File No. 2-57151
As filed on October 30, ^ 1997
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
---
Pre-Effective Amendment No. ---------
Post-Effective Amendment No. ^ 37 X
--------- ---
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
---
Amendment No. ^ 26 X
------------ ---
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)
-------------------
Copies to:
Ronald M. Feiman, Esq.
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 W. 47th Street
New York, New York 10036
-------------------
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 ^ January 1, 1998, 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.
-------------------
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, ^ 1997 was
filed on or about October ^ 24, 1997.
Page 1 of 199
---
Exhibit index is located at page 109
---
<PAGE>
INVESCO INCOME FUNDS, INC.
---------------------------
CROSS-REFERENCE SHEET
Form N-1A
Item Caption
- --------- -------
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 ^ Funds and ^
Their Management
5....................... The ^ Funds and ^ Their
Management
5A...................... Not Applicable
6....................... Fund Services; Taxes,
Dividends and ^ Other
Distributions; Additional
Information
7....................... How ^ To Buy Shares; Fund
Price and Performance; Fund
Services; The ^ Funds and ^
Their 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
- --------- -------
12....................... The ^ Funds and ^ Their
Management
13....................... Investment ^ Policies and
Restrictions
14....................... The ^ Funds and ^ Their
Management
15....................... The ^ Funds and ^ Their
Management; Additional
Information
16....................... The ^ Funds and ^ Their
Management; Additional
Information
17....................... Investment ^ Policies and
Restrictions
18....................... Additional Information
19....................... How Shares Can Be Purchased;
How Shares Are Valued;
Services Provided by the ^
Funds; Tax-Deferred Retirement
Plans; How to Redeem Shares
20....................... Dividends, ^ Other
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.
-ii-
<PAGE>
PROSPECTUS
January 1, 1998
INVESCO INCOME FUNDS, INC.
INVESCO Select Income Fund
INVESCO High Yield Fund
INVESCO U.S. Government Securities Fund
INVESCO Short-Term Bond Fund
The four INVESCO Income Funds (the "Funds") described in this Prospectus are
actively managed to seek high current income through investments in fixed-income
securities. The INVESCO Select Income Fund (the "Select Income Fund"), the
INVESCO High Yield Fund (the "High Yield Fund"), the INVESCO U.S. Government
Securities Fund (the "U.S. Government Securities Fund") and the INVESCO
Short-Term Bond Fund (the "Short-Term Bond Fund") are diversified mutual funds
that seek 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. The
Select Income Fund, High Yield Fund and U.S. Government Securities Fund each
have a secondary objective of capital appreciation. The 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.
This Prospectus provides you with the basic information you should know
before investing in a Fund. You should read it and keep it for future reference.
A Statement of Additional Information containing further information about the
Funds, dated January 1, 1998, has been filed with the Securities and Exchange
Commission and is incorporated by reference into this Prospectus. To obtain a
free copy, write to INVESCO Distributors, Inc., P.O. Box 173706, Denver,
Colorado 80217-3706; call 1-800-525-8085; or visit us on the world wide web:
http://www.invesco.com.
The Select Income Fund may invest up to 50% of its total assets in lower
rated bonds, commonly known as "high yield" or "junk bonds." The High Yield Fund
invests primarily in such 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 these Funds. See
"Investment Objective and Strategy" and "Investment Policies and Risks."
<PAGE>
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 EACH FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION. THE SHARES
OF EACH FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
TABLE OF CONTENTS
ESSENTIAL INFORMATION.....................................................6
ANNUAL FUND EXPENSES......................................................7
FINANCIAL HIGHLIGHTS.....................................................10
INVESTMENT OBJECTIVE AND STRATEGY........................................18
INVESTMENT POLICIES AND RISKS............................................21
THE FUNDS AND THEIR MANAGEMENT...........................................27
FUND PRICE AND PERFORMANCE...............................................30
HOW TO BUY SHARES........................................................32
FUND SERVICES............................................................37
HOW TO SELL SHARES.......................................................38
TAXES, DIVIDENDS AND OTHER DISTRIBUTIONS.................................41
ADDITIONAL INFORMATION...................................................42
<PAGE>
ESSENTIAL INFORMATION
Investment Goals And Strategy: Select Income, High Yield and U.S. Government
Securities Funds are diversified mutual funds seeking high current income. The
High Yield Fund invests 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. The Select Income
Fund invests in securities whose maturities will vary with interest rates. The
U.S. Government Securities Fund invests primarily 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. Capital appreciation is a secondary objective for
the Select Income, High Yield and U.S. Government Securities Funds. Short-Term
Bond Fund seeks the highest current income consistent with minimum fluctuations
in principal value and with maintaining liquidity; this Fund's investments are
primarily in government and government agency debt securities, with a
dollar-weighted average maturity of not more than three years. There is no
guarantee that the Funds will meet their investment objective. See "Investment
Objective And Strategy" and "Investment Policies And Risks."
Designed For: The Select Income and the U.S. Government Securities Funds are
designed for investors seeking daily income, paid monthly. The High Yield Fund
is 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. The Short-Term Bond Fund is 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, one or more of these Funds may be a valuable
element of your investment portfolio. You may also wish to consider one of the
Funds as part of a Uniform Gifts/Transfers to Minors Act Account or systematic
investment strategy. Each Fund may be a suitable investment for tax-deferred
retirement programs such as the IRA, SEP-IRA, SIMPLE IRA, 401(k), Profit
Sharing, Money Purchase Pension, or 403(b) plans.
Time Horizon: The Funds are primarily managed for current income. The Select
Income, High Yield and U.S. Government Securities Funds also have a secondary
potential for capital growth. Investors should not consider each Fund as a
suitable investment for the portion of their savings devoted to capital
appreciation, or for that portion focused on liquidity and stable principal
value.
Risks: The Funds focus on fixed-income securities. Each Fund's investments
are subject to both credit risk and market risk, both of which are increased by
investing in lower rated securities. High Yield and Select Income 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" for specific risks associated with each Fund.
<PAGE>
Organization and Management: Each Fund is a series of INVESCO Income Funds,
Inc. (the "Company"), a diversified, managed, no-load mutual fund. Each Fund is
owned by its shareholders. The Funds employ INVESCO Funds Group, Inc. ("IFG"),
founded in 1932, to serve as investment adviser, administrator and transfer
agent. INVESCO Trust Company ("INVESCO Trust"), founded in 1969, serves as
sub-adviser. Together, IFG and INVESCO Trust constitute "Fund Management." Prior
to September 30, 1997, IFG served as the Funds' distributor. Effective September
30, 1997, INVESCO Distributors, Inc. ("IDI"), founded in 1997 as a wholly-owned
subsidiary of IFG, became the Funds' distributor.
Each Fund's investments are selected by its portfolio manager or managers.
See "The Funds And Their Management."
IFG, INVESCO Trust and IDI are subsidiaries of AMVESCAP PLC, an
international investment management company that manages approximately $177.5
billion in assets. AMVESCAP PLC is based in London with money managers located
in Europe, North America, and the Far East.
The Funds offer 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 per Fund, which is waived for
regular investment plans, including EasiVest and Direct Payroll
Purchase, and certain retirement plans.
Minimum Subsequent Investment: $50 per Fund (Minimums are lower for
certain retirement plans).
ANNUAL FUND EXPENSES
Each Fund is no-load; there are no fees to purchase, exchange or redeem
shares. Each Fund is authorized to pay a Rule 12b-1 distribution fee of up to
one quarter of one percent of each Fund's average net assets each year. (See
"How To Buy Shares -- Distribution Expenses.")
Like any company, each Fund has operating expenses -- such as portfolio
management, accounting, shareholder servicing, maintenance of shareholder
accounts, and other expenses. These expenses are paid from each Fund's assets.
Lower expenses therefore benefit investors by increasing a Fund's investment
return.
<PAGE>
We calculate annual operating expenses as a percentage of each Fund's
average annual net assets. To keep expenses competitive, the Funds' adviser
voluntarily reimburses the Select Income Fund, High Yield Fund and U.S.
Government Securities Fund for amounts in excess of 1.05%, 1.25% and 1.00%
(excluding excess amounts that have been offset by the expense offset
arrangements described below), respectively, of each Fund's average net assets.
The Short-Term Bond Fund's adviser and sub-adviser voluntarily reimburse the
Fund for amounts in excess of 0.85% (excluding excess amounts that have been
offset by the expense offset arrangements described (below) of the Fund's
average net assets.
Annual Fund Operating Expenses
- ------------------------------
(as a percentage of average net assets)
Select Income Fund
- ------------------
Management Fee 0.55%
12b-1 Fees 0.25%
Other Expenses 0.23%
Total Fund Operating Expenses (1)(2) 1.03%
High Yield Fund
- ---------------
Management Fee 0.47%
12b-1 Fees 0.25%
Other Expenses 0.28%
Total Fund Operating Expenses(1) 1.00%
U.S. Government Securities Fund
- -------------------------------
Management Fee 0.55%
12b-1 Fees 0.25%
Other Expenses 0.21%
Total Fund Operating Expenses (1)(2) 1.01%
Short-Term Bond Fund
- --------------------
Management Fee 0.50%
12b-1 Fees 0.25%
Other Expenses 0.08%
Total Fund Operating Expenses (1)(3) 0.83%
(1) It should be noted that each Fund's actual total operating expenses were
lower than the figures shown because each Fund's custodian and pricing expenses
were reduced under an expense offset arrangement. However, as a result of an SEC
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. See "The Funds And
Their Management."
(2) Certain Fund expenses are being voluntarily absorbed by IFG. In the
absence of such absorbed expenses, "Other Expenses" and "Total Fund Operating
Expenses" for the fiscal year ended August 31, 1997 would have been
0.41% and 1.21%, respectively, for Select Income Fund, and 0.52% and 1.32%,
<PAGE>
respectively, for U.S. Government Securities Fund. This is based on each
Fund's actual expenses for the fiscal year ended August 31, 1997. See "The Funds
And Their Management."
(3) Certain Fund expenses are being voluntarily absorbed by IFG and INVESCO
Trust. In the absence of such absorbed expenses, "Other Expenses" and "Total
Fund Operating Expenses" for the fiscal year ended August 31, 1997, would have
been 0.52% and 1.27%, respectively, for the Short-Term Bond Fund. This is based
on the Fund's actual expenses for the fiscal year ended August 31, 1997. See
"The Fund And Their 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
each 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
------ ------- ------- --------
Select Income $11 $33 $57 $126
High Yield $11 $32 $55 $123
U.S. Government Securities $11 $32 $56 $124
Short-Term Bond $9 $27 $46 $103
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 each Fund's expenses, see "The Funds and Their
Management" and "How To Buy Shares -- Distribution Expenses."
Because each Fund pays a distribution fee, investors who own shares of the
Funds 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 Company's 1997 Annual Report to Shareholders, which is
incorporated by reference into the Statement of Additional Information. Both are
available without charge by contacting IDI at the address or telephone number on
the cover of this Prospectus. The Annual Report also contains more information
about each Fund's performance.
<TABLE>
<CAPTION>
Period
Ended
Year Ended August 31 August 31 Year Ended December 31
-------------------------------------- ------- ---------------------------------------------------
1997 1996 1995 1994 1993^ 1992 1991 1990 1989 1988 1987
Select Income Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value -
Beginning of Period $6.35 $6.54 $6.18 $6.80 $6.53 $6.50 $5.96 $6.26 $6.39 $6.36 $7.10
-------------------------------------- ------ ---------------------------------------------------
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.45 0.47 0.47 0.47 0.33 0.52 0.53 0.59 0.63 0.61 0.63
Net Gains or (Losses)
on Securities (Both
Realized and
Unrealized) 0.34 (0.17) 0.36 (0.43) 0.27 0.13 0.53 (0.30) (0.13) 0.03 (0.74)
------------------------------------- ------ ---------------------------------------------------
Total from Investment
Operations 0.79 0.30 0.83 0.04 0.60 0.65 1.06 0.29 0.50 0.64 0.11
--------------------------------------- ------ ---------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net
Investment Income 0.45 0.46 0.47 0.47 0.33 0.52 0.52 0.59 0.63 0.61 0.63
In Excess of Net
Investment Income+ 0.00 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Distributions from
Capital Gains 0.03 0.02 0.00 0.09 0.00 0.10 0.00 0.00 0.00 0.00 0.00
<PAGE>
In Excess of Capital
Gains 0.00 0.00 0.00 0.10 0.00 0.00 0.00 0.00 0.00 0.00 0.00
-------------------------------------- ------ ---------------------------------------------------
Total Distributions 0.48 0.49 0.47 0.66 0.33 0.62 0.52 0.59 0.63 0.61 0.63
-------------------------------------- ------ ---------------------------------------------------
Net Asset Value -
End of Period $6.66 $6.35 $6.54 $6.18 $6.80 $6.53 $6.50 $5.96 $6.26 $6.39 $6.36
====================================== ====== ===================================================
TOTAL RETURN 12.89% 4.78% 14.01% 0.47% 9.42%* 10.38% 18.57% 4.86% 8.17% 10.52% (1.63%)
RATIOS
Net Assets - End of
Period
($000 Omitted) $287,618 $258,093 $216,597 $138,337 $158,780 $123,036 $93,827 $46,423 $32,783 $29,902 $19,751
Ratio of Expenses to
Average Net Assets# 1.03%@ 1.01%@ 1.00% 1.11% 1.15%~ 1.14% 1.15% 1.01% 0.99% 1.00% 0.99%
Ratio of Net
Investment Income
to Average
Net Assets# 6.98% 7.14% 7.38% 7.22% 7.40%~ 7.97% 8.57% 9.67% 9.92% 9.47% 9.36%
Portfolio Turnover Rate 263% 210% 181% 135% 105%* 178% 117% 38% 121% 143% 131%
^ From January 1, 1993 to August 31, 1993.
+ 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, 1997, 1996, 1995 and 1994. If such expenses had not been
voluntarily absorbed, ratio of expenses to average net assets would have been
1.21%, 1.16%, 1.22% and 1.15%, respectively, and ratio of net investment income
to average net assets would have been 6.80%, 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>
<TABLE>
<CAPTION>
Period
Ended
Year Ended August 31 August 31 Year Ended December 31
-------------------------------------- ------- ---------------------------------------------------
1997 1996 1995 1994 1993^ 1992 1991 1990 1989 1988 1987
High Yield Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value -
Beginning of Period $6.84 $6.73 $6.73 $7.32 $6.97 $6.66 $6.00 $7.16 $7.82 $7.75 $8.38
-------------------------------------- ------- ---------------------------------------------------
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.62 0.63 0.66 0.62 0.39 0.64 0.70 0.83 0.95 0.93 0.94
Net Gains or (Losses)
on Securities (Both
Realized and
Unrealized) 0.64 0.11 0.03 (0.59) 0.36 0.30 0.64 (1.14) (0.66) 0.07 (0.63)
-------------------------------------- ------- ---------------------------------------------------
Total from Investment
Operations 1.26 0.74 0.69 0.03 0.75 0.94 1.34 (0.31) 0.29 1.00 0.31
-------------------------------------- ------- ---------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net
Investment Income+ 0.62 0.63 0.66 0.62 0.40 0.63 0.68 0.85 0.95 0.93 0.94
Distributions from
Capital Gains 0.03 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
In Excess of Capital
Gains 0.00 0.00 0.03 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
-------------------------------------- ------- ---------------------------------------------------
Total Distributions 0.65 0.63 0.69 0.62 0.40 0.63 0.68 0.85 0.95 0.93 0.94
-------------------------------------- ------- ---------------------------------------------------
Net Asset Value -
End of Period $7.45 $6.84 $6.73 $6.73 $7.32 $6.97 $6.66 $6.00 $7.16 $7.82 $7.75
====================================== ======= ===================================================
TOTAL RETURN 19.27% 11.38% 11.12% 0.37% 11.01%* 14.53% 23.51% (4.57%) 3.72% 13.54% 3.52%
<PAGE>
RATIOS
Net Assets - End of
Period
($000 Omitted) $470,965 $375,201 $288,959 $243,773 $308,945 $212,172 $99,103 $40,380 $49,017 $60,470 $37,848
Ratio of Expenses to
Average Net Assets# 1.00%@ 0.99%@ 1.00% 0.97% 0.97%~ 1.00% 1.05% 0.94% 0.83% 0.82% 0.86%
Ratio of Net
Investment Income
to Average
Net Assets# 8.71% 9.13% 10.01% 8.70% 8.28%~ 9.29% 10.57% 12.57% 12.27% 11.72% 11.22%
Portfolio Turnover Rate 129% 266% 201% 195% 45%* 120% 64% 28% 53% 42% 89%
^ From January 1, 1993 to August 31, 1993.
+ 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, if applicable, which is before any expense offset
arrangements.
~ Annualized
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Period
Ended
Year Ended August 31 August 31 Year Ended December 31
------------------------------------- --------- ---------------------------------------------------
1997 1996 1995 1994 1993^ 1992 1991 1990 1989 1988 1987
U.S. Government Securities Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value -
Beginning of Period $7.15 $7.49 $7.10 $8.19 $7.61 $7.65 $7.09 $7.14 $6.87 $6.98 $7.90
------------------------------------- ------- ---------------------------------------------------
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.43 0.44 0.45 0.41 0.28 0.46 0.48 0.53 0.56 0.54 0.53
Net Gains or (Losses)
on Securities (Both
Realized and
Unrealized) 0.34 (0.34) 0.39 (0.93) 0.58 (0.04) 0.57 (0.05) 0.26 (0.11) (0.92)
------------------------------------- ------- ---------------------------------------------------
Total from Investment
Operations 0.77 0.10 0.84 (0.52) 0.86 0.42 1.05 0.48 0.82 0.43 (0.39)
------------------------------------- ------- ---------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net
Investment Income 0.43 0.43 0.45 0.41 0.28 0.46 0.49 0.53 0.55 0.54 0.53
In Excess of Net
Investment Income+ 0.00 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Distributions from
Capital Gains 0.00 0.00 0.00 0.16 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------------------------------------- ------ ---------------------------------------------------
Total Distributions 0.43 0.44 0.45 0.57 0.28 0.46 0.49 0.53 0.55 0.54 0.53
------------------------------------- ------ ---------------------------------------------------
Net Asset Value -
End of Period $7.49 $7.15 $7.49 $7.10 $8.19 $7.61 $7.65 $7.09 $7.14 $6.87 $6.98
===================================== ====== ===================================================
TOTAL RETURN 11.01% 1.31% 12.37% (6.53%) 11.61%* 5.68% 15.56% 7.23% 12.40% 6.39% (5.10%)
<PAGE>
RATIOS
Net Assets - End of
Period
($000 Omitted) $51,581 $54,614 $38,087 $36,740 $36,391 $35,799 $29,229 $21,247 $19,293 $9,388 $7,848
Ratio of Expenses to
Average Net Assets# 1.01%@ 1.02%@ 1.00% 1.32% 1.40%~ 1.27% 1.27% 1.07% 1.04% 1.19% 1.29%
Ratio of Net
Investment Income
to Average
Net Assets# 5.78% 5.76% 6.24% 5.46% 5.36%~ 6.08% 6.78% 7.58% 7.98% 7.75% 7.06%
Portfolio Turnover Rate 139% 212% 99% 95% 100%* 115% 67% 38% 159% 221% 284%
^ From January 1, 1993 to August 31, 1993.
+ 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, 1997, 1996, 1995 and 1994. If such expenses had not been
voluntarily absorbed, ratio of expenses to average net assets would have been
1.89%, 1.48%, 1.51% and 1.42%, respectively, and ratio of net investment income
to average net assets would have been 5.47%, 5.30%, 5.73% and 5.36%,
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>
<TABLE>
<CAPTION>
Period
Ended
Year Ended August 31 August 31
------------------------------------------ --------------
1997 1996 1995 1994^
Short-Term Bond Fund
<S> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value - Beginning of Period $9.41 $9.54 $9.46 $10.00
------------------------------------------ --------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.50 0.56 0.57 0.47
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 0.15 (0.13) 0.08 (0.54)
------------------------------------------ --------------
Total from Investment Operations 0.65 0.43 0.65 (0.07)
------------------------------------------ --------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income+ 0.55 0.56 0.57 0.47
------------------------------------------ --------------
Net Asset Value - End of Period $9.51 $9.41 $9.54 $9.46
========================================== ==============
TOTAL RETURN 7.08% 4.63% 7.16% (0.72%)*
RATIOS
Net Assets - End of Period ($000 Omitted) $12,344 $10,735 $8,979 $7,878
Ratio of Expenses to Average Net Assets# 0.83%@ 0.80%@ 0.46% 0.46%~
Ratio of Net Investment Income to
Average Net Assets# 5.82% 5.85% 6.05% 5.50%~
Portfolio Turnover Rate 331% 103% 68% 169%*
^ From September 30, 1993, commencement of investment 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.
<PAGE>
# Various expenses of the Fund were voluntarily absorbed by IFG and INVESCO
Trust for the years ended August 31, 1997, 1996, 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 1.27%, 2.17%, 2.09% and 2.04%,
respectively, and ratio of net investment income to average net assets would
have been 4.81%, 4.48%, 4.42% and 3.92%, 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 Select Income 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 it invests. The High Yield 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. The U.S. Government Securities 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 or instrumentalities, and in repurchase
agreements and futures contracts with respect to such securities. Potential
capital appreciation is a secondary factor in the selection of investments for
the Select Income, High Yield and U.S. Government Securities Funds. The
Short-Term Bond Fund seeks to achieve the highest level of current income as is
consistent with minimum fluctuation in principal value and with maintaining
liquidity. Each Fund's investment objective is fundamental and cannot be changed
without the approval of a Fund's shareholders. There is no assurance that a
Fund's investment objective will be met.
Portfolio Turnover. There are no fixed limitations regarding portfolio
turnover for the Funds; 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 each Fund's portfolio
turnover rate, its brokerage practices and certain federal income tax matters.
Select Income Fund
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 Ratings Group, Inc., a division of The McGraw- Hill Companies, Inc.
("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.
<PAGE>
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.
High Yield Fund
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 or BB or lower by
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.
U.S. Government Securities Fund
The Fund invests substantially all (and in no event less than 65%) of its
assets in government and government agency or government instrumentality debt
securities (including mortgage-backed securities issued or guaranteed by
government agencies or government-sponsored enterprises), 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.
<PAGE>
government agency securities not supported by the U.S. government, but only by
the creditworthiness of the government-related issuer. These include securities
issued by Fannie Mae (formerly, the Federal National Mortgage Association), the
Federal Home Loan Mortgage Corporation ("Freddie Mac"), the Federal Home Loan
Bank, the Resolution Fundings Corporation 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.
Short-Term Bond Fund
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.
<PAGE>
When we believe market or economic conditions are adverse, the Select
Income, High Yield and U.S. Government Funds may act defensively -- that is,
temporarily invest up to 100% of their respective assets in cash and debt
securities having maturities of less than three years at the time of issuance,
seeking to protect their 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. With respect to
the Select Income and High Yield Funds, Fund Management seeks to temper
volatility by having each Fund invest in many different companies in a variety
of industries. With respect to the Short-Term Bond Fund, 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.
Debt Securities. The Select Income, High Yield and Short-Term Bond Funds
may invest in corporate debt securities. The U.S. Government Securities Fund may
invest in debt securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities. 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 issued by the U.S. government, its agencies and
instrumentalities carry a low level of credit risk compared to higher yielding
corporate bonds. Corporate debt obligations are rated based on their credit risk
as estimated by independent services such as Moody's, S&P, Fitch Investors
Service, Inc. ("Fitch") or Duff & Phelps, Inc. ("D&P"). These ratings attempt to
evaluate the likelihood that principal and interest will be paid when due, but
do not evaluate the volatility of a debt obligation's value or its liquidity and
do not guarantee the performance of the issuer. "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, government agency and government
instrumentality securities, are subject to market risk.
The Select Income, High Yield and Short-Term Bond Funds may invest in
issues rated below investment grade quality (commonly called "junk bonds"), and
rated Ba or lower by Moody's or BB or lower by S&P, 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.
Risks of Lower Rated Bonds. The lower a bond's quality, 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.
<PAGE>
To reduce these risks, at least 50% of the Select Income Fund's assets
normally are invested in debt securities rated Baa or above by Moody's or BBB or
above by S&P. In addition, the Select Income Fund may invest in corporate
short-term notes rated at least Prime-1 by Moody's or A-1 by S&P. Overall, these
bonds and notes enjoy strong to adequate capacity to pay principal and interest.
No more than 50% of the Select Income Fund's assets may be invested in
junk bonds. Investments in unrated securities may not exceed 25% of the Select
Income Fund's total assets. Never, under any circumstances, is the Select Income
Fund permitted to invest in bonds which are rated below B by Moody's or B- by
S&P. Bonds rated below 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.
Because the High Yield Fund normally invests primarily in junk bonds, the
securities held by this Fund generally will be subject to greater credit and
market risks. Never, under any circumstances, is the High Yield 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.
The Short-Term Bond Fund does not invest in obligations it believes to be
highly speculative. As a result, the Fund invests primarily in corporate bonds
rated investment grade (BBB and above by S&P, Fitch or D&P or Baa and above by
Moody's) that are believed to enjoy strong to adequate capacity to pay principal
and interest. No more than 15% of this Fund's total assets may be invested in
junk bonds. Never, under any circumstances, does the Short-Term Bond 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 Short-Term Bond Fund may invest in corporate short-term notes
rated at least Prime-1 by Moody's or A-1 by S&P and municipal short-term notes
rated at least MIG-1 by Moody's, SP-1 by S&P, F-1 by Fitch or Duff-1 by D&P (the
highest rating categories for such notes).
While Fund Management continuously monitors all of the corporate bonds in
each 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. A 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.
<PAGE>
Because investment in medium and lower rated securities involves both
greater credit risk and market risk, achievement of each Fund's investment
objective 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 each 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
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 a
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 a Fund to value, particular securities at certain
times, thereby making it difficult to make specific valuation determinations.
