PROSPECTUS
August 31, 1995
INVESCO DYNAMICS FUND, INC.
INVESCO Dynamics Fund, Inc. (the "Fund") is actively and
aggressively managed to seek appreciation of capital. Most of its
investments are in U.S. common stocks, but the Fund has the
flexibility to invest in other types of securities.
This prospectus provides you with the basic information you should know
before investing in the Fund. You should read it and keep it for future
reference. A Statement of Additional Information containing further information
about the Fund, dated August 31, 1995, has been filed with the Securities and
Exchange Commission, and is incorporated by reference into this prospectus. To
obtain a free copy, write to INVESCO Funds Group, Inc., P.O. Box 173706, Denver,
Colorado 80217-3706; or call 1-800-525-8085.
TABLE OF CONTENTS Page
ESSENTIAL INFORMATION...................................................... 3
ANNUAL FUND EXPENSES....................................................... 4
FINANCIAL HIGHLIGHTS....................................................... 6
INVESTMENT OBJECTIVE AND STRATEGY.......................................... 7
INVESTMENT POLICIES AND RISKS.............................................. 8
THE FUND AND ITS MANAGEMENT................................................ 9
FUND PRICE AND PERFORMANCE................................................. 11
HOW TO BUY SHARES.......................................................... 12
FUND SERVICES.............................................................. 15
HOW TO SELL SHARES......................................................... 16
TAXES, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS............................ 18
ADDITIONAL INFORMATION..................................................... 19
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION. THE SHARES
OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL
<PAGE>
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY.
ESSENTIAL INFORMATION
Investment Goal And Strategy. INVESCO Dynamics Fund, Inc. is
a diversified mutual fund that seeks appreciation of capital
through aggressive investment policies. It invests primarily in
common stocks of U.S. companies traded on national securities
exchanges and over-the-counter. There is no guarantee that the Fund
will meet its objective. See "Investment Objective And Strategy."
The Fund is Designed For: Investors seeking capital growth over the
long-term. While not intended as a complete investment program, the Fund may be
a valuable element of your investment portfolio. You also may wish to consider
the Fund as part of a Uniform Gift/Transfer To Minors Account or systematic
investing strategy. The Fund may be a suitable investment for many types of
retirement programs, including IRA, SEP-IRA, SARSEP, 401(k), Profit Sharing,
Money Purchase Pension, and 403(b) plans.
Time Horizon. Potential shareholders should consider this a
long-term investment due to the volatility of the securities held
by the Fund.
Risks. The Fund uses an aggressive investment strategy, which at times may
include holdings in foreign securities and rapid portfolio turnover. The returns
on foreign investments may be influenced by currency fluctuations and other
risks of investing overseas. Rapid portfolio turnover may result in higher
brokerage commissions and the acceleration of taxable capital gains. These
policies make the Fund unsuitable for that portion of your savings dedicated to
current income or preservation of capital over the short-term. See "Investment
Objective and Strategy" and "Investment Policies and Risks."
Organization and Management. The Fund is owned by its
shareholders. It employs INVESCO Funds Group, Inc. ("IFG"), founded
in 1932, to serve as investment adviser, administrator,
distributor, and transfer agent. INVESCO Trust Company ("INVESCO
Trust"), founded in 1969, serves as sub-adviser.
INVESCO Trust senior vice president Timothy J. Miller has
managed INVESCO Dynamics Fund since 1993. He has 16 years of
investment management experience. A Chartered Financial Analyst, he
earned his MBA from the University of Missouri and a BSBA from St.
Louis University. See "The Fund And Its Management."
IFG and INVESCO Trust are part of a global firm that managed approximately
$65 billion as of December 31, 1994. The parent company, INVESCO PLC, is based
in London, with money managers located in Europe, North America and the Far
East.
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This Fund offers all of the following services at no charge:
Telephone purchases
Telephone exchanges
Telephone redemptions
Automatic reinvestment of distributions Regular investment plans, such as
EasiVest (the Fund's automatic monthly investment program), Direct Payroll
Purchase, and Automatic Monthly Exchange Periodic withdrawal plans
See "How To Buy Shares" and "How To Sell Shares."
Minimum Initial Investment: $1,000, which is waived for
regular investment plans, including EasiVest and Direct Payroll
Purchase, and certain retirement plans.
Minimum Subsequent Investment: $50 (Minimums are lower for
certain retirement plans.)
ANNUAL FUND EXPENSES
The Fund is no-load; there are no fees to purchase, exchange
or redeem shares. The Fund is authorized to pay a Rule 12b-1
distribution fee of one quarter of one percent each year. (See
"How To Buy Shares -- Distribution Expenses.")
Like any company, the Fund has operating expenses, such as portfolio
management, accounting, shareholder servicing, maintenance of shareholder
accounts, and other expenses. These expenses are paid from the Fund's assets.
Lower expenses therefore benefit investors by increasing the Fund's total
return.
We calculate annual operating expenses as a percentage of the Fund's
average annual net assets. To keep expenses competitive, the Fund's manager
voluntarily reimburses the Fund for amounts in excess of 1.21% of average net
assets.
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fee 0.60%
12b-1 Fees 0.25%
Other Expenses (after absorbed expenses)1 0.36%
Total Fund Operating Expenses (after absorbed expenses)1 1.21%
1Assumes that the current voluntary expense limitation had been in effect during
the fiscal year ended April 30, 1995. In the absence of the voluntary expense
limitation, the Fund's "Other Expenses" and "Total Fund Operating Expenses"
would have been 0.37% and 1.22%, respectively, based on the Fund's actual
expenses for that fiscal year.
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Example
A shareholder would pay the following expenses on a $1,000 investment for
the periods shown, assuming a hypothetical 5% annual return and redemption at
the end of each time period. (Of course, actual operating expenses are paid from
the Fund's assets, and are deducted from the amount of income available for
distribution to shareholders; they are not charged directly to shareholder
accounts.)
1 Year 3 Years 5 Years 10 Years
$12 $38 $66 $146
The purpose of this table is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly. The example should
not be considered a representation of past or future performance, and actual
annual returns and expenses may be greater or less than those shown. For more
information on the Fund's expenses, see "The Fund and Its Management" and "How
to Buy Shares - Distribution Expenses."
Since the Fund pays a distribution fee, investors who own Fund shares for
a long period of time may pay more than the economic equivalent of the maximum
front-end sales charge permitted for mutual funds by the National Association of
Securities Dealers, Inc.
<PAGE>
<TABLE>
<CAPTION>
INVESCO Dynamics Fund, Inc.
Financial Highlights
(For a Fund Share Outstanding throughout Each Period)
The following information has been audited by Price Waterhouse LLP,
independent accountants. This information should be read in conjunction with the
audited financial statements and the independent accountant's report appearing
in the Fund's 1995 Annual Report to Shareholders which is incorporated by
reference into the Statement of Additional Information. Both are available
without charge by contacting IFG at the address or telephone number on the cover
of this prospectus. The Annual Report also contains more information about the
Fund's performance.
Year Ended April 30
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
--------------------------------------------------------------------------------------------------
PER SHARE DATA
Net Asset Value -
Beginning of
Period $10.15 $10.89 $9.57 $8.50 $7.39 $7.14 $6.65 $8.42 $8.59 $7.28
--------------------------------------------------------------------------------------------------
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment
Income (Loss) 0.03 (0.02) (0.03) (0.02) 0.05 0.13 0.13 0.02 0.02 0.05
Net Gains or
(Losses) on
Securities
(Both Realized
and Unrealized) 1.34 1.99 1.64 2.05 1.64 0.54 0.48 (1.30) 1.58 2.56
--------------------------------------------------------------------------------------------------
Total From
Investment
Operations 1.37 1.97 1.61 2.03 1.69 0.67 0.61 (1.28)
--------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from
Net Investment
Income 0.03 0.00 0.00 0.00 0.05 0.13 0.12 0.02 0.02 0.06
Distributions from
Capital Gains 0.11 2.71 0.29 0.96 0.53 0.29 0.00 0.47 1.75 1.24
--------------------------------------------------------------------------------------------------
Total
Distributions 0.14 2.71 0.29 0.96 0.58 0.42 0.12 0.49 1.77 1.30
--------------------------------------------------------------------------------------------------
Net Asset Value -
End of Period $11.38 $10.15 $10.89 $9.57 $8.50 $7.39 $7.14 $6.65 $8.42 $8.59
==================================================================================================
TOTAL RETURN 13.57% 17.86% 16.80% 23.47% 23.11% 9.29% 9.20% (14.72%) 21.65% 35.93%
RATIOS
Net Assets -
End of Period
($000 Omitted) $421,600 $287,293 $231,100 $153,956 $100,860 $60,817 $89,755 $83,651 $91,042 $87,640
Ratio of Expenses
to Average
Net Assets# 1.20% 1.17% 1.20% 1.18% 1.15% 0.98% 0.98% 1.02% 0.92% 90%
Ratio of Net
Investment
Income (Loss)
to Average
Net Assets# 0.33% (0.37%) (0.38%) (0.17%) 0.59% 1.47% 1.77% 0.28% 0.27% 0.63%
Portfolio
Turnover Rate 176% 169% 144% 174% 243% 225% 237% 199% 234% 246%
<FN>
#Various expenses of the Fund were voluntarily absorbed by IFG for the year
ended April 30, 1995. If such expenses had not been voluntarily absorbed, ratio
of expenses to average net assets would have been 1.22% and ratio of net
investment income to average net assets would have been 0.31%.
</FN>
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE AND STRATEGY
The Fund seeks appreciation of capital through aggressive investment
policies. This investment objective is fundamental and may not be changed
without the approval of the Fund's shareholders. The Fund seeks to achieve this
objective through the investment of its assets in a variety of securities that
are believed to present opportunities for capital enhancement. We're primarily
looking for common stocks of companies traded on U.S. securities exchanges, as
well as over-the-counter. The Fund also has the flexibility to invest in
preferred stocks and convertible or straight issues of debentures, as well as
foreign securities. There is no assurance that the Fund's investment objective
will be met.
The Fund's investment portfolio is actively traded. Since our strategy
highlights many short-term factors -- current information about a company,
investor interest, price movements of the company's securities and general
market and monetary conditions -- securities may be bought and sold relatively
frequently. The Fund's portfolio turnover rate may be higher than many other
mutual funds, sometimes exceeding 200%; this turnover also may result in greater
brokerage commissions and acceleration of capital gains which are taxable when
distributed to shareholders. The Statement of Additional Information includes an
expanded discussion of the Fund's portfolio turnover rate, its brokerage
practices and certain federal income tax matters.
When we believe market or economic conditions are unfavorable, the Fund
may assume a defensive position by temporarily investing up to 100% of its
assets in high quality money market instruments, such as short-term U.S.
government obligations, commercial paper or repurchase agreements, seeking to
protect its assets until conditions stabilize.
The Fund may invest in illiquid securities, including securities that are
subject to restrictions on resale and securities that are not readily
marketable. The Fund may also invest in restricted securities that may be resold
to institutional investors, known as "Rule 144A Securities." For more
information concerning illiquid and Rule 144A Securities, see "Investment
Policies and Restrictions" in the Statement of Additional Information.
<PAGE>
INVESTMENT POLICIES AND RISKS
Investors generally should expect to see their price per share vary with
movements in the stock market, changes in economic conditions and other factors.
The Fund invests in many different companies in a variety of industries; this
diversification reduces the Fund's overall exposure to investment and market
risks, but cannot eliminate these risks.
Foreign Securities. Up to 25% of the Fund's total assets, measured at the
time of purchase, may be invested directly in foreign securities. Securities of
Canadian issuers and American Depository Receipts ("ADRs") are not subject to
this 25% limitation. ADRs are receipts representing shares of a foreign
corporation held by a U.S. bank that entitle the holder to all dividends and
capital gains.ADRs are denominated in U.S. dollars and trade in the U.S.
securities markets.
For U.S. investors, the returns on foreign securities are influenced not
only by the returns on the foreign investments themselves, but also by currency
fluctuations. That is, when the U.S. dollar generally rises against foreign
currencies, returns on foreign securities for a U.S. investor may decrease. By
contrast, in a period when the U.S. dollar generally declines, those returns may
increase.
Other aspects of international investing to consider include:
-less publicly available information than is generally available about
U.S. issuers;
-differences in accounting, auditing and financial reporting standards;
-generally higher commission rates on foreign portfolio transactions and
longer settlement periods;
-smaller trading volumes and generally lower liquidity of foreign stock
markets, which may cause greater price volatility; and
-investments in certain countries may be subject to foreign withholding
taxes, which may reduce dividend income or capital gains payable to
shareholders.
There is also the possibility of expropriation or confiscatory taxation;
adverse changes in investment or exchange control regulations; political
instability; potential restrictions on the flow of international capital; and
the possibility of the Fund experiencing difficulties in pursuing legal remedies
and collecting judgments.
ADRs are subject to some of the same risks as direct investments in
foreign securities, including the risk that material information about the
issuer may not be disclosed in the United States and the risk that currency
fluctuations may adversely affect the value of the ADR.
Repurchase Agreements. The Fund may invest money, for as short a time as
overnight, using repurchase agreements ("repos"). With a repo, the Fund buys a
debt instrument, agreeing simultaneously to sell it back to the prior owner at
an agreed-upon price. The Fund could incur costs or delays in seeking to sell
the security if the prior owner defaults on its repurchase obligation. To reduce
that risk, the securities underlying each repurchase agreement will be
maintained with the Fund's custodian in an amount at least equal to the
repurchase price under the agreement (including accrued interest). These
agreements are entered into only with member banks of the Federal Reserve
System, registered broker-dealers, and registered U.S. government securities
dealers that are deemed creditworthy understandards established by the Fund's
board of directors.
