As filed on May 5, 2000 File No. 002-26125
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. __ __
Post-Effective Amendment No. 56 X
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 30 X
INVESCO STOCK 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:
Clifford J. Alexander, Esq. Ronald M. Feiman, Esq.
Kirkpatrick & Lockhart LLP Mayer, Brown & Platt
1800 Massachusetts Avenue, N.W. 1675 Broadway
Second Floor New York, New York 10019-5820
Washington, D.C. 20036-1800
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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)
X on May 19, 2000, pursuant to paragraph (b)
__ 60 days after filing pursuant to paragraph (a)(1)
__ on _____________, pursuant to paragraph (a)(1)
__ 75 days after filing pursuant to paragraph (a)(2)
__ on _________, pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box:
X this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
PROSPECTUS | May 19, 2000
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YOU SHOULD KNOW WHAT INVESCO KNOWS (TM)
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INVESCO STOCK FUNDS, INC.
INVESCO DYNAMICS FUND--INSTITUTIONAL CLASS
A NO-LOAD CLASS OF SHARES OF A MUTUAL FUND SEEKING CAPITAL APPRECIATION.
TABLE OF CONTENTS
Investment Goals, Strategies And Risks..............3
Fund Performance....................................4
Fees And Expenses...................................6
Investment Risks....................................7
Risks Associated With Particular Investments........7
Temporary Defensive Positions......................11
Fund Management....................................12
Portfolio Managers.................................12
Potential Rewards..................................13
Share Price........................................13
How To Buy Shares..................................14
Your Account Services..............................16
How To Sell Shares.................................17
Taxes..............................................19
Dividends And Capital Gain Distributions...........19
Financial Highlights...............................21
[INVESCO ICON] INVESCO
The Securities and Exchange Commission has not approved or disapproved the
shares of this Fund. Likewise, the Commission has not determined if this
Prospectus is truthful or complete. Anyone who tells you otherwise is committing
a federal crime.
<PAGE>
This Prospectus will tell you more about:
[KEY ICON] Investment Goals & Strategies
[ARROWS ICON] Potential Investment Risks
[GRAPH ICON] Past Performance
[INVESCO ICON] Working With INVESCO
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[KEY ICON] [ARROWS ICON] INVESTMENT GOALS, STRATEGIES AND RISKS
INVESCO Funds Group, Inc. ("INVESCO") is the investment adviser for the
Fund. Together with our affiliated companies, we at INVESCO direct all aspects
of the management and sale of the Fund.
This Prospectus contains important information about the Fund's
Institutional Class shares, which are offered only to institutional investors
and qualified retirement plans. The Fund also offers one or more additional
classes of shares through separate prospectuses. Each of the Fund's classes has
different expenses. You can choose the class of shares that is best for you. To
obtain additional information about other classes of shares, contact INVESCO
Distributors, Inc. ("IDI") at 1-800-328-2234.
FOR MORE DETAILS ABOUT THE FUND'S CURRENT INVESTMENTS AND MARKET OUTLOOK,
PLEASE SEE THE MOST RECENT ANNUAL OR SEMIANNUAL REPORT.
The Fund attempts to make your investment grow. It is actively managed.
Although the Fund can invest in debt securities, it primarily invests in equity
securities that INVESCO believes will rise in price faster than other
securities, as well as in options and other investments whose values are based
upon the values of these securities.
The Fund primarily invests in common stocks of mid-sized U.S. companies --
those with market capitalizations between $2 billion and $15 billion at the time
of purchase -- but also has the flexibility to invest in other types of
securities, including preferred stocks, convertible securities and bonds.
The core of the Fund's portfolio is invested in securities of established
companies that are leaders in attractive growth markets with a history of strong
returns. The remainder of the portfolio is invested in securities of companies
that show accelerating growth, driven by product cycles, favorable industry or
sector conditions and other factors that INVESCO believes will lead to rapid
sales or earnings growth.
The Fund's strategy relies on many short-term factors including current
information about a company, investor interest, price movements of a company's
<PAGE>
securities and general market and monetary conditions. Consequently, the Fund's
investments are usually bought and sold relatively frequently.
The Fund is managed in the growth style. At INVESCO, growth investing
starts with research from the "bottom up," and focuses on company fundamentals
and growth prospects.
We require that securities purchased for the Fund meet the following
standards:
o EXCEPTIONAL GROWTH: The markets and industries they represent are
growing significantly faster than the economy as a whole.
o LEADERSHIP: They are leaders -- or emerging leaders -- in these markets,
securing their positions through technology, marketing, distribution or
some other innovative means.
o FINANCIAL VALIDATION: Their returns -- in the form of sales unit growth,
rising operating margins, internal funding and other factors -- demonstrate
exceptional growth and leadership.
While the Fund generally invests in mid-sized companies, the Fund sometimes
invests in the securities of smaller companies. The prices of these securities
tend to move up and down more rapidly than the securities prices of larger, more
established companies, and the price of Fund shares tends to fluctuate more than
it would if the Fund invested in the securities of larger companies.
The Fund is subject to other principal risks such as market, liquidity,
derivatives, options and futures, counterparty, interest rate, duration, foreign
securities, lack of timely information and credit risks. These risks are
described and discussed later in the Prospectus under the headings "Investment
Risks" and "Risks Associated With Particular Investments." An investment in the
Fund is not a deposit of any bank and is not insured or guaranteed by the
Federal Deposit Insurance Corporation ("FDIC") or any other government agency.
As with any mutual fund, there is always a risk that you may lose money on your
investment in the Fund.
[GRAPH ICON] FUND PERFORMANCE
Since the Fund's Institutional Class shares are not offered until May 19,
2000, the bar chart below shows the Fund's Investor Class shares' actual yearly
performance for the years ended December 31 (commonly known as its "total
return") since inception. INVESTOR CLASS SHARES ARE NOT OFFERED IN THIS
PROSPECTUS. INVESTOR CLASS AND INSTITUTIONAL CLASS RETURNS WOULD BE SIMILAR
BECAUSE BOTH CLASSES OF SHARES INVEST IN THE SAME PORTFOLIO OF SECURITIES. THE
RETURNS OF THE CLASSES WOULD DIFFER, HOWEVER, TO THE EXTENT OF DIFFERING LEVELS
OF EXPENSES. In this regard, the bar chart does not reflect contingent deferred
sales charges; if it did, the total return shown would be lower. The bar chart
does, however, reflect asset based sales charges of 0.25% of net assets. The
table below shows average annual total returns for various periods ended
December 31 for the Fund's Investor Class shares compared to the S&P MidCap 400
Index. The information in the chart and table illustrates the variability of the
Fund's Investor Class shares' total return and how its performance compared to a
broad measure of market performance. Remember, past performance does not
indicate how the Fund will perform in the future.
<PAGE>
The chart below contains the following plot points:
<TABLE>
<CAPTION>
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DYNAMICS FUND - INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2),(3)
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'90 '91 '92 '93 '94 '95 '96 '97 '98 '99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(6.35%) 67.00% 13.15% 19.10% (1.95%) 37.55% 15.65% 24.09% 23.25% 71.80%
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Best Calendar Qtr. 12/99 38.83%
Worst Calendar Qtr. 9/90 (19.61%)
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</TABLE>
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AVERAGE ANNUAL TOTAL RETURN(1),(3)
AS OF 12/31/99
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1 YEAR 5 YEARS 10 YEARS
Dynamics Fund - Investor Class 71.80% 33.11% 24.06%
S&P MidCap 400 Index(4) 14.72% 23.05% 17.32%
(1) Total return figures include reinvested dividends and capital gain
distributions, and include the effect of the Fund's expenses.
(2) The total returns are for Investor Class shares that are not offered in this
Prospectus. Total returns of Institutional Class shares will differ only to
the extent that the classes do not have the same expenses.
(3) The return for Dynamics Fund--Investor Class was 15.12% as of the calendar
quarter ended March 31, 2000.
(4) The S&P MidCap 400 Index is an unmanaged index indicative of domestic
mid-capitalization stocks. Please keep in mind that the Index does not pay
brokerage, management, administrative or distribution expenses, all of which
are paid by the Fund and are reflected in its annual returns.
<PAGE>
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDER FEES PAID DIRECTLY FROM YOUR ACCOUNT
You pay no fee to purchase Fund shares, to exchange to another INVESCO
fund, or to sell your shares. Accordingly, no fees are paid directly from your
shareholder account. The only Fund costs you pay are annual Fund operating
expenses that are deductible from Fund assets.
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS
DYNAMICS FUND--INSTITUTIONAL CLASS
Management Fees 0.52%
Distribution and Service (12b-1) Fees None
Other Expenses(1) 0.27%
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Total Annual Fund Operating Expenses(1) 0.79%
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(1) Based on estimated expenses for the current fiscal year, which may be
more or less than actual expenses. Actual expenses are not provided
because the Fund's Institutional Class shares are not offered until
May 16, 2000. Certain expenses of the Fund will be absorbed by
INVESCO in order to ensure that expenses for the Fund's Institutional
Class shares will not exceed 0.95% of the Fund's average net assets
attributable to Institutional Class shares pursuant to a commitment
between the Fund and INVESCO. This commitment may be changed at any time
following consultation with the board of directors.
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Institutional Class shares of the Fund to the cost of investing in other mutual
funds.
The Example assumes that you invested $10,000 in the Institutional Class
shares of the Fund for the time periods indicated and redeemed all of your
shares at the end of each period. The Example also assumes that your investment
had a hypothetical 5% return each year and that the Fund's Institutional Class
shares' operating expenses remained the same. Although the actual costs and
performance of the Fund's Institutional Class shares may be higher or lower,
based on these assumptions your costs would have been:
1 year 3 years 5 years 10 years
$81 $252 $439 $978
<PAGE>
[ARROWS ICON] INVESTMENT RISKS
You should determine the level of risk with which you are comfortable
before you invest. The principal risks of investing in any mutual fund,
including the Fund, are:
BEFORE INVESTING IN THE FUND, YOU SHOULD DETERMINE THE LEVEL OF RISK WITH
WHICH YOU ARE COMFORTABLE. TAKE INTO ACCOUNT FACTORS LIKE YOUR AGE, CAREER,
INCOME LEVEL, AND TIME HORIZON.
NOT INSURED. Mutual funds are not insured by the FDIC or any other agency,
unlike bank deposits such as CDs or savings accounts.
NO GUARANTEE. No mutual fund can guarantee that it will meet its investment
objectives.
POSSIBLE LOSS OF INVESTMENT. A mutual fund cannot guarantee its
performance, nor assure you that the market value of your investment will
increase. You may lose the money you invest, and the Fund will not reimburse you
for any of these losses.
VOLATILITY. The price of your mutual fund shares will increase or decrease
with changes in the value of the Fund's underlying investments and changes in
the equity markets as a whole.
NOT A COMPLETE INVESTMENT PLAN. An investment in any mutual fund does not
constitute a complete investment plan. The Fund is designed to be only a part of
your personal investment plan.
[ARROWS ICON] RISKS ASSOCIATED WITH PARTICULAR INVESTMENTS
You should consider the special factors associated with the policies
discussed below in determining the appropriateness of investing in the Fund. See
the Statement of Additional Information for a discussion of additional risk
factors.
MARKET RISK
Equity stock prices vary and may fall, thus reducing the value of the
Fund's investments.Certain stocks selected for the Fund's portfolio may decline
in value more than the overall stock market. In general, the securities of large
businesses with outstanding securities worth $15 billion or more are less
volatile than those of mid-size businesses with outstanding securities worth
more than $2 billion, or small businesses with outstanding securities worth less
than $2 billion.
LIQUIDITY RISK
The Fund's portfolio is liquid if the Fund is able to sell the securities
it owns at a fair price within a reasonable time. Liquidity is generally related
to the market trading volume for a particular security. Investments in smaller
companies or in foreign companies or companies in emerging markets are subject
to a variety of risks, including potential lack of liquidity.
<PAGE>
DERIVATIVES RISK
A derivative is a financial instrument whose value is "derived," in some
manner, from the price of another security, index, asset or rate. Derivatives
include options and futures contracts, among a wide range of other instruments.
The principal risk of investments in derivatives is that the fluctuations in
their values may not correlate perfectly with the overall securities markets.
Some derivatives are more sensitive to interest rate changes and market price
fluctuations than others. Also, derivatives are subject to counterparty risk as
described below.
OPTIONS AND FUTURES RISK
Options and futures are common types of derivatives that the Fund may
occasionally use to hedge its investments. An option is the right to buy or sell
a security or other instrument, index or commodity at a specific price on or
before a specific date. A future is an agreement to buy or sell a security or
other instrument, index or commodity at a specific price on a specific date.
COUNTERPARTY RISK
This is a risk associated primarily with repurchase agreements and some
derivatives transactions. It is the risk that the other party in the transaction
will not fulfill its contractual obligation to complete the transaction with the
Fund.
INTEREST RATE RISK
Changes in interest rates will affect the resale value of debt securities
held in the Fund's portfolio. In general, as interest rates rise, the resale
value of debt securities decreases; as interest rates decline, the resale value
of debt securities generally increases. Debt securities with longer maturities
usually are more sensitive to interest rate movements.
DURATION RISK
Duration is a measure of a debt security's sensitivity to interest rate
changes. Duration is usually expressed in terms of years, with longer durations
usually more sensitive to interest rate movements.
FOREIGN SECURITIES RISKS
Investments in foreign and emerging markets carry special risks, including
currency, political, regulatory and diplomatic risks. The Fund may invest up to
25% of its assets in securities of non-U.S. issuers. Securities of Canadian
issuers and American Depository Receipts are not subject to this 25% limitation.
CURRENCY RISK. A change in the exchange rate between U.S. dollars and a
foreign currency may reduce the value of the Fund's investment in a
security valued in the foreign currency, or based on that currency value.
POLITICAL RISK. Political actions, events or instability may result in
unfavorable changes in the value of a security.
REGULATORY RISK. Government regulations may affect the value of a security.
In foreign countries, securities markets that are less regulated than those
in the U.S. may permit trading practices that are not allowed in the U.S.
<PAGE>
DIPLOMATIC RISK. A change in diplomatic relations between the U.S. and a
foreign country could affect the value or liquidity of investments.
EUROPEAN ECONOMIC AND MONETARY UNION. Austria, Belgium, Finland,
France, Germany, Ireland, Italy, Luxembourg, The Netherlands, Portugal
and Spain are presently members of the European Economic and Monetary
Union (the "EMU") which as of January 1, 1999, adopted the euro as a
common currency. The national currencies will be sub-currencies of the
euro until July 1, 2002, at which time these currencies will disappear
entirely. Other European countries may adopt the euro in the future.
The introduction of the euro presents some uncertainties and possible
risks, which could adversely affect the value of securities held by the
Fund.
EMU countries, as a single market, may affect future investment
decisions of the Fund. As the euro is implemented, there may be
changes in the relative strength and value of the U.S. dollar and other
major currencies, as well as possible adverse tax consequences. The euro
transition by EMU countries -- present and future -- may affect the fiscal
and monetary levels of those participating countries. There may be
increased levels of price competition among business firms within EMU
countries and between businesses in EMU and non-EMU countries. The outcome
of these uncertainties could have unpredictable effects on trade and
commerce and result in increased volatility for all financial markets.
LACK OF TIMELY INFORMATION RISK
Timely information about a security or its issuer may be unavailable,
incomplete or inaccurate. This risk is more common to securities issued by
foreign companies and companies in emerging markets than it is to the securities
of U.S.-based companies.
CREDIT RISK
The Fund may invest in debt instruments, such as notes, bonds and
commercial paper. There is a possibility that the issuers of these instruments
will be unable to meet interest payments or repay principal. Changes in the
financial strength of an issuer may reduce the credit rating of its debt
instruments and may affect their value.
-----------------------------------------
The Fund generally invests in equity securities of growing companies.
However, in an effort to diversify its holdings and provide some protection
against the risk of other investments, the Fund also may invest in other types
of securities and other financial instruments, as indicated in the chart below.
These investments, which at any given time may constitute a significant portion
of the Fund's portfolio, have their own risks.
<PAGE>
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INVESTMENT RISKS
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AMERICAN DEPOSITORY RECEIPTS (ADRS)
These are securities issued by U.S. Market,
banks that represent shares of foreign Information,
corporations held by those banks. Political,
Although traded in U.S. securities Regulatory,
markets and valued in U.S. dollars, ADRs Diplomatic,
carry most of the risks of investing Liquidity and
directly in foreign securities. Currency Risks
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DEBT SECURITIES
Securities issued by private companies Market, Credit,
or governments repre senting an Interest Rate
obligation to pay interest and to repay and Duration
principal when the security matures. Risks
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DELAYED DELIVERY OR WHEN-ISSUED
SECURITIES
Ordinarily, the Fund purchases Market and
securities and pays for them in cash at Interest Rate
the normal trade settlement time. When Risks
the Fund pur chases a delayed delivery
or when-issued security, it promises to
pay in the future for example, when the
security is actually available for
delivery to the Fund. The Fund's
obligation to pay and the interest rate
it receives, in the case of debt
securities, usually are fixed when the
Fund promises to pay. Between the date
the Fund promises to pay and the date
the securities are actually received,
the Fund receives no interest on its
invest ment, and bears the risk that the
market value of the when-issued security
may decline.
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FORWARD FOREIGN CURRENCY CONTRACTS
A contract to exchange an amount of Currency,
currency on a date in the future at an Political,
agreed-upon exchange rate might be used Diplomatic,
by the Fund to hedge against changes in Counterparty and
foreign currency exchange rates when the Regulatory Risks
Fund invests in foreign securities.
Does not reduce price fluctuations in
foreign securities, or prevent losses
if the prices of those securities
decline.
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FUTURES
A futures contract is an agreement to Market,
buy or sell a specific amount of a Liquidity and
financial instrument (such as an index Options and
option) at a stated price on a stated Futures Risks
date. The Fund may use futures con
tracts to provide liquidity and to hedge
portfolio value.
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JUNK BONDS
Debt securities that are rated BB or Market, Credit,
lower by Standard & Poor's or Ba or Interest Rate
lower by Moody's Investors Service. and Duration
Tend to pay higher interest rates than Risks
higher-rated debt securities, but carry
a higher credit risk.
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<PAGE>
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INVESTMENT RISKS
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OPTIONS
The obligation or right to deliver or Credit,
receive a security or other instrument, Information,
index or commodity, or cash payment Liquidity and
depending on the price of the underlying Options and
security or the per formance of an index Futures Risks
or other benchmark. Includes options on
specific securities and stock indices,
and options on stock index futures. May
be used in the Fund's portfolio to
provide liquidity and hedge portfolio
value.
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OTHER FINANCIAL INSTRUMENTS
These may include forward contracts, Counterparty,
swaps, caps, floors and collars. They Credit,
may be used to try to manage the Fund's Currency,
foreign currency exposure and other Interest Rate,
investment risks, which can cause its net Liquidity,
asset value to rise or fall. The Fund Market and
may use these financial instruments, Regulatory Risks
commonly known as "derivatives," to
increase or decrease its exposure to
changing securi ties prices, interest
rates, currency exchange rates or other
factors.
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REPURCHASE AGREEMENTS
A contract under which the seller of a Credit and
security agrees to buy it back at an Counterparty
agreed-upon price and time in the future. Risks
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RULE 144A SECURITIES
Securities that are not registered, but Liquidity Risk
which are bought and sold solely by
institutional investors. The Fund considers
many Rule 144A securities to be "liquid,"
although the market for such securities
typically is less active than the public
securities markets.
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[ARROWS ICON] TEMPORARY DEFENSIVE POSITIONS
When securities markets or economic conditions are unfavorable or
unsettled, we might try to protect the assets of the Fund by investing in
securities that are highly liquid, such as high quality money market instruments
like short-term U.S. government obligations, commercial paper or repurchase
agreements, even though that is not the normal investment strategy of the Fund.
We have the right to invest up to 100% of the Fund's assets in these securities,
although we are unlikely to do so. Even though the securities purchased for
defensive purposes often are considered the equivalent of cash, they also have
<PAGE>
their own risks. Investments that are highly liquid or comparatively safe tend
to offer lower returns. Therefore, the Fund's performance could be comparatively
lower if it concentrates in defensive holdings.
[INVESCO ICON] FUND MANAGEMENT
INVESTMENT ADVISER
INVESCO IS A SUBSIDIARY OF AMVESCAP PLC, AN INTERNATIONAL INVESTMENT
MANAGEMENT COMPANY THAT MANAGES MORE THAN $392 BILLION IN ASSETS WORLDWIDE.
AMVESCAP IS BASED IN LONDON, WITH MONEY MANAGERS LOCATED IN EUROPE, NORTH AND
SOUTH AMERICA, AND THE FAR EAST.
INVESCO, located at 7800 East Union Avenue, Denver, Colorado, is the
investment adviser of the Fund. INVESCO was founded in 1932 and manages over
$41.8 billion for more than 1,077,115 shareholders of 45 INVESCO mutual funds.
INVESCO performs a wide variety of other services for the Fund, including
administrative and transfer agency functions (the processing of purchases, sales
and exchanges of Fund shares).
A wholly owned subsidiary of INVESCO, IDI is the Fund's distributor and is
responsible for the sale of the Fund's shares.
INVESCO and IDI are subsidiaries of AMVESCAP PLC.
The following table shows the fee the Fund paid to INVESCO for its advisory
services in the period ended July 31, 1999:
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ADVISORY FEE AS A PERCENTAGE OF
FUND AVERAGE ANNUAL NET ASSETS UNDER MANAGEMENT
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INVESCO Dynamics Fund 0.52% (Annualized)
Since the Fund's Institutional Class shares are not offered until May 19,
2000, Institutional Class shares paid no fees to INVESCO for its advisory
services in the period ended July 31, 1999.
[INVESCO ICON] PORTFOLIO MANAGERS
The following individuals are primarily responsible for the day-to-day
management of the Fund's portfolio holdings:
TIMOTHY J. MILLER, a director and senior vice president of INVESCO, is the
lead portfolio manager of the Fund. Before joining INVESCO in 1992, Tim was a
portfolio manager with Mississippi Valley Advisors. He is a Chartered Financial
Analyst. Tim holds an M.B.A. from the University of Missouri--St. Louis and a
B.S.B.A. from St. Louis University.
THOMAS WALD, a vice president of INVESCO, is the co-portfolio manager of
the Fund. Before joining INVESCO in 1997, Tom was an analyst with Munder Capital
Management, Duff & Phelps and Prudential Investment Corp. He is a Chartered
<PAGE>
Financial Analyst. Tom holds an M.B.A. from the Wharton School at the University
of Pennsylvania and a B.A. from Tulane University.
Tom Wald is a member of the INVESCO Growth Team, which is led by Tim
Miller.
[INVESCO ICON] POTENTIAL REWARDS
NO SINGLE FUND SHOULD REPRESENT YOUR COMPLETE INVESTMENT PROGRAM NOR SHOULD
YOU ATTEMPT TO USE THE FUND FOR SHORT-TERM TRADING PURPOSES.
The Fund offers shareholders the potential to increase the value of their
capital over time. Like most mutual funds, the Fund seeks to provide higher
returns than the market or its competitors, but cannot guarantee that
performance. The Fund seeks to minimize risk by investing in many different
companies in a variety of industries.
SUITABILITY FOR INVESTORS
Only you can determine if an investment in the Fund is right for you based
upon your own economic situation, the risk level with which you are comfortable
and other factors. In general, the Fund is most suitable for investors who:
o are willing to grow their capital over the long-term (at least five years).
o understand that shares of the Fund can, and likely will, have daily price
fluctuations.
o are investing in tax-deferred retirement accounts, such as Traditional
and Roth Individual Retirement Accounts ("IRAs"), as well as employer-
sponsored qualified retirement plans, including 401(k)s and 403(b)s,
all of which have longer investment horizons.
You probably do not want to invest in the Fund if you are:
o primarily seeking current dividend income.
o unwilling to accept potential daily changes in the price of Fund shares.
o speculating on short-term fluctuations in the stock markets.
[INVESCO ICON] SHARE PRICE
CURRENT MARKET VALUE OF FUND ASSETS
+ ACCRUED INTEREST AND DIVIDENDS
- - FUND DEBTS,
INCLUDING ACCRUED EXPENSES
- -----------------------------------
/ NUMBER OF SHARES
= YOUR SHARE PRICE (NAV).
The value of your Fund shares is likely to change daily. This value is
known as the Net Asset Value per share, or NAV. INVESCO determines the market
value of each investment in the Fund's portfolio each day that the New York
Stock Exchange ("NYSE") is open, at the close of the regular trading day on that
exchange (normally 4:00 p.m. Eastern time). Therefore, shares of the Fund are
not priced on days when the NYSE is closed, which generally is on weekends and
national holidays in the U.S.
NAV is calculated by adding together the current market price of all of the
Fund's investments and other assets, including accrued interest and dividends;
subtracting the Fund's debts, including accrued expenses; and dividing that
<PAGE>
dollar amount by the total number of the Fund's outstanding shares.
All purchases, sales and exchanges of Fund shares are made by INVESCO at
the NAV next calculated after INVESCO receives proper instructions from you to
purchase, redeem or exchange shares of the Fund. Your instructions must be
received by INVESCO no later than the close of the NYSE to effect transactions
at that day's NAV. If INVESCO hears from you after that time, your instructions
will be processed at the NAV calculated at the end of the next day that the NYSE
is open.
Foreign securities exchanges, which set the prices for foreign securities
held by the Fund, are not always open the same days as the NYSE, and may be open
for business on days the NYSE is not. For example, Thanksgiving Day is a holiday
observed by the NYSE and not by overseas exchanges. In this situation, the Fund
would not calculate NAV on Thanksgiving Day (and INVESCO would not buy, sell or
exchange shares for you on that day), even though activity on foreign exchanges
could result in changes in the value of investments held by the Fund on that
day.
[INVESCO ICON] HOW TO BUY SHARES
TO BUY SHARES AT THAT DAY'S CLOSING PRICE, YOU MUST CONTACT US BEFORE THE
CLOSE OF THE NYSE, NORMALLY, 4:00 P.M. EASTERN TIME.
The Fund offers multiple classes of shares. Each class represents an
identical interest in the Fund and has the same rights, except that each class
bears its own distribution and shareholder servicing charges, and other
expenses. The income attributable to each class and the dividends payable on the
shares of each class will be reduced by the amount of the distribution fee or
service fee, if applicable, and the other expenses payable by that class.
In deciding which class of shares to purchase, you should consider, among
other things, (i) the length of time you expect to hold your shares, (ii) the
provisions of the distribution plan applicable to the class, if any, and (iii)
the eligibility requirements that apply to purchases of a particular class.
Institutional Class shares are offered only to institutional investors and
qualified retirement plans. Institutional Class shares are not available to
retail investors.
The following chart shows several convenient ways to invest in the Fund.
There is no charge to invest, exchange or redeem shares when you make
transactions directly through INVESCO. However, if you invest in the Fund
through a securities broker, you may be charged a commission or transaction fee
for either purchases or sales of Fund shares. For all new accounts, please send
a completed application form, and specify the fund or funds you wish to
purchase.
INVESCO reserves the right to increase, reduce or waive the Fund's minimum
investment requirements in its sole discretion if it determines this action is
in the best interest of the Fund's shareholders. INVESCO also reserves the right
in its sole discretion to reject any order to buy Fund shares, including
purchases by exchange.
<PAGE>
MINIMUM INITIAL INVESTMENT. $1,000,000
MINIMUM SUBSEQUENT INVESTMENT. $250,000
EXCHANGE POLICY. You may exchange your shares in the Fund for those in
another INVESCO mutual fund on the basis of their respective NAVs at the time of
the exchange.
FUND EXCHANGES CAN BE A CONVENIENT WAY FOR YOU TO DIVERSIFY YOUR
INVESTMENTS, OR TO REALLOCATE YOUR INVESTMENTS WHEN YOUR OBJECTIVES CHANGE.
Before making any exchange, be sure to review the prospectuses of the funds
involved and consider the differences between the funds. Also, be certain that
you qualify to purchase certain classes of shares in the new fund. An exchange
is the sale of shares from one fund immediately followed by the purchase of
shares in another. Therefore, any gain or loss realized on the exchange is
recognizable for federal income tax purposes (unless, of course, you or your
account qualifies as tax-deferred under the Internal Revenue Code). If the
shares of the fund you are selling have gone up in value since you bought them,
the sale portion of an exchange may result in taxable income to you.
We have the following policies governing exchanges:
o Both fund accounts involved in the exchange must be registered in exactly the
same name(s) and Social Security or federal tax I.D. number(s).
o You may make up to four exchanges out of the Fund per 12-month period.
o The Fund reserves the right to reject any exchange request, or to modify or
terminate the exchange policy, if it is in the best interests of the Fund
and its shareholders. Notice of all such modifications or terminations that
affect all shareholders of the Fund will be given at least 60 days prior to
the effective date of the change, except in unusual instances, including a
suspension of redemption of the exchanged security under Section 22(e) of
the Investment Company Act of 1940.
In addition, the ability to exchange may be temporarily suspended at any
time that sales of the fund into which you wish to exchange are temporarily
stopped.
Please remember that if you pay by check, Automated Clearing House ("ACH"),
or wire and your funds do not clear, you will be responsible for any related
loss to the Fund or INVESCO. If you are already an INVESCO funds shareholder,
the Fund may seek reimbursement for any loss from your existing account(s).
METHOD INVESTMENT MINIMUM PLEASE REMEMBER
- --------------------------------------------------------------------------------
BY CHECK $1,000,000; This Fund is
Mail to: $250,000 for offered only to
INVESCO Funds Group, each subse- institutional
Inc., quent investors and
P.O. Box 173706, investment. qualified
Denver, CO 80217-3706. retirement plans.
You may send your check This Fund is not
by overnight courier to: available to
7800 E. Union Ave. retail investors.
Denver, CO 80237.
<PAGE>
METHOD INVESTMENT MINIMUM PLEASE REMEMBER
- --------------------------------------------------------------------------------
BY WIRE $1,000,000; This Fund is
You may send your $250,000 for offered only to
payment by each subse- institutional
bank wire (call INVESCO quent investors and
for investment. qualified
instructions). retirement plans.
This Fund is not
available to retail
investors.
