PROSPECTUS
September 29, 1995
INVESCO Cash Reserves Fund
INVESCO Cash Reserves Fund (the "Fund") seeks as high a level of current
income as is consistent with liquidity and safety of capital by investing in a
variety of short-term money market securities. An investment in the Fund is
neither insured nor guaranteed by the U.S. Government. The Fund's shares are
offered at net asset value, which is expected to be $1.00 per share. However,
there can be no assurance that the Fund will be able to maintain a stable net
asset value of $1.00 per share.
The Fund is a series of INVESCO Money Market Funds, Inc. (the "Company"), an
open-end management investment company consisting of three separate no-load
money market funds, each of which represents a separate portfolio of
investments.
This Prospectus relates to shares of the Fund. Separate Prospectuses are
available upon request from INVESCO Funds Group, Inc. for the Company's other
two funds, INVESCO Tax-Free Money Fund and INVESCO U.S. Government Money Fund.
Additional funds may be offered in the future.
This Prospectus provides you with the basic information you should know
before investing in the Fund. You should read it and keep it for future
reference. A Statement of Additional Information containing further information
about the Fund, dated September 29, 1995, has been filed with the Securities and
Exchange Commission and is incorporated by reference into this Prospectus. You
can obtain a copy without charge by writing INVESCO Funds Group, Inc., P.O. Box
173706, Denver, Colorado 80217-3706; or by calling 1-800-525-8085.
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<PAGE>
TABLE OF CONTENTS Page
ANNUAL FUND EXPENSES 2
FINANCIAL HIGHLIGHTS 3
PERFORMANCE DATA 4
INVESTMENT OBJECTIVE AND POLICIES 4
THE FUND AND ITS MANAGEMENT 6
HOW SHARES CAN BE PURCHASED 7
SERVICES PROVIDED BY THE FUND 9
HOW TO REDEEM SHARES 11
TAXES AND DIVIDENDS 12
ADDITIONAL INFORMATION 13
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>
ANNUAL FUND EXPENSES
The Fund is 100% no-load; there are no fees to purchase, exchange or
redeem shares nor any ongoing marketing ("12b-1") expenses. Lower expenses
benefit Fund shareholders by increasing the Fund's total return.
Shareholder Transaction Expenses
Sales load "charge" on purchases None
Sales load "charge" on reinvested dividends None
Redemption fees None
Exchange fees None
Annual Fund Operating Expenses(1)*
(as a percentage of average net assets)
Management Fee 0.41%
12b-1 Fees None
Other Expenses 0.44%
Transfer Agency Fee(2) 0.33%
General Services, Administrative
Services, Registration, Postage (3) 0.11%
Total Fund Operating Expenses 0.85%
(1) Certain Fund expenses are being voluntarily absorbed by INVESCO Funds
Group, Inc. ("INVESCO") in order to ensure that the Fund's total operating
expenses do not exceed 0.85% of the Fund's average net assets. See "The Fund and
Its Management."
(2) Consists of the transfer agency fee described under "Additional
Information - Transfer and Dividend Disbursing Agent."
(3) Includes, but is not limited to, fees and expenses of directors,
custodian bank, legal counsel and auditors, costs of administrative services
furnished under an Administrative Services Agreement, costs of registration of
Fund shares under applicable laws, and costs of printing and distributing
reports to shareholders.
Example*
A shareholder would pay the following expenses on a $1,000 investment for
the periods shown, assuming (1) a 5% annual return and (2) redemption at the end
of each time period:
1 Year 3 Years 5 Years 10 Years
$8 $26 $45 $100
*The expense information in the above tables has been presented on a basis that
assumes that the Fund's current 0.85% expense limitation had been in effect
during the entire year ended May 31, 1995.
<PAGE>
The purpose of the foregoing table is to assist investors in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. Such expenses are paid from the Fund's assets. (See "The Fund and
Its Management.") The Fund charges no sales load, redemption fee, or exchange
fee and bears no distribution expenses. The Example should not be considered a
representation of past or future expenses, and actual expenses may be greater or
less than those shown. The assumed 5% annual return is hypothetical and should
not be considered a representation of past or future annual returns, which may
be greater or less than the assumed amount.
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Fund share outstanding throughout Each Period)
Year Ended May 31, 1995
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 accountants report appearing in
the Fund's 1995 Annual Report to Shareholders, which is incorporated by
reference into the Statement of Additional Information. Both are available
without charge by contacting INVESCO Funds Group, Inc. at the address or
telephone number shown below.
<TABLE>
<CAPTION>
Period
Year Ended
Ended May 31May 31 Year Ended January 31
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------
1995 1994 1993+ 1993 1992 1991 1990 1989 1988 1987 1986
Cash Reserves Fund
PER SHARE DATA
Net Asset Value --
Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------------------------------------------------------------------------------------------------
INCOME FROM
INVESTMENT OPERATIONS
Net Investment
Income Earned and
Distributed to
Shareholders 0.05 0.03 0.01 0.03 0.05 0.07 0.08 0.07 0.06 0.06 0.07
---------------------------------------------------------------------------------------------------
Net Asset Value --
End of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===================================================================================================
TOTAL RETURN 4.76% 2.58% 0.75%* 3.00% 5.35% 7.76% 8.79% 7.25% 6.28% 6.01% 7.76%
RATIOS
Net Assets --
End of Period
($000 Omitted) $644,341 $747,551 $490,932 $506,337 $557,708 $431,808 $396,286 $317,410 $319,216 $178,675 $205,707
Ratio of Expenses to
Average Net Assets# 0.75% 0.81% 0.98%~ 0.80% 0.83% 0.76% 0.79% 0.79% 0.82% 0.81% 0.80%
Ratio of Net Investment
Income to Average Net
Assets# 4.65% 2.61% 2.26%~ 2.98% 5.17% 7.49% 8.46% 7.04% 6.24% 5.86% 7.45%
<FN>
+ From February 1, 1993 to May 31, 1993.
* Total return is based on operations for the period shown and, accordingly, is
not representative of a full year.
</FN>
</TABLE>
# Various expenses of the Fund were voluntarily absorbed by INVESCO Funds Group
for the year ended May 31, 1995. If such expenses had not been voluntarily
absorbed, ratio of expenses to average net assets would have been 0.85% and
ratio of net investment income to average net assets would have been 4.55%.
~ Annualized
Further information about the performance of the Fund is contained in the Fund's
Annual Report to Shareholders, which may be obtained without charge by writing
INVESCO Funds Group, Inc., P.O. Box 173706, Denver, Colorado 80217-3706; or by
calling 1-800-525-8085.
<PAGE>
PERFORMANCE DATA
From time to time the Fund advertises its "yield", "effective yield" and
"total return" performance. These figures are based upon historical investment
results and are not intended to indicate future performance. The "yield" of the
Fund refers to the income generated by an investment in the Fund over a
seven-day period (which period will be stated in the advertisement). This income
is then "annualized." That is, the amount of income generated by the investment
during that week is assumed to be generated each week over a 52-week period and
is shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in the Fund
is assumed to be reinvested. The "effective yield" will be slightly higher than
the "yield" because of the compounding effect of this assumed reinvestment.
"Total return" refers to the average annual rate of return of an
investment in the Fund. This figure is computed by calculating the percentage
change in value of an investment of $1,000, assuming reinvestment of all income
dividends and other distributions, to the end of a specified period. Periods of
one year, five years, and ten years are used to the extent possible.
Statements of the Fund's total return performance are based upon
investment results during a specified period and assume reinvestment of all
dividends and capital gains, if any, paid during that period. Thus, a report of
total return performance should not be considered as representative of future
performance. The Fund charges no sales load, redemption fee, or exchange fee
which would affect the total return computation.
In conjunction with performance reports and/or analyses of shareholder
service for the Fund, comparative data between the Fund's performance for a
given period and recognized indicators of money market performance for the same
period, and/or assessments of the quality of shareholder service, may be
provided to shareholders. Such indicators include the Donoghue's Money Fund
Report, Bank Rate Monitor's 100 Highest Yields, the Certificate of Deposit
indices, Treasury Bill indices and the Consumer Price Index. In addition,
rankings, ratings, and comparisons of investment performance and/or assessments
of the quality of shareholder service published by the William Donoghue
Organization, Money, Kiplinger's Personal Finance, Morningstar, and similar
sources which utilize information compiled (i) internally; (ii) by Lipper
Analytical Services, Inc.; or (iii) by other recognized analytical services, may
be used in advertising. Rankings and comparisons of the Fund's performance by
Donoghue will be drawn from its Taxable Funds First Tier grouping.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek as high a level of current
income as is consistent with liquidity and safety of capital. While there can be
no assurance that this objective will be achieved, the Fund seeks to achieve its
objective through investment in a diversified portfolio of high-quality,
short-term debt obligations, each of which must mature within one year from the
date of purchase. Because the Fund invests in high quality, short-term debt
obligations, its ability to achieve a high level of current income is limited in
comparison to mutual funds that invest in securities that present a greater
credit risk.
The securities in which the Fund invests consist of: (1) United States
Government obligations, consisting of securities issued or guaranteed as to
principal or interest by the U.S. Government or one of its agencies or
instrumentalities, such as Treasury bills, bonds, and notes, Government National
Mortgage Association participation certificates, Federal Home Loan Bank
securities, and Federal National Mortgage Association bonds; (2) commercial
paper, limited to obligations which are rated by at least two nationally
recognized statistical rating organizations ("NRSROs"), generally Standard &
Poor's Rating Group ("S&P") and Moody's Investors Service, Inc. ("Moody's"), in
the highest short-term rating category (A-1 by S&P and Prime-1 by Moody's), or
where the obligation is rated by only one NRSRO, such obligation is rated in the
highest short-term rating category, generally A-1 or Prime-1; (3) obligations of
domestic banks (as described in the Statement of Additional Information) and
their foreign affiliates, consisting of certificates of deposit and bankers'
acceptances; and (4) corporate obligations, consisting of bonds, debentures and
notes. Domestic bank and corporate obligations must be rated in one of the two
highest short-term rating categories by at least two NRSROs or by one NRSRO, if
the obligation has been rated by only one NRSRO. The Fund may invest in
obligations that are not rated by any NRSRO if the Fund's investment adviser
determines, in an analysis similar to that performed by an NRSRO in rating
similar securities and issuers, that the instrument is of comparable quality to
a security rated in one of the two highest short-term rating categories. The
Fund will at all times invest at least 95% of its assets in securities rated in
the highest short-term rating category by at least two NRSROs or by one NRSRO,
if the security has been rated by only one NRSRO, or in comparable unrated
securities, that the adviser determines present minimal credit risk. For a
description of the relevant rating categories applicable to the Fund's
investments, see Appendix A in the Statement of Additional Information.
The Fund is subject to certain restrictions, which are set forth in the
Statement of Additional Information, regarding its investments which may not be
altered without the approval of the Fund's shareholders. Those restrictions
include, among others,
<PAGE>
limitations with respect to the percentages of the value of its total assets
that may be invested in any one issuer or in one industry. The Fund may not
invest more than 5% of its total assets in the securities of any one issuer,
other than obligations issued or guaranteed by the U.S. Government. In addition,
the Fund's investment objective stated above is fundamental and may not be
changed without a vote of the Fund's shareholders.
The return on investment in the Fund will depend upon the interest earned
by the Fund on its security holdings, after deduction of Fund expenses, and is
paid to shareholders in the form of daily dividends. If interest rates increase,
the value of interest-paying debt securities may decrease, and vice versa.
Notwithstanding the possibility of fluctuations in values of the Fund's
securities, as a result of the Fund's use of amortized cost valuation and its
declaration of income dividends daily, it is expected, but cannot be assured,
that the Fund's net asset value will be maintained at a constant value of $1.00
per share. Under the amortized cost valuation method, securities are valued at
their cost at the time of purchase, and thereafter there is assumed a constant
amortization to maturity of any discount or premium.
Generally, the Fund intends to hold securities purchased until maturity.
When in the opinion of the Fund's investment adviser or sub-adviser
(collectively, "Fund Management") it is advisable in light of prevailing market
or business conditions, however, securities may be sold without regard to how
long they have been held.
The Fund may enter into repurchase agreements with respect to any of the
types of obligations listed above with registered broker-dealers, registered
government securities dealers, or member banks of the Federal Reserve System,
which are deemed creditworthy, as described in the Statement of Additional
Information. (For a description of the requirements for broker-dealers and
registered government securities dealers, see the Statement of Additional
Information.) Repurchase agreements, which may be considered a "loan" under the
Investment Company Act of 1940 (the "1940 Act"), involve the purchase of debt
securities ("collateral") with the condition that, after a stated period of
time, the original seller will buy back such securities at a predetermined price
or yield. The amount required to be paid to the Fund upon repurchase reflects
the Fund's yield under the agreement. In the event that the original seller
defaults on its obligation to repurchase the securities, the Fund could incur
costs or delays in seeking to sell such securities. To minimize risk, the
securities underlying each repurchase agreement will be maintained with the
Fund's custodian in an amount at least equal to the repurchase price under the
agreement (including accrued interest), and such agreements will be effected
only with parties that meet certain creditworthiness standards established by
the Company's board of directors. While the Fund has not adopted any limit on
the amount of its total
<PAGE>
assets that may be invested in repurchase agreements, the Company's board of
directors has established the policy that all repurchase agreements entered into
by the Fund will mature in seven days or less. In no event will the Fund enter
into a repurchase agreement that is not fully collateralized by either U.S.
government securities or securities that are otherwise eligible for inclusion in
the Fund's portfolio, which are rated in the highest rating category by at least
two NRSROs, or one NRSRO if such securities are rated by only one NRSRO.
The Fund also may place a portion of its assets in interest-bearing
accounts with domestic banks meeting the criteria set forth in the Statement of
Additional Information under which the Fund is free to withdraw its assets at
any time without suffering any interest reduction or other penalty. One year
obligations issued not more than 375 days prior to maturity will be considered
as meeting the Fund's investment requirements. In addition, the Fund will
maintain a dollar-weighted average portfolio maturity of 90 days or less, and
will limit its portfolio investments to United States dollar-denominated
instruments that are eligible for investment by the Fund under applicable
Securities and Exchange Commission rules.
THE FUND AND ITS MANAGEMENT
The Company is a no-load mutual fund, registered with the Securities and
Exchange Commission as an open-end, diversified, management investment company.
The Fund was incorporated on October 14, 1975 under the laws of Colorado, and on
July 1, 1993 was reorganized as a series of the Company, a Maryland corporation
incorporated on April 2, 1993. The overall supervision of the Company is the
responsibility of its board of directors.
Pursuant to an agreement with the Company, INVESCO Funds Group, Inc.
("INVESCO"), 7800 E. Union Avenue, Denver, Colorado, serves as the Fund's
investment adviser. INVESCO is primarily responsible for providing the Fund with
various administrative services, and supervising the Fund's daily business
affairs. These services are subject to review by the Company's board of
directors.
INVESCO is an indirect wholly-owned subsidiary of INVESCO PLC. INVESCO PLC
is a financial holding company that, through its subsidiaries, engages in the
business of investment management on an international basis. INVESCO was
established in 1932 and, as of May 31, 1995, managed 14 mutual funds, consisting
of 38 separate portfolios, with combined assets of approximately $9.9 billion on
behalf of over 796,000 shareholders.
Pursuant to an agreement with INVESCO, INVESCO Trust Company ("INVESCO
Trust"), 7800 E. Union Avenue, Denver, Colorado, serves as the Company's
sub-adviser. INVESCO Trust, a trust company founded in 1969, is a wholly-owned
subsidiary of INVESCO that
<PAGE>
served as adviser or sub-adviser to 41 investment portfolios as of May 31,
1995, including 27 portfolios in the INVESCO group. These 41 portfolios had
aggregate assets of approximately $9.5 billion as of May 31, 1995. 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. INVESCO Trust, subject to the supervision of
INVESCO, is primarily responsible for selecting and managing the Fund's
investments. Although the Company is not a party to the sub-advisory agreement,
the agreement has been approved by shareholders of the Company.
The following individual serves as the portfolio manager for the Fund and
is primarily responsible for the day-to-day management of the Fund's portfolio
of securities:
Richard R. Hinderlie Portfolio manager of the Fund since
1993; portfolio manager of INVESCO
U.S. Government Money Fund and
INVESCO U.S. Government Securities
Fund; co-portfolio manager of
INVESCO Short-Term Bond Fund;
portfolio manager of INVESCO Trust
Company since 1993; Securities
Analyst with Bank Western from 1987
to 1992; B.A., Pacific Lutheran
University; M.B.A., Arizona State
University.
The Fund pays INVESCO a monthly fee which is based upon a percentage of
the Fund's average net assets, determined daily. The maximum rate payable by the
Fund for each fiscal year is 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 in excess of $500 million.
For the fiscal year ended May 31, 1995, the investment advisory fees paid by the
Fund amounted to 0.41% of the Fund's average net assets. Out of its advisory fee
which it receives from the Fund, INVESCO pays INVESCO Trust, as the Fund's
sub-adviser, a monthly fee, which is computed at the annual rate of 0.15% of the
Fund's average net assets. No fee is paid by the Fund to INVESCO Trust.
The Company also has entered into an Administrative Services Agreement,
dated April 30, 1993 (the "Administrative Agreement"), with INVESCO. Pursuant to
the Administrative Agreement, INVESCO performs certain administrative,
recordkeeping and internal sub-accounting services, including without
limitation, maintaining general ledger and capital stock accounts, preparing a
daily trial balance, calculating net asset value daily, providing selected
general ledger reports and providing sub-accounting and recordkeeping services
for Fund shareholder accounts maintained by certain retirement and employee
benefit plans for the benefit of
<PAGE>
participants in such plans. For such services, the Fund pays INVESCO a fee
consisting of a base fee of $10,000 per year, plus an additional incremental fee
computed at the annual rate of 0.015% per year of the average net assets of the
Fund. INVESCO also is paid a fee by the Fund for providing transfer agent
services. See "Additional Information."
The Fund's expenses, which are accrued daily, are generally deducted from
the Fund's total income before dividends are paid. Total expenses of the Fund
for the fiscal year ended May 31, 1995, including investment advisory fees (but
excluding brokerage commissions which are included as a cost of acquiring
securities), amounted to 0.75% of the Fund's average net assets. Certain fund
expenses were, and are, voluntarily absorbed by INVESCO pursuant to a commitment
to the Fund in order to ensure that the Fund's total operating expenses did not
exceed 0.75% of the Fund's average net assets (from July 1, 1994 through April
30, 1995) and will not exceed 0.85% of the Fund's average net assets (beginning
May 1, 1995). This commitment may be changed following consultation with the
Company's board of directors. In the absence of such voluntary expense
limitation, the Fund's total expenses for the fiscal year ended May 31, 1995
would have been 0.85% of the Fund's average net assets.
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of
their financial responsibility coupled with their ability to effect transactions
at the best available prices. Although the Fund does not market its shares
through intermediary brokers or dealers, the Fund may place orders for portfolio
transactions with qualified broker/dealers that recommend the Fund, or sell
shares of the Fund, to clients, or act as agent in the purchase of Fund shares
for clients, if Fund Management believes that the quality of the execution of
the transaction and level of commission are comparable to those available from
other qualified brokerage firms.
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 investment and other personnel to
conduct their personal investment activities in a manner that Fund Management
believes is not detrimental to the Fund or Fund Management's other advisory
clients. See the Statement of Additional Information for more detailed
information.
HOW SHARES CAN BE PURCHASED
Shares of the Fund are sold on a continuous basis by INVESCO, as the Fund's
Distributor, at the net asset value per share next calculated after receipt of a
purchase order in good form and of federal funds by the Fund, as described
below. No sales charge is imposed upon the sale of shares of the Fund. To
purchase shares of the Fund, send a check made payable to INVESCO Funds Group,
Inc., together with a completed application form, to:
INVESCO FUNDS GROUP, INC.
Post Office Box 173706
Denver, Colorado 80217-3706
Purchase orders must specify the Fund in which the investment is to be
made.
<PAGE>
The minimum initial purchase must be at least $1,000, with subsequent
investments of not less than $50, except that: (1) those shareholders
establishing an EasiVest or direct payroll purchase account, as described below
in the Prospectus section entitled "Services Provided by the Fund", may open an
account without making any initial investment if they agree to make regular,
minimum purchases of at least $50; (2) those shareholders investing in an
Individual Retirement Account ("IRA"), or through omnibus accounts where
individual shareholder recordkeeping and sub-accounting are not required may
make initial minimum purchases of $250; (3) Fund Management may permit a lesser
amount to be invested in the Fund under a federal income tax-deferred retirement
plan (other than an IRA), or under a group investment plan qualifying as a
sophisticated investor; and (4) Fund Management reserves the right to reduce or
waive the minimum purchase requirements in its sole discretion where it
determines such action is in the best interests of the Fund. The minimum initial
purchase requirement of $1,000, as described above, does not apply to
shareholder account(s) in any of the INVESCO funds opened prior to January 1,
1993, and, thus, is not a minimum balance requirement for those existing
accounts. However, for shareholders already having accounts in any of the
INVESCO funds, all initial share purchases in a new Fund account including those
made using the exchange privilege, must meet the Fund's applicable minimum
investment requirements.
Because the Fund seeks to be fully invested at all times, an order to
purchase shares will not be effective until the investor's payment can be
converted into available federal funds (i.e., moneys held on deposit within the
Federal Reserve System) under regular banking processing procedures or, if the
investor is acquiring shares in an exchange from another INVESCO fund, the Fund
receives the proceeds of the exchange. Checks drawn on a member bank of the
Federal Reserve System normally are converted into federal funds within two or
three business days following receipt of the checks by the Fund. In the case of
checks drawn on banks which are not members of the Federal Reserve System, it
may take longer for federal funds to become available. During the period of time
prior to receipt of federal funds or the proceeds of an exchange, an investor's
money will not be invested in the Fund and will not earn any dividends. During
such time, an investor's money is held in a
<PAGE>
separate custodial account, which results in no interest or other economic
benefit accruing to INVESCO. The purchase of shares can be expedited by placing
bank wire or overnight courier orders. Overnight courier orders must meet the
above minimum requirements. In no case can a bank wire order be in an amount
less than $1,000. For further information, the purchaser may call the Fund's
office by using the telephone number on the cover of this Prospectus. Orders
sent by overnight courier, including Express Mail, should be sent to the street
address, not Post Office Box, of INVESCO Funds Group, Inc., at 7800 E. Union
Avenue, Denver, CO 80237.
If your check does not clear, you will be responsible for any related loss
the Fund or INVESCO incurs. If you are already a shareholder in the INVESCO
funds, the Fund has the option to redeem shares from any identically registered
account in the Fund or any other INVESCO fund as reimbursement for any loss
incurred. You may also be prohibited or restricted from making future purchases
in any of the INVESCO funds.
Persons who invest in the Fund through a securities broker may be charged
a commission or transaction fee by the broker for the handling of the
transaction if the broker so elects. Any investor may deal directly with the
Fund in any transaction, however. In that event, there is no such charge.
INVESCO may from time to time make payments from its revenues to securities
dealers and other financial institutions that provide distribution-related
and/or administrative services for the Fund.
The Fund reserves the right in its sole discretion to reject any order for
purchase of its shares (including purchases by exchange) when in the judgment of
Fund Management, such rejection is in the best interest of the Fund.
Net asset value per share of the Fund is computed once each day that the
New York Stock Exchange is open as of the close of regular trading on that
Exchange (usually 4:00 p.m., New York time) and also may be computed on other
days under certain circumstances. Net asset value per share is calculated by
dividing the value of the Fund's securities plus the value of its other assets
(including interest accrued but not collected), less all liabilities (including
accrued expenses), by the number of outstanding shares of the Fund. As a result
of using the amortized cost valuation method to value its portfolio securities
and declaring income dividends daily, the Fund expects, but cannot guarantee,
that it will be able to maintain a constant net asset value of $1.00 per share.
SERVICES PROVIDED BY THE FUND
Shareholder Accounts. INVESCO maintains a share account that reflects the
current holdings of each shareholder. Share certificates will be issued only
upon specific request. Since certificates must be carefully safeguarded and must
be surrendered in order to exchange or redeem Fund shares, most shareholders do
not request share certificates in order to facilitate such transactions. Each
shareholder is sent a detailed confirmation of each transaction in shares of the
Fund. Shareholders whose only transactions are through the EasiVest, direct
payroll purchase, automatic monthly exchange or periodic withdrawal programs, or
are reinvestments of dividends or capital gains in the same or another Fund,
<PAGE>
will receive confirmations of those transactions on their quarterly statements.
These programs are discussed below. For information regarding a shareholder's
account and transactions, the shareholder may call the Fund's office by using
the telephone number on the cover of this Prospectus.
Reinvestment of Distributions. Income dividends paid by the Fund are
automatically reinvested in additional shares of the Fund at the net asset value
per share in effect on the ex-dividend date. A shareholder may, however, elect
to reinvest dividends in certain of the other no-load mutual funds advised and
distributed by INVESCO, or to receive payment of all dividends in excess of
$10.00 by check by giving written notice to INVESCO at least two weeks prior to
the record date on which the change is to take effect. Further information
concerning these options can be obtained by contacting INVESCO.
