File No. 2-72165
As filed on ^ August 29, 1997
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. ^ 25 X
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. ^ 26 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)
- --- ^ on ________________, pursuant to paragraph (b)
- --- 60 days after filing pursuant to paragraph (a)(1)
^ X on November 1, 1997, 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, ^ 1997, was
filed on or about ^August 27, 1997.
Page 1 of 218
Exhibit index is located at page 95
<PAGE>
INVESCO TAX-FREE INCOME FUNDS, INC.
-----------------------------
CROSS-REFERENCE SHEET
Form N-1A
Item Caption
- --------- -------
Part A Prospectus
1....................... Cover Page
2....................... Annual Fund Expenses; Essential
Information
3....................... Financial Highlights; Fund Price
and Performance
4....................... Investment Objective and Strategy;
Investment Policies and Risks; The
^ Funds and ^ Their Management
5....................... The ^ Funds and ^ Their Management
5A...................... Not Applicable
6....................... Fund Services; Taxes, Dividends and
Capital Gain Distributions;
Additional Information
7....................... How ^ To Buy Shares; Fund Price and
Performance; Fund Services; The ^
Funds and ^ Their Management
8....................... Fund Services; How to Sell Shares
9....................... Not Applicable
Part B Statement of Additional Information
10....................... Cover Page
11....................... Table of Contents
12....................... The ^ Funds and ^ Their Management
-i-
<PAGE>
Form N-1A
Item Caption
- --------- -------
13....................... Investment ^ Policies and
Restrictions
14....................... The ^ Funds and ^ Their Management
15....................... The ^ Funds and ^ Their Management;
Additional Information
16....................... The ^ Funds and ^ Their Management;
Additional Information
17....................... Investment ^ Policies and
Restrictions
18....................... Additional Information
19....................... How Shares Can Be Purchased; How
Shares Are Valued; Services
Provided by the ^ Funds; 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.
-ii-
<PAGE>
PROSPECTUS
November 1, 1997
INVESCO TAX-FREE INCOME FUNDS, INC.
INVESCO Tax-Free Intermediate Bond Fund
INVESCO Tax-Free Long-Term Bond Fund
The two INVESCO Tax-Free Income Funds (the "Funds") described in this
Prospectus are actively managed to seek as high a level of current income exempt
from federal income taxes as is consistent with the preservation of capital. The
INVESCO Tax-Free Intermediate Bond Fund (the "Intermediate Bond Fund") invests
in a diversified portfolio of intermediate-term obligations, the interest on
which is exempt from federal income taxes. The INVESCO Tax-Free Long-Term Bond
Fund (the "Long-Term Bond Fund") invests in a diversified portfolio of long-term
obligations, the interest on which is exempt from federal income taxes. These
"municipal bonds" may be issued by states, territories, and possessions of the
United States and the District of Columbia, as well as their political
subdivisions, agencies, and instrumentalities. The dollar-weighted average
maturity of the obligations in the Intermediate Bond Fund's portfolio normally
will range from five to 10 years. The dollar weighted average maturity of the
obligations in the Long-Term Bond Fund's portfolio normally will be at least 10
years.
This Prospectus provides you with the basic information you should know
before investing in either of the Funds. You should read it and keep it for
future reference. A Statement of Additional Information containing further
information about the Funds, dated November 1, 1997, 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; or on the World
Wide Web: http://www.invesco.com.
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>
TABLE OF CONTENTS
ESSENTIAL INFORMATION........................................................6
ANNUAL FUND EXPENSES.........................................................7
FINANCIAL HIGHLIGHTS........................................................10
INVESTMENT OBJECTIVE AND STRATEGY...........................................14
INVESTMENT POLICIES AND RISKS...............................................15
THE FUNDS AND THEIR MANAGEMENT..............................................21
FUND PRICE AND PERFORMANCE..................................................24
HOW TO BUY SHARES...........................................................25
FUND SERVICES...............................................................29
HOW TO SELL SHARES..........................................................30
TAXES, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS.............................33
ADDITIONAL INFORMATION......................................................34
<PAGE>
ESSENTIAL INFORMATION
Investment Goal And Strategy. INVESCO Tax-Free Income Funds 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 and long-term obligations for the Intermediate Bond Fund and
Long-Term Bond Fund, respectively. The Funds invest primarily in municipal
obligations. The dollar-weighted average maturity for the Funds' portfolios
normally will range from three to ten years for the Intermediate Bond Fund and
ten years or longer for the Long-Term Bond Fund. There is no guarantee that the
Funds will meet their investment objectives. See "Investment Objective And
Strategy."
Designed For: Investors primarily seeking current income free from federal
income taxes. While not a complete investment program, the Funds may be a
valuable element of your investment portfolio. The Funds are not a suitable
investment for tax-sheltered retirement programs such as the IRA, SEP-IRA,
SIMPLE IRA, 401(k), Profit Sharing, Money Purchase Pension, or 403(b) plans.
Time Horizon. The Funds are managed for daily income, paid monthly.
Investors should not consider these Funds for the portion of their savings
devoted to capital growth.
Risks. The Funds use a moderate investment strategy, but their 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. Each Fund is a series of INVESCO Tax-Free
Income Funds, Inc. (the "Company"), a diversified, managed, no-load mutual fund.
Each Fund is owned by its shareholders. The Funds employ INVESCO Funds Group,
Inc. ("IFG"), founded in 1932, to serve as investment adviser, administrator and
transfer agent. INVESCO Trust Company ("INVESCO Trust"), founded in 1969, serves
as sub-adviser. Together, IFG and INVESCO Trust constitute "Fund Management."
Prior to September 29, 1997, INVESCO Funds Group, Inc. served as the Funds'
distributor. Effective September 29, 1997 INVESCO Distributors, Inc. ("IDI"),
founded in 1997 as a wholly-owned subsidiary of IFG, became the Funds'
distributor.
The Funds' 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 Funds And
Their Management."
IFG, INVESCO Trust and IDI are subsidiaries of AMVESCAP PLC, an
international investment management company that manages approximately $165
billion in assets. AMVESCAP PLC is based in London with money managers located
in Europe, North America, and the Far East.
<PAGE>
This Fund Offers all of the following services at no charge:
Telephone purchases
Telephone exchanges
Telephone redemptions
Automatic reinvestment of distributions
Regular investment plans, such as EasiVest (the Fund's automatic monthly
investment program), Direct Payroll Purchase, and Automatic
Monthly Exchange
Periodic withdrawal plans
See "How To Buy Shares" and "How To Sell Shares."
Minimum Initial Investment: $1,000 per Fund, which is waived for regular
investment plans, including EasiVest and Direct Payroll Purchase.
Minimum Subsequent Investment: $50 per Fund
ANNUAL FUND EXPENSES
The Funds are no-load; there are no fees to purchase, exchange or redeem
shares. Each 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, each Fund has operating expenses -- such as portfolio
management, accounting, shareholder servicing, maintenance of shareholder
accounts, and other expenses. These expenses are paid from each Fund's assets.
Lower expenses therefore benefit investors by increasing a Fund's total return.
We calculate annual operating expenses as a percentage of each Fund's
average annual net assets. To keep expenses competitive, the Funds' adviser and
sub-adviser voluntarily reimburse the Intermediate Bond Fund for amounts in
excess of 0.90% of average net assets and the Fund's adviser voluntarily
reimburses the Long-Term Bond Fund for amounts in excess of 0.90% of average
net assets.
<PAGE>
Annual Fund Operating Expenses
(as a percentage of average net assets)
Intermediate Long-Term
Bond Fund Bond Fund
------------ ---------
Management Fee 0.50% 0.55%
12b-1 Fees 0.25% 0.25%
Other Expenses (after
absorbed expenses)(1),(2) 0.09% 0.10%
Total Fund Operating Expenses
(after absorbed expenses)(1),(2) 0.84% 0.90%
(1) It should be noted that each Fund's actual total operating expenses
were lower than the figures shown because each Fund's custodian fees were
reduced under an expense offset arrangement. However, as a result of an SEC
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 reductions for expense offset arrangements for periods
prior to the fiscal year ended June 30, 1997. See "The Funds and Their
Management."
(2) Certain expenses of the Intermediate Bond Fund are being absorbed
voluntarily by IFG and INVESCO Trust and of the Long-Term Bond Fund by IFG. In
the absence of such absorbed expense, the Intermediate Bond Fund's "Other
Expenses" and "Total Fund Operating Expenses" would have been 1.68% and 2.43%,
respectively, and the Long-Term Bond Fund's "Other Expenses" and "Total Fund
Operating Expenses" would have been 0.25% and 1.05%, respectively, based on each
Fund's actual expenses for the fiscal year ended June 30, 1997.
Example
A shareholder would pay the following expenses on a $1,000 investment for
the periods shown, assuming a hypothetical 5% annual return and redemption at
the end of each time period. (Of course, actual operating expenses are paid from
each Fund's assets and are deducted from the amount of income available for
distribution to shareholders; they are not charged directly to shareholder
accounts.)
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Intermediate Bond Fund $9 $27 $47 $104
Long-Term Bond Fund $9 $29 $50 $111
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.
<PAGE>
For more information on each Fund's expenses, see "The Funds And Their
Management" and "How To Buy Shares -- Distribution Expenses."
Because each Fund pays a distribution fee, investors who own shares of the
Funds for a long period of time may pay more than the economic equivalent of the
maximum front-end sales charge permitted for mutual funds by the National
Association of Securities Dealers, Inc.
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
The following information has been audited by Price Waterhouse LLP,
independent accountants. This information should be read in conjunction with the
audited financial statements and the independent accountant's report thereon
appearing in the Company's 1997 Annual Report to Shareholders, which is
incorporated by reference into the Statement of Additional Information. Both are
available without charge by contacting IFG at the address or telephone number on
the cover of this Prospectus.
<TABLE>
<CAPTION>
Period
Ended
Year Ended June 30 June 30
--------------------------------------------- -------------
1997 1996 1995 1994^
Tax-Free Intermediate Bond Fund
<S> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value - Beginning of Period $9.74 $9.70 $9.52 $10.00
--------------------------------------------- -------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.41 0.43 0.44 0.19
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 0.16 0.04 0.18 (0.48)
--------------------------------------------- -------------
Total from Investment Operations 0.57 0.47 0.62 (0.29)
--------------------------------------------- -------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.41 0.43 0.44 0.19
--------------------------------------------- -------------
Net Asset Value - End of Period $9.90 $9.74 $9.70 $9.52
============================================= =============
TOTAL RETURN 5.96% 4.89% 6.67% (2.93%)*
RATIOS
Net Assets - End of Period
($000 Omitted) $4,645 $4,997 $4,907 $5,083
Ratio of Expenses to Average Net Assets# 0.84%@ 0.76%@ 0.70% 0.70%~
Ratio of Net Investment Income to
Average Net Assets# 4.18% 4.40% 4.56% 3.75%~
Portfolio Turnover Rate 41% 49% 23% 55%*
</TABLE>
<PAGE>
^ From December 1, 1993, commencement of investment operations, to June 30,
1994.
* Based on operations for the period shown and, accordingly, are not
representative of a full year.
# Various expenses of the Fund were voluntarily absorbed by IFG and ITC for the
years ended June 30, 1997, 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 2.43%, 2.34%, 2.45% and 3.09% (annualized),
respectively, and ratio of net investment income to average net assets would
have been 2.59%, 2.82%, 2.81% and 1.36% (annualized), respectively.
@ Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
~ Annualized
<PAGE>
Financial Highlights (Continued)
(For a Fund Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
Year Ended June 30
-----------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
Tax-Free Long-Term Bond Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value -
Beginning of Period $15.20 $15.07 $15.29 $16.35 $15.69 $15.05 $14.90 $15.15 $13.82 $13.86
-----------------------------------------------------------------------------------------
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.66 0.73 0.80 0.83 0.87 0.92 0.96 0.99 1.01 1.00
Net Gains or (Losses)
on Securities (Both
Realized and Unrealized) 0.38 0.32 0.09 (1.00) 1.04 0.95 0.27 (0.25) 1.33 (0.04)
-----------------------------------------------------------------------------------------
Total from Investment
Operations 1.04 1.05 0.89 (0.17) 1.91 1.87 1.23 0.74 2.34 0.96
-----------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net
Investment Income 0.66 0.73 0.80 0.83 0.87 0.92 0.96 0.99 1.01 1.00
In Excess of Net
Investment Income 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Distributions from
Capital Gains 0.23 0.19 0.31 0.06 0.38 0.31 0.12 0.00 0.00 0.00
-----------------------------------------------------------------------------------------
Total Distributions 0.90 0.92 1.11 0.89 1.25 1.23 1.08 0.99 1.01 1.00
-----------------------------------------------------------------------------------------
Net Asset Value -
End of Period $15.34 $15.20 $15.07 $15.29 $16.35 $15.69 $15.05 $14.90 $15.15 $13.82
=========================================================================================
TOTAL RETURN 7.05% 7.01% 6.16% (1.16%) 12.57% 12.79% 8.55% 5.10% 17.64% 7.29%
RATIOS
Net Assets - End of Period
($000 Omitted) $220,410 $250,890 $254,584 $282,407 $332,239 $272,382 $208,100 $179,107 $143,678 $109,132
Ratio of Expenses to
Average Net Assets# 0.90%@ 0.91%@ 0.92% 1.00% 1.03% 1.02% 0.93% 0.75% 0.74% 0.77%
Ratio of Net Investment
Income to Average
Net Assets# 4.36% 4.76% 5.31% 5.14% 5.43% 5.90% 6.39% 6.67% 7.06% 7.33%
Portfolio Turnover Rate 123% 146% 99% 28% 30% 28% 25% 27% 27% 41%
</TABLE>
<PAGE>
# Various expenses of the Fund were voluntarily absorbed by IFG for the years
ended June 30, 1997, 1996 and 1995. If such expenses had not been voluntaily
absorbed, ratio of expenses to average net assets would have been 1.05%, 1.04%
and 1.05%, respectively, and ratio of net investment income to average net
assets would have been 4.21%, 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.
<PAGE>
INVESTMENT OBJECTIVE AND STRATEGY
Each 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 each
Fund's shareholders. There is no assurance that a Fund's investment objective
will be met.
- --------------------------------------------------------------------------------
INVESCO TAX-FREE
INCOME FUNDS FUND STRATEGY
- --------------------------------------------------------------------------------
INVESCO Tax-Free o Intermediate-Term Municipal Bonds which may
Intermediate include any combination of general
Bond Fund obligation, revenue or industrial development
bonds.
o At least 80% of the Fund's total assets
normally will consist of a combination of
municipal bonds rated investment grade as
defined under "Investment Policies and Risks"
and short-term municipal notes rated within
the two highest rating categories as
described under "Investment Policies and
Risks."
o Municipal bonds may include any combination
of general obligations, revenue or industrial
development bonds.
o The dollar weighted average maturity of the
Fund's obligations normally will range from
three to ten years and will vary as Fund
Management responds to changes in interest
rates.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESCO Tax-Free o Long-Term Municipal Bonds which may include
Long-Term Bond any combination of general obligation,
Fund revenue or industrial development bonds.
o At least 80% of the Fund's assets normally
will consist of a combination of municipal
bonds rated investment grade as described
under "Investment Policies and Risks" and
short-term municipal notes rated within the
two highest rating categories as described
under "Investment Policies and Risks."
o Municipal bonds may include any combination
of general obligation, revenue or industrial
development bonds.
<PAGE>
o The dollar weighted average maturity of the
Fund's portfolio normally will be at least
ten years and will vary as Fund Management
responds to changes in interest rates.
- --------------------------------------------------------------------------------
Under ordinary circumstances, no more than 20% of each Fund's total assets
may consist of bonds subject to the Alternative Minimum Tax ("AMT Bonds"),
short-term or temporary taxable securities (the income from which may be subject
to federal income tax), debt obligations rated below investment grade and cash.
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 Funds
invest in many different issues over a wide geographical range; this
diversification reduces the Funds' 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 payment obligations and repay principal when due, we are referring to
"credit risk." Municipal obligations are rated based on their estimated credit
risk by independent services such as Standard & Poor's Ratings Group, Inc., a
division of The McGraw-Hill Companies, Inc. ("S&P"), Moody's Investors Services,
Inc. ("Moody's"), Fitch Investors Services, Inc. ("Fitch") or Duff & Phelps,
Inc. ("D&P"). "Market risk" refers to sensitivity to changes in interest rates:
For instance, when interest rates go up, the market value of a previously issued
bond generally declines; on the other hand, when interest rates go down, the
prices of bonds generally increase.
The lower a bond's quality, the more it is subject to credit risk and
market risk and the more speculative it becomes. This is also true of most
unrated municipal securities. Therefore, the Funds do not invest in obligations
they believe 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 each 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);
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 Intermediate Bond Fund invest in bonds which are rated
below CCC or Caa by S&P or Moody's, respectively. In addition, never, under any
circumstances, does the Long-Term Bond Fund invest in bonds which are rated
below B- or B by S&P and Moody's, respectively. Bonds rated B-, B, CCC, or Caa
may be in default or there may be present elements of danger with respect to
payment of principal or interest. While Fund Management continuously monitors
all of the municipal bonds in each Fund's portfolio for the issuer's ability to
make required principal and interest payments and other quality factors, it may
retain a bond whose rating is changed to one below the minimum rating required
for purchase of the security. For a detailed description of municipal bond
ratings, see the Statement of Additional Information and Appendix A therein.
<PAGE>
The Funds may invest in short-term municipal notes rated within the two
highest ratings by S&P or Moody's.
The following chart reflects the percentage of each Fund's total assets
that were invested in municipal bonds (by rating category) for the fiscal year
ended June 30, 1997.
- --------------------------------------------------------------------------------
BELOW
INVESTMENT UN-
INVESCO INVESTMENT GRADE GRADE RATED
TAX-FREE --------------------------------------------------------------------
INCOME AAA/ AA/ BBB/ BB/
FUNDS Aaa Aa A Baa Ba B
- --------------------------------------------------------------------------------
INVESCO
Tax-Free
Interme- 41.29% 11.54% 19.55% 10.36% 0.25% 0.25% 2.91%
diate Bond
Fund
- --------------------------------------------------------------------------------
INVESCO
Tax-Free
Long-Term 42.34% 12.94% 14.11% 3.00% 2.23% 0.00% 2.13%
Bond Fund
- --------------------------------------------------------------------------------
In addition, 10.46% and 21.10%, respectively, of the Intermediate Bond
Fund's and Long-Term Bond Fund's total assets were invested in corporate and
municipal short-term notes rated by at least one rating category in the highest
rating category for such notes.
All of these percentages were determined on a dollar-weighted basis,
calculated by averaging the Funds' month-end portfolio holdings during the
fiscal year. Keep in mind that each Fund's holdings are actively traded, and
bond ratings are occasionally adjusted by ratings services, so these figures do
not represent the Funds' actual holdings or quality ratings as of June 30, 1997.
AMT Bonds. These are "private activity bonds" issued after August 7, 1986;
the proceeds are directed in full or in part to private, for-profit
organizations. The income from AMT bonds is exempt from federal income tax but
may be subject to the alternative minimum tax -- a special tax that applies to
taxpayers who have certain adjustments to income or tax preference items.
Temporary/Short-Term Taxable Investments. The Funds may invest in
temporary and/or short-term taxable investments. Short-term taxable investments,
if any, normally will consist of notes having quality ratings within the two
highest grades of Moody's, S&P, Fitch or D&P; obligations of the U.S.
government, its agencies or instrumentalities; commercial paper rated at least
P-2 by Moody's, A-2 by S&P; certificates of deposit of U.S. domestic banks,
including foreign branches of domestic banks, with assets of $1 billion or more;
time deposits; banker's acceptances and other short-term bank obligations; and
<PAGE>
repurchase agreements. Temporary taxable investments, if any, normally will
consist of corporate bonds and other debt obligations. Dividends paid by a Fund
attributable to income from such investments will be taxable to investors. See
"Taxes, Dividends and Capital Gain Distributions."
When we believe market or economic conditions are adverse, the Funds may
assume a defensive position by temporarily investing up to 100% of its assets in
short-term taxable investments or cash, seeking to protect its assets until
conditions stabilize.
Tender Option Bonds. The Intermediate Bond 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 at par plus
accrued-interest at designated times.
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. Each 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 a Fund. Brokerage fees are paid
to trade futures contracts, and each Fund is required to maintain margin
deposits. The board of directors has adopted a non- fundamental restriction that
the aggregate market value of the futures contracts the Long-Term Bond Fund
holds cannot exceed 30% of the market value of its total assets.
Put and call options on futures contracts or securities may be traded by
each Fund in order to protect against declines in the values of portfolio
securities or against increases in the cost of securities to be acquired. The
purchaser of an option purchases the right to affect a transaction in the
underlying future or security at a specified price (the "strike price") before a
specified date (the "expiration date"). In exchange for the right, the purchaser
pays a "premium" to the seller, which represents the price of the right to buy
or sell the underlying instrument. In exchange for the premium, the seller of
the option becomes obligated to affect a transaction in the underlying future or
security, at the strike price, at any time prior to the expiration date, should
the buyer choose to exercise the option. A call option contract grants the
<PAGE>
purchaser the right to buy the underlying future or security, at the strike
price, before the expiration date. A put option contract grants the purchaser
the right to sell the underlying future or security, at the strike price, before
the expiration date. Purchases of options on futures contracts may present less
dollar risk in hedging a 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 a Fund upon exercise or liquidation of the option, and, unless the
price of the underlying futures contract or security changes sufficiently, the
option may expire without value to the Fund.
Although each 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 a 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 a Fund may be required to maintain a
position until exercise or expiration, which could result in losses.
Transactions in futures contracts and options are subject to other risks as
well, which are set forth in greater detail in the Statement of Additional
Information and Appendix B therein.
Zero Coupon Securities. The Funds may invest in Zero Coupon Securities. Of
the 10% of the Intermediate Bond Fund's total assets that may be invested in
debt obligations rated below investment grade, no more than 5% of the
Intermediate Bond Fund's total assets may be invested in zero coupon bonds
having such ratings. 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. A 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 each 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 a 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.
<PAGE>
Securities Lending. Each Fund may seek to earn additional income by
lending securities to qualified brokers, dealers, banks, or other financial
institutions, on a fully collateralized basis. For further information on this
policy, see "Investment Policies and Restrictions" in the Statement of
Additional Information.
Repurchase Agreements. Each Fund may invest money, for as short a time as
overnight, using repurchase agreements ("repos"). With a repo, a Fund buys a
debt instrument, agreeing simultaneously to sell it back to the prior owner at
an agreed-upon price. A 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 such Fund's custodian in an amount at least equal to the
repurchase price under the agreement (including accrued interest). These
agreements are entered into only with member banks of the Federal Reserve
System, registered broker-dealers, and registered U.S. government securities
dealers that are deemed creditworthy under standards set by the Company's board
of directors.
Illiquid and Rule 144A Securities. Each Fund may invest up to 15% of its
total assets in illiquid securities, including securities that are subject to
restrictions on resale and securities that are not readily marketable.
Investments in illiquid securities are subject to the risk that a Fund may not
be able to dispose of a security at the time desired or at a reasonable price,
or may have to bear the expense and delay of registering the security in order
to resell it. The Intermediate Bond Fund also may purchase certain securities
that are not registered for sale to the general public, but that can be resold
to institutional investors ("Rule 144A Securities"), without regard to the
foregoing 15% limitation, if a liquid trading market exists. For more
information concerning illiquid and Rule 144A Securities, see "Investment
Policies and Restrictions" 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
each Fund's shareholders. For example, with respect to 75% of its total assets,
each Fund limits to 5% the portion of its total assets that may be invested in a
single issuer. In addition, each 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 each Fund's
shareholders.
<PAGE>
For a further discussion of risks associated with an investment in the
Funds, see "Investment Policies and Restrictions" and "Investment Practices" in
the Statement of Additional Information.
THE FUNDS AND THEIR MANAGEMENT
The Company is a no-load mutual fund, registered with the Securities and
Exchange Commission as a diversified, open-end, management investment company.
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 Funds and reviews the services provided by the adviser and
sub-adviser. Under an agreement with the Company, IFG, 7800 E. Union Avenue,
Denver, Colorado 80237, serves as investment adviser for each Fund; it is
primarily responsible for providing the Funds with various administrative
services. IFG's wholly-owned subsidiary, INVESCO Trust, is the Funds'
sub-adviser and is primarily responsible for managing each Fund's investments.
James S. Grabovac, portfolio manager for the Funds since 1995, has
responsibility for the day-to-day management of the Funds' holdings. 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
their personal investment activities in a manner that Fund Management believes
is not detrimental to the Funds or Fund Management's other advisory clients. See
the Statement of Additional Information for more detailed information.
Each Fund pays IFG a monthly management fee which is based upon a
percentage of each Fund's average net assets determined daily; in turn, IFG pays
INVESCO Trust a sub-advisory fee out of its management fee. With respect to the
Intermediate Bond Fund, 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. With respect to the Long-Term Bond Fund,
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
<PAGE>
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, 1977, investment management
fees paid by the Intermediate Bond Fund and the Long- Term Bond Fund amounted to
0.50% and 0.55%, respectively (after voluntary expense limitation), of each
Fund's average net assets. Out of these advisory fees, prior to September 30,
1997, IFG paid to INVESCO Trust as a sub-advisory fee an amount equal to 0.25%
and 0.24%, respectively, of the Intermediate Bond Fund's and the Long- Term Bond
Fund's average net assets. After September 30, 1997, IFG will pay to INVESCO
Trust, as a sub-advisory fee, an amount computed at the annual rate of 0.1667%
on the first $300 million of the Fund's average net assets, 0.1333% on the next
$200 million of the Fund's average net assets, and 0.10% on the Fund's average
net assets in excess of $500 million; and to the Long-Term Bond Fund computed at
the annual rate of 0.1833% on the first $300 million of the Fund's average net
assets, 0.15% on the next $200 million of the Fund's average net assets, and
0.1167% on the Fund's average net assets in excess of $500 million. No fee is
paid by the Funds to INVESCO Trust.
Under a Transfer Agency Agreement, IFG acts as registrar, transfer agent,
and dividend disbursing agent for the Funds. Each Fund pays an annual fee of
$26.00 per shareholder account or, where applicable, per participant in an
omnibus account per year. Registered broker-dealers, third party administrators
of tax-qualified retirement plans and other entities, including affiliates of
IFG, may provide equivalent services to the Funds. In these cases, IFG may pay,
out of the fee it receives from the Funds, an annual sub-transfer agency or
recordkeeping fee to the third party.
In addition, under an Administrative Services Agreement, IFG handles
additional administrative, recordkeeping, and internal sub- accounting services
for the Funds. For such services, IFG was paid, for the fiscal year ended June
30, 1997, a fee equal to the following percentages of each Fund's average net
assets (prior to the absorption of certain Fund expenses): Intermediate Bond
Fund, 0.23% and Long-Term Bond Fund, 0.02%.
Each Fund's expenses, which are accrued daily, are deducted from total
income before dividends are paid. Total expenses of each Fund (prior to any
expense offset) for the fiscal year ended June 30, 1997, including investment
management fees (but excluding brokerage commissions, which are a cost of
acquiring securities), amounted to the following percentages of each Fund's
average net assets: Intermediate Bond Fund, 0.84% and Long-Term Bond Fund, 0.90%
(after voluntary expense limitation). Certain expenses of the Intermediate Bond
Fund are absorbed voluntarily by IFG and INVESCO Trust and certain expenses of
the Long-Term Bond Fund are absorbed voluntarily by IFG pursuant to a commitment
to those Funds in order to ensure that each Fund's total operating expenses do
not exceed 0.90% of each Fund's average net assets. These commitments may be
changed following consultation with the Company's board of directors. In the
absence of this voluntary expense limitation, total operating expenses of the
Intermediate Bond Fund and the Long-Term Bond Fund would have been 2.43% and
1.05%, respectively.
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of
their financial responsibility coupled with their ability to effect transactions
at the best available prices. As discussed under "How To Buy Shares --
<PAGE>
Distribution Expenses," the Funds may market their shares through intermediary
brokers or dealers that have entered into Dealer Agreements with IDI, as the
Funds' Distributor. The Funds may place orders for portfolio transactions with
qualified broker-dealers that recommend the Funds or sell shares of the Funds to
clients, or act as agent in the purchase of shares of the Funds for clients, if
Fund Management believes that the quality of the execution of the transaction
and level of commission are comparable to those available from other qualified
brokerage firms. For further information, see "Investment Practices -- Placement
of Portfolio Brokerage" in the Statement of Additional Information.
IFG, INVESCO Trust and IDI are indirect wholly owned subsidiaries of
AMVESCAP PLC. AMVESCAP PLC is a publicly-traded holding company that, through
its subsidiaries, engages in the business of investment management on an
international basis. INVESCO PLC changed its name to AMVESCO PLC on March 3,
1997 and to AMVESCAP PLC on May 8, 1997, as part of a merger between a direct
subsidiary of INVESCO PLC and A I M Management Group Inc., that created one of
the largest independent investment management businesses in the world. IFG and
INVESCO Trust will continue to operate under their existing names. AMVESCAP PLC
has approximately $165 billion in assets under management. IFG was established
in 1932 and, as of June 30, 1997, managed 14 mutual funds, consisting of 45
separate portfolios, with combined assets of approximately $15.4 billion on
behalf of over 857,000 shareholders. INVESCO Trust (founded in 1969) served as
adviser or sub-adviser to 59 investment portfolios as of June 30, 1997,
including 31 portfolios in the INVESCO group. These 59 portfolios had aggregate
assets of approximately $14.1 billion as of June 30, 1997. In addition, INVESCO
Trust provides investment management services to private clients including
employee benefit plans that may be invested in a collective trust sponsored by
INVESCO Trust. IDI was established in 1997 and is the distributor for 14 mutual
funds consisting of 45 separate portfolios.
FUND PRICE AND PERFORMANCE
Determining Price. The value of your investment in each Fund will vary
daily. The price per share is also known as the Net Asset Value ("NAV"). IFG
prices each Fund every day that the New York Stock Exchange is open, as of the
close of regular trading (normally, 4:00 p.m., New York time). NAV is calculated
by adding together the current market value of each 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 a Fund's total return and yield. Total return
figures show the average annual rate of return on a $1,000 investment in a Fund,
assuming reinvestment of all dividends and capital gain distributions, for one-,
five- and ten-year periods (or since inception). Cumulative total return shows
the actual rate of return on an investment for the period cited; average annual
total return represents the average annual percentage change in the value of an
investment. Both cumulative and average annual total returns tend to "smooth
out" fluctuations in a Fund's investment results, because they do show interim
variations in performance that occur during the periods cited.
<PAGE>
The yield of a 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 a 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 Funds' recent and historical performance is
contained in the Company's Annual Report to Shareholders. You can get a free
copy by calling or writing to IFG using the phone number or address on the back
of this Prospectus.
When we quote mutual fund rankings published by Lipper Analytical
Services, Inc., we may compare the Funds to others in their categories of
Intermediate Municipal Debt Funds for the Intermediate Bond Fund and General
Municipal Bond Funds for the Long-Term Bond Fund, as well as the broad-based
Lipper general fund groupings. These rankings allow you to compare the Funds to
their 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 Funds.
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 IDI. However, if you invest
in the Funds through a securities broker, you may be charged a commission or
transaction fee. For all new accounts, please send a completed application form.
Please specify which Fund's shares you wish to purchase.
Fund Management reserves the right to increase, reduce or waive the
minimum investment requirements in its sole discretion, where it determines this
action is in the best interests of a Fund. Further, Fund Management reserves the
right in its sole discretion to reject any order for the purchase of Fund shares
(including purchases by exchange) when, in its judgment, such rejection is in a
Fund's best interests.
<PAGE>
HOW TO BUY SHARES
================================================================================
Method Investment Minimum Please Remember
- --------------------------------------------------------------------------------
By Check $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 a
P.O. Box 173706, investment. Fund or IFG incurs.
Denver, CO 80217- If you are already
3706. a shareholder in
Or you may send the INVESCO funds,
your check by the Fund may seek
overnight courier reimbursement from
to: 7800 E. Union your existing
Ave., account(s) for any
Denver, CO 80237. 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 a Fund or IFG
Or you may transmit incurs. If you are
your payment by already a
bank wire (call IFG shareholder in the
for instructions). INVESCO funds, a
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 a Fund or IFG
incurs. If you are
already a shareholder in
the INVESCO funds, a Fund
may seek reimbursement
from your existing
account(s) for any loss
incurred.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
By Exchange $1,000 to open a See "Exchange
Between a Fund and new account; $50 Policy" 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 shares of a Fund will not begin earning dividends
or other distributions until your payment can be converted into available
federal funds under regular banking procedures or, if you are acquiring shares
in an exchange from another INVESCO fund, the Fund receives the proceeds of the
exchange. Checks normally are converted into federal funds (moneys held on
deposit within the Federal Reserve System) within two or three business days
after we receive them, although this period may be longer for checks drawn on
banks that are not members of the Federal Reserve System.
Exchange Policy. You may exchange your shares in these Funds 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 INVESCO fund shares:
1) The fund accounts must be identically registered.
2) You may make four exchanges out of each fund during each
calendar year.
3) An exchange is the redemption of shares from one fund followed by the
purchase of shares in another. Therefore, any gain or loss realized on the
exchange is recognizable for federal income tax purposes (unless, of course,
your account is tax-deferred).
4) The Funds reserve the right to reject any exchange request, or to
modify or terminate exchange policies, in the best interests of the Funds and
their shareholders. Notice of all such modifications or terminations will be
given at least 60 days prior to the effective date of the change in policy,
except for unusual instances (such as when redemptions of the exchanged shares
are suspended under Section 22(e) of the Investment Company Act of 1940, or when
sales of the fund into which you are exchanging are temporarily stopped).
<PAGE>
Distribution Expenses. Each Fund is authorized under a Plan and Agreement
of Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Plan") to use its assets to finance certain activities relating to the
distribution of its shares to investors. Under the Plan, monthly payments may be
made by each Fund to IDI to permit IDI, at its discretion, to engage in certain
activities, and provide certain services approved by the board of directors in
connection with the distribution of each Fund's shares to investors. These
activities and services may include the payment of compensation (including
incentive compensation and/or continuing compensation based on the amount of
customer assets maintained in a Fund) to securities dealers and other financial
institutions and organizations, which may include IDI-affiliated companies, to
obtain various distribution-related and/or administrative services for the
Funds. Such services may include, among other things, processing new shareholder
account applications, preparing and transmitting to the Fund's Transfer Agent
computer processable tapes of all transactions by customers, and serving as the
primary source of information to customers in answering questions concerning the
Fund and their transactions with the Fund.
In addition, other permissible activities and services include advertising,
the preparation, printing and distribution of sales literature and prospectuses
to prospective investors and such other services and promotional activities for
the Funds as may from time to time be agreed upon by the Company and its board
of directors, including public relations efforts and marketing programs to
communicate with investors and prospective investors. These services and
activities may be conducted by the staff of IDI or its affiliates or by third
parties.
Under the Plan, the Company's payments to IDI on behalf of each Fund are
limited to an amount computed at an annual rate of 0.25% of each Fund's average
net assets during the month. IDI is not entitled to payment for overhead
expenses under the Plan, but may be paid for all or a portion of the
compensation paid for salaries and other employee benefits for the personnel of
IDI whose primary responsibilities involve marketing shares of the INVESCO
Funds, including the Funds. Payment amounts by each Fund under the Plan, for any
month, may be made to compensate IDI for permissible activities engaged in and
services provided by IDI during the rolling 12-month period in which that month
falls. Therefore, any obligations incurred by IDI in excess of the limitations
described above will not be paid by the Funds under the Plan, and will be borne
by IDI. In addition, IDI and its affiliates may from time to time make
additional payments from its revenues to securities dealers and other financial
institutions that provide distribution- related and/or administrative services
for the Funds. No further payments will be made by the Funds under the Plan in
the event of its termination. Also, any payments made by the Funds may not be
used to finance directly the distribution of shares of any other fund of the
Company or other mutual fund advised by IFG. Payments made by each Fund under
the Plan for compensation of marketing personnel, as noted above, are based on
an allocation formula designed to ensure that all such payments are appropriate.
For more information see "How Shares Can Be Purchased -- Distribution Plan" in
the Statement of Additional Information.
