PROSPECTUS
October 1, 1997
INVESCO MONEY MARKET FUNDS, INC.
U.S. Government Money Fund
Cash Reserves Fund
Tax-Free Money Fund
No-load mutual funds seeking a high level of current income
The three INVESCO Money Market Funds (the "Funds") described in this Prospectus
are actively managed to seek as high a level of current income as is consistent
with liquidity and safety of capital. Income earned by INVESCO U.S. Government
Money Fund ^(the "U.S. Government Money Fund") and INVESCO Cash Reserves Fund
(the "Cash Reserves Fund") will normally be taxable while INVESCO Tax- Free
Money Fund (the "Tax-Free Money Fund") seeks income exempt from federal income
taxes. Each of the Funds invests in a variety of short-term money market
securities. SHARES OF EACH FUND ARE SOLD AT NET ASSET VALUE, WHICH IS EXPECTED
TO ALWAYS BE $1.00 PER SHARE. HOWEVER, THERE CAN BE NO ASSURANCE THAT THE FUNDS
WILL BE ABLE TO MAINTAIN A STABLE NET VALUE OF $1.00 PER SHARE. INVESTMENTS IN
THESE FUNDS ARE NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT.
This Prospectus provides you with the basic information you should know before
investing in one of the Funds. You should read it and keep it for future
reference. A Statement of Additional Information containing further information
about the Funds, dated October 1, 1997, has been filed with the Securities and
Exchange Commission and is incorporated by reference into this Prospectus. To
obtain a free copy, write to INVESCO Funds Group, Inc., P.O. Box 173706, Denver,
Colorado 80217-3706; call 1-800-525-8085; or ^ visit our web site at
http://www.invesco.com.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION. THE SHARES
OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
CONTENTS
ESSENTIAL INFORMATION........................................................2
ANNUAL FUND EXPENSES.........................................................3
FINANCIAL HIGHLIGHTS.........................................................5
INVESTMENT OBJECTIVE AND STRATEGY............................................8
INVESTMENT POLICIES AND RISKS................................................8
THE FUNDS AND THEIR MANAGEMENT..............................................12
FUND PRICE AND PERFORMANCE..................................................14
HOW TO BUY SHARES...........................................................14
FUND SERVICES...............................................................16
HOW TO SELL SHARES..........................................................17
TAXES AND DIVIDENDS.........................................................18
ADDITIONAL INFORMATION......................................................19
<PAGE>
ESSENTIAL INFORMATION
Investment Goal And Strategy. INVESCO Money Funds seek as high a level of
current income as is consistent with safety and liquidity of capital through
specific short-term money market securities. Income earned by U. S. Government
Money ^ Fund and Cash Reserves Fund will normally be taxable, while Tax-Free
Money Fund seeks income exempt from federal income tax. There is no guarantee
that the Funds will meet their objectives. See "Investment Objective And
Strategy."
^ Designed For: Investors seeking current income with stability of
principal may wish to consider U.S. Government Money Fund or Cash Reserves Fund.
Investors with the additional need for federal tax-exempt income may wish to
consider Tax-Free Money Fund. While not intended as a complete investment
program, any of these Funds may be a valuable element of your investment
portfolio. You also may wish to consider one of the Funds as part of a Uniform
Gift/Transfer To Minors Account or systematic investing strategy. The ^ INVESCO
Government Money Fund and Cash Reserve Fund may be a suitable investment option
for many types of retirement programs, including IRA, SEP-IRA, SIMPLE IRA,
401(k), Profit Sharing, Money Purchase Pension, and 403(b) plans.
Time Horizon. In selecting holdings, the Funds do not consider potential
capital appreciation. Investors should consider each of these Funds as a
conservative, short-term investment for emergency savings or as a safe harbor
during periods of market uncertainty.
Risks. Shares of the Funds are not insured or guaranteed by the U.S.
government, or any state or federal agency. See "Investment Objective and
Strategy" and "Investment Policies and Risks."
Organization and Management. Each Fund is a series of INVESCO Money Market
Funds, Inc. (the "Company"), a diversified, managed, no-load mutual fund. Each
Fund is owned by its shareholders. They employ INVESCO Funds Group, Inc.
("IFG"), founded in 1932, to serve as investment adviser, administrator^ and
transfer agent. INVESCO Trust Company ("INVESCO Trust"), founded in 1969, serves
as sub-adviser. Together, IFG and INVESCO Trust constitute "Fund Management."
The U.S. Government Money Fund and Cash Reserves Fund are managed by
INVESCO Trust Vice President Richard R. Hinderlie. The Tax-Free Money Fund is
managed by INVESCO Trust Vice President Ingeborg Cosby. See "The Funds And Their
Management."
IFG and INVESCO Trust are subsidiaries of AMVESCAP PLC, an international
investment management company that manages approximately $165 billion in assets.
AMVESCAP PLC is based in London with money managers located in Europe, North
America and the Far East.
<PAGE>
These Funds Offer All of the Following Services at No Charge:
Telephone exchanges
Automatic reinvestment of distributions
Free Checkwriting
Periodic withdrawal plans
Regular investment plans, such as EasiVest (the Fund's automatic monthly
investment program), Direct Payroll Purchase, and Automatic Monthly Exchange
See "How To Buy Shares" and "How To Sell Shares."
Minimum Initial Investment: $1,000 per Fund, which is waived for regular
investment plans, including EasiVest and Direct Payroll Purchase.
Minimum Subsequent Investment: $50 per Fund (Minimums are lower for certain
retirement plans.)
ANNUAL FUND EXPENSES
The Funds are 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 a Fund's total return.
Like any company, each Fund has operating expenses -- such as portfolio
management, accounting, shareholder servicing, maintenance of shareholder
accounts, and other expenses. These expenses are paid from each Fund's assets.
Lower expenses therefore benefit investors by increasing a Fund's total return.
We calculate annual operating expenses as a percentage of each Fund's
average annual net assets. To keep expenses competitive, the Funds' adviser
voluntarily reimburses Tax-Free Money Fund for amounts in excess of 0.75% of
average net assets, and reimburses U.S. Government Money Fund and Cash Reserves
Fund for amounts in excess of 0.85% of average net assets.
Annual Fund Operating Expenses
(as a percentage of average net assets)
U.S. Government Money Fund
Management Fee 0.50%
12b-1 Fees None
Other Expenses(1),(2) 0.36%
Total Fund Operating Expenses(1),(2) 0.86%
<PAGE>
Cash Reserves Fund
Management Fee 0.41%
12b-1 Fee None
Other Expenses(1),(2) 0.45%
Total Fund Operating Expenses(1),(2) 0.86%
Tax-Free Money Fund
Management Fee 0.50%
12b-1 Fees None
Other Expenses(1),(2) 0.26%
Total Fund Operating Expenses(1),(2) 0.76%
(1) It should be noted that each Fund's actual total operating expenses were
lower than the figures shown because each Fund's custodian fees were reduced
under an expense offset arrangement. However, as a result of an SEC requirement
for mutual funds to state their total operating expenses without crediting any
such expense offset arrangement, the figures shown above DO NOT reflect these
reductions. In comparing expenses for different years, please note that the
Ratios of Expenses to Average Net Assets shown under "Financial Highlights" DO
reflect reductions for expense offset arrangements for periods prior to the
fiscal year ended May 31, 1996. See "The Funds And Their Management."
(2) Certain expenses of the Funds are being absorbed voluntarily by IFG. In the
absence of such absorbed expenses, the U. S. Government Money Fund's "Other
Expenses" and "Total Fund Operating Expenses" would have been 0.56% and 1.06%
respectively; the Cash Reserves Fund's "Other Expenses" and "Total Fund ^
Operating Expenses" would have been 0.51% and 0.92%, respectively; and the
Tax-Free Money Fund's "Other Expenses" and "Total Fund Operating Expenses" would
have been 0.52% and 1.02%, respectively, based on each Fund's actual expenses
for the fiscal year ended May 31, 1997.
EXAMPLE
A shareholder would pay the following expenses on a $1,000 investment for the
periods shown, assuming a hypothetical 5% annual return and redemption at the
end of each time period. (Of course, actual operating expenses are paid from
each Fund's assets and are deducted from the amount of income available for
distribution to shareholders; they are not charged directly to shareholder
accounts.)
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
U.S. Government
Money Fund $9 $28 $48 $106
Cash Reserves Fund 9 28 48 106
Tax-Free Money Fund 8 24 42 94
The purpose of this table is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly. THE EXAMPLE SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE OR EXPENSES,
AND ACTUAL ANNUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
For more information on each Fund's expenses, see "The Funds And Their
Management" and "How To Buy Shares -- Distribution Expenses."
<PAGE>
^ Financial Highlights
(For a Fund Share Outstanding Throughout Each Period)
The following information has been audited by Price Waterhouse LLP,
independent accountants. This information should be read in conjunction with the
audited financial statements and the ^ Report of Independent Accountants thereon
appearing in the Company's 1997 Annual Report to Shareholders, which is
incorporated by reference into the Statement of Additional Information. Both are
available without charge by contacting IFG at the address or telephone number on
the back of the Prospectus. The Annual Report also contains more information
about the Funds' performance.
<TABLE>
<CAPTION>
Period Year Period
Ended Ended Ended
Year Ended May 31 May 31 December 31 December 31
--------------------------------------------------------------------------------
1997 1996 1995 1994 1993> ^ 1992 1991^
U.S. Government Money Fund
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value - Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
--------------------------------------------------------------------------------
INCOME AND DISTRIBUTIONS
FROM INVESTMENT OPERATIONS
Net Investment Income Earned
and Distributed to Shareholders 0.04 0.05 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 $1.00 $1.00
================================================================================
TOTAL RETURN 4.57% 4.90% 4.66% 2.56% 0.93%* 2.97% 3.23%*
RATIOS
Net Assets - End of Period
($000 Omitted) $66,451 $79,392 $60,843 $73,912 $34,519 $30,282 $7,203
Ratio of Expenses to Average
Net Assets# 0.86%@ 0.87%@ 0.75% 0.75% 0.75%~ 0.75% 0.74%~
Ratio of Net Investment Income
to Average Net Assets# 4.51% 4.78% 4.55% 2.60% 2.27%~ 2.82% 4.54%~
</TABLE>
<PAGE>
^> From January 1, 1993 to May 31, 1993.
^ From April 26, 1991, commencement of operations, to December 31, 1991.
* Based on operations for the period shown and, accordingly, ^ are not
representative of a full year.
# Various expenses of the Fund were voluntarily absorbed by IFG for the years
ended May 31, 1997, 1996, 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 1.06%, 1.05%, 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 4.31%,
4.59%, 4.20%, 2.35%, 1.84%, 2.49% and 3.35%, respectively.
@ Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
~ Annualized
<PAGE>
^ Financial Highlights (Continued)
(For a Fund Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
Period
Ended
Year Ended May 31 May 31 Year Ended January 31
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993> 1993 1992 1991 1990 1989 1988
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 AND DISTRIBUTIONS
FROM INVESTMENT
OPERATIONS
Net Investment Income
Earned and Distributed
to Shareholders 0.05 0.05 0.05 0.03 0.01 0.03 0.05 0.07 0.08 0.07 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 4.69% 5.01% 4.76% 2.58% 0.75%* 3.00% 5.35% 7.76% 8.79% 7.25% 6.28%
RATIOS
Net Assets - End of Period
($000 Omitted) $661,648 $587,277 $644,341 $747,551 $490,932 $506,337 $557,708 $431,808 $396,286 $317,410 $319,216
Ratio of Expenses to
Average Net Assets# 0.86%@ 0.87%@ 0.75% 0.81% 0.98%~ 0.80% 0.83% 0.76% 0.79% 0.79% 0.82%
Ratio of Net Investment
Income to Average
Net Assets# 4.62% 4.86% 4.65% 2.61% 2.26%~ 2.98% 5.17% 7.49% 8.46% 7.04% 6.24%
</TABLE>
> From February 1, 1993 to May 31, 1993.