Periodic Withdrawal Plan. A Periodic Withdrawal Plan is available to
shareholders who own or purchase shares of any mutual funds advised by INVESCO
having a total value of $10,000 or more; provided, however, that at the time the
Plan is established, the shareholder owns shares having a value of at least
$5,000 in the fund from which the withdrawals will be made. Under the Periodic
Withdrawal Plan, INVESCO, as agent, will make specified monthly or quarterly
payments of any amount selected (minimum payment of $100) to the party
designated by the shareholder. Notice of all changes concerning the Periodic
Withdrawal Plan must be received by INVESCO at least two weeks prior to the next
scheduled check. Further information regarding the Periodic Withdrawal Plan and
its requirements and tax consequences can be obtained by contacting INVESCO.
Exchange Privilege. Shares of the Fund may be exchanged for shares of any
other fund of the Company as well as for shares of any of the following other
no-load mutual funds, which are also advised and distributed by INVESCO, on the
basis of their respective net asset values at the time of the exchange: 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
Multiple Asset Funds, Inc., INVESCO Specialty Funds, Inc., INVESCO Strategic
Portfolios, Inc., INVESCO Tax-Free Income Funds, Inc., and INVESCO Value Trust.
<PAGE>
An exchange involves the redemption of shares in the Fund and investment
of the redemption proceeds in shares of another fund of the Company or in shares
of one of the funds listed above. Exchanges will be made at the net asset value
per share next determined after receipt of an exchange request in proper order.
Any gain or loss realized on an exchange is recognizable for federal income tax
purposes by the shareholder. Exchange requests may be made either by telephone
or by written request to INVESCO Funds Group, Inc., using the telephone number
or address on the cover of this Prospectus. 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.
The privilege of exchanging Fund shares by telephone is available to
shareholders automatically unless expressly declined. By signing the new account
Application, a Telephone Transaction Authorization Form or otherwise utilizing
telephone exchange privileges, the investor has agreed that the Fund will not be
liable for following instructions communicated by telephone that it reasonably
believes to be genuine. The Fund employs procedures, which it believes are
reasonable, designed to confirm that exchange instructions are genuine. These
may include recording telephone instructions and providing written confirmations
of exchange transactions. As a result of this policy, the investor may bear the
risk of any loss due to unauthorized or fraudulent instructions; provided,
however, that if the Fund fails to follow these or other reasonable procedures,
the Fund may be liable.
The exchange privilege may be modified or terminated at any time. Except
for those limited instances where redemptions of the exchanged security are
suspended under Section 22(e) of the 1940 Act, or where sales of the fund into
which the shareholder is exchanging are temporarily stopped, notice of all such
modifications or termination of the exchange privilege will be given at least 60
days prior to the date of termination or the effective date of the modification.
Before making an exchange, the shareholder should review the prospectuses
of the funds involved and consider their differences, and should be aware that
the exchange privilege may only be available in those states where exchanges may
be legally made, which will require that the shares being acquired are
registered for sale in the shareholder's state of residence. Shareholders
interested in exercising the exchange privilege may contact INVESCO for
information concerning their particular exchanges.
Automatic Monthly Exchange. Shareholders who have accounts in any one or
more of the mutual funds distributed by INVESCO may arrange for a fixed dollar
amount of their fund shares to be automatically exchanged for shares of any
other INVESCO mutual fund listed under "Exchange Privilege" on a monthly basis.
The minimum monthly exchange in this program is $50.00. This automatic exchange
program can be changed by the shareholder at any time by notifying INVESCO at
least two weeks prior to the date the change is to be made. Further information
regarding this service can be obtained by contacting INVESCO.
<PAGE>
EasiVest. For shareholders who want to maintain a schedule of monthly
investments, EasiVest uses various methods to draw a preauthorized amount from
the shareholder's bank account to purchase Fund shares. This automatic
investment program can be changed by the shareholder at any time by writing to
INVESCO at least two weeks prior to the date the change is to be made. Further
information regarding this service can be obtained by contacting INVESCO.
Direct Payroll Purchase. Shareholders may elect to have their employers
make automatic purchases of Fund shares for them by deducting a specified amount
from their regular paychecks. This automatic investment program can be modified
or terminated at any time by the shareholder by notifying the employer. Further
information regarding this service can be obtained by contacting INVESCO.
Tax-Deferred Retirement Plans. Shares of the Fund may be purchased for
self-employed individual retirement plans, IRAs, simplified employee pension
plans and corporate retirement plans. In addition, shares can be used to fund
tax qualified plans established under Section 403(b) of the Internal Revenue
Code by educational institutions, including public school systems and private
schools, and certain kinds of non-profit organizations, which provide deferred
compensation arrangements for their employees.
Prototype forms for the establishment of these various plans, including,
where applicable, disclosure statements required by the Internal Revenue
Service, are available from INVESCO. INVESCO Trust Company, a subsidiary of
INVESCO, is qualified to serve as trustee or custodian under these plans and
provides the required services at competitive rates. Retirement plans (other
than IRAs) receive monthly statements reflecting all transactions in their Fund
accounts. IRAs receive the confirmations and quarterly statements described
under "Shareholder Accounts." For complete information, including prototype
forms and service charges, call INVESCO at the telephone number listed on the
cover of this Prospectus or send a written request to: Retirement Services,
INVESCO Funds Group, Inc., Post Office Box 173706, Denver, Colorado 80217-3706.
<PAGE>
HOW TO REDEEM SHARES
Shares of the Fund may be redeemed at any time at their current net asset
value per share next determined after a request in proper form is received at
the Fund's office. (See "How Shares Can Be Purchased.") As stated above, the
Fund expects, but cannot guarantee, to maintain a $1.00 per share constant net
asset value.
If the shares to be redeemed are represented by stock certificates, a
written request for redemption signed by the registered shareholder(s) and the
certificates must be forwarded to INVESCO Funds Group, Inc., Post Office Box
173706, Denver, Colorado 80217-3706. Redemption requests sent by overnight
courier, including Express Mail, should be sent to the street address, not Post
Office Box, of INVESCO Funds Group, Inc. at 7800 E. Union Avenue, Denver, CO
80237. If no certificates have been issued, a written redemption request signed
by each registered owner of the account may be submitted to INVESCO at the
address noted above. If shares are held in the name of a corporation, additional
documentation may be necessary. Call or write for specifics. If payment for the
redeemed shares is to be made to someone other than the registered owner(s), the
signature(s) must be guaranteed by a financial institution which qualifies as an
eligible guarantor institution. Redemption procedures with respect to accounts
registered in the names of broker/dealers may differ from those applicable to
other shareholders.
Be careful to specify the account from which the redemption is to be made.
Shareholders have a separate account for each Fund in which they invest.
Payment of redemption proceeds will be mailed within seven days following
receipt of the required documents. However, payment may be postponed under
unusual circumstances, such as when normal trading is not taking place on the
New York Stock Exchange or an emergency as defined by the Securities and
Exchange Commission exists. If the shares to be redeemed were purchased by check
and that check has not yet cleared, payment will be made promptly upon clearance
of the purchase check (which may take up to 15 days).
If a shareholder participates in EasiVest, the Fund's automatic monthly
investment program, and redeems all of the shares in his Fund account, INVESCO
will terminate any further EasiVest purchases unless otherwise instructed by the
shareholder.
Because of the high relative costs of handling small accounts, should the
value of any shareholder's account fall below $250 as a result of shareholder
action, the Fund reserves the right to effect the involuntary redemption of 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.
<PAGE>
Shareholders with $1,000 or more in their accounts may avail themselves of
the Check Withdrawal Option. A one-time charge of $5 will be made to institute
the option. Checks will be furnished at no charge and may be written in amounts
of not less than $500. Shares in the Fund will be redeemed to cover payment of
checks drawn by the shareholder. INVESCO reserves the right to institute a
charge for checks upon notice to all shareholders with the option. Further
information regarding this option may be obtained by contacting INVESCO.
Fund shareholders (other than shareholders holding Fund shares in accounts
of IRA plans) may request expedited redemption of shares having a minimum value
of at least $250, (or redemption of all shares if their value is less than $250)
held in accounts maintained in their name by telephoning redemption instructions
to INVESCO, using the telephone number on the cover of this Prospectus. The
redemption proceeds, at the shareholder's option, either will be mailed to the
address listed for the shareholder's Fund account, or wired (minimum of $1,000)
or mailed to the bank which the shareholder has designated to receive the
proceeds of telephone redemptions. The Fund charges no fee for effecting such
telephone redemptions. Unless Fund Management permits a larger redemption
request to be placed by telephone, a shareholder may not place a redemption
request by telephone in excess of $25,000. These telephone redemption privileges
may be modified or terminated in the future at the discretion of Fund
Management.
For INVESCO Trust Company-sponsored federal income tax-deferred retirement
plans, the term "shareholders" is defined to mean plan trustees that file a
written request to be able to redeem Fund shares by telephone. Shareholders
should understand that, while the Fund will attempt to process all telephone
redemption requests on an expedited basis, there may be times, particularly in
periods of severe economic or market disruption, when (a) they may encounter
difficulty in placing a telephone redemption request, and (b) processing
telephone redemptions will require up to seven days following receipt of the
redemption request, or additional time because of the unusual circumstances set
forth above.
The privilege of redeeming Fund shares by telephone is available to
shareholders automatically unless expressly declined. By signing a new account
Application, a Telephone Redemption Authorization form or otherwise utilizing
telephone redemption privileges, the shareholder has agreed that the Fund will
not be liable for following instructions communicated by telephone that it
reasonably believes to be genuine. The Fund employs procedures, which it
believes are reasonable, designed to confirm that telephone instructions are
genuine. These may include recording telephone instructions and providing
written confirmation of transactions initiated by telephone. As a result of this
policy, the investor may bear the risk of any loss due to unauthorized or
fraudulent instructions; provided, however, that if the Fund fails to follow
these or other reasonable procedures, the Fund may be held liable.
<PAGE>
TAXES AND DIVIDENDS
Taxes. The Fund intends to distribute to shareholders substantially all of
its net investment income and net capital gains, if any, in order to continue to
qualify for tax treatment as a regulated investment company. Thus, the Fund does
not expect to pay any federal income or excise taxes.
Unless shareholders are exempt from income taxes, they must include all
dividends as taxable income for federal, state, and local income tax purposes.
Dividends are taxable whether they are received in cash or automatically
invested in shares of the Fund or another fund in the INVESCO group.
Shareholders may be subject to backup withholding of 31% on dividends and
redemption proceeds. Unless a shareholder is subject to backup withholding for
other reasons, the shareholder can avoid backup withholding on his Fund account
by ensuring that INVESCO has a correct, certified tax identification number.
Dividends. The Fund earns ordinary or net investment income in the form of
dividends and interest on its investments. The Fund's policy is to distribute
substantially all of this income, less Fund expenses, to shareholders. Dividends
from net investment income are declared daily and paid monthly. Dividends and
capital gains, if any, are automatically reinvested in additional shares of the
Fund at the net asset value on the ex-dividend date, unless otherwise requested.
(See "Services Provided by the Fund - Reinvestment of Distributions.")
At the end of each year, information regarding the tax status of dividends
is provided to shareholders. The Fund does not invest in long-term securities
and therefore any capital gains or losses realized by the Fund will be
short-term gains or losses. Short- term capital gains are included with income
from dividends and interest as ordinary income and are paid to shareholders as
dividends.
Shareholders are encouraged to consult their tax advisers with respect to
these matters. For further information, see "Dividends and Taxes" in the
Statement of Additional Information.
<PAGE>
ADDITIONAL INFORMATION
Voting Rights. All shares of the Fund, and the two other 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. Voting with
respect to certain matters, such as ratification of independent accountants and
the election of directors, will be by all funds of the Company voting together.
In other cases, such as voting upon an investment advisory contract, voting is
on a fund-by-fund basis. To the extent permitted by law, when not all funds are
affected by a matter to be voted upon, only shareholders of the fund or funds
affected by the matter will be entitled to vote thereon. The Company is not
generally required, and does not expect, to hold regular annual meetings of
shareholders. However, the board of directors will call special meetings of
shareholders for the purpose, among other reasons, of voting upon the question
of removal of a director or directors 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
Company will assist shareholders in communicating with other shareholders as
required by the 1940 Act. Directors may be removed by action of the holders of a
majority of the outstanding shares of the Company.
Shareholder Inquiries. All inquiries regarding the Fund should be directed
to the Fund at the telephone number or mailing address set forth on the cover
page of this Prospectus.
Transfer and Dividend Disbursing Agent. INVESCO Funds Group, Inc., 7800 E.
Union Avenue, Denver, Colorado 80237, acts as registrar, transfer agent, and
dividend disbursing agent for the Fund pursuant to a Transfer Agency Agreement
which provides that the Fund will pay an annual fee of $21.00 per shareholder
account or omnibus account participant. The transfer agency fee is not charged
to each shareholder's or participant's account, but is an expense of the Fund to
be paid from the Fund's assets. Registered broker-dealers, third party
administrators of tax-qualified retirement plans and other entities, including
affiliates of INVESCO, may provide sub-transfer agency services to the Fund
which reduce or eliminate the need for identical services to be provided on
behalf of the Fund by INVESCO. In such cases, INVESCO may pay the third party an
annual sub-transfer agency fee of up to $21.00 per participant in the third
party's omnibus account out of the transfer agency fee which is paid to INVESCO
by the Fund.
<PAGE>
INVESCO MONEY MARKET FUNDS, INC.
INVESCO Cash Reserves Fund A no-load
mutual fund seeking high current income.
PROSPECTUS
September 29, 1995
To receive general information and prospectuses on any of INVESCO's funds or
retirement plans, or to obtain current account or price information, call
toll-free:
1-800-525-8085
To reach PAL, your 24-hour Personal Account Line, call:
1-800-424-8085
Or write to:
INVESCO Funds Group, Inc., Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
If you're in Denver, visit one of our convenient Investor Centers:
Cherry Creek
155-B Fillmore Street
Denver Tech Center
7800 East Union Avenue
Lobby Level
<PAGE>
PROSPECTUS
September 29, 1995
INVESCO Tax-Free Money Fund
INVESCO Tax-Free Money Fund (the "Fund") pursues its investment objective
of seeking as high a level of current income exempt from federal income taxation
as is consistent with liquidity and preservation of capital by investing in a
diversified portfolio of high-quality, short-term debt 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 income taxation. Such obligations may
include municipal bonds, notes and commercial paper. The Fund's shares are
offered at net asset value, which is expected, but cannot be assured, to be
maintained at a constant $1.00 per share. Shares of the Fund are neither insured
nor guaranteed by the U.S. government.
The Fund is a series of INVESCO Money Market Funds, Inc. (the "Company"),
an open-end management investment company consisting of three separate no-load
money market funds, each of which represents a separate portfolio of
investments.
This Prospectus relates to shares of the Fund. Separate
Prospectuses are available upon request from INVESCO Funds Group,
Inc. for the Company's other two funds, INVESCO Cash Reserves Fund
and INVESCO U.S. Government Money Fund. Additional Funds may be
offered in the future.
This Prospectus provides you with the basic information you should know
before investing in the Fund. You should read it and keep it for future
reference. A Statement of Additional Information containing further information
about the Fund, dated September 29, 1995, has been filed with the Securities and
Exchange Commission and is incorporated by reference into this Prospectus. You
can obtain a copy without charge by writing INVESCO Funds Group, Inc., P.O. Box
173706, Denver, Colorado 80217-3706; or by calling 1-800-525-8085.
<PAGE>
TABLE OF CONTENTS Page
ANNUAL FUND EXPENSES 2
FINANCIAL HIGHLIGHTS 3
PERFORMANCE DATA 4
INVESTMENT OBJECTIVE AND POLICIES 4
THE FUND AND ITS MANAGEMENT 7
HOW SHARES CAN BE PURCHASED 8
SERVICES PROVIDED BY THE FUND 10
HOW TO REDEEM SHARES 11
TAXES AND DIVIDENDS 13
ADDITIONAL INFORMATION 14
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>
ANNUAL FUND EXPENSES
The Fund is 100% no-load; there are no fees to purchase, exchange or
redeem shares nor any ongoing marketing ("12b-1") expenses. Lower expenses
benefit Fund shareholders by increasing the Fund's total return.
Shareholder Transaction Expenses
Sales load "charge" on purchases None
Sales load "charge" on reinvested dividends None
Redemption fees None
Exchange fees None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management fee 0.50%
12b-1 Fees None
Other Expenses (after absorbed expenses)(1) 0.25%
Transfer Agency Fee(2) 0.25%
General Services, Administrative
Services, Registration, Postage(3) 0.00%
Total Fund Operating Expenses
(after absorbed expenses)(1) 0.75%
(1) Certain Fund expenses are being voluntarily absorbed by INVESCO Funds
Group, Inc. ("INVESCO") and INVESCO Trust Company ("INVESCO Trust") in order to
ensure that the Fund's total operating expenses do not exceed 0.75% of the
Fund's average net assets. In the absence of such voluntary expense limitation
the Fund's "Other Expenses" and "Total Fund Operating Expenses" would have been
0.50% and 1.00%, respectively, of the Fund's average net assets, based on the
actual expenses of the Fund for the fiscal year ended May 31, 1995. See "The
Fund and Its Management."
(2) Consists of the transfer agency fee described under
"Additional Information -- Transfer and Dividend Disbursing Agent."
(3) Includes, but is not limited to, fees and expenses of directors,
custodian bank, legal counsel and auditors, a bond pricing service, costs of
administrative services furnished under an Administrative Services Agreement,
costs of registration of Fund shares under applicable laws, and costs of
printing and distributing reports to shareholders.
<PAGE>
Example
A shareholder would pay the following expenses on a $1,000 investment for
the periods shown, assuming (1) a 5% annual return and (2) redemption at the end
of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$8 $24 $42 $93
The purpose of the foregoing table is to assist investors in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. Such expenses are paid from the Fund's assets. (See "The Fund and
Its Management.") The Fund charges no sales load, redemption fee or exchange fee
and bears no distribution expenses. The Example should not be considered a
representation of past or future expenses, and actual expenses may be greater or
less than those shown. The assumed 5% annual return is hypothetical and should
not be considered a representation of past or future annual returns, which may
be greater or less than the assumed amount.
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding throughout each Period)
Year Ended May 31, 1995
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 accountants report appearing in
the Fund's 1995 Annual Report to Shareholders which is incorporated by reference
into the Statement of Additional Information. Both are available without charge
by contacting INVESCO Funds Group, Inc. at the address or telephone number shown
below.
<TABLE>
<CAPTION>
Period
Year Ended
Ended May 31May 31 Year Ended January 31
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 1994 1993+ 1993 1992 1991 1990 1989 1988 1987 1986
Tax-Free Money Fund
PER SHARE DATA
Net Asset Value --
Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
--------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment
Income Earned and
Distributed to
Shareholders 0.03 0.02 0.00^ 0.02 0.03 0.05 0.05 0.05 0.04 0.04 0.06
--------------------------------------------------------------------------------------------------
Net Asset Value --
End of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
--------------------------------------------------------------------------------------------------
TOTAL RETURN 2.86% 1.84% 0.16%* 2.16% 3.42% 4.89% 5.51% 5.20% 4.15% 4.05% 5.58%
RATIOS
Net Assets --
End of Period
($000 Omitted) $58,780 $84,521 $63,498 $65,167 $60,413 $40,440 $34,262 $27,709 $31,212 $29,297 $25,833
Ratio of
Expenses to Average Net
Assets# 0.75% 0.75% 0.75%~ 0.75% 0.78% 0.90% 0.93% 0.88% 0.86% 0.79% 0.04%
Ratio of Net Investment
Income to Average Net
Assets# 2.77% 1.83% 2.03%~ 2.13% 3.30% 4.77% 5.37% 5.10% 4.07% 3.99% 5.49%
<PAGE>
<FN>
+ From May 1, 1993 to May 31, 1993.
^ Net Investment Income Earned and Distributed to Shareholders for the period ended May 31, 1993 aggregated less than $0.01
on a per share basis.
* Total return is based on operations for the period shown and, accordingly, is
not representative of a full year.
# Various expenses of the Fund were voluntarily absorbed by INVESCO Funds Group
for the years ended May 31, 1995 and 1994, the period ended May 31, 1993, and
the years ended April 30, 1993, 1992, 1987 and 1986, respectively. If such
expenses had not been voluntarily absorbed, ratio of expenses to average net
assets would have been 1.00%, 1.00%, 1.19%, 1.02%, 0.99%, 0.84% and 0.85%,
respectively, and ratio of net investment income to average net assets would
have been 2.52%, 1.58%, 1.59%, 1.86%, 3.09%, 3.94% and 4.68% for the above
periods, respectively.
~ Annualized
[/FN]
</TABLE>
Further information about the performance of the Fund is contained in the Fund's
Annual Report to Shareholders, which may be obtained without charge by writing
INVESCO Funds Group, Inc., P.O. Box 173706, Denver, Colorado 80217-3706; or by
calling 1-800-525-8085.
<PAGE>
PERFORMANCE DATA
From time to time, the Fund advertises its "yield", "effective yield" and
"total return" performance. The Fund also may provide a "tax equivalent yield."
These figures are based upon historical investment results and are not intended
to indicate future performance. The "yield" of the Fund refers to the income
generated by an investment in the Fund over a seven-day period (which period
will be stated in the advertisement). This income is then "annualized." That is,
the amount of income generated by the investment during that week is assumed to
be generated each week over a 52-week period and is shown as a percentage of the
investment. The "effective yield" is calculated similarly but, when annualized,
the income earned by an investment in the Fund is assumed to be reinvested. The
"effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment. The "tax equivalent yield" of
the Fund refers to the yield that a taxable money market fund would have to
generate in order to produce an after-tax yield equivalent to that of the Fund.
The use of a tax equivalent yield allows investors to compare the yield of the
Fund, which is excluded from gross income (except to the extent that the
alternative minimum tax is applicable) for federal income tax purposes, with
yields of funds which are not tax-exempt.
"Total return" refers to the average annual rate of return of an
investment in the Fund. This figure is computed by calculating the percentage
change in value of an investment of $1,000, assuming reinvestment of all income
dividends and other distributions, to the end of a specified period. Periods of
one year, five years, and ten years are used to the extent possible.
Statements of the Fund's total return performance are based upon
investment results during a specified period and assume reinvestment of all
dividends and capital gains, if any, paid during that period. Thus, a report of
total return performance should not be considered as representative of future
performance. The Fund charges no sales load, redemption fee, or exchange fee
which would affect the total return computation.
In conjunction with performance reports and/or analyses of shareholder
service for the Fund, comparative data between the Fund's performance for a
given period and recognized indicators of money market performance for the same
period, and/or assessments of the quality of shareholder service, may be
provided to shareholders. Such indicators include the Donoghue's Money Fund
Report, Bank Rate Monitor's 100 Highest Yields, the Certificate of Deposit
indices, Treasury Bill indices, and the Consumer Price Index. In addition,
rankings and comparisons of investment performance and/or assessments of the
quality of shareholder service published by the William Donoghue Organization,
Money, Kiplinger's Personal Finance, Morningstar, and similar sources
<PAGE>
which utilize information compiled (i) internally, (ii) by Lipper Analytical
Services, Inc., or (iii) by other recognized analytical services may be used in
advertising. Rankings and comparisons of the Fund's performance by Donoghue will
be drawn from its Tax-Free Funds--Stockbroker and General Purpose grouping.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek as high a level of current
income exempt from federal income taxation as is consistent with liquidity and
safety of capital. While there can be no assurance that this objective will be
achieved, the Fund seeks to achieve its objective through investment in a
diversified portfolio of high-quality, short-term debt obligations issued by or
on behalf of states, territories and possessions of the United States and the
District of Columbia and their political subdivisions, agencies and
instrumentalities, the interest on which, in the opinion of the issuer's bond
counsel, is exempt from federal income taxation ("municipal obligations"). Such
municipal obligations fall into two principal classifications: (1) "general
obligation" bonds, which are secured by the issuer's full faith and credit and
taxing power for the payment of principal and interest; and (2) "revenue" bonds,
which are payable only from revenues produced by a particular facility or class
of facilities or special excise tax or specific revenue source. Because the Fund
invests in high-quality, short-term municipal obligations, its ability to
achieve a high level of current income is limited in comparison to mutual funds
that invest in securities which present a greater credit risk.
At least 80% of the Fund's total assets will, under normal circumstances,
be invested in municipal obligations, the income from which is exempt from
federal income taxes, and which are not private activity bonds on which the
interest may be treated as a preference item for purposes of the federal
alternative minimum tax. See "Taxes and Dividends." These obligations consist
of: (1) municipal bonds, comprising what are generally known as high-grade
bonds, which are rated at the time of purchase by at least two nationally
recognized statistical rating organizations ("NRSROs"), generally Moody's
Investors Service, Inc. ("Moody's") and Standard & Poor's Rating Group ("S&P"),
in the two highest grades (Aaa or Aa by Moody's and AAA or AA by S&P), or where
the bonds are rated only by S&P or Moody's, such bonds are rated Aaa or Aa or
AAA or AA, or where the Fund's investment adviser has determined that it is
appropriate to purchase such bonds based on a creditworthiness finding; (2)
municipal notes which are rated MIG-1 by Moody's at time of purchase; (3)
municipal commercial paper which is rated by at least two NRSROs, generally
Moody's and S&P in the highest grade (A-1 by S&P or P-1 by Moody's), or where
the obligation is rated only by S&P or Moody's, such obligation is rated A-1 or
P-1; and (4) other municipal obligations that are not rated by an NRSRO, but
which are of comparable quality to such
<PAGE>
obligations rated in the highest grade as determined by the Fund's investment
adviser in accordance with an analysis performed by the investment adviser
similar to one performed by S&P or Moody's in rating similar securities and
issuers. The Fund may invest in any combination of municipal bonds, notes and
commercial paper and may invest more than 25% of its total assets in industrial
development obligations. For a description of these ratings, see Appendix A in
the Statement of Additional Information.
