As filed on March 1, 1999 File No. 002-85905
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No.
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Post-Effective Amendment No. 24 X
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. 24 X
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INVESCO SECTOR FUNDS, INC.
(Formerly, INVESCO Strategic Portfolios, Inc.)
(Exact Name of Registrant as Specified in Charter)
7800 E. Union Avenue, Denver, Colorado 80237
(Address of Principal Executive Offices)
P.O. Box 173706, Denver, Colorado 80217-3706
(Mailing Address)
Registrant's Telephone Number, including Area Code: (303) 930-6300
Glen A. Payne, Esq.
7800 E. Union Avenue
Denver, Colorado 80237
(Name and Address of Agent for Service)
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Copies to:
Ronald M. Feiman, Esq.
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 W. 47th St.
New York, New York 10036
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Approximate Date of Proposed Public Offering: As soon as practicable after this
post-effective amendment becomes effective.
It is proposed that this filing will become effective (check appropriate box)
X immediately upon filing pursuant to paragraph (b)
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on _________________, pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)(1)
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on _________________, pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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on _________, pursuant to paragraph (a)(2) of rule 485
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If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
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previously filed post-effective amendment.
Page 1 of 130
Exhibit index is located at page 146
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INVESCO SECTOR FUNDS, INC.
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CROSS-REFERENCE SHEET
Form N-1A
Item Caption
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Part A Prospectus
1. . . . . . . . . . Cover Page; Back Cover Page
2. . . . . . . . . . Investment Goals and Strategies; Fund Performance
3. . . . . . . . . . Fees and Expenses; Investment Risks
4. . . . . . . . . . Investment Goals and Strategies; Investment Risks
5. . . . . . . . . . Not Applicable
6 . . . . . . . . . Fund Management
7. . . . . . . . . . Share Price; How To Buy Shares; Your Account Services
. . . . . . . . . . . How To Sell Shares; Taxes
8. . . . . . . . . . Distribution Expenses
9. . . . . . . . . . Financial Highlights
Part B Statement of Additional Information
10. . . . . . . . . . Cover Page; Table of Contents
11. . . . . . . . . . The Company
12. . . . . . . . . . Investment Policies and Risks;
Investment Restrictions and Strategies
13. . . . . . . . . . Management of the Funds
14. . . . . . . . . . Control Persons and Principal Shareholders
15. . . . . . . . . . Management of the Funds
16. . . . . . . . . . Brokerage Allocation and Other Practices
17. . . . . . . . . . Capital Stock
18. . . . . . . . . . Contained in Prospectuses
19. . . . . . . . . . Tax Consequences of Owning Shares of the Funds
20. . . . . . . . . . Not Applicable
21. . . . . . . . . . Performance
22. . . . . . . . . . Financial Statements
Part C Other Information
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C to this Registration Statement.
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PROSPECTUS | March 1, 1999
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YOU SHOULD KNOW WHAT INVESCO KNOWS(TM)
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SECTOR FUNDS
ENERGY FUND
ENVIRONMENTAL SERVICES FUND
FINANCIAL SERVICES FUND
GOLD FUND
HEALTH SCIENCES FUND
LEISURE FUND
TECHNOLOGY FUND - CLASS II
UTILITIES FUND
No-load mutual funds designed for investors seeking targeted investment
opportunities.
TABLE OF CONTENTS
Investment Goals And Strategies.........................................4
Fund Performance........................................................8
Fees And Expenses.......................................................10
Investment Risks........................................................12
Risks Associated With Particular Investments............................13
Temporary Defensive Positions...........................................16
Portfolio Turnover......................................................17
Fund Management.........................................................17
Portfolio Managers......................................................18
Potential Rewards.......................................................19
Share Price.............................................................20
How To Buy Shares.......................................................20
Your Account Services...................................................23
How To Sell Shares......................................................24
Taxes...................................................................25
Dividends And Capital Gain Distributions................................26
Financial Highlights....................................................27
INVESCO
The Securities and Exchange Commission has not approved or disapproved the
shares of these Funds. Likewise, it has not determined if this Prospectus is
truthful or complete. Anyone who tells you otherwise is committing a federal
crime.
[/R]
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This Prospectus will tell you more about:
[KEY ICON] INVESTMENT OBJECTIVES & STRATEGIES
[ARROW ICON] POTENTIAL INVESTMENT RISKS
[GRAPH ICON] PAST PERFORMANCE & POTENTIAL ADVANTAGES
INVESCO ICON] WORKING WITH INVESCO
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[KEY ICON] INVESTMENT GOALS AND STRATEGIES
FACTORS COMMON TO ALL THE FUNDS
INVESCO Funds Group, Inc. ("INVESCO") is the investment adviser for the
Funds. Together with our affiliated companies, we at INVESCO control all aspects
of the management and sale of the Funds.