- --------------------------------------------------------------------------------
BY TELEPHONE WITH ACH $1,000,000; This Fund is
Call 1-800-328-2234 to $250,000 for offered only to
request your pur chase. each subse- institutional
INVESCO will move money quent investors and
from your designated investment. qualified
bank/credit union check retirement plans.
ing or savings account This Fund is not
in order to purchase available to
shares, upon your retail investors.
telephone instructions, You must forward
whenever you wish. your bank account
information to
INVESCO prior to
using this option.
- --------------------------------------------------------------------------------
BY PAL(R) $1,000,000; This Fund is
Your "Personal Account $250,000 for offered only to
Line" is each subse- institutional
available for subsequent quent investors and
purchases investment. qualified
and exchanges 24 hours a retirement plans.
day. This Fund is not
Simply call available to
1-800-424-8085. retail investors.
Be sure to write
down the
confirmation number
provided by PAL(R).
You must forward
your bank account
information to
INVESCO prior to
using this option.
- --------------------------------------------------------------------------------
BY EXCHANGE $1,000,000; See "Exchange
Between two INVESCO $250,000 for Policy."
funds. Call each subse-
1-800-328-2234 for quent
prospectuses of investment.
other INVESCO funds.
Exchanges may be made
by phone or at our Web
site at www.invesco.com.
You may also establish an
automatic monthly
exchange service
between two INVESCO funds;
call us for further details
and the correct form.
[INVESCO ICON] YOUR ACCOUNT SERVICES
INVESCO PROVIDES YOU WITH SERVICES DESIGNED TO MAKE IT SIMPLE FOR YOU TO BUY,
SELL OR EXCHANGE YOUR SHARES OF ANY INVESCO MUTUAL FUND.
<PAGE>
SHAREHOLDER ACCOUNTS. INVESCO maintains your share account, which contains your
current Fund holdings. The Fund does not issue share certificates.
QUARTERLY INVESTMENT SUMMARIES. Each calendar quarter, you receive a
written statement which consolidates and summarizes account activity and value
at the beginning and end of the period for each of your INVESCO funds.
TRANSACTION CONFIRMATIONS. You receive detailed confirmations of individual
purchases, exchanges and sales. If you choose certain recurring transaction
plans (for instance, EasiVest), your transactions are confirmed on your
quarterly Investment Summaries.
TELEPHONE TRANSACTIONS. You may buy, exchange and sell Fund shares by
telephone, unless you specifically decline these privileges when you fill out
the INVESCO new account Application.
YOU CAN CONDUCT MOST TRANSACTIONS AND CHECK ON YOUR ACCOUNT THROUGH OUR
TOLL-FREE TELEPHONE NUMBER. YOU MAY ALSO ACCESS PERSONAL ACCOUNT INFORMATION AT
OUR WEB SITE, WWW.INVESCO.COM.
Unless you decline the telephone transaction privileges, when you fill out
and sign the new account Application, a Telephone Transaction Authorization
Form, or use your telephone transaction privileges, you lose certain rights if
someone gives fraudulent or unauthorized instructions to INVESCO that result in
a loss to you. In general, if INVESCO has followed reasonable procedures, such
as recording telephone instructions and sending written transaction
confirmations, INVESCO is not liable for following telephone instructions that
it believes to be genuine. Therefore, you have the risk of loss due to
unauthorized or fraudulent instructions.
IRAS AND OTHER RETIREMENT PLANS. Shares of any INVESCO mutual fund may be
purchased for IRAs and many other types of tax-deferred retirement plans. Please
call INVESCO for information and forms to establish or transfer your existing
retirement plan or account.
[INVESCO ICON] HOW TO SELL SHARES
The following chart shows several convenient ways to sell your Fund shares.
Shares of the Fund may be sold at any time at the next NAV calculated after your
request to sell in proper form is received by INVESCO. Depending on Fund
performance, the NAV at the time you sell your shares may be more or less than
the price you paid to purchase your shares.
TO SELL SHARES AT THAT DAY'S CLOSING PRICE, YOU MUST CONTACT US BEFORE 4:00
P.M. EASTERN TIME.
If you own shares in more than one INVESCO fund, please specify the fund whose
shares you wish to sell. Remember that any sale or exchange of shares in a
non-retirement account will likely result in a taxable gain or loss.
While INVESCO attempts to process telephone redemptions promptly, there may
be times-- particularly in periods of severe economic or market disruption--
when you may experience delays in redeeming shares by phone.
INVESCO usually mails you the proceeds from the sale of Fund shares within
seven days after we receive your request to sell in proper form. However,
payment may be postponed under unusual circumstances--for instance, if normal
trading is not taking place on the NYSE, or during an emergency as defined by
the Securities and Exchange Commission. If your INVESCO fund shares were
purchased by a check which has not yet cleared, payment will be made promptly
when your purchase check does clear; that can take up to 15 days.
<PAGE>
METHOD REDEMPTION MINIMUM PLEASE REMEMBER
- --------------------------------------------------------------------------------
BY TELEPHONE $250 (or, if INVESCO's telephone
Call us toll-free less, full redemption
at: liquidation of privileges may be
1-800-328-2234 the account) for modified or
a redemption terminated in the
check; $1,000 for future at INVESCO's
a wire to your discretion.
bank of record.
The maximum
amount which may
be redeemed by
telephone is
generally $25,000.
- --------------------------------------------------------------------------------
IN WRITING Any amount. The redemption
Mail your request to request must be
INVESCO Funds Group, signed by all
Inc., P.O. Box registered account
173706, Denver, CO owners. Payment
80217-3706. You may will be mailed to
also send your your address as it
request by overnight appears on
courier to 7800 E. INVESCO's records,
Union Ave., Denver, or to a bank
CO 80237. designated by you
in writing.
- --------------------------------------------------------------------------------
BY EXCHANGE See "Exchange
Between two INVESCO Policy."
funds. Call When opening a new
1-800-328-2234 for account, investment
prospectuses of minimums apply.
other INVESCO
funds. Exchanges
may be made by phone
or at our Web site at
www.invesco.com.
You may also establish
an automatic monthly
exchange service between
two INVESCO funds; call
us for further details
and the correct form.
- --------------------------------------------------------------------------------
PAYMENT TO THIRD Any amount. All registered
PARTY account owners must
Mail your request to sign the request,
INVESCO with signature
Funds Group, Inc., guarantees from an
P.O. Box eligible guarantor
173706, Denver, CO financial
80217-3706. institution, such
as a commercial
bank or a
recognized national
or regional
securities firm.
<PAGE>
[GRAPH ICON] TAXES
Everyone's tax status is unique. We encourage you to consult your own tax
adviser on the tax impact to you of investing in the Fund.
TO AVOID BACKUP WITHHOLDING, BE SURE WE HAVE YOUR CORRECT SOCIAL SECURITY OR
TAXPAYER IDENTIFICATION NUMBER.
The Fund customarily distributes to its shareholders substantially all of
its net investment income, net capital gains and net gains from foreign currency
transactions, if any. You receive a proportionate part of these distributions,
depending on the percentage of the Fund's shares that you own. These
distributions are required under federal tax laws governing mutual funds. It is
the policy of the Fund to distribute all investment company taxable income and
net capital gains. As a result of this policy and the Fund's qualification as a
regulated investment company, it is anticipated that the Fund will not pay any
federal income or excise taxes. Instead, the Fund will be accorded conduit or
"pass through" treatment for federal income tax purposes.
However, unless you are (or your account is) exempt from income taxes, you
must include all dividends and capital gain distributions paid to you by the
Fund in your taxable income for federal, state and local income tax purposes.
You also may realize capital gains or losses when you sell shares of the Fund at
more or less than the price you originally paid. An exchange is treated as a
sale, and is a taxable event. Dividends and other distributions usually are
taxable whether you receive them in cash or automatically reinvest them in
shares of the Fund or other INVESCO funds.
If you have not provided INVESCO with complete, correct tax information,
the Fund is required by law to withhold 31% of your distributions and any money
that you receive from the sale of shares of the Fund as a backup withholding
tax.
We will provide you with detailed information every year about your
dividends and capital gain distributions. Depending on the activity in your
individual account, we may also be able to assist with cost basis figures for
shares you sell.
[GRAPH ICON] DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
The Fund earns ordinary or investment income from dividends and interest on
its investments. The Fund expects to distribute substantially all of this
investment income, less Fund expenses, to shareholders annually or at such other
times as the Fund may elect.
NET INVESTMENT INCOME AND NET REALIZED CAPITAL GAINS ARE DISTRIBUTED TO
SHAREHOLDERS AT LEAST ANNUALLY. DISTRIBUTIONS ARE TAXABLE WHETHER REINVESTED IN
ADDITIONAL SHARES OR PAID TO YOU IN CASH (EXCEPT FOR TAX-EXEMPT ACCOUNTS).
The Fund also realizes capital gains or losses when it sells securities in its
portfolio for more or less than it had paid for them. If total gains on sales
exceed total losses (including losses carried forward from previous years), the
Fund has a net realized capital gain. Net realized capital gains, if any, are
distributed to shareholders at least annually, usually in December.
<PAGE>
Under present federal income tax laws, capital gains may be taxable at
different rates, depending on how long the Fund has held the underlying
investment. Short-term capital gains which are derived from the sale of assets
held one year or less are taxed as ordinary income. Long-term capital gains
which are derived from the sale of assets held for more than one year are taxed
at up to the maximum capital gains rate, currently 20% for individuals.
Dividends and capital gain distributions are paid to you if you hold shares on
the record date of the distribution regardless of how long you have held your
shares. The Fund's NAV will drop by the amount of the distribution on the day
the distribution is declared. If you buy shares of the Fund just before a
distribution is declared, you may wind up "buying a distribution." This means
that if the Fund declares a dividend or capital gain distribution shortly after
you buy, you will receive some of your investment back as a taxable
distribution. Most shareholders want to avoid this. And, if you sell your shares
at a loss for tax purposes and purchase a substantially identical investment
within 30 days before or after that sale, the transaction is usually considered
a "wash sale" and you will not be able to claim a tax loss.
Dividends and capital gain distributions paid by the Fund are automatically
reinvested in additional Fund shares at the NAV on the ex-distribution date,
unless you choose to have them automatically reinvested in another INVESCO fund
or paid to you by check or electronic funds transfer. If you choose to be paid
by check, the minimum amount of the check must be at least $10; amounts less
than that will be automatically reinvested. Dividends and other distributions,
whether received in cash or reinvested in additional Fund shares, may be subject
to federal income tax.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
financial performance of Investor Class shares of the Fund for the past five
years (or, if shorter, the period of the Fund's operations). Certain information
reflects financial results for a single Investor Class share. Since
Institutional Class shares are new, financial information is not available for
this class as of the date of this Prospectus. The total returns in the table
represent the annual percentages that an investor would have earned (or lost) on
an investment in an Investor Class share of the Fund (assuming reinvestment of
all dividends and distributions). This information has been audited by
PricewaterhouseCoopers LLP, independent accountants, whose report, along with
the financial statements, is included in INVESCO Stock Funds, Inc.'s 1999 Annual
Report to Shareholders, which is incorporated by reference into the Statement of
Additional Information. This Report is available without charge by contacting
IDI at the address or telephone number on the back cover of this Prospectus.
<TABLE>
<CAPTION>
PERIOD
ENDED
JULY 31 YEAR ENDED APRIL 30
- -------------------------------------------------------------------------------------------------
1999(a) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
DYNAMICS FUND -
INVESTOR CLASS
PER SHARE DATA
Net Asset Value - Beginning of
Period $18.15 $16.41 $12.02 $13.61 $11.38 $10.15
- -------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income (Loss)(b) 0.00 0.00 (0.05) (0.04) 0.02 0.03
Net Gains or Losses on Securities
(Both Realized and Unrealized) 1.24 3.04 6.39 (0.19) 3.94 1.34
- -------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.24 3.04 6.34 (0.23) 3.96 1.37
- -------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment
Income (c) 0.00 0.00 0.00 0.00 0.02 0.03
Distributions from Capital Gains 0.00 1.30 1.95 1.36 1.71 0.11
- -------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 0.00 1.30 1.95 1.36 1.73 0.14
- -------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $19.39 $18.15 $16.41 $12.02 $13.61 $11.38
=================================================================================================
TOTAL RETURN 6.83%(d) 20.83% 56.42% (2.34%) 36.32% 13.57%
RATIOS
Net Assets--End of Period
($000 Omitted) $2,471,482 $2,044,321 $1,340,299 $762,396 $778,416 $421,600
Ratio of Expenses to Average
Net Assets 1.03%(e)(g) 1.05%(e) 1.08%(e) 1.16%(e) 1.14%(e) 1.20%(f)
Ratio of Net Investment
Income (Loss) to Average
Net Assets (0.32%)(g) (0.41%) (0.43%) (0.31%) 0.16% 0.33%(f)
Portfolio Turnover Rate 23%(d) 129% 178% 204% 196% 176%
</TABLE>
<PAGE>
(a) From May 1, 1999 to July 31, 1999, the Fund's current fiscal year end.
(b) Net Investment Income (Loss) aggregated less than $0.01 on a per share basis
for the period ended July 31, 1999 and for the year ended April 30, 1999.
(c) Distributions in excess of net investment income for the year ended April
30, 1996, aggregated less than $0.01 on a per share basis.
(d) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(e) Ratio is based on Total Expenses of the Fund, which is before any expense
offset arrangements (these may include transfer agency and custodian fees).
(f) Various expenses of the Fund were voluntarily absorbed by INVESCO for the
year ended April 30, 1995. If INVESCO had not voluntarily absorbed these
expenses, ratio of expenses to average net assets would have been 1.22% and
ratio of net investment income to average net assets would have been 0.31%.
(g) Annualized
<PAGE>
May 19, 2000
INVESCO STOCK FUNDS, INC.
INVESCO DYNAMICS FUND--INSTITUTIONAL CLASS
You may obtain additional information about the Fund from several sources:
FINANCIAL REPORTS. Although this Prospectus describes the Fund's
anticipated investments and operations, the Fund also prepares annual and
semiannual reports that detail the Fund's actual investments at the report date.
These reports include discussion of the Fund's recent performance, as well as
market and general economic trends affecting the Fund's performance. The annual
report also includes the report of the Fund's independent accountants.
STATEMENT OF ADDITIONAL INFORMATION. The SAI dated May 8, 2000 is a
supplement to this Prospectus and has detailed information about the Fund and
its investment policies and practices. A current SAI for the Fund is on file
with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference; in other words, the SAI is legally a part of this
Prospectus, and you are considered to be aware of the contents of the SAI.
INTERNET. The Prospectus, SAI, annual report and semiannual report of the
Fund are available on the SEC Web site at www.sec.gov.
To obtain a free copy of the current Prospectus, SAI, annual report or
semiannual report, write to INVESCO Distributors, Inc., P.O. Box 173706, Denver,
Colorado 80217-3706; or call 1-800-328-2234. Copies of these materials are also
available (with a copying charge) from the SEC's Public Reference Section at 450
Fifth Street, N.W., Washington, D.C., 20549-0102. This information can be
obtained by electronic request at the following email address:
[email protected], or by calling 1-202-942-8090. The SEC file numbers for the
Fund are 811-1474 and 002-26125.
To reach PAL(R), your 24-hour Personal Account Line, call: 1-800-424-8085.
If you're in Denver, please visit one of our convenient Investor Centers:
Cherry Creek
155-B Fillmore Street
Denver Tech Center
7800 East Union Avenue
P120 811-1474
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
INVESCO STOCK FUNDS, INC.
INVESCO Blue Chip Growth Fund - Investor Class and Class C
INVESCO Dynamics Fund - Investor Class, Institutional Class and Class C
INVESCO Endeavor Fund - Investor Class and Class C
INVESCO Growth & Income Fund - Investor Class and Class C
INVESCO Small Company Growth Fund - Investor Class and Class C
INVESCO S&P 500 Index Fund - Investor Class and Institutional Class
INVESCO Value Equity Fund - Investor Class and Class C
Address: Mailing Address:
7800 E. Union Ave., Denver, CO 80237 P.O. Box 173706, Denver, CO 80217-3706
Telephone:
In continental U.S., 1-800-525-8085
May 19, 2000
- ------------------------------------------------------------------------------
A Prospectus for the Investor Class shares of INVESCO Blue Chip Growth, INVESCO
Dynamics, INVESCO Endeavor, INVESCO Growth & Income, INVESCO Small Company
Growth, INVESCO S&P 500 Index and INVESCO Value Equity Funds dated August 31,
1999, a Prospectus for INVESCO S&P 500 Index Fund - Institutional Class dated
August 31, 1999, a Prospectus for INVESCO Dynamics Fund - Institutional Class
dated May 19, 2000, and a Prospectus for the Class C shares of INVESCO Blue
Chip Growth, INVESCO Dynamics, INVESCO Endeavor, INVESCO Growth & Income,
INVESCO Small Company Growth, and INVESCO Value Equity Funds dated February 15,
2000, provide the basic information you should know before investing in a Fund.
This Statement of Additional Information ("SAI") is incorporated by reference
into the Funds' Prospectuses; in other words, this SAI is legally part of the
Funds' Prospectuses. Although this SAI is not a prospectus, it contains
information in addition to that set forth in the Prospectuses. It is intended to
provide additional information regarding the activities and operations of the
Funds and should be read in conjunction with the Prospectuses.
<PAGE>
You may obtain, without charge, the current Prospectuses, SAI and annual and
semiannual reports of the Funds by writing to INVESCO Distributors, Inc., P.O.
Box 173706, Denver, CO 80217-3706 , or by calling 1-800-525-8085. The
Prospectuses of the Investor Class and Class C shares of the Funds are also
available through the INVESCO Web site at www.invesco.com.
<PAGE>
TABLE OF CONTENTS
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Investments, Policies and Risks . . . . . . . . . . . . . . . . . . . . . . . 28
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Management of the Funds . . . . . . . . . . . . . . . . . . . . . . . . . . .50
Other Service Providers . . . . . . . . . . . . . . . . . . . . . . . . . . .82
Brokerage Allocation and Other Practices . . . . . . . . . . . . . . . . . . .83
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Tax Consequences of Owning Shares of a Fund . . . . . . . . . . . . . . . . . 88
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .90
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .94
<PAGE>
THE COMPANY
The Company was incorporated under the laws of Maryland as INVESCO Dynamics
Fund, Inc. on April 2, 1993. On July 1, 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.
On June 26, 1997, the Company changed its name to INVESCO Capital Appreciation
Funds, Inc. and designated two series of shares of common stock of the Company
as the INVESCO Dynamics Fund and the INVESCO Growth & Income Fund. On August 28,
1998, the Company changed its name to INVESCO Equity Funds, Inc. and designated
a third series of shares of common stock of the Company as the INVESCO Endeavor
Fund. On October 29, 1998 the Company changed its name to INVESCO Stock Funds,
Inc. On July 15, 1999, the Company assumed all of the assets and liabilities of
INVESCO Blue Chip Growth Fund, a series of INVESCO Growth Fund, Inc.; INVESCO
Small Company Growth Fund, a series of INVESCO Emerging Opportunity Funds, Inc.;
INVESCO S&P 500 Index Fund, a series of INVESCO Specialty Funds, Inc.; and
INVESCO Value Equity Fund, a series of INVESCO Value Trust.
The Company is an open-end, diversified, management investment company currently
consisting of seven portfolios of investments: INVESCO Blue Chip Growth Fund -
Investor Class and Class C, INVESCO Dynamics Fund - Investor Class,
Institutional Class and Class C, INVESCO Endeavor Fund - Investor Class and
Class C, INVESCO Growth & Income Fund - Investor Class and Class C, INVESCO
Small Company Growth Fund - Investor Class and Class C, INVESCO S&P 500 Index
Fund - Investor Class and Institutional Class and INVESCO Value Equity Fund
Investor Class and Class C (each a "Fund" and collectively the "Funds").
Additional funds may be offered in the future.
"Open-end" means that each Fund issues an indefinite number of shares which it
continuously offers to redeem at net asset value per share ("NAV"). A
"management" investment company actively buys and sells securities for the
portfolio of each Fund at the direction of a professional manager. Open-end
management investment companies (or one or more series of such companies, such
as the Funds) are commonly referred to as mutual funds. The Funds do not charge
sales fees to purchase their shares. However, the Investor Class shares of each
Fund pay a 12b-1 distribution fee which is computed and paid monthly at an
annual rate of 0.25% of average net assets attributable to Investor Class
shares. The Class C shares of each Fund pay a 12b-1 distribution/ service fee
which is computed and paid monthly at an aggregate annual rate of 1.00% of
average net assets attributable to Class C shares.
Although S&P 500 Index Fund attempts to mirror the performance of the S&P 500
Composite Stock Price Index ("S&P 500"), the Fund is not affiliated in any way
with Standard & Poor's ("S&P"). S&P is not involved in the determination of the
prices and amount of the securities bought by the Fund, the sale of Fund shares
or the calculation of the equation by which Fund shares are to be converted into
cash.
S&P does not guarantee the accuracy and/or the completeness of the S&P 500 or
any data included therein and S&P shall have no liability for any errors,
omissions or interruptions therein. S&P makes no warranty, express or implied,
as to results to be obtained by the Company, shareholders of the Fund or any
<PAGE>
other person or entity from the use of the S&P 500 or any data included therein.
S&P makes no express or implied warranty, and expressly disclaims all warranties
of merchantability or fitness for a particular purpose or use with respect to
the S&P 500 or any data included therein. Without limiting any of the foregoing,
in no event shall S&P have any liability for any special, punitive, indirect or
consequential damages (including lost profits), even if notified of the
possibility of such damages.
INVESTMENTS, POLICIES AND RISKS
The principal investments and policies of the Funds are discussed in the
Prospectuses of the Funds. The Funds also may invest in the following securities
and engage in the following practices.
ADRs -- American Depository Receipts, or ADRs, are securities issued by American
banks. ADRs are receipts for the shares of foreign corporations that are held by
the bank issuing the receipt. An ADR entitles its holder to all dividends and
capital gains on the underlying foreign securities, less any fees paid to the
bank. Purchasing ADRs gives a Fund the ability to purchase the functional
equivalent of foreign securities without going to the foreign securities markets
to do so. ADRs are bought and sold in U.S. dollars, not foreign currencies. An
ADR that is "sponsored" means that the foreign corporation whose shares are
represented by the ADR is actively involved in the issuance of the ADR, and
generally provides material information about the corporation to the U.S.
market. An "unsponsored" ADR program means that the foreign corporation whose
shares are held by the bank is not obligated to disclose material information in
the United States, and, therefore, the market value of the ADR may not reflect
important facts known only to the foreign company. Since they mirror their
underlying foreign securities, ADRs generally have the same risks as investing
directly in the underlying foreign securities.
CERTIFICATES OF DEPOSIT IN FOREIGN BANKS AND U.S. BRANCHES OF FOREIGN BANKS --
The Funds may maintain time deposits in and invest in U.S. dollar denominated
CDs issued by foreign banks and U.S. branches of foreign banks. The Funds limit
investments in foreign bank obligations to U.S. dollar denominated obligations
of foreign banks which have more than $10 billion in assets, have branches or
agencies in the U.S., and meet other criteria established by the board of
directors. Investments in foreign securities involve special considerations.
There is generally less publicly available information about foreign issuers
since many foreign countries do not have the same disclosure and reporting
requirements as are imposed by the U.S. securities laws. Moreover, foreign
issuers are generally not bound by uniform accounting and auditing and financial
reporting requirements and standards of practice comparable to those applicable
to domestic issuers. Such investments may also entail the risks of possible
imposition of dividend withholding or confiscatory taxes, possible currency
blockage or transfer restrictions, expropriation, nationalization or other
adverse political or economic developments, and the difficulty of enforcing
obligations in other countries.
The Funds may also invest in bankers' acceptances, time deposits and
certificates of deposit of U.S. branches of foreign banks and foreign branches
of U.S. banks. Investments in instruments of U.S. branches of foreign banks will
be made only with branches that are subject to the same regulations as U.S.
banks. Investments in instruments issued by a foreign branch of a U.S. bank will
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be made only if the investment risk associated with such investment is the same
as that involving an investment in instruments issued by the U.S. parent, with
the U.S. parent unconditionally liable in the event that the foreign branch
fails to pay on the investment for any reason.
COMMERCIAL PAPER -- Commercial paper is the term for short-term promissory
notes issued by domestic corporations to meet current working capital needs.
Commercial paper may be unsecured by the corporation's assets but may be backed
by a letter of credit from a bank or other financial institution. The letter of
credit enhances the paper's creditworthiness. The issuer is directly responsible
for payment but the bank "guarantees" that if the note is not paid at maturity
by the issuer, the bank will pay the principal and interest to the buyer.
INVESCO Funds Group, Inc. ("INVESCO"), the Funds' investment adviser, will
consider the creditworthiness of the institution issuing the letter of credit,
as well as the creditworthiness of the issuer of the commercial paper, when
purchasing paper enhanced by a letter of credit. Commercial paper is sold either
in an interest-bearing form or on a discounted basis, with maturities not
exceeding 270 days.
DEBT SECURITIES -- Debt securities include bonds, notes and other securities
that give the holder the right to receive fixed amounts of principal, interest,
or both on a date in the future or on demand. Debt securities also are often
referred to as fixed-income securities, even if the rate of interest varies over
the life of the security.
Debt securities are generally subject to credit risk and market risk. Credit
risk is the risk that the issuer of the security may be unable to meet interest
or principal payments or both as they come due. Market risk is the risk that the
market value of the security may decline for a variety of reasons, including
changes in interest rates. An increase in interest rates tends to reduce the
market values of debt securities in which a Fund has invested. A decline in
interest rates tends to increase the market values of debt securities in which a
Fund has invested.
Moody's Investor Services, Inc. ("Moody's") and S&P ratings provide a useful
guide to the credit risk of many debt securities. The lower the rating of a debt
security, the greater the credit risk the rating service assigns to the
security. To compensate investors for accepting that greater risk, lower-rated
debt securities tend to offer higher interest rates. Growth & Income Fund may
invest up to 25% of its portfolio in lower-rated debt securities, which are
often referred to as "junk bonds." Increasing the amount of Fund assets invested
in unrated or lower-grade straight debt securities may increase the yield
produced by the Fund's debt securities but will also increase the credit risk of
those securities. A debt security is considered lower-grade if it is rated Ba or
less by Moody's or BB or less by S&P. Lower-rated and non-rated debt securities
of comparable quality are subject to wider fluctuations in yields and market
values than higher-rated debt securities and may be considered speculative.
Although a Fund may invest in debt securities assigned lower grade ratings by
S&P or Moody's, at the time of purchase, the Funds are not 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 INVESCO to be of equivalent quality. Debt
securities rated lower than B by either S&P or Moody's are usually considered to
be speculative. At the time of purchase, INVESCO will limit Fund investments to
debt securities which INVESCO believes are not highly speculative and which are
rated at least B by S&P and Moody's.
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A significant economic downturn or increase in interest rates may cause issuers
of debt securities to experience increased financial problems which could
adversely affect their ability to pay principal and interest obligations, to
meet projected business goals, and to obtain additional financing. These
conditions more severely impact issuers of lower-rated debt securities. The
market for lower-rated straight debt securities may not be as liquid as the
market for higher-rated straight debt securities. Therefore, INVESCO attempts to
limit purchases of lower-rated securities to securities having an established
secondary market.
Debt securities rated Caa by Moody's may be in default or may present risks of
non-payment of principal or interest. Lower-rated securities by S&P (categories
BB and B) include those which are predominantly speculative because of the
issuer's perceived capacity to pay interest and repay principal in accordance
with their terms; BB indicates the lowest degree of speculation and B a higher
degree of speculation. While such bonds will likely have some quality and
protective characteristics, these are usually outweighed by large uncertainties
or major risk exposures to adverse conditions.
Although bonds in the lowest investment grade debt category (those rated BBB by
S&P, Baa by Moody's or the equivalent) are regarded as having adequate
capability to pay principal and interest, they have speculative characteristics.
Adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to make principal and interest payments than is the case for
higher-rated bonds. Lower-rated bonds by Moody's (categories Ba, B or Caa) are
of poorer quality and also have speculative characteristics. Bonds rated Caa may
be in default or there may be present elements of danger with respect to
principal or interest. Lower-rated bonds by S&P (categories BB, B or CCC)
include those that are regarded, on balance, as predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal in
accordance with their terms; BB indicates the lowest degree of speculation and
CCC a high degree of speculation. While such bonds likely will have some quality
and protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions. Bonds having equivalent ratings from
other ratings services will have characteristics similar to those of the
corresponding S&P and Moody's ratings. For a specific description of S&P and
Moody's corporate bond rating categories, please refer to Appendix A.
The Funds, except for S&P 500 Index Fund, may invest in zero coupon bonds and
step-up bonds. Zero coupon bonds do not make regular interest payments. Zero
coupon bonds are sold at a discount from face value. Principal and accrued
discount (representing interest earned but not paid) are paid at maturity in the
amount of the face value. 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. The market values of zero coupon and step-up
bonds generally fluctuate more in response to changes in interest rates than
interest-paying securities of comparable term and quality. A Fund may be
required to distribute income recognized on these bonds, even though no cash may
be paid to the Fund until the maturity or call date of a bond, in order for the
Fund to maintain its qualification as a regulated investment company. These
required distributions could reduce the amount of cash available for investment
by a Fund.
DOMESTIC BANK OBLIGATIONS -- U.S. banks (including their foreign branches) issue
certificates of deposit (CDs) and bankers' acceptances which may be purchased by
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the Funds if an issuing bank has total assets in excess of $5 billion and the
bank otherwise meets the Funds' credit rating requirements. CDs are issued
against deposits in a commercial bank for a specified period and rate and are
normally negotiable. Eurodollar CDs are certificates issued by a foreign branch
(usually London) of a U.S. domestic bank, and, as such, the credit is deemed to
be that of the domestic bank. Bankers' acceptances are short-term credit
instruments evidencing the promise of the bank (by virtue of the bank's
"acceptance") to pay at maturity a draft which has been drawn on it by a
customer (the "drawer"). Bankers' acceptances are used to finance the import,
export, transfer, or storage of goods and reflect the obligation of both the
bank and the drawer to pay the face amount. Both types of securities are subject
to the ability of the issuing bank to meet its obligations, and are subject to
risks common to all debt securities. In addition, banker's acceptances may be
subject to foreign currency risk and certain other risks of investment in
foreign securities.
