File No. 2-26125
As filed ^ on April 16, 1998
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1933 X
Pre-Effective Amendment No. ________
Post-Effective Amendment No. ^ 47 X
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
--
Amendment No. ^ 21 X
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INVESCO CAPITAL APPRECIATION FUNDS, INC.
^
(Exact Name of Registrant as Specified in Charter)
7800 E. Union Avenue, Denver, Colorado 80237
(Address of Principal Executive Offices)
P.O. Box 173706, Denver, Colorado 80217-3706
(Mailing Address)
Registrant's Telephone Number, including Area Code: (303) 930-6300
Glen A. Payne, Esq.
7800 E. Union Avenue
Denver, Colorado 80237
(Name and Address of Agent for Service)
-------------------
Copies to:
Ronald M. Feiman, Esq.
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 W. 47th St.
New York, New York 10036
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Approximate Date of Proposed Public Offering: As soon as practicable
after this post-effective amendment becomes effective.
It is proposed that this filing will become effective (check
appropriate box)
_______ immediately upon filing pursuant to paragraph (b)
_______ ^ on _______________, pursuant to paragraph (b)
_______ 60 days after filing pursuant to paragraph (a)(1)
_______ on _______________, pursuant to paragraph (a)(1)
^ X 75 days after filing pursuant to paragraph (a)(2)
_______ on _______________, pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
___ this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
Registrant has previously elected to register an indefinite number of shares of
its common stock pursuant to Rule 24f-2 under the Investment Company Act.
Registrant's Rule 24f-2 Notice for the fiscal year ended April 30, 1997, was
filed on or about June 25, 1997.
Page 1 of 105
Exhibit index is located at page 69
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NOTE
This Post-Effective Amendment (Form N-1A) is being filed to add the INVESCO
Growth & Income Fund to the Registrant, INVESCO Capital Appreciation Funds, Inc.
and does not affect the other series of the Registrant: INVESCO Dynamics Fund.
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INVESCO CAPITAL APPRECIATION FUNDS, INC.
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CROSS-REFERENCE SHEET
Form N-1A
Item Caption
Part A Prospectus
1....................... Cover Page
2....................... Annual Fund Expenses; Essential
Information
3....................... ^ Fund Price and Performance
4....................... Investment Objective and Strategy;
Investment Policies and Risks; The
Fund and Its Management
5....................... The Fund and Its Management
5A...................... Not Applicable
6....................... Fund Services; Taxes, Dividends and
Capital Gain Distributions;
Additional Information
7....................... How to Buy Shares; Fund Price and
Performance; Fund Services; The
Fund and Its Management
8....................... Fund Services; How to Sell Shares
9....................... Not Applicable
Part B Statement of Additional Information
10....................... Cover Page
11....................... Table of Contents
12....................... The ^ Funds and ^ Their Management
-i-
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Form N-1A
Item Caption
13....................... Investment Practices; Investment
Policies and Restrictions
14....................... The ^ Funds and ^ Their Management
15....................... The ^ Funds and ^ Their Management;
Additional Information
16....................... The ^ Funds and ^ Their Management;
Additional Information
17....................... Investment Practices; Investment
Policies and Restrictions
18....................... Additional Information
19....................... How Shares Can Be Purchased; How
Shares Are Valued; Services
Provided by the Fund; Tax-Deferred
Retirement Plans; How to Redeem
Shares
20....................... Dividends, Capital Gain
Distributions and Taxes
21....................... How Shares Can Be Purchased
22....................... Performance Data
23....................... Additional Information
Part C Other Information
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
-ii-
<PAGE>
PROSPECTUS
June 30, 1998
INVESCO CAPITAL APPRECIATION FUNDS, INC.
INVESCO GROWTH & INCOME FUND
INVESCO Growth & Income Fund (the "Fund") is actively managed to seek high
total return through a combination of capital appreciation and current income.
The Fund invests primarily in common stocks, preferred stocks and securities
convertible into common stocks of companies which offer growth of earnings and
the payment of current dividends. The Fund may also purchase securities which do
not pay current dividends but which offer prospects for growth of capital and
future income.
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 June 30, 1998, has been filed with the Securities and
Exchange Commission and is incorporated by reference into this Prospectus. To
obtain a free copy, write to INVESCO Funds Group, Inc., P.O. Box 173706, Denver,
Colorado 80217-3706; call 1-800-525-8085; or on the World Wide Web:
http://www.invesco.com.
The Fund may invest in lower-rated bonds and foreign debt securities,
commonly known as "junk bonds." Investments of this type are subject to greater
risks, including default risks, than those found in higher rated securities.
Purchasers should carefully assess the risks associated with an investment in
this Fund. See "Risk Factors."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION. THE SHARES
OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
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TABLE OF CONTENTS
Page
ESSENTIAL INFORMATION..........................................................7
ANNUAL FUND EXPENSES...........................................................8
INVESTMENT OBJECTIVE AND STRATEGY..............................................9
INVESTMENT POLICIES AND RISKS..................................................9
THE FUND AND ITS MANAGEMENT...................................................13
FUND PRICE AND PERFORMANCE....................................................15
HOW TO BUY SHARES.............................................................15
FUND SERVICES.................................................................19
HOW TO SELL SHARES............................................................20
TAXES, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS...............................22
ADDITIONAL INFORMATION........................................................23
<PAGE>
ESSENTIAL INFORMATION
Investment Goal And Strategy. The Fund is actively managed to seek high
total return through a combination of capital appreciation and current income.
The Fund invests primarily in common stocks, preferred stocks and securities
convertible into common stocks of companies which offer growth of earnings and
the payment of current dividends. The Fund may also purchase securities which do
not pay current dividends but which offer prospects for growth of capital and
future income. There is no guarantee that the Fund will meet its objective. See
"Investment Objective and Strategy."
Designed For: Investors seeking a combination of capital growth over the
long term and current income. 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
option for many types of retirement programs, including various Individual
Retirement Accounts ("IRAs"), 401(k), Profit Sharing, Money Purchase Pension,
and 403(b) plans.
Time Horizon. Because the value of its holdings varies, the Fund's price
per share will fluctuate. Investors should consider this a medium- to long-term
investment.
Risks. The Fund uses an investment strategy which at times may include
securities rated below investment grade and foreign debt securities; and may
experience relatively rapid portfolio turnover. The Fund's investments in debt
securities are subject to credit risk and market risk, both of which are
increased by investing in lower rated securities. The returns on foreign
investments may be influenced by the 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 preservation of capital over the
short-term. See "Investment Objective And Strategy" and "Investment Policies and
Risks."
Organization and Management. The Fund is a series of INVESCO Capital
Appreciation Funds, Inc. (the "Company"), a diversified, managed, no-load mutual
fund. The Fund is owned by its shareholders. It employs INVESCO Funds Group,
Inc. ("IFG"), founded in 1932, to serve as investment adviser, administrator and
transfer agent. INVESCO Distributors, Inc. ("IDI"), founded in 1997 as a
wholly-owned subsidiary of IFG, is the Fund's distributor.
The Fund's investments are selected by two experienced INVESCO portfolio
managers: IFG vice president Trent E. May and IFG vice president, Frederick R.
"Fritz" Meyer. Mr. May also serves as co- portfolio manager of the INVESCO
Growth Fund and the INVESCO Small Company Growth Fund. A Chartered Financial
Analyst, he earned his MBA from Rollins College and a BS in Engineering from the
Florida Institute of Technology. Mr. Meyer earned his MBA from Amos Tuck
School-Dartmouth College and his AB from Dartmouth College with a distinction in
Economics. See "The Fund And Its Management."
IFG and IDI are subsidiaries of AMVESCAP PLC, an international investment
management company that manages approximately $192.2 billion in assets. AMVESCAP
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 of the Fund's average net assets 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
estimated expenses for the current fiscal year. To keep expenses competitive,
the advisor voluntarily reimburses the Fund for certain expenses in excess of
1.50% of the Fund's average net assets.
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fee [0.75%]
12b-1 Fees 0.25%
Other Expenses (after expense limitation)(1) [0.50%]
Total Fund Operating Expenses (after expense
limitation)(1) [1.50%]
(1) Based on estimated expenses for the current fiscal year which may be more or
less than actual expenses. If necessary, certain Fund expenses will be absorbed
voluntarily by IFG for at least the first fiscal year of the Fund's operations
in order to ensure that expenses for the Fund will not exceed 1.50% of the
Fund's average net assets pursuant to an agreement among the Fund and IFG. If
such voluntary expense limit were not in effect, the Fund's "Other Expenses" and
"Total Fund Operating Expenses" for the fiscal year ending April 30, 1999 are
estimated to be [____%] and [____%], respectively, of the Fund's average net
assets. Actual expenses are not provided because the Fund did not begin a public
offering of its securities until June 30, 1998.
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
$15 $48
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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."
Because 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.
INVESTMENT OBJECTIVE AND STRATEGY
The Fund is actively managed to seek high total return through a
combination of capital appreciation and current income. This investment
objective is fundamental and may not be changed without the approval of the
Fund's shareholders. The Fund seeks to achieve its objective through the
investment of its assets in common stocks, preferred stocks and securities
convertible into common stocks that are believed to present opportunities for
capital enhancement and/or current income. The Fund may also invest in
securities which offer prospects for appreciation of capital or future income
such as: bonds and debt securities (including high yield debt instruments).
There is no guarantee that the Fund's investment objective will be met.
The Fund's investment portfolio is actively managed. Because 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 as their suitability for the Fund's portfolio changes. This policy
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 adverse, 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.
INVESTMENT POLICIES AND RISKS
The Fund seeks high total return through a combination of capital
appreciation and current income by investing mainly in equity securities. The
Fund intends to invest the majority of its assets in domestic and foreign equity
securities. Equity securities may include common stocks, preferred stocks and
securities convertible into common stock. The equity securities in which the
Fund invests may be issued by either established, well-capitalized companies or
newly formed small capitalization ("small cap") companies. These securities may
be traded on national, regional or foreign stock exchanges or in the
over-the-counter market. Small cap companies frequently have limited operating
histories, product lines and financial and managerial resources, and may face
intense competitive pressures from larger companies. The market prices of small
cap stocks may be more volatile than the stocks of larger companies both because
they typically trade in lower volumes and because small cap firms may be more
vulnerable to changes in their earnings and prospects. Although equity
securities have a history of long-term growth in value, their prices fluctuate
based on changes in a company's financial condition and on overall market and
economic conditions.
<PAGE>
Investors generally should expect to see their price per share and income
levels vary with movements in the stock and fixed-income markets, changes in
economic conditions and other factors. The Fund invests in many different
companies in a variety of securities and industries; this diversification may
help reduce the Fund's exposure to particular investment and market risks but
cannot eliminate these risks.
Debt Securities. When we assess an issuer's ability to meet its interest
rate obligations and repay its debt when due, we are referring to "credit risk."
Debt obligations are rated based on their estimated credit risk by independent
services such as Standard & Poor's, a division of the McGraw-Hill Companies
("S&P"), or Moody's Investor Services, Inc. ("Moody's"). "Market risk" for debt
securities principally refers to sensitivity to changes in interest rates. For
instance, when interest rates go up, the market value of a previously issued
bond generally declines; on the other hand, when interest rates go down, bond
prices generally increase.
The lower a bond's quality, the more it is subject to credit risk and
market risk and the more speculative it is. This is also true of most unrated
securities. The Fund may invest in issues rated below investment grade quality
(commonly called "junk bonds," and rated BB or lower by S&P or Ba or lower by
Moody's or, if unrated, are judged by Fund Management to be of equivalent
quality). Such securities held by the Fund generally will be subject to greater
credit and market risks. These securities include issues which are of poorer
quality and may have some speculative characteristics, according to the rating
services. Investments in unrated securities may not exceed 25% of the Fund's
total assets and the Fund may not invest more than 25% of its total assets in
junk bonds. Never, under any circumstances, is the Fund permitted to invest in
bonds that are in default or are rated CCC or below by S&P or Caa or below by
Moody's or, if unrated, are judged by Fund Management to be of equivalent
quality. Bonds rated CCC or Caa are predominantly speculative and may be in
default or may have present elements of danger with respect to the repayment of
principal or interest. While Fund Management continuously monitors all of the
debt securities in the Fund's portfolio for the issuer's ability to make
required principal and interest payments and other quality factors, it may
retain a bond whose rating is changed to one below the minimum rating required
for purchase of the security. The Fund is not required to sell immediately debt
securities that go into default, but may continue to hold such securities until
such time as Fund Management determines it is in the best interests of the Fund
to sell the securities.
The Fund's investments in debt securities may include investments in zero
coupon bonds, step-up bonds, mortgage-backed securities and asset-backed
securities. Zero coupon bonds ("zeros") make no periodic interest payments.
Instead, they are sold at a discount from their face value. The buyer of the
zero receives the rate of return by the gradual appreciation in the price of the
security, which is redeemed at face value at maturity. Step-up bonds initially
make no (or low) cash interest payments but begin paying interest (or a higher
rate of interest) at a fixed time after issuance of the bond. Being extremely
responsive to changes in interest rates, the market prices of both zeros and
step-up bonds may be more volatile than other bonds. The Fund may be required to
distribute income recognized on these bonds, even though no cash interest
payments may be received, which could reduce the amount of cash available for
investment by the Fund.
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Mortgage-backed securities represent interests in pools of mortgages.
Asset-backed securities generally represent interests in pools of consumer
loans. Both usually are structured as pass-through securities. Interest and
principal payments ultimately depend on payment of the underlying loans,
although the securities may be supported, at least in part, by letters of credit
or other credit enhancements or, in the case of mortgage-backed securities,
guarantees by the U.S. government, its agencies or instrumentalities. The
underlying loans are subject to prepayments that may shorten the securities'
weighted average lives and may lower their returns. For more information on debt
securities, see "Investment Policies and Restrictions" in the Statement of
Additional Information.
Foreign Securities. Up to 25% of the Fund's total assets, measured at the
time of purchase, may be invested directly in foreign equity or corporate debt
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 a foreign
currency, returns for a U.S. investor on foreign securities denominated in that
foreign currency 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
-investment income on certain foreign securities 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 the Fund may experience 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.
Rule 144A Securities. The Fund may not purchase securities that are not
readily marketable. However, the Fund may purchase certain securities that are
not registered for sale to the general public but that can be resold to
institutional investors ("Rule 144A Securities"), if a liquid institutional
trading market exists. The Fund's board of directors has delegated to Fund
<PAGE>
Management the authority to determine the liquidity of Rule 144A Securities
pursuant to guidelines approved by the board. In the event that a Rule 144A
Security held by the Fund is subsequently determined to be illiquid, the
security will be sold as soon as that can be done in an orderly fashion
consistent with the best interests of the Fund's shareholders. For more
information concerning Rule 144A Securities, see "Investment Policies And
Restrictions" in the Statement of Additional Information.
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 and date. The Fund could incur costs or delays in seeking
to sell the instrument if the prior owner defaults on its repurchase obligation.
To reduce that risk, the securities that are the subject of the repurchase
agreement will be maintained with the Fund's custodian in an amount at least
equal to the repurchase price under the agreement (including accrued interest).
These agreements are entered into only with member banks of the Federal Reserve
System, registered broker-dealers, and registered U.S. government securities
dealers that are deemed creditworthy under standards established by the
Company's board of directors.
Futures and Options. A futures contract is an agreement to buy or sell a
specific amount of a financial instrument or commodity at a particular price on
a particular date. The Fund will use futures contracts only to hedge against
price changes in the value of its current or intended investments in securities.
In the event that an anticipated decrease in the value of portfolio securities
occurs as a result of a general decrease in prices, the adverse effects of such
changes may be offset, at least in part, by gains on the sale of futures
contracts. Conversely, the increased cost of portfolio securities to be
acquired, caused by a general increase in prices, may be offset, at least in
part, by gains on futures contracts purchased by the Fund. Brokerage fees are
paid to trade futures contracts, and the Fund is required to maintain margin
deposits.
Put and call options on futures contracts or securities may be traded by
the Fund in order to protect against declines in the value of portfolio
securities or against increases in the cost of securities to be acquired. The
purchaser of an option purchases the right to effect a transaction in the
underlying future or security at a specified price (the "strike price") before a
specified date (the "expiration date"). In exchange for the right, the purchaser
pays a "premium" to the seller, which represents the price of the right to buy
or to sell the underlying instrument. In exchange for the premium, the seller of
the option becomes obligated to effect a transaction in the underlying future or
security, at the strike price, at any time prior to the expiration date, should
the buyer choose to exercise the option. A call option contract grants the
purchaser the right to buy the underlying future or security, at the strike
price, before the expiration date. A put option contract grants the purchaser
the right to sell the underlying future or security, at the strike price, before
the expiration date. Purchases of options on futures contracts may present less
dollar risk in hedging the Fund's portfolio than the purchase and sale of the
underlying futures contracts, since the potential loss is limited to the amount
of the premium plus related transaction costs. The premium paid for such a put
or call option plus any transaction costs will reduce the benefit, if any,
realized by the Fund upon exercise or liquidation of the option, and, unless the
price of the underlying futures contract or security changes sufficiently, the
option may expire without value to the Fund.
<PAGE>
Although the Fund will enter into futures contracts and options on futures
contracts and securities solely for hedging or other nonspeculative purposes,
their use does involve certain risks. For example, a lack of correlation between
the value of an instrument underlying an option or futures contract and the
assets being hedged, or unexpected adverse price movements, could render a
Fund's hedging strategy unsuccessful and could result in losses. In addition,
there can be no assurance that a liquid secondary market will exist for any
contract purchased or sold, and the Fund may be required to maintain a position
until exercise or expiration, which could result in losses. Transactions in
futures contracts and options are subject to other risks as well, which are set
forth in greater detail in the Statement of Additional Information and Appendix
A therein.
Delayed Delivery or When-Issued Purchases. Debt securities may at times be
purchased or sold by the Fund with settlement taking place in the future. The
Fund may invest up to 10% of its net assets in when-issued securities. The
payment obligation and the interest rate that will be received on the securities
generally are fixed at the time the Fund enters into the commitment. Between the
date of purchase and the settlement date, the value of the securities is subject
to market fluctuations, and no interest is payable to the Fund prior to the
settlement date.
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 Policies and Restrictions" in the Statement of
Additional Information.
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.
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, with respect to 75% of the Fund's total
assets, the Fund limits to 5% of its total assets the amount which may be
invested in a single issuer, and to 25% the portion that may be invested in any
one industry. The Fund's ability to borrow money is limited to borrowings from
banks for temporary or emergency purposes in amounts not exceeding 33-1/3% of
net assets. Except where indicated to the contrary, the investment objectives
and policies described in this Prospectus are non-fundamental and may be changed
without the approval of the Fund's shareholders.
THE FUND AND ITS MANAGEMENT
The Company is a no-load mutual fund, registered with the Securities and
Exchange Commission as a diversified, open-end, management investment company.
It was incorporated as INVESCO Dynamics Fund, Inc. on February 17, 1967 under
the laws of Colorado and was reorganized as a Maryland corporation on July 1,
1993. On July 3, 1997, the name of the Company was changed to INVESCO Capital
Appreciation Funds, Inc.
The Company's board of directors has responsibility for overall
supervision of the Fund and reviews the services provided by the adviser. Under
an agreement with the Company, IFG, 7800 E. Union Avenue, Denver, Colorado
80237, serves as the Fund's investment adviser; it is primarily responsible for
providing the Fund with investment management and various administrative
services.
IFG and IDI are indirect wholly owned subsidiaries of AMVESCAP PLC.
AMVESCAP PLC is a publicly-traded holding company that, through its
subsidiaries, engages in the business of investment management on an
<PAGE>
international basis. INVESCO PLC changed its name to AMVESCO PLC on March 3,
1997, and to AMVESCAP PLC on May 8, 1997, as a part of a merger between a direct
subsidiary of INVESCO PLC and A I M Management Group Inc., thus creating one of
the largest independent investment management businesses in the world. IFG
continues to operate under its existing name. AMVESCAP has approximately $192.2
billion in assets under management. IFG was established in 1932 and, as of
December 31, 1997, managed 14 mutual funds, consisting of 47 separate
portfolios, with combined assets of approximately $16.7 billion on behalf of
848,106 shareholders.
The following managers share responsibility for the day-to-day management
of the Fund's holdings:
Trent E. May, C.F.A. has served as the lead portfolio manager of the Fund
since its inception in 1998. He is also co-portfolio manager of the INVESCO
Growth Fund, Inc. (since 1996) and the INVESCO Small Company Growth Fund (since
1996). Mr. May is a vice president of IFG. Formerly, he was senior equity fund
manager/equity analyst at Munder Capital Management in Birmingham, Michigan. BS
in Engineering, Florida Institute of Technology; MBA, Rollins College. He is a
Chartered Financial Analyst.
Fritz Meyer has served as the co-portfolio manager of the Fund since its
inception in 1998. Mr. Meyer is a vice president of IFG. Formerly, he was an
executive vice president and portfolio manager with Nelson, Benson & Zellmer,
Inc. in Denver, Colorado. A.B. with a distinction in Economics, Dartmouth
College; MBA, Amos Tuck School-Dartmouth College.
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.
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 [0.75%] of the Fund's average net assets.
Under a Distribution Agreement effective September 30, 1997, IDI is the
Fund's distributor. IDI, established in 1997, is a registered broker-dealer that
acts as distributor for all retail funds advised by IFG.
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
$20.00 per shareholder account or, where applicable, per participant in an
omnibus account per year. Registered broker-dealers, third party administrators
of tax-qualified retirement plans and other entities, including affiliates of
IFG, may provide equivalent services to the Fund. In these cases, IFG may pay,
out of the fee it receives from the Fund, an annual sub-transfer agency or
recordkeeping fee to the third party.
Under an Administrative Services Agreement, IFG handles additional
administrative, recordkeeping, and internal sub- accounting services for the
Fund.
The Fund's expenses, which are accrued daily, are deducted from total
income before dividends are paid. 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 1.50% of the Fund's average net assets.
<PAGE>
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of
such brokers' and dealers' 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 that recommend the Fund, or sell
shares of the Fund, to clients, or act as agent in the purchase of Fund shares
for clients, if Fund Management believes that the quality of the execution of
the transaction and level of commission are comparable to those available from
other qualified brokerage firms. For further information, see "Investment
Practices - Placement of Portfolio Brokerage" in the Statement of Additional
Information.