FOR MORE DETAILS ABOUT EACH FUND'S CURRENT INVESTMENTS AND MARKET OUTLOOK,
PLEASE SEE THE MOST RECENT ANUAL OR SEMIANNUAL REPORT.
All of the Funds attempt to make your investment grow; Utilities Fund also
attempts to earn income for you. The Funds are aggressively managed. Although
the Funds can invest in debt securities, they primarily invest in equity
securities that INVESCO believes will rise in price faster than other
securities, as well as in options and other investments whose value is based
upon the values of equity securities.
Each Fund normally invests at least 80% of its assets in companies doing
business in the economic sector described by its name. The remainder of each
Fund's assets are not required to be invested in the sector. To determine
whether a potential investment is truly doing business in a particular sector, a
company must meet at least one of the following tests:
o At least 50% of its gross income or its net sales must come from activities
in the sector;
o At least 50% of its assets must be devoted to producing revenues from the
sector; or
o Based on other available information, we determine that its primary
business is within the sector.
INVESCO uses a bottom-up investment approach to create each Fund's
investment portfolio, focusing on company fundamentals and growth prospects when
selecting securities. In general, the Funds emphasize strongly managed companies
that INVESCO believes will generate above-average growth rates for the next
three to five years. We prefer markets and industries where leadership is in a
few hands, and we tend to avoid slower-growing markets or industries.
Each Fund's investments are diversified across the sector on which it
focuses. However, because those investments are limited to a comparatively
narrow segment of the economy, a Fund's investments are not as diversified as
most mutual funds, and far less diversified than the broad securities markets.
This means that the Funds tend to be more volatile than other mutual funds, and
the values of their portfolio investments tend to go up and down more rapidly.
As a result, the value of your investment in a Fund may rise or fall rapidly.
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The Funds are concentrated in these sectors:
[KEY ICON] ENERGY FUND
The Fund invests primarily in the equity securities of companies within the
energy sector. These industries include oil companies, oil and gas exploration
companies, pipeline companies, refinery companies, energy conservation
companies, coal and uranium companies, alternative energy companies and
pollution control technology companies. These businesses may be adversely
affected by foreign government, federal or state regulations on energy
production, distribution and sale.
Generally, we prefer to keep the Fund's investments divided among the three
main energy subsectors: major oil companies, energy services, and oil and gas
exploration/production companies. We adjust portfolio weightings depending on
current economic conditions. Although individual security selection drives the
performance of the Fund, short-term fluctuations in commodity prices may
influence Fund returns and increase price fluctuations in the Fund's shares.
[KEY ICON] ENVIRONMENTAL SERVICES FUND
The Fund invests primarily in the equity securities of companies that
participate in the environmental services industries in the U. S. and foreign
countries. These industries include, but are not limited to, treatment,
reduction, and/or disposal of waste; decontamination, monitoring, or
transportation of waste; remedial services; landfills, recycling, incineration,
pollution reduction projects and systems; environmental insurance and surety
bonding; safety and protection equipment for environmental workers; specialty
environmental services; and companies that have produced or developed
environmentally safe products and technologies related to pollution controls.
The core portion of the Fund's portfolio focuses on environmental services
companies with market-leading positions, which we believe will maintain or
improve their market share regardless of overall economic conditions. The
remainder of the portfolio consists of securities issued by faster-growing
companies. The market prices of these stocks tend to rise and fall more rapidly
than those of larger, more established companies.
In general, government regulation has caused this sector to expand.
However, regulations can always change, which could lower the value of companies
in this sector. Also, since the materials handled and processes involved include
hazardous components, there is significant liability risk. In addition, there
are also risks of intense competition within this sector.
[KEY ICON] FINANCIAL SERVICES FUND
The Fund invests primarily in the equity securities of companies involved
in the financial services sector. These industries include, among others, banks
(regional and money-centers), insurance companies (life, property and casualty,
and multiline), and investment and miscellaneous industries (asset managers,
brokerage firms, and government-sponsored agencies).
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Because of accounting differences in this sector, we place a greater
emphasis on companies that are increasing their revenue streams along with their
earnings. We seek companies that we believe can grow their revenues and earnings
regardless of the interest rate environment -- although securities prices of
financial services companies generally are interest rate-sensitive. We prefer
companies that have both marketing expertise and superior technology, because
INVESCO believes these companies are more likely to deliver products that match
their customers' needs. We attempt to keep the portfolio holdings
well-diversified across the entire financial services sector. We adjust
portfolio weightings depending on current economic conditions and relative
valuations of securities.
This sector generally is subject to extensive governmental regulation,
which may change frequently. In addition, the profitability of businesses in
these industries depends heavily upon the availability and cost of money, and
may fluctuate significantly in response to changes in interest rates, as well as
changes in general economic conditions. From time to time, severe competition
may also affect the profitability of these industries, and the insurance
industry in particular.
