PROSPECTUS
November 1, 1997
INVESCO INDUSTRIAL INCOME FUND, INC.
INVESCO Industrial Income Fund, Inc. (the "Fund") is actively managed to
seek the best possible current income, while following sound investment
practices. Capital growth potential is an additional consideration in the
selection of portfolio securities. The Fund normally invests at least 65% of its
total assets in dividend-paying common stocks. Up to 10% of the Fund's total
assets may be invested in equity securities that do not pay regular dividends.
The remaining assets are invested in other income-producing securities, such as
corporate bonds. The Fund also has the flexibility to invest in other types of
securities.
This Prospectus provides you with the basic information you should know
before investing in the Fund. You should read it and keep it for future
reference. A Statement of Additional Information containing further information
about the Fund, dated November 1, 1997, has been filed with the Securities and
Exchange Commission, and is incorporated by reference into this Prospectus. To
obtain a free copy, write to INVESCO Distributors, Inc., P.O. Box 173706,
Denver, Colorado 80217-3706; call 1-800-525-8085; or visit our web site at
http://www.invesco.com.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION. THE SHARES
OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
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TABLE OF CONTENTS
Page
----
ESSENTIAL INFORMATION........................................................2
ANNUAL FUND EXPENSES.........................................................3
FINANCIAL HIGHLIGHTS.........................................................4
INVESTMENT OBJECTIVE AND STRATEGY............................................5
INVESTMENT POLICIES AND RISKS................................................5
THE FUND AND ITS MANAGEMENT..................................................7
FUND PRICE AND PERFORMANCE...................................................9
HOW TO BUY SHARES...........................................................10
FUND SERVICES...............................................................12
HOW TO SELL SHARES..........................................................13
TAXES, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS.............................14
ADDITIONAL INFORMATION......................................................15
<PAGE>
ESSENTIAL INFORMATION
Investment Goal And Strategy^: INVESCO Industrial Income Fund, Inc. is a
diversified mutual fund that seeks the best possible current income, while
following sound investment practices, with the added potential for capital
appreciation. It invests primarily in dividend-paying common stocks of U.S.
companies traded on national securities exchanges or over-the-counter. The Fund
also may invest in equity securities that do not pay regular dividends and other
income-producing securities, such as corporate bonds. There is no guarantee that
the Fund will meet its objective. See "Investment Objective And Strategy."
Designed For: Investors primarily seeking current income, but who do not
wish to sacrifice the potential for capital growth over the long term. While not
a complete investment program, the Fund may be a valuable element of your
investment portfolio. You also may wish to consider the Fund as part of a
Uniform Gift/Transfer To Minors Account or systematic investing strategy. The
Fund may be a suitable investment for many types of retirement programs,
including the IRA, SEP-IRA, SIMPLE IRA, 401(k), Profit Sharing, Money Purchase
Pension, and 403(b) plans.
Time Horizon^: Stock and bond prices fluctuate on a daily basis, and the
Fund's price per share therefore varies daily. Potential shareholders should
consider this a long-term investment.
Risks^: The Fund generally uses a moderate investment strategy, but may
hold securities rated below investment grade and foreign debt securities, and
may experience relatively rapid portfolio turnover. The Fund's investments in
debt securities are subject to credit risk and market risk, both of which are
increased by investing in lower rated securities. The returns on foreign
investments may be influenced by the risks of investing overseas. Rapid
portfolio turnover may result in higher brokerage commissions and the
acceleration of taxable capital gains. These policies make the Fund unsuitable
for that portion of your savings dedicated to preservation of capital over the
short-term. See "Investment Objective and Strategy" and "Investment Policies and
Risks."
Organization and Management^: The Fund is owned by its shareholders. It
employs INVESCO Funds Group, Inc. ("IFG"), founded in 1932 to serve as
investment adviser, administrator and transfer agent; and INVESCO Trust Company
("INVESCO Trust")^, founded in 1969^, to serve as sub-adviser. Together, IFG and
INVESCO Trust constitute "Fund Management." Prior to September 30, 1997, IFG
served as the Fund's distributor. Effective September 30, 1997, INVESCO
Distributors, Inc. ("IDI"), founded in 1997 as a wholly-owned subsidiary of IFG,
became the Fund's distributor.
<PAGE>
The Fund's investments are selected by two experienced INVESCO portfolio
managers: INVESCO senior vice presidents Charles Mayer, who has 27 years of
investment experience, and Donovan J. (Jerry) Paul, with 21 years of experience.
A Chartered Financial Analyst, Mr. Mayer earned his M.B.A. from St. John's
University and a B.A. from St. Peter's College. Mr. Paul holds an M.B.A. from
the University of Northern Iowa and a B.B.A. from the University of Iowa; he is
both a Chartered Financial Analyst and Certified Public Accountant. See "The
Fund And Its Management."
IFG, INVESCO Trust and IDI are subsidiaries of AMVESCAP PLC, an
international investment management company that manages approximately $177.5
billion in assets. AMVESCAP PLC is based in London with money managers located
in Europe, North America and the Far East.
This Fund offers all of the following services at no charge: Telephone purchases
Telephone exchanges Telephone redemptions Automatic reinvestment of
distributions Regular investment plans, such as EasiVest (the Fund's automatic
monthly investment program), Direct Payroll Purchase, and Automatic Monthly
Exchange) Periodic withdrawal plans
See "How To Buy Shares" and "How To Sell Shares."
Minimum Initial Investment: $1,000, which is waived for regular investment
plans, including EasiVest and Direct Payroll Purchase, and certain retirement
plans.
Minimum Subsequent Investment: $50 (Minimums are lower for certain
retirement plans.)
ANNUAL FUND EXPENSES
The Fund is no-load; there are no fees to purchase, exchange or redeem
shares. The Fund, however, is authorized to pay a Rule 12b-1 distribution fee of
one quarter of one percent of the Fund's average net assets each year. (See "How
To Buy Shares--Distribution Expenses.")
Like any company, the Fund has operating expenses -- such as portfolio
management, accounting, shareholder servicing, maintenance of shareholder
accounts, and other expenses. These expenses are paid from the Fund's assets.
Lower expenses therefore benefit investors by increasing the Fund's total
return.
We calculate annual operating expenses as a percentage of the Fund's
average annual net assets. To share economies of scale and to keep expenses
competitive, Fund Management voluntarily reduced the management fees on the
Fund's daily net assets over $5 billion.
<PAGE>
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fee (after expense limitation) 0.48%
12b-1 Fees 0.25%
Other Expenses(1),(2) 0.22%
Total Fund Operating Expenses
(after expense limitation)(1),(2) 0.95%
(1)It should be noted that the Fund's actual total operating expenses were
lower than the figures shown, because the Fund's custodian, transfer agent and
depository fees were reduced under an expense offset arrangement. However, as a
result of an SEC requirement for mutual funds to state their total operating
expenses without crediting any such expense offset arrangement, the figures
shown above do not reflect these reductions. In comparing expenses for different
years, please note that the ratios of Expenses to Average Net Assets shown under
"Financial Highlights" do reflect any reductions for periods prior to the fiscal
year ended June 30, 1996.
(2)Under an expense limitation voluntarily agreed to by IFG, which became
mandatory on May 15, 1997, the management fee paid by the Fund has been reduced
to the following annual rates: 0.45% on daily net assets over $2 billion but
less than $4 billion, 0.40% on daily net assets over $4 billion but less than $5
billion. In addition, in order to share economies of scale and to keep expenses
competitive, Fund Management voluntarily reduced the management fees on the
Fund's daily net assets over $5 billion. In the absence of the voluntary expense
limitation, the Fund's "Management Fee" and "Total Fund Operating Expenses"
would have been 0.51% and 0.98%, respectively, based on the Fund's actual
expenses for the fiscal year ended June 30, 1997.
Example
A shareholder would pay the following expenses on a $1,000 investment for
the periods shown, assuming a hypothetical 5% annual return and redemption at
the end of each time period. (Of course, actual operating expenses are paid from
the Fund's assets and are deducted from the amount of income available for
distribution to shareholders; they are not charged directly to shareholder
accounts.)
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$10 $30 $53 $117
The purpose of this table is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly. THE EXAMPLE SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE OR EXPENSES,
AND ACTUAL ANNUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
For more information on the Fund's expenses, see "The Fund and Its Management"
and "How To Buy Shares -- Distribution Expenses."
<PAGE>
Because the Fund pays a distribution fee, investors who own Fund shares for
a long period of time may pay more than the economic equivalent of the maximum
front-end sales charge permitted for mutual funds by the National Association of
Securities Dealers, Inc.
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
The following information has been audited by Price Waterhouse LLP,
independent accountants. This information should be read in conjunction with the
audited financial statements and the independent accountant's report thereon
appearing in the Fund's 1997 Annual Report to Shareholders, which is
incorporated by reference into the Statement of Additional Information. Both are
available without charge by contacting IDI at the address or telephone number on
the cover of this prospectus. The Annual Report also contains more information
about the Fund's performance.
<TABLE>
<CAPTION>
Year Ended June 30
--------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value -
Beginning of
Period $13.21 $11.92 $11.32 $11.53 $10.67 $9.74 $9.39 $8.88 $7.98 $8.85
--------------------------------------------------------------------------------------------------------
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment
Income 0.35 0.41 0.42 0.36 0.31 0.28 0.36 0.38 0.42 0.35
Net Gains or
(Losses)
on Securities
(Both Realized
and Unrealized) 3.05 1.53 1.14 0.02 1.33 1.38 0.81 1.43 1.01 (0.51)
--------------------------------------------------------------------------------------------------------
Total from
Investment
Operations 3.40 1.94 1.56 0.38 1.64 1.66 1.17 1.81 1.43 (0.16)
--------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from
Net Investment
Income 0.35 0.41 0.42 0.36 0.32 0.29 0.34 0.40 0.39 0.36
<PAGE>
In Excess of Net
Investment
Income 0.00 0.00 0.00 0.11 0.00 0.00 0.00 0.00 0.00 0.00
Distributions
from Capital
Gains 0.95 0.24 0.54 0.12 0.46 0.44 0.48 0.90 0.14 0.35
--------------------------------------------------------------------------------------------------------
Total
Distributions 1.30 0.65 0.96 0.59 0.78 0.73 0.82 1.30 0.53 0.71
--------------------------------------------------------------------------------------------------------
Net Asset Value -
End of Period $15.31 $13.21 $11.92 $11.32 $11.53 $10.67 $9.74 $9.39 $8.88 $7.98
========================================================================================================
TOTAL RETURN 27.33% 16.54% 14.79% 3.24% 15.66% 17.04% 13.06% 21.08% 18.45% (1.21%)
RATIOS
Net Assets -
End of Period
($000 Omitted) $4,574,675 $4,170,536$4,009,609 $3,913,322$3,412,527 $2,092,955 $881,226 $572,373 $399,538 $380,978
Ratio of
Expenses to
Average Net
Assets# 0.95%@ 0.93%@ 0.94% 0.92% 0.96% 0.98% 0.94% 0.76% 0.78% 0.78%
Ratio of Net
Investment
Income to
Average Net
Assets# 2.54% 3.17% 3.61% 3.11% 2.94% 2.75% 3.92% 4.14% 5.08% 4.29%
Portfolio
Turnover Rate 47% 63% 54% 56% 121% 119% 104% 132% 124% 148%
Average Commission
Rate Paid^^ $0.0370 - - - - - - - - -
</TABLE>
#Various expenses of the Fund were voluntarily absorbed by IFG for the years
ended June 30, 1997, 1996, 1995, 1994 and 1993. If such expenses had not been
voluntarily absorbed, ratio of expenses to average net assets would have been
0.98%, 0.96%, 0.97%, 0.95% and 0.98%, respectively, and ratio of net investment
income to average net assets would have been 2.51%, 3.14%, 3.58%, 3.08% and
2.92%, respectively.
@ Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
^^ The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the total
number of related shares purchased or sold, which is required to be disclosed
for fiscal years beginning September 1, 1995 and thereafter.
<PAGE>
INVESTMENT OBJECTIVE AND STRATEGY
The Fund seeks the best possible current income while following sound
investment practices. This investment objective is fundamental and cannot be
changed without the approval of the Fund's shareholders. Capital growth
potential is an additional consideration in the selection of portfolio
securities. The Fund normally invests at least 65% of its total assets in
dividend-paying common stocks. Up to 10% of the Fund's total assets may be
invested in equity securities that do not pay regular dividends. The remaining
assets are invested in other income-producing securities, such as corporate
bonds. The Fund also has the flexibility to invest in preferred stocks and
convertible bonds. There is no maximum limit on the amount of equity or debt
securities in which the Fund may invest. There is no assurance that the Fund's
investment objective will be met.
The Fund's investments in equity securities are limited to those that are
readily marketable in the United States. These securities include American
Depository Receipts ("ADRs"), which represent shares of a foreign corporation
held by a U.S. bank that entitle the holder to all dividends and capital gains.
ADRs are denominated in U.S. dollars and trade in the U.S. securities markets.
The Fund's investment portfolio is actively traded. Economic conditions
and market circumstances vary from day to day; securities may be bought and sold
relatively frequently as their suitability for the Fund's portfolio changes.
This policy may result in increased brokerage commissions and acceleration of
capital gains which are taxable when distributed to shareholders. The Statement
of Additional Information includes an expanded discussion of the Fund's
portfolio turnover rate, its brokerage practices and certain federal income tax
matters.
When we believe market or economic conditions are adverse, the Fund may
assume a defensive position -- that is, temporarily invest up to 100% of its
assets in high quality corporate bonds, notes or U.S. government obligations, or
money market instruments such as commercial paper or repurchase agreements,
seeking to protect its assets until conditions stabilize.
INVESTMENT POLICIES AND RISKS
Investors generally should expect to see their price per share vary with
movements in the stock market, changes in economic conditions and other factors.
The Fund invests in many different companies in a variety of industries; this
diversification reduces the Fund's overall exposure to investment and market
risks but cannot eliminate these risks.
Debt Securities. When we assess an issuer's ability to meet its interest
rate obligations and repay its debt when due, we are referring to "credit risk."
Debt obligations are rated based on their credit risk as estimated by
independent services such as Moody's Investors Service, Inc. ("Moody's") or
<PAGE>
Standard & Poor's Ratings Group, Inc., a division of The McGraw-Hill Companies,
Inc. ("S&P"). "Market risk" refers to interest rates: For instance, when
interest rates go up, the market value of a previously issued bond generally
declines; on the other hand, when interest rates go down, bonds generally see
their prices increase.
The lower a bond's quality, the more it is subject to credit risk and
market risk, and the more speculative it becomes. This is also true of most
unrated debt securities. Therefore, the Fund does not invest in obligations it
believes to be highly speculative. Corporate bonds rated Aaa, Aa, A or Baa by
Moody's or AAA, AA, A or BBB by S&P ("investment grade") enjoy strong to
adequate capacity to pay principal and interest. No more than 15% of the Fund's
total assets may be invested in issues rated below investment grade quality
(commonly called "junk bonds" and rated BB or below by S&P or Ba or below by
Moody's); these include issues which are of poorer quality and may have some
speculative characteristics, according to the ratings services. Never, under any
circumstances, does the Fund invest in bonds rated below Caa by Moody's or CCC
by S&P. Bonds rated Caa or CCC may be in default or there may be present
elements of danger with respect to payment of principal or interest. While Fund
Management continuously monitors all of the debt securities in the Fund's
portfolio for the issuer's ability to make required principal and interest
payments and other quality factors, the Fund may retain a bond whose rating is
changed to one below the minimum rating required for purchase of the security.