The balance of the Fund's total assets, in an amount under normal
circumstances not to exceed 20% of its total assets (measured at the time any
investment is purchased), may be invested in private activity bonds, as
discussed above, and in taxable securities with remaining effective maturities
of one year or less on the date purchased by the Fund, which are determined by
management to be eligible for investment by the Fund under applicable SEC rules.
The circumstances under which the Fund will invest in taxable securities include
but are not limited to: (a) pending investment of proceeds of sales of Fund
shares or of portfolio securities; (b) pending settlement of purchases of
portfolio securities; and (c) to maintain liquidity for the purpose of meeting
anticipated redemptions. The kinds of taxable securities in which the Fund may
invest are limited to the following: (i) obligations of the U.S. government or
its agencies, instrumentalities or authorities; (ii) prime commercial paper
obligations which are rated by at least two NRSROs, generally S&P and Moody's,
in the highest short-term rating category (A-1 by S&P and Prime-1 by Moody's),
or where the obligation is rated only by S&P or Moody's, such obligation is
rated A-1 or Prime-1; (iii) certificates of deposit and banker's acceptances of
domestic banks (including their foreign branches), as described in the Statement
of Additional Information; and (iv) repurchase agreements with respect to any
portfolio securities. The Fund may, for defensive purposes, temporarily invest
up to 100% of its total assets in such taxable securities when, in the opinion
of the investment adviser, to do so is advisable in light of prevailing market
and economic conditions or for purposes of preserving liquidity and capital. In
addition, the Fund may in the future temporarily invest in other taxable
securities determined appropriate for investment by the board of directors,
without obtaining the approval of shareholders. Shareholders will be notified,
however, in the event the board takes such action.
The Fund is subject to certain restrictions, which are set forth in the
Statement of Additional Information, regarding its investments which may not be
altered without the approval of the Fund's shareholders. Those restrictions
include, among others, limitations with respect to the percentages of the value
of its total assets which may be invested in any one issuer or in one industry.
The Fund may not invest more than 5% of its total assets in the securities of
any one issuer, other than obligations issued or guaranteed by the U.S.
Government. In addition, the investment objectives and policies described in the
preceding paragraphs are fundamental and may not be changed without a vote of
the Fund's shareholders.
<PAGE>
The interest rates on certain municipal bonds and municipal notes are not
fixed and may fluctuate based upon changes in market rates. Municipal
obligations of this type are called "variable rate" or "floating rate"
obligations.
The payment of principal and interest by issuers of certain municipal
obligations purchased by the Fund may be guaranteed by letters of credit, note
repurchase agreements, insurance or other credit facilities offered by banks or
other financial institutions. Such guarantees will be considered in determining
whether a municipal obligation meets the Fund's investment quality requirements.
No assurance can be given that a municipality or guarantor will be able to
satisfy the payment of principal or interest on a municipal obligation.
The return on investment in the Fund will depend upon the interest earned
by the Fund on its security holdings, after deduction of Fund expenses, and is
paid to shareholders in the form of dividends. If interest rates increase, the
value of interest- paying debt securities may decrease, and vice versa.
Notwithstanding the possibility of fluctuations in values of the Fund's
securities, as a result of the Fund's use of amortized cost valuation and its
declaration of income dividends daily, it is expected, but cannot be assured,
that the Fund's net asset value will be maintained at a constant value of $1.00
per share. Under the amortized cost valuation method, securities are valued at
their cost at the time of purchase, and thereafter there is assumed a constant
amortization to maturity of any discount or premium.
Generally, the Fund intends to hold securities purchased until maturity.
When in the opinion of the Fund's investment adviser or sub-adviser
(collectively, "Fund Management") it is advisable in light of prevailing market
or business conditions, however, securities may be sold without regard to how
long they have been held.
All obligations purchased by the Fund must have remaining maturities of
one year or less. In addition, the Fund will maintain a dollar-weighted average
portfolio maturity of 90 days or less. In computing the remaining maturity and
average portfolio maturity for variable rate obligations, the longer of the date
upon which the Fund may obtain prepayment of principal or the date upon which
the interest rate of the obligation is next required to be adjusted may in
certain circumstances be considered as the maturity date. One-year obligations
issued not more than 375 days prior to maturity will be considered as meeting
the Fund's investment requirements.
<PAGE>
The Fund may purchase securities together with the right to resell them to
the seller at an agreed upon price or yield within a specific period prior to
the maturity date of such securities. Such a right to resell is commonly known
as a "stand-by commitment" or a "put." Municipal obligations may at times be
purchased or sold on a delayed delivery, or a when-issued basis (i.e.,
securities may be purchased or sold by the Fund with settlement taking place in
the future, often a month or more later). The payment obligation and the
interest rate that will be received on the securities are fixed at the time the
Fund enters into the commitment.
The Fund may enter into repurchase agreements with respect to any of the
obligations listed above with registered broker-dealers, registered government
securities dealers or member banks of the Federal Reserve System which are
deemed creditworthy, as described in the Statement of Additional Information.
(For a description of requirements for registered government securities dealers,
see the Statement of Additional Information.) Repurchase agreements, which may
be considered a "loan" under the Investment Company Act of 1940 (the 1940
"Act"), involve the purchase of debt securities with the condition that, after a
stated period of time, the original seller will buy back such securities at a
predetermined price or yield. The amount required to be paid to the Fund upon
repurchase reflects the Fund's yield under the agreement. In the event that the
original seller defaults on its obligation to repurchase the securities, the
Fund could incur costs or delays in seeking to sell such securities. To minimize
risk, the securities underlying each repurchase agreement will be maintained
with the Fund's custodian in an amount at least equal to the repurchase price
under the agreement (including accrued interest), and such agreements will be
effected only with parties that meet certain creditworthiness standards
established by the Company's board of directors. In addition, the Company's
board of directors has established the policy that all repurchase agreements
entered into by the Fund will mature in seven days or less. In no event will the
Fund enter into a repurchase agreement that is not fully collateralized by
either U.S. government securities or securities that are otherwise eligible for
inclusion in the Fund's portfolio that are rated in the highest rating category
by at least two NRSROs, or one NRSRO if such securities are rated by only one
NRSRO. Also, at no time will the Fund's investments in securities subject to
repurchase agreements maturing in more than seven days or other illiquid
securities exceed 10% of the total assets of the Fund. The Fund has not adopted
any limit on the amount of its total assets that may be invested in repurchase
agreements maturing in seven days or less.
<PAGE>
THE FUND AND ITS MANAGEMENT
The Company is a no-load mutual fund, registered with the Securities and
Exchange Commission as an open-end, diversified, management investment company.
The Fund was incorporated on March 4, 1983 under the laws of Colorado, and on
July 1, 1993 was reorganized as a series of the Company, a Maryland corporation
incorporated on April 2, 1993. The overall supervision of the Company is the
responsibility of its board of directors.
Pursuant to an agreement with the Company, INVESCO Funds Group, Inc., 7800
E. Union Avenue, Denver, Colorado, serves as the Fund's investment adviser.
INVESCO is primarily responsible for providing the Fund with various
administrative services, and supervising the Fund's daily business affairs.
These services are subject to review by the Company's board of directors.
INVESCO is an indirect wholly-owned subsidiary of INVESCO PLC. INVESCO PLC
is a financial holding company that, through its subsidiaries, engages in the
business of investment management on an international basis. INVESCO was
established in 1932 and, as of May 31, 1995, managed 14 mutual funds, consisting
of 38 separate portfolios, with combined assets of approximately $9.9 billion on
behalf of over 796,000 shareholders.
Pursuant to an agreement with INVESCO, INVESCO Trust Company, 7800 E.
Union Avenue, Denver, Colorado, serves as the Company's sub-adviser. INVESCO
Trust, a trust company founded in 1969, is a wholly-owned subsidiary of INVESCO
that served as adviser or sub- adviser to 41 investment portfolios as of May 31,
1995, including 27 portfolios in the INVESCO group. These 41 portfolios had
aggregate assets of approximately $9.5 billion as of May 31, 1995. 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. INVESCO Trust, subject to the supervision of
INVESCO, is primarily responsible for selecting and managing the Fund's
investments. Although the Company is not a party to the sub-advisory agreement,
the agreement has been approved by the shareholders of the Company.
The following individual serves as the portfolio manager for the Fund and
is primarily responsible for the day-to-day management of the Fund's portfolio
of securities:
Ingeborg Cosby Portfolio manager of the Fund since 1992;
assistant portfolio manager of the Fund from
1987 to 1992; assisted portfolio managers at
INVESCO from 1985 to 1987; assistant to
portfolio managers at First Affiliated
Securities, Inc. of Denver from 1982 to 1985.
The Fund pays INVESCO a monthly fee which is based upon a percentage of
the Fund's average net assets, determined daily. The maximum rate payable by the
Fund for each fiscal year is 0.50% on the first $300 million of the average net
assets of the Fund, 0.40% on the next $200 million of the Fund's average net
assets, and
<PAGE>
0.30% on the average net assets in excess of $500 million. For the fiscal year
ended May 31, 1995, the investment advisory fees paid by the Fund amounted to
0.50% of the Fund's average net assets. Out of its advisory fee which it
receives from the Fund, INVESCO pays INVESCO Trust, as the Fund's sub-adviser, a
monthly fee, which is computed at the annual rate of 0.15% of the Fund's average
net assets. No fee is paid by the Fund to INVESCO Trust.
The Company also has entered into an Administrative Services Agreement,
dated April 30, 1993 (the "Administrative Agreement"), with INVESCO. Pursuant to
the Administrative Agreement, INVESCO performs certain administrative,
recordkeeping and internal sub-accounting services, including without
limitation, maintaining general ledger and capital stock accounts, preparing a
daily trial balance, calculating net asset value daily, providing selected
general ledger reports and providing sub-accounting and recordkeeping services
for Fund shareholder accounts maintained by certain retirement and employee
benefit plans for the benefit of participants in such plans. For such services,
the Fund pays INVESCO a fee consisting of a base fee of $10,000 per year, plus
an additional incremental fee computed at the annual rate of 0.015% per year of
the average net assets of the Fund. INVESCO also is paid a fee by the Fund for
providing transfer agent services. See "Additional Information."
The Fund's expenses, which are accrued daily, are deducted from total
income before dividends are paid. Total expenses of the Fund for the fiscal year
ended May 31, 1995, including investment advisory fees (but excluding brokerage
commissions, which are a cost of acquiring securities), amounted to 0.75% of the
Fund's average net assets. Certain Fund expenses are voluntarily absorbed by
INVESCO and INVESCO Trust pursuant to a commitment to the Fund in order to
ensure that the Fund's total operating expenses do not exceed 0.75% of the
Fund's average net assets. This commitment may be changed following consultation
with the Company's board of directors. In the absence of such voluntary expense
limitation, the Fund's total expenses for the fiscal year ended May 31, 1995
would have been 1.00% of the Fund's average net assets.
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of
their financial responsibility coupled with their ability to effect transactions
at the best available prices. Although the Fund does not market its shares
through intermediary brokers or dealers, the Fund may place orders for portfolio
transactions with qualified broker/dealers that recommend the Fund, or sell
shares of the Fund, to clients, or act as agent in the purchase of Fund shares
for clients, if Fund Management believes that the quality of the execution of
the transaction and level of commission are comparable to those available from
other qualified brokerage firms.
<PAGE>
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 investment and other personnel to
conduct their personal investment activities in a manner that Fund Management
believes is not detrimental to the Fund or Fund Management's other advisory
clients. See the Statement of Additional Information for more detailed
information.
HOW SHARES CAN BE PURCHASED
Shares of the Fund are sold on a continuous basis by INVESCO, as the
Fund's Distributor, at the net asset value per share next calculated after
receipt of a purchase order in good form and of federal funds by the Fund, as
described below. No sales charge is imposed upon the sale of shares of the Fund.
To purchase shares of the Fund, send a check made payable to INVESCO Funds
Group, Inc., together with a completed application form, to:
INVESCO FUNDS GROUP, INC.
Post Office Box 173706
Denver, Colorado 80217-3706
Purchase orders must specify the Fund in which the
investment is to be made.
The minimum initial investment must be at least $1,000, with subsequent
investments of not less than $50, except that: (1) those shareholders
establishing an EasiVest or direct payroll purchase account, as described below
in the Prospectus section entitled "Services Provided by the Fund," may open an
account without making any initial investment if they agree to make regular,
minimum purchases of at least $50; (2) those shareholders investing through
omnibus accounts where individual shareholder recordkeeping and sub-accounting
are not required may make initial minimum purchases of $250; (3) Fund Management
may permit a lesser amount to be invested in the Fund under a group investment
plan qualifying as a sophisticated investor; and (4) Fund Management reserves
the right to reduce or waive the minimum purchase requirements in its sole
discretion where it determines such action is in the best interests of the Fund.
The minimum initial purchase requirement of $1,000, as described above, does not
apply to shareholder account(s) in any of the INVESCO funds opened prior to
January 1, 1993, and thus, is not a minimum balance requirement for those
existing accounts. However, for shareholders already having accounts in any of
the INVESCO funds, all initial share purchases in a new Fund account, including
those made using the exchange privilege, must meet the Fund's applicable minimum
investment requirements.
Because the Fund seeks to be fully invested at all times, an order to
purchase shares will not be effective until the investor's
<PAGE>
payment can be converted into available federal funds (i.e., monies held on
deposit within the Federal Reserve System) under regular banking processing
procedures or, if the investor is acquiring shares in an exchange from another
INVESCO fund, the Fund receives the proceeds of the exchange. Checks drawn on a
member bank of the Federal Reserve System normally are converted into federal
funds within two or three business days following receipt of the checks by the
Fund. In the case of checks drawn on banks which are not members of the Federal
Reserve System, it may take longer for federal funds to become available. During
the period of time prior to receipt of federal funds or the proceeds of an
exchange, an investor's money will not be invested in the Fund and will not earn
any dividends. During such time, an investor's money is held in a separate
custodial account, which results in no interest or other economic benefit
accruing to INVESCO. The purchase of shares can be expedited by placing bank
wire or overnight courier orders. Overnight courier orders must meet the above
minimum requirements. In no case can a bank wire order be in an amount less than
$1,000. For further information, the purchaser may call the Fund's office by
using the telephone number on the cover of this Prospectus. Orders sent by
overnight courier, including Express Mail, should be sent to the street address,
not Post Office Box, of INVESCO Funds Group, Inc., at 7800 E. Union Avenue,
Denver, Colorado 80237.
If your check does not clear, you will be responsible for any related loss
the Fund or INVESCO incurs. If you are already a shareholder in the INVESCO
funds, the Fund has the option to redeem shares from any identically registered
account in the Fund or any other INVESCO fund as reimbursement for any loss
incurred. You may also be prohibited or restricted from making future purchases
in any of the INVESCO funds.
Persons who invest in the Fund through a securities broker may be charged
a commission or transaction fee by the broker for the handling of the
transaction, if the broker so elects. Any investor may deal directly with the
Fund in any transaction, however. In that event, there is no such charge.
INVESCO may from time to time make payments from its revenues to securities
dealers and other financial institutions that provide distribution-related
and/or administrative services for the Fund.
The Fund reserves the right in its sole discretion to reject any order for
purchase of its shares (including purchases by exchange) when, in the judgment
of management, such rejection is in the best interest of the Fund.
Net asset value per share of the Fund is computed once each day that the
New York Stock Exchange is open as of the close of regular trading on that
Exchange (usually 4:00 p.m., New York time) and also may be computed on other
days under certain circumstances. Net asset value per share is calculated by
dividing the value of
<PAGE>
the Fund's securities plus the value of its other assets (including interest
accrued but not collected), less all liabilities (including accrued expenses),
by the number of shares outstanding of the Fund. As a result of using the
amortized cost valuation method to value its portfolio securities and declaring
income dividends daily, the Fund expects, but cannot guarantee, that it will be
able to maintain a constant net asset value of $1.00 per share.
SERVICES PROVIDED BY THE FUND
Shareholder Accounts. INVESCO maintains a share account that reflects the
current holdings of each shareholder. Share certificates will be issued only
upon specific request. Since certificates must be carefully safeguarded and must
be surrendered in order to exchange or redeem Fund shares, most shareholders do
not request share certificates in order to facilitate such transactions. Each
shareholder is sent a detailed confirmation of each transaction in shares of the
Fund. Shareholders whose only transactions are through the EasiVest, direct
payroll purchase, automatic monthly exchange or periodic withdrawal programs, or
are reinvestment of dividends or capital gains in the same or another Fund, will
receive confirmations of those transactions on their quarterly statements. These
programs are discussed below. For information regarding a shareholder's account
and transactions, a shareholder may call the Fund's office by using the
telephone number on the cover of this Prospectus.
Reinvestment of Distributions. Income dividends paid by the Fund are
automatically reinvested in additional shares of the Fund at the net asset value
per share in effect on the ex-dividend date. A shareholder may, however, elect
to reinvest dividends in certain of the other no-load mutual funds advised and
distributed by INVESCO, or to receive payment of all dividends in excess of
$10.00 by check by giving written notice to INVESCO at least two weeks prior to
the record date on which the change is to take effect. Further information
concerning these options can be obtained by contacting INVESCO.
Periodic Withdrawal Plan. A Periodic Withdrawal Plan is available to
shareholders who own or purchase shares of any mutual funds advised by INVESCO
having a total value of $10,000 or more; provided, however, that at the time the
Plan is established, the shareholder owns shares having a value of at least
$5,000 in the fund from which the withdrawals will be made. Under the Periodic
Withdrawal Plan, INVESCO, as agent, will make specified monthly or quarterly
payments of any amount selected (minimum payment of $100) to the party
designated by the shareholder. Notice of all changes concerning the Periodic
Withdrawal Plan must be received by INVESCO at least two weeks prior to the next
scheduled check. Further information regarding the Periodic Withdrawal Plan and
its requirements and tax consequences can be obtained by contacting INVESCO.
<PAGE>
Exchange Privilege. Shares of the Fund may be exchanged for shares of any
other fund of the Company, as well as for shares of any of the following other
no-load mutual funds, which are also advised and distributed by INVESCO, on the
basis of their respective net asset values at the time of the exchange: 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
Multiple Asset Funds, Inc., INVESCO Specialty Funds, Inc., INVESCO Strategic
Portfolios, Inc., INVESCO Tax-Free Income Funds, Inc., and INVESCO Value Trust.
An exchange involves the redemption of shares of the Fund and investment
of the redemption proceeds in shares of another fund of the Company or in one of
the funds listed above. Exchanges will be made at the net asset value per share
next determined after receipt of an exchange request in proper order. Any gain
or loss realized on an exchange is recognizable for federal income tax purposes
by the shareholder. Exchange requests may be made either by telephone or by
written request to INVESCO Funds Group, Inc., using the telephone number or
address on the cover of this Prospectus. 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.
The privilege of exchanging Fund shares by telephone is available to
shareholders automatically unless expressly declined. By signing the new account
Application, a Telephone Transaction Authorization Form or otherwise utilizing
telephone exchange privileges, the investor has agreed that the Fund will not be
liable for following instructions communicated by telephone that it reasonably
believes to be genuine. The Fund employs procedures, which it believes are
reasonable, designed to confirm that exchange instructions are genuine. These
may include recording telephone instructions and providing written confirmations
of exchange transactions. As a result of this policy, the investor may bear the
risk of any loss due to unauthorized or fraudulent instructions; provided,
however, that if the Fund fails to follow these or other reasonable procedures,
the Fund may be liable.
The exchange privilege may be modified or terminated at any time. Except
for those limited instances where redemptions of the exchanged security are
suspended under Section 22(e) of the 1940 Act, or where sales of the fund into
which the shareholder is exchanging are temporarily stopped, notice of all such
<PAGE>
modifications or termination of the exchange privilege will be given at least
60 days prior to the date of termination or the effective date of the
modification.
Before making an exchange, the shareholder should review the prospectuses
of the funds involved and consider their differences and should be aware that
the exchange privilege may only be available in those states where exchanges may
be legally made, which will require that the shares being acquired are
registered for sale in the shareholder's state of residence. Shareholders
interested in exercising the exchange privilege may contact INVESCO for
information concerning their particular exchanges.
Automatic Monthly Exchange. Shareholders who have accounts in any one or
more of the mutual funds distributed by INVESCO may arrange for a fixed dollar
amount of their fund shares to be automatically exchanged for shares of any
other INVESCO mutual fund listed under "Exchange Privilege" on a monthly basis.
The minimum monthly exchange in this program is $50.00. This automatic exchange
program can be changed by the shareholder at any time by notifying INVESCO at
least two weeks prior to the date the change is to be made. Further information
regarding this service can be obtained by contacting INVESCO.
EasiVest. For shareholders who want to maintain a schedule of monthly
investments, EasiVest uses various methods to draw a preauthorized amount from
the shareholder's bank account to purchase Fund shares. This automatic
investment program can be changed by the shareholder at any time by writing to
INVESCO at least two weeks prior to the date the change is to be made. Further
information regarding this service can be obtained by contacting INVESCO.
Direct Payroll Purchase. Shareholders may elect to have their employers
make automatic purchases of Fund shares for them by deducting a specified amount
from their regular paychecks. This automatic investment program can be modified
or terminated at any time by the shareholder by notifying the employer. Further
information regarding this service can be obtained by contacting INVESCO.
HOW TO REDEEM SHARES
Shares of the Fund may be redeemed at any time at their current net asset
value per share next determined after a request in proper form is received at
the Fund's office. (See "How Shares Can Be Purchased.") As stated above, the
Fund expects, but cannot guarantee, to maintain a $1.00 per share constant net
asset value.
If shares to be redeemed are represented by stock certificates, a written
request for redemption signed by the registered shareholder(s) and the
certificates must be forwarded to
<PAGE>
INVESCO Funds Group, Inc., Post Office Box 173706, Denver, Colorado 80217-3706.
Redemption requests sent by overnight courier, including Express Mail, should be
sent to the street address, not Post Office Box, of INVESCO Funds Group, Inc. at
7800 E. Union Avenue, Denver, CO 80237. If no certificates have been issued, a
written redemption request signed by each registered owner of the account may be
submitted to INVESCO at the address noted above. If shares are held in the name
of a corporation, additional documentation may be necessary. Call or write for
specifics. If payment for the redeemed shares is to be made to someone other
than the registered owner(s), the signature(s) must be guaranteed by a financial
institution which qualifies as an eligible guarantor institution. Redemption
procedures with respect to accounts registered in the names of broker/dealers
may differ from those applicable to other shareholders.
Be careful to specify the account from which the redemption is to be made.
Shareholders have a separate account for each Fund in which they invest.
Payment of redemption proceeds will be mailed within seven days after
receipt of the required documents. However, payment may be postponed under
unusual circumstances, such as when normal trading is not taking place on the
New York Stock Exchange or an emergency, as defined by the Securities and
Exchange Commission, exists. If the shares to be redeemed were purchased by
check and that check has not yet cleared, payment will be made promptly upon
clearance of the purchase check (which may take up to 15 days).
If a shareholder participates in EasiVest, the Fund's automatic monthly
investment program, and redeems all of the shares in his Fund account, INVESCO
will terminate any further EasiVest purchases unless otherwise instructed by the
shareholder.
Because of the high relative costs of handling small accounts, should the
value of any shareholder's account fall below $250 as a result of shareholder
action, the Fund reserves the right to effect the involuntary redemption of 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.
Shareholders with $1,000 or more in their accounts may avail themselves of
the Check Withdrawal Option. A one-time charge of $5 will be made to institute
the option. Checks will be furnished at no charge and may be written in amounts
of not less than $500. Shares in the Fund will be redeemed to cover payment of
checks drawn by the shareholder. INVESCO reserves the right to institute a
charge for checks upon notice to all shareholders with the option. Further
information regarding this option may be obtained by contacting INVESCO.
<PAGE>
Fund shareholders may request expedited redemption of shares having a
minimum value of at least $250 (or redemption of all shares if their value is
less than $250), held in accounts maintained in their name by telephoning
redemption instructions to INVESCO using the telephone number on the cover of
this Prospectus. The redemption proceeds, at the shareholder's option, either
will be mailed to the address listed for the shareholder's Fund account, or
wired (minimum $1,000) or mailed to the bank which the shareholder has
designated to receive the proceeds of telephone redemptions. The Fund charges no
fee for effecting such telephone redemptions. Unless Fund Management permits a
larger redemption request to be placed by telephone, a shareholder may not place
a redemption request by telephone in excess of $25,000. These telephone
redemption privileges may be modified or terminated in the future at
management's discretion.
Shareholders should understand that, while the Fund will attempt to
process all telephone redemptions on an expedited basis, there may be times,
particularly in periods of severe economic or market disruption, when (a) they
may encounter difficulty in placing a telephone redemption request, and (b)
processing telephone redemptions will require up to seven days following receipt
of the redemption request, or additional time because of the unusual
circumstances set forth above.
