposure to investment and market risks, but cannot
eliminate these risks.
<PAGE>
Corporate Bonds. When we assess an issuer's ability to meet its interest
rate obligations and repay its debt when due, we are referring to "credit risk."
Debt obligations are rated based on their estimated credit risk by independent
services such as S&P or Moody's. "Market risk" refers to sensitivity to changes
in interest rates: For instance, when interest rates go up, the market value of
a previously issued bond generally declines; on the other hand, when interest
rates go down, bonds generally see their prices increase.
Risks of Lower Rated Bonds. The lower a bond's quality, the more it is
subject to credit risk and market risk and the more speculative it becomes; this
is also true of most unrated securities. To reduce these risks, at least 50% of
the Fund's assets normally are invested in debt securities rated AAA, AA, A or
BBB by S&P or Aaa, Aa, A or Baa by Moody's. In addition, the Fund may invest in
corporate short-term notes rated at least A-1 by S&P or Prime-1 by Moody's.
Overall, these bonds and notes enjoy strong to adequate capacity to pay
principal and interest.
No more than 50% of assets may be invested in issues rated below
investment grade quality (commonly called "junk bonds," and rated BB or lower by
S&P or Ba or lower by Moody's or, if unrated, are judged by Fund Management to
be of equivalent quality); these include issues which are of poorer quality and
may have some speculative characteristics, according to the ratings services.
Investments in unrated securities may not exceed 25% of the Fund's total assets.
Never, under any circumstances, is the Fund permitted to invest in bonds which
are rated below B by Moody's or B- by S&P. Bonds rated B or B- generally lack
characteristics of a desirable investment and are deemed speculative with
respect to the issuer's capacity to pay interest and repay principal over a long
period of time. While Fund Management continuously monitors all of the corporate
bonds in the Fund's portfolio for the issuer's ability to make required
principal and interest payments and other quality factors, it may retain a bond
whose rating is changed to one below the minimum rating required for purchase of
the security.
Because investment in medium and lower rated securities involves both
greater credit risk and market risk, achievement of the Fund's investment
objectives may be more dependent on Fund Management's own credit analysis than
is the case for funds investing in higher quality securities. In addition, the
share price and yield of the Fund may be expected to fluctuate more than in the
case of funds investing in higher quality, shorter term securities. Moreover, a
significant economic downturn or major increase in interest rates may result in
issuers of lower rated securities experiencing increased financial stress, which
would adversely affect their ability to service their principal, dividend and
interest obligations, meet projected business goals, and obtain additional
financing. In this regard, it should be noted that while the market for high
yield corporate bonds has been in existence for many years and from time to time
<PAGE>
has experienced economic downturns, this market has involved a significant
increase in the use of high yield corporate debt securities to fund highly
leveraged corporate acquisitions and restructurings. Past experience may not,
therefore, provide an accurate indication of future performance of the high
yield bond market, particularly during periods of economic recession.
Furthermore, expenses incurred to recover an investment in a defaulted security
may adversely affect the Fund's net asset value. Finally, while Fund Management
attempts to limit purchases of medium and lower rated securities to securities
having an established secondary market, the secondary market for such securities
may be less liquid than the market for higher quality securities. The reduced
liquidity of the secondary market for such securities may adversely affect the
market price of, and ability of the Fund to value, particular securities at
certain times, thereby making it difficult to make specific valuation
determinations.
For the fiscal year ended August 31, ^ 1996, the following percentages of
the Fund's total assets were invested in corporate bonds rated investment grade
(BBB by S&P or Baa by Moody's and above) at the time they were purchased: AAA--^
0.18%; AA--^ 0.49% ; A--^ 3.21%; and BBB--^ 10.42%, and the following
percentages were invested in corporate bonds rated below investment grade at the
time of purchase: BB--^ 24.40%; B--^ 18.61%; CCC--^ 0.02%; and D--^ 0.00%.
Finally, ^ 0.03% of total assets were invested in unrated corporate bonds. All
of these percentages were determined on a dollar-weighted basis, calculated by
averaging the Fund's month-end portfolio holdings during the fiscal year. Keep
in mind that the Fund's holdings are actively traded, and bond ratings are
occasionally adjusted by ratings services, so these figures do not represent the
Fund's actual holdings or quality ratings as of August 31, ^ 1996.
For a detailed description of corporate bond ratings, see the Appendix of
this prospectus and the Statement of Additional Information.
Foreign Securities. The Fund's investments in debt obligations may include
securities issued by foreign governments and foreign corporations. As a matter
of policy, which may be changed without a vote of shareholders, up to 25% of the
Fund's total assets, measured at the time of purchase, may be invested directly
in foreign debt securities, provided that all such securities are denominated
and pay interest in U.S. dollars (such as Eurobonds and Yankee bonds).
Securities of Canadian issuers are not subject to this 25% limitation.
Investments in foreign debt securities involve certain risks.
For U.S. investors, the returns on foreign debt securities are influenced
not only by the returns on the foreign investments themselves, but also by
currency fluctuations. That is, when the U.S. dollar generally rises against
<PAGE>
foreign currencies, returns on foreign securities for a U.S. investor may
decrease. By contrast, in a period when the U.S. dollar generally declines,
those returns may increase. The Fund attempts to minimize these risks by
limiting its investments in foreign debt securities to those which are
denominated and pay interest in U.S. dollars.
Other aspects of international investing to consider include:
-less publicly available information than is generally available about U.S.
issuers;
-differences in accounting, auditing and financial reporting standards;
-generally higher commission rates on foreign portfolio transactions and
longer settlement periods;
-smaller trading volumes and generally lower liquidity of foreign stock
markets, which may cause greater price volatility; and
-investments in certain countries may be subject to foreign withholding
taxes, which may reduce dividends or capital gains payable to shareholders.
There is also the possibility of expropriation or confiscatory taxation;
adverse changes in investment or exchange control regulations; political
instability; potential restrictions on the flow of international capital; and
the possibility of the Fund experiencing difficulties in pursuing legal remedies
and collecting judgments.
Rule 144A Securities. The Fund may not purchase securities that are not
readily marketable. However, the Fund may purchase certain securities that are
not registered for sale to the general public, but that can be resold to
institutional investors ("Rule 144A Securities") if a liquid trading market
exists. The Company's board of directors has delegated to Fund Management the
authority to determine the liquidity of Rule 144A Securities pursuant to
guidelines approved by the board. In the event that a Rule 144A Security held by
the Fund is subsequently determined to be illiquid, the security will be sold as
soon as that can be done in an orderly fashion consistent with the best
interests of the Fund's shareholders. For more information concerning Rule 144A
Securities, see "Investment Policies and Restrictions" in the Statement of
Additional Information.
Zero Coupon Bonds and Pay-In-Kind Bonds. The Fund may invest in zero coupon
bonds and pay-in-kind bonds if Fund Management determines that the risk of a
default on the security, which could result in adverse tax consequences, is not
significant. Zero coupon bonds make no periodic interest payments. Instead, they
<PAGE>
are sold at a discount from their face value. The buyer of the security
receives the rate of return by the gradual appreciation in the price of the
security, which is redeemed at face value at maturity. Pay-in-kind ("PIK") bonds
pay interest in cash or additional securities, at the issuer's option, for a
specified period. Being extremely responsive to changes in interest rates, the
market price of zero coupon and PIK securities may be more volatile than other
bonds. The Fund may be required to distribute income recognized on these bonds,
even though no cash interest payments are received, which could reduce the
amount of cash available for investment by the Fund.
Delayed Delivery or When-Issued Purchases. Debt securities may at times be
purchased or sold by the Fund with settlement taking place in the future. The
Fund may invest, and hold, up to 10% of its net assets in when-issued
securities. The payment obligation and the interest rate that will be received
on the securities generally are fixed at the time the Fund enters into the
commitment. Between the date of purchase and the settlement date, the value of
the securities is subject to market fluctuations, and no interest is payable to
the Fund prior to the settlement date.
Securities Lending. The Fund may seek to earn additional income by lending
securities to qualified brokers, dealers, banks, or other financial
institutions, on ^ a fully collateralized basis. For further information on this
policy, see "Investment Policies and Restrictions" in the Statement of
Additional Information.
Repurchase Agreements. The Fund may invest money, for as short a time as
overnight, using repurchase agreements ("repos"). With a repo, the Fund buys a
debt instrument, agreeing simultaneously to sell it back to the prior owner at
an agreed-upon price. The Fund could incur costs or delays in seeking to sell
the ^ security if the prior owner defaults on its repurchase obligation. To
reduce that risk, the securities ^ underlying each repurchase agreement will be
maintained with the Fund's custodian in an amount at least equal to the
repurchase price under the agreement (including accrued interest). These
agreements are entered into only with member banks of the Federal Reserve
System, registered broker-dealers, and registered U.S. government securities
dealers that are deemed creditworthy under standards set by the ^ Company's
board of directors.
Portfolio Turnover. There are no fixed limitations regarding portfolio
turnover for the Fund; securities may be sold without regard to the time they
have been held when investment considerations warrant such action. Increased
turnover may result in greater transaction costs and acceleration of capital
gains which are taxable when distributed to shareholders. The Statement of
<PAGE>
Additional Information includes an expanded discussion of the Fund's
portfolio turnover rate, its brokerage practices and certain federal income tax
matters.
For a further discussion of risks associated with an investment in the
Fund, see "Investment Policies and Restrictions" and "Investment Practices" in
the Statement of Additional Information.
Investment Restrictions. Certain restrictions, which are set forth in the
Statement of Additional Information, may not be altered without the approval of
the Fund's shareholders. For example, the Fund limits to 5% the portion of its
total assets which may be invested in a single issuer, and to 25% the portion
that may be invested in any one industry (other than U.S. government
securities). The Fund's ability to borrow money is limited to borrowings from
banks for temporary or emergency purposes in amounts not exceeding 10% of net
assets. Additionally, except where indicated to the contrary, the investment
objectives and policies described in this prospectus are fundamental and may not
be changed without a vote of the Fund's shareholders.
THE FUND AND ITS MANAGEMENT
The Company is a no-load mutual fund, registered with the Securities and
Exchange Commission as a diversified, open-end, management investment company.
It was incorporated on August 20, 1976, under the laws of Colorado and was
reorganized as a Maryland corporation on April 2, 1993.
The Company's board of directors has responsibility for overall
supervision of the Fund, and reviews the services provided by the adviser and
sub-adviser. Under an agreement with the Company, INVESCO Funds Group, Inc.
("IFG"), 7800 E. Union Avenue, Denver, Colorado 80237, serves as the Fund's
investment manager; it is primarily responsible for providing the Fund with
various administrative services. IFG's wholly-owned subsidiary, INVESCO Trust,
is the Fund's sub-adviser and is primarily responsible for managing the Fund's
investments. Together, IFG and INVESCO Trust constitute "Fund Management."
Donovan "Jerry" Paul, portfolio manager for the Fund since 1994, has
responsibility for the day-to-day management of the Fund's holdings. He also
manages INVESCO High Yield Fund and INVESCO VIF-High Yield Portfolio; further,
he is co-manager of INVESCO Short-Term Bond Fund, INVESCO Industrial Income
Fund, INVESCO Balanced Fund, and INVESCO VIF-Industrial Income Portfolio. A
Chartered Financial Analyst and Certified Public Accountant, Mr. Paul is a
senior vice president and director of fixed-income research of INVESCO Trust.
His investment career was launched in 1976, and has included these highlights:
He was a senior vice president and director of fixed-income research (1989 to
1992) and portfolio manager (1987 to 1992) with Stein, Roe & Farnham Inc;
<PAGE>
from 1993 to 1994, he was president of Quixote Investment Management, Inc. He
holds an MBA from the University of Northern Iowa and BBA from the University of
Iowa.
Fund Management permits investment and other personnel to purchase and
sell securities for their own accounts, subject to a compliance policy governing
personal investing. This policy requires Fund Management's personnel to conduct
their personal investment activities in a manner that Fund Management believes
is not detrimental to the Fund or Fund Management's other advisory clients. See
the Statement of Additional Information for more detailed information.
The Fund pays IFG a monthly management fee which is based upon a
percentage of the Fund's average net assets determined daily; in turn, IFG pays
INVESCO Trust a sub-advisory fee out of its management fee. The management fee
is computed at the annual rate of 0.55% on the first $300 million of the Fund's
average net assets; 0.45% on the next $200 million of the Fund's average net
assets; and 0.35% on the Fund's average net assets over $500 million. For the
fiscal year ended August 31, ^ 1996, investment management fees paid by the Fund
amounted to 0.55% (prior to the voluntary absorption of certain Fund expenses by
INVESCO) of its average net assets. Out of this fee, IFG paid an amount equal to
^ 0.24% of the Fund's average net assets to INVESCO Trust as a sub- advisory
fee. No fee is paid by the Fund to INVESCO Trust.
Under a Transfer Agency Agreement, IFG acts as registrar, transfer agent,
and dividend disbursing agent for the Fund. The Fund pays an annual fee of ^
$26.00 per shareholder account or omnibus account participant for these
services. Registered broker-dealers, third party administrators of tax-qualified
retirement plans and other entities, including affiliates of IFG, may provide
equivalent services to the Fund. In these cases, IFG may pay, out of the fee it
receives from the Fund, an annual sub-transfer agency or record-keeping fee to
the third party.
In addition, under an Administrative Services Agreement, IFG handles
additional administrative, record-keeping, and internal sub-accounting services
for the Fund. For the fiscal year ended August 31, ^ 1996, the Fund paid IFG a
fee for these services equal to 0.02% (prior to the voluntary absorption of
certain fund expenses by IFG) of the Fund's average net assets.
The Fund's expenses, which are accrued daily, are deducted from total
income before dividends are paid. Total expenses of the Fund (prior to any
expense offset) for the fiscal year ended August 31, ^ 1996, including
investment management fees (but excluding brokerage commissions, which are a
cost of acquiring securities), amounted to 1.01% of the Fund's average net
assets. Certain Fund expenses are absorbed voluntarily by IFG pursuant to a
commitment to the Fund in order to ensure that the Fund's total operating
<PAGE>
expenses do not exceed ^ 1.00% of the Fund's average net assets. This commitment
may be changed following consultation with the Company's board of directors. In
the absence of this voluntary expense limitation, the Fund's total operating
expenses would have been ^ 1.16% of its average net assets.
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of
their financial responsibility coupled with their ability to effect transactions
at the best available prices. As discussed under "How to Buy Shares --
Distribution Expenses," the Fund may market its shares through intermediary
brokers or dealers that have entered into Dealer Agreements with IFG, as the
Fund's Distributor. The Fund may place orders for portfolio transactions with
qualified ^ broker-dealers that recommend the Fund, or sell shares of the Fund,
to clients, or act as agent in the purchase of Fund shares for clients, if Fund
Management believes that the quality of the execution of the transaction and
level of commission are comparable to those available from other qualified
brokerage firms. For further information, see "Investment Practices -- Placement
of Portfolio Brokerage" in the Statement of Additional Information.
The parent company for IFG and INVESCO Trust is INVESCO PLC, a publicly
traded holding company whose subsidiaries provide investment services around the
world. IFG was established in 1932 and, as of August 31, ^ 1996, managed 14
mutual funds, consisting of ^ 39 separate portfolios, with combined assets of
approximately ^ $12.8 billion on behalf of over ^ 827,000 shareholders. INVESCO
Trust (founded in 1969) served as adviser or sub-adviser to ^ 46 investment
portfolios as of August 31, ^ 1996, including 27 portfolios in the INVESCO
group. These ^ 46 portfolios had aggregate assets of approximately ^ $12.0
billion as of August 31, ^ 1996. In addition, INVESCO Trust provides investment
management services to private clients, including employee benefit plans that
may be invested in a collective trust sponsored by INVESCO Trust.
FUND PRICE AND PERFORMANCE
Determining Price. The value of your investment in the Fund will vary
daily. The price per share is also known as the Net Asset Value ("NAV"). IFG
prices the Fund every day that the New York Stock Exchange is open, as of the
close of regular trading ^ (normally, 4:00 p.m., New York time). NAV is
calculated by adding together the current market value of all of the Fund's
assets, including accrued interest and dividends; then subtracting liabilities,
including accrued expenses; and finally dividing that dollar amount by the total
number of shares outstanding.
Performance Data. To keep shareholders and potential investors
informed, we will occasionally advertise the Fund's total return
and yield. Total return figures show the average annual rate of
<PAGE>
return on a $1,000 investment in the Fund, assuming reinvestment of all
dividends and capital gain distributions for one-, five- and ten-year periods.
Cumulative total return shows the actual rate of return on an investment;
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, not showing
the interim variations in performance over the periods cited.
The yield of the Fund refers to the income generated by an investment in
the Fund over a 30-day or one month period, and is computed by dividing the net
investment income per share earned during the period by the net asset value per
share at the end of the period, then adjusting the result to provide for
semi-annual compounding.
More information about the Fund's recent and historical performance is
contained in the Fund's Annual Report to shareholders. You can get a free copy
by calling or writing to IFG using the telephone number or address on the cover
of this prospectus.
When we quote mutual fund rankings published by Lipper Analytical
Services, Inc., we may compare the Fund to others in its category of Corporate
Bond Funds--BBB Rated, as well as the broad-based Lipper general fund groupings.
These rankings allow you to compare the Fund to its peers. Other independent
financial media also produce performance- or service-related comparisons, which
you may see in our promotional materials. For more information see "Fund
Performance" in the Statement of Additional Information.
Performance figures are based on historical investment results and are not
intended to suggest future performance.
HOW TO BUY SHARES
The ^ chart on page 20 shows several convenient ways to invest in the
Fund. Your new Fund shares will be priced at the NAV next determined after your
order is received in proper form. There is no charge to invest, exchange, or
redeem shares when you make transactions directly through IFG. However, if you
invest in the Fund through a securities broker, you may be charged a commission
or transaction fee. For all new accounts, please send a completed application
form. Please specify which Fund you wish to purchase.
Fund Management reserves the right to increase, reduce or waive the
minimum investment requirements in its sole discretion, where it determines this
action is in the best interests of the Fund. Further, Fund Management reserves
the right in its sole discretion to reject any order for the purchase of Fund
shares (including purchases by exchange) when, in its judgment, such rejection
is in the Fund's best interests.
<PAGE>
HOW TO BUY SHARES
================================================================================
Method Investment Minimum Please Remember
- --------------------------------------------------------------------------------
By Check $1,000 for regular If your check does
Mail to: account; not clear, you will
INVESCO Funds $250 for an Indivi- be responsible for
Group, Inc. dual Retirement any related loss
P.O. Box 173706 Account; the Fund or IFG
Denver, CO 80217- $50 minimum for incurs. If you are
3706. each subsequent already a
Or you may send investment. shareholder in the
your check by INVESCO funds, the
overnight courier Fund may seek
to: 7800 E. Union reimbursement from
Ave., your existing
Denver, CO 80237. account(s) for any
loss incurred.
- --------------------------------------------------------------------------------
By Telephone or $1,000. Payment must be
Wire received within 3
Call 1-800-525-8085 business days, or
to request your the transaction may
purchase. Then send be cancelled. If a
your check by telephone purchase
overnight courier is cancelled due to
to our street nonpayment, you
address: will be responsible
7800 E. Union Ave., for any related
Denver, CO 80237. loss the Fund or
Or you may transmit IFG incurs. If you
your payment by are already a
bank wire (call IFG shareholder in the
for instructions). INVESCO funds, the
Fund may seek
reimbursement from
your existing
account(s) for any
loss incurred.
<PAGE>
- --------------------------------------------------------------------------------
With EasiVest or $50 per month for Like all regular
Direct Payroll EasiVest; $50 per investment plans,
Purchase pay period for neither EasiVest
You may enroll on Direct Payroll nor Direct Payroll
the fund Purchase. You may Purchase ensures a
application, or start or stop your profit or protects
call us for the regular investment against loss in a
correct form and plan at any time, falling market.
more details. with two weeks' Because you'll
Investing the same notice to IFG. invest continually,
amount on a monthly regardless of
basis allows you to varying price
buy more shares levels, consider
when prices are low your financial
and fewer shares ability to keep
when prices are buying through low
high. This "dollar- price levels. And
cost averaging" may remember that you
help offset market will lose money if
fluctuations. Over you redeem your
a period of time, shares when the
your average cost market value of all
per share may be your shares is less
less than the than their cost.
actual average
price per share.
- --------------------------------------------------------------------------------
By PAL $1,000. Be sure to write
Your "Personal down the
Account Line" is confirmation number
available for provided by PAL.
subsequent Payment must be
purchases and received within 3
exchanges 24-hours business days, or
a day. Simply call the transaction may
1-800-424-8085. be cancelled. If a
telephone purchase
is cancelled due to
nonpayment, you
will be responsible
for any related
loss the Fund or
IFG incurs. If you
are already a
shareholder in the
INVESCO funds, the
Fund may seek
reimbursement from
your existing
account(s) for any
loss incurred.
<PAGE>
- --------------------------------------------------------------------------------
By Exchange $1,000 to open a See "Exchange
Between this and new account; $50 Privilege^," below.
another of the for written
INVESCO funds. Call requests to
1-800-525-8085 for purchase additional
prospectuses of shares for an
other INVESCO existing account.
funds. You may also (The exchange
establish an minimum is $250 for
Automatic Monthly purchases requested
Exchange service by telephone.)
between two INVESCO
funds; call IFG for
further details and
the correct form.
================================================================================
Your order to purchase Fund shares will not begin earning dividends or
other distributions until your payment can be converted into available federal
funds under regular banking procedures or, if you are acquiring shares in an
exchange from another INVESCO fund, the Fund receives the proceeds of the
exchange. Checks normally are converted into federal funds (moneys held on
deposit within the Federal Reserve System) within two or three business days
after we receive them, although this period may be longer for checks drawn on
banks that are not members of the Federal Reserve System.
Exchange Privilege. You may exchange your shares in this Fund for those in
another INVESCO fund, on the basis of their respective net asset values at the
time of the exchange. Before making any exchange, be sure to review the
prospectuses of the funds involved and consider their differences.
Please note these policies regarding exchanges of fund shares:
1) The fund accounts must be identically registered.
2) You may make four exchanges out of each fund during each
calendar year.
3) An exchange is the redemption of shares from one fund followed by
the purchase of shares in another. Therefore, any gain or loss
realized on the exchange is recognizable for federal income tax
purposes (unless, of course, your account is tax-deferred).
4) The Fund reserves the right to reject any exchange
request, or to modify or terminate exchange privileges,
in the best interests of the Fund and its shareholders.
Notice of all such modifications or termination will be
<PAGE>
given at least 60 days prior to the effective date of the change in
privilege, except for unusual instances (such as when redemptions of
the exchanged shares are suspended under Section 22(e) of the
Investment Company Act of 1940, or when sales of the fund into which
you are exchanging are temporarily stopped).
Distribution Expenses. The Fund is authorized under a Plan and Agreement
of Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Plan") to use its assets to finance certain activities relating to the
distribution of shares. These expenditures may include compensation (including
incentive compensation and/or continuing compensation based on the amount of
customer assets maintained in the Fund) to securities dealers and other
financial institutions and organizations, which may include IFG-affiliated
companies, to obtain various distribution-related and/or administrative services
for the Fund. Such services may include, among other things, processing new
shareholder account applications, preparing and transmitting to the Fund's
transfer agent computer-processable tapes of all transactions by customers, and
serving as the primary source of information to customers in answering questions
concerning the Fund and their transactions.
In addition, other reimbursable expenditures include advertising,
preparation and distribution of sales literature, printing and distribution of
prospectuses to prospective investors, public relations efforts, marketing
programs and such other services and promotional activities agreed upon from
time to time by the Fund and its board of directors. These services and
activities may be conducted by the staff of IFG or its affiliates or by third
parties.
IFG is not entitled to reimbursement for overhead expenses under the Plan,
but may be reimbursed for all or a portion of the compensation paid for salaries
and other employee benefits for IFG personnel whose primary responsibilities
involve marketing shares of the INVESCO funds, including the Fund. Also, any
payments made by the Fund may not be used to finance the distribution of shares
of any other mutual fund advised by IFG. Payments made by the Fund under the
Plan for compensation of marketing personnel, as noted above, are based on an
allocation formula designed to ensure that all such payments are appropriate.
Under the Plan, the Fund's reimbursement to IFG is limited to an amount
computed at a maximum annual rate of 0.25% of the Fund's average net assets.
Payments by the Fund under the Plan, for any month, may only be made to
reimburse expenditures incurred during the rolling 12-month period in which that
month falls. Therefore, any reimbursable expenses incurred by IFG in excess of
the limitation described above are not reimbursable and will be borne by IFG. In
addition, IFG may from time to time make additional payments from its revenues
to securities dealers and other
<PAGE>
to securities dealers and other financial institutions that provide
distribution-related and/or administrative services for the Fund. No further
payments will be made by the Fund under the Plan in the event of its
termination.
FUND SERVICES
Shareholder Accounts. IFG will maintain a share account that reflects your
current holdings. Share certificates will be issued only upon specific request.
You will have greater flexibility to conduct transactions if you do not request
certificates.
Transaction Confirmations. You will receive detailed confirmations of
individual purchases, exchanges, and redemptions. If you choose certain
recurring transaction plans (for instance, EasiVest), your transactions will be
confirmed on your quarterly Investment Summary.
Investment Summaries. Each calendar quarter, shareholders receive a
written statement which consolidates and summarizes account activity and value
at the beginning and end of the period for each of their INVESCO funds.
Reinvestment of Distributions. Dividends and capital gain distributions
are automatically invested in additional fund shares at the NAV on the
ex-dividend date, unless you choose to have dividends and/or capital gain
distributions automatically reinvested in another INVESCO fund or paid by check
(minimum of $10.00).
Telephone Transactions. All shareholders may exchange and redeem Fund
shares by telephone, unless they expressly decline these privileges. By signing
the new account Application, a Telephone Transaction Authorization Form, or
otherwise using these privileges, the investor has agreed that, if the Fund has
followed reasonable procedures, such as recording telephone instructions and
sending written transaction confirmations, it will not be liable for following
telephoned instructions that it believes to be genuine. As a result of this
policy, the investor may bear the risk of any loss due to unauthorized or
fraudulent instructions.
Retirement Plans and IRAs. Fund shares may be purchased for Individual
Retirement Accounts ^("IRAs") and many types of tax-deferred retirement plans.
IFG can supply you with information and forms to establish or transfer your
existing plan or account.
HOW TO SELL SHARES
The following chart shows several convenient ways to redeem your Fund
shares. Shares of the Fund may be redeemed at any time at their current NAV next
determined after a request in proper form is received at the Fund's office. The
NAV at the time of the redemption may be more or less than the price you paid to
<PAGE>
purchase your shares, depending primarily upon the Fund's investment
performance.
Please ^ specify from which fund you wish to redeem shares. Shareholders
have a separate account for each fund in which they invest.
HOW TO SELL SHARES
================================================================================
Method Minimum Redemption Please Remember
================================================================================
By Telephone $250 (or, if less, These telephone
Call us toll-free full liquidation of redemption
at 1-800-525-8085. the account) for a privileges may be
redemption check; modified or
$1,000 for a wire terminated in the
to bank of record. future at the
The maximum amount discretion of IFG.
which may be
redeemed by
telephone is
generally $25,000.
- --------------------------------------------------------------------------------
In Writing Any amount. The If the shares to be
Mail your request redemption request redeemed are
to INVESCO Funds must be signed by represented by
Group, Inc., P.O. all registered stock certificates,
Box 173706 shareholders(s). the certificates
Denver, CO 80217- Payment will be must be sent to
3706. You may also mailed to your IFG.
send your request address of record,
by overnight or to a pre-
courier to 7800 E. designated bank.
Union Ave., Denver,
CO 80237.
- --------------------------------------------------------------------------------
By Exchange $1,000 to open a See "Exchange
Between this and new account; $50 Privilege," ^ page
another of the for written 22.
INVESCO funds. Call requests to
1-800-525-8085 for purchase additional
prospectuses of shares for an
other INVESCO existing account.
funds. You may also (The exchange
establish an minimum is $250 for
automatic monthly exchanges requested
exchange service by telephone.)
between two INVESCO
funds; call IFG for
further details and
the correct form.
<PAGE>
- --------------------------------------------------------------------------------
Periodic Withdrawal $100 per payment, You must have at
Plan on a monthly or least $10,000 total
You may call us to quarterly basis. invested with the
request the The redemption INVESCO funds, with
appropriate form check may be made at least $5,000 of
and more payable to any that total invested
information at 1- party you in the fund from
800-525-8085. designate. which withdrawals
will be made.
- --------------------------------------------------------------------------------
Payment To Third Any amount. All registered
Party owners of the
Mail your request account must sign
to INVESCO Funds the request, with a
Group, Inc., P.O. signature guarantee
Box 173706 from an eligible
Denver, CO 80217- guarantor financial
3706. institution, such
as a commercial
bank or recognized
national or
regional securities
firm.
================================================================================
While the Fund will attempt to process telephone redemptions promptly,
there may be times -- particularly in periods of severe economic or market
disruption -- when you may experience delays in redeeming shares by phone.
Payments of redemption proceeds will be mailed within seven days following
receipt of the redemption request in proper form. However, payment may be
postponed under unusual circumstances -- for instance, if normal trading is not
taking place on the New York Stock Exchange or during an emergency as defined by
the Securities and Exchange Commission. If your shares were purchased by a check
which has not yet cleared, payment will be made promptly upon clearance of the
purchase check (which may take up to 15 days).
If you participate in EasiVest, the Fund's automatic monthly investment
program, and redeem all of the shares in your account, we will terminate any
further EasiVest purchases unless you instruct us otherwise.
Because of the high relative costs of handling small accounts, should the
value of any shareholder's account fall below $250 as a result of shareholder
action, the Fund reserves the right to involuntarily redeem all shares in such
account, in which case the account would be liquidated and the proceeds
forwarded to the shareholder. Prior to any such redemption, a shareholder will
<PAGE>
be notified and given 60 days to increase the value of the account to $250
or more.
TAXES, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Taxes. The Fund intends to distribute to shareholders substantially all of
its net investment income, net capital gains and net gains from foreign currency
transactions, if any, in order to continue to qualify for tax treatment as a
regulated investment company. Thus, the Fund does not expect to pay any federal
income or excise taxes.
Unless shareholders are exempt from income taxes, they must include all
dividends and capital gain distributions in taxable income for federal, state,
and local income tax purposes. Dividends and other distributions are taxable
whether they are received in cash or automatically distributed in shares of the
Fund or another fund in the INVESCO group.
The Fund may be subject to withholding of foreign taxes on dividends or
interest it receives on foreign securities. Foreign taxes withheld will be
treated as an expense of the Fund unless the Fund meets the qualifications to
enable it to pass these taxes through to shareholders for use by them as a
foreign tax credit or deduction.
Shareholders may be subject to backup withholding of 31% on dividends,
capital gain distributions and redemption proceeds. Unless you are subject to
backup withholding for other reasons, you can avoid backup withholding on your
Fund account by ensuring that we have a correct, certified tax identification
number.
Dividends and Capital Gain Distributions. The Fund earns ordinary or net
investment income in the form of dividends and interest on its investments. The
Fund's policy is to distribute substantially all of this income, less Fund
expenses, to shareholders on a monthly basis, at the discretion of the ^
Company's board of directors.
In addition, the Fund realizes capital gains and losses when it sells
securities for more or less than it paid. If total gains on sales exceed total
losses (including losses carried forward from previous years), the Fund has a
net realized capital gain. Net realized capital gains, if any, are distributed
to shareholders at least annually, usually in December.
Dividends and capital gain distributions are paid to shareholders who hold
shares on the record date of distribution regardless of how long the shares have
been held. The Fund's share price will then drop by the amount of the
distribution on the day the distribution is made. If a shareholder purchases
shares immediately prior to the distribution, the shareholder will, in effect,
<PAGE>
have "bought" the distribution by paying the full purchase price, a portion
of which is then returned in the form of a taxable distribution^.
At the end of each year, information regarding the tax status of dividends
and capital gain distributions is provided to shareholders. Net realized capital
gains are divided into short-term and long-term gains depending upon how long
the Fund held the security which gave rise to the gains. The capital gains
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 taxable
dividends.
Shareholders also may realize capital gains or losses when they sell their
Fund shares at more or less than the price originally paid.
We encourage you to consult a tax adviser with respect to
these matters. For further information see "Dividends, Capital Gain
Distributions and Taxes" in the Statement of Additional
Information.
ADDITIONAL INFORMATION
Voting Rights. All shares of the Company have equal voting rights based on
one vote for each share owned. Voting with respect to certain matters, such as
ratification of independent accountants and the election of directors, will be
by all the funds of the Company voting together. In other cases, such as voting
upon an investment advisory contract, voting is on a fund-by-fund basis. To the
extent permitted by law, when not all funds are affected by a matter to be voted
upon, only shareholders of the fund or funds affected by the matter will be
entitled to vote thereon. The Company is not generally required and does not
expect to hold regular annual meetings of shareholders. However, 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 Investment Company Act
of 1940.
<PAGE>
APPENDIX - RATINGS SERVICES
There are several independent ratings services that analyze debt
obligations issued by corporations. The two most frequently used services are
Moody's Investors Service, Inc., and Standard & Poor's.
The chart below shows the various ratings used by each service for the
categories of bonds in which the Fund may invest. There are additional
refinements to each rating system: Moody's may use the modifier 1 to indicate
that the security ranks in the higher end of its generic ratings category;
modifier 2 indicates a mid-range rank, and 3 indicates the issue ranks at the
lower end of its category. Similarly, S&P may use a + or - sign to indicate a
security's relative standing within its generic category.
================================================================================
Moody's S&P Bond Description
- --------------------------------------------------------------------------------
Aaa AAA Highest quality, often referred to as
"gilt edged." Carries the smallest
degree of investment risk: Interest
payments are protected by a large or
exceptionally stable margin and
principal is secure.
- --------------------------------------------------------------------------------
Aa AA High quality or high grade. Margins of
protection may be smaller than those
above, or fluctuation of protective
elements may be of greater amplitude.
Other elements may be present which
make long-term risks somewhat larger
than in Aaa or AAA securities.
- --------------------------------------------------------------------------------
A A Upper medium-grade obligations.
Adequate to strong capacity to pay
principal and interest, but somewhat
more susceptible to adverse effects of
changes in circumstances and economic
conditions.
- --------------------------------------------------------------------------------
Baa BBB Medium-grade obligations. Neither
highly protected nor poorly secured.
Interest and principal security
currently appear adequate, but certain
protective elements may be lacking or
characteristically unreliable over the
longer-term. May have speculative
characteristics.
<PAGE>
- --------------------------------------------------------------------------------
Ba BB Speculative, but less near-term
vulnerability to default than those
below. These bonds face major ongoing
uncertainties or exposure to adverse
business, financial or economic
conditions that could lead to
inadequate capacity to make timely
interest and principal payments.
- --------------------------------------------------------------------------------
B B Generally lack characteristics of a
desirable investment. Greater
vulnerability to default: currently
have capacity to meet timely interest
and principal payments, but assurance
of payments over any extended period of
time may be small, and/or other terms
of the bond contract may be in
jeopardy.
================================================================================
<PAGE>
INVESCO SELECT INCOME FUND
A no-load mutual fund seeking a high level of
current income.
PROSPECTUS
^ December 31, 1996
To receive general information and prospectuses on any of ^ INVESCO's funds or
retirement plans, or to obtain current account or price information or responses
to other questions, call toll-free:
1-800-525-8085
To reach PAL, your 24-hour Personal Account Line ^ call:
1-800-424-8085
You can find us on the World Wide Web:
http://www.invesco.com
Or write to:
INVESCO Funds Group, Inc., Distributor
^ Post Office Box 173706
Denver, Colorado 80217-3706
If you're in Denver, please visit one of our convenient Investor Centers:
Cherry Creek
155-B Fillmore Street;
Denver Tech Center
7800 East Union Avenue
Lobby Level
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PROSPECTUS
^ December 31, 1996
INVESCO HIGH YIELD FUND
INVESCO HIGH YIELD Fund (the "Fund") is actively managed to seek as high a
level of current income as is consistent with the risk involved in investing
substantially all of its assets in bonds and other debt securities and in
preferred stocks. Such securities ordinarily include those rated in lower
categories by established ratings services.
This prospectus provides you with the basic information you should know
before investing in the Fund. You should read it and keep it for future
reference. A Statement of Additional Information containing further information
about the Fund, dated ^ December 31, 1996, has been filed with the Securities
and Exchange Commission and is incorporated by reference into this prospectus.
To obtain a free copy, write to INVESCO Funds Group, Inc., P.O. Box 173706,
Denver, Colorado 80217-3706; or call 1-800-525-8085.
THE FUND INVESTS PRIMARILY IN LOWER-RATED BONDS, COMMONLY KNOWN AS "HIGH
YIELD" OR "JUNK BONDS." THESE INVESTMENTS ARE SUBJECT TO GREATER RISKS,
INCLUDING THE RISK OF DEFAULT, THAN HIGHER RATED SECURITIES. YOU SHOULD
CAREFULLY ASSESS THE RISKS ASSOCIATED WITH AN INVESTMENT IN THE FUND. SEE
"INVESTMENT OBJECTIVE AND STRATEGY" AND "INVESTMENT POLICIES AND RISKS."
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^CONTENTS
ESSENTIAL INFORMATION...................................................... 34
ANNUAL FUND EXPENSES....................................................... 35
FINANCIAL HIGHLIGHTS....................................................... 37
INVESTMENT OBJECTIVE AND STRATEGY.......................................... 39
INVESTMENT POLICIES AND RISKS.............................................. 39
THE FUND AND ITS MANAGEMENT................................................ 44
FUND PRICE AND PERFORMANCE................................................. 46
HOW TO BUY SHARES.......................................................... 47
FUND SERVICES.............................................................. 52
HOW TO SELL SHARES......................................................... 53
TAXES, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS............................ 55
ADDITIONAL INFORMATION..................................................... 56
APPENDIX -- RATINGS SERVICES............................................... 58
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION. THE SHARES
OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
ESSENTIAL INFORMATION
Investment Goal And Strategy. INVESCO High Yield Fund is a diversified
mutual fund that seeks as high a level of current income as is consistent with
the risk involved in investing substantially all of its assets in bonds and
other debt securities and in preferred stocks. Such securities ordinarily
include those rated in lower categories by established ratings services. In
selecting investments, we consider potential capital appreciation as a secondary
factor . There is no guarantee that the Fund will meet its objective. See
"Investment Objective And Strategy."
Designed For: Investors seeking high daily income, paid monthly, who can
tolerate greater fluctuations in principal value than those associated with more
conservative bond funds. While not a complete investment program, the Fund may
be a valuable element of your investment portfolio. You may also wish to
consider the Fund as part of a Uniform Gifts/Transfers to Minors Account or
systematic investment strategy. The Fund may be a suitable investment for
tax-sheltered retirement programs such as the IRA, SEP-IRA, SARSEP, 401(k),
Profit Sharing, Money Purchase Pension, or 403(b) plans.
Time Horizon. The Fund is primarily managed for current income, with the
secondary potential for long-term capital growth. Investors should not consider
this Fund for the portion of their savings devoted to capital appreciation, or
for that portion focused on liquidity and stable principal value.
Risks. The Fund uses a moderately aggressive investment strategy, focusing
on lower quality bonds and preferred stocks. The Fund's investments are subject
to both credit risk and market risk, both of which are increased by investing in
lower rated securities. The Fund may invest up to 25% of its total assets in
dollar-denominated foreign debt securities, the returns on which may be
influenced by the risks of investing overseas. The Fund may experience rapid
portfolio turnover that may result in higher brokerage commissions and the
acceleration of taxable capital gains. See "Investment Policies and Risks."
Organization and Management. The Fund is a series of INVESCO
Income Funds, Inc. (the "Company"), a diversified, managed, no-load
mutual fund. The Fund is owned by its shareholders. It employs
INVESCO Funds Group, Inc. ("IFG"), founded in 1932, to serve as
investment adviser, administrator, distributor, and transfer agent;
and INVESCO Trust Company ("INVESCO Trust"), founded in 1969, as
sub-adviser. Together, IFG and INVESCO Trust constitute "Fund
Management."
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The Fund's investments are selected by INVESCO senior vice
president Donovan "Jerry" Paul. A Chartered Financial Analyst, Mr.
Paul earned his MBA from the University of Northern Iowa and a BBA
from the University of Iowa. See "The Fund And Its Management."
IFG and INVESCO Trust are part of a global firm that managed approximately
^ $90 billion as of June 30, ^ 1996 The parent company, INVESCO PLC, is based in
London, with money managers located in Europe, North America, and the Far East.
This Fund ^ offers all of the following services at no charge:
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Telephone purchases
Telephone exchanges
Telephone redemptions
Automatic reinvestment of distributions
Regular investment plans ^ such as EasiVest (the Fund's
automatic monthly investment program), Direct Payroll
Purchase, and Automatic Monthly Exchange)
Periodic withdrawal plans
See "How To Buy Shares" and "How To Sell Shares."
Minimum Initial Investment: $1,000, which is waived for
regular investment plans, including EasiVest and Direct Payroll
Purchase, and certain retirement plans.
Minimum Subsequent Investment: $50 (minimums are lower for
certain retirement plans).
ANNUAL FUND EXPENSES
The Fund is no-load; there are no fees to purchase, exchange
or redeem shares. The Fund^ is authorized to pay a Rule 12b-1
distribution fee of up to one quarter of one percent of the Fund's
average net assets each year. (See "How To Buy Shares
- --Distribution Expenses.")
Like any company, the Fund has operating expenses -- such as portfolio
management, accounting, shareholder servicing, maintenance of shareholder
accounts, and other expenses. These expenses are paid from the Fund's assets.
Lower expenses therefore benefit investors by increasing the Fund's ^ investment
return.
We calculate annual operating expenses as a percentage of the Fund's
average annual net assets. To keep expenses competitive, the Fund's manager
voluntarily ^ reimbursed the Fund for amounts in excess of 1.00% of average net
assets from July 1, 1994 through April 30, 1996, and reimburses the Fund for
amounts in excess of 1.25% of average net assets effective May 1, 1996.
<PAGE>
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fee ^ 0.49%
12b-1 Fees 0.25%
Other Expenses ^ 0.25%
Total Fund Operating Expenses^(1)(2) 0.99%
^(1) Portions of brokerage commissions paid by the Fund were used to reduce Fund
expenses, and the Fund's custodian fees were reduced under an expense offset
arrangement. However, as a result of a new regulatory requirement, the figures
shown above do not reflect these reductions. In comparing expenses for different
years, please note that the ratios of Expenses to Average Net Assets shown under
"Financial Highlights" do reflect reductions for periods prior to the fiscal
year ended August 31, 1996.
(2) Certain Fund expenses are being voluntarily absorbed by INVESCO
Funds Group, Inc. ("IFG"). In the absence of such absorbed
expenses, the Fund's "Other Expenses" and "Total Fund Operating
Expenses" would have been ^ 0.25% and ^ 0.99%, respectively, based
on the Fund's actual expenses for the fiscal year ended August 31,
^ 1996. See "The Fund and Its Management."
Example
A shareholder would pay the following expenses on a $1,000 investment for
the periods shown, assuming a hypothetical 5% annual return and redemption at
the end of each time period. (Of course, actual operating expenses are paid from
the Fund's assets, and are deducted from the amount of income available for
distribution to shareholders; they are not charged directly to shareholder
accounts.)
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$10 $32 $55 ^ $122
The purpose of this table is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly. THE EXAMPLE SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE OR EXPENSES,
AND ACTUAL ANNUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
For more information on the Fund's expenses, see "The Fund and Its Management"
and "How to Buy Shares -- Distribution Expenses."
Since the Fund pays a distribution fee, investors who own Fund shares for
a long period of time may pay more than the economic equivalent of the maximum
front-end sales charge permitted for mutual funds by the National Association of
Securities Dealers, Inc. ^
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FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout ^ Each Period)
The following information has been audited by Price Waterhouse LLP,
independent accountants. This information should be read in conjunction with the
audited financial statements and the independent accountant's report thereon
appearing in the Fund's ^ 1996 Annual Report to Shareholders, which is
incorporated by reference into the Statement of Additional Information. Both are
available without charge by contacting IFG at the address or telephone number on
the cover of this prospectus. The Annual Report also contains more information
about the Fund's performance.
<TABLE>
<CAPTION>
Period
^ Ended
Year Ended August 31 August 31 Year Ended December 31
------------------------- --------- -------------------------------------------------------------
1996 1995 1994 1993> ^ 1992 1991 1990 1989 1988 1987 1986
^
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value -
Beginning of Period $6.73 $6.73 $7.32 $6.97 $6.66 $6.00 $7.16 $7.82 $7.75 $8.38 $8.37 ^
------------------------- --------- -------------------------------------------------------------
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.63 0.66 0.62 0.39 0.64 0.70 0.83 0.95 0.93 0.94 1.00 ^
Net Gains or (Losses)
on Securities
(Both ^ Realized
and Unrealized) 0.11 0.03 (0.59) 0.36 0.30 0.64 (1.14) (0.66) 0.07 (0.63) 0.19 ^
------------------------- --------- -------------------------------------------------------------
Total from Investment
Operations 0.74 0.69 0.03 0.75 0.94 1.34 (0.31) 0.29 1.00 0.31 1.19 ^
------------------------- --------- -------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net
Investment ^ Income+ 0.63 0.66 0.62 0.40 0.63 0.68 0.85 0.95 0.93 0.94 1.01 ^
Distributions from
Capital Gains 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.17 ^
<PAGE>
In Excess of
Capital Gains 0.00 0.03 ^ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------------------------- --------- -------------------------------------------------------------
Total Distributions 0.63 0.69 0.62 0.40 0.63 0.68 0.85 0.95 0.93 0.94 1.18
========================= ========= =============================================================
Net Asset Value -
End of Period $6.84 $6.73 $6.73 $7.32 $6.97 $6.66 $6.00 $7.16 $7.82 $7.75 $8.38
^ TOTAL RETURN 11.38% 11.12% 0.37% 11.01%* 14.53% 23.51% (4.57%) 3.72% 13.54% 3.52% 14.64% ^
RATIOS
Net Assets -
End of Period
($000 Omitted) $375,201 $288,959 $243,773 $308,945 $212,172 $99,103 $40,380 $49,017 $60,470 $37,848 $46,587 ^
Ratio of Expenses
to ^ Average
Net Assets# 0.99%@ 1.00% 0.97% 0.97%~ 1.00% 1.05% 0.94% 0.83% 0.82% 0.86% 0.76% ^
Ratio of Net
^ InvestmentIncome
to Average ^ Net
Assets# 9.13% 10.01% 8.70% 8.28%~ 9.29% 10.57% 12.57% 12.27% 11.72% 11.22% 11.35% ^
Portfolio Turnover Rate 266% 201% 195% 45%* 120% 64% 28% 53% 42% 89% 134% ^
^> From January 1, 1993 to August 31, 1993, the Fund's current fiscal year-end.
+ Distributions in excess of net investment income for the year ended August 31,
1996, aggregated less than $0.01 on a per share basis.
* Based^ on operations for the period shown and, accordingly, are not
representative of a full year.
# Various expenses of the Fund were voluntarily absorbed by IFG for the years
ended August 31, 1996, 1995 and 1994. If such expenses had not been voluntarily
absorbed, ratio of expenses to average net assets would have been 0.99%, 1.07%
and 0.98%, respectively, and ratio of net investment income to average net
assets would have been 9.13%, 9.94% and 8.69%, respectively.
@ Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
~ Annualized
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE AND STRATEGY
The Fund seeks to achieve as high a level of current income as is
consistent with the risk involved in investing substantially all of its assets
in bonds and other debt securities and in preferred stocks. This investment
objective is fundamental and cannot be changed without the approval of the
Fund's shareholders. There is no assurance that the Fund's investment objective
will be met.
The Fund invests primarily in higher yielding corporate bonds (including
convertible issues) and preferred stocks with medium to lower credit ratings.
These securities are generally rated Ba or lower by Moody's Investors Service,
Inc. ("Moody's") or BB or lower by Standard & Poor's ("S&P"). However, under no
circumstances will the Fund invest in any issue rated lower than Caa by Moody's
or CCC by S&P, or any issue that is in default. Potential capital appreciation
is a factor in the selection of investments, but is secondary to the Fund's
primary objective. (See "Investment Policies and Risks" below and the Appendix
to this prospectus for a description of bond ratings.)
The Fund also may invest in securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities (which may or may not be backed by
the full faith and credit of the United States) and bank certificates of
deposit. In addition, the Fund may invest in corporate short-term notes rated at
least A-1 by S&P or Prime-1 by Moody's. In addition, the Fund may invest in
municipal obligations, including municipal short-term notes rated at least SP-1
by S&P or MIG-1 by Moody's, when we believe that their potential returns are
better than those that might be achieved by investing in securities of corporate
or U.S. governmental issuers.
As a matter of policy, which may be changed without a vote of
shareholders, at least 65% of the Fund's total assets normally will be invested
in debt securities maturing at least three years after they are issued. However,
there are no limitations on the maturities of the securities held by the Fund,
and the Fund's average maturity will vary as Fund Management responds to changes
in interest rates.
When we believe market or economic conditions are adverse, the Fund may
act defensively -- that is, temporarily invest up to 100% of its assets in cash
and debt securities having maturities of less than three years at the time of
issuance, seeking to protect its assets until conditions stabilize.
INVESTMENT POLICIES AND RISKS
Investors should expect to see their price per share vary with moves in
the fixed-income market, economic conditions and other factors. The Fund invests
<PAGE>
in many different companies in a variety of industries; this
diversification reduces the Fund's overall exposure to investment and market
risks, but cannot eliminate these risks.
Corporate Bonds. When we assess an issuer's ability to meet its interest
rate obligations and repay its debt when due, we are referring to "credit risk."
Debt obligations are rated based on their estimated credit risk by independent
services such as S&P or Moody's. "Market risk" refers to sensitivity to changes
in interest rates: For instance, when interest rates go up, the market value of
a previously issued bond generally declines; on the other hand, when interest
rates go down, bonds generally see their prices increase.
Risks of Lower Rated Bonds. The lower a bond's quality, the more it is
subject to credit risk and market risk and the more speculative it becomes; this
is also true of most unrated securities. Since the Fund normally invests
primarily in issues rated below investment grade quality (commonly called "junk
bonds," and rated BB or lower by S&P or Ba or lower by Moody's or, if unrated,
are judged by Fund Management to be of equivalent quality), the securities held
by the Fund generally will be subject to greater credit and market risks. These
securities include issues which are of poorer quality and may have some
speculative characteristics, according to the ratings services. Never, under any
circumstances, is the Fund permitted to invest in bonds that are in default or
are rated below Caa by Moody's or CCC by S&P or, if unrated, are judged by Fund
Management to be of equivalent quality. Bonds rated Caa or CCC are predominantly
speculative and may be in default or may have present elements of danger with
respect to the repayment of principal or interest. While Fund Management
continuously monitors all of the corporate bonds in the Fund's portfolio for the
issuer's ability to make required principal and interest payments and other
quality factors, it may retain a bond whose rating is changed to one below the
minimum rating required for purchase of the security. The Fund is not required
to sell immediately debt securities that go into default, but may continue to
hold such securities until such time as Fund Management determines it is in the
best interests of the Fund to sell the securities.
Because investment in medium and lower rated securities involves both
greater credit risk and market risk, achievement of the Fund's investment
objectives may be more dependent on Fund Management's own credit analysis than
is the case for funds investing in higher quality securities. In addition, the
share price and yield of the Fund may be expected to fluctuate more than in the
case of funds investing in higher quality, shorter term securities. Moreover, a
significant economic downturn or major increase in interest rates may result in
issuers of lower rated securities experiencing increased financial stress, which
would adversely affect their ability to service their principal, dividend
<PAGE>
and interest obligations, meet projected business goals, and obtain additional
financing. In this regard, it should be noted that while the market for high
yield corporate bonds has been in existence for many years and from time to time
has experienced economic downturns, there has been a significant increase in the
use of high yield corporate debt securities to fund highly leveraged corporate
acquisitions and restructurings. Past experience may not, therefore, provide an
accurate indication of future performance of the high yield bond market,
particularly during periods of economic recession. Furthermore, expenses
incurred to recover an investment in a defaulted security may adversely affect
the Fund's net asset value. Finally, while Fund Management attempts to limit
purchases of medium and lower rated securities to securities having an
established secondary market, the secondary market for such securities may be
less liquid than the market for higher quality securities. The reduced liquidity
of the secondary market for such securities may adversely affect the market
price of, and ability of the Fund to value, particular securities at certain
times, thereby making it difficult to make specific valuation determinations.
For the fiscal year ended August 31, ^ 1996, the following percentages of
the Fund's total assets were invested in corporate bonds rated investment grade
(BBB by S&P or Baa by Moody's and above) at the time they were purchased: AAA--^
0.00%; AA--^ 0.00% ; A--^ 0.09%; and BBB--^ 1.49%, and the following percentages
were invested in corporate bonds rated below investment grade at the time of
purchase: BB--^ 20.46%; B--^ 58.65%; CCC--^ 5.87%; and D--^ 0.00%. Finally, ^
1.71% of total assets were invested in unrated corporate bonds. All of these
percentages were determined on a dollar-weighted basis, calculated by averaging
the Fund's month-end portfolio holdings during the fiscal year. Keep in mind
that the Fund's holdings are actively traded, and bond ratings are occasionally
adjusted by ratings services, so these figures do not represent the Fund's
actual holdings or quality ratings as of August 31, ^ 1996.
For a detailed description of corporate bond ratings, see the Appendix of
this prospectus and the Statement of Additional Information.
Foreign Securities. The Fund's investments in debt obligations may include
securities issued by foreign governments and foreign corporations. As a matter
of policy, which may be changed without a vote of shareholders, up to 25% of the
Fund's total assets, measured at the time of purchase, may be invested directly
in foreign debt securities, provided that all such securities are denominated
and pay interest in U.S. dollars (such as Eurobonds and Yankee bonds).
Securities of Canadian issuers are not subject to this 25% limitation.
Investments in foreign debt securities involve certain risks.
<PAGE>
For U.S. investors, the returns on foreign debt securities are
influenced not only by the returns on the foreign investments
themselves, but also by currency fluctuations. That is, when the
U.S. dollar generally rises against foreign currencies, returns on
foreign securities for a U.S. investor may decrease. By contrast,
in a period when the U.S. dollar generally declines, those returns
may increase. The Fund attempts to minimize these risks by
limiting its investments in foreign debt securities to those which
are denominated and pay interest in U.S. dollars.
Other aspects of international investing to consider include:
-less publicly available information than is generally
available about U.S. issuers;
-differences in accounting, auditing and financial reporting
standards;
-generally higher commission rates on foreign portfolio
transactions and longer settlement periods;
-smaller trading volumes and generally lower liquidity of foreign stock
markets, which may cause greater price volatility; and
-investments in certain countries may be subject to foreign withholding
taxes, which may reduce dividend income or capital gains payable to
shareholders.
There is also the possibility of expropriation or confiscatory taxation;
adverse changes in investment or exchange control regulations; political
instability; potential restrictions on the flow of international capital; and
the possibility of the Fund experiencing difficulties in pursuing legal remedies
and collecting judgments.
Illiquid and Rule 144A Securities. The Fund may invest up to ^ 15% of its
net assets in securities that are illiquid because they are subject to
restrictions on resale ("restricted securities") or because they are not readily
marketable^. The Fund may not be able to dispose of illiquid securities at the
time desired or at a reasonable price. In addition, if the securities are not
registered, their marketability and value could be adversely affected. The ^
Fund may purchase certain securities that are not registered for sale to the
general public, but that can be resold to institutional investors ("Rule 144A
Securities"), if a liquid trading market exists for such securities. The
liquidity of the Fund's investments in Rule 144A Securities could be impaired if
dealers or institutional investors become uninterested in purchasing these
securities. The Company's board of directors has delegated to Fund Management
the authority to determine the liquidity of Rule 144A Securities pursuant to
<PAGE>
guidelines approved by the board and therefore to conclude that such securities
are not subject to the foregoing 15% limitation. For more information concerning
illiquid Rule 144A Securities, see "Investment Policies and Restrictions" in the
Statement of Additional Information.
Zero Coupon Bonds and Pay-In-Kind Bonds. The Fund may invest in zero
coupon bonds and pay-in-kind bonds if Fund Management determines that the risk
of a default on the security, which could result in adverse tax consequences, is
not significant. Zero coupon bonds make no periodic interest payments. Instead,
they are sold at a discount from their face value. The buyer of the security
receives the rate of return by the gradual appreciation in the price of the
security, which is redeemed at face value at maturity. Pay-in-kind ("PIK") bonds
pay interest in cash or additional securities, at the issuer's option, for a
specified period. Being extremely responsive to changes in interest rates, the
market price of zero coupon and PIK securities may be more volatile than other
bonds. The Fund may be required to distribute income recognized on these bonds,
even though no cash interest payments are received, which could reduce the
amount of cash available for investment by the Fund.
Delayed Delivery or When-Issued Purchases. Debt securities may at times be
purchased or sold by the Fund with settlement taking place in the future. The
Fund may invest up to 10% of its net assets in when-issued securities. The
payment obligation and the interest rate that will be received on the securities
generally are fixed at the time the Fund enters into the commitment. Between the
date of purchase and the settlement date, the value of the securities is subject
to market fluctuations, and no interest is payable to the Fund prior to the
settlement date.
Securities Lending. The Fund may seek to earn additional income by lending
securities to qualified brokers, dealers, banks, or other financial
institutions, on a fully collateralized basis. For further information on this
policy, see "Investment Policies and Restrictions" in the Statement of
Additional Information.
Repurchase Agreements. The Fund may invest money, for as short a time as
overnight, using repurchase agreements ("repos"). With a repo, the Fund buys a
debt instrument, agreeing simultaneously to sell it back to the prior owner at
an agreed-upon price. The Fund could incur costs or delays in seeking to sell
the ^ security if the prior owner defaults on its repurchase obligation. To
reduce that risk, the securities ^ underlying each repurchase agreement will be
maintained with the Fund's custodian in an amount at least equal to the
repurchase price under the agreement (including accrued interest). These
agreements are entered into only with member banks of the Federal Reserve
System, registered broker-dealers, and registered U.S. government securities
<PAGE>
dealers that are deemed creditworthy under standards set by the ^ Company's
board of directors.