For the fiscal year ended August 31, 1997, the following percentages of
Select Income, High Yield and Short-Term Bond Funds' total assets were invested
in corporate bonds rated investment grade (Baa by Moody's or BBB by S&P and
above) at the time they were purchased: Aaa/AAA--0%; Aa/AA--1.9%; A--10.4% and
Baa/BBB-- 17.2% for the Select Income Fund; Aaa/AAA--0%; Aa/AA--0% and
Baa/BBB--0% for the High Yield Fund; and Aaa/AAA--0%; Aa/AA--0.5%; A--15.8% and
Baa/BBB--2.0% for the Short-Term Bond Fund. The following percentages were
invested in corporate bonds rated below investment grade at the time of
purchase: Ba/BB--13.8%; B--20.6%; Caa/CCC--0% and D--0% for the Select Income
Fund; Ba/BB--7.8%; B-- 56.6%; Caa/CCC--6.7%; and D--0% for the High Yield Fund;
and BB-- 1.0%; B--8.4%; CCC--0% and D--0% for the Short-Term Bond Fund. Finally,
3.6%, 8.9% and 1.3% of total assets were invested in unrated corporate bonds for
the Select Income, High Yield and Short-Term Bond Funds, respectively. All of
these percentages were determined on a dollar-weighted basis, calculated by
averaging each Fund's month-end portfolio holdings during the fiscal year. Keep
in mind that a Fund's holdings are actively traded, and bond ratings are
occasionally adjusted by ratings services, so these figures do not represent
each Fund's actual holdings or quality ratings as of August 31, 1997.
<PAGE>
For a detailed description of corporate bond ratings, see the Appendix to
this Prospectus and the Statement of Additional Information.
Foreign Securities. Select Income, High Yield and Short-Term Bond Funds'
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 each 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 and American Depository Receipts ("ADRs") are not subject to this 25%
limitation. ADRs are receipts representing shares of a foreign corporation held
by a U.S. bank that entitles the holder to all dividends and capital gains. ADRs
are denominated in U.S. dollars and trade in the U.S. securities markets.
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 a
foreign currency, returns for a U.S. investor on foreign securities may
decrease. By contrast, in a period when the U.S. dollar generally declines,
those returns may increase. Each 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
<PAGE>
the possibility of each Fund experiencing difficulties in pursuing legal
remedies and collecting judgments.
ADRs are subject to some of the same risks as direct investments in
foreign securities, including the risk that material information about the
issuer may not be disclosed in the United States and the risk that currency
fluctuations may adversely affect the value of the ADR.
Illiquid and Rule 144A Securities. High Yield 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 Select Income and Short-Term Bond Funds may not purchase securities
that are not readily marketable. However, such Funds, in addition to the High
Yield 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 a 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 such Fund's shareholders. For more
information concerning rule 144A Securities, see "Investment Policies and
Restrictions" in the Statement of Additional Information.
Zero Coupon Bonds, Pay-in-Kind Bonds, and Step-up Bonds. The Select Income
and High Yield Funds may invest in zero coupon bonds and payment-in-kind ("PIK")
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. PIK bonds pay interest in cash or additional securities, at
the issuer's option, for a specified period. In addition to zero coupon bonds,
the Short-Term Bond Fund may invest in step-up bonds. 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. Zero coupon, PIK
and step-up bonds are more sensitive to changes in interest rates than bonds
that pay interest on a current basis in cash. When interest rates fall, the
value of these types of bonds will increase more rapidly, and when interest
rates rise, their value falls more dramatically. A Fund may be required to
<PAGE>
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 such Fund.
Interest Rate Futures Contracts. The U.S. Government Securities and
Short-Term Bond Funds may buy and sell interest rate futures contracts relating
to the debt securities in which each Fund invests for the purpose of hedging the
value of their securities portfolio. These practices and their risks are
discussed under "Investment Policies and Restrictions" in the Statement of
Additional Information.
Mortgage-Backed and Asset-Backed Securities. The U.S. Government
Securities and Short-Term Bond Funds may invest in mortgage-backed securities
issued or guaranteed as to principal and interest by the U.S. government,
federal agencies or instrumentalities such as GNMA, Fannie Mae and Freddie Mac.
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 and
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.
In addition to being able to invest in mortgage-backed securities, the
Short-Term Bond Fund may also invest in asset- backed securities which represent
interests in pools of consumer loans. As with mortgage-backed securities,
asset-backed securities are structured as pass-through securities. Interest and
principal payments ultimately depend on payment of the underlying loans,
although securities may be supported, at least in part, by letters of credit or
other credit enhancements. As with mortgage-backed securities, underlying loans
are subject to prepayments that may shorten the securities' weighted average
lives and may lower their return.
The Short-Term Bond Fund 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 Short-Term Bond Fund maintain
stability.
<PAGE>
Delayed Delivery or When-Issued Purchases. Debt securities may at times be
purchased or sold by the Funds with settlement taking place in the future. Each
of the High Yield, Short-Term Bond and Select Income Funds may only invest up to
10% of their 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 a Fund enters into the commitment to purchase a security on a
when-issued basis, although the Fund does not pay for or earn interest on the
security until it is delivered. Between the date of purchase and the settlement
date, however, the value of the securities is subject to market fluctuations.
Repurchase Agreements. Each Fund may invest money, for as short a time as
overnight, using repurchase agreements ("repos"). With a repo, a Fund buys a
debt instrument, agreeing simultaneously to sell it back to the prior owner at
an agreed-upon price and time. A 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 a 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.
Securities Lending. Each Fund may seek to earn additional income by
lending securities to qualified brokers, dealers, banks, or other financial
institutions, on a fully collateralized basis. For further information on this
policy, see "Investment Policies and Restrictions" in the Statement of
Additional Information.
For a further discussion of risks associated with an investment in each
Fund, see "Investment Policies and Restrictions" and "Investment Practices" in
the Statement of Additional Information.
Investment Restrictions. Certain restrictions, which are identified in the
Statement of Additional Information, may not be altered without the approval of
each Fund's shareholders. For example, each Fund limits to 5% the portion of its
respective total assets that may be invested in any one issuer (other than cash
items and U.S. government securities). In addition, each 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 FUNDS AND THEIR MANAGEMENT
The Company is a no-load mutual fund, registered with the Securities and
Exchange Commission as a diversified, open-end, management investment company.
<PAGE>
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 Funds, and reviews the services provided by the adviser and
sub-adviser. Under an agreement with the Company, IFG, 7800 E. Union Avenue,
Denver, Colorado 80237, serves as each Fund's investment adviser; it is
primarily responsible for providing the Funds with various administrative
services. IFG's wholly-owned subsidiary, INVESCO Trust, is each Fund's
sub-adviser and is primarily responsible for managing the Funds' investments.
The Funds are managed by members of the INVESCO Fixed Income Team, which
is headed by Donovan J. (Jerry) Paul. The following individuals are primarily
responsible for the day-to-day management of the Fund's portfolio holdings:
Donovan J. (Jerry) Paul, a Chartered Financial Analyst and Certified
Public Accountant, has been the portfolio manager of the Select Income
Fund since 1994, the portfolio manager of the High Yield Fund since 1994,
and a co-portfolio manager of the Short-Term Bond Fund since 1994.
Mr. Paul also manages INVESCO VIF-High Yield Fund, INVESCO Industrial
Income Fund, INVESCO VIF-Industrial Income Fund, and INVESCO Balanced
Fund. Mr. Paul is also a senior vice president, portfolio manager,
and director of fixed-income research of INVESCO Trust. Mr. Paul was
previously a senior vice president and director of fixed-income research
(1989 to 1992) and portfolio manager (1987 to 1992) with Stein, Roe &
Farnham Inc. and president of Quixote Investment Management, Inc. (1993
to 1994). Mr. Paul received an M.B.A. from the University of Northern
Iowa and a B.B.A. from the University of Iowa.
Richard R. Hinderlie has been the portfolio manager of the U.S. Government
Securities Fund since 1994 and a co-portfolio manager of the Short-Term
Bond Fund since 1993. Mr. Hinderlie also manages INVESCO U.S. Government
Money Fund and INVESCO Cash Reserves Fund and is a vice president of
INVESCO Trust. Mr. Hinderlie was previously a securities analyst with
Bank Western from 1987 to 1993. Mr. Hinderlie received an M.B.A.
from Arizona State University and a B.A. in Economics 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.
<PAGE>
Each Fund pays IFG a monthly management fee which is based upon a
percentage of each Fund's average net assets determined daily; in turn, IFG pays
INVESCO Trust a sub-advisory fee out of its management fee. With respect to the
Select Income and U.S. Government Securities Funds, 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. With
respect to the High Yield and Short-Term Bond Funds, 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, 1997, investment management fees paid by the Select
Income, High Yield, U.S. Government Securities, and Short-Term Bond Funds
amounted to 0.55%, 0.47%, 0.55% and 0.50%, respectively (prior to the voluntary
absorption of certain Fund expenses by IFG), of each Fund's average net assets.
Out of these advisory fees, IFG paid to INVESCO Trust as a sub-advisory fee an
amount equal to 0.24%, 0.22%, 0.25% and 0.25%, respectively, of the Select
Income, High Yield, U.S. Government Securities and Short- Term Bond Funds'
average net assets. No fee is paid by the Funds to INVESCO Trust.
Under a Transfer Agency Agreement, IFG acts as registrar, transfer agent,
and dividend disbursing agent for the Funds. Each Fund pays an annual fee of
$26.00 per shareholder account or where applicable, per participant in an
omnibus account. Registered broker-dealers, third party administrators of
tax-qualified retirement plans and other entities, including affiliates of IFG,
may provide equivalent services to the Funds. In these cases, IFG may pay, out
of the fee it receives from the Funds, an annual sub- transfer agency or
recordkeeping fee to the third party.
In addition, under an Administrative Services Agreement, IFG handles
additional administrative, recordkeeping and internal sub- accounting services
for the Funds. For such services, IFG was paid, for the fiscal year ended August
31, 1997, a fee equal to the following percentages of each Fund's average net
assets (prior to the absorption of certain Fund expenses): Select Income Fund,
0.02%; High Yield Fund, 0.02%; U.S. Government Securities Fund, 0.03% and
Short-Term Bond Fund, 0.10%.
Each Fund's expenses, which are accrued daily, are deducted from total
income before dividends are paid. Total expenses of each Fund (prior to any
expense offset) for the fiscal year ended August 31, 1997, including investment
management fees (but excluding brokerage commissions, which are a cost of
acquiring securities), amounted to the following percentages of each Fund's
average net assets: Select Income Fund, 1.03%; High Yield Fund, 1.00%; U.S.
Government Securities Fund, 1.01% and Short-Term Bond Fund, 0.83%. Certain
expenses of the Select Income, High Yield and U.S. Government Securities Funds
are absorbed voluntarily by IFG pursuant to a commitment to each Fund and
certain expenses of the Short-Term Bond Fund are absorbed voluntarily by IFG and
INVESCO Trust pursuant to a commitment to the Fund in order to ensure that each
Fund's total operating expenses do not exceed the following percentages of each
<PAGE>
Fund's average net assets: Select Income Fund, 1.05%; High Yield Fund,
1.25%, U.S. Government Securities Fund, 1.00% and Short-Term Bond Fund, 0.85%.
These commitments may be changed following consultation with the Company's board
of directors. In the absence of this voluntary expense limitation, each Fund's
total operating expenses would have been 1.21%, 1.84%, and 1.27% of their
average net assets for Select Income, U.S. Government Securities and Short-Term
Bond Funds, respectively.
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," each Fund may market its shares through intermediary
brokers or dealers that have entered into Dealer Agreements with IDI, as the
Fund's Distributor. A 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.
IFG, INVESCO Trust and IDI are indirect wholly owned subsidiaries of
AMVESCAP PLC. AMVESCAP PLC is a publicly-traded holding company that, through
its subsidiaries, engages in the business of investment management on an
international basis. INVESCO PLC changed its name to AMVESCO PLC on March 3,
1997 and to AMVESCAP PLC on May 8, 1997, as part of a merger between a direct
subsidiary of INVESCO PLC and A I M Management Group Inc., that created one of
the largest independent investment management businesses in the world. IFG and
INVESCO Trust continued to operate under their existing names. AMVESCAP PLC has
approximately $177.5 billion in assets under management. IFG was established in
1932 and, as of August 31, 1997, managed 14 mutual funds, consisting of 46
separate portfolios, with combined assets of approximately $15.9 billion on
behalf of over 854,448 shareholders. INVESCO Trust (founded in 1969) served as
adviser or sub-adviser to 59 investment portfolios as of August 31, 1997,
including 32 portfolios in the INVESCO group. These 59 portfolios had aggregate
assets of approximately $14.7 billion as of August 31, 1997. In addition,
INVESCO Trust provides investment management services to private clients
including employee benefit plans that may be invested in a collective trust
sponsored by INVESCO Trust. IDI was established in 1997 and is the distributor
for 14 mutual funds consisting of 46 separate portfolios.
FUND PRICE AND PERFORMANCE
Determining Price. The value of your investment in the Funds will vary
daily. The price per share is also known as the Net Asset Value ("NAV"). IFG
<PAGE>
prices each 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 each Fund's total return and yield. Total return
figures show the average annual rate of return on a $1,000 investment in a 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 a Fund's
investment results, because they do not show the interim variations in
performance over the periods cited.
With respect to the Select Income, High Yield and Short-Term Bond Funds,
the yield is calculated by utilizing the Fund's calculated income, expenses and
average outstanding shares for the most recent 30-day or one-month period,
dividing it by the month-end net asset value and annualizing the resulting
number. With respect to the U.S. Government Securities Fund, the yield 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 each
Fund's recent and historical performance is contained in the Company's Annual
Report to Shareholders. You can get a free copy by calling or writing to IDI
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 each Fund to others in their category of
Corporate Bond Funds -- BBB rated for the Select Income Fund, High Current Yield
Funds for the High Yield Fund, U.S. Government Funds for the U.S. Government
Securities Fund and Short Investment Grade Debt Funds for the Short-Term Bond
Fund, as well as the broad-based Lipper general fund groupings. These rankings
allow you to compare each Fund to its peers. Other independent financial media
also produce performance- or service-related comparisons, which you may see in
our promotional materials. For more information see "Fund Performance" in the
Statement of Additional Information.
Performance figures are based on historical investment results and are not
intended to suggest future performance.
<PAGE>
HOW TO BUY SHARES
The following chart shows several convenient ways to invest in a 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 a Fund through a securities broker, you may be charged a commission or
transaction fee. For all new accounts, please send a completed application form.
Please specify which fund's shares you wish to purchase.
Fund Management reserves the right to increase, reduce or waive the
minimum investment requirements in its sole discretion, when it determines this
action is in the best interests of a 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 a
Fund's best interests.
<PAGE>
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
Method Investment Minimum Please Remember
- --------------------------------------------------------------------------------
By Check
Mail to: INVESCO $1,000 for regular If your check does
Funds Group, Inc. account; $250 for not clear, you will
P.O. Box 173706 an Individual be responsible for
Denver, CO 80217- Retirement Account; any related loss a
3706. Or you may $50 minimum for Fund or IFG incurs.
send your check by each subsequent If you are already
overnight courier investment. a shareholder in
to: 7800 E. Union the INVESCO funds,
Ave., Denver, CO a Fund may seek
80237. reimbursement from
your existing
account(s) for any
loss incurred.
- --------------------------------------------------------------------------------
By Telephone or
Wire
Call 1-800-525-8085 $1,000. Payment must be
to request your received within 3
purchase. Then send business days, or
your check by the transaction may
overnight courier be canceled. If a
to our street purchase is
address: 7800 E. canceled due to
Union Ave., Denver, nonpayment, you
CO 80237. Or you will be responsible
may transmit your for any related
payment by bank loss a Fund or IFG
wire (call IFG for incurs. If you are
instructions). already a
shareholder in the
INVESCO funds, a
Fund may seek
reimbursement from
your existing
account(s) for any
loss incurred.
<PAGE>
- --------------------------------------------------------------------------------
With EasiVest or
Direct Payroll
Purchase
You may enroll on $50 per month for Like all regular
the fund EasiVest; $50 per investment plans,
application, or pay period for neither EasiVest
call us for the Direct Payroll nor Direct Payroll
correct form and Purchase. You may Purchase ensures a
more details. start or stop your profit or protects
Investing the same regular investment against loss in a
amount on a monthly plan at any time, falling market.
basis allows you to with two weeks' Because you'll
buy more shares notice to IFG. invest continually,
when prices are low regardless of
and fewer shares varying price
when prices are levels, consider
high. This "dollar- your financial
cost averaging" may ability to keep
help offset market buying through low
fluctuations. Over price levels. And
a period of time, remember that you
your average cost will lose money if
per share may be you redeem your
less than the shares when the
actual average market value of all
price per share. your shares is less
than their cost.
- --------------------------------------------------------------------------------
By PAL(R)
Your "Personal $1,000. Be sure to write
Account Line" is down the
available for confirmation number
subsequent provided by PAL(R).
purchases and Payment must be
exchanges 24-hours received within 3
a day. Simply call business days, or
1-800-424-8085. the transaction may
be canceled. If a
telephone purchase
is canceled due to
nonpayment, you
will be responsible
for any related
loss a Fund or IFG
incurs. If you are
already a shareholder in
the INVESCO funds, a Fund
may seek reimbursement
from your existing
account(s) for any loss
incurred.
<PAGE>
================================================================================
By Exchange
Between a Fund and $1,000 to open a See "Exchange
another of the new account; $50 Policy" below.
INVESCO funds. Call for written
1-800-525-8085 for requests to
prospectuses of purchase additional
other INVESCO shares for an
funds. You may also existing account.
establish an (The exchange
Automatic Monthly minimum is $250 for
Exchange service purchases requested
between two INVESCO by telephone.)
funds; call IFG for
further details and
the correct form.
================================================================================
Your order to purchase shares of a Fund will not begin earning dividends
or other distributions until either 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 Policy. You may exchange your shares in a 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 Funds reserve the right to reject any exchange request, or to
modify or terminate the exchange policy, when it is in the best
interests of the Fund and its shareholders. Notice of all such
modifications or termination will be given at least 60 days prior
to the effective date of the change in privilege, except in
unusual instances (such as when redemptions of the exchanged
<PAGE>
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. Each Fund is authorized under a Plan and Agreement
of Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Plan") to use its assets to finance certain activities relating to the
distribution of its shares to investors. Under the Plan, monthly payments may be
made by each Fund to IDI to permit IDI, at its discretion, to engage in certain
activities, and provide certain services approved by the board of directors in
connection with the distribution of each Fund's shares to investors. These
activities and services may include the payment of compensation (including
incentive compensation and/or continuing compensation based on the amount of
customer assets maintained in a Fund) to securities dealers and other financial
institutions and organizations, which may include IDI-affiliated companies, to
obtain various distribution-related and/or administrative services for the
Funds. 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 a
Fund and their transactions with a Fund.
In addition, other permissible activities and services include
advertising, the preparation, printing and distribution of sales literature,
printing and distribution of prospectuses to prospective investors and such
other services and promotional activities for the Funds as may from time to time
be agreed upon by the Company and its board of directors, including public
relations efforts and marketing programs to communicate with investors and
prospective investors. These services and activities may be conducted by the
staff of IDI or its affiliates or by third parties.
Under the Plan, the Company's payments to IDI on behalf of each Fund are
limited to an amount computed at an annual rate of 0.25% of each Fund's average
net assets. IDI is not entitled to payment for overhead expenses under the Plan,
but may be paid for all or a portion of the compensation paid for salaries and
other employee benefits for the personnel of IDI or IFG whose primary
responsibilities involve marketing shares of the INVESCO Funds, including the
Funds. Payment amounts by each Fund under the Plan, for any month, may be made
to compensate IDI for permissible activities engaged in and services provided by
IDI during the rolling 12-month period in which that month falls. Therefore, any
obligations incurred by IDI in excess of the limitations described above will
not be paid by the Funds under the Plan, and will be borne by IDI. In addition,
IDI and its affiliates may from time to time make additional payments from its
revenues to securities dealers and other financial institutions that provide
distribution- related and/or administrative services for the Funds. No further
<PAGE>
payments will be made by the Funds under the Plan in the event of its
termination. Also, any payments made by the Funds may not be used to finance
directly the distribution of shares of any other fund of the Company or other
mutual fund advised by IFG. Payments made by each 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. For more
information see "How Shares Can Be Purchased -- Distribution Plan" in the
Statement of Additional Information.
FUND SERVICES
Shareholder Accounts. IFG will maintain a share account that reflects your
current holdings. Share certificates will be issued only upon specific request.
You will have greater flexibility to conduct transactions if you do not request
certificates.
Transaction Confirmations. You will receive detailed confirmations of
individual purchases, exchanges, and redemptions. If you choose certain
recurring transaction plans (for instance, EasiVest), your transactions will be
confirmed on your quarterly Investment Summary.
Investment Summaries. Each calendar quarter, shareholders receive a
written statement which consolidates and summarizes account activity and value
at the beginning and end of the period for each of their INVESCO funds.
Reinvestment of Distributions. Dividends and capital gain distributions
are automatically reinvested in additional fund shares at the NAV on the
ex-dividend date, unless you choose to have dividends and/or other distributions
automatically reinvested in another INVESCO fund or paid by check (minimum of
$10.00).
Telephone Transactions. All shareholders may exchange and redeem shares of
the Funds 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 a 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. Shares of the Funds 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.
<PAGE>
HOW TO SELL SHARES
The following chart shows several convenient ways to redeem your Fund
shares. Shares of the Funds 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 a Fund's investment
performance.
Please specify from which fund you wish to redeem shares. Shareholders
have a separate account for each fund in which they invest.
<PAGE>
HOW TO SELL SHARES
- --------------------------------------------------------------------------------
Method Minimum Redemption Please Remember
- --------------------------------------------------------------------------------
By Telephone
Call us toll-free $250 (or, if less, This option is not
at 1-800-525-8085. full liquidation of available for
the account) for a shares held in
redemption check; IRAs.
$1,000 for a wire
to bank of record.
The maximum amount
which may be redeemed
by telephone is generally
$25,000. These telephone
redemption privileges
may be modified or
terminated in the future
at IFG's discretion.
- --------------------------------------------------------------------------------
In Writing
Mail your request Any amount. The If the shares to be
to INVESCO Funds redemption request redeemed are
Group, Inc., P.O. must be signed by represented by
Box 173706 all registered stock certificates,
Denver, CO 80217- owners of the the certificates
3706. You may also account. Payment must be sent to
send your request will be mailed to IFG.
by overnight your address of
courier to 7800 E. record or to a pre-
Union Ave., Denver, designated bank.
CO 80237.
- --------------------------------------------------------------------------------
By Exchange
Between a Fund and $1,000 to open a See "Exchange
another of the new account; $50 Policy" page 35.
INVESCO funds. Call for written
1-800-525-8085 for requests to
prospectuses of purchase additional
other INVESCO shares for an
funds. You may also existing account.
establish an (The exchange
automatic monthly minimum is $250 for
exchange service exchanges requested
between two INVESCO by telephone.)
funds; call IFG for
further details and
the correct form.
<PAGE>
- --------------------------------------------------------------------------------
Periodic Withdrawal
Plan
You may call us to $100 per payment, You must have at
request the on a monthly or least $10,000 total
appropriate form quarterly basis. invested with the
and more The redemption INVESCO funds, with
information at 1- check may be made at least $5,000 of
800-525-8085. payable to any that total invested
party you in the fund from
designate. which withdrawals
will be made.
- --------------------------------------------------------------------------------
Payment To Third
Party
Mail your request Any amount. All registered
to INVESCO Funds owners of the
Group, Inc., P.O. account must sign
Box 173706 the request, with a
Denver, CO 80217- signature guarantee
3706. from an eligible
guarantor financial
institution, such
as a commercial
bank or recognized
national or
regional securities
firm.
================================================================================
While the Funds will attempt to process telephone redemptions promptly,
there may be times -- particularly in periods of severe economic or market
disruption -- when you may experience delays in redeeming shares by phone.
Payments of redemption proceeds will be mailed within seven days following
receipt of the redemption request in proper form. However, payment may be
postponed under unusual circumstances -- for instance, if normal trading is not
taking place on the New York Stock Exchange or during an emergency as defined by
the Securities and Exchange Commission. If your shares were purchased by a check
which has not yet cleared, payment will be made promptly upon clearance of the
purchase check (which will take up to 15 days).
If you participate in EasiVest, the Fund's automatic monthly investment
program, and redeem all of the shares in your account, we will terminate any
further EasiVest purchases unless you instruct us otherwise.
Because of the high relative costs of handling small accounts, should the
value of any shareholder's account fall below $250 as a result of shareholder
action, the Funds reserve the right to redeem all shares in such account, in
which case the account would be involuntarily 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 OTHER DISTRIBUTIONS
Taxes. Each Fund intends to distribute to shareholders all of its net
investment income, net capital gains and net gains from foreign currency
transactions, if any, in order to continue to qualify for tax treatment as a
regulated investment company. Thus, the Funds do not expect to pay any federal
income or excise taxes.
Unless shareholders are exempt from income taxes, they must include all
dividends and other distributions in taxable income for federal, state and local
income tax purposes. Dividends and other distributions are taxable whether they
are received in cash or automatically reinvested in shares of the Fund or
another fund in the INVESCO group.
Net realized capital gains of the Fund are classified as short-term and
long-term gains depending upon how long the Fund held the security that gave
rise to the gains. Short-term capital gains are included in income from
dividends and interest as ordinary income and are taxed at the taxpayer's
marginal tax rate. The Taxpayer Relief Act of 1997 (the "Tax Act"), enacted in
August 1997, changed the taxation of long-term capital gains by applying
different capital gains rates depending on the taxpayer's holding period and
marginal rate of federal income tax. Long-term gains realized on the sale of
securities held for more than one year but not for more than 18 months are
taxable at a rate of 28%. This category of long-term gains is often referred to
as "mid-term" gains but is technically termed "28% rate gains". Long-term gains
realized on the sale of securities held for more than 18 months are taxable at a
rate of 20%. The Tax Act, however, does not address the application of these
rules to distributions of net capital gain (excess of long-term capital gain
over short-term capital losses) by a regulated investment company, including
whether such distributions may be treated by its shareholders in accordance with
the Fund's holding period for the assets it sold that generated the gain. The
application of the new capital gain rules must be determined by further
legislation or future regulations that are not available as this Prospectus is
being prepared. At the end of each year, information regarding the tax status of
dividends and other distributions is provided to shareholders. Shareholders
should consult their tax advisers as to the effect of the Tax Act on
distributions by the Funds of net capital gain.
