INVESCO Short-Term Bond Fund
Supplement to Prospectus
dated December 29, 1995
The section of the Fund's Prospectus entitled "Essential Information - Risks" is
amended to read as follows:
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."
Additionally, the section of the Fund's Prospectus entitled "Essential
Information -- Organization and Management" is amended to (1) delete the second
paragraph and 92) substitute the following new paragraph in its place:
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 holds a M.B.A. from the University
of Northern Iowa and a B.B.A. from the University of Iowa; he is both a
Chartered Financial Analyst and a Certified Public Accountant. Mr.
Hinderlie earned his M.B.A. from Arizona State University and his B.A. from
Pacific Lutheran University.
Additionally, the section of the Fund's Prospectus entitled "Investment
Objective and Strategy" is amended to (1) delete the second paragraph and (2)
substitute the following new paragraph in its place:
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.
Additionally, the section of the Fund's Prospectus entitled "Investment Policies
and Risks" is amended to (1) delete the third paragraph and (2) substitute the
following new paragraph in its place:
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. 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)
enjoy strong to adequate capacity to pay principal and interest. No more
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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 some speculative characteristics,
according to the ratings services. Never, under any circumstances, does the
Fund invest in bonds rated below B. Although bonds rated B currently have
the capacity to meet interest and principal payments, adverse business,
financial or economic conditions likely 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.
In addition, the section of the Fund's Prospectus entitled "The Fund and Its
Management" is amended to (1) delete the third paragraph and add the following
paragraphs in its place:
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
senior vice president of INVESCO Trust since 1994, he entered the
investment management industry in 1976. Mr. Paul's recent career includes
these highlights: From 1989 to 1992, he served as senior vice president
and director of fixed-income research, and from 1987 to 1992, as portfolio
manager, with Stein, Roe & Farnham, Inc. From 1993 to 1994, he was
president of Quixote Investment Management, Inc. Mr. Paul received a
B.B.A. from the University of Iowa and a M.B.A. from the University of
Northern Iowa. He is a Chartered Financial Analyst and a Certified Public
Accountant.
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
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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 a M.B.A. from Arizona State University and a
B.A. from Pacific Lutheran University.
The date of this Supplement is February 29, 1996.
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INVESCO INCOME FUNDS, INC.
Supplement to Statement of Additional Information
dated December 29, 1995
The first paragraph in the section of the above Statement of Additional
Information entitled "Investment Policies and Restrictions" is amended to read
as follows:
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 entitled
holders thereof to certain preferences in payment of dividends and assets
in priority to holders to common stock. As discussed in its prospectus,
the INVESCO Short-Term Bond Fund may invest in debt securities of all
types in any proportion, and may invest up to 15% of its total assets in
issues rated below investment grade quality. For a specific description of
each corporate bond rating category in which the INVESCO Short-Term Bond
Fund may invest, please refer to the Appendix.
Additionally, the following appendix is hereby added to the Statement of
Additional Information:
Appendix
BOND RATINGS
The following is a description of Standard & Poor's ("Standard &
Poor's") and Moody's Investors Service, Inc. ("Moody's") bond rating
categories applicable to the securities in which the INVESCO Short-Term
Bond Fund may invest:
Moody's Investors Service, Inc. Corporate Bond Ratings
Aaa - Bonds rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or by an
exceptionally stable margin, and principal is secure. While the various
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protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa - Bonds rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long term risk appear
somewhat larger than in Aaa securities.
A - Bonds rated A possess many favorable investment attributes, and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
Baa - Bonds rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba - Bonds rated Ba are judged to have speculative elements. Their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of
other terms of the contract over any longer period of time may be small.
Standard & Poor's Ratings Group Corporate Bond Ratings
AAA - This is the highest rating assigned by Standard & Poor's to a
debt obligation and indicates an extremely strong capacity to pay
principal and interest.
AA - Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority
of instances they differ from AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to the adverse
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effects of changes in circumstances and economic conditions than bonds in
higher rated categories.
BBB - Bonds rated BBB are regarded as having an adequate capability
to pay principal and interest. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
principal and interest for bonds in this category than for bonds in higher
rated categories.
BB - Bonds rated BB have less near-term vulnerability to default
than other speculative issues. However, they fact major ongoing
uncertainties or exposure to adverse business, financial, or economic
conditions which could lead to inadequate capacity to meet timely interest
and principal payments.
B - Bonds rated B have greater vulnerability to default but
currently have the capacity to meet interest payments and principal
repayments. Adverse business, financial, or economic conditions will
likely impair capacity or willingness to pay interest and repay principal.
The date of this Supplement is February 29, 1996.