For more information on debt securities and the foregoing corporate bond rating
categories, see the Statement of Additional Information.
For the fiscal year ended June 30, 1997, the following percentages of the
Fund's total assets were invested in corporate bonds rated investment grade by
Moody's or S&P at the time they were purchased: AAA--0.00%; AA--0.26%; A--2.92%;
and BBB--7.94%, and the following percentages were invested in corporate bonds
rated below investment grade at the time of purchase: BB--15.27%; B--23.64%;
CCC--2.30%; and D--0.00%. Finally, 1.39% of total assets were invested in
unrated corporate bonds. All of these percentages were determined on a
dollar-weighted basis, calculated by averaging the Fund's month-end portfolio
holdings during the fiscal year. Keep in mind that the Fund's holdings are
actively traded, and bond ratings are occasionally adjusted by ratings services,
so these figures do not represent the Fund's actual holdings or quality ratings
as of June 30, 1997.
The Fund's investments in debt securities may include investments in zero
coupon bonds, step-up bonds and asset-backed securities. Zero coupon bonds
("zeros") make no periodic interest payments. Instead, they are sold at a
discount from their face value. The buyer of the zero receives the rate of
return by the gradual appreciation in the price of the security, which is
redeemed at face value at maturity. Step-up bonds initially make no (or low)
cash interest payments but begin paying interest (or a higher rate of interest)
at a fixed time after issuance of the bond. Because they are extremely
responsive to changes in interest rates, the market prices of zeros and step-up
bonds may be more volatile than the market prices of other bonds. The Fund may
be required to distribute income recognized on these bonds, even though no cash
interest payments may be received, which could reduce the amount of cash
<PAGE>
available for investment by the Fund. Asset-backed securities generally
represent interests in pools of consumer loans and most often are structured as
pass-through securities. Interest and principal payments ultimately depend on
payment of the underlying loans by individuals, although the securities may be
supported, at least in part, by letters of credit or other credit enhancements.
The underlying loans are subject to prepayments that may shorten the securities'
weighted average life and may lower their returns.
Foreign Securities. The Fund's investments in debt obligations may include
securities issued by foreign governments and foreign corporations. Up to 25% of
the Fund's total assets, measured at the time of purchase, may be invested
directly in foreign debt securities, provided that all such securities are
denominated and pay interest in U.S. dollars (such as Eurobonds and Yankee
bonds). Securities of Canadian issuers and ADRs are not subject to this 25%
limitation. Investments in foreign debt securities involve certain risks.
For U.S. investors, the returns on foreign debt securities are influenced
not only by the returns on the foreign investments themselves but also by
currency fluctuations. That is, when the U.S. dollar generally rises against a
foreign currency, returns for a U.S. investor on foreign securities denominated
in that foreign currency may decrease. By contrast, in a period when the U.S.
dollar generally declines, those returns may increase. The Fund attempts to
minimize these risks by limiting its investments in foreign debt securities to
those which are denominated and pay interest in U.S. dollars.
Other aspects of international investing to consider include:
-less publicly available information than is generally available about U.S.
issuers;
-differences in accounting, auditing and financial reporting standards;
-generally higher commission rates on foreign portfolio transactions and
longer settlement periods;
-smaller trading volumes and generally lower liquidity of foreign stock
markets, which may cause greater price volatility; and
-investments in certain countries may be subject to foreign withholding
taxes, which may reduce dividend income or capital gains payable to
shareholders.
There is also the possibility of expropriation or confiscatory taxation;
adverse changes in investment or exchange control regulations; political
instability; potential restrictions on the flow of international capital; and
the possibility of the Fund experiencing difficulties in pursuing legal remedies
and collecting judgments.
ADRs are subject to some of the same risks as direct investments in
foreign securities, including the risk that material information about the
issuer may not be disclosed in the United States and the risk that currency
fluctuations may adversely affect the value of the ADR.
<PAGE>
Rule 144A Securities. The Fund may not purchase securities that are not
readily marketable. However, the Fund may purchase certain securities that are
not registered for sale to the general public but that can be resold to
institutional investors ("Rule 144A Securities") if a liquid trading market
exists. The Fund's board of directors has delegated to Fund Management the
authority to determine the liquidity of Rule 144A Securities pursuant to
guidelines approved by the board. In the event that a Rule 144A Security held by
the Fund is subsequently determined to be illiquid, the security will be sold as
soon as that can be done in an orderly fashion consistent with the best
interests of the Fund's shareholders. For more information concerning Rule 144A
Securities, see "Investment Policies and Restrictions" in the Statement of
Additional Information.
Repurchase Agreements. The Fund may invest money, for as short a time as
overnight, using repurchase agreements ("repos"). With a repo, the Fund buys a
debt instrument, agreeing simultaneously to sell it back to the prior owner at
an agreed-upon price and time. The Fund could incur costs or delays in seeking
to sell the instrument, if the prior owner defaults on its repurchase
obligation. To reduce that risk, the securities that are the subject of each
repurchase agreement will be maintained with the Fund's custodian in an amount
at least equal to the repurchase price under the agreement (including accrued
interest). These agreements are entered into only with member banks of the
Federal Reserve System, registered broker-dealers, and registered U.S.
government securities dealers that are deemed creditworthy under standards
established by the Fund's board of directors.
Securities Lending. The Fund may seek to earn additional income by lending
securities to qualified brokers, dealers, banks, or other financial
institutions, on a fully collateralized basis. For further information on this
policy, see "Investment Policies and Restrictions" in the Statement of
Additional Information.
For a further discussion of risks associated with an investment in the
Fund, see "Investment Policies and Restrictions" and "Investment Practices" in
the Statement of Additional Information.
Investment Restrictions. Certain restrictions, which are set forth in the
Statement of Additional Information, may not be altered without the approval of
the Fund's shareholders. For example, the Fund limits to 5% the portion of its
total assets that may be invested in a single company and to 25% the portion
that may be invested in any one industry.
THE FUND AND ITS MANAGEMENT
The Fund is a no-load mutual fund, registered with the Securities and
Exchange Commission as a diversified, open-end management investment company. It
was incorporated on March 20, 1959, under the laws of Maryland and first
publicly offered shares on February 1, 1960.
<PAGE>
The Fund's board of directors has responsibility for overall supervision
of the Fund and reviews the services provided by the adviser and sub-adviser.
Under an agreement with the Fund, IFG, 7800 E. Union Avenue, Denver, Colorado
80237, serves as the Fund's investment manager; it is primarily responsible for
providing the Fund with various administrative services. IFG's wholly-owned
subsidiary, INVESCO Trust, is the Fund's sub-adviser and is primarily
responsible for managing the Fund's investments.
The following managers share responsibility for the day-to-day management
of the Fund's holdings:
Charles P. Mayer has served as co-portfolio manager for the Fund since
1993, focusing on equity investments. He is also co-portfolio manager of INVESCO
Balanced Fund and INVESCO-VIF Industrial Income Portfolio. Mr. Mayer began his
investment career in 1969 and is now a senior vice president of INVESCO Trust;
from 1993 to 1994, he was a vice president of INVESCO Trust. From 1984 to 1993,
he was a portfolio manager with Westinghouse Pension. B.A., St. Peter's College;
M.B.A., St. John's University.
Donovan J. (Jerry) Paul has served as co-portfolio manager for the Fund
since 1994, focusing on fixed-income investments. He also is the portfolio
manager of INVESCO High Yield Fund, INVESCO Select Income Fund, and INVESCO
VIF-High Yield Portfolio, as well as co- portfolio manager of INVESCO Short-Term
Bond Fund, INVESCO VIF- Industrial Income Portfolio and INVESCO Balanced Fund. A
senior vice president of INVESCO Trust since 1994, he entered the investment
management industry in 1976. Mr. Paul's career includes these highlights: From
1989 to 1992, he served as senior vice president and director of fixed-income
research, and from 1987 to 1992, as portfolio manager, with Stein, Roe & Farnham
Inc. From 1993 to 1994, he was president of Quixote Investment Management, Inc.
B.B.A., University of Iowa; M.B.A., University of Northern Iowa; Chartered
Financial Analyst; Certified Public Accountant.
Fund Management permits investment and other personnel to purchase and
sell securities for their own accounts, subject to a compliance policy governing
personal investing. This policy requires Fund Management's personnel to conduct
their personal investment activities in a manner that Fund Management believes
is not detrimental to the Fund or Fund Management's other advisory clients. See
the Statement of Additional Information for more detailed information.
The Fund pays IFG a monthly management fee that is based upon a percentage
of the Fund's average net assets determined daily. Effective May 15, 1997, the
management fee is computed at the annual rate of 0.60% on the first $350 million
of the Fund's average net assets; 0.55% on the next $350 million of the Fund's
average net assets; 0.50% on the Fund's average net assets over $700 million but
less than $2 billion; 0.45% on the Fund's average net assets over $2 billion but
less than $4 billion; and 0.40% on the Fund's average net assets over $4
billion. From October 15, 1992 through May 14, 1997, IFG voluntarily waived that
portion of its fee which exceeded 0.45% of the average net assets of the Fund in
excess of $2 billion pursuant to a commitment to the Fund. In addition, from
October 21, 1993 through May 14, 1997, IFG voluntarily waived that portion of
<PAGE>
its fee which exceeded 0.40% of the average net assets of the Fund in excess of
$4 billion pursuant to a commitment to the Fund. In addition, effective May 15,
1997, the above two voluntary expense limitations became mandatory, and Fund
Management voluntarily reduced management fees on the Fund's daily net assets
over $5 billion. For the fiscal year ended June 30, 1997, investment advisory
fees paid by the Fund amounted to 0.40% of the Fund's average net assets. In the
absence of such voluntary expense limitation, the investment advisory fees paid
by the Fund for the fiscal year ended June 30, 1997, would have been 0.43% of
the Fund's average net assets. Out of this fee, IFG paid an amount equal to
0.20% of the Fund's average net assets to INVESCO Trust as a sub-advisory fee
(0.19% after INVESCO Trust's voluntary waiver of a portion of its fee pursuant
to a commitment to the Fund). No fee is paid by the Fund to INVESCO Trust.
Under a Transfer Agency Agreement, IFG acts as registrar, transfer agent,
and dividend disbursing agent for the Fund. The Fund pays an annual fee of
$20.00 per shareholder account or, where applicable, per participant in an
omnibus account. Registered broker-dealers, third party administrators of
tax-qualified retirement plans and other entities, including affiliates of IFG,
may provide equivalent services to the Fund. In these cases, IFG may pay, out of
the fee it receives from the Fund, an annual sub-transfer agency or
recordkeeping fee to the third party.
In addition, under an Administrative Services Agreement, IFG handles
additional administrative, recordkeeping, and internal sub-accounting services
for the Fund. For the fiscal year ended June 30, 1997, the Fund paid IFG a fee
for these services equal to 0.015% of the Fund's average net assets.
The Fund's expenses, which are accrued daily, are deducted from total
income before dividends are paid. Total expenses of the Fund (prior to any
expense offset arrangement) for the fiscal year ended June 30, 1997, including
investment management fees (but excluding brokerage commissions, which are a
cost of acquiring securities), amounted to 0.95% (after voluntary absorption of
advisory fees by IFG) of the Fund's average net assets. However, in the absence
of the voluntary expense limitation discussed above, the total expenses of the
Fund for the year ended June 30, 1997, would have been 0.98% of the Fund's
average net assets.
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of
their financial responsibility coupled with their ability to effect transactions
at the best available prices. The Fund may place orders for portfolio
transactions with qualified broker-dealers which recommend the Fund, or sell
shares of the Fund, to clients, or act as agent in the purchase of Fund shares
for clients, if Fund Management believes that the quality of the execution of
the transaction and level of commission are comparable to those available from
other qualified brokerage firms. For further information, see "Investment
Practices -- Placement of Portfolio Brokerage" in the Statement of Additional
Information.
<PAGE>
IFG, INVESCO Trust and IDI are indirect wholly owned subsidiaries of
AMVESCAP PLC. AMVESCAP PLC is a publicly-traded holding company that, through
its subsidiaries, engages in the business of investment management on an
international basis. INVESCO PLC changed its name to AMVESCO PLC on March 3,
1997 and to AMVESCAP PLC on May 8, 1997, as part of a merger between a direct
subsidiary of INVESCO PLC and A I M Management Group Inc. that created one of
the largest independent investment management businesses in the world. IFG and
INVESCO Trust continued to operate under their existing names. AMVESCAP PLC has
approximately $177.5 billion in assets under management. IFG was established in
1932 and, as of June 30, 1997, managed 14 mutual funds, consisting of ^ 46
separate portfolios, with combined assets of approximately $15.4 billion on
behalf of over 857,000 shareholders. INVESCO Trust, founded in 1969, served as
adviser or sub-adviser to 59 investment portfolios as of June 30, 1997,
including 31 portfolios in the INVESCO group. These 59 portfolios had aggregate
assets of approximately $14.1 billion as of June 30, 1997. In addition, INVESCO
Trust provides investment management services to private clients including
employee benefit plans that may be invested in a collective trust sponsored by
INVESCO Trust. IDI was established in 1997 and is the distributor for 14 mutual
funds consisting of 46 separate portfolios.
FUND PRICE AND PERFORMANCE
Determining Price. The value of your investment in the Fund will vary
daily. The price per share is also known as the Net Asset Value ("NAV"). IFG
prices the Fund every day that the New York Stock Exchange is open, as of the
close of regular trading (normally, 4:00 p.m. New York time). NAV is calculated
by adding together the current market value of all of the Fund's assets,
including accrued interest and dividends; then subtracting liabilities,
including accrued expenses; and finally dividing that dollar amount by the total
number of shares outstanding.
Performance Data. To keep shareholders and potential investors informed,
we will occasionally advertise the Fund's total return and yield. Total return
figures show the rate of return on a $1,000 investment in the Fund, assuming
reinvestment of all dividends and capital gain distributions for one-, five-,
and ten-year periods. Cumulative total return shows the actual rate of return on
an investment for the period cited; average annual total return represents the
average annual percentage change in the value of an investment. Both cumulative
and average annual total returns tend to "smooth out" fluctuations in the Fund's
investment results, because they do not show the interim variations in
performance over the periods cited.
The yield of the Fund refers to the income generated by an investment in
the Fund over a 30 day or one-month period and is calculated by dividing the net
investment income per share earned during the period by the net asset value per
share at the end of the period, then adjusting the result to provide for
semi-annual compounding. More information about the Fund's recent and historical
<PAGE>
performance is contained in the Fund's Annual Report to Shareholders. You can
get a free copy by calling or writing to IDI using the phone number or address
on the cover of this Prospectus.
When we quote mutual fund rankings published by Lipper Analytical
Services, Inc., we may compare the Fund to others in its category of Equity
Income Funds, as well as the broad-based Lipper general fund groupings. These
rankings allow you to compare the Fund to its peers. Other independent financial
media also produce performance- or service-related comparisons, which you may
see in our promotional materials. For more information see "Fund Performance" in
the Statement of Additional Information.
Performance figures are based on historical investment results and are not
intended to suggest future performance.
HOW TO BUY SHARES
The following chart shows several convenient ways to invest in the Fund.
Your new Fund shares will be priced at the NAV next determined after your order
is received in proper form. There is no charge to invest, exchange, or redeem
shares when you make transactions directly through IFG. However, if you invest
in the Fund through a securities broker, you may be charged a commission or
transaction fee. For all new accounts, please send a completed application form.
