PROSPECTUS | August 15, 2000, AS SUPPLEMENTED AUGUST 24, 2000
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YOU SHOULD KNOW WHAT INVESCO KNOWS (TM)
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INVESCO MONEY MARKET FUNDS, INC.
INVESCO CASH RESERVES FUND -- CLASS A, B AND C
A MUTUAL FUND DESIGNED FOR INVESTORS SEEKING A HIGH LEVEL OF CURRENT
INCOME, CONSISTENT WITH THE PRESERVATION OF CAPITAL AND THE MAINTENANCE OF
LIQUIDITY. CLASS A, B AND C SHARES ARE SOLD PRIMARILY THROUGH THIRD PARTIES,
SUCH AS BROKERS, BANKS, AND FINANCIAL PLANNERS.
TABLE OF CONTENTS
Investment Goals, Strategies And Risks..............................2
Fund Performance....................................................3
Fees And Expenses...................................................4
Investment Risks....................................................5
Principal Risks Associated With The Fund............................6
Fund Management.....................................................7
Portfolio Manager...................................................7
Potential Rewards...................................................8
Share Price.........................................................8
How To Buy Shares...................................................9
How To Sell Shares.................................................14
Dividends And Taxes................................................16
Financial Highlights...............................................17
No dealer, sales person, or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and you should not rely on such other information or
representations.
[INVESCO ICON] INVESCO
The Securities and Exchange Commission has not approved or disapproved the
shares of the Fund. Likewise, the Commission has not determined if this
Prospectus is truthful or complete. Anyone who tells you otherwise is committing
a federal crime.
<PAGE>
INVESCO Funds Group, Inc. ("INVESCO") is the investment adviser for the
Fund. Together with our affiliated companies, we at INVESCO direct all aspects
of the management of the Fund.
This Prospectus contains important information about the Fund's Class A, B
and C shares, which are sold primarily through third parties, such as brokers,
banks, and financial planners. Class A and Class B shares of the Fund are not
appropriate for direct investments. We will only permit investment in Class A or
Class B shares if such investments occur as a result of exchanges into the Fund
from Class A or Class B shares of other INVESCO funds.
The Fund also offers an additional class of shares directly to the public
through a separate prospectus. Each of the classes of shares have varying
expenses, with resulting effects on their performance. You can choose the class
of shares that is best for you, based on how much you plan to invest and other
relevant factors discussed in "How To Buy Shares." To obtain additional
information about other classes of shares, contact INVESCO Distributors, Inc.
("IDI") at 1-800-328-2234 or your broker, bank, or financial planner who is
offering the Class A, B and C shares offered in this Prospectus.
This Prospectus will tell you more about:
[KEY ICON] Investment Goals & Strategies
[ARROWS ICON] Potential Investment Risks
[GRAPH ICON] Past Performance
[INVESCO ICON] Working With INVESCO
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[KEY ICON] [ARROWS ICON] INVESTMENT GOALS, STRATEGIES AND RISKS
FOR MORE DETAILS ABOUT THE FUND'S CURRENT INVESTMENTS AND MARKET OUTLOOK, PLEASE
SEE THE MOST RECENT ANNUAL OR SEMIANNUAL REPORT.
The Fund is a money market fund. It invests in "money market" securities, which
are high quality debt securities with a life span or remaining maturity of 397
days or less. The average dollar-weighted maturity of the Fund's portfolio is 90
days or less.
The Fund invests primarily in short-term debt securities issued by large
creditworthy corporations, banks and finance companies, as well as debt
securities issued by the U.S. government. These securities include corporate
debt securities, bank obligations, short-term commercial paper, U.S. government
debt, and repurchase agreements.
The Fund is not intended for investors seeking capital appreciation. While
not intended as a complete investment program, the Fund may be a valuable
element of your investment portfolio.
The Fund operates under policies designed to ensure compliance with
specific federal regulations applied to money market funds. These policies
include requirements for:
<PAGE>
o maintaining high credit quality of the Fund's investments;
o maintaining a short average portfolio maturity;
o ensuring adequate diversification of both the issuers of the Fund's
investments and the guarantors of those investments, if any; and
o monitoring accurate pricing of the Fund's investments so unfairness does not
result from the use of the amortized cost method to value those investments.
An investment in the Fund is not insured or guaranteed by the Federal
Deposit Insurance Corporation ("FDIC") or any other government agency. Although
the Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund.
[GRAPH ICON] FUND PERFORMANCE
Since the Fund's Class C shares were not offered until February 15, 2000
and the Class A and B shares were not offered until August 15, 2000, the bar
chart below shows the Fund's Investor Class shares' actual yearly performance
for the years ended December 31 (commonly known as its "total return") over the
past decade. Investor Class shares are not offered in this Prospectus. Investor
Class and Class A, B and C returns would be similar because all classes of
shares invest in the same portfolio of securities. The returns of the classes
would differ, however, to the extent of differing levels of expenses. In this
regard, the bar chart does not reflect sales charges, contingent deferred sales
charges or asset based sales charges; if it did, the total returns shown would
be lower. The table below shows average annual total returns for various periods
ended December 31 for the Fund's Investor Class shares. To obtain current 7-day
yield information, please call INVESCO at 1-800-328-2234. Remember, past
performance does not indicate how the Fund will perform in the future.
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CASH RESERVES FUND -- INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2),(3)
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'90 '91 '92 '93 '94 '95 '96 '97 '98 '99
7.82% 5.58% 3.16% 2.36% 3.70% 5.26% 4.70% 4.81% 4.74% 4.38%
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Best Calendar Qtr. 6/90 1.93%
Worst Calendar Qtr. 6/93 0.56%
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<PAGE>
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AVERAGE ANNUAL TOTAL RETURN(1),(2)
AS OF 12/31/99
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1 YEAR 5 YEARS 10 YEARS
Cash Reserves Fund--Investor Class 4.38% 4.78% 4.64%
(1) Total return figures include reinvested dividends, and include the effect
of the Fund's expenses.
(2) The return for Cash Reserves Fund - Investor Class was 1.37% as of the
calendar quarter ended June 30, 2000.
(3) The total returns are for the Investor Class shares that are not offered
in this Prospectus. Total returns of Class A, B and C shares will differ
only to the extent that the classes do not have the same expenses.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
SHAREHOLDER FEES PAID DIRECTLY FROM YOUR ACCOUNT
Class A Class B Class C
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage of
offering price) None None None
Maximum Deferred Sales Charge (Load)
(as a percentage of the total original
cost of the shares) 1%(1) 5.00%(1) 1.00%(1)
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS
Class A Class B Class C
Management Fees 0.40% 0.40% 0.40%
Distribution and Service (12b-1) fees(2) 0.35% 1.00% 1.00%
Other Expenses 0.58%(3) 0.58%(3) 0.15%(4)
----- ----- -----
Total Annual Fund Operating Expenses 1.33%(3) 1.98%(3) 1.55%(4)
===== ===== =====
(1) A 5% and 1% contingent deferred sales charge (CDSC) may be charged on
Class B and Class C shares, respectively, and a 1% CDSC may be charged on
Class A shares under certain circumstances. Please see the section
entitled "How To Buy Shares."
(2) Because each Class pays a 12b-1 distribution fee which is based upon
the Fund's assets, if you own shares of the Fund for a long period of
time, you may pay more than the economic equivalent of the maximum
front-end sales charge permitted for mutual funds by the National
Association of Securities Dealers, Inc.
(3) Based on estimated expenses for the current fiscal year which may be
more or less than actual expenses. Actual expenses are not provided
because the Fund's Class A and B shares were not offered until August 15,
2000. Certain expenses of the Fund will be absorbed voluntarily by
INVESCO in order to ensure that expenses for the Fund's Class A and B
shares will not exceed 1.25% and 1.90%, respectively, of the Fund's
average net assets attributable to the respective class of shares
pursuant to a commitment between the Fund and INVESCO. This commitment
may be changed at any time following consultation with the board of
<PAGE>
directors. After absorption, but excluding any expense offset
arrangements, the Fund's Class A shares' Other Expenses and Total Annual
Fund Operating Expenses for the fiscal year ending May 31, 2001 are
estimated to be 0.50% and 1.25%, respectively, of the Fund's average net
assets attributable to Class A shares; and the Fund's Class B shares'
Other Expenses and Total Annual Fund Operating Expenses for the fiscal
year ending May 31, 2001 are estimated to be 0.50% and 1.90%,
respectively, of the Fund's average net assets attributable to Class B
shares.
(4) The expense information in the table has been restated from the
financials to reflect a change in the transfer agency fees.
EXAMPLES
The Examples are intended to help you compare the cost of investing in the
Fund to the cost of investing in other mutual funds.
The Examples assume that you invested $10,000 in the Fund for the time
periods indicated. The first Example assumes that you redeem all of your shares
at the end of those periods. The second Example assumes that you keep your
shares. Both Examples also assume that your investment had a hypothetical 5%
return each year and that the Fund's operating expenses remained the same.
Although the actual costs and performance of the Fund may be higher or lower,
based on these assumptions your costs would have been:
IF SHARES ARE REDEEMED 1 year 3 years 5 years 10 years
Class A $135 $421 $ 729 $1,601
Class B 701 921 1,268 2,142
Class C 258 490 845 1,759
IF SHARES ARE NOT REDEEMED 1 year 3 years 5 years 10 years
Class A $135 $421 $ 729 $1,601
Class B 201 621 1,068 2,142
Class C 158 490 845 1,759
[ARROWS ICON] INVESTMENT RISKS
You should determine the level of risk with which you are comfortable
before you invest. The principal risks of investing in any mutual fund,
including the Fund, are:
<PAGE>
BEFORE INVESTING IN THE FUND, YOU SHOULD DETERMINE THE LEVEL OF RISK WITH WHICH
YOU ARE COMFORTABLE. TAKE INTO ACCOUNT FACTORS LIKE YOUR AGE, CAREER, INCOME
LEVEL, AND TIME HORIZON.
NOT INSURED. Mutual funds are not insured by the FDIC or any other
government agency, unlike bank deposits such as CDs or savings accounts.
NO GUARANTEE. No mutual fund can guarantee that it will meet its investment
objectives.
POSSIBLE LOSS OF INVESTMENT. A mutual fund cannot guarantee its
performance. Investment professionals generally consider money market funds
conservative and safe investments, compared to many other investment
alternatives. However, as with all types of securities investing, investments in
money market funds are not guaranteed and do present some risk of loss. The Fund
will not reimburse you for any losses.
NOT A COMPLETE INVESTMENT PLAN. An investment in any mutual fund does not
constitute a complete investment plan. The Fund is designed to be only a part of
your personal investment plan.
[ARROWS ICON] PRINCIPAL RISKS ASSOCIATED WITH THE FUND
You should consider the special factors associated with the policies
discussed below in determining the appropriateness of investing in the Fund. See
the Statement of Additional Information for a discussion of additional risk
factors.
INTEREST RATE RISK
Changes in interest rates will affect the resale value of debt securities
held in the Fund's portfolio. When interest rates go up, the market values of
previously issued debt securities generally decline. Also, the Fund's new
investments are likely to be in debt securities paying lower rates than the rest
of the Fund's portfolio when interest rates go down. This reduces the Fund's
yield. A weak economy or strong stock market may cause interest rates to
decline.
CREDIT RISK
The Fund invests in debt instruments, such as notes, bonds and commercial
paper. There is a possibility that the issuers of these instruments will be
unable to meet interest payments or repay principal. Changes in the financial
strength of an issuer may reduce the credit rating of its debt instruments and
may affect their value.
DURATION RISK
Duration is a measure of a debt security's sensitivity to interest rate
changes. Duration of money market securities is usually expressed in terms of
days or months, with longer durations usually more sensitive to interest rate
movements.
OPPORTUNITY RISK
With long-term investment plans, there may be a risk that you are not
taking enough risk, and thus missing the opportunity on other less conservative
but potentially more rewarding investments. The Fund has an investment goal of
current income, not capital appreciation. Therefore the Fund, by itself, will
<PAGE>
not be a suitable investment for people seeking long-term growth for objectives
such as retirement or the funding of a child's college education.
COUNTERPARTY RISK
This is a risk associated primarily with repurchase agreements. It is the
risk that the other party in the transaction will not fulfill its contractual
obligation to complete the transaction with the Fund.
[INVESCO ICON] FUND MANAGEMENT
INVESTMENT ADVISER
INVESCO IS A SUBSIDIARY OF AMVESCAP PLC, AN INTERNATIONAL INVESTMENT MANAGEMENT
COMPANY THAT MANAGES MORE THAN $392 BILLION IN ASSETS WORLDWIDE. AMVESCAP IS
BASED IN LONDON, WITH MONEY MANAGERS LOCATED IN EUROPE, NORTH AND SOUTH AMERICA,
AND THE FAR EAST.
INVESCO, located at 7800 E. Union Avenue, Denver, Colorado, is the investment
adviser of the Fund. INVESCO was founded in 1932 and manages over $42 billion
for more than 1,131,067 shareholders of 46 INVESCO mutual funds. INVESCO
performs a wide variety of other services for the Fund, including administrative
and transfer agent functions (the processing of purchases, sales and exchanges
of Fund shares).
A wholly owned subsidiary of INVESCO, IDI is the Fund's distributor and is
responsible for the sale of the Fund's shares.
INVESCO and IDI are subsidiaries of AMVESCAP PLC.
The following table shows the fee the Fund paid to INVESCO for its advisory
services in the fiscal year ended May 31, 2000:
ADVISORY FEE AS A PERCENTAGE OF AVERAGE ANNUAL
NET ASSETS UNDER MANAGEMENT
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Cash Reserves Fund 0.40%
[INVESCO ICON] PORTFOLIO MANAGER
The following individual is primarily responsible for the day-to-day
management of the Fund's portfolio holdings:
RICHARD R. HINDERLIE, a vice president of INVESCO, is the portfolio manager
of the Fund. Dick joined INVESCO in 1993. He holds an M.B.A. from Arizona State
University and a B.A. in Economics from Pacific Lutheran University.
<PAGE>
[INVESCO ICON] POTENTIAL REWARDS
NO SINGLE FUND SHOULD REPRESENT YOUR COMPLETE INVESTMENT PROGRAM NOR SHOULD YOU
ATTEMPT TO USE THE FUND FOR LONG-TERM CAPITAL GROWTH PURPOSES.
The Fund offers shareholders the potential for monthly payment of daily
income, while maintaining a stable share value, at a level of risk lower than
many other types of investments. Yields on short-term securities tend to be
lower than the yields on longer-term fixed-income securities. The Fund seeks to
provide higher returns than other money market funds and the money market in
general, but cannot guarantee that performance.
SUITABILITY FOR INVESTORS
Only you can determine if an investment in the Fund is right for you based
upon your own economic situation, the risk level with which you are comfortable
and other factors. In general, the Fund is most suitable for investors who:
o want to earn income at current money market rates.
o want to preserve the value of their investment.
o do not want to be exposed to a high level of risk.
You probably do not want to invest in the Fund if you are:
o primarily seeking long-term growth (although the Fund may serve as the cash
equivalent portion of a balanced investment program).
[INVESCO ICON] SHARE PRICE
The value of your Fund shares is not likely to change from $1.00, although
this cannot be guaranteed. This value is known as the Net Asset Value per share,
or NAV. INVESCO determines the value of each investment in the Fund's portfolio
each day that the New York Stock Exchange ("NYSE") is open, at the close of the
regular trading day on that exchange (normally 4:00 p.m. Eastern time).
Therefore, shares of the Fund are not priced on days when the NYSE is closed,
which generally is on weekends and national holidays in the U.S.
THE COMBINATION OF THE AMORTIZED COST METHOD OF VALUATION AND THE DAILY
DECLARATION OF DIVIDENDS MEANS THAT THE FUND'S NET ASSET VALUE IS EXPECTED TO BE
$1.00 PER SHARE, DESPITE CHANGES IN THE MARKET VALUE OF THE FUND'S SECURITIES.
The Fund uses the amortized cost method for establishing the value of its
investments. The amortized cost method values securities at their cost at the
time of purchase, and then amortizes the discount or premium to maturity. The
Fund declares dividends daily, based upon the interest earned by the Fund's
investments that day. The combination of the amortized cost method of valuation
and the daily declaration of dividends means that the Fund's net asset value is
expected to be $1.00 per share, despite changes in the market value of the
Fund's securities. However, we cannot guarantee that the Fund's net asset value
will be maintained at a constant value of $1.00 per share.
<PAGE>
All purchases, sales and exchanges of Fund shares are made by INVESCO at
the NAV next calculated after INVESCO receives proper instructions from you to
purchase, redeem or exchange shares of the Fund. Your instructions must be
received by INVESCO no later than the close of the NYSE to effect transactions
that day. If INVESCO hears from you after that time, your instructions will be
processed on the next day that the NYSE is open.
[INVESCO ICON] HOW TO BUY SHARES
TO BUY SHARES AT THAT DAY'S CLOSING PRICE, YOU MUST CONTACT US BEFORE THE
CLOSE OF THE NYSE, NORMALLY 4:00 P.M. EASTERN TIME.
The Fund offers multiple classes of shares. We will only permit investment
in Class A or Class B shares if such investments occur as a result of exchanges
into the Fund from Class A or Class B shares of other INVESCO funds. The chart
in this section shows several convenient ways to invest in the Fund. Each class
represents an identical interest in the Fund and has the same rights, except
that each class bears its own distribution and shareholder servicing charges,
and other expenses. The income attributable to each class and the dividends
payable on the shares of each class will be reduced by the amount of the
distribution fee or service fee, if applicable, and the other expenses payable
by that class.