Shareholders also may realize capital gains or losses when they sell their
Fund shares at more or less than the price originally paid. Capital gain on
shares held for more than one year will be long-term capital gain, in which
event it will be subject to federal income tax at the rates indicated above.
<PAGE>
The Fund may be subject to withholding of foreign taxes on dividends or
interest it receives on foreign securities. Foreign taxes withheld will be
treated as an expense of the Fund.
Individuals and certain other non-corporate shareholders may be subject to
backup withholding of 31% on dividends, capital gain and other distributions and
redemption proceeds. Unless you are subject to backup withholding for other
reasons, you can avoid backup withholding on your Fund account by ensuring that
we have a correct, certified tax identification number.
We encourage you to consult a tax adviser with respect to these matters.
For further information see "Dividends, Other Distributions and Taxes" in the
Statement of Additional Information.
Dividends and Other Distributions. Each Fund earns ordinary or net
investment income in the form of interest on its investments. Dividends paid by
each Fund will be based solely on the income earned by it. Each Fund's policy is
to distribute substantially all of this income, less Fund expenses, to
shareholders. Dividends from net investment income are declared daily and paid
monthly at the discretion of the Company's board of directors. Dividends are
automatically reinvested in additional shares of the Fund at the net asset value
on the ex-dividend date unless otherwise requested.
In addition, each Fund realizes capital gains and losses when it sells
securities for more or less than it paid. If total gains on sales exceed total
losses (including losses carried forward from previous years), the Fund has a
net realized capital gain. Net realized capital gains, if any, together with
gains, if any, realized on foreign currency transactions, are distributed to
shareholders at least annually, usually in December. Capital gain distributions
are automatically reinvested in additional shares of a Fund at the net asset
value on the ex-dividend date unless otherwise requested.
Dividends and other distributions are paid to holders of shares on the
record date of distribution regardless of how long the Fund shares have been
held by the shareholder. The Fund's share price will then drop on the
ex-dividend date by the amount of the distribution. If a shareholder purchases
shares immediately prior to the distribution, the shareholder will, in effect,
have "bought" the distribution by paying the full purchase price, a portion of
which is then returned in the form of a taxable distribution.
ADDITIONAL INFORMATION
Voting Rights. All shares of the Company have equal voting rights based on
one vote for each share owned and a corresponding fractional vote for each
fractional share owned. The Company is not generally required and does not
expect to hold regular annual meetings of shareholders. However, when requested
to do so in writing by the holders of 10% or more of the outstanding shares of
the Company or as may be required by applicable law or the Company's Articles of
Incorporation, the board of directors will call special meetings of
shareholders. Directors may be removed by action of the holders of a majority of
the outstanding shares of the Company. The Company 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 and S&P.
The chart below shows the various ratings used by each service for the
categories of bonds and preferred stock in which the Funds 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. For a
further discussion of risks associated with the Funds, see "Investment Policies
and Risks" and "Investment Practices" in the Statement of Additional
Information.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
b B Lacks the characteristics of a
desirable investment. Assurance of
dividend payments over any extended
period of time may be small.
================================================================================
<PAGE>
INVESCO INCOME FUNDS
Select Income Fund
High Yield Fund
U.S. Government Securities Fund
Short-Term Bond Fund
No-load mutual funds seeking a high level of
current income from investing in fixed-income
securities.
PROSPECTUS
January 1, 1998
INVESCO FUNDS
INVESCO Distributors, Inc.,
Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
1-800-525-8085
PAL(R), 1-800-424-8085
http://www.invesco.com
In Denver, visit one of our convenient Investor Centers:
Cherry Creek,
155-B Fillmore Street
Denver Tech Center,
7800 East Union Avenue,
Lobby Level
In addition, all documents filed by the Company with the Securities and Exchange
Commission can be located on a web site maintained by the Commission at
http://www.sec.gov.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
^ January 1, 1998
INVESCO 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 ^ investment management company currently consisting of four separate
portfolios of investments: INVESCO Select Income Fund (the "Select Income
Fund"), INVESCO High Yield Fund (the "High Yield Fund"), INVESCO U.S. Government
Securities Fund (the "U.S. Government Securities Fund"), and INVESCO Short-Term
Bond Fund (the "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 ^ the Select Income, High Yield and U.S. Government Funds'
primary objective. Investors may purchase shares of any or all Funds. Additional
Funds may be added in the future.
INVESCO SELECT INCOME FUND
The ^ 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 ^ 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.
<PAGE>
INVESCO U.S. GOVERNMENT SECURITIES FUND
The ^ 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^ or instrumentalities and in repurchase
agreements and futures contracts with respect thereto. ^ INVESCO SHORT-TERM BOND
FUND The ^ 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.
^ A Prospectus for the Funds dated January 1, ^ 1998 which ^ provides the
basic information you should know before investing in ^ the Funds may be
obtained without charge from INVESCO ^ Distributors, 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 ^ the Prospectus. It is intended to provide you with additional
information regarding the activities and operations of the Fund and should be
read in conjunction with the Prospectus.
Investment Adviser ^: INVESCO FUNDS GROUP, INC.
Distributor: INVESCO DISTRIBUTORS, INC.
<PAGE>
TABLE OF CONTENTS Page
----
INVESTMENT POLICIES AND RESTRICTIONS........................................49
THE FUNDS AND THEIR MANAGEMENT..............................................62
HOW SHARES CAN BE PURCHASED.................................................76
HOW SHARES ARE VALUED.......................................................80
FUND PERFORMANCE............................................................81
SERVICES PROVIDED BY THE FUND...............................................84
TAX-DEFERRED RETIREMENT PLANS...............................................85
HOW TO REDEEM SHARES........................................................86
DIVIDENDS, ^ OTHER DISTRIBUTIONS AND TAXES..................................86
INVESTMENT PRACTICES........................................................89
ADDITIONAL INFORMATION......................................................92
APPENDIX - GNMA CERTIFICATES^ AND FUTURES CONTRACTS.........................97
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
As discussed in ^ the Prospectus in the sections entitled "Investment
Objective and Strategy" and "Investment Policies and Risks," the ^ Select Income
Fund and ^ 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 ^ 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 ^ the Prospectus, the ^ Short-Term Bond Fund may
invest in investment- grade debt securities of all types in any proportion. The
U.S. Government Securities Fund may invest in government and government agency
or government instrumentality debt securities (including mortgage-backed
securities issued or guaranteed by government agencies or government-sponsored
enterprises).
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 ^ a Fund's
portfolio may be adjusted should such anticipated changes offer the opportunity
to further ^ its investment objectives.
Foreign Securities. As discussed in the ^ Prospectus in the section
entitled "Investment Policies And Risks -- Foreign Securities," the Select
Income Fund, ^ Short-Term Bond Fund and ^ High Yield Fund^ 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
<PAGE>
reporting standards, practices, and requirements as compared to those
applicable to United States issuers.
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 ^ Funds will endeavor to achieve the most
favorable net results on ^ their portfolio transactions. There is generally less
government supervision and regulation of securities exchanges, brokers and
listed issuers in foreign countries 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 ^,
political or social instability, or diplomatic developments which could affect ^
the Funds' investments in those countries. Moreover, the economies of foreign ^
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.
Illiquid and 144A Securities. As discussed in the section of the
Prospectus entitled "Investment Policies and Risks," the High Yield Fund may
invest in securities that are illiquid because they are subject to 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
<PAGE>
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"),
if a liquid institutional 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 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 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").
Investments in Eurobonds and Yankee bonds entail certain risks similar to
investments in foreign securities in general. For information on these risks see
"Investment Policies and Risks" in the Prospectus.
When-Issued and Delayed Delivery Securities. As discussed in the section
of ^ the Funds' 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
<PAGE>
or sold by the Funds with payment and delivery takingplace in the future in
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 ^ a transaction is entered
into, but in no event later than 90 days^ after the transaction date. No payment
or delivery is made by the Funds until they receive delivery or payment from the
other party to the transaction. However, when a Fund purchases a security on a
when- issued or delayed delivery basis, it assumes the risk that the market
price of the security may fluctuate between the date of purchase and the date of
delivery.
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 ^ cash or liquid securities 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 ^ the section of the Funds'
Prospectus entitled "Investment Policies And Risks," 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 ^ a Fund acquires 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 ^ a Fund must have a total value ^ at
least equal to the value of the repurchase agreement (including accrued interest
earned thereon) and are held as collateral by the ^ Fund's custodian bank until
the repurchase agreement is completed. ^ The High Yield Fund ^ may enter into a
<PAGE>
repurchase agreement maturing in more than seven days if as a result no
more than 10% of the High Yield 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 ^
Fund may incur a loss upon disposition of the security. If the other party to
the agreement becomes insolvent and subject to liquidation or reorganization
under the Bankruptcy Code or other laws, a court may determine that the
underlying security is collateral for a loan by the ^ Fund not within the
control of the ^ Fund and therefore the obtainment by the ^ Fund 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 ^ Fund
Management acknowledges these risks, it is expected that they can be controlled
through careful monitoring procedures.
^ Lending of Securities. As described in the section of the Funds'
Prospectus entitled "Investment Policies And Risks," the Funds 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 ^ Adviser and Sub-Adviser monitor 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 ^ a Fund will comply with all ^
applicable regulatory requirements^.
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.
^
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.
<PAGE>
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, although
the underlying mortgage may be guaranteed as to principal and interest.
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.
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
<PAGE>
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 ^ Prospectus, the ^ U.S. Government
Securities ^ and ^ Short-Term Bond ^ Funds may engage in buying and selling
interest rate futures contracts; however, the ^ 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 ^ Investment Company Act of 1940 (the
"1940 Act"), of the Fund's outstanding shares. The ^ 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 ^ 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 ^ U.S.
Government Securities ^ and Short-Term Bond ^ Funds, 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
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.
<PAGE>
The "sale" of a Government Securities Future by the ^ U.S. Government
Securities Fund^ or "sale" of a debt security future by the ^ 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 ^ U.S. Government Securities Fund^ or
"purchase" of a debt security future by the ^ 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 ^ U.S. Government Securities Fund purchases or sells a
U.S. government security, or when the ^ 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 Future or debt securities future fluctuates, making the Government
Securities Future or debt security future more or less valuable, a process known
as ^ marking to ^ 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, ^ a Fund 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 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 ^ U.S. Government
Securities Fund or ^ Short-Term Bond Fund is the prospect that the prices of
<PAGE>
Government Securities Futures or debt security futures will correlate
imperfectly with the behavior of the cash (i.e., market value) prices of ^ a
Fund's 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 or sub-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 or sub-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 ^ U.S.
Government Securities Fund sold a Government Securities Future, or the ^
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.
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 ^ U.S. Government
Securities ^ and ^ 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.
<PAGE>
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. ^
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 ^ U.S. Government Securities
Fund or the ^ Short-Term Bond Fund holds ^ cannot 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.
Investment Restrictions
As described in ^ the section of the Funds' Prospectus entitled
"Investment Policies And Risks," the Funds operate under ^ investment
restrictions ^. These restrictions 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 ^ Funds' investment restrictions and their
investment policies, 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 ^ U.S.
Government Securities Fund's entering into futures contracts in
accordance with that Fund's investment policies, or the ^ 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
<PAGE>
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 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 ^ U.S. Government Securities Fund entering into
futures contracts or the ^ 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 ^ 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 ^ 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 ^ High Yield Fund, purchase the securities of any
issuer having a record, together with predecessors, of less than
three years continuous operation;
<PAGE>
(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 ^
Short-Term Bond Fund, write, purchase or sell puts, calls, straddles
or any other option contract or combination thereof;
(15) other than the High Yield Fund, 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
available market quotations, would constitute more than 10% of that
Fund's total net assets;
(16) ^ invest more than 25% of that Fund's total ^ 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 ^ each Fund
is not to invest more than 25% of ^ its total ^ 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 ^ a modified S&P industry code
classification schema which uses various sources to classify.
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
<PAGE>
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.
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 ^ 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.
^
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.
<PAGE>
With respect to the non-fundamental investment restriction (1)
above, the board of directors has 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
^("IFG"), is employed as the Company's investment adviser. ^ IFG was established
in 1932 and also serves as an investment adviser to INVESCO Capital Appreciation
Funds, Inc. (formerly, INVESCO Dynamics Fund, Inc.), INVESCO Diversified Funds,
Inc.^, INVESCO Emerging Opportunity Funds, Inc., INVESCO 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. IFG, as investment adviser, has contracted with INVESCO
Trust Company ("INVESCO Trust") ^ to provide investment advisory and research
services to the Funds. INVESCO Trust has primary responsibility for providing
<PAGE>
portfolio investment management services to the Funds. INVESCO Trust, a
trust company founded in 1969, is a wholly-owned subsidiary of INVESCO.
The Distributor. Effective September 30, 1997, INVESCO Distributors, Inc.
("IDI") became the Funds' distributor. IDI, established in 1997, is a registered
broker-dealer that acts as distributor for all retail mutual funds advised by
IFG. Prior to September 30, 1997, IFG served as the Funds' distributor.
IFG, INVESCO Trust and IDI are indirect wholly-owned subsidiaries of
AMVESCAP ^ PLC, a publicly-traded holding company ^ that, through its
subsidiaries, engages in the business of investment management on an
international basis. INVESCO PLC changed its name to AMVESCO PLC on March 3,
1997 and to AMVESCAP PLC on May 8, 1997, as part of a merger between a direct
subsidiary of INVESCO PLC and A I M Management Group, Inc. that created one of
the largest independent management businesses in the world with approximately
$177.5 billion in assets under management. IFG was established in 1932 and as of
August 31, 1997, managed 14 mutual funds, consisting of ^ 46 separate
portfolios, on behalf of over ^ 854,448 shareholders. ^ AMVESCAP PLC's 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. ^ of Boston, Massachusetts^ primarily
manages pension and endowment accounts.
--PRIMCO Capital Management, Inc. of Louisville, Kentucky^ specializes in
managing stable return investments, principally on behalf of Section 401(k)
retirement plans.
--INVESCO Realty Advisors, Inc. of Dallas, Texas is responsible for
providing advisory services in the U.S. real estate markets for ^ pension plans
and public pension funds, as well as endowment and foundation accounts.
--A I M Advisors, Inc. of Houston, Texas provides investment advisory and
administrative services for retail and institutional mutual funds.
--A I M Capital Management, Inc. of Houston, Texas provides investment
advisory services to individuals, corporations, pension plans and other private
investment advisory accounts and also serves as a sub-adviser to certain retail
and institutional mutual funds, one Canadian mutual fund and one portfolio of an
<PAGE>
open-end registered investment company that is offered to separate accounts
of variable insurance companies.
--A I M Distributors, Inc. and Fund Management Company of Houston, Texas
are registered broker-dealers that act as the principal underwriters for retail
and institutional mutual funds.
The corporate headquarters of ^ AMVESCAP PLC are located at 11 Devonshire
Square, London, ^ EC2M4YR, England.
As indicated in the ^ Funds' Prospectus, IFG and INVESCO ^ Trust permit
investment and other personnel to purchase and sell securities for their own
accounts in accordance with a compliance policy governing personal investing by
directors, officers and employees of IFG, INVESCO Trust and ^ their North
American affiliates. The policy requires officers, inside directors, investment
and other personnel of IFG, INVESCO Trust and ^ their North American affiliates
to pre-clear all transactions in securities not otherwise exempt under the
policy. Requests for trading authority will be denied when, among other reasons,
the proposed personal transaction would be contrary to the provisions of the
policy or would be deemed to adversely affect any transaction then known to be
under consideration for or to have been effected on behalf of any client
accounts, including the Funds.
In addition to the pre-clearance requirement described above, the policy
subjects officers, inside directors, investment and other personnel of IFG,
INVESCO Trust and ^ their North American affiliates to various trading
restrictions and reporting obligations. All reportable transactions are reviewed
for compliance with the policy. The provisions of the policy are administered by
and subject to exceptions authorized by ^ IFG.
Investment Advisory Agreement. ^ IFG serves as investment adviser to the
Funds pursuant to an investment advisory agreement dated February 28, 1997 (the
"Agreement") with the Company which was approved ^ by the board of directors on
November 6, 1996, by a vote cast in person by a majority of the directors of the
Company, including a majority of the directors who are not "interested persons"
of the Company or ^ IFG at a meeting called for such purpose. ^ The Agreement
was approved by the Funds' shareholders on January 31, 1997, for an initial term
expiring ^ February 28, 1999. 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 ^ each 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, or by a
<PAGE>
Fund with respect to that Fund, upon sixty (60) days' written notice and
terminates automatically in the event of an assignment to the extent required by
the 1940 Act and the rules thereunder.
The Agreement provides that ^ IFG 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 ^ IFG).
Further, ^ IFG shall perform all administrative, internal accounting (including
computation of net asset value), clerical, statistical, secretarial and all
other services necessary or incidental to the administration of the affairs of
the Funds excluding, however, those services that are the subject of separate
agreement between the Company and ^ IFG or any affiliate thereof, including the
distribution and sale of Fund shares and provision of transfer agency, dividend
disbursing agency, and registrar services, and services furnished under an
Administrative Services Agreement with ^ IFG discussed below. Services provided
under the Agreement include, but are not limited to: supplying the Company with
officers, clerical staff and other employees, if any, who are necessary in
connection with the Funds' operations; furnishing office space, facilities,
equipment, and supplies; providing personnel and facilities required to respond
to inquiries related to shareholder accounts; conducting periodic compliance
reviews of the Funds' operations; preparation and review of required documents,
reports and filings by ^ IFG's in-house legal and accounting staff (including
the prospectus, statement of additional information, proxy statements,
shareholder 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 ^ IFG are borne by the Funds.
As full compensation for its advisory services to the Company, ^ IFG
receives a monthly fee. The fee with respect to the ^ Select Income ^ and ^ U.S.
Government Securities ^ Funds 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 ^ High Yield ^ and ^ Short-Term
Bond ^ Funds also are calculated daily but are reduced by 0.05% at each level in
the above fee schedule.
^
Sub-Advisory Agreement. INVESCO Trust serves as sub-adviser to the Funds
pursuant to a sub-advisory agreement dated February 28, 1997 (the
"Sub-Agreement") with ^ IFG which was approved ^ by the board of directors on
November 6, 1996, by a vote cast in person by a majority of the directors of the
Company, including a majority of the directors who are not "interested persons"
<PAGE>
of the Company, ^ IFG or INVESCO Trust at a meeting called for such
purpose. ^ Shareholders of the Funds approved the Sub-Advisory Agreement on
January 31, 1997, for an initial term expiring ^ February 28, 1999. Thereafter,
the Sub-Agreement may be continued from year to year as 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 each Fund. Any 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 ^ IFG, shall manage the investment portfolios of the Funds in conformity with
each Fund's investment policies. These management services ^ include: (a)
managing the investment and reinvestment of all the assets, now or hereafter
acquired, of 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 ^ Select Income ^ and
U.S. Government Securities ^ Funds, as compensation for its services, INVESCO
Trust shall receive from ^ IFG, at the end of each month, a fee based upon the
average daily value of each ^ Fund's net assets at the following annual rates:
prior to January 1, 1998, 0.25% on each ^ Fund's average net assets up to $200
million^ and 0.20% on each ^ Fund's average net assets in excess of $200
million^; and effective January 1, 1998, 0.1833% on the first $300 million of
<PAGE>
each Fund's average net assets, 0.1500% on the next $200 million of each
Fund's average net assets and 0.1167% of each Fund's average net assets in
excess of $500 million. With respect to the High Yield Fund, as compensation for
its services, INVESCO Trust shall receive from ^ IFG, at the end of each month,
a fee based upon the average daily value of ^ the Fund's net assets at the
following annual rates: ^ prior to January 1, 1998, 0.25% on the Fund's average
net assets up to $200 million and 0.20% on the Fund's average net assets in
excess of ^ $200 million; and effective January 1, 1998, 0.1667% ont he first
$300 million of the Fund's average net assets, 0.1333% on the next $200 million
of the Fund's average net assets and 0.1000% of the Fund's average net assets in
excess of $500 million. With respect to the Short-Term Bond Fund, as
compensation for its services, INVESCO Trust shall receive from IFG, at the end
of each month, a fee based upon the average daily value of the Fund's net assets
at the following annual rates: prior to January 1, 1998, 0.25% on the first $300
million of the Fund's average net assets, 0.20% on the next $200 million of the
Fund's average net assets, and 0.15% of the Fund's average net assets in excess
of $500 million; and effective January 1, 1998, 0.1667% on the first $300
million of the Fund's average net assets, 0.1333% on the next $200 million of
the Fund's average net assets and 0.1000% of the Fund's average net assets in
excess of $500 million.
Administrative Services Agreement. ^ IFG, either directly or through
affiliated companies, provides certain administrative, sub-accounting, and
recordkeeping services to the Funds pursuant to an Administrative Services
Agreement dated ^ February 28, 1997 (the "Administrative Agreement"). The
Administrative Agreement was approved ^ by the board of directors on November 6,
1996, by a vote cast in person by all of the directors of the Company, including
all of the directors who are not "interested persons" of the Company or ^ IFG at
a meeting called for such purpose. The Administrative Agreement ^ is for an
initial term ^ expiring ^ February 28, 1998, and has been continued by action of
the board of directors ^ until May 15, 1998. The Administrative Agreement may be
continued from year to year as long as each such continuance is specifically
approved by the board of directors of the 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 ^ IFG 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 ^ IFG 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
<PAGE>
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 ^ IFG consisting of a base fee of
$10,000 per year, plus an additional incremental fee computed daily and paid
monthly at an annual rate of 0.015% per year of the average net assets of the
Fund.
Transfer Agency Agreement. ^ IFG also performs transfer agent, dividend
disbursing agent, and registrar services for the Funds pursuant to a Transfer
Agency Agreement dated February 28, 1997, 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 ^ November 6, 1997, for an initial term expiring ^ February 28,
1998 and has been extended by action of the board of directors until ^ May 15,
1998. Thereafter, the Transfer Agency Agreement may be continued from year to
year as 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 each 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
^ an annual fee of $26.00 per shareholder account or ^, where applicable, per
participant ^ in an omnibus account. This fee is paid monthly at a rate of 1/12
of the annual fee and is based upon the number of shareholder accounts ^ and
omnibus account participants in existence 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, 1997(1) August 31, 1996(1) August 31, 1995(1) ^
------------------ ----------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
-------- -------- -------- -------- -------- -------- -------- -------- -------
Select Income $1,477,302 $786,616 $50,289 $1,410,937 $614,471 $48,480 $946,146 $518,379 $35,804
^ High Yield 1,964,043 651,471 72,410 1,671,610 532,180 61,443 1,290,879 555,664 48,750 ^
U.S. Government
Securities 312,851 178,192 18,532 233,025 177,086 16,355 219,925 177,310 15,998 ^
Short-Term Bond 61,150 61,050 11,833 44,394 51,685 11,332 43,277 47,595 11,298 ^
(1) These amounts do not reflect the voluntary expense limitations described in
the Funds' prospectus.
</TABLE>
<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' portfolios
are properly administered. The officers of the Company, all of whom are officers
and employees of, and paid by, ^ IFG, 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 ^ IFG.
All of the officers and directors of the Company hold comparable positions
with INVESCO Capital Appreciation Funds, Inc. (formerly, INVESCO Dynamics Fund,
Inc.), INVESCO Diversified Funds, 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 ^, with
the exception of Mr. Hesser, also serve as 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 ^ AMVESCAP PLC, London, England, and of various subsidiaries
thereof^. Chairman of the Board of ^ INVESCO Treasurer's Series Trust^. Address:
1315 Peachtree Street, NE, Atlanta, Georgia. Born: May 11, 1935.
FRED A. DEERING,+# Vice Chairman of the Board. Vice Chairman of ^ INVESCO
Treasurer's Series Trust. Trustee of ^ INVESCO Global Health Sciences Fund.
Formerly, Chairman of the Executive Committee and Chairman of the Board of
Security Life of Denver Insurance Company, Denver, Colorado; Director of ING
America Life Insurance Company, Urbaine Life Insurance Company and Midwestern
United Life Insurance Company. Address: Security Life Center, 1290 Broadway,
Denver, Colorado. Born: January 12, 1928.
DAN J. HESSER,+* President, CEO and Director. Chairman of the Board,
President, and Chief Executive Officer of INVESCO Funds Group, Inc. ^ and
INVESCO Distributors, Inc; President and Director of INVESCO Trust Company^;
President and Chief Operating Officer of INVESCO Global Health Sciences Fund.
Born: December 27, 1939.
<PAGE>
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); since October 1984, Director of the Center for the Study of
Regulated Industry at Georgia State University; formerly, member of the
faculties of the Harvard Business School and the Sloan School of Management of
MIT. Dr. Andrews is also a Director of ^ the Southeastern Thrift and Bank Fund,
Inc. and The Sheffield Funds, Inc. Address: 4625 Jettridge Drive, Atlanta,
Georgia. Born: June 23, 1930.
BOB R. BAKER,+** Director. President and Chief Executive Officer of AMC
Cancer Research Center, Denver, Colorado, since January 1989; until mid-December
1988, Vice Chairman of the Board of First Columbia Financial Corporation (a
financial institution), Englewood, Colorado. Formerly, Chairman of the Board and
Chief Executive Officer of First Columbia Financial Corporation. Address: 1775
Sherman Street, #1000, Denver, Colorado. Born: August 7, 1936.