EQUITY SECURITIES -- The Funds may invest in common, preferred and convertible
preferred stocks, and securities whose values are tied to the price of stocks,
such as rights, warrants and convertible debt securities. Common stocks and
preferred stocks represent equity ownership in a corporation. Owners of stock,
such as the Funds, share in a corporation's earnings through dividends which may
be declared by the corporation, although the receipt of dividends is not the
principal benefit that the Funds seek when they invest in stocks and similar
instruments.
Instead, the Funds seek to invest in stocks that will increase in market value
and may be sold for more than a Fund paid to buy them. Market value is based
upon constantly changing investor perceptions of what the company is worth
compared to other companies. Although dividends are a factor in the changing
market value of stocks, many companies do not pay dividends, or pay
comparatively small dividends. The principal risk of investing in equity
securities is that their market values fluctuate constantly, often due to
factors entirely outside the control of the Funds or the company issuing the
stock. At any given time, the market value of an equity security may be
significantly higher or lower than the amount paid by a Fund to acquire it.
Owners of preferred stocks are entitled to dividends payable from the
corporation's earnings, which in some cases may be "cumulative" if prior
dividends on the preferred stock have not been paid. Dividends payable on
preferred stock have priority over distributions to holders of common stock, and
preferred stocks generally have a priority 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 holders of a company's debt securities generally
are entitled to be paid by the company before it pays anything to its
stockholders.
Rights and warrants are securities which entitle the holder to purchase the
securities of a company (usually, its common stock) at a specified price during
a specified time period. The value of a right or warrant is affected by many of
the same factors that determine the prices of common stocks. Rights and warrants
may be purchased directly or acquired in connection with a corporate
reorganization or exchange offer.
The Funds also may purchase convertible securities including 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.
<PAGE>
Until conversion, the owner of convertible securities usually receives the
interest paid on a convertible bond or the dividend preference of a preferred
stock.
A convertible security has an "investment value" which is a theoretical value
determined by the yield it provides in comparison with similar securities
without the conversion feature. Investment value changes are based upon
prevailing interest rates and other factors. It also has a "conversion value,"
which is the market value the convertible security would have if it were
exchanged for the underlying equity security. Convertible securities may be
purchased at varying price levels above or below their investment values or
conversion values.
Conversion value is a simple mathematical calculation that fluctuates directly
with the price of the underlying security. However, if the conversion value is
substantially below the investment value, the market value of the convertible
security is governed principally by its investment value. If the conversion
value is near or above the investment value, the market value of the convertible
security generally will rise above the investment value. In such cases, the
market value of the convertible security may be higher than its 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. 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.
EUROBONDS AND YANKEE BONDS (All Funds, except S&P 500 Index Fund) -- Bonds
issued by foreign branches of U.S. banks ("Eurobonds") and bonds issued by a
U.S. branch of a foreign bank and sold in the United States ("Yankee bonds").
These bonds are bought and sold in U.S. dollars, but generally carry with them
the same risks as investing in foreign securities.
FOREIGN SECURITIES -- Investments in the securities of foreign companies,
or companies that have their principal business activities outside the United
States, involve certain risks not associated with investments in U.S. companies.
Non-U.S. companies generally are not subject to the same uniform accounting,
auditing and financial reporting standards that apply to U.S. companies.
Therefore, financial information about foreign companies may be incomplete, or
may not be comparable to the information available on U.S. companies. There may
also be less publicly available information about a foreign company.
Although the volume of trading in foreign securities markets is growing,
securities of many non-U.S. companies may be less liquid and have greater swings
in price than securities of comparable U.S. companies. The costs of buying and
selling securities on foreign securities exchanges are generally significantly
higher than similar costs in the United States. There is generally less
government supervision and regulation of exchanges, brokers and issuers in
foreign countries than there is in the United States. Investments in non-U.S.
securities may also be subject to other risks different from those affecting
U.S. investments, including local political or economic developments,
expropriation or nationalization of assets, confiscatory taxation, and
imposition of withholding taxes on dividends or interest payments. If it becomes
necessary, it may be more difficult for a Fund to obtain or to enforce a
judgment against a foreign issuer than against a domestic issuer.
<PAGE>
Securities traded on foreign markets are usually bought and sold in local
currencies, not in U.S. dollars. Therefore, the market value of foreign
securities acquired by a Fund can be affected -- favorably or unfavorably -- by
changes in currency rates and exchange control regulations. Costs are incurred
in converting money from one currency to another. Foreign currency exchange
rates are determined by supply and demand on the foreign exchange markets.
Foreign exchange markets are affected by the international balance of payments
and other economic and financial conditions, government intervention,
speculation and other factors, all of which are outside the control of each
Fund. Generally, the Funds' foreign currency exchange transactions will be
conducted on a cash or "spot" basis at the spot rate for purchasing or selling
currency in the foreign currency exchange markets.
FUTURES, OPTIONS AND OTHER FINANCIAL INSTRUMENTS
GENERAL. As discussed in the Prospectuses, the adviser and/or sub-adviser may
use various types of financial instruments, some of which are derivatives, to
attempt to manage the risk of a Fund's investments or, in certain circumstances,
for investment (e.g., as a substitute for investing in securities). These
financial instruments include options, futures contracts (sometimes referred to
as "futures"), forward contracts, swaps, caps, floors and collars (collectively,
"Financial Instruments"). The policies in this section do not apply to other
types of instruments sometimes referred to as derivatives, such as indexed
securities, mortgage-backed and other asset-backed securities, and stripped
interest and principal of debt.
Hedging strategies can be broadly categorized as "short" hedges and "long" or
"anticipatory" hedges. A short hedge involves the use of a Financial Instrument
in order to partially or fully offset potential variations in the value of one
or more investments held in a Fund's portfolio. A long or anticipatory hedge
involves the use of a Financial Instrument in order to partially or fully offset
potential increases in the acquisition cost of one or more investments that the
Fund intends to acquire. In an anticipatory hedge transaction, the Fund does not
already own a corresponding security. Rather, it relates to a security or type
of security that the Fund intends to acquire. If the Fund does not eliminate the
hedge by purchasing the security as anticipated, the effect on the Fund's
portfolio is the same as if a long position were entered into. Financial
Instruments may also be used, in certain circumstances, for investment (e.g., as
a substitute for investing in securities).
Financial Instruments on individual securities generally are used to attempt to
hedge against price movements in one or more particular securities positions
that a Fund already owns or intends to acquire. Financial Instruments on
indexes, in contrast, generally are used to attempt to hedge all or a portion of
a portfolio against price movements of the securities within a market sector in
which the Fund has invested or expects to invest.
The use of Financial Instruments is subject to applicable regulations of the
Securities and Exchange Commission ("SEC"), the several exchanges upon which
they are traded, and the Commodity Futures Trading Commission ("CFTC"). In
<PAGE>
addition, the Funds' ability to use Financial Instruments will be limited
by tax considerations. See "Tax Consequences of Owning Shares of a Fund."
In addition to the instruments and strategies described below, the adviser
and/or sub-adviser may use other similar or related techniques to the extent
that they are consistent with a Fund's investment objective and permitted by its
investment limitations and applicable regulatory authorities. The Funds'
Prospectuses or Statement of Additional Information ("SAI") will be supplemented
to the extent that new products or techniques become employed involving
materially different risks than those described below or in the Prospectuses.
Special Risks. Financial Instruments and their use involve special
considerations and risks, certain of which are described below.
(1) Financial Instruments may increase the volatility of a Fund. If the adviser
and/or sub-adviser employs a Financial Instrument that correlates imperfectly
with a Fund's investments, a loss could result, regardless of whether or not the
intent was to manage risk. In addition, these techniques could result in a loss
if there is not a liquid market to close out a position that a Fund has entered.
(2) There might be imperfect correlation between price movements of a Financial
Instrument and price movement of the investment(s) being hedged. For example, if
the value of a Financial Instrument used in a short hedge increased by less than
the decline in value of the hedged investment(s), the hedge would not be fully
successful. This might be caused by certain kinds of trading activity that
distorts the normal price relationship between the security being hedged and the
Financial Instrument. Similarly, the effectiveness of hedges using Financial
Instruments on indexes will depend on the degree of correlation between price
movements in the index and price movements in the securities being hedged.
The Funds are authorized to use options and futures contracts related to
securities with issuers, maturities or other characteristics different from the
securities in which it typically invests. This involves a risk that the options
or futures position will not track the performance of a Fund's portfolio
investments.
The direction of options and futures price movements can also diverge from the
direction of the movements of the prices of their underlying instruments, even
if the underlying instruments match a Fund's investments well. Options and
futures prices are affected by such factors as current and anticipated
short-term interest rates, changes in volatility of the underlying instrument,
and the time remaining until expiration of the contract, which may not affect
security prices the same way. Imperfect correlation may also result from
differing levels of demand in the options and futures markets and the securities
markets, from structural differences in how options and futures and securities
are traded, or from imposition of daily price fluctuation limits or trading
halts. A Fund may take positions in options and futures contracts with a greater
or lesser face value than the securities it wishes to hedge or intends to
purchase in order to attempt to compensate for differences in volatility between
the contract and the securities, although this may not be successful in all
cases.
<PAGE>
(3) If successful, the above-discussed hedging strategies can reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable price
movements of portfolio securities. However, such strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements. For example, if a Fund entered into a short hedge because the adviser
and/or sub-adviser projected a decline in the price of a security in the Fund's
portfolio, and the price of that security increased instead, the gain from that
increase would likely be wholly or partially offset by a decline in the value of
the short position in the Financial Instrument. Moreover, if the price of the
Financial Instrument declined by more than the increase in the price of the
security, the Fund could suffer a loss.
(4) A Fund's ability to close out a position in a Financial Instrument prior to
expiration or maturity depends on the degree of liquidity of the market or, in
the absence of such a market, the ability and willingness of the other party to
the transaction (the "counterparty") to enter into a transaction closing out the
position. Therefore, there is no assurance that any position can be closed out
at a time and price that is favorable to a Fund.
(5) As described below, the Funds are required to maintain assets as "cover,"
maintain segregated accounts or make margin payments when they take positions in
Financial Instruments involving obligations to third parties (i.e., Financial
Instruments other than purchased options). If a Fund is unable to close out its
positions in such Financial Instruments, it might be required to continue to
maintain such assets or segregated accounts or make such payments until the
position expired. These requirements might impair a Fund's ability to sell a
portfolio security or make an investment at a time when it would otherwise be
favorable to do so, or require that the Fund sell a portfolio security at a
disadvantageous time.
Cover. Positions in Financial Instruments, other than purchased options, expose
the Funds to an obligation to another party. A Fund will not enter into any such
transaction unless it owns (1) an offsetting ("covered") position in securities,
currencies or other options, futures contracts or forward contracts, or (2) cash
and liquid assets with a value, marked-to-market daily, sufficient to cover its
obligations to the extent not covered as provided in (1) above. The Funds will
comply with SEC guidelines regarding cover for these instruments and will, if
the guidelines so require, designate cash or liquid assets as segregated in the
prescribed amount as determined daily.
Assets used as cover or held as segregated cannot be sold while the position in
the corresponding Financial Instrument is open unless they are replaced with
other appropriate assets. As a result, the commitment of a large portion of a
Fund's assets to cover or to hold as segregated could impede portfolio
management or the Fund's ability to meet redemption requests or other current
obligations.
Options. Each Fund may engage in certain strategies involving options to attempt
to manage the risk of its investments or, in certain circumstances, for
investment (e.g., as a substitute for investing in securities). A call option
gives the purchaser the right to buy, and obligates the writer to sell the
underlying investment at the agreed-upon exercise price during the option
period. A put option gives the purchaser the right to sell, and obligates the
<PAGE>
writer to buy the underlying investment at the agreed-upon exercise price during
the option period. Purchasers of options pay an amount, known as a premium, to
the option writer in exchange for the right under the option contract. See
"Options on Indexes" below with regard to cash settlement of option contracts on
index values.
The purchase of call options can serve as a hedge against a price rise of the
underlier and the purchase of put options can serve as a hedge against a price
decline of the underlier. Writing call options can serve as a limited short
hedge because declines in the value of the hedged investment would be offset to
the extent of the premium received for writing the option. However, if the
security or currency appreciates to a price higher than the exercise price of
the call option, it can be expected that the option will be exercised and a Fund
will be obligated to sell the security or currency at less than its market
value.
Writing put options can serve as a limited long or anticipatory hedge because
increases in the value of the hedged investment would be offset to the extent of
the premium received for writing the option. However, if the security or
currency depreciates to a price lower than the exercise price of the put option,
it can be expected that the put option will be exercised and a Fund will be
obligated to purchase the security or currency at more than its market value.
The value of an option position will reflect, among other things, the current
market value of the underlying investment, the time remaining until expiration,
the relationship of the exercise price to the market price of the underlying
investment, the price volatility of the underlying investment and general market
and interest rate conditions. Options that expire unexercised have no value.
A Fund may effectively terminate its right or obligation under an option by
entering into a closing transaction. For example, the Fund may terminate its
obligation under a call or put option that it had written by purchasing an
identical call or put option, which is known as a closing purchase transaction.
Conversely, the Fund may terminate a position in a put or call option it had
purchased by writing an identical put or call option, which is known as a
closing sale transaction. Closing transactions permit a Fund to realize profits
or limit losses on an option position prior to its exercise or expiration.
Risks of Options on Securities. Options embody the possibility of large amounts
of exposure, which will result in a Fund's net asset value being more sensitive
to changes in the value of the related investment. A Fund may purchase or write
both exchange-traded and OTC options. Exchange-traded options in the United
States are issued by a clearing organization affiliated with the exchange on
which the option is listed that, in effect, guarantees completion of every
exchange-traded option transaction. In contrast, OTC options are contracts
between a Fund and its counterparty (usually a securities dealer or a bank) with
no clearing organization guarantee. Thus, when a Fund purchases an OTC option,
it relies on the counterparty from whom it purchased the option to make or take
delivery of the underlying investment upon exercise of the option. Failure by
the counterparty to do so would result in the loss of any premium paid by a Fund
as well as the loss of any expected benefit from the transaction.
The Funds' ability to establish and close out positions in options depends on
the existence of a liquid market. However, there can be no assurance that such a
<PAGE>
market will exist at any particular time. Closing transactions can be made for
OTC options only by negotiating directly with the counterparty, or by a
transaction in the secondary market if any such market exists. There can be no
assurance that a Fund will in fact be able to close out an OTC option position
at a favorable price prior to expiration. In the event of insolvency of the
counterparty, a Fund might be unable to close out an OTC option position at any
time prior to the option's expiration. If a Fund is not able to enter into an
offsetting closing transaction on an option it has written, it will be required
to maintain the securities subject to the call or the liquid assets underlying
the put until a closing purchase transaction can be entered into or the option
expires. However, there can be no assurance that such a market will exist at any
particular time.
If a Fund were unable to effect a closing transaction for an option it had
purchased, it would have to exercise the option to realize any profit. The
inability to enter into a closing purchase transaction for a covered call option
written by a Fund could cause material losses because the Fund would be unable
to sell the investment used as cover for the written option until the option
expires or is exercised.
Options on Indexes. Puts and calls on indexes are similar to puts and calls on
securities or futures contracts except that all settlements are in cash and
changes in value depend on changes in the index in question. When a Fund writes
a call on an index, it receives a premium and agrees that, prior to the
expiration date, upon exercise of the call, the purchaser will receive from the
Fund an amount of cash equal to the positive difference between the closing
price of the index and the exercise price of the call times a specified multiple
("multiplier"), which determines the total dollar value for each point of such
difference. When a Fund buys a call on an index, it pays a premium and has the
same rights as to such call as are indicated above. When a Fund buys a put on an
index, it pays a premium and has the right, prior to the expiration date, to
require the seller of the put to deliver to the Fund an amount of cash equal to
the positive difference between the exercise price of the put and the closing
price of the index times the multiplier. When a Fund writes a put on an index,
it receives a premium and the purchaser of the put has the right, prior to the
expiration date, to require the Fund to deliver to it an amount of cash equal to
the positive difference between the exercise price of the put and the closing
level of the index times the multiplier.
The risks of purchasing and selling options on indexes may be greater than
options on securities. Because index options are settled in cash, when a Fund
writes a call on an index it cannot fulfill its potential settlement obligations
by delivering the underlying securities. A Fund can offset some of the risk of
writing a call index option by holding a diversified portfolio of securities
similar to those on which the underlying index is based. However, a Fund cannot,
as a practical matter, acquire and hold a portfolio containing exactly the same
securities as underlie the index and, as a result, bears a risk that the value
of the securities held will vary from the value of the index.
Even if a Fund could assemble a portfolio that exactly reproduced the
composition of the underlying index, it still would not be fully covered from a
risk standpoint because of the "timing risk" inherent in writing index options.
When an index option is exercised, the amount of cash that the holder is
entitled to receive is determined by the difference between the exercise price
and the closing index level. As with other kinds of options, a Fund as the call
writer will not learn what it has been assigned until the next business day. The
time lag between exercise and notice of assignment poses no risk for the writer
of a covered call on a specific underlying security, such as common stock,
<PAGE>
because in that case the writer's obligation is to deliver the underlying
security, not to pay its value as of a moment in the past. In contrast, the
writer of an index call will be required to pay cash in an amount based on the
difference between the closing index value on the exercise date and the exercise
price. By the time a Fund learns what it has been assigned, the index may have
declined. This "timing risk" is an inherent limitation on the ability of index
call writers to cover their risk exposure.
If a Fund has purchased an index option and exercises it before the closing
index value for that day is available, it runs the risk that the level of the
underlying index may subsequently change. If such a change causes the exercised
option to fall out-of-the-money, the Fund nevertheless will be required to pay
the difference between the closing index value and the exercise price of the
option (times the applicable multiplier) to the assigned writer.
OTC Options. Unlike exchange-traded options, which are standardized with respect
to the underlying instrument, expiration date, contract size, and strike price,
the terms of OTC options (options not traded on exchanges) generally are
established through negotiation with the other party to the option contract.
While this type of arrangement allows a Fund great flexibility to tailor the
option to its needs, OTC options generally involve greater risk than
exchange-traded options, which are guaranteed by the clearing organization of
the exchange where they are traded.
Generally, OTC foreign currency options used by a Fund are European-style
options. This means that the option is only exercisable immediately prior to its
expiration. This is in contrast to American-style options, which are exercisable
at any time prior to the expiration date of the option.
Futures Contracts and Options on Futures Contracts. When a Fund purchases or
sells a futures contract, it incurs an obligation respectively to take or make
delivery of a specified amount of the obligation underlying the contract at a
specified time and price. When a Fund writes an option on a futures contract, it
becomes obligated to assume a position in the futures contract at a specified
exercise price at any time during the term of the option. If a Fund writes a
call, on exercise it assumes a short futures position. If it writes a put, on
exercise it assumes a long futures position.
The purchase of futures or call options on futures can serve as a long or an
anticipatory hedge, and the sale of futures or the purchase of put options on
futures can serve as a short hedge. Writing call options on futures contracts
can serve as a limited short hedge, using a strategy similar to that used for
writing call options on securities or indexes. Similarly, writing put options on
futures contracts can serve as a limited long or anticipatory hedge.
In addition, futures strategies can be used to manage the "duration" (a measure
of anticipated sensitivity to changes in interest rates, which is sometimes
related to the weighted average maturity of a portfolio) and associated interest
rate risk of a Fund's fixed-income portfolio. If the adviser and/or sub-adviser
wishes to shorten the duration of a Fund's fixed-income portfolio (i.e., reduce
anticipated sensitivity), the Fund may sell an appropriate debt futures contract
or a call option thereon, or purchase a put option on that futures contract. If
the adviser and/or sub-adviser wishes to lengthen the duration of a Fund's
fixed-income portfolio (i.e., increase anticipated sensitivity), the Fund may
buy an appropriate debt futures contract or a call option thereon, or sell a put
option thereon.
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At the inception of a futures contract, a Fund is required to deposit "initial
margin" in an amount generally equal to 10% or less of the contract value.
Initial margin must also be deposited when writing a call or put option on a
futures contract, in accordance with applicable exchange rules. Subsequent
"variation margin" payments are made to and from the futures broker daily as the
value of the futures or written option position varies, a process known as
"marking-to-market." Unlike margin in securities transactions, initial margin on
futures contracts and written options on futures contracts does not represent a
borrowing on margin, but rather is in the nature of a performance bond or
good-faith deposit that is returned to the Fund at the termination of the
transaction if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, a Fund may be required to
increase the level of initial margin deposits. If the Fund has insufficient cash
to meet daily variation margin requirements, it might need to sell securities in
order to do so at a time when such sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures can enter
into offsetting closing transactions, similar to closing transactions on
options, by selling or purchasing, respectively, an instrument identical to the
instrument purchased or sold. However, there can be no assurance that a liquid
market will exist for a particular contract at a particular time. In such event,
it may not be possible to close a futures contract or options position.
Under certain circumstances, futures exchanges may establish daily limits on the
amount that the price of a futures contract or an option on a futures contract
can vary from the previous day's settlement price; once that limit is reached,
no trades may be made that day at a price beyond the limit. Daily price limits
do not limit potential losses because prices could move to the daily limit for
several consecutive days with little or no trading, thereby preventing
liquidation of unfavorable positions.
If a Fund were unable to liquidate a futures contract or an option on a futures
contract position due to the absence of a liquid market or the imposition of
price limits, it could incur substantial losses. The Fund would continue to be
subject to market risk with respect to the position. In addition, except in the
case of purchased options, the Fund would continue to be required to make daily
variation margin payments and might be required to continue to maintain the
position being hedged by the futures contract or option or to continue to
maintain cash or securities in a segregated account.
To the extent that a Fund enters into futures contracts, options on futures
contracts and options on foreign currencies traded on a CFTC-regulated exchange,
in each case that is not for bona fide hedging purposes (as defined by the
CFTC), the aggregate initial margin and premiums required to establish these
positions (excluding the amount by which options are "in-the-money" at the time
of purchase) may not exceed 5% of the liquidation value of the Fund's portfolio,
after taking into account unrealized profits and unrealized losses on any
contracts the Fund has entered into. This policy does not limit to 5% the
percentage of the Fund's assets that are at risk in futures contracts, options
on futures contracts and currency options.
Risks of Futures Contracts and Options Thereon. The ordinary spreads at a given
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time between prices in the cash and futures markets (including the options on
futures markets), due to differences in the natures of those markets, are
subject to the following factors. First, 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 the cash and futures markets. Second, the liquidity of the futures
market depends on participants entering into offsetting transactions rather than
making or taking delivery. To the extent participants decide to make or take
delivery, liquidity in the futures market could be reduced, thus producing
distortion. Due to the possibility of distortion, a hedge may not be successful.
Although stock index futures contracts do not require physical delivery, under
extraordinary market conditions, liquidity of such futures contracts also could
be reduced. Additionally, the adviser and/or sub-adviser may be incorrect in its
expectations as to the extent of various interest rates, currency exchange rates
or stock market movements or the time span within which the movements take
place.
Index Futures. The risk of imperfect correlation between movements in the price
of index futures and movements in the price of the securities that are the
subject of a hedge increases as the composition of a Fund's portfolio diverges
from the index. The price of the index futures may move proportionately more
than or less than the price of the securities being hedged. If the price of the
index futures moves proportionately less than the price of the securities that
are the subject of the hedge, the hedge will not be fully effective. Assuming
the price of the securities being hedged has moved in an unfavorable direction,
as anticipated when the hedge was put into place, the Fund would be in a better
position than if it had not hedged at all, but not as good as if the price of
the index futures moved in full proportion to that of the hedged securities.
However, if the price of the securities being hedged has moved in a favorable
direction, this advantage will be partially offset by movement of the price of
the futures contract. If the price of the futures contract moves more than the
price of the securities, the Fund will experience either a loss or a gain on the
futures contract that will not be completely offset by movements in the price of
the securities that are the subject of the hedge.
Where index futures are purchased in an anticipatory hedge, it is possible that
the market may decline instead. If a Fund then decides not to invest in the
securities at that time because of concern as to possible further market decline
or for other reasons, it will realize a loss on the futures contract that is not
offset by a reduction in the price of the securities it had anticipated
purchasing.
Foreign Currency Hedging Strategies--Special Considerations. A Fund may use
options and futures contracts on foreign currencies, as mentioned previously,
and forward currency contracts, as described below, to attempt to hedge against
movements in the values of the foreign currencies in which the Fund's securities
are denominated or, in certain circumstances, for investment (e.g., as a
substitute for investing in securities denominated in foreign currency).
Currency hedges can protect against price movements in a security that a Fund
owns or intends to acquire that are attributable to changes in the value of the
currency in which it is denominated.
A Fund might seek to hedge against changes in the value of a particular currency
when no Financial Instruments on that currency are available or such Financial
Instruments are more expensive than certain other Financial Instruments. In such
cases, a Fund may seek to hedge against price movements in that currency by
entering into transactions using Financial Instruments on another currency or a
<PAGE>
basket of currencies, the value of which the adviser and/or sub-adviser believes
will have a high degree of positive correlation to the value of the currency
being hedged. The risk that movements in the price of the Financial Instrument
will not correlate perfectly with movements in the price of the currency subject
to the hedging transaction may be increased when this strategy is used.
The value of Financial Instruments on foreign currencies depends on the value of
the underlying currency relative to the U.S. dollar. Because foreign currency
transactions occurring in the interbank market might involve substantially
larger amounts than those involved in the use of such Financial Instruments, a
Fund could be disadvantaged by having to deal in the odd-lot market (generally
consisting of transactions of less than $1 million) for the underlying foreign
currencies at prices that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign currencies
or any regulatory requirement that quotations available through dealers or other
market sources be firm or revised on a timely basis. Quotation information
generally is representative of very large transactions in the interbank market
and thus might not reflect odd-lot transactions where rates might be less
favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Financial Instruments until they reopen.
Settlement of hedging transactions involving foreign currencies might be
required to take place within the country issuing the underlying currency. Thus,
a Fund might be required to accept or make delivery of the underlying foreign
currency in accordance with any U.S. or foreign regulations regarding the
maintenance of foreign banking arrangements by U.S. residents and might be
required to pay any fees, taxes and charges associated with such delivery
assessed in the issuing country.
Forward Currency Contracts and Foreign Currency Deposits. The Funds may enter
into forward currency contracts to purchase or sell foreign currencies for a
fixed amount of U.S. dollars or another foreign currency. A forward currency
contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days (term) from the date of the
forward currency contract agreed upon by the parties, at a price set at the time
the forward currency contract is entered. Forward currency contracts are
negotiated directly between currency traders (usually large commercial banks)
and their customers.
Such transactions may serve as long or anticipatory hedges. For example, a Fund
may purchase a forward currency contract to lock in the U.S. dollar price of a
security denominated in a foreign currency that the Fund intends to acquire.
Forward currency contracts may also serve as short hedges. For example, a Fund
may sell a forward currency contract to lock in the U.S. dollar equivalent of
the proceeds from the anticipated sale of a security or a dividend or interest
payment denominated in a foreign currency.
The Funds may also use forward currency contracts to hedge against a decline in
the value of existing investments denominated in foreign currency. Such a hedge
<PAGE>
would tend to offset both positive and negative currency fluctuations, but would
not offset changes in security values caused by other factors. A Fund could also
hedge the position by entering into a forward currency contract to sell another
currency expected to perform similarly to the currency in which the Fund's
existing investments are denominated. This type of hedge could offer advantages
in terms of cost, yield or efficiency, but may not hedge currency exposure as
effectively as a simple hedge against U.S. dollars. This type of hedge may
result in losses if the currency used to hedge does not perform similarly to the
currency in which the hedged securities are denominated.
The Funds may also use forward currency contracts in one currency or a basket of
currencies to attempt to hedge against fluctuations in the value of securities
denominated in a different currency if the adviser anticipates that there will
be a positive correlation between the two currencies.
The cost to a Fund of engaging in forward currency contracts varies with factors
such as the currency involved, the length of the contract period and the market
conditions then prevailing. Because forward currency contracts are usually
entered into on a principal basis, no fees or commissions are involved. When a
Fund enters into a forward currency contract, it relies on the counterparty to
make or take delivery of the underlying currency at the maturity of the
contract. Failure by the counterparty to do so would result in the loss of some
or all of any expected benefit of the transaction.
As is the case with futures contracts, purchasers and sellers of forward
currency contracts can enter into offsetting closing transactions, similar to
closing transactions on futures contracts, by selling or purchasing,
respectively, an instrument identical to the instrument purchased or sold.
Secondary markets generally do not exist for forward currency contracts, with
the result that closing transactions generally can be made for forward currency
contracts only by negotiating directly with the counterparty. Thus, there can be
no assurance that a Fund will in fact be able to close out a forward currency
contract at a favorable price prior to maturity. In addition, in the event of
insolvency of the counterparty, the Fund might be unable to close out a forward
currency contract. In either event, the Fund would continue to be subject to
market risk with respect to the position, and would continue to be required to
maintain a position in securities denominated in the foreign currency or to
segregate cash or liquid assets.
The precise matching of forward currency contract amounts and the value of the
securities, dividends or interest payments involved generally will not be
possible because the value of such securities, dividends or interest payments,
measured in the foreign currency, will change after the forward currency
contract has been established. Thus, a Fund might need to purchase or sell
foreign currencies in the spot (cash) market to the extent such foreign
currencies are not covered by forward currency contracts. The projection of
short-term currency market movements is extremely difficult, and the successful
execution of a short-term hedging strategy is highly uncertain.
Forward currency contracts may substantially change a Fund's investment exposure
to changes in currency exchange rates and could result in losses to the Fund if
currencies do not perform as the adviser anticipates. There is no assurance that
the adviser's and/or sub-adviser's use of forward currency contracts will be
advantageous to a Fund or that it will hedge at an appropriate time.
<PAGE>
The Funds may also purchase and sell foreign currency and invest in foreign
currency deposits. Currency conversion involves dealer spreads and other costs,
although commissions usually are not charged.
Combined Positions. A Fund may purchase and write options or futures in
combination with each other, or in combination with futures or forward currency
contracts, to manage the risk and return characteristics of its overall
position. For example, a Fund may purchase a put option and write a call option
on the same underlying instrument, in order to construct a combined position
whose risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at one
strike price and buying a call option at a lower price, in order to reduce the
risk of the written call option in the event of a substantial price increase.
Because combined options positions involve multiple trades, they result in
higher transaction costs.