When you invest in the Fund through a securities broker, including a broker
affiliated with INVESCO, you may be charged a commission or transaction fee for
either purchases or sales of Fund shares. For all new accounts, please send a
completed application form and specify the fund or funds and the class or
classes of shares you wish to purchase.
INVESCO reserves the right to increase, reduce or waive the Fund's minimum
investment requirements in its sole discretion, if it determines this action is
in the best interests of the Fund's shareholders. INVESCO also reserves the
right in its sole discretion to reject any order to buy Fund shares, including
purchases by exchange.
MINIMUM INITIAL INVESTMENT. $10,000, which is waived for regular investment
plans, including EasiVest and Direct Payroll Purchase, and certain retirement
plans, including IRAs.
MINIMUM SUBSEQUENT INVESTMENT. $1,000 (Minimums are lower for certain
retirement plans.)
EXCHANGE POLICY. You may exchange your shares in the Fund for shares of the
same class in another INVESCO mutual fund on the basis of their respective NAVs
at the time of the exchange. Currently, the only other INVESCO Fund available
for exchange with respect to Class A and B shares is INVESCO Advantage Fund. If
you exchange Class A shares of another INVESCO fund purchased at NAV into Class
A shares of Cash Reserves Fund you will not pay a CDSC at the time of that
exchange. If you exchange shares that are subject to a CDSC into Cash Reserves
Fund, those shares will continue to be subject to the applicable CDSC. Shares of
any money market fund purchased without a sales charge may be exchanged for
shares of funds offered with a sales charge upon payment of the sales charge.
<PAGE>
FUND EXCHANGES CAN BE A CONVENIENT WAY FOR YOU TO DIVERSIFY YOUR
INVESTMENTS, OR TO REALLOCATE YOUR INVESTMENTS WHEN YOUR OBJECTIVES CHANGE.
Before making any exchange, be sure to review the prospectuses of the funds
involved and consider the differences between the funds. Also, be certain that
you qualify to purchase certain classes of shares in the new fund. An exchange
is the sale of shares from one fund immediately 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, you or your
account qualifies as tax-deferred under the Internal Revenue Code). If the
shares of the fund you are selling have gone up in value since you bought them,
the sale portion of an exchange may result in taxable income to you.
You may be required to pay an initial sales charge when exchanging from a
fund with a lower initial sales charge than the one into which you are
exchanging. If you exchange from Class A shares not subject to a CDSC or sales
charge into Class A shares subject to those charges, you will be charged any
applicable CDSC or sales charge. You will not pay a sales charge when exchanging
Class B shares for other Class B shares or Class C shares for other Class C
shares. If you make an exchange involving Class B or Class C shares, the amount
of time you held the original shares will be added to the holding period of the
Class B or Class C shares, respectively, into which you exchanged for the
purpose of calculating any CDSC that may be assessed upon a subsequent
redemption.
We have the following policies governing exchanges:
o Both fund accounts involved in the exchange must be registered in exactly the
same name(s) and Social Security or federal tax I.D. number(s).
o You may make up to four exchanges out of the Fund per 12-month period,
but you may be subject to the CDSC, described below.
o The Fund reserves the right to reject any exchange request, or to
modify or terminate the exchange policy if it is in the best interests of
the Fund and its shareholders. Notice of all such modifications or
terminations that affect all shareholders of the Fund will be given at
least 60 days prior to the effective date of the change, except in
unusual instances, including a suspension of redemption of the exchanged
security under Section 22(e) of the Investment Company Act of 1940.
In addition, the ability to exchange may be temporarily suspended at any
time that sales of the fund into which you wish to exchange are temporarily
stopped.
Please remember that if you pay by check, Automated Clearing House ("ACH"),
or wire and your funds do not clear, you will be responsible for any related
loss to any fund of INVESCO. If you are already an INVESCO funds shareholder,
the Fund may seek reimbursement for any loss from your existing account(s).
CHOOSING A SHARE CLASS. The Fund has multiple classes of shares, each class
representing an interest in the same portfolio of investments. In deciding which
class of shares to purchase, you should consider, among other things, (i) the
length of time you expect to hold your shares, (ii) the provisions of the
distribution plan applicable to that class, if any, (iii) the eligibility
<PAGE>
requirements that apply to purchases of a particular class, and (iv) any
assistance you may receive in making your investment determination.
In addition you should also consider the factors below:
CLASS A CLASS B CLASS C
Exchange only Exchange only
No initial sales charge No initial sales charge No initial sales charge
You may pay a CDSC on CDSC on redemptions CDSC on redemptions
redemptions within within six years within 13 months
18 months. Please see
"Exchange Policy"
12b-1 fee of 0.35% 12b-1 fee of 1.00% 12b-1 fee of 1.00%
No conversion Converts to Class A No conversion
shares after eight years
along with a pro rata
portion of its reinvested
dividends and distributions
Generally more appropriate Purchase orders limited Purchase orders limited
for long-term investors to amounts of $250,000 to amounts of
or less $1,000,000 or less.
Generally more
appropriate for short-
term investors
Your investment representative can help you decide among the various
classes. Please contact your investment representative for several convenient
ways to invest in the Fund. Class A, B and C shares of the Fund are available
only through your investment representative.
SALES CHARGES
CONTINGENT DEFERRED SALES CHARGE (CDSC) FOR CLASS B AND C SHARES. You can
purchase Class B and Class C shares at their net asset value per share. However,
when you redeem them, they are subject to a CDSC in the following percentages:
Year since
purchase made Class B Class C
------------- ------- -------
First 5% 1%*
Second 4% None
Third 3% None
Fourth 3% None
Fifth 2% None
Sixth 1% None
Seventh and following None None
*The first year will consist of the first 13 months.
<PAGE>
CDSC EXCEPTIONS
You will not pay a CDSC:
o if you purchase Class A shares and hold those shares for more than 18 months;
o if you redeem Class B shares you held for more than six years;
o if you redeem Class C shares you held for more than 13 months;
o if you redeem shares acquired through reinvestment of dividends and
distributions;
o on increases in the net asset value of your shares;
o if you participate in the periodic withdrawal program and withdraw up to 10%
of the value of your shares that are subject to a CDSC in any 12-month
period. The value of your shares, and applicable 12-month period, will
be calculated based upon the value of your account on, and the date of, the
first periodic withdrawal;
o to pay account fees;
o for IRA distributions due to death, disability or periodic distributions
based on life expectancy;
o to return excess contributions (and earnings, if applicable) from
retirement plan accounts; or
o for redemptions following the death of a shareholder or beneficial owner.
There may be other situations when you may be able to purchase or redeem
shares at reduced or no sales charges. Consult the Fund's Statement of
Additional Information for further details.
METHOD INVESTMENT MINIMUM PLEASE REMEMBER
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BY CHECK (CLASS C) $10,000 for regular INVESCO does not
Mail to: accounts; accept a third
INVESCO Funds Group, Inc. $1,000 minimum for party check unless
P.O. Box 17970, each subsequent it is from another
Denver, CO 80217. investment; financial
You may send your $500 for an IRA; institution related
check by overnight $250 minimum for to a retirement
courier to: each subsequent plan transfer.
7800 E. Union Ave. IRA investment.
Denver, CO 80237.
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BY WIRE (CLASS C) $10,000 for regular
You may send your accounts;
payment by bank $1,000 minimum for
wire (call 1-800-328-2234 each subsequent
for instructions). investment;
$500 for an IRA;
$250 minimum for
each subsequent
IRA investment.
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BY TELEPHONE WITH ACH (CLASS C) $10,000 for regular You must forward
Call 1-800-328-2234 accounts; your bank account
to request your $1,000 minimum for information to
to purchase. Upon receiving each subsequent INVESCO prior to
your telephone instructions, investment; using this option.
INVESCO will move money $500 for an IRA;
from your designated bank/ $250 minimum for
credit union checking or each subsequent
savings account in order IRA investment.
to purchase shares.
<PAGE>
METHOD INVESTMENT MINIMUM PLEASE REMEMBER
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BY PERSONAL ACCOUNT LINE $10,000 for regular Be sure to write
(CLASS C) accounts; down the
Automated transactions $1,000 minimum for confirmation number
by phone are available each subsequent provided to you.
for subsequent investment; You must forward
purchase 24 hours a $500 for an IRA; your bank account
day. Simply call $250 minimum for information to
1-800-424-8085. each subsequent INVESCO prior to
IRA investment. using this option.
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BY EXCHANGE (ALL CLASSES) $10,000 for regular See "Exchange
Between two INVESCO accounts; Policy."
funds. Call $1,000 minimum for
1-800-328-2234 for each subsequent
prospectuses of investment;
other INVESCO funds. $500 for an IRA;
Exchanges may be $250 minimum for
made by phone. Class C each subsequent
shares may also be IRA investment.
exchanged at our Web site
at invescofunds.com.
You may also
establish an
automatic monthly
exchange service
between two INVESCO
funds; call us for
further details and
the correct form.
DISTRIBUTION EXPENSES. We have adopted a Master Distribution Plan and
Agreement (commonly known as a "12b-1 Plan") for each class of shares of the
Fund. The 12b-1 fees paid by the Fund's classes of shares are used to pay
distribution fees to IDI for the sale and distribution of the Fund's shares and
for services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the Fund's shares pay these fees out of
their assets on an ongoing basis, these fees increase the cost of your
investment.
HOUSEHOLDING. To save money for the Fund, INVESCO will send only one copy
of a prospectus or financial report to each household address. This process,
known as "householding," is used for most required shareholder mailings. It does
not apply to account statements. You may, of course, request an additional copy
<PAGE>
of a prospectus or financial report at any time by calling or writing
INVESCO. You may also request that householding be eliminated from all your
required mailings.
[INVESCO ICON] HOW TO SELL SHARES
The following chart shows several convenient ways to sell your Fund shares.
Shares of the Fund may be sold at any time at the next NAV calculated after your
request to sell in proper form is received by INVESCO. Depending on Fund
performance, the NAV at the time you sell your shares may be more or less than
the price you paid to purchase your shares.
TO SELL SHARES AT THAT DAY'S CLOSING PRICE, YOU MUST CONTACT US BEFORE
4:00 P.M. EASTERN TIME.
If you own shares in more than one INVESCO fund, please specify the fund whose
shares you wish to sell and specify the class of shares. Remember that any sale
or exchange of shares in a non-retirement account will likely result in a
taxable gain or loss.
While INVESCO attempts 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.
INVESCO usually mails you the proceeds from the sale of fund shares within
seven days after we receive your request to sell in proper form. However,
payment may be postponed under unusual circumstances -- for instance, if normal
trading is not taking place on the NYSE, or during an emergency as defined by
the Securities and Exchange Commission. If your INVESCO fund shares were
purchased by a check which has not yet cleared, payment will be made promptly
when your purchase check does clear; that can take up to 15 days.
Because of the Fund's expense structure, it costs as much to handle a small
account as it does to handle a large one. If the value of your account in the
Fund falls below $250 as a result of your actions (for example, sale of your
Fund shares), the Fund reserves the right to sell all of your shares, send the
proceeds of the sale to you and close your account. Before this is done, you
will be notified and given 60 days to increase the value of your account to $250
or more.
REDEMPTION FEES. Except for any applicable CDSC, we will not charge you any
fees to redeem your shares; however, your broker or financial consultant may
charge service fees for handling these transactions.
<PAGE>
METHOD REDEMPTION MINIMUM PLEASE REMEMBER
--------------------------------------------------------------------------------
BY TELEPHONE $250 (or, if less, INVESCO's telephone
Call us toll-free full liquidation redemption
at: of the account) privileges may be
1-800-328-2234 for a redemption modified or
check; $1,000 for terminated in the
a wire to your future at INVESCO's
bank of record. discretion.
The maximum amount
which may be
redeemed by
telephone is
generally $25,000.
--------------------------------------------------------------------------------
IN WRITING Any amount. The redemption
Mail your request to request must be
INVESCO Funds Group, Inc., signed by all
P.O. Box 17970, registered account
Denver, CO 80217 owners. Payment
You may also send will be mailed to
your request by your address as it
overnight courier to appears on
7800 E. Union Ave., INVESCO's records,
Denver, CO 80237 or to a bank
designated by you
in writing.
--------------------------------------------------------------------------------
BY TELEPHONE WITH ACH $50 You must forward
Call 1-800-328-2234 your bank account
to request your information to
redemption. INVESCO INVESCO prior to
will automatically using this option.
pay the proceeds
into your designated
bank account.
--------------------------------------------------------------------------------
BY EXCHANGE $250 for exchanges See "Exchange
Between two INVESCO requested Policy."
funds. Call by telephone. When you exchange
1-800-328-2234 for into an INVESCO fund
prospectuses of you have not pre-
other INVESCO funds. viously invested in,
Exchanges may be made the Fund's invest-
by phone. Class C shares ment minimums apply.
may also be exchanged at
our Web site at
invescofunds.com.
You may also establish
an automatic monthly
exchange service between
two INVESCO funds; call
us for further details
and the correct form.
<PAGE>
METHOD REDEMPTION MINIMUM PLEASE REMEMBER
--------------------------------------------------------------------------------
PERIODIC WITHDRAWAL $100 per payment You must have least
PLAN on a monthly or $10,000 total
You may call us to quarterly basis. invested with the
request the The redemption INVESCO funds with
appropriate form and check may be made at least $5,000 of
more information at payable to any that total invested
1-800-328-2234. party you in the fund from
designate. which withdrawals
will be made.
--------------------------------------------------------------------------------
PAYMENT TO THIRD Any amount. All registered
PARTY account owners must
Mail your request to sign the request,
INVESCO Funds Group, Inc., with signature
P.O. Box 17970 guarantees from an
Denver, CO 80217 eligible guarantor
financial
institution, such
as a commercial
bank or a
recognized national
or regional
securities firm.
[INVESCO ICON] DIVIDENDS AND TAXES
TO AVOID BACKUP WITHHOLDING, BE SURE WE HAVE YOUR CORRECT SOCIAL SECURITY
OR TAXPAYER IDENTIFICATION NUMBER.
Everyone's tax status is unique. We encourage you to consult your own tax
adviser on the tax impact to you of investing in the Fund.
The Fund earns ordinary or investment income from interest on its
investments. The Fund expects to distribute substantially all of this investment
income, less Fund expenses, to shareholders. You will ordinarily earn income on
each day you are invested in the Fund, and that income is paid by the Fund to
you once a month. Dividends are automatically reinvested in additional shares of
the Fund at the net asset value on the monthly dividend distribution date,
unless you request that dividends be paid in cash.
Unless you are (or your account is) exempt from income taxes, you must
include all dividends paid to you by the Fund in your taxable income for
federal, state and local income tax purposes. Dividends and other distributions
usually are taxable whether you receive them in cash or automatically reinvest
them in shares of the Fund or other INVESCO funds.
If you have not provided INVESCO with complete, correct tax information,
the Fund is required by law to withhold 31% of your distributions and any money
that you receive from the sale of shares of the Fund as a backup withholding
tax.
We will provide you with detailed information every year about your
dividends.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
financial performance of Investor Class and Class C shares of the Fund for the
past five years (or, if shorter, the period of the Fund's operations). Certain
information reflects financial results for a single share. Since Class A and B
shares are new, financial information is not available for these classes as of
the date of this Prospectus. The total returns in the table represent the annual
percentages that an investor would have earned on an investment in an Investor
Class or Class C share of the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
independent accountants, whose report, along with the financial statements, is
included in INVESCO Money Market Funds, Inc.'s 2000 Annual Report to
Shareholders, which is incorporated by reference into the Statement of
Additional Information. This Report is available without charge by contacting
IDI at the address or telephone number on the back cover of this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED MAY 31
---------------------------------------------------
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
CASH RESERVES FUND -
INVESTOR CLASS
PER SHARE DATA
Net Asset Value - Beginning of Period $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 0.04 0.05 0.05 0.05
===========================================================================================
Net Asset Value - End of Period $1.00 $1.00 $1.00 $1.00 $1.00
===========================================================================================
TOTAL RETURN 4.87% 4.45% 4.82% 4.69% 5.01%
RATIOS
Net Assets - End of Period
($000 Omitted) $912,135 $814,158 $766,670 $661,648 $587,277
Ratio of Expenses to Average
Net Assets(a)(b) 0.91% 0.90% 0.91% 0.86% 0.87%
Ratio of Net Investment Income to
Average Net Assets(a) 4.75% 4.36% 4.76% 4.62% 4.86%
</TABLE>
(a) Various expenses of the Class were voluntarily absorbed by INVESCO for the
years ended May 31, 2000, 1999, 1998, 1997 and 1996. If INVESCO had not
voluntarily absorbed these expenses, ratio of expenses to average net
assets would have been 0.94%, 0.91%, 0.93%, 0.92% and 0.92%, respectively,
and ratio of net investment income to average net assets would have been
4.72%, 4.35%, 4.74%, 4.56% and 4.81%, respectively.
(b) Ratio is based on Total Expenses of the Class, less expenses absorbed by
INVESCO, which is before any expense offset arrangement (which may include
custodian and transfer agency fees).
