File No. 2-57151
As filed on ^ August 13, 1999
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
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Post-Effective Amendment No. ^ 39 X
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. ^ 28 X
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INVESCO BOND FUNDS, INC.
(formerly, INVESCO Income Funds, Inc.)
(Exact Name of Registrant as Specified in Charter)
7800 E. Union Avenue, Denver, Colorado 80237
(Address of Principal Executive Offices)
P.O. Box 173706, Denver, Colorado 80217-3706
(Mailing Address)
Registrant's Telephone Number, including Area Code: (303) 930-6300
Glen A. Payne, Esq.
7800 E. Union Avenue
Denver, Colorado 80237
(Name and Address of Agent for Service)
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Copies to:
Ronald M. Feiman, Esq.
^ Mayer, Brown & Platt
^ 1675 Broadway
New York, New York ^ 10019-5820
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Approximate Date of Proposed Public Offering: As soon as practicable
after this post-effective amendment becomes effective.
It is proposed that this filing will become effective:
X immediately upon filing pursuant to paragraph (b)
___ on _____________, pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(1)
___ ^ on _____________, pursuant to paragraph (a)(1)
___ 75 days after filing pursuant to paragraph (a)(2)
___ on _____________, pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
____ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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^
Page 1 of 96
Exhibit index is located at page 84
<PAGE>
PROSPECTUS
^ August 13, 1999
INVESCO TAX-FREE ^ BOND FUND
INVESCO Tax-Free ^ Bond Fund (formerly, ^ INVESCO Tax-Free ^ Long-Term Bond
Fund) (the "Fund") is actively managed to seek as high a level of current income
exempt from federal income taxes as is consistent with the preservation of
capital. The ^ Fund invests in a diversified portfolio of long-term obligations,
the interest on which is exempt from federal income taxes. These "municipal
bonds" may be issued by states, territories, and possessions of the United
States and the District of Columbia, as well as their political subdivisions,
agencies, and instrumentalities. The dollar ^ weighted average maturity of the
obligations in the ^ portfolio normally will be at least 10 years.
^ The Fund is a series of INVESCO ^ Bond Funds, Inc. (formerly, INVESCO
Income Funds, Inc.) (the "Company"), a diversified, managed no-load mutual fund
consisting of four portfolios of investments. Investors may purchase shares of ^
any of the Funds. Additional funds may be offered in the future.
This Prospectus provides you with the basic information you should know
before investing in ^ the ^ Fund. You should read it and keep it for future
reference. A Statement of Additional Information containing further information
about the ^ Fund, dated ^ August 13, 1999, has been filed with the Securities
and Exchange Commission, and is incorporated by reference into this Prospectus.
To request a free copy, write to INVESCO Distributors, Inc., P.O. Box 173706,
Denver, Colorado 80217-3706; call 1-800-525-8085; or visit our web site at: ^
www.invesco.com.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK OR OTHER FINANCIAL INSTITUTION. THE SHARES OF THE FUND ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
ESSENTIAL INFORMATION........................................................4
ANNUAL FUND EXPENSES.........................................................5
FINANCIAL HIGHLIGHTS.........................................................7
INVESTMENT OBJECTIVE AND STRATEGY............................................9
INVESTMENT POLICIES AND RISKS...............................................10
THE ^ FUND AND ^ ITS MANAGEMENT.............................................14
FUND PRICE AND PERFORMANCE..................................................17
HOW TO BUY SHARES...........................................................18
FUND SERVICES...............................................................22
HOW TO SELL SHARES..........................................................23
TAXES, DIVIDENDS AND OTHER DISTRIBUTIONS....................................25
ADDITIONAL INFORMATION......................................................27
<PAGE>
ESSENTIAL INFORMATION
- ---------------------
Investment Goal and Strategy: The ^ Fund seeks as high a level of current
income exempt from federal income taxes as is consistent with the preservation
of capital by investing in a diversified portfolio of ^ long-term obligations ^.
The Fund invests primarily in municipal obligations. ^ There is no guarantee
that the ^ Fund will meet ^ its investment ^ objective. See "Investment
Objective And Strategy" and "Investment Policies And Risks."
Designed For: Investors primarily seeking current income free from federal
income taxes. While not a complete investment program, the ^ Fund may be a
valuable element of your investment portfolio. The ^ Fund is not a suitable
investment for tax-sheltered retirement programs, including various Individual
Retirement Accounts ("IRAs"), 401(k), Profit Sharing, Money Purchase Pension,
and 403(b) plans.
Time Horizon: The ^ Fund is managed for daily income, paid monthly.
Investors should not consider ^ this Fund for the portion of their savings
devoted to capital growth.
Risks: The ^ Fund uses a moderate investment strategy, but ^ its
investments are subject to both credit and market risk. Investors should expect
to see their price per share vary with moves in the municipal bond market,
economic conditions and other factors. See "Investment Policies And Risks."
Organization and Management: ^ The Fund is a series of the Company. Each
Fund is owned by its shareholders. ^ It employs INVESCO Funds Group, Inc.
("INVESCO"), founded in 1932, to serve as investment adviser, administrator and
transfer agent. INVESCO Distributors, Inc. ("IDI"), founded in 1997 as a
wholly-owned subsidiary of INVESCO, is the ^ Fund's distributor.
The ^ Fund's investments are selected by INVESCO portfolio manager Dawn
Daggy-Mangerson. Ms. Daggy-Mangerson earned her B.S. from DePaul University. See
"The ^ Fund And ^ Its Management."
INVESCO and IDI are indirect, wholly-owned subsidiaries of AMVESCAP PLC, an
international investment management company that managed approximately ^ $281
billion in assets as of ^ March 31, 1999. AMVESCAP PLC is based in London with
money managers located in Europe, North America, South America and the Far East.
<PAGE>
The ^ Fund offers all of the following services at no charge:
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Telephone purchases
Telephone exchanges
Telephone redemptions
Automatic reinvestment of distributions
Regular investment plans, such as EasiVest (the Fund's automatic
monthly investment program), Direct Payroll Purchase, and Automatic
Monthly Exchange
Periodic withdrawal plans
See "How To Buy Shares" and "How To Sell Shares."
Minimum Initial Investment: $1,000 ^, which is waived for regular
investment plans, including EasiVest and Direct Payroll Purchase.
Minimum Subsequent Investment: $50 ^
ANNUAL FUND EXPENSES
- --------------------
The ^ Fund is no-load; there are no fees to purchase, exchange or redeem
shares. ^ The Fund is authorized to pay a Rule 12b-1 distribution fee of one
quarter of one percent of ^ the Fund's average net assets each year. (See "How
To Buy Shares - Distribution Expenses.").
Like any company, ^ the Fund has operating expenses -- such as portfolio
management accounting, shareholder servicing, maintenance of shareholder
accounts, and other expenses. These expenses are paid from ^ the Fund's assets.
Lower expenses therefore benefit investors by increasing ^ the Fund's total
return.
We calculate annual operating expenses as a percentage of ^ the Fund's
average annual net assets. To keep expenses competitive, INVESCO voluntarily
reimburses the ^ Fund for amounts in excess of 0.90% of ^ the Fund's average net
assets.
<PAGE>
Annual Fund Operating Expenses
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(as a percentage of average net assets)
^ Bond Fund
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Management Fee ^ 0.55%
12b-1 Fees 0.25% ^
Other Expenses (after
absorbed expenses)(1)(2) ^ 0.11%
Total Fund Operating Expenses
(after absorbed expenses)(1)(2) ^ 0.91%
(1) It should be noted that ^ the Fund's actual total operating expenses were
lower than the figures shown because ^ the Fund's custodian fees 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 expense
offset arrangements for periods prior to the fiscal year ended June 30, 1998.
See "The ^ Fund And ^ Its Management."
(2) Certain expenses of the ^ Fund are being absorbed voluntarily by INVESCO. In
the absence of such absorbed expense, the ^ Fund's "Other Expenses" and "Total
Fund Operating Expenses" would have been 0.24% and 1.04%, respectively, based on
each Fund's actual expenses for the fiscal year ended June 30, 1998.
Example:
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A shareholder would pay the following expenses on a ^ $10,000 investment
for the periods shown, assuming a hypothetical 5% annual return and redemption
at the end of each time period. (Of course, actual operating expenses are paid
from ^ the Fund's assets and are deducted from the amount of income available
for distribution to shareholders; they are not charged directly to shareholder
accounts.)
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
^ 106 331 574 1,271
The purpose of this table is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly. THE EXAMPLE SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE OR EXPENSES,
AND ACTUAL ANNUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
For more information on ^ the Fund's expenses, see "The ^ Fund And ^ Its
Management" and "How To Buy Shares - Distribution Expenses."
Because ^ the Fund pays a distribution fee, investors who own shares of
the ^ Fund 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
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(For a Fund Share Outstanding Throughout Each Period)
The following information has been audited by PricewaterhouseCoopers LLP,
independent accountants. This information should be read in conjunction with the
audited financial statements and the Report of Independent Accountants thereon
appearing in the Company's 1998 Annual Report to Shareholders^ and the unaudited
financial statements and accompanying notes in the Fund's Semi-Annual Report to
Shareholders for the six-month period ended December 31, 1998, which are
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 back cover of this Prospectus. The Annual Report also contains more
information about ^ the Fund's performance.
^ Financial Highlights
^(For a Fund Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
^ Six Months
Ended
December 31 Year Ended June 30
------------ --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989^
^ Unaudited
PER SHARE DATA
Net Asset Value -
Beginning of Period ^ $15.57 $15.34 $15.20 $15.07 $15.29 $16.35 $15.69 $15.05 $14.90 $15.15 $13.82
^ ---------------------------------------------------------------------------------------------------
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income ^ 0.32 0.63 0.66 0.73 0.80 0.83 0.87 0.92 0.96 0.99 1.01
Net Gains or (Losses) on
Securities ^(Both
Realized ^ and
Unrealized) ^ 0.18 0.40 0.38 0.32 0.09 (1.00) 1.04 0.95 0.27 (0.25) 1.33
^ ---------------------------------------------------------------------------------------------------
Total from Investment
Operations ^ 0.50 1.03 1.04 1.05 0.89 (0.17) 1.91 1.87 1.23 0.74 2.34
^ ---------------------------------------------------------------------------------------------------
<PAGE>
LESS DISTRIBUTIONS
Dividends from Net
Investment ^ Income ^ 0.32 0.63 0.66 0.73 0.80 0.83 0.87 0.92 0.96 0.99 1.01
^ In Excess of Net
Investment Income 0.00 0.00 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Distributions from
Capital Gains 0.46 0.17 0.23 0.19 0.31 0.06 0.38 0.31 0.12 0.00 0.00
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Total Distributions 0.78 0.80 0.90 0.92 1.11 0.89 1.25 1.23 1.08 0.99 1.01
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Net Asset Value -
End of Period ^ $15.29 $15.57 $15.34 $15.20 $15.07 $15.29 $16.35 $15.69 $15.05 $14.90 $15.15
^ TOTAL RETURN 3.23%(a) 6.87% 7.05% 7.01% 6.16% (1.16%) 12.57% 12.79% 8.55% 5.10% 17.64%
RATIOS
Net Assets - End of
^ Period
($000 Omitted) $208,809 $211,471 $220,410 $250,890 $254,584 $282,407 $332,239 $272,382 $208,100 $179,107 $143,678
Ratio of Expenses to
Average Net
Assets^(b) 0.46%(a)(c) 0.91%@ 0.90%@ 0.91%@ 0.92% 1.00% 1.03% 1.02% 0.93% 0.75% 0.74%
Ratio of Net
Investment
Income to Average
Net Assets^(b) 2.02%(a) 4.06% 4.36% 4.76% 5.31% 5.14% 5.43% 5.90% 6.39% 6.67% 7.06%
Portfolio Turnover
Rate 44%(a) 173% 123% 146% 99% 28% 30% 28% 25% 27% 27%
</TABLE>
(a) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(b)^ Various expenses of the Fund were voluntarily absorbed by INVESCO for the
six months ended December 31, 1998 and for the years ended June 30, 1998, 1997,
1996 and 1995. If such expenses had not been voluntarily absorbed, ratio of
expenses to average net assets would have been 0.52% (not annualized), 1.04%,
1.05%, 1.04% and 1.05%, respectively, and ratio of net investment income to
average net assets would have been 1.96% (not annualized), 3.93%, 4.21%, 4.63%
and 5.18%, respectively.
^(c) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
<PAGE>
INVESTMENT OBJECTIVE AND STRATEGY
- ---------------------------------
^ The Fund seeks as high a level of current income exempt from federal
income taxes as is consistent with the preservation of capital. This investment
objective is fundamental and cannot be changed without the approval of ^ the
Fund's shareholders. There is no assurance that ^ the Fund's investment
objective will be met.
^
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FUND STRATEGY
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Tax-Free ^ Bond o ^ Long-Term Municipal Bonds
Fund which may include any
combination of general
obligation, revenue or
industrial development bonds.
^
o At least 80% of the Fund's
assets normally will consist of
a combination of municipal
bonds rated investment grade as
described under "Investment
Policies And Risks" and
short-term municipal notes
rated within the two highest
rating categories as described
under "Investment Policies And
Risks."
o The dollar-weighted average maturity of
the Fund's portfolio normally will be at
least ten years and will vary as INVESCO
responds to changes in interest rates.
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Under ordinary circumstances, no more than 20% of ^ the Fund's total
assets may consist of bonds subject to the Alternative Minimum Tax ("AMT
Bonds"), short-term or temporary taxable securities (the income from which may
be subject to federal income tax), debt obligations rated below investment grade
and cash.
When we believe market or economic conditions are unfavorable, the ^ Fund
may assume a defensive position by temporarily investing up to 100% of ^ its
assets in short-term taxable investments or cash, seeking to protect ^ its
assets until conditions stabilize.
<PAGE>
INVESTMENT POLICIES AND RISKS
- -----------------------------
Investors should expect to see the price per share of the ^ Fund vary with
movements in the municipal bond market, changes in economic conditions and other
factors. The ^ Fund invests in many different securities and industries over a
wide geographical range; this diversification may help reduce the ^ Fund's
exposure to particular investment and market risks but cannot eliminate these
risks.
Year 2000 Computer Issue. Due to the fact that many computer systems in
use today cannot recognize the Year 2000, but will, unless corrected, revert to
1900 or 1980 or cease to function at that time, the markets for securities in
which the ^ Fund invests may be detrimentally affected by computer failures
affecting portfolio investments or trading of securities beginning January 1,
2000. Improperly functioning trading systems may result in settlement problems
and liquidity issues. In addition, corporate and governmental data processing
errors may result in production issues for individual companies and overall
economic uncertainties. Earnings of individual issuers may be affected by
remediation costs, which may be substantial. The ^ Fund's investments may be
adversely affected.
Municipal Securities. When we assess an issuer's ability to meet its
interest payment obligations and repay principal when due, we are referring to
"credit risk." Municipal obligations are rated based on their estimated credit
risk by independent services such as Standard & Poor's, a division of The
McGraw-Hill Companies, Inc. ("S&P"), Moody's Investors Services, Inc.
("Moody's"), Fitch Investors Services, Inc. ("Fitch") or Duff & Phelps, Inc.
("D&P"). "Market risk" refers to sensitivity to changes in interest rates. For
instance, when interest rates go up, the market value of a previously issued
bond generally declines; on the other hand, when interest rates go down, the
prices of bonds generally increase.
The lower a bond's quality, the more it is subject to credit risk and
market risk and the more speculative it becomes. This is also true of most
unrated municipal securities. Therefore, the ^ Fund does not invest in
obligations ^ it believes to be highly speculative. In practice, this means we
primarily hold investment grade municipal bonds -- those rated AAA, AA, A or BBB
by S&P or Aaa, Aa, A or Baa by Moody's. Overall, these municipal securities
enjoy strong to adequate capacity to pay principal and interest. No more than
10% of ^ the Fund's total assets may be invested in issues rated below
investment grade quality (commonly called "junk bonds" and rated BB or lower by
S&P or Ba or lower by Moody's or, if unrated, judged by INVESCO to be of
equivalent quality); these include issues which are of poorer quality and may
have some speculative characteristics, according to the ratings services. Never,
under any circumstances, does the ^ Fund invest in bonds which are rated below
B- or B by S&P or Moody's, respectively. Bonds rated B-, B, CCC, or Caa may be
in default or there may be present elements of danger with respect to payment of
principal or interest. While INVESCO continuously monitors all of the municipal
bonds in ^ the Fund's portfolio for the issuer's ability to make required
principal and interest payments and other quality factors, it may retain a bond
whose rating is changed to one below the minimum rating required for purchase of
the security. For a detailed description of municipal bond ratings, see the
Statement of Additional Information and Appendix A therein.
The ^ Fund may invest in short-term municipal notes rated within the two
highest ratings by S&P or Moody's.
<PAGE>
The following chart reflects the percentage of ^ the Fund's total assets
that were invested in municipal bonds (by rating category) for the fiscal year
ended June 30, 1998.
^
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BELOW INVESTMENT
INVESTMENT GRADE GRADE ^ UNRATED
- --------------------------------------------------------------------------------
AAA/ AA/ BBB/ BB/
Aaa Aa A Baa Ba B
^
- --------------------------------------------------------------------------------
48.63% 15.53% 12.69% 1.82% 1.83% 0.00% 1.34%
- --------------------------------------------------------------------------------
In addition, ^ 17.33% of the Fund's total assets were invested in
corporate and municipal short-term notes rated by at least one rating category
in the highest rating category for such notes.
All of these percentages were determined on a dollar-weighted basis,
calculated by averaging the ^ Fund's month-end portfolio holdings during the
fiscal year. Keep in mind that ^ the Fund's holdings are actively traded, and
bond ratings are occasionally adjusted by ratings services, so these figures do
not represent the ^ Fund's actual holdings or quality ratings as of June 30,
1998, or at any particular time during the fiscal year.
AMT Bonds. These are "private activity bonds" issued after August 7, 1986;
the proceeds are directed in full or in part to private, for-profit
organizations. The income from AMT bonds is exempt from federal income tax but
may be subject to the alternative minimum tax -- a special tax that applies to
taxpayers who have certain adjustments to income or tax preference items.
Temporary/Short-Term Taxable Investments. The ^ Fund may invest in
temporary and/or short-term taxable investments. Short-term taxable investments,
if any, normally will consist of notes having quality ratings within the two
highest grades of Moody's, S&P, Fitch or D&P; obligations of the U.S.
government, its agencies or instrumentalities; commercial paper rated at least
P-2 by Moody's, A-2 by S&P; certificates of deposit of U.S. domestic banks,
including foreign branches of domestic banks, with assets of $1 billion or more;
time deposits; banker's acceptances and other short-term bank obligations; and
repurchase agreements. Temporary taxable investments, if any, normally will
consist of corporate bonds and other debt obligations. Dividends paid by ^ the
Fund attributable to income from such investments will be taxable to investors.
See "Taxes, Dividends And Other Distributions."
^
Futures and Options. A futures contract is an agreement to buy or sell a
specific amount of a financial instrument or commodity at a particular price on
a particular date. ^ The Fund will use futures contracts only to hedge against
price changes in the value of its current or intended investments in securities.
In the event that an anticipated decrease in the value of portfolio securities
occurs as a result of a general decrease in prices, the adverse effects of such
changes may be offset, at least in part, by gains on the sale of futures
contracts. Conversely, the increased cost of portfolio securities to be
acquired, caused by a general increase in prices, may be offset, at least in
part, by gains on futures contracts purchased by ^ the Fund. Brokerage fees are
paid to trade futures contracts, and ^ the Fund is required to maintain margin
deposits. The board of directors has adopted a non-fundamental restriction that
the aggregate market value of the futures contracts the ^ Fund holds cannot
exceed 30% of the market value of its total assets.