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 (generally, 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; subtracting liabilities,
including accrued expenses; and 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 (or since inception). 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 for the period cited;
average annual total return represents the average annual percentage change in
the value of an investment. Both cumulative and average annual total returns
tend to "smooth out" fluctuations in the Fund's investment results, because they
do not show the interim variations in performance over the periods cited.
When we quote mutual fund rankings published by Lipper Analytical
Services, Inc., we may compare the Fund to others in its category of Growth and
Income, 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.
HOW TO BUY SHARES
The following chart shows several convenient ways to invest in the Fund.
Your new Fund shares will be priced at the NAV next determined after your order
is received in proper form. There is no charge to invest, exchange, or redeem
shares when you make transactions directly through IFG. However, if you invest
in the Fund through a securities broker, you may be charged a commission or
transaction fee. IFG may from time to time make payments from its revenues to
securities dealers and other financial institutions that provide
distribution-related and/or administrative services for the Company. For all new
accounts, please send a completed application form. Please specify which Fund
you wish to purchase.
<PAGE>
Fund Management reserves the right to increase, reduce or waive the
minimum investment requirements in its sole discretion, where it determines this
action is in the best interests of 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 Policy. 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 the exchange policy, when it is 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 policy, except for unusual
instances (such as when redemptions of the exchanged shares are
suspended under Section 22(e) of the Investment Company Act of 1940,
or when sales of the fund into which you are exchanging are
temporarily stopped).
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
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 IRA; be responsible for any
P.O. Box 173706 $50 minimum for related loss the Fund or
Denver, CO 80217- each subsequent IFG incurs. If you are
3706. investment. already a shareholder in
You may send your the INVESCO fund, the
check by overnight Fund may seek
courier to: 7800 E. reimbursement from your
Union Ave., Denver, existing account(s) for
CO 80237. any loss incurred.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
By telephone or Wire Payment must be received
Call 1-800-525-8085 $1,000. within 3 business days,
to request your or the transaction may
purchase. Then send be canceled. If a
your check by purchase is canceled due
overnight courier to nonpayment, you will
to our street be responsible for any
address: related loss the Fund or
7800 E. Union Ave., IFG incurs. If you are
Denver, CO 80237. already a shareholder in
Or you may transmit the INVESCO funds, the
your payment by Fund may seek
bank wire (call IFG reimbursement from your
for instructions). existing account(s) for
any loss incurred.
- --------------------------------------------------------------------------------
With EasiVest or Like all regular
Direct Payroll investment plans, neither
Purchase EasiVest nor Direct
You may enroll on $50 per month for Payroll Purchase ensures
the fund EasiVest; $50 per a profit or protects
application, or pay period for against loss in a falling
call us for the Direct Payroll market. Because you'll
correct form and Purchase. You may invest continually,
more details. start or stop your regardless of varying
Investing the same regular investment price levels, consider
amount on a monthly plan at any time, your financial ability to
basis allows you to with two weeks' keep buying through low
buy more shares notice to IFG. price levels. And
and fewer shares remember that you will
when prices are lose money if you redeem
high. This your shares when the
"dollar-cost market value of all your
averaging" may help shares is les than their
offset market cost.
fluctuations. Over
a period of time,
your average cost
per share may be
less than the
actual average
price per share.
- --------------------------------------------------------------------------------
By PAL Be sure to write down
Your "Personal $1,000. the confirmation number
Account Line" is provided by PAL. Payment
available for must be received within 3
subsequent business days, or the
purchases and transaction may be
exchanges 24 hours cancelled. If a purchase
a day. Simply call is cancelled due to
1-800-424-8085. 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.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
By Exchange
Between this and $1,000 to open a See "Exchange
another of the new account; $50 Policy," page 16.
INVESCO funds. Call for written
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.
- --------------------------------------------------------------------------------
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 its shares to investors. Under this Plan, monthly payments may
be made by the Fund to IDI to permit IDI, at its discretion, to engage in
certain activities and provide certain services approved by the board of
directors of the Company in connection with the distribution of the Fund's
shares to investors. These activities and services may include the payment of
compensation (including incentive compensation and/or continuing compensation
based on the amount of customer assets maintained in the Fund) to securities
dealers and other financial institutions and organizations, which may include
IFG and IDI 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 with
the Fund.
In addition, other permissible activities and services include
advertising, the preparation, printing and distribution of sales literature,
printing and distribution of prospectuses to prospective investors, and such
other services and promotional activities for the Funds as may from time to time
be agreed upon by the Company and its board of directors, including public
relations efforts and marketing programs to communicate with investors and
prospective investors. These services and activities may be conducted by the
staff of IFG, IDI or their affiliates or by third parties.
Under the Plan, the Company's payments to IDI on behalf of the Fund are
limited to an amount computed at an annual rate of 0.25% of the Fund's New
Assets. IDI is not entitled to payment for overhead expenses under the Plan, but
may be paid for all or a portion of the compensation paid for salaries and other
employee benefits for the personnel of IFG or IDI whose primary responsibilities
involve marketing shares of the INVESCO funds, including the Fund. Payment
amounts by the Fund under the Plan, for any month, may be made to compensate IDI
for permissible activities engaged in and services provided by IDI during the
<PAGE>
rolling 12-month period in which that month falls, although the period is
expanded to 24 months for expenses incurred during the first 24 months of the
Fund's operations. Therefore, any obligations incurred by IDI in excess of the
limitations described above will not be paid by the Fund under the Plan, and
will be borne by IDI. In addition, IDI and its affiliates may from time to time
make additional payments from its revenues to securities dealers, financial
advisers and 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 the Plan's termination. Payments made by the
Fund may not be used to finance directly the distribution of shares of any other
Fund of the Company or other mutual fund advised by IFG or distributed by IDI.
However, payments received by IDI which are not used to finance the distribution
of shares of a Fund become part of IDI's revenues and may be used by IDI for
activities that promote distribution of any of the mutual funds advised by IFG.
Subject to review by the Funds' directors, 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.
IDI will bear any distribution- and service-related expenses in excess of the
amounts which are compensated pursuant to the Plan. The Plan also authorizes any
financing of distributions which may result from IDI's use of its own resources,
including profits from investment advisory fees received from a Fund, providing
that such fees are legitimate and not excessive. For more information, see "How
Shares Can Be Purchased - Distribution Plan" in the Statement of Additional
Information.
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
telephone 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.
<PAGE>
Retirement Plans and IRAs. Fund shares may be purchased for IRAs and many
types of tax-deferred retirement plans. IFG can supply you with information and
forms to establish or transfer your existing plan or account.
HOW TO SELL SHARES
The following chart shows several convenient ways to redeem your Fund
shares. Shares of the Fund may be redeemed at any time at the 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.
HOW TO SELL SHARES
- --------------------------------------------------------------------------------
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; IRAs.
$1,000 for a wire
to bank of record. 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- owners of the the certificates
3706. You may also account. Payment must be sent to
send your request will be mailed to IFG.
by overnight your address of
courier to 7800 E. record, or to a
Union Ave., Denver, designated bank.
CO 80237.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
By Exchange
Between this and $1,000 to open a See "Exchange
another of the new account; $50 Policy," page 16.
INVESCO funds. Call for written
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.
- --------------------------------------------------------------------------------
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 Any amount. All registered owners
Mail your request of the account must sign
to INVESCO Funds the request, with a
Group, Inc. signature guarantee from
P.O. Box 173706 an eligible guarantor
Denver, CO 80217- financial institution,
3706. 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 will take up to 15 days).
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.
<PAGE>
TAXES, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Taxes. The Fund intends to distribute to shareholders all of its net
investment income, net capital gains and net gains from foreign currency
transactions, if any. Distribution of all net investment income to shareholders
allows the Fund to maintain its tax status as a regulated investment company.
The Fund does not expect to pay any federal income or excise taxes because of
its tax status as a regulated investment company.
Shareholders must include all dividends and other distributions in taxable
income for federal, state and local income tax purposes, unless they are exempt
from income taxes. Dividends and other distributions are taxable whether they
are received in cash or automatically reinvested in shares of the Fund or
another fund in the INVESCO group.
Net realized capital gains of the Fund are classified as short-term and
long-term gains depending upon how long the Fund held the security that gave
rise to the gains. Short-term capital gains are included in income from
dividends and interest as ordinary income and are taxed at the taxpayer's
marginal tax rate. the Taxpayer Relief Act of 1997 (the "Tax Act"), enacted in
August 1997, changed the taxation of long-term capital gains by applying
different capital gains rates depending on the taxpayer's holding period and
marginal rate of federal income tax. Long-term gains realized on the sale of
securities held for more than one year but not for more than 18 months are
taxable at a rate of 28%. This category of long-term gains is often referred to
as "mid-term" gains but is technically termed "28% rate gains." Long-term gains
realized on the sale of securities held for more than 18 months are taxable at a
rate of 20%. At the end of each year, information regarding the tax status of
dividends and other distributions is provided to shareholders. Shareholders
should consult their tax adviser as to the effect of the Tax Act on
distributions of net capital gains by the Fund.
Shareholders may realize capital gains or losses when they sell their
shares at more or less than the price originally paid. Capital gains on shares
held for more than one year will be long-term capital gain, in which event it
will be subject to federal income tax at the rates indicated above.
The Fund may be subject to 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.
Individuals and certain other non-corporate shareholders may be subject to
backup withholding of 31% on dividends, capital gains and other distributions
and redemption proceeds. You can avoid backup withholding on your account by
ensuring that we have a correct, certified tax identification number, unless you
are subject to backup withholding for other reasons.
We encourage you to consult a tax adviser with respect to these matters.
For further information see "Dividends, Other Distributions And Taxes" in the
Statement of Additional Information.
Dividends and Other Distributions. The Fund earns ordinary or net
investment income in the form of interest and dividends on investments.
Dividends paid by the Fund will be based solely on the income earned by it. The
Fund's policy is to distribute substantially all of this income, less expenses,
to shareholders on an annual basis, at the discretion of the Company's board of
directors. Dividends are automatically reinvested in additional shares of the
Fund at the net asset value on the payable date unless otherwise requested.
<PAGE>
In addition, the Fund realizes capital gains and losses when it sells
securities or derivatives 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,
together with gains, if any, realized on foreign currency transactions, are
distributed to shareholders at least annually, usually in December. Capital gain
distributions are automatically reinvested in additional shares of the Fund at
the net asset value on the payable date unless otherwise requested.
Dividend and other distributions are paid to shareholders who hold shares
on the record date of the distribution, regardless of how long the shares have
been held by the shareholder. The Fund's share price will then drop by the
amount of the distribution on the ex-dividend or ex-distribution date. If a
shareholder purchases shares immediately prior to the distribution, the
shareholder will, in effect, have "bought" the distribuiton by paying the full
purchase price, a portion of which is then returned in the form of a taxable
distribution.
ADDITIONAL INFORMATION
Voting Rights. All shares of the Company have equal voting rights based on
one vote for each share owned and a corresponding fractional vote for each
fractional share owned. The Company is not generally required and does not
expect to hold regular annual meetings of shareholders. However, when requested
to do so in writing by the holders of 10% or more of the outstanding shares of
the Fund or as may be required by applicable law or the Company's Articles of
Incorporation, the board of directors will call special meetings of
shareholders. Directors may be removed by action of the holders of a majority of
the outstanding shares of the Company's funds. The Company will assist
shareholders in communicating with other shareholders as required by the
Investment Company Act of 1940.
Master/Feeder Option. As a matter of fundamental policy, the Company may,
in the future, seek to achieve the Fund's investment objective by investing all
of the Fund's assets in another investment company having substantially the same
fundamental investment objective, policies and limitations. It is expected that
any such investment company would be managed by IFG in substantially the same
manner as the Fund. If permitted by applicable law, any such investment may be
made in the sole discretion of the Company's board of directors without a vote
of the Fund's shareholders. However, shareholders will be given at least 30 days
prior notice of any such investment. Such an investment would be made only if
the board of directors determines it to be in the best interests of the Fund and
its shareholders based on potential cost savings, operational efficiencies or
other factors. No assurance can be given that costs would be materially reduced
if this option were implemented.
<PAGE>
INVESCO GROWTH & INCOME FUND A no-load
mutual fund seeking capital appreciation and
current income.
PROSPECTUS
June 30, 1998
INVESCO FUNDS
INVESCO Distributors, Inc.
Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
1-800-525-8085
PAL(R): 1-800-424-8085
http://www.invesco.com
In Denver, visit one of our
convenient Investor Centers:
Cherry Creek,
155-B Fillmore Street;
Denver Tech Center,
7800 East Union Avenue,
Lobby Level
In addition, all documents
filed by the Company with the
Securities and Exchange
Commission can be located
on a web site maintained
by the Commission at
http://www.sec.gov.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
^ June 30, 1998
INVESCO CAPITAL APPRECIATION FUNDS, INC.
^ INVESCO Dynamics Fund
^ INVESCO Growth & Income Fund
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 Capital Appreciation Funds, Inc. (The "Company") is a diversified,
no-load management investment company currently consisting of ^ two portfolios
of investments, the INVESCO Dynamics Fund (the " ^ Dynamics Fund")and the
INVESCO Growth & Income Fund ("Growth & Income Fund") (collectively, the
"Funds"). INVESCO Dynamics Fund seeks capital appreciation through aggressive
investment policies. The Growth & Income Fund seeks high total return through a
combination of capital appreciation and current income.
The ^ DYNAMICS 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 Dynamics Fund normally invests
primarily in common stocks but may invest in other kinds of securities when
determined appropriate by management. The Dynamics Fund should not be considered
by investors seeking current income.
The GROWTH AND INCOME FUND seeks to achieve its investment objectives of
providing its shareholders appreciation of capital and current income by
investing primarily in common stocks, preferred stocks and securities
convertible into common stocks of companies which offer growth of earnings and
the payment of current dividends. The Growth & Income Fund may also purchase
securities which do not pay current dividends but which offer prospects for
growth of capital and future income.
Additional funds may be offered in the future.
A Prospectus for the Dynamics Fund dated July 3, 1997^ and a Prospectus for
the Growth & Income Fund dated June 30, 1998, which provide the basic
information you should know before investing in the ^ Funds, may be obtained
without charge from INVESCO ^ Distributors, 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 ^ Prospectuses. It is intended to provide additional
information regarding the activities and operations of the ^ Funds, and should
be read in conjunction with the ^ Prospectuses.
Investment Adviser ^: INVESCO FUNDS GROUP, INC.
^ Distributor: INVESCO DISTRIBUTORS, INC.
<PAGE>
TABLE OF CONTENTS
Page
INVESTMENT POLICIES AND RESTRICTIONS..........................................27
THE FUNDS AND THEIR MANAGEMENT................................................35
HOW SHARES CAN BE PURCHASED...................................................44
HOW SHARES ARE VALUED.........................................................47
FUND PERFORMANCE..............................................................48
SERVICES PROVIDED BY THE ^ FUNDS..............................................50
TAX-DEFERRED RETIREMENT PLANS.................................................50
HOW TO REDEEM SHARES..........................................................50
DIVIDENDS, ^ OTHER DISTRIBUTIONS, AND TAXES...................................51
INVESTMENT PRACTICES..........................................................53
ADDITIONAL INFORMATION........................................................56
APPENDIX A....................................................................59
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
^As discussed in each Fund's Prospectus in the section entitled "Investment
Objective and Policies," the Funds may invest in a variety of securities and
employ a broad range of investment techniques in seeking to achieve their
respective investment objectives. Such securities and techniques include the
following:
Types of Equity Securities
As described in the Prospectuses, equity securities which may be purchased
by the Funds consist of common, preferred and convertible preferred stocks, and
securities having equity characteristics such as rights, warrants and
convertible debt securities. Common stocks and preferred stocks represent equity
ownership interests in a corporation and participate in the corporation's
earnings through dividends which may be declared by the corporation. Unlike
common stocks, preferred stocks are entitled to stated dividends payable from
the corporation's earnings, which in some cases may be "cumulative" if prior
stated dividends have not been paid. Dividends payable on preferred stock have
priority over distributions to holders of common stock, and preferred stocks
generally have preferences on the distribution of assets in the event of the
corporation's liquidation. Preferred stocks may be "participating," which means
that they may be entitled to dividends in excess of the stated dividend in
certain cases. The rights of common and preferred stocks are generally
subordinate to rights associated with a corporation's debt securities. Rights
and warrants are securities which entitle the holder to purchase the securities
of a company (generally, its common stock) at a specified price during a
specified time period. Because of this feature, the values of rights and
warrants are affected by factors similar to those which determine the prices of
common stocks and exhibit similar behavior. Rights and warrants may be purchased
directly or acquired in connection with a corporate reorganization or exchange
offer.
Convertible securities which may be purchased by the Funds include
convertible debt obligations and convertible preferred stock. A convertible
security entitles the holder to exchange it for a fixed number of shares of
common stock (or other equity security), usually at a fixed price within a
specified period of time. Until conversion, the holder receives the interest
paid on a convertible bond or the dividend preference of a preferred stock.
Convertible securities have an "investment value" which is the theoretical
value determined by the yield they provide in comparison with similar securities
without the conversion feature. Investment value changes are based upon
prevailing interest rates and other factors. They also have a "conversion value"
which is their worth in market value if the securities were exchanged for their
underlying equity securities. Conversion value fluctuates directly with the
price of the underlying security. If conversion value is substantially below
investment value, the price of the convertible security is governed principally
by its investment value. If the conversion value is near or above investment
value, the price of the convertible security generally will rise above
investment value and may represent a premium over conversion value due to the
combination of the convertible security's right to interest (or dividend
preference) and the possibility of capital appreciation from the conversion
feature. A convertible security's price, when price is influenced primarily by
its conversion value, generally will yield less than a senior non-convertible
security of comparable investment value. Convertible securities may be purchased
at varying price levels above their investment values or conversion values.
However, there is no assurance that any premium above investment value or
conversion value will be recovered because prices change and, as a result, the
ability to achieve capital appreciation through conversion may be eliminated.
<PAGE>
Debt Securities. As discussed in the sections of the Fund's Prospectus
entitled "Investment Objective And Strategy" and "Investment Policies And
Risks," the debt securities in which the Fund invests generally are subject to
two kinds of risk: credit risk and market risk. Credit risk relates to the
ability of the issuer to meet interest or principal payments or both as they
come due. The ratings given a debt security by Moody's Investors Service, Inc.
("Moody's") and/or Standard & Poor's, a division of The McGraw-Hill Companies,
Inc. ("S&P") provide a generally useful guide as to such credit risk. Market
risk relates to the fact that the market values of debt securities in which the
Fund invests generally will be affected by changes in the level of interest
rates. An increase in interest rates will tend to reduce the market values of
such debt securities, whereas a decline in interest rates will tend to increase
their values.
Restricted/144A Securities. As discussed in the section of the Fund's
Prospectus entitled "Investment Policies And Risks," the Fund may invest in
restricted securities that can be resold to institutional investors pursuant to
Rule 144A under the Securities Act of 1933^ ("Rule 144A Securities"). ^ 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.
Rule 144A under the 1933 Act establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. 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 ^ a Fund^ could affect adversely ^ the
marketability of such security, and the Fund might be unable to dispose of such
security promptly or at reasonable prices.
Repurchase Agreements. As discussed in the ^ section of each Fund's
Prospectus entitled "Investment Policies And Risks," each Fund may invest in
repurchase agreements with respect to debt instruments eligible for investment
by ^ a Fund with member banks of the Federal Reserve System, registered
broker-dealers^ and registered U.S. government securities dealers^. A repurchase
agreement may be considered a loan collateralized by securities. The resale
price reflects an agreed upon interest rate effective for the period the
instrument is held by ^ a Fund and is unrelated to the interest rate on the
underlying instrument. In these transactions, the securities acquired by ^ a
Fund (including accrued interest earned thereon) must have a total value ^ at
least equal to the value of the repurchase agreement^ and are held as collateral
by the ^ Funds' custodian bank until the repurchase agreement is completed.
^ The use of repurchase agreements involves certain risks. For example, if
the other party to the agreement defaults on its obligation to repurchase the
underlying security at a time when the value of the security has declined, the
Fund may incur a loss upon disposition of the security. If the other party to
the agreement becomes insolvent and subject to liquidation or reorganization
under the Bankruptcy Code or other laws, the Fund may experience costs and
delays in realizing on the collateral. Finally, it is possible that the Fund may
not be able to substantiate its interest in the underlying security and may be
deemed an unsecured creditor of the other party to the agreement. While the
Fund's management acknowledges these risks, it is expected that the risks can be
minimized through careful monitoring procedures.
<PAGE>
Lending of Securities. As described in the section of each Fund's
Prospectus entitled "Investment Policies And Risks," each Fund may lend its
portfolio securities to qualified brokers, dealers, banks or other financial
institutions, provided that such loans are callable at any time by the Fund and
are at all times secured by collateral consisting of cash or securities issued
or guaranteed by the United States government or its agencies, or any
combination thereof, equal to at least the market value, determined daily, of
the loaned securities. The advantage of such loans is that the Fund continues to
have the benefits (and risks) of ownership of the loaned securities, while at
the same time receiving income from the borrower of the securities. Loans will
be made only to firms deemed by the adviser or sub-adviser (under procedures
established by the Company's board of directors) to be creditworthy and when the
amount of interest income to be received justifies the inherent risks. A loan
may be terminated by the borrower on one business day's notice, or by the Fund
at any time. If at any time the borrower fails to maintain the required amount
of collateral (at least 100% of the market value of the borrowed securities,
plus accrued interest and dividends), the Fund will require the deposit of
additional collateral not later than the business day following the day on which
a collateral deficiency occurs or the collateral appears inadequate. If the
deficiency is not remedied by the end of that period, the Fund will use the
collateral to replace the securities while holding the borrower liable for any
excess of replacement cost over collateral. Upon termination of the loan, the
borrower is required to return the securities to the Fund. Any gain or loss
during the loan period would inure to the Fund.
Futures and Options on Futures. As described in the Fund's Prospectus, the
Fund may enter into futures contracts, and purchase and sell ("write") options
to buy or sell futures contracts. The Fund will comply with and adhere to all
limitations in the manner and extent to which it effects transactions in futures
and options on such futures currently imposed by the rules and policy guidelines
of the Commodity Futures Trading Commission as conditions for exemption of a
mutual fund, or the investment advisers thereto, from registration as a
commodity pool operator. The Fund will not, as to any positions, whether long,
short or a combination thereof, enter into futures and options thereon for which
the aggregate initial margins and premiums exceed 5% of the fair market value of
its assets after taking into account unrealized profits and losses on options it
has entered into. In the case of an option that is "in-the-money," as defined in
the Commodity Exchange Act (the "CEA"), the in-the-money amount may be excluded
in computing such 5%. (In general a call option on a future is "in-the-money" if
the value of the future exceeds the exercise ("strike") price of the call; a put
option on a future is "in-the-money" if the value of the future which is the
subject of the put is exceeded by the strike price of the put.) The Fund may use
futures and options thereon solely for bona fide hedging or for other
non-speculative purposes within the meaning and intent of the applicable
provisions of the CEA.