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED MAY 31
-------------------
2000(a)
CASH RESERVES FUND - CLASS C
PER SHARE DATA
Net Asset Value - Beginning of Period $1.00
--------------------------------------------------------------------------------
INCOME AND DISTRIBUTIONS FROM
INVESTMENT OPERATIONS
NET INVESTMENT INCOME EARNED AND
DISTRIBUTED TO SHAREHOLDERS 0.01
================================================================================
Net Asset Value - End of Period $1.00
================================================================================
TOTAL RETURN(b) 1.36%(c)
RATIOS
Net Assets - End of Period ($000 Omitted) $4,186
Ratio of Expenses to Average Net Assets(d) 1.54%(e)
Ratio of Net Investment Income to Average Net Assets 4.73%(e)
(a) From February 15, 2000, since inception of Class C shares, to May 31, 2000.
(b) The applicable CDSC fees are not included in the Total Return calculation.
(c) Based on operations for the period shown and, accordingly, is not
representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less expenses absorbed by
INVESCO, which is before any expense offset arrangements (which may include
custodian and transfer agent fees).
(e) Annualized.
<PAGE>
AUGUST 15, 2000
AS SUPPLEMENTED AUGUST 24, 2000
INVESCO MONEY MARKET FUNDS, INC.
INVESCO CASH RESERVES FUND - CLASS A, B AND C
You may obtain additional information about the Fund from several sources:
FINANCIAL REPORTS. Although this Prospectus describes the Fund's
anticipated investments and operations, the Fund also prepares annual and
semiannual reports that detail the Fund's actual investments at the report date.
These reports include discussion of the Fund's recent performance, as well as
market and general economic trends affecting the Fund's performance. The annual
report also includes the report of the Fund's independent accountants.
STATEMENT OF ADDITIONAL INFORMATION. The SAI dated August 15, 2000, as
supplemented August 24, 2000, is a supplement to this Prospectus and has
detailed information about the Fund and its investment policies and practices. A
current SAI for the Fund is on file with the Securities and Exchange Commission
and is incorporated in this Prospectus by reference; in other words, the SAI is
legally a part of this Prospectus, and you are considered to be aware of the
contents of the SAI.
INTERNET. The current Prospectus of the Fund may be accessed through the
INVESCO Web site at invescofunds.com. In addition, the Prospectus, SAI, annual
report and semiannual report of the Fund are available on the SEC Web site at
www.sec.gov.
To obtain a free copy of the current Prospectus, SAI, annual report or
semiannual report, write to INVESCO Distributors, Inc., P.O. Box 173706, Denver,
Colorado 80217-3706; or call 1-800-328-2234. Copies of these materials are also
available (with a copying charge) from the SEC's Public Reference Section at 450
Fifth Street, N.W., Washington, D.C. 20549-0102. This information can be
obtained by electronic request at the following E-mail address:
[email protected] or by calling 1-202-942-8090. The SEC file numbers for the
Fund are 811-2606 and 002-55079.
811-2606
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
INVESCO MONEY MARKET FUNDS, INC.
INVESCO Cash Reserves Fund - Investor Class and Class A, B and C
INVESCO Tax-Free Money Fund - Investor Class
INVESCO U.S. Government Money Fund - Investor Class
Address: Mailing Address:
7800 E. Union Ave., Denver, CO 80237 P.O. Box 173706, Denver, CO 80217-3706
Telephone:
In continental U.S., 1-800-328-2234
August 15, 2000
As Supplemented August 24, 2000
------------------------------------------------------------------------------
A Prospectus for the Investor Class shares of INVESCO Cash Reserves,
INVESCO Tax-Free Money and INVESCO U.S. Government Money Funds dated September
30, 1999 and a Prospectus for the Class A, B and C shares of INVESCO Cash
Reserves Fund dated August 15, 2000, as supplemented August 24, 2000, provide
the basic information you should know before investing in a Fund. This Statement
of Additional Information ("SAI") is incorporated by reference into the Funds'
Prospectuses; in other words, this SAI is legally part of the Funds'
Prospectuses. Although this SAI is not a prospectus, it contains information in
addition to that set forth in the Prospectuses. It is intended to provide
additional information regarding the activities and operations of the Funds and
should be read in conjunction with the Prospectuses.
You may obtain, without charge, the current Prospectuses, SAI and annual and
semiannual reports of the Funds by writing to INVESCO Distributors, Inc., P.O.
Box 173706, Denver, CO 80217-3706 , or by calling 1-800-525-8085 for Investor
Class and 1-800-328-2234 for Class A, B and C. The Prospectus of the Investor
Class shares of the Funds and the Prospectus of the Class A, B and C shares of
INVESCO Cash Reserves Fund are also available through the INVESCO Web site at
invescofunds.com.
<PAGE>
TABLE OF CONTENTS
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Investments, Policies and Risks. . . . . . . . . . . . . . . . . .3
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . .8
Management of the Funds . . . . . . . . . . . . . . . . . . . . 13
Other Service Providers . . . . . . . . . . . . . . . . . . . . .38
Brokerage Allocation and Other Practices . . . . . . . . . . . . 38
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . .39
Tax Consequences of Owning Shares of a Fund . . . . . . . . . . .41
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Code of Ethics . . . . . . . . . . . . . . . . . . . . . . . . . 45
Financial Statements . . . . . . . . . . . . . . . . . . . . . . 45
Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
<PAGE>
THE COMPANY
The Company was incorporated on April 2, 1993, under the laws of Maryland. On
July 1, 1993, the Company, through 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. (incorporated in Colorado
on March 4, 1983) and 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 the period prior to July 1, 1993, relates to
such Predecessor Funds.
The Company is an open-end, diversified, management investment company currently
consisting of three portfolios of investments: INVESCO Cash Reserves Fund -
Investor Class and Class A, B and C, INVESCO Tax-Free Money Fund - Investor
Class and INVESCO U.S. Government Money Fund - Investor Class (each a "Fund" and
collectively, the "Funds"). Additional funds may be offered in the future.
"Open-end" means that each Fund issues an indefinite number of shares which it
continuously offers to redeem at net asset value per share ("NAV"). A
"management" investment company actively buys and sells securities for the
portfolio of each Fund at the direction of a professional manager. Open-end
management investment companies (or one or more series of such companies, such
as the Funds) are commonly referred to as mutual funds.
INVESTMENTS, POLICIES AND RISKS
The principal investments and policies of the Funds are discussed in the
Prospectuses of the Funds. The investment objective of each of the Funds is to
achieve as high a level of current income as is consistent with the preservation
of capital, the maintenance of liquidity, and investing in high-quality debt
securities. (What constitutes a high-quality debt security varies with the type
of security and, where applicable, is noted in the discussion of each security.)
Tax-Free Money Fund also seeks income exempt from federal income tax. Each
Fund's assets are invested in securities having maturities of 397 days or less,
and the dollar-weighted average maturity of the portfolio will not exceed 90
days. The Funds buy only securities determined by INVESCO Funds Group, Inc.
("INVESCO"), the Funds' investment adviser, pursuant to procedures approved by
the board of directors, to be of high quality with minimal credit risk and to be
eligible for investment by the Funds under applicable U.S. Securities and
Exchange Commission ("SEC") rules. Generally, the Funds are required to invest
at least 95% of their total assets in the securities of issuers with the highest
credit rating. Credit ratings are the opinion of the private companies (such as
Standard & Poor's ("S&P") or Moody's Investors Service, Inc. ("Moody's")) that
rate companies on their securities; they are not guarantees. See Appendix A for
additional descriptions of the Funds' investments, as well as discussions of the
degrees of risk involved in such investments.
CERTIFICATES OF DEPOSIT IN FOREIGN BANKS AND U.S. BRANCHES OF FOREIGN BANKS --
The Funds may maintain time deposits in and invest in U.S. dollar denominated
CDs issued by foreign banks and U.S. branches of foreign banks. The Funds limit
investments in foreign bank obligations to U.S. dollar denominated obligations
<PAGE>
of foreign banks which have more than $10 billion in assets, have branches or
agencies in the U.S., and meet other criteria established by the board of
directors. Investments in foreign securities involve special considerations.
There is generally less publicly available information about foreign issuers
since many foreign countries do not have the same disclosure and reporting
requirements as are imposed by U.S. securities laws. Moreover, foreign issuers
are generally not bound by uniform accounting and auditing and financial
reporting requirements and standards of practice comparable to those applicable
to domestic issuers. Such investments may also entail the risks of possible
imposition of dividend withholding or confiscatory taxes, possible currency
blockage or transfer restrictions, expropriation, nationalization or other
adverse political or economic developments, and the difficulty of enforcing
obligations in other countries.
The Funds may also invest in bankers' acceptances, time deposits and
certificates of deposit of U.S. branches of foreign banks and foreign branches
of U.S. banks. Investments in instruments of U.S. branches of foreign banks will
be made only with branches that are subject to the same regulations as U.S.
banks. Investments in instruments issued by a foreign branch of a U.S. bank will
be made only if the investment risk associated with such investment is the same
as that involving an investment in instruments issued by the U.S. parent, with
the U.S. parent unconditionally liable in the event that the foreign branch
fails to pay on the investment for any reason.
COMMERCIAL PAPER -- Commercial paper is the term for short-term promissory notes
issued by domestic corporations to meet current working capital needs.
Commercial paper may be unsecured by the corporation's assets but may be backed
by a letter of credit from a bank or other financial institution. The letter of
credit enhances the paper's creditworthiness. The issuer is directly responsible
for payment but the bank "guarantees" that if the note is not paid at maturity
by the issuer, the bank will pay the principal and interest to the buyer.
INVESCO will consider the creditworthiness of the institution issuing the letter
of credit, as well as the creditworthiness of the issuer of the commercial
paper, when purchasing paper enhanced by a letter of credit. Commercial paper is
sold either in an interest-bearing form or on a discounted basis, with
maturities not exceeding 270 days.
Commercial paper acquired by a Fund must be rated by at least two nationally
recognized securities ratings organizations (NRSROs), generally S&P and Moody's,
in the highest rating category (A-1 by S&P or P-1 by Moody's), or, where the
obligation is rated by only S&P or Moody's and not by any other NRSRO, such
obligation is rated A-1 or P-1. Money market instruments purchased by a Fund
which are not rated by any NRSRO must be determined by INVESCO to be of
equivalent credit quality to the rated securities in which a Fund may invest. In
INVESCO's opinion, obligations that are not rated are not necessarily of lower
quality than those which are rated; however, they may be less marketable and
typically may provide higher yields. The Funds invest in unrated securities only
when such an investment is in accordance with a Fund's investment objective of
achieving a high level of current income and when such investment will not
impair the Fund's ability to comply with requests for redemptions. Commercial
paper is usually secured by the corporation's assets but may sometimes be backed
by a letter of credit from a bank or other financial institution.
<PAGE>
CREDIT ENHANCEMENTS -- The Funds may acquire a right to sell an obligation to
another party at a guaranteed price approximating par value, either on demand or
at specified intervals. The right to sell may form part of the obligation or be
acquired separately by a Fund. These rights may be referred to as demand
features, guarantees or puts, depending on their characteristics (collectively
referred to as "Guarantees"), and may involve letters of credit or other credit
support arrangements supplied by domestic or foreign banks supporting the other
party's ability to purchase the obligation from a Fund. The Funds will acquire
Guarantees solely to facilitate portfolio liquidity and do not intend to
exercise them for trading purposes. In considering whether an obligation meets
the Fund's quality standards, a Fund may look to the creditworthiness of the
party providing the right to sell or to the quality of the obligation itself.
The acquisition of a Guarantee will not affect the valuation of the underlying
obligation which will continue to be valued in accordance with the amortized
cost method of valuation.
DIVERSIFICATION -- The Company is a diversified investment company under the
Investment Company Act of 1940, as amended "the 1940 Act". Except to the extent
permitted under Rule 2a-7 of the 1940 Act or any successor rule thereto, no more
than 5% of the value of each Fund's total assets can be invested in the
securities of any one issuer (other than securities issued or guaranteed by the
U.S. government or any of its agencies or instrumentalities, or securities of
other investment companies).
DOMESTIC BANK OBLIGATIONS -- U.S. banks (including their foreign branches) issue
certificates of deposit ("CDs") and bankers' acceptances which may be purchased
by the Funds if an issuing bank has total assets in excess of $5 billion and the
bank otherwise meets the Funds' credit rating requirements. 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 of the 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"). Bankers' acceptances 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. Both types of securities are subject
to the ability of the issuing bank to meet its obligations, and are subject to
risks common to all debt securities. In addition, banker's acceptances may be
subject to foreign currency risk and certain other risks of investment in
foreign securities.
ILLIQUID SECURITIES -- Securities which do not trade on stock exchanges or in
the over the counter market, or have restrictions on when and how they may be
sold, are generally considered to be "illiquid." An illiquid security is one
that a Fund may have difficulty -- or may even be legally precluded from --
selling at any particular time. A Fund may invest in illiquid securities,
including restricted securities and other investments which are not readily
marketable. A Fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities that are
deemed to be illiquid because they are subject to legal or contractual
restrictions on resale or because they cannot be sold or disposed of in the
ordinary course of business at approximately the prices at which they are
valued. Repurchase agreements maturing in more than seven days are considered
illiquid for purposes of this restriction.
The principal risk of investing in illiquid securities is that a Fund may be
<PAGE>
unable to dispose of them at the time desired or at a reasonable price. In
addition, in order to resell a restricted security, a Fund might have to bear
the expense and incur the delays associated with registering the security with
the SEC and obtaining listing on a securities exchange or in the over the
counter market.
INSURANCE FUNDING AGREEMENTS -- The Funds may also invest in funding agreements
issued by domestic insurance companies. Such funding agreements will only be
purchased from insurance companies which have outstanding an issue of long-term
debt securities rated AAA or AA by S&P, or Aaa or Aa by Moody's. In all cases,
the Funds will attempt to obtain the right to demand payment, on not more than
seven days' notice, for all or any part of the amount subject to the funding
agreement, plus accrued interest. The Funds intend to execute their right to
demand payment only as needed to provide liquidity to meet redemptions, or to
maintain a high quality investment portfolio. A Fund's investments in funding
agreements that do not have this demand feature, or for which there is not a
readily available market, are considered to be investments in illiquid
securities.
LOAN PARTICIPATION INTERESTS -- The Funds may purchase loan participation
interests in all or part of specific holdings of corporate debt obligations. The
issuer of such debt obligations is also the issuer of the loan participation
interests into which the obligations have been apportioned. A Fund will purchase
only loan participation interests issued by companies whose commercial paper is
currently rated in the highest rating category by at least two NRSROs, generally
S&P and Moody's (A-1 by S&P or P-1 by Moody's), or where such instrument is
rated only by S&P or Moody's and not by any other NRSRO, such instrument is
rated A-1 or P-1. Such loan participation interests will only be purchased from
banks which meet the criteria for banks discussed above and registered
broker-dealers or registered government securities dealers which have
outstanding commercial paper or other short-term debt obligations rated in the
highest rating category by at least two NRSROs or by one NRSRO if such
obligation is rated by only one NRSRO. Such banks and security dealers are not
guarantors of the debt obligations represented by the loan participation
interests, and therefore are not responsible for satisfying such debt
obligations in the event of default. Additionally, such banks and securities
dealers act merely as facilitators, with regard to repayment by the issuer, with
no authority to direct or control repayment. A Fund will attempt to ensure that
there is a readily available market for all of the loan participation interests
in which it invests. The Funds' investments in loan participation interests for
which there is not a readily available market are considered to be investments
in illiquid securities.
MUNICIPAL OBLIGATIONS -- Tax-Free Money Fund may invest in short-term municipal
debt securities including municipal bonds, notes and commercial paper.
Municipal Bonds -- Municipal bonds are classified as general obligation or
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.
<PAGE>
Municipal Notes -- Municipal notes are short-term debt obligations issued
by municipalities which normally have a maturity at the time of issuance
of six months to three years. Such notes include 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 -- Municipal commercial paper is short-term
debt obligations issued by municipalities which may be issued at a
discount (sometimes referred to as Short-Term Discount Notes). These
obligations 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 INVESCO believes that this increase may continue.
Variable Rate 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 a Fund would have the right
to demand prepayment of the principal amount of the obligation prior to
its stated maturity. The issuer of the variable rate obligation may retain
the right to prepay the principal amount prior to maturity.
It is a policy of Tax-Free Money Fund that, under normal market conditions, it
will have at least 80% of its net assets invested in municipal obligations that,
based on the opinion of counsel to the issuer, pay interest free from federal
income tax. It is the Fund's present intention to invest its assets so that
substantially all of its annual income will be tax-exempt. Tax-Free Money Fund
may invest in municipal obligations whose interest income may be specially
treated as a tax preference item under the alternative minimum tax ("AMT").
Securities that generate income that is a tax preference item may not be counted
towards the 80% tax exempt threshold described above. Tax-exempt income may
result in an indirect tax preference item for corporations, which may subject an
investor to liability under the AMT depending on its particular situation.
Tax-Free Money Fund, however, will not invest more than 20% of its net assets in
obligations the interest from which gives rise to a preference item for the
purpose of the AMT and in other investments subject to federal income tax.
Distributions from this Fund may be subject to state and local taxes.
Tax-Free Money Fund will not purchase a municipal obligation unless the Fund has
been advised that the issuer's bond counsel has rendered an opinion that such
obligations have been validly issued and that the interest thereon is exempt
from federal income taxation. In addition, Tax-Free Money Fund will not purchase
a municipal obligation that, in the opinion of INVESCO, is reasonably likely to
be held not to be validly issued or to pay interest thereon which is not exempt
from federal income taxation.