Turnover. The Funds' options and futures activities may affect their turnover
rates and brokerage commission payments. The exercise of calls or puts written
by a Fund, and the sale or purchase of futures contracts, may cause it to sell
or purchase related investments, thus increasing its turnover rate. Once a Fund
has received an exercise notice on an option it has written, it cannot effect a
closing transaction in order to terminate its obligation under the option and
must deliver or receive the underlying securities at the exercise price. The
exercise of puts purchased by a Fund may also cause the sale of related
investments, increasing turnover. Although such exercise is within the Fund's
control, holding a protective put might cause it to sell the related investments
for reasons that would not exist in the absence of the put. A Fund will pay a
brokerage commission each time it buys or sells a put or call or purchases or
sells a futures contract. Such commissions may be higher than those that would
apply to direct purchases or sales.
Swaps, Caps, Floors and Collars. The Funds are authorized to enter into swaps,
caps, floors and collars. Swaps involve the exchange by one party with another
party of their respective commitments to pay or receive cash flows, e.g., an
exchange of floating rate payments for fixed rate payments. The purchase of a
cap or a floor entitles the purchaser, to the extent that a specified index
exceeds in the case of a cap, or falls below in the case of a floor, a
predetermined value, to receive payments on a notional principal amount from the
party selling such instrument. A collar combines elements of buying a cap and
selling a floor.
ILLIQUID SECURITIES (All Funds, except S&P 500 Index Fund) -- Securities which
do not trade on stock exchanges or in the over the counter market, or have
restrictions on when and how they may be sold, are generally considered to be
"illiquid." An illiquid security is one that a Fund may have difficulty -- or
may even be legally precluded from -- selling at any particular time. The Funds
may invest in illiquid securities, including restricted securities and other
investments which are not readily marketable. A Fund will not purchase any such
security if the purchase would cause the Fund to invest more than 15% of its net
assets, measured at the time of purchase, in illiquid securities. Repurchase
agreements maturing in more than seven days are considered illiquid for purposes
of this restriction.
The principal risk of investing in illiquid securities is that a Fund may be
unable to dispose of them at the time desired or at a reasonable price. In
<PAGE>
addition, in order to resell a restricted security, a Fund might have to
bear the expense and incur the delays associated with registering the security
with the SEC, and otherwise obtaining listing on a securities exchange or in the
over the counter market.
INVESTMENT COMPANY SECURITIES -- To manage their daily cash positions, the Funds
may invest in securities issued by other investment companies that invest in
short-term debt securities and seek to maintain a net asset value of $1.00 per
share ("money market funds"). The Funds also may invest in Standard & Poor's
Depository Receipts ("SPDRs") and shares of other investment companies. SPDRs
are investment companies whose portfolios mirror the compositions of specific
S&P indices, such as the S&P 500 and the S&P 400. SPDRs are traded on the
American Stock Exchange. SPDR holders such as a Fund are paid a "Dividend
Equivalent Amount" that corresponds to the amount of cash dividends accruing to
the securities held by the SPDR Trust, net of certain fees and expenses. The
Investment Company Act of 1940, as amended (the "1940 Act"), limits investments
in securities of other investment companies, such as the SPDR Trust. These
limitations include, among others, that, subject to certain exceptions, no more
than 10% of a Fund's total assets may be invested in securities of other
investment companies and no more than 5% of its total assets may be invested in
the securities of any one investment company. As a shareholder of another
investment company, a Fund would bear its pro rata portion of the other
investment company's expenses, including advisory fees, in addition to the
expenses the Fund bears directly in connection with its own operations.
REITS -- Real Estate Investment Trusts are investment trusts that invest
primarily in real estate and securities of businesses connected to the real
estate industry.
REPURCHASE AGREEMENTS -- A Fund may enter into repurchase agreements, or REPOs,
on debt securities that the Fund is allowed to hold in its portfolio. This is a
way to invest money for short periods. A REPO is an agreement under which the
Fund acquires a debt security and then resells it to the seller at an
agreed-upon price and date (normally, the next business day). The repurchase
price represents an interest rate effective for the short period the debt
security is held by the Fund, and is unrelated to the interest rate on the
underlying debt security. A repurchase agreement is often considered as a loan
collateralized by securities. The collateral securities acquired by the Fund
(including accrued interest earned thereon) must have a total value in excess of
the value of the repurchase agreement. The collateral securities are held by the
Fund's custodian bank until the repurchase agreement is completed.
The Funds may enter into repurchase agreements with commercial banks, registered
broker-dealers or registered government securities dealers that are creditworthy
under standards established by the Company's board of directors. The Company's
board of directors has established standards that INVESCO and the applicable
sub-adviser must use to review the creditworthiness of any bank, broker or
dealer that is party to a REPO. REPOs maturing in more than seven days are
considered illiquid securities. A Fund will not enter into repurchase agreements
maturing in more than seven days if as a result more than 15% of the Fund's net
assets would be invested in these repurchase agreements and other illiquid
securities.
As noted above, the Funds use REPOs as a means of investing cash for short
<PAGE>
periods of time. Although REPOs are considered to be highly liquid and
comparatively low-risk, the use of REPOs does involve some 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 on the sale of the collateral security. If the other party
to the agreement becomes insolvent and subject to liquidation or reorganization
under the Bankruptcy Code or other laws, a court may determine that the
underlying security is collateral for a loan by the Fund not within the control
of the Fund and therefore the realization by the Fund on such collateral may
automatically be stayed. 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.
RULE 144A SECURITIES (All Funds, except S&P 500 Index Fund) -- Securities that
can be resold to institutional investors pursuant to Rule 144A under the
Securities Act of 1933, as amended (the "1933 Act"). In recent years, a large
institutional market has developed for many Rule 144A Securities. Institutional
investors generally cannot sell these securities to the general public but
instead will often depend on an efficient institutional market in which Rule
144A Securities can readily be resold to other institutional investors, 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 does not necessarily mean that a Rule 144A Security is illiquid.
Institutional markets for Rule 144A Securities may provide both reliable market
values for Rule 144A Securities and enable a Fund to sell a Rule 144A investment
when appropriate. For this reason, the Company's board of directors has
concluded that if a sufficient institutional trading market exists for a given
Rule 144A security, it may be considered "liquid," and not subject to a Fund's
limitations on investment in restricted securities. The Company's board of
directors has given INVESCO the day-to-day authority to determine the liquidity
of Rule 144A Securities, according to guidelines approved by the board. The
principal risk of investing in Rule 144A Securities is that there may be an
insufficient number of qualified institutional buyers interested in purchasing a
Rule 144A Security held by a Fund, and the Fund might be unable to dispose of
such security promptly or at reasonable prices.
SECURITIES LENDING -- Each Fund may lend its portfolio securities. The advantage
of lending portfolio securities is that a Fund continues to have the benefits
(and risks) of ownership of the loaned securities, while at the same time
receiving interest from the borrower of the securities. The primary risk in
lending portfolio securities is that a borrower may fail to return a portfolio
security.
SOVEREIGN DEBT -- In certain emerging countries, the central government and its
agencies are the largest debtors to local and foreign banks and others.
Sovereign debt involves the risk that the government, as a result of political
considerations or cash flow difficulties, may fail to make scheduled payments of
interest or principal and may require holders to participate in rescheduling of
payments or even to make additional loans. If an emerging country government
defaults on its sovereign debt, there is likely to be no legal proceeding under
which the debt may be ordered repaid, in whole or in part. The ability or
willingness of a foreign sovereign debtor to make payments of principal and
interest in a timely manner may be influenced by, among other factors, its cash
flow, the magnitude of its foreign reserves, the availability of foreign
exchanges on the payment date, the debt service burden to the economy as a
<PAGE>
whole, the debtor's then current relationship with the International Monetary
Fund and its then current political constraints. Some of the emerging countries
issuing such instruments have experienced high rates of inflation in recent
years and have extensive internal debt. Among other effects, high inflation and
internal debt service requirements may adversely affect the cost and
availability of future domestic sovereign borrowing to finance government
programs, and may have other adverse social, political and economic
consequences, including effects on the willingness of such countries to service
their sovereign debt. An emerging country government's willingness and ability
to make timely payments on its sovereign debt also are likely to be heavily
affected by the country's balance of trade and its access to trade and other
international credits. If a country's exports are concentrated in a few
commodities, such country would be more significantly exposed to a decline in
the international prices of one or more of such commodities. A rise in
protectionism on the part of its trading partners, or unwillingness by such
partners to make payment for goods in hard currency, could also adversely affect
the country's ability to export its products and repay its debts. Sovereign
debtors may also be dependent on expected receipts from such agencies and others
abroad to reduce principal and interest arrearages on their debt. However,
failure by the sovereign debtor or other entity to implement economic reforms
negotiated with multilateral agencies or others, to achieve specified levels of
economic performance, or to make other debt payments when due, may cause third
parties to terminate their commitments to provide funds to the sovereign debtor,
which may further impair such debtor's willingness or ability to service its
debts.
The Funds may invest in debt securities issued under the "Brady Plan" in
connection with restructurings in emerging country debt markets or earlier
loans. These securities, often referred to as "Brady Bonds," are, in some cases,
denominated in U.S. dollars and collateralized as to principal by U.S. Treasury
zero coupon bonds having the same maturity. At least one year's interest
payments, on a rolling basis, are collateralized by cash or other investments.
Brady Bonds are actively traded on an over-the-counter basis in the secondary
market for emerging country debt securities. Brady Bonds are lower-rated bonds
and are highly volatile.
U.S. GOVERNMENT SECURITIES -- Each Fund may, from time to time, purchase debt
securities issued by the U.S. government. These securities include Treasury
bills, notes, and bonds. Treasury bills have a maturity of one year or less,
Treasury notes generally have a maturity of one to ten years, and Treasury bonds
generally have maturities of more than ten years.
U.S. government debt securities also include securities issued or guaranteed by
agencies or instrumentalities of the U.S. government. Some obligations of U.S.
government agencies, which are established under the authority of an act of
Congress, such as Government National Mortgage Association ("GNMA")
Participation Certificates, are supported by the full faith and credit of the
U.S. Treasury. GNMA Certificates are mortgage-backed securities representing
part ownership of a pool of mortgage loans. These loans -- issued by lenders
such as mortgage bankers, commercial banks and savings and loan associations --
are either insured by the Federal Housing Administration or guaranteed by the
Veterans Administration. A "pool" or group of such mortgages is assembled and,
after being approved by GNMA, is offered to investors through securities
dealers. Once approved by GNMA, the timely payment of interest and principal on
each mortgage is guaranteed by GNMA and backed by the full faith and credit of
the U.S. government. The market value of GNMA Certificates is not guaranteed.
GNMA Certificates are different from bonds because principal is paid back
monthly by the borrower over the term of the loan rather than returned in a lump
<PAGE>
sum at maturity, as is the case with a bond. GNMA Certificates are called
"pass-through" securities because both interest and principal payments
(including prepayments) are passed through to the holder of the GNMA
Certificate.
Other United States government debt securities, such as securities of the
Federal Home Loan Banks, are supported by the right of the issuer to borrow from
the Treasury. Others, such as bonds issued by Fannie Mae, a federally chartered
private corporation, are supported only by the credit of the corporation. In the
case of securities not backed by the full faith and credit of the United States,
a Fund must look principally to the agency issuing or guaranteeing the
obligation in the event the agency or instrumentality does not meet its
commitments. A Fund will invest in securities of such instrumentalities only
when INVESCO and the applicable sub-advisers are satisfied that the credit risk
with respect to any such instrumentality is comparatively minimal.
WHEN-ISSUED/DELAYED DELIVERY -- The Funds normally buy and sell securities on an
ordinary settlement basis. That means that the buy or sell order is sent, and a
Fund actually takes delivery or gives up physical possession of the security on
the "settlement date," which is three business days later. However, the Funds
also may purchase and sell securities on a when-issued or delayed delivery
basis.
When-issued or delayed delivery transactions occur when securities are purchased
or sold by a Fund and payment and delivery take place at an agreed-upon time in
the future. The Funds may engage in this practice in an effort to secure an
advantageous price and yield. However, the yield on a comparable security
available when delivery actually takes place may vary from the yield on the
security at the time the when-issued or delayed delivery transaction was entered
into. When a Fund engages in when-issued and delayed delivery transactions, it
relies on the seller or buyer to consummate the sale at the future date. If the
seller or buyer fails to act as promised, that failure may result in the Fund
missing the opportunity of obtaining a price or yield considered to be
advantageous. No payment or delivery is made by a Fund until it receives
delivery or payment from the other party to the transaction. However,
fluctuation in the value of the security from the time of commitment until
delivery could adversely affect a Fund.
INVESTMENT RESTRICTIONS
The Funds operate under certain investment restrictions. For purposes of the
following restrictions, all percentage limitations apply immediately after a
purchase or initial investment. Any subsequent change in a particular percentage
resulting from fluctuations in value does not require elimination of any
security from a Fund.
The following restrictions are fundamental and may not be changed without prior
approval of a majority of the outstanding voting securities of a Fund, as
defined in the 1940 Act.
Each Fund may not:
1. purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities or municipal securities) if, as a result, more than 25%
of the Fund's total assets would be invested in the securities of
companies whose principal business activities are in the same industry;
<PAGE>
2. with respect to 75% of the Fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities, or securities of
other investment companies) if, as a result, (i) more than 5% of a Fund's
total assets would be invested in the securities of that issuer, or (ii) a
Fund would hold more than 10% of the outstanding voting securities of that
issuer;
3. underwrite securities of other issuers, except insofar as it may be
deemed to be an underwriter under the 1933 Act in connection with the
disposition of the Fund's portfolio securities;
4. borrow money, except that the Fund may borrow money in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings);
5. issue senior securities, except as permitted under the 1940 Act;
6. lend any security or make any loan if, as a result, more than 33 1/3%
of its total assets would be lent to other parties, but this limitation
does not apply to the purchase of debt securities or to repurchase
agreements;
7. purchase or sell physical commodities; however, this policy shall not
prevent the Fund from purchasing and selling foreign currency, futures
contracts, options, forward contracts, swaps, caps, floors, collars and
other financial instruments; or
8. purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the Fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business).
9. Each Fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company managed by INVESCO or an affiliate
or a successor thereof, with substantially the same fundamental investment
objective, policies and limitations as the Fund.
In addition, each Fund has the following non-fundamental policies, which may be
changed without shareholder approval:
A. The Fund may not sell securities short (unless it owns or has the right
to obtain securities equivalent in kind and amount to the securities sold
short) or purchase securities on margin, except that (i) this policy does
not prevent the Fund from entering into short positions in foreign
currency, futures contracts, options, forward contracts, swaps, caps,
floors, collars and other financial instruments, (ii) the Fund may obtain
such short-term credits as are necessary for the clearance of
transactions, and (iii) the Fund may make margin payments in connection
with futures contracts, options, forward contracts, swaps, caps, floors,
collars and other financial instruments.
<PAGE>
B. The Fund may borrow money only from a bank or from an open-end
management investment company managed by INVESCO or an affiliate or a
successor thereof for temporary or emergency purposes (not for leveraging
or investing) or by engaging in reverse repurchase agreements with any
party (reverse repurchase agreements will be treated as borrowings for
purposes of fundamental limitation (4)).
C. The Fund does not currently intend to purchase any security if, as a
result, more than 15% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
D. The Fund may invest in securities issued by other investment companies
to the extent that such investments are consistent with the Fund's
investment objective and policies and permissible under the 1940 Act.
E. With respect to fundamental limitation (1), domestic and foreign
banking will be considered to be different industries.
In addition, with respect to a Fund that may invest in municipal obligations,
the following non-fundamental policy applies, which may be changed without
shareholder approval:
Each state (including the District of Columbia and Puerto Rico), territory
and possession of the United States, each political subdivision, agency,
instrumentality and authority thereof, and each multi-state agency of
which a state is a member is a separate "issuer." When the assets and
revenues of an agency, authority, instrumentality or other political
subdivision are separate from the government creating the subdivision and
the security is backed only by assets and revenues of the subdivision,
such subdivision would be deemed to be the sole issuer. Similarly, in the
case of an Industrial Development Bond or Private Activity bond, if that
bond is backed only by the assets and revenues of the non-governmental
user, then that non-governmental user would be deemed to be the sole
issuer. However, if the creating government or another entity guarantees a
security, then to the extent that the value of all securities issued or
guaranteed by that government or entity and owned by a Fund exceeds 10% of
the Fund's total assets, the guarantee would be considered a separate
security and would be treated as issued by that government or entity.
Following is a chart outlining some of the limitations pursuant to
non-fundamental investment policies set by the board of directors. These
non-fundamental policies may be changed by the board of directors without
shareholder approval:
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
INVESTMENT BLUE CHIP GROWTH DYNAMICS ENDEAVOR GROWTH & INCOME
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------
EQUITY SECURITIES Unlimited Unlimited Unlimited Unlimited
- ------------------------------------------------------------------------------------------
LOWER RATED Not Allowed Up to 25%
CORPORATE DEBT
SECURITIES
- ------------------------------------------------------------------------------------------
FOREIGN SECURITIES Up to 25% Up to 25% Up to 25% Up to 25%
(Percentages
exclude ADRs and
securities of
Canadian issuers.)
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
INVESTMENT SMALL COMPANY GROWTH S&P 500 INDEX VALUE EQUITY
- ------------------------------------------------------------------------------------------
EQUITY SECURITIES Normall, at least Normally, those Normally, at
65% in companies listed in the S&P least 65%
with market capi- 500 Index
talizations of $2
billion or less
- ------------------------------------------------------------------------------------------
LOWER RATED CORPO- Up to 5%
RATE DEBT SECURITIES
- ------------------------------------------------------------------------------------------
FOREIGN SECURITIES Up to 25% Only securities Up to 25%
(Percentages exclude that are listed
ADRs and securities in the S&P 500
of Canadian issuers.) Index
- ------------------------------------------------------------------------------------------
</TABLE>
MANAGEMENT OF THE FUNDS
THE INVESTMENT ADVISER
INVESCO, located at 7800 East Union Avenue, Denver, Colorado, is the Company's
investment adviser. INVESCO was founded in 1932 and serves as an investment
adviser to:
INVESCO Bond Funds, Inc. (formerly, INVESCO Income Funds, Inc.)
INVESCO Combination Stock & Bond Funds, Inc. (formerly, INVESCO Flexible
Funds, Inc.)
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Sector Funds, Inc. (formerly, INVESCO Strategic Portfolios, Inc.)
INVESCO Stock Funds, Inc. (formerly, INVESCO Equity Funds, Inc.)
INVESCO Treasurer's Series Funds, Inc. (formerly, INVESCO Treasurer's
Series Trust)
INVESCO Variable Investment Funds, Inc.
<PAGE>
As of March 31, 2000, INVESCO managed 45 mutual funds having combined assets
of over $41.8 billion, on behalf of more than 1,077,115 shareholders.
INVESCO is an indirect wholly owned subsidiary of AMVESCAP PLC, a publicly
traded holding company. Through its subsidiaries, AMVESCAP PLC engages in the
business of investment management on an international basis. AMVESCAP PLC is one
of the largest independent investment management businesses in the world, with
approximately $392 billion in assets under management on March 31, 2000.
AMVESCAP PLC's North American subsidiaries include:
INVESCO Retirement and Benefit Services, Inc. ("IRBS"), Atlanta, Georgia,
develops and provides domestic and international defined contribution
retirement plan services to plan sponsors, institutional retirement plan
sponsors, institutional plan providers and foreign governments.
INVESCO Retirement Plan Services ("IRPS"), Atlanta, Georgia, a
division of IRBS, provides recordkeeping and investment selection
services to defined contribution plan sponsors of plans with between
$2 million and $200 million in assets. Additionally, IRPS provides
investment consulting services to institutions seeking to provide
retirement plan products and services.
Institutional Trust Company, doing business as INVESCO Trust Company
("ITC"), Denver, Colorado, a division of IRBS, provides retirement
account custodian and/or trust services for individual retirement
accounts ("IRAs") and other retirement plan accounts. This includes
services such as recordkeeping, tax reporting and compliance. ITC acts
as trustee or custodian to these plans. ITC accepts contributions and
provides complete transfer agency functions: correspondence,
sub-accounting, telephone com munica tions and processing of
distributions.
INVESCO, Inc., Atlanta, Georgia, manages individualized investment
portfolios of equity, fixed-income and real estate securities for
institutional clients, including mutual funds and the collective investment
entities. INVESCO, Inc. includes the following Divisions:
INVESCO Capital Management Division, Atlanta, Georgia, manages
institutional investment portfolios, consisting primarily of
discretionary employee benefit plans for corporations and state and
local governments, and endowment funds.
INVESCO Management & Research Division, Boston, Massachusetts,
primarily man ages pension and endowment accounts.
PRIMCO Capital Management Division, Louisville, Kentucky, specializes
in managing stable return investments, principally on behalf of
Section 401(k) retirement plans.
<PAGE>
INVESCO Realty Advisors Division, Dallas, Texas, is responsible for
providing advi sory services in the U.S. real estate markets for
AMVESCAP PLC's clients worldwide. Clients include corporate pension
plans and public pension funds as well as endowment and foundation
accounts.
INVESCO (NY) Division, New York, is an investment adviser for
separately managed accounts, such as corporate and municipal pension
plans, Taft-Hartley Plans, insurance companies, charitable
institutions and private individuals. INVESCO NY further serves as
investment adviser to several closed-end investment companies, and as
sub-adviser with respect to certain commingled employee benefit
trusts.
A I M Advisors, Inc., Houston, Texas, provides investment advisory and
administrative services for retail and institutional mutual funds.
A I M Capital Management, Inc., Houston, Texas, provides investment
advisory services to individuals, corporations, pension plans and other
private investment advisory accounts and also serves as a sub-adviser to
certain retail and institutional mutual funds, one Canadian mutual fund and
one portfolio of an open-end registered investment company that is offered
to separate accounts of variable insurance companies.
A I M Distributors, Inc. and Fund Management Company, Houston, Texas, are
registered broker-dealers that act as the principal underwriters for retail
and institutional mutual funds.
The corporate headquarters of AMVESCAP PLC are located at 11 Devonshire Square,
London, EC2M4YR, England.
THE INVESTMENT ADVISORY AGREEMENT
INVESCO serves as investment adviser to the Funds under an investment advisory
agreement dated February 28, 1997 (the "Agreement") with the Company.
The Agreement requires that INVESCO manage the investment portfolio of each Fund
in a way that conforms with the Fund's investment policies. INVESCO may directly
manage a Fund itself, or may hire a sub-adviser, which may be an affiliate of
INVESCO, to do so. Specifically, INVESCO is responsible for:
o managing the investment and reinvestment of all the assets of the Funds,
and executing all purchases and sales of portfolio securities;
o maintaining a continuous investment program for the Funds, consistent with
(i) each Fund's investment policies as set forth in the Company's Articles
of Incorporation, Bylaws and Registration Statement, as from time to time
amended, under the 1940 Act, and in any prospectus and/or statement of
additional information of the Funds, as from time to time amended and in
use under the 1933 Act, and (ii) the Company's status as a regulated
investment company under the Internal Revenue Code of 1986, as amended;
o determining what securities are to be purchased or sold for the Funds,
unless otherwise directed by the directors of the Company, and executing
transactions accordingly;
<PAGE>
o providing the Funds the benefit of the investment analysis and research,
the reviews of current economic conditions and trends, and the
consideration of a long-range investment policy now or hereafter generally
available to the investment advisory customers of the adviser or any
sub-adviser;
o determining what portion of each Fund's assets should be invested in the
various types of securities authorized for purchase by the Fund; and
o making recommendations as to the manner in which voting rights, rights to
consent to Fund action and any other rights pertaining to a Fund's
portfolio securities shall be exercised.
INVESCO also performs all of the following services for the Funds:
o administrative;
o internal accounting (including computation of net asset value);
o clerical and statistical;
o secretarial;
o all other services necessary or incidental to the administration of the
affairs of the Funds;
o supplying the Company with officers, clerical staff and other employees;
o furnishing office space, facilities, equipment, and supplies; providing
personnel and facilities required to respond to inquiries related to
shareholder accounts;
o conducting periodic compliance reviews of the Funds' operations;
preparation and review of required documents, reports and filings by
INVESCO's in-house legal and accounting staff or in conjunction with
independent attorneys and accountants (including prospectuses, statements
of additional information, proxy statements, shareholder reports, tax
returns, reports to the SEC, and other corporate documents of the Funds);
o supplying basic telephone service and other utilities; and
o preparing and maintaining certain of the books and records required to be
prepared and maintained by the Funds under the 1940 Act.
Expenses not assumed by INVESCO are borne by the Funds. As full compensation for
its advisory services to the Company, INVESCO receives a monthly fee from each
Fund. The fee is calculated at the annual rate of:
<PAGE>
Blue Chip Growth and Dynamics Funds
o 0.60% on the first $350 million of each Fund's average net assets;
o 0.55% on the next $350 million of each Fund's average net assets;
o 0.50% of each Fund's average net assets from $700 million;
o 0.45% of each Fund's average net assets from $2 billion;
o 0.40% of each Fund's average net assets from $4 billion;
o 0.375% of each Fund's average net assets from $6 billion; and
o 0.35% of each Fund's average net assets from $8 billion.
INVESCO Endeavor and Growth & Income Funds
o 0.75% on the first $500 million of each Fund's average net assets;
o 0.65% on the next $500 million of each Fund's average net assets;
o 0.55% of each Fund's average net assets from $1 billion;
o 0.45% of each Fund's average net assets from $2 billion;
o 0.40% of each Fund's average net assets from $4 billion;
o 0.375% of each Fund's average net assets from $6 billion; and
o 0.35% of each Fund's average net assets from $8 billion.
Small Company Growth Fund
o 0.75% on the first $350 million of the Fund's average net assets;
o 0.65% on the next $350 million of the Fund's average net assets;
o 0.55% of the Fund's average net assets from $700 million;
o 0.45% of the Fund's average net assets from $2 billion;
o 0.40% of the Fund's average net assets from $4 billion;
o 0.375% of the Fund's average net assets from $6 billion; and
o 0.35% of the Fund's average net assets from $8 billion.
<PAGE>
S&P 500 Index Fund
o 0.25% of the Fund's average net assets.
Value Equity Fund
o 0.75% on the first $500 million of the Fund's average net assets;
o 0.65% on the next $500 million of the Fund's average net assets;
o 0.50% of the Fund's average net assets from $1 billion;
o 0.45% of the Fund's average net assets from $2 billion;
o 0.40% of the Fund's average net assets from $4 billion;
o 0.375% of the Fund's average net assets from $6 billion; and
o 0.35% of the Fund's average net assets from $8 billion.
During the periods outlined in the table below, the Funds paid INVESCO
advisory fees in the dollar amounts shown below. Since the Funds' Class C shares
were not offered until February 15, 2000 and Dynamics Fund - Institutional Class
shares are not offered until May 19, 2000, no advisory fees were paid with
respect to Class C shares and Institutional Class shares for Dynamics Fund for
the periods shown below. If applicable, the advisory fees were offset by credits
in the amounts shown below, so INVESCO's fees were not in excess of the expense
limitations shown below, which have been voluntarily agreed to by the Company
and INVESCO.
<TABLE>
<CAPTION>
Advisory Total Expense Total Expense
Fee Dollars Reimbursements Limitations
----------- -------------- -------------
<S> <C> <C> <C>
Blue Chip Growth Fund - Investor Class
July 31, 1999(a) $5,712,698 $0 N/A
August 31, 1998 $4,561,574 $0 N/A
August 31, 1997 $3,922,981 $0 N/A
August 31, 1996 $3,196,929 $0 N/A
Dynamics Fund - Investor Class
July 31, 1999(b) $2,927,803 $0 1.20%(c)
April 30, 1999 $7,750,919 $0 1.21%
April 30, 1998 $5,874,212 $0 1.21%
April 30, 1997 $4,550,303 $0 1.21%
<PAGE>
INVESCO Endeavor Fund - Investor Class
July 31, 1999(b) $ 173,488 $0 1.50%
April 30, 1999 $ 206,836 $0 1.50%
Growth & Income Fund - Investor Class
July 31, 1999(b) $ 107,949 $33,201 1.50%
April 30, 1999 $ 209,172 $53,659 1.50%
Small Company Growth Fund - Investor Class
July 31, 1999(d) $ 512,934 $ 84,361 1.50%
May 31, 1999 $1,973,393 $201,069 1.50%
May 31, 1998 $2,334,680 $ 0 1.50%
May 31, 1997 $2,029,312 $ 59,729 1.50%
S&P 500 Index Fund - Institutional Class
July 31, 1999(e) $ 9,042 $ 29,912 0.35%(f)
July 31, 1998 $ 3,729 $ 31,239 0.30%
S&P 500 Index Fund - Investor Class
July 31, 1999(e) $ 99,317 $155,166 0.60%(g)
July 31, 1998 $ 10,030 $ 44,823 0.55%
Value Equity Fund - Investor Class
July 31, 1999(a) $ 2,756,316 $397,754 1.30%(h)
August 31, 1998 $ 3,080,351 $164,235 1.25%
August 31, 1997 $ 2,250,039 $ 0 N/A
August 31, 1996 $ 1,382,049 $ 0 N/A
</TABLE>
(a) For the period September 1, 1998 through July 31, 1999
(b) For the period May 1, 1999 through July 31, 1999
(c) Effective May 13, 1999, the Total Expense Limitation was changed to 1.20%
(d) For the period June 1, 1999 through July 31, 1999
(e) For the period August 1, 1998 through July 31, 1999
(f) Effective May 13, 1999, the Total Expense Limitation was changed to
0.35%
(g) Effective May 13, 1999, the Total Expense Limitation was changed to 0.60%
(h) Effective May 13, 1999, the Total Expense Limitation was changed to 1.30%
THE SUB-ADVISORY AGREEMENT
With respect to the S&P 500 Index Fund, World Asset Management ("World") serves
as sub-adviser to the Fund pursuant to a sub-advisory agreement dated July 15,
1999 with INVESCO.
<PAGE>
With respect to the Value Equity Fund, INVESCO Capital Management, a division of
INVESCO, Inc. ("ICM") serves as sub-adviser to the Fund pursuant to a
sub-advisory agreement dated February 28, 1997 with INVESCO.