The privilege of redeeming Fund shares by telephone is available to
shareholders automatically unless expressly declined. By signing a new account
Application, a Telephone Redemption Authorization form or otherwise utilizing
telephone redemption privileges, the shareholder has agreed that the Fund will
not be liable for following instructions communicated by telephone that it
reasonably believes to be genuine. The Fund employs procedures, which it
believes are reasonable, designed to confirm that telephone instructions are
genuine. These may include recording telephone instructions and providing
written confirmation of transactions initiated by telephone. As a result of this
policy, the investor may bear the risk of any loss due to unauthorized or
fraudulent instructions; provided, however, that if the Fund fails to follow
these or other reasonable procedures, the Fund may be liable.
TAXES AND DIVIDENDS
Taxes. The Fund intends to distribute to shareholders substantially all of
its net investment income and net capital gains, if any, in order to continue to
qualify for tax treatment as a regulated investment company. Thus, the Fund does
not expect to pay federal income or excise taxes.
In addition, the Fund intends to continue to qualify during each fiscal
year to pay "exempt-interest dividends" to its shareholders. Exempt-interest
dividends, which are derived from
<PAGE>
net income earned by the Fund on municipal obligations, will be excludable from
gross income of the shareholders for federal income tax purposes. Any
distributions to shareholders from net interest income earned by the Fund from
taxable temporary investments, or from net capital gains, whether paid in cash
or reinvested in additional shares, would be subject to federal income taxation.
Under the Tax Reform Act of 1986, interest on certain "private activity
bonds" issued after August 7, 1986, is an item of tax preference for purposes of
the alternative minimum tax in taxable years beginning after December 31, 1986.
The Fund intends to limit its investments in such "private activity bonds" to
not more than 20% of the Fund's total assets. The portion of exempt-interest
dividends paid by the Fund which is attributable to such "private activity
bonds" would be an item of tax preference to shareholders. Additionally, certain
corporations also may have to include exempt-interest dividends in calculating
alternative minimum taxable income in situations where the "adjusted current
earnings" of the corporation exceeds its alternative minimum taxable income.
Shareholders may be subject to backup withholding of 31% on the taxable
portion of dividends and redemption proceeds. Unless a shareholder is subject to
backup withholding for other reasons, the shareholder can avoid backup
withholding on his Fund account by ensuring that INVESCO has a correct,
certified tax identification number.
Dividends. The Fund earns ordinary or net investment income in the form of
dividends and interest on its investments. The Fund's policy is to distribute
substantially all of this income, less Fund expenses, to shareholders. Dividends
from net investment income are declared daily and paid monthly. Dividends are
automatically reinvested in additional shares of the Fund at the net asset value
on the ex-dividend date, unless requested otherwise by the shareholder. (See
"Services Provided By The Fund - Reinvestment of Distributions.")
At the end of each year, information regarding the tax status of dividends
is provided to shareholders. The Fund does not invest in long-term securities
and therefore any capital gains or losses realized by the Fund will be
short-term gains or losses. The Fund anticipates that substantially all of the
dividends to be paid by the Fund will be exempt from federal income taxes.
99.04% of the dividends declared by the Fund during the fiscal year ended May
31, 1995, were exempt from federal income taxes. There is no assurance this will
be the case in future years. If any portion of such dividends is not exempt, the
Fund will advise shareholders of the taxable proportion in its annual tax
notice. Exemption of exempt- interest dividends for federal income tax purposes
does not necessarily result in exemption under the income or other tax laws of
any state or local taxing authority. Although these dividends generally will be
subject to such state and local taxes, the laws
<PAGE>
of the several states and local taxing authorities vary with respect to the
taxation of such exempt-interest dividends, other dividends, and distributions
of capital gains.
Shareholders are encouraged to consult their tax advisers with respect to
these matters. For further information, see "Dividends and Taxes" in the
Statement of Additional Information.
ADDITIONAL INFORMATION
Voting Rights. All shares of the Fund, and the two other 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. Voting with
respect to certain matters, such as ratification of independent accountants and
the election of directors, will be by all funds of the Company voting together.
In other cases, such as voting upon an investment advisory contract, voting is
on a fund-by-fund basis. To the extent permitted by law, when not all funds are
affected by a matter to be voted upon, only shareholders of the fund or funds
affected by the matter will be entitled to vote thereon. The Company is not
generally required and does not expect to hold regular annual meetings of
shareholders. However, the board of directors will call special meetings of
shareholders for the purpose, among other reasons, of voting upon the question
of removal of a director or directors 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
Company will assist shareholders in communicating with other shareholders as
required by the 1940 Act. Directors may be removed by action of the holders of a
majority of the outstanding shares of the each of the Funds of the Company.
Shareholder Inquiries. All inquiries regarding the Fund should be directed
to the Fund at the telephone number or mailing address set forth on the cover
page of this Prospectus.
Transfer and Dividend Disbursing Agent. INVESCO Funds Group, Inc., 7800 E.
Union Avenue, Denver, Colorado 80237, acts as registrar, transfer agent, and
dividend disbursing agent for the Fund pursuant to a Transfer Agency Agreement
which provides that the Fund will pay an annual fee of $21.00 per shareholder
account or omnibus account participant. The transfer agency fee is not charged
to each shareholder's or participant's account, but is an expense of the Fund to
be paid from the Fund's assets. Registered broker-dealers and other entities,
including affiliates of INVESCO, may provide sub-transfer agency services to the
Fund which reduce or eliminate the need for identical services to be provided on
behalf of the Fund by INVESCO. In such cases, INVESCO may pay the third party an
annual sub-transfer agency fee of up to $21.00 per participant in the third
party's omnibus account out of the transfer agency fee which is paid to INVESCO
by the Fund.
<PAGE>
INVESCO MONEY MARKET FUNDS, INC.
INVESCO Tax-Free Money Fund A no-load mutual
fund seeking high interest income exempt from
federal income taxation with liquidity and
safety of capital.
PROSPECTUS
September 29, 1995
To receive general information and prospectuses on any of INVESCO's funds or
retirement plans, or to obtain current account or price information, call
toll-free:
1-800-525-8085
To reach PAL, your 24-hour Personal Account Line, call:
1-800-424-8085
Or write to:
INVESCO Funds Group, Inc., Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
If you're in Denver, visit one of our convenient Investor Centers:
Cherry Creek
155-B Fillmore Street
Denver Tech Center
7800 East Union Avenue
Lobby Level
<PAGE>
PROSPECTUS
September 29, 1995
INVESCO U.S. Government Money Fund
INVESCO U.S. Government Money Fund (the "Fund") seeks to achieve its
investment objective by investing only in debt obligations issued or guaranteed
by the U.S. Government or its agencies, which may or may not be supported by the
full faith and credit of the United States Treasury, maturing in 365 days or
less from the date of purchase, and in repurchase agreements with respect
thereto. Shares of the Fund are neither insured nor guaranteed by the U.S.
Government. It is expected, but cannot be assured, that the value of the Fund's
shares will be maintained at a constant $1.00 per share.
The Fund is a series of INVESCO Money Market Funds, Inc. (the "Company"),
an open-end management investment company consisting of three separate no-load
money market mutual funds, each of which represents a separate portfolio of
investments.
This Prospectus relates to shares of the Fund. Separate Prospectuses are
available upon request from INVESCO Funds Group, Inc. for the Company's other
two funds, INVESCO Cash Reserves Fund and INVESCO Tax-Free Money Fund.
Additional funds may be offered in the future.
This Prospectus provides you with the basic information you should know
before investing in the Money Fund. You should read it and keep it for future
reference. A Statement of Additional Information containing further information
about the Fund, dated September 29, 1995, has been filed with the Securities and
Exchange Commission and is incorporated by reference into this Prospectus. You
can obtain a copy without charge by writing INVESCO Funds Group, Inc., Post
Office Box 173706, Denver, Colorado 80217-3706; or by calling 1-800-525-8085.
<PAGE>
TABLE OF CONTENTS Page
ANNUAL FUND EXPENSES 2
FINANCIAL HIGHLIGHTS 3
PERFORMANCE DATA 4
INVESTMENT OBJECTIVE AND POLICIES 4
THE FUND AND ITS MANAGEMENT 6
HOW SHARES CAN BE PURCHASED 7
SERVICES PROVIDED BY THE FUND 8
HOW TO REDEEM SHARES 11
TAXES AND DIVIDENDS 12
ADDITIONAL INFORMATION 12
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>
ANNUAL FUND EXPENSES
The Fund is 100% no-load; there are no fees to purchase, exchange or
redeem shares, nor any ongoing marketing ("12b-1") expenses. Lower expenses
benefit Fund shareholders by increasing the Fund's total return.
Shareholder Transaction Expenses
Sales load "charge" on purchases None
Sales load "charge" on reinvested dividends None
Redemption fees None
Exchange fees None
Annual Fund Operating Expenses*
(as a percentage of average net assets)
Management Fee 0.50%
12b-1 Fees None
Other Expenses (after absorbed expenses) (1) 0.35%
Transfer Agency Fee(2) 0.25%
General Services, Administrative
Services, Registration, Postage (3) 0.10%
Total Fund Operating Expenses 0.85%
(after absorbed expenses)(1)
(1) Certain Fund expenses are being voluntarily absorbed by INVESCO Funds
Group, Inc. ("INVESCO") in order to ensure that the Fund's total operating
expenses do not exceed 0.85% of the Fund's average net assets. In the absence of
such voluntary expense limitation, the Fund's "Other Expenses" and "Total Fund
Operating Expenses" would have been 0.60% and 1.10%, respectively, for the
fiscal year ended May 31, 1995. See "The Fund and Its Management."
(2) Consists of the transfer agency fee described under
"Additional Information - Transfer and Dividend Disbursing Agent."
(3) Includes, but is not limited to, fees and expenses of directors,
custodian bank, legal counsel and auditors, costs of administrative services
furnished under an Administrative Services Agreement, costs of registration of
Fund shares under applicable laws, and costs of printing and distributing
reports to shareholders.
Example*
A shareholder would pay the following expenses on a $1000 investment for
the periods shown, assuming (1) a 5% annual return and (2) redemption at the end
of each time period:
1 Year 3 Years 5 Years 10 Years
$8 $26 $45 $100
*The expense information in the above tables has been presented on a basis that
assumes that the Fund's current 0.85% expense limitation had been in effect
during the entire year ended May 31, 1995.
The purpose of the foregoing table is to assist investors in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. Such expenses are paid from the Fund's assets. (See "The Fund and
Its Management.") The Fund charges no sales load, redemption fee or exchange fee
and bears no distribution expenses. The Example should not be considered a
representation of past or future expenses, and actual expenses may be greater or
less than those shown. The assumed 5% annual return is hypothetical and should
not be considered a representation of past or future annual returns, which may
be greater or less than the assumed amount.
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding throughout Each Period)
Year Ended May 31, 1995
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 accountants report appearing in
the Fund's 1995 Annual Report to Shareholders, which is incorporated by
reference into the Statement of Additional Information. Both are available
without charge by contacting INVESCO Funds Group, Inc. at the address or
telephone number shown below.
<TABLE>
<CAPTION>
Period Year Period
Ended Ended Ended
Year Ended May 31 May 31 December 31 December 31
<S> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------
1995 1994 1993+ 1992 1991^
U.S. Government Money Fund
PER SHARE DATA
Net Asset Value --
Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
-------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income Earned
and Distributed to Shareholders 0.05 0.03 0.01 0.03 0.03
-------------------------------------------------------------------------------
Net Asset Value --
End of Period $1.00 $1.00 $1.00 $1.00 $1.00
===============================================================================
TOTAL RETURN 4.66% 2.56% 0.93%* 2.97% 3.23%*
RATIOS
Net Assets -- End of Period
($000 Omitted) $60,843 $73,912 $34,519 $30,282 $7,203
Ratio of Expenses to Average
Net Assets# 0.75% 0.75% 0.75%~ 0.75% 0.74%~
Ratio of Net Investment Income
to Average Net Assets# 4.55% 2.60% 2.27%~ 2.82% 4.54%~
<FN>
+ From January 1, 1993 to May 31, 1993.
^ From April 26, 1991, commencement of operations to December 31, 1991.
* Total return is based on operations for the period shown and, accordingly, is
not representative of a full year.
# Various expenses of the Fund were voluntarily absorbed by INVESCO Funds Group
for the years ended May 31, 1995 and 1994, the period ended May 31, 1993, the
year ended December 31, 1992 and the period ended December 31, 1991. If such
expenses had not been voluntarily absorbed, ratio of expenses to average net
assets would have been 1.10%, 1.00%, 1.18%, 1.08%, and 1.93%,
respectively, and ratio of net investment income to average net assets would
have been 4.20%, 2.35%, 1.84%, 2.49%, and 3.35% for the above periods,
respectively.
~ Annualized
[/FN]
Further information about the performance of the Fund is contained in the Fund's
Annual Report to Shareholders, which may be obtained without charge by writing
INVESCO Funds Group, Inc., P.O. Box 173706, Denver, Colorado 80217-3706; or by
calling 1-800-525-8085.
</TABLE>
<PAGE>
PERFORMANCE DATA
From time to time, the Fund may advertise its "yield", "effective yield"
and "total return" performance. These figures are based upon historical
investment results and are not intended to indicate future performance. The
"yield" of the Fund refers to the income generated by an investment in the Fund
over a seven-day period (which period will be stated in the advertisement). This
income is then "annualized." That is, the amount of income generated by the
investment during that week is assumed to be generated each week over a 52-week
period and is shown as a percentage of the investment. The "effective yield" is
calculated similarly but, when annualized, the income earned by an investment in
the Fund is assumed to be reinvested. The "effective yield" will be slightly
higher than the "yield" because of the compounding effect of this assumed
reinvestment.
"Total return" refers to the average annual rate of return of an
investment in the Fund. This figure is computed by calculating the percentage
change in value of an investment of $1,000, assuming reinvestment of all income
dividends and other distributions, to the end of a specified period. Periods of
one year, five years, and ten years are used to the extent possible.
Statements of the Fund's total return performance are based upon
investment results during a specified period and assume reinvestment of all
dividends and capital gains, if any, paid during that period. Thus, a report of
total return performance should not be considered as representative of future
performance. The Fund charges no sales load, redemption fee, or exchange fee
which would affect the total return computation.
In conjunction with performance reports and/or analyses of shareholder
service for the Fund, comparative data between the Fund's performance or yield
for a given period and recognized indicators of money market performance for the
same period, and/or assessments of the quality of shareholder service, may be
provided to shareholders. Such indicators include the Donoghue's Money Fund
Report, Bank Rate Monitor's 100 Highest Yields, the Certificate of Deposit
indices, Treasury Bill indices, and the Consumer Price Index. In addition,
rankings, ratings, and comparisons of investment performance and/or assessments
of the quality of shareholder service published by the William Donoghue
Organization, Money, Kiplinger's Personal Finance, Morningstar, and similar
sources which utilize information compiled (i) internally; (ii) by Lipper
Analytical Services, Inc.; or (iii) by other recognized analytical services may
be used in advertising. Rankings and comparisons of the Fund's performance by
Donoghue will be drawn from its U.S. Government and Agencies Money Market Fund
grouping.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to achieve as high a level of
current income as is consistent with liquidity and safety of capital. While
there can be no assurance that this objective will be achieved, the Fund seeks
to achieve its objective by investing only in debt obligations issued or
guaranteed by the U.S. Government or its agencies, which may or may not be
supported by the full faith and credit of the United States Treasury, maturing
in 365 days or less from the date of purchase, and in repurchase agreements with
respect thereto. Because the Fund invests only in short-term U.S. Government
securities, its ability to achieve a high level of current income is limited in
comparison to mutual funds that invest in securities which present a greater
credit risk. Securities issued or guaranteed by the U.S. Government include a
variety of U.S. Treasury securities that differ in their interest rates,
maturities and dates of issuance. Treasury Bills have face maturities of one
year or less. Treasury Notes have face maturities of from one to ten years and
Treasury Bonds generally have face maturities of greater than ten years. In
addition, U.S. Government agencies established under the authority of an act of
Congress issue securities which may or may not be supported by the full faith
and credit of the United States Treasury. The securities in which the Fund
invests consist of: direct obligations of the United States such as Treasury
Bills, Treasury Notes, and U.S. Government Bonds, as well as investments in
agencies of the U.S. Government, the securities of which may or may not be
supported by the full faith and credit of the U.S. Treasury, including, but not
limited to, the Government National Mortgage Association (GNMA), the Department
of Housing and Urban Development, the Farmers' Home Administration, the Small
Business Administration, the Federal National Mortgage Association (FNMA), the
Federal Home Loan Mortgage Corporation and the Federal Home Loan Bank. The GNMA
certificates in which the Fund may invest are mortgage-based securities, and are
subject to the risk that prepayments of the underlying mortgages will cause the
principal and interest on the certificate to be paid prior to their stated
maturities. In the event of a prepayment during a period of declining interest
rates, the Fund may be required to invest the proceeds at a lower interest rate.
The investment objective of the Fund and its investment policies, except
where indicated to the contrary, are deemed to be fundamental policies and thus
may not be changed without prior approval by the holders of a majority of its
outstanding voting securities, as defined in the Investment Company Act of 1940
(the "1940 Act"). In addition, the Fund is subject to certain investment
restrictions that are set forth in the Statement of Additional Information and
may not be altered without approval of shareholders. One of those restrictions
limits borrowing of money to borrowings from banks for temporary or emergency
purposes (but not for investment) in an amount not to exceed 5% of total assets
of the Fund.
<PAGE>
The return on investment in the Fund will depend upon the interest earned
by the Fund on its security holdings, after deduction of Fund expenses, and is
paid to shareholders in the form of daily dividends. If interest rates increase,
the value of interest-paying debt securities may decrease, and vice versa.
Notwithstanding the possibility of fluctuations in values of the Fund's
securities, as a result of the Fund's use of amortized cost valuation and its
declaration of income dividends daily, it is expected, but cannot be assured,
that the Fund's net asset value will be maintained at a constant value of $1.00
per share. Under the amortized cost valuation method, securities are valued at
their cost at the time of purchase, and thereafter there is assumed a constant
amortization to maturity of any discount or premium.
The Fund limits the dollar-weighted average maturity of its portfolio
securities to 90 days or less.
Generally, the Fund intends to hold securities purchased until maturity.
When in the opinion of the Fund's investment adviser or sub-adviser
(collectively "Fund Management") it is advisable in light of prevailing market
or business conditions, however, securities may be sold without regard to how
long they have been held.
The Fund may enter into repurchase agreements with respect to any of the
obligations listed above with registered broker-dealers, registered government
securities dealers or member banks of the Federal Reserve System, which are
deemed creditworthy, as described in the Statement of Additional Information.
(For a description of the requirements for broker-dealers and registered
government securities dealers, see the Statement of Additional Information.)
Repurchase agreements, which may be considered a "loan" under the 1940 Act,
involve the purchase of debt securities ("collateral") with the condition that,
after a stated period of time, the original seller will buy back such securities
at a predetermined price or yield. The amount required to be paid to the Fund
upon repurchase reflects the Fund's yield under the agreement. In the event that
the original seller defaults on its obligation to repurchase the securities, the
Fund could incur costs or delays in seeking to sell such securities. To minimize
risk, the securities underlying each repurchase agreement will be maintained
with the Fund's custodian in an amount at least equal to the repurchase price
under the agreement (including accrued interest), and such agreements will be
effected only with parties that meet certain creditworthiness standards
established by the Company's board of directors. Although the Fund has not
adopted any limit on the amount of its total assets that may be invested in
repurchase agreements, the Company's board of directors has established the
policy that all repurchase agreements entered into by the Fund will mature in
seven days or less. In no event will the Fund enter into a repurchase agreement
that is not fully collateralized by U.S. government securities.
<PAGE>
THE FUND AND ITS MANAGEMENT
The Company is a no-load mutual fund, registered with the Securities and
Exchange Commission as an open-end, diversified management investment company.
The Fund commenced operations on April 26, 1991 as a series of Financial Series
Trust, a Massachusetts business trust. On July 1, 1993, the Fund was reorganized
as a series of the Company, a Maryland corporation incorporated on April 2,
1993. The overall supervision of the Company is the responsibility of its board
of directors.
Pursuant to an agreement with the Company, INVESCO Funds Group, Inc. 7800
E. Union Avenue, Denver, Colorado, serves as the Fund's investment adviser.
INVESCO is primarily responsible for providing the Fund with various
administrative services, and supervising the Fund's daily business affairs.
These services are subject to review by the Company's board of directors.
INVESCO is an indirect wholly-owned subsidiary of INVESCO PLC. INVESCO PLC
is a financial holding company that, through its subsidiaries, engages in the
business of investment management on an international basis. INVESCO was
established in 1932 and, as of May 31, 1995, managed 14 mutual funds, consisting
of 38 separate portfolios, with combined assets of approximately $9.9 billion on
behalf of over 796,000 shareholders.
Pursuant to an agreement with INVESCO, INVESCO Trust Company ("INVESCO
Trust"), 7800 E. Union Avenue, Denver, Colorado, serves as the Company's
sub-adviser. INVESCO Trust, a trust company founded in 1969, is a wholly-owned
subsidiary of INVESCO that served as adviser or sub-adviser to 41 investment
portfolios as of May 31, 1995, including 27 portfolios in the INVESCO group.
These 41 portfolios had aggregate assets of approximately $9.5 billion as of May
31, 1995. 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. INVESCO Trust, subject to the
supervision of INVESCO, is primarily responsible for selecting and managing the
Fund's investments. Although the Company is not a party to the sub-advisory
agreement, the agreement has been approved by the shareholders of the Company.
The following individual serves as the portfolio manager for the Fund and
is primarily responsible for the day-to-day management of the Fund's portfolio
of securities:
<PAGE>
Richard R. Hinderlie Portfolio manager of the Fund since
1993; portfolio manager of INVESCO
Cash Reserves Fund and INVESCO U.S.
Government Securities Fund; co-
portfolio manager of INVESCO Short-
Term Bond Fund; portfolio manager of
INVESCO Trust Company since 1993;
Securities Analyst with Bank Western
from 1987 to 1992; B.A., Pacific
Lutheran University; M.B.A., Arizona
State University.
The Fund pays INVESCO a monthly fee which is based on a percentage of its
average net assets, determined daily. The maximum rate payable by the Fund for
each fiscal year is 0.50% on the first $300 million of its average net assets,
0.40% on the next $200 million of its average net assets, and 0.30% on its
average net assets in excess of $500 million. For the fiscal year ended May 31,
1995, the investment advisory fees paid by the Fund amounted to 0.50% of its
average net assets. Out of its advisory fee which it receives from the Fund,
INVESCO pays INVESCO Trust, as the Fund's sub-adviser, a monthly fee, which is
computed at the annual rate of 0.15% of the Fund's average net assets. No fee is
paid by the Fund to INVESCO Trust.
The Company also has entered into an Administrative Service Agreement,
dated April 30, 1993 (the "Administrative Agreement"), with INVESCO. Pursuant to
the Administrative Agreement, INVESCO performs certain administrative,
recordkeeping and internal sub- accounting services, including without
limitation, maintaining general ledger and capital stock accounts, preparing a
daily trial balance, calculating net asset value daily, providing selected
general ledger reports and providing sub-accounting and recordkeeping services
for Fund shareholder accounts maintained by certain retirement and employee
benefit plans for the benefit of participants in such plans. For such services,
the Fund pays INVESCO a fee consisting of a base fee of $10,000 per year, plus
an additional incremental fee computed at an annual rate of 0.015% per year of
the average net assets of the Fund. INVESCO also is paid a fee by the Fund for
providing transfer agent services. See "Additional Information."
The Fund's expenses, which are accrued daily, are generally deducted from
the Fund's total income before dividends are paid. Total expenses of the Fund
for the fiscal year ended May 31, 1995, including investment advisory fees (but
excluding brokerage commissions which are included as a cost of acquiring
securities), amounted to 0.75% of the Fund's average net assets. Certain Fund
expenses were, and are, voluntarily absorbed by INVESCO pursuant to a commitment
to the Fund in order to ensure that the Fund's total expenses did not exceed
0.75% of the Fund's average net assets
<PAGE>
(through April 30, 1995) and will not exceed 0.85% of the Fund's average net
assets (beginning May 1, 1995). This commitment may be changed following
consultation with the Company's board of directors. In the absence of such
voluntary expense limitation, the Fund's total expenses for the fiscal year
ended May 31, 1995 would have been 1.10% of the Fund's average net assets.
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of
their financial responsibility coupled with their ability to effect transactions
at the best available prices. Although the Fund does not market its shares
through intermediary brokers or dealers, the Fund may place orders for portfolio
transactions with qualified broker/dealers that recommend the Fund, or sell
shares of the Fund, to clients, or act as agent in the purchase of Fund shares
for clients, if Fund Management believes that the quality of the execution of
the transaction and level of commission are comparable to those available from
other qualified brokerage firms.
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 investment and other personnel to
conduct their personal investment activities in a manner that Fund Management
believes is not detrimental to the Fund or Fund Management's other advisory
clients. See the Statement of Additional Information for more detailed
information.
HOW SHARES CAN BE PURCHASED
Shares of the Fund are sold on a continuous basis by INVESCO, as the
Fund's Distributor at the net asset value per share next calculated after
receipt of a purchase order in good form and of federal funds by the Fund, as
described below. No sales charge is imposed upon the sale of shares of the Fund.