Municipal obligations purchased by the Fund must be rated by at least two
<PAGE>
NRSROs - generally S&P and Moody's - in the highest rating category (AAA or AA
by S&P or Aaa or Aa by Moody's), or by one NRSRO in the highest rating category
if such obligations are rated by only one NRSRO. Municipal notes or municipal
commercial paper must be rated in the highest rating category by at least two
NRSROs, or where the note or paper is rated only by one NRSRO, in the highest
rating category by that NRSRO. If a security is unrated, the Fund may invest in
such security if INVESCO determines, in an analysis similar to that performed by
Moody's or S&P in rating similar securities and issuers, that the security is
comparable to that eligible for investment by the Fund. 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. If a
security originally rated in the highest rating category by a NRSRO has been
downgraded to the second highest rating category, INVESCO 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 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 INVESCO 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 Fund.
PORTFOLIO SECURITIES LOANS -- The Company, on behalf of each of the Funds, may
lend limited amounts of the Funds' portfolio securities (not to exceed 33 1/3%
of a Fund's total assets). Because there could be delays in recovery of loaned
securities or even a loss of rights in collateral should the borrower fail
financially, loans will be made only to firms deemed by INVESCO to be of good
standing and will not be made unless, in the judgment of INVESCO, the
consideration to be earned from such loans would justify the risk. INVESCO will
evaluate the creditworthiness of such borrowers in accordance with procedures
adopted and monitored by the board of directors. It is expected that the
Company, on behalf of the applicable Fund, will use the cash portions of loan
collateral to invest in short-term income producing securities for the Fund's
account and that the Company may share some of the income from these investments
with the borrower. See "Portfolio Securities Loans" at Appendix A to this SAI.
REPURCHASE AGREEMENTS -- A Fund may enter into repurchase agreements and reverse
repurchase agreements. (See Appendix A for a discussion of these agreements and
the risks involved with such transactions.) The Funds will enter into repurchase
agreements and reverse repurchase agreements only with (i) banks which have
total assets in excess of $4 billion and meet other criteria established by the
board of directors and (ii) with registered broker-dealers or registered
government securities dealers which have outstanding commercial paper or other
debt obligations rated in the highest rating category by at least two NRSROs or
by one NRSRO if such obligations are rated by only one NRSRO. INVESCO will
monitor the creditworthiness of such entities in accordance with procedures
adopted and monitored by the board of directors. The Funds will enter into
repurchase agreements whenever, in the opinion of INVESCO, such transactions
would be advantageous to the Funds. Repurchase agreements afford an opportunity
for the Funds to earn a return on temporarily available cash. The Funds will
enter into reverse repurchase agreements only for the purpose of obtaining funds
necessary for meeting redemption requests of shareholders. Interest earned by
the Funds on repurchase agreements would not be tax-exempt, and thus would
constitute taxable income.
<PAGE>
TEMPORARY DEFENSIVE POSITION -- From time to time, on a temporary basis for
defensive purposes, Tax-Free Money Fund may also hold 100% of its assets in cash
or invest in taxable short term investments ("taxable investments"), including
obligations of the U.S. government, its agencies or instrumentalities;
commercial paper limited to obligations which are rated by at least two NRSROs -
generally S&P and Moody's - in the highest rating category (A-1 by S&P and P-1
by Moody's), or by one NRSRO if such obligations are rated by only one NRSRO;
certificates of deposit of U.S. domestic banks, including foreign branches of
domestic banks meeting the criteria described in the discussion above; time
deposits; and repurchase agreements with respect to any of the foregoing with
registered broker-dealers, registered government securities dealers or banks.
U.S. GOVERNMENT SECURITIES -- Each Fund may purchase debt securities issued by
the U.S. government without limit. These securities include Treasury bills,
notes and bonds. Treasury bills have a maturity of one year or less, Treasury
notes generally have a maturity of one to ten years and Treasury bonds generally
have maturities of more than ten years.
U.S. government debt securities also include securities issued or guaranteed by
agencies or instrumentalities of the U.S. government. Some obligations of U.S.
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
U.S. 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 U.S. government. The market value of GNMA Certificates is not guaranteed.
GNMA Certificates are different from bonds because principal is paid back
monthly by the borrower over the term of the loan rather than returned in a lump
sum at maturity, as is the case with a bond. GNMA Certificates are called
"pass-through" securities because both interest and principal payments
(including prepayments) are passed through to the holder of the GNMA
Certificate.
Other United States government debt securities, such as securities of the
Federal Home Loan Banks, are supported by the right of the issuer to borrow from
the Treasury. Others, such as bonds issued by Fannie Mae, a federally chartered
private corporation, are supported only by the credit of the corporation. In the
case of securities not backed by the full faith and credit of the United States,
a Fund must look principally to the agency issuing or guaranteeing the
obligation in the event the agency or instrumentality does not meet its
commitments. A Fund will invest in securities of such instrumentalities only
when INVESCO is satisfied that the credit risk with respect to any such
instrumentality is comparatively minimal.
WHEN-ISSUED/DELAYED DELIVERY -- The Funds normally buy and sell securities on an
ordinary settlement basis. That means that the buy or sell order is sent, and a
Fund actually takes delivery or gives up physical possession of the security on
the "settlement date," which is three business days later. However, the Funds
also may purchase and sell securities on a when-issued or delayed delivery
basis.
<PAGE>
When-issued or delayed delivery transactions occur when securities are purchased
or sold by a Fund and payment and delivery take place at an agreed-upon time in
the future. The Funds may engage in this practice in an effort to secure an
advantageous price and yield. However, the yield on a comparable security
available when delivery actually takes place may vary from the yield on the
security at the time the when-issued or delayed delivery transaction was entered
into. When a Fund engages in when-issued and delayed delivery transactions, it
relies on the seller or buyer to consummate the sale at the future date. If the
seller or buyer fails to act as promised, that failure may result in the Fund
missing the opportunity of obtaining a price or yield considered to be
advantageous. No payment or delivery is made by a Fund until it receives
delivery or payment from the other party to the transaction. However,
fluctuation in the value of the security from the time of commitment until
delivery could adversely affect a Fund.
INVESTMENT RESTRICTIONS
The Funds operate under certain investment restrictions. For purposes of the
following restrictions, all percentage limitations apply immediately after a
purchase or initial investment. Any subsequent change in a particular percentage
resulting from fluctuations in value does not require elimination of any
security from a Fund.
The following restrictions are fundamental and may not be changed without prior
approval of a majority of the outstanding voting securities of a Fund, as
defined in the 1940 Act. Each Fund may not:
1. purchase the securities of any issuer (other than securities issued
or guaranteed by the U.S. government or any of its agencies or
instrumentalities, municipal securities or securities issued or
guaranteed by domestic banks, including U.S. branches of foreign banks
and foreign branches of U.S. banks) if, as a result, more than 25% of
the Fund's total assets would be invested in the securities of
companies whose principal business activities are in the same industry;
2. except to the extent permitted under Rule 2a-7 of the 1940 Act, or any
successor rule thereto, purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities, or securities of other investment
companies) if, as a result, (i) more than 5% of the Fund's total assets
would be invested in the securities of that issuer, or (ii) the Fund would
hold more than 10% of the outstanding voting securities of that issuer;
3. underwrite securities of other issuers, except insofar as it may be
deemed to be an underwriter under the Securities Act of 1933 (the "1933
Act"), as amended, in connection with the disposition of the Fund's
portfolio securities;
<PAGE>
4. borrow money, except that the Fund may borrow money in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed)
less liabilities (other than borrowings);
5. issue senior securities, except as permitted under the 1940 Act;
6. lend any security or make any loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to the purchase of debt securities or to
repurchase agreements;
7. purchase or sell physical commodities; however, this policy shall not
prevent the Fund from purchasing and selling foreign currency, futures
contracts, options, forward contracts, swaps, caps, floors, collars and
other financial instruments; or
8. purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the Fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business).
9. Each Fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company managed by INVESCO or an affiliate
or a successor thereof, with substantially the same fundamental investment
objective, policies and limitations as the Fund.
In addition, each Fund has the following non-fundamental policies, which may be
changed without shareholder approval:
A. The Fund may not sell securities short (unless it owns or has the right
to obtain securities equivalent in kind and amount to the securities sold
short) or purchase securities on margin, except that (i) this policy does
not prevent the Fund from entering into short positions in foreign
currency, futures contracts, options, forward contracts, swaps, caps,
floors, collars and other financial instruments, (ii) the Fund may obtain
such short-term credits as are necessary for the clearance of
transactions, and (iii) the Fund may make margin payments in connection
with futures contracts, options, forward contracts, swaps, caps, floors,
collars and other financial instruments.
B. The Fund may borrow money only from a bank or from an open-end
management investment company managed by INVESCO or an affiliate or a
successor thereof for temporary or emergency purposes (not for leveraging
or investing) or by engaging in reverse repurchase agreements with any
party (reverse repurchase agreements will be treated as borrowings for
purposes of fundamental limitation (4)).
C. The Fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
<PAGE>
D. The Fund may invest in securities issued by other investment companies
to the extent that such investments are consistent with the Fund's
investment objective and policies and permissible under the 1940 Act.
E. With respect to fundamental limitation (1), domestic and foreign
banking will be considered to be different industries.
In addition, with respect to a Fund that may invest in municipal obligations,
the following non-fundamental policy applies, which may be changed without
shareholder approval:
Each state (including the District of Columbia and Puerto Rico), territory
and possession of the United States, each political subdivision, agency,
instrumentality and authority thereof, and each multi-state agency of
which a state is a member is a separate "issuer." When the assets and
revenues of an agency, authority, instrumentality or other political
subdivision are separate from the government creating the subdivision and
the security is backed only by assets and revenues of the subdivision,
such subdivision would be deemed to be the sole issuer. Similarly, in the
case of an Industrial Development Bond or Private Activity Bond, if that
bond is backed only by the assets and revenues of the non-governmental
user, then that non-governmental user would be deemed to be the sole
issuer.
Following is a chart outlining some of the limitations pursuant to
non-fundamental investment policies set by the board of directors. These
non-fundamental policies may be changed by the board of directors without
shareholder approval:
--------------------------------------------------------------------------------
INVESTMENT CASH RESERVES TAX-FREE MONEY U.S. GOVERNMENT MONEY
--------------------------------------------------------------------------------
DEBT SECURITIES At least 95% in
Corporate Debt the highest
short-term
rating category
--------------------------------------------------------------------------------
U.S. Government No Limit Up to 20%, No Limit
Obligations including
private
activity bonds
and other tax-
able instruments
--------------------------------------------------------------------------------
Municipal At least 80%
Obligations
--------------------------------------------------------------------------------
Private Activity Up to 20%,
Bonds and including U.S.
taxable securities government
obligations
--------------------------------------------------------------------------------
TEMPORARY TAXABLE Up to 100% for
defensive purposes
--------------------------------------------------------------------------------
<PAGE>
MANAGEMENT OF THE FUNDS
THE INVESTMENT ADVISER
INVESCO, located at 7800 East Union Avenue, Denver, Colorado, is the Company's
investment adviser. INVESCO was founded in 1932 and serves as investment adviser
to:
INVESCO Advantage Series Funds, Inc.
INVESCO Bond Funds, Inc.
INVESCO Combination Stock & Bond Funds, Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Sector Funds, Inc.
INVESCO Stock Funds, Inc.
INVESCO Treasurer's Series Funds, Inc.
INVESCO Variable Investment Funds, Inc.
As of June 30, 2000, INVESCO managed 46 mutual funds having combined assets of
over $42 billion, on behalf of more than 1,131,067 shareholders.
INVESCO is an indirect, wholly owned subsidiary of AMVESCAP PLC, a publicly
traded holding company. Through its subsidiaries, AMVESCAP PLC engages in the
business of investment management on an international basis. AMVESCAP PLC is one
of the largest independent investment management businesses in the world with
approximately $392 billion in assets under management as of March 31, 2000.
AMVESCAP PLC's North American subsidiaries include:
INVESCO Retirement and Benefit Services, Inc. ("IRBS"), Atlanta, Georgia,
develops and provides domestic and international defined contribution
retirement plan services to plan sponsors, institutional retirement plan
sponsors, institutional plan providers and foreign governments.
INVESCO Retirement Plan Services ("IRPS"), Atlanta, Georgia, a division of
IRBS, provides recordkeeping and investment selection services to defined
contribution plan sponsors of plans with between $2 million and $200
million in assets. Additionally, IRPS provides investment consulting
services to institutions seeking to provide retirement plan products and
services.
Institutional Trust Company, doing business as INVESCO Trust Company
("ITC"), Denver, Colorado, a division of IRBS, provides retirement account
custodian and/or trust services for individual retirement accounts
("IRAs") and other retirement plan accounts. This includes services
such as recordkeeping, tax reporting and compliance. ITC acts as
trustee or custodian to these plans. ITC accepts contributions and
provides complete transfer agency functions: correspondence, sub-
accounting, telephone communications and processing of distributions.
<PAGE>
INVESCO, Inc., Atlanta, Georgia, manages individualized investment
portfolios of equity, fixed-income and real estate securities for
institutional clients, including mutual funds and collective investment
entities. INVESCO, Inc. includes the following Divisions:
INVESCO Capital Management Division, Atlanta, Georgia, manages
institutional investment portfolios, consisting primarily of discretionary
employee benefit plans for corporations and state and local governments,
and endowment funds.
INVESCO Management & Research Division, Boston, Massachusetts, primarily
manages pension and endowment accounts.
PRIMCO Capital Management Division, Louisville, Kentucky, specializes in
managing stable return investments, principally on behalf of Section
401(k) retirement plans.
INVESCO Realty Advisors Division, Dallas, Texas, is responsible for
providing advisory services in the U.S. real estate markets for AMVESCAP
PLC's clients worldwide. Clients include corporate pension plans and
public pension funds as well as endowment and foundation accounts.
INVESCO (NY) Division, New York, is an investment adviser for separately
managed accounts, such as corporate and municipal pension plans,
Taft-Hartley Plans, insurance companies, charitable institutions and
private individuals. INVESCO NY further serves as investment adviser
to several closed-end investment companies, and as sub-adviser with
respect to certain commingled employee benefit trusts.
A I M Advisors, Inc., Houston, Texas, provides investment advisory and
administrative services for retail and institutional mutual funds.
A I M Capital Management, Inc., Houston, Texas, provides investment advisory
services to individuals, corporations, pension plans and other private
investment advisory accounts and also serves as a sub-adviser to certain
retail and institutional mutual funds, one Canadian mutual fund and one
portfolio of an open-end registered investment company that is offered to
separate accounts of insurance companies.
A I M Distributors, Inc. and Fund Management Company, 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.
<PAGE>
THE INVESTMENT ADVISORY AGREEMENT
INVESCO serves as investment adviser to the Funds under an investment advisory
agreement dated February 28, 1997 (the "Agreement") with the Company.
The Agreement requires that INVESCO manages the investment portfolio of each
Fund in a way that conforms with the Fund's investment policies. INVESCO may
directly manage a Fund itself, or may hire a sub-adviser, which may be an
affiliate of INVESCO, to do so. Specifically, INVESCO is responsible for:
o managing the investment and reinvestment of all the assets of the
Funds, and executing all purchases and sales of portfolio securities;
o 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 1933 Act, and (ii) the Company's status as a regulated
investment company under the Internal Revenue Code of 1986, as amended;
o determining what securities are to be purchased or sold for the Funds,
unless otherwise directed by the directors of the Company, and executing
transactions accordingly;
o 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 a long-range investment policy now or hereafter generally
available to the investment advisory customers of the adviser or any
sub-adviser;
o determining what portion of each Fund's assets should be invested in the
various types of securities authorized for purchase by a Fund; and
o making recommendations as to the manner in which voting rights, rights to
consent to Fund action and any other rights pertaining to a Fund's
portfolio securities shall be exercised.
INVESCO also performs all of the following services for the Funds:
o administrative;
o internal accounting (including computation of net asset value);
o clerical and statistical;
o secretarial;
o all other services necessary or incidental to the administration of
the affairs of the Funds;
<PAGE>
o supplying the Company with officers, clerical staff and other
employees;
o furnishing office space, facilities, equipment, and supplies; providing
personnel and facilities required to respond to inquiries related to
shareholder accounts;
o conducting periodic compliance reviews of the Funds' operations;
preparation and review of required documents, reports and filings by
INVESCO's in-house legal and accounting staff or in conjunction with
independent attorneys and accountants (including prospectuses, statements
of additional information, proxy statements, shareholder reports, tax
returns, reports to the SEC, and other corporate documents of the Funds);
o supplying basic telephone service and other utilities; and
o preparing and maintaining certain of the books and records required to be
prepared and maintained by the Funds under the 1940 Act.
Expenses not assumed by INVESCO are borne by the Funds. As full compensation for
its advisory services to the Company, INVESCO receives a monthly fee from each
Fund. The fee is calculated at the 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.
During the fiscal years ended May 31, 2000, 1999 and 1998, the Funds paid
INVESCO advisory fees in the dollar amounts shown below. Since Cash Reserves
Fund's Class A and B shares were not offered until August 15, 2000, no advisory
fees were paid with respect to those classes of that Fund for the periods shown
below. If applicable, the advisory fees were offset by credits in the amounts
shown below, so that INVESCO's fees were not in excess of the expense
limitations shown below, which have been voluntarily agreed to by the Company
and INVESCO.