LAWRENCE H. BUDNER,# Director. Trust Consultant; prior to June 30, 1987,
Senior Vice President and Senior Trust Officer of InterFirst Bank, Dallas,
Texas. Address: 7608 Glen Albens Circle, Dallas, Texas. Born: July 25, 1930.
DANIEL D. CHABRIS,+# Director. Financial Consultant; Assistant Treasurer of
Colt Industries Inc., New York, New York, from 1966 to 1988. Address: ^ 19
Kingsbridge Way, Madison, Connecticut. Born: August 1, 1923.
^ WENDY L. GRAMM, Ph.D.,** Director. Self-employed (since 1993); Professor
of Economics and Public Administration, University of Texas at Arlington.
Formerly, Chairman, Commodity Futures Trading Commission from 1988 to 1993,
administrator for Information and Regulatory Affairs at the Office of Management
and Budget from 1985 to 1988, Executive Director of the Presidential Task Force
on Regulatory Relief and Director of the Federal Trade Commission's Bureau of
Economics. Dr. Gramm is also a director of the Chicago Mercantile Exchange,
Enron Corporation, IBP, Inc., State Farm Insurance Company, State Farm Life
Insurance Company, Kinetic Concepts, Inc., Independant Women's Forum,
International Republic Institute, and the Republican Women's Federal Forum. Dr.
Gramm is also a member of the Board of Visitors, College of Business
Administration, University of Iowa, and a member of the Board of Visitors,
Center for Study of Public Choice, George Mason University. Address: 4201 Yuma
Street, N.W., Washington, D.C. Born: January 10, 1945.
HUBERT L. HARRIS, JR.,* Director. Chairman (since ^ 1996)^ and President
(January 1990 to ^ May 1996) of INVESCO Services, Inc. ^; Chief ^ Executive
Officer of INVESCO Individual Services Group. Member of the Executive Committee
of the Alumni Board of Trustees of Georgia Institute of Technology. Address:
1315 Peachtree Street, NE, Atlanta, Georgia. Born: July 15, 1943.
<PAGE>
KENNETH T. KING,^# Director. Formerly, Chairman of the Board of The Capitol
Life Insurance Company, Providence Washington Insurance Company, and Director of
numerous subsidiaries thereof in the U.S. Formerly, Chairman of the Board of The
Providence Capitol Companies in the United Kingdom and Guernsey. Chairman of the
Board of the Symbion Corporation (a high technology company) until 1987.
Address: 4080 North Circulo Manzanillo, Tucson, Arizona. Born: November 16,
1925.
JOHN W. MCINTYRE,# Director. Retired. Formerly, Vice Chairman of the Board
of Directors of the Citizens and Southern Corporation and Chairman of the Board
and Chief Executive Officer of ^ the Citizens and Southern Georgia Corporation
and Citizens and Southern National Bank. Director of Golden Poultry Co., Inc.
Trustee of ^ INVESCO Global Health Sciences Fund and Gables Residential Trust.
Address: 7 Piedmont Center, Suite 100, Atlanta, Georgia. Born: September 14,
1930.
LARRY SOLL, Ph.D., Director.** Formerly, Chairman of the Board (1987 to
1994), Chief Executive Officer (1982 to 1989 and 1993 to 1994) and President
(1982 to 1989) of Synergen Corp. Director of Synergen since incorporation in
1982. Director of ISD Pharmaceuticals, Inc., Trustee of INVESCO Global Health
Sciences Fund. Address: 345 Poorman Road, Boulder, Colorado. Born: April 26,
1942.
GLEN A. PAYNE, Secretary. Senior Vice President (since 1995), General
Counsel and Secretary of INVESCO Funds Group, Inc. and INVESCO Trust Company
^(since 1989) and INVESCO Distributors, Inc. (since 1997); Vice President (May
1989 to April 1995) ^, Secretary and General Counsel of INVESCO Funds Group,
Inc. ^; formerly, employee of a U.S. regulatory agency, Washington, D.C., (June
1973 through May 1989). Born: September 25, 1947.
RONALD L. GROOMS, Treasurer. Senior Vice President and Treasurer of INVESCO
Funds Group, Inc. and INVESCO Trust Company ^(since 1988). Senior Vice President
and Treasurer of INVESCO Distributors, Inc. (since 1997). Born: October 1, 1946.
WILLIAM J. GALVIN, JR., Assistant Secretary. Senior Vice President of
INVESCO Funds Group, Inc. (since 1995) and of INVESCO Distributors, Inc. (since
1997) and Trust Officer of INVESCO Trust Company (since July 1995) and formerly
(August 1992 to July 1995), Vice President of INVESCO Funds Group, Inc. and ^
Trust Officer of INVESCO Trust Company. Formerly, Vice President of 440
Financial Group from June 1990 to August 1992 ^; Assistant Vice President of
Putnam Companies from November 1986 to June 1990. Born: August 21, 1956.
ALAN I. WATSON, Assistant Secretary. Vice President of INVESCO Funds Group,
Inc. (since 1984) and Trust Officer of INVESCO Trust Company. Born: September
14, 1941.
<PAGE>
JUDY P. WIESE, Assistant Treasurer. Vice President of INVESCO Funds Group,
Inc. (since 1984) and of INVESCO Distributors, Inc. (since 1997) and Trust
Officer of INVESCO Trust Company. Born:February 3, 1948.
#Member of the audit committee of the Company.
+Member of the executive committee of the Company. On occasion, the
executive committee acts upon the current and ordinary business of the Company
between meetings of the board of directors. Except for certain powers which,
under applicable law, may only be exercised by the full board of directors, the
executive committee may exercise all powers and authority of the board of
directors in the management of the business of the Company. All decisions are
subsequently submitted for ratification by the board of directors.
*These directors are "interested persons" of the Company as defined in the
^ Investment Company Act of 1940.
**Member of the management liaison committee of the Company.
As of October ^24, 1997, 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 ^ the Funds' outstanding shares.
Director Compensation
The following table sets forth, for the fiscal year ended August 31, ^
1997: the compensation paid by the Company to its ^ 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 ^ IDI (including the Company), INVESCO
Advisor Funds, Inc., INVESCO Treasurer's Series Trust and ^ INVESCO Global
Health Sciences Fund (collectively, the "INVESCO Complex") to these directors
for services rendered in their capacities as directors or trustees during the
year ended December 31, ^ 1996. As of December 31, ^ 1996, there were ^ 49 funds
in the INVESCO Complex. Dr. Soll became an independent director of the Company
effective May 15, 1997. Dr. Gramm became an independent director of the Company
effective July 29, 1997.
<PAGE>
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, ^ $6,153 $1,424 $1,386 $98,850
Vice Chairman of
the Board
Victor L. Andrews ^ 6,117 1,345 1,605 84,350
Bob R. Baker ^ 6,232 1,201 2,151 84,850
Lawrence H. Budner ^ 5,983 1,345 1,605 80,350
Daniel D. Chabris 6,107 1,535 1,140 84,850
A. D. Frazier, Jr.(4) 1,356 0 0 81,500
Wendy L. Gramm 1,313 0 0 0
Kenneth T. King 5,530 1,478 1,257 71,350
John W. McIntyre 5,856 0 0 90,350
Larry Soll 2,578 0 0 17,500
------- ------ ------ --------
Total $47,225 $8,328 $9,144 $693,950
% of Net Assets 0.0057%(5) 0.0010%(5) 0.0045%(6)
(1)The vice chairman of the board, the chairmen of the audit, management
liaison and compensation committees, and the members of the executive and
valuation committees, and the members of specially approved task forces of the
board of directors each receive compensation for serving in such capacities in
addition to the compensation paid to all independent directors.
(2)Represents benefits accrued with respect to the Defined Benefit Deferred
Compensation Plan discussed below, and not compensation deferred at the election
of the directors.
(3)These ^ figures represent the Company's share of the estimated annual
benefits payable by the INVESCO Complex (excluding ^ INVESCO Global Health
Sciences Fund which does not participate in any retirement plan) upon the
directors' retirement, calculated using the current method of allocating
director compensation among the funds in the INVESCO Complex. These estimated
benefits assume retirement at age 72 and that the basic retainer payable to the
directors will be adjusted periodically for inflation, for increases in the
number of funds in the INVESCO Complex, and for other reasons during the period
in which retirement benefits are accrued on behalf of the respective directors.
This results in lower estimated benefits for directors who are closer to
retirement and higher estimated benefits for directors who are further from
retirement. With the exception of Messrs. Frazier ^, Gramm, McIntyre and Soll,
<PAGE>
each of these directors has served as a director/trustee of one or more of
the funds in the INVESCO Complex for the minimum five-year period required to be
eligible to participate in the Defined Benefit Deferred Compensation Plan.
^ (4)Effective February 28, 1997, Mr. Frazier resigned as a director of the
Company. Effective November 1, 1996, Mr. Frazier ^ was employed by INVESCO PLC
(the predecessor to AMVESCAP PLC), a company affiliated with IFG, and did not
receive any director's fees or other compensation from the Company or other
funds in the INVESCO Complex for his service as a director.
^ (5)Total as a percentage of the Company's net assets as of August 31, ^
1997.
^ (6)Total as a percentage of the net assets of the INVESCO Complex as of
December 31, ^ 1996.
Messrs. Brady, Harris^ and Hesser, as "interested persons" of the Company
and other funds in the INVESCO Complex, receive compensation as officers or
employees of ^ IFG or its affiliated companies, and do not receive any
director's fees or other compensation from the Company or other funds in the
INVESCO Complex for their services as directors.
The boards of directors/trustees of the mutual funds managed by ^ IFG and
INVESCO Treasurer's Series Trust have adopted a Defined Benefit Deferred
Compensation Plan for the non-interested directors and trustees of the funds.
Under this plan, each director or trustee who is not an interested person of the
funds (as defined in the 1940 Act) and who has served for at least five years (a
"qualified director") is entitled to receive, upon retiring from the boards at
the retirement age of 72 (or the retirement age of 73 to 74, if the retirement
date is extended by the boards for one or two years, but less than three years)
continuation of payment for one year (the "first year retirement benefit") of
the annual basic retainer payable by the funds to the qualified director at the
time of his or her retirement (the "basic retainer"). Commencing with any such
director's second year of retirement, and commencing with the first year of
retirement of a director whose retirement has been extended by the board for
three years, a qualified director shall receive quarterly payments at an annual
rate equal to ^ 40% of the basic retainer. These payments will continue for the
remainder of the qualified director's life or ten years, whichever is longer
(the "reduced retainer payments"). If a qualified director dies or becomes
disabled after age 72 and before age 74 while still a director of the funds, the
first year retirement benefit and the reduced retainer payments will be made to
him or her or to his or her beneficiary or estate. If a qualified director
becomes disabled or dies either prior to age 72 or during his/her 74th year
while still a director of the funds, the director will not be entitled to
receive the first year retirement benefit; however, the reduced retainer
payments will be made to his or her beneficiary or estate. The plan is
administered by a committee of three directors who are also participants in the
<PAGE>
plan and one director who is not a plan participant. The cost of the plan will
be allocated among the INVESCO^ and Treasurer's Series Trust funds 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 that is comprised of ^ five 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 ^ IFG 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." ^ IDI 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 ^ described in the section of the Funds' Prospectus
entitled "How To Buy Shares - Distribution Expenses^," the Company has adopted a
Plan and Agreement of Distribution (the "Plan") pursuant to Rule 12b-1 under the
1940 Act. The ^ initial Plan was approved on April 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"). The board of directors, on February 4, 1997, approved amending the
Plan to a compensation type 12b-1 plan. This amendment of the Plan will not
result in increasing the amount of the Funds' payments thereunder.
<PAGE>
The Plan was continued by action of the board of directors until May 15, 1998.
Pursuant to authorization granted by the Company's board of directors on
September 2, 1997, a new Plan became effective on September 30, 1997, under
which IDI assumed all obligations related to distribution which were previously
performed by IFG.
The Plan provides that the Funds may make monthly payments to ^ IDI of
amounts computed at an annual rate no greater than 0.25% of ^ each Fund's
average net assets to ^ permit IDI, at its discretion, to engage in certain
activities and provide services in connection with the distribution of ^ a
Fund's shares to investors. Payment amounts by a Fund under the Plan, for any
month, may ^ be made to compensate IDI for permissible activities engaged in and
services provided by IDI during the rolling 12-month period in which that month
falls^. During the fiscal year ended August 31^ 1997 the Select Income, High
Yield, U.S. Government Securities and Short-Term Bond Funds made payments to IFG
(the predecessor of IDI as distributor of shares of the Funds) under the 12b-1
Plan in the amount of $666,209, $1,020,541, $140,631 and $30,227, respectively.
In addition, as of August 31, ^ 1997, $62,454, $101,678, $13,184 and $2,674 of
additional distribution ^ accruals had been incurred under the Plan for ^ the
Select Income ^, High Yield ^, U.S. Government Securities ^ and Short-Term Bond
Funds, respectively, and will be paid to IDI during the fiscal year ended August
31, 1998. As noted in the Prospectus, one type of expenditure permitted by the
Plan is the payment of compensation to securities companies, and other financial
institutions and organizations, which may include ^ IDI-affiliated companies, in
order to obtain various distribution-related and/or administrative services for
the 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 ^ IDI to
broker-dealers who sell shares of ^ a Fund and may be made to banks, savings and
loan associations and other depository institutions. Although the Glass-Steagall
Act limits the ability of certain banks to act as underwriters of mutual fund
shares, the Company does not believe that these limitations would affect the
ability of such banks to enter into arrangements with ^ IDI, but can give no
assurance in this regard. However, to the extent it is determined otherwise in
the future, arrangements with banks might have to be modified or terminated,
and, in that case, the size of 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, ^ 1997, allocations of 12b-1 amounts
paid by the Select Income Fund for the following categories of expenses were:
advertising--^ $21,033; sales literature, printing, and postage--^ $92,889;
direct mail--^ $16,244 public relations/promotion--^ $19,721; compensation
to securities dealers and other organizations--^ $412,314; marketing
<PAGE>
personnel--^ $104,008 For the fiscal year ended August 31, ^ 1997, allocations
of 12b-1 amounts paid by the High Yield Fund for the following categories of
expenses were: advertising--^ $40,473; sales literature, printing and postage--^
$157,687; direct mail--^ $86,674; public relations/promotion--^ $22,301;
compensation to securities dealers and other organizations--^ $497,270;
marketing personnel--^ $216,136. For the fiscal year ended August 31, ^ 1997,
allocations of 12b-1 amounts paid by the U.S. Government Securities Fund were:
advertising--^ $5,138; sales literature, printing and postage--^ $18,414; direct
mail--^ $3,834; public relations/promotion--^ $2,723; compensation to securities
dealers and other organizations--^ $86,117; marketing personnel--^ $24,405. For
the fiscal year ended August 31, ^ 1997, allocation of 12b-1 amounts paid by the
Short-Term Bond Fund were: advertising--^ $1,878; sales literature, printing and
postage--^ $11,964 direct mail--^ $1,370; public relations/promotion--^ $984;
compensation to securities dealers and other organizations--^ $7,121; marketing
personnel--^ $6,910.
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 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 can also ^ 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
offering of a Fund's shares would not, of course, affect a shareholder's ability
to redeem his or her shares. So long as the Plan is in effect, the selection and
nomination of persons to serve as independent directors of the Company shall be
committed to the independent directors then in office at the time of such
<PAGE>
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 ^ IDI
shall terminate automatically, in the event of such "assignment," in which ^
case the Funds may continue to make payments, pursuant to the Plan, to ^ IDI or
another organization only upon the approval of new arrangements, which may or
may not be with ^ IDI, regarding the use of the amounts authorized to be paid by
it under the Plan, by the directors, including a majority of the 12b-1
directors, by a vote cast in person at a meeting called for such purpose.
Information regarding the services rendered under the Plan and the amounts
paid therefor by each Fund are provided to, and reviewed by, the directors on a
quarterly basis.^ On an annual basis, the directors consider the continued
appropriateness of the Plan 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 herein under the section entitled "The Funds and Their
Management -Officers and Directors of the Company" who are also officers either
of ^ IDI or companies affiliated with ^ IDI. The benefits which the Company
believes will be reasonably likely to flow to the Funds and their shareholders
under the Plan include the following:
(1) Enhanced marketing efforts, if successful, should result in an
increase in net assets through the sale of additional shares and
afford greater resources with which to pursue the investment
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;
<PAGE>
(3) The positive effect which increased Fund assets will have on its
revenues could allow ^ IFG and its affiliated companies:
(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 ^ IFG and its affiliated companies (and support
them in their infancy), and thereby expand the investment
choices available to all shareholders, and
(c) To acquire and retain talented employees who desire
to be associated with a growing organization; and
(4) Increased Fund assets may result in reducing each investor's share
of certain expenses through economies of scale (e.g. exceeding
established breakpoints in the advisory fee schedule and allocating
fixed expenses over a larger asset base), thereby partially
offsetting the costs of the Plan.
HOW SHARES ARE VALUED
As described in the section of ^ the Funds' Prospectus entitled ^"How To
Buy Shares," 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 ^ that Fund receives a
request to purchase or redeem shares. Net asset value per share is not
calculated on days the New York Stock Exchange is closed, such as federal
holidays, including New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving, and
Christmas. ^ The net asset value per share of each Fund is calculated by
dividing the value of all securities held by ^ that Fund ^ plus its other assets
(including dividends and interest accrued but not collected), less ^ that 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
<PAGE>
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 ^ value of securities held by ^ each Fund, and other assets used in
computing net asset value, generally ^ is determined as of the time regular
trading in such securities or assets is completed each day. ^ Because regular
trading in most foreign securities markets is completed simultaneously with, or
prior to, the close of regular trading on the New York Stock Exchange, closing
prices for foreign securities usually are available for purposes of computing ^
a 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 ^ the Funds' Prospectus entitled "Fund
Price and Performance," the ^ Company advertises the yield and total return
performance of the Funds. 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
<PAGE>
that each month has 30 days). Dividends received on the preferred stocks
held by the ^ High Yield Fund are recognized, for purposes of yield
calculations, on a daily accrual basis. As discussed in ^ the Prospectus, and in
the Appendix of this Statement of Additional Information, the GNMA Certificates
held by the ^ 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, ^ 1997, were as follows: ^ Select Income
Fund, ^ 6.09%; High Yield Fund, ^ 8.40%; U.S. Government Securities Fund, ^
5.28%; and ^ Short-Term Bond Fund, ^ 5.62%.
Average annual total return performance for each of the Funds for the
indicated periods ended August 31, ^ 1997, was as follows:
<PAGE>
1 3 5 10
Fund Year Years Years Years
- ---- ---- ----- ----- -----
INVESCO Select Income ^ 12.89% 10.48 8.72% 9.35%
INVESCO High Yield ^ 19.27% 13.86 11.12% 9.82%
INVESCO U.S.
Government Securities ^ 11.01% 8.12% 6.05% 7.48%
INVESCO Short-Term
Bond ^ 7.08% 6.29% 4.59%(1) N/A
- ---------------------------
(1) Inception date: ^ 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
equate the initial amount invested to the ending redeemable value, according to
the following formula:
P(1 + T)exponent n = ERV
where: P = initial payment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of initial payment
The average annual total return performance figures shown above were
determined by solving the above formula for "T" for each time period 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:
<PAGE>
American Association of Individual Investors' Journal
Banxquote
Barron's
Business Week
CDA Investment Technologies
CNBC
CNN
Consumer Digest
Financial Times
Financial World
Forbes
Fortune
Ibbotson Associates, Inc.
Institutional Investor
Investment Company Data, Inc.
Investor's Business Daily
Kiplinger's Personal Finance
Lipper Analytical Services, Inc.'s Mutual Fund Performance
Analysis
Money
Morningstar
Mutual Fund Forecaster
No-Load Analyst
No-Load Fund X
Personal Investor
Smart Money
The New York Times
The No-Load Fund Investor
U.S. News and World Report
United Mutual Fund Selector
USA Today
Wall Street Journal
Wiesenberger Investment Companies Services
Working Woman
Worth
SERVICES PROVIDED BY THE FUND
Periodic Withdrawal Plan. As described in the section of ^ the Funds'
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. ^ Because
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.
<PAGE>
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.
^ Participation in the Periodic Withdrawal Plan may be terminated at any
time by sending a written request to ^ IFG. Upon termination, all future
dividends and capital gain distributions will be reinvested in additional shares
unless a shareholder requests otherwise.
Exchange ^ Policy. As discussed in the section of ^ the Funds' Prospectus
entitled "How ^ To Buy Shares - Exchange ^ Policy," each Fund offers
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 ^
IFG. Exchange requests may be made either by telephone or by written request to
^ IFG, using the telephone number or address on the cover of this Statement of
Additional Information. Exchanges made by telephone must be in an amount of at
least $250, if the exchange is being made into an existing account of one of the
INVESCO funds. All exchanges that 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 ^ the Funds' 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 ^ IFG will be provided with prototype documents and other
supporting information regarding the type of Plan requested. Each of these plans
involves a long-term commitment of assets and is subject to possible regulatory
penalties for excess contributions, premature distributions or for insufficient
distributions after age 70-1/2. The legal and tax implications may vary
according to the circumstances of the individual investor. Therefore, the
investor is urged to consult with an attorney or tax adviser prior to the
establishment of such a plan.
<PAGE>
HOW TO REDEEM SHARES
Normally, payments for shares redeemed will be mailed within seven (7) days
following receipt of the required documents as described in the section of ^ the
Funds' 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
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 ^ is obligated ^ 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, ^ OTHER 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^ (the "Code"). Each Fund so qualified ^ for the
^ taxable year ended August 31, ^ 1997, and intends to continue to qualify
during its current ^ taxable year. As a result, because each Fund intends to
distribute all of its income and recognized gains, 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 and net realized gains
from certain foreign currency transactions are, for federal income tax purposes,
taxable as ordinary income to shareholders. After the end of each calendar year,
^ each Fund sends shareholders information regarding the amount and character of
dividends paid in the year^.
Distributions by the ^ Funds of net capital ^ gain (the excess of net
long^-term capital gain over net short-term capital loss) are, for federal
income tax purposes, taxable to the shareholder as long-term capital ^ gains
regardless ^ how long a shareholder has held shares of ^ a Fund. The Taxpayer
Relief Act of 1997 (the "Tax Act"), enacted in August 1997, changed the taxation
of long-term capital gains by applying different capital gains rates depending
on the taxpayer's holding period and marginal rate of federal income tax.
<PAGE>
Long-term gains realized on the sale of securities held for more than one year
but not for more than 18 months are taxable at a rate of 28%. This category of
long-term gains is often referred to as "mid-term" gains but is technically
termed "28% rate gains". Long-term gains realized on the sale of securities held
for more than 18 months are taxable at a rate of 20%. The Tax Act, however, does
not address the application of these rules to distributions of net capital gain
(excess of long-term capital gain over short-term capital losses) by a regulated
investment company, including whether such distributions may be treated by its
shareholders in accordance with the Fund's holding period for the assets it sold
that generated the gain. The application of the new capital gain rules must be
determined by further legislation or future regulations that are not available
as this Prospectus is being prepared. At the end of each year, information
regarding the tax status of dividends and other distributions is provided to
shareholders. Shareholders should consult their tax advisers as to the effect of
the Tax Act on distributions by the Fund of net capital gain.
All dividends and other distributions are regarded as taxable to the
investor, regardless whether ^ such dividends and distributions are reinvested
in additional shares of a Fund. The net asset value of Fund shares reflects
accrued net investment income and undistributed realized capital and foreign
currency gains; therefore, when a distribution is made, the net asset value is
reduced by the amount of the distribution. If the net asset value of ^ Fund
shares ^ were reduced below a ^ shareholder's cost as a result of a
distribution, such distribution would be taxable to the shareholder although a
portion would be, in effect, a return of invested capital. ^ However, the net
asset value per share will be reduced by the amount of the distribution, which
would reduce any gain ^ or increase any loss^ for tax purposes on any subsequent
redemption of shares by the shareholder.
IFG^ may provide Fund shareholders with information concerning the average
cost basis of their shares in order to help them prepare their tax returns. This
information is intended as a convenience to shareholders^ and will not be
reported to the Internal Revenue Service (the ^"IRS"). The IRS permits the use
of several methods to determine the cost basis of mutual fund shares. The cost
basis information provided by ^ IFG will be computed using the single-category
average cost method, although neither ^ IFG nor the Fund recommends any
particular method of determining cost basis. Other methods may result in
different tax consequences. If a shareholder has reported gains or losses ^ with
respect to shares of a Fund in past years, the shareholder must continue to
use the cost basis method previously used^ unless the shareholder applies to the
IRS for permission to change ^ the method.
<PAGE>
If Fund shares are sold at a loss after being held for six months or less,
the loss will be treated as a long-term, instead of short-term, capital loss to
the extent of any capital gain distributions received on those shares.
^ The Fund will be subject to a ^ non-deductible 4% excise tax to the
extent it fails to distribute by the end of any calendar year substantially all
of ^ it ordinary income for that year and net capital ^ gains for the one-year
period ending on October 31 of that year, plus certain other amounts.
Dividends and interest received by ^ each Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not ^ imposes taxes on capital gains in
respect of investments by foreign investors. ^ Foreign taxes withheld will be
treated as an expense of the Fund.
The Fund may invest in the stock of "passive foreign investment companies"
(PFICs). A PFIC is a foreign corporation (other than a controlled foreign
corporation) that, in general, meets either of the following tests: (1) at least
75% of its gross income is passive or (2) an average of at least 50% of its
assets produce, or are held for the production of, passive income. Under certain
circumstances, a Fund will be subject to federal income tax on a portion of any
"excess distribution" received on the stock of a PFIC or of any gain on
disposition of the stock (collectively "PFIC income"), plus interest thereon,
even if the Fund distributes the PFIC income as a taxable dividend to its
shareholders. The balance of the PFIC income will be included in the Fund's
investment company taxable income and, accordingly, will not be taxable to the
Fund to the extent that income is distributed to its shareholders.
Each Fund may elect to "mark-to-market" its stock in any PFIC.