<PAGE>
FUND SERVICES
Shareholder Accounts. IFG will maintain a separate share account for each
Fund whose shares you own 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 shares of
the Funds by telephone, unless they expressly decline these privileges. By
signing the new account Application, a Telephone Transaction Authorization Form,
or otherwise using these privileges, the investor has agreed that, if a Fund has
followed reasonable procedures, such as recording telephone instructions and
sending written transaction confirmations, it will not be liable for following
telephoned instructions that it believes to be genuine. As a result of this
policy, the investor may bear the risk of any loss due to unauthorized or
fraudulent instructions.
HOW TO SELL SHARES
The following chart shows several convenient ways to redeem your Fund
shares. Shares of either Fund may be redeemed at any time at their current NAV
next determined after a request in proper form is received at the Fund's office.
The NAV at the time of the redemption may be more or less than the price you
paid to purchase your shares, depending primarily upon the Fund's investment
performance.
Please specify from which Fund you wish to redeem shares. Shareholders
have a separate account for each fund in which they invest.
<PAGE>
HOW TO SELL SHARES
================================================================================
Method Minimum Redemption Please Remember
================================================================================
By Telephone $250 (or, if less, These telephone
Call us toll-free full liquidation of redemption
at 1-800-525-8085. the account) for a privileges may be
redemption check; modified or
$1,000 for a wire terminated in the
to bank of record. future at the
The maximum amount discretion of IFG.
which may be
redeemed by
telephone is
generally $25,000.
- --------------------------------------------------------------------------------
In Writing Any amount. The If the shares to be
Mail your request redemption request redeemed are
to INVESCO Funds must be signed by represented by
Group, Inc., P.O. all registered stock certificates,
Box 173706, owners of the the certificates
Denver, CO 80217- account. Payment must be sent to
3706. You may also will be mailed to IFG.
send your request your address of
by overnight record, or to a
courier to 7800 E. pre-designated
Union Ave., Denver, bank.
CO 80237.
- --------------------------------------------------------------------------------
By Exchange $1,000 to open a See "Exchange
Between a Fund and new account; $50 Policy," 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 Funds will attempt to process telephone redemptions promptly,
there may be times -- particularly in periods of severe economic or market
disruption -- when you may experience delays in redeeming shares by phone.
Payments of redemption proceeds will be mailed within seven days following
receipt of the redemption request in proper form. However, payment may be
postponed under unusual circumstances -- for instance, if normal trading is not
taking place on the New York Stock Exchange or during an emergency as defined by
the Securities and Exchange Commission. If your shares were purchased by a check
which has not yet cleared, payment will be made promptly upon clearance of the
purchase check (which will take up to 15 days).
If you participate in EasiVest, the Funds' automatic monthly investment
program, and redeem all of the shares in your account, we will terminate any
further EasiVest purchases unless you instruct us otherwise.
Because of the high relative costs of handling small accounts, should the
value of any shareholder's account fall below $250 as a result of shareholder
action, the Funds reserve the right to 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. Each 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 Funds
do not expect to pay any federal income or excise taxes.
Exempt-interest dividends paid by each Fund are normally free of federal
income tax to shareholders, although they are subject to state and local income
taxes. Unless shareholders are exempt from income taxes, however, they must
include all distributions of net capital gains (both long-term and short-term),
<PAGE>
as well as any dividends earned on a 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
reinvested in shares of one of the Funds or another fund in the INVESCO group.
Net realized capital gains are divided into short-term and long-term gains
depending upon how long a Fund held the security which gave rise to the gains.
The capital gains distribution consists of long-term capital gains which are
taxed at the capital gains rate. Short-term capital gains are included with
income from dividends and interest as ordinary income and are paid to
shareholders as taxable dividends.
The Taxpayer Relief Act of 1997 ("Act"), enacted in August 1997,
dramatically changes the taxation of net capital gain (i.e.,the excess of net
long-term capital gain over net short-term capital loss), by applying different
rates thereto depending on the taxpayer's holding period and marginal rate of
federal income tax. The Act, however, does not address the application of these
rules to distributions by regulated investment companies. Accordingly,
shareholders should consult their tax advisers as to the effect of the Act on
distributions by a Fund to them of net capital gain.
Shareholders also may realize capital gains or losses when they sell their
Fund shares at more or less than the price originally paid.
Interest on certain "private activity bonds" issued after August 7, 1986,
is an item of tax preference for purposes of the alternative minimum tax. Each
Fund intends to limit, and has limited in the past, its investments in such
bonds to not more than 20% of its total assets. The portion of exempt-interest
dividends paid by a Fund that is attributable to such bonds would be an item of
tax preference to shareholders.
At the end of each year, information regarding the tax status of
dividends, capital gain distributions and the portion, if any, of distributions
that is an item of tax preference is provided to shareholders.
Individuals and certain other non-corporate shareholders may be subject to
backup withholding of 31% on taxable dividends, capital gain distributions and
redemption proceeds. Unless you are subject to backup withholding for other
reasons, you can avoid backup withholding on your Fund account(s) by ensuring
that we have a correct, certified tax identification number.
We encourage you to consult a tax adviser with respect to these matters.
For further information, see "Dividends, Capital Gain Distributions and Taxes"
in the Statement of Additional Information.
<PAGE>
Dividends and Capital Gain Distributions. Each Fund earns daily net
investment income in the form of interest on its investments. Each Fund's policy
is to distribute substantially all of this income, less Fund expenses, to
shareholders on a monthly basis, at the discretion of the Company's board of
directors.
In addition, each 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), a 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. A Fund's share price will then drop by the amount of the distribution
on the ex- dividend date. If a shareholder purchases shares immediately prior to
such date, the shareholder will, in effect, have "bought" the dividend by paying
the full purchase price, a portion of which is then returned in the form of a
distribution, some or all of which may be taxable.
ADDITIONAL INFORMATION
Voting Rights. All shares of the Funds of the Company have equal voting
rights based on one vote for each share owned and a corresponding fractional
vote for each fractional share owned. The Company is not generally required and
does not expect to hold regular annual meetings of shareholders. However, when
requested to do so in writing by the holders of 10% or more of the outstanding
shares of the Company or as may be required by applicable law or the Company's
Articles of Incorporation, the board of directors will call special meetings of
shareholders. Directors may be removed by action of the holders of a majority of
the outstanding shares of the Company. The Company will assist shareholders in
communicating with other shareholders as required by the Investment Company Act
of 1940.
<PAGE>
INVESCO TAX-FREE INCOME FUNDS, INC.
INVESCO Tax-Free Intermediate Bond
Fund
INVESCO Tax-Free Long-Term Bond Fund
No-load mutual funds seeking as high a level
of current income exempt from federal taxes
as is consistent with the preservation of
capital.
PROSPECTUS
November 1, 1997
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
You can find us on the World Wide Web:
http://www.invesco.com
Or write to:
INVESCO Funds Group, Inc., Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
If you're in Denver, please visit one of our convenient Investor Centers:
Cherry Creek
155-B Fillmore Street
Denver Tech Center
7800 East Union Avenue
Lobby Level
In addition, all documents filed by the Company with the Securities and Exchange
Commission can be located on a Web site maintained by the commission at
http://ww.sec.gov.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
November 1, ^ 1997
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, ^
no-load investment management company, currently consisting of two separate
portfolios of investments: INVESCO Tax^-Free ^ Intermediate Bond Fund and
INVESCO Tax^-Free ^ Long-Term 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.
^ A Prospectus for both Funds dated November 1, ^ 1997, which ^ provides
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 ^: INVESCO FUNDS GROUP, INC.
Distributor: INVESCO DISTRIBUTORS, INC.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
INVESTMENT POLICIES AND RESTRICTIONS........................................36
THE FUNDS AND THEIR MANAGEMENT..............................................48
HOW SHARES CAN BE PURCHASED.................................................59
HOW SHARES ARE VALUED.......................................................63
FUND PERFORMANCE............................................................64
SERVICES PROVIDED BY THE FUNDS..............................................67
HOW TO REDEEM SHARES........................................................68
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS, AND TAXES............................68
INVESTMENT PRACTICES........................................................70
ADDITIONAL INFORMATION......................................................73
APPENDIX....................................................................76
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
Municipal Obligations
^ As discussed in the Prospectus in the section entitled "Investment
Objective and Strategy," 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 kin of municipal bond which
<PAGE>
particular kind of municipal bond which are issued by or on behalf of public
authorities to obtain funds for various local, privately operated facilities.
Such obligations are, in most cases, revenue bonds that generally are secured by
a lease with a particular private corporation. A Fund's portfolio may consist of
any combination of general obligation and revenue bonds. ^
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 ^ the 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, a division of The McGraw-Hill
Companies, Inc. ("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. Municipal Notes are debt obligations issued by
municipalities which normally have a maturity at the time of issuance from six
months to three years. The principal classifications of municipal notes are tax
anticipation notes, bond anticipation notes, and revenue anticipation notes.
Notes sold in anticipation of collection of taxes, a bond sale or receipt of
other revenues are normally obligations of the issuing municipality or agency.
<PAGE>
While the Funds' investment adviser attempts to limit purchases of lower
rated municipal securities to securities having an established retail secondary
market, the market for such securities may not be as liquid as the market for
higher rated municipal securities.
Other Permissible Investments
Temporary Investments. As discussed in the section of 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 ^ the Funds'
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 ^ segregated account with their custodian bank
consisting of ^ cash, any liquid securities or a combination thereof marked to
market daily equal in value to the amount of such commitments. 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.
^ 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 ^ segregated account is
different from the risk of fluctuation in the value of the Funds' portfolio
securities. Each Fund ^ may enter into commitments to purchase securities on a
when-issued basis ^ when deemed advisable to further ^ each Fund's pursuit of
its respective investment objective and policies ^. 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.
<PAGE>
Futures Contracts and Options on Futures
As described in the Funds' ^ Prospectus, 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. ^ To the
extent that the Fund enters into futures contracts, options on futures contracts
and options on foreign currencies traded on a CFTC-regulated exchange, in each
case that is not for bona fide hedging purposes (as defined by the CFTC), the
aggregate initial margins and premiums required to establish these positions
(excluding the amount by which options are "in-the-money" at the time of
purchase) may not exceed 5% of the liquidation value of the Fund's portfolio,
after taking into account unrealized profits and unrealized losses on any
contracts that the Fund has entered into. (In general, a call option on a
futures contract is "in-the-money" if the value of the futures contract exceeds
the exercise ("strike") price of the call; a put option on a futures contract is
"in-the-money" if the value of the futures contract that is the subject of the
put is exceeded by the strike price of the put.)
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
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
<PAGE>
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.
^ Each Fund 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.
<PAGE>
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 ^ 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
(the "1933 Act") (hereinafter referred to as "Rule 144A Securities"). The ^
Company's board of directors has delegated to ^ the Fund's adviser and
sub-adviser the authority to determine the liquidity of Rule 144A Securities
pursuant to guidelines approved by the board. ^ The Intermediate Bond Fund may
not invest more than ^ 15% of its net assets in restricted securities.
Investments in restricted securities involve certain risks to the extent
that the Intermediate Bond 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
<PAGE>
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 ^ Funds' Prospectus, each Fund
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 ^ Company'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 ^ a Fund and is unrelated to the interest
rate on the underlying instrument. In these transactions, the securities
acquired by ^ a Fund (including accrued interest earned thereon) must have a
total value ^ at least equal to the value of the repurchase agreement, and are
held as collateral by the Funds' custodian bank until the repurchase agreement
is completed.
Loans of Portfolio Securities. ^ Each Fund also may lend portfolio
securities to qualified brokers, dealers, banks, or other financial
institutions. This practice permits ^ a Fund to earn income, which, in turn, can
be invested in additional securities to pursue the Fund's investment objective.
Loans of securities by ^ a Fund will be collateralized by cash, letters of
credit, or securities issued or guaranteed by the U.S. government or its
agencies equal to at least 100% of the current market value of the loaned
securities, determined on a daily basis. Lending securities involves certain
risks, the most significant of which is the risk that a borrower may fail to
return a portfolio security. The 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 ^ a
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 ^ the section of the Funds'
Prospectus entitled "Investment Objective and Strategy," the Funds operate under
certain investment restrictions ^. These restrictions are fundamental and may
not be changed with respect to a particular Fund without the prior approval of
<PAGE>
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 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.
(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.)
<PAGE>
(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.
(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.
<PAGE>
(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
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.
<PAGE>
(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^. 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).
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 except as discussed in restriction (7);
(3) mortgage, pledge or hypothecate its portfolio securities or borrow
money, except from banks for temporary or emergency purposes (but
not for investment) and then in an amount not exceeding 10% of ^ the
value of the Fund's ^ net assets. The Fund will not purchase
additional securities while any such borrowings exist;
^(4) invest in the securities of any ^ other investment company except
for a purchase or acquisition in accordance with a plan of
reorganization, merger or consolidation;
(5) purchase securities (except obligations issued or guaranteed by the
U.S. Government) if the purchase would cause the Fund, at the time,
to have more than 5% of the ^ value of its total assets invested in
securities of any one issuer or to own more than 10% of the
outstanding securities of any one issuer;
(6) make loans to any person, except through the purchase of debt
securities in accordance with the Fund's investment policies, or the
lending of portfolio securities to broker-dealers or other
institutional investors, or the entering into repurchase agreements
with member banks of the Federal Reserve System, registered
broker-dealers and registered government securities dealers. The
aggregate value of all portfolio securities loaned may not exceed
<PAGE>
33-1/3% of the Fund's net assets (taken at current value). No more
than 10% of the Fund's net assets may be invested in repurchase
agreements maturing in more than seven days;
(7) buy or sell commodities or commodity contracts, oil, gas, or other
mineral interest or exploration programs, or real estate or
interests therein. However, the Fund may purchase municipal bonds
or other permitted securities secured by real estate or which may
represent indirect interests therein and may buy and sell options
and futures contracts for the purpose of hedging the value of its
securities portfolio, provided that the Fund will not enter into
options or futures contracts for which the aggregate initial margins
exceed 5% of the fair market value of the Fund's assets;
(8) invest in any issuer for the purpose of exercising control or
management;
(9) purchase securities which have legal or contractual restrictions on
resale or purchase securities for which, at the time of purchase,
there is no readily available market;
(10) engage in the underwriting of any securities of other issuers except
to the extent that the purchase of municipal bonds or other
permitted investments directly from the issuer thereof and the
subsequent disposition of such investments may be deemed to be an
underwriting;
(11) purchase or retain securities of any issuer in which any officer or
director of the Fund or its investment adviser beneficially owns
more than 1/2 of 1% of the outstanding securities, or in which all
of the officers and directors of the Company and its investment
adviser, as a group, beneficially own more than 5% of such
securities;
(12) purchase equity securities or securities convertible into equity
securities;
(13) participate on a joint or a joint and several basis in any
securities trading account or purchase warrants;
(14) invest more than 25% of its total assets in any particular industry
or industries, except municipal securities, or obligations issued or
guaranteed by the U.S. government, its agencies or
instrumentalities. (Industrial development bonds are grouped into
an "industry" where the payment of principal and interest is the
ultimate responsibility of companies within the same industry.)
With the exception of restriction (7) above, the Tax-Free Long-Term Bond
Fund has no fundamental policies as to the use of futures contracts.
<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 ("IFG") is employed as the ^ Company's investment adviser. ^ IFG was
established in 1932 and also serves as ^ an investment adviser to INVESCO
Capital Appreciation Funds, Inc. (formerly INVESCO Dynamics Fund, Inc.), INVESCO
Diversified Funds, Inc.^, INVESCO Emerging Opportunity Funds, Inc., INVESCO
Growth Fund, Inc., INVESCO Income Funds, Inc., INVESCO Industrial Income Fund,
Inc., INVESCO International Funds, Inc.^, INVESCO Multiple Asset Funds, Inc.,
INVESCO Specialty Funds, Inc., INVESCO Strategic Portfolios, Inc., INVESCO
Tax-Free Income Funds, Inc., INVESCO Value Trust^ and INVESCO Variable
Investment Funds, Inc.
^ IFG is an indirect wholly owned subsidiary of AMVESCAP PLC, a
publicly-traded holding company ^ that, through its subsidiaries, engages in the
business of investment management on an international basis. INVESCO PLC changed
its name to AMVESCO PLC on March 3, 1997 and to AMVESCAP PLC on May 8, 1997, as
part of a merger between a direct subsidiary of INVESCO PLC and A I M Management
Group, Inc. that created one of the largest independent management businesses in
the world with approximately $165 billion in assets under management. IFG was
established in 1932 and as of June 30, 1997, managed 14 mutual funds, consisting
of ^ 45 separate portfolios, on behalf of over ^ 857,000 shareholders. ^
AMVESCAP PLC's North American subsidiaries include the following:
--INVESCO Distributors, Inc. of Denver, Colorado is a registered
broker-dealer that acts as the principal underwriter for retail mutual funds.
--INVESCO Capital Management, Inc. of Atlanta, Georgia^ manages
institutional investment portfolios, consisting primarily of discretionary
employee benefit plans for corporations and state and local governments, and
endowment funds. INVESCO Capital Management, Inc. is the sole shareholder of
INVESCO Services, Inc., a registered broker-dealer whose primary business is the
distribution of shares of two registered investment companies.
--INVESCO Management & Research, Inc. ^ of Boston, Massachusetts^ primarily
manages pension and endowment accounts.
--PRIMCO Capital Management, Inc. of Louisville, Kentucky^ specializes in
managing stable return investments, principally on behalf of Section 401(k)
retirement plans.
--INVESCO Realty Advisors, Inc. of Dallas, Texas^ is responsible for
providing advisory services in the U.S. real estate markets for ^ pension plans
and public pension funds, as well as endowment and foundation accounts.
<PAGE>
--A I M Advisors, Inc. of Houston, Texas provides investment advisory and
administrative services for retail and institutional mutual funds.
--A I M Capital Management, Inc. of Houston, Texas provides investment
advisory services to individuals, corporations, pension plans and other private
investment advisory accounts and also serves as a sub-adviser to certain retail
and institutional mutual funds, one Canadian mutual fund and one portfolio of an
open-end registered investment company that is offered to separate accounts of
variable insurance companies.
--A I M Distributors, Inc. and Fund Management Company of Houston, Texas
are registered broker-dealers that act as the principal underwriters for retail
and institutional mutual funds.
The corporate headquarters of ^ AMVESCAP PLC are located at 11 Devonshire
Square, London, ^ EC2M4YR, England.
The Sub-Adviser. IFG, as investment adviser, has contracted with INVESCO
Trust Company ("INVESCO Trust") to provide investment advisory and research
services to the Company. INVESCO Trust has the primary responsibility for
providing portfolio investment management services to the Funds. INVESCO Trust,
a trust company founded in 1969, is a wholly owned subsidiary of IFG.
As indicated in the Funds' Prospectus, IFG and INVESCO ^ Trust permit
investment and other personnel to purchase and sell securities for their own
accounts in accordance with a compliance policy governing personal investing by
directors, officers and employees of IFG, INVESCO Trust and ^ their North
American affiliates. The policy requires officers, inside directors, investment
and other personnel of IFG, INVESCO Trust and ^ their North American affiliates
to pre-clear all transactions in securities not otherwise exempt under the
policy. Requests for trading authority will be denied when, among other reasons,
the proposed personal transaction would be contrary to the provisions of the
policy or would be deemed to adversely affect any transaction then known to be
under consideration for or to have been effected on behalf of any client
account, including the Funds.
In addition to the pre-clearance requirement described above, the policy
subjects officers, inside directors, investment and other personnel of IFG,
INVESCO Trust and ^ their North American affiliates to various trading
restrictions and reporting obligations. All reportable transactions are reviewed
for compliance with the policy. The provisions of ^ this policy are administered
by and subject to exceptions authorized by INVESCO or INVESCO Trust.
Investment Advisory Agreement. ^ IFG serves as investment adviser to each
of the Funds pursuant to an investment advisory agreement dated February 28,
1997 (the "Agreement") with the Company which was approved ^ by the board of
directors on November 6, 1996, by a vote cast in person by a majority of the
directors of the Company, including a majority of the directors who are not
"interested persons" of the Company or ^ IFG, at a meeting called for such
<PAGE>
purpose. ^ Shareholders of each of the Funds approved the Agreement on ^ January
31, 1997, for an initial term expiring ^ February 28, 1999. Thereafter, this
Agreement may be continued from year to year ^ with respect 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 ^ 1940 Act, 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 ^ 1940 Act) of
any such party, cast in person at a meeting called for the purpose of voting on
such continuance. The Agreement may be terminated at any time without penalty by
either party, or by a Fund with respect to that Fund, upon sixty (60) days'
written notice and terminates automatically in the event of an assignment to the
extent required by the ^ 1940 Act and the Rules thereunder. ^
The Agreement provides that ^ IFG shall manage the investment portfolios of
the Funds in conformity with ^ each Fund's investment policies (either directly
or by delegation to a sub-adviser which may be a company affiliated with ^ IFG).
Further, ^ IFG shall perform all administrative, internal accounting (including
computation of net asset value), clerical, statistical, secretarial and all
other services necessary or incidental to the administration of the affairs of
the Funds excluding, however, those services that are the subject of separate
agreement between the ^ Company and ^ IFG or any affiliate thereof, including
the distribution and sale of shares of the Funds and provision of transfer
agency, dividend disbursing agency, and registrar services, and services
furnished under an Administrative Services Agreement with ^ IFG discussed below.
Services provided under the Agreement include, but are not limited to: supplying
the ^ Company with officers, clerical staff and other employees, if any, who are
necessary in connection with the Funds' operations; furnishing office space,
facilities, equipment, and supplies; providing personnel and facilities required
to respond to inquiries related to shareholder accounts; conducting periodic
compliance reviews of the Funds' operations; preparation and review of required
documents, reports and filings by ^ IFG's in-house legal and accounting staff
(including the prospectus, statement of additional information, proxy
statements, shareholder reports, tax returns, reports to the SEC, and other
corporate documents of the 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, ^ IFG is
entitled to receive a monthly fee. 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 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 ^ greater than
$500 million. For the fiscal years ended June 30, 1997, 1996^ and 1995, ^ the
Tax-Free ^ Intermediate Bond Fund paid INVESCO advisory fees ^(prior to the
voluntary absorption of certain Fund expenses by INVESCO)^ of $23,630, $26,991
and $23,812, respectively. The fee for the ^ Long-Term Bond Fund is calculated
daily at an annual rate of: ^ 0.55% on the first $300 million of the Fund's
<PAGE>
average net assets; ^ 0.45% on the next $200 million of the Fund's average net
assets; and ^ 0.35% on the Fund's average net assets greater than $500 million.
For the fiscal years ended June 30, 1997, 1996, and 1995 ^, the Tax-Free ^
Long-Term Bond Fund paid ^ IFG advisory fees (prior to the voluntary absorption
of certain Fund expenses by IFG) of $1,275,473, $1,389,027 and $1,471,474,
respectively. ^
Sub-Advisory Agreement. INVESCO Trust serves as sub-adviser to each of the
Funds pursuant to a sub-advisory agreement dated February 28, 1997 (the
"Sub-Agreement") with ^ IFG which was approved ^ by the board of directors on
November 6, 1996, by a vote cast in person by a majority of the directors of the
Company, including a majority of the directors who are not "interested persons"
of the Company, ^ IFG, or INVESCO Trust at a meeting called for such purpose. ^
Shareholders of each of the Funds approved the Sub-Advisory Agreement on January
31, 1997, for an initial term expiring ^ February 28, 1999. Thereafter, the
Sub-Agreement may be continued from year to year as to each Fund as long as each
such continuance is specifically approved by the board of directors of the
Company, or by a vote of the holders of a majority, as defined in the 1940 Act,
of the outstanding shares of 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 ^ 1940 Act and the
rules thereunder. ^
The Sub-Agreement provides that INVESCO Trust, subject to the supervision
of ^ IFG, shall manage the investment portfolios of 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
acquired, of ^ each Fund, 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^ 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 (the "1933 Act"), as amended, and (ii) the
Company's status as a regulated investment company under the Internal Revenue
Code of 1986, as amended; (c) determining what securities are to be purchased or
sold for ^ each Fund, unless otherwise directed by the directors of the Company
or ^ IFG, 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.
<PAGE>
The Sub-Agreement provides that as compensation for its services, INVESCO
Trust shall receive from ^ IFG, at the end of each month, a fee based upon the
average daily value of the Tax-Free ^ Intermediate Bond ^ Fund's average net
assets at the following annual rates: ^ 0.1667% on the Fund's average net assets
up to ^ $300 million, 0.1333% on the next $200 million of the Fund's average net
assets and 0.10% of the Fund's average net assets in excess of ^ $500 million^;
and a fee based upon the average daily value of the Tax-Free ^ Long-Term Bond
Fund at the following annual rates: ^ 0.1833% on the first $300 million of the
Fund's average net assets ^, 0.15% on the next $200 million of the Fund's
average net assets^, and ^ 0.1167% on the Fund's average net assets in excess of
$500 million. The Sub-Advisory fee is paid by ^ IFG, NOT the Funds.
Administrative Services Agreement. ^ IFG, either directly or through
affiliated companies, ^ provides certain administrative, sub-accounting, and
recordkeeping services to the Funds pursuant to an Administrative Services
Agreement dated ^ February 28, 1997 (the "Administrative Agreement"). The
Administrative Agreement was approved ^ by the board of directors on November 6,
1996, by a vote cast in person by all of the directors of the Company, including
all of the directors who are not "interested persons" of the Company or ^ IFG at
a meeting called for such purpose. The Administrative Agreement ^ is for an
initial term ^ expiring ^ February 28, 1998, and has been continued by action of
the board of directors until ^ May 15, 1998. The Administrative Agreement may be
continued from year to year as long as such continuance is specifically approved
by the board of directors of the Company, including a majority of the directors
who are not parties to the Administrative Agreement or interested persons (as
defined in the 1940 Act) of any such party, cast in person at a meeting called
for the purpose of voting on such continuance. The Administrative Agreement may
be terminated at any time without penalty by ^ IFG on sixty (60) days' written
notice, or by the Company upon thirty (30) days' written notice, and terminates
automatically in the event of an assignment unless the Company's board of
directors approves such assignment.
The Administrative Agreement provides that ^ IFG shall provide the
following services to the Funds: (A) such sub-accounting and recordkeeping
services and functions as are reasonably necessary for the operation of the
Funds; and (B) such sub-accounting, recordkeeping, and administrative services
and functions which may be provided by affiliates of ^ IFG, 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 ^ IFG consisting of a base fee of $10,000 per
year, plus an additional incremental fee computed daily and paid monthly at an
annual rate of 0.015% per year of the average net assets of each Fund.
During the fiscal ^ years ended June 30, 1997, 1996^ and 1995, ^ the
Tax-Free ^ Intermediate Bond Fund paid INVESCO administrative services fees
^(prior to the voluntary absorption of certain Fund expenses by ^ IFG) in the
amount of $10,709, $10,810 and $10,714, respectively. During the fiscal years
<PAGE>
ended June 30, 1997, 1996 and 1995 ^, the Tax-Free ^ Long-Term Bond Fund paid ^
IFG administrative services fees (prior to the voluntary absorption of certain
Fund expenses by ^ IFG) in the amount of ^ $44,786, $47,882 and ^ $50,131,
respectively.
Transfer Agency Agreement. ^ IFG also performs transfer agent, dividend
disbursing agent, and registrar services for the Funds pursuant to a Transfer
Agency Agreement dated February 28, 1997, which was approved by the board of
directors of the Company, including a majority of the Company's directors who
are not parties to the Transfer Agency Agreement or "interested persons" of any
such party, on ^ November 6, 1996, for an initial term expiring ^ February 28,
1998 and has been extended by action of the board of directors until ^ May 15,
1998. Thereafter, the Transfer Agency Agreement may be continued from year to
year as 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 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 ^ IFG.
The Transfer Agency Agreement provides that ^ each Fund shall pay to ^ IFG
a fee of $26.00 per shareholder account or, where applicable, per participant in
an omnibus account ^ 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, 1997, 1996 and 1995 ^, the Tax-Free Intermediate
Bond Fund paid INVESCO transfer agency fees (prior to the voluntary absorption
of certain Fund expenses by INVESCO) of ^ $15,084, $14,234 and
$12,446,respectively. For the fiscal years ended June 30, 1997, 1996 and 1995,
the Tax-Free Long-Term Bond Fund paid INVESCO transfer agency fees (prior to the
voluntary absorption of certain Fund expenses by IFG) of $317,800, $324,030 and
$390,390, 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 ^ of the Funds are carried out and that ^ the Funds' portfolios
are properly administered. The officers of the Company, all of whom are officers
and employees of, and are paid by, ^ IFG, are responsible for the day-to-day
administration of the Company and each of the Funds. The investment adviser for
^ the Company has the primary responsibility for making investment decisions on
behalf ^ the Company. These investment decisions are reviewed by the investment
committee of ^ IFG.
All of the officers and directors of the Company hold comparable positions
with INVESCO Capital Appreciation Funds, Inc. (formerly, INVESCO Dynamics Fund,
Inc.), INVESCO Diversified Funds, Inc.^, INVESCO Emerging Opportunity Funds,
<PAGE>
Inc., INVESCO Growth Fund, Inc., INVESCO Income Funds, Inc., INVESCO Industrial
Income Fund, Inc., INVESCO International Funds, Inc.^, INVESCO Multiple Asset
Funds, Inc., INVESCO Specialty Funds, Inc., INVESCO Strategic Portfolios, Inc.,
INVESCO Tax-Free Income Funds, Inc., and INVESCO Variable Investment Funds, Inc.
All of the directors of the Company also serve as trustees of INVESCO Value
Trust. In addition, all of the directors of the Company ^, with the exception of
^ Dan Hesser, serve as trustees of INVESCO Treasurer's Series Trust. All of the
officers of the Company also hold comparable positions with INVESCO Value Trust.
Set forth below is information with respect to each of the Company's officers
and directors. Unless otherwise indicated, the address of the directors and
officers is Post Office Box 173706, Denver, Colorado 80217-3706. Their
affiliations represent their principal occupations during the past five years.
CHARLES W. BRADY,*+ Chairman of the Board. Chief Executive Officer and
Director of ^ AMVESCAP PLC, London, England, and of various subsidiaries
thereof^. Chairman of the Board of INVESCO ^ Treasurer's Series Trust^. Address:
1315 Peachtree Street, NE, Atlanta, Georgia. Born: May 11, 1935.
FRED A. DEERING,+# Vice Chairman of the Board. Vice Chairman of ^ INVESCO
Treasurer's Series Trust. Trustee of ^ INVESCO Global Health Sciences Fund.
Formerly, Chairman of the Executive Committee and Chairman of the Board of
Security Life of Denver Insurance Company, Denver, Colorado; ^ Director of ING
America Life Insurance ^ Company, Urbaine Life Insurance Company and Midwestern
United Life Insurance Company. Address: Security Life Center, 1290 Broadway,
Denver, Colorado. Born: January 12, 1928.
DAN J. HESSER,+* President, CEO and Director. Chairman of the Board,
President, and Chief Executive Officer of INVESCO Funds Group, Inc. ^ and
INVESCO Distributors, Inc.; President and Director of INVESCO Trust Company^;
President and Chief Operating Officer of INVESCO Global Health Sciences Fund.
Born: December 27, 1939.
VICTOR L. ANDREWS,** Director. Professor Emeritus, Chairman Emeritus and
Chairman of the CFO Roundtable of the Department of Finance at Georgia State
University, Atlanta, Georgia; President, Andrews Financial Associates, Inc.
(consulting firm); since October 1984, Director of the Center for the Study of
Regulated Industry at Georgia State University; formerly, member of the
faculties of the Harvard Business School and the Sloan School of Management of
MIT. Dr. Andrews is also a director of ^ the Southeastern Thrift and Bank Fund,
Inc. and The Sheffield Funds, Inc. Address: 4625 Jettridge Drive, Atlanta,
Georgia. Born: June 23, 1930.
BOB R. BAKER,+** Director. President and Chief Executive Officer of AMC
Cancer Research Center, Denver, Colorado, since January 1989; until mid-December
1988, Vice Chairman of the Board of First Columbia Financial Corporation (a
financial institution), Englewood, Colorado. Formerly, Chairman of the Board and
Chief Executive Officer of First Columbia Financial Corporation. Address: 1775
Sherman Street, #1000, Denver, Colorado. Born: August 7, 1936.
LAWRENCE H. BUDNER,# Director. Trust Consultant; prior to June 30, 1987,
Senior Vice President and Senior Trust Officer of InterFirst Bank, Dallas,
Texas. Address: 7608 Glen Albens Circle, Dallas, Texas. Born: July 25, 1930.
<PAGE>
DANIEL D. CHABRIS,+# Director. Financial Consultant; Assistant Treasurer of
Colt Industries Inc., New York, New York, from 1966 to 1988. Address: ^ 19
Kingsbridge Way, Madison, Connecticut. Born: August 1, 1923.
^ WENDY L. GRAMM, Ph.D.,** Director. Self-employed (since 1993); Professor
of Economics and Public Administration, University of Texas at Arlington.
Formerly, Chairman, Commodity Futures Trading Commission from 1988 to 1993,
administrator for Information and Regulatory Affairs at the Office of Management
and Budget from 1985 to 1988, Executive Director of the Presidential Task Force
on Regulatory Relief and Director of the Federal Trade Commission's Bureau of
Economics. Dr. Gramm is also a director of the Chicago Mercantile Exchange,
Enron Corporation, IBP, Inc., State Farm Insurance Company, State Farm Life
Insurance Company, Kinetic Concepts, Inc., Independant Women's Forum,
International Republic Institute, and the Republican Women's Federal Forum. Dr.
Gramm is also a member of the Board of Visitors, College of Business
Administration, University of Iowa, and a member of the Board of Visitors,
Center for Study of Public Choice, George Mason University. Address: 4201 Yuma
Street, N.W., Washington, D.C. Born: January 10, 1945.
HUBERT L. HARRIS, ^ Jr.,* Director. President of INVESCO Services, Inc.
(since January 1990). Director of ^ AMVESCAP PLC and Chief Financial Officer of
INVESCO Individual Services Group. Member of the Executive Committee of the
Alumni Board of Trustees of Georgia Institute of Technology. Address: 1315
Peachtree Street, ^ NE, Atlanta, Georgia. Born: July 15, 1943.
KENNETH T. KING,** Director. Formerly, Chairman of the Board of The Capitol
Life Insurance Company, Providence Washington Insurance Company, and Director of
numerous subsidiaries thereof in the U.S. Formerly, Chairman of the Board of The
Providence Capitol Companies in the United Kingdom and Guernsey. Chairman of the
Board of the Symbion Corporation (a high technology company) until 1987.
Address: 4080 North Circulo Manzanillo, Tucson, Arizona. Born: November 16,
1925.
JOHN W. MCINTYRE,# Director. Retired. Formerly, Vice Chairman of the Board
of Directors of the Citizens and Southern Corporation and Chairman of the Board
and Chief Executive Officer of the Citizens and Southern Georgia Corporation and
Citizens and Southern National Bank. Director of Golden Poultry Co., Inc.
Trustee of ^ INVESCO Global Health Sciences Fund and Gables Residential Trust.
Address: ^ 7 Piedmont Center, Suite 100, Atlanta, Georgia 30305. Born: September
14, 1930.
LARRY SOLL, Ph.D., Director. Formerly, Chairman of the Board (1987 to
1994), Chief Executive Officer (1982 to 1989 and 1993 to 1994) and President
(1982 to 1989) of Synergen Corp. Director of Synergen since incorporation in
1982. Director of ISD Pharmaceuticals, Inc., Trustee of INVESCO Global Health
Sciences Fund. Address: 345 Poorman Road, Boulder, Colorado. Born: April 26,
1942.
<PAGE>
GLEN A. PAYNE, Secretary. Senior Vice President, General Counsel and
Secretary of INVESCO Funds Group, Inc. (since 1995) and INVESCO Trust Company
(since 1995) and of INVESCO Distributors, Inc. (since 1997); Vice President (May
1989 to April 1995), Secretary and General Counsel of INVESCO Funds Group, Inc.;
formerly, employee of a U.S. regulatory agency, Washington, D.C., (June 1973
through May 1989). Born: September 25, 1947.
RONALD L. GROOMS, Treasurer. Senior Vice President and Treasurer of INVESCO
Funds Group, Inc. and INVESCO Trust Company ^(since 1988). Senior Vice President
and Treasurer of INVESCO Distributors, Inc. (since 1997). Born: October 1, 1946.