Unlike when the Fund purchases or sells a security, no price is paid or
received by the Fund upon the purchase or sale of a futures contract. Instead,
the Fund will be required to deposit in its segregated asset account an amount
of cash or qualifying securities (currently U.S. Treasury bills), currently in a
minimum amount of $15,000. This is called "initial margin." Such initial margin
is in the nature of a performance bond or good faith deposit on the contract.
However, since losses on open contracts are required to be reflected in cash in
the form of variation margin payments, the Fund may be required to make
additional payments during the term of the contracts to its broker. Such
payments would be required, for example, where, during the term of an interest
rate futures contract purchased by the Fund, there was a general increase in
interest rates, thereby making the Fund's portfolio securities less valuable. In
all instances involving the purchase of financial futures contracts by the Fund,
an amount of cash together with such other securities as permitted by applicable
<PAGE>
regulatory authorities to be utilized for such purpose, at least equal to the
market value of the futures contracts, will be deposited in a segregated account
with the Fund's custodian to collateralize the position. At any time prior to
the expiration of a futures contract, the Fund may elect to close its position
by taking an opposite position which will operate to terminate the Fund's
position in the futures contract. For a more complete discussion of the risks
involved in futures and options on futures and other securities, refer to
Appendix B ("Description of Futures, Options and Forward Contracts").
Where futures are purchased to hedge against a possible increase in the
price of a security before the Fund is able in an orderly fashion to invest in
the security, it is possible that the market may decline instead. If the Fund,
as a result, concluded not to make the planned investment at that time because
of concern as to possible further market decline or for other reasons, the Fund
would realize a loss on the futures contract that is not offset by a reduction
in the price of securities purchased.
In addition to the possibility that there may be an imperfect correlation
or no correlation at all between movements in the futures contracts and the
portion of the portfolio being hedged, the price of futures may not correlate
perfectly with movements in the prices due to certain market distortions. All
participants in the futures market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions which
could distort the normal relationship between underlying instruments and the
value of the futures contract. Moreover, the deposit requirements in the futures
market are less onerous than margin requirements in the securities market and
may therefore cause increased participation by speculators in the futures
market. Such increased participation may also cause temporary price distortions.
Due to the possibility of price distortion in the futures market and because of
the imperfect correlation between movements in the underlying instrument and
movements in the prices of futures contracts, the value of futures contracts as
a hedging device may be reduced.
In addition, if the Fund has insufficient available cash, it may at times
have to sell securities to meet variation margin requirements. Such sales may
have to be effected at a time when it may be disadvantageous to do so.
Options on Futures Contracts. The Fund may buy and write options on
futures contracts for hedging purposes; options are also included in the types
of instruments sometimes known as derivatives. The purchase of a call option on
a futures contract is similar in some respects to the purchase of a call option
on an individual security. Depending on the pricing of the option compared to
either the price of the futures contract upon which it is based or the price of
the underlying instrument, ownership of the option may or may not be less risky
than ownership of the futures contract or the underlying instrument. As with the
purchase of futures contracts, when the Fund is not fully invested it may buy a
call option on a futures contract to hedge against a market advance.
The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the security or foreign currency which is
deliverable under, or of the index comprising, the futures contract. If the
futures price at the expiration of the option is below the exercise price, the
Fund will retain the full amount of the option premium which provides a partial
hedge against any decline that may have occurred in the Fund's portfolio
holdings. The writing of a put option on a futures contract constitutes a
partial hedge against increasing prices of the security or foreign currency
which is deliverable under, or of the index comprising, the futures contract. If
the futures price at expiration of the option is higher than the exercise price,
the Fund will retain the full amount of the option premium which provides a
<PAGE>
partial hedge against any increase in the price of securities which the Fund is
considering buying. If a call or put option which the Fund has written is
exercised, the Fund will incur a loss which will be reduced by the amount of the
premium it received. Depending on the degree of correlation between changes in
the value of its portfolio securities and changes in the value of the futures
positions, the Fund's losses from existing options on futures may to some extent
be reduced or increased by changes in the value of portfolio securities.
The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities. For
example, the Fund may buy a put option on a futures contract to hedge the Fund's
portfolio against the risk of falling prices.
The amount of risk the Fund assumes when it buys an option on a futures
contract is the premium paid for the option plus related transaction costs. In
addition to the correlation risks discussed above, the purchase of an option
also entails the risk that changes in the value of the underlying futures
contract will not be reflected fully in the value of the options bought.
Forward Foreign Currency Contracts
The Fund may enter into forward currency contracts, which are included in
the types of instruments sometimes known as derivatives, to purchase or sell
foreign currencies (i.e., non-U.S. currencies) as a hedge against possible
variations in foreign exchange rates. A forward foreign currency contract is an
agreement between the contracting parties to exchange an amount of currency at
some future time at an agreed upon rate. The rate can be higher or lower than
the spot rate between the currencies that are the subject of the contract. A
forward contract generally has no deposit requirement, and such transactions do
not involve commissions. By entering into a forward contract for the purchase or
sale of the amount of foreign currency invested in a foreign security
transaction, the Fund can hedge against possible variations in the value of the
dollar versus the subject currency either between the date the foreign security
is purchased or sold and the date on which payment is made or received or during
the time the Fund holds the foreign security. Hedging against a decline in the
value of a currency in the foregoing manner does not eliminate fluctuations in
the prices of portfolio securities or prevent losses if the prices of such
securities decline. Furthermore, such hedging transactions preclude the
opportunity for gain if the value of the hedged currency should rise. The Fund
will not speculate in forward currency contracts. Although the Fund has not
adopted any limitations on its ability to use forward contracts as a hedge
against fluctuations in foreign exchange rates, the Fund does not attempt to
hedge all of its non-U.S. portfolio positions and will enter into such
transactions only to the extent, if any, deemed appropriate by its investment
adviser or sub-adviser. The Fund will not enter into forward contracts for a
term of more than one year.
Investment Restrictions. As described in the section of the Prospectus
entitled "Investment Policies And Risks," ^ each 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 ^ each Fund. For purposes of the
following limitations, all percentage limitations apply immediately after a
purchase or initial investment. Any subsequent change in a particular percentage
resulting from fluctuations in value does not require elimination of any
security from ^ a Fund.
<PAGE>
Under these restrictions, the Dynamics 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;
(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.
<PAGE>
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).
In applying restriction (12) above, the Fund uses ^ a modified S&P
industry code classification schema which uses various sources to classify.
Under these restrictions, the Growth & Income Fund will not:
(1) issue preference shares or create any funded debt;
(2) sell short or buy on margin, except for the Fund's purchase or sale
of options or futures, or writing, purchasing or selling puts or
calls options;
(3)* borrow money in excess of 5% of the value of its total assets and
then only from banks, and when borrowing, it is a temporary measure
for emergency purposes;
(4) invest in the securities of any other investment company except for
a purchase or acquisition in accordance with a plan of
reorganization, merger or consolidation;
(5) with respect to 75% of its total assets, purchase securities if the
purchase would cause the Fund, at the time, to have more than 5% of
the value of its total assets invested in the securities of any one
company or to own more than 10% of the voting securities of any one
company (except obligations issued or guaranteed by the U.S.
Government);
(6) make loans to any person, except through the purchase of debt
securities in accordance with the Fund's investment policies, or the
lending of portfolio securities to broker-dealers or other
institutional investors, or the entering into repurchase agreements
with member banks of the Federal Reserve System, registered
broker-dealers and registered government securities dealers. The
aggregate value of all portfolio securities loaned may not exceed
33-1/3% of the Fund's total assets (taken at current value). No more
than 10% of the Fund's total assets may be invested in repurchase
agreements maturing in more than seven days;
<PAGE>
(7) buy or sell commodities, commodity contracts or real estate
(however, the Fund may purchase securities of companies investing in
real estate). This restriction shall not prevent the Fund from
purchasing or selling options on individual securities, security
indexes, and currencies, or financial futures or options on
financial futures, or undertaking forward foreign currency
contracts.
(8) invest in any company for the purpose of exercising
control or management;
(9) buy other than readily marketable securities;
(10) engage in the underwriting of any securities;
(11) purchase securities of any company in which any officer or director
of the Fund or its investment adviser owns more than 1/2 of 1% of
the outstanding securities, or in which all of the officers and
directors of the Fund and its investment adviser, as a group, own
more than 5% of such securities;
(12) invest more than 25% of the value of the Fund's total assets in one
particular industry.
*The Fund has no intention of borrowing money for other than temporary cash flow
purposes in the foreseeable future unless unexpected developments make borrowing
of money by the Fund under this fundamental investment restriction desirable in
order to allow the Fund to meet its obligation (e.g., processing redemptions in
a timely manner).
With respect to investment restriction (9) above, the board of directors
has delegated to the Funds' investment adviser the authority to determine
whether a liquid market exists for securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933, or any successor to such rule, and
whether or not such securities are subject to restriction (9) above. Under
guidelines established by the board of directors, the adviser will consider the
following factors, among others, in making this determination: (1) the
unregistered nature of 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).
In applying restriction (12) above, the Fund uses a modified S&P industry
code classification schema which uses various sources to classify.
The following non-fundamental investment restrictions have been adopted by
the Fund. These investment restrictions may be changed by the directors at their
discretion, without shareholder approval:
(1) The Fund will not enter into any futures contracts, options on
futures, puts and calls if immediately thereafter the aggregate
margin deposits on all outstanding derivatives positions held by the
Fund and premiums paid on outstanding positions, after taking into
account unrealized profits and losses, would exceed 5% of the market
value of the total assets of the Fund.
<PAGE>
(2) The Fund will not enter into any derivatives positions if the
aggregate net amount of the Fund's commitments under outstanding
derivatives positions of the Fund would exceed the market value of
the total assets of the Fund.
THE FUNDS AND THEIR MANAGEMENT
The Company. The Company was incorporated as INVESCO Dynamics Fund, Inc. on
April 2, 1993, under the laws of Maryland. On June 30, 1993, the Company 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 Company for periods prior to July 1, 1993, relates to FDF.
The name of the Company was changed to INVESCO Capital Appreciation Funds, Inc.
^ on July 3, 1997.
The Investment Adviser. INVESCO Funds Group, Inc., a Delaware corporation
("IFG"), is employed as the Company's investment adviser. IFG was established in
1932 and also serves as an investment adviser to INVESCO 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 ^ Investment Sub-Adviser. Prior to February 3, 1998, Institutional
Trust Company ("ITC"), formerly INVESCO Trust Company^, provided sub-advisory
services to the Dynamics Fund. Effective February 3, 1998, ITC no longer
provides sub-advisory service to this Fund and IFG provides such day-to-day
portfolio management services as the investment adviser to the Dynamics Fund.
This change in no way changes the basis upon which investment advice is provided
to the Dynamics Fund, the cost of those services to this Fund or the persons
actually performing the investment advisory and other services previously
provided by ITC.
^ The Distributor. Effective September 30, 1997 (with respect to the
Growth & Income Fund, upon inception), INVESCO Distributors, Inc. ("IDI") became
the Funds' distributor. IDI, established in 1997, is a registered broker-dealer
that acts as distributor for all retail mutual funds advised by IFG. Prior to
September 30, 1997, IFG served as the Dynamics Fund's distributor.
IFG and IDI are indirect wholly owned ^ subsidiaries of AMVESCAP PLC, a
publicly-traded holding company that, through its subsidiaries, engages in the
business of investment management on an international basis. INVESCO PLC changed
its name to AMVESCO PLC on March 3, 1997 and to AMVESCAP PLC on May 8, 1997, as
part of a merger between a direct subsidiary of INVESCO PLC and A I M Management
Group Inc. that created one of the largest independent investment management
businesses in the world with approximately ^ $192.2 billion in assets under
management. IFG was established in 1932 and as of ^December 31, 1997, managed
^14 mutual funds, consisting of ^47 separate portfolios, on behalf of over
^848,000 shareholders.
AMVESCAP PLC's North American subsidiaries include the following:
--ITC of Denver, Colorado, provides retirement account custodian and/or
trust services for individual retirement accounts (IRAs) and other retirement
plan accounts. This includes services such as recordkeeping, tax reporting and
compliance. ITC acts as trustee or custodian to these plans. ITC accepts
contributions and provides, through IFG, complete transfer agency functions:
correspondence, subaccounting, telephone communications and processing of
distributions.
<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. 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 AMVESCAP PLC's clients
worldwide. Clients include corporate pension plans and public pension funds as
well as endowment and foundation accounts.
--A I M Advisors, Inc. of Houston, Texas provides investment advisory and
administrative services for retail and institutional mutual funds.
--A I M Capital Management, Inc. of Houston, Texas provides investment
advisory services to individuals, corporations, pension plans and other private
investment advisory accounts and also serves as a sub-adviser to certain retail
and institutional mutual funds, one Canadian mutual fund and one portfolio of an
open-end registered investment company that is offered to separate accounts of
variable insurance companies.
--A I M Distributors, Inc. and Fund Management Company of Houston, Texas
are registered broker-dealers that act as the principal underwriters for retail
and institutional mutual funds.
The corporate headquarters of AMVESCAP PLC are located at 11 Devonshire
Square, London, EC2M4YR, England.
As indicated in the ^ Funds' Prospectuses, IFG 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 IFG^ and ^ its North American affiliates. The policy
requires officers, inside directors, investment and other personnel of IFG^ 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 ^ Funds.
In addition to the pre-clearance requirement described above, the policy
subjects officers, inside directors, investment and other personnel of IFG^ 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 ^ IFG.
<PAGE>
Investment Advisory Agreement. IFG serves as investment adviser pursuant to
an investment advisory agreement dated February 28, 1997 (the "Agreement") with
the Company which was approved by the board of directors on November 6, 1996, by
a vote cast in person by a majority of the directors of the Company, including a
majority of the directors who are not "interested persons" of the Company or IFG
at a meeting called for such purpose. Shareholders of the Fund approved the
Agreement on January 31, 1997 for an initial term expiring February 28, 1999.
With respect to the Growth & Income Fund, the Agreement was approved by IFG on
June 30, 1998, for an initial term expiring June 30, 2000. Thereafter, the
Agreement may be continued from year to year as long as each such continuance is
specifically approved at least annually by the board of directors of the
Company, or by a vote of the holders of a majority, as defined in the 1940 Act,
of the outstanding shares of the ^ Funds. Any such continuance also must be
approved by a majority of the Company's directors who are not parties to the
Agreement or interested persons (as defined in the 1940 Act) of any such party,
cast in person at a meeting called for the purpose of voting on such
continuance. The Agreement may be terminated at any time without penalty by
either party upon sixty (60) days' written notice and terminates automatically
in the event of an assignment to the extent required by the 1940 Act and the
rules thereunder.
The Agreement provides that IFG shall manage the investment ^ portfolios
of the ^ Funds in conformity with ^ each Fund's investment policies (either
directly or by delegation to a sub-adviser which may be a company affiliated
with IFG). Further, IFG shall perform all administrative, internal accounting
(including computation of net asset value), clerical, statistical, secretarial
and all other services necessary or incidental to the administration of the
affairs of the ^ Funds excluding, however, those services that are the subject
of separate agreement between the Company and IFG or any affiliate thereof,
including the distribution and sale of ^ each Fund's shares and provision of
transfer agency, dividend disbursing agency, and registrar services, and
services furnished under an Administrative Services Agreement with IFG discussed
below. Services provided under the Agreement include, but are not limited to:
supplying the Company with officers, clerical staff and other employees, if any,
who are necessary in connection with the ^ Funds' operations; furnishing office
space, facilities, equipment, and supplies; providing personnel and facilities
required to respond to inquiries related to shareholder accounts; conducting
periodic compliance reviews of the ^ Funds' operations; preparation and review
of required documents, reports and filings by IFG's in-house legal and
accounting staff (including the prospectus, statement of additional information,
proxy statements, shareholder reports, tax returns, reports to the SEC, and
other corporate documents of the ^ Funds), except insofar as the assistance of
independent accountants or attorneys is necessary or desirable; supplying basic
telephone service and other utilities; and preparing and maintaining certain of
the books and records required to be prepared and maintained by the ^ Funds
under the 1940 Act. Expenses not assumed by IFG are borne by the ^ Funds.
As full compensation for its advisory services to the Company, IFG
receives a monthly fee. ^ With respect to the Dynamics Fund, 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.
With respect to the Growth & Income Fund, the fee is calculated at the annual
rate of [0.75%] of the Funds' average net assets. ^
Administrative Services Agreement. IFG, 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 February 28, 1997 (the "Administrative Agreement"). The
Administrative Agreement was approved on November 6, 1996, by a vote cast in
person by all of the directors of the Company, including all of the directors
<PAGE>
who are not "interested persons" of the Company or ^ IFG at a meeting called for
such purpose. The Administrative Agreement ^ was for an initial term expiring
February 28, 1998 and has been extended by action of the board of directors
until May 15, ^ 1999. The Administrative Agreement may be continued from year to
year as long as each such continuance is specifically approved by the board of
directors of the Company, including a majority of the directors who are not
parties to the Administrative Agreement or interested persons (as defined in the
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 ^ IFG on sixty (60)
days' written notice, or by the ^ Company upon thirty (30) days' written notice,
and terminates automatically in the event of an assignment unless the Company's
board of directors approves such assignment.
The Administrative Agreement provides that IFG shall provide the following
services to the ^ Funds: (A) such sub-accounting and recordkeeping services and
functions as are reasonably necessary for the operation of the ^ Funds; and (B)
such sub-accounting, recordkeeping, and administrative services and functions,
which may be provided by affiliates of IFG, as are reasonably necessary for the
operation of Fund shareholder accounts maintained by certain retirement plans
and employee benefit plans for the benefit of participants in such plans.
As full compensation for services provided under the Administrative
Agreement, ^ each Fund pays a monthly fee to ^ IFG consisting of a base fee of
$10,000 per year, plus an additional incremental fee computed daily and paid
monthly at an annual rate of 0.015% per year of the average net assets of the
Fund. During the fiscal years ended April 30, 1997, 1996 and 1995, the Dynamics
Fund paid ^ IFG administrative services fees in the amount of $130,696, $97,509
and $60,466, respectively. The Growth & Income Fund did not pay IFG
Administrative Services Fees as of April 30, 1997 as the Fund did not commence
operations until June 30, 1998.
Transfer Agency Agreement. IFG also performs transfer agent, dividend
disbursing agent, and registrar services for the Fund pursuant to a Transfer
Agency Agreement dated February 28, 1997 which was approved by the board of
directors of the Company, including a majority of the Company's directors who
are not parties to the Transfer Agency Agreement or "interested persons" of any
such party, on November 6, 1996, for an initial term expiring February 28, 1998
and has been extended by action of the board of directors until May 15, ^ 1999.
Thereafter the Transfer Agency Agreement may be continued from year to year as
long as such continuance is specifically approved at least annually by the board
of directors of the Company, or by a vote of the holders of a majority of the
outstanding shares of the ^ Funds. Any such continuance also must be approved by
a majority of the Company's directors who are not parties to the Transfer Agency
Agreement or interested persons (as defined by the 1940 Act) of any such party,
cast in person at a meeting called for the purpose of voting on such
continuance. The Transfer Agency Agreement may be terminated at any time without
penalty by either party upon sixty (60) days' written notice and terminates
automatically in the event of assignment.
The Transfer Agency Agreement provides that the ^ Funds shall pay to IFG
an annual fee of $20.00 per shareholder account, or, where applicable, per
participant in an omnibus account per year. This fee is paid monthly at 1/12 of
the annual fee and is based upon the actual number of shareholder accounts and
omnibus account participants in existence at any time during each month. For the
fiscal years ended April 30, 1997, 1996 and 1995, the Dynamics Fund paid ^ IFG
transfer agency fees of $1,964,970, $1,108,321 and $838,096 (prior to the
voluntary absorption of certain Fund expenses by INVESCO), respectively. The
Growth & Income Fund did not pay IFG transfer agency fees as of April 30, 1997
as the Fund did not commence operations until June 30, 1998.
<PAGE>
Officers and Directors of the Company. The overall direction and
supervision of the Company is the responsibility of the board of directors,
which has the primary duty of seeing that the ^ general investment policies and
programs of each of the ^ Funds are carried out and that the ^ Funds are
properly administered. The officers of the Company, all of whom are officers and
employees of, and paid by IFG, are responsible for the day-to-day administration
of the Company and each of the ^ Funds. The investment adviser for ^ each Fund
has the primary responsibility for making investment decisions on behalf of ^
that Fund. These investment decisions are reviewed by the investment committee
of IFG.
All of the officers and directors of the Company hold comparable positions
with INVESCO 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. All of the directors of the Company also serve
as trustees of INVESCO Value Trust. In addition, all of the directors of the
Company, with the exception of Dan Hesser, ^ are trustees of INVESCO Treasurer's
Series Trust. All of the officers of the Company also hold comparable positions
with INVESCO Value Trust. Set forth below is information with respect to each of
the Company's officers and directors. Unless otherwise indicated, the address of
the directors and officers is Post Office Box 173706, Denver, Colorado
80217-3706. Their affiliations represent their principal occupations during at
least the past five years.
CHARLES W. BRADY,*+ Chairman of the Board. Chief Executive Officer and
Director of AMVESCAP PLC, London, England, and of various subsidiaries thereof;
Chairman of the Board of INVESCO Treasurer's Series Trust. Address: 1315
Peachtree Street, NE, Atlanta, Georgia. Born: May 11, 1935.
FRED A. DEERING,+# Vice Chairman of the Board. Vice Chairman of INVESCO
Treasurer's Series Trust. Trustee of INVESCO Global Health Sciences Fund.
Formerly, Chairman of the Executive Committee and Chairman of the Board of
Security Life of Denver Insurance Company, Denver, Colorado; Director of ING
America Life Insurance ^ Company, Urbaine Life Insurance Company and Midwestern
United Life Insurance Company. Address: Security Life Center, 1290 Broadway,
Denver, Colorado. Born: January 12, 1928.