Advisory Total Expense Total Expense
Investor Class Fee Dollars Reimbursements Limitations
-------------- ----------- -------------- -----------
Cash Reserves Fund
May 31, 2000 $3,202,302 $301,539 0.90%
May 31, 1999 3,157,241 87,157 0.90%
May 31, 1998 2,789,986 140,835 0.90%
Tax-Free Money Fund
May 31, 2000 $ 207,298 $ 98,939 0.85%
May 31, 1999 246,764 123,371 0.85%(1)
May 31, 1998 238,537 144,423 0.75%
U.S. Government Money Fund
May 31, 2000 $ 432,748 $256,535 0.85%
May 31, 1999 450,781 195,925 0.85%
May 31, 1998 369,593 187,969 0.85%
<PAGE>
Advisory Total Expense Total Expense
Class C Fee Dollars Reimbursements Limitations
------- ----------- -------------- -----------
Cash Reserves Fund(2)
May 31, 2000 $4,442 N/A 1.90%
May 31, 1999 N/A N/A N/A
May 31, 1998 N/A N/A N/A
(1) 0.75% prior to May 13, 1999.
(2) For the period February 15, 2000, commencement of the sale of Class C
shares, through May 31, 2000.
ADMINISTRATIVE SERVICES AGREEMENT
INVESCO, either directly or through affiliated companies, provides certain
administrative, sub-accounting, and recordkeeping services to the Funds pursuant
to an Administrative Services Agreement dated June 1, 2000 with the Company.
The Administrative Services Agreement requires INVESCO to provide the following
services to the Funds:
o such sub-accounting and recordkeeping services and functions as are
reasonably necessary for the operation of the Funds; and
o such sub-accounting, recordkeeping, and administrative services and
functions, which may be provided by affiliates of INVESCO, as are
reasonably necessary for the operation of Fund shareholder accounts
maintained by certain retirement plans and employee benefit plans for the
benefit of participants in such plans.
As full compensation for services provided under the Administrative Services
Agreement, each Fund pays a monthly fee to INVESCO consisting of a base fee of
$10,000 per year plus an additional incremental fee computed daily and paid
monthly at an annual rate of 0.015% of the average net assets of each Fund prior
to May 13, 1999, and 0.045% per year of the average net assets of each Fund
effective May 13, 1999.
TRANSFER AGENCY AGREEMENT
INVESCO also performs transfer agent, dividend disbursing agent, and
registrar services for the Funds pursuant to a Transfer Agency Agreement dated
June 1, 2000 with the Company.
The Transfer Agency Agreement provides that each Fund pays INVESCO an annual fee
of $29.50 ($27.00 prior to June 1, 2000) per shareholder account, or, where
applicable, per participant in an omnibus account. This fee is paid monthly at
the rate of 1/12 of the annual fee and is based upon the actual number of
shareholder accounts and omnibus account participants in each Fund at any time
during each month.
<PAGE>
FEES PAID TO INVESCO
During the fiscal years ended May 31, 2000, 1999 and 1998, the Funds paid
INVESCO the following fees in the dollar amounts shown below (prior to the
absorption of certain Fund expenses by INVESCO). Since Cash Reserves Fund's
Class A and B shares were not offered until August 15, 2000, no fees were paid
with respect to those Classes of that Fund for the periods shown below.
Administrative Transfer
Investor Class Advisory Services Agency
-------------- -------- -------- ------
Cash Reserves Fund
May 31, 2000 $3,202,302 $370,493 $3,312,180
May 31, 1999 3,157,241 140,326 3,167,337
May 31, 1998 2,789,986 109,499 2,779,935
Tax-Free Money Fund
May 31, 2000 $ 207,298 $ 28,657 $ 123,690
May 31, 1999 246,764 18,152 138,487
May 31, 1998 238,537 17,156 151,577
U.S. Government Money Fund
May 31, 2000 $ 432,748 $ 48,947 $ 391,337
May 31, 1999 450,781 24,949 363,724
May 31, 1998 369,593 21,088 303,712
Administrative Transfer
Class C Advisory Services Agency
------- -------- -------- ------
Cash Reserves Fund(1)
May 31, 2000 $4,442 $519 $592
May 31, 1999 N/A N/A N/A
May 31, 1998 N/A N/A N/A
(1) For the period February 15, 2000, commencement of the sale of Class C
shares, through May 31, 2000.
DIRECTORS AND OFFICERS OF THE COMPANY
The overall direction and supervision of the Company come from the board of
directors. The board of directors is responsible for making sure that the Funds'
general investment policies and programs are carried out and that the Funds are
properly administered.
The board of directors has an audit committee comprised of four of the directors
who are not affiliated with INVESCO (the "Independent Directors"). The committee
meets quarterly with the Company's independent accountants and officers to
review accounting principles used by the Company, the adequacy of internal
<PAGE>
controls, the responsibilities and fees of the independent accountants, and
other matters.
The Company has a management liaison committee which meets quarterly with
various management personnel of INVESCO in order to facilitate better
understanding of management and operations of the Company, and to review legal
and operational matters which have been assigned to the committee by the board
of directors, in furtherance of the board of directors' overall duty of
supervision.
The Company has a brokerage committee. The committee meets periodically to
review soft dollar and other brokerage transactions by the Funds, and to review
policies and procedures of INVESCO with respect to brokerage transactions. It
reports on these matters to the Company's board of directors.
The Company has a derivatives committee. The committee meets periodically to
review derivatives investments made by the Funds. It monitors derivative usage
by the Funds and the procedures utilized by INVESCO to ensure that the use of
such instruments follows the policies on such instruments adopted by the
Company's board of directors. It reports on these matters to the Company's board
of directors.
The Company has a legal committee and an insurance committee. These committees
meet when necessary to review legal and insurance matters of importance to the
directors of the Company.
The Company has a nominating committee. The committee meets periodically to
review and nominate candidates for positions as independent directors to fill
vacancies on the board of directors.
The officers of the Company, all of whom are officers and employees of INVESCO,
are responsible for the day-to-day administration of the Company and the Funds.
The officers of the Company receive no direct compensation from the Company or
the Funds for their services as officers. INVESCO has the primary responsibility
for making investment decisions on behalf of the Funds. These investment
decisions are reviewed by the investment committee of INVESCO.
All of the officers and directors of the Company hold comparable positions with
the following funds, which, with the Company, are collectively referred to as
the "INVESCO Funds":
INVESCO Advantage Series Funds, Inc.
INVESCO Bond Funds, Inc.
INVESCO Combination Stock & Bond Funds, Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Sector Funds, Inc.
INVESCO Stock Funds, Inc.
INVESCO Treasurer's Series Funds, Inc.
INVESCO Variable Investment Funds, Inc.
<PAGE>
The table below provides information about each of the Company's directors and
officers. Their affiliations represent their principal occupations.
Name, Address, and Age Position(s) Held Principal Occupation(s)
With Company During Past Five Years
Mark H. Williamson(2)(3) President, Chief President, Chief
7800 E. Union Avenue Executive Officer and Executive Officer and
Denver, Colorado Chairman of the Board Chairman of the Board
Age: 49 of INVESCO Funds
Group Inc.; Presi-
dent, Chief Executive
Officer and Chairman
of the Board of
INVESCO Distributors,
Inc.; President,
Chief Operating
Officer and Chairman
of the Board of
INVESCO Global Health
Sciences Fund;
formerly, Chairman and
Chief Executive
Officer of NationsBanc
Advisors, Inc.;
formerly, Chairman of
NationsBanc
Investments, Inc.
Fred A. Deering Vice Chairman of the Trustee of INVESCO
(1)(2)(7)(8) Board Global Health Sciences
Security Life Center Fund; formerly,
1290 Broadway Chairman of the
Denver, Colorado Executive Committee
Age: 72 and Chairman of the
Board of Security Life
of Denver Insurance
Company; Director of
ING American Holdings
Company and First ING
Life Insurance
Company of New York.
<PAGE>
Name, Address, and Age Position(s) Held Principal Occupation(s)
With Company During Past Five Years
Victor L. Andrews, Director Professor Emeritus,
Ph.D.(4)(6) Chairman Emeritus and
34 Seawatch Drive Chairman of the CFO
Savannah, Georgia Roundtable of the
Age: 70 Department of Finance
of Georgia State
University; President,
Andrews Financial
Associates, Inc.
(consulting firm);
Director of The
Sheffield Funds, Inc.;
formerly, member of
the faculties of the
Harvard Business
School and the Sloan
School of Management
of MIT.
Bob R. Baker(2)(4)(5)(9) Director Consultant (since
37 Castle Pines Dr. North 2000); formerly
Castle Rock, Colorado President and Chief
Age: 63 Executive Officer
(1989 to 2000) of AMC
Cancer Research
Center, Denver,
Colorado; until
mid-December 1988,
Vice Chairman of the
Board of First
Columbia Financial
Corporation,
Englewood, Colorado;
formerly, Chairman of
the Board and Chief
Executive Officer of
First Columbia
Financial Corporation.
Charles W. Brady(3) Director Chief Executive
1315 Peachtree St., N.E. Officer and Director
Atlanta, Georgia of AMVESCAP PLC,
Age: 65 London, England and
various subsidiaries
of AMVESCAP PLC;
Trustee of INVESCO
Global Health Sciences
Fund.
<PAGE>
Position(s) Held Principal
Name, Address, and Age With Company Occupation(s) During
Past Five Years
Lawrence H. Budner(1)(5) Director Trust Consultant;
7608 Glen Albens Circle prior to June 30,
Dallas, Texas 1987, Senior Vice
Age: 70 President and Senior
Trust Officer of
InterFirst Bank,
Dallas, Texas.
James T. Bunch(4)(5)(9) Director Principal and Founder
3600 Republic Plaza of Green Manning &
320 Seventeenth Street Bunch Ltd., Denver,
Denver, Colorado Colorado, since August
Age: 57 1988; Director and
Secretary of Green
Manning & Bunch
Securities, Inc.,
Denver, Colorado since
September 1993; Vice
President and Director
of Western Golf
Association and Evans
Scholars Foundation;
formerly, General
Counsel and Director
of Boettcher & Co.,
Denver, Colorado;
formerly, Chairman and
Managing Partner of
Davis Graham & Stubbs,
Denver, Colorado.
<PAGE>
Name, Address, and Age Position(s) Held Principal Occupation(s)
With Company During Past Five Years
Wendy L. Gramm, Ph.D Director Self-employed (since
(4)(6)(9) 1993); Distinguished
3401 N. Fairfax Senior Fellow and
Arlington, Virginia Director, Regulatory
Age: 55 Studies Program,
Mercatus Center,
George Mason Uni-
versity, VA; formerly,
Chairman, Commodity
Futures Trading Commis-
sion; Administrator
for Information and
Regulatory Affairs at
the Office of
Management and Budget,
also, Director of
Enron Corporation,
IBP, inc., State Farm
Insurance Company,
International Republic
Institute, and the
Texas Public Policy
Foundation; formerly,
Director of the
Chicago Mercantile
Exchange (1994-1999),
Kinetic Concepts, Inc.
(1996-1997) and the
Independent Women's
Forum (1994-1999).
Richard W. Healey(3) Director Director and Senior
7800 E. Union Avenue Vice President of
Denver, Colorado INVESCO Distributors,
Age: 45 Inc. since 1998;
formerly, Senior Vice
President of GT
Global-North America
(1996 to 1998) and The
Boston Company
(1993-1996).
<PAGE>
Name, Address, and Age Position(s) Held Principal Occupation(s)
With Company During Past Five Years
Gerald J. Lewis(1)(6)(7) Director Chairman of Lawsuit
701 "B" Street Resolution Services,
Suite 2100 San Diego, California
San Diego, California since 1987; Director
Age: 66 of General Chemical
Group, Inc., Hampdon,
New Hampshire, since
1996; formerly,
Associate Justice of
the California Court
of Appeals; Director
of Wheelabrator
Technologies, Inc.,
Fisher Scientific,
Inc., Henley
Manufacturing, Inc.,
and California Coastal
Properties, Inc.;
formerly, Of Counsel,
Latham & Watkins, San
Diego, California
(1987 to 1997).
John W. McIntyre Director Retired. Formerly,
(1)(2)(5)(7) Vice Chairman of the
7 Piedmont Center Board of Directors of
Suite 100 The Citizens and
Atlanta, Georgia Southern Corporation
Age: 69 and Chairman of the
Board and Chief Execu
tive Officer of The
Citizens and
Southern Georgia
Corp. and The Citizens
and Southern National
Bank; Trustee of
INVESCO Global Health
Sciences Fund, Gables
Residential Trust,
Employee's Retirement
System of GA, Emory
University, and J.M.
Tull Charitable
Foundation; Director
of Kaiser Foundation
Health Plans of
Georgia, Inc.
<PAGE>
Name, Address, and Age Position(s) Held Principal Occupation(s)
With Company During Past Five Years
Larry Soll, Ph.D. Director Retired. Formerly,
(4)(6)(9) Chairman of the Board
345 Poorman Road (1987 to 1994), Chief
Boulder, Colorado Executive Officer
Age: 58 (1982 to 1989 and 1993
to 1994) and Presi-
dent (1982 to 1989) of
Synergen Inc.;
Director of Synergen
since incorporation
in 1982; Director of
Isis Pharmaceuticals,
Inc.; Trustee of
INVESCO Global Health
Sciences Fund.
Glen A. Payne Secretary Senior Vice President,
7800 E. Union Avenue General Counsel and
Denver, Colorado Secretary of INVESCO
Age: 52 Funds Group, Inc.;
Senior Vice President,
Secretary and General
Counsel of INVESCO
Distributors, Inc.;
Secretary of INVESCO
Global Health Sciences
Fund; and General
Counsel of INVESCO
Trust Company (1989 to
1998) and employee of
a U.S. regulatory
agency, Washington,
D.C. (1973 to 1989).
<PAGE>
Name, Address, and Age Position(s) Held Principal Occupation(s)
With Company During Past Five Years
Ronald L. Grooms Chief Accounting Senior Vice President,
7800 E. Union Avenue Officer, Chief Finan- Treasurer and Director
Denver, Colorado cial Officer and of INVESCO Funds
Age: 53 Treasurer Group, Inc.; Senior
Vice President,
Treasurer and Direc-
tor of INVESCO
Distributors, Inc.;
Treasurer and
Principal Financial
and Accounting Officer
of INVESCO Global
Health Sciences Fund;
formerly, Senior Vice
President and
Treasurer of INVESCO
Trust Company (1988
to 1998).
William J. Galvin, Jr. Assistant Secretary Senior Vice President
7800 E. Union Avenue and Assistant
Denver, Colorado Secretary of INVESCO
Age: 43 Funds Group, Inc.;
Senior Vice President
and Assistant
Secretary of INVESCO
Distributors, Inc.;
formerly, Trust
Officer of INVESCO
Trust Company (1995 to
1998).
Pamela J. Piro Assistant Treasurer Vice President and
7800 E. Union Avenue Assistant Treasurer
Denver, Colorado of INVESCO Funds
Age: 39 Group, Inc.; Assistant
Treasurer of INVESCO
Distributors, Inc.;
formerly, Assistant
Vice President (1996
to 1997),
Director-Portfolio
Accounting (1994 to
1996), Portfolio
Accounting Manager
(1993 to 1994) and
Assistant Accounting
Manager (1990 to 1993).
<PAGE>
Name, Address, and Age Position(s) Held Principal Occupation(s)
With Company During Past Five Years
Alan I. Watson Assistant Secretary Vice President of
7800 E. Union Avenue INVESCO Funds Group,
Denver, Colorado Inc.; formerly, Trust
Age: 58 Officer of INVESCO
Trust Company.
Judy P. Wiese Assistant Secretary Vice President and
7800 E. Union Avenue Assistant Secretary
Denver, Colorado of INVESCO Funds
Age: 52 Group, Inc.; Assistant
Secretary of INVESCO
Distributors, Inc.;
formerly, Trust
Officer of INVESCO
Trust Company.
(1) Member of the audit committee of the Company.
(2) 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.
(3) These directors are "interested persons" of the Company as defined in
the 1940 Act.
(4) Member of the management liaison committee of the Company.
(5) Member of the brokerage committee of the Company.
(6) Member of the derivatives committee of the Company.
(7) Member of the legal committee of the Company.
(8) Member of the insurance committee of the Company.
(9) Member of the nominating committee of the Company.
The following table shows the compensation paid by the Company to its
Independent Directors for services rendered in their capacities as directors of
the Company; the benefits accrued as Company expenses with respect to the
Defined Benefit Deferred Compensation Plan discussed below; and the estimated
annual benefits to be received by these directors upon retirement as a result of
<PAGE>
their service to the Company, all for the fiscal period ended May 31, 2000.
In addition, the table sets forth the total compensation paid by all of the
INVESCO Funds and INVESCO Global Health Sciences Fund (collectively, the
"INVESCO Complex") to these directors or trustees for services rendered in their
capacities as directors or trustees during the year ended December 31, 1999. As
of December 31, 1999, there were 46 funds in the INVESCO Complex.