Marking-to-market, in this context, means including in ordinary income for each
taxable year the excess, if any, of the fair market value of the PFIC stock over
one Fund's adjusted tax basis therein as of the end of that year. Once the
election has been made, a Fund also will be allowed to deduct from ordinary
income the excess, if any, of its adjusted basis in PFIC stock over the fair
market value thereof as of the end of the year, but only to the extent of any
net mark-to-market gains with respect to that PFIC stock included by the Fund
for prior taxable years. A Fund's adjusted tax basis in each PFIC's stock with
respect to which it makes this election will be adjusted to reflect the amounts
of income included and deductions taken under the election.
Gains or losses (1) from the disposition of foreign currencies, (2) from
the disposition of debt securities denominated in foreign currency that are
attributable to fluctuations in the value of the foreign currency between the
date of acquisition of each security and the date of disposition, and (3) that
are attributable to fluctuations in exchange rates that occur between
<PAGE>
the time the Fund accrues interest, dividends or other receivables or accrues
expenses or other liabilities denominated in a foreign currency and the time the
Fund actually collects the receivables or pays the liabilities, generally will
be treated as ordinary income or loss. These gains or losses may increase or
decrease the amount of the Fund's investment company taxable income to be
distributed to its shareholders.
Shareholders should consult their own tax advisers regarding specific
questions as to federal, state and local taxes. ^ Dividends and other
distributions generally will be subject to applicable state and local taxes.
Qualification as a regulated investment company under the ^ Code for federal
income tax purposes does not entail government supervision of management or
investment policies.
INVESTMENT PRACTICES
Portfolio Turnover. There are no fixed limitations regarding the 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, 1997, 1996^ and ^ 1995, the ^ Select Income Fund's
portfolio turnover rates were 263%, 210%^ and 181% ^, respectively, the ^ High
Yield Fund's turnover rates were 129%, 266%^ and 201% ^, respectively, and the ^
U.S. Government Securities Fund's portfolio turnover rates were ^ 139%, 212% and
99%, respectively and the Short-Term Bond Fund's portfolio turnover rates were
331%, 103% and 68%, respectively. 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 ^ IFG, 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 ^ IFG's or INVESCO Trust's evaluation of their financial responsibility,
subject to their ability to effect transactions at the best available prices. ^
IFG or INVESCO Trust evaluates the overall reasonableness of brokerage
commissions or underwriting discounts (the difference between the full
acquisition price to acquire the new offering and the discount offered to
members of the underwriting syndicate) paid by reviewing the quality of
executions obtained on each Fund's portfolio transactions ^, viewed in terms of
the size of transactions, prevailing market conditions in the security purchased
or sold, and general economic and market conditions. In seeking to ensure that
<PAGE>
the commissions or discounts charged the Fund are consistent with prevailing and
reasonable commissions or discounts, ^ IFG or INVESCO Trust also endeavors to
monitor brokerage industry practices with regard to the commissions or discounts
charged by brokers and dealers on transactions effected for other comparable
institutional investors. While ^ IFG 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, ^ IFG or INVESCO Trust may select brokers that provide
research services to effect such transactions. Research services consist of
statistical and analytical reports relating to issuers, industries, securities
and economic factors and trends, which may be of assistance or value to ^ IFG or
INVESCO Trust in making informed investment decisions. Research services
prepared and furnished by brokers through which the Funds effect securities
transactions may be used by ^ IFG or INVESCO Trust in servicing all of their
respective accounts and not all such services may be used by ^ IFG 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, ^ IFG or INVESCO Trust, consistent with
the standard of seeking to obtain the best execution on portfolio transactions,
may place orders with such brokers for the execution of 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
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
<PAGE>
Programs, the Company's directors have authorized the Funds to pay transfer
agency fees to ^ IFG based on the number of investors who have beneficial
interests in the NTF Program Sponsor's omnibus accounts in the Funds. ^ IFG, in
turn, pays these transfer agency fees to the NTF Program Sponsor as a
sub-transfer agency or recordkeeping fee in payment of all or a portion of the
Services Fee. In the event that the sub-transfer agency or recordkeeping fee is
insufficient to pay all of the Services Fee with respect to these NTF Programs,
the directors of the 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. ^ IFG 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 ^ IDI to place a portion of each Fund's brokerage
transactions with certain NTF Program Sponsors or their affiliated brokers, if ^
IFG reasonably believes that, in effecting the Fund's transactions in portfolio
securities, the broker is able to provide the best execution of orders at the
most favorable prices. A portion of the commissions earned by such a broker from
executing portfolio transactions on behalf of the 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 ^ IFG or
IDI 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 ^ IFG 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, ^ IFG 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 ^ IFG prior to each fiscal year-end of the Funds. The
Company's board of directors has also authorized the Funds to pay to ^ IDI the
full Rule 12b-1 fees contemplated by the Plan in ^ compensate IDI for expenses
incurred by ^ IDI 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 ^ compensate
IDI for payments to such NTF Program Sponsor absent such credits.
The aggregate dollar amount of underwriting discounts and brokerage
commissions paid by the Company for the fiscal years ended August 31, 1997,
1996^ and 1995 ^ were $4,191,369, $3,611,046^ and $1,481,550 ^, respectively.
For the fiscal year ended August 31, ^ 1997, brokers providing research services
<PAGE>
received ^ $2,500 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, ^ $2,500; U.S. Government Securities Fund, $0; and
Short-Term Bond Fund, $0. The aggregate dollar amount of such portfolio
transactions was ^ $1,070,950. 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, ^ 1997.
At August 31, ^ 1997, the Funds held securities of their regular brokers
or dealers, or their parents, as follows:
Value of
Securities
Fund Broker or Dealer at ^ 08/31/97
- ---- ---------------- -------------
Select Income Fund GE Capital Services $11,127,000.00
High Yield Fund Associates Corp. of $8,503,000.00
North America
U.S. Government State Street Bank $255,000.00
Securities Fund & Trust
Short-Term Bond Fund State Street Bank $1,304,000.00
& Trust
Neither IFG nor INVESCO Trust receives any brokerage commissions on
portfolio transactions effected on behalf of the ^ Funds, and there is no
affiliation between ^ IFG, INVESCO Trust, or any person affiliated with ^ IFG,
INVESCO Trust, or the ^ Funds and any broker or dealer that executes
transactions for the ^ Funds.
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, ^ 1997, 43,176,748 shares of the ^ Select
Income Fund; ^ 63,206,605 shares of the ^ High Yield Fund; ^ 6,882,696 shares of
the ^ U.S. Government Securities Fund; and ^ 1,297,795 shares of the ^
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 ^ series represent the interests of the shareholders of
such ^ series in a particular portfolio of investments of the Company. Each ^
series of the Company's shares is preferred over all other ^ series with respect
to the assets specifically allocated to that ^ series, and all income, earnings,
<PAGE>
profits and proceeds from such assets, subject only to the rights of
creditors, are allocated to shares of that ^ series. The assets of each ^ series
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 ^ series 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 ^ series. In the
unlikely event that a liability allocable to one ^ series exceeds the assets
belonging to the ^ series, all or a portion of such liability may have to be
borne by the holders of shares of the Company's other ^ series.
All dividends on shares of a particular ^ series shall be paid only out of
the income belonging to that ^ series, pro rata to the holders of that ^ series.
In the event of the liquidation or dissolution of the Company or of a particular
^ series, the shareholders of each ^ series that is being liquidated shall be
entitled to receive, as a ^ series, when and as declared by the board of
directors, the excess of the assets belonging to that ^ series over the
liabilities belonging to that ^ series. The holders of shares of any ^ series
shall not be entitled to any distribution upon liquidation of any other ^
series. The assets so distributable to the shareholders of any particular ^
series shall be distributed among such shareholders in proportion to the number
of shares of that ^ series held by them and recorded on the books of the
Company.
All Fund shares, regardless of ^ series, have equal voting rights. Voting
with respect to certain matters, such as ratification of independent accountants
or election of directors, will be by all ^ series of the Company. When not all ^
series 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 ^ series 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.
<PAGE>
Principal Shareholders. As of October 1, ^ 1997, 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
- ---------------- ----------------- --------
^ Select Income Fund
- --------------------
Charles Schwab & Co., Inc. ^ 7,235,278.2650 16.168
Special Custody Acct. For The ^
Exclusive Benefit of ^ Customers
^ 101 Montgomery St.
San Francisco, CA 94104
Resources Trust ^ Co. Cust. For 4,575,068.9000 10.224
^ The Exclusive Benefit of The
Various Customers of IMS
P.O. Box 3865
Englewood, CO 80155
^ High Yield Fund
- -----------------
Charles Schwab & Co., Inc. ^ 25,662,163.4090 38.118
Special Custody Acct. For The ^
Exclusive Benefit of ^ Customers
^ 101 Montgomery St.
San Francisco, CA 94104
<PAGE>
^ U.S. Government ^ Securities Fund
- -----------------------------------
Resources Trust Co. Cust. ^ For 3,299,049.6150 48.643
The Exclusive Benefit of ^ The
Various Customers of IMS ^
P.O. Box 3865
Englewood, CO 80155
Charles Schwab & Co., Inc. ^ 405,170.3780 5.974
Special Custody Acct. For The ^
Exclusive Benefit of ^ Customers
^ 101 Montgomery St.
San Francisco, CA 94104
^ Short-Term Bond Fund
- ----------------------
Charles Schwab & Co., Inc. 207,875.8470 15.199
Special Custody Acct. For The
Exclusive Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104
Amalgamated Bank of NY Cust. ^ 153,202.9620 11.202
^ TMU Private Busline ^
Pension Trust
^ Amivest Discretionary Inv. Mgr.
P.O. Box 370
Cooper Station
New York, NY 10276
^
Amalgamated Bank of NY Cust. ^ 85,649.1140 6.262
Local 917 Pension Annuity & ^
Health Funds ^ Amivest Corp.
^ DIS Inv. Management
P.O. Box 370
Cooper Station
New York, NY ^ 10276
INVESCO Trust Co. Cust. 69,814.3670 5.105
Charles Halff
SEEC 4028 Plan 10/25/76
Christian-Jew Foundation
4105 Shady Oak Dr.
San Antonio, TX 78229
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.
<PAGE>
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.
Under its contract with the Company, the custodian is authorized to establish
separate accounts in foreign countries and to cause foreign securities owned by
the Funds to be held outside the United States in branches of U.S. banks and, to
the extent permitted by applicable regulations, in certain foreign banks and
securities depositories.
Transfer Agent. 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 LLP, 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, ^ 1997, 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, ^ 1997.
^ Prospectus. The Company will furnish, without charge, a copy of the ^
Funds' Prospectus ^ upon request. ^ 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.
Registration Statement. This Statement of Additional Information and the ^
Prospectus 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
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.
<PAGE>
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
other things, the level of market rates, the Certificates' coupon rates and the
prepayment experience of the pool of mortgages backing each Certificate.
<PAGE>
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 ^ Prospectus (Part A): 10
Financial Highlights for INVESCO Select
Income Fund for the fiscal years ended
August 31, 1997, 1996, 1995 and 1994, ^ the
eight-month period ended August 31, 1993
and for each of the ^ six years in the
period ended December 31, 1992.
Financial Highlights for INVESCO High 12
Yield Fund for the fiscal years ended
August 31, 1997, 1996, 1995 and 1994, the
eight-month period ended August 31, 1993
and for each of the ^ six years in the
period ended December 31, 1992.
Financial Highlights for INVESCO U.S. 14
Government Securities Fund for the fiscal
years ended August 31, 1997, 1996, 1995
and 1994, the eight-month period ended
August 31, 1993 and each of the ^ five
years in the period ended December 31,
1992.
Financial Highlights for INVESCO Short- 16
Term Bond Fund for the fiscal years
ended August 31, 1997, 1996 and 1995
and the 11-month period from
September 30, 1993 (commencement of
operations) to August 31, 1994.
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
ended August 31, ^ 1997 and the report
of Price Waterhouse LLP with respect to
<PAGE>
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, ^ 1997: Statement of Investment
Securities as of August
31, ^ 1997; Statement of Assets
and Liabilities as of August
31, ^ 1997; Statement of Operations
for the year ended August
31, ^ 1997; Statement of Changes in
Net Assets for each of the
two years in the period ended
August 31, ^ 1997; 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.(1)
(2) Bylaws, as amended July 21, ^
1993.(1)
(3) Not applicable.
(4) Not required to be filed on EDGAR.
(5) (a) Investment Advisory Agreement
between ^ Registrant and INVESCO
Funds Group, Inc. dated February
28, 1997 ^.
(b) Sub-Advisory Agreement between
INVESCO Funds Group, Inc. and
INVESCO Trust Company dated ^
February 28, 1997.
^(6) (a) General Distribution Agreement
between ^ Registrant and INVESCO
Funds Group, Inc. dated ^ February
28, 1997.
(b) General Distribution Agreement
between Registrant and INVESCO
Distributors, Inc. dated September
30, 1997.
<PAGE>
(7) Defined Benefit Deferred
Compensation Plan for Non-
Interested Directors and ^
Trustees.
(8) Custody Agreement between the
Company and State Street Bank and
Trust Company dated July 1, ^
1994.(1)
(a) Amendment to Custody Agreement
dated October 25, ^ 1995.(1)
(b) Data Access Addendum dated May
19, 1997.
(9) (a) Transfer Agency Agreement
between ^ Registrant and INVESCO
Funds Group, Inc. dated ^ February
28, 1997.
^(b) Administrative Services
Agreement between ^ Registrant and
INVESCO Funds Group, Inc. dated
February 28, 1997 ^.
(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.
(11) Consent of Independent Accountants.
(12) Not applicable.
(13) Not applicable.
(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 &
<PAGE>
Trust Agreement; and Financial
403(b) Retirement ^ Plan, all filed
with Registration Statement of
INVESCO International Funds, Inc.
(File No. 33-63498), filed May 27,
1993, and herein incorporated by
reference.
(15) Plan and Agreement of Distribution
^ pursuant to Rule 12b-1 under the
Investment Company Act of ^ 1940 dated
April 30, 1993.
(a) Amendment of Plan and
Agreement of Distribution
pursuant to 12b-1 under the
Investment Company Act of
1940 dated July 19, 1995.(1)
(b) Amended Plan and Agreement of
Distribution adopted pursuant to
Rule 12b-1 under the Investment
Company Act of 1940 dated January 1, 1997.
(c) Amended Plan and Agreement of
Distribution adopted pursuant to
rule 12b-1 under the Investment
Company Act of 1940 dated September
30, 1997.
(16) Schedule for computation of
performance ^ data.
(17) (a) Financial Data Schedule
for the period ended August
31, ^ 1997 for INVESCO Select
Income Fund.
(b) Financial Data Schedule
for the period ended August
31, ^ 1997 for INVESCO High
Yield Fund.
(c) Financial Data Schedule for
the period ended August 31, ^ 1997
for INVESCO U.S. Government
Securities Fund.
<PAGE>
(d) Financial Data Schedule for the
period ended August
31, ^ 1997 for INVESCO Short-
Term Bond Fund.
(18) Not Applicable.
(1)Previously filed on EDGAR with Post-Effective Amendment No. 36 to the
Registrant's Registration Statement on October 30, 1996 and incorporated herein
by reference.
(2)Previously filed on EDGAR with Post-Effective Amendment No. ^ 37 dated
October ^ 30, 1996 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 ^ September 30, 1997
-------------- --------------------
Common Stock
INVESCO Select Income Fund ^ 13,671
INVESCO High Yield Fund ^ 16,691
INVESCO U.S. Government Securities Fund ^ 3,177
INVESCO Short-Term Bond Fund ^ 1,322
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.
Item 28. Business and Other Connections of Investment Adviser
See "The ^ Funds and ^ Their Management" in the Funds' ^ Prospectus
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.
<PAGE>
Item 29. Principal Underwriters
(a) INVESCO Capital Appreciation Funds, Inc.
INVESCO Diversified Funds, 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
- ------------------ ------------- -------------
^ William J. Galvin, Jr. Senior Vice Assistant
7800 E. Union Avenue President Secretary
Denver, CO 80237
^ Ronald L. Grooms Senior Vice Treasurer,
7800 E. Union Avenue President & Chief Fin'l
Denver, CO 80237 Treasurer Officer, and
Chief Acctg.
Off.
Dan J. Hesser President, President,
7800 E. Union Avenue Chief Executive CEO & Dir.
Denver, CO 80237 Officer &
Director
Gregory E. Hyde Vice President
7800 E. Union Avenue
Denver, CO 80237
Charles P. Mayer Director ^
7800 E. Union Avenue
Denver, CO 80237
Glen A. Payne Senior Vice Secretary
^ 7800 E. Union Avenue President ^,
^ Denver, CO 80237 Secretary &
^ General Counsel
Judy P. Wiese Vice President Asst. Treas.
^ 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.
<PAGE>
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 ^ or directors, 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,
and to assist in communications with other shareholders as
required by Section 16(c) of the Investment Company Act of
1940.^
^(b) 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, ^ 1997.
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, ^ 1997.
/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/ ^ Larry Soll
- ------------------------------------ ------------------------------------
Bob R. Baker, Director ^ Larry Soll 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
/s/ Wendy L. Gramm
- ------------------------------------
Wendy L. Gramm, 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 (with the exception of Larry Soll and Wendy L. Gramm) 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 and October 30,
1996.
<PAGE>
Exhibit Index
Page in
Exhibit Number Registration Statement
^ 5(a) 110
5(b) 117
6(a) 123
6(b) 131
7 140
8(b) 145
9(a) 161
9(b) 174
10 177
11 179
15 180
15(b) 184
15(c) 188
16 193
17(a) 194
17(b) 195
17(c) 196
17(d) 197
99.POA ^ GRAMM 198
99.POA SOLL 199
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made this 28th day of February, 1997, 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").
WITNESSETH:
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 four 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; INVESCO U.S. Government Securities Fund; and INVESCO Short-Term
Bond 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 four 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 four Portfolios;
(b) to maintain a continuous investment program for the Fund's four
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 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 four Portfolios, unless otherwise directed by the Directors of the
Fund, and to execute transactions accordingly;
(d) to provide to the Fund's four 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;
<PAGE>
(e) to determine what portion of the Fund's four 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 four 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 four 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 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 sub-accounting, 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.
<PAGE>
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 four Portfolios;
(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 four 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 four Portfolios;
(l) extraordinary expenses, including fees and disbursements of Fund
counsel, in connection with litigation by or against the Fund or any
Portfolio;
<PAGE>
(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 four 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 Adviser with respect to the
Portfolios designated as INVESCO High Yield Fund and INVESCO Short-Term Bond
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
<PAGE>
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 four Portfolios, neither the Adviser nor its officers or employees,
will act as a principal or agent for any party other than the Fund's four
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. The Duration and Termination. This Agreement shall become effective as of
the date it is approved by a majority of the outstanding voting securities of
the Portfolios of the Fund, and unless sooner terminated as hereinafter
provided, shall remain in force for an initial term ending two years from the
date of execution, and from year to year thereafter, but only as long as such
continuance is specifically approved at least annually (i) by a vote of a
majority of the outstanding voting securities of the four 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 four 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 4 earned prior to such termination.
7. Non-Exclusive Services. The Adviser shall, during the term of this
Agreement, be entitled to render investment advisory services to others,
including, without limitation, other investment companies with similar
objectives to those of the Fund's four Portfolios. The Adviser may, when it
deems such to be advisable, aggregate orders for its other customers together
<PAGE>
with any securities of the same type to be sold or purchased for the Fund's
four Portfolios in order to obtain best execution and lower brokerage
commissions. In such event, the Adviser shall allocate the shares so purchased
or sold, as well as the expenses incurred in the transaction, in the manner it
considers to be most equitable and consistent with its fiduciary obligations to
the Fund's four 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 four
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.
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.
<PAGE>
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.
By:/s/Dan J. Hesser
-------------------------------
President
ATTEST:
/s/ Glen A. Payne
- ------------------------
Secretary
INVESCO FUNDS GROUP, INC.
By:/s/Ronald L. Grooms
-------------------------------
Senior Vice President
ATTEST:
/s/ Glen A. Payne
- -----------------------
Secretary
SUB-ADVISORY AGREEMENT
AGREEMENT made this 28th day of February, 1997, by and between INVESCO Funds
Group, Inc. ("INVESCO"), a Delaware corporation, and INVESCO TRUST COMPANY, a
Colorado corporation ("the Sub-Adviser").
WITNESSETH:
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; the INVESCO U.S. Government Securities Fund; and
the INVESCO Short-Term Bond Fund (collectively, the "Funds"); and
WHEREAS, INVESCO and the Sub-Adviser are engaged in rendering investment
advisory services and are registered as investment advisers under the Investment
Advisers Act of 1940; and
WHEREAS, INVESCO has entered into an Investment Advisory Agreement with the
Company (the "INVESCO Investment Advisory Agreement"), pursuant to which INVESCO
is required to provide investment advisory services to the Company, and, upon
receipt of written approval of the Company, is authorized to retain companies
which are affiliated with INVESCO to provide such services; and
WHEREAS, the Sub-Adviser is willing to provide investment advisory services
to the Company on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, INVESCO and the Sub-Adviser hereby agree as follows:
ARTICLE I
DUTIES OF THE SUB-ADVISER
INVESCO hereby employs the Sub-Adviser to act as investment adviser to the
Company and to furnish the investment advisory services described below, subject
to the broad supervision of INVESCO and Board of Directors of the Company, for
the period and on the terms and conditions set forth in this Agreement. The Sub-
Adviser hereby accepts such assignment and agrees during such period, at its own
expense, to render such services and to assume the obligations herein set forth
for the compensation provided for herein. The Sub-Adviser shall for all purposes
herein be deemed to be an independent contractor and, unless otherwise expressly
provided or authorized herein, shall have no authority to act for or represent
the Company in any way or otherwise be deemed an agent of the Company.
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:
<PAGE>
(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
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
<PAGE>
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
Information. With respect to the INVESCO Select Income Fund, the INVESCO High
Yield Fund, and the INVESCO U.S. Government Money Fund, 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. With respect to the INVESCO Short-Term Bond Fund, the
advisory fee to the Sub- Adviser shall be computed at the annual rate of 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. 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
<PAGE>
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.
ARTICLE VI
DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall become effective as of the date it is approved by a
majority of the outstanding voting securities of the Portfolios of the Fund, and
unless sooner terminated as hereinafter provided, shall remain in force for an
initial term ending two years from the date of execution, and from year to year
thereafter 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.
<PAGE>
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).
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.
By: /s/ Ronald L. Grooms
------------------------------
Senior Vice President
ATTEST:
/s/ Glen A. Payne
- --------------------------
Secretary
INVESCO TRUST COMPANY
By:/s/ Dan J. Hesser
-------------------------------
President
ATTEST:
/s/ Glen A. Payne
- --------------------------
Secretary
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made this 28th day of February, 1997 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 currently has one class of shares (the "Shares") which is
divided into four series, and which 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 legally may 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 a 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 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.
<PAGE>
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.
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
<PAGE>
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 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
<PAGE>
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.
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 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
<PAGE>
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 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
<PAGE>
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 such suit, for the reasonable fees
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.
<PAGE>
13. This Agreement shall become effective as of the date it is approved
by a majority vote of the Directors of the Fund, as well as a
majority vote of the Directors who are not "interested persons"
(as defined in the Investment Company Act) of the Fund, and shall
continue in effect for an initial term expiring February 28, 1998,
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 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.
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, 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.
<PAGE>
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.
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/ Dan J. Hesser
/s/ Glen A. Payne -------------------------------
- ------------------- Dan J. Hesser
President
Glen A. Payne
Secretary
INVESCO FUNDS GROUP, INC.
ATTEST:
By: /s/ Ronald L. Grooms
------------------------------
/s/ Glen A. Payne Ronald L. Grooms
- ------------------- Senior Vice President
Glen A. Payne
Secretary
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made this 30th day of September, 1997 between INVESCO
INCOME FUNDS, INC., a Maryland corporation (the "Fund"), and INVESCO
DISTRIBUTORS, 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 currently has one class of shares (the "Shares") which is
divided into four series, and which 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 legally may 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 a 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.
<PAGE>
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 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 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.
<PAGE>
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.
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.
<PAGE>
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 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.
<PAGE>
(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 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
<PAGE>
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 such
suit, for the reasonable fees 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
<PAGE>
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 as of the date it is
approved by a majority vote of the Directors of the Fund, as well as
a majority vote of the Directors who are not "interested persons"
(as defined in the Investment Company Act) of the Fund, and shall
continue in effect for an initial term expiring September 30, 1998,
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 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.
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, 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.
<PAGE>
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.
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/ Dan J. Hesser
------------------------------------
Dan J. Hesser
/s/ Glen A. Payne President
- --------------------------
Glen A. Payne
Secretary
INVESCO DISTRIBUTORS, INC.
ATTEST:
By:/s/ Ronald L. Grooms
------------------------------------
Ronald L. Grooms
/s/ Glen A. Payne Senior Vice President
- ----------------------------
Glen A. Payne
Secretary
DEFINED BENEFIT DEFERRED COMPENSATION PLAN
FOR NON-INTERESTED DIRECTORS AND TRUSTEES
The registered, open-end management investment companies referred to on
Schedule A as the Schedule may hereafter be revised by the addition and deletion
of investment companies (the "Funds") have adopted this Defined Benefit Deferred
Compensation Plan ("Plan") for the benefit of those directors and trustees of
the Funds who are not interested directors or trustees thereof as defined in
Section 2(a)(19) of the Investment Company Act of 1940, as amended ("Independent
Directors").
1. Eligibility
Each Independent Director who has served as such ("Eligible Service") on
the boards of any of the Funds and their predecessor and successor entities, if
any, or as an Independent Director of the now-defunct investment management
company known as FG Series for an aggregate of at least five years at the time
of his Service Termination Date (as defined in paragraph 2) will be entitled to
receive benefits under the Plan. An Independent Director's period of Eligible
Service commences on the date of election to the board of directors or trustees
of any one or more of the Funds ("Board"). Hereafter, references in this Plan to
Independent Directors shall be deemed to include only those Directors who have
met the Eligible Service requirement for Plan participation.