DAN J. HESSER,^+* President, CEO and Director. Chairman of the Board,
President, and Chief Executive Officer of INVESCO Funds Group, Inc. and INVESCO
Distributors, Inc.; President and Director of INVESCO Trust Company^. President
and Chief Operating Officer of INVESCO Global Health Sciences Fund. Born:
December 27, 1939.
VICTOR L. ANDREWS,** Director. Professor Emeritus, Chairman Emeritus and
Chairman of the CFO Roundtable of the Department of Finance ^ at Georgia State
University, Atlanta, Georgia; President, Andrews Financial Associates, Inc.
(consulting firm); since October 1984, Director of the Center for the Study of
Regulated Industry of Georgia State University; formerly, member of the
faculties of the Harvard Business School and the Sloan School of Management of
MIT. Dr. Andrews is also a director of ^ the Southeastern Thrift and Bank Fund,
Inc. and The Sheffield Funds, Inc. Address: 4625 Jettridge Drive, Atlanta,
Georgia. Born: June 23, 1930.
<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.
LAWRENCE H. BUDNER,# Director. Trust Consultant; prior to June 30, 1987,
Senior Vice President and Senior Trust Officer of InterFirst Bank, Dallas,
Texas. Address: 7608 Glen Albens Circle, Dallas, Texas. Born: July 25, 1930.
DANIEL D. CHABRIS,+# Director. Financial Consultant; Assistant Treasurer of
Colt Industries Inc., New York, New York, from 1966 to 1988. Address: 19
Kingsbridge Way, Madison, Connecticut. Born: August 1, 1923.
WENDY L. GRAMM, Ph.D.,** Director. Self-employed (since 1993); Professor of
Economics and Public Administration, University of Texas at Arlington. Formerly,
Chairman, Commodity Futures Trading Commission from 1988 to 1993, administrator
for Information and Regulatory Affairs at the Office of Management and Budget
from 1985 to 1988, Executive Director of the Presidential Task Force on
Regulatory Relief and Director of the Federal Trade Commission's Bureau of
Economics. Dr. Gramm is also a director of the Chicago Mercantile Exchange,
Enron Corporation, IBP, Inc., State Farm Insurance Company, State Farm Life
Insurance Company, Independent Women's Forum, International Republic Institute,
and the Republican Women's Federal Forum. Dr. Gramm is also a member of the
Board of Visitors, College of Business Administration, University of Iowa, and a
member of the Board of Visitors, Center for Study of Public Choice, George Mason
University. Address: 4201 Yuma Street, N.W., Washington, D.C. Born: January 10,
1945.
HUBERT L. HARRIS, JR.,* Director. Chairman (since 1996) and
President (January 1990 to May 1996) of INVESCO Services, Inc.;
Chief Executive Officer of INVESCO Individual Services Group. Member
of the Executive Committee of the Alumni Board of Trustees of
Georgia Institute of Technology. Address: 1315 Peachtree Street, NE,
Atlanta, Georgia. Born: July 15, 1943.
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.^ Director of Golden Poultry Co., Inc. Trustee of
INVESCO Global Health Sciences Fund and Gables Residential Trust.
Address: 7 Piedmont Center, Suite 100, Atlanta, ^ GA. Born: September 14, 1930.
LARRY SOLL, Ph.D.,** Director. Retired. Formerly, Chairman of the Board
(1987 to 1994), Chief Executive Officer (1982 to 1989 and 1993 to 1994) and
President (1982 to 1989) of Synergen Corp. Director of Synergen since its
incorporation in 1982. Director of ^ ISI Pharmaceuticals, Inc. Trustee of
INVESCO Global Health Sciences Fund. Address: 345 Poorman Road, Boulder,
Colorado. Born: April 26, 1942.
<PAGE>
GLEN A. PAYNE, Secretary. Senior Vice President (since 1995), General
Counsel and Secretary of INVESCO Funds Group, Inc. and INVESCO Trust Company
(since 1989) and INVESCO Distributors, Inc. (since 1997); Vice President (May
1989 to April 1995), Secretary and General Counsel of INVESCO Funds Group,
Inc.^; formerly, employee of a U.S. regulatory agency, Washington, D.C. (June
1973 through May 1989). Born: September 25, 1947.
RONALD L. GROOMS, Treasurer. Senior Vice President and Treasurer of INVESCO
Funds Group, Inc. and INVESCO Trust Company ^(since 1988). Senior Vice President
and Treasurer of INVESCO Distributors, Inc. (since 1997). Born: October 1, 1946.
WILLIAM J. GALVIN, JR., Assistant Secretary. Senior Vice President of
INVESCO Funds Group, Inc. (since 1995) and of INVESCO Distributors, Inc. (since
1997) and Trust Officer of INVESCO Trust Company since July 1995 and formerly
(August 1992 to July 1995) Vice President of INVESCO Funds Group, Inc. and trust
officer of INVESCO Trust Company. Formerly, Vice President of 440 Financial
Group from June 1990 to August 1992 ^ and Assistant Vice President of Putnam
Companies from November 1986 to June 1990. Born: August 21, 1956.
ALAN I. WATSON, Assistant Secretary. Vice President of INVESCO Funds Group,
Inc. (since 1984) and Trust Officer of INVESCO Trust Company. Born: September
14, 1941.
JUDY P. WIESE, Assistant Treasurer. Vice President of INVESCO Funds Group,
Inc. (since 1984) and of INVESCO Distributors, Inc. (since 1997) and Trust
Officer of INVESCO Trust Company. Born: February 3, 1948.
#Member of the audit committee of the ^ Company's board of
directors.
+Member of the executive committee of the ^ Company's board of directors.
On occasion, the executive committee acts upon the current and ordinary business
of the Company between meetings of the board of directors. Except for certain
powers which, under applicable law, may only be exercised by the full board of
directors, the executive committee may exercise all powers and authority of the
board of directors in the management of the business of the Company. All
decisions are subsequently submitted for ratification by the board of ^
Directors.
*These directors are "interested persons" of the Company as defined in the
^ Investment Company Act of 1940.
**Member of the management liaison committee of the ^ Company's
board of directors.
As of ^ April 1, 1998, officers and directors of the Company, as a group,
beneficially owned less than 1% of the ^ Company's outstanding shares and less
than 1% of each Fund's outstanding shares.
<PAGE>
Director Compensation
The following table sets forth, for the fiscal year ended April 30, 1997:
the compensation paid by the Company to its eight independent directors for
services rendered in their capacities as directors of the Company; the benefits
accrued as Company expenses with respect to the Defined Benefit Deferred
Compensation Plan discussed below; and the estimated annual benefits to be
received by these directors upon retirement as a result of their service to the
Company. In addition, the table sets forth the total compensation paid by all of
the mutual funds distributed by INVESCO Funds Group, Inc. (including the
Company), INVESCO Advisor Funds, Inc., INVESCO Treasurer's Series Trust, and
INVESCO Global Health Sciences Fund (collectively, the "INVESCO Complex") to
these directors for services rendered in their capacities as directors or
trustees during the year ended December 31, 1996. As of December 31, 1996, there
were 49 funds in the INVESCO Complex. Dr. Soll became an independent director of
the Company effective May 15, 1997, and is not included in the following chart.
Dr. Gramm became an independent director of the Company effective July 29, 1997,
and is not included in the following chart.
Total
Compensa-
Benefits Estimated tion From
Aggregate Accrued Annual INVESCO
Name of Compensa- As Part Benefits Complex
Person, tion From of Company Upon Re- Paid To
Position Company(1) Expenses(2) tirement(3) Directors(1)
Fred ^ A. Deering, $ 3,407 $ 1,634 $1,591 $ 98,850
Vice Chairman of
the Board
Victor L. Andrews 3,089 1,544 1,841 84,350
Bob R. Baker 3,245 1,378 2,468 84,850
Lawrence H. Budner 2,920 1,544 1,841 80,350
Daniel D. Chabris 3,245 1,762 1,309 84,850
A. D. Frazier, Jr.(4) 1,841 0 0 81,500
Kenneth T. King 2,413 1,696 1,443 71,350
John W. McIntyre 2,920 0 0 90,350
------- ------ ----- -------
Total $23,080 $9,558 10,493 $676,450
% of Net Assets 0.0030%6 0.0013%5 0.0044%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 Company's share of the estimated
annual benefits payable by the INVESCO Complex (excluding INVESCO
Global Health Sciences Fund, which does not participate in any retirement
plan) upon the directors' retirement, calculated using the current method
of allocating director compensation among the funds in the INVESCO
Complex. These estimated benefits assume retirement at age 72 and that the
basic retainer payable to the directors will be adjusted periodically for
inflation, for increases in the number of funds in the INVESCO Complex, and
for other reasons during the period in which retirement benefits are accrued on
behalf of the respective directors. This results in lower estimated
benefits for directors who are closer to retirement and higher
estimated benefits for directors who are further from retirement. With
the exception of Messrs. Frazier and McIntyre, each of these directors has
served as a director/trustee of one or more of the funds in the INVESCO
Complex for the minimum five-year period required to be eligible to
participate in the Defined Benefit Deferred Compensation Plan.
(4)Effective February 28, 1997, Mr. Frazier resigned as a director of
the Company. Effective November 1, 1996, Mr. Frazier was employed by AMVESCAP
PLC, a company affiliated with INVESCO. Because it was possible that Mr.
Frazier would be employed with AMVESCAP PLC, ^ he was deemed to be an
"interested person" of the Company and of the other funds in the INVESCO
Complex effective May 1, 1996. Effective November 1, 1996, Mr. Frazier no
longer received any director's fees or other compensation from the Company
or other funds in the INVESCO Complex for his service as a director. Mr.
Frazier resigned as a director of the Company effective February 28, 1997.
(5)Totals as a percentage of the Company's net assets as of April 30,
1997.
(6)Total as a percentage of the net assets of the INVESCO Complex
as of December 31, 1996.
Messrs. Brady and Hesser, as "interested persons" of the Company, the Fund
and 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 Company or the other funds in the
INVESCO Complex for their service as directors.
The boards of directors/trustees of the mutual funds managed by IFG and
INVESCO Treasurer's Series Trust have adopted a Defined Benefit Deferred
Compensation Plan for the non-interested directors and trustees of the funds.
Under this plan, each director or trustee who is not an interested person of the
funds (as defined in the 1940 Act) and who has served for at least five years (a
"qualified director") is entitled to receive, upon retiring from the boards at
the retirement age of 72 (or the retirement age of 73 or 74, if the retirement
date is extended by the boards for one or two years, but less than three years)
continuation of payment for one year (the "first year retirement benefit") of
the annual basic retainer payable by the funds to the qualified director at the
time of his or her retirement (the "basic retainer"). Commencing with any such
director's second year of retirement, and commencing with the first year of
retirement of a director whose retirement has been extended by the board for
three years, a qualified director shall receive quarterly payments at an annual
rate equal to 40% of the basic retainer. These payments will continue for the
remainder of the qualified director's life or ten years, whichever is longer
(the "reduced retainer payments"). If a qualified director dies or becomes
disabled after age 72 and before age 74 while still a director of the funds, the
first year retirement benefit and the reduced retainer payments will be made to
him or her or to his or her beneficiary or estate. If a qualified director
becomes disabled or dies either prior to age 72 or during ^ his or 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 or her beneficiary or estate. The plan is
<PAGE>
administered by a committee of three directors who are also participants in the
plan and one director who is not a plan participant. The cost of the plan will
be allocated among the IFG and Treasurer's Series funds in a manner determined
to be fair and equitable by the committee. Although the Company 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 Company
has no stock options or other pension or retirement plans for management or
other personnel and pays no salary or compensation to any of its officers.
The Company has an audit committee that is comprised of ^ five of the
directors who are not interested persons of the Company. The committee meets
periodically with the Company's independent accountants and officers to review
accounting principles used by the Company, the adequacy of internal controls,
the responsibilities and fees of the independent accountants, and other matters.
The Company also has a management liaison committee which meets quarterly
with various management personnel of INVESCO in order (a) to facilitate better
understanding of management and operations of the Company, and (b) to review
legal and operational matters which have been assigned to the committee by the
board of directors, in furtherance of the board of directors' overall duty of
supervision.
HOW SHARES CAN BE PURCHASED
^ The shares of ^ each Fund ^ are sold on a continuous basis at the net
asset value per share of the Fund next calculated after receipt of a purchase
order in good form. The net asset value per share for each Fund is computed
separately for each Fund and is determined 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."
The Company has authorized one or more brokers to accept purchase orders
on the Funds' behalf. Such brokers are authorized to designate other
intermediaries to accept purchase orders on the Funds' behalf. The Funds will be
deemed to have received a purchase order when an authorized broker or, if
applicable, a broker's authorized designee, accepts the order. A purchase order
will be priced at a Fund's Net Asset Value next calculated after the order has
been accepted by an authorized broker or the broker's authorized designee.
IDI acts as the Funds' Distributor under a distribution agreement with the
^ Funds, under which it receives no compensation and bears all ^ expense,
including the costs of printing and distribution of prospectuses incident to
direct sales and distribution of Fund shares on a no-load basis.
Distribution Plan. As discussed under "How to Buy Shares -Distribution
Expenses" in the Prospectus, the Company has adopted a Plan and Agreement of
Distribution (the "Plan") pursuant to Rule 12b-1 under the 1940 Act, which was
implemented on November 1, 1990. The Plan provides that ^ each Fund may make
monthly payments to IFG of amounts computed at an annual rate no greater than
0.25% of the Fund's average net assets to permit IFG, at its discretion, to
engage in certain activities and provide services in connection with the
distribution of ^ each Fund's shares to investors. Payment ^ by a Fund under the
Plan, for any month, may be made to compensate IFG for permissible activities
engaged in and services provided by ^ IFG during the rolling 12-month period in
which that month falls, although the period is extended to 24 months for
obligations incurred during the first 24 months of a Fund's operations. For the
fiscal year ended April 30, 1997, the Dynamics Fund made payments to ^ IFG under
<PAGE>
the Plan in the amount of $2,012,429. In addition, as of April 30, 1997,
$153,027 of additional distribution accruals had been incurred by the Dynamics
Fund and will be paid during the fiscal year ended April 30, 1998. As noted in
the section of ^ each Fund's Prospectus entitled "How to Buy Shares-Distribution
Expenses," one type of expenditure is the payment of compensation to securities
companies and other financial institutions and organizations, which may include
IFG-affiliated companies, in order to obtain various distribution-related and/or
administrative services for the ^ Funds. Each Fund is authorized by the Plan to
use its assets to finance the payments made to obtain those services. Payments
will be made by IFG to broker-dealers who sell shares of the ^ Funds and may be
made to banks, savings and loan associations and other depository institutions.
Although the Glass-Steagall Act limits the ability of certain banks to act as
underwriters of mutual fund shares, the Company does not believe that these
limitations would affect the ability of such banks to enter into arrangements
with IFG, 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 ^ Funds possibly
could decrease to the extent that the banks would no longer invest customer
assets in ^ a particular Fund. Neither the Company nor its investment adviser
will give any preference to banks or other depository institutions which enter
into such arrangements when selecting investments to be made by ^ each Fund.
For the fiscal year ended April 30, 1997, allocation of 12b-1 amounts paid
by the Dynamics Fund for the following categories of expenses were:
advertising--$406,171; sales literature, printing, and postage--$260,850; direct
mail--$85,518; public relations/promotion--$28,948; compensation to securities
dealers and other organizations--$950,063; and marketing personnel--$280,879.
There were no allocations made with respect to the Growth & Income Fund as of
April 30, 1997, as the Fund did not commence operations until June 30, 1998.
The nature and scope of services which are provided by securities dealers
and other organizations may vary by dealer but include, among other things,
processing new stockholder account applications, preparing and transmitting to
the Company's Transfer Agent computer-processable tapes of all Fund transactions
by customers, serving as the primary source of information to customers in
answering questions concerning ^ each Fund, and assisting in other customer
transactions with ^ each Fund.
The Plan was approved on April 21, 1993, at a meeting called for such
purpose, by a majority of the directors of the Company, including a majority of
the directors who neither are "interested persons" of the Company nor have any
financial interest in the operation of the Plan ("12b-1 directors"). 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 May 15, ^ 1999. With respect to the Dynamics Fund,
the board of directors, on February 4, 1997, approved amending the Plan,
effective January 1, 1997, to convert the Plan to a compensation type Rule 12b-1
plan. This amendment of the Plan ^ did not result in increasing the amount of
the Fund's payments thereunder. With respect to the Growth & Income Fund, the
Plan has been approved by action of the board of directors of the Company for an
initial period expiring May 15, 1999.
The Plan provides that it shall continue in effect with respect to ^ each
Fund for so long as such continuance is approved at least annually by the vote
of the board of directors of the Company cast in person at a meeting called for
the purpose of voting on such continuance. The Plan can also be terminated at
any time with respect to ^ any Fund, without penalty, if a majority of the 12b-1
<PAGE>
directors, or shareholders of ^ such Fund, vote to terminate the Plan. The
Company may, in its absolute discretion, suspend, discontinue or limit the
offering of its shares 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 ^ Funds, the investment climate
for ^ any particular Fund, general market conditions, and the volume of sales
and redemptions of a 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 ^ a Fund's shares; however, the Company is not contractually
obligated to continue the Plan for any particular period of time. Suspension of
the offering of ^ a Fund's shares would not, of course, affect a shareholder's
ability to redeem his or her shares. So long as the Plan is in effect, the
selection and nomination of persons to serve as ^ 12b-1 directors of the Company
shall be committed to the ^ 12b-1 directors then in office at the time of such
selection or nomination. The Plan may not be amended to increase materially the
amount of ^ a Fund's payments thereunder without approval of the shareholders of
^ such Fund, and all material amendments to the Plan must be approved by the
board of directors of the Company, including a majority of the 12b-1 directors.
Under the agreement implementing the Plan, IFG or the ^ Funds, the latter by
vote of a majority of the 12b-1 directors^ or of the holders of a majority of ^
any 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 ^ any Fund under the Plan in the event of its termination as to
that Fund.
To the extent that the Plan constitutes a plan of distribution adopted
pursuant to Rule 12b-1 under the 1940 Act, it shall remain in effect as such, so
as to authorize the use of ^ each Fund's assets in the amounts and for the
purposes set forth therein, notwithstanding the occurrence of an assignment, as
defined by the 1940 Act, and rules thereunder. To the extent it constitutes an
agreement pursuant to a plan, ^ each Fund's obligation to make payments to IFG
shall terminate automatically, in the event of such "assignment," in which event
the ^ Funds may continue to make payments, pursuant to the Plan, to IFG or
another organization only upon the approval of new arrangements, which may or
may not be with IFG, 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 ^ each Fund are provided to, and reviewed by, the directors on
a quarterly basis. On an annual basis, the directors consider the continued
appropriateness of the Plan 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 Company who have a direct or indirect
financial interest in the operation of the Plan are the officers and directors
of the Company listed herein under the section entitled "The ^ Funds And ^ Their
Management-Officers and Directors of the Company," who are also officers either
of IFG or companies affiliated with IFG. The benefits which the Company believes
will be reasonably likely to flow to the ^ Funds and ^ their shareholders under
the Plan include the following:
<PAGE>
(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 ^ Funds
in amounts and at times that are disadvantageous for investment
purposes;
(3) The positive effect which increased Fund assets will have on ^ its
revenues could allow IFG:
(a) To have greater resources to make the financial commitments
necessary to improve the quality and level of ^ each Fund's
shareholder services (in both systems and personnel),
(b) To increase the number and type of mutual funds available to
investors from IFG (and support them in their infancy), and
thereby expand the investment choices available to all
shareholders, and
(c) To acquire and retain talented employees who desire
to be associated with a growing organization; and
(4) Increased Fund assets may result in reducing each investor's share
of certain expenses through economies of scale (e.g. exceeding
established breakpoints in the advisory fee schedule and allocating
fixed expenses over a larger asset base), thereby partially
offsetting the costs of the plan.
HOW SHARES ARE VALUED
As described in the section of ^ each Fund's Prospectus entitled "Fund
Price and Performance," the net asset value of shares of ^ each Fund is computed
once each day that the New York Stock Exchange is open as of the close of
regular trading on that Exchange (generally 4:00 p.m., New York time) and
applies to purchase and redemption orders received prior to that time. Net asset
value per share is also computed on any other day on which there is a sufficient
degree of trading in the securities held by ^ a Fund that the current net asset
value per share might be materially affected by changes in the value of the
securities held, but only if on such day ^ such Fund receives a request to
purchase or redeem shares. Net asset value per share is not calculated on days
the New York Stock Exchange is closed, such as federal holidays including New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving, and Christmas.
The net asset value per share of ^ each Fund is calculated by dividing the
value of all securities held by ^ a 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 ^ that
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
<PAGE>
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 Company's 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 Company's board of
directors reviews the methods used by such service to assure itself that
securities will be valued at their fair values. The ^ Company's board of
directors also periodically monitors the methods used by such pricing services.
Debt securities with remaining maturities of 60 days or less at the time of
purchase normally are valued at amortized cost.
The ^ value of the securities held by the ^ Funds 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. Because 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 ^
a Fund's net asset value. However, in the event that the closing price of a
foreign security is not available in time to calculate ^ a Fund's net asset
value on a particular day, the Company'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 ^ Funds' Prospectuses entitled "Fund
Price and Performance," the Company advertises the total return performance of
the ^ Funds. Average annual total return performance for the Dynamics Fund for
the one-, five-, and ten-year periods ended April 30, 1997, was (2.34%), 15.79%
and 12.41%, 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)exponent 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 ^
Funds' performance for a given period and other types of investment vehicles,
including certificates of deposit, may be provided to prospective investors and
shareholders.
<PAGE>
In conjunction with performance reports and/or analyses of shareholder
service for the ^ Funds, comparative data between the ^ Funds' performance for a
given period and recognized indices of investment results for the same period,
and/or assessments of the quality of shareholder service, may be provided to
shareholders. Such indices include indices provided by Dow Jones & Company,
Standard & Poor's, Lipper Analytical Services, Inc., Lehman Brothers, National
Association of Securities Dealers Automated Quotations, Frank Russell Company,
Value Line Investment Survey, the American Stock Exchange, Morgan Stanley
Capital International, Wilshire Associates, the Financial Times Stock Exchange,
the New York Stock Exchange, the Nikkei Stock Average and Deutcher Aktienindex,
all of which are unmanaged market indicators. In addition, rankings, ratings,
and comparisons of investment performance and/or assessments of the quality of
shareholder service made by independent sources may be used in advertisements,
sales literature or shareholder reports, including reprints of, or selections
from, editorials or articles about the ^ Funds. These sources utilize
information compiled (i) internally; (ii) by Lipper Analytical Services, Inc.;
or (iii) by other recognized analytical services. The Lipper Analytical
Services, Inc. mutual fund rankings and comparisons which may be used by the ^
Funds in performance reports will be drawn from the ^ Capital Appreciation
^(Dynamics) and Growth and Income (Growth & Income) mutual fund ^ groupings, in
addition to the broad-based Lipper general fund groupings. Sources for Fund
performance information and articles about the ^ Funds include, but are not
limited to, the following:
American Association of Individual Investors' Journal
Banxquote
Barron's
Business Week
CDA Investment Technologies
CNBC
CNN
Consumer Digest
Financial Times
Financial World
Forbes
Fortune
Ibbotson Associates, Inc.