[KEY ICON] GOLD FUND
The Fund invests primarily in the equity securities of companies involved
in the exploring, mining, processing, or dealing and investing in gold. The
securities of these companies are highly dependent on the price of gold at any
given time.
Fluctuations in the price of gold directly - and often dramatically -
affect the profitability and market value of companies in this sector. Changes
in political or economic climate for the two largest gold producers - South
Africa and the former Soviet Union - may have a direct impact on the price of
gold worldwide. Up to 10% of the Fund's assets may be invested in gold bullion.
Gold Fund's investments in gold bullion will earn no income return; appreciation
in the market price of gold is the sole manner in which the Fund can realize
gains on bullion investments. The Fund may have higher storage and custody costs
in connection with its ownership of bullion than those associated with the
purchase, holding and sale of more traditional types of investments.
Because of the Fund's narrow focus, investors should expect extreme swings
in the price of the Fund. INVESCO employs a "growth gold" philosophy which
focuses the core portion of the portfolio on mid- to small-sized exploration
companies that have the potential to make major gold discoveries around the
world. The market prices of the stocks of these companies tend to rise and fall
more rapidly than those of larger, more established companies. The remainder of
the Fund's portfolio focuses on major gold stocks which are leaders in their
fields. Up to 100% of the Fund's assets may be invested in foreign companies.
[KEY ICON] HEALTH SCIENCES FUND
The Fund invests primarily in the equity securities of companies that
develop, produce or distribute products or services related to health care.
These industries include, but are not limited to, medical equipment or supplies,
pharmaceuticals, health care facilities, and applied research and development of
new products or services.
We target strongly managed, innovative companies with new products. INVESCO
attempts to blend well-established health care firms with faster-growing, more
dynamic entities. Well-established health care companies typically
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provide liquidity and earnings visibility for the portfolio and represent
core holdings in the Fund. The remainder of the portfolio consists of
faster-growing, more dynamic health care companies, which have new products or
are increasing their market share of existing products. Many faster-growing
health care companies have limited operating histories and their potential
profitability may be dependent on regulatory approval of their products, which
increases the volatility of these companies' security prices.
Many of these activities are funded or subsidized by governments;
withdrawal or curtailment of this support could lower the profitability and
market prices of such companies. Changes in government regulation could also
have an adverse impact. Continuing technological advances may mean rapid
obsolescence of products and services.
[KEY ICON] LEISURE FUND
The Fund invests primarily in the equity securities of companies engaged in
the design, production and distribution of products related to the leisure
activities of individuals. These industries include, but are not limited to,
advertising, communications/cable TV, cruise lines, entertainment, recreational
equipment, lodging, publishers, restaurants and selected retailers. This sector
depends on consumer discretionary spending, which generally falls during
economic downturns. Securities of gambling casinos often are subject to high
price volatility and are considered speculative. Video and electronic games are
subject to risks of rapid obsolescence.
We seek firms that can grow their businesses regardless of the economic
environment. INVESCO attempts to keep the portfolio well-diversified across the
entire leisure sector, adjusting portfolio weightings depending on prevailing
economic conditions and relative valuations of securities.
[KEY ICON] TECHNOLOGY FUND -- CLASS II
The Fund invests primarily in the equity securities of companies engaged in
technology-related industries. These include, but are not limited to, applied
technology, biotechnology, communications, computers, video, electronics,
oceanography, office and factory automation, and robotics. Many of these
products and services are subject to rapid obsolescence, which may lower the
market value of the securities of the companies in this sector.
A core portion of the Fund's portfolio is invested in market-leading
technology companies that we believe will maintain or improve their market share
regardless of overall economic conditions. These companies are usually large,
established firms which are leaders in their field and have a strategic
advantage over many of their competitors. The remainder of the Fund's portfolio
consists of faster-growing, more volatile technology companies that INVESCO
believes to be emerging leaders in their fields. The market prices of these
companies tend to rise and fall more rapidly than those of larger, more
established companies.
[KEY ICON] UTILITIES FUND
The Fund invests primarily in the equity securities of companies that
produce, generate, transmit or distribute natural gas or electricity, as well as
in companies that provide telecommunications services, including local, long
distance and wireless, and excluding broadcasting.
<PAGE>
Governmental regulation, difficulties in obtaining adequate financing and
investment return, environmental issues, prices of fuel for electric generation,
availability of natural gas and risks associated with nuclear power facilities
may adversely affect the market value of the Fund's holdings.
INVESCO seeks to keep the portfolio divided among the electric utilities,
natural gas and telecommunications industries. Weightings within the various
industry segments are continually monitored to prevent extreme tilts in the
Fund's portfolio, and INVESCO adjusts the portfolio weightings depending on the
prevailing economic conditions.