Please specify which fund's shares you wish to purchase.
Fund Management reserves the right to increase, reduce or waive the
minimum investment requirements in its sole discretion, where it determines this
action is in the best interests of the Fund. Further, Fund Management reserves
the right in its sole discretion to reject any order for the purchase of Fund
shares (including purchases by exchange) when, in its judgment, such rejection
is in the Fund's best interests.
HOW TO BUY SHARES
================================================================================
Method Investment Minimum Please Remember
- --------------------------------------------------------------------------------
By Check
Mail to: $1,000 for regular If your check does
INVESCO Funds account; not clear, you will
Group, Inc. $250 for an be responsible for
P.O. Box 173706 Individual any related loss
Denver, CO 80217- Retirement Account; the Fund or IFG
3706. $50 minimum for incurs. If you are
Or you may send each subsequent already a
your check by investment. shareholder in the
overnight courier INVESCO funds, the
to: 7800 E. Union Fund may seek
Ave., reimbursement from
Denver, CO 80237. your existing
account(s) for any
loss incurred.
- --------------------------------------------------------------------------------
<PAGE>
By Telephone or
Wire $1,000. Payment must be
Call 1-800-525-8085 received within 3
to request your business days, or
purchase. Then send the transaction may
your check by be cancelled. If a
overnight courier telephone purchase
to our street is cancelled due to
address: nonpayment, you
7800 E. Union Ave., will be responsible
Denver, CO 80237. for any related
Or you may transmit loss the Fund or
your payment by IFG incurs. If you
bank wire (call IFG are already a
for instructions). shareholder in the
INVESCO funds, the
Fund may seek
reimbursement from
your existing
account(s) for any
loss incurred.
- --------------------------------------------------------------------------------
With EasiVest or
Direct Payroll
Purchase
You may enroll on $50 per month for Like all regular
the fund EasiVest; $50 per investment plans,
application, or pay period for neither EasiVest
call us for the Direct Payroll nor Direct Payroll
correct form and Purchase. You may Purchase ensures a
more details. start or stop your profit or protects
Investing the same regular investment against loss in a
amount on a monthly plan at any time, falling market.
basis allows you to with two weeks' Because you'll
buy more shares notice to IFG. invest continually,
when prices are low regardless of
and fewer shares varying price
when prices are levels, consider
high. This "dollar- your financial
cost averaging" may ability to keep
help offset market buying through low
fluctuations. Over price levels. And
a period of time, remember that you
your average cost will lose money if
per share may be you redeem your
less than the shares when the
actual average market value of all
price per share. your shares is less
than their cost.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
By PAL
Your "Personal $1,000. Be sure to write
Account Line" is down the
available for confirmation number
subsequent provided by PAL.
purchases and Payment must be
exchanges 24-hours received within 3
a day. Simply call business days, or
1-800-424-8085. the transaction may
be cancelled. If a
telephone purchase
is cancelled due to
nonpayment, you
will be responsible
for any related
loss the Fund or
IFG incurs. If you
are already a
shareholder in the
INVESCO funds, the
Fund may seek
reimbursement from
your existing
account(s) for any
loss incurred.
- --------------------------------------------------------------------------------
By Exchange
Between this and $1,000 to open a See "Exchange
another of the new account; $50 Policy" page 10.
INVESCO funds. Call for written
1-800-525-8085 for requests to
prospectuses of purchase additional
other INVESCO shares for an
funds. You may also existing account.
establish an (The exchange
Automatic Monthly minimum is $250 for
Exchange service purchases requested
between two INVESCO by telephone.)
funds; call IFG for
further details and
the correct form.
================================================================================
Exchange Policy. You may exchange your shares in this Fund for those in
another INVESCO fund, on the basis of their respective net asset values at the
time of the exchange. Before making any exchange, be sure to review the
prospectuses of the funds involved and consider their differences.
Please note these policies regarding exchanges of fund shares:
1) The fund accounts must be identically registered.
<PAGE>
2) You may make four exchanges out of each fund during each calendar
year.
3) An exchange is the redemption of shares from one fund followed by
the purchase of shares in another. Therefore, any gain or loss
realized on the exchange is recognizable for federal income tax
purposes (unless, of course, your account is tax-deferred).
4) The Fund reserves the right to reject any exchange request, or to
modify or terminate the exchange policy, when it is in the best
interests of the Fund and its shareholders. Notice of all such
modifications or termination will be given at least 60 days prior to
the effective date of the change in privilege, except for unusual
instances (such as when redemptions of the exchanged shares are
suspended under Section 22(e) of the Investment Company Act of 1940,
or when sales of the fund into which you are exchanging are
temporarily stopped).
Distribution Expenses. The Fund is authorized under a Plan and Agreement of
Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Plan") to use its assets to finance certain activities relating to the
distribution of its shares to investors. Under the Plan, monthly payments may be
made by the Fund to IDI to permit IDI, at its discretion, to engage in certain
activities, and provide certain services approved by the board of directors of
the Fund in connection with the distribution of the Fund's shares to investors.
These activities and services may include the payment of compensation (including
incentive compensation and/or continuing compensation based on the amount of
customer assets maintained in the Fund) to securities dealers and other
financial institutions and organizations, which may include IDI-affiliated
companies, to obtain various distribution-related and/or administrative services
for the Fund. Such services may include, among other things, processing new
shareholder account applications, preparing and transmitting to the Fund's
Transfer Agent computer processable tapes of all transactions by customers, and
serving as the primary source of information to customers in answering questions
concerning the Fund and their transactions with the Fund.
In addition, other permissible activities and services include
advertising, the preparation, printing and distribution of sales literature,
printing and distribution of prospectuses to prospective investors and such
other services and promotional activities for the Fund as may from time to time
be agreed upon by the Fund and its board of directors, including public
relations efforts and marketing programs to communicate with investors and
prospective investors. These services and activities may be conducted by the
staff of IDI or its affiliates or by third parties.
Under the Plan, the Fund's payments to IDI are limited to an amount
computed at an annual rate of 0.25% of the Fund's average net assets. IDI is not
entitled to payment for overhead expenses under the Plan, but may be paid for
all or a portion of the compensation paid for salaries and other employee
benefits for the personnel of IDI or IFG whose primary responsibilities involve
<PAGE>
marketing shares of the INVESCO Funds, including the Fund. Payment amounts by
the Fund under the Plan, for any month, may be made to compensate IDI for
permissible activities engaged in and services provided by IDI during the
rolling 12-month period in which that month falls. Therefore, any obligations
incurred by IDI in excess of the limitations described above will not be paid by
the Fund under the Plan, and will be borne by IDI. In addition, IDI and its
affiliates may from time to time make additional payments from its revenues to
securities dealers and other financial institutions that provide
distribution-related and/or administrative services for the Fund. No further
payments will be made by the Fund under the Plan in the event of its
termination. Also, any payments made by the Fund may not be used to finance
directly the distribution of shares of any other mutual fund advised by IFG.
Payments made by the Fund under the Plan for compensation of marketing
personnel, as noted above, are based on an allocation formula designed to ensure
that all such payments are appropriate. For more information see "How Shares Can
Be Purchased -- Distribution Plan" in the Statement of Additional Information.
FUND SERVICES
Shareholder Accounts. IFG will maintain a share account that reflects your
current holdings. Share certificates will be issued only upon specific request.
You will have greater flexibility to conduct transactions if you do not request
certificates.
Transaction Confirmations. You will receive detailed confirmations of
individual purchases, exchanges, and redemptions. If you choose certain
recurring transaction plans (for instance, EasiVest), your transactions will be
confirmed on your quarterly Investment Summary.
Investment Summaries. Each calendar quarter, shareholders receive a
written statement which consolidates and summarizes account activity and value
at the beginning and end of the period for each of their INVESCO funds.
Reinvestment of Distributions. Dividends and capital gain distributions
are automatically invested in additional fund shares at the NAV on the
ex-dividend date, unless you choose to have dividends and/or capital gain
distributions automatically reinvested in another INVESCO fund or paid by check
(minimum of $10.00).
Telephone Transactions. All shareholders may exchange and redeem Fund
shares by telephone, unless they expressly decline these privileges. By signing
the new account Application, a Telephone Transaction Authorization Form, or
otherwise using these privileges, the investor has agreed that, if the Fund has
followed reasonable procedures, such as recording telephone instructions and
sending written transaction confirmations, it will not be liable for following
telephoned instructions that it believes to be genuine. As a result of this
policy, the investor may bear the risk of any loss due to unauthorized or
fraudulent instructions.
<PAGE>
Retirement Plans And IRAs. Fund shares may be purchased for Individual
Retirement Accounts ("IRAs") and many types of tax-deferred retirement plans.
IFG can supply you with information and forms to establish or transfer your
existing plan or account.
HOW TO SELL SHARES
The following chart shows several convenient ways to redeem your Fund
shares. Shares of the Fund may be redeemed at any time at their current NAV next
determined after a request in proper form is received at the Fund's office. The
NAV at the time of the redemption may be more or less than the price you paid to
purchase your shares, depending primarily upon the Fund's investment
performance.
Please specify from which fund you wish to redeem shares. Shareholders
have a separate account for each fund in which they invest.
HOW TO SELL SHARES
================================================================================
Method Minimum Redemption Please Remember
================================================================================
By Telephone
Call us toll-free $250 (or, if less, This option is not
at 1-800-525-8085. full liquidation of available for
the account) for a shares held in
redemption check; IRAs.
$1,000 for a wire
to bank of record.
The maximum amount
which may be
redeemed by
telephone is
generally $25,000.
These telephone
redemption
privileges may be
modified or
terminated in the
future at the
discretion of IFG.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
In Writing
Mail your request Any amount. The If the shares to be
to INVESCO Funds redemption request redeemed are
Group, Inc., P.O. must be signed by represented by
Box 173706 all registered stock certificates,
Denver, CO 80217- owners of the the certificates
3706. You may also account. Payment must be sent to
send your request will be mailed to IFG.
by overnight your address of
courier to 7800 E. record or to a pre-
Union Ave., Denver, designated bank.
CO 80237.
- --------------------------------------------------------------------------------
By Exchange
Between this and $1,000 to open a See "Exchange
another of the new account; $50 Policy," page 10.
INVESCO funds. Call for written
1-800-525-8085 for requests to
prospectuses of purchase additional
other INVESCO shares for an
funds. You may also existing account.
establish an (The exchange
automatic monthly minimum is $250 for
exchange service exchanges requested
between two INVESCO by telephone.)
funds; call IFG for
further details and
the correct form.
- --------------------------------------------------------------------------------
Periodic Withdrawal
Plan
You may call us to $100 per payment, You must have at
request the on a monthly or least $10,000 total
appropriate form quarterly basis. invested with the
and more The redemption INVESCO funds, with
information at 1- check may be made at least $5,000 of
800-525-8085. payable to any that total invested
party you in the fund from
designate. which withdrawals
will be made.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Payment To Third
Party
Mail your request Any amount. All registered
to INVESCO Funds owners of the
Group, Inc., P.O. account must sign
Box 173706 the request, with a
Denver, CO 80217- signature guarantee
3706. from an eligible
guarantor financial
institution, such
as a commercial
bank or recognized
national or
regional securities
firm.
================================================================================
While the Fund will attempt to process telephone redemptions promptly,
there may be times -- particularly in periods of severe economic or market
disruption -- when you may experience delays in redeeming shares by phone.
Payments of redemption proceeds will be mailed within seven days following
receipt of the redemption request in proper form. However, payment may be
postponed under unusual circumstances --for instance, if normal trading is not
taking place on the New York Stock Exchange or during an emergency as defined by
the Securities and Exchange Commission. If your shares were purchased by a check
which has not yet cleared, payment will be made promptly upon clearance of the
purchase check (which will take up to 15 days).
If you participate in EasiVest, the Fund's automatic monthly investment
program, and redeem all of the shares in your account, we will terminate any
further EasiVest purchases unless you instruct us otherwise.
Because of the high relative costs of handling small accounts, should the
value of any shareholder's account fall below $250 as a result of shareholder
action, the Fund reserves the right to involuntarily redeem all shares in such
account, in which case the account would be liquidated and the proceeds
forwarded to the shareholder. Prior to any such redemption, a shareholder will
be notified and given 60 days to increase the value of the account to $250 or
more.
TAXES, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Taxes. The Fund intends to distribute to shareholders substantially all of
its net investment income, net capital gains and net gains from foreign currency
transactions, if any, in order to continue to qualify for tax treatment as a
regulated investment company. Thus, the Fund does not expect to pay any federal
income or excise taxes.
<PAGE>
Unless shareholders are exempt from income taxes, they must include all
dividends and capital gain distributions in taxable income for federal, state,
and local income tax purposes. Dividends and other distributions are taxable
whether they are received in cash or automatically distributed in shares of the
Fund or another fund in the INVESCO group.
The Taxpayer Relief Act of 1997 (the "Tax Act"), enacted in August 1997,
changed the taxation of capital gains by applying different capital gains rates
depending on the taxpayer's holding period and marginal rate of federal income
tax. Net realized capital gains of the Fund are classified as short-term,
mid-term and long-term gains depending on how long the Fund held the security
which gave rise to the gains. Short-term capital gains are included in income
from dividends and interest as ordinary income and are taxed at the taxpayer's
marginal tax rate.
Shareholders also may realize capital gains or losses when they sell their
Fund shares at more or less than the price originally paid.
At the end of each year, information regarding the tax status of dividends
and capital gain distributions is provided to shareholders.
The Fund may be subject to withholding of foreign taxes on dividends or
interest it receives on foreign securities. Foreign taxes withheld will be
treated as an expense of the Fund.
Individuals and certain other non-corporate shareholders may be subject to
backup withholding of 31% on dividends, capital gain distributions and
redemption proceeds. Unless you are subject to backup withholding for other
reasons, you can avoid backup withholding on your Fund account by ensuring that
we have a correct, certified tax identification number.
We encourage you to consult a tax adviser with respect to these matters.
For further information, see "Dividends, Capital Gain Distributions and Taxes"
in the Statement of Additional Information.
Dividends and Capital Gain Distributions. The Fund earns ordinary or net
investment income in the form of dividends and interest on its investments. The
Fund's policy is to distribute substantially all of this income, less Fund
expenses, to shareholders on a quarterly basis, at the discretion of the Fund's
board of directors.
In addition, the Fund realizes capital gains and losses when it sells
securities for more or less than it paid. If total gains on sales exceed total
losses (including losses carried forward from previous years), the Fund has a
net realized capital gain. Net realized capital gains, if any, are distributed
to shareholders at least annually, usually in December.
Dividends and capital gain distributions are paid to shareholders who hold
shares on the record date of distribution regardless of how long the shares have
been held. The Fund's share price will then drop by the amount of the
distribution on the day the distribution is made. If a shareholder purchases
shares immediately prior to the distribution, the shareholder will, in effect,
have "bought" the distribution by paying the full purchase price, a portion of
which is then returned in the form of a taxable distribution.
<PAGE>
ADDITIONAL INFORMATION
Voting Rights. All shares of the Fund have equal voting rights based on
one vote for each share owned and a corresponding fractional vote for each
fractional share owned. The Fund is not generally required and does not expect
to hold regular annual meetings of shareholders. However, when requested to do
so in writing by the holders of 10% or more of the outstanding shares of the
Fund or as may be required by applicable law or the Fund's Articles of
Incorporation, the board of directors will call special meetings of
shareholders. Directors may be removed by action of the holders of a majority of
the outstanding shares of the Fund. The Fund will assist shareholders in
communicating with other shareholders as required by the Investment Company Act
of 1940.