* Based on operations for the period shown and, accordingly, is not
representative of a full year.
<PAGE>
# Various expenses of the Fund were voluntarily absorbed by IFG for the years
ended May 31, 1997, 1996 and 1995. If such expenses had not been voluntarily
absorbed, ratio of expenses to average net assets would have been 0.92%, 0.92%
and 0.85%, respectively, and ratio of net investment income to average net
assets would have been 4.56%, 4.81% and 4.55%, respectively.
@ Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
~ Annualized
<PAGE>
^ Financial Highlights (Continued)
(For a Fund Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
Period
Ended
Year Ended May 31 May 31 Year Ended April 30
-------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993> 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 AND DISTRIBUTIONS
FROM INVESTMENT
OPERATIONS
Net Investment Income
Earned and Distributed
to Shareholders 0.03 0.03 0.03 0.02 0.00+ 0.02 0.03 0.05 0.05 0.05 0.04
-------------------------------------------------------------------------------------------------
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 2.90% 3.08% 2.86% 1.84% 0.16%* 2.16% 3.42% 4.89% 5.51% 5.20% 4.15%
<PAGE>
RATIOS
Net Assets -
End of Period
($000 Omitted) $47,577 $51,649 $58,780 $84,521 $63,498 $65,167 $60,413 $40,440 $34,262 $27,709 $31,212
Ratio of Expenses to
Average Net Assets# 0.76%@ 0.77%@ 0.75% 0.75% 0.75%~ 0.75% 0.78% 0.90% 0.93% 0.88% 0.86%
Ratio of Net Investment
Income to Average
Net Assets# 2.86% 3.03% 2.77% 1.83% 2.03%~ 2.13% 3.30% 4.77% 5.37% 5.10% 4.07%
</TABLE>
> 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.
* 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 IFG and ITC for the
years ended May 31, 1997, 1996, 1995 and 1994, the period ended May 31, 1993,
and the years ended April 30, 1993 and 1992, respectively. If such expenses had
not been voluntarily absorbed, ratio of expenses to average net assets would
have been 1.01%, 1.05%, 1.00%, 1.00%, 1.19%, 1.02% and 0.99%, respectively, and
ratio of net investment income to average net assets would have been 2.61%,
2.75%, 2.52%, 1.58%, 1.59%, 1.86% and 3.09%, respectively.
@ Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
~ Annualized
<PAGE>
INVESTMENT OBJECTIVE AND STRATEGY
Each Fund seeks as high a level of current income as is consistent with
liquidity and safety of capital by investing in specific short-term money market
securities as described below. Tax-Free Money Fund has the additional objective
of providing income which is exempt from federal income taxes. These investment
objectives are fundamental and cannot be changed without the approval of a
Fund's shareholders. There is no assurance that a Fund's investment objective
will be met.
INVESCO Money Portfolio May Hold
Market Fund
- --------------------------------------------------------------------------------
U.S. Government Debt obligations issued or guaranteed by the U.S.
Money Fund U.S. government or its agencies; and repurchase
agreements collateralized by such obligations.
Cash Reserves Debt obligations issued or guaranteed by the U.S.
Fund government or its agencies; corporate debt
obligations; commercial paper; certificates of deposit
and bankers' acceptances issued by domestic banks;
and repurchase agreements collateralized by such
obligations
Tax-Free Money Debt obligations issued by the states, territories,
Fund and possessions of the United States and District of
Columbia and their political subdivisions, agencies
and instrumentalities, which pay interest exempt from
federal income taxes; repurchase agreements
collateralized by such obligations; private activity
bonds and taxable securities.
See "Investment Policies And Risks" below, as well as "Investment Policies
And Restrictions" in the Statement of Additional Information.
The short-term debt obligations in which each Fund invests must mature,
or be deemed to mature, within ^ 397 days ^ from the date of purchase.
Generally, the Funds intend to hold securities purchased until maturity.
However, securities may be sold without regard for how long they have been held.
Each Fund will maintain a dollar-weighted average portfolio maturity of 90 days
or less.
Because each of the Funds invests in short-term debt obligations their
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.
<PAGE>
While a Fund may invest in obligations of the federal government, which may
or may not be supported by the full faith and credit of the U.S. government,
shares of the Funds are not issued or guaranteed by the U.S. government.
INVESTMENT POLICIES AND RISKS
The return on investment in each Fund will depend upon the interest earned
by each 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. Not
withstanding the possibility of fluctuations in values of a Fund's securities,
as a result of each Fund's use of amortized cost valuation and its declaration
of income dividends daily, it is expected, but cannot be assured, that each
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 a discount or premium.
U.S. GOVRRMENT SECURIRTIES. These securities consist of Treasury bills,
notes and 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. Obligations of United States
government agencies include Government National Mortgage Association ("GNMA"),
Fannie Mae (formerly known as Federal National Mortgage Association) and Federal
Home Loan Mortgage Corporation ("FHLMC") obligations. Some of these securities
are guaranteed by the U.S. government, others are guaranteed only by the issuing
agency. For more information concerning U.S. government securities, see
"Investment Policies and Restrictions" in the Statement of Additional
Information.
DEBT OBLIGATIONS OF COMMERCIAL BANKS AND CORPORATIONS. When we assess an
issuer's ability to meet its interest rate obligations and repay its debt when
due, we are referring to "credit risk." Debt obligations are rated based on
their estimated credit risk by independent services such as Standard and Poor's
Ratings Services, a division of The McGraw-Hill Companies, Inc. ("S&P") or
Moody's Investors Service, Inc. ("Moody's"). S&P and Moody's are nationally
recognized securities rating organizations ("NRSROs"). For an explanation of
these organizations and their ratings, see the Statement of Additional
Information.
"Market risk" refers to sensitivity to changes in interest rates. For
example, when interest rates go up, the market value of a previously issued
obligation generally declines; on the other hand, when interest rates go down,
the market prices of these obligations generally increase. Also, when interest
rates go down, net cash inflows are likely to be invested in portfolio
instruments producing lower yields than the balance of a Fund's portfolio, thus
reducing the Fund's yield.
<PAGE>
MUNICIPAL OBLIGATIONS. Like corporate debt obligations, the debt of
municipalities is also rated by NRSROs. Tax-Free Money Fund will only invest in
municipal bonds rated at the time of purchase in the two highest grades, for
longer-term bonds; municipal notes rated MIG-1 by Moody's; and municipal
commercial paper rated in the highest grades. There is no guarantee that a
municipality will be able to satisfy the payment and interest on a municipal
obligation.
U.S. GOVERNMENT MONEY FUND
The U. S. Government Money Fund seeks to achieve its objective by investing
only in debt obligations issued or guaranteed by the U. S. government or its
agencies maturing or deemed to be maturing, in ^ 397 days ^ or less from the
date of purchase, and in repurchase agreements with respect to such instruments.
The securities in which the U. S. Government Money Fund invests consist of:
direct obligations of the United States such as Treasury bills, Treasury notes,
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,
obligations of GNMA, the Department of Housing and Urban Development, the
Farmer's Home Administration, the Small Business Administration, Fannie Mae,
(FHLMC) and the Federal Home Loan Banks. The GNMA, FHLMC and Fannie Mae
certificates in which the U. S. Government Money Fund may invest are
mortgage-backed 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 U. S. Government Money Fund may be
required to invest the proceeds at a lower interest rate. The U.S. Government
Money Fund limits the dollar-weighted average maturity of its portfolio
securities to 90 days or less.
CASH RESERVES FUND
The Cash Reserves Fund seeks to achieve its objective by investing in a
diversified portfolio of high-quality, short-term debt obligations maturing
within ^ 397 days ^ from the date of purchase.
The securities in which the Cash Reserves Fund invests consist of: (1)
U.S. government obligations, consisting of securities issued or guaranteed as to
principal or interest by the U.S. government or one of its agencies or
instrumentalites, such as Treasury bills, bonds, notes and GNMA bonds; (2)
commercial paper, limited to obligations which are rated by at least two NRSROs,
generally S&P and Moody's, in the highest short-term rating category CA-1 by S&P
and Prime-1 by Moody's, or where the obligation is rated by only one NRSRO, such
<PAGE>
obligation is rated in the highest short-term rating category; 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 Cash Reserves Fund may
invest in obligations that are not rated by any NRSRO but which are of
comparable quality to such obligations rated in the highest grade as determined
by the Cash Reserves Fund's investment adviser in accordance with an analysis
performed by the investment adviser. The Cash Reserves Fund will at all times
invest at least 95% of its total 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 Cash Reserves 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 Cash Reserves 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 ^ 397 days prior to
maturity will be considered as meeting the Cash Reserves Fund's investment
requirements. The Cash Reserves Fund will limit its portfolio investments to
United States dollar-denominated instruments that are eligible for investment by
the Cash Reserves Fund under applicable Securities and Exchange Commission
rules.
TAX-FREE MONEY FUND
Tax-Free Money Fund has the additional objective of providing income which
is exempt from federal income taxes. The Tax-Free Money Fund seeks to achieve
its objectives 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, in some cases, from a special excise tax or
specific revenue source.
<PAGE>
At least 80% of the Tax-Free Money Fund's total assets (measured at the
time any investment is purchased) will, under normal circumstances, be invested
in municipal obligations, the income from which is exempt from federal income
taxes. 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 NRSROs, generally S&P and Moody's, in
the two highest grades (AAA or AA by S&P and Aaa or Aa by Moody's), 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 Tax-Free Money Fund's investment adviser has determined that it
is appropriate to purchase such bonds based on a credit-worthiness finding; (2)
municipal notes which are rated SP-1 by S&P and MIG-1 by Moody's at time of
purchase; (3) municipal commercial paper which is rated by at least two NRSROs,
generally S&P and Moody's 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 obligations rated in the highest
grade as determined by the Tax- Free Money Fund's investment adviser. For a
description of these ratings, see Appendix A in the Statement of Additional
Information. The Tax-Free Money 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. An economic, business, political
or other change that affects one security may also affect other securities in
the same industry segment, thereby potentially increasing market risk. Examples
of changes that may affect certain industry segments include proposed
legislation affecting the financing of a project, shortages or price increases
of needed materials, or declining markets or need for a project.
The payment of principal and interest by issuers of certain municipal
obligations purchased by the Tax-Free Money Fund may be guaranteed by letters of
credit, insurance or other credit instruments offered by banks or other
financial institutions. Such guarantees will be considered in determining
whether a municipal obligation meets the Tax-Free Money 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.
Up to 20% of the Tax-Free Money Fund's total assets may be invested in
private activity bonds and in taxable securities. The circumstances under which
the Tax-Free Money Fund will invest in taxable securities include but are not
limited to: (a) pending investment of proceeds of sales of shares or of
portfolio securities; (b) pending settlement of portfolio securities; and (c) to
maintain liquidity for the purpose of meeting anticipated redemptions. The kinds
of taxable securities in which the Tax-Free Money 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 bankers' acceptances of domestic
<PAGE>
banks (including their foreign branches), as described in the Statement of
Additional Information; and (iv) repurchase agreements with respect to any
portfolio securities. The Tax-Free Money 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 Tax-Free Money 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.
In computing the remaining maturity and average portfolio maturity for
variable rate obligations, the longer of the date upon which the Tax-Free Money
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 ^
397 days prior to maturity will be considered as meeting these investment
requirements.