WILLIAM J. GALVIN, JR., Assistant Secretary. Senior Vice President of
INVESCO Funds Group, Inc. ^(since 1995) and of INVESCO Distributors, Inc. (since
1997) and Trust Officer of INVESCO Trust Company since July 1995 and formerly
(August 1992 to July 1995) Vice President of INVESCO Funds Group, Inc. and trust
officer of INVESCO Trust Company. Formerly,Vice President of 440 Financial Group
from June 1990 to August 1992; Assistant Vice President of Putnam Companies from
November 1986 to June 1990. Born: August 21, 1956.
ALAN I. WATSON, Assistant Secretary. Vice President of INVESCO Funds Group,
Inc. (since 1984) and of INVESCO Distributors, Inc. (since 1997) and Trust
Officer of INVESCO Trust Company. Born: September 14, 1941.
JUDY P. WIESE, Assistant Treasurer. Vice President of INVESCO Funds Group,
Inc. (since 1984) and of INVESCO Distributors, Inc. (since 1997) and Trust
Officer of INVESCO Trust Company. Born: February 3, 1948.
#Member of the audit committee of the Company.
+Member of the executive committee of the Company. On occasion, the
executive committee acts upon the current and ordinary business of the Company
between meetings of the board of directors. Except for certain powers which,
under applicable law, may only be exercised by the full board of directors, the
executive committee may exercise all powers and authority of the board of
directors in the management of the business of the Company. All decisions are
subsequently submitted for ratification by the board of directors.
*These directors are "interested persons" of the Company as defined in the
1940 Act.
**Member of the management liaison committee of the Company.
As of ^ August 13, 1997, officers and directors of the Company, as a
group, beneficially owned less than 1% of the ^ Funds' outstanding shares.
<PAGE>
Director Compensation
The following table sets forth, for the fiscal year ended June 30, ^ 1997:
the compensation paid by the Company to its ^ nine 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 ^ Distributors, Inc. (including the
Company), INVESCO Advisor Funds, Inc., INVESCO Treasurer's Series Trust and ^
INVESCO Global Health Sciences Fund (collectively, the "INVESCO Complex") to
these directors for services rendered in their capacities as directors or
trustees during the year ended December 31, ^ 1996. As of December 31, ^ 1996,
there were ^ 49 funds in the INVESCO Complex. Dr. Soll became an independent
director of the Company effective May 15, 1997. Dr. Gramm became an independant
director of the Company effective July 29, 1997 and is not included in the table
below.
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, ^ $2,719 $474 $462 $98,850
Vice Chairman of
the Board
Victor L. Andrews ^ 2,678 448 535 84,350
Bob R. Baker ^ 2,720 400 717 84,850
Lawrence H. Budner ^ 2,639 448 535 80,350
Daniel D. Chabris 2,685 512 380 84,850
A. D. Frazier, Jr.(4) 1,247 0 0 81,500
Kenneth T. King 2,478 493 419 71,350
John W. McIntyre 2,616 0 0 90,350
Larry Soll 571 0 0 17,500
--------
Total $20,353 $2,775 $3,048 $693,950
% of Net Assets 0.0090%(5) 0.0012%(5) 0.0045%(6)
<PAGE>
(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 INVESCO Global Health
Sciences Fund which does not participate in any retirement plan) upon the
directors' retirement, calculated using the current method of allocating
director compensation among the funds in the INVESCO Complex. These estimated
benefits assume retirement at age 72 and that the basic retainer payable to the
directors will be adjusted periodically for inflation, for increases in the
number of funds in the INVESCO Complex, and for other reasons during the period
in which retirement benefits are accrued on behalf of the respective directors.
This results in lower estimated benefits for directors who are closer to
retirement and higher estimated benefits for directors who are further from
retirement. With the exception of Messrs. Frazier and McIntyre, each of these
directors has served as a ^ director of one or more of the funds in the INVESCO
Complex for the minimum five-year period required to be eligible to participate
in the Defined Benefit Deferred Compensation Plan.
^(4)Effective February 28, 1997, Mr. Frazier resigned as a director of the
Company. Effective November 1, 1996, Mr. Frazier was employed by INVESCO PLC,
(the predecessor to AMVESCAP PLC), a company affiliated with ^ IFG. Because it
was possible that Mr. Frazier would be so employed, he was deemed to be an
^"interested person^" of the ^ Company and of the other funds in the INVESCO
Complex, effective May 1, 1996. ^ Effective November 1, 1996, Mr. Frazier no
longer received any director's fees or other compensation from the Company or
other funds in the INVESCO Complex for his service as a director.
^(5)Totals as a percentage of the Company's net assets as of June 30, ^
1997.
^(6)Total as a percentage of the net assets of the INVESCO Complex as of
December 31, ^ 1996.
Messrs. Brady, Harris, and Hesser, as "interested persons" of the Company
and other funds in the INVESCO Complex, receive compensation as officers or
employees of 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 ^ IFG and
INVESCO Treasurer's Series Trust have adopted a Defined Benefit Deferred
Compensation Plan for the non-interested directors and trustees of the funds.
<PAGE>
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 ^ 40% of the basic retainer. These payments will continue
for the remainder of the qualified director's life or ten years, whichever is
longer (the "reduced retainer payments"). If a qualified director dies or
becomes disabled after age 72 and before age 74 while still a director of the
funds, the first year retirement benefit and the reduced retainer payments will
be made to him or 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 ^ IFG and
Treasurer's Series Trust funds in a manner determined to be fair and equitable
by the committee. The Company is not making any payments to directors under the
plan as of the date of this Statement of Additional Information. The Company has
no stock options or other pension or retirement plans for management or other
personnel and pays no salary or compensation to any of its officers.
The Company has an audit committee which is comprised of ^ five of the
directors who are not interested persons of the Company. The committee meets
periodically with the Company's independent accountants and officers to review
accounting principles used by the Company, the adequacy of internal controls,
the responsibilities and fees of the independent accountants, and other matters.
The Company also has a management liaison committee which meets quarterly
with various management personnel of ^ IFG in order (a) to facilitate better
understanding of management and operations of the Company, and (b) to review
legal and operational matters which have been assigned to the committee by the
board of directors, in furtherance of the board of directors' overall duty of
supervision.
HOW SHARES CAN BE PURCHASED
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." ^ IDI acts as the
<PAGE>
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 ^ described in the section of the Funds' Prospectus
entitled "How To Buy Shares - Distribution Expenses^," the Company has adopted a
Plan and Agreement of Distribution (the "Plan") pursuant to Rule 12b-1 under the
1940 Act, which was implemented on November 1, 1990. The Plan provides that the
Funds may make monthly payments to ^ IDI of amounts computed at an annual rate
no greater than 0.25% of each Fund's average net assets to ^ permit IDI, at its
discretion, to engage in certain activities and provide services in connection
with the distribution of a ^ Fund's shares to investors. Payment amounts by a
Fund under the Plan, for any month, may ^ be made to compensate IDI for
permissible activities engaged in and services provided by IDI during the
rolling 12-month period in which that month falls^. For the fiscal year ended
June 30, ^ 1997 the Tax-Free Intermediate Bond Fund and Tax-Free Long-Term Bond
Fund made payments to ^ IFG (the predecessor of IDI, distributor of shares of
the Funds) under the 12b-1 Plan (prior to the voluntary absorption of certain
Fund expenses by ^ IFG) in the amount of ^ $11,861 and ^ $893,896, respectively.
In addition, as of June 30, ^ 1997, $906 and ^ $43,979 of additional
distribution ^ accruals had been incurred under the Plan for the Tax-Free
Intermediate Bond Fund and Tax-Free Long-Term Bond Fund, respectively, ^ and
will be paid to IDI during the fiscal year ended June 30, 1998. As noted in the
Prospectus, one type of payable expenditure is the payment of compensation to
securities companies, and other financial institutions and organizations, which
may include ^ IDI-affiliated companies, in order to obtain various
distribution-related and/or administrative services for the Funds. Each Fund is
authorized by the Plan to use its assets to finance the payments made to obtain
those services. Payments will be made by ^ IDI to broker-dealers who sell shares
of a Fund and may be made to banks, savings and loan associations and other
depository institutions. Although the Glass-Steagall Act limits the ability of
certain banks to act as underwriters of mutual fund shares, the ^ Company does
not believe that these limitations would affect the ability of such banks to
enter into arrangements with ^ IDI, but can give no assurance in this regard.
However, to the extent it is determined otherwise in the future, arrangements
with banks might have to be modified or terminated, and, in that case, the size
of one or more of the Funds possibly could decrease to the extent that the banks
would no longer invest customer assets in a particular Fund. Neither the Company
nor its investment adviser will give any preference to banks or other depository
institutions which enter into such arrangements when selecting investments to be
made by each Fund.
For the ^ fiscal year ended June 30, ^ 1997, allocations of 12b^-1 amounts
paid by the Tax-Free ^ Intermediate Bond Fund for the following categories of
expenses were: advertising ^-- $1,700; sales literature, printing and postage
^-- $3,705; direct mail ^-- $977; public relations/promotion ^-- $554;
compensation to securities dealers and other organizations ^-- $915; marketing
<PAGE>
personnel ^--$4,010. For the ^ fiscal year ended June 30, ^ 1997 allocation of
12b^-1 amounts paid by the Tax-Free ^ Long-Term Bond Fund for the following
categories of expenses were: advertising^--$91,179; sales literature, printing
and postage^--$265,208; direct mail^--$52,633; public
relations/promotion^--$28,969; compensation to securities dealers and other
organizations^--$212,727; marketing personnel^--$243,180.
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 initial Plan was approved on April 21, 1993, at a meeting called for
such purpose by a majority of the directors of the Company, including a majority
of the directors who neither are "interested persons" of the Company nor have
any financial interest in the operation of the Plan ("12b-1 directors"). ^ This
Plan was approved by ^ IFG 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 ^ was continued by action
of the board of directors until ^ May 15, 1998. The board of directors, on
February 4, 1997, approved amending the Plan to a compensation type 12b-1 plan.
This amendment of the Plan will not result in increasing the amount of the
Funds' payments thereunder. Pursuant to authorization granted by the Company's
board of directors on September 2, 1997, a new Plan became effective on
September 29, 1997, under which IDI assumes all obligations related to
distribution from IFG.
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
<PAGE>
shareholder's ability to redeem his or her shares. So long as the Plan is in
effect, the selection and nomination of persons to serve as independent
directors of the Company shall be committed to the independent directors then in
office at the time of such selection or nomination. The Plan may not be amended
to increase materially the amount of 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, ^
IDI or the Funds, the latter by vote of a majority of the 12b-1 directors, or of
the holders of a majority of a Fund's outstanding voting securities, may
terminate such agreement as to that Fund without penalty upon 30 days' written
notice to the other party. No further payments will be made by a Fund under the
Plan in the event of its termination as to that Fund.
To the extent that the Plan constitutes a plan of distribution adopted
pursuant to Rule 12b-1 under the 1940 Act, it shall remain in effect as such, so
as to authorize the use of each Fund's assets in the amounts and for the
purposes set forth therein, notwithstanding the occurrence of an assignment, as
defined by the 1940 Act, and rules thereunder. To the extent it constitutes an
agreement pursuant to a plan, each Fund's obligation to make payments to ^ IDI
shall terminate automatically, in the event of such "assignment," in which case
the Funds may continue to make payments pursuant to the Plan to ^ IDI or another
organization only upon the approval of new arrangements, which may or may not be
with ^ IDI, regarding the use of the amounts authorized to be paid by it under
the Plan, by the directors, including a majority of the 12b-1 directors, by a
vote cast in person at a meeting called for such purpose.
Information regarding the services rendered under the Plan and the amounts
paid therefor by the Funds are provided to, and reviewed by, the directors on a
quarterly basis.^ On an annual basis, the directors consider the continued
appropriateness of the Plan and the level of compensation provided therein.
The only directors or interested persons, as that term is defined in
Section 2(a)(19) of the 1940 Act, of the Company who have a direct or indirect
financial interest in the operation of the Plan are the officers and directors
of the Company listed herein under the section entitled "The ^ Funds And Their
Management--Officers and Directors of the Company" who are also officers either
of ^ IFG or companies affiliated with ^ IFG. 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;
<PAGE>
(3) The positive effect which increased Fund assets will have on its
revenues could allow ^ IDI and its affiliated companies:
(a) To have greater resources to make the financial commitments
necessary to improve the quality and level of each Fund's
shareholder services (in both systems and personnel),
(b) To increase the number and type of mutual funds available to
investors from ^ IDI and its affiliated companies (and support
them in their infancy), and thereby expand the investment
choices available to all shareholders, and
(c) To acquire and retain talented employees who desire to be
associated with a growing organization; and
(4) Increased Fund assets may result in reducing each investor's share
of certain expenses through economies of scale (e.g. exceeding
established breakpoints in the advisory fee schedule and allocating
fixed expenses over a larger asset base), thereby partially
offsetting the costs of the Plan.
HOW SHARES ARE VALUED
As described in the section of ^ the Funds' Prospectus entitled ^"How To
Buy Shares," the net asset value of shares of each Fund 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 ^ that Fund receives a request to purchase or redeem shares.
Net asset value per share is not calculated on days the New York Stock Exchange
is closed, such as federal holidays including New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving, and Christmas. The net asset value per share of a Fund
is calculated by dividing the value of all securities held by ^ that Fund plus
other assets (including interest accrued but not collected), less ^ that Fund's
liabilities (including accrued expenses, but excluding capital and surplus), by
the number of shares outstanding of the Fund.
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
<PAGE>
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
periodically monitors the methods used by such pricing services. Absent unusual
circumstances, short-term debt securities with remaining maturities of 60 days
or less at the time of purchase are valued at amortized cost.
FUND PERFORMANCE
As discussed in the section of ^ the Funds' 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, ^ 1997 and the period December 1, 1993
(commencement of operations of the Fund) to June 30, ^ 1997 (life of the Fund)
was ^ 5.96% and ^ 4.00%, 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, ^ 1997 was ^ 7.05%, 6.24% and ^ 8.19%, respectively. Average
annual total return performance for each of the periods indicated was computed
by finding the average annual compounded rates of return that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:
P(1 + T)n = ERV
where: P = initial payment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of initial payment
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, ^ 1997, for the Tax- Free
Intermediate Bond Fund of 3.94% and for the Tax-Free Long-Term Bond Fund of ^
4.64%, 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
<PAGE>
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
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 Intermediate Bond Fund as of June 30, ^
1997 was ^ 4.64% at the 15% tax bracket, ^ 5.47% at the 28% tax bracket, and ^
5.88% at the 33% tax bracket. The tax equivalent yield of the Tax-Free Long-Term
Bond Fund as of June 30, 1997, was 5.46% at the 15% tax bracket, 6.44% at the
28% tax bracket, and 6.93% 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.
<PAGE>
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
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
<PAGE>
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 ^ the Funds'
Prospectus entitled "How ^ To Sell Shares," each Fund offers a Periodic
Withdrawal Plan. All dividends and distributions on shares owned by shareholders
participating in this Plan are reinvested in additional shares. ^ Because
withdrawal payments represent the proceeds from sales of shares, the amount of
shareholders' investments in a 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.
^ Participation in the Periodic Withdrawal Plan may be terminated at any
time by sending a written request to ^ IFG. Upon termination, all future
dividends and capital gain distributions will be reinvested in additional shares
unless a shareholder requests otherwise.
Exchange Privilege. As discussed in the section of ^ the Funds' Prospectus
entitled "How ^ To Buy Shares - Exchange Privilege," ^ each Fund offers
shareholders the privilege of exchanging shares of ^ a Fund for shares of
another fund or for shares of certain other no-load mutual funds advised by ^
IFG. 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.
<PAGE>
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 (7) days
following receipt of the required documents as described in the section of ^ the
Funds' Prospectus entitled "How ^ To Sell Shares." The right of redemption may
be suspended and payment postponed when: (a) the New York Stock Exchange is
closed for other than customary weekends and holidays; (b) trading on that
exchange is restricted; (c) an emergency exists as a result of which disposal by
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 ^ SEC by order so permits.
It is possible that in the future conditions may exist which would, in the
opinion of the Company's investment adviser, make it undesirable for a Fund to
pay for redeemed shares in cash. In such cases, the investment adviser may
authorize payment to be made in portfolio securities or other property of the
Funds. However, the Company ^ is obligated ^ under the ^ 1940 Act to redeem for
cash all shares of a Fund presented for redemption by any one shareholder having
a value up to $250,000 (or 1% of the Fund's net assets if that is less) in any
90-day period. Securities delivered in payment of redemptions are selected
entirely by the investment adviser based on what is in the best interests of 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.
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, ^ 1997, 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.
<PAGE>
^ Each Fund intends to qualify to pay "exempt-interest dividends" to its
shareholders. ^ Each Fund will so qualify if at least 50% of ^ its total assets
are invested in municipal securities at the close of each quarter of the
Company's fiscal year. The exempt interest portion of the income dividend which
is payable monthly may be based on the ratio of ^ a Fund's tax-exempt income to
taxable income for the entire ^ taxable year. In such case, the ratio would be
determined and reported to shareholders after the close of each ^ taxable year
^. Thus, the ^ exempt-interest portion of any particular dividend may be based
upon the tax-exempt portion of all distributions for the taxable year, rather
than upon the tax-exempt portion of that particular dividend. Exemption of
exempt-interest dividends for federal income tax purposes does not necessarily
result in exemption under the income or other tax laws of any state or local
taxing authority. Although these dividends generally ^ may be subject to ^ state
and local income taxes, the laws of the several states and local taxing
authorities vary with respect to the taxation of ^ exempt-interest dividends, ^
taxable dividends and distributions of capital gains.
^ A corporation includes exempt-interest dividends in calculating ^ its
alternative taxable income in situations where the "adjusted current earnings"
of the corporation exceeds its alternative minimum taxable income.
^
Any loss realized on the ^ redemption of shares in the Funds that have
been held by the shareholder for six months or less ^ is not deductible to the
extent of the amount of any exempt-interest dividend paid with respect to such
shares and the balance of the loss is^ treated as long-term, instead of
short-term, capital loss to the extent of any capital gain distributions
received on those shares.
Entries or persons who are "substantial users" (or persons related to
"substantial users") of facilities financed by private activity bonds or
industrial development bonds should consult their tax advisers before purchasing
shares of a Fund because, for users of certain of these facilities, the interest
on those bonds is not exempt from federal income tax. For these purposes, the
term "substantial user" is defined generally to include a "non-exempt person"
who regularly uses in trade or business a part of a facility financed from the
proceeds of such bonds.
Up to 85% of social security and railroad retirement benefits may be
included in taxable income for recipients whose adjusted gross income (including
income from tax-exempt sources such as a Fund) plus 50% of their benefits
exceeds certain base amounts. Exempt-interest dividends from a Fund still are
tax-exempt to the extent described above, they are only included in the
calculation of whether a recipient's income exceeds the established amounts.
IFG may provide shareholders of the Funds ^ with information concerning
the average cost basis of their shares in order to help them prepare their tax
returns. This information is intended as a convenience to shareholders^ and will
not be reported to the Internal Revenue Service (the "IRS"). The IRS permits the
use of several methods to determine the cost basis of mutual fund shares. The
cost basis information provided by ^ IFG will be computed using the
single-category average cost method, although neither ^ IFG nor the Company
<PAGE>
recommends any particular method of determining cost basis. Other methods may
result in different tax consequences. If a shareholder has reported gains or
losses ^ with respect to shares of a Fund in past years, the shareholder must
continue to use the method previously used, unless the shareholder applies to
the IRS for permission to change ^ the method.
Shareholders should consult their own tax advisers regarding specific
questions as to federal, state and local taxes. Qualification as a regulated
investment company under the Internal Revenue Code of 1986, as amended for
income tax purposes does not entail government supervision of management or
investment policies.
INVESTMENT PRACTICES
Portfolio Turnover. There are no fixed limitations regarding the 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,
1997, 1996^ and 1995, ^ the Tax-Free Long-Term Bond Fund's portfolio turnover
rates were 123%, 146%^ and 99%, ^ respectively. For the fiscal years ended June
30, 1997, 1996 and 1995 ^, the Tax-Free Intermediate Bond Fund's portfolio
turnover rates were 41%, 49%^ and 23% ^, respectively. The higher portfolio
turnover rate for the Tax-Free Long-Term Bond Fund during the fiscal year ended
June 30, ^ 1996, 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.
Placement of Portfolio Brokerage. Either ^ IFG, as the Company's
investment adviser, or INVESCO Trust, as the Company's sub-adviser, places
orders for the purchase and sale of securities with brokers and dealers based
upon ^ IFG's or INVESCO Trust's evaluation of their financial responsibility
subject to their ability to effect transactions at the best available prices. ^
IFG or INVESCO Trust evaluates the overall reasonableness of any brokerage
commissions paid by reviewing the quality of executions obtained on ^ each
Fund's portfolio transactions, viewed in terms of the size of transactions,
prevailing market conditions in the security purchased or sold, and general
economic and market conditions. In seeking to ensure that ^ any commissions
charged each Fund are consistent with prevailing and reasonable commissions, ^
IFG or INVESCO Trust also endeavors to monitor brokerage industry practices with
regard to the commissions charged by brokers and dealers on transactions
<PAGE>
effected for other comparable institutional investors. While ^ IFG 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, ^ IFG or INVESCO Trust may select brokers that provide
research services to effect such transactions. Research services consist of
statistical and analytical reports relating to issuers, industries, securities
and economic factors and trends, which may be of assistance or value to ^ IFG or
INVESCO Trust in making informed investment decisions. Research services
prepared and furnished by brokers through which the Fund effects securities
transactions may be used by ^ IFG or INVESCO Trust in servicing all of its
accounts and not all such services may be used by ^ IFG or INVESCO Trust in
connection with the Funds.
In recognition of the value of the above-described brokerage and research
services provided by certain brokers, ^ IFG or INVESCO Trust, consistent with
the standard of seeking to obtain the best execution on portfolio transactions,
may place orders with such brokers for the execution of Fund transactions on
which the commissions are in excess of those which other brokers might have
charged for effecting the same transactions.
Portfolio transactions may be effected through qualified broker-dealers ^
that recommend the Funds to their clients, or ^ that 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
<PAGE>
Company's directors ^ have authorized the ^ Funds to apply dollars
generated from the ^ Company's Plan and Agreement of Distribution pursuant to
Rule 12b-1 under the 1940 Act (the "Plan") to pay the entire Services Fee,
subject to the maximum Rule 12b-1 fee permitted by the Plan. With respect to
other NTF Programs, the ^ Company's directors have authorized the Fund to pay
transfer agency fees to ^ IDI based on the number of investors who have
beneficial interests in the NTF Program Sponsor's omnibus accounts in the Fund.
^ IDI, in turn, pays these transfer agency fees to the NTF Program Sponsor as a
sub-transfer agency or recordkeeping fee in payment of all or a portion of the
Services Fee. In the event that the sub-transfer agency or recordkeeping fee is
insufficient to pay all of the Services Fee with respect to these NTF Programs,
the directors of the ^ Company have authorized the ^ Funds 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. ^ IDI itself pays the portion of
the Fund's Services Fee, if any, that exceeds the sum of the sub-transfer agency
or recordkeeping fee and Rule 12b-1 fee. The ^ Company's directors have further
authorized ^ IDI to place a portion of ^ each Fund's brokerage transactions with
certain NTF Program Sponsors or their affiliated brokers, if ^ IDI 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 ^ a 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 ^ such Fund,
and second against any Rule 12b-1 fees used to pay a portion of the Services
Fee, on a basis which has resulted from negotiations between ^ IDI and the NTF
Program Sponsor. Thus, ^ a 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 ^ such Fund's credits. In the event that the
transfer agency fee paid by ^ a Fund to INVESCO with respect to investors who
have beneficial interests in a particular NTF Program Sponsor's omnibus accounts
in ^ a Fund exceeds the Services Fee applicable to ^ such Fund, after
application of credits, ^ IDI may carry forward the excess and apply it to
future Services Fees payable to that NTF Program Sponsor with respect to ^ such
Fund. The amount of excess transfer agency fees carried forward will be reviewed
for possible adjustment by ^ IDI prior to each fiscal year-end of the Fund. The
^ Company's board of directors has also authorized ^ each Fund to pay to ^ IDI
the full Rule 12b-1 fees contemplated by the Plan ^ to compensate IDI for
expenses incurred by ^ IDI in engaging in the activities and providing the
services on behalf of ^ such Fund contemplated by the Plan, subject to the
maximum Rule 12b-1 fee permitted by the Plan, notwithstanding that credits have
been applied to reduce the portion of the 12b-1 fee that would have been used to
^ compensate IDI for payments to such NTF Program Sponsor absent such credits.
The aggregate dollar amount of brokerage commissions paid by the Tax-Free
Intermediate Bond Fund for the years ended June 30, ^ 1997, 1996 and 1995 was
$0, $7,538 and $4,147, respectively, and for the fiscal years ended June 30,
1997, 1996^ and 1995^ were $748,918, $884,965^ and $393,584, ^ 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, ^ 1997, no commissions were paid to brokers in connection
with their provision of research services to either Fund.
<PAGE>
Neither ^ IFG nor INVESCO Trust receive any brokerage commissions on
portfolio transactions effected on behalf of the Funds, and there is no
affiliation between ^ IFG, INVESCO Trust, or any person affiliated with ^ IFG,
INVESCO Trust, or the Funds, and any broker or dealer that executes transactions
for the Funds.
ADDITIONAL INFORMATION
Common Stock. The Company has ^ 500,000,000 authorized shares of common
stock with a par value of $0.01 per share. Of the Company's authorized shares, ^
100,000,000 shares have been allocated to the Tax-Free Long-Term Bond Fund and ^
100,000,000 shares have been allocated to Tax-Free Intermediate Bond Fund. As of
June 30, ^ 1997, 14,368,509 shares of the Tax-Free Long-Term Bond Fund and ^
469,281 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 ^ series of common stock without seeking the approval of
shareholders and may classify and reclassify any authorized but unissued shares.
Shares of each ^ series represent the interests of the shareholders of
such ^ series in a particular portfolio of investments of the Company. Each ^
series of the Company's shares is preferred over all other ^ series with respect
to the assets specifically allocated to that ^ series, and all income, earnings,
profits and proceeds from such assets, subject only to the rights of creditors,
are allocated to shares of that ^ series. The assets of each ^ series are
segregated on the books of account and are charged with the liabilities of that
^ series and with a share of the Company's general liabilities. The board of
directors determines those assets and liabilities deemed to be general assets or
liabilities of the Company, and those items are allocated among ^ series in a
manner deemed by the board to be fair and equitable. Generally, such allocation
will be made based upon the relative total net assets of each ^ series. In the
unlikely event that a liability allocable to one class exceeds the assets
belonging to the ^ series, all or a portion of such liability may have to be
borne by the holders of shares of the Company's other ^ series.
All dividends on shares of a particular ^ series shall be paid only out of
the income belonging to that ^ series, pro rata to the holders of that ^ series.
In the event of the liquidation or dissolution of the Company or of a particular
^ series, the shareholders of each ^ series that is being liquidated shall be
entitled to receive, as a ^ series, when and as declared by the board of
directors, the excess of the assets belonging to that ^ series over the
liabilities belonging to that ^ series. The holders of shares of any ^ series
shall not be entitled to any distribution upon liquidation of any other ^
series. The assets so distributable to the shareholders of any particular ^
series shall be distributed among such shareholders in proportion to the number
of shares of that ^ series held by them and recorded on the books of the
Company.
<PAGE>
All Fund shares, regardless of ^ series, have equal voting rights. Voting
with respect to certain matters, such as ratification of independent accountants
or election of directors, will be by all ^ series of the Company. When not all ^
series are affected by a matter to be voted upon, such as approval of an
investment advisory contract or changes in a Fund's investment policies, only
shareholders of the ^ series affected by the matter will be entitled to vote.
Company shares have noncumulative voting rights, which means that the holders of
a majority of the shares voting for the election of directors of the Company can
elect 100% of the directors if they choose to do so. In such event, the holders
of the remaining shares voting for the election of directors will not be able to
elect any person or persons to the board of directors. After they have been
elected by shareholders, the directors will continue to serve until their
successors are elected and have qualified or they are removed from office, in
either case by a shareholder vote, or until death, resignation or retirement.
They may appoint their own successors, provided that always at least a majority
of the directors have been elected by the Company's shareholders. It is the
intention of the Company not to hold annual meetings of shareholders. The
directors will call annual or special meetings of shareholders for action by
shareholder vote as may be required by the 1940 Act or the Company's Articles of
Incorporation, or at their discretion.
Principal Shareholders. As of ^ August 1, ^ 1997, 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. ^ 45,754.5670 9.670%
Special Custody Account
^ For The Exclusive Benefit
of Customers
^ 101 Montgomery St.
San Francisco, CA 94104
^ John Canaday 35,658.9410 7.536%
^ 745 Pine St.
Boulder, CO 80302
INVESCO Tax-Free
Long-Term Bond Fund
- -------------------
-0- -0- -0-
<PAGE>
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, LLP, Washington, D.C.,
is legal counsel for the Company. The firm of Moye, Giles, O'Keefe, Vermeire &
Gorrell, Denver, Colorado, serves as special counsel to the Company.
Financial Statements. The Funds' audited financial statements and the
notes thereto for the fiscal year ended June 30, ^ 1997, 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, ^ 1997.
Prospectus. The Company will furnish, without charge, a copy of the ^
Funds' Prospectus ^ upon request. ^ Such requests should be made to the Company
at the mailing address or telephone number set forth on the first page of this
Statement of Additional Information.
Registration Statement. This Statement of Additional Information and the
Prospectus do not contain all of the information set forth in the Registration
Statement the Company has filed with the SEC. The complete Registration
Statement may be obtained from the SEC upon payment of the fee prescribed by the
rules and regulations of, the SEC.
<PAGE>
APPENDIX A
Description of Moody's ^ municipal bond ratings:
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and have
speculative characteristics as well.
Ba--Bonds which are rated Ba are judged to have speculative elements: their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments of, or maintenance of
other terms of, the contract over any long period of time may be small.
Caa--Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Rating Refinements: Moody's may apply the numerical modifier "1", for
municipally-backed bonds, and modifiers "1", "2" and "3", for corporate-backed
municipals. The modifier 1 indicates that the security ranks in the higher end
of its generic rating category; the modifier 2 indicates a mid-range ranking;
and modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
<PAGE>
Description of ^ S&P's municipal bond ratings:
AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA--Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in a small degree.
A--Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.
BB,B--Bonds rated BB or B are regarded, on balance, as predominantly speculative
with respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and B a higher degree of speculation. While such bonds will likely
have some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
CCC--Bonds rated CCC have a currently identifiable vulnerability to default and
are dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, they are not likely to have
the capacity to pay interest and repay principal.
Description of ^ Fitch's corporate and municipal bond ratings:
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.
<PAGE>
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 ^ D&P's long-term corporate and municipal debt ratings:
AAA--Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA- --High credit quality. Protection factors are strong. Risk is
modest but may vary slightly from time to time because of economic conditions.
BBB+, BBB, BBB- --Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
Plus (+) or Minus (-): The ratings may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
Description of Moody's ^ ratings of state and municipal notes:
Moody's ratings for state and municipal and other short-term obligations will be
designated Moody's Investment Grade ("MIG"). This distinction is in recognition
of the differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower are uppermost in importance in
short-term borrowing, while various factors of the first importance in long-term
borrowing risk are of lesser importance in the short run.
Symbols will be used as follows:
MIG-1--Notes bearing this designation are of the best quality enjoying strong
protection from established cash flows of funds for their servicing or from
established and broad-based access to the market for refinancing, or both.
MIG-2--Notes bearing this designation are of high quality, with margins of
protection ample although not so large as in the preceding group.
<PAGE>
Description of ^ S&P's ratings for investment grade municipal notes and
short-term demand obligations:
SP-1: Issues carrying this designation have a very strong or strong capacity to
pay principal and interest. Issues determined to possess overwhelming safety
characteristics will be given a "plus" designation.
SP-2: Issues carrying this designation have a satisfactory capacity to pay
principal and interest.
Description of Moody's ^ tax-exempt and taxable commercial paper ratings:
Moody's Commercial Paper ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
nine months. Moody's makes no representation that such obligations are exempt
from registration under the Securities Act of 1933, nor does it represent that
any specific note is a valid obligation of a rated issuer or issued in
conformity with any applicable law. The following designations, all judged to be
investment grade, indicate the relative repayment capacity of rated issuers of
securities in which the Fund may invest:
Prime-1: Issuers rated Prime-1 have a superior capacity for repayment for
short-term promissory obligations.
Prime-2: Issuers rated Prime-2 have a strong capacity for repayment of
short-term promissory obligations.
Description of ^ S&P's ratings for demand obligations and taxable and tax-exempt
commercial paper:
S&P's ratings are a current assessment of the likelihood of timely payment of
debt having an original maturity of no more than 365 days. The two rating
categories for securities in which the Fund may invest are as follows:
A-1: This designation indicates the degree of safety regarding timely payment is
either overwhelming or very strong. Issues determined to possess overwhelming
safety characteristics will be given a "plus" designation.
A-2: Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
<PAGE>
APPENDIX B
DESCRIPTION OF FUTURES CONTRACTS AND OPTIONS
Options on Securities
An option on a security provides the purchaser, or "holder," with the
right, but not the obligation, to purchase, in the case of a "call" option, or
sell, in the case of a "put" option, the security or securities underlying the
option, for a fixed exercise price up to a stated expiration date. The holder
pays a non-refundable purchase price for the option, known as the "premium." The
maximum amount of risk the purchaser of the option assumes is equal to the
premium plus related transaction costs, although the entire amount may be lost.
The risk of the seller, or "writer," however, is potentially unlimited, unless
the option is "covered," which is generally accomplished through the writer's
ownership of the underlying security, in the case of a call option, or the
writer's segregation of an amount of cash or securities equal to the exercise
price, in the case of a put option. If the writer's obligation is not so
covered, it is subject to the risk of the full change in value of the underlying
security from the time the option is written until exercise.
Upon exercise of the option, the holder is required to pay the purchase
price of the underlying security, in the case of a call option, or to deliver
the security in return for the purchase price, in the case of a put option.
Conversely, the writer is required to deliver the security, in the case of a
call option, or to purchase the security, in the case of a put option. Options
on securities which have been purchased or written may be closed out prior to
exercise or expiration by entering into an offsetting transaction on the
exchange on which the initial position was established, subject to the
availability of a liquid secondary market.
Options on securities are traded on national securities exchanges, such as
the Chicago Board of Options Exchange and the New York Stock Exchange, which are
regulated by the Securities and Exchange Commission. The Options Clearing
Corporation guarantees the performance of each party to an exchange-traded
option, by in effect taking the opposite side of each such option. A holder or
writer may engage in transactions in exchange-traded options on securities and
options on indices of securities only through a registered broker/dealer which
is a member of the exchange on which the option is traded.
An option position in an exchange-traded option may be closed out only on
an exchange which provides a secondary market for an option of the same series.
Although the Fund will generally purchase or write only those options for which
there appears to be an active secondary market, there is no assurance that a
liquid secondary market on an exchange will exist for any particular option at
any particular time. In such event it might not be possible to effect closing
transactions in a particular option with the result that this Fund would have to
exercise the option in order to realize any profit. This would result in this
Fund incurring brokerage commissions upon the disposition of underlying
securities acquired through the exercise of a call option or upon the purchase
of underlying securities upon the exercise of a put option. If these Funds as
<PAGE>
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. 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
<PAGE>
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.
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.
<PAGE>
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 each of the 11
three years in the period ended June
30, 1997 and the period from December
1, 1993 (commencement of ^ investment
operations) through June 30, 1994 for
Tax-Free Intermediate Bond ^ Fund.
Financial Highlights for each of the 13
ten years in the period ended June 30,
^ 1997 for ^ Tax-Free Long-Term Bond
Fund.
Page in
Statement
of Addi-
tional
Information
-----------
(2) The following audited financial
statements of the ^ Company and the notes
thereto for the fiscal year ended June
30, ^ 1997, 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, ^ 1997: Statement of
Investment Securities as of June 30, ^
1997; Statement of Assets and Liabilities
<PAGE>
as of June 30, ^ 1997; Statement of
Operations for the year ended June 30, ^
1997; Statement of Changes in Net Assets
for each of the two years ^ in the period
ended June 30, 1997; Financial Highlights
for each of the three years in the period
ended June 30, 1997 and the period from
December 1, 1993 (commencement of
operations) through June 30, 1994 for
Tax-Free Intermediate Bond Fund and for
each of the ^ five years ended June 30,
^ 1997 for 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)(1)
(2) ^ Bylaws(1)
(3) Not applicable.