2. Service Termination and Service Termination Date
a. Service Termination. Service Termination means termination of service
(other than by disability or death) of an Independent Director which results
from the Director's having reached his Service Termination Date.
b. Service Termination Date. An Independent Director's Service Termination
Date is normally the last day of the calendar quarter in which such Director's
seventy-second birthday occurs. A majority of the Board of a Fund may annually
extend a Director's Service Termination Date for a maximum period of three
years, through the date not later than the last day of the calendar quarter in
which such Director's seventy-fifth birthday occurs.
As used in this Plan unless otherwise stipulated, Service Termination Date
shall mean an Independent Director's normal Service Termination Date, or the
Director's extended Service Termination Date, whichever may be applicable to the
Independent Director.
3. Defined Payments and Benefit
a. Payments. If an Independent Director's Service Termination Date occurs
on a date not later than the last day of the calendar quarter in which such
Director's seventy-fourth birthday occurs, the Independent Director will receive
four quarterly payments during the first twelve months subsequent to his Service
Termination Date (the "First Year Retirement Payments"), with each payment to be
equal to 25 percent of the annual basic retainer payable by each Fund to the
Independent Director on his Service Termination Date (excluding any fees
relating to attending meetings or chairing committees).
b. Benefit. Commencing with the first anniversary of the Service
Termination Date of any Independent Director who has received the First Year
Retirement Payments, and commencing as of the Service Termination Date of an
<PAGE>
Independent Director whose Service Termination Date is subsequent to the date of
the last day of the calendar quarter in which such Director's seventy-fourth
birthday occurred, the Independent Director will receive, for the remainder of
his life, a benefit (the "Benefit"), payable quarterly, with each quarterly
payment to be equal to 10 percent of the annual basic retainer payable by each
Fund to the Independent Director on his Service Termination Date (excluding any
fees relating to attending meetings or chairing committees).
c. Death Provisions. If an Independent Director's service as a Director is
terminated because of his death subsequent to the last day of the calendar
quarter in which such Director's seventy-second birthday occurred and prior to
the last day of the calendar quarter in which such Director's seventy-fourth
birthday occurs, the designated beneficiary of the Independent Director shall
receive the First Year Retirement Payments and shall, commencing with the
quarter following the quarter in which the last First Year Retirement Payment is
made, receive the Benefit for a period of ten years, with quarterly payments to
be made to the designated beneficiary.
If an Independent Director's service as a Director is terminated because
of his death prior to the last day of the calendar quarter in which such
Director's seventy-second birthday occurs or subsequent to the last day of the
calendar quarter in which such Director's seventy-fourth birthday occurred, the
designated beneficiary of the Independent Director shall receive the Benefit for
a period of ten years, with quarterly payments to be made to the designated
beneficiary commencing in the first quarter following the Director's death.
d. Disability Provisions. If an Independent Director's service as a
Director is terminated because of his disability subsequent to the last day of
the calendar quarter in which such Director's seventy-second birthday occurred
and prior to the last day of the calendar quarter in which such Director's
seventy-fourth birthday occurs, the Independent Director shall receive the First
Year Retirement Payments and shall, commencing with the quarter following the
quarter in which the last First Year Retirement Payment is made, receive the
Benefit for the remainder of his life, with quarterly payments to be made to the
disabled Independent Director. If the disabled Independent Director should die
before the First Year Retirement Payments are completed and before forty
quarterly Benefit payments are made, such payments will continue to be made to
the Independent Director's designated beneficiary until the aggregate of the
First Year Retirement Payments and forty quarterly Benefit payments have been
made to the disabled Independent Director and the Director's designated
beneficiary.
If an Independent Director's service as a Director is terminated because
of his disability prior to the last day of the calendar quarter in which such
Director's seventy-second birthday occurs or subsequent to the last day of the
calendar quarter in which such Director's seventy-fourth birthday occurred, the
Independent Director shall receive the Benefit for the remainder of his life,
with quarterly payments to be made to the disabled Independent Director
commencing in the first quarter following the Director's termination for
disability. If the disabled Independent Director should die before forty
quarterly payments are made, payments will continue to be made to the
Independent Director's designated beneficiary until the aggregate of forty
quarterly payments has been made to the disabled Independent Director and the
Director's designated beneficiary.
e. Death of Independent Director and Beneficiary. If the Independent
Director and his designated beneficiary should die before the First Year
<PAGE>
Retirement Payments and/or a total of forty quarterly Benefit payments are made,
the remaining value of the Independent Director's First Year Retirement Payments
and/or Benefit shall be determined as of the date of the death of the
Independent Director's designated beneficiary and shall be paid to the estate of
the designated beneficiary in one lump sum or in periodic payments, with the
determinations with respect to the value of the First Year Retirement Payments
and/or Benefit and the method and frequency of payment to be made by the
Committee (as defined in paragraph 8.a.) in its sole discretion.
4. Designated Beneficiary
The beneficiary referred to in paragraph 3 may be designated or changed by
the Independent Director without the consent of any prior beneficiary on a form
provided by the Committee (as defined in paragraph 8.a.) and delivered to the
Committee before the Independent Director's death. If no such beneficiary shall
have been designated, or if no designated beneficiary shall survive the
Independent Director, the value or remaining value of the Independent Director's
First Year Retirement Payments and/or Benefit shall be determined as of the date
of the death of the Independent Director by the Committee and shall be paid as
promptly as possible in one lump sum to the Independent Director's estate.
5. Disability
An Independent Director shall be deemed to have become disabled for the
purposes of paragraph 3 if the Committee shall find on the basis of medical
evidence satisfactory to it that the Independent Director is disabled, mentally
or physically, as a result of an accident or illness, so as to be prevented from
performing each of the duties which are incumbent upon an Independent Director
in fulfilling his responsibilities as such.
6. Time of Payment
The First Year Retirement Payments and/or the Benefit for each year will
be paid in quarterly installments that are as nearly equal as possible.
7. Payment of First Year Retirement Payments and/or Benefit: Allocation of
Costs
Each Fund is responsible for the payment of the amount of the First Year
Retirement Payments and/or Benefit applicable to the Fund, as well as its
proportionate share of all expenses of administration of the Plan, including
without limitation all accounting and legal fees and expenses and fees and
expenses of any Actuary. The obligations of each Fund to pay such First Year
Retirement Payments and/or Benefit and expenses will not be secured or funded in
any manner, and such obligations will not have any preference over the lawful
claims of each Fund's creditors and shareholders. To the extent that the First
Year Retirement Payments and/or Benefit is paid by more than one Fund, such
costs and expenses will be allocated among such Funds in a manner that is
determined by the Committee to be fair and equitable under the circumstances. To
the extent that one or more of such Funds consist of one or more separate
portfolios, such costs and expenses allocated to any such Fund will thereafter
be allocated among such portfolios by the Board of the Fund in a manner that is
determined by such Board to be fair and equitable under the circumstances.
8. Administration
a. The Committee. Any question involving entitlement to payments under or
<PAGE>
the administration of the Plan will be referred to a four-person committee (the
"Committee") composed of three Independent Directors designated by all of the
Independent Directors of the Funds and one director of the Funds who is not an
Independent Director, designated by the non-Independent Directors. Except as
otherwise provided herein, the Committee will make all interpretations and
determinations necessary or desirable for the Plan's administration, and such
interpretations and determinations will be final and conclusive. Committee
members will be elected annually.
b. Powers of the Committee. The Committee will represent and act on behalf
of the Funds in respect of the Plan and, subject to the other provisions of the
Plan, the Committee may adopt, amend or repeal bylaws or other regulations
relating to the administration of the Plan, the conduct of the Committee's
affairs, its rights or powers, or the rights or powers of its members. The
Committee will report to the Independent Directors and to the Boards of the
Funds from time to time on its activities in respect of the Plan. The Committee
or persons designated by it will cause such records to be kept as may be
necessary for the administration of the Plan.
9. Miscellaneous Provisions
a. Rights Not Assignable. Other than as is specifically provided in
paragraph 3, the right to receive any payment under the Plan is not transferable
or assignable, and nothing in the Plan shall create any benefit, cause of
action, right of sale, transfer, assignment, pledge, encumbrance, or other such
right in any heirs or the estate of any Independent Director.
b. Amendment, etc. The Committee, with the concurrence of the Board of any
Fund, may as to the specific Fund at any time amend or terminate the Plan or
waive any provision of the Plan; provided, however, that subject to the
limitations imposed by paragraph 7, no amendment, termination or waiver will
impair the rights of an Independent Director to receive the payments which would
have been made to such Independent Director had there been no such amendment,
termination, or waiver.
c. No Right to Reelection. Nothing in the Plan will create any obligation
on the part of the Board of any Fund to nominate any Independent Director for
reelection.
d. Consulting. Subsequent to his Service Termination Date, an Independent
Director may render such services for any Fund, for such compensation, as may be
agreed upon from time to time by such Independent Director and the Board of the
Fund which desires to procure such services.
e. Effectiveness. The Plan will be effective for all Independent Directors
who have Service Termination Dates occurring on and after October 20, 1993.
Periods of Eligible Service shall include periods commencing prior and
subsequent to such date. Upon its adoption by the Board of a Fund, the Plan will
become effective as to that Fund on the date when the Committee determines that
any regulatory approval or advice that may be necessary or appropriate in
connection with the Plan have been obtained.
Adopted October 20, 1993. Amended October 19, 1994.
Amended May 1, 1996, effective July 1, 1996.
<PAGE>
SCHEDULE A
TO
DEFINED BENEFIT DEFERRED COMPENSATION PLAN
FOR NON-INTERESTED DIRECTORS AND TRUSTEES
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.
The INVESCO Advisor Funds, Inc.
INVESCO Treasurer's Series Trust
DATA ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT
AGREEMENT between each Fund listed on Appendix A, (individually a
"Customer" and collectively, the "Customers") and State Street Bank and Trust
Company ("State Street").
PREAMBLE
WHEREAS, State Street has been appointed as custodian of certain assets of
each Customer pursuant to a certain Custodian Agreement (the "Custodian
Agreement") for each of the respective Customers;
WHEREAS, State Street has developed and utilizes proprietary accounting
and other systems, including State Street's proprietary Multicurrency HORIZONR
Accounting System, in its role as custodian of each Customer, and maintains
certain Customer-related data ("Customer Data") in databases under the control
and ownership of State Street (the "Data Access Services"); and
WHEREAS, State Street makes available to each Customer certain Data Access
Services solely for the benefit of the Customer, and intends to provide
additional services, consistent with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the parties
agree as follows:
1. SYSTEM AND DATA ACCESS SERVICES
a. System. Subject to the terms and conditions of this Agreement, State
Street hereby agrees to provide each Customer with access to State Street's
Multicurrency HORIZON Accounting System and the other information systems
(collectively, the "System") as described in Attachment A, on a remote basis for
the purpose of obtaining reports, solely on computer hardware, system software
and telecommunication links, as listed in Attachment B (the "Designated
Configuration") of the Customer, or certain third parties approved by State
Street that serve as investment advisors or investment managers (the "Investment
Advisor") or independent auditors (the "Independent Auditors") of a Customer and
solely with respect to the Customer or on any designated substitute or back-up
equipment configuration with State Street's written consent, such consent not to
be unreasonably withheld.
b. Data Access Services. State Street agrees to make available to each
Customer the Data Access Services subject to the terms and conditions of this
Agreement and data access operating standards and procedures as may be issued by
State Street from time to time. The ability of each Customer to originate
electronic instructions to State Street on behalf of each Customer in order to
<PAGE>
(i) effect the transfer or movement of cash or securities held under custody by
State Street or (ii) transmit accounting or other information (such transactions
are referred to herein as "Client Originated Electronic Financial
Instructions"), and (iii) access data for the purpose of reporting and analysis,
shall be deemed to be Data Access Services for purposes of this Agreement.
c. Additional Services. State Street may from time to time agree to make
available to a Customer additional Systems that are not described in the
attachments to this Agreement. In the absence of any other written agreement
concerning such additional systems, the term "System" shall include, and this
Agreement shall govern, a Customer's access to and use of any additional System
made available by State Street and/or accessed by the Customer.
2. NO USE OF THIRD PARTY SOFTWARE
State Street and each Customer acknowledge that in connection with the
Data Access Services provided under this Agreement, each Customer will have
access, through the Data Access Services, to Customer Data and to functions of
State Street's proprietary systems; provided, however that in no event will the
Customer have direct access to any third party systems-level software that
retrieves data for, stores data from, or otherwise supports the System.
3. LIMITATION ON SCOPE OF USE
a. Designated Equipment; Designated Location. The System and the Data
Access Services shall be used and accessed solely on and through the Designated
Configuration at the offices of a Customer or the Investment Advisor or
Independent Auditor located in Denver, Colorado ("Designated Location").
b. Designated Configuration; Trained Personnel. State Street shall be
responsible for supplying, installing and maintaining the Designated
Configuration at the Designated Location. State Street and each Customer agree
that each will engage or retain the services of trained personnel to enable both
State Street and the Customer to perform their respective obligations under this
Agreement. State Street agrees to use commercially reasonable efforts to
maintain the System so that it remains serviceable, provided, however, that
State Street does not guarantee or assure uninterrupted remote access use of the
System.
c. Scope of Use. Each Customer will use the System and the Data Access
Services only for the processing of securities transactions, the keeping of
books of account for the Customer and accessing data for purposes of reporting
and analysis. Each Customer shall not, and shall cause its employees and agents
not to (i) permit any third party to use the System or the Data Access Services,
(ii) sell, rent, license or otherwise use the System or the Data Access Services
in the operation of a service bureau or for any purpose other than as expressly
authorized under this Agreement, (iii) use the System or the Data Access
Services for any fund, trust or other investment vehicle without the prior
<PAGE>
written consent of State Street, (iv) allow access to the System or the Data
Access Services through terminals or any other computer or telecommunications
facilities located outside the Designated Locations, (v) allow or cause any
information (other than portfolio holdings, valuations of portfolio holdings,
and other information reasonably necessary for the management or distribution of
the assets of the Customer) transmitted from State Street's databases, including
data from third party sources, available through use of the System or the Data
Access Services to be redistributed or retransmitted to another computer,
terminal or other device for other than use for or on behalf of the Customer or
(vi) modify the System in any way, including without limitation, developing any
software for or attaching any devices or computer programs to any equipment,
system, software or database which forms a part of or is resident on the
Designated Configuration.
d. Other Locations. Except in the event of an emergency or of a planned
System shutdown, each Customer's access to services performed by the System or
to Data Access Services at the Designated Location may be transferred to a
different location only upon the prior written consent of State Street. In the
event of an emergency or System shutdown, each Customer may use any back-up site
included in the Designated Configuration or any other back-up site agreed to by
State Street, which agreement will not be unreasonably withheld. Each Customer
may secure from State Street the right to access the System or the Data Access
Services through computer and telecommunications facilities or devices complying
with the Designated Configuration at additional locations only upon the prior
written consent of State Street and on terms to be mutually agreed upon by the
parties.
e. Title. Title and all ownership and proprietary rights to the
System, including any enhancements or modifications thereto, whether or not made
by State Street, are and shall remain with State Street.
f. No Modification. Without the prior written consent of State Street, a
Customer shall not modify, enhance or otherwise create derivative works based
upon the System, nor shall the Customer reverse engineer, decompile or otherwise
attempt to secure the source code for all or any part of the System.
g. Security Procedures. Each Customer shall comply with data access
operating standards and procedures and with user identification or other
password control requirements and other security procedures as may be issued
from time to time by State Street for use of the System on a remote basis and to
access the Data Access Services. Each Customer shall have access only to the
Customer Data and authorized transactions agreed upon from time to time by State
Street and, upon notice from State Street, the Customer shall discontinue remote
use of the System and access to Data Access Services for any security reasons
cited by State Street; provided, that, in such event, State Street shall, for a
period not less than 180 days (or such other shorter period specified by the
Customer) after such discontinuance, assume responsibility to provide accounting
services under the terms of the Custodian Agreement.
<PAGE>
h. Inspections. State Street shall have the right to inspect the use of
the System and the Data Access Services by the Customer and the Investment
Advisor to ensure compliance with this Agreement. The on-site inspections shall
be upon prior written notice to Customer and the Investment Advisor and at
reasonably convenient times and frequencies so as not to result in an
unreasonable disruption of the Customer's or the Investment Advisor's business.
4. PROPRIETARY INFORMATION
a. Proprietary Information. Each Customer acknowledges and State Street
represents that the System and the databases, computer programs, screen formats,
report formats, interactive design techniques, documentation and other
information made available to the Customer by State Street as part of the Data
Access Services and through the use of the System constitute copyrighted, trade
secret, or other proprietary information of substantial value to State Street.
Any and all such information provided by State Street to each Customer shall be
deemed proprietary and confidential information of State Street (hereinafter
"Proprietary Information"). Each Customer agrees that it will hold such
Proprietary Information in confidence and secure and protect it in a manner
consistent with its own procedures for the protection of its own confidential
information and to take appropriate action by instruction or agreement with its
employees who are permitted access to the Proprietary Information to satisfy its
obligations hereunder. Each Customer further acknowledges that State Street
shall not be required to provide the Investment Advisor or the Investment
Auditor with access to the System unless it has first received from the
Investment Advisor of the Investment Auditor an undertaking with respect to
State Street's Proprietary Information in the form of Attachment C and/or
Attachment C-1 to this Agreement. Each Customer shall use all commercially
reasonable efforts to assist State Street in identifying and preventing any
unauthorized use, copying or disclosure of the Proprietary Information or any
portions thereof or any of the logic, formats or designs contained therein.
b. Cooperation. Without limitation of the foregoing, each Customer shall
advise State Street immediately in the event the Customer learns or has reason
to believe that any person to whom the Customer has given access to the
Proprietary Information, or any portion thereof, has violated or intends to
violate the terms of this Agreement, and each Customer will, at its expense,
cooperate with State Street in seeking injunctive or other equitable relief in
the name of the Customer or State Street against any such person.
c. Injunctive Relief. Each Customer acknowledges that the disclosure of
any Proprietary Information, or of any information which at law or equity ought
to remain confidential, will immediately give rise to continuing irreparable
injury to State Street inadequately compensable in damages at law. In addition,
State Street shall be entitled to obtain immediate injunctive relief against the
breach or threatened breach of any of the foregoing undertakings, in addition to
any other legal remedies which may be available.
<PAGE>
d. Survival. The provisions of this Section 4 shall survive the
termination of this Agreement.
5. LIMITATION ON LIABILITY
a. Limitation on Amount and Time for Bringing Action. Each Customer agrees
any liability of State Street to the Customer or any third party arising out of
State Street's provision of Data Access Services or the System under this
Agreement shall be limited to the amount paid by the Customer for the preceding
24 months for such services. In no event shall State Street be liable to the
Customer or any other party for any special, indirect, punitive or consequential
damages even if advised of the possibility of such damages. No action,
regardless of form, arising out of this Agreement may be brought by the Customer
more than two years after the Customer has knowledge that the cause of action
has arisen.
b. NO OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, ARE MADE BY STATE STREET. IN NO EVENT WILL STATE STREET BE
LIABLE TO THE CUSTOMER OR ANY OTHER PARTY FOR ANY CONSEQUENTIAL OR INCIDENTAL
DAMAGES WHICH MAY ARISE FROM THE CUSTOMER'S ACCESS TO THE SYSTEM OR USE OF
INFORMATION OBTAINED THEREBY.
c. Third-Party Data. Organizations from which State Street may obtain
certain data included in the System or the Data Access Services are solely
responsible for the contents of such data, and State Street shall have no
liability for claims arising out of the contents of such third-party data,
including, but not limited to, the accuracy thereof.
d. Regulatory Requirements. As between State Street and each Customer,
the Customer shall be solely responsible for the accuracy of any accounting
statements or reports produced using the Data Access Services and the System and
the conformity thereof with any requirements of law.
e. Force Majeure. Neither State Street or a Customer shall be liable for
any costs or damages due to delay or nonperformance under this Agreement arising
out of any cause or event beyond such party's control, including without
limitation, cessation of services hereunder or any damages resulting therefrom
to the other party, or the Customer as a result of work stoppage, power or other
mechanical failure, computer virus, natural disaster, governmental action, or
communication disruption.
6. INDEMNIFICATION
Each Customer agrees to indemnify and hold State Street harmless from any
loss, damage or expense including reasonable attorney's fees, (a "loss")
suffered by State Street arising from (i) the negligence or willful misconduct
<PAGE>
in the use by the Customer of the Data Access Services or the System, including
any loss incurred by State Street resulting from a security breach at the
Designated Location or committed by the Customer's employees or agents or the
Investment Advisor or the Independent Auditor of the Customer and (ii) any loss
resulting from incorrect Client Originated Electronic Financial Instructions.
State Street shall be entitled to rely on the validity and authenticity of
Client Originated Electronic Financial Instructions without undertaking any
further inquiry as long as such instruction is undertaken in conformity with
security procedures established by State Street from time to time.
7. FEES
Fees and charges for the use of the System and the Data Access Services
and related payment terms shall be as set forth in the Custody Fee Schedule in
effect from time to time between the parties (the "Fee Schedule"). Any tariffs,
duties or taxes imposed or levied by any government or governmental agency by
reason of the transactions contemplated by this Agreement, including, without
limitation, federal, state and local taxes, use, value added and personal
property taxes (other than income, franchise or similar taxes which may be
imposed or assessed against State Street) shall be borne by each Customer. Any
claimed exemption from such tariffs, duties or taxes shall be supported by
proper documentary evidence delivered to State Street.
8. TRAINING, IMPLEMENTATION AND CONVERSION
a. Training. State Street agrees to provide training, at a designated
State Street training facility or at the Designated Location, to the Customer's
personnel in connection with the use of the System on the Designated
Configuration. Each Customer agrees that it will set aside, during regular
business hours or at other times agreed upon by both parties, sufficient time to
enable all operators of the System and the Data Access Services, designated by
the Customer, to receive the training offered by State Street pursuant to this
Agreement.
b. Installation and Conversion. State Street shall be responsible for
the technical installation and conversion ("Installation and Conversion") of the
Designated Configuration. Each Customer shall have the following
responsibilities in connection with Installation and Conversion of the System:
(i) The Customer shall be solely responsible for the timely acquisition
and maintenance of the hardware and software that attach to the
Designated Configuration in order to use the Data Access Services
at the Designated Location.
(ii) State Street and the Customer each agree that they will
assign qualified personnel to actively participate during the
Installation and Conversion phase of the System implementation to
enable both parties to perform their respective obligations under
this Agreement.
<PAGE>
9. SUPPORT
During the term of this Agreement, State Street agrees to provide the
support services set out in Attachment D to this Agreement.
10. TERM OF AGREEMENT
a. Term of Agreement. This Agreement shall become effective on the
date of its execution by State Street and shall remain in full force and effect
until terminated as herein provided.
b. Termination of Agreement. Any party may terminate this Agreement (i)
for any reason by giving the other parties at least one-hundred and eighty days'
prior written notice in the case of notice of termination by State Street to the
Customer or thirty days' notice in the case of notice from the Customer to State
Street of termination; or (ii) immediately for failure of the other party to
comply with any material term and condition of the Agreement by giving the other
party written notice of termination. In the event the Customer shall cease doing
business, shall become subject to proceedings under the bankruptcy laws (other
than a petition for reorganization or similar proceeding) or shall be
adjudicated bankrupt, this Agreement and the rights granted hereunder shall, at
the option of State Street, immediately terminate with notice to the Customer.
Termination of this Agreement with respect to any given Customer shall in no way
affect the continued validity of this Agreement with respect to any other
Customer. This Agreement shall in any event terminate as to any Customer within
90 days after the termination of the Custodian Agreement applicable to such
Customer.
c. Termination of the Right to Use. Upon termination of this Agreement for
any reason, any right to use the System and access to the Data Access Services
shall terminate and the Customer shall immediately cease use of the System and
the Data Access Services. Immediately upon termination of this Agreement for any
reason, the Customer shall return to State Street all copies of documentation
and other Proprietary Information in its possession; provided, however, that in
the event that either State Street or the Customer terminates this Agreement or
the Custodian Agreement for any reason other than the Customer's breach, State
Street shall provide the Data Access Services for a period of time and at a
price to be agreed upon by State Street and the Customer.
11. MISCELLANEOUS
a. Assignment; Successors. This Agreement and the rights and
obligations of each Customer and State Street hereunder shall not be assigned by
any party without the prior written consent of the other parties, except that
<PAGE>
State Street may assign this Agreement to a successor of all or a substantial
portion of its business, or to a party controlling, controlled by, or under
common control with State Street.
b. Survival. All provisions regarding indemnification, warranty,
liability and limits thereon, and confidentiality and/or protection of
proprietary rights and trade secrets shall survive the termination of this
Agreement.
c. Entire Agreement. This Agreement and the attachments hereto constitute
the entire understanding of the parties hereto with respect to the Data Access
Services and the use of the System and supersedes any and all prior or
contemporaneous representations or agreements, whether oral or written, between
the parties as such may relate to the Data Access Services or the System, and
cannot be modified or altered except in a writing duly executed by the parties.
This Agreement is not intended to supersede or modify the duties and liabilities
of the parties hereto under the Custodian Agreement or any other agreement
between the parties hereto except to the extent that any such agreement
specifically refers to the Data Access Services or the System. No single waiver
or any right hereunder shall be deemed to be a continuing waiver.
d. Severability. If any provision or provisions of this Agreement
shall be held to be invalid, unlawful, or unenforceable, the validity, legality,
and enforceability of the remaining provisions shall not in any way be affected
or impaired.
e. Governing Law. This Agreement shall be interpreted and construed
in accordance with the internal laws of The Commonwealth of Massachusetts
without regard to the conflict of laws provisions thereof.