The Tax-Free Money 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 Tax-Free Money Fund with
settlement taking place in the future, after a month or more). The payment
obligation and the interest rate that will be received on the securities are
fixed at the time the Tax-Free Money Fund enters into the commitment.
REPURCHASE AGREEMENTS. A Fund may invest money, for as short a time as
overnight, using repurchase agreements ("repos"). With a repo, the Fund buys a
debt instrument, agreeing simultaneously to sell it back to the prior owner at
an agreed-upon price. The Fund could incur costs or delays in seeking to sell
the instrument if the prior owner defaults on its repurchase obligation. To
reduce that risk, the securities which are the subject of the repurchase
agreement will be maintained with the Fund's custodian in an amount at least
equal to the repurchase price under the agreement (including accrued interest).
These agreements are entered into only with member banks of the Federal Reserve
System, registered broker-dealers, and registered U.S. government securities
dealers that are deemed creditworthy under standards set by the Company's board
of directors. A repo may generate taxable income.
INVESTMENT RESTRICTIONS. Certain restrictions, which are set forth in the
Statement of Additional Information, may not be altered without the approval of
a Fund's shareholders. Each Fund limits to 5% of its total assets the amount
which may be invested in a single issuer, and to 25% the portion that may be
invested in any one industry (other than U.S. government securities). The Funds'
ability to borrow money is limited to borrowings from banks for temporary or
emergency purposes in amounts not exceeding 10% for the Cash Reserves and
<PAGE>
Tax-Free Money Funds and 5% for the U. S. Government Money Fund of each Fund's
total assets. Except where indicated to the contrary, the investment objectives
and policies described in this Prospectus are fundamental and may not be changed
without a vote of that Fund's shareholders.
For a further discussion of risks associated with an investment in a Fund,
see "Investment Policies and Restrictions" and "Investment Practices" in the
Statement of Additional Information.
THE FUNDS AND THEIR MANAGEMENT
The Company is a no-load mutual fund, registered with the Securities and
Exchange Commission as a diversified, open-end, management investment company.
Cash Reserves Fund was incorporated on October 14, 1975, and Tax-Free Money Fund
was incorporated on March 4, 1983, under the laws of Colorado. U.S. Government
Money Fund commenced operations as a series of Financial Series Trust, a
Massachusetts business trust, on April 6, 1991. On July 1, 1993, these three
Funds were reorganized as a series of the Company, a Maryland corporation
incorporated on April 2, 1993.
The Company's board of directors has responsibility for overall
supervision of the Funds, and reviews the services provided by the adviser and
sub-adviser. Under an agreement with the Company, IFG, 7800 E. Union Avenue,
Denver, Colorado 80237, serves as ^ investment adviser for each Fund; it is
primarily responsible for providing the Funds with various administrative
services. IFG's wholly-owned subsidiary, INVESCO Trust, is ^ each Fund's sub-
adviser and is primarily responsible for managing each Fund's investments.
Together, IFG and INVESCO Trust constitute "Fund Management."
^
- --------------------------------------------------------------------------------
Since 1993, Richard R. Hinderlie has had responsibility for the day-to-day
management of the U.S. Government Money Fund and Cash Reserves Fund. He is also
the co-manager of the INVESCO Short-Term Bond Fund. Now a Vice President (since
1996) and portfolio manager (1993 to present) of INVESCO Trust, he previously
served as a securities analyst with Bank Western (1987 to 1992). He earned a BA
from Pacific Lutheran University and an MBA from Arizona State University.
Since 1992, Ingeborg S. Cosby has had responsibility for the day-to-day
management of the Tax-Free Money Fund. From 1987 to 1992 she was the assistant
portfolio manager of the Fund. Now a Vice President (since 1997) of INVESCO
Trust, from 1985 to 1987, she assisted portfolio managers at INVESCO Trust.
Previously (1982 to 1985), she was assistant to portfolio managers at First
Affiliated Securities, Inc.
- --------------------------------------------------------------------------------
Fund Management permits investment and other personnel to purchase and
sell securities for their own accounts, subject to a compliance policy governing
personal investing. This policy requires Fund Management's personnel to conduct
their personal investment activities in a manner that Fund Management believes
is not detrimental to the Funds or Fund Management's other advisory clients. See
the Statement of Additional Information for more detailed information.
<PAGE>
Each Fund pays IFG a monthly management fee which is based upon a
percentage of the Fund's average net assets determined daily; in turn, IFG pays
INVESCO Trust a sub-advisory fee out of its management fee. The management fee
is computed at the annual rate of 0.50% on the first $300 million of a Fund's
average net assets; 0.40% on the next $200 million of a Fund's average net
assets; and 0.30% on a Fund's average net assets over $500 million. For the
fiscal year ended May 31, 1997, the Funds paid fees equal to the following
percentages of their average net assets: U.S. Government Money Fund, 0.50%; Cash
Reserves Fund, 0.41%; and Tax- Free Money Fund, 0.50%.
Out of these advisory fees, IFG paid to INVESCO Trust as a sub-advisory
fee an amount equal to the following percentages of each Fund's average net
assets: U.S. Government Money Fund, 0.15%; Cash Reserves Fund, 0.15%; and
Tax-Free Money Fund, 0.15%. No fee is paid by the Funds to INVESCO Trust.
Under a Transfer Agency Agreement, IFG acts as registrar, transfer agent,
and dividend disbursing agent for the Funds. Each Fund pays an annual fee of
$27.00 per shareholder account or, where applicable, per participant in an
omnibus account per year. Registered broker-dealers, third party administrators
of tax-qualified retirement plans and other entities, including affiliates of
IFG, may provide equivalent services to the Funds. In these cases, IFG may pay,
out of the fees it receives from the Funds, an annual sub-transfer agency or
recordkeeping fee to the third party.
In addition, under an Administrative Services Agreement, IFG handles
additional administrative, record-keeping, and internal sub-accounting services
for the Funds. For such services, IFG was paid, for the fiscal year ended May
31, 1997, a fee equal to the following percentages of each Fund's average net
assets: U.S. Government Money Fund, 0.03%; Cash Reserves Fund, 0.02%; and Tax-
Free Money Fund, 0.03%.
Each Fund's expenses, which are accrued daily, are deducted from total
income before dividends are paid. Total expenses of the Funds for the fiscal
year ended May 31, 1997, including investment management fees (but excluding
brokerage commissions, which are a cost of acquiring securities), amounted to
the following percentages of each Fund's average net assets: U.S. Government
Money Fund, 0.86%; Cash Reserves Fund, 0.86%; and Tax-Free Money Fund, 0.76%.
Certain Fund expenses are absorbed voluntarily by IFG pursuant to a commitment
to the Funds in order to ensure that a Fund's total operating expenses do not
exceed the following percentages of each Fund's average net assets: U.S.
Government Money Fund, 0.85%; Cash Reserves Fund, 0.85%; and Tax-Free Money
Fund, 0.75%. These commitments may be changed following consultation with the
Company's board of directors. In the absence of this voluntary expense
limitation, each Fund's total operating expenses would have equaled the
following percentages of each Fund's average net assets: U.S. Government Money
Fund, 1.06%; Cash Reserves Fund, 0.92%; and Tax-Free Money Fund, 1.02%.
<PAGE>
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of
their financial responsibility coupled with their ability to effect transactions
at the best available prices. As discussed under "How ^ To Buy Shares --
Distribution Expenses," the Funds may market their shares through intermediary
brokers or dealers that have entered into Dealer Agreements with IFG, as the
Funds' Distributor. The Funds may place orders for portfolio transactions with
qualified ^ broker-dealers which recommend the Funds, or sell shares of the
Funds, to clients, or act as agent in the purchase of shares of the Funds for
clients, if Fund Management believes that the quality of the execution of the
transaction and level of commission are comparable to those available from other
qualified brokerage firms. For further information, see "Investment Practices --
Placement of Portfolio Brokerage" in the Statement of Additional Information.
IFG and INVESCO Trust are indirect wholly owned subsidiaries of AMVESCAP
PLC. AMVESCAP PLC is a publicly-traded holding company that, through its
subsidiaries, engages in the business of investment management on an
international basis. INVESCO PLC changed its name to AMVESCO PLC on March 3,
1997, and to AMVESCAP PLC on May 8, 1997, as part of a merger between a direct
subsidiary of INVESCO PLC and A I M Management Group Inc., that created one of
the largest independent investment management businesses in the world. IFG and
INVESCO Trust will continue to operate under their existing names. AMVESCAP PLC
has approximately $165 billion in assets under management. IFG was established
in 1932 and, as of May 31, 1997, managed 14 mutual funds, consisting of 45
separate portfolios, with combined assets of approximately $14.8 billion on
behalf of over 859,000 shareholders. INVESCO Trust (founded in 1969) served as
advisor or sub-adviser to 58 investment portfolios as of May 31, 1997, including
31 portfolios in the INVESCO group. These 58 portfolios had aggregate assets of
approximately $13.5 billion as of May 31, 1997. In addition, INVESCO Trust
provides investment management services to private clients, including employee
benefit plans that may be invested in a collective trust sponsored by INVESCO
Trust.
FUND PRICE AND PERFORMANCE
DETERMINING PRICE. The price per share is also known as the Net Asset Value
("NAV"). Each Fund uses its best efforts to maintain its NAV at $1.00. It is
expected (but cannot be guaranteed) that the value of your investment in a Fund
will not vary. NAV is calculated by adding together the current market value of
all of the Fund's assets, including accrued interest and dividends; then
subtracting liabilities, including accrued expenses; and finally dividing that
dollar amount by the total number of shares outstanding.
Your return on an investment in a Fund will depend upon the interest earned
by such Fund on its holdings, after deduction of Fund expenses. Net income is
declared daily and paid monthly to the shareholders of each Fund.
PERFORMANCE DATA. To keep shareholders and potential investors informed,
we will occasionally advertise a Fund's "current yield," "effective yield" and
"total return" performance. In addition, the U.S. Government Money and Cash
Reserves Funds may advertise a "tax equivalent yield." The yield of a Fund
<PAGE>
refers to the income generated by an investment in the Fund over a 7-day period,
and is computed by dividing the net investment income per share earned during
the period by the net asset value per share at the end of the period, then
adjusting the result to provide for semi-annual compounding. The effective yield
is calculated similarly but, when annualized, the income earned by an investment
in a Fund is assumed to be reinvested. This reinvestment may cause the effective
yield to be higher than the current yield. The "tax equivalent yield" of a 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. More information about the Funds' recent and historical
performance is contained in the Company's Annual Report to Shareholders. You can
get a free copy by calling or writing to IFG using the phone number or address
on the back of this Prospectus.
When we quote mutual fund rankings published by Lipper Analytical Services,
Inc., we may compare the fund to others in the following categories: U.S.
Government Money Fund -- U.S. Government Money Market Funds; Cash Reserves Fund,
Money Market Funds; and Tax-Free Money Fund -- Tax-Exempt Money Market Funds.
These rankings allow you to compare the Fund to its peers. Other independent
financial media also produce performance- or service- related comparisons, which
you may see in the Funds' promotional materials. For more information see "Fund
Performance" in the Statement of Additional Information.
Performance figures are based on historical investment results and are not
intended to suggest future returns.
HOW TO BUY SHARES
The following chart shows several convenient ways to invest in the Funds.
There is no charge to invest, exchange, or redeem shares when you make
transactions directly through IFG. However, if you invest in a Fund through a
securities broker, you may be charged a commission or transaction fee. For all
new accounts, please send a completed application form. Please specify which
Fund you wish to purchase.
Fund Management reserves the right to increase, reduce or waive the
minimum investment requirements in its sole discretion, where it determines this
action is in the best interests of a Fund. Further, Fund Management reserves the
right in its sole discretion to reject any order for the purchase of Fund shares
(including purchases by exchange) when, in its judgment, such rejection is in a
Fund's best interests. Shares of the Funds are not available for telephone
purchase.