(4) Not required to be filed on EDGAR
(5) (a) Investment Advisory Agreement between ^ Registrant
and INVESCO Funds Group, Inc. dated February 28, 1997. ^
(b) Sub-Advisory Agreement between INVESCO Funds Group,
Inc. and INVESCO Trust Company dated ^ February 28,
1997.
^(6) (a) General Distribution Agreement between Registrant
and INVESCO Funds Group, Inc. dated ^ February 28, 1997.
(b) Form of Distribution Agreement between Registrant
and INVESCO Distributors, Inc.
(7) Defined Benefit Deferred Compensation Plan for
Non-Interested Directors and ^ Trustees.
(8) Custody Agreement between Registrant and State Street
Bank and Trust Company dated July 1, ^ 1993.
<PAGE>
(a) Amendment to Custody Agreement dated October 25,
1995.
(b) Data Access Service Addendum dated May 19, 1997.
(9) (a) Transfer Agency Agreement between Registrant and
INVESCO Funds Group, Inc. dated February 28, 1997. ^
(b) Administrative Services Agreement between
^ Registrant and INVESCO Funds Group, Inc., dated
February 28, 1997. ^
(10) Opinion and consent of counsel as to the legality of the
securities being registered, indicating whether they
will, when sold, be legally issued, fully paid and non-^
assessable was filed with the Securities and Exchange
Commission on or about August 27, 1997, pursuant to Rule
24f-2 and herein incorporated by reference.
(11) Consent of Independent Accountants.
(12) Not applicable.
(13) Not applicable.
(14) Copies of model plans used in the establishment of
retirement plans as follows: Non-standardized Profit
Sharing Plan; Non-standardized Money Purchase Pension
Plan; Standardized Profit Sharing Plan Adoption
Agreement; Standardized Money Purchase Pension Plan;
Non-standardized 401(k) Plan Adoption Agreement;
Standardized 401(k) Paired Profit Sharing Plan;
Standardized Simplified Profit Sharing Plan;
Standardized Simplified Money Purchase Plan; Defined
Contribution Master Plan & Trust Agreement; and
Financial 403(b) Retirement Plan, all filed with
Registration Statement of INVESCO International Funds,
Inc. (File No. 33-63498), filed May 27, 1993, and
herein incorporated by reference.
(15) ^ Plan and Agreement of Distribution ^ pursuant to Rule
12b^-1 under the Investment Company Act of 1940 dated
April 30, 1993.
(a)^ Amendment of Plan and Agreement of Distribution ^
pursuant to 12b-1 under the Investment Company Act of
1940 dated July 19, 1995.
(b) Amended Plan and Agreement of Distribution adopted
pursuant to Rule 12b-1 under the Investment Company Act
of 1940 dated January 1, 1997.
<PAGE>
(c) Form of Amended Plan and Agreement of Distribution
adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940 dated ______________, 1997.
(16) Schedule for computation of performance data^.
(17) (a) Financial Data Schedule for the fiscal year ended
June 30, ^ 1997, for INVESCO Tax-Free Long-Term Bond
Fund.
(b) Financial Data Schedule for the fiscal year ended
June 30, ^ 1997 for INVESCO Tax- Free Intermediate Bond
Fund.
(18) Not applicable.
- ---------------------
(1)Previously filed on EDGAR with Post-Effective Amendment No. ^ 24 to the
^ Registrant's Registration Statement on Form N-1A on ^ October 18, 1996, 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, ^ 1997
-------------- ---------------
INVESCO Tax-Free
Long-Term Bond Fund
Common Stock ^ 7,959
INVESCO Tax-Free
Intermediate Bond Fund
Common Stock ^ 338
<PAGE>
Item 27. Indemnification
Indemnification provisions for officers and directors of Registrant
are set forth in Article VII, Section 2 of the Articles of Incorporation, and
are hereby incorporated by reference. See Item 24(b)(1) above. Under these
Articles, officers and directors will be indemnified to the fullest extent
permitted to directors by the Maryland General Corporation Law, subject only to
such limitations as may be required by the Investment Company Act of 1940, as
amended, and the rules thereunder. Under the Investment Company Act of 1940,
Fund directors and officers cannot be protected against liability to the Company
or its shareholders to which they would be subject because of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties of
their office. The Company also maintains liability insurance policies covering
its directors and officers.
Item 28. Business and Other Connections of Investment Adviser
See "The ^ Funds and ^ Their Management" in the 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 Capital Appreciation Funds, Inc.
INVESCO Diversified Funds, Inc.
^ INVESCO Emerging Opportunity Funds, Inc.
INVESCO Growth Fund, Inc.
INVESCO Income Funds, Inc.
INVESCO Industrial Income Fund, Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Multiple Asset Funds, Inc.
INVESCO Specialty Funds, Inc.
INVESCO Strategic Portfolios, Inc.
INVESCO Value Trust
INVESCO Variable Investment Funds, Inc.
<PAGE>
(b)
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------ ------------- --------------
^
Charles W. Brady Chairman of
1315 Peachtree St. NE the Board
Atlanta, GA 30309
Frederick W. Braley Chief Financial
400 Colony Square, Suite 2200 Officer and
1201 Peachtree St., N.E. Treasurer
Atlanta, GA 30361
Scott P. Brogan Senior Vice
400 Colony Square, Suite 2200 President
1201 Peachtree St., N.E.
Atlanta, GA 30361
Darryl Celkupa Vice President
7800 E. Union Avenue
Denver, CO 80237
Rayane S. Clark Vice President -
400 Colony Square, Suite 2200 Defined Contribu-
1201 Peachtree St., N.E. tions, Operations
Atlanta, GA 30361
M. Anthony Cox Senior Vice
1315 Peachtree St., N.E. President
Atlanta, GA 30309
^
Robert D. Cromwell Regional Vice
7800 E. Union Avenue President
Denver, CO 80237
^ Mary Ann Dallenbach Senior Vice
400 Colony Square, Suite 2200 President
1201 Peachtree St., N.E.
Atlanta, GA 30361
<PAGE>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------ ------------- -------------
Douglas P. Dohm Regional Vice
400 Colony Square, Suite 2200 President
1201 Peachtree St., N.E.
Atlanta, GA 30361
William J. Galvin, Jr. Sr. Vice President Assistant
7800 E. Union Avenue Secretary
^ 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.
Hubert L. Harris, Jr. Director Director
1315 Peachtree Street NE
Atlanta, GA 30309
Dan J. Hesser Chairman of the President,
7800 E. Union Avenue Board, President, CEO & Dir.
Denver, CO 80237 Chief Executive
Officer, & Director
Thomas M. Hurley Vice President
7800 E. Union Avenue
Denver, CO 80237
Gregory E. Hyde Vice President
7800 E. Union Avenue
Denver, CO 80237
Joseph B. Jennings Senior Vice
400 Colony Square, Suite 2200 President
1201 Peachtree St., N.E.
Atlanta, GA 30361
<PAGE>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------ ------------- -------------
^ Mark A. Jones Senior Vice
400 Colony Square, Suite 2200 President
1201 Peachtree St., N.E.
Atlanta, GA 30361
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
Barbara L. March Senior Vice
400 Colony Square, Suite 2200 President
1201 Peachtree St., N.E.
Atlanta, GA 30361
Charles P. Mayer Director ^
7800 E. Union Avenue ^
Denver, CO 80237
Robert J. O'Connor Director
^ 1201 Peachtree Street NE
Atlanta, GA ^ 30361
^
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
<PAGE>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------ ------------- -------------
Kent Schmeckpepper ^ Assistant Vice
7800 E. Union Avenue President
Denver, CO 80237
^
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
^
Alan I. Watson Vice President Asst. Sec.
7800 E. Union Avenue
Denver, CO 80237
Judy P. Wiese ^ 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.
<PAGE>
Item 32. Undertakings
(a) The Registrant hereby undertakes that the board of directors
will call such meetings of shareholders for action by
shareholder vote, including acting on the question of removal
of a director or directors, as may be requested in writing by
the holders of at least 10% of the outstanding shares of the
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 ^ 29th day of ^ August, 1997.
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 ^ 29th day of ^
August, 1997.
/s/ Dan J. Hesser /s/ Lawrence H. Budner
- ------------------------------ --------------------------------------------
Dan J. Hesser, President & Lawrence H. Budner, Director
Director
(Chief Executive Officer)
/s/ Ronald L. Grooms /s/ Daniel D. Chabris
- ------------------------------ --------------------------------------------
Ronald L. Grooms, Treasurer Daniel D. Chabris, Director
(Chief Financial and
Accounting Officer)
/s/ Victor L. Andrews /s/ Fred A. Deering
- ------------------------------ --------------------------------------------
Victor L. Andrews, Director Fred A. Deering, Director
/s/ Bob R. Baker /s/ ^ Larry Soll
- ------------------------------ --------------------------------------------
Bob R. Baker, Director ^ Larry Soll, Director
/s/ Hubert L. Harris, Jr. /s/ Kenneth T. King^
- ------------------------------ --------------------------------------------
Hubert L. Harris, Jr., Kenneth T. King, Director
Director
/s/ Charles W. Brady /s/ John W. McIntyre
- ------------------------------ --------------------------------------------
Charles W. Brady, Director John W. McIntyre, Director
/s/ Wendy L. Gramm
- ------------------------------
Wendy L. Gramm, Director
By* By:* /s/ Glen A. Payne
--------------------------- ----------------------------------------
Edward F. O'Keefe Glen A. Payne
Attorney in Fact Attorney in Fact
* Original Powers of Attorney authorizing Edward F. O'Keefe and Glen A.
Payne, and each of them, to execute this post-effective amendment to the
Registration Statement of the Registrant on behalf of the above-named directors
and officers of the Registrant (with the exception of Larry Soll) 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 and
October 18, 1996.
<PAGE>
Exhibit ^
Page in
Exhibit Number Registration Statement
- -------------- ----------------------
^ 5(a) 96
5(b) 104
6(a) 111
6(b) 120
7 129
8 135
8(a) 161
8(b) 162
9(a) 178
9(b) 191
11 195
15 196
15(a) 201
15(b) 204
15(c) 209
16 214
17(a) 215
17(b) 216
99.POASOLL 217
99.POAGRAMM 218
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made this 28th day of February, 1997, in Denver, Colorado,
by and between INVESCO FUNDS GROUP, INC. (the "Adviser"), a Delaware
corporation, and INVESCO Tax-Free Income Funds, Inc., a Maryland corporation
(the "Fund").
WITNESSETH:
WHEREAS, the Fund is a corporation organized under the laws of the State of
Maryland; and
WHEREAS, the Fund is registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), as a diversified, open-end management
investment company and has one class of shares which currently consists of two
series (the "Shares"), such series initially being the INVESCO Tax-Free Long-
Term Bond Fund and the INVESCO Tax-Free Intermediate Bond Fund (the
"Portfolios"); and
WHEREAS, the Fund desires that the Adviser manage its investment operations
and the Adviser desires to manage said operations;
NOW, THEREFORE, in consideration of these premises and of the mutual
covenants and agreements hereinafter contained, the parties hereto agree as
follows:
1. Investment Management Services. The Adviser hereby agrees to manage the
investment operations of the Fund and its Portfolios, subject to the terms of
this Agreement and to the supervision of the Fund's directors (the "Directors").
The Adviser agrees to perform, or arrange for the performance of, the following
specific services for the Fund:
(a) to manage the investment and reinvestment of all the assets, now or
hereafter acquired, of the Fund and the Portfolios of the Fund;
(b) to maintain a continuous investment program for the Fund and the
Portfolios of the Fund, consistent with (i) the Fund's and the Portfolios'
investment policies as set forth in the Fund's Articles of Incorporation,
Bylaws, and Registration Statement, as from time to time amended, under the
Investment Company Act of 1940, as amended (the "1940 Act"), and in any
prospectus and/or statement of additional information of the Fund or any
Portfolio of the Fund, as from time to time amended and in use under the
Securities Act of 1933, as amended, and (ii) the Fund's status as a regulated
investment company under the Internal Revenue Code of 1986, as amended;
(c) to determine what securities are to be purchased or sold for the Fund
and its Portfolios, unless otherwise directed by the Directors of the Fund,
and to execute transactions accordingly;
<PAGE>
(d) to provide to the Fund and the Portfolios 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 Portfolios of the Fund
should be invested in the various types of securities authorized for purchase
by the Fund;
(f) to make recommendations as to the manner in which voting rights,
rights to consent to Fund and/or Portfolio action and any other rights
pertaining to the Fund's portfolio securities shall be exercised; and
(g) to calculate the net asset value of the Fund and each Portfolio, as
applicable, as required by the 1940 Act, subject to such procedures as may be
established from time to time by the Fund's Directors, based upon the
information provided to the Adviser by the Fund or by the custodian, co-
custodian or sub-custodian of the Fund's or any of the 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 Portfolios
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 advisory fee payable pursuant to
paragraph 4 hereof. The Adviser may follow a policy of considering sales of
shares of the Fund as a factor in the selection of broker/dealers to execute
portfolio transactions, subject to the requirements of best execution discussed
above.
The Adviser shall for all purposes herein provided be deemed to be an
independent contractor.
2. Allocation of Costs and Expenses. The Adviser shall reimburse the Fund
monthly for any salaries paid by the Fund to officers, Directors, and full-time
employees of the Fund who also are officers, general partners or employees of
the Adviser or its affiliates. Except for such sub-accounting, recordkeeping,
and administrative services which are to be provided by the Adviser to the Fund
under the Administrative Services Agreement between the Fund and the Adviser
<PAGE>
dated April 30, 1993, which was approved on April 23, 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 Portfolios is a party or in
connection with securities owned by the Fund or the Portfolios of the Fund;
(b) the fees, charges and expenses of any independent public accountants,
custodian, depository, dividend disbursing agent, dividend reinvestment
agent, transfer agent, registrar, independent pricing services and legal
counsel for the Fund or for the Portfolios of the Fund;
(c) the interest on indebtedness, if any, incurred by the Fund or the
Portfolios of the Fund;
(d) the taxes, including franchise, income, issue, transfer, business
license, and other corporate fees payable by the Fund or the Portfolios 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 independent Directors, and the
compensation of any employees and officers of the Fund who are not employees
of the Adviser or one of its affiliated companies and compensated as such;
(g) the costs of printing and distributing reports, notices of
shareholders' meetings, proxy statements, dividend notices, prospectuses,
<PAGE>
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 litigation by or against the Fund or the
Portfolios 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 Portfolios of the Fund, as determined
<PAGE>
by valuations made in accordance with the Fund's procedure for calculating the
Portfolios' 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 INVESCO Tax-Free Long-Term Bond Fund shall be as follows:
0.55% on the first $300 million of the Portfolio's average net assets as so
determined, 0.45% of the Portfolio's average 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. The advisory fee applicable to the INVESCO
Tax-Free Intermediate Bond Fund shall be 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.
During any period when the determination of any Portfolio's net asset value
is suspended by the Directors of the Fund, the net asset value of a share of the
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
Portfolios 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 any 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 Portfolios
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 Portfolios 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
Portfolios of the Fund, and unless sooner terminated as hereinafter provided,
shall remain in force for an initial term ending two years from the date of
execution, and from year to year thereafter, but only as long as such
<PAGE>
continuance is specifically approved at least annually (i) by a vote of a
majority of the outstanding voting securities of the Portfolios of the Fund or
by the Directors of the Fund, and (ii) by a majority of the Directors of the
Fund who are not interested persons of the Adviser or the Fund by votes cast in
person at a meeting called for the purpose of voting on such approval.
This Agreement may, on 60 days' prior written notice, be terminated without
the payment of any penalty, by the Directors of the Fund, or by the vote of a
majority of the outstanding voting securities of the Fund or the Portfolios 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 4 earned prior to such termination.
7. Non-Exclusive Services. The Adviser shall, during the term of this
Agreement, be entitled to render investment advisory services to others,
including, without limitation, other investment companies with similar
objectives to those of the Fund or the Portfolios 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 Portfolios 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 Portfolios of the Fund and the Adviser's other
customers.
8. Liability. The Adviser shall have no liability to the Fund or any
Portfolios 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 performance of its obligations to the Fund
or any Portfolios of the Fund not involving willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations and duties hereunder.
<PAGE>
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, discharged
or terminated orally, but only by an instrument in writing signed by the Fund
and the Adviser. In addition, 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 Portfolios 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. 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.
By:/s/Dan J. Hesser
----------------------------------
President
ATTEST:
/s/ Glen A. Payne
- ------------------------------
Secretary
INVESCO FUNDS GROUP, INC.
By:/s/ Ronald L. Grooms
------------------------
Senior Vice President
ATTEST:
/s/ Glen A. Payne
- -------------------------
Secretary
SUB-ADVISORY AGREEMENT
AGREEMENT made this 28th day of February, 1997, by and between INVESCO Funds
Group, Inc. ("INVESCO"), a Delaware corporation, and INVESCO TRUST COMPANY,
a Colorado corporation ("the Sub-Adviser").
WITNESSETH:
WHEREAS, INVESCO 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 such series being designated the INVESCO
Tax-Free Long-Term Bond and the INVESCO Tax-Free Intermediate Bond Fund (the
"Funds"); and
WHEREAS, INVESCO and the Sub-Adviser are engaged in rendering investment
advisory services and are registered as investment advisers under the Investment
Advisers Act of 1940; and
WHEREAS, INVESCO has entered into an Investment Advisory Agreement with the
Company (the "INVESCO Investment Advisory Agreement"), pursuant to which INVESCO
is required to provide investment advisory services to the Company, and, upon
receipt of written approval of the Company, is authorized to retain companies
which are affiliated with INVESCO to provide such services; and
WHEREAS, the Sub-Adviser is willing to provide investment advisory services
to the Company on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, INVESCO and the Sub-Adviser hereby agree as follows:
ARTICLE I
DUTIES OF THE SUB-ADVISER
INVESCO hereby employs the Sub-Adviser to act as investment adviser to the
Company and to furnish the investment advisory services described below, subject
to the broad supervision of INVESCO and Board of Directors of the Company, for
the period and on the terms and conditions set forth in this Agreement. The Sub-
Adviser hereby accepts such assignment and agrees during such period, at its own
expense, to render such services and to assume the obligations herein set forth
for the compensation provided for herein. The Sub-Adviser shall for all purposes
herein be deemed to be an independent contractor and, unless otherwise expressly
provided or authorized herein, shall have no authority to act for or represent
the Company in any way or otherwise be deemed an agent of the Company.
<PAGE>
The Sub-Adviser hereby agrees to manage the investment operations of the
Funds, subject to the supervision of the Company's directors (the "Directors")
and INVESCO. Specifically, the Sub-Adviser agrees to perform the following
services:
(a) to manage the investment and reinvestment of all the assets, now or
hereafter acquired, of the Funds, and to execute all purchases and sales of
portfolio securities;
(b) to maintain a continuous investment program for the Funds, consistent
with (i) the Funds' investment policies as set forth in the Company's
Articles of Incorporation, Bylaws, and Registration Statement, as from time
to time amended, under the Investment Company Act of 1940, as amended (the
"1940 Act"), and in any prospectus and/or statement of additional information
of the Funds, as from time to time amended and in use under the Securities
Act of 1933, as amended, and (ii) the Company's status as a regulated
investment company under the Internal Revenue Code of 1986, as amended;
(c) to determine what securities are to be purchased or sold for the
Funds, unless otherwise directed by the Directors of the Company or INVESCO,
and to execute transactions accordingly;
(d) to provide to the Funds the benefit of all of the investment analysis
and research, the reviews of current economic conditions and trends, and the
consideration of long-range investment policy now or hereafter generally
available to investment advisory customers of the Sub-Adviser;
(e) to determine what portion of the Funds should be invested in the
various types of securities authorized for purchase by the Funds; and
(f) to make recommendations as to the manner in which voting rights,
rights to consent to Fund action and any other rights pertaining to the
Funds' portfolio securities shall be exercised.
With respect to execution of transactions for the Funds, the Sub-Adviser is
authorized to employ such brokers or dealers as may, in the Sub-Adviser's best
judgment, implement the policy of the Funds to obtain prompt and reliable
execution at the most favorable price obtainable. In assigning an execution or
negotiating the commission to be paid therefor, the Sub-Adviser is authorized to
consider the full range and quality of a broker's services which benefit the
Funds, including but not limited to research and analytical capabilities,
reliability of performance, and financial soundness and responsibility. Research
services prepared and furnished by brokers through which the Sub-Adviser effects
securities transactions on behalf of the Funds may be used by the Sub-Adviser in
servicing all of its accounts, and not all such services may be used by the Sub-
Adviser in connection with the Funds. In the selection of a broker or dealer for
execution of any negotiated transaction, the Sub-Adviser shall have no duty or
obligation to seek advance competitive bidding for the most favorable negotiated
commission rate for such transaction, or to select any broker solely on the
<PAGE>
basis of its purported or "posted" commission rate for such transaction,
provided, however, that the Sub-Adviser shall consider such "posted" commission
rates, if any, together with any other information available at the time as to
the level of commissions known to be charged on comparable transactions by other
qualified brokerage firms, as well as all other relevant factors and
circumstances, including the size of any contemporaneous market in such
securities, the importance to the Funds of speed, efficiency, and
confidentiality of execution, the execution capabilities required by the
circumstances of the particular transactions, and the apparent knowledge or
familiarity with sources from or to whom such securities may be purchased or
sold. Where the commission rate reflects services, reliability and other
relevant factors in addition to the cost of execution, the Sub-Adviser shall
have the burden of demonstrating that such expenditures were bona fide and for
the benefit of the Funds.
ARTICLE II
ALLOCATION OF CHARGES AND EXPENSES
The Sub-Adviser assumes and shall pay for maintaining the staff and personnel
necessary to perform its obligations under this Agreement, and shall, at its own
expense, provide the office space, equipment and facilities necessary to perform
its obligations under this Agreement. Except to the extent expressly assumed by
the Sub-Adviser herein and except to the extent required by law to be paid by
the Sub-Adviser, INVESCO and/or the Company shall pay all costs and expenses in
connection with the operations of the Funds.
ARTICLE III
COMPENSATION OF THE SUB-ADVISER
For the services rendered, facilities furnished, and expenses assumed by the
Sub-Adviser, INVESCO shall pay to the Sub-Adviser a fee, computed daily and paid
as of the last day of each month, using for each daily calculation the most
recently determined net asset value of each of the Funds, as determined by a
valuation made in accordance with the Funds' procedures for calculating its net
asset value as described in the Funds' Prospectus and/or Statement of Additional
Information. With respect to the INVESCO Tax-Free Long-Term Bond Fund, 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. With respect to the INVESCO Tax-Free
Intermediate Bond Fund, the advisory fee to the Sub-Adviser shall be computed at
the annual rate of 0.25% of the first $300 million of the average net assets;
0.20% on the next $200 million of average net assets; and 0.15% on the average
net assets greater than $500 million. During any period when the determination
of any Fund's net asset value is suspended by the Directors of the Funds, 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
<PAGE>
to any assets of the Funds which may be invested in any other investment company
for which the Sub-Adviser serves as investment adviser or sub-adviser. The fee
provided for hereunder shall be prorated in any month in which this Agreement is
not in effect for the entire month. The Sub-Adviser shall be entitled to receive
fees hereunder only for such periods as the INVESCO Investment Advisory
Agreement remains in effect.
ARTICLE IV
ACTIVITIES OF THE SUB-ADVISER
The services of the Sub-Adviser to the Funds are not to be deemed to be
exclusive, the Sub-Adviser and any person controlled by or under common control
with the Sub-Adviser (for purposes of this Article IV referred to as
"affiliates") being free to render services to others. It is understood that
directors, officers, employees and shareholders of the Funds are or may become
interested in the Sub-Adviser and its affiliates, as directors, officers,
employees and shareholders or otherwise and that directors, officers, employees
and shareholders of the Sub-Adviser, INVESCO and their affiliates are or may
become interested in the Funds as directors, officers and employees.
ARTICLE V
AVOIDANCE OF INCONSISTENT POSITIONS AND COMPLIANCE WITH APPLICABLE LAWS
In connection with purchases or sales of securities for the investment
portfolio of the Funds, neither the Sub-Adviser nor any of its directors,
officers or employees will act as a principal or agent for any party other than
the Funds or receive any commissions. The Sub-Adviser will comply with all
applicable laws in acting hereunder including, without limitation, the 1940 Act;
the Investment Advisers Act of 1940, as amended; and all rules and regulations
duly promulgated under the foregoing.
ARTICLE VI
DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall become effective as of the date it is approved by a
majority of the outstanding voting securities of each of the Funds, 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 (i) the Directors of the Funds, or by the vote of a majority
of the outstanding voting securities of the Funds, and (ii) a majority of those
Directors who are not parties to this Agreement or interested persons of any
such party cast in person at a meeting called for the purpose of voting on such
approval.
<PAGE>
This Agreement may be terminated at any time, without the payment of any
penalty, by INVESCO, the Funds by vote of the Directors of the Company, or by
vote of a majority of the outstanding voting securities of the Funds, or by the
Sub-Adviser. A termination by INVESCO or the Sub-Adviser shall require sixty
days' written notice to the other party and to the Company, and a termination by
the Company shall require such notice to each of the parties. This Agreement
shall automatically terminate in the event of its assignment to the extent
required by the Investment Company Act of 1940 and the Rules thereunder.
The Sub-Adviser agrees to furnish to the Directors of the Company such
information on an annual basis as may reasonably be necessary to evaluate the
terms of this Agreement.
Termination of this Agreement shall not affect the right of the Sub-Adviser
to receive payments on any unpaid balance of the compensation described in
Article III hereof earned prior to such termination.
ARTICLE VII
AMENDMENTS OF THIS AGREEMENT
No provision of this Agreement may be orally changed or discharged, but may
only be modified by an instrument in writing signed by the Sub-Adviser and
INVESCO. In addition, no amendment to this Agreement shall be effective unless
approved by (1) the vote of a majority of the Directors of the Company,
including a majority of the Directors who are not parties to this Agreement or
interested persons of any such party cast in person at a meeting called for the
purpose of voting on such amendment and (2) the vote of a majority of the
outstanding voting securities of each of the Funds (other than an amendment
which can be effective without shareholder approval under applicable law).
ARTICLE VIII
DEFINITIONS OF CERTAIN TERMS
In interpreting the provisions of this Agreement, the terms "vote of a
majority of the outstanding voting securities," "assignments," "affiliated
person" and "interested person," when used in this Agreement, shall have the
respective meanings specified in the Investment Company Act and the Rules and
Regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under said Act.
ARTICLE IX
GOVERNING LAW
This Agreement shall be construed in accordance with the laws of the State of
Colorado and the applicable provisions of the Investment Company Act. To the
<PAGE>
extent that the applicable laws of the State of Colorado, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
ARTICLE X
MISCELLANEOUS
Notice. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for the receipt of such notice.
Severability. Each provision of this Agreement is intended to be severable.
If any provision of this Agreement shall be held illegal or made invalid by a
court decision, statute, rule or otherwise, such illegality or invalidity shall
not affect the validity or enforceability of the remainder of this Agreement.
Headings. The headings in this Agreement are inserted for convenience and
identification only and are in no way intended to describe, interpret, define or
limit the size, extent or intent of this Agreement or any provision hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
INVESCO FUNDS GROUP, INC.
By:/s/ Ronald L. Grooms
------------------------------
Senior Vice President
ATTEST:
/s/ Glen A. Payne
--------------------------
Secretary
INVESCO TRUST COMPANY
By:/s/ Dan J. Hesser
----------------------------
President
ATTEST:
/s/ Glen A. Payne
--------------------------
Secretary
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made this 28th day of February, 1997 between INVESCO
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 has one class of shares (the "Shares") which is
divided into two series, and which may be divided into additional series (the
"Series"), each representing an interest in a separate portfolio of investments,
and it is in the interest of the Fund to offer the Shares for sale continuously;
and
WHEREAS, the Underwriter is engaged in the business of selling shares of
investment companies either directly to investors or through other securities
dealers; and
WHEREAS, the Fund and the Underwriter wish to enter into an agreement with
each other with respect to the continuous offering of the Shares of each Series
in order to promote growth of the Fund and facilitate the distribution of the
Shares;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto as follows:
1. The Fund hereby appoints the Underwriter its agent for the
distribution of Shares of each Series in jurisdictions wherein such
Shares legally may be offered for sale; provided, however, that the
Fund in its absolute discretion may (a) issue or sell Shares of each
Series directly to purchasers, or (b) issue or sell Shares of a
particular Series to the shareholders of any other Series or to the
shareholders of any other investment company, for which the
Underwriter or any affiliate thereof shall act as exclusive
distributor, who wish to exchange all or a portion of their
investment in Shares of such Series or in shares of such other
investment company for the Shares of a particular Series.
Notwithstanding any other provision hereof, the Fund may terminate,
suspend or withdraw the offering of Shares whenever, in its sole
discretion, it deems such action to be desirable. The Fund reserves
the right to reject any subscription in whole or in part for any
reason.
2. The Underwriter hereby agrees to serve as agent for the
distribution of the Shares and agrees that it will use its best
efforts with reasonable promptness to sell such part of the
authorized Shares remaining unissued as from time to time shall be
effectively registered under the Securities Act of 1933, as amended
(the "1933 Act"), at such prices and on such terms as hereinafter
set forth, all subject to applicable federal and state securities
<PAGE>
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.
5. The Shares of each Series offered for sale or sold by the
Underwriter shall be offered or sold at the net asset value per
share determined in accordance with the then current Prospectus
and/or SAI relating to the sale of the Shares of the appropriate
Series except as departure from such prices shall be permitted by
the then current Prospectus and/or SAI of the Fund, in accordance
with applicable rules and regulations of the Securities and Exchange
Commission. The price the Fund shall receive for the Shares of each
Series purchased from the Fund shall be the net asset value per
share of such Share, determined in accordance with the Prospectus
and/or SAI applicable to the sale of the Shares of such Series.
<PAGE>
6. Except as may be otherwise agreed to by the Fund, the
Underwriter shall be responsible for issuing and delivering such
confirmations of sales made by it pursuant to this Agreement as may
be required; provided, however, that the Underwriter or the Fund may
utilize the services of other persons or entities believed by it to
be competent to perform such functions. Shares shall be registered
on the transfer books of the Fund in such names and denominations as
the Underwriter may specify.
7. The Fund will execute any and all documents and furnish any
and all information which may be reasonably necessary in connection
with the qualification of the Shares for sale (including the
qualification of the Fund as a broker-dealer where necessary or
advisable) in such states as the Underwriter may reasonably request
(it being understood that the Fund shall not be required without its
consent to comply with any requirement which in the opinion of the
Directors of the Fund is unduly burdensome). The Underwriter, at its
own expense, will effect all qualifications of itself as broker or
dealer, or otherwise, under all applicable state or Federal laws
required in order that the Shares may be sold in such states or
jurisdictions as the Fund may reasonably request.
8. The Fund shall prepare and furnish to the Underwriter from
time to time the most recent form of the Prospectus and/or SAI of
the Fund and/or of each Series of the Fund. The Fund authorizes the
Underwriter to use the Prospectus and/or SAI, in the forms furnished
to the Underwriter from time to time, in connection with the sale of
the Shares of the Fund and/or of each Series of the Fund. The Fund
will furnish to the Underwriter from time to time such information
with respect to the Fund, each Series, and the Shares as the
Underwriter may reasonably request for use in connection with the
sale of the Shares. The Underwriter agrees that it will not use or
distribute or authorize the use, distribution or dissemination by
broker-dealers or others in connection with the sale of the Shares
any statements, other than those contained in a current Prospectus
and/or SAI of the Fund or applicable Series, except such
supplemental literature or advertising as shall be lawful under
Federal and state securities laws and regulations, and that it will
promptly furnish the Fund with copies of all such material.
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
<PAGE>
current Prospectus and/or SAI. In selling, redeeming or
repurchasing the Shares for the account of the Fund, the
Underwriter will in all respects conform to the requirements of
all state and federal laws and the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., relating to
such sale, redemption or repurchase, as the case may be. The
Underwriter will observe and be bound by all the provisions of
the Articles of Incorporation or Bylaws of the Fund and of
any provisions in the Registration Statement, Prospectus and
SAI, as such may be amended or supplemented from time to
time, notice of which shall have been given to the Underwriter,
which at the time in any way require, limit, restrict or
prohibit or otherwise regulate any action on the part of the
Underwriter.
11. (a) The Fund shall indemnify, defend and hold
harmless the Underwriter, its officers and directors and any
person who controls the Underwriter within the meaning of the
1933 Act, from and against any and all claims, demands,
liabilities and expenses (including the cost of investigating
or defending such claims, demands or liabilities and any
attorney fees incurred in connection therewith) which the
Underwriter, its officers and directors or any such
controlling person, may incur under the federal securities
laws, the common law or otherwise, arising out of or based
upon any alleged untrue statement of a material fact contained
in the Registration Statement or any related Prospectus and/or
SAI or arising out of or based upon any alleged omission to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
Notwithstanding the foregoing, this indemnity
agreement, to the extent that it might require
indemnity of the Underwriter or any person who is an officer,
director or controlling person of the Underwriter, shall not
inure to the benefit of the Underwriter or officer, director
or controlling person thereof unless a court of competent
jurisdiction shall determine, or it shall have been determined
by controlling precedent, that such result would not be
against public policy as expressed in the federal securities
laws and in no event shall anything contained herein be so
construed as to protect the Underwriter against any liability
to the Fund, the Directors or the Fund's shareholders to which
the Underwriter would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Agreement.
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
<PAGE>
principal address in Denver, Colorado and sent to the
Fund by the person against whom such action is brought
within ten (10) days after the summons or other first legal
process shall have been served upon the Underwriter, its
officers or directors or any such controlling person. The
failure to notify the Fund of any such action shall not
relieve the Fund from any liability which it may have to the
person against whom such action is brought by reason of any
such alleged untrue statement or omission otherwise than
on account of the indemnity agreement contained in this
paragraph. The Fund shall be entitled to assume the
defense of any suit brought to enforce such claim, demand, or
liability, but in such case the defense shall be conducted by
counsel chosen by the Fund and approved by the Underwriter,
which approval shall not be unreasonably withheld. If the Fund
elects to assume the defense of any such suit and retain
counsel approved by the Underwriter, the defendant or
defendants in such suit shall bear the fees and expenses of an
additional counsel obtained by any of them. Should the Fund
elect not to assume the defense of any such suit, or should
the Underwriter not approve of counsel chosen by the Fund, the
Fund will reimburse the Underwriter, its officers and
directors or the controlling person or persons named as
defendant or defendants in such suit, for the reasonable fees
and expenses of any counsel retained by the Underwriter or
them. In addition, the Underwriter shall have the right to
employ counsel to represent it, its officers and directors and
any such controlling person who may be subject to liability
arising out of any claim in respect of which indemnity may be
sought by the Underwriter against the Fund hereunder if in the
reasonable judgment of the Underwriter it is advisable for the
Underwriter, its officers and directors or such controlling
person to be represented by separate counsel, in which event
the reasonable fees and expenses of such separate counsel
shall be borne by the Fund. This indemnity agreement and the
Fund's representations and warranties in this Agreement shall
remain operative and in full force and effect and shall
survive the delivery of any of the Shares as provided in this
Agreement. This indemnity agreement shall inure exclusively to
the benefit of the Underwriter and its successors, the
Underwriter's officers and directors and their respective
estates and any such controlling person and their successors
and estates. The Fund shall promptly notify the Underwriter of
the commencement of any litigation or proceeding against it in
connection with the issue and sale of the Shares.
(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
<PAGE>
the Fund, its Directors or any such controlling person may
incur under the Federal securities laws, the common law or
otherwise, but only to the extent that such liability or
expense incurred by the Fund, its Directors or such
controlling person resulting from such claims or demands shall
arise out of or be based upon (a) any alleged untrue statement
of a material fact contained in information furnished in
writing by the Underwriter to the Fund specifically for use in
the Registration Statement or any related Prospectus and/or
SAI or shall arise out of or be based upon any alleged
omission to state a material fact in connection with such
information required to be stated in the Registration
Statement or the related Prospectus and/or SAI or necessary to
make such information not misleading and (b) any alleged act
or omission on the Underwriter's part as the Fund's agent that
has not been expressly authorized by the Fund in writing.
