File No. 2-72165
As filed on ^ October 18, 1996
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No. ________
Post-Effective Amendment No. ^ 24 X
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. ^ 25 X
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INVESCO TAX-FREE INCOME FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
7800 E. Union Avenue, Denver, Colorado 80237
(Address of Principal Executive Offices)
P.O. Box 173706, Denver, Colorado 80217-3706
(Mailing Address)
Registrant's Telephone Number, including Area Code: (303) 930-6300
Glen A. Payne, Esq.
7800 E. Union Avenue
Denver, Colorado 80237
(Name and Address of Agent for Service)
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Copies to:
Ronald M. Feiman, Esq.
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 W. 47th St.
New York, New York 10036
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Approximate Date of Proposed Public Offering: As soon as practicable after this
post-effective amendment becomes effective.
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
^ X on November 1, 1996, 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.
Registrant has previously elected to register an indefinite number of shares of
its common stock pursuant to Rule 24f-2 under the Investment Company Act.
Registrant's Rule 24f-2 Notice for the fiscal year ended June 30, ^ 1996, was
filed on or about August ^ 26, 1996.
Page 1 of 211
Exhibit index is located at page 120
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INVESCO TAX-FREE INCOME FUNDS, INC.
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CROSS-REFERENCE SHEET
Form N-1A
Item Caption
- --------- -------
Part A Prospectus
1....................... Cover Page
2....................... Annual Fund Expenses; Essential
Information
3....................... Financial Highlights; Fund Price
and Performance
4....................... Investment Objective and Strategy;
Investment Policies and Risks; The
Fund and Its Management
5....................... The Fund and Its Management
5A...................... Not Applicable
6....................... Fund Services; Taxes, Dividends and
Capital Gain Distributions;
Additional Information
7....................... How to Buy Shares; Fund Price and
Performance; Fund Services; The
Fund and Its Management
8....................... Fund Services; How to Sell Shares
9....................... Not Applicable
Part B Statement of Additional Information
10....................... Cover Page
11....................... Table of Contents
12....................... The Fund and Its Management
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Form N-1A
Item Caption
- --------- -------
13....................... Investment Practices; Investment
Policies and Restrictions
14....................... The Fund and Its Management
15....................... The Fund and Its Management; Additi
onal Information
16....................... The Fund and Its Management;
Additional Information
17....................... Investment Practices; Investment
Policies and Restrictions
18....................... Additional Information
19....................... How Shares Can Be Purchased; How
Shares Are Valued; Services
Provided by the Fund; How to Redeem
Shares
20....................... Dividends, Capital Gain
Distributions, and Taxes
21....................... How Shares Can Be Purchased
22....................... Fund Performance
23....................... Additional Information
Part C Other Information
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
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<PAGE>
PROSPECTUS
^ November 1, 1996
INVESCO TAX-FREE INTERMEDIATE BOND FUND
INVESCO Tax-Free Intermediate 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, by investing in a diversified
portfolio of intermediate-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 Fund's portfolio
normally will range from five to 10 years.
This prospectus provides you with the basic information you should know
before investing in the Fund. You should read it and keep it for future
reference. A Statement of Additional Information containing further information
about the Fund, dated ^ November 1, 1996, has been filed with the Securities and
Exchange Commission, and is incorporated by reference into this prospectus. To
obtain a free copy, write to INVESCO Funds Group, Inc., P.O. Box 173706, Denver,
Colorado 80217-3706; or call 1- 800-525-8085.
<PAGE>
TABLE OF CONTENTS
ESSENTIAL INFORMATION...................................................... 6
ANNUAL FUND EXPENSES....................................................... 7
FINANCIAL HIGHLIGHTS....................................................... 9
INVESTMENT OBJECTIVE AND STRATEGY.......................................... 11
INVESTMENT POLICIES AND RISKS.............................................. 11
THE FUND AND ITS MANAGEMENT................................................ 15
FUND PRICE AND PERFORMANCE................................................. 17
HOW TO BUY SHARES.......................................................... 18
FUND SERVICES.............................................................. 23
HOW TO SELL SHARES......................................................... 23
TAXES, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS............................ 25
ADDITIONAL INFORMATION..................................................... 27
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION. THE SHARES
OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
ESSENTIAL INFORMATION
Investment Goal And Strategy. INVESCO Tax-Free Intermediate
Bond Fund is a diversified mutual fund that seeks current income
free from federal income taxes. The Fund invests primarily in
municipal obligations, and the average dollar-weighted maturity for
its entire portfolio normally will range from five to 10 years.
There is no guarantee that the Fund will meet its objective. See
"Investment Objective And Strategy."
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 such as the IRA, SEP-IRA,
SARSEP, 401(k), Profit Sharing, Money Purchase Pension, or 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 INVESCO
Tax-Free Income Funds, Inc. (the "Company"), a diversified,
managed, no-load mutual fund. The Fund is owned by its
shareholders. It employs INVESCO Funds Group, Inc. ("IFG"), founded
in 1932, to serve as investment adviser, administrator,
distributor, and transfer agent; and INVESCO Trust Company
("INVESCO Trust"), founded in 1969, as sub-adviser. Together, IFG
and INVESCO Trust constitute "Fund Management."
The Fund's investments are selected by INVESCO vice president
James S. Grabovac. A Chartered Financial Analyst, Mr. Grabovac
earned his MBA from the University of Michigan and a BA from
Lawrence University. See "The Fund And Its Management."
IFG and INVESCO Trust are part of a global firm that managed approximately
^ $90 billion as of June 30, ^ 1996. The parent company, INVESCO PLC, is based
in London, with money managers located in Europe, North America, and the Far
East.
This Fund Offers all of the following services at no charge:
Telephone purchases
Telephone exchanges
Telephone redemptions
Automatic reinvestment of distributions
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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, however, 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, the Fund's manager
voluntarily ^ reimbursed the Fund for amounts in excess of 0.70% of average net
assets through April 30, 1996, and reimburses the Fund for amounts in excess of
0.80% of average net assets effective May 1, 1996.
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fee 0.50%
12b-1 Fees 0.25%
Other expenses (after absorbed expenses)1,2 0.01% ^
Total Fund Operating Expenses (after
absorbed ^ expenses)1,2 0.76%
^ (1)Portions of the brokerage commissions paid by the Fund were used to reduce
Fund expenses, and the Fund's custodian fees were reduced under an expense
offset arrangement. However, as a result of a new regulatory requirement, the
figures shown above do not reflect these reductions. In comparing expenses for
different years, please note that the ratios of Expenses to Average Net Assets
shown under "Financial Highlights" do reflect any reductions for periods prior
to the fiscal year ended June 30, 1996.
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(2)Certain Fund expenses of the Tax-Free Intermediate Bond Fund are being
voluntarily absorbed by IFG. Ratio reflects total expenses less absorbed
expenses by IFG, before any expense offset arrangement. In the absense of such
voluntary expense limitation, the Fund's ^"Other Expenses" and "Total ^
Operating Expenses" would have been ^ 1.59% and ^ 2.34%, respectively, based on
the Fund's actual expenses for the fiscal year ended June 30, ^ 1996.
Example
A shareholder would pay the following expenses on a $1,000 investment for
the periods shown, assuming a hypothetical 5% annual return and redemption at
the end of each time period. (Of course, actual operating expenses are paid from
the Fund's assets, and are deducted from the amount of income available for
distribution to shareholders; they are not charged directly to shareholder
accounts.)
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
^ $8 $24 $42 $94
The purpose of this table is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly. THE EXAMPLE SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE OR EXPENSES,
AND ACTUAL ANNUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
For more information on the Fund's expenses, see "The Fund and Its Management"
and "How to Buy Shares -- Distribution Expenses."
Since the Fund pays a distribution fee, investors who own Fund shares for
a long period of time may pay more than the economic equivalent of the maximum
front-end sales charge permitted for mutual funds by the National Association of
Securities Dealers, Inc.
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout ^ Each Period)
The following information has been audited by Price Waterhouse LLP,
independent accountants. This information should be read in conjunction with the
audited financial statements and the independent accountant's report thereon
appearing in the Fund's ^ 1996 Annual Report to Shareholders, which is
incorporated by reference into the Statement of Additional Information. Both are
available without charge by contacting IFG at the address or telephone number on
the cover of this prospectus. The Annual Report also contains more information
about the Fund's performance.
^ Period
Ended
Year Ended ^ June 30 June 30
----------------------------------
1996 1995 1994^
Tax-Free Intermediate Bond Fund
PER SHARE DATA
Net Asset Value ^--
Beginning of Period $9.70 $9.52 $10.00
---------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.43 0.44 0.19
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 0.04 0.18 (0.48)
---------------------------------
Total ^ from Investment Operations 0.47 0.62 (0.29)
---------------------------------
LESS DISTRIBUTIONS
Dividends from Net
Investment Income 0.43 0.44 0.19
---------------------------------
Net Asset Value ^-- End of Period $9.74 $9.70 $9.52
=================================
TOTAL RETURN 4.89% 6.67% (2.93%)*
RATIOS
Net Assets -- End of Period
($000 Omitted) $4,997 $4,907 $5,083
Ratio of Expenses to
Average ^ Net Assets# 0.76%@ 0.70% 0.70%~
Ratio of Net Investment Income
to^ Average Net Assets# 4.40% 4.56% 3.75%~
Portfolio Turnover Rate 49% 23% 55%*
^ From December 1, 1993, commencement of operations, to June 30, 1994.
* ^ Based on operations for the period shown and, accordingly, are not
representative of a full year.
<PAGE>
# Various expenses of the Fund were voluntarily absorbed by IFG and ITC for the
^ years ended June 30, 1996 and 1995, and for the period ended June 30, 1994.
If such expenses had not been ^ voluntarily absorbed, ratio of expenses to
average net assets would have been 2.34%, 2.45% and 3.09%, respectively, and
ratio of net investment income to average net assets would have been 2.82%,
2.81% and 1.36%, respectively.
@ Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
~ Annualized
<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. Our strategy is moderate, so we focus on intermediate-term
municipal bonds, which may include any combination of general obligation,
revenue, or industrial development bonds. As a matter of fundamental investment
policy, at least 80% of the Fund's total assets normally will consist of
municipal bonds rated investment ^ grade, as defined below. Under ordinary
circumstances, no more than 20% of the Fund's total assets may consist of AMT
bonds, short-term taxable securities, debt obligations rated below investment
grade, and cash. There is no assurance that the Fund's investment objective will
be met.
The dollar-weighted average maturity of the obligations in the Fund's
portfolio normally will range from five to 10 years, and will vary as Fund
Management responds to changes in interest rates.
INVESTMENT POLICIES AND RISKS
Investors should expect to see their price per share vary with moves in
the municipal bond market, economic conditions and other factors. The Fund
invests in many different issues over a wide geographical range; this
diversification reduces the Fund's overall exposure to investment and market
risks, but cannot eliminate these risks.
Municipal Securities. When we assess an issuer's ability to meet its
interest rate obligations and repay its debt when due, we are referring to
"credit risk." Municipal obligations are rated based on their estimated credit
risk by independent services such as Standard & Poor's ^ Rating Group ^("S&P"),
Moody's Investors Service, 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, bonds generally see their prices 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 Fund Management to be of equivalent quality);
<PAGE>
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 CCC or Caa by
S&P or Moody's, respectively. Bonds rated CCC or Caa may be in default or there
may be present elements of danger with respect to payment of principal or
interest. While Fund Management 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.
As discussed above, under normal circumstances, no more than 20% of the
Fund's total assets may be invested in the aggregate in AMT bonds, short-term
taxable securities, debt obligations rated below investment grade and cash.
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.
Short-Term Taxable Investments. These 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.
Dividends paid by the Fund attributable to income from such investments will be
taxable to investors. See "Taxes, Capital Gain Distributions and Dividends."
When we believe market or economic conditions are ^ adverse, the Fund may
assume a defensive position by temporarily investing up to 100% of its assets in
short-term taxable investments, seeking to protect its assets until conditions
stabilize.
Tender Option Bonds. The Fund may seek to earn additional income by
purchasing "tender option bonds," municipal bonds which have relatively long
maturities and offer fixed income at a substantially higher rate than other
short-term tax-exempt bonds. Tender option bonds involve three parties: the
issuer, the buyer, and a third party, such as a bank, broker-dealer, or another
financial institution. In exchange for a periodic fee, this third party allows
the purchaser to cash in ("tender") the bond for its face value at periodic
intervals.
<PAGE>
Tender option bonds must be carefully evaluated, based on the
creditworthiness of the issuer and third party. At times, the tender option
feature on these bonds may be terminable; in such an instance, the tender option
bonds may be considered illiquid securities.
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.
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. Put
and call options are contracts which grant the right to sell at a specified
price a specific security or futures contract by a certain date. The put option
buyer gains this right in return for a premium. 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 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.
<PAGE>
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. Of the 10% of the Fund's total assets that may be
invested in debt obligations rated below investment grade, no more than 5% of
the Fund's total assets may be invested in zero coupon bonds having such
ratings.
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 qualified brokers, dealers, banks, or other financial
institutions, on a fully collateralized basis. For further information on this
policy, see "Investment Policies and Restrictions" in the Statement of
Additional Information.
Repurchase Agreements. The Fund may invest money, for as short a time as
overnight, using repurchase agreements ("repos"). With a repo, the Fund buys a
debt instrument, agreeing simultaneously to sell it back to the prior owner at
an agreed-upon price. The Fund could incur costs or delays in seeking to sell
the instrument if the prior owner defaults on its repurchase obligation. To
reduce that risk, the securities ^ that are the subject of the 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 Fund's board of
directors.
The Fund may invest in illiquid securities, including securities that are
subject to restrictions on resale and securities that are not readily
marketable. The Fund also may invest in restricted securities that may be resold
to institutional investors, known as "Rule 144A Securities." For more
information concerning illiquid and Rule 144A Securities, see "Investment
Policies and Restrictions" in the Statement of Additional Information.
<PAGE>
For a further discussion of risks associated with an investment in the
Fund, see "Investment Policies and Restrictions" and "Investment Practices" in
the Statement of Additional Information.
Investment Restrictions. Certain restrictions, which are set forth in the
Statement of Additional Information, may not be altered without the approval of
the Fund's shareholders. For example, with respect to 75% of its 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.
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 April 2, 1993, under the laws of Maryland.
The Company's board of directors has responsibility for overall
supervision of the Fund, and reviews the services provided by the adviser and
sub-adviser. Under an agreement with the Company, INVESCO Funds Group, Inc.
("IFG"), 7800 E. Union Avenue, Denver, Colorado 80237, serves as the Fund's
investment manager; it is primarily responsible for providing the Fund with
various administrative services. IFG's wholly-owned subsidiary, INVESCO Trust,
is the Fund's sub-adviser and is primarily responsible for managing the Fund's
investments. Together, IFG and INVESCO Trust constitute "Fund Management."
James S. Grabovac, portfolio manager for the Fund since 1995, has
responsibility for the day-to-day management of the Fund's holdings. He also
manages INVESCO Tax-Free Long-Term Bond Fund. A Chartered Financial Analyst, Mr.
Grabovac is a vice president of INVESCO Trust; previously, his career included
these highlights: He was a principal and fund manager (1991 to 1995) and
portfolio manager (1989 to 1991) with Stein Roe & Farnham Inc., a futures and
options trader with Continental Illinois National Bank (1987), a corporate bond
trader with The Chicago Corporation from 1985 to 1987, and Midwest municipal
underwriting manager with Continental Illinois National Bank from 1982 to 1985.
He holds an MBA from the University of Michigan and a BA from Lawrence
University.
Fund Management permits investment and other personnel to purchase and
sell securities for their own accounts, subject to a compliance policy governing
personal investing. This policy requires Fund Management's personnel to conduct
<PAGE>
their personal investment activities in a manner that Fund Management
believes is not detrimental to the Fund or Fund Management's other advisory
clients. See the Statement of Additional Information for more detailed
information.
The Fund pays IFG a monthly management fee which is based upon a
percentage of the Fund's average net assets determined daily; in turn, IFG pays
INVESCO Trust a sub-advisory fee out of its management fee. The management fee
is computed at the annual rate of 0.50% on the first $300 million of the Fund's
average net assets; 0.40% on the next $200 million of the Fund's average net
assets; and 0.30% on the Fund's average net assets over $500 million. For the
fiscal year ended June 30, ^ 1996, investment management fees paid by the Fund
amounted to 0.50% of the Fund's average net assets. Out of this fee, IFG paid an
amount equal to 0.24% of the Fund's average net assets to INVESCO Trust as a
sub- advisory fee. No fee is paid by the Fund to INVESCO Trust.
Under a Transfer Agency Agreement, IFG acts as registrar, transfer agent,
and dividend disbursing agent for the Fund. The Fund pays an annual fee of ^
$26.00 per shareholder account or per participant in an omnibus account ^ for
these services. Registered broker-dealers, third party administrators of
tax-qualified retirement plans and other entities, including affiliates of IFG,
may provide equivalent services to the Fund. In these cases, IFG may pay, out of
the fee it receives from the Fund, an annual sub- transfer agency or
record-keeping fee to the third party.
In addition, under an Administrative Services Agreement, IFG handles
additional administrative, record-keeping, and internal sub-accounting services
for the Fund. For the fiscal year ended June 30, ^ 1996, the Fund paid IFG a fee
for these services equal to ^ 0.20% (prior to the voluntary absorption of
certain Fund expenses by IFG) of the Fund's average net assets.
The Fund's expenses, which are accrued daily, are deducted from total
income before dividends are paid. Total expenses of the Fund for the fiscal year
ended June 30, ^ 1996, including investment management fees (but excluding
brokerage commissions, which are a cost of acquiring securities), amounted to ^
0.76% of the Fund's average net assets. Certain Fund expenses are absorbed
voluntarily by IFG and ITC pursuant to a commitment to the Fund in order to
ensure that the Fund's total operating expenses ^ did not exceed 0.70% of the
Fund's average net assets (through April 30, 1996) and will not exceed 0.80% of
the Fund's average net assets (beginning May 1, 1996). This commitment may be
changed following consultation with the Company's board of directors. In the
absence of this voluntary expense limitation, the Fund's total operating
expenses would have been ^ 2.34% of the Fund's average net assets.
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of
their financial responsibility coupled with their ability to effect transactions
<PAGE>
at the best available prices. As discussed under "How to Buy Shares --
Distribution Expenses," the Fund may market its shares through intermediary
brokers or dealers that have entered into Dealer Agreements with IFG, as the
Fund's Distributor. The Fund may place orders for portfolio transactions with
qualified broker/dealers which recommend the Fund, or sell shares of the Fund,
to clients, or act as agent in the purchase of Fund shares for clients, if Fund
Management believes that the quality of the execution of the transaction and
level of commission are comparable to those available from other qualified
brokerage firms. For further information, see "Investment Practices -- Placement
of Portfolio Brokerage" in the Statement of Additional Information.
The parent company for IFG and INVESCO Trust is INVESCO PLC, a publicly
traded holding company whose subsidiaries provide investment services around the
world. IFG was established in 1932 and, as of June 30, ^ 1996, managed 14 mutual
funds, consisting of ^ 39 separate portfolios, with combined assets of
approximately ^ $12.9 billion on behalf of over ^ 826,000 shareholders. INVESCO
Trust (founded in 1969) served as adviser or sub-adviser to ^ 45 investment
portfolios as of June 30, ^ 1996, including 27 portfolios in the INVESCO group.
These 45 portfolios had aggregate assets of approximately ^ $12.0 billion as of
June 30, ^ 1996. In addition, INVESCO Trust provides investment management
services to private clients, including employee benefit plans that may be
invested in a collective trust sponsored by INVESCO Trust.
FUND PRICE AND PERFORMANCE
Determining Price. The value of your investment in the Fund will vary
daily. The price per share is also known as the Net Asset Value (NAV). IFG
prices the Fund every day that the New York Stock Exchange is open, as of the
close of regular trading (normally, 4:00 p.m., New York time). NAV is calculated
by adding together the current market value of all of the Fund's assets,
including accrued interest and dividends; then subtracting liabilities,
including accrued expenses; and finally dividing that dollar amount by the total
number of shares outstanding.
Performance Data. To keep shareholders and potential investors informed,
we will occasionally advertise the Fund's total return and yield. Total return
figures show the average annual rate of return on a $1,000 investment in the
Fund, assuming reinvestment of all dividends and capital gain distributions, for
one-, five- and ten-year periods. Cumulative total return shows the actual rate
of return on an investment; average annual total return represents the average
annual percentage change in the value of an investment. Both cumulative and
average annual total returns tend to "smooth out" fluctuations in the Fund's
investment results, not showing the interim variations in performance over the
periods cited.
The yield of the Fund refers to the income generated by an investment in
the Fund over a 30-day or one month period, and is computed by dividing the net
<PAGE>
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 taxable investment would have to generate in order to
provide the same income as the Fund, 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 Fund's Annual Report to shareholders. You can get a free copy
by calling or writing to IFG using the phone number or address on the cover of
this prospectus.
When we quote mutual fund rankings published by Lipper Analytical
Services, Inc., we may compare the fund to others in its category of
Intermediate Municipal Debt Funds, as well as the broad-based Lipper general
fund groupings. These rankings allow you to compare the Fund to its peers. Other
independent financial media also produce performance- or service-related
comparisons, which you may see in our promotional materials. For more
information see "Fund Performance" in the Statement of Additional Information.
Performance figures are based on historical investment results and are not
intended to suggest future performance.
HOW TO BUY SHARES
The 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 IFG. However, if you invest
in the Fund through a securities broker, you may be charged a commission or
transaction fee. For all new accounts, please send a completed application form.
Please specify which Fund you wish to purchase.
Fund Management reserves the right to increase, reduce or waive the
minimum investment requirements in its sole discretion, where it determines this
action is in the best interests of the Fund. Further, Fund Management reserves
the right in its sole discretion to reject any order for the purchase of Fund
shares (including purchases by exchange) when, in its judgment, such rejection
is in the Fund's best interests.
<PAGE>
================================================================================
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 IFG
Denver, CO 80217- incurs. If you are
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.
- --------------------------------------------------------------------------------
By Telephone or $1,000. Payment must be
Wire received within 3
Call 1-800-525-8085 business days, or
to request your the transaction may
purchase. Then send be cancelled. If a
your check by telephone purchase
overnight courier is cancelled due to
to our street nonpayment, you
address: will be responsible
7800 E. Union Ave., for any related
Denver, CO 80237. loss the Fund or
Or you may transmit IFG incurs. If you
your payment by are already a
bank wire (call IFG shareholder in the
for instructions). INVESCO funds, the
Fund may seek
reimbursement from your
existing account(s) for
any loss incurred.
<PAGE>
- --------------------------------------------------------------------------------
With EasiVest or $50 per month for Like all regular
Direct Payroll EasiVest; $50 per investment plans,
Purchase pay period for neither EasiVest
You may enroll on Direct Payroll nor Direct Payroll
the fund Purchase. You may Purchase ensures a
application, or start or stop your profit or protects
call us for the regular investment against loss in a
correct form and plan at any time, falling market.
more details. with two weeks' Because you'll
Investing the same notice to IFG. invest continually,
amount on a monthly regardless of
basis allows you to varying price
buy more shares levels, consider
when prices are low your financial
and fewer shares ability to keep
when prices are buying through low
high. This "dollar- price levels. And
cost averaging" may remember that you
help offset market will lose money if
fluctuations. Over you redeem your
a period of time, shares when the
your average cost market value of all
per share may be your shares is less
less than the than their cost.
actual average
price per share.
- --------------------------------------------------------------------------------
By PAL(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 cancelled. If a
telephone purchase is
cancelled due to
nonpayment, you will be
responsible for any
related loss the Fund or
IFG incurs. If you are
already a shareholder in
the INVESCO funds, the
Fund may seek
reimbursement from your
existing account(s) for
any loss incurred.
<PAGE>
- --------------------------------------------------------------------------------
By Exchange $1,000 to open a See "Exchange
Between this and new account; $50 Privilege" below.
another of the for written
INVESCO funds. Call requests to
1-800-525-8085 for purchase additional
prospectuses of shares for an
other INVESCO existing account.
funds. You may also (The exchange
establish an minimum is $250 for
Automatic Monthly purchases requested
Exchange service by telephone.)
between two INVESCO
funds; call IFG for
further details and
the correct form.
================================================================================
Your order to purchase Fund shares will not begin earning dividends or
other distributions until your payment can be converted into available federal
funds under regular banking procedures or, if you are acquiring shares in an
exchange from another INVESCO fund, the Fund receives the proceeds of the
exchange. Checks normally are converted into federal funds (moneys held on
deposit within the Federal Reserve System) within two or three business days
after we receive them, although this period may be longer for checks drawn on
banks that are not members of the Federal Reserve System.
Exchange Privilege. You may exchange your shares in this Fund for those in
another INVESCO fund, on the basis of their respective net asset values at the
time of the exchange. Before making any exchange, be sure to review the
prospectuses of the funds involved and consider their differences.
Please note these policies regarding exchanges of fund shares:
1) The fund accounts must be identically registered.
2) You may make four exchanges out of each fund during each
calendar year.
3) An exchange is the redemption of shares from one fund followed by the
purchase of shares in another. Therefore, any gain or loss realized on the
exchange is recognizable for federal income tax purposes (unless, of course,
your account is tax-deferred).
4) The Fund reserves the right to reject any exchange request, or to
modify or terminate exchange privileges, in the best interests of the Fund and
its shareholders. Notice of all such modifications or termination will be given
at least 60 days prior to the effective date of the change in privilege, except
for unusual instances (such as when redemptions of the exchanged shares are
<PAGE>
suspended under Section 22(e) of the Investment Company Act of 1940, or
when sales of the fund into which you are exchanging are temporarily stopped).
Distribution Expenses. The Fund is authorized under a Plan and Agreement
of Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Plan") to use its assets to finance certain activities relating to the
distribution of shares. These expenditures may include compensation (including
incentive compensation and/or continuing compensation based on the amount of
customer assets maintained in the Fund) to securities dealers and other
financial institutions and organizations, which may include IFG-affiliated
companies, to obtain various distribution-related and/or administrative services
for the Fund. Such services may include, among other things, processing new
shareholder account applications, preparing and transmitting to the Fund's
transfer agent computer-processable tapes of all transactions by customers, and
serving as the primary source of information to customers in answering questions
concerning the Fund and their transactions.
In addition, other reimbursable expenditures include advertising,
preparation and distribution of sales literature, printing and distribution of
prospectuses to prospective investors, public relations efforts, marketing
programs and such other services and promotional activities agreed upon from
time to time by the Fund and its board of directors. These services and
activities may be conducted by the staff of IFG or its affiliates or by third
parties.
IFG is not entitled to reimbursement for overhead expenses under the Plan,
but may be reimbursed for all or a portion of the compensation paid for salaries
and other employee benefits for IFG personnel whose primary responsibilities
involve marketing shares of the INVESCO funds, including the Fund. Also, any
payments made by the Fund may not be used to finance the distribution of shares
of any other mutual fund advised by IFG. Payments made by the Fund under the
Plan for compensation of marketing personnel, as noted above, are based on an
allocation formula designed to ensure that all such payments are appropriate.
Under the Plan, the Fund's reimbursement to IFG is limited to an amount
computed at a maximum annual rate of 0.25% of the Fund's average net assets.
Payments by the Fund under the Plan, for any month, may only be made to
reimburse expenditures incurred during the rolling 12-month period in which that
month falls, although this period is expanded to 24 months for expenses incurred
during the first 24 months of the Fund's operations. Therefore, any reimbursable
expenses incurred by IFG in excess of the limitations described above are not
reimbursable and will be borne by IFG. In addition, IFG may from time to time
make additional payments from its revenues to securities dealers and other
financial institutions that provide distribution-related and/or administrative
services for the Fund. No further payments will be made by the Fund under the
Plan in the event of its termination.
<PAGE>
FUND SERVICES
Shareholder Accounts. IFG will maintain a share account that reflects your
current holdings. Share certificates will be issued only upon specific request.
You will have greater flexibility to conduct transactions if you do not request
certificates.
Transaction Confirmations. You will receive detailed confirmations of
individual purchases, exchanges, and redemptions. If you choose certain
recurring transaction plans (for instance, EasiVest), your transactions will be
confirmed on your quarterly Investment Summary.
Investment Summaries. Each calendar quarter, shareholders receive a
written statement which consolidates and summarizes account activity and value
at the beginning and end of the period for each of their INVESCO funds.
Reinvestment of Distributions. Dividends and capital gain distributions
are automatically invested in additional fund shares at the NAV on the
ex-dividend date, unless you choose to have dividends and/or capital gain
distributions automatically reinvested in another INVESCO fund or paid by check
(minimum of $10.00).
Telephone Transactions. All shareholders may exchange and redeem Fund
shares by telephone, unless they expressly decline these privileges. By signing
the new account Application, a Telephone Transaction Authorization Form, or
otherwise using these privileges, the investor has agreed that, if the Fund has
followed reasonable procedures, such as recording telephone instructions and
sending written transaction confirmations, it will not be liable for following
telephoned instructions that it believes to be genuine. As a result of this
policy, the investor may bear the risk of any loss due to unauthorized or
fraudulent instructions.
HOW TO SELL SHARES
The following chart shows several convenient ways to redeem your Fund
shares. Shares of the Fund may be redeemed at any time at their current NAV next
determined after a request in proper form is received at the Fund's office. The
NAV at the time of the redemption may be more or less than the price you paid to
purchase your shares, depending primarily upon the Fund's investment
performance.
Please be specific from which fund you wish to redeem shares. Shareholders
have a separate account for each fund in which they invest.
<PAGE>
================================================================================
Method Minimum Redemption Please Remember
================================================================================
By Telephone $250 (or, if less, These telephone
Call us toll-free full liquidation of redemption
at 1-800-525-8085. the account) for a privileges may be
redemption check; modified or
$1,000 for a wire terminated in the
to bank of record. future at the
The maximum amount discretion of IFG.
which may be
redeemed by
telephone is
generally $25,000.
- --------------------------------------------------------------------------------
In Writing Any amount. The If the shares to be
Mail your request redemption request redeemed are
to INVESCO Funds must be signed by represented by
Group, Inc., P.O. all registered stock certificates,
Box 173706 shareholders(s). the certificates
Denver, CO 80217- Payment will be must be sent to
3706. You may also mailed to your IFG.
send your request address of record,
by overnight or to a pre-
courier to 7800 E. designated bank.
Union Ave., Denver,
CO 80237.
- --------------------------------------------------------------------------------
By Exchange $1,000 to open a See "Exchange
Between this and new account; $50 Privilege," above.
another of the for written
INVESCO funds. Call requests to
1-800-525-8085 for purchase additional
prospectuses of shares for an
other INVESCO existing account.
funds. You may also (The exchange
establish an minimum is $250 for
automatic monthly exchanges requested
exchange service by telephone.)
between two INVESCO
funds; call IFG for
further details and
the correct form.
- --------------------------------------------------------------------------------
Periodic Withdrawal $100 per payment, You must have at
Plan on a monthly or least $10,000 total
You may call us to quarterly basis. invested with the
request the The redemption INVESCO funds, with
appropriate form check may be made at least $5,000 of
and more payable to any that total invested
information at 1- party you in the fund from
800-525-8085. designate. which withdrawals
will be made.
<PAGE>
- --------------------------------------------------------------------------------
Payment To Third Any amount. All registered
Party owners of the
Mail your request account must sign
to INVESCO Funds the request, with a
Group, Inc., P.O. signature guarantee
Box 173706 from an eligible
Denver, CO 80217- guarantor financial
3706. institution, such
as a commercial
bank or recognized
national or
regional securities
firm.
================================================================================
While the Fund will attempt to process telephone redemptions promptly,
there may be times -- particularly in periods of severe economic or market
disruption -- when you may experience delays in redeeming shares by phone.
Payments of redemption proceeds will be mailed within seven days following
receipt of the redemption request in proper form. However, payment may be
postponed under unusual circumstances -- for instance, if normal trading is not
taking place on the New York Stock Exchange or during an emergency as defined by
the Securities and Exchange Commission. If your shares were purchased by a check
which has not yet cleared, payment will be made promptly upon clearance of the
purchase check (which may take up to 15 days).
If you participate in EasiVest, the Fund's automatic monthly investment
program, and redeem all of the shares in your account, we will terminate any
further EasiVest purchases unless you instruct us otherwise.
Because of the high relative costs of handling small accounts, should the
value of any shareholder's account fall below $250 as a result of shareholder
action, the Fund reserves the right to involuntarily redeem all shares in such
account, in which case the account would be liquidated and the proceeds
forwarded to the shareholder. Prior to any such redemption, a shareholder will
be notified and given 60 days to increase the value of the account to $250 or
more.
TAXES, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS^
Taxes. The Fund intends to distribute to shareholders substantially all of
its net investment income and net capital gains, if any, in order to continue to
qualify for tax treatment as a regulated investment company. Thus, the Fund does
not expect to pay any federal income or excise taxes.
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
<PAGE>
taxes. Unless shareholders are exempt from income taxes, however, they must
include all capital gain distributions, as well as any dividends earned on the
Fund's short-term taxable investments, in taxable income for federal, state, and
local income tax purposes. These distributions are taxable whether they are
received in cash or automatically distributed in shares of the Fund or another
fund in the INVESCO group.
^ Under the Tax Reform Act of 1986, interest on certain " private activity
bonds ^" issued after August 7, 1986, is an item of tax preference for purposes
of the alternative minimum tax in taxable years beginning after December 31,
1986. The Fund intends to limit, and has limited in the past, its investments in
such "private activity bonds" to not more than 20% of the Fund's total assets.
The portion of exempt-interest dividends paid by the Fund which is attributable
to such "private activity bonds" would be an item of tax preference to
shareholders.
Shareholders may be subject to backup withholding of 31% on capital gain
distributions and redemption proceeds. Unless you are subject to backup
withholding for other reasons, you can avoid backup withholding on your Fund
account by ensuring that we have a correct, certified tax identification number.
Dividends and Capital Gain Distributions. The Fund earns daily net
investment income in the form of dividends and interest on its investments. The
Fund's policy is to distribute substantially all of this income, less Fund
expenses, to shareholders on a monthly basis, at the discretion of the Fund's
board of directors.
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.
Dividends and capital gain distributions are paid to shareholders who hold
shares on the record date of distribution regardless of how long the shares have
been held. The Fund's share price will then drop by the amount of the
distribution on the day the distribution is made. If a shareholder purchases
shares immediately prior to the distribution, the shareholder will, in effect,
have "bought" the distribution by paying the full purchase price, a portion of
which is then returned in the form of a distribution, some or all of which may
be taxable.
At the end of each year, information regarding the tax status of
dividends, capital gain distributions, and distributions subject to tax
preference is provided to shareholders. Net realized capital gains are divided
into short-term and long-term gains depending upon how long the Fund held the
security which gave rise to the gains. The capital gains distribution consists
of long-term capital gains which are taxed at the capital gains rate. Short-
<PAGE>
term capital gains are included with any ordinary, taxable income from
dividends and interest as ordinary income and are paid to shareholders as
taxable dividends.
Shareholders also may realize capital gains or losses when they sell their
Fund shares at more or less than the price originally paid.
We encourage you to consult a tax adviser with respect to these matters.
For further information see "Dividends, Capital Gain Distributions and Taxes" in
the Statement of Additional Information.
ADDITIONAL INFORMATION
Voting Rights. All shares of the Company have equal voting rights based on
one vote for each share owned. Voting with respect to certain matters, such as
ratification of independent accountants and the election of directors, will be
by all the funds of the Company voting together. In other cases, such as voting
upon an investment advisory contract, voting is on a fund-by-fund basis. To the
extent permitted by law, when not all funds are affected by a matter to be voted
upon, only shareholders of the fund or funds affected by the matter will be
entitled to vote thereon. The Company is not generally required and does not
expect to hold regular annual meetings of shareholders. However, when requested
to do so in writing by the holders of 10% or more of the outstanding shares of
the Company or as may be required by applicable law or the Company's Articles of
Incorporation, the board of directors will call special meetings of
shareholders. Directors may be removed by action of the holders of a majority of
the outstanding shares of the Company. The Company will assist shareholders in
communicating with other shareholders as required by the Investment Company Act
of 1940.
<PAGE>
INVESCO TAX-FREE INTERMEDIATE 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
^ November 1, 1996
To receive general information and prospectuses on any of the INVESCO funds or
retirement plans, or to obtain current account or price information or responses
to other questions, call toll-free:
1-800-525-8085
To reach PAL(R), your 24-hour Personal Account Line (PAL) call:
1-800-424-8085
Or write to:
INVESCO Funds Group, Inc., Distributor
^ Post Office Box 173706
Denver, Colorado 80217-3706
You can find us on the World Wide Web:
http://www.invesco.com
If you're in Denver, please visit one of our convenient Investor Centers:
Cherry Creek
155-B Fillmore Street
Denver Tech Center
7800 East Union Avenue
Lobby Level
<PAGE>
PROSPECTUS
^ November 1, 1996
INVESCO TAX-FREE LONG-TERM BOND FUND
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 by investing 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 Fund's portfolio normally will be at
least 10 years.
This prospectus provides you with the basic information you should know
before investing in the Fund. You should read it and keep it for future
reference. A Statement of Additional Information containing further information
about the Fund, dated ^ November 1, 1996, has been filed with the Securities and
Exchange Commission and is incorporated by reference into this prospectus. To
obtain a free copy, write to INVESCO Funds Group, Inc., P.O. Box 173706, Denver,
Colorado 80217-3706; or call 1-800-525-8085.
<PAGE>
TABLE OF CONTENTS
ESSENTIAL INFORMATION...................................................... 31
ANNUAL FUND EXPENSES....................................................... 32
FINANCIAL HIGHLIGHTS....................................................... 34
INVESTMENT OBJECTIVE AND STRATEGY.......................................... 36
INVESTMENT POLICIES AND RISKS.............................................. 36
THE FUND AND ITS MANAGEMENT................................................ 40
FUND PRICE AND PERFORMANCE................................................. 42
HOW TO BUY SHARES.......................................................... 43
FUND SERVICES.............................................................. 48
HOW TO SELL SHARES......................................................... 48
TAXES, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS............................ 50
ADDITIONAL INFORMATION..................................................... 52
^ SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER FINANCIAL
INSTITUTION. THE SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
ESSENTIAL INFORMATION
Investment Goal And Strategy. INVESCO Tax-Free Long-Term Bond Fund is a
diversified mutual fund that seeks current income free from federal income
taxes. The Fund invests primarily in municipal obligations, and the average
dollar-weighted maturity for its entire portfolio will normally be 10 years or
longer. There is no guarantee that the Fund will meet its objective. See
"Investment Objective And Strategy."
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 such as the IRA, SEP-IRA,
SARSEP, 401(k), Profit Sharing, Money Purchase Pension, or 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 INVESCO Tax-Free
Income Funds, Inc. (the "Company"), a diversified, managed, no-load mutual fund.
The Fund is owned by its shareholders. It employs INVESCO Funds Group, Inc.