To purchase shares of the Fund, send a check made payable to INVESCO Funds
Group, Inc., together with a completed application form, to:
INVESCO FUNDS GROUP, INC.
Post Office Box 173706
Denver, Colorado 80217-3706
Purchase orders must specify the Fund in which the investment is to be
made.
The minimum initial purchase must be at least $1,000, with subsequent
investments of not less than $50, except that: (1) those shareholders
establishing an EasiVest or direct payroll purchase account, as described below
in the Prospectus section entitled "Services Provided by the Fund", may open an
account without making any initial investment if they agree to make
<PAGE>
regular, minimum purchases of at least $50; (2) those shareholders investing in
an Individual Retirement Account ("IRA") or through omnibus accounts where
individual shareholder recordkeeping and sub-accounting are not required may
make initial minimum purchases of $250; (3) Fund Management may permit a lesser
amount to be invested in the Fund under a federal income tax-deferred retirement
plan (other than an IRA) or under a group investment plan qualifying as a
sophisticated investor; and (4) Fund Management reserves the right to reduce or
waive the minimum purchase requirements in its sole discretion where it
determines such action is in the best interests of the Fund. The minimum initial
purchase requirement of $1,000, as described above, does not apply to
shareholder account(s) in any of the INVESCO funds opened prior to January 1,
1993, and, thus, is not a minimum balance requirement for those existing
accounts. However, for shareholders already having accounts in any of the
INVESCO funds, all initial share purchases in a new Fund account, including
those made using the exchange privilege, must meet the Fund's applicable minimum
investment requirements.
Because the Fund seeks to be fully invested at all times, an order to
purchase shares will not be effective until an investor's payment can be
converted into available federal funds (i.e., monies held on deposit within the
Federal Reserve System) under regular banking processing procedures or, if the
investor is acquiring shares in an exchange from another INVESCO Fund, the Fund
receives the proceeds of the exchange. Checks drawn on a member bank of the
Federal Reserve System normally are converted into federal funds within two or
three business days following receipt of the checks by the Fund. In the case of
checks drawn on banks which are not members of the Federal Reserve System, it
may take longer for federal funds to become available. During the period of time
prior to receipt of federal funds or the proceeds of an exchange, an investor's
money will not be invested in the Fund and will not earn any dividends. During
such time, an investor's money is held in a separate custodial account, which
results in no interest or other economic benefit accruing to INVESCO. The
purchase of shares can be expedited by placing bank wire or overnight courier
orders. Overnight courier orders must meet the above minimum requirements. In no
case can a bank wire order be in an amount less than $1,000. For further
information, the purchaser may call the Fund's office by using the telephone
number on the cover of this Prospectus. Orders sent by overnight courier,
including Express Mail, should be sent to the street address, not Post Office
Box, of INVESCO Funds Group, Inc., at 7800 E. Union Avenue, Denver, CO 80237.
If your check does not clear, you will be responsible for any related loss
the Fund or INVESCO incurs. If you are already a shareholder in the INVESCO
funds, the Fund has the option to redeem shares from any identically registered
account in the Fund or any other INVESCO fund as reimbursement for any loss
incurred. You may also be prohibited or restricted from making future purchases
in any of the INVESCO funds.
<PAGE>
Persons who invest in the Fund through a securities broker may be charged
a commission or transaction fee by the broker for the handling of the
transaction, if the broker so elects. Any investor may deal directly with the
Fund in any transaction, however. In that event, there is no such charge.
INVESCO may from time to time make payments from its revenues to securities
dealers and other financial institutions that provide distribution-related
and/or administrative services for the Fund.
The Fund reserves the right in its sole discretion to reject any order for
purchase of its shares (including purchases by exchange) when, in the judgment
of management, such rejection is in the best interest of the Fund.
Net asset value per share of the Fund is computed once each day that the
New York Stock Exchange is open as of the close of regular trading on that
Exchange (usually 4:00 p.m., New York time) and also may be computed on other
days under certain circumstances. Net asset value per share is calculated by
dividing the value of the Fund's securities plus the value of its other assets
(including dividends and interest accrued but not collected), less all
liabilities (including accrued expenses), by the number of outstanding shares of
the Fund. As a result of using the amortized cost valuation method to value its
securities and as a result of declaring dividends daily, the Fund expects, but
cannot guarantee, that it will be able to maintain a constant net asset value of
$1.00 per share.
SERVICES PROVIDED BY THE FUND
Shareholder Accounts. INVESCO maintains a share account that reflects the
current holdings of each shareholder. Share certificates will be issued only
upon specific request. Since certificates must be carefully safeguarded and must
be surrendered in order to exchange or redeem Fund shares, most shareholders do
not request share certificates in order to facilitate such transactions. Each
shareholder is sent a detailed confirmation of each transaction in shares of the
Fund. Shareholders whose only transactions are through the EasiVest, direct
payroll purchase, automatic monthly exchange or periodic withdrawal programs, or
are reinvestments of dividends or capital gains in the same or another Fund,
will receive confirmations of those transactions on their quarterly statements.
These programs are discussed below. For information regarding a shareholder's
account and transactions, the shareholder may call the Fund's office by using
the telephone number on the cover of this Prospectus.
<PAGE>
Reinvestment of Distributions. Income dividends paid by the Fund are
automatically reinvested in additional shares of the Fund at the net asset value
per share of the Fund in effect on the ex- dividend date. A shareholder may,
however, elect to reinvest dividends in certain of the other no-load mutual
funds advised and distributed by INVESCO, or to receive payment of all dividends
in excess of $10.00 by check by giving written notice to INVESCO at least two
weeks prior to the record date on which the change is to take effect. Further
information concerning these options can be obtained by calling INVESCO.
Periodic Withdrawal Plan. A Periodic Withdrawal Plan is available to
shareholders who own or purchase shares of any mutual funds advised by INVESCO
having a total value of $10,000 or more; provided, however, that at the time the
Plan is established, the shareholder owns shares having a value of at least
$5,000 in the fund from which the withdrawals will be made. Under the Periodic
Withdrawal Plan, INVESCO, as agent, will make specified monthly or quarterly
payments of any amount selected (minimum payment of $100) to the party
designated by the shareholder. Notice of all changes concerning the Periodic
Withdrawal Plan must be received by INVESCO at least two weeks prior to the next
scheduled check. Further information regarding the Periodic Withdrawal Plan and
its requirements and tax consequences can be obtained by contacting INVESCO.
Exchange Privilege. Shares of the Fund may be exchanged for shares of any
other fund of the Company, as well as for shares of any of the following other
no-load mutual funds, which are also advised and distributed by INVESCO, on the
basis of their respective net asset values at the time of the exchange: 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
Multiple Asset Funds, Inc., INVESCO Specialty Funds, Inc., INVESCO Strategic
Portfolios, Inc., INVESCO Tax-Free Income Funds, Inc., and INVESCO Value Trust.
An exchange involves the redemption of shares in the Fund and investment
of the redemption proceeds in shares of another fund of the Company or in one of
the funds listed above. Exchanges will be made at the net asset value per share
next determined after receipt of an exchange request in proper order. Any gain
or loss realized on an exchange is recognizable for federal income tax purposes
by the shareholder. Exchange requests may be made either by telephone or by
written request to INVESCO Funds Group, Inc., using the telephone number or
address on the cover of this Prospectus. 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.
<PAGE>
The privilege of exchanging Fund shares by telephone is available to
shareholders automatically unless expressly declined. By signing the new account
Application, a Telephone Transaction Authorization Form or otherwise utilizing
telephone exchange privileges, the investor has agreed that the Fund will not be
liable for following instructions communicated by telephone that it reasonably
believes to be genuine. The Fund employs procedures, which it believes are
reasonable, designed to confirm that exchange instructions are genuine. These
may include recording telephone instructions and providing written confirmations
of exchange transactions. As a result of this policy, the investor may bear the
risk of any loss due to unauthorized or fraudulent instructions; provided,
however, that if the Fund fails to follow these or other reasonable procedures,
the Fund may be liable.
The exchange privilege may be modified or terminated at any time. Except
for those limited instances where redemptions of the exchanged security are
suspended under Section 22(e) of the 1940 Act, or where sales of the fund into
which the shareholder is exchanging are temporarily stopped, notice of all such
modifications or termination of the exchange privilege will be given at least 60
days prior to the date of termination or the effective date of the modification.
Before making an exchange, the shareholder should review the prospectuses
of the funds involved and consider their differences, and should be aware that
the exchange privilege may only be available in those states where exchanges may
be legally made, which will require that the shares being acquired are
registered for sale in the shareholder's state of residence. Shareholders
interested in exercising the exchange privilege may contact INVESCO for
information concerning their particular exchanges.
Automatic Monthly Exchange. Shareholders who have accounts in any one or
more of the mutual funds distributed by INVESCO may arrange for a fixed dollar
amount of their fund shares to be automatically exchanged for shares of any
other INVESCO mutual fund listed under "Exchange Privilege" on a monthly basis.
The minimum monthly exchange in this program is $50.00. This automatic exchange
program can be changed by the shareholder at any time by notifying INVESCO at
least two weeks prior to the date the change is to be made. Further information
regarding this service can be obtained by contacting INVESCO.
EasiVest. For shareholders who want to maintain a schedule of monthly
investments, EasiVest uses various methods to draw a preauthorized amount from
the shareholder's bank account to purchase Fund shares. This automatic
investment program can be changed by the shareholder at any time by writing to
INVESCO at least two weeks prior to the date the change is to be made. Further
information regarding this service can be obtained by contacting INVESCO.
<PAGE>
Direct Payroll Purchase. Shareholders may elect to have their employers
make automatic purchases of Fund shares for them by deducting a specified amount
from their regular paychecks. This automatic investment program can be modified
or terminated at any time by the shareholder by notifying the employer. Further
information regarding this service can be obtained by contacting INVESCO.
Tax-Deferred Retirement Plans. Shares of the Fund may be purchased for
self-employed individual retirement plans, IRAs, simplified employee pension
plans, and corporate retirement plans. In addition, shares can be used to fund
tax qualified plans established under Section 403(b) of the Internal Revenue
Code by educational institutions, including public school systems and private
schools, and certain kinds of non-profit organizations, which provide deferred
compensation arrangements for their employees.
Prototype forms for the establishment of these various plans, including
where applicable, disclosure statements required by the Internal Revenue
Service, are available from INVESCO. INVESCO Trust Company, a subsidiary of
INVESCO, is qualified to serve as trustee or custodian under these plans and
provides the required services at competitive rates. Retirement plans (other
than IRAs) receive monthly statements reflecting all transactions in their Fund
accounts. IRAs receive the confirmations and quarterly statements described
under "Shareholder Accounts." For complete information, including prototype
forms and service charges, call INVESCO at the telephone number listed on the
cover of this Prospectus or send a written request to: Retirement Services,
INVESCO Funds Group, Inc., Post Office Box 173706, Denver, Colorado 80217-3706.
HOW TO REDEEM SHARES
Shares of the Fund may be redeemed at any time at their current net asset
value next determined after a request in proper form is received at the Fund's
office. (See "How Shares Can Be Purchased.") As stated above, the Fund expects,
but cannot guarantee, to maintain a $1.00 per share constant net asset value.
If the shares to be redeemed are represented by stock certificates, a
written request for redemption signed by the registered shareholder(s) and the
certificates must be forwarded to INVESCO Funds Group, Inc., Post Office Box
173706, Denver, Colorado 80217-3706. Redemption requests sent by overnight
courier, including Express Mail, should be sent to the street address, not Post
Office Box, of INVESCO Funds Group, Inc. at 7800 E. Union Avenue, Denver, CO
80237. If no certificates have been issued, a written redemption request signed
by each registered owner of the account may be submitted to INVESCO at the
address noted above.
<PAGE>
If shares are held in the name of a corporation, additional documentation
may be necessary. Call or write for specifics. If payment for the redeemed
shares is to be made to someone other than the registered owner(s), the
signature(s) must be guaranteed by a financial institution which qualifies as an
eligible guarantor institution. Redemption procedures with respect to accounts
registered in the names of broker/dealers may differ from those applicable to
other shareholders.
Be careful to specify the account from which the redemption is to be made.
Shareholders have a separate account for each Fund in which they invest.
Payment of redemption proceeds will be mailed within seven days following
receipt of the required documents. However, payment may be postponed under
unusual circumstances, such as when normal trading is not taking place on the
New York Stock Exchange or an emergency as defined by the Securities and
Exchange Commission exists. If the shares to be redeemed were purchased by check
and that check has not yet cleared, payment will be made after the Fund has
allowed a reasonable time for clearance of the purchase check (which may take up
to 15 days).
If a shareholder participates in EasiVest, the Fund's automatic monthly
investment program, and redeems all of the shares in his Fund account, INVESCO
will terminate any further EasiVest purchases unless otherwise instructed by the
shareholder.
Because of the high relative costs of handling small accounts, should the
value of any shareholder's account fall below $250 as a result of shareholder
action, the Fund reserves the right to effect the involuntary redemption of 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.
Shareholders with $1,000 or more in their account may avail themselves of
the Check Withdrawal Option. A one-time charge of $5 will be made to institute
the option. Checks will be furnished at no charge and may be written in amounts
of not less than $500. Shares in the Fund will be redeemed to cover payment of
checks drawn by the shareholder. INVESCO reserves the right to institute a
charge for checks upon notice to all shareholders with the option. Further
information regarding this option may be obtained by contacting INVESCO.
Fund shareholders (other than shareholders holding Fund shares in accounts
of IRA plans) may request expedited redemption of shares having a value of at
least $250 (or redemption of all shares if their value is less than $250), held
in accounts maintained in their name by telephoning redemption instructions to
INVESCO, using
<PAGE>
the telephone number on the cover of this Prospectus. The redemption proceeds,
at the shareholder's option, either will be mailed to the address listed for the
shareholder's Fund account, or wired (minimum of $1,000) or mailed to the bank
which the shareholder has designated to receive the proceeds of telephone
redemptions. The Fund charges no fee for effecting such telephone redemptions.
Unless Fund Management permits a larger redemption request to be placed by
telephone, a shareholder may not place a redemption request by telephone in
excess of $25,000. These telephone redemption privileges may be modified or
terminated in the future at the discretion of Fund Management.
For INVESCO Trust Company-sponsored federal income tax-deferred retirement
plans, the term "shareholders" is defined to mean plan trustees that file a
written request to be able to redeem Fund shares by telephone. Shareholders
should understand that, while the Fund will attempt to process all telephone
redemption requests on an expedited basis, there may be times, particularly in
periods of severe economic or market disruption, when (a) they may encounter
difficulty in placing a telephone redemption request, and (b) processing
telephone redemptions will require up to seven days following receipt of the
redemption request, or additional time because of the unusual circumstances set
forth above.
The privilege of redeeming Fund shares by telephone is available to
shareholders automatically unless expressly declined. By signing a new account
Application, a Telephone Redemption Authorization form or otherwise utilizing
telephone redemption privileges, the shareholder has agreed that the Fund will
not be liable for following instructions communicated by telephone that it
reasonably believes to be genuine. The Fund employs procedures, which it
believes are reasonable, designed to confirm that telephone instructions are
genuine. These may include recording telephone instructions and providing
written confirmation of transactions initiated by telephone. As a result of this
policy, the investor may bear the risk of any loss due to unauthorized or
fraudulent instructions; provided, however, that if the Fund fails to follow
these or other reasonable procedures, the Fund may be liable.
TAXES AND DIVIDENDS
Taxes. The Fund intends to distribute to shareholders substantially all of
its net investment income and net capital gains, if any, in order to continue to
qualify for tax treatment as a regulated investment company. Thus, it is not
expected that the Fund will be required to pay any federal income excise or
taxes.
Unless shareholders are exempt from income taxes, they must include all
dividends as taxable income for federal, state and local income tax purposes.
Dividends are taxable whether they are received in cash or automatically
invested in shares of the Fund or another fund in the INVESCO group.
<PAGE>
Shareholders may be subject to backup withholding of 31% on dividends and
redemption proceeds. Unless a shareholder is subject to backup withholding for
other reasons, the shareholder can avoid backup withholding on his Fund account
by ensuring that INVESCO has a correct, certified tax identification number.
Dividends. The Fund earns ordinary or net investment income in the form of
dividends and interest on its investments. The Fund's policy is to distribute
substantially all of this income, less Fund expenses, to shareholders. Dividends
from net investment income are declared daily and paid monthly. Dividends and
capital gains, if any, are automatically reinvested in additional shares of the
Fund at the net asset value on the ex-dividend date, unless otherwise requested.
(See "Services Provided by the Fund - Reinvestment of Distributions.")
At the end of each year, information regarding the tax status of dividends
is provided to shareholders. The Fund does not invest in long-term securities
and therefore any capital gains or losses realized by the Fund will be
short-term gains or losses. Short- term capital gains are included with income
from dividends and interest as ordinary income and are paid to shareholders as
dividends.
Shareholders are encouraged to consult their tax advisers with respect to
these matters. For further information, see "Dividends and Taxes" in the
Statement of Additional Information.
ADDITIONAL INFORMATION
Voting Rights. All shares of the Fund, and the two other 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. Voting with
respect to certain matters, such as notification of independent accountants and
the election of directors, will be by all funds of the Company voting together.
In other cases, such as voting upon an investment advisory contract, voting is
on a fund-by-fund basis. To the extent permitted by law, when not all funds are
affected by a matter to be voted upon, only shareholders of the fund or funds
affected by the matter will be entitled to vote thereon. The Company is not
generally required and does not expect to hold regular annual meetings of
shareholders; however, the board of directors will call special meetings of
shareholders for the purpose, among other reasons, of voting upon the question
of removal of a director or directors 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
Company will assist shareholders in communicating with other shareholders as
required by the 1940 Act. Directors may be removed by action of the holders of a
majority of the outstanding shares of the Company.
<PAGE>
Shareholder Inquiries. All inquiries regarding the Fund should be directed
to the Fund at the telephone number or mailing address set forth on the cover
page of this Prospectus.
Transfer and Dividend Disbursing Agent. INVESCO Funds Group, Inc., 7800 E.
Union Avenue, Denver, Colorado 80237, acts as registrar, transfer agent, and
dividend disbursing agent for the Fund pursuant to a Transfer Agency Agreement
which provides that the Fund will pay an annual fee of $21.00 per shareholder
account or omnibus account participant. The transfer agency fee is not charged
to each shareholder's or participant's account but is an expense of the Fund to
be paid from the Fund's assets. Registered broker-dealers, third party
administrators of tax-qualified retirement plans and other entities, including
affiliates of INVESCO, may provide sub-transfer agency services to the Fund
which reduce or eliminate the need for identical services to be provided on
behalf of the Fund by INVESCO. In such cases, INVESCO may pay the third party an
annual sub-transfer agency fee of up to $21.00 per participant in the third
party's omnibus account out of the transfer agency fee which is paid to INVESCO
by the Fund.
<PAGE>
INVESCO MONEY MARKET FUNDS, INC.
INVESCO U.S. Government Money Fund
A no-load mutual fund seeking safety and
current income.
PROSPECTUS
September 29, 1995
To receive general information and prospectuses on any of INVESCO's funds or
retirement plans, or to obtain current account or price information, call
toll-free:
1-800-525-8085
To reach PAL, your 24-hour Personal Account Line, call:
1-800-424-8085
Or write to:
INVESCO Funds Group, Inc., Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
If you're in Denver, visit one of our convenient Investor Centers:
Cherry Creek
155-B Fillmore Street
Denver Tech Center
7800 East Union Avenue
Lobby Level
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
September 29, 1995
INVESCO MONEY MARKET FUNDS, INC.
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 Money Market Funds, Inc. (the "Company") is an open-end management
investment company organized in series form in which all three of its Funds,
INVESCO Cash Reserves Fund, INVESCO Tax- Free Money Fund and INVESCO U.S.
Government Money Fund (collectively, the "Funds" and individually, a "Fund"),
are money market funds which seek to provide shareholders with as high a level
of current income as is consistent with liquidity and safety of capital. It is
expected, but cannot be assured, that the value of all of the Funds' shares will
be maintained at a constant $1.00 per share. Investors may purchase shares of
any or all three Funds. The following are available:
INVESCO Cash Reserves Fund will pursue its investment objective by
investing in a diversified portfolio of high-quality, short-term debt
obligations.
INVESCO Tax-Free Money Fund will pursue its investment objective by
investing in a diversified portfolio of high-quality, short-term debt
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 income taxation.
Such obligations may include municipal bonds, notes and commercial paper.
INVESCO U.S. Government Money Fund will pursue its investment
objective by investing only in debt obligations issued or
guaranteed by the U.S. Government or its agencies.
<PAGE>
Separate Prospectuses for each of the Funds dated September 29, 1995,
which provide the basic information you should know before investing in the
Funds, may be obtained without charge from INVESCO Funds Group, Inc., P.O. Box
173706, Denver, Colorado 80217- 3706. This Statement of Additional Information
is not a Prospectus, but contains information in addition to and more detailed
than that set forth in the Prospectus. It is intended to provide you with
additional information regarding the activities and operations of the Fund, and
should be read in conjunction with the Prospectus.
Investment Adviser and Distributor: INVESCO FUNDS GROUP, INC.
TABLE OF CONTENTS
Page
INVESTMENT POLICIES AND RESTRICTIONS 67
THE FUNDS AND THEIR MANAGEMENT 81
HOW SHARES CAN BE PURCHASED 94
HOW SHARES ARE VALUED 94
FUND PERFORMANCE 97
SERVICES PROVIDED BY THE FUNDS 99
TAX-DEFERRED RETIREMENT PLANS 100
HOW TO REDEEM SHARES 100
DIVIDENDS AND TAXES 101
INVESTMENT PRACTICES 102
ADDITIONAL INFORMATION 104
APPENDIX A 107
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
As discussed in their respective Prospectuses in the sections entitled
"Investment Objective and Policies," the Funds may invest in a variety of
short-term money market securities in seeking to achieve their respective
investment objectives. Such securities include the following:
U.S. Government Obligations. The INVESCO Cash Reserve Fund and INVESCO
U.S. Government Money Fund may invest in U.S. Government obligations without
limit. The INVESCO Tax-Free Money Fund may invest up to 20% of its total assets
in U.S. Government obligations. These securities consist of treasury bills,
treasury notes, and treasury bonds, which differ only in their interest rates,
maturities, and dates of issuance, and securities issued or guaranteed by
agencies or instrumentalities of the U.S. Government. Treasury bills have a face
maturity of one year or less. Treasury notes generally have face maturities of
one to ten years, and treasury bonds generally have face maturities of more than
ten years.
Some obligations of United States Government agencies, which are
established under the authority of an act of Congress, such as Government
National Mortgage Association (GNMA) participation certificates, are supported
by the full faith and credit of the United States Treasury. GNMA Certificates
are mortgage-backed securities representing part ownership of a pool of mortgage
loans. These loans -- issued by lenders such as mortgage bankers, commercial
banks and savings and loan associations -- are either insured by the Federal
Housing Administration or guaranteed by the Veterans Administration. A "pool" or
group of such mortgages is assembled and, after being approved by GNMA, is
offered to investors through securities dealers. Once approved by GNMA, the
timely payment of interest and principal on each mortgage is guaranteed by GNMA
and backed by the full faith and credit of the United States Government. The
market value of GNMA Certificates is not guaranteed. GNMA Certificates differ
from bonds in that principal is paid back monthly by the borrower over the term
of the loan rather than returned in a lump sum at maturity. GNMA Certificates
are called "pass-through" securities because both interest and principal
payments (including prepayments) are passed through to the holder of the
Certificate. Upon receipt, principal payments will be used by the Fund to
purchase additional GNMA certificates or other U.S. government securities.
Other United States Government obligations, such as securities of the
Federal Home Loan Banks, are supported by the right of the issuer to borrow from
the Treasury. Still others, such as bonds issued by the Federal National
Mortgage Association, a federally chartered private corporation, are supported
only by the credit of the instrumentality. In the case of securities not backed
by the full faith and credit of the United States, the Fund must look
<PAGE>
principally to the agency issuing or guaranteeing the obligation for ultimate
repayment, and may not be able to assert a claim against the United States
itself in the event the agency or instrumentality does not meet its commitments.
The Fund will invest in securities of such instrumentalities only when its
investment adviser and sub-adviser are satisfied that the credit risk with
respect to any such instrumentality is minimal.
Obligations of Domestic Banks. The INVESCO Cash Reserves Fund and INVESCO
Tax-Free Money Fund may invest in these obligations, which consist of
certificates of deposit ("CD's") and bankers' acceptances, rated in one of the
two highest short-term rating categories by at least two nationally recognized
statistical rating organizations ("NRSROs") or one NRSRO if such obligations are
rated by only one NRSRO, issued by domestic banks (including their foreign
branches) which have total assets in excess of $4 billion and meet other
criteria established by the board of directors. CD's are issued against deposits
in a commercial bank for a specified period and rate and are normally
negotiable. Eurodollar CD's are certificates issued by a foreign branch (usually
London) of a U.S. Domestic bank, and, as such, the credit is deemed to be that
of the domestic bank.
Bankers' acceptances are short-term credit instruments evidencing the
promise by a bank (by virtue of the bank's "acceptance") to pay at maturity a
draft which has been drawn on it by a customer (the "drawer"). These instruments
are used to finance the import, export, transfer, or storage of goods and
reflect the obligation of both the bank and the drawer to pay the face amount.