<PAGE>
INVESCO INDUSTRIAL INCOME FUND
A no-load mutual fund seeking current income
with capital growth as an additional factor.
PROSPECTUS
November 1, 1997
INVESCO FUNDS
INVESCO Distributors, Inc.
Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
1-800-525-8085
PAL(R): 1-800-424-8085
http://www.invesco.com
In Denver, visit one of our
convenient Investor Centers:
Cherry Creek
155-B Fillmore Street
Denver Tech Center
7800 East Union Avenue
Lobby Level
In addition, all documents filed
by the Company with the Securities
and Exchange Commission can be
located on a web site maintained
by the Commission at
http://www.sec.gov.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
November 1, 1997
INVESCO INDUSTRIAL INCOME FUND, INC.
A no-load mutual fund seeking current
income with capital growth as an additional factor
Address: Mailing Address:
7800 E. Union Avenue Post Office Box 173706
Denver, Colorado 80237 Denver, Colorado 80217-3706
Telephone:
In continental U.S., 1-800-525-8085
- --------------------------------------------------------------------------------
INVESCO INDUSTRIAL INCOME FUND, INC.'s (the "Fund") investment objective
is to seek the best possible current income while following sound investment
practices. The Fund will pursue this objective by investing its assets in
securities with the potential to provide a relatively high yield and stable
return and which, over a period of years, may also provide capital appreciation.
Capital growth potential is a secondary factor in the selection of portfolio
securities of the Fund.
A Prospectus for the Fund dated November 1, 1997, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge from INVESCO Distributors, Inc., Post Office Box 173706, Denver,
Colorado 80217-3706. This Statement of Additional Information is not a
Prospectus, but contains information in addition to and more detailed than that
set forth in the Prospectus. It is intended to provide additional information
regarding the activities and operations of the Fund, and should be read in
conjunction with the Prospectus.
Investment Adviser: INVESCO FUNDS GROUP, INC.
Distributor: INVESCO DISTRIBUTORS, INC.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS Page
----
INVESTMENT POLICIES AND RESTRICTIONS 3
THE FUND AND ITS MANAGEMENT 7
HOW SHARES CAN BE PURCHASED 21
HOW SHARES ARE VALUED 25
FUND PERFORMANCE 26
SERVICES PROVIDED BY THE FUND 28
TAX-DEFERRED RETIREMENT PLANS 29
HOW TO REDEEM SHARES 30
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES 30
INVESTMENT PRACTICES 32
ADDITIONAL INFORMATION 35
APPENDIX A 38
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
In pursuing its investment objective, the Fund endeavors to select and
purchase securities providing reasonably secure dividend or interest income.
Sometimes warrants are acquired when offered with income-producing securities,
but the warrants are disposed of as soon as that can be done in an orderly
fashion consistent with the best interests of the Fund's shareholders. Acquiring
warrants involves a risk that the Fund will lose the premium it pays to acquire
warrants if the Fund does not exercise a warrant before it expires. The major
portion of the investment portfolio normally consists of common stocks,
convertible bonds and debentures, and preferred stocks; however, there may also
be substantial holdings of non-convertible debt securities, including
non-investment grade and unrated debt securities.
Debt Securities. As discussed in the section of the Fund's Prospectus
entitled "Investment Policies and Risks," the straight debt securities in which
the Fund invests are generally subject to two kinds of risk, credit risk and
market risk. The ratings given a straight debt security by Moody's Investors
Service, Inc. ("Moody's")and Standard & Poor's Ratings Group, Inc., a division
of The McGraw-Hill Companies, Inc. ("S&P") provide a generally useful guide as
to such credit risk. The lower the rating given a debt security by such rating
service, the greater the credit risk such rating service perceives to exist with
respect to such security. Increasing the amount of Fund assets invested in
unrated or lower grade (Ba or less by Moody's, BB or less by S&P) debt
securities, while intended to increase the yield produced by the Fund's debt
securities, will also increase the credit risk to which those debt securities
are subject.
Lower rated debt securities and non-rated securities of comparable quality
tend to be subject to wider fluctuations in yields and market values than higher
rated debt securities and may have speculative characteristics. Although the
Fund may invest in debt securities assigned lower grade ratings by S&P or
Moody's, the Fund's investments have generally been limited to debt securities
rated B or higher by either Moody's or S&P. Debt securities rated lower than B
by either Moody's or S&P may be highly speculative. The Fund's investment
adviser intends to limit such Fund investments to straight debt securities which
are not believed by the adviser to be highly speculative and which are rated at
least Caa or CCC, respectively, by Moody's or S&P. In addition, a significant
economic downturn or major increase in interest rates may well result in issuers
of lower rated debt securities experiencing increased financial stress which
would adversely affect their ability to meet their obligations to pay principal
and interest, to meet projected business goals, and to obtain additional
financing. While the Fund's investment adviser attempts to limit purchases of
lower rated debt securities to securities having an established retail secondary
market, the market for such securities may not be as liquid as the market for
higher rated debt securities. Bonds rated Caa by Moody's may be in default or
there may be present elements of danger with respect to principal or interest.
Bonds that are lower rated by S&P (categories BB, B, CCC) include those which
are regarded, on balance, as predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal in accordance with their
<PAGE>
terms; BB indicates the lowest degree of speculation and CCC a high degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions. For a specific description of each corporate
bond rating category, please refer to Appendix A.
Repurchase Agreements
As discussed in the section of the Fund's Prospectus entitled "Investment
Objective and Strategy," the Fund may invest in repurchase agreements with
commercial banks, registered brokers or registered government securities
dealers, which are believed to be creditworthy under standards established by
the Company's board of directors. A repurchase agreement is an agreement under
which the Fund acquires a debt instrument (generally a security issued by the
U.S. government or an agency thereof, a banker's acceptance or a certificate of
deposit) from a commercial bank, broker or dealer, subject to resale to the
seller at an agreed-upon price and date (normally, the next business day). A
repurchase agreement may be considered a loan collateralized by securities. The
resale price reflects an agreed-upon interest rate effective for the period the
instrument is held by the Fund and is unrelated to the interest rate on the
underlying instrument. In these transactions, the securities acquired by the
Fund (including accrued interest earned thereon) must have a total value at
least equal to the value of the repurchase agreement, and are held as collateral
by the Fund's custodian bank until the repurchase agreement is completed.
The use of repurchase agreements involves certain risks. For example, if
the other party to the agreement defaults on its obligation to repurchase the
underlying security at a time when the value of the security has declined, the
Fund may incur a loss upon disposition of the security. If the other party to
the agreement becomes insolvent and subject to liquidation or reorganization
under the Bankruptcy Code or other laws, the Fund may experience costs and
delays in realizing on the collateral. Finally, it is possible that the Fund may
not be able to substantiate its interest in the underlying security and may be
deemed an unsecured creditor of the other party to the agreement. While the
Fund's management acknowledges these risks, it is expected that the risks can be
minimized through careful monitoring procedures.
Restricted/144A Securities. In recent years, a large institutional market
has developed for certain securities that are not registered under the
Securities Act of 1933 (the "1933 Act"). Institutional investors will not
generally seek to sell these instruments to the general public, but instead will
often depend on an efficient institutional market in which such unregistered
securities can be readily resold or on an issuer's ability to honor a demand for
repayment. Therefore, the fact that there are contractual or legal restrictions
on resale to the general public or certain institutions is not dispositive of
the liquidity of such investments.
<PAGE>
Rule 144A under the 1933 Act establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. Institutional markets for restricted securities
that might develop as a result of Rule 144A could provide both readily
ascertainable values for restricted securities and the ability to liquidate an
investment in order to satisfy share redemption orders. An insufficient number
of qualified institutional buyers interested in purchasing Rule 144A-eligible
securities held by the Fund, however, could affect adversely the marketability
of such portfolio securities and the Fund might be unable to dispose of such
securities promptly or at reasonable prices.
Lending of Securities. The Fund also may lend its portfolio securities to
qualified brokers, dealers, banks, or other financial institutions. This
practice permits the Fund to earn income, which, in turn, can be invested in
additional securities to pursue the Fund's investment objective. Loans of
securities by the Fund will be collateralized by cash, letters of credit, or
securities issued or guaranteed by the U.S. government or its agencies equal to
at least 100% of the current market value of the loaned securities, determined
on a daily basis. Lending securities involves certain risks, the most
significant of which is the risk that a borrower may fail to return a portfolio
security. The Fund monitors the creditworthiness of borrowers in order to
minimize such risks. The Fund will not lend any security if, as a result of such
loan, the aggregate value of securities then on loan would exceed 33-1/3% of the
Fund's net assets (taken at market value). While voting rights may pass with the
loaned securities, if a material event (e.g., proposed merger, sale of assets,
or liquidation) is to occur affecting an investment on loan, the loan must be
called and the securities voted. Loans of securities made by the Fund will
comply with all other applicable regulatory requirements.
Investment Restrictions. As described in the section of the Fund's
Prospectus entitled "Investment Policies and Risks," the Fund has adopted
certain fundamental investment restrictions. The first three restrictions set
forth below are contained in the Fund's charter and may not be changed without
prior approval by the holders of two-thirds of the outstanding shares of the
Fund. The Fund's other investment restrictions may not be changed without the
prior approval of the holders of a majority of the outstanding voting securities
of the Fund as defined in the 1940 Act. For purposes of the following
limitation, all percentage limitations apply immediately after a purchase or
initial investment. Any subsequent change in a particular percentage resulting
from fluctuations in value does not require elimination of any security from the
Fund.
Under these restrictions, the Fund may not:
(1) issue preference shares or create any funded debt;
(2) sell short or buy on margin;
(3) borrow money in excess of 5% of the value of its total net assets
and then only from banks, and when borrowing, it is a temporary
measure for emergency purposes;
<PAGE>
(4) buy or sell real estate, commodities, commodity contracts (however,
the Fund may purchase securities of companies investing in real
estate);
(5) invest in securities of any other investment company except for a
purchase or acquisition in accordance with a plan of reorganization,
merger or consolidation;
(6) invest in any company for the purpose of exercising control or
management;
(7) buy other than readily marketable securities;
(8) purchase securities if the purchase would cause the Fund, at the
time, to have more than 5% of its total assets invested in the
securities of any one company or to own more than 10% of the voting
securities of any one company (except obligations issued or
guaranteed by the U.S.
Government);
(9) engage in the underwriting of any securities;
(10) make loans to any person, except through the purchase of debt
securities in accordance with the Fund's investment policies, or the
lending of portfolio securities to broker-dealers or other
institutional investors, or the entering into repurchase agreements
with member banks of the Federal Reserve System, registered
broker-dealers and registered government securities dealers. The
aggregate value of all portfolio securities loaned may not exceed
33-1/3% of the Fund's total net assets (taken at current value). No
more than 10% of the Fund's total net assets may be invested in
repurchase agreements maturing in more than seven days;
(11) purchase securities of any company in which any officer or director
of the Fund or its investment adviser owns more than 1/2 of 1% of
the outstanding securities, or in which all of the officers and
directors of the Fund and its investment supervisor, as a group, own
more than 5% of such securities; or
(12) invest more than 25% of the value of the Fund's assets in one
particular industry.
The Fund has no written policy regarding the writing of put and call
options but has not engaged in such practices and does not anticipate doing so.
With respect to investment restriction (7) above, the board of directors
has delegated to the Fund's investment adviser the authority to determine
whether a liquid market exists for securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933, or any successor to such rule, and
<PAGE>
whether or not such securities are subject to restriction (7) above. Under
guidelines established by the board of directors, the adviser will consider the
following factors, among others, in making this determination: (1) the
unregistered nature of a Rule 144A security, (2) the frequency of trades and
quotes for the security; (3) the number of dealers willing to purchase or sell
the security and the number of other potential purchasers; (4) dealer
undertakings to make a market in the security; and (5) the nature of the
security and the nature of marketplace trades (e.g., the time needed to dispose
of the security, the method of soliciting offers and the mechanics of transfer).
In applying restriction (12) above, the Fund uses a modified S&P industry
code classification schema which uses various sources to classify.
Under the 1940 Act, Fund directors and officers cannot be protected
against liability to the Fund or its shareholders to which they would be subject
because of willful misfeasance, bad faith, gross negligence or reckless
disregard of duties of their office.
THE FUND AND ITS MANAGEMENT
The Fund. The Fund was incorporated under the laws of Maryland on March 20,
1959.
The Investment Adviser. INVESCO Funds Group, Inc., a Delaware corporation
("IFG"), is employed as the Fund's investment adviser. IFG was established in
1932 and also serves as an investment adviser to INVESCO Capital Appreciation
Funds, Inc. (formerly, INVESCO Dynamics Fund, Inc.), INVESCO Diversified Funds,
Inc., INVESCO Emerging Opportunity Funds, Inc., INVESCO Growth Fund, Inc.,
INVESCO Income Funds, Inc., INVESCO International Funds, Inc., INVESCO Money
Market Funds, Inc., INVESCO Multiple Asset Funds, Inc., INVESCO Specialty Funds,
Inc., INVESCO Strategic Portfolios, Inc., INVESCO Tax-Free Income Funds, Inc.,
INVESCO Value Trust, and INVESCO Variable Investment Funds, Inc.
The Sub-Adviser. IFG, as investment adviser, has contracted with INVESCO
Trust Company ("INVESCO Trust") to provide investment advisory and research
services to the Fund. INVESCO Trust has the primary responsibility for providing
portfolio investment management services to the Fund.
The Distributor. Effective September 30, 1997, INVESCO Distributors, Inc.
("IDI") became the Fund's distributor. IDI is a registered broker-dealer that
acts as distributor for all retail mutual funds advised by IFG. Prior to
September 30, 1997, IFG served as the Fund's distributor.
IFG, INVESCO Trust and IDI are indirect wholly-^ owned subsidiaries of
AMVESCAP PLC, a publicly-traded holding company that, through its subsidiaries,
engages in the business of investment management on an international basis.
INVESCO PLC changed its name to AMVESCO PLC on March 3, 1997 and to AMVESCAP PLC
on May 8, 1997, as part of a merger between a direct subsidiary of INVESCO PLC
and A I M Management Group, Inc. that created one of the largest independent
management businesses in the world with approximately $177.5 billion in assets
under management. IFG was established in 1932 and as of June 30, 1997, managed
14 mutual funds, consisting of 46 separate portfolios, on behalf of over 857,000
shareholders. AMVESCAP PLC's North American subsidiaries include the following:
<PAGE>
^
--INVESCO Capital Management, Inc. of Atlanta, Georgia manages
institutional investment portfolios, consisting primarily of discretionary
employee benefit plans for corporations and state and local governments, and
endowment funds. INVESCO Capital Management, Inc. is the sole shareholder of
INVESCO Services, Inc., a registered broker-dealer whose primary business is the
distribution of shares of two registered investment companies.
--INVESCO Management & Research, Inc. of Boston, Massachusetts primarily
manages pension and endowment accounts.
--PRIMCO Capital Management, Inc. of Louisville, Kentucky specializes in
managing stable return investments, principally on behalf of Section 401(k)
retirement plans.
--INVESCO Realty Advisors, Inc. of Dallas, Texas is responsible for
providing advisory services in the U.S. real estate markets for pension plans
and public pension funds, as well as endowment and foundation accounts.
--A I M Advisors, Inc. of Houston, Texas provides investment advisory and
administrative services for retail and institutional mutual funds.