("IFG"), founded in 1932, to serve as investment adviser, administrator,
distributor, and transfer agent; and INVESCO Trust Company ("INVESCO Trust"),
founded in 1969, as sub-adviser. Together, IFG and INVESCO Trust constitute
"Fund Management."
The Fund's investments are selected by INVESCO vice president James S.
Grabovac. A Chartered Financial Analyst, Mr. Grabovac earned his MBA from the
University of Michigan and a BA from Lawrence University. See "The Fund And Its
Management."
IFG and INVESCO Trust are part of a global firm that managed approximately
^ $90 billion as of June 30, ^ 1996. The parent company, INVESCO PLC, is based
in London, with money managers located in Europe, North America, and the Far
East.
This Fund Offers all of the following services at no charge:
Telephone purchases
Telephone exchanges
Telephone redemptions
Automatic reinvestment of distributions
<PAGE>
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, however, 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, the Fund's manager
voluntarily reimburses the Fund for amounts in excess of 0.90% of average net
assets.
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fee 0.55%
12b-1 Fees 0.25%
Other ^ expenses (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 and pricing
expenses were reduced under an expense offset arrangement and the Fund Manager's
voluntary reimbursement to the Fund for amounts in excess of 0.90% of average
net assets. However, as a result of a regulatory requirement for mutual funds to
state their total operating expenses without crediting any such expense offset
arrangement, 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 any
reductions for periods prior to the fiscal year ended June 30, ^ 1996.
<PAGE>
(2)Certain Fund expenses of the Tax-Free Long-Term Bond Fund are being
voluntarily absorbed by IFG. Ratio reflects total expenses less absorbed
expenses by IFG, before any expense offset arrangement. In the absense of such
voluntary expense limitation, the Fund's "Other Expenses" and "Total ^ Operating
Expenses" would have been ^ 0.24% and ^ 1.04%, respectively, based on the Fund's
actual expenses for ^ the fiscal year ended June 30, 1996.^
Example*
A shareholder would pay the following expenses on a $1,000 investment for
the periods shown, assuming a hypothetical 5% annual return and redemption at
the end of each time period. (Of course, actual operating expenses are paid from
the Fund's assets, and are deducted from the amount of income available for
distribution to shareholders; they are not charged directly to shareholder
accounts.)
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$9 $29 ^ $51 $112
The purpose of this table is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly. THE EXAMPLE SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE OR EXPENSES,
AND ACTUAL ANNUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
For more information on the Fund's expenses, see "The Fund and Its Management"
and "How to Buy Shares -- Distribution Expenses."
Since the Fund pays a distribution fee, investors who own Fund shares for
a long period of time may pay more than the economic equivalent of the maximum
front-end sales charge permitted for mutual funds by the National Association of
Securities Dealers, Inc.
*The expense information in the above tables has been presented on a basis that
assumes that the Fund's current 0.90% expense limitation had been in effect
during the entire year ended June 30, 1995.
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout ^ Each Period)
The following information has been audited by Price Waterhouse LLP,
independent accountants. This information should be read in conjunction with the
audited financial statements and the independent accountant's report thereon
appearing in the Fund's ^ 1996 Annual Report to Shareholders, which is
incorporated by reference into the Statement of Additional Information. Both are
available without charge by contacting IFG at the address or telephone number on
the cover of this prospectus. The Annual Report also contains more information
about the Fund's performance.
<TABLE>
<CAPTION>
Year Ended June 30
------------------------------------------------------------------------------------------------------
^ 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 ^
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tax-Free Long-Term Bond Fund
PER SHARE DATA
Net Asset Value --
Beginning of
Period $15.07 $15.29 $16.35 $15.69 $15.05 $14.90 $15.15 $13.82 $13.86 $15.20 ^
-----------------------------------------------------------------------------------------------------^
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment
Income 0.73 0.80 0.83 0.87 0.92 0.96 0.99 1.01 1.00 1.09 ^
Net Gains or (Losses)
on Securities
(Both Realized
and Unrealized) 0.32 0.09 (1.00) 1.04 0.95 0.27 (0.25) 1.33 (0.04) (0.28) ^
-----------------------------------------------------------------------------------------------------^
Total ^ from Investment
Operations 1.05 0.89 (0.17) 1.91 1.87 1.23 0.74 2.34 0.96 0.81 ^
-----------------------------------------------------------------------------------------------------^
<PAGE>
LESS DISTRIBUTIONS
Dividends from Net
Investment Income 0.73 0.80 0.83 0.87 0.92 0.96 0.99 1.01 1.00 1.09 ^
Distributions from
Capital Gains 0.19 0.31 0.06 0.38 0.31 0.12 0.00 0.00 0.00 1.06 ^
-----------------------------------------------------------------------------------------------------^
Total Distributions 0.92 1.11 0.89 1.25 1.23 1.08 0.99 1.01 1.00 2.15 ^
-----------------------------------------------------------------------------------------------------^
Net Asset Value --
End of Period $15.20 $15.07 $15.29 $16.35 $15.69 $15.05 $14.90 $15.15 $13.82 $13.86 ^
=====================================================================================================^
TOTAL RETURN 7.01% 6.16% (1.16%) 12.57% 12.79% 8.55% 5.10% 17.64% 7.29% 4.99% ^
RATIOS
Net Assets --
End of Period
($000 Omitted) $250,890 $254,584 $282,407 $332,239 $272,382 $208,100 $179,107 $143,678 $109,132 $117,875 ^
Ratio of Expenses
to Average
Net Assets# 0.91%@ 0.92% 1.00% 1.03% 1.02% 0.93% 0.75% 0.74% 0.77% 0.70% ^
Ratio of Net
Investment Income
to Average ^ Net
Assets# 4.76% 5.31% 5.14% 5.43% 5.90% 6.39% 6.67% 7.06% 7.33% 7.04% ^
Portfolio
Turnover Rate 146% 99% 28% 30% 28% 25% 27% 27% 41% 98% ^
# Various expenses of the Fund were voluntarily absorbed by IFG for the ^ years
ended June 30, 1996 and 1995. If such expenses had not been voluntaily
absorbed, ratio of expenses to average net assets would have been 1.04% and
1.05%, respectively, and ratio of net investment income to average net assets
would have been ^ 4.63% and 5.18%, respectively.
@ Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
</TABLE>
<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. We focus on long-term municipal bonds, which may include
any combination of general obligation, revenue, or industrial development bonds.
As a matter of fundamental investment policy, at least 80% of the Fund's assets
normally will consist of municipal bonds rated investment ^ grade (as defined
below) and short-term municipal notes rated within the two highest ratings by
Standard & Poor's ^ Rating Group ^("S&P") or Moody's Investors Service, Inc. ^
("Moody's"). Under ordinary circumstances, no more than 20% of the Fund's assets
may consist of municipal bonds rated below investment grade, temporary taxable
investments (the income from which may be subject to federal income tax), AMT
bonds and cash. There is no assurance that the Fund's investment objective will
be met.
The dollar-weighted average maturity of the obligations in the Fund's
portfolio normally will be at least 10 years, and will vary as Fund Management
responds to changes in interest rates. There is no limitation on the maximum
maturities of investments that may be purchased by the Fund.
INVESTMENT POLICIES AND RISKS
Investors should expect to see their price per share vary with moves in
the municipal bond market, economic conditions and other factors. The Fund
invests in many different issues over a wide geographical range; this
diversification reduces the Fund's overall exposure to investment and market
risks, but cannot eliminate these risks.
Municipal Securities. When we assess an issuer's ability to meet its
interest rate obligations and repay its debt when due, we are referring to
"credit risk." Municipal obligations are rated based on their estimated credit
risk by independent services such as S&P or Moody's. "Market risk" refers to
sensitivity to changes in interest rates: For instance, when interest rates go
up, the market value of a previously issued bond generally declines; on the
other hand, when interest rates go down, bonds generally see their prices
increase.
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 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
<PAGE>
unrated, are judged by Fund Management to be of equivalent quality); these
include issues which are of poorer quality and may have some speculative
characteristics, according to the ratings services. Never, under any
circumstances, does the Fund invest in bonds which are rated below B- or B by
S&P and Moody's, respectively. Bonds rated B- or B may be in default or there
may be present elements of danger with respect to payment of principal or
interest. While Fund Management 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.
For the fiscal year ended June 30, 1996, the following percentages of the
Fund's total assets were invested in municipal bonds rated investment grade (BBB
by S&P or Baa by Moody's and above) at the time they were purchased: AAA--
34.39%; AA-- 15.37%; A-- 20.82%; and BBB-- 6.49%; and the following percentages
were invested in municipal bonds rated below investment grade at the time of
purchase: BB-- 3.90%. Finally, 1.65% of total assets were invested in unrated
municipal bonds determined by Fund Management to be at least comparable to bonds
rated B. In addition, 14.15% of the Fund's total assets were invested in
corporate and municipal short-term notes rated 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, 1996.
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.
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. The board of
directors has adopted a non-fundamental restriction that the aggregate market
<PAGE>
value of the futures contracts the Fund holds cannot exceed 30% of the
market value of its total assets. Brokerage fees are paid to trade futures
contracts, and the Fund is required to maintain margin deposits.
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. Put
and call options are contracts which grant the right to sell at a specified
price a specific security or futures contract by a certain date. The put option
buyer gains this right in return for a premium. 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 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. 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.
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
<PAGE>
the securities is subject to market fluctuations, and no interest is
payable to the Fund prior to the settlement date.
Securities Lending. The Fund may seek to earn additional income by lending
securities to qualified brokers, dealers, banks, or other financial
institutions, on a fully collateralized basis. For further information on this
policy, see "Investment Policies and Restrictions" in the Statement of
Additional Information.
Repurchase Agreements. The Fund may invest money, for as short a time as
overnight, using repurchase agreements ("repos"). With a repo, the Fund buys a
debt instrument, agreeing simultaneously to sell it back to the prior owner at
an agreed-upon price. The Fund could incur costs or delays in seeking to sell
the instrument if the prior owner defaults on its repurchase obligation. To
reduce that risk, the securities ^ that are the subject of the 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 Fund's board of
directors.
When we believe market or economic conditions are ^ adverse, the Fund may
assume a defensive position by temporarily investing a portion of its assets in
short-term taxable investments or cash, seeking to protect its assets until
conditions stabilize. Short- term taxable investments, if any, normally will
consist of obligations of the U.S. government, its agencies or
instrumentalities; obligations of banks regulated by the United States,
including negotiable certificates of deposit and banker's acceptances; and
commercial paper rated at least P-2 by Moody's or A-2 by S&P. Dividends paid by
the Fund attributable to income from such investments will be taxable to
investors. See "Taxes, Capital Gain Distributions and Dividends."
For a further discussion of risks associated with an investment in the
Fund, see "Investment Policies and Restrictions" and "Investment Practices" in
the Statement of Additional Information.
Investment Restrictions. Certain restrictions, which are set forth in the
Statement of Additional Information, may not be altered without the approval of
the Fund's shareholders. For example, the Fund limits to 5% the portion of its
total assets which may be invested in a single issuer, and to 25% the portion
that may be invested in any one industry. 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. In addition, except where
indicated to the contrary, the investment objective and policies described in
<PAGE>
this prospectus are fundamental and may not be changed without a
vote of the Fund's shareholders.
THE FUND AND ITS MANAGEMENT
The Company is a no-load mutual fund, registered with the Securities and
Exchange Commission as a diversified, open-end, management investment company.
It was incorporated on April 22, 1981, under the laws of Colorado and was
reorganized as a Maryland corporation on November 1, 1993.
The Company's board of directors has responsibility for overall
supervision of the Fund, and reviews the services provided by the adviser and
sub-adviser. Under an agreement with the Company, INVESCO Funds Group, Inc.
("IFG"), 7800 E. Union Avenue, Denver, Colorado 80237, serves as the Fund's
investment manager; it is primarily responsible for providing the Fund with
various administrative services. IFG's wholly-owned subsidiary, INVESCO Trust,
is the Fund's sub-adviser and is primarily responsible for managing the Fund's
investments. Together, IFG and INVESCO Trust constitute "Fund Management."
James S. Grabovac, portfolio manager for the Fund since 1995, has
responsibility for the day-to-day management of the Fund's holdings. He also
manages INVESCO Tax-Free Intermediate Bond Fund. A Chartered Financial Analyst,
Mr. Grabovoc is a vice president of INVESCO Trust; previously, his career
included these highlights: He was a principal and fund manager (1991 to 1995)
and portfolio manager (1989 to 1991) with Stein Roe & Farnham Inc., a futures
and options trader with Continental Illinois National Bank (1987), a corporate
bond trader with The Chicago Corporation from 1985 to 1987, and Midwest
municipal underwriting manager with Continental Illinois National Bank from 1982
to 1985. He holds an MBA from the University of Michigan and a BA from Lawrence
University.
Fund Management permits investment and other personnel to purchase and
sell securities for their own accounts, subject to a compliance policy governing
personal investing. This policy requires Fund Management's personnel to conduct
their personal investment activities in a manner that Fund Management believes
is not detrimental to the Fund or Fund Management's other advisory clients. See
the Statement of Additional Information for more detailed information.
The Fund pays IFG a monthly management fee which is based upon a
percentage of the Fund's average net assets determined daily; in turn, IFG pays
INVESCO Trust a sub-advisory fee out of its management fee. The management fee
is computed at the annual rate of 0.55% on the first $300 million of the Fund's
average net assets; 0.45% on the next $200 million of the Fund's average net
assets; and 0.35% on the Fund's average net assets over $500 million. For the
fiscal year ended June 30, ^ 1996, investment management fees paid by the Fund
amounted to 0.55% of its average net assets. Out of this fee, IFG paid an amount
<PAGE>
equal to 0.24% of the Fund's average net assets to INVESCO Trust as a
sub-advisory fee. No fee is paid by the Fund to INVESCO Trust.
Under a Transfer Agency Agreement, IFG acts as registrar, transfer agent,
and dividend disbursing agent for the Fund. The Fund pays an annual fee of ^
$26.00 per shareholder account or per participant in an omnibus account ^ for
these services. Registered broker-dealers, third party administrators of
tax-qualified retirement plans and other entities, including affiliates of IFG,
may provide equivalent services to the Fund. In these cases, IFG may pay, out of
the fee it receives from the Fund, an annual sub- transfer agency or
record-keeping fee to the third party.
In addition, under an Administrative Services Agreement, IFG handles
additional administrative, record-keeping, and internal sub-accounting services
for the Fund. For the fiscal year ended June 30, ^ 1996, the Fund paid IFG a fee
for these services equal to 0.02% (prior to the voluntary absorption of certain
fund expenses by IFG) of the Fund's average net assets.
The Fund's expenses, which are accrued daily, are deducted from total
income before dividends are paid. Total expenses of the Fund for the fiscal year
ended June 30, ^ 1996, including investment management fees (but excluding
brokerage commissions, which are a cost of acquiring securities), amounted to ^
0.91% of the Fund's average net assets. Certain Fund expenses were, and are,
absorbed voluntarily by IFG pursuant to a commitment to the Fund in order to
ensure that the Fund's total operating expenses ^ did not exceed ^ 1.00% of the
Fund's average net assets (from July 1, 1994 through August 31, 1994) and will
not exceed 0.90% of the Fund's average net assets (beginning September 1, 1994).
This commitment may be changed following consultation with the Company's board
of directors. In the absence of this voluntary expense limitation, the Fund's
total operating expenses would have been ^ 1.04% of its average net assets.
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of
their financial responsibility coupled with their ability to effect transactions
at the best available prices. As discussed under "How to Buy Shares --
Distribution Expenses," the Fund may market its shares through intermediary
brokers or dealers that have entered into Dealer Agreements with IFG, as the
Fund's Distributor. The Fund may place orders for portfolio transactions with
qualified broker/dealers which recommend the Fund, or sell shares of the Fund,
to clients, or act as agent in the purchase of Fund shares for clients, if Fund
Management believes that the quality of the execution of the transaction and
level of commission are comparable to those available from other qualified
brokerage firms. For further information, see "Investment Practices -- Placement
of Portfolio Brokerage" in the Statement of Additional Information.
<PAGE>
The parent company for IFG and INVESCO Trust is INVESCO PLC, a publicly
traded holding company whose subsidiaries provide investment services around the
world. IFG was established in 1932 and, as of June 30, ^ 1996, managed 14 mutual
funds, consisting of ^ 39 separate portfolios, with combined assets of
approximately ^ $12.9 billion on behalf of over ^ 826,000 shareholders. INVESCO
Trust (founded in 1969) served as adviser or sub-adviser to ^ 45 investment
portfolios as of June 30, ^ 1996, including 27 portfolios in the INVESCO group.
These 45 portfolios had aggregate assets of approximately ^ $12.0 billion as of
June 30, ^ 1996. In addition, INVESCO Trust provides investment management
services to private clients, including employee benefit plans that may be
invested in a collective trust sponsored by INVESCO Trust.
FUND PRICE AND PERFORMANCE
Determining Price. The value of your investment in the Fund will vary
daily. The price per share is also known as the Net Asset Value (NAV). IFG
prices the Fund every day that the New York Stock Exchange is open, as of the
close of regular trading (normally, 4:00 p.m., New York time). NAV is calculated
by adding together the current market value of all of the Fund's assets,
including accrued interest and dividends; then subtracting liabilities,
including accrued expenses; and finally dividing that dollar amount by the total
number of shares outstanding.
Performance Data. To keep shareholders and potential investors informed,
we will occasionally advertise the Fund's total return and yield. Total return
figures show the average annual rate of return on a $1,000 investment in the
Fund, assuming reinvestment of all dividends and capital gain distributions for
one-, five- and ten-year periods. Cumulative total return shows the actual rate
of return on an investment; average annual total return represents the average
annual percentage change in the value of an investment. Both cumulative and
average annual total returns tend to "smooth out" fluctuations in the Fund's
investment results, not showing the interim variations in performance over the
periods cited.
The yield of the Fund refers to the income generated by an investment in
the Fund over a 30-day or one month period, and is computed by dividing the net
investment income per share earned during the period by the net asset value per
share at the end of the period, then adjusting the result to provide for
semi-annual compounding. We may also discuss the Fund's "taxable equivalent
yield" -- the yield a taxable investment would have to generate in order to
provide the same income as the Fund, 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 Fund's Annual Report to shareholders. You can get a free copy
by calling or writing to IFG using the telephone number or address on the cover
of this prospectus.
<PAGE>
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.
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 IFG. However, if you invest
in the Fund through a securities broker, you may be charged a commission or
transaction fee. For all new accounts, please send a completed application form.
Please specify which Fund you wish to purchase.
Fund Management reserves the right to increase, reduce or waive the
minimum investment requirements in its sole discretion, where it determines this
action is in the best interests of the Fund. Further, Fund Management reserves
the right in its sole discretion to reject any order for the purchase of Fund
shares (including purchases by exchange) when, in its judgment, such rejection
is in the Fund's best interests.
<PAGE>
================================================================================
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 IFG
Denver, CO 80217- incurs. If you are
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.
- --------------------------------------------------------------------------------
By Telephone or $1,000. Payment must be
Wire received within 3
Call 1-800-525-8085 business days, or
to request your the transaction may
purchase. Then send be cancelled. If a
your check by telephone purchase
overnight courier is cancelled due to
to our street nonpayment, you
address: will be responsible
7800 E. Union Ave., for any related
Denver, CO 80237. loss the Fund or
Or you may transmit IFG incurs. If you
your payment by are already a
bank wire (call IFG shareholder in the
for instructions). INVESCO funds, the
Fund may seek
reimbursement from your
existing account(s) for
any loss incurred.
<PAGE>
- --------------------------------------------------------------------------------
With EasiVest or $50 per month for Like all regular
Direct Payroll EasiVest; $50 per investment plans,
Purchase pay period for neither EasiVest
You may enroll on Direct Payroll nor Direct Payroll
the fund Purchase. You may Purchase ensures a
application, or start or stop your profit or protects
call us for the regular investment against loss in a
correct form and plan at any time, falling market.
more details. with two weeks' Because you'll
Investing the same notice to IFG. invest continually,
amount on a monthly regardless of
basis allows you to varying price
buy more shares levels, consider
when prices are low your financial
and fewer shares ability to keep
when prices are buying through low
high. This "dollar- price levels. And
cost averaging" may remember that you
help offset market will lose money if
fluctuations. Over you redeem your
a period of time, shares when the
your average cost market value of all
per share may be your shares is less
less than the than their cost.
actual average
price per share.
- --------------------------------------------------------------------------------
By PAL(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 cancelled. If a
telephone purchase is
cancelled due to
nonpayment, you will be
responsible for any
related loss the Fund or
IFG incurs. If you are
already a shareholder in
the INVESCO funds, the
Fund may seek
reimbursement from your
existing account(s) for
any loss incurred.
<PAGE>
- --------------------------------------------------------------------------------
By Exchange $1,000 to open a See "Exchange
Between this and new account; $50 Privilege" below.
another of the for written
INVESCO funds. Call requests to
1-800-525-8085 for purchase additional
prospectuses of shares for an
other INVESCO existing account.
funds. You may also (The exchange
establish an minimum is $250 for
Automatic Monthly purchases requested
Exchange service by telephone.)
between two INVESCO
funds; call IFG for
further details and
the correct form.
================================================================================
Your order to purchase Fund shares will not begin earning dividends or
other distributions until your payment can be converted into available federal
funds under regular banking procedures or, if you are acquiring shares in an
exchange from another INVESCO fund, the Fund receives the proceeds of the
exchange. Checks normally are converted into federal funds (moneys held on
deposit within the Federal Reserve System) within two or three business days
after we receive them, although this period may be longer for checks drawn on
banks that are not members of the Federal Reserve System.
Exchange Privilege. You may exchange your shares in this Fund for those in
another INVESCO fund, on the basis of their respective net asset values at the
time of the exchange. Before making any exchange, be sure to review the
prospectuses of the funds involved and consider their differences.
Please note these policies regarding exchanges of fund shares:
1) The fund accounts must be identically registered.
2) You may make four exchanges out of each fund during each
calendar year.
3) An exchange is the redemption of shares from one fund followed by the
purchase of shares in another. Therefore, any gain or loss realized on the
exchange is recognizable for federal income tax purposes (unless, of course,
your account is tax-deferred).
4) The Fund reserves the right to reject any exchange request, or to
modify or terminate exchange privileges, in the best interests of the Fund and
its shareholders. Notice of all such modifications or termination will be given
at least 60 days prior to the effective date of the change in privilege, except
for unusual instances (such as when redemptions of the exchanged shares are
<PAGE>
suspended under Section 22(e) of the Investment Company Act of 1940, or
when sales of the fund into which you are exchanging are temporarily stopped).
Distribution Expenses. The Fund is authorized under a Plan and Agreement
of Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Plan") to use its assets to finance certain activities relating to the
distribution of shares. These expenditures may include compensation (including
incentive compensation and/or continuing compensation based on the amount of
customer assets maintained in the Fund) to securities dealers and other
financial institutions and organizations, which may include IFG-affiliated
companies, to obtain various distribution-related and/or administrative services
for the Fund. Such services may include, among other things, processing new
shareholder account applications, preparing and transmitting to the Fund's
transfer agent computer-processable tapes of all transactions by customers, and
serving as the primary source of information to customers in answering questions
concerning the Fund and their transactions.
In addition, other reimbursable expenditures include advertising,
preparation and distribution of sales literature, printing and distribution of
prospectuses to prospective investors, public relations efforts, marketing
programs and such other services and promotional activities agreed upon from
time to time by the Fund and its board of directors. These services and
activities may be conducted by the staff of IFG or its affiliates or by third
parties.
IFG is not entitled to reimbursement for overhead expenses under the Plan,
but may be reimbursed for all or a portion of the compensation paid for salaries
and other employee benefits for IFG personnel whose primary responsibilities
involve marketing shares of the INVESCO funds, including the Fund. Also, any
payments made by the Fund may not be used to finance the distribution of shares
of any other mutual fund advised by IFG. Payments made by the Fund under the
Plan for compensation of marketing personnel, as noted above, are based on an
allocation formula designed to ensure that all such payments are appropriate.
Under the Plan, the Fund's reimbursement to IFG is limited to an amount
computed at a maximum annual rate of 0.25% of the Fund's average net assets.
Payments by the Fund under the Plan, for any month, may only be made to
reimburse expenditures incurred during the rolling 12-month period in which that
month falls. Therefore, any reimbursable expenses incurred by IFG in excess of
the limitation described above are not reimbursable and will be borne by IFG. In
addition, IFG may from time to time make additional payments from its revenues
to securities dealers and other financial institutions that provide
distribution-related and/or administrative services for the Fund. No further
payments will be made by the Fund under the Plan in the event of its
termination.
<PAGE>
FUND SERVICES
Shareholder Accounts. IFG will maintain a share account that reflects your
current holdings. Share certificates will be issued only upon specific request.
You will have greater flexibility to conduct transactions if you do not request
certificates.
Transaction Confirmations. You will receive detailed confirmations of
individual purchases, exchanges, and redemptions. If you choose certain
recurring transaction plans (for instance, EasiVest), your transactions will be
confirmed on your quarterly Investment Summary.
Investment Summaries. Each calendar quarter, shareholders receive a
written statement which consolidates and summarizes account activity and value
at the beginning and end of the period for each of their INVESCO funds.
Reinvestment of Distributions. Dividends and capital gain distributions
are automatically invested in additional fund shares at the NAV on the
ex-dividend date, unless you choose to have dividends and/or capital gain
distributions automatically reinvested in another INVESCO fund or paid by check
(minimum of $10.00).
Telephone Transactions. All shareholders may exchange and redeem Fund
shares by telephone, unless they expressly decline these privileges. By signing
the new account Application, a Telephone Transaction Authorization Form, or
otherwise using these privileges, the investor has agreed that, if the Fund has
followed reasonable procedures, such as recording telephone instructions and
sending written transaction confirmations, it will not be liable for following
telephoned instructions that it believes to be genuine. As a result of this
policy, the investor may bear the risk of any loss due to unauthorized or
fraudulent instructions.
HOW TO SELL SHARES
The following chart shows several convenient ways to redeem your Fund
shares. Shares of the Fund may be redeemed at any time at their current NAV next
determined after a request in proper form is received at the Fund's office. The
NAV at the time of the redemption may be more or less than the price you paid to
purchase your shares, depending primarily upon the Fund's investment
performance.
Please be specific from which fund you wish to redeem shares. Shareholders
have a separate account for each fund in which they invest.
<PAGE>
================================================================================
Method Minimum Redemption Please Remember
================================================================================
By Telephone $250 (or, if less, These telephone
Call us toll-free full liquidation of redemption
at 1-800-525-8085. the account) for a privileges may be
redemption check; modified or
$1,000 for a wire terminated in the
to bank of record. future at the
The maximum amount discretion of IFG.
which may be
redeemed by
telephoneis
generally $25,000.
- --------------------------------------------------------------------------------
In Writing Any amount. The If the shares to be
Mail your request redemption request redeemed are
to INVESCO Funds must be signed by represented by
Group, Inc., P.O. all registered stock certificates,
Box 173706 shareholders(s). the certificates
Denver, CO 80217- Payment will be must be sent to
3706. You may also mailed to your IFG.
send your request address of record,
by overnight or to a pre-
courier to 7800 E. designated bank.
Union Ave., Denver,
CO 80237.
- --------------------------------------------------------------------------------
By Exchange $1,000 to open a See "Exchange
Between this and new account; $50 Privilege," above.
another of the for written
INVESCO funds. Call requests to
1-800-525-8085 for purchase additional
prospectuses of shares for an
other INVESCO existing account.
funds. You may also (The exchange
establish an minimum is $250 for
automatic monthly exchanges requested
exchange service by telephone.)
between two INVESCO
funds; call IFG for
further details and
the correct form.
- --------------------------------------------------------------------------------
Periodic Withdrawal $100 per payment, You must have at
Plan on a monthly or least $10,000 total
You may call us to quarterly basis. invested with the
request the The redemption INVESCO funds, with
appropriate form check may be made at least $5,000 of
and more payable to any that total invested
information at 1- party you in the fund from
800-525-8085. designate. which withdrawals
will be made.
<PAGE>
- --------------------------------------------------------------------------------
Payment To Third Any amount. All registered
Party owners of the
Mail your request account must sign
to INVESCO Funds the request, with a
Group, Inc., P.O. signature guarantee
Box 173706 from an eligible
Denver, CO 80217- guarantor financial
3706. institution, such
as a commercial
bank or recognized
national or
regional securities
firm.
================================================================================
While the Fund will attempt to process telephone redemptions promptly,
there may be times -- particularly in periods of severe economic or market
disruption -- when you may experience delays in redeeming shares by phone.
Payments of redemption proceeds will be mailed within seven days following
receipt of the redemption request in proper form. However, payment may be
postponed under unusual circumstances -- for instance, if normal trading is not
taking place on the New York Stock Exchange or during an emergency as defined by
the Securities and Exchange Commission. If your shares were purchased by a check
which has not yet cleared, payment will be made promptly upon clearance of the
purchase check (which may take up to 15 days).
If you participate in EasiVest, the Fund's automatic monthly investment
program, and redeem all of the shares in your account, we will terminate any
further EasiVest purchases unless you instruct us otherwise.
Because of the high relative costs of handling small accounts, should the
value of any shareholder's account fall below $250 as a result of shareholder
action, the Fund reserves the right to involuntarily redeem all shares in such
account, in which case the account would be liquidated and the proceeds
forwarded to the shareholder. Prior to any such redemption, a shareholder will
be notified and given 60 days to increase the value of the account to $250 or
more.
TAXES, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS^
Taxes. The Fund intends to distribute to shareholders substantially all of
its net investment income and net capital gains, if any, in order to continue to
qualify for tax treatment as a regulated investment company. Thus, the Fund does
not expect to pay any federal income or excise taxes.
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
<PAGE>
taxes. Unless shareholders are exempt from income taxes, however, they must
include all capital gain distributions, as well as any dividends earned on the
Fund's short-term taxable investments, in taxable income for federal, state, and
local income tax purposes. These distributions are taxable whether they are
received in cash or automatically distributed in shares of the Fund or another
fund in the INVESCO group.
^ Under the Tax Reform Act of 1986, interest on certain " private activity
bonds ^" issued after August 7, 1986, is an item of tax preference for purposes
of the alternative minimum tax in taxable years beginning after December 31,
1986. The Fund intends to limit, and has limited in the past, its investments in
such "private activity bonds" to not more than 20% of the Fund's total assets.
The portion of exempt-interest dividends paid by the Fund which is attributable
to such "private activity bonds" would be an item of tax preference to
shareholders.
Shareholders may be subject to backup withholding of 31% on capital gain
distributions and redemption proceeds. Unless you are subject to backup
withholding for other reasons, you can avoid backup withholding on your Fund
account by ensuring that we have a correct, certified tax identification number.
Dividends^ and Capital Gain Distributions. The Fund earns daily net
investment income in the form of dividends and interest on its investments. The
Fund's policy is to distribute substantially all of this income, less Fund
expenses, to shareholders on a monthly basis, at the discretion of the Fund's
board of directors.
In addition, the Fund realizes capital gains and losses when it sells
securities for more or less than it paid and engages in futures transactions. If
total gains on sales exceed total losses (including losses carried forward from
previous years), the Fund has a net realized capital gain. Net realized capital
gains, if any, are distributed to shareholders at least annually, usually in
December.
Dividends and capital gain distributions are paid to shareholders who hold
shares on the record date of distribution regardless of how long the shares have
been held. The Fund's share price will then drop by the amount of the
distribution on the day the distribution is made. If a shareholder purchases
shares immediately prior to the distribution, the shareholder will, in effect,
have "bought" the distribution by paying the full purchase price, a portion of
which is then returned in the form of a distribution, some or all of which may
be taxable.
At the end of each year, information regarding the tax status of
dividends, capital gain distributions, and distributions subject to tax
preference is provided to shareholders. Net realized capital gains are divided
into short-term and long-term gains depending upon how long the Fund held the
security which gave rise to the gains. The capital gains distribution consists
<PAGE>
of long-term capital gains which are taxed at the capital gains rate.
Short-term capital gains are included with any ordinary, taxable income from
dividends and interest as ordinary income and are paid to shareholders as
taxable dividends.
Shareholders also may realize capital gains or losses when they sell their
Fund shares at more or less than the price originally paid.
We encourage you to consult a tax adviser with respect to these matters.
For further information see "Dividends, Capital Gain Distributions and Taxes" in
the Statement of Additional Information.
ADDITIONAL INFORMATION
Voting Rights. All shares of the Company have equal voting rights based on
one vote for each share owned. Voting with respect to certain matters, such as
ratification of independent accountants and the election of directors, will be
by all the funds of the Company voting together. In other cases, such as voting
upon an investment advisory contract, voting is on a fund-by-fund basis. To the
extent permitted by law, when not all funds are affected by a matter to be voted
upon, only shareholders of the fund or funds affected by the matter will be
entitled to vote thereon. The Company is not generally required and does not
expect to hold regular annual meetings of shareholders. However, when requested
to do so in writing by the holders of 10% or more of the outstanding shares of
the Company or as may be required by applicable law or the Company's Articles of
Incorporation, the board of directors will call special meetings of
shareholders. Directors may be removed by action of the holders of a majority of
the outstanding shares of the Company. The Fund will assist shareholders in
communicating with other shareholders as required by the Investment Company Act
of 1940.
<PAGE>
INVESCO TAX-FREE LONG-TERM 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
^ November 1, 1996
To receive general information and prospectuses on any of the INVESCO funds or
retirement plans, or to obtain current account or price information or responses
to other questions, call toll-free:
1-800-525-8085
To reach PAL(R), your 24-hour Personal Account Line (PAL) call:
1-800-424-8085
Or write to:
INVESCO Funds Group, Inc., Distributor
^ Post Office Box 173706
Denver, Colorado 80217-3706
You can find us on the World Wide Web:
http://www.invesco.com
If you're in Denver, please visit one of our convenient Investor Centers:
Cherry Creek
155-B Fillmore Street
Denver Tech Center
7800 East Union Avenue
Lobby Level
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
^ November 1, 1996
INVESCO TAX-FREE INCOME FUNDS, INC.
Two no-load investment funds seeking as high a level
of interest income exempt from federal income taxes
as is consistent with the preservation of capital
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 TAX-FREE INCOME FUNDS, INC. (the "Company"), is a diversified,
managed, no-load mutual fund, consisting of two separate portfolios of
investments: INVESCO Tax-Free Long-Term Bond Fund and INVESCO Tax-Free
Intermediate Bond Fund (collectively, the "Funds" and individually, a "Fund").
The investment objective of each 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 Funds 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.
Separate Prospectuses for each Fund dated ^ November 1, 1996 , which
provide the basic information you should know before investing in a Fund, may be
obtained without charge from INVESCO Funds Group, 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 Funds, and should be read in
conjunction with the Prospectus.
Investment Adviser and Distributor: INVESCO FUNDS GROUP, INC.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
INVESTMENT POLICIES AND RESTRICTIONS 56
THE FUNDS AND THEIR MANAGEMENT 70
HOW SHARES CAN BE PURCHASED 82
HOW SHARES ARE VALUED 86
FUND PERFORMANCE 87
SERVICES PROVIDED BY THE FUNDS 90
HOW TO REDEEM SHARES 91
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS, AND TAXES 92
INVESTMENT PRACTICES 93
ADDITIONAL INFORMATION 96
APPENDIX 100
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
Municipal Obligations
^ The Funds may purchase or sell a variety of tax-exempt securities in seeking
to achieve their investment objective without regard to how long the securities
have been held in a 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 a 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 Funds invest 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,
<PAGE>
revenue bonds that generally are secured by a lease with a particular private
corporation. A Fund's portfolio may consist of any combination of general
obligation and revenue bonds. Municipal Notes are debt obligations issued by
municipalities which normally have a maturity at the time of issuance ^ from six
months to three years.
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 a Fund might
be adversely affected. In such event, the Funds would reevaluate their
investment objective and policies and submit possible changes in the structure
of the Funds for the consideration of shareholders.
As discussed in each Prospectus, the municipal securities in which the
Funds invest 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 Ratings Group ("S&P") for the Tax-Free
Long-Term Bond Fund and the ratings given a municipal security by Moody's, S&P,
Fitch Investor Services, Inc. ("Fitch"), and Duff & Phelps, Inc. ("D&P") for the
Tax-Free Intermediate Bond 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 a 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. 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 Funds' investment adviser attempts to limit purchases of lower
rated municipal securities to securities having an established retail secondary
<PAGE>
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 each Fund's
Prospectus entitled "Investment Objective and Policies," the Funds may from time
to time invest a portion of their 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.
When-Issued Purchases. As discussed in the section of each 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 a 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 Funds will maintain a separate account with their custodian bank
consisting of a combination of cash and any high-grade, liquid short term debt
securities currently held by a Fund equal in value to the amount of such
commitments. A Fund will only make commitments to purchase securities with the
intention of actually acquiring the securities; however, a Fund may sell these
commitments before the settlement date if to do so is deemed advisable as a
matter of investment strategy.
If the market value of securities in a Fund's separate account declines,
the Fund will place additional cash or securities in the account, on a daily
basis if necessary, so that the market value of the account will continue to
equal the amount of the Fund's commitments. To the extent a 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, a 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 a Fund's payment obligation). The risk of fluctuation in value of the
short-term securities in the separate account is different from the risk of
fluctuation in the value of the Funds' portfolio securities. Each Fund intends
to enter into commitments to purchase securities on a when-issued basis only to
the extent deemed advisable to further its pursuit of its investment objective
and policies regarding
<PAGE>
and policies regarding investments. Such commitments will not ordinarily
involve a substantial portion of a Fund's assets, defined as available cash
reserves of a Fund plus proceeds of unsettled regular-way sales of Fund
securities.
Futures Contracts and Options on Futures
As described in the Funds' Prospectuses, the Funds may enter into futures
contracts and may purchase and sell ("write") options to buy or sell futures
contracts. The Funds 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 investment advisers thereto, from registration as a commodity pool
operator. Under those restrictions, each Fund will not, as to any positions,
whether long, short or a combination thereof, enter into futures and 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 Funds 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. As to
long positions which are used as part of the Funds' portfolio strategies and are
incidental to their activities in the underlying cash market, the "underlying
commodity value" of the respective Fund's futures and options thereon must not
exceed the sum of (i) cash set aside in an identifiable manner, or short-term
U.S. debt obligations or other dollar-denominated high-quality, short-term money
instruments so set aside, plus sums deposited on margin; (ii) cash proceeds from
existing investments due in 30 days; and (iii) accrued profits held at the
futures commission merchant. The "underlying commodity value" of a future is
computed by multiplying the size of the future by the daily settlement price of
the future. For an option on a future, that value is the underlying commodity
value of the future underlying the option.
Unlike when the Funds purchase or sell a security, no price is paid or
received by a Fund upon the purchase or sale of a futures contract. Instead, the
Funds are 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, a
<PAGE>
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 a 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 a 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
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 a 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.
<PAGE>
The Funds may buy and write options on futures contracts for hedging
purposes. 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 a 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, a 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, a 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 a 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, a Fund's losses from existing
options on futures may to some extent be reduced or increased by changes in the
value of portfolio securities.
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, a Fund may buy a put option on a futures contract to hedge its
portfolio against the risk of falling prices.