<PAGE>
Put and call options on futures contracts or securities may be traded by ^
the Fund in order to protect against declines in the values of portfolio
securities or against increases in the cost of securities to be acquired. The
purchaser of an option purchases the right to effect a transaction in the
underlying future or security at a specified price (the "strike price") before a
specified date (the "expiration date"). In exchange for the right, the purchaser
pays a "premium" to the seller, which represents the price of the right to buy
or sell the underlying instrument. In exchange for the premium, the seller of
the option becomes obligated to effect a transaction in the underlying future or
security, at the strike price, at any time prior to the expiration date, should
the buyer choose to exercise the option. A call option contract grants the
purchaser the right to buy the underlying future or security, at the strike
price, before the expiration date. A put option contract grants the purchaser
the right to sell the underlying future or security, at the strike price, before
the expiration date. Purchases of options on futures contracts may present less
dollar risk in hedging ^ the Fund's portfolio than the purchase and sale of the
underlying futures contracts, since the potential loss is limited to the amount
of the premium plus related transaction costs. The premium paid for such a put
or call option plus any transaction costs will reduce the benefit, if any,
realized by ^ the Fund upon exercise or liquidation of the option, and, unless
the price of the underlying futures contract or security changes sufficiently,
the option may expire without value to the Fund.
Although ^ the Fund will enter into futures contracts and options on
futures contracts and securities solely for hedging or other nonspeculative
purposes, their use does involve certain risks. For example, a lack of
correlation between the value of an instrument underlying an option or futures
contract and the assets being hedged, or unexpected adverse price movements,
could render ^ the Fund's hedging strategy unsuccessful and could result in
losses. In addition, there can be no assurance that a liquid secondary market
will exist for any contract purchased or sold, and ^ the Fund may be required to
maintain a position until exercise or expiration, which could result in losses.
Transactions in futures contracts and options are subject to other risks as
well, which are set forth in greater detail in the Statement of Additional
Information and Appendix B therein.
Zero Coupon Securities. The ^ Fund may invest in Zero Coupon Securities. ^
These securities 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. Being extremely responsive to changes in
interest rates, the market price of zero coupon securities may be more volatile
than other bonds. ^ The Fund may be required to distribute income recognized on
these bonds, even though no cash interest payments are received, which could
reduce the amount of cash available for investment by the Fund.
<PAGE>
Delayed Delivery or When-Issued Purchases. Municipal obligations may at
times be purchased or sold by ^ the Fund with settlement taking place in the
future. The payment obligation and the interest rate that will be received on
the securities generally are fixed at the time ^ the Fund enters into the
commitment. Between the date of purchase and the settlement date, the value of
the securities is subject to market fluctuations, and no interest is payable to
the Fund prior to the settlement date.
Securities Lending. ^ The Fund may seek to earn additional income by
lending securities to ^ other parties on a fully collateralized basis. For
further information on this policy, see "Investment Policies And Restrictions"
in the Statement of Additional Information.
Repurchase Agreements. ^ The Fund may invest money, for as short a time as
overnight, using repurchase agreements ("repos"). With a repo, ^ the Fund buys a
debt instrument, agreeing simultaneously to sell it back to the prior owner at
an agreed-upon price and date. ^ The Fund could incur costs or delays in seeking
to sell the security if the prior owner defaults on its repurchase obligation.
To reduce that risk, the securities that are the subject of each repurchase
agreement will be maintained with ^ the Fund's custodian in an amount at least
equal to the repurchase price under the agreement (including accrued interest).
These agreements are entered into only with member banks of the Federal Reserve
System, registered broker-dealers, and registered U.S. government securities
dealers that are deemed creditworthy under standards set by the Company's board
of directors.
^
Investment Restrictions. Certain restrictions, which are identified in the
Statement of Additional Information, may not be altered without the approval of
^ the Fund's shareholders. For example, with respect to ^ 100% of the ^ Fund's
total assets ^, the Fund limits to 5% the portion of its total assets that may
be invested in a single issuer. In addition, ^ the Fund limits to 25% the
portion of its total assets that may be invested in any one industry. Municipal
securities are not considered to be an "industry" for this purpose, although
industrial development bonds are grouped into industries depending upon the
businesses of the companies that have the ultimate responsibility for payment.
Except where indicated to the contrary, the investment policies described in
this Prospectus are not considered fundamental and may be changed without a vote
of ^ the Fund's shareholders.
For a further discussion of risks associated with an investment in the ^
Fund, see "Investment Policies And Restrictions" and "Investment Practices" in
the Statement of Additional Information.
<PAGE>
THE ^ FUND AND ^ ITS MANAGEMENT
- -------------------------------
The Company is a no-load mutual fund, registered with the Securities and
Exchange Commission as a diversified, open-end, management investment company.
It was incorporated on ^ August 20, 1976, under the laws of Colorado and was
reorganized as a Maryland corporation on April 2, 1993. On October 29, 1998, the
name of the Company was changed to INVESCO Bond Funds, Inc. On August 13, 1999,
the Company assumed all of the assets and liabilities of INVESCO Tax-Free Bond
Fund (formerly, INVESCO Tax-Free Long-Term Bond Fund), a series of INVESCO
Tax-Free Income Funds, Inc.
The Company's board of directors has responsibility for overall
supervision of the ^ Fund and reviews the services provided by the investment
adviser. Under an agreement with the Company, INVESCO, 7800 E. Union Avenue,
Denver, Colorado 80237, serves as investment adviser for ^ the Fund; it is
primarily responsible for providing the ^ Fund with portfolio management and
various administrative services.
INVESCO 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. AMVESCAP
PLC had approximately ^ $281 billion in assets under management as of ^ March
31, 1999. INVESCO was established in 1932 and, as of ^ May 31, 1999, managed ^
10 mutual funds, consisting of ^ 50 separate portfolios, with combined assets of
approximately ^ $22.7 billion on behalf of over ^ 916,165 shareholders.
Prior to February 3, 1998, Institutional Trust Company, doing business as
INVESCO Trust Company ("ITC"), provided sub-advisory services to the ^ Fund;
termination of its sub-advisory services in no way changed the basis upon which
investment advice is provided to the ^ Fund, the cost of those services to the ^
Fund or the persons actually performing the investment advisory and other
services previously provided by ITC. INVESCO provides such day-to-day portfolio
management services.
The ^ Fund is managed by Dawn Daggy-Mangerson, who is a member of INVESCO's
Fixed Income Team, which is headed by Donovan J. (Jerry) Paul. Ms.
Daggy-Mangerson became the portfolio manager of the Fund in 1998 and has primary
responsibility for the day-to-day management of the ^ Fund's portfolio holdings.
Ms. Daggy-Mangerson was previously vice president and fixed income portfolio
manager with NationsBank/Tradestreet Investment Associates, Inc. from 1997 to
1998; a portfolio manager with Boatmen's Trust Company from 1995 to 1997; a
portfolio manager and trader from 1991 to 1995, a trader from 1990 to 1991, and
an assistant trader from 1988 to 1990, with Stein Roe & Farnham; and a trading
associate with E. F. Hutton & Co., Inc. from 1985 to 1988. Ms. Daggy-Mangerson
received a B.S. in Commerce with a concentration in Finance from DePaul
University.
INVESCO 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 INVESCO's personnel to conduct their
personal investment activities in a manner that INVESCO believes is not
detrimental to the ^ Fund or INVESCO's other advisory clients. See the Statement
of Additional Information for more detailed information.
<PAGE>
^ The Fund pays INVESCO a monthly management fee that is based upon a
percentage of ^ the Fund's average net assets determined daily. ^ The management
fee is computed at the annual rate of 0.55% on the first $300 million of the
Fund's average net assets; 0.45% on the next $200 million of the Fund's average
net assets; and 0.35% on the Fund's average net assets over $500 million. For
the fiscal year ended June 30, 1998, investment advisory fees paid by the ^ Fund
amounted to ^ 0.55%^ (after voluntary expense limitation), of ^ the Fund's
average net assets.
Under a Distribution Agreement, IDI provides services relating to the
distribution and sales of the ^ Fund's shares. IDI, established in 1997, is a
registered broker-dealer that acts as distributor for all retail funds advised
by INVESCO. Prior to September 30, 1997, INVESCO served as the ^ Fund's
distributor.
Under a Transfer Agency Agreement, INVESCO acts as registrar, transfer
agent, and dividend disbursing agent for the ^ Fund. The Fund pays an annual fee
of $26.00 per shareholder account or, 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
INVESCO, may provide equivalent services to the ^ Fund. In these cases, INVESCO
may pay, out of the fee it receives from the ^ Fund, an annual sub-transfer
agency fee or recordkeeping fee to the third party.
Under an Administrative Services Agreement, INVESCO handles additional
administrative, recordkeeping, and internal sub-accounting services for the ^
Fund. For the fiscal year ended June 30, 1998, the Fund paid INVESCO a fee for
these services equal to the following ^ percentage of ^ the Fund's average net
assets (prior to the absorption of certain Fund expenses): ^ 0.02%.
The management and custodial services provided to the ^ Fund by INVESCO
and the ^ Fund's custodian, and the services provided to shareholders by INVESCO
and IDI and other service providers, depend on the continued functioning of
their computer systems. Many computer systems in use today cannot recognize the
Year 2000, but will revert to 1900 or 1980 or will cease to function due to the
manner in which dates were encoded and are calculated. That failure could have a
negative impact on the handling of the ^ Fund's securities trades, ^ its share
pricing and ^ its account services. The ^ Fund and ^ its service providers have
been actively working on necessary changes to their computer systems to deal
with the Year 2000 issue and expect that their computer systems will be adapted
before that date, but there can be no assurance that they will be successful.
Furthermore, services may be impaired at that time as a result of the
interaction of their systems with noncomplying computer systems of others.
INVESCO plans to test as many such interactions as practicable prior to December
31, 1999 and to develop contingency plans for reasonably anticipated
failures.
<PAGE>
^ The Fund's expenses, which are accrued daily, are deducted from total
income before dividends are paid. Total expenses of ^ the Fund (prior to any
expense offset arrangements) for the fiscal year ended June 30, ^ 1999,
including investment advisory fees (but excluding brokerage commissions, which
are a cost of acquiring securities), amounted to ^ 0.91% (after voluntary
expense limitation) of the Fund's average net assets. Certain expenses of the ^
Fund are absorbed voluntarily by INVESCO pursuant to a commitment to ^ the Fund
to ensure that ^ the Fund's total operating expenses do not exceed 0.90% of ^
the Fund's average net assets. ^ This commitment may be changed following
consultation with the Company's board of directors. In the absence of this
voluntary expense limitation, total operating expenses of the ^ Fund would have
been ^ 1.06%.
INVESCO places orders for the purchase and sale of portfolio securities
with brokers and dealers based upon INVESCO's evaluation of such brokers' and
dealers' financial responsibility coupled with their ability to effect
transactions at the best available prices. As discussed under "How To Buy Shares
- - Distribution Expenses," the ^ Fund may market ^ its shares through
intermediary brokers or dealers that have entered into dealer agreements with
INVESCO or IDI, as the ^ Fund's distributor. The ^ Fund may place orders for
portfolio transactions with qualified brokers and dealers that recommend the ^
Fund or sell shares of the ^ Fund to clients, or act as agent in the purchase of
shares of the ^ Fund for clients, if INVESCO 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.
<PAGE>
FUND PRICE AND PERFORMANCE
- --------------------------
Determining Price. The value of your investment in ^ the Fund may vary
daily. The price per share is also known as the Net Asset Value ("NAV"). INVESCO
prices ^ the Fund every day that the New York Stock Exchange is open, as of the
close of regular trading (generally, 4:00 p.m. New York time). NAV is calculated
by adding together the current market value of ^ the Fund's assets, including
accrued interest and dividends; subtracting liabilities, including accrued
expenses; and dividing that dollar amount by the total number of shares
outstanding.
Performance Data. To keep shareholders and potential investors informed,
we will occasionally advertise ^ the Fund's total return and yield. Total return
figures show the average annual rate of return on a ^ $10,000 investment in ^
the Fund, assuming reinvestment of all dividends and capital gain distributions,
for one-, five-and ten-year periods (or since inception). Cumulative total
return shows the actual rate of return on an investment for the period cited;
average annual total return represents the average annual percentage change in
the value of an investment. Both cumulative and average annual total returns
tend to "smooth out" fluctuations in ^ the Fund's investment results, because
they do not show interim variations in performance that occur during the periods
cited.
The yield of ^ the Fund refers to the income generated by an investment in
the Fund over a 30-day or one-month period and is computed by dividing the net
investment income per share earned during the period by the net asset value per
share at the end of the period, then adjusting the result to provide for
semi-annual compounding. We may also discuss ^ the Fund's "taxable equivalent
yield" -- the yield a non-taxable investment would have to generate in order to
provide the same income as a taxable investment, assuming certain federal tax
rates. This yield quotation allows investors to compare taxable and tax-exempt
bond funds more fairly. More information about the ^ Fund's recent and
historical performance is contained in the Company's Annual Report to
Shareholders. You can get a free copy by calling or writing to IDI using the
phone number or address on the back cover of this Prospectus.
When we quote mutual fund rankings published by Lipper Analytical
Services, Inc., we may compare the ^ Fund to others in its category of General
Municipal Bond Funds ^, as well as the broad-based Lipper general fund
groupings. These rankings allow you to compare the ^ Fund to ^ its peers. Other
independent financial media also produce performance- or service-related
comparisons, which you may see in our promotional materials. For more
information, see "Fund Performance" in the Statement of Additional Information.
Performance figures are based on historical investment results and are not
intended to suggest future performance.
<PAGE>
HOW TO BUY SHARES
- -----------------
The following chart shows several convenient ways to invest in the ^ Fund.
Your new Fund shares will be priced at the NAV next determined after your order
is received in proper form. There is no charge to invest, exchange or redeem
shares when you make transactions directly through INVESCO. However, if you
invest in the ^ Fund through a securities broker, you may be charged a
commission or transaction fee. INVESCO and IDI may from time to time make
payments from its revenues to securities dealers and other financial
institutions that provide distribution-related and/or administrative services
for the Company. For all new accounts, please send a completed application form.
Please specify which fund's shares you wish to purchase.
INVESCO reserves the right to increase, reduce or waive the minimum
investment requirements in its sole discretion, where it determines this action
is in the best interests of ^ the Fund. Further, INVESCO reserves the right in
its sole discretion to reject any order for the purchase of Fund shares
(including purchases by exchange) when, in its judgment, such rejection is in ^
the Fund's best interests.
HOW TO BUY SHARES
================================================================================
METHOD INVESTMENT MINIMUM PLEASE REMEMBER
- --------------------------------------------------------------------------------
BY CHECK $1,000 for regular If your check does
Mail to: account; not clear, you will
INVESCO Funds $50 minimum for be responsible for
Group, Inc. each subsequent any related loss ^
P.O. Box 173706, investment. the Fund or INVESCO
Denver, CO incurs. If you are
80217-3706. already a
Or you may send shareholder in the
your check by INVESCO funds, the
overnight courier Fund may seek
to: 7800 E. Union reimbursement from
Ave., your existing
Denver, CO 80237. account(s) for any
loss incurred.
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
BY TELEPHONE OR $1,000. Payment must be
WIRE received within 3
Call 1-800-525-8085 business days, or
to request your the transaction may
purchase. Then send be canceled. If a
your check by telephone purchase
overnight courier is canceled due to
to our street nonpayment, you
address: will be responsible
7800 E. Union Ave., for any related
Denver, CO 80237. loss ^ the Fund or
Or you may transmit INVESCO incurs. If
your payment by you are already a
bank wire (call shareholder in the
INVESCO for INVESCO funds, ^
instructions). the Fund may seek
reimbursement from
your existing
account(s) for any
loss incurred.
- --------------------------------------------------------------------------------
WITH EASIVEST OR $50 per month for Like all regular
DIRECT PAYROLL EasiVest; $50 per investment plans,
PURCHASE pay period for neither EasiVest
You may enroll on Direct Payroll nor Direct Payroll
the fund Purchase. You may Purchase ensures a
application, or start or stop your profit or protects
call us for the regular investment against loss in a
correct form and plan at any time, falling market.
more details. with two weeks' Because you'll
Investing the same notice to INVESCO. invest continually,
amount on a monthly regardless of
basis allows you to varying price
buy more shares levels, consider
when prices are low your financial
and fewer shares ability to keep
when prices are buying through low
high. This price levels. And
"dollar-cost remember that you
averaging" may help will lose money if
offset market you redeem your
fluctuations. Over shares when the
a period of time, market value of all
your average cost your shares is less
per share may be than their cost.
less than the
actual average
price per share.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
BY PAL (R) $1,000. Be sure to write
Your "Personal down the
Account Line" is confirmation number
available for provided by PAL(R).
subsequent Payment must be
purchases and received within 3
exchanges 24-hours business days, or
a day. Simply call the transaction may
1-800-424-8085. be canceled. If a
telephone purchase
is canceled due to
nonpayment, you
will be responsible
for any related
loss ^ the Fund or
INVESCO incurs. If
you are already a
shareholder in the
INVESCO funds, ^
the Fund may seek
reimbursement from
your existing
account(s) for any
loss incurred.
- --------------------------------------------------------------------------------
BY EXCHANGE $1,000 to open a See "Exchange
Between ^ the Fund new account; $50 Policy" page ^ 26.
and another of the for written
INVESCO funds. Call requests to
1-800-525-8085 for purchase additional
prospectuses of shares for an
other INVESCO existing account.
funds. You may also (The exchange
establish an minimum is $250 for
Automatic Monthly purchases requested
Exchange service by telephone.)
between two INVESCO
funds; call INVESCO
for further details
and the correct
form.
================================================================================
Your order to purchase shares of ^ the Fund will not begin earning
dividends or other distributions until your payment can be converted into
available federal funds under regular banking procedures or, if you are
acquiring shares in an exchange from another INVESCO fund, the Fund receives the
proceeds of the exchange. Checks normally are converted into federal funds
(moneys held on deposit within the Federal Reserve System) within two or three
business days after we receive them, although this period may be longer for
checks drawn on banks that are not members of the Federal Reserve System.
Exchange Policy. You may exchange your shares in ^ the 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.
<PAGE>
Please note these policies regarding exchanges of INVESCO 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) In order to prevent abuse of this policy to the
disadvantage of other shareholders, the Fund reserves the
right to temporarily or permanently terminate the
exchange option of any shareholder who requests more than
four exchanges in a year, or at any time the Fund
determines the actions of the shareholder are detrimental
to Fund performance and shareholders. The Fund will
determine whether to do so based on a consideration of
both the number of exchanges any particular shareholder,
or group of shareholders, has requested and the time
period over which those exchange requests have been made,
together with the level of expense to the Fund which will
result from effecting additional exchange requests. The
Fund is intended to be a long-term investment vehicle and
is not designed to provide investors the means of
speculation on short-term market movements.
5) Notice of all modifications or terminations that would
affect all Fund shareholders will be given at least 60
days prior to the effective date of the change in policy,
except in unusual circumstances (such as when redemptions
of the exchanged shares are suspended under Section 22(e)
of the Investment Company Act of 1940, or when sales of
the fund into which you are exchanging are temporarily
suspended).