<PAGE>
For a further discussion of risks associated with an investment in the
Fund, see "Investment Policies and Restrictions" and "Investment Practices" in
the Statement of Additional Information.
Securities Lending. The Fund may seek to earn additional income by lending
securities to qualified brokers, dealers, banks, or other financial
institutions, on a fully collateralized basis. For further information on this
policy, see "Investment Policiesand Restrictions" in the Statement of Additional
Information.
Investment Restrictions. Certain restrictions, which are set forth in the
Statement of Additional Information, may not be altered without the approval of
the Fund's shareholders. For example, the Fund limits to 5% the portion of its
total assets that may be invested in any one issuer, and to 25% the portion of
its total assets that may be invested in any one industry.
THE FUND AND ITS MANAGEMENT
The Fund is a no-load mutual fund, registered with the Securities and
Exchange Commission as a diversified, open-end, management investment company.
It was incorporated on February 17, 1967 under the laws of Colorado and was
reorganized as a Maryland corporation on July 1, 1993.
The Fund's board of directors has responsibility for overall supervision
of the Fund, and reviews the services provided by the adviser and sub-adviser.
Under an agreement with the Fund, INVESCO Funds Group, Inc. ("IFG"), 7800 E.
Union Avenue, Denver, Colorado 80237, serves as the Fund's investment manager;
it is primarily responsible for providing the Fund with various administrative
services. IFG's wholly-owned subsidiary, INVESCO Trust Company ("INVESCO
Trust"), is the Fund's sub-adviser and is primarily responsible for managing the
Fund's investments. Together, IFG and INVESCO Trust constitute "Fund
Management."
Timothy J. Miller, C.F.A., has served as portfolio manager for the Fund
since 1993 and is primarily responsible for the day-to-day management of the
Fund's holdings. His recent career includes these highlights: Portfolio manager
of the Leisure Portfolio of INVESCO Strategic Portfolios, Inc.; senior vice
president (1995 to present), vice president (1993 to 1995) and portfolio manager
(1992 to present) of INVESCO Trust. Formerly (1979 to 1992), analyst and
portfolio manager with Mississippi Valley Advisors. B.S.B.A., St. Louis
University; M.B.A., University of Missouri. He is a Chartered Financial Analyst.
Fund Management permits investment and other personnel to purchase and
sell securities for their own accounts, subject to a compliance policy governing
personal investing. This policy requires Fund Management's personnel to conduct
their personal investment activities in a manner that Fund Management believes
is not detrimental to the Fund or Fund Management's other advisory clients. See
the Statement of Additional Information for more detailed information.
<PAGE>
The Fund pays IFG a monthly management fee which is based upon a percentage
of the Fund's average net assets determined daily. The management fee is
computed at the annual rate of 0.60% on the first $350 million of the Fund's
average net assets; 0.55% on the next $350 million of the Fund's average net
assets; and 0.50% on the Fund's average net assets over $700 million. For the
fiscal year ended April 30, 1995, investment management fees paid by the Fund
amounted to 0.60% of the Fund's average net assets. Out of this fee, IFG paid an
amount equal to 0.23% of the Fund's average net assets to INVESCO Trust as a
sub-advisory fee. No fee is paid by the Fund to INVESCO Trust.
Under a Transfer Agency Agreement, IFG acts as registrar, transfer agent,
and dividend disbursing agent for the Fund. The Fund pays an annual fee of
$14.00 per shareholder account or omnibus account participant for these
services. Registered broker-dealers, third party administrators of tax-qualified
retirement plans and other entities may provide equivalent services to the Fund.
In these cases, IFG may pay, out of the fee it receives from the Fund, an annual
sub-transfer agency fee to the third party.
In addition, under an Administrative Services Agreement, IFG handles
additional administrative, record-keeping, and internal sub-accounting services
for the Fund. For the fiscal year ended April 30, 1995, the Fund paid IFG a fee
for these services equal to 0.018% of the Fund's average net assets.
The Fund's expenses, which are accrued daily, are deducted from total
income before dividends are paid. Total expenses of the Fund for the fiscal year
ended April 30, 1995, including investment management fees (but excluding
brokerage commissions, which are a cost of acquiring securities), amounted to
1.20% of the Fund's average net assets. If necessary, certain Fund expenses will
be absorbed voluntarily by IFG in order to ensure that the Fund's total
operating expenses will not exceed 1.21% of the Fund's average net assets.
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of
their financial responsibility coupled with their ability to effect transactions
at the best available prices. As discussed under "How to Buy Shares -
Distribution Expenses," the Fund may market its shares through intermediary
brokers or dealers that have entered into Dealer Agreements with IFG, as the
Fund's distributor. The Fund may place orders for portfolio transactions with
qualified broker/dealers which recommend the Fund, or sell shares of the Fund,
to clients, or act as agent in the purchase of Fund shares for clients, if Fund
Management believes that the quality of the execution of the transaction and
level of commission are comparable to those available from other qualified
brokerage firms. For further information, see "Investment Practices - Placement
of Portfolio Brokerage" in the Statement of Additional Information.
The parent company for IFG and INVESCO Trust is INVESCO PLC, a publicly
traded holding company whose subsidiaries provide investment services around the
world. IFG was established in 1932 and, as of April 30, 1995, managed 14 mutual
funds, consisting of 38 separate portfolios, with combined assets of
approximately $9.8 billion on behalf of over 800,000 shareholders. INVESCO Trust
(founded in 1969) served as adviser or sub-adviser to 41 investment portfolios
as of April 30, 1995, including 27 portfolios in the INVESCO group. These
portfolios had aggregate assets of approximately $9.1 billion as of April 30,
1995. In addition, INVESCO Trust provides investment management services to
private clients, including employee benefit plans that may be invested in a
collective trust sponsored by INVESCO Trust.
<PAGE>
FUND PRICE AND PERFORMANCE
Determining Price. The value of your investment in the Fund will vary
daily. The price per share is also known as the Net Asset Value (NAV). IFG
prices the Fund every day that the New York Stock Exchange is open, as of the
close of regular trading (normally, 4:00 p.m., New York time). NAV is calculated
by adding together the current market value of all of the Fund's assets,
including accrued interest and dividends; then subtracting liabilities,
including accrued expenses; and finally dividing that dollar amount by the total
number of Fund shares outstanding.
Performance Data. To keep shareholders and potential investors informed,
we will occasionally advertise the Fund's total return for one, five-, and
ten-year periods. Total return figures show the rate of return on a $1,000
investment in the Fund, assuming reinvestment of all dividends and capital gain
distributions for the periods cited. Cumulative total return shows the actual
rate of return on an investment; average annual total return represents the
average annual percentage change in the value of an investment. Both cumulative
and average annual total returns tend to "smooth out" fluctuations in the Fund's
investment results, not showing the interim variations in performance over the
periods cited. More information about the Fund's recent and historical
performance is contained in the Fund's Annual Report to Shareholders. You can
get a free copy by calling or writing to IFG using the phone number or address
on the cover of this prospectus.
When we quote mutual fund rankings published by Lipper Analytical
Services, Inc., we may compare the fund to others in its category of Capital
Appreciation Funds, as well as the broad-based Lipper general fund groupings.
These rankings allow you to compare the Fund to its peers. Other independent
financial media also produce performance- or service-related comparisons, which
you may see in our promotional materials. For more information see "Fund
Performance" in the Statement of Additional Information.
Performance figures are based on historical earnings and are not intended
to suggest future performance.
<PAGE>
HOW TO BUY SHARES
The chart on page 16 shows several convenient ways to invest in the Fund.
Your new Fund shares will be priced at the NAV next determined after your order
in proper form is received. There is no charge to invest, exchange, or redeem
shares when you make transactions directly through IFG. However, if you invest
in the Fund through a securities broker, you may be charged a commission or
transaction fee. For all new accounts, please send a completed application form.
Please specify which Fund you wish to purchase.
Fund Management reserves the right to reduce or waive the minimum
investment requirements in its sole discretion, where it determines this action
is in the best interests of the Fund. Further, Fund Management reserves the
right in its sole discretion to reject any order for the purchase of Fund shares
(including purchases by exchange) when, in its judgment, such rejection is in
the Fund's best interests.
Exchange Privilege. You may exchange your shares in this Fund for those in
another INVESCO fund on the basis of their respective net asset values at the
time of the exchange. Before making any exchange, be sure to review the
prospectuses of the funds involved and consider their differences.
Please note these policies regarding exchanges of fund shares:
1) The fund accounts must be identically registered.
2) You may make up to four exchanges out of each fund during
each calendar year.
3) An exchange is the redemption of shares from one fund followed by
the purchase of shares in another. Therefore, any gain or loss
realized on the exchange is recognizable for federal income tax
purposes (unless, of course, your account is tax-deferred).
4) The Fund reserves the right to reject any exchange
request, or to modify or terminate exchange privileges,
in the best interests of the Fund and its shareholders.
Notice of all such modifications or termination will be
given at least 60 days prior to the effective date of the
change in privilege, except for unusual instances (such
as when redemptions of the exchanged shares are suspended
under Section 22(e) of the Investment Company Act of
1940, or when sales of the fund into which you are
exchanging are temporarily stopped).
<PAGE>
================================================================================
Method Investment Minimum Please Remember
- --------------------------------------------------------------------------------
By Check
Mail to: $1,000 for regular If your check does
INVESCO Funds account; not clear, you will
Group, Inc. $250 for an be responsible for
P.O. Box 173706 Individual any related loss
Denver, CO 80217- Retirement Account; the Fund or IFG
3706. $50 minimum for incurs. If you are
Or you may send each subsequent already a
your check by investment. shareholder in the
overnight courier INVESCO funds, the
to: 7800 E. Union Fund may seek
Ave., Denver, CO reimbursement from
80237. your existing
account(s) for any
loss incurred.
- --------------------------------------------------------------------------------
By Telephone or
Wire
Call 1-800-525-8085 $1,000. Payment must be
to request your received within 3
purchase. Then send business days, or
your check by the transaction may
overnight courier be cancelled. If a
to our street purchase is
address: cancelled due to
7800 E. Union Ave., nonpayment, you
Denver, CO 80237. will be responsible
Or you may transmit for any related
your payment by loss the Fund or
bank wire (call IFG IFG incurs. If you
for instructions). are already a
shareholder in the
INVESCO funds, the Fund
may seek reimbursement
from your existing
account(s) for any loss
incurred.
- --------------------------------------------------------------------------------
With EasiVest or
Direct Payroll
Purchase
You may enroll on $50 per month for Like all regular
the fund EasiVest; $50 per investment plans,
application, or pay period for neither EasiVest
call us for the Direct Payroll nor Direct Payroll
correct form and Purchase. You may Purchase ensures a
more details. start or stop your profit or protects
Investing the same regular investment against loss in a
amount on a monthly plan at any time, falling market.
basis allows you to with two weeks' Because you'll
buy more shares notice to IFG. invest continually,
when prices are low regardless of
and fewer shares varying price
when prices are levels, consider
high. This your financial
"dollar-cost ability to keep
averaging" may help buying through low
offset market price levels. And
fluctuations. Over remember that you
a period of time, will lose money if
your average cost you redeem your
per share may be shares when the
less than the market value of all
actual average your shares is less
price per share. than their cost.
<PAGE>
- --------------------------------------------------------------------------------
By PAL
Your "Personal $1,000. Be sure to write
Account Line" is down the
available for confirmation number
subsequent provided by PAL.
purchases and Payment must be
exchanges 24 hours received within 3
a day. Simply call business days, or
1-800-424-8085. the transaction may
be cancelled. If a
purchase is cancelled
due to nonpayment, you
will be responsible for
any related loss the
Fund or IFG incurs. If
you are already a
shareholder in the
INVESCO funds, the Fund
may seek reimbursement
from your existing
account(s) for any loss
incurred.
- --------------------------------------------------------------------------------
By Exchange
Between this and $1,000 to open a See "Exchange
another of the new account; $50 Privilege," page
INVESCO funds. Call for written 14.
1-800-525-8085 for requests to
prospectuses of purchase additional
other INVESCO funds. shares for an
You may also establish existing account.
an Automatic Monthly (The exchange minimum
Exchange service between is $250 for exchanges
two INVESCO funds; call requested by telephone).
IFG for further details
and the correct form.
Distribution Expenses. The Fund is authorized under a Plan and Agreement
of Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Plan") to use its assets to finance certain activities relating to the
distribution of shares. These expenditures may include compensation (including
incentive compensation and/or continuing compensation based on the amount of
customer assets maintained in the Fund) to securities dealers and other
financial institutions and organizations, which may include IFG-affiliated
companies, to obtain various distribution-related and/or administrative services
for the Fund. Such services may include, among other things, processing new
shareholder account applications, preparing and transmitting to the Fund's
transfer agent computer-processable tapes of all transactions by customers, and
serving as the primary source of information to customers in answering questions
concerning the Fund and their transactions.
<PAGE>
In addition, other reimbursable expenditures include advertising,
preparation and distribution of sales literature, printing and distribution of
prospectuses to prospective investors, public relations efforts, marketing
programs and other services and promotional activities agreed upon from time to
time by the Fund and its board of directors.