The amount of risk a 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.
Illiquid and Rule 144A Securities. The Tax-Free Intermediate Bond Fund may
invest in securities that are illiquid because they are subject to restrictions
on their resale ("restricted securities") or because, based upon their nature or
the market for such securities, they are not readily marketable. The Fund also
may invest in restricted securities that can be resold to institutional
investors pursuant to Rule 144A under the Securities Act of 1933, as amended
<PAGE>
(the "1933 Act") (hereinafter referred to as "Rule 144A Securities"). The
Fund's board of directors has delegated to Fund Management the authority to
determine the liquidity of Rule 144A Securities pursuant to guidelines approved
by the board. ^ Pursuant to undertakings given to certain states, the Fund may
not invest more than 5% of its total assets in illiquid securities. Liquid Rule
144A Securities are not subject to this limitation, although the Fund may not
invest more than 15% of its total assets in restricted securities.
Investments in restricted securities involve certain risks to the extent
that the Fund might have to bear the expense and incur the delays associated
with effecting registration in order to sell the security.
In recent years, a large institutional market has developed for Rule 144A
Securities. Institutional investors generally will not seek to sell these
instruments to the general public, but instead will often depend on an efficient
institutional market in which Rule 144A Securities can readily be resold or on
an issuer's ability to honor a demand for repayment. Therefore, the fact that
there are contractual or legal restrictions on resale to the general public or
certain institutions is not dispositive of the liquidity of such investments.
Institutional markets for Rule 144A Securities may provide both readily
ascertainable values for Rule 144A Securities and the ability to liquidate an
investment in order to satisfy share redemption orders. An insufficient number
of qualified institutional buyers interested in purchasing a Rule 144A Security
held by the Fund, however, could adversely affect the marketability of such
security, and the Fund might be unable to dispose of such security promptly or
at reasonable prices.
Repurchase Agreements. As discussed in the Prospectuses, the Funds may
enter into repurchase agreements with respect to debt instruments eligible for
investment by the Funds 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 Fund's board of
directors. A repurchase agreement may be considered a loan collateralized by
securities. The resale price reflects an agreed upon interest rate effective for
the period the instrument is held by the Funds and is unrelated to the interest
rate on the underlying instrument. In these transactions, the securities
acquired by the Fund (including accrued interest earned thereon) must have a
total value in excess of the value of the repurchase agreement, and are held as
collateral by the Funds' custodian bank until the repurchase agreement is
completed.
Loans of Portfolio Securities. The Funds also may lend portfolio
securities to qualified brokers, dealers, banks, or other financial
institutions. 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
<PAGE>
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 Funds monitor the creditworthiness of borrowers
in order to minimize such risks. The Funds 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 ^ Tax-Free Long-Term Bond Fund's total assets or the Tax-Free
Intermediate Bond Fund's net assets (taken at market value). While voting rights
may pass with the loaned securities, if a material event (e.g., proposed merger,
sale of assets, or liquidation) is to occur affecting an investment on loan, the
loan must be called and the securities voted. Loans of securities made by the
Fund will comply with all other applicable regulatory requirements, including
the rules of the New York Stock Exchange and the requirements of the Investment
Company Act of 1940, as amended (the "1940 Act"), and the rules of the
Securities and Exchange Commission (the "SEC") thereunder.
Investment Restrictions. As described in each Fund's Prospectus, the Funds
operate under certain investment restrictions that are fundamental and may not
be changed with respect to a particular Fund without the prior approval of the
holders of a majority, as defined in the 1940 Act, of the outstanding voting
securities of that Fund. For purposes of the following limitations, all
percentage limitations apply immediately after a purchase or initial investment.
Any subsequent change in a particular percentage resulting from fluctuations in
value does not require elimination of any security from a Fund.
Under the Tax-Free Long-Term Bond Fund's fundamental
investment restrictions, the Tax-Free Long-Term Bond Fund may not:
(1) issue preference shares or create any funded debt;
(2) sell short or buy on margin;
(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
<PAGE>
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
33-1/3% of the Fund's total net assets (taken at current value). No
more than 10% of the Fund's total 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 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;
<PAGE>
(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 Tax-Free Long-Term Bond
Fund has no fundamental policies as to the use of future contracts.
The Company has given undertakings to the State of Texas that the Tax-Free
Long-Term Bond Fund may not invest in any oil, gas, or mineral leases; and may
not invest in real estate limited partnership interests.
Under the Tax-Free Intermediate Bond Fund's fundamental
investment restrictions, the Tax-Free Intermediate Bond Fund may
not:
(1) With respect to seventy five percent (75%) of the value of its total
assets, purchase the securities of any one issuer (except cash items
and "Government securities" as defined under the 1940 Act), if the
purchase would cause the Fund to have more than 5% of the value of
its total assets invested in the securities of such issuer or to own
more than 10% of the outstanding voting securities of such issuer;
(2) Borrow money, except that the Fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) and may enter
into reverse repurchase agreements in an aggregate amount not
exceeding 33 1/3% of the value of its total assets (including the
amount borrowed) less liabilities (other than borrowings). Any
borrowings that come to exceed 33 1/3% of the value of the Fund's
total assets by reason of a decline in net assets will be reduced
within three business days to the extent necessary to comply with
the 33 1/3% limitation. This restriction shall not prohibit deposits
of assets to margin or guarantee positions in futures, options,
swaps, or forward contracts, or the segregation of assets in
connection with such contracts.
(3) Invest more than 25% of the value of its total assets in any
particular industry (other than municipal securities or U.S.
Government securities).
(4) Invest directly in real estate or interests in real estate; however,
the Tax-Free Intermediate Bond Fund may own debt or equity
securities issued by companies engaged in those businesses.
<PAGE>
(5) Purchase or sell physical commodities other than foreign
currencies unless acquired as a result of ownership of
securities (but this shall not prevent the Tax-Free
Intermediate Bond Fund from purchasing or selling
options, futures, and forward contracts or from investing
in securities or other instruments backed by physical
commodities).
(6) Lend any security or make any other loan if, as a result, more than
33 1/3% of its total assets would be lent to other parties (but this
limitation does not apply to purchases of commercial paper, debt
securities or to repurchase agreements.)
(7) Act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the
disposition of portfolio securities of the Tax-Free Intermediate
Bond Fund.
In applying the industry concentration investment restrictions (no. 14 in
the case of the Tax-Free Long-Term Bond Fund, and no. 3 in the case of the
Tax-Free Intermediate Bond Fund), the Funds use an industry classification
system based on the O'Neil Database published by William O'Neil & Co., Inc.
Additional investment restrictions adopted by the Company on behalf of the
INVESCO Tax-Free Intermediate Bond Fund and which may be changed by the
directors, at their discretion, without shareholder approval, include the
following:
(1) The Tax-Free Intermediate Bond Fund's investments in warrants,
valued at the lower of cost or market, may not exceed 5% of the
value of its total assets. Included within that amount, but not to
exceed 2% of the value of the Tax-Free Intermediate Bond Fund's
total assets, may be warrants that are not listed on the New York,
American, or other United States Securities exchanges. Warrants
acquired by the Tax-Free Intermediate Bond Fund in units or attached
to securities shall be deemed to be without value.
(2) The Tax-Free Intermediate Bond Fund will not (i) enter into any
futures contracts or options on futures contracts if immediately
thereafter the aggregate margin deposits on all outstanding futures
contracts positions held by the Fund and premiums paid on
outstanding options on futures contracts, after taking into account
unrealized profits and losses, would exceed 5% of the market value
of the total assets of the Fund, or (ii) enter into any futures
contracts if the aggregate net amount of the Tax-Free Intermediate
Bond Fund's commitments under outstanding futures contracts
positions of the Tax-Free Intermediate Bond Fund would exceed the
market value of the total assets of the Fund.
<PAGE>
(3) The Tax-Free Intermediate Bond Fund does not currently intend to
sell securities short, unless it owns or has the right to obtain
securities equivalent in kind and amount to the securities sold
short without the payment of any additional consideration therefor,
and provided that transactions in options and forward futures
contracts are not deemed to constitute selling securities short.
(4) The Tax-Free Intermediate Bond Fund does not currently intend to
purchase securities on margin, except that the Fund may obtain such
short-term credits as are necessary for the clearance of
transactions, and provided that margin payments and other deposits
in connection with transactions in options, futures, and forward
contracts shall not be deemed to constitute purchasing securities on
margin.
(5) The Tax-Free Intermediate Bond Fund does not currently intend to (i)
purchase securities of other investment companies, except in the
open market where no commission except the ordinary broker's
commission is paid, or (ii) purchase or retain securities issued by
other open-end investment companies. Limitations (i) and (ii) do not
apply to money market funds or to securities received as dividends,
through offers of exchange, or as a result of a reorganization,
consolidation, or merger. If the Tax- Free Intermediate Bond Fund
invests in a money market fund, the Tax-Free Intermediate Bond
Fund's investment adviser will reduce its advisory fee by the amount
of any investment advisory and administrative services fees paid to
the investment manager of the money market fund.
(6) The Tax-Free Intermediate Bond Fund may not mortgage or pledge any
securities owned or held by the Fund in amounts that exceed, in the
aggregate, 15% of the Fund's net asset value, provided that this
limitation does not apply to reverse repurchase agreements, to
assets deposited to margin or guarantee positions in futures,
options, swaps or forward contracts or to assets placed in a
segregated account in connection with such contracts.
(7) The Tax-Free Intermediate Bond Fund does not currently intend to
invest directly in oil, gas, or other mineral development or
exploration programs or leases; however, the Tax-Free Intermediate
Bond Fund may own debt or equity securities of companies engaged in
those businesses.
(8) The Tax-Free Intermediate Bond Fund does not currently intend to
purchase any illiquid securities or enter into a repurchase
agreement if, as a result, more than 10% of its net assets would be
invested in repurchase agreements not entitling the holder to
<PAGE>
payment of principal and interest within seven days and in
securities that are illiquid by virtue of legal or contractual
restrictions on resale or for which there is no readily available
market. The board of directors, or the Tax-Free Intermediate Bond
Fund's investment adviser acting pursuant to authority delegated by
the board of directors, may determine that a readily available
market exists for securities eligible for resale pursuant to Rule
144A under the Securities Act of 1933, or any successor to such
rule, and that such securities are not subject to the foregoing
limitation.
(9) The Tax-Free Intermediate Bond Fund may not invest in companies for
the purpose of exercising control or management, except to the
extent that exercise by the Fund of its rights under agreements
related to portfolio securities would be deemed to constitute such
control.
(10) The Tax-Free Intermediate Bond Fund may not invest more than 25% of
the value 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 respect to investment restriction 8 above, the board of directors has
delegated to the Tax-Free Intermediate Bond Funds' investment adviser the
authority to determine that a liquid market exists for securities eligible for
resale pursuant to Rule 144A under the Securities Act of 1933, or any successor
to such rule, and that such securities are not subject to restriction 8 above.
Under guidelines established by the board of directors, the adviser will
consider the following factors, among others, in making this determination: (1)
the unregistered nature of a Rule 144A security, (2) the frequency of trades and
quotes for the security; (3) the number of dealers willing to purchase or sell
the security and the number of other potential purchasers; (4) dealer
undertakings to make a market in the security; and (5) the nature of the
security and the nature of marketplace trades (e.g., the time needed to dispose
of the security, the method of soliciting offers and the mechanics of transfer).
The Tax-Free Intermediate Bond Fund has given an undertaking to the State
of Arkansas that the Fund will not invest in securities of unseasoned issuers,
including their predecessors, which have been in operation for less than 3
years, and equity securities of issuers which are not readily marketable, if by
reason thereof the value of its aggregate investment in such securities would
exceed 5% of its total assets. Additionally, the Fund may purchase or write put
<PAGE>
and call options on securitiis or straddles, spreads or combinations
thereof, only if by reason thereof the value of the Fund's aggregate investment
in such classes of securities will be 5% or less of its total assets. Also, the
Fund will not buy or sell commodities or commodity contracts.
Both Funds have also given an undertaking to the State of Kentucky that
they will not invest in oil, gas or other mineral development or exploration
programs or leases.
The Tax-Free Intermediate Bond Fund has given an undertaking to the State
of Ohio that the Fund will not purchase or retain the securities of any issuer
if the officers, directors, advisers or managers of the Fund owning beneficially
more than one-half of 1% of the securities of an issuer together own
beneficially more than 5% of the securities of that issuer. Additionally, the
Fund will not invest more than 15% of the Fund's total net assets in the
securities of issuers which, together with any predecessors, have a record of
less than three years continuous operations, or securities of issuers which are
restricted as to disposition.
<PAGE>
THE FUNDS AND THEIR MANAGEMENT
The Company. The Company was incorporated under the laws of Maryland on
April 2, 1993. On November 1, 1993, the Tax-Free Long- Term Bond Fund of the
Company assumed all the assets and liabilities of Financial Tax-Free Income
Shares, Inc. ("FTFIS"), a Colorado corporation incorporated on April 22, 1981.
All financial and other information about the Tax-Free Long-Term Bond Fund for
periods prior to November 1, 1993, relates to FTFIS.
The Investment Adviser. INVESCO Funds Group, Inc., a Delaware corporation,
("INVESCO") is employed as the Funds' investment adviser. INVESCO was
established in 1932 and also serves as the investment adviser to INVESCO
Diversified Funds, Inc., INVESCO Dynamics Fund, Inc., INVESCO Emerging
Opportunity Funds, Inc., INVESCO Growth Fund, Inc., INVESCO Income Funds, Inc.,
INVESCO Industrial Income Fund, Inc., INVESCO International Funds, Inc., INVESCO
Money Market Funds, Inc., INVESCO Multiple Asset Funds, Inc., INVESCO Specialty
Funds, Inc., INVESCO Strategic Portfolios, Inc., INVESCO Value Trust, and
INVESCO Variable Investment Funds, Inc.
The Sub-Adviser. INVESCO Trust Company ("INVESCO Trust") serves as the
sub-adviser to the Funds, pursuant to an agreement between INVESCO and INVESCO
Trust. INVESCO Trust, a trust company founded in 1969, is a wholly-owned
subsidiary of INVESCO.
INVESCO is an indirect, wholly-owned subsidiary of INVESCO PLC, a
publicly-traded holding company organized in 1935. Through subsidiaries located
in London, Denver, Atlanta, Boston, Louisville, Dallas, Tokyo, Hong Kong, and
the Channel Islands, INVESCO PLC provides investment services around the world.
INVESCO was acquired by INVESCO PLC in 1982 and as of June 30, ^ 1996, managed
14 mutual funds, consisting of ^ 39 separate portfolios, on behalf of over ^
826,000 shareholders. INVESCO PLC's other North American subsidiaries include
the following:
--INVESCO Capital Management, Inc. of Atlanta, Georgia,
manages institutional investment portfolios, consisting primarily
of discretionary employee benefit plans for corporations and state
and local governments, and endowment funds. INVESCO Capital
Management, Inc. is the sole shareholder of INVESCO Services, Inc.,
a registered broker-dealer whose primary business is the
distribution of shares of two registered investment companies.
--INVESCO Management & Research, Inc. (formerly Gardner and
Preston Moss, Inc.) of Boston, Massachusetts, primarily manages
pension and endowment accounts.
--PRIMCO Capital Management, Inc. of Louisville, Kentucky,
specializes in managing stable return investments, principally on
behalf of Section 401(k) retirement plans.
<PAGE>
--INVESCO Realty Advisors of Dallas, Texas, is responsible for providing
advisory services in the U.S. real estate markets for INVESCO PLC's clients
worldwide. Clients include corporate plans, public pension funds as well as
endowment and foundation accounts.
The corporate headquarters of INVESCO PLC are located at 11 Devonshire
Square, London, EC2M 4YR, England.
As indicated in the 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 Funds.
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 the policy are administered by and subject to
exceptions authorized by INVESCO.
Investment Advisory Agreement. INVESCO serves as investment adviser
pursuant to an investment advisory agreement (the "Agreement") with the Company
which was approved on April 21, 1993, by vote cast in person by a majority of
the directors of the Company, including a majority of the directors who are not
"interested persons" of the Company or INVESCO, at a meeting called for such
purpose. Pursuant to authorization granted by the public shareholders of FTFIS
on May 24, 1993, FTFIS, as the initial shareholder of the Company, approved the
Agreement on October 27, 1993 for an initial term expiring April 30, 1995. The
Agreement has been continued by action of the board of directors through April
30, ^ 1997. Thereafter, the Agreement may be continued from year to year as to
each Fund as long as 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 Investment Company Act of 1940, of the outstanding
shares of such Fund. Any such continuance also must be approved by a majority of
the Company's directors who are not parties to the Agreement or interested
persons (as defined in the Investment Company Act of 1940) 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 Investment Company
<PAGE>
Act of 1940 and the Rules thereunder. The Agreement was approved by INVESCO
on November 26, 1993 as the then sole shareholder of the Tax-Free Intermediate
Bond Fund.
The Agreement provides that INVESCO shall manage the investment portfolios
of the Funds in conformity with the Funds' investment policies (either directly
or by delegation to a sub-adviser which may be a 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 Funds excluding, however, those services that are the subject of
separate agreement between the Funds and INVESCO or any affiliate thereof,
including the distribution and sale of shares of the Funds 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 Funds with officers, clerical staff and other
employees, if any, who are necessary in connection with the Funds' operations;
furnishing office space, facilities, equipment, and supplies; providing
personnel and facilities required to respond to inquiries related to shareholder
accounts; conducting periodic compliance reviews of the Funds' operations;
preparation and review of required documents, reports and filings by 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 Funds under the Investment Company Act of 1940. Expenses not
assumed by INVESCO are borne by the Funds.
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 average net assets of the Tax-Free
Long-Term Bond Fund; reduced to 0.45% on the next $200 million of the average
net assets of the Tax-Free Long-Term Bond Fund; and further reduced to 0.35% on
the average net assets of the Tax-Free Long-Term Bond Fund greater than $500
million. For the fiscal years ended June 30, 1996, 1995, and 1994, ^ the
Tax-Free Long-Term Bond Fund paid INVESCO advisory fees of ^ $1,389,027 (prior
to the voluntary absorption of certain Fund expenses by INVESCO), ^ $1,471,474
(prior to the voluntary absorption of certain Fund expenses by INVESCO), and
$1,758,722, respectively. The fee for the Tax-Free Intermediate Bond Fund is
calculated daily at an annual rate of: 0.50% on the first $300 million of the
average net assets; reduced to 0.40% on the next $200 million of the average net
assets; and further reduced to 0.30% on the average net assets greater than $500
million. For the fiscal ^ years ended June 30, 1996 and 1995 and the period
<PAGE>
ended June 30, 1994, the Tax-Free Intermediate Bond Fund paid INVESCO
advisory fees (prior to the voluntary absorption of certain Fund expenses by
INVESCO) of $26,991, $23,812 and $9,874, respectively.
Certain states in which the shares of the Funds are qualified for sale
currently impose limitations on the expenses of the Funds. At the date of this
Statement of Additional Information, the most restrictive state-imposed annual
expense limitation requires that INVESCO absorb any amount necessary to prevent
each Fund's aggregate ordinary operating expenses (excluding interest, taxes,
brokerage fees and commissions and extraordinary charges such as litigation
costs) from exceeding in any fiscal year 2.5% of the Fund's first $30,000,000 of
average net assets, 2.0% of the next $70,000,000 of average net assets and 1.5%
of the remaining average net assets. No payment of the investment advisory fee
will be made to INVESCO which would result in either Fund's expenses exceeding
on a cumulative annualized basis this state limitation. During the past year,
INVESCO did not absorb any amounts under this provision for any Fund.
Sub-Advisory Agreement. INVESCO Trust serves as sub-adviser to the Funds
pursuant to a sub-advisory agreement (the "Sub-Agreement") with INVESCO which
was approved on April 21, 1993, by a vote cast in person by a majority of the
directors of the Company, including a majority of the directors who are not
"interested persons" of the Company, INVESCO, or INVESCO Trust at a meeting
called for such purpose. Pursuant to authorization granted by the public
shareholders of FTFIS on May 24, 1993, FTFIS, as the initial shareholder of the
Company, approved the Sub- Agreement on October 27, 1993 for an initial term
expiring April 30, 1995. Thereafter, the Sub-Agreement may be continued from
year to year as to each Fund as long as each such continuance is specifically
approved by the board of directors of the Company, or by a vote of the holders
of a majority, as defined in the 1940 Act, of the outstanding shares of such
Fund. Each such continuance must also be approved by a majority of the directors
who are not parties to the Sub-Agreement or interested persons (as defined in
the 1940 Act) of any such party, cast in person at a meeting called for the
purpose of voting on such continuance. The Sub-Agreement may be terminated at
any time without penalty by either party or the Funds upon sixty (60) days'
written notice, and terminates automatically in the event of an assignment to
the extent required by the Investment Company Act of 1940 and the rules
thereunder. The Sub- Agreement was approved by INVESCO on November 26, 1993, as
the then sole shareholder of the Tax-Free Intermediate Bond Fund. The Sub-
Agreement has been continued by action of the board of directors through April
30, ^ 1997.
The Sub-Agreement provides that INVESCO Trust, subject to the supervision
of INVESCO, shall manage the investment portfolios of each Fund in conformity
with each Fund's investment policies. These management services would include:
(a) managing the investment and reinvestment of all the assets, now or hereafter
<PAGE>
acquired, of the Funds, and executing all purchases and sales of portfolio
securities; (b) maintaining a continuous investment program for the Funds,
consistent with (i) each Fund's investment policies as set forth in the
Company's Articles of Incorporation, Bylaws, and Registration Statement, as from
time to time amended, under the 1940 Act, as amended, and in any prospectus
and/or statement of additional information of the Funds, as from time to time
amended and in use under the Securities Act of 1933, as amended, and (ii) the
Company's status as a regulated investment company under the Internal Revenue
Code of 1986, as amended; (c) determining what securities are to be purchased or
sold for the Funds, unless otherwise directed by the directors of the Company or
INVESCO, and executing transactions accordingly; (d) providing the Funds the
benefit of all of the investment analysis and research, the reviews of current
economic conditions and trends, and the consideration of long-range investment
policy now or hereafter generally available to investment advisory customers of
the Sub-Adviser; (e) determining what portion of the Funds should be invested in
the various types of securities authorized for purchase by each Fund; and (f)
making recommendations as to the manner in which voting rights, rights to
consent to Company action and any other rights pertaining to each Fund's
portfolio securities shall be exercised.
The Sub-Agreement provides that as compensation for its services, INVESCO
Trust shall receive from INVESCO, at the end of each month, a fee based upon the
average daily value of the Tax- Free Long-Term Bond Fund's average net assets at
the following annual rates: 0.25% of the average net assets up to $200 million,
and 0.20% of the average net assets in excess of $200 million, and a fee based
upon the average daily value of the Tax-Free Intermediate Bond Fund at the
following annual rates: 0.25% of the average net assets up to $300 million;
0.20% of the next $200 million of average net assets; and 0.15% of the average
net assets in excess of $500 million. The Sub-Advisory fee is paid by INVESCO,
NOT the Funds.
Administrative Services Agreement. INVESCO, either directly or through
affiliated companies, also provides certain administrative, sub-accounting, and
recordkeeping services to the Funds pursuant to an Administrative Services
Agreement dated April 30, 1993 (the "Administrative Agreement"). The
Administrative Agreement was approved on April 21, 1993, by a vote cast in
person by all of the directors of the Company, including all of the directors
who are not "interested persons" of the Company or INVESCO at a meeting called
for such purpose. The Administrative Agreement was for an initial term of one
year expiring April 30, 1994, and has been continued by action of the board of
directors until April 30, ^ 1997. 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
<PAGE>
the purpose of voting on such continuance. The Administrative Agreement may be
terminated at any time without penalty by INVESCO on sixty (60) days' written
notice, or by the Company upon thirty (30) days' written notice, and terminates
automatically in the event of an assignment unless the Company's board of
directors approves such assignment.
The Administrative Agreement provides that INVESCO shall provide the
following services to the Funds: (A) such sub-accounting and recordkeeping
services and functions as are reasonably necessary for the operation of the
Funds; and (B) such sub-accounting, recordkeeping, and administrative services
and functions which may be provided by affiliates of INVESCO, as are reasonably
necessary for the operation of a 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, each 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 each Fund.
During the fiscal year ended June 30, 1996, 1995, and 1994, ^ the Tax-Free
Long-Term Bond Fund paid INVESCO administrative services fees in the amount of ^
$47,882 (prior to the voluntary absorption of certain Fund expenses by INVESCO),
^ $50,131 (prior to the voluntary absorption of certain Fund expenses by
INVESCO), and $58,680, respectively. During the fiscal ^ years ended June 30,
1996 and 1995 and the period ended June 30, 1994, the Tax-Free Intermediate Bond
Fund paid INVESCO administrative services fees ^(prior to the voluntary
absorption of certain Fund expenses by INVESCO) in the amount of $10,810,
$10,714 and $6,129, respectively.
Transfer Agency Agreement. INVESCO also performs transfer agent, dividend
disbursing agent, and registrar services for the Funds pursuant to a Transfer
Agency Agreement which was approved by the board of directors of the Company,
including a majority of the Company's directors who are not parties to the
Transfer Agency Agreement or "interested persons" of any such party, on April
21, 1993, for an initial term expiring April 30, 1994. The Transfer Agency
Agreement has been continued by action of the board of directors until April 30,
^ 1997 and thereafter may be continued from year to year as long as such
continuance is specifically approved at least annually by the board of directors
of the Company, or by a vote of the holders of a majority of the outstanding
shares of each of the Funds. 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
<PAGE>
automatically in the event of assignment. Prior to March 8, 1991, transfer
agency services were provided by INVESCO Trust Company, a wholly owned
subsidiary of INVESCO.
The Transfer Agency Agreement provides that the Funds shall pay to INVESCO
a fee of ^ $26.00 per shareholder account or omnibus account participant per
year. This fee is paid monthly at 1/12 of the annual fee and is based upon the
actual number of shareholder accounts or omnibus account participants in
existence at any time during each month. For the fiscal years ended June 30,
1996, 1995, and 1994, ^ the Tax-Free Long-Term Bond Fund paid INVESCO transfer
agency fees of ^ $324,030 (prior to the voluntary absorption of certain Fund
expenses by INVESCO), ^ $390,390 (prior to the voluntary absorption of certain
Fund expenses by INVESCO) and $310,709, respectively. For the fiscal ^ years
ended June 30, 1996 and 1995 and the period ended June 30, 1994, the Tax-Free
Intermediate Bond Fund paid INVESCO transfer agency fees (prior to the voluntary
absorption of certain Fund expenses by INVESCO) of $14,234, $12,446 and $3,083,
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 each Fund are carried out and that each Fund's portfolio is properly
administered. The officers of the Company, all of whom are officers and
employees of, and paid by, INVESCO, are responsible for the day-to-day
administration of the Funds. The investment adviser for each Fund has the
primary responsibility for making investment decisions on behalf of each Fund.
These investment decisions are reviewed by the investment committee of INVESCO.
All of the officers and directors of the Company hold comparable positions
with INVESCO Diversified Funds, Inc., INVESCO Dynamics Fund, Inc., INVESCO
Emerging Opportunity Funds, Inc., INVESCO Growth Fund, Inc., INVESCO Income
Funds, Inc., INVESCO Industrial Income Fund, Inc., INVESCO International Funds,
Inc., INVESCO Money Market Funds, Inc., INVESCO Multiple Asset Funds, Inc.,
INVESCO Specialty Funds, Inc., INVESCO Strategic Portfolios, Inc., and INVESCO
Variable Investment Funds, Inc. All of the directors of the Company also ^ serve
as trustees of INVESCO Value Trust. In addition, all of the directors of the
Company also are^ directors of INVESCO Advisor Funds, Inc. (formerly known as
"The EBI Funds, Inc."); and, with the exception of Mr. Hesser, trustees of
INVESCO Treasurer's Series Trust. All of the officers of the Company also hold
comparable positions with INVESCO Value Trust. Set forth below is information
with respect to each of the Company's officers and directors. Unless otherwise
indicated, the address of the directors and officers is Post Office Box 173706,
Denver, Colorado 80217-3706. Their affiliations represent their principal
occupations during the past five years.
CHARLES W. BRADY,*+ Chairman of the Board. Chief Executive
Officer and Director of INVESCO PLC, London, England, and of
<PAGE>
various subsidiaries thereof; Chairman of the Board of ^ INVESCO
Advisor Funds, Inc., INVESCO Treasurer's Series Trust, and The
Global Health Sciences Fund. Address: 1315 Peachtree Street,
NE, Atlanta, Georgia. Born: May 11, 1935.
FRED A. DEERING,+# Vice Chairman of the Board. Vice Chairman
of ^ INVESCO Advisor Funds, Inc. and INVESCO Treasurer's Series
Trust. Trustee of The Global Health Sciences Fund. Formerly,
Chairman of the Executive Committee and Chairman of the Board of
Security Life of Denver Insurance Company, Denver, Colorado; ^
Chairman of ING America Life Insurance Co., Urbaine Life Insurance
Company and Midwestern United Life Insurance Company. Address:
Security Life Center, 1290 Broadway, Denver, Colorado. Born:
January 12, 1928.
DAN J. HESSER,+* President and Director. Chairman of the
Board, President, and Chief Executive Officer of INVESCO Funds
Group, Inc. ^; Director of INVESCO Trust Company. Trustee of The
Global Health Sciences Fund. Born: December 27, 1939.
VICTOR L. ANDREWS,** Director. ^ Professor Emeritus,
Chairman Emeritus and Chairman of the CFO Roundtable of the
Department of Finance at Georgia State University, Atlanta,
Georgia^; President, Andrews Financial Associates, Inc. (consulting
firm); formerly, member of the faculties of the Harvard Business
School and the Sloan School of Management of MIT. Dr. Andrews is
also a ^ director of The ^ Southeastern Thrift and Bank Fund, Inc.
and The Sheffield Funds, Inc. Address: ^ 4625 Jettridge Drive,
Atlanta, Georgia. Born: June 23, 1930.
BOB R. BAKER,+** Director. President and Chief Executive
Officer of AMC Cancer Research Center, Denver, Colorado, since
January 1989; until mid-December 1988, Vice Chairman of the Board
of First Columbia Financial Corporation (a financial institution),
Englewood, Colorado. Formerly, Chairman of the Board and Chief
Executive Officer of First Columbia Financial Corporation.
Address: 1775 Sherman Street, #1000, Denver, Colorado. Born:
August 7, 1936.
^
LAWRENCE H. BUDNER,# Director. Trust Consultant; prior to
June 30, 1987, Senior Vice President and Senior Trust Officer of
InterFirst Bank, Dallas, Texas. Address: 7608 Glen Albens
Circle, Dallas, Texas. Born: July 25, 1930.
DANIEL D. CHABRIS,+# Director. Financial Consultant;
Assistant Treasurer of Colt Industries Inc., New York, New York,
from 1966 to 1988. Address: 15 Sterling Road ^, Armonk, New York.
Born: August 1, 1923.
A. D. FRAZIER, JR.,*,** Director. Chief Operating Officer of
the Atlanta Committee for the Olympic Games. From 1982 to 1991,
Mr. Frazier was employed in various capacities by First Chicago
<PAGE>
Bank, most recently as Executive Vice President of the North
American Banking Group. Trustee of The Global Health Sciences
Fund. Director of Magellan Health Services, Inc. and of Charter
Medical Corp. Address: 250 Williams Street, Suite 6000, Atlanta,
Georgia^ 30301. Born: June 23, 1944.
HUBERT L. HARRIS, JR.,* Director, Chairman (since May 1996)
and President (January 1990 to April 1996) of INVESCO Services,
Inc. Director of INVESCO PLC and Chief Financial Officer of
INVESCO Individual Services Group. Member of the Executive
Committee of the Alumni Board of Trustees of Georgia Institute of
Technology. Address: 1315 Peachtree Street, N.E., Atlanta,
Georgia. Born: July 15, 1943.
KENNETH T. KING,** Director. Formerly, Chairman of the Board
of The Capitol Life Insurance Company, Providence Washington
Insurance Company, and Director of numerous subsidiaries thereof in
the U.S. Formerly, Chairman of the Board of The Providence Capitol
Companies in the United Kingdom and Guernsey. Chairman of the
Board of the Symbion Corporation (a high technology company) until
1987. Address: 4080 North Circulo Manzanillo, Tucson, Arizona.
Born: November 16, 1925.
JOHN W. MCINTYRE,# Director. Retired. Formerly, Vice
Chairman of the Board of Directors of ^ the Citizens and Southern
Corporation and Chairman of the Board and Chief Executive Officer
of ^ the Citizens and Southern Georgia ^ Corporation and Citizens
and Southern National Bank. ^ Director of Golden Poultry Co., Inc.
^ Trustee of The Global Health Sciences Fund and Gables Residential
Trust. Address: Seven Piedmont Center, Suite 100, Atlanta, Georgia
30305. Born: September 14, 1930.
^
GLEN A. PAYNE, Secretary. Senior Vice President, General
Counsel and Secretary of INVESCO Funds Group, Inc. and INVESCO
Trust Company; formerly, employee of a U.S. regulatory agency,
Washington, D.C., (June 1973 through May 1989). Born: September
25, 1947.
RONALD L. GROOMS, Treasurer. Senior Vice President and
Treasurer of INVESCO Funds Group, Inc. and INVESCO Trust Company
since January 1988. Born: October 1, 1946.
WILLIAM J. GALVIN, JR., Assistant Secretary. Senior Vice
President of INVESCO Funds Group, Inc. and Trust Officer of INVESCO
Trust Company ^. Formerly, Vice President of 440 Financial Group
from June 1990 to August 1992; Assistant Vice President of Putnam
Companies from November 1986 to June 1990. Born: August 21, 1956.
ALAN I. WATSON, Assistant Secretary. Vice President of
INVESCO Funds Group, Inc. and Trust Officer of INVESCO Trust
Company. Born: September 14, 1941.
<PAGE>
JUDY P. WIESE, Assistant Treasurer. Vice President of INVESCO
Funds Group, Inc. and Trust Officer of INVESCO Trust Company.
Born: February 3, 1948.
#Member of the audit committee of the Company.
+Member of the executive committee of the Company. On occasion, the
executive committee acts upon the current and ordinary business of the Company
between meetings of the board of directors. Except for certain powers which,
under applicable law, may only be exercised by the full board of directors, the
executive committee may exercise all powers and authority of the board of
directors in the management of the business of the Company. All decisions are
subsequently submitted for ratification by the board of directors.
*These directors are "interested persons" of the Company as
defined in the 1940 Act.
**Member of the management liaison committee of the Company.
As of ^ October 16, 1996, 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 June 30, ^ 1996:
the compensation paid by the Company to its eight independent directors for
services rendered in their capacities as directors of the Company; the benefits
accrued as Company expenses with respect to the Defined Benefit Deferred
Compensation Plan discussed below; and the estimated annual benefits to be
received by these directors upon retirement as a result of their service to the
Company. In addition, the table sets forth the total compensation paid by all of
the mutual funds distributed by INVESCO Funds Group, Inc. (including the
Company), ^ INVESCO Advisor Funds, Inc., INVESCO Treasurer's Series Trust and
The Global Health Sciences Fund (collectively, the "INVESCO Complex") to these
directors for services rendered in their capacities as directors or trustees
during the year ended December 31, ^ 1995. As of December 31, ^ 1995, there were
^ 48 funds in the INVESCO Complex.
Total
Compensa-
Benefits Estimated tion From
Aggregate Accrued As Annual INVESCO
Compensa- Part of Benefits Complex
tion From Company Upon Paid To
Company(1) Expenses(2) Retirement(3) Directors(1)
Fred A.Deering, ^ $2,688 $478 $398 $87,350
Vice Chairman of
the Board
<PAGE>
Victor L. Andrews ^ 2,573 421 438 68,000
Bob R. Baker ^ 2,620 434 587 73,000
Lawrence H. Budner ^ 2,542 451 438 68,350
Daniel D. Chabris ^ 2,627 515 312 73,350
A. D. Frazier, ^ Jr.4,5 2,442 0 0 ^ 63,500
Kenneth T. King ^ 2,574 496 361 70,000
John W. McIntyre4 ^ 2,521 0 0 ^ 67,850
Total ^ $20,587 $2,795 $2,534 $571,400
% of Net Assets ^ 0.0080%(6) 0.0011%(6) 0.0043%(7)
(1)The vice chairman of the board, the chairmen of the audit, management
liaison and compensation committees, and the members of the executive and
valuation committees each receive compensation for serving in such capacities in
addition to the compensation paid to all independent directors.
(2)Represents benefits accrued with respect to the Defined Benefit Deferred
Compensation Plan discussed below, and not compensation deferred at the election
of the directors.
(3)These figures represent the Company's share of the estimated annual
benefits payable by the INVESCO Complex (excluding the Global Health Sciences
Fund which does not participate in any retirement plan) upon the directors'
retirement, calculated using the current method of allocating director
compensation among the funds in the INVESCO Complex. These estimated benefits
assume retirement at age 72 and that the basic retainer payable to the directors
will be adjusted periodically for inflation, for increases in the number of
funds in the INVESCO Complex, and for other reasons during the period in which
retirement benefits are accrued on behalf of the respective directors. This
results in lower estimated benefits for directors who are closer to retirement
and higher estimated benefits for directors who are further from retirement.
With the exception of Messrs. Frazier and McIntyre, each of these directors has
served as a director/trustee of one or more of the funds in the INVESCO Complex
for the minimum five-year period required to be eligible to participate in the
Defined Benefit Deferred Compensation Plan.
(4)Messrs. Frazier and McIntyre began serving as directors of the Company
on April 19, 1995.
(5)Because of the possibility that A. D. Frazier, Jr. may become employed
by a company affiliated with INVESCO at some point in the future, he was deemed
to be an "interested person" of the Fund and of the other funds in the INVESCO
Complex effective May 1, 1996.
<PAGE>
Until such time as Mr. Frazier actually becomes employed by an
INVESCO-affiliated company, however, he will continue to receive the same
director's fees and other compensation as the Fund's independent directors.
(6)Totals ^ as a percentage of the Company's net assets as of June 30, ^
1996.
^ (7)Total as a percentage of the net assets of the INVESCO Complex as of
December 31, ^ 1995.
Messrs. ^ Brady, Harris, and Hesser, ^ as "interested persons" of the
Company and other funds in the INVESCO Complex, receive compensation as officers
or employees of INVESCO or its affiliated companies, and do not receive any
director's fees or other compensation from the Company or other funds in the
INVESCO Complex for their services as directors.
The boards of directors/trustees of the mutual funds managed by INVESCO, ^
INVESCO Advisor Funds, Inc. and INVESCO Treasurer's Series Trust have adopted a
Defined Benefit Deferred Compensation Plan for the non-interested directors and
trustees of the funds. Under this plan, each director or trustee who is not an
interested person of the funds (as defined in the 1940 Act) and who has served
for at least five years (a "qualified director") is entitled to receive, upon
retiring from the boards at the retirement age of 72 (or the retirement age of
73 to 74, if the retirement date is extended by the boards for one or two years,
but less than three years) continuation of payment for one year (the "first year
retirement benefit") of the annual basic retainer payable by the funds to the
qualified director at the time of his retirement (the "basic retainer").