<PAGE>
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
Method Investment Minimum Please Remember
- --------------------------------------------------------------------------------
By Check $1,000 for regular If your check does
Mail to: account; not clear, you will
INVESCO Funds $250 for an Indivi- be responsible for
Group, Inc. dual Retirement any related loss
P.O. Box 173706 Account; the Fund or IFG
Denver, CO 80217- $50 minimum for incurs. If you are
3706. each subsequent already a
Or you may send investment. shareholder in the
your check by INVESCO funds, the
overnight courier Fund may seek
to: 7800 E. Union reimbursement from
Ave., your existing
Denver, CO 80237. account(s) for any
loss incurred.
- --------------------------------------------------------------------------------
By Wire $1,000. Payment must be
Call 1-800-525-8085 received within 3
for instructions on business days, or
how to transmit the transaction may
your payment by be canceled.
bank wire.
- --------------------------------------------------------------------------------
With EasiVest or $50 per month for Like all regular
Direct Payroll EasiVest; $50 per investment plans,
Purchase pay period for neither EasiVest
You may enroll on Direct Payroll nor Direct Payroll
the fund Purchase. You may Purchase ensures a
application, or start or stop your profit or protects
call us for the regular investment against loss in a
correct form and plan at any time, falling market.
more details about with two weeks' Because you'll
these automatic notice to IFG. invest continually,
monthly investment regardless of
plans. varying price
levels, consider
your financial
ability to keep
buying through low
price levels. And
remember that you
will lose money if
you redeem your
shares when the
market value of all
your shares is less
than their cost.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
By PAL $1,000. Be sure to write
Your "Personal down the
Account Line" is confirmation number
available for provided by PAL(R).
exchanges 24-hours Payment must be
a day. Simply call received within 3
1-800-424-8085. business days, or
the transaction may
be cancelled. If a
telephone purchase
is cancelled due to
non-payment, you
will be responsible
for any related
loss the Portfolio
or IFG incurs. If
you are already a
shareholder in the
INVESCO funds, the
Portfolio may seek
reimbursement from
your existing
account(s) for any
loss incurred.
- --------------------------------------------------------------------------------
By Exchange $1,000 to open a See "Exchange ^
Between this and new account; $50 Policy" below.
another of the for written
INVESCO funds. Call requests to
1-800-525-8085 for purchase additional
prospectuses of shares for an
other INVESCO existing account.
funds. You may also (The exchange
establish an minimum is $250 for
Automatic Monthly purchases requested
Exchange service by telephone.)
between two INVESCO
funds; call IFG for
further details and
the correct form.
- --------------------------------------------------------------------------------
Your order to purchase Fund shares will not begin earning dividends until
your payment can be converted into available federal funds under regular banking
procedures or, if you are acquiring shares in an exchange from another INVESCO
fund, the Fund receives the proceeds of the exchange. Checks normally are
converted into federal funds (moneys held on deposit within the Federal Reserve
System) within two or three business days after we receive them, although this
period may be longer for checks drawn on banks that are not members of the
Federal Reserve System.
<PAGE>
EXCHANGE ^ POLICY. You may exchange your shares in one of the Funds for
those in another INVESCO fund, on the basis of their respective net asset values
at the time of the exchange. Before making any exchange, be sure to review the
prospectuses of the funds involved and consider their differences.
Please note these policies regarding exchanges of fund shares:
1) The fund accounts must be identically registered.
2) You may make four exchanges out of each fund during each
calendar year.
3) An exchange is the redemption of shares from one fund followed by
the purchase of shares in another. Therefore, any gain or loss
realized on the exchange is recognizable for federal income tax
purposes (unless, of course, your account is tax-deferred).
4) Each Fund reserves the right to reject any exchange request, or to
modify or terminate the exchange ^ policy, in the best interests of
the ^ Funds and ^ their shareholders. Notice of all such
modifications or termination will be given at least 60 days prior to
the effective date of the change in ^ policy, except for unusual
instances (such as when redemptions of the exchanged shares are
suspended under Section 22(e) of the Investment Company Act of 1940,
or when sales of the fund into which you are exchanging are
temporarily stopped).
FUND SERVICES
SHAREHOLDER ACCOUNTS. IFG will maintain a separate share account for each
Fund whose shares you own that reflects your current holdings. Share
certificates will be issued only upon specific request. You will have greater
flexibility to conduct transactions if you do not request certificates.
TRANSACTION CONFIRMATIONS. You will receive detailed confirmations of
individual purchases, exchanges, and redemptions. If you choose certain
recurring transaction plans (for instance, EasiVest), your transactions will be
confirmed on your quarterly Investment Summary.
INVESTMENT SUMMARIES. Each calendar quarter, shareholders receive a
written statement which consolidates and summarizes account activity and value
at the beginning and end of the period for each of their INVESCO funds.
REINVESTMENT OF DISTRIBUTIONS. Dividends are automatically invested in
additional fund shares at the NAV on the ex-dividend date, unless you choose to
have dividends automatically reinvested in another INVESCO fund or paid by check
(minimum of $10.00).
<PAGE>
CHECKWRITING. Shareholders with $1,000 or more in their account may redeem
shares of that Fund by check. Personalized checks will be provided at no charge,
and may be made payable to any party in any amount of $500 or more. Shares in
the Fund will be redeemed to cover payment of the check. INVESCO reserves the
right to institute a charge for this service upon notice to all shareholders.
Further information about this option may be obtained from INVESCO.
TELEPHONE TRANSACTIONS. All shareholders may exchange and redeem Fund
shares by telephone, unless they expressly decline these privileges. By signing
the new account Application, a Telephone Transaction Authorization Form, or
otherwise using these privileges, the investor has agreed that, if a Fund has
followed reasonable procedures, such as recording telephone instructions and
sending written transaction confirmations, it will not be liable for following
telephoned instructions that it believes to be genuine. As a result of this
policy, the investor may bear the risk of any loss due to unauthorized or
fraudulent instructions.
RETIREMENT PLANS AND IRAS. Shares of these Funds may be purchased for
Individual Retirement Accounts (IRAs) and many types of tax-deferred retirement
plans. IFG can supply you with information and forms to establish or transfer
your existing plan or account.
HOW TO SELL SHARES
The following chart shows several convenient ways to redeem your Fund
shares. Shares of the Fund may be redeemed at any time at their current NAV next
determined after a request in proper form is received at the Fund's office. The
NAV at the time of the redemption is expected, but cannot be guaranteed, to
remain at $1.00.
Please specify from which Fund you wish to redeem shares. Shareholders
have a separate account for each Fund in which they invest.
<PAGE>
HOW TO SELL SHARES
- --------------------------------------------------------------------------------
Method Minimum Redemption Please Remember
- --------------------------------------------------------------------------------
By Telephone $250 (or, if less, These telephone
Call us toll-free full liquidation of redemption
at 1-800-525-8085. the account) for a privileges may be
redemption check; modified or
$1,000 for a wire terminated in the
to bank of record. future at the
The maximum amount discretion of IFG.
which may be
redeemed by
telephone is
generally $25,000.
- --------------------------------------------------------------------------------
In Writing Any amount. The If the shares to be
Mail your request redemption request redeemed are
to INVESCO Funds must be signed by represented by
Group, Inc., P.O. all registered stock certificates,
Box 173706 owners of the the certificates
Denver, CO 80217- account. Payment must be sent to
3706. You may also will be mailed to IFG.
send your request your address of
by overnight record, or to a
courier to 7800 E. pre-designated
Union Ave., Denver, bank.
CO 80237.
- --------------------------------------------------------------------------------
By Check $500 minimum per Personalized checks
check. are available from
IFG without charge
upon request.
Checks may be made
payable to any
party.
- --------------------------------------------------------------------------------
By Exchange $1,000 to open a See "Exchange ^
Between this and new account; $50 Policy" above.
another of the for written
INVESCO funds. Call requests to
1-800-525-8085 for purchase additional
prospectuses of shares for an
other INVESCO existing account.
funds. You may also (The exchange
establish an minimum is $250 for
automatic monthly exchanges requested
exchange service by telephone.)
between two INVESCO
funds; call IFG for
further details and
the correct form.
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<PAGE>
- --------------------------------------------------------------------------------
Periodic Withdrawal $100 per payment, You must have at
Plan on a monthly or least $10,000 total
You may call us to quarterly basis. invested with the
request the The redemption INVESCO funds, with
appropriate form check may be made at least $5,000 of
and more payable to any that total invested
information at 1- party you in the fund from
800-525-8085. designate. which withdrawals
will be made.
- --------------------------------------------------------------------------------
Payment To Third Any amount. All registered
Party owners of the
Mail your request account must sign
to INVESCO Funds the request, with a
Group, Inc., P.O. signature guarantee
Box 173706 from an eligible
Denver, CO 80217- guarantor financial
3706. institution, such
as a commercial
bank or recognized
national or
regional securities
firm.
- --------------------------------------------------------------------------------
While the Funds will attempt to process telephone redemptions promptly,
there may be times -- particularly in periods of severe economic or market
disruption -- when you may experience delays in redeeming shares by phone.
Payments of redemption proceeds will be mailed within seven days following
receipt of the redemption request in proper form. However, payment may be
postponed under unusual circumstances --for instance, if normal trading is not
taking place on the New York Stock Exchange or during an emergency as defined by
the Securities and Exchange Commission. If your shares were purchased by a check
which has not yet cleared, payment will be made promptly upon clearance of the
purchase check (which will take up to 15 days).
If you participate in EasiVest, the Funds' automatic monthly investment
program, and redeem all of the shares in your account, we will terminate any
further EasiVest purchases unless you instruct us otherwise.
Because of the high relative costs of handling small accounts, should the
value of any shareholder's account fall below $250 as a result of shareholder
action, the Funds reserve the right to involuntarily redeem all shares in such
account, in which case the account would be liquidated and the proceeds
forwarded to the shareholder. Prior to any such redemption, a shareholder will
be notified and given 60 days to increase the value of the account to $250 or
more.
<PAGE>
TAXES AND DIVIDENDS
TAXES. Each Fund intends to distribute to shareholders substantially all
of its net investment income and net capital gains, if any, in order to continue
to qualify for tax treatment as a regulated investment company under Subchapter
M of the Internal Revenue Code. Thus, the Funds do not expect to pay any federal
income or excise taxes.
Unless shareholders are exempt from income taxes, they must include all
dividends as taxable income for federal, state, and local income tax purposes.
Dividends are taxable whether they are received in cash or automatically
distributed in shares of a Fund or another fund in the INVESCO group.
Because the Funds do not invest in long-term securities, any capital gains
or losses realized by a Fund will be short-term gains or losses. These
short-term gains are treated the same as ordinary income, such as wages, for tax
purposes and do not receive special capital gain treatment.
In addition, the Tax-Free Money Fund intends to continue to qualify during
each fiscal year to pay "exempt-interest dividends" to shareholders. These
dividends are derived from net income earned by the Fund on municipal
obligations and are 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, would be subject to federal income taxation. Please note that income
exempt at the federal level may still be taxable under state tax laws.
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 Tax-Free Money 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.
^ Individuals and certain other non-corporate shareholders may be subject
to backup withholding of 31% on dividends, capital gain distributions and
redemption proceeds. Unless you are subject to backup withholding for other
reasons, you can avoid backup withholding on your Fund account by ensuring that
we have a correct, certified tax identification number.