The Sub-Agreements provide that World and ICM, as applicable, subject to the
supervision of INVESCO, shall manage the investment portfolio of the respective
Funds in conformity with each such Fund's investment policies. These management
services include: (a) managing the investment and reinvestment of all the
assets, now or hereafter acquired, of each Fund, and executing all purchases and
sales of portfolio securities; (b) maintaining a continuous investment program
for the Funds, consistent with (i) each Fund's investment policies as set forth
in the Company's Articles of Incorporation, Bylaws and Registration Statement,
as from time to time amended, under the 1940 Act, as amended, and in any
prospectus and/or statement of additional information of the Company, as from
time to time amended and in use under the 1933 Act and (ii) the Company's status
as a regulated investment company under the Internal Revenue Code of 1986, as
amended; (c) determining what securities are to be purchased or sold for each
Fund, unless otherwise directed by the directors of the Company or INVESCO, and
executing transactions accordingly; (d) providing the Funds the benefit of all
of the investment analysis and research, the reviews of current economic
conditions and trends, and the consideration of long-range investment policy now
or hereafter generally available to investment advisory customers of World or
ICM; (e) determining what portion of each applicable Fund's assets should be
invested in the various types of securities authorized for purchase by such
Fund; and (f) making recommendations as to the manner in which voting rights,
rights to consent to Company action and any other rights pertaining to the
portfolio securities of each applicable Fund shall be exercised.
The Sub-Agreements provide that, as compensation for their services, World and
ICM shall receive from INVESCO, at the end of each month, a fee based upon the
average daily value of the applicable Fund's net assets. The sub-advisory fees
are paid by INVESCO, NOT the Funds. The fees are calculated at the following
annual rates:
S&P 500 Index Fund
o 0.07% on the first $10 million of the Fund's average net assets;
o 0.05% on the next $40 million of the Fund's average net assets; and
o 0.03% of the Fund's average net assets from $50 million.
Value Equity Fund
o 0.30% on the first $500 million of the Fund's average net assets;
o 0.26% on the next $500 million of the Fund's average net assets;
o 0.20% of the Fund's average net assets from $1 billion;
<PAGE>
o 0.18% of the Fund's average net assets from $2 billion;
o 0.16% of the Fund's average net assets from $4 billion;
o 0.15% of the Fund's average net assets from $6 billion; and
o 0.14% of the Fund's average net assets from $8 billion.
ADMINISTRATIVE SERVICES AGREEMENT
INVESCO, either directly or through affiliated companies, provides certain
administrative, sub-accounting, and recordkeeping services to the Funds pursuant
to an Administrative Services Agreement dated February 28, 1997 with the
Company.
The Administrative Services Agreement requires INVESCO to provide the following
services to the Funds:
o such sub-accounting and recordkeeping services and functions as are
reasonably necessary for the operation of the Funds; and
o such sub-accounting, recordkeeping, and administrative services and
functions, which may be provided by affiliates of INVESCO, as are
reasonably necessary for the operation of Fund shareholder accounts
maintained by certain retirement plans and employee benefit plans for the
benefit of participants in such plans.
As full compensation for services provided under the Administrative Services
Agreement, each Fund pays a monthly fee to INVESCO consisting of a base fee of
$10,000 per year, plus an additional incremental fee computed daily and paid
monthly at an annual rate of 0.015% of the average net assets of each Fund prior
to May 13, 1999, and 0.045% per year of the average net assets of each Fund
effective May 13, 1999.
TRANSFER AGENCY AGREEMENT
INVESCO also performs transfer agent, dividend disbursing agent and registrar
services for the Funds pursuant to a Transfer Agency Agreement dated February
28, 1997 with the Company.
The Transfer Agency Agreement provides that each Fund pays INVESCO an annual fee
of $20.00 per shareholder account, or, where applicable, per participant in an
omnibus account. This fee is paid monthly at the rate of 1/12 of the annual fee
and is based upon the actual number of shareholder accounts and omnibus account
participants in each Fund at any time during each month.
FEES PAID TO INVESCO
For the periods outlined in the table below for each Fund, the Funds' Investor
Class shares paid the following fees to INVESCO (in some instances, prior to the
<PAGE>
absorption of certain Fund expenses by INVESCO). Since the Funds' Class C
shares were not offered until February 15, 2000 and Dynamics Fund -
Institutional Class shares are not offered until May 19, 2000, no fees were
paid with respect to Class C shares and Institutional Class shares of Dynamics
Fund for the periods shown below.
Administrative Transfer
Advisory Services Agency
-------- -------- ------
Blue Chip Growth Fund - Investor Class
July 31, 1999(a) $5,712,698 $ 248,879 $1,500,795
August 31, 1998 4,561,574 131,098 1,160,513
August 31, 1997 3,922,981 112,386 1,066,438
August 31, 1996 3,196,929 92,412 751,390
Dynamics Fund - Investor Class
July 31, 1999(b) $2,927,803 $ 236,694 $ 993,382
April 30, 1999 7,750,919 226,800 2,693,081
April 30, 1998 5,874,212 170,476 2,156,766
April 30, 1997 4,550,303 130,696 1,964,970
INVESCO Endeavor Fund - Investor Class
July 31, 1999(b) $ 173,488 $ 12,209 $ 57,863
April 30, 1999(c) 206,836 9,217 52,532
Growth & Income Fund - Investor Class
July 31, 1999(b) $ 107,949 $ 8,442 $ 47,918
April 30, 1999(d) 209,172 12,517 70,040
Small Company Growth Fund - Investor Class
July 31, 1999(e) $ 512,934 $ 33,164 $ 327,104
May 31, 1999 1,973,393 54,324 1,116,282
May 31, 1998 2,334,680 56,738 1,090,224
May 31, 1997 2,029,312 50,600 1,043,895
S&P 500 Index Fund - Institutional Class
July 31, 1999 $ 9,042 $ 1,793 $ 2,447
July 31, 1998 3,729 2,624 266
S&P 500 Index Fund - Investor Class
July 31, 1999 $ 99,317 $ 19,051 $ 76,345
July 31, 1998 10,030 4,250 7,631
<PAGE>
Value Equity Fund - Investor Class
July 31, 1999(a) $2,756,316 $ 89,785 $1,011,717
August 31, 1998 3,080,351 71,607 918,694
August 31, 1997 2,250,039 55,001 610,115
August 31, 1996 1,382,049 37,641 282,255
(a) From September 1, 1998 to July 31, 1999
(b) From May 1, 1999 to July 31, 1999
(c) From October 28, 1998 (commencement of operations) to April 30, 1999
(d) From July 1, 1998 (commencement of operations) to April 30, 1999
(e) From June 1, 1999 to July 31, 1999
DIRECTORS AND OFFICERS OF THE COMPANY
The overall direction and supervision of the Company come from the board of
directors. The board of directors is responsible for making sure that the Funds'
general investment policies and programs are carried out and that the Funds are
properly administered.
The board of directors has an audit committee comprised of four of the directors
who are not affiliated with INVESCO (the "Independent Directors"). The committee
meets quarterly with the Company's independent accountants and officers to
review accounting principles used by the Company, the adequacy of internal
controls, the responsibilities and fees of the independent accountants, and
other matters.
The Company has a management liaison committee which meets quarterly with
various management personnel of INVESCO in order to facilitate better
understanding of management and operations of the Company, and to review legal
and operational matters which have been assigned to the committee by the board
of directors, in furtherance of the board of directors' overall duty of
supervision.
The Company has a brokerage committee. The committee meets periodically to
review soft dollar and other brokerage transactions by the Funds, and to review
policies and procedures of INVESCO with respect to brokerage transactions. It
reports on these matters to the Company's board of directors.
The Company has a derivatives committee. The committee meets periodically to
review derivatives investments made by the Funds. It monitors derivative usage
by the Funds and the procedures utilized by INVESCO to ensure that the use of
such instruments follows the policies on such instruments adopted by the
Company's board of directors. It reports on these matters to the Company's board
of directors.
The Company has a legal committee and an insurance committee. These committees
meet when necessary to review legal and insurance matters of importance to the
directors of the Company.
The Company has a nominating committee. The committee meets periodically to
review and nominate candidates for positions as independent directors to fill
vacancies on the board of directors.
<PAGE>
The officers of the Company, all of whom are officers and employees of INVESCO,
are responsible for the day-to-day administration of the Company and the Funds.
The officers of the Company receive no direct compensation from the Company or
the Funds for their services as officers. INVESCO has the primary responsibility
for making investment decisions on behalf of the Funds. These investment
decisions are reviewed by the investment committee of INVESCO.
All of the officers and directors of the Company hold comparable positions with
the following funds, which, with the Company, are collectively referred to as
the "INVESCO Funds":
INVESCO Bond Funds, Inc. (formerly, INVESCO Income Funds, Inc.)
INVESCO Combination Stock & Bond Funds, Inc. (formerly, INVESCO Flexible
Funds, Inc.)
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Sector Funds, Inc. (formerly, INVESCO Strategic Portfolios, Inc.)
INVESCO Stock Funds, Inc. (formerly, INVESCO Equity Funds, Inc.)
INVESCO Treasurer's Series Funds, Inc. (formerly, INVESCO Treasurer's
Series Trust)
INVESCO Variable Investment Funds, Inc.
The table below provides information about each of the Company's directors and
officers. Their affiliations represent their principal occupations.
Name, Address, and Age Position(s) Held With Principal Occupation(s)
Company During Past Five Years
Mark H. Williamson(2)(3) President, Chief President, Chief
7800 E. Union Avenue Executive Officer Executive Officer and
Denver, Colorado and Chairman of the Chairman of the Board
Age: 48 Board of INVESCO Funds
Group, Inc.; President,
Chief Executive Officer
and Chairman of the Board
of INVESCO Distributors,
Inc.; President, Chief
Operating Officer and
Trustee of INVESCO Global
Health Sciences Fund;
formerly, Chairman and
Chief Executive Officer
of NationsBanc Advisors,
Inc.; formerly, Chairman
of NationsBanc
Investments, Inc.
<PAGE>
Name, Address, and Age Position(s) Held With Principal Occupation(s)
Company During Past Five Years
Fred A. Deering(1)(2)(7)(8) Vice Chairman of the Trustee of INVESCO Glo-
Security Life Center Board bal Health Sciences
1290 Broadway Fund; formerly,
Denver, Colorado Chairman of the
Age: 72 Executive Committee
and Chairman of the Board
of Security Life of Denver
Insurance Company;
Director of ING American
Holdings Company and First
ING Life Insurance
Company of New York.
Victor L. Andrews, Director Professor Emeritus,
Ph.D.(4)(6) Chairman Emeritus and
34 Seawatch Drive Chairman of the CFO
Savannah, Georgia Roundtable of the
Age: 69 Department of Finance of
Georgia State University;
President, Andrews Finan-
cial Associates, Inc.(con-
sulting firm); Director
of The Sheffield Funds,
Inc.; formerly, member of
the faculties of the
Harvard Business School
and the Sloan
School of Management of
MIT.
<PAGE>
Name, Address, and Age Position(s) Held With Principal Occupation(s)
Company During Past Five Years
Bob R. Baker(2)(4)(5)(9) Director Consultant (since
37 Castle Pines Dr., N. 2000); formerly, President
Castle Rock, Colorado and Chief Executive
Age: 63 Officer (1989 to 2000)
of AMC Cancer Research
Center, Denver, Colorado;
until mid-December 1988,
Vice Chairman of the Board
of First Columbia
Financial Corporation,
Englewood, Colorado;
formerly, Chairman of the
Board and Chief Executive
Officer of First Columbia
Financial Corporation.
Charles W. Brady(3) Director Chairman of the Board
1315 Peachtree St., N.E. of INVESCO Global
Atlanta, Georgia Health Sciences Fund;
Age: 64 Chief Executive Officer
and Chairman of AMVESCAP
PLC, London, England and
various subsidiaries of
AMVESCAP PLC.
Lawrence H. Budner(1)(5) Director Trust Consultant;
7608 Glen Albens Circle prior to June 30,
Dallas, Texas 1987, Senior Vice
Age: 69 President and Senior
Trust Officer of
InterFirst Bank,
Dallas, Texas.
<PAGE>
Name, Address, and Age Position(s) Held With Principal Occupation(s)
Company During Past Five Years
James T. Bunch(4)(5)(9) Director Principal and Founder
3600 Republic Plaza of Green Manning &
370 Seventeenth Street Bunch Ltd., Denver,
Denver, Colorado Colorado, since August
Age: 57 1988; Director and
Secretary of Green
Manning & Bunch
Securities, Inc.,
Denver, Colorado since
September 1993; Vice
President and Director
of Western Golf
Association and Evans
Scholars Foundation;
formerly, General
Counsel and Director
of Boettcher & Co.,
Denver, Colorado;
formerly, Chairman and
Managing Partner of
Davis Graham & Stubbs,
Denver, Colorado.
<PAGE>
Name, Address, and Age Position(s) Held With Principal Occupation(s)
Company During Past Five Years
Wendy L. Gramm, Director Self-employed (since
Ph.D.(4)(6)(9) 1993); Professor of
4201 Yuma Street, N.W. Economics and Public
Washington, DC Administration,
Age: 55 University of Texas at
Arlington; formerly,
Chairman, Commodity
Futures Trading
Commission; Administrator
for Information and
Regulatory Affairs at the
Office of Management and
Budget, Executive Director
of the Presidential Task
Force on Regulatory
Relief, and Director of
the Federal Trade Com-
mission's Bureau of Eco-
nomics. Also, Director of
Chicago Mercantile
Exchange, Enron Corpora-
tion, IBP, Inc., State
Farm Insurance Company,
Independent Women's
Forum, International
Republic Institute, and
the Republican Women's
Federal Forum.
<PAGE>
Name, Address, and Age Position(s) Held With Principal Occupation(s)
Company During Past Five Years
Richard W. Healey(3) Director Director and Senior
7800 E. Union Avenue Vice President of
Denver, Colorado INVESCO Distributors,
Age: 45 Inc. since 1998;
formerly, Senior Vice
President of GT Glo-
bal-North America
(1996 to 1998) and The
Boston Company (1993
to 1996).
Gerald J. Lewis(1)(6)(7) Director Chairman of Lawsuit
701 "B" Street Resolution Services,
Suite 2100 San Diego, California
San Diego, California since 1987; Director
Age: 66 of General Chemical
Group, Inc., Hampdon, New
Hampshire, since 1996;
formerly, Associate
Justice of the California
Court of Appeals;
Director of Wheelabrator
Technologies, Inc., Fisher
Scientific, Inc., Henley
Manufacturing, Inc., and
California Coastal Proper-
ties, Inc.; Of Counsel,
Latham & Watkins, San
Diego, California (1987 to
1997).
<PAGE>
Name, Address, and Age Position(s) Held With Principal Occupation(s)
Company During Past Five Years
John W. McIntyre(1)(2)(5)(7) Director Retired. Formerly,
7 Piedmont Center Vice Chairman of the
Suite 100 Board of Directors of
Atlanta, Georgia The Citizens and
Age: 69 Southern Corporation and
Chairman of the Board and
Chief Executive Officer
of The Citizens and
Southern Georgia Corp. and
The Citizens and Southern
National Bank; Trustee of
INVESCO Global Health
Sciences Fund, Gables
Residential Trust,
Employee's Retirement
System of GA, Emory
University, and J.M. Tull
Charitable Foundation;
Director of Kaiser Foun-
dation Health Plans of
Georgia, Inc.
Larry Soll, Ph.D.(4)(6)(9) Director Retired. Formerly,
345 Poorman Road Chairman of the Board
Boulder, Colorado (1987 to 1994), Chief
Age: 58 Executive Officer
(1982 to 1989 and 1993 to
1994) and President (1982
to 1989) of Synergen Inc.;
Director of Synergen since
incorporation in 1982;
Director of Isis
Pharmaceuticals, Inc.;
Trustee of INVESCO Global
Health Sciences Fund.
<PAGE>
Name, Address, and Age Position(s) Held With Principal Occupation(s)
Company During Past Five Years
Glen A. Payne Secretary Senior Vice President,
7800 E. Union Avenue General Counsel and
Denver, Colorado Secretary of INVESCO
Age: 52 Funds Group, Inc.; Senior
Vice President, Secretary
and General Counsel of
INVESCO Distributors,
Inc.; Secretary of INVESCO
Global Health Sciences
Fund; formerly, General
Counsel of INVESCO Trust
Company (1989 to1998) and
employee of a U.S. regula-
tory agency, Washington,
D.C. (1973 to 1989).
Ronald L. Grooms Chief Accounting Senior Vice President,
7800 E. Union Avenue Officer, Chief Finan- Treasurer and Director
Denver, Colorado cial Officer and of INVESCO Funds
Age: 53 Treasurer Group, Inc.; Senior
Vice President,
Treasurer and Direc-
tor of INVESCO
Distributors, Inc.;
Treasurer and
Principal Financial
and Accounting Officer
of INVESCO Global
Health Sciences Fund;
formerly, Senior Vice
President and
Treasurer of INVESCO
Trust Company (1988
to 1998).
<PAGE>
Name, Address, and Age Position(s) Held With Principal Occupation(s)
Company During Past Five Years
William J. Galvin, Jr. Assistant Secretary Senior Vice President
7800 E. Union Avenue and Assistant
Denver, Colorado Secretary of INVESCO
Age: 43 Funds Group, Inc.;
Senior Vice President
and Assistant
Secretary of INVESCO
Distributors, Inc.;
formerly, Trust
Officer of INVESCO
Trust Company (1995 to
1998).
Pamela J. Piro Assistant Treasurer Vice President and
7800 E. Union Avenue Assistant Treasurer
Denver, Colorado of INVESCO Funds
Age: 39 Group, Inc.; Assistant
Treasurer of INVESCO
Distributors, Inc.;
formerly, Assistant
Vice President (1996
to 1997), Director -
Portfolio Accounting
(1994 to 1996),
Portfolio Accounting
Manager (1993 to 1994)
and Assistant
Accounting Manager
(1990 to 1993).
Alan I. Watson Assistant Secretary Vice President of
7800 E. Union Avenue INVESCO Funds Group,
Denver, Colorado Inc.; formerly, Trust
Age: 58 Officer of INVESCO
Trust Company.
Judy P. Wiese Assistant Secretary Vice President and
7800 E. Union Avenue Assistant Secretary
Denver, Colorado of INVESCO Funds
Age: 52 Group, Inc.; Assistant
Secretary of INVESCO
Distributors, Inc.;
formerly, Trust Officer of
INVESCO Trust Company.
(1) Member of the audit committee of the Company.
<PAGE>
(2) Member of the executive committee of the Company. On occasion, the executive
committee acts upon the current and ordinary business of the Company between
meetings of the board of directors. Except for certain powers which, under
applicable law, may only be exercised by the full board of directors, the
executive committee may exercise all powers and authority of the board of
directors in the management of the business of the Company. All decisions are
subsequently submitted for ratification by the board of directors.
(3) These directors are "interested persons" of the Company as defined in
the 1940 Act.
(4) Member of the management liaison committee of the Company.
(5) Member of the brokerage committee of the Company.
(6) Member of the derivatives committee of the Company.
(7) Member of the legal committee of the Company.
(8) Member of the insurance committee of the Company.
(9) Member of the nominating committee of the Company.
The following table shows the compensation paid by the Company to its
Independent Directors for services rendered in their capacities as directors of
the Company; the benefits accrued as Company expenses with respect to the
Defined Benefit Deferred Compensation Plan discussed below; and the estimated
annual benefits to be received by these directors upon retirement as a result of
their service to the Company, all for the period ended July 31, 1999.
In addition, the table sets forth the total compensation paid by all of the
INVESCO Funds and INVESCO Global Health Sciences Fund (collectively, the
"INVESCO Complex") to these directors or trustees for services rendered in their
capacities as directors or trustees during the year ended December 31, 1999. As
of December 31, 1999, there were 46 funds in the INVESCO Complex.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Name of Aggregate Benefits Estimated Total Compensa-
Person and Compensation Accrued As Annual Benefits tion From
Position From Company(1) Part of Upon Retirement(3) INVESCO Com-
Company plex Paid To
Expenses(2) Directors(7)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fred A. Deering $6,164 $8,033 $5,425 $107,050
Vice Chairman of
the Board
- -----------------------------------------------------------------------------------------------
Victor L. Andrews 5,589 7,684 5,981 84,700
- -----------------------------------------------------------------------------------------------
Bob R. Baker 5,672 6,862 8,016 82,850
- -----------------------------------------------------------------------------------------------
Lawrence H. Budner 5,561 7,684 5,981 82,850
- -----------------------------------------------------------------------------------------------
<PAGE>
- -----------------------------------------------------------------------------------------------
Name of Aggregate Benefits Estimated Total Compensa-
Person and Compensation Accrued As Annual Benefits tion From
Position From Company(1) Part of Upon Retirement(3) INVESCO Com-
Company plex Paid To
Expenses(2) Directors(7)
- -----------------------------------------------------------------------------------------------
James T. Bunch(4) 0 0 0 0
- -----------------------------------------------------------------------------------------------
Daniel D. Chabris(5) 2,366 7,852 4,921 34,000
- -----------------------------------------------------------------------------------------------
Wendy L. Gramm 5,449 0 0 81,350
- -----------------------------------------------------------------------------------------------
Kenneth T. King(5) 6,014 8,199 4,921 85,850
- -----------------------------------------------------------------------------------------------
Gerald J. Lewis(4) 0 0 0 0
- -----------------------------------------------------------------------------------------------
John W. McIntyre 6,135 0 0 108,700
- -----------------------------------------------------------------------------------------------
Larry Soll 5,449 0 0 100,900
- -----------------------------------------------------------------------------------------------
Total 48,399 46,314 35,245 768,250
- -----------------------------------------------------------------------------------------------
% of Net Assets 0.0010%(6) 0.0010%(6) 0.0024%(7)
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) The vice chairman of the board, the chairmen of the Funds' committees who
are Independent Directors, and the members of the Funds' committees who
are Independent Directors each receive compensation for serving in such
capacities in addition to the compensation paid to all Independent Directors.
(2) Represents estimated benefits accrued with respect to the Defined Benefit
Deferred Compensation Plan discussed below, and not compensation deferred at the
election of the directors.
(3) These amounts represent the Company's share of the estimated annual
benefits payable by the INVESCO Funds upon the directors' retirement, calculated
using the current method of allocating director compensation among the INVESCO
Funds. These estimated benefits assume retirement at age 72 and that the basic
retainer payable to the directors will be adjusted periodically for inflation,
for increases in the number of funds in the INVESCO Funds, and for other reasons
during the period in which retirement benefits are accrued on behalf of the
respective directors. This results in lower estimated benefits for directors who
are closer to retirement and higher estimated benefits for directors who are
further from retirement. With the exception of Drs. Soll and Gramm and Messrs.
Bunch and Lewis, each of these directors has served as a director of one or more
of the funds in the INVESCO Funds for the minimum five-year period required to
be eligible to participate in the Defined Benefit Deferred Compensation Plan.
Mr. McIntyre became eligible to participate in the Defined Benefit Deferred
Compensation Plan as of November 1, 1998, and was not included in the
calculation of retirement benefits until November 1, 1999.
<PAGE>
(4) Messrs. Bunch and Lewis became directors of the Company on January 1, 2000.
(5) Mr. Chabris retired as a director of the Company on September 30, 1998. Mr.
King retired as a director of the Company on December 31, 1999.
(6) Total as a percentage of the Company's net assets as of July 31, 1999.
(7) Total as a percentage of the net assets of the INVESCO Complex as of
December 31, 1999.
Messrs. Brady, Healey and Williamson, as "interested persons" of the Company and
the other INVESCO Funds, receive compensation as officers or employees of
INVESCO or its affiliated companies, and do not receive any director's fees or
other compensation from the Company or the other funds in the INVESCO Funds for
their service as directors.
The boards of directors of the mutual funds in the INVESCO Funds have adopted a
Defined Benefit Deferred Compensation Plan (the "Plan") for the Independent
Directors of the funds. Under this Plan, each director who is not an interested
person of the funds (as defined in Section 2(a)(19) of the 1940 Act) and who has
served for at least five years (a "Qualified Director") is entitled to receive,
if the Qualified Director retires upon reaching age 72 (or the retirement age of
73 or 74, if the retirement date is extended by the boards for one or two years,
but less than three years), continuation of payment for one year (the "First
Year Retirement Benefit") of the annual basic retainer and annualized board
meeting fees payable by the funds to the Qualified Director at the time of
his/her retirement (the "Basic Benefit"). Commencing with any such director's
second year of retirement, commencing with the first year of retirement of any
Qualified Director whose retirement has been extended by the boards for three
years, and commencing with attainment of age 72 by a Qualified Director who
voluntarily retires prior to reaching age 72, a Qualified Director shall receive
quarterly payments at an annual rate equal to 50% of the Basic Benefit. These
payments will continue for the remainder of the Qualified Director's life or ten
years, whichever is longer (the "Reduced Benefit Payments"). If a Qualified
Director dies or becomes disabled after age 72 and before age 74 while still a
director of the funds, the First Year Retirement Benefit and Reduced Benefit
Payments will be made to him/her or to his/her beneficiary or estate. If a
Qualified Director becomes disabled or dies either prior to age 72 or during
his/her 74th year while still a director of the funds, the director will not be
entitled to receive the First Year Retirement Benefit; however, the Reduced
Benefit Payments will be made to him/her or to his/her beneficiary or estate.
The Plan is administered by a committee of three directors who are also
participants in the Plan and one director who is not a Plan participant. The
cost of the Plan will be allocated among the INVESCO Funds in a manner
determined to be fair and equitable by the committee. The Company began making
payments under the Plan to Mr. Chabris as of October 1, 1998 and to Mr. King as
of January 1, 2000. The Company has no stock options or other pension or
retirement plans for management or other personnel and pays no salary or
compensation to any of its officers. A similar plan has been adopted by INVESCO
Global Health Sciences Fund's board of trustees. All trustees of INVESCO Global
Health Sciences Fund are also directors of the INVESCO Funds.
<PAGE>
The Independent Directors have contributed to a deferred compensation plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of certain of the INVESCO
Funds. Certain of the deferred amounts have been invested in the shares of all
INVESCO Funds, except Funds offered by INVESCO Variable Investment Funds, Inc.,
in which the directors are legally precluded from investing. Each Independent
Director may, therefore, be deemed to have an indirect interest in shares of
each such INVESCO Fund, in addition to any INVESCO Fund shares the Independent
Director may own either directly or beneficially.
CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS
As of April 30, 2000, the following persons owned more than 5% of the
outstanding shares of the Funds indicated below. This level of share ownership
is considered to be a "principal shareholder" relationship with a Fund under the
1940 Act. Shares that are owned "of record" are held in the name of the person
indicated. Shares that are owned "beneficially" are held in another name, but
the owner has the full economic benefit of ownership of those shares:
Blue Chip Growth Fund
- --------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage Owned
(Record/Beneficial)
- --------------------------------------------------------------------------------
Charles Schwab & Co., Inc. Record 5.16%
Special Custody Account for the
Exclusive Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
- --------------------------------------------------------------------------------
<PAGE>
Dynamics Fund
- --------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage Owned
(Record/Beneficial)
- --------------------------------------------------------------------------------
Charles Schwab & Co., Inc. Record 13.49%
Special Custody Account for
the Exclusive Benefit of
Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
- --------------------------------------------------------------------------------
Connecticut General Life Ins. Record 6.91%
c/o Liz Pezda M-110
P.O. Box 2975 H 19 B
Hartford, CT 06104-2975
- --------------------------------------------------------------------------------
FIIOC Agent Record 5.82%
Employee Benefit Plans
100 Magellan Way, KW1C
Covington, KY 41015-1987
- --------------------------------------------------------------------------------
National Financial Services Record 5.15%
Corp.
The Exclusive Benefit of
Customers
One World Financial Center
200 Liberty St., 5th Floor
Attn: Kate - Recon
New York, NY 10281-5500
- --------------------------------------------------------------------------------
INVESCO Endeavor Fund
- --------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage Owned
(Record/Beneficial)
- --------------------------------------------------------------------------------
Charles Schwab & Co., Inc. Record 25.63%
Special Custody Account for
the Exclusive Benefit of
Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
- --------------------------------------------------------------------------------
National Financial Services Record 7.15%
Corp.
The Exclusive Benefit of
Customers
One World Financial Center
200 Liberty St., 5th Floor
Attn: Kate - Recon
New York, NY 10281-5500
- --------------------------------------------------------------------------------
<PAGE>
Growth & Income Fund
- --------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage Owned
(Record/Beneficial)
- --------------------------------------------------------------------------------
Charles Schwab & Co., Inc. Record 26.32%
Special Custody Account for
the Exclusive Benefit of
Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
- --------------------------------------------------------------------------------
Nat'l Financial Services Corp. Record 6.90%
The Exclusive Benefit of Cust.
One World Financial Center
200 Liberty Street, 5th Floor
Attn: Kate Recon
New York, NY 10281-1003
- --------------------------------------------------------------------------------
Small Company Growth Fund
- --------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage Owned
(Record/Beneficial)
- --------------------------------------------------------------------------------
Connecticut General Life Record 13.64%
Insurance
c/o Liz Pezda M-110
P.O. Box 2975 H 19 B
Hartford, CT 06104-2975
- --------------------------------------------------------------------------------
Charles Schwab & Co., Inc. Record 10.37%
Special Custody Account for
the Exclusive Benefit of
Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
- --------------------------------------------------------------------------------
State Street Bank Cust Record 6.72%
RR Donnelley Deferred Comp
Plan Aggressive Equity Fund
US Mutual Fund Services Div.
PO Box 1713
Boston, MA 02105-1713
- --------------------------------------------------------------------------------
FIIOC Agent Record 6.35%
Employee Benefit Plans
100 Magellan Way KW1C
Covington, KY 41015-1987
- --------------------------------------------------------------------------------
<PAGE>
S&P 500 Index Fund
- --------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage Owned
(Record/Beneficial)
- --------------------------------------------------------------------------------
INVESCO Trust Company Record 32.19%
Right Choice Managed Care Inc.
Exec Def Retirement Plan
1831 Chestnut Street
St. Louis, MO 63103-2231
- --------------------------------------------------------------------------------
INVESCO Trust Company Record 22.81%
Right Choice Managed Care Inc.
Supp Exec Retirement Plan
1831 Chestnut Street
St. Louis, MO 63103-2231
- --------------------------------------------------------------------------------
INVESCO Trust Company Record 21.09%
Compass Group USA
Non-Qualified Plan IRPS
Attn: Kelly Allen
P.O. Box 1350
Winston-Salem, NC 27102-1350
- --------------------------------------------------------------------------------
Charles Schwab & Co., Inc. Record 14.77%
Special Custody Account for
the Exclusive Benefit of
Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
- --------------------------------------------------------------------------------
Value Equity Fund
- --------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage Owned
(Record/Beneficial)
- --------------------------------------------------------------------------------
Charles Schwab & Co., Inc. Record 6.87%
Special Custody Account for
the Exclusive Benefit of
Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage Owned
(Record/Beneficial)
- --------------------------------------------------------------------------------
INVESCO Trust Company Record 6.06%
Morris Communications Corp.