IFG is not entitled to reimbursement for overhead expenses under the Plan,
but may be reimbursed for all or a portion of the compensation paid for salaries
and other employee benefits for IFG personnel whose primary responsibilities
involve marketing shares of the INVESCO funds, including the Fund. Also, any
payments made by the Fund may not be used to finance the distribution of shares
of any other mutual fund advised by IFG. Payments made by the Fund under the
Plan for compensation of marketing personnel, as noted above, are based on an
allocation formula designed to ensure that all such payments are appropriate.
Under the Plan, the Fund's reimbursement to IFG is limited to an amount
computed at a maximum rate of 0.25% of the Fund's annual average net assets.
Payments by the Fund under the Plan, for any month, may only be made to
reimburse expenditures incurred during the rolling 12-month period in which that
month falls. Therefore, any reimbursable expenses incurred by IFG in excess of
the limitation described above are not reimbursable and will be borne by IFG. In
addition, IFG may from time to time make additional payments from its revenues
to securities dealers and other financial institutions that provide
distribution-related and/or administrative services for the Fund. No further
payments will be made by the Fund under the Plan in the event of its
termination.
FUND SERVICES
Shareholder Accounts. IFG will maintain a share account that reflects your
current holdings. Share certificates will be issued only upon specific request.
You will have greater flexibility to conduct transactions if you do not request
certificates.
Transaction Confirmations. You will receive detailed confirmations of
individual purchases, exchanges, and redemptions. If you choose certain
recurring transaction plans (for instance, EasiVest), your transactions will be
confirmed on your quarterly Investment Summary.
Investment Summaries. Each calendar quarter, shareholders receive a
written statement which consolidates and summarizes account activity and value
at the beginning and end of the period for each of their INVESCO funds.
Reinvestment of Distributions. Dividends and capital gain distributions
are automatically invested in additional Fund shares at the NAV on the
ex-dividend date, unless you choose to have dividends and/or capital gain
distributions automatically reinvested in another INVESCO fund or paid by check
(minimum of $10.00).
Telephone Transactions. All shareholders may exchange and redeem Fund
shares by telephone, unless they expressly decline these privileges. By signing
the new account Application, a Telephone Transaction Authorization Form, or
otherwise using these privileges, the investor has agreed that, if the Fund has
followed reasonable procedures, such as recording telephone instructions and
sending written transaction confirmations, it will not be liable for following
telephoned instructions that it believes to be genuine. As a result of this
policy, the investor may bear the risk of any loss due to unauthorized or
fraudulent instructions.
Retirement Plans and IRAs. Fund shares may be purchased for Individual
Retirement Accounts (IRAs) and many types of tax-deferred retirement plans. IFG
can supply you with information and forms to establish or transfer your existing
plan or account.
<PAGE>
HOW TO SELL SHARES
The following chart shows several convenient ways to redeem your Fund
shares. Shares of the Fund may be redeemed at any time at their current NAV next
determined after a request in proper form is received at the Fund's office. The
NAV at the time of the redemption may be more or less than the price you paid to
purchase your shares, depending primarily upon the Fund's investment
performance.
Please specify from which fund you wish to redeem shares. Shareholders
have a separate account for each fund in which they invest.
While the Fund will attempt to process telephone redemptions promptly,
there may be times -- particularly in periods of severe economic or market
disruption -- when you may experience delays in redeeming shares by phone.
================================================================================
Method Minimum Redemption Please Remember
================================================================================
By Telephone
Call us toll-free $250 (or, if less, This option is not
at 1-800-525-8085. full liquidation of available for
the account) for a shares held in
redemption check; Individual
$1,000 for a wire Retirement Accounts
to bank of record. ("IRAs").
The maximum amount
which may be
redeemed by
telephone is
generally $25,000.
These telephone
redemption
privileges may be
modified or
terminated in the
future at IFG's
discretion.
- --------------------------------------------------------------------------------
In Writing
Mail your request Any amount. The If the shares to be
to INVESCO Funds redemption request redeemed are
Group, Inc., P.O. must be signed by represented by
Box 173706 all registered stock certificates,
Denver, CO 80217- shareholder(s). the certificates
3706. You may also Payment will be must be sent to
send your request mailed to your IFG.
by overnight address of record,
courier to 7800 E. or to a designated
Union Ave., Denver, bank.
CO 80237.
- --------------------------------------------------------------------------------
By Exchange
Between this and $1,000 to open a See "Exchange
another of the new account; $50 Privilege," page
INVESCO funds. Call for written 14.
1-800-525-8085 for requests to
prospectuses of purchase additional
other INVESCO shares for an
funds. You may also existing account.
establish an (The exchange
automatic monthly minimum is $250 for
exchange service exchanges requested
between two INVESCO by telephone.)
funds; call IFG for
further details and
the correct form.
<PAGE>
- --------------------------------------------------------------------------------
Periodic Withdrawal
Plan
You may call us to $100 per payment on You must have at
request the a monthly or least $10,000 total
appropriate form quarterly basis. invested with the
and more The redemption INVESCO funds, with
information at 1- check may be made at least $5,000 of
800-525-8085. payable to any that total invested
party you in the fund from
designate. which withdrawals
will be made.
- --------------------------------------------------------------------------------
Payment To Third
Party
Mail your request Any amount. All registered
to INVESCO Funds owners of the
Group, Inc., P.O. account must sign
Box 173706 the request, with a
Denver, CO 80217- signature guarantee
3706. from an eligible
guarantor financial
institution, such as a
commercial bank or a
recognized national or
regional securities
firm.
================================================================================
Payments of redemption proceeds will be mailed within seven days following
receipt of the redemption request in proper form. However, payment may be
postponed under unusual circumstances -- for instance, if normal trading is not
taking place on the New York Stock Exchange, or during an emergency as defined
by the Securities and Exchange Commission. If your shares were purchased by a
check which has not yet cleared, payment will be made promptly upon clearance of
the purchase check (which may take up to 15 days).
<PAGE>
If you participate in Easivest, the Fund's automatic monthly investment
program, and redeem all of the shares in your account, we will terminate any
further Easivest purchases unless you instruct us otherwise.
Because of the high relative costs of handling small accounts, should the
value of any shareholder's account fall below $250 as a result of shareholder
action, the Fund reserves the right to individually redeem all shares in such
account, in which case the account would be liquidated and the proceeds
forwarded to the shareholder. Prior to any such redemption, a shareholder will
be notified and given 60 days to increase the value of the account to $250 or
more.
TAXES, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Taxes. The Fund intends to distribute to shareholders substantially all of
its net investment income, net capital gains and net gains from foreign currency
transactions, if any, in order to continue to qualify for tax treatment as a
regulated investment company. Thus, the Fund does not expect to pay any federal
income or excise taxes.
Unless shareholders are exempt from income taxes, they must include all
dividends and capital gain distributions in taxable income for federal, state,
and local income tax purposes. Dividends and other distributions are taxable
whether they are received in cash or automatically invested in shares of the
Fund or another fund in the INVESCO group.
The Fund may be subject to the withholding of foreign taxes on dividends
or interest it receives on foreign securities. Foreign taxes withheld will be
treated as an expense of the Fund unless the Fund meets the qualifications to
enable it to pass these taxes through to shareholders for use by them as a
foreign tax credit or deduction.
Shareholders may be subject to backup withholding of 31% on dividends,
capital gain distributions and redemption proceeds. Unless you are subject to
backup withholding for other reasons, you can avoid backup withholding on your
Fund account by ensuring that we have a correct, certified tax identification
number.
Dividends and Capital Gain Distributions. The Fund earns ordinary or net
investment income, in the form of dividends and interest on its investments. The
Fund's policy is to distribute substantially all of this income, less Fund
expenses, to shareholders on an annual or semiannual basis, at the discretion of
the Fund's board of directors.
In addition, the Fund realizes capital gains and losses when it sells
securities for more or less than it paid. If total gains on sales exceed total
losses (including losses carried forward from previous years), the Fund has a
net realized capital gain. Net realized capital gains, if any, are distributed
to shareholders at least annually, usually in December.
<PAGE>
Dividends and capital gain distributions are paid to shareholders who hold
shares on the record date of the distribution regardless of how long the shares
have been held. The Fund's share price will then drop by the amount of the
distribution on the day the distribution is made. If a shareholder purchases
shares immediately prior to the distribution, the shareholder will, in effect,
have "bought" the distribution by paying full purchase price, a portion of which
is then returned in the form of a taxable distribution.
At the end of each year, information regarding the tax status of dividends
and capital gain distributions is provided to shareholders. Net realized capital
gains are divided into short-term and long-term gains depending on how long the
Fund held the security which gave rise to the gains. The capital gain
distribution consists of long-term capital gains which are taxed at the capital
gains rate. Short-term capital gains are included with income from dividends and
interest as ordinary income and are paid to shareholders as dividends.
Shareholders also may realize capital gains or losses when they sell Fund
shares at more or less than the price originally paid.
We encourage you to consult your tax adviser with respect to these
matters. For further information see "Dividends, Capital Gain Distributions and
Taxes" in the Statement of Additional Information.
ADDITIONAL INFORMATION
Voting Rights. All shares of the Fund have equal voting rights based on
one vote for each share owned. The Fund 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 Fund or as may be required by applicable law or the Fund'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 Fund. The Fund will assist shareholders in
communicating with other shareholders as required by the Investment Company Act
of 1940.
<PAGE>
INVESCO DYNAMICS FUND, INC.
A no-load mutual fund seeking
capital appreciation through
aggressive investment policies.
PROSPECTUS
August 31, 1995
To receive general information and prospectuses on any of INVESCO's funds or
retirement plans, or to obtain current account or price information, call
toll-free:
1-800-525-8085
To reach PAL, your 24-hour Personal Account Line call:
1-800-424-8085
Or write to:
INVESCO Funds Group, Inc., Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
If you're in Denver, please visit one of our convenient Investor Centers:
Cherry Creek
155-B Fillmore Street
Denver Tech Center
7800 East Union Avenue
Lobby Level
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
August 31, 1995
INVESCO DYNAMICS FUND, INC.
A no-load mutual fund seeking
capital appreciation through
aggressive investment policies
Address: Mailing Address:
7800 E. Union Avenue Post Office Box 173706
Denver, Colorado 80237 Denver, Colorado 80217-3706
Telephone:
In continental U.S., 1-800-525-8085
- --------------------------------------------------------------------------------
INVESCO DYNAMICS FUND, INC. ("the Fund") seeks to achieve its investment
objective of providing its shareholders appreciation of capital through
aggressive investment policies by investing its assets in a variety of
securities which are believed to present possibilities for capital enhancement.
The Fund normally invests primarily in common stocks but may invest in other
kinds of securities when determined appropriate by management. The Fund should
not be considered by investors seeking current income.
A Prospectus for the Fund dated August 31, 1995, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge from INVESCO Funds Group, Inc., Post Office Box 173706, Denver,
Colorado 80217-3706. This Statement of Additional Information is not a
Prospectus, but contains information in addition to and more detailed than that
set forth in the Prospectus. It is intended to provide additional information
regarding the activities and operations of the Fund, and should be read in
conjunction with the Prospectus.
Investment Adviser and Distributor: INVESCO FUNDS GROUP, INC.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
INVESTMENT POLICIES AND RESTRICTIONS 23
THE FUND AND ITS MANAGEMENT 26
HOW SHARES CAN BE PURCHASED 36
HOW SHARES ARE VALUED 40
FUND PERFORMANCE 41
SERVICES PROVIDED BY THE FUND 43
TAX-DEFERRED RETIREMENT PLANS 43
HOW TO REDEEM SHARES 43
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS, AND TAXES 44
INVESTMENT PRACTICES 46
ADDITIONAL INFORMATION 48
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
In the selection of portfolio securities, management seeks to evaluate
fundamental investment factors believed to be favorable to long-term
appreciation of a security, including such factors as the quality of management
of the issuer, the growth rate of its earnings per share, the outlook for future
growth of sales and earnings and the rate of return of profits on its investment
capital. General economic conditions, market trends and conditions within an
industry are also considered in making investment decisions. In the structuring
of the Fund's portfolio, attention is given to the selection of securities of
issuers which, because of their new products, new services or new processes or
because of favorable prospects for future earnings, appear to be in an early
stage of growth.
Illiquid and 144A Securities. The Fund may invest in securities that are
illiquid because they are subject to restrictions on their resale ("restricted
securities") or because, based upon their nature or the market for such
securities, they are not readily marketable. The Fund also may invest in
restricted securities that can be resold to institutional investors pursuant to
Rule 144A under the Securities Act of 1933, as amended (the "1933 Act")
(hereinafter referred to as "Rule 144A Securities"). The Fund's board of
directors has delegated to Fund management the authority to determine the
liquidity of Rule 144A Securities pursuant to guidelines approved by the board.
The Fund is authorized to invest up to 10% of its total assets in a combination
of Rule 144A Securities (as discussed below) and illiquid securities (including
repurchase agreements maturing in more than seven days), provided that no more
than 5% of the Fund's total assets, measured at the time of purchase, are
invested in illiquid securities.
Investments in restricted securities involve certain risks to the extent
that the Fund might have to bear the expense and incur the delays associated
with effecting registration in order to sell the security.
In recent years, a large institutional market has developed for Rule 144A
Securities. Institutional investors generally will not seek to sell these
instruments to the general public, but instead will often depend on an efficient
institutional market in which Rule 144A Securities can readily be resold or on
an issuer's ability to honor a demand for repayment. Therefore, the fact that
there are contractual or legal restrictions on resale to the general public or
certain institutions is not dispositive of the liquidity of such investments.