Distribution Expenses. ^ The Fund is authorized under a Plan and Agreement
of Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Plan") to use its assets to finance certain activities relating to the
distribution of its shares to investors. Under the Plan, monthly payments may be
made by ^ the Fund to IDI to permit IDI, at its discretion, to engage in certain
activities, and provide certain services approved by the board of directors of
the Company in connection with the distribution of ^ the Fund's shares to
investors. These activities and services may include the payment of compensation
(including incentive compensation and/or continuing compensation based on the
amount of customer assets maintained in ^ the Fund) to securities dealers and
other financial institutions and organizations, which may include INVESCO- and
IDI-affiliated companies, to obtain various distribution-related and/or
administrative services for the ^ Fund. Such services may include, among other
things, processing new shareholder account applications, preparing and
transmitting to the Fund's Transfer Agent computer processable tapes of all
transactions by customers, and serving as the primary source of information to
customers in answering questions concerning the Fund and their transactions
with the Fund.
<PAGE>
In addition, other permissible activities and services include
advertising, preparation, printing and distribution of sales literature,
printing and distribution of prospectuses to prospective investors and such
other services and promotional activities for the ^ Fund as may from time to
time be agreed upon by the 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 INVESCO, IDI or their affiliates or by third parties.
Under the Plan, the ^ Fund's payments to IDI are limited to an amount
computed at an annual rate of 0.25% of ^ the Fund's average net assets. IDI is
not entitled to payment for overhead expenses under the Plan, but may be paid
for all or a portion of the compensation paid for salaries and other employee
benefits for the personnel of INVESCO or IDI whose primary responsibilities
involve marketing shares of the INVESCO mutual funds, including the ^ Fund.
Payment amounts by ^ the Fund under the Plan, for any month, may be made to
compensate IDI for permissible activities engaged in and services provided by
IDI during the rolling 12-month period in which that month falls. Therefore, any
obligations incurred by IDI in excess of the limitations described above will
not be paid by the ^ Fund under the Plan, and will be borne by IDI. In addition,
IDI and its affiliates may from time to time make additional payments from their
revenues to securities dealers, financial advisers and other financial
institutions that provide distribution-related and/or administrative services
for the ^ Fund. No further payments will be made by the ^ Fund under the Plan in
the event of the Plan's termination. Payments made by the ^ Fund may not be used
to finance directly the distribution of shares of any other fund of the Company
or other mutual fund advised by INVESCO and distributed by IDI. However,
payments received by IDI which are not used to finance the distribution of
shares of the ^ Fund become part of IDI's revenues and may be used by IDI for
activities that promote distribution of any of the mutual funds advised by
INVESCO. Subject to review by the Company's directors, payments made by the ^
Fund under the Plan for compensation of marketing personnel, as noted above, are
based on an allocation formula designed to ensure that all such payments are
appropriate. IDI will bear any distribution-and service-related expenses in
excess of the amounts which are compensated pursuant to the Plan. The Plan also
authorizes any financing of distribution which may result from INVESCO's or
IDI's use of fees received from the ^ Fund for services rendered by INVESCO,
providing that such fees are legitimate and not excessive. For more information
see "How Shares Can Be Purchased -Distribution Plan" in the Statement of
Additional Information.
FUND SERVICES
- -------------
Shareholder Accounts. INVESCO will maintain a separate share
account ^ that reflects your current holdings. ^ The Fund no longer
issues share certificates.
<PAGE>
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 or ex-distribution date, unless you choose to have dividends
and/or other distributions automatically reinvested in another INVESCO fund or
paid by check (minimum of $10.00).
Telephone Transactions. All shareholders may exchange and redeem shares of
the ^ Fund by telephone, unless they expressly decline these privileges. By
signing the new account Application, a Telephone Transaction Authorization Form,
or otherwise using these privileges, the investor has agreed that, if ^ the Fund
has followed reasonable procedures, such as recording telephone instructions and
sending written transaction confirmations, it will not be liable for following
telephone instructions that it believes to be genuine. As a result of this
policy, the investor may bear the risk of any loss due to unauthorized or
fraudulent instructions.
HOW TO SELL SHARES
- ------------------
The following chart shows several convenient ways to redeem your Fund
shares. Shares of ^ the Fund may be redeemed at any time at ^ its current NAV
next determined after a request in proper form is received at the Fund's office.
The NAV at the time of the redemption may be more or less than the price you
paid to purchase your shares, depending primarily upon the Fund's investment
performance.
Please specify from which ^ fund you wish to redeem shares. Shareholders
have a separate account for each fund in which they invest.
HOW TO SELL SHARES
================================================================================
METHOD MINIMUM REDEMPTION PLEASE REMEMBER
================================================================================
BY TELEPHONE $250 (or, if less, These telephone
Call us toll-free full liquidation of redemption
at 1-800-525-8085. the account) for a privileges may be
redemption check; modified or
$1,000 for a wire terminated in the
to bank of record. future at the
The maximum amount discretion of
which may be INVESCO.
redeemed by
telephone is
generally $25,000.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
IN WRITING Any amount. The
Mail your request redemption request
to INVESCO Funds must be signed by
Group, Inc., P.O. all registered
Box 173706, owners of the
Denver, CO account. Payment
80217-3706. You may will be mailed to
also send your your address of
request by record, or to a
overnight courier pre-designated
to 7800 E. Union bank.^
Ave., Denver, CO
80237.
- --------------------------------------------------------------------------------
BY EXCHANGE $1,000 to open a See "Exchange
Between ^ the Fund new account; $50 Policy," page ^ 26.
and another of the for written
INVESCO funds. Call requests to
1-800-525-8085 for purchase additional
prospectuses of shares for an
other INVESCO existing account.
funds. You may also (The exchange
establish an minimum is $250 for
automatic monthly exchanges requested
exchange service by telephone.)
between two INVESCO
funds; call INVESCO
for further details
and the correct
form.
- --------------------------------------------------------------------------------
PERIODIC WITHDRAWAL $100 per payment, You must have at
PLAN on a monthly or least $10,000 total
You may call us to quarterly basis. invested with the
request the The redemption INVESCO funds, with
appropriate form check may be made at least $5,000 of
and more payable to any that total invested
information at party you in the fund from
1-800-525-8085. designate. which withdrawals
will be made.
- --------------------------------------------------------------------------------
PAYMENT TO THIRD Any amount. All registered
PARTY account owners must
Mail your request sign the request,
to INVESCO Funds with a signature
Group, Inc., P.O. guarantee from an
Box 173706, eligible guarantor
Denver, CO financial
80217-3706. institution, such
as a commercial
bank or recognized
national or
regional securities
firm.
===================================================+++==========================
While the ^ Fund will attempt to process telephone redemptions promptly,
there may be times -- particularly in periods of severe economic or market
disruption -- when you may experience delays in redeeming shares by phone.
<PAGE>
Payments of redemption proceeds will be mailed within seven days following
receipt of the redemption request in proper form. However, payment may be
postponed under unusual circumstances --for instance, if normal trading is not
taking place on the New York Stock Exchange or during an emergency as defined by
the Securities and Exchange Commission. If your shares were purchased by a check
which has not yet cleared, payment will be made promptly upon clearance of the
purchase check (which will take up to 15 days).
If you participate in EasiVest, the ^ Fund's automatic monthly investment
program, and redeem all of the shares in your account, we will terminate any
further EasiVest purchases unless you instruct us otherwise.
Because of the high relative costs of handling small accounts, should the
value of any shareholder's account fall below $250 as a result of shareholder
action, the ^ Fund reserves the right to involuntarily redeem all shares in such
account, in which case the account would be liquidated and the proceeds
forwarded to the shareholder. Prior to any such redemption, a shareholder will
be notified and given 60 days to increase the value of the account to $250 or
more.
TAXES, DIVIDENDS AND OTHER DISTRIBUTIONS
- ----------------------------------------
Taxes. ^ The Fund intends to distribute to shareholders substantially all
of its net investment income and net capital gains, if any. Distribution of
substantially all net investment income to shareholders allows the ^ Fund to
maintain ^ its tax status as a regulated investment company. The ^ Fund does not
expect to pay any federal income or excise taxes because of ^ its distribution
policy and tax status as a regulated investment company.
Exempt-interest dividends paid by ^ the Fund are normally free of federal
income tax to shareholders, although they are subject to state and local income
taxes. Shareholders must include all other distributions, including any
dividends earned on ^ the Fund's short-term taxable investments, as taxable
income for federal, state and local income tax purposes unless they are exempt
from income taxes. These 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 which 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. Long-term gains realized between May 7, 1997 and July 28,
1997 on the sale of securities held for more than 12 months are taxable at the
maximum rate of 20%. Long-term gains realized between July 29, 1997 and December
31, 1997 on the sale of securities held for more than one year but not for more
than 18 months are taxable at the maximum rate of 28%. Long-term gains realized
between July 29, 1997 and December 31, 1997 on the sale of securities held for
more than 18 months are taxable at a maximum rate of 20%. Beginning January 1,
<PAGE>
1998, the IRS Restructuring and Reform Act of 1998, signed into law on July 24,
1998, lowers the holding period for long-term capital gains entitled to the 20%
capital gains tax rate from 18 months to 12 months. Accordingly, all long-term
gains realized after December 31, 1997 on the sale of securities held for more
than 12 months will be taxable at a maximum rate of 20%. Note that the rate of
capital gains tax is dependent on the shareholder's marginal tax rate and may be
lower than the above rates. 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 distributions
by ^ the Fund.
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 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.
Interest on certain "private activity bonds" issued after August 7, 1986,
is an item of tax preference for purposes of the alternative minimum tax. ^ The
Fund intends to limit, and has limited in the past, its investments in such
bonds to not more than 20% of its total assets. The portion of exempt-interest
dividends paid by ^ the Fund that is attributable to such bonds would be an item
of tax preference to shareholders.
At the end of each year, information regarding the tax status of
dividends, capital gain distributions and the portion, if any, of distributions
that is an item of tax preference is provided to shareholders.
Individuals and certain other non-corporate shareholders may be subject to
backup withholding of 31% on taxable dividends, capital gain distributions and
redemption proceeds. You can avoid backup withholding on your account(s) by
ensuring that we have a correct, certified tax identification number unless you
are subject to backup withholding for other reasons.
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 Capital Gain Distributions. ^ The Fund earns ordinary or net
investment income in the form of interest on its investments. Dividends paid by
^ the Fund will be based solely on the income earned by it. ^ The Fund's policy
is to distribute substantially all of this income, less 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, ^ the Fund realizes capital gains and losses when it sells
securities or engages in futures transactions for more or less than it paid. If
total gains on sales exceed total losses (including losses carried forward from
previous years), ^ the Fund has a net realized capital gain. Net realized
capital gains, if any, are distributed to shareholders at least annually,
usually in December. Capital gain distributions are automatically reinvested
in additional shares of the Fund at the net asset value on the ex-distribution
date unless otherwise requested.
<PAGE>
Dividends and other distributions are paid to shareholders who hold 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 by the
amount of the distribution on the ex-dividend or ex-distribution date. If a
shareholder purchases shares immediately prior to such date, 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 distribution, some
or all of which may be taxable.
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 Fund. The ^ Company will assist shareholders in
communicating with other shareholders as required by the Investment Company Act
of 1940.
<PAGE>
INVESCO ^ BOND FUNDS, INC.
INVESCO Tax-Free ^ Bond Fund
^ A no-load mutual ^ fund seeking as
high a level of current income
exempt from federal taxes as is
consistent with the preservation of
capital.
PROSPECTUS
^ August 13, 1999
INVESCO FUNDS
INVESCO Distributors, Inc.(SM)
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
3003 East Third Avenue;
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
^ August 13, 1999
INVESCO ^ BOND FUNDS, INC.
INVESCO Tax-Free ^ Bond Fund
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 ^ Bond Funds, Inc. (formerly, INVESCO Income Funds,
Inc.) (the "Company"), is a no-load, open-end, diversified
management investment company, currently consisting of ^ four
separate portfolios of investments^. Additional funds may be added
in the future.
The investment objective of ^ the INVESCO Tax-Free Bond Fund (formerly,
INVESCO Tax-Free Long-Term Bond Fund) (the "Fund") is to seek as high a level of
current income exempt from federal income taxation as is consistent with the
preservation of capital. The ^ Fund will pursue this objective by investing in a
diversified portfolio of obligations issued by states, territories and
possessions of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities, the interest on which is
exempt from federal taxes ("municipal bonds"). Such obligations may include any
combination of general obligation bonds, revenue bonds, and industrial
development bonds.
A Prospectus for the ^ Fund dated ^ August 13, 1999, which provides the
basic information you should know before investing in ^ the Fund, may be
obtained without charge from INVESCO Distributors, Inc., Post Office Box 173706,
Denver, Colorado 80217-3706. This Statement of Additional Information is not a
prospectus, but contains information in addition to and more detailed than that
set forth in the Prospectus. It is intended to provide 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
INVESTMENT POLICIES AND RESTRICTIONS........................................31
THE ^ FUND AND ^ ITS MANAGEMENT.............................................39
HOW SHARES CAN BE PURCHASED.................................................50
HOW SHARES ARE VALUED.......................................................53
FUND PERFORMANCE............................................................54
SERVICES PROVIDED BY THE ^ FUND.............................................57
HOW TO REDEEM SHARES........................................................57
DIVIDENDS, OTHER DISTRIBUTIONS, AND TAXES...................................58
INVESTMENT PRACTICES........................................................59
ADDITIONAL INFORMATION......................................................62
APPENDIX A..................................................................65
APPENDIX B..................................................................69
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
- ------------------------------------
Municipal Obligations
- ---------------------
As discussed in the Prospectus in the section entitled "Investment
Objective And Strategy," the ^ Fund may purchase or sell a variety of tax-exempt
securities in seeking to achieve ^ its investment objective without regard to
how long the securities have been held in ^ the Fund's portfolio. Although
short-term trading increases portfolio turnover, execution costs associated with
the purchase or sale of municipal bonds are substantially less than the costs
incurred in transactions involving equity securities of equivalent dollar
values. Gains, if any, realized by ^ the Fund as a result of sales of municipal
bonds or other securities and futures or other transactions are subject to
federal income taxes.
Securities in which the ^ Fund invests include the following:
Municipal Bonds. Municipal bonds are debt obligations issued to obtain
funds for various public purposes, including the construction of a wide range of
public facilities such as airports, bridges, highways, housing, hospitals, mass
transportation, schools, streets and water and sewer works. Other public
purposes for which municipal bonds may be issued include refunding outstanding
obligations, obtaining funds for general operating expenses and obtaining funds
to loan to other public institutions and facilities. In addition, certain kinds
of industrial development bonds are issued by or on behalf of public authorities
to obtain funds to provide to privately operated housing facilities, sports
facilities, convention or trade show facilities, airport, mass transit, port or
parking facilities, air or water pollution control facilities and certain local
facilities for water supply, gas, electricity, sewage or solid waste disposal.
Such obligations are considered to be municipal bonds if the interest paid
thereon qualifies as exempt from federal income taxation. Other kinds of
industrial development bonds, the proceeds from which are used for the
construction, equipment, repair or improvement of privately operated industrial
or commercial facilities, may also be considered municipal bonds. Although the
current federal tax laws impose substantial limitations on the size of such
issues, the Fund will only invest in industrial development bonds, the interest
from which is exempt from federal income taxation.
There are two principal classifications of tax-exempt municipal bonds:
"general obligation" and "revenue" bonds. General obligation bonds are secured
by the issuer's pledge of its full faith, credit and unlimited taxing power for
the payment of principal and interest. Revenue bonds are payable only from the
revenues generated by a particular facility or class of facility, or in some
cases from the proceeds of a special excise tax or specific revenue source.
Industrial development obligations are a particular kind of municipal bond which
are issued by or on behalf of public authorities to obtain funds for various
local, privately operated facilities. Such obligations are, in most cases,
revenue bonds that generally are secured by a lease with a particular private
corporation. ^ The Fund's portfolio may consist of any combination of general
obligation and revenue bonds.
<PAGE>
From time to time, proposals to restrict or eliminate the federal income
tax exemption for interest on municipal bonds have been introduced before
Congress. Similar proposals may be introduced in the future. If such a proposal
were enacted, the availability of municipal bonds for investment by ^ the Fund
might be adversely affected. In such event, the ^ Fund would reevaluate ^ its
investment objective and policies and submit possible changes in the structure
of the ^ Fund for the consideration of shareholders.
As discussed in the Prospectus, the municipal securities in which the ^
Fund invests are generally subject to two kinds of risk, credit risk and market
risk. The ratings given a municipal security by Moody's Investors Service, Inc.
("Moody's") and Standard & Poor's, a division of The McGraw-Hill Companies, Inc.
("S&P") for the ^ Fund provide a generally useful guide as to such credit risk.
The lower the rating given a municipal security by such rating service, the
greater the credit risk such rating service perceives to exist with respect to
such security.
Increasing the amount of ^ the Fund's assets invested in unrated or lower
grade (Ba or less by Moody's, BB or less by S&P) municipal securities, while
intended to increase the yield produced by the Fund's municipal securities, will
also increase the credit risk to which those municipal securities are subject.
Lower rated municipal securities and non-rated securities of comparable quality
tend to be subject to wider fluctuations in yields and market values than higher
rated securities and may have speculative characteristics. In addition, a
significant economic downturn or major increase in interest rates may well
result in issuers of lower rated municipal securities experiencing increased
financial stress which would adversely affect their ability to service their
principal and interest obligations and to obtain additional financing.
Municipal Notes. Municipal Notes are debt obligations issued by
municipalities which normally have a maturity at the time of issuance from six
months to three years. The principal classifications of municipal notes are tax
anticipation notes, bond anticipation notes, and revenue anticipation notes.
Notes sold in anticipation of collection of taxes, a bond sale or receipt of
other revenues are normally obligations of the issuing municipality or agency.
While the ^ Fund's investment adviser attempts to limit purchases of lower
rated municipal securities to securities having an established retail secondary
market, the market for such securities may not be as liquid as the market for
higher rated municipal securities.
Other Permissible Investments
- -----------------------------
Temporary Investments. As discussed in the section of the ^ Fund's
Prospectus entitled "Investment Objective And Policies," the ^ Fund may from
time to time invest a portion of ^ its assets on a temporary basis in "temporary
investments," the income from which may be subject to federal income tax. Any
net interest income on taxable temporary investments will be taxable to
shareholders as ordinary income when distributed.
<PAGE>
^
Repurchase Agreements. As discussed in the ^ Fund's Prospectus, ^ the Fund
may enter into repurchase agreements with respect to debt instruments eligible
for investment by the ^ Fund with member banks of the Federal Reserve System,
registered broker-dealers, and registered government securities dealers, which
are deemed creditworthy under standards established by the Company's board of
directors. A repurchase agreement is an agreement under which ^ the Fund
acquires a debt instrument (generally, a security issued by the U.S. government
or an agency thereof, a banker's acceptance or 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 Fund and is unrelated to the interest rate on the underlying instrument.
In these transactions, the securities acquired by ^ the Fund (including accrued
interest earned thereon) must have a total value at least equal to the value of
the repurchase agreement, and are held as collateral by the ^ Fund's custodian
bank until the repurchase agreement is completed. In addition, the Company's
board of directors monitors the ^ Fund's repurchase agreement transactions and
has established guidelines and standards for review by the investment adviser of
the creditworthiness of any bank, broker or dealer party to a repurchase
agreement with ^ the Fund.
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, ^ the Fund may experience costs and delays in
realizing on the collateral. Finally, it is possible that ^ the Fund may not be
able to substantiate its interest in the underlying security and may be deemed
an unsecured creditor of the other party to the agreement. While INVESCO
acknowledges these risks, it is expected that they can be controlled through
careful monitoring procedures.