Portfolio Turnover. There are no fixed limitations regarding portfolio
turnover for the Fund; securities may be sold without regard to the time they
have been held when investment considerations warrant such action. Increased
turnover may result in greater brokerage commissions and acceleration of capital
gains that are taxable when distributed to shareholders. The Statement of
Additional Information includes an expanded discussion of the Fund's portfolio
turnover rate, its brokerage practices and certain federal income tax matters.
For a further discussion of risks associated with an investment in the
Fund, see "Investment Policies and Restrictions" and "Investment Practices" in
the Statement of Additional Information.
Investment Restrictions. Certain restrictions, which are set forth in the
Statement of Additional Information, may not be altered without the approval of
the Fund's shareholders. For example, the Fund limits to 5% the portion of its
total assets which may be invested in a single issuer, and to 25% the portion
that may be invested in any one industry (other than U.S. government
securities). The Fund's ability to borrow money is limited to borrowings from
banks for temporary or emergency purposes in amounts not exceeding 10% of net
assets. Additionally, except where indicated to the contrary, the investment
objectives and policies described in this prospectus are fundamental and may not
be changed without a vote of the Fund's shareholders.
THE FUND AND ITS MANAGEMENT
The Company is a no-load mutual fund, registered with the Securities and
Exchange Commission as a diversified, open-end, management investment company.
It was incorporated on August 20, 1976, under the laws of Colorado and was
reorganized as a Maryland corporation on April 2, 1993.
The Company's board of directors has responsibility for overall
supervision of the Fund, and reviews the services provided by the adviser and
sub-adviser. Under an agreement with the Company, INVESCO Funds Group, Inc.
("IFG"), 7800 E. Union Avenue, Denver, Colorado 80237, serves as the Fund's
investment manager; it is primarily responsible for providing the Fund with
various administrative services. IFG's wholly-owned subsidiary, INVESCO Trust,
is the Fund's sub-adviser and is primarily responsible for managing the Fund's
investments. Together, IFG and INVESCO Trust constitute "Fund Management."
Donovan "Jerry" Paul, portfolio manager for the Fund since
1994, has responsibility for the day-to-day management of the
<PAGE>
Fund's holdings. He also manages INVESCO Select Income Fund and INVESCO VIF-High
Yield Portfolio; further, he is co-manager of INVESCO Short-Term Bond Fund,
INVESCO Industrial Income Fund, INVESCO Balanced Fund, and INVESCO
VIF-Industrial Income Portfolio. A Chartered Financial Analyst and Certified
Public Accountant, Mr. Paul is a senior vice president and director of
fixed-income research of INVESCO Trust. His investment career was launched in
1976, and has included these highlights: He was a senior vice president and
director of fixed-income research (1989 to 1992) and portfolio manager (1987 to
1992) with Stein, Roe & Farnham Inc; from 1993 to 1994, he was president of
Quixote Investment Management, Inc. He holds an MBA from the University of
Northern Iowa and BBA from the University of Iowa.
Fund Management permits investment and other personnel to purchase and
sell securities for their own accounts, subject to a compliance policy governing
personal investing. This policy requires Fund Management's personnel to conduct
their personal investment activities in a manner that Fund Management believes
is not detrimental to the Fund or Fund Management's other advisory clients. See
the Statement of Additional Information for more detailed information.
The Fund pays IFG a monthly management fee which is based upon a
percentage of the Fund's average net assets determined daily; in turn, IFG pays
INVESCO Trust a sub-advisory fee out of its management fee. The management fee
is computed at the annual rate of 0.50% on the first $300 million of the Fund's
average net assets; 0.40% on the next $200 million of the Fund's average net
assets; and 0.30% on the Fund's average net assets over $500 million. For the
fiscal year ended August 31, ^ 1996, investment management fees paid by the Fund
amounted to ^ 0.49% (prior to the voluntary absorption of certain Fund expenses
by INVESCO) of its average net assets. Out of this fee, IFG paid an amount equal
to ^ 0.23% of the Fund's average net assets to INVESCO Trust as a sub- advisory
fee. No fee is paid by the Fund to INVESCO Trust.
Under a Transfer Agency Agreement, IFG acts as registrar, transfer agent,
and dividend disbursing agent for the Fund. The Fund pays an annual fee of ^
$26.00 per shareholder account or omnibus account participant for these
services. Registered broker-dealers, third party administrators of tax-qualified
retirement plans and other entities, including affiliates of IFG, may provide
equivalent services to the Fund. In these cases, IFG may pay, out of the fee it
receives from the Fund, an annual sub-transfer agency or record-keeping fee to
the third party.
In addition, under an Administrative Services Agreement, IFG handles
additional administrative, record-keeping, and internal sub-accounting services
for the Fund. For the fiscal year ended August 31, ^ 1996, the Fund paid IFG a
<PAGE>
fee for these services equal to 0.02% (prior to the voluntary absorption of
certain fund expenses by IFG) of the Fund's average net assets.
The Fund's expenses, which are accrued daily, are deducted from total
income before dividends are paid. Total expenses of the Fund (prior to any
expense offset) for the fiscal year ended August 31, ^ 1996, including
investment management fees (but excluding brokerage commissions, which are a
cost of acquiring securities), amounted to ^ 0.99% of the Fund's average net
assets. Certain Fund expenses are absorbed voluntarily by IFG pursuant to a
commitment to the Fund in order to ensure that the Fund's total operating
expenses ^ did not exceed 1.00% of the Fund's average net assets (from July 1,
1994 through April 30, 1996) and do not exceed 1.25% of the Fund's average net
assets (beginning May 1, 1996). This commitment may be changed following
consultation with the Company's board of directors. In the absence of this
voluntary expense limitation, the Fund's total operating expenses would have
been ^ 0.99% of its average net assets.
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of
their financial responsibility coupled with their ability to effect transactions
at the best available prices. As discussed under "How to Buy Shares --
Distribution Expenses," the Fund may market its shares through intermediary
brokers or dealers that have entered into Dealer Agreements with IFG, as the
Fund's Distributor. The Fund may place orders for portfolio transactions with
qualified ^ broker-dealers that recommend the Fund, or sell shares of the Fund,
to clients, or act as agent in the purchase of Fund shares for clients, if Fund
Management believes that the quality of the execution of the transaction and
level of commission are comparable to those available from other qualified
brokerage firms. For further information, see "Investment Practices -- Placement
of Portfolio Brokerage" in the Statement of Additional Information.
The parent company for IFG and INVESCO Trust is INVESCO PLC, a publicly
traded holding company whose subsidiaries provide investment services around the
world. IFG was established in 1932 and, as of ^ August 31, 1996, managed 14
mutual funds, consisting of ^ 39 separate portfolios, with combined assets of
approximately ^ $12.8 billion on behalf of over ^ 827,000 shareholders. INVESCO
Trust (founded in 1969) served as adviser or sub-adviser to ^ 46 investment
portfolios as of August 31, ^ 1996, including 27 portfolios in the INVESCO
group. These ^ 46 portfolios had aggregate assets of approximately ^ $12.0
billion as of August 31, ^ 1996. In addition, INVESCO Trust provides investment
management services to private clients, including employee benefit plans that
may be invested in a collective trust sponsored by INVESCO Trust.
<PAGE>
FUND PRICE AND PERFORMANCE
Determining Price. The value of your investment in the Fund will vary
daily. The price per share is also known as the Net Asset Value ("NAV"). IFG
prices the Fund every day that the New York Stock Exchange is open, as of the
close of regular trading ^ (normally, 4:00 p.m., New York time). NAV is
calculated by adding together the current market value of all of the Fund's
assets, including accrued interest and dividends; then subtracting liabilities,
including accrued expenses; and finally dividing that dollar amount by the total
number of shares outstanding.
Performance Data. To keep shareholders and potential investors informed,
we will occasionally advertise the Fund's total return and yield. Total return
figures show the average annual rate of return on a $1,000 investment in the
Fund, assuming reinvestment of all dividends and capital gain distributions for
one-, five- and ten-year periods. Cumulative total return shows the actual rate
of return on an investment; 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, not showing the interim variations in performance over the
periods cited.
The yield of the Fund refers to the income generated by an investment in
the Fund over a 30-day or one month period, and is computed by dividing the net
investment income per share earned during the period by the net asset value per
share at the end of the period, then adjusting the result to provide for
semi-annual compounding.
More information about the Fund's recent and historical performance is
contained in the Fund's Annual Report to shareholders. You can get a free copy
by calling or writing to IFG using the telephone number or address on the cover
of this prospectus.
When we quote mutual fund rankings published by Lipper Analytical
Services, Inc., we may compare the Fund to others in its category of High
Current Yield Funds, as well as the broad-based Lipper general fund groupings.
These rankings allow you to compare the Fund to its peers. Other independent
financial media also produce performance- or service-related comparisons, which
you may see in our promotional materials. For more information see "Fund
Performance" in the Statement of Additional Information.
Performance figures are based on historical investment results and are not
intended to suggest future performance.
HOW TO BUY SHARES
The ^ chart on page 48 shows several convenient ways to invest in the
Fund. Your new Fund shares will be priced at the NAV next determined after your
order is received in proper form. There is no charge to invest, exchange, or
<PAGE>
redeem shares when you make transactions directly through IFG. However, if
you invest in the Fund through a securities broker, you may be charged a
commission or transaction fee. For all new accounts, please send a completed
application form. Please specify which Fund you wish to purchase.
Fund Management reserves the right to increase, reduce or waive the
minimum investment requirements in its sole discretion, where it determines this
action is in the best interests of the Fund. Further, Fund Management reserves
the right in its sole discretion to reject any order for the purchase of Fund
shares (including purchases by exchange) when, in its judgment, such rejection
is in the Fund's best interests.
HOW TO BUY SHARES
================================================================================
Method Investment Minimum Please Remember
- --------------------------------------------------------------------------------
By Check $1,000 for regular If your check does
Mail to: account; not clear, you will
INVESCO Funds $250 for an be responsible for
Group, Inc. Individual any related loss
P.O. Box 173706 Retirement Account; the Fund or IFG
Denver, CO 80217- $50 minimum for incurs. If you are
3706. each subsequent already a
Or you may send investment. shareholder in the
your check by INVESCO funds, the
overnight courier Fund may seek
to: 7800 E. Union reimbursement from
Ave., your existing
Denver, CO 80237. account(s) for any
loss incurred.
<PAGE>
- --------------------------------------------------------------------------------
By Telephone or $1,000. Payment must be
Wire received within 3
Call 1-800-525-8085 business days, or
to request your the transaction may
purchase. Then send be cancelled. If a
your check by telephone purchase
overnight courier is cancelled due to
to our street nonpayment, you
address: will be responsible
7800 E. Union Ave., for any related
Denver, CO 80237. loss the Fund or
Or you may transmit IFG incurs. If you
your payment by are already a
bank wire (call IFG shareholder in the
for instructions). INVESCO funds, the
Fund may seek
reimbursement from
your existing
account(s) for any
loss incurred.
- --------------------------------------------------------------------------------
With EasiVest or $50 per month for Like all regular
Direct Payroll EasiVest; $50 per investment plans,
Purchase pay period for neither EasiVest
You may enroll on Direct Payroll nor Direct Payroll
the fund Purchase. You may Purchase ensures a
application, or start or stop your profit or protects
call us for the regular investment against loss in a
correct form and plan at any time, falling market.
more details. with two weeks' Because you'll
Investing the same notice to IFG. invest continually,
amount on a monthly regardless of
basis allows you to varying price
buy more shares levels, consider
when prices are low your financial
and fewer shares ability to keep
when prices are buying through low
high. This "dollar- price levels. And
cost averaging" may remember that you
help offset market will lose money if
fluctuations. Over you redeem your
a period of time, shares when the
your average cost market value of all
per share may be your shares is less
less than the than their cost.
actual average
price per share.
<PAGE>
- --------------------------------------------------------------------------------
By PAL $1,000. Be sure to write
Your "Personal down the
Account Line" is confirmation number
available for provided by PAL.
subsequent Payment must be
purchases and received within 3
exchanges 24-hours business days, or
a day. Simply call the transaction may
1-800-424-8085. be cancelled. If a
telephone purchase
is cancelled due to
nonpayment, you
will be responsible
for any related
loss the Fund or
IFG incurs. If you
are already a
shareholder in the
INVESCO funds, the
Fund may seek
reimbursement from
your existing
account(s) for any
loss incurred.
- --------------------------------------------------------------------------------
By Exchange $1,000 to open a See "Exchange
Between this and new account; $50 Privilege^," below.
another of the for written
INVESCO funds. Call requests to
1-800-525-8085 for purchase additional
prospectuses of shares for an
other INVESCO existing account.
funds. You may also (The exchange
establish an minimum is $250 for
Automatic Monthly purchases requested
Exchange service by telephone.)
between two INVESCO
funds; call IFG for
further details and
the correct form.
================================================================================
Your order to purchase Fund shares will not begin earning dividends or
other distributions until your payment can be converted into available federal
funds under regular banking procedures or, if you are acquiring shares in an
exchange from another INVESCO fund, the Fund receives the proceeds of the
exchange. Checks normally are converted into federal funds (moneys held on
deposit within the Federal Reserve System) within two or three business days
<PAGE>
after we receive them, although this period may be longer for checks drawn
on banks that are not members of the Federal Reserve System.
Exchange Privilege. You may exchange your shares in this Fund for those in
another INVESCO fund, on the basis of their respective net asset values at the
time of the exchange. Before making any exchange, be sure to review the
prospectuses of the funds involved and consider their differences.
Please note these policies regarding exchanges of fund shares:
1) The fund accounts must be identically registered.
2) You may make four exchanges out of each fund during each
calendar year.
3) An exchange is the redemption of shares from one fund followed by the
purchase of shares in another. Therefore, any gain or loss realized on the
exchange is recognizable for federal income tax purposes (unless, of course,
your account is tax-deferred).
4) The Fund reserves the right to reject any exchange request, or to
modify or terminate exchange privileges, in the best interests of the Fund and
its shareholders. Notice of all such modifications or termination will be given
at least 60 days prior to the effective date of the change in privilege, except
for unusual instances (such as when redemptions of the exchanged shares are
suspended under Section 22(e) of the Investment Company Act of 1940, or when
sales of the fund into which you are exchanging are temporarily stopped).
Distribution Expenses. The Fund is authorized under a Plan and Agreement
of Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Plan") to use its assets to finance certain activities relating to the
distribution of shares. These expenditures may include compensation (including
incentive compensation and/or continuing compensation based on the amount of
customer assets maintained in the Fund) to securities dealers and other
financial institutions and organizations, which may include IFG-affiliated
companies, to obtain various distribution-related and/or administrative services
for the Fund. Such services may include, among other things, processing new
shareholder account applications, preparing and transmitting to the Fund's
transfer agent computer-processable tapes of all transactions by customers, and
serving as the primary source of information to customers in answering questions
concerning the Fund and their transactions.
In addition, other reimbursable expenditures include advertising,
preparation and distribution of sales literature, printing and distribution of
prospectuses to prospective investors, public relations efforts, marketing
programs and such other services and promotional activities agreed upon from
<PAGE>
time to time by the Fund and its board of directors. These services and
activities may be conducted by the staff of IFG or its affiliates or by third
parties.
IFG is not entitled to reimbursement for overhead expenses under the Plan,
but may be reimbursed for all or a portion of the compensation paid for salaries
and other employee benefits for IFG personnel whose primary responsibilities
involve marketing shares of the INVESCO funds, including the Fund. Also, any
payments made by the Fund may not be used to finance the distribution of shares
of any other mutual fund advised by IFG. Payments made by the Fund under the
Plan for compensation of marketing personnel, as noted above, are based on an
allocation formula designed to ensure that all such payments are appropriate.
Under the Plan, the Fund's reimbursement to IFG is limited to an amount
computed at a maximum annual rate of 0.25% of the Fund's average net assets.
Payments by the Fund under the Plan, for any month, may only be made to
reimburse expenditures incurred during the rolling 12-month period in which that
month falls. Therefore, any reimbursable expenses incurred by IFG in excess of
the limitation described above are not reimbursable and will be borne by IFG. In
addition, IFG may from time to time make additional payments from its revenues
to securities dealers and other financial institutions that provide
distribution-related and/or administrative services for the Fund. No further
payments will be made by the Fund under the Plan in the event of its
termination.
FUND SERVICES
Shareholder Accounts. IFG will maintain a share account that reflects your
current holdings. Share certificates will be issued only upon specific request.
You will have greater flexibility to conduct transactions if you do not request
certificates.
Transaction Confirmations. You will receive detailed
confirmations of individual purchases, exchanges, and redemptions.
If you choose certain recurring transaction plans (for instance,
EasiVest), your transactions will be confirmed on your quarterly
Investment Summary.
Investment Summaries. Each calendar quarter, shareholders receive a
written statement which consolidates and summarizes account activity and value
at the beginning and end of the period for each of their INVESCO funds.
Reinvestment of Distributions. Dividends and capital gain distributions
are automatically invested in additional fund shares at the NAV on the
ex-dividend date, unless you choose to have dividends and/or capital gain
distributions automatically reinvested in another INVESCO fund or paid by check
(minimum of $10.00).
<PAGE>
Telephone Transactions. All shareholders may exchange and redeem Fund
shares by telephone, unless they expressly decline these privileges. By signing
the new account Application, a Telephone Transaction Authorization Form, or
otherwise using these privileges, the investor has agreed that, if the Fund has
followed reasonable procedures, such as recording telephone instructions and
sending written transaction confirmations, it will not be liable for following
telephoned instructions that it believes to be genuine. As a result of this
policy, the investor may bear the risk of any loss due to unauthorized or
fraudulent instructions.
Retirement Plans and IRAs. Fund shares may be purchased for Individual
Retirement Accounts ^("IRAs") and many types of tax-deferred retirement plans.
IFG can supply you with information and forms to establish or transfer your
existing plan or account.
HOW TO SELL SHARES
The following chart shows several convenient ways to redeem your Fund
shares. Shares of the Fund may be redeemed at any time at their current NAV next
determined after a request in proper form is received at the Fund's office. The
NAV at the time of the redemption may be more or less than the price you paid to
purchase your shares, depending primarily upon the Fund's investment
performance.
Please ^ specify from which fund you wish to redeem shares. Shareholders
have a separate account for each fund in which they invest.
HOW TO SELL SHARES
================================================================================
Method Minimum Redemption Please Remember
================================================================================
By Telephone $250 (or, if less, These telephone
Call us toll-free full liquidation of redemption
at 1-800-525-8085. the account) for a privileges may be
redemption check; modified or
$1,000 for a wire terminated in the
to bank of record. future at the
The maximum amount discretion of IFG.
which may be
redeemed by
telephone is
generally $25,000.
<PAGE>
- --------------------------------------------------------------------------------
In Writing Any amount. The If the shares to be
Mail your request redemption request redeemed are
to INVESCO Funds must be signed by represented by
Group, Inc., P.O. all registered stock certificates,
Box 173706 shareholders(s). the certificates
Denver, CO 80217- Payment will be must be sent to
3706. You may also mailed to your IFG.
send your request address of record,
by overnight or to a pre-
courier to 7800 E. designated bank.
Union Ave., Denver,
CO 80237.
- --------------------------------------------------------------------------------
By Exchange $1,000 to open a See "Exchange
Between this and new account; $50 Privilege," ^ page
another of the for written 51.
INVESCO funds. Call requests to
1-800-525-8085 for purchase additional
prospectuses of shares for an
other INVESCO existing account.
funds. You may also (The exchange
establish an minimum is $250 for
automatic monthly exchanges requested
exchange service by telephone.)
between two INVESCO
funds; call IFG for
further details and
the correct form.
- --------------------------------------------------------------------------------
Periodic Withdrawal $100 per payment, You must have at
Plan on a monthly or least $10,000 total
You may call us to quarterly basis. invested with the
request the The redemption INVESCO funds, with
appropriate form check may be made at least $5,000 of
and more payable to any that total invested
information at 1- party you in the fund from
800-525-8085. designate. which withdrawals
will be made.
- --------------------------------------------------------------------------------
Payment To Third Any amount. All registered
Party owners of the
Mail your request account must sign
to INVESCO Funds the request, with a
Group, Inc., P.O. signature guarantee
Box 173706 from an eligible
Denver, CO 80217- guarantor financial
3706. institution, such
as a commercial
bank or recognized
national or
regional securities
firm.
================================================================================
<PAGE>
While the Fund will attempt to process telephone redemptions promptly,
there may be times -- particularly in periods of severe economic or market
disruption -- when you may experience delays in redeeming shares by phone.
Payments of redemption proceeds will be mailed within seven days following
receipt of the redemption request in proper form. However, payment may be
postponed under unusual circumstances -- for instance, if normal trading is not
taking place on the New York Stock Exchange or during an emergency as defined by
the Securities and Exchange Commission. If your shares were purchased by a check
which has not yet cleared, payment will be made promptly upon clearance of the
purchase check (which may take up to 15 days).
If you participate in EasiVest, the Fund's automatic monthly investment
program, and redeem all of the shares in your account, we will terminate any
further EasiVest purchases unless you instruct us otherwise.
Because of the high relative costs of handling small accounts, should the
value of any shareholder's account fall below $250 as a result of shareholder
action, the Fund reserves the right to involuntarily redeem all shares in such
account, in which case the account would be liquidated and the proceeds
forwarded to the shareholder. Prior to any such redemption, a shareholder will
be notified and given 60 days to increase the value of the account to $250 or
more.
TAXES, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Taxes. The Fund intends to distribute to shareholders substantially all of
its net investment income, net capital gains and net gains from foreign currency
transactions, if any, in order to continue to qualify for tax treatment as a
regulated investment company. Thus, the Fund does not expect to pay any federal
income or excise taxes.
Unless shareholders are exempt from income taxes, they must include all
dividends and capital gain distributions in taxable income for federal, state,
and local income tax purposes. Dividends and other distributions are taxable
whether they are received in cash or automatically distributed in shares of the
Fund or another fund in the INVESCO group.
The Fund may be subject to withholding of foreign taxes on dividends or
interest it receives on foreign securities. Foreign taxes withheld will be
treated as an expense of the Fund unless the Fund meets the qualifications to
enable it to pass these taxes through to shareholders for use by them as a
foreign tax credit or deduction.
<PAGE>
Shareholders may be subject to backup withholding of 31% on dividends,
capital gain distributions and redemption proceeds. Unless you are subject to
backup withholding for other reasons, you can avoid backup withholding on your
Fund account by ensuring that we have a correct, certified tax identification
number.
Dividends and Capital Gain Distributions. The Fund earns ordinary or net
investment income in the form of dividends and interest on its investments. The
Fund's policy is to distribute substantially all of this income, less Fund
expenses, to shareholders on a monthly basis, at the discretion of the ^
Company's board of directors.
In addition, the Fund realizes capital gains and losses when it sells
securities for more or less than it paid. If total gains on sales exceed total
losses (including losses carried forward from previous years), the Fund has a
net realized capital gain. Net realized capital gains, if any, are distributed
to shareholders at least annually, usually in December.
Dividends and capital gain distributions are paid to shareholders who hold
shares on the record date of distribution regardless of how long the shares have
been held. The Fund's share price will then drop by the amount of the
distribution on the day the distribution is made. If a shareholder purchases
shares immediately prior to the distribution, the shareholder will, in effect,
have "bought" the distribution by paying the full purchase price, a portion of
which is then returned in the form of a taxable distribution^.
At the end of each year, information regarding the tax status of dividends
and capital gain distributions is provided to shareholders. Net realized capital
gains are divided into short-term and long-term gains depending upon how long
the Fund held the security which gave rise to the gains. The capital gains
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 taxable
dividends.
Shareholders also may realize capital gains or losses when they sell their
Fund shares at more or less than the price originally paid.
We encourage you to consult a tax adviser with respect to
these matters. For further information see "Dividends, Capital Gain
Distributions and Taxes" in the Statement of Additional
Information.
<PAGE>
ADDITIONAL INFORMATION
Voting Rights. All shares of the Company have equal voting rights based on
one vote for each share owned. Voting with respect to certain matters, such as
ratification of independent accountants and the election of directors, will be
by all the funds of the Company voting together. In other cases, such as voting
upon an investment advisory contract, voting is on a fund-by-fund basis. To the
extent permitted by law, when not all funds are affected by a matter to be voted
upon, only shareholders of the fund or funds affected by the matter will be
entitled to vote thereon. The Company is not generally required and does not
expect to hold regular annual meetings of shareholders. However, 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 Investment Company Act
of 1940.
<PAGE>
APPENDIX -- RATINGS SERVICES
There are several independent ratings services that analyze debt
obligations and preferred stock issued by corporations. The two most frequently
used services are Moody's Investors Service, Inc., and Standard & Poor's.
The charts below shows the various ratings used by each service for the
categories of bonds and preferred stock in which the Fund may invest. There are
additional refinements to each rating system: Moody's may use the modifier 1 to
indicate that the security ranks in the higher end of its generic ratings
category; modifier 2 indicates a mid-range rank, and 3 indicates the issue ranks
at the lower end of its category. Similarly, S&P may use a + or - sign to
indicate a security's relative standing within its generic category.
================================================================================
Moody's S&P Bond Description
- --------------------------------------------------------------------------------
Aaa AAA Highest quality, often referred to as
"gilt edged." Carries the smallest
degree of investment risk: Interest
payments are protected by a larger or
exceptionally stable margin and
principal is secure.
- --------------------------------------------------------------------------------
Aa AA High quality or high grade. Margins of
protection may be smaller than those
above, or fluctuation of protective
elements may be of greater amplitude.
Other elements may be present which
make long-term risks somewhat larger
than in Aaa or AAA securities.
- --------------------------------------------------------------------------------
A A Upper medium-grade obligations.
Adequate to strong capacity to pay
principal and interest, but somewhat
more susceptible to adverse effects of
changes in circumstances and economic
conditions.
- --------------------------------------------------------------------------------
Baa BBB Medium-grade obligations. Neither
highly protected nor poorly secured.
Interest and principal security
currently appear adequate, but certain
protective elements may be lacking or
characteristically unreliable over the
longer-term. May have speculative
characteristics.
<PAGE>
- --------------------------------------------------------------------------------
Ba BB Speculative, but less near-term
vulnerability to default than those
below. These bonds face major ongoing
uncertainties or exposure to adverse
business, financial or economic
conditions that could lead to
inadequate capacity to make timely
interest and principal payments.
- --------------------------------------------------------------------------------
B B Generally lack characteristics of a
desirable investment. Greater
vulnerability to default: currently
have capacity to meet timely interest
and principal payments, but assurance
of payments over any extended period of
time may be small, and/or other terms
of the bond contract may be in
jeopardy.
- --------------------------------------------------------------------------------
Caa CCC Bonds in poor standing. These bonds may be
in default or there may be present elements of
danger with respect to principal or interest.
- --------------------------------------------------------------------------------
aaa AAA Top-quality. Good asset protection and
extremely strong capacity for dividend
payment.
- --------------------------------------------------------------------------------
aa AA High-grade. Offers reasonable assurance
that earnings and asset protection will
remain relatively well-maintained in
the foreseeable future.
- --------------------------------------------------------------------------------
a A Upper medium-grade. Earnings and asset
protection are expected to remain at
adequate levels.
- --------------------------------------------------------------------------------
baa BBB Medium-grade. Neither highly protected
nor poorly secured. Backed by adequate
capacity to maintain dividend payments,
but susceptible to adverse economic
conditions or changing circumstances.
- --------------------------------------------------------------------------------
ba BB Has speculative elements and its future
is not well assured. Earnings and
asset protection may be very moderate
and not well safeguarded during adverse
periods.
<PAGE>
- --------------------------------------------------------------------------------
b B Lacks the characteristics of a
desirable investment. Assurance of
dividend payments over any extended
period of time may be small.
================================================================================
<PAGE>
INVESCO HIGH YIELD FUND
A no-load mutual fund seeking a high level of
current income from lower rated securities.
PROSPECTUS
^ December 31, 1996
To receive general information and prospectuses on any of ^ INVESCO's funds or
retirement plans, or to obtain current account or price information or responses
to other questions, call toll-free:
1-800-525-8085
To reach PAL, your 24-hour Personal Account Line ^ call:
1-800-424-8085
You can find us on the World Wide Web:
http://www.invesco.com
Or write to:
INVESCO Funds Group, Inc., Distributor
^ Post Office Box 173706
Denver, Colorado 80217-3706
If you're in Denver, please visit one of our convenient Investor Centers:
Cherry Creek
155-B Fillmore Street;
Denver Tech Center
7800 East Union Avenue
Lobby Level
<PAGE>
PROSPECTUS
^ December 31, 1996
INVESCO U.S. GOVERNMENT SECURITIES FUND
INVESCO U.S. Government Securities Fund (the "Fund") is actively managed
to seek as high a level of current income as is consistent with the risk
involved in investing in bonds and other debt obligations issued or guaranteed
by the U.S. government, its agencies and instrumentalities, and in repurchase
agreements and futures contracts with respect to such securities. Potential
capital appreciation is a factor in the selection of investments, but is
secondary to the Fund's primary objective.
This prospectus provides you with the basic information you should know
before investing in the Fund. You should read it and keep it for future
reference. A Statement of Additional Information containing further information
about the Fund, dated ^ December 31, 1996, has been filed with the Securities
and Exchange Commission and is incorporated by reference into this prospectus.
To obtain a free copy, write to INVESCO Funds Group, Inc., P.O. Box 173706,
Denver, Colorado 80217-3706; or call 1-800-525-8085.
<PAGE>
^CONTENTS
ESSENTIAL INFORMATION...................................................... 63
ANNUAL FUND EXPENSES....................................................... 64
FINANCIAL HIGHLIGHTS....................................................... 66
INVESTMENT OBJECTIVE AND STRATEGY.......................................... 68
INVESTMENT POLICIES AND RISKS.............................................. 68
THE FUND AND ITS MANAGEMENT................................................ 70
FUND PRICE AND PERFORMANCE................................................. 72
HOW TO BUY SHARES.......................................................... 73
FUND SERVICES.............................................................. 78
HOW TO SELL SHARES......................................................... 78
TAXES, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS............................ 81
ADDITIONAL INFORMATION..................................................... 82
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION. THE SHARES
OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
ESSENTIAL INFORMATION
Investment Goal And Strategy. INVESCO U.S. Government
Securities Fund is a diversified mutual fund that seeks as high a
level of current income as is consistent with the risk involved in
investing in bonds and other debt obligations issued or guaranteed
by the U.S. government, its agencies and instrumentalities, and in
repurchase agreements and futures contracts with respect to such
securities. The securities in which the Fund invests offer a wide
range of maturities. In selecting investments, we consider
potential capital appreciation as a secondary factor. There is no
guarantee that the Fund will meet its objective. See "Investment
Objective And Strategy."
Designed For: Investors primarily seeking daily income, paid monthly.
While not a complete investment program, the Fund may be a valuable element of
your investment portfolio. You may also wish to consider the Fund as part of a
Uniform Gifts/Transfers to Minors Account or systematic investment strategy. The
Fund may be a suitable investment for tax-sheltered retirement programs such as
the IRA, SEP-IRA, SARSEP, 401(k), Profit Sharing, Money Purchase Pension, or
403(b) plans.
Time Horizon. The Fund is primarily managed for current income, with the
secondary potential for capital growth. Investors should not consider this Fund
for the portion of their savings devoted to capital appreciation, or for that
portion focused on liquidity and stable principal value.
Risks. The Fund uses a moderate investment strategy, focusing
on U.S. government and government agency securities. These
investments are subject to both credit and market risk. See
"Investment Policies and Risks."
Organization and Management. The Fund is a series of INVESCO
Income Funds, Inc. (the "Company"), a diversified, managed, no-load
mutual fund. The Fund is owned by its shareholders. It employs
INVESCO Funds Group, Inc. ("IFG"), founded in 1932, to serve as
investment adviser, administrator, distributor, and transfer agent;
and INVESCO Trust Company ("INVESCO Trust"), founded in 1969, as
sub-adviser. Together, IFG and INVESCO Trust constitute "Fund
Management."
Richard R. Hinderlie selects the Fund's investments. Mr.
Hinderlie earned his MBA from the Arizona State University and a BA
from Pacific Lutheran University. See "The Fund And Its
Management."
IFG and INVESCO Trust are part of a global firm that managed approximately
^ $90 billion as of June 30, ^ 1996. The parent company, INVESCO PLC, is based
in London, with money managers located in Europe, North America, and the Far
East.
<PAGE>
This Fund ^ offers all of the following services at no charge:
-------------------------------------------------------------
Telephone purchases
Telephone exchanges
Telephone redemptions
Automatic reinvestment of distributions
Regular investment plans ^ such as EasiVest (the Fund's
automatic monthly investment program), Direct Payroll
Purchase, and Automatic Monthly Exchange)
Periodic withdrawal plans
See "How To Buy Shares" and "How To Sell Shares."
Minimum Initial Investment: $1,000, which is waived for
regular investment plans, including EasiVest and Direct Payroll
Purchase, and certain retirement plans.
Minimum Subsequent Investment: $50 (minimums are lower for
certain retirement plans).
ANNUAL FUND EXPENSES
The Fund is no-load; there are no fees to purchase, exchange
or redeem shares. The Fund^ is authorized to pay a Rule 12b-1
distribution fee of up to one quarter of one percent of the Fund's
average net assets each year. (See "How To Buy Shares
- --Distribution Expenses.")
Like any company, the Fund has operating expenses -- such as portfolio
management, accounting, shareholder servicing, maintenance of shareholder
accounts, and other expenses. These expenses are paid from the Fund's assets.
Lower expenses therefore benefit investors by increasing the Fund's total
return.
We calculate annual operating expenses as a percentage of the Fund's
average annual net assets. To keep expenses competitive, the Fund's manager
voluntarily reimburses the Fund for amounts in excess of 1.00% of average net
assets.
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fee 0.55%
12b-1 Fees 0.25%
Other Expenses ^ 0.22%
Total Fund Operating Expenses ^(1)(2) 1.02%
^(1) Portions of the brokerage commissions paid by the Fund were used to reduce
Fund expenses, and the Fund's custodian fees were reduced under an expense
offset arrangement. However, as a result of a new regulatory requirement, the
figures shown above do not reflect these reductions. In comparing expenses for
different years, please note that the ratios of Expenses to Average Net
<PAGE>
Assets shown under "Financial Highlights" do reflect reductions for periods
prior to the fiscal year ended August 31, 1996.
(2) Certain Fund expenses are being voluntarily absorbed by INVESCO Funds Group,
Inc. ("IFG). In the absence of such absorbed expenses, the Fund's "Other
Expenses" and "Total Fund Operating Expenses" would have been ^ 0.68% and ^
1.48%, respectively, based on the Fund's actual expenses for the fiscal year
ended August 31, ^ 1996. See "The Fund and Its Management."
Example
A shareholder would pay the following expenses on a $1,000 investment for
the periods shown, assuming a hypothetical 5% annual return and redemption at
the end of each time period. (Of course, actual operating expenses are paid from
the Fund's assets, and are deducted from the amount of income available for
distribution to shareholders; they are not charged directly to shareholder
accounts.)
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$10 ^ $33 $57 $125
The purpose of this table is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly. THE EXAMPLE SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE OR EXPENSES,
AND ACTUAL ANNUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
For more information on the Fund's expenses, see "The Fund and Its Management"
and "How to Buy Shares -- Distribution Expenses."
Since the Fund pays a distribution fee, investors who own Fund shares for
a long period of time may pay more than the economic equivalent of the maximum
front-end sales charge permitted for mutual funds by the National Association of
Securities Dealers, Inc. ^
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout ^ Each Period)
The following information has been audited by Price Waterhouse LLP,
independent accountants. This information should be read in conjunction with the
audited financial statements and the independent accountant's report thereon
appearing in the Fund's ^ 1996 Annual Report to Shareholders, which is
incorporated by reference into the Statement of Additional Information. Both are
available without charge by contacting IFG at the address or telephone number on
the cover of this prospectus. The Annual Report also contains more information
about the Fund's performance.
<TABLE>
<CAPTION>
Period Period ^
Ended Ended
Year Ended ^ August 31 August 31 Year Ended ^ December 31
-------------------------- --------- -------------------------------------------------------------
1996 1995 1994 1993> ^ 1992 1991 1990 1989 1988 1987 1986^
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value -
Beginning of Period $7.49 $7.10 $8.19 $7.61 $7.65 $7.09 $7.14 $6.87 $6.98 $7.90 $7.50
------------------------- -------- -------------------------------------------------------------
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.44 0.45 0.41 0.28 0.46 0.48 0.53 0.56 0.54 0.53 0.61
Net Gains or (Losses)
on ^ Securities (Both
Realized and
^ Unrealized) (0.34) 0.39 (0.93) 0.58 (0.04) 0.57 (0.05) 0.26 (0.11) (0.92) 0.43
------------------------- -------- -------------------------------------------------------------
Total from Investment
Operations 0.10 0.84 (0.52) 0.86 0.42 1.05 0.48 0.82 0.43 (0.39) 1.04
------------------------- -------- -------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net
Investment ^ Income 0.43 0.45 0.41 0.28 0.46 0.49 0.53 0.55 0.54 0.53 0.61
In Excess of Net
Investment Income+ 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
<PAGE>
68
Distributions from
Capital Gains 0.00 0.00 0.16 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.03
------------------------- -------- -------------------------------------------------------------
Total Distributions 0.44 0.45 0.57 0.28 0.46 0.49 0.53 0.55 0.54 0.53 0.64
------------------------- -------- -------------------------------------------------------------
Net Asset Value -
End of Period $7.15 $7.49 $7.10 $8.19 $7.61 $7.65 $7.09 $7.14 $6.87 $6.98 $7.90
========================= ======== =============================================================
TOTAL RETURN 1.31% 12.37% (6.53%) 11.61%* 5.68% 15.56% 7.23% 12.40% 6.39% (5.10%) 14.23%*
RATIOS
Net Assets -
End of Period
($000 Omitted) $54,614$38,087 $36,740 $36,391 $35,799 $29,229 $21,247 $19,293 $9,388 $7,848 $7,165
Ratio of Expenses
to Average Net
^ Assets# 1.02%@ 1.00% 1.32% 1.40%~ 1.27% 1.27% 1.07% 1.04% 1.19% 1.29% 0.74%~
Ratio of Net Investment
Income to Average
Net Assets# 5.76% 6.24% 5.46% 5.36%~ 6.08% 6.78% 7.58% 7.98% 7.75% 7.06% 7.53%~
Portfolio Turnover Rate 212% 99% 95% 100%* 115% 67% 38% 159% 221% 284% 61%*
^> From January 1, 1993 to August 31, 1993, the Fund's current fiscal year-end.
^ From January 2, 1986, commencement of operations, to December 31, 1986.
+ Distributions in excess of net investment income for the year ended August 31,
1995, aggregated less than $0.01 on a per share basis.
* ^ Based on operations for the period shown and, accordingly, are not
representative of a full year.
# Various expenses of the Fund were voluntarily absorbed by IFG for the years
ended August 31, 1996, 1995 and 1994 and for the period ended ^ December 31,
1986. If such expenses had not been voluntarily absorbed, ratio of expenses to
average net assets would have been 1.48%, 1.51%, 1.42% and 1.11%, respectively,
and ratio of net investment income to average net assets would have been 5.30%,
5.73%, 5.36% and 7.16%, respectively.
@ Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
~ Annualized
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE AND STRATEGY
The Fund seeks a high level of income by investing in bonds and other debt
obligations issued or guaranteed by the U.S. government, its agencies and
instrumentalities, and in repurchase agreements and futures contracts with
respect to such securities. This investment objective is fundamental and cannot
be changed without the approval of the Fund's shareholders. Potential capital
appreciation is a factor in the selection of investments, but is secondary to
the Fund's primary objective. There is no assurance that the Fund's investment
objective will be met.
The Fund invests substantially all (and in no event less than 65%) of its
assets in government and government agency debt securities, government agency
and instrumentality securities. Some of these portfolio holdings -- Treasury
bonds, bills, and notes -- may be issued directly by the U.S. government and are
backed by the full faith and credit of the federal government. Similar
protection is offered by securities of certain agencies, which include, among
others, the Government National Mortgage Association (GNMA), the Department of
Housing and Urban Development, the Small Business Administration, and the
Farmers' Home Administration. In addition, the Fund may hold U.S. government
agency securities not supported by the U.S. government, but only by the credit
of the issuer. These include securities issued by the Federal National Mortgage
Association (FNMA), the Federal Home Loan Mortgage Corporation (FHLMC), the
Federal Home Loan Bank and the Student Loan Marketing Association. The value of
the Fund's shares is not guaranteed by the U.S. government.
As a matter of policy, which may be changed without a vote of
shareholders, at least 65% of the Fund's total assets normally will be invested
in debt securities maturing at least three years after they are issued. However,
there are no limitations on the maturities of the securities held by the Fund,
and the Fund's average maturity will vary as Fund Management responds to changes
in interest rates.
When we believe market or economic conditions are adverse, the Fund may
act defensively -- that is, temporarily invest up to 100% of its assets in cash
and debt securities having maturities of less than three years at the time of
issuance, seeking to protect its assets until conditions stabilize.
INVESTMENT POLICIES AND RISKS
Investors should expect to see their price per share vary with moves in
the fixed-income market, economic conditions and other factors.
When we assess an issuer's ability to meet its interest rate obligations
and repay its debt when due, we are referring to "credit risk." Debt securities
<PAGE>
issued by the U.S. government, its agencies and instrumentalities carry a
low level of credit risk compared to higher yielding corporate bonds.
"Market risk" refers to sensitivity to changes in interest rates: For
instance, when interest rates go up, the market value of a previously issued
bond generally declines; on the other hand, when interest rates go down, bonds
generally see their prices increase. All bonds, including government and
government agency securities, are subject to market risk.
Mortgage-Backed Securities. The Fund may invest in mortgage-backed
securities issued or guaranteed by the U.S. government or federal agencies such
as GNMA, FNMA and FHLMC. Some of these securities, such as GNMA certificates,
are backed by the full faith and credit of the U.S. Treasury while others, such
as FHLMC certificates, are not. Mortgage-backed securities represent interests
in pools of mortgages which have been purchased from loan institutions such as
banks and savings & loans, and packaged for resale in the secondary market.
Interest and principal are "passed through" to the holders of the securities.
The timely payment of interest and principal is guaranteed by a federal agency,
but the market value of the security is not guaranteed and will vary. When
interest rates drop, many home buyers choose to refinance their mortgages. These
prepayments may shorten the average weighted lives of mortgage-backed securities
and may lower their returns.
Interest Rate Futures Contracts. The Fund may buy and sell interest rate
futures contracts relating to U.S. government securities for the purpose of
hedging the value of its securities portfolio. These practices and their risks
are discussed under "Investment Policies and Restrictions" in the Statement of
Additional Information.
Delayed Delivery or When-Issued Purchases. Debt securities may at times be
purchased or sold by the Fund with settlement taking place in the future. The
payment obligation and the interest rate that will be received on the securities
generally are fixed at the time the Fund enters into the commitment. Between the
date of purchase and the settlement date, the value of the securities is subject
to market fluctuations, and no interest is payable to the Fund prior to the
settlement date.
Securities Lending. The Fund may seek to earn additional income by lending
securities to qualified brokers, dealers, banks, or other financial
institutions, on a fully collateralized basis. For further information on this
policy, see "Investment Policies and Restrictions" in the Statement of
Additional Information.
Repurchase Agreements. The Fund may invest money, for as short
a time as overnight, using repurchase agreements ("repos"). With a
repo, the Fund buys a debt instrument, agreeing simultaneously to
<PAGE>
sell it back to the prior owner at an agreed-upon price. The Fund could incur
costs or delays in seeking to sell the ^ security if the prior owner defaults on
its repurchase obligation. To reduce that risk, the securities ^ underlying each
repurchase agreement will be maintained with the Fund's custodian in an amount
at least equal to the repurchase price under the agreement (including accrued
interest). These agreements are entered into only with member banks of the
Federal Reserve System, registered broker-dealers, and registered U.S.
government securities dealers that are deemed creditworthy under standards set
by the ^ Company's board of directors.
Portfolio Turnover. There are no fixed limitations regarding portfolio
turnover for the Fund; securities may be sold without regard to the time they
have been held when investment considerations warrant such action. Increased
turnover may result in greater brokerage commissions and acceleration of capital
gains which are taxable when distributed to shareholders. The Statement of
Additional Information includes an expanded discussion of the Fund's portfolio
turnover rate, its brokerage practices and certain federal income tax matters.
For a further discussion of risks associated with an investment in the
Fund, see "Investment Policies and Restrictions" and "Investment Practices" in
the Statement of Additional Information.
Investment Restrictions. Certain restrictions, which are set forth in the
Statement of Additional Information, may not be altered without the approval of
the Fund's shareholders. For example, the Fund's ability to borrow money is
limited to borrowings from banks for temporary or emergency purposes in amounts
not exceeding 10% of net assets. Additionally, except where indicated to the
contrary, the investment objectives and policies described in this prospectus
are fundamental and may not be changed without a vote of the Fund's
shareholders.
THE FUND AND ITS MANAGEMENT
The Company is a no-load mutual fund, registered with the Securities and
Exchange Commission as a diversified, open-end, management investment company.
It was incorporated on August 20, 1976, under the laws of Colorado and was
reorganized as a Maryland corporation on April 2, 1993.
The Company's board of directors has responsibility for overall
supervision of the Fund, and reviews the services provided by the adviser and
sub-adviser. Under an agreement with the Company, INVESCO Funds Group, Inc.
("IFG"), 7800 E. Union Avenue, Denver, Colorado 80237, serves as the Fund's
investment manager; it is primarily responsible for providing the Fund with
various administrative services. IFG's wholly-owned subsidiary, INVESCO Trust,
<PAGE>
is the Fund's sub-adviser and is primarily responsible for managing the
Fund's investments. Together, IFG and INVESCO Trust constitute "Fund
Management."
Richard R. Hinderlie, portfolio manager for the Fund since 1994, has
responsibility for the day-to-day management of the Fund's holdings. He also
manages INVESCO U.S. Government Money Fund, INVESCO Cash Reserves Fund and
INVESCO Short-Term Bond Fund. Mr. Hinderlie has been a portfolio manager for
INVESCO Trust since 1993. Before joining INVESCO Trust, he was a securities
analyst with Bank Western from 1987 to 1993. He earned an MBA from Arizona State
University and BA from Pacific Lutheran University.
Fund Management permits investment and other personnel to purchase and
sell securities for their own accounts, subject to a compliance policy governing
personal investing. This policy requires Fund Management's personnel to conduct
their personal investment activities in a manner that Fund Management believes
is not detrimental to the Fund or Fund Management's other advisory clients. See
the Statement of Additional Information for more detailed information.
The Fund pays IFG a monthly management fee which is based upon a
percentage of the Fund's average net assets determined daily; in turn, IFG pays
INVESCO Trust a sub-advisory fee out of its management fee. The management fee
is computed at the annual rate of 0.55% on the first $300 million of the Fund's
average net assets; 0.45% on the next $200 million of the Fund's average net
assets; and 0.35% on the Fund's average net assets over $500 million. For the
fiscal year ended August 31, ^ 1996, investment management fees paid by the Fund
amounted to 0.55% (prior to the voluntary absorption of certain Fund expenses by
INVESCO) of its average net assets. Out of this fee, IFG paid an amount equal to
0.25% of the Fund's average net assets to INVESCO Trust as a sub- advisory fee.
No fee is paid by the Fund to INVESCO Trust.
Under a Transfer Agency Agreement, IFG acts as registrar, transfer agent,
and dividend disbursing agent for the Fund. The Fund pays an annual fee of ^
$26.00 per shareholder account or omnibus account participant for these
services. Registered broker-dealers, third party administrators of tax-qualified
retirement plans and other entities, including affiliates of IFG, may provide
equivalent services to the Fund. In these cases, IFG may pay, out of the fee it
receives from the Fund, an annual sub-transfer agency or record-keeping fee to
the third party.
In addition, under an Administrative Services Agreement, IFG handles
additional administrative, record-keeping, and internal sub-accounting services
for the Fund. For the fiscal year ended August 31, ^ 1996, the Fund paid IFG a
fee for these services equal to 0.04% (prior to the voluntary absorption of
certain fund expenses by IFG) of the Fund's average net assets.
<PAGE>
The Fund's expenses, which are accrued daily, are deducted from total
income before dividends are paid. Total expenses of the Fund (prior to any
expense offset) for the fiscal year ended August 31, ^ 1996, including
investment management fees (but excluding brokerage commissions, which are a
cost of acquiring securities), amounted to ^ 1.02% of the Fund's average net
assets. Certain Fund expenses are absorbed voluntarily by IFG pursuant to a
commitment to the Fund in order to ensure that the Fund's total operating
expenses do not exceed 1.00% of the Fund's average net assets. This commitment
may be changed following consultation with the Company's board of directors. In
the absence of this voluntary expense limitation, the Fund's total operating
expenses would have been ^ 1.48% of its average net assets.
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of
their financial responsibility coupled with their ability to effect transactions
at the best available prices. As discussed under "How to Buy Shares --
Distribution Expenses," the Fund may market its shares through intermediary
brokers or dealers that have entered into Dealer Agreements with IFG, as the
Fund's Distributor. The Fund may place orders for portfolio transactions with
qualified ^ broker-dealers that recommend the Fund, or sell shares of the Fund,
to clients, or act as agent in the purchase of Fund shares for clients, if Fund
Management believes that the quality of the execution of the transaction and
level of commission are comparable to those available from other qualified
brokerage firms. For further information, see "Investment Practices -- Placement
of Portfolio Brokerage" in the Statement of Additional Information.
The parent company for IFG and INVESCO Trust is INVESCO PLC, a publicly
traded holding company whose subsidiaries provide investment services around the
world. IFG was established in 1932 and, as of August 31, ^ 1996, managed 14
mutual funds, consisting of ^ 39 separate portfolios, with combined assets of
approximately ^ $12.8 billion on behalf of over ^ 827,000 shareholders. INVESCO
Trust (founded in 1969) served as adviser or sub-adviser to ^ 46 investment
portfolios as of August 31, ^ 1996, including 27 portfolios in the INVESCO
group. These ^ 46 portfolios had aggregate assets of approximately ^ $12.0
billion as of August 31, ^ 1996. In addition, INVESCO Trust provides investment
management services to private clients, including employee benefit plans that
may be invested in a collective trust sponsored by INVESCO Trust.
FUND PRICE AND PERFORMANCE
Determining Price. The value of your investment in the Fund will vary
daily. The price per share is also known as the Net Asset Value ("NAV"). IFG
prices the Fund every day that the New York Stock Exchange is open, as of the
close of regular trading ^ (normally, 4:00 p.m., New York time). NAV is
calculated by adding together the current market value of all of the Fund's
<PAGE>
assets, including accrued interest and dividends; then subtracting
liabilities, including accrued expenses; and finally dividing that dollar amount
by the total number of shares outstanding.
Performance Data. To keep shareholders and potential investors informed,
we will occasionally advertise the Fund's total return and yield. Total return
figures show the average annual rate of return on a $1,000 investment in the
Fund, assuming reinvestment of all dividends and capital gain distributions for
one-, five- and ten-year periods. Cumulative total return shows the actual rate
of return on an investment; 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, not showing the interim variations in performance over the
periods cited.
The yield of the Fund refers to the income generated by an investment in
the Fund over a 30-day or one month period, and is computed by dividing the net
investment income per share earned during the period by the net asset value per
share at the end of the period, then adjusting the result to provide for
semi-annual compounding.
More information about the Fund's recent and historical performance is
contained in the Fund's Annual Report to shareholders. You can get a free copy
by calling or writing to IFG using the telephone number or address on the cover
of this prospectus.
When we quote mutual fund rankings published by Lipper Analytical
Services, Inc., we may compare the Fund to others in its category of U.S.
Government Funds, as well as the broad-based Lipper general fund groupings.
These rankings allow you to compare the Fund to its peers. Other independent
financial media also produce performance- or service-related comparisons, which
you may see in our promotional materials. For more information see "Fund
Performance" in the Statement of Additional Information.
Performance figures are based on historical investment results and are not
intended to suggest future performance.
HOW TO BUY SHARES
The ^ chart on page 75 shows several convenient ways to invest in the
Fund. Your new Fund shares will be priced at the NAV next determined after your
order is received in proper form. There is no charge to invest, exchange, or
redeem shares when you make transactions directly through IFG. However, if you
invest in the Fund through a securities broker, you may be charged a commission
or transaction fee. For all new accounts, please send a completed application
form. Please specify which Fund you wish to purchase.
<PAGE>
Fund Management reserves the right to increase, reduce or waive the
minimum investment requirements in its sole discretion, where it determines this
action is in the best interests of the Fund. Further, Fund Management reserves
the right in its sole discretion to reject any order for the purchase of Fund
shares (including purchases by exchange) when, in its judgment, such rejection
is in the Fund's best interests.
HOW TO BUY SHARES
================================================================================
Method Investment Minimum Please Remember
- --------------------------------------------------------------------------------
By Check $1,000 for regular If your check does
Mail to: account; $250 for not clear, you will
INVESCO Funds an Individual be responsible for
Group, Inc. Retirement Account; any related loss
P.O. Box 173706 $50 minimum for the Fund or IFG
Denver, CO 80217- each subsequent incurs. If you are
3706. investment. already a
Or you may send shareholder in the
your check by INVESCO funds, the
overnight courier Fund may seek
to: 7800 E. Union reimbursement from
Ave., your existing
Denver, CO 80237. account(s) for any
loss incurred.
- --------------------------------------------------------------------------------
By Telephone or $1,000. Payment must be
Wire received within 3
Call 1-800-525-8085 business days, or
to request your the transaction may
purchase. Then send be cancelled. If a
your check by ^ purchase is
overnight courier cancelled due to
to our street nonpayment, you
address: will be responsible
7800 E. Union Ave., for any related
Denver, CO 80237. loss the Fund or
Or you may transmit IFG incurs. If you
your payment by are already a
bank wire (call IFG shareholder in the
for instructions). INVESCO funds, the
Fund may seek
reimbursement from
your existing
account(s) for any
loss incurred.
<PAGE>
- --------------------------------------------------------------------------------
With EasiVest or $50 per month for Like all regular
Direct Payroll EasiVest; $50 per investment plans,
Purchase pay period for neither EasiVest
You may enroll on Direct Payroll nor Direct Payroll
the fund Purchase. You may Purchase ensures a
application, or start or stop your profit or protects
call us for the regular investment against loss in a
correct form and plan at any time, falling market.
more details. with two weeks' Because you'll
Investing the same notice to IFG. invest continually,
amount on a monthly regardless of
basis allows you to varying price
buy more shares levels, consider
when prices are low your financial
and fewer shares ability to keep
when prices are buying through low
high. This "dollar- price levels. And
cost averaging" may remember that you
help offset market will lose money if
fluctuations. Over you redeem your
a period of time, shares when the
your average cost market value of all
per share may be your shares is less
less than the than their cost.
actual average
price per share.
- --------------------------------------------------------------------------------
By PAL $1,000. Be sure to write
Your "Personal down the
Account Line" is confirmation number
available for provided by PAL.
subsequent Payment must be
purchases and received within 3
exchanges 24-hours business days, or
a day. Simply call the transaction may
1-800-424-8085. be cancelled. If a
telephone purchase
is cancelled due to
nonpayment, you
will be responsible
for any related
loss the Fund or
IFG incurs. If you
are already a
shareholder in the
INVESCO funds, the
Fund may seek
reimbursement from
your existing
account(s) for any
loss incurred.
<PAGE>
- --------------------------------------------------------------------------------
By Exchange $1,000 to open a See "Exchange
Between this and new account; $50 Privilege^," below.
another of the for written
INVESCO funds. Call requests to
1-800-525-8085 for purchase additional
prospectuses of shares for an
other INVESCO existing account.
funds. You may also (The exchange
establish an minimum is $250 for
Automatic Monthly purchases requested
Exchange service by telephone.)
between two INVESCO
funds; call IFG for
further details and
the correct form.
================================================================================
Your order to purchase Fund shares will not begin earning dividends or
other distributions until your payment can be converted into available federal
funds under regular banking procedures or, if you are acquiring shares in an
exchange from another INVESCO fund, the Fund receives the proceeds of the
exchange. Checks normally are converted into federal funds (moneys held on
deposit within the Federal Reserve System) within two or three business days
after we receive them, although this period may be longer for checks drawn on
banks that are not members of the Federal Reserve System.
Exchange Privilege. You may exchange your shares in this Fund for those in
another INVESCO fund, on the basis of their respective net asset values at the
time of the exchange. Before making any exchange, be sure to review the
prospectuses of the funds involved and consider their differences.
Please note these policies regarding exchanges of fund shares:
1) The fund accounts must be identically registered.
2) You may make four exchanges out of each fund during each
calendar year.
3) An exchange is the redemption of shares from one fund followed by
the purchase of shares in another. Therefore, any gain or loss
realized on the exchange is recognizable for federal income tax
purposes (unless, of course, your account is tax-deferred).
4) The Fund reserves the right to reject any exchange
request, or to modify or terminate exchange privileges,
in the best interests of the Fund and its shareholders.
Notice of all such modifications or termination will be
<PAGE>
given at least 60 days prior to the effective date of the change in
privilege, except for unusual instances (such as when redemptions of
the exchanged shares are suspended under Section 22(e) of the
Investment Company Act of 1940, or when sales of the fund into which
you are exchanging are temporarily stopped).