Institutional Investor
Investment Company Data, Inc.
Investor's Business Daily
Kiplinger's Personal Finance
Lipper Analytical Services, Inc.'s Mutual Fund
Performance Analysis
Money
Morningstar
Mutual Fund Forecaster
No-Load Analyst
No-Load Fund X
Personal Investor
Smart Money
The New York Times
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 ^ FUNDS
Periodic Withdrawal Plan. As described in the section of the ^ Funds'
Prospectuses entitled "How to Sell Shares," ^ each Fund offers a Periodic
Withdrawal Plan. All dividends and distributions on shares owned by shareholders
participating in this Plan are reinvested in additional shares. Because
withdrawal payments represent the proceeds from sales of shares, the amount of
shareholders' investments in ^ a Fund will be reduced to the extent that
withdrawal payments exceed dividends and other distributions paid and
reinvested. Any gain or loss on such redemptions must be reported for tax
purposes. In each case, shares will be redeemed at the close of business on or
about the 20th day of each month preceding payment and payments will be mailed
within five business days thereafter.
The Periodic Withdrawal Plan involves the use of principal and is not a
guaranteed annuity. Payments under the Periodic Withdrawal Plan do not represent
income or a return on investment.
^ Participation in the Periodic Withdrawal Plan may be terminated at any
time by directing a written request to IFG. Upon termination, all future
dividends and capital gain distributions will be reinvested in additional shares
unless the shareholder requests otherwise.
Exchange ^ Policy. As discussed in the section of the ^ Funds'
Prospectuses entitled "How to Buy Shares - Exchange ^ Policy," each Fund offers
shareholders the ^ ability to exchange shares of ^ a Fund for shares of certain
other no-load mutual funds advised by IFG. Exchange requests may be made either
by telephone or by written request to INVESCO Funds Group, Inc., using the
telephone number or address on the cover of this Statement of 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 ^ policy is
not an option or right to purchase securities^ and is not available in any state
or other jurisdiction where the shares of the mutual fund into which transfer is
to be made are not qualified for sale, or when the net asset value of the shares
presented for exchange is less than the minimum dollar purchase required by the
appropriate prospectus.
TAX-DEFERRED RETIREMENT PLANS
As described in the section of the ^ Funds' Prospectuses entitled "Fund
Services," shares of ^ a Fund may be purchased as the investment medium for
various tax-deferred retirement plans. Persons who request information regarding
these plans from IFG will be provided with prototype documents and other
supporting information regarding the type of plan requested. Each of these plans
involves a long-term commitment of assets and is subject to possible regulatory
penalties for excess contributions, premature distributions or for insufficient
distributions after age 70-1/2. The legal and tax implications may vary
according to the circumstances of the individual investor. Therefore, the
investor is urged to consult with an attorney or tax adviser prior to the
establishment of such a plan.
HOW TO REDEEM SHARES
The Company has authorized one or more brokers to accept redemption orders
on the Funds' behalf. Such brokers are authorized to designate other
intermediaries to accept redemption orders on the Fund's behalf. The Funds will
be deemed to have received a redemption order when an authorized broker or, if
<PAGE>
applicable, a broker's authorized designee, accepts the order. A redemption
order will be priced at a Fund's Net Asset Value next calculated after the order
has been accepted by an authorized broker or the broker's authorized designee.
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 ^ Funds' Prospectuses entitled "How to Sell Shares." The right of redemption
may be suspended and payment postponed when: (a) the New York Stock Exchange is
closed for other than customary weekends and holidays; (b) trading on that
exchange is restricted; (c) an emergency exists as a result of which disposal by
^ a Fund of securities owned by it is not reasonably practicable, or it is not
reasonably practicable for ^ a Fund fairly to determine the value of its net
assets; or (d) the SEC by order so permits.
It is possible that in the future conditions may exist which would, in the
opinion of the Company's investment adviser, make it undesirable for ^ a Fund to
pay for redeemed shares in cash. In such cases, the investment adviser may
authorize payment to be made in portfolio securities or other property of the
Fund. However, the Company is obligated under the 1940 Act to redeem for cash
all shares of ^ a Fund presented for redemption by any one shareholder having a
value up to $250,000 (or 1% of the Fund's net assets if that is less) in any
90-day period. Securities delivered in payment of redemptions are selected
entirely by the investment adviser based on what is in the best interests of the
Fund and its shareholders, and are valued at the value assigned to them in
computing the Fund's net asset value per share. Shareholders receiving such
securities are likely to incur brokerage costs on their subsequent sales of the
securities.
DIVIDENDS, ^ OTHER DISTRIBUTIONS, AND TAXES
^ Each Fund intends to continue to conduct its business and satisfy the
applicable diversification of assets and source of income requirements to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). The Dynamics Fund so qualified in
the fiscal year ended April 30, 1997, and ^ both Funds intend to qualify during
^ their current fiscal year. As a result, it is anticipated that ^ neither Fund
will pay ^ federal income or excise taxes and both Funds will be accorded
conduit or "pass through" treatment for federal income tax purposes.
Dividends paid by ^ each 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,
^ each Fund sends shareholders information regarding the amount and character of
dividends paid in the year^.
^ Distributions by each 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. ^ The Taxpayer Relief Act
of 1997 (the "Tax Act"), enacted in August 1997, changed the taxation of
long-term capital gains for individuals by applying different capital gains
rates depending on the taxpayer's holding period and marginal rate of federal
income tax. Long-term gains realized on the sale of securities held for more
than one year but not for more than 18 months are taxable at a rate of 28%. This
category of long-term gains is often referred to as "mid-term" gains but is
technically termed "28% rate gains." Long-term gains realized on the sale of
securities held for more than 18 months are taxable at a rate of 20%. At the end
<PAGE>
of each year, information regarding the tax status of dividends and other
distributions is provided to shareholders. Shareholders should consult their tax
advisers as to the effect of the Tax Act on distributions by the Fund of net
capital gains.
All dividends and other distributions are regarded as taxable to the
investor, whether or not such dividends and distributions are reinvested in
additional shares^ of the Fund or another fund in the INVESCO group. The net
asset value of Fund shares ^ 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 the net asset value of Fund shares were 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. ^ 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. ^
IFG 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 IFG will be computed using the single-category
average cost method, although neither IFG 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 ^ a Fund in past
years, the shareholder must continue to use the method previously used, unless
the shareholder applies to the IRS for permission to change ^ the method.
If ^ a Fund's 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.
^ Each Fund will be subject to a nondeductible 4% excise tax to the extent
it fails to distribute by the end of any calendar year substantially all of its
ordinary income for that year and net capital ^ gains for the one-year period
ending on ^ April 30 of that year, plus certain other amounts.
Dividends and interest received by ^ a 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. Foreign taxes withheld will be
treated as an expense of the Portfolio. If more than 50% of the value of ^ a
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. ^ Each 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.
<PAGE>
^ Each Fund may invest in the stock of "passive foreign investment
companies" (PFICs"). A PFIC is a foreign corporation (other than a controlled
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, ^ a 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 ^ such
Fund's investment company taxable income and, accordingly, will not be taxable
to it to the extent that income is distributed to its shareholders.
Each Portfolio may elect to "mark-to-market" its stock in any PFIC.
Marking-to-market, in this context, means including in ordinary income for each
taxable year the excess, if any, of the fair market value of the PFIC stock over
a Portfolio's adjusted tax basis therein as of the end of that year. Once the
election has been made, a Portfolio also will be allowed to deduct from ordinary
income the excess, if any, of its adjusted basis in PFIC stock over the fair
market value thereof as of the end of the year, but only to the extent of any
net mark-to-market gains with respect to that PFIC stock included by a Portfolio
for prior taxable years. A Portfolio's adjusted tax basis in each PFIC's stock
with respect to which it makes this election will be adjusted to reflect that
amounts of income included and deductions taken under the election.
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 ^
a Fund accrues interest, dividends or other receivables or accrues expenses or
other liabilities denominated in a foreign currency and the time ^ such 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.
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 Company's charter permits ^ each 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 Dynamics Fund's inception, leverage has never been
employed, and it may not be employed by either Fund without express
authorization of the ^ Company'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 ^ were not realized and the market value of
securities so purchased ^ declined, however, the impact of such market decline
would be increased by the amount of interest paid on such borrowings.
<PAGE>
Portfolio Turnover. There are no fixed limitations regarding ^ a Fund's
portfolio turnover. Since the Dynamics Fund started business, the rate of
portfolio turnover has fluctuated under constantly changing economic conditions
and market circumstances. Portfolio turnover rates for the Dynamics Fund for the
fiscal years ended April 30, 1997 and 1996 were 204% and 196%, respectively.
Securities initially satisfying the basic policies and objectives of ^ a Fund
may be disposed of when they are no longer suitable. Brokerage costs to ^ a 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 ^ are 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.
Placement of Portfolio Brokerage. ^ IFG, as the ^ Funds' investment ^
adviser, places orders for the purchase and sale of securities with brokers and
dealers based upon IFG's ^ evaluation of the financial responsibility of the
brokers and dealers, and considering the brokers' and dealers' ability to effect
transactions at the best available prices. IFG ^ evaluates the overall
reasonableness of brokerage commissions paid by reviewing the quality of
executions obtained on the ^ portfolio transactions of each Fund, 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 ^ Funds are consistent with prevailing
and reasonable commissions, IFG ^ 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 IFG ^
seeks reasonably competitive rates, the ^ Funds do not necessarily pay the
lowest commission or spread available.
Consistent with the standard of seeking to obtain the best execution on
portfolio transactions, IFG ^ may select brokers that provide research services
to effect such transactions. Research services consist of statistical and
analytical reports relating to issuers, industries, securities and economic
factors and trends, which may be of assistance or value to IFG ^ in making
informed investment decisions. Research services prepared and furnished by
brokers through which the Fund effects securities transactions may be used by
IFG ^ in servicing all of its accounts and not all such services may be used by
IFG ^ in connection with the ^ Funds.
In recognition of the value of the above-described brokerage and research
services provided by certain brokers, IFG ^, consistent with the standard of
seeking to obtain the best execution on portfolio transactions, may place orders
with such brokers for the execution of ^ transactions for the Funds on which the
commissions are in excess of those which other brokers might have charged for
effecting the same transactions.
Portfolio transactions may be effected through qualified broker-dealers
that recommend the ^ Funds to their clients, or that act as agent in the
purchase of ^ a Fund's shares for their clients. When a number of brokers and
dealers can provide comparable best price and execution on a particular
transaction, the ^ Company's adviser or sub-adviser may consider the sale of
Fund shares by a broker or dealer in selecting among qualified broker-dealers.
Certain financial institutions (including brokers who may sell shares of
the ^ Funds, or affiliates of such brokers) are paid a fee (the "Services Fee")
for recordkeeping, shareholder communications and other services provided by the
brokers to investors purchasing shares of the Funds through no transaction fee
programs ("NTF Programs") offered by the financial institution or its affiliated
broker (an "NTF Program Sponsor"). The Services Fee is based on the average
<PAGE>
daily value of the investments in each Fund made in the name of such NTF Program
Sponsor and held in omnibus accounts maintained on behalf of investors
participating in the NTF Program. With respect to certain NTF Programs, the
directors of the ^ Company have authorized the ^ Funds to apply dollars
generated from the ^ Company's Plan and Agreement of Distribution pursuant to
Rule 12b-1 under the 1940 Act (the "Plan") to pay the entire Services Fee,
subject to the maximum Rule 12b-1 fee permitted by the Plan. With respect to
other NTF Programs, the Company's directors have authorized the ^ Funds to pay
transfer agency fees to IFG based on the number of investors who have beneficial
interests in the NTF Program Sponsor's omnibus accounts in the ^ Funds. IFG, in
turn, pays these transfer agency fees to the NTF Program Sponsor as a
sub-transfer agency or recordkeeping fee in payment of all or a portion of the
Services Fee. In the event that the sub-transfer agency or recordkeeping fee is
insufficient to pay all of the Services Fee with respect to these NTF Programs,
the directors of the Company have authorized the Company to apply dollars
generated from the Plan to pay the remainder of the Services Fee, subject to the
maximum Rule 12b-1 fee permitted by the Plan. IFG itself pays the portion of the
^ Fund's Services Fee, if any, that exceeds the sum of the sub-transfer agency
or recordkeeping fee and Rule 12b-1 fee. The Company's directors have further
authorized IFG to place a portion of the ^ Funds' brokerage transactions with
certain NTF Program Sponsors or their affiliated brokers, if IFG reasonably
believes that, in effecting the ^ Funds' transactions in portfolio securities,
the broker is able to provide the best execution of orders at the most favorable
prices. A portion of the commissions earned by such a broker from executing
portfolio transactions on behalf of the ^ Funds may be credited by the NTF
Program Sponsor against its Services Fee. Such credit shall be applied first
against any sub-transfer agency or recordkeeping fee payable with respect to the
^ Funds, and second against any Rule 12b-1 fees used to pay a portion of the
Services Fee, on a basis which has resulted from negotiations between IFG and
the NTF Program Sponsor. Thus, the ^ Funds pay sub-transfer agency or
recordkeeping fees to the NTF Program Sponsor in payment of the Services Fee
only to the extent that such fees are not offset by the ^ Funds' credits. In the
event that the transfer agency fee paid by the ^ Funds to IFG with respect to
investors who have beneficial interests in a particular NTF Program Sponsor's
omnibus accounts in ^ a Fund exceeds the Services Fee applicable to the Fund,
after application of credits, IFG may carry forward the excess and apply it to
future Services Fees payable to that NTF Program Sponsor with respect to ^ a
Fund. The amount of excess transfer agency fees carried forward will be reviewed
for possible adjustment by IFG prior to each fiscal year-end of the ^ Funds. The
Company's board of directors has also authorized the Fund to pay to IFG the full
Rule 12b-1 fees contemplated by the Plan ^ as payment for expenses incurred by ^
IFG in engaging in the activities and providing the services on behalf of the ^
Funds contemplated by the Plan, subject to the maximum Rule 12b-1 fee permitted
by the Plan, notwithstanding that credits have been applied to reduce the
portion of the 12b-1 fee that would have been used to ^ pay IFG for payments to
such NTF Program Sponsor absent such credits.
The aggregate dollar amount of brokerage commissions paid by the Company
for the Dynamics Fund for the fiscal years ended April 30, 1997, 1996 and 1995,
were $5,707,197, $3,891,234 and $1,742,196, respectively. For the fiscal year
ended April 30, 1997, brokers providing research services received $2,699,291 in
commissions on portfolio transactions effected for the Dynamics Fund. The
aggregate dollar amount of such portfolio transactions was $1,591,210,810.
Commissions of $1,200 were allocated to certain brokers in recognition of their
sales of shares of the Dynamics Fund on portfolio transactions of ^ such Fund
effected during the fiscal year ended April 30, 1997.
<PAGE>
At April 30, 1997, the Dynamics Fund held debt securities of its regular
brokers or dealers, or their parents, as follows:
Value of Securities
Broker or Dealer at 4/30/97
Lehman Brothers Holdings 10,163
Cigna Corp. 27,292
^ IFG does not receive any brokerage commissions on portfolio transactions
effected on behalf of the ^ Funds, and there is no affiliation between IFG^ or
any person affiliated with IFG^ or the ^ Funds and any broker or dealer that
executes transactions for the ^ Funds.
ADDITIONAL INFORMATION
Common Stock. The Company has 300,000,000 authorized shares of common stock
with a par value of $0.01 per share. ^ Of the Company's authorized shares,
150,000,000 shares have been allocated to each of the two series. As of March
31, 1998, 80,124,255.583 shares of the Dynamics Fund were outstanding. All
shares issued and outstanding are, and all shares offered hereby, when issued,
will be, fully paid and nonassessable. The board of directors has the authority
to designate additional classes of common stock without seeking the approval of
shareholders and may classify and reclassify any authorized but unissued shares.
Shares ^ of each series represent the interests of the shareholders of such
series in a particular portfolio of investments of the Company. Each series of
the Company's shares is preferred over all other series with respect to the
assets specifically allocated to that series, and all income, earnings, profits
and proceeds from such assets, subject only to the rights of creditors, are
allocated to shares of that series. The assets of each series are segregated on
the books of account and are charged with the liabilities of that series and
with a share of the Company's general liabilities. The board of directors
determines those assets and liabilities deemed to be general assets or
liabilities of the Company, and those items are allocated among series in a
manner deemed by the board of directors to be fair and equitable. Generally,
such allocation will be made based upon the relative total net assets of each
series. In the unlikely event that a liability allocable to one series exceeds
the assets belonging to the series, all or a portion of such liability may have
to be borne by the holders of shares of the Company's other series.
All Fund shares, regardless of series, have equal voting rights. Voting
with respect to certain matters, such as ratification of independent accountants
or election of directors, will be by all series of the Company. When not all
series are affected by a matter to be voted upon, such as approval of an
investment advisory contract or change in a Fund's investment policies, only
shareholders of the series affected by the matter may be entitled to vote.
Company shares have noncumulative voting rights, which means that the holders of
a majority of the shares voting for the election of directors of the Company can
elect 100% of the directors if they choose to do so^. In such event, the holders
of the remaining shares voting for the election of directors will not be able to
elect any person or persons to the board of directors. After they have been
elected by shareholders, the directors will continue to serve until their
successors are elected and have qualified or they are removed from office, in
either case by a shareholder vote, or until death, resignation or retirement.
Directors may appoint their own successors, provided that always at least a
majority of the directors have been elected by the ^ Company's shareholders. It
is the intention of the ^ Company not to hold annual meetings of shareholders.
The directors will call annual or special meetings of shareholders for action by
shareholder vote as may be required by the 1940 Act or the Company's Articles of
Incorporation, or at their discretion.
<PAGE>
Principal Shareholders. As of ^ March 31, ^ 1998, the following entity held
more than 5% of the Dynamics Fund's outstanding equity securities.
Amount and Nature Class and Percent
Name and Address of Ownership of Class
Charles Schwab & Co. Inc. ^ 11,795,918.373 14.66%
Special Custody Account
For The Exclusive Benefit
of Customers
Attn: Mutual Funds
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
Company. The independent accountants are responsible for auditing the financial
statements of the ^ Company.
Custodian. State Street Bank and Trust Company, P.O. Box 351, Boston,
Massachusetts, has been designated as custodian of the cash and investment
securities of the Company. The bank is also responsible for, among other things,
receipt and delivery of the ^ investment securities of the Company's Funds in
accordance with procedures and conditions specified in the custody agreement.
Under the contract with the Company, the custodian is authorized to establish
separate accounts in foreign countries and to cause foreign securities owned by
the ^ Company to be held outside the United States in branches of U.S. Banks
and, to the extent permitted by applicable regulations, in certain foreign banks
and securities depositories.
Transfer Agent. The Company is provided with transfer agent, registrar, and
dividend disbursing agent services by INVESCO Funds Group, Inc., 7800 E. Union
Avenue, Denver, Colorado, pursuant to the Transfer Agency Agreement described ^
herein. Such services include the issuance, cancellation and transfer of shares
of the ^ Funds, and the maintenance of records regarding the ownership of such
shares.
Reports to Shareholders. The Company's fiscal year ends on April 30. The
Company distributes reports at least semiannually to its shareholders. Financial
statements regarding the ^ Company, audited by the independent accountants, are
sent to shareholders annually.
Legal Counsel. The firm of Kirkpatrick & Lockhart LLP, Washington, D.C., is
legal counsel for the Company. The firm of Moye, Giles, O'Keefe, Vermeire &
Gorrell, Denver, Colorado, acts as special counsel to the ^ Company.
Financial Statements. The ^ audited financial statements of the ^ Dynamics
Fund and the notes thereto for the fiscal year ended April 30, 1997, and the
report of Price Waterhouse LLP with respect to such financial statements, are
incorporated herein by reference from the Company's Annual Report to
Shareholders for the fiscal year ended April 30, 1997: Statement of Investment
Securities as of April 30, 1997; Statement of Assets and Liabilities as of April
30, 1997; Statement of Operations for the year ended April 30, 1997; Statement
of Changes in Net Assets for each of the two years in the period ended April 30,
1997; and Financial Highlights for each of the five years in the period ended
April 30, 1997.
<PAGE>
Prospectus. The Company will furnish, without charge, a copy of ^ any
Fund's ^ Prospectus upon request. Such requests should be made to the Company at
the mailing address or telephone number set forth on the first page of this
Statement of Additional Information.
Registration Statement. This Statement of Additional Information and the ^
related Prospectuses do not contain all of the information set forth in the
Registration Statement the ^ Company has filed with the SEC. The complete
Registration Statement may be obtained from the SEC upon payment of the fee
prescribed by the rules and regulations of the SEC.
<PAGE>
APPENDIX A
DESCRIPTION OF FUTURES AND OPTIONS CONTRACTS
Options on Securities
An option on a security provides the purchaser, or "holder," with the
right, but not the obligation, to purchase, in the case of a "call" option, or
sell, in the case of a "put" option, the security or securities underlying the
option, for a fixed exercise price up to a stated expiration date. The holder
pays a non-refundable purchase price for the option, known as the "premium." The
maximum amount of risk the purchaser of the option assumes is equal to the
premium plus related transaction costs, although the entire amount may be lost.
The risk of the seller, or "writer," however, is potentially unlimited, unless
the option is "covered," which is generally accomplished through the writer's
ownership of the underlying security, in the case of a call option, or the
writer's segregation of an amount of cash or securities equal to the exercise
price, in the case of a put option. If the writer's obligation is not so
covered, it is subject to the risk of the full change in value of the underlying
security from the time the option is written until exercise.
Upon exercise of the option, the holder is required to pay the purchase
price of the underlying security, in the case of a call option, or to deliver
the security in return for the purchase price, in the case of a put option.