Securities Lending. ^ The Fund also may lend portfolio securities ^. This
practice permits ^ the Fund to earn income, which, in turn, can be invested in
additional securities to pursue the Fund's investment objective. Loans of
securities by ^ the Fund will be collateralized by cash, letters of credit, or
securities issued or guaranteed by the U.S. government or its agencies equal to
at least 100% of the current market value of the loaned securities, determined
on a daily basis. Lending securities involves certain risks, the most
significant of which is the risk that a borrower may fail to return a portfolio
security. The ^ Fund monitors the creditworthiness of borrowers in order to
minimize such risks. ^ The 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. While voting rights may pass with the loaned
securities, if a material event (e.g., proposed merger, sale of assets, or
liquidation) is to occur affecting an investment on loan, the loan must be
called and the securities voted. Loans of securities made by ^ the Fund will
comply with all other applicable regulatory requirements.
<PAGE>
When-Issued Purchases. As discussed in the section of the ^ Fund's
Prospectus entitled "Investment Policies And Risks," municipal obligations may
at times be acquired on a when-issued basis. Securities purchased on a
when-issued basis and the securities held in ^ the Fund's portfolio are subject
to changes in value based on the public's perception of the creditworthiness of
the issuers and changes in the level of interest rates (generally resulting in
appreciation when interest rates decline and depreciation when interest rates
rise). The ^ Fund will maintain a segregated account with their custodian bank
consisting of cash, any liquid securities or a combination thereof marked to
market daily equal in value to the amount of such commitments. ^ The Fund will
only make commitments to purchase securities with the intention of actually
acquiring the securities; however, ^ the Fund may sell these commitments before
the settlement date if to do so is deemed advisable as a matter of investment
strategy.
To the extent ^ the Fund remains substantially invested in debt securities
at the same time that it has committed to purchase securities on a when-issued
basis, which it would normally expect to do, there will be greater fluctuations
in the Fund's net asset value than if it set aside cash to pay for when-issued
securities. In addition, there will be a greater potential for the realization
of capital gains, which are not exempt from federal income taxation, and of
capital losses. When the payment of when-issued securities must be met, ^ the
Fund will provide payment from available cash flow, sale of portfolio securities
(possibly at a gain or loss) or, although it would not normally expect to do so,
from sale of the when-issued securities themselves (which may at the time of
sale have a value greater or less than ^ the Fund's payment obligation). The
risk of fluctuation in value of the short-term securities in the segregated
account is different from the risk of fluctuation in the value of the ^ Fund's
portfolio securities. ^ The Fund may enter into commitments to purchase
securities on a when-issued basis when deemed advisable to further ^ the Fund's
pursuit of its respective investment objective and policies. Such commitments
will not ordinarily involve a substantial portion of ^ the Fund's assets,
defined as available cash reserves of ^ the Fund plus proceeds of unsettled
regular-way sales of Fund securities.
Futures Contracts and Options on Futures. As described in the ^ Fund's
Prospectus, the ^ Fund may enter into futures contracts and may purchase and
sell ("write") options to buy or sell futures contracts. The ^ Fund will comply
with and adhere to all limitations in the manner and extent to which they effect
transactions in futures and options on such futures currently imposed by the
rules and policy guidelines of the Commodity Futures Trading Commission as
conditions for exemption of a mutual fund, or the investment advisers thereto,
from registration as a commodity pool operator. ^ The Fund will not, as to any
positions, whether long, short or a combination thereof, enter into futures and
<PAGE>
options thereon for which the aggregate initial margins and premiums exceed 5%
of the fair market value of its assets after taking into account unrealized
profits and losses on options it has entered into. In the case of an option that
is "in-the-money," as defined in the Commodity Exchange Act (the "CEA"), the
in-the-money amount may be excluded in computing such 5%. (In general a call
option on a future is "in-the-money" if the value of the future exceeds the
exercise ("strike") price of the call; a put option on a future is
"in-the-money" if the value of the future which is the subject of the put is
exceeded by the strike price of the put.) The ^ Fund may use futures and options
thereon solely for bona fide hedging or for other non-speculative purposes
within the meaning and intent of the applicable provisions of the CEA.
Unlike when ^ the Fund purchases or sells a security, no price is paid or
received by ^ the Fund upon the purchase or sale of a futures contract. Instead,
the Fund will be required to deposit in a segregated asset account with a
commodity broker an amount of cash or qualifying securities (currently U.S.
Treasury bills) currently in a minimum amount of $15,000. This is called
"initial margin." Such initial margin is in the nature of a performance bond or
good faith deposit on the contract. However, since losses on open contracts are
required to be reflected in cash in the form of variation margin payments, ^ the
Fund may be required to make additional payments during the term of the
contracts to its broker. Such payments would be required, for example, where,
during the term of an interest rate futures contract purchased by the Fund,
there was a general increase in interest rates, thereby making the Fund's
portfolio securities less valuable. In all instances involving the purchase of
financial futures contracts by ^ the Fund, an amount of cash together with such
other securities as permitted by applicable regulatory authorities to be
utilized for such purpose, at least equal to the market value of the futures
contracts, will be deposited in a segregated account with the Fund's custodian
to collateralize the position. At any time prior to the expiration of a futures
contract, the Fund may elect to close its position by taking an opposite
position which will operate to terminate the Fund's position in the futures
contract. For a more complete discussion of the risks involved in futures and
options on futures and other securities, refer to Appendix B ("Description of
Futures Contracts and Options").
Where futures are purchased to hedge against a possible increase in the
price of a security before ^ the Fund is able in an orderly fashion to invest in
the security, it is possible that the market may decline instead. If the Fund,
as a result, concluded not to make the planned investment at that time because
of concern as to possible further market decline or for other reasons, the Fund
would realize a loss on the futures contract that is not offset by a reduction
in the price of securities purchased.
In addition to the possibility that there may be an imperfect correlation
or no correlation at all between movements in the futures contracts and the
portion of the portfolio being hedged, the price of futures may not correlate
perfectly with movements in the prices due to certain market distortions. All
participants in the futures market are subject to margin deposit and maintenance
<PAGE>
requirements. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions which
could distort the normal relationship between underlying instruments and the
value of the futures contract. Moreover, the deposit requirements in the futures
market are less onerous than margin requirements in the securities market and
may therefore cause increased participation by speculators in the futures
market. Such increased participation may also cause temporary price distortions.
Due to the possibility of price distortion in the futures market and because of
the imperfect correlation between movements in the underlying instrument and
movements in the prices of futures contracts, the value of futures contracts as
a hedging device may be reduced.
In addition, if ^ the Fund has insufficient available cash, it may at
times have to sell securities to meet variation margin requirements. Such sales
may have to be effected at a time when it may be disadvantageous to do so.
Options on Futures Contracts. ^ The Fund may buy and write options on
futures contracts for hedging purposes; options are also included in the types
of instruments sometimes known as derivatives. The purchase of a call option on
a futures contract is similar in some respects to the purchase of a call option
on an individual security. Depending on the pricing of the option compared to
either the price of the futures contract upon which it is based or the price of
the underlying instrument, ownership of the option may or may not be less risky
than ownership of the futures contract or the underlying instrument. As with the
purchase of futures contracts, when ^ the Fund is not fully invested it may buy
a call option on a futures contract to hedge against a market advance.
The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the security which is deliverable under, or of
the index comprising, the futures contract. If the futures price at the
expiration of the option is below the exercise price, ^ the Fund will retain the
full amount of the option premium which provides a partial hedge against any
decline that may have occurred in the Fund's portfolio holdings. The writing of
a put option on a futures contract constitutes a partial hedge against
increasing prices of the security which is deliverable under, or of the index
comprising, the futures contract. If the futures price at expiration of the
option is higher than the exercise price, ^ the Fund will retain the full amount
of the option premium which provides a partial hedge against any increase in the
price of securities which the Fund is considering buying. If a call or put
option which ^ the Fund has written is exercised, the Fund will incur a loss
which will be reduced by the amount of the premium it received. Depending on the
degree of correlation between change in the value of its portfolio securities
and changes in the value of the futures positions, ^ the Fund's losses from
existing options on futures may to some extent be reduced or increased by
changes in the value of portfolio securities.
<PAGE>
The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities. For
example, ^ the Fund may buy a put option on a futures contract to hedge its
portfolio against the risk of falling prices.
The amount of risk ^ the Fund assumes when it buys an option on a futures
contract is the premium paid for the option plus related transaction costs. In
addition to the correlation risks discussed above, the purchase of an option
also entails the risk that changes in the value of the underlying futures
contract will not be reflected fully in the value of the options bought.
Investment Restrictions. As described in the section of the ^ Fund's
Prospectus entitled "Investment Policies And Risks," the ^ Fund operates under
certain investment restrictions. For purposes of the following limitations, all
percentage limitations apply immediately after a purchase or initial investment.
Any subsequent change in a particular percentage resulting from fluctuations in
value does not require elimination of any security from ^ the Fund.
The following restrictions are fundamental and may not be changed with
respect to the ^ Fund without the prior approval of the holders of a majority,
as defined in the 1940 Act, of the outstanding voting securities of the Fund.
Under ^ the Fund's fundamental investment restrictions, the Fund may not:
^
(1) issue preference shares or create any funded debt;
(2) sell short or buy on margin except as discussed in restriction (7);
(3) mortgage, pledge or hypothecate its 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 the Fund's net assets. The Fund will not purchase
additional securities while any such borrowings exist;
(4) invest in the securities of any other investment company except for
a purchase or acquisition in accordance with a plan of
reorganization, merger or consolidation;
(5) purchase securities (except obligations issued or guaranteed by the
U.S. Government) if the purchase would cause the Fund, at the time,
to have 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 securities of any one issuer;
(6) make loans to any person, except through the purchase of debt
securities in accordance with the Fund's investment policies, or the
lending of portfolio securities to broker-dealers or other
institutional investors, or the entering into repurchase agreements
with member banks of the Federal Reserve System, registered
broker-dealers and registered government securities dealers. The
aggregate value of all portfolio securities loaned may not exceed
<PAGE>
33-1/3% of the Fund's net assets (taken at current value). No more
than 10% of the Fund's net assets may be invested in repurchase
agreements maturing in more than seven days;
(7) buy or sell commodities or commodity contracts, oil, gas, or other
mineral interest or exploration programs,or real estate or interests
therein. However, the Fund may purchase municipal bonds or other
permitted securities secured by real estate or which may represent
indirect interests therein and may buy and sell options and futures
contracts for the purpose of hedging the value of its securities
portfolio, provided that the Fund will not enter into options or
futures contracts for which the aggregate initial margins exceed 5%
of the fair market value of the Fund's assets;
(8) invest in any issuer for the purpose of exercising control or
management;
(9) purchase securities which have legal or contractual restrictions on
resale or purchase securities for which, at the time of purchase,
there is no readily available market;
(10) engage in the underwriting of any securities of other issuers except
to the extent that the purchase of municipal bonds or other
permitted investments directly from the issuer thereof and the
subsequent disposition of such investments may be deemed to be an
underwriting;
(11) purchase or retain securities of any issuer in which any officer or
director of the Fund or its investment adviser beneficially owns
more than 1/2 of 1% of the outstanding securities, or in which all
of the officers and directors of the Company and its investment
adviser, as a group, beneficially own more than 5% of such
securities;
(12) purchase equity securities or securities convertible into equity
securities;
(13) participate on a joint or a joint and several basis in any
securities trading account or purchase warrants;
(14) invest more than 25% of its total assets in any particular industry
or industries,except municipal securities, or obligations issued or
guaranteed by the U.S. government,its agencies or instrumentalities.
(Industrial development bonds are grouped into an "industry" where
the payment of principal and interest is the ultimate
responsibility of companies within the same industry.)
With the exception of restriction (7) above, the ^ Fund has no fundamental
policies as to the use of futures contracts.
In applying the industry concentration investment restrictions (no. 14 ^),
the Fund uses a modified S&P industry code classification schema which uses
various sources to classify securities.
<PAGE>
THE ^ FUND AND ^ ITS MANAGEMENT
- -------------------------------
The Company. The Company was incorporated under the laws of ^ Colorado on
August 20, 1976 and was reorganized as a Maryland corporation on April 2, 1993.
On ^ October 29, 1998, the name of the Company was changed to INVESCO Bond
Funds, Inc. On August 13, 1999, the Company assumed all of the assets and
liabilities of ^ INVESCO Tax-Free Bond Fund (formerly, INVESCO Tax-Free
Long-Term Bond Fund ^), a series of INVESCO Tax-Free Income Funds, Inc.
The Company is an open-end, diversified, no-load management investment
company curently consisting of four portfolios of investments: INVESCO High
Yield Bond Fund, INVESCO Select Income Fund, INVESCO U.S. Government Securities
Fund and INVESCO Tax-Free Bond Fund. Additional funds may be offered in the
future.
The Investment Adviser. INVESCO Funds Group, Inc., a Delaware corporation
("INVESCO"), is employed as the Company's investment adviser. INVESCO was
established in 1932 and also serves as an investment adviser to INVESCO ^ Bond
Funds, Inc. (formerly, INVESCO Income Funds, Inc.), INVESCO Combination Stock &
Bond Funds, Inc. (formerly, INVESCO Flexible Funds, Inc.), INVESCO ^
International Funds, Inc., INVESCO Sector Funds, Inc. (formerly, INVESCO
Strategic Portfolios, Inc.), INVESCO Specialty Funds, Inc., INVESCO Stock Funds,
Inc. (formerly, INVESCO Equity Funds, Inc.), INVESCO ^ Treasurer's Series Funds,
Inc. (formerly, INVESCO ^ Treasurer's Series Trust), and INVESCO Variable
Investment Funds, Inc.
Prior to February 3, 1998, Institutional Trust Company, doing business as
INVESCO Trust Company ("ITC"), provided sub-advisory services to the ^ Fund.
Effective February 3, 1998, ITC no longer provided sub-advisory services to the
^ Fund. INVESCO provides such day-to-day portfolio management services as the
investment adviser to the ^ Fund. This change did not change the basis upon
which investment advice is provided to the ^ Fund, the cost of those services to
the ^ Fund or the persons actually performing the investment advisory and other
services previously provided by ITC.
The Distributor. Effective September 30, 1997, INVESCO Distributors, Inc.
("IDI") became the ^ Fund's distributor. IDI, established in 1997, is a
registered broker-dealer that acts as distributor for all retail mutual funds
advised by INVESCO. Prior to September 30, 1997, INVESCO served as the ^ Fund's
distributor.
INVESCO and IDI are indirect, wholly-owned subsidiaries of AMVESCAP PLC, a
publicly-traded holding company that, through its subsidiaries, engages in the
business of investment management on an international basis. INVESCO PLC changed
its name to AMVESCO PLC on March 3, 1997 and to AMVESCAP PLC on May 8, 1997, as
part of a merger between a direct subsidiary of INVESCO PLC and A I M Management
Group, Inc. that created one of the largest investment management businesses in
the world with approximately ^ $281 billion in assets under management as of ^
March 31, 1999. INVESCO was established in 1932 and as of ^ May 31, 1999,
managed ^ 10 mutual funds, consisting of ^ 50 separate portfolios, on behalf of
over ^ 916,165 shareholders.
<PAGE>
AMVESCAP PLC's North American subsidiaries include the following:
--INVESCO Retirement and Benefit Services, Inc. ("IRBS") of
Atlanta, Georgia, develops and provides domestic and international defined
contribution retirement plan services to plan sponsors, institutional retirement
plan sponsors, institutional plan providers and foreign governments.
--INVESCO Retirement Plan Services ("IRPS") of Atlanta, Georgia, a
division of IRBS, provides recordkeeping and investment selection services to
defined contribution plan sponsors of plans with between $2 million and $200
million in assets. Additionally, IRPS provides investment consulting services to
institutions seeking to provide retirement plan products and services.
--ITC of Denver, Colorado, a division of IRBS, provides retirement account
custodian and/or trust services for individual retirement accounts ("IRAs") and
other retirement plan accounts. These include services such as recordkeeping,
tax reporting and compliance. ITC acts as trustee or custodian to these plans.
ITC accepts contributions and provides, through INVESCO, complete transfer
agency functions: correspondence, sub-accounting, telephone communications and
processing of distributions.
--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 one registered investment company.
--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.
--INVESCO (NY), Inc., New York, is an investment adviser for separately
managed accounts, such as corporate and municipal pension plans, Taft-Hartley
Plans, insurance companies, charitable institutions and private individuals.
INVESCO NY also offers the opportunity for its clients to invest both directly
and indirectly through partnerships in primarily private investments or
privately negotiated transactions. INVESCO NY further serves as investment
adviser to several closed-end investment companies, and as subadviser with
respect to certain commingled employee benefit trusts. INVESCO NY specializes in
the fundamental research investment approach, with the help of quantitative
tools.
<PAGE>
--A I M Advisors, Inc. of Houston, Texas provides investment advisory and
administrative services for retail and institutional mutual funds.
--A I M Capital Management, Inc. of Houston, Texas provides investment
advisory services to individuals, corporations, pension plans and other private
investment advisory accounts and also serves as a sub-adviser to certain retail
and institutional mutual funds, one Canadian mutual fund and one portfolio of an
open-end registered investment company that is offered to separate accounts of
insurance companies that issue variable annuity and/or variable life products.
--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 ^ Fund's Prospectus, INVESCO permits investment and
other personnel to purchase and sell securities for their own accounts in
accordance with a compliance policy governing personal investing by directors,
officers and employees of INVESCO, and its North American affiliates. The policy
requires officers, inside directors, investment and other personnel of INVESCO
and its North American affiliates to pre-clear all transactions in securities
not otherwise exempt under the policy. Requests for trading authority will be
denied when, among other reasons, the proposed personal transaction would be
contrary to the provisions of the policy or would be deemed to adversely affect
any transaction then known to be under consideration for or to have been
effected on behalf of any client account, including the ^ Fund.
In addition to the pre-clearance requirement described above, the policy
subjects officers, inside directors, investment and other personnel of INVESCO
and its North American affiliates to various trading restrictions and reporting
obligations. All reportable transactions are reviewed for compliance with the
policy. The provisions of this policy are administered by and subject to
exceptions authorized by INVESCO.
Investment Advisory Agreement. INVESCO serves as investment adviser to ^
the ^ Fund 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 INVESCO, at a meeting called for such purpose.
Shareholders of ^ the ^ Fund approved the Agreement on January 31, 1997, for an
initial term expiring February 28, 1999. On May 13, 1998, this period was
extended by the Company's board of directors to May 15, ^ 2000. Pursuant to
shareholder authorization, the Agreement was approved with respect to the Fund
on August 13, 1999. The Agreement may be continued from year to year with
respect to ^ the 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, as defined in the 1940 Act, of the outstanding shares of
the ^ Fund. Any such continuance also must be approved by a
<PAGE>
majority of the Company's directors who are not parties to the Agreement or
interested persons (as defined in the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such continuance. The
Agreement may be terminated at any time without penalty by either party^ upon
sixty (60) days' written notice and terminates automatically in the event of an
assignment to the extent required by the 1940 Act and the Rules thereunder.
The Agreement provides that INVESCO shall manage the investment portfolios
of the ^ Fund in conformity with ^ the Fund's investment policies (either
directly or by delegation to a sub-adviser which may be a company affiliated
with INVESCO). Further, INVESCO shall perform all administrative, internal
accounting (including computation of net asset value), clerical, statistical,
secretarial and all other services necessary or incidental to the administration
of the affairs of the ^ Fund excluding, however, those services that are the
subject of separate agreement between the Company and INVESCO or any affiliate
thereof, including the distribution and sale of ^ the Fund's shares and
provision of transfer agency, dividend disbursing agency, and registrar
services, and services furnished under an Administrative Services Agreement with
INVESCO discussed below. Services provided under the Agreement include, but are
not limited to: supplying the Company with officers, clerical staff and other
employees, if any, who are necessary in connection with the ^ Fund's operations;
furnishing office space, facilities, equipment, and supplies; providing
personnel and facilities required to respond to inquiries related to shareholder
accounts; conducting periodic compliance reviews of the ^ Fund's operations;
preparation and review of required documents, reports and filings by INVESCO's
in-house legal and accounting staff (including the prospectus, statement of
additional information, proxy statements, shareholder reports, tax returns,
reports to the SEC, and other corporate documents of the Fund), except insofar
as the assistance of independent accountants or attorneys is necessary or
desirable; supplying basic telephone service and other utilities; and preparing
and maintaining certain of the books and records required to be prepared and
maintained by the ^ Fund under the Investment Company Act of 1940. Expenses not
assumed by INVESCO are borne by the ^ Fund.