Notwithstanding the foregoing, this indemnity agreement,
to the extent that it might require indemnity of the Fund
or any Director or controlling person of the Fund, shall
not inure to the benefit of the Fund or Director
or controlling person thereof unless a court of
competent jurisdiction shall determine, or it shall have been
determined by controlling precedent, that such result would
not be against public policy as expressed in the federal
securities laws and in no event shall anything contained
herein be so construed as to protect any Director of the Fund
against any liability to the Fund or the Fund's shareholders
to which the Director would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence or reckless
disregard of the duties involved in the conduct of his office.
This indemnity agreement is expressly conditioned upon
the Underwriter's being notified of any action brought
against the Fund, its Directors or any such controlling
person, which notification shall be given by 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
<PAGE>
to assume the defense of any such suit and retain counsel
approved by the Fund, the defendant or defendants in such
suit shall bear the fees and expenses of an additional counsel
obtained by any of them. Should the Underwriter elect not
to assume the defense of any such suit, or should the
Fund not approve of counsel chosen by the Underwriter,
the Underwriter will reimburse the Fund, its Directors or the
controlling person or persons named as defendant or defendants
in such suit, for the reasonable fees and expenses of any
counsel retained by the Fund or them. In addition, the
Fund shall have the right to employ counsel to represent it,
its Directors and any such controlling person who may
be subject to liability arising out of any claim
in respect of which indemnity may be sought by
the Fund against the Underwriter hereunder if in the
reasonable judgment of the Fund it is advisable for the Fund,
its Directors or such controlling person to be represented by
separate counsel, in which event the reasonable fees and
expenses of such separate counsel shall be borne by the
Underwriter. This indemnity agreement and the Underwriter's
representations and warranties in this Agreement shall remain
operative and in full force and effect and shall survive the
delivery of any of the Shares as provided in this Agreement.
This indemnity agreement shall inure exclusively to the
benefit of the Fund and its successors, the Fund's Directors
and their respective estates and any such controlling person
and their successors and estates. The Underwriter shall
promptly notify the Fund of the commencement of any litigation
or proceeding against it in connection with the issue and sale
of the Shares.
12. The Fund will pay or cause to be paid (a) expenses
(including the fees and disbursements of its own counsel) of any
registration of the Shares under the 1933 Act, as amended, (b)
expenses incident to the issuance of the Shares, and (c) expenses
(including the fees and disbursements of its own counsel) incurred
in connection with the preparation, printing and distribution of the
Fund's Prospectuses, SAIs, and periodic and other reports sent to
holders of the Shares in their capacity as such. The Underwriter
shall prepare and provide necessary copies of all sales literature
subject to the Fund's approval thereof.
13. This Agreement shall become effective as of the date it is
approved by a majority vote of the Directors of the Fund, as well as
a majority vote of the Directors who are not "interested persons"
(as defined in the Investment Company Act) of the Fund, and shall
continue in effect for an initial term expiring February 28, 1998,
and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually (a)(i) by a
vote of the Directors of the Fund or (ii) by a vote of a majority of
the outstanding voting securities of the Fund, and (b) by a vote of
a majority of the Directors of the Fund who are not "interested
<PAGE>
persons," as defined in the Investment Company Act, of the Fund
cast in person at a meeting for the purpose of voting on this
Agreement.
Either party hereto may terminate this Agreement on any date,
without the payment of a penalty, by giving the other party at
least 60 days' prior written notice of such termination specifying
the date fixed therefor. In particular, this Agreement may be
terminated at any time, without payment of any penalty, by vote of a
majority of the members of the Directors of the Fund or by a vote of
a majority of the outstanding voting securities of the Fund on not
more than 60 days' written notice to the Underwriter.
Without prejudice to any other remedies of the Fund provided
for in this Agreement or otherwise, the Fund may terminate
this Agreement at any time immediately upon the Underwriter's
failure to fulfill any of the obligations of the Underwriter
hereunder.
14. The Underwriter expressly agrees that, notwithstanding anything
to the contrary herein, or in any applicable law, it will
look solely to the assets of the Fund for any obligations of the
Fund hereunder and nothing herein shall be construed to create any
personal liability on the part of any Director or any shareholder of
the Fund.
15. This Agreement shall automatically terminate in the event
of its assignment. In interpreting the provisions of this Section
15, the definition of "assignment" contained in the Investment
Company Act shall be applied.
16. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other
party at such address as such other party may designate for the
receipt of such notice.
17. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in
writing signed by the Fund and the Underwriter and, if applicable,
approved in the manner required by the Investment Company Act.
18. Each provision of this Agreement is intended to be
severable. If any provision of this Agreement shall be held illegal
or made invalid by a court decision, statute, rule or otherwise,
such illegality or invalidity shall not affect the validity or
enforceability of the remainder of this Agreement.
19. This Agreement and the application and interpretation hereof shall
be governed exclusively by the laws of the State of Colorado.
<PAGE>
IN WITNESS WHEREOF, the Fund and the Underwriter have each caused this
Agreement to be executed on its behalf by an officer thereunto duly authorized
and the Underwriter has caused its corporate seal to be affixed as of the day
and year first above written.
INVESCO TAX-FREE INCOME FUNDS, INC.
ATTEST:
By:/s/ Dan J. Hesser
----------------------------------
/s/ Dan J. Hesser
Glen A. Payne President
- ------------------
Glen A. Payne
Secretary
INVESCO FUNDS GROUP, INC.
ATTEST:
By: /s/ Ronald L. Grooms
-----------------------------
Ronald L. Grooms
/s/ Glen A. Payne Senior Vice President
- ----------------------------
Glen A. Payne
Secretary
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made this ----- day of ---------, 1997 between INVESCO
TAX-FREE INCOME FUNDS, INC., a Maryland corporation (the "Fund"), and INVESCO
DISTRIBUTORS, INC., a Delaware corporation (the "Underwriter").
W I T N E S S E T H:
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), as a diversified, open-end management
investment company and currently has one class of shares (the "Shares") which is
divided into two series, and which may be divided into additional series (the
"Series"), each representing an interest in a separate portfolio of investments,
and it is in the interest of the Fund to offer the Shares for sale continuously;
and
WHEREAS, the Underwriter is engaged in the business of selling shares of
investment companies either directly to investors or through other securities
dealers; and
WHEREAS, the Fund and the Underwriter wish to enter into an agreement with
each other with respect to the continuous offering of the Shares of each Series
in order to promote growth of the Fund and facilitate the distribution of the
Shares;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto as follows:
1. The Fund hereby appoints the Underwriter its agent for the
distribution of Shares of each Series in jurisdictions wherein such
Shares legally may be offered for sale; provided, however, that the
Fund in its absolute discretion may (a) issue or sell Shares of each
Series directly to purchasers, or (b) issue or sell Shares of a
particular Series to the shareholders of any other Series or to the
shareholders of any other investment company, for which the
Underwriter or any affiliate thereof shall act as exclusive
distributor, who wish to exchange all or a portion of their
investment in Shares of such Series or in shares of such other
investment company for the Shares of a particular Series.
Notwithstanding any other provision hereof, the Fund may terminate,
suspend or withdraw the offering of Shares whenever, in its sole
discretion, it deems such action to be desirable. The Fund
reserves the right to reject any subscription in whole or in part
for any reason.
2. The Underwriter hereby agrees to serve as agent for the
distribution of the Shares and agrees that it will use its best
efforts with reasonable promptness to sell such part of the
authorized Shares remaining unissued as from time to time shall be
effectively registered under the Securities Act of 1933, as amended
(the "1933 Act"), at such prices and on such terms as hereinafter
set forth, all subject to applicable federal and state securities
<PAGE>
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.
5. The Shares of each Series offered for sale or sold by the
Underwriter shall be offered or sold at the net asset value per
share determined in accordance with the then current Prospectus
and/or SAI relating to the sale of the Shares of the appropriate
Series except as departure from such prices shall be permitted by
the then current Prospectus and/or SAI of the Fund, in accordance
with applicable rules and regulations of the Securities and Exchange
Commission. The price the Fund shall receive for the Shares of each
Series purchased from the Fund shall be the net asset value per
share of such Share, determined in accordance with the Prospectus
and/or SAI applicable to the sale of the Shares of such Series.
6. Except as may be otherwise agreed to by the Fund, the
Underwriter shall be responsible for issuing and delivering such
confirmations of sales made by it pursuant to this Agreement as may
<PAGE>
be required; provided, however, that the Underwriter or the Fund may
utilize the services of other persons or entities believed by it to
be competent to perform such functions. Shares shall be registered
on the transfer books of the Fund in such names and denominations as
the Underwriter may specify.
7. The Fund will execute any and all documents and furnish any
and all information which may be reasonably necessary in connection
with the qualification of the Shares for sale (including the
qualification of the Fund as a broker-dealer where necessary or
advisable) in such states as the Underwriter may reasonably request
(it being understood that the Fund shall not be required without its
consent to comply with any requirement which in the opinion of the
Directors of the Fund is unduly burdensome). The Underwriter, at its
own expense, will effect all qualifications of itself as broker or
dealer, or otherwise, under all applicable state or Federal laws
required in order that the Shares may be sold in such states or
jurisdictions as the Fund may reasonably request.
8. The Fund shall prepare and furnish to the Underwriter from
time to time the most recent form of the Prospectus and/or SAI of
the Fund and/or of each Series of the Fund. The Fund authorizes the
Underwriter to use the Prospectus and/or SAI, in the forms furnished
to the Underwriter from time to time, in connection with the sale of
the Shares of the Fund and/or of each Series of the Fund. The Fund
will furnish to the Underwriter from time to time such information
with respect to the Fund, each Series, and the Shares as the
Underwriter may reasonably request for use in connection with the
sale of the Shares. The Underwriter agrees that it will not use or
distribute or authorize the use, distribution or dissemination by
broker-dealers or others in connection with the sale of the Shares
any statements, other than those contained in a current Prospectus
and/or SAI of the Fund or applicable Series, except such
supplemental literature or advertising as shall be lawful under
Federal and state securities laws and regulations, and that it will
promptly furnish the Fund with copies of all such material.
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
<PAGE>
Incorporation or Bylaws of the Fund and of any provisions in the
Registration Statement, Prospectus and SAI, as such may be amended
or supplemented from time to time, notice of which shall have been
given to the Underwriter, which at the time in any way require,
limit, restrict or prohibit or otherwise regulate any action on the
part of the Underwriter.
11. (a) The Fund shall indemnify, defend and hold harmless
the Underwriter, its officers and directors and any
person who controls the Underwriter within the meaning of the
1933 Act, from and against any and all claims, demands,
liabilities and expenses (including the cost of investigating
or defending such claims, demands or liabilities and any
attorney fees incurred in connection therewith) which the
Underwriter, its officers and directors or any such
controlling person, may incur under the federal securities
laws, the common law or otherwise, arising out of or based
upon any alleged untrue statement of a material fact contained
in the Registration Statement or any related Prospectus and/or
SAI or arising out of or based upon any alleged omission to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
Notwithstanding the foregoing, this indemnity agreement,
to the extent that it might require indemnity of
the Underwriter or any person who is an officer,
director or controlling person of the Underwriter, shall not
inure to the benefit of the Underwriter or officer, director
or controlling person thereof unless a court of competent
jurisdiction shall determine, or it shall have been determined
by controlling precedent, that such result would not be
against public policy as expressed in the federal securities
laws and in no event shall anything contained herein be so
construed as to protect the Underwriter against any liability
to the Fund, the Directors or the Fund's shareholders to which
the Underwriter would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Agreement.
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
<PAGE>
contained in this paragraph. The Fund shall be entitled to
assume the defense of any suit brought to enforce such claim,
demand, or liability, but in such case the defense shall be
conducted by counsel chosen by the Fund and approved by the
Underwriter, which approval shall not be unreasonably
withheld. If the Fund elects to assume the defense of
any such suit and retain counsel approved by the
Underwriter, the defendant or defendants in such suit shall
bear the fees and expenses of an additional counsel obtained
by any of them. Should the Fund elect not to assume the
defense of any such suit, or should the Underwriter not
approve of counsel chosen by the Fund, the Fund will reimburse
the Underwriter, its officers and directors or the controlling
person or persons named as defendant or defendants in such
suit, for the reasonable fees and expenses of any counsel
retained by the Underwriter or them. In addition, the
Underwriter shall have the right to employ counsel to
represent it, its officers and directors and any such
controlling person who may be subject to liability arising out
of any claim in respect of which indemnity may be sought by
the Underwriter against the Fund hereunder if in the
reasonable judgment of the Underwriter it is advisable for the
Underwriter, its officers and directors or such controlling
person to be represented by separate counsel, in which event
the reasonable fees and expenses of such separate counsel
shall be borne by the Fund. This indemnity agreement and the
Fund's representations and warranties in this Agreement shall
remain operative and in full force and effect and shall
survive the delivery of any of the Shares as provided in this
Agreement. This indemnity agreement shall inure exclusively to
the benefit of the Underwriter and its successors, the
Underwriter's officers and directors and their respective
estates and any such controlling person and their successors
and estates. The Fund shall promptly notify the Underwriter of
the commencement of any litigation or proceeding against it in
connection with the issue and sale of the Shares.
(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
<PAGE>
information required to be stated in the Registration
Statement or the related Prospectus and/or SAI or necessary to
make such information not misleading and (b) any alleged act
or omission on the Underwriter's part as the Fund's agent that
has not been expressly authorized by the Fund in writing.
Notwithstanding the foregoing, this indemnity agreement, to
the extent that it might require indemnity of the Fund or
any Director or controlling person of the Fund, shall not
inure to the benefit of the Fund or Director or controlling
person thereof unless a court of competent jurisdiction
shall determine, or it shall have been determined by
controlling precedent, that such result would not be
against public policy as expressed in the federal
securities laws and in no event shall anything contained
herein be so construed as to protect any Director of the Fund
against any liability to the Fund or the Fund's shareholders
to which the Director would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence or reckless
disregard of the duties involved in the conduct of his office.
This indemnity agreement is expressly conditioned upon the
Underwriter's being notified of any action brought
against the Fund, its Directors or any such controlling
person, which notification shall be given by letter or
telegram addressed to the Underwriter at its principal
office in Denver, Colorado, and sent to the Under-
writer by the person against whom such action is brought,
within ten (10) days after the summons or other first legal
process shall have been served upon the Fund, its Directors or
any such controlling person. The failure to notify the
Underwriter of any such action shall not relieve the
Underwriter from any liability which it may have to the person
against whom such action is brought by reason of any such
alleged untrue statement or omission otherwise than on account
of the indemnity agreement contained in this paragraph. The
Underwriter shall be entitled to assume the defense of any
suit brought to enforce such claim, demand, or liability, but
in such case the defense shall be conducted by counsel chosen
by the Underwriter and approved by the Fund, which approval
shall not be unreasonably withheld. If the Underwriter elects
to assume the defense of any such suit and retain counsel
approved by the Fund, the defendant or defendants in such suit
shall bear the fees and expenses of an additional counsel
obtained by any of them. Should the Underwriter elect not to
assume the defense of any such suit, or should the Fund not
approve of counsel chosen by the Underwriter, the Underwriter
will reimburse the Fund, its Directors or the controlling
person or persons named as defendant or defendants in such
suit, for the reasonable fees and expenses of any counsel
retained by the Fund or them. In addition, the Fund shall have
the right to employ counsel to represent it, its Directors and
any such controlling person who may be subject to liability
<PAGE>
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 are not "interested persons"
(as defined in the Investment Company Act) of the Fund, and shall
continue in effect for an initial term expiring
------------------, 1998, and from year to year thereafter, but
only so long as such continuance is specifically approved at least
annually (a)(i) by a vote of the Directors of the Fund or (ii) by a
vote of a majority of the outstanding voting securities of the Fund,
and (b) by a vote of a majority of the Directors of the Fund who are
not "interested persons," as defined in the Investment Company Act,
<PAGE>
of the Fund cast in person at a meeting for the purpose of voting
on this Agreement.
Either party hereto may terminate this Agreement on any
date, without the payment of a penalty, by giving the other party at
least 60 days' prior written notice of such termination specifying
the date fixed therefor. In particular, this Agreement may be
terminated at any time, without payment of any penalty, by vote of a
majority of the members of the Directors of the Fund or by a vote of
a majority of the outstanding voting securities of the Fund on not
more than 60 days' written notice to the Underwriter.
Without prejudice to any other remedies of the Fund provided
for in this Agreement or otherwise, the Fund may terminate
this Agreement at any time immediately upon the Underwriter's
failure to fulfill any of the obligations of the Underwriter
hereunder.
14. The Underwriter expressly agrees that, notwithstanding anything
to the contrary herein, or in any applicable law, it will
look solely to the assets of the Fund for any obligations of the
Fund hereunder and nothing herein shall be construed to create any
personal liability on the part of any Director or any shareholder of
the Fund.
15. This Agreement shall automatically terminate in the event
of its assignment. In interpreting the provisions of this Section
15, the definition of "assignment" contained in the Investment
Company Act shall be applied.
16. Any notice under this Agreement shall be in writing, addressed
and delivered or mailed, postage prepaid, to the other
party at such address as such other party may designate for the
receipt of such notice.
17. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in
writing signed by the Fund and the Underwriter and, if applicable,
approved in the manner required by the Investment Company Act.
18. Each provision of this Agreement is intended to be severable.
If any provision of this Agreement shall be held illegal
or made invalid by a court decision, statute, rule or otherwise,
such illegality or invalidity shall not affect the validity or
enforceability of the remainder of this Agreement.
19. This Agreement and the application and interpretation hereof shall
be governed exclusively by the laws of the State of Colorado.
<PAGE>
IN WITNESS WHEREOF, the Fund and the Underwriter have each caused this
Agreement to be executed on its behalf by an officer thereunto duly authorized
and the Underwriter has caused its corporate seal to be affixed as of the day
and year first above written.
INVESCO TAX-FREE INCOME FUNDS, INC.
ATTEST:
By:/s/
-----------------------------
Dan J. Hesser
/s/ President
- --------------------------
Glen A. Payne
Secretary
INVESCO DISTRIBUTORS, INC.
ATTEST:
By:/s/
-----------------------------
Ronald L. Grooms
/s/ Senior Vice President
- --------------------------
Glen A. Payne
Secretary
DEFINED BENEFIT DEFERRED COMPENSATION PLAN
FOR NON-INTERESTED DIRECTORS AND TRUSTEES
The registered, open-end management investment companies referred to on
Schedule A as the Schedule may hereafter be revised by the addition and deletion
of investment companies (the "Funds") have adopted this Defined Benefit Deferred
Compensation Plan ("Plan") for the benefit of those directors and trustees of
the Funds who are not interested directors or trustees thereof as defined in
Section 2(a)(19) of the Investment Company Act of 1940, as amended ("Independent
Directors").
1. Eligibility
Each Independent Director who has served as such ("Eligible Service") on
the boards of any of the Funds and their predecessor and successor entities, if
any, or as an Independent Director of the now-defunct investment management
company known as FG Series for an aggregate of at least five years at the time
of his Service Termination Date (as defined in paragraph 2) will be entitled to
receive benefits under the Plan. An Independent Director's period of Eligible
Service commences on the date of election to the board of directors or trustees
of any one or more of the Funds ("Board"). Hereafter, references in this Plan to
Independent Directors shall be deemed to include only those Directors who have
met the Eligible Service requirement for Plan participation.
2. Service Termination and Service Termination Date
a. Service Termination. Service Termination means termination of service
(other than by disability or death) of an Independent Director which results
from the Director's having reached his Service Termination Date.
b. Service Termination Date. An Independent Director's Service Termination
Date is normally the last day of the calendar quarter in which such Director's
seventy-second birthday occurs. A majority of the Board of a Fund may annually
extend a Director's Service Termination Date for a maximum period of three
years, through the date not later than the last day of the calendar quarter in
which such Director's seventy-fifth birthday occurs.
As used in this Plan unless otherwise stipulated, Service Termination Date
shall mean an Independent Director's normal Service Termination Date, or the
Director's extended Service Termination Date, whichever may be applicable to the
Independent Director.
3. Defined Payments and Benefit
a. Payments. If an Independent Director's Service Termination Date occurs
on a date not later than the last day of the calendar quarter in which such
Director's seventy-fourth birthday occurs, the Independent Director will receive
four quarterly payments during the first twelve months subsequent to his Service
Termination Date (the "First Year Retirement Payments"), with each payment to be
<PAGE>
equal to 25 percent of the annual basic retainer payable by each Fund to the
Independent Director on his Service Termination Date (excluding any fees
relating to attending meetings or chairing committees).
b. Benefit. Commencing with the first anniversary of the Service
Termination Date of any Independent Director who has received the First Year
Retirement Payments, and commencing as of the Service Termination Date of an
Independent Director whose Service Termination Date is subsequent to the date of
the last day of the calendar quarter in which such Director's seventy-fourth
birthday occurred, the Independent Director will receive, for the remainder of
his life, a benefit (the "Benefit"), payable quarterly, with each quarterly
payment to be equal to 10 percent of the annual basic retainer payable by each
Fund to the Independent Director on his Service Termination Date (excluding any
fees relating to attending meetings or chairing committees).
c. Death Provisions. If an Independent Director's service as a Director is
terminated because of his death subsequent to the last day of the calendar
quarter in which such Director's seventy-second birthday occurred and prior to
the last day of the calendar quarter in which such Director's seventy-fourth
birthday occurs, the designated beneficiary of the Independent Director shall
receive the First Year Retirement Payments and shall, commencing with the
quarter following the quarter in which the last First Year Retirement Payment is
made, receive the Benefit for a period of ten years, with quarterly payments to
be made to the designated beneficiary.
If an Independent Director's service as a Director is terminated because
of his death prior to the last day of the calendar quarter in which such
Director's seventy-second birthday occurs or subsequent to the last day of the
calendar quarter in which such Director's seventy-fourth birthday occurred, the
designated beneficiary of the Independent Director shall receive the Benefit for
a period of ten years, with quarterly payments to be made to the designated
beneficiary commencing in the first quarter following the Director's death.
d. Disability Provisions. If an Independent Director's service as a
Director is terminated because of his disability subsequent to the last day of
the calendar quarter in which such Director's seventy-second birthday occurred
and prior to the last day of the calendar quarter in which such Director's
seventy-fourth birthday occurs, the Independent Director shall receive the First
Year Retirement Payments and shall, commencing with the quarter following the
quarter in which the last First Year Retirement Payment is made, receive the
Benefit for the remainder of his life, with quarterly payments to be made to the
disabled Independent Director. If the disabled Independent Director should die
before the First Year Retirement Payments are completed and before forty
quarterly Benefit payments are made, such payments will continue to be made to
the Independent Director's designated beneficiary until the aggregate of the
First Year Retirement Payments and forty quarterly Benefit payments have been
made to the disabled Independent Director and the Director's designated
beneficiary.
<PAGE>
If an Independent Director's service as a Director is terminated because
of his disability prior to the last day of the calendar quarter in which such
Director's seventy-second birthday occurs or subsequent to the last day of the
calendar quarter in which such Director's seventy-fourth birthday occurred, the
Independent Director shall receive the Benefit for the remainder of his life,
with quarterly payments to be made to the disabled Independent Director
commencing in the first quarter following the Director's termination for
disability. If the disabled Independent Director should die before forty
quarterly payments are made, payments will continue to be made to the
Independent Director's designated beneficiary until the aggregate of forty
quarterly payments has been made to the disabled Independent Director and the
Director's designated beneficiary.
e. Death of Independent Director and Beneficiary. If the Independent
Director and his designated beneficiary should die before the First Year
Retirement Payments and/or a total of forty quarterly Benefit payments are made,
the remaining value of the Independent Director's First Year Retirement Payments
and/or Benefit shall be determined as of the date of the death of the
Independent Director's designated beneficiary and shall be paid to the estate of
the designated beneficiary in one lump sum or in periodic payments, with the
determinations with respect to the value of the First Year Retirement Payments
and/or Benefit and the method and frequency of payment to be made by the
Committee (as defined in paragraph 8.a.) in its sole discretion.
4. Designated Beneficiary
The beneficiary referred to in paragraph 3 may be designated or changed by
the Independent Director without the consent of any prior beneficiary on a form
provided by the Committee (as defined in paragraph 8.a.) and delivered to the
Committee before the Independent Director's death. If no such beneficiary shall
have been designated, or if no designated beneficiary shall survive the
Independent Director, the value or remaining value of the Independent Director's
First Year Retirement Payments and/or Benefit shall be determined as of the date
of the death of the Independent Director by the Committee and shall be paid as
promptly as possible in one lump sum to the Independent Director's estate.
5. Disability
An Independent Director shall be deemed to have become disabled for the
purposes of paragraph 3 if the Committee shall find on the basis of medical
evidence satisfactory to it that the Independent Director is disabled, mentally
or physically, as a result of an accident or illness, so as to be prevented from
performing each of the duties which are incumbent upon an Independent Director
in fulfilling his responsibilities as such.
6. Time of Payment
The First Year Retirement Payments and/or the Benefit for each year will
be paid in quarterly installments that are as nearly equal as possible.
<PAGE>
7. Payment of First Year Retirement Payments and/or Benefit: Allocation of
Costs
Each Fund is responsible for the payment of the amount of the First Year
Retirement Payments and/or Benefit applicable to the Fund, as well as its
proportionate share of all expenses of administration of the Plan, including
without limitation all accounting and legal fees and expenses and fees and
expenses of any Actuary. The obligations of each Fund to pay such First Year
Retirement Payments and/or Benefit and expenses will not be secured or funded in
any manner, and such obligations will not have any preference over the lawful
claims of each Fund's creditors and shareholders. To the extent that the First
Year Retirement Payments and/or Benefit is paid by more than one Fund, such
costs and expenses will be allocated among such Funds in a manner that is
determined by the Committee to be fair and equitable under the circumstances. To
the extent that one or more of such Funds consist of one or more separate
portfolios, such costs and expenses allocated to any such Fund will thereafter
be allocated among such portfolios by the Board of the Fund in a manner that is
determined by such Board to be fair and equitable under the circumstances.
8. Administration
a. The Committee. Any question involving entitlement to payments under or
the administration of the Plan will be referred to a four-person committee (the
"Committee") composed of three Independent Directors designated by all of the
Independent Directors of the Funds and one director of the Funds who is not an
Independent Director, designated by the non-Independent Directors. Except as
otherwise provided herein, the Committee will make all interpretations and
determinations necessary or desirable for the Plan's administration, and such
interpretations and determinations will be final and conclusive. Committee
members will be elected annually.
b. Powers of the Committee. The Committee will represent and act on behalf
of the Funds in respect of the Plan and, subject to the other provisions of the
Plan, the Committee may adopt, amend or repeal bylaws or other regulations
relating to the administration of the Plan, the conduct of the Committee's
affairs, its rights or powers, or the rights or powers of its members. The
Committee will report to the Independent Directors and to the Boards of the
Funds from time to time on its activities in respect of the Plan. The Committee
or persons designated by it will cause such records to be kept as may be
necessary for the administration of the Plan.
9. Miscellaneous Provisions
a. Rights Not Assignable. Other than as is specifically provided in
paragraph 3, the right to receive any payment under the Plan is not transferable
or assignable, and nothing in the Plan shall create any benefit, cause of
action, right of sale, transfer, assignment, pledge, encumbrance, or other such
right in any heirs or the estate of any Independent Director.
b. Amendment, etc. The Committee, with the concurrence of the Board of any
Fund, may as to the specific Fund at any time amend or terminate the Plan or
<PAGE>
waive any provision of the Plan; provided, however, that subject to the
limitations imposed by paragraph 7, no amendment, termination or waiver will
impair the rights of an Independent Director to receive the payments which would
have been made to such Independent Director had there been no such amendment,
termination, or waiver.
c. No Right to Reelection. Nothing in the Plan will create any obligation
on the part of the Board of any Fund to nominate any Independent Director for
reelection.
d. Consulting. Subsequent to his Service Termination Date, an Independent
Director may render such services for any Fund, for such compensation, as may be
agreed upon from time to time by such Independent Director and the Board of the
Fund which desires to procure such services.
e. Effectiveness. The Plan will be effective for all Independent Directors
who have Service Termination Dates occurring on and after October 20, 1993.
Periods of Eligible Service shall include periods commencing prior and
subsequent to such date. Upon its adoption by the Board of a Fund, the Plan will
become effective as to that Fund on the date when the Committee determines that
any regulatory approval or advice that may be necessary or appropriate in
connection with the Plan have been obtained.
Adopted October 20, 1993. Amended October 19, 1994.
Amended May 1, 1996, effective July 1, 1996.
<PAGE>
SCHEDULE A
TO
DEFINED BENEFIT DEFERRED COMPENSATION PLAN
FOR NON-INTERESTED DIRECTORS AND TRUSTEES
INVESCO Diversified Funds, Inc.
INVESCO Dynamics Fund, Inc.
INVESCO Emerging Opportunity Funds, Inc.
INVESCO Growth Fund, Inc.
INVESCO Income Funds, Inc.
INVESCO Industrial Income Fund, Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Multiple Asset Funds, Inc.
INVESCO Specialty Funds, Inc.
INVESCO Strategic Portfolios, Inc.
INVESCO Tax-Free Income Funds, Inc.
INVESCO Value Trust
INVESCO Variable Investment Funds, Inc.
The INVESCO Advisor Funds, Inc.
INVESCO Treasurer's Series Trust
CUSTODIAN CONTRACT
Between
INVESCO TAX-FREE MONEY FUNDS, INC.
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
-----
1. Employment of Custodian and Property to be Held by It 1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian in the United States 3
2.1 Holding Securities 3
2.2 Delivery of Securities 3
2.3 Registration of Securities 8
2.4 Bank Accounts 9
2.5 Availability of Federal Funds 10
2.6 Collection of Income 10
2.7 Payment of Fund Monies 11
2.8 Liability for Payment in Advance of
Receipt of Securities Purchased 14
2.9 Appointment of Agents 15
2.10 Deposit of Fund Assets in Securities System 15
2.10A Fund Assets Held in the Custodian's Direct
Paper Sytem 18
2.11 Segregated Account 20
2.12 Ownership Certificates for Tax Purposes 21
2.13 Proxies 22
2.14 Communications Relating to Portfolio
Securities 22
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States 23
3.1 Appointment of Foreign Sub-Custodians 23
3.2 Assets to be Held 23
3.3 Foreign Securities Depositories 24
3.4 Agreements with Foreign Banking Institutions 24
3.5 Access of Independent Accountants of the Fund 25
3.6 Reports by Custodian 25
3.7 Transactions in Foreign Custody Account 26
3.8 Liability of Foreign Sub-Custodians 27
3.9 Liability of Custodian 27
3.10 Reimbursement for Advances 28
3.11 Monitoring Responsibilities 29
3.12 Branches of U.S. Banks 29
3.13 Tax Law 30
<PAGE>
4. Payments for Sales or Repurchase or Redemptions
of Shares of the Funds 31
5. Proper Instructions 32
6. Actions Permitted Without Express Authority 33
7. Evidence of Authority 33
8. Duties of Custodian With Respect to the Books of Account
and Calculation of Net Asset Value and Net Income 34
9. Records 34
10. Opinion of Fund's Independent Accountants 35
11. Reports to Fund by Independent Public Accountants 35
12. Compensation of Custodian 36
13. Responsibility of Custodian 36
14. Effective Period, Termination and Amendment 38
15. Successor Custodian 40
16. Interpretive and Additional Provisions 41
17. Additional Funds 42
18. Massachusetts Law to Apply 42
19. Prior Contracts 42
20. Shareholder Communications 43
<PAGE>
CUSTODIAN CONTRACT
This Contract between Invesco INVESCO Tax-Free Income Funds, Inc., a
corporation organized and existing under the laws of Maryland, having its
principal place of business at 7800 E. Union Avenue, Denver, Colorado 80237
hereinafter called the "Fund", and State Street Bank and Trust Company, a
Massachusetts trust company, having its principal place of business at 225
Franklin Street, Boston, Massachusetts, 02110, hereinafter called the
"Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Fund intends to initially offer shares in two series, the
INVESCO Tax-Free Long-Term Bond Fund and INVESCO Tax-Free Intermediate Bond Fund
(such series together with all other series subsequently established by the
Fund and made subject to this Contract in accordance with paragraph 17, being
herein referred to as the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of the assets of
the Portfolios of the Fund, including securities which the Fund, on behalf of
the applicable Portfolio desires to be held in places within the United States
("domestic securities") and securities it desires to be held outside the United
States ("foreign securities") pursuant to the provisions of the Articles of
Incorporation. The Fund on behalf of the Portfolio(s) agrees to deliver to the
Custodian all securities and cash of the Portfolios, and all payments of income,
payments of principal or capital distributions received by it with respect to
all securities owned by the Portfolio(s) from time to time, and the cash
consideration received by it for such new or treasury shares of capital stock of
the Fund representing interests in the Portfolios, ("Shares") as may be issued
or sold from time to time. The Custodian shall not be responsible for any
property of a Portfolio held or received by the Portfolio and not delivered to
the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article
5), the Custodian shall on behalf of the applicable Portfolio(s) from time to
time employ one or more sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of Directors of the Fund
<PAGE>
on behalf of the applicable Portfolio(s), and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as sub-custodian
for the Fund's foreign securities on behalf of the applicable Portfolio(s) the
foreign banking institutions and foreign securities depositories designated in
Schedule A hereto but only in accordance with the provisions of Article 3.
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY
THE CUSTODIAN IN THE UNITED STATES
2.1 HOLDING SECURITIES. The Custodian shall hold and physically
segregate for the account of each Portfolio all non-cash property, to
be held by it in the United States including all domestic securities
owned by such Portfolio, other than (a) securities which are maintained
pursuant to Section 2.10 in a clearing agency which acts as a
securities depository or in a book-entry system authorized by the U.S.
Department of the Treasury, collectively referred to herein as
"Securities System" and (b) commercial paper of an issuer for which
State Street Bank and Trust Company acts as issuing and paying agent
("Direct Paper") which is deposited and/or maintained in the Direct
Paper System of the Custodian pursuant to Section 2.10A.
2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver
domestic securities owned by a Portfolio held by the Custodian or in a
Securities System account of the Custodian or in the Custodian's Direct
Paper book entry system account ("Direct Paper System Account") only
upon receipt of Proper Instructions from the Fund on behalf of the
applicable Portfolio, which may be continuing instructions when deemed
appropriate by the parties, and only in the
following cases:
1) Upon sale of such securities for the account of the Portfolio
and receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Portfolio;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
<PAGE>
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer
into the name of the Portfolio or into the name of any nominee
or nominees of the Custodian or into the name or nominee name
of any agent appointed pursuant to Section 2.9 or into the
name or nominee name of any sub-custodian appointed pursuant
to Article 1; or for exchange for a different number of bonds,
certificates or other evidence representing the same aggregate
face amount or number of units; provided that, in any such
case, the new securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of
the Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street delivery"
custom; provided that in any such case, the Custodian shall
have no responsibility or liability for any loss arising from
the delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar
securities, the surrender thereof in the exercise of such
warrants, rights or similar securities or the surrender of
interim receipts or temporary securities for definitive
securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;
10) For delivery in connection with any loans of
securities made by the Portfolio, but only against receipt of
adequate collateral as agreed upon from time to time by the
Custodian and the Fund on behalf of the Portfolio, which may
be in the form of cash or obligations issued by the United
States government, its agencies or instrumentalities, except
that in connection with any loans for which collateral is to
be credited to the Custodian's account in the book-entry
system authorized by the U.S. Department of the Treasury, the
Custodian will not be held liable or responsible for the
delivery of securities owned by the Portfolio prior to the
receipt of such collateral;
<PAGE>
11) For delivery as security in connection with any
borrowings by the Fund on behalf of the Portfolio requiring a
pledge of assets by the Fund on behalf of the Portfolio, but
only against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of
any agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities
exchange, or of any similar organization or organizations,
regarding escrow or other arrangements in connection with
transactions by the Portfolio of the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian, and a Futures Commission Merchant registered
under the Commodity Exchange Act, relating to compliance with
the rules of the Commodity Futures Trading Commission and/or
any Contract Market, or any similar organization or
organizations, regarding account deposits in connection with
transactions by the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer
agent ("Transfer Agent") for the Fund, for delivery to such
Transfer Agent or to the holders of shares in connection with
distributions in kind, as may be described from time to time
in the currently effective prospectus and statement of
additional information of the Fund, related to the Portfolio
("Prospectus"), in satisfaction of requests by holders of
Shares for repurchase or redemption; and
15) For any other proper corporate purpose, but only
upon receipt of, in addition to Proper Instructions from the
Fund on behalf of the applicable Portfolio, a certified copy
of a resolution of the Board of Directors or of the Executive
Committee signed by an officer of the Fund and certified by
the Secretary or an Assistant Secretary, specifying the
securities of the Portfolio to be delivered, setting forth the
purpose for which such delivery is to be made, declaring such
purpose to be a proper corporate purpose, and naming the
person or persons to whom delivery of such securities shall be
made.