Conversely, the writer is required to deliver the security, in the case of a
call option, or to purchase the security, in the case of a put option. Options
on securities which have been purchased or written may be closed out prior to
exercise or expiration by entering into an offsetting transaction on the
exchange on which the initial position was established, subject to the
availability of a liquid secondary market.
Options on securities are traded on national securities exchanges, such as
the Chicago Board of Options Exchange, which are regulated by the Securities and
Exchange Commission. The Options Clearing Corporation ("OCC") guarantees the
performance of each party to an exchange-traded option, by in effect taking the
opposite side of each such option. A holder or writer may engage in transactions
in exchange-traded options on securities and options on indices of securities
only through a registered broker/dealer which is a member of the exchange on
which the option is traded.
An option position in an exchange-traded option may be closed out only on
an exchange which provides a secondary market for an option of the same series.
Although the Funds generally will purchase or write only those options for which
there appears to be an active secondary market, there is no assurance that a
liquid secondary market on an exchange will exist for any particular option at
any particular time. In such event it might not be possible to effect closing
transactions in a particular option with the result that a Fund would have to
exercise the option in order to realize any profit. This would result in the
Fund incurring brokerage commissions upon the disposition of underlying
securities acquired through the exercise of a call option or upon the purchase
of underlying securities upon the exercise of a put option. If the Fund, as a
covered call option writer, is unable to effect a closing purchase transaction
in a secondary market, unless the Fund is required to deliver the securities
pursuant to the assignment of an exercise notice, it will not be able to sell
the underlying security until the option expires.
Reasons for the potential absence of a liquid secondary market on an
exchange include the following: (i) there may be insufficient trading interest
in certain options; (ii) restrictions may be imposed by an exchange on opening
transactions or closing transac tions or both; (iii) trading halts, suspensions
or other restric tions may be imposed with respect to particular classes or
series of options or underlying securities; (iv) unusual or unforeseen
<PAGE>
circumstances may interrupt normal operations on an exchange; (v) the facilities
of an exchange or a clearing corporation may not at all times be adequate to
handle current trading volume; or (vi) one or more exchanges could, for economic
or other reasons, decide or be compelled at some future date to discontinue the
trading of options (or particular class or series of options) in which event the
secondary market on that exchange (or in the class or series of options) would
cease to exist, although outstanding options on that exchange which had been
issued by a clearing corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms. There is no assurance
that higher than anticipated trading activity or other unforeseen events might
not, at a particular time, render certain of the facilities of any of the
clearing corporations inadequate and thereby result in the institution by an
exchange of special procedures which may interfere with the timely execution of
customers' orders. However, the OCC, based on forecasts provided by the U.S.
exchanges, believes that its facilities are adequate to handle the volume of
reasonably anticipated options transactions, and such exchanges have advised
such clearing corporation that they believe their facilities will also be
adequate to handle reasonably anticipated volume.
In addition, options on securities may be traded over-the-counter ("OTC")
through financial institutions dealing in such options as well as the underlying
instruments. OTC options are purchased from or sold (written) to dealers or
financial institu tions which have entered into direct agreements with the
Company on behalf of a Fund. With OTC options, such variables as expiration
date, exercise price and premium will be agreed upon between the Fund and the
transacting dealer, without the intermediation of a third party such as the OCC.
If the transacting dealer fails to make or take delivery of the securities
underlying an option it has written, in accordance with the terms of that option
as written, the Fund would lose the premium paid for the option as well as any
anticipated benefit of the transaction. The Fund will engage in OTC option
transactions only with primary U.S. government securities dealers recognized by
the Federal Reserve Bank of New York.
Futures Contracts
A futures contract is a bilateral agreement providing for the purchase and
sale of a specified type and amount of a financial instrument or foreign
currency, or for the making and acceptance of a cash settlement, at a stated
time in the future, for a fixed price. By its terms, a futures contract provides
for a specified settlement date on which, in the case of the majority of
interest rate and foreign currency futures contracts, the fixed income
securities or currency underlying the contract are delivered by the seller and
paid for by the purchaser, or on which, in the case of stock index futures
contracts and certain interest rate and foreign currency futures contracts, the
difference between the price at which the contract was entered into and the
contract's closing value is settled between the purchaser and seller in cash.
Futures Contracts differ from options in that they are bilateral agreements,
with both the purchaser and the seller equally obligated to complete the
transaction. In addition, futures contracts call for settlement only on the
expiration date, and cannot be "exercised" at any other time during their term.
The purchase or sale of a futures contract also differs from the purchase
or sale of a security or the purchase of an option in that no purchase price is
paid or received. Instead, an amount of cash or cash equivalents, which varies
but may be as low as 5% or less of the value of the contract, must be deposited
with the broker as "initial margin." Subsequent payments to and from the broker,
referred to as "variation margin," are made on a daily basis as the value of the
index or instrument underlying the futures contract fluctuates, making positions
in the futures contract more or less valuable, a process known as "marking to
market."
<PAGE>
A futures contract may be purchased or sold only on an exchange, known as a
"contract market," designated by the Commodity Futures Trading Commission for
the trading of such contract, and only through a registered futures commission
merchant which is a member of such contract market. A commission must be paid on
each completed purchase and sale transaction. The contract market clearing house
guarantees the performance of each party to a futures contract, by in effect
taking the opposite side of such contract. At any time prior to the expiration
of a futures contract, a trader may elect to close out its position by taking an
opposite position on the contract market on which the position was entered into,
subject to the availability of a secondary market, which will operate to
terminate the initial position. At that time, a final determination of variation
margin is made and any loss experienced by the trader is required to be paid to
the contract market clearing house while any profit due to the trader must be
delivered to it.
Interest rate futures contracts currently are traded on a variety of fixed
income securities, including long-term U.S. Treasury bonds, Treasury notes,
Government National Mortgage Association modified pass-through mortgage-backed
securities, U.S. Treasury bills, bank certificates of deposit and commercial
paper. In addition, interest rate futures contracts include contracts on indices
of municipal securities. Foreign currency futures contracts currently are traded
on the British pound, Canadian dollar, Japanese yen, Swiss franc, West German
mark and on Eurodollar deposits.
Options on Futures Contracts
An option on a futures contract provides the holder with the right to enter
into a "long" position in the underlying futures contract, in the case of a call
option, or a "short" position in the underlying futures contract, in the case of
a put option, at a fixed exercise price to a stated expiration date. Upon
exercise of the option by the holder, the contract market clearing house
establishes a corresponding short position for the writer of the option, in the
case of a call option, or a corresponding long position, in the case of a put
option. In the event that an option is exercised, the parties will be subject to
all the risks associated with the trading of futures contracts, such as payment
of variation margin deposits. In addition, the writer of an option on a futures
contract, unlike the holder, is subject to initial and variation margin
requirements on the option position.
A position in an option on a futures contract may be terminated by the
purchaser or seller prior to expiration by effecting a closing purchase or sale
transaction, subject to the availability of a liquid secondary market, which is
the purchase or sale of an option of the same series (i.e., the same exercise
price and expiration date) as the option previously purchased or sold. The
difference between the premiums paid and received represents the trader's profit
or loss on the transaction.
An option, whether based on a futures contract, a stock index or a
security, becomes worthless to the holder when it expires. Upon exercise of an
option, the exchange or contract market clearing house assigns exercise notices
on a random basis to those of its members which have written options of the same
series and with the same expiration date. A brokerage firm receiving such
notices then assigns them on a random basis to those of its customers which have
written options of the same series and expiration date. A writer therefore has
no control over whether an option will be exercised against it, nor over the
time of such exercise.
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Page in
Prospectus
(1) Financial statements and schedules
included in Prospectus (Part A):
None.
(2) The following audited financial
statements of the Company and the
notes thereto with respect to the
Dynamics Fund for the fiscal year
ended April 30, 1997, and the report
of Price Waterhouse LLP with respect
to such financial statements, are
incorporated in the Statement of
Additional Information by reference
from the Company's Annual Report to
Shareholders for the fiscal year
ended April 30, 1997; Statement of
Investment Securities as of April
30, 1997; Statement of Assets and
Liabilities as of April 30, 1997;
Statement of Operations for the year
ended April 30, 1997; Statement of
Changes in Net Assets for each of
the two years in the period ended
April 30, 1997; and Financial
Highlights for each of the five
years in the period ended April 30,
1997.
(3) Financial statements and schedules
included in Part C:
None: Schedules have been omitted as
all information has been presented
in the financial statements.
(b) Exhibits:
(1) Articles of Incorporation (Charter)
filed April 2, 1993.(2)
(a) Articles of Amendment to
Articles of Incorporation filed June
26, ^ 1997.(3)
(2) Bylaws, as amended July 21, 1993.(2)
(3) Not applicable.
<PAGE>
(4) Not required to be filed on EDGAR.
(5) (a) Investment Advisory Agreement
between Registrant and INVESCO Funds
Group, Inc. dated February 28, ^
1997.(3)
^(i) Form of Amendment to Investment Advisory
Agreement, dated ____________, 1998, between
Registrant and INVESCO Funds Group, Inc.
^(6) Distribution Agreement between
Registrant and INVESCO Funds Group,
Inc. dated February 28, ^ 1997.(3)
(b) Distribution Agreement, dated
September 30, 1997, between
Registrant and INVESCO Distributors,
Inc.
(7) Defined Benefit Deferred
Compensation Plan for Non-Interested
Directors and ^ Trustees.(3)
(8) Custody Agreement between Registrant
and State Street Bank and Trust
Company dated July 1, 1993.(1)
(a) Amendment to Custody Agreement
dated October 25, ^ 1995.(3)
(b) Data Access Addendum.
(c) Additional Fund Letter dated
April 15, 1998.
(9) (a) Transfer Agency Agreement
between Registrant and INVESCO Funds
Group, Inc. dated February 28, ^
1997.(3)
(b) Administrative Services
Agreement between Registrant and
INVESCO Funds Group, Inc., dated
February 28, ^ 1997.(3)
(10) Opinion and consent of counsel as to
the legality of the securities being
registered, indicating whether they
will, when sold, be legally issued,
fully paid and non-assessable^.
(11) Consent of Independent Accountants.
(12) Not applicable.
(13) Not applicable.
<PAGE>
(14) Copies of model plans used in the
establishment of retirement plans as
follows: Non-standardized Profit
Sharing Plan; Non-standardized Money
Purchase Pension Plan; Standardized
Profit Sharing Plan Adoption
Agreement; Standardized Money Purchase
Pension Plan; Non-standardized 401(k)
Plan Adoption Agreement; Standardized
401(k) Paired Profit Sharing Plan;
Standardized Simplified Profit Sharing
Plan; Standardized Simplified Money
Purchase Plan; Defined Contribution
Master Plan & Trust Agreement; and
Financial 403(b) Retirement Plan, all
filed with Registration Statement of
INVESCO International Funds,
Inc. (File No. 33-63498), filed ^ on
EDGAR on February 26, 1998.
^(15) Amended Plan and Agreement of
Distribution dated January 1, 1997,
adopted pursuant to Rule 12b-1
under the Investment Company Act of
^ 1940.3
(16) Schedule for computation of performance
^ data.(3)
(17) Financial Data Schedule for INVESCO
Dynamics Fund.
(18) Not Applicable.
- ---------------
(1)Previously filed on EDGAR with Post-Effective Amendment No. 44 to the
Registration Statement on June 22, 1993 and incorporated herein by reference.
(2)Previously filed on EDGAR with Post-Effective Amendment No. 45 to the
Registration Statement on August 27, 1996 and incorporated herein by reference.
3Previously filed on EDGAR with Post-Effective Amendment No. 46 to
the Registration Statement on June 30, 1997 and incorporated herein
by reference.
Item 25. Persons Controlled by or Under Common Control with Registrant
No person is presently controlled by or under common control with
Registrant.
Item 26. Number of Holders of Securities
Title of Class Number of Record
Common Stock Holders as of
^ March 31, 1998
^ Dynamics Fund 47,405
<PAGE>
Item 27. Indemnification
Indemnification provisions for officers and directors of Registrant are set
forth in Article VII, Section 2 of the Articles of Incorporation, and are hereby
incorporated by reference. See Item 24(b)(1) above. Under these Articles,
officers and directors will be indemnified to the fullest extent permitted to
directors by the Maryland General Corporation Law, subject only to such
limitations as may be required by the ^ Investment Company Act of 1940, and the
rules thereunder. Under the ^ Investment Company Act of 1940, Fund directors and
officers cannot be protected against liability to the ^ Company or its
shareholders to which they would be subject because of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties of their office. The
^ Company also intends to maintain liability insurance policies covering its
directors and officers.
Item 28. Business and Other Connections of Investment Adviser
See "The ^ Company and Its Management" in the Prospectus and Statement of
Additional Information for information regarding the business of the investment
adviser. For information as to the business, profession, vocation or employment
of a substantial nature of each of the officers and directors of INVESCO Funds
Group, Inc., reference is made to Schedule Ds to the Form ADV filed under the
Investment Advisers Act of 1940 by INVESCO Funds Group, Inc., which schedules
are herein incorporated by reference.
Item 29. Principal Underwriters
INVESCO Diversified Funds, Inc.
INVESCO Emerging Opportunity Funds, Inc.
INVESCO Growth Fund, Inc.
INVESCO Income Funds, Inc.
INVESCO Industrial Income Fund, Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Multiple Asset Funds, Inc.
INVESCO Specialty Funds, Inc.
INVESCO Strategic Portfolios, Inc.
INVESCO Tax-Free Income Funds, Inc.
INVESCO Value Trust
INVESCO Variable Investment Funds, Inc.
<PAGE>
(b)
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
^ William J. Galvin, Jr. Senior Vice Assistant
7800 E. Union Avenue President Secretary ^
^ Denver, CO 80237
^ Ronald L. Grooms Senior Vice Treasurer,
7800 E. Union Avenue President & ^ Chief Fin'l
Denver, CO 80237 ^ Treasurer Officer, and
^ Chief Acctg.
^ Off.
Hubert L. Harris, Jr. Director
1315 Peachtree ^ St., N.E.
Atlanta, GA 30309
Dan J. Hesser Chairman of ^ President, ^
7800 E. Union Avenue ^ the Board & CEO & Dir.
^ Denver, CO 80237 Director
^
Gregory E. Hyde Senior Vice
7800 E. Union Avenue President
Denver, CO 80237
^
Charles P. Mayer Director
7800 E. Union Avenue
Denver, CO 80237
^ Glen A. Payne Senior Vice Secretary
7800 E. Union Avenue President ^,
^ Denver, CO 80237 Secretary &
^ General Counsel
Judy P. Wiese Vice President Asst. Treas.
7800 E. Union Avenue
Denver, CO 80237
^ Mark H. Williamson President,
7800 E. Union Avenue Chief Executive ^
^ Denver, CO 80237 Officer &
^ Director
(c) Not applicable.
1
<PAGE>
Item 30. Location of Accounts and Records
Dan J. Hesser
7800 E. Union Avenue
Denver, CO 80237
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) The Registrant shall furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
(b) The Registrant hereby undertakes to file a post-effective
amendment containing reasonably current financial statements
for INVESCO Growth & Income Fund within four to six months
from the effective date of Post-Effective Amendment No. 47.
<PAGE>
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the registrant ^ has duly caused this
post-effective amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Denver, County of Denver, and State of
Colorado, on the ^ 16th day of ^ April, 1998.
Attest: INVESCO ^ Capital Appreciation
Funds, Inc.
/s/ Glen A. Payne /s/ Dan J. Hesser
- ------------------------------ --------------------------------------
Glen A. Payne, Secretary Dan J. Hesser, President
Pursuant to the requirements of the Securities Act of 1933, this
post-effective amendment to Registrant's Registration Statement has been signed
by the following persons in the capacities indicated on this ^ 16th day of ^
April, 1998.
/s/ Dan J. Hesser /s/ Lawrence H. Budner
- ------------------------------------ ------------------------------------
Dan J. Hesser, President & Lawrence H. Budner, ^ Director
^ Director, (Chief Executive Officer)
/s/ Ronald L. Grooms /s/ Daniel D. Chabris
- ----------------------------------- ------------------------------------
Ronald L. Grooms, Treasurer Daniel D. Chabris, ^ Director
(Chief Financial and ^ Accounting
Officer)
/s/ Victor L. Andrews /s/ Fred A. Deering
- ------------------------------------ ------------------------------------
Victor L. Andrews, ^ Director Fred A. Deering, ^ Director
/s/ Bob R. Baker /s/ Larry Soll
- ------------------------------------ ------------------------------------
Bob R. Baker, Director Larry Soll, Director
/s/ ^ Hubert L. Harris, Jr. /s/ Kenneth T. King
- ------------------------------------ ------------------------------------
^ Hubert L. Harris, Jr., Director Kenneth T. King, Director
/s/ Charles W. Brady /s/ John W. McIntyre
- ------------------------------------ ------------------------------------
Charles W. Brady, Director John W. McIntyre, Director
/s/ Wendy L. Gramm
- ------------------------------------
Wendy L. Gramm, Director
/s/ Glen A. Payne
By* -------------------------------- By*---------------------------------
Edward F. O'Keefe Glen A. Payne
Attorney in Fact Attorney in Fact
* Original Powers of Attorney authorizing Edward F. O'Keefe and Glen A.
Payne, and each of them, to execute this post-effective amendment to the
Registration Statement of the Registrant on behalf of the above-named directors
and officers of the Registrant (with the exception of Drs. Gramm and Soll) have
been filed with the Securities and Exchange Commission on June 15, 1993, June
22, 1994, ^ June 22, 1995 and June 30, 1997, respectively.
<PAGE>
Exhibit Index
Page in
Exhibit Number Registration Statement
^ 5(a)(i) 70
6(b) 71
8(b) 83
8(c) 102
10 103
11 104
17 105
Form of
Amendment to Investment Advisory Agreement
This is an Amendment to the Investment Advisory Agreement made and
entered into between INVESCO Capital Appreciation Funds, Inc., a Maryland
corporation (the "Company") and INVESCO Funds Group, Inc., a Delaware
corporation ("IFG"), as of the 28th day of February, 1997 (the "Agreement").
WHEREAS, the Company desires to have IFG perform investment advisory,
statistical, research, and certain administrative and clerical services with
respect to management of the assets of the Company allocable to the INVESCO
Growth & Income Fund, and IFG is willing and able to perform such services on
the terms and conditions set forth in the Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in the Agreement, it is agreed that the terms and conditions of the
Agreement shall be applicable to the Company's assets allocable to the INVESCO
Growth & Income Fund, to the same extent as if the INVESCO Growth & Income Fund
were to be added to the definition of "Funds" as utilized in the Agreement, and
that INVESCO Growth & Income Fund shall pay IFG a fee for services provided to
them by IFG under the Agreement as follows: 0.60% on the first $350 million of
INVESCO Growth & Income Fund's average net assets as so determined, 0.55% of
INVESCO Growth & Income Fund's average net asset value for net assets in excess
of $350 million but not more than $700 million, and 0.50% of INVESCO Growth &
Income Fund's average net assets in excess of $700 million.
IN WITNESS WHEREOF, the parties have executed this Agreement on this
1st day of July, 1998.
INVESCO CAPITAL APPRECIATION
FUNDS, INC.
By:_______________________________
Dan J. Hesser,
President
ATTEST:
- ---------------------------
Glen A. Payne, Secretary
INVESCO FUNDS GROUP, INC.
By:________________________________
Ronald L. Grooms,
Senior Vice President
ATTEST:
- ---------------------------
Glen A. Payne, Secretary
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made this 30th day of September, 1997 between INVESCO
DYNAMICS FUND, INC., a Maryland corporation (the "Fund"), and INVESCO
DISTRIBUTORS, INC., a Delaware corporation (the "Underwriter").
W I T N E S S E T H:
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"), as a diversified, open-end
management investment company and currently has one class of shares (the
"Shares") representing an interest in a portfolio of investments, and it is in
the interest of the Fund to offer the Shares for sale continuously; and
WHEREAS, the Underwriter is engaged in the business of selling shares
of investment companies either directly to investors or through other securities
dealers; and
WHEREAS, the Fund and the Underwriter wish to enter into an agreement
with each other with respect to the continuous offering of the Shares in order
to promote growth of the Fund and facilitate the distribution of the Shares;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto as follows:
1. The Fund hereby appoints the Underwriter its agent for the
distribution of Shares in jurisdictions wherein such Shares
legally may be offered for sale; provided, however, that the Fund
in its absolute discretion may (a) issue or sell Shares directly
to purchasers, or (b) issue or sell Shares to the shareholders of
any other investment company, for which the Underwriter or any
affiliate thereof shall act as exclusive distributor, who wish to
exchange all or a portion of their investment in shares of such
other investment company for the Shares of the Fund.
Notwithstanding any other provision hereof, the Fund may
terminate, suspend or withdraw the offering of Shares whenever,
in its sole discretion, it deems such action to be desirable. The
Fund reserves the right to reject any subscription in whole or in
part for any reason.
<PAGE>
2. The Underwriter hereby agrees to serve as agent for the
distribution of the Shares and agrees that it will use its best
efforts with reasonable promptness to sell such part of the
authorized Shares remaining unissued as from time to time shall
be effectively registered under the Securities Act of 1933, as
amended (the "1933 Act"), at such prices and on such terms as
hereinafter set forth, all subject to applicable federal and
state securities laws and regulations. Nothing herein shall be
construed to prohibit the Underwriter from engaging in other
related or unrelated businesses.
3. In addition to serving as the Fund's agent in the distribution of
the Shares, the Underwriter shall also provide to the holders of
the Shares certain maintenance, support or similar services
("Shareholder Services"). Such services shall include, without
limitation, answering routine shareholder inquiries regarding the
Fund, assisting shareholders in considering whether to change
dividend options and helping to effectuate such changes,
arranging for bank wires, and providing such other services as
the Fund may reasonably request from time to time. It is
expressly understood that the Underwriter or the Fund may enter
into one or more agreements with third parties pursuant to which
such third parties may provide the Shareholder Services provided
for in this paragraph. Nothing herein shall be construed to
impose upon the Underwriter any duty or expense in connection
with the services of any registrar, transfer agent or custodian
appointed by the Fund, the computation of the asset value or
offering price of Shares, the preparation and distribution of
notices of meetings, proxy soliciting material, annual and
periodic reports, dividends and dividend notices, or any other
responsibility of the Fund.