As full compensation for its advisory services to the Company, INVESCO is
entitled to receive a monthly fee. The fee ^ is calculated daily at an 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 greater than $500 million. For the fiscal years ended
June 30, 1998, 1997 and 1996, the ^ Fund paid INVESCO advisory fees (prior to
the voluntary absorption of certain Fund expenses by INVESCO) of $1,195,773,
$1,275,473 and $1,389,027, respectively.
Administrative Services Agreement. INVESCO, either directly or through
affiliated companies, also provides certain administrative, sub-accounting, and
recordkeeping services to the ^ Fund pursuant to an Administrative Services
Agreement dated February 28, 1997 (the "Administrative Agreement"). The
Administrative Agreement was approved by the board of directors on November 6,
1996, by a vote cast in person by a majority of the directors of the Company,
<PAGE>
including a majority of the directors who are not "interested persons" of the
Company or INVESCO at a meeting called for such purpose. The Administrative
Agreement was for an initial term expiring February 28, 1998, and has been
continued by action of the board of directors until May 15, ^ 2000. The
Administrative Agreement may be continued from year to year as long as such
continuance is specifically approved by the board of directors of the Company,
including a majority of the directors who are not parties to the Administrative
Agreement or interested persons (as defined in the 1940 Act) of any such party,
cast in person at a meeting called for the purpose of voting on such
continuance. The Administrative Agreement may be terminated at any time without
penalty by INVESCO on sixty (60) days' written notice, or by the Company upon
thirty (30) days' written notice, and terminates automatically in the event of
an assignment unless the Company's board of directors approves such assignment.
The Administrative Agreement provides that INVESCO shall provide the
following services to the ^ Fund: (a) such sub-accounting and recordkeeping
services and functions as are reasonably necessary for the operation of the ^
Fund; and (b) such sub-accounting, recordkeeping, and administrative services
and functions which may be provided by affiliates of INVESCO, as are reasonably
necessary for the operation of ^ the Fund's shareholder accounts maintained by
certain retirement plans and employee benefit plans for the benefit of
participants in such plans.
As full compensation for services provided under the Administrative
Agreement, ^ the Fund pays a fee to INVESCO consisting of a base fee of $10,000
per year, plus an additional incremental fee computed daily and paid monthly at
an annual rate of 0.015% per year of the average net assets of ^ the Fund prior
to May 13, 1999 and 0.045% per year of the average net assets of the Fund
effective May 13, 1999. During the fiscal years ended June 30, 1998, 1997 and
1996, the ^ Fund paid INVESCO administrative services fees (prior to the
voluntary absorption of certain Fund expenses by INVESCO) in the amount of
$42,612, $44,786 and $47,882, respectively.
Transfer Agency Agreement. INVESCO also performs transfer agent, dividend
disbursing agent, and registrar services for the ^ Fund pursuant to a Transfer
Agency Agreement dated February 28, 1997, which was approved by the board of
directors of the 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, 1996, for an initial term expiring February 28, 1998
which has been extended by action of the board of directors until May 15, ^
2000. Thereafter, the Transfer Agency Agreement may be continued from year to
year as long as such continuance is specifically approved at least annually by
the board of directors of the Company, or by a vote of the holders of a majority
of the outstanding shares of ^ the ^ Fund. Any such continuance also must be
approved by a majority of the Company's directors who are not parties to the
Transfer Agency Agreement or interested persons (as defined by the 1940 Act) of
any such party, cast in person at a meeting called for the purpose of voting on
such continuance. The Transfer Agency Agreement may be terminated at any time
without penalty by either party upon sixty (60) days' written notice and
terminates automatically in the event of assignment.
<PAGE>
The Transfer Agency Agreement provides that ^ the Fund will pay to INVESCO
a 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 actual number of shareholder accounts or omnibus account
participants in existence at any time. ^ For the fiscal years ended June 30,
1998, 1997 and 1996 the ^ Fund paid INVESCO transfer agency fees (prior to the
voluntary absorption of certain Fund expenses by INVESCO) of $266,096, $317,800
and $324,030, respectively.
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 ^ the ^ Fund are carried out and that the ^ Fund is properly
administered. The officers of the Company, all of whom are officers and
employees of, and are paid by, INVESCO, are responsible for the day-to-day
administration of the Company and ^ the ^ Fund. The investment adviser for the
Company has the primary responsibility for making investment decisions on behalf
the Company. These investment decisions are reviewed by the investment committee
of INVESCO.
All of the officers and directors of the Company hold comparable positions
with INVESCO ^ Bond Funds, Inc. (formerly, INVESCO Income Funds, Inc.), INVESCO
Combination Stock & Bond Funds, Inc. (formerly, INVESCO Flexible Funds, Inc.),
INVESCO ^ International Funds, Inc., INVESCO Sector Funds, Inc. (formerly,
INVESCO Strategic Portfolios, Inc.), INVESCO Specialty Funds, Inc., INVESCO
Stock Funds, Inc. (formerly, INVESCO Equity Funds, Inc.), INVESCO ^ Treasurer's
Series Funds, Inc. (formerly, INVESCO ^ Treasurer's Series Trust), and INVESCO
Variable Investment Funds, Inc. ^ 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 Global Health Sciences Fund. Address: 1315
Peachtree Street, NE, Atlanta, Georgia. Born: May 11, 1935.
FRED A. DEERING,+# Vice Chairman of the Board. 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. Address: Security Life Center,
1290 Broadway, Denver, Colorado. Born: January 12, 1928.
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
<PAGE>
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: 34 Seawatch Drive, Savannah, 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.
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, Independent 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.
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. 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. Retired. 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 ISI
<PAGE>
Pharmaceuticals, Inc., Trustee of INVESCO Global Health Sciences Fund.
Address: 345 Poorman Road, Boulder, Colorado. Born: April 26, 1942.
MARK H. WILLIAMSON, +* President, CEO and Director. President, CEO and
Director of IDI; President, CEO and Director of INVESCO and President of INVESCO
Global Health Sciences Fund. Formerly, Chairman and CEO of NationsBanc Advisors,
Inc. (1995 to 1997) and Chairman of NationsBanc Investments, Inc. (1997 to
1998). Born: May 24, 1951.
GLEN A. PAYNE, Secretary. Senior Vice President (since 1995), General
Counsel (since 1989) and Secretary (since 1989) of INVESCO and Senior Vice
President, Secretary and General Counsel of IDI (since 1997); Vice President
(May 1989 to April 1995) of INVESCO; Senior Vice President (1995 to 1998),
Secretary (1989 to 1998) and General Counsel (1989 to 1998) of ITC. 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
(since 1988). Senior Vice President and Treasurer of IDI (since 1997). Senior
Vice President and Treasurer of ITC (1988 to 1998). Born: October 1, 1946.
WILLIAM J. GALVIN, JR., Assistant Secretary. Senior Vice President of
INVESCO (since 1995) and of IDI (since 1997) and formerly, Trust Officer of ITC
(1995 to 1998) and Vice President of INVESCO (1992 to 1995). 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.
PAMELA J. PIRO, Assistant Treasurer. Vice President of INVESCO (since
1997). Formerly, Assistant Vice President of INVESCO (1996 to 1997). Born:
August 23, 1960.
ALAN I. WATSON, Assistant Secretary. Vice President of INVESCO (since
1984). Formerly, Trust Officer of ITC. Born: September 14, 1941.
JUDY P. WIESE, Assistant Secretary. Vice President of INVESCO (since 1984)
and of IDI (since 1997). Formerly, Trust Officer of ITC. Born: February 3, 1948.
*These directors are "interested persons" of the Company as defined in the
1940 Act.
#Member of the audit committee of the Company's board of directors.
@Member of the derivatives committee of the Company's board of directors.
@@Member of the soft dollar brokerage committee of the Company's board of
directors.
+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.
<PAGE>
**Member of the management liaison committee of the Company's board of
directors.
As of ^ August 6, 1999, officers and directors of the Company, as a group,
beneficially owned less than 1% of the ^ Fund's outstanding shares.
Director Compensation
- ---------------------
The following table sets forth, for the fiscal year ended ^ August 31,
1998: the compensation paid by the Company to its 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 and advised by INVESCO, ^ 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, ^ 1998. As of December 31, ^ 1998, there were 49 funds
in the INVESCO Complex.
<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, ^ $6,464 $2,112 $1,356 $103,700
Vice Chairman of
the Board
Victor L. Andrews ^ 6,305 1,996 1,569 80,350
Bob R. Baker ^ 6,518 1,783 2,103 84,000
Lawrence H. Budner ^ 6,189 1,996 1,569 79,350
Daniel D. Chabris4 ^ 6,344 2,158 1,171 70,000
Wendy L. Gramm ^ 6,067 0 0 ^ 79,000
Kenneth T. King ^ 5,957 2,194 1,230 77,050
John W. McIntyre ^ 6,108 0 0 ^ 98,500
Larry Soll ^ 6,108 0 0 ^ 96,000
---------
Total ^ $56,060 $12,239 $8,998 $767,950
% of Net Assets 0.0044%(5) 0.0010%(5) 0.0035%(6)
(1)The vice chairman of the board, the chairmen of the audit, management
liaison, derivatives, soft dollar brokerage and compensation committees and the
members of the executive and valuation committees, each receive compensation for
serving in such capacities in addition to the compensation paid to all
independent directors.
(2)Represents benefits accrued with respect to the Defined Benefit Deferred
Compensation Plan discussed below, and not compensation deferred at the election
of the directors.
(3)These figures represent the Company's share of the estimated annual
benefits payable by the INVESCO Complex (excluding the INVESCO Global Health
Sciences Fund which does not participate in this 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 Mr. McIntyre and Drs. Soll and Gramm, each of
these directors has served as a director 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.
<PAGE>
(4)Mr. Chabris retired as a director effective September 30, 1998.
(5)Totals as a percentage of the Company's net assets as of ^ August 31,
1998.
(6)Total as a percentage of the net assets of the INVESCO Complex as of
December 31, ^ 1998.
Messrs. Brady and Williamson, as "interested persons" of the Company, the
^ Fund and other funds in the INVESCO Complex, receive compensation as officers
or employees of INVESCO or its affiliated companies, and do not receive any
director's fees or other compensation from the Company or other funds in the
INVESCO Complex for their services as directors.
The boards of directors/trustees of the mutual funds managed by INVESCO
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 termination of service as a
director (normally 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 and
annualized board meeting fees 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 50% of the basic retainer and annualized board meeting fees. 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 or 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 plan and one director who is not a plan participant. The cost of the plan
will be allocated among the INVESCO and INVESCO Treasurer's Series Trust Funds
in a manner determined to be fair and equitable by the committee. The Company
began making plan payments to Mr. Chabris as of October 1, 1998. 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 independent directors have contributed to a deferred compensation
plan, pursuant to which they have deferred receipt of a portion of the
compensation which they would otherwise have been paid as directors of selected
INVESCO Funds. ^ Certain of the deferred amounts ^ have been invested in the
shares of all ^ INVESCO Funds, except Funds offered by INVESCO Variable
Investment Funds, Inc., in which the directors are legally precluded from
<PAGE>
investing. Each Independent Director may, therefore, be deemed to have an
indirect interest in shares of each such INVESCO Fund, in addition to any
INVESCO Fund shares the Independent Director may own either directly or
beneficially.
The Company has an audit committee that is comprised of four of the
directors who are not interested persons of the Company. The committee meets
periodically with the Company's independent accountants and officers to review
accounting principles used by the Company, the adequacy of internal controls,
the responsibilities and fees of the independent accountants, and other matters.
The Company has a management liaison committee which meets quarterly with
various management personnel of INVESCO in order (a) to facilitate better
understanding of management and operations of the Company, and (b) to review
legal and operational matters which have been assigned to the committee by the
board of directors, in furtherance of the board of directors' overall duty of
supervision.
The Company has a soft dollar brokerage committee. The committee meets
periodically to review soft dollar brokerage transactions by the ^ Fund, and to
review policies and procedures of the ^ Fund's adviser with respect to soft
dollar brokerage transactions. It reports on these matters to the Company's
board of directors.
The Company has a derivatives committee. The committee meets periodically
to review derivatives investments made by the ^ Fund. It monitors derivatives
usage by the ^ Fund and the procedures utilized by the ^ Fund's adviser to
ensure that the use of such instruments follows the policies on such instruments
adopted by the Company's board of directors. It reports on these matters to the
Company's board of directors.
HOW SHARES CAN BE PURCHASED
- ---------------------------
The shares of ^ the Fund are sold on a continuous basis at the net asset
value per share of the Fund next calculated after receipt of a purchase order in
good form. The net asset value per share is computed separately for ^ the 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."
The Company has authorized one or more brokers to accept purchase orders
on the ^ Fund's behalf. Such brokers are authorized to designate other
intermediaries to accept purchase orders on the ^ Fund's behalf. The ^ Fund will
be deemed to have received a purchase order when an authorized broker, or, if
applicable, a broker's authorized designee, accepts the order. A purchase order
will be priced at ^ the Fund's net asset value next calculated after the order
has been accepted by an authorized broker or the broker's designee.
IDI acts as the ^ Fund's Distributor under a distribution agreement with
the Company and bears all expenses, including the costs of printing and
distribution of the prospectus, incident to marketing of ^ the Fund's shares,
except for such distribution expenses which are paid out of ^ the Fund's assets
under the Company's Plan of Distribution which has been adopted by the Company
pursuant Rule 12b-1 under the 1940 Act.
<PAGE>
Distribution Plan. As described in the section of the ^ Fund's 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, which was implemented on November 1, 1990. The Plan provides that the
^ Fund may make monthly payments to IDI of amounts computed at an annual rate no
greater than 0.25% of ^ the Fund's average net assets to permit IDI, at its
discretion, to engage in certain activities and provide services in connection
with the distribution of ^ the Fund's shares to investors. Payment amounts by ^
the Fund under the Plan, for any month, may be made to compensate IDI for
permissible activities engaged in and services provided by IDI during the
rolling 12-month period in which that month falls. For the fiscal year ended
June 30, 1998, the ^ Fund made payments to INVESCO (the predecessor of IDI as
distributor of shares of the ^ Fund) and IDI under the 12b-1 Plan (prior to the
voluntary absorption of certain Fund expenses by INVESCO) in the amount of ^
$543,760^. In addition, as of June 30, 1998, ^ $43,752 of additional
distribution accruals had been incurred under the Plan for the ^ Fund and will
be paid to IDI during the fiscal year ended June 30, 1999. As noted in the
Prospectus, one type of expenditure is the payment of compensation to securities
companies and other financial institutions and organizations, which may include
INVESCO-affiliated companies, in order to obtain various distribution-related
and/or administrative services for the ^ Fund. The Fund is authorized by the
Plan to use its assets to finance the payments made to obtain those services.
Payments will be made by IDI to broker-dealers who sell shares of ^ the Fund and
may be made to banks, savings and loan associations and other depository
institutions. Although the Glass-Steagall Act limits the ability of certain
banks to act as underwriters of mutual fund shares, the 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 ^ the ^ Fund
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 ^ the
Fund.
For the fiscal year ended June 30, 1998^ allocation of 12b-1 amounts paid
by the ^ Fund for the following categories of expenses were:
advertising--$67,032; sales literature, printing and postage--$90,320; direct
mail--$42,306; public relations/promotion--$37,578; compensation to securities
dealers and other organizations--$109,767; marketing personnel--$196,757.
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 transactions by ^ the
Fund's customers, serving as the primary source of information to customers in
answering questions concerning ^ the Fund, and assisting in other customer
transactions with ^ the Fund.
^ Pursuant to authorization granted by the public shareholders of FTFIS on
May 24, 1993 FTFIS, as the initial shareholder of the ^ Fund, approved the
Agreement on October 27, 1993 for an initial term expiring April 30, 1994. The
board of directors, on February 4, 1997, approved amending the Plan to a
compensation type 12b-1 plan. This amendment of the Plan did not result in
increasing the amount of the ^ Fund's payments thereunder. The Plan has been
continued by action of the board of directors until May 15, ^ 2000. Pursuant to
authorization granted by the Company's board of directors on September 2, 1997,
a new Plan became effective on September 29, 1997, under which IDI has assumed
all obligations related to distribution from INVESCO. Pursuant to shareholder
authorization, the Plan was approved with respect to the Fund on August 13,
1999.
<PAGE>
The Plan provides that it shall continue in effect with respect to ^ the
Fund for so long as such continuance is approved at least annually by the vote
of the board of directors of the 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 ^ the Fund, without penalty, if a majority of the
independent directors, or shareholders of ^ the Fund, vote to terminate the
Plan. The Company may, in its absolute discretion, suspend, discontinue or limit
the offering of shares of ^ the Funds at any time. In determining whether any
such action should be taken, the board of directors intends to consider all
relevant factors including, without limitation, the size of ^ the Fund, the
investment climate for ^ the Fund, general market conditions, and the volume of
sales and redemptions of ^ the Fund's shares. The Plan may continue in effect
and payments may be made under the Plan following any such temporary suspension
or limitation of the offering of ^ the Fund's shares; however, ^ the Fund is not
contractually obligated to continue the Plan for any particular period of time.
Suspension of the offering of ^ the Fund's shares would not, of course, affect a
shareholder's ability to redeem his or her shares. So long as the Plan is in
effect, the selection and nomination of persons to serve as independent
directors of the Company shall be committed to the independent directors then in
office at the time of such selection or nomination. The Plan may not be amended
to increase materially the amount of ^ the Fund's payments thereunder without
approval of the shareholders of ^ the Fund, and all material amendments to the
Plan must be approved by the board of directors of the Company, including a
majority of the independent directors. Under the agreement implementing the
Plan, IDI or the ^ Fund, the latter by vote of a majority of the independent
directors, or of the holders of a majority of ^ the Fund's outstanding voting
securities, may terminate such agreement as to ^ the Fund without penalty upon
30 days' written notice to the other party. No further payments will be made by
^ the Fund under the Plan in the event of its termination as to ^ the 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 ^ the Fund's assets in the amounts and for the
purposes set forth therein, notwithstanding the occurrence of an assignment, as
defined by the 1940 Act, and rules thereunder. To the extent it constitutes an
agreement pursuant to a plan, ^ the Fund's obligation to make payments to IDI
shall terminate automatically, in the event of such "assignment," in which case
the ^ Fund may continue to make payments pursuant to the Plan to IDI or another
organization only upon the approval of new arrangements, which may or may not be
with IDI, regarding the use of the amounts authorized to be paid by it under the
Plan, by the directors, including a majority of the independent directors, by a
vote cast in person at a meeting called for such purpose.
<PAGE>
Information regarding the services rendered under the Plan and the amounts
paid therefor by the ^ Fund are provided to, and reviewed by, the directors on a
quarterly basis. On an annual basis, the directors consider the continued
appropriateness of the Plan and the level of compensation provided therein.