Commercial Paper. INVESCO Cash Reserves Fund may invest in these
obligations, which are short-term promissory notes issued by domestic
corporations to meet current working capital requirements. Such paper may be
unsecured or backed by a letter of credit. Commercial paper issued with a letter
of credit is, in effect, "two party paper," with the issuer directly responsible
for payment, plus a bank's guarantee that if the note is not paid at maturity by
the issuer, the bank will pay the principal and interest to the buyer.
Commercial paper is sold either as interest-bearing or on a discounted basis,
with maturities not exceeding 270 days.
The INVESCO Cash Reserves Fund may not purchase securities that are not
readily marketable. However, the Fund's investments in commercial paper may
include commercial paper issued pursuant to the exemption from registration
contained in Section 4(2) of the Securities Act of 1993 ("Section 4(2) Paper")
if a liquid trading market exists. The liquidity of the Fund's investments in
Section 4(2) Paper could be impaired if dealers or institutional investors
become uninterested in purchasing these securities. The Company's board of
directors has delegated to the adviser the authority to determine the liquidity
of Section 4(2) Paper pursuant to
<PAGE>
guidelines approved by the board. In the event that an issue of Section 4(2)
Paper subsequently is determined to be illiquid, the security will be sold as
soon as that can be done in an orderly fashion consistent with the best
interests of the Fund's shareholders.
The corporate obligations which may be part of the INVESCO Cash Reserves
Fund's investments consist of bonds, debentures, and notes issued by
corporations in order to finance longer term credit needs.
Repurchase Agreements. Each of the Funds may enter into repurchase
agreements with banks which meet the criteria outlined above or with registered
broker-dealers or registered government securities dealers, which are deemed
creditworthy. Such broker-dealers or U.S. government securities dealers must
have outstanding either commercial paper or other short-term debt obligations
rated in the highest rating category by at least two NRSROs or one NRSRO if such
obligations are only rated by one NRSRO. In the event of default of the seller
under a repurchase agreement, the Funds have a right to sell the collateral. In
exercising that right, however, the Funds may suffer time delays and incur costs
or losses in connection with the disposition of the underlying securities. To
reduce risks, the Funds follow certain procedures, including maintaining
collateral at all times in an amount equal to the repurchase price (including
any accrued interest due thereunder), considering the creditworthiness of the
seller, and maintaining the collateral with either the Funds' custodian or a
depository which has been approved by the board of directors of the Funds.
Investment Ratings. If a security originally rated in the highest rating
category by an NRSRO has been downgraded to the second highest rating category,
the Funds' investment adviser must assess promptly whether the security presents
minimal credit risk and must take such action with respect to the security as it
determines to be in the best interest of the affected Fund. If a Fund security
is downgraded below the second highest rating of an NRSRO, is in default, or no
longer presents a minimal credit risk, the security must be disposed of either
within five business days of the investment adviser becoming aware of the new
rating, the default, or the credit risk, or as soon as practicable consistent
with achieving an orderly disposition of the security, whichever is the first to
occur, unless the executive committee of the Funds' board of directors
determines within the aforesaid five business days that holding the security is
in the best interest of any of the Funds. The ratings of any NRSRO represent its
opinions as to the quality of the issuers and securities which it undertakes to
rate. It should be emphasized, however, that ratings are general and not
absolute standards of quality.
<PAGE>
Municipal Obligations
As discussed in the section entitled "Investment Objective and Policies"
of INVESCO Tax-Free Money Fund's Prospectus, this Fund may invest in a variety
of short-term, tax-exempt securities in seeking to achieve its investment
objective. Such securities
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 types
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, this Fund will only invest in those industrial development bonds, the
interest from which is exempt from federal income taxation.
There are two principal classifications of tax-exempt municipal bonds:
"general obligation" and "revenue" bonds. General obligation bonds are secured
by the issuer's pledge of its full faith, credit and unlimited taxing power for
the payment of principal and interest. Revenue bonds are payable only from the
revenues generated by a particular facility or class of facility, or in some
cases from the proceeds of a special excise tax or specific revenue source.
Industrial development obligations are a particular kind of municipal bond which
are issued by or on behalf of public authorities to obtain funds for many kinds
of local, privately operated facilities. Such obligations are, in most cases,
revenue bonds that generally are secured by a lease with a particular private
corporation. The INVESCO Tax-Free Money Fund's portfolio may consist of any
combination of general obligation and revenue bonds.
<PAGE>
From time to time, proposals to restrict or eliminate the federal income
tax exemption for interest on municipal bonds have been introduced before
Congress. Similar proposals may be introduced in the future. If such a proposal
were enacted, the availability of municipal bonds for investment by this Fund
might be adversely affected. In such event, this Fund would reevaluate its
investment objective and policies and submit possible changes in the structure
of this Fund for the consideration of shareholders.
For a description of the minimum bond ratings by Moody's Investors
Service, Inc. or Standard & Poor's Corporation required for a municipal bond to
be eligible for inclusion in the Fund's portfolio, see "Appendix A" to this
Statement of Additional
Information.
Municipal Notes. Municipal notes, eligible for purchase by INVESCO
Tax-Free Money Fund, are short-term debt obligations issued by municipalities
which normally have a maturity at the time of issuance of from six months to
three years. The principal classifications of such notes are tax anticipation
notes, bond anticipation notes, revenue anticipation notes, and project 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.
Municipal Commercial Paper. INVESCO Tax-Free Money Fund also may invest in
municipal commercial paper, which refers to short-term debt obligations issued
by municipalities which may be issued at a discount (sometimes referred to as
Short-Term Discount Notes). Such obligations normally are issued to meet
seasonal working capital needs of a municipality or interim construction
financing and are paid from a municipality's general revenues or refinanced with
long-term debt. Although the availability of municipal commercial paper has been
limited, from time to time the amounts of such debt obligations offered have
increased, and the Fund's investment adviser believes that this increase may
continue.
As discussed in the Fund's Prospectus, to be eligible for purchase by
INVESCO Tax-Free Money Fund, municipal obligations must satisfy certain
investment quality requirements. After the Fund has purchased an issue of
municipal obligations, such issue might cease to be rated, or its rating might
be reduced below the minimum required for purchase by the Fund. If a security
originally rated in the highest rating category by a nationally recognized
statistical rating organization ("NRSRO") has been downgraded to the second
highest rating category, the Fund's investment adviser must assess promptly
whether the security presents minimal credit risk and must take such action with
respect to the security as it determines to be in the best interest of the Fund.
If a Fund security is downgraded below the second highest rating of an NRSRO, is
in default, or no longer presents a minimal credit risk, the security must be
disposed of either within five business days of the investment adviser becoming
aware of the new rating, the
<PAGE>
default, or the credit risk, or as soon as practicable consistent with
achieving an orderly disposition of the security, whichever is the first to
occur, unless the executive committee of the Fund's board of directors
determines within the aforesaid five business days that holding the security is
in the best interest of the Fund. The ratings of any NRSRO represent its
opinions as to the quality of the municipal obligations which it undertakes to
rate. It should be emphasized, however, that ratings are general and not
absolute standards of quality. Consequently, tax-exempt obligations with the
same maturity and rating may have different yields, while obligations of the
same maturity with different ratings may have the same yield.
The INVESCO Tax-Free Money Fund will not purchase a municipal obligation
unless the issuer's bond counsel has rendered an opinion that such obligation
has been validly issued and that the interest thereon is exempt from federal
income taxation. In addition, the Fund will not purchase a municipal obligation
that, in the opinion of the Fund's investment adviser, is reasonably likely to
be held not to be validly issued or to pay interest thereon which is not exempt
from federal income taxation.
Variable Rate Obligations. As discussed in INVESCO Tax-Free Money Fund's
Prospectus, the Fund may invest in variable rate municipal obligations. The
interest rate payable on a variable rate municipal obligation is adjusted either
at predetermined periodic intervals or whenever there is a change in the market
rate of interest upon which the interest rate payable is based. A variable rate
obligation may include a demand feature pursuant to which the Fund would have
the right to demand prepayment of the principal amount of the obligation prior
to its stated maturity. In addition, the issuer of a variable rate obligation
may retain the right to prepay the principal amount prior to maturity.
The principal benefit of a variable rate municipal obligation is that the
interest rate adjustment minimizes changes in the market value of the
obligation. As a result, the purchase of variable rate municipal obligations
should enhance the ability of the Fund to maintain a stable net asset value per
share and to sell an obligation prior to maturity at a price approximating the
full principal amount of the obligation. The principal benefit to the Fund of
purchasing obligations with a demand feature is that liquidity, and the ability
of the Fund to obtain repayment of the full principal amount of a municipal
obligation prior to maturity, are enhanced. The investment adviser will
continually monitor the creditworthiness of issuers of variable rate obligations
and their ability to make payments on demand.
Stand-by Commitments. As discussed in INVESCO Tax-Free Money Fund's
Prospectus, the Fund may acquire stand-by commitments under which the Fund
purchases securities together with a right to resell them to the seller at an
agreed upon price or yield within a
<PAGE>
specific period prior to the maturity date of such securities. The benefit to
the Fund of acquiring stand-by commitments would be to facilitate the ability of
the Fund to invest its assets fully in securities on which the interest is
exempt from federal income taxation while preserving the necessary flexibility
and liquidity to meet unusually large redemptions and to purchase at a later
date securities other than those subject to the commitment. Stand-by commitments
generally will be available without the payment of any direct or indirect
consideration. If it is believed to be necessary or advisable, the Fund may pay
for stand-by commitments, either separately, in cash, or by paying a higher
price for the securities that are acquired subject to the stand-by commitment.
As a matter of policy, however, the total amount "paid" in either manner for
outstanding commitments held by the Fund will not exceed 1/2 of 1% of the value
of its total assets calculated after any stand-by commitment is acquired.
In determining whether to exercise stand-by commitments and in selecting
which commitments to exercise in which circumstances, the investment adviser
will consider, among other things, the amount of cash available to the Fund, the
expiration dates of the available commitments, any future commitments for
securities, alternate investment opportunities and the desirability of retaining
the underlying securities in the Fund. The Fund will refrain from exercising
stand-by commitments to avoid imposing a loss on a dealer and jeopardizing its
business relationship with that dealer. Any stand-by commitments acquired by the
Fund will have the following features: (1) the commitments will be in writing
and will be physically held by the Fund's custodian; (2) they will be
exercisable at any time prior to the underlying security's maturity; (3) rights
of the Fund to exercise commitments will be unconditional and unqualified; (4)
stand-by commitments will be entered into only with dealers, banks and brokers
which present a minimal risk of default as determined by the investment adviser
under procedures adopted by the board of directors; (5) although the commitments
will not be transferable, the municipal obligations purchased subject to such
commitments may be sold to a third party at any time, even though a commitment
may be outstanding; and (6) their exercise price in each case will be (i) the
Fund's acquisition cost of the municipal obligation that is subject to this
commitment (excluding any accrued interest that the Fund paid on acquisition of
the security), less any amortized market premium or plus any amortized market or
original issue discount during the period the Fund owned the municipal
obligation, plus (ii) all interest accrued on the municipal obligation since the
last interest payment date during the period such obligation was owned by the
Fund. In addition, the acquisition, exercisability and duration of stand-by
commitments will not be factors in determining the dollar-weighted average of
the Fund or the value of the securities it holds. No value is given to stand-by
commitments in determining the Fund's net asset value per share, and any amounts
paid for such commitments will be reflected as unrealized depreciation for the
period during which the commitment is held.
<PAGE>
The Internal Revenue Service ("IRS") has issued a revenue ruling and
several favorable letter rulings to the effect that a regulated investment
company will be the owner of municipal obligations acquired subject to a
stand-by commitment and that interest on the securities will be tax-exempt to
the company. The IRS has announced, however, that it will no longer issue
advance rulings in this area. There is no assurance that stand-by commitments
will be available to the INVESCO Tax-Free Money Fund, nor can it be assumed that
such commitments will continue to be available under all market conditions.
When-Issued Purchases. As discussed in INVESCO Tax-Free Money Fund's
Prospectus, municipal obligations may at times be acquired on a when-issued
basis. Securities purchased on a when-issued basis and the securities held in
the Fund's portfolio are subject to changes in value based on the public's
perception of the creditworthiness of the issuers and changes in the level of
interest rates (generally resulting in depreciation when interest rates rise.)
The Fund will maintain a separate account with its custodian bank consisting of
a combination of cash and any high-grade debt securities currently held by the
Fund equal in value to the amount of such commitments. The Fund will only make
commitments to purchase securities with the intention of actually acquiring the
securities; however, the Fund may sell these commitments before the settlement
date if to do so is deemed advisable as a matter of investment strategy.
If the market value of securities in the separate account declines, the
Fund will place additional cash or securities in the account, on a daily basis
if necessary, so that the market value of the account will continue to equal the
amount of the Fund's commitments. To the extent the Fund remains substantially
invested in debt securities at the same time that it has committed to purchase
securities on a when-issued basis, which it would normally expect to do, there
is a greater potential for fluctuation in the Fund's net asset value than if it
set aside cash to pay for when-issued securities. In addition, there will be a
greater potential for the realization of capital gains, which are not exempt
from federal income taxation, and of capital losses. When the payment of
when-issued securities must be met, the Fund will provide payment from available
cash flow, sale of portfolio securities (possibly at a gain or loss) or,
although it would not normally expect to do so, from sale of the when-issued
securities themselves (which may at the time of sale have a value greater or
less than the Fund's payment obligation). The INVESCO Tax-Free Money Fund
intends to enter into commitments to purchase securities on a when-issued basis
only to the extent necessary to assure compliance with its investment objective
and policies regarding permitted investments. Such commitments will not
ordinarily involve a substantial portion of the Fund's assets.
<PAGE>
Investment Restrictions. As described in the section of each Fund's
Prospectus entitled "Investment Objective and Policies," the Funds operate under
certain investment restrictions. These policies are fundamental and may not be
changed with respect to a particular Fund without the prior approval of the
holders of a majority, as defined in the Investment Company Act of 1940 (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 the Fund.
INVESCO Cash Reserves Fund
Under these restrictions, INVESCO Cash Reserves Fund may not:
(1) issue preference shares or create any funded debt;
(2) sell short or buy on margin;
(3) mortgage, pledge or hypothecate its portfolio securities or borrow
money, except from banks for temporary or emergency purposes (but
not for investment) and then in an amount not exceeding 10% of the
value of the Fund's total 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, other than 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 debt obligations of any one issuer. For this purpose,
all indebtedness of an issuer shall be deemed a single class of
security;
(6) lend money or securities to any person (except through the purchase
of debt securities or entering into repurchase agreements in
accordance with the Fund's investment policies);
(7) buy or sell commodities, commodity contracts or real estate
(however, the Fund may purchase securities of companies investing in
real estate);
<PAGE>
(8) invest in any company for the purpose of exercising
control or management;
(9) buy other than readily marketable securities;
(10) engage in the underwriting of any securities;
(11) purchase securities of any company in which any officer or director
of the Fund or of its investment adviser beneficially owns more than
1/2 of 1% of the outstanding securities, and in which all of the
officers and directors of the Fund and its investment adviser, as a
group, beneficially own more than 5% of such securities;
(12) purchase common or preferred stocks or securities
convertible into stocks;
(13) purchase the securities of any issuer having a record, together with
predecessors, of less than three years continuous operation;
(14) buy or sell oil, gas or other mineral interests or
exploration programs;
(15) invest more than 25% of the value of the Fund's assets in
one particular industry (obligations of the U.S.
Government and of domestic banks are excepted); and
(16) participate on a joint or joint and several basis in any securities
trading account, or purchase warrants, or write, purchase or sell
puts, calls, straddles or any other option contract or combination
thereof.
With respect to investment restriction (9) above, the board of directors
has delegated to the Funds' investment adviser the authority to determine that a
liquid market exists for Section 4(2) Paper, and that such securities are not
subject to restriction (9) above. Under guidelines established by the board of
directors, the adviser will consider the following factors, among others, in
making this determination: (1) the unregistered nature of Section 4(2) Paper,
(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).
In applying restriction (15), above, the INVESCO Cash Reserves Fund uses an
industry classification system based on the O'Neil Database published by William
O'Neil & Co., Inc. In addition, the INVESCO Cash Reserves Fund considers captive
finance companies to be within separate industry categories based on the
operating industries to which they are related.
<PAGE>
INVESCO Tax-Free Money Fund
Under these restrictions, the INVESCO Tax-Free Money Fund may not:
(1) invest in equity securities or securities convertible
into equity securities;
(2) sell short or buy on margin, or write or purchase put or call
options, provided, however, that the Fund may enter into stand-by
commitments as described under "Investment Objective and Policies";
(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 to exceed 10% of the
value of the Fund's total net assets; the Fund will not purchase
additional securities while any such borrowings exist;
(4) lend money or securities to any person (except through the purchase
of debt securities or entering into repurchase agreements in
accordance with the Fund's investment policies);
(5) engage in the underwriting of any securities of other issuers except
to the extent that the purchase of municipal obligations or other
permitted investments directly from the issuer thereof and the
subsequent disposition of such investments may be deemed to be an
underwriting;
(6) issue senior securities as defined in the Investment Company Act
(except insofar as the Fund may be deemed to have issued a senior
security by reason of entering into a repurchase agreement or
borrowing money in accordance with the restrictions described above
or purchasing any securities on a when-issued basis);
(7) 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;
(8) purchase securities (except obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities) 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
<PAGE>
to own more than 10% of the outstanding debt obligations of any one issuer. For
the purposes of this limitation and that set forth in item (11) below, the Fund
will regard each state and each political subdivision, agency or instrumentality
of such state and such multi-state agency of which such state is a member as a
separate issuer; in addition, all indebtedness of an issuer shall be deemed a
single class of security, provided, however, that if the creating government or
some other entity guarantees a security, such a guarantee would be considered a
separate security and would be treated as an issue of such government or other
entity;
(9) buy or sell commodities or commodity contracts, oil, gas, or other
mineral interests or exploration programs or real estate or
interests therein. However, the Fund may purchase municipal
obligations or other permitted securities secured by real estate or
which may represent indirect interests therein;
(10) invest in any issuer for the purpose of exercising
control or management;
(11) purchase or retain securities of any issuer in which any
officer or director of the Fund or of its investment
adviser beneficially owns more than 1/2 of 1% of the
outstanding securities, and in which all of the officers
or directors of the Fund and its investment adviser, as
a group, beneficially own more than 5% of such
securities;
(12) purchase the securities of any issuer having a record, together with
predecessors, of less than three years continuous operation;
(13) 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" if the payment of principal and interest is
the ultimate responsibility of companies within the same
industry; and
(14) purchase securities of any issuer if as a result more
than 10% of the value of the Fund's total assets would be
invested in securities that are subject to legal or
contractual restrictions on resale ("restricted
securities") and in securities for which there are no
readily available market quotations; or enter into
repurchase agreements maturing in more than seven days,
if as a result such repurchase agreements together with
restricted securities and securities for which there are
no readily available market quotations would constitute more
than 10% of the Fund's assets.
<PAGE>
Rule 5b-2 under the 1940 Act provides that a guarantee of a security shall
not be deemed to be a security issued by the guarantor, provided that the value
of all securities issued or guaranteed by the guarantor, and owned by a Fund,
does not exceed 10% of the value of the total assets of the Fund. Pursuant to
this rule, INVESCO Tax-Free Money Fund interprets restriction (8), above, as
permitting the Fund to own securities guaranteed by a single entity in an amount
up to 10% of the value of the Fund's total assets.
In applying restriction (13) above, the INVESCO Tax-Free Money Fund uses
an industry classification system based on the O'Neil Database published by
William O'Neil & Co., Inc.
In applying restriction (14) above, INVESCO Tax-Free Money Fund also
includes illiquid securities (those which cannot be sold in the ordinary course
of business within seven days at approximately the valuation given to them by
the Fund) among the securities subject to the 10% of total asets limit.
INVESCO U.S. Government Money Fund
Under these restrictions, the INVESCO U.S. Government Money
Fund may not:
(1) other than investments by the Fund in obligations issued
or guaranteed by the U.S. Government, its agencies or
instrumentalities, invest in the securities of issuers
conducting their principal business activities in the
same industry (investments in obligations issued by a
foreign government, including the agencies or
instrumentalities of a foreign government, are considered
to be investments in a single industry), if immediately
after such investment the value of the Fund's investments
in such industry would exceed 25% of the value of the
Fund's total assets;
(2) invest in the securities of any one issuer, other than the United
States Government, if immediately after such investment more than 5%
of the value of the Fund's total assets, taken at market value,
would be invested in such issuer or more than 10% of such issuer's
outstanding voting securities would be owned by the Fund;
(3) underwrite securities of other issuers, except insofar as it may
technically be deemed an "underwriter" under the Securities Act of
1933, as amended, in connection with the disposition of the Fund's
portfolio securities;
<PAGE>
(4) invest in companies for the purpose of exercising control
or management;
(5) issue any class of senior securities or borrow money, except
borrowings from banks for temporary or emergency purposes not in
excess of 5% of the value of the Fund's total assets at the time the
borrowing is made;
(6) mortgage, pledge, hypothecate or in any manner transfer as security
for indebtedness any securities owned or held except to an extent
not greater than 5% of the value of the Fund's total assets;
(7) make short sales of securities or maintain a short
position;
(8) purchase securities on margin, except that the Fund may obtain such
short-term credit as may be necessary for the clearance of purchases
and sales of portfolio securities;
(9) purchase or sell real estate or interests in real estate. The Fund
may invest in securities secured by real estate or interests therein
or issued by companies, including real estate investment trusts,
which invest in real estate or interests therein;
(10) purchase or sell commodities or commodity contracts;
(11) make loans to other persons, except that the Fund may purchase debt
obligations consistent with its investment objective and policies;
(12) purchase securities of other investment companies except
in connection with a merger, consolidation, acquisition
or reorganization; and
(13) invest in securities for which there are legal or
contractual restrictions on resale.
In applying restriction (1) above, the INVESCO U.S. Government Money Fund
uses an industry classification system based on the O'Neil Database published by
William O'Neil & Co., Inc.
The Company has given an undertaking to the State of Missouri that it will
limit any Fund investments in securities which are secured by real estate or
real estate interests only to those securities which are readily marketable.
In addition, the Company has given an undertaking to the State of Texas
that none of the Funds will invest in real estate limited partnership interests.
<PAGE>
THE FUNDS AND THEIR MANAGEMENT
The Company. The Company was incorporated on April 2, 1993, under the laws
of Maryland. On July 1, 1993, the Company, through the INVESCO Cash Reserves
Fund, INVESCO Tax-Free Money Fund and INVESCO U.S. Government Money Fund,
respectively, assumed all of the assets and liabilities of Financial Daily
Income Shares, Inc. (incorporated in Colorado on October 14, 1975), Financial
Tax-Free Money Fund, Inc. (incorporated in Colorado on March 4, 1983) and the
Financial U.S. Government Money Fund, a series of Financial Series Trust
(organized as a Massachusetts business trust on July 15, 1987) (collectively the
"Predecessor Funds"). All financial and other information about the Funds for
periods prior to July 1, 1993, relates to such Predecessor Funds.
The Investment Adviser. INVESCO Funds Group, Inc., ("INVESCO") is employed
as the Company's investment adviser. INVESCO was established in 1932 and also
serves as an investment adviser to INVESCO Diversified Funds, Inc., INVESCO
Dynamics Fund, Inc., INVESCO Emerging Opportunity Funds, Inc., INVESCO Growth
Fund, Inc., INVESCO Income Funds, Inc., INVESCO Industrial Income Fund, Inc.,
INVESCO International Funds, Inc., INVESCO 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 Sub-Adviser. INVESCO, 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 INVESCO.
INVESCO is an indirect wholly-owned subsidiary of INVESCO PLC, a
publicly-traded holding company organized in 1935. Through subsidiaries located
in London, Denver, Atlanta, Boston, Louisville, Dallas, Tokyo, Hong Kong, and
the Channel Islands, INVESCO PLC provides investment services around the world.
INVESCO was acquired by INVESCO PLC in 1982 and, as of May 31, 1995
managed 14 mutual funds, consisting of 38 separate portfolios, on behalf of over
796,000 shareholders. INVESCO PLC's other North American subsidiaries include
the following:
--INVESCO Capital Management, Inc. of Atlanta, Georgia manages
institutional investment portfolios, consisting primarily of
discretionary employee benefit plans for corporations and state and
local governments, and endowment funds. INVESCO Capital
Management, Inc. is the sole shareholder of INVESCO Services, Inc.,
<PAGE>
a registered broker/dealer whose primary business is the distribution of shares
of two registered investment companies.
--INVESCO Management & Research, Inc. (formerly Gardner and Preston Moss,
Inc.) of Boston, Massachusetts primarily manages pension and endowment accounts.
--PRIMCO Capital Management, Inc. of Louisville, Kentucky specializes in
managing stable return investments, principally on behalf of Section 401(k)
retirement plans.
--INVESCO Realty Advisors, Inc. of Dallas, Texas is responsible for
providing advisory services in the U.S. real estate markets for INVESCO PLC's
clients worldwide. Clients include corporate plans, public pension funds, and
endowment and foundation accounts.