--A I M Capital Management, Inc. of Houston, Texas provides investment
advisory services to individuals, corporations, pension plans and other private
investment advisory accounts and also serves as a sub-adviser to certain retail
and institutional mutual funds, one Canadian mutual fund and one portfolio of an
open-end registered investment company that is offered to separate accounts of
variable insurance companies.
--A I M Distributors, Inc. and Fund Management Company of Houston, Texas
are registered broker-dealers that act as the principal underwriters for retail
and institutional mutual funds.
The corporate headquarters of AMVESCAP PLC are located at 11 Devonshire
Square, London, EC2M4YR, England.
As indicated in the Fund's Prospectus, IFG and INVESCO Trust permit
investment and other personnel to purchase and sell securities for their own
accounts in accordance with a compliance policy governing personal investing by
directors, officers and employees of IFG, INVESCO Trust and their North American
affiliates. The policy requires officers, inside directors, investment and other
personnel of IFG, INVESCO Trust and their North American affiliates to pre-clear
all transactions in securities not otherwise exempt under the policy. Requests
for trading authority will be denied when, among other reasons, the proposed
personal transaction would be contrary to the provisions of the policy or would
be deemed to adversely affect any transaction then known to be under
consideration for or to have been effected on behalf of any client account,
including the Fund.
<PAGE>
In addition to the pre-clearance requirement described above, the policy
subjects officers, inside directors, investment and other personnel of IFG,
INVESCO Trust and their North American affiliates to various trading
restrictions and reporting obligations. All reportable transactions are reviewed
for compliance with the policy. The provisions of this policy are administered
by and subject to exceptions authorized by IFG or INVESCO Trust.
Investment Advisory Agreement. IFG serves as investment adviser pursuant to
an investment advisory agreement dated February 28, 1997 (the "Agreement") with
the Fund which was approved by the board of directors on November 6, 1996, by
vote cast in person by a majority of the directors of the Fund, including a
majority of the directors who are not "interested persons" of the Fund or
INVESCO at a meeting called for such purpose. The Agreement was approved by the
Fund's shareholders on January 31, 1997, for an initial term expiring February
28, 1999. Thereafter, the Agreement may be continued from year to year as long
as such continuance is specifically approved at least annually by the board of
directors of the Fund, or by a vote of the holders of a majority, as defined in
the 1940 Act, of the outstanding shares of the Fund. Any such continuance also
must be approved by a majority of the Fund's directors who are not parties to
the Agreement or interested persons (as defined in the 1940 Act) of any such
party, cast in person at a meeting called for the purpose of voting on such
continuance. The Agreement may be terminated at any time without penalty by
either party or the Fund upon sixty (60) days' written notice and terminates
automatically in the event of an assignment to the extent required by the 1940
Act and the Rules thereunder.
The Agreement provides that IFG shall manage the investment portfolio of
the Fund in conformity with the Fund's investment policies (either directly or
by delegation to a sub-adviser which may be a company affiliated with IFG).
Further, IFG shall perform all administrative, internal accounting (including
computation of net asset value), clerical, statistical, secretarial and all
other services necessary or incidental to the administration of the affairs of
the Fund excluding, however, those services that are the subject of separate
agreement between the Fund and IFG or any affiliate thereof, including the
distribution and sale of Fund shares and provision of transfer agency, dividend
disbursing agency, and registrar services, and services furnished under an
Administrative Services Agreement with IFG discussed below. Services provided
under the Agreement include, but are not limited to: supplying the Fund with
officers, clerical staff and other employees, if any, who are necessary in
connection with the Fund's operations; furnishing office space, facilities,
equipment, and supplies; providing personnel and facilities required to respond
to inquiries related to shareholder accounts; conducting periodic compliance
reviews of the Fund's operations; preparation and review of required documents,
reports and filings by IFG's in-house legal and accounting staff (including the
prospectus, statement of additional information, proxy statements, shareholder
reports, tax returns, reports to the SEC, and other corporate documents of the
Fund), except insofar as the assistance of independent accountants or attorneys
is necessary or desirable; supplying basic telephone service and other
utilities; and preparing and maintaining certain of the books and records
required to be prepared and maintained by the Fund under the 1940 Act. Expenses
not assumed by IFG are borne by the Fund.
<PAGE>
As full compensation for its advisory services to the Fund, IFG receives a
monthly fee. Effective May 15, 1997, the fee is computed at the annual rate of:
0.60% on the first $350 million of the Fund's average net assets; 0.55% on the
next $350 million of the Fund's average net assets; 0.50% of the Fund's average
net assets in excess of $700 million but less than $2 billion; 0.45% on the
Fund's average net assets in excess of $2 billion but less than $4 billion; and
0.40% on the Fund's average net assets in excess of $4 billion. October 15, 1992
through May 14, 1997, IFG voluntarily waived that portion of its fee which
exceeded 0.45% of the average net assets of the Fund in excess of $2 billion. In
addition, effective October 21, 1993 through May 14, 1997, IFG voluntarily
waived that portion of its fee which exceeded 0.40% of the average net assets of
the Fund in excess of $4 billion. In addition, effective May 15, 1997, Fund
Management voluntarily reduced management fees on the Fund's daily net assets
over $5 billion. For the fiscal years ended June 30, 1997, 1996 and 1995, the
Fund paid IFG (prior to the voluntary absorption of certain Fund expenses by
IFG) advisory fees of $21,791,002, $21,541,300 and $19,946,443, respectively.
Sub-Advisory Agreement. INVESCO Trust serves as sub-adviser to the Fund
pursuant to a sub-advisory agreement dated February 28, 1997 (the
"Sub-Agreement") with IFG which was approved by the board of directors on
November 6, 1996 by a vote cast in person by a majority of the directors of the
Fund, including a majority of the directors who are not "interested persons" of
the Fund, IFG or INVESCO Trust at a meeting called for such purpose.
Shareholders of the Fund approved the Sub-Advisory Agreement on January 31,
1997, for an initial term expiring February 28, 1999. Thereafter, the
Sub-Agreement may be continued from year to year as long as each such
continuance is specifically approved by the board of directors of the Fund, or
by a vote of the holders of a majority, as defined in the 1940 Act, of the
outstanding shares of the Fund. Each such continuance also must be approved by a
majority of the directors who are not parties to the Sub-Agreement or interested
persons, as defined in the 1940 Act of any such party, cast in person at a
meeting called for the purpose of voting on such continuance. The Sub-Agreement
may be terminated at any time without penalty by either party or the Fund upon
sixty (60) days' written notice, and terminates automatically in the event of an
assignment to the extent required by the 1940 Act and the rules thereunder.
The Sub-Agreement provides that INVESCO Trust, subject to the supervision
of IFG and the Fund's board of directors, shall manage the investment portfolio
of the Fund in conformity with the Fund's investment policies. These management
services would include: (a) managing the investment and reinvestment of all the
assets, now or hereafter acquired, of the Fund, and executing all purchases and
sales of portfolio securities; (b) maintaining a continuous investment program
for the Fund, consistent with (i) the Fund's investment policies as set forth in
the Fund's Articles of Incorporation, Bylaws, and Registration Statement, as
from time to time amended, under the 1940 Act and in any prospectus and/or
statement of additional information of the Fund, as from time to time amended
and in use under the 1933 Act and (ii) the Fund's status as a regulated
investment company under the Internal Revenue Code of 1986, as amended; (c)
determining what securities are to be purchased or sold for the Fund, unless
otherwise directed by the directors of the Fund or IFG, and executing
transactions accordingly; (d) providing the Fund the benefit of all of the
investment analysis and research, the reviews of current economic conditions and
<PAGE>
trends, and the consideration of long-range investment policy now or hereafter
generally available to investment advisory customers of the Sub-Adviser; (e)
determining what portion of the Fund should be invested in the various types of
securities authorized for purchase by the Fund; and (f) making recommendations
as to the manner in which voting rights, rights to consent to Fund action and
any other rights pertaining to the Fund's portfolio securities shall be
exercised.
The Sub-Agreement provides that as compensation for its services, INVESCO
Trust shall receive from IFG, at the end of each month, a fee based upon the
average net assets of the Fund at the following annual rates: 0.25% on the
Fund's average net assets up to $200 million, and 0.20% on the Fund's average
net assets in excess of $200 million. Effective October 15, 1992, INVESCO Trust
has voluntarily agreed to waive that portion of its sub-advisory fee which
exceeds 0.18% of the average net assets of the Fund in excess of $2 billion. In
addition, effective October 21, 1993, INVESCO Trust has voluntarily agreed to
waive that portion of its sub-advisory fee which exceeds 0.16% of the average
net assets of the Fund in excess of $4 billion. The Sub-Advisory fee is paid by
IFG, NOT the Fund.
Administrative Services Agreement. IFG, either directly or through
affiliated companies, also provides certain administrative, sub-accounting, and
recordkeeping services to the Fund pursuant to an Administrative Services
Agreement dated February 28, 1997 (the "Administrative Agreement"). The
Administrative Agreement was approved by the board of directors on November 6,
1996 by a vote cast in person by all of the directors of the Fund, including all
of the directors who are not "interested persons" of the Fund or IFG at a
meeting called for such purpose. The Administrative Agreement is for an initial
term expiring February 28, 1998, and has been continued by action of the board
of directors until May 15, 1998. The Administrative Agreement may be continued
from year to year as long as each such continuance is specifically approved by
the board of directors of the Fund, including a majority of the directors who
are not parties to the Administrative Agreement or interested persons (as
defined in the 1940 Act) of any such party, cast in person at a meeting called
for the purpose of voting on such continuance. The Administrative Agreement may
be terminated at any time without penalty by IFG on sixty (60) days' written
notice, or by the Fund upon thirty (30) days' written notice, and terminates
automatically in the event of an assignment unless the Fund's board of directors
approves such assignment.
The Administrative Agreement provides that IFG shall provide the following
services to the Fund: (A) such sub-accounting and recordkeeping services and
functions as are reasonably necessary for the operation of the Fund; and (B)
such sub-accounting, recordkeeping, and administrative services and functions,
which may be provided by affiliates of IFG, as are reasonably necessary for the
operation of Fund shareholder accounts maintained by certain retirement plans
and employee benefit plans for the benefit of participants in such plans.
As full compensation for services provided under the Administrative
Agreement, the Fund pays a fee to IFG consisting of a base fee of $10,000 per
year, plus an additional incremental fee computed daily and paid monthly at an
annual rate of 0.015% per year of the average net assets of the Fund. During the
<PAGE>
fiscal years ended June 30, 1997, 1996 and 1995, the Fund paid IFG
administrative services fees in the amount of $648,015, $640,468 and $592,643,
respectively.
Transfer Agency Agreement. IFG also performs transfer agent, dividend
disbursing agent, and registrar services for the Fund pursuant to a Transfer
Agency Agreement dated February 28, 1997, which was approved by the board of
directors of the Fund, including a majority of the Fund's directors who are not
parties to the Transfer Agency Agreement or "interested persons" of any such
party, on November 6, 1996, for an initial term expiring February 28, 1998 and
has been extended by action of the board of directors until May 15, 1998.
Thereafter, the Transfer Agency Agreement may be continued from year to year as
long as such continuance is specifically approved at least annually by the board
of directors of the Fund, or by a vote of the holders of a majority of the
outstanding shares of the Fund. Any such continuance also must be approved by a
majority of the Fund's directors who are not parties to the Transfer Agency
Agreement or interested persons (as defined by the 1940 Act) of any such party,
cast in person at a meeting called for the purpose of voting on such
continuance. The Transfer Agency Agreement may be terminated at any time without
penalty by either party upon sixty (60) days' written notice and terminates
automatically in the event of assignment.
The Transfer Agency Agreement provides that the Fund shall pay to IFG a fee
of $20.00 per shareholder account or where applicable per participant in an
omnibus account. This fee is paid monthly at a rate of 1/12 of the annual fee
and is based upon the actual number of shareholder accounts or omnibus account
participants in existence at any time.
For the fiscal years ended June 30, 1997, 1996 and 1995, the Fund paid IFG
transfer agency fees of $6,785,271, $5,698,274 and $5,386,968, respectively.
Officers and Directors of the Fund. The overall direction and supervision
of the Fund is the responsibility of the board of directors, which has the
primary duty of seeing that the Fund's general investment policies and programs
of the Fund are carried out and that the Fund's portfolio is properly
administered. The officers of the Fund, all of whom are officers and employees
of and paid by IFG, are responsible for the day-to-day administration of the
Fund. The investment adviser for the Fund has the primary responsibility for
making investment decisions on behalf of the Fund. These investment decisions
are reviewed by the investment committee of IFG.
All of the officers and directors of the Fund hold comparable positions
with INVESCO Capital Appreciation Funds, Inc. (formerly, INVESCO Dynamics Fund,
Inc.), INVESCO Diversified Funds, Inc., INVESCO Emerging Opportunity Funds,
Inc., INVESCO Growth Fund, Inc., INVESCO Income Funds, Inc., INVESCO
International Funds, Inc., INVESCO Money Market Funds, Inc., INVESCO Multiple
Asset Funds, Inc., INVESCO Specialty Funds, Inc., INVESCO Strategic Portfolios,
Inc., INVESCO Tax-Free Income Funds, Inc., and INVESCO Variable Investment
Funds, Inc. All of the directors of the Fund also serve as trustees of INVESCO
Value Trust. In addition, all of the directors of the Fund with the exception of
Mr. Hesser, serve as trustees of INVESCO Treasurer's Series Trust. All of the
<PAGE>
officers of the Fund also hold comparable positions with INVESCO Value Trust.
Set forth below is information with respect to each of the Fund's officers and
directors. Unless otherwise indicated, the address of the directors and officers
is Post Office Box 173706, Denver, Colorado 80217-3706. Their affiliations
represent their principal occupations during the past five years.
CHARLES W. BRADY,*+** Chairman of the Board. Chief Executive Officer and
Director of AMVESCAP PLC, London, England, and of various subsidiaries thereof.
Chairman of the Board of INVESCO Treasurer's Series Trust. Address: 1315
Peachtree Street, NE, Atlanta, Georgia. Born: May 11, 1935.
FRED A. DEERING,+# Vice Chairman of the Board. Vice Chairman of INVESCO
Treasurer's Series Trust. Trustee of INVESCO Global Health Sciences Fund.
Formerly, Chairman of the Executive Committee and Chairman of the Board of
Security Life of Denver Insurance Company, Denver, Colorado; Director of ING
America Life Insurance Company, Urbaine Life Insurance Company and Midwestern
United Life Insurance Company. Address: Security Life Center, 1290 Broadway,
Denver, Colorado. Born: January 12, 1928.
DAN J. HESSER,+* President, CEO and Director. Chairman of the Board,
President, and Chief Executive Officer of INVESCO Funds Group, Inc. and INVESCO
Distributors, Inc; President and Director of INVESCO Trust Company; President
and Chief Operating Officer of INVESCO Global Health Sciences Fund. Born:
December 27, 1939.
VICTOR L. ANDREWS,** Director. Professor Emeritus, Chairman Emeritus and
Chairman of the CFO Roundtable of the Department of Finance at Georgia State
University, Atlanta, Georgia; President, Andrews Financial Associates, Inc.
(consulting firm); since October 1984, Director of the Center for the Study of
Regulated Industry at Georgia State University; formerly, member of the
faculties of the Harvard Business School and the Sloan School of Management of
MIT. Dr. Andrews is also a Director of the Southeastern Thrift and Bank Fund,
Inc. and The Sheffield Funds, Inc. Address: 4625 Jettridge Drive, Atlanta,
Georgia. Born: June 23, 1930.