Institutional markets for Rule 144A Securities may provide both readily
ascertainable values for Rule 144A Securities and the ability to liquidate an
investment in order to satisfy share redemption orders. An insufficient number
of qualified institutional buyers interested in purchasing a Rule 144A Security
held by the Fund, however, could adversely affect the marketability of such
security, and the Fund might be unable to dispose of such security promptly or
at reasonable prices.
<PAGE>
Repurchase Agreements. As discussed in the Prospectus, the Fund may enter
into repurchase agreements with respect to debt instruments eligible for
investment by the Fund with member banks of the Federal Reserve System,
registered broker-dealers, and registered government securities dealers, which
are deemed creditworthy under standards established by the Fund's board of
directors. A repurchase agreement may be considered a loan collateralized by
securities. The resale price reflects an agreed upon interest rate effective for
the period the instrument is held by the Fund and is unrelated to the interest
rate on the underlying instrument. In these transactions, the securities
acquired by the Fund (including accrued interest earned thereon) must have a
total value in excess of the value of the repurchase agreement, and are held as
collateral by the Fund's custodian bank until the repurchase agreement is
completed.
Loans of Portfolio Securities. The Fund also may lend its portfolio
securities to qualified brokers, dealers, banks, or other financial
institutions. This practice permits the Fund to earn income, which, in turn, can
be invested in additional securities to pursue the Fund's investment objective.
Loans of securities by the Fund will be collateralized by cash, letters of
credit, or securities issued or guaranteed by the U.S. government or its
agencies equal to at least 100% of the current market value of the loaned
securities, determined on a daily basis. Lending securities involves certain
risks, the most significant of which is the risk that a borrower may fail to
return a portfolio security. The Fund monitors the creditworthiness of borrowers
in order to minimize such risks. The Fund will not lend any security if, as a
result of such loan, the aggregate value of securities then on loan would exceed
33-1/3% of the Fund's net assets (taken at market value). While voting rights
may pass with the loaned securities, if a material event (e.g., proposed merger,
sale of assets, or liquidation) is to occur affecting an investment on loan, the
loan must be called and the securities voted. Loans of securities made by the
Fund will comply with all other applicable regulatory requirements, including
the rules of the New York Stock Exchange and the requirements of the Investment
Company Act of 1940, as amended (the "1940 Act"), and the rules of the
Securities and Exchange Commission (the "SEC") thereunder.
Investment Restrictions. As described in the section of the Prospectus
entitled "Investment Policies and Risks," the Fund has adopted certain
fundamental investment restrictions. These restrictions may not be changed
without the prior approval of the holders of a majority, as defined in the 1940
Act, of the outstanding voting securities of the Fund. For purposes of the
following limitations, all percentage limitations apply immediately after a
purchase or initial investment. Any subsequent change in a particular percentage
resulting from fluctuations in value does not require elimination of any
security from the Fund. Under these restrictions, the Fund may not:
(1) issue preference shares or create any funded debt;
(2) sell short or buy on margin;
(3) borrow money (in the event the board of directors should
authorize the borrowing of money for the purpose of exercising
permissive leverage) unless immediately thereafter the Fund's total
net assets equal at least 400% of all borrowings, except that the
percentage may be less than 400% if reduced because of changes in
the value of the Fund's investments, but it is required at all times
to comply with the provisions of the Investment Company Act of 1940
and to maintain asset coverage of at least 300%. The Fund may borrow
only from banks;
<PAGE>
(4) buy or sell real estate (however, the Fund may purchase securities
of companies investing in real estate), commodities or commodity
contracts;
(5) invest in securities of any other investment company except for a
purchase or acquisition in accordance with a plan of reorganization,
merger or consolidation;
(6) invest in any company for the purpose of exercising
control or management;
(7) purchase the securities of any company if as a result of
such purchase more than 10% of total assets would be
invested in securities that are illiquid because of the
legal or contractual restrictions on resale to which they
are subject ("restricted securities"), or because there
are no readily available market quotations for such
securities, or enter into a repurchase agreement maturing
in more than seven days, if as a result, such repurchase
agreements, together with illiquid securities, would
constitute more than 10% of total assets;
(8) purchase securities if the purchase would cause the Fund, at the
time, to have more than 5% of its total assets invested in the
securities of any one issuer or to own more than 10% of the voting
securities of any one issuer (except obligations issued or
guaranteed by the U.S.
Government);
(9) engage in the underwriting of any securities;
(10) make loans to any person, except through the purchase of
debt securities in accordance with the Fund's investment
policies, or the lending of portfolio securities to
broker-dealers or other institutional investors, or the
entering into repurchase agreements with member banks of
the Federal Reserve System, registered broker-dealers and
registered government securities dealers. The aggregate
value of all portfolio securities loaned may not exceed
33-1/3% of the Fund's total net assets (taken at current
value). No more than 10% of the Fund's total net assets
may be invested in repurchase agreements maturing in more
than seven days;
(11) purchase securities of any company in which any officer or director
of the Fund or its investment adviser owns more than 1/2 of 1% of
the outstanding securities, or in which all of the officers or
directors of the Fund and its investment supervisor, as a group, own
more than 5% of such securities; or
(12) invest more than 25% of the value of the Fund's assets in one
particular industry.
In applying restriction (7) above, the Fund also includes illiquid
securities (those which cannot be sold in the ordinary course of business within
seven days at approximately the valuation given to them by the Fund) among the
securities subject to the 10% of total assets limit. The board of directors has
delegated to the Fund's investment adviser the authority to determine that a
liquid market exists for securities eligible for resale pursuant to Rule 144A
under the 1933 Act, or any successor to such rule, and that such securities are
not subject to the Fund's 5% of total assets limitations on investing in
securities that are not readily marketable, discussed below. Under guidelines
established by the board of directors, the adviser will consider the following
factors, among others, in making this determination: (1) the unregistered nature
of a Rule 144A security, (2) the frequency of trades and quotes for the
security; (3) the number of dealers willing to purchase or sell the security and
the number of other potential purchasers; (4) dealer undertakings to make a
market in the security; and (5) the nature of the security and the nature of
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers and the mechanics of transfer). However, Rule 144A
Securities are still subject to the Fund's 10% of total assets limitation on
investments in restricted securities (securities for which there are legal or
contractual restrictions on resale).
<PAGE>
In applying restriction (12) above, the Fund uses an industry
classification system based on the O'Neil Database published by William O'Neil &
Co., Inc.
In addition to the foregoing investment restrictions, the Fund has given
the following undertakings to the Texas State Securities Board: (1) The Fund's
investments in unattached warrants, valued at the lower of cost or market, will
not exceed 2% of net assets; and (2) The Fund may not invest in any oil, gas, or
mineral leases, and may not invest in real estate limited partnership interests.
The Fund has also given an undertaking to the State of Indiana that it will
not purchase any security, if such purchase would cause the Fund to have more
than: (1) 10% of its total assets invested in securities of issuers which the
Fund is restricted from selling to the public without registration under the
1933 Act; or (2) 5% of its total assets invested in securities of unseasoned
issuers, including their predecessors, which have been in operation for less
than three years, and equity securities of issuers which are not readily
marketable. In addition, the Fund has undertaken not to purchase any interest in
oil, gas or other mineral exploration or development programs.
The Fund has also given an undertaking to the State of Arkansas that it
will not invest in securities of unseasoned issuers, including their
predecessors, which have been in operation for less than three years, and equity
securities of issuers which are not readily marketable, if by reason thereof the
value of its aggregate investment in such classes of securities will exceed 5%
of its total assets. In addition, the Fund will not purchase puts, calls,
straddles, spreads, and any combination thereof if by reason thereof the value
of its aggregate investment in such classes of securities will exceed 5% of its
total assets.
THE FUND AND ITS MANAGEMENT
The Fund. The Fund was incorporated on April 2, 1993, under the laws of
Maryland. On July 1, 1993, the Fund assumed all of the assets and liabilities of
Financial Dynamics Fund, Inc. ("FDF"), which was incorporated in Colorado on
February 17, 1967. All financial and other information about the Fund for
periods prior to July 1, 1993, relates to FDF.
The Investment Adviser. INVESCO Funds Group, Inc., a Delaware corporation
("INVESCO"), is employed as the Fund's investment adviser. INVESCO was
established in 1932 and also serves as an investment adviser to INVESCO
Diversified Funds, Inc., INVESCO Emerging Opportunity Funds, Inc., INVESCO
Growth Fund, Inc., INVESCO Income Funds, Inc., INVESCO Industrial Income Fund,
Inc., INVESCO International Funds, Inc., INVESCO Money Market Funds, Inc.,
INVESCO Multiple Asset Funds, Inc., INVESCO Specialty Funds, Inc., INVESCO
Strategic Portfolios, Inc., INVESCO Tax-Free Income Funds, Inc., INVESCO Value
Trust, and INVESCO Variable Investment Funds, Inc.
The Sub-Adviser. INVESCO Trust Company ("INVESCO Trust") serves as the
sub-adviser to the Fund, pursuant to an agreement between INVESCO and INVESCO
Trust. INVESCO Trust, a trust company founded in 1969, is a wholly-owned
subsidiary of INVESCO.
INVESCO is an indirect, wholly-owned subsidiary of INVESCO PLC, a
publicly-traded holding company organized in 1935. Through subsidiaries located
in London, Denver, Atlanta, Boston, Louisville, Dallas, Tokyo, Hong Kong, and
the Channel Islands, INVESCO PLC provides investment services around the world.
INVESCO was acquired by INVESCO PLC in 1982 and as of April 30, 1995, managed 14
mutual funds, consisting of 38 separate portfolios, on behalf of over 800,000
shareholders. INVESCO PLC's other North American subsidiaries include the
following:
<PAGE>
--INVESCO Capital Management, Inc. of Atlanta, Georgia,
manages institutional investment portfolios, consisting primarily
of discretionary employee benefit plans for corporations and state
and local governments, and endowment funds. INVESCO Capital
Management, Inc. is the sole shareholder of INVESCO Services, Inc.,
a registered broker-dealer whose primary business is the
distribution of shares of two registered investment companies.
--INVESCO Management & Research, Inc. (formerly Gardner and
Preston Moss, Inc.) of Boston, Massachusetts, primarily manages
pension and endowment accounts.
--PRIMCO Capital Management, Inc. of Louisville, Kentucky,
specializes in managing stable return investments, principally on
behalf of Section 401(k) retirement plans.
--INVESCO Realty Advisors of Dallas, Texas, is responsible for providing
advisory services in the U.S. real estate markets for INVESCO PLC's clients
worldwide. Clients include corporate plans, public pension funds as well as
endowment and foundation accounts.
The corporate headquarters of INVESCO PLC are located at 11 Devonshire
Square, London, EC2M 4YR, England.
As indicated in the Prospectus, INVESCO permits investment and other
personnel to purchase and sell securities for their own accounts in accordance
with a compliance policy governing personal investing by directors, officers and
employees of INVESCO and its North American affiliates. The policy requires
officers, inside directors, investment and other personnel of INVESCO and its
North American affiliates to pre-clear all transactions in securities not
otherwise exempt under the policy. Requests for trading authority will be denied
when, among other reasons, the proposed personal transaction would be contrary
to the provisions of the policy or would be deemed to adversely affect any
transaction then known to be under consideration for or to have been effected on
behalf of any client account, including the Fund.
In addition to the pre-clearance requirement described above, the policy
subjects officers, inside directors, investment and other personnel of INVESCO
and its North American affiliates to various trading restrictions and reporting
obligations. All reportable transactions are reviewed for compliance with the
policy. The provisions of the policy are administered by and subject to
exceptions authorized by INVESCO.
Investment Advisory Agreement. INVESCO serves as investment adviser
pursuant to an investment advisory agreement (the "Agreement") with the Fund
which was approved on April 21, 1993, by a vote cast in person by a majority of
the directors of the Fund, including a majority of the directors who are not
"interested persons" of the Fund or INVESCO at a meeting called for such
purpose. Pursuant to authorization granted by the public shareholders of FDF on
May 24, 1993, FDF, as the initial shareholder of the Fund, approved the
Agreement on June 24, 1993, for an initial term expiring April 30, 1995. The
Agreement has been continued by action of the board of directors through April
30, 1996. Thereafter, the Agreement may be continued from year to year as long
as each such continuance is specifically approved at least annually by the board
of directors of the Fund, or by a vote of the holders of a majority, as defined
in the 1940 Act, of the outstanding shares of the Fund. Any such continuance
also must be approved by a majority of the Fund's directors who are not parties
to the Agreement or interested persons (as defined in the 1940 Act) of any such
party, cast in person at a meeting called for the purpose of voting on such
continuance. The Agreement may be terminated at any time without penalty by
either party upon sixty (60) days' written notice and terminates automatically
in the event of an assignment to the extent required by the 1940 Act and the
rules thereunder.
<PAGE>
The Agreement provides that INVESCO shall manage the investment portfolio
of the Fund in conformity with the Fund's investment policies (either directly
or by delegation to a sub- adviser which may be a company affiliated with
INVESCO). Further, INVESCO shall perform all administrative, internal accounting
(including computation of net asset value), clerical, statistical, secretarial
and all other services necessary or incidental to the administration of the
affairs of the Fund excluding, however, those services that are the subject of
separate agreement between the Fund and INVESCO or any affiliate thereof,
including the distribution and sale of Fund shares and provision of transfer
agency, dividend disbursing agency, and registrar services, and services
furnished under an Administrative Services Agreement with INVESCO discussed
below. Services provided under the Agreement include, but are not limited to:
supplying the Fund with officers, clerical staff and other employees, if any,
who are necessary in connection with the Fund's operations; furnishing office
space, facilities, equipment, and supplies; providing personnel and facilities
required to respond to inquiries related to shareholder accounts; conducting
periodic compliance reviews of the Fund's operations; preparation and review of
required documents, reports and filings by INVESCO's in-house legal and
accounting staff (including the prospectus, statement of additional information,
proxy statements, shareholder reports, tax returns, reports to the SEC, and
other corporate documents of the Fund), except insofar as the assistance of
independent accountants or attorneys is necessary or desirable; supplying basic
telephone service and other utilities; and preparing and maintaining certain of
the books and records required to be prepared and maintained by the Fund under
the 1940 Act. Expenses not assumed by INVESCO are borne by the Fund.