Distribution Expenses. The Fund is authorized under a Plan and Agreement
of Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Plan") to use its assets to finance certain activities relating to the
distribution of shares. These expenditures may include compensation (including
incentive compensation and/or continuing compensation based on the amount of
customer assets maintained in the Fund) to securities dealers and other
financial institutions and organizations, which may include IFG-affiliated
companies, to obtain various distribution-related and/or administrative services
for the Fund. Such services may include, among other things, processing new
shareholder account applications, preparing and transmitting to the Fund's
transfer agent computer-processable tapes of all transactions by customers, and
serving as the primary source of information to customers in answering questions
concerning the Fund and their transactions.
In addition, other reimbursable expenditures include advertising,
preparation and distribution of sales literature, printing and distribution of
prospectuses to prospective investors, public relations efforts, marketing
programs and such other services and promotional activities agreed upon from
time to time by the Fund and its board of directors. These services and
activities may be conducted by the staff of IFG or its affiliates or by third
parties.
IFG is not entitled to reimbursement for overhead expenses under the Plan,
but may be reimbursed for all or a portion of the compensation paid for salaries
and other employee benefits for IFG personnel whose primary responsibilities
involve marketing shares of the INVESCO funds, including the Fund. Also, any
payments made by the Fund may not be used to finance the distribution of shares
of any other mutual fund advised by IFG. Payments made by the Fund under the
Plan for compensation of marketing personnel, as noted above, are based on an
allocation formula designed to ensure that all such payments are appropriate.
Under the Plan, the Fund's reimbursement to IFG is limited to an amount
computed at a maximum annual rate of 0.25% of the Fund's average net assets.
Payments by the Fund under the Plan, for any month, may only be made to
reimburse expenditures incurred during the rolling 12-month period in which that
month falls. Therefore, any reimbursable expenses incurred by IFG in excess of
the limitation described above are not reimbursable and will be borne by IFG. In
addition, IFG may from time to time make additional payments from its revenues
<PAGE>
to securities dealers and other financial institutions that provide
distribution-related and/or administrative services for the Fund. No further
payments will be made by the Fund under the Plan in the event of its
termination.
FUND SERVICES
Shareholder Accounts. IFG will maintain a share account that reflects your
current holdings. Share certificates will be issued only upon specific request.
You will have greater flexibility to conduct transactions if you do not request
certificates.
Transaction Confirmations. You will receive detailed
confirmations of individual purchases, exchanges, and redemptions.
If you choose certain recurring transaction plans (for instance,
EasiVest), your transactions will be confirmed on your quarterly
Investment Summary.
Investment Summaries. Each calendar quarter, shareholders receive a
written statement which consolidates and summarizes account activity and value
at the beginning and end of the period for each of their INVESCO funds.
Reinvestment of Distributions. Dividends and capital gain distributions
are automatically invested in additional fund shares at the NAV on the
ex-dividend date, unless you choose to have dividends and/or capital gain
distributions automatically reinvested in another INVESCO fund or paid by check
(minimum of $10.00).
Telephone Transactions. All shareholders may exchange and redeem Fund
shares by telephone, unless they expressly decline these privileges. By signing
the new account Application, a Telephone Transaction Authorization Form, or
otherwise using these privileges, the investor has agreed that, if the Fund has
followed reasonable procedures, such as recording telephone instructions and
sending written transaction confirmations, it will not be liable for following
telephoned instructions that it believes to be genuine. As a result of this
policy, the investor may bear the risk of any loss due to unauthorized or
fraudulent instructions.
Retirement Plans and IRAs. Fund shares may be purchased for Individual
Retirement Accounts ^("IRAs") and many types of tax-deferred retirement plans.
IFG can supply you with information and forms to establish or transfer your
existing plan or account.
HOW TO SELL SHARES
The following chart shows several convenient ways to redeem your Fund
shares. Shares of the Fund may be redeemed at any time at their current NAV next
determined after a request in proper form is received at the Fund's office. The
NAV at the time of the redemption may be more or less than the price you paid to
<PAGE>
purchase your shares, depending primarily upon the Fund's investment
performance.
Please ^ specify from which fund you wish to redeem shares. Shareholders
have a separate account for each fund in which they invest.
HOW TO SELL SHARES
================================================================================
Method Minimum Redemption Please Remember
================================================================================
By Telephone $250 (or, if less, These telephone
Call us toll-free full liquidation of redemption
at 1-800-525-8085. the account) for a privileges may be
redemption check; modified or
$1,000 for a wire terminated in the
to bank of record. future at the
The maximum amount discretion of IFG.
which may be
redeemed by
telephone is
generally $25,000.
- --------------------------------------------------------------------------------
In Writing Any amount. The If the shares to be
Mail your request redemption request redeemed are
to INVESCO Funds must be signed by represented by
Group, Inc., P.O. all registered stock certificates,
Box 173706 shareholders(s). the certificates
Denver, CO 80217- Payment will be must be sent to
3706. You may also mailed to your IFG.
send your request address of record,
by overnight or to a pre-
courier to 7800 E. designated bank.
Union Ave., Denver,
CO 80237.
- --------------------------------------------------------------------------------
By Exchange $1,000 to open a See "Exchange
Between this and new account; $50 Privilege," ^ page
another of the for written 77.
INVESCO funds. Call requests to
1-800-525-8085 for purchase additional
prospectuses of shares for an
other INVESCO existing account.
funds. You may also (The exchange
establish an minimum is $250 for
automatic monthly exchanges requested
exchange service by telephone.)
between two INVESCO
funds; call IFG for
further details and
the correct form.
<PAGE>
- --------------------------------------------------------------------------------
Periodic Withdrawal $100 per payment, You must have at
Plan on a monthly or least $10,000 total
You may call us to quarterly basis. invested with the
request the The redemption INVESCO funds, with
appropriate form check may be made at least $5,000 of
and more payable to any that total invested
information at 1- party you in the fund from
800-525-8085. designate. which withdrawals
will be made.
- --------------------------------------------------------------------------------
Payment To Third Any amount. All registered
Party owners of the
Mail your request account must sign
to INVESCO Funds the request, with a
Group, Inc., P.O. signature guarantee
Box 173706 from an eligible
Denver, CO 80217- guarantor financial
3706. institution, such
as a commercial
bank or recognized
national or
regional securities
firm.
================================================================================
While the Fund will attempt to process telephone redemptions promptly,
there may be times -- particularly in periods of severe economic or market
disruption -- when you may experience delays in redeeming shares by phone.
Payments of redemption proceeds will be mailed within seven days following
receipt of the redemption request in proper form. However, payment may be
postponed under unusual circumstances -- for instance, if normal trading is not
taking place on the New York Stock Exchange or during an emergency as defined by
the Securities and Exchange Commission. If your shares were purchased by a check
which has not yet cleared, payment will be made promptly upon clearance of the
purchase check (which may take up to 15 days).
If you participate in EasiVest, the Fund's automatic monthly investment
program, and redeem all of the shares in your account, we will terminate any
further EasiVest purchases unless you instruct us otherwise.
Because of the high relative costs of handling small accounts, should the
value of any shareholder's account fall below $250 as a result of shareholder
action, the Fund reserves the right to involuntarily redeem all shares in such
account, in which case the account would be liquidated and the proceeds
forwarded to the shareholder. Prior to any such redemption, a shareholder will
<PAGE>
be notified and given 60 days to increase the value of the account to
$250 or more.
TAXES, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Taxes. The Fund intends to distribute to shareholders substantially all of
its net investment income and net capital gains, if any, in order to continue to
qualify for tax treatment as a regulated investment company. Thus, the Fund does
not expect to pay any federal income or excise taxes.
Unless shareholders are exempt from income taxes, they must include all
dividends and capital gain distributions in taxable income for federal, state,
and local income tax purposes. Dividends and other distributions are taxable
whether they are received in cash or automatically distributed in shares of the
Fund or another fund in the INVESCO group.
Shareholders may be subject to backup withholding of 31% on dividends,
capital gain distributions and redemption proceeds. Unless you are subject to
backup withholding for other reasons, you can avoid backup withholding on your
Fund account by ensuring that we have a correct, certified tax identification
number.
Dividends and Capital Gain Distributions. The Fund earns ordinary or net
investment income in the form of dividends and interest on its investments. The
Fund's policy is to distribute substantially all of this income, less Fund
expenses, to shareholders on a monthly basis, at the discretion of the ^
Company's board of directors.
In addition, the Fund realizes capital gains and losses when it sells
securities for more or less than it paid. If total gains on sales exceed total
losses (including losses carried forward from previous years), the Fund has a
net realized capital gain. Net realized capital gains, if any, are distributed
to shareholders at least annually, usually in December.
Dividends and capital gain distributions are paid to shareholders who hold
shares on the record date of distribution regardless of how long the shares have
been held. The Fund's share price will then drop by the amount of the
distribution on the day the distribution is made. If a shareholder purchases
shares immediately prior to the distribution, the shareholder will, in effect,
have "bought" the distribution by paying the full purchase price, a portion of
which is then returned in the form of a taxable distribution^.
At the end of each year, information regarding the tax status of dividends
and capital gain distributions is provided to shareholders. Net realized capital
gains are divided into short-term and long-term gains depending upon how long
<PAGE>
the Fund held the security which gave rise to the gains. The capital gains
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 taxable
dividends.
Shareholders also may realize capital gains or losses when they sell their
Fund shares at more or less than the price originally paid.
We encourage you to consult a tax adviser with respect to
these matters. For further information see "Dividends, Capital Gain
Distributions and Taxes" in the Statement of Additional
Information.
ADDITIONAL INFORMATION
Voting Rights. All shares of the Company have equal voting rights based on
one vote for each share owned. Voting with respect to certain matters, such as
ratification of independent accountants and the election of directors, will be
by all the funds of the Company voting together. In other cases, such as voting
upon an investment advisory contract, voting is on a fund-by-fund basis. To the
extent permitted by law, when not all funds are affected by a matter to be voted
upon, only shareholders of the fund or funds affected by the matter will be
entitled to vote thereon. The Company is not generally required and does not
expect to hold regular annual meetings of shareholders. However, 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 Investment Company Act
of 1940.
<PAGE>
INVESCO U.S. GOVERNMENT SECURITIES FUND
A no-load mutual fund seeking a high level of
current income from government and government
agency debt obligations.
PROSPECTUS
^ December 31, 1996
To receive general information and prospectuses on any of ^ INVESCO's funds or
retirement plans, or to obtain current account or price information or responses
to other questions, call toll-free:
1-800-525-8085
To reach PAL, your 24-hour Personal Account Line ^ call:
1-800-424-8085
You can find us on the World Wide Web:
http://www.invesco.com
Or write to:
INVESCO Funds Group, Inc., Distributor
^ Post Office Box 173706
Denver, Colorado 80217-3706
If you're in Denver, please visit one of our convenient Investor Centers:
Cherry Creek
155-B Fillmore Street;
Denver Tech Center
7800 East Union Avenue
Lobby Level
<PAGE>
PROSPECTUS
^ December 31, 1996
INVESCO SHORT-TERM BOND FUND
INVESCO Short-Term Bond Fund (the "Fund") is actively managed to seek the
highest level of current income as is consistent with minimum fluctuation in
principal value and with maintaining liquidity. The Fund invests in a
diversified portfolio of short-and intermediate-term debt obligations issued by
corporations, as well as the U.S. government and its agencies, with a
dollar-weighted average maturity of not more than three years.
This prospectus provides you with the basic information you should know
before investing in the Fund. You should read it and keep it for future
reference. A Statement of Additional Information containing further information
about the Fund, dated ^ December 31, 1996 has been filed with the Securities and
Exchange Commission and is incorporated by reference into this prospectus. To
obtain a free copy, write to INVESCO Funds Group, Inc., P.O. Box 173706, Denver,
Colorado 80217-3706; or call 1-800-525-8085.
<PAGE>
CONTENTS
ESSENTIAL INFORMATION...................................................... 86
ANNUAL FUND EXPENSES....................................................... 87
FINANCIAL HIGHLIGHTS....................................................... 90
INVESTMENT OBJECTIVE AND STRATEGY.......................................... 92
INVESTMENT POLICIES AND RISKS.............................................. 92
THE FUND AND ITS MANAGEMENT................................................ 96
FUND PRICE AND PERFORMANCE................................................. 99
HOW TO BUY SHARES..........................................................100
FUND SERVICES..............................................................105
HOW TO SELL SHARES.........................................................105
TAXES, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS............................108
ADDITIONAL INFORMATION.....................................................109
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION. THE SHARES
OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
ESSENTIAL INFORMATION
Investment Goal And Strategy. INVESCO Short-Term Bond Fund is
a diversified mutual fund that seeks to achieve the highest level
of current income as is consistent with minimum fluctuation in
principal value and with maintaining liquidity. The Fund invests
in corporate and government and government agency debt securities;
the average dollar-weighted maturity of holdings is no more than
three years. There is no guarantee that the Fund will meet its
objective. See "Investment Objective And Strategy."
Designed For: Investors seeking higher yields than those available from
shorter-term, higher quality money market funds and who can tolerate modest
price fluctuations. While not a complete investment program, the Fund may be a
valuable element of your investment portfolio. You may also wish to consider the
Fund as part of a Uniform Gifts/Transfers to Minors Account or systematic
investment strategy. The Fund may be a suitable investment for tax-sheltered
retirement programs such as the IRA, SEP-IRA, SARSEP, 401(k), Profit Sharing,
Money Purchase Pension, or 403(b) plans.
Time Horizon. The Fund is primarily managed for current
income. Investors should not consider this Fund for the portion of
their savings devoted to long-term capital appreciation.
Risks. The Fund uses a moderate investment strategy, focusing
on shorter-term obligations which fluctuate less in value than
long-term bonds^, but may hold securities rated below investment
grade. The Fund's investments are subject to ^ credit risk and
market risk, both of which are increased by investing in lower
rated securities. The Fund will not provide the same stability of
principal as money market funds. See "Investment Policies and
Risks."
Organization and Management. The Fund is a series of INVESCO
Income Funds, Inc. (the "Company"), a diversified, managed, no-load
mutual fund. The Fund is owned by its shareholders. It employs
INVESCO Funds Group, Inc. ("IFG"), founded in 1932, to serve as
investment adviser, administrator, distributor, and transfer agent;
and INVESCO Trust Company ("INVESCO Trust"), founded in 1969, as
sub-adviser. Together, IFG and INVESCO Trust constitute "Fund
Management."
The Fund's investments are selected by two INVESCO portfolio managers:
INVESCO senior vice president Donovan J. (Jerry) Paul and INVESCO vice president
Richard R. Hinderlie ^. Mr Paul, a Chartered Financial Analyst, holds an MBA
from the University of Northern Iowa and a BBA from the University of Iowa. Mr.
Hinderlie earned his MBA from ^ Arizona State University and ^ his BA from
Pacific Lutheran University. ^
<PAGE>
IFG and INVESCO Trust are part of a global firm that managed approximately
$74 billion as of June 30, 1995. The parent company, INVESCO PLC, is based in
London, with money managers located in Europe, North America, and the Far East.
This Fund ^ offers all of the following services at no charge:
-------------------------------------------------------------
Telephone purchases
Telephone exchanges
Telephone redemptions
Automatic reinvestment of distributions
Regular investment plans ^ such as EasiVest (the Fund's
automatic monthly investment program), Direct Payroll
Purchase, and Automatic Monthly Exchange^
Periodic withdrawal plans
See "How To Buy Shares" and "How To Sell Shares."
Minimum Initial Investment: $1,000, which is waived for
regular investment plans, including EasiVest and Direct Payroll
Purchase and certain retirement plans.
Minimum Subsequent Investment: $50 (minimums are lower for
certain retirement plans).
ANNUAL FUND EXPENSES
The Fund is no-load; there are no fees to purchase, exchange
or redeem shares. The Fund, however, is authorized to pay a Rule
12b-1 distribution fee of up to one quarter of one percent of the
Fund's average net assets, each year. (See "How To Buy Shares
- --Distribution Expenses.")
Like any company, the Fund has operating expenses -- such as portfolio
management, accounting, shareholder servicing, maintenance of shareholder
accounts, and other expenses. These expenses are paid from the Fund's assets.
Lower expenses therefore benefit investors by increasing the Fund's ^ investment
return.
We calculate annual operating expenses as a percentage of the Fund's
average annual net assets. To keep expenses competitive, the Fund's manager
voluntarily ^ reimbursed the Fund for amounts in excess of 0.75% of average net
assets from May 1, 1995 through April 30, 1996, and reimburses the Fund for
amounts in excess of 0.80% of average net assets effective May 1, 1996.
<PAGE>
Annual Fund Operating Expenses
(as a percentage of average net assets)^
Management Fee 0.50%
12b-1 Fees 0.25%
Other Expenses ^ 0.05%
Total Fund Operating Expenses ^(1) (2) 0.80%
^(1) Portions of the brokerage commissions paid by the Fund were used to reduce
Fund expenses, and the Fund's custodian fees were reduced under an expense
offset arrangement. However, as a result of a new regulatory requirement, the
figures shown above do not reflect these reductions. In comparing expenses for
different years, please note that the ratios of Expenses to Average Net Assets
shown under "Financial Highlights" do reflect reductions for periods prior to
the fiscal year ended August 31, 1996.
(2) Certain Fund expenses are being voluntarily absorbed by INVESCO
Funds Group, Inc. ("IFG"). In the absence of such absorbed
expenses, the Fund's "Other Expenses" and "Total Fund Operating
Expenses" would have been ^ 1.42% and ^ 2.17%, respectively, based
on the Fund's actual expenses for the fiscal year ended August 31,
^ 1996. See "The Fund and Its Management."
<PAGE>
^ Example
A shareholder would pay the following expenses on a $1,000 investment for
the periods shown, assuming a hypothetical 5% annual return and redemption at
the end of each time period. (Of course, actual operating expenses are paid from
the Fund's assets, and are deducted from the amount of income available for
distribution to shareholders; they are not charged directly to shareholder
accounts.)
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$8 ^ $26 $45 $99
The purpose of this table is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly. THE EXAMPLE SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE OR EXPENSES,
AND ACTUAL ANNUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
For more information on the Fund's expenses, see "The Fund and Its Management"
and "How to Buy Shares -- Distribution Expenses."
Since the Fund pays a distribution fee, investors who own Fund shares for
a long period of time may pay more than the economic equivalent of the maximum
front-end sales charge permitted for mutual funds by the National Association of
Securities Dealers, Inc.
*The expense information in the above tables has been presented on a basis that
assumes that the Fund's current ^ 0.80% expense limitation had been in effect
during the entire year ended August 31, 1996. ^
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout ^ Each Period)
The following information has been audited by Price Waterhouse LLP,
independent accountants. This information should be read in conjunction with the
audited financial statements and the independent accountant's report appearing
in the Fund's ^ 1996 Annual Report to Shareholders, which is incorporated by
reference into the Statement of Additional Information. Both are available
without charge by contacting IFG at the address or telephone number on the cover
of this prospectus. The Annual Report also contains more information about the
Fund's performance.
^ Period
Ended
Year Ended ^ August 31 August 31
------------------------ ---------
1996 1995 1994^
PER SHARE DATA
Net Asset Value -
Beginning of Period ^ $9.54 $9.46 $10.00
------------------------ ---------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.56 0.57 0.47
Net Gains or (Losses)
on ^ Securities (Both Realized
and Unrealized) (0.13) 0.08 (0.54)
------------------------ ---------
Total from Investment Operations 0.43 0.65 (0.07)
------------------------ ---------
LESS DISTRIBUTIONS
Dividends from Net
Investment Income+ 0.56 0.57 0.47
------------------------ ---------
Net Asset Value
End of Period $9.41 $ 9.54 ^ $ 9.46
======================== =========
TOTAL RETURN 4.63% 7.16% (0.72%)*
RATIOS
Net Assets ^ End of Period
($000 Omitted) $10,735 $8,979 $7,878
Ratio of Expenses to Average
Net Assets# 0.80%@ 0.46% 0.46% ~
<PAGE>
Ratio of Net Investment
Income ^ to Average
Net Assets# 5.85% 6.05% 5.50% ~
Portfolio Turnover Rate 103% 68% 169% *
^ From September 30, 1993, commencement of operations, to August 31, 1994.
+ Distributions in excess of net investment income for the ^ years ended August
31, 1996 and 1995, aggregated less that $0.01 on a per share basis.
* ^ Based on operations for the period shown and, accordingly, are not
representative of a full year.
# Various expenses of the Fund were voluntarily absorbed by IFG and ITC for the
^ years ended August 31, 1996 and 1995 and for the period ended August 31, 1994.
If such expenses had not been voluntarily absorbed, ratio of expenses to average
net assets would have been 2.17%, 2.09% and 2.04% (annualized), respectively,
and ratio of net investment income to average net assets would have been 4.48%,
4.42% and 3.92% (annualized), respectively.
@ Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
~ Annualized
<PAGE>
INVESTMENT OBJECTIVE AND STRATEGY
The Fund seeks to achieve the highest level of current income as is
consistent with minimum fluctuation in principal value and with maintaining
liquidity. This investment objective is fundamental and cannot be changed
without the approval of the Fund's shareholders. There is no assurance that the
Fund's investment objective will be met.
The Fund normally invests at least 65% of its total assets in bonds and
debentures. The Fund may invest in all types of variable and fixed rate
corporate, government and government agency debt securities ^. The government
and government agency securities in which the Fund invests may or may not be
backed by the full faith and credit of the United States.
Holdings are selected primarily from two maturity ranges: short-term
(obligations maturing in under three years) and intermediate-term (obligations
maturing in three to 10 years). The Fund maintains a diversified portfolio with
a dollar-weighted average maturity of three years or less. This average is based
on the actual stated maturity dates of the debt securities in the Fund's
portfolio, except for debt securities having special features that give them the
characteristics of shorter-term obligations. For example, variable rate
securities, on which coupon rates of interest are adjusted on specified dates in
response to changes in interest rates, are deemed to mature at their next
interest rate adjustment date^. In addition, debt securities with "put" features
entitling the Fund to repayment of principal on specified dates are deemed to
mature at the next put exercise date. When Fund Management deems it appropriate,
the Fund may invest in debt securities having maturities in excess of 10 years.
Debt securities will be selected based on Fund Management's assessment of
interest rate trends and the liquidity of various instruments under prevailing
market conditions. The potential for capital appreciation is an incidental
factor that also may be considered. When we believe market or economic
conditions are adverse, the Fund may seek to protect its assets by investing to
a greater extent in cash securities and shorter-term securities such as
commercial paper and notes, bank certificates of deposit and other financial
institution obligations and repurchase agreements.
INVESTMENT POLICIES AND RISKS
Investors should expect to see their price per share vary with moves in
the ^ stock market, economic conditions and other factors. Fund Management seeks
to temper volatility through diversification and credit analysis, as well as by
maintaining an average dollar-weighted maturity of three years or less. These
strategies can help reduce, but not eliminate, market and credit risk.
<PAGE>
Corporate Debt Securities. When we assess an issuer's ability
to meet its interest rate obligations and repay its debt when due,
we are referring to "credit risk." Debt obligations are rated based
on their estimated credit risk by independent services such as
Standard & Poor's ("S&P"), Moody's Investors Service Inc.
("Moody's"), Fitch Investors Service, Inc. ("Fitch") or Duff &
Phelps, Inc. ("D&P"). "Market risk" refers to sensitivity to
changes in interest rates: For instance, when interest rates go up,
the market value of a previously issued bond generally declines; on
the other hand, when interest rates go down, bonds generally see
their prices increase.
The lower a bond's quality rating, the more it is believed by the rating
service to be subject to credit risk and market risk and the more speculative it
becomes; this is also true of most unrated securities. ^ Therefore, the Fund
does not invest in obligations it believes to be highly speculative. Corporate
bonds rated investment grade (AAA, AA, A or BBB by S&P ^, Fitch, or D&P or, Aaa,
Aa, A or Baa by Moody's^) are believed to enjoy strong to adequate capacity to
pay principal and interest. No more than 15% of the Fund's total assets may be
invested in issues rated below investment grade quality (commonly called "junk
bonds," and rated BB or below by S&P, Fitch or D&P or Ba or below by Moody's);
these include issues which are of poorer quality and may have speculative
characteristics, according to the ratings services. Never, under any
circumstances, does the Fund invest in securities rated below B. Although bonds
rated B are believed to have the current capacity to meet principal and interest
payments, they are believed to be subject to a greater extent than higher rated
instruments, to the risk that adverse business, financial or economic conditions
will impair this capacity. In addition, the Fund may invest in corporate
short-term notes rated at least A-1 by S&P, Prime-1 by Moody's, F-1 by Fitch or
Duff 1 by D&P, and municipal short-term notes rated at least SP-1 by S&P, MIG-1
by Moody's, F-1 by Fitch or Duff 1 by D&P (the highest rating categories for
such notes). Overall, these securities enjoy strong to adequate capacity to pay
principal and interest. ^ While Fund Management continuously monitors all of the
corporate bonds in the ^ Fund's portfolio for the ^ issuer's ability to make
required principal and interest payments and other quality factors, it may
retain a bond whose rating is changed to one below the minimum rating required
for purchase of the security. ^ For more information on the foregoing bond
rating categories, see the Statement of Additional Information.
For the fiscal year ended August 31, 1996, the following percentages of
the Fund's total assets were invested in corporate bonds rated investment grade
(BBB by S&P or Baa by Moody's and above) at the time they were purchased: AAA --
0.00%; AA -- 0.00%; A -- 27.89%; and BBB -- 7.75%, and the following percentages
were invested in corporate bonds rated below investment grade at the time of
purchase: BB -- 2.57%; B -- 2.24%; CCC -- 0.00%; and D -- 0.00%. Finally, none
<PAGE>
of the Fund's total assets were invested in unrated corporate bonds. All of
these percentages were determined on a dollar-weighted basis, calculated by
averaging the Fund's month-end portfolio holdings during the fiscal year. Keep
in mind that the Fund's holdings are actively traded, and bond ratings are
occasionally adjusted by ratings services, so these figures do not represent the
Fund's actual holdings or quality ratings as of August 31, 1996.
The Fund's investments in debt securities may include investments in zero
coupon bonds, step-up bonds, mortgage-backed securities and asset-backed
securities. Zero coupon bonds ("zeros") make no periodic interest payments.
Instead, they are sold at a discount from their face value. The buyer of the
zero receives the rate of return by the gradual appreciation in the price of the
security, which is redeemed at face value at maturity. Zeros can be originally
issued in zero coupon form or created by separating the interest and principal
components of outstanding securities. 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. Being extremely responsive to
changes in interest rates, the market prices of both zeros and step-up bonds may
be more volatile than other bonds. The Fund may be required to distribute income
recognized on these bonds, even though no cash interest payments may be
received, which could reduce the amount of cash available for investment by the
Fund.
Mortgage-backed securities represent interests in pools of mortgages.
Asset-backed securities generally represent interests in pools of consumer
loans. Both usually are structured as pass-through securities. Interest and
principal payments ultimately depend on payment of the underlying loans,
although the securities may be supported, at least in part, by letters of credit
or other credit enhancements or, in the case of mortgage-backed securities,
guarantees by the U.S. government, its agencies or instrumentalities. The
underlying loans are subject to prepayments that may shorten the securities'
weighted average lives and may lower their return.
The Fund also may invest in stripped mortgage- or asset-backed securities,
in which the principal and interest payments on the underlying pool of loans are
separated or "stripped" to ^ create two classes of securities. In general, the
interest-only, or IO, class receives all of the interest payments and the
principal-only, or PO, class receives all of the principal payments. The market
prices of these securities generally are more sensitive to changes in interest
and prepayment rates than traditional mortgage and asset-backed securities, such
purchases are used to help the Fund maintain stability.
<PAGE>
Foreign Securities. The Fund's investments in debt obligations may include
securities issued by foreign governments and foreign corporations. Up to 25% of
the Fund's total assets, measured at the time of purchase, may be invested
directly in foreign debt securities; securities of Canadian issuers are not
subject to this limitation. See "Investment Policies and Restrictions" in the
Statement of Additional Information for a discussion of the risks involved in
investing in foreign debt securities.
Rule 144A Securities. The Fund may not purchase securities that are not
readily marketable. However, the Fund may purchase certain securities that are
not registered for sale to the general public, but that can be resold to
institutional investors ("Rule 144A Securities") if a liquid trading market
exists. For more information concerning Rule 144A Securities, see "Investment
Policies and Restrictions" in the Statement of Additional Information.
Interest Rate Futures Contracts. The Fund may buy and sell interest rate
futures contracts relating to the debt securities in which it invests for the
purpose of hedging the value of its securities portfolio. These practices and
their risks are discussed under "Investment Policies and Restrictions" in the
Statement of Additional Information.
Delayed Delivery or When-Issued Purchases. Debt securities may at times be
purchased or sold by the Fund with settlement taking place in the future. The
Fund may invest up to 10% of its net assets in when-issued securities. The
payment obligation and the interest rate that will be received on the securities
generally are fixed at the time the Fund enters into the commitment. Between the
date of purchase and the settlement date, the value of the securities is subject
to market fluctuations, and no interest is payable to the Fund prior to the
settlement date.
Securities Lending. The Fund may seek to earn additional income by lending
securities to qualified brokers, dealers, banks, or other financial
institutions, on a fully collateralized basis. For further information on this
policy, see "Investment Policies and Restrictions" in the Statement of
Additional Information.
Repurchase Agreements. The Fund may invest money, for as short a time as
overnight, using repurchase agreements ("repos"). With a repo, the Fund buys a
debt instrument, agreeing simultaneously to sell it back to the prior owner at
an agreed-upon price. The Fund could incur costs or delays in seeking to sell
the ^ security if the prior owner defaults on its repurchase obligation. To
reduce that risk, the securities ^ underlying each repurchase agreement will be
maintained with the Fund's custodian in an amount at least equal to the
repurchase price under the agreement (including accrued interest). These
agreements are entered into only with member banks of the Federal Reserve
<PAGE>
System, registered broker-dealers, and registered U.S. government
securities dealers that are deemed creditworthy under standards set by the ^
Company's board of directors.
Portfolio Turnover. There are no fixed limitations regarding portfolio
turnover for the Fund; securities may be sold without regard to the time they
have been held when investment considerations warrant such action. Increased
turnover may result in greater brokerage commissions and acceleration of capital
gains which are taxable when distributed to shareholders. The Statement of
Additional Information includes an expanded discussion of the Fund's portfolio
turnover rate, its brokerage practices and certain federal income tax matters.
For a further discussion of risks associated with an investment in the
Fund, see "Investment Policies and Restrictions" and "Investment Practices" in
the Statement of Additional Information.
Investment Restrictions. Certain restrictions, which are set forth in the
Statement of Additional Information, may not be altered without the approval of
the Fund's shareholders. For example, the Fund limits to 5% the portion of its
total assets that may be invested in a single issuer, and to 25% the portion
that may be invested in any one industry (other than U.S. government
securities). The Fund's ability to borrow money is limited to borrowings from
banks for temporary or emergency purposes in amounts not exceeding 10% of net
assets. Except where indicated to the contrary, the investment objectives and
policies described in this prospectus are not fundamental and may be changed
without a vote of the Fund's shareholders.
THE FUND AND ITS MANAGEMENT
The Company is a no-load mutual fund, registered with the Securities and
Exchange Commission as a diversified, open-end, management investment company.
It was incorporated on August 20, 1976, under the laws of Colorado and was
reorganized as a Maryland corporation on April 2, 1993.
The Company's board of directors has responsibility for overall
supervision of the Fund, and reviews the services provided by the adviser and
sub-adviser. Under an agreement with the Company, INVESCO Funds Group, Inc.
("IFG"), 7800 E. Union Avenue, Denver, Colorado 80237, serves as the Fund's
investment manager; it is primarily responsible for providing the Fund with
various administrative services. IFG's wholly-owned subsidiary, INVESCO Trust,
is the Fund's sub-adviser and is primarily responsible for managing the Fund's
investments. Together, IFG and INVESCO Trust constitute "Fund Management."
<PAGE>
The following managers share responsibility for the day-to-day management
of the Fund's holdings:
Donovan J. (Jerry) Paul has served as co-portfolio manager for the Fund
since 1996. He is also the portfolio manager of the INVESCO High Yield Fund,
INVESCO Select Income Fund, and INVESCO VIF-High Yield Portfolio, as well as
co-portfolio manager of INVESCO Industrial Income Fund, INVESCO VIF-Industrial
Income Portfolio and INVESCO Balanced Fund. A Chartered Financial Analyst and
Certified Public Accountant, Mr. Paul is a senior vice president and director of
fixed-income research of INVESCO Trust. His investment career was launched in
1976, and has included these highlights: He was a senior vice president and
director of fixed-income research (1989 to 1992) and portfolio manager (1987 to
1992) with Stein, Roe & Farnham Inc; from 1993 to 1994, he was president of
Quixote Investment Management, Inc. He holds an MBA from the University of
Northern Iowa and a BBA from the University of Iowa.
Richard R. Hinderlie^ has served as co-portfolio manager for the Fund
since ^ 1996 and portfolio manager for the Fund from 1994 to 1996. He also
manages INVESCO U.S. Government Money Fund, INVESCO Cash Reserves Fund and
INVESCO U.S. Government Securities Fund. Mr. Hinderlie has been a ^ vice
president of INVESCO Trust since 1996 and a portfolio manager since 1993. Before
joining INVESCO Trust, he was a securities analyst with Bank Western from 1987
to 1993. He earned an MBA from Arizona State University and a BA from Pacific
Lutheran University.
Fund Management permits investment and other personnel to purchase and
sell securities for their own accounts, subject to a compliance policy governing
personal investing. This policy requires Fund Management's personnel to conduct
their personal investment activities in a manner that Fund Management believes
is not detrimental to the Fund or Fund Management's other advisory clients. See
the Statement of Additional Information for more detailed information.
The Fund pays IFG a monthly management fee which is based upon a
percentage of the Fund's average net assets determined daily; in turn, IFG pays
INVESCO Trust a sub-advisory fee out of its management fee. The management fee
is computed at the annual rate of 0.50% on the first $300 million of the Fund's
average net assets; 0.40% on the next $200 million of the Fund's average net
assets; and 0.30% on the Fund's average net assets over $500 million. For the
fiscal year ended August 31, ^ 1996, investment management fees paid by the Fund
amounted to 0.50% (prior to the voluntary absorption of certain Fund expenses by
INVESCO) of its average net assets. Out of this fee, IFG paid an amount equal to
0.25% of the Fund's average net assets to INVESCO Trust as a sub- advisory fee.
No fee is paid by the Fund to INVESCO Trust.
<PAGE>
Under a Transfer Agency Agreement, IFG acts as registrar, transfer agent,
and dividend disbursing agent for the Fund. The Fund pays an annual fee of ^
$26.00 per shareholder account or omnibus account participant for these
services. Registered broker-dealers, third party administrators of tax-qualified
retirement plans and other entities, including affiliates of IFG, may provide
equivalent services to the Fund. In these cases, IFG may pay, out of the fee it
receives from the Fund, an annual sub-transfer agency or record-keeping fee to
the third party.
In addition, under an Administrative Services Agreement, IFG handles
additional administrative, record-keeping, and internal sub-accounting services
for the Fund. For the fiscal year ended August 31, ^ 1996, the Fund paid IFG a
fee for these services equal to 0.13% (prior to the voluntary absorption of
certain fund expenses by IFG) of the Fund's average net assets.
The Fund's expenses, which are accrued daily, are deducted from total
income before dividends are paid. Total expenses of the Fund (prior to any
expense offset) for the fiscal year ended August 31, ^ 1996, including
investment management fees (but excluding brokerage commissions, which are a
cost of acquiring securities), amounted to ^ 0.80% of the Fund's average net
assets. Certain Fund expenses ^ are^ absorbed voluntarily by IFG pursuant to a
commitment to the Fund in order to ensure that the Fund's total operating
expenses ^ do not exceed ^ 0.75% of the Fund's average net assets (through April
30, ^ 1996) and will not exceed ^ 0.80% of the Fund's average net assets
(beginning May 1, ^ 1996). This commitment may be changed following consultation
with the Company's board of directors. In the absence of this voluntary expense
limitation, the Fund's total operating expenses would have been ^ 2.17% of its
average net assets.
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of
their financial responsibility coupled with their ability to effect transactions
at the best available prices. As discussed under "How to Buy Shares --
Distribution Expenses," the Fund may market its shares through intermediary
brokers or dealers that have entered into Dealer Agreements with IFG, as the
Fund's Distributor. The Fund may place orders for portfolio transactions with
qualified ^ broker-dealers that recommend the Fund, or sell shares of the Fund,
to clients, or act as agent in the purchase of Fund shares for clients, if Fund
Management believes that the quality of the execution of the transaction and
level of commission are comparable to those available from other qualified
brokerage firms. For further information, see "Investment Practices -- Placement
of Portfolio Brokerage" in the Statement of Additional Information.
The parent company for IFG and INVESCO Trust is INVESCO PLC, a publicly
traded holding company whose subsidiaries provide investment services around the
<PAGE>
world. IFG was established in 1932 and, as of August 31, ^ 1996, managed 14
mutual funds, consisting of ^ 39 separate portfolios, with combined assets of
approximately ^ $12.8 billion on behalf of over ^ 827,000 shareholders. INVESCO
Trust (founded in 1969) served as adviser or sub-adviser to ^ 46 investment
portfolios as of August 31, ^ 1996, including 27 portfolios in the INVESCO
group. These ^ 46 portfolios had aggregate assets of approximately ^ $12.0
billion as of August 31, ^ 1996. In addition, INVESCO Trust provides investment
management services to private clients, including employee benefit plans that
may be invested in a collective trust sponsored by INVESCO Trust.
FUND PRICE AND PERFORMANCE
Determining Price. The value of your investment in the Fund will vary
daily. The price per share is also known as the Net Asset Value ("NAV"). IFG
prices the Fund every day that the New York Stock Exchange is open, as of the
close of regular trading ^ (normally, 4:00 p.m., New York time). NAV is
calculated by adding together the current market value of all of the Fund's
assets, including accrued interest and dividends; then subtracting liabilities,
including accrued expenses; and finally dividing that dollar amount by the total
number of shares outstanding.
Performance Data. To keep shareholders and potential investors informed,
we will occasionally advertise the Fund's total return and yield. Total return
figures show the average annual rate of return on a $1,000 investment in the
Fund, assuming reinvestment of all dividends and capital gain distributions for
one-, five- and ten-year periods. Cumulative total return shows the actual rate
of return on an investment; 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, not showing the interim variations in performance over the
periods cited.
The yield of the Fund refers to the income generated by an investment in
the Fund over a 30-day or one month period, and is computed by dividing the net
investment income per share earned during the period by the net asset value per
share at the end of the period, then adjusting the result to provide for
semi-annual compounding.
More information about the Fund's recent and historical performance is
contained in the Fund's Annual Report to shareholders. You can get a free copy
by calling or writing to IFG using the telephone number or address on the cover
of this prospectus.
When we quote mutual fund rankings published by Lipper Analytical
Services, Inc., we may compare the Fund to others in its category of Short
Investment Grade Debt, as well as the broad-based Lipper general fund groupings.
<PAGE>
These rankings allow you to compare the Fund to its peers. Other
independent financial media also produce performance- or service-related
comparisons, which you may see in our promotional materials. For more
information see "Fund Performance" in the Statement of Additional Information.
Performance figures are based on historical investment results and are not
intended to suggest future performance.
HOW TO BUY SHARES
The ^ chart on page 102 shows several convenient ways to invest in the
Fund. Your new Fund shares will be priced at the NAV next determined after your
order is received in proper form. There is no charge to invest, exchange, or
redeem shares when you make transactions directly through IFG. However, if you
invest in the Fund through a securities broker, you may be charged a commission
or transaction fee. For all new accounts, please send a completed application
form. Please specify which Fund you wish to purchase.
Fund Management reserves the right to increase, reduce or waive the
minimum investment requirements in its sole discretion, where it determines this
action is in the best interests of the Fund. Further, Fund Management reserves
the right in its sole discretion to reject any order for the purchase of Fund
shares (including purchases by exchange) when, in its judgment, such rejection
is in the Fund's best interests.
<PAGE>
HOW TO BUY SHARES
================================================================================
Method Investment Minimum Please Remember
- --------------------------------------------------------------------------------
By Check $1,000 for regular If your check does
Mail to: account; $250 for not clear, you will
INVESCO Funds an Individual be responsible for
Group, Inc. Retirement Account any related loss
P.O. Box 173706 $50 minimum for the Fund or IFG
Denver, CO 80217- each subsequent incurs. If you are
3706. investment. already a
Or you may send shareholder in the
your check by INVESCO funds, the
overnight courier Fund may seek
to: 7800 E. Union reimbursement from
Ave., your existing
Denver, CO 80237. account(s) for any
loss incurred.
- --------------------------------------------------------------------------------
By Telephone or $1,000. Payment must be
Wire received within 3
Call 1-800-525-8085 business days, or
to request your the transaction may
purchase. Then send be cancelled. If a
your check by ^ purchase is
overnight courier cancelled due to
to our street nonpayment, you
address: will be responsible
7800 E. Union Ave., for any related
Denver, CO 80237. loss the Fund or
Or you may transmit IFG incurs. If you
your payment by are already a
bank wire (call IFG shareholder in the
for instructions). INVESCO funds, the
Fund may seek
reimbursement from
your existing
account(s) for any
loss incurred.
<PAGE>
- --------------------------------------------------------------------------------
With EasiVest or $50 per month for Like all regular
Direct Payroll EasiVest; $50 per investment plans,
Purchase pay period for neither EasiVest
You may enroll on Direct Payroll nor Direct Payroll
the fund Purchase. You may Purchase ensures a
application, or start or stop your profit or protects
call us for the regular investment against loss in a
correct form and plan at any time, falling market.
more details. with two weeks' Because you'll
Investing the same notice to IFG. invest continually,
amount on a monthly regardless of
basis allows you to varying price
buy more shares levels, consider
when prices are low your financial
and fewer shares ability to keep
when prices are buying through low
high. This "dollar- price levels. And
cost averaging" may remember that you
help offset market will lose money if
fluctuations. Over you redeem your
a period of time, shares when the
your average cost market value of all
per share may be your shares is less
less than the than their cost.
actual average
price per share.
- --------------------------------------------------------------------------------
By PAL $1,000. Be sure to write
Your "Personal down the
Account Line" is confirmation number
available for provided by PAL.
subsequent Payment must be
purchases and received within 3
exchanges 24-hours business days, or
a day. Simply call the transaction may
1-800-424-8085. be cancelled. If a
^ purchase is
cancelled due to
nonpayment, you
will be responsible
for any related
loss the Fund or
IFG incurs. If you
are already a
shareholder in the
INVESCO funds, the
Fund may seek
reimbursement from
your existing
account(s) for any
loss incurred.
<PAGE>
- --------------------------------------------------------------------------------
By Exchange $1,000 to open a See "Exchange
Between this and new account; $50 Privilege^," below.
another of the for written
INVESCO funds. Call requests to
1-800-525-8085 for purchase additional
prospectuses of shares for an
other INVESCO existing account.
funds. You may also (The exchange
establish an minimum is $250 for
Automatic Monthly purchases requested
Exchange service by telephone.)
between two INVESCO
funds; call IFG for
further details and
the correct form.
================================================================================
Your order to purchase Fund shares will not begin earning dividends or
other distributions until your payment can be converted into available federal
funds under regular banking procedures or, if you are acquiring shares in an
exchange from another INVESCO fund, the Fund receives the proceeds of the
exchange. Checks normally are converted into federal funds (moneys held on
deposit within the Federal Reserve System) within two or three business days
after we receive them, although this period may be longer for checks drawn on
banks that are not members of the Federal Reserve System.
Exchange Privilege. You may exchange your shares in this Fund for those in
another INVESCO fund, on the basis of their respective net asset values at the
time of the exchange. Before making any exchange, be sure to review the
prospectuses of the funds involved and consider their differences.
Please note these policies regarding exchanges of fund shares:
1) The fund accounts must be identically registered.
2) You may make four exchanges out of each fund during each
calendar year.
3) An exchange is the redemption of shares from one fund followed by the
purchase of shares in another. Therefore, any gain or loss realized on the
exchange is recognizable for federal income tax purposes (unless, of course,
your account is tax-deferred).
4) The Fund reserves the right to reject any exchange request, or to
modify or terminate exchange privileges, in the best interests of the Fund and
its shareholders. Notice of all such modifications or termination will be given
at least 60 days prior to the effective date of the change in privilege, except
<PAGE>
for unusual instances (such as when redemptions of the exchanged shares are
suspended under Section 22(e) of the Investment Company Act of 1940, or when
sales of the fund into which you are exchanging are temporarily stopped).
Distribution Expenses. The Fund is authorized under a Plan and Agreement
of Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Plan") to use its assets to finance certain activities relating to the
distribution of shares. These expenditures may include compensation (including
incentive compensation and/or continuing compensation based on the amount of
customer assets maintained in the Fund) to securities dealers and other
financial institutions and organizations, which may include IFG-affiliated
companies, to obtain various distribution-related and/or administrative services
for the Fund. Such services may include, among other things, processing new
shareholder account applications, preparing and transmitting to the Fund's
transfer agent computer-processable tapes of all transactions by customers, and
serving as the primary source of information to customers in answering questions
concerning the Fund and their transactions.
In addition, other reimbursable expenditures include advertising,
preparation and distribution of sales literature, printing and distribution of
prospectuses to prospective investors, public relations efforts, marketing
programs and such other services and promotional activities agreed upon from
time to time by the Fund and its board of directors. These services and
activities may be conducted by the staff of IFG or its affiliates or by third
parties.
IFG is not entitled to reimbursement for overhead expenses under the Plan,
but may be reimbursed for all or a portion of the compensation paid for salaries
and other employee benefits for IFG personnel whose primary responsibilities
involve marketing shares of the INVESCO funds, including the Fund. Also, any
payments made by the Fund may not be used to finance the distribution of shares
of any other mutual fund advised by IFG. Payments made by the Fund under the
Plan for compensation of marketing personnel, as noted above, are based on an
allocation formula designed to ensure that all such payments are appropriate.
Under the Plan, the Fund's reimbursement to IFG is limited to an amount
computed at a maximum annual rate of 0.25% of the Fund's average net assets.
Payments by the Fund under the Plan, for any month, may only be made to
reimburse expenditures incurred during the rolling 12-month period in which that
month falls. Therefore, any reimbursable expenses incurred by IFG in excess of
the limitation described above are not reimbursable and will be borne by IFG. In
addition, IFG may from time to time make additional payments from its revenues
to securities dealers and other financial institutions that provide
<PAGE>
distribution-related and/or administrative services for the Fund. No
further payments will be made by the Fund under the Plan in the event of its
termination.
FUND SERVICES
Shareholder Accounts. IFG will maintain a share account that reflects your
current holdings. Share certificates will be issued only upon specific request.
You will have greater flexibility to conduct transactions if you do not request
certificates.
Transaction Confirmations. You will receive detailed
confirmations of individual purchases, exchanges, and redemptions.
If you choose certain recurring transaction plans (for instance,
EasiVest), your transactions will be confirmed on your quarterly
Investment Summary.
Investment Summaries. Each calendar quarter, shareholders receive a
written statement which consolidates and summarizes account activity and value
at the beginning and end of the period for each of their INVESCO funds.
Reinvestment of Distributions. Dividends and capital gain distributions
are automatically invested in additional fund shares at the NAV on the
ex-dividend date, unless you choose to have dividends and/or capital gain
distributions automatically reinvested in another INVESCO fund or paid by check
(minimum of $10.00).
Telephone Transactions. All shareholders may exchange and redeem Fund
shares by telephone, unless they expressly decline these privileges. By signing
the new account Application, a Telephone Transaction Authorization Form, or
otherwise using these privileges, the investor has agreed that, if the Fund has
followed reasonable procedures, such as recording telephone instructions and
sending written transaction confirmations, it will not be liable for following
telephoned instructions that it believes to be genuine. As a result of this
policy, the investor may bear the risk of any loss due to unauthorized or
fraudulent instructions.
Retirement Plans and IRAs. Fund shares may be purchased for Individual
Retirement Accounts ^("IRAs") and many types of tax-deferred retirement plans.
IFG can supply you with information and forms to establish or transfer your
existing plan or account.
HOW TO SELL SHARES
The ^ chart on page 107 shows several convenient ways to redeem your Fund
shares. Shares of the Fund may be redeemed at any time at their current NAV next
determined after a request in proper form is received at the Fund's office. The
NAV at the time of the redemption may be more or less than the price you paid to
<PAGE>
purchase your shares, depending primarily upon the Fund's investment
performance.
Please ^ specify from which fund you wish to redeem shares. Shareholders
have a separate account for each fund in which they invest.
HOW TO SELL SHARES
================================================================================
Method Minimum Redemption Please Remember
================================================================================
By Telephone $250 (or, if less, These telephone
Call us toll-free full liquidation of redemption
at 1-800-525-8085. the account) for a privileges may be
redemption check; modified or
$1,000 for a wire terminated in the
to bank of record. future at the
The maximum amount discretion of IFG.
which may be
redeemed by
telephone is
generally $25,000.
- --------------------------------------------------------------------------------
In Writing Any amount. The If the shares to be
Mail your request redemption request redeemed are
to INVESCO Funds must be signed by represented by
Group, Inc., P.O. all registered stock certificates,
Box 173706 shareholders(s). the certificates
Denver, CO 80217- Payment will be must be sent to
3706. You may also mailed to your IFG.
send your request address of record,
by overnight or to a pre-
courier to 7800 E. designated bank.
Union Ave., Denver,
CO 80237.
- --------------------------------------------------------------------------------
By Exchange $1,000 to open a See "Exchange
Between this and new account; $50 Privilege," ^ page
another of the for written __.
INVESCO funds. Call requests to
1-800-525-8085 for purchase additional
prospectuses of shares for an
other INVESCO existing account.
funds. You may also (The exchange
establish an minimum is $250 for
automatic monthly exchanges requested
exchange service by telephone.)
between two INVESCO
funds; call IFG for
further details and
the correct form.
<PAGE>
- --------------------------------------------------------------------------------
Periodic Withdrawal $100 per payment, You must have at
Plan on a monthly or least $10,000 total
You may call us to quarterly basis. invested with the
request the The redemption INVESCO funds, with
appropriate form check may be made at least $5,000 of
and more payable to any that total invested
information at 1- party you in the fund from
800-525-8085. designate. which withdrawals
will be made.
- --------------------------------------------------------------------------------
Payment To Third Any amount. All registered
Party owners of the
Mail your request account must sign
to INVESCO Funds the request, with a
Group, Inc., P.O. signature guarantee
Box 173706 from an eligible
Denver, CO 80217- guarantor financial
3706. institution, such
as a commercial
bank or recognized
national or
regional securities
firm.
================================================================================
While the Fund will attempt to process telephone redemptions promptly,
there may be times -- particularly in periods of severe economic or market
disruption -- when you may experience delays in redeeming shares by phone.
Payments of redemption proceeds will be mailed within seven days following
receipt of the redemption request in proper form. However, payment may be
postponed under unusual circumstances -- for instance, if normal trading is not
taking place on the New York Stock Exchange or during an emergency as defined by
the Securities and Exchange Commission. If your shares were purchased by a check
which has not yet cleared, payment will be made promptly upon clearance of the
purchase check (which may take up to 15 days).
If you participate in EasiVest, the Fund's automatic monthly investment
program, and redeem all of the shares in your account, we will terminate any
further EasiVest purchases unless you instruct us otherwise.
Because of the high relative costs of handling small accounts, should the
value of any shareholder's account fall below $250 as a result of shareholder
action, the Fund reserves the right to involuntarily redeem all shares in such
account, in which case the account would be liquidated and the proceeds
forwarded to the shareholder. Prior to any such redemption, a shareholder will
<PAGE>
be notified and given 60 days to increase the value of the account to $250
or more.
TAXES, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Taxes. The Fund intends to distribute to shareholders substantially all of
its net investment income, net capital gains and net gains from foreign currency
transactions, if any, in order to continue to qualify for tax treatment as a
regulated investment company. Thus, the Fund does not expect to pay any federal
income or excise taxes.
Unless shareholders are exempt from income taxes, they must include all
dividends and capital gain distributions in taxable income for federal, state,
and local income tax purposes. Dividends and other distributions are taxable
whether they are received in cash or automatically distributed in shares of the
Fund or another fund in the INVESCO group.
The Fund may be subject to withholding of foreign taxes on dividends or
interest it receives on foreign securities. Foreign taxes withheld will be
treated as an expense of the Fund unless the Fund meets the qualifications to
enable it to pass these taxes through to shareholders for use by them as a
foreign tax credit or deduction.
Shareholders may be subject to backup withholding of 31% on dividends,
capital gain distributions and redemption proceeds. Unless you are subject to
backup withholding for other reasons, you can avoid backup withholding on your
Fund account by ensuring that we have a correct, certified tax identification
number.
Dividends and Capital Gain Distributions. The Fund earns ordinary or net
investment income in the form of dividends and interest on its investments. The
Fund's policy is to distribute substantially all of this income, less Fund
expenses, to shareholders on a monthly basis, at the discretion of the ^
Company's board of directors.
In addition, the Fund realizes capital gains and losses when it sells
securities for more or less than it paid. If total gains on sales exceed total
losses (including losses carried forward from previous years), the Fund has a
net realized capital gain. Net realized capital gains, if any, are distributed
to shareholders at least annually, usually in December.
Dividends and capital gain distributions are paid to shareholders who hold
shares on the record date of distribution regardless of how long the shares have
been held. The Fund's share price will then drop by the amount of the
distribution on the day the distribution is made. If a shareholder purchases
shares immediately prior to the distribution, the shareholder will, in effect,
<PAGE>
effect, have "bought" the distribution by paying the full purchase price, a
portion of which is then returned in the form of a taxable distribution^.
At the end of each year, information regarding the tax status of dividends
and capital gain distributions is provided to shareholders. Net realized capital
gains are divided into short-term and long-term gains depending upon how long
the Fund held the security which gave rise to the gains. The capital gains
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 taxable
dividends.
Shareholders also may realize capital gains or losses when they sell their
Fund shares at more or less than the price originally paid.
We encourage you to consult a tax adviser with respect to
these matters. For further information see "Dividends, Capital Gain
Distributions and Taxes" in the Statement of Additional
Information.
ADDITIONAL INFORMATION
Voting Rights. All shares of the Company have equal voting rights based on
one vote for each share owned. Voting with respect to certain matters, such as
ratification of independent accountants and the election of directors, will be
by all the funds of the Company voting together. In other cases, such as voting
upon an investment advisory contract, voting is on a fund-by-fund basis. To the
extent permitted by law, when not all funds are affected by a matter to be voted
upon, only shareholders of the fund or funds affected by the matter will be
entitled to vote thereon. The Company is not generally required and does not
expect to hold regular annual meetings of shareholders. However, 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 Investment Company Act
of 1940.
<PAGE>
INVESCO SHORT-TERM BOND FUND
A no-load mutual fund seeking current income with
liquidity and low volatility.
PROSPECTUS
^ December 31, 1996
To receive general information and prospectuses on any of ^ INVESCO's funds or
retirement plans, or to obtain current account or price information or responses
to other questions, call toll-free:
1-800-525-8085
To reach PAL, your 24-hour Personal Account Line ^ call:
1-800-424-8085
You can find us on the World Wide Web:
http://www.invesco.com
Or write to:
INVESCO Funds Group, Inc., Distributor
^ Post Office Box 173706
Denver, Colorado 80217-3706
If you're in Denver, please visit one of our convenient Investor Centers:
Cherry Creek
155-B Fillmore Street;
Denver Tech Center
7800 East Union Avenue
Lobby Level
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
^ December 31, 1996
INVESCO INCOME FUNDS, INC.
Four no-load portfolios seeking
a high level of current income
Address: Mailing Address:
7800 E. Union Avenue Post Office Box 173706
Denver, Colorado 80237 Denver, Colorado 80217-3706
Telephone:
In continental U.S., 1-800-525-8085
- --------------------------------------------------------------------------------
INVESCO INCOME FUNDS, INC., (the "Company") is a diversified, managed,
no-load mutual fund consisting of four separate portfolios of investments:
INVESCO Select Income Fund, INVESCO High Yield Fund, INVESCO U.S. Government
Securities Fund, and INVESCO Short- Term Bond Fund (collectively, the "Funds"
and individually, a "Fund"). The investment objective of each Fund is to provide
investors with as high a level of current income as is consistent with the risk
involved in investing in the types of securities in which each Fund invests.
Potential capital appreciation is a factor in the selection of investments, but
is secondary to each Fund's primary objective. Investors may purchase shares of
any or all Funds. Additional Funds may be added in the future.
INVESCO SELECT INCOME FUND
The INVESCO Select Income Fund seeks to achieve its investment objective
through the investment of substantially all of its assets in bonds and other
debt securities. It is anticipated that at least 50% of such securities will be
rated in medium and higher categories by an established rating service.
INVESCO HIGH YIELD FUND
The INVESCO High Yield Fund seeks to achieve its investment objective
through the investment of substantially all of its assets in bonds and other
debt securities and in preferred stock. Such securities ordinarily include those
rated in lower categories by established rating services.
INVESCO U.S. GOVERNMENT SECURITIES FUND
The INVESCO U.S. Government Securities Fund seeks to achieve
its investment objective by investing in bonds and other debt obligations issued
or guaranteed by the U.S. Government or its agencies, which are supported by the
full faith and credit of the United States, and in repurchase agreements and
futures contracts with respect thereto.
<PAGE>
INVESCO SHORT-TERM BOND FUND
The INVESCO Short-Term Bond Fund (the "Fund") seeks to achieve the highest
level of current income as is consistent with minimum fluctuation in principal
value and with liquidity. The Fund invests primarily in short-term debt
securities (having maturities of 3 years or less) and intermediate-term debt
securities (having maturities of 3 to 10 years) and maintains a diversified
portfolio with a dollar-weighted average maturity of not more than three years.
The Fund pursues its investment objective by investing in a variety of debt
securities consistent with the policies of this Fund.
Separate Prospectuses for each of the Funds dated ^ January 1, 1997, which
provide the basic information you should know before investing in a Fund may be
obtained without charge from INVESCO Funds Group, Inc., P.O. Box 173706, Denver,
Colorado 80217-3706. This Statement of Additional Information is not a
Prospectus, but contains information in addition to and more detailed than that
set forth in each Prospectus. It is intended to provide you with additional
information regarding the activities and operations of the Fund and should be
read in conjunction with the Prospectus.