Commencing with any such director's second year of retirement, and commencing
with the first year of retirement of a director whose retirement has been
extended by the board for three years, a qualified director shall receive
quarterly payments at an annual rate equal to 25% of the basic retainer. These
payments will continue for the remainder of the qualified director's life or ten
years, whichever is longer (the "reduced retainer payments"). If a qualified
director dies or becomes disabled after age 72 and before age 74 while still a
director of the funds, the first year retirement benefit and the reduced
retainer payments will be made to him or to his beneficiary or estate. If a
qualified director becomes disabled or dies either prior to age 72 or during
his/her 74th year while still a director of the funds, the director will not be
entitled to receive the first year retirement benefit; however, the reduced
retainer payments will be made to his beneficiary or estate. The plan is
administered by a committee of three directors who are also participants in the
plan and one director who is not a plan participant. The cost of the plan will
be allocated among the INVESCO, ^ INVESCO Advisor and Treasurer's Series funds
in a manner determined to be fair and equitable by the committee. The Company is
not making any payments to directors under the plan as of the date of this
<PAGE>
Statement of ADditional Information. The Company has no stock options or
other pension or retirement plans for management or other personnel and pays no
salary or compensation to any of its officers.
The Company has an audit committee comprised of four of the directors who
are not interested persons of the Company. The committee meets periodically with
the Company's independent accountants and officers to review accounting
principles used by the Company, the adequacy of internal controls, the
responsibilities and fees of the independent accountants, and other matters.
The Company also has a management liaison committee which meets quarterly
with various management personnel of INVESCO in order (a) to facilitate better
understanding of management and operations of the Company, and (b) to review
legal and operational matters which have been assigned to the committee by the
board of directors, in furtherance of the board of directors' overall duty of
supervision.
HOW SHARES CAN BE PURCHASED
Each Fund's shares are sold on a continuous basis at the net asset value
per share next calculated after receipt of a purchase order in good form. The
net asset value per share is computed once each day that the New York Stock
Exchange is open as of the close of regular trading on that Exchange, but may
also be computed at other times. See "How Shares Are Valued." INVESCO acts as
the Funds' Distributor under a distribution agreement with the Company under
which it receives no compensation and bears all expenses, including the cost of
printing and distributing prospectuses, incident to marketing of a Fund's
shares, except for such distribution expenses which are paid out of a 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.
Distribution Plan. As discussed under "How To Buy Shares Distribution
Expenses" in the Prospectus, the Funds have 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 Funds may make
monthly payments to INVESCO of amounts computed at an annual rate no greater
than 0.25% of each Fund's average net assets to reimburse it for expenses
incurred by it in connection with the distribution of a Fund's shares to
investors. Payment amounts by a Fund under the Plan, for any month, may only be
made to reimburse or pay expenditures incurred during the rolling 12-month
period in which that month falls, although this period is expanded to 24 months
for expenses incurred during the first 24 months of the Fund's operations. For
the fiscal year ended June 30, ^ 1996 the Tax-Free Intermediate Bond Fund and
Tax-Free Long-Term Bond Fund made payments to INVESCO under the 12b-1 Plan
(prior to the voluntary absorption of certain Fund expenses by INVESCO) in the
amount of ^ $13,576 and ^ $326,810, respectively. In addition, as of June 30,
<PAGE>
^ 1996, $953 and ^ $10,542 of additional distribution expenses had been incurred
under the Plan for the Tax-Free Intermediate Bond Fund and Tax-Free Long-Term
Bond Fund, respectively, subject to payment upon approval of the Funds'
directors, which payment was approved on ^ August 14, 1996 . As noted in the
Prospectuses, one type of reimbursable expenditure is the payment of
compensation to securities companies, and other financial institutions and
organizations, which may include INVESCO-affiliated companies, in order to
obtain various distribution-related and/or administrative services for the
Funds. Each Fund is authorized by the Plan to use its assets to finance the
payments made to obtain those services. Payments will be made by INVESCO to
broker-dealers who sell shares of a Fund and may be made to banks, savings and
loan associations and other depository institutions. Although the Glass-Steagall
Act limits the ability of certain banks to act as underwriters of mutual fund
shares, the Funds do not believe that these limitations would affect the ability
of such banks to enter into arrangements with INVESCO, but can give no assurance
in this regard. However, to the extent it is determined otherwise in the future,
arrangements with banks might have to be modified or terminated, and, in that
case, the size of one or more of the Funds possibly could decrease to the extent
that the banks would no longer invest customer assets in a particular Fund.
Neither the Company nor its investment adviser will give any preference to banks
or other depository institutions which enter into such arrangements when
selecting investments to be made by each Fund.
For the 12 months ended June 30, ^ 1996 allocation of 12b-1 amounts paid
by the Tax-Free Long-Term Bond Fund for the following categories of expenses
were: advertising--^ $30,152; sales literature, printing and postage--^ $76,482;
direct mail--^ $25,616; public relations/promotion--^ $25,457; compensation to
securities dealers and other organizations--^ $81,987; marketing personnel--^
$87,116. For the 12 months ended June 30, ^ 1996, allocations of 12b-1 amounts
paid by the Tax-Free Intermediate Bond Fund for the following categories of
expenses were: advertising --^ $1,265; sales literature, printing and postage --
^ $5,402; direct mail -- ^ $1,125; public relations/promotion -- $1,042;
compensation to securities dealers and other organizations -- ^ $1,322;
marketing personnel -- ^ $3,420.
The nature and scope of services which are provided by securities dealers
and other organizations may vary by dealer but include, among other things,
processing new stockholder account applications, preparing and transmitting to
the Company's Transfer Agent computer-processable tapes of each Fund's
transactions by customers, serving as the primary source of information to
customers in answering questions concerning each Fund, and assisting in other
customer transactions with each Fund.
The Plan was approved on April 21, 1993, at a meeting called for such
purpose by a majority of the directors of the Company, including a majority of
the directors who neither are "interested persons" of the Company nor have any
<PAGE>
financial interest in the operation of the Plan ("12b-1 directors"). The
Plan was approved by INVESCO on November 26, 1993, as the then sole shareholder
of the Tax-Free Intermediate Bond Fund. Pursuant to authorization granted by the
public shareholders of FTFIS on May 24, 1993 FTFIS, as the initial shareholder
of the Tax-Free Long-Term Bond Fund, approved the Agreement on October 27, 1993
for an initial term expiring April 30, 1994. The Plan has been continued by
action of the board of directors until April 30, ^ 1997.
The Plan provides that it shall continue in effect with respect to each
Fund for so long as such continuance is approved at least annually by the vote
of the board of directors of the Company cast in person at a meeting called for
the purpose of voting on such continuance. The Plan can also be terminated at
any time with respect to any Fund, without penalty, if a majority of the 12b-1
directors, or shareholders of such Fund, vote to terminate the Plan. The Company
may, in its absolute discretion, suspend, discontinue or limit the offering of
its shares of any Fund at any time. In determining whether any such action
should be taken, the board of directors intends to consider all relevant factors
including, without limitation, the size of a particular Fund, the investment
climate for any particular Fund, general market conditions, and the volume of
sales and redemptions of a 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 a Fund's shares; however, neither Fund is
contractually obligated to continue the Plan for any particular period of time.
Suspension of the offering of a Fund's shares would not, of course, affect a
shareholder's ability to redeem his shares. So long as the Plan is in effect,
the selection and nomination of persons to serve as independent directors of the
Company shall be committed to the independent directors then in office at the
time of such selection or nomination. The Plan may not be amended to increase
materially the amount of any Fund's payments thereunder without approval of the
shareholders of that Fund, and all material amendments to the Plan must be
approved by the board of directors of the Company, including a majority of the
12b-1 directors. Under the agreement implementing the Plan, INVESCO or the
Funds, the latter by vote of a majority of the 12b-1 directors, or of the
holders of a majority of a Fund's outstanding voting securities, may terminate
such agreement as to that Fund without penalty upon 30 days' written notice to
the other party. No further payments will be made by a Fund under the Plan in
the event of its termination as to that Fund.
To the extent that the Plan constitutes a plan of distribution adopted
pursuant to Rule 12b-1 under the 1940 Act, it shall remain in effect as such, so
as to authorize the use of each Fund's assets in the amounts and for the
purposes set forth therein, notwithstanding the occurrence of an assignment, as
defined by the 1940 Act, and rules thereunder. To the extent it constitutes an
agreement pursuant to a plan, each Fund's obligation to make payments to INVESCO
shall terminate automatically, in the event of such "assignment," in which case
<PAGE>
the Funds may continue to make payments pursuant to the Plan to INVESCO or
another organization only upon the approval of new arrangements, which may or
may not be with INVESCO, regarding the use of the amounts authorized to be paid
by it under the Plan, by the directors, including a majority of the 12b-1
directors, by a vote cast in person at a meeting called for such purpose.
Information regarding the services rendered under the Plan and the amounts
paid therefor by the Funds are provided to, and reviewed by, the directors on a
quarterly basis. In the quarterly review, the directors determine whether, and
to what extent, INVESCO will be reimbursed for expenditures which it has made
that are reimbursable under the Funds' Rule 12b-1 Plan. 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 INVESCO or companies affiliated with INVESCO. 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 Funds;
(2) The sale of additional shares reduces the likelihood that redemption
of shares will require the liquidation of securities of the Funds in
amounts and at times that are disadvantageous for investment
purposes;
(3) The positive effect which increased Fund assets will have on its
revenues could allow INVESCO:
(a) To have greater resources to make the financial commitments
necessary to improve the quality and level of each Fund's
shareholder services (in both systems and personnel),
(b) To increase the number and type of mutual funds available to
investors from INVESCO (and support them in their infancy),
and thereby expand the investment choices available to all
shareholders, and
(c) To acquire and retain talented employees who desire
to be associated with a growing organization; and
<PAGE>
(4) Increased Fund assets may result in reducing each investor's share
of certain expenses through economies of scale (e.g. exceeding
established breakpoints in the advisory fee schedule and allocating
fixed expenses over a larger asset base), thereby partially
offsetting the costs of the Plan.
HOW SHARES ARE VALUED
As described in the section of each Fund's Prospectus entitled "Fund Price
and Performance," the net asset value of shares of each Fund 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 a 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 a Fund receives a request to purchase or redeem
shares. Net asset value per share is not calculated on days the New York Stock
Exchange is closed, such as federal holidays including New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving, and Christmas. The net asset value per share is calculated by
dividing the value of all securities held by a particular Fund plus other assets
(including interest accrued but not collected), less all liabilities (including
accrued expenses, but excluding capital and surplus), by the number of shares
outstanding.
The Funds value 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 Funds, 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
<PAGE>
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 each Fund's Prospectus entitled "Fund Price
and Performance," the Funds advertise their total return performance and yield.
The total return performance for the Tax-Free Intermediate Bond Fund for the
one-year period ended June 30, ^ 1996 and the period December 1, 1993
(commencement of operations of the Fund) to June 30, ^ 1996 (life of the Fund)
was ^ 4.89% and ^ 3.25%, respectively. Average annual total return performance
for the Tax-Free Long-Term Bond Fund for the one-, five- and ten-year periods
ended June 30, ^ 1996 was ^ 7.01%, 7.35% and ^ 7.98%, 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:
<PAGE>
P(1 + T)n = ERV
where: P = initial payment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of initial payment
The average annual total return performance figures shown above were
determined by solving the above formula for "T" for each time period indicated.
The 30-day compounded yield at June 30, ^ 1996, for the Tax- Free
Long-Term Bond Fund of ^ 4.52% and the Tax-Free Intermediate Bond Fund of ^
4.13%, was determined by computing the yield of each obligation held by the
respective 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 each 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 a Fund is not insured and its yield is
not guaranteed.
Any tax equivalent yield quotation of a 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
<PAGE>
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 Tax-Free Long-Term Bond Fund as of
June 30, ^ 1996, was ^ 5.32% at the 15% tax bracket, ^ 6.28% at the 28% tax
bracket, and ^ 6.75% at the 33% tax bracket. The tax equivalent yield of the
Tax-Free Intermediate Bond Fund as of June 30, ^ 1996 was ^ 4.86% at the 15% tax
bracket, ^ 5.74% at the 28% tax bracket, and ^ 6.16% at the 33% tax bracket.
In conjunction with performance reports, comparative data between each
Fund's performance for a given period and other types of investment vehicles,
including certificates of deposit, may be provided to prospective investors and
shareholders.
In conjunction with performance reports and/or analyses of shareholder
service for the Funds, comparative data between a Fund's performance for a given
period and recognized indices of investment results for the same period, and/or
assessments of the quality of shareholder service, may be provided to
shareholders. Such indices include indices provided by Dow Jones & Company,
Standard & Poor's, Lipper Analytical Services, Inc., Lehman Brothers, National
Association of Securities Dealers Automated Quotations, Frank Russell Company,
Value Line Investment Survey, the American Stock Exchange, Morgan Stanley
Capital International, Wilshire Associates, the Financial Times Stock Exchange,
the New York Stock Exchange, the Nikkei Stock Average and Deutcher Aktienindex,
all of which are unmanaged market indicators. In addition, rankings, ratings,
and comparisons of investment performance and/or assessments of the quality of
shareholder service made by independent sources may be used in advertisements,
sales literature or shareholder reports, including reprints of, or selections
from, editorials or articles about the Funds. These sources utilize information
compiled (i) internally; (ii) by Lipper Analytical Services, Inc.; or (iii) by
other recognized analytical services. The Lipper Analytical Services, Inc.
mutual fund rankings and comparisons which may be used by the Tax-Free Long-
Term Bond Fund and the Tax-Free Intermediate Bond Fund in performance reports
will be drawn from the General Municipal Bond Funds and Intermediate Municipal
Debt Funds mutual fund groupings, respectively, in addition to the broad-based
Lipper general fund groupings. Sources for Fund performance information and
articles about the Funds include, but are not limited to, the following:
American Association of Individual Investors' Journal
Banxquote
Barron's
Business Week
CDA Investment Technologies
CNBC
CNN
Consumer Digest
Financial Times
<PAGE>
Financial World
Forbes
Fortune
Ibbotson Associates, Inc.
Institutional Investor
Investment Company Data, Inc.
Investor's Business Daily
Kiplinger's Personal Finance
Lipper Analytical Services, Inc.'s Mutual Fund Performance
Analysis
Money
Morningstar
Mutual Fund Forecaster
No-Load Analyst
No-Load Fund X
Personal Investor
Smart Money
The New York Times
The No-Load Fund Investor
U.S. News and World Report
United Mutual Fund Selector
USA Today
Wall Street Journal
Wiesenberger Investment Companies Services
Working Woman
Worth
SERVICES PROVIDED BY THE FUNDS
Periodic Withdrawal Plan. As described in the section of each Fund's
Prospectus entitled "How to Sell Shares," each Fund offers a Periodic Withdrawal
Plan. All dividends and distributions on shares owned by shareholders
participating in this Plan are reinvested in additional shares. Since withdrawal
payments represent the proceeds from sales of shares, the amount of
shareholders' investments in a particular Fund will be reduced to the extent
that withdrawal payments exceed dividends and other distributions paid and
reinvested. Any gain or loss on such redemptions must be reported for tax
purposes. In each case, shares will be redeemed at the close of business on or
about the 20th day of each month preceding payment, and payments will be mailed
within five business days thereafter.
The Periodic Withdrawal Plan involves the use of principal and is not a
guaranteed annuity. Payments under such Plan do not represent income or a return
on investment.
A Periodic Withdrawal Plan may be terminated at any time by sending a
written request to INVESCO. Upon termination, all future dividends and capital
gain distributions will be reinvested in additional shares unless a shareholder
requests otherwise.
Exchange Privilege. As discussed in the section of each
Fund's Prospectus entitled "How to Buy Shares - Exchange
<PAGE>
Privilege," the Funds offer shareholders the privilege of exchanging shares of
the Funds for shares of another fund or for shares of certain other no-load
mutual funds advised by INVESCO. Exchange requests may be made by telephone or
by written request to INVESCO Funds Group, Inc. using the telephone number or
address on the cover of this Statement of Additional Information. Exchanges made
by telephone must be in an amount of at least $250, if the exchange is being
made into an existing account of one of the INVESCO funds. All exchanges that
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 privilege is not an option or right to
purchase securities, but is a revocable privilege permitted under the present
policies of each of the funds and is not available in any state or other
jurisdiction where the shares of the mutual fund into which transfer is to be
made are not qualified for sale, or when the net asset value of the shares
presented for exchange is less than the minimum dollar purchase required by the
appropriate prospectus.
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 each
Fund's Prospectus entitled "How to Sell Shares." The right of redemption may be
suspended and payment postponed when: (a) the New York Stock Exchange is closed
for other than customary weekends and holidays; (b) trading on that exchange is
restricted; (c) an emergency exists as a result of which disposal by the Funds
of securities owned by it is not reasonably practicable, or it is not reasonably
practicable for a Fund fairly to determine the value of its net assets; or (d)
the Securities and Exchange Commission by order so permits.
It is possible that in the future conditions may exist which would, in the
opinion of the Company's investment adviser, make it undesirable for a Fund to
pay for redeemed shares in cash. In such cases, the investment adviser may
authorize payment to be made in portfolio securities or other property of the
Funds. However, the Company has obligated itself under the Investment Company
Act of 1940 to redeem for cash all shares of a Fund presented for redemption by
any one shareholder having a value up to $250,000 (or 1% of the Fund's net
assets if that is less) in any 90-day period. Securities delivered in payment of
redemptions are selected entirely by the investment adviser based on what is in
the best interests of a Fund and its shareholders, and are valued at the value
assigned to them in computing each Fund's net asset value per share.
Shareholders receiving such securities are likely to incur brokerage costs on
their subsequent sales of the securities.
<PAGE>
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS, AND TAXES
Each Fund intends to continue to conduct its business and satisfy the
applicable diversification of assets and source of income and distribution
requirements to qualify as a regulated investment company under Subchapter M of
the Internal Revenue Code of 1986, as amended. Each Fund so qualified in the
fiscal year ended June 30, ^ 1996, and each Fund intends to continue to qualify
during its current fiscal year. As a result, it is anticipated that each Fund
will pay no federal income or excise taxes and will be accorded conduit or "pass
through" treatment for federal income tax purposes.
As discussed in the section of each Fund's Prospectus entitled "Taxes,
Capital Gain Distributions and Dividends," the Funds also intend to qualify to
pay "exempt-interest dividends" to its shareholders. The Funds will so qualify
if at least 50% of their 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 each Fund's tax-exempt income to taxable income for the entire fiscal
year. In such case, the ratio would be determined and reported to shareholders
after the close of each fiscal year of the Funds. Thus, the tax-exempt portion
of any particular dividend may be based upon the tax-exempt portion of all
distributions for the 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 will be subject to such state and local taxes, the laws of the several
states and local taxing authorities vary with respect to the taxation of such
exempt-interest dividends, other dividends and distributions of capital gains.
In addition, interest on indebtedness incurred or continued by a shareholder to
purchase or carry shares of the Funds is not deductible for federal income tax
purposes. Shareholders of the Funds are advised to consult their own tax
advisers with respect to these matters.
As discussed in each Fund's Prospectus, certain corporations which are
subject to the alternative minimum tax may have to include exempt-interest
dividends in calculating their alternative taxable income in situations where
the "adjusted current earnings" of the corporation exceeds its alternative
minimum taxable income. In addition, to the extent that the Funds invest in
certain "private activity bonds" issued after August 7, 1986, a portion of
exempt-interest dividends attributable to such bonds would be an item of tax
preference to shareholders.
Any loss realized on the sale or exchange of shares in the Funds that have
been held by the shareholder for six months or less (unless Treasury regulations
are issued which provide for a shorter period) is not deductible to the extent
of the amount of any exempt-interest dividend paid with respect to such shares.
<PAGE>
If the Fund's shares are sold at a loss after being held for six months or
less, the loss will be treated as long-term, instead of short-term, capital loss
to the extent of any capital gain distributions received on those shares.
INVESCO may provide Fund shareholders with information concerning the
average cost basis of their shares in order to help them prepare their tax
returns. This information is intended as a convenience to shareholders, and will
not be reported to the Internal Revenue Service (the "IRS"). The IRS permits the
use of several methods to determine the cost basis of mutual fund shares. The
cost basis information provided by INVESCO will be computed using the
single-category average cost method, although neither INVESCO nor the 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 for a Fund in past years, the shareholder must continue to use the method
previously used, unless the shareholder applies to the IRS for permission to
change methods.
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 Funds'
portfolio turnover. Since the Tax-Free Long-Term Bond 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,
1996, 1995, and 1994, ^ the Tax-Free Long-Term Bond Fund's portfolio turnover
rates were ^ 146%, 99%, and 28%, respectively. For the fiscal years ended June
30, 1996 and 1995 and period ended June 30, 1994, the Tax-Free Intermediate Bond
Fund's portfolio turnover rates were 49%, 23% and 55%, respectively. The higher
portfolio turnover rate for the Tax-Free Long-Term Bond Fund during the fiscal
year ended June 30, 1995, was primarily the result of a restructuring of the
Fund's portfolio to extend duration, increase call protection and increase
overall credit quality. Securities initially satisfying the basic policies and
objectives of a 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 each 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. Either INVESCO, as the Company's
investment adviser, or INVESCO Trust, as the Company's sub-adviser, places
orders for the purchase and sale of securities with brokers and dealers based
upon INVESCO's or INVESCO Trust's evaluation of their financial responsibility
subject to their ability to effect transactions at the best available prices.
INVESCO or INVESCO Trust evaluates the overall reasonableness of any brokerage
commissions paid by reviewing the quality of executions obtained on the Funds'
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 charged each Fund
are consistent with prevailing and reasonable commissions, INVESCO or INVESCO
Trust also endeavors to monitor brokerage industry practices with regard to the
commissions charged by brokers and dealers on transactions effected for other
comparable institutional investors. While INVESCO or INVESCO Trust seeks
reasonably competitive rates, a Fund does not necessarily pay the lowest
commission 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 or INVESCO Trust may select brokers that provide
research services to effect such transactions. Research services consist of
statistical and analytical reports relating to issuers, industries, securities
and economic factors and trends, which may be of assistance or value to INVESCO
or INVESCO Trust in making informed investment decisions. Research services
prepared and furnished by brokers through which the Fund effects securities
transactions may be used by INVESCO or INVESCO Trust in servicing all of its
accounts and not all such services may be used by INVESCO or INVESCO Trust in
connection with the Funds.
In recognition of the value of the above-described brokerage and research
services provided by certain brokers, INVESCO or INVESCO Trust, consistent with
the standard of seeking to obtain the best execution on portfolio transactions,
may place orders with such brokers for the execution of Fund transactions on
which the commissions are in excess of those which other brokers might have
charged for effecting the same transactions.
<PAGE>
Portfolio transactions may be effected through qualified ^ broker-dealers
who recommend the Funds to their clients, or who act as agent in the purchase of
a Fund's shares for their clients. When a number of brokers and dealers can
provide comparable best price and execution on a particular transaction, the
Company's adviser may consider the sale of a Fund's shares by a broker or dealer
in selecting among qualified broker/dealers.
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 Funds through no transaction fee
programs ("NTF Programs") offered by the financial institution or its affiliated
broker (an "NTF Program Sponsor"). The Services Fee is based on the average
daily value of the investments in each Fund made in the name of such NTF Program
Sponsor and held in omnibus accounts maintained on behalf of investors
participating in the NTF Program. With respect to certain NTF Programs, the
directors of the Fund have authorized the Fund to apply dollars generated from
the Fund'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
Fund'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
Fund have authorized the Fund 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 Fund'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 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
<PAGE>
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 Fund's board of directors has
also authorized the Fund to pay to INVESCO the full Rule 12b-1 fees contemplated
by the Plan in reimbursement of expenses incurred by INVESCO in engaging in the
activities and providing the services on behalf of the 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 reimburse INVESCO for payments to such
NTF Program Sponsor absent such credits.
The aggregate dollar amount of brokerage commissions paid by the Tax-Free
Intermediate Bond Fund for the ^ years ended June 30, 1996 and 1995 and the
period ended June 30, 1994 was $7,538, $4,147 and $6,541, respectively, and for
the fiscal years ended June 30, 1996, 1995, and 1994^ were $884,965, $393,584,
and $258,985, ^ respectively, for Tax-Free Long-Term Bond Fund. The higher level
of brokerage commissions paid by the Tax-Free Long-Term Bond Fund for the year
ended June 30, ^ 1996 was primarily due to the Fund's higher level of portfolio
turnover in that year. For the period ended June 30, ^ 1996, no commissions were
paid to brokers in connection with their provision of research services to
either Fund.
Neither INVESCO nor INVESCO Trust receive any brokerage commissions on
portfolio transactions effected on behalf of the Funds, and there is no
affiliation between INVESCO, INVESCO Trust, or any person affiliated with
INVESCO, INVESCO Trust, or the Funds, and any broker or dealer that executes
transactions for the Funds.
ADDITIONAL INFORMATION
Common Stock. The Company has 500 million authorized shares of common
stock with a par value of $0.01 per share. Of the Company's authorized shares,
100 million shares have been allocated to the Tax-Free Long-Term Bond Fund and
100 million shares have been allocated to Tax-Free Intermediate Bond Fund. As of
June 30, ^ 1996, 16,507,045 shares of the Tax-Free Long-Term Bond Fund and ^
512,816 shares of the Tax-Free Intermediate Bond Fund were outstanding. All
shares issued and outstanding are, and all shares offered hereby, when issued,
will be, fully paid and nonassessable. The board of directors has the authority
to designate additional classes of common stock without seeking the approval of
shareholders and may classify and reclassify any authorized but unissued shares.
<PAGE>
Shares of each class represent the interests of the shareholders of such
class in a particular portfolio of investments of the Company. Each class of the
Company's shares is preferred over all other classes with respect to the assets
specifically allocated to that class, and all income, earnings, profits and
proceeds from such assets, subject only to the rights of creditors, are
allocated to shares of that class. The assets of each class are segregated on
the books of account and are charged with the liabilities of that class and with
a share of the Company's general liabilities. The board of directors determines
those assets and liabilities deemed to be general assets or liabilities of the
Company, and those items are allocated among classes in a manner deemed by the
board to be fair and equitable. Generally, such allocation will be made based
upon the relative total net assets of each class. In the unlikely event that a
liability allocable to one class exceeds the assets belonging to the class, all
or a portion of such liability may have to be borne by the holders of shares of
the Company's other classes.
All dividends on shares of a particular class shall be paid only out of
the income belonging to that class, pro rata to the holders of that class. In
the event of the liquidation or dissolution of the Company or of a particular
class, the shareholders of each class that is being liquidated shall be entitled
to receive, as a class, when and as declared by the board of directors, the
excess of the assets belonging to that class over the liabilities belonging to
that class. The holders of shares of any class shall not be entitled to any
distribution upon liquidation of any other class. The assets so distributable to
the shareholders of any particular class shall be distributed among such
shareholders in proportion to the number of shares of that class held by them
and recorded on the books of the Company.
All Fund shares, regardless of class, have equal voting rights. Voting
with respect to certain matters, such as ratification of independent accountants
or election of directors, will be by all classes of the Company. When not all
classes are affected by a matter to be voted upon, such as approval of an
investment advisory contract or changes in a Fund's investment policies, only
shareholders of the class affected by the matter will be entitled to vote.
Company shares have noncumulative voting rights, which means that the holders of
a majority of the shares voting for the election of directors of the Company can
elect 100% of the directors if they choose to do so. In such event, the holders
of the remaining shares voting for the election of directors will not be able to
elect any person or persons to the board of directors. After they have been
elected by shareholders, the directors will continue to serve until their
successors are elected and have qualified or they are removed from office, in
either case by a shareholder vote, or until death, resignation or retirement.
They may appoint their own successors, provided that always at least a majority
of the directors have been elected by the Company's shareholders. It is the
intention of the Company not to hold annual meetings of shareholders. The
directors will call annual or special meetings of shareholders for action by
<PAGE>
shareholder vote as may be required by the 1940 Act or the Company's
Articles of Incorporation, or at their discretion.
Principal Shareholders. As of ^ October 1, ^ 1996, the following entities
held more than 5% of the outstanding securities of the Funds listed below.
Name and Address of
Beneficial Owner Number of Shares Percent of Class
- ------------------- ---------------- ----------------
INVESCO Tax-Free
Intermediate Bond Fund
Charles Schwab & Co., Inc. 61,963.841 12.554%
Special Custody Account Record
for The Exclusive Benefit
of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
Alice T. Campbell 60,238.780 12.205% ^
3355 Stonecrest Ct. Record and Beneficial
Atlanta, GA 30341
John Canaday ^ 34,455.088 6.981%
745 Pine St. Record and Beneficial
Boulder, CO 80302
^
<PAGE>
INVESCO Tax-Free
Long-Term Bond Fund
-0- -0- -0-
Independent Accountants. Price Waterhouse, LLP, 950 Seventeenth Street,
Denver, Colorado, has been selected as the independent accountants of the
Company. The independent accountants are responsible for auditing the financial
statements of the Company.
Custodian. State Street Bank and Trust Company, P.O. Box 351, Boston,
Massachusetts, has been designated as custodian of the cash and investment
securities of the Company. The bank is also responsible for, among other things,
receipt and delivery of the 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 the Fund and the maintenance of records regarding the ownership of
such shares.
Reports to Shareholders. The Company's fiscal year ends on June 30. The
Company distributes reports at least semiannually to its shareholders. Financial
statements regarding the Company, audited by the independent accountants, are
sent to shareholders annually.
Legal Counsel. The firm of Kirkpatrick & Lockhart, Washington, D.C., is
legal counsel for the Company. The firm of Moye, Giles, O'Keefe, Vermeire &
Gorrell, Denver, Colorado, serves as special counsel to the Company.
Financial Statements. The Funds' audited financial statements and the
notes thereto for the fiscal year ended June 30, ^ 1996, and the report of Price
Waterhouse LLP with respect to such financial statements, are incorporated
herein by reference from the Funds' Annual Report to Shareholders for the fiscal
year ended June 30, ^ 1996.
Prospectus. The Company will furnish, without charge, a copy of the
applicable Prospectus for each of its Funds upon request. There is a separate
Prospectus available for each Fund. Such requests should be made to the Company
at the mailing address or telephone number set forth on the first page of this
Statement of Additional Information.
Registration Statement. This Statement of Additional Information and the
Prospectus do not contain all of the information set forth in the Registration
Statement the Company has filed with the SEC. The complete Registration
Statement may be obtained from the SEC upon payment of the fee prescribed by the
rules and regulations of, the SEC.
<PAGE>
APPENDIX A
Description of Moody's Investors Service, Inc.'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
<PAGE>
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.
Description of Standard & Poor'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.
<PAGE>
Description of Fitch Investors Service, Inc. 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.
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 Duff & Phelps Inc. 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.
<PAGE>
Description of Moody's Investors Service, Inc.'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 Standard & Poor'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.
Description of Moody's Investors Service, Inc.'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 Standard & Poor's ^ ratings for demand obligations and taxable
and tax-exempt commercial paper:
<PAGE>
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 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
<PAGE>
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 these Funds as
covered call option writers are unable to effect a closing purchase transaction
in a secondary market, unless the Funds are required to deliver the securities
pursuant to the assignment of an exercise notice, they will not be able to sell
the underlying security until the option expires.
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 Options Clearing Corporation, 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 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 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.
<PAGE>
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.
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.
<PAGE>
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.
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
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Page in
Prospectus
----------
(1) Financial statements and schedules
included in Prospectus (Part A):
Financial Highlights for the period from 9
commencement of the INVESCO Tax-Free
Intermediate Bond Fund's operations
(December 1, 1993) until June 30, 1994;
and the ^ fiscal years ended June 30,
1996 and 1995.
Financial Highlights for each of the 34
ten years in the period ended June 30,
^ 1996 for the Tax-Free Long-Term Bond
Fund.
Page in
Statement
of Addi-
tional
Information
-----------
(2) The following audited financial
statements of the INVESCO Tax-Free Long-
Term Bond Fund and the INVESCO Tax-Free
Intermediate Bond Fund and the notes
thereto for the fiscal year ended June
30, ^ 1996, and the report of Price
Waterhouse LLP with respect to such
financial statements, are incorporated in
the Statement of Additional Information
by reference from the Company's Annual
Report to Shareholders for the fiscal
year ended June 30, ^ 1996: Statement
of Investment Securities as of June 30, ^
1996; Statement of Assets and Liabilities
as of June 30, ^ 1996; Statement of
Operations for the year ended June 30, ^
1996; Statement of Changes in Net Assets
for each of the ^ two years ended June
30, ^ 1996 for the Tax-Free Intermediate
Bond Fund and for each of the two years^
ended June 30, ^ 1996 for the Tax-Free
Long-Term Bond Fund; Financial Highlights
for the ^ two years ended June 30, ^
1996 and the period from commencement of
<PAGE>
the Fund's operations (December 1, 1993) until
June 30, 1994 for the Tax-Free Intermediate
Bond Fund and for each of the five years ended
June 30, ^ 1996 for the Tax-Free Long-Term
Bond Fund.
(3) Financial statements and schedules included
in Part C:
None: Schedules have been omitted as all
information has been presented in the
financial statements.
(b) Exhibits:
(1) Articles of Incorporation ^(Charter)
(2) ^ Bylaws
(3) Not applicable.
(4) Not required to be filed on EDGAR^
(5) (a) Investment Advisory Agreement between
the Company and INVESCO Funds Group, Inc.
dated April 30, ^ 1993.
^(i) Amendment of Investment Advisory
Agreement dated October 20, 1993.
^(b) Sub-Advisory Agreement between INVESCO
Funds Group, Inc. and INVESCO Trust Company
dated April 30, ^ 1993.
^(i) Amendment of Sub-Advisory
Agreement dated October 20, 1993.
(6) General Distribution Agreement between the
Company and INVESCO Funds Group, Inc. dated
April 30, ^ 1993.
(7) Defined Benefit Deferred Compensation Plan for
Non-Interested Directors and Trustees.(3)
(8) Custody Agreement between the Company and
State Street Bank and Trust Company dated
July 1, ^ 1993.(2)
(9) (a) Transfer Agency Agreement between the
Company and INVESCO Funds Group, Inc. dated
April 30, ^ 1993.
^(i) Amendment to Fee Schedule dated
^ May 1, ^ 1996.
<PAGE>
^(b) Administrative Services Agreement
between the Company and INVESCO Funds
Group, Inc., dated April 30, ^ 1993.
(i) Amendment to Administrative
Services agreement dated October
20, 1993.
(10) Opinion and consent of counsel as to the
legality of the securities being registered,
indicating whether they will, when sold, be
legally issued, fully paid and non-^
assessable.(2)
(11) Consent of Independent Accountants.
(12) Not applicable.
(13) Not applicable.
(14) Copies of model plans used in the
establishment of retirement plans as
follows: Non-standardized Profit
Sharing Plan; Nonstandardized Money
Purchase Pension Plan; Standardized
Profit Sharing Plan Adoption Agreement;
Standardized Money Purchase Pension Plan;
Non-standardized 401(k) Plan Adoption
Agreement; Standardized 401(k) Paired
Profit Sharing Plan; Standardized
Simplified Profit Sharing Plan;
Standardized Simplified Money Purchase
Plan; Defined Contribution Master Plan
& Trust Agreement; and Financial 403(b)
Retirement Plan, all filed with
Registration Statement of INVESCO
International Funds, Inc. (File No.
33-63498), filed May 27, 1993, and herein
incorporated by reference.
(15) (a) Plan and Agreement of Distribution
dated April 30, 1993, adopted pursuant
to Rule 12b-1 under the Investment Company
Act of ^ 1940.
(b) Amendment of Plan and Agreement of
Distribution dated July 19, ^ 1995.(1)
(16) Schedule for computation of performance
data--previously filed with Post-Effective
Amendment No. 11 dated September 1, 1988,
and herein incorporated by reference.
(17) (a) Financial Data Schedule for the ^
fiscal year ended June 30, ^ 1996, for
INVESCO Tax-Free Long-Term Bond Fund.
<PAGE>
(b) Financial Data Schedule for the ^
fiscal year ended June 30, ^ 1996, for
INVESCO Tax- Free Intermediate Bond
Fund.
(18) Not applicable.
- ---------------------
(1)Previously filed on EDGAR with Post-Effective Amendment No. ^ 23 to the
Registrant's Registration Statement on Form N-1A on ^ August 31, 1995 and
incorporated herein by reference.
(2)Previously filed with Post-Effective Amendment No. ^ 18 to the
Registrant's Registration Statement on Form N-1A on September ^1, 1993 and
incorporated herein by reference.
(3)Previously filed with Post-Effective Amendment No. 20 to the
Registrant's Registration Statement on December 1, 1993 and incorporated herein
by reference.
Item 25. Persons Controlled by or Under Common Control with
Registrant
No person is presently controlled by or under common control with
Registrant.
Item 26. Number of Holders of Securities
Number of Record
Holders as of
Title of Class July 31, ^ 1996
-------------- ---------------
INVESCO Tax-Free
Long-Term Bond Fund
Common Stock ^ 9,518
INVESCO Tax-Free
Intermediate Bond Fund
Common Stock ^ 379
Item 27. Indemnification
Indemnification provisions for officers and directors of Registrant
are set forth in Article VII, Section 2 of the Articles of Incorporation, and
are hereby incorporated by reference. See Item 24(b)(1) above. Under these
Articles, officers and directors will be indemnified to the fullest extent
permitted to directors by the Maryland General Corporation Law, subject only to
such limitations as may be required by the Investment Company Act of 1940, as
amended, and the rules thereunder. Under the Investment Company Act of 1940,
Fund directors and officers cannot be protected against liability to the Company
or its shareholders to which they would be subject because of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties of
<PAGE>
their office. The Company also maintains liability insurance policies
covering its directors and officers.
Item 28. Business and Other Connections of Investment Adviser
See "The Fund and Its Management" in the Prospectus and Statement of
Additional Information for information regarding the business of the investment
adviser. For information as to the business, profession, vocation or employment
of a substantial nature of each of the officers and directors of INVESCO Funds
Group, Inc., reference is made to Schedule Ds to the Form ADV filed under the
Investment Advisers Act of 1940 by INVESCO Funds Group, Inc., which schedules
are herein incorporated by reference.
Item 29. Principal Underwriters
(a) INVESCO Diversified Funds, Inc.
INVESCO Dynamics Fund, Inc.
INVESCO Emerging Opportunity Funds, Inc.
INVESCO Growth Fund, Inc.
INVESCO Income Funds, Inc.
INVESCO Industrial Income Fund, Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Multiple Asset Funds, Inc.
INVESCO Specialty Funds, Inc.
INVESCO Strategic Portfolios, Inc.
INVESCO Value Trust
INVESCO Variable Investment Funds, Inc.