As full compensation for its advisory services to the Fund, INVESCO
receives a monthly fee. The fee is calculated at the annual rate of 0.60% on the
first $350 million of the Fund's average net assets; 0.55% on the next $350
million of the Fund's average net assets; and 0.50% on the Fund's average net
assets in excess of $700 million. For the fiscal years ended April 30, 1995,
1994 and 1993, the Fund paid INVESCO advisory fees of $2,012,861 (prior to the
voluntary absorption of certain Fund expenses by INVESCO), $1,749,114 and
$1,184,084, respectively.
Certain states in which the shares of the Fund are qualified for sale
currently impose limitations on the expenses of the Fund. At the date of this
Statement of Additional Information, the most restrictive state-imposed annual
expense limitation requires that INVESCO absorb any amount necessary to prevent
the Fund's aggregate ordinary operating expenses (excluding interest, taxes,
brokerage fees, and commissions, and extraordinary charges such as litigation
costs) from exceeding in any fiscal year 2.5% on the Fund's first $30 million of
average net assets, 2.0% on the next $70 million of average net assets and 1.5%
on the remaining average net assets. No payment of the investment advisory fee
will be made to INVESCO which would result in Fund expenses exceeding on a
cumulative annualized basis this state limitation. During the past year, INVESCO
did not absorb any amounts under this provision.
<PAGE>
Sub-Advisory Agreement. INVESCO Trust serves as sub-adviser to the Fund
pursuant to a sub-advisory agreement (the "Sub- Agreement") with INVESCO which
was approved on April 21, 1993, by a vote cast in person by a majority of the
directors of the Fund, including a majority of the directors who are not
"interested persons" of the Fund, INVESCO, or INVESCO Trust at a meeting called
for such purpose. Pursuant to authorization granted by the public shareholders
of FDF on May 24, 1993, FDF, as the initial shareholder of the Fund, approved
the Sub-Agreement on June 24, 1993, for an initial term expiring April 30, 1995.
The Sub- Agreement has been continued by action of the board of directors
through April 30, 1996. Thereafter, the Sub-Agreement may be continued from year
to year as long as each such continuance is specifically approved by the board
of directors of the Fund, or by a vote of the holders of a majority, as defined
in the 1940 Act, of the outstanding shares of the Fund. Each such continuance
also must be approved by a majority of the directors who are not parties to the
Sub-Agreement or interested persons (as defined in the 1940 Act) of any such
party, cast in person at a meeting called for the purpose of voting on such
continuance. The Sub-Agreement may be terminated at any time without penalty by
either party or the Fund upon sixty (60) days' written notice, and terminates
automatically in the event of an assignment to the extent required by the 1940
Act and the rules thereunder.
The Sub-Agreement provides that INVESCO Trust, subject to the supervision
of INVESCO, shall manage the investment portfolio of the Fund in conformity with
the Fund's investment policies. These management services would include: (a)
managing the investment and reinvestment of all the assets, now or hereafter
acquired, of the Fund, and executing all purchases and sales of portfolio
securities; (b) maintaining a continuous investment program for the Fund,
consistent with (i) the Fund's investment policies as set forth in the Fund's
Articles of Incorporation, Bylaws, and Registration Statement, as from time to
time amended, under the 1940 Act, and in any prospectus and/or statement of
additional information of the Fund, as from time to time amended and in use
under the 1933 Act, and (ii) the Fund's status as a regulated investment company
under the Internal Revenue Code of 1986, as amended; (c) determining what
securities are to be purchased or sold for the Fund, unless otherwise directed
by the directors of the Fund or INVESCO, and executing transactions accordingly;
(d) providing the Fund the benefit of all of the investment analysis and
research, the reviews of current economic conditions and trends, and the
consideration of long-range investment policy now or hereafter generally
available to investment advisory customers of the Sub-Adviser; (e) determining
what portion of the Fund should be invested in the various types of securities
authorized for purchase by the Fund; and (f) making recommendations as to the
manner in which voting rights, rights to consent to Fund action and any other
rights pertaining to the Fund's portfolio securities shall be exercised.
The Sub-Agreement provides that as compensation for its services, INVESCO
Trust shall receive from INVESCO, at the end of each month, a fee based upon the
average net assets of the Fund at the following annual rate: 0.25% on the Fund's
average net assets up to $200 million, and 0.20% on the Fund's average net
assets in excess of $200 million. The Sub-Advisory fee is paid by INVESCO, NOT
the Fund.
Administrative Services Agreement. INVESCO, either directly or through
affiliated companies, also provides certain administrative, sub-accounting, and
recordkeeping services to the Fund pursuant to an Administrative Services
Agreement dated April 30, 1993 (the "Administrative Agreement"). The
Administrative Agreement was approved on April 21, 1993, by a vote cast in
person by all of the directors of the Fund, including all of the directors who
are not "interested persons" of the Fund or INVESCO at a meeting called for such
purpose. The Administrative Agreement was for an initial term expiring April 30,
1994 and has been renewed through April 30, 1996. The Administrative Agreement
may be continued from year to year as long as each such continuance is
specifically approved by the board of directors of the Fund, including a
majority of the directors who are not parties to the Administrative Agreement or
interested persons (as defined in the Investment Company Act of 1940) of any
such party, cast in person at a meeting called for the purpose of voting on such
continuance. The Administrative Agreement may be terminated at any time without
penalty by INVESCO on sixty (60) days' written notice, or by the Fund upon
thirty (30) days' written notice, and terminates automatically in the event of
an assignment unless the Fund's board of directors approves such assignment.
The Administrative Agreement provides that INVESCO shall provide the
following services to the Fund: (A) such sub-accounting and recordkeeping
services and functions as are reasonably necessary for the operation of the
Fund; and (B) such sub-accounting, recordkeeping, and administrative services
and functions, which may be provided by affiliates of INVESCO, as are reasonably
necessary for the operation of Fund shareholder accounts maintained by certain
retirement plans and employee benefit plans for the benefit of participants in
such plans.
<PAGE>
As full compensation for services provided under the Administrative
Agreement, the Fund pays a monthly fee to INVESCO consisting of a base fee of
$10,000 per year, plus an additional incremental fee computed daily and paid
monthly at an annual rate of 0.015% per year of the average net assets of the
Fund. During the fiscal years ended April 30, 1995, 1994 and 1993, the Fund paid
INVESCO administrative services fees in the amount of $60,466 (prior to the
voluntary absorption of certain Fund expenses by INVESCO), $53,729 and $39,602,
respectively.
Transfer Agency Agreement. INVESCO also performs transfer agent, dividend
disbursing agent, and registrar services for the Fund pursuant to a Transfer
Agency Agreement which was approved by the board of directors of the Fund,
including a majority of the Fund's directors who are not parties to the Transfer
Agency Agreement or "interested persons" of any such party, on April 21, 1993,
for an initial term expiring April 30, 1994. The Transfer Agency Agreement has
been continued by action of the board of directors until April 30, 1996, and
thereafter may be continued from year to year as long as such continuance is
specifically approved at least annually by the board of directors of the Fund,
or by a vote of the holders of a majority of the outstanding shares of the Fund.
Any such continuance also must be approved by a majority of the Fund's directors
who are not parties to the Transfer Agency Agreement or interested persons (as
defined by the 1940 Act) of any such party, cast in person at a meeting called
for the purpose of voting on such continuance. The Transfer Agency Agreement may
be terminated at any time without penalty by either party upon sixty (60) days'
written notice and terminates automatically in the event of assignment.
The Transfer Agency Agreement provides that the Fund shall pay to INVESCO
a fee of $14.00 per shareholder account or omnibus account participant per year.
This fee is paid monthly at 1/12 of the annual fee and is based upon the actual
number of shareholder accounts or omnibus account participants in existence at
any time during each month. For the fiscal years ended April 30, 1995, 1994 and
1993, the Fund paid INVESCO transfer agency fees of $838,096 (prior to the
voluntary absorption of certain Fund expenses by INVESCO), $485,984 and
$364,072, respectively.
Officers and Directors of the Fund. The overall direction and supervision
of the Fund is the responsibility of the board of directors, which has the
primary duty of seeing that the Fund's general investment policies and programs
of the Fund are carried out and that the Fund's portfolio is properly
administered. The officers of the Fund, all of whom are officers and employees
of, and paid by INVESCO, are responsible for the day-to-day administration of
the Fund. The investment adviser for the Fund has the primary responsibility for
making investment decisions on behalf of the Fund. These investment decisions
are reviewed by the investment committee of INVESCO.
<PAGE>
All of the officers and directors of the Fund hold comparable positions
with INVESCO Diversified Funds, Inc., INVESCO Emerging Opportunity Funds, Inc.,
INVESCO Growth Fund, Inc., INVESCO Income Funds, Inc., INVESCO Industrial Income
Fund, Inc., INVESCO International Funds, Inc., INVESCO Money Market Funds, Inc.,
INVESCO Multiple Asset Funds, Inc., INVESCO Specialty Funds, Inc., INVESCO
Strategic Portfolios, Inc., INVESCO Tax-Free Income Funds, Inc., and INVESCO
Variable Investment Funds, Inc. In addition, all of the directors of the Fund
are also trustees of INVESCO Value Trust. In addition, all of the directors of
the Fund with the exception of Messrs. Hesser and Sim, also are trustees of
INVESCO Treasurer's Series Trust and directors of The EBI Funds, Inc. All of the
officers of the Fund also hold comparable positions with INVESCO Value Trust.
Set forth below is information with respect to each of the Fund's officers and
directors. Unless otherwise indicated, the address of the directors and officers
is Post Office Box 173706, Denver, Colorado 80217-3706. Their affiliations
represent their principal occupations during at least the past five years.
CHARLES W. BRADY,*+ Chairman of the Board. Chief Executive
Officer and Director of INVESCO PLC, London, England, and of
various subsidiaries thereof; Chairman of the Board of The EBI
Funds, Inc., INVESCO Treasurer's Series Trust, and The Global
Health Sciences Fund. Address: 1315 Peachtree Street, NE,
Atlanta, Georgia. Born: May 11, 1935.
FRED A. DEERING,+# Vice Chairman of the Board. Vice Chairman
of The EBI Funds, Inc. and INVESCO Treasurer's Series Trust.
Trustee of The Global Health Sciences Fund. Chairman of the
Executive Committee and, formerly, Chairman of the Board of
Security Life of Denver Insurance Company, Denver, Colorado;
Director of NN Financial, Toronto, Ontario, Canada; Director and
Chairman of the Executive Committee of ING America Life, Life
Insurance Co. of Georgia and Southland Life Insurance Company.
Address: Security Life Center, 1290 Broadway, Denver, Colorado.
Born: January 12, 1928.
DAN J. HESSER,*+ President and Director. Chairman of the
Board, President, and Chief Executive Officer of INVESCO Funds
Group, Inc., and Director of INVESCO Trust Company. Trustee of The
Global Health Sciences Fund. Born: December 27, 1939.
VICTOR L. ANDREWS,** Director. Mills Bee Lane Professor of
Banking and Finance and Chairman of the Department of Finance at
Georgia State University, Atlanta, Georgia, since 1968; since
October 1984, Director of the Center for the Study of Regulated
Industry at Georgia State University; formerly, member of the
faculties of the Harvard Business School and the Sloan School of
Management of MIT. Dr. Andrews is also a director of The
Southeastern Thrift and Bank Fund, Inc. and The Sheffield Funds,
Inc. Address: Department of Finance, Georgia State University,
University Plaza, Atlanta, Georgia. Born: June 23, 1930.
<PAGE>
BOB R. BAKER,+** Director. President and Chief Executive
Officer of AMC Cancer Research Center, Denver, Colorado, since
January 1989; until mid-December 1988, Vice Chairman of the Board
of First Columbia Financial Corporation (a financial institution),
Englewood, Colorado. Formerly, Chairman of the Board and Chief
Executive Officer of First Columbia Financial Corporation.
Address: 1775 Sherman Street, #1000, Denver, Colorado. Born:
August 7, 1936.
FRANK M. BISHOP,* Director. President and Chief Operating
Officer of INVESCO Inc. since February, 1993; Director of INVESCO
Funds Group, Inc.; Director (since February 1993), Vice President
(since December 1991), and Portfolio Manager (since February 1987),
of INVESCO Capital Management, Inc. (and predecessor firms)
Atlanta, Georgia. Address: 1315 Peachtree Street, N.E., Atlanta,
Georgia. Born: December 7, 1943.
LAWRENCE H. BUDNER,# Director. Trust Consultant; prior to
June 30, 1987, Senior Vice President and Senior Trust Officer of
InterFirst Bank, Dallas, Texas. Address: 7608 Glen Albens,
Dallas, Texas. Born: July 25, 1930.
DANIEL D. CHABRIS,+# Director. Financial Consultant;
Assistant Treasurer of Colt Industries Inc., New York, New York,
from 1966 to 1988. Address: 15 Sterling Road, Armonk, New York.