<PAGE>
IN WITNESS WHEREOF, each of the undersigned Funds severally has
caused this Agreement to be duly executed in its name and through its duly
authorized officer as of the date hereof.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Ronald E. Logue
-------------------------
Title: Executive Vice President
-------------------------
Date: -------------------------
EACH FUND LISTED ON APPENDIX A
By: /s/ Glen A. Payne
--------------------------
Title: Secretary
--------------------------
Date: May 19, 1997
--------------------------
<PAGE>
APPENDIX A
INVESCO FUNDS
INVESCO Diversified Funds, Inc.
INVESCO Small Company Value Fund
INVESCO Dynamics Fund, Inc.
INVESCO Dynamics Fund, Inc.
INVESCO Emerging Opportunity Funds, Inc.
INVESCO Small Company Growth Fund
INVESCO Worldwide Emerging Markets Fund
INVESCO Growth Fund, Inc.
INVESCO Growth Fund, Inc.
INVESCO Income Funds, Inc.
INVESCO High Yield Fund
INVESCO Select Income Fund
INVESCO Short-Term Bond Fund
INVESCO U.S. Government Bond Fund
INVESCO Industrial Income Fund, Inc.
INVESCO Industrial Income Fund, Inc.
INVESCO International Funds, Inc.
INVESCO European Fund
INVESCO International Growth Fund
INVESCO Pacific Basin Fund
INVESCO Money Market Funds, Inc.
INVESCO Cash Reserves Fund
INVESCO Tax-Free Money Fund
INVESCO U.S. Government Money Fund
INVESCO Multiple Asset Funds, Inc.
INVESCO Balanced Fund
INVESCO Multi-Asset Allocation Fund
<PAGE>
INVESCO Specialty Funds, Inc.
INVESCO Asian Growth Fund
INVESCO European Small Company Fund
INVESCO Latin American Growth Fund
INVESCO Realty Fund
INVESCO Worldwide Capital Goods Fund
INVESCO Worldwide Communications Fund
INVESCO Strategic Portfolios, Inc.
Energy Portfolio
Environmental Services Portfolio
Financial Services Portfolio
Gold Portfolio
Health Sciences Portfolio
Leisure Portfolio
Technology Portfolio
Utilities Portfolio
INVESCO Tax-Free Income Funds, Inc.
INVESCO Tax-Free Intermediate Bond Fund
INVESCO Tax-Free Long-Term Bond Fund
INVESCO Treasurer's Series Trust
INVESCO Treasurer's Money Market Reserve Fund
INVESCO Treasurer's Prime Reserve Fund
INVESCO Treasurer's Special Reserve Fund
INVESCO Treasurer's Tax-Exempt Reserve Fund
INVESCO Value Trust
INVESCO Intermediate Government Bond Fund
INVESCO Total Return Fund
INVESCO Value Equity Fund
INVESCO Variable Investment Funds, Inc. INVESCO VIF-Dynamics Portfolio INVESCO
VIF-Health Sciences Portfolio INVESCO VIF-High Yield Portfolio INVESCO
VIF-Industrial Income Portfolio INVESCO VIF-Small Company Growth Portfolio
INVESCO VIF-Technology Portfolio INVESCO VIF-Total Return Portfolio INVESCO
VIF-Utilities Portfolio INVESCO VIF-Growth Portfolio*
*Effective May 1, 1997.
<PAGE>
ATTACHMENT A
Multicurrency HORIZONR Accounting System
System Product Description
I. The Multicurrency HORIZONR Accounting System is designed to provide lot level
portfolio and general ledger accounting for SEC and ERISA type requirements and
includes the following services: 1) recording of general ledger entries; 2)
calculation of daily income and expense; 3) reconciliation of daily activity
with the trial balance, and 4) appropriate automated feeding mechanisms to (i)
domestic and international settlement systems, (ii) daily, weekly and monthly
evaluation services, (iii) portfolio performance and analytic services, (iv)
customer's internal computing systems and (v) various State Street provided
information services products.
II. GlobalQuestR GlobalQuestR is designed to provide customer access to the
following information maintained on The Multicurrency HORIZONR Accounting
System: 1) cash transactions and balances; 2) purchases and sales; 3) income
receivables; 4) tax refund receivables; 5) daily priced positions; 6) open
trades; 7) settlement status; 8) foreign exchange transactions; 9) trade
history; and 10) daily, weekly and monthly evaluation services.
III. HORIZONR Gateway. HORIZONR Gateway provides customers with the ability
to (i) generate reports using information maintained on the Multicurrency
HORIZON Accounting System which may be viewed or printed at the customer's
location; (ii) extract and download data from the Multicurrency HORIZONR
Accounting System; and (iii) access previous day and historical data. The
following information which may be accessed for these purposes: 1) holdings; 2)
holdings pricing; 3) transactions, 4) open trades; 5) income; 6) general
ledger and 7) cash.
<PAGE>
ATTACHMENT B
Designated Configuration
<PAGE>
ATTACHMENT C
Undertaking
The undersigned understands that in the course of its employment as
Investment Advisor to each of the Funds (individually a, "Customer" ,
collectively, the "Customers") it will have access to State Street Bank and
Trust Company's ("State Street") Multicurrency HORIZON Accounting System and
other information systems (collectively, the "System").
The undersigned acknowledges that the System and the databases, computer
programs, screen formats, report formats, interactive design techniques,
documentation, and other information made available to the Undersigned by State
Street as part of the Data Access Services provided to the Customer and through
the use of the System constitute copyrighted, trade secret, or other proprietary
information of substantial value to State Street. Any and all such information
provided by State Street to the Undersigned shall be deemed proprietary and
confidential information of State Street (hereinafter "Proprietary
Information"). The Undersigned agrees that it will hold such Proprietary
Information in confidence and secure and protect it in a manner consistent with
its own procedures for the protection of its own confidential information and to
take appropriate action by instruction or agreement with its employees who are
permitted access to the Proprietary Information to satisfy its obligations
hereunder.
The Undersigned will not attempt to intercept data, gain access to data in
transmission, or attempt entry into any system or files for which it is not
authorized. It will not intentionally adversely affect the integrity of the
System through the introduction of unauthorized code or data, or through
unauthorized deletion.
Upon notice by State Street for any reason, any right to use the System and
access to the Data Access Services shall terminate and the Undersigned shall
immediately cease use of the System and the Data Access Services. Immediately
upon notice by State Street for any reason, the Undersigned shall return to
State Street all copies of documentation and other Proprietary Information in
its possession.
By: /s/ Glen A. Payne
---------------------
Title: Secretary
---------------------
Date: May 19, 1997
---------------------
<PAGE>
ATTACHMENT C-1
Undertaking
The undersigned understands that in the course of its employment as
Independent Auditor to each of the Funds (individually a, "Customer" ,
collectively, the "Customers") it will have access to State Street Bank and
Trust Company's ("State Street") Multicurrency HORIZON Accounting System and
other information systems (collectively, the "System").
The undersigned acknowledges that the System and the databases, computer
programs, screen formats, report formats, interactive design techniques,
documentation, and other information made available to the Undersigned by State
Street as part of the Data Access Services provided to the Customer and through
the use of the System constitute copyrighted, trade secret, or other proprietary
information of substantial value to State Street. Any and all such information
provided by State Street to the Undersigned shall be deemed proprietary and
confidential information of State Street (hereinafter "Proprietary
Information"). The Undersigned agrees that it will hold such Proprietary
Information in confidence and secure and protect it in a manner consistent with
its own procedures for the protection of its own confidential information and to
take appropriate action by instruction or agreement with its employees who are
permitted access to the Proprietary Information to satisfy its obligations
hereunder.
The Undersigned will not attempt to intercept data, gain access to data in
transmission, or attempt entry into any system or files for which it is not
authorized. It will not intentionally adversely affect the integrity of the
System through the introduction of unauthorized code or data, or through
unauthorized deletion.
Upon notice by State Street for any reason, any right to use the System and
access to the Data Access Services shall terminate and the Undersigned shall
immediately cease use of the System and the Data Access Services. Immediately
upon notice by State Street for any reason, the Undersigned shall return to
State Street all copies of documentation and other Proprietary Information in
its possession.
[Independent Auditor]
By:---------------------------
Title:------------------------
Date:-------------------------
<PAGE>
ATTACHMENT D
Support
During the term of this Agreement, State Street agrees to provide the
following on-going support services:
a. Telephone Support. The Customer Designated Persons may contact State
Street's HORIZON Help Desk and Customer Assistance Center between the hours of
8 a.m. and 6 p.m. (Eastern time) on all business days for the purpose of
obtaining answers to questions about the use of the System, or to report
apparent problems with the System. From time to time, the Customer shall provide
to State Street a list of persons, not to exceed five in number, who shall be
permitted to contact State Street for assistance (such persons being referred to
as "the Customer Designated Persons").
b. Technical Support. State Street will provide technical support to
assist the Customer in using the System and the Data Access Services. The total
amount of technical support provided by State Street shall not exceed 10
resource days per year. State Street shall provide such additional technical
support as is expressly set forth in the fee schedule in effect from time to
time between the parties (the "Fee Schedule"). Technical support, including
during installation and testing, is subject to the fees and other terms set
forth in the Fee Schedule.
c. Maintenance Support. State Street shall use commercially
reasonable efforts to correct system functions that do not work according to the
System Product Description as set forth on Attachment A in priority order in the
next scheduled delivery release or otherwise as soon as is practicable.
d. System Enhancements. State Street will provide to the Customer any
enhancements to the System developed by State Street and made a part of the
System; provided that, sixty (60) days prior to installing any such enhancement,
State Street shall notify the Customer and shall offer the Customer reasonable
training on the enhancement. Charges for system enhancements shall be as
provided in the Fee Schedule. State Street retains the right to charge for
related systems or products that may be developed and separately made available
for use other than through the System.
e. Custom Modifications. In the event the Customer desires custom
modifications in connection with its use of the System, the Customer shall make
a written request to State Street providing specifications for the desired
modification. Any custom modifications may be undertaken by State Street in its
sole discretion in accordance with the Fee Schedule.
f. Limitation on Support. State Street shall have no obligation to
support the Customer's use of the System: (1) for use on any computer
equipment or telecommunication facilities which does not conform to the
Designated Configuration or (ii) in the event the Customer has modified the
System in breach of this Agreement.
TRANSFER AGENCY AGREEMENT
AGREEMENT made as of this 28th day of February, 1997, 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 East Union Avenue,
Denver, Colorado 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;
(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
<PAGE>
(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.
(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;
<PAGE>
(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;
(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.
<PAGE>
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.
(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.
<PAGE>
(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.
(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.
<PAGE>
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.
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.
<PAGE>
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.
(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.
<PAGE>
(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
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
<PAGE>
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
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.
<PAGE>
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
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 February 28, 1997
after approval by vote of a majority (as defined in the 1940
Act) of the Fund's board of directors, including a majority of
the directors who are not interested persons of the Fund (as
defined in the 1940 Act), and shall continue in effect for an
initial term expiring February 28, 1998 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: Dan J. Hesser, President
To the Transfer Agent:
INVESCO Funds Group, Inc.
Post Office Box 173706
Denver, Colorado 80217-3706
Attention: Ronald L. Grooms, Senior Vice President
(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.
<PAGE>
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/ 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
<PAGE>
FEE SCHEDULE
for
Services Pursuant to Transfer Agency Agreement, dated February 28, 1997,
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 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 28th day of February, 1997.
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,
ATTEST: Senior Vice President
/s/ Glen A. Payne
- ---------------------------
Glen A. Payne, Secretary
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT made as of the 28th day of February, 1997, 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: (1) INVESCO High
Yield Fund, (2) INVESCO Select Income Fund, (3) INVESCO Short-Term Bond Fund,
and (4) 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 Fund;
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
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
<PAGE>
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 a
wholly-owned subsidiary of INVESCO, 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.
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 Fund 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 INVESCO 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 the Portfolios'
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
<PAGE>
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 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 remain in effect until no later than February 28,
1998 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 INVESCO; (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) INVESCO 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
pre-paid, 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.
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/ Dan J. Hesser
------------------------------
ATTEST: Dan J. Hesser
/s/ Glen A. Payne President
- -----------------------
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
MOYE, GILES, O'KEEFE, VERMEIRE, GORRELL
29th Floor
1225 Seventeenth Street
Denver, Colorado 80202
Telephone: (303) 292-2900
June 9, 1993
INVESCO Income Funds, Inc.
P.O. Box 2040
Denver, Colorado 80201
Gentlemen:
This is in response to your request for our opinion as to the legality of
the registration of an indefinite number of shares of capital stock ($0.01 per
value per share) of INVESCO Income Funds, Inc., being registered with the
Securities and Exchange Commission under the Investment Company Act of 1940 and
the Securities Act of 1993, as amended (Form N-1A). This share registration is
being requested pursuant to the provisions of Rule 24f-2 under Section 24(f) of
the Investment Company Act of 1940.
We have examined the articles of incorporation of INVESCO Income Funds,
Inc. As filed for record with the State Department of Assessments and Taxation
of the State of Maryland on April 2, 1993; the bylaws; the minute books setting
forth, among other things, the actions taken by the board of directors
authorizingt the issuance and sale of the corporation's capital stock and
related acts and procedures; the registration statement including all exhibits
thereto; and have made such other examination as deemed necessary in the
premises.
Based upon our examination, we are of the opinion that INVESCO Income
Funds, Inc. Is a corporation duly organized and existing under and by virtue of
the laws of the State of Maryland, with full power to issue its shares of
capital stock. Said shares, up to the maximum amount hereinafter indicated, when
issued and sold in the manner and on the terms set forth in the registration
statement, will be legally and validly issued, fully paid and non-assessable
shares of the corporation and of the par value of $0.01 per share. The maximum
number of shares which has been authorized by the Corporation, and thus the
maximum number which may legally and validly be issued, is six hundred million
shares of such capital stock.
<PAGE>
INVESCO Income Funds, Inc.
June 9, 1993
Page 2
We hereby consent to the use of this opinion in the registration statement
and further consent to the reference to our name therein.
Very truly yours,
MOYE, GILES, O'KEEFE,
VERMEIRE & GORRELL
By: Edward F. O'Keefe, P.C.
By:/s/Edward F. O'Keefe
-----------------------------
Edward F. O'Keefe, President
EFO/ljc
Consent of Independent Accountants
We hereby consent to the incorporation by reference to the Prospectus and
Statement of Additional Information constituting parts of this Post- Effective
Amendment No. 37 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated October 8, 1997, relating to the financial
statements and financial highlights appearing in the August 31, 1997 Annual
Report to Shareholders of INVESCO Income Fund, Inc., which is also incorporated
by reference into the Registration Statement. We also consent to the reference
to us under the headings "Financial Highlights" in the Prospectus 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 28, 1997
PLAN AND AGREEMENT OF DISTRIBUTION PURSUANT TO RULE 12B-1
PLAN AND AGREEMENT made as of the 30th day of April, 1993, by and between
INVESCO Income Funds, Inc., a Maryland corporation (hereinafter called the
"Company"), and INVESCO FUNDS GROUP, Inc., a Delaware corporation ("INVESCO").
WHEREAS, the Company engages in business as an open-end management
investment company, and is registered as such under the Investment Company Act
of 1940, as amended (the "Act"); and
WHEREAS, the Company desires to finance the distribution of the shares of
each of its three classes or series of common stock, each of which represents an
interest in a separate portfolio of investments, together with any additional
such classes or series that may hereafter be offered to the public
(individually, a "Fund" and collectively, the "Funds"), in accordance with this
Plan and Agreement of Distribution pursuant to Rule 12b-1 under the Act (the
"Plan and Agreement"); and
WHEREAS, INVESCO desires to be retained to perform services in accordance
with such Plan and Agreement and on said terms and conditions; and
WHEREAS, this Plan and Agreement has been approved by a vote of the board
of directors of the Company, including a majority of the directors who are not
interested persons of the Company, as defined in the Act, and who have no direct
or indirect financial interest in the operation of this Plan and Agreement (the
"Disinterested Directors") cast in person at a meeting called for the purpose of
voting on this Plan and Agreement;
NOW, THEREFORE, the Company hereby adopts the Plan set forth herein and
the Company and INVESCO hereby enter into this Agreement pursuant to the Plan in
accordance with the requirements of Rule 12b-1 under the Act, and provide and
agree as follows:
1. The Plan is defined as those provisions of this document by which
the Company adopts a Plan pursuant to Rule 12b-1 under the Act
and authorizes payments as described herein. The Agreement
is defined as those provisions of this document by which the
Company retains INVESCO to provide distribution services
beyond those required by the General Distribution Agreement
between the parties, as are described herein. The Company may
retain the Plan notwithstanding termination of the Agreement.
Termination of the Plan will automatically terminate the
Agreement. Each Fund is hereby authorized to utilize its
assets to finance certain activities in connection with
distribution of its shares.
2. Subject to the supervision of the board of directors, the Company
hereby retains INVESCO to promote the distribution of the shares
of each of the Funds by providing services and engaging in
activities beyond those specifically required by the Distribution
Agreement between the Company and INVESCO and to provide
related services. The activities and services to be provided by
INVESCO hereunder shall include one or more of the following:
(A) the payment of compensation (including trail commissions
and incentive compensation) to securities dealers, financial
<PAGE>
Institutions and other organizations which render distribution and
administrative services in connection with the distribution of the
shares of each of the Funds; (b) the printing and distribution of
Reports and prospectuses for the use of potential investors in
Each Fund; (c) the preparing and distributing of sales literature;
(d) the providing of advertising and engaging in other
promotional activities, including direct mail solicitation, and
television, radio, newspaper and other media advertisements; and (e)
the providing of such other services and activities as may from time
to time be agreed upon by the Company. Such reports and
prospectuses, sales literature, advertising and promotional
activities and other services and activities may be prepared and/or
conducted either by INVESCO's own staff or third parties.
3. INVESCO hereby undertakes to use its best efforts to promote sales
of shares of each of the Funds to investors by engaging in those
activities specified in paragraph (2) above as may be necessary and
as it from time to time believes will best further sales of such
shares.
4. Each Fund is hereby authorized to expend, out of its assets, on a
monthly basis, and shall reimburse INVESCO to such extent, for
INVESCO's actual direct expenditures incurred over a rolling
twelve-month period in engaging in the activities and providing the
services specified in paragraph (2) above, an amount computed at an
annual rate of .25 of 1% of the average daily net assets of the
Fund during the month. INVESCO shall not be entitled
hereunder to reimbursement for overhead expenses (overhead
expenses defined as customary overhead not including the
costs of INVESCO's personnel whose primary responsibilities
involve marketing of the INVESCO Funds). Payments by a Fund
hereunder, for any month, may be made only with respect to
expenditures incurred by INVESCO during the Rolling
twelve-month period in which that month falls, and any
expenditures incurred in excess of the limitation described above
are not reimbursable. No payments will be made by the Company
hereunder after the date of termination of the Plan and Agreement.
5. To the extent that expenditures made by INVESCO out of its own
resources to finance any activity primarily intended to result in
the sale of shares of a Fund, pursuant to this Plan and Agreement or
otherwise, may be deemed to constitute the indirect use of Fund
assets, such indirect use of Fund assets is hereby authorized in
addition to, and not in lieu of, any other payments authorized under
this Plan and Agreement.
6. The Treasurer of INVESCO shall provide and the board of directors
of the Company shall review, at least quarterly, a written report of
all amounts expended pursuant to the Plan and Agreement. Each such
report shall itemize the purposes and the amounts of such actual
expenses incurred for which reimbursement is being made, and shall
itemize the direct expenditure of amounts by each Fund as authorized
by the penultimate sentence of paragraph (4) above. Upon request,
but no less frequently than annually, INVESCO shall provide to the
<PAGE>
board of directors of the Company such information as may reasonably
be required for it to review the continuing appropriateness of the
Plan and Agreement.
7. This Plan and Agreement shall each become effective as to each Fund
as of the effective date of the reorganization of Financial Bond
Shares, Inc. Into the Company. Thereafter, this Agreement shall
continue in effect for an initial term expiring April 30, 1994,
unless terminated as provided below. Thereafter, the Plan and
Agreement shall continue in effect from year to year, provided that
the continuance of each is approved at least annually by a vote of
the board of directors of the Company, including a majority of the
Disinterested Directors, cast in person at a meeting called for the
purpose of voting on such continuance. The Plan may be terminated at
any time as to any Fund, without penalty, by the vote of a majority
of the Disinterested Directors or by the vote of a majority of the
outstanding voting securities of the Fund. INVESCO, or the Company,
by vote of a majority of the outstanding voting securities of any
Fund, may terminate the Agreement under this Plan as to such Fund,
without penalty, upon 30 days' written notice to the other party. In
the event that neither INVESCO nor any affiliate of INVESCO serves
the Company as investment adviser, the agreement with INVESCO
pursuant to this Plan shall terminate at such time. The board of
directors may determine to approve a continuance of the Plan, but
not a continuance of the Agreement, hereunder.
8. So long as the Plan remains in effect, the selection and nomination
of persons to serve as directors of the Company who are not
"interested persons" of the Company shall be committed to the
discretion of the directors then in office who are not "interested
persons" of the Company. However, nothing contained herein shall
prevent the participation of other persons in the selection and
nomination process, provided that a final decision on any such
selection or nomination is within the discretion of, and approved
by, a majority of the directors of the Company then in office who
are not "interested persons" of the Company.
9. This Plan may not be amended to increase the amount to be spent by
any fund hereunder without approval of a majority of the outstanding
voting securities of that Fund. All material amendments to the Plan
and to the Agreement must be approved by the vote of the board of
directors of the Company, including a majority of the Disinterested
Directors, cast in person at a meeting called for the purpose of
voting on such amendment.
10. To the extent that this Plan and Agreement constitutes a Plan of
Distribution adopted pursuant to Rule 12b-1 under the Act, it shall
remain in effect as such, so as to authorize the use by each Fund of
Its assets in the amounts and for the purposes set forth herein,
notwithstanding the occurrence of an "assignment," as defined by the
Act and the rules thereunder. To the extent it constitutes an
agreement with INVESCO pursuant to a plan, it shall terminate
automatically in the event of such"assignment". Upon a termination
<PAGE>
of the agreement with INVESCO, the Funds may continue to make
payments pursuant to the Plan only upon the approval of a new
agreement under this Plan and Agreement, which may or may not be
with INVESCO, or the adoption of other arrangements regarding the
use of the amounts authorized to be paid by the Funds hereunder, by
the Company's board of directors in accordance with the procedures
set forth in paragraph 7 above.
11. The Company shall preserve copies of this Plan and Agreement and all
reports made pursuant to paragraph 6 hereof, together with minutes
of all board of directors meetings at which the adoption, amendment
or continuance of the Plan were considered (describing the factors
considered and the basis for decision), for a period of not less
than six years from the date of this Plan and Agreement, or any such
reports or minutes, as the case may be, the first two years in an
easily accessible place.
12. This Plan and Agreement shall be construed in accordance with the
laws of the State of Colorado and applicable provisions of the Act.
To the extent the applicable laws of the State of Colorado, or any
provisions herein, conflict with the applicable provisions of the
Act, the latter shall control.
IN WITNESS WHEREOF, the partes hereto have executed and delivered
this Plan and Agreement on 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
AMENDED PLAN AND AGREEMENT OF DISTRIBUTION PURSUANT TO RULE 12b-1
PLAN AND AGREEMENT made as of 1st day of January, 1997, by and between
INVESCO Income Funds, Inc., a Maryland corporation (hereinafter called the
"Company"), and INVESCO FUNDS GROUP, Inc., a Delaware corporation ("INVESCO").
WHEREAS, the Company engages in business as an open-end management
investment company, and is registered as such under the Investment Company Act
of 1940, as amended (the "Act"); and
WHEREAS, the Company desires to finance the distribution of the shares of
each of its four classes or series of common stock, each of which represents an
interest in a separate portfolio of investments, together with any additional
such classes or series that may hereafter be offered to the public
(individually, a "Fund" and collectively, the "Funds"), in accordance with this
Plan and Agreement of Distribution pursuant to Rule 12b-1 under the Act (the
"Plan and Agreement"); and
WHEREAS, INVESCO desires to be retained to perform services in accordance
with such Plan and Agreement and on said terms and conditions; and
WHEREAS, this Plan and Agreement has been approved by a vote of the board
of directors of the Company, including a majority of the directors who are not
interested persons of the Company, as defined in the Act, and who have no direct
or indirect financial interest in the operation of this Plan and Agreement (the
"Disinterested Directors") cast in person at a meeting called for the purpose of
voting on this Plan and Agreement;
NOW, THEREFORE, the Company hereby adopts the Plan set forth herein and
the Company and INVESCO hereby enter into this Agreement pursuant to the Plan in
accordance with the requirements of Rule 12b-1 under the Act, and provide and
agree as follows:
1. The Plan is defined as those provisions of this document by which
the Company adopts a Plan pursuant to Rule 12b- 1 under the Act and
authorizes payments as described herein. The Agreement is defined
as those provisions of this document by which the Company retains
INVESCO to provide distribution services beyond those required by
the General Distribution Agreement between the parties, as are
described herein. The Company may retain the Plan notwithstanding
termination of the Agreement. Termination of the Plan will
automatically terminate the Agreement. Each Fund is hereby
authorized to utilize the assets of the Company to finance certain
activities in connection with distribution of the Company's shares.
2. Subject to the supervision of the board of directors, the Company
hereby retains INVESCO to promote the distribution of shares of each
of the Funds by providing services and engaging in activities beyond
those specifically required by the Distribution Agreement between
the Company and INVESCO and to provide related services. The
activities and services to be provided by INVESCO hereunder shall
include one or more of the following: (a) the payment of
compensation (including trail commissions and incentive
compensation) to securities dealers, financial institutions and
other organizations, which may include INVESCO-affiliated companies,
<PAGE>
that render distribution and administrative services in connection
with the distribution of the shares of each of the Funds; (b) the
printing and distribution of reports and prospectuses for the use of
potential investors in each Fund; (c) the preparing and distributing
of sales literature; (d) the providing of advertising and engaging
in other promotional activities, including direct mail solicitation,
and television, radio, newspaper and other media advertisements; and
(e) the providing of such other services and activities as may from
time to time be agreed upon by the Company. Such reports and
prospectuses, sales literature, advertising and promotional
activities and other services and activities may be prepared and/or
conducted either by INVESCO's own staff, the staff of INVESCO-
affiliated companies, or third parties.