DIVIDENDS. Each Fund earns ordinary or net investment income in the form of
^ interest on its investments. Each Fund's policy is to distribute substantially
all of this income, less Fund expenses, to shareholders. Dividends from net
<PAGE>
investment income are declared daily and paid monthly. Dividends and capital
gains, if any, are automatically reinvested in additional shares of a Fund at
the net asset value on the ex-dividend date, unless otherwise requested.
Tax-Free Money Fund anticipates that substantially all of the dividends
paid by it will be exempt from federal income taxes. During the fiscal year
ended May 31, 1997, 99.99% of the dividends declared by this Fund were exempt
from federal income taxes. There is no assurance that this will be the case in
future years. Income may be subject to state and local taxes, or to the federal
Alternative Minimum Tax.
At the end of each year, information regarding the tax status of their
dividends is provided to shareholders of each Fund. We encourage you to consult
a tax adviser with respect to these matters. For further information see "Taxes
And Dividends" in the Statement of Additional Information.
ADDITIONAL INFORMATION
Voting Rights. All shares of the Funds of the Company have equal voting
rights based on one vote for each share owned and a corresponding fractional
vote for each fractional share owned. The Company is not generally required and
does not expect to hold regular annual meetings of shareholders. However, when
requested to do so in writing by the holders of 10% or more of the outstanding
shares of the Company or as may be required by applicable law or the Company's
Articles of Incorporation, the board of directors will call special meetings of
shareholders. Directors may be removed by action of the holders of a majority of
the outstanding shares of the Company. The ^ Company will assist shareholders in
communicating with other shareholders as required by the Investment Company Act
of 1940.
<PAGE>
October 1, 1997
INVESCO
MONEY MARKET
FUNDS, INC.
U.S. Government
Money Fund
Cash Reserves Fund
Tax-Free Money Fund
PROSPECTUS
^ No-load mutual fund seeking
a high level of current income.
INVESCO FUNDS
INVESCO Funds Group, Inc.
Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
1-800-525-8085
PAL(R), 1-800-424-8085
http://www.invesco.com.
^ In Denver, please visit one of our
convenient Investor Centers:
Cherry Creek
155-B Fillmore Street;
Denver Tech Center
7800 East Union Avenue
Lobby Level
In addition, all documents filed
by the Company with the
Securities and Exchange
Commission can be located on a
^ web site maintained by the
Commission at
http://www.sec.gov.
Printed on recycled paper.
PSMM 10/97 9796
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
October 1, 1997
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 ^,
diversified investment management company organized in series form in which all
three of its Funds, INVESCO U.S. Government Money Fund ("U.S. Government Money
Fund"), INVESCO Cash Reserves Fund (Cash Reserves Fund"), and INVESCO Tax-Free
Money Fund ("Tax-Free 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. Tax-Free Money Fund has the additional objective of seeking income
exempt from federal income tax. 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 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.
The Cash Reserves Fund will pursue its investment objective by investing
in a diversified portfolio of high-quality, short-term debt obligations.
The 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.
<PAGE>
A Prospectus for the Funds dated October 1, 1997, which provides 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 3
THE FUNDS AND THEIR MANAGEMENT 16
HOW SHARES CAN BE PURCHASED 30
HOW SHARES ARE VALUED 30
FUND PERFORMANCE 32
SERVICES PROVIDED BY THE FUNDS 34
TAX-DEFERRED RETIREMENT PLANS 35
HOW TO REDEEM SHARES 36
DIVIDENDS AND TAXES 36
INVESTMENT PRACTICES 37
ADDITIONAL INFORMATION 39
APPENDIX A 42
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
As discussed in the Prospectus in the section entitled "Investment
Objective and Strategy," 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 Cash Reserve Fund and U.S. Government
Money Fund may invest in U.S. government obligations without limit. In order to
fulfill its investment objective, the U.S. Government Money Fund will only
invest in U.S. government securities as a general rule. The 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 Funds to
purchase additional GNMA certificates or other U.S. government securities.
Other U.S. government obligations, such as securities of the Federal Home
Loan Banks, are supported by the Treasury's discretionary authority to lend to
the issuer. Still others, such as bonds issued by Fannie Mae (formerly, 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 Funds must look 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 Funds will invest in securities of such
instrumentalities only when their investment adviser and sub-adviser
(collectively, "Fund Management") are satisfied that the credit risk with
respect to any such instrumentality is minimal.
<PAGE>
Obligations of Domestic Banks. The Cash Reserves Fund and Tax- Free Money
Fund may invest in these obligations, which consist of certificates of deposit
("CDs") 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. CDs are issued against deposits in a commercial bank for a
specified period and rate and are normally negotiable. Eurodollar CDs are
certificates issued by a foreign branch (usually London) of a U.S. domestic
bank, and, as such, the credit is deemed to be that of the domestic bank.
Bankers' acceptances are short-term credit instruments evidencing the
promise 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. 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 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 Funds' adviser and sub-adviser (collectively, "Fund
Management") the authority to determine the liquidity of Section 4(2) Paper
pursuant to 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 Cash Reserves Fund's
investments consist of bonds, debentures, and notes issued by corporations in
order to finance longer term credit needs.
Repurchase Agreements. As discussed in the Funds' Prospectus^ in the
section entitled "Investment Policies and Risks," the Funds may enter into
repurchase agreements with respect to debt instruments eligible for investment
by ^ the Funds with member banks of the Federal Reserve System, registered
<PAGE>
broker-dealers, and registered government securities dealers, which are deemed
creditworthy under standards established by the Company's board of directors. A
repurchase agreement may be considered a loan collateralized by securities. The
resale price reflects an agreed upon interest rate effective for the period the
instrument is held by a Fund and is unrelated to the interest rate on the
underlying instrument. In these transactions, the securities acquired by a Fund
(including accrued interest earned thereon) must have a total value at least
equal to the value of the repurchase agreement, and are held as collateral by
the ^ Funds' custodian bank until the repurchase agreement is completed. Repos
may generate taxable income.
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 Company's board of directors
determines within the aforesaid five business days that holding the security is
in the best interest 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.
Municipal Obligations
As discussed in the section entitled "Investment Objective and Strategy"
of its Prospectus, the Tax-Free Money 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 lend 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
<PAGE>
industrial development bonds, the proceeds from which are used for the
construction, equipment, repair or improvement of privately operated industrial
or commercial facilities, may also be considered municipal bonds. Although the
current federal tax laws impose substantial limitations on the size of such
issues, the Tax-Free Money Fund will only invest in those industrial development
bonds, the interest from which, in the opinion of counsel to the issuer, is
exempt from federal income taxation.
There are two principal classifications of 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.
From time to time, proposals to restrict or eliminate the federal income
tax exemption for interest on municipal bonds have been introduced before
Congress. Similar proposals may be introduced in the future. If such a proposal
were enacted, the availability of municipal bonds for investment by the Tax-Free
Money Fund might be adversely affected. In such event, the Tax-Free Money Fund
would reevaluate its investment objective and policies and submit possible
changes in the structure of the Tax-Free Money Fund for the consideration of
shareholders.
For a description of the minimum bond ratings by Moody's Investors
Service, Inc. ("Moody's") or Standard & Poor's, a division of The McGraw-Hill
Companies, Inc. ("S&P") 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. 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.
<PAGE>
As discussed in the Prospectus, to be eligible for purchase by the 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 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 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 Tax-Free Money 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 the Prospectus^ in the section
entitled "Investment Policies and Risks," the Tax-Free Money 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
<PAGE>
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 the Prospectus^ in the section
entitled "Investment Policies and Risks," the Tax-Free Money 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
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 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 the Prospectus^ in the section
entitled "Investment Policies and Risks," the Tax-Free Money Fund may at times
acquire municipal obligations 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 segregated
account with its custodian bank consisting of cash, liquid securities or a
combination thereof marked to market daily equal in value to the amount of such
commitments. The Fund will only make commitments to purchase securities with the
intention of actually acquiring the securities; however, the Fund may sell these
commitments before the settlement date if to do so is deemed advisable as a
matter of investment strategy.
To the extent the Fund remains substantially invested in debt securities
at the same time that it has committed to purchase securities on a when-issued
basis, which it would normally expect to do, there 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.
Investment Restrictions. As described in the section of the Funds'
Prospectus entitled "Investment Objective and Strategy," the Funds operate under
certain investment restrictions. These ^ restrictions are fundamental and may
not be changed with respect to a particular Fund without the prior approval of
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.
<PAGE>
U.S. GOVERNMENT MONEY FUND
Under these restrictions, the 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;
(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;
<PAGE>
(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 U.S. Government Money Fund uses an
industry classification system based on the O'Neil Database published by William
O'Neil & Co., Inc.
CASH RESERVES FUND
Under these restrictions, the 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);
(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;
<PAGE>
(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 Fund Management 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,
Fund Management 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 Cash Reserves Fund uses an
industry classification system based on the O'Neil Database published by William
O'Neil & Co., Inc. In addition, the Cash Reserves Fund considers captive finance
companies to be within separate industry categories based on the operating
industries to which they are related.
TAX-FREE MONEY FUND
Under these restrictions, the Tax-Free Money Fund may not:
(1) invest in equity securities or securities convertible into equity
securities;
<PAGE>
(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 Policies and
Restrictions";
(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 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;
<PAGE>
(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.
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 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, the 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 assets limit.
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 Cash Reserves Fund,
Tax-Free Money Fund and 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.
<PAGE>
(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., a Delaware ^
corporation ("IFG") is employed as the Company's investment adviser. IFG was
established in 1932 and also serves as an investment adviser to INVESCO Capital
Appreciation Funds, Inc. (formerly INVESCO Dynamics Fund, Inc.), INVESCO
Diversified Funds, Inc., INVESCO Emerging Opportunity Funds, Inc., INVESCO
Growth Fund, Inc., INVESCO Income Funds, Inc., INVESCO Industrial Income Fund,
Inc., INVESCO International Funds, Inc., INVESCO Multiple Asset Funds, Inc.,
INVESCO Specialty Funds, Inc., INVESCO Strategic Portfolios, Inc., INVESCO
Tax-Free Income Funds, Inc., INVESCO Value Trust and INVESCO Variable Investment
Funds, Inc.
The Sub-Adviser. IFG, as investment adviser, has contracted with INVESCO
Trust Company ("INVESCO Trust") to provide investment advisory and research
services to the Company. INVESCO Trust has the primary responsibility for
providing portfolio investment management services to the Funds. INVESCO Trust,
a trust company founded in 1969, is a wholly owned subsidiary of IFG.
IFG and INVESCO Trust are ^ indirect wholly owned ^ subsidiaries of
AMVESCAP PLC, a publicly-traded holding company that, through its subsidiaries,
engages in the business of investment management on an international basis.
INVESCO PLC changed its name to AMVESCO PLC on March 3, 1997, and to AMVESCAP
PLC on May 8, 1997, as part of a merger between a direct subsidiary of INVESCO
PLC and A I M Management Group, Inc. that created one of the largest independent
management businesses in the world with approximately $165 billion in assets
under management. IFG was established in 1932 and as of May 31, 1997, managed 14
mutual funds, consisting of ^ 45 separate portfolios, on behalf of over 859,115
shareholders. AMVESCAP PLC's North American subsidiaries include the following:
--INVESCO Capital Management, Inc. of Atlanta, Georgia manages
institutional investment portfolios, consisting primarily of discretionary
employee benefit plans for corporations and state and local governments, and
endowment funds. INVESCO Capital Management, Inc. is the sole shareholder of
INVESCO Services, Inc., a registered broker/dealer whose primary business is the
distribution of shares of two registered investment companies.
--INVESCO Management & Research, Inc. of Boston, Massachusetts primarily
manages pension and endowment accounts.
--PRIMCO Capital Management, Inc. of Louisville, Kentucky specializes in
managing stable return investments, principally on behalf of Section 401(k)
retirement plans.