Born: August 1, 1923.
A. D. FRAZIER, JR.,** Director. Chief Operating Officer of
the Atlanta Committee for the Olympic Games. From 1982 to 1991,
Mr. Frazier was employed in various capacities by First Chicago
Bank, most recently as Executive Vice President of the North
American Banking Group. Trustee of The Global Health Sciences
Fund. Address: 250 Williams Street, Suite 6000, Atlanta, Georgia.
Born: June 29, 1944.
KENNETH T. KING,** Director. Formerly, Chairman of the Board
of The Capitol Life Insurance Company, Providence Washington
Insurance Company, and Director of numerous subsidiaries thereof in
the U.S. Formerly, Chairman of the Board of The Providence Capitol
Companies in the United Kingdom and Guernsey. Chairman of the
Board of the Symbion Corporation (a high technology company) until
1987. Address: 4080 North Circulo Manzanillo, Tucson, Arizona.
Born: November 16, 1925.
JOHN W. MCINTYRE,# Director. Retired. Formerly, Vice
Chairman of the Board of Directors of The Citizens and Southern
Corporation and Chairman of the Board and Chief Executive Officer
of The Citizens and Southern Georgia Corp. and Citizens and
Southern National Bank. Trustee of The Global Health Sciences Fund
and Gables Residential Trust. Director of Golden Poultry Co., Inc.
Address: 7 Piedmont Center, Suite 100, Atlanta, Georgia. Born:
September 14, 1930.
<PAGE>
R. DALTON SIM*, Director. Chairman of the Board (since March
1993) and President (since January 1991) of INVESCO Trust Company;
Director since June 1987 and, formerly, Executive Vice President
and Chief Investment Officer (June 1987 to January 1991) of INVESCO
Funds Group, Inc.; President (since 1994) and Trustee (since 1991)
of The Global Health Sciences Fund. Born: July 18, 1939.
GLEN A. PAYNE, Secretary. Senior Vice President, General
Counsel and Secretary of INVESCO Funds Group, Inc. and INVESCO
Trust Company; formerly, employee of a U.S. regulatory agency,
Washington, D.C. (June 1973 through May 1989). Born: September 25,
1947.
RONALD L. GROOMS, Treasurer. Senior Vice President and
Treasurer of INVESCO Funds Group, Inc. and INVESCO Trust Company.
Born: October 1, 1946.
WILLIAM J. GALVIN, JR., Assistant Secretary. Vice President
of INVESCO Funds Group, Inc. and Trust Officer of INVESCO Trust
Company since August 1992; Vice President of 440 Financial Group
from June 1990 to August 1992; Assistant Vice President of Putnam
Companies from November 1986 to June 1990. Born: August 21, 1956.
ALAN I. WATSON, Assistant Secretary. Vice President of
INVESCO Funds Group, Inc. and Trust Officer of INVESCO Trust
Company. Born: September 14, 1941.
JUDY P. WIESE, Assistant Treasurer. Vice President of INVESCO
Funds Group, Inc. and Trust Officer of INVESCO Trust Company.
Born: February 3, 1948.
#Member of the audit committee of the Fund.
+Member of the executive committee of the Fund. On occasion, the executive
committee acts upon the current and ordinary business of the Fund 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 Fund. All decisions are
subsequently submitted for ratification by the board of directors.
*These directors are "interested persons" of the Fund as
defined in the 1940 Act.
**Member of the management liaison committee of the Fund.
As of May 31, 1995, officers and directors of the Fund, as a group,
beneficially owned less than 1% of the Fund's outstanding shares.
Director Compensation
<PAGE>
The following table sets forth, for the fiscal year ended April 30, 1995:
the compensation paid by the Fund to its eight independent directors for
services rendered in their capacities as directors of the Fund; the benefits
accrued as Fund expenses with respect to the Defined Benefit Deferred
Compensation Plan discussed below; and the estimated annual benefits to be
received by these directors upon retirement as a result of their service to the
Fund. In addition, the table sets forth the total compensation paid by all of
the mutual funds distributed by INVESCO Funds Group, Inc. (including the Fund),
The EBI Funds, Inc., INVESCO Treasurer's Series Trust, and The Global Health
Sciences Fund (collectively, the "INVESCO Complex") to these directors for
services rendered in their capacities as directors or trustees during the year
ended December 31, 1994. As of December 31, 1994, there were 45 funds in the
INVESCO Complex.
Total
Compensa-
Benefits Estimated tion From
Aggregate Accrued Annual INVESCO
Name of Compensa- As Part Benefits Complex
Person, tion From of Fund Upon Re- Paid To
Position Fund(1) Expenses(2) tirement(3) Directors(1)
Fred A.Deering, $ 2,307 $ 1,117 $ 655 $ 89,350
Vice Chairman of
the Board
Victor L. Andrews 1,992 1,055 758 68,000
Bob R. Baker 2,216 942 1,016 75,350
Lawrence H. Budner 1,992 1,055 758 68,000
Daniel D. Chabris 2,161 1,204 539 73,350
A. D. Frazier, Jr.4 0 0 0 32,500
Kenneth T. King 2,079 1,160 594 71,000
John W. McIntyre4 0 0 0 33,000
------- ------ ----- --------
Total $12,747 $6,533 $510,550
% of Net Assets .0028%5 .0015%5 .0052%6
(1)The vice chairman of the board, the chairmen of the audit, management
liaison and compensation committees, and the members of the executive and
valuation committees each receive compensation for serving in such capacities in
addition to the compensation paid to all independent directors.
(2)Represents 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 figures represent the Fund's share of the estimated annual
benefits payable by the INVESCO Complex (excluding The Global Health Sciences
Fund, which does not participate in any retirement plan) upon the directors'
retirement, calculated using the current method of allocating director
compensation among the funds in the INVESCO Complex. These estimated benefits
assume retirement at age 72 and that the basic retainer payable to the directors
will be adjusted periodically for inflation, for increases in the number of
funds in the INVESCO Complex, and for other reasons during the period in which
retirement benefits are accrued on behalf of the respective directors. This
results in lower estimated benefits for directors who are closer to retirement
and higher estimated benefits for directors who are further from retirement.
With the exception of Messrs. Frazier and McIntyre, each of these directors has
served as a director/trustee of one or more of the funds in the INVESCO Complex
for the minimum five-year period required to be eligible to participate in the
Defined Benefit Deferred Compensation Plan.
4Messrs. Frazier and McIntyre began serving as directors of
the Fund on April 19, 1995.
5Totals as a percentage of the Fund's net assets as of April
30, 1995.
6Total as a percentage of the net assets of the INVESCO
Complex as of December 31, 1994.
Messrs. Bishop, Brady, Hesser, and Sim, as "interested persons" of the
Fund and of the other funds in the INVESCO Complex, receive compensation as
officers or employees of INVESCO or its affiliated companies, and do not receive
any director's fees or other compensation from the Fund or the other funds in
the INVESCO Complex for their service as directors.
The board of directors has adopted a retirement policy for directors who
have attained 72 years of age. The retirement date for each director is the last
day of the calendar quarter in which he or she turns 72; provided, however, that
a majority of the directors may annually extend a director's retirement date for
a maximum period of three years, or through the calendar quarter in which the
director turns 75.
The boards of directors/trustees of the mutual funds managed by INVESCO,
The EBI Funds, Inc. and INVESCO Treasurer's Series Trust have adopted a Defined
Benefit Deferred Compensation Plan for the non-interested directors and trustees
of the funds. Under this plan, each director or trustee who is not an interested
person of the funds (as defined in the 1940 Act) and who has served for at least
five years (a "qualified director") is entitled to receive, upon retiring from
the boards at the retirement age of 72 (or the retirement age of 73 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
<PAGE>
benefit") of the annual basic retainer payable by the funds to the qualified
director at the time of his retirement (the "basic retainer"). Commencing with
any such director's second year of retirement, and commencing with the first
year of retirement of a director whose retirement has been extended by the board
for three years, a qualified director shall receive quarterly payments at an
annual rate equal to 25% of the basic retainer. These payments will continue for
the remainder of the qualified director's life or ten years, whichever is longer
(the "reduced retainer payments"). If a qualified director dies or becomes
disabled after age 72 and before age 74 while still a director of the funds, the
first year retirement benefit and the reduced retainer payments will be made to
him or to his beneficiary or estate. If a qualified director becomes disabled or
dies either prior to age 72 or during his/her 74th year while still a director
of the funds, the director will not be entitled to receive the first year
retirement benefit; however, the reduced retainer payments will be made to his
beneficiary or estate. The plan is administered by a committee of three
directors who are also participants in the plan and one director who is not a
plan participant. The cost of the plan will be allocated among the INVESCO, EBI
and Treasurer's Series funds in a manner determined to be fair and equitable by
the committee. Although the Fund is not making any payments to directors under
the plan as of the date of this Statement of Additional Information, it has
begun to accrue, as a current expense, a proportionate amount of the estimated
future cost of these benefits. The Fund has no stock options or other pension or
retirement plans for management or other personnel and pays no salary or
compensation to any of its officers.
The Fund has an audit committee comprised of four of the directors who are
not interested persons of the Fund. The committee meets periodically with the
Fund's independent accountants and officers to review accounting principles used
by the Fund, the adequacy of internal controls, the responsibilities and fees of
the independent accountants, and other matters.
The Fund also has a management liaison committee which meets quarterly
with various management personnel of INVESCO in order (a) to facilitate better
understanding of management and operations of the Fund, and (b) to review legal
and operational matters which have been assigned to the committee by the board
of directors, in furtherance of the board of directors' overall duty of
supervision.
HOW SHARES CAN BE PURCHASED
The Fund's shares are sold on a continuous basis at the net asset value
per share next calculated after receipt of a purchase order in good form. The
net asset value per share is computed once each day that the New York Stock
Exchange is open as of the close of regular trading on that Exchange, but may
also be computed at other times. See "How Shares Are Valued." INVESCO acts as
the Fund's Distributor under a distribution agreement with the Fund under which
it receives no compensation and bears all expenses,
<PAGE>
including the cost of printing and distributing prospectuses, incident to
marketing of the Fund's shares, except for such distribution expenses which are
paid out of Fund assets under the Fund's Plan of Distribution which has been
adopted by the Fund pursuant to Rule 12b-1 under the 1940 Act.
Distribution Plan. As discussed under "How to Buy Shares - Distribution
Expenses" in the Prospectus, the Fund has adopted a Plan and Agreement of
Distribution (the "Plan") pursuant to Rule 12b-1 under the 1940 Act, which was
implemented on November 1, 1990. The Plan provides that the Fund may make
monthly payments to INVESCO of amounts computed at an annual rate no greater
than 0.25% of the Fund's average net assets during any 12-month period to
reimburse INVESCO for expenses incurred in connection with the distribution of
the Fund's shares to investors. For the fiscal year ended April 30, 1995, the
Fund made payments to INVESCO under the Plan in the amount of $813,823 (prior to
the voluntary absorption of certain Fund expenses by INVESCO). In addition, as
of April 30, 1995, $82,939 of additional distribution expenses had been incurred
for the Fund, subject to payment upon approval of the Fund's directors. As noted
in the section of the Fund's Prospectus entitled "How to Buy Shares-Distribution
Expenses," one type of reimbursable expenditure is the payment of compensation
to securities companies and other financial institutions and organizations,
which may include INVESCO-affiliated companies, in order to obtain various
distribution-related and/or administrative services for the Fund. The Fund is
authorized by the Plan to use its assets to finance the payments made to obtain
those services. Payments will be made by INVESCO to broker-dealers who sell
shares of the Fund and may be made to banks, savings and loan associations and
other depository institutions. Although the Glass-Steagall Act limits the
ability of certain banks to act as underwriters of mutual fund shares, the Fund
does not believe that these limitations would affect the ability of such banks
to enter into arrangements with INVESCO, but can give no assurance in this
regard. However, to the extent it is determined otherwise in the future,
arrangements with banks might have to be modified or terminated, and, in that
case, the size of the Fund possibly could decrease to the extent that the banks
would no longer invest customer assets in the Fund. Neither the Fund nor its
investment adviser will give any preference to banks or other depository
institutions which enter into such arrangements when selecting investments to be
made by the Fund.
For the fiscal year ended April 30, 1995, allocation of 12b-1 amounts paid
by the Fund for the following categories of expenses were:
advertising--$188,719; sales literature, printing, and postage--$146,700; direct
mail--$64,037; public relations/promotion--$65,470; compensation to securities
dealers and other organizations--$138,874; and marketing personnel-- $210,023.
<PAGE>
The nature and scope of services which are provided by securities dealers
and other organizations may vary by dealer but include, among other things,
processing new stockholder account applications, preparing and transmitting to
the Fund's Transfer Agent computer-processable tapes of all Fund transactions by
customers, serving as the primary source of information to customers in
answering questions concerning the Fund, and assisting in other customer
transactions with the Fund.
The Plan was approved on April 21, 1993, at a meeting called for such
purpose, by a majority of the directors of the Fund, including a majority of the
directors who neither are "interested persons" of the Fund nor have any
financial interest in the operation of the Plan ("12b-1 directors"). Pursuant to
authorization granted by the public shareholders of FDF on May 24, 1993, FDF, as
the initial shareholder of the Fund, approved the Plan on June 24, 1993 for an
initial term expiring April 30, 1994. The Plan has been continued by action of
the board of directors until April 30, 1996.