BOB R. BAKER,+** Director. President and Chief Executive Officer of AMC
Cancer Research Center, Denver, Colorado, since January 1989; until mid-December
1988, Vice Chairman of the Board of First Columbia Financial Corporation (a
financial institution), Englewood, Colorado. Formerly, Chairman of the Board and
Chief Executive Officer of First Columbia Financial Corporation. Address: 1775
Sherman Street, #1000, Denver, Colorado. Born: August 7, 1936.
LAWRENCE H. BUDNER,# Director. Trust Consultant; prior to June 30, 1987,
Senior Vice President and Senior Trust Officer of InterFirst Bank, Dallas,
Texas. Address: 7608 Glen Albens Circle, Dallas, Texas. Born: July 25, 1930.
DANIEL D. CHABRIS,+# Director. Financial Consultant; Assistant Treasurer of
Colt Industries Inc., New York, New York, from 1966 to 1988. Address: 19
Kingsbridge Way, Madison Connecticut. Born: August 1, 1923.
<PAGE>
WENDY L. GRAMM, Ph.D.,** Director. Self-employed (since 1993); Professor of
Economics and Public Administration, University of Texas at Arlington. Formerly,
Chairman, Commodity Futures Trading Commission from 1988 to 1993, administrator
for Information and Regulatory Affairs at the Office of Management and Budget
from 1985 to 1988, Executive Director of the Presidential Task Force on
Regulatory Relief and Director of the Federal Trade Commission's Bureau of
Economics. Dr. Gramm is also a director of the Chicago Mercantile Exchange,
Enron Corporation, IBP, Inc., State Farm Insurance Company, State Farm Life
Insurance Company, Kinetic Concepts, Inc., Independant Women's Forum,
International Republic Institute, and the Republican Women's Federal Forum. Dr.
Gramm is also a member of the Board of Visitors, College of Business
Administration, University of Iowa, and a member of the Board of Visitors,
Center for Study of Public Choice, George Mason University. Address: 4201 Yuma
Street, N.W., Washington, D.C. Born: January 10, 1945.
HUBERT L. HARRIS, JR.,* Director. Chairman (since 1996) and President
(January 1990 to May 1996) of INVESCO Services, Inc.; Chief Executive Officer of
INVESCO Individual Services Group. Member of the Executive Committee of the
Alumni Board of Trustees of Georgia Institute of Technology. Address: 1315
Peachtree Street, NE, Atlanta, Georgia. Born: July 15, 1943.
KENNETH T. KING,# Director. Formerly, Chairman of the Board of The Capitol
Life Insurance Company, Providence Washington Insurance Company, and Director of
numerous subsidiaries thereof in the U.S. Formerly, Chairman of the Board of The
Providence Capitol Companies in the United Kingdom and Guernsey. Chairman of the
Board of the Symbion Corporation (a high technology company) until 1987.
Address: 4080 North Circulo Manzanillo, Tucson, Arizona. Born: November 16,
1925.
JOHN W. MCINTYRE,# Director. Retired. Formerly, Vice Chairman of the Board
of Directors of the Citizens and Southern Corporation and Chairman of the Board
and Chief Executive Officer of the Citizens and Southern Georgia Corporation and
Citizens and Southern National Bank. Director of Golden Poultry Co., Inc.
Trustee of INVESCO Global Health Sciences Fund and Gables Residential Trust.
Address: 7 Piedmont Center, Suite 100, Atlanta, Georgia. Born: September 14,
1930.
LARRY SOLL, Ph.D., Director.** Formerly, Chairman of the Board (1987 to
1994), Chief Executive Officer (1982 to 1989 and 1993 to 1994) and President
(1982 to 1989) of Synergen Corp. Director of Synergen since incorporation in
1982. Director of ISD Pharmaceuticals, Inc., Trustee of INVESCO Global Health
Sciences Fund. Address: 345 Poorman Road, Boulder, Colorado. Born: April 26,
1942.
GLEN A. PAYNE, Secretary. Senior Vice President (since 1995), General
Counsel and Secretary of INVESCO Funds Group, Inc. and INVESCO Trust Company
(since 1989) and INVESCO Distributors, Inc. (since 1997); Vice President (May
1989 to April 1995), Secretary and General Counsel of INVESCO Funds Group, Inc.;
formerly, employee of a U.S. regulatory agency, Washington, D.C., (June 1973
through May 1989). Born: September 25, 1947.
RONALD L. GROOMS, Treasurer. Senior Vice President and Treasurer of INVESCO
Funds Group, Inc. and INVESCO Trust Company (since 1988). Senior Vice President
and Treasurer of INVESCO Distributors, Inc. (since 1997). Born: October 1, 1946.
<PAGE>
WILLIAM J. GALVIN, JR., Assistant Secretary. Senior Vice President of
INVESCO Funds Group, Inc. (since 1995) and of INVESCO Distributors, Inc. (since
1997) and Trust Officer of INVESCO Trust Company (since July 1995) and formerly
(August 1992 to July 1995), Vice President of INVESCO Funds Group, Inc. and
Trust Officer of INVESCO Trust Company. Formerly, Vice President of 440
Financial Group from June 1990 to August 1992; Assistant Vice President of
Putnam Companies from November 1986 to June 1990. Born: August 21, 1956.
ALAN I. WATSON, Assistant Secretary. Vice President of INVESCO Funds Group,
Inc. (since 1984) and of INVESCO Distributors, Inc. (since 1997) and Trust
Officer of INVESCO Trust Company. Born: September 14, 1941.
JUDY P. WIESE, Assistant Treasurer. Vice President of INVESCO Funds Group,
Inc. (since 1984) and of INVESCO Distributors, Inc. (since 1997) and Trust
Officer of INVESCO Trust Company. Born: February 3, 1948.
#Member of the audit committee of the Company.
+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.
*These directors are "interested persons" of the Company as
defined in the Investment Company Act of 1940.
**Member of the management liaison committee of the Company.
As of October 7, 1997, officers and directors of the Fund, as a group,
beneficially owned less than 1% of the Fund's outstanding shares.
Director Compensation
The following table sets forth, for the fiscal year ended June 30, 1997,
the compensation paid by the Fund to its independent directors for services
rendered in their capacities as directors of the Fund; the benefits accrued as
Fund expenses with respect to the Defined Benefit Deferred Compensation Plan
discussed below; and the estimated annual benefits to be received by these
directors upon retirement as a result of their service to the Fund. In addition,
the table sets forth the total compensation paid by all of the mutual funds
distributed by INVESCO Funds Group, Inc. (including the Fund), INVESCO Advisor
Funds, Inc., INVESCO Treasurer's Series Trust and INVESCO Global Health Sciences
Fund (collectively, the "INVESCO Complex") to these directors for services
rendered in their capacities as directors or trustees during the year ended
December 31, 1996. As of December 31, 1996, there were 49 funds in the INVESCO
Complex. Dr. Soll became an independent director of the Company effective May
15, 1997. Dr. Gramm became an independent director of the Company effective July
29, 1997 and is not included in the table below.
<PAGE>
Total
Compensa-
Benefits Estimated tion From
Aggregate Accrued As Annual INVESCO
Compensa- Part of Benefits Complex
tion From Fund Upon Paid To
Fund(1) Expenses(2) Retirement(3) Directors(1)
Fred A. Deering, $13,406 $ 8,039 $ 7,827 $98,850
Vice Chairman of
the Board
Victor L. Andrews 12,755 7,596 9,061 84,350
Bob R. Baker 13,477 6,783 12,142 84,850
Lawrence H. Budner 12,082 7,596 9,061 80,350
Daniel D. Chabris 12,819 8,669 6,439 84,850
A. D. Frazier, Jr.(4) 4,602 0 0 81,500
Kenneth T. King 9,356 8,347 7,099 71,350
John W. McIntyre 11,662 0 0 90,350
Larry Soll 1,578 0 0 17,500
------- ------- ------- --------
Total $91,737 $47,030 $51,629 $693,950
% of Net Assets 0.0020%(5) 0.0010%(5) 0.0045%(6)
(1)The vice chairman of the board, the chairmen of the audit, management
liaison and compensation committees, and the members of the executive and
valuation committees, and the members of specially approved task forces of the
board of directors each receive compensation for serving in such capacities in
addition to the compensation paid to all independent directors.
(2)Represents benefits accrued with respect to the Defined Benefit Deferred
Compensation Plan discussed below, and not compensation deferred at the election
of the directors.
(3)These figures represent the Fund's share of the estimated annual
benefits payable by the INVESCO Complex (excluding INVESCO Global Health
Sciences Fund which does not participate in any retirement plan) upon the
directors' retirement, calculated using the current method of allocating
director compensation among the funds in the INVESCO Complex. These estimated
benefits assume retirement at age 72 and that the basic retainer payable to the
directors will be adjusted periodically for inflation, for increases in the
number of funds in the INVESCO Complex, and for other reasons during the period
in which retirement benefits are accrued on behalf of the respective directors.
<PAGE>
This results in lower estimated benefits for directors who are closer to
retirement and higher estimated benefits for directors who are further from
retirement. With the exception of Messrs. Frazier and McIntyre and Drs. Soll and
Gramm, each of these directors has served as a director of one or more of the
funds in the INVESCO Complex for the minimum five-year period required to be
eligible to participate in the Defined Benefit Deferred Compensation Plan.
(4)Effective February 28, 1997, Mr. Frazier resigned as a director of the
Company. Effective November 1, 1996, Mr. Frazier was employed by INVESCO PLC
(the predecessor to AMVESCAP PLC), a company affiliated with IFG, and did not
receive any director's fees or other compensation from the Fund or other funds
in the INVESCO Complex for his service as a director.
(5)Total as a percentage of the Fund's net assets as of June 30, 1997.
(6)Total as a percentage of the net assets of the INVESCO Complex as of
December 31, 1996.
Messrs. Brady, Harris and Hesser, as "interested persons" of the Fund and
of the other funds in the INVESCO Complex, receive compensation as officers or
employees of IFG or its affiliated companies, and do not receive any director's
fees or other compensation from the Fund or other funds in the INVESCO Complex
for their services as directors.
The boards of directors/trustees of the mutual funds managed by IFG and
INVESCO Treasurer's Series Trust have adopted a Defined Benefit Deferred
Compensation Plan for the non-interested directors and trustees of the funds.
Under this plan, each director or trustee who is not an interested person of the
funds (as defined in the 1940 Act) and who has served for at least five years (a
"qualified director") is entitled to receive, upon retiring from the boards at
the retirement age of 72 (or the retirement age of 73 to 74, if the retirement
date is extended by the boards for one or two years, but less than three years)
continuation of payment for one year (the "first year retirement benefit") of
the annual basic retainer payable by the funds to the qualified director at the
time of his retirement (the "basic retainer"). Commencing with any such
director's second year of retirement, and commencing with the first year of
retirement of a director whose retirement has been extended by the board for
three years, a qualified director shall receive quarterly payments at an annual
rate equal to 40% of the basic retainer. These payments will continue for the
remainder of the qualified director's life or ten years, whichever is longer
(the "reduced retainer payments"). If a qualified director dies or becomes
disabled after age 72 and before age 74 while still a director of the funds, the
first year retirement benefit and the reduced retainer payments will be made to
him or to his beneficiary or estate. If a qualified director becomes disabled or
dies either prior to age 72 or during his/her 74th year while still a director
of the funds, the director will not be entitled to receive the first year
retirement benefit; however, the reduced retainer payments will be made to his
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 and
Treasurer's Series Trust funds in a manner determined to be fair and equitable
<PAGE>
by the committee. The Fund is not making any payments to directors under the
plan as of the date of this Statement of Additional Information. The Fund has no
stock options or other pension or retirement plans for management or other
personnel and pays no salary or compensation to any of its officers.
The Fund has an audit committee that is comprised of five of the directors
who are not interested persons of the Fund. The committee meets periodically
with the Fund's independent accountants and officers to review accounting
principles used by the Fund, the adequacy of internal controls, the
responsibilities and fees of the independent accountants, and other matters.
The Fund also has a management liaison committee which meets quarterly
with various management personnel of IFG in order (a) to facilitate better
understanding of management and operations of the Fund, and (b) to review legal
and operational matters which have been assigned to the committee by the board
of directors, in furtherance of the board of directors' overall duty of
supervision.
HOW SHARES CAN BE PURCHASED
The Fund's shares are sold on a continuous basis at the net asset value
per share of the Fund next calculated after receipt of a purchase order in good
form. The net asset value per share is computed once each day that the New York
Stock Exchange is open as of the close of regular trading on that Exchange, but
may also be computed at other times. See "How Shares Are Valued." IDI acts as
the Fund's Distributor under a distribution agreement with the Fund under which
it receives no compensation and bears all expenses, including the cost of
printing and distributing prospectuses, incident to marketing of the Fund's
shares, except for such distribution expenses which are paid out of Fund assets
under the Fund's Plan of Distribution which has been adopted by the Fund
pursuant to Rule 12b-1 under the 1940 Act.
Distribution Plan. As described in the section of the Fund's Prospectus
entitled "How To Buy Shares - Distribution Expenses," the Fund has adopted a
Plan and Agreement of Distribution (the "Plan") pursuant to Rule 12b-1 under the
1940 Act, which was implemented on November 1, 1990. The initial Plan was
approved on April 17, 1990, at a meeting called for such purpose by a majority
of the directors of the Fund, including a majority of the directors who neither
are "interested persons" of the Fund nor have any financial interest in the
operation of the Plan ("12b-1 directors"). The board of directors, on February
4, 1997, approved amending the Plan to a compensation type 12b-1 plan. This
amendment of the Plan did not result in increasing the amount of the Fund's
payments thereunder. The Plan was continued by action of the board of directors
until May 15, 1998. Pursuant to authorization granted by the Fund's board of
directors on September 2, 1997, a new Plan became effective on September 30,
1997, under which IDI has assumed all obligations related to distribution which
previously were performed by IFG.
<PAGE>
The Plan provides that the Fund may make monthly payments to IDI of amounts
computed at an annual rate no greater than 0.25% of the Fund's average net
assets to permit IDI, at its discretion, to engage in certain activities and
provide services in connection with the distribution of the Fund's shares to
investors. Payment amounts by the Fund under the Plan, for any month, may be
made to compensate IDI for permissible activities engaged in and services
provided by IDI during the rolling 12-month period in which that month falls.
For the fiscal year ended June 30, 1997 the Fund made payments to IFG (the
predecessor of IDI as distributor of shares of the Funds) under the 12b-1 Plan
(prior to the voluntary absorption of certain Fund expenses by IFG) in the
amount of $14,751,573. In addition, as of June 30, 1997, $899,644 of additional
distribution accruals had been incurred under the Plan for the Fund, and will be
paid to IDI during the fiscal year ended June 30, 1998. As noted in the
Prospectus, one type of expenditure permitted by the Plan is the payment of
compensation to securities companies, and other financial institutions and
organizations, which may include IDI-affiliated companies, in order to obtain
various distribution-related and/or administrative services for the Fund. The
Fund is authorized by the Plan to use its assets to finance the payments made to
obtain those services. Payments will be made by IDI to broker-dealers who sell
shares of the Fund and may be made to banks, savings and loan associations and
other depository institutions. Although the Glass-Steagall Act limits the
ability of certain banks to act as underwriters of mutual fund shares, the Fund
does not believe that these limitations would affect the ability of such banks
to enter into arrangements with 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 Fund possibly could decrease to the extent that the banks would no longer
invest customer assets in the Fund. Neither the Fund nor its investment adviser
will give any preference to banks or other depository institutions which enter
into such arrangements when selecting investments to be made by the Fund.