Employee's Profit Sharing
Retirement Plan
725 Broad Street
Augusta, GA 30901-1336
- --------------------------------------------------------------------------------
INVESCO Trust Company Record 5.70%
The Ritz Carlton Hotel Company
LLC
Special Reserve Plan DC
400 Colony Square Suite 2200
1201 Peachtree Street NE
Atlanta, GA 30361-3500
- --------------------------------------------------------------------------------
As of April 19, 2000, officers and directors of the Company, as a group,
beneficially owned less than 1% of each of the Fund's outstanding shares.
DISTRIBUTOR
INVESCO Distributors, Inc. ("IDI"), a wholly owned subsidiary of INVESCO, is the
distributor of the Funds. IDI receives no compensation and bears all expenses,
including the cost of printing and distributing prospectuses, incident to
marketing of the Funds' shares, except for such distribution expenses as are
paid out of Fund assets under the Company's Plans of Distribution, which have
been adopted by each Fund pursuant to Rule 12b-1 under the 1940 Act.
INVESTOR CLASS. The Company has adopted a Plan and Agreement of Distribution
(the "Investor Class Plan") with respect to Investor Class shares, which
provides that the Investor Class shares of each Fund will make monthly payments
to IDI computed at an annual rate no greater than 0.25% of average net assets
attributable to Investor Class shares. These payments permit IDI, at its
discretion, to engage in certain activities and provide services in connection
with the distribution of a Fund's Investor Class shares to investors. Payments
by a Fund under the Investor Class Plan, for any month, may be made to
compensate IDI for permissible activities engaged in and services provided.
<PAGE>
CLASS C. The Company has adopted a Master Distribution Plan and Agreement
pursuant to Rule 12b-1 under the 1940 Act relating to the Class C shares of the
Funds (the "Class C Plan"). Under the Class C Plan, Class C shares of the Funds
pay compensation to IDI at an annual rate of 1.00% per annum of the average
daily net assets attributable to Class C shares for the purpose of financing any
activity which is primarily intended to result in the sale of Class C shares.
The Class C Plan is designed to compensate IDI for certain promotional and other
sales-related costs, and to implement a dealer incentive program which provides
for periodic payments to selected dealers who furnish continuing personal
shareholder services to their customers who purchase and own Class C shares of a
Fund. Payments can also be directed by IDI to selected institutions that have
entered into service agreements with respect to Class C shares of each Fund and
that provide continuing personal services to their customers who own such Class
C shares of a Fund. Activities appropriate for financing under the Class C Plan
include, but are not limited to, the following: printing of prospectuses and
statements of additional information and reports for other than existing
shareholders; preparation and distribution of advertising material and sales
literature; expenses of organizing and conducting sales seminars; supplemental
payments to dealers and other institutions such as asset-based sales charges or
as payments of service fees under shareholder service arrangements; and costs of
administering the Class C Plan.
Of the aggregate amount payable under the Class C Plan, payments to dealers and
other financial institutions that provide continuing personal shareholder
services to their customers who purchase and own Class C shares of a Fund, in
amounts of up to 0.25% of the average daily net assets of the Class C shares of
the Fund attributable to the customers of such dealers or financial institutions
are characterized as a service fee. Payments to dealers and other financial
institutions in excess of such amount and payments to IDI would be characterized
as an asset-based sales charge pursuant to the Class C Plan. Payments pursuant
to the Class C Plan are subject to any applicable limitations imposed by rules
of the National Association of Securities Dealers, Inc. ("NASD"). The Class C
Plan conforms to rules of the NASD by limiting payments made to dealers and
other financial institutions who provide continuing personal shareholder
services to their customers who purchase and own Class C shares of the Funds to
no more than 0.25% per annum of the average daily net assets of the Class C
shares of the Funds attributable to the customers of such dealers or financial
institutions, and by imposing a cap on the total sales charges, including
asset-based sales charges, that may be paid by the Funds.
IDI may pay sales commissions to dealers and institutions who sell Class C
shares of the Funds at the time of such sales. Payments with respect to Class C
shares will equal 1.00% of the purchase price of the Class C shares sold by the
dealer or institution, and will consist of a sales commission of 0.75% of the
purchase price of Class C shares sold plus an advance of the first year service
fee of 0.25% with respect to such shares. IDI will retain all payments received
by it relating to Class C shares for the first thirteen months after they are
purchased. The portion of the payments to IDI under the Class C Plan
attributable to Class C shares which constitutes an asset-based sales charge
(0.75%) is intended in part to permit IDI to recoup a portion of on-going sales
commissions to dealers plus financing costs, if any. After the first thirteen
months, IDI will make such payments quarterly to dealers and institutions based
on the average net asset value of Class C shares which are attributable to
shareholders for whom the dealers and institutions are designated as dealers of
record.
<PAGE>
A significant expenditure under the Investor Class Plan and Class C Plan
(collectively, the "Plans") is compensation paid to securities companies and
other financial institutions and organizations, which may include
INVESCO-affiliated companies, in order to obtain various distribution-related
and/or administrative services for the Funds. Each Fund is authorized by a Plan
to use its assets to finance the payments made to obtain those services.
Payments will be made by IDI to broker-dealers who sell shares of a Fund and may
be made to banks, savings and loan associations and other depository
institutions. Although the Glass-Steagall Act limits the ability of certain
banks to act as underwriters of mutual fund shares, INVESCO does not believe
that these limitations would affect the ability of such banks to enter into
arrangements with IDI, 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 the Funds. 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 a Fund.
Financial institutions and any other person entitled to receive compensation for
selling Fund shares may receive different compensation for selling shares of one
particular class instead of another.
During the period ended July 31, 1999, the Funds made payments to IDI under the
Investor Class Plan in the amounts of $2,507,538, $1,291,398, $49,244, $34,245,
$138,369, $88,491, and $915,156 for Blue Chip Growth Fund - Investor Class,
Dynamics Fund - Investor Class, Endeavor Fund - Investor Class, Growth & Income
Fund - Investor Class, Small Company Growth Fund - Investor Class, S&P 500 Index
Fund - Investor Class and Value Equity Fund - Investor Class, respectively. In
addition, as of July 31, 1999, $277,286, $524,406, $23,848, $12,940, $100,988,
$13,861 and $83,038 of additional distribution accruals had been incurred for
Blue Chip Growth Fund - Investor Class, Dynamics Fund - Investor Class, Endeavor
Fund - Investor Class, Growth & Income Fund - Investor Class, Small Company
Growth Fund - Investor Class, S&P 500 Index Fund - Investor Class and Value
Equity Fund - Investor Class, respectively, and will be paid during the fiscal
year ended July 31, 2000. Since the Funds' Class C shares were not offered until
February 15, 2000, the Funds' Class C shares made no payments to IDI under the
Class C Plan during the period ended July 31, 1999. For the fiscal year ended
July 31, 1999, allocation of 12b-1 amounts paid by the Funds' Investor Class for
the following categories of expenses were:
Blue Chip Growth Fund - Investor Class
Advertising--$1,251,932;
Sales literature, printing, and postage--$259,217;
Direct Mail--$166,036;
Public Relations/Promotion--$112,722;
Compensation to securities dealers and other organizations--$396,205; and
Marketing personnel--$321,426.
Dynamics Fund - Investor Class
Advertising--$333,433;
Sales literature, printing, and postage--$82,180;
<PAGE>
Direct Mail--$39,011;
Public Relations/Promotion--$62,799;
Compensation to securities dealers and other organizations--$636,304; and
Marketing personnel--$137,671.
INVESCO Endeavor Fund - Investor Class
Advertising--$31,872;
Sales literature, printing, and postage--$3,067;
Direct Mail--$2,645;
Public Relations/Promotion--$2,056;
Compensation to securities dealers and other organizations--$6,726; and
Marketing personnel--$2,878.
Growth & Income Fund - Investor Class
Advertising--$25,828;
Sales literature, printing, and postage--$2,003;
Direct Mail--$1,343;
Public Relations/Promotion--$1,013;
Compensation to securities dealers and other organizations--$2,727; and
Marketing personnel--$1,331.
Small Company Growth Fund - Investor Class
Advertising--$6,605;
Sales literature, printing, and postage--$9,551;
Direct Mail--$8,895;
Public Relations/Promotion--$11,675;
Compensation to securities dealers and other organizations--$76,799; and
Marketing personnel--$24,844.
S&P 500 Index Fund - Investor Class
Advertising--$24,616;
Sales literature, printing, and postage--$22,775;
Direct Mail--$2,760;
Public Relations/Promotion--$4,380;
Compensation to securities dealers and other organizations--$20,335; and
Marketing personnel--$13,625.
Value Equity Fund - Investor Class
Advertising--$134,414;
Sales literature, printing, and postage--$68,376;
Direct Mail--$19,218;
<PAGE>
Public Relations/Promotion--$26,709;
Compensation to securities dealers and other organizations--$573,142; and
Marketing personnel--$93,297.
The services which are provided by securities dealers and other organizations
may vary by dealer but include, among other things, processing new shareholder
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 the
Funds, and assisting in other customer transactions with the Funds.
The Plans provide that they shall continue in effect with respect to each Fund
as 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, including the vote of a majority of the
Independent Directors. A Plan can also be terminated at any time by a Fund,
without penalty, if a majority of the Independent Directors, or shareholders of
the relevant class of shares of the Fund, vote to terminate a 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 a Fund, the investment climate for a Fund,
general market conditions, and the volume of sales and redemptions of a Fund's
shares. The Plans may continue in effect and payments may be made under a Plan
following any temporary suspension or limitation of the offering of Fund shares;
however, the Company is not contractually obligated to continue a 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 Plans are in effect, the selection and nomination of persons to
serve as Independent Directors of the Company shall be committed to the
Independent Directors then in office at the time of such selection or
nomination. The Plans may not be amended to increase the amount of a Fund's
payments under a Plan without approval of the shareholders of the affected class
of the Fund's shares, and all material amendments to a Plan must be approved by
the board of directors of the Company, including a majority of the Independent
Directors. Under the agreement implementing the Plans, IDI or a Fund, the latter
by vote of a majority of the Independent Directors, or a majority of the holders
of the relevant class of a 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 a Fund under a Plan in the event of its
termination.
To the extent that a Plan constitutes a plan of distribution adopted pursuant to
Rule 12b-1 under the 1940 Act, it shall remain in effect as such, so as to
authorize the use of Fund assets in the amounts and for the purposes set forth
therein, notwithstanding the occurrence of an assignment, as defined by the 1940
Act, and rules thereunder. To the extent it constitutes an agreement pursuant to
a plan, a Fund's obligation to make payments to IDI shall terminate
automatically, in the event of such "assignment." In this event, a Fund may
continue to make payments pursuant to a Plan only upon the approval of new
arrangements regarding the use of the amounts authorized to be paid by a Fund
under a Plan. Such new arrangements must be approved by the directors, including
a majority of the Independent Directors, by a vote cast in person at a meeting
called for such purpose. These new arrangements might or might not be with IDI.
<PAGE>
On a quarterly basis, the directors review information about the distribution
services that have been provided to each Fund and the 12b-1 fees paid for such
services. On an annual basis, the directors consider whether a Plan should be
continued and, if so, whether any amendment to the Plan, including changes in
the amount of 12b-1 fees paid by each class of a Fund, should be made.
The only Company directors and interested persons, as that term is defined in
Section 2(a)(19) of the 1940 Act, who have a direct or indirect financial
interest in the operation of the Plans are the officers and directors of the
Company who are also officers either of IDI or other companies affiliated with
IDI. The benefits which the Company believes will be reasonably likely to flow
to a Fund and its shareholders under the Plans include the following:
o 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 Funds;
o 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; and
o Increased Fund assets may result in reducing each investor's share of
certain expenses through economies of scale (e.g., exceeding established
breakpoints in an advisory fee schedule and allocating fixed expenses over
a larger asset base), thereby partially offsetting the costs of a Plan.
The positive effect which increased Fund assets will have on INVESCO's revenues
could allow INVESCO and its affiliated companies:
o To have greater resources to make the financial commitments necessary to
improve the quality and level of the Funds' shareholder services (in both
systems and personnel);
o To increase the number and type of mutual funds available to investors from
INVESCO and its affiliated companies (and support them in their infancy),
and thereby expand the investment choices available to all shareholders;
and
o To acquire and retain talented employees who desire to be associated with a
growing organization.
OTHER SERVICE PROVIDERS
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 1670 Broadway, Suite 1000, Denver, Colorado,
are the independent accountants of the Company. The independent accountants are
responsible for auditing the financial statements of the Funds.
<PAGE>
CUSTODIAN
State Street Bank and Trust Company, P.O. Box 351, Boston, Massachusetts, is the
custodian of the cash and investment securities of the Company. The custodian is
also responsible for, among other things, receipt and delivery of each Fund's
investment securities in accordance with procedures and conditions specified in
the custody agreement with the Company. The custodian is authorized to establish
separate accounts in foreign countries and to cause foreign securities owned by
the Funds to be held outside the United States in branches of U.S. banks and, to
the extent permitted by applicable regulations, in certain foreign banks and
securities depositories.
TRANSFER AGENT
INVESCO, 7800 E. Union Avenue, Denver, Colorado, is the Company's transfer
agent, registrar, and dividend disbursing agent. Services provided by INVESCO
include the issuance, cancellation and transfer of shares of the Funds, and the
maintenance of records regarding the ownership of such shares.
LEGAL COUNSEL
The firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., 2nd
Floor, Washington, D.C., is legal counsel for the Company. The firm of Moye,
Giles, O'Keefe, Vermeire & Gorrell LLP, 1225 17th Street, Suite 2900, Denver,
Colorado, acts as special counsel to the Company.
BROKERAGE ALLOCATION AND OTHER PRACTICES
As the investment adviser to the Funds, INVESCO places orders for the purchase
and sale of securities with broker-dealers based upon an evaluation of the
financial responsibility of the broker-dealers and the ability of the
broker-dealers to effect transactions at the best available prices.
While INVESCO seeks reasonably competitive commission rates, the Funds do not
necessarily pay the lowest commission or spread available. INVESCO is permitted
to, and does, consider qualitative factors in addition to price in the selection
of brokers. Among other things, INVESCO considers the quality of executions
obtained on a Fund's portfolio transactions, viewed in terms of the size of
transactions, prevailing market conditions in the security purchased or sold,
and general economic and market conditions. INVESCO has found that a broker's
consistent ability to execute transactions is at least as important as the price
the broker charges for those services.
In seeking to ensure that the commissions charged a Fund are consistent with
prevailing and reasonable commissions, INVESCO monitors brokerage industry
practices and commissions charged by broker-dealers on transactions effected for
other institutional investors like the Funds.
Consistent with the standard of seeking to obtain favorable execution on
portfolio transactions, INVESCO may select brokers that provide research
<PAGE>
services to INVESCO and the Company, as well as other INVESCO mutual funds and
other accounts managed by INVESCO. Research services include statistical and
analytical reports relating to issuers, industries, securities and economic
factors and trends, which may be of assistance or value to INVESCO in making
informed investment decisions. Research services prepared and furnished by
brokers through which a Fund effects securities transactions may be used by
INVESCO in servicing all of its accounts and not all such services may be used
by INVESCO in connection with a particular Fund. Conversely, a Fund receives
benefits of research acquired through the brokerage transactions of other
clients of INVESCO.
In order to obtain reliable trade execution and research services, INVESCO may
utilize brokers that charge higher commissions than other brokers would charge
for the same transaction. This practice is known as "paying up." However, even
when paying up, INVESCO is obligated to obtain favorable execution of a Fund's
transactions.
Portfolio transactions also may be effected through 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 broker-dealers can provide
comparable best price and execution on a particular transaction, INVESCO may
consider the sale of a Fund's shares by a broker-dealer in selecting among
qualified broker-dealers.
Certain of the INVESCO Funds utilize fund brokerage commissions to pay custody
fees for each respective fund. This program requires that the participating
funds receive favorable execution.
The aggregate dollar amount of underwriting discounts and brokerage commissions
paid by each Fund for the periods outlined in the table below were:
Blue Chip Growth Fund
Period Ended July 31, 1999(a) $3,975,896
Year Ended August 31, 1998 2,574,626
Year Ended August 31, 1997 5,300,030
Year Ended August 31, 1996 2,703,470
Dynamics Fund
Period Ended July 31, 1999(b) $3,309,214
Year Ended April 30, 1999 7,689,483
Year Ended April 30, 1998 7,542,687
Year Ended April 30, 1997 5,707,197
INVESCO Endeavor Fund
Period Ended July 31, 1999(b) $1,463,690
Period Ended April 30, 1999(c) 466,439
Growth & Income Fund
Period Ended July 31, 1999(b) $ 165,787
Period Ended April 30, 1999(d) 438,309
<PAGE>
Small Company Growth Fund
Period Ended July 31, 1999(e) $1,414,200
Year Ended May 31, 1998 3,319,634
Year Ended May 31, 1997 4,167,020
Year Ended May 31, 1996 3,987,784
S&P 500 Index Fund
Year Ended July 31, 1999 $ 18,707
Year Ended July 31, 1998 0
Value Equity Fund
Period Ended July 31, 1999(a) $ 272,645
Year Ended August 31, 1998 194,473
Year Ended August 31, 1997 470,619
(a) From September 1, 1998 to July 31, 1999
(b) From May 1, 1999 to July 31, 1999
(c) From October 28, 1998 (commencement of operations) to April 30, 1999
(d) From July 1, 1998 (commencement of operations) to April 30, 1999
(e) From June 1, 1999 to July 31, 1999
For the fiscal year ended July 31, 1999, brokers providing research services
received $4,728,050 in commissions on portfolio transactions effected for the
Funds. The aggregate dollar amount of such portfolio transactions was
$3,773,902,315. Commissions totaling $206,673 were allocated to certain brokers
in recognition of their sales of shares of the Funds on portfolio transactions
of the Funds effected during the fiscal year ended July 31, 1999.
At July 31, 1999, each Fund held debt securities of its regular brokers or
dealers, or their parents, as follows:
<PAGE>
- --------------------------------------------------------------------------------
FUND BROKER OR DEALER VALUE OF SECURITIES
AT JULY 31, 1999
- --------------------------------------------------------------------------------
Blue Chip Growth General Electric $50,662,110
- --------------------------------------------------------------------------------
Dynamics American Express $45,000,000
Credit
- --------------------------------------------------------------------------------
General Electric 30,000,000
Companies
- --------------------------------------------------------------------------------
State Street Bank & 5,853,000
Trust
- --------------------------------------------------------------------------------
Paine Webber Group 5,400,000
- --------------------------------------------------------------------------------
INVESCO Endeavor State Street Bank & Trust $3,745,000
- --------------------------------------------------------------------------------
General Electric 1,486,215
- --------------------------------------------------------------------------------
Growth & Income General Electric $ 2,078,630
- --------------------------------------------------------------------------------
State Street Bank & 1,145,000
Trust
- --------------------------------------------------------------------------------
American Express 615,273
- --------------------------------------------------------------------------------
Small Company Growth State Street Bank & $80,476,000
Trust
- --------------------------------------------------------------------------------
S&P 500 Index State Street Bank & 5,182,000
Trust
- --------------------------------------------------------------------------------
General Electric 2,130,841
- --------------------------------------------------------------------------------
Ford Motor 344,654
- --------------------------------------------------------------------------------
American Express 343,209
- --------------------------------------------------------------------------------
Morgan Stanley Dean 296,421
Witter
- --------------------------------------------------------------------------------
Merrill Lynch 144,224
- --------------------------------------------------------------------------------
Morgan (JP) & Co. 117,261
- --------------------------------------------------------------------------------
CIGNA Corp 109,970
- --------------------------------------------------------------------------------
American General 105,230
- --------------------------------------------------------------------------------
Sears Roebuck 91,409
- --------------------------------------------------------------------------------
Bank Boston Corp 79,324
- --------------------------------------------------------------------------------
State Street 71,300
- --------------------------------------------------------------------------------
PaineWebber Group 32,000
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FUND BROKER OR DEALER VALUE OF SECURITIES
AT JULY 31, 1999
- --------------------------------------------------------------------------------
Value Equity State Street Bank & $ 5,686,000
Trust
- --------------------------------------------------------------------------------
Ford Motor 6,253,175
- --------------------------------------------------------------------------------
General Electric 7,902,500
- --------------------------------------------------------------------------------
American General 6,963,750
- --------------------------------------------------------------------------------
State Street 1,842,750
- --------------------------------------------------------------------------------
Neither INVESCO nor any affiliate of INVESCO receives any brokerage commissions
on portfolio transactions effected on behalf of the Funds, and there is no
affiliation between INVESCO or any person affiliated with INVESCO or the Funds
and any broker-dealer that executes transactions for the Funds.
CAPITAL STOCK
The Company is authorized to issue up to three billion five hundred million
shares of common stock with a par value of $0.01 per share. As of April 30,
2000, the following shares of each Fund were outstanding:
Blue Chip Growth Fund - Investor Class 220,362,568
Blue Chip Growth Fund - Class C 161,267
Dynamics Fund - Investor Class 255,391,257
Dynamics Fund - Institutional Class 0
Dynamics Fund - Class C 57,268
INVESCO Endeavor Fund - Investor Class 15,543,676
INVESCO Endeavor Fund - Class C 57,398
Growth & Income Fund - Investor Class 9,187,150
Growth & Income Fund - Class C 32,384
Small Company Growth Fund - Investor Class 63,563,231
Small Company Growth Fund - Class C 51,168
S&P 500 Index Fund - Investor Class 6,032,659
S&P 500 Index Fund - Institutional Class 386,306
Value Equity Fund - Investor Class 11,431,143
Value Equity Fund - Class C 584
A share of each class of a Fund represents an identical interest in that Fund's
investment portfolio and has the same rights, privileges and preferences.
However, each class may differ with respect to sales charges, if any,
distribution and/or service fees, if any, other expenses allocable exclusively
to each class, voting rights on matters exclusively affecting that class, and
its exchange privilege, if any. The different sales charges and other expenses
applicable to the different classes of shares of the Funds will affect the
performance of those classes. Each share of a Fund is entitled to participate
<PAGE>
equally in dividends for that class, other distributions and the proceeds of any
liquidation of a class of that Fund. However, due to the differing expenses of
the classes, dividends and liquidation proceeds on Institutional Class, Investor
Class and Class C shares will differ. All shares of a Fund will be voted
together, except that only the shareholders of a particular class of a Fund may
vote on matters exclusively affecting that class, such as the terms of a Rule
12b-1 Plan as it relates to the class. All shares issued and outstanding are,
and all shares offered hereby when issued will be, fully paid and nonassessable.
The board of directors has the authority to designate additional classes of
common stock without seeking the approval of shareholders and may classify and
reclassify any authorized but unissued shares.
Shares have no preemptive rights and are freely transferable on the books of
each Fund.
All shares of the Company have equal voting rights based on one vote for each
share owned. The Company is not generally required and does not expect to hold
regular annual meetings of shareholders. However, when requested to do so in
writing by the holders of 10% or more of the outstanding shares of the Company
or as may be required by applicable law or the Company's Articles of
Incorporation, the board of directors will call special meetings of
shareholders.
Directors may be removed by action of the holders of a majority of the
outstanding shares of the Company. The Funds will assist shareholders in
communicating with other shareholders as required by the 1940 Act.
Fund shares have noncumulative voting rights, which means that the holders of a
majority of the shares of the Company voting for the election of directors of
the Company can elect 100% of the directors if they choose to do so. If that
occurs, the holders of the remaining shares voting for the election of directors
will not be able to elect any person or persons to the board of directors.
Directors may be removed by action of the holders of a majority of the
outstanding shares of the Company.
TAX CONSEQUENCES OF OWNING SHARES OF A FUND
Each Fund intends to continue to conduct its business and satisfy the applicable
diversification of assets, distribution and source of income requirements to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. Each Fund qualified as a regulated investment
company and intends to continue to qualify during its current fiscal year. It is
the policy of each Fund to distribute all investment company taxable income and
net capital gains. As a result of this policy and the Funds' qualification as
regulated investment companies, it is anticipated that none of the Funds will
pay federal income or excise taxes and that all of the Funds will be accorded
conduit or "pass through" treatment for federal income tax purposes. Therefore,
any taxes that a Fund would ordinarily owe are paid by its shareholders on a
pro-rata basis. If a Fund does not distribute all of its net investment income
or net capital gains, it will be subject to income and excise taxes on the
amount that is not distributed. If a Fund does not qualify as a regulated
investment company, it will be subject to income tax on its net investment
income and net capital gains at the corporate tax rates.
Dividends paid by a Fund from net investment income as well as distributions of
net realized short-term capital gains and net realized gains from certain
<PAGE>
foreign currency transactions are taxable for federal income tax purposes as
ordinary income to shareholders. After the end of each calendar year, the Funds
send shareholders information regarding the amount and character of dividends
paid in the year, including the dividends eligible for the dividends-received
deduction for corporations. Dividends eligible for the dividends-received
deduction will be limited to the aggregate amount of qualifying dividends that a
Fund derives from its portfolio investments.
A Fund realizes a capital gain or loss when it sells a portfolio security for
more or less than it paid for that security. Capital gains and losses are
divided into short-term and long-term, depending on how long the Fund held the
security which gave rise to the gain or loss. If the security was held one year
or less the gain or loss is considered short-term, while holding a security for
more than one year will generate a long-term gain or loss. A capital gain
distribution consists of long-term capital gains which are taxed at the capital
gains rate. Short-term capital gains are included with income from dividends and
interest as ordinary income and are paid to shareholders as dividends, as
discussed above. If total long-term gains on sales exceed total short-term
losses, including any losses carried forward from previous years, a Fund will
have a net capital gain. Distributions by a Fund of net capital gains are, for
federal income tax purposes, taxable to the shareholder as a long-term capital
gain regardless of how long a shareholder has held shares of the particular
Fund. Such distributions are not eligible for the dividends-received deduction.
After the end of each calendar year, the Funds send information to shareholders
regarding the amount and character of distributions paid during the year.
All dividends and other distributions are taxable income to the shareholder,
whether or not such dividends and distributions are reinvested in additional
shares or paid in cash. If the net asset value of a Fund's shares should be
reduced below a shareholder's cost as a result of a distribution, such
distribution would be taxable to the shareholder although a portion would be a
return of invested capital. The net asset value of shares of a Fund reflects
accrued net investment income and undistributed realized capital and foreign
currency gains; therefore, when a distribution is declared, the net asset value
is reduced by the amount of the distribution. If shares of a Fund 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.
If it invests in foreign securities, a Fund may be subject to the withholding of
foreign taxes on dividends or interest it receives on foreign securities.
Foreign taxes withheld will be treated as an expense of the Fund unless the Fund
meets the qualifications and makes the election to enable it to pass these taxes
through to shareholders for use by them as a foreign tax credit or deduction.
Tax conventions between certain countries and the United States may reduce or
eliminate such taxes.
A Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation that, in general, meets either of the
following tests: (1) at least 75% of its gross income is passive or (2) an
average value of at least 50% of its assets produce, or are held for the
production of, passive income. Each Fund intends to "mark-to-market" its stock
in any PFIC. In this context, "marking-to-market" means including in ordinary
<PAGE>
income for each taxable year the excess, if any, of the fair market value of the
PFIC stock over the Fund's adjusted basis in the PFIC stock as of the end of the
year. In certain circumstances, a Fund will also be allowed to deduct from
ordinary income the excess, if any, of its adjusted basis in PFIC stock over the
fair market value of the PFIC stock as of the end of the year. The deduction
will only be allowed to the extent of any PFIC mark-to-market gains recognized
as ordinary income in prior years. A Fund's adjusted tax basis in each PFIC
stock for which it makes this election will be adjusted to reflect the amount of
income included or deduction taken under the election.
Gains or losses (1) from the disposition of foreign currencies, (2) from the
disposition of debt securities denominated in foreign currencies 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 the Fund
actually collects the receivables or pays the liabilities, generally will be
treated as ordinary income or loss. These gains or losses may increase or
decrease the amount of a Fund's investment company taxable income to be
distributed to its shareholders.
INVESCO may provide Fund shareholders with information concerning the average
cost basis of their shares in order to help them prepare their tax returns. This
information is intended as a convenience to shareholders and will not be
reported to the Internal Revenue Service (the "IRS"). The IRS permits the use of
several methods to determine the cost basis of mutual fund shares. The cost
basis information provided by INVESCO will be computed using the single-category
average cost method, although neither INVESCO nor the Funds recommend any
particular method of determining cost basis. Other methods may result in
different tax consequences. If you have reported gains or losses for a Fund in
past years, you must continue to use the method previously used, unless you
apply to the IRS for permission to change methods.
If you sell Fund shares at a loss after holding them for six months or less,
your loss will be treated as long-term (instead of short-term) capital loss to
the extent of any capital gain distributions that you may have 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 its net capital gains for the one-year period
ending on October 31 of that year, plus certain other amounts.
You should consult your own tax adviser regarding specific questions as to
federal, state and local taxes. Dividends 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.
PERFORMANCE
To keep shareholders and potential investors informed, INVESCO will occasionally
advertise the Funds' total return for one-, five-, and ten-year periods (or
since inception). Total return figures show the rate of return on a $10,000
<PAGE>
investment in a 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 a Fund's investment
results, because they do not show the interim variations in performance over the
periods cited. More information about the Funds' recent and historical
performance is contained in the Company's Annual Report to Shareholders. You can
get a free copy by calling or writing to INVESCO using the telephone number or
address on the back cover of the Funds' Prospectuses.
When we quote mutual fund rankings published by Lipper Inc., we may compare a
Fund to others in its appropriate Lipper category, as well as the broad-based
Lipper general fund groupings. These rankings allow you to compare a Fund to its
peers. Other independent financial media also produce performance- or
service-related comparisons, which you may see in our promotional materials.
Performance figures are based on historical earnings and are not intended to
suggest future performance.