2.3 REGISTRATION OF SECURITIES. Domestic securities held by the
Custodian (other than bearer securities) shall be registered in the
name of the Portfolio or in the name of any nominee of the Fund on
behalf of the Portfolio or of any nominee of the Custodian which
nominee shall be assigned exclusively to the Portfolio, unless the
<PAGE>
Fund has authorized in writing the appointment of a nominee to be used
in common with other registered investment companies
having the same investment adviser as the Portfolio,
or in the name or nominee name of any agent appointed
pursuant to Section 2.9 or in the name or nominee name of any
sub-custodian appointed pursuant to Article 1. All securities accepted
by the Custodian on behalf of the Portfolio under the terms of this
Contract shall be in "street name" or other good delivery form. If,
however, the Fund directs the Custodian to maintain securities in
"street name", the Custodian shall utilize its best efforts only to
timely collect income due the Fund on such securities and to notify the
Fund on a best efforts basis only of relevant corporate actions
including, without limitation, pendency of calls, maturities, tender or
exchange offers.
2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate
bank account or accounts in the United States in the name of each
Portfolio of the Fund, subject only to draft or order by the Custodian
acting pursuant to the terms of this Contract, and shall hold in such
account or accounts, subject to the provisions hereof, all cash
received by it from or for the account of the Portfolio, other than
cash maintained by the Portfolio in a bank account established and used
in accordance with Rule 17f-3 under the Investment Company Act of 1940.
Funds held by the Custodian for a Portfolio may be deposited by it to
its credit as Custodian in the Banking Department of the Custodian or
in such other banks or trust companies as it may in its discretion deem
necessary or desirable; provided, however, that every such bank or
trust company shall be qualified to act as a custodian under the
Investment Company Act of 1940 and that each such bank or trust company
and the funds to be deposited with each such bank or trust company
shall on behalf of each applicable Portfolio be approved by vote of a
majority of the Board of Directors of the Fund. Such funds shall be
deposited by the Custodian in its capacity as Custodian and shall be
withdrawable by the Custodian only in that capacity.
2.5 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the
Fund on behalf of each applicable Portfolio and the Custodian, the
Custodian shall, upon the receipt of Proper Instructions from the Fund
on behalf of a Portfolio, make federal funds available to such
Portfolio as of specified times agreed upon from time to time by the
Fund and the Custodian in the amount of checks received in payment for
Shares of such Portfolio which are deposited into the Portfolio's
account.
2.6 COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to registered domestic securities held hereunder to which
each Portfolio shall be entitled either by law or pursuant to custom in
the securities business, and shall collect on a timely basis all income
and other payments with respect to bearer domestic securities if, on
the date of payment by the issuer, such securities are held by the
<PAGE>
Custodian or its agent thereof and shall credit such
income, as collected, to such Portfolio's custodian account. Without
limiting the generality of the foregoing, the Custodian shall detach
and present for payment all coupons and other income items requiring
presentation as and when they become due and shall collect interest
when due on securities held hereunder. Income due each Portfolio on
securities loaned pursuant to the provisions of Section 2.2 (10) shall
be the responsibility of the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the Fund
with such information or data as may be necessary to assist the Fund in
arranging for the timely delivery to the Custodian of the income to
which the Portfolio is properly entitled.
2.7 PAYMENT OF FUN MONIES. Upon receipt of Proper Instructions from
the Fund on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian
shall pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options,
futures contracts or options on futures contracts for the
account of the Portfolio but only (a) against the delivery of
such securities or evidence of title to such options, futures
contracts or options on futures contracts to the Custodian (or
any bank, banking firm or trust company doing business in the
United States or abroad which is qualified under the
Investment Company Act of 1940, as amended, to act as a
custodian and has been designated by the Custodian as its
agent for this purpose) registered in the name of the
Portfolio or in the name of a nominee of the Custodian
referred to in Section 2.3 hereof or in proper form for
transfer; (b) in the case of a purchase effected through a
Securities System, in accordance with the conditions set forth
in Section 2.10 hereof; (c) in the case of a purchase
involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.10A; (d) in the case of
repurchase agreements entered into between the Fund on behalf
of the Portfolio and the Custodian, or another bank, or a
broker-dealer which is a member of NASD, (i) against delivery
of the securities either in certificate form or through an
entry crediting the Custodian's account at the Federal Reserve
Bank with such securities or (ii) against delivery of the
receipt evidencing purchase by the Portfolio of securities
owned by the Custodian along with written evidence of the
agreement by the Custodian to repurchase such securities from
the Portfolio or (e) for transfer to a time deposit account of
the Fund in any bank, whether domestic or foreign; such
transfer may be effected prior to receipt of a confirmation
from a broker and/or the applicable bank pursuant to Proper
Instructions from the Fund as defined in Article 5;
<PAGE>
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued by the
Portfolio as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred
by the Portfolio, including but not limited to the following
payments for the account of the Portfolio: interest, taxes,
management, accounting, transfer agent and legal fees, and
operating expenses of the Fund whether or not such expenses
are to be in whole or part capitalized or treated as deferred
expenses;
5) For the payment of any dividends on Shares of the Portfolio
declared pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, but only upon receipt
of, in addition to Proper Instructions from the Fund on behalf
of the Portfolio, a certified copy of a resolution of the
Board of Directors or of the Executive Committee of the Fund
signed by an officer of the Fund and certified by its
Secretary or an Assistant Secretary, specifying the amount of
such payment, setting forth the purpose for which such payment
is to be made, declaring such purpose to be a proper purpose,
and naming the person or persons to whom such payment is to be
made.
2.8 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES
PURCHASED. Except as specifically stated otherwise in this Contract, in
any and every case where payment for purchase of domestic securities
for the account of a Portfolio is made by the Custodian in advance of
receipt of the securities purchased in the absence of specific written
instructions from the Fund on behalf of such Portfolio to so pay in
advance, the Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received by
the Custodian.
2.9 APPOINTMENT OF AGENTS. The Custodian may at any time or times in
its discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the Investment Company
Act of 1940, as amended, to act as a custodian, as its agent to carry
out such of the provisions of this Article 2 as the Custodian may from
time to time direct; provided, however, that the appointment of any
<PAGE>
agent shall not relieve the Custodian of its responsibilities
or liabilities hereunder.
2.10 DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEMS. The Custodian may
deposit and/or maintain securities owned by a Portfolio in a clearing
agency registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system authorized by the
U.S. Department of the Treasury and certain federal agencies,
collectively referred to herein as "Securities System" in accordance
with applicable Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to the following
provisions:
1) The Custodian may keep securities of the Portfolio
in a Securities System provided that such securities are
represented in an account ("Account") of the Custodian in the
Securities System which shall not include any assets of the
Custodian other than assets held as a fiduciary, custodian or
otherwise for customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a Securities System shall
identify by book-entry those securities belonging to the
Portfolio;
3) The Custodian shall pay for securities purchased for
the account of the Portfolio upon (i) receipt of advice from
the Securities System that such securities have been
transferred to the Account, and (ii) the making of an entry on
the records of the Custodian to reflect such payment and
transfer for the account of the Portfolio. The Custodian shall
transfer securities sold for the account of the Portfolio upon
(i) receipt of advice from the Securities System that payment
for such securities has been transferred to the Account, and
(ii) the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the
Portfolio. Copies of all advices from the Securities System of
transfers of securities for the account of the Portfolio shall
identify the Portfolio, be maintained for the Portfolio by the
Custodian and be provided to the Fund at its request. Upon
request, the Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the account
of the Portfolio in the form of a written advice or notice and
shall furnish to the Fund on behalf of the Portfolio copies of
daily transaction sheets reflecting each day's transactions in
the Securities System for the account of the Portfolio.
<PAGE>
4) The Custodian shall provide the Fund for the Portfolio with
any report obtained by the Custodian on the Securities
System's accounting system, internal accounting control and
procedures for safeguarding securities deposited in the
Securities System;
5) The Custodian shall have received from the Fund on behalf of
the Portfolio the initial or annual certificate, as the case
may be, required by Article 14 hereof;
6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be liable to the Fund for
the benefit of the Portfolio for any loss or damage to the
Portfolio resulting from use of the Securities System by
reason of any negligence, misfeasance or misconduct of the
Custodian or any of its agents or of any of its or their
employees or from failure of the Custodian or any such agent
to enforce effectively such rights as it may have against the
Securities System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with
respect to any claim against the Securities System or any
other person which the Custodian may have as a consequence of
any such loss or damage if and to the extent that the
Portfolio has not been made whole for any such loss or damage.
2.10A FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM. The Custodian
may deposit and/or maintain securities owned by a Portfolio in the
Direct Paper System of the Custodian subject to the following
provisions:
1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper Instructions
from the Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the
Direct Paper System only if such securities are represented in
an account ("Account") of the Custodian in the Direct Paper
System which shall not include any assets of the Custodian
other than assets held as a fiduciary, custodian or otherwise
for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System
shall identify by book-entry those securities belonging to the
Portfolio;
4) The Custodian shall pay for securities purchased for the
account of the Portfolio upon the making of an entry on the
records of the Custodian to reflect such payment and transfer
of securities to the account of the Portfolio. The Custodian
shall transfer securities sold for the account of the
<PAGE>
Portfolio upon the making of an entry on the records of the
Custodian to reflect such transfer and receipt of payment for
the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the account
of the Portfolio, in the form of a written advice or notice,
of Direct Paper on the next business day following such
transfer and shall furnish to the Fund on behalf of the
Portfolio copies of daily transaction sheets reflecting each
day's transaction in the Securities System for the account of
the Portfolio;
6) The Custodian shall provide the Fund on behalf of
the Portfolio with any report on its system of internal
accounting control as the Fund may reasonably request from
time to time.
2.11 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on
behalf of each such Portfolio, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
an account by the Custodian pursuant to Section 2.10 hereof, (i) in
accordance with the provisions of any agreement among the Fund on
behalf of the Portfolio, the Custodian and a broker-dealer registered
under the Exchange Act and a member of the NASD (or any futures
commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract
market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Portfolio, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by the
Portfolio or commodity futures contracts or options thereon purchased
or sold by the Portfolio, (iii) for the purposes of compliance by the
Portfolio with the procedures required by Investment Company Act
Release No. 10666, or any subsequent release or releases of the
Securities and Exchange Commission relating to the maintenance of
segregated accounts by registered investment companies and (iv) for
other proper corporate purposes, but only, in the case of clause (iv),
upon receipt of, in addition to Proper Instructions from the Fund on
behalf of the applicable Portfolio, a certified copy of a resolution of
the Board of Directors or of the Executive Committee signed by an
officer of the Fund and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such segregated
account and declaring such purposes to be proper corporate purposes.
<PAGE>
2.12 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of each Portfolio held by
it and in connection with transfers of securities.
2.13 PROXIES. The Custodian shall, with respect to the domestic
securities held hereunder, cause to be promptly executed by the
registered holder of such securities, if the securities are registered
otherwise than in the name of the Portfolio or a nominee of the
Portfolio, all proxies, without indication of the manner in which such
proxies are to be voted, and shall promptly deliver to the Portfolio
such proxies, all proxy soliciting materials and all notices relating
to such securities.
2.14 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to the
Fund for each Portfolio all written information (including, without
limitation, pendency of calls and maturities of domestic securities and
expirations of rights in connection therewith and notices of exercise
of call and put options written by the Fund on behalf of the Portfolio
and the maturity of futures contracts purchased or sold by the
Portfolio) received by the Custodian from issuers of the securities
being held for the Portfolio. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Portfolio all
written information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the party (or
his agents) making the tender or exchange offer. If the Portfolio
desires to take action with respect to any tender offer, exchange offer
or any other similar transaction, the Portfolio shall notify the
Custodian at least three business days prior to the date on which the
Custodian is to take such action.
3. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD
OUTSIDE OF THE UNITED STATES
3.1 APPOINTMENT OF FOREIGN SUB-CUSTODIANS. The Fund hereby authorizes
and instructs the Custodian to employ as sub-custodians for the
Portfolio's securities and other assets maintained outside the United
States the foreign banking institutions and foreign securities
depositories designated on Schedule A hereto ("foreign
sub-custodians"). Upon receipt of "Proper Instructions", as defined in
Section 5 of this Contract, together with a certified resolution of the
Fund's Board of Directors, the Custodian and the Fund may agree to
amend Schedule A hereto from time to time to designate additional
foreign banking institutions and foreign securities depositories to act
a sub-custodian. Upon receipt of Proper Instructions, the Fund may
<PAGE>
instruct the Custodian to cease the employment of any one or more such
sub-custodians for maintaining custody of the Portfolio's assets.
3.2 ASSETS TO BE HELD. The Custodian shall limit the securities and
other assets maintained in the custody of the foreign sub-custodians
to: (a) "foreign securities", as defined in paragraph (c)(1) of Rule
17f-5 under the Investment Company Act of 1940, and (b) cash and cash
equivalents in such amounts as the Custodian or the Fund may determine
to be reasonably necessary to effect the Portfolio's foreign securities
transactions. The Custodian shall identify on its books as belonging to
the Fund, the foreign securities of the Fund held by each foreign
sub-custodian.
3.3 FOREIGN SECURITIES DEPOSITORIES. Except as may otherwise be agreed
upon in writing by the Custodian and the Fund, assets of the Portfolios
shall be maintained in foreign securities depositories only through
arrangements implemented by the foreign banking institutions serving as
sub-custodians pursuant to the terms hereof. Where possible, such
arrangements shall include entry into agreements containing the
provisions set forth in Section 3.4 hereof.
3.4 AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each agreement with a
foreign banking institution shall be substantially in the form set
forth in Exhibit 1 hereto and shall provide that: (a) the assets of
each Portfolio will not be subject to any right, charge, security
interest, lien or claim of any kind in favor of the foreign banking
institution or its creditors or agent, except a claim of payment for
their safe custody or administration; (b) beneficial ownership for the
assets of each Portfolio will be freely transferable without the
payment of money or value other than for custody or administration; (c)
adequate records will be maintained identifying the assets as belonging
to each applicable Portfolio; (d) officers of or auditors employed by,
or other representatives of the Custodian, including to the extent
permitted under applicable law the independent public accountants for
the Fund, will be given access to the books and records of the foreign
banking institution relating to its actions under its agreement with
the Custodian; and (e) assets of the Portfolios held by the foreign
sub-custodian will be subject only to the instructions of the Custodian
or its agents.
3.5 ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND. Upon request of the
Fund, the Custodian will use its best efforts to arrange for the
independent accountants of the Fund to be afforded access to the books
and records of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate to the
performance of such foreign banking institution under its agreement
with the Custodian.
<PAGE>
3.6 REPORTS BY CUSTODIAN. The Custodian will supply to the Fund from
time to time, as mutually agreed upon, statements in respect of the
securities and other assets of the Portfolio(s) held by foreign
sub-custodians, including but not limited to an identification of
entities having possession of the Portfolio(s) securities and other
assets and advices or notifications of any transfers of securities to
or from each custodial account maintained by a foreign banking
institution for the Custodian on behalf of each applicable Portfolio
indicating, as to securities acquired for a Portfolio, the identity of
the entity having physical possession of such securities.
3.7 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT
(a) Except as otherwise provided in paragraph (b) of
this Section 3.7, the provision of Sections 2.2 and 2.7 of this
Contract shall apply, mutatis mutandis to the foreign securities of the
Fund held outside the United States by foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to
the contrary, settlement and payment for securities received for the
account of each applicable Portfolio and delivery of securities
maintained for the account of each applicable Portfolio may be effected
in accordance with the customary established securities trading or
securities processing practices and procedures in the jurisdiction or
market in which the transaction occurs, including, without limitation,
delivering securities to the purchaser thereof or to a dealer therefor
(or an agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such
purchaser or dealer.
(c) Securities maintained in the custody of a foreign
sub-custodian may be maintained in the name of such entity's nominee to
the same extent as set forth in Section 2.3 of this Contract, and the
Fund agrees to hold any such nominee harmless from any liability as a
holder of record of such securities.
3.8 LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to
which the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable care
in the performance of its duties and to indemnify, and hold harmless,
the Custodian and each Fund from and against any loss, damage, cost,
expense, liability or claim arising out of or in connection with the
institution's performance of such obligations. At the election of the
Fund, it shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims against a foreign banking
institution as a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that the Fund has not been made
whole for any such loss, damage, cost, expense, liability or claim.
3.9 LIABILITY OF CUSTODIAN. The Custodian shall be liable for the acts
or omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a foreign
<PAGE>
banking institution, a foreign securities depository or a branch of a
U.S. bank as contemplated by paragraph 3.12 hereof, the Custodian shall
not be liable for any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency restrictions,
or acts of war or terrorism or any loss where the sub-custodian has
otherwise exercised reasonable care. Notwithstanding the foregoing
provisions of this paragraph 3.9, in delegating custody duties to State
Street London Ltd., the Custodian shall not be relieved of any
responsibility to the Fund for any loss due to such delegation, except
such loss as may result from (a) political risk (including, but not
limited to, exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed hostilities) or
(b) other losses (excluding a bankruptcy or insolvency of State Street
London Ltd. not caused by political risk) due to Acts of God, nuclear
incident or other losses under circumstances where the Custodian and
State Street London Ltd. have exercised reasonable care.
3.10 REIMBURSEMENT FOR ADVANCES. If the Fund requires the Custodian to
advance cash or securities for any purpose for the benefit of a
Portfolio including the purchase or sale of foreign exchange or of
contracts for foreign exchange, or in the event that the Custodian or
its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance
of this Contract, except such as may arise from its or its nominee's
own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the applicable
Portfolio shall be security therefor and should the Fund fail to repay
the Custodian promptly, the Custodian shall be entitled to utilize
available cash and to dispose of such Portfolios assets to the extent
necessary to obtain reimbursement.
3.11 MONITORING RESPONSIBILITIES. The Custodian shall furnish annually
to the Fund, during the month of June, information concerning the
foreign sub-custodians employed by the Custodian. Such information
shall be similar in kind and scope to that furnished to the Fund in
connection with the initial approval of this Contract. In addition, the
Custodian will promptly inform the Fund in the event that the Custodian
learns of a material adverse change in the financial condition of a
foreign sub-custodian or any material loss of the assets of the Fund or
in the case of any foreign sub-custodian not the subject of an
exemptive order from the Securities and Exchange Commission is notified
by such foreign sub-custodian that there appears to be a substantial
likelihood that its shareholders' equity will decline below $200
million (U.S. dollars or the equivalent thereof) or that its
shareholders' equity has declined below $200 million (in each case
computed in accordance with generally accepted U.S. accounting
principles).
<PAGE>
3.12 Branches of U.S. Banks.
(a) Except as otherwise set forth in this Contract, the
provisions hereof shall not apply where the custody of the Portfolios
assets are maintained in a foreign branch of a banking institution
which is a "bank" as defined by Section 2(a)(5) of the Investment
Company Act of 1940 meeting the qualification set forth in Section
26(a) of said Act. The appointment of any such branch as a
sub-custodian shall be governed by paragraph 1 of this Contract.
(b) Cash held for each Portfolio of the Fund in the
United Kingdom shall be maintained in an interest bearing account
established for the Fund with the Custodian's London branch, which
account shall be subject to the direction of the Custodian, State
Street London Ltd. or both.
3.13 TAX LAW. The Custodian shall have no responsibility or liability
for any obligations now or hereafter imposed on the Fund or the
Custodian as custodian of the Fund by the tax law of the United States
of America or any state or political subdivision thereof. It shall be
the responsibility of the Fund to notify the Custodian of the
obligations imposed on the Fund or the Custodian as custodian of the
Fund by the tax law of jurisdictions other than those mentioned in the
above sentence, including responsibility for withholding and other
taxes, assessments or other governmental charges, certifications and
governmental reporting. The sole responsibility of the Custodian with
regard to such tax law shall be to use reasonable efforts to assist the
Fund with respect to any claim for exemption or refund under the tax
law of jurisdictions for which the Fund has provided such information.
4. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND
The Custodian shall receive from the distributor for the Shares or from
the Transfer Agent of the Fund and deposit into the account of the appropriate
Portfolio such payments as are received for Shares of that Portfolio issued or
sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund on behalf of each such Portfolio and the Transfer Agent
of any receipt by it of payments for Shares of such Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Articles of Incorporation and any applicable votes of the
Board of Directors of the Fund pursuant thereto, the Custodian shall, upon
receipt of instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer Agent a request
for redemption or repurchase of their Shares. In connection with the redemption
or repurchase of Shares of a Portfolio, the Custodian is authorized upon receipt
of instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares of the Fund, the Custodian shall honor checks drawn on
the Custodian by a holder of Shares, which checks have been furnished by the
Fund to the holder of Shares, when presented to the Custodian in accordance
<PAGE>
with such procedures and controls as are mutually agreed upon from time to time
between the Fund and the Custodian.
5. PROPER INSTRUCTIONS
Proper Instructions as used throughout this Contract means a writing
signed or initialled by one or more person or persons as the Board of Directors
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with respect
to the transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of Directors of the
Fund accompanied by a detailed description of procedures approved by the Board
of Directors, Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the Board of
Directors and the Custodian are satisfied that such procedures afford adequate
safeguards for the Portfolios' assets. For purposes of this Section, Proper
Instructions shall include instructions received by the Custodian pursuant to
any three-party agreement which requires a segregated asset account in
accordance with Section 2.11.
6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Contract, provided that all such payments
shall be accounted for to the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Portfolio, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of the Portfolio except as otherwise directed by the Board of
Directors of the Fund.
<PAGE>
7. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the Fund.
The Custodian may receive and accept a certified copy of a vote of the Board of
Directors of the Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Board of Directors pursuant to the Articles of Incorporation as described
in such vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
8. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND
CALCULATION OF NET ASSET VALUE AND NET INCOME
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Directors of the Fund to keep
the books of account of each Portfolio and/or compute the net asset value per
share of the outstanding shares of each Portfolio or, if directed in writing to
do so by the Fund on behalf of the Portfolio, shall itself keep such books of
account and/or compute such net asset value per share. If so directed, the
Custodian shall also calculate daily the net income of the Portfolio as
described in the Fund's currently effective prospectus related to such Portfolio
and shall advise the Fund and the Transfer Agent daily of the total amounts of
such net income and, if instructed in writing by an officer of the Fund to do
so, shall advise the Transfer Agent periodically of the division of such net
income among its various components. The calculations of the net asset value per
share and the daily income of each Portfolio shall be made at the time or times
described from time to time in the Fund's currently effective prospectus related
to such Portfolio.
9. RECORDS
The Custodian shall with respect to each Portfolio create and maintain
all records relating to its activities and obligations under this Contract in
such manner as will meet the obligations of the Fund under the Investment
Company Act of 1940, with particular attention to Section 31 thereof and Rules
31a-1 and 31a-2 thereunder. All such records shall be the property of the Fund
and shall at all times during the regular business hours of the Custodian be
open for inspection by duly authorized officers, employees or agents of the Fund
and employees and agents of the Securities and Exchange Commission. The
Custodian shall, at the Fund's request, supply the Fund with a tabulation of
securities owned by each Portfolio and held by the Custodian and shall, when
requested to do so by the Fund and for such compensation as shall be agreed upon
between the Fund and the Custodian, include certificate numbers in such
tabulations.
<PAGE>
10. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Fund on behalf
of each applicable Portfolio may from time to time request, to obtain from year
to year favorable opinions from the Fund's independent accountants with respect
to its activities hereunder in connection with the preparation of the Fund's
Form N-1A, and Form N-SAR or other annual reports to the Securities and Exchange
Commission and with respect to any other requirements of such Commission.
11. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, on behalf of each of the
Portfolios at such times as the Fund may reasonably require, with reports by
independent public accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, futures contracts and
options on futures contracts, including securities deposited and/or maintained
in a Securities System, relating to the services provided by the Custodian under
this Contract; such reports, shall be of sufficient scope and in sufficient
detail, as may reasonably be required by the Fund to provide reasonable
assurance that any material inadequacies would be disclosed by such examination,
and, if there are no such inadequacies, the reports shall so state.
12. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund on behalf of each applicable Portfolio and the Custodian.
13. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract, but
shall be kept indemnified by and shall be without liability to the Fund for any
action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel (who may be counsel for
the Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice.
<PAGE>
The Custodian shall be liable for the acts or omissions of a foreign
banking institution appointed pursuant to the provisions of Article 3 to the
same extent as set forth in Article 1 hereof with respect to sub-custodians
located in the United States (except as specifically provided in Article 3.9)
and, regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a U.S. bank
as contemplated by paragraph 3.12 hereof, the Custodian shall not be liable for
any loss, damage, cost, expense, liability or claim resulting from, or caused
by, the direction of or authorization by the Fund to maintain custody of any
securities or cash of the Fund in a foreign country including, but not limited
to, losses resulting from nationalization, expropriation, currency restrictions,
or acts of war or terrorism.
If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund or the Portfolio being liable for the payment
of money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, foreign exchange contracts and assumed settlement)
for the benefit of a Portfolio including the purchase or sale of foreign
exchange or of contracts for foreign exchange or in the event that the Custodian
or its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance of this
Contract, except such as may arise from its or its nominee's own negligent
action, negligent failure to act or willful misconduct, any property at any time
held for the account of the applicable Portfolio shall be security therefor and
should the Fund fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of such Portfolio's assets to
the extent necessary to obtain reimbursement.
14. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; provided,
however that the Custodian shall not with respect to a Portfolio act under
Section 2.10 hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of Directors of the Fund has
approved the initial use of a particular Securities System by such Portfolio, as
required by Rule 17f-4 under the Investment Company Act of 1940,
<PAGE>
as amended and that the Custodian shall not with respect to
a Portfolio act under Section 2.10A hereof in the absence of receipt of an
initial certificate of the Secretary or an Assistant Secretary that the Board of
Directors has approved the initial use of the Direct Paper System by such
Portfolio; provided further, however, that the Fund shall not amend or terminate
this Contract in contravention of any applicable federal or state regulations,
or any provision of the Articles of Incorporation, and further provided, that
the Fund on behalf of one or more of the Portfolios may at any time by action of
its Board of Directors (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
15. SUCCESSOR CUSTODIAN
If a successor custodian for the Fund, of one or more of the Portfolios
shall be appointed by the Board of Directors of the Fund, the Custodian shall,
upon termination, deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all securities of each
applicable Portfolio then held by it hereunder and shall transfer to an account
of the successor custodian all of the securities of each such Portfolio held in
a Securities System.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board of
Directors of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian on behalf of each applicable Portfolio and all
instruments held by the Custodian relative thereto and all other property held
by it under this Contract on behalf of each applicable Portfolio and to transfer
to an account of such successor custodian all of the securities of
<PAGE>
each such Portfolio held in any Securities System. Thereafter, such bank or
trust company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Directors to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
16. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Contract, the Custodian and
the Fund on behalf of each of the Portfolios, may from time to time agree on
such provisions interpretive of or in addition to the provisions of this
Contract as may in their joint opinion be consistent with the general tenor of
this Contract. Any such interpretive or additional provisions shall be in a
writing signed by both parties and shall be annexed hereto, provided that no
such interpretive or additional provisions shall contravene any applicable
federal or state regulations or any provision of the Articles of Incorporation
of the Fund. No interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this Contract.
17. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares in
addition to INVESCO Tax-Free Long-Term Bond Fund and INVESCO Tax-Free
Intermediate Bond Fund with respect to which it desires to have the Custodian
render services as custodian under the terms hereof, it shall so notify the
Custodian in writing, and if the Custodian agrees in writing to provide such
services, such series of Shares shall become a Portfolio hereunder.
18. MASSACHUSETTS LAW TO APPLY
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
19. PRIOR CONTRACTS
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund on behalf of each of the Portfolios and the
Custodian relating to the custody of the Fund's assets.
<PAGE>
20. SHAREHOLDER COMMUNICATIONS
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether the Fund authorizes
the Custodian to provide the Fund's name, address, and share position to
requesting companies whose stock the Fund owns. If the Fund tells the Custodian
"no", the Custodian will not provide this information to requesting companies.
If the Fund tells the Custodian "yes" or do not check either "yes" or "no"
below, the Custodian is required by the rule to treat the Fund as consenting to
disclosure of this information for all securities owned by the Fund or any funds
or accounts established by the Fund. For the Fund's protection, the Rule
prohibits the requesting company from using the Fund's name and address for any
purpose other than corporate communications. Please indicate below whether the
Fund consent or object by checking one of the alternatives below.
YES [ ] You are authorized to release the Fund's name, address, and share
positions.
NO [X] You are not authorized to release the Fund's name, address, and share
positions.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 1st day of July, 1993.
ATTEST INVESCO TAX-FREE INCOME FUNDS, INC.
/s/ Glen A. Payne By /s/ John M. Butler
- ---------------------------- ----------------------------------
ATTEST STATE STREET BANK AND TRUST COMPANY
By
- ---------------------------- --------------------------------
Executive Vice President
AMENDMENT TO CUSTODIAN CONTRACT
Agreement made by and between State Street Bank and Trust Company (the
"Custodian") and INVESCO Tax-Free Income Funds, Inc. (Formerly Financial
Tax-Free Income Funds, Inc.) (the "Fund").
WHEREAS, the Custodian and the Fund are parties to a custodian contract
dated July 1, 1993 (the "Custodian Contract") governing the terms and conditions
under which the Custodian maintains custody of the securities and other assets
of the Fund; and
WHEREAS, the Custodian and the Fund desire to amend the terms and
conditions under which the Custodian maintains the Fund's securities and other
non-cash property in the custody of certain foreign sub-custodians in conformity
with the requirements of Rule 17f-5 under the Investment Company Act of 1940, as
amended;
NOW THEREFORE, in consideration of the premises and covenants contained
herein, the Custodian and the Fund hereby amend the Custodian Contract by the
addition of the following terms and provisions;
1. Notwithstanding any provisions to the contrary set forth in the
Custodian Contract, the Custodian may hold securities and other non-cash
property for all of its customers, including the Fund, with a foreign
sub-custodian in a single account that is identified as belonging to the
Custodian for the benefit of its customers, provided however, that (i) the
records of the Custodian with respect to securities and other non-cash property
of the Fund which are maintained in such account shall identify by bookentry
those securities and other non-cash property belonging to the Fund and (ii) the
Custodian shall require that securities and other non-cash property so held by
the foreign sub-custodian be held separately from any assets of the foreign
sub-custodian or of others.
2. Except as specifically superseded or modified herein, the terms and
provisions of the Custodian Contract shall continue to apply with full force and
effect.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed as a sealed instrument in its name and behalf by its duly authorized
representative this 25th day of October, 1995.
INVESCO TAX-FREE INCOME FUNDS, INC.
By: /s/ Glen A. Payne
------------------------------
Title: Secretary
STATE STREET BANK AND TRUST COMPANY
By: /s/ Charles R. Whittemore, Jr.
------------------------------
Title: Vice President
DATA ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT
----------------------------------------------------
AGREEMENT between each Fund listed on Appendix A, (individually a
"Customer" and collectively, the "Customers") and State Street Bank and Trust
Company ("State Street").
PREAMBLE
WHEREAS, State Street has been appointed as custodian of certain assets of
each Customer pursuant to a certain Custodian Agreement (the "Custodian
Agreement") for each of the respective Customers;
WHEREAS, State Street has developed and utilizes proprietary accounting
and other systems, including State Street's proprietary Multicurrency HORIZONR
Accounting System, in its role as custodian of each Customer, and maintains
certain Customer-related data ("Customer Data") in databases under the control
and ownership of State Street (the "Data Access Services"); and
WHEREAS, State Street makes available to each Customer certain Data Access
Services solely for the benefit of the Customer, and intends to provide
additional services, consistent with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the parties
agree as follows:
1. SYSTEM AND DATA ACCESS SERVICES
a. System. Subject to the terms and conditions of this Agreement, State
Street hereby agrees to provide each Customer with access to State Street's
Multicurrency HORIZONR Accounting System and the other information systems
(collectively, the "System") as described in Attachment A, on a remote basis for
the purpose of obtaining reports, solely on computer hardware, system software
and telecommunication links, as listed in Attachment B (the "Designated
Configuration") of the Customer, or certain third parties approved by State
Street that serve as investment advisors or investment managers (the "Investment
Advisor") or independent auditors (the "Independent Auditors") of a Customer and
solely with respect to the Customer or on any designated substitute or back-up
equipment configuration with State Street's written consent, such consent not to
be unreasonably withheld.
b. Data Access Services. State Street agrees to make available to each
Customer the Data Access Services subject to the terms and conditions of this
<PAGE>
Agreement and data access operating standards and procedures as may be issued by
State Street from time to time. The ability of each Customer to originate
electronic instructions to State Street on behalf of each Customer in order to
(i) effect the transfer or movement of cash or securities held under custody by
State Street or (ii) transmit accounting or other information (such transactions
are referred to herein as "Client Originated Electronic Financial
Instructions"), and (iii) access data for the purpose of reporting and analysis,
shall be deemed to be Data Access Services for purposes of this Agreement.
c. Additional Services. State Street may from time to time agree to make
available to a Customer additional Systems that are not described in the
attachments to this Agreement. In the absence of any other written agreement
concerning such additional systems, the term "System" shall include, and this
Agreement shall govern, a Customer's access to and use of any additional System
made available by State Street and/or accessed by the Customer.
2. NO USE OF THIRD PARTY SOFTWARE
State Street and each Customer acknowledge that in connection with the
Data Access Services provided under this Agreement, each Customer will have
access, through the Data Access Services, to Customer Data and to functions of
State Street's proprietary systems; provided, however that in no event will the
Customer have direct access to any third party systems-level software that
retrieves data for, stores data from, or otherwise supports the System.
3. LIMITATION ON SCOPE OF USE
a. Designated Equipment; Designated Location. The System and the Data
Access Services shall be used and accessed solely on and through the Designated
Configuration at the offices of a Customer or the Investment Advisor or
Independent Auditor located in Denver, Colorado ("Designated Location").
b. Designated Configuration; Trained Personnel. State Street shall be
responsible for supplying, installing and maintaining the Designated
Configuration at the Designated Location. State Street and each Customer agree
that each will engage or retain the services of trained personnel to enable both
State Street and the Customer to perform their respective obligations under this
Agreement. State Street agrees to use commercially reasonable efforts to
maintain the System so that it remains serviceable, provided, however, that
State Street does not guarantee or assure uninterrupted remote access use of the
System.
c. Scope of Use. Each Customer will use the System and the Data Access
Services only for the processing of securities transactions, the keeping of
books of account for the Customer and accessing data for purposes of reporting
<PAGE>
and analysis. Each Customer shall not, and shall cause its employees and agents
not to (i) permit any third party to use the System or the Data Access Services,
(ii) sell, rent, license or otherwise use the System or the Data Access Services
in the operation of a service bureau or for any purpose other than as expressly
authorized under this Agreement, (iii) use the System or the Data Access
Services for any fund, trust or other investment vehicle without the prior
written consent of State Street, (iv) allow access to the System or the Data
Access Services through terminals or any other computer or telecommunications
facilities located outside the Designated Locations, (v) allow or cause any
information (other than portfolio holdings, valuations of portfolio holdings,
and other information reasonably necessary for the management or distribution of
the assets of the Customer) transmitted from State Street's databases, including
data from third party sources, available through use of the System or the Data
Access Services to be redistributed or retransmitted to another computer,
terminal or other device for other than use for or on behalf of the Customer or
(vi) modify the System in any way, including without limitation, developing any
software for or attaching any devices or computer programs to any equipment,
system, software or database which forms a part of or is resident on the
Designated Configuration.
d. Other Locations. Except in the event of an emergency or of a planned
System shutdown, each Customer's access to services performed by the System or
to Data Access Services at the Designated Location may be transferred to a
different location only upon the prior written consent of State Street. In the
event of an emergency or System shutdown, each Customer may use any back-up site
included in the Designated Configuration or any other back-up site agreed to by
State Street, which agreement will not be unreasonably withheld. Each Customer
may secure from State Street the right to access the System or the Data Access
Services through computer and telecommunications facilities or devices complying
with the Designated Configuration at additional locations only upon the prior
written consent of State Street and on terms to be mutually agreed upon by the
parties.
e. Title. Title and all ownership and proprietary rights to the
System, including any enhancements or modifications thereto, whether or not made
by State Street, are and shall remain with State Street.
f. No Modification. Without the prior written consent of State Street, a
Customer shall not modify, enhance or otherwise create derivative works based
upon the System, nor shall the Customer reverse engineer, decompile or otherwise
attempt to secure the source code for all or any part of the System.
g. Security Procedures. Each Customer shall comply with data access
operating standards and procedures and with user identification or other
password control requirements and other security procedures as may be issued
<PAGE>
from time to time by State Street for use of the System on a remote basis and to
access the Data Access Services. Each Customer shall have access only to the
Customer Data and authorized transactions agreed upon from time to time by State
Street and, upon notice from State Street, the Customer shall discontinue remote
use of the System and access to Data Access Services for any security reasons
cited by State Street; provided, that, in such event, State Street shall, for a
period not less than 180 days (or such other shorter period specified by the
Customer) after such discontinuance, assume responsibility to provide accounting
services under the terms of the Custodian Agreement.
h. Inspections. State Street shall have the right to inspect the use of
the System and the Data Access Services by the Customer and the Investment
Advisor to ensure compliance with this Agreement. The on-site inspections shall
be upon prior written notice to Customer and the Investment Advisor and at
reasonably convenient times and frequencies so as not to result in an
unreasonable disruption of the Customer's or the Investment Advisor's business.