<TABLE>
<CAPTION>
Name of Aggregate Benefits Estimated Total Compensation
Person and Compensation Accrued Annual Benefits From INVESCO
Position From Company(1) As Part of Upon Retirement(3) Complex Paid To
Company Directors(7)
Expenses(2)
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fred A. Deering, Vice $4,479 $2,543 $1,241 $107,050
Chairman of the Board
----------------------------------------------------------------------------------------------------
Victor L. Andrews 4,390 2,436 1,437 84,700
----------------------------------------------------------------------------------------------------
Bob R. Baker 4,360 2,175 1,926 82,850
----------------------------------------------------------------------------------------------------
Lawrence H. Budner 4,332 2,436 1,437 82,850
----------------------------------------------------------------------------------------------------
James T. Bunch(4) 1,962 0 0 0
----------------------------------------------------------------------------------------------------
Daniel D. Chabris(5) 2,250 2,428 1,182 34,000
----------------------------------------------------------------------------------------------------
Wendy Gramm 4,277 0 0 81,350
----------------------------------------------------------------------------------------------------
Kenneth T. King(5) 4,662 2,574 1,182 85,850
----------------------------------------------------------------------------------------------------
Gerald J. Lewis(4) 1,986 0 0 0
----------------------------------------------------------------------------------------------------
John W. McIntyre 4,450 671 1,437 108,700
----------------------------------------------------------------------------------------------------
Larry Soll 4,315 0 0 100,900
----------------------------------------------------------------------------------------------------
Total $41,463 $15,263 $9,842 768,250
----------------------------------------------------------------------------------------------------
% of Net Assets 0.0042%(6) 0.0016%(6) 0.0024%(7)
----------------------------------------------------------------------------------------------------
</TABLE>
(1) The vice chairman of the board, the chairmen of the Funds' committees
who are Independent Directors, and the members of the Funds' committees who are
Independent Directors each receive compensation for serving in such capacities
in addition to the compensation paid to all Independent Directors.
(2) Represents estimated benefits accrued with respect to the Defined
Benefit Deferred Compensation Plan discussed below, and not compensation
deferred at the election of the directors.
<PAGE>
(3) These amounts represent the Company's share of the estimated annual
benefits payable by the INVESCO Funds upon the directors' retirement, calculated
using the current method of allocating director compensation among the INVESCO
Funds. 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 Funds, and for other reasons
during the period in which retirement benefits are accrued on behalf of the
respective directors. This results in lower estimated benefits for directors who
are closer to retirement and higher estimated benefits for directors who are
further from retirement. With the exception of Drs. Soll and Gramm and Messrs.
Bunch and Lewis, each of these directors has served as a director of one or more
of the funds in the INVESCO Funds for the minimum five-year period required to
be eligible to participate in the Defined Benefit Deferred Compensation Plan.
Mr. McIntyre became eligible to participate in the Defined Benefit Deferred
Compensation Plan as of November 1, 1998, and was not included in the
calculation of retirement benefits until November 1, 1999.
(4) Messrs. Bunch and Lewis became directors of the Company on January 1, 2000.
(5) Mr. Chabris retired as a director of the Company on September 30, 1998. Mr.
King retired as a director of the Company on December 31, 1999.
(6) Total as a percentage of the Company's net assets as of May 31, 2000.
(7) Total as a percentage of the net assets of the INVESCO Complex as of
December 31, 1999.
Messrs. Brady, Healey and Williamson, as "interested persons" of the Company and
the other INVESCO Funds, 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 the other funds in the INVESCO Funds for
their service as directors.
The boards of directors of the mutual funds in the INVESCO Funds have adopted a
Defined Benefit Deferred Compensation Plan (the "Plan") for the Independent
Directors of the funds. Under this Plan, each director who is not an interested
person of the funds (as defined in Section 2(a)(19) of the 1940 Act) and who has
served for at least five years (a "Qualified Director") is entitled to receive,
if the Qualified Director retires upon reaching age 72 (or the retirement age of
73 or 74, if the retirement date is extended by the boards for one or two years,
but less than three years), continuation of payment for one year (the "First
Year Retirement Benefit") of the annual basic retainer and annualized board
meeting fees payable by the funds to the Qualified Director at the time of
his/her retirement (the "Basic Benefit"). Commencing with any such director's
second year of retirement, commencing with the first year of retirement of any
Qualified Director whose retirement has been extended by the boards for three
years, and commencing with attainment of age 72 by a Qualified Director who
voluntarily retired prior to reaching age 72, a Qualified Director shall receive
quarterly payments at an annual rate equal to 50% of the Basic Benefit. These
payments will continue for the remainder of the Qualified Director's life or ten
years, whichever is longer (the "Reduced Benefit Payments"). If a Qualified
Director dies or becomes disabled after age 72 and before age 74 while still a
<PAGE>
director of the funds, the First Year Retirement Benefit and Reduced Benefit
Payments will be made to him/her or to his/her 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
Benefit Payments will be made to him/her or to his/her beneficiary or estate.
The Plan is administered by a committee of three directors who are also
participants in the Plan and one director who is not a Plan participant. The
cost of the Plan will be allocated among the INVESCO Funds in a manner
determined to be fair and equitable by the committee. The Company began making
payments under the Plan to Mr. Chabris as of October 1, 1998 and to Mr. King as
of January 1, 2000. 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. A similar plan has been adopted by INVESCO
Global Health Sciences Fund's board of trustees. All trustees of INVESCO Global
Health Sciences Fund are also directors of the INVESCO Funds.
The Independent Directors have contributed to a deferred compensation plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of certain of the INVESCO
Funds. Certain of the deferred amounts have been invested in the shares of all
INVESCO Funds, except Funds offered by INVESCO Variable Investment Funds, Inc.,
in which the directors are legally precluded from investing. Each Independent
Director may, therefore, be deemed to have an indirect interest in shares of
each such INVESCO Fund, in addition to any INVESCO Fund shares the Independent
Directors may own either directly or beneficially.
CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS
As of June 30, 2000, the following persons owned more than 5% of the oustanding
shares of the Fund indicated below. This level of share ownership is considered
to be a "principal shareholder" relationship with a Fund under the 1940 Act.
Shares that are owned "of record" are held in the name of the person indicated.
Shares that are owned "beneficially" are held in another name, but the owner has
the full economic benefit of ownership of those shares:
Tax-Free Money Fund
--------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage Owned
(Record/Beneficial)
================================================================================
Glendale Enterprises Inc. Record 6.45%
Fund Investment Research
Mountain View Professional Bldg.
2309 Mountain View Dr., Ste. 230
Boise, ID 83706
--------------------------------------------------------------------------------
As of July 10, 2000, officers and directors of the Company, as a group,
beneficially owned less than 3% of any Fund's outstanding shares.
<PAGE>
DISTRIBUTOR
INVESCO Distributors, Inc. ("IDI"), a wholly owned subsidiary of INVESCO, is the
distributor of the Funds. IDI bears all expenses, including the cost of printing
and distributing prospectuses, incident to marketing of the Funds' shares,
except for such distribution expenses as are paid out of Fund assets under the
Company's Plans of Distribution (the "Plans"), which have been adopted by Cash
Reserves Fund - Classes A, B and C pursuant to Rule 12b-1 under the 1940 Act.
CLASS A. The Company has adopted a Master Distribution Plan and Agreement -
Class A pursuant to Rule 12b-1 under the 1940 Act relating to the Class A shares
of Cash Reserves Fund (the "Class A Plan"). Under the Class A Plan, Class A
shares of Cash Reserves Fund pay compensation to IDI at an annual rate of 0.35%
per annum of the average daily net assets attributable to Class A shares for the
purpose of financing any activity which is primarily intended to result in the
sale of Class A shares. During any period that Class A shares of Cash Reserves
Fund are closed to new investors, the Fund will reduce this payment for Class A
shares from 0.35% to 0.25% per annum.
The Class A Plan is designed to compensate IDI, on a monthly basis, for certain
promotional and other sales-related costs, and to implement a dealer incentive
program which provides for periodic payments to selected dealers who furnish
continuing personal shareholder services to their customers who purchase and own
Class A shares of Cash Reserves Fund. Payments can also be directed by IDI to
selected institutions that have entered into service agreements with respect to
Class A shares of Cash Reserves Fund and that provide continuing personal
services to their customers who own Class A shares of the Fund. The service fees
payable to selected institutions are calculated at the annual rate of 0.25% of
the average daily net asset value of those Fund shares that are held in such
institutions' customers' accounts.
Of the aggregate amount payable under the Class A Plan, payments to dealers and
other financial institutions that provide continuing personal shareholder
services to their customers who purchase and own Class A shares of Cash Reserves
Fund, in amounts up to 0.25% of the average daily net assets of the Class A
shares of the Fund attributable to the customers of such dealers or financial
institutions, are characterized as service fees. Payments to dealers and other
financial institutions in excess of such amount and payments to IDI would be
characterized as an asset-based sales charge pursuant to the Class A Plan. The
Class A Plan also imposes a cap on the total amount of sales charges, including
asset-based sales charges, that may be paid by the Company with respect to Class
A shares of Cash Reserves Fund.
CLASS B. The Company has also adopted a Master Distribution Plan and Agreement -
Class B pursuant to Rule 12b-1 under the 1940 Act relating to Class B shares of
Cash Reserves Fund (the "Class B Plan"). Under the Class B Plan, Class B shares
of Cash Reserves Fund pay compensation to IDI at an annual rate of 1.00% per
annum of the average daily net assets attributable to Class B shares for the
purpose of financing any activity which is primarily intended to result in the
sale of Class B shares. Of such amount, Cash Reserves Fund pays a service fee of
0.25% of the average daily net assets attributable to Class B shares to selected
dealers and other institutions which furnish continuing personal shareholder
services to their customers who purchase and own Class B shares. Any amounts not
paid as a service fee would constitute an asset-based sales charge. The Class B
<PAGE>
Plan imposes a cap on the total amount of sales charges, including asset-based
sales charges, that may be paid by the Company with respect to the Class B
shares of Cash Reserves Fund.
CLASS C. The Company has also adopted a Master Distribution Plan and Agreement -
Class C pursuant to Rule 12b-1 under the 1940 Act relating to the Class C shares
of Cash Reserves Fund (the "Class C Plan"). Under the Class C Plan, Class C
shares of Cash Reserves Fund pay compensation to IDI at an annual rate of 1.00%
per annum of the average daily net assets attributable to Class C shares for the
purpose of financing any activity which is primarily intended to result in the
sale of Class C shares.The Class C Plan is designed to compensate IDI for
certain promotional and other sales-related costs, and to implement a dealer
incentive program which provides for periodic payments to selected dealers who
furnish continuing personal shareholder services to their customers who purchase
and own Class C shares of Cash Reserves Fund. Payments can also be directed by
IDI to selected institutions that have entered into service agreements with
respect to Class C shares of Cash Reserves Fund and that provide continuing
personal services to their customers who own Class C shares of Cash Reserves
Fund.
Of the aggregate amount payable under the Class C Plan, payments to dealers and
other financial institutions that provide continuing personal shareholder
services to their customers who purchase and own Class C shares of Cash Reserves
Fund, in amounts up to 0.25% of the average daily net assets of the Class C
shares of the Fund attributable to the customers of such dealers or financial
institutions, are characterized as service fees. Payments to dealers and other
financial institutions in excess of such amount and payments to IDI would be
characterized as an asset-based sales charge pursuant to the Class C Plan. The
Class C Plan also imposes a cap on the total amount of sales charges, including
asset-based sales charges, that may be paid by the Company with respect to the
Class C shares of Cash Reserves Fund.
IDI may pay sales commissions to dealers and institutions who sell Class C
shares of Cash Reserves Fund at the time of such sales. Payments with respect to
Class C shares will equal 1.00% of the purchase price of the Class C shares sold
by the dealer or institution, and will consist of a sales commission of 0.75% of
the purchase price of Class C shares sold plus an advance of the first year
service fee of 0.25% with respect to such shares. IDI will retain all payments
received by it relating to Class C shares for the first thirteen months after
they are purchased. The portion of the payments to IDI under the Class C Plan
attributable to Class C shares which constitutes an asset-based sales charge
(0.75%) is intended in part to permit IDI to recoup a portion of on-going sales
commissions to dealers plus financing costs, if any. After the first thirteen
months, IDI will make such payments quarterly to dealers and institutions based
on the average net asset value of Class C shares which are attributable to
shareholders for whom the dealers and institutions are designated as dealers of
record.
ALL PLANS. Activities appropriate for financing under the Plans include, but are
not limited to, the following: printing of prospectuses and statements of
additional information and reports for other than existing shareholders;
preparation and distribution of advertising material and sales literature;
expenses of organizing and conducting sales seminars; and supplemental payments
to dealers and other institutions such as asset-based sales charges or as
payments of service fees under shareholder service arrangements. Pursuant to an
incentive program, IDI may enter into agreements ("Shareholder Service
<PAGE>
Agreements") with investment dealers selected from time to time by IDI for the
provision of distribution assistance in connection with the sale of Cash
Reserves Fund's shares to such dealers' customers, and for the provision of
continuing personal shareholder services to customers who may from time to time
directly or beneficially own shares of the Fund. The distribution assistance and
continuing personal shareholder services to be rendered by dealers under the
Shareholder Service Agreements may include, but shall not be limited to, the
following: preparing and distributing advertising materials and sales
literature; answering routine customer inquiries concerning the Fund; assisting
customers in changing dividend options, account designations and addresses, and
in enrolling in any of several special investment plans in connection with the
purchase of the Fund's shares; assisting in the establishment and maintenance of
customer accounts and in arranging for any capital gains distributions
automatically to be invested in the Fund's shares; and providing such other
information and services as the Fund or the customer may reasonably request.
Under the Plans, in addition to the Shareholder Service Agreements authorizing
payments to selected dealers, banks may enter into Shareholder Service
Agreements authorizing payments under the Plans to be made to banks which
provide services to their customers who have purchased Fund shares. Services
provided pursuant to Shareholder Service Agreements with banks may include some
or all of the following: answering shareholder inquiries regarding the Fund and
the Company; performing sub-accounting; establishing and maintaining shareholder
accounts and records; processing customer purchase and redemption transactions;
providing periodic statements showing a shareholder's account balance and the
integration of such statements with those of other transactions and balances in
the shareholder's other accounts serviced by the bank; forwarding applicable
prospectuses, proxy statements, reports and notices to bank clients who hold
Fund shares; and such other administrative services as the Fund reasonably may
request, to the extent permitted by applicable statute, rule or regulation.
Similar agreements may be permitted under the Plans for institutions which
provide recordkeeping for and administrative services to 401(k) plans.
Financial intermediaries and any other person entitled to receive compensation
for selling shares of Cash Reserves Fund may receive different compensation for
selling shares of different classes.
Under a Shareholder Service Agreement, Cash Reserves Fund agrees to pay fees
periodically to selected dealers and other institutions that render the
foregoing services to their customers. The fees payable under a Shareholder
Service Agreement generally will be calculated at the end of each payment period
for each business day of Cash Reserves Fund during such period at the annual
rate of 0.35% and 1.00% of the average daily net asset value of Cash Reserves
Fund's shares with respect to Class A shares and Class B and C shares,
respectively. Fees calculated in this manner shall be paid only to those
selected dealers or other institutions who are dealers or institutions of record
at the close of business on the last business day of the applicable payment
period for the account in which Cash Reserves Fund's shares are held.
Payments pursuant to the Plans are subject to any applicable limitations imposed
by the rules of the National Association of Securities Dealers, Inc. ("NASD").
The Plans conform to rules of the NASD by limiting payments made to dealers and
other financial institutions who provide continuing personal shareholder
services to their customers who purchase and own shares of Cash Reserves Fund to
<PAGE>
no more than 0.25% per annum of the average daily net assets of the applicable
class of shares of the Fund attributable to the customers of such dealers or
financial institutions, and by imposing a cap on the total sales charges,
including asset based sales charges, that may be paid by Cash Reserves Fund and
its shares.
Each Plan provides that no provision of the Plan will be interpreted to prohibit
payments during periods when sales of shares of Cash Reserves Fund have been
discontinued, suspended or otherwise limited.
Under the Plans, certain financial institutions which have entered into services
agreements and which sell shares of Cash Reserves Fund on an agency basis may
receive payments from the Fund pursuant to the respective Plan. IDI does not act
as principal, but rather as agent for the Fund, in making dealer incentive and
shareholder servicing payments under the Plans. These payments are an obligation
of Cash Reserves Fund and not of IDI.
For the fiscal period ended May 31, 2000, with respect to its Class C
shares, Cash Reserves Fund paid IDI under the Plan $7,182. In addition, as of
May 31, 2000, $3,757 of additional distribution accruals had been incurred by
the Class C shares of Cash Reserves Fund and will be paid during the fiscal year
ended May 31, 2001. Since the Funds' Class A and B shares were not offered until
August 15, 2000, the Funds' Class A and B shares made no payment to IDI under
the Plans during the year ended May 31, 2000.
An estimate by category of actual fees paid by the Cash Reserves Fund under the
Class C Plan during the fiscal period ended May 31, 2000 were allocated as
follows:
Advertising $ 0
Sales literature, printing and postage $ 0
Direct mail $ 0
Public relations/promotion $ 0
Compensation to securities dealers and other organizations $ 7,182
Marketing personnel $ 0
The Plans require IDI to provide, at least quarterly, the board of directors
with a written report of the amounts expended pursuant to the Plans and the
purposes for which such expenditures were made. The board of directors reviews
these reports in connection with their decisions with respect to the Plans.