The Plan provides that it shall continue in effect with respect to the
Fund for so long as such continuance is approved at least annually by the vote
of the board of directors of the Fund cast in person at a meeting called for the
purpose of voting on such continuance. The Plan can also be terminated at any
time with respect to the Fund, without penalty, if a majority of the 12b-1
directors, or shareholders of the Fund, vote to terminate the Plan. The Fund
may, in its absolute discretion, suspend, discontinue or limit the offering of
its shares at any time. In determining whether any such action should be taken,
the board of directors intends to consider all relevant factors including,
without limitation, the size of the Fund, the investment climate for the Fund,
general market conditions, and the volume of sales and redemptions of Fund
shares. The Plan may continue in effect and payments may be made under the Plan
following any such temporary suspension or limitation of the offering of Fund
shares; however, the Fund is not contractually obligated to continue the Plan
for any particular period of time. Suspension of the offering of Fund shares
would not, of course, affect a shareholder's ability to redeem his shares. So
long as the Plan is in effect, the selection and nomination of persons to serve
as independent directors of the Fund shall be committed to the independent
directors then in office at the time of such selection or nomination. The Plan
may not be amended to increase materially the amount of the Fund's payments
thereunder without approval of the shareholders of the Fund, and all material
amendments to the Plan must be approved by the board of directors of the Fund,
including a majority of the 12b-1 directors. Under the agreement implementing
the Plan, INVESCO or the Fund, the latter by vote of a majority of the 12b-1
directors, or of the holders of a majority of the Fund's outstanding voting
securities, may terminate such agreement without penalty upon 30 days' written
notice to the other party. No further payments will be made by the Fund under
the Plan in the event of its termination.
<PAGE>
To the extent that the Plan constitutes a plan of distribution adopted
pursuant to Rule 12b-1 under the 1940 Act, it shall remain in effect as such, so
as to authorize the use of Fund assets in the amounts and for the purposes set
forth therein, notwithstanding the occurrence of an assignment, as defined by
the 1940 Act, and rules thereunder. To the extent it constitutes an agreement
pursuant to a plan, the Fund's obligation to make payments to INVESCO shall
terminate automatically, in the event of such "assignment," in which event the
Fund may continue to make payments, pursuant to the Plan, to INVESCO or another
organization only upon the approval of new arrangements, which may or may not be
with INVESCO, regarding the use of the amounts authorized to be paid by it under
the Plan, by the directors, including a majority of the 12b-1 directors, by a
vote cast in person at a meeting called for such purpose.
Information regarding the services rendered under the Plan and the amounts
paid therefor by the Fund are provided to, and reviewed by, the directors on a
quarterly basis. In the quarterly review, the directors determine whether, and
to what extent, INVESCO will be reimbursed for expenditures which it has made
that are reimbursable under the Fund's Rule 12b-1 Plan. On an annual basis, the
directors consider the continued appropriateness of the Plan at the level of
compensation provided therein.
The only directors or interested persons, as that term is defined in
Section 2(a)(19) of the 1940 Act, of the Fund who have a direct or indirect
financial interest in the operation of the Plan are the officers and directors
of the Fund listed herein under the section entitled "The Fund And Its
Management-Officers and Directors of the Fund," who are also officers either of
INVESCO or companies affiliated with INVESCO. The benefits which the Fund
believes will be reasonably likely to flow to the Fund and its shareholders
under the Plan include the following:
(1) Enhanced marketing efforts, if successful, should result in an
increase in net assets through the sale of additional shares and
afford greater resources with which to pursue the investment
objectives of the Fund;
(2) The sale of additional shares reduces the likelihood that redemption
of shares will require the liquidation of securities of the Fund in
amounts and at times that are disadvantageous for investment
purposes;
(3) The positive effect which increased Fund assets will have on
INVESCO's revenues could allow INVESCO:
(a) To have greater resources to make the financial commitments
necessary to improve the quality and level of the Fund's
shareholder services (in both systems and personnel),
(b) To increase the number and type of mutual funds available to
investors from INVESCO (and support them in their infancy),
and thereby expand the investment choices available to all
shareholders, and
<PAGE>
(c) To acquire and retain talented employees who desire
to be associated with a growing organization; and
(4) Increased Fund assets may result in reducing each investor's share
of certain expenses through economies of scale (e.g. exceeding
established breakpoints in the advisory fee schedule and allocating
fixed expenses over a larger asset base), thereby partially
offsetting the costs of the plan.
HOW SHARES ARE VALUED
As described in the section of the Fund's Prospectus entitled "Fund Price
and Performance," the net asset value of shares of the Fund is computed once
each day that the New York Stock Exchange is open as of the close of regular
trading on that Exchange (generally 4:00 p.m., New York time) and applies to
purchase and redemption orders received prior to that time. Net asset value per
share is also computed on any other day on which there is a sufficient degree of
trading in the securities held by the Fund that the current net asset value per
share might be materially affected by changes in the value of the securities
held, but only if on such day the Fund receives a request to purchase or redeem
shares. Net asset value per share is not calculated on days the New York Stock
Exchange is closed, such as federal holidays including New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving, and Christmas.
The net asset value per share of the Fund is calculated by dividing the
value of all securities held by the Fund and its other assets (including
dividends and interest accrued but not collected), less the Fund's liabilities
(including accrued expenses), by the number of outstanding shares of the Fund.
Securities traded on national securities exchanges, the NASDAQ National Market
System, the NASDAQ Small Cap market and foreign markets are valued at their last
sale prices on the exchanges or markets where such securities are primarily
traded. Securities traded in the over-the-counter market for which last sale
prices are not available, and listed securities for which no sales were reported
on a particular date, are valued at their highest closing bid prices (or, for
debt securities, yield equivalents thereof) obtained from one or more dealers
making markets for such securities. If market quotations are not readily
available, securities or other assets will be valued at their fair values as
determined in good faith by the board of directors or pursuant to procedures
adopted by the board of directors. The above procedures may include the use of
valuations furnished by a pricing service which employs a matrix to determine
valuations for normal institutional-size trading units of debt securities. Prior
to utilizing a pricing service, the Fund's board of directors reviews the
methods used by such service to assure itself that securities will be valued at
their fair values. The Fund's board of directors also periodically monitors the
methods used by such pricing services. Debt securities with remaining maturities
of 60 days or less at the time of purchase normally are valued at amortized
cost.
<PAGE>
The values of the securities held by the Fund and other assets used in
computing net asset value generally are determined as of the time regular
trading in such securities or assets is completed each day. Since regular
trading in most foreign securities markets is completed simultaneously with, or
prior to, the close of regular trading on the New York Stock Exchange, closing
prices for foreign securities usually are available for purposes of computing
the Fund's net asset value. However, in the event that the closing price of a
foreign security is not available in time to calculate the Fund's net asset
value on a particular day, the Fund's board of directors has authorized the use
of the market price for the security obtained from an approved pricing service
at an established time during the day which may be prior to the close of regular
trading in the security. The value of all assets and liabilities initially
expressed in foreign currencies will be converted into U.S. dollars at the spot
rate of such currencies against U.S. dollars provided by an approved pricing
service.
FUND PERFORMANCE
As discussed in the section of the Fund's Prospectus entitled "Fund Price
and Performance," the Fund advertises its total return performance. Average
annual total return performance for the one-, five-, and ten-year periods ended
April 30, 1995, was 13.57%, 18.90% and 14.87%, respectively. Average annual
total return performance for each of the periods indicated was computed by
finding the average annual compounded rates of return that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:
P(1 + T)n = ERV
where: P = initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of initial payment
The average annual total return performance figures shown above were
determined by solving the above formula for "T" for each time period indicated.
In conjunction with performance reports, comparative data between the
Fund's performance for a given period and other types of investment vehicles,
including certificates of deposit, may be provided to prospective investors and
shareholders.
In conjunction with performance reports and/or analyses of shareholder
service for the Fund, comparative data between the Fund's performance for a
given period and recognized indices of investment results for the same period,
and/or assessments of the quality of shareholder service, may be provided to
shareholders.
<PAGE>
Such indices include indices provided by Dow Jones & Company, Standard &
Poor's, Lipper Analytical Services, Inc., Lehman Brothers, National Association
of Securities Dealers Automated Quotations, Frank Russell Company, Value Line
Investment Survey, the American Stock Exchange, Morgan Stanley Capital
International, Wilshire Associates, the Financial Times Stock Exchange, the New
York Stock Exchange, the Nikkei Stock Average and Deutcher Aktienindex, all of
which are unmanaged market indicators. In addition, rankings, ratings, and
comparisons of investment performance and/or assessments of the quality of
shareholder service made by independent sources may be used in advertisements,
sales literature or shareholder reports, including reprints of, or selections
from, editorials or articles about the Fund. These sources utilize information
compiled (i) internally; (ii) by Lipper Analytical Services, Inc.; or (iii) by
other recognized analytical services. The Lipper Analytical Services, Inc.
mutual fund rankings and comparisons which may be used by the Fund in
performance reports will be drawn from the "Capital Appreciation Funds" mutual
fund grouping, in addition to the broad-based Lipper general fund groupings.
Sources for Fund performance information and articles about the Fund include,
but are not limited to, the following:
American Association of Individual Investors' Journal
Banxquote
Barron's
Business Week
CDA Investment Technologies
CNBC
CNN
Consumer Digest
Financial Times
Financial World
Forbes
Fortune
Ibbotson Associates, Inc.
Institutional Investor
Investment Company Data, Inc.
Investor's Business Daily
Kiplinger's Personal Finance
Lipper Analytical Services, Inc.'s Mutual Fund
Performance Analysis
Money
Morningstar
Mutual Fund Forecaster
No-Load Analyst
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
<PAGE>
SERVICES PROVIDED BY THE FUND
Periodic Withdrawal Plan. As described in the section of the Prospectus
entitled "How to Sell Shares," the Fund offers a Periodic Withdrawal Plan. All
dividends and distributions on shares owned by shareholders participating in
this Plan are reinvested in additional shares. Since withdrawal payments
represent the proceeds from sales of shares, the amount of shareholders'
investments in the Fund will be reduced to the extent that withdrawal payments
exceed dividends and other distributions paid and reinvested. Any gain or loss
on such redemptions must be reported for tax purposes. In each case, shares will
be redeemed at the close of business on or about the 20th day of each month
preceding payment and payments will be mailed within five business days
thereafter.
The Periodic Withdrawal Plan involves the use of principal and is not a
guaranteed annuity. Payments under such Plan do not represent income or a return
on investment.
A Periodic Withdrawal Plan may be terminated at any time by directing a
written request to INVESCO. Upon termination, all future dividends and capital
gain distributions will be reinvested in additional shares unless a shareholder
requests otherwise.
Exchange Privilege. As discussed in the section of the Prospectus entitled
"How to Buy Shares - Exchange Privilege," the Fund offers shareholders the
privilege of exchanging shares of the Fund for shares of certain other no-load
mutual funds advised by INVESCO. Exchange requests may be made either by
telephone or by written request to INVESCO Funds Group, Inc., using the
telephone number or address on the cover of this Statement of Additional
Information. Exchanges made by telephone must be in an amount of at least $250,
if the exchange is being made into an existing account of one of the INVESCO
funds. All exchanges that establish a new account must meet the fund's
applicable minimum initial investment requirements. Written exchange requests
into an existing account have no minimum requirements other than the fund's
applicable minimum subsequent investment requirements. Any gain or loss realized
on an exchange is recognized for federal income tax purposes. This privilege is
not an option or right to purchase securities, but is a revocable privilege
permitted under the present policies of each of the funds and is not available
in any state or other jurisdiction where the shares of the mutual fund into
which transfer is to be made are not qualified for sale, or when the net asset
value of the shares presented for exchange is less than the minimum dollar
purchase required by the appropriate prospectus.
TAX-DEFERRED RETIREMENT PLANS
As described in the section of the Prospectus entitled "Fund Services,"
shares of the Fund may be purchased as the investment medium for various
tax-deferred retirement plans. Persons who request information regarding these
plans from INVESCO will be provided with prototype documents and other
supporting information regarding the type of plan requested. Each of these plans
involves a long-term commitment of assets and is subject to possible regulatory
penalties for excess contributions, premature distributions or for insufficient
distributions after age 70-1/2. The legal and tax implications may vary
according to the circumstances of the individual investor. Therefore, the
investor is urged to consult with an attorney or tax adviser prior to the
establishment of such a plan.
HOW TO REDEEM SHARES
Normally, payments for shares redeemed will be mailed within seven (7)
days following receipt of the required documents as described in the section of
the Prospectus entitled "How to Redeem Shares." The right of redemption may be
suspended and payment postponed when: (a) the New York Stock Exchange is closed
for other than customary weekends and holidays; (b) trading on that exchange is
restricted; (c) an emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable, or it is not reasonably
practicable for the Fund fairly to determine the value of its net assets; or (d)
the SEC by order so permits.
It is possible that in the future conditions may exist which would, in the
opinion of the Fund's investment adviser, make it undesirable for the Fund to
pay for redeemed shares in cash. In such cases, the investment adviser may
authorize payment to be made in portfolio securities or other property of the
Fund. However, the Fund is obligated under the 1940 Act to redeem for cash all
shares of the Fund presented for redemption by any one shareholder having a
value up to $250,000 (or 1% of the Fund's net assets if that is less) in any
90-day period. Securities delivered in payment of redemptions are selected
entirely by the investment adviser based on what is in the best interests of the
Fund and its shareholders, and are valued at the value assigned to them in
computing the Fund's net asset value per share. Shareholders receiving such
securities are likely to incur brokerage costs on their subsequent sales of the
securities.