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 ^ Fund And ^ Its
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 it and its shareholders under the Plan
include the following:
(1) Enhanced marketing efforts, if successful, should result in an
increase in net assets through the sale of additional shares and
afford greater resources with which to pursue the investment
objectives of the ^ Fund;
(2) The sale of additional shares reduces the likelihood that redemption
of shares will require the liquidation of securities of the ^ Fund
in amounts and at times that are disadvantageous for investment
purposes;
(3) The positive effect which increased Fund assets will have on its
revenues could allow INVESCO and its affiliated companies:
(a) To have greater resources to make the financial commitments
necessary to improve the quality and level of ^ the Fund's
shareholder services (in both systems and personnel),
(b) To increase the number and type of mutual funds available to
investors from INVESCO and its affiliated companies (and
support them in their infancy), and thereby expand the
investment choices available to all shareholders, and
(c) To acquire and retain talented employees who desire to be
associated with a growing organization; and
(4) Increased Fund assets may result in reducing each investor's share
of certain expenses through economies of scale (e.g. exceeding
established breakpoints in the advisory fee schedule and allocating
fixed expenses over a larger asset base), thereby partially
offsetting the costs of the Plan.
HOW SHARES ARE VALUED
- ---------------------
As described in the section of the ^ Fund's Prospectus entitled "How To Buy
Shares," the net asset value of shares of ^ the Fund is computed once each day
that the New York Stock Exchange is open as of the close of regular trading on
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 in which there is a sufficient degree of trading in
the securities held by ^ the Fund that the current net asset value per share
might be materially affected by changes in the value of the securities held, but
only if on such day ^ the Fund receives a request to purchase or redeem shares.
Net asset value per share is not calculated on days the New York Stock Exchange
is closed, such as federal holidays including New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving, and Christmas.
<PAGE>
The net asset value per share of ^ the Fund is calculated by dividing the
value of all securities held by ^ the Fund plus other assets (including interest
accrued but not collected), less ^ the Fund's liabilities (including accrued
expenses, but excluding capital and surplus), by the number of shares
outstanding of the Fund. The ^ Fund values municipal securities (including
commitments to purchase such securities on a when-issued basis) on the basis of
prices provided by a pricing service which uses information with respect to
transactions in bonds, quotations from bond dealers, market transactions in
comparable securities and various relationships between securities in
determining values. The Company's directors have approved the use of these
pricing procedures and will continue to evaluate their appropriateness as
necessary. Under these procedures, the last quoted sale price is used to value
municipal securities where trades have occurred on the valuation date. In
addition, where trades may not have occurred but where reliable market
quotations are readily available for an issue of municipal securities held by
the ^ Fund, such securities are valued at the bid price on the basis of such
quotations. Non tax-exempt securities for which market quotations are readily
available are valued on a consistent basis at market value based upon such
quotations; any securities for which market quotations are not readily available
and other assets will be valued at fair value as determined in good faith using
methods prescribed by the Company's board of directors (presently, "matrix
pricing" as provided by the pricing service). Prior to utilizing a pricing
service, the Company's board of directors will review 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. Absent unusual circumstances, short-term debt securities
with remaining maturities of 60 days or less at the time of purchase are valued
at amortized cost.
FUND PERFORMANCE
- ----------------
As discussed in the section of the ^ Fund's Prospectus entitled "Fund
Price And Performance," the ^ Fund advertises its total return performance and
yield. The total return performance for the ^ Fund for the one-, five- and
ten-year periods ended June 30, 1998 was 6.87%, 5.14% and 8.15%, respectively.
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)n = ERV
where: P = initial payment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of initial payment
<PAGE>
The average annual total return performance figures shown above were
determined by solving the above formula for "T" for each time period indicated.
The 30-day compounded yield at June 30, 1998, ^ of 3.78%, was determined
by computing the yield of each obligation held by the ^ Fund, based on market
value of the obligation (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 actual accrued interest. The
resultant yield 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 held by the
Fund (assuming each month has 30 days).
The yield of each security is determined as follows;
1) For obligations issued without original issue discount (OID) and having
a current market premium, yield to maturity (or yield to call if applicable) is
used.
2) For obligations issued without OID and having a current market
discount, coupon rate is used.
3) For obligations issued with OID, trading at a discount to the remaining
portion of OID, yield to maturity, based on the OID calculation at issue date,
is used.
4) For obligations issued with OID, trading at a premium to the remaining
portion of OID, yield to maturity is used.
Current yield will fluctuate from day to day and is not necessarily
representative of future results. A shareholder should remember that yield is a
function of the kind and quality of the instruments in ^ the Fund's portfolio,
portfolio maturity and operating expenses. A number of factors should be taken
into account before using yield information as a basis for comparison with
alternative investments. An investment in ^ the Fund is not insured and its
yield is not guaranteed.
Any tax equivalent yield quotation of ^ the Fund will be calculated as
follows: If the entire current yield quotation for such period is tax-exempt,
the tax equivalent yield will be the current yield quotation divided by one
minus a stated income tax rate or rates. If a portion of the current yield
quotation is not tax-exempt, the tax equivalent yield will be the sum of (a)
that portion of the yield which is tax-exempt divided by 1 minus a stated income
tax rate or rates and (b) the portion of the yield which is not tax-exempt. The
tax equivalent yield of the ^ Fund as of June 30, 1998, was 4.45% at the 15% tax
bracket, 5.25% at the 28% tax bracket, and 5.64% at the 33% tax bracket.
In conjunction with performance reports, comparative data between ^ the
Fund's performance for a given period and other types of investment vehicles,
including certificates of deposit, may be provided to prospective investors and
shareholders.
<PAGE>
In conjunction with performance reports and/or analyses of shareholder
service for the ^ Fund, comparative data between ^ the Fund's performance for a
given period and recognized indices of investment results for the same period,
and/or assessments of the quality of shareholder service, may be provided to
shareholders. Such indices include indices provided by Dow Jones & Company,
Standard & Poor's, Lipper ^ Inc., Lehman Brothers, National Association of
Securities Dealers Automated Quotations, Frank Russell Company, Value Line
Investment Survey, the American Stock Exchange, Morgan Stanley Capital
International, Wilshire Associates, the Financial Times Stock Exchange, the New
York Stock Exchange, the Nikkei Stock Average and Deutcher Aktienindex, all of
which are unmanaged market indicators. In addition, rankings, ratings, and
comparisons of investment performance and/or assessments of the quality of
shareholder service made by independent sources may be used in advertisements,
sales literature or shareholder reports, including reprints of, or selections
from, editorials or articles about the ^ Fund. These sources utilize information
compiled (i) internally; (ii) by Lipper ^ Inc.; or (iii) by other recognized
analytical services. The Lipper ^ Inc. mutual fund rankings and comparisons
which may be used by the ^ Fund in performance reports will be drawn from the
General Municipal Bond Funds ^ mutual fund groupings^ in addition to the
broad-based Lipper general fund groupings. Sources for Fund performance
information and articles about the ^ Fund include, but are not limited to, the
following:
AMERICAN ASSOCIATION OF INDIVIDUAL INVESTORS' JOURNAL
BANXQUOTE
BARRON'S
BUSINESS WEEK
CDA INVESTMENT TECHNOLOGIES
CNBC
CNN
CONSUMER DIGEST
FINANCIAL TIMES
FINANCIAL WORLD
FORBES
FORTUNE
IBBOTSON ASSOCIATES, INC.
INSTITUTIONAL INVESTOR
INVESTMENT COMPANY DATA, INC.
INVESTOR'S BUSINESS DAILY
KIPLINGER'S PERSONAL FINANCE
LIPPER ^ INC.'S MUTUAL FUND PERFORMANCE ^ ANALYSIS
MONEY
MORNINGSTAR
MUTUAL FUND FORECASTER
NO-LOAD ANALYST
NO-LOAD FUND X
PERSONAL INVESTOR
SMART MONEY
THE NEW YORK TIMES
THE NO-LOAD FUND INVESTOR
U.S. NEWS AND WORLD REPORT
UNITED MUTUAL FUND SELECTOR
USA TODAY
WALL STREET JOURNAL
WIESENBERGER INVESTMENT COMPANIES SERVICES
WORKING WOMAN
WORTH
<PAGE>
SERVICES PROVIDED BY THE ^ FUND
- -------------------------------
Periodic Withdrawal Plan. As described in the section of the ^ Fund's
Prospectus entitled "How To Sell Shares," ^ the Fund offers a Periodic
Withdrawal Plan. All dividends and other distributions on shares owned by
shareholders participating in this Plan are reinvested in additional shares.
Because withdrawal payments represent the proceeds from sales of shares, the
amount of shareholders' investments in ^ the Fund will be reduced to the extent
that withdrawal payments exceed dividends and other distributions paid and
reinvested. Any gain or loss on such redemptions must be reported for tax
purposes. In each case, shares will be redeemed at the close of business on or
about the 20th day of each month preceding payment, and payments will be mailed
within five business days thereafter.
The Periodic Withdrawal Plan involves the use of principal and is not a
guaranteed annuity. Payments under such 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 INVESCO. 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 ^ Fund's Prospectus
entitled "How To Buy Shares - Exchange Policy," ^ the Fund offers shareholders
the ability to exchange shares of ^ the Fund for shares of another fund or for
shares of certain other no-load mutual funds advised by INVESCO. Exchange
requests may be made by telephone or by written request to INVESCO using the
telephone number or address on the cover of this Statement of Additional
Information. Exchanges made by telephone must be in an amount of at least $250,
if the exchange is being made into an existing account of one of the INVESCO
funds. All exchanges that establish a new account must meet the fund's
applicable minimum initial investment requirements. Written exchange requests
into an existing account have no minimum requirements other than the fund's
applicable minimum subsequent investment requirements. Any gain or loss realized
on an exchange is recognized for federal income tax purposes. This ability is
not an option or right to purchase securities 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.
HOW TO REDEEM SHARES
- --------------------
Normally, payment for shares redeemed will be mailed within seven days
following receipt of the required documents as described in the section of the ^
Fund's Prospectus entitled "How To Sell Shares." The right of redemption may be
suspended and payment postponed when: (a) the New York Stock Exchange is closed
for other than customary weekends and holidays; (b) trading on that exchange is
restricted; (c) an emergency exists as a result of which disposal by the ^ Fund
of securities owned by it is not reasonably practicable, or it is not reasonably
practicable for ^ the Fund fairly to determine the value of its net assets; or
(d) the SEC by order so permits.
<PAGE>
The Company has authorized brokers to accept redemption orders on the ^
Fund's behalf. Such brokers are authorized to designate other intermediaries to
accept redemption orders on the ^ Fund's behalf. The ^ Fund will be deemed to
have received a redemption order when an authorized broker or, if applicable, a
broker's authorized designee, accepts the order. A redemption order will be
priced at ^ the Fund's net asset value next calculated after the order has been
accepted by an authorized broker or the broker's authorized designee.
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 ^ the Fund
to pay for redeemed shares in cash. In such cases, the investment adviser may
authorize payment to be made in portfolio securities or other property of the ^
Fund. However, the Company is obligated under the 1940 Act to redeem for cash
all shares of ^ the Fund presented for redemption by any one shareholder having
a value up to $250,000 (or 1% of the Fund's net assets if that is less) in any
90-day period. Securities delivered in payment of redemptions are selected
entirely by the investment adviser based on what is in the best interests of ^
the Fund and its shareholders, and are valued at the value assigned to them in
computing ^ the Fund's net asset value per share. Shareholders receiving such
securities are likely to incur brokerage costs on their subsequent sales of the
securities.
DIVIDENDS, OTHER DISTRIBUTIONS, AND TAXES
- -----------------------------------------
^ The Fund intends to continue to conduct its business and satisfy the
applicable diversification of assets and source of income and distribution
requirements to qualify as a regulated investment company under Subchapter M of
the Internal Revenue Code of 1986, as amended. ^ The Fund so qualified in the
fiscal year ended June 30, 1998, and intends to continue to qualify during its
current fiscal year. As a result, it is anticipated that ^ the Fund will not pay
federal income or excise taxes and that ^ the Fund will be accorded conduit or
"pass through" treatment for federal income tax purposes.
^ The Fund intends to qualify to pay "exempt-interest dividends" to its
shareholders. ^ The Fund will so qualify if at least 50% of its total assets are
invested in municipal securities at the close of each quarter of the Company's
fiscal year. The exempt interest portion of the income dividend which is payable
monthly may be based on the ratio of ^ the Fund's tax-exempt income to taxable
income for the entire taxable year. In such case, the ratio would be determined
and reported to shareholders after the close of each taxable year. Thus, the
exempt-interest portion of any particular dividend may be based upon the
tax-exempt portion of all distributions for the taxable year, rather than upon
the tax-exempt portion of that particular dividend. Exemption of exempt-interest
dividends for federal income tax purposes does not necessarily result in
exemption under the income or other tax laws of any state or local taxing
authority. Although these dividends generally may be subject to state and local
income taxes, the laws of the several states and local taxing authorities vary
with respect to the taxation of exempt-interest dividends, taxable dividends and
distributions of capital gains.
A corporation includes exempt-interest dividends in calculating its
alternative taxable income in situations where the "adjusted current earnings"
of the corporation exceeds its alternative minimum taxable income.
<PAGE>
Any loss realized on the redemption of shares in the ^ Fund that have been
held by the shareholder for six months or less is not deductible to the extent
of the amount of any exempt-interest dividend paid with respect to such shares
and the balance of the loss is treated as long-term, instead of short-term,
capital loss to the extent of any capital gain distributions received on those
shares.
Entities or persons who are "substantial users" (or persons related to
"substantial users") of facilities financed by private activity bonds or
industrial development bonds should consult their tax advisers before purchasing
shares of ^ the Fund because, for users of certain of these facilities, the
interest on those bonds is not exempt from federal income tax. For these
purposes, the term "substantial user" is defined generally to include a
"non-exempt person" who regularly uses in trade or business a part of a facility
financed from the proceeds of such bonds.
Up to 85% of social security and railroad retirement benefits may be
included in taxable income for recipients whose adjusted gross income (including
income from tax-exempt sources such as a Fund) plus 50% of their benefits
exceeds certain base amounts. Exempt-interest dividends from ^ the Fund still
are tax-exempt to the extent described above, they are only included in the
calculation of whether a recipient's income exceeds the established amounts.
INVESCO may provide shareholders of the ^ Fund with information concerning
the average cost basis of their shares in order to help them prepare their tax
returns. This information is intended as a convenience to shareholders and will
not be reported to the Internal Revenue Service (the "IRS"). The IRS permits the
use of several methods to determine the cost basis of mutual fund shares. The
cost basis information provided by INVESCO will be computed using the
single-category average cost method, although neither INVESCO nor the Company
recommends any particular method of determining cost basis. Other methods may
result in different tax consequences. If a shareholder has reported gains or
losses with respect to shares of ^ the Fund in past years, the shareholder must
continue to use the method previously used, unless the shareholder applies to
the IRS for permission to change the method.
Shareholders should consult their own tax advisers regarding specific
questions as to federal, state and local taxes. Qualification as a regulated
investment company under the Internal Revenue Code of 1986, as amended for
income tax purposes does not entail government supervision of management or
investment policies.
INVESTMENT PRACTICES
- --------------------
Portfolio Turnover. There are no fixed limitations regarding the ^ Fund's
portfolio turnover. Since the ^ Fund started business, the rate of portfolio
turnover has fluctuated under constantly changing economic conditions and market
circumstances. During the fiscal years ended June 30, 1998, 1997 and 1996, the ^
Fund's portfolio turnover rates were 173%, 123% and 146%, respectively. ^
Securities initially satisfying the basic policies and objectives of ^ the Fund
may be disposed of when they are no longer suitable. In computing the portfolio
turnover rate, 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 is calculated by dividing (a) the lesser of purchases or sales
of portfolio securities for the fiscal year by (b) the monthly average of the
value of portfolio securities owned by ^ the Fund during the fiscal year. Prior
to 1985, all investments in U.S. government securities were excluded in
computing the portfolio turnover rate.
<PAGE>
Placement of Portfolio Brokerage. INVESCO, as the ^ Fund's adviser, places
orders for the purchase and sale of securities with brokers and dealers based
upon INVESCO's evaluation of such brokers' and dealers' financial responsibility
subject to their ability to effect transactions at the best available prices.
INVESCO evaluates the overall reasonableness of any 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 ^ the Fund's
portfolio transactions, viewed in terms of the size of transactions, prevailing
market conditions in the security purchased or sold, and general economic and
market conditions. In seeking to ensure that the commissions or discounts
charged ^ the Fund are consistent with prevailing and reasonable commissions or
discounts, INVESCO also endeavors to monitor brokerage industry practices with
regard to the commissions or discounts charged by brokers and dealers on
transactions effected for other comparable institutional investors. While
INVESCO seeks reasonably competitive rates, ^ the Fund does not necessarily pay
the lowest commission, discount or spread available.
Portfolio securities are usually purchased from an underwriter at prices
which include underwriting fees paid by the issuer or from a primary market
maker acting as principal for the securities on a net basis, with no brokerage
commission being paid by the Funds. On occasion, securities may be purchased
directly from the issuer. Other purchases and all sales are placed with those
dealers from whom the investment manager believes best execution will be
obtained, which may be acting as either agents or principals. Usually no
brokerage commissions are paid by the Funds for such transactions. Transactions
placed through dealers serving as primary market makers normally are executed at
a price based on the bid and asked prices.
Consistent with the standard of seeking to obtain the best execution on
portfolio transactions, INVESCO may select brokers that provide research
services to effect such transactions. Research services consist of statistical
and analytical reports relating to issuers, industries, securities and economic
factors and trends, which may be of assistance or value to INVESCO in making
informed investment decisions. Research services prepared and furnished by
brokers through which the ^ Fund effects securities transactions may be used by
INVESCO in servicing all of its accounts and not all such services may be used
by INVESCO in connection with the ^ Fund.
In recognition of the value of the above-described brokerage and research
services provided by certain brokers, INVESCO, consistent with the standard of
seeking to obtain the best execution on portfolio transactions, may place orders
with such brokers for the execution of Fund transactions on which the
commissions are in excess of those which other brokers might have charged for
effecting the same transactions.
Portfolio transactions may be effected through qualified brokers and
dealers that recommend the ^ Fund to their clients, or that act as agent in the
purchase of ^ the Fund's shares for their clients. When a number of brokers and
dealers can provide comparable best price and execution on a particular
transaction, INVESCO may consider the sale of Fund shares by a broker or dealer
in selecting among qualified brokers and dealers.