Investment Adviser and Distributor: INVESCO FUNDS GROUP, INC.
<PAGE>
TABLE OF CONTENTS Page
INVESTMENT POLICIES AND RESTRICTIONS.......................................114
THE FUNDS AND THEIR MANAGEMENT.............................................128
HOW SHARES CAN BE PURCHASED................................................142
HOW SHARES ARE VALUED......................................................146
FUND PERFORMANCE...........................................................147
SERVICES PROVIDED BY THE FUND..............................................151
TAX-DEFERRED RETIREMENT PLANS..............................................152
HOW TO REDEEM SHARES.......................................................152
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES............................153
INVESTMENT PRACTICES.......................................................155
ADDITIONAL INFORMATION.....................................................159
APPENDIX - GNMA CERTIFICATES, AND FUTURES CONTRACTS........................164
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
As discussed in their respective Prospectuses in the sections entitled
"Investment Objective and Strategy" and "Investment Policies and Risks," the
INVESCO Select Income Fund and the INVESCO High Yield Fund may invest in bonds
and other debt securities. Such securities include corporate bonds and
debentures (including convertible issues), equipment trust certificates and
promissory notes, and, where the yields are competitive with those of corporate
debt securities, obligations issued or guaranteed by the U.S. government or its
agencies, and obligations of any state, municipality or political subdivision
thereof. Generally, corporate bonds and equipment trust certificates are secured
obligations, whereas debentures and notes are unsecured. In addition, the
INVESCO High Yield Fund may invest in preferred stock. Preferred stock generally
entitles holders thereof to certain preferences in payment of dividends and
assets in priority to holders of common stock. As discussed in its Prospectus,
the INVESCO Short-Term Bond Fund may invest in investment-grade debt securities
of all types in any proportion.
Subject to complying with applicable investment policies, in recognition
of changing fiscal policies and economic conditions, each of the Funds may vary
the proportions of its holdings in intermediate, long-term, and short-term
obligations, and they may dispose of any such securities prior to maturity and
reinvest on the basis of yield disparities. The value of the debt securities in
each of the Funds will vary inversely with changes in prevailing interest rates.
Thus, when interest rates decline, the market value of a portfolio security
already invested at higher yields can be expected to rise if such security is
protected against early call. Conversely, when interest rates increase, the
market value of a portfolio security already invested at lower yields can be
expected to decline. When it appears to the Funds' investment adviser or
sub-adviser that interest rates may change, the composition of the Funds'
portfolios may be adjusted should such anticipated changes offer the opportunity
to further their investment objectives.
Foreign Securities. As discussed in the Prospectuses of INVESCO Select
Income Fund, INVESCO Short-Term Bond Fund and INVESCO High Yield Fund, these
Funds may invest up to 25% of their respective total assets, at the time of
purchase, in foreign securities; securities of Canadian issuers are not subject
to this limitation. There is generally less publicly available information,
reports and ratings about foreign companies and other foreign issuers than that
which is available about companies and issuers in the United States. Foreign
issuers are also generally subject to fewer uniform accounting and auditing and
financial reporting standards, practices, and requirements as compared to those
applicable to United States issuers.
<PAGE>
For U.S. investors, the returns on foreign debt securities are influenced
not only by the returns on the foreign investments themselves, but also by
currency fluctuations. That is, when the U.S. dollar generally rises against
foreign currencies, returns on foreign securities for a U.S. investor may
decrease. By contrast, in a period when the U.S. dollar generally declines,
those returns may increase. The Select Income and High Yield Funds attempt to
minimize these risks by limiting their investments in foreign debt securities to
those which are denominated and pay interest in U.S. dollars.
The investment adviser or sub-adviser will normally purchase foreign
securities in over-the-counter markets or on exchanges located in the countries
in which the respective principal offices of the issuers of the various debt
securities are located, as such markets or exchanges are generally the best
available market for foreign securities. Foreign securities markets are
generally not as developed or efficient as those in the United States. While
growing in volume, they usually have substantially less volume than the New York
Stock Exchange, and securities of some foreign issuers are less liquid and more
volatile than securities of comparable United States issuers. Fixed commissions
on foreign exchanges are generally higher than negotiated commissions on United
States exchanges, although the Fund will endeavor to achieve the most favorable
net results on its portfolio transactions. There is generally less government
supervision and regulation of securities exchanges, brokers and listed issuers
than in the United States.
With respect to certain foreign countries, there is the possibility of
adverse changes in investment or exchange control regulations, expropriation or
confiscatory taxation, limitations on the removal of funds or other assets of
the Select Income, Short- Term Bond or High Yield Funds, political or social
instability, or diplomatic developments which could affect United States
investments in those countries. Moreover, the foreign economics of individual
countries may differ favorably or unfavorably from the United States' economy in
such respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payment position.
The interest payable on certain foreign debt securities may be subject to
foreign withholding taxes, thus reducing the net amount of income available for
distribution to the shareholders of these Funds.
When-Issued and Delayed Delivery Securities. As discussed in the section
of each Fund's Prospectus entitled "Investment Policies and Risks," the Funds
may purchase and sell securities on a when-issued or delayed delivery basis.
When-issued or delayed delivery transactions arise when securities (normally,
debt obligations of issuers eligible for investment by the Funds) are purchased
or sold by the Funds with payment and delivery taking place in the future in
<PAGE>
order to secure what is considered to be an advantageous price and yield.
However, the yield on a comparable security available when delivery takes place
may vary from the yield on the security at the time that the when-issued or
delayed delivery transaction was entered into. When the Funds engage in
when-issued and delayed delivery transactions, they rely on the seller or buyer,
as the case may be, to consummate the sale. Failure to do so may result in the
Funds missing the opportunity of obtaining a price or yield considered to be
advantageous. When-issued and delayed delivery transactions may generally be
expected to settle within one month from the date the transactions are entered
into, but in no event later than 90 days. However, no payment or delivery is
made by the Funds until they receive delivery or payment from the other party to
the transaction.
To the extent that a Fund remains substantially fully invested at the same
time that it has purchased when-issued securities, as it would normally expect
to do, there may be greater fluctuations in its net assets than if the Fund sets
aside cash to satisfy its purchase commitments.
When a Fund purchases securities on a when-issued basis, it will maintain
in a segregated account with their Custodian cash, U.S. Government securities or
other high-grade debt obligations readily convertible into cash having an
aggregate value equal to the amount of such purchase commitments, until payment
is made. If necessary, additional assets will be placed in the account daily so
that the value of the account will equal or exceed the amount of the Fund's
purchase commitments.
Repurchase Agreements. As discussed in each Fund's Prospectus, the Funds
may invest in repurchase agreements with commercial banks, registered
brokers-dealers and registered government securities dealers that are deemed
creditworthy under standards established by the Fund's board of directors. A
repurchase agreement is an agreement under which the Funds acquire a debt
instrument (generally a security issued by the U.S. government or an agency
thereof, a banker's acceptance or a certificate of deposit) from a commercial
bank, broker or dealer, subject to resale to the seller at an agreed upon price
and date (normally, the next business day). A repurchase agreement may be
considered a loan collateralized by securities. The resale price reflects an
agreed upon interest rate effective for the period the instrument is held by the
Funds and is unrelated to the interest rate on the underlying instrument. In
these transactions, the securities acquired by the Funds (including accrued
interest earned thereon) must have a total value in excess of the value of the
repurchase agreement and are held as collateral by the Funds' Custodian Bank
until the repurchase agreement is completed. A Fund will not enter into a
repurchase agreement maturing in more than seven days if as a result more than
<PAGE>
10% of the Fund's net assets would be invested in such repurchase
agreements and other illiquid securities.
The use of repurchase agreements involves certain risks. For example, if
the other party to the agreement defaults on its obligation to repurchase the
underlying security at a time when the value of the security has declined, the
Funds may incur a loss upon disposition of the security. If the other party to
the agreement becomes insolvent and subject to liquidation or reorganization
under the Bankruptcy Code or other laws, a court may determine that the
underlying security is collateral for a loan by the Funds not within the control
of the Funds and therefore the obtainment by the Funds of such collateral may
automatically be stayed. Finally, it is possible that a Fund may not be able to
substantiate its interest in the underlying security and may be deemed an
unsecured creditor of the other party to the agreement. While the Funds'
management acknowledges these risks, it is expected that they can be controlled
through careful monitoring procedures.
Loans of Portfolio Securities. The Funds also may lend their portfolio
securities to qualified brokers, dealers, banks, or other financial
institutions. This practice permits the Funds to earn income which, in turn, can
be invested in additional securities to pursue the Funds' investment objectives.
Loans of securities by the Funds will be collateralized by cash, letters of
credit or securities issued or guaranteed by the U. S. government or its
agencies equal to at least 100% of the current market value of the loaned
securities, determined on a daily basis. Lending securities involves certain
risks, the most significant of which is the risk that a borrower may fail to
return a portfolio security. The Fund monitors the creditworthiness of borrowers
in order to minimize such risks. A Fund will not lend any security if, as a
result of such loan, the aggregate value of securities then on loan would exceed
33-1/3% of the Fund's net assets (taken at market value). While voting rights
may pass with the loaned securities, if a material event (e.g., proposed merger,
sale of assets, or liquidation) is to occur affecting an investment on loan, the
loan must be called and the securities voted. Loans of securities made by the
Funds will comply with all other applicable regulatory requirements, including
the rules of the New York Stock Exchange and the requirements of the Investment
Company Act of 1940, as amended (the "1940 Act"), and the rules of the
Securities and Exchange Commission (the "SEC") thereunder.
At the present time, a Fund may pay reasonable negotiated finder fees in
connection with loaned securities, so long as such fees are set forth in a
written contract and are in compliance with guidelines with respect to such fees
established by the investment company's directors or trustees.
Illiquid and 144A Securities. The High Yield Fund may invest
in securities that are illiquid because they are subject to
<PAGE>
restrictions on their resale ("restricted securities") or because, based upon
their nature or the market for such securities, they are not readily marketable.
However, the High Yield 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 will be considered as illiquid for purposes of this
restriction. Investments in illiquid securities involve certain risks to the
extent that the High Yield Fund may be unable to dispose of such a security at
the time desired or at a reasonable price. In addition, in order to resell a
restricted security, the High Yield Fund might have to bear the expense and
incur the delays associated with effecting registration.
Each Fund also may invest in restricted securities that can be resold to
institutional investors pursuant to Rule 144A under the Securities Act of 1933,
as amended (the "1933 Act") (hereinafter referred to as "Rule 144A Securities").
These securities may be purchased by the ^ Funds if a liquid institutional
trading market exists subject only to the State of Ohio's 15% of net assets
limit on such securities. ^ The Company's board of directors has delegated to
Fund management the authority to determine the liquidity of Rule 144A Securities
pursuant to guidelines approved by the board.
In recent years, a large institutional market has developed for Rule 144A
Securities. Institutional investors generally will not seek to sell these
instruments to the general public, but instead will often depend on an efficient
institutional market in which Rule 144A Securities can readily be resold or on
an issuer's ability to honor a demand for repayment. Therefore, the fact that
there are contractual or legal restrictions on resale to the general public or
certain institutions is not dispositive of the liquidity of such investments.
Institutional markets for Rule 144A Securities may provide both readily
ascertainable values for Rule 144A Securities and the ability to liquidate an
investment in order to satisfy share redemption orders. An insufficient number
of qualified institutional buyers interested in purchasing a Rule 144A Security
held by a Fund, however, could adversely affect the marketability of such
security and the Fund might be unable to dispose of such security promptly or at
reasonable prices.
Euro/Yankee Bonds. The INVESCO Select Income, High Yield and Short-Term
Bond Funds may invest in dollar-denominated bonds issued by foreign branches of
domestic banks ("Eurobonds") and dollar-denominated bonds issued by a U.S.
branch of a foreign bank and sold in the United States ("Yankee bonds").
Investment in Eurobonds and Yankee bonds entail certain risks similar to
investment in foreign securities in general. For information on these risks see
"Investment Policies and Risks" in the relevant Prospectuses.
<PAGE>
U.S. Government Obligations. These securities consist of
treasury bills, treasury notes, and treasury bonds, which differ
only in their interest rates, maturities, and dates of issuance.
Treasury bills have a maturity of one year or less. Treasury notes
generally have a maturity of one to ten years, and treasury bonds
generally have maturities of more than ten years. As discussed in
each Fund's Prospectus, U.S. government obligations also include
securities issued or guaranteed by agencies or instrumentalities of
the U.S. government.
Some obligations of United States government agencies, which are
established under the authority of an act of Congress, such as Government
National Mortgage Association (GNMA) participation certificates, are supported
by the full faith and credit of the United States Treasury. GNMA Certificates
are mortgage-backed securities representing part ownership of a pool of mortgage
loans. These loans -- issued by lenders such as mortgage bankers, commercial
banks and savings and loan associations -- are either insured by the Federal
Housing Administration or guaranteed by the Veterans Administration. A "pool" or
group of such mortgages is assembled and, after being approved by GNMA, is
offered to investors through securities dealers. Once approved by GNMA, the
timely payment of interest and principal on each mortgage is guaranteed by GNMA
and backed by the full faith and credit of the United States government. The
market value of GNMA Certificates is not guaranteed. GNMA Certificates differ
from bonds in that principal is paid back monthly by the borrower over the term
of the loan rather than returned in a lump sum at maturity. GNMA Certificates
are called "pass-through" securities because both interest and principal
payments (including prepayments) are passed through to the holder of the
Certificate. Upon receipt, principal payments will be used by each Fund to
purchase additional securities under its investment objective and investment
policies.
Other United States government obligations, such as securities of the
Federal Home Loan Banks, are supported by the right of the issuer to borrow from
the Treasury to repay its obligations. Still others, such as bonds issued by the
Federal National Mortgage Association, a federally chartered private
corporation, are supported only by the credit of the instrumentality.
Obligations of Domestic Banks. These obligations consist of certificates
of deposit ("CDs") and bankers' acceptances issued by domestic banks (including
their foreign branches) having total assets in excess of $5 billion, which meet
the Funds' minimum 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.
<PAGE>
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"). These instruments
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.
Commercial Paper. These obligations are short-term promissory notes issued
by domestic corporations to meet current working capital requirements. Such
paper may be unsecured or backed by a bank letter of credit. Commercial paper
issued with a letter of credit is, in effect, "two party paper," with the issuer
directly responsible for payment, plus a bank's guarantee that if the note is
not paid at maturity by the issuer, the bank will pay the principal and interest
to the buyer. Commercial paper is sold either as interest-bearing or on a
discounted basis, with maturities not exceeding 270 days.
Futures Contracts. As discussed in the Prospectuses of the INVESCO U.S.
Government Securities Fund and the INVESCO Short-Term Bond Fund, those Funds may
engage in buying and selling interest rate futures contracts; however, the
INVESCO U.S. Government Securities Fund may buy and sell only interest rate
futures contracts relating to U.S. government securities ("Government Securities
Futures"). This limitation on this Fund's engaging in interest rate futures
contracts to those relating to U.S. government securities is a fundamental
policy which may be changed only by holders of a majority, as defined in the
1940 Act, of that Fund's outstanding shares. The INVESCO Short-Term Bond Fund
may engage in buying and selling interest rate futures contracts relating to the
debt securities in which it invests for the purpose of hedging the value of its
securities portfolio. The U.S. Government Securities Fund and Short-Term Bond
Funds have no other fundamental policies as to their use of futures contracts
and thus no fundamental policy as to a percentage limit thereon; however, see
below for limitations relating to the Commodity Futures Trading Commission (the
"CFTC") and a percentage restriction adopted by the board of directors.
In connection with hedging (a "long futures position"), the INVESCO U.S.
Government Securities Fund and Short-Term Bond Fund, respectively, would take a
long futures position with the intention of doing so as a temporary substitute
for the purchase of long-term U.S. government securities, and any debt
securities in which the Short-Term Bond Fund invests, which may then be
purchased in an orderly fashion. These Funds expect that they would, in the
ordinary course, purchase such long-term securities upon termination of the long
futures position a substantial majority of the time, but under unusual market
conditions, a long futures position may be terminated without the corresponding
purchase of long-term U.S. government securities or other long-term debt
<PAGE>
securities. These Funds will deposit in a segregated account with their
custodian bank U.S. government securities maturing in one year or less, or cash,
in an amount equal to the fluctuating market value of long futures contracts
they have purchased, less any margin deposited on their long position. They may
hold cash or acquire such government securities for the purpose of making these
deposits.
The "sale" of a Government Securities Future by the INVESCO U.S.
Government Securities Fund, or "sale" of a debt security future by the INVESCO
Short-Term Bond Fund, means the acquisition by these Funds of an obligation to
deliver the related U.S. government securities or other debt securities (i.e.,
those called for by the contract) at a specified price on a specified date. The
"purchase" of a Government Securities Future by the INVESCO U.S. Government
Securities Fund, or "purchase" of a debt security future by the INVESCO
Short-Term Bond Fund, means the acquisition by these Funds of an obligation to
acquire the related U.S. government securities or other debt securities at a
specified price on a specified date.
Unlike when the INVESCO U.S. Government Securities Fund purchases or sells
a U.S. government security, or when the INVESCO Short-Term Bond Fund purchases
or sells a debt security, no price is paid or received by these Funds upon the
purchase or sale of a Government Securities Future or a debt security future.
Initially, these Funds will be required to deposit with the futures commission
merchant (the "broker") an amount of cash or U.S. Treasury Bills equal to a
varying specified percentage of the contract amount. This amount is known as
initial margin. Subsequent payments, called variation margin, to and from the
broker, will be made on a daily basis as the price of the underlying U.S.
government securities or debt securities fluctuates, making the Government
Securities Future or debt security future more or less valuable, a process known
as mark to the market. Changes in variation margin are recorded by these Funds
as unrealized gains or losses. Initial margin payments will be deposited in the
Company's custodian bank in an account registered in the broker's name; access
to the assets in that account may be made by the broker only under specified
conditions. At any time prior to expiration of the Government Securities Future
or debt security future, these Funds may elect to close the position by taking
an opposite position which will operate to terminate the Funds' position on the
Government Securities Future or debt security future. A final determination of
variation margin is then made, additional cash is required to be paid by or
released to these Funds, and the Funds realize a loss or a gain. Although
Government Securities Futures or debt security futures by their terms call for
the actual delivery or acquisition of the related U.S. government securities or
debt securities, in most cases the contractual obligation is so fulfilled
without having to make or take delivery of the related U.S. government
securities or debt securities. These Funds do not intend to make or take
<PAGE>
delivery of these securities. All transactions in the futures markets,
including transactions in Government Securities Futures or debt security
futures, are made, offset or fulfilled through a clearing house associated with
the exchange on which the contracts are traded.
One risk in employing Government Securities Futures or debt security
futures to attempt to protect against the price volatility of the U.S.
government securities or debt securities held in the INVESCO U.S. Government
Securities Fund or INVESCO Short-Term Bond Fund is the prospect that the prices
of Government Securities Futures or debt security futures will correlate
imperfectly with the behavior of the cash (i.e., market value) prices of these
Funds' U.S. government securities or debt securities. For a hedge to be
completely effective, the price change of the hedging instrument should equal
the price change of the security being hedged. Such equal price changes are not
always possible because the investment underlying the hedging instrument may not
be the same investment that is being hedged. The adviser will attempt to create
a closely correlated hedge, but hedging activity may not be completely
successful in eliminating market value fluctuation. The ordinary spreads between
prices in the cash and futures markets, due to differences in the natures of
those markets, may be subject to distortions in the following manners. 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 future 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. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market may cause temporary
price distortions. Due to the possibility of distortion, a correct forecast of
general interest trends by the adviser may still not result in a successful
transaction.
Another risk is that the adviser would be incorrect in its expectations as
to the extent of various interest rate movements or the time span within which
the movements take place. For example, if the INVESCO U.S. Government Securities
Fund sold a Government Securities Future, or the INVESCO Short-Term Bond Fund
sold a debt security future in anticipation of an increase in interest rates,
and then interest rates went down instead, these Funds would lose money on the
sale. Any gains or losses on futures transactions will not be tax-exempt.
<PAGE>
The use of futures to attempt to protect against the market risk of a
decline in the value of portfolio securities is referred to as having a "short
futures position." The use of futures to attempt to protect against the market
risk that portfolio securities are not fully included in an increase in value is
referred to as having a "long futures position." The INVESCO U.S. Government
Securities Fund and the INVESCO Short-Term Bond Fund must operate within certain
restrictions as to their long and short positions in futures under a rule (the
"CFTC Rule") adopted by the CFTC under the Commodity Exchange Act (the "CEA") to
be eligible for the exclusion provided by the CFTC Rule from registration by
these Funds with the CFTC as a "commodity pool operator" (as defined under the
CEA), and they must represent to the CFTC that they will operate within such
restrictions. Under these restrictions, these Funds will not, as to any
positions, whether long, short or a combination thereof, enter into futures for
which the aggregate initial margins exceed 5% of this fair market value of the
Funds' assets. Under the applicable restrictions, these Funds also must, as to
their short positions, use futures solely for bona fide hedging purposes within
the meaning and intent of the applicable provisions under the CEA; see the
second paragraph under "Futures Contracts" as to the meaning of "hedging" in the
case of these Funds. As to their long positions which are used as part of these
Funds' strategies and are incidental to the Funds' activities in the underlying
cash market, the "underlying commodity value" (see below) of these Funds'
futures must not exceed the sum of (i) cash set aside in an identifiable manner,
or short-term U.S. debt obligations or other U.S. dollar-denominated high
quality short-term money market instruments so set aside, plus any funds
deposited as margin; (ii) cash proceeds from existing investments due in 30
days, and (iii) accrued profits held at the futures commission merchant. (There
are described above the various segregated accounts which these Funds must
maintain with their custodian bank as to their futures activities due to
requirements other than those of the CFTC Rule; these Funds will, as to their
long positions, be required to abide by the more restrictive of these other
requirements or the above requirements of the CFTC Rule.) The "underlying
commodity value" of a future is computed by multiplying the size of the future
by the daily settlement price of the future.
Although these Funds have no fundamental policy restricting the use of
futures, the Company's board of directors has adopted a restriction that the
aggregate market value of the Futures Contracts the INVESCO U.S. Government
Securities Fund or the INVESCO Short-Term Bond Fund holds not exceed 20% of the
market value of the respective Fund's total assets. This restriction would not
be changed by the Company's board of directors without considering the policies
and concerns of federal and state regulatory agencies.
<PAGE>
Investment Restrictions
As described in each Fund's Prospectus, the Funds operate under certain
investment restrictions that are fundamental and may not be changed with respect
to a particular Fund without the prior approval of the holders of a majority, as
defined in the 1940 Act, of the outstanding voting securities of that Fund. For
purposes of the following limitations, all percentage limitations apply
immediately after a purchase or initial investment. Any subsequent change in a
particular percentage resulting from fluctuations in value does not require
elimination of any security from a Fund.
Under these fundamental investment restrictions, each Fund may not:
(1) sell short or buy on margin;
(2) mortgage, pledge or hypothecate portfolio securities or
borrow money, except from banks for temporary or emergency
purposes (but not for investment) and then in an amount
not exceeding 10% of the value of its total net assets.
A Fund will not purchase additional securities while any
borrowings on behalf of such Fund exist; provided,
however, that this restriction shall not be deemed to
affect the INVESCO U.S. Government Securities Fund's
entering into futures contracts in accordance with that
Fund's investment policies, or the INVESCO Short-Term Bond
Fund's entering into futures contracts or options
transactions in accordance with that Fund's investment
policies.
(3) invest in the securities of any other investment company except for a
purchase or acquisition in accordance with a plan of reorganization,
merger or consolidation;
(4) purchase securities if the purchase would cause the Fund
to have at the time more than 5% of the value of its total
assets invested in securities of any one issuer or to own
more than 10% of the outstanding voting securities of any
one issuer (except obligations issued or guaranteed by the
U.S. government, its agencies or instrumentalities*). For
this purpose, all indebtedness of an issuer shall be
deemed a single class of security;
(5) make loans to any person, except through the purchase of
debt securities in accordance with the investment policies
of the Funds, or the lending of portfolio securities to
broker-dealers or other institutional investors, or the
entering into repurchase agreements with member banks of
the Federal Reserve System, registered broker-dealers and
registered government securities dealers. The aggregate
value of all portfolio securities loaned may not exceed
33-1/3% of a Fund's total net assets (taken at current
<PAGE>
value). No more than 10% of a Fund's total net assets may
be invested in repurchase agreements maturing in more than
seven days;
(6) other than the INVESCO U.S. Government Securities Fund
entering into futures contracts or the INVESCO Short-Term
Bond Fund entering into futures contracts or options
transactions in accordance with those Funds' investment
policies, buy or sell commodities, commodity contracts or
real estate (however, securities of companies investing in
real estate may be purchased);
(7) invest in any company for the purpose of exercising
control or management;
(8) other than the INVESCO High Yield Fund, buy other than
readily marketable securities; ^
(9) engage in the underwriting of any securities;
(10) purchase securities of any company in which any officer or director
of the Fund or of its investment adviser beneficially owns more than
1/2 of 1% of the outstanding securities or in which all of the
officers or directors of the Fund and its investment adviser, as a
group, own more than 5% of such securities;
(11) purchase equity securities; provided, however, that the
INVESCO High Yield Fund may purchase convertible and
non-convertible preferred stock. This shall not be
deemed to prohibit the acquisition of equity securities
resulting from the ownership of debt securities, as, for
example, the conversion of convertible bonds or an
exchange in connection with a corporate reorganization;
^(12) other than the INVESCO High Yield Fund, purchase the
securities of any issuer having a record, together with
predecessors, of less than three years continuous operation;
(13) buy or sell oil, gas or other mineral interest or
exploration programs;
(14) participate on a joint or joint and several basis in any securities
trading account, or purchase warrants, or, except for the INVESCO
Short-Term Bond Fund, write, purchase or sell puts, calls, straddles
or any other option contract or combination thereof;
(15) enter into repurchase agreements maturing in more than seven days
if, as a result, such repurchase agreements, together with
securities for which there are no readily
<PAGE>
securities for which there are no readily available market
quotations, would constitute more than 10% of that Fund's total net
assets;
(16) include, as an investment of each Fund, more than 25% of that Fund's
total net assets in any one industry, excluding government
securities. Telephone utilities, water, gas, and electric utilities
shall be considered separate industries.
*If an entity, other than the U.S. government, its agencies or
instrumentalities, guarantees a security, such guarantee is considered a
separate security which must be valued and included in the five percent
limitation, subject to those exceptions allowed by Rule 5b-2 under the 1940 Act.
In addition to the above restrictions, a fundamental policy of the Funds
is not to invest more than 25% of their total net assets (taken at market value
at the time of each investment) in the securities of issuers in any one
industry. In applying this restriction, the Funds use an industry classification
system based on, where applicable, the O'Neil Database published by William
O'Neal & Co., Inc.
In applying restriction (8) above, the Funds also include illiquid
securities (those which cannot be sold in the ordinary course of business within
seven days at approximately the valuation given to them by the Fund) among the
securities subject to the limitations of that paragraph. The Company's board of
directors has delegated to the Funds' investment adviser the authority to
determine that a liquid market exists for securities eligible for resale
pursuant to Rule 144A under the 1933 Act, or any successor to such rule, and
that such securities are not subject to the Funds' limitations on investing in
illiquid securities or securities that are not readily marketable. Under
guidelines established by the board of directors, the adviser will consider the
following factors, among others, in making this determination: (1) the
unregistered nature of a Rule 144A security, (2) the frequency of trades and
quotes for the security; (3) the number of dealers willing to purchase or sell
the security and the number of other potential purchasers; (4) dealer
undertakings to make a market in the security; and (5) the nature of the
security and the nature of marketplace trades (e.g., the time needed to dispose
of the security, the method of soliciting offers and the mechanics of
transfer).^
In applying restriction (11) above, the Funds consider acquisitions of
equity securities as components of units which consist primarily of debt
securities as permissible acquisitions resulting from the ownership of debt
securities.
<PAGE>
In ^ applying restriction (14) above, the Funds consider warrants acquired
as components of units consisting primarily of debt securities to be permissible
investments as contemplated by restriction (11) above.
The INVESCO Short-Term Bond Fund does not currently intend to buy or sell
put or call options or option contracts, and will not do so until the Company's
board of directors adopts an investment policy governing such purchases or
sales.
The Company has given undertakings to the State of Texas that the Funds
will not invest in any oil, gas, or mineral leases; or in real estate limited
partnership interests.
The INVESCO Short-Term Bond Fund has given an undertaking to the State of
Arkansas that the Fund will not purchase any real estate or interests therein,
other than readily marketable securities.
In addition to the foregoing, the Funds may not issue preference shares or
create any funded debt. "Fund shares," the only means of participating in the
ownership of a Fund, are all nonassessable, and have equal rights, within each
class, as to dividends, voting power and asset value. No shareholder of a Fund,
as such, has any preemptive right to purchase or subscribe for any Fund shares
which may be issued; however, the board of directors, in its discretion, may
extend purchase or subscription rights pro rata to all shareholders.
Additional investment restrictions adopted by the Company on behalf of the
Funds and which may be changed by the directors, at their discretion, without
shareholder approval, include the following:
(1) The High Yield Fund will not purchase any security or
enter into a repurchase agreement if, as a result, more
than 15% of its net assets would be invested in
repurchase agreements not entitling the holder to payment
of principal and interest within seven days and in
securities that are illiquid by virtue of legal or
contractual restrictions on resale that offered liquidity
or the absence of a readily available market. The board
of directors, or the Fund's investment adviser acting
pursuant to authority delegated by the board of
directors, may determine that a readily available market
exists for securities that are not registered under the
Securities Act of 1933 but are nevertheless eligible for
resale pursuant to Rule 144A under the Securities Act of
1933, or any successor to such rule, and therefore that
such securities are not subject to the foregoing
limitation.
With respect to the non-fundamental investment
restriction (1) above, the board of directors has
<PAGE>
delegated to the Fund's investment adviser the authority to
determine whether a liquid market exists for securities eligible for
resale pursuant to Rule 144A under the 1933 Act, or any successor to
such rule, and whether such securities are subject to the non-
fundamental restriction (1) above. Under guidelines established by
the board of directors, the adviser will consider the following
factors, among others, in making this determination: (1) the
unregistered nature of a Rule 144A security; (2) the frequency of
trades and quotes for the security; (3) the number of dealers
willing to purchase or sell the security and the number of other
potential purchasers; (4) dealer undertakings to make a market in
the security; and (5) the nature of the security and the nature of
marketplace trades (e.g., the time needed to dispose of the
security, the method of soliciting offers and the mechanics of
transfer).
(2) The High Yield Fund will not purchase securities of any
issuer (other than the U.S. government, its agencies and
instrumentalities or instruments guaranteed by the U.S.
government or any such agency or instrumentality with a
record of more than three years' continuous operation
(including that of predecessors) with a record of less
than three years' continuous operation (including that of
predecessors) if such purchase would cause the Fund's
investments in all such issuers to exceed 5% of the
Fund's total assets taken at market value at the time of
such purchases.
THE FUNDS AND THEIR MANAGEMENT
The Company. The Company was incorporated on April 2, 1993,
under the laws of Maryland.
The Investment Adviser. INVESCO Funds Group, Inc., a Delaware corporation
("INVESCO"), is employed as the Company's investment adviser. INVESCO was
established in 1932 and also serves as an investment adviser to INVESCO
Diversified Funds, Inc., INVESCO Dynamics Fund, Inc., INVESCO Emerging
Opportunity Funds, Inc., INVESCO Growth Fund, Inc., INVESCO Industrial Income
Fund, Inc., INVESCO International Funds, Inc., INVESCO Money Market Funds, Inc.,
INVESCO Multiple Asset Funds, Inc., INVESCO Specialty Funds, Inc., INVESCO
Strategic Portfolios, Inc., INVESCO Tax-Free Income Funds, Inc., INVESCO Value
Trust, and INVESCO Variable Investment Funds, Inc.
The Sub-Adviser. INVESCO Trust Company ("INVESCO Trust") serves as the
sub-adviser to the Funds, pursuant to an agreement between INVESCO and INVESCO
Trust. INVESCO Trust, a trust company founded in 1969, is a wholly-owned
subsidiary of INVESCO.
<PAGE>
INVESCO is an indirect, wholly-owned subsidiary of INVESCO PLC, a
publicly-traded holding company organized in 1935. Through subsidiaries located
in London, Denver, Atlanta, Boston, Louisville, Dallas, Tokyo, Hong Kong, and
the Channel Islands, INVESCO PLC provides investment services around the world.
INVESCO was acquired by INVESCO PLC in 1982 and, as of August 31, ^ 1996,
managed 14 mutual funds, consisting of ^ 39 separate portfolios, on behalf of
over ^ 827,000 shareholders. INVESCO PLC's other North American subsidiaries
include the following:
--INVESCO Capital Management, Inc. of Atlanta, Georgia manages
institutional investment portfolios, consisting primarily of
discretionary employee benefit plans for corporations and state and
local governments, and endowment funds. INVESCO Capital
Management, Inc. is the sole shareholder of INVESCO Services, Inc.,
a registered broker-dealer whose primary business is the
distribution of shares of two registered investment companies.
--INVESCO Management & Research, Inc. (formerly, Gardner and
Preston Moss, Inc.) of Boston, Massachusetts, primarily manages
pension and endowment accounts.
--PRIMCO Capital Management, Inc. of Louisville, Kentucky,
specializes in managing stable return investments, principally on
behalf of Section 401(k) retirement plans.
--INVESCO Realty Advisors, Inc. of Dallas, Texas is
responsible for providing advisory services in the U.S. real estate
markets for INVESCO PLC's clients worldwide. Clients include
corporate plans, public pension funds as well as endowment and
foundation accounts.
The corporate headquarters of INVESCO PLC are located at 11 Devonshire
Square, London, EC2M 4YR, England.
As indicated in the Prospectuses, INVESCO permits investment and other
personnel to purchase and sell securities for their own accounts in accordance
with a compliance policy governing personal investing by directors, officers and
employees of INVESCO and its North American affiliates. The policy requires
officers, inside directors, investment and other personnel of INVESCO and its
North American affiliates to pre-clear all transactions in securities not
otherwise exempt under the policy. Requests for trading authority will be denied
when, among other reasons, the proposed personal transaction would be contrary
to the provisions of the policy or would be deemed to adversely affect any
transaction then known to be under consideration for or to have been effected on
behalf of any client accounts, including the Funds.
In addition to the pre-clearance requirement described above, the policy
subjects officers, inside directors, investment and other personnel of INVESCO
<PAGE>
and its North American affiliates to various trading restrictions and
reporting obligations. All reportable transactions are reviewed for compliance
with the policy. The provisions of the policy are administered by and subject to
exceptions authorized by INVESCO.
Investment Advisory Agreement. INVESCO serves as investment adviser
pursuant to an investment advisory agreement (the "Agreement") with the Company
which was approved on April 21, 1993, by a vote cast in person by a majority of
the directors of the Company, including a majority of the directors who are not
"interested persons" of the Company or INVESCO at a meeting called for such
purpose. Pursuant to authorizations granted by the public shareholders of the
Select Income Portfolio and U.S. Government Securities Portfolio of FBS on May
24, 1993, and by the public shareholders of the High Yield Portfolio of FBS on
June 21, 1993, such Portfolios, as the initial shareholders of the Company
approved the Agreement for an initial term expiring April 30, 1995. The
Agreement was approved by INVESCO on September 29, 1993, as the then sole
shareholder of the INVESCO Short-Term Bond Fund. The Agreement has been
continued by action of the board of directors through April 30, ^ 1997.
Thereafter, the Agreement may be continued from year to year as to each Fund as
long as each such continuance is specifically approved at least annually by the
board of directors of the Company, or by a vote of the holders of a majority, as
defined in the 1940 Act, of the outstanding shares of the Fund. Any such
continuance also must be approved by a majority of the Company's directors who
are not parties to the Agreement or interested persons (as defined in the 1940
Act) of any such party, cast in person at a meeting called for the purpose of
voting on such continuance. The Agreement may be terminated at any time without
penalty by either party upon sixty (60) days' written notice and terminates
automatically in the event of an assignment to the extent required by the 1940
Act and the rules thereunder.
^
The Agreement provides that INVESCO shall manage the investment portfolios
of the Funds in conformity with the Funds' investment policies (either directly
or by delegation to a sub-adviser, which may be a party affiliated with
INVESCO). Further, INVESCO shall perform all administrative, internal accounting
(including computation of net asset value), clerical, statistical, secretarial
and all other services necessary or incidental to the administration of the
affairs of the Funds excluding, however, those services that are the subject of
separate agreement between the Company and INVESCO or any affiliate thereof,
including the distribution and sale of Fund shares and provision of transfer
agency, dividend disbursing agency, and registrar services, and services
furnished under an Administrative Services Agreement with INVESCO discussed
below. Services provided under the Agreement include, but are not limited to:
supplying the Company with officers, clerical staff and other employees, if any,
who are necessary in connection with the Funds' operations; furnishing office
<PAGE>
space, facilities, equipment, and supplies; providing personnel and
facilities required to respond to inquiries related to shareholder accounts;
conducting periodic compliance reviews of the Funds' operations; preparation and
review of required documents, reports and filings by INVESCO's in-house legal
and accounting staff (including the prospectus, statement of additional
information, proxy statements, shareholder reports, tax returns, reports to the
SEC, and other corporate documents of the Funds), except insofar as the
assistance of independent accountants or attorneys is necessary or desirable;
supplying basic telephone service and other utilities; and preparing and
maintaining certain of the books and records required to be prepared and
maintained by the Funds under the 1940 Act. Expenses not assumed by INVESCO are
borne by the Funds.
As full compensation for its advisory services to the Company, INVESCO
receives a monthly fee. The fee with respect to the INVESCO Select Income Fund
and INVESCO U.S. Government Securities Fund is calculated daily at an annual
rate of: 0.55% of average net assets of each such Fund up to $300 million;
reduced to 0.45% of average net assets of each such Fund exceeding $300 million
but not exceeding $500 million; and further reduced to 0.35% of average net
assets of each such Fund in excess of $500 million. The fees for the INVESCO
High Yield Fund and the INVESCO Short-Term Bond Fund also are calculated daily
but are reduced by 0.05% at each level in the above fee schedule.
Certain states in which the shares of the Funds are qualified for sale
currently impose limitations on the expenses of each of the Funds. At the date
of this Statement of Additional Information, the most restrictive state-imposed
annual expense limitation requires that INVESCO absorb the amount necessary to
prevent any Fund's aggregate ordinary operating expenses (excluding interest,
taxes, Rule 12b-1 fees, brokerage fees and commissions, and extraordinary
charges such as litigation costs) from exceeding in any fiscal year 2.5% of that
Fund's first $30 million of average net assets, 2.0% of the next $70 million of
average net assets and 1.5% of the remaining average net assets. No payment of
the investment advisory fee will be made to INVESCO which would result in a
Fund's expenses exceeding on a cumulative annualized basis this state
limitation. During the past year, INVESCO did not absorb any amounts under this
provision for any Fund.
Sub-Advisory Agreement. INVESCO Trust serves as sub-adviser to the Funds
pursuant to a sub-advisory agreement (the "Sub-Agreement") with INVESCO which
was approved on April 21, 1993, by a vote cast in person by a majority of the
directors of the Company, including a majority of the directors who are not
"interested persons" of the Company, INVESCO, or INVESCO Trust at a meeting
called for such purpose. Pursuant to authorizations granted by the public
shareholders of the Select Income Portfolio and U.S. Government Securities
Portfolio of FBS on May 24, 1993, and by the public shareholders of the High
<PAGE>
Yield Portfolio of FBS on June 21, 1993, such Portfolios, as the initial
shareholders of the Company, approved the Sub-Agreement on June 24, 1993, for an
initial term expiring April 30, ^ 1996. The Sub-Agreement was approved by
INVESCO on September 29, 1993, as the then sole shareholder of the INVESCO
Short-Term Bond Fund. The Sub-Agreement has been continued by action of the
board of directors until April 30, ^ 1997. Thereafter, the Sub-Agreement may be
continued from year to year as to each Fund as long as each such continuance is
specifically approved by the board of directors of the Company, or by a vote of
the holders of a majority, as defined in the 1940 Act, of the outstanding shares
of the Fund. Each such continuance also must be approved by a majority of the
directors who are not parties to the Sub-Agreement or interested persons (as
defined in the 1940 Act) of any such party, cast in person at a meeting called
for the purpose of voting on such continuance. The Sub-Agreement may be
terminated at any time without penalty by either party or the Company upon sixty
(60) days' written notice, and terminates automatically in the event of an
assignment to the extent required by the 1940 Act and the rules thereunder.^
The Sub-Agreement provides that INVESCO Trust, subject to the supervision
of INVESCO, shall manage the investment portfolios of the Funds in conformity
with each Fund's investment policies. These management services would include:
(a) managing the investment and reinvestment of all the assets, now or hereafter
acquired, of the Funds, and executing all purchases and sales of portfolio
securities; (b) maintaining a continuous investment program for the Funds,
consistent with (i) each Fund's investment policies as set forth in the
Company's Articles of Incorporation, Bylaws, and Registration Statement, as from
time to time amended, under the 1940 Act, as amended, and in any prospectus
and/or statement of additional information of the Company, as from time to time
amended and in use under the 1933 Act, as amended, and (ii) the Company's status
as a regulated investment company under the Internal Revenue Code of 1986, as
amended; (c) determining what securities are to be purchased or sold for each of
the Funds, unless otherwise directed by the directors of the Company or INVESCO,
and executing transactions accordingly; (d) providing the Funds the benefit of
all of the investment analysis and research, the reviews of current economic
conditions and trends, and the consideration of long-range investment policy now
or hereafter generally available to investment advisory customers of the
Sub-Adviser; (e) determining what portion of each of the Funds should be
invested in the various types of securities authorized for purchase by each
Fund; and (f) making recommendations as to the manner in which voting rights,
rights to consent to Company action and any other rights pertaining to the
portfolio securities of each Fund shall be exercised.
The Sub-Agreement provides that with respect to the INVESCO Select Income
Fund, INVESCO High Yield Fund, and INVESCO U.S. Government Securities Fund, as
<PAGE>
compensation for its services, INVESCO Trust shall receive from INVESCO, at
the end of each month, a fee based upon the average daily value of each such
Fund's net assets at the following annual rates: 0.25% on each such Fund's
average net assets up to $200 million, and 0.20% on each such Fund's average net
assets in excess of $200 million. The Sub- Agreement provides that with respect
to the INVESCO Short-Term Bond Fund, as compensation for its services, INVESCO
Trust shall receive from INVESCO, at the end of each month, a fee based upon the
average daily value of such Fund's net assets at the following annual rates:
0.25% of the first $300 million of such Fund's average net assets, 0.20% of the
next $200 million of such Fund's average net assets and 0.15% of such Fund's
average net assets in excess of $500 million. The Sub-Advisory fee is paid by
INVESCO, NOT the Funds.
Administrative Services Agreement. INVESCO, either directly or through
affiliated companies, provides certain administrative, sub-accounting, and
recordkeeping services to the Funds pursuant to an Administrative Services
Agreement dated April 30, 1993 (the "Administrative Agreement"). The
Administrative Agreement was approved on April 21, 1993, by a vote cast in
person by all of the directors of the Company, including all of the directors
who are not "interested persons" of the Company or INVESCO at a meeting called
for such purpose. The Administrative Agreement was for an initial term of one
year expiring April 30, 1994, and has been continued by action of the board of
directors through April 30, ^ 1997. The Administrative Agreement may be
continued from year to year as long as each such continuance is specifically
approved by the board of directors of the Company, including a majority of the
directors who are not parties to the Administrative Agreement or interested
persons (as defined in the 1940 Act) of any such party, cast in person at a
meeting called for the purpose of voting on such continuance. The Administrative
Agreement may be terminated at any time without penalty by INVESCO on sixty (60)
days' written notice, or by the Company upon thirty (30) days' written notice,
and terminates automatically in the event of an assignment unless the Company's
board of directors approves such assignment.
The Administrative Agreement provides that INVESCO shall provide the
following services to the Funds: (A) such sub-accounting and recordkeeping
services and functions as are reasonably necessary for the operation of the
Funds; and (B) 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
Agreement, each Fund pays a monthly fee to INVESCO consisting of a base fee of
$10,000 per year, plus an additional incremental fee computed daily and paid
<PAGE>
monthly at an annual rate of 0.015% 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 Funds pursuant to a Transfer
Agency Agreement which was approved by the board of directors of the Company,
including a majority of the Company's directors who are not parties to the
Transfer Agency Agreement or "interested persons" of any such party, on April
21, 1993, for an initial term expiring April 30, 1994. The Transfer Agency
Agreement has been continued by action of the board of directors until April 30,
^ 1997, and thereafter may be continued from year to year as to each Fund as
long as such continuance is specifically approved at least annually by the board
of directors of the Company, or by a vote of the holders of a majority of the
outstanding shares of the Fund. Any such continuance also must be approved by a
majority of the Company's directors who are not parties to the Transfer Agency
Agreement or interested persons (as defined by the 1940 Act) of any such party,
cast in person at a meeting called for the purpose of voting on such
continuance. The Transfer Agency Agreement may be terminated at any time without
penalty by either party upon sixty (60) days' written notice and terminates
automatically in the event of assignment.
The Transfer Agency Agreement provides that the Funds will pay to INVESCO
a fee of ^ $26.00 per shareholder account or omnibus account participant per
year. This fee is paid monthly at 1/12 of the annual fee and is based upon the
number of shareholder accounts or omnibus account participants in existence at
any time during each month.
Set forth below is a table showing the advisory fees, administrative
services fees, and transfer agency fees paid by each of the Funds for the
periods shown.
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended ^ Year Ended
August 31, ^ 1996(1) August 31, ^ 1995(1) August 31, ^ 1994(1)
-------------------- ------------------- --------------------
Adminis- Adminis- Adminis-
Transfer trative Transfer trative Transfer trative
Advisory Agency Services Advisory Agency Services Advisory Agency Services
Fees Fees Fees Fees Fees Fees Fees Fees Fees
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Select Income ^ $1,410,937 $614,471 $48,480 $946,146 $518,379 $35,804 $800,176 $287,082 $31,823
^ High Yield 1,671,610 532,180 61,443 1,290,879 555,664 48,750 1,366,598 310,712 51,127 ^
U.S. Government
Securities 233,025 177,086 16,355 219,925 177,310 15,998 181,704 92,445 14,956 ^
Short-Term Bond 44,394 51,685 11,332 43,277 47,595 11,298 31,920 16,627 10,124
(1)^ These amounts do not reflect the voluntary expense limitations described in
the Funds' prospectuses.
<PAGE>
Officers and Directors of the Company. The overall direction and
supervision of the Company is the responsibility of the board of directors,
which has the primary duty of seeing that the general investment policies and
programs of each of the Funds are carried out and that the Funds are properly
administered. The officers of the Company, all of whom are officers and
employees of, and paid by, INVESCO, are responsible for the day-to-day
administration of the Company and each of the Funds. The investment adviser for
each Fund has the primary responsibility for making investment decisions on
behalf of that Fund. These investment decisions are reviewed by the investment
committee of INVESCO.
All of the officers and directors of the Company hold comparable positions
with INVESCO Diversified Funds, Inc., INVESCO Dynamics Fund, Inc., INVESCO
Emerging Opportunity Funds, Inc., INVESCO Growth Fund, Inc., INVESCO Industrial
Income Fund, Inc., INVESCO International Funds, Inc., INVESCO Money Market
Funds, Inc., INVESCO Multiple Asset Funds, Inc., INVESCO Specialty Funds, Inc.,
INVESCO Strategic Portfolios, Inc., INVESCO Tax-Free Income Funds, Inc., and
INVESCO Variable Investment Funds, Inc. All of the directors of the Company also
serve as trustees of INVESCO Value Trust. In addition, all of the directors of
the Company also are^ directors of INVESCO Advisor Funds, Inc. (formerly known
as "The EBI Funds, Inc."); and, with the exception of Mr. Hesser, trustees of
INVESCO Treasurer's Series Trust. All of the officers of the Company also hold
comparable positions with INVESCO Value Trust. Set forth below is information
with respect to each of the Company's officers and directors. Unless otherwise
indicated, the address of the directors and officers is Post Office Box 173706,
Denver, Colorado 80217-3706. Their affiliations represent their principal
occupations during the past five years.
CHARLES W. BRADY,*+ Chairman of the Board. Chief Executive
Officer and Director of INVESCO PLC, London, England, and of
various subsidiaries thereof; Chairman of the Board of The EBI
Funds, Inc., INVESCO Treasurer's Series Trust, and The Global Heath
Sciences Fund. Address: 1315 Peachtree Street, NE, Atlanta,
Georgia. Born: May 11, 1935.
FRED A. DEERING,+# Vice Chairman of the Board. Vice Chairman
of ^ INVESCO Advisor Funds, Inc. and INVESCO Treasurer's Series
Trust. Trustee of The Global Health Sciences Fund. Formerly,
Chairman of the Executive Committee and Chairman of the Board of
Security Life of Denver Insurance Company, Denver, Colorado;
Director of ^ ING America Life Insurance Company, Urbaine Life
Insurance Company and Midwestern United Life Insurance Company.
Address: Security Life Center, 1290 Broadway, Denver, Colorado.
Born: January 12, 1928.
DAN J. HESSER,+* President and Director. Chairman of the
Board, President and Chief Executive Officer of INVESCO Funds
<PAGE>
Group, Inc. ^; Director of INVESCO Trust Company. Trustee of The
Global Health Sciences Fund. Born: December 27, 1939.
VICTOR L. ANDREWS,** Director. ^ Professor Emeritus,
Chairman Emeritus and Chairman of the CFO Roundtable of the
Department of Finance at Georgia State University, Atlanta,
Georgia^; President, Andrews Financial Associates, Inc. (consulting
firm); formerly, member of the faculties of the Harvard Business
School and the Sloan School of Management of MIT. Dr. Andrews is
also a Director of The Southeastern Thrift and Bank Fund, Inc. and
The Sheffield Funds, Inc. Address: ^ 4625 Jettridge Drive,
Atlanta, Georgia. Born: June 23, 1930.
BOB R. BAKER,+** Director. President and Chief Executive
Officer of AMC Cancer Research Center, Denver, Colorado, since
January 1989; until mid-December 1988, Vice Chairman of the Board
of First Columbia Financial Corporation (a financial institution),
Englewood, Colorado. Formerly, Chairman of the Board and Chief
Executive Officer of First Columbia Financial Corporation.
Address: 1775 Sherman Street, #1000, Denver, Colorado. Born:
August 7, 1936.
^
LAWRENCE H. BUDNER,# Director. Trust Consultant; prior to
June 30, 1987, Senior Vice President and Senior Trust Officer of
InterFirst Bank, Dallas, Texas. Address: 7608 Glen Albens
Circle, Dallas, Texas. Born: July 25, 1930.
DANIEL D. CHABRIS,+# Director. Financial Consultant;
Assistant Treasurer of Colt Industries Inc., New York, New York,
from 1966 to 1988. Address: 15 Sterling Road, Armonk, New York.
Born: August 1, 1923.
A. D. FRAZIER, JR.,*^,** Director. Executive vice president
of INVESCO PLC (since November 1996). Formerly, senior executive
vice president and Chief Operating Officer of the Atlanta Committee
for the Olympic Games. From 1982 to 1991, Mr. Frazier was employed
in various capacities by First Chicago American Banking Group.
Trustee of The Global Health Sciences Fund. Director of Magellan
Health Services, Inc. and of Charter Medical Corp. Address: 250
Williams Street, Suite 6000, Atlanta, Georgia 30301. Born: June
29, 1944.
HUBERT L. HARRIS, JR.,* Director. Chairman (since May 1996),
President (January 1990 to April 1996) of INVESCO Services, Inc.
Director of INVESCO PLC and Chief Financial Officer of INVESCO
Individual Services Group. Member of the Executive Committee of
the Alumni Board of Trustees of Georgia Institute of Technology.
Address: 1315 Peachtree Street, NE, Atlanta, Georgia. Born: July
15, 1943.
<PAGE>
KENNETH T. KING,** Director. Formerly, Chairman of the Board
of The Capitol Life Insurance Company, Providence Washington
Insurance Company, and Director of numerous subsidiaries thereof in
the U.S. Formerly, Chairman of the Board of The Providence Capitol
Companies in the United Kingdom and Guernsey. Chairman of the
Board of the Symbion Corporation (a high technology company) until
1987. Address: 4080 North Circulo Manzanillo, Tucson, Arizona.
Born: November 16, 1925.
JOHN W. MCINTYRE,# Director. Retired. Formerly, Vice
Chairman of the Board of Directors of the Citizens and Southern
Corporation and Chairman of the Board and Chief Executive Officer
of ^ The Citizens and Southern Georgia Corporation and Citizens and
Southern National Bank. Director of Golden Poultry Co., Inc.
Trustee of The Global Health Sciences Fund and Gables Residential
Trust. Address: ^ 7 Piedmont Center, Suite 100, Atlanta, Georgia
^. Born: September 14, 1930.
^
GLEN A. PAYNE, Secretary. Senior Vice President, General
Counsel and Secretary of INVESCO Funds Group, Inc. and INVESCO
Trust Company ^ since April 1995 and formerly (May 1989 to April
1995) Vice President, Secretary and General Counsel of INVESCO
Funds Group, Inc. and INVESCO Trust Company. Formerly, employee of
a U.S. regulatory agency, Washington, D.C., (June 1973 through May
1989). Born: September 25, 1947.
RONALD L. GROOMS, Treasurer. Senior Vice President and
Treasurer of INVESCO Funds Group, Inc. and INVESCO Trust Company
since January 1988. Born: October 1, 1946.
WILLIAM J. GALVIN, JR., Assistant Secretary. Senior Vice President of
INVESCO Funds Group, Inc. and Trust Officer of INVESCO Trust Company ^ since
July 1995 and formerly (August 1992 to July 1995), Vice President of INVESCO
Funds Group, Inc. and trust officer of INVESCO Trust Company. Formerly, Vice
President of 440 Financial Group from June 1990 to August 1992 ^ and Assistant
Vice President of Putnam Companies from November 1986 to June 1990. Born: August
21, 1956.
ALAN I. WATSON, Assistant Secretary. Vice President of
INVESCO Funds Group, Inc. and Trust Officer of INVESCO Trust
Company. Born: September 14, 1941.
JUDY P. WIESE, Assistant Treasurer. Vice President of INVESCO
Funds Group, Inc. and Trust Officer of INVESCO Trust Company.
Born: February 3, 1948.
#Member of the audit committee of the Company.
<PAGE>
+Member of the executive committee of the Company. On occasion, the
executive committee acts upon the current and ordinary business of the Company
between meetings of the board of directors. Except for certain powers which,
under applicable law, may only be exercised by the full board of directors, the
executive committee may exercise all powers and authority of the board of
directors in the management of the business of the Company. All decisions are
subsequently submitted for ratification by the board of directors.
*These directors are "interested persons" of the Company as
defined in the 1940 Act.
**Member of the management liaison committee of the Company.
As of October ^29, 1996, officers and directors of the Company, as a
group, beneficially owned less than ^1% of the Company's outstanding shares and
less than ^1% of each Fund's outstanding shares.
Director Compensation
The following table sets forth, for the fiscal year ended August 31, ^
1996: the compensation paid by the Company to its eight eligible independent
directors for services rendered in their capacities as directors of the Company;
the benefits accrued as Company expenses with respect to the Defined Benefit
Deferred Compensation Plan discussed below; and the estimated annual benefits to
be received by these directors upon retirement as a result of their service to
the Company. In addition, the table sets forth the total compensation paid by
all of the mutual funds distributed by INVESCO Funds Group, Inc. (including the
Company), ^ INVESCO Advisor Funds, Inc., INVESCO Treasurer's Series Trust and
The Global Health Sciences Fund (collectively, the "INVESCO Complex") to these
directors for services rendered in their capacities as directors or trustees
during the year ended December 31, ^ 1995. As of December 31, ^ 1995, there were
^ 48 funds in the INVESCO Complex.
Total
Compensa-
Benefits Estimated tion From
Aggregate Accrued As Annual INVESCO
Compensa- Part of Benefits Complex
tion From Company Upon Paid To
Company(1) Expenses(2) Retirement(3) Directors(1)
)
Fred A.Deering, ^ $5,642 $1,076 $896 $87,350
Vice Chairman of
the Board
Victor L. Andrews ^ 5,372 948 987 68,000
<PAGE>
Bob R. Baker ^ 5,431 977 1,323 73,000
Lawrence H. Budner ^ 5,289 1,017 987 68,350
Daniel D. Chabris ^ 5,448 1,160 702 73,350
A. D. Frazier, ^ Jr.4,5 5,219 0 0 ^ 63,500
Kenneth T. King ^ 5,392 1,118 812 70,000
John W. McIntyre4 ^ 5,237 0 0 ^ 67,850
Total ^ $43,030 $6,296 $5,707 $571,400
% of Net Assets ^ 0.0062%6 0.0009%6 0.0043%7
(1)The vice chairman of the board, the chairmen of the audit, management
liaison and compensation committees, and the members of the executive and
valuation committees each receive compensation for serving in such capacities in
addition to the compensation paid to all independent directors.
(2)Represents benefits accrued with respect to the Defined Benefit Deferred
Compensation Plan discussed below, and not compensation deferred at the election
of the directors.
(3)These amounts represent the Company's share of the estimated annual
benefits payable by the INVESCO Complex (excluding ^ The Global Health Sciences
Fund which does not participate in any retirement plan) upon the directors'
retirement, calculated using the current method of allocating director
compensation among the funds in the INVESCO Complex. These estimated benefits
assume retirement at age 72 and that the basic retainer payable to the directors
will be adjusted periodically for inflation, for increases in the number of
funds in the INVESCO Complex, and for other reasons during the period in which
retirement benefits are accrued on behalf of the respective directors. This
results in lower estimated benefits for directors who are closer to retirement
and higher estimated benefits for directors who are further from retirement.