The Class B and Class C Plans require that the Distribution Agreements provide
that IDI (or dealers or financial institutions that offer and sell Class B and C
shares) will be deemed to have performed all services required to be performed
in order to receive an asset-based sales charge on the average daily net assets
attributable to Class B or Class C shares upon settlement of each sale of a
Class B or Class C shares.
As required by Rule 12b-1, the Plans were approved by the board of directors,
including a majority of the directors who are not "interested persons" (as
defined in the 1940 Act) of the Company and who have no direct or indirect
financial interest in the operation of the Plans ("Independent Directors"). In
<PAGE>
approving the Plans in accordance with the requirements of Rule 12b-1, the
directors considered various factors and determined that there is a reasonable
likelihood that the Plans would benefit each affected class of Cash Reserves
Fund and its respective shareholders.
The Plans do not obligate Cash Reserves Fund to reimburse IDI for the actual
expenses IDI may incur in fulfilling its obligations under the Plans. Thus, even
if IDI's actual expenses exceed the fee payable to IDI thereunder at any given
time, Cash Reserves Fund will not be obligated to pay more than that fee. If
IDI's expenses are less than the fee it receives, IDI will retain the full
amount of the fee.
Unless the Plans are terminated earlier in accordance with their terms, they
continue as long as such continuance is specifically approved at least annually
by the board of directors, including a majority of the Independent Directors.
The Plans may be terminated with respect to a class by the vote of a majority of
the Independent Directors, or by the vote of a majority of the outstanding
voting securities of such class of Cash Reserves Fund.
Any change in the Plans that would increase materially the distribution expenses
paid by the applicable class requires approval by the shareholders of that class
of shares; otherwise, they may be amended by the directors, including a majority
of the Independent Directors, by votes case in person at a meeting called for
the purpose of voting upon such amendment. As long as the Plans are in effect,
the selection or nomination of the Independent Directors is committed to the
discretion of the Independent Directors. In the event the Class A Plan is
amended in a manner which the board of directors determines would materially
increase the charges paid by holders of Class A shares of Cash Reserves Fund
under the Class A Plan, the Class B shares of Cash Reserves Fund will no longer
convert into Class A shares of the Fund unless the Class B shares, voting
separately, approve such amendment. If the Class B shareholders do not approve
such amendment, the board of directors will (i) create a new class of shares of
Cash Reserves Fund which is identical in all material respects to the Class A
shares as they existed prior to the implementation of the amendment, and (ii)
ensure that the existing Class B shares of Cash Reserves Fund will be exchanged
or converted into such new class of shares no later than the date the Class B
shares were scheduled to convert into Class A shares.
The principal difference between the Class A Plan, the Class B Plan and the
Class C Plan are: (i) the Class A Plan pays to IDI 0.35% of the average daily
net assets of Cash Reserves Fund's Class A shares and each of the Class B and
Class C Plans pay IDI or dealers or financial institutions 1.00% of the average
daily net assets of the respective Class B and Class C shares; (ii) the Class B
Plan obligates the Class B shares to continue to make payments to IDI following
termination of the Class B shares' Distribution Agreement with respect to Class
B shares sold by or attributable to the distribution efforts of IDI unless there
has been a complete termination of the Class B Plan (as defined in such Plan);
and (iii) the Class B Plan expressly authorizes IDI to assign, transfer or
pledge its rights to payments pursuant to the Class B Plan.
<PAGE>
DEALER CONCESSIONS
IDI may pay a dealer concession and/or advance a service fee on such
transactions as set forth below.
In addition to amounts paid to dealers as a dealer concession, IDI may,
from time to time, at its expense or as an expense for which it may be
compensated under a distribution plan, if applicable, pay a bonus or other
consideration or incentive to dealers who sell a minimum dollar amount of the
shares of INVESCO Cash Reserves Fund during a specified period of time. At the
option of the dealer, such incentives may take the form of payment for travel
expenses, including lodging, incurred in connection with trips taken by
qualifying registered representatives and their families to places within or
outside the United States. The total amount of such additional bonus payments or
other consideration shall not exceed 0.25% of the public offering price of the
shares sold. Any such bonus or incentive programs will not change the price paid
by investors for the purchase of Cash Reserves Fund's shares or the amount the
Fund will receive as proceeds from such sales. Dealers may not use sales of Cash
Reserves Fund's shares to qualify for any incentives to the extent that such
incentives may be prohibited by the laws of any state.
IDI may pay sales commissions to dealers and institutions that sell Class C
shares of Cash Reserves Fund at the time of such sales. Payments with respect to
Class C shares will equal 1.00% of the purchase price of the Class C shares sold
by the dealer or institution, and will consist of a sales commission of 0.75% of
the purchase price of the Class C shares sold plus an advance of the first year
service fee of 0.25% with respect to such shares. IDI will retain all payments
received by it relating to Class C shares for the first year after they are
purchased. The portion of the payments to IDI under the Class C Plan which
constitutes an asset-based sales charge (0.75%) is intended in part to permit
IDI to recoup a portion of on-going sales commissions to dealers plus financing
costs, if any. After the first full year, IDI will make such payments quarterly
to dealers and institutions based on the average net asset value of Class C
shares which are attributable to shareholders for whom the dealers and
institutions are designated as dealers of record. These commissions are not paid
on sales to investors who may not pay the CDSC and in circumstances where IDI
grants an exemption on particular transactions.
PURCHASES AT NET ASSET VALUE. Purchases of shares of Cash Reserves Fund at net
asset value (without payment of an initial sales charge) may be made in
connection with: (a) the reinvestment of dividends and distributions from the
Fund; (b) exchanges of shares of certain funds; or (c) a merger, consolidation
or acquisition of assets of a fund.
<PAGE>
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS
CDSCs will not apply to the following:
o Redemptions following the death or post-purchase disability of (1) any
registered shareholders on an account or (2) a settlor of a living trust,
of shares held in the account at the time of death or initial determination
of post-purchase disability;
o Certain distributions from individual retirement accounts, Section 403(b)
retirement plans, Section 457 deferred compensation plans and Section 401
qualified plans, where redemptions result from (i) required minimum
distributions to plan participants or beneficiaries who are age 70-1/2 or
older, and only with respect to that portion of such distributions that
does not exceed 10% annually of the participant's or beneficiary's account
value in a particular INVESCO Fund; (ii) in kind transfers of assets where
the participant or beneficiary notifies the distributor of the transfer not
later than the time the transfer occurs; (iii) tax-free rollovers or
transfers of assets to another plan of the type described above invested in
Class B or Class C shares of Cash Reserves Fund; (iv) tax-free returns of
excess contributions or returns of excess deferral amounts; and (v)
distributions on the death or disability (as defined in the Internal
Revenue Code of 1986, as amended) of the participant or beneficiary;
o Liquidation by Cash Reserves Fund when the account value falls below the
minimum required account size of $250;
o Investment account(s) of INVESCO; and
o Class C shares if the investor's dealer of record notifies IDI prior to
the time of investment that the dealer waives the payment otherwise payable
to him.
HOW TO PURCHASE AND REDEEM SHARES
A complete description of the manner by which shares of the Funds may be
purchased appears in the Prospectus under the caption "How To Buy Shares."
Information concerning redemption of the Cash Reserves Fund shares is set forth
in the Prospectus under the caption "How To Sell Shares." Shares of the Fund may
be redeemed directly through IDI or through any dealer who has entered into an
agreement with IDI. In addition to the Fund's obligation to redeem shares, IDI
may also repurchase shares as an accommodation to the shareholders. To effect a
repurchase, those dealers who have executed Selected Dealer Agreements with IDI
must phone orders to the order desk of Cash Reserves Fund at 1-800-328-2234 and
guarantee delivery of all required documents in good order. A repurchase is
effected at the net asset value of the Fund next determined after such order is
received. Such arrangement is subject to timely receipt by IDI of all required
documents in good order. If such documents are not received within a reasonable
time after the order is placed, the order is subject to cancellation. While
there is no charge imposed by the Fund or by IDI (other than any applicable
CDSC) when shares are redeemed or repurchased, dealers may charge a fair service
fee for handling the transaction. INVESCO intends to redeem all shares of the
Fund in cash.
<PAGE>
The right of redemption may be suspended or the date of payment postponed when
(a) trading on the New York Stock Exchange ("NYSE") is restricted, as determined
by applicable rules and regulations of the SEC, (b) the NYSE is closed for other
than customary weekend and holiday closings, (c) the SEC has by order permitted
such suspension, or (d) an emergency as determined by the SEC exists making
disposition of portfolio securities or the valuation of the net assets of the
Fund not reasonably practicable.
OTHER SERVICE PROVIDERS
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 1670 Broadway, Suite 1000, Denver, Colorado, are the
independent accountants of the Company. The independent accountants are
responsible for auditing the financial statements of the Funds.
CUSTODIAN
State Street Bank and Trust Company, P.O. Box 351, Boston, Massachusetts, is the
custodian of the cash and investment securities of the Company. The custodian 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 with the Company. The custodian is authorized to establish
separate accounts in foreign countries and to cause foreign securities owned by
the Funds to be held outside the United States in branches of U.S. banks and, to
the extent permitted by applicable regulations, in certain foreign banks and
securities depositories.
TRANSFER AGENT
INVESCO, 7800 E. Union Avenue, Denver, Colorado, is the Company's transfer
agent, registrar, and dividend disbursing agent. Services provided by INVESCO
include the issuance, cancellation and transfer of shares of the Funds, and the
maintenance of records regarding the ownership of such shares.
LEGAL COUNSEL
The firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., 2nd
Floor, Washington, D.C., is legal counsel for the Company. The firm of Moye,
Giles, O'Keefe, Vermeire & Gorrell LLP, 1225 17th Street, Suite 2900, Denver,
Colorado, acts as special counsel to the Company.
BROKERAGE ALLOCATION AND OTHER PRACTICES
As the investment adviser to the Funds, INVESCO places orders for the purchase
and sale of securities with broker-dealers based upon an evaluation of the
financial responsibility of the broker-dealers and the ability of the
broker-dealers to effect transactions at the best available prices.
Consistent with the standard of seeking to obtain favorable execution on
<PAGE>
portfolio transactions, INVESCO may select brokers that provide research
services to INVESCO and the Company, as well as other INVESCO mutual funds and
other accounts managed by INVESCO. Research services include statistical and
analytical reports relating to issuers, industries, securities and economic
factors and trends, which may be of assistance or value to INVESCO in making
informed investment decisions. Research services prepared and furnished by
brokers through which a Fund effects securities transactions may be used by
INVESCO in servicing all of its accounts and not all such services may be used
by INVESCO in connection with a particular Fund. Conversely, a Fund receives
benefits of research acquired through the brokerage transactions of other
clients of INVESCO.
Because the securities that the Funds invest in are generally traded on a
principal basis, it is unusual for a Fund to pay any brokerage commissions. The
Funds paid no brokerage commissions for the fiscal years ended May 31, 2000,
1999 and 1998. For the fiscal year ended May 31, 2000, brokers providing
research services received $0 in commissions on portfolio transactions effected
for the Funds. The aggregate dollar amount of such portfolio transactions was
$0. Commissions totaling $0 were allocated to certain brokers in recognition of
their sales of shares of the Funds on portfolio transactions of the Funds
effected during the fiscal year ended May 31, 2000.
At May 31, 2000, each Fund held debt securities of its regular brokers or
dealers, or their parents, as follows:
--------------------------------------------------------------------------------
Fund Broker or Dealer Value of Securities
at May 31, 2000
================================================================================
Cash Reserves State Street Bank and Trust $3,775,000
--------------------------------------------------------------------------------
GE Capital Services $15,000,000
--------------------------------------------------------------------------------
Merrill Lynch $22,908,673
--------------------------------------------------------------------------------
Morgan Stanley Dean Witter $40,848,860
--------------------------------------------------------------------------------
GE Company $45,000,000
--------------------------------------------------------------------------------
General Motors Acceptance $45,694,935
--------------------------------------------------------------------------------
Sears Roebuck Acceptance $12,000,000
--------------------------------------------------------------------------------
Heller Financial $47,000,000
--------------------------------------------------------------------------------
General Motors $44,896,428
--------------------------------------------------------------------------------
Tax-Free Money None
--------------------------------------------------------------------------------
U.S. Government Money None
--------------------------------------------------------------------------------
Neither INVESCO nor any affiliate of INVESCO receives any brokerage commissions
on portfolio transactions effected on behalf of the Funds, and there is no
affiliation between INVESCO or any person affiliated with INVESCO or the Funds
and any broker or dealer that executes transactions for the Funds.
<PAGE>
CAPITAL STOCK
The Company is authorized to issue up to twenty billion shares of common stock
with a par value of $0.01 per share. As of June 30, 2000, the following shares
of each Fund were outstanding:
Cash Reserves Fund - Investor Class 809,156,333
Cash Reserves Fund - Class A 0
Cash Reserves Fund - Class B 0
Cash Reserves Fund - Class C 4,581,384
Tax-Free Money Fund - Investor Class 40,390,212
U.S. Government Money Fund - Investor Class 78,921,727
A share of each class of a Fund represents an identical interest in that Fund's
investment portfolio and has the same rights, privileges and preferences.
However, each class may differ with respect to sales charges, if any,
distribution and/or service fees, if any, other expenses allocable exclusively
to each class, voting rights on matters exclusively affecting that class, and
its exchange privilege, if any. The different sales charges and other expenses
applicable to the different classes of shares of the Funds will affect the
performance of those classes. Each share of a Fund is entitled to participate
equally in dividends for that class, other distributions and the proceeds of any
liquidation of a class of the Fund. However, due to the differing expenses of
the classes, dividends and liquidation proceeds on Investor Class shares and
Class A, Class B and Class C shares of Cash Reserves Fund will differ. All
shares of a Fund will be voted together, except that only the shareholders of a
particular class of a Fund may vote on matters exclusively affecting that class,
such as terms of a Rule 12b-1 Plan as it relates to the class. All shares issued
and outstanding are, and all shares offered hereby when issued will be, fully
paid and nonassessable. Other than the automatic conversion of Class B Shares to
Class A shares of Cash Reserves Fund, there are no conversion rights. The board
of directors has the authority to designate additional classes of common stock
without seeking the approval of shareholders and may classify and reclassify any
authorized but unissued shares.
Shares have no preemptive rights and are freely transferable on the books of
each Fund.
All shares of the Company have equal voting rights based on one vote for each
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 Funds will assist shareholders in
communicating with other shareholders as required by the 1940 Act.
Fund shares have noncumulative voting rights, which means that the holders of a
majority of the shares of the Company voting for the election of directors of
<PAGE>
the Company can elect 100% of the directors if they choose to do so. If that
occurs, 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.
Directors may be removed by action of the holders of a majority of the
outstanding shares of the Company.
TAX CONSEQUENCES OF OWNING SHARES OF A FUND
Each Fund intends to continue to conduct its business and satisfy the applicable
diversification of assets, distribution 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 Fund qualified as a regulated investment
company and intends to continue to qualify during its current fiscal year. It is
the policy of each Fund to distribute all investment company taxable income. As
a result of this policy and the Funds' qualifications as regulated investment
companies, it is anticipated that none of the Funds will pay federal income or
excise taxes and that the Funds will be accorded conduit or "pass through"
treatment for federal income tax purposes. Therefore, any taxes that a Fund
would ordinarily owe are paid by its shareholders on a pro-rata basis. If a Fund
does not distribute all of its net investment income, it will be subject to
income and excise taxes on the amount that is not distributed. If a Fund does
not qualify as a regulated investment company, it will be subject to corporate
income tax on its net investment income at the corporate tax rates.
Tax-Free Money Fund intends to qualify to pay "exempt-interest dividends" to its
shareholders. The Fund will qualify if at least 50% of the value of its total
assets are invested in municipal securities at the end of each quarter of the
Fund's fiscal year. The exempt-interest portion of the monthly income dividend
may be based on the ratio of that Fund's tax-exempt income to taxable income for
the entire fiscal year. The ratio is calculated and reported to shareholders at
the end of each fiscal year of the Fund. The tax-exempt portion of any
particular dividend may be based on the tax-exempt portion of all distributions
for the year, rather than on the tax-exempt portion of that particular dividend.
A corporation includes exempt-interest dividends in calculating its alternative
minimum taxable income in situations where the adjusted current earnings of the
corporation exceed its alternative minimum taxable income.
Entities or persons who are "substantial users" (or persons related to
"substantial users") of facilities financed by private activity bonds or
industrial development bonds should consult their tax advisers before purchasing
shares of the Tax-Free Money Fund because, for users of certain of these
facilities, the interest on such bonds is not exempt from federal income tax.
For these purposes, the term "substantial user" is defined generally to include
a "non-exempt person" who regularly uses in trade or business a part of a
facility financed from the proceeds of such bonds.
The Funds' investment objectives and policies, including their policy of
attempting to maintain a net asset value of $1.00 per share, make it unlikely
that any capital gains will be paid to investors. However, each Fund cannot
guarantee that such a net asset value will be maintained. Accordingly, a
shareholder may realize a capital gain or loss upon redemption of shares of a
Fund. Capital gain or loss on shares held for one year or less is classified as
<PAGE>
short-term capital gain or loss while capital gain or loss on shares held for
more than one year is classified as long-term capital gain or loss. Any loss
realized on the redemption of fund shares held for six months or less is
nondeductible to the extent of any exempt-interest dividends paid with respect
to such shares. Each Fund will be subject to a nondeductible 4% excise tax to
the extent it fails to distribute by the end of any calendar year substantially
all of its ordinary income for that year and its net capital gains for the
one-year period ending on October 31 of that year, plus certain other amounts.