--INVESCO Realty Advisors, Inc. of Dallas, Texas is responsible for
providing advisory services in the U.S. real estate markets for pension plans
and public pension funds, as well as endowment and foundation accounts.
--A I M Advisors, Inc. Of Houston, Texas provides investment advisory and
administrative services for retail and institutional mutual funds.
<PAGE>
--A I M Capital Management, Inc. Of Houston, Texas provides investment
advisory services to individuals, corporations, pension plans and other private
investment advisory accounts and also serves as a sub-adviser to certain retail
and institutional mutual funds, one Canadian mutual fund and one portfolio of an
open-end registered investment company that is offered to separate accounts of
variable insurance companies.
--A I M Distributors, Inc. and Fund Management Company of Houston, Texas
are registered broker-dealers that act as the principal underwriters for retail
and institutional mutual funds.
The corporate headquarters of AMVESCAP PLC are located at 11 Devonshire
Square, London, EC2M4YR, England.
^
As indicated in the Funds' Prospectus, IFG and INVESCO Trust permit
investment and other personnel to purchase and sell securities for their own
accounts in accordance with a compliance policy governing personal investing by
directors, officers and employees of IFG, INVESCO Trust and their North American
affiliates. The policy requires officers, inside directors, investment and other
personnel of IFG, INVESCO Trust and their North American affiliates to pre-
clear all transactions in securities not otherwise exempt under the policy.
Requests for trading authority will be denied when, among other reasons, the
proposed personal transaction would be contrary to the provisions of the policy
or would be deemed to adversely affect any transaction then known to be under
consideration for or to have been effected on behalf of any client account,
including the Funds.
In addition to the pre-clearance requirement described above, the policy
subjects officers, inside directors, investment and other personnel of IFG,
INVESCO Trust and their North American affiliates to various trading
restrictions and reporting obligations. All reportable transactions are reviewed
for compliance with the policy. The provisions of this policy are administered
by and subject to exceptions authorized by ^ IFG or INVESCO Trust.
Investment Advisory Agreement. IFG serves as investment adviser to each of
the Funds pursuant to an investment advisory agreement dated February 28, 1997
(the "Agreement") with the Company which was approved by the board of directors
on November 6, 1996, by a vote cast in person by a majority of the directors of
the Company, including a majority of the directors who are not "interested
persons" of the Company or IFG at a meeting called for such purpose.
Shareholders of each of the Funds approved the Agreement on January 31, 1997,
for an initial term expiring February 28, 1999. ^ Thereafter this Agreement may
be continued from year to year with respect to each Fund as long as 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 such Fund. Any such continuance also must
<PAGE>
be approved by a majority of the Company's directors who are not parties to the
Agreement or interested persons (as defined in the 1940 Act) of any such party,
cast in person at a meeting called for the purpose of voting on such
continuance. The Agreement may be terminated at any time without penalty by
either party, or by a Fund with respect to that Fund, upon sixty (60) days'
written notice and terminates automatically in the event of an assignment to the
extent required by the 1940 Act and the rules thereunder.
The Agreement provides that IFG shall manage the investment portfolios of
the Funds in conformity with each Fund's investment policies (either directly or
by delegation to a sub-adviser which may be a company affiliated with IFG).
Further, IFG shall perform all administrative, internal accounting (including
computation of net asset value), clerical, statistical, secretarial and all
other services necessary or incidental to the administration of the affairs of
the Funds excluding, however, those services that are the subject of separate
agreement between the Company and IFG or any affiliate thereof, including the
distribution and sale of Fund shares and provision of transfer agency, dividend
disbursing agency, and registrar services, and services furnished under an
Administrative Services Agreement with IFG discussed below. Services provided
under the Agreement include, but are not limited to: supplying the Company with
officers, clerical staff and other employees, if any, who are necessary in
connection with the Funds' operations; furnishing office space, facilities,
equipment, and supplies; providing personnel and facilities required to respond
to inquiries related to shareholder accounts; conducting periodic compliance
reviews of the Funds' operations; preparation and review of required documents,
reports and filings by IFG's in-house legal and accounting staff (including the
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 IFG are borne by the Funds.
As full compensation for its advisory services provided to the Company,
IFG receives a monthly fee. The fee is ^ calculated daily at an annual rate of:
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.
Sub-Advisory Agreement. INVESCO Trust serves as sub-adviser to each of the
Funds pursuant to a sub-advisory agreement dated February 28, 1997 (the
"Sub-Agreement") with IFG which was approved on November 6, 1996, by a vote cast
in person by a majority of the directors of the Company, including a majority of
the directors who are not "interested persons" of the Company, IFG, or INVESCO
Trust at a meeting called for such purpose. Shareholders of each of the Funds
approved the Sub-Agreement on January 31, 1997, for an initial term expiring
February 28, 1999. Thereafter, the Sub-Agreement may be continued from year to
<PAGE>
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 IFG and the Company's board of directors, 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 IFG, and executing transactions accordingly; (d)
providing the Funds the benefit of all of the investment analysis and research,
the reviews of current economic conditions and trends, and the consideration of
long-range investment policy now or hereafter generally available to investment
advisory customers of the Sub-Adviser; (e) determining what portion of 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 IFG, 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 IFG,
NOT the Funds.
Administrative Services Agreement. IFG, either directly or through
affiliated companies, provides certain administrative, sub-accounting, and
recordkeeping services to the Funds pursuant to an Administrative Services
Agreement dated February 28, 1997 (the "Administrative Agreement"). The
Administrative Agreement was approved by the board of directors on November 6,
1996, by a vote cast in person by ^ a majority of the directors of the Company,
including ^ a majority of the directors who are not "interested persons" of the
Company or IFG at a meeting called for such purpose. The Administrative
Agreement is for an initial term expiring February 28, 1998 and has been
<PAGE>
extended by action of the board of directors until May 15, 1998. The
Administrative Agreement may be continued from year to year as long as each such
continuance is specifically approved by the board of directors of the Company,
including a majority of the directors who are not parties to the Administrative
Agreement or interested persons (as defined in the 1940 Act) of any such party,
cast in person at a meeting called for the purpose of voting on such
continuance. The Administrative Agreement may be terminated at any time without
penalty by IFG on sixty (60) days' written notice, or by the Company upon thirty
(30) days' written notice, and terminates automatically in the event of an
assignment unless the Company's board of directors approves such assignment.
The Administrative Agreement provides that IFG shall provide the following
services to the Funds: (A) such sub-accounting and recordkeeping services and
functions as are reasonably necessary for the operation of the Funds; and (B)
such sub-accounting, recordkeeping, and administrative services and functions,
which may be provided by affiliates of IFG, 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 IFG consisting of a base fee of
$10,000 per year, plus an additional incremental fee computed daily and paid
monthly at an annual rate of 0.015% per year of the average net assets of the
Fund.
Transfer Agency Agreement. IFG also performs transfer agent, dividend
disbursing agent, and registrar services for the Company pursuant to a Transfer
Agency Agreement dated February 28, 1997, which was approved by the board of
directors of the Company, including a majority of the Company's directors who
are not parties to the Transfer Agency Agreement or "interested persons" of any
such party, on November 6, 1996, for an initial term expiring February 28, 1998,
and has been extended by action of the board of directors until May 15, 1998.
Thereafter, the Transfer Agency Agreement may be continued from year to year as
long as such continuance is specifically approved at least annually by the board
of directors of the Company, or by a vote of the holders of a majority of the
outstanding shares of each of the Funds. Any such continuance also must be
approved by a majority of the Company's directors who are not parties to the
Transfer Agency Agreement or interested persons (as defined by the 1940 Act) of
any such party, by votes cast in person at a meeting called for the purpose of
voting on such continuance. The Transfer Agency Agreement may be terminated at
any time without penalty by either party upon sixty (60) days' written notice
and terminates automatically in the event of assignment.
The Transfer Agency Agreement provides that ^ each Fund shall pay to IFG ^
a fee of $27.00 per shareholder account or, where applicable, per participant in
an omnibus account per year. This fee is paid monthly at 1/12 of the annual fee
and is based upon the actual number of shareholder accounts and omnibus account
participants in existence at any time during each month.
<PAGE>
Set forth below are the advisory fees, administrative fees and transfer
agency fees paid by each of the Funds for the periods indicated:
INVESCO U.S. Government Money Fund
<TABLE>
<CAPTION>
Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended
May 31, 1997 May 31, 1996 May 31, 1995
----------------- ----------------- -----------------
<S> <C> <C> <C>
Advisory Fee(1) $426,139 $377,802 $338,959
Administrative
Services Fee 22,784 21,334 20,169
Transfer Agency Fee 339,383 280,826 273,251
</TABLE>
- ----------------
(1) These amounts do not reflect the voluntary expense limitations applicable
to the Funds described in the Funds' Prospectus.
INVESCO Cash Reserves Fund
<TABLE>
<CAPTION>
Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended
May 31, 1997 May 31, 1996 May 31, 1995
----------------- ----------------- -----------------
<S> <C> <C> <C>
Advisory Fee(1) $2,978,520 $2,739,278 $2,931,431
Administrative
Services Fee 118,983 106,900 116,614
Transfer Agency Fee 2,995,219 2,445,244 2,333,326
</TABLE>
- -----------------
(1) These amounts do not reflect the voluntary expense limitations applicable
to the Funds described in the Funds' Prospectus.
<PAGE>
INVESCO Tax-Free Money Fund
<TABLE>
<CAPTION>
Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended
May 31, 1997 May 31, 1996 May 31, 1995
----------------- ----------------- -----------------
<S> <C> <C> <C>
Advisory Fee(1) $282,216 $286,046 359,656
Administrative
Services Fee 18,463 18,582 20,789
Transfer Agency Fee 174,207 177,342 203,616
</TABLE>
- --------------
(1) These amounts do not reflect the voluntary expense limitations applicable to
the Funds described in the Funds' Prospectus.
<PAGE>
Officers and Directors of the Company. The overall direction and
supervision of the Company is the responsibility of the board of directors,
which has the primary duty of seeing that the general investment policies and
programs of each of the Funds are carried out and that the Funds' portfolios are
properly administered. The officers of the Company, all of whom are officers and
employees of, and are paid by, IFG, are responsible for the day-to-day
administration of the Company and each of the Funds. The investment adviser for
the Company has the primary responsibility for making investment decisions on
behalf the Company. These investment decisions are reviewed by the investment
committee of ^ IFG.
All of the officers and directors of the Company hold comparable positions
with INVESCO Capital Appreciation Funds, Inc. (formerly, INVESCO Dynamics Fund,
Inc.), INVESCO Diversified Funds, Inc., INVESCO Emerging Opportunity Funds,
Inc., INVESCO Growth Fund, Inc., INVESCO Income Funds, Inc., INVESCO Industrial
Income Fund, Inc., INVESCO International Funds, Inc., INVESCO Multiple Asset
Funds, Inc., INVESCO Specialty Funds, Inc., INVESCO Strategic Portfolios, Inc.,
INVESCO Tax-Free Income Funds, Inc., and INVESCO Variable Investment Funds, Inc.
All of the directors of the Company also serve as trustees of INVESCO Value
Trust. In addition, all of the directors of the Company, with the exception of
Dan Hesser, serve as trustees of INVESCO Treasurer's Series Trust. All of the
officers of the Company also hold comparable positions with INVESCO Value Trust.
Set forth below is information with respect to each of the Company's officers
and directors. Unless otherwise indicated, the address of the directors and
officers is Post Office Box 173706, Denver, Colorado 80217-3706. Their
affiliations represent their principal occupations during the past five years.
CHARLES W. BRADY,*+ Chairman of the Board. Chief Executive Officer and
Director of AMVESCAP PLC, London, England, and of various subsidiaries thereof.