Average annual total return performance for the one-, five-, and ten-year
periods (or since inception) ended July 31, 1999 was:
<TABLE>
<CAPTION>
10 Year or
Name of Fund 1 Year 5 Year Since Inception
- ------------ ------ ------ ---------------
<S> <C> <C> <C>
Blue Chip Growth Fund - Investor Class 42.06%(a) 23.66% 16.87%
Dynamics Fund - Investor Class 6.83%(b) 25.43% 20.11%
INVESCO Endeavor Fund - Investor Class 1.78%(b) N/A 66.10%(c)
Growth & Income Fund - Investor Class 5.71%(b) N/A 55.82%(d)
Small Company Growth Fund - Investor Class 12.67%(e) 18.45% 18.39%(f)
S&P 500 Index Fund - Investor Class 20.09% N/A 26.92%(g)
S&P 500 Index Fund - Institutional Class 20.40% N/A 26.36%(g)
Value Equity Fund - Investor Class 25.41%(a) 18.78% 13.56%
</TABLE>
(a) From September 1, 1998 to July 31, 1999
(b) From May 1, 1999 to July 31, 1999
(c) Since inception October 28, 1998
(d) Since inception July 1, 1998
(e) From June 1, 1999 to July 31, 1999
(f) Since inception December 27, 1991
(g) Since inception December 23, 1997
Average annual total return performance is not provided for each Fund's
Class C shares and Dynamics Fund's Institutional Class shares since they were
not offered until February 15, 2000 and May 19, 2000, respectively. Average
annual total return performance for each of the periods indicated was computed
<PAGE>
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)exponential n] = ERV
where: P = a hypothetical initial payment of $10,000
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 a Fund's
performance for a given period and other types of investment vehicles, including
certificates of deposit, may be provided to prospective investors and
shareholders.
In conjunction with performance reports and/or analyses of shareholder services
for a Fund, comparative data between that Fund's performance for a given period
and recognized indices of investment results for the same period, and/or
assessments of the quality of shareholder service, may be provided to
shareholders. Such indices include indices provided by Dow Jones & Company, S&P,
Lipper Inc., Lehman Brothers, National Association of Securities Dealers
Automated Quotations, Frank Russell Company, Value Line Investment Survey, the
American Stock Exchange, Morgan Stanley Capital International, Wilshire
Associates, the Financial Times Stock Exchange, the New York Stock Exchange, the
Nikkei Stock Average and Deutcher Aktienindex, all of which are unmanaged market
indicators. In addition, rankings, ratings, and comparisons of investment
performance and/or assessments of the quality of shareholder service made by
independent sources may be used in advertisements, sales literature or
shareholder reports, including reprints of, or selections from, editorials or
articles about the Fund. These sources utilize information compiled (i)
internally; (ii) by Lipper Inc.; or (iii) by other recognized analytical
services. The Lipper Inc. mutual fund rankings and comparisons which may be used
by the Funds in performance reports will be drawn from the following mutual fund
groupings, in addition to the broad-based Lipper general fund groupings:
Lipper Mutual
Fund Fund Category
---- -------------
Blue Chip Growth Fund Large-Cap Growth Funds
Dynamics Fund Mid-Cap Growth Funds
INVESCO Endeavor Fund Mid-Cap Growth Funds
Growth & Income Fund Large-Cap Core Funds
Small Company Growth Fund Small-Cap Growth Funds
S&P 500 Index Fund S&P 500 Funds
Value Equity Fund Multi-Cap Growth Funds
Sources for Fund performance information and articles about the Funds include,
but are not limited to, the following:
<PAGE>
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 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
FINANCIAL STATEMENTS
The financial statements for the Funds for the fiscal year ended July 31, 1999,
are incorporated herein by reference from INVESCO Stock Funds, Inc.'s Annual
Report to Shareholders dated July 31, 1999.
<PAGE>
APPENDIX A
BOND RATINGS
The following is a description of Moody's and S&P's bond ratings:
Moody's Corporate Bond Ratings
Aaa - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa - Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group, they comprise what are generally known as high grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the long
term risk appear somewhat larger than in Aaa securities.
A - Bonds rated A possess many favorable investment attributes, and are to be
considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds rated Baa are considered as medium grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba - Bonds rated Ba are judged to have speculative elements. Their future cannot
be considered as well assured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class.
B - Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or maintenance of other terms of
the contract over any longer period of time may be small.
Caa - Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest. S&P Corporate Bond Ratings
AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
<PAGE>
AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB - Bonds rated BBB are regarded as having an adequate capability to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
BB - Bonds rated BB have less near-term vulnerability to default than other
speculative issues. However, they face major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments.
B - Bonds rated B have a greater vulnerability to default but currently have the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal.
CCC - Bonds rated CCC have a currently identifiable vulnerability to default and
are dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, they are not likely to have
the capacity to pay interest and repay principal.
<PAGE>
PART C. OTHER INFORMATION
ITEM 23. EXHIBITS
(a) Articles of Incorporation filed April 2, 1993.(2)
(1) Articles of Amendment to Articles of Incorporation filed
June 26, 1997.(3)
(2) Articles Supplementary to Articles of Incorporation filed
May 18, 1998.(5)
(3) Articles of Amendment of Articles of Incorporation filed
August 28, 1998.(6)
(4) Articles of Amendment to Articles of Incorporation filed
October 29, 1998.(8)
(5) Articles of Amendment to Articles of Incorporation filed
May 24, 1999.(7)
(6) Articles of Amendment to Articles of Incorporation filed
July 15, 1999.(8)
(7) Articles of Transfer of INVESCO Growth Funds, Inc. and
INVESCO Stock Funds, Inc., filed July 15, 1999.(9)
(8) Articles of Amendment of Articles of Incorporation filed
July 14, 1999.(11)
(9) Articles of Transfer of INVESCO Emerging Opportunity
Funds, Inc. and INVESCO Stock Funds, Inc., filed July 15,
1999.(9)
(10) Articles of Amendment and Restatement of Articles of
Incorporation filed December 2, 1999.(11)
(11) Articles of Amendment to Articles of Amendment and
Restatement of Articles of Incorpration filed May 5, 2000.
(b) Bylaws, as amended July 21, 1993.(2)
(c) Not applicable.
(d)(1) Investment Advisory Agreement between Registrant and
INVESCO Funds Group, Inc. dated February 28, 1997.(3)
(a) Amendment dated June 30, 1998 to Advisory Agreement.(4)
(b) Amendment dated September 18, 1998 to Advisory
Agreement.(8)
(c) Amendment dated May 13, 1999 to Advisory Agreement.(9)
<PAGE>
(d) Amendment dated July 15, 1999 to Advisory
Agreement.(11)
(2) Sub-Advisory Agreement between INVESCO Funds Group, Inc.
and World Asset Management with respect to INVESCO S&P 500
Index Fund.
(3) Form of Sub-Advisory Agreement between INVESCO Funds
Group, Inc. and INVESCO Capital Management, Inc. with respect
to INVESCO Value Equity Fund.(11)
(e)(1) Distribution Agreement between Registrant and INVESCO
Distributors, Inc. dated September 30, 1997.(4)
(a) Amendment dated September 18, 1998 to
Distribution Agreement.(11)
(b) Amendment dated July 15, 1999 to Distribution
Agreement.(11)
(f)(1) Amended Defined Benefit Deferred Compensation Plan for
Non-Interested Directors and Trustees.(11)
(g)Custody Agreement between Registrant and State Street Bank
and Trust Company dated July 1, 1993.(1)
(1) Amendment to Custody Agreement dated October 25, 1995.(3)
(2) Data Access Services Addendum.(4)
(3) Additional Fund Letter dated April 15, 1998.(4)
(4) Additional Fund Letter dated August 27, 1998.(8)
(5) Additional Fund Letter dated July 14, 1999.(11)
(6) Amended Fee Schedule effective January 1, 2000.(11)
(h)(1) Transfer Agency Agreement between Registrant and INVESCO
Funds Group, Inc. dated February 28, 1997.(3)
(a) Amendment dated October 16, 1998 to Transfer Agency
Agreement.
(b) Amendment dated October 29, 1998 to Transfer Agency
Agreement.(9)
(2) Administrative Services Agreement between the Registrant
and INVESCO Funds Group, Inc. dated February 28, 1997.(2)
(a) Amendment dated May 18, 1997 to Administrative
Services Agreement.(11)
(b) Amendment dated June 29, 1998 to Administrative
Services Agreement.(9)
<PAGE>
(c) Amendment dated October 16, 1998 to Administrative
Services Agreement.(9)
(d) Amendment dated May 13, 1999 to Administrative
Services Agreement.(9)
(i)(1) 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 dated
January 16, 1968.(4)
(2) Opinion and consent of counsel with respect to INVESCO
Blue Chip Growth Fund, INVESCO Small Company Growth Fund,
INVESCO S&P 500 Index Fund and INVESCO Value Equity Fund as
to the legality of the securities being registered dated
July 14, 1999.(7)
(j) Consent of Independent Accountants.
(k) Not applicable.
(l) Not applicable.
(m)(1) Amended Plan and Agreement of Distribution dated
September 30, 1997 adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940 with respect to the Funds'
Investor Class shares.(11)
(a) Amendment dated August 28, 1998 to Amended Plan and
Agreement of Distribution Pursuant to Rule 12b-1.(11)
(b) Amendment dated October 29, 1998 to Amended Plan and
Agreement of Distribution Pursuant to Rule 12b-1.(11)
(2) Master Distribution Plan and Agreement adopted
pursuant to Rule 12b-1 under the Investment Company Act of
1940 dated January 27, 2000 with respect to the Funds' Class
C shares.
(n) Not Applicable.
(o)(1) Plan pursuant to Rule 18f-3 under the Investment Company
Act of 1940 with respect to INVESCO S&P 500 Index Fund adopted
February 3, 1999.(9)
(2) Plan pursuant to Rule 18f-3 under the Investment
Company Act of 1940 with respect to INVESCO Blue Chip Growth
Fund adopted November 9, 1999.(11)
(3) Plan pursuant to Rule 18f-3 under the Investment
Company Act of 1940 with respect to INVESCO Dynamics Fund
adopted November 9, 1999.(11)
<PAGE>
(4) Plan pursuant to Rule 18f-3 under the Investment
Company Act of 1940 with respect to INVESCO Endeavor Fund
adopted November 9, 1999.(11)
(5) Plan pursuant to Rule 18f-3 under the Investment
Company Act of 1940 with respect to INVESCO Growth & Income
Fund adopted November 9, 1999.(11)
(6) Plan pursuant to Rule 18f-3 under the Investment
Company Act of 1940 with respect to INVESCO Small Company
Growth Fund adopted November 9, 1999.(11)
(7) Plan pursuant to Rule 18f-3 under the Investment
Company Act of 1940 with respect to INVESCO Value Equity Fund
adopted November 9, 1999.(11)
(1) Previously filed with Post-Effective Amendment No. 44 to the Registration
Statement on June 22, 1993, and incorporated by reference herein.
(2) Previously filed with Post-Effective Amendment No. 45 to the Registration
Statement on August 27, 1996 and incorporated by reference herein.
(3) Previously filed with Post-Effective Amendment No. 46 to the Registration
Statement on June 30, 1997, and incorporated by reference herein.
(4) Previously filed with Post-Effective Amendment No. 47 to the Registration
Statement on April 16, 1998, and incorporated by reference herein.
(5) Previously filed with Post-Effective Amendment No. 48 to the Registration
Statement on July 10, 1998, and incorporated by reference herein.
(6) Previously filed with Post-Effective Amendment No. 49 to the Registration
Statement on August 28, 1998, and incorporated by reference herein.
(7) Previously filed with Post-Effective Amendment No. 50 to the Registration
Statement on July 14, 1999, and incorporated by reference herein.
(8) Previously filed with Post-Effective Amendment No. 51 to the Registration
Statement on July 15, 1999 and incorporated by reference herein.
(9) Previously filed with Post-Effective Amendment No. 52 to the Registration
Statement on August 31, 1999 and incorporated by reference herein.
(10)Previously filed with Post-Effective Amendment No. 53 to the Registration
Statement on November 4, 1999 and incorporated by reference herein.
(11)Previously filed with Post-Effective Amendment No. 54 to the Registration
Statement on January 31, 2000 and incorporated by reference herein.
<PAGE>
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH INVESCO STOCK
FUNDS, INC.(THE "COMPANY")
No person is presently controlled by or under common control with the Company.
ITEM 25. INDEMNIFICATION
Indemnification provisions for officers, directors and employees of the Company
are set forth in Article X of the Amended Bylaws and Article Seventh (3) of the
Articles of Restatement of the Articles of Incorporation, and are hereby
incorporated by reference. See Item 24(b)(1) and (2) above. Under these
Articles, directors and officers 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, as
amended, and the rules thereunder. Under the Investment Company Act of 1940,
directors and officers of the Company cannot be protected against liability to a
Fund 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 maintains liability insurance policies covering
its directors and officers.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
See "Fund Management" in the Funds' Prospectuses and "Management of the Funds"
in the Statement of Additional Information for information regarding the
business of the investment adviser, INVESCO.
Following are the names and principal occupations of each director and officer
of the investment adviser, INVESCO. Certain of these persons hold positions with
IDI, a subsidiary of INVESCO.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Name Position with Adviser Principal Occupation and Company Affiliation
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mark H. Williamson Chairman, President & Chief Executive
Director and Officer
Officer INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Raymond R. Cunningham Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
William J. Galvin, Jr. Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Ronald L. Grooms Officer & Senior Vice President & Treasurer
Director INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Richard W. Healey Officer & Senior Vice President
Director INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
<PAGE>
- ----------------------------------------------------------------------------------------------------------
William R. Keithler Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Trent E. May Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Charles P. Mayer Officer & Senior Vice President
Director INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Timothy J. Miller Officer & Senior Vice President
Director INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Donovan J. (Jerry) Paul Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Glen A. Payne Officer Senior Vice President, Secretary
& General Counsel
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
John R. Schroer, II Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Marie E. Aro Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Ingeborg S. Cosby Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Stacie Cowell Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Linda J. Gieger Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
<PAGE>
- ----------------------------------------------------------------------------------------------------------
Mark D. Greenberg Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Brian B. Hayward Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Richard R. Hinderlie Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Stuart Holland Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Thomas M. Hurley Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Patricia F. Johnston Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Campbell C. Judge Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Steve King Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Thomas A. Kolbe Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Peter M. Lovell Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
<PAGE>
- ----------------------------------------------------------------------------------------------------------
James F. Lummanick Officer Vice President & Assistant
General Counsel
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Thomas A. Mantone, Jr. Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
George A. Matyas Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Corey M. McClintock Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Douglas J. McEldowney Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Frederick R. (Fritz) Meyer Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Stephen A. Moran Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Jeffrey G. Morris Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Laura M. Parsons Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
<PAGE>
- ----------------------------------------------------------------------------------------------------------
Jon B. Pauley Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Pamela J. Piro Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Anthony R. Rogers Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Gary L. Rulh Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
James B. Sandidge Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Thomas H. Scanlan Officer Regional Vice President
INVESCO Funds Group, Inc.
12028 Edgepark Court
Potomac, MD 20854
- ----------------------------------------------------------------------------------------------------------
John S. Segner Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Reagan A. Shopp Officer Regional Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Terri B. Smith Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Tane T. Tyler Officer Vice President & Assistant
General Counsel
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Thomas R. Wald Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Alan I. Watson Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Judy P. Wiese Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
<PAGE>
- ----------------------------------------------------------------------------------------------------------
Michael D. Legoski Officer Assistant Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
William S. Mechling Officer Assistant Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Donald R. Paddack Officer Assistant Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Kent T. Schmeckpeper Officer Assistant Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
Jeraldine E. Kraus Officer Assistant Secretary
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ----------------------------------------------------------------------------------------------------------
ITEM 27. (a) PRINCIPAL UNDERWRITERS
INVESCO Bond Funds, Inc.
INVESCO Combination Stock & Bond Funds, Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Sector Funds, Inc.
INVESCO Stock Funds, Inc.
INVESCO Treasurer's Series Funds, Inc.
INVESCO Variable Investment Funds, Inc.
(b)
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter the Company
- ------------------ ------------ -------------
Raymond R. Cunningham Senior Vice
7800 E. Union Avenue President
Denver, CO 80237
William J. Galvin, Jr. Senior Vice Assistant Secretary
7800 E. Union Avenue President &
Denver, CO 80237 Asst. Secretary
<PAGE>
Ronald L. Grooms Senior Vice Treasurer,
7800 E. Union Avenue President, Chief Fin'l
Denver, CO 80237 Treasurer, & Officer, and
Director Chief Acctg. Off.
Richard W. Healey Senior Vice
7800 E. Union Avenue President &
Denver, CO 80237 Director
Charles P. Mayer Director
7800 E. Union Avenue
Denver, CO 80237
Timothy J. Miller 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
Pamela J. Piro Assistant Treasurer Assistant Treasurer
7800 E. Union Avenue
Denver, CO 80237
Judy P. Wiese Assistant Secretary Assistant Secretary
7800 E. Union Avenue
Denver, CO 80237
Mark H. Williamson Chairman of the Board, Chairman of the Board,
7800 E. Union Avenue President, & Chief President & CEO
Denver, CO 80237 Executive Officer
(c) Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
Mark H. Williamson
7800 E. Union Avenue
Denver, CO 80237
ITEM 29. MANAGEMENT SERVICES
Not applicable.
ITEM 30. UNDERTAKINGS
Not applicable
<PAGE>
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Company certifies that it meets all the
requirements for effectiveness of this Registration Statement under Rule 485(b)
under the Securities Act and 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 5th day of May,
2000.
Attest: INVESCO Stock Funds, Inc.
/s/ Glen A. Payne /s/ Mark H. Williamson
- ------------------------------ ----------------------------------
Glen A. Payne, Secretary Mark H. Williamson, President
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities and
on the date indicated.
/s/ Mark H. Williamson /s/ Lawrence H. Budner*
- ------------------------------- -----------------------------
Mark H. Williamson, President & Lawrence H. Budner, Director
Director (Chief Executive Officer)
/s/ John W. McIntyre*
/s/ Ronald L. Grooms -----------------------------
- ------------------------------- John W. McIntyre, Director
Ronald L. Grooms, Treasurer
(Chief Financial & Accounting Officer) /s/ Richard W. Healey*
----------------------
/s/ Victor L. Andrews* Richard W. Healey, Director
- -------------------------------
Victor L. Andrews, Director /s/ Fred A. Deering*
-----------------------------
/s/ Bob R. Baker* Fred A. Deering, Director
- -------------------------------
Bob R. Baker, Director /s/ Larry Soll*
-----------------------------
/s/ Charles W. Brady* Larry Soll, Director
- -------------------------------
Charles W. Brady, Director /s/ Wendy L. Gramm*
-----------------------------
/s/ James T. Bunch* Wendy L. Gramm, Director
- -------------------------------
James T. Bunch, Director /s/ Gerald J. Lewis*
-----------------------------
Gerald J. Lewis, Director
By By /s/ Glen A. Payne
- ----------------------------- -------------------------
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 Mr. Healey) have been filed with the
Securities and Exchange Commission on June 15, 1993, June 22, 1994, June 22,
1995, June 30, 1997, August 28, 1998 and March 8, 2000, respectively.
<PAGE>
Exhibit Index
Page in
Exhibit Number Registration Statement
- -------------- ----------------------
a(11) 109
d(2) 112
h(1)(a) 120
j 121
m(2) 122
POA Healey 134
</TABLE>
ARTICLES OF AMENDMENT
OF
ARTICLES OF AMENDMENT AND RESTATEMENT
OF
ARTICLES OF INCORPORATION
OF
INVESCO STOCK FUNDS, INC.
INVESCO Stock Funds, Inc., a corporation organized and existing under the
General Corporation Law of the State of Maryland (the "Company"), hereby
certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: By unanimous consent effective as of February 3, 1999, the
board of directors of the Company voted to create an additional class of shares
of INVESCO Dynamics Fund Common Stock of the Company designated as INVESCO
Dynamics Fund - Institutional Class, and has authorized 100,000,000 shares of
stock to be allocated to said class. The aggregate number of shares of stock of
all series/classes which the Company had the authority to issue before creation
of a new class of INVESCO Dynamics Fund was three billion five hundred million
(3,500,000,000) shares of Common Stock with a par value of $0.01 per share. The
aggregate number of shares of stock of all series/classes which the Company
shall have the authority to issue after creation of a new class of INVESCO
Dynamics Fund Common Stock is three billion five hundred million (3,500,000,000)
shares of Common Stock. The newly designated class of INVESCO Dynamics Fund
Common Stock designated as INVESCO Dynamics Fund - Institutional Class has a par
value of $0.01 per share.
SECOND: Shares of each class have been duly authorized and classified by
the board of directors pursuant to authority and power contained in the Articles
of Incorporation of the Company.
THIRD: A description of the Common Stock so classified, including the
powers, preferences, participating, voting or other special rights and
qualifications, restrictions and limitations thereof, is as outlined in the
Articles of Incorporation of the Company.
FOURTH: The Company is registered as an open-end investment
management company under the Investment Company Act of 1940.
The undersigned, President of the Company, who is executing on behalf of
the Company the foregoing Articles of Amendment, of which this paragraph is made
a part, hereby acknowledges, in the name and on behalf of the Company, the
foregoing Articles of Amendment to be the corporate act of the Company and
further verifies under oath that, to the best of his knowledge, information and
belief, the matters and facts set forth herein are true in all material
respects, under the penalties of perjury.
<PAGE>
IN WITNESS WHEREOF, INVESCO Stock Funds, Inc. has caused these Articles of
Amendment to be signed in its name and on its behalf by its President and
witnessed by its Secretary on the 4th day of May, 2000.
These Articles of Amendment shall be effective as of the 4th day of
May, 2000 by the Maryland State Department of Assessments and Taxation.
INVESCO STOCK FUNDS, INC.
By: /s/ Mark H. Williamson
---------------------------------
Mark H. Williamson, President
WITNESSED:
By: /s/ Glen A. Payne
----------------------------
Glen A. Payne, Secretary
<PAGE>
CERTIFICATION
I, Ruth A. Christensen, a notary public in and for the City and County of
Denver, and State of Colorado, do hereby certify that Mark H. Williamson,
personally known to me to be the person whose name is subscribed to the
foregoing Articles of Amendment, appeared before me this date in person and
acknowledged that he signed, sealed and delivered said instrument as his full
and voluntary act and deed for the uses and purposes therein set forth.
Given my hand and official seal this 4th day of May, 2000.
/s/ Ruth A. Christensen
------------------------------------
Notary Public
My Commission Expires: March 16, 2002
SUB-ADVISORY AGREEMENT
AGREEMENT made this 15th day of July, 1999, by and between INVESCO Funds
Group, Inc. ("INVESCO"), a Delaware corporation, and World Asset Management, a
general partnership organized under the laws of the State of Delaware ("the Sub
Adviser").
W I T N E S S E T H:
WHEREAS, INVESCO STOCK FUNDS, INC. (the "Company") is engaged in business
as a diversified, open end management investment company registered under the
Investment Company Act of 1940, as amended (hereinafter referred to as the
"Investment Company Act") and has one class of shares (the "Shares"), which is
divided into series, each representing an interest in a separate portfolio of
investments, with one such series being designated the INVESCO S&P 500 Index
Fund (the "Fund"); and
WHEREAS, INVESCO and the Sub Adviser are engaged in rendering investment
advisory services and are registered as investment advisers under the Investment
Advisers Act of 1940; and
WHEREAS, INVESCO has entered into an Investment Advisory Agreement with
the Company (the "INVESCO Investment Advisory Agreement"), pursuant to which
INVESCO is required to provide investment advisory services to the Company, and,
upon receipt of written approval of the Company, is authorized to retain other
parties to provide such services; and
WHEREAS, the Sub Adviser is willing to provide investment advisory
services to the Company on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, INVESCO and the Sub Adviser hereby agree as follows:
ARTICLE I
DUTIES OF THE SUB ADVISER
INVESCO hereby employs the Sub Adviser to act as investment adviser to the
Company and to furnish the investment advisory services described below, subject
to the broad supervision of INVESCO and Board of Directors of the Company, for
the period and on the terms and conditions set forth in this Agreement. The Sub
Adviser hereby accepts such assignment and agrees during such period, at its own
expense, to render such services and to assume the obligations herein set forth
for the compensation provided for herein. The Sub Adviser shall for all purposes
<PAGE>
herein be deemed to be an independent contractor and, unless otherwise expressly
provided or authorized herein, shall have no authority to act for or represent
the Company in any way or otherwise be deemed an agent of the Company.
The Sub Adviser hereby agrees to manage the investment operations of the
Funds, subject to the supervision of the Company's directors (the "Directors")
and INVESCO. Specifically, the Sub Adviser agrees to perform the following
services:
(a) to manage the investment and reinvestment of all the assets, now or
hereafter acquired, of the Funds, to execute all purchases and sales of
portfolio securities and to vote all proxies of portfolio securities;
(b) to maintain a continuous investment program for the Funds, consistent
with (i) the Funds' investment policies as set forth in the Company's Articles
of Incorporation, Bylaws, and Registration Statement, as from time to time
amended, under the Investment Company Act of 1940, as amended (the "1940 Act"),
and in any prospectus and/or statement of additional information of the Funds,
as from time to time amended and in use under the Securities Act of 1933, as
amended, and (ii) the Company's status as a regulated investment company under
the Internal Revenue Code of 1986, as amended;
(c) to determine what securities are to be purchased or sold for the
Funds, unless otherwise directed by the Directors of the Company or INVESCO, and
to execute transactions accordingly;
(d) to provide to the Funds the benefit of all of the investment analysis
and research, the reviews of current economic conditions and trends, and the
consideration of long range investment policy now or hereafter generally
available to investment advisory customers of the Sub Adviser;
(e) to determine what portion of the Funds should be invested in the
various types of securities authorized for purchase by the Funds; and
(f) to make recommendations as to the manner in which voting rights,
rights to consent to Funds action and any other rights pertaining to the Funds'
portfolio securities shall be exercised.
With respect to execution of transactions for the Funds, the Sub Adviser
is authorized to employ such brokers or dealers as may, in the Sub Adviser's
best judgment, implement the policy of the Funds to obtain prompt and reliable
execution at the most favorable price obtainable. In assigning an execution or
negotiating the commission to be paid therefor, the Sub Adviser is authorized to
<PAGE>
consider the full range and quality of a broker's services which benefit the
Funds, including but not limited to research and analytical capabilities,
reliability of performance, and financial soundness and responsibility. Research
services prepared and furnished by brokers through which the Sub Adviser effects
securities transactions on behalf of the Funds may be used by the Sub Adviser in
servicing all of its accounts, and not all such services may be used by the Sub
Adviser in connection with the Funds. In the selection of a broker or dealer for
execution of any negotiated transaction, the Sub Adviser shall have no duty or
obligation to seek advance competitive bidding for the most favorable negotiated
commission rate for such transaction, or to select any broker solely on the
basis of its purported or "posted" commission rate for such transaction,
provided, however, that the Sub Adviser shall consider such "posted" commission
rates, if any, together with any other information available at the time as to
the level of commissions known to be charged on comparable transactions by other
qualified brokerage firms, as well as all other relevant factors and
circumstances, including the size of any contemporaneous market in such
securities, the importance to the Funds of speed, efficiency, and
confidentiality of execution, the execution capabilities required by the
circumstances of the particular transactions, and the apparent knowledge or
familiarity with sources from or to whom such securities may be purchased or
sold. Where the commission rate reflects services, reliability and other
relevant factors in addition to the cost of execution, the Sub Adviser shall
have the burden of demonstrating that such expenditures were bona fide and for
the benefit of the Funds.
The Sub-Adviser may recommend transactions in which it has directly or
indirectly a material interest, in unregulated collective investment schemes
including any operated or advised by the Sub-Adviser or in margined
transactions. Advice on investments may extend to investments not traded or
exchanges recognized or designated by the Securities and Investments Board.
Both parties acknowledge that the advice given under this Agreement may
involve liabilities in one currency matched by assets in another currency and
that accordingly movements in rates of exchange may have a separate effect,
unfavorable as well as favorable on the gain or loss experienced on an
investment.
In carrying out its duties hereunder, the Sub-Adviser shall comply with
all instructions of INVESCO in connection therewith such instructions may be
given by letter, telex, telephone or facsimile by any Director or Officer of
INVESCO or by any other person authorized by INVESCO.
<PAGE>
Any instructions which appear to conflict with the terms of this Agreement
may be confirmed by the Sub-Adviser with INVESCO prior to execution.
ARTICLE II
ALLOCATION OF CHARGES AND EXPENSES
The Sub Adviser assumes and shall pay for maintaining the staff and
personnel necessary to perform its obligations under this Agreement, and shall,
at its own expense, provide the office space, equipment and facilities necessary
to perform its obligations under this Agreement. Except to the extent expressly
assumed by the Sub Adviser herein and except to the extent required by law to be
paid by the Sub Adviser, INVESCO and/or the Company shall pay all costs and
expenses in connection with the operations of the Funds.
ARTICLE III
COMPENSATION OF THE SUB ADVISER
For the services rendered, facilities furnished, and expenses assumed by
the Sub Adviser, INVESCO shall pay to the Sub Adviser a fee, computed daily and
paid as of the last day of each month, using for each daily calculation the most
recently determined net asset value of the Funds, as determined by a valuation
made in accordance with the Fund's procedures for calculating its net asset
value as described in the Fund's Prospectus and/or Statement of Additional
Information. The advisory fee to the Sub Adviser with respect to the Fund shall
be computed at the annual rate of 0.07% of the Fund's daily net assets up to $10
million; 0.05% of the Fund's daily net assets in excess of $10 million but not
more than $50 million; and 0.03% of the Fund's daily net assets in excess of $50
million. During any period when the determination of the Funds' net asset value
is suspended by the Directors of the Funds, the net asset value of a share of
the Funds as of the last business day prior to such suspension shall, for the
purpose of this Article III, be deemed to be the net asset value at the close of
each succeeding business day until it is again determined. However, no such fee
shall be paid to the Sub Adviser with respect to any assets of the Funds which
may be invested in any other investment company for which the Sub Adviser serves
as investment adviser or sub adviser. The fee provided for hereunder shall be
prorated in any month in which this Agreement is not in effect for the entire
month. The Sub Adviser shall be entitled to receive fees hereunder only for such
periods as the INVESCO Investment Advisory Agreement remains in effect.