<PAGE>
(b)
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------ ------------- -------------
^
Frank M. Bishop Director ^
1315 Peachtree Street NE
Atlanta, GA 30309
Charles W. Brady Chairman of
1315 Peachtree ^ St. NE the Board
Atlanta, GA 30309
^
M. Anthony Cox Senior Vice
1315 Peachtree ^ St., N.E. President
Atlanta, GA 30309
Steven T. Cox, Jr. Regional Vice
7800 E. Union Avenue President
Denver, CO 80237
Robert D. Cromwell ^ Regional Vice
7800 E. Union Avenue President
Denver, CO 80237
^
Samuel T. DeKinder Director
1315 Peachtree Street NE
Atlanta, GA 30309
^ Douglas P. Dhom Regional Vice
^ 1355 Peachtree Street NE President
^ Atlanta, GA 30309
William J. Galvin, Jr. ^ Sr. Vice President Assistant
7800 E. Union Avenue ^ Secretary
Denver, CO 80237
Linda J. Gieger Vice President
7800 E. Union Avenue
Denver, CO 80237
Ronald L. Grooms ^ Sr. Vice President Treasurer,
7800 E. Union Avenue ^ & Treasurer Chief Fin'l
Denver, CO 80237 ^ Officer, and
Chief Acctg.
Off.
<PAGE>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant ^
- ------------------ ------------- --------------
Wylie G. Hairgrove Vice President
7800 E. Union Avenue
Denver, CO 80237
Hubert L. Harris, Jr. Director
1315 Peachtree Street NE
Atlanta, GA 30309
Dan J. Hesser Chairman of the ^ President
7800 E. Union Avenue Board, President, & Dir.
Denver, CO 80237 ^ Chief Executive
Officer, & Director
Mark A. Jones Regional Vice
^ 7800 E. Union Avenue President
^ Denver, CO 80237
Jeraldine E. Kraus Assistant Secretary
7800 E. Union Avenue
Denver, CO 80237
Michael D. Legoski Assistant Vice
7800 E. Union Avenue President
Denver, CO 80237
James F. Lummanick Vice President;
7800 E. Union Avenue Assistant
Denver, CO 80237 General Counsel
Brian N. Minturn Executive
7800 E. Union Avenue Vice President
Denver, CO 80237
Robert J. O'Connor Director
1315 Peachtree Street NE
Atlanta, GA 30309
<PAGE>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------ ------------- -------------
^ Donald R. Paddack Assistant
7800 E. Union Avenue Vice President
Denver, CO 80237
^
Laura M. Parsons Vice President
7800 E. Union Avenue
Denver, CO 80237
Glen A. Payne ^ Sr. Vice President, Secretary
7800 E. Union Avenue ^ Secretary &
Denver, CO 80237 General Counsel
Pamela J. Piro Assistant Vice
7800 E. Union Avenue President
Denver, CO 80237
Gary S. Ruhl Vice President
7800 E. Union Avenue
Denver, CO 80237
R. Dalton Sim Director ^
7800 E. Union Avenue
Denver, CO 80237
James S. Skesavage Regional Vice
1315 Peachtree Street ^ NE President
Atlanta, GA 30309
^
Terri Berg Smith Vice President
7800 E. Union Avenue
Denver, CO 80237
^ Tane T. Tyler Asst. Vice
^ 7800 E. Union Avenue President
^ Denver, CO 80237
<PAGE>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------ ------------- -------------
Alan I. Watson Vice President Asst. Sec.
7800 E. Union Avenue
Denver, CO 80237
Judy P. Wiese Vice President Asst. Treas.
7800 E. Union Avenue
Denver, CO 80237
^
Allyson B. Zoellner Vice President
7800 E. Union Avenue
Denver, CO ^ 80239
(c) Not applicable.
Item 30. Location of Accounts and Records
Dan J. Hesser
7800 E. Union Avenue
Denver, CO 80237
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) The Registrant hereby undertakes that the board of
directors will call such meetings of shareholders
for action by shareholder vote, including acting on
the question of removal of a director or directors,
as may be requested in writing by the holders of at
least 10% of the outstanding shares of the Fund or
as may be required by applicable law or the
Company's Articles of Incorporation, and to assist
shareholders in communicating with other
shareholders as required by the Investment Company
Act of 1940.
(b)^ The Registrant shall furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
<PAGE>
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the registrant has duly caused this
pre-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 ^17th day of ^ October, 1996.
Attest: INVESCO Tax-Free Income
Funds, Inc.
/s/ Glen A. Payne /s/ Dan J. Hesser
- ------------------------------ ------------------------------
Glen A. Payne, Secretary Dan J. Hesser, President
Pursuant to the requirements of the Securities Act of 1933, this
pre-effective amendment to Registrant's Registration Statement has been signed
by the following persons in the capacities indicated on this ^17th day of ^
October, 1996.
/s/ Dan J. Hesser /s/ Lawrence H. Budner
- ------------------------------ ------------------------------
Dan J. Hesser, President & Lawrence H. Budner, Director
Director
(Chief Executive Officer)
/s/ Ronald L. Grooms /s/ Daniel D. Chabris
- ------------------------------ ------------------------------
Ronald L. Grooms, Treasurer Daniel D. Chabris, Director
(Chief Financial and
Accounting Officer)
/s/ Victor L. Andrews /s/ Fred A. Deering
- ------------------------------ ------------------------------
Victor L. Andrews, Director Fred A. Deering, Director
/s/ Bob R. Baker /s/ A. D. Frazier, Jr.
- ------------------------------ ------------------------------
Bob R. Baker, Director A. D. Frazier, Jr., Director
/s/ ^ Hubert L. Harris, Jr. /s/ Kenneth T. King, Director
- ------------------------------ ------------------------------
Hubert L. Harris, Jr., Kenneth T. King, Director
Director
/s/ Charles W. Brady /s/ John W. McIntyre
- ------------------------------ ------------------------------
Charles W. Brady, Director John W. McIntyre, Director
^
By* By* /s/ Glen A. Payne
--------------------------- -------------------------
Edward F. O'Keefe Glen A. Payne
Attorney in Fact Attorney in Fact
* Original Powers of Attorney authorizing Edward F. O'Keefe and Glen A.
Payne, and each of them, to execute this post-effective amendment to the
Registration Statement of the Registrant on behalf of the above-named directors
and officers of the Registrant have been filed with the Securities and Exchange
Commission on July 20, 1989, January 9, 1990, May 22, 1992, September 1, 1993,
December 1, 1993, August 30, 1995.
<PAGE>
Exhibit Index
Page in
Exhibit Number Registration Statement
- -------------- ----------------------
^ 1 120
^ 2 130
^ 5(a) 152
5(a)(i) 161
5(b) 162
5(b)(i) 168
6 170
9(a) 180
9(a)(i) 193
9(b) 194
9(b)(i) 199
11 201
15(a) 202
17(a) 207
17(b) 208
99.POA HARRIS 209
ARTICLES OF INCORPORATION
OF
INVESCO TAX-FREE INCOME FUNDS, INC.
THIS IS TO CERTIFY to the Maryland State Department of Assessments that
the undersigned, Dan J. Hesser, whose post office address is 7800 E. Union
Avenue, Suite 800, Denver, Colorado 80237, and being at least 18 years of age,
does hereby declare that he is an incorporator intending to form a corporation
under and by virtue of the general laws of the State of Maryland authorizing the
formation of corporations.
ARTICLE I
NAME AND TERM
The name of the corporation is INVESCO Tax-Free Income Funds, Inc. The
corporation shall have perpetual existence.
ARTICLE II
POWERS AND PURPOSES
The nature of the business and the objects and purposes to be transacted,
promoted and carried on by the corporation are as follows:
1. To engage in the business of an incorporated investment company of
open-end management type and to engage in all legally permissible
activities and operations usual, customary, or necessary in
connection therewith.
2. In general, to engage in any other business permitted to
corporations by the laws of the State of Maryland and to
have and exercise all powers conferred upon or permitted
to corporations by the Maryland General Corporation Law
and any other laws of the State of Maryland; provided,
however, that the corporation shall be restricted from
engaging in any activities or taking any actions which
would preclude its compliance with applicable provisions
of the Investment Company Act of 1940, as amended,
applicable to open-end management type investment
companies or applicable rules promulgated thereunder.
ARTICLE III
CAPITALIZATION
Section 1. The aggregate number of shares the corporation shall have the
authority to issue is five hundred million (500,000,000) shares of Common Stock,
having a par value of one
<PAGE>
cent ($0.01) per share. The aggregate par value of all shares which the
corporation shall have the authority to issue is five million dollars
($5,000,000). Such stock may be issued as full shares or as fractional shares.
In the exercise of the powers granted to the board of directors pursuant to
section 3 of this Article III, the board of directors initially designates two
classes of shares of Common Stock of the corporation, to be designated as the
INVESCO Tax-Free Long-Term Bond Fund and the INVESCO Tax-Free Intermediate Bond
Fund, respectively. Initially, one hundred million (100,000,000) shares of the
corporation's Common Stock are classified as and are allocated to each such
designated class.
Unless otherwise prohibited by law, so long as the corporation is
registered as an open-end investment company under the Investment Company Act of
1940, as amended, the total number of shares which the corporation is authorized
to issue may be increased or decreased by the board of directors in accordance
with the applicable provisions of the Maryland General Corporation Law.
Section 2. No holder of stock of the corporation shall be entitled as a
matter of right to purchase or subscribe for any shares of the capital stock of
the corporation which it may issue or sell, whether out of the number of shares
authorized by these articles of incorporation, or out of any shares of the
capital stock of the corporation acquired by it after the issue thereof.
Section 3. The corporation is authorized to issue its stock in one or more
series or one or more classes of shares, and, subject to the requirements of the
Investment Company Act of 1940, as amended, particularly Section 18(f) thereof
and Rule 18f-2 thereunder, the different series and classes, if any, shall be
established and designated, and the variations in the relative preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption as between the
different series or classes shall be fixed and determined and may be classified
and reclassified by the board of directors; provided that the board of directors
shall not classify or reclassify any of such shares into any class or series of
stock which is prior to any class or series of stock then outstanding with
respect to rights upon the liquidation, dissolution or winding up of the affairs
of, or upon any distribution of the general assets of, the corporation, except
that there may be variations so fixed and determined between different series or
classes as to investment objective, purchase price, right of redemption, special
rights as to dividends and on liquidation with respect to assets and income
belonging to a particular series or class, voting powers and conversion rights.
All references to shares in these articles of incorporation shall be deemed to
be shares of any or all series and classes of shares of the corporation's
capital stock as the context may require.
<PAGE>
(a) The number of authorized shares allocated to each series
or class and the number of shares of each series or of each class
that may be issued shall be in such number as may be determined by
the board of directors. The directors may classify or reclassify any
unissued shares or any shares previously issued and reacquired of
any series or class into one or more series or one or more classes
that may be established and designated by the board of directors
from time to time. The directors may hold as treasury shares (of the
same or some other series or class), reissue for such consideration
and on such terms as they may determine, or cancel any shares of any
series or any class reacquired by the corporation at their
discretion from time to time.
(b) All consideration received by the corporation for the
issue or sale of shares of a particular series or class,
together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits and
proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any
funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, shall
irrevocably belong to that series or class for all
purposes, subject only to the rights of creditors of that
series or class, and shall be so recorded upon the books
of account of the corporation. In the event that there
are any assets, income, earnings, profits and proceeds
thereof, funds, or payments which are not readily
identifiable as belonging to any particular series or
class, the directors shall allocate them among any one or
more of the series or classes established and designated
from time to time in such manner and on such basis as
they, in their sole discretion, deem fair and equitable.
Each such allocation by the corporation shall be
conclusive and binding upon the stockholders of all
series or classes for all purposes. The directors shall
have full discretion, to the extent not inconsistent with
the Investment Company Act of 1940, as amended, and the
Maryland General Corporation Law to determine which items
shall be treated as income and which items shall be
treated as capital; and each such determination and
allocation shall be conclusive and binding upon the
stockholders.
(c) The assets belonging to each particular class or series
shall be charged with the liabilities of the corporation
in respect to that class or series and all expenses,
costs, charges and reserves attributable to that class or
series, and any general liabilities, expenses, costs,
charges or reserves of the corporation which are not
readily identifiable as belonging to any particular class
or series shall be allocated and charged by the directors
to and among any one or more of the classes or series
established and designated from time to time in such
<PAGE>
manner and on such basis as the directors in their sole discretion
deem fair and equitable. Each allocation of liabilities, expenses,
costs, charges and reserves by the directors shall be conclusive and
binding upon the stockholders of all series and classes for all
purposes.
(d) Dividends and distributions on shares of a particular
series or class may be paid with such frequency as the
directors may determine, which may be daily or otherwise,
pursuant to a standing resolution or resolutions adopted
only once or with such frequency as the board of
directors may determine, to the holders of shares of that
series or class, from such of the income and capital
gains, accrued or realized, from the assets belonging to
that series or class, as the directors may determine,
after providing for actual and accrued liabilities
belonging to that series or class. All dividends and
distributions on shares of a particular series or class
shall be distributed pro rata to the holders of that
series or class in proportion to the number of shares of
that series or class held by such holders at the date and
time of record established for the payment of such
dividends or distributions except that in connection with
any dividend or distribution program or procedure, the
board of directors may determine that no dividend or
distribution shall be payable on shares as to which the
stockholder's purchase order and/or payment have not been
received by the time or times established by the board of
directors under such program or procedure.
The corporation intends to have each series that may be established
to represent interests of a separate investment portfolio qualify as
a "regulated investment company" under the Internal Revenue Code of
1986, or any successor comparable statute thereto, and regulations
promulgated thereunder. Inasmuch as the computation of net income
and gains for federal income tax purposes may vary from the
computation thereof on the books of the corporation, the board of
directors shall have the power, in its sole discretion, to
distribute in any fiscal year as dividends, including dividends
designated in whole or in part as capital gains distributions,
amounts sufficient, in the opinion of the board of directors, to
enable the respective series to qualify as regulated investment
companies and to avoid liability of such series for federal income
tax in respect of that year. However, nothing in the foregoing shall
limit the authority of the board of directors to make distributions
greater than or less than the amount necessary to qualify the series
as regulated investment companies and to avoid liability of such
series for such tax.
(e) Dividends and distributions may be made in cash, property
or additional shares of the same or another class or
<PAGE>
series, or a combination thereof, as determined by the board of
directors or pursuant to any program that the board of directors may
have in effect at the time for the election by each stockholder of
the mode of the making of such dividend or distribution to that
stockholder. Any such dividend or distribution paid in shares will
be paid at the net asset value thereof as defined in section (4)
below.
(f) In the event of the liquidation or dissolution of the
corporation or of a particular class or series, the
stockholders of each class or series that has been
established and designated and is being liquidated shall
be entitled to receive, as a class or series, when and as
declared by the board of directors, the excess of the
assets belonging to that class or series over the
liabilities belonging to that class or series. The
holders of shares of any particular class or series shall
not be entitled thereby to any distribution upon
liquidation of any other class or series. The assets so
distributable to the stockholders of any particular class
or series shall be distributed among such stockholders in
proportion to the number of shares of that class or
series held by them and recorded on the books of the
corporation. The liquidation of any particular class or
series in which there are shares then outstanding may be
authorized by vote of a majority of the board of
directors then in office, subject to the approval of a
majority of the outstanding securities of that class or
series, as defined in the Investment Company Act of 1940,
as amended, and without the vote of the holders of any
other class or series. The liquidation or dissolution of
a particular class or series may be accomplished, in
whole or in part, by the transfer of assets of such class
or series to another class or series or by the exchange
of shares of such class or series for the shares of
another class or series.
(g) On each matter submitted to a vote of the stockholders,
each holder of a share shall be entitled to one vote for
each share standing in his name on the books of the
corporation, irrespective of the class or series thereof,
and all shares of all classes or series shall vote as a
single class or series ("single class voting"); provided,
however that (i) as to any matter with respect to which
a separate vote of any class or series is required by the
Investment Company Act of 1940, as amended, or by the
Maryland General Corporation Law, such requirement as to
a separate vote by that class or series shall apply in
lieu of single class voting as described above; (ii) in
the event that the separate vote requirements referred to
in (i) above apply with respect to one or more but not
all classes or series, then, subject to (iii) below, the
shares of all other classes or series shall vote as a
<PAGE>
single class or series; and (iii) as to any matter which does not
affect the interest of a particular class or series, only the
holders of shares of the one or more affected classes shall be
entitled to vote. Holders of shares of the stock of the corporation
shall not be entitled to exercise cumulative voting in the election
of directors or on any other matter.
(h) The establishment and designation of any series or class
of shares, in addition to the initial class of shares
which has been established in section (1) above, shall be
effective upon the adoption by a majority of the then
directors of a resolution setting forth such
establishment and designation and the relative rights and
preferences of such series or class, or as otherwise
provided in such instrument and the filing with the
proper authority of the State of Maryland of Articles
Supplementary setting forth such establishment and
designation and relative rights and preferences.
Section 4. The corporation shall, upon due presentation of a share or
shares of stock for redemption, redeem such share or shares of stock at a
redemption price prescribed by the board of directors in accordance with
applicable laws and regulations; provided that in no event shall such price be
less than the applicable net asset value per share of such class or series as
determined in accordance with the provisions of this section (4), less such
redemption or other charge as is determined by the board of directors. Subject
to applicable law, the corporation may redeem shares, not offered by a
stockholder for redemption, held by any stockholder whose shares of a class or
series had a value less than such minimum amount as may be fixed by the board of
directors from time to time or prescribed by applicable law other than as a
result of a decline in value of such shares because of market action; provided
that before the corporation redeems such shares it must notify the shareholder
by first-class mail that the value of his shares is less than the required
minimum value and allow him 60 days to make an additional investment in an
amount which will increase the value of his account to the required minimum
value. Unless otherwise required by applicable law, the price to be paid for
shares redeemed pursuant to the preceding sentence shall be the aggregate net
asset value of the shares at the close of business on the date of redemption,
and the shareholder shall have no right to object to the redemption of his
shares. The corporation shall pay redemption prices in cash, except that the
corporation may at its sole option pay redemption prices in kind in such manner
as is consistent with and not in contravention of Section 18(f) of the
Investment Company Act of 1940, as amended, and any Rules or Regulations
thereunder. Redemption prices shall be paid exclusively out of the assets of the
class or series whose shares are being redeemed.
Notwithstanding the foregoing, the corporation may postpone
payment of redemption proceeds and may suspend the right of the
<PAGE>
holders of shares of any class or series to require the corporation to redeem
shares of that class or series during any period or at any time when and to the
extent permissible under the Investment Company Act of 1940, as amended, or any
rule or order thereunder.
The net asset value of a share of any class or series of common stock of
the corporation shall be determined in accordance with applicable laws and
regulations or under the supervision of such persons and at such time or times
as shall from time to time be prescribed by the board of directors.
Section 5. The corporation may issue, sell, redeem, repurchase and
otherwise deal in and with shares of its stock in fractional denominations and
such fractional denominations shall, for all purposes, be shares having
proportionately to the respective fractions represented thereby all the rights
of whole shares, including without limitation, the right to vote, the right to
receive dividends and distributions, and the right to participate upon
liquidation of the corporation; provided that the issue of shares in fractional
denominations shall be limited to such transactions and be made upon such terms
as may be fixed by or under authority of the bylaws.
Section 6. The corporation shall not be obligated to issue certificates
representing shares of any class or series unless it shall receive a written
request therefor from the record holder thereof in accordance with procedures
established in the bylaws or by the board of directors.
ARTICLE IV
PREEMPTIVE RIGHTS
No stockholder of the corporation of any class or series, whether now or
hereafter authorized, shall have any preemptive or preferential or other right
of purchase of or subscription to any share of any class or series of stock, or
shares convertible into, exchangeable for or evidencing the right to purchase
stock of any class or series whatsoever, whether or not the stock in question be
of the same class or series as may be held by such stockholder, and whether now
or hereafter authorized and whether issued for cash, property, services or
otherwise, other than such, if any, as the board of directors in its discretion
may from time to time fix.
ARTICLE V
PRINCIPAL OFFICE AND REGISTERED AGENT
The post office address of the principal office of the
corporation in the State of Maryland is 32 South Street, Baltimore, Maryland
21202. The resident agent of the corporation is The Corporation Trust
Incorporated, whose post office address is 32 South Street, Baltimore, Maryland
21202. Said resident agent is a corporation of the State of Maryland.
<PAGE>
ARTICLE VI
DIRECTORS
Section 1. The initial board of directors shall consist of three members
who need not be residents of the State of Maryland or stockholders of the
corporation.
Section 2. The names of the persons who shall act as directors until the
first meeting of stockholders or until their successors shall have been elected
and qualified are as follows:
Charles W. Brady 1315 Peachtree Street, N.E., Atlanta, Georgia
John M. Butler 7800 E. Union Avenue, Denver, Colorado
Dan J. Hesser 7800 E. Union Avenue, Denver, Colorado
Section 3. The number of directors may be increased or decreased in
accordance with the bylaws, provided that the number shall not be reduced to
less than three.
Section 4. A majority of the directors shall constitute a quorum for the
transaction of business, unless the bylaws shall provide that a different number
shall constitute a quorum; provided, however, that in no case shall a quorum be
less than one-third (1/3) of the total number of directors or less than two (2)
directors.
Section 5. No person shall serve as a director, unless elected by the
stockholders at an annual meeting or a special meeting called for such purpose;
except that vacancies occurring between such meetings may be filled by the
directors in accordance with the bylaws, and subject to such limitations as may
be set forth by applicable laws and regulations.
Section 6. The board of directors of the corporation is hereby empowered
to authorize the issuance from time to time of shares of stock, whether of a
class or series now or hereafter authorized, for such consideration as it deems
advisable, subject to such limitations as may be set forth herein, in the
bylaws, in the Maryland General Corporation Law, and in the Investment Company
Act of 1940, as amended.
Section 7. The board of directors of the corporation may make, alter or
repeal from time to time any of the bylaws of the corporation except any
particular bylaw which is specified as not subject to alternation or repeal by
the board of directors.
ARTICLE VII
LIABILITY AND INDEMNIFICATION
Section 1. Directors and officers of the corporation, including persons
who formerly have served in such capacities, shall have limitations on, and/or
immunity from, liability of such directors and officers to the fullest extent
<PAGE>
permitted by the Maryland General Corporation Law, subject only to such
restrictions as may be required by the Investment Company Act of 1940, as
amended, and the rules thereunder. Such limitations and/or immunity will apply
to acts or omissions occurring at the time an individual serves as a director or
officer of the corporation, whether such person is a director or officer of the
corporation at the time of any proceeding in which liability is asserted against
the director or officer. No amendment to these Articles of Incorporation or
repeal of any of its provisions shall limit or eliminate the benefits provided
to directors and officers under this provision with respect to any act or
omission which occurred prior to such amendment or repeal.
Section 2. The corporation shall indemnify and advance expenses to its
directors and officers, including persons who formerly have served in such
capacities, to the fullest extent permitted to directors by the Maryland General
Corporation Law and the bylaws of the corporation, as such Law and bylaws now or
in the future may be in effect, subject only to such limitations as may be
required by the Investment Company Act of 1940, as amended, and the rules
thereunder.
ARTICLE VIII
SPECIAL VOTING AND MEETING PROVISIONS
Section 1. Notwithstanding any provision of Maryland law requiring a
greater proportion than a majority of the votes of all classes or of any class
of stock entitled to be cast to take or authorize any action, the corporation
may take or authorize any such action upon the concurrence of a majority of the
aggregate number of the votes entitled to be cast thereon.
Section 2. The presence in person or by proxy of the holders of one-third
of the shares of stock of the corporation entitled to vote without regard to
class shall constitute a quorum at any meeting of stockholders, except with
respect to any matter which by law requires the approval of one or more classes
of stock, in which case the presence in person or by proxy of the holders of
one-third of the shares of stock of each class entitled to vote on the matter
shall constitute a quorum.
Section 3. So long as the corporation is registered pursuant to the
Investment Company Act of 1940, as amended, the corporation will not be required
to hold annual shareholder meetings in years in which the election of directors
is not required to be acted upon under the Investment Company Act of 1940, as
amended.
<PAGE>
ARTICLE IX
AMENDMENT
The corporation reserves the right from time to time to make
any amendment of its articles of incorporation now or hereafter authorized by
law, including any amendment which alters the contract rights, as expressly set
forth in such articles, of any outstanding stock by classification,
reclassification or otherwise, but no such amendment which changes the terms or
rights of any of its outstanding shares shall be valid unless such amendment
shall have been authorized by not less than a majority of the aggregate number
of votes entitled to be cast thereon, by a vote at a meeting or in writing with
or without a meeting.
IN WITNESS WHEREOF, I have signed these articles of incorporation on this
1st day of April, 1993.
/s/Dan J. Hesser
------------------
Dan J. Hesser
Attest: /s/ Glen A. Payne
-----------------
Glen A. Payne
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
I hereby certify that on the 1st day of April, 1993, before me, the
subscriber, a Notary Public of the State of Colorado, in and for the City and
County of Denver, personally appeared Dan J. Hesser who acknowledged the
foregoing articles of incorporation to be his act.
WITNESS my hand and notarial seal, the day and year first above written.
/s/ Cheryl K. Howlett
---------------------
Notary Public
My commission expires: February 22, 1995.
BYLAWS
OF
INVESCO TAX-FREE INCOME FUNDS, INC.
AS OF APRIL 5, 1993
ARTICLE I.
SHAREHOLDERS
Section 1. Annual Meeting. Unless otherwise determined
by the board of directors or required by
applicable law, no annual meeting of
shareholders shall be required to be held in
any year in which the election of directors is
not required under the Investment Company Act
of 1940. If the corporation is required to
hold a meeting of shareholders to elect
directors, the meeting shall be designated as
the annual meeting of shareholders for that
year, and shall be held no later than 120 days
after occurrence of the event requiring the
meeting at a place within or without the State
of Maryland.
Section 2. Special Meetings. Special meetings of the
shareholders entitled to vote shall be called
upon the request in writing of the president
or, in his absence, a vice president, or by a
vote of a majority of the board of directors,
or upon the request in writing of shareholders
of the Company representing not less than ten
percent (10%) of the votes entitled to be cast
at the meeting.
Section 3. Place of Meetings. Each annual and any special
meeting of the shareholders shall be held at
the principal office of the corporation in
Denver, Colorado, or at such alternate site as
may be determined by the board of directors.
Section 4. Notices. Notices of every meeting, annual or
special, shall specify the place, day and hour
of the meeting and shall be mailed not less
than ten (10) days nor more than ninety (90)
days before such meeting. Such notice shall
be given by the Secretary of the Corporation
to each shareholder entitled to notice of and
entitled to vote at the meeting. In the event
that a special meeting is called by the
shareholders entitled to vote, the Secretary
of the Corporation shall inform the
shareholders who make the request of the
<PAGE>
reasonably estimated cost of preparing and
mailing a notice of the meeting, and upon
payment of these costs to the Corporation,
shall notify each shareholder entitled to notice
of the meeting. Notice of every special meeting
shall indicate briefly its purpose. Notice shall
be deemed delivered where it is personally
delivered to the individual, left at the
individual's usual place of business, or
mailed to the individual at the individual's
address as it appears on the records of
the Corporation.
Section 5. Quorum. At every meeting of the shareholders,
the presence in person or by proxy of the
holders of one-third of all of the shares of
stock of the corporation issued and
outstanding and entitled to vote without
regard to class shall constitute a quorum,
except with respect to any matter which by law
requires the approval of one or more classes
of stock, in which case the presence in person
or by proxy of the holders of one-third of the
shares of stock of each class entitled to vote
on the matter shall constitute a quorum;
provided, however, that at every meeting of
the shareholders, the representation of a
larger number of shareholders shall constitute
a quorum if required by the Investment Company
Act of 1940, as amended, other applicable law,
or by the Articles of Incorporation.
Section 6. Voting. At every meeting of the shareholders
at which a quorum is present, each shareholder
entitled to vote shall be entitled to vote in
person, or by proxy appointed by instrument in
writing subscribed by such shareholder, or his
duly authorized attorney, and he shall have
one (1) vote for each share of stock standing
registered in his name on each matter
submitted at the meeting on which such share
is entitled to vote and for each director to
be elected. Fractional shares shall be
entitled to proportionate fractional votes.
Every proxy shall be dated and no proxy shall
be valid after eleven (11) months from its
date unless otherwise provided in the proxy.
There shall be no cumulative voting in the
election of directors. Except as otherwise
provided by law, by the charter of the
corporation, or by these bylaws, at each
meeting of stockholders at which a quorum is
present, all matters shall be decided by a
majority of the votes cast by the stockholders
<PAGE>
present in person or represented by proxy
and entitled to vote with respect to any
such matter.
Section 7. Qualification of Voters. At every meeting of
shareholders, unless the voting is conducted
by inspectors, the proxies and ballots shall
be received, and all questions with respect to
the qualification of voters and the validity
of proxies and the acceptance or rejection of
votes shall be decided by the chairman of the
meeting. If demanded by shareholders present
in person or by proxy entitled to cast twenty-
five per cent (25%) in number of votes, or if
ordered by the chairman of the meeting, the
vote upon any election or question shall be
taken by ballot and, upon such demand or
order, the voting shall be conducted by two
(2) inspectors appointed by the chairman, in
which event the proxies and ballots shall be
received and all questions with respect to the
qualification of votes and the validity of
proxies and the acceptance or rejection of
votes shall be decided by such inspectors.
Unless so demanded or ordered, no vote need be
by ballot and the voting need not be conducted
by inspectors.
Section 8. Waiver of Notice. A waiver of notice of any
meeting of shareholders signed by any
shareholder entitled to such notice filed with
the records of the meeting, whether before or
after the holding thereof or actual attendance
at the meeting in person or by proxy, shall be
deemed equivalent to the giving of notice to
such shareholder.
Section 9. Adjournment. A meeting of shareholders convened
on the date for which it was called may be
adjourned from time to time without further
notice to a date not more than 120 days after
the original record date of the meeting.
Section 10. Action by Shareholders Without Meeting. Except
as otherwise provided by law, the provisions of
these bylaws relating to notices and meetings
to the contrary notwithstanding, any action
required or permitted to be taken at any
meeting of shareholders may be taken without
a meeting if a consent in writing setting forth
the action shall be signed by all the shareholders
entitled to vote upon the action and such consent
shall be filed with the records of the corporation.
<PAGE>
ARTICLE II.
BOARD OF DIRECTORS
Section 1. Powers. The business and property of the
corporation shall be conducted and managed by
its board of directors, which may exercise all
of the powers of the corporation, except such
as are by statute, by the charter or by the
bylaws, conferred upon or reserved to the
shareholders. The board of directors shall
keep full and complete records of its
transactions.
Section 2. Number. By vote of a majority of the entire
board of directors, the number of directors
may be increased or decreased from time to
time; provided that, in no event, may the
number be decreased to less than three.
Section 3. Election. The members of the board of
directors shall be elected by the shareholders
by plurality vote at the annual meeting, or at
any special meeting called for such purpose.
Each director shall hold office until his
successor shall have been duly chosen and
qualified, or until he shall have resigned or
shall have been removed in the manner provided
by law. Any vacancy, including one created by
an increase in the number of directors on the
board (except where such vacancy is created by
removal by the shareholders), may be filled by
the vote of a majority of the remaining
directors, although such majority is less than
a quorum; provided, however, that immediately
after filling any vacancy by such action of
the board of directors, at least two-thirds
(2/3) of the directors then holding office
shall have been elected by the shareholders at
an annual or special meeting.
Section 4. Regular Meetings. The board of directors
shall schedule an Annual Meeting at such place
and time as they may designate for the purpose
of organization, the election of officers, and
the transaction of other business. Other
regular meetings may be held as scheduled by
a majority of the directors.
Section 5. Special Meetings. Special meetings of the
board of directors may be called at any time
<PAGE>
by the president or by a majority of the
directors or by a majority of the executive
committee.
Section 6. Notice of Meetings. Notice of the place, day
and hour of every special meeting shall be
given to each director at least two (2) days
before the meeting, by written announcement,
telephone, telegraph and/or mail addressed to
him at his post office address, according to
the records of the corporation. Unless
required by resolution of the board of
directors, no notice of any meeting of the
board of directors need state the business to
be transacted thereat. No notice of any
meeting of the board of directors need be
given to any director who attends, or to any
director who, in writing executed and filed
with the records of the meeting either before
or after the holding thereof, waives such
notice. Any meeting of the board of directors
may adjourn from time to time to reconvene at
the same or some other place, and no notice
need be given of any such adjourned meeting
other than by announcement.
Section 7. Quorum. At all meetings of the board of
directors, one-third of the total number of
directors or not less than two (2) directors
shall constitute a quorum for the transaction
of business. In the absence of a quorum, the
directors present by a majority vote and
without notice other than by announcement may
adjourn the meeting from time to time until a
quorum shall be present. At any such
adjourned meeting, any business may be
transacted which might have been transacted at
the meeting as originally notified.
Section 8. Compensation of Directors. Directors shall be
entitled to receive such compensation from the
corporation for their services as may from
time to time be voted by the board of
directors. All directors shall be reimbursed
for their reasonable expenses of attendance,
if any, at the board and committee meetings.
Any director of the corporation may also serve
the corporation in any other capacity and
receive compensation therefor.
Section 9. Vacancies. Any vacancy occurring in the board
of directors may be filled by the affirmative
vote of a majority of the remaining directors
though less than a quorum of the board of
<PAGE>
directors. A director elected to fill a vacancy
shall be elected for the unexpired term of his
predecessor in office. Any directorship to be
filled by reason of an increase in the number
of directors may be filled by election by the
board of directors for a term of office
continuing only until the next election of
directors by the shareholders.
Section 10. Resignation and Removal of Directors. Any
director or member of any committee may resign
at any time. Such resignation shall be made
in writing and shall take effect at the time
specified therein. If no time is specified,
it shall take effect from the time of its
receipt by the Secretary, who shall record
such resignation, noting the day and hour of
its reception. The acceptance of a resignation
shall not be necessary to make it effective.
Notwithstanding anything to the contrary in
Article I, Section 2 hereof, a meeting for
removing a director shall be called in
accordance with the procedures specified in
Section 16(c) of the Investment Company Act
of 1940, and the shareholder communications
provisions of said Section 16(c) shall be
following by the corporation. At any meeting
of shareholders, duly called and at which a
quorum is present, the shareholders may, by
affirmative vote of the holders of a majority
of the votes entitled to be cast thereon,
remove any director or directors from office
and may elect a successor or successors to fill
any resulting vacancies to hold office until
the next annual meeting of shareholders or
until a successor or successors are elected
and qualify.
Section 11. Telephone Meetings. Any member or members
of the board of directors or of any committee
designated by the board of directors, may
participate in a meeting of the board, or any
such committee, as the case may be, by means
of a conference telephone or similar
communications equipment if all persons
participating in the meeting can hear each
other at the same time. Participation in a
meeting by these means constitutes presence
in person at the meeting. This Section 11
shall not be applicable to meetings held for
the purpose of voting in respect of approval
of contracts or agreements whereby a person
undertakes to serve or act as investment
<PAGE>
adviser of, or principal underwriter for, the
corporation or in respect to other matters as
to which the Investment Company Act of 1940
or the rules thereunder require that votes be cast
in person.
Section 12. Action by Directors Without Meeting. The
provisions of these bylaws covering notices
and meetings to the contrary notwithstanding,
and except as required by law (including
Section 15 of the Investment Company Act of
1940), any action required or permitted to be
taken at any meeting of the board of directors
may be taken without a meeting if a consent in
writing setting forth the action shall be
signed by all of the directors entitled to vote
upon the action and such written consent is
filed with the minutes of proceedings of the board
of directors.
ARTICLE III.
COMMITTEES
Section 1. Executive Committee. The board of directors,
by resolution adopted by a majority of the
whole board of directors, may provide for an
executive committee of three (3) or more
directors. If provision be made for an
executive committee, the members thereof shall
be elected by the board of directors to serve
during the pleasure of the board of directors.
Unless otherwise provided by resolution of the
board of directors, the president shall be a
member and the chairman of the executive
committee shall preside at all meetings
thereof. During the intervals between the
meetings of the board of directors, the
executive committee shall possess and may
exercise all of the powers of the board of
directors in the management of the business
and affairs of the corporation conferred by
the bylaws or otherwise, to the extent
authorized by the resolution providing for
such executive committee or by subsequent
resolution adopted by a majority of the whole
board of directors, in all cases in which
specific directions shall not have been given
by the board of directors. Notwithstanding
the foregoing, the executive committee shall
not have the power to: (i) declare dividends
or distributions on stock; (ii) issue stock
other than as provided by the Maryland General
<PAGE>
Corporation Law; (iii) recommend to the
shareholders any action which requires
shareholder approval; (iv) amend these
bylaws; or (v) approve any merger or share
exchange which does not require shareholder
approval. The executive committee shall
maintain written records of its transactions.
All action by the executive committee shall
be reported to the board of directors at its
meeting next succeeding such action, and
shall be subject to ratification, with or
without revision or alteration, by such vote
of the board of directors as would have been
required under Article II, Section 7, hereof,
had such action been taken by the board of
directors. Vacancies in the executive committee
shall be filled by the board of directors.
Section 2. Meetings of the Executive Committee. The
executive committee shall fix its own rules of
procedure and shall meet as provided by such
rules or by resolution of the board of
directors, and it shall also meet at the call
of the chairman or of any two (2) members of
the committee. A majority of the executive
committee shall constitute a quorum. Except
in cases in which it is otherwise provided by
resolution of the board of directors, the vote
of a majority of such quorum at a duly
constituted meeting shall be sufficient to
elect and to pass any measure, subject to
ratification by the board of directors as
provided in Section 1 of this Article III.
Section 3. Other Committees. The board of directors may
by resolution provide for such other standing
or special committees as it deems desirable,
and discontinue the same at its pleasure.
Each such committee shall have such powers
and perform such duties as may be assigned
to it by the board of directors.
Section 4. Committee Action Without Meeting. The
provisions of these bylaws covering notices
and meetings to the contrary notwithstanding,
and except as required by law, any action
required or permitted to be taken at any
meeting of any committee of the board of
directors appointed pursuant to these bylaws
may be taken without a meeting if a consent in
writing setting forth the action shall be
signed by all members of the committee
entitled to vote upon the action, and such
written consent is filed with the records of
the proceedings of the committee.
<PAGE>
ARTICLE IV.
OFFICERS
Section 1. Numbers; Qualifications; Term of Office;
Vacancies. The board of directors may select
one of their number as chairman of the board
and may select one of their number as vice
chairman of the board (neither of which
positions shall be considered to be the
designation of a position as an officer of the
corporation), and shall choose as officers a
president from among the directors and a
treasurer and a secretary who need not be
directors. The board of directors may also
choose one or more vice presidents, one or
more assistant secretaries and one or more
assistant treasurers, none of whom need be a
director. Any two or more of such offices,
except those of president and vice president,
may be held by the same person, but no officer
shall execute, acknowledge or verify any
instrument in more than one capacity if such
instrument is required by law or by the
certificate of incorporation or by these
bylaws or by resolution of the board of
directors to be executed, acknowledged or
verified by any two or more officers. Each
such officer shall hold office until the first
meeting of the board of directors after the
annual meeting of the shareholders next
following his election or, if no such annual
meeting of the shareholders is held, until the
annual meeting of the board of directors in
the year following his election, and, until
his successor is chosen and qualified or until
he shall have resigned or died, or until he
shall have been removed as hereinafter
provided in Section 3 of this Article IV. Any
vacancy in any of the above offices may be
filled by the board of directors at any
regular or special meeting. All officers and
agents of the corporation, as between
themselves and the corporation, shall have
such authority and perform such duties in the
management of the corporation as may be
provided in or pursuant to these bylaws, or,
to the extent not so provided, as may be
prescribed by the board of directors;
provided, that no rights of any third party
shall be affected or impaired by any such
<PAGE>
bylaws or resolution of the board unless the
third party has knowledge thereof.