4. PROPRIETARY INFORMATION
a. Proprietary Information. Each Customer acknowledges and State Street
represents that the System and the databases, computer programs, screen formats,
report formats, interactive design techniques, documentation and other
information made available to the Customer by State Street as part of the Data
Access Services and through the use of the System constitute copyrighted, trade
secret, or other proprietary information of substantial value to State Street.
Any and all such information provided by State Street to each Customer shall be
deemed proprietary and confidential information of State Street (hereinafter
"Proprietary Information"). Each Customer agrees that it will hold such
Proprietary Information in confidence and secure and protect it in a manner
consistent with its own procedures for the protection of its own confidential
information and to take appropriate action by instruction or agreement with its
employees who are permitted access to the Proprietary Information to satisfy its
obligations hereunder. Each Customer further acknowledges that State Street
shall not be required to provide the Investment Advisor or the Investment
Auditor with access to the System unless it has first received from the
Investment Advisor of the Investment Auditor an undertaking with respect to
State Street's Proprietary Information in the form of Attachment C and/or
Attachment C-1 to this Agreement. Each Customer shall use all commercially
reasonable efforts to assist State Street in identifying and preventing any
unauthorized use, copying or disclosure of the Proprietary Information or any
portions thereof or any of the logic, formats or designs contained therein.
b. Cooperation. Without limitation of the foregoing, each Customer
shall advise State Street immediately in the event the Customer learns or has
reason to believe that any person to whom the Customer has given access to the
<PAGE>
Proprietary Information, or any portion thereof, has violated or intends to
violate the terms of this Agreement, and each Customer will, at its expense,
cooperate with State Street in seeking injunctive or other equitable relief in
the name of the Customer or State Street against any such person.
c. Injunctive Relief. Each Customer acknowledges that the disclosure of
any Proprietary Information, or of any information which at law or equity ought
to remain confidential, will immediately give rise to continuing irreparable
injury to State Street inadequately compensable in damages at law. In addition,
State Street shall be entitled to obtain immediate injunctive relief against the
breach or threatened breach of any of the foregoing undertakings, in addition to
any other legal remedies which may be available.
d. Survival. The provisions of this Section 4 shall survive the
termination of this Agreement.
5. LIMITATION ON LIABILITY
a. Limitation on Amount and Time for Bringing Action. Each Customer agrees
any liability of State Street to the Customer or any third party arising out of
State Street's provision of Data Access Services or the System under this
Agreement shall be limited to the amount paid by the Customer for the preceding
24 months for such services. In no event shall State Street be liable to the
Customer or any other party for any special, indirect, punitive or consequential
damages even if advised of the possibility of such damages. No action,
regardless of form, arising out of this Agreement may be brought by the Customer
more than two years after the Customer has knowledge that the cause of action
has arisen.
b. NO OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, ARE MADE BY STATE STREET. IN NO EVENT WILL STATE STREET BE
LIABLE TO THE CUSTOMER OR ANY OTHER PARTY FOR ANY CONSEQUENTIAL OR INCIDENTAL
DAMAGES WHICH MAY ARISE FROM THE CUSTOMER'S ACCESS TO THE SYSTEM OR USE OF
INFORMATION OBTAINED THEREBY.
c. Third-Party Data. Organizations from which State Street may obtain
certain data included in the System or the Data Access Services are solely
responsible for the contents of such data, and State Street shall have no
liability for claims arising out of the contents of such third-party data,
including, but not limited to, the accuracy thereof.
d. Regulatory Requirements. As between State Street and each Customer,
the Customer shall be solely responsible for the accuracy of any accounting
statements or reports produced using the Data Access Services and the System and
the conformity thereof with any requirements of law.
<PAGE>
e. Force Majeure. Neither State Street or a Customer shall be liable for
any costs or damages due to delay or nonperformance under this Agreement arising
out of any cause or event beyond such party's control, including without
limitation, cessation of services hereunder or any damages resulting therefrom
to the other party, or the Customer as a result of work stoppage, power or other
mechanical failure, computer virus, natural disaster, governmental action, or
communication disruption.
6. INDEMNIFICATION
Each Customer agrees to indemnify and hold State Street harmless from any
loss, damage or expense including reasonable attorney's fees, (a "loss")
suffered by State Street arising from (i) the negligence or willful misconduct
in the use by the Customer of the Data Access Services or the System, including
any loss incurred by State Street resulting from a security breach at the
Designated Location or committed by the Customer's employees or agents or the
Investment Advisor or the Independent Auditor of the Customer and (ii) any loss
resulting from incorrect Client Originated Electronic Financial Instructions.
State Street shall be entitled to rely on the validity and authenticity of
Client Originated Electronic Financial Instructions without undertaking any
further inquiry as long as such instruction is undertaken in conformity with
security procedures established by State Street from time to time.
7. FEES
Fees and charges for the use of the System and the Data Access Services
and related payment terms shall be as set forth in the Custody Fee Schedule in
effect from time to time between the parties (the "Fee Schedule"). Any tariffs,
duties or taxes imposed or levied by any government or governmental agency by
reason of the transactions contemplated by this Agreement, including, without
limitation, federal, state and local taxes, use, value added and personal
property taxes (other than income, franchise or similar taxes which may be
imposed or assessed against State Street) shall be borne by each Customer. Any
claimed exemption from such tariffs, duties or taxes shall be supported by
proper documentary evidence delivered to State Street.
8. TRAINING, IMPLEMENTATION AND CONVERSION
a. Training. State Street agrees to provide training, at a designated
State Street training facility or at the Designated Location, to the Customer's
personnel in connection with the use of the System on the Designated
Configuration. Each Customer agrees that it will set aside, during regular
business hours or at other times agreed upon by both parties, sufficient time to
<PAGE>
enable all operators of the System and the Data Access Services, designated by
the Customer, to receive the training offered by State Street pursuant to this
Agreement.
b. Installation and Conversion. State Street shall be responsible for
the technical installation and conversion ("Installation and Conversion") of the
Designated Configuration. Each Customer shall have the following
responsibilities in connection with Installation and Conversion of the System:
(i) The Customer shall be solely responsible for the timely acquisition
and maintenance of the hardware and software that attach to the
Designated Configuration in order to use the Data Access Services
at the Designated Location.
(ii) State Street and the Customer each agree that they will
assign qualified personnel to actively participate during the
Installation and Conversion phase of the System implementation to
enable both parties to perform their respective obligations under
this Agreement.
9. SUPPORT
During the term of this Agreement, State Street agrees to provide the
support services set out in Attachment D to this Agreement.
10. TERM OF AGREEMENT
a. Term of Agreement. This Agreement shall become effective on the
date of its execution by State Street and shall remain in full force and effect
until terminated as herein provided.
b. Termination of Agreement. Any party may terminate this Agreement (i)
for any reason by giving the other parties at least one-hundred and eighty days'
prior written notice in the case of notice of termination by State Street to the
Customer or thirty days' notice in the case of notice from the Customer to State
Street of termination; or (ii) immediately for failure of the other party to
comply with any material term and condition of the Agreement by giving the other
party written notice of termination. In the event the Customer shall cease doing
business, shall become subject to proceedings under the bankruptcy laws (other
than a petition for reorganization or similar proceeding) or shall be
adjudicated bankrupt, this Agreement and the rights granted hereunder shall, at
the option of State Street, immediately terminate with notice to the Customer.
Termination of this Agreement with respect to any given Customer shall in no way
affect the continued validity of this Agreement with respect to any other
<PAGE>
Customer. This Agreement shall in any event terminate as to any Customer
within 90 days after the termination of the Custodian Agreement applicable to
such Customer.
c. Termination of the Right to Use. Upon termination of this Agreement for
any reason, any right to use the System and access to the Data Access Services
shall terminate and the Customer shall immediately cease use of the System and
the Data Access Services. Immediately upon termination of this Agreement for any
reason, the Customer shall return to State Street all copies of documentation
and other Proprietary Information in its possession; provided, however, that in
the event that either State Street or the Customer terminates this Agreement or
the Custodian Agreement for any reason other than the Customer's breach, State
Street shall provide the Data Access Services for a period of time and at a
price to be agreed upon by State Street and the Customer.
11. MISCELLANEOUS
a. Assignment; Successors. This Agreement and the rights and
obligations of each Customer and State Street hereunder shall not be assigned by
any party without the prior written consent of the other parties, except that
State Street may assign this Agreement to a successor of all or a substantial
portion of its business, or to a party controlling, controlled by, or under
common control with State Street.
b. Survival. All provisions regarding indemnification, warranty,
liability and limits thereon, and confidentiality and/or protection of
proprietary rights and trade secrets shall survive the termination of this
Agreement.
c. Entire Agreement. This Agreement and the attachments hereto constitute
the entire understanding of the parties hereto with respect to the Data Access
Services and the use of the System and supersedes any and all prior or
contemporaneous representations or agreements, whether oral or written, between
the parties as such may relate to the Data Access Services or the System, and
cannot be modified or altered except in a writing duly executed by the parties.
This Agreement is not intended to supersede or modify the duties and liabilities
of the parties hereto under the Custodian Agreement or any other agreement
between the parties hereto except to the extent that any such agreement
specifically refers to the Data Access Services or the System. No single waiver
or any right hereunder shall be deemed to be a continuing waiver.
d. Severability. If any provision or provisions of this Agreement
shall be held to be invalid, unlawful, or unenforceable, the validity, legality,
and enforceability of the remaining provisions shall not in any way be affected
or impaired.
<PAGE>
e. Governing Law. This Agreement shall be interpreted and construed
in accordance with the internal laws of The Commonwealth of Massachusetts
without regard to the conflict of laws provisions thereof.
IN WITNESS WHEREOF, each of the undersigned Funds severally has
caused this Agreement to be duly executed in its name and through its duly
authorized officer as of the date hereof.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Russell E. Lyons
----------------------------
Title: Executive Vice President
---------------------------
Date:
----------------------
EACH FUND LISTED ON APPENDIX A
By: /s/ Glen A. Payne
--------------------------
Title: Secretary
--------------------------
Date: May 19, 1997
-----------------------
<PAGE>
APPENDIX A
INVESCO FUNDS
INVESCO Diversified Funds, Inc.
INVESCO Small Company Value Fund
INVESCO Dynamics Fund, Inc.
INVESCO Dynamics Fund, Inc.
INVESCO Emerging Opportunity Funds, Inc.
INVESCO Small Company Growth Fund
INVESCO Worldwide Emerging Markets Fund
INVESCO Growth Fund, Inc.
INVESCO Growth Fund, Inc.
INVESCO Income Funds, Inc.
INVESCO High Yield Fund
INVESCO Select Income Fund
INVESCO Short-Term Bond Fund
INVESCO U.S. Government Bond Fund
INVESCO Industrial Income Fund, Inc.
INVESCO Industrial Income Fund, Inc.
INVESCO International Funds, Inc.
INVESCO European Fund
INVESCO International Growth Fund
INVESCO Pacific Basin Fund
INVESCO Money Market Funds, Inc.
INVESCO Cash Reserves Fund
INVESCO Tax-Free Money Fund
INVESCO U.S. Government Money Fund
INVESCO Multiple Asset Funds, Inc.
INVESCO Balanced Fund
INVESCO Multi-Asset Allocation Fund
<PAGE>
INVESCO Specialty Funds, Inc.
INVESCO Asian Growth Fund
INVESCO European Small Company Fund
INVESCO Latin American Growth Fund
INVESCO Realty Fund
INVESCO Worldwide Capital Goods Fund
INVESCO Worldwide Communications Fund
INVESCO Strategic Portfolios, Inc.
Energy Portfolio
Environmental Services Portfolio
Financial Services Portfolio
Gold Portfolio
Health Sciences Portfolio
Leisure Portfolio
Technology Portfolio
Utilities Portfolio
INVESCO Tax-Free Income Funds, Inc.
INVESCO Tax-Free Intermediate Bond Fund
INVESCO Tax-Free Long-Term Bond Fund
INVESCO Treasurer's Series Trust
INVESCO Treasurer's Money Market Reserve Fund
INVESCO Treasurer's Prime Reserve Fund
INVESCO Treasurer's Special Reserve Fund
INVESCO Treasurer's Tax-Exempt Reserve Fund
INVESCO Value Trust
INVESCO Intermediate Government Bond Fund
INVESCO Total Return Fund
INVESCO Value Equity Fund
INVESCO Variable Investment Funds, Inc. INVESCO VIF-Dynamics Portfolio INVESCO
VIF-Health Sciences Portfolio INVESCO VIF-High Yield Portfolio INVESCO
VIF-Industrial Income Portfolio INVESCO VIF-Small Company Growth Portfolio
INVESCO VIF-Technology Portfolio INVESCO VIF-Total Return Portfolio INVESCO
VIF-Utilities Portfolio INVESCO VIF-Growth Portfolio*
*Effective May 1, 1997.
<PAGE>
ATTACHMENT A
Multicurrency HORIZONR Accounting System
System Product Description
I. The Multicurrency HORIZONR Accounting System is designed to provide lot level
portfolio and general ledger accounting for SEC and ERISA type requirements and
includes the following services: 1) recording of general ledger entries; 2)
calculation of daily income and expense; 3) reconciliation of daily activity
with the trial balance, and 4) appropriate automated feeding mechanisms to (i)
domestic and international settlement systems, (ii) daily, weekly and monthly
evaluation services, (iii) portfolio performance and analytic services, (iv)
customer's internal computing systems and (v) various State Street provided
information services products.
II. GlobalQuestR GlobalQuestR is designed to provide customer access to the
following information maintained on The Multicurrency HORIZONR Accounting
System: 1) cash transactions and balances; 2) purchases and sales; 3) income
receivables; 4) tax refund receivables; 5) daily priced positions; 6) open
trades; 7) settlement status; 8) foreign exchange transactions; 9) trade
history; and 10) daily, weekly and monthly evaluation services.
III. HORIZONR Gateway. HORIZONR Gateway provides customers with the ability
to (i) generate reports using information maintained on the Multicurrency
HORIZONR Accounting System which may be viewed or printed at the customer's
location; (ii) extract and download data from the Multicurrency HORIZONR
Accounting System; and (iii) access previous day and historical data. The
following information which may be accessed for these purposes: 1) holdings; 2)
holdings pricing; 3) transactions, 4) open trades; 5) income; 6) general
ledger and 7) cash.
<PAGE>
ATTACHMENT B
Designated Configuration
<PAGE>
ATTACHMENT C
Undertaking
The undersigned understands that in the course of its employment as
Investment Advisor to each of the Funds (individually a, "Customer",
collectively, the "Customers") it will have access to State Street Bank and
Trust Company's ("State Street") Multicurrency HORIZON Accounting System and
other information systems (collectively, the "System").
The undersigned acknowledges that the System and the databases, computer
programs, screen formats, report formats, interactive design techniques,
documentation, and other information made available to the Undersigned by State
Street as part of the Data Access Services provided to the Customer and through
the use of the System constitute copyrighted, trade secret, or other proprietary
information of substantial value to State Street. Any and all such information
provided by State Street to the Undersigned shall be deemed proprietary and
confidential information of State Street (hereinafter "Proprietary
Information"). The Undersigned agrees that it will hold such Proprietary
Information in confidence and secure and protect it in a manner consistent with
its own procedures for the protection of its own confidential information and to
take appropriate action by instruction or agreement with its employees who are
permitted access to the Proprietary Information to satisfy its obligations
hereunder.
The Undersigned will not attempt to intercept data, gain access to data in
transmission, or attempt entry into any system or files for which it is not
authorized. It will not intentionally adversely affect the integrity of the
System through the introduction of unauthorized code or data, or through
unauthorized deletion.
Upon notice by State Street for any reason, any right to use the System and
access to the Data Access Services shall terminate and the Undersigned shall
immediately cease use of the System and the Data Access Services. Immediately
upon notice by State Street for any reason, the Undersigned shall return to
State Street all copies of documentation and other Proprietary Information in
its possession.
By: /s/ Glen A. Payne
--------------------------------
Title: Secretary
--------------------------------
May 19, 1997
Date: --------------------------------
<PAGE>
ATTACHMENT D
Support
During the term of this Agreement, State Street agrees to provide the
following on-going support services:
a. Telephone Support. The Customer Designated Persons may contact State
Street's HORIZONR Help Desk and Customer Assistance Center between the hours of
8 a.m. and 6 p.m. (Eastern time) on all business days for the purpose of
obtaining answers to questions about the use of the System, or to report
apparent problems with the System. From time to time, the Customer shall provide
to State Street a list of persons, not to exceed five in number, who shall be
permitted to contact State Street for assistance (such persons being referred to
as "the Customer Designated Persons").
b. Technical Support. State Street will provide technical support to
assist the Customer in using the System and the Data Access Services. The total
amount of technical support provided by State Street shall not exceed 10
resource days per year. State Street shall provide such additional technical
support as is expressly set forth in the fee schedule in effect from time to
time between the parties (the "Fee Schedule"). Technical support, including
during installation and testing, is subject to the fees and other terms set
forth in the Fee Schedule.
c. Maintenance Support. State Street shall use commercially
reasonable efforts to correct system functions that do not work according to the
System Product Description as set forth on Attachment A in priority order in the
next scheduled delivery release or otherwise as soon as is practicable.
d. System Enhancements. State Street will provide to the Customer any
enhancements to the System developed by State Street and made a part of the
System; provided that, sixty (60) days prior to installing any such enhancement,
State Street shall notify the Customer and shall offer the Customer reasonable
training on the enhancement. Charges for system enhancements shall be as
provided in the Fee Schedule. State Street retains the right to charge for
related systems or products that may be developed and separately made available
for use other than through the System.
e. Custom Modifications. In the event the Customer desires custom
modifications in connection with its use of the System, the Customer shall make
a written request to State Street providing specifications for the desired
modification. Any custom modifications may be undertaken by State Street in its
sole discretion in accordance with the Fee Schedule.
f. Limitation on Support. State Street shall have no obligation to
support the Customer's use of the System: (1) for use on any computer
equipment or telecommunication facilities which does not conform to the
Designated Configuration or (ii) in the event the Customer has modified the
System in breach of this Agreement.
TRANSFER AGENCY AGREEMENT
AGREEMENT made as of this 28th day of February, 1997, between INVESCO 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 East Union Avenue,
Denver, Colorado 80237 (hereinafter referred to as the "Transfer Agent").
WITNESSETH:
That for and in consideration of mutual promises hereinafter set forth,
the Fund and the Transfer Agent agree as follows:
1. Definitions. Whenever used in this Agreement, the following words
and phrases, unless the context otherwise requires, shall have the
following meanings:
(a) "Authorized Person" shall be deemed to include the President,
any Vice President, the Secretary, Treasurer, or any other
person, whether or not any such person is an officer or
employee of the Fund, duly authorized to give Oral
Instructions and Written Instructions on behalf of the Fund as
indicated in a certification as may be received by the
Transfer Agent from time to time;
(b) "Certificate" shall mean any notice, instruction or other
instrument in writing, authorized or required by this
Agreement to be given to the Transfer Agent, which is actually
received by the Transfer Agent and signed on behalf of the
Fund by any two officers thereof;
(c) "Commission" shall have the meaning given it in the 1940 Act;
(d) "Custodian" refers to the custodian of all of the securities
and other moneys owned by the Fund;
(e) "Oral Instructions" shall mean verbal instructions actually
received by the Transfer Agent from a person reasonably
believed by the Transfer Agent to be an Authorized Person;
(f) "Prospectus" shall mean the currently effective prospectus
relating to the Fund's Shares registered under the Securities
Act of 1933;
(g) "Shares" refers to the shares of common stock, $.01 par value,
of the Fund;
(h) "Shareholder" means a record owner of Shares;
(i) "Written Instructions" shall mean a written communication
actually received by the Transfer Agent where the receiver is
able to verify with a reasonable degree of certainty the
<PAGE>
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.
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:
<PAGE>
(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;
(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
<PAGE>
(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.
8. Sale of Fund Shares.
(a) Whenever the Fund or its authorized agent shall sell or cause
to be sold any Shares, the Fund or its authorized agent shall
provide or cause to be provided to the Transfer Agent
information including: (i) the number of Shares sold, trade
date, and price; (ii) the amount of money to be delivered to
the Custodian for the sale of such Shares; (iii) in the case
of a new account, a new account application or sufficient
information to establish an account.
<PAGE>
(b) The Transfer Agent will, upon receipt by it of a check or
other payment identified by it as an investment in Shares of
the Fund and drawn or endorsed to the Transfer Agent as agent
for, or identified as being for the account of, the Fund,
promptly deposit such check or other payment to the
appropriate account postings necessary to reflect the
investment. The Transfer Agent will notify the Fund, or its
designee, and the Custodian of all purchases and related
account adjustments.
(c) Upon receipt of the notification required under paragraph (a)
hereof and the notification from the Custodian that such money
has been received by it, the Transfer Agent shall issue to the
purchaser or his authorized agent such Shares as he is
entitled to receive, based on the appropriate net asset value
of the Fund's Shares, determined in accordance with applicable
federal law or regulation, as described in the Prospectus for
the Fund. In issuing Shares to a purchaser or his authorized
agent, the Transfer Agent shall be entitled to rely upon the
latest written directions, if any, previously received by the
Transfer Agent from the purchaser or his authorized agent
concerning the delivery of such Shares.
(d) The Transfer Agent shall not be required to issue any Shares
of the Fund where it has received Written Instructions from
the Fund or written notification from any appropriate federal
or state authority that the sale of the Shares of the Fund has
been suspended or discontinued, and the Transfer Agent shall
be entitled to rely upon such Written Instructions or written
notification.
(e) Upon the issuance of any Shares of the Fund in accordance with
the foregoing provision of this Article, the Transfer Agent
shall not be responsible for the payment of any original issue
or other taxes required to be paid by the Fund in connection
with such issuance.
9. Returned Checks. In the event that any check or other order for the
payment of money is returned unpaid for any reason, the Transfer
Agent will: (i) give prompt notice of such return to the Fund or its
designee; (ii) place a stop transfer order against all Shares issued
or held on deposit as a result of such check or order; (iii) in the
case of any Shareholder who has obtained redemption checks, place a
stop payment order on the checking account on which such checks are
issued; and (iv) take such other steps as the Transfer Agent may, in
its discretion, deem appropriate or as the Fund or its designee may
instruct.
<PAGE>
10. Redemptions.
(a) Redemptions By Mail or In Person. Shares of the Fund will be
redeemed upon receipt by the Transfer Agent of: (i) a written
request for redemption, signed by each registered owner
exactly as the Shares are registered; (ii) certificates
properly endorsed for any Shares for which certificates have
been issued; (iii) signature guarantees to the extent required
by the Transfer Agent as described in the Prospectus for the
Fund; and (iv) any additional documents required by the
Transfer Agent for redemption by corporations, executors,
administrators, trustees and guardians.
(b) Wire Orders or Telephone Redemptions. The Transfer Agent will,
consistent with procedures which may be established by the
Fund from time to time for redemption by wire or telephone,
upon receipt of such a wire order or telephone redemption
request, redeem Shares and transmit the proceeds of such
redemption to the redeeming Shareholder as directed. All wire
or telephone redemptions will be subject to such additional
requirements as may be described in the Prospectus for the
Fund. Both the Fund and the Transfer Agent reserve the right
to modify or terminate the procedures for wire order or
telephone redemptions at any time.
(c) Processing Redemptions. Upon receipt of all necessary
information and documentation relating to a redemption, the
Transfer Agent will issue to the Custodian an advice setting
forth the number of Shares of the Fund received by the
Transfer Agent for redemption and that such shares are valid
and in good form for redemption. The Transfer Agent shall,
upon receipt of the moneys paid to it by the Custodian for the
redemption of Shares, pay such moneys to the Shareholder, his
authorized agent or legal representative.
11. Transfers and Exchanges. The Transfer Agent is authorized to review
and process transfers of Shares of the Fund and to the extent, if
any, permitted in the Prospectus for the Fund, exchanges between the
Fund and other mutual funds advised by INVESCO Funds Group, Inc., on
the records of the Fund maintained by the Transfer Agent. If Shares
to be transferred are represented by outstanding certificates, the
Transfer Agent will, upon surrender to it of the certificates in
proper form for transfer, and upon cancellation thereof, countersign
and issue new certificates for a like number of Shares and deliver
the same. If the Shares to be transferred are not represented by
outstanding certificates, the Transfer Agent will, upon an order
therefor by or on behalf of the registered holder thereof in proper
form, credit the same to the transferee on its books. If Shares are
to be exchanged for Shares of another mutual fund, the Transfer
Agent will process such exchange in the same manner as a redemption
and sale of Shares, except that it may in its discretion waive
requirements for information and documentation.
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
<PAGE>
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.
(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.
<PAGE>
(f) If the Transfer Agent shall not receive from the Custodian
sufficient cash to make payment to all Shareholders of the
Fund as of the record date, the Transfer Agent shall, upon
notifying the Fund, withhold payment to all Shareholders of
record as of the record date until such sufficient cash is
provided to the Transfer Agent.
14. Other Duties. In addition to the duties expressly provided for
herein, the Transfer Agent shall perform such other duties and
functions as are set forth in the Fee Schedules(s) hereto from time
to time.
15. Taxes. It is understood that the Transfer Agent shall file such
appropriate information returns concerning the payment of dividends
and capital gain distributions with the proper federal, state and
local authorities as are required by law to be filed by the Fund and
shall withhold such sums as are required to be withheld by
applicable law.
16. Books and Records.
(a) The Transfer Agent shall maintain records showing for each
investor's account the following: (i) names, addresses, tax
identifying numbers and assigned account numbers; (ii) numbers
of Shares held; (iii) historical information regarding the
account of each Shareholder, including dividends paid and date
and price of all transactions on a Shareholder's account; (iv)
any stop or restraining order placed against a Shareholder's
account; (v) information with respect to withholdings in the
case of a foreign account; (vi) any capital gain or dividend
reinvestment order, plan application, dividend address and
correspondence relating to the current maintenance of a
Shareholder's account; (vii) certificate numbers and
denominations for any Shareholders holding certificates; and
(viii) any information required in order for the Transfer
Agent to perform the calculations contemplated or required by
this Agreement.
(b) Any records required to be maintained by Rule 31a-1 under the
1940 Act will be preserved for the periods prescribed in Rule
31a-2 under the 1940 Act. Such records may be inspected by the
Fund at reasonable times. The Transfer Agent may, at its
option at any time, and shall forthwith upon the Fund's
demand, turn over to the Fund and cease to retain in the
Transfer Agent's files, records and documents created and
maintained by the Transfer Agent in performance of its
services or for its protection. At the end of the six-year
retention period, such records and documents will either be
turned over to the Fund, or destroyed in accordance with the
Fund's authorization.
<PAGE>
17. Shareholder Relations.
(a) The Transfer Agent will investigate all Shareholder inquiries
related to Shareholder accounts and respond promptly to
correspondence from Shareholders.
(b) The Transfer Agent will address and mail all communications to
Shareholders or their nominees, including proxy material and
periodic reports to Shareholders.
(c) In connection with special and annual meetings of
Shareholders, the Transfer Agent will prepare Shareholder
lists, mail and certify as to the mailing of proxy materials,
process and tabulate returned proxy cards, report on proxies
voted prior to meetings, and certify to the Secretary of the
Fund Shares to be voted at meetings.
18. Reliance by Transfer Agent; Instructions.
(a) The Transfer Agent shall be protected in acting upon any paper
or document believed by it to be genuine and to have been
signed by an Authorized Person and shall not be held to have
any notice of any change of authority of any person until
receipt of written certification thereof from the Fund. It
shall also be protected in processing Share certificates which
it reasonably believes to bear the proper manual or facsimile
signatures of the officers of the Fund and the proper
countersignature of the Transfer Agent.
(b) At any time the Transfer Agent may apply to any Authorized
Person of the Fund for Written Instructions, and, at the
expense of the Fund, may seek advice from legal counsel for
the Fund, with respect to any matter arising in connection
with this Agreement, and it shall not be liable for any action
taken or not taken or suffered by it in good faith in
accordance with such Written Instructions or with the opinion
of such counsel. In addition, the Transfer Agent, its
officers, agents or employees, shall accept instructions or
requests given to them by any person representing or acting on
behalf of the Fund only if said representative is known by the
Transfer Agent, its officers, agents or employees, to be an
Authorized Person. The Transfer Agent shall have no duty or
obligation to inquire into, nor shall the Transfer Agent be
responsible for, the legality of any act done by it upon the
request or direction of Authorized Persons of the Fund.
(c) Notwithstanding any of the foregoing provisions of this
Agreement, the Transfer Agent shall be under no duty or
obligation to inquire into, and shall not be liable for: (i)
the legality of the issue or sale of any Shares of the Fund,
or the sufficiency of the amount to be received therefor; (ii)
the legality of the redemption of any Shares of the Fund, or
the propriety of the amount to be paid therefor; (iii) the
legality of the declaration of any dividend by the Fund, or
the legality of the issue of any Shares of the Fund in payment
of any stock dividend; or (iv) the legality of any
recapitalization or readjustment of the Shares of the Fund.
<PAGE>
19. Standard of Care and Indemnification.
(a) The Transfer Agent may, in connection with this Agreement,
employ agents or attorneys in fact, and shall not be liable
for any loss arising out of or in connection with its actions
under this Agreement so long as it acts in good faith and with
due diligence, and is not negligent or guilty of any willful
misconduct.
(b) The Fund hereby agrees to indemnify and hold harmless the
Transfer Agent from and against any and all claims, demands,
expenses and liabilities (whether with or without basis in
fact or law) of any and every nature which the Transfer Agent
may sustain or incur or which may be asserted against the
Transfer Agent by any person by reason of, or as a result of:
(i) any action taken or omitted to be taken by the Transfer
Agent in good faith in reliance upon any Certificate,
instrument, order or stock certificate believed by it to be
genuine and to be signed, countersigned or executed by any
duly Authorized Person, upon the Oral Instructions or Written
Instructions of an Authorized Person of the Fund or upon the
opinion of legal counsel for the Fund or its own counsel; or
(ii) any action taken or omitted to be taken by the Transfer
Agent in connection with its appointment in good faith in
reliance upon any law, act, regulation or interpretation of
the same even though the same may thereafter have been
altered, changed, amended or repealed. However,
indemnification hereunder shall not apply to actions or
omissions of the Transfer Agent or its directors, officers,
employees or agents in cases of its own gross negligence,
willful misconduct, bad faith, or reckless disregard of its or
their own duties hereunder.
20. Affiliation Between Fund and Transfer Agent. It is understood that
the directors, officers, employees, agents and Shareholders of the
Fund, and the officers, directors, employees, agents and
shareholders of the Fund's investment adviser, INVESCO Funds Group,
Inc. (the "Adviser"), are or may be interested in the Transfer Agent
as directors, officers, employees, agents, shareholders, or
otherwise, and that the directors, officers, employees, agents or
shareholders of the Transfer Agent may be interested in the Fund as
directors, officers, employees, agents, shareholders, or otherwise,
or in the Adviser as officers, directors, employees, agents,
shareholders or otherwise.
21. Term.
(a) This Agreement shall become effective on February 28, 1997
after approval by vote of a majority (as defined in the 1940
Act) of the Fund's board of directors, including a majority of
the directors who are not interested persons of the Fund (as
defined in the 1940 Act), and shall continue in effect for an
initial term expiring February 28, 1998 and from year to year
thereafter, so long as such continuance is specifically
<PAGE>
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.
To the Fund:
INVESCO Tax-Free Income Funds, Inc.
Post Office Box 173706
Denver, Colorado 80217-3706
Attention: Dan J. Hesser, President
To the Transfer Agent:
INVESCO Funds Group, Inc.
Post Office Box 173706
Denver, Colorado 80217-3706
Attention: Ronald L. Grooms, Senior Vice President
<PAGE>
(b) This Agreement shall not be assignable and in the event of its
assignment (in the sense contemplated by the 1940 Act), it
shall automatically terminate.
(c) This Agreement shall be construed in accordance with the laws
of the State of Colorado.
(d) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original; but such
counterparts shall, together, constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate officers thereunder duly authorized and
their respective corporate seals to be hereunto affixed, as of the day and year
first above written.
INVESCO 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
/s/ Glen A. Payne
- -------------------------
Glen A. Payne, Secretary
<PAGE>
FEE SCHEDULE
for
Services Pursuant to Transfer Agency Agreement, dated February 28, 1997,
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 it opens or closes, as well as in each
month which the account remains open, regardless of the account balance.
Expenses. The Fund shall not be liable for reimbursement to the Transfer
Agent of expenses incurred by it in the performance of services pursuant to the
Agreement, provided, however, that nothing herein or in the Agreement shall be
construed as affecting in any manner any obligations assumed by the Fund with
respect to expense payment or reimbursement pursuant to a separate written
agreement between the Fund and the Transfer Agent or any affiliate thereof.
Effective this 28th day of February, 1997.
INVESCO 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,
ATTEST: Senior Vice President
/s/ Glen A. Payne
- --------------------------
Glen A. Payne, Secretary
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT made as of the 28th day of February, 1997, in Denver, Colorado,
by and between INVESCO 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 separate portfolios of investments: (1) INVESCO
Tax-Free Intermediate Bond Fund, and (2) INVESCO Tax-Free Long-Term Bond Fund
(the "Portfolios"); and
WHEREAS, INVESCO is registered as an investment adviser under the
Investment Advisers Act of 1940, and engages in the business of acting as
investment adviser and providing certain other administrative, sub-accounting
and recordkeeping services to certain investment companies, including the Fund;
and
WHEREAS, the Fund desires to retain INVESCO to render certain
administrative, sub-accounting and recordkeeping services (the "Services") in
the manner and on the terms and conditions hereinafter set forth; and
WHEREAS, INVESCO desires to be retained to perform such services on said
terms and conditions;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the Fund and INVESCO agree as follows:
1. The Fund hereby retains INVESCO to provide, or, upon receipt of written
approval of the Fund arrange for other companies, including affiliates of
INVESCO, to provide to the Portfolios: A) such sub-accounting and recordkeeping
services and functions as are reasonably necessary for the operation of the
Portfolios. Such services shall include, but shall not be limited to,
preparation and maintenance of the following required books, records and other
documents: (1) journals containing daily itemized records of all purchases and
sales, and receipts and deliveries of securities and all receipts and
disbursements of cash and all other debits and credits, in the form required by
Rule 31a-1(b)(1) under the Act; (2) general and auxiliary ledgers reflecting all
asset, liability, reserve, capital, income and expense accounts, in the form
required by Rules 31a-1(b)(2)(i) - (iii) under the Act; (3) a securities record
or ledger reflecting separately for each portfolio security as of trade date all
"long" and "short" positions carried by the Portfolios for the account of the
Portfolios, if any, and showing the location of all securities long and the
off-setting position to all securities short, in the form required by Rule
31a-1(b)(3) under the Act; (4) a record of all portfolio purchases or sales, in
the form required by Rule 31a-1(b)(6) under the Act; (5) a record of all puts,
calls, spreads, straddles and all other options, if any, in which the Portfolios
have any direct or indirect interest or which the Portfolios have granted or
guaranteed, in the form required by Rule 31a-1(b)(7) under the Act; (6) a record
of the proof of money balances in all ledger accounts maintained pursuant to
this Agreement, in the form required by Rule 31a- 1(b)(8) under the Act; and (7)
price make-up sheets and such records as are necessary to reflect the
determination of the Portfolios' net asset value. The foregoing books and
<PAGE>
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 a
wholly-owned subsidiary of INVESCO, as are reasonably necessary for the
operation of Portfolio shareholder accounts maintained by certain retirement
plans and employee benefit plans for the benefit of participants in such plans.