With the exception of Messrs. Frazier and McIntyre, each of these directors has
served as a director/trustee of one or more of the funds in the INVESCO Complex
for the minimum five-year period required to be eligible to participate in the
Defined Benefit Deferred Compensation Plan.
(4)Messrs. Frazier and McIntyre began serving as directors of the Company
on April 19, 1995.
(5)Effective November 1, 1996, A.D. Frazier, Jr. was employed by INVESCO
PLC, a company affiliated with INVESCO. Because it was possible that Mr. Frazier
would be employed with INVESCO PLC effective May 1, 1996, he was deemed to be an
"interested person" of the Company and of the other funds in the INVESCO
Complex.
<PAGE>
Effective November 1, 1996, Mr. Frazier will no longer receive any
director's fees or other compensation from the Company or other funds in the
INVESCO Complex for his service as a director.
(6)Total ^ as a percentage of the Company's net assets as of August 31, ^
1996.
^ (7)Total as a percentage of the net assets of the INVESCO Complex as of
December 31, ^ 1995.
^ Messrs. Brady, Harris, Hesser and, effective November 1, 1996, Frazier,
as "interested persons" of the Company and other funds in the INVESCO Complex,
receive compensation as officers or employees of INVESCO or its affiliated
companies, and do not receive any director's fees or other compensation from the
Company or other funds in the INVESCO Complex for their services as directors.
The boards of directors/trustees of the mutual funds managed by INVESCO, ^
INVESCO Advisor Funds, Inc. and INVESCO Treasurer's Series Trust have adopted a
Defined Benefit Deferred Compensation Plan for the non-interested directors and
trustees of the funds. Under this plan, each director or trustee who is not an
interested person of the funds (as defined in the 1940 Act) and who has served
for at least five years (a "qualified director") is entitled to receive, upon
retiring from the boards at the retirement age of 72 (or the retirement age of
73 to 74, if the retirement date is extended by the boards for one or two years,
but less than three years) continuation of payment for one year (the "first year
retirement benefit") of the annual basic retainer payable by the funds to the
qualified director at the time of his retirement (the "basic retainer").
Commencing with any such director's second year of retirement, and commencing
with the first year of retirement of a director whose retirement has been
extended by the board for three years, a qualified director shall receive
quarterly payments at an annual rate equal to 25% of the basic retainer. These
payments will continue for the remainder of the qualified director's life or ten
years, whichever is longer (the "reduced retainer payments"). If a qualified
director dies or becomes disabled after age 72 and before age 74 while still a
director of the funds, the first year retirement benefit and the reduced
retainer payments will be made to him or to his beneficiary or estate. If a
qualified director becomes disabled or dies either prior to age 72 or during
his/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
retainer payments will be made to his beneficiary or estate. The plan is
administered by a committee of three directors who are also participants in the
plan and one director who is not a plan participant. The cost of the plan will
be allocated among the INVESCO, ^ INVESCO Advisor and Treasurer's Series funds
<PAGE>
in a manner determined to be fair and equitable by the committee. The
Company is not making any payments to directors under the plan as of the date of
this Statement of Additional Information. The Company has no stock options or
other pension or retirement plans for management or other personnel and pays no
salary or compensation to any of its officers.
The Company has an audit committee comprised of four of the directors who
are not interested persons of the Company. The committee meets periodically with
the Company's independent accountants and officers to review accounting
principles used by the Company, the adequacy of internal controls, the
responsibilities and fees of the independent accountants, and other matters.
The Company also has a management liaison committee which meets quarterly
with various management personnel of INVESCO in order (a) to facilitate better
understanding of management and operations of the Company, and (b) to review
legal and operational matters which have been assigned to the committee by the
board of directors, in furtherance of the board of directors' overall duty of
supervision.
HOW SHARES CAN BE PURCHASED
Shares of each Fund are sold on a continuous basis at the respective net
asset value per share of the Fund next calculated after receipt of a purchase
order in good form. The net asset value per share is computed separately for
each Fund and is determined once each day that the New York Stock Exchange is
open as of the close of regular trading on that Exchange, but may also be
computed at other times. See "How Shares Are Valued." INVESCO acts as the Funds'
Distributor under a distribution agreement with the Company under which it
receives no compensation and bears all expenses, including the costs of printing
and distributing prospectuses, incident to marketing of the Funds' shares,
except for such distribution expenses which are paid out of Fund assets under
the Company's Plan of Distribution which has been adopted by the Company
pursuant to Rule 12b-1 under the 1940 Act.
Distribution Plan. As discussed under "How To Buy Shares Distribution
Expenses" in the Prospectus, the Company has adopted a Plan and Agreement of
Distribution (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. The Plan
provides that each of the Funds may make monthly payments to INVESCO of amounts
computed at an annual rate no greater than 0.25% of the Fund's average net
assets to reimburse it for expenses incurred by it in connection with the
distribution of each Fund's shares to investors. Payment amounts by a Fund under
the Plan, for any month, may only be made to reimburse or pay expenditures
incurred during the rolling 12-month period in which that month falls, although
this period is expanded to 24 months for expenses incurred during the first 24
<PAGE>
months of the Fund's operations. During the fiscal year ended August 31, ^
1996, the Company made payments to INVESCO under the Plan (prior to the
voluntary absorption of certain Fund expenses by INVESCO) in the amount of ^
$630,553, $842,755, $102,611, and $21,828 for INVESCO Select Income Fund,
INVESCO High Yield Fund, INVESCO U.S. Government Securities Fund, and INVESCO
Short-Term Bond Fund, respectively. In addition, as of August 31, ^ 1996,
$55,191, $78,839, $11,195, and $2,243 of additional distribution expenses had
been incurred for INVESCO Select Income Fund, INVESCO High Yield Fund, INVESCO
U.S. Government Securities Fund, and INVESCO Short-Term Bond Fund, respectively,
subject to payment upon approval by the Company's directors, which payments ^
are scheduled to be approved on October ^ 30, 1996. As noted in the
Prospectuses, one type of reimbursable expenditure is the payment of
compensation to securities companies and other financial institutions and
organizations, which may include INVESCO- affiliated companies, in order to
obtain various distribution-related and/or administrative services for the
Funds. Each Fund is authorized by the Plan to use its assets to finance the
payments made to obtain those services. Payments will be made by INVESCO to
broker-dealers who sell shares of the Funds and may be made to banks, savings
and loan associations and other depository institutions. Although the
Glass-Steagall Act limits the ability of certain banks to act as underwriters of
mutual fund shares, the Company does not believe that these limitations would
affect the ability of such banks to enter into arrangements with INVESCO, but
can give no assurance in this regard. However, to the extent it is determined
otherwise in the future, arrangements with banks might have to be modified or
terminated, and, in that case, the size of one or more of the Funds possibly
could decrease to the extent that the banks would no longer invest customer
assets in a particular Fund. Neither the Company nor its investment adviser will
give any preference to banks or other depository institutions which enter into
such arrangements when selecting investments to be made by each Fund.
For the fiscal year ended August 31, ^ 1996, allocation of 12b-1 amounts
paid by the Select Income Fund for the following categories of expenses were:
advertising--^ $77,628; sales literature, printing, and postage--^ $140,677;
direct mail--^ $58,036 public relations/promotion--^ $23,560; compensation to
securities dealers and other organizations--^ $233,879; marketing personnel--^
$96,773. For the fiscal year ended August 31, ^ 1996, allocation of 12b-1
amounts paid by the High Yield Fund for the following categories of expenses
were: advertising--^ $31,532; sales literature, printing and postage--^
$100,242; direct mail--^ $34,046; public relations/promotion--^ $37,923;
compensation to securities dealers and other organizations--^ $438,241;
marketing personnel--^ $200,771. For the fiscal year ended August 31, ^ 1996,
allocation of 12b-1 amounts paid by the U.S. Government Securities Fund were:
advertising--^ $37,150; sales literature, printing and postage--^ $14,396;
<PAGE>
direct mail--^ $3,303; public relations/promotion--^ $3,273; compensation
to securities dealers and other organizations--^ $26,717; marketing personnel--^
$17,772. For the fiscal year ended August 31, ^ 1996, allocation of 12b-1
amounts paid by the Short-Term Bond Fund were: advertising--^ $1,067; sales
literature, printing and postage--^ $9,332; direct mail--^ $1,112; public
relations/promotion--^ $1,162; compensation to securities dealers and other
organizations--^ $3,847; marketing personnel--^ $5,309.
The nature and scope of services which are provided by securities dealers
and other organizations may vary by dealer but include, among other things,
processing new stockholder account applications, preparing and transmitting to
the Company's Transfer Agent computer-processable tapes of each Fund's
transactions by customers, serving as the primary source of information to
customers in answering questions concerning each Fund, and assisting in other
customer transactions with each Fund.
The Plan was approved on April 21, 1993, at a meeting called for such
purpose by a majority of the directors of the Company, including a majority of
the directors who neither are "interested persons" of the Company nor have any
financial interest in the operation of the Plan ("12b-1 directors"). Pursuant to
authorizations granted by the public shareholders of the Select Income Portfolio
and U.S. Government Securities Portfolio of FBS on May 24, 1993, and by the
public shareholders of the High Yield Portfolio of FBS on June 21, 1993, such
Portfolios, as the initial shareholders of the Company, approved the Plan for an
initial term expiring April 30, 1994. The Plan was approved by INVESCO on
September 29, 1993, as the then sole shareholder of the INVESCO Short-Term Bond
Fund. The Plan has been continued by action of the board of directors until
April 30, ^ 1997.
The Plan provides that it shall continue in effect with respect to each
Fund for so long as such continuance is approved at least annually by the vote
of the board of directors of the Company cast in person at a meeting called for
the purpose of voting on such continuance. The Plan also can be terminated at
any time with respect to any Fund, without penalty, if a majority of the 12b-1
directors, or shareholders of such Fund, vote to terminate the Plan. The Company
may, in its absolute discretion, suspend, discontinue or limit the offering of
the shares of any Fund at any time. In determining whether any such action
should be taken, the board of directors intends to consider all relevant factors
including, without limitation, the size of the Funds, the investment climate for
any particular Fund, general market conditions, and the volume of sales and
redemptions of Fund shares. The Plan may continue in effect and payments may be
made under the Plan following any such temporary suspension or limitation of the
offering of a Fund's shares; however, the Company is not contractually obligated
to continue the Plan for any particular period of time. Suspension of the
<PAGE>
offering of a Fund's shares would not, of course, affect a shareholder's
ability to redeem his shares. So long as the Plan is in effect, the selection
and nomination of persons to serve as independent directors of the Company shall
be committed to the independent directors then in office at the time of such
selection or nomination. The Plan may not be amended to increase materially the
amount of any Fund's payments thereunder without approval of the shareholders of
that Fund, and all material amendments to the Plan must be approved by the board
of directors of the Company, including a majority of the 12b-1 directors. Under
the agreement implementing the Plan, INVESCO or the Funds, the latter by vote of
a majority of the 12b-1 directors or of the holders of a majority of a Fund's
outstanding voting securities, may terminate such agreement as to that Fund
without penalty upon 30 days' written notice to the other party. No further
payments will be made by a Fund under the Plan in the event of its termination
as to that Fund.
To the extent that the Plan constitutes a plan of distribution adopted
pursuant to Rule 12b-1 under the 1940 Act, it shall remain in effect as such, so
as to authorize the use of each Fund's assets in the amounts and for the
purposes set forth therein, notwithstanding the occurrence of an assignment, as
defined by the 1940 Act, and rules thereunder. To the extent it constitutes an
agreement pursuant to a plan, each Fund's obligation to make payments to INVESCO
shall terminate automatically, in the event of such "assignment," in which event
the Funds may continue to make payments, pursuant to the Plan, to INVESCO or
another organization only upon the approval of new arrangements, which may or
may not be with INVESCO, regarding the use of the amounts authorized to be paid
by it under the Plan, by the directors, including a majority of the 12b-1
directors, by a vote cast in person at a meeting called for such purpose.
Information regarding the services rendered under the Plan and the amounts
paid therefor by each Fund are provided to, and reviewed by, the directors on a
quarterly basis. In the quarterly review, the directors determine whether, and
to what extent, INVESCO will be reimbursed for expenditures which it has made
that are reimbursable under the Company's Rule 12b-1 Plan. On an annual basis,
the directors consider the continued appropriateness of the Plan at the level of
compensation provided therein.
The only directors or interested persons, as that term is defined in
Section 2(a)(19) of the 1940 Act, of the Company who have a direct or indirect
financial interest in the operation of the Plan are the officers and directors
of the Company listed under "The Funds and Their Management - Officers and
Directors of the Company" who are also officers either of INVESCO or companies
affiliated with INVESCO. The benefits which the Company believes will be
reasonably likely to flow to the Funds and their shareholders under the Plan
include the following:
<PAGE>
(1) Enhanced marketing efforts, if successful, should result in an
increase in net assets through the sale of additional shares and
afford greater resources with which to pursue the investment
objectives of the Funds;
(2) The sale of additional shares reduces the likelihood that redemption
of shares will require the liquidation of securities of the Funds in
amounts and at times that are disadvantageous for investment
purposes;
(3) The positive effect which increased Fund assets will have on its
revenues could allow INVESCO:
(a) To have greater resources to make the financial commitments
necessary to improve the quality and level of each Fund's
shareholder services (in both systems and personnel),
(b) To increase the number and type of mutual funds available to
investors from INVESCO (and support them in their infancy),
and thereby expand the investment choices available to all
shareholders, and
(c) To acquire and retain talented employees who desire
to be associated with a growing organization; and
(4) Increased Fund assets may result in reducing each investor's share
of certain expenses through economies of scale (e.g. exceeding
established breakpoints in the advisory fee schedule and allocating
fixed expenses over a larger asset base), thereby partially
offsetting the costs of the Plan.
HOW SHARES ARE VALUED
As described in the section of each Fund's Prospectus entitled "Fund Price
and Performance," the net asset value of shares of each Fund of the Company is
computed once each day that the New York Stock Exchange is open as of the close
of regular trading on that Exchange (generally 4:00 p.m., New York time) and
applies to purchase and redemption orders received prior to that time. Net asset
value per share is also computed on any other day on which there is a sufficient
degree of trading in the securities held by a Fund that the current net asset
value per share of such Fund might be materially affected by changes in the
value of the securities held, but only if on such day the Fund receives a
request to purchase or redeem shares. Net asset value per share is not
calculated on days the New York Stock Exchange is closed, such as federal
holidays, including New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving, and Christmas.
<PAGE>
The net asset value per share of each Fund is calculated by dividing the
value of all securities held by the Fund and its other assets (including
dividends and interest accrued but not collected), less the Fund's liabilities
(including accrued expenses), by the number of outstanding shares of the Fund.
Securities traded on national securities exchanges, the NASDAQ National Market
System, the NASDAQ Small Cap Market and foreign markets are valued at their last
sale prices on the exchanges or markets where such securities are primarily
traded. Securities traded in the over-the-counter market for which last sale
prices are not available, and listed securities for which no sales were reported
on a particular date, are valued at their highest closing bid prices (or, for
debt securities, yield equivalents thereof) obtained from one or more dealers
making markets for such securities. If market quotations are not readily
available, securities will be valued at their fair values as determined in good
faith by the Company's board of directors or pursuant to procedures adopted by
the board of directors. The above procedures may include the use of valuations
furnished by a pricing service which employs a matrix to determine valuations
for normal institutional-size trading units of debt securities. Prior to
utilizing a pricing service, the Company's board of directors reviews the
methods used by such service to assure itself that securities will be valued at
their fair values. The Company's board of directors also periodically monitors
the methods used by such pricing services. Debt securities with remaining
maturities of 60 days or less at the time of purchase are normally valued at
amortized cost.
The values of securities held by the Funds, and other assets used in
computing net asset value, generally are determined as of the time regular
trading in such securities or assets is completed each day. Since regular
trading in most foreign securities markets is completed simultaneously with, or
prior to, the close of regular trading on the New York Stock Exchange, closing
prices for foreign securities usually are available for purposes of computing
the Fund's net asset value on a particular day. However, in the event that the
closing price of a foreign security is not available in time to calculate a
Fund's net asset value on a particular day the Company's board of directors has
authorized the use of the market price for the established time during the day
which may be prior to the close of regular trading in the security. The value of
all assets and liabilities initially expressed in foreign currencies will be
converted into U.S. dollars at the spot rates of such currencies against U.S.
dollars provided by an approved pricing service.
FUND PERFORMANCE
As discussed in the section of each Fund's Prospectus entitled "Fund Price
and Performance," the Funds advertise their yield and total return performance.
<PAGE>
In calculating yield quotations for the Funds, except for asset-backed
securities, such as GNMA certificates, interest earned is determined by
computing yield to maturity (or yield to call, if applicable) of each obligation
held by a Fund, based upon market value of each obligation (including actual
accrued interest) at the close of business on the last business day of each
month, or, with respect to an obligation purchased during the month, the
purchase price plus accrued interest. The resultant yield to maturity is divided
by 360 and multiplied by the market value of the obligation (including actual
accrued interest), and the result is multiplied by the number of days in the
subsequent month that the obligation is in the Fund (assuming that each month
has 30 days). Dividends received on the preferred stocks held by the INVESCO
High Yield Fund are recognized, for purposes of yield calculations, on a daily
accrual basis. As discussed in each Prospectus, and in the Appendix of this
Statement of Additional Information, the GNMA Certificates held by the INVESCO
U.S. Government Securities and Select Income Funds are generally subject to
monthly payments of principal and interest ("paydowns"). In computing these
Funds' yields, gain or loss attributable to actual monthly paydowns is accounted
for as an increase or decrease to interest income during the period. The Funds
amortize the discount and premium on the remaining security, based on the cost
of the security, to the weighted average maturity date, if such information is
available, or to the remaining term of the GNMA Certificate, if the weighted
average maturity date is not available. Yield quotations for each Fund for the
30 days ended August 31, ^ 1996, were as follows: INVESCO Select Income Fund, ^
7.70%; INVESCO High Yield Fund, ^ 9.37%; INVESCO U.S. Government Securities
Fund, ^ 5.76%; and INVESCO Short-Term Bond Fund, ^ 5.64%.
Average annual total return performance for each of the Funds for the
indicated periods ended August 31, ^ 1996, was as follows:
1 3 5 10
Fund Year Years Years Years
- ---- ---- ----- ----- -----
INVESCO Select Income ^ 4.78% 6.27% 9.17% 8.14%
INVESCO High Yield ^ 11.38% 7.50% 10.85% 8.66%
INVESCO U.S.
Government Securities(2) ^ 1.31% 2.09% 6.33% 6.16%(1)
INVESCO Short-Term
Bond(3) ^ 4.63% N/A N/A 3.74%(1)
- ---------------------------
(1) Life of Fund.
(2) The INVESCO U.S. Government Securities Fund did not
commence operations until January 2, 1986.
(3) The INVESCO Short-Term Bond Fund did not commence operations until
September 30, 1993.
Average annual total return performance for each of the periods indicated
was computed by finding the average annual compounded rates of return that would
<PAGE>
equate the intitial amount invested to the ending redeemable value,
according to the following formula:
P(1 + T)n = ERV
where: P = initial payment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of initial payment
The average annual total return performance figures shown above were
determined by solving the above formula for "T" for each time period and Fund
indicated.
In conjunction with performance reports and/or analyses for the Funds,
comparative data between a Fund's performance for a given period and recognized
indices of investment results for the same period, and/or assessments of the
quality of shareholder service, may be provided to shareholders. Such indices
include indices provided by Dow Jones & Company, Standard & Poor's, Lipper
Analytical Services, 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 Funds. These sources utilize information compiled (i)
internally; (ii) by Lipper Analytical Services, Inc.; or (iii) by other
recognized analytical services. The Lipper Analytical Services, Inc. mutual fund
rankings and comparisons which may be used by the Funds in performance reports
will be drawn from the mutual fund groupings listed in each Fund's prospectus,
in addition to the broad-based Lipper general fund groupings. Sources for Fund
performance information and articles about the Funds include, but are not
limited to, the following:
American Association of Individual Investors' Journal
Banxquote
Barron's
Business Week
CDA Investment Technologies
CNBC
CNN
Consumer Digest
Financial Times
Financial World
Forbes
Fortune
Ibbotson Associates, Inc.
Institutional Investor
<PAGE>
Investment Company Data, Inc.
Investor's Business Daily
Kiplinger's Personal Finance
Lipper Analytical Services, Inc.'s Mutual Fund Performance
Analysis
Money
Morningstar
Mutual Fund Forecaster
No-Load Analyst
No-Load Fund X
Personal Investor
Smart Money
The New York Times
The No-Load Fund Investor
U.S. News and World Report
United Mutual Fund Selector
USA Today
Wall Street Journal
Wiesenberger Investment Companies Services
Working Woman
Worth
SERVICES PROVIDED BY THE FUND
Periodic Withdrawal Plan. As described in the section of each Fund's
Prospectus entitled "How to Sell Shares," each Fund offers a Periodic Withdrawal
Plan. All dividends and distributions on shares owned by shareholders
participating in this Plan are reinvested in additional shares. Since withdrawal
payments represent the proceeds from sales of shares, the amount of
shareholders' investments in a Fund will be reduced to the extent that
withdrawal payments exceed dividends and other distributions paid and
reinvested. Any gain or loss on such redemptions must be reported for tax
purposes. In each case, shares will be redeemed at the close of business on or
about the 20th day of each month preceding payment and payments will be mailed
within five business days thereafter.
The Periodic Withdrawal Plan involves the use of principal and is not a
guaranteed annuity. Payments under such Plan do not represent income or a return
on investment.
A Periodic Withdrawal Plan may be terminated at any time by sending a
written request to INVESCO. Upon termination, all future dividends and capital
gain distributions will be reinvested in additional shares unless a shareholder
requests otherwise.
Exchange Privilege. As discussed in the section of each Fund's Prospectus
entitled "How to Buy Shares - Exchange Privilege," the Funds offer shareholders
the privilege of exchanging shares of the Funds for shares of another Fund or
for shares of certain other no-load mutual funds advised by INVESCO.
<PAGE>
Exchange requests may be made either by telephone or by written request to
INVESCO Funds Group, Inc., using the telephone number or address on the cover of
this Statement of Additional Information. Exchanges made by telephone must be in
an amount of at least $250, if the exchange is being made into an existing
account of one of the INVESCO funds. All exchanges that have established a new
account must meet the fund's applicable minimum initial investment requirements.
Written exchange requests into an existing account have no minimum requirements
other than the fund's applicable minimum subsequent investment requirements. Any
gain or loss realized on such an exchange is recognized for federal income tax
purposes. This privilege is not an option or right to purchase securities, but
is a revocable privilege permitted under the present policies of each of the
funds and is not available in any state or other jurisdiction where the shares
of the mutual fund into which transfer is to be made are not qualified for sale,
or when the net asset value of the shares presented for exchange is less than
the minimum dollar purchase required by the appropriate prospectus.
TAX-DEFERRED RETIREMENT PLANS
As described in the section of each Fund's Prospectus entitled "Fund
Services," shares of a Fund may be purchased as the investment medium for
various tax-deferred retirement plans. Persons who request information regarding
these plans from INVESCO will be provided with prototype documents and other
supporting information regarding the type of Plan requested. Each of these plans
involves a long-term commitment of assets and is subject to possible regulatory
penalties for excess contributions, premature distributions or for insufficient
distributions after age 70-1/2. The legal and tax implications may vary
according to the circumstances of the individual investor. Therefore, the
investor is urged to consult with an attorney or tax adviser prior to the
establishment of such a plan.
HOW TO REDEEM SHARES
Normally, payments for shares redeemed will be mailed within seven (7)
days following receipt of the required documents as described in the section of
each Fund's Prospectus entitled "How to Sell Shares." The right of redemption
may be suspended and payment postponed when: (a) the New York Stock Exchange is
closed for other than customary weekends and holidays; (b) trading on that
exchange is restricted; (c) an emergency exists as a result of which disposal by
a Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets; or (d) the SEC by order so permits.
It is possible that in the future conditions may exist which would, in the
opinion of the Company's investment adviser, make it undesirable for a Fund to
<PAGE>
pay for redeemed shares in cash. In such cases, the investment adviser may
authorize payment to be made in portfolio securities or other property of the
Fund. However, the Company has obligated itself under the 1940 Act to redeem for
cash all shares of a Fund presented for redemption by any one shareholder having
a value up to $250,000 (or 1% of the Fund's net assets if that is less) in any
90-day period. Securities delivered in payment of redemptions are selected
entirely by the investment adviser based on what is in the best interests of the
Fund and its shareholders, and are valued at the value assigned to them in
computing the Fund's net asset value per share. Shareholders receiving such
securities are likely to incur brokerage costs on their subsequent sales of the
securities.
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES
Each Fund intends to continue to conduct its business and satisfy the
applicable diversification of assets and source of income requirements to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. Each Fund so qualified in the fiscal year
ended August 31, ^ 1996, and intends to continue to qualify during its current
fiscal year. As a result, it is anticipated that the Funds will pay no federal
income or excise taxes and will be accorded conduit or "pass through" treatment
for federal income tax purposes.
Dividends paid by the Funds from net investment income, as well as
distributions of net realized short-term capital gains are, for federal income
tax purposes, taxable as ordinary income to shareholders. After the end of each
calendar year, each 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. Such amounts will be limited
to the aggregate amount of qualifying dividends which the Fund derives from its
portfolio investments.
Distributions by the Funds of net capital gains (the excess of long-term
capital gain over net short-term capital loss) are, for federal income tax
purposes, taxable to the shareholder as long-term capital gain regardless of how
long a shareholder has held shares of a Fund. Such distributions are identified
as such and are not eligible for the dividends-received deduction.
All dividends and other distributions are regarded as taxable to the
investor, whether or not such dividends and distributions are reinvested in
additional shares. If the net asset value of the shares of the Funds 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, in
effect, a return of invested capital. The net asset value of shares of the Funds
reflects accrued net investment income and undistributed realized capital gains;
therefore, when a distribution is made, the net asset value is reduced by the
<PAGE>
amount of the distribution. If shares 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.
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
recommends any particular method of determining cost basis. Other methods may
result in different tax consequences. If a shareholder has reported gains or
losses for a Fund in past years, the shareholder must continue to use the method
previously used, unless the shareholder applies to the IRS for permission to
change methods.
If Fund shares are sold at a loss after being held for six months or less,
the loss will be treated as long-term, instead of short-term, capital loss to
the extent of any capital gain distributions received on those shares.
A 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 capital gain net income for the one-year
period ending on October 31 of that year, plus certain other amounts.
Dividends and interest received by a Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors. If more than 50% of the value of a
Fund's total assets at the close of any taxable year consists of securities of
foreign corporations, the Fund will be eligible to, and may, file an election
with the IRS that will enable its shareholders, in effect, to receive the
benefit of the foreign tax credit with respect to any foreign and U.S.
possessions income taxes paid by it. The Fund will report to its shareholders
shortly after each taxable year their respective shares of the Fund's income
from sources within, and taxes paid to, foreign countries and U.S. possessions
if it makes this election.
<PAGE>
Shareholders should consult their own tax advisers regarding specific
questions as to federal, state and local taxes. Although dividend distributions
by the INVESCO U.S. Government Securities Fund may be exempt from state and
local taxes in certain states, dividends and capital gain distributions will
generally be subject to applicable state and local taxes. Qualification as a
regulated investment company under the Internal Revenue Code of 1986, as amended
for income tax purposes does not entail government supervision of management or
investment policies.
INVESTMENT PRACTICES
Portfolio Turnover. There are no fixed limitations regarding the portfolio
turnover of the Funds. The rate of portfolio turnover has fluctuated under
constantly changing economic conditions and market circumstances. During the
fiscal years ended August 31, 1996, 1995^ and 1994, ^ the INVESCO Select Income
Fund's portfolio turnover rates were ^ 210%, 181% and 135%, respectively, the
INVESCO High Yield Fund's turnover rates were 266%, 201%^ and 195%, ^
respectively, and the INVESCO U.S. Government Securities Fund's portfolio
turnover rates were 212%, 99%^ and 95%, ^ respectively. During the fiscal ^
years ended August 31, 1996 and 1995 and the eleven-month period ended August
31, 1994, the INVESCO Short-Term Bond Fund's portfolio turnover rates were 103%,
68% and 169%. The portfolio turnover ^ rate for the Short-Term Bond Fund for the
eleven months ended August 31, 1994 ^ is not annualized. Securities initially
satisfying the basic policies and objectives of a Fund may be disposed of when
they are no longer suitable. Brokerage costs to these Funds are commensurate
with the rate of portfolio activity. In computing the above portfolio turnover
rates, all investments with maturities or expiration dates at the time of
acquisition of one year or less were excluded. Subject to this exclusion, the
turnover rate was calculated by dividing (A) the lesser of purchases or sales of
portfolio securities for the fiscal year by (B) the monthly average of the value
of portfolio securities owned by the Fund during the fiscal year.
Placement of Portfolio Brokerage. Either INVESCO, as the Company's
investment adviser, or INVESCO Trust, as the Company's sub-adviser, places
orders for the purchase and sale of securities with brokers and dealers based
upon INVESCO's or INVESCO Trust's evaluation of their financial responsibility,
subject to their ability to effect transactions at the best available prices.
INVESCO or INVESCO Trust evaluates the overall reasonableness of brokerage
commissions or underwriting discounts (the difference between the full
acquisition price to acquire the new offering and the discount offered to
members of the underwriting syndicate) paid by reviewing the quality of
executions obtained on portfolio transactions of each Fund, viewed in terms of
the size of transactions, prevailing market conditions in the security purchased
or sold, and general economic and market conditions. In seeking to ensure that
the commissions or discounts charged the Fund are consistent with prevailing and
<PAGE>
reasonable commissions or discounts, INVESCO or INVESCO Trust also
endeavors to monitor brokerage industry practices with regard to the commissions
or discounts charged by brokers and dealers on transactions effected for other
comparable institutional investors. While INVESCO or INVESCO Trust seeks
reasonably competitive rates, the Funds do not necessarily pay the lowest
commission, spread or discount available.
Consistent with the standard of seeking to obtain the best execution on
portfolio transactions, INVESCO or INVESCO Trust may select brokers that provide
research services to effect such transactions. Research services consist of
statistical and analytical reports relating to issuers, industries, securities
and economic factors and trends, which may be of assistance or value to INVESCO
or INVESCO Trust in making informed investment decisions. Research services
prepared and furnished by brokers through which the Funds effect securities
transactions may be used by INVESCO or INVESCO Trust in servicing all of their
respective accounts and not all such services may be used by INVESCO or INVESCO
Trust in connection with the Funds.
In recognition of the value of the above-described brokerage and research
services provided by certain brokers, INVESCO or INVESCO Trust, consistent with
the standard of seeking to obtain the best execution on portfolio transactions,
may place orders with such brokers for the execution of transactions for the
Funds on which the commissions or discounts are in excess of those which other
brokers might have charged for effecting the same transactions.
Portfolio transactions may be effected through qualified ^ broker-dealers
who recommend the Funds to their clients, or who act as agent in the purchase of
any of the Fund's shares for their clients. When a number of brokers and dealers
can provide comparable best price and execution on a particular transaction, the
Company's adviser may consider the sale of Fund shares by a broker or dealer in
selecting among qualified ^ broker-dealers.
Certain financial institutions (including brokers who may sell shares of
the Funds, or affiliates of such brokers) are paid a fee (the "Services Fee")
for recordkeeping, shareholder communications and other services provided by the
brokers to investors purchasing shares of the Funds through no transaction fee
programs ("NTF Programs") offered by the financial institution or its affiliated
broker (an "NTF Program Sponsor"). The Services Fee is based on the average
daily value of the investments in each Fund made in the name of such NTF Program
Sponsor and held in omnibus accounts maintained on behalf of investors
participating in the NTF Program. With respect to certain NTF Programs, the
directors of the Company have authorized the Funds to apply dollars generated
from the Company's Plan and Agreement of Distribution pursuant to Rule 12b-1
<PAGE>
under the 1940 Act (the "Plan") to pay the entire Services Fee, subject to the
maximum Rule 12b-1 fee permitted by the Plan. With respect to other NTF
Programs, the Company's directors have authorized the Funds to pay transfer
agency fees to INVESCO based on the number of investors who have beneficial
interests in the NTF Program Sponsor's omnibus accounts in the Funds. INVESCO,
in turn, pays these transfer agency fees to the NTF Program Sponsor as a
sub-transfer agency or recordkeeping fee in payment of all or a portion of the
Services Fee. In the event that the sub-transfer agency or recordkeeping fee is
insufficient to pay all of the Services Fee with respect to these NTF Programs,
the directors of the Company have authorized the Company to apply dollars
generated from the Plan to pay the remainder of the Services Fee, subject to the
maximum Rule 12b-1 fee permitted by the Plan. INVESCO itself pays the portion of
each Fund's Services Fee, if any, that exceeds the sum of the sub-transfer
agency or recordkeeping fee and Rule 12b-1 fee. The Company's directors have
further authorized INVESCO to place a portion of each Fund's brokerage
transactions with certain NTF Program Sponsors or their affiliated brokers, if
INVESCO reasonably believes that, in effecting the Fund's transactions in
portfolio securities, the broker is able to provide the best execution of orders
at the most favorable prices. A portion of the commissions earned by such a
broker from executing portfolio transactions on behalf of the Funds may be
credited by the NTF Program Sponsor against its Services Fee. Such credit shall
be applied first against any sub-transfer agency or recordkeeping fee payable
with respect to the Funds, and second against any Rule 12b-1 fees used to pay a
portion of the Services Fee, on a basis which has resulted from negotiations
between INVESCO and the NTF Program Sponsor. Thus, the Funds pay sub- transfer
agency or recordkeeping fees to the NTF Program Sponsor in payment of the
Services Fee only to the extent that such fees are not offset by a Fund's
credits. In the event that the transfer agency fee paid by the Funds to INVESCO
with respect to investors who have beneficial interests in a particular NTF
Program Sponsor's omnibus accounts in a Fund exceeds the Services Fee applicable
to the Fund, after application of credits, INVESCO may carry forward the excess
and apply it to future Services Fees payable to that NTF Program Sponsor with
respect to that Fund. The amount of excess transfer agency fees carried forward
will be reviewed for possible adjustment by INVESCO prior to each fiscal
year-end of the Funds. The Company's board of directors has also authorized the
Funds to pay to INVESCO the full Rule 12b-1 fees contemplated by the Plan in
reimbursement of expenses incurred by INVESCO in engaging in the activities and
providing the services on behalf of the Funds contemplated by the Plan, subject
to the maximum Rule 12b-1 fee permitted by the Plan, notwithstanding that
credits have been applied to reduce the portion of the 12b-1 fee that would have
been used to reimburse INVESCO for payments to such NTF Program Sponsor absent
such credits.
<PAGE>
The aggregate dollar amount of underwriting discounts and brokerage
commissions paid by the Company for the fiscal years ended August 31, 1996,
1995^ and 1994 ^ were $3,611,046, $1,481,550^ and $685,631, ^ respectively. For
the fiscal year ended August 31, ^ 1996, brokers providing research services
received ^ $1,300 in commissions on portfolio transactions effected for the
Funds. On a Fund-by-Fund basis this figure breaks down as follows: Select Income
Fund, ^ $0; High Yield Fund, ^ $1,300; U.S. Government Securities Fund, $0; and
Short-Term Bond Fund, $0. The aggregate dollar amount of such portfolio
transactions was ^ $538,682. As a result of selling shares of the Fund, brokers
received $0 in commissions on portfolio transactions effected for the Funds
during the fiscal year ended August 31, ^ 1996.
At August 31, ^ 1996, the Funds held securities of their regular brokers
or dealers, or their parents, as follows:
Value of
Securities
Fund Broker or Dealer at ^ 08/31/96
- ---- ---------------- -------------
INVESCO Select Income Associates Corporation ^ 8,100,000
^ of North America
General Electric Capital 8,100,000
Donaldson, Lufkin, and 2,801,000
Jenrette Fixed Income
INVESCO High Yield Associates Corporation ^ 13,500,000
of North America
Chevron Oil Finance 12,383,000
INVESCO U.S. Gov't. State Street Bank ^ 9,190,000
Securities and Trust ^ North America
INVESCO Short-Term Bond State Street Bank and ^ 1,030,000
^ Trust North America
Merrill Lynch ^ 400,000
Fixed Income
Neither INVESCO nor INVESCO Trust receives any brokerage commissions on
portfolio transactions effected on behalf of the Fund, and there is no
affiliation between INVESCO, INVESCO Trust, or any person affiliated with
INVESCO, INVESCO Trust, or the Fund and any broker or dealer that executes
transactions for the Fund.
<PAGE>
ADDITIONAL INFORMATION
Common Stock. The Company has 600,000,000 authorized shares of common
stock with a par value of $0.01 per share. Of the Company's authorized shares,
100,000,000 shares have been allocated to each of four classes, representing the
Company's four Funds. As of August 31, ^ 1996, 40,629,816 shares of the INVESCO
Select Income Fund; ^ 54,835,176 shares of the INVESCO High Yield Fund; ^
7,638,635 shares of the INVESCO U.S. Government Securities Fund; and ^ 1,140,887
shares of the INVESCO Short-Term Bond Fund were outstanding. All shares issued
and outstanding are, and all shares offered hereby, when issued, will be fully
paid and nonassessable. The board of directors has the authority to designate
additional classes of common stock without seeking the approval of shareholders,
and may classify and reclassify any authorized but unissued shares.
Shares of each class represent the interests of the shareholders of such
class in a particular portfolio of investments of the Company. Each class of the
Company's shares is preferred over all other classes with respect to the assets
specifically allocated to that class, and all income, earnings, profits and
proceeds from such assets, subject only to the rights of creditors, are
allocated to shares of that class. The assets of each class are segregated on
the books of account and are charged with the liabilities of that class and with
a share of the Company's general liabilities. The board of directors determines
those assets and liabilities deemed to be general assets or liabilities of the
Company, and those items are allocated among classes in a manner deemed by the
board to be fair and equitable. Generally, such allocation will be made based
upon the relative total net assets of each class. In the unlikely event that a
liability allocable to one class exceeds the assets belonging to the class, all
or a portion of such liability may have to be borne by the holders of shares of
the Company's other classes.
All dividends on shares of a particular class shall be paid only out of
the income belonging to that class, pro rata to the holders of that class. In
the event of the liquidation or dissolution of the Company or of a particular
class, the shareholders of each class that is being liquidated shall be entitled
to receive, as a class, when and as declared by the board of directors, the
excess of the assets belonging to that class over the liabilities belonging to
that class. The holders of shares of any class shall not be entitled to any
distribution upon liquidation of any other class. The assets so distributable to
the shareholders of any particular class shall be distributed among such
shareholders in proportion to the number of shares of that class held by them
and recorded on the books of the Company.
All Fund shares, regardless of class, have equal voting
rights. Voting with respect to certain matters, such as
<PAGE>
ratification of independent accountants or election of directors, will be by all
classes of the Company. When not all classes are affected by a matter to be
voted upon, such as approval of an investment advisory contract or changes in a
Fund's investment policies, only shareholders of the class affected by the
matter will be entitled to vote. Company shares have noncumulative voting
rights, which means that the holders of a majority of the shares voting for the
election of directors of the Company can elect 100% of the directors if they
choose to do so. In such event, the holders of the remaining shares voting for
the election of directors will not be able to elect any person or persons to the
board of directors. After they have been elected by shareholders, the directors
will continue to serve until their successors are elected and have qualified or
they are removed from office, in either case by a shareholder vote, or until
death, resignation or retirement. They may appoint their own successors,
provided that always at least a majority of the directors have been elected by
the Company's shareholders. It is the intention of the Company not to hold
annual meetings of shareholders. The directors will call annual or special
meetings of shareholders for action by shareholder vote as may be required by
the 1940 Act or the Company's Articles of Incorporation, or at their discretion.
Principal Shareholders. As of ^ October 1, 1996, the following entities
held more than 5% of the outstanding securities of the Funds listed below.
Amount and Nature ^ Percent
Name and Address of Ownership of Class
- ---------------- ----------------- --------
INVESCO Select Income Fund
Charles Schwab & Co. Inc. ^ 8,269,046.0130 20.804%
^ Special Custody Acct. for Record
the Exclusive Benefit of
Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
Resources Trust ^ 2,754,788.1250 6.931%
Meridian Accts. Record
P.O. Box 3865
Englewood, CO 80155
<PAGE>
INVESCO High Yield Fund
Charles Schwab & Co. Inc. ^ 22,436,516.3510 38.150%
^ Special Custody Acct. for Record
the Exclusive Benefit of
Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
INVESCO U.S. Government
Securities Fund
^ Resources Trust Co. Cust. for 3,420,326.2630 45.443%
^ The Exclusive Benefit of the Record
^ Customers of Meridian
^ Investment Management Corp.
P.O. Box 3865
Englewood, CO 80155
^
Charles Schwab & Co.^ Inc. 496,431.7360 6.596%
Special Custody Acct. for Record
the Exclusive Benefit of
Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
INVESCO Short-Term Bond Fund
Amalgamated Bank of NY Cust. 143,158.6430 12.583%
TWU Private Busline Record
Pension Trust
Amnivest Discretionary Inv. Mgr.
P.O. Box 370 Cooper Station
New York, NY 10276
Charles Schwab & Co., Inc. 143,158.6430 12.462%
Special Custody Acct. for Record
the Exclusive Benefit of
Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
Amalgamated Bank of NY Cust. 80,810.2160 7.035%
Local 917 Pension Annuity & Record
Health Funds Amnivest Corp.
Dis. Inv. Management
P.O. Box 370 Cooper Station
New York, NY 10286
<PAGE>
Amalgamated Bank of NY Cust. 62,139.8590 5.409%
Elevator Div. Ret. Benefit Plan Record
Amnivest Corp. Discretionary
Investment Mgr.
P.O. Box 370 Cooper Station
New York, NY 10003
Independent Accountants. Price Waterhouse LLP, 950
Seventeenth Street, Denver, Colorado, has been selected as the
independent accountants of the Company. The independent
accountants are responsible for auditing the financial statements
of the Company.
Custodian. State Street Bank and Trust Company, P.O. Box 351, Boston,
Massachusetts, has been designated as custodian of the cash and investment
securities of the Company. The bank is also responsible for, among other things,
receipt and delivery of the investment securities of the Company's Funds in
accordance with procedures and conditions specified in the custody agreement.
Transfer Agent. The Company is provided with transfer agent, registrar,
and dividend disbursing agent services by INVESCO Funds Group, Inc., 7800 E.
Union Avenue, Denver, Colorado 80237, pursuant to the Transfer Agency Agreement
described herein. Such services include the issuance, cancellation and transfer
of shares of the Funds, and the maintenance of records regarding the ownership
of such shares.
Reports to Shareholders. The Company's fiscal year ends on August 31. The
Company distributes reports at least semiannually to its shareholders. Financial
statements regarding the Company, audited by the independent accountants, are
sent to shareholders annually.
Legal Counsel. The firm of Kirkpatrick & Lockhart,
Washington, D.C. is legal counsel for the Company. The firm of
Moye, Giles, O'Keefe, Vermeire & Gorrell, Denver, Colorado, acts as special
counsel to the Company.
Financial Statements. The Company's audited financial statements and the
notes thereto for the fiscal year ended August 31, ^ 1996, and the report of
Price Waterhouse LLP with respect to such financial statements, are incorporated
herein by reference from the Company's Annual Report to Shareholders for the
fiscal year ended August 31, ^ 1996.
Prospectuses. The Company will furnish, without charge, a copy of the
applicable Prospectus for each of its Funds upon request. There is a separate
Prospectus available for each Fund. Such requests should be made to the Company
at the mailing address or telephone number set forth on the first page of this
Statement of Additional Information.
<PAGE>
Registration Statement. This Statement of Additional
Information and the Prospectuses do not contain all of the
information set forth in the Registration Statement the Company has
filed with the SEC. The complete Registration Statement may be
obtained from the SEC upon payment of the fee prescribed by the
rules and regulations of the SEC.
<PAGE>
APPENDIX - GNMA CERTIFICATES, AND FUTURES CONTRACTS
GNMA Certificates
Government National Mortgage Association. The Government
National Mortgage Association is a wholly-owned corporate
instrumentality of the United States within the U.S. Department of
Housing and Urban Development. GNMA's principal programs involve
its guarantees of privately issued securities backed by pools of
mortgages.
Nature of GNMA Certificates. GNMA Certificates are mortgage-backed
securities. The Certificates evidence part ownership of a pool of mortgage
loans. The Certificates which the Company purchases are of the modified
pass-through type. Modified pass-through Certificates entitle the holder to
receive all interest and principal payments owed on the mortgage pool, net of
fees paid to the GNMA Certificate issuer and GNMA, regardless of whether or not
the mortgagor actually makes the payment.
GNMA Certificates are backed by mortgages and, unlike most bonds, their
principal amount is paid back by the borrower over the length of the loan rather
than in a lump sum at maturity. Principal payments received by the Company will
be reinvested in additional GNMA Certificates or in other permissible
investments.
GNMA Guarantee. The National Housing Act authorizes GNMA to guarantee the
timely payment of principal of and interest on securities backed by a pool of
mortgages insured by the Federal Housing Administration or the Farmers Home
Administration or guaranteed by the Veterans Administration. The GNMA guarantee
is backed by the full faith and credit of the United States. GNMA is also
empowered to borrow without limitation from the U.S. Treasury if necessary to
make any payments required under its guarantee.
Life of GNMA Certificates. The average life of a GNMA Certificate is
likely to be substantially less than the original maturity of the mortgage pools
underlying the securities. Prepayments of principal by mortgagors and mortgage
foreclosures will result in the return of a portion of principal invested before
the maturity of the mortgages in the pool.
As prepayment of individual mortgage pools will vary widely, it is not
possible to predict accurately the average life of a particular issue of GNMA
Certificates. However, statistics published by the Federal Housing
Administration are normally used as an indicator of the expected average life of
GNMA Certificates. These statistics indicate that the average life of
single-family dwelling mortgages with 25-30 year maturities (the type of
mortgages backing the vast majority of GNMA Certificates) is approximately 12
<PAGE>
years. For this reason, it is customary for pricing purposes to consider
GNMA Certificates as 30-year mortgage-backed securities which prepay fully in
the twelfth year.
Yield Characteristics of GNMA Certificates. The coupon rate of interest of
GNMA Certificates is lower than the interest rate paid on the VA-guaranteed or
FHA-insured mortgages underlying the Certificates, but only by the amount of the
fees paid to GNMA and the GNMA Certificate issuer. For the most common type of
mortgage pool, containing single-family dwelling mortgages, GNMA receives an
annual fee of 0.06 of 1% of the outstanding principal for providing its
guarantee, and the GNMA Certificate issuer is paid an annual servicing fee of
0.44 of 1% for assembling the mortgage pool and for passing through monthly
payments of interest and principal to Certificate holders.
The coupon rate by itself, however, does not indicate the yield which will
be earned on the Certificates for the following reasons:
1. Certificates are usually issued at a premium or discount,
rather than at par.
2. After issuance, Certificates usually trade in the
secondary market at a premium or discount.
3. Interest is paid monthly rather than semiannually as is the case for
traditional bonds. Monthly compounding has the effect of raising the effective
yield earned on GNMA Certificates.
4. The actual yield of each GNMA Certificate is influenced by the
prepayment experience of the mortgage pool underlying the Certificate. If
mortgagors prepay their mortgages, the principal returned to Certificate holders
may be reinvested at higher or lower rates.
In quoting yields for GNMA Certificates, the customary practice is to
assume that the Certificates will have a 12-year life. Compared on this basis,
GNMA Certificates have historically yielded roughly 1/4 of 1% more than high
grade corporate bonds and 1/2 of 1% more than U.S. Government and U.S.
Government agency bonds. As the life of individual pools may vary widely,
however, the actual yield earned on any issue of GNMA Certificates may differ
significantly from the yield estimated on the assumption of a 12-year life.
Market for GNMA Certificates. Since the inception of the GNMA
mortgage-backed securities program in 1970, the amount of GNMA Certificates
outstanding has grown rapidly. The size of the market and the active
participation in the secondary market by securities dealers and many types of
investors make GNMA Certificates highly liquid instruments. Quotes for GNMA
Certificates are readily available from securities dealers and depend on, among
<PAGE>
other things, the level of market rates, the Certificates' coupon rates and
the prepayment experience of the pool of mortgages backing each Certificate.
Futures Contracts
A futures contract is an agreement between two parties for the future
acquisition or delivery of fixed income securities. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities called for by the contract at a specified price on a specified date.
A "purchase" of a futures contract means the acquisition of a contractual
obligation to acquire the securities called for by the contract at a specified
price on a specified date. The purpose of the acquisition or sale of a futures
contract, in the case of a Fund holding long-term debt securities, is to protect
the portfolio from fluctuations in interest rates without actually buying or
selling long-term debt securities. For example, when a Fund owns long-term U.S.
treasury bonds, if interest rates were expected to increase, the Fund might
enter into futures contracts for the sale of such bonds. Such a sale would have
much the same effect as selling some of the long-term U.S. treasury bonds owned
by the Fund. If interest rates did increase, the value of the bonds in the Fund
would decline, but the value of the Fund's futures contracts would increase at
approximately the same rate, thereby keeping the net asset value of the Fund
from declining as much as it otherwise would have. Similarly, when it is
expected that interest rates may decline, futures contracts may be purchased to
hedge against anticipated purchases of long-term bonds at higher prices. Since
fluctuations in the value of futures contracts should be similar to that of
long-term bonds, the Fund could take advantage of the anticipated rise in the
value of long-term bonds without actually buying them until the market had
stabilized. At that time, the futures contracts could be liquidated and the
Fund's cash reserves could then be used to buy long-term bonds on the cash
market. The Fund could accomplish similar results by selling bonds with long
maturities and investing in bonds with short maturities when interest rates are
expected to increase. However, since the futures contract market is more liquid
than the cash market, the use of futures contracts as an investment technique
allows the Fund to maintain a defensive position without having to sell its
portfolio securities.
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Page in
Prospectus
----------
(1) Financial statements and schedules
included in Prospectuses (Part A):
Financial Highlights for INVESCO
Select Income Fund for the years
ended August 31, 1996, 1995 and
1994, and the eight-month period
ended August 31, 1993 and for each
of the ^ seven years in the period
ended December 31, 1992. 9
Financial Highlights for INVESCO
High Yield Fund for the fiscal years
ended August 31, 1996, 1995 and 1994,
the eight-month period ended August
31, 1993 and for each of the ^ seven
years in the period ended December 31,
1992. 37
Financial Highlights for INVESCO U.S.
Government Securities Fund for the
fiscal years ended August 31, 1996,
1995 and 1994, the eight-month period
ended August 31, 1993^ and each
of the six years in the period ended
December 31, 1992 ^. 67
Financial Highlights for INVESCO Short-
Term Bond Fund for the fiscal ^ years
ended August 31, 1996 and 1995 and the
11-month period from September 30, 1993
(commencement of operations) to
August 31, 1994. 91
Page in
Statement
of Addi-
tional In-
formation
---------
(2) The following audited financial
statements of the INVESCO Select
Income Fund, the INVESCO High Yield
Fund, the INVESCO U.S. Government
Securities Fund and the INVESCO
Short-Term Bond Fund and the notes
thereto for the fiscal year
<PAGE>
ended August 31, ^ 1996 and the
report of Price Waterhouse LLP
with respect to such financial
statements, are incorporated in
the Statement of Additional
Information by reference from the
Company's Annual Report to
Shareholders for the fiscal year
ended August 31, ^ 1996: Statement
of Investment Securities as
of August 31, ^ 1996; Statement
of Assets and Liabilities as
of August 31, ^ 1996; Statement
of Operations for the year
ended August 31, ^ 1996; Statement
of Changes in Net Assets for each
of the two years in the period ended
August 31, ^ 1996; Financial
Highlights for each of the five
years in the ^ periods indicated.
(3) Financial statements and schedules
included in Part C:
None: Schedules have been omitted as all
information has been presented in the
financial statements.
(b) Exhibits:
(1) Articles of Incorporation (Charter)
filed April 2, ^ 1993.
(2) Bylaws, as amended July 21, ^ 1993.
(3) Not applicable.
(4) ^ Not required to be filed on
EDGAR.
(5) (a) Investment Advisory Agreement
between the Company and INVESCO
Funds Group, Inc. dated April 30, ^
1993.
(i) Amendment to this
Investment Advisory ^
Agreement.
(b) Sub-Advisory Agreement between
INVESCO and INVESCO Trust Company
dated April 30, ^ 1993.
(i) Amendment to this Sub-
Advisory ^ Agreement.
<PAGE>
(ii) Amendment to this Sub-
Advisory ^ Agreement.
(6) General Distribution Agreement
between the Company and INVESCO
Funds Group, Inc. dated April 30, ^
1993.
(7) Defined Benefit Deferred
Compensation Plan for Non-
Interested Directors and ^
Trustees.(2)
(8) Custody Agreement between the
Company and State Street
Bank and Trust Company dated
July 1, ^ 1994.
(a) Amendment to Custody Agreement
dated October 25, 1995.
(9) (a) Transfer Agency Agreement
between the Company and INVESCO
Funds Group, Inc. dated April 30, ^
1993.
(i) Amendment to Transfer
Agency Agreement between the
Company and INVESCO Funds
Group, Inc. dated May 1, ^
1996.
(b) Administrative Services
Agreement between the Company and
INVESCO Funds Group, Inc. dated
April 30, ^ 1993.
(i) Amendment to this
Administrative Services ^
Agreement.
(10) Opinion and consent of counsel
as to the legality of the
securities being registered,
indicating whether they will,
when sold, be legally issued,
fully paid and non-^ assessable.(2)
(11) Consent of Independent Accountants.
(12) Not applicable.
(13) Not applicable.
<PAGE>
(14) Copies of model plans used in the
establishment of retirement plans
as follows: Non-standardized
Profit Sharing Plan; Non-
standardized Money Purchase Pension
Plan; Standardized Profit Sharing
Plan Adoption Agreement;
Standardized Money Purchase Pension
Plan; Non-standardized 401(k) Plan
Adoption Agreement; Standardized
401(k) Paired Profit Sharing Plan;
Standardized Simplified Profit
Sharing Plan; Standardized
Simplified Money Purchase Plan;
Defined Contribution Master Plan &
Trust Agreement; and Financial
403(b) Retirement ^ Plan.(4)
(15) Plan and Agreement of Distribution
dated April 30, 1993, adopted
pursuant to Rule 12b-1 under the
Investment Company Act of ^ 1940.2
Amendment of Plan and Agreement of
Distribution dated July 19, ^
1995.(1)
(16) Schedule for computation of
performance ^ data.(4)
(17) (a) Financial Data Schedule for the
period ended August 31, 1996 for
INVESCO Select Income Fund.
(b) Financial Data Schedule for the
period ended August 31, 1996 for
INVESCO High Yield Fund.
(c) Financial Data Schedule for
the period ended August 31, 1996
for INVESCO U.S. Government
Securities Fund.
(d) Financial Data Schedule for the
period ended August 31, 1996 for
INVESCO Short-Term Bond Fund.
(18) Not Applicable.
(1)Previously filed on EDGAR with Post-Effective
Amendment No. ^ 24 dated ^ October 24, 1995 and
incorporated by reference herein.
<PAGE>
(2)Previously filed with Post-Effective Amendment
No. 33 dated March 31, 1994 and incorporated by
reference herein.
(3)Previously filed with Post-Effective Amendment No. ^
30 dated ^ June 14, 1993 and incorporated by reference
herein.
(4)Previously^ filed with the Registration Statement of
INVESCO International Funds, Inc. (File No. 33-63498)
filed May 27, 1993 and incorporated by reference
herein.
^ (5)Previously filed with Post-Effective Amendment No. 24
dated February 21, 1989 and incorporated by reference
herein.
^
Item 25. Persons Controlled by or Under Common Control with
Registrant
No person is presently controlled by or under common control with
the INVESCO Select Income Fund, INVESCO High Yield Fund, INVESCO U.S. Government
Securities Fund, or INVESCO Short- Term Bond Fund of the Registrant.
Item 26. Number of Holders of Securities
Number of Record
Holders as of
Title of Class August 31, ^ 1996
-------------- -----------------
Common Stock
INVESCO Select Income Fund ^ 14,539
INVESCO High Yield Fund ^ 15,332
INVESCO U.S. Government Securities Fund ^ 3,980
INVESCO Short-Term Bond Fund ^ 1,202
Item 27. Indemnification
Indemnification provisions for officers and directors of Registrant
are set forth in Article VII, Section 2 of the Articles of Incorporation, and
are hereby incorporated by reference. See Item 24(b)(1) above. Under these
Articles, officers and directors will be indemnified to the fullest extent
permitted to directors by the Maryland General Corporation Law, subject only to
such limitations as may be required by the Investment Company Act of 1940, as
amended, and the rules thereunder. Under the Investment Company Act of 1940,
Fund directors and officers cannot be protected against liability to the Company
or its shareholders to which they would be subject because of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties of
their office. The Company also maintains liability insurance policies covering
its directors and officers.
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
See "The Fund and Its Management" in the Funds' respective
Prospectuses and in the Statement of Additional Information for information
regarding the business of the investment adviser. For information as to the
business, profession, vocation or employment of a substantial nature of each of
the officers and directors of INVESCO Funds Group, Inc., reference is made to
the Schedule Ds to the Form ADV filed under the Investment Advisers Act of 1940
by INVESCO Funds Group, Inc., which schedules are herein incorporated by
reference.
Item 29. Principal Underwriters
(a) INVESCO Diversified Funds, Inc.
INVESCO Dynamics Fund, Inc.
INVESCO Emerging Opportunity Funds, Inc.
INVESCO Growth Fund, Inc.
INVESCO Industrial Income Fund, Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Multiple Asset Funds, Inc.
INVESCO Specialty Funds, Inc.