Section 2. Subordinate Officers. The board of directors,
or any officer thereunto authorized by it, may
appoint from time to time such other officers
and agents for such terms of office and with such
powers and duties as may be prescribed by the
board of directors or the officer making such
appointment.
Section 3. Removal. Any officer or agent may be removed
by the board of directors whenever, in its
judgment, the best interests of the corporation
will be served thereby, but such removal shall
be without prejudice to the contractual rights,
if any, of the person so removed.
Section 4. Chairman of the Board. The chairman of the
board, if one shall be elected, shall preside
at all meetings of the board of directors, and
shall appoint all committees except such as
are required by statute, these bylaws or a
resolution of the board of directors or of the
executive committee to be otherwise appointed,
and shall have other such duties as may be
assigned to him from time to time by the board
of directors. In recognition of notable and
distinguished services to the corporation, the
board of directors may designate one of its
members as honorary chairman, who shall have
such duties as the board may, from time to
time, assign him by appropriate resolution,
excluding, however, any authority or duty
vested by law or these bylaws in any other
officer.
Section 5. Vice Chairman of the Board. The vice chairman
of the board, if one shall be elected, shall
preside at all meetings of the board of
directors at which the chairman of the board
is not present, shall call at his discretion
and shall preside at meetings of those
directors of the corporation who are not
affiliated with the corporation's investment
adviser, distributor, or affiliates thereof,
and shall perform such other duties as may be
assigned to the vice chairman from time to
time by the board of directors.
Section 6. President. The president shall preside at all
meetings of the shareholders and, in the
absence of the chairman and the vice chairman
<PAGE>
of the board or if a chairman and vice chairman
of the board are not elected, at all meetings
of the board of directors. Unless otherwise provided
by the board of directors, he shall have direct
control of and any authority over the business and
affairs and over the officers of the corporation,
and shall preside at all meetings of the executive
committee. The president shall also perform all
such other duties as are incident to his office
and as may be assigned to him from time to time
by the board of directors.
Section 7. Vice Presidents. The vice president or vice
presidents, at the request of the president or
in his absence or inability to act, shall
perform the duties and exercise the functions
of the president in such manner as may be
directed by the president, the board of
directors or the executive committee. The
vice president or vice presidents shall have
such other powers and perform all such other
duties as may be assigned to them by the board
of directors, the executive committee, or the
president.
Section 8. Secretary. The secretary shall see that all
notices are duly given in accordance with
these bylaws; he shall keep the minutes of all
meetings of the shareholders and, if directed
to do so by the chairman of the meeting, of
meetings of the board of directors and of the
executive committee at which he shall be
present; he shall have charge of the books and
records and the corporate seal or seals of the
corporation; he shall see that the corporate
seal is affixed to all documents, the
execution of which under the seal of the
corporation is duly authorized and is
necessary; and he shall make such reports and
perform all such other duties as are incident
to his office and as may be assigned to him
from time to time by the board of directors or
by the president.
Section 9. Treasurer. The treasurer shall be the chief
financial officer of the corporation, and as
such shall have supervision of the custody of
all funds, securities and valuable documents
of the corporation, subject to such
arrangements as may be authorized or approved
by the board of directors with respect to the
custody of assets of the corporation; shall
receive, or cause to be received, and give, or
<PAGE>
cause to be given, receipts for all funds,
securities or valuable documents paid or
delivered to, or for the account of, the
corporation, and cause such funds, securities
or valuable documents to be deposited for the
account of the corporation with such banks or
trust companies as shall be designated by the
board of directors; shall pay or cause to be
paid out of the funds of the corporation all
just debts of the corporation upon their
maturity; shall maintain, or cause to be
maintained, accurate records of all receipts,
disbursements, assets, liabilities, and
transactions of the corporation; shall see
that adequate audits thereof are regularly
made; shall, when required by the board of
directors, render accurate statements of the
condition of the corporation; and shall perform
all such other duties as are incident to his
office and as may be assigned to him by the
board of directors or by the president.
Section 10. Assistant Secretaries, Assistant Treasurers.
The assistant secretaries and assistant treasurers
shall have such duties as from time to time may be
assigned to them by the board of directors, or
by the president.
Section 11. Compensation. The board of directors shall have
the power to fix the compensation of all officers
and agents of the corporation, but may delegate
to any officer or committee the power of determining
the amount of salary to be paid to any officer or
agent of the corporation other than the chairman of
the board, the president, the vice presidents,
the secretary and the treasurer.
Section 12. Contracts. Except as otherwise provided by law
or by the charter, no contract or transaction
between the corporation and any partnership or
corporation, and no act of the corporation, shall
in any way be affected or invalidated by the fact
that any officer or director of the corporation is
pecuniarily or otherwise interested therein or
is a member, officer or director of such other
partnership or corporation if such interest shall
be known to the board of directors of the
corporation. Specifically, but without limitation
of the foregoing, the corporation may enter into
one or more contracts appointing INVESCO Funds Group,
Inc. investment adviser of the corporation, and may
otherwise do business with INVESCO Funds Group,
<PAGE>
Inc., notwithstanding the fact that one or more
of the directors of the corporation and some or
all of its officers are, have been or may become
directors, officers, members, employees, or
shareholders of INVESCO Funds Group, Inc. and
may deal freely with each other, and neither
such contract appointing INVESCO Funds Group,
Inc. investment adviser to the corporation nor
any other contract or transaction between the
corporation and INVESCO Funds Group, Inc. shall
be invalidated or in any way affected thereby,
nor shall any director or officer of the
corporation by reason thereof be liable to the
corporation or to any shareholder or creditor
of the corporation or to any other person for any
loss incurred under or by reason of any such
contract or transaction. For purposes of this
paragraph, any reference to "INVESCO Funds Group,
Inc." shall be deemed to include said company and
any parent, subsidiary or affiliate of said company
and any successor (by merger, consolidation or
otherwise) to said company or any such parent,
subsidiary or affiliate.
Section 13. Delegation of Duties. Whenever an officer is
absent or disabled, or whenever for any reason
the board of directors may deem it desirable,
the board may delegate the powers and duties
of an officer to any other officer or officers
or to any director or directors.
ARTICLE V.
CAPITAL STOCK
Section 1. Issuance of Stock. The corporation shall not
issue its shares of capital stock except as
approved by the board of directors. Upon the
sale of each share of its common stock, except
as otherwise permitted by applicable laws and
regulations, the corporation shall receive in
cash or in securities valued as provided in
Article VIII of these bylaws, not less than
the current net asset value thereof, exclusive
of any distributing commission or discount,
and in no event less than the par value
thereof.
Section 2. Certificates. Certificates for the Corporation's
classes of Common Stock shall be issued only upon
<PAGE>
the specific request of a shareholder. If
certificates are requested, they shall be
issued in such a form as may be approved by
the board of directors, they shall be
respectively numbered serially for each class
of shares, or series thereof, as they are
issued, and shall be signed by, or bear a
facsimile of the signatures of, the president
or a vice president, and shall also be signed
by, or bear a facsimile of the signature of some
other person who is one of the following: the
treasurer, an assistant treasurer, the secretary,
or an assistant secretary; and shall be sealed
with, or bear a facsimile of, the seal of the
corporation. In case any officer of the
corporation whose signature or facsimile
signature appears on such certificates shall
cease to be such officer, whether because of
death, resignation or otherwise, certificates
may nevertheless be issued and delivered as
though such person had not ceased to be an
officer.
Section 3. Transfers. Subject to the Maryland General
Corporation Law, the board of directors shall
have power and authority to make all such
rules and regulations as it may deem expedient
concerning the issue, transfer and
registration of certificates of stock; and may
appoint transfer agents and registrars
thereof. The duties of transfer agent and
registrar may be combined.
Section 4. Stock Ledgers. Original or duplicate stock
ledgers, containing the names and addresses of
the shareholders of the corporation and the
number of shares of each class held by them
respectively, shall be kept at an office or
agency of the corporation in such city or town
as may be designated by the board of
directors.
Section 5. Closing of Transfer Books or Fixing of Record
Date. For the purpose of determining
shareholders entitled to notice of or to vote
at any meeting of shareholders or any
adjournment thereof, or shareholders entitled
to receive payment of any dividend, or in
order to make a determination of shareholders
for any other purpose, the board of directors
of the Corporation may provide that the share
transfer books shall be closed for a stated
period but not to exceed, in any case, twenty
days. If the share transfer books shall be
<PAGE>
closed for the purpose of determining shareholders
entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at
least ten days immediately preceding such meeting.
In lieu of closing the share transfer books, the
board of directors may fix in advance a date as
the record date for any such determination of
shareholders, such date in any case to be not more
than ninety days and, in case of a meeting of
shareholders, not less than ten days prior to the
date on which the particular action, requiring such
determination of shareholders, is to be taken. If
the share transfer books are not closed and no
record date is fixed for the determination of
shareholders entitled to notice of or to vote at
a meeting of shareholders, the later of the close of
business on the date on which notice of the meeting
is mailed or the thirtieth day before the meeting
shall be the record date for determining shareholders
entitled to notice of or to vote at a meeting of
shareholders. The record date for determining
shareholders entitled to receive payment of a
dividend or an allotment of any rights shall be
the close of business on the day on which the
resolution of the board of directors declaring
such dividend or allotment of rights is adopted.
But the payment or allotment may not be made more
than 60 days after the date on which the resolution
is adopted. When a determination of shareholders
entitled to vote at any meeting of shareholders
has been made as provided in this section, such
determination shall apply to any adjournment thereof.
Section 6. New Certificates. In case any certificate of
stock is lost, stolen, mutilated or destroyed,
the board of directors may authorize the issue
of a new certificate in place thereof upon
such terms and conditions as it may deem
advisable; or the board of directors may
delegate such power to any officer or officers
of the corporation; but the board of directors
or such officer or officers, in their
discretion, may refuse to issue such new
certificate, save upon the order of some court
having jurisdiction in the premises.
Section 7. Registered Owners of Stock. The corporation
shall be entitled to recognize the exclusive
right of a person registered on its books as
the owner of shares of stock to receive
<PAGE>
dividends, and to vote as such owner, and to
hold liable for calls and assessments a person
registered on its books as the owner of shares
of stock, and shall not be bound to recognize
any equitable or other claim to or interest in
such share or shares on the part of any other
person, whether or not it shall have express
or other notice thereof, except as otherwise
provided by the laws of Maryland.
Section 8. Fractional Denominations. Subject to any
applicable provisions of law and the charter
of the corporation, the corporation may issue
shares of its capital stock in fractional
denominations, provided that the transactions
in which and the terms and conditions upon
which shares in fractional denominations may
be issued from time to time be limited or
determined by or under the authority of the
board of directors.
ARTICLE VI.
FINANCES
Section 1. Checks, drafts, etc. All instruments,
documents, and other papers shall be executed
in the name and on behalf of the corporation,
and all drafts, checks, notes and other
obligations for the payment of money by the
corporation shall, unless otherwise provided
by resolution of the board of directors, be
signed by the president or vice president and
countersigned by the secretary or treasurer.
Section 2. Annual Reports. A statement of the affairs of
the corporation shall be submitted at the
annual meeting of the shareholders and, within
twenty (20) days after the meeting, shall be
placed on file at the corporation's principal
office. If the corporation is not required to
hold an annual meeting of shareholders, the
corporation's statement of affairs shall be
placed on file at the corporation's principal
office within one hundred and twenty (120)
days after the end of its fiscal year. Such
statement shall be prepared by such executive
officer of the corporation as may be
designated by resolution of the board of
directors. If no other executive officer is
so designated, it shall be the duty of the
president to prepare such statement.
<PAGE>
Section 3. Fiscal Year. The fiscal year of the
corporation shall begin on 1st day of July in
each year and end on the 30th day of June
following.
Section 4. Dividends and Distributions. Subject to any
applicable provisions of law and the charter
of the corporation, dividends and
distributions upon the common stock of the
corporation may be declared at such intervals
as the board of directors may determine, in
cash, in securities or other property, or in
shares of stock of the corporation, from any
sources permitted by law, all as the board of
directors shall from time to time determine.
Section 5. Location of Books and Records. The books and
records of the corporation may be kept outside
the State of Maryland at the principal office
of the corporation or at such place or places
as the board of directors may from time to time
determine, except as otherwise required by law.
ARTICLE VII.
REDEMPTION OF STOCK
The registered owner of the outstanding stock of the corporation shall
have the right to require the corporation to redeem his shares at the asset
value thereof, as hereinafter defined in Article VIII of these bylaws, upon
delivery to the corporation of any certificate, or certificates, properly
endorsed, which have been issued as evidence of ownership of such stock, and a
written request for redemption in a form satisfactory to the corporation.
Stock of the corporation shall be redeemed at the current net asset value
per share next determined after a request in proper form has been received from
the registered owner or owner's designee at the office of the corporation
designated to receive redemption requests. Any certificates delivered at the
designated principal place of business of the corporation on a day which is not
a business day as herein defined, shall be deemed to have been received on the
business day next succeeding the day of such delivery. Subject to the
limitations of the Investment Company Act of 1940, the board of directors shall
have authority to fix a reasonable service charge for redemption of its stock,
including redemption pursuant to any periodic withdrawal or variable payment
plan or contract.
<PAGE>
ARTICLE VIII.
DETERMINATION OF ASSET VALUE
Section 1. Net Asset Value. The net asset value of a
share of common stock of the corporation shall
be determined in accordance with applicable
laws and regulations under the supervision of
such persons and at such time or times,
including the close of business on each
business day, as shall be prescribed by the
board of directors. Each such determination
shall be made by subtracting from the value of
the assets of the corporation (as determined
pursuant to Section 2 of this Article of the
bylaws) the amount of its liabilities,
dividing the remainder by the number of shares
of common stock issued and outstanding, and
adjusting the results to the nearest full cent
per share.
Section 2. Valuation of Portfolio Securities and Other Assets.
Except as otherwise required by any applicable law
or regulation of any regulatory agency having
jurisdiction over the activities of the corporation,
the corporation shall determine the value of its
portfolio securities and other assets as follows:
(a) securities for which market quotations are
readily available shall be valued at current
market value determined in such manner as the
board of directors may from time to time
prescribe;
(b) all other securities and assets shall be
valued at amounts deemed best to reflect
their fair value as determined in good
faith by or under the supervision of
such persons and at such time or times
as shall from time to time be prescribed
by the board of directors;
All quotations, sale prices, bid and asked prices and other
information shall be obtained from such sources as the persons
making such determination believe to be reliable, and any
determination of net asset value based thereon shall be
conclusive.
ARTICLE IX.
PERIOD OF EMERGENCY
During any period of emergency, the board of directors, at its option, may
suspend the computation of asset value for the purpose of issuing or redeeming
it stock, and may suspend any obligation to accept payments for the acquisition
<PAGE>
of additional stock of the corporation and may suspend the obligation of
the corporation to redeem stock. A period of emergency is defined to be:
(a) A period during which the New York Stock Exchange is closed other
than customary weekend and holiday closings, or during which trading
on the New York Stock Exchange is restricted;
(b) A period during which disposal by the corporation of securities
owned by it is not reasonably practicable, or during which it is not
reasonably practicable for the corporation to fairly to determine
the value of its net assets; or
(c) Such other periods as the Securities and Exchange Commission
pursuant to the provisions of the Investment Company Act of 1940 may
by order declare as an emergency period or periods.
ARTICLE X.
MISCELLANEOUS PROVISIONS
Section 1. Seal. The board of directors shall provide a
suitable seal, bearing the name of the corporation,
which shall be in the charge of the secretary.
The board of directors may authorize one or more
duplicate seals and provide for the custody
thereof.
Section 2. Bonds. The board of directors may require any
officer, agent or employee of the corporation
to give a bond to the corporation, conditioned
upon the faithful discharge of his duties, with
one or more sureties and in such amount as may be
satisfactory to the board of directors.
Section 3. Voting upon Stock in Other Corporations. Any
stock in other corporations or associations,
which may from time to time be held by the
corporation, may be voted at any meeting of
the shareholders thereof by the president or a
vice president of the corporation or by proxy
or proxies appointed by the president or one
of the vice presidents of the corporation.
The board of directors, however, may by
resolution appoint some other person or
persons to vote such stock, in which case,
such person or persons shall be entitled to
vote such stock upon the production of a
certified copy of such resolution.
<PAGE>
Section 4. Bylaws. The board of directors shall have the
power to make, amend and repeal the bylaws of
the corporation which may contain any
provision for regulation and management of the
affairs of the corporation not inconsistent
with law or the certificate of incorporation;
provided that any and all provisions of the
bylaws, notwithstanding the power of the
directors to act with respect thereto, may be
altered or repealed, and new provisions may be
adopted by the shareholders or at any annual
meeting or any special meeting called for that
purpose.
Section 5. Appointment and Duties of Custodian. The
corporation shall at all times employ a bank
or trust company having the qualifications
specified by the Investment Company Act of
1940, as amended, as custodian with authority
as its agent, but subject to such
restrictions, limitations and other
requirements, if any, as may be contained in
these bylaws and the Investment Company Act of
1940, as amended:
(1) to receive and hold the securities owned by
the corporation and deliver the same upon
written order;
(2) to receive and receipt for any moneys due to
the corporation and deposit the same in its
own banking department or elsewhere as the
board of directors may direct;
(3) to disburse such funds upon orders or
vouchers;
(4) and to provide such additional services as may
be requested by the corporation;
all upon such basis of compensation as may be agreed upon
between the board of directors and the custodian.
The board of directors may also authorize the custodian to employ one or
more sub-custodians from time to time to perform such of the acts and
services of the custodian, and upon such terms and conditions, as may be
agreed upon between the custodian and such sub-custodian and approved by
the board of directors.
Section 6. Central Certification System. Subject to such
rules, regulations and orders as the U.S.
Securities and Exchange Commission may adopt,
<PAGE>
the board of directors may direct the custodian
to deposit all or any part of the securities
owned by the corporation in a system for the
central handling of securities established by a
national securities exchange or a national
securities association registered with the SEC
under the Securities Exchange Act of 1934, or
such other person as may be permitted by the
SEC or its staff in accordance with the Investment
Company Act of 1940, as amended, and any rule or
staff interpretation thereof, pursuant to which
system all securities of any particular class or
series of any issuer deposited within the system
are treated as fungible and may be transferred
or pledged by bookkeeping entry without physical
delivery of such securities, provided that all
such deposits shall be subject to withdrawal only
upon the order of the corporation.
Section 7. Compliance with Federal Regulations. The
board of directors is hereby empowered to take
such action as it may deem to be necessary,
desirable or appropriate so that the
corporation is or shall be in compliance with
any federal or state statute, rule or
regulation with which compliance by the
corporation is required.
Section 8. Waiver of Notice. Whenever any notice of the
time, place or purpose of any meeting of
shareholders, directors, or of any committee
is required to be given under the provisions
of statute or under the provisions of the
charter of the corporation or these bylaws, a
waiver thereof in writing, signed by the
person or person entitled to such notice and
filed with the records of the meeting, whether
before or after the holding thereof, or actual
attendance at the meeting of directors or
committee in person, shall be deemed
equivalent to the giving of such notice to
such person.
Section 9. Offices. The principal office of the
corporation in the State of Maryland shall be
in the City of Baltimore. In addition to its
principal office in the State of Maryland, the
corporation may have an office or offices in
the City of Denver, State of Colorado, and at
such other places as the board of directors
may from time to time designate or the
business of the corporation may require.
<PAGE>
Section 10. Definitions. For all purposes of the
certificate of incorporation and these bylaws,
the terms:
(a) "business day" shall be defined as a day with respect to
which the New York Stock Exchange is open for business,
and with respect to which the actual time of closing of
such exchange is that time which shall have been
scheduled for such closing in advance of the opening of
such exchange;
(b) "the close of business" shall be defined as the time of
closing of the New York Stock Exchange.
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made this 30th day of April 1993, Denver, Colorado, by
and between INVESCO Funds Group, Inc. (the "Adviser"), a Delaware corporation,
and INVESCO Tax-Free Income Funds, Inc., a Maryland Corporation (the "Fund").
W I T N E S S E T H :
WHEREAS, the Fund is a corporation organized under the laws of
the State of Maryland; and
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), as a diversified, open-end management
investment company and has one class of shares which currently consists of one
series (the "Shares"), such series initially being the INVESCO Tax-Free Long-
Term Bond Fund (the "Portfolio"); and
WHEREAS, the Fund desires that the Adviser manage its investment
operations and the Adviser desires to manage said operations;
NOW, THEREFORE, in consideration of these premises and of the mutual
covenants and agreements hereinafter contained, the parties hereto agree as
follows:
1. Investment Management Services. The Adviser hereby
agrees to manage the investment operations of the Fund
and its Portfolio, subject to the terms of this Agreement
and to the supervision of the Fund's directors (the
"Directors"). The Adviser agrees to perform, or arrange
for the performance of, the following specific services
for the Fund:
(a) to manage the investment and reinvestment of all
the assets, now or hereafter acquired, of the Fund
and the Portfolio of the Fund;
(b) to maintain a continuous investment program for the
Fund and the Portfolio of the Fund, consistent with
(i) the Fund's and the Portfolio's investment
policies as set forth in the Fund's Articles of
Incorporation, Bylaws, and Registration Statement,
as from time to time amended, under the Investment
Company Act of 1940, as amended (the "1940 Act"),
and in any prospectus and/or statement of
additional information of the Fund or the Portfolio
of the Fund, as from time to time amended and in
use under the Securities Act of 1933, as amended,
and (ii) the Fund's status as a regulated
investment company under the Internal Revenue Code
of 1986, as amended;
<PAGE>
(c) to determine what securities are to be purchased or sold for
the Fund and its Portfolio, unless otherwise directed by the
Directors of the Fund, and to execute transactions
accordingly;
(d) to provide to the Fund and the Portfolio of the
Fund the benefit of all of the investment analyses
and research, the reviews of current economic
conditions and trends, and the consideration of
long-range investment policy now or hereafter
generally available to investment advisory
customers of the Adviser;
(e) to determine what portion of the Fund and the
Portfolio of the Fund should be invested in stocks,
Government obligations, commercial paper,
certificates of deposit, bankers' acceptances,
variable amount notes, corporate debt obligations,
and any other authorized securities;
(f) to make recommendations as to the manner in which voting
rights, rights to consent to Fund and/or Portfolio action and
any other rights pertaining to the Fund's portfolio securities
shall be exercised; and
(g) to calculate the net asset value of the Fund and
the Portfolio, as applicable, as required by the
1940 Act, subject to such procedures as may be
established from time to time by the Fund's
Directors, based upon the information provided to
the Adviser by the Fund or by the custodian,
co-custodian or sub-custodian of the Fund's or any
of the Portfolio's assets (the "Custodian") or such
other source as designated by the Directors from
time to time.
With respect to execution of transactions for the Fund and for the
Portfolio of the Fund, the Adviser shall place, or arrange for the
placement of, all orders for the purchase or sale of portfolio
securities with brokers or dealers selected by the Adviser. In
connection with the selection of such brokers or dealers and the
placing of such orders, the Adviser is directed at all times to
obtain for the Fund and the Portfolios of the Fund the most
favorable execution and price; after fulfilling this primary
requirement of obtaining the most favorable execution and price, the
Adviser is hereby expressly authorized to consider as a secondary
factor in selecting brokers or dealers with which such orders may be
placed whether such firms furnish statistical, research and other
information or services to the Adviser. Receipt by the Adviser of
any such statistical or other information and services should not be
deemed to give rise to any requirement for adjustment of the
<PAGE>
advisory fee payable pursuant to paragraph 3 hereof. The Adviser
may follow a policy of considering sales of shares of the Fund as a
factor in the selection of broker/dealers to execute portfolio
transactions, subject to the requirements of best execution
discussed above.
The Adviser shall for all purposes herein provided be deemed to be
an independent contractor.
2. Allocation of Costs and Expenses. The Adviser shall
reimburse the Fund monthly for any salaries paid by the
Fund to officers, Directors, and full-time employees of
the Fund who also are officers, general partners or
employees of the Adviser or its affiliates. Except for
such subaccounting, recordkeeping, and administrative
services which are to be provided by the Adviser to the
Fund under the Administrative Services Agreement between
the Fund and the Adviser dated April 30, 1993, which was
approved on April 21, 1993, by the Fund's board of
directors, including all of the independent directors, at
the Fund's request the Adviser shall also furnish to the
Fund, at the expense of the Adviser, such competent
executive, statistical, administrative, internal
accounting and clerical services as may be required in
the judgment of the Directors of the Fund. These
services will include, among other things, the
maintenance (but not preparation) of the Fund's accounts
and records, and the preparation (apart from legal and
accounting costs) of all requisite corporate documents
such as tax returns and reports to the Securities and
Exchange Commission and Fund shareholders. The Adviser
also will furnish, at the Adviser's expense, such office
space, equipment and facilities as may be reasonably
requested by the Fund from time to time.
Except to the extent expressly assumed by the Adviser herein and
except to the extent required by law to be paid by the Adviser, the
Fund shall pay all costs and expenses in connection with the
operations and organization of the Fund. Without limiting the
generality of the foregoing, such costs and expenses payable by the
Fund include the following:
(a) all brokers' commissions, issue and transfer taxes, and other
costs chargeable to the Fund and any Portfolio of the Fund in
connection with securities transactions to which the Fund or
the Portfolio is a party or in connection with securities
owned by the Fund or the Portfolio of the Fund;
(b) the fees, charges and expenses of any independent
public accountants, custodian, depository, dividend
disbursing agent, dividend reinvestment agent,
<PAGE>
transfer agent, registrar, independent pricing
services and legal counsel for the Fund or for the
Portfolio of the Fund;
(c) the interest on indebtedness, if any, incurred by
the Fund or the Portfolio of the Fund;
(d) the taxes, including franchise, income, issue, transfer,
business license, and other corporate fees payable by the Fund
or the Portfolio of the Fund to federal, state, county, city,
or other governmental agents;
(e) the fees and expenses involved in maintaining the registration
and qualification of the Fund and of its shares under laws
administered by the Securities and Exchange Commission or
under other applicable regulatory requirements, including the
preparation and printing of prospectuses and statements of
additional information;
(f) the compensation and expenses of its Directors;
(g) the costs of printing and distributing reports,
notices of shareholders' meetings, proxy
statements, dividend notices, prospectuses,
statements of additional information and other
communications to the Fund's shareholders, as well
as all expenses of shareholders' meetings and
Directors' meetings;
(h) all costs, fees or other expenses arising in
connection with the organization and filing of the
Fund's Articles of Incorporation, including its
initial registration and qualification under the
1940 Act and under the Securities Act of 1933, as
amended, the initial determination of its tax
status and any rulings obtained for this purpose,
the initial registration and qualification of its
securities under the laws of any state and the
approval of the Fund's operations by any other
federal or state authority;
(i) the expenses of repurchasing and redeeming shares
of the Fund;
(j) insurance premiums;
(k) the costs of designing, printing, and issuing
certificates representing shares of beneficial
interest of the Fund;
(l) extraordinary expenses, including fees and
disbursements of Fund counsel, in connection with
<PAGE>
litigation by or against the Fund or the Portfolio
of the Fund;
(m) premiums for the fidelity bond maintained by the Fund pursuant
to Section 17(g) of the 1940 Act and rules promulgated
thereunder (except for such premiums as may be allocated to
the Adviser as an insured thereunder);
(n) association and institute dues; and
(o) the expenses, if any, of distributing shares of the Fund paid
by the Fund pursuant to a Plan and Agreement of Distribution
adopted under Rule 12b-1 of the Investment Company Act of
1940.
3. Use of Affiliated Companies. In connection with the
rendering of the services required to be provided by the
Adviser under this Agreement, the Adviser may, to the
extent it deems appropriate and subject to compliance
with the requirements of applicable laws and regulations,
and upon receipt of written approval of the Fund, make
use of its affiliated companies and their employees;
provided that the Adviser shall supervise and remain
fully responsible for all such services in accordance
with and to the extent provided by this Agreement and
that all costs and expenses associated with the providing
of services by any such companies or employees and
required by this Agreement to be borne by the Adviser
shall be borne by the Adviser or its affiliated
companies.
4. Compensation of the Adviser. For the services to be
rendered and the charges and expenses to be assumed by
the Adviser hereunder, the Fund shall pay to the Adviser
an advisory fee which will be computed on a daily basis
and paid as of the last day of each month, using for each
daily calculation the most recently determined net asset
value of the Portfolio of the Fund, as determined by
valuations made in accordance with the Fund's procedure
for calculating the Portfolio's net asset value as
described in the Fund's Prospectus and/or Statement of
Additional Information. On an annual basis the advisory
fee applicable to the Portfolio shall be as follows:
0.55% on the first $300 million of each Portfolio's
average net assets as so determined, 0.45% of each
Portfolio's average net asset value for net assets in
excess of $300 million but not more than $500 million,
and 0.35% of the Portfolio's average net assets in excess
of $500 million.
During any period when the determination of the Portfolio's net
asset value is suspended by the Directors of the Fund, the net asset
value of a share of the
<PAGE>
Portfolio as of the last business day prior to such suspension
shall, for the purpose of this Paragraph 4, be deemed to be the net
asset value at the close of each succeeding business day until it is
again determined. However, no such fee shall be paid to the Adviser
with respect to any assets of the Fund or the Portfolio thereof
which may be invested in any other investment company for which the
Adviser serves as investment adviser. The fee provided for hereunder
shall be prorated in any month in which this Agreement is not in
effect for the entire month.
If, in any given year, the sum of the Portfolio's expenses exceeds
the most restrictive state imposed annual expense limitation, the
Adviser will be required to reimburse the Portfolio for such excess
expenses promptly. Interest, taxes and extraordinary items such as
litigation costs are not deemed expenses for purposes of this
paragraph and shall be borne by the Fund or the Portfolio in any
event. Expenditures, including costs incurred in connection with the
purchase or sale of portfolio securities, which are capitalized in
accordance with generally accepted accounting principles applicable
to investment companies, are accounted for as capital items and
shall not be deemed to be expenses for purposes of this paragraph.
5. Avoidance of Inconsistent Positions and Compliance with
Laws. In connection with purchases or sales of securities for
the investment portfolio of the Fund, neither the Adviser
nor its officers or employees will act as a principal or
agent for any party other than the Fund or the Portfolio
of the Fund or receive any commissions. The Adviser will
comply with all applicable laws in acting hereunder
including, without limitation, the 1940 Act; the
Investment Advisers Act of 1940, as amended; and all
rules and regulations duly promulgated under the
foregoing.
6. Duration and Termination. This Agreement shall become
effective as of the date it is approved by a majority of
the outstanding voting securities of the Portfolio of the
Fund, and unless sooner terminated as hereinafter
provided, shall remain in force for an initial term
ending two years from the date of execution, and from
year to year thereafter, but only as long as such
continuance is specifically approved at least annually
(i) by a vote of a majority of the outstanding voting
securities of the Portfolio of the Fund or by the
Directors of the Fund, and (ii) by a majority of the
Directors of the Fund who are not interested persons of
the Adviser or the Fund by votes cast in person at a
<PAGE>
meeting called for the purpose of voting on such
approval.
This Agreement may, on 60 days' prior written notice, be terminated
without the payment of any penalty, by the Directors of the Fund, or
by the vote of a majority of the outstanding voting securities of
the Fund or the Portfolio of the Fund, as the case may be, or by the
Adviser. This Agreement shall immediately terminate in the event of
its assignment, unless an order is issued by the Securities and
Exchange Commission conditionally or unconditionally exempting such
assignment from the provisions of Section 15(a) of the 1940 Act, in
which event this Agreement shall remain in full force and effect
subject to the terms and provisions of said order. In interpreting
the provisions of this paragraph 6, the definitions contained in
Section 2(a) of the 1940 Act and the applicable rules under the 1940
Act (particularly the definitions of "interested person,"
"assignment" and "vote of a majority of the outstanding voting
securities") shall be applied.
The Adviser agrees to furnish to the Directors of the Fund such
information on an annual basis as may reasonably be necessary to
evaluate the terms of this Agreement.
Termination of this Agreement shall not affect the right of the
Adviser to receive payments on any unpaid balance of the
compensation described in paragraph 3 earned prior to such
termination.
7. Non-Exclusive Services. The Adviser shall, during the
term of this Agreement, be entitled to render investment
advisory services to others, including, without
limitation, other investment companies with similar
objectives to those of the Fund or the Portfolio of the
Fund. The Adviser may, when it deems such to be
advisable, aggregate orders for its other customers
together with any securities of the same type to be sold
or purchased for the Fund or the Portfolio of the Fund in
order to obtain best execution and lower brokerage
commissions. In such event, the Adviser shall allocate
the shares so purchased or sold, as well as the expenses
incurred in the transaction, in the manner it considers
to be most equitable and consistent with its fiduciary
obligations to the Fund or the Portfolio of the Fund and
the Adviser's other customers.
8. Liability. The Adviser shall have no liability to the
Fund or any Portfolio of the Fund or to the Fund's
shareholders or creditors, for any error of judgment,
mistake of law, or for any loss arising out of any
investment, nor for any other act or omission, in the
<PAGE>
performance of its obligations to the Fund or any Portfolio of the
Fund not involving willful misfeasance, bad faith, gross negligence
or reckless disregard of its obligations and duties hereunder.
9. Miscellaneous Provisions.
Notice. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other
party at such address as such other party may designate for the
receipt of such notice.
Amendments Hereof. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument
in writing signed by the Fund and the Adviser, and no material
amendment of this Agreement shall be effective unless approved by
(1) the vote of a majority of the Directors of the Fund, including a
majority of the Directors who are not parties to this Agreement or
interested persons of any such party cast in person at a meeting
called for the purpose of voting on such amendment, and (2) the vote
of a majority of the outstanding voting securities of the Portfolio
of the Fund; provided, however, that this paragraph shall not
prevent any immaterial amendment(s) to this Agreement, which
amendment(s) may be made without shareholder approval, if such
amendment(s) are made with the approval of (1) the Directors and (2)
a majority of the Directors of the Fund who are not interested
persons of the Adviser or the Fund.
Severability. Each provision of this Agreement is intended to be
severable. If any provision of this Agreement shall be held illegal
or made invalid by a court decision, statute, rule or otherwise,
such illegality or invalidity shall not affect the validity or
enforceability of the remainder of this Agreement.
Headings. The headings in this Agreement are inserted for
convenience and identification only and are in no way intended to
describe, interpret, define or limit the size, extent or intent of
this Agreement or any provision hereof.
Applicable Law. This Agreement shall be construed in accordance with
the laws of the State of Colorado and the applicable provisions of
the 1940 Act. To the extent that the applicable laws of the State of
Colorado, or any of the provisions herein, conflict with applicable
provisions of the 1940 Act, the latter shall control
<PAGE>
IN WITNESS WHEREOF, the Adviser and the Fund each has caused this
Agreement to be duly executed on its behalf by an officer thereunto duly
authorized, the day and year first above written.
INVESCO TAX-FREE INCOME FUNDS, INC.
ATTEST:
By: /s/ John M. Butler
---------------------
John M. Butler
/s/ Glen A. Payne President
- -----------------
Glen A. Payne
Secretary
INVESCO FUNDS GROUP, INC.
ATTEST:
By: /s/ Dan J. Hesser
---------------------
Dan J. Hesser
/s/ Glen A. Payne President
- -----------------
Glen A. Payne
Secretary
Amendment to Investment Advisory Agreement
This is an Amendment to the Investment Advisory Agreement made and entered
into between INVESCO Tax-Free Income Funds, Inc., a Maryland corporation (the
"Company"), and INVESCO Funds Group, Inc., a Delaware corporation ("IFG"), as of
the 30th day of April, 1993 (the "Agreement").
WHEREAS, the Company desires to have IFG perform investment advisory,
statistical, research, and certain administrative and clerical services with
respect to management of the assets of the Company allocable to the INVESCO
Tax-Free Intermediate Bond Fund of the Company, and IFG is willing and able to
perform such services on the terms and conditions set forth in the Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in the Agreement, it is agreed that the terms and conditions of the
Agreement shall be applicable to the Company's assets allocable to the INVESCO
Tax-Free Intermediate Bond Fund, to the same extent as if the INVESCO Tax-Free
Intermediate Bond Fund were to be added to the definition of "Portfolio" as
utilized in the Agreement, and that INVESCO Tax-Free Intermediate Bond Fund
shall pay IFG a fee for services provided to it by IFG under the Agreement as
follows: 0.50% of the first $300 million of the Portfolio's average net assets;
0.40% of the next $200 million of the Portfolio's average net assets; and 0.30%
of the Portfolio's average net assets over $500 million.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to
Agreement on this 20th day of October, 1993.
INVESCO TAX-FREE INCOME FUNDS, INC.
By: /s/ Dan J. Hesser
------------------------
Dan J. Hesser, President
ATTEST:
/s/ Glen A. Payne
- ------------------------
Glen A. Payne, Secretary
(CORPORATE SEAL) INVESCO FUNDS GROUP, INC.
By: /s/ Ronald L. Grooms
------------------------
ATTEST: Ronald L. Grooms, Senior
Vice President
/s/ Glen A. Payne
- ------------------------
Glen A. Payne, Secretary
(CORPORATE SEAL)
SUB-ADVISORY AGREEMENT
AGREEMENT made this 30th day of April, 1993, by and between INVESCO Funds
Group, Inc. ("INVESCO"), a Delaware corporation, and INVESCO Trust Company, a
Colorado corporation ("the Sub-Adviser").
W I T N E S S E T H:
WHEREAS, INVESCO TAX-FREE INCOME FUNDS, INC. (the "Company") is engaged in
business as a diversified, open-end management investment company registered
under the Investment Company Act of 1940, as amended (hereinafter referred to as
the "Investment Company Act") and has one class of shares (the "Shares"), which
may be divided into additional series, each representing an interest in a
separate portfolio of investments, with the first such series being designated
the INVESCO Tax-Free Long-Term Bond Fund (the "Fund"); and
WHEREAS, INVESCO and the Sub-Adviser are engaged in rendering investment
advisory services and are registered as investment advisers under the Investment
Advisers Act of 1940; and
WHEREAS, INVESCO has entered into an Investment Advisory Agreement with
the Company (the "INVESCO Investment Advisory Agreement"), pursuant to which
INVESCO is required to provide investment advisory services to the Company, and,
upon receipt of written approval of the Company, is authorized to retain
companies which are affiliated with INVESCO to provide such services; and
WHEREAS, the Sub-Adviser is willing to provide investment advisory
services to the Company on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, INVESCO and the Sub-Adviser hereby agree as follows:
ARTICLE I
DUTIES OF THE SUB-ADVISER
INVESCO hereby employs the Sub-Adviser to act as investment adviser to the
Company and to furnish the investment advisory services described below, subject
to the broad supervision of INVESCO and Board of Directors of the Company, for
the period and on the terms and conditions set forth in this Agreement. The
Sub-Adviser hereby accepts such assignment and agrees during such period, at its
own expense, to render such services and to assume the obligations herein set
forth for the compensation provided for herein. The Sub-Adviser shall for all
purposes herein be deemed to be an independent contractor and, unless otherwise
expressly provided or authorized herein, shall have no authority to act for
<PAGE>
or represent the Company in any way or otherwise be deemed an agent
of the Company.