Chairman of the Board of INVESCO Treasurer's Series Trust. Address: 1315
Peachtree Street, NE, Atlanta, Georgia. Born: May 11, 1935.
FRED A. DEERING,+# Vice Chairman of the Board. Vice Chairman of INVESCO
Treasurer's Series Trust. Trustee of INVESCO Global Health Sciences Fund.
Formerly, Chairman of the Executive Committee and Chairman of the Board of
Security Life of Denver Insurance Company, Denver, Colorado; Director of ING
America Life Insurance Company, Urbaine Life Insurance Company and Midwestern
United Life Insurance Company. Address: Security Life Center, 1290 Broadway,
Denver, Colorado. Born: January 12, 1928.
DAN J. HESSER,+* President, CEO and Director. Chairman of the Board,
President, and Chief Executive Officer of INVESCO Funds Group, Inc.; President
and Director of INVESCO Trust Company; President and Chief Operating Officer of
INVESCO Global Health Sciences Fund. Born: December 27, 1939.
<PAGE>
VICTOR L. ANDREWS,** Director. Professor Emeritus, Chairman Emeritus and
Chairman of the CFO Roundtable of the Department of Finance at Georgia State
University, Atlanta, Georgia; President, Andrews Financial Associates, Inc.
(consulting firm); since October 1984, Director of the Center for the Study of
Regulated Industry at Georgia State University; formerly, member of the
faculties of the Harvard Business School and the Sloan School of Management of
MIT. Dr. Andrews is also a director of the Southeastern Thrift and Bank Fund,
Inc. and The Sheffield Funds, Inc. Address: 4625 Jettridge Drive, Atlanta,
Georgia. Born: June 23, 1930.
BOB R. BAKER,+** Director. President and Chief Executive Officer of AMC
Cancer Research Center, Denver, Colorado, since January 1989; until mid-December
1988, Vice Chairman of the Board of First Columbia Financial Corporation (a
financial institution), Englewood, Colorado. Formerly, Chairman of the Board and
Chief Executive Officer of First Columbia Financial Corporation. Address: 1775
Sherman Street, #1000, Denver, Colorado. Born: August 7, 1936.
LAWRENCE H. BUDNER,# Director. Trust Consultant; prior to June 30, 1987,
Senior Vice President and Senior Trust Officer of InterFirst Bank, Dallas,
Texas. Address: 7608 Glen Albens Circle, Dallas, Texas. Born: July 25, 1930.
DANIEL D. CHABRIS,+# Director. Financial Consultant; Assistant Treasurer of
Colt Industries Inc., New York, New York, from 1966 to 1988. Address: 19
Kingsbridge Way, Madison, Connecticut. Born: August 1, 1923.
WENDY L. GRAMM, Ph.D.,** Director. Self-employed (since 1993); Professor of
Economics and Public Administration, University of Texas at Arlington. Formerly,
Chairman, Commodity Futures Trading Commission from 1988 to 1993, administrator
for Information and Regulatory Affairs at the Office of Management and Budget
from 1985 to 1988, Executive Director of the Presidential Task Force on
Regulatory Relief and Director of the Federal Trade Commission's Bureau of
Economics. Dr. Gramm is also a director of the Chicago Mercantile Exchange,
Enron Corporation, IBP, Inc., State Farm Insurance Company, State Farm Life
Insurance Company, Kinetic Concepts, Inc., Independant Women's Forum,
International Republic Institute, and the Republican Women's Federal Forum. Dr.
Gramm is also a member of the Board of Visitors, College of Business
Administration, University of Iowa, and a member of the Board of Visitors,
Center for Study of Public Choice, George Mason University. Address: 4201 Yuma
Street, N.W., Washington, D.C. Born: January 10, 1945.
HUBERT L. HARRIS, JR.,* Director. Chairman (since 1996) and President
(January 1990 to May 1996) of INVESCO Services, Inc.; Chief Executive Officer of
INVESCO Individual Services Group. Member of the Executive Committee of the
Alumni Board of Trustees of Georgia Institute of Technology. Address: 1315
Peachtree Street, NE, Atlanta, Georgia. Born: July 15, 1943.
<PAGE>
KENNETH T. KING,** Director. Formerly, Chairman of the Board of The Capitol
Life Insurance Company, Providence Washington Insurance Company, and Director of
numerous subsidiaries thereof in the U.S. Formerly, Chairman of the Board of The
Providence Capitol Companies in the United Kingdom and Guernsey. Chairman of the
Board of the Symbion Corporation (a high technology company) until 1987.
Address: 4080 North Circulo Manzanillo, Tucson, Arizona. Born: November 16,
1925.
JOHN W. MCINTYRE,# Director. Retired. Formerly, Vice Chairman of the Board
of Directors of the Citizens and Southern Corporation and Chairman of the Board
and Chief Executive Officer of the Citizens and Southern Georgia Corporation and
Citizens and Southern National Bank. Director of Golden Poultry Co., Inc.
Trustee of INVESCO Global Health Sciences Fund and Gables Residential Trust.
Address: 7 Piedmont Center, Suite 100, Atlanta, Georgia 30305. Born: September
14, 1930.
LARRY SOLL, Ph.D., Director. Formerly, Chairman of the Board (1987 to
1994), Chief Executive Officer (1982 to 1989 and 1993 to 1994) and President
(1982 to 1989) of Synergen Corp. Director of Synergen since incorporation in
1982. Director of ISD Pharmaceuticals, Inc., Trustee of INVESCO Global Health
Sciences Fund. Address: 345 Poorman Road, Boulder, Colorado. Born: April 26,
1942.
GLEN A. PAYNE, Secretary. Senior Vice President (since 1995), General
Counsel and Secretary of INVESCO Funds Group, Inc. and INVESCO Trust Company;
Vice President (May 1989 to April 1995), Secretary and General Counsel of
INVESCO Funds Group, Inc.; formerly, employee of a U.S. regulatory agency,
Washington, D.C., (June 1973 through May 1989). Born: September 25, 1947.
RONALD L. GROOMS, Treasurer. Senior Vice President and Treasurer of INVESCO
Funds Group, Inc. and INVESCO Trust Company. 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 since July
1995 and formerly (August 1992 to July 1995) Vice President of INVESCO Funds
Group, Inc. and trust officer of INVESCO Trust Company. Formerly,Vice President
of 440 Financial Group from June 1990 to August 1992; Assistant Vice President
of Putnam Companies from November 1986 to June 1990. Born: August 21, 1956.
ALAN I. WATSON, Assistant Secretary. Vice President of INVESCO Funds Group,
Inc. 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.
<PAGE>
*These directors are "interested persons" of the Company as defined in the
1940 Act.
**Member of the management liaison committee of the Company.
As of July 11, 1997, officers and directors of the Company, as a group,
beneficially owned less than 1% of the Company's outstanding shares, and less
than 1%, 1% and 2%, respectively, of the outstanding shares of the INVESCO U.S.
Government Money Fund, Cash Reserves Fund and the Tax-Free Money Fund.
Director Compensation
The following table sets forth, for the fiscal year ended May 31, 1997:
the compensation paid by the Fund to its eight independent directors for
services rendered in their capacities as directors of the ^ Company; 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),
INVESCO Advisor Funds, Inc., INVESCO Treasurer's Series Trust and INVESCO Global
Health Sciences Fund (collectively, the "INVESCO Complex") to these directors
for services rendered in their capacities as directors or trustees during the
year ended December 31, 1996. As of December 31, 1996, there were 49 funds in
the INVESCO Complex. Dr. Soll became an independent director of the Company
effective May 15, 1997. Dr. Gramm became in independent director of the Company
effective July 29, 1997, and is not included in the table below. Effective
February 28, 1997, Mr. Frazier resigned as a director of the Company.
<PAGE>
Total
Compensa-
Benefits Estimated tion From
Aggregate Accrued As Annual INVESCO
Compensa- Part of Benefits Complex
tion From Company Upon Paid To
Company(1) Expenses(2) Retirement(3) Directors(1)
Fred A.Deering, $5,567 $1,611 $1,569 $98,850
Vice Chairman of
the Board
Victor L. Andrews 5,468 1,523 1,816 84,350
Bob R. Baker 5,609 1,360 2,434 84,850
Lawrence H. Budner 5,328 1,523 1,816 80,350
Daniel D. Chabris 5,447 1,738 1,291 84,850
A. D. Frazier, Jr.(4) 2,305 0 0 81,500
Kenneth T. King 4,782 1,673 1,423 71,350
John W. McIntyre 5,225 0 0 90,350
Larry Soll 1,078 0 0 17,500
------- ------ ------- --------
Total $40,809 $9,428 $10,349 $693,950
% of Net Assets 0.0050%(5) 0.0011%(5) 0.0045%(6)
(1)The vice chairman of the board, the chairmen of the audit, management
liaison and compensation committees, and the members of the executive and
valuation committees each receive compensation for serving in such capacities in
addition to the compensation paid to all independent directors.
(2)Represents benefits accrued with respect to the Defined Benefit Deferred
Compensation Plan discussed below, and not compensation deferred at the election
of the directors.
(3)These figures represent the Company's share of the estimated annual
benefits payable by the INVESCO Complex (excluding INVESCO Global Health
Sciences Fund which does not participate in any retirement plan) upon the
directors' retirement, calculated using the current method of allocating
director compensation among the funds in the INVESCO Complex. These estimated
benefits assume retirement at age 72 and that the basic retainer payable to the
directors will be adjusted periodically for inflation, for increases in the
number of funds in the INVESCO Complex, and for other reasons during the period
in which retirement benefits are accrued on behalf of the respective directors.
<PAGE>
This results in lower estimated benefits for directors who are closer to
retirement and higher estimated benefits for directors who are further from
retirement. With the exception of Messrs. Frazier and McIntyre, each of these
directors has served as a director/trustee of one or more of the funds in the
INVESCO Complex for the minimum five-year period required to be eligible to
participate in the Defined Benefit Deferred Compensation Plan.
(4)Effective February 28, 1997, Mr. Frazier resigned as a director of the
Company. Effective November 1, 1996, Mr. Frazier was employed by AMVESCAP PLC, a
company affiliated with IFG. Because it was possible that Mr. Frazier would be
employed with AMVESCAP PLC, he was deemed to be an "interested person" of the
Company and of the other funds in the INVESCO Complex, effective May 1, 1996.
Effective November 1, 1996, Mr. Frazier no longer received any director's fees
or other compensation from the Company or other funds in the INVESCO Complex for
his service as a director.
(5)Totals as a percentage of the Company's net assets as of May 31, 1997.
(6)Total as a percentage of the net assets of the INVESCO Complex as of
December 31, 1996.
Messrs. Brady, Harris and Hesser, as "interested persons" of the Company
and other funds in the INVESCO Complex, receive compensation as officers or
employees of INVESCO or its affiliated companies, and do not receive any
director's fees or other compensation from the Company or other funds in the
INVESCO Complex for their services as directors.
The boards of directors/trustees of the mutual funds managed by IFG and
INVESCO Treasurer's Series Trust have adopted a Defined Benefit Deferred
Compensation Plan for the non-interested directors and trustees of the funds.