For the fiscal year ended June 30, 1997, allocations of 12b-1 amounts paid
by the Fund for the following categories of expenses were: advertising --
$2,260,783; sales literature, printing and postage -- $1,163,948; direct mail --
$505,485; public relations/promotion -- $369,836; compensation to securities
dealers and other organizations -- $8,137,253; marketing personnel --
$2,314,268.
The nature and scope of services which are provided by securities dealers
and other organizations may vary by dealer but include, among other things,
processing new stockholder account applications, preparing and transmitting to
the Fund's Transfer Agent computer-processable tapes of the Fund's transactions
by customers, serving as the primary source of information to customers in
answering questions concerning the Fund, and assisting in other customer
transactions with the Fund.
The Plan provides that it shall continue in effect with respect to the
Fund for so long as such continuance is approved at least annually by the vote
of the board of directors of the Fund cast in person at a meeting called for the
purpose of voting on such continuance. The Plan can also be terminated at any
time with respect to the Fund, without penalty, if a majority of the 12b-1
directors, or shareholders of the Fund, vote to terminate the Plan. The Fund
<PAGE>
may, in its absolute discretion, suspend, discontinue or limit the offering
of its shares of the Fund at any time. In determining whether any such action
should be taken, the board of directors intends to consider all relevant factors
including, without limitation, the size of the Fund, the investment climate for
the Fund, general market conditions, and the volume of sales and redemptions of
the Fund's shares. The Plan may continue in effect and payments may be made
under the Plan following any such temporary suspension or limitation of the
offering of the Fund's shares; however, the Fund is not contractually obligated
to continue the Plan for any particular period of time. Suspension of the
offering of the Fund's shares would not, of course, affect a shareholder's
ability to redeem his or her shares. So long as the Plan is in effect, the
selection and nomination of persons to serve as independent directors of the
Fund shall be committed to the independent directors then in office at the time
of such selection or nomination. The Plan may not be amended to increase
materially the amount of the Fund's payments thereunder without approval of the
shareholders of the Fund, and all material amendments to the Plan must be
approved by the board of directors of the Fund, including a majority of the
12b-1 directors. Under the agreement implementing the Plan, IDI or the Fund, the
latter by vote of a majority of the 12b-1 directors, or of the holders of a
majority of the Fund's outstanding voting securities, may terminate such
agreement without penalty upon 30 days' written notice to the other party. No
further payments will be made by the Fund under the Plan in the event of its
termination.
To the extent that the Plan constitutes a plan of distribution adopted
pursuant to Rule 12b-1 under the 1940 Act, it shall remain in effect as such, so
as to authorize the use of the Fund's assets in the amounts and for the purposes
set forth therein, notwithstanding the occurrence of an assignment, as defined
by the 1940 Act, and rules thereunder. To the extent it constitutes an agreement
pursuant to a plan, the Fund's obligation to make payments to IDI shall
terminate automatically, in the event of such "assignment," in which case the
Fund may continue to make payments pursuant to the Plan to IDI or another
organization only upon the approval of new arrangements, which may or may not be
with IDI, regarding the use of the amounts authorized to be paid by it under the
Plan, by the directors, including a majority of the 12b-1 directors, by a vote
cast in person at a meeting called for such purpose.
Information regarding the services rendered under the Plan and the amounts
paid therefor by the Fund are provided to, and reviewed by, the directors on a
quarterly basis. On an annual basis, the directors consider the continued
appropriateness of the Plan and the level of compensation provided therein.
The only directors or interested persons, as that term is defined in
Section 2(a)(19) of the 1940 Act, of the Fund who have a direct or indirect
financial interest in the operation of the Plan are the officers and directors
of the Fund listed herein under the section entitled "The Fund And Its
Management--Officers and Directors of the Fund" who are also officers either of
^ IFG or companies affiliated with ^ IFG . The benefits which the Fund believes
will be reasonably likely to flow to it and its shareholders under the Plan
include the following:
<PAGE>
(1) Enhanced marketing efforts, if successful, should result in an
increase in net assets through the sale of additional shares and
afford greater resources with which to pursue the investment
objectives of the Fund;
(2) The sale of additional shares reduces the likelihood that redemption
of shares will require the liquidation of securities of the Fund in
amounts and at times that are disadvantageous for investment
purposes;
(3) The positive effect which increased Fund assets will have on its
revenues could allow ^ IFG and its affiliated companies:
(a) To have greater resources to make the financial commitments
necessary to improve the quality and level of the Fund's
shareholder services (in both systems and personnel),
(b) To increase the number and type of mutual funds available to
investors from ^ IFG and its affiliated companies (and support
them in their infancy), and thereby expand the investment
choices available to all shareholders, and
(c) To acquire and retain talented employees who desire to be
associated with a growing organization; and
(4) Increased Fund assets may result in reducing each investor's share
of certain expenses through economies of scale (e.g. exceeding
established breakpoints in the advisory fee schedule and allocating
fixed expenses over a larger asset base), thereby partially
offsetting the costs of the Plan.
HOW SHARES ARE VALUED
As described in the section of the Fund's Prospectus entitled "Fund Price
and Performance" the net asset value of shares of the Fund is computed once each
day that the New York Stock Exchange is open as of the close of regular trading
on that Exchange (generally 4:00 p.m., New York time) and applies to purchase
and redemption orders received prior to that time. Net asset value per share is
also computed on any other day on which there is a sufficient degree of trading
in the securities held by the Fund that the current net asset value per share of
the Fund might be materially affected by changes in the value of the securities
held, but only if on such day the Fund receives a request to purchase or redeem
shares. Net asset value per share is not calculated on days the New York Stock
Exchange is closed, such as federal holidays, including New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving, and Christmas. The net asset value per share of
<PAGE>
the Fund is calculated by dividing the value of all securities held by the Fund
plus its other assets (including dividends and interest accrued but not
collected), less the Fund's liabilities (including accrued expenses), by the
number of outstanding shares of the Fund.
Securities traded on national securities exchanges, the NASDAQ National
Market System, the NASDAQ Small Cap market and foreign markets are valued at
their last sale prices on the exchanges or markets where such securities are
primarily traded. Securities traded in the over-the-counter markets for which
last sale prices are not available, and listed securities for which no sales
were reported on a particular date, are valued at their highest closing bid
prices (or, for debt securities, yield equivalents thereof) obtained from one or
more dealers making markets for such securities. If market quotations are not
readily available, securities or other assets will be valued at their fair value
as determined in good faith by the Fund's board of directors or pursuant to
procedures adopted by the board of directors. The above procedures may include
the use of valuations furnished by a pricing service which employs a matrix to
determine valuations for normal institutional-size trading units of debt
securities. Prior to a pricing service, the Fund's board of directors reviews
the methods used by such service to assure itself that securities will be valued
at their fair values. The Fund's board of directors also periodically monitors
the methods used by such pricing services. Debt securities with remaining
maturities of 60 days or less at the time of purchase normally are valued at
amortized cost.
The values of securities held by the Fund and other assets used in
computing net asset value generally are determined as of the time regular
trading in such securities or assets is completed each day. Since regular
trading in most foreign securities markets is completed simultaneously with, or
prior to, the close of regular trading on the New York Stock Exchange, closing
prices for foreign securities usually are available for purposes of computing
the Fund's net asset value. However, in the event that the closing price of a
foreign security is not available in time to calculate the Fund's net asset
value on a particular day, the Fund's board of directors has authorized the use
of the market price for the security obtained from an approved pricing service
at an established time during the day which may be prior to the close of regular
trading in the security.
FUND PERFORMANCE
As discussed in the section of the Fund's Prospectus entitled "Fund Price
and Performance," the Fund advertises its yield and total return performance. In
calculating yield quotations for the Fund, interest earned is determined by
computing yield to maturity (or yield to call, if applicable) of each obligation
held by the Fund, based upon the market value of each obligation (including
actual accrued interest) at the close of business on the last business day of
each month, or, with respect to an obligation purchased during the month, the
purchase price plus accrued interest. The resultant yield to maturity is divided
by 360 and multiplied by the market value of the obligation (including actual
accrued interest), and the result is multiplied by the number of days in the
subsequent month that the obligation is in the Fund (assuming that each month
has 30 days). Dividends received held by the Fund are recognized, for purposes
of yield calculations, on a daily accrual basis. The Fund's yield for the 30
days ended June 30, 1997, was 2.47%.
<PAGE>
Average annual total return performance for the one-, five-and ten-year
periods ended June 30, 1997, was 27.33%, 15.26% and 14.32%, respectively.
Average annual total return performance for each of the periods indicated was
computed by finding the average annual compounded rates of return that would
equate the initial amount invested to the ending redeemable value, according to
the following formula:
P(1 + T)n = ERV
where: P = initial payment of $1000
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.
In conjunction with performance reports, comparative data between the
Fund's performance for a given period and other types of investment vehicles,
including certificates of deposit, may be provided to prospective investors and
shareholders.
In conjunction with performance reports and/or analyses of shareholder
service for the Fund, comparative data between the Fund's performance for a
given period and recognized indices of investment results for the same period,
and/or assessments of the quality of shareholder service, may be provided to
shareholders. Such indices include indices provided by Dow Jones & Company,
Standard & Poor's, Lipper Analytical Services, Inc., Lehman Brothers, National
Association of Securities Dealers Automated Quotations, Frank Russell Company,
Value Line Investment Survey, the American Stock Exchange, Morgan Stanley
Capital International, Wilshire Associates, the Financial Times Stock Exchange,
the New York Stock Exchange, the Nikkei Stock Average and Deutcher Aktienindex,
all of which are unmanaged market indicators. In addition, rankings, ratings,
and comparisons of investment performance and/or assessments of the quality of
shareholder service made by independent sources may be used in advertisements,
sales literature or shareholder reports, including reprints of, or selections
from, editorials or articles about the Fund. These sources utilize information
compiled (i) internally; (ii) by Lipper Analytical Services, Inc.; or (iii) by
other recognized analytical services. The Lipper Analytical Services, Inc.
mutual fund rankings and comparisons which may be used by the Fund in
performance reports will be drawn from the "Equity Income Funds" mutual fund
grouping, in addition to the broad-based Lipper general fund groupings. Sources
for Fund performance information and articles about the Fund include, but are
not limited to, the following:
American Association of Individual Investors' Journal
Banxquote
Barron's
Business Week
CDA Investment Technologies
CNBC
CNN
<PAGE>
Consumer Digest
Financial Times
Financial World
Forbes
Fortune
Ibbotson Associates, Inc.
Institutional Investor
Investment Company Data, Inc.
Investor's Business Daily
Kiplinger's Personal Finance
Lipper Analytical Services, Inc.'s Mutual Fund Performance
Analysis
Money
Morningstar
Mutual Fund Forecaster
No-Load Analyst
No-Load Fund X
Performance Analysis
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
Wall Street Journal
Wiesenberger Investment Companies Services
Working Woman
Worth
SERVICES PROVIDED BY THE FUND
Periodic Withdrawal Plan. As described in the section of the Fund's
Prospectus entitled "How To Sell Shares," the Fund offers a Periodic Withdrawal
Plan. All dividends and distributions on shares owned by shareholders
participating in this Plan are reinvested in additional shares. Because
withdrawal payments represent the proceeds from sales of shares, the amount of
shareholders' investments in the Fund will be reduced to the extent that
withdrawal payments exceed dividends and other distributions paid and
reinvested. Any gain or loss on such redemptions must be reported for tax
purposes. In each case, shares will be redeemed at the close of business on or
about the 20th day of each month preceding payment, and payments will be mailed
within five business days thereafter.
The Periodic Withdrawal Plan involves the use of principal and is not a
guaranteed annuity. Payments under such Plan do not represent income or a return
on investment.
Participation in the Periodic Withdrawal Plan may be terminated at any
time by sending a written request to IFG. Upon termination, all future dividends
and capital gain distributions will be reinvested in additional shares unless a
shareholder requests otherwise.
<PAGE>
Exchange Policy. As discussed in the section of the Prospectus entitled
"How To Buy Shares--Exchange Policy," the Fund offers shareholders the ability
to exchange shares of the Fund for shares of certain other mutual funds advised
by IFG. Exchange requests may be made either by telephone or by written request
to IFG using the telephone number or address on the cover of this Statement of
Additional Information. Exchanges made by telephone must be in an amount of at
least $250, if the exchange is being made into an existing account of one of the
INVESCO funds. All exchanges that establish a NEW account must meet the fund's
applicable minimum initial investment requirements. Written exchange requests
into an existing account have no minimum requirements other than the fund's
applicable minimum subsequent investment requirements. Any gain or loss realized
on an exchange is recognized for federal income tax purposes. This privilege is
not an option or right to purchase securities, but is a revocable privilege
permitted under the present policies of each of the funds and is not available
in any state or other jurisdiction where the shares of the mutual fund into
which transfer is to be made are not qualified for sale, or when the net asset
value of the shares presented for exchange is less than the minimum dollar
purchase required by the appropriate prospectus.
TAX-DEFERRED RETIREMENT PLANS
As described in the section of the Prospectus entitled "Fund Services,"
shares of the Fund may be purchased as the investment medium for various
tax-deferred retirement plans. Persons who request information regarding these
plans from IFG will be provided with prototype documents and other supporting
information regarding the type of plan requested. Each of these plans involves a
long-term commitment of assets and is subject to possible regulatory penalties
for excess contributions, premature distributions or for insufficient
distributions after age 70-1/2. The legal and tax implications may vary
according to the circumstances of the individual investor. Therefore, the
investor is urged to consult with an attorney or tax adviser prior to the
establishment of such a plan.
HOW TO REDEEM SHARES
Normally, payments for shares redeemed will be mailed within seven (7) days
following receipt of the required documents as described in the section of the
Prospectus entitled "How To Sell Shares." The right of redemption may be
suspended and payment postponed when: (a) the New York Stock Exchange is closed
for other than customary weekends and holidays; (b) trading on that exchange is
restricted; (c) an emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund fairly to determine the value of its net assets; or (d)
the SEC by order so permits.
It is possible that in the future conditions may exist which would, in the
opinion of the Fund's investment adviser, make it undesirable for the Fund to
pay for redeemed shares in cash. In such cases, the investment adviser may
authorize payment to be made in portfolio securities or other property of the
Fund. However, the Fund is obligated under the 1940 Act to redeem for cash all
shares of the Fund presented for redemption by any one shareholder having a
<PAGE>
value up to $250,000 (or 1% of the Fund's net assets if that is less) in any
90-day period. Securities delivered in payment of redemptions are selected
entirely by the investment adviser based on what is in the best interests of the
Fund and its shareholders, and are valued at the value assigned to them in
computing the Fund's net asset value per share. Shareholders receiving such
securities are likely to incur brokerage costs on their subsequent sales of the
securities.
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES
The Fund intends to continue to conduct its business and satisfy the
applicable diversification of assets and source of income requirements to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. The Fund so qualified in the fiscal year ended
June 30, 1997 and intends to continue to qualify during its current fiscal year.
As a result, it is anticipated that the Fund will pay no federal income or
excise taxes and will be accorded conduit or "pass through" treatment for
federal income tax purposes.