<PAGE>
Certain financial institutions (including brokers who may sell shares of
the ^ Fund, or affiliates of such brokers) are paid a fee (the "Services Fee")
for recordkeeping, shareholder communications and other services provided by the
brokers to investors purchasing shares of the ^ Fund through no transaction fee
programs ("NTF Programs") offered by the financial institution or its affiliated
broker (an "NTF Program Sponsor"). The Services Fee is based on the average
daily value of the investments in ^ the Fund made in the name of such NTF
Program Sponsor and held in omnibus accounts maintained on behalf of investors
participating in the NTF Program. With respect to certain NTF Programs, the
Company's directors have authorized the ^ Fund 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 Programs, the
Company's directors have authorized ^ the Fund to pay transfer agency fees to
INVESCO based on the number of investors who have beneficial interests in the
NTF Program Sponsor's omnibus accounts in the ^ Fund. INVESCO, in turn, pays
these transfer agency fees to the NTF Program Sponsor as a sub-transfer agency
or recordkeeping fee in payment of all or a portion of the Services Fee. In the
event that the sub-transfer agency or recordkeeping fee is insufficient to pay
all of the Services Fee with respect to these NTF Programs, the directors of the
Company have authorized the Company to apply dollars generated from the Plan to
pay the remainder of the Services Fee, subject to the maximum Rule 12b-1 fee
permitted by the Plan. INVESCO itself pays the portion of ^ the Fund's Services
Fee, if any, that exceeds the sum of the sub-transfer agency or recordkeeping
fee and Rule 12b-1 fee. The Company's directors have further authorized INVESCO
to place a portion of ^ the Fund's brokerage transactions with certain NTF
Program Sponsors or their affiliated brokers, if INVESCO reasonably believes
that, in effecting the Fund's transactions in portfolio securities, the broker
is able to provide the best execution of orders at the most favorable prices. A
portion of the commissions earned by such a broker from executing portfolio
transactions on behalf of ^ the Fund may be credited by the NTF Program Sponsor
against its Services Fee. Such credit shall be applied first against any
sub-transfer agency or recordkeeping fee payable with respect to ^ the Fund, and
second against any Rule 12b-1 fees used to pay a portion of the Services Fee, on
a basis which has resulted from negotiations between IDI or INVESCO and the NTF
Program Sponsor. Thus, ^ the Fund pays sub-transfer agency or recordkeeping fees
to the NTF Program Sponsor in payment of the Services Fee only to the extent
that such fees are not offset by ^ the Fund's credits. In the event that the
transfer agency fee paid by ^ the Fund to INVESCO with respect to investors who
have beneficial interests in a particular NTF Program Sponsor's omnibus accounts
in ^ the Fund exceeds the Services Fee applicable to ^ the Fund, after
application of credits, INVESCO may carry forward the excess and apply it to
future Services Fees payable to that NTF Program Sponsor with respect to ^ the
Fund. The amount of excess transfer agency fees carried forward will be reviewed
for possible adjustment by INVESCO prior to each fiscal year-end of the Fund.
The Company's board of directors has also authorized ^ the Fund to pay to IDI
the full Rule 12b-1 fees contemplated by the Plan as payment for expenses
incurred by IDI in engaging in the activities and providing the services on
behalf of ^ the Fund contemplated by the Plan, subject to the maximum Rule
12b-1 fee permitted by the Plan, notwithstanding that credits have been applied
to reduce the portion of the 12b-1 fee that would have been used to compensate
IDI for payments to such NTF Program Sponsor absent such credits.
<PAGE>
The aggregate dollar amount of brokerage commissions paid by the ^ Fund
for the fiscal years ended June 30, 1998, 1997 and 1996 were $623,244, $748,918
and $884,965, respectively^. For the period ended June 30, 1998, ^ $548 was paid
to brokers in connection with their provision of research services to the ^
Fund.
INVESCO receives no brokerage commissions on portfolio transactions
effected on behalf of the ^ Fund, and there is no affiliation between INVESCO or
any person affiliated with INVESCO, or the ^ Fund, and any broker or dealer that
executes transactions for the ^ Fund.
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 the ^ Fund. As of June 30, 1998,
13,585,358 shares of the ^ 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 series 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, 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 series 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 class 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.
<PAGE>
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 ^ the 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.
Directors may appoint their own successors, provided that always a majority of
the directors have been elected by the Company's shareholders. It is the
intention of the Company not to hold annual meetings of shareholders. The
directors will call annual or special meetings of shareholders for action by
shareholder vote as may be required by the 1940 Act or the Company's Articles of
Incorporation, or at their discretion.
Principal Shareholders. As of ^ July 31, 1999, the following entities held
more than 5% of the outstanding securities of the ^ Fund.
Name and Address of
Beneficial Owner Number of Shares Percent of Class
- ------------------- ----------------- ----------------
^ None
Independent Accountants. PricewaterhouseCoopers, LLP, 950 Seventeenth
Street, Denver, Colorado, has been selected as the independent accountants of
the Company. The independent accountants are responsible for auditing the
financial statements of the Company.
Custodian. State Street Bank and Trust Company, P.O. Box 351, Boston,
Massachusetts, has been designated as custodian of the cash and investment
securities of the Company. The bank is also responsible for, among other things,
receipt and delivery of the Company's investment securities in accordance with
procedures and conditions specified in the custody agreement.
Transfer Agent. The Company is provided with transfer agent, registrar,
and dividend disbursing agent services by INVESCO Funds Group, Inc., 7800 E.
Union Avenue, Denver, Colorado, pursuant to the Transfer Agency Agreement
described herein. Such services include the issuance, cancellation and transfer
of shares of each Fund and the maintenance of records regarding the ownership of
such shares.
Reports to Shareholders.^ 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, serves as special counsel to the Company.
<PAGE>
Financial Statements. The ^ Fund's audited financial statements and the
notes thereto for the fiscal year ended June 30, 1998^ and the report of
PricewaterhouseCoopers LLP with respect to such financial statements, ^ and the
unaudited financial statements and accompanying notes thereto and the Report to
Shareholders for the six-month period ended December 31, 1998 are incorporated
herein by reference from the Company's Annual Report to Shareholders for the
fiscal year ended June 30, 1998 and the Fund's Semi-Annual Report to
Shareholders for the six-month period ended December 31, 1998, respectively.
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
related 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 A
Description of Moody's municipal bond ratings:
- ----------------------------------------------
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and have
speculative characteristics as well.
Ba--Bonds which are rated Ba are judged to have speculative elements: their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments of, or maintenance of
other terms of, the contract over any long period of time may be small.
Caa--Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Rating Refinements: Moody's may apply the numerical modifier "1", for
municipally-backed bonds, and modifiers "1", "2" and "3", for corporate-backed
municipals. The modifier 1 indicates that the security ranks in the higher end
of its generic rating category; the modifier 2 indicates a mid-range ranking;
and modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
<PAGE>
Description of S&P's municipal bond ratings:
- --------------------------------------------
AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA--Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in a small degree.
A--Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.
BB,B--Bonds rated BB or B are regarded, on balance, as predominantly speculative
with respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and B a higher degree of speculation. While such bonds will likely
have some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
CCC--Bonds rated CCC have a currently identifiable vulnerability to default and
are dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, they are not likely to have
the capacity to pay interest and repay principal.
Description of Fitch's corporate and municipal bond ratings:
- ------------------------------------------------------------
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
<PAGE>
Plus (+) or Minus (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the AAA category.
Description of D&P's long-term corporate and municipal debt ratings:
- --------------------------------------------------------------------
AAA--Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA- --High credit quality. Protection factors are strong. Risk is
modest but may vary slightly from time to time because of economic conditions.
BBB+, BBB, BBB- --Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
Plus (+) or Minus (-): The ratings may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
Description of Moody's ratings of state and municipal notes:
- ------------------------------------------------------------
Moody's ratings for state and municipal and other short-term obligations will be
designated Moody's Investment Grade ("MIG"). This distinction is in recognition
of the differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower are uppermost in importance in
short-term borrowing, while various factors of the first importance in long-term
borrowing risk are of lesser importance in the short run.
Symbols will be used as follows:
MIG-1--Notes bearing this designation are of the best quality enjoying strong
protection from established cash flows of funds for their servicing or from
established and broad-based access to the market for refinancing, or both.
MIG-2--Notes bearing this designation are of high quality, with margins of
protection ample although not so large as in the preceding group.
Description of S&P's ratings for investment grade municipal notes and short-term
- --------------------------------------------------------------------------------
demand obligations:
- -------------------
SP-1: Issues carrying this designation have a very strong or strong capacity to
pay principal and interest. Issues determined to possess overwhelming safety
characteristics will be given a "plus" designation.
SP-2: Issues carrying this designation have a satisfactory capacity to pay
principal and interest.
<PAGE>
Description of Moody's tax-exempt and taxable commercial paper ratings:
- -------------------------------------------------------------------------------
Moody's Commercial Paper ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
nine months. Moody's makes no representation that such obligations are exempt
from registration under the Securities Act of 1933, nor does it represent that
any specific note is a valid obligation of a rated issuer or issued in
conformity with any applicable law. The following designations, all judged to be
investment grade, indicate the relative repayment capacity of rated issuers of
securities in which the Fund may invest:
Prime-1: Issuers rated Prime-1 have a superior capacity for repayment for
short-term promissory obligations.
Prime-2: Issuers rated Prime-2 have a strong capacity for repayment of
short-term promissory obligations.
Description of S&P's ratings for demand obligations and taxable and tax-exempt
- --------------------------------------------------------------------------------
commercial paper:
- -----------------
S&P's ratings are a current assessment of the likelihood of timely payment of
debt having an original maturity of no more than 365 days. The two rating
categories for securities in which the Fund may invest are as follows:
A-1: This designation indicates the degree of safety regarding timely payment is
either overwhelming or very strong. Issues determined to possess overwhelming
safety characteristics will be given a "plus" designation.
A-2: Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
<PAGE>
APPENDIX B
DESCRIPTION OF FUTURES CONTRACTS AND OPTIONS
- --------------------------------------------
Options on Securities
- ---------------------
An option on a security provides the purchaser, or "holder," with the
right, but not the obligation, to purchase, in the case of a "call" option, or
sell, in the case of a "put" option, the security or securities underlying the
option, for a fixed exercise price up to a stated expiration date. The holder
pays a non-refundable purchase price for the option, known as the "premium." The
maximum amount of risk the purchaser of the option assumes is equal to the
premium plus related transaction costs, although the entire amount may be lost.
The risk of the seller, or "writer," however, is potentially unlimited, unless
the option is "covered," which is generally accomplished through the writer's
ownership of the underlying security, in the case of a call option, or the
writer's segregation of an amount of cash or securities equal to the exercise
price, in the case of a put option. If the writer's obligation is not so
covered, it is subject to the risk of the full change in value of the underlying
security from the time the option is written until exercise.
Upon exercise of the option, the holder is required to pay the purchase
price of the underlying security, in the case of a call option, or to deliver
the security in return for the purchase price, in the case of a put option.
Conversely, the writer is required to deliver the security, in the case of a
call option, or to purchase the security, in the case of a put option. Options
on securities which have been purchased or written may be closed out prior to
exercise or expiration by entering into an offsetting transaction on the
exchange on which the initial position was established, subject to the
availability of a liquid secondary market.
Options on securities are traded on national securities exchanges, such as
the Chicago Board of Options Exchange and the New York Stock Exchange, which are
regulated by the Securities and Exchange Commission. The Options Clearing
Corporation ("OCC") guarantees the performance of each party to an
exchange-traded option, by in effect taking the opposite side of each such
option. A holder or writer may engage in transactions in exchange-traded options
on securities and options on indices of securities only through a registered
broker/dealer which is a member of the exchange on which the option is traded.
An option position in an exchange-traded option may be closed out only on
an exchange which provides a secondary market for an option of the same series.
Although the Fund will generally purchase or write only those options for which
there appears to be an active secondary market, there is no assurance that a
liquid secondary market on an exchange will exist for any particular option at
any particular time. In such event it might not be possible to effect closing
transactions in a particular option with the result that this Fund would have to
exercise the option in order to realize any profit. This would result in this
Fund incurring brokerage commissions upon the disposition of underlying
securities acquired through the exercise of a call option or upon the purchase
of underlying securities upon the exercise of a put option. If the Fund, as a
covered call option writer, is unable to effect a closing purchase transaction
in a secondary market, unless the Fund is required to deliver the securities
pursuant to the assignment of an exercise notice, it will not be able to sell
the underlying security until the option expires.
<PAGE>
Reasons for the potential absence of a liquid secondary market on an
exchange include the following: (i) there may be insufficient trading interest
in certain options; (ii) restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular classes or
series of options or underlying securities: (iv) unusual or unforeseen
circumstances may interrupt normal operations on an exchange; (v) the facilities
of an exchange or a clearing corporation may not at all times be adequate to
handle current trading volume or (vi) one or more exchanges could, for economic
or other reasons, decide or be compelled at some future date to discontinue the
trading of options (or particular class or series of options) in which event the
secondary market on that exchange (or in the class or series of options) would
cease to exist, although outstanding options on that exchange which had been
issued by a clearing corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms. There is no assurance
that higher than anticipated trading activity or other unforeseen events might
not, at a particular time, render certain of the facilities of any of the
clearing corporations inadequate and thereby result in the institution by an
exchange of special procedures which may interfere with the timely execution of
customers' orders. However, the OCC, based on forecasts provided by the U.S.
exchanges, believes that its facilities are adequate to handle the volume of
reasonably anticipated options transactions, and such exchanges have advised
such clearing corporation that they believe their facilities will also be
adequate to handle reasonably anticipated volume.
In addition, options on securities may be traded over-the-counter ("OTC")
through financial institutions dealing in such options as well as the underlying
instruments. OTC options are purchased from or sold (written) to dealers or
financial institutions which have entered into direct agreements with the
Company on behalf of a Fund. With OTC options, such variables as expiration
date, exercise price and premium will be agreed upon between the Fund and the
transacting dealer, without the intermediation of a third party such as the OCC.
If the transacting dealer fails to make or take delivery of the securities
underlying an option it has written, in accordance with the terms of that option
as written, the Fund would lose the premium paid for the option as well as any
anticipated benefit of the transaction. The Fund will engage in OTC option
transactions only with primary U.S. Government securities dealers recognized by
the Federal Reserve Bank of New York.
Futures Contracts
- -----------------
A futures contract is a bilateral agreement providing for the purchase and
sale of a specified type and amount of a financial instrument or foreign
currency, or for the making and acceptance of a cash settlement, at a stated
time in the future, for a fixed price. By its terms, a futures contract provides
for a specified settlement date on which, in the case of the majority of
interest rate and foreign currency futures contracts, the fixed income
securities or currency underlying the contract are delivered by the seller and
paid for by the purchaser, or on which, in the case of stock index futures
contracts and certain interest rate and foreign currency futures contracts, the
difference between the price at which the contract was entered into and the
contract's closing value is settled between the purchaser and seller in cash.
Futures contracts differ from options in that they are bilateral agreements,
with both the purchaser and the seller equally obligated to complete the
transaction. In addition, Futures contracts call for settlement only on the
expiration date, and cannot be "exercised" at any other time during their term.
<PAGE>
The purchase or sale of a futures contract also differs from the purchase
or sale of a security or the purchase of an option in that no purchase price is
paid or received. Instead, an amount of cash or cash equivalent, which varies
but may be as low as 5% or less of the value of the contract, must be deposited
with the broker as "initial margin." Subsequent payments to and from the broker,
referred to as "variation margin," are made on a daily basis as the value of the
index or instrument underlying the futures contract fluctuates, making positions
in the futures contract more or less valuable, a process known as "marking to
market."
A futures contract may be purchased or sold only on an exchange, known as
a "contract market," designated by the Commodity Futures Trading Commission for
the trading of such contract, and only through a registered futures commission
merchant which is a member of such contract market. A commission must be paid on
each completed purchase and sale transaction. The contract market clearing house
guarantees the performance of each party to a futures contract, by in effect
taking the opposite side of such contract. At any time prior to the expiration
of a futures contract, a trader may elect to close out its position by taking an
opposite position on the contract market on which the position was entered into,
subject to the availability of a secondary market, which will operate to
terminate the initial position. At that time, a final determination of variation
margin is made and any loss experienced by the trader is required to be paid to
the contract market clearing house while any profit due to the trader must be
delivered to it.
Interest rate futures contracts currently are traded on a variety of fixed
income securities, including long-term U.S. Treasury bonds, Treasury notes,
Government National Mortgage Association modified pass-through mortgage-backed
securities, U.S. Treasury bills, bank certificates of deposit and commercial
paper. In addition, interest rate futures contracts include contracts on indices
of municipal securities. Foreign currency futures contracts currently are traded
on the British pound, Canadian dollar, Japanese yen, Swiss franc, West German
mark and on Eurodollar deposits.
Options on Futures Contracts
- ----------------------------
An option on a futures contract provides the holder with the right to enter
into a "long" position in the underlying futures contract, in the case of a call
option, or a "short" position in the underlying Futures Contract, in the case of
a put option, at a fixed exercise price to a stated expiration date. Upon
exercise of the option by the holder, the contract market clearing house
establishes a corresponding short position for the writer of the option, in the
case of a call option, or a corresponding long position, in the case of a put
option. In the event that an option is exercised, the parties will be subject to
all the risks associated with the trading of futures contracts, such as payment
of variation margin deposits. In addition, the writer of an option on a futures
contract, unlike the holder, is subject to initial and variation margin
requirements on the option position.
<PAGE>
A position in an option on a futures contract may be terminated by the
purchaser or seller prior to expiration by effecting a closing purchase or sale
transaction, subject to the availability of a liquid secondary market, which is
the purchase or sale of an option of the same series (i.e., the same exercise
price and expiration date) as the option previously purchased or sold. The
difference between the premiums paid and received represents the trader's profit
or loss on the transaction.
An option, whether based on a futures contract, a stock index or a
security, becomes worthless to the holder when it expires. Upon exercise of an
option, the exchange or contract market clearing house assigns exercise notices
on a random basis to those of its members which have written options of the same
series and with the same expiration date. A brokerage firm receiving such
notices then assigns them on a random basis to those of its customers which have
written options of the same series and expiration date. A writer therefore has
no control over whether an option will be exercised against it, nor over the
time of such exercise. ^^^
<PAGE>
PART C. OTHER INFORMATION
^ Exhibits:
^(a) Articles of Incorporation (Charter) filed
April 2, 1993.(1)
^(1) Articles Supplementary to Articles of ^
Incorporation.(3)
^(2) Articles of Amendment to Articles of
Incorporation filed August 13, 1999.
(3) Articles of Transfer filed August 13, 1999.
(b) Bylaws, as amended July 21, 1993.(1)
^(c) Not applicable.
^(d) (1) Investment Advisory Agreement between
Registrant and INVESCO Funds Group, Inc. dated
February 28, 1997.(2)
^(e) (1) General Distribution Agreement between
Registrant and INVESCO Funds Group, Inc. dated
February 28, 1997.(2)
^(2) General Distribution Agreement between
Registrant and INVESCO Distributors, Inc.
dated September 30, 1997.(2)
^(f) (1) Defined Benefit Deferred Compensation
Plan for Non-Interested Directors and ^
Trustees.(3)
^(2) Amended Defined Compensation Plan for
Non-Interested Directors and ^ Trustees.(3)
^(g) Custody Agreement between the Company and
State Street Bank and Trust Company dated July
1, 1994.(1)
^(1) Amendment to Custody Agreement dated
October 25, 1995.(1)
<PAGE>
^(2) Data Access Addendum dated May 19, 1997.(2)
^(h) (1) Transfer Agency Agreement between
Registrant and INVESCO Funds Group, Inc. dated
February 28, 1997.(2)
^(2) Administrative Services Agreement between
Registrant and INVESCO Funds Group, Inc. dated
February 28, 1997.(2)
^(i) (1) Opinion and consent of counsel as to the legality of
the securities being registered, indicating whether they
will, when sold, be legally issued, fully paid and
non-assessable.(2)
(2) Opinion and consent of counsel with respect to
INVESCO Tax-Free Bond Fund as to the legality of the
securities being registered dated August 13, 1999.
(j)^ Consent of Independent Accountants.
^(k) Not applicable.
^(l) Not applicable.
^(m) Plan and Agreement of Distribution adopted
pursuant to Rule 12b-1 under the Investment
Company Act of 1940 between Registrant and INVESCO
Distributors, Inc. ^ dated September 30, ^ 1997.
^(n) Not Applicable.
^(o) 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, 1997 and incorporated by reference herein.
(3)Previously filed on EDGAR with Post-Effective Amendment No. ^ 38 dated
October ^ 25, 1998, and incorporated by reference herein.
<PAGE>
Item ^ 24. Persons Controlled by or Under Common Control with Registrant
-------------------------------------------------------------
No person is presently controlled by or under common control with ^
INVESCO Select Income Fund, INVESCO High Yield Fund, INVESCO U.S. Government
Securities Fund, or INVESCO ^ Tax-Free Bond Fund of the Registrant.