The corporate headquarters of INVESCO PLC are located at 11 Devonshire
Square, London, EC2M 4YR, England.
As indicated in the Prospectuses, INVESCO 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 INVESCO, INVESCO Trust and their North
American affiliates. The policy requires officers, inside directors, investment
and other personnel of INVESCO, 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 Fund.
In addition to the pre-clearance requirement described above, the policy
subjects officers, inside directors, investment and other personnel of INVESCO,
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 adminstered by
and subject to exceptions authorized by INVESCO or INVESCO Trust.
Investment Advisory Agreement. INVESCO serves as investment adviser
pursuant to an investment advisory agreement (the "Agreement") with the Company
which was approved on April 21, 1993, by a vote cast in person by a majority of
the directors of the Company, including a majority of the directors who are not
"interested persons" of the Company or INVESCO at a meeting called for such
purpose. Pursuant to authorizations granted by the public shareholders of the
Predecessor Funds at meetings held on May 24, 1993, the Predecessor Funds,
<PAGE>
as the initial shareholders of the Company, approved the Agreement on June
24, 1993, for an initial term expiring April 30, 1995. This Agreement has been
continued by action of the board of directors until April 30, 1996. Thereafter,
the Agreement may be continued from year to year as long as each such
continuance is specifically approved at least annually by the board of directors
of the Company, or by a vote of the holders of a majority, as defined in the
1940 Act, of the outstanding shares of each of the Funds. 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 upon sixty (60) days' written notice and terminates automatically
in the event of an assignment to the extent required by the 1940 Act and the
rules thereunder.
The Agreement provides that INVESCO shall manage the investment portfolios
of the 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
INVESCO). Further, INVESCO shall perform all administrative, internal accounting
(including computation of net asset value), clerical, statistical, secretarial
and all other services necessary or incidental to the administration of the
affairs of the Funds excluding, however, those services that are the subject of
separate agreement between the Company and INVESCO or any affiliate thereof,
including the distribution and sale of Fund shares and provision of transfer
agency, dividend disbursing agency, and registrar services, and services
furnished under an Administrative Services Agreement with INVESCO discussed
below. Services provided under the Agreement include, but are not limited to:
supplying the Company with officers, clerical staff and other employees, if any,
who are necessary in connection with the Funds' operations; furnishing office
space, facilities, equipment, and supplies; providing personnel and facilities
required to respond to inquiries related to shareholder accounts; conducting
periodic compliance reviews of the Funds' operations; preparation and review of
required documents, reports and filings by INVESCO's in-house legal and
accounting staff (including the prospectuses, statement of additional
information, proxy statements, shareholder reports, tax returns, reports to the
SEC, and other corporate documents of the Funds), except insofar as the
assistance of independent accountants or attorneys is necessary or desirable;
supplying basic telephone service and other utilities; and preparing and
maintaining certain of the books and records required to be prepared and
maintained by the Funds under the 1940 Act. Expenses not assumed by INVESCO are
borne by the Funds.
As full compensation for its advisory services provided to the Company,
INVESCO receives a monthly fee. The fee is based upon a percentage of each
Fund's average net assets, determined daily as follows: 0.50% on the first $300
million of each Fund's average net assets; 0.40% on the next $200 million of
each Fund's average net assets; and 0.30% on each Fund's average net assets in
excess of $500 million.
<PAGE>
Certain states in which the shares of each of the Funds are qualified for
sale currently impose limitations on the expenses of each of the Funds. As of
the date of this Statement of Additional Information, the most restrictive
state-imposed annual expense limitation requires that INVESCO absorb any amount
necessary to prevent any Fund's aggregate ordinary operating expenses (excluding
interest, taxes, brokerage fees and commissions and extraordinary charges, such
as litigation costs) from exceeding in any fiscal year 2.5% on that Fund's first
$30 million of average net assets, 2.0% on the next $70 million of average net
assets and 1.5% on the remaining average net assets. No payment of the
investment advisory fee will be made to INVESCO which would result in any of the
Funds' expenses exceeding on a cumulative annualized basis this state
limitation. While total operating expenses (as defined above) for INVESCO Cash
Reserves Fund for the fiscal year ended May 31, 1995 and January 31, 1993, did
not exceed the above state limitation, INVESCO voluntarily assumed certain
expenses for that Fund during those periods. Such absorbed expenses amounted to
$714,814 and $50,743, respectively. While total operating expenses of the
INVESCO Tax-Free Money Fund for the fiscal years ended May 31, 1995 and 1994,
the one-month period ended May 31, 1993 and the fiscal year ended April 30, 1993
did not exceed the above state limitation, INVESCO voluntarily absorbed all
expenses for that Fund exceeding 0.75% of average net assets. Such absorbed
expenses amounted to $175,773, $176,185, $23,228 and $161,426, respectively, in
those periods. While total operating expenses of the INVESCO U.S. Government
Money Fund for the fiscal years ended May 31, 1995 and 1994, the five-month
period ended May 31, 1993 and the fiscal year ended December 31, 1992 did not
exceed the above state expense limitation, INVESCO voluntarily assumed certain
expenses of that Fund during those periods. Such absorbed expenses amounted to
$234,127, $132,880, $55,163 and $83,768, respectively, in those periods.
Sub-Advisory Agreement. INVESCO Trust serves as sub-adviser to all of the
Funds pursuant to a sub-advisory agreement (the "Sub-Agreement") with INVESCO
which was approved on April 21, 1993, by a vote cast in person by a majority of
the directors of the Company, including a majority of the directors who are not
"interested persons" of the Company, INVESCO, or INVESCO Trust at a meeting
called for such purpose. Pursuant to authorizations granted by the public
shareholders of the Predecessor Funds at meetings held on May 24, 1993, the
Predecessor Funds, as the initial shareholders of the Company, approved the
Sub-Agreement on June 24, 1993, for an initial term expiring April 30, 1995. The
Sub-Agreement has been continued by action of the board of directors until April
30, 1996. Thereafter, the Sub-Agreement may
<PAGE>
be continued from year to year as long as each such continuance is specifically
approved by the board of directors of the Company, or by a vote of the holders
of a majority, as defined in the 1940 Act, of the outstanding shares of each of
the Funds. Each such continuance also must be approved by a majority of the
directors who are not parties to the Sub-Agreement or interested persons (as
defined in the 1940 Act) of any such party, cast in person at a meeting called
for the purpose of voting on such continuance. The Sub-Agreement may be
terminated at any time without penalty by either party or the Company upon sixty
(60) days' written notice, and terminates automatically in the event of an
assignment to the extent required by the 1940 Act and the rules thereunder.
The Sub-Agreement provides that INVESCO Trust, subject to the supervision
of INVESCO, shall manage the investment portfolio of each Fund in conformity
with each Fund's investment policies. These management services include: (a)
managing the investment and reinvestment of all the assets, now or hereafter
acquired, of 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
INVESCO, and executing transactions accordingly; (d) providing the Funds the
benefit of all of the investment analysis and research, the reviews of current
economic conditions and trends, and the consideration of long-range investment
policy now or hereafter generally available to investment advisory customers of
the Sub-Adviser; (e) determining what portion of each Fund should be invested in
the various types of securities authorized for purchase by each Fund; and (f)
making recommendations as to the manner in which voting rights, rights to
consent to Company action and any other rights pertaining to each Fund's
portfolio securities, shall be exercised.
The Sub-Agreement provides that as compensation for its services, INVESCO
Trust shall receive from INVESCO, at the end of each month, a fee at the annual
rate of 0.15% of each Fund's average net assets. The Sub-Advisory fee is paid by
INVESCO, NOT the Funds.
Administrative Services Agreement. INVESCO, either directly or through
affiliated companies, provides certain administrative, sub-accounting, and
recordkeeping services to the Funds pursuant to an Administrative Services
Agreement dated April 30, 1993 (the "Administrative Agreement"). The
Administrative Agreement was
<PAGE>
approved on April 21, 1993, by a vote cast in person by all of the directors of
the Company, including all of the directors who are not "interested persons" of
the Company or INVESCO at a meeting called for such purpose. The Administrative
Agreement was for an initial term expiring April 30, 1994 and has been renewed
through April 30, 1996. The Administrative Agreement may be continued from year
to year as long as each such continuance is specifically approved by the board
of directors of the Company, including a majority of the directors who are not
parties to the Administrative Agreement or interested persons (as defined in the
1940 Act) of any such party, cast in person at a meeting called for the purpose
of voting on such continuance. The Administrative Agreement may be terminated at
any time without penalty by INVESCO on sixty (60) days' written notice, or by
the Company upon thirty (30) days' written notice, and terminates automatically
in the event of an assignment unless the Company's board of directors approves
such assignment.
The Administrative Agreement provides that INVESCO shall provide the
following services to the Funds: (A) such sub-accounting and recordkeeping
services and functions as are reasonably necessary for the operation of the
Funds; and (B) such sub-accounting, recordkeeping, and administrative services
and functions, which may be provided by affiliates of INVESCO, as are reasonably
necessary for the operation of Fund shareholder accounts maintained by certain
retirement plans and employee benefit plans for the benefit of participants in
such plans.
As full compensation for services provided under the Administrative
Agreement, each Fund pays a monthly fee to INVESCO consisting of a base fee of
$10,000 per year, plus an additional incremental fee computed daily and paid
monthly at an annual rate of 0.015% per year of the average net assets of the
Fund.
Transfer Agency Agreement. INVESCO also performs transfer agent, dividend
disbursing agent, and registrar services for the Company pursuant to a Transfer
Agency Agreement which was approved by the board of directors of the Company,
including a majority of the Company's directors who are not parties to the
Transfer Agency Agreement or "interested persons" of any such party, on April
21, 1993, for an initial term expiring April 30, 1994. The Transfer Agency
Agreement has been continued by action of the board of directors until April 30,
1996, and thereafter may be continued from year to year as long as such
continuance is specifically approved at least annually by the board of directors
of the Company, or by a vote of the holders of a majority of the outstanding
shares of each of the Funds. Any such continuance also must be approved by a
majority of the Company's directors who are not parties to the Transfer Agency
Agreement or interested persons (as defined by the 1940 Act) of any such party,
cast in person at a meeting called for the purpose of voting on such
continuance. The Transfer Agency Agreement may be terminated at any time without
penalty by either party upon sixty (60) days' written notice and terminates
automatically in the event of assignment.
<PAGE>
The Transfer Agency Agreement provides that the Company shall pay to
INVESCO an annual fee of $21.00 per shareholder account or omnibus account
participant. 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.
Set forth below are tables showing the advisory fees, administrative
services fees and transfer agency fees paid by each of the Funds for the periods
indicated:
<TABLE>
<CAPTION>
INVESCO Cash Reserves Fund
<S> <C> <C> <C> <C>
Fiscal Year Ended Fiscal Year Ended Four-Month Period Fiscal Year Ended
May 31, 1995(1) May 31, 1994 Ended May 31, 1993 January 31, 1993(1)
Advisory Fee $2,931,431 $2,459,276 $762,728 $2,679,994
Administrative
Services Fee 116,614 93,317 28,357 103,991
Transfer Agency Fee 2,333,326 1,354,873 457,044 1,521,829
- --------------
(1) Does not reflect certain expenses incurred during the fiscal year ended
May 31, 1995 and the one-month period ended January 31, 1993 voluntarily
absorbed by INVESCO of $714,814 and $50,743, respectively.
INVESCO Tax-Free Money Fund
Fiscal Year Ended Fiscal Year Ended One-Month Period Fiscal Year Ended
May 31, 1995 May 31, 1994 Ended May 31, 1993 April 30, 1993
Advisory Fee(1) $359,656 $345,263 $26,660 $301,663
Administrative
Services Fee 20,789 20,358 1,633 19,031
Transfer Agency Fee 203,616 138,019 11,583 133,517
- --------------
(1) The advisory fees for the fiscal years ended May 31, 1995 and 1994, the
one-month period ended May 31, 1993, and the fiscal year ended April 30,
1993 do not reflect voluntarily absorbed expenses by INVESCO and INVESCO
Trust of $175,773, $176,185, $23,228, and $161,426, respectively.
INVESCO U.S. Government Money Fund
Fiscal Year Ended Fiscal Year Ended Period Ended Fiscal Year Ended
May 31, 1995 May 31, 1994 May 31, 1993 December 31, 1992
Advisory Fee(1) $338,959 $265,577 $65,325 $125,360
Administrative
Services Fee 20,169 17,967 6,127 13,761
Transfer Agency Fee 273,251 128,213 34,511 58,162
(1) The advisory fees for the fiscal years ended May 31, 1995 and 1994, the
five month- period ended May 31, 1993, and the fiscal year ended December
31, 1992 do not reflect voluntarily absorbed expenses by INVESCO of
$234,127, $132,880, $55,163, and $83,768, respectively.
</TABLE>
<PAGE>
Officers and Directors of the Fund. 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, INVESCO, 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 INVESCO.
All of the officers and directors of the Company hold comparable positions
with INVESCO Diversified Funds, Inc., INVESCO Dynamics Fund, Inc., INVESCO
Emerging Opportunity Funds, Inc., INVESCO Growth Fund, Inc., INVESCO Income
Funds, Inc., INVESCO Industrial Income Fund, Inc., INVESCO International Funds,
Inc., INVESCO Multiple Asset Funds, Inc., INVESCO Specialty Funds, Inc., INVESCO
Strategic Portfolios, Inc., INVESCO Tax-Free Income Funds, Inc., and INVESCO
Variable Investment Funds, Inc. In addition, all of the directors of the Company
are also trustees of INVESCO Value Trust. In addition, all of the directors of
the Fund, with the exception of Messrs. Hesser and Sim, also are trustees of
INVESCO Treasurer's Series Trust and directors of The EBI Funds, Inc. All of the
officers of the Company also hold comparable positions with INVESCO Value Trust.
Set forth below is information with respect to each of the Company's officers
and directors. Unless otherwise indicated, the address of the directors and
officers is Post Office Box 173706, Denver, Colorado 80217-3706. Their
affiliations represent their principal occupations during the past five years.
CHARLES W. BRADY,*+ Chairman of the Board. Chief Executive
Officer and Director of INVESCO PLC, London, England, and of
various subsidiaries thereof; Chairman of the Board of The EBI
Funds, Inc., INVESCO Treasurer's Series Trust, and The Global Heath
Sciences Fund. Address: 1315 Peachtree Street, NE, Atlanta,
Georgia. Born: May 11, 1935.
FRED A. DEERING,+# Vice Chairman of the Board. Vice Chairman
of The EBI Funds, Inc. and INVESCO Treasurer's Series Trust.
Trustee of The Global Health Sciences Fund. Formerly, Chairman of
the Executive Committee and Chairman of the Board of Security Life
of Denver Insurance Company, Denver, Colorado; Director of NN
Financial, Toronto, Ontario, Canada; Director and Chairman of the
Executive Committee of ING America Life, Life Insurance Co. of
Georgia and Southland Life Insurance Company. Address: Security
Life Center, 1290 Broadway, Denver, Colorado. Born: January 12,
1928.
DAN J. HESSER,+* President and Director. Chairman of the Board, President
and Chief Executive Officer of INVESCO Funds Group, Inc.; Director of INVESCO
Trust Company. Trustee of The Global Health Sciences Fund. Born: December 27,
1939.
<PAGE>
VICTOR L. ANDREWS,** Director. Mills Bee Lane Professor of Banking and
Finance and Chairman of the Department of Finance at Georgia State University,
Atlanta, Georgia, since 1968; 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: Department of Finance, Georgia State
University, University Plaza, 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.
FRANK M. BISHOP,* Director. President and Chief Operating Officer of
INVESCO Inc. since February, 1993; Director of INVESCO Funds Group, Inc. since
March 1993; Director (since February 1993), Vice President (since December
1991), and Portfolio Manager (since February 1987), of INVESCO Capital
Management, Inc. (and predecessor firms) Atlanta, Georgia. Address: 1315
Peachtree Street, N.E., Atlanta, Georgia. Born: July 25, 1930.
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, Dallas, Texas. Born: July 25, 1930.
DANIEL D. CHABRIS,+# Director. Financial Consultant; Assistant Treasurer of
Colt Industries Inc., New York, New York, from 1966 to 1988. Address: 15
Sterling Road, Armonk, New York. Born: August 1, 1923.
A. D. FRAZIER, JR., ** Director. Chief Operating Officer of the Atlanta
Committee for the Olympic Games. From 1982 to 1991, Mr. Frazier was employed in
various capacities by First Chicago Bank, most recently as Executive Vice
President of the North American Banking Group. Trustee of The Global Health
Sciences Fund. Address: 250 Williams Street, Suite 6000, Atlanta, Georgia 30301.
Born: June 29, 1944.
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.
<PAGE>
JOHN W. MCINTYRE,# Director. Retired. Formerly, Vice Chairman of the Board
of Directors of the Citizens and Southern Corporation and Chairman of the Board
and Chief Executive Officer of the Citizens and Southern Georgia Corporation and
Citizens and Southern National Bank. Director of Golden Poultry Co., Inc.
Trustee of The Global Health Sciences Fund and Gables Residential Trust.
Address: Seven Piedmont Center, Suite 100, Atlanta, Georgia 30305. Born:
September 14, 1930.
R. DALTON SIM*, Director. Chairman of the Board (since March 1993) and
President (since January 1991) of INVESCO Trust Company; Director since June
1987 and, formerly, Executive Vice President and Chief Investment Officer (June
1987 to January 1991) of INVESCO Funds Group, Inc.; President (since 1994) and
Trustee (since 1991) of The Global Health Sciences Fund. Born: July 18, 1939.
GLEN A. PAYNE, Secretary. Senior Vice President, General Counsel and
Secretary of INVESCO Funds Group, Inc. and INVESCO Trust Company; formerly,
employee of a U.S. regulatory agency, Washington, D.C., (June 1973 through May
1989). Born: September 25, 1947.
RONALD L. GROOMS, Treasurer. Senior Vice President and Treasurer of INVESCO
Funds Group, Inc. and INVESCO Trust Company. Born: October 1, 1946.
WILLIAM J. GALVIN, JR., Assistant Secretary. Senior Vice President of
INVESCO Funds Group, Inc. and Trust Officer of INVESCO Trust Company; Vice
President of 440 Financial Group from June 1990 to August 1992; Assistant Vice
President of Putnam Companies from November 1986 to June 1990. Born: August 21,
1956.
ALAN I. WATSON, Assistant Secretary. Vice President of INVESCO Funds Group,
Inc. and Trust Officer of INVESCO Trust Company. Born: September 14, 1941.
JUDY P. WIESE, Assistant Treasurer. Vice President of INVESCO Funds Group,
Inc. and Trust Officer of INVESCO Trust Company. Born: February 3, 1948.
#Member of the audit committee of the Company.
+Member of the executive committee of the Company. On occasion, the
executive committee acts upon the current and ordinary business of the Company
between meetings of the board of directors. Except for certain powers which,
under applicable law, may only be exercised by the full board of directors, the
executive committee may exercise all powers and authority of the board of
directors in the management of the business of the Company. All decisions are
subsequently submitted for ratification by the board of directors.
*These directors are "interested persons" of the Company as defined in the
Investment Company Act of 1940.
**Member of the management liaison committee of the Company.
<PAGE>
As of September 13, 1995, officers and directors of the Company, as a
group, beneficially owned less than 1% of the Company's outstanding shares, less
than 1% of the INVESCO Cash Reserve Fund's and INVESCO U.S. Government Money
Fund's outstanding shares and 733,592.37 shares, or 1.28%, of the INVESCO
Tax-Free Money Fund's outstanding shares.
Director Compensation
The following table sets forth, for the fiscal year ended May 31, 1995:
the compensation paid by the Fund to its eight independent directors for
services rendered in their capacities as directors of the Fund; the benefits
accrued as Fund 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
Fund. In addition, the table sets forth the total compensation paid by all of
the mutual funds distributed by INVESCO Funds Group, Inc. (including the Funds),
The EBI Funds, Inc., INVESCO Treasurer's Series Trust and The Global Health
Sciences Fund (collectively, the "INVESCO Complex") to these directors for
services rendered in their capacities as directors or trustees during the year
ended December 31, 1994. As of December 31, 1994, there were 45 funds in the
INVESCO Complex.
Total
Compensa-
Benefits Estimated tion From
Aggregate Accrued As Annual INVESCO
Compensa- Part of Benefits Complex
tion From Company Upon Paid To
Company1 Expenses2 Retirement3 Directors1
Fred A.Deering, $6,540 $2,655 $ 1,475 $89,350
Vice Chairman of
the Board
Victor L. Andrews 5,548 2,509 1,708 68,000
Bob R. Baker 6,195 2,240 2,288 75,350
<PAGE>
Lawrence H. Budner 5,548 2,509 1,708 68,000
Daniel D. Chabris 6,006 2,863 1,214 73,350
A. D. Frazier, Jr.4 1,238 0 0 32,500
Kenneth T. King 5,901 2,757 1,338 71,000
John W. McIntyre4 1,238 0 0 33,000
Total $38,214 $15,533 $9,731 $510,550
% of Net Assets 0.0050%5 0.0020%5 0.0052%6
1The 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.
2Represents benefits accrued with respect to the Defined Benefit Deferred
Compensation Plan discussed below, and not compensation deferred at the election
of the directors.
3These figures represent the Company's share of the estimated annual
benefits payable by the INVESCO Complex (excluding the Global Health Sciences
Fund which does not participate in any retirement plan) upon the directors'
retirement, calculated using the current method of allocating director
compensation among the funds in the INVESCO Complex. These estimated benefits
assume retirement at age 72 and that the basic retainer payable to the directors
will be adjusted periodically for inflation, for increases in the number of
funds in the INVESCO Complex, and for other reasons during the period in which
retirement benefits are accrued on behalf of the respective directors. This
results in lower estimated benefits for directors who are closer to retirement
and higher estimated benefits for directors who are further from retirement.
With the exception of Messrs. Frazier and McIntyre, each of these directors has
served as a director/trustee of one or more of the funds in the INVESCO Complex
for the minimum five-year period required to be eligible to participate in the
Defined Benefit Deferred Compensation Plan.
4Messrs. Frazier and McIntyre began serving as directors of the Fund on
April 19, 1995.
5Totals as a percentage of the Company's net assets as of May 31, 1995.
6Total as a percentage of the net assets of the INVESCO Complex as of
December 31, 1994.
<PAGE>
Messrs. Bishop, Brady, Hesser, and Sim, as "interested persons" of the
Company and other funds in the INVESCO Complex, receive compensation as officers
or employees of INVESCO or its affiliated companies, and do not receive any
director's fees or other compensation from the Company or other funds in the
INVESCO Complex for their services as directors.
The boards of directors/trustees of the mutual funds managed by INVESCO,
The EBI Funds, Inc. and INVESCO Treasurer's Series Trust have adopted a Defined
Benefit Deferred Compensation Plan for the non-interested directors and trustees
of the funds. Under this plan, each director or trustee who is not an interested
person of the funds (as defined in the 1940 Act) and who has served for at least
five years (a "qualified director") is entitled to receive, upon retiring from
the boards at the retirement age of 72 (or the retirement age of 73 to 74, if
the retirement date is extended by the boards for one or two years, but less
than three years) continuation of payment for one year (the "first year
retirement benefit") of the annual basic retainer payable by the funds to the
qualified director at the time of his retirement (the "basic retainer").
Commencing with any such director's second year of retirement, and commencing
with the first year of retirement of a director whose retirement has been
extended by the board for three years, a qualified director shall receive
quarterly payments at an annual rate equal to 25% of the basic retainer. These
payments will continue for the remainder of the qualified director's life or ten
years, whichever is longer (the "reduced retainer payments"). If a qualified
director dies or becomes disabled after age 72 and before age 74 while still a
director of the funds, the first year retirement benefit and the reduced
retainer payments will be made to him or to his beneficiary or estate. If a
qualified director becomes disabled or dies either prior to age 72 or during
his/her 74th year while still a director of the funds, the director will not be
entitled to receive the first year retirement benefit; however, the reduced
retainer payments will be made to his beneficiary or estate. The plan is
administered by a committee of three directors who are also participants in the
plan and one director who is not a plan participant. The cost of the plan will
be allocated among the INVESCO, EBI and Treasurer's Series funds in a manner
determined to be fair and equitable by the committee. The Company is not making
any payments to directors under the plan as of the date of this Statement of
Additional Information. The Company has no stock options or other pension or
retirement plans for management or other personnel and pays no salary or
compensation to any of its officers.
The Company has an audit committee comprised of four of the directors who
are not interested persons of the Company. The committee meets periodically with
the Company's independent accountants and officers to review accounting
principles used by the Company, the adequacy of internal controls, the
responsibilities and fees of the independent accountants, and other matters.
<PAGE>
The Company also has a management liaison committee which meets quarterly
with various management personnel of INVESCO in order (a) to facilitate better
understanding of management and operations of the Company, and (b) to review
legal and operational matters which have been assigned to the committee by the
board of directors, in furtherance of the board of directors' overall duty of
supervision.
HOW SHARES CAN BE PURCHASED
The Funds' 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 and of
federal funds by the Funds' custodian. The net asset value per share for 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, but also may be computed at other
times. See "How Shares Are Valued." INVESCO acts as the Funds' Distributor under
a distribution agreement with the Company under which it receives no
compensation and bears all expenses, including the costs of printing and
distributing prospectuses, incident to direct sales and distribution of each of
the Fund's shares on a no-load basis.