3. INVESCO hereby undertakes to use its best efforts to promote sales
of shares of each of the Funds to investors by engaging in those
activities specified in paragraph (2) above as may be necessary and
as it from time to time believes will best further sales of such
shares.
4. Each Fund is hereby authorized to expend, out of its assets, on a
monthly basis, and shall pay INVESCO to such extent, to enable
INVESCO at its discretion to engage over a rolling twelve-month
period (or the rolling twenty-four month period specified below) in
the activities and provide the services specified in paragraph (2)
above, an amount computed at an annual rate of .25 of 1% of the
average daily net assets of the Fund during the month. INVESCO
shall not be entitled hereunder to payment for overhead expenses
(overhead expenses defined as customary overhead NOT including the
costs of INVESCO's personnel whose primary responsibilities involve
marketing of the INVESCO Funds). Payments by a Fund hereunder, for
any month, may be used to compensate INVESCO for: (a) activities
engaged in and services provided by INVESCO during the rolling
twelve-month period in which that month falls, or (b) to the extent
permitted by applicable law, for any month during the first twenty-
four months following a Fund's commencement of operations,
activities engaged in and services provided by INVESCO during the
rolling twenty-four month period in which that month falls, and any
obligations incurred by INVESCO in excess of the limitation
described above shall not be paid for out of Fund assets. No Fund
shall be authorized to expend, for any month, a greater percentage
of its assets to pay INVESCO for activities engaged in and services
provided by INVESCO during the rolling twenty-four month period
referred to above than it would otherwise be authorized to expend
out of its assets to pay INVESCO for activities engaged in and
services provided by INVESCO during the rolling twelve-month period
referred to above, and no Fund shall be authorized to expend, for
any month, a greater percentage of its assets to pay INVESCO for
activities engaged in and services provided by INVESCO pursuant to
the Plan and Agreement than it would otherwise have been authorized
to expend out of its assets to reimburse INVESCO for expenditures
incurred by INVESCO pursuant to the Plan and Agreement as it existed
prior to February 5, 1997. No payments will be made by the Company
hereunder after the date of termination of the Plan and Agreement.
<PAGE>
5. To the extent that obligations incurred by INVESCO out of its own
resources to finance any activity primarily intended to result in
the sale of shares of a Fund, pursuant to this Plan and Agreement or
otherwise, may be deemed to constitute the indirect use of Fund
assets, such indirect use of Fund assets is hereby authorized in
addition to, and not in lieu of, any other payments authorized under
this Plan and Agreement.
6. The Treasurer of INVESCO shall provide to the board of directors of
the Company, at least quarterly, a written report of all moneys
spent by INVESCO on the activities and services specified in
paragraph (2) above pursuant to the Plan and Agreement. Each such
report shall itemize the activities engaged in and services provided
by INVESCO to a Fund as authorized by the penultimate sentence of
paragraph (4) above. Upon request, but no less frequently than
annually, INVESCO shall provide to the board of directors of the
Company such information as may reasonably be required for it to
review the continuing appropriateness of the Plan and Agreement.
7. This Plan and Agreement shall each become effective immediately upon
approval by a vote of a majority of the outstanding voting
securities of the Company as defined in the Act, and shall continue
in effect until February 5, 1998 unless terminated as provided
below. Thereafter, the Plan and Agreement shall continue in effect
from year to year, provided that the continuance of each is approved
at least annually by a vote of the board of directors of the
Company, including a majority of the Disinterested Directors, cast
in person at a meeting called for the purpose of voting on such
continuance. The Plan may be terminated at any time as to any Fund,
without penalty, by the vote of a majority of the Disinterested
Directors or by the vote of a majority of the outstanding voting
securities of that Fund. INVESCO, or the Company, by vote of a
majority of the Disinterested Directors or of the holders of a
majority of the outstanding voting securities of the Fund, may
terminate the Agreement under this Plan as to such Fund, without
penalty, upon 30 days' written notice to the other party. In the
event that neither INVESCO nor any affiliate of INVESCO serves the
Company as investment adviser, the agreement with INVESCO pursuant
to this Plan shall terminate at such time. The board of directors
may determine to approve a continuance of the Plan, but not a
continuance of the Agreement, hereunder.
8. So long as the Plan remains in effect, the selection and nomination
of persons to serve as directors of the Company who are not
"interested persons" of the Company shall be committed to the
discretion of the directors then in office who are not "interested
persons" of the Company. However, nothing contained herein shall
prevent the participation of other persons in the selection and
nomination process, provided that a final decision on any such
selection or nomination is within the discretion of, and approved
by, a majority of the directors of the Company then in office who
are not "interested persons" of the Company.
<PAGE>
9. This Plan may not be amended to increase the amount to be spent by a
Fund hereunder without approval of a majority of the outstanding
voting securities of that Fund. All material amendments to the Plan
and to the Agreement must be approved by the vote of the board of
directors of the Company, including a majority of the Disinterested
Directors, cast in person at a meeting called for the purpose of
voting on such amendment.
10. To the extent that this Plan and Agreement constitutes a Plan of
Distribution adopted pursuant to Rule 12b-1 under the Act it shall
remain in effect as such, so as to authorize the use by each Fund of
its assets in the amounts and for the purposes set forth herein,
notwithstanding the occurrence of an "assignment," as defined by the
Act and the rules thereunder. To the extent it constitutes an
agreement with INVESCO pursuant to a plan, it shall terminate
automatically in the event of such "assignment." Upon a termination
of the agreement with INVESCO, the Funds may continue to make
payments pursuant to the Plan only upon the approval of a new
agreement under this Plan and Agreement, which may or may not be
with INVESCO, or the adoption of other arrangements regarding the
use of the amounts authorized to be paid by the Funds hereunder, by
the Company's board of directors in accordance with the procedures
set forth in paragraph 7 above.
11. The Company shall preserve copies of this Plan and Agreement and all
reports made pursuant to paragraph 6 hereof, together with minutes
of all board of directors meetings at which the adoption, amendment
or continuance of the Plan were considered (describing the factors
considered and the basis for decision), for a period of not less
than six years from the date of this Plan and Agreement, or any such
reports or minutes, as the case may be, the first two years in an
easily accessible place.
12. This Plan and Agreement shall be construed in accordance with the
laws of the State of Colorado and applicable provisions of the Act.
To the extent the applicable laws of the State of Colorado, or any
provisions herein, conflict with the applicable provisions of the
Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Plan and Agreement on the 5th day of February, 1997.
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
AMENDED PLAN AND AGREEMENT OF DISTRIBUTION PURSUANT TO RULE 12b-1
PLAN AND AGREEMENT made as of 30th day of September, 1997, by and between
INVESCO INCOME FUNDS, INC., a Maryland corporation (hereinafter called the
"Company"), and INVESCO DISTRIBUTORS, INC., a Delaware corporation ("INVESCO").
WHEREAS, the Company engages in business as an open-end management
investment company, and is registered as such under the Investment Company Act
of 1940, as amended (the "Act"); and
WHEREAS, the Company desires to finance the distribution of the shares of
each of its four classes or series of common stock, each of which represents an
interest in a separate portfolio of investments, together with any additional
such classes or series that may hereafter be offered to the public
(individually, a "Fund" and collectively, the "Funds"), in accordance with this
Plan and Agreement of Distribution pursuant to Rule 12b-1 under the Act (the
"Plan and Agreement"); and
WHEREAS, INVESCO desires to be retained to perform services in accordance
with such Plan and Agreement and on said terms and conditions; and
WHEREAS, this Plan and Agreement has been approved by a vote of the board
of directors of the Company, including a majority of the directors who are not
interested persons of the Company, as defined in the Act, and who have no direct
or indirect financial interest in the operation of this Plan and Agreement (the
"Disinterested Directors") cast in person at a meeting called for the purpose of
voting on this Plan and Agreement;
NOW, THEREFORE, the Company hereby adopts the Plan set forth herein and
the Company and INVESCO hereby enter into this Agreement pursuant to the Plan in
accordance with the requirements of Rule 12b-1 under the Act, and provide and
agree as follows:
1. The Plan is defined as those provisions of this document by which
the Company adopts a Plan pursuant to Rule 12b- 1 under the Act and
authorizes payments as described herein. The Agreement is defined
as those provisions of this document by which the Company retains
INVESCO to provide distribution services beyond those required by
the General Distribution Agreement between the parties, as are
described herein. The Company may retain the Plan notwithstanding
termination of the Agreement. Termination of the Plan will
automatically terminate the Agreement. Each Fund is hereby
authorized to utilize the assets of the Company to finance certain
activities in connection with distribution of the Company's shares.
2. Subject to the supervision of the board of directors, the Company
hereby retains INVESCO to promote the distribution of shares of each
of the Funds by providing services and engaging in activities beyond
those specifically required by the Distribution Agreement between
the Company and INVESCO and to provide related services. The
activities and services to be provided by INVESCO hereunder shall
include one or more of the following: (a) the payment of
compensation (including trail commissions and incentive
compensation) to securities dealers, financial institutions and
<PAGE>
other organizations, which may include INVESCO-affiliated companies,
that render distribution and administrative services in connection
with the distribution of the shares of each of the Funds; (b) the
printing and distribution of reports and prospectuses for the use of
potential investors in each Fund; (c) the preparing and distributing
of sales literature; (d) the providing of advertising and engaging
in other promotional activities, including direct mail solicitation,
and television, radio, newspaper and other media advertisements; and
(e) the providing of such other services and activities as may from
time to time be agreed upon by the Company. Such reports and
prospectuses, sales literature, advertising and promotional
activities and other services and activities may be prepared and/or
conducted either by INVESCO's own staff, the staff of INVESCO-
affiliated companies, or third parties.
3. INVESCO hereby undertakes to use its best efforts to promote sales
of shares of each of the Funds to investors by engaging in those
activities specified in paragraph (2) above as may be necessary and
as it from time to time believes will best further sales of such
shares.
4. Each Fund is hereby authorized to expend, out of its assets, on a
monthly basis, and shall pay INVESCO to such extent, to enable
INVESCO at its discretion to engage over a rolling twelve-month
period (or the rolling twenty-four month period specified below) in
the activities and provide the services specified in paragraph (2)
above, an amount computed at an annual rate of .25 of 1% of the
average daily net assets of the Fund during the month. INVESCO
shall not be entitled hereunder to payment for overhead expenses
(overhead expenses defined as customary overhead NOT including the
costs of INVESCO's personnel whose primary responsibilities involve
marketing of the INVESCO Funds). Payments by a Fund hereunder, for
any month, may be used to compensate INVESCO for: (a) activities
engaged in and services provided by INVESCO during the rolling
twelve-month period in which that month falls, or (b) to the extent
permitted by applicable law, for any month during the first twenty-
four months following a Fund's commencement of operations,
activities engaged in and services provided by INVESCO during the
rolling twenty-four month period in which that month falls, and any
obligations incurred by INVESCO in excess of the limitation
described above shall not be paid for out of Fund assets. No Fund
shall be authorized to expend, for any month, a greater percentage
of its assets to pay INVESCO for activities engaged in and services
provided by INVESCO during the rolling twenty-four month period
referred to above than it would otherwise be authorized to expend
out of its assets to pay INVESCO for activities engaged in and
services provided by INVESCO during the rolling twelve-month period
referred to above, and no Fund shall be authorized to expend, for
any month, a greater percentage of its assets to pay INVESCO for
<PAGE>
activities engaged in and services provided by INVESCO pursuant to
the Plan and Agreement than it would otherwise have been authorized
to expend out of its assets to reimburse INVESCO for expenditures
incurred by INVESCO pursuant to the Plan and Agreement as it existed
prior to February 5, 1997. No payments will be made by the Company
hereunder after the date of termination of the Plan and Agreement.
5. To the extent that obligations incurred by INVESCO out of its own
resources to finance any activity primarily intended to result in
the sale of shares of a Fund, pursuant to this Plan and Agreement or
otherwise, may be deemed to constitute the indirect use of Fund
assets, such indirect use of Fund assets is hereby authorized in
addition to, and not in lieu of, any other payments authorized under
this Plan and Agreement.
6. The Treasurer of INVESCO shall provide to the board of directors of
the Company, at least quarterly, a written report of all moneys
spent by INVESCO on the activities and services specified in
paragraph (2) above pursuant to the Plan and Agreement. Each such
report shall itemize the activities engaged in and services provided
by INVESCO to a Fund as authorized by the penultimate sentence of
paragraph (4) above. Upon request, but no less frequently than
annually, INVESCO shall provide to the board of directors of the
Company such information as may reasonably be required for it to
review the continuing appropriateness of the Plan and Agreement.
7. This Plan and Agreement shall each become effective immediately
since the predecessor Plan and Agreement had already been approved
by a vote of a majority of the outstanding voting securities of the
Company as defined in the Act, and shall continue in effect until
September 30, 1998 unless terminated as provided below. Thereafter,
the Plan and Agreement shall continue in effect from year to year,
provided that the continuance of each is approved at least annually
by a vote of the board of directors of the Company, including a
majority of the Disinterested Directors, cast in person at a meeting
called for the purpose of voting on such continuance. The Plan may
be terminated at any time as to any Fund, without penalty, by the
vote of a majority of the Disinterested Directors or by the vote of
a majority of the outstanding voting securities of that Fund.
INVESCO, or the Company, by vote of a majority of the Disinterested
Directors or of the holders of a majority of the outstanding voting
securities of the Fund, may terminate the Agreement under this Plan
as to such Fund, without penalty, upon 30 days' written notice to
the other party. In the event that neither INVESCO nor any
affiliate of INVESCO serves the Company as investment adviser, the
agreement with INVESCO pursuant to this Plan shall terminate at such
time. The board of directors may determine to approve a continuance
of the Plan, but not a continuance of the Agreement, hereunder.
8. So long as the Plan remains in effect, the selection and nomination
of persons to serve as directors of the Company who are not
"interested persons" of the Company shall be committed to the
discretion of the directors then in office who are not "interested
persons" of the Company. However, nothing contained herein shall
<PAGE>
prevent the participation of other persons in the selection and
nomination process, provided that a final decision on any such
selection or nomination is within the discretion of, and approved
by, a majority of the directors of the Company then in office who
are not "interested persons" of the Company.
9. This Plan may not be amended to increase the amount to be spent by a
Fund hereunder without approval of a majority of the outstanding
voting securities of that Fund. All material amendments to the Plan
and to the Agreement must be approved by the vote of the board of
directors of the Company, including a majority of the Disinterested
Directors, cast in person at a meeting called for the purpose of
voting on such amendment.
10. To the extent that this Plan and Agreement constitutes a Plan of
Distribution adopted pursuant to Rule 12b-1 under the Act it shall
remain in effect as such, so as to authorize the use by each Fund of
its assets in the amounts and for the purposes set forth herein,
notwithstanding the occurrence of an "assignment," as defined by the
Act and the rules thereunder. To the extent it constitutes an
agreement with INVESCO pursuant to a plan, it shall terminate
automatically in the event of such "assignment." Upon a termination
of the agreement with INVESCO, the Funds may continue to make
payments pursuant to the Plan only upon the approval of a new
agreement under this Plan and Agreement, which may or may not be
with INVESCO, or the adoption of other arrangements regarding the
use of the amounts authorized to be paid by the Funds hereunder, by
the Company's board of directors in accordance with the procedures
set forth in paragraph 7 above.
11. The Company shall preserve copies of this Plan and Agreement and all
reports made pursuant to paragraph 6 hereof, together with minutes
of all board of directors meetings at which the adoption, amendment
or continuance of the Plan were considered (describing the factors
considered and the basis for decision), for a period of not less
than six years from the date of this Plan and Agreement, or any such
reports or minutes, as the case may be, the first two years in an
easily accessible place.
12. This Plan and Agreement shall be construed in accordance with the
laws of the State of Colorado and applicable provisions of the Act.
To the extent the applicable laws of the State of Colorado, or any
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
Plan and Agreement on the 30th day of September, 1997.
INVESCO INCOME FUNDS, INC.
By: /s/ Dan J. Hesser
-----------------------------
Dan J. Hesser, President
ATTEST: /s/ Glen A. Payne
-------------------------
Glen A. Payne, Secretary
INVESCO DISTRIBUTORS, INC.
By: /s/ Ronald L. Grooms
----------------------------
Ronald L. Grooms,
Senior Vice President
ATTEST: /s/ Glen A. Payne
------------------------
Glen A. Payne, Secretary
SCHEDULE FOR COMPUTATION OF PERFORMANCE DATA
TOTAL RETURN
Formula in release:
P = $1,000 initial payment
T = average annual total return
n = number of years (including fractional portions)
ERV = ending redeemable value
P(1+T)exponent n = ERV
The formula given on pages 64 and 65 of the release is written to solve for
Ending Redeemable Value. However, the quantity to be reported is T (Average
Annual Total Return).
Because P, n and ERV are known values, we have solved for T as follows,
T = n /((ERV / P) - 1)
and have reported those amounts as the total return.
YIELD
Formula in release:
a = dividends and interest earned
b = expenses accured
c = average shares outstanding
d = price per share at end of period
YIELD = 2C( a-b +1) 6 -1]
----
cd
(Assumes all months have 30 days and year is 360 days.
A one month period or 30 days was used for accruals as appropriate).
Dividends have been accrued by dividing annual dividend income (based on most
recent dividend rate) by 360 and multiplying by the number of days the security
was held in the portfolio.
Interest earned on short-term instruments was actual per books.
Interest earned on corporate bonds and US Treasury obligations was determined
by computing yield to maturity (or yhield to call if applicable) of each
obligation held in the Portfolios based on market value of the obligations
(including actual accrued interest) at the close of business on the last
business day of each month, or with respect to obligations purchased during
the month, the purchase price plus accrued interest. The resultant yield to
maturity was divided by 360 and multiplied by the market value of the
obligation (including actual accrued interest) multiplied by the number of days
in the subsequent month that the obligation was in the Portfolio.
GNMA's were based on yield to maturity and gain/(loss) on paydowns was
included in income.
Expenses accrued were actual per books.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000201815
<NAME> INVESCO INCOME FUNDS, INC.
<SERIES>
<NUMBER> 1
<NAME> INVESCO SELECT INCOME FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 282742479
<INVESTMENTS-AT-VALUE> 285456567
<RECEIVABLES> 8088370
<ASSETS-OTHER> 42378
<OTHER-ITEMS-ASSETS> 47711
<TOTAL-ASSETS> 293635026
<PAYABLE-FOR-SECURITIES> 5174796
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 842147
<TOTAL-LIABILITIES> 6016943
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 278055066
<SHARES-COMMON-STOCK> 43176748
<SHARES-COMMON-PRIOR> 40629816
<ACCUMULATED-NII-CURRENT> 37249
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 6811680
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2714088
<NET-ASSETS> 287618083
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 21505416
<OTHER-INCOME> 0
<EXPENSES-NET> 2719672
<NET-INVESTMENT-INCOME> 18785744
<REALIZED-GAINS-CURRENT> 6970303
<APPREC-INCREASE-CURRENT> 6812752
<NET-CHANGE-FROM-OPS> 13783055
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 18772522
<DISTRIBUTIONS-OF-GAINS> 1164947
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 22926524
<NUMBER-OF-SHARES-REDEEMED> 23065551
<SHARES-REINVESTED> 2685959
<NET-CHANGE-IN-ASSETS> 29525227
<ACCUMULATED-NII-PRIOR> 24027
<ACCUMULATED-GAINS-PRIOR> 1166391
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1477302
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3243016
<AVERAGE-NET-ASSETS> 270310643
<PER-SHARE-NAV-BEGIN> 6.35
<PER-SHARE-NII> 0.45
<PER-SHARE-GAIN-APPREC> 0.34
<PER-SHARE-DIVIDEND> 0.45
<PER-SHARE-DISTRIBUTIONS> 0.03
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 6.66
<EXPENSE-RATIO> 1
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000201815
<NAME> INVESCO INCOME FUNDS, INC.
<SERIES>
<NUMBER> 2
<NAME> INVESCO HIGH YIELD FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 428126786
<INVESTMENTS-AT-VALUE> 436941947
<RECEIVABLES> 33036703
<ASSETS-OTHER> 76285
<OTHER-ITEMS-ASSETS> 3104798
<TOTAL-ASSETS> 473159733
<PAYABLE-FOR-SECURITIES> 282860
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1911859
<TOTAL-LIABILITIES> 2194719
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 440202947
<SHARES-COMMON-STOCK> 63206605
<SHARES-COMMON-PRIOR> 54835176
<ACCUMULATED-NII-CURRENT> 16678
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 21930228
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8815161
<NET-ASSETS> 470965014
<DIVIDEND-INCOME> 207760
<INTEREST-INCOME> 10149033
<OTHER-INCOME> 0
<EXPENSES-NET> 4098346
<NET-INVESTMENT-INCOME> 36258447
<REALIZED-GAINS-CURRENT> 23000271
<APPREC-INCREASE-CURRENT> 14932249
<NET-CHANGE-FROM-OPS> 37932520
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 36240760
<DISTRIBUTIONS-OF-GAINS> 1805972
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 82068049
<NUMBER-OF-SHARES-REDEEMED> 78100199
<SHARES-REINVESTED> 4403579
<NET-CHANGE-IN-ASSETS> 95763770
<ACCUMULATED-NII-PRIOR> (1009)
<ACCUMULATED-GAINS-PRIOR> 897351
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1964043
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4156454
<AVERAGE-NET-ASSETS> 418938486
<PER-SHARE-NAV-BEGIN> 6.84
<PER-SHARE-NII> 0.62
<PER-SHARE-GAIN-APPREC> 0.64
<PER-SHARE-DIVIDEND> 0.62
<PER-SHARE-DISTRIBUTIONS> 0.03
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 7.45
<EXPENSE-RATIO> 1
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000201815
<NAME> INVESCO INCOME FUNDS, INC.
<SERIES>
<NUMBER> 3
<NAME> INVESCO U.S. GOVERNMENT SECURITIES FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 57963442
<INVESTMENTS-AT-VALUE> 59089946
<RECEIVABLES> 700476
<ASSETS-OTHER> 39671
<OTHER-ITEMS-ASSETS> 78549
<TOTAL-ASSETS> 59908642
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8327828
<TOTAL-LIABILITIES> 8327828
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 49528654
<SHARES-COMMON-STOCK> 6882696
<SHARES-COMMON-PRIOR> 7638635
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 655656
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1396504
<NET-ASSETS> 51580814
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3857843
<OTHER-INCOME> 0
<EXPENSES-NET> 569729
<NET-INVESTMENT-INCOME> 3288114
<REALIZED-GAINS-CURRENT> 1121369
<APPREC-INCREASE-CURRENT> 1720828
<NET-CHANGE-FROM-OPS> 2842197
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3288114
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13984238
<NUMBER-OF-SHARES-REDEEMED> 15152477
<SHARES-REINVESTED> 412300
<NET-CHANGE-IN-ASSETS> (3032768)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (451129)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 312851
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 752278
<AVERAGE-NET-ASSETS> 56320326
<PER-SHARE-NAV-BEGIN> 7.15
<PER-SHARE-NII> 0.43
<PER-SHARE-GAIN-APPREC> 0.34
<PER-SHARE-DIVIDEND> 0.43
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 7.49
<EXPENSE-RATIO> 1
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000201815
<NAME> INVESCO INCOME FUNDS, INC.
<SERIES>
<NUMBER> 4
<NAME> INVESCO SHORT-TERM BOND FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 11673829
<INVESTMENTS-AT-VALUE> 11684896
<RECEIVABLES> 670591
<ASSETS-OTHER> 15348
<OTHER-ITEMS-ASSETS> 6154
<TOTAL-ASSETS> 12376989
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 32636
<TOTAL-LIABILITIES> 32636
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12712551
<SHARES-COMMON-STOCK> 1297795
<SHARES-COMMON-PRIOR> 1140887
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (379265)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11067
<NET-ASSETS> 12344353
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 810659
<OTHER-INCOME> 0
<EXPENSES-NET> 98144
<NET-INVESTMENT-INCOME> 712515
<REALIZED-GAINS-CURRENT> 7626
<APPREC-INCREASE-CURRENT> 99263
<NET-CHANGE-FROM-OPS> 106889
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 712515
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2048615
<NUMBER-OF-SHARES-REDEEMED> 1962721
<SHARES-REINVESTED> 71014
<NET-CHANGE-IN-ASSETS> 1609769
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (326802)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 61150
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 225084
<AVERAGE-NET-ASSETS> 12044689
<PER-SHARE-NAV-BEGIN> 9.41
<PER-SHARE-NII> 0.50
<PER-SHARE-GAIN-APPREC> 0.15
<PER-SHARE-DIVIDEND> 0.55
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.51
<EXPENSE-RATIO> 1
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
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 Capital Appreciation Funds, Inc.
INVESCO Diversified Funds, 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 25th day of August, 1997.
/s/ Wendy L. Gramm
-----------------------------------
Wendy L. Gramm
STATE OF District of
Columbia )
)
COUNTY OF )
SUBSCRIBED, SWORN TO AND ACKNOWLEDGED before me by Wendy L. Gramm, as a
director or trustee of each of the above-described entities, this 25th day of
August, 1997.
/s/ Margaret Foster
---------------------------------
Notary Public
My Commission Expires: Feb. 14, 2000
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 4th day of June, 1997.
/s/ Larry Soll
-----------------------------------
Larry Soll
STATE OF WASHINGTON )
)
COUNTY OF SAN JUAN )
SUBSCRIBED, SWORN TO AND ACKNOWLEDGED before me by Larry Soll, as a
director or trustee of each of the above-described entities, this 4th day of
June, 1997.
/s/Mary Paulette Weaver
---------------------------------
Notary Public
My Commission Expires: 1-27-99