<PAGE>
ARTICLE IV
ACTIVITIES OF THE SUB ADVISER
The services of the Sub Adviser to the Funds are not to be deemed to be
exclusive, the Sub Adviser and any person controlled by or under common control
with the Sub Adviser (for purposes of this Article IV referred to as
"affiliates") being free to render services to others. It is understood that
directors, officers, employees and shareholders of the Funds are or may become
interested in the Sub Adviser and its affiliates, as directors, officers,
employees and shareholders or otherwise and that directors, officers, employees
and shareholders of the Sub Adviser, INVESCO and their affiliates are or may
become interested in the Funds as directors, officers and employees.
ARTICLE V
AVOIDANCE OF INCONSISTENT POSITIONS AND COMPLIANCE WITH APPLICABLE LAWS
In connection with purchases or sales of securities for the investment
portfolios of the Funds, neither the Sub Adviser nor any of its directors,
officers or employees will act as a principal or agent for any party other than
the Funds or receive any commissions. The Sub Adviser will comply with all
applicable laws in acting hereunder including, without limitation, the 1940 Act;
the Investment Advisers Act of 1940, as amended; and all rules and regulations
duly promulgated under the foregoing.
ARTICLE VI
DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall become effective as of the date it is approved by a
majority of the outstanding voting securities of the Fund. Thereafter, this
Agreement shall remain in force for an initial term of two years from the date
of execution, and from year to year thereafter until its termination in
accordance with this Article VI, but only so long as such continuance is
specifically approved at least annually by (i) the Directors of the Company, or
by the vote of a majority of the outstanding voting securities of the Funds, and
(ii) a majority of those Directors who are not parties to this Agreement or
interested persons of any such party cast in person at a meeting called for the
purpose of voting on such approval.
<PAGE>
This Agreement may be terminated at any time, without the payment of any
penalty, by INVESCO, the Funds by vote of the Directors of the Company, or by
vote of a majority of the outstanding voting securities of the Funds, or by the
Sub Adviser. A termination by INVESCO or the Sub Adviser shall require sixty
days' written notice to the other party and to the Company, and a termination by
the Company shall require such notice to each of the parties. This Agreement
shall automatically terminate in the event of its assignment to the extent
required by the Investment Company Act of 1940 and the Rules thereunder.
The Sub Adviser agrees to furnish to the Directors of the Company such
information on an annual basis as may reasonably be necessary to evaluate the
terms of this Agreement.
Termination of this Agreement shall not affect the right of the Sub
Adviser to receive payments on any unpaid balance of the compensation described
in Article III hereof earned prior to such termination.
ARTICLE VII
LIABILITY
The Sub Adviser agrees to use its best efforts and judgement and due care
in carrying out its duties under this Agreement provided however that the Sub
Adviser shall not be liable to INVESCO for any loss suffered by INVESCO or the
funds advised in connection with the subject matter of this Agreement unless
such loss arises from the willful misfeasance, bad faith or negligence in the
performance of the Sub-Adviser's duties and subject and without prejudice to the
foregoing. INVESCO hereby undertakes to indemnify and to keep indemnified the
Sub Adviser from and against any and all liabilities, obligations, losses,
damages, suits and expenses which may be incurred by or asserted against the Sub
Adviser for which it is responsible pursuant to Article I hereof provided always
that the Sub-Adviser shall send to INVESCO as soon as possible all claims,
letters, summonses, writs or documents which it receives from third parties and
provide whatever information and assistance INVESCO may require and no liability
of any sort shall be admitted and no undertaking shall be given nor shall any
offer, promise or payment be made or legal expenses incurred by the Sub Adviser
without written consent of INVESCO who shall be entitled if it so desires to
take over and conduct in the name of the Sub Adviser the defense of any action
or to prosecute any claim for indemnity or damages or otherwise against any
third party.
<PAGE>
ARTICLE VIII
AMENDMENTS OF THIS AGREEMENT
No provision of this Agreement may be orally changed or discharged, but
may only be modified by an instrument in writing signed by the Sub Adviser and
INVESCO. In addition, no amendment to this Agreement shall be effective unless
approved by (1) the vote of a majority of the Directors of the Company,
including a majority of the Directors who are not parties to this Agreement or
interested persons of any such party cast in person at a meeting called for the
purpose of voting on such amendment and (2) the vote of a majority of the
outstanding voting securities of the Funds (other than an amendment which can be
effective without shareholder approval under applicable law).
ARTICLE IX
DEFINITIONS OF CERTAIN TERMS
In interpreting the provisions of this Agreement, the terms "vote of a
majority of the outstanding voting securities," "assignments," "affiliated
person" and "interested person," when used in this Agreement, shall have the
respective meanings specified in the Investment Company Act and the Rules and
Regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under said Act.
ARTICLE X
GOVERNING LAW
This Agreement shall be construed in accordance with the laws of the State
of Colorado and the applicable provisions of the Investment Company Act. To the
extent that the applicable laws of the State of Colorado, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
ARTICLE XI
MISCELLANEOUS
Advice. Any recommendation or advice given by the Sub Adviser to INVESCO
hereunder shall be given in writing or by mail, telex, telefacsimile or by
telephone, such telephone advice to be confirmed by mail, telex, telefacsimile
or in writing to such place as INVESCO shall from time to time require; further
the Sub Adviser shall be free to telephone INVESCO as it sees fit in the
performance of its duties.
<PAGE>
Notice. 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.
Severability. 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.
Headings. The headings in this Agreement are inserted for convenience and
identification only and are in no way intended to describe, interpret, define or
limit the size, extent or intent of this Agreement or any provision hereof.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
INVESCO FUNDS GROUP, INC.
ATTEST:
By: /S/ Mark H. Williamson
----------------------
/s/ Glen A. Payne Mark H. Williamson,
- ------------------ President
Glen A. Payne, Secretary
WORLD ASSET MANAGEMENT
ATTEST:
/s/ Robert J. Kay By: /s/ Todd B. Johnson
- ----------------- -------------------
Robert J. Kay Todd B. Johnson
Director - Client Services President
AMENDMENT TO TRANSFER AGENCY AGREEMENT
This is an Amendment to the Transfer Agency Agreement made and entered
into between INVESCO Funds Group, Inc., a Delaware corporation ("INVESCO"), and
INVESCO Dynamics Fund, Inc., a Maryland corporation (the "Fund") as of the 28th
day of February, 1997 (the "Agreement").
WHEREAS, effective as of August 28, 1998, the Fund has changed its name to
"INVESCO Equity Funds, Inc."; and
WHEREAS, the Fund is engaged in business as an open-end management
investment company, is registered as such under the Investment Company Act of
1940, as amended (the "Act") and is authorized to issue shares representing
interests in separte portfolios of investments (the "Portfolios");
NOW, THEREFORE, the name of the Fund is "INVESCO Equity Funds, Inc.";
and
The Fund is authorized to issue shares representing interests in the
Portfolio, the INVESCO Endeavor Fund.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the 16th day of October, 1998.
INVESCO FUNDS GROUP, INC.
By: /s/ Ronald L. Grooms
---------------------
ATTEST: Ronald L. Grooms
Treasurer & Chief Financial
/s/ Glen A. Payne Officer & Accounting Officer
- -----------------
Glen A. Payne
Secretary
INVESCO CAPITAL APPRECIATION FUNDS,
INC.
By: /s/ William J. Galvin, Jr.
--------------------------
William J. Galvin, Jr.
Senior Vice President
ATTEST:
/s/ Glen A. Payne
- -----------------
Glen A. Payne
Secretary
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement of Form N-1A of our report dated August 25, 1999, relating to the
financial statements and financial highlights which appears in the July 31, 1999
Annual Report to Shareholders of INVESCO Stock Funds, Inc., which is also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the headings "Financial Highlights" and "Independent
Accountants" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Denver, Colorado
May 5, 2000
EXHIBIT m(2)
MASTER DISTRIBUTION PLAN AND AGREEMENT
BETWEEN
INVESCO STOCK FUNDS, INC.
(CLASS C SHARES)
AND
INVESCO DISTRIBUTORS, INC.
THIS AGREEMENT made as of the 27th day of January, 2000, by and between
INVESCO STOCK FUNDS, INC. a Maryland Corporation (the "Company"), with respect
to the series of shares of the common stock of the Funds set forth on Appendix A
to this Agreement (the "Funds") (the shares of each of the Funds hereinafter
referred to as the "Class C Shares") and INVESCO DISTRIBUTORS, INC., a Delaware
corporation (the "Distributor").
WHEREAS, the Company engages in business as an open-end management
investment company, and is registered as such under the Investment Company Act
of 1940, as amended (the "Act"); and
WHEREAS, the Company desires to finance the distribution of the Class C
Shares of common stock of each Fund, together with the Class C Shares of any
additional Fund that may hereafter be offered to the public, in accordance with
this Master Distribution Plan and Agreement of Distribution pursuant to Rule
12b-1 under the Act (the "Plan and Agreement"); and
WHEREAS, Distributor desires to be retained to perform services in
accordance with such Plan and Agreement and on said terms and conditions; and
WHEREAS, this Plan and Agreement has been approved by a vote of the board
of directors of the Company, including a majority of the directors who are not
interested persons of the Company, as defined in the Act, and who have no direct
or indirect financial interest in the operation of this Plan and Agreement (the
"Independent Directors"), cast in person at a meeting called for the purpose of
voting on this Plan and Agreement;
NOW, THEREFORE, the Company hereby adopts the Plan set forth herein and
the Company and Distributor hereby enter into this Agreement pursuant to the
Plan in accordance with the requirements of Rule 12b-1 under the Act, and
provide and agree as follows:
FIRST: The Plan is defined as those provisions of this document by which
the Company adopts a Plan pursuant to Rule 12b-1 under the Act and authorizes
payments as described herein. The Agreement is defined as those provisions of
<PAGE>
this document by which the Company retains Distributor to provide distribution
services beyond those required by the General Distribution Agreement between the
parties, as are described herein. The Company may retain the Plan
notwithstanding termination of the Agreement. Termination of the Plan will
automatically terminate the Agreement. Each Fund is hereby authorized to utilize
the assets of the Company to finance certain activities in connection with
distribution of the Company's Class C Shares.
SECOND: The Company on behalf of the Class C Shares hereby appoints the
Distributor as its exclusive agent for the sale of the Class C Shares to the
public directly and through investment dealers and financial institutions in the
United States and throughout the world in accordance with the terms of the
current prospectuses applicable to the Funds.
THIRD: The Class C shares of each Fund may incur expenses per annum of the
average daily net assets of the Company attributable to the Class C Shares at
the rates set forth in Schedule A subject to any limitations imposed from time
to time by applicable rules of the National Association of Securities Dealers,
Inc.
FOURTH: The Company shall not sell any Class C Shares except through the
Distributor and under the terms and conditions set forth in the FIFTH paragraph
below. Notwithstanding the provisions of the foregoing sentence, however:
(A) the Company may issue Class C Shares to any other investment company
or personal holding company, or to the shareholders thereof, in exchange for all
or a majority of the shares or assets of any such company; and
(B) the Company may issue Class C Shares at their net asset value in
connection with certain classes of transactions or to certain categories of
persons, in accordance with Rule 22d-1 under the Act, provided that any such
category is specified in the then current prospectus of the applicable Class C
Shares.
FIFTH: The Distributor hereby accepts appointment as exclusive agent for
the sale of the Class C Shares and agrees that it will use its best efforts to
sell such shares; provided, however, that:
(A) the Distributor may, and when requested by the Company on behalf of
the Class C Shares shall, suspend its efforts to effectuate such sales at any
time when, in the opinion of the Distributor or of the Company, no sales should
be made because of market or other economic considerations or abnormal
circumstances of any kind; and
(B) the Company may withdraw the offering of the Class C Shares at any
time without the consent of the Distributor. It is mutually understood and
agreed that the Distributor does not undertake to sell any specific amount of
the Class C Shares. The Company shall have the right to specify minimum amounts
for initial and subsequent orders for the purchase of Class C Shares.
(C ) To the extent that obligations incurred by Distributor out of its own
<PAGE>
resources to finance any activity primarily intended to result in the sale of
Class C Shares of a Fund, pursuant to this Plan and Agreement or otherwise, may
be deemed to constitute the indirect use of Class C Shares Fund assets, such
indirect use of Class C Shares Fund assets is hereby authorized in addition to,
and not in lieu of, any other payments authorized under this Plan and Agreement.
(D) Distributor shall provide to the Company's Board of Directors and the
Board of Directors shall review, at least quarterly, a written report of the
amounts expended pursuant to the Plan and Agreement and the purposes for which
such expenditures were made.
SIXTH:
(A) The public offering price of the Class C shares shall be the net asset
value per share of the applicable Class C shares. Net asset value per share
shall be determined in accordance with the provisions of the then current
prospectus and statement of additional information of the applicable Fund. The
Company's Board of Directors may establish a schedule of contingent deferred
sales charges to be imposed at the time of redemption of the Class C Shares, and
such schedule shall be disclosed in the current prospectus or statement of
additional information of each Fund. Such schedule of contingent deferred sales
charges may reflect variations in or waivers of such charges on redemptions of
Class C shares, either generally to the public or to any specified class of
shareholders and/or in connection with any specified class of transactions, in
accordance with applicable rules and regulations and exemptive relief granted by
the Securities and Exchange Commission, and as set forth in the Funds' current
prospectus(es) or statement(s) of additional information. The Distributor and
the Company shall apply any then applicable scheduled variation in or waiver of
contingent deferred sales charges uniformly to all shareholders and/or all
transactions belonging to a specified class.
(B) The Distributor may pay to investment dealers and other financial
institutions through whom Class C Shares are sold, such sales commission as the
Distributor may specify from time to time. Payment of any such sales commissions
shall be the sole obligation of the Distributor.
(C) Amounts set forth in Schedule A may be used to finance any activity
which is primarily intended to result in the sale of the Class C Shares,
including, but not limited to, expenses of organizing and conducting sales
seminars, advertising programs, finders fees, printing of prospectuses and
statements of additional information (and supplements thereto) and reports for
other than existing shareholders, preparation and distribution of advertising
material and sales literature, supplemental payments to dealers and other
institutions as asset-based sales charges and providing such other services and
activities as may from time to time be agreed upon by the Company. Such reports,
prospectuses and statements of additional information (and supplements thereto),
sales literature, advertising and other services and activities may be prepared
and/or conducted either by Distributor's own staff, the staff of affiliated
companies of the Distributor, or third parties.
<PAGE>
(D) Amounts set forth in Schedule A may also be used to finance payments
of service fees under a shareholder service arrangement to be established by
Distributor in accordance with Section E below, and the costs of administering
the Plan and Agreement. To the extent that amounts paid hereunder are not used
specifically to compensate Distributor for any such expense, such amounts may be
treated as compensation for Distributor's distribution-related services. All
amounts expended pursuant to the Plan and Agreement shall be paid to Distributor
and are the legal obligation of the Company and not of Distributor. That portion
of the amounts paid under the Plan and Agreement that is not paid or advanced by
Distributor to dealers or other institutions that provide personal continuing
shareholder service as a service fee pursuant to Section E below shall be deemed
an asset-based sales charge. No provision of this Plan and Agreement shall be
interpreted to prohibit any payments by the Company during periods when the
Company has suspended or otherwise limited sales.
(E) Amounts expended by the Company under the Plan shall be used in part
for the implementation by Distributor of shareholder service arrangements. The
maximum service fee paid to any service provider shall be twenty-five
one-hundredths of one percent (0.25%), per annum of the average daily net assets
of the Company attributable to the Shares owned by the customers of such service
provider, or such lower rate for the Fund as is specified on Schedule A.
(1) Pursuant to this program, Distributor may enter into agreements
("Service Agreements") with such broker-dealers ("Dealers") as may
be selected from time to time by Distributor for the provision of
distribution-related personal shareholder services in connection
with the sale of Shares to the Dealers' clients and customers
("Customers") to Customers who may from time to time directly or
beneficially own Shares. The distribution-related personal
continuing shareholder services to be rendered by Dealers under the
Service Agreements may include, but shall not be limited to, the
following : (i) distributing sales literature; (ii) answering
routine Customer inquiries concerning the Company and the Shares;
(iii) assisting Customers in changing dividend options, account
designations and addresses, and in enrolling into any of several
retirement plans offered in connection with the purchase of Shares;
(iv) assisting in the establishment and maintenance of customer
accounts and records, and in the processing of purchase and
redemption transactions; (v) investing dividends and capital gains
distributions automatically in Shares; and (vi) providing such
other information and services as the Company or the Customer may
reasonably request.
(2) Distributor may also enter into agreements ("Third Party
Agreements") with selected banks, financial planners, retirement
plan service providers and other appropriate third parties acting in
an agency capacity for their customers ("Third Parties"). Third
Parties acting in such capacity will provide some or all of the
shareholder services to their customers as set forth in the Third
Party Agreements from time to time.
<PAGE>
(3) Distributor may also enter into variable group annuity
contractholder service agreements ("Variable Contract Agreements")
with selected insurance companies ("Insurance Companies") offering
variable annuity contracts to employers as funding vehicles for
retirement plans qualified under Section 401(a) of the Internal
Revenue Code, where amounts contributed under such plans are
invested pursuant to such variable annuity contracts in Shares of
the Company. The Insurance Companies receiving payments under such
Variable Contract Agreements will provide specialized services to
contractholders and plan participants, as set forth in the Variable
Contract Agreements from time to time.
(4) Distributor may also enter into shareholder service agreements
("Bank Trust Department Agreements and Brokers for Bank Trust
Department Agreements") with selected bank trust departments and
brokers for bank trust departments. Such bank trust departments and
brokers for bank trust departments will provide some or all of the
shareholder services to their customers as set forth in the Bank
Trust Department Agreements and Brokers for Bank Trust Department
Agreements.
(F) No provision of this Plan and Agreement shall be deemed to prohibit
any payments by a Fund to the Distributor or by a Fund or the Distributor to
investment dealers, financial institutions and 401(k) plan service providers
where such payments are made under the Plan and Agreement.
(G) The Company shall redeem Class C Shares from shareholders in
accordance with the terms set forth from time to time in the current prospectus
and statement of additional information of each Fund. The price to be paid to a
shareholder to redeem Class C Shares shall be equal to the net asset value of
the Class C Shares being redeemed, less any applicable contingent deferred sales
charge. The Distributor shall be entitled to receive the amount of any
applicable contingent deferred sales charge that has been subtracted from gross
redemption proceeds. The Company shall pay or cause the Company's transfer agent
to pay the applicable contingent deferred sales charge to the Distributor on the
date net redemption proceeds are payable to the redeeming shareholder.
SEVENTH: The Distributor shall act as agent of the Company on behalf of
each Fund in connection with the sale and repurchase of Class C Shares. Except
with respect to such sales and repurchases, the Distributor shall act as
principal in all matters relating to the promotion or the sale of Class C Shares
and shall enter into all of its own engagements, agreements and contracts as
principal on its own account. The Distributor shall enter into agreements with
investment dealers and financial institutions selected by the Distributor,
authorizing such investment dealers and financial institutions to offer and sell
Class C Shares to the public upon the terms and conditions set forth therein,
which shall not be inconsistent with the provisions of this Agreement. Each
agreement shall provide that the investment dealer and financial institution
shall act as a principal, and not as an agent, of the Company on behalf of the
Funds. The Distributor or such other investment dealers or financial
institutions will be deemed to have performed all services required to be
performed in order to be entitled to receive the asset based sales charge
<PAGE>
portion of any amounts payable with respect to Class C Shares to the Distributor
pursuant to the Plan and Agreement adopted by the Company on behalf of each Fund
upon the settlement of each sale of a Class C Share (or a share of another fund
from which the Class C Share derives).
EIGHTH: The Funds shall bear:
(A) the expenses of qualification of Class C Shares for sale in connection
with such public offerings in such states as shall be selected by the
Distributor, and of continuing the qualification therein until the Distributor
notifies the Company that it does not wish such qualification continued; and
(B) all legal expenses in connection with the foregoing.
NINTH:
(A) The Distributor shall bear the expenses of printing from the final
proof and distributing the Funds' prospectuses and statements of additional
information (including supplements thereto) relating to public offerings made by
the Distributor pursuant to this Agreement (which shall not include those
prospectuses and statements of additional information, and supplements thereto,
to be distributed to shareholders of each Fund), and any other promotional or
sales literature used by the Distributor or furnished by the Distributor to
dealers in connection with such public offerings, and expenses of advertising in
connection with such public offerings.
(B) The Distributor may be compensated for all or a portion of such
expenses, or may receive reasonable compensation for distribution related
services, to the extent permitted by the Plan and Agreement.
TENTH: The Distributor will accept orders for the purchase of Class C
Shares only to the extent of purchase orders actually received and not in excess
of such orders, and it will not avail itself of any opportunity of making a
profit by expediting or withholding orders. It is mutually understood and agreed
that the Company may reject purchase orders where, in the judgment of the
Company, such rejection is in the best interest of the Company.
<PAGE>
ELEVENTH: The Company, on behalf of the Funds, and the Distributor shall
each comply with all applicable provisions of the Act, the Securities Act of
1933, rules and regulations of the National Association of Securities Dealers,
Inc. and its affiliates, and of all other federal and state laws, rules and
regulations governing the issuance and sale of Class C Shares.
TWELFTH:
(A) In the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties hereunder on the part of the
Distributor, the Company on behalf of the Funds agrees to indemnify the
Distributor against any and all claims, demands, liabilities and expenses which
the Distributor may incur under the Securities Act of 1933, or common law or
otherwise, arising out of or based upon any alleged untrue statement of a
material fact contained in any registration statement or prospectus of the
Funds, or any omission to state a material fact therein, the omission of which
makes any statement contained therein misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Company or Fund in connection therewith by or on behalf of the
Distributor. The Distributor agrees to indemnify the Company and the Funds
against any and all claims, demands, liabilities and expenses which the Company
or the Funds may incur arising out of or based upon any act or deed of the
Distributor or its sales representatives which has not been authorized by the
Company or the Funds in its prospectus or in this Agreement.
(B) The Distributor agrees to indemnify the Company and the Funds against
any and all claims, demands, liabilities and expenses which the Company or the
Funds may incur under the Securities Act of 1933, or common law or otherwise,
arising out of or based upon any alleged untrue statement of a material fact
contained in any registration statement or prospectus of the Funds, or any
omission to state a material fact therein if such statement or omission was made
in reliance upon, and in conformity with, information furnished to the Company
or the Funds in connection therewith by or on behalf of the Distributor.
(C) Notwithstanding any other provision of this Agreement, the Distributor
shall not be liable for any errors of the Funds' transfer agent, or for any
failure of any such transfer agent to perform its duties.
THIRTEENTH: Nothing herein contained shall require the Company to take
any action contrary to any provision of its Articles of Incorporation, or to
any applicable statute or regulation.
FOURTEENTH: This Plan and Agreement shall become effective as of the date
hereof, shall continue in force and effect until May 30, 2000, and shall
continue in force and effect from year to year thereafter, provided that such
continuance is specifically approved at least annually (a)(i) by the Board of
Directors of the Company or (ii) by the vote of a majority of the Funds'
outstanding voting securities of Class C Shares (as defined in Section 2(a)(42)
of the 1940 Act), and (b) by vote of a majority of the Company's directors who
are not parties to this Plan and Agreement or "interested persons" (as defined
in Section 2(a)(19) of the 1940 Act) of any party to this Plan and Agreement
cast in person at a meeting called for such purpose.
<PAGE>
Any amendment to this Plan and Agreement that requires the approval of the
shareholders of Class C Shares pursuant to Rule 12b-1 under the 1940 Act shall
become effective as to such Class C Shares upon the approval of such amendment
by a "majority of the outstanding voting securities" (as defined in the 1940
Act) of such Class C Shares, provided that the Board of Directors of the Company
has approved such amendment.
FIFTEENTH: This Plan and Agreement, any amendment to this Plan and
Agreement and any agreements related to this Plan and Agreement shall become
effective immediately upon the receipt by the Company of both (a) the
affirmative vote of a majority of the Board of Directors of the Company, and (b)
the affirmative vote of a majority of those directors of the Company who are not
"interested persons" of the Company (as defined in the 1940 Act) and have no
direct or indirect financial interest in the operation of this Plan and
Agreement or any agreements related to it (the "Independent Directors"), cast in
person at a meeting called for the purpose of voting on this Plan and Agreement
or such agreements. Notwithstanding the foregoing, no such amendment that
requires the approval of the shareholders of Class C Shares of a Company shall
become effective as to such Class C Shares until such amendment has been
approved by the shareholders of such Class C Shares in accordance with the
provisions of the Fourteenth paragraph of this Plan and Agreement.
This Plan and Agreement may not be amended to increase materially the
amount of distribution expenses provided for in Schedule A hereof unless such
amendment is approved in the manner provided herein, and no material amendment
to the Plan and Agreement shall be made unless approved in the manner provided
for in the Fourteenth paragraph hereof.
So long as the Plan and Agreement remains in effect, the selection and
nomination of persons to serve as directors of the Company who are not
"interested persons" of the Company shall be committed to the discretion of the
directors then in office who are not "interested persons" of the Company.
However, nothing contained herein shall prevent the participation of other
persons in the selection and nomination process, provided that a final decision
on any such selection or nomination is within the discretion of, and approved
by, a majority of the directors of the Company then in office who are not
"interested persons" of the Company.
SIXTEENTH:
(A) This Plan and Agreement may be terminated at any time, without the
payment of any penalty, by vote of the Board of Directors of the
Company or by vote of a majority of the outstanding voting
securities of Class C Shares of each Fund, or by the Distributor, on
sixty (60) days' written notice to the other party.
<PAGE>
(B) In the event that neither Distributor nor any affiliate of
Distributor serves the Company as investment adviser, the agreement
with Distributor pursuant to this Plan shall terminate at such time.
The board of directors may determine to approve a continuance of the
Plan and/or a continuance of the Agreement, hereunder.
(C) To the extent that this Plan and Agreement constitutes a Plan of
Distribution adopted pursuant to Rule 12b-1 under the Act it
shall remain in effect as such, so as to authorize the use by the
Class C Shares of each Fund of its assets in the amounts and for
the purposes set forth herein, notwithstanding the occurrence of
an "assignment," as defined by the Act and the rules thereunder.
To the extent it constitutes an agreement with INVESCO pursuant
to a plan, it shall terminate automatically in the event of such
"assignment." Upon a termination of the agreement with
Distributor, the Funds may continue to make payments pursuant to
the Plan only upon the approval of a new agreement under this
Plan and Agreement, which may or may not be with Distributor, or
the adoption of other arrangements regarding the use of the
amounts authorized to be paid by the Funds hereunder, by the
Company's board of directors in accordance with the procedures
set forth above.
SEVENTEENTH: Any notice under this Plan and Agreement shall be in writing,
addressed and delivered, or mailed postage prepaid, to the other party at such
address as the other party may designate for the receipt of notices. Until
further notice to the other party, it is agreed that the addresses of both the
Company and the Distributor shall be 7800 East Union Avenue, Mail Stop 201,
Denver, Colorado 80237.
EIGHTEENTH: This Plan and Agreement shall be governed by and construed
in accordance with the laws (without reference to conflicts of law
provisions) of the State of Maryland.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Plan and Agreement to be
executed in duplicate on the day and year first above written.
INVESCO STOCK FUNDS, Inc.
Attest:
By: /s/ Mark H. Williamson
/s/ Glen A. Payne ----------------------
- ----------------- Name: Mark H. Williamson
Name: Glen A. Payne Title: President
Title: Secretary
INVESCO DISTRIBUTORS, INC.
Attest:
By: /s/ Ronald L. Grooms
/s/ Glen A. Payne --------------------
- ----------------- Name: Ronald L. Grooms
Name: Glen A. Payne Title: Treasurer
Title: Secretary
<PAGE>
APPENDIX A
TO
MASTER DISTRIBUTION PLAN AND AGREEMENT
OF
INVESCO STOCK FUNDS, Inc.
CLASS C SHARES
INVESCO Blue Chip Growth Fund
INVESCO Dynamics Fund
INVESCO Growth & Income Fund
INVESCO Endeavor Fund
INVESCO Small Company Growth Fund
INVESCO Value Equity Fund
<PAGE>
SCHEDULE A
TO
MASTER DISTRIBUTION PLAN and AGREEMENT
OF
INVESCO STOCK FUNDS, INC.
(DISTRIBUTION FEE)
The Company shall pay the Distributor as full compensation for all
services rendered and all facilities furnished under the Distribution Plan and
Agreement for each Fund (or Class thereof) designated below, a Distribution Fee*
determined by applying the annual rate set forth below as to each Fund (or Class
thereof) to the average daily net assets of the Fund (or Class thereof) for the
plan year, computed in a manner used for the determination of the offering price
of shares of the Fund.
MAXIMUM MAXIMUM MAXIMUM
ASSET BASED SERVICE AGGREGATE
FUND CLASS C SHARES SALES CHARGE FEE FEE
INVESCO Blue Chip Growth Fund 0.75% 0.25% 1.00%
INVESCO Dynamics Fund 0.75% 0.25% 1.00%
INVESCO Growth & Income Fund 0.75% 0.25% 1.00%
INVESCO Endeavor Fund 0.75% 0.25% 1.00%
INVESCO Small Company Growth Fund 0.75% 0.25% 1.00%
INVESCO Value Equity Fund 0.75% 0.25% 1.00%
- ------------------
* The Distribution Fee is payable apart from the sales charge, if any, as
stated in the current prospectus for the applicable Fund (or Class
thereof).
POWER OF ATTORNEY
The person executing this Power of Attorney hereby appoints Edward F.
O'Keefe and Glen A. Payne, or either of them, as his attorney-in-fact to execute
and to file such Registration Statements under federal and state securities laws
and such Post-Effective Amendments to such Registration Statements of the
hereinafter described entities as such attorney-in-fact, or either of them, may
deem appropriate:
INVESCO Advantage Series Funds, Inc.
INVESCO Bond Funds, Inc.
INVESCO Combination Stock & Bond Funds, Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Sector Funds, Inc.
INVESCO Stock Funds, Inc.
INVESCO Treasurer's Series Funds, Inc.
INVESCO Variable Investment Funds, Inc.
This Power of Attorney, which shall not be affected by the disability of
the undersigned, is executed and effective as of the 5th day of May, 2000.
/s/ Richard W. Healey
---------------------
Richard W. Healey
STATE OF COLORADO )
)
COUNTY OF )
SUBSCRIBED, SWORN TO AND ACKNOWLEDGED before me by Richard W. Healey, as a
director of each of the above-described entities, this 5th day of May, 2000.
/s/ Ruth A. Christensen
------------------------
Notary Public
My Commission Expires: 3/16/2002