The Sub-Adviser hereby agrees to manage the investment operations of the
Funds, subject to the supervision of the Company's directors (the "Directors")
and INVESCO. Specifically, the Sub-Adviser agrees to perform the following
services:
(a) to manage the investment and reinvestment of all the assets, now or
hereafter acquired, of the Fund, and to execute all purchases and
sales of portfolio securities;
(b) to maintain a continuous investment program for the Fund, consistent
with (i) the Fund's investment policies as set forth in the
Company's Articles of Incorporation, Bylaws, and Registration
Statement, as from time to time amended, under the Investment
Company Act of 1940, as amended (the "1940 Act"), and in any
prospectus and/or statement of additional information of the Fund,
as from time to time amended and in use under the Securities Act of
1933, as amended, and (ii) the Company's status as a regulated
investment company under the Internal Revenue Code of 1986, as
amended;
(c) to determine what securities are to be purchased or sold for the
Fund, unless otherwise directed by the Directors of the Company or
INVESCO, and to execute transactions accordingly;
(d) to provide to the Fund the benefit of all of the investment analysis
and research, the reviews of current economic conditions and trends,
and the consideration of long-range investment policy now or
hereafter generally available to investment advisory customers of
the Sub-Adviser;
(e) to determine what portion of the Fund should be invested in the
various types of securities authorized for purchase by the Fund; and
(f) to make recommendations as to the manner in which voting rights,
rights to consent to Fund action and any other rights pertaining to
the Fund's portfolio securities shall be exercised.
With respect to execution of transactions for the Fund, the Sub-Adviser is
authorized to employ such brokers or dealers as may, in the Sub-Adviser's best
judgment, implement the policy of the Fund to obtain prompt and reliable
execution at the most favorable price obtainable. In assigning an execution or
negotiating the commission to be paid therefor, the Sub-Adviser is authorized to
consider the full range and quality of a broker's services which benefit the
<PAGE>
Fund, including but not limited to research and analytical capabilities,
reliability of performance, and financial soundness and responsibility. Research
services prepared and furnished by brokers through which the Sub-Adviser effects
securities transactions on behalf of the Funds may be used by the Sub-Adviser in
servicing all of its accounts, and not all such services may be used by the
Sub-Adviser in connection with the Fund. In the selection of a broker or dealer
for execution of any negotiated transaction, the Sub-Adviser shall have no duty
or obligation to seek advance competitive bidding for the most favorable
negotiated commission rate for such transaction, or to select any broker solely
on the basis of its purported or "posted" commission rate for such transaction,
provided, however, that the Sub-Adviser shall consider such "posted" commission
rates, if any, together with any other information available at the time as to
the level of commissions known to be charged on comparable transactions by other
qualified brokerage firms, as well as all other relevant factors and
circumstances, including the size of any contemporaneous market in such
securities, the importance to the Fund of speed, efficiency, and confidentiality
of execution, the execution capabilities required by the circumstances of the
particular transactions, and the apparent knowledge or familiarity with sources
from or to whom such securities may be purchased or sold. Where the commission
rate reflects services, reliability and other relevant factors in addition to
the cost of execution, the Sub-Adviser shall have the burden of demonstrating
that such expenditures were bona fide and for the benefit of the Fund.
ARTICLE II
ALLOCATION OF CHARGES AND EXPENSES
The Sub-Adviser assumes and shall pay for maintaining the staff and
personnel necessary to perform its obligations under this Agreement, and shall,
at its own expense, provide the office space, equipment and facilities necessary
to perform its obligations under this Agreement. Except to the extent expressly
assumed by the Sub-Adviser herein and except to the extent required by law to be
paid by the Sub-Adviser, INVESCO and/or the Company shall pay all costs and
expenses in connection with the operations of the Fund.
ARTICLE III
COMPENSATION OF THE SUB-ADVISER
For the services rendered, facilities furnished, and expenses assumed by
the Sub-Adviser, INVESCO shall pay to the Sub-Adviser a fee, computed daily and
paid as of the last day of each month, using for each daily calculation the most
recently determined net asset value of the Fund, as determined by a valuation
made in accordance with the Fund's procedures for calculating its net asset
value as described in the Fund's Prospectus and/or Statement of Additional
Information. The advisory fee to the Sub-Adviser shall be computed at the annual
rate of 0.25% of the Fund's daily net assets up to $200 million, and 0.20% of
the Fund's daily net assets in excess of $200 million. During any period when
the determination of the Fund's net asset value is suspended by the Directors of
<PAGE>
the Fund, the net asset value of a share of the Fund as of the last business day
prior to such suspension shall, for the purpose of this Article III, be deemed
to be the net asset value at the close of each succeeding business day until it
is again determined. However, no such fee shall be paid to the Sub-Adviser with
respect to any assets of the Fund which may be invested in any other investment
company for which the Sub-Adviser serves as investment adviser or sub-adviser.
The fee provided for hereunder shall be prorated in any month in which this
Agreement is not in effect for the entire month. The Sub-Adviser shall be
entitled to receive fees hereunder only for such periods as the INVESCO
Investment Advisory Agreement remains in effect.
ARTICLE IV
ACTIVITIES OF THE SUB-ADVISER
The services of the Sub-Adviser to the Fund are not to be deemed to be
exclusive, the Sub-Adviser and any person controlled by or under common control
with the Sub-Adviser (for purposes of this Article IV referred to as
"affiliates") being free to render services to others. It is understood that
directors, officers, employees and shareholders of the Fund are or may become
interested in the Sub-Adviser and its affiliates, as directors, officers,
employees and shareholders or otherwise and that directors, officers, employees
and shareholders of the Sub-Adviser, INVESCO and their affiliates are or may
become interested in the Fund as directors, officers and employees.
ARTICLE V
AVOIDANCE OF INCONSISTENT POSITIONS AND COMPLIANCE WITH APPLICABLE LAWS
In connection with purchases or sales of securities for the investment
portfolio of the Fund, neither the Sub-Adviser nor any of its directors,
officers or employees will act as a principal or agent for any party other than
the Fund or receive any commissions. The Sub-Adviser will comply with all
applicable laws in acting hereunder including, without limitation, the 1940 Act;
the Investment Advisers Act of 1940, as amended; and all rules and regulations
duly promulgated under the foregoing.
ARTICLE VI
DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall become effective as of the date it is approved by a
majority of the outstanding voting securities of the Fund, and shall remain in
force for an initial term of two years from the date of execution, and from year
to year thereafter until its termination in accordance with this Article VI, but
only so long as such continuance is specifically approved at least annually by
<PAGE>
(i) the Directors of the Fund, or by the vote of a majority of the outstanding
voting securities of the Fund, and (ii) a majority of those Directors who are
not parties to this Agreement or interested persons of any such party cast in
person at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by INVESCO, the Fund by vote of the Directors of the Company, or by
vote of a majority of the outstanding voting securities of the Fund, or by the
Sub-Adviser. A termination by INVESCO or the Sub-Adviser shall require sixty
days' written notice to the other party and to the Company, and a termination by
the Company shall require such notice to each of the parties. This Agreement
shall automatically terminate in the event of its assignment to the extent
required by the Investment Company Act of 1940 and the Rules thereunder.
The Sub-Adviser agrees to furnish to the Directors of the Company such
information on an annual basis as may reasonably be necessary to evaluate the
terms of this Agreement.
Termination of this Agreement shall not affect the right of the
Sub-Adviser to receive payments on any unpaid balance of the compensation
described in Article III hereof earned prior to such termination.
ARTICLE VII
AMENDMENTS OF THIS AGREEMENT
No provision of this Agreement may be orally changed or discharged, but
may only be modified by an instrument in writing signed by the Sub-Adviser and
INVESCO. In addition, no amendment to this Agreement shall be effective unless
approved by (1) the vote of a majority of the Directors of the Company,
including a majority of the Directors who are not parties to this Agreement or
interested persons of any such party cast in person at a meeting called for the
purpose of voting on such amendment and (2) the vote of a majority of the
outstanding voting securities of the Fund (other than an amendment which can be
effective without shareholder approval under applicable law).
ARTICLE VIII
DEFINITIONS OF CERTAIN TERMS
In interpreting the provisions of this Agreement, the terms "vote of a
majority of the outstanding voting securities," "assignments," "affiliated
person" and "interested person," when used in this Agreement, shall have the
respective meanings specified in the Investment Company Act and the Rules and
Regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under said Act.
<PAGE>
ARTICLE IX
GOVERNING LAW
This Agreement shall be construed in accordance with the laws of the State
of Colorado and the applicable provisions of the Investment Company Act. To the
extent that the applicable laws of the State of Colorado, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
ARTICLE X
MISCELLANEOUS
Notice. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for the receipt of such notice.
Severability. Each provision of this Agreement is intended to be
severable. If any provision of this Agreement shall be held illegal or made
invalid by a court decision, statute, rule or otherwise, such illegality or
invalidity shall not affect the validity or enforceability of the remainder of
this Agreement.
Headings. The headings in this Agreement are inserted for convenience and
identification only and are in no way intended to describe, interpret, define or
limit the size, extent or intent of this Agreement or any provision hereof.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
INVESCO FUNDS GROUP, INC.
ATTEST:
By: /s/ Dan J. Hesser
-----------------
Dan J. Hesser
/s/ Glen A. Payne President
- -----------------
Glen A. Payne
Secretary
INVESCO TRUST COMPANY
ATTEST:
By: /s/ R. Dalton Sim
-----------------
R. Dalton Sim
/s/ Glen A. Payne President
- -----------------
Glen A. Payne
Secretary
Amendment to Sub-Advisory Agreement
This is an Amendment to the Sub-Advisory Agreement made and entered into
between INVESCO Trust Company, a Colorado corporation (the "Trust Company"), and
INVESCO Funds Group, Inc., a Delaware corporation ("IFG"), as of the 30th day of
April, 1993 (the "Sub- Agreement").
WHEREAS, IFG has entered into an Investment Advisory Agreement with the
INVESCO Tax-Free Income Funds, Inc. (the "Company"), pursuant to which IFG is
required to provide investment advisory services to specific Funds making up the
Company, and, upon receipt of written approval of the Company, is authorized to
retain companies which are affiliated with IFG to provide such services; and
WHEREAS, the Company and IFG desire to have the Trust Company perform
investment advisory services with respect to management of the assets of the
Company allocable to the INVESCO Tax-Free Intermediate Bond Fund of the Company,
and the Trust Company is willing and able to perform such services on the terms
and conditions set forth in the Sub-Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in the Sub-Agreement, it is agreed that the terms and conditions of
the Sub-Agreement shall be applicable to the Company's assets allocable to the
INVESCO Tax-Free Intermediate Bond Fund, to the same extent as if the INVESCO
Tax- Free Intermediate Bond Fund were to be added to the definition of "Fund" as
utilized in the Sub-Agreement, except that the Trust Company shall receive as
compensation for services rendered by it under the Sub-Agreement to the INVESCO
Tax-Free Intermediate Bond Fund a fee based on the average daily net assets of
that fund, calculated daily at the applicable annual rate and paid monthly as
follows: 0.25% of the first $300 million of the average net assets; 0.20% on the
next $200 million of the average net assets; and 0.15% on the average net assets
greater than $500 million.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to
Agreement on this 20th day of October, 1993.
INVESCO TRUST COMPANY
By: /s/ R. Dalton Sim
------------------------
R. Dalton Sim, President
ATTEST:
/s/ Glen A. Payne
- ------------------------
Glen A. Payne, Secretary
(CORPORATE SEAL)
INVESCO FUNDS GROUP, INC.
By: /s/ Ronald L. Grooms
------------------------
ATTEST: Ronald L. Grooms, Senior
Vice President
/s/ Glen A. Payne
- ------------------------
Glen A. Payne, Secretary
(CORPORATE SEAL)
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made this 30th day of April, 1993 between INVESCO
TAX-FREE INCOME FUNDS, INC., a Maryland corporation (the "Fund"), and INVESCO
FUNDS GROUP, INC., a Delaware corporation (the "Underwriter").
W I T N E S S E T H:
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), as a diversified, open-end management
investment company and currently proposes to have one class of shares (the
"Shares") which currently consists of one Series, and may be divided into
additional series (the "Series"), each representing an interest in a separate
portfolio of investments, and it is in the interest of the Fund to offer the
Shares for sale continuously; and
WHEREAS, the Underwriter is engaged in the business of selling shares of
investment companies either directly to investors or through other securities
dealers; and
WHEREAS, the Fund and the Underwriter wish to enter into an agreement with
each other with respect to the continuous offering of the Shares of each Series
in order to promote growth of the Fund and facilitate the distribution of the
Shares;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto as follows:
1. The Fund hereby appoints the Underwriter its agent for
the distribution of Shares of the Series in jurisdictions
wherein such Shares may legally be offered for sale;
provided, however, that the Fund in its absolute
discretion may (a) issue or sell Shares of the Series
directly to purchasers, or (b) issue or sell Shares of
the Series to the shareholders of any other Series or to
the shareholders of any other investment company, for
which the Underwriter or any affiliate thereof shall act
as exclusive distributor, who wish to exchange all or a
portion of their investment in Shares of the Series or in
shares of such other investment company for the Shares of
the Series. Notwithstanding any other provision hereof,
the Fund may terminate, suspend or withdraw the offering
of Shares whenever, in its sole discretion, it deems such
action to be desirable. The Fund reserves the right to
reject any subscription in whole or in part for any
reason.
2. The Underwriter hereby agrees to serve as agent for the distribution
of the Shares and agrees that it will use its best efforts with
reasonable promptness to sell such part of the authorized Shares
remaining unissued as from
<PAGE>
time to time shall be effectively registered under the Securities
Act of 1933, as amended (the "1933 Act"), at such prices and on such
terms as hereinafter set forth, all subject to applicable federal
and state securities laws and regulations. Nothing herein shall be
construed to prohibit the Underwriter from engaging in other related
or unrelated businesses.
3. In addition to serving as the Fund's agent in the
distribution of the Shares, the Underwriter shall also
provide to the holders of the Shares certain maintenance,
support or similar services ("Shareholder Services").
Such services shall include, without limitation,
answering routine shareholder inquiries regarding the
Fund, assisting shareholders in considering whether to
change dividend options and helping to effectuate such
changes, arranging for bank wires, and providing such
other services as the Fund may reasonably request from
time to time. It is expressly understood that the
Underwriter or the Fund may enter into one or more
agreements with third parties pursuant to which such
third parties may provide the Shareholder Services
provided for in this paragraph. Nothing herein shall be
construed to impose upon the Underwriter any duty or
expense in connection with the services of any registrar,
transfer agent or custodian appointed by the Fund, the
computation of the asset value or offering price of
Shares, the preparation and distribution of notices of
meetings, proxy soliciting material, annual and periodic
reports, dividends and dividend notices, or any other
responsibility of the Fund.
4. Except as otherwise specifically provided for in this
Agreement, the Underwriter shall sell the Shares directly
to purchasers, or through qualified broker-dealers or
others, in such manner, not inconsistent with the
provisions hereof and the then effective Registration
Statement of the Fund under the 1933 Act (the
"Registration Statement") and related Prospectus (the
"Prospectus") and Statement of Additional Information
("SAI") of the Fund as the Underwriter may determine from
time to time; provided that no broker-dealer or other
person shall be appointed or authorized to act as agent
of the Fund without the prior consent of the directors
(the "Directors") of the Fund. The Underwriter will
require each broker-dealer to conform to the provisions
hereof and of the Registration Statement (and related
Prospectus and SAI) at the time in effect under the 1933
Act with respect to the public offering price of the
Shares of any Series. The Fund will have no obligation
to pay any commissions or other remuneration to such
broker-dealers.
<PAGE>
5. The Shares of the Series offered for sale or sold by the
Underwriter shall be offered or sold at the net asset
value per share determined in accordance with the then
current Prospectus and/or SAI relating to the sale of the
Shares of the Series except as departure from such prices
shall be permitted by the then current Prospectus and/or
SAI of the Fund, in accordance with applicable rules and
regulations of the Securities and Exchange Commission.
The price the Fund shall receive for the Shares of each
Series purchased from the Fund shall be the net asset
value per share of such Share, determined in accordance
with the Prospectus and/or SAI applicable to the sale of
the Shares of the Series.
6. Except as may be otherwise agreed to by the Fund, the
Underwriter shall be responsible for issuing and
delivering such confirmations of sales made by it
pursuant to this Agreement as may be required; provided,
however, that the Underwriter or the Fund may utilize the
services of other persons or entities believed by it to
be competent to perform such functions. Shares shall be
registered on the transfer books of the Fund in such
names and denominations as the Underwriter may specify.
7. The Fund will execute any and all documents and furnish
any and all information which may be reasonably necessary
in connection with the qualification of the Shares for
sale (including the qualification of the Fund as a
broker-dealer where necessary or advisable) in such
states as the Underwriter may reasonably request (it
being understood that the Fund shall not be required
without its consent to comply with any requirement which
in the opinion of the Directors of the Fund is unduly
burdensome). The Underwriter, at its own expense, will
effect all qualifications of itself as broker or dealer,
or otherwise, under all applicable state or Federal laws
required in order that the Shares may be sold in such
states or jurisdictions as the Fund may reasonably
request.
8. The Fund shall prepare and furnish to the Underwriter
from time to time the most recent form of the Prospectus
and/or SAI of the Fund and/or of the Series of the Fund.
The Fund authorizes the Underwriter to use the Prospectus
and/or SAI, in the forms furnished to the Underwriter
from time to time, in connection with the sale of the
Shares of the Fund and/or of the Series of the Fund. The
Fund will furnish to the Underwriter from time to time
such information with respect to the Fund, the Series,
and the Shares as the Underwriter may reasonably request
for use in connection with the sale of the Shares. The
Underwriter agrees that it will not use or distribute or
authorize the use, distribution or dissemination by
broker-dealers or others in connection with the sale of
<PAGE>
the Shares any statements, other than those contained in a current
Prospectus and/or SAI of the Fund or the Series, except such
supplemental literature or advertising as shall be lawful under
Federal and state securities laws and regulations, and that it will
promptly furnish the Fund with copies of all such material.
9. The Underwriter will not make, or authorize any broker-dealers or
others to make any short sales of the Shares of the Fund or
otherwise make any sales of the Shares unless such sales are made in
accordance with a then current Prospectus and/or SAI relating to the
sale of the applicable Shares.
10. The Underwriter, as agent of and for the account of the
Fund, may cause the redemption or repurchase of the
Shares at such prices and upon such terms and conditions
as shall be specified in a then current Prospectus and/or
SAI. In selling, redeeming or repurchasing the Shares
for the account of the Fund, the Underwriter will in all
respects conform to the requirements of all state and
federal laws and the Rules of Fair Practice of the
National Association of Securities Dealers, Inc.,
relating to such sale, redemption or repurchase, as the
case may be. The Underwriter will observe and be bound
by all the provisions of the Articles of Incorporation or
Bylaws of the Fund and of any provisions in the
Registration Statement, Prospectus and SAI, as such may
be amended or supplemented from time to time, notice of
which shall have been given to the Underwriter, which at
the time in any way require, limit, restrict or prohibit
or otherwise regulate any action on the part of the
Underwriter.
11. (a) The Fund shall indemnify, defend and hold harmless
the Underwriter, its officers and directors and any
person who controls the Underwriter within the
meaning of the 1933 Act, from and against any and
all claims, demands, liabilities and expenses
(including the cost of investigating or defending
such claims, demands or liabilities and any
attorney fees incurred in connection therewith)
which the Underwriter, its officers and directors
or any such controlling person, may incur under the
federal securities laws, the common law or
otherwise, arising out of or based upon any alleged
untrue statement of a material fact contained in
the Registration Statement or any related
Prospectus and/or SAI or arising out of or based
upon any alleged omission to state a material fact
required to be stated therein or necessary to make
the statements therein not misleading.
<PAGE>
Notwithstanding the foregoing, this indemnity agreement, to
the extent that it might require indemnity of the Underwriter
or any person who is an officer, director or controlling
person of the Underwriter, shall not inure to the benefit of
the Underwriter or officer, director or controlling person
thereof unless a court of competent jurisdiction shall
determine, or it shall have been determined by controlling
precedent, that such result would not be against public policy
as expressed in the federal securities laws and in no event
shall anything contained herein be so construed as to protect
the Underwriter against any liability to the Fund, the
Directors or the Fund's shareholders to which the Underwriter
would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of its duties
or by reason of its reckless disregard of its obligations and
duties under this Agreement.
This indemnity agreement is expressly conditioned upon the
Fund's being notified of any action brought against the
Underwriter, its officers or directors or any such controlling
person, which notification shall be given by letter or by
telegram addressed to the Fund at its principal address in
Denver, Colorado and sent to the Fund by the person against
whom such action is brought within ten (10) days after the
summons or other first legal process shall have been served
upon the Underwriter, its officers or directors or any such
controlling person. The failure to notify the Fund of any such
action shall not relieve the Fund from any liability which it
may have to the person against whom such action is brought by
reason of any such alleged untrue statement or omission
otherwise than on account of the indemnity agreement contained
in this paragraph. The Fund shall be entitled to assume the
defense of any suit brought to enforce such claim, demand, or
liability, but in such case the defense shall be conducted by
counsel chosen by the Fund and approved by the Underwriter,
which approval shall not be unreasonably withheld. If the Fund
elects to assume the defense of any such suit and retain
counsel approved by the Underwriter, the defendant or
defendants in such suit shall bear the fees and expenses of an
additional counsel obtained by any of them. Should the Fund
elect not to assume the defense of any such suit, or should
the Underwriter not approve of counsel chosen by the Fund, the
Fund will reimburse the Underwriter, its officers and
directors or the controlling person or persons named as
<PAGE>
defendant or defendants in such suit, for the reasonable
fees and expenses of any counsel retained by the Underwriter
or them. In addition, the Underwriter shall have the right
to employ counsel to represent it, its officers and directors
and any such controlling person who may be subject to
liability arising out of any claim in respect of which
indemnity may be sought by the Underwriter against the Fund
hereunder if in the reasonable judgment of the Underwriter it
is advisable for the Underwriter, its officers and directors
or such controlling person to be represented by separate
counsel, in which event the reasonable fees and expenses of
such separate counsel shall be borne by the Fund. This
indemnity agreement and the Fund's representations and
warranties in this Agreement shall remain operative and in
full force and effect and shall survive the delivery of any of
the Shares as provided in this Agreement. This indemnity
agreement shall inure exclusively to the benefit of the
Underwriter and its successors, the Underwriter's officers and
directors and their respective estates and any such
controlling person and their successors and estates. The Fund
shall promptly notify the Underwriter of the commencement of
any litigation or proceeding against it in connection with the
issue and sale of the Shares.
(b) The Underwriter agrees to indemnify, defend and
hold harmless the Fund, its Directors and any
person who controls the Fund within the meaning of
the 1933 Act, from and against any and all claims,
demands, liabilities and expenses (including the
cost of investigating or defending such claims,
demands or liabilities and any attorney fees
incurred in connection therewith) which the Fund,
its Directors or any such controlling person may
incur under the Federal securities laws, the common
law or otherwise, but only to the extent that such
liability or expense incurred by the Fund, its
Directors or such controlling person resulting from
such claims or demands shall arise out of or be
based upon (a) any alleged untrue statement of a
material fact contained in information furnished in
writing by the Underwriter to the Fund specifically
for use in the Registration Statement or any
related Prospectus and/or SAI or shall arise out of
or be based upon any alleged omission to state a
material fact in connection with such information
required to be stated in the Registration Statement
or the related Prospectus and/or SAI or necessary
to make such information not misleading and (b) any
alleged act or omission on the Underwriter's part
<PAGE>
as the Fund's agent that has not been expressly
authorized by the Fund in writing.
Notwithstanding the foregoing, this indemnity agreement, to
the extent that it might require indemnity of the Fund or any
Director or controlling person of the Fund, shall not inure to
the benefit of the Fund or Director or controlling person
thereof unless a court of competent jurisdiction shall
determine, or it shall have been determined by controlling
precedent, that such result would not be against public policy
as expressed in the federal securities laws and in no event
shall anything contained herein be so construed as to protect
any Director of the Fund against any liability to the Fund or
the Fund's shareholders to which the Director would otherwise
be subject by reason of willful misfeasance, bad faith or
gross negligence or reckless disregard of the duties involved
in the conduct of his office.
This indemnity agreement is expressly conditioned upon the
Underwriter's being notified of any action brought against the
Fund, its Directors or any such controlling person, which
notification shall be given by letter or telegram addressed to
the Underwriter at its principal office in Denver, Colorado,
and sent to the Underwriter by the person against whom such
action is brought, within ten (10) days after the summons or
other first legal process shall have been served upon the
Fund, its Directors or any such controlling person. The
failure to notify the Underwriter of any such action shall not
relieve the Underwriter from any liability which it may have
to the person against whom such action is brought by reason of
any such alleged untrue statement or omission otherwise than
on account of the indemnity agreement contained in this
paragraph. The Underwriter shall be entitled to assume the
defense of any suit brought to enforce such claim, demand, or
liability, but in such case the defense shall be conducted by
counsel chosen by the Underwriter and approved by the Fund,
which approval shall not be unreasonably withheld. If the
Underwriter elects to assume the defense of any such suit and
retain counsel approved by the Fund, the defendant or
defendants in such suit shall bear the fees and expenses of an
additional counsel obtained by any of them. Should the
Underwriter elect not to assume the defense of any such suit,
or should the Fund not approve of counsel chosen by the
Underwriter, the Underwriter will reimburse the Fund, its
Directors or the controlling person or persons named as
defendant or defendants in such suit, for the reasonable fees
<PAGE>
and expenses of any counsel retained by the Fund or them. In
addition, the Fund shall have the right to employ counsel to
represent it, its Directors and any such controlling person
who may be subject to liability arising out of any claim in
respect of which indemnity may be sought by the Fund against
the Underwriter hereunder if in the reasonable judgment of the
Fund it is advisable for the Fund, its Directors or such
controlling person to be represented by separate counsel, in
which event the reasonable fees and expenses of such separate
counsel shall be borne by the Underwriter. This indemnity
agreement and the Underwriter's representations and warranties
in this Agreement shall remain operative and in full force and
effect and shall survive the delivery of any of the Shares as
provided in this Agreement. This indemnity agreement shall
inure exclusively to the benefit of the Fund and its
successors, the Fund's Directors and their respective estates
and any such controlling person and their successors and
estates. The Underwriter shall promptly notify the Fund of the
commencement of any litigation or proceeding against it in
connection with the issue and sale of the Shares.
12. The Fund will pay or cause to be paid (a) expenses
(including the fees and disbursements of its own counsel)
of any registration of the Shares under the 1933 Act, as
amended, (b) expenses incident to the issuance of the
Shares, and (c) expenses (including the fees and
disbursements of its own counsel) incurred in connection
with the preparation, printing and distribution of the
Fund's Prospectuses, SAIs, and periodic and other reports
sent to holders of the Shares in their capacity as such.
The Underwriter shall prepare and provide necessary
copies of all sales literature subject to the Fund's
approval thereof.
13. This Agreement shall become effective as of the date it
is approved by a majority vote of the Directors of the
Fund, as well as a majority vote of the Directors who,
except for their positions as Directors of the Fund, are
not "interested persons" (as defined in the Investment
Company Act) of the Fund, and shall continue in effect
for an initial term of two years from the date of
execution, and from year to year thereafter, but only so
long as such continuance is specifically approved at
least annually (a)(i) by a vote of the Directors of the
Fund or (ii) by a vote of a majority of the outstanding
voting securities of the Fund, and (b) by a vote of a
majority of the Directors of the Fund who, except for
their positions as Directors of the Fund, are not
<PAGE>
"interested persons," as defined in the Investment Company Act, of
the Fund cast in person at a meeting for the purpose of voting on
this Agreement.
Either party hereto may terminate this Agreement on any date,
without the payment of a penalty, by giving the other party at least
60 days' prior written notice of such termination specifying the
date fixed therefor. In particular, this Agreement may be terminated
at any time, without payment of any penalty, by vote of a majority
of the members of the Directors of the Fund or by a vote of a
majority of the outstanding voting securities of the Fund on not
more than 60 days' written notice to the Underwriter.
Without prejudice to any other remedies of the Fund provided for in
this Agreement or otherwise, the Fund may terminate this Agreement
at any time immediately upon the Underwriter's failure to fulfill
any of the obligations of the Underwriter hereunder.
14. The Underwriter expressly agrees that, notwithstanding anything to
the contrary herein, or in any applicable law, that it will look
solely to the assets of the Fund for any obligations of the Fund
hereunder and nothing herein shall be construed to create any
personal liability on the part of any Director or any shareholder of
the Fund.
15. This Agreement shall automatically terminate in the event of its
assignment. In interpreting the provisions of this Section 15, the
definition of "assignment" contained in the Investment Company Act
shall be applied.
16. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate for the receipt of such
notice.
17. No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by
the Fund and the Underwriter and, if applicable, approved in the
manner required by the Investment Company Act.
18. Each provision of this Agreement is intended to be severable. If any
provision of this Agreement shall be held illegal or made invalid by
a court decision, statute, rule or otherwise, such illegality or
invalidity shall not affect the validity or enforceability of the
remainder of this Agreement.
<PAGE>
19. This Agreement and the application and interpretation
hereof shall be governed exclusively by the laws of the
State of Colorado.
IN WITNESS WHEREOF, the Fund and the Underwriter have each caused this
Agreement to be executed on its behalf by an officer thereunto duly authorized
and the Underwriter has caused its corporate seal to be affixed as of the day
and year first above written.
INVESCO TAX-FREE INCOME FUNDS, INC.
ATTEST:
By: /s/ John M. Butler
------------------
John M. Butler
/s/ Glen A. Payne President
- -----------------
Glen A. Payne
Secretary
INVESCO FUNDS GROUP, INC.
ATTEST:
By: /s/ Dan J. Hesser
------------------
Dan J. Hesser
/s/ Glen A. Payne President
- -----------------
Glen A. Payne
Secretary
TRANSFER AGENCY AGREEMENT
AGREEMENT made as of this 30th day of April, 1993, between INVESCO
Tax-Free Income Funds, Inc., a Maryland corporation, having its principal office
and place of business at 7800 East Union Avenue, Denver, Colorado, 80237
(hereinafter referred to as the "Fund") and INVESCO Funds Group, Inc., a
Delaware corporation, having its principal place of business at 7800 E. Union
Avenue, Denver, CO 80237 (hereinafter referred to as the "Transfer Agent").
WITNESSETH:
That for and in consideration of mutual promises hereinafter set forth,
the Fund and the Transfer Agent agree as follows:
1. Definitions. Whenever used in this Agreement, the
following words and phrases, unless the context
otherwise requires, shall have the following meanings:
(a) "Authorized Person" shall be deemed to include the
President, any Vice President, the Secretary,
Treasurer, or any other person, whether or not any
such person is an officer or employee of the Fund,
duly authorized to give Oral Instructions and
Written Instructions on behalf of the Fund as
indicated in a certification as may be received by
the Transfer Agent from time to time;
(b) "Certificate" shall mean any notice, instruction or other
instrument in writing, authorized or required by this
Agreement to be given to the Transfer Agent, which is actually
received by the Transfer Agent and signed on behalf of the
Fund by any two officers thereof;
(c) "Commission" shall have the meaning given it in the
1940 Act;
(d) "Custodian" refers to the custodian of all of the
securities and other moneys owned by the Fund;
(e) "Oral Instructions" shall mean verbal instructions actually
received by the Transfer Agent from a person reasonably
believed by the Transfer Agent to be an Authorized Person;
(f) "Prospectus" shall mean the currently effective
prospectus relating to the Fund's Shares
registered under the Securities Act of 1933;
(g) "Shares" refers to the shares of common stock, $.01
par value, of the Fund;
<PAGE>
(h) "Shareholder" means a record owner of Shares;
(i) "Written Instructions" shall mean a written communication
actually received by the Transfer Agent where the receiver is
able to verify with a reasonable degree of certainty the
authenticity of the sender of such communication; and
(j) The "1940 Act" refers to the Investment Company Act of 1940
and the Rules and Regulations thereunder, all as amended from
time to time.
2. Representation of Transfer Agent. The Transfer Agent does hereby
represent and warrant to the Fund that it has an effective
registration statement on SEC Form TA-1 and, accordingly, has duly
registered as a transfer agent as provided in Section 17A(c) of the
Securities Exchange Act of 1934.
3. Appointment of the Transfer Agent. The Fund hereby appoints and
constitutes the Transfer Agent as transfer agent for all of the
Shares of the Fund authorized as of the date hereof, and the
Transfer Agent accepts such appointment and agrees to perform the
duties herein set forth. If the board of directors of the Fund
hereafter reclassifies the Shares, by the creation of one or more
additional series or otherwise, the Transfer Agent agrees that it
will act as transfer agent for the Shares so reclassified on the
terms set forth herein.
4. Compensation.
(a) The Fund will initially compensate the Transfer Agent for its
services rendered under this Agreement in accordance with the
fees set forth in the Fee Schedule annexed hereto and
incorporated herein.
(b) The parties hereto will agree upon the compensation for acting
as transfer agent for any series of Shares hereafter
designated and established at the time that the Transfer Agent
commences serving as such for said series, and such agreement
shall be reflected in a Fee Schedule for that series, dated
and signed by an authorized officer of each party hereto, to
be attached to this Agreement.
(c) Any compensation agreed to hereunder may be adjusted from time
to time by attaching to this Agreement a revised Fee Schedule,
dated and signed by an authorized officer of each party
hereto, and a certified copy of the resolution of the board of
directors of the Fund authorizing such revised Fee Schedule.
(d) The Transfer Agent will bill the Fund as soon as practicable
after the end of each calendar month, and said billings will
be detailed in accordance with the Fee Schedule for the Fund.
The Fund will promptly pay to the Transfer Agent the amount of
such billing.
<PAGE>
5. Documents. In connection with the appointment of the Transfer Agent,
the Fund shall, on or before the date this Agreement goes into
effect, file with the Transfer Agent the following documents:
(a) A certified copy of the Articles of Incorporation of the Fund,
including all amendments thereto, as then in effect;
(b) A certified copy of the Bylaws of the Fund, as then in effect;
(c) Certified copies of the resolutions of the board of directors
authorizing this Agreement and designating Authorized Persons
to give instructions to the Transfer Agent;
(d) A specimen of the certificate for Shares of the Fund in the
form approved by the board of directors, with a certificate of
the Secretary of the Fund as to such approval;
(e) All account application forms and other documents relating to
Shareholder accounts;
(f) A certified list of Shareholders of the Fund with the name,
address and tax identification number of each Shareholder, and
the number of Shares held by each, certificate numbers and
denominations (if any certificates have been issued), lists of
any accounts against which stops have been placed, together
with the reasons for said stops, and the number of Shares
redeemed by the Fund;
(g) Copies of all agreements then in effect between the Fund and
any agent with respect to the issuance, sale, or cancellation
of Shares; and
(h) An opinion of counsel for the Fund with respect to the
validity of the Shares.
6. Further Documentation. The Fund will also furnish from time to time
the following documents:
(a) Each resolution of the board of directors authorizing the
original issue of Shares;
(b) Each Registration Statement filed with the Commission, and
amendments and orders with respect thereto, in effect with
respect to the sale of Shares of the Fund;
(c) A certified copy of each amendment to the Articles of
Incorporation and the Bylaws of the Fund;
<PAGE>
(d) Certified copies of each resolution of the board of directors
designating Authorized Persons to give instructions to the
Transfer Agent;
(e) Certificates as to any change in any officer, director, or
Authorized Person of the Fund;
(f) Specimens of all new certificates for Shares accompanied by
the Fund's resolutions of the board of directors approving
such forms; and
(g) Such other certificates, documents or opinions as may mutually
be deemed necessary or appropriate for the Transfer Agent in
the proper performance of its duties.
7. Certificates for Shares and Records Pertaining Thereto.
(a) At the expense of the Fund, the Transfer Agent shall maintain
an adequate supply of blank share certificates to meet the
Transfer Agent's requirements therefor. Such share
certificates shall be properly signed by facsimile. The Fund
agrees that, notwithstanding the death, resignation, or
removal of any officer of the Fund whose signature appears on
such certificates, the Transfer Agent may continue to
countersign certificates which bear such signatures until
otherwise directed by the Fund.
(b) The Transfer Agent agrees to prepare, issue and mail
certificates as requested by the Shareholders for Shares of
the Fund in accordance with the instructions of the Fund and
to confirm such issuance to the Shareholder and the Fund or
its designee.
(c) The Fund hereby authorizes the Transfer Agent to issue
replacement share certificates in lieu of certificates which
have been lost, stolen or destroyed, without any further
action by the board of directors or any officer of the Fund,
upon receipt by the Transfer Agent of properly executed
affidavits or lost certificate bonds, in form satisfactory to
the Transfer Agent, with the Fund and the Transfer Agent as
obligees under any such bond.
(d) The Transfer Agent shall also maintain a record of each
certificate issued, the number of Shares represented thereby
and the holder of record. The Transfer Agent shall further
maintain a stop transfer record on lost and/or replaced
certificates.
(e) The Transfer Agent may establish such additional rules and
regulations governing the transfer or registration of
certificates for Shares as it may deem advisable and
consistent with such rules and regulations generally adopted
by transfer agents.
<PAGE>
8. Sale of Fund Shares.
(a) Whenever the Fund or its authorized agent shall sell or cause
to be sold any Shares, the Fund or its authorized agent shall
provide or cause to be provided to the Transfer Agent
information including: (i) the number of Shares sold, trade
date, and price; (ii) the amount of money to be delivered to
the Custodian for the sale of such Shares; (iii) in the case
of a new account, a new account application or sufficient
information to establish an account.
(b) The Transfer Agent will, upon receipt by it of a check or
other payment identified by it as an investment in Shares of
the Fund and drawn or endorsed to the Transfer Agent as agent
for, or identified as being for the account of, the Fund,
promptly deposit such check or other payment to the
appropriate account postings necessary to reflect the
investment. The Transfer Agent will notify the Fund, or its
designee, and the Custodian of all purchases and related
account adjustments.
(c) Upon receipt of the notification required under paragraph (a)
hereof and the notification from the Custodian that such money
has been received by it, the Transfer Agent shall issue to the
purchaser or his authorized agent such Shares as he is
entitled to receive, based on the appropriate net asset value
of the Fund's Shares, determined in accordance with applicable
federal law or regulation, as described in the Prospectus for
the Fund. In issuing Shares to a purchaser or his authorized
agent, the Transfer Agent shall be entitled to rely upon the
latest written directions, if any, previously received by the
Transfer Agent from the purchaser or his authorized agent
concerning the delivery of such Shares.