HOW SHARES ARE VALUED
As described in the section of each Fund's Prospectus entitled "How Shares
Can Be Purchased," 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 (usually 4:00 p.m., New York time) and applies to
purchase and redemption orders received prior to that time. Net asset value per
share is also computed on any other day on which there is a sufficient degree of
trading in the portfolio 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 the Fund receives a request to purchase
or redeem shares. Net asset value per share is not calculated on days the New
York Stock Exchange is closed such as federal holidays, including New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
The net asset value per share of each Fund is calculated by dividing the
value of all securities held by that Fund and its other assets, less the Fund's
liabilities (including accrued expenses), by the number of outstanding shares of
that Fund.
The value of securities held by each Fund are determined pursuant to the
amortized cost method of valuation. Amortized cost involves valuing a security
at its cost at the time of purchase and
<PAGE>
thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates upon the market
value of the security. This valuation method may result in periods during which
the value of a security as determined by amortized cost may be higher or lower
than the price a Fund would receive if it sold that security. During such
periods, a Fund's yield may differ somewhat from the yield that would have been
obtained if securities were valued on the basis of their market prices. For
example, if use of amortized cost resulted in a lower (or higher) aggregate
portfolio value on a particular day than would result from the use of a
valuation method using market prices, a prospective investor in the Fund would
be able to obtain a somewhat higher (or lower) yield than would otherwise be the
case, and existing shareholders would receive less (or more) investment income.
Amortized cost valuation is utilized by each Fund to attempt to maintain a
constant net asset value per share of $1.00.
Each Fund uses amortized cost valuation pursuant to a rule issued by the
Securities and Exchange Commission under the 1940 Act. That rule requires each
Fund to adhere to various procedures under which the board of directors: (a) is
obligated, as a particular responsibility within the overall duty of care owed
to shareholders, to establish procedures reasonably designed, taking into
account current market conditions and each Fund's investment objective, to
stabilize the net asset value per share as computed for the purpose of
distribution and redemption at $1.00 per share; (b) must review periodically, as
it deems appropriate and at such intervals as are reasonable in light of current
market conditions, the relationship between the net asset value per share using
amortized cost valuation and net asset value per share based upon the market
prices of portfolio securities; (c) is required to consider what steps, if any,
should be taken in the event of a difference of more than 1/2 of 1% between the
two valuation methods; and (d) must take such steps as it considers appropriate
(such as shortening the Fund's average portfolio maturity, realizing gains or
losses, or reducing the Fund's daily dividends) to minimize any material
dilution or other unfair results which might otherwise arise. If necessary to
avoid such dilution or other unfair results, the board of directors may
determine to value a Fund's securities at market prices instead of using
amortized cost, in which case that Fund's net asset value per share may deviate
from $1.00.
With respect to the INVESCO Tax-Free Money Fund, for purposes of
monitoring the relationship between the net asset value per share using
amortized cost and net asset value per share based upon the market value of its
portfolio securities, the Fund may determine the market values of 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 municipal obligations,
<PAGE>
quotations from dealers in municipal obligations, market transactions in
comparable securities and various relationships between securities in
determining values. The Company's directors have approved the use of these
pricing procedures and will evaluate their appropriateness periodically. Under
these procedures, where reliable market quotations are readily available for an
issue of municipal securities held by the Fund, such securities are valued at
the bid price on the basis of such quotations. Securities which are not
tax-exempt and 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 would be
valued on a consistent basis at fair value as determined in good faith using
methods prescribed by the Company's directors.
The rule also requires each Fund to limit its investments to instruments
which the board of directors determines present minimal credit risks and which
are of high quality. With respect to INVESCO Cash Reserves Fund and INVESCO
Tax-Free Money Fund, high quality securities consist of those rated by at least
two NRSROs, or one NRSRO if such instruments are only rated by one NRSRO, in one
of the two highest short-term rating categories or, in the case of any
instrument that is not rated, are determined, in an analysis similar to that
performed by an NRSRO in rating similar securities and issues, to be of
comparable quality to a security rated in one of the two highest rating
categories by an NRSRO. (For a description of the relevant rating categories
applicable to these Funds, see "Appendix A" to this Statement of Additional
Information.) These Funds also are prohibited from investing more than 5% of
their assets in securities which are not rated in the highest short-term rating
categories of the requisite number of NRSROs or in unrated securities determined
to be of comparable quality to securities rated in the highest rating category
by the NRSROs, and will not invest in the securities of a single issuer rated in
a category other than the highest rating category to an extent greater than 1%
of the Fund's assets or $1 million, whichever is greater. With respect to
INVESCO U.S. Government Money Fund, high quality securities consist of those
determined to be of high quality by any major rating service or, in the case of
any instrument that is not rated, of comparable quality as determined by the
Company's board of directors.
In addition, each of the Funds is required to maintain a dollar-weighted
average portfolio maturity (not exceeding 90 days) appropriate to its objective
of maintaining a stable net asset value of $1.00 per share, and may not purchase
any instrument having a remaining maturity of more than 13 months.
<PAGE>
FUND PERFORMANCE
As discussed in each Fund's Prospectus, the Company advertises the yield,
current yield and total return performance of the Funds.
These yield quotations are based on each 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. The
Funds also may quote an "effective yield," computed by compounding the
unannualized base period return by adding one to that figure, raising the sum to
a power equal to 365 divided by 7, and subtracting one from the result. At May
31, 1995, the INVESCO Cash Reserve Fund's current and effective yields were
5.36% and 5.50%, respectively; the INVESCO Tax-Free Money Fund's current and
effective yields were 3.60% and 3.67%, respectively; and the INVESCO U.S.
Government Money Fund's current and effective yields were 5.29% and 5.43%,
respectively.
Current yield and effective yield will fluctuate from day to day and are
not necessarily representative of future results. A shareholder should remember
that yield is a function of the kind and quality of the instruments in a 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.
With respect to INVESCO Tax-Free Money Fund, any tax equivalent yield
quotation of the Fund shall 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 one minus a stated income tax rate or rates and (b) the
portion of the yield which is not tax-exempt.
Average annual total return performance for each of the Funds for the
indicated periods ended May 31, 1995 was as follows:
1 5 10
Fund Year Years Years
Cash Reserves Fund 4.76 4.31 5.74
Tax-Free Money Fund 2.86 2.97 3.92
U.S. Gov't Money Fund 4.66 (1) ------
(1) The INVESCO U.S. Government Money Fund did not commence operations until
April 26, 1991. The total return of INVESCO U.S. Government Money Fund for the
49-month period from April 26, 1991 (date of inception) through May 31, 1995,
was 3.51%.
<PAGE>
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 $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of initial payment
The average annual total return performance figures shown above were
determined by solving the above formula for "T" for each time period and Fund
indicated.
In conjunction with performance reports, comparative data between any of
the Fund's performance for a given period and other types of investment
vehicles, including certificates of deposit, may be provided to prospective
investors and shareholders.
From time to time, evaluations of performance made by independent sources
may also be used in advertisements, sales literature or shareholder reports,
including reprints of, or selections from, editorials or articles about the
Fund. Sources for Fund performance information and articles about the Fund
include, but are not limited to, the following:
American Association of Individual Investors' Journal
Banxquote
Barron's
Business Week
CDA Investment Technologies
CNBC
CNN
Consumer Digest
Financial Times
Financial World
Forbes
Fortune
Ibbotson Associates, Inc.
Institutional Investor
Investment Company Data, Inc.
Investor's Business Daily
Kiplinger's Personal Finance
Lipper Analytical Services, inc.'s Mutual Fund Performance
Analysis
Money
Morningstar
Mutual Fund Forecaster
No-Load Analyst
<PAGE>
No-Load Fund X
Personal Investor
Smart Money
The New York Times
The No-Load Fund Investor
U.S. News and World Report
United Mutual Fund Selector
USA Today
The Wall Street Journal
Wiesenberger Investment Companies Service
Working Woman
Worth
SERVICES PROVIDED BY THE FUNDS
Periodic Withdrawal Plan. As described in the section of each Fund's
Prospectus entitled "Services Provided by the Fund," each Fund offers a Periodic
Withdrawal Plan. All dividends and distributions on shares owned by shareholders
participating in this Plan are reinvested in additional shares. Since withdrawal
payments represent the proceeds from sales of shares, the amount of
shareholders' investments in that Fund will be reduced to the extent that
withdrawal payments exceed dividends and other distributions paid and
reinvested. Any gain or loss on such redemptions must be reported for tax
purposes. In each case, shares will be redeemed at the close of business on or
about the 20th day of each month preceding payment, and payments will be mailed
within five business days thereafter.
The Periodic Withdrawal Plan involves the use of principal and is not a
guaranteed annuity. Payments under such Plan do not represent income or a return
on investment.
A Periodic Withdrawal Plan may be terminated at any time by directing a
written request to INVESCO. Upon termination, all future dividends and capital
gain distributions will be reinvested in additional shares unless a shareholder
requests otherwise.
Exchange Privilege. As discussed in the section of each Fund's Prospectus
entitled "Services Provided By the Fund," the Funds offer shareholders the
privilege of exchanging shares of the Funds for shares of certain other mutual
funds advised by INVESCO. Exchange requests may be made either 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
have established a new account must meet the fund's applicable minimum initial
investment requirements. Written exchange requests into an existing account have
no minimum requirements other than the fund's applicable
<PAGE>
minimum subsequent investment requirements. Any gain or loss realized on such
an exchange is recognized for federal income tax purposes. This privilege is not
an option or right to purchase securities, but is a revocable privilege
permitted under the present policies of each of the funds and is not available
in any state or other jurisdiction where the shares of the mutual fund into
which transfer is to be made are not qualified for sale, or when the net asset
value of the shares presented for exchange is less than the minimum dollar
purchase required by the appropriate prospectus.
TAX-DEFERRED RETIREMENT PLANS
As described in the section of the Prospectus entitled "Services Provided
By the Fund," shares of the INVESCO Cash Reserves Fund and INVESCO U.S.
Government Money Fund may be purchased as the investment medium for various
tax-deferred retirement plans. Persons who request information regarding these
plans from INVESCO will be provided with prototype documents and other
supporting information regarding the type of plan requested. Each of these plans
involves a long-term commitment of assets and is subject to possible regulatory
penalties for excess contributions, premature distributions or for insufficient
distributions after age 70-1/2. The legal and tax implications may vary
according to the circumstances of the individual investor. Therefore, the
investor is urged to consult with an attorney or tax adviser prior to the
establishment of such a plan.
HOW TO REDEEM SHARES
Normally, payments for shares redeemed will be mailed within seven (7)
days following receipt of the required documents as described in the section of
each Fund's Prospectus entitled "How to Redeem Shares." The right of redemption
may be suspended and payment postponed when: (a) the New York Stock Exchange is
closed for other than customary weekends and holidays; (b) trading on that
exchange is restricted; (c) an emergency exists as a result of which disposal by
a particular Fund of securities owned by it is not reasonably practicable or it
is not reasonably practicable for a particular Fund fairly to determine the
value of its net assets; or (d) the SEC by order so permits.
It is possible that in the future conditions may exist which would, in the
opinion of the Company's investment adviser, make it undesirable for a Fund to
pay for redeemed shares in cash. In such cases, the investment adviser may
authorize payment to be made in portfolio securities or other property of the
Fund. However, the Company is obligated under the 1940 Act to redeem for cash
all shares of a Fund presented for redemption by any one shareholder having a
value up to $250,000 (or 1% of the Fund's net assets if that is less) in any
90-day period. Securities delivered in payment of redemptions are selected
entirely by the investment
<PAGE>
adviser based on what is in the best interests of the Fund and its
shareholders, and are valued at the value assigned to them in computing the
Fund's net asset value per share. Shareholders receiving such securities are
likely to incur brokerage costs on their subsequent sales of the securities.
DIVIDENDS AND TAXES
Each Fund intends to continue to conduct its business and satisfy the
applicable diversification of assets and source of income requirements to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. Each of the Funds so qualified in the fiscal
year ended May 31, 1995 and intends to continue to qualify during their current
fiscal year. As a result, it is anticipated that the Funds will pay no federal
income taxes and will be accorded conduit or "pass through" treatment for
federal income tax purposes.
With respect to INVESCO Cash Reserves Fund and INVESCO U.S. Government
Money Fund, all dividends are regarded as taxable to the investor, whether or
not such dividends are reinvested in additional shares. Dividends paid by these
Funds from net investment income are for federal income tax purposes taxable as
ordinary income to shareholders. The Funds' investment objectives and policies,
including their policy of maintaining a constant net asset value of $1.00, make
it unlikely that any future capital gains will be realized.
Dividends from INVESCO Cash Reserves Fund also generally will be subject
to applicable state and local taxes. A portion of any dividend distributions
from INVESCO U.S. Government Money Fund may be subject to applicable state and
local taxes.
As discussed in INVESCO Tax-Free Money Fund's Prospectus, that Fund
intends to qualify to pay "exempt-interest dividends" to its shareholders. The
Fund will so qualify if at least 50% of its total assets are invested in
municipal securities at the close of each quarter of that Fund's fiscal year.
The exempt interest portion of the income dividend which is payable monthly may
be based on the ratio of that Fund's tax-exempt income to taxable income for the
entire fiscal year. In such a case, the ratio would be determined and reported
to shareholders after the close of each fiscal year of the Fund. Thus, the
tax-exempt portion of any particular dividend may be based upon the tax-exempt
portion of all distributions for the year, rather than upon the tax-exempt
portion of that particular dividend. Exemption of exempt-interest dividends for
federal income tax purposes does not necessarily result in exemption under the
income or other tax laws of any state or local taxing authority. Although these
dividends generally will be subject to such state and local taxes, the laws of
the several states and local taxing authorities vary with respect to the
taxation of such exempt-interest dividends, other dividends and
<PAGE>
distributions of capital gains. In addition, interest on indebtedness incurred
or continued by a shareholder to purchase or carry shares of this Fund is not
deductible for federal income tax purposes. Shareholders of the INVESCO Tax-Free
Money Fund are advised to consult their own tax advisers with respect to these
matters.
As discussed in INVESCO Tax-Free Money Fund's Prospectus, certain
corporations which are subject to the alternative minimum tax may have to
include exempt-interest dividends in calculating their alternative taxable
income in situations where the "adjusted current earnings" of the corporation
exceeds its alternative minimum taxable income. In addition, to the extent that
the Fund invests in certain "private activity bonds" issued after August 7,
1986, a portion of exempt-interest dividends attributable to such bonds would be
an item of tax preference to shareholders.
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. As a general practice, each Fund intends to hold
securities purchased until maturity. Where management deems it advisable in
light of prevailing market or business conditions, however, the Funds may
dispose of securities prior to maturity and reinvest on the basis of yield
disparities. There is no assurance that the judgment upon which such a technique
is premised will be accurate or that such technique when employed will be
effective. Due to the short maturities of securities purchased and the intention
to invest and reinvest on the basis of yield disparities, each Fund is expected
to have a high portfolio turnover. This should not affect income or net asset
value, since brokerage commissions are not normally charged on the purchase and
sale of securities of the kind in which the Funds may invest. Such transactions
may, however, involve transaction costs in the form of spreads between bid and
asked prices.
Placement of Portfolio Brokerage. Either INVESCO, as the Company's
investment adviser, or INVESCO Trust, as the Company's sub-adviser, places
orders for the purchase and sale of securities with brokers and dealers based
upon INVESCO's or INVESCO Trust's evaluation of their financial responsibility,
subject to their ability to effect transactions at the best available prices.
INVESCO or INVESCO Trust evaluates the overall reasonableness of any brokerage
commissions paid by reviewing the quality of executions obtained on 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
<PAGE>
conditions. In seeking to ensure that any commissions charged the Fund are
consistent with prevailing and reasonable commissions or discounts, INVESCO or
INVESCO Trust also endeavors to monitor brokerage industry practices with regard
to the commissions or discounts charged by brokers and dealers on transactions
effected for other comparable institutional investors. While INVESCO or INVESCO
Trust seeks reasonably competitive rates, the Funds do not necessarily pay the
lowest commission, spread, or discount available.
Consistent with the standard of seeking to obtain the best execution on
portfolio transactions, INVESCO or INVESCO Trust may select brokers that provide
research services to effect such transactions. Research services consist of
statistical and analytical reports relating to issuers, industries, securities
and economic factors and trends, which may be of assistance or value to INVESCO
or INVESCO Trust in making informed investment decisions. Research services
prepared and furnished by brokers through which the Funds effect securities
transactions may be used by INVESCO or INVESCO Trust in servicing all of their
respective accounts and not all such services may be used by INVESCO or INVESCO
Trust in connection with the Funds.
In recognition of the value of the above-described brokerage and research
services provided by certain brokers, INVESCO or INVESCO Trust, consistent with
the standard of seeking to obtain the best execution on portfolio transactions,
may place orders with such brokers for the execution of transactions for the
Funds on which the commissions or discounts are in excess of those which other
brokers might have charged for effecting the same transactions.
Portfolio transactions may be effected through qualified broker/dealers
who recommend the Funds to their clients, or who act as agent in the purchase of
any of the Funds' shares for their clients. When a number of brokers and dealers
can provide comparable best price and execution on a particular transaction, the
Company's adviser may consider the sale of Fund shares by a broker or dealer in
selecting among qualified broker/dealers.
No brokerage commissions on purchases and sales of portfolio securities
were incurred for the fiscal years ended May 31, 1995 and 1994, the four-month
period ended May 31, 1993 or the fiscal year ended January 31, 1993 for INVESCO
Cash Reserves Fund. No brokerage commissions on purchases and sales of portfolio
securities were incurred for the fiscal years ended May 31, 1995 and 1994, the
one-month period ended May 31, 1993 and the fiscal year ended April 30, 1993 for
INVESCO Tax-Free Money Fund. No brokerage commissions on purchases and sales of
portfolio securities were incurred for the fiscal years ended May 31, 1995 and
1994, the five-month period ended May 31, 1993, and the fiscal year ended
December 31, 1992, for INVESCO U.S. Government Money Fund.
<PAGE>
At May 31, 1995, the Funds held securities of their regular brokers or
dealers, or their parents, as follows:
Value of Securities
Broker or Dealer at 5/31/95
INVESCO Cash Reserves Fund
American Express Credit Corporation $23,000,000
Ford Motor Credit Company $32,000,000
Merrill Lynch and Company Incorporated $31,652,278
Goldman Sachs Group Loan participation $29,634,317
Tax-Free Money Fund
Associates Corporation of North America $1,000,000
INVESCO U.S. Government Money Fund
State Street Bank And Trust Of North America $20,885,000
Neither INVESCO nor INVESCO Trust receives any brokerage commissions on
portfolio transactions effected on behalf of any of the Funds, and there is no
affiliation between INVESCO, INVESCO Trust, or any person affiliated with
INVESCO, INVESCO Trust, or the Funds, and any broker or dealer that executes
transactions for the Funds.
ADDITIONAL INFORMATION
Common Stock. The Company has 10,000,000,000 authorized shares of common
stock with a par value of $0.01 per share. Of the Company's authorized shares,
5,000,000,000 shares have been allocated to INVESCO Cash Reserves Fund and
1,000,000,000 shares have been allocated to each of INVESCO Tax-Free Money Fund
and INVESCO U.S. Government Money Fund. As of May 31, 1995, 664,340,773 shares
of the Cash Reserves Fund, 58,779,634 shares of the Tax-Free Money Fund and
60,842,988 shares of the U.S. Government Money Fund were outstanding. All shares
issued and outstanding are, and all shares offered hereby, when issued, will be,
fully paid and nonassessable. The board of directors has the authority to
designate additional classes of common stock without seeking the approval of
shareholders and may classify and reclassify any authorized but unissued shares.
Shares of each class represent the interests of the shareholders of such
class in a particular portfolio of investments of the Company. Each class of the
Company's shares is preferred over all other classes in respect of the assets
specifically
<PAGE>
allocated to that class, and all income, earnings, profits and proceeds from
such assets, subject only to the rights of creditors, are allocated to shares of
that class. The assets of each class are segregated on the books of account and
are charged with the liabilities of that class and with a share of the Company's
general liabilities. The board of directors determines those assets and
liabilities deemed to be general assets or liabilities of the Company, and these
items are allocated among classes in a manner deemed by the board to be fair and
equitable. Generally, such allocation will be based upon the relative total net
assets of each class. In the unlikely event that a liability allocable to one
class exceeds the assets belonging to the class, all or a portion of such
liability may have to be borne by the holders of shares of the Company's other
classes.
All shares, regardless of class, have equal voting rights. Voting with
respect to certain matters, such as ratification of independent accountants or
election of directors, will be by all classes of the Company. When not all
classes are affected by a matter to be voted upon, such as approval of an
investment advisory contract or changes in a Fund's investment policies, only
shareholders of the class affected by the matter may 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 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 Investment Company Act of 1940 or the Company's Articles of
Incorporation, or at their discretion.
Principal Shareholders. As of August 31, 1995, the following
entities held more than 5% of the Funds' outstanding securities:
Amount and Nature Percent
Name and Address of Ownership of Class
INVESCO Cash Reserves Fund
None
INVESCO Tax-Free Money Fund
None
<PAGE>
INVESCO U.S. Government Money Fund
Carn & Co. #02085001 15,679,415,240 20.503
IVAC Employee Savings Plan Record and Beneficial
DTD
Attn: Mutual Funds Dept.
P.O. Box 96211
Washington, D.C. 20090
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 each Fund'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 80237, pursuant to the Transfer Agency Agreement
described in "The Funds and Their Management." Such services include the
issuance, cancellation and transfer of shares of each of the Funds and the
maintenance of records regarding the ownership of such shares.
Reports to Shareholders. The Company's fiscal year ends on May 31. The
Fund distributes reports at least semiannually to its shareholders. Financial
statements regarding the Company, audited by the independent accountants, are
sent to shareholders annually.
Legal Counsel. The firm of Kirkpatrick & Lockhart LLP, Washington, D.C., is
legal counsel for the Company. The firm of Moye, Giles, O'Keefe, Vermeire &
Gorrell, Denver, Colorado, acts as special counsel to the Company.
Financial Statements. The Funds' audited financial statements and the
notes thereto for the fiscal year ended May 31, 1995 and the report of Price
Waterhouse LLP with respect to such financial statements are incorporated herein
by reference from the Company's Annual Report to Shareholders for the fiscal
year ended May 31, 1995.
Prospectuses. The Company will furnish, without charge, a copy of the
applicable Prospectus for each of its Funds, upon request. There is a separate
Prospectus available for each Fund. Such requests should be made to the Company
at the mailing address or telephone number set forth on the first page of this
Statement of Additional Information.
Registration Statement. This Statement of Additional Information and the
Prospectuses do not contain all of the information set forth in the Registration
Statement the Company has filed with the Securities and Exchange Commission. The
complete Registration Statement may be obtained from the Securities and Exchange
Commission upon payment of the fee prescribed by the rules and regulations of
the Commission.
<PAGE>
APPENDIX A
BOND AND COMMERCIAL PAPER RATINGS.
INVESCO Cash Reserves Fund and INVESCO Tax-Free Money Fund are required to
limit their investments to instruments which the board of directors determines
present minimal credit risks and which are rated by at least two nationally
recognized securities rating organizations ("NRSROs"), or one NRSRO if such
instruments are only rated by one NRSRO, in one of the two highest rating
categories (or in comparable unrated securities). The highest rating categories
for Standard & Poor's Rating Group ("S&P") and Moody's Investors Service, Inc.
("Moody's") are AAA and Aaa, respectively; the second highest rating categories
provided by S&P and Moody's are AA and Aa, respectively.
Bond Ratings. Bonds which are rated Aaa by Moody's 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.
Bonds which are rated Aa by Moody's are judged to be of high quality by
all standards. Together with the Aaa group, they comprise what is 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
the protective elements may be greater, or there may be other elements present
which make the long-term risks appear somewhat larger than Aaa rated securities.
Bonds rated AAA by S&P are highest grade obligations. They possess the
ultimate degree of protection as to principal and interest. Market-wise, they
move with interest rates and hence provide the maximum safety on all counts.
Bonds rated AA by S&P also qualify as high grade obligations, and in the
majority of instances differ from AAA issues only in small degree. Here, too,
prices move with the long-term money market.
Moody's Ratings of Municipal Notes. MIG-1: the best quality.
MIG-2: high quality, with ample margins of protection, although
not as large as in the preceding group.
Commercial Paper Ratings. S&P's quality ratings of the issuer are graded
into six classifications, ranging from A-1 for the highest quality designation
down to A-2, A-3, B, C and D for the lowest.
<PAGE>
The requirements a company must meet to qualify for an A rating are as
follows: Liquidity ratios are adequate to meet cash requirements. Long-term
senior debt is rated "A" or better, although in some cases "BBB" credits may be
allowed. The issuer has access to at least two additional channels of borrowing.
Basic earnings and cash flow have an upward trend with allowance made for
unusual circumstances. Typically, the issuer's industry is well established and
the issuer has a strong position within the industry. The reliability and
quality of management are unquestioned.
Moody's rates commercial paper pursuant to the following graded rating
classification system in order to suggest a more precise delineation of the
relative risks involved in different issues: Prime-1; Prime-2; Prime-3; and Not
rated. The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Among the factors considered by Moody's in assigning ratings are the
following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations.