Under this plan, each director or trustee who is not an interested person of the
funds (as defined in the 1940 Act) and who has served for at least five years (a
"qualified director") is entitled to receive, upon retiring from the boards at
the retirement age of 72 (or the retirement age of 73 to 74, if the retirement
date is extended by the boards for one or two years, but less than three years)
continuation of payment for one year (the "first year retirement benefit") of
the annual basic retainer payable by the funds to the qualified director at the
time of his retirement (the "basic retainer"). Commencing with any such
director's second year of retirement, and commencing with the first year of
retirement of a director whose retirement has been extended by the board for
three years, a qualified director shall receive quarterly payments at an annual
rate equal to 40% of the basic retainer. These payments will continue for the
remainder of the qualified director's life or ten years, whichever is longer
(the "reduced retainer payments"). If a qualified director dies or becomes
disabled after age 72 and before age 74 while still a director of the funds, the
first year retirement benefit and the reduced retainer payments will be made to
him or to his beneficiary or estate. If a qualified director becomes disabled or
dies either prior to age 72 or during his/her 74th year while still a director
of the funds, the director will not be entitled to receive the first year
retirement benefit; however, the reduced retainer payments will be made to his
<PAGE>
beneficiary or estate. The plan is administered by a committee of three
directors who are also participants in the plan and one director who is not a
plan participant. The cost of the plan will be allocated among the IFG and
Treasurer's Series Trust funds in a manner determined to be fair and equitable
by the committee. The Company is not making any payments to directors under the
plan as of the date of this Statement of Additional Information. The Company has
no stock options or other pension or retirement plans for management or other
personnel and pays no salary or compensation to any of its officers.
The Company has an audit committee which is comprised of four of the
directors who are not interested persons of the Company. The committee meets
periodically with the Company's independent accountants and officers to review
accounting principles used by the Company, the adequacy of internal controls,
the responsibilities and fees of the independent accountants, and other matters.
The Company also has a management liaison committee which meets quarterly
with various management personnel of INVESCO in order (a) to facilitate better
understanding of management and operations of the Company, and (b) to review
legal and operational matters which have been assigned to the committee by the
board of directors, in furtherance of the board of directors' overall duty of
supervision.
HOW SHARES CAN BE PURCHASED
Shares of the Funds are sold on a continuous basis at the net asset value
per share next calculated after receipt of a purchase order in good form. The
net asset value per share 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." IFG 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 the Funds' Prospectus entitled "How To Buy
Shares," the net asset value of shares of each Fund is computed once each day
that the New York Stock Exchange is open as of the close of regular trading on
that Exchange ^(generally 4:00 p.m., New York time) and applies to purchase and
redemption orders received prior to that time. Net asset value per share is also
computed on any other day 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, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas. ^ The net asset value per share of ^
a Fund is calculated by dividing the value of all securities held by that Fund ^
plus its other assets, less the Fund's liabilities (including accrued expenses),
by the number of outstanding shares of ^ the Fund.
<PAGE>
The value of securities held by the Funds 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 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 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, 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
<PAGE>
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 board of
directors.
FUND PERFORMANCE
As discussed in the section of the Funds' Prospectus^ entitled "Fund Price
and Performance," 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 day period, 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, 1997, the INVESCO U.S.
Government Money Fund's current and effective yields were 4.61% and 4.72%,
respectively; the INVESCO Cash Reserves Fund's current and effective yields were
4.87% and 4.99%, respectively; and the INVESCO Tax-Free Money Fund's current and
effective yields were 3.39% and 3.45%, 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 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, 1997 was as follows:
<PAGE>
1 5 10
Fund Year Years Years
- ---- ---- ----- -----
Cash Reserves Fund 4.69 3.93 5.42
Tax-Free Money Fund 2.90 2.55 3.57
U.S. Gov't Money Fund 4.57 3.84 3.87#
# From inception (April 1991).
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
Funds. Sources for Fund performance information and articles about the Funds
include, but are not limited to, the following:
American Association of Individual Investors' Journal
Banxquote
Barron's
Business Week
CDA Investment Technologies
CNBC
CNN
Consumer Digest
Financial Times
Financial World
Forbes
Fortune
<PAGE>
Ibbotson Associates, Inc.
Institutional Investor
Investment Company Data, Inc.
Investor's Business Daily
Kiplinger's Personal Finance
Lipper Analytical Services, Inc.'s Mutual Fund Performance
Analysis
Money
Morningstar
Mutual Fund Forecaster
No-Load Analyst
No-Load Fund X
Personal Investor
Smart Money
The New York Times
The No-Load Fund Investor
U.S. News and World Report
United Mutual Fund Selector
USA Today
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 the Funds'
Prospectus entitled "How To Sell Shares," each Fund offers a Periodic Withdrawal
Plan. All dividends and distributions on shares owned by shareholders
participating in this Plan are reinvested in additional shares. Because
withdrawal payments represent the proceeds from sales of shares, the amount of
shareholders' investments in a Fund will be reduced to the extent that
withdrawal payments exceed dividends and other distributions paid and
reinvested. Any gain or loss on such redemptions must be reported for tax
purposes. In each case, shares will be redeemed at the close of business on or
about the 20th day of each month preceding payment, and payments will be mailed
within five business days thereafter.
The Periodic Withdrawal Plan involves the use of principal and is not a
guaranteed annuity. Payments under such Plan do not represent income or a return
on investment.
Participation in the Periodic Withdrawal Plan may be terminated at any
time by 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 ^ Policy. As discussed in the section of the Funds' Prospectus
entitled "How to Buy Shares -- Exchange ^ Policy," each Fund offers shareholders
the ^ ability to exchange shares of a Fund for shares of another fund or for
shares of certain other no-load mutual funds advised by IFG. Exchange requests
may be made 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
<PAGE>
Additional Information. Exchanges made by telephone must be in an amount of at
least $250, if the exchange is being made into an existing account of one of the
INVESCO funds. All exchanges that have established a NEW account must meet the
fund's applicable minimum initial investment requirements. Written exchange
requests into an existing account have no minimum requirements other than the
fund's applicable minimum subsequent investment requirements. Any gain or loss
realized on such an exchange is recognized for federal income tax purposes. This
privilege is not an option or right to purchase securities, but is a revocable
privilege permitted under the present policies of each of the funds and is not
available in any state or other jurisdiction where the shares of the mutual fund
into which transfer is to be made are not qualified for sale, or when the net
asset value of the shares presented for exchange is less than the minimum dollar
purchase required by the appropriate prospectus.
TAX-DEFERRED RETIREMENT PLANS
As described in the section of the Funds' Prospectus entitled "Fund
Services," shares of the U.S. Government Money Fund and Cash Reserves Fund may
be purchased as the investment medium for various tax-deferred retirement plans.
Persons who request information regarding these plans from IFG will be provided
with prototype documents and other supporting information regarding the type of
plan requested. Each of these plans involves a long-term commitment of assets
and is subject to possible regulatory penalties for excess contributions,
premature distributions or for insufficient distributions after age 70-1/2. The
legal and tax implications may vary according to the circumstances of the
individual investor. Therefore, the investor is urged to consult with an
attorney or tax adviser prior to the establishment of such a plan.
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 Sell Shares." The right of redemption may be
suspended and payment postponed when: (a) the New York Stock Exchange is closed
for other than customary weekends and holidays; (b) trading on that exchange is
restricted; (c) an emergency exists as a result of which disposal by a
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 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.
<PAGE>
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, 1997 and intends to continue to qualify during its 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 U.S. Government Money Fund and Cash Reserves 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.
A portion of any dividend distributions from U.S. Government Money Fund
may be subject to applicable state and local taxes. Dividends from Cash Reserves
Fund generally will be subject to applicable state and local taxes.
As discussed in the Prospectus, the Tax-Free Money 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 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 Tax-Free Money Fund are advised to consult their own tax advisers with
respect to these matters.
As discussed in the 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.
<PAGE>
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 Fund 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 IFG, as the Company's investment
adviser, or INVESCO Trust, as the Company's sub-adviser, places orders for the
purchase and sale of securities with brokers and dealers based upon IFG's or
INVESCO Trust's evaluation of their financial responsibility, subject to their
ability to effect transactions at the best available prices. ^ IFG or INVESCO
Trust evaluates the overall reasonableness of any brokerage commissions paid by
reviewing the quality of executions obtained on each Fund's portfolio
transactions, viewed in terms of the size of transactions, prevailing market
conditions in the security purchased or sold and general economic and market
conditions. In seeking to ensure that any commissions charged the Fund are
consistent with prevailing and reasonable commissions, ^ IFG or INVESCO Trust
also endeavors to monitor brokerage industry practices with regard to the
commissions charged by brokers and dealers on transactions effected for other
comparable institutional investors. While ^ IFG or INVESCO Trust seeks
reasonably competitive rates, the Funds do not necessarily pay the lowest
commission or spread available.
Consistent with the standard of seeking to obtain the best execution on
portfolio transactions, ^ IFG or INVESCO Trust may select brokers that provide
research services to effect such transactions. Research services consist of
statistical and analytical reports relating to issuers, industries, securities
and economic factors and trends, which may be of assistance or value to Fund
Management in making informed investment decisions. Research services prepared
and furnished by brokers through which the Funds effect securities transactions
may be used by ^ IFG or INVESCO Trust in servicing all of their respective
accounts and not all such services may be used by ^ IFG or INVESCO Trust in
connection with the Funds.
<PAGE>
In recognition of the value of the above-described brokerage and research
services provided by certain brokers, ^ IFG or INVESCO Trust, consistent with
the standard of seeking to obtain the best execution on portfolio transactions,
may place orders with such brokers for the execution of transactions for the
Funds on which the mark-ups are in excess of those which other brokers might
have charged for effecting the same transactions.
Portfolio transactions may be effected through qualified broker-dealers ^
that recommend the Funds to their clients, or ^ that act as agent in the
purchase of 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, 1997, 1996 and 1995 for the
Funds.
At May 31, 1997, the Funds held securities of their regular brokers or
dealers, or their parents, as follows:
Value of Securities
- -------------------
Value at
Broker or Dealer 5/31/97
- ---------------- --------
U.S. Government Money Fund -0-
Cash Reserves Fund $113,985,000
Tax-Free Money Fund -0-
Neither IFG nor INVESCO Trust receives any brokerage commissions on
portfolio transactions effected on behalf of any of the Funds, and there is no
affiliation between IFG, INVESCO Trust, or any person affiliated with IFG,
INVESCO Trust, or the Funds, and any broker or dealer that executes transactions
for the Funds.
ADDITIONAL INFORMATION
Common Stock. The Company has 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, 1997, 661,647,800 shares
of the Cash Reserves Fund, 47,577,125 shares of the Tax-Free Money Fund and
66,451,479 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.
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Shares of each class represent the interests of the shareholders of such
class in a particular portfolio of investments of the Company. Each class of the
Company's shares is preferred over all other classes ^ with respect ^ to the
assets specifically allocated to that class, and all income, earnings, profits
and proceeds from such assets, subject only to the rights of creditors, are
allocated to shares of that class. The assets of each class are segregated on
the books of account and are charged with the liabilities of that class and with
a share of the Company's general liabilities. The board of directors determines
those assets and liabilities deemed to be general assets or liabilities of the
Company, and 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 June 30, 1997, there were no entities that
held more than 5% of the Funds' outstanding securities:
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.
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Transfer Agent. The Company is provided with transfer agent, registrar,
and dividend disbursing agent services by IFG, 7800 E. Union Avenue, Denver,
Colorado 80237, pursuant to the Transfer Agency Agreement described herein. Such
services include the issuance, cancellation and transfer of shares of 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, 1997 and the report of Price
Waterhouse LLP with respect to such financial statements are incorporated herein
by reference from the Company's Annual Report to Shareholders for the fiscal
year ended May 31, 1997.
Prospectus. The Company will furnish, without charge, a copy of the
Prospectus for the Funds, upon request. Such requests should be made to the
Company at the mailing address or telephone number set forth on the first page
of this Statement of Additional Information.
Registration Statement. This Statement of Additional Information and the
Prospectus do not contain all of the information set forth in the Registration
Statement the Company has filed with the 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.
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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 S&P and 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.
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.
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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.
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