<PAGE>
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS, AND TAXES
The Fund intends to continue to conduct its business and satisfy the
applicable diversification of assets and source of income requirements to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. The Fund so qualified in the fiscal year ended
April 30, 1995, and intends to continue to qualify during its current fiscal
year. As a result, it is anticipated that the Fund will pay no federal income or
excise taxes and will be accorded conduit or "pass through" treatment for
federal income tax purposes.
Dividends paid by the Fund from net investment income as well as
distributions of net realized short-term capital gains and net realized gains
from certain foreign currency transactions are, for federal income tax purposes,
taxable as ordinary income to shareholders. After the end of each calendar year,
the Fund sends shareholders information regarding the amount and character of
dividends paid in the year, including the dividends eligible for the
dividends-received deduction for corporations. Such amounts will be limited to
the aggregate amount of qualifying dividends which the Fund derives from its
portfolio investments.
Distributions by the Fund of net capital gain (the excess of net long-term
capital gain over net short term capital loss) are, for federal income tax
purposes, taxable to the shareholder as long-term capital gains regardless of
how long a shareholder has held shares of the Fund. Such distributions are
identified as such and are not eligible for the dividends-received deduction.
All dividends and other distributions are regarded as taxable to the
investor, whether or not such dividends and distributions are reinvested in
additional shares. If the net asset value of Fund shares should be reduced below
a shareholder's cost as a result of a distribution, such distribution would be
taxable to the shareholder although a portion would be, in effect, a return of
invested capital. The net asset value of shares of the Fund reflects accrued net
investment income and undistributed realized capital and foreign currency gains;
therefore, when a distribution is made, the net asset value is reduced by the
amount of the distribution. If shares are purchased shortly before a
distribution, the full price for the shares will be paid and some portion of the
price may then be returned to the shareholder as a taxable dividend or capital
gain. However, the net asset value per share will be reduced by the amount of
the distribution, which would reduce any gain (or increase any loss) for tax
purposes on any subsequent redemption of shares.
Dividends and interest received by the Fund may give rise to withholding
and other taxes imposed by foreign countries. Tax conventions between certain
countries and the United States may reduce or eliminate such taxes.
INVESCO may provide Fund shareholders with information concerning the
average cost basis of their shares in order to help them prepare their tax
returns. This information is intended as a convenience to shareholders, and will
not be reported to the Internal Revenue Service (the "IRS"). The IRS permits the
use of several methods to determine the cost basis of mutual fund shares. The
cost basis information provided by INVESCO will be computed using the
single-category average cost method, although neither INVESCO nor the Fund
recommends any particular method of determining cost basis. Other methods may
result in different tax consequences. If a shareholder has reported gains or
losses for the Fund in past years, the shareholder must continue to use the
method previously used, unless the shareholder applies to the IRS for permission
to change methods.
<PAGE>
If Fund shares are sold at a loss after being held for six months or less,
the loss will be treated as long-term, instead of short-term, capital loss to
the extent of any capital gain distributions received on those shares.
The 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 capital gain net income for the one-year
period ending on October 31 of that year, plus certain other amounts.
Dividends and interest received by the Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors. If more than 50% of the value of
the Fund's total assets at the close of any taxable year consists of securities
of foreign corporations, the Fund will be eligible to, and may, file an election
with the Internal Revenue Service that will enable its shareholders, in effect,
to receive the benefit of the foreign tax credit with respect to any foreign and
U.S. possessions income taxes paid by it. The Fund will report to its
shareholders shortly after each taxable year their respective shares of the
Fund's income from sources within, and taxes paid to, foreign countries and U.S.
possessions if it makes this election.
The Fund may invest in the stock of "passive foreign investment companies"
(PFICs"). A PFIC is a foreign corporation that, in general, meets either of the
following tests: (1) at least 75% of its gross income is passive or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, the Fund will be subject to
federal income tax on a portion of any "excess distribution" received on the
stock of a PFIC or of any gain on disposition of the stock (collectively "PFIC
income"), plus interest thereon, even if the Fund distributes the PFIC income as
a taxable dividend to its shareholders. The balance of the PFIC income will be
included in the Fund's investment company taxable income and, accordingly, will
not be taxable to it to the extent that income is distributed to its
shareholders.
Gains or losses (1) from the disposition of foreign currencies, (2) from
the disposition of debt securities denominated in foreign currency that are
attributable to fluctuations in the value of the foreign currency between the
date of acquisition of each security and the date of disposition, and (3) that
are attributable to fluctuations in exchange rates that occur between the time
the Fund accrues interest, dividends or other receivables or accrues expenses or
other liabilities denominated in a foreign currency and the time the Fund
actually collects the receivables or pays the liabilities, generally will be
treated as ordinary income or loss. These gains or losses may increase or
decrease the amount of the Fund's investment company taxable income to be
distributed to its shareholders.
<PAGE>
Shareholders should consult their own tax advisers regarding specific
questions as to federal, state and local taxes. Dividends and capital gain
distributions 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.
INVESTMENT PRACTICES
Leverage. The Fund's charter permits the Fund to borrow from banks up to
25% of the value of its net assets, excluding the proceeds of any such borrowing
(subject to its investment restrictions), for the purpose of purchasing
portfolio securities. This is a speculative technique commonly known as
leverage. Since the Fund's inception, leverage has never been employed, and it
may not be employed without express authorization of the Fund's board of
directors. Such authorization is not presently contemplated. Should the leverage
technique be employed at some future date, it would be employed with the
expectation that portfolio gains attributable to the investment of borrowed
monies will exceed the interest costs on such monies. If this expectation is not
realized and the market value of securities so purchased declines, however, the
impact of such market decline would be increased by the amount of interest paid
on such borrowings.
Portfolio Turnover. There are no fixed limitations regarding the Fund's
portfolio turnover. Since the Fund started business, the rate of portfolio
turnover has fluctuated under constantly changing economic conditions and market
circumstances. Portfolio turnover rates for the fiscal years ended April 30,
1995, 1994 and 1993, were 176%, 169% and 144%, respectively. Securities
initially satisfying the basic policies and objectives of the Fund may be
disposed of when they are no longer suitable. Brokerage costs to the Fund are
commensurate with the rate of portfolio activity. In computing the portfolio
turnover rate, all investments with maturities or expiration dates at the time
of acquisition of one year or less were excluded. Subject to this exclusion, the
turnover rate is calculated by dividing (A) the lesser of purchases or sales of
portfolio securities for the fiscal year by (B) the monthly average of the value
of portfolio securities owned by the Fund during the fiscal year.
<PAGE>
Placement of Portfolio Brokerage. Either INVESCO, as the Fund's investment
adviser, or INVESCO Trust, as the Fund's sub- adviser, places orders for the
purchase and sale of securities with brokers and dealers based upon INVESCO's or
INVESCO Trust's evaluation of their financial responsibility, subject to their
ability to effect transactions at the best available prices. INVESCO or INVESCO
Trust evaluates the overall reasonableness of brokerage commissions paid by
reviewing the quality of executions obtained on the Fund's portfolio
transactions, viewed in terms of the size of transactions, prevailing market
conditions in the security purchased or sold, and general economic and market
conditions. In seeking to ensure that the commissions charged the Fund are
consistent with prevailing and reasonable commissions, INVESCO or INVESCO Trust
also endeavors to monitor brokerage industry practices with regard to the
commissions charged by broker/dealers on transactions effected for other
comparable institutional investors. While INVESCO or INVESCO Trust seeks
reasonably competitive rates, the Fund does not necessarily pay the lowest
commission or spread available.
Consistent with the standard of seeking to obtain the best execution on
portfolio transactions, INVESCO or INVESCO Trust may select brokers that provide
research services to effect such transactions. Research services consist of
statistical and analytical reports relating to issuers, industries, securities
and economic factors and trends, which may be of assistance or value to INVESCO
or INVESCO Trust in making informed investment decisions. Research services
prepared and furnished by brokers through which the Fund effects securities
transactions may be used by INVESCO or INVESCO Trust in servicing all of its
accounts and not all such services may be used by INVESCO or INVESCO Trust in
connection with the Fund.
In recognition of the value of the above-described brokerage and research
services provided by certain brokers, INVESCO or INVESCO Trust, consistent with
the standard of seeking to obtain the best execution on portfolio transactions,
may place orders with such brokers for the execution of Fund transactions on
which the commissions are in excess of those which other brokers might have
charged for effecting the same transactions.
Portfolio transactions may be effected through qualified broker/dealers
who recommend the Fund to their clients, or who act as agent in the purchase of
the Fund's shares for their clients. When a number of brokers and dealers can
provide comparable best price and execution on a particular transaction, the
Fund's adviser may consider the sale of Fund shares by a broker or dealer in
selecting among qualified broker/dealers.
The aggregate dollar amount of brokerage commissions paid by the Fund for
the fiscal years ended April 30, 1995, 1994 and 1993, were $1,742,196,
$2,619,679 and $1,445,703, respectively. For the fiscal year ended April 30,
1995, brokers providing research services received $816,352 in commissions on
portfolio transactions effected for the Fund. The aggregate dollar amount of
such portfolio transactions was $400,858,875. Commissions of $130,826 were
allocated to certain brokers in recognition of their sales of shares of the Fund
on portfolio transactions of the Fund effected during the fiscal year ended
April 30, 1995.
<PAGE>
At April 30, 1995, the Fund held debt securities of its regular brokers or
dealers, or their parents, as follows:
Value of Securities
Broker or Dealer at 4/30/95
Ford Motor Credit Company $21,200,000
General Electric Capital Corporation 7,564,000
Neither INVESCO nor INVESCO Trust receives any brokerage commissions on
portfolio transactions effected on behalf of the Fund, and there is no
affiliation between INVESCO, INVESCO Trust, or any person affiliated with
INVESCO, INVESCO Trust, or the Fund and any broker or dealer that executes
transactions for the Fund.
ADDITIONAL INFORMATION
Common Stock. The Fund has 300,000,000 authorized shares of common
stock with a par value of $0.01 per share. As of April 30, 1995, 37,061,629 of
those shares were outstanding. All shares are of one class with equal rights as
to voting, dividends and liquidation. All shares issued and outstanding are, and
all shares offered hereby, when issued, will be, fully paid and nonassessable.
The board of directors has the authority to designate additional classes of
common stock without seeking the approval of shareholders and may classify and
reclassify any authorized but unissued shares.
Shares have no preemptive rights, and are freely transferable on the
books of the Fund. Fund shares have noncumulative voting rights, which means
that the holders of a majority of the shares voting for the election of
directors of the Fund can elect 100% of the directors if they choose to do so,
and, in such event, the holders of the remaining shares voting for the election
of directors will not be able to elect any person or persons to the board of
directors. After they have been elected by shareholders, the directors will
continue to serve until their successors are elected and have qualified or they
are removed from office, in either case by a shareholder vote, or until death,
resignation or retirement. They may appoint their own successors, provided that
always at least a majority of the directors have been elected by the Fund's
shareholders. It is the intention of the Fund not to hold annual meetings of
shareholders. The directors will call annual or special meetings of shareholders
for action by shareholder vote as may be required by the 1940 Act or the Fund's
Articles of Incorporation, or at their discretion.
<PAGE>
Principal Shareholders. As of May 31, 1995, the following entity held more
than 5% of the Fund's outstanding equity securities.
Amount and Nature Class and Percent
Name and Address of Ownership of Class
Charles Schwab & Co. Inc. 6,997,221.892 18.052%
Reinvest Acct. Record
101 Montgomery St.
San Francisco, CA 94104
Independent Accountants. Price Waterhouse LLP, 950 Seventeenth Street,
Denver, Colorado, has been selected as the independent accountants of the Fund.
The independent accountants are responsible for auditing the financial
statements of the Fund.
Custodian. State Street Bank and Trust Company, P.O. Box 351, Boston,
Massachusetts, has been designated as custodian of the cash and investment
securities of the Fund. The bank is also responsible for, among other things,
receipt and delivery of the Fund's investment securities in accordance with
procedures and conditions specified in the custody agreement.
Transfer Agent. The Fund is provided with transfer agent, registrar, and
dividend disbursing agent services by INVESCO Funds Group, Inc., 7800 E. Union
Avenue, Denver, Colorado, pursuant to the Transfer Agency Agreement described in
"The Fund and Its Management." Such services include the issuance, cancellation
and transfer of shares of the Fund, and the maintenance of records regarding the
ownership of such shares.
Reports to Shareholders. The Fund's fiscal year ends on April 30. The Fund
distributes reports at least semiannually to its shareholders. Financial
statements regarding the Fund, audited by the independent accountants, are sent
to shareholders annually.
Legal Counsel. The firm of Kirkpatrick & Lockhart LLP,
Washington, D.C., is legal counsel for the Fund. The firm of Moye,
Giles, O'Keefe, Vermeire & Gorrell, Denver, Colorado, acts as
special counsel to the Fund.
Financial Statements. The Fund's audited financial statements and the
notes thereto for the fiscal year ended April 30, 1995, and the report of Price
Waterhouse LLP with respect to such financial statements, are incorporated
herein by reference from the Fund's Annual Report to Shareholders for the fiscal
year ended April 30, 1995.
Prospectus. The Fund will furnish, without charge, a copy of the
Prospectus upon request. Such requests should be made to the Fund at the mailing
address or telephone number set forth on the first page of this Statement of
Additional Information.
Registration Statement. This Statement of Additional Information and the
Prospectus do not contain all of the information set forth in the Registration
Statement the Fund has filed with the SEC. The complete Registration Statement
may be obtained from the SEC upon payment of the fee prescribed by the rules and
regulations of the SEC.