INVESCO Strategic Portfolios, Inc.
INVESCO Tax-Free Income Funds, Inc.
INVESCO Value Trust
INVESCO Variable Investment Funds, Inc.
<PAGE>
(b)
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------ ------------- -------------
^
Frank M. Bishop Director ^
1315 Peachtree Street N.E.
Atlanta, GA 30309
Charles W. Brady Chairman of
1315 Peachtree Street N.E. the Board
Atlanta, GA 30309
^
M. Anthony Cox Senior Vice
1315 Peachtree Street N.E. President
Atlanta, GA 30309
Steven T. Cox, Jr. Regional Vice
7800 E. Union Avenue President
Denver, CO 80237
Robert D. Cromwell ^ Regional Vice ^
7800 E. Union Avenue President ^
^ Denver, CO 80237
Samuel T. DeKinder Director
1315 Peachtree Street N.E.
Atlanta, GA 30309
Douglas P. Dhom Regional Vice
1355 Peachtree Street N.E. President
Atlanta, GA 30309
William J. Galvin, Jr. Senior Vice Asst.
7800 E. Union Avenue President Secretary
Denver, CO 80237
<PAGE>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------ ------------- -------------
Linda J. Gieger Vice President
7800 E. Union Ave.
Denver, CO 80237
Ronald L. Grooms Senior Vice Treasurer,
7800 E. Union Avenue President Chief Fin'l
Denver, CO 80237 & Treasurer Officer &
Chief Acctg.
Officer
Wylie G. Hairgrove Vice President
7800 E. Union Avenue
Denver, CO 80237
^ Hubert L. Harris ^, Jr. Director Director
1315 Peachtree Street, N.E. ^
Atlanta, GA 30309
Dan J. Hesser Chairman of the President &
7800 E. Union Avenue Board, President, Director
Denver, CO 80237 CEO & Director
Mark A. Jones Regional Vice
1315 Peachtree Street, N.E. President
Atlanta, GA 30309
Jeraldine E. Kraus Assistant Secretary
7800 E. Union Avenue
Denver, CO 80237
Michael D. Legoski Assistant Vice
7800 E. Union Avenue President
Denver, CO 80239
<PAGE>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------ ------------- -------------
^ James F. Lummanick Vice President;
^ 7800 E. Union Avenue Asst. General
^ Denver, CO 80237 Counsel
Brian N. Minturn Executive Vice
7800 E. Union Avenue President
Denver, CO 80237
Robert J. O'Connor Director
1315 Peachtree Street, N.E.
Atlanta, GA 30309
Donald R. Paddack Asst. Vice
7800 E. Union Avenue President
Denver, CO 80237
Laura M. Parsons Vice President
7800 E. Union Avenue
Denver, CO 80237
Glen A. Payne Senior Vice Secretary
7800 E. Union Avenue President, Secretary
Denver, CO 80237 General Counsel
^ Pamela J. Piro Asst. Vice
7800 E. Union Avenue President
Denver, CO 80237
Gary J. Ruhl Vice President
7800 E. Union Ave.
Denver, CO 80237
R. Dalton Sim Director ^
7800 E. Union Avenue
Denver, CO 80237
James S. Skesavage Regional Vice
1315 Peachtree Street N.E. President
Atlanta, GA 30309
<PAGE>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------ ------------- -------------
Terri Berg Smith Vice President
7800 E. Union Avenue
Denver, CO 80237
^ Tane T. Tyler Asst. Vice
^ 7800 E. Union Ave. President
^ Denver, CO 80237
Alan I. Watson Vice President Asst. Sec.
7800 E. Union Avenue
Denver, CO 80237
Judy P. Wiese Vice President Asst. Treas.
7800 E. Union Avenue
Denver, CO 80237
Allyson B. Zoellner Vice President
7800 E. Union Avenue
Denver, CO 80237
(c) Not applicable.
Item 30. Location of Accounts and Records
Dan J. Hesser
7800 E. Union Avenue
Denver, CO 80237
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) The Registrant hereby undertakes that the board of
directors will call such meetings of shareholders
for action by shareholder vote, including acting on
the question of removal of a director of directors
and to assist in communications with other
shareholders as required by Section 16(c) of the
Investment Company Act of 1940, as may be requested
in writing by the holders of at least 10% of the
outstanding shares of the Company or any of its
Funds, or as may be required by applicable law or
the Company's Articles of Incorporation.
^
<PAGE>
(c) The Registrant shall furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
<PAGE>
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the registrant has duly caused this
post-effective amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Denver, County of Denver, and State of
Colorado, on the ^ 30th day of October, ^ 1996.
Attest: INVESCO Income Funds, Inc.
/s/ Glen A. Payne /s/ Dan J. Hesser
- ------------------------------------ ------------------------------------
Glen A. Payne, Secretary Dan J. Hesser, President
Pursuant to the requirements of the Securities Act of 1933, this
post-effective amendment to Registrant's Registration Statement has been signed
by the following persons in the capacities indicated on this ^ 30th day of
October, ^ 1996.
/s/Dan J. Hesser /s/ Lawrence H. Budner
- ------------------------------------ ------------------------------------
Dan J. Hesser, President & Lawrence H. Budner, Director
Director (Chief Executive Officer)
/s/ Ronald L. Grooms /s/ Daniel D. Chabris
- ------------------------------------ ------------------------------------
Ronald L. Grooms, Treasurer Daniel D. Chabris, Director
(Chief Financial and
Accounting Officer)
/s/ Victor L. Andrews /s/ Fred A. Deering
- ------------------------------------ ------------------------------------
Victor L. Andrews, Director Fred A. Deering, Director
/s/ Bob R. Baker /s/ A. D. Frazier, Jr.
- ------------------------------------ ------------------------------------
Bob R. Baker, Director A. D. Frazier, Jr., Director
/s/ Hubert L. Harris, Jr. /s/ Kenneth T. King
- ------------------------------------ ------------------------------------
Hubert L. Harris, Jr., Director Kenneth T. King, Director
/s/ Charles W. Brady /s/ John W. McIntyre
- ------------------------------------ ------------------------------------
Charles W. Brady, Director John W. McIntyre, Director
By* By* /s/ Glen A. Payne
--------------------------------- ---------------------------------
Edward F. O'Keefe Glen A. Payne
Attorney in Fact Attorney in Fact
* Original Powers of Attorney authorizing Edward F. O'Keefe and Glen A. Payne,
and each of them, to execute this post-effective amendment to the Registration
Statement of the Registrant on behalf of the above-named directors and officers
of the Registrant have been filed with the Securities and Exchange Commission on
January 9, 1990, January 16, 1990, May 22, 1992, March 31, 1994, October 23,
1995.
<PAGE>
Exhibit Index
Page in
Exhibit Number Registration Statement
- -------------- ----------------------
^ 1 180
^ 2 190
5(a) 212
5(a)(i) 221
5(b) 222
5(b)(i) 229
5(b)(ii) 230
6 232
8 242
8(a) 267
9(a) 268
9(a)(i) 282
9(b) 283
9(b)(i) 288
11 289
17(a) 290
17(b) 291
17(c) 292
17(d) 293
99.POA HARRIS 294
</TABLE>
ARTICLES OF INCORPORATION
OF
INVESCO INCOME FUNDS, INC.
THIS IS TO CERTIFY to the Maryland State Department of Assessments that
the undersigned, Dan J. Hesser, whose post office address is 7800 E. Union
Avenue, Suite 800, Denver, Colorado 80237, and being at least 18 years of age,
does hereby declare that he is an incorporator intending to form a corporation
under and by virtue of the general laws of the State of Maryland authorizing the
formation of corporations.
ARTICLE I
NAME AND TERM
The name of the corporation is INVESCO Income Funds, Inc. The corporation
shall have perpetual existence.
ARTICLE II
POWERS AND PURPOSES
The nature of the business and the objects and purposes to be transacted,
promoted and carried on by the corporation are as follows:
1. To engage in the business of an incorporated investment company of
open-end management type and to engage in all legally permissible
activities and operations usual, customary, or necessary in
connection therewith.
2. In general, to engage in any other business permitted to
corporations by the laws of the State of Maryland and to
have and exercise all powers conferred upon or permitted
to corporations by the Maryland General Corporation Law
and any other laws of the State of Maryland; provided,
however, that the corporation shall be restricted from
engaging in any activities or taking any actions which
would preclude its compliance with applicable provisions
of the Investment Company Act of 1940, as amended,
applicable to open-end management type investment
companies or applicable rules promulgated thereunder.
ARTICLE III
CAPITALIZATION
Section 1. The aggregate number of shares the corporation shall have the
authority to issue is six hundred million (600,000,000) shares of Common Stock,
having a par value of one cent ($0.01) per share. The aggregate par value of all
<PAGE>
shares which the corporation shall have the authority to issue is six
million dollars ($6,000,000). Such stock may be issued as full shares or as
fractional shares.
In the exercise of the powers granted to the board of directors pursuant
to Section 3 of this Article III, the board of directors initially designates
four classes of shares of Common Stock of the corporation, to be designated as
the INVESCO Short- Term Bond Fund, INVESCO U. S. Government Securities Fund,
INVESCO Select Income Fund and the INVESCO High Yield Fund, respectively.
Initially, one hundred million (100,000,000) shares of the corporation's Common
Stock are classified as and are allocated to each such designated class.
Unless otherwise prohibited by law, so long as the corporation is
registered as an open-end investment company under the Investment Company Act of
1940, as amended, the total number of shares which the corporation is authorized
to issue may be increased or decreased by the board of directors in accordance
with the applicable provisions of the Maryland General Corporation Law.
Section 2. No holder of stock of the corporation shall be entitled as a
matter of right to purchase or subscribe for any shares of the capital stock of
the corporation which it may issue or sell, whether out of the number of shares
authorized by these articles of incorporation, or out of any shares of the
capital stock of the corporation acquired by it after the issue thereof.
Section 3. The corporation is authorized to issue its stock in one or more
series or one or more classes of shares, and, subject to the requirements of the
Investment Company Act of 1940, as amended, particularly Section 18(f) thereof
and Rule 18f-2 thereunder, the different series and classes, if any, shall be
established and designated, and the variations in the relative preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption as between the
different series or classes shall be fixed and determined and may be classified
and reclassified by the board of directors; provided that the board of directors
shall not classify or reclassify any of such shares into any class or series of
stock which is prior to any class or series of stock then outstanding with
respect to rights upon the liquidation, dissolution or winding up of the affairs
of, or upon any distribution of the general assets of, the corporation, except
that there may be variations so fixed and determined between different series or
classes as to investment objective, purchase price, right of redemption, special
rights as to dividends and on liquidation with respect to assets and income
belonging to a particular series or class, voting powers and conversion rights.
All references to shares in these articles of incorporation shall be deemed to
be shares of any or all series and classes of shares of the corporation's
capital stock as the context may require.
<PAGE>
(a) The number of authorized shares allocated to each series
or class and the number of shares of each series or of each class
that may be issued shall be in such number as may be determined by
the board of directors. The directors may classify or reclassify any
unissued shares or any shares previously issued and reacquired of
any series or class into one or more series or one or more classes
that may be established and designated by the board of directors
from time to time. The directors may hold as treasury shares (of the
same or some other series or class), reissue for such consideration
and on such terms as they may determine, or cancel any shares of any
series or any class reacquired by the corporation at their
discretion from time to time.
(b) All consideration received by the corporation for the
issue or sale of shares of a particular series or class,
together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits and
proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any
funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, shall
irrevocably belong to that series or class for all
purposes, subject only to the rights of creditors of that
series or class, and shall be so recorded upon the books
of account of the corporation. In the event that there
are any assets, income, earnings, profits and proceeds
thereof, funds, or payments which are not readily
identifiable as belonging to any particular series or
class, the directors shall allocate them among any one or
more of the series or classes established and designated
from time to time in such manner and on such basis as
they, in their sole discretion, deem fair and equitable.
Each such allocation by the corporation shall be
conclusive and binding upon the stockholders of all
series or classes for all purposes. The directors shall
have full discretion, to the extent not inconsistent with
the Investment Company Act of 1940, as amended, and the
Maryland General Corporation Law to determine which items
shall be treated as income and which items shall be
treated as capital; and each such determination and
allocation shall be conclusive and binding upon the
stockholders.
(c) The assets belonging to each particular class or series
shall be charged with the liabilities of the corporation
in respect to that class or series and all expenses,
costs, charges and reserves attributable to that class or
series, and any general liabilities, expenses, costs,
charges or reserves of the corporation which are not
readily identifiable as belonging to any particular class
or series shall be allocated and charged by the directors
to and among any one or more of the classes or series
established and designated from time to time in such
<PAGE>
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 corporation intends to have each series that may be established
to represent interests of a separate investment portfolio qualify as
a "regulated investment company" under the Internal Revenue Code of
1986, or any successor comparable statute thereto, and regulations
promulgated thereunder. Inasmuch as the computation of net income
and gains for federal income tax purposes may vary from the
computation thereof on the books of the corporation, the board of
directors shall have the power, in its sole discretion, to
distribute in any fiscal year as dividends, including dividends
designated in whole or in part as capital gains distributions,
amounts sufficient, in the opinion of the board of directors, to
enable the respective series to qualify as regulated investment
companies and to avoid liability of such series for federal income
tax in respect of that year. However, nothing in the foregoing shall
limit the authority of the board of directors to make distributions
greater than or less than the amount necessary to qualify the series
as regulated investment companies and to avoid liability of such
series for such tax.
(e) Dividends and distributions may be made in cash, property
or additional shares of the same or another class or
<PAGE>
series, or a combination thereof, as determined by the board of
directors or pursuant to any program that the board of directors may
have in effect at the time for the election by each stockholder of
the mode of the making of such dividend or distribution to that
stockholder. Any such dividend or distribution paid in shares will
be paid at the net asset value thereof as defined in section (4)
below.
(f) In the event of the liquidation or dissolution of the
corporation or of a particular class or series, the
stockholders of each class or series that has been
established and designated and is being liquidated shall
be entitled to receive, as a class or series, when and as
declared by the board of directors, the excess of the
assets belonging to that class or series over the
liabilities belonging to that class or series. The
holders of shares of any particular class or series shall
not be entitled thereby to any distribution upon
liquidation of any other class or series. The assets so
distributable to the stockholders of any particular class
or series shall be distributed among such stockholders in
proportion to the number of shares of that class or
series held by them and recorded on the books of the
corporation. The liquidation of any particular class or
series in which there are shares then outstanding may be
authorized by vote of a majority of the board of
directors then in office, subject to the approval of a
majority of the outstanding securities of that class or
series, as defined in the Investment Company Act of 1940,
as amended, and without the vote of the holders of any
other class or series. The liquidation or dissolution of
a particular class or series may be accomplished, in
whole or in part, by the transfer of assets of such class
or series to another class or series or by the exchange
of shares of such class or series for the shares of
another class or series.
(g) On each matter submitted to a vote of the stockholders,
each holder of a share shall be entitled to one vote for
each share standing in his name on the books of the
corporation, irrespective of the class or series thereof,
and all shares of all classes or series shall vote as a
single class or series ("single class voting"); provided,
however that (i) as to any matter with respect to which
a separate vote of any class or series is required by the
Investment Company Act of 1940, as amended, or by the
Maryland General Corporation Law, such requirement as to
a separate vote by that class or series shall apply in
lieu of single class voting as described above; (ii) in
the event that the separate vote requirements referred to
in (i) above apply with respect to one or more but not
all classes or series, then, subject to (iii) below, the
shares of all other classes or series shall vote as a
<PAGE>
single class or series; and (iii) as to any matter which does not
affect the interest of a particular class or series, only the
holders of shares of the one or more affected classes shall be
entitled to vote. Holders of shares of the stock of the corporation
shall not be entitled to exercise cumulative voting in the election
of directors or on any other matter.
(h) The establishment and designation of any series or class
of shares, in addition to the initial class of shares
which has been established in section (1) above, shall be
effective upon the adoption by a majority of the then
directors of a resolution setting forth such
establishment and designation and the relative rights and
preferences of such series or class, or as otherwise
provided in such instrument and the filing with the
proper authority of the State of Maryland of Articles
Supplementary setting forth such establishment and
designation and relative rights and preferences.
Section 4. The corporation shall, upon due presentation of a share or
shares of stock for redemption, redeem such share or shares of stock at a
redemption price prescribed by the board of directors in accordance with
applicable laws and regulations; provided that in no event shall such price be
less than the applicable net asset value per share of such class or series as
determined in accordance with the provisions of this section (4), less such
redemption or other charge as is determined by the board of directors. Subject
to applicable law, the corporation may redeem shares, not offered by a
stockholder for redemption, held by any stockholder whose shares of a class or
series had a value less than such minimum amount as may be fixed by the board of
directors from time to time or prescribed by applicable law, other than as a
result of a decline in value of such shares because of market action; provided
that before the corporation redeems such shares it must notify the shareholder
by first-class mail that the value of his shares is less than the required
minimum value and allow him 60 days to make an additional investment in an
amount which will increase the value of his account to the required minimum
value. Unless otherwise required by applicable law, the price to be paid for
shares redeemed pursuant to the preceding sentence shall be the aggregate net
asset value of the shares at the close of business on the date of redemption,
and the shareholder shall have no right to object to the redemption of his
shares. The corporation shall pay redemption prices in cash, except that the
corporation may at its sole option pay redemption prices in kind in such manner
as is consistent with and not in contravention of Section 18(f) of the
Investment Company Act of 1940, as amended, and any Rules or Regulations
thereunder. Redemption prices shall be paid exclusively out of the assets of the
class or series whose shares are being redeemed.
Notwithstanding the foregoing, the corporation may postpone
payment of redemption proceeds and may suspend the right of the
<PAGE>
holders of shares of any class or series to require the corporation to redeem
shares of that class or series during any period or at any time when and to the
extent permissible under the Investment Company Act of 1940, as amended, or any
rule or order thereunder.
The net asset value of a share of any class or series of common stock of
the corporation shall be determined in accordance with applicable laws and
regulations or under the supervision of such persons and at such time or times
as shall from time to time be prescribed by the board of directors.
Section 5. The corporation may issue, sell, redeem, repurchase and
otherwise deal in and with shares of its stock in fractional denominations and
such fractional denominations shall, for all purposes, be shares having
proportionately to the respective fractions represented thereby all the rights
of whole shares, including without limitation, the right to vote, the right to
receive dividends and distributions, and the right to participate upon
liquidation of the corporation; provided that the issue of shares in fractional
denominations shall be limited to such transactions and be made upon such terms
as may be fixed by or under authority of the bylaws.
Section 6. The corporation shall not be obligated to issue certificates
representing shares of any class or series unless it shall receive a written
request therefor from the record holder thereof in accordance with procedures
established in the bylaws or by the board of directors.
ARTICLE IV
PREEMPTIVE RIGHTS
No stockholder of the corporation of any class or series, whether now or
hereafter authorized, shall have any preemptive or preferential or other right
of purchase of or subscription to any share of any class or series of stock, or
shares convertible into, exchangeable for or evidencing the right to purchase
stock of any class or series whatsoever, whether or not the stock in question be
of the same class or series as may be held by such stockholder, and whether now
or hereafter authorized and whether issued for cash, property, services or
otherwise, other than such, if any, as the board of directors in its discretion
may from time to time fix.
ARTICLE V
PRINCIPAL OFFICE AND REGISTERED AGENT
The post office address of the principal office of the corporation in the
State of Maryland is 32 South Street, Baltimore, Maryland 21202. The resident
agent of the corporation is The Corporation Trust Incorporated, whose post
office address is 32 South Street, Baltimore, Maryland 21202. Said resident
agent is a corporation of the State of Maryland.
<PAGE>
ARTICLE VI
DIRECTORS
Section 1. The initial board of directors shall consist of three members
who need not be residents of the State of Maryland or stockholders of the
corporation.
Section 2. The names of the persons who shall act as directors until the
first meeting of stockholders or until their successors shall have been elected
and qualified are as follows:
Charles W. Brady 1315 Peachtree Street, N.E., Atlanta, Georgia
John M. Butler 7800 E. Union Avenue, Denver, Colorado
Dan J. Hesser 7800 E. Union Avenue, Denver, Colorado
Section 3. The number of directors may be increased or decreased in
accordance with the bylaws, provided that the number shall not be reduced to
less than three.
Section 4. A majority of the directors shall constitute a quorum for the
transaction of business, unless the bylaws shall provide that a different number
shall constitute a quorum; provided, however, that in no case shall a quorum be
less than one-third (1/3) of the total number of directors or less than two (2)
directors.
Section 5. 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 corporation is hereby empowered
to authorize the issuance from time to time of shares of stock, whether of a
class or series now or hereafter authorized, for such consideration as it deems
advisable, subject to such limitations as may be set forth herein, in the
bylaws, in the Maryland General Corporation Law, and in the Investment Company
Act of 1940, as amended.
Section 7. The board of directors of the corporation may make, alter or
repeal from time to time any of the bylaws of the corporation except any
particular bylaw which is specified as not subject to alternation or repeal by
the board of directors.
ARTICLE VII
LIABILITY AND INDEMNIFICATION
Section 1. Directors and officers of the corporation,
including persons who formerly have served in such capacities,
<PAGE>
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 corporation, whether such
person is a director or officer of the corporation at the time of any proceeding
in which liability is asserted against the director or officer. No amendment to
these Articles of Incorporation or repeal of any of its provisions shall limit
or eliminate the benefits provided to directors and officers under this
provision with respect to any act or omission which occurred prior to such
amendment or repeal.
Section 2. The corporation shall indemnify and advance expenses to its
directors and officers, including persons who formerly have served in such
capacities, to the fullest extent permitted to directors by the Maryland General
Corporation Law and the bylaws of the corporation, as such Law and bylaws now or
in the future may be in effect, subject only to such limitations as may be
required by the Investment Company Act of 1940, as amended, and the rules
thereunder.
ARTICLE VIII
SPECIAL VOTING AND MEETING PROVISIONS
Section 1. Notwithstanding any provision of Maryland law requiring a
greater proportion than a majority of the votes of all classes or of any class
of stock entitled to be cast to take or authorize any action, the corporation
may take or authorize any such action upon the concurrence of a majority of the
aggregate number of the votes entitled to be cast thereon.
Section 2. The presence in person or by proxy of the holders of one-third
of the shares of stock of the corporation entitled to vote without regard to
class shall constitute a quorum at any meeting of stockholders, except with
respect to any matter which by law requires the 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.
<PAGE>
Section 3. So long as the corporation is registered pursuant to the
Investment Company Act of 1940, as amended, the corporation will not be required
to hold annual shareholder meetings in years in which the election of directors
is not required to be acted upon under the Investment Company Act of 1940, as
amended.
ARTICLE IX
AMENDMENT
The corporation reserves the right from time to time to make any amendment
of its articles of incorporation now or hereafter authorized by law, including
any amendment which alters the contract rights, as expressly set forth in such
articles, of any outstanding stock by classification, reclassification or
otherwise, but no such amendment which changes the terms or rights of any of its
outstanding shares shall be valid unless such amendment shall have been
authorized by not less than a majority of the aggregate number of votes entitled
to be cast thereon, by a vote at a meeting or in writing with or without a
meeting.
IN WITNESS WHEREOF, I have signed these articles of incorporation on this
1st day of April, 1993.
/s/ Dan J. Hesser
-----------------
Dan J. Hesser
Attest: /s/ Glen A. Payne
-----------------
Glen A. Payne
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
I hereby certify that on the 1st day of April, 1993, before me, the
subscriber, a Notary Public of the State of Colorado, in and for the City and
County of Denver, personally appeared Dan J. Hesser who acknowledged the
foregoing articles of incorporation to be his act.
WITNESS my hand and notarial seal, the day and year first above written.
/s/ Cheryl K. Howlett
------------------------------
Notary Public
My commission expires: February 22, 1995.
BYLAWS
OF
INVESCO INCOME FUNDS, INC.
AS OF JULY 21, 1993
ARTICLE I.
SHAREHOLDERS
Section 1. Annual Meeting. Unless otherwise determined
by the board of directors or required by
applicable law, no annual meeting of
shareholders shall be required to be held in
any year in which the election of directors is
not required under the Investment Company Act
of 1940. If the corporation is required to
hold a meeting of shareholders to elect
directors, the meeting shall be designated as
the annual meeting of shareholders for that
year, and shall be held no later than 120 days
after occurrence of the event requiring the
meeting at a place within or without the State
of Maryland.
Section 2. Special Meetings. Special meetings of the
shareholders entitled to vote shall be called
upon the request in writing of the president
or, in his absence, a vice president, or by a
vote of a majority of the board of directors,
or upon the request in writing of shareholders
of the Company representing not less than ten
percent (10%) of the votes entitled to be cast
at the meeting.
Section 3. Place of Meetings. Each annual and any special
meeting of the shareholders shall be held at the
principal office of the corporation in Denver, Colorado,
or at such alternate site as may be determined by the
board of directors.
Section 4. Notices. Notices of every meeting, annual or
special, shall specify the place, day and hour
of the meeting and shall be mailed not less
than ten (10) days nor more than ninety (90)
days before such meeting. Such notice shall
be given by the Secretary of the Corporation
to each shareholder entitled to notice of and
entitled to vote at the meeting. In the event
that a special meeting is called by the
shareholders entitled to vote, the Secretary
of the Corporation shall inform the
shareholders who make the request of the
<PAGE>
reasonably estimated cost of preparing and mailing a
notice of the meeting, and upon payment of these costs
to the Corporation, shall notify each shareholder
entitled to notice of the meeting. Notice of every
special meeting shall indicate briefly its purpose.
Notice shall be deemed delivered where it is personally
delivered to the individual, left at the individual's
usual place of business, or mailed to the individual at
the individual's address as it appears on the records of
the Corporation.
Section 5. Quorum. At every meeting of the shareholders,
the presence in person or by proxy of the
holders of one-third of all of the 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 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;
provided, however, that at every meeting of
the shareholders, the representation of a
larger number of shareholders shall constitute
a quorum if required by the Investment Company
Act of 1940, as amended, other applicable law,
or by the Articles of Incorporation.
Section 6. Voting. At every meeting of the shareholders
at which a quorum is present, each shareholder
entitled to vote shall be entitled to vote in
person, or by proxy appointed by instrument in
writing subscribed by such shareholder, or his
duly authorized attorney, and he shall have
one (1) vote for each share of stock standing
registered in his name on each matter
submitted at the meeting on which such share
is entitled to vote and for each director to
be elected. Fractional shares shall be
entitled to proportionate fractional votes.
Every proxy shall be dated and no proxy shall
be valid after eleven (11) months from its
date unless otherwise provided in the proxy.
There shall be no cumulative voting in the
election of directors. Except as otherwise
provided by law, by the charter of the
corporation, or by these bylaws, at each
meeting of stockholders at which a quorum is
present, all matters shall be decided by a
majority of the votes cast by the stockholders
<PAGE>
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
<PAGE>
action and such consent shall be filed with
the records of the corporation.
ARTICLE II.
BOARD OF DIRECTORS
Section 1. Powers. The business and property of the
corporation shall be conducted and managed by
its board of directors, which may exercise all
of the powers of the corporation, except such
as are by statute, by the charter or by the
bylaws, conferred upon or reserved to the
shareholders. The board of directors shall
keep full and complete records of its
transactions.
Section 2. Number. By vote of a majority of the entire
board of directors, the number of directors
may be increased or decreased from time to
time; provided that, in no event, may the
number be decreased to less than three.
Section 3. Election. The members of the board of
directors shall be elected by the shareholders
by plurality vote at the annual meeting, or at
any special meeting called for such purpose.
Each director shall hold office until his
successor shall have been duly chosen and
qualified, or until he shall have resigned or
shall have been removed in the manner provided
by law. Any vacancy, including one created by
an increase in the number of directors on the
board (except where such vacancy is created by
removal by the shareholders), may be filled by
the vote of a majority of the remaining
directors, although such majority is less than
a quorum; provided, however, that immediately
after filling any vacancy by such action of
the board of directors, at least two-thirds
(2/3) of the directors then holding office
shall have been elected by the shareholders at
an annual or special meeting.
Section 4. Regular Meetings. The board of directors shall
schedule an Annual Meeting at such place and time as
they may designate for the purpose of organization, the
election of officers, and the transaction of other
business. Other regular meetings may be held as
scheduled by a majority of the directors.
<PAGE>
Section 5. Special Meetings. Special meetings of the
board of directors may be called at any time
by the president or by a majority of the
directors or by a majority of the executive
committee.
Section 6. Notice of Meetings. Notice of the place, day
and hour of every special meeting shall be
given to each director at least two (2) days
before the meeting, by written announcement,
telephone, telegraph and/or mail addressed to
him at his post office address, according to
the records of the corporation. Unless
required by resolution of the board of
directors, no notice of any meeting of the
board of directors need state the business to
be transacted thereat. No notice of any
meeting of the board of directors need be
given to any director who attends, or to any
director who, in writing executed and filed
with the records of the meeting either before
or after the holding thereof, waives such
notice. Any meeting of the board of directors
may adjourn from time to time to reconvene at
the same or some other place, and no notice
need be given of any such adjourned meeting
other than by announcement.
Section 7. Quorum. At all meetings of the board of
directors, one-third of the total number of
directors or not less than two (2) directors
shall constitute a quorum for the transaction
of business. In the absence of a quorum, the
directors present by a majority vote and
without notice other than by announcement may
adjourn the meeting from time to time until a
quorum shall be present. At any such
adjourned meeting, any business may be
transacted which might have been transacted at
the meeting as originally notified.
Section 8. Compensation of Directors. Directors shall be
entitled to receive such compensation from the
corporation for their services as may from
time to time be voted by the board of
directors. All directors shall be reimbursed
for their reasonable expenses of attendance,
if any, at the board and committee meetings.
Any director of the corporation may also serve
the corporation in any other capacity and
receive compensation therefor.
Section 9. Vacancies. Any vacancy occurring in the board
of directors may be filled by the affirmative
<PAGE>
vote of a majority of the remaining directors though
less than a quorum of the board of directors. A director
elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office. Any
directorship to be filled by reason of an increase in
the number of directors may be filled by election by the
board of directors for a term of office continuing only
until the next election of directors by the
shareholders.
Section 10. Resignation and Removal of Directors. Any
director or member of any committee may resign
at any time. Such resignation shall be made
in writing and shall take effect at the time
specified therein. If no time is specified,
it shall take effect from the time of its
receipt by the Secretary, who shall record
such resignation, noting the day and hour of
its reception. The acceptance of a
resignation shall not be necessary to make it
effective. Notwithstanding anything to the
contrary in Article I, Section 2 hereof, a
meeting for removing a director shall be
called in accordance with the procedures
specified in Section 16(c) of the Investment
Company Act of 1940, and the shareholder
communications provisions of said Section
16(c) shall be following by the corporation.
At any meeting of shareholders, duly called
and at which a quorum is present, the
shareholders may, by affirmative vote of the
holders of a majority of the votes entitled to
be cast thereon, remove any director or
directors from office and may elect a
successor or successors to fill any resulting
vacancies to hold office until the next annual
meeting of shareholders or until a successor
or successors are elected and qualify.
Section 11. Telephone Meetings. Any member or members of
the board of directors or of any committee
designated by the board of directors, may
participate in a meeting of the board, or any
such committee, as the case may be, by means
of a conference telephone or similar
communications equipment if all persons
participating in the meeting can hear each
other at the same time. Participation in a
meeting by these means constitutes presence in
person at the meeting. This Section 11 shall
not be applicable to meetings held for the
purpose of voting in respect of approval of
<PAGE>
contracts or agreements whereby a person undertakes to
serve or act as investment adviser of, or principal
underwriter for, the corporation or in respect to other
matters as to which the Investment Company Act of 1940
or the rules thereunder require that votes be cast in
person.
Section 12. Action by Directors Without Meeting. The
provisions of these bylaws covering notices
and meetings to the contrary notwithstanding,
and except as required by law (including
Section 15 of the Investment Company Act of
1940), any action required or permitted to be
taken at any meeting of the board of directors
may be taken without a meeting if a consent in
writing setting forth the action shall be
signed by all of the directors entitled to
vote upon the action and such written consent
is filed with the minutes of proceedings of
the board of directors.
ARTICLE III.
COMMITTEES
Section 1. Executive Committee. The board of directors,
by resolution adopted by a majority of the
whole board of directors, may provide for an
executive committee of three (3) or more
directors. If provision be made for an
executive committee, the members thereof shall
be elected by the board of directors to serve
during the pleasure of the board of directors.
Unless otherwise provided by resolution of the
board of directors, the president shall be a
member and the chairman of 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
<PAGE>
or distributions on stock; (ii) issue stock other than
as provided by the Maryland General Corporation Law;
(iii) recommend to the shareholders any action which
requires shareholder approval; (iv) amend these bylaws;
or (v) approve any merger or share exchange which does
not require shareholder approval. The executive
committee shall maintain written records of its
transactions. All action by the executive committee
shall be reported to the board of directors at its
meeting next succeeding such action, and shall be
subject to ratification, with or without revision or
alteration, by such vote of the board of directors as
would have been required under Article II, Section 7,
hereof, had such action been taken by the board of
directors. Vacancies in the executive committee shall be
filled by the board of directors.
Section 2. Meetings of the Executive Committee. The
executive committee shall fix its own rules of
procedure and shall meet as provided by such
rules or by resolution of the board of
directors, and it shall also meet at the call
of the chairman or of any two (2) members of
the committee. A majority of the executive
committee shall constitute a quorum. Except
in cases in which it is otherwise provided by
resolution of the board of directors, the vote
of a majority of such quorum at a duly
constituted meeting shall be sufficient to
elect and to pass any measure, subject to
ratification by the board of directors as
provided in Section 1 of this Article III.
Section 3. Other Committees. The board of directors may by
resolution provide for such other standing or special
committees as it deems desirable, and discontinue the
same at its pleasure. Each such committee shall have
such powers and perform such duties as may be assigned
to it by the board of directors.
Section 4. Committee Action Without Meeting. The
provisions of these bylaws covering notices
and meetings to the contrary notwithstanding,
and except as required by law, any action
required or permitted to be taken at any
meeting of any committee of the board of
directors appointed pursuant to these bylaws
may be taken without a meeting if a consent in
writing setting forth the action shall be
signed by all members of the committee
<PAGE>
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;
<PAGE>
provided, that no rights of any third party shall be
affected or impaired by any such bylaws or resolution of
the board unless the third party has knowledge thereof.
Section 2. Subordinate Officers. The board of directors, or any
officer thereunto authorized by it, may appoint from
time to time such other officers and agents for such
terms of office and with such powers and duties as may
be prescribed by the board of directors or the officer
making such appointment.
Section 3. Removal. Any officer or agent may be removed by the
board of directors whenever, in its judgment, the best
interests of the corporation will be served thereby, but
such removal shall be without prejudice to the
contractual rights, if any, of the person so removed.
Section 4. Chairman of the Board. The chairman of the
board, if one shall be elected, shall preside
at all meetings of the board of directors, and
shall appoint all committees except such as
are required by statute, these bylaws or a
resolution of the board of directors or of the
executive committee to be otherwise appointed,
and shall have other such duties as may be
assigned to him from time to time by the board
of directors. In recognition of notable and
distinguished services to the corporation, the
board of directors may designate one of its
members as honorary chairman, who shall have
such duties as the board may, from time to
time, assign him by appropriate resolution,
excluding, however, any authority or duty
vested by law or these bylaws in any other
officer.
Section 5. Vice Chairman of the Board. The vice chairman
of the board, if one shall be elected, shall
preside at all meetings of the board of
directors at which the chairman of the board
is not present, shall call at his discretion
and shall preside at meetings of those
directors of the corporation who are not
affiliated with the corporation's investment
adviser, distributor, or affiliates thereof,
and shall perform such other duties as may be
assigned to the vice chairman from time to
time by the board of directors.
<PAGE>
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.
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
<PAGE>
by the board of directors with respect to the custody of
assets of the corporation; shall receive, or cause to be
received, and give, or cause to be given, receipts for
all funds, securities or valuable documents paid or
delivered to, or for the account of, the corporation,
and cause such funds, securities or valuable documents
to be deposited for the account of the corporation with
such banks or trust companies as shall be designated by
the board of directors; shall pay or cause to be paid
out of the funds of the corporation all just debts of
the corporation upon their maturity; shall maintain, or
cause to be maintained, accurate records of all
receipts, disbursements, assets, liabilities, and
transactions of the corporation; shall see that adequate
audits thereof are regularly made; shall, when required
by the board of directors, render accurate statements of
the condition of the corporation; and shall perform all
such other duties as are incident to his office and as
may be assigned to him by the board of directors or by
the president.
Section 10. Assistant Secretaries, Assistant Treasurers.
The assistant secretaries and assistant
treasurers shall have such duties as from time
to time may be assigned to them by the board
of directors, or by the president.
Section 11. Compensation. The board of directors shall
have the power to fix the compensation of all
officers and agents of the corporation, but
may delegate to any officer or committee the
power of determining the amount of salary to
be paid to any officer or agent of the
corporation other than the chairman of the
board, the president, the vice presidents, the
secretary and the treasurer.
Section 12. Contracts. Except as otherwise provided by
law or by the charter, no contract or
transaction between the corporation and any
partnership or corporation, and no act of the
corporation, shall in any way be affected or
invalidated by the fact that any officer or
director of the corporation is pecuniarily or
otherwise interested therein or is a member,
officer or director of such other partnership
or corporation if such interest shall be known
to the board of directors of the corporation.
Specifically, but without limitation of the
foregoing, the corporation may enter into one
<PAGE>
or more contracts appointing INVESCO Funds Group, Inc.
investment adviser of the corporation, and may otherwise
do business with INVESCO Funds Group, Inc.,
notwithstanding the fact that one or more of the
directors of the corporation and some or all of its
officers are, have been or may become directors,
officers, members, employees, or shareholders of INVESCO
Funds Group, Inc. and may deal freely with each other,
and neither such contract appointing INVESCO Funds
Group, Inc. investment adviser to the corporation nor
any other contract or transaction between the
corporation and INVESCO Funds Group, Inc. shall be
invalidated or in any way affected thereby, nor shall
any director or officer of the corporation by reason
thereof be liable to the corporation or to any
shareholder or creditor of the corporation or to any
other person for any loss incurred under or by reason of
any such contract or transaction. For purposes of this
paragraph, any reference to "INVESCO Funds Group, Inc."
shall be deemed to include said company and any parent,
subsidiary or affiliate of said company and any
successor (by merger, consolidation or otherwise) to
said company or any such parent, subsidiary or
affiliate.
Section 13. Delegation of Duties. Whenever an officer is absent
or disabled, or whenever for any reason the board of
directors may deem it desirable, the board may delegate
the powers and duties of an officer to any other officer
or officers or to any director or directors.
ARTICLE V.
CAPITAL STOCK
Section 1. Issuance of Stock. The corporation shall not
issue its shares of capital stock except as
approved by the board of directors. Upon the
sale of each share of its common stock, except
as otherwise permitted by applicable laws and
regulations, the corporation shall receive in
cash or in securities valued as provided in
Article VIII of these bylaws, not less than
the current net asset value thereof, exclusive
of any distributing commission or discount,
and in no event less than the par value
thereof.
<PAGE>
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, 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
<PAGE>
period but not to exceed, in any case, twenty days. If
the share transfer books shall be closed for the purpose
of determining shareholders entitled to notice of or to
vote at a meeting of shareholders, such books shall be
closed for at least ten days immediately preceding such
meeting. In lieu of closing the share transfer books,
the board of directors may fix in advance a date as the
record date for any such determination of shareholders,
such date in any case to be not more than ninety days
and, in case of a meeting of shareholders, not less than
ten days prior to the date on which the particular
action, requiring such determination of shareholders, is
to be taken. If the share transfer books are not closed
and no record date is fixed for the determination of
shareholders entitled to notice of or to vote at a
meeting of shareholders, the later of the close of
business on the date on which notice of the meeting is
mailed or the thirtieth day before the meeting shall be
the record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders. The
record date for determining shareholders entitled to
receive payment of a dividend or an allotment of any
rights shall be the close of business on the day on
which the resolution of the board of directors declaring
such dividend or allotment of rights is adopted. But the
payment or allotment may not be made more than 60 days
after the date on which the resolution is adopted. When
a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in
this section, such determination shall apply to any
adjournment thereof.
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
<PAGE>
right of a person registered on its books as the owner
of shares of stock to receive dividends, and to vote as
such owner, and to hold liable for calls and assessments
a person registered on its books as the owner of shares
of stock, and shall not be bound to recognize any
equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as
otherwise provided by the laws of Maryland.
Section 8. Fractional Denominations. Subject to any
applicable provisions of law and the charter
of the corporation, the corporation may issue
shares of its capital stock in fractional
denominations, provided that the transactions
in which and the terms and conditions upon
which shares in fractional denominations may
be issued from time to time be limited or
determined by or under the authority of the
board of directors.
ARTICLE VI.
FINANCES
Section 1. Checks, drafts, etc. All instruments,
documents, and other papers shall be executed
in the name and on behalf of the corporation,
and all drafts, checks, notes and other
obligations for the payment of money by the
corporation shall, unless otherwise provided
by resolution of the board of directors, be
signed by the president or vice president and
countersigned by the secretary or treasurer.
Section 2. Annual Reports. A statement of the affairs of
the corporation shall be submitted at the
annual meeting of the shareholders and, within
twenty (20) days after the meeting, shall be
placed on file at the corporation's principal
office. If the corporation is not required to
hold an annual meeting of shareholders, the
corporation's statement of affairs shall be
placed on file at the corporation's principal
office within one hundred and twenty (120)
days after the end of its fiscal year. Such
statement shall be prepared by such executive
officer of the corporation as may be
designated by resolution of the board of
directors. If no other executive officer is
<PAGE>
so designated, it shall be the duty of the
president to prepare such statement.
Section 3. Fiscal Year. The fiscal year of the
corporation shall begin on 1st day of
September in each year and end on the 31st day
of August 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 this Article of the
bylaws) the amount of its liabilities,
dividing the remainder by the number of shares
of common stock issued and outstanding, and
adjusting the results to the nearest full cent
per share.
Section 2. Valuation of Portfolio Securities and Other Assets.
Except as otherwise required by any applicable law or
regulation of any regulatory agency having jurisdiction
over the activities of the corporation, the corporation
shall determine the value of its portfolio securities
and other assets as follows:
(a) securities for which market quotations are readily
available shall be valued at current market value
determined in such manner as the board of directors may
from time to time prescribe;
(b) all other securities and assets shall be valued at
amounts deemed best to reflect their fair value as
determined in good faith by or under the supervision of
such persons and at such time or times as shall from
time to time be prescribed by the board of directors;
All quotations, sale prices, bid and asked prices and other
information shall be obtained from such sources as the persons
making such determination believe to be reliable, and any
determination of net asset value based thereon shall be
conclusive.
<PAGE>
ARTICLE IX.
PERIOD OF EMERGENCY
During any period of emergency, the board of directors, at its option, may
suspend the computation of asset value for the purpose of issuing or redeeming
it stock, and may suspend any obligation to accept payments for the acquisition
of additional stock of the corporation and may suspend the obligation of the
corporation to redeem stock. A period of emergency is defined to be:
(a) A period during which the New York Stock Exchange is closed other
than customary weekend and holiday closings, or during which trading
on the New York Stock Exchange is restricted;
(b) A period during which disposal by the corporation of securities
owned by it is not reasonably practicable, or during which it is not
reasonably practicable for the corporation to fairly to determine
the value of its net assets; or
(c) Such other periods as the Securities and Exchange Commission
pursuant to the provisions of the Investment Company Act of 1940 may
by order declare as an emergency period or periods.
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.
<PAGE>
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.
<PAGE>
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.
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made this 30th day of April, 1993, in Denver, Colorado,
by and between INVESCO Funds Group, Inc. (the "Adviser"), a Delaware
corporation, and INVESCO Income Funds, Inc., a Maryland Corporation (the
"Fund").
W I T N E S S E T H :
WHEREAS, the Fund is a corporation organized under the laws of
the State of Maryland; and
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), as a diversified, open-end management
investment company and has one class of shares which is divided into three
series (the "Shares"), each representing an interest in a separate portfolio of
investments (such series initially being the INVESCO Select Income Fund; INVESCO
High Yield Fund; and INVESCO U.S. Government Securities Fund (the
"Portfolios")); and
WHEREAS, the Fund desires that the Adviser manage its investment
operations and the Adviser desires to manage said operations;
NOW, THEREFORE, in consideration of these premises and of the mutual
covenants and agreements hereinafter contained, the parties hereto agree as
follows:
1. Investment Management Services. The Adviser hereby
agrees to manage the investment operations of the Fund's
three Portfolios, subject to the terms of this Agreement
and to the supervision of the Fund's directors (the
"Directors"). The Adviser agrees to perform, or arrange
for the performance of, the following specific services
for the Fund:
(a) to manage the investment and reinvestment of all the
assets, now or hereafter acquired, of the Fund's
three Portfolios;
(b) to maintain a continuous investment program for the
Fund's three Portfolios, consistent with (i) the
Portfolios' investment policies as set forth in the
Fund's Articles of Incorporation, Bylaws, and
Registration Statement, as from time to time
amended, under the Investment Company Act of 1940,
as amended (the "1940 Act"), and in any prospectus
and/or statement of additional information of the
Fund or any Portfolio of the Fund, as from time to
time amended and in use under the Securities Act of
1933, as amended, and (ii) the Fund's status as a
<PAGE>
regulated investment company under the Internal
Revenue Code of 1986, as amended;
(c) to determine what securities are to be purchased or sold for
the Fund's three Portfolios, unless otherwise directed by the
Directors of the Fund, and to execute transactions
accordingly;
(d) to provide to the Fund's three Portfolios the benefit of all
of the investment analyses and research, the reviews of
current economic conditions and trends, and the consideration
of long-range investment policy now or hereafter generally
available to investment advisory customers of the Adviser;
(e) to determine what portion of the Fund's three Portfolios
should be invested in the various types of securities
authorized for purchase by the Fund;
(f) to make recommendations as to the manner in which voting
rights, rights to consent to Fund and/or Portfolio action and
any other rights pertaining to the Portfolios' securities
shall be exercised; and
(g) to calculate the net asset value of the Fund and
each Portfolio, as applicable, as required by the
1940 Act, subject to such procedures as may be
established from time to time by the Fund's
Directors, based upon the information provided to
the Adviser by the Fund or by the custodian,
co-custodian or sub-custodian of the Fund's or any
of the Portfolios' assets (the "Custodian") or such
other source as designated by the Directors from
time to time.
With respect to execution of transactions for the Fund's three
Portfolios, the Adviser shall place, or arrange for the placement
of, all orders for the purchase or sale of portfolio securities with
brokers or dealers selected by the Adviser. In connection with the
selection of such brokers or dealers and the placing of such orders,
the Adviser is directed at all times to obtain for the Fund's three
Portfolios the most favorable execution and price; after fulfilling
this primary requirement of obtaining the most favorable execution
and price, the Adviser is hereby expressly authorized to consider as
a secondary factor in selecting brokers or dealers with which such
orders may be placed whether such firms furnish statistical,
research and other information or services to the Adviser. Receipt
by the Adviser of any such statistical or other information and
services should not be deemed to give rise to any requirement for
<PAGE>
adjustment of the advisory fee payable pursuant to paragraph 4
hereof. The Adviser may follow a policy of considering sales of
shares of the Fund as a factor in the selection of broker/dealers
to execute portfolio transactions, subject to the requirements of
best execution discussed above.
The Adviser shall for all purposes herein provided be deemed to be
an independent contractor.
2. Allocation of Costs and Expenses. The Adviser shall
reimburse the Fund monthly for any salaries paid by the
Fund to officers, Directors, and full-time employees of
the Fund who also are officers, general partners or
employees of the Adviser or its affiliates. Except for
such subaccounting, recordkeeping, and administrative
services which are to be provided by the Adviser to the
Fund under the Administrative Services Agreement between
the Fund and the Adviser dated April 30, 1993, which was
approved on April 21, 1993, by the Fund's board of
directors, including all of the independent directors, at
the Fund's request the Adviser shall also furnish to the
Fund, at the expense of the Adviser, such competent
executive, statistical, administrative, internal
accounting and clerical services as may be required in
the judgment of the Directors of the Fund. These
services will include, among other things, the
maintenance (but not preparation) of the Fund's accounts
and records, and the preparation (apart from legal and
accounting costs) of all requisite corporate documents
such as tax returns and reports to the Securities and
Exchange Commission and Fund shareholders. The Adviser
also will furnish, at the Adviser's expense, such office
space, equipment and facilities as may be reasonably
requested by the Fund from time to time.
Except to the extent expressly assumed by the Adviser herein and
except to the extent required by law to be paid by the Adviser, the
Fund shall pay all costs and expenses in connection with the
operations and organization of the Fund. Without limiting the
generality of the foregoing, such costs and expenses payable by the
Fund include the following:
(a) all brokers' commissions, issue and transfer taxes, and other
costs chargeable to the Fund and any Portfolio in connection
with securities transactions to which the Fund or any
Portfolio is a party or in connection with securities owned by
the Fund's three Portfolios;
<PAGE>
(b) the fees, charges and expenses of any independent
public accountants, custodian, depository, dividend
disbursing agent, dividend reinvestment agent,
transfer agent, registrar, independent pricing
services and legal counsel for the Fund;
(c) the interest on indebtedness, if any, incurred by
the Fund or any of the Fund's three Portfolios;
(d) the taxes, including franchise, income, issue, transfer,
business license, and other corporate fees payable by the Fund
or any Portfolio to federal, state, county, city, or other
governmental agents;
(e) the fees and expenses involved in maintaining the registration
and qualification of the Fund and of its shares under laws
administered by the Securities and Exchange Commission or
under other applicable regulatory requirements;
(f) the compensation and expenses of its Directors;
(g) the costs of printing and distributing reports, notices of
shareholders' meetings, proxy statements, dividend notices,
prospectuses, statements of additional information and other
communications to the Fund's shareholders, as well as all
expenses of shareholders' meetings and Directors' meetings;
(h) all costs, fees or other expenses arising in
connection with the organization and filing of the
Fund's Articles of Incorporation, including its
initial registration and qualification under the
1940 Act and under the Securities Act of 1933, as
amended, the initial determination of its tax status
and any rulings obtained for this purpose, the
initial registration and qualification of its
securities under the laws of any state and the
approval of the Fund's operations by any other
federal or state authority;
(i) the expenses of repurchasing and redeeming shares of
the Fund;
(j) insurance premiums;
(k) the costs of designing, printing, and issuing
certificates representing shares of beneficial
interest of the Fund's three Portfolios;
<PAGE>
(l) extraordinary expenses, including fees and
disbursements of Fund counsel, in connection with
litigation by or against the Fund or any Portfolio;
(m) premiums for the fidelity bond maintained by the Fund pursuant
to Section 17(g) of the 1940 Act and rules promulgated
thereunder (except for such premiums as may be allocated to
the Adviser as an insured thereunder);
(n) association and institute dues; and
(o) the expenses, if any, of distributing shares of the Fund paid
by the Fund pursuant to a Plan and Agreement of Distribution
adopted under Rule 12b-1 of the Investment Company Act of
1940.
3. Use of Affiliated Companies. In connection with the
rendering of the services required to be provided by the
Adviser under this Agreement, the Adviser may, to the
extent it deems appropriate and subject to compliance
with the requirements of applicable laws and regulations,
and upon receipt of written approval of the Fund, make
use of its affiliated companies and their employees;
provided that the Adviser shall supervise and remain
fully responsible for all such services in accordance
with and to the extent provided by this Agreement and
that all costs and expenses associated with the providing
of services by any such companies or employees and
required by this Agreement to be borne by the Adviser
shall be borne by the Adviser or its affiliated
companies.
4. Compensation of the Adviser. For the services to be
rendered and the charges and expenses to be assumed by
the Adviser hereunder, the Fund shall pay to the Adviser
an advisory fee which will be computed on a daily basis
and paid as of the last day of each month, using for each
daily calculation the most recently determined net asset
value of each of the three Portfolios of the Fund, as
determined by valuations made in accordance with the
Fund's procedure for calculating its net asset value as
described in the Fund's Prospectus and/or Statement of
Additional Information. The advisory fee to the Adviser
with respect to each of the Portfolios designated as
INVESCO Select Income Fund and INVESCO U.S. Government
Securities Fund shall be computed at the following annual
rates: 0.55% of such Portfolio's average net assets up
to $300 million; 0.45% of such Portfolio's average net
assets in excess of $300 million but not more than $500
million; and 0.35% of such Portfolio's average net assets
in excess of $500 million. The advisory fee to the
<PAGE>
Adviser with respect to the Portfolio designated as INVESCO High
Yield Fund shall be computed at the following annual rates: 0.50% of
such Portfolio's average net assets up to $300 million; 0.40% of
such Portfolio's average net assets in excess of $300 million but
not more than $500 million; and 0.30% of such Portfolio's average
net assets in excess of $500 million.
During any period when the determination of the Fund's net asset
value is suspended by the Directors of the Fund, the net asset value
of a share of the Fund as of the last business day prior to such
suspension shall, for the purpose of this Paragraph 4, be deemed to
be the net asset value at the close of each succeeding business day
until it is again determined. However, no such fee shall be paid to
the Adviser with respect to any assets of the Fund or any Portfolio
thereof which may be invested in any other investment company for
which the Adviser serves as investment adviser. The fee provided for
hereunder shall be prorated in any month in which this Agreement is
not in effect for the entire month.
If, in any given year, the sum of a Portfolio's expenses exceeds the
most restrictive state imposed annual expense limitation, the
Adviser will be required to reimburse that Portfolio for such excess
expenses promptly. Interest, taxes and extraordinary items such as
litigation costs are not deemed expenses for purposes of this
paragraph and shall be borne by the Fund or Portfolio in any event.
Expenditures, including costs incurred in connection with the
purchase or sale of portfolio securities, which are capitalized in
accordance with generally accepted accounting principles applicable
to investment companies, are accounted for as capital items and
shall not be deemed to be expenses for purposes of this paragraph.
5. Avoidance of Inconsistent Positions and Compliance with
Laws. In connection with purchases or sales of securities for
the investment portfolio of the Fund's three Portfolios,
neither the Adviser nor its officers or employees, will
act as a principal or agent for any party other than the
Fund's three Portfolios or receive any commissions. The
Adviser will comply with all applicable laws in acting
hereunder including, without limitation, the 1940 Act;
the Investment Advisers Act of 1940, as amended; and all
rules and regulations duly promulgated under the
foregoing.
6. Duration and Termination. This Agreement shall become
effective as of the effective date of the reorganization
<PAGE>
of Financial Bond Shares, Inc. into INVESCO Income Funds, Inc.
Thereafter, unless sooner terminated as hereinafter provided, this
Agreement shall remain in force for an initial term ending two years
from the date of execution, and from year to year thereafter, but
only as long as such continuance is specifically approved at least
annually (i) by a vote of a majority of the outstanding voting
securities of the three Portfolios of the Fund or by the Directors
of the Fund, and (ii) by a majority of the Directors of the Fund who
are not interested persons of the Adviser or the Fund by votes cast
in person at a meeting called for the purpose of voting on such
approval.
This Agreement may, on 60 days' prior written notice, be terminated
without the payment of any penalty, by the Directors of the Fund, or
by the vote of a majority of the outstanding voting securities of
the Fund's three Portfolios, as the case may be, or by the Adviser.
This Agreement shall immediately terminate in the event of its
assignment, unless an order is issued by the Securities and Exchange
Commission conditionally or unconditionally exempting such
assignment from the provisions of Section 15(a) of the 1940 Act, in
which event this Agreement shall remain in full force and effect
subject to the terms and provisions of said order. In interpreting
the provisions of this paragraph 6, the definitions contained in
Section 2(a) of the 1940 Act and the applicable rules under the 1940
Act (particularly the definitions of "interested person,"
"assignment" and "vote of a majority of the outstanding voting
securities") shall be applied.
The Adviser agrees to furnish to the Directors of the Fund such
information on an annual basis as may reasonably be necessary to
evaluate the terms of this Agreement.
Termination of this Agreement shall not affect the right of the
Adviser to receive payments on any unpaid balance of the
compensation described in paragraph 3 earned prior to such
termination.
7. Non-Exclusive Services. The Adviser shall, during the
term of this Agreement, be entitled to render investment
advisory services to others, including, without
limitation, other investment companies with similar
objectives to those of the Fund's three Portfolios. The
Adviser may, when it deems such to be advisable,
aggregate orders for its other customers together with
any securities of the same type to be sold or purchased
for the Fund's three Portfolios in order to obtain best
execution and lower brokerage commissions. In such
<PAGE>
event, the Adviser shall allocate the shares so purchased or sold,
as well as the expenses incurred in the transaction, in the manner
it considers to be most equitable and consistent with its fiduciary
obligations to the Fund's three Portfolios and the Adviser's other
customers.
8. Liability. The Adviser shall have no liability to the
Fund or any Portfolio or to the Fund's shareholders or
creditors, for any error of judgment, mistake of law, or
for any loss arising out of any investment, nor for any
other act or omission, in the performance of its
obligations to the Fund or any Portfolio not involving
willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties
hereunder.
9. Miscellaneous Provisions.
Notice. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other
party at such address as such other party may designate for the
receipt of such notice.
Amendments Hereof. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument
in writing signed by the Fund and the Adviser, and no material
amendment of this Agreement shall be effective unless approved by
(1) the vote of a majority of the Directors of the Fund, including a
majority of the Directors who are not parties to this Agreement or
interested persons of any such party cast in person at a meeting
called for the purpose of voting on such amendment, and (2) the vote
of a majority of the outstanding voting securities of any of the
Fund's three Portfolios as to which such amendment is applicable;
provided, however, that this paragraph shall not prevent any
immaterial amendment(s) to this Agreement, which amendment(s) may be
made without shareholder approval, if such amendment(s) are made
with the approval of (1) the Directors and (2) a majority of the
Directors of the Fund who are not interested persons of the Adviser
or the Fund.