Item 25 ^. 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 ^ 26. Business and Other Connections of Investment Adviser
----------------------------------------------------
See "The Fund And Its Management" in the Prospectuses and "The ^ Fund And
^ Its Management" in the Statement of Additional Information for information
regarding the business of the investment adviser, INVESCO.
Following are the names and principal occupations of each director and
officer of the investment adviser, INVESCO^.
<PAGE>
Position
with Principal Occupation and
Name Adviser Company Affiliation
---- -------- -------------------------
^ Mark H. Williamson Chairman ^, ^ President & Chief
Officer & Executive Officer
Director INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
^ Raymond Roy Officer ^ Senior Vice President ^
Cunningham INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
William J. Galvin, Jr. Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Ronald L. Grooms Officer Senior Vice President &
Treasurer
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Richard W. Healey Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
^ William R. Keithler Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Charles P. Mayer Officer & Senior Vice President
Director INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Timothy J. Miller Officer & Senior Vice President
Director INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Donovan J. (Jerry) Paul Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Glen A. Payne Officer Senior Vice President,
Secretary & General
Counsel
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
<PAGE>
Position
with Principal Occupation and
Name Adviser Company Affiliation
---- -------- -------------------------
John R. Schroer, II Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Marie E. Aro Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Ingeborg S. Cosby Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Stacie Cowell Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Dawn Daggy-Mangerson Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Elroy E. Frye, Jr. Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Linda J. Gieger Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Mark D. Greenberg Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
^Denver, CO 80237
Richard R. Hinderlie Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Thomas M. Hurley Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Patricia F. Johnston Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
<PAGE>
Position
with Principal Occupation and
Name Adviser Company Affiliation
---- -------- -------------------------
Campbell C. Judge Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Peter M. Lovell Oficer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
James F. Lummanick Officer Vice President &
Assistant General Counsel
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Thomas A. Mantone, Jr. Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Trent E. May Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Corey M. McClintock Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Douglas J. McEldowney Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Frederick R. (Fritz) Officer Vice President
Meyer INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Stephen A. Moran Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Jeffrey G. Morris Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Laura M. Parsons Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
<PAGE>
Position
with Principal Occupation and
Name Adviser Company Affiliation
---- -------- -------------------------
Jon B. Pauley Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Pamela J. Piro Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Anthony R. Rogers Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Gary L. Rulh Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
James B. Sandidge Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
John S. Segner Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Terri B. Smith Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Tane T. Tyler Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Thomas R. Wald Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Alan I. Watson Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Judy P. Wiese Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
<PAGE>
Position
with Principal Occupation and
Name Adviser Company Affiliation
---- -------- -------------------------
^ Thomas H. Scanlan Officer ^ Regional Vice President
INVESCO Funds Group, Inc.
^ 12028 Edgepark Court
^ Potomac, MD 20854
Reagan A. Shopp Officer ^ Regional Vice President
INVESCO Funds Group, Inc.
^7800 East Union Avenue
Denver, CO 80237
^ Michael D. Legoski Officer Assistant Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Donald R. Paddack Officer Assistant Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Kent T. Schmeckpeper Officer Assistant Vice President
Account Relationship
Manager
INVESCO Funds Group, Inc.
7800 East Union Avenue
^Denver, CO 80237
Jeraldine E. Kraus Officer Assistant Secretary
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Item 29. Principal Underwriters
----------------------
^(a) INVESCO Bond Funds, Inc.
^ INVESCO Combination Stock & Bond Funds, ^ Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Sector Funds, Inc.
INVESCO Specialty Funds, Inc.
INVESCO Stock Funds, Inc.
INVESCO ^ Treasurer's Series Funds, Inc.
^ 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 Ass't. Secretary
Ronald L. Grooms Senior Vice Treasurer,
7800 E. Union Avenue President ^, Chief Fin'l
Denver, CO 80237 Treasurer & Officer, and
Director Chief Acctg. Off.
Richard W. Healey Senior Vice
7800 E. Union Avenue President ^ &
^ Denver, CO 80237 Director
Charles P. Mayer Director
7800 E. Union Avenue
Denver, CO 80237
Timothy J. Miller Director
7800 E. Union Avenue
Denver, CO 80237
Glen A. Payne Senior Vice Secretary
7800 E. Union Avenue President,
Denver, CO 80237 Secretary &
General Counsel
Pamela J. Piro Assistant Assistant
7800 E. Union Avenue Treasurer Treasurer
Denver, CO 80237
Judy P. Wiese Vice President ^ Assistant
7800 E. Union Avenue & Assistant Secretary
Denver, CO 80237 ^ Secretary
Mark H. Williamson ^ Chairman of President,
7800 E. Union Avenue ^ the Board, CEO &
Denver, CO 80237 ^ President & Director
Chief Executive
Officer ^
<PAGE>
(c) Not applicable.
Item ^ 28. Location of Accounts and Records
--------------------------------
Mark H. Williamson
7800 E. Union Avenue
Denver, CO 80237
Item ^ 29. Management Services
-------------------
Not applicable.
Item ^ 30. Undertakings
------------
^ Not Applicable.
<PAGE>
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the registrant certifies that it meets all the
requirements for effectiveness of this registration statement under Rule 485(b)
under the Securities Act of 1933 and 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 ^ 13th day of ^ August, 1999.
Attest: INVESCO Bond Funds, Inc.
^
/s/ Glen A. Payne /s/Mark H. Williamson
- ------------------------------ ------------------------------------
Glen A. Payne, Secretary Mark H. Williamson, President
Pursuant to the requirements of the Securities Act of 1933, this
post-effective amendment to Registrant's Registration Statement has been signed
below by the following persons in the capacities and on the date indicated ^.
/s/ Mark H. Williamson /s/ Lawrence H. Budner
- ------------------------------------ ------------------------------------
Mark H. Williamson, President & Lawrence H. Budner, Director
Director (Chief Executive Officer)
/s/ Ronald L. Grooms /s/ Fred A. Deering
- ------------------------------------ ------------------------------------
Ronald L. Grooms, Treasurer Fred A. Deering, Director
(Chief Financial and
Accounting Officer)
/s/ Victor L. Andrews /s/ Larry Soll
- ------------------------------------ ------------------------------------
Victor L. Andrews, Director Larry Soll, Director
/s/ Bob R. Baker /s/ Kenneth T. King
- ------------------------------------ ------------------------------------
Bob R. Baker, 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 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, October 30, 1996 and October 30, 1997.
<PAGE>
Exhibit Index
-------------
Page in
Exhibit Number Registration Statement
- -------------- ----------------------
^ a(2) 85
a(3) 87
i(2) 89
j 90
m 92
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
INVESCO BOND FUNDS, INC.
INVESCO Bond Funds, Inc., a corporation organized and existing under the
General Corporation Law of the State of Maryland (the "Company"), hereby
certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: Prior to this amendment, in the exercise of powers granted to the
board of directors pursuant to Section 3 of this Article III, the board of
directors designated four series of shares of common stock of the Company to be
designated as the INVESCO High Yield Fund, the INVESCO Select Income Fund, the
INVESCO Short-Term Bond Fund, and the INVESCO U.S. Government Securities Fund.
Three hundred million (300,000,000) shares of the Company's Common Stock are
classified as and allocated to each of the INVESCO High Yield Fund and INVESCO
Select Income Fund. One hundred million (100,000,000) shares of the Company's
Common Stock are classified as and allocated to each of the INVESCO Short-Term
Bond Fund and INVESCO U.S. Government Securities Fund.
SECOND: Shares of each class have been duly authorized and classified by
the board of directors pursuant to authority and power contained in the Articles
of Incorporation of the Company.
THIRD: A description of the common stock so classified, including the
powers, preferences participating, voting or other special rights and
qualifications, restrictions and limitations thereof, is as outlined in the
Articles of Incorporation of the Company.
FOURTH: The Company is registered as an open-end management investment
company under the Investment Company Act of 1940.
FIFTH: Article III, Section 1 of the Articles of Incorporation of the
Company is hereby amended to read as follows:
ARTICLE III
CAPITALIZATION
Section 1. The aggregate number of shares the Company shall have the
authority to issue is one billion (1,000,000,000) shares of Common Stock,
having a par value of one cent ($0.01) per share. The aggregate par value
of all shares which the Company shall have authority to issue is ten
million dollars ($10,000,000). Such stock may be issued as full shares or
as fractional shares.
In the exercise of powers granted to the board of directors pursuant
to Section III of this Article III, the board of directors designates four
series of shares of common stock of the Company to be designated as the
INVESCO High Yield Fund, the INVESCO Select Income Fund, the INVESCO
Tax-Free Bond Fund, and the INVESCO U.S. Government Securities Fund. Three
hundred million (300,000,000) shares of the Company's Common Stock are
classified as and allocated to each of the INVESCO High Yield Fund and
INVESCO Select Income Fund. One hundred million (100,000,000) shares of
the Company's Common Stock are classified as and allocated to each of the
INVESCO Tax-Free Bond Fund and INVESCO U.S. Government Securities Fund.
Unless otherwise prohibited by law, so long as the corporation is
registered as an open-end investment company under the Investment Company
Act of 1940, as amended, the total number of shares which the corporation
is authorized to issue may be increased or decreased by the board of
directors in accordance with the applicable provisions of the Maryland
General Corporation Law.
The foregoing amendment was duly adopted in accordance with the
requirements of Section 2-408 of the General Corporation Law of the State of
Maryland.
The undersigned, President of the Company, who is executing on behalf of
the Company the foregoing Articles of Amendment, of which this paragraph is made
a part, hereby acknowledges, in the name and on behalf of the Company, the
foregoing Articles of Amendment to be the corporate act of the Company and
further verifies under oath that, to the best of his knowledge, information and
belief, the matters and facts set forth herein are true in all material
respects, under the penalties of perjury.
<PAGE>
IN WITNESS WHEREOF, INVESCO Bond Funds, Inc. has caused these Articles of
Amendment to be signed in its name and on its behalf by its President and
witnessed by its President on the 10th day of August, 1999.
These Articles of Amendment shall be effective upon acceptance by the
Maryland State Department of Assessments and Taxation.
INVESCO BOND FUNDS, INC.
By: /s/ Ronald L. Grooms
------------------------------------
Ronald L. Grooms, Treasurer & Chief
Financial & Accounting Officer
WITNESSED:
By: /s/ Glen A. Payne
--------------------------
Glen A. Payne, Secretary
CERTIFICATION
I, Ruth A. Christensen, a notary public in and for the City and County
of Denver, and State of Colorado, do hereby certify that Ronald L. Grooms,
personally known to me to be the person whose name is subscribed to the
foregoing Articles of Amendment, appeared before me this date in person and
acknowledged that he signed, sealed and delivered said instrument as his full
and voluntary act and deed for the uses and purposes therein set forth.
Given my hand and official seal this 10th day of August, 1999.
/s/ Ruth A. Christensen
------------------------------------
Notary Public
My Commission Expires: March 16, 2002
ARTICLES OF TRANSFER
OF
INVESCO TAX-FREE INCOME FUNDS, INC.
AND
INVESCO BOND FUNDS, INC.
These Articles of Transfer are entered into and effective as of August 13,
1999 pursuant to the provisions of Section 3-109 of the Corporations and
Associations Article of the Annotated Code of Maryland, by and between the
undersigned corporation, INVESCO Bond Funds, Inc., a Maryland corporation, and
the undersigned corporation, INVESCO Tax-Free Income Funds, Inc., a Maryland
corporation on behalf of its sole series, INVESCO Tax-Free Bond Fund (formerly,
INVESCO Tax-Free Long-Term Bond Fund) ("Fund"), with respect to the transfer of
all the assets and liabilities of the Fund in exchange for shares of common
stock in INVESCO Tax-Free Bond Fund, a series of INVESCO Bond Funds, Inc., in
accordance with an Agreement and Plan of Conversion and Termination made as of
March 21, 1999 ("Plan").
FIRST: INVESCO Tax-Free Income Funds, Inc. agrees to transfer all of
its property and assets to INVESCO Bond Funds, Inc. in accordance with the
Plan.
SECOND: INVESCO Bond Funds, Inc. is a corporation incorporated under
the laws of the State of Maryland.
THIRD: INVESCO Tax-Free Bond Fund is the only series of INVESCO Tax-Free
Income Funds, Inc., a corporation organized under the laws of the State of
Maryland.
FOURTH: The address and principal place of business of INVESCO
Tax-Free Income Funds, Inc. is:
7800 East Union Avenue
Denver, Colorado 80237
FIFTH: The principal office of INVESCO Bond Funds, Inc. in the State
of Maryland is:
c/o The Corporation Trust Incorporated
32 South Street
Baltimore, Maryland 21202
SIXTH: The principal office of INVESCO Tax-Free Income Funds, Inc. in
the State of Maryland is:
c/o The Corporation Trust Incorporated
32 South Street
Baltimore, Maryland 21202
SEVENTH: Neither INVESCO Bond Funds, Inc. nor INVESCO Tax-Free Income
Funds, Inc. owns an interest in land located in the State of Maryland.
EIGHTH: The terms and conditions of the transfer as set forth in the Plan
and incorporated by reference into these Articles were advised, authorized, and
approved in the manner and by any vote required by INVESCO Bond Funds, Inc.'s
Articles of Incorporation, as amended, and the Maryland General Corporation Law,
and INVESCO Tax-Free Income Funds, Inc.'s Articles of Incorporation, as amended,
and the Maryland General Corporation Law. The Plan was approved by INVESCO
Tax-Free Income Funds, Inc.'s Board of Directors at a meeting on February 3,
1999, and the holders of a majority of the outstanding shares of INVESCO
Tax-Free Income Funds, Inc.'s common stock entitled to vote at a meeting of
shareholders on May 20, 1999. The Plan was approved by INVESCO Bond Funds,
Inc.'s Board of Directors at a meeting on February 3, 1999; no approval by
shareholders of INVESCO Bond Funds, Inc. was required.
<PAGE>
NINTH: The nature and amount of the consideration paid by INVESCO Bond
Funds, Inc. for the transfer of assets of INVESCO Tax-Free Bond Fund to
INVESCO Bond Funds, Inc. has been determined in accordance with the terms and
conditions of the Plan.
IN WITNESS WHEREOF, INVESCO Bond Funds, Inc. and INVESCO Tax-Free Income
Funds, Inc., on behalf of INVESCO Tax-Free Bond Fund, has each caused these
presents to be signed in its name and on its behalf by the undersigned officers.
INVESCO BOND FUNDS, INC.,
on behalf of INVESCO Tax-Free
Bond Fund
Attest:
By: /s/ Glen A. Payne By: /s/ Ronald L. Grooms
-------------------- -------------------------
Glen A. Payne, Ronald L. Grooms,
Secretary Treasurer & Chief
Financial &
Accounting Officer
INVESCO TAX-FREE INCOME FUNDS,
INC., on behalf of INVESCO Tax-Free
Bond Fund
Attest:
By: /s/ Glen A. Payne By: /s/ Ronald L. Grooms
-------------------- -------------------------
Glen A. Payne, Ronald L. Grooms,
Secretary Treasurer & Chief
Financial &
Accounting Officer
THE UNDERSIGNED, the Treasurer & Chief Financial & Accounting Officer of
INVESCO Bond Funds, Inc., a corporation organized under the laws of the State of
Maryland on April 2, 1993, who executed on behalf of said Corporation the
foregoing Articles of Transfer of which this certificate is made a part, hereby
acknowledges, in the name and on behalf of said Corporation, the foregoing
Articles of Transfer to be the corporate act of said Corporation and further
certifies that to the best of his/her knowledge, information and belief, the
matters and facts set forth therein with respect to the approval thereof are
true in all material respects, under the penalties of perjury.
INVESCO BOND FUNDS, INC.
/s/ Ronald L. Grooms
-----------------------------
Ronald L. Grooms,
Treasurer & Chief Financial &
Accounting Officer
THE UNDERSIGNED, the Treasurer & Chief Financial & Accounting Officer of
INVESCO Tax-Free Income Funds, Inc., a corporation organized under the laws of
the State of Maryland on April 2, 1993, who executed on behalf of said
Corporation the foregoing Articles of Transfer of which this certificate is made
a part, hereby acknowledges, in the name and on behalf of said Corporation, the
foregoing Articles of Transfer to be the corporate act of said Corporation and
further certifies that to the best of his/her knowledge, information and belief,
the matters and facts set forth therein with respect to the approval thereof are
true in all material respects, under the penalties of perjury.
INVESCO TAX-FREE INCOME FUNDS, INC.
/s/ Ronald L. Grooms
----------------------------------------
Ronald L. Grooms,
Treasurer & Chief Financial & Accounting
Officer
--------------------------
KIRKPATRICK & LOCKHART LLP
--------------------------
1800 Massachusetts Avenue, N.W.
2ND FLOOR
WASHINGTON, D. C. 20036-1800
TELEPHONE (202) 778-9000
FACSIMILE (202) 778-9100
www.kl.com
August 9, 1999
INVESCO Bond Funds, Inc.
7800 East Union Avenue
Denver, Colorado 80236
Dear Sir or Madam:
You have requested our opinion, as counsel to INVESCO Bond Funds, Inc.
(the "Company"), a corporation organized under the laws of the State of Maryland
on April 2, 1993, as to certain matters regarding the issuance of Shares of the
Company in connection with the reorganization of INVESCO Tax-Free Bond Fund, a
series of a Maryland corporation; (the "Acquired Fund") into the Company, as
provided for in the Agreement and Plan of Conversion and Termination (the
"Plan") between the Company and INVESCO Tax-Free Income Funds, Inc. on behalf of
the Acquired Fund. The Plan provides for the Acquired Fund to transfer all of
its assets to a new series of the Company (the "Acquiring Fund") in exchange
solely for the issuance of Shares and the Acquiring Fund's assumption of the
liabilities of the Acquired Fund. (As used in this letter, the term "Shares"
means the shares of common stock of the Acquiring Fund to be issued in
connection with the Plan.)
We have, as counsel, participated in various corporate and other matters
relating to the Company. We have examined copies, either certified or otherwise
proved to be genuine, of its Articles of Incorporation and By-Laws, the minutes
of meetings of its Board of Directors and other documents relating to the
organization and operation of the Company, and we are generally familiar with
its business affairs. Based upon the foregoing, it is our opinion that the
Shares of the Company may be legally and validly issued in accordance with the
Company's Articles of Incorporation and By-Laws and subject to compliance with
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and applicable state laws regulating the offer and sale of securities,
and when so issued, the Shares will be legally issued, fully paid and
non-assessable.
We hereby consent to the filing of this opinion in connection with
Post-Effective Amendment No. 39 to the Company's Registration Statement on Form
N-1A (File No. 002-57151) to be filed with the Securities and Exchange
Commission. We also consent to the reference to our firm under the caption
"Legal Counsel" in the Statement of Additional Information filed as part of the
Registration Statement.
Sincerely,
/s/Kirkpatrick & Lockhart LLP
-----------------------------
Kirkpatrick & Lockhart LLP
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 39 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated July 31, 1998, relating to the financial
statements and financial highlights of INVESCO Tax-Free Long-Term Bond Fund (now
known as INVESCO Tax-Free Bond Fund) appearing in the June 30, 1998 Annual
Report to Shareholders of INVESCO Tax-Free Income Funds, Inc. (now one of the
portfolios comprising INVESCO Bond Funds, Inc.), which is also incorporated by
reference into the Registration Statement. We also consent to the references to
us under the heading "Financial Highlights" in the Prospectus and under the
headings "Independent Accountants" and "Financial Statements" in the Statement
of Additional Information.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Denver, Colorado
August 11, 1999
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:
<PAGE>
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, 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.
<PAGE>
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.
<PAGE>
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 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.
<PAGE>
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 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