4. Except as otherwise specifically provided for in this Agreement,
the Underwriter shall sell the Shares directly to purchasers, or
through qualified broker-dealers or others, in such manner, not
inconsistent with the provisions hereof and the then effective
Registration Statement of the Fund under the 1933 Act (the
"Registration Statement") and related Prospectus (the
"Prospectus") and Statement of Additional Information ("SAI") of
<PAGE>
the Fund as the Underwriter may determine from time to time;
provided that no broker-dealer or other person shall be appointed
or authorized to act as agent of the Fund without the prior
consent of the directors (the "Directors") of the Fund. The
Underwriter will require each broker-dealer to conform to the
provisions hereof and of the Registration Statement (and related
Prospectus and SAI) at the time in effect under the 1933 Act with
respect to the public offering price of the Shares. The Fund will
have no obligation to pay any commissions or other remuneration
to such broker-dealers.
5. The Shares offered for sale or sold by the Underwriter shall be
offered or sold at the net asset value per share determined in
accordance with the then current Prospectus and/or SAI relating
to the sale of the Shares except as departure from such prices
shall be permitted by the then current Prospectus and/or SAI of
the Fund, in accordance with applicable rules and regulations of
the Securities and Exchange Commission. The price the Fund shall
receive for the Shares purchased from the Fund shall be the net
asset value per share of such Share, determined in accordance
with the Prospectus and/or SAI applicable to the sale of the
Shares.
6. Except as may be otherwise agreed to by the Fund, the Underwriter
shall be responsible for issuing and delivering such
confirmations of sales made by it pursuant to this Agreement as
may be required; provided, however, that the Underwriter or the
Fund may utilize the services of other persons or entities
believed by it to be competent to perform such functions. Shares
shall be registered on the transfer books of the Fund in such
names and denominations as the Underwriter may specify.
7. The Fund will execute any and all documents and furnish any and
all information which may be reasonably necessary in connection
with the qualification of the Shares for sale (including the
qualification of the Fund as a broker-dealer where necessary or
advisable) in such states as the Underwriter may reasonably
request (it being understood that the Fund shall not be required
without its consent to comply with any requirement which in the
opinion of the Directors of the Fund is unduly burdensome). The
Underwriter, at its own expense, will effect all qualifications
<PAGE>
of itself as broker or dealer, or otherwise, under all applicable
state or Federal laws required in order that the Shares may be
sold in such states or jurisdictions as the Fund may reasonably
request.
8. The Fund shall prepare and furnish to the Underwriter from time
to time the most recent form of the Prospectus and/or SAI of the
Fund. The Fund authorizes the Underwriter to use the Prospectus
and/or SAI, in the forms furnished to the Underwriter from time
to time, in connection with the sale of the Shares of the Fund.
The Fund will furnish to the Underwriter from time to time such
information with respect to the Fund and the Shares as the
Underwriter may reasonably request for use in connection with the
sale of the Shares. The Underwriter agrees that it will not use
or distribute or authorize the use, distribution or dissemination
by broker-dealers or others in connection with the sale of the
Shares any statements, other than those contained in a current
Prospectus and/or SAI of the Fund except such supplemental
literature or advertising as shall be lawful under Federal and
state securities laws and regulations, and that it will promptly
furnish the Fund with copies of all such material.
9. The Underwriter will not make, or authorize any broker-dealers or
others to make any short sales of the Shares of the Fund or
otherwise make any sales of the Shares unless such sales are made
in accordance with a then current Prospectus and/or SAI relating
to the sale of the applicable Shares.
10. The Underwriter, as agent of and for the account of the Fund, may
cause the redemption or repurchase of the Shares at such prices
and upon such terms and conditions as shall be specified in a
then current Prospectus and/or SAI. In selling, redeeming or
repurchasing the Shares for the account of the Fund, the
Underwriter will in all respects conform to the requirements of
all state and federal laws and the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., relating to
such sale, redemption or repurchase, as the case may be. The
Underwriter will observe and be bound by all the provisions of
the Articles of Incorporation or Bylaws of the Fund and of any
<PAGE>
provisions in the Registration Statement, Prospectus and SAI, as
such may be amended or supplemented from time to time, notice of
which shall have been given to the Underwriter, which at the time
in any way require, limit, restrict or prohibit or otherwise
regulate any action on the part of the Underwriter.
11. (a) The Fund shall indemnify, defend and hold harmless the
Underwriter, its officers and directors and any person who
controls the Underwriter within the meaning of the 1933 Act,
from and against any and all claims, demands, liabilities
and expenses (including the cost of investigating or
defending such claims, demands or liabilities and any
attorney fees incurred in connection therewith) which the
Underwriter, its officers and directors or any such
controlling person, may incur under the federal securities
laws, the common law or otherwise, arising out of or based
upon any alleged untrue statement of a material fact
contained in the Registration Statement or any related
Prospectus and/or SAI or arising out of or based upon any
alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein
not misleading.
Notwithstanding the foregoing, this indemnity agreement, to
the extent that it might require indemnity of the
Underwriter or any person who is an officer, director or
controlling person of the Underwriter, shall not inure to
the benefit of the Underwriter or officer, director or
controlling person thereof unless a court of competent
jurisdiction shall determine, or it shall have been
determined by controlling precedent, that such result would
not be against public policy as expressed in the federal
securities laws and in no event shall anything contained
herein be so construed as to protect the Underwriter against
any liability to the Fund, the Directors or the Fund's
shareholders to which the Underwriter would otherwise be
subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of
<PAGE>
its reckless disregard of its obligations and duties under
this Agreement.
This indemnity agreement is expressly conditioned upon the
Fund's being notified of any action brought against the
Underwriter, its officers or directors or any such
controlling person, which notification shall be given by
letter or by telegram addressed to the Fund at its principal
address in Denver, Colorado and sent to the Fund by the
person against whom such action is brought within ten (10)
days after the summons or other first legal process shall
have been served upon the Underwriter, its officers or
directors or any such controlling person. The failure to
notify the Fund of any such action shall not relieve the
Fund from any liability which it may have to the person
against whom such action is brought by reason of any such
alleged untrue statement or omission otherwise than on
account of the indemnity agreement contained in this
paragraph. The Fund shall be entitled to assume the defense
of any suit brought to enforce such claim, demand, or
liability, but in such case the defense shall be conducted
by counsel chosen by the Fund and approved by the
Underwriter, which approval shall not be unreasonably
withheld. If the Fund elects to assume the defense of any
such suit and retain counsel approved by the Underwriter,
the defendant or defendants in such suit shall bear the fees
and expenses of an additional counsel obtained by any of
them. Should the Fund elect not to assume the defense of any
such suit, or should the Underwriter not approve of counsel
chosen by the Fund, the Fund will reimburse the Underwriter,
its officers and directors or the controlling person or
persons named as defendant or defendants in such suit, for
the reasonable fees and expenses of any counsel retained by
the Underwriter or them. In addition, the Underwriter shall
have the right to employ counsel to represent it, its
officers and directors and any such controlling person who
may be subject to liability arising out of any claim in
respect of which indemnity may be sought by the Underwriter
<PAGE>
against the Fund hereunder if in the reasonable judgment of
the Underwriter it is advisable for the Underwriter, its
officers and directors or such controlling person to be
represented by separate counsel, in which event the
reasonable fees and expenses of such separate counsel shall
be borne by the Fund. This indemnity agreement and the
Fund's representations and warranties in this Agreement
shall remain operative and in full force and effect and
shall survive the delivery of any of the Shares as provided
in this Agreement. This indemnity agreement shall inure
exclusively to the benefit of the Underwriter and its
successors, the Underwriter's officers and directors and
their respective estates and any such controlling person and
their successors and estates. The Fund shall promptly notify
the Underwriter of the commencement of any litigation or
proceeding against it in connection with the issue and sale
of the Shares.
(b) The Underwriter agrees to indemnify, defend and hold
harmless the Fund, its Directors and any person who controls
the Fund within the meaning of the 1933 Act, from and
against any and all claims, demands, liabilities and
expenses (including the cost of investigating or defending
such claims, demands or liabilities and any attorney fees
incurred in connection therewith) which the Fund, its
Directors or any such controlling person may incur under the
Federal securities laws, the common law or otherwise, but
only to the extent that such liability or expense incurred
by the Fund, its Directors or such controlling person
resulting from such claims or demands shall arise out of or
be based upon (a) any alleged untrue statement of a material
fact contained in information furnished in writing by the
Underwriter to the Fund specifically for use in the
Registration Statement or any related Prospectus and/or SAI
or shall arise out of or be based upon any alleged omission
to state a material fact in connection with such information
required to be stated in the Registration Statement or the
related Prospectus and/or SAI or necessary to make such
information not misleading and (b) any alleged act or
omission on the Underwriter's part as the Fund's agent that
has not been expressly authorized by the Fund in writing.
<PAGE>
Notwithstanding the foregoing, this indemnity agreement, to
the extent that it might require indemnity of the Fund or
any Director or controlling person of the Fund, shall not
inure to the benefit of the Fund or Director or controlling
person thereof unless a court of competent jurisdiction
shall determine, or it shall have been determined by
controlling precedent, that such result would not be against
public policy as expressed in the federal securities laws
and in no event shall anything contained herein be so
construed as to protect any Director of the Fund against any
liability to the Fund or the Fund's shareholders to which
the Director would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence or reckless
disregard of the duties involved in the conduct of his
office.
This indemnity agreement is expressly conditioned upon the
Underwriter's being notified of any action brought against
the Fund, its Directors or any such controlling person,
which notification shall be given by letter or telegram
addressed to the Underwriter at its principal office in
Denver, Colorado, and sent to the Underwriter by the person
against whom such action is brought, within ten (10) days
after the summons or other first legal process shall have
been served upon the Fund, its Directors or any such
controlling person. The failure to notify the Underwriter of
any such action shall not relieve the Underwriter from any
liability which it may have to the person against whom such
action is brought by reason of any such alleged untrue
statement or omission otherwise than on account of the
indemnity agreement contained in this paragraph. The
Underwriter shall be entitled to assume the defense of any
suit brought to enforce such claim, demand, or liability,
but in such case the defense shall be conducted by counsel
chosen by the Underwriter and approved by the Fund, which
approval shall not be unreasonably withheld. If the
<PAGE>
Underwriter elects to assume the defense of any such suit
and retain counsel approved by the Fund, the defendant or
defendants in such suit shall bear the fees and expenses of
an additional counsel obtained by any of them. Should the
Underwriter elect not to assume the defense of any such
suit, or should the Fund not approve of counsel chosen by
the Underwriter, the Underwriter will reimburse the Fund,
its Directors or the controlling person or persons named as
defendant or defendants in such suit, for the reasonable
fees and expenses of any counsel retained by the Fund or
them. In addition, the Fund shall have the right to employ
counsel to represent it, its Directors and any such
controlling person who may be subject to liability arising
out of any claim in respect of which indemnity may be sought
by the Fund against the Underwriter hereunder if in the
reasonable judgment of the Fund it is advisable for the
Fund, its Directors or such controlling person to be
represented by separate counsel, in which event the
reasonable fees and expenses of such separate counsel shall
be borne by the Underwriter. This indemnity agreement and
the Underwriter's representations and warranties in this
Agreement shall remain operative and in full force and
effect and shall survive the delivery of any of the Shares
as provided in this Agreement. This indemnity agreement
shall inure exclusively to the benefit of the Fund and its
successors, the Fund's Directors and their respective
estates and any such controlling person and their successors
and estates. The Underwriter shall promptly notify the Fund
of the commencement of any litigation or proceeding against
it in connection with the issue and sale of the Shares.
12. The Fund will pay or cause to be paid (a) expenses (including the
fees and disbursements of its own counsel) of any registration of
the Shares under the 1933 Act, as amended, (b) expenses incident
to the issuance of the Shares, and (c) expenses (including the
fees and disbursements of its own counsel) incurred in connection
with the preparation, printing and distribution of the Fund's
Prospectuses, SAIs, and periodic and other reports sent to
<PAGE>
holders of the Shares in their capacity as such. The Underwriter
shall prepare and provide necessary copies of all sales
literature subject to the Fund's approval thereof.
13. This Agreement shall become effective as of the date it is
approved by a majority vote of the Directors of the Fund, as well
as a majority vote of the Directors who are not "interested
persons" (as defined in the Investment Company Act) of the Fund,
and shall continue in effect for an initial term expiring
February 28, 1998, and from year to year thereafter, but only so
long as such continuance is specifically approved at least
annually (a)(i) by a vote of the Directors of the Fund or (ii) by
a vote of a majority of the outstanding voting securities of the
Fund, and (b) by a vote of a majority of the Directors of the
Fund who are not "interested persons," as defined in the
Investment Company Act, of the Fund cast in person at a meeting
for the purpose of voting on this Agreement.
Either party hereto may terminate this Agreement on any date,
without the payment of a penalty, by giving the other party at
least 60 days' prior written notice of such termination
specifying the date fixed therefor. In particular, this Agreement
may be terminated at any time, without payment of any penalty, by
vote of a majority of the members of the Directors of the Fund or
by a vote of a majority of the outstanding voting securities of
the Fund on not more than 60 days' written notice to the
Underwriter.
Without prejudice to any other remedies of the Fund provided for
in this Agreement or otherwise, the Fund may terminate this
Agreement at any time immediately upon the Underwriter's failure
to fulfill any of the obligations of the Underwriter hereunder.
14. The Underwriter expressly agrees that, notwithstanding anything
to the contrary herein, or in any applicable law, it will look
solely to the assets of the Fund for any obligations of the Fund
hereunder and nothing herein shall be construed to create any
personal liability on the part of any Director or any shareholder
of the Fund.
<PAGE>
15. This Agreement shall automatically terminate in the event of its
assignment. In interpreting the provisions of this Section 15,
the definition of "assignment" contained in the Investment
Company Act shall be applied.
16. Any notice under this Agreement shall be in writing, addressed
and delivered or mailed, postage prepaid, to the other party at
such address as such other party may designate for the receipt of
such notice.
17. No provision of this Agreement may be changed, waived, discharged
or terminated orally, but only by an instrument in writing signed
by the Fund and the Underwriter and, if applicable, approved in
the manner required by the Investment Company Act.
18. Each provision of this Agreement is intended to be severable. If
any provision of this Agreement shall be held illegal or made
invalid by a court decision, statute, rule or otherwise, such
illegality or invalidity shall not affect the validity or
enforceability of the remainder of this Agreement.
19. This Agreement and the application and interpretation hereof
shall be governed exclusively by the laws of the State of
Colorado.
<PAGE>
IN WITNESS WHEREOF, the Fund and the Underwriter have each caused this
Agreement to be executed on its behalf by an officer thereunto duly authorized
and the Underwriter has caused its corporate seal to be affixed as of the day
and year first above written.
INVESCO DYNAMICS FUND, INC.
ATTEST:
By: /s/ Dan J. Hesser
-------------------------
Dan J. Hesser
President
/s/ Glen A. Payne
- ----------------------
Glen A. Payne
Secretary
INVESCO DISTRIBUTORS, INC.
ATTEST:
By: /s/ Ronald L. Grooms
-------------------------
Ronald L. Grooms
Senior Vice President
/s/ Glen A. Payne
- ----------------------
Glen A. Payne
Secretary
DATA ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT
AGREEMENT between each Fund listed on Appendix A, (individually a
"Customer" and collectively, the "Customers") and State Street Bank and Trust
Company ("State Street").
PREAMBLE
WHEREAS, State Street has been appointed as custodian of certain assets of
each Customer pursuant to a certain Custodian Agreement (the "Custodian
Agreement") for each of the respective Customers;
WHEREAS, State Street has developed and utilizes proprietary accounting and
other systems, including State Street's proprietary Multicurrency HORIZONR
Accounting System, in its role as custodian of each Customer, and maintains
certain Customer-related data ("Customer Data") in databases under the control
and ownership of State Street (the "Data Access Services"); and
WHEREAS, State Street makes available to each Customer certain Data Access
Services solely for the benefit of the Customer, and intends to provide
additional services, consistent with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the parties
agree as follows:
1. SYSTEM AND DATA ACCESS SERVICES
a. System. Subject to the terms and conditions of this Agreement, State
Street hereby agrees to provide each Customer with access to State Street's
Multicurrency HORIZONR Accounting System and the other information systems
(collectively, the "System") as described in Attachment A, on a remote basis for
the purpose of obtaining reports, solely on computer hardware, system software
and telecommunication links, as listed in Attachment B (the "Designated
Configuration") of the Customer, or certain third parties approved by State
Street that serve as investment advisors or investment managers (the "Investment
Advisor") or independent auditors (the "Independent Auditors") of a Customer and
solely with respect to the Customer or on any designated substitute or back-up
equipment configuration with State Street's written consent, such consent not to
be unreasonably withheld.
b. Data Access Services. State Street agrees to make available to each
Customer the Data Access Services subject to the terms and conditions of this
Agreement and data access operating standards and procedures as may be issued by
State Street from time to time. The ability of each Customer to originate
electronic instructions to State Street on behalf of each Customer in order to
(i) effect the transfer or movement of cash or securities held under custody by
State Street or (ii) transmit accounting or other information (such transactions
are referred to herein as "Client Originated Electronic Financial
Instructions"), and (iii) access data for the purpose of reporting and analysis,
shall be deemed to be Data Access Services for purposes of this Agreement.
<PAGE>
c. Additional Services. State Street may from time to time agree to make
available to a Customer additional Systems that are not described in the
attachments to this Agreement. In the absence of any other written agreement
concerning such additional systems, the term "System" shall include, and this
Agreement shall govern, a Customer's access to and use of any additional System
made available by State Street and/or accessed by the Customer.
2. NO USE OF THIRD PARTY SOFTWARE
State Street and each Customer acknowledge that in connection with the Data
Access Services provided under this Agreement, each Customer will have access,
through the Data Access Services, to Customer Data and to functions of State
Street's proprietary systems; provided, however that in no event will the
Customer have direct access to any third party systems-level software that
retrieves data for, stores data from, or otherwise supports the System.
3. LIMITATION ON SCOPE OF USE
a. Designated Equipment; Designated Location. The System and the Data
Access Services shall be used and accessed solely on and through the Designated
Configuration at the offices of a Customer or the Investment Advisor or
Independent Auditor located in Denver, Colorado ("Designated Location").
b. Designated Configuration; Trained Personnel. State Street shall be
responsible for supplying, installing and maintaining the Designated
Configuration at the Designated Location. State Street and each Customer agree
that each will engage or retain the services of trained personnel to enable both
State Street and the Customer to perform their respective obligations under this
Agreement. State Street agrees to use commercially reasonable efforts to
maintain the System so that it remains serviceable, provided, however, that
State Street does not guarantee or assure uninterrupted remote access use of the
System.
c. Scope of Use. Each Customer will use the System and the Data Access
Services only for the processing of securities transactions, the keeping of
books of account for the Customer and accessing data for purposes of reporting
and analysis. Each Customer shall not, and shall cause its employees and agents
not to (i) permit any third party to use the System or the Data Access Services,
(ii) sell, rent, license or otherwise use the System or the Data Access Services
in the operation of a service bureau or for any purpose other than as expressly
authorized under this Agreement, (iii) use the System or the Data Access
Services for any fund, trust or other investment vehicle without the prior
written consent of State Street, (iv) allow access to the System or the Data
Access Services through terminals or any other computer or telecommunications
<PAGE>
facilities located outside the Designated Locations, (v) allow or cause any
information (other than portfolio holdings, valuations of portfolio holdings,
and other information reasonably necessary for the management or distribution of
the assets of the Customer) transmitted from State Street's databases, including
data from third party sources, available through use of the System or the Data
Access Services to be redistributed or retransmitted to another computer,
terminal or other device for other than use for or on behalf of the Customer or
(vi) modify the System in any way, including without limitation, developing any
software for or attaching any devices or computer programs to any equipment,
system, software or database which forms a part of or is resident on the
Designated Configuration.
d. Other Locations. Except in the event of an emergency or of a planned
System shutdown, each Customer's access to services performed by the System or
to Data Access Services at the Designated Location may be transferred to a
different location only upon the prior written consent of State Street. In the
event of an emergency or System shutdown, each Customer may use any back-up site
included in the Designated Configuration or any other back-up site agreed to by
State Street, which agreement will not be unreasonably withheld. Each Customer
may secure from State Street the right to access the System or the Data Access
Services through computer and telecommunications facilities or devices complying
with the Designated Configuration at additional locations only upon the prior
written consent of State Street and on terms to be mutually agreed upon by the
parties.
e. Title. Title and all ownership and proprietary rights to the System,
including any enhancements or modifications thereto, whether or not made by
State Street, are and shall remain with State Street.
f. No Modification. Without the prior written consent of State Street, a
Customer shall not modify, enhance or otherwise create derivative works based
upon the System, nor shall the Customer reverse engineer, decompile or otherwise
attempt to secure the source code for all or any part of the System.
<PAGE>
g. Security Procedures. Each Customer shall comply with data access
operating standards and procedures and with user identification or other
password control requirements and other security procedures as may be issued
from time to time by State Street for use of the System on a remote basis and to
access the Data Access Services. Each Customer shall have access only to the
Customer Data and authorized transactions agreed upon from time to time by State
Street and, upon notice from State Street, the Customer shall discontinue remote
use of the System and access to Data Access Services for any security reasons
cited by State Street; provided, that, in such event, State Street shall, for a
period not less than 180 days (or such other shorter period specified by the
Customer) after such discontinuance, assume responsibility to provide accounting
services under the terms of the Custodian Agreement.
h. Inspections. State Street shall have the right to inspect the use of the
System and the Data Access Services by the Customer and the Investment Advisor
to ensure compliance with this Agreement. The on-site inspections shall be upon
prior written notice to Customer and the Investment Advisor and at reasonably
convenient times and frequencies so as not to result in an unreasonable
disruption of the Customer's or the Investment Advisor's business.
4. PROPRIETARY INFORMATION
a. Proprietary Information. Each Customer acknowledges and State Street
represents that the System and the databases, computer programs, screen formats,
report formats, interactive design techniques, documentation and other
information made available to the Customer by State Street as part of the Data
Access Services and through the use of the System constitute copyrighted, trade
secret, or other proprietary information of substantial value to State Street.