Severability. Each provision of this Agreement is intended to be
severable. If any provision of this Agreement shall be held illegal
or made invalid by a court decision, statute, rule or otherwise,
such illegality or invalidity shall not affect the validity or
enforceability of the remainder of this Agreement.
<PAGE>
Headings. The headings in this Agreement are inserted for
convenience and identification only and are in no way intended to
describe, interpret, define or limit the size, extent or intent of
this Agreement or any provision hereof.
Applicable Law. This Agreement shall be construed in accordance with
the laws of the State of Colorado and the applicable provisions of
the 1940 Act. To the extent that the applicable laws of the State of
Colorado, or any of the provisions herein, conflict with applicable
provisions of the 1940 Act, the latter shall control.
IN WITNESS WHEREOF, the Adviser and the Fund each has caused this
Agreement to be duly executed on its behalf by an officer thereunto duly
authorized, the day and year first above written.
INVESCO INCOME FUNDS, INC.
ATTEST:
By: /s/ John M. Butler
------------------------------
John M. Butler
/s/ Glen A. Payne President
- ----------------------------
Glen A. Payne
Secretary
INVESCO FUNDS GROUP, INC.
ATTEST:
By: /s/ Dan J. Hesser
-----------------------------
Dan J. Hesser
/s/ Glen A. Payne President
- ----------------------------
Glen A. Payne
Secretary
Amendment to Investment Advisory Agreement
This is an Amendment to the Investment Advisory Agreement made and entered
into between INVESCO Income Funds, Inc., a Maryland corporation (the "Company"),
and INVESCO Funds Group, Inc., a Delaware corporation ("IFG"), as of the 30th
day of April, 1993 (the "Agreement").
WHEREAS, the Company desires to have IFG perform investment advisory,
statistical, research, and certain administrative and clerical services with
respect to management of the assets of the Company allocable to the INVESCO
Short-Term Bond Fund of the Company, and IFG is willing and able to perform such
services on the terms and conditions set forth in the Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in the Agreement, it is agreed that the terms and conditions of the
Agreement shall be applicable to the Company's assets allocable to the INVESCO
Short-Term Bond Fund, to the same extent as if the INVESCO Short-Term Bond Fund
were to be added to the definition of "Portfolios" as utilized in the Agreement,
and that INVESCO Short-Term Bond Fund shall pay IFG a fee for services provided
to it by IFG under the Agreement determined on the same basis as the fee to IFG
paid by the INVESCO High Yield Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to
Agreement on this day of July, 1993.
INVESCO INCOME FUNDS, INC.
By: /s/ Ronald L. Grooms
--------------------------
Ronald L. Grooms, Treasurer
ATTEST:
/s/ Glen A. Payne
- ---------------------------------
Glen A. Payne, Secretary
(CORPORATE SEAL) INVESCO FUNDS GROUP, INC.
By: /s/ Dan J. Hesser
---------------------------
ATTEST: Dan J. Hesser, President
/s/ Glen A. Payne
- ---------------------------------
Glen A. Payne, Secretary
(CORPORATE SEAL)
SUB-ADVISORY AGREEMENT
AGREEMENT made this 30th day of April, 1993, by and between INVESCO Funds
Group, Inc. ("INVESCO"), a Delaware corporation, and INVESCO Trust Company, a
Colorado corporation ("the Sub-Adviser").
W I T N E S S E T H:
WHEREAS, INVESCO INCOME FUNDS, INC. (the "Company") is engaged
in business as a diversified, open-end management investment company
registered under the Investment Company Act of 1940, as amended
(hereinafter referred to as the "Investment Company Act") and has
one class of shares (the "Shares"), which is divided into series,
each representing an interest in a separate portfolio of
investments, with such series being designated the INVESCO Select
Income Fund; the INVESCO High Yield Fund; and the INVESCO U.S.
Government Securities Fund (collectively, the "Portfolios"); and
WHEREAS, INVESCO and the Sub-Adviser are engaged in rendering investment
advisory services and are registered as investment advisers under the Investment
Advisers Act of 1940; and
WHEREAS, INVESCO has entered into an Investment Advisory Agreement with
the Company (the "INVESCO Investment Advisory Agreement"), pursuant to which
INVESCO is required to provide investment advisory services to the Company, and,
upon receipt of written approval of the Company, is authorized to retain
companies which are affiliated with INVESCO to provide such services; and
WHEREAS, the Sub-Adviser is willing to provide investment advisory
services to the Company on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, INVESCO and the Sub-Adviser hereby agree as follows:
ARTICLE I
DUTIES OF THE SUB-ADVISER
INVESCO hereby employs the Sub-Adviser to act as investment adviser to the
Company and to furnish the investment advisory services described below, subject
to the broad supervision of INVESCO and Board of Directors of the Company, for
the period and on the terms and conditions set forth in this Agreement. The
Sub-Adviser hereby accepts such assignment and agrees during such period, at its
own expense, to render such services and to assume the obligations herein set
forth for the compensation provided for herein. The Sub-Adviser shall for all
purposes herein be deemed to be an independent contractor and, unless otherwise
<PAGE>
expressly provided or authorized herein, shall have no authority to act for or
represent the Company in any way or otherwise be deemed an agent of the Company.
The Sub-Adviser hereby agrees to manage the investment operations of the
Funds, subject to the supervision of the Company's directors (the "Directors")
and INVESCO. Specifically, the Sub-Adviser agrees to perform the following
services:
(a) to manage the investment and reinvestment of all the
assets, now or hereafter acquired, of the Funds, and to
execute all purchases and sales of portfolio securities;
(b) to maintain a continuous investment program for the
Funds, consistent with (i) the Funds' investment policies
as set forth in the Company's Articles of Incorporation,
Bylaws, and Registration Statement, as from time to time
amended, under the Investment Company Act of 1940, as
amended (the "1940 Act"), and in any prospectus and/or
statement of additional information of the Funds, as from
time to time amended and in use under the Securities Act
of 1933, as amended, and (ii) the Company's status as a
regulated investment company under the Internal Revenue
Code of 1986, as amended;
(c) to determine what securities are to be purchased or sold for the
Funds, unless otherwise directed by the Directors of the Company or
INVESCO, and to execute transactions accordingly;
(d) to provide to the Funds the benefit of all of the investment
analysis and research, the reviews of current economic conditions
and trends, and the consideration of long-range investment policy
now or hereafter generally available to investment advisory
customers of the Sub-Adviser;
(e) to determine what portion of the Funds should be invested
in the various types of securities authorized for
purchase by the Funds; and
(f) to make recommendations as to the manner in which voting rights,
rights to consent to Funds action and any other rights pertaining to
the Funds' portfolio securities shall be exercised.
With respect to execution of transactions for the Funds, the Sub-Adviser
is authorized to employ such brokers or dealers as may, in the Sub-Adviser's
best judgment, implement the policy of the Funds to obtain prompt and reliable
execution at the most favorable price obtainable. In assigning an execution or
negotiating the commission to be paid therefor, the Sub-Adviser is authorized to
<PAGE>
consider the full range and quality of a broker's services which benefit the
Funds, including but not limited to research and analytical capabilities,
reliability of performance, and financial soundness and responsibility. Research
services prepared and furnished by brokers through which the Sub-Adviser effects
securities transactions on behalf of the Funds may be used by the Sub-Adviser in
servicing all of its accounts, and not all such services may be used by the
Sub-Adviser in connection with the Funds. In the selection of a broker or dealer
for execution of any negotiated transaction, the Sub-Adviser shall have no duty
or obligation to seek advance competitive bidding for the most favorable
negotiated commission rate for such transaction, or to select any broker solely
on the basis of its purported or "posted" commission rate for such transaction,
provided, however, that the Sub-Adviser shall consider such "posted" commission
rates, if any, together with any other information available at the time as to
the level of commissions known to be charged on comparable transactions by other
qualified brokerage firms, as well as all other relevant factors and
circumstances, including the size of any contemporaneous market in such
securities, the importance to the Funds of speed, efficiency, and
confidentiality of execution, the execution capabilities required by the
circumstances of the particular transactions, and the apparent knowledge or
familiarity with sources from or to whom such securities may be purchased or
sold. Where the commission rate reflects services, reliability and other
relevant factors in addition to the cost of execution, the Sub-Adviser shall
have the burden of demonstrating that such expenditures were bona fide and for
the benefit of the Funds.
ARTICLE II
ALLOCATION OF CHARGES AND EXPENSES
The Sub-Adviser assumes and shall pay for maintaining the staff and
personnel necessary to perform its obligations under this Agreement, and shall,
at its own expense, provide the office space, equipment and facilities necessary
to perform its obligations under this Agreement. Except to the extent expressly
assumed by the Sub-Adviser herein and except to the extent required by law to be
paid by the Sub-Adviser, INVESCO and/or the Company shall pay all costs and
expenses in connection with the operations of the Funds.
ARTICLE III
COMPENSATION OF THE SUB-ADVISER
For the services rendered, facilities furnished, and expenses assumed by
the Sub-Adviser, INVESCO shall pay to the Sub-Adviser a fee, computed daily and
paid as of the last day of each month, using for each daily calculation the most
recently determined net asset value of the Funds, as determined by a valuation
made in accordance with the Fund's procedures for calculating its net asset
value as described in the Fund's Prospectus and/or Statement of Additional
<PAGE>
Information. The advisory fee to the Sub-Adviser shall be computed at the
annual rate of 0.25% of each Fund's daily net assets up to $200 million and
0.20% of each Fund's daily net assets in excess of $200 million. During any
period when the determination of the Funds' net asset value is suspended by the
Directors of the Funds, the net asset value of a share of the Funds as of the
last business day prior to such suspension shall, for the purpose of this
Article III, be deemed to be the net asset value at the close of each succeeding
business day until it is again determined. However, no such fee shall be paid to
the Sub-Adviser with respect to any assets of the Funds which may be invested in
any other investment company for which the Sub-Adviser serves as investment
adviser or sub-adviser. The fee provided for hereunder shall be prorated in any
month in which this Agreement is not in effect for the entire month. The
Sub-Adviser shall be entitled to receive fees hereunder only for such periods as
the INVESCO Investment Advisory Agreement remains in effect.
ARTICLE IV
ACTIVITIES OF THE SUB-ADVISER
The services of the Sub-Adviser to the Funds are not to be deemed to be
exclusive, the Sub-Adviser and any person controlled by or under common control
with the Sub-Adviser (for purposes of this Article IV referred to as
"affiliates") being free to render services to others. It is understood that
directors, officers, employees and shareholders of the Funds are or may become
interested in the Sub-Adviser and its affiliates, as directors, officers,
employees and shareholders or otherwise and that directors, officers, employees
and shareholders of the Sub-Adviser, INVESCO and their affiliates are or may
become interested in the Funds as directors, officers and employees.
ARTICLE V
AVOIDANCE OF INCONSISTENT POSITIONS AND COMPLIANCE WITH APPLICABLE LAWS
In connection with purchases or sales of securities for the investment
portfolios of the Funds, neither the Sub-Adviser nor any of its directors,
officers or employees will act as a principal or agent for any party other than
the Funds or receive any commissions. The Sub-Adviser will comply with all
applicable laws in acting hereunder including, without limitation, the 1940 Act;
the Investment Advisers Act of 1940, as amended; and all rules and regulations
duly promulgated under the foregoing.
<PAGE>
ARTICLE VI
DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall become effective as of the effective date of the
reorganization of Financial Bond Shares, Inc. into INVESCO Income Funds, Inc.
Thereafter, this Agreement shall remain in force for an initial term of two
years from the date of execution, and from year to year thereafter until its
termination in accordance with this Article VI, but only so long as such
continuance is specifically approved at least annually by (i) the Directors of
the Funds, or by the vote of a majority of the outstanding voting securities of
the Funds, and (ii) a majority of those Directors who are not parties to this
Agreement or interested persons of any such party cast in person at a meeting
called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by INVESCO, the Funds by vote of the Directors of the Company, or by
vote of a majority of the outstanding voting securities of the Funds, or by the
Sub-Adviser. A termination by INVESCO or the Sub-Adviser shall require sixty
days' written notice to the other party and to the Company, and a termination by
the Company shall require such notice to each of the parties. This Agreement
shall automatically terminate in the event of its assignment to the extent
required by the Investment Company Act of 1940 and the Rules thereunder.
The Sub-Adviser agrees to furnish to the Directors of the Company such
information on an annual basis as may reasonably be necessary to evaluate the
terms of this Agreement.
Termination of this Agreement shall not affect the right of the
Sub-Adviser to receive payments on any unpaid balance of the compensation
described in Article III hereof earned prior to such termination.
ARTICLE VII
AMENDMENTS OF THIS AGREEMENT
No provision of this Agreement may be orally changed or discharged, but
may only be modified by an instrument in writing signed by the Sub-Adviser and
INVESCO. In addition, no amendment to this Agreement shall be effective unless
approved by (1) the vote of a majority of the Directors of the Company,
including a majority of the Directors who are not parties to this Agreement or
interested persons of any such party cast in person at a meeting called for the
purpose of voting on such amendment and (2) the vote of a majority of the
outstanding voting securities of the Funds (other than an amendment which can be
effective without shareholder approval under applicable law).
<PAGE>
ARTICLE VIII
DEFINITIONS OF CERTAIN TERMS
In interpreting the provisions of this Agreement, the terms "vote of a
majority of the outstanding voting securities," "assignments," "affiliated
person" and "interested person," when used in this Agreement, shall have the
respective meanings specified in the Investment Company Act and the Rules and
Regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under said Act.
ARTICLE IX
GOVERNING LAW
This Agreement shall be construed in accordance with the laws of the State
of Colorado and the applicable provisions of the Investment Company Act. To the
extent that the applicable laws of the State of Colorado, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
ARTICLE X
MISCELLANEOUS
Notice. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for the receipt of such notice.
Severability. Each provision of this Agreement is intended to be
severable. If any provision of this Agreement shall be held illegal or made
invalid by a court decision, statute, rule or otherwise, such illegality or
invalidity shall not affect the validity or enforceability of the remainder of
this Agreement.
Headings. The headings in this Agreement are inserted for convenience and
identification only and are in no way intended to describe, interpret, define or
limit the size, extent or intent of this Agreement or any provision hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
INVESCO FUNDS GROUP, INC.
ATTEST:
By: /s/ Dan J. Hesser
-------------------------------
Dan J. Hesser
/s/ Glen A. Payne President
- ----------------------------
Glen A. Payne
Secretary
INVESCO TRUST COMPANY
ATTEST:
By: /s/ R. Dalton Sim
-------------------------------
R. Dalton Sim
/s/ Glen A. Payne President
- ----------------------------
Glen A. Payne
Secretary
Amendment to Sub-Advisory Agreement
This is an Amendment to the Sub-Advisory Agreement made and entered into
between INVESCO Trust Company, a Colorado corporation (the "Trust Company"), and
INVESCO Funds Group, Inc., a Delaware corporation ("IFG"), as of the 30th day of
April, 1993 (the "Sub-Agreement").
WHEREAS, IFG has entered into an Investment Advisory Agreement with the
INVESCO Income Funds, Inc. (the "Company"), pursuant to which IFG is required to
provide investment advisory services to specific Funds making up the Company,
and, upon receipt of written approval of the Company, is authorized to retain
companies which are affiliated with IFG to provide such services; and
WHEREAS, the Company and IFG desire to have the Trust Company perform
investment advisory services with respect to management of the assets of the
Company allocable to the INVESCO Short-Term Bond Fund of the Company, and the
Trust Company is willing and able to perform such services on the terms and
conditions set forth in the Sub-Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in the Sub-Agreement, it is agreed that the terms and conditions of
the Sub- Agreement shall be applicable to the Company's assets allocable to the
INVESCO Short- Term Bond Fund, to the same extent as if the INVESCO Short-Term
Bond Fund were to be added to the definition of "Portfolios" as utilized in the
Sub-Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to
Agreement on this day of July, 1993.
INVESCO TRUST COMPANY
By /s/ Ronald L. Grooms
--------------------
Ronald L. Grooms, Sr. Vice President
ATTEST:
/s/ Glen A. Payne
- -----------------
Glen A. Payne, Secretary
(CORPORATE SEAL)
INVESCO FUNDS GROUP, INC.
By /s/ Dan J. Hesser
-----------------
ATTEST: Dan J. Hesser, President
/s/ Glen A. Payne
- -----------------
Glen A. Payne, Secretary
(CORPORATE SEAL)
AMENDMENT TO SUB-ADVISORY AGREEMENT
This is an Amendment to the Sub-Advisory Agreement made and entered into
between INVESCO Trust Company, a Colorado corporation (the "Trust Company"), and
INVESCO Funds Group, Inc., a Delaware corporation ("IFG"), as of the 30th day of
April, 1993 (the "Sub- Agreement").
WHEREAS, IFG has entered into an Investment Advisory Agreement with the
INVESCO Income Funds, Inc. (the "Company"), pursuant to which IFG is required to
provide investment advisory services to specific Funds making up the Company,
and, upon receipt of written approval of the Company, is authorized to retain
companies which are affiliated with IFG to provide such services; and
WHEREAS, the Company and IFG desires to have the Trust Company perform
investment advisory services with respect to management of the assets of the
Company allocable to the INVESCO Short-Term Bond Fund of the Company, and the
Trust Company is willing and able to perform such services on the terms and
conditions set forth in the Sub-Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in the Sub-Agreement, it is agreed that the terms and conditions of
the Sub-Agreement shall be applicable to the Company's assets allocable to the
INVESCO Short-Term Bond Fund, to the same extent as if the INVESCO Short-Term
Bond Fund were to be added to the definition of "Portfolios" as utilized in the
SubAgreement, and that IFG shall pay the Trust Company a fee for services
provided to the INVESCO Short-Term Bond Fund by the Trust Company under the
Sub-Agreement based upon the average daily value of such Fund's net assets at
the following annual rates: 0.25% of the first $300 million of such Fund's
average net assets; 0.20% of the next $200 million of such Fund's average net
assets; and 0.15% of such Fund's average net assets in excess of $500 million.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Sub-Agreement on this 29th day of September, 1993.
INVESCO TRUST COMPANY
By: /s/ Ronald L. Grooms
---------------------------
Ronald L. Grooms, Senior
Vice President
ATTEST:
/s/ Glen A. Payne
- ----------------------------
Glen A. Payne, Secretary
(CORPORATE SEAL)
INVESCO FUNDS GROUP, INC.
By: /s/ Dan J. Hesser
-----------------------------
Dan J. Hesser, President
ATTEST:
/s/ Glen A. Payne
- ----------------------------
Glen A. Payne, Secretary
(CORPORATE SEAL)
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made this 30th day of April, 1993 between INVESCO INCOME
FUNDS, INC., a Maryland corporation (the "Fund"), and INVESCO FUNDS GROUP, INC.,
a Delaware corporation (the "Underwriter").
W I T N E S S E T H:
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), as a diversified, open-end management
investment company and has one class of shares (the "Shares"), which is divided
into three series, and may be divided into additional series (the "Series"),
each representing an interest in a separate portfolio of investments, and it is
in the interest of the Fund to offer the Shares for sale continuously; and
WHEREAS, the Underwriter is engaged in the business of selling shares of
investment companies either directly to investors or through other securities
dealers; and
WHEREAS, the Fund and the Underwriter wish to enter into an agreement with
each other with respect to the continuous offering of the Shares of each Series
in order to promote growth of the Fund and facilitate the distribution of the
Shares;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto as follows:
1. The Fund hereby appoints the Underwriter its agent for
the distribution of Shares of each Series in
jurisdictions wherein such Shares may legally be offered
for sale; provided, however, that the Fund in its
absolute discretion may (a) issue or sell Shares of each
Series directly to purchasers, or (b) issue or sell
Shares of a particular Series to the shareholders of any
other Series or to the shareholders of any other
investment company, for which the Underwriter or any
affiliate thereof shall act as exclusive distributor, who
wish to exchange all or a portion of their investment in
Shares of such Series or in shares of such other
investment company for the Shares of the particular
Series. Notwithstanding any other provision hereof, the
Fund may terminate, suspend or withdraw the offering of
Shares whenever, in its sole discretion, it deems such
action to be desirable. The Fund reserves the right to
reject any subscription in whole or in part for any
reason.
2. The Underwriter hereby agrees to serve as agent for the
distribution of the Shares and agrees that it will use
its best efforts with reasonable promptness to sell such
<PAGE>
part of the authorized Shares remaining unissued as from time to
time shall be effectively registered under the Securities Act of
1933, as amended (the "1933 Act"), at such prices and on such terms
as hereinafter set forth, all subject to applicable federal and
state securities laws and regulations. Nothing herein shall be
construed to prohibit the Underwriter from engaging in other related
or unrelated businesses.
3. In addition to serving as the Fund's agent in the
distribution of the Shares, the Underwriter shall also
provide to the holders of the Shares certain maintenance,
support or similar services ("Shareholder Services").
Such services shall include, without limitation,
answering routine shareholder inquiries regarding the
Fund, assisting shareholders in considering whether to
change dividend options and helping to effectuate such
changes, arranging for bank wires, and providing such
other services as the Fund may reasonably request from
time to time. It is expressly understood that the
Underwriter or the Fund may enter into one or more
agreements with third parties pursuant to which such
third parties may provide the Shareholder Services
provided for in this paragraph. Nothing herein shall be
construed to impose upon the Underwriter any duty or
expense in connection with the services of any registrar,
transfer agent or custodian appointed by the Fund, the
computation of the asset value or offering price of
Shares, the preparation and distribution of notices of
meetings, proxy soliciting material, annual and periodic
reports, dividends and dividend notices, or any other
responsibility of the Fund.
4. Except as otherwise specifically provided for in this
Agreement, the Underwriter shall sell the Shares directly
to purchasers, or through qualified broker-dealers or
others, in such manner, not inconsistent with the
provisions hereof and the then effective Registration
Statement of the Fund under the 1933 Act (the
"Registration Statement") and related Prospectus (the
"Prospectus") and Statement of Additional Information
("SAI") of the Fund as the Underwriter may determine from
time to time; provided that no broker-dealer or other
person shall be appointed or authorized to act as agent
of the Fund without the prior consent of the directors
(the "Directors") of the Fund. The Underwriter will
require each broker-dealer to conform to the provisions
hereof and of the Registration Statement (and related
Prospectus and SAI) at the time in effect under the 1933
Act with respect to the public offering price of the
Shares of any Series. The Fund will have no obligation
to pay any commissions or other remuneration to such
broker-dealers.
<PAGE>
5. The Shares of each Series offered for sale or sold by the
Underwriter shall be offered or sold at the net asset
value per share determined in accordance with the then
current Prospectus and/or SAI relating to the sale of the
Shares of the appropriate Series except as departure from
such prices shall be permitted by the then current
Prospectus and/or SAI of the Fund, in accordance with
applicable rules and regulations of the Securities and
Exchange Commission. The price the Fund shall receive
for the Shares of each Series purchased from the Fund
shall be the net asset value per share of such Share,
determined in accordance with the Prospectus and/or SAI
applicable to the sale of the Shares of such Series.
6. Except as may be otherwise agreed to by the Fund, the
Underwriter shall be responsible for issuing and
delivering such confirmations of sales made by it
pursuant to this Agreement as may be required; provided,
however, that the Underwriter or the Fund may utilize the
services of other persons or entities believed by it to
be competent to perform such functions. Shares shall be
registered on the transfer books of the Fund in such
names and denominations as the Underwriter may specify.
7. The Fund will execute any and all documents and furnish
any and all information which may be reasonably necessary
in connection with the qualification of the Shares for
sale (including the qualification of the Fund as a
broker-dealer where necessary or advisable) in such
states as the Underwriter may reasonably request (it
being understood that the Fund shall not be required
without its consent to comply with any requirement which
in the opinion of the Directors of the Fund is unduly
burdensome). The Underwriter, at its own expense, will
effect all qualifications of itself as broker or dealer,
or otherwise, under all applicable state or Federal laws
required in order that the Shares may be sold in such
states or jurisdictions as the Fund may reasonably
request.
8. The Fund shall prepare and furnish to the Underwriter
from time to time the most recent form of the Prospectus
and/or SAI of the Fund and/or of each Series of the Fund.
The Fund authorizes the Underwriter to use the Prospectus
and/or SAI, in the forms furnished to the Underwriter
from time to time, in connection with the sale of the
Shares of the Fund and/or of each Series of the Fund.
The Fund will furnish to the Underwriter from time to
time such information with respect to the Fund, each
Series, and the Shares as the Underwriter may reasonably
request for use in connection with the sale of the
Shares. The Underwriter agrees that it will not use or
distribute or authorize the use, distribution or
dissemination by broker-dealers or others in connection
<PAGE>
with the sale of the Shares any statements, other than those
contained in a current Prospectus and/or SAI of the Fund or
applicable Series, except such supplemental literature or
advertising as shall be lawful under Federal and state securities
laws and regulations, and that it will promptly furnish the Fund
with copies of all such material.
9. The Underwriter will not make, or authorize any broker-dealers or
others to make any short sales of the Shares of the Fund or
otherwise make any sales of the Shares unless such sales are made in
accordance with a then current Prospectus and/or SAI relating to the
sale of the applicable Shares.
10. The Underwriter, as agent of and for the account of the
Fund, may cause the redemption or repurchase of the
Shares at such prices and upon such terms and conditions
as shall be specified in a then current Prospectus and/or
SAI. In selling, redeeming or repurchasing the Shares
for the account of the Fund, the Underwriter will in all
respects conform to the requirements of all state and
federal laws and the Rules of Fair Practice of the
National Association of Securities Dealers, Inc.,
relating to such sale, redemption or repurchase, as the
case may be. The Underwriter will observe and be bound
by all the provisions of the Articles of Incorporation or
Bylaws of the Fund and of any provisions in the
Registration Statement, Prospectus and SAI, as such may
be amended or supplemented from time to time, notice of
which shall have been given to the Underwriter, which at
the time in any way require, limit, restrict or prohibit
or otherwise regulate any action on the part of the
Underwriter.
11. (a) The Fund shall indemnify, defend and hold harmless
the Underwriter, its officers and directors and any
person who controls the Underwriter within the
meaning of the 1933 Act, from and against any and
all claims, demands, liabilities and expenses
(including the cost of investigating or defending
such claims, demands or liabilities and any
attorney fees incurred in connection therewith)
which the Underwriter, its officers and directors
or any such controlling person, may incur under the
federal securities laws, the common law or
otherwise, arising out of or based upon any alleged
untrue statement of a material fact contained in
the Registration Statement or any related
Prospectus and/or SAI or arising out of or based
upon any alleged omission to state a material fact
required to be stated therein or necessary to make
the statements therein not misleading.
<PAGE>
Notwithstanding the foregoing, this indemnity agreement, to
the extent that it might require indemnity of the Underwriter
or any person who is an officer, director or controlling
person of the Underwriter, shall not inure to the benefit of
the Underwriter or officer, director or controlling person
thereof unless a court of competent jurisdiction shall
determine, or it shall have been determined by controlling
precedent, that such result would not be against public policy
as expressed in the federal securities laws and in no event
shall anything contained herein be so construed as to protect
the Underwriter against any liability to the Fund, the
Directors or the Fund's shareholders to which the Underwriter
would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of its duties
or by reason of its reckless disregard of its obligations and
duties under this Agreement.
This indemnity agreement is expressly conditioned upon the
Fund's being notified of any action brought against the
Underwriter, its officers or directors or any such controlling
person, which notification shall be given by letter or by
telegram addressed to the Fund at its principal address in
Denver, Colorado and sent to the Fund by the person against
whom such action is brought within ten (10) days after the
summons or other first legal process shall have been served
upon the Underwriter, its officers or directors or any such
controlling person. The failure to notify the Fund of any such
action shall not relieve the Fund from any liability which it
may have to the person against whom such action is brought by
reason of any such alleged untrue statement or omission
otherwise than on account of the indemnity agreement contained
in this paragraph. The Fund shall be entitled to assume the
defense of any suit brought to enforce such claim, demand, or
liability, but in such case the defense shall be conducted by
counsel chosen by the Fund and approved by the Underwriter,
which approval shall not be unreasonably withheld. If the Fund
elects to assume the defense of any such suit and retain
counsel approved by the Underwriter, the defendant or
defendants in such suit shall bear the fees and expenses of an
additional counsel obtained by any of them. Should the Fund
elect not to assume the defense of any such suit, or should
the Underwriter not approve of counsel chosen by the Fund, the
Fund will reimburse the Underwriter, its officers and
directors or the controlling person or persons named as
<PAGE>
defendant or defendants in such suit, for the reasonable
fees and expenses of any counsel retained by the Underwriter
or them. In addition, the Underwriter shall have the right to
employ counsel to represent it, its officers and directors and
any such controlling person who may be subject to liability
arising out of any claim in respect of which indemnity may
be sought by the Underwriter against the Fund hereunder if
in the reasonable judgment of the Underwriter it is advisable
for the Underwriter, its officers and directors or such
controlling person to be represented by separate counsel,
in which event the reasonable fees and expenses of such
separate counsel shall be borne by the Fund. This
indemnity agreement and the Fund's representations and
warranties in this Agreement shall remain operative and in
full force and effect and shall survive the delivery of any of
the Shares as provided in this Agreement. This indemnity
agreement shall inure exclusively to the benefit of the
Underwriter and its successors, the Underwriter's officers and
directors and their respective estates and any such
controlling person and their successors and estates. The Fund
shall promptly notify the Underwriter of the commencement of
any litigation or proceeding against it in connection with the
issue and sale of the Shares.
(b) The Underwriter agrees to indemnify, defend and
hold harmless the Fund, its Directors and any
person who controls the Fund within the meaning of
the 1933 Act, from and against any and all claims,
demands, liabilities and expenses (including the
cost of investigating or defending such claims,
demands or liabilities and any attorney fees
incurred in connection therewith) which the Fund,
its Directors or any such controlling person may
incur under the Federal securities laws, the common
law or otherwise, but only to the extent that such
liability or expense incurred by the Fund, its
Directors or such controlling person resulting from
such claims or demands shall arise out of or be
based upon (a) any alleged untrue statement of a
material fact contained in information furnished in
writing by the Underwriter to the Fund specifically
for use in the Registration Statement or any
related Prospectus and/or SAI or shall arise out of
or be based upon any alleged omission to state a
material fact in connection with such information
required to be stated in the Registration Statement
or the related Prospectus and/or SAI or necessary
to make such information not misleading and (b) any
alleged act or omission on the Underwriter's part
<PAGE>
as the Fund's agent that has not been expressly
authorized by the Fund in writing.
Notwithstanding the foregoing, this indemnity agreement, to
the extent that it might require indemnity of the Fund or any
Director or controlling person of the Fund, shall not inure to
the benefit of the Fund or Director or controlling person
thereof unless a court of competent jurisdiction shall
determine, or it shall have been determined by controlling
precedent, that such result would not be against public policy
as expressed in the federal securities laws and in no event
shall anything contained herein be so construed as to protect
any Director of the Fund against any liability to the Fund or
the Fund's shareholders to which the Director would otherwise
be subject by reason of willful misfeasance, bad faith or
gross negligence or reckless disregard of the duties involved
in the conduct of his office.
This indemnity agreement is expressly conditioned upon the
Underwriter's being notified of any action brought against the
Fund, its Directors or any such controlling person, which
notification shall be given by letter or telegram addressed to
the Underwriter at its principal office in Denver, Colorado,
and sent to the Underwriter by the person against whom such
action is brought, within ten (10) days after the summons or
other first legal process shall have been served upon the
Fund, its Directors or any such controlling person. The
failure to notify the Underwriter of any such action shall not
relieve the Underwriter from any liability which it may have
to the person against whom such action is brought by reason of
any such alleged untrue statement or omission otherwise than
on account of the indemnity agreement contained in this
paragraph. The Underwriter shall be entitled to assume the
defense of any suit brought to enforce such claim, demand, or
liability, but in such case the defense shall be conducted by
counsel chosen by the Underwriter and approved by the Fund,
which approval shall not be unreasonably withheld. If the
Underwriter elects to assume the defense of any such suit and
retain counsel approved by the Fund, the defendant or
defendants in such suit shall bear the fees and expenses of an
additional counsel obtained by any of them. Should the
Underwriter elect not to assume the defense of any such suit,
or should the Fund not approve of counsel chosen by the
Underwriter, the Underwriter will reimburse the Fund, its
Directors or the controlling person or persons named as
defendant or defendants in sucyh suit, for the reasonable fees
<PAGE>
and expenses of any counsel retained by the Fund or them. In
addition, the Fund shall have the right to employ counsel to
represent it, its Directors and any such controlling person
who may be subject to liability arising out of any claim in
respect of which indemnity may be sought by the Fund against
the Underwriter hereunder if in the reasonable judgment of the
Fund it is advisable for the Fund, its Directors or such
controlling person to be represented by separate counsel, in
which event the reasonable fees and expenses of such separate
counsel shall be borne by the Underwriter. This indemnity
agreement and the Underwriter's representations and warranties
in this Agreement shall remain operative and in full force and
effect and shall survive the delivery of any of the Shares as
provided in this Agreement. This indemnity agreement shall
inure exclusively to the benefit of the Fund and its
successors, the Fund's Directors and their respective estates
and any such controlling person and their successors and
estates. The Underwriter shall promptly notify the Fund of the
commencement of any litigation or proceeding against it in
connection with the issue and sale of the Shares.
12. The Fund will pay or cause to be paid (a) expenses
(including the fees and disbursements of its own counsel)
of any registration of the Shares under the 1933 Act, as
amended, (b) expenses incident to the issuance of the
Shares, and (c) expenses (including the fees and
disbursements of its own counsel) incurred in connection
with the preparation, printing and distribution of the
Fund's Prospectuses, SAIs, and periodic and other reports
sent to holders of the Shares in their capacity as such.
The Underwriter shall prepare and provide necessary
copies of all sales literature subject to the Fund's
approval thereof.
13. This Agreement shall become effective on the effective
date of the reorganization of Financial Bond Shares, Inc.
into INVESCO Income Funds, Inc. Thereafter, this
Agreement shall continue in effect for an initial term
expiring April 30, 1995, and from year to year
thereafter, but only so long as such continuance is
specifically approved at least annually (a)(i) by a vote
of the Directors of the Fund or (ii) by a vote of a
majority of the outstanding voting securities of the
Fund, and (b) by a vote of a majority of the Directors of
the Fund who, except for their positions as Directors of
the Fund, are not "interested persons," as defined in the
Investment Company Act, of the Fund cast in person at a
meeting for the purpose of voting on this Agreement.
<PAGE>
Either party hereto may terminate this Agreement on any date,
without the payment of a penalty, by giving the other party at least
60 days' prior written notice of such termination specifying the
date fixed therefor. In particular, this Agreement may be terminated
at any time, without payment of any penalty, by vote of a majority
of the members of the Directors of the Fund or by a vote of a
majority of the outstanding voting securities of the Fund on not
more than 60 days' written notice to the Underwriter.
Without prejudice to any other remedies of the Fund provided for in
this Agreement or otherwise, the Fund may terminate this Agreement
at any time immediately upon the Underwriter's failure to fulfill
any of the obligations of the Underwriter hereunder.
14. The Underwriter expressly agrees that, notwithstanding anything to
the contrary herein, or in any applicable law, that it will look
solely to the assets of the Fund for any obligations of the Fund
hereunder and nothing herein shall be construed to create any
personal liability on the part of any Director or any shareholder of
the Fund.
15. This Agreement shall automatically terminate in the event of its
assignment. In interpreting the provisions of this Section 15, the
definition of "assignment" contained in the Investment Company Act
shall be applied.
16. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate for the receipt of such
notice.
17. No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by
the Fund and the Underwriter and, if applicable, approved in the
manner required by the Investment Company Act.
18. Each provision of this Agreement is intended to be severable. If any
provision of this Agreement shall be held illegal or made invalid by
a court decision, statute, rule or otherwise, such illegality or
invalidity shall not affect the validity or enforceability of the
remainder of this Agreement.
19. This Agreement and the application and interpretation
hereof shall be governed exclusively by the laws of the
State of Colorado.
<PAGE>
IN WITNESS WHEREOF, the Fund and the Underwriter have each caused this
Agreement to be executed on its behalf by an officer thereunto duly authorized
and the Underwriter has caused its corporate seal to be affixed as of the day
and year first above written.
INVESCO INCOME FUNDS, INC.
ATTEST:
By: /s/ John M. Butler
/s/ Glen A. Payne ------------------
- ----------------- John M. Butler
Glen A. Payne President
Secretary
INVESCO FUNDS GROUP, INC.
ATTEST:
By: /s/ Dan J. Hesser
/s/ Glen A. Payne -----------------
- ----------------- Dan J. Hesser
Glen A. Payne President
Secretary
CUSTODIAN CONTRACT
Between
INVESCO INCOME FUNDS, INC.
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be held By It ....... 1
2. Duties of the Custodian with Respect to Property of
the Fund Held by the Custodian in the United States ......... 3
2.1 Holding Securities.................................... 3
2.2 Delivery of Securities................................ 3
2.3 Registration of Securities............................ 8
2.4 Bank Accounts......................................... 9
2.5 Availability of Federal Funds......................... 10
2.6 Collection of income.................................. 10
2.7 Payment of Fund Monies................................ 11
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased.................................. 14
2.9 Appointment of Agents................................. 15
2.10 Deposit of Fund Assets in Securities System........... 15
2.10A Fund Assets held in the Custodian's Direct Paper
System................................................ 18
2.11 Segregated Account.................................... 20
2.12 Ownership Certificates for Tax Purposes............... 21
2.13 Proxies............................................... 22
2.14 Communications Relating to Portfolio Securities....... 22
3. Duties of the Custodian with Respect to Property of the
Fund Held Outside of the United States....................... 23
3.1 Appointment of Foreign Sub-Custodians................. 23
3.2 Assets to be Held..................................... 23
3.3 Foreign Securities Depositories....................... 24
3.4 Agreements with Foreign Banking Institutions.......... 24
3.5 Access of Independent Accountants of the Fund......... 25
3.6 Reports by Custodian.................................. 25
3.7 Transactions in Foreign Custody Account............... 26
3.8 Liability of Foreign Sub-Custodians................... 27
3.9 Liability of Custodian................................ 27
3.10 Reimbursement for Advances............................ 28
3.11 Monitoring Responsibilities........................... 29
3.12 Branches of U.S. Banks................................ 29
3.13 Tax Law............................................... 30
<PAGE>
4. Payments for Sales or Repurchase or Redemptions of Shares
of the Fund.................................................. 31
5. Proper Instructions.......................................... 32
6. Actions Permitted Without Express Authority.................. 33
7. Evidence of Authority........................................ 33
8. Duties of Custodian With Respect to the Books of Account
and Calculation of Net Asset Value and Net Income............ 34
9. Records...................................................... 34
10. Opinion of Fund's Independent Accountants.................... 35
11. Reports to Fund by Independent Public Accountants............ 35
12. Compensation of Custodian.................................... 36
13. Responsibility of Custodian.................................. 36
14. Effective Period, Termination and Amendment.................. 38
15. Successor Custodian.......................................... 40
16. Interpretive and Additional Provisions....................... 41
17. Additional Funds............................................. 42
18. Massachusetts Law to Apply................................... 42
19. Prior Contracts.............................................. 42
20. Shareholder Communications................................... 43
<PAGE>
CUSTODIAN CONTRACT
This Contract between INVESCO Income Funds, Inc., a corporation organized
and existing under the laws of Maryland, having its principal place of business
at 7800 East Union Avenue, Denver, Colorado 80237, hereinafter called the
"Fund", and State Street Bank and Trust Company, a Massachusetts trust company,
having its principal place of business at 225 Franklin Street, Boston,
Massachusetts 02110, hereinafter called the "Custodian's,
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund intends to initially offer shares in four series, INVESCO
Short-Term Bond Fund, INVESCO U.S. Government Securities Fund, INVESCO Select
Income Fund, INVESCO High Yield Fund (such series together with all other series
subsequently established by the Fund and made subject to this Contract in
accordance with paragraph 17, being herein referred to as the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of the assets of the
Portfolios of the Fund, including securities which the Fund, on behalf of the
applicable Portfolio desires to be held in places within the United States
("domestic securities") and securities it desires to be held outside the United
States ("foreign securities") pursuant to the provisions of the Articles of
Incorporation. The Fund on behalf of the Portfolio(s) agrees to deliver to the
Custodian all securities and cash of the Portfolios, and all payments of income,
payments of principal or capital distributions received by it with respect to
all securities owned by the Portfolio(s) from time to time, and-the cash
consideration received by it for such new or treasury shares of capital stock of
the Fund representing interests in the Portfolios, ("Shares") as may be issued
or sold from time to time. The Custodian shall not be responsible for any
property of a Portfolio held or received by the Portfolio and not delivered to
the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 5),
the Custodian shall on behalf of the applicable Portfolio(s) from time to time
employ one or more sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of Directors of the Fund on
behalf of the applicable Portfolio(s), and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as sub-custodian
for the Fund's foreign securities on behalf of the applicable Portfolio(s) the
foreign banking institutions and foreign securities depositories designated in
Schedule A hereto but only in accordance with the provisions of Article 3.
<PAGE>
2. Duties of the Custodian with respect to Property of the Fund Held by the
Custodian in the United States.
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of each Portfolio all non-cash property, to be held by it
in the United States including all domestic securities owned by such
Portfolio, other than (a) securities which are maintained pursuant to
Section 2.10 in a clearing agency which acts as a securities deposi-
tory or in a book-entry system authorized by the U.S. Department of
the Treasury, collectively referred to herein as "Securities System"
and (b) commercial paper of an issuer for which State Street Bank and
Trust Company acts as issuing and paying agent ("Direct Paper") which
is deposited and/or maintained in the Direct Paper System of the
Custodian pursuant to Section 2.10A. 2.2 Delivery of Securities. The
Custodian shall release and deliver domestic securities owned by a Port-
folio held by the Custodian or in a Securities System account of the
Custodian or in the Custodian's Direct Paper book entry system account
("Direct Paper System Account") only upon receipt of Proper Instructions
from the Fund on behalf of the applicable Portfolio, which may be
continuing instructions when deemed appropriate by the parties, and
only in the following cases: 1) Upon sale of such securities for the
account of the Portfolio and receipt of payment therefor;
2.2 Delivery of Securities. The Custodian shall release and deliver domestic
securities owned by a Portfolio held by the Custodian or in a Securities
System account of the Custodian or in the Custodian's Direct Paper book
entry system account ("Direct Paper System Account") only upon receipt of
Proper Instructions from the Fund on behalf of the applicable Portfolio,
which may be continuing instructions when deemed appropriate by the
parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio and
receipt of payment therefor;
2) Upon receipt of payment in connection with any repurchase agree-
ment related to such securities entered into by the Portfolio;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other simi-
lar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
<PAGE>
6) To the issuer thereof, or its agent, for transfer into the name
of the Portfolio or into the name of any nominee or nominees of
the Custodian or into the name or nominee name of any agent
appointed pursuant to Section 2.9 or into the name or nominee
name of any sub-custodian appointed pursuant to Article 1; or for
exchange for a different number of bonds, certificates or other
evidence representing the same aggregate face amount or number of
units; provided that, in any such case, the new securities are to
be delivered to the Custodian;
7) Upon the sale of such securities for the account of the Port-
folio, to the broker or its clearing agent, against a receipt,
for examination in accordance with "street delivery" custom;
provided that in any such case, the Custodian shall have no
responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for such
securities except as may arise from the Custodian's own negli-
gence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjust-
ment of the securities of the issuer of such securities, or
pursuant to provisions for conversion contained in such securi-
ties, or pursuant to any deposit agreement; provided that, in any
such case, the new securities and cash, if any, are to be
delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
10) For delivery in connection with any loans of securities made by
the Portfolio, but only against receipt of adequate collateral
as agreed upon from time to time by the Custodian and the Fund
on behalf of the Portfolio, which may be in the form of cash or
obligations issued by the United States government, its
agencies or instrumentalities, except that in connection with any
loans for which collateral is to be credited to the
Custodian's account in the book-entry system authorized by the
U.S. Department of the Treasury, the Custodian will not be held
liable or responsible for the delivery of securities owned
by the Portfolio prior to the receipt of such collateral; or
<PAGE>
11) For delivery as security in connection with any borrowings by
the Fund on behalf of the Portfolio requiring a pledge of
assets by the Fund on behalf of the Portfolio, but only against
receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Securities Exchange Act of
1934 (the "Exchange Act") and a member of The National
Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing Corporation
and of any registered national securities exchange, or of any
similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Portfolio of
the Fund;
13) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian, and a
Futures Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract Market,
or any similar organization or organizations, regarding account
deposits in connection with transactions by the Portfolio of the
Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to
the holders of shares in connection with distributions in kind,
as may be described from time to time in the currently effective
prospectus and statement of additional information of the Fund,
related to the Portfolio ("Prospectus"), in satisfaction of
requests by holders of Shares for repurchase or redemption; and
15) For any other proper corporate purpose, but only upon receipt
of, in addition to Proper Instructions from the Fund on behalf of
the applicable Portfolio, a certified copy of a resolution of the
Board of Directors or of the Executive Committee signed by an
officer of the Fund and certified by the Secretary or an
Assistant Secretary, specifying the securities of the Portfolio
to be delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom
delivery of such securities shall be made.
2.3 Reqistration of Securities. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be
<PAGE>
assigned exclusively to the Portfolio, unless the Fund has authorized in
writing the appointment of a nominee to be used in common with other
registered investment companies having the same investment adviser as the
Portfolio, or in the name or nominee name of any agent appointed pursuant
to Section 2.9 or in the name or nominee name of any sub-custodian
appointed pursuant to Article 1. All securities accepted by the Custodian
on behalf of the Portfolio under the terms of this Contract shall be in
"street name" or other good delivery form. If, however, the Fund directs
the Custodian to maintain securities in "street name", the Custodian
shall utilize its best efforts only to timely collect income due the Fund
on such securities and to notify the Fund on a best efforts basis only of
relevant corporate actions including, without limitation, pendency of
calls, maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Portfolio of
the Fund, subject only to draft or order by the Custodian acting pursuant
to the terms of this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or for the
account of the Portfolio, other than cash maintained by the Portfolio in a
bank account established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940. Funds held by the Custodian for a Port-
folio may be deposited by it to its credit as Custodian in the Banking
Department of the Custodian or in such other banks or trust companies as it
may in its discretion deem necessary or desirable; Provided, however, that
every such bank or trust company shall be qualified to act as a custodian
under the Investment Company Act of 1940 and that each such bank or trust
company and the funds to be deposited with each such bank or trust company
shall on behalf of each applicable Portfolio be approved by vote of a
majority of the Board of Directors of the Fund. Such funds shall be
deposited by the Custodian in its capacity as Custodian and shall be
withdrawable by the Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between the Fund on
behalf of each applicable Portfolio and the Custodian, the Custodian shall,
upon the receipt of Proper Instructions from the Fund on behalf of a Port-
folio, make federal funds available to such Portfolio as of specified times
agreed upon from time to time by the Fund and the Custodian in the amount
of checks received in payment for Shares of such Portfolio which are
deposited into the Portfolio's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to registered domestic securities held hereunder to which each
Portfolio shall be entitled either by law or pursuant to custom in
the securities business, and shall collect on a timely basis all income
<PAGE>
and other payments with respect to bearer domestic securities if, on the
date of payment by the issuer, such securities are held by the Custodian or
its agent thereof and shall credit such income, as collected, to such
Portfolio's custodian account. Without limiting the generality of the
foregoing, the Custodian shall detach and present for payment all coupons
and other income items requiring presentation as and when they become due
and shall collect interest when due on securities held hereunder. Income
due each Portfolio on securities loaned pursuant to the provisions of
Section 2.2(10) shall be the responsibility of the Fund. The Custodian
will have no duty or responsibility in connection therewith, other than to
provide the Fund with such information or data as may be necessary to
assist the Fund in arranging for the timely delivery to the Custodian of
the income to which the Portfolio is properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions from the Fund
on behalf of the applicable Portfolio, which may be continuing instructions
when deemed appropriate by the parties, the Custodian shall pay out monies
of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures con-
tracts or options on futures contracts for the account of the
Portfolio but only (a) against the delivery of such securities or
evidence of title to such options, futures contracts or options
on futures contracts to the Custodian (or any bank, banking firm
or trust company doing business in the United States or abroad
which is qualified under the Investment Company Act of 1940, as
amended, to act as a custodian and has been designated by the
Custodian as its agent for this purpose) registered in the name
of the Portfolio or in the name of a nominee of the Custodian
referred to in Section 2.3 hereof or in proper form for transfer;
(b) in the case of a purchase effected through a Securities
System, in accordance with the conditions set forth in Section
2.10 hereof; (c) in the case of a purchase involving the Direct
Paper System, in accordance with the conditions set forth in
Section 2.10A; (d) in the case of repurchase agreements entered
into between the Fund on behalf of the Portfolio and the
Custodian, or another bank, or a broker-dealer which is a member
of NASD, (i) against delivery of the securities either in
certificate form or through an entry crediting the Custodian's
account at the Federal Reserve Bank with such securities or
<PAGE>
(ii) against delivery of the receipt evidencing purchase by the
Portfolio of securities owned by the Custodian along with written
evidence of the agreement by the Custodian to repurchase such
securities from the Portfolio or (e) for transfer to a time
deposit account of the Fund in any bank, whether domestic or
foreign; such transfer may be effected prior to receipt of a
confirmation from a broker and/or the applicable bank pursuant to
Proper Instructions from the Fund as defined in Article 5;
2) In connection with conversion, exchange or surrender of securi-
ties owned by the Portfolio as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Port-
folio as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments
for the account of the Portfolio: interest, taxes, management,
accounting, transfer agent and legal fees, and operating expenses
of the Fund whether or not such expenses are to be in whole or
part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares of the Portfolio
declared pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, but only upon receipt of, in addi-
tion to Proper Instructions from the Fund on behalf of the
Portfolio, a certified copy of a resolution of the Board of
Directors or of the Executive Committee of the Fund signed by an
officer of the Fund and certified by its Secretary or an
Assistant Secretary, specifying the amount of such payment,
setting forth the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and naming the
person or persons to whom such payment is to be made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.Except
as specifically stated otherwise in this Contract, in any and every case
where payment for purchase of domestic securities for the account of a
Portfolio is made by the Custodian in advance of receipt of the securities
purchased in the absence of specific written instructions from the Fund on
behalf of such Portfolio to so pay in advance, the Custodian shall be
absolutely liable to the Fund for such securities to the same extent as if
the securities had been received by the Custodian.
<PAGE>
2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of 1940,
as amended, to act as a custodian, as its agent to carry out such of the
provisions of this Article 2 as the Custodian may from time to time direct;
provided, however, that the appointment of any agent shall not relieve the
Custodian of its responsibilities or liabilities hereunder.
2.10 Deposit of Fund Assets in Securities Systems. The Custodian may deposit
and/or maintain securities owned by a Portfolio in a clearing agency
registered with the Securities and Exchange Commission under Section 17A of
the Securities Exchange Act of 1934, which acts as a securities depository,
or in the book-entry system authorized by the U.S. Department of the
Treasury and certain federal agencies, collectively referred to herein
as "Securities System" in accordance with applicable Federal Reserve Board
and Securities and Exchange Commission rules and regulations, if any, and
subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a
Securities System provided that such securities are represented
in an account("Account") of the Custodian in the Securities
System which shall not include any assets of the Custodian other
than assets held as a fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a Securities System shall
identify by book-entry those securities belonging to the Port-
folio;
3) The Custodian shall pay for securities purchased for the account
of the Portfolio upon (i) receipt of advice from the Securities
System that such securities have been transferred to the Account,
and (ii) the making of an entry on the records of the Custodian
to reflect such payment and transfer for the account of the
Portfolio. The Custodian shall transfer securities sold for the
account of the Portfolio upon (i) receipt of advice from the
Securities System that payment for such securities has been
transferred to the Account, and (ii) the making of an entry on
the records of the Custodian to reflect such transfer and
payment for the account of the Portfolio. Copies of all advices
from the Securities System of transfers of securities for the
account of the Portfolio shall identify the Portfolio, be main-
tained for the Portfolio by the Custodian and be provided to the
Fund at its request. Upon request, the Custodian shall furnish
the Fund on behalf of the Portfolio confirmation of each transfer
to or from the account of the Portfolio in the form of a written
advice or notice and shall furnish to the Fund on behalf of
the Portfolio copies of daily transaction sheets reflecting each
day's transactions in the Securities System for the account of
the Portfolio.
<PAGE>
4) The Custodian shall provide the Fund for the Portfolio with
any report obtained by the Custodian on the Securities System's
accounting system, internal accounting control and procedures
for safeguarding securities deposited in the Securities System;
5) The Custodian shall have received from the Fund on behalf of the
Portfolio the initial or annual certificate, as the case may be,
required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss or damage to the Portfolio resulting from
use of the Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its agents
or of any of its or their employees or from failure of the
Custodian or any such agent to enforce effectively such rights
as it may have against the Securities System; at the election of
the Fund, it shall be entitled to be subrogated to the rights of
the Custodian with respect to any claim against the Securities
System or any other person which the Custodian may have as a
consequence of any such loss or damage if and to the extent that
the Portfolio has not been made whole for any such loss or
damage.
2.10A Fund Assets Held in the Custodian's Direct Paper System The Custodian may
deposit and/or maintain securities owned by a Portfolio in the Direct
Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions from the
Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct
Paper System only if such securities are represented in an
account ("Account") of the Custodian in the Direct Paper System
which shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the
Portfolio;
4) The Custodian shall pay for securities purchased for the account
of the Portfolio upon the making of an entry on the records of
the Custodian to reflect such payment and transfer of securities
to the account of the Portfolio. The Custodian shall transfer
<PAGE>
securities sold for the account of the Portfolio upon the making
of an entry on the records of the Custodian to reflect such
transfer and receipt of payment for the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the
Portfolio, in the form of a written advice or notice, of Direct
Paper on the next business day following such transfer and shall
furnish to the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transaction in the
Securities System for the account of the Portfolio;
6) The Custodian shall provide the Fund on behalf of the Portfolio
with any report on its system of internal accounting control as
the Fund may reasonably request from time to time.
2.11 Segregated Account. The Custodian shall upon receipt of Proper Instructions
from the Fund on behalf of each applicable Portfolio establish and maintain
a segregated account or accounts for and on behalf of each such Portfolio,
into which account or accounts may be transferred cash and/or securities,
including securities maintained in an account by the Custodian
pursuant to Section 2.10 hereof, (i) in accordance with the provisions of
any agreement among the Fund on behalf of the Portfolio, the Custodian and
a broker-dealer registered under the Exchange Act and a member of the NASD
(or any futures commission merchant registered under the Commodity
Exchange Act), relating to compliance with the rules of The Options
Clearing Corporation and of any registered national securities exchange
(or the Commodity Futures Trading Commission or any registered contract
market), or of any similar organization or organizations, regarding escrow
or other arrangements in connection with transactions by the Portfolio,
(ii) for purposes of segregating cash or government securities in
connection with options purchased, sold or written by the Portfolio or
commodity futures contracts or options thereon purchased or sold by the
Portfolio, (iii) for the purposes of compliance by the Portfolio with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of segregated accounts by registered investment
companies and (iv) for other proper corporate purposes, but only, in the
case of clause (iv), upon receipt of, in addition to Proper Instructions
from the Fund on behalf of the applicable Portfolio, a certified copy of a
resolution of the Board of Directors or of the Executive Committee signed
by an officer of the Fund and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such segregated account
and declaring such purposes to be proper corporate purposes.
2.12 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other payments with
respect to domestic securities of each Portfolio held by it and in
connection with transfers of securities.
<PAGE>
2.13 Proxies. The Custodian shall, with respect to the domestic securities held
hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of
the Portfolio or a nominee of the Portfolio, all proxies, without indica-
tion of the manner in which such proxies are to be voted, and shall
promptly deliver to the Portfolio such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.14 Communications Relating to Portfolio Securities Subject to the provisions
of Section 2.3, the Custodian shall transmit promptly to the Fund for
each Portfolio all written information (including, without limitation,
pendency of calls and maturities of domestic securities and expirations
of rights in connection therewith and notices of exercise of call and put
options written by the Fund on behalf of the Portfolio and the maturity of
futures contracts purchased or sold by the Portfolio) received by the
Custodian from issuers of the securities being held for the Portfolio. With
respect to tender or exchange offers, the Custodian shall transmit
promptly to the Portfolio all written information received by the Custodian
from issuers of the securities whose tender or exchange is sought and from
the party (or his agents) making the tender or exchange offer. If the Port-
folio desires to take action with respect to any tender offer, exchange
offer or any other similar transaction, the Portfolio shall notify the
Custodian at least three business days prior to the date on which the
Custodian is to take such action.
3. Duties of the Custodian with Respect to Property of the Fund Held Outside of
the United States
3.1 Appointment of Foreign Sub-Custodians
The Fund hereby authorizes and instructs the Custodian to employ as sub-
custodians for the Portfolio's securities and other assets maintained
outside the United States the foreign banking institutions and foreign
securities depositories designated on Schedule A hereto ("foreign
sub-custodians"). Upon receipt of "Proper Instructions", as defined in
Section 5 of this Contract, together with a certified resolution of the
Fund's Board of Directors, the Custodian and the Fund may agree to amend
Schedule A hereto from time to time to designate additional foreign
banking institutions and foreign securities depositories to act as sub-
custodian. Upon receipt of Proper Instructions, the Fund may instruct the
Custodian to cease the employment of any one or more such sub-custodians
for maintaining custody of the Portfolio's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to:
(a) "foreign securities", as defined in paragraph (c)(l) of Rule 17f-5
under the Investment Company Act of 1940, and (b) cash and cash
<PAGE>
equivalents in such amounts as the Custodian or the Fund may determine to
be reasonably necessary to effect the Portfolio's foreign securities trans-
actions. The Custodian shall identify on its books as belonging to the
Fund, the foreign securities of the Fund held by each foreign sub-
custodian.