(d) The Transfer Agent shall not be required to issue any Shares
of the Fund where it has received Written Instructions from
the Fund or written notification from any appropriate federal
or state authority that the sale of the Shares of the Fund has
been suspended or discontinued, and the Transfer Agent shall
be entitled to rely upon such Written Instructions or written
notification.
(e) Upon the issuance of any Shares of the Fund in accordance with
the foregoing provision of this Article, the Transfer Agent
shall not be responsible for the payment of any original issue
or other taxes required to be paid by the Fund in connection
with such issuance.
9. Returned Checks. In the event that any check or other order for the
payment of money is returned unpaid for any reason, the Transfer
Agent will: (i) give prompt notice of such return to the Fund or its
designee; (ii) place a stop transfer order against all Shares issued
or held on deposit as a result of such check or order; (iii) in the
case of any Shareholder who has obtained redemption checks, place a
<PAGE>
stop payment order on the checking account on which such checks are
issued; and (iv) take such other steps as the Transfer Agent may, in
its discretion, deem appropriate or as the Fund or its designee may
instruct.
10. Redemptions.
(a) Redemptions By Mail or In Person. Shares of the Fund will be
redeemed upon receipt by the Transfer Agent of: (i) a written
request for redemption, signed by each registered owner
exactly as the Shares are registered; (ii) certificates
properly endorsed for any Shares for which certificates have
been issued; (iii) signature guarantees to the extent required
by the Transfer Agent as described in the Prospectus for the
Fund; and (iv) any additional documents required by the
Transfer Agent for redemption by corporations, executors,
administrators, trustees and guardians.
(b) Wire Orders or Telephone Redemptions. The Transfer Agent will,
consistent with procedures which may be established by the
Fund from time to time for redemption by wire or telephone,
upon receipt of such a wire order or telephone redemption
request, redeem Shares and transmit the proceeds of such
redemption to the redeeming Shareholder as directed. All wire
or telephone redemptions will be subject to such additional
requirements as may be described in the Prospectus for the
Fund. Both the Fund and the Transfer Agent reserve the right
to modify or terminate the procedures for wire order or
telephone redemptions at any time.
(c) Processing Redemptions. Upon receipt of all necessary
information and documentation relating to a redemption, the
Transfer Agent will issue to the Custodian an advice setting
forth the number of Shares of the Fund received by the
Transfer Agent for redemption and that such shares are
valid and in good form for redemption. The Transfer Agent
shall, upon receipt of the moneys paid to it by the Custodian
for the redemption of Shares, pay such moneys to the
Shareholder, his authorized agent or legal representative.
11. Transfers and Exchanges. The Transfer Agent is authorized to review
and process transfers of Shares of the Fund and to the extent, if
any, permitted in the Prospectus for the Fund, exchanges between the
Fund and other mutual funds advised by INVESCO Funds Group, Inc., on
the records of the Fund maintained by the Transfer Agent. If Shares
to be transferred are represented by outstanding certificates, the
Transfer Agent will, upon surrender to it of the certificates in
proper form for transfer, and upon cancellation thereof, countersign
and issue new certificates for a like number of Shares and deliver
the same. If the Shares to be transferred are not represented by
outstanding certificates, the Transfer Agent will, upon an order
therefor by or on behalf of the registered holder thereof in proper
form, credit the same to the transferee on its books. If Shares
are to be exchanged for Shares of another mutual fund, the Transfer
<PAGE>
Agent will process such exchange in the same manner as a redemption
and sale of Shares, except that it may in its discretion waive
requirements for information and documentation.
12. Right to Seek Assurances. The Transfer Agent reserves the right to
refuse to transfer or redeem Shares until it is satisfied that the
requested transfer or redemption is legally authorized, and it shall
incur no liability for the refusal, in good faith, to make transfers
or redemptions which the Transfer Agent, in its judgment, deems
improper or unauthorized, or until it is satisfied that there is no
basis for any claims adverse to such transfer or redemption. The
Transfer Agent may, in effecting transfers, rely upon the provisions
of the Uniform Act for the Simplification of Fiduciary Security
Transfers or the Uniform Commercial Code, as the same may be amended
from time to time, which in the opinion of legal counsel for the
Fund or of its own legal counsel protect it in not requiring certain
documents in connection with the transfer or redemption of Shares of
the Fund, and the Fund shall indemnify the Transfer Agent for any
act done or omitted by it in reliance upon such laws or opinions of
counsel to the Fund or of its own counsel.
13. Distributions.
(a) The Fund will promptly notify the Transfer Agent of the
declaration of any dividend or distribution. The Fund shall
furnish to the Transfer Agent a resolution of the board of
directors of the Fund certified by the Secretary authorizing
the declaration of dividends and authorizing the Transfer
Agent to rely on Oral Instructions or a Certificate specifying
the date of the declaration of such dividend or distribution,
the date of payment thereof, the record date as of which
Shareholders entitled to payment shall be determined, the
amount payable per share to Shareholders of record as of
that date, and the total amount payable to the Transfer Agent
on the payment date.
(b) The Transfer Agent will, on or before the payable date of any
dividend or distribution, notify the Custodian of the
estimated amount of cash required to pay said dividend or
distribution, and the Fund agrees that, on or before the
mailing date of such dividend or distribution, it shall
instruct the Custodian to place in a dividend disbursing
account funds equal to the cash amount to be paid out. The
Transfer Agent, in accordance with Shareholder instructions,
will calculate, prepare and mail checks to, or (where
appropriate) credit such dividend or distribution to the
account of, Fund Shareholders, and maintain and safeguard all
underlying records.
(c) The Transfer Agent will replace lost checks upon receipt of
properly executed affidavits and maintain stop payment orders
against replaced checks.
<PAGE>
(d) The Transfer Agent will maintain all records necessary to
reflect the crediting of dividends which are reinvested in
Shares of the Fund.
(e) The Transfer Agent shall not be liable for any improper
payments made in accordance with the resolution of the board
of directors of the Fund.
(f) If the Transfer Agent shall not receive from the Custodian
sufficient cash to make payment to all Shareholders of the
Fund as of the record date, the Transfer Agent shall, upon
notifying the Fund, withhold payment to all Shareholders of
record as of the record date until such sufficient cash is
provided to the Transfer Agent.
14. Other Duties. In addition to the duties expressly provided for
herein, the Transfer Agent shall perform such other duties and
functions as are set forth in the Fee Schedules(s) hereto from time
to time.
15. Taxes. It is understood that the Transfer Agent shall file such
appropriate information returns concerning the payment of dividends
and capital gain distributions with the proper federal, state and
local authorities as are required by law to be filed by the Fund and
shall withhold such sums as are required to be withheld by
applicable law.
16. Books and Records.
(a) The Transfer Agent shall maintain records showing for each
investor's account the following: (i) names, addresses, tax
identifying numbers and assigned account numbers; (ii) numbers
of Shares held; (iii) historical information regarding the
account of each Shareholder, including dividends paid and date
and price of all transactions on a Shareholder's account; (iv)
any stop or restraining order placed against a Shareholder's
account; (v) information with respect to withholdings in the
case of a foreign account; (vi) any capital gain or dividend
reinvestment order, plan application, dividend address and
correspondence relating to the current maintenance of a
Shareholder's account; (vii) certificate numbers and
denominations for any Shareholders holding certificates; and
(viii) any information required in order for the Transfer
Agent to perform the calculations contemplated or required by
this Agreement.
(b) Any records required to be maintained by Rule 31a-1 under the
1940 Act will be preserved for the periods prescribed in Rule
31a-2 under the 1940 Act. Such records may be inspected by
the Fund at reasonable times. The Transfer Agent may, at its
option at any time, and shall forthwith upon the Fund's
demand, turn over to the Fund and cease to retain in the
Transfer Agent's files, records and documents created and
maintained by the Transfer Agent in performance of its
services or for its protection. At the end of the six-year
retention period, such records and documents will either
<PAGE>
be turned over to the Fund, or destroyed in accordance with
the Fund's authorization.
17. Shareholder Relations.
(a) The Transfer Agent will investigate all Shareholder inquiries
related to Shareholder accounts and respond promptly to
correspondence from Shareholders.
(b) The Transfer Agent will address and mail all communications to
Shareholders or their nominees, including proxy material and
periodic reports to Shareholders.
(c) In connection with special and annual meetings of
Shareholders, the Transfer Agent will prepare Shareholder
lists, mail and certify as to the mailing of proxy materials,
process and tabulate returned proxy cards, report on proxies
voted prior to meetings, and certify to the Secretary of the
Fund Shares to be voted at meetings.
18. Reliance by Transfer Agent; Instructions.
(a) The Transfer Agent shall be protected in acting upon any paper
or document believed by it to be genuine and to have been
signed by an Authorized Person and shall not be held to have
any notice of any change of authority of any person until
receipt of written certification thereof from the Fund. It
shall also be protected in processing Share certificates which
it reasonably believes to bear the proper manual or facsimile
signatures of the officers of the Fund and the proper
countersignature of the Transfer Agent.
(b) At any time the Transfer Agent may apply to any Authorized
Person of the Fund for Written Instructions, and, at the
expense of the Fund, may seek advice from legal counsel for
the Fund, with respect to any matter arising in connection
with this Agreement, and it shall not be liable for any action
taken or not taken or suffered by it in good faith in
accordance with such Written Instructions or with the opinion
of such counsel. In addition, the Transfer Agent, its
officers, agents or employees, shall accept instructions
or requests given to them by any person representing or acting
on behalf of the Fund only if said representative is known by
the Transfer Agent, its officers, agents or employees, to be
an Authorized Person. The Transfer Agent shall have no duty
or obligation to inquire into, nor shall the Transfer Agent be
responsible for, the legality of any act done by it upon
the request or direction of Authorized Persons of the Fund.
(c) Notwithstanding any of the foregoing provisions of this
Agreement, the Transfer Agent shall be under no duty or
obligation to inquire into, and shall not be liable for: (i)
<PAGE>
the legality of the issue or sale of any Shares of the Fund,
or the sufficiency of the amount to be received therefor;
(ii) the legality of the redemption of any Shares of the Fund,
or the propriety of the amount to be paid therefor; (iii)
the legality of the declaration of any dividend by the Fund,
or the legality of the issue of any Shares of the Fund in
payment of any stock dividend; or (iv) the legality of any
recapitalization or readjustment of the Shares of the Fund.
19. Standard of Care and Indemnification.
(a) The Transfer Agent may, in connection with this Agreement,
employ agents or attorneys in fact, and shall not be liable
for any loss arising out of or in connection with its actions
under this Agreement so long as it acts in good faith and with
due diligence, and is not negligent or guilty of any willful
misconduct.
(b) The Fund hereby agrees to indemnify and hold harmless the
Transfer Agent from and against any and all claims, demands,
expenses and liabilities (whether with or without basis in
fact or law) of any and every nature which the Transfer Agent
may sustain or incur or which may be asserted against the
Transfer Agent by any person by reason of, or as a result of:
(i) any action taken or omitted to be taken by the Transfer
Agent in good faith in reliance upon any Certificate,
instrument, order or stock certificate believed by it to be
genuine and to be signed, countersigned or executed by any
duly Authorized Person, upon the Oral Instructions or Written
Instructions of an Authorized Person of the Fund or upon the
opinion of legal counsel for the Fund or its own counsel; or
(ii) any action taken or omitted to be taken by the Transfer
Agent in connection with its appointment in good faith in
reliance upon any law, act, regulation or interpretation of
the same even though the same may thereafter have been
altered, changed, amended or repealed. However,
indemnification hereunder shall not apply to actions or
omissions of the Transfer Agent or its directors, officers,
employees or agents in cases of its own gross negligence,
willful misconduct, bad faith, or reckless disregard of its
or their own duties hereunder.
20. Affiliation Between Fund and Transfer Agent. It is understood that
the directors, officers, employees, agents and Shareholders of the
Fund, and the officers, directors, employees, agents and
shareholders of the Fund's investment adviser, INVESCO Funds Group,
Inc. (the "Adviser"), are or may be interested in the Transfer Agent
as directors, officers, employees, agents, shareholders, or
otherwise, and that the directors, officers, employees, agents or
shareholders of the Transfer Agent may be interested in the Fund as
directors, officers, employees, agents, shareholders, or otherwise,
or in the Adviser as officers, directors, employees, agents,
shareholders or otherwise.
<PAGE>
21. Term.
(a) This Agreement shall become effective on the date on which it
is approved by vote of a majority (as defined in the 1940 Act)
of the Fund's board of directors, including a majority of the
directors who are not interested persons of the Fund (as
defined in the 1940 Act), or the date on which the Transfer
Agent's registration statement on SEC Form TA-1 becomes
effective (whichever occurs later), and shall continue in
effect for an initial term of one year, and from year to year
thereafter, so long as such continuance is specifically
approved at least annually both: (i) by either the board of
directors or the vote of a majority of the outstanding voting
securities of the Fund; and (ii) by a vote of the majority of
the directors who are not interested persons of the Fund (as
defined in the 1940 Act) cast in person at a meeting called
for the purpose of voting upon such approval.
(b) Either of the parties hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the
date of such termination, which shall not be less than 60 days
after the date of receipt of such notice. In the event such
notice is given by the Fund, it shall be accompanied by a
resolution of the board of directors, certified by the
Secretary, electing to terminate this Agreement and
designating a successor transfer agent.
22. Amendment. This Agreement may not be amended or modified in any
manner except by a written agreement executed by both parties with
the formality of this Agreement, and (i) authorized or approved by
the resolution of the board of directors, including a majority of
the directors of the Fund who are not interested persons of the Fund
as defined in the 1940 Act, or (ii) authorized and approved by such
other procedures as may be permitted or required by the 1940 Act.
23. Subcontracting. The Fund agrees that the Transfer Agent may, in its
discretion, subcontract for certain of the services to be provided
hereunder; provided, however, that the transfer agent will be liable
to the Fund for any loss arising out of or in connection with the
actions of any subcontractor, if the subcontractor fails to act in
good faith and with due diligence or is negligent or guilty of any
willful misconduct.
24. Miscellaneous.
(a) Any notice and other instrument in writing, authorized or
required by this Agreement to be given to the Fund or the
Transfer Agent, shall be sufficiently given if addressed to
that party and mailed or delivered to it at its office set
forth below or at such other place as it may from time to time
designate in writing.
<PAGE>
To the Fund:
INVESCO Tax-Free Income Funds, Inc.
Post Office Box 173706
Denver, Colorado 80217-3706
Attention: John M. Butler, President
To the Transfer Agent:
INVESCO Funds Group, Inc.
Post Office Box 173706
Denver, Colorado 80217-3706
Attention: Dan J. Hesser, President
(b) This Agreement shall not be assignable and in the event of its
assignment (in the sense contemplated by the 1940 Act), it
shall automatically terminate.
(c) This Agreement shall be construed in accordance with the laws
of the State of Colorado.
(d) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original; but such
counterparts shall, together, constitute only one instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate officers thereunder duly authorized and
their respective corporate seals to be hereunto affixed, as of the day and year
first above written.
INVESCO TAX-FREE INCOME FUNDS, INC.
By: /s/ John M. Butler
-------------------------
John M. Butler, President
ATTEST:
/s/ Glen A. Payne
- ------------------------
Glen A. Payne, Secretary
INVESCO FUNDS GROUP, INC.
By: /s/ Dan J. Hesser
------------------------
Dan J. Hesser, President
ATTEST:
/s/ Glen A. Payne
- ------------------------
Glen A. Payne, Secretary
AMENDMENT NO. 2
to
FEE SCHEDULE
for
Services pursuant to a Transfer Agency Agreement, dated April 30, 1993
between INVESCO Tax-Free Income Funds, Inc. (the "Fund") and INVESCO Funds
Group, Inc. as Transfer Agent (the "Agreement").
Account Maintenance Charges. Fees are based on an annual charge set forth
below per shareholder account or omnibus account participant for account
maintenance, as described in the Agreement. This charge, in the amount of $26.00
per shareholder account per year, or in the case of omnibus accounts that are
invested in the Fund $26.00 per participant in such accounts per year, is
billable monthly at the rate of one-twelfth (1/12) of the annual fee. A charge
is made for an account in the month that is opens or closes, as well as in each
month which the account remains open, regardless of the account balance.
Expenses. The Fund shall not be liable for reimbursement to the Transfer
Agent of expenses incurred by it in the performance of services pursuant to the
Agreement, provided, however, that nothing herein or in the Agreement shall be
construed as affecting in any manner any obligations assumed by the Fund with
respect to expense payment or reimbursement pursuant to a separate written
agreement between the Fund and the Transfer Agent or any affiliate thereof.
Effective this 1st day of May, 1996.
INVESCO TAX-FREE INCOME FUNDS, INC.
By: /s/ Dan J. Hesser
------------------------
Dan J. Hesser, President
ATTEST:
/s/ Glen A. Payne
- ------------------------
Glen A. Payne, Secretary
INVESCO FUNDS GROUP, INC.
By: /s/ Ronald L. Grooms
--------------------
Ronald L. Grooms
Senior Vice President
ATTEST:
Glen A. Payne
- ------------------------
Glen A. Payne, Secretary
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT made as of the 30th day of April, 1993, in Denver, Colorado, by
and between INVESCO Tax-Free Income Funds, Inc., a Maryland corporation (the
"Fund"), and INVESCO Funds Group, Inc., a Delaware corporation (hereinafter
referred to as "INVESCO").
WHEREAS, the Fund is engaged in business as an open-end management
investment company, is registered as such under the Investment Company Act of
1940, as amended (the "Act"), and is authorized to issue shares representing
interests in the following portfolio of investment: the INVESCO Tax-Free
Long-Term Bond Fund (the "Portfolio"); and
WHEREAS, INVESCO is registered as an investment adviser under the
Investment Advisers Act of 1940, and engages in the business of acting as
investment adviser and providing certain other administrative, sub-accounting,
and recordkeeping services to certain investment companies, including the
Portfolio; and
WHEREAS, the Fund desires to retain INVESCO to render certain
administrative, sub-accounting, and recordkeeping services (the "Services") in
the manner and on the terms and conditions hereinafter set forth; and
WHEREAS, INVESCO desires to be retained to perform such
services on said terms and conditions;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the Fund and INVESCO agree as follows:
1. The Fund hereby retains INVESCO to provide, or, upon
receipt of written approval of the Fund arrange for other
companies, including affiliates of INVESCO, to provide to
the Portfolio: A) such sub-accounting and recordkeeping
services and functions as are reasonably necessary for
the operation of the Portfolio. Such services shall
include, but shall not be limited to, preparation and
maintenance of the following required books, records and
other documents: (1) journals containing daily itemized
records of all purchases and sales, and receipts and
deliveries of securities and all receipts and
disbursements of cash and all other debits and credits,
in the form required by Rule 31a-1(b)(1) under the Act;
(2) general and auxiliary ledgers reflecting all asset,
liability, reserve, capital, income and expense accounts,
in the form required by Rules 31a-1(b)(2)(i) - (iii)
under the Act; (3) a securities record or ledger
reflecting separately for each portfolio security as of
trade date all "long" and "short" positions carried by
the Portfolio for the account of the Portfolio, if any,
and showing the location of all securities long and the
off-setting position to all securities short, in the form
<PAGE>
required by Rule 31a-1(b)(3) under the Act; (4) a record of all
portfolio purchases or sales, in the form required by Rule
31a-1(b)(6) under the Act; (5) a record of all puts, calls, spreads,
straddles and all other options, if any, in which the Portfolio has
any direct or indirect interest or which the Portfolio has granted
or guaranteed, in the form required by Rule 31a-1(b)(7) under the
Act; (6) a record of the proof of money balances in all ledger
accounts maintained pursuant to this Agreement, in the form required
by Rule 31a-1(b)(8) under the Act; and (7) price make-up sheets and
such records as are necessary to reflect the determination of the
Portfolio's net asset value. The foregoing books and records shall
be maintained and preserved by INVESCO in accordance with and for
the time periods specified by applicable rules and regulations,
including Rule 31a-2 under the Act. All such books and records shall
be the property of the Fund and, upon request therefor, INVESCO
shall surrender to the Fund such of the books and records so
requested; and B) such sub-accounting, recordkeeping, and
administrative services and functions, which shall be furnished by
INVESCO's wholly-owned subsidiary, INVESCO Solutions, Inc., as are
reasonably necessary for the operation of Fund shareholder accounts
maintained by certain retirement plans and employee benefit plans
for the benefit of participants in such plans. Such services and
functions shall include, but shall not be limited to: (1)
establishing new retirement plan participant accounts; (2) receipt
and posting of weekly, bi-weekly and monthly retirement plan
contributions; (3) allocation of contributions to each participant's
individual Portfolio account; (4) maintenance of separate account
balances for each source of retirement plan money (i.e., Company,
Employee, Voluntary, Rollover) invested in the Portfolio; (5)
purchase, sale, exchange or transfer of monies in the retirement
plan as directed by the relevant party; (6) distribution of monies
for participant loans, hardships, terminations, death or disability
payments; (7) distribution of periodic payments for retired
participants; (8) posting of distributions of interest, dividends
and long-term capital gains to participants by the Portfolio; (9)
production of monthly, quarterly and/or annual statements of all
Portfolio activity for the relevant parties; (10) processing of
participant maintenance information for investment election changes,
address changes, beneficiary changes and Qualified Domestic
Relations Orders; (11) responding to telephone and written inquiries
concerning Portfolio investments, retirement plan provisions and
compliance issues; (12) performing discrimination testing and
counseling employers on cure options on failed tests; (13)
preparation of 1099R and W2P participant IRS tax forms; (14)
preparation of, or assisting in the preparation of, 5500 Series tax
forms, Summary Plan Descriptions and
<PAGE>
Determination Letters; and (15) reviewing legislative and IRS
changes to keep the retirement plan in compliance with applicable
law.
2. INVESCO shall, at its own expense, maintain such staff
and employ or retain such personnel and consult with such
other persons as it shall from time to time determine to
be necessary or useful to the performance of its
obligations under this Agreement. Without limiting the
generality of the foregoing, such staff and personnel
shall be deemed to include officers of INVESCO and
persons employed or otherwise retained by INVESCO to
provide or assist in providing the Services to the
Portfolio.
3. INVESCO shall, at its own expense, provide such office
space, facilities and equipment (including, but not
limited to, computer equipment, communication lines and
supplies) and such clerical help and other services as
shall be necessary to provide the Services to the
Portfolio. In addition, INVESCO may arrange on behalf of
the Portfolio to obtain pricing information regarding the
Portfolio's investment securities from such company or
companies as are approved by a majority of the Fund's
board of directors; and, if necessary, the Fund shall be
financially responsible to such company or companies for
the reasonable cost of providing such pricing
information.
4. The Fund will, from time to time, furnish or otherwise make
available to INVESCO such information relating to the business and
affairs of the Portfolios as INVESCO may reasonably require in order
to discharge its duties and obligations hereunder.
5. For the services rendered, facilities furnished, and
expenses assumed by INVESCO under this Agreement, the
Fund shall pay to the Investment Adviser a $10,000 per
year per Portfolio base fee, plus an additional fee,
computed on a daily basis and paid on a monthly basis.
For purposes of each daily calculation of this additional
fee, the most recently determined net asset value of the
Portfolio, as determined by a valuation made in
accordance with the Fund's procedure for calculating the
Portfolio's net asset value as described in the
Portfolio's Prospectus and/or Statement of Additional
Information, shall be used. The additional fee to
INVESCO under this Agreement shall be computed at the
annual rate of 0.015% of the Portfolio's daily net assets
as so determined. During any period when the
determination of the Fund's net asset value is suspended
by the directors of the Fund, the net asset value of a
share of that Portfolio as of the last business day prior
to such suspension shall, for the purpose of this
<PAGE>
Paragraph 5, be deemed to be the net asset value at the close of
each succeeding business day until it is again determined.
6. INVESCO will permit representatives of the Fund including
the Fund's independent auditors to have reasonable access
to the personnel and records of INVESCO in order to
enable such representatives to monitor the quality of
services being provided and the level of fees due INVESCO
pursuant to this Agreement. In addition, INVESCO shall
promptly deliver to the board of directors of the Fund
such information as may reasonably be requested from time
to time to permit the board of directors to make an
informed determination regarding continuation of this
Agreement and the payments contemplated to be made
hereunder.
7. This Agreement shall remain in effect until no later than
April 30, 1994 and from year to year thereafter provided
such continuance is approved at least annually by the
vote of a majority of the directors of the Fund who are
not parties to this Agreement or "interested persons" (as
defined in the Act) of any such party, which vote must be
cast in person at a meeting called for the purpose of
voting on such approval; and further provided, however,
that (a) the Fund may, at any time and without the
payment of any penalty, terminate this Agreement upon
thirty days written notice to the Investment Adviser; (b)
the Agreement shall immediately terminate in the event of
its assignment (within the meaning of the Act and the
Rules thereunder) unless the Board of Directors of the
Fund approves such assignment; and (c) the Investment
Adviser may terminate this Agreement without payment of
penalty on sixty days written notice to the Fund. Any
notice under this Agreement shall be given in writing,
addressed and delivered, or mailed postage prepaid, to
the other party at the principal office of such party.
8. This Agreement shall be construed in accordance with the laws of the
State of Colorado and the applicable provisions of the Act. To the
extent the applicable law of the State of Colorado or any of the
provisions herein conflict with the applicable provisions of the
Act, the latter shall control.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written.
INVESCO TAX-FREE INCOME FUNDS, INC.
By: /s/ John M. Butler
------------------
John M. Butler
President
INVESCO FUNDS GROUP, INC.
By: /s/ Dan J. Hesser
-----------------
Dan J. Hesser
President
Amendment to Administrative Services Agreement
This is an Amendment to the Administrative Services Agreement made and
entered into between INVESCO Tax-Free Income Funds, Inc., a Maryland corporation
(the "Company"), and INVESCO Funds Group, Inc., a Delaware corporation ("IFG"),
as of the 30th day of April, 1993 (the "Services Agreement").
WHEREAS, the Company desires to have IFG perform certain administrative,
sub-accounting, and recordkeeping services with respect to the assets of the
Company allocable to the INVESCO Tax- Free Intermediate Bond Fund of the
Company, and IFG is willing and able to perform such services on the terms and
conditions set forth in the Services Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in the Services Agreement, it is agreed that the terms and conditions
of the Services Agreement shall be applicable to the Company's assets allocable
to the INVESCO Tax- Free Intermediate Bond Fund, to the same extent as if the
INVESCO Tax-Free Intermediate Bond Fund were to be added to the definition of
"Portfolio" as utilized in the Services Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to
Agreement on this 20th day of October, 1993.
INVESCO TAX-FREE INCOME FUNDS, INC.
By: /s/ Dan J. Hesser
------------------------
Dan J. Hesser, President
ATTEST:
/s/ Glen A. Payne
- ------------------------
Glen A. Payne, Secretary
(CORPORATE SEAL)
INVESCO FUNDS GROUP, INC.
By: /s/ Ronald L. Grooms
------------------------
ATTEST: Ronald L. Grooms, Senior
Vice President
/s/ Glen A. Payne
- ------------------------
Glen A. Payne, Secretary
(CORPORATE SEAL)
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectuses and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 24 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated August 1, 1996, relating to the financial
statements and financial highlights appearing in the June 30, 1996 Annual Report
to Shareholders of INVESCO Tax-Free Income Funds, Inc., which is also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the heading "Financial Highlights" in the
Prospectuses and under the headings "Independent Accountants" and "Financial
Statements" in the Statement of Additional Information.
/s/ Price Waterhouse LLP
- ------------------------
Price Waterhouse LLP
Denver, Colorado
October 16, 1996
PLAN AND AGREEMENT OF DISTRIBUTION PURSUANT TO RULE 12b-1
PLAN AND AGREEMENT made as of the 30th day of April, 1993, by and between
INVESCO Tax-Free Income Funds, Inc., a Maryland corporation (hereinafter called
the "Company"), and INVESCO FUNDS GROUP, Inc., a Delaware corporation
("INVESCO").
WHEREAS, the Company engages in business as an open-end management
investment company, and is registered as such under the Investment Company Act
of 1940, as amended (the "Act"); and
WHEREAS, the Company desires to finance the distribution of the shares of
its class or series of common stock, which represents an interest in a portfolio
of investment, together with any additional such classes or series that may
hereafter be offered to the public (the "Fund"), in accordance with this Plan
and Agreement of Distribution pursuant to Rule 12b-1 under the Act (the "Plan
and Agreement"); and
WHEREAS, INVESCO desires to be retained to perform services in accordance
with such Plan and Agreement and on said terms and conditions; and
WHEREAS, this Plan and Agreement has been approved by a vote of the board
of directors of the Company, including a majority of the directors who are not
interested persons of the Company, as defined in the Act, and who have no direct
or indirect financial interest in the operation of this Plan and Agreement (the
"Disinterested Directors") cast in person at a meeting called for the purpose of
voting on this Plan and Agreement;
NOW, THEREFORE, the Company hereby adopts the Plan set forth herein and
the Company and INVESCO hereby enter into this Agreement pursuant to the Plan in
accordance with the requirements of Rule 12b-1 under the Act, and provide and
agree as follows:
1. The Plan is defined as those provisions of this document
by which the Company adopts a Plan pursuant to Rule 12b-1
under the Act and authorizes payments as described
herein. The Agreement is defined as those provisions of
this document by which the Company retains INVESCO to
provide distribution services beyond those required by
the General Distribution Agreement between the parties,
as are described herein. The Company may retain the Plan
notwithstanding termination of the Agreement.
Termination of the Plan will automatically terminate the
Agreement. Each Fund is hereby authorized to utilize the
assets of the Company to finance certain activities in
connection with distribution of the Company's shares.
2. Subject to the supervision of the board of directors, the
Company hereby retains INVESCO to promote the
distribution of the Company's shares of the Fund by
providing services and engaging in activities beyond
<PAGE>
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 render distribution and administrative
services in connection with the distribution of the shares of the
Fund; (b) the printing and distribution of reports and prospectuses
for the use of potential investors in the Fund; (c) the preparing
and distributing of sales literature; (d) the providing of
advertising and engaging in other promotional activities, including
direct mail solicitation, and television, radio, newspaper and other
media advertisements; and (e) the providing of such other services
and activities as may from time to time be agreed upon by the
Company. Such reports and prospectuses, sales literature,
advertising and promotional activities and other services and
activities may be prepared and/or conducted either by INVESCO's own
staff or third parties.
3. INVESCO hereby undertakes to use its best efforts to promote sales
of shares of the Fund to investors by engaging in those activities
specified in paragraph (2) above as may be necessary and as it from
time to time believes will best further sales of such shares.
4. The Fund is hereby authorized to expend, out of its
assets, on a monthly basis, and shall reimburse INVESCO
to such extent, for INVESCO's actual direct expenditures
incurred over a rolling twelve-month period in engaging
in the activities and providing the services specified in
paragraph (2) above, an amount computed at an annual rate
of .25 of 1% of the average daily net assets of the Fund
during the month. INVESCO shall not be entitled
hereunder to reimbursement for overhead expenses
(overhead expenses defined as customary overhead not
---
including the costs of INVESCO's personnel whose primary
responsibilities involve marketing of the INVESCO
Funds). Payments by a Fund hereunder, for any month, may
be made only with respect to expenditures incurred by
INVESCO during the rolling twelve-month period in which
that month falls, and any expenditures incurred in excess
of the limitation described above are not reimbursable.
No payments will be made by the Company hereunder after
the date of termination of the Plan and Agreement.
5. To the extent that expenditures made by INVESCO out of its own
resources to finance any activity primarily intended to result in
the sale of shares of the Fund, pursuant to this Plan and Agreement
or otherwise, may be deemed to constitute the indirect use of Fund
assets,
<PAGE>
assets, such indirect use of Fund assets is hereby authorized in
addition to, and not in lieu of, any other payments authorized under
this Plan and Agreement.
6. The Treasurer of INVESCO shall provide and the board of
directors of the Company shall review, at least
quarterly, a written report of all amounts expended
pursuant to the Plan and Agreement. Each such report
shall itemize the purposes and the amounts of such actual
expenses incurred for which reimbursement is being made,
and shall itemize the direct expenditure of amounts by
the Fund as authorized by the penultimate sentence of
paragraph (4) above. Upon request, but no less
frequently than annually, INVESCO shall provide to the
board of directors of the Company such information as may
reasonably be required for it to review the continuing
appropriateness of the Plan and Agreement.
7. This Plan and Agreement shall each become effective
immediately upon approval by a vote of a majority of the
outstanding voting securities of the Company as defined
in the Act, and shall continue in effect for a period of
one year from the date of such approval 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 the Fund, without penalty, by the vote of a
majority of the Disinterested Directors or by the vote of
a majority of the outstanding voting securities of the
Fund. INVESCO, or the Company, by vote of a majority of
the 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
the 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,
<PAGE>
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 the Company hereunder without approval of a
majority of the outstanding voting securities of the
Fund. All material amendments to the Plan and to the
Agreement must be approved by the vote of the board of
directors of the Company, including a majority of the
Disinterested Directors, cast in person at a meeting
called for the purpose of voting on such amendment.
10. To the extent that this Plan and Agreement constitutes a
Plan of Distribution adopted pursuant to Rule 12b-1 under
the Act it shall remain in effect as such, so as to
authorize the use by the 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 Fund 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 Fund hereunder, by the Company's board
of directors in accordance with the procedures set forth
in paragraph 7 above.
11. The Company shall preserve copies of this Plan and
Agreement and all reports made pursuant to paragraph 6
hereof, together with minutes of all board of directors
meetings at which the adoption, amendment or continuance
of the Plan were considered (describing the factors
considered and the basis for decision), for a period of
not less than six years from the date of this Plan and
Agreement, or any such reports or minutes, as the case
may be, the first two years in an easily accessible
place.
12. This Plan and Agreement shall be construed in accordance with the
laws of the State of Colorado and applicable provisions of the Act.
To the extent the applicable laws of the State of Colorado, or any
provisions herein, conflict with the applicable provisions of the
Act, the latter shall control.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Plan and Agreement on the day and year first above written.
INVESCO TAX-FREE INCOME FUNDS, INC.
By: /s/ John M. Butler, President
-----------------------------
John M. Butler, President
ATTEST: /s/ Glen A. Payne
------------------------
Glen A. Payne, Secretary
INVESCO FUNDS GROUP, INC.
By: /s/ Dan J. Hesser
------------------------
Dan J. Hesser, President
ATTEST: /s/ Glen A. Payne
-------------------------
Glen A. Payne, Secretary
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> INVESCO TAX-FREE LONG-TERM BOND FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 244618191
<INVESTMENTS-AT-VALUE> 249016883
<RECEIVABLES> 5932685
<ASSETS-OTHER> 96868
<OTHER-ITEMS-ASSETS> 49658
<TOTAL-ASSETS> 255096094
<PAYABLE-FOR-SECURITIES> 2373079
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1832957
<TOTAL-LIABILITIES> 4206036
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<PAID-IN-CAPITAL-COMMON> 243007677
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<NET-ASSETS> 250890058
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 14278601
<OTHER-INCOME> 0
<EXPENSES-NET> 2272831
<NET-INVESTMENT-INCOME> 12005770
<REALIZED-GAINS-CURRENT> 4270433
<APPREC-INCREASE-CURRENT> 1464794
<NET-CHANGE-FROM-OPS> 5735227
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 12005770
<DISTRIBUTIONS-OF-GAINS> 3155247
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7077690
<NUMBER-OF-SHARES-REDEEMED> 8237343
<SHARES-REINVESTED> 770451
<NET-CHANGE-IN-ASSETS> (3694230)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 3155906
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1389027
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2634025
<AVERAGE-NET-ASSETS> 253209482
<PER-SHARE-NAV-BEGIN> 15.07
<PER-SHARE-NII> 0.73
<PER-SHARE-GAIN-APPREC> 0.32
<PER-SHARE-DIVIDEND> 0.73
<PER-SHARE-DISTRIBUTIONS> 0.19
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.20
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> INVESCO TAX-FREE INTERMEDIATE BOND FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 4843744
<INVESTMENTS-AT-VALUE> 4853656
<RECEIVABLES> 82637
<ASSETS-OTHER> 10510
<OTHER-ITEMS-ASSETS> 74774
<TOTAL-ASSETS> 5021577
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 24553
<TOTAL-LIABILITIES> 24553
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5124207
<SHARES-COMMON-STOCK> 512816
<SHARES-COMMON-PRIOR> 506037
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (137095)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9912
<NET-ASSETS> 4997024
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 276055
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<EXPENSES-NET> 38625
<NET-INVESTMENT-INCOME> 237430
<REALIZED-GAINS-CURRENT> 410
<APPREC-INCREASE-CURRENT> 24371
<NET-CHANGE-FROM-OPS> 24781
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<DISTRIBUTIONS-OF-INCOME> 237430
<DISTRIBUTIONS-OF-GAINS> 010
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<NUMBER-OF-SHARES-SOLD> 653804
<NUMBER-OF-SHARES-REDEEMED> 669109
<SHARES-REINVESTED> 22084
<NET-CHANGE-IN-ASSETS> 89960
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (137505)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 26991
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 126277
<AVERAGE-NET-ASSETS> 5376314
<PER-SHARE-NAV-BEGIN> 9.70
<PER-SHARE-NII> 0.43
<PER-SHARE-GAIN-APPREC> 0.04
<PER-SHARE-DIVIDEND> 0.43
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</TABLE>
POWER OF ATTORNEY
The person executing this Power of Attorney hereby appoints Edward F.
O'Keefe and Glen A. Payne, or either of them, as his attorney-in-fact to execute
and to file such Registration Statements under federal and state securities laws
and such Post-Effective Amendments to such Registration Statements of the
hereinafter described entities as such attorney-in-fact, or either of them, may
deem appropriate:
INVESCO Diversified Funds, Inc.
INVESCO Dynamics Fund, Inc.
INVESCO Emerging Opportunity Funds, Inc.
INVESCO Growth Fund, Inc.
INVESCO Income Funds, Inc.
INVESCO Industrial Income Fund, Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Multiple Asset Funds, Inc.
INVESCO Specialty Funds, Inc.
INVESCO Strategic Portfolios, Inc.
INVESCO Tax-Free Income Funds, Inc.
INVESCO Value Trust
INVESCO Variable Investment Funds, Inc.
This Power of Attorney, which shall not be affected by the disability of
the undersigned, is executed and effective as of the 23rd day of July, 1996.
/s/ Hubert L. Harris, Jr.
-------------------------
Hubert L. Harris, Jr.
STATE OF GEORGIA )
)
COUNTY OF DEKALB )
SUBSCRIBED, SWORN TO AND ACKNOWLEDGED before me by Hubert L. Harris, Jr.,
as a director or trustee of each of the above-described entities, this 23rd day
of July, 1996.
/s/ Cecilia Underwood
--------------------------
Notary Public
My Commission Expires: October 14, 1997