Any and all such information provided by State Street to each Customer shall be
deemed
<PAGE>
proprietary and confidential information of State Street (hereinafter
"Proprietary Information"). Each Customer agrees that it will hold such
Proprietary Information in confidence and secure and protect it in a manner
consistent with its own procedures for the protection of its own confidential
information and to take appropriate action by instruction or agreement with its
employees who are permitted access to the Proprietary Information to satisfy its
obligations hereunder. Each Customer further acknowledges that State Street
shall not be required to provide the Investment Advisor or the Investment
Auditor with access to the System unless it has first received from the
Investment Advisor of the Investment Auditor an undertaking with respect to
State Street's Proprietary Information in the form of Attachment C and/or
Attachment C-1 to this Agreement. Each Customer shall use all commercially
reasonable efforts to assist State Street in identifying and preventing any
unauthorized use, copying or disclosure of the Proprietary Information or any
portions thereof or any of the logic, formats or designs contained therein.
b. Cooperation. Without limitation of the foregoing, each Customer shall
advise State Street immediately in the event the Customer learns or has reason
to believe that any person to whom the Customer has given access to the
Proprietary Information, or any portion thereof, has violated or intends to
violate the terms of this Agreement, and each Customer will, at its expense,
cooperate with State Street in seeking injunctive or other equitable relief in
the name of the Customer or State Street against any such person.
c. Injunctive Relief. Each Customer acknowledges that the disclosure of any
Proprietary Information, or of any information which at law or equity ought to
remain confidential, will immediately give rise to continuing irreparable injury
to State Street inadequately compensable in damages at law. In addition, State
Street shall be entitled to obtain immediate injunctive relief against the
breach or threatened breach of any of the foregoing undertakings, in addition to
any other legal remedies which may be available.
<PAGE>
d. Survival. The provisions of this Section 4 shall survive the termination
of this Agreement.
5. LIMITATION ON LIABILITY
a. Limitation on Amount and Time for Bringing Action. Each Customer agrees
any liability of State Street to the Customer or any third party arising out of
State Street's provision of Data Access Services or the System under this
Agreement shall be limited to the amount paid by the Customer for he preceding
24 months for such services. In no event shall State Street be liable to the
Customer or any other party for any special, indirect, punitive or consequential
damages even if advised of the possibility of such damages. No action,
regardless of form, arising out of this Agreement may be brought by the Customer
more than two years after the Customer has knowledge that the cause of action
has arisen.
b. NO OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, ARE MADE BY STATE STREET. IN NO EVENT WILL STATE STREET BE
LIABLE TO THE CUSTOMER OR ANY OTHER PARTY FOR ANY CONSEQUENTIAL OR INCIDENTAL
DAMAGES WHICH MAY ARISE FROM THE CUSTOMER'S ACCESS TO THE SYSTEM OR USE OF
INFORMATION OBTAINED THEREBY.
c. Third-Party Data. Organizations from which State Street may obtain
certain data included in the System or the Data Access Services are solely
responsible for the contents of such data, and State Street shall have no
liability for claims arising out of the contents of such third-party data,
including, but not limited to, the accuracy thereof.
d. Regulatory Requirements. As between State Street and each Customer, the
Customer shall be solely responsible for the accuracy of any accounting
statements or reports produced using the Data Access Services and the System and
the conformity thereof with any requirements of law.
<PAGE>
e. Force Majeure. Neither State Street or a Customer shall be liable for
any costs or damages due to delay or nonperformance under this Agreement arising
out of any cause or event beyond such party's control, including without
limitation, cessation of services hereunder or any damages resulting therefrom
to the other party, or the Customer as a result of work stoppage, power or other
mechanical failure, computer virus, natural disaster, governmental action, or
communication disruption.
6. INDEMNIFICATION
Each Customer agrees to indemnify and hold State Street harmless from any
loss, damage or expense including reasonable attorney's fees, (a "loss")
suffered by State Street arising from (i) the negligence or willful misconduct
in the use by the Customer of the Data Access Services or the System, including
any loss incurred by State Street resulting from a security breach at the
Designated Location or committed by the Customer's employees or agents or the
Investment Advisor or the Independent Auditor of the Customer and (ii) any loss
resulting from incorrect Client Originated Electronic Financial Instructions.
State Street shall be entitled to rely on the validity and authenticity of
Client Originated Electronic Financial Instructions without undertaking any
further inquiry as long as such instruction is undertaken in conformity with
security procedures established by State Street from time to time.
7. FEES
Fees and charges for the use of the System and the Data Access Services and
related payment terms shall be as set forth in the Custody Fee Schedule in
effect from time to time between the parties (the "Fee Schedule"). Any tariffs,
duties or taxes imposed or levied by any government or governmental agency by
reason of the transactions contemplated by this Agreement, including, without
<PAGE>
limitation, federal, state and local taxes, use, value added and personal
property taxes (other than income, franchise or similar taxes which may be
imposed or assessed against State Street) shall be borne by each Customer. Any
claimed exemption from such tariffs, duties or taxes shall be supported by
proper documentary evidence delivered to State Street.
8. TRAINING, IMPLEMENTATION AND CONVERSION
a. Training. State Street agrees to provide training, at a designated State
Street training facility or at the Designated Location, to he Customer's
personnel in connection with the use of the System on the Designated
Configuration. Each Customer agrees that it will set aside, during regular
business hours or at other times agreed upon by both parties, sufficient time to
enable all operators of the System and the Data Access Services, designated by
the Customer, to receive the training offered by State Street pursuant to this
Agreement.
b. Installation and Conversion. State Street shall be responsible for the
technical installation and conversion ("Installation and Conversion") of the
Designated Configuration. Each Customer shall have the following
responsibilities in connection with Installation and Conversion of the System:
(i) The Customer shall be solely responsible for the timely
acquisition and maintenance of the hardware and software that attach
to the Designated Configuration in order to use the Data Access
Services at the Designated Location.
(ii) State Street and the Customer each agree that they will assign
qualified personnel to actively participate during the Installation
and Conversion phase of the System implementation to enable both
parties to perform their respective obligations under this Agreement.
<PAGE>
9. SUPPORT
During the term of this Agreement, State Street agrees to provide the
support services set out in Attachment D to this Agreement.
10. TERM OF AGREEMENT
a. Term of Agreement. This Agreement shall become effective on the date of
its execution by State Street and shall remain in full force and effect u til
terminated as herein provided.
b. Termination of Agreement. Any party may terminate this Agreement (i) for
any reason by giving the other parties at least one-hundred and eighty days'
prior written notice in the case of notice of termination by State Street to the
Customer or thirty days' notice in the case of notice from the Customer to State
Street of termination; or (ii) immediately for failure of the other party to
comply with any material term and condition of the Agreement by giving the other
party written notice of termination. In the event the Customer shall cease doing
business, shall become subject to proceedings under the bankruptcy laws (other
than a petition for reorganization or similar proceeding) or shall be
adjudicated bankrupt, this Agreement and the rights granted hereunder shall, at
the option of State Street, immediately terminate with notice to the Customer.
Termination of this Agreement with respect to any given Customer shall in no way
affect the continued validity of this Agreement with respect to any other
Customer. This Agreement shall in any event terminate as to any Customer within
90 days after the termination of the Custodian Agreement applicable to such
Customer.
c. Termination of the Right to Use. Upon termination of this Agreement for
any reason, any right to use the System and access to the Data Access Services
shall terminate and the Customer shall immediately cease use of the System and
the Data Access Services. Immediately upon termination of this Agreement for any
reason, the Customer shall return to State Street all copies of documentation
<PAGE>
and other Proprietary Information in its possession; provided, however,
that in the event that either State Street or the Customer terminates this
Agreement or the Custodian Agreement for any reason other than the Customer's
breach, State Street shall provide the Data Access Services for a period of time
and at a price to be agreed upon by State Street and the Customer.
11. MISCELLANEOUS
a. Assignment; Successors. This Agreement and the rights and obligations of
each Customer and State Street hereunder shall not be assigned by any party
without the prior written consent of the other parties, except that State Street
may assign this Agreement to a success r of all or a substantial portion of its
business, or to a party controlling, controlled by, or under common control with
State Street.
b. Survival. All provisions regarding indemnification, warranty, liability
and limits thereon, and confidentiality and/or protection of proprietary rights
and trade secrets shall survive the termination of this Agreement.
c. Entire Agreement. This Agreement and the attachments hereto constitute
the entire understanding of the parties hereto with respect to the Data Access
Services and the use of the System and supersedes any and all prior or
contemporaneous representations or agreements, whether oral or written, between
the parties as such may relate to the Data Access Services or the System, and
cannot be modified or altered except in a writing duly executed by the parties.
This Agreement is not intended to supersede or modify the duties and liabilities
of the parties hereto under the Custodian Agreement or any other agreement
between the parties hereto except to the extent that any such agreement
specifically refers to the Data Access Services or the System. No single waiver
or any right hereunder shall be deemed to be a continuing waiver.
d. Severability. If any provision or provisions of this Agreement shall be
held to be invalid, unlawful, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired.
e. Governing Law. This Agreement shall be interpreted and construed in
accordance with the internal laws of The Commonwealth of Massachusetts without
regard to the conflict of laws provisions thereof.
<PAGE>
IN WITNESS WHEREOF, each of the undersigned Funds severally has
caused this Agreement to be duly executed in its name and through its duly
authorized officer as of the date hereof.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Ronald E. Logue
-----------------------------------
Title: Exeuctive Vice President
Date: -----------------------------
EACH FUND LISTED ON APPENDIX A
By: /s/ Glen A. Payne
------------------------------
Title: Secretary
Date: May 19, 1997
------------------------------
<PAGE>
APPENDIX A
INVESCO FUNDS
INVESCO Diversified Funds, Inc.
INVESCO Small Company Value Fund
INVESCO Dynamics Fund, Inc.
INVESCO Dynamics Fund, Inc.
INVESCO Emerging Opportunity Funds, Inc.
INVESCO Small Company Growth Fund
INVESCO Worldwide Emerging Markets Fund
INVESCO Growth Fund, Inc.
INVESCO Growth Fund, Inc.
INVESCO Income Funds, Inc.
INVESCO High Yield Fund
INVESCO Select Income Fund
INVESCO Short-Term Bond Fund
INVESCO U.S. Government Bond Fund
INVESCO Industrial Income Fund, Inc.
INVESCO Industrial Income Fund, Inc.
INVESCO International Funds, Inc.
INVESCO European Fund
INVESCO International Growth Fund
INVESCO Pacific Basin Fund
INVESCO Money Market Funds, Inc.
INVESCO Cash Reserves Fund
INVESCO Tax-Free Money Fund
INVESCO U.S. Government Money Fund
INVESCO Multiple Asset Funds, Inc.
INVESCO Balanced Fund
INVESCO Multi-Asset Allocation Fund
<PAGE>
INVESCO Specialty Funds, Inc.
INVESCO Asian Growth Fund
INVESCO European Small Company Fund
INVESCO Latin American Growth Fund
INVESCO Realty Fund
INVESCO Worldwide Capital Goods Fund
INVESCO Worldwide Communications Fund
INVESCO Strategic Portfolios, Inc.
Energy Portfolio
Environmental Services Portfolio
Financial Services Portfolio
Gold Portfolio
Health Sciences Portfolio
Leisure Portfolio
Technology Portfolio
Utilities Portfolio
INVESCO Tax-Free Income Funds, Inc.
INVESCO Tax-Free Intermediate Bond Fund
INVESCO Tax-Free Long-Term Bond Fund
INVESCO Treasurer's Series Trust
INVESCO Treasurer's Money Market Reserve Fund
INVESCO Treasurer's Prime Reserve Fund
INVESCO Treasurer's Special Reserve Fund
INVESCO Treasurer's Tax-Exempt Reserve Fund
INVESCO Value Trust
INVESCO Intermediate Government Bond Fund
INVESCO Total Return Fund
INVESCO Value Equity Fund
INVESCO Variable Investment Funds, Inc.
INVESCO VIF-Dynamics Portfolio
INVESCO VIF-Health Sciences Portfolio
INVESCO VIF-High Yield Portfolio
INVESCO VIF-Industrial Income Portfolio
<PAGE>
INVESCO VIF-Small Company Growth Portfolio
INVESCO VIF-Technology Portfolio
INVESCO VIF-Total Return Portfolio
INVESCO VIF-Utilities Portfolio
INVESCO VIF-Growth Portfolio*
*Effective May 1, 1997.
<PAGE>
ATTACHMENT A
Multicurrency HORIZONR Accounting System
System Product Description
I. The Multicurrency HORIZONR Accounting System is designed to provide lot
level portfolio and general ledger accounting for SEC and ERISA type
requirements and includes the following services: 1) recording of general ledger
entries; 2) calculation of daily income and expense; 3) reconciliation of daily
activity with the trial balance, and 4) appropriate automated feeding mechanisms
to (i) domestic and international settlement systems, (ii) daily, weekly and
monthly evaluation services, (iii) portfolio performance and analytic services,
(iv) customer's internal computing systems and (v) various State Street provided
information services products.
II. GlobalQuestR GlobalQuestR is designed to provide customer access to the
following information maintained on The Multicurrency HORIZONR Accounting
System: 1) cash transactions and balances; 2) purchases and sales; 3) income
receivables; 4) tax refund receivables; 5) daily priced positions; 6) open
trades; 7) settlement status; 8) foreign exchange transactions; 9) trade
history; and 10) daily, weekly and monthly evaluation services.
III. HORIZONR Gateway. HORIZONR Gateway provides customers with the ability
to (i) generate reports using information maintained on the Multicurrency
HORIZONR Accounting System which may be viewed or printed at the customer's
location; (ii) extract and download data from the Multicurrency HORIZONR
Accounting System; and (iii) access previous day and historical data. The
following information which may be accessed for these purposes: 1) holdings; 2)
holdings pricing; 3) transactions, 4) open trades; 5) income; 6) general ledger
and 7) cash.
<PAGE>
ATTACHMENT B
Designated Configuration
<PAGE>
ATTACHMENT C
Undertaking
The undersigned understands that in the course of its employment as
Investment Advisor to each of the Funds (individually a, "Customer" ,
collectively, the "Customers") it will have access to State Street Bank and
Trust Company's ("State Street") Multicurrency HORIZON Accounting System and
other information systems (collectively, the "System").
The undersigned acknowledges that the System and the databases, computer
programs, screen formats, report formats, interactive design techniques,
documentation, and other information made available to the Undersigned by State
Street as part of the Data Access Services provided to the Customer and through
the use of the System constitute copyrighted, trade secret, or other proprietary
information of substantial value to State Street. Any and all such information
provided by State Street to the Undersigned shall be deemed proprietary and
confidential information of State Street (hereinafter "Proprietary
Information"). The Undersigned agrees that it will hold such Proprietary
Information in confidence and secure and protect it in a manner consistent with
its own procedures for the protection of its own confidential information and to
take appropriate action by instruction or agreement with its employees who are
permitted access to the Proprietary Information to satisfy its obligations
hereunder.
The Undersigned will not attempt to intercept data, gain access to data in
transmission, or attempt entry into any system or files for which it is not
authorized. It will not intentionally adversely affect the integrity of the
System through the introduction of unauthorized code or data, or through
unauthorized deletion.
Upon notice by State Street for any reason, any right to use the System and
access to the Data Access Services shall terminate and the Undersigned shall
immediately cease use of the System and the Data Access Services. Immediately
upon notice by State Street for any reason, the Undersigned shall return to
State Street all copies of documentation and other Proprietary Information in
its possession.
By: /s/ Glen A. Payne
----------------------------
Title: Secretary
Date: May 19, 1997
-----------------------
<PAGE>
ATTACHMENT D
Support
During the term of this Agreement, State Street agrees to provide the
following on-going support services:
a. Telephone Support. The Customer Designated Persons may contact State
Street's HORIZONR Help Desk and Customer Assistance Center between the hours of
8 a.m. and 6 p.m. (Eastern time) on all business days for the purpose of
obtaining answers to questions about the use of the System, or to report
apparent problems with the System. From time to time, the Customer shall provide
to State Street a list of persons, not to exceed five in number, who shall be
permitted to contact State Street for assistance (such persons being referred to
as "the Customer Designated Persons").
b. Technical Support. State Street will provide technical support to assist
the Customer in using the System and the Data Access Services. The total amount
of technical support provided by State Street shall not exceed 10 resource days
per year. State Street shall provide such additional technical support as is
expressly set forth in the fee schedule in effect from time to time between the
parties (the "Fee Schedule"). Technical support, including during installation
and testing, is subject to the fees and other terms set forth in the Fee
Schedule.
c. Maintenance Support. State Street shall use commercially reasonable
efforts to correct system functions that do not work according to the System
Product Description as set forth on Attachment A in priority order in the next
scheduled delivery release or otherwise as soon as is practicable.
d. System Enhancements. State Street will provide to the Customer any
enhancements to the System developed by State Street and made a part of the
System; provided that, sixty (60) days prior to installing any such enhancement,
State Street shall notify the Customer and shall offer the Customer reasonable
<PAGE>
training on the enhancement. Charges for system enhancements shall be as
provided in the Fee Schedule. State Street retains the right to charge for
related systems or products that may be developed and separately made available
for use other than through the System.
e. Custom Modifications. In the event the Customer desires custom
modifications in connection with its use of the System, the Customer shall make
a written request to State Street providing specifications for the desired
modification. Any custom modifications may be undertaken by State Street in its
sole discretion in accordance with the Fee Schedule.
f. Limitation on Support. State Street shall have no obligation to support
the Customer's use of the System: (1) for use on any computer equipment or
telecommunication facilities which does not conform to the Designated
Configuration or (ii) in the event the Customer has modified the System in
breach of this Agreement.
INVESCO FUNDS GROUP, INC.
7800 East Union Avenue
Denver, Colorado 80237
INVESCO FUNDS Post Office Box 173706
Denver, Colorado 80217-3706
Telephone: 303-930-6300
April 15, 1998
Mr. Christopher J. Meyers
Assistant Vice President
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
Re: INVESCO Capital Appreciation Funds, Inc.
Dear Chris:
This is to advise you that INVESCO Capital Appreciation Funds, Inc. (the
"Company") has established a new series of shares to be known as INVESCO Growth
& Income Fund. In accordance with the Additional Funds provision in Paragraph 17
of the Custodian Contract dated October 20, 1993 between the Company and State
Street Bank and Trust Company, the Company hereby requests that you act as
Custodian for the new series under the terms of the Contract.
Please indicate your acceptance of the foregoing by executing two copies of this
Letter Agreement, returning one to the Company and retaining one copy for your
records.
Sincerely,
/s/ Glen A. Payne
Glen A. Payne
Secretary
Agreed to this _____ day of __________, 1998.
STATE STREET BANK AND TRUST COMPANY
By: _______________________________________
Vice President
MODESITT AND SHAW
ATTORNEYS AT LAW
1500 DENVER U.S. NATIONAL CENTER
1700 BROADWAY
DENVER, COLORADO 80202
LELAND E. MODESITT
RICHARD H. SHAW TELEPHONE 292-1650
PETER L. GARRETT AREA CODE 303
NORMAN D. JOHNSON
January 16, 1968
Financial Dynamics Fund, Inc.
950 Broadway
Denver, Colorado
Gentlemen:
This is in response to your request for an opinion as to the legality
of two million shares of capital stock of Financial Dynamics, Inc., currently
being registered with the Securities and Exchange Commission by post-effective
amendment to the registration statement (Form S-5) under the Securities Act of
1933 as amended.
We have examined a certified copy of the Certificate of Incorporation
of Financial Dynamics Fund, Inc., as filed for record in the office of the
Secretary of State of the State of Colorado on February 17, 1967, the by-laws
and other documents included in the registration statement and the current
post-effective amendment thereto.
Based upon our examination, we are of the opinion that Financial
Dynamics, Inc., is a corporation duly organized and existing under and by virtue
of the laws of the State of Colorado with full power to issue its shares of
capital stock and that said shares when issued and sold in the manner and on the
terms set forth in the post-effective amendment to the registration statement
will be legally and validly issued, fully paid and non-assessable shares of the
corporation of the par value of 1(cent) per share, with the rights and
privileges set forth in the Certificate of Incorporation.
We hereby consent to the use of this opinion in the above-mentioned
post-effective amendment to the registration statement and further consent to
reference to our name therein.
Very truly yours,
MODESITT AND SHAW
/s/ Leland E. Modesitt
----------------------
Leland E. Modesitt
LEM:mmm
Consent of Independent Accountants
We hereby conssent to to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 47 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated May 30, 1997, relating to the financial
statements and financial highlights appearing in the April 30, 1997 Annual
report to Shareholders of INVESCO Dynamics Fund, Inc. (now known as INVESCO
Capital Appreciation Funds, Inc.), which is also incorporated by reference into
the Registration Statement. We also consent to the references to us under the
heading "Financial Highlights" in the Prospectus and under the headings
"Independent Accountants" and "Financial Statements" in the Statement of
Additional Information.
/s/ Price Waterhouse LLP
- ------------------------
Price Waterhouse LLP
Denver, Colorado
April 16, 1998
[ARTICLE] 6
[CIK] 0000035692
[NAME] INVESCO DYNAMICS FUND, INC.
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] APR-30-1997
[PERIOD-END] APR-30-1997
[INVESTMENTS-AT-COST] 745683445
[INVESTMENTS-AT-VALUE] 762594853
[RECEIVABLES] 29770522
[ASSETS-OTHER] 92091
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 792457466
[PAYABLE-FOR-SECURITIES] 28654808
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1407039
[TOTAL-LIABILITIES] 30061847
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 713749397
[SHARES-COMMON-STOCK] 63412679
[SHARES-COMMON-PRIOR] 57186453
[ACCUMULATED-NII-CURRENT] (9165)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 31744567
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 16910820
[NET-ASSETS] 762395619
[DIVIDEND-INCOME] 5003726
[INTEREST-INCOME] 1943404
[OTHER-INCOME] (163415)
[EXPENSES-NET] 9247863
[NET-INVESTMENT-INCOME] (2464148)
[REALIZED-GAINS-CURRENT] 40252470
[APPREC-INCREASE-CURRENT] (65105461)
[NET-CHANGE-FROM-OPS] (24852991)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 80828360
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 61735689
[NUMBER-OF-SHARES-REDEEMED] 61637091
[SHARES-REINVESTED] 6127628
[NET-CHANGE-IN-ASSETS] (16020139)
[ACCUMULATED-NII-PRIOR] 430
[ACCUMULATED-GAINS-PRIOR] 72316047
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 4550303
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 9356563
[AVERAGE-NET-ASSETS] 803572
[PER-SHARE-NAV-BEGIN] 13.61
[PER-SHARE-NII] (0.04)
[PER-SHARE-GAIN-APPREC] (0.19)
[PER-SHARE-DIVIDEND] 0.00
[PER-SHARE-DISTRIBUTIONS] 1.36
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 12.02
[EXPENSE-RATIO] 1.00
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