Such services and functions shall include, but shall not be limited to: (1)
establishing new retirement plan participant accounts; (2) receipt and posting
of weekly, bi-weekly and monthly retirement plan contributions; (3) allocation
of contributions to each participant's individual Portfolio account; (4)
maintenance of separate account balances for each source of retirement plan
money (i.e., Company, Employee, Voluntary, Rollover) invested in the Portfolios;
(5) purchase, sale, exchange or transfer of monies in the retirement plan as
directed by the relevant party; (6) distribution of monies for participant
loans, hardships, terminations, death or disability payments; (7) distribution
of periodic payments for retired participants; (8) posting of distributions of
interest, dividends and long-term capital gains to participants by the
Portfolios; (9) production of monthly, quarterly and/or annual statements of all
Portfolio activity for the relevant parties; (10) processing of participant
maintenance information for investment election changes, address changes,
beneficiary changes and Qualified Domestic Relations Orders; (11) responding to
telephone and written inquiries concerning Portfolio investments, retirement
plan provisions and compliance issues; (12) performing discrimination testing
and counseling employers on cure options on failed tests; (13) preparation of
1099R and W2P participant IRS tax forms; (14) preparation of, or assisting in
the preparation of, 5500 Series tax forms, Summary Plan Descriptions and
Determination Letters; and (15) reviewing legislative and IRS changes to keep
the retirement plan in compliance with applicable law.
2. INVESCO shall, at its own expense, maintain such staff and employ or
retain such personnel and consult with such other persons as it shall from time
to time determine to be necessary or useful to the performance of its
obligations under this Agreement. Without limiting the generality of the
foregoing, such staff and personnel shall be deemed to include officers of
INVESCO and persons employed or otherwise retained by INVESCO to provide or
assist in providing the Services to the Portfolios.
3. INVESCO shall, at its own expense, provide such office space,
facilities and equipment (including, but not limited to, computer equipment,
communication lines and supplies) and such clerical help and other services as
shall be necessary to provide the Services to the Portfolios. In addition,
INVESCO may arrange on behalf of the Fund to obtain pricing information
regarding the Portfolios' investment securities from such company or companies
as are approved by a majority of the Fund's board of directors; and, if
necessary, the Fund shall be financially responsible to such company or
companies for the reasonable cost of providing such pricing information.
4. The Fund will, from time to time, furnish or otherwise make available
to INVESCO such information relating to the business and affairs of the
Portfolios as INVESCO may reasonably require in order to discharge its duties
<PAGE>
and obligations hereunder.
5. For the services rendered, facilities furnished, and expenses assumed
by INVESCO under this Agreement, the Fund shall pay to INVESCO a $10,000 per
year per Portfolio base fee, plus an additional fee, computed on a daily basis
and paid on a monthly basis. For purposes of each daily calculation of this
additional fee, the most recently determined net asset value of each Portfolio,
as determined by a valuation made in accordance with the Fund's procedure for
calculating each Portfolio's net asset value as described in the Portfolios'
Prospectus and/or Statement of Additional Information, shall be used. The
additional fee to INVESCO under this Agreement shall be computed at the annual
rate of 0.015% of each Portfolio's daily net assets as so determined. During any
period when the determination of a Portfolio's net asset value is suspended by
the directors of the Fund, the net asset value of a share of that Portfolio as
of the last business day prior to such suspension shall, for the purpose of this
Paragraph 5, be deemed to be the net asset value at the close of each succeeding
business day until it is again determined.
6. INVESCO will permit representatives of the Fund including the Fund's
independent auditors to have reasonable access to the personnel and records of
INVESCO in order to enable such representatives to monitor the quality of
services being provided and the level of fees due INVESCO pursuant to this
Agreement. In addition, INVESCO shall promptly deliver to the board of directors
of the Fund such information as may reasonably be requested from time to time to
permit the board of directors to make an informed determination regarding
continuation of this Agreement and the payments contemplated to be made
hereunder.
7. This Agreement shall remain in effect until no later than February 28,
1998 and from year to year thereafter provided such continuance is approved at
least annually by the vote of a majority of the directors of the Fund who are
not parties to this Agreement or "interested persons" (as defined in the Act) of
any such party, which vote must be cast in person at a meeting called for the
purpose of voting on such approval; and further provided, however, that (a) the
Fund may, at any time and without the payment of any penalty, terminate this
Agreement upon thirty days written notice to INVESCO; (b) the Agreement shall
immediately terminate in the event of its assignment (within the meaning of the
Act and the Rules thereunder) unless the Board of Directors of the Fund approves
such assignment; and (c) INVESCO may terminate this Agreement without payment of
penalty on sixty days written notice to the Fund. Any notice under this
Agreement shall be given in writing, addressed and delivered, or mailed postage
pre-paid, to the other party at the principal office of such party.
8. This Agreement shall be construed in accordance with the laws of the
State of Colorado and the applicable provisions of the Act. To the extent the
applicable law of the State of Colorado or any of the provisions herein conflict
with the applicable provisions of the Act, the latter shall control.
<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/ Dan J. Hesser
---------------------------------
ATTEST: Dan J. Hesser
/s/ Glen A. Payne President
- ------------------------------
Glen A. Payne
Secretary
INVESCO FUNDS GROUP, INC.
By: /s/ Ronald L. Grooms
--------------------------------
ATTEST: Ronald L. Grooms
/s/ Glen A. Payne Senior Vice President
- ------------------------------
Glen A. Payne
Secretary
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 25 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated August 1, 1997, relating to the financial
statements and financial highlights appearing in the June 30, 1997 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 Prospectus
and under the headings "Independent Accountants" and "Financial Statements" in
the Statement of Additional Information.
/s/ Price Waterhouse LLP
- -------------------------
Price Waterhouse LLP
Denver, Colorado
August 27, 1997
PLAN AND AGREEMENT OF DISTRIBUTION PURSUANT TO RULE 12b-1
PLAN AND AGREEMENT made as of the 30th day of April, 1993, by and between
INVESCO 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.
<PAGE>
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 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, 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
<PAGE>
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, 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
<PAGE>
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
AMENDMENT OF PLAN AND AGREEMENT OF DISTRIBUTION
PURSUANT TO RULE 12b-1
THIS Amendment of Plan and Agreement of Distribution Pursuant to Rule
12b-1 (this "Amendment") is entered into as of the 19th day of July, 1995, 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 and INVESCO have entered into a Plan and Agreement of
Distribution Pursuant to Rule 12b-1, dated as of April 30, 1993 (the "Plan and
Agreement"); and
WHEREAS, the Plan and Agreement may be amended provided that all material
amendments to the Plan and Agreement are approved by the vote of the board of
directors of the Company, including a majority of the Disinterested Directors,
case in person at a meeting called for the purpose of voting on such amendment
and, provided further, that the Plan may not be amended to increase the amount
to be spent by a Fund thereunder without approval of a majority of the
outstanding voting securities of that Fund; and
WHEREAS, the Company has determined to amend the Plan, and the Company and
INVESCO have mutually determined to amend the Agreement, in the manner set forth
in this Amendment, and such amendments were 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 held on July 19, 1995, called for the purpose of
voting on such amendments; and
WHEREAS, the Company has determined that the amendments to the Plan
contained in this Amendment will not increase the amount to be spent by any Fund
under the Plan, and therefore do not require the approval of a majority of the
outstanding voting securities of any Fund;
NOW, THEREFORE, the parties hereby agree as follows:
1. All capitalized terms used in this Amendment, unless otherwise defined,
shall have the meanings assigned to them in the Plan and Agreement.
2. The Company hereby adopts the amendments to the Plan set forth below,
and the Company and INVESCO hereby agree to the amendments to the Agreement set
forth below.
3. Section 2 of the Plan and Agreement is hereby amended to
read as follows:
Subject to the supervision of the board of directors, the Company hereby
retains INVESCO to promote the distribution of shares of each of the Funds
by providing services and engaging in activities beyond those specifically
required by the Distribution Agreement between the Company and INVESCO and
to provide related services. The activities and services to be provided by
INVESCO hereunder shall include one or more of the following: (a) the
payment of compensation (including trail commissions and incentive
<PAGE>
compensation) to securities dealers, financial institutions and other
organizations, which may include INVESCO-affiliated companies, that render
distribution and administrative services in connection with the
distribution of shares of each of the Funds; (b) the printing and
distribution of reports and prospectuses for the use of potential
investors in each Fund; (C) the preparing and distributing of sales
literature; (d) the providing of advertising and engaging in other
promotional activities, including direct mail solicitation, and
television, radio, newspaper and other media advertisements; and (e) the
providing of such other services and activities as may from time to time
be agreed upon by the Company. Such reports and prospectuses, sales
literature, advertising and promotional activities and other services and
activities may be prepared and/or conducted either by INVESCO's own staff,
the staff of INVESCO-affiliated companies, or third parties.
4. Section 4 of the Plan and Agreement is hereby amended to
read as follows:
Each Fund is hereby authorized to expend, out of its assets, on a monthly
basis, and shall reimburse INVESCO to such extent, for INVESCO's actual
direct expenditures incurred over a rolling twelve-month period (or the
rolling twenty-four month period specified below) 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: (a) expenditures incurred by INVESCO during the
rolling twelve-month period in which that month falls, or (b) to the
extent permitted by applicable law, for any month during the first
twenty-four months following a Fund's commencement of operations,
expenditures incurred by INVESCO during the rolling twenty-four month
period in which that month falls, and any expenditures incurred in excess
of the limitations described above are not reimbursable. No Fund shall be
authorized to expend, for any month, a greater amount out of its assets to
reimburse INVESCO for expenditures incurred during the rolling twenty-four
month period referred to above than it would otherwise be authorized to
expend out of its assets to reimburse INVESCO for expenditures incurred
during the rolling twelve month period referred to above. No payments will
be made by the Company hereunder after the date of termination of the Plan
and Agreement.
5. Except to the extent modified by this Amendment, the Plan
and Agreement shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment on the day and year first above written.
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: /s/ Glen A. Payne
-------------------------
Glen A. Payne, Secretary
AMENDED PLAN AND AGREEMENT OF DISTRIBUTION PURSUANT TO RULE 12b-1
PLAN AND AGREEMENT made as of 1st day of January, 1997, by and between
INVESCO 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
each of its two classes or series of common stock, each of which represents an
interest in a separate portfolio of investments, together with any additional
such classes or series that may hereafter be offered to the public
(individually, a "Fund" and collectively, the "Funds"), in accordance with this
Plan and Agreement of Distribution pursuant to Rule 12b-1 under the Act (the
"Plan and Agreement"); and
WHEREAS, INVESCO desires to be retained to perform services in accordance
with such Plan and Agreement and on said terms and conditions; and
WHEREAS, this Plan and Agreement has been approved by a vote of the board
of directors of the Company, including a majority of the directors who are not
interested persons of the Company, as defined in the Act, and who have no direct
or indirect financial interest in the operation of this Plan and Agreement (the
"Disinterested Directors") cast in person at a meeting called for the purpose of
voting on this Plan and Agreement;
NOW, THEREFORE, the Company hereby adopts the Plan set forth herein and
the Company and INVESCO hereby enter into this Agreement pursuant to the Plan in
accordance with the requirements of Rule 12b-1 under the Act, and provide and
agree as follows:
1. The Plan is defined as those provisions of this document
by which the Company adopts a Plan pursuant to Rule 12b-
1 under the Act and authorizes payments as described
herein. The Agreement is defined as those provisions of
this document by which the Company retains INVESCO to
provide distribution services beyond those required by
the General Distribution Agreement between the parties,
as are described herein. The Company may retain the Plan
notwithstanding termination of the Agreement.
Termination of the Plan will automatically terminate the
Agreement. Each Fund is hereby authorized to utilize the
assets of the Company to finance certain activities in
connection with distribution of the Company's shares.
<PAGE>
2. Subject to the supervision of the board of directors, the
Company hereby retains INVESCO to promote the
distribution of shares of each of the Funds by providing
services and engaging in activities beyond those
specifically required by the Distribution Agreement
between the Company and INVESCO and to provide related
services. The activities and services to be provided by
INVESCO hereunder shall include one or more of the
following: (a) the payment of compensation (including
trail commissions and incentive compensation) to
securities dealers, financial institutions and other
organizations, which may include INVESCO-affiliated
companies, that render distribution and administrative
services in connection with the distribution of the
shares of each of the Funds; (b) the printing and
distribution of reports and prospectuses for the use of
potential investors in each Fund; (c) the preparing and
distributing of sales literature; (d) the providing of
advertising and engaging in other promotional activities,
including direct mail solicitation, and television,
radio, newspaper and other media advertisements; and (e)
the providing of such other services and activities as
may from time to time be agreed upon by the Company.
Such reports and prospectuses, sales literature,
advertising and promotional activities and other services
and activities may be prepared and/or conducted either by
INVESCO's own staff, the staff of INVESCO-affiliated
companies, or third parties.
3. INVESCO hereby undertakes to use its best efforts to promote sales
of shares of each of the Funds to investors by engaging in those
activities specified in paragraph (2) above as may be necessary and
as it from time to time believes will best further sales of such
shares.
4. Each Fund is hereby authorized to expend, out of its
assets, on a monthly basis, and shall pay INVESCO to such
extent, to enable INVESCO at its discretion to engage
over a rolling twelve-month period (or the rolling
twenty-four month period specified below) in the
activities and provide the services specified in
paragraph (2) above, an amount computed at an annual rate
of .25 of 1% of the average daily net assets of the Fund
during the month. INVESCO shall not be entitled
hereunder to payment for overhead expenses (overhead
expenses defined as customary overhead NOT including the
costs of INVESCO's personnel whose primary
responsibilities involve marketing of the INVESCO
Funds). Payments by a Fund hereunder, for any month, may
be used to compensate INVESCO for: (a) activities engaged
in and services provided by INVESCO during the rolling
twelve-month period in which that month falls, or (b) to
<PAGE>
the extent permitted by applicable law, for any month during the
first twenty-four months following a Fund's commencement of
operations, activities engaged in and services provided by INVESCO
during the rolling twenty-four month period in which that month
falls, and any obligations incurred by INVESCO in excess of the
limitation described above shall not be paid for out of Fund assets.
No Fund shall be authorized to expend, for any month, a greater
percentage of its assets to pay INVESCO for activities engaged in
and services provided by INVESCO during the rolling twenty-four
month period referred to above than it would otherwise be authorized
to expend out of its assets to pay INVESCO for activities engaged in
and services provided by INVESCO during the rolling twelve-month
period referred to above, and no Fund shall be authorized to expend,
for any month, a greater percentage of its assets to pay INVESCO for
activities engaged in and services provided by INVESCO pursuant to
the Plan and Agreement than it would otherwise have been authorized
to expend out of its assets to reimburse INVESCO for expenditures
incurred by INVESCO pursuant to the Plan and Agreement as it existed
prior to February 5, 1997. No payments will be made by the Company
hereunder after the date of termination of the Plan and Agreement.
5. To the extent that obligations incurred by INVESCO out of
its own resources to finance any activity primarily
intended to result in the sale of shares of a Fund,
pursuant to this Plan and Agreement or otherwise, may be
deemed to constitute the indirect use of Fund assets,
such indirect use of Fund assets is hereby authorized in
addition to, and not in lieu of, any other payments
authorized under this Plan and Agreement.
6. The Treasurer of INVESCO shall provide to the board of
directors of the Company, at least quarterly, a written
report of all moneys spent by INVESCO on the activities
and services specified in paragraph (2) above pursuant to
the Plan and Agreement. Each such report shall itemize
the activities engaged in and services provided by
INVESCO to a Fund as authorized by the penultimate
sentence of paragraph (4) above. Upon request, but no
less frequently than annually, INVESCO shall provide to
the board of directors of the Company such information as
may reasonably be required for it to review the
continuing appropriateness of the Plan and Agreement.
7. This Plan and Agreement shall each become effective immediately upon
approval by a vote of a majority of the outstanding voting
securities of the Company as defined in the Act, and shall continue
in effect until February 5, 1998 unless terminated as provided
below. Thereafter, the Plan and Agreement shall continue in
effect from year to year, provided that the continuance of each
is approved at least annually by a vote of the board of
directors of the Company, including a majority of the
<PAGE>
Disinterested Directors, cast in person at a meeting called for
the purpose of voting on such continuance. The Plan may be
terminated at any time as to any Fund, without penalty, by the vote
of a majority of the Disinterested Directors or by the vote of a
majority of the outstanding voting securities of that Fund. INVESCO,
or the Company, by vote of a majority of the Disinterested Directors
or of the holders of a majority of the outstanding voting securities
of the Fund, may terminate the Agreement under this Plan as to such
Fund, without penalty, upon 30 days' written notice to the other
party. In the event that neither INVESCO nor any affiliate of
INVESCO serves the Company as investment adviser, the agreement with
INVESCO pursuant to this Plan shall terminate at such time. The
board of directors may determine to approve a continuance of the
Plan, but not a continuance of the Agreement, hereunder.
8. So long as the Plan remains in effect, the selection and
nomination of persons to serve as directors of the
Company who are not "interested persons" of the Company
shall be committed to the discretion of the directors
then in office who are not "interested persons" of the
Company. However, nothing contained herein shall prevent
the participation of other persons in the selection and
nomination process, provided that a final decision on any
such selection or nomination is within the discretion of,
and approved by, a majority of the directors of the
Company then in office who are not "interested persons"
of the Company.
9. This Plan may not be amended to increase the amount to be
spent by a Fund hereunder without approval of a majority
of the outstanding voting securities of that Fund. All
material amendments to the Plan and to the Agreement must
be approved by the vote of the board of directors of the
Company, including a majority of the Disinterested
Directors, cast in person at a meeting called for the
purpose of voting on such amendment.
10. To the extent that this Plan and Agreement constitutes a Plan of
Distribution adopted pursuant to Rule 12b-1 under the Act it shall
remain in effect as such, so as to authorize the use by each Fund of
its assets in the amounts and for the purposes set forth herein,
notwithstanding the occurrence of an "assignment," as defined by the
Act and the rules thereunder. To the extent it constitutes an
agreement with INVESCO pursuant to a plan, it shall terminate
automatically in the event of such "assignment." Upon a
termination of the agreement with INVESCO, the Funds may
continue to make payments pursuant to the Plan only upon the
approval of a new agreement under this Plan and Agreement, which may
or may not be with INVESCO, or the adoption of other arrangements
regarding the use of the amounts authorized to be paid by the Funds
hereunder, by the Company's board of directors in accordance with
the procedures set forth in paragraph 7 above.
11. The Company shall preserve copies of this Plan and
Agreement and all reports made pursuant to paragraph 6
hereof, together with minutes of all board of directors
<PAGE>
meetings at which the adoption, amendment or continuance
of the Plan were considered (describing the factors
considered and the basis for decision), for a period of
not less than six years from the date of this Plan and
Agreement, or any such reports or minutes, as the case
may be, the first two years in an easily accessible
place.
12. This Plan and Agreement shall be construed in accordance with the
laws of the State of Colorado and applicable provisions of the Act.
To the extent the applicable laws of the State of Colorado, or any
provisions herein, conflict with the applicable provisions of the
Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Plan and Agreement on the 5th day of February, 1997.
INVESCO 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: /s/ Glen A. Payne
---------------------------
Glen A. Payne, Secretary
AMENDED PLAN AND AGREEMENT OF DISTRIBUTION
PURSUANT TO RULE 12b-1
PLAN AND AGREEMENT made as of ----- day of ----------, 1997, by and
between INVESCO Tax-Free Income Funds, Inc., a Maryland corporation (hereinafter
called the "Company"), and INVESCO DISTRIBUTORS, Inc., a Delaware corporation
("INVESCO").
WHEREAS, the Company engages in business as an open-end management
investment company, and is registered as such under the Investment Company Act
of 1940, as amended (the "Act"); and
WHEREAS, the Company desires to finance the distribution of the shares of
each of its two classes or series of common stock, each of which represents an
interest in a separate portfolio of investments, together with any additional
such classes or series that may hereafter be offered to the public
(individually, a "Fund" and collectively, the "Funds"), in accordance with this
Plan and Agreement of Distribution pursuant to Rule 12b-1 under the Act (the
"Plan and Agreement"); and
WHEREAS, INVESCO desires to be retained to perform services in accordance
with such Plan and Agreement and on said terms and conditions; and
WHEREAS, this Plan and Agreement has been approved by a vote of the board
of directors of the Company, including a majority of the directors who are not
interested persons of the Company, as defined in the Act, and who have no direct
or indirect financial interest in the operation of this Plan and Agreement (the
"Disinterested Directors") cast in person at a meeting called for the purpose of
voting on this Plan and Agreement;
NOW, THEREFORE, the Company hereby adopts the Plan set forth herein and
the Company and INVESCO hereby enter into this Agreement pursuant to the Plan in
accordance with the requirements of Rule 12b-1 under the Act, and provide and
agree as follows:
1. The Plan is defined as those provisions of this document by which
the Company adopts a Plan pursuant to Rule 12b- 1 under the Act and
authorizes payments as described herein. The Agreement is defined as
those provisions of this document by which the Company retains
INVESCO to provide distribution services beyond those
required by the General Distribution Agreement between the
parties, as are described herein. The Company may retain the Plan
notwithstanding termination of the Agreement. Termination of the
Plan will automatically terminate the Agreement. Each Fund is
hereby authorized to utilize the assets of the Company to
finance certain activities in connection with distribution
of the Company's shares.
<PAGE>
2. Subject to the supervision of the board of directors, the Company
hereby retains INVESCO to promote the distribution of shares of
each of the Funds by providing services and engaging in activities
beyond those specifically required by the Distribution Agreement
between the Company and INVESCO and to provide related services.
The activities and services to be provided by INVESCO hereunder
shall include one or more of the following: (a) the payment of
compensation (including trail commissions and incentive
compensation) to securities dealers, financial institutions and
other organizations, which may include INVESCO Funds Group, Inc.
and its affiliated companies, that render distribution and
administrative services in connection with the distribution of the
shares of each of the Funds; (b) the printing and distribution of
reports and prospectuses for the use of potential investors in each
Fund; (c) the preparing and distributing of sales literature;
(d) the providing of advertising and engaging in other promotional
activities, including direct mail solicitation, and television,
radio, newspaper and other media advertisements; and (e) the
providing of such other services and activities as may from time to
time be agreed upon by the Company. Such reports and prospectuses,
sales literature, advertising and promotional activities and other
services and activities may be prepared and/or conducted either by
INVESCO's own staff, the staff of INVESCO Funds Group, Inc. and its
affiliated companies, or third parties.
3. INVESCO hereby undertakes to use its best efforts to promote sales
of shares of each of the Funds to investors by engaging in those
activities specified in paragraph (2) above as may be necessary
and as it from time to time believes will best further sales of
such shares.
4. Each Fund is hereby authorized to expend, out of its assets, on a
monthly basis, and shall pay INVESCO to such extent, to enable
INVESCO at its discretion to engage over a rolling twelve-month
period (or the rolling twenty-four month period specified below)
in the activities and provide the services specified in paragraph
(2) above, an amount computed at an annual rate of .25 of 1% of the
average daily net assets of the Fund during the month. INVESCO
shall not be entitled hereunder to payment for overhead expenses
(overhead expenses defined as customary overhead NOT including the
costs of INVESCO's personnel whose primary responsibilities involve
marketing of the INVESCO Funds). Payments by a Fund hereunder, for
any month, may be used to compensate INVESCO for: (a) activities
engaged in and services provided by INVESCO during the rolling
twelve-month period in which that month falls, or (b) to the extent
permitted by applicable law, for any month during the first twenty-
four months following a Fund's commencement of operations,
activities engaged in and services provided by INVESCO during the
rolling twenty-four month period in which that month falls, and any
obligations incurred by INVESCO in excess of the limitation
described above shall not be paid for out of Fund assets. No Fund
shall be authorized to expend, for any month, a greater percentage
of its assets to pay INVESCO for activities engaged in and services
<PAGE>
provided by INVESCO during the rolling twenty-four month period
referred to above than it would otherwise be authorized to expend
out of its assets to pay INVESCO for activities engaged in and
services provided by INVESCO during the rolling twelve-month period
referred to above, and no Fund shall be authorized to expend, for
any month, a greater percentage of its assets to pay INVESCO for
activities engaged in and services provided by INVESCO pursuant to
the Plan and Agreement than it would otherwise have been authorized
to expend out of its assets to reimburse INVESCO for expenditures
incurred by INVESCO pursuant to the Plan and Agreement as it existed
prior to February 5, 1997. No payments will be made by the Company
hereunder after the date of termination of the Plan and Agreement.
5. To the extent that obligations incurred by INVESCO out of its own
resources to finance any activity primarily intended to result in
the sale of shares of a Fund, pursuant to this Plan and Agreement
or otherwise, may be deemed to constitute the indirect use of Fund
assets, such indirect use of Fund assets is hereby authorized in
addition to, and not in lieu of, any other payments authorized under
this Plan and Agreement.
6. The Treasurer of INVESCO shall provide to the board of directors of
the Company, at least quarterly, a written report of all moneys
spent by INVESCO on the activities and services specified in
paragraph (2) above pursuant to the Plan and Agreement. Each such
report shall itemize the activities engaged in and services
provided by INVESCO to a Fund as authorized by the penultimate
sentence of paragraph (4) above. Upon request, but no less
frequently than annually, INVESCO shall provide to the board of
directors of the Company such information as may reasonably be
required for it to review the continuing appropriateness of the Plan
and Agreement.
7. This Plan and Agreement shall each become effective immediately
upon approval by a vote of a majority of the outstanding voting
securities of the Company as defined in the Act, and shall continue
in effect until ---------, 1998 unless terminated as provided below.
Thereafter, the Plan and Agreement shall continue in effect from
year to year, provided that the continuance of each is approved at
least annually by a vote of the board of directors of the Company,
including a majority of the Disinterested Directors, cast in person
at a meeting called for the purpose of voting on such continuance.
The Plan may be terminated at any time as to any Fund, without
penalty, by the vote of a majority of the Disinterested Directors
or by the vote of a majority of the outstanding voting securities
of that Fund. INVESCO, or the Company, by vote of a majority of
the Disinterested Directors or of the holders of a majority of the
<PAGE>
outstanding voting securities of the Fund, may terminate the
Agreement under this Plan as to such Fund, without penalty, upon
30 days' written notice to the other party. In the event that
neither INVESCO nor any affiliate of INVESCO serves the Company
as investment adviser, the agreement with INVESCO pursuant to
this Plan shall terminate at such time. The board of directors
may determine to approve a continuance of the Plan, but not a
continuance of the Agreement, hereunder.
8. So long as the Plan remains in effect, the selection and nomination
of persons to serve as directors of the Company who are not
"interested persons" of the Company shall be committed to the
discretion of the directors then in office who are not "interested
persons" of the Company. However, nothing contained herein shall
prevent the participation of other persons in the selection and
nomination process, provided that a final decision on any such
selection or nomination is within the discretion of, and approved
by, a majority of the directors of the Company then in office who
are not "interested persons" of the Company.
9. This Plan may not be amended to increase the amount to be spent by
a Fund hereunder without approval of a majority of the outstanding
voting securities of that Fund. All material amendments to the
Plan and to the Agreement must be approved by the vote of the board
of directors of the Company, including a majority of the
Disinterested Directors, cast in person at a meeting called for the
purpose of voting on such amendment.
10. To the extent that this Plan and Agreement constitutes a Plan of
Distribution adopted pursuant to Rule 12b-1 under the Act it shall
remain in effect as such, so as to authorize the use by each Fund
of its assets in the amounts and for the purposes set forth herein,
notwithstanding the occurrence of an "assignment," as defined by
the Act and the rules thereunder. To the extent it constitutes an
agreement with INVESCO pursuant to a plan, it shall terminate
automatically in the event of such "assignment." Upon a termination
of the agreement with INVESCO, the Funds may continue to make
payments pursuant to the Plan only upon the approval of a new
agreement under this Plan and Agreement, which may or may not
be with INVESCO, or the adoption of other arrangements regarding the
use of the amounts authorized to be paid by the Funds hereunder, by
the Company's board of directors in accordance with the procedures
set forth in paragraph 7 above.
11. The Company shall preserve copies of this Plan and Agreement and all
reports made pursuant to paragraph 6 hereof, together with minutes
of all board of directors meetings at which the adoption, amendment
or continuance of the Plan were considered (describing the factors
considered and the basis for decision), for a period of not less
than six years from the date of this Plan and Agreement, or any such
reports or minutes, as the case may be, the first two years in an
easily accessible place.
<PAGE>
12. This Plan and Agreement shall be construed in accordance with the
laws of the State of Colorado and applicable provisions of the Act.
To the extent the applicable laws of the State of Colorado, or any
provisions herein, conflict with the applicable provisions of the
Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Plan and Agreement on the 5th day of February, 1997.
INVESCO TAX-FREE INCOME
FUNDS, INC.
By: /s/
-------------------------------
Dan J. Hesser, President
ATTEST: /s/
----------------------------
Glen A. Payne, Secretary
INVESCO DISTRIBUTORS, INC.
By: /s/
---------------------------------
Ronald L. Grooms,
Senior Vice President
ATTEST: /s/
--------------------------
Glen A. Payne, Secretary
COMPUTATION OF PERFORMANCE DATA
Current yield quotations are based on the Fund's investment results during
the latest seven days, computed by determining the net change, exclusive of
capital changes, in the value of a hypothetical pre-existing account having a
balance of one share at the beginning of the period, dividing the net change in
account value by the value of the account at the beginning of the base period to
obtain the base period return, and multiplying the base period return by 365/7.
Effective yield is computed by compounding the unannualied base period return by
dividing the base period return by 7, adding one to the quotient, raising the
sum to the 365th power, and subtracting one form the result.
Formulas are as follows, where D = dividend paid on one share during the latest
7 days:
Current Yield = D / 7 x 365
Compounded Yield = ((1 / 7)365) - 1
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> INVESCO TAX-FREE LONG-TERM BOND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 224540424
<INVESTMENTS-AT-VALUE> 232089282
<RECEIVABLES> 2889490
<ASSETS-OTHER> 32915
<OTHER-ITEMS-ASSETS> 45288
<TOTAL-ASSETS> 235056975
<PAYABLE-FOR-SECURITIES> 14111302
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 535351
<TOTAL-LIABILITIES> 14646653
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 210551446
<SHARES-COMMON-STOCK> 14368509
<SHARES-COMMON-PRIOR> 16507045
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2885393
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6973483
<NET-ASSETS> 220410322
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 12196712
<OTHER-INCOME> 0
<EXPENSES-NET> 2062645
<NET-INVESTMENT-INCOME> 10134067
<REALIZED-GAINS-CURRENT> 2193157
<APPREC-INCREASE-CURRENT> 3362194
<NET-CHANGE-FROM-OPS> 5555351
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 10296898
<DISTRIBUTIONS-OF-GAINS> 3483894
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2869165
<NUMBER-OF-SHARES-REDEEMED> 5711420
<SHARES-REINVESTED> 703719
<NET-CHANGE-IN-ASSETS> (30479736)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 4271092
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1275473
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2429546
<AVERAGE-NET-ASSETS> 233350927
<PER-SHARE-NAV-BEGIN> 15.20
<PER-SHARE-NII> 0.66
<PER-SHARE-GAIN-APPREC> 0.38
<PER-SHARE-DIVIDEND> 0.67
<PER-SHARE-DISTRIBUTIONS> 0.23
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.34
<EXPENSE-RATIO> 1
<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-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 4454198
<INVESTMENTS-AT-VALUE> 4524888
<RECEIVABLES> 85245
<ASSETS-OTHER> 8757
<OTHER-ITEMS-ASSETS> 29752
<TOTAL-ASSETS> 4648642
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3193
<TOTAL-LIABILITIES> 3193
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4700940
<SHARES-COMMON-STOCK> 469281
<SHARES-COMMON-PRIOR> 512816
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (123653)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 68162
<NET-ASSETS> 4645449
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 235485
<OTHER-INCOME> 0
<EXPENSES-NET> 37871
<NET-INVESTMENT-INCOME> 197614
<REALIZED-GAINS-CURRENT> 13442
<APPREC-INCREASE-CURRENT> 58250
<NET-CHANGE-FROM-OPS> 71692
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 196923
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 288509
<NUMBER-OF-SHARES-REDEEMED> 350074
<SHARES-REINVESTED> 18030
<NET-CHANGE-IN-ASSETS> (351575)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (137,095)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 23630
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 114885
<AVERAGE-NET-ASSETS> 4762673
<PER-SHARE-NAV-BEGIN> 9.74
<PER-SHARE-NII> 0.41
<PER-SHARE-GAIN-APPREC> 0.16
<PER-SHARE-DIVIDEND> 0.41
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.90
<EXPENSE-RATIO> 1
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
POWER OF ATTORNEY
The person executing this Power of Attorney hereby appoints Edward F.
O'Keefe and Glen A. Payne, or either of them, as his attorney-in-fact to execute
and to file such Registration Statements under federal and state securities laws
and such Post-Effective Amendments to such Registration Statements of the
hereinafter described entities as such attorney-in-fact, or either of them, may
deem appropriate:
INVESCO Diversified Funds, Inc.
INVESCO Dynamics Fund, Inc.
INVESCO Emerging Opportunity Funds, Inc.
INVESCO Growth Fund, Inc.
INVESCO Income Funds, Inc.
INVESCO Industrial Income Fund, Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Multiple Asset Funds, Inc.
INVESCO Specialty Funds, Inc.
INVESCO Strategic Portfolios, Inc.
INVESCO Tax-Free Income Funds, Inc.
INVESCO Value Trust
INVESCO Variable Investment Funds, Inc.
This Power of Attorney, which shall not be affected by the disability of
the undersigned, is executed and effective as of the 4th day of June, 1997.
/s/ Larry Soll
------------------------------------------
Larry Soll
STATE OF WASHINGTON )
)
COUNTY OF SAN JUAN )
SUBSCRIBED, SWORN TO AND ACKNOWLEDGED before me by Larry Soll, as a
director or trustee of each of the above-described entities, this 4th day of
June, 1997.
Mary Paulette Weaver
------------------------------------------
Notary Public
My Commission Expires: 1-27-99
POWER OF ATTORNEY
The person executing this Power of Attorney hereby appoints Edward F.
O'Keefe and Glen A. Payne, or either of them, as his attorney-in-fact to execute
and to file such Registration Statements under federal and state securities laws
and such Post-Effective Amendments to such Registration Statements of the
hereinafter described entities as such attorney-in-fact, or either of them, may
deem appropriate:
INVESCO Capital Appreciation Funds, Inc.
INVESCO Diversified Funds, Inc.
INVESCO Emerging Opportunity Funds, Inc.
INVESCO Growth Fund, Inc.
INVESCO Income Funds, Inc.
INVESCO Industrial Income Fund, Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Multiple Asset Funds, Inc.
INVESCO Specialty Funds, Inc.
INVESCO Strategic Portfolios, Inc.
INVESCO Tax-Free Income Funds, Inc.
INVESCO Value Trust
INVESCO Variable Investment Funds, Inc.
This Power of Attorney, which shall not be affected by the disability of
the undersigned, is executed and effective as of the 25th day of August, 1997.
/s/ Wendy L. Gramm
------------------------------------------
Wendy L. Gramm
STATE OF District of )
Columbia )
COUNTY OF )
SUBSCRIBED, SWORN TO AND ACKNOWLEDGED before me by Wendy L. Gramm, as a
director or trustee of each of the above-described entities, this 25 th day of
August, 1997.
/s/ Margaret Foster
------------------------------------------
Notary Public
My Commission Expires: February 14, 2000