Dividends paid by the Fund from net investment income as well as
distributions of net realized short-term capital gains are, for federal income
tax purposes, taxable as ordinary income to shareholders. After the end of each
calendar year, the Fund sends shareholders information regarding the amount and
character of dividends paid in the year, including the dividends eligible for
the dividends-received deduction for corporations. Such amounts will be limited
to the aggregate amount of qualifying dividends which the Fund derives from its
portfolio investments.
Distributions by the Fund of net capital gains (the excess of long-term
and mid-term capital gains over net short-term capital loss) are, for federal
income tax purposes, taxable to the shareholder as long-term capital gains
regardless of how long a shareholder has held shares of the Fund. Such
distributions are identified as such and are not eligible for the
dividends-received deduction.
All dividends and other distributions are regarded as taxable to the
investor, whether or not such dividends and distributions are reinvested in
additional shares. If the net asset value of Fund shares should be reduced below
a shareholder's cost as a result of a distribution, such distribution would be
taxable to the shareholder although a portion would be, in effect, a return of
invested capital. The net asset value of shares of the Fund reflects accrued net
investment income and undistributed realized capital gains; therefore, when a
distribution is made, the net asset value is reduced by the amount of the
distribution. If shares are purchased shortly before a distribution, the full
price for the shares will be paid and some portion of the price may then be
returned to the shareholder as a taxable dividend or capital gain. However, the
net asset value per share will be reduced by the amount of the distribution,
which would reduce any gain (or increase any loss) for tax purposes on any
subsequent redemption of shares.
<PAGE>
IFG may provide Fund shareholders with information concerning the average
cost basis of their shares in order to help them prepare their tax returns. This
information is intended as a convenience to shareholders and will not be
reported to the Internal Revenue Service (the "IRS"). The IRS permits the use of
several methods to determine the cost basis of mutual fund shares. The cost
basis information provided by IFG will be computed using the single-category
average cost method, although neither IFG nor the Fund recommends any particular
method of determining cost basis. Other methods may result in different tax
consequences. If a shareholder has reported gains or losses with respect to
shares of the Fund in past years, the shareholder must continue to use the
method previously used, unless the shareholder applies to the IRS for permission
to change the method.
If the Fund's shares are sold at a loss after being held for six months or
less, the loss will be treated as long-term, instead of short-term, capital loss
to the extent of any capital gain distributions received on those shares.
The Fund will be subject to a nondeductible 4% excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of its
ordinary income for that year and capital gain net income for the one-year
period ending on October 31 of that year, plus certain other amounts.
Dividends and interest received by the Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors. If more than 50% of the value of
the Fund's total assets at the close of any taxable year consists of securities
of foreign corporations, the Fund will be eligible to, and may, file an election
with the Internal Revenue Service that will enable its shareholders, in effect,
to receive the benefit of the foreign tax credit with respect to any foreign and
U.S. possessions income taxes paid by it. The Fund will report to its
shareholders shortly after each taxable year their respective shares of the
Fund's income from sources within, and taxes paid to, foreign countries and U.S.
possessions if it makes this election.
The Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation that, in general, meets either of the
following tests: (1) at least 75% of its gross income is passive or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, the Fund will be subject to
federal income tax on a portion of any "excess distribution" received on the
stock of a PFIC or of any gain on disposition of the stock (collectively "PFIC
income"), plus interest thereon, even if the Fund distributes the PFIC income as
a taxable dividend to its shareholders. The balance of the PFIC income will be
included in the Fund's investment company taxable income and, accordingly, will
not be taxable to it to the extent that income is distributed to its
shareholders.
<PAGE>
Shareholders should consult their own tax advisers regarding specific
questions as to federal, state and local taxes. Dividends and capital gain
distributions will generally be subject to applicable state and local taxes.
Qualification as a regulated investment company under the Internal Revenue Code
of 1986, as amended for income tax purposes does not entail government
supervision of management or investment policies.
INVESTMENT PRACTICES
Portfolio Turnover. There are no fixed limitations regarding the Fund's
portfolio turnover. Since the Fund started business, the rate of portfolio
turnover has fluctuated under constantly changing economic conditions and market
circumstances. Portfolio turnover rates for the fiscal years ended June 30,
1997, 1996 and 1995 were 47%, 63% and 54%, respectively. Securities initially
satisfying the basic policies and objectives of the Fund may be disposed of when
they are no longer suitable. Brokerage costs to the Fund are commensurate with
the rate of portfolio activity. In computing the portfolio turnover rate, all
investments with maturities or expiration dates at the time of acquisition of
one year or less were excluded. Subject to this exclusion, the turnover rate is
calculated by dividing (A) the lesser of purchases or sales of portfolio
securities for the fiscal year by (B) the monthly average of the value of
portfolio securities owned by the Fund during the fiscal year.
Placement of Portfolio Brokerage. Either IFG, as the Fund's investment
adviser, or INVESCO Trust, as the Fund's sub-adviser, places orders for the
purchase and sale of securities with brokers and dealers based upon IFG's or
INVESCO Trust's evaluation of their financial responsibility subject to their
ability to effect transactions at the best available prices. IFG or INVESCO
Trust evaluates the overall reasonableness of brokerage commissions paid by
reviewing the quality of executions obtained on the Fund's portfolio
transactions, viewed in terms of the size of transactions, prevailing market
conditions in the security purchased or sold, and general economic and market
conditions. In seeking to ensure that any commissions charged the Fund are
consistent with prevailing and reasonable commissions or discounts, IFG or
INVESCO Trust also endeavor to monitor brokerage industry practices with regard
to the commissions or discounts charged by brokers and dealers on transactions
effected for other comparable institutional investors. While IFG or INVESCO
Trust seek reasonably competitive rates, the Fund does not necessarily pay the
lowest commission, spread, or discount available.
Consistent with the standard of seeking to obtain the best execution on
portfolio transactions, IFG or INVESCO Trust may select brokers that provide
research services to effect such transactions. Research services consist of
statistical and analytical reports relating to issuers, industries, securities
and economic factors and trends, which may be of assistance or value to IFG or
INVESCO Trust in making informed investment decisions. Research services
prepared and furnished by brokers through which the Fund effects securities
transactions may be used by IFG or INVESCO Trust in servicing all of its
accounts and not all such services may be used by IFG or INVESCO Trust in
connection with the Fund.
<PAGE>
In recognition of the value of the above-described brokerage and research
services provided by certain brokers, IFG or INVESCO Trust, consistent with the
standard of seeking to obtain the best execution on portfolio transactions, may
place orders with such brokers for the execution of Fund transactions on which
the commissions or discounts are in excess of those which other brokers might
have charged for effecting the same transactions.
Portfolio transactions may be effected through qualified broker-dealers
that recommend the Fund to their clients, or who act as agent in the purchase of
the Fund's shares for their clients. When a number of brokers and dealers can
provide comparable best price and execution on a particular transaction, the
Fund's adviser or sub-adviser may consider the sale of Fund shares by a broker
or dealer in selecting among qualified broker-dealers.
Certain financial institutions (including brokers who may sell shares of
the Fund, or affiliates of such brokers) are paid a fee (the "Services Fee") for
recordkeeping, shareholder communications and other services provided by the
brokers to investors purchasing shares of the Fund through no transaction fee
programs ("NTF Programs") offered by the financial institution or its affiliated
broker (an "NTF Program Sponsor"). The Services Fee is based on the average
daily value of the investments in each Fund made in the name of such NTF Program
Sponsor and held in omnibus accounts maintained on behalf of investors
participating in the NTF Program. With respect to certain NTF Programs, the
directors of the Fund have authorized the Fund to apply dollars generated from
the Fund's Plan and Agreement of Distribution pursuant to Rule 12b-1 under the
1940 Act (the "Plan") to pay the entire Services Fee, subject to the maximum
Rule 12b-1 fee permitted by the Plan. With respect to other NTF Programs, the
Fund's directors have authorized the Fund to pay transfer agency fees to IFG
based on the number of investors who have beneficial interests in the NTF
Program Sponsor's omnibus accounts in the Fund. IFG, in turn, pays these
transfer agency fees to the NTF Program Sponsor as a sub-transfer agency or
recordkeeping fee in payment of all or a portion of the Services Fee. In the
event that the sub-transfer agency or recordkeeping fee is insufficient to pay
all of the Services Fee with respect to these NTF Programs, the directors of the
Fund have authorized the Fund to apply dollars generated from the Plan to pay
the remainder of the Services Fee, subject to the maximum Rule 12b-1 fee
permitted by the Plan. IFG itself pays the portion of the Fund's Services Fee,
if any, that exceeds the sum of the sub-transfer agency or recordkeeping fee and
Rule 12b-1 fee. The Fund's directors have further authorized IFG to place a
portion of the Fund's brokerage transactions with certain NTF Program Sponsors
or their affiliated brokers, if IFG reasonably believes that, in effecting the
Fund's transactions in portfolio securities, the broker is able to provide the
best execution of orders at the most favorable prices. A portion of the
commissions earned by such a broker from executing portfolio transactions on
behalf of the Fund may be credited by the NTF Program Sponsor against its
Services Fee. Such credit may be applied against any sub-transfer agency or
recordkeeping fee payable with respect to the Fund, or against any Rule 12b-1
fees used to pay a portion of the Services Fee, on a basis which has resulted
from negotiations between IFG or IDI and the NTF Program Sponsor. Thus, the Fund
pays sub-transfer agency or recordkeeping fees to the NTF Program Sponsor in
payment of the Services Fee only to the extent that such fees are not offset by
the Fund's credits. In the event that the transfer agency fee paid by the Fund
to IFG with respect to investors who have beneficial interests in a particular
<PAGE>
NTF Program Sponsor's omnibus accounts in the Fund exceeds the Services Fee
applicable to the Fund, after application of credits, IFG may carry forward the
excess and apply it to future Services Fees payable to that NTF Program Sponsor
with respect to the Fund. The amount of excess transfer agency fees carried
forward will be reviewed for possible adjustment by IFG prior to each fiscal
year-end of the Fund. The Fund's board of directors has also authorized the Fund
to pay to IDI the full Rule 12b-1 fees contemplated by the Plan in compensation
of expenses incurred by IDI in engaging in the activities and providing the
services on behalf of the Fund contemplated by the Plan, subject to the maximum
Rule 12b-1 fee permitted by the Plan, notwithstanding that credits have been
applied to reduce the portion of the 12b-1 fee that would have been used to
compensate IDI for payments to such NTF Program Sponsor absent such credits.
The aggregate dollar amounts of brokerage commissions paid by the Fund for
the fiscal years ended June 30, 1997, 1996 and 1995 were $4,594,928, $4,668,404
and $5,098,664, respectively. For the fiscal year ended June 30, 1997, brokers
providing research services received $2,236,892 in commissions on portfolio
transactions effected for the Fund. The aggregate dollar amount of such
portfolio transactions was $1,826,392,715. As a result of selling shares of the
Fund, brokers received $15,000 in commissions on portfolio transactions effected
for the Fund during the fiscal year ended June 30, 1997.
At June 30, 1997, the Fund held securities of its regular brokers or
dealers, or their parents, as follows:
Value of Securities
Broker or Dealer at 6/30/97
- ---------------- -------------------
Chevron Oil Finance $18,741,000
American Express Credit 30,190,000
Donaldson Lufkin & Jennette 6,000,000
Neither IFG nor INVESCO Trust receive any brokerage commissions on
portfolio transactions effected on behalf of the Fund, and there is no
affiliation between IFG, INVESCO Trust, or any person affiliated with IFG,
INVESCO Trust, or the Fund and any broker or dealer that executes transactions
for the Fund.
ADDITIONAL INFORMATION
Common Stock. The Fund has one billion authorized shares of common stock
with a par value of $1.00 per share. As of June 30, 1997, 298,771,934 of the
Fund's shares of common stock were outstanding. All shares are of one class with
equal rights as to voting, dividends and liquidation. All shares issued and
outstanding are, and all shares offered hereby, when issued, will be, fully paid
and nonassessable. Shares have no preemptive rights and are freely transferable
on the books of the Fund.
Fund shares have noncumulative voting rights, which means that the holders
of a majority of the shares voting for the election of directors of the Fund can
elect 100% of the directors if they choose to do so. In such event, the holders
<PAGE>
of the remaining shares voting for the election of directors will not be able to
elect any person or persons to the board of directors. After they have been
elected by shareholders, the directors will continue to serve until their
successors are elected and have qualified or they are removed from office, in
either case by a shareholder vote, or until death, resignation, or retirement.
Directors may appoint their own successors, provided that always at least a
majority of the directors have been elected by the Fund's shareholders. It is
the intention of the Fund not to hold annual meetings of shareholders. The
directors may call annual or special meetings of shareholders for action by
shareholder vote as may be required by the Investment Company Act of 1940 or the
Fund's Articles of Incorporation, or at their discretion.
Principal Shareholders. As of September 30, 1997, the following entities
held more than 5% of the Fund's outstanding equity securities.
Amount and Class and
Nature of Percent
Name and Address Ownership of Class
- ---------------- ---------- ---------
Charles Schwab & Co. Inc. 40,547,453.400 13.752
Special Custody Acct.
For The Exclusive Benefit
of Customers
101 Montgomery St.
San Francisco, CA 94104
Independent Accountants. Price Waterhouse LLP, 950 Seventeenth Street,
Denver, Colorado, has been selected as the independent accountants of the Fund.
The independent accountants are responsible for auditing the financial
statements of the Fund.
Custodian. State Street Bank and Trust Company, P.O. Box 351, Boston,
Massachusetts, has been designated as custodian of the cash and investment
securities of the Fund. The bank is also responsible for, among other things,
receipt and delivery of the Fund's investment securities in accordance with
procedures and conditions specified in the custody agreement. Under its contract
with the Fund, the custodian is authorized to establish separate accounts in
foreign countries and to cause foreign securities owned by the Fund to be held
outside the United States in branches of U.S. banks and, to the extent permitted
by applicable regulations, in certain foreign banks and securities depositories.
Transfer Agent. The Fund is provided with transfer agent services by
INVESCO Funds Group, Inc., 7800 E. Union Avenue, Denver, Colorado 80237,
pursuant to the Transfer Agency Agreement described herein. Such services
include the issuance, cancellation and transfer of shares of the Fund, and the
maintenance of records regarding the ownership of such shares.
Reports to Shareholders. The Fund's fiscal year ends on June 30. The Fund
distributes reports at least semiannually to its shareholders. Financial
statements regarding the Fund, audited by the independent accountants, are sent
to shareholders annually.
<PAGE>
Legal Counsel. The firm of Kirkpatrick & Lockhart LLP, Washington, D.C., is
legal counsel for the Fund. The firm of Moye, Giles, O'Keefe, Vermeire &
Gorrell, Denver, Colorado, acts as special counsel to the Fund.
Financial Statements. The Fund's audited financial statements and the
notes thereto for the fiscal year ended June 30, 1997 and the report of Price
Waterhouse LLP with respect to such financial statements, are incorporated
herein by reference from the Fund's Annual Report to Shareholders for the fiscal
year ended June 30, 1997.
Prospectus. The Fund will furnish, without charge, a copy of the
Prospectus upon request. Such requests should be made to the Fund at the mailing
address or telephone number set forth on the first page of this Statement of
Additional Information.
Registration Statement. This Statement of Additional Information and the
related Prospectus do not contain all of the information set forth in the
Registration Statement the Fund has filed with the SEC. The complete
Registration Statement may be obtained from the SEC upon payment of the fee
prescribed by the rules and regulations of the SEC.
<PAGE>
APPENDIX A
BOND RATINGS
The following is a description of Moody's and S&P's bond ratings:
Moody's Investors Service, Inc. 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.