3.3 Foreign Securities Desositories. Except as may otherwise be agreed upon in
writing by the Custodian and the Fund, assets of the Portfolios shall be
maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as sub-custodians
pursuant to the terms hereof. Where possible, such arrangements shall
include entry into agreements containing the provisions set forth in Sec-
tion 3.4 hereof.
3.4 Agreements with Foreign Banking Institutions.Each agreement with a foreign
banking institution shall be substantially in the form set forth in
Exhibit 1 hereto and shall provide that: (a) the assets of each Portfolio
will not be subject to any right, charge, security interest, lien or claim
of any kind in favor of the foreign banking institution or its creditors or
agent, except a claim of payment for their safe custody or administration;
(b) beneficial ownership for the assets of each Portfolio will be freely
transferable without the payment of money or value other than for custody
or administration; (c) adequate records will be maintained identifying the
assets as belonging to each applicable Portfolio; (d) officers of or
auditors employed by, or other representatives of the Custodian, including
to the extent permitted under applicable law the independent public
accountants for the Fund, will be given access to the books and records of
the foreign banking institution relating to its actions under its agreement
with the Custodian; and (e) assets of the Portfolios held by the foreign
sub-custodian will be subject only to the instructions of the Custodian or
its agents.
3.5 Access of Independent Accountants of the Fund. Upon request of the Fund,
the Custodian will use its best efforts to arrange for the independent
accountants of the Fund to be afforded access to the books and records of
any foreign banking institution employed as a foreign sub-custodian insofar
as such books and records relate to the performance of such foreign banking
institution under its agreement with the Custodian.
3.6 Reports by Custodian. The Custodian will supply to the Fund from time to
time, as mutually agreed upon, statements in respect of the securities and
other assets of the Portfolio(s) held by foreign sub-custodians, including
but not limited to an identification of entities having possession of the
Portfolio(s) securities and other assets and advices or notifications of
any transfers of securities to or from each custodial account maintained
by a foreign banking institution for the Custodian on behalf of each
<PAGE>
applicable Portfolio indicating, as to securities acquired for a Portfolio,
the identity of the entity having physical possession of such securities.
3.7 Transactions in Foreign Custody Account
(a) Except as otherwise provided in paragraph (b) of this Section 3.7, the
provision of Sections 2.2 and 2.7 of this Contract shall apply, mutatis
mutandis to the foreign securities of the Fund held outside the United
States by foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of each
applicable Portfolio and delivery of securities maintained for the account
of each applicable Portfolio may be effected in accordance with the
customary established securities trading or securities processing prac-
tices and procedures in the jurisdiction or market in which the transaction
occurs, including, without limitation, delivering securities to the pur-
chaser thereof or to a dealer therefor (or an agent for such purchaser or
dealer) against a receipt with the expectation of receiving later payment
for such securities from such purchaser or dealer.
(c) Securities maintained in the custody of a foreign sub-custodian may be
maintained in the name of such entity's nominee to the same extent as set
forth in Section 2.3 of this Contract, and the Fund agrees to hold
any such nominee harmless from any liability as a holder of record of such
securities.
3.8 Liability of Foreign Sub-Custodians. Each agreement pursuant to which the
Custodian employs a foreign banking institution as a foreign sub-custodian
shall require the institution to exercise reasonable care in the perform-
ance of its duties and to indemnify, and hold harmless, the Custodian and
each Fund from and against any loss, damage, cost, expense, liability or
claim arising out of or in connection with the institution's performance of
such obligations. At the election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any claims
against a foreign banking institution as a consequence of any such loss,
damage, cost, expense, liability or claim if and to the extent that the
Fund has not been made whole for any such loss, damage, cost, expense,
liability or claim.
3.9 Liability of Custodian. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set forth
with respect to sub-custodians generally in this Contract and,regardless of
whether assets are maintained in the custody of a foreign banking institu-
tion, a foreign securities depository or a branch of a U.S. bank as
contemplated by paragraph 3.12 hereof, the Custodian shall not be liable
for any loss, damage, cost, expense, liability or claim resulting from
nationalization, expropriation, currency restrictions, or acts of war or
<PAGE>
or any loss where the sub-custodian has otherwise exercised reasonable
care. Notwithstanding the foregoing provisions of this paragraph 3.9, in
delegating custody duties to State Street London Ltd., the Custodian shall
not be relieved of any responsibility to the Fund for any loss due to such
delegation, except such loss as may result from (a) political risk
(including, but not limited to, exchange control restrictions, confis-
cation, expropriation, nationalization, insurrection, civil strife or armed
hostilities) or (b) other losses (excluding a bankruptcy or insolvency of
State Street London Ltd. not caused by political risk) due to Acts of God,
nuclear incident or other losses under circumstances where the Custodian
and State Street London Ltd. have exercised reasonable care.
3.10 Reimbursement for Advances. If the Fund requires the Custodian to advance
cash or securities for any purpose for the benefit of a Portfolio including
the purchase or sale of foreign exchange or of contracts for foreign
exchange, or in the event that the Custodian or its nominee shall incur or
be assessed any taxes, charges, expenses, assessments, claims or liabili-
ties in connection with the performance of this Contract, except such
as may arise from its or its nominee's own negligent action, negligent
failure to act or willful misconduct, any property at any time held for the
account of the applicable Portfolio shall be security therefor and should
the Fund fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of such Portfolios assets
to the extent necessary to obtain reimbursement.
3.11 Monitoring Responsibilities. The Custodian shall furnish annually to the
Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian.Such information shall be similar
in kind and scope to that furnished to the Fund in connection with the
initial approval of this Contract. In addition, the Custodian will promptly
inform the Fund in the event that the Custodian learns of a material
adverse change in the financial condition of a foreign sub-custodian or any
material loss of the assets of the Fund or in the case of any foreign sub-
custodian not the subject of an exemptive order from the Securities and Ex-
change Commission is notified by such foreign sub-custodian that there
appears to be a substantial likelihood that its shareholders' equity will
decline below $200 million (U.S. dollars or the equivalent thereof) or
that its shareholders' equity has declined below $200 million (in each
case computed in accordance with generally accepted U.S. accounting princi-
ples).
3.12 Branches of U.S. Banks
(a) Except as otherwise set forth in this Contract, the provisions hereof
shall not apply where the custody of the Portfolios assets are maintained
<PAGE>
in a foreign branch of a banking institution which is a "bank" as defined
by Section 2(a)(5) of the Investment Company Act of 1940 meeting the
qualification set forth in Section 26(a) of said Act. The appointment of
any such branch as a sub-custodian shall be governed by paragraph 1 of this
Contract.
(b) Cash held for each Portfolio of the Fund in the United Kingdom shall be
maintained in an interest bearing account established for the Fund with
the Custodian's London branch, which account shall be subject to the
direction of the Custodian, State Street London Ltd. or both.
3.13 Tax Law The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on the Fund or the Custodian as custo-
dian of the Fund by the tax law of the United States of America or any
state or political subdivision thereof. It shall be the responsibility of
the Fund to notify the Custodian of the obligations imposed on the Fund or
the Custodian as custodian of the Fund by the tax law of jurisdictions
other than those mentioned in the above sentence, including responsibility
for withholding and other taxes, assessments or other governmental charges,
certifications and governmental reporting. The sole responsibility of the
Custodian with regard to such tax law shall be to use reasonable efforts
to assist the Fund with respect to any claim for exemption or refund under
the tax law of jurisdictions for which the Fund has provided such informa-
tion.
4. Payments for Sales or Repurchases or Redemption's of Shares of the Fund.
The Custodian shall receive from the distributor for the Shares or from the
Transfer Agent of the Fund and deposit into the account of the appropriate
Portfolio such payments as are received for Shares of that Portfolio issued or
sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund on behalf of each such Portfolio and the Transfer Agent
of any receipt by it of payments for Shares of such Portfolio. From such funds
as may be available for the purpose but subject to the limitations of the
Articles of Incorporation and any applicable votes of the Board of Directors of
the Fund pursuant thereto, the Custodian shall, upon receipt of instructions
from the Transfer Agent, make funds available for payment to holders of Shares
who have delivered to the Transfer Agent a request for redemption or repurchase
of their Shares. In connection with the redemption or repurchase of Shares of a
Portfolio, the Custodian is authorized upon receipt of instructions from the
Transfer Agent to wire funds to or through a commercial bank designated by the
redeeming shareholders. In connection with the redemption or repurchase of
Shares of the Fund, the Custodian shall honor checks drawn on the Custodian by a
holder of Shares, which checks have been furnished by the Fund to the holder of
<PAGE>
Shares, when presented to the Custodian in accordance with such procedures
and controls as are mutually agreed upon from time to time between the Fund and
the Custodian.
5. Proper Instructions
Proper Instructions as used throughout this Contract means a writing signed
or initialled by one or more person or persons as the Board of Directors shall
have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with respect
to the transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of Directors of the
Fund accompanied by a detailed description of procedures approved by the Board
of Directors, Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the Board of
Directors and the Custodian are satisfied that such procedures afford adequate
safeguards for the Portfolios' assets. For purposes of this Section, Proper
Instructions shall include instructions received by the Custodian pursuant to
any three - party agreement which requires a segregated asset account in
accordance with Section 2.11.
6. Actions Permitted without express Authority
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its duties under this
Contract, provided that all such payments shall be accounted for to the Fund on
behalf of the Portfolio;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Portfolio, checks, drafts and
other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection with
the sale, exchange, substitution, purchase, transfer and other dealings with the
securities and property of the Portfolio except as otherwise directed by the
Board of Directors of the Fund.
<PAGE>
7. Evidence of Authority
The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of the Fund. The
Custodian may receive and accept a certified copy of a vote of the Board of
Directors of the Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Board of Directors pursuant to the Articles of Incorporation as described
in such vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account and Calculation of
Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board of Directors of the Fund to keep the
books of account of each Portfolio and/or compute the net asset value per share
of the outstanding shares of each Portfolio or, if directed in writing to do so
by the Fund on behalf of the Portfolio, shall itself keep such books of account
and/or compute such net asset value per share. If so directed, the Custodian
shall also calculate daily the net income of the Portfolio as described in
the Fund's currently effective prospectus related to such Portfolio and shall
advise the Fund and the Transfer Agent daily of the total amounts of such net
income and, if instructed in writing by an officer of the Fund to do so, shall
advise the Transfer Agent periodically of the division of such net income among
its various components. The calculations of the net asset value per share and
the daily income of each Portfolio shall be made at the time or times described
from time to time in the Fund's currently effective prospectus related to
such Portfolio.
9. Records
The Custodian shall with respect to each Portfolio create and maintain all
records relating to its activities and obligations under this Contract in such
manner as will meet the obligations of the Fund under the Investment Company Act
of 1940, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder. All such records shall be the property of the Fund and shall
at all times during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the Fund and
employees and agents of the Securities and Exchange Commission. The Custodian
shall, at the Fund's request, supply the Fund with a tabulation of securities
owned by each Portfolio and held by the Custodian and shall, when requested to
do so by the Fund and for such compensation as shall be agreed upon between the
Fund and the Custodian, include certificate numbers in such tabulations.
<PAGE>
10. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the Fund on behalf of
each applicable Portfolio may from time to time request, to obtain from year to
year favorable opinions from the Fund's independent accountants with respect to
its activities hereunder in connection with the preparation of the Fund's Form
N-1A, and Form N-SAR or other annual reports to the Securities and Exchange
Commission and with respect to any other requirements of such Commission.
11. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, on behalf of each of the Portfolios
at such times as the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian under this Contract;
such reports, shall be of sufficient scope and in sufficient detail, as may
reasonably be required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and, if there are
no such inadequacies, the reports shall so state.
12. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its services
and expenses as Custodian, as agreed upon from time to time between the Fund on
behalf of each applicable Portfolio and the Custodian.
13. Responsibilities of Custodian
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties, including any
futures commission merchant acting pursuant to the terms of a three-party
futures or options agreement. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Contract, but shall be
kept indemnified by and shall be without liability to the Fund for any action
taken or omitted by it in good faith without negligence. It shall be entitled to
rely on and may act upon advice of counsel (who may be counsel for the Fund) on
all matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
<PAGE>
The Custodian shall be liable for the acts or omissions of a foreign
banking institution appointed pursuant to the provisions of Article 3 to the
same extent as set forth in Article 1 hereof with respect to sub-custodians
located in the United States (except as specifically provided in Article 3.9)
and, regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a U.S. bank
as contemplated by paragraph 3.12 hereof, the Custodian shall not be liable for
any loss, damage, cost, expense, liability or claim resulting from, or caused
by, the direction of or authorization by the Fund to maintain custody of any
securities or cash of the Fund in a foreign country including, but not limited
to, losses resulting from nationalization, expropriation, currency restrictions,
or acts of war or terrorism.
If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund or the Portfolio being liable for the payment
of money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it.
If the Fund requires the Custodian, its affiliates, subsidiaries or agents,
to advance cash or securities for any purpose (including but not limited to
securities settlements, foreign exchange contracts and assumed settlement) for
the benefit of a Portfolio including the purchase or sale of foreign exchange or
of contracts for foreign exchange or in the event that the Custodian or its
nominee shall incur or be assessed any taxes, charges, expenses, assessments,
claims or liabilities in connection with the performance of this Contract,
except such as may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct, any property at any time held
for the account of the applicable Portfolio shall be security therefor and
should the Fund fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of such Portfolio's assets to
the extent necessary to obtain reimbursement.
14. Effective Period. Termination and Amendment
This Contract shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid to
the other party, such termination to take effect not sooner than thirty (30)
days after the date of such delivery or mailing; provided, however that the
Custodian shall not with respect to a Portfolio act under Section 2.10 hereof in
the absence of receipt of an initial certificate of the Secretary or an
<PAGE>
Assistant Secretary that the Board of Directors of the Fund has approved
the initial use of a particular Securities System by such Portfolio and the
receipt of an annual certificate of the Secretary or an Assistant Secretary that
the Board of Directors has reviewed the use by such Portfolio of such Securities
System, as required in each case by Rule 17f-4 under the Investment Company Act
of 1940, as amended and that the Custodian shall not with respect to a
Portfolio act under Section 2.10A hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board of
Directors has approved the initial use of the Direct Paper System by such
Portfolio and the receipt of an annual certificate of the Secretary or an
Assistant Secretary that the Board of Directors has reviewed the use by such
Portfolio of the Direct Paper System; provided further, however, that the Fund
shall not amend or terminate this Contract in contravention of any applicable
federal or state regulations, or any provision of the Articles of Incorporation,
and further provided, that the Fund on behalf of one or more of the Portfolios
may at any time by action of its Board of Directors (i) substitute another
bank or trust company for the Custodian by giving notice as described
above to the Custodian, or (ii) immediately terminate this Contract in the
event of the appointment of a conservator or receiver for the Custodian by the
Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent juris-
diction.
Upon termination of the Contract, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termiantion and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
15. Successor Custodian.
If a successor custodian for the Fund, of one or more of the Portfolios
shall be appointed by the Board of directors of the Fund, the Custodian shall,
upon termination, deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all securities of each
applicable Portfolio then held by it hereunder and shall transfer to an account
of the successor custodian all of the securities of each such Portfolio held in
a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Board of
Directors of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
<PAGE>
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered to
the Custodian on or before the date when such termiantion shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian on behalf of each applicable Portfolio and all
instruments held by the Custodian relative thereto and all other property held
by it under this Contract on behalf of each applicable Portfolio and to transfer
to an account of such successor custodian all of the securities of each such
Portfolio held in any Securities System. Thereafter, such bank or trust company
shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Directors to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
16. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and the
Fund on behalf of each of the Portfolios, may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of this
Contract. Any such interpretive or additional provisions shall be in writing
signed Dy both parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any applicable federal or
state regulations or any provision of the Articles of Incorporation of the Fund.
No interpretive or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Contract.
17. Additional Funds
In the event that the Fund establishes one or more series of Shares in
addition to INVESCO Short-Term Bond Fund, INVESCO U.S. Government Securities
Fund, INVESCO Select Income Fund, INVESCO High Yield Fund with respect to which
it desires to have the Custodian render services as custodian under the terms
hereof, it shall so notify the Custodian in writing, and if the Custodian agrees
in writing to provide such services, such series of Shares shall become a
Portfolio hereunder.
<PAGE>
18. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
19. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund on behalf of each of the Portfolios and the Custodian
relating to the custody of the Fund's assets.
20. Shareholder Communications
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, we need you to indicate whether you authorize us to provide your name,
address, and share position to requesting companies whose stock you own. If you
tell us "no", we will not provide this information to requesting companies. If
you tell us "yes" or do not check either "yes" or "no" below, we are required by
the rule to treat you as consenting to disclosure of this information for all
securities owned by you or any funds or accounts established by you. For your
protection, the Rule prohibits the requesting company from using your name and
address for any purpose other than corporate communications. Please indicate
below whether you consent or object by checking one of the alternatives below.
YES [ ] You are authorized to release our
name, address, and share positions.
NO [X] You are not authorized to release our
name, address, and share positions.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 1st day of July , 1993.
ATTEST INVESCO INCOME FUNDS, INC.
/s/ Glen A. Payne By: /s/ John M. Butler
- ------------------------------- ---------------------------------
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ By: /s/
- -------------------------------- --------------------------------
Assistant Secretary Executive Vice President
AMENDMENT TO CUSTODIAN CONTRACT
Agreement made by and between State Street Bank and Trust
Company (the "Custodian") and INVESCO Income Funds, Inc. (the
"Fund").
WHEREAS, the Custodian and the Fund are parties to a custodian contract
dated July 1, 1993 (the "Custodian Contract") governing the terms and conditions
under which the Custodian maintains custody of the securities and other assets
of the Fund; and
WHEREAS, the Custodian and the Fund desire to amend the terms and
conditions under which the Custodian maintains the Fund's securities and other
non-cash property in the custody of certain foreign sub-custodians in conformity
with the requirements of Rule 17f-5 under the Investment Company Act of 1940, as
amended;
NOW THEREFORE, in consideration of the premises and covenants contained
herein, the Custodian and the Fund hereby amend the Custodian Contract by the
addition of the following terms and provisions;
1. Notwithstanding any provisions to the contrary set forth in the
Custodian Contract, the Custodian may hold securities and other non-cash
property for all of its customers, including the Fund, with a foreign
sub-custodian in a single account that is identified as belonging to the
Custodian for the benefit of its customers, provided however, that (i) the
records of the Custodian with respect to securities and other non-cash property
of the Fund which are maintained in such account shall identify by bookentry
those securities and other non-cash property belonging to the Fund and (ii) the
Custodian shall require that securities and other non-cash property so held by
the foreign sub-custodian be held separately from any assets of the foreign
sub-custodian or of others.
2. Except as specifically superseded or modified herein, the terms and
provisions of the Custodian Contract shall continue to apply with full force and
effect.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed as a sealed instrument in its name and behalf by its duly authorized
representative this 25th day of October, 1995.
INVESCO INCOME FUNDS, INC.
By: /s/ Glen A. Payne
------------------------------
Title: Secretary
STATE STREET BANK AND TRUST COMPANY
By: /s/ Charles R. Whittemore, Jr.
------------------------------
Title: Vice President
TRANSFER AGENCY AGREEMENT
AGREEMENT made as of this 30th day of April, 1993, between INVESCO Income
Funds, Inc., a Maryland corporation, having its principal office and place of
business at 7800 East Union Avenue, Denver, Colorado, 80237 (hereinafter
referred to as the "Fund") and INVESCO Funds Group, Inc., a Delaware
corporation, having its principal place of business at 7800 E. Union Avenue,
Denver, CO 80237 (hereinafter referred to as the "Transfer Agent").
WITNESSETH:
That for and in consideration of mutual promises hereinafter set forth,
the Fund and the Transfer Agent agree as follows:
1. Definitions. Whenever used in this Agreement, the
following words and phrases, unless the context
otherwise requires, shall have the following meanings:
(a) "Authorized Person" shall be deemed to include the
President, any Vice President, the Secretary,
Treasurer, or any other person, whether or not any
such person is an officer or employee of the Fund,
duly authorized to give Oral Instructions and
Written Instructions on behalf of the Fund as
indicated in a certification as may be received by
the Transfer Agent from time to time;
(b) "Certificate" shall mean any notice, instruction or other
instrument in writing, authorized or required by this
Agreement to be given to the Transfer Agent, which is actually
received by the Transfer Agent and signed on behalf of the
Fund by any two officers thereof;
(c) "Commission" shall have the meaning given it in the
1940 Act;
(d) "Custodian" refers to the custodian of all of the
securities and other moneys owned by the Fund;
(e) "Oral Instructions" shall mean verbal instructions actually
received by the Transfer Agent from a person reasonably
believed by the Transfer Agent to be an Authorized Person;
(f) "Prospectus" shall mean the currently effective
prospectus relating to the Fund's Shares
registered under the Securities Act of 1933;
(g) "Shares" refers to the shares of common stock, $.01
par value, of the Fund;
<PAGE>
(h) "Shareholder" means a record owner of Shares;
(i) "Written Instructions" shall mean a written communication
actually received by the Transfer Agent where the receiver is
able to verify with a reasonable degree of certainty the
authenticity of the sender of such communication; and
(j) The "1940 Act" refers to the Investment Company Act of 1940
and the Rules and Regulations thereunder, all as amended from
time to time.
2. Representation of Transfer Agent. The Transfer Agent does hereby
represent and warrant to the Fund that it has an effective
registration statement on SEC Form TA-1 and, accordingly, has duly
registered as a transfer agent as provided in Section 17A(c) of the
Securities Exchange Act of 1934.
3. Appointment of the Transfer Agent. The Fund hereby appoints and
constitutes the Transfer Agent as transfer agent for all of the
Shares of the Fund authorized as of the date hereof, and the
Transfer Agent accepts such appointment and agrees to perform the
duties herein set forth. If the board of directors of the Fund
hereafter reclassifies the Shares, by the creation of one or more
additional series or otherwise, the Transfer Agent agrees that it
will act as transfer agent for the Shares so reclassified on the
terms set forth herein.
4. Compensation.
(a) The Fund will initially compensate the Transfer Agent for its
services rendered under this Agreement in accordance with the
fees set forth in the Fee Schedule annexed hereto and
incorporated herein.
(b) The parties hereto will agree upon the compensation for acting
as transfer agent for any series of Shares hereafter
designated and established at the time that the Transfer Agent
commences serving as such for said series, and such agreement
shall be reflected in a Fee Schedule for that series, dated
and signed by an authorized officer of each party hereto, to
be attached to this Agreement.
(c) Any compensation agreed to hereunder may be adjusted from time
to time by attaching to this Agreement a revised Fee Schedule,
dated and signed by an authorized officer of each party
hereto, and a certified copy of the resolution of the board of
directors of the Fund authorizing such revised Fee Schedule.
<PAGE>
(d) The Transfer Agent will bill the Fund as soon as practicable
after the end of each calendar month, and said billings will
be detailed in accordance with the Fee Schedule for the Fund.
The Fund will promptly pay to the Transfer Agent the amount of
such billing.
5. Documents. In connection with the appointment of the Transfer
Agent, the Fund shall, on or before the date this Agreement goes
into effect, file with the Transfer Agent the following documents:
(a) A certified copy of the Articles of Incorporation of the Fund,
including all amendments thereto, as then in effect;
(b) A certified copy of the Bylaws of the Fund, as then in effect;
(c) Certified copies of the resolutions of the board of directors
authorizing this Agreement and designating Authorized Persons
to give instructions to the Transfer Agent;
(d) A specimen of the certificate for Shares of the Fund in the
form approved by the board of directors, with a certificate of
the Secretary of the Fund as to such approval;
(e) All account application forms and other documents relating to
Shareholder accounts;
(f) A certified list of Shareholders of the Fund with the name,
address and tax identification number of each Shareholder, and
the number of Shares held by each, certificate numbers and
denominations (if any certificates have been issued), lists of
any accounts against which stops have been placed, together
with the reasons for said stops, and the number of Shares
redeemed by the Fund;
(g) Copies of all agreements then in effect between the Fund and
any agent with respect to the issuance, sale, or cancellation
of Shares; and
(h) An opinion of counsel for the Fund with respect to the
validity of the Shares.
6. Further Documentation. The Fund will also furnish from time to time
the following documents:
(a) Each resolution of the board of directors authorizing the
original issue of Shares;
(b) Each Registration Statement filed with the Commission, and
amendments and orders with respect thereto, in effect with
respect to the sale of Shares of the Fund;
<PAGE>
(c) A certified copy of each amendment to the Articles of
Incorporation and the Bylaws of the Fund;
(d) Certified copies of each resolution of the board of directors
designating Authorized Persons to give instructions to the
Transfer Agent;
(e) Certificates as to any change in any officer, director, or
Authorized Person of the Fund;
(f) Specimens of all new certificates for Shares accompanied by
the Fund's resolutions of the board of directors approving
such forms; and
(g) Such other certificates, documents or opinions as may mutually
be deemed necessary or appropriate for the Transfer Agent in
the proper performance of its duties.
7. Certificates for Shares and Records Pertaining Thereto.
(a) At the expense of the Fund, the Transfer Agent shall maintain
an adequate supply of blank share certificates to meet the
Transfer Agent's requirements therefor. Such share
certificates shall be properly signed by facsimile. The Fund
agrees that, notwithstanding the death, resignation, or
removal of any officer of the Fund whose signature appears on
such certificates, the Transfer Agent may continue to
countersign certificates which bear such signatures until
otherwise directed by the Fund.
(b) The Transfer Agent agrees to prepare, issue and mail
certificates as requested by the Shareholders for Shares of
the Fund in accordance with the instructions of the Fund and
to confirm such issuance to the Shareholder and the Fund or
its designee.
(c) The Fund hereby authorizes the Transfer Agent to issue
replacement share certificates in lieu of certificates which
have been lost, stolen or destroyed, without any further
action by the board of directors or any officer of the Fund,
upon receipt by the Transfer Agent of properly executed
affidavits or lost certificate bonds, in form satisfactory to
the Transfer Agent, with the Fund and the Transfer Agent as
obligees under any such bond.
(d) The Transfer Agent shall also maintain a record of each
certificate issued, the number of Shares represented thereby
and the holder of record. The Transfer Agent shall further
maintain a stop transfer record on lost and/or replaced
certificates.
<PAGE>
(e) The Transfer Agent may establish such additional rules and
regulations governing the transfer or registration of
certificates for Shares as it may deem advisable and
consistent with such rules and regulations generally adopted
by transfer agents.
8. Sale of Fund Shares.
(a) Whenever the Fund or its authorized agent shall sell or cause
to be sold any Shares, the Fund or its authorized agent shall
provide or cause to be provided to the Transfer Agent
information including: (i) the number of Shares sold, trade
date, and price; (ii) the amount of money to be delivered to
the Custodian for the sale of such Shares; (iii) in the case
of a new account, a new account application or sufficient
information to establish an account.
(b) The Transfer Agent will, upon receipt by it of a check or
other payment identified by it as an investment in Shares of
the Fund and drawn or endorsed to the Transfer Agent as agent
for, or identified as being for the account of, the Fund,
promptly deposit such check or other payment to the
appropriate account postings necessary to reflect the
investment. The Transfer Agent will notify the Fund, or its
designee, and the Custodian of all purchases and related
account adjustments.
(c) Upon receipt of the notification required under paragraph (a)
hereof and the notification from the Custodian that such money
has been received by it, the Transfer Agent shall issue to the
purchaser or his authorized agent such Shares as he is
entitled to receive, based on the appropriate net asset value
of the Fund's Shares, determined in accordance with applicable
federal law or regulation, as described in the Prospectus for
the Fund. In issuing Shares to a purchaser or his authorized
agent, the Transfer Agent shall be entitled to rely upon the
latest written directions, if any, previously received by the
Transfer Agent from the purchaser or his authorized agent
concerning the delivery of such Shares.
(d) The Transfer Agent shall not be required to issue any Shares
of the Fund where it has received Written Instructions from
the Fund or written notification from any appropriate federal
or state authority that the sale of the Shares of the Fund has
been suspended or discontinued, and the Transfer Agent shall
be entitled to rely upon such Written Instructions or written
notification.
<PAGE>
(e) Upon the issuance of any Shares of the Fund in accordance with
the foregoing provision of this Article, the Transfer Agent
shall not be responsible for the payment of any original issue
or other taxes required to be paid by the Fund in connection
with such issuance.
9. Returned Checks. In the event that any check or other order for the
payment of money is returned unpaid for any reason, the Transfer
Agent will: (i) give prompt notice of such return to the Fund or
its designee; (ii) place a stop transfer order against all Shares
issued or held on deposit as a result of such check or order; (iii)
in the case of any Shareholder who has obtained redemption checks,
place a stop payment order on the checking account on which such
checks are issued; and (iv) take such other steps as the Transfer
Agent may, in its discretion, deem appropriate or as the Fund or its
designee may instruct.
10. Redemptions.
(a) Redemptions By Mail or In Person. Shares of the Fund will be
redeemed upon receipt by the Transfer Agent of: (i) a written
request for redemption, signed by each registered owner
exactly as the Shares are registered; (ii) certificates
properly endorsed for any Shares for which certificates have
been issued; (iii) signature guarantees to the extent required
by the Transfer Agent as described in the Prospectus for the
Fund; and (iv) any additional documents required by the
Transfer Agent for redemption by corporations, executors,
administrators, trustees and guardians.
(b) Wire Orders or Telephone Redemptions. The Transfer Agent
will, consistent with procedures which may be established by
the Fund from time to time for redemption by wire or
telephone, upon receipt of such a wire order or telephone
redemption request, redeem Shares and transmit the proceeds of
such redemption to the redeeming Shareholder as directed. All
wire or telephone redemptions will be subject to such
additional requirements as may be described in the Prospectus
for the Fund. Both the Fund and the Transfer Agent reserve
the right to modify or terminate the procedures for wire order
or telephone redemptions at any time.
(c) Processing Redemptions. Upon receipt of all necessary
information and documentation relating to a redemption, the
Transfer Agent will issue to the Custodian an advice setting
forth the number of Shares of the Fund received by the
Transfer Agent for redemption and that such shares are valid
and in good form for redemption. The Transfer Agent shall,
upon receipt of the moneys paid to it by the Custodian for the
redemption of Shares, pay such moneys to the Shareholder, his
authorized agent or legal representative.
<PAGE>
11. Transfers and Exchanges. The Transfer Agent is authorized to review
and process transfers of Shares of the Fund and to the extent, if
any, permitted in the Prospectus for the Fund, exchanges between the
Fund and other mutual funds advised by INVESCO Funds Group, Inc., on
the records of the Fund maintained by the Transfer Agent. If Shares
to be transferred are represented by outstanding certificates, the
Transfer Agent will, upon surrender to it of the certificates in
proper form for transfer, and upon cancellation thereof, countersign
and issue new certificates for a like number of Shares and deliver
the same. If the Shares to be transferred are not represented by
outstanding certificates, the Transfer Agent will, upon an order
therefor by or on behalf of the registered holder thereof in proper
form, credit the same to the transferee on its books. If Shares are
to be exchanged for Shares of another mutual fund, the Transfer
Agent will process such exchange in the same manner as a redemption
and sale of Shares, except that it may in its discretion waive
requirements for information and documentation.
12. Right to Seek Assurances. The Transfer Agent reserves the right to
refuse to transfer or redeem Shares until it is satisfied that the
requested transfer or redemption is legally authorized, and it shall
incur no liability for the refusal, in good faith, to make transfers
or redemptions which the Transfer Agent, in its judgment, deems
improper or unauthorized, or until it is satisfied that there is no
basis for any claims adverse to such transfer or redemption. The
Transfer Agent may, in effecting transfers, rely upon the provisions
of the Uniform Act for the Simplification of Fiduciary Security
Transfers or the Uniform Commercial Code, as the same may be amended
from time to time, which in the opinion of legal counsel for the
Fund or of its own legal counsel protect it in not requiring certain
documents in connection with the transfer or redemption of Shares of
the Fund, and the Fund shall indemnify the Transfer Agent for any
act done or omitted by it in reliance upon such laws or opinions of
counsel to the Fund or of its own counsel.
13. Distributions.
(a) The Fund will promptly notify the Transfer Agent of the
declaration of any dividend or distribution. The Fund shall
furnish to the Transfer Agent a resolution of the board of
directors of the Fund certified by the Secretary authorizing
the declaration of dividends and authorizing the Transfer
Agent to rely on Oral Instructions or a Certificate specifying
the date of the declaration of such dividend or distribution,
the date of payment thereof, the record date as of which
Shareholders entitled to payment shall be determined, the
amount payable per share to Shareholders of record as of that
date, and the total amount payable to the Transfer Agent on
the payment date.
<PAGE>
(b) The Transfer Agent will, on or before the payable date of any
dividend or distribution, notify the Custodian of the
estimated amount of cash required to pay said dividend or
distribution, and the Fund agrees that, on or before the
mailing date of such dividend or distribution, it shall
instruct the Custodian to place in a dividend disbursing
account funds equal to the cash amount to be paid out. The
Transfer Agent, in accordance with Shareholder instructions,
will calculate, prepare and mail checks to, or (where
appropriate) credit such dividend or distribution to the
account of, Fund Shareholders, and maintain and safeguard all
underlying records.
(c) The Transfer Agent will replace lost checks upon receipt of
properly executed affidavits and maintain stop payment orders
against replaced checks.
(d) The Transfer Agent will maintain all records necessary to
reflect the crediting of dividends which are reinvested in
Shares of the Fund.
(e) The Transfer Agent shall not be liable for any improper
payments made in accordance with the resolution of the board
of directors of the Fund.
(f) If the Transfer Agent shall not receive from the Custodian
sufficient cash to make payment to all Shareholders of the
Fund as of the record date, the Transfer Agent shall, upon
notifying the Fund, withhold payment to all Shareholders of
record as of the record date until such sufficient cash is
provided to the Transfer Agent.
14. Other Duties. In addition to the duties expressly provided for
herein, the Transfer Agent shall perform such other duties and
functions as are set forth in the Fee Schedules(s) hereto from time
to time.
15. Taxes. It is understood that the Transfer Agent shall file such
appropriate information returns concerning the payment of dividends
and capital gain distributions with the proper federal, state and
local authorities as are required by law to be filed by the Fund and
shall withhold such sums as are required to be withheld by
applicable law.
16. Books and Records.
(a) The Transfer Agent shall maintain records showing for each
investor's account the following: (i) names, addresses, tax
identifying numbers and assigned account numbers; (ii) numbers
<PAGE>
of Shares held; (iii) historical information regarding the
account of each Shareholder, including dividends paid and date
and price of all transactions on a Shareholder's account; (iv)
any stop or restraining order placed against a Shareholder's
account; (v) information with respect to withholdings in the
case of a foreign account; (vi) any capital gain or dividend
reinvestment order, plan application, dividend address and
correspondence relating to the current maintenance of a
Shareholder's account; (vii) certificate numbers and
denominations for any Shareholders holding certificates; and
(viii) any information required in order for the Transfer
Agent to perform the calculations contemplated or required by
this Agreement.
(b) Any records required to be maintained by Rule 31a-1 under the
1940 Act will be preserved for the periods prescribed in Rule
31a-2 under the 1940 Act. Such records may be inspected by the
Fund at reasonable times. The Transfer Agent may, at its
option at any time, and shall forthwith upon the Fund's
demand, turn over to the Fund and cease to retain in the
Transfer Agent's files, records and documents created and
maintained by the Transfer Agent in performance of its
services or for its protection. At the end of the six-year
retention period, such records and documents will either be
turned over to the Fund, or destroyed in accordance with the
Fund's authorization.
17. Shareholder Relations.
(a) The Transfer Agent will investigate all Shareholder inquiries
related to Shareholder accounts and respond promptly to
correspondence from Shareholders.
(b) The Transfer Agent will address and mail all communications to
Shareholders or their nominees, including proxy material and
periodic reports to Shareholders.
(c) In connection with special and annual meetings of
Shareholders, the Transfer Agent will prepare Shareholder
lists, mail and certify as to the mailing of proxy materials,
process and tabulate returned proxy cards, report on proxies
voted prior to meetings, and certify to the Secretary of the
Fund Shares to be voted at meetings.
18. Reliance by Transfer Agent; Instructions.
(a) The Transfer Agent shall be protected in acting upon any paper
or document believed by it to be genuine and to have been
signed by an Authorized Person and shall not be held to have
<PAGE>
any notice of any change of authority of any person until
receipt of written certification thereof from the Fund. It
shall also be protected in processing Share certificates which
it reasonably believes to bear the proper manual or facsimile
signatures of the officers of the Fund and the proper
countersignature of the Transfer Agent.
(b) At any time the Transfer Agent may apply to any Authorized
Person of the Fund for Written Instructions, and, at the
expense of the Fund, may seek advice from legal counsel for
the Fund, with respect to any matter arising in connection
with this Agreement, and it shall not be liable for any action
taken or not taken or suffered by it in good faith in
accordance with such Written Instructions or with the opinion
of such counsel. In addition, the Transfer Agent, its
officers, agents or employees, shall accept instructions or
requests given to them by any person representing or acting on
behalf of the Fund only if said representative is known by the
Transfer Agent, its officers, agents or employees, to be an
Authorized Person. The Transfer Agent shall have no duty or
obligation to inquire into, nor shall the Transfer Agent be
responsible for, the legality of any act done by it upon the
request or direction of Authorized Persons of the Fund.
(c) Notwithstanding any of the foregoing provisions of this
Agreement, the Transfer Agent shall be under no duty or
obligation to inquire into, and shall not be liable for: (i)
the legality of the issue or sale of any Shares of the Fund,
or the sufficiency of the amount to be received therefor; (ii)
the legality of the redemption of any Shares of the Fund, or
the propriety of the amount to be paid therefor; (iii) the
legality of the declaration of any dividend by the Fund, or
the legality of the issue of any Shares of the Fund in payment
of any stock dividend; or (iv) the legality of any
recapitalization or readjustment of the Shares of the Fund.
19. Standard of Care and Indemnification.
(a) The Transfer Agent may, in connection with this Agreement,
employ agents or attorneys in fact, and shall not be liable
for any loss arising out of or in connection with its actions
under this Agreement so long as it acts in good faith and with
due diligence, and is not negligent or guilty of any willful
misconduct.
(b) The Fund hereby agrees to indemnify and hold harmless the
Transfer Agent from and against any and all claims, demands,
expenses and liabilities (whether with or without basis in
fact or law) of any and every nature which the Transfer Agent
<PAGE>
may sustain or incur or which may be asserted against the
Transfer Agent by any person by reason of, or as a result of:
(i) any action taken or omitted to be taken by the Transfer
Agent in good faith in reliance upon any Certificate,
instrument, order or stock certificate believed by it to be
genuine and to be signed, countersigned or executed by any
duly Authorized Person, upon the Oral Instructions or Written
Instructions of an Authorized Person of the Fund or upon the
opinion of legal counsel for the Fund or its own counsel; or
(ii) any action taken or omitted to be taken by the Transfer
Agent in connection with its appointment in good faith in
reliance upon any law, act, regulation or interpretation of
the same even though the same may thereafter have been
altered, changed, amended or repealed. However,
indemnification hereunder shall not apply to actions or
omissions of the Transfer Agent or its directors, officers,
employees or agents in cases of its own gross negligence,
willful misconduct, bad faith, or reckless disregard of its or
their own duties hereunder.
20. Affiliation Between Fund and Transfer Agent. It is understood that
the directors, officers, employees, agents and Shareholders of the
Fund, and the officers, directors, employees, agents and
shareholders of the Fund's investment adviser, INVESCO Funds Group,
Inc. (the "Adviser"), are or may be interested in the Transfer Agent
as directors, officers, employees, agents, shareholders, or
otherwise, and that the directors, officers, employees, agents or
shareholders of the Transfer Agent may be interested in the Fund as
directors, officers, employees, agents, shareholders, or otherwise,
or in the Adviser as officers, directors, employees, agents,
shareholders or otherwise.
21. Term.
(a) This Agreement shall become effective on the effective date of
the reorganization of Financial Bond Shares, Inc. into INVESCO
Income Funds, Inc. Thereafter, this Agreement shall continue
in effect for an initial term expiring April 30, 1994, and
from year to year thereafter, so long as such continuance is
specifically approved at least annually both: (i) by either
the board of directors or the vote of a majority of the
outstanding voting securities of the Fund; and (ii) by a vote
of the majority of the directors who are not interested
persons of the Fund (as defined in the 1940 Act) cast in
person at a meeting called for the purpose of voting upon such
approval.
<PAGE>
(b) Either of the parties hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the
date of such termination, which shall not be less than 60 days
after the date of receipt of such notice. In the event such
notice is given by the Fund, it shall be accompanied by a
resolution of the board of directors, certified by the
Secretary, electing to terminate this Agreement and
designating a successor transfer agent.
22. Amendment. This Agreement may not be amended or modified in any
manner except by a written agreement executed by both parties with
the formality of this Agreement, and (i) authorized or approved by
the resolution of the board of directors, including a majority of
the directors of the Fund who are not interested persons of the Fund
as defined in the 1940 Act, or (ii) authorized and approved by such
other procedures as may be permitted or required by the 1940 Act.
23. Subcontracting. The Fund agrees that the Transfer Agent may, in its
discretion, subcontract for certain of the services to be provided
hereunder; provided, however, that the transfer agent will be liable
to the Fund for any loss arising out of or in connection with the
actions of any subcontractor, if the subcontractor fails to act in
good faith and with due diligence or is negligent or guilty of any
willful misconduct.
24. Miscellaneous.
(a) Any notice and other instrument in writing, authorized or
required by this Agreement to be given to the Fund or the
Transfer Agent, shall be sufficiently given if addressed to
that party and mailed or delivered to it at its office set
forth below or at such other place as it may from time to time
designate in writing.
To the Fund:
INVESCO Income Funds, Inc.
Post Office Box 173706
Denver, Colorado 80217-3706
Attention: John M. Butler, President
To the Transfer Agent:
INVESCO Funds Group, Inc.
Post Office Box 173706
Denver, Colorado 80217-3706
Attention: Dan J. Hesser, President
<PAGE>
(b) This Agreement shall not be assignable and in the event of its
assignment (in the sense contemplated by the 1940 Act), it
shall automatically terminate.
(c) This Agreement shall be construed in accordance with the laws
of the State of Colorado.
(d) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original; but such
counterparts shall, together, constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate officers thereunder duly authorized and
their respective corporate seals to be hereunto affixed, as of the day and year
first above written.
INVESCO INCOME FUNDS, INC.
By: /s/ John M. Butler
------------------
John M. Butler, President
ATTEST:
/s/ Glen A. Payne
- ------------------------
Glen A. Payne, Secretary
INVESCO FUNDS GROUP, INC.
By: /s/ Dan J. Hesser
-----------------
Dan J. Hesser, President
ATTEST:
/s/ Glen A. Payne
- ------------------------
Glen A. Payne, Secretary
<PAGE>
AMENDED FEE SCHEDULE
for
Services Pursuant to Transfer Agency Agreement, dated April 30, 1993,
between INVESCO Income Funds, Inc. (the "Fund") and INVESCO Funds Group, Inc. as
Transfer Agent (the "Agreement").
Account Maintenance Charges. Fees are based on an annual charge set forth
below per shareholder account or omnibus account participant for account
maintenance, as described in the Agreement. This charge, in the amount of $14.00
per shareholder account per year, or in the case of omnibus accounts that are
invested in the Fund, $14.00 per participant in such accounts per year, is
billable monthly at the rate of one-twelfth (1/12) of the annual fee. A charge
is made for an account in the month that it opens or closes, as well as in each
month which the account remains open, regardless of the account balance.
Expenses. The Fund shall not be liable for reimbursement to the Transfer
Agent of expenses incurred by it in the performance of services pursuant to the
Agreement, provided, however, that nothing herein or in the Agreement shall be
construed as affecting in any manner any obligations assumed by the Fund with
respect to expense payment or reimbursement pursuant to a separate written
agreement between the Fund and the Transfer Agent or any affiliate thereof.
Effective this 1st day of April, 1994.
INVESCO INCOME FUNDS, INC.
By: /s/ Dan J. Hesser
-----------------
Dan J. Hesser, President
ATTEST:
/s/ Glen A. Payne
- --------------------------
Glen A. Payne, Secretary
INVESCO FUNDS GROUP, INC.
By: /s/ Ronald L. Grooms
--------------------
Ronald L. Grooms,
Senior Vice President
ATTEST:
/s/ Glen A. Payne
- --------------------------
Glen A. Payne, Secretary
AMENDMENT NO. 2
to
FEE SCHEDULE
for
Services Pursuant to Transfer Agency Agreement, dated April 21, 1993,
between INVESCO Income Funds, Inc. (the "Fund") and INVESCO Funds Group, Inc. as
Transfer Agent (the "Agreement").
Account Maintenance Charges. Fees are based on an annual charge set forth
below per shareholder account or omnibus account participant for account
maintenance, as described in the Agreement. This charge, in the amount of $26.00
per shareholder account per year, or in the case of omnibus accounts that are
invested in the Fund, $26.00 per participant in such accounts per year, is
billable monthly at the rate of one-twelfth (1/12) of the annual fee. A charge
is made for an account int he month that it opens or closes, as well as in each
month which the account remains open, regardless of the account balance.
Expenses. The Fund shall not be liable for reimbursement to the Transfer
Agent of expenses incurred by it in the performance of services pursuant to the
Agreement, provided, however, that nothing herein or in the Agreement shall be
construed as affecting in any manner any obligations assumed by the Fund with
respect to expense payment or reimbursement pursuant to a separate written
agreement between the Fund and the Transfer Agent or any affiliate thereof.
Effective this 1st day of May, 1996.
INVESCO INCOME FUNDS, INC.
By: /s/ Dan J. Hesser
-----------------
Dan J. Hesser, President
ATTEST:
/s/ Glen A. Payne
- -----------------------------
Glen A. Payne, Secretary
INVESCO FUNDS GROUP, INC.
By: /s/ Ronald L. Grooms
--------------------
Ronald L. Grooms,
Senior Vice President
ATTEST:
/s/ Glen A. Payne
- -------------------------------
Glen A. Payne, Secretary
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT made as of the 30th day of April, 1993, in Denver, Colorado, by
and between INVESCO Income Funds, Inc., a Maryland corporation (the "Fund"), and
INVESCO Funds Group, Inc., a Delaware corporation (hereinafter referred to as
"INVESCO").
WHEREAS, the Fund is engaged in business as an open-end management
investment company, is registered as such under the Investment Company Act of
1940, as amended (the "Act"), and is authorized to issue shares representing
interests in the following separate portfolios of investments: INVESCO Select
Income Fund; the INVESCO High Yield Fund; and the INVESCO U.S. Government
Securities Fund (the "Portfolios"); and
WHEREAS, INVESCO is registered as an investment adviser under the
Investment Advisers Act of 1940, and engages in the business of acting as
investment adviser and providing certain other administrative, sub-accounting,
and recordkeeping services to certain investment companies, including the
Portfolios; and
WHEREAS, the Fund desires to retain INVESCO to render certain
administrative, sub-accounting, and recordkeeping services (the "Services") in
the manner and on the terms and conditions hereinafter set forth; and
WHEREAS, INVESCO desires to be retained to perform such
services on said terms and conditions;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the Fund and INVESCO agree as follows:
1. The Fund hereby retains INVESCO to provide, or, upon
receipt of written approval of the Fund arrange for other
companies, including affiliates of INVESCO, to provide to
the Portfolios: A) such sub-accounting and recordkeeping
services and functions as are reasonably necessary for
the operation of the Portfolios. Such services shall
include, but shall not be limited to, preparation and
maintenance of the following required books, records and
other documents: (1) journals containing daily itemized
records of all purchases and sales, and receipts and
deliveries of securities and all receipts and
disbursements of cash and all other debits and credits,
in the form required by Rule 31a-1(b)(1) under the Act;
(2) general and auxiliary ledgers reflecting all asset,
liability, reserve, capital, income and expense accounts,
in the form required by Rules 31a-1(b)(2)(i) - (iii)
under the Act; (3) a securities record or ledger
reflecting separately for each portfolio security as of
trade date all "long" and "short" positions carried by
the Portfolios for the account of the Portfolios, if any,
and showing the location of all securities long and the
<PAGE>
off-setting position to all securities short, in the form required
by Rule 31a-1(b)(3) under the Act; (4) a record of all portfolio
purchases or sales, in the form required by Rule 31a-1(b)(6) under
the Act; (5) a record of all puts, calls, spreads, straddles and all
other options, if any, in which the Portfolios have any direct or
indirect interest or which the Portfolios have granted or
guaranteed, in the form required by Rule 31a-1(b)(7) under the Act;
(6) a record of the proof of money balances in all ledger accounts
maintained pursuant to this Agreement, in the form required by Rule
31a-1(b)(8) under the Act; and (7) price make-up sheets and such
records as are necessary to reflect the determination of the
Portfolios' net asset value. The foregoing books and records shall
be maintained and preserved by INVESCO in accordance with and for
the time periods specified by applicable rules and regulations,
including Rule 31a-2 under the Act. All such books and records shall
be the property of the Fund and, upon request therefor, INVESCO
shall surrender to the Fund such of the books and records so
requested; and B) such sub-accounting, recordkeeping, and
administrative services and functions, which shall be furnished by
INVESCO's wholly-owned subsidiary, INVESCO Solutions, Inc., as are
reasonably necessary for the operation of Portfolio shareholder
accounts maintained by certain retirement plans and employee benefit
plans for the benefit of participants in such plans. Such services
and functions shall include, but shall not be limited to: (1)
establishing new retirement plan participant accounts; (2) receipt
and posting of weekly, bi-weekly and monthly retirement plan
contributions; (3) allocation of contributions to each participant's
individual Portfolio account; (4) maintenance of separate account
balances for each source of retirement plan money (i.e., Company,
Employee, Voluntary, Rollover) invested in the Portfolios; (5)
purchase, sale, exchange or transfer of monies in the retirement
plan as directed by the relevant party; (6) distribution of
monies for participant loans, hardships, terminations, death or
disability payments; (7) distribution of periodic payments for
retired participants; (8) posting of distributions of interest,
dividends and long-term capital gains to participants by the
Portfolios; (9) production of monthly, quarterly and/or annual
statements of all Portfolio activity for the relevant parties; (10)
processing of participant maintenance information for investment
election changes, address changes, beneficiary changes and Qualified
Domestic Relations Orders; (11) responding to telephone and written
inquiries concerning Portfolio investments, retirement plan
provisions and compliance issues; (12) performing discrimination
testing and counseling employers on cure options on failed tests;
(13) preparation of 1099R and W2P participant IRS tax forms; (14)
preparation of, or assisting in the preparation of, 5500 Series tax
forms, Summary Plan Descriptions and Determination Letters; and (15)
reviewing legislative and IRS changes to keep the retirement plan in
compliance with applicable law.
<PAGE>
2. INVESCO shall, at its own expense, maintain such staff and employ or
retain such personnel and consult with such other persons as it
shall from time to time determine to be necessary or useful to the
performance of its obligations under this Agreement. Without
limiting the generality of the foregoing, such staff and personnel
shall be deemed to include officers of INVESCO and persons employed
or otherwise retained by INVESCO to provide or assist in providing
the Services to the Portfolios.
3. INVESCO shall, at its own expense, provide such office space,
facilities and equipment (including, but not limited to, computer
equipment, communication lines and supplies) and such clerical help
and other services as shall be necessary to provide the Services to
the Portfolios. In addition, INVESCO may arrange on behalf of the
Portfolios to obtain pricing information regarding the Portfolios'
investment securities from such company or companies as are approved
by a majority of the Fund's board of directors; and, if necessary,
the Fund shall be financially responsible to such company or
companies for the reasonable cost of providing such pricing
information.
4. The Fund will, from time to time, furnish or otherwise make
available to INVESCO such information relating to the business and
affairs of the Portfolios as INVESCO may reasonably require in order
to discharge its duties and obligations hereunder.
5. For the services rendered, facilities furnished, and expenses
assumed by INVESCO under this Agreement, the Fund shall pay to the
Investment Adviser a $10,000 per year per Portfolio base fee, plus
an additional fee, computed on a daily basis and paid on a monthly
basis. For purposes of each daily calculation of this additional
fee, the most recently determined net asset value of each Portfolio,
as determined by a valuation made in accordance with the Fund's
procedure for calculating each Portfolio's net asset value as
described in each Portfolio's Prospectus and/or Statement of
Additional Information, shall be used. The additional fee to
INVESCO under this Agreement shall be computed at the annual rate of
0.015% of each Portfolio's daily net assets as so determined.
During any period when the determination of a Portfolio's net asset
value is suspended by the directors of the Fund, the net asset value
of a share of that Portfolio as of the last business day prior to
such suspension shall, for the purpose of this Paragraph 5, be
deemed to be the net asset value at the close of each succeeding
business day until it is again determined.
6. INVESCO will permit representatives of the Fund including the Fund's
independent auditors to have reasonable access to the personnel and
records of INVESCO in order to enable such representatives to
monitor the quality of services being provided and the level of fees
<PAGE>
due INVESCO pursuant to this Agreement. In addition, INVESCO shall
promptly deliver to the board of directors of the Fund such
information as may reasonably be requested from time to time to
permit the board of directors to make an informed determination
regarding continuation of this Agreement and the payments
contemplated to be made hereunder.
7. This Agreement shall become effective on the effective date of the
reorganization of Financial Bond Shares, Inc. into INVESCO Income
Funds, Inc. Thereafter, this Agreement shall remain in effect until
no later than April 30, 1994 and from year to year thereafter
provided such continuance is approved at least annually by the vote
of a majority of the directors of the Fund who are not parties to
this Agreement or "interested persons" (as defined in the Act) of
any such party, which vote must be cast in person at a meeting
called for the purpose of voting on such approval; and further
provided, however, that (a) the Fund may, at any time and without
the payment of any penalty, terminate this Agreement upon thirty
days written notice to the Investment Adviser; (b) the Agreement
shall immediately terminate in the event of its assignment (within
the meaning of the Act and the Rules thereunder) unless the Board of
Directors of the Fund approves such assignment; and (c) the
Investment Adviser may terminate this Agreement without payment of
penalty on sixty days written notice to the Fund. Any notice under
this Agreement shall be given in writing, addressed and delivered,
or mailed postage prepaid, to the other party at the principal
office of such party.
8. This Agreement shall be construed in accordance with the laws of the
State of Colorado and the applicable provisions of the Act. To the
extent the applicable law of the State of Colorado or any of the
provisions herein conflict with the applicable provisions of the
Act, the latter shall control.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written.
INVESCO INCOME FUNDS, INC.
By: /s/ John M. Butler
------------------
John M. Butler
President
INVESCO FUNDS GROUP, INC.
By: /s/ Dan J. Hesser
-----------------
Dan J. Hesser
President
Amendment to Administrative Services Agreement
This is an Amendment to the Administrative Services Agreement made and
entered into between INVESCO Income Funds, Inc., a Maryland corporation (the
"Company"), and INVESCO Funds Group, Inc., a Delaware corporation ("IFG"), as of
the 30th day of April, 1993 (the "Services Agreement").
WHEREAS, the Company desires to have IFG perform certain administrative,
sub-accounting, and recordkeeping services with respect to the assets of the
Company allocable to the INVESCO Short- Term Bond Fund of the Company, and IFG
is willing and able to perform such services on the terms and conditions set
forth in the Services Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in the Services Agreement, it is agreed that the terms and conditions
of the Services Agreement shall be applicable to the Company's assets allocable
to the INVESCO Short-Term Bond Fund, to the same extent as if the INVESCO
Short-Term Bond Fund were to be added to the definition of "Portfolios" as
utilized in the Services Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to
Agreement on this day of July, 1993.
INVESCO INCOME FUNDS, INC.
By: /s/ John M. Butler
--------------------------
John M. Butler, President
ATTEST:
/s/ Glen A. Payne
- ---------------------------------
Glen A. Payne, Secretary
(CORPORATE SEAL)
INVESCO FUNDS GROUP, INC.
By /s/ Dan J. Hesser
-----------------
ATTEST: Dan J. Hesser, President
/s/ Glen A. Payne
- -----------------
Glen A. Payne, Secretary
(CORPORATE SEAL)
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectuses and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 36 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated September 30, 1996, relating to the financial
statements and financial highlights appearing in the August 31, 1996 Annual
Report to Shareholders of INVESCO Income Funds, Inc., which is also incorporated
by reference into the Registration Statement. We also consent to the references
to us under the heading "Financial Highlights" in the Prospectuses and under the
headings "Independent Accountants" and "Financial Statements" in the Statement
of Additional Information.
/s/ Price Waterhouse LLP
- ------------------------
Price Waterhouse LLP
Denver, Colorado
October 30, 1996
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POWER OF ATTORNEY
The person executing this Power of Attorney hereby appoints Edward F.
O'Keefe and Glen A. Payne, or either of them, as his attorney-in-fact to execute
and to file such Registration Statements under federal and state securities laws
and such Post-Effective Amendments to such Registration Statements of the
hereinafter described entities as such attorney-in-fact, or either of them, may
deem appropriate:
INVESCO Diversified Funds, Inc.
INVESCO Dynamics Fund, Inc.
INVESCO Emerging Opportunity Funds, Inc.
INVESCO Growth Fund, Inc.
INVESCO Income Funds, Inc.
INVESCO Industrial Income Fund, Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Multiple Asset Funds, Inc.
INVESCO Specialty Funds, Inc.
INVESCO Strategic Portfolios, Inc.
INVESCO Tax-Free Income Funds, Inc.
INVESCO Value Trust
INVESCO Variable Investment Funds, Inc.
This Power of Attorney, which shall not be affected by the disability of
the undersigned, is executed and effective as of the 23rd day of July, 1996.
/s/ Hubert L. Harris, Jr.
-------------------------
Hubert L. Harris, Jr.
STATE OF GEORGIA )
)
COUNTY OF DELALB )
SUBSCRIBED, SWORN TO AND ACKNOWLEDGED before me by Hubert L. Harris, Jr.,
as a director or trustee of each of the above-described entities, this 23rd day
of July, 1996.
/s/ Cecilia Underwood
---------------------
Notary Public
My Commission Expires: October 14, 1997