You should consult your own tax adviser regarding specific questions as to
federal, state and local taxes. Dividends will generally be subject to
applicable 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.
PERFORMANCE
To keep shareholders and potential investors informed, INVESCO will occasionally
advertise the Funds' total returns for one-, five-, and ten-year periods (or
since inception).
Each Fund's total return is calculated in accordance with a standardized formula
for computation of annualized total return. Standardized total return for Class
A shares of Cash Reserves Fund reflects the deduction of the maximum initial
sales charge at the time of purchase. Standardized total return for Class B and
Class C shares of Cash Reserves Fund reflects the deduction of the maximum
applicable contingent deferred sales charge on a redemption of shares held for
the period. Total returns quoted in advertising reflect all aspects of a Fund's
return, including the effect of reinvesting dividends and capital gain
distributions, and any change in a Fund's net asset value per share over the
period. Average annual returns are calculated by determining the growth or
decline in value of a hypothetical investment in a Fund over a stated period,
and then calculating the annually compounded percentage rate that would have
produced the same result if the rate of growth or decline in value has been
constant over the period. Because average annual returns tend to even out
variations in a Fund's returns, investors should realize that a Fund's
performance is not constant over time, but changes from year to year, and that
average annual returns do not represent the actual year-to-year performance of a
Fund.
In addition to average annual returns, the Funds may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Cumulative total return shows the actual rate of return on
an investment for the period cited; average annual total return represents the
average annual percentage change in the value of an investment. Both cumulative
and average annual total returns tend to "smooth out" fluctuations in a Fund's
investment results, because they do not show the interim variations in
performance over the periods cited. Total returns may be quoted with or without
taking Cash Reserves Fund's Class A, B or Class C contingent deferred sales
charge into account. Excluding sales charges from a total return calculation
produces a higher total return figure.
We may also advertise a Fund's "current yield" and "effective yield." Both yield
figures are based on historical earnings and are not intended to indicate future
performance. The "current yield" of a Fund refers to the income generated by an
investment in the Fund over a seven-day period (which period will be stated in
the advertisement). This income is then "annualized." That is, the amount of
income generated by the investment during that week is assumed to be generated
each week over a 52-week period and is shown as a percentage of the investment.
The "effective yield" is calculated similarly but, when annualized, the income
earned by an investment in the Fund is assumed to be reinvested. The "effective
<PAGE>
yield" will be slightly higher than the "current yield" because of the
compounding effect of this assumed reinvestment. For the seven days ended May
31, 2000, Cash Reserves Fund's current and effective yields for Investor Class
shares were 5.59% and 5.74%, respectively; Cash Reserves Fund's current and
effective yields for Class C shares were 5.04% and 5.16%, respectively; Tax-Free
Money Fund's current and effective yields were 3.33% and 3.38%, respectively;
and U.S. Government Money Fund's current and effective yields were 5.40% and
5.55%, respectively.
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 INVESCO using the telephone number or address on the back
cover of the Funds' Prospectuses.
When we quote mutual fund rankings published by Lipper Inc., we may compare a
Fund to others in its appropriate Lipper category, as well as the broad-based
Lipper general fund groupings. These rankings allow you to compare a Fund to its
peers. Other independent financial media also produce performance- or
service-related comparisons, which you may see in our promotional materials.
Performance figures are based on historical earnings and are not intended to
suggest future performance.
Average annual total return performance for the one-, five-, and ten-year
periods (or since inception) ended May 31, 2000 was:
<TABLE>
<CAPTION>
10 YEAR OR
INVESTOR CLASS 1 YEAR 5 YEAR SINCE INCEPTION
-------------- ------ ------ ---------------
<S> <C> <C> <C>
Cash Reserves Fund - Investor Class 4.87% 4.77% 4.54%
Cash Reserves Fund - Class C N/A N/A 1.36%(1)
Tax-Free Money Fund - Investor Class 2.86% 2.90% 2.93%
U.S. Government Money Fund - Investor Class 4.74% 4.66% 4.15%(2)
</TABLE>
(1) Class C shares were offered beginning February 15, 2000.
(2) Since inception April 26, 1991
Average annual total return performance is not provided for Cash Reserves
Fund's Class A and B shares since those classes were not offered until August
15, 2000. 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 = a hypothetical initial payment of $10,000
T = average annual total return
n = number of years
<PAGE>
ERV = ending redeemable value of initial payment
The average annual total return performance figures shown above were determined
by solving the above formula for "T" for each time period indicated.
In conjunction with performance reports, comparative data between a Fund's
performance for a given period and other types of investment vehicles, including
certificates of deposit, may be provided to prospective investors and
shareholders.
In conjunction with performance reports and/or analyses of shareholder services
for a Fund, comparative data between that Fund's performance for a given period
and recognized indices of investment results for the same period, and/or
assessments of the quality of shareholder service, may be provided to
shareholders. Such indices include indices provided by Dow Jones & Company, S&P,
Lipper Inc., Lehman Brothers, National Association of Securities Dealers
Automated Quotations, Frank Russell Company, Value Line Investment Survey, the
American Stock Exchange, Morgan Stanley Capital International, Wilshire
Associates, the Financial Times Stock Exchange, the New York Stock Exchange, the
Nikkei Stock Average and Deutcher Aktienindex, all of which are unmanaged market
indicators. In addition, rankings, ratings, and comparisons of investment
performance and/or assessments of the quality of shareholder services made by
independent sources may be used in advertisements, sales literature or
shareholder reports, including reprints of, or selections from, editorials or
articles about the Fund. These sources utilize information compiled (i)
internally; (ii) by Lipper Inc.; or (iii) by other recognized analytical
services. The Lipper Inc. mutual fund rankings and comparisons which may be used
by the Fund in performance reports will be drawn from the following mutual fund
groupings, in addition to the broad-based Lipper general fund groupings:
Lipper Mutual
Fund Fund Category
---- -------------
Cash Reserve Fund Money Market Funds
Tax-Free Money Fund Tax-Exempt Money Market Funds
U.S. Government Money Fund U.S. Government Money Market 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
<PAGE>
FORBES
FORTUNE
IBBOTSON ASSOCIATES, INC.
INSTITUTIONAL INVESTOR
INVESTMENT COMPANY DATA, INC.
INVESTOR'S BUSINESS DAILY
KIPLINGER'S PERSONAL FINANCE
LIPPER INC.'S MUTUAL FUND PERFORMANCE ANALYSIS
MONEY
MORNINGSTAR
MUTUAL FUND FORECASTER
NO-LOAD ANALYST
NO-LOAD FUND X
PERSONAL INVESTOR
SMART MONEY
THE NEW YORK TIMES
THE NO-LOAD FUND INVESTOR
U.S. NEWS AND WORLD REPORT
UNITED MUTUAL FUND SELECTOR
USA TODAY
THE WALL STREET JOURNAL
WIESENBERGER INVESTMENT COMPANIES SERVICES
WORKING WOMAN
WORTH
CODE OF ETHICS
INVESCO permits investment and other personnel to purchase and sell
securities for their own accounts, subject to a compliance policy governing
personal investing. This policy requires INVESCO's personnel to conduct their
personal investment activities in a manner that INVESCO believes is not
detrimental to the Fund or INVESCO's other advisory clients. The Code of Ethics
is on file with, and may be obtained from, the Commission.
FINANCIAL STATEMENTS
The financial statements for the Funds for the fiscal year ended May 31, 2000
are incorporated herein by reference from the INVESCO Money Market Funds, Inc.'s
Annual Report to Shareholders dated May 31, 2000.
<PAGE>
APPENDIX A
Some of the terms used in the Statement of Additional Information are
described below.
BANK OBLIGATIONS include certificates of deposit which are negotiable
certificates evidencing the indebtedness of a commercial bank to repay funds
deposited with it for a definite period of time (usually from 14 days to one
year) at a stated interest rate.
BANKERS' ACCEPTANCES are credit instruments evidencing the obligation of a
bank to pay a draft which has been drawn on it by a customer. These instruments
reflect the obligation both of the bank and of the drawer to pay the face amount
of the instrument upon maturity.
BOND ANTICIPATION NOTES normally are issued to provide interim financing
until long-term financing can be arranged. The long-term bonds then provide the
money for the repayment of the Notes.
MUNICIPAL BONDS may be issued to raise money for various public purposes
-- like constructing public facilities and making loans to public institutions.
Certain types of municipal bonds, such as certain project notes, are backed by
the full faith and credit of the United States. Certain types of municipal bonds
are issued to obtain funding for privately operated facilities. The two
principal classifications of municipal bonds are "general obligation" and
"revenue" bonds. General obligation bonds are backed by the taxing power of the
issuing municipality and are considered the safest type of municipal bond.
Issuers of general obligation bonds include states, counties, cities, towns and
regional districts. The proceeds of these obligations are used to fund a wide
range of public projects including the construction or improvement of schools,
highways and roads, water and sewer systems and a variety of other public
purposes. The basic security of general obligation bonds is the issuer's pledge
of its faith, credit, and taxing power for the payment of principal and
interest. Revenue bonds are backed by the net revenues derived from a particular
facility or group of facilities of a municipality or, in some cases, from the
proceeds of a special excise or other specific revenue source. Although the
principal security behind these bonds varies widely, many provide additional
security in the form of a debt service reserve fund whose monies may also be
used to make principal and interest payments on the issuer's obligations.
Industrial development revenue bonds are a specific type of revenue bond backed
by the credit and security of a private user and therefore investments in these
bonds have more potential risk. Although nominally issued by municipal
authorities, industrial development revenue bonds are generally not secured by
the taxing power of the municipality but are secured by the revenues of the
authority derived from payments by the industrial user.
COMMERCIAL PAPER consists of short-term (usually one to 180 days)
unsecured promissory notes issued by corporations in order to finance their
current operations.
CORPORATE DEBT OBLIGATIONS are bonds and notes issued by corporations and
other business organizations, including business trusts, in order to finance
their long-term credit needs.
MONEY MARKET refers to the marketplace composed of the financial
institutions which handle the purchase and sale of liquid, short-term,
high-grade debt instruments. The money market is not a single entity, but
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consists of numerous separate markets, each of which deals in a different type
of short-term debt instrument. These include U.S. government securities,
commercial paper, certificates of deposit and bankers' acceptances, which are
generally referred to as money market instruments.
PORTFOLIO SECURITIES LOANS: The Company, on behalf of each of the Funds,
may lend limited amounts of its portfolio securities (not to exceed 33 1/3% of a
particular Fund's total assets). Management of the Company understands that it
is the current view of the staff of the SEC that the Funds are permitted to
engage in loan transactions only if the following conditions are met: (1) the
applicable Fund must receive 100% collateral in the form of cash or cash
equivalents, e.g., U.S. Treasury bills or notes, from the borrower; (2) the
borrower must increase the collateral whenever the market value of the
securities (determined on a daily basis) rises above the level of the
collateral; (3) the Company must be able to terminate the loan after notice; (4)
the applicable Fund must receive reasonable interest on the loan or a flat fee
from the borrower, as well as amounts equivalent to any dividends, interest or
other distributions on the securities loaned and any increase in market value;
(5) the applicable Fund may pay only reasonable custodian fees in connection
with the loan; (6) voting rights on the securities loaned may pass to the
borrower; however, if a material event affecting the investment occurs, the
Company must be able to terminate the loan and vote proxies or enter into an
alternative arrangement with the borrower to enable the Company to vote proxies.
Excluding items (1) and (2), these practices may be amended from time to time as
regulatory provisions permit.
REPURCHASE AGREEMENTS: A repurchase agreement is a transaction in which a
Fund purchases a security and simultaneously commits to sell the security to the
seller at an agreed upon price and date (usually not more than seven days) after
the date of purchase. The resale price reflects the purchase price plus an
agreed upon market rate of interest which is unrelated to the coupon rate or
maturity of the purchased security. A Fund's risk is limited to the ability of
the seller to pay the agreed upon amount on the delivery date. In the opinion of
management this risk is not material; if the seller defaults, the underlying
security constitutes collateral for the seller's obligations to pay. This
collateral will be held by the custodian for the Company's assets. However, in
the absence of compelling legal precedents in this area, there can be no
assurance that the Company will be able to maintain its rights to such
collateral upon default of the issuer of the repurchase agreement. To the extent
that the proceeds from a sale upon a default in the obligation to repurchase are
less than the repurchase price, the particular Fund would suffer a loss.
REVENUE ANTICIPATION NOTES are issued in expectation of receipt of other
kinds of revenue, such as federal revenues available under the Federal Revenue
Sharing Program.
REVERSE REPURCHASE AGREEMENTS are transactions where a Fund temporarily
transfers possession of a portfolio security to another party, such as a bank or
broker-dealer, in return for cash, and agrees to buy the security back at a
future date and price. The use of reverse repurchase agreements will create
leverage, which is speculative. Reverse repurchase agreements are borrowings
subject to the Funds' investment restrictions applicable to that activity. The
Company will enter into reverse repurchase agreements solely for the purpose of
obtaining funds necessary for meeting redemption requests. The proceeds received
from a reverse repurchase agreement will not be used to purchase securities for
investment purposes.
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SHORT-TERM DISCOUNT NOTES (tax-exempt commercial paper) are promissory
notes issued by municipalities to supplement their cash flow. The ratings A-1
and P-1 are the highest commercial paper ratings assigned by S&P and Moody's,
respectively.
TAX ANTICIPATION NOTES are to finance working capital needs of
municipalities and are issued in anticipation of various seasonal tax revenues,
to be payable from these specific future taxes.
TIME DEPOSITS are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate. Time
deposits which may be held by the Funds will not benefit from insurance from the
Federal Deposit Insurance Corporation.
U.S. GOVERNMENT SECURITIES are debt securities (including bills, notes,
and bonds) issued by the U.S. Treasury or issued by an agency or instrumentality
of the U.S. government which is established under the authority of an Act of
Congress. Such agencies or instrumentalities include, but are not limited to,
Fannie Mae, Ginnie Mae (also known as Government National Mortgage Association),
the Federal Farm Credit Bank, and the Federal Home Loan Banks. Although all
obligations of agencies, authorities and instrumentalities are not direct
obligations of the U.S. Treasury, payment of the interest and principal on these
obligations may be backed directly or indirectly by the U.S. government. This
support can range from the backing of the full faith and credit of the United
States to U.S. Treasury guarantees, or to the backing solely of the issuing
instrumentality itself. In the case of securities not backed by the full faith
and credit of the United States, a Fund 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.
RATINGS OF MUNICIPAL AND CORPORATE DEBT OBLIGATIONS
The four highest ratings of Moody's and S&P for municipal and corporate
debt obligations are Aaa, Aa, A and Baa and AAA, AA, A and BBB, respectively.
MOODY'S. The characteristics of these debt obligations rated by Moody's are
generally as follows:
Aaa -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
Moody's applies the numerical modifiers 1, 2 and 3 to the Aa rating
classification. The modifier 1 indicates a ranking for the security in the
higher end of this rating category; the modifier 2 indicates a mid- range
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ranking; and the modifier 3 indicates a ranking in the lower end of this rating
category.
A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Moody's ratings for state and municipal notes and other short-term loans
are designated Moody's Investment Grade ("MIG"). This distinction is in
recognition of the difference between short-term credit and long-term credit. A
short-term rating may also be assigned on an issue having a demand feature. Such
ratings are designated as VMIG. Short-term ratings on issues with demand
features are differentiated by the use of the VMIG symbol to reflect such
characteristics as payment upon demand rather than fixed maturity dates and
payment relying on external liquidity.
MIG 1/VMIG 1 -- Notes and loans bearing this designation are of the best
quality, enjoying strong protection from established cash flows of funds for
their servicing or from established and broad-based access to the market for
refinancing, or both.
MIG 2/VMIG 2 -- Notes and loans bearing this designation are of high
quality, with margins of protection ample although not so large as in the
preceding group.
S&P'S RATING SERVICES. The characteristics of these debt obligations rated
by S&P are generally as follows:
AAA -- This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA -- Bonds rated AA also qualify as high quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority of
instances they differ from AAA issues only in small degree.
A -- Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
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S&P ratings for short-term notes are as follows:
SP-1 -- Very strong capacity to pay principal and interest.
SP-2 -- Satisfactory capacity to pay principal and interest.
SP-3 -- Speculative capacity to pay principal and interest.
A debt rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor.
RATINGS OF COMMERCIAL PAPER
DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS. Among the factors
considered by Moody's Investors Services, Inc. in assigning commercial paper
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
the 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. Relative differences in strength and
weakness in respect to these criteria would establish a rating of one of three
classifications; P-1 (Highest Quality), P-2 (Higher Quality) or P-3 (High
Quality).
DESCRIPTION OF S&P COMMERCIAL PAPER RATINGS. An S&P commercial paper
rating is a current assessment of the likelihood of timely payment of debt
having an original maturity of no more than 365 days. Ratings are graded into
four categories, ranging from "A" for the highest quality obligations to "D" for
the lowest. The "A" categories are as follows:
A -- Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with the numbers 1, 2, and 3 to indicate the relative degree of safety.
A-1 -- This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong.
A-2 -- Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-1.
A-3 -- Issues carrying this designation have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designations.