[GRAPH ICON] FUND PERFORMANCE
The bar charts below show each Fund's actual yearly performance ended
December 31 (commonly known as its "total return") over the past decade. The
table below shows average annual returns for various periods ended December 31,
1998 for each Fund compared to the S&P 500 Index. The information in these
charts and the table illustrates the variability of each Fund's returns and how
its performance compared to a broad measure of market performance. The bar
charts provide some indication of the risks of investing in the Funds by showing
changes in the year to year performance of each Fund. Remember, past performance
does not indicate how a Fund will perform in the future.(1)
ACTUAL ANNUAL TOTAL RETURN(2) ACTUAL ANNUAL TOTAL RETURN(2)
The bar chart shows the Energy Fund's The bar chart shows the Environmental
actual yearly performance ended Services Fund's actual yearly
December 31. performance ended December 31.
Worst calendar qtr. 9/98 -18.34% Worst calendar qtr. 9/98 -16.38%
Best calendar qtr. 9/97 28.24% Best calendar qtr. 9/97 18.89%
ACTUAL ANNUAL TOTAL RETURN(2) ACTUAL ANNUAL TOTAL RETURN(2)
The bar chart shows the Financial The bar chart shows the Gold Fund's
Services Fund's actual yearly actual yearly performance ended
performance ended December 31. December 31.
Worst calendar qtr. 9/90 -20.54% Worst calendar qtr. 12/97 -37.51%
Best calendar qtr. 3/91 27.65% Best calendar qtr. 3/96 46.17%
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ACTUAL ANNUAL TOTAL RETURN(2) ACTUAL ANNUAL TOTAL RETURN(2)
The bar chart shows the Health The bar chart shows the Leisure
Sciences Fund's actual yearly Fund's actual yearly performance
performance December 31. ended December 31.
Worst calendar qtr. 3/93 -21.96% Worst calendar qtr. 9/90 -25.01%
Best calendar qtr. 3/91 32.90% Best calendar qtr. 12/98 24.82%
ACTUAL ANNUAL TOTAL RETURN(2) ACTUAL ANNUAL TOTAL RETURN(2)
The bar chart shows the Technology The bar chart shows the Utilities
Fund's actual yearly performance Fund's actual yearly performance
ended December 31. ended December 31.
Worst calendar qtr. 9/90 -28.54% Worst calendar qtr. 9/90 -10.07%
Best calendar qtr. 3/91 34.81% Best calendar qtr. 12/98 16.33%
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AVERAGE ANNUAL RETURN(2)
AS OF 12/31/98
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1 YEAR 5 YEARS 10 YEARS
Energy Fund (27.83%) 5.80% 4.50%
Environmental Services Fund(3) (10.13%) 9.24% 4.38%
Financial Services Fund 13.45% 23.01% 25.06%
Gold Fund (22.54%) (16.98%) (5.95%)
Health Sciences Fund 43.40% 24.87% 24.88%
Leisure Fund 29.78% 14.52% 20.02%
Technology Fund - Class II 30.12% 21.49% 23.77%
Utilities Fund 24.30% 14.48% 14.86%
S&P 500 Index(1) 28.58% 24.03% 19.17%
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(1)The S&P 500 is an unmanaged index that shows the performance of large
capitalization common stocks. Please keep in mind that the S&P 500 does not
pay brokerage, management, administrative or distribution expenses, all of
which are paid by the Funds and are reflected in their annual returns.
(2)Total return figures include reinvested dividends and capital gain
distributions, and include the effect of each Fund's expenses.
(3)Environmental Services Fund did not commence investment operations until
January 2, 1991.
FEES AND EXPENSES
SHAREHOLDER FEES PAID DIRECTLY FROM YOUR ACCOUNT
You pay no fees to purchase Fund shares, to exchange to another INVESCO
fund, or to sell your shares. Accordingly, no fees are paid directly from your
shareholder account. The only Fund costs you pay are annual Fund operating
expenses that are deducted from Fund assets.
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS
INVESCO ENERGY FUND
Management Fees 0.75%
Distribution and Service (12b-1) Fees(1) 0.25%
Other Expenses(2) 0.61%
Total Annual Fund Operating Expenses(2) 1.61%
INVESCO ENVIRONMENTAL SERVICES FUND
Management Fees 0.75%
Distribution and Service (12b-1) Fees (1) 0.25%
Other Expenses(2)(3) 1.27%
Total Annual Fund Operating Expenses(2)(3) 2.27%
INVESCO FINANCIAL SERVICES FUND
Management Fees 0.62%
Distribution and Service (12b-1) Fees(1) 0.25%
Other Expenses(2) 0.26%
Total Annual Fund Operating Expenses(2) 1.13%
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INVESCO GOLD FUND
Management Fees 0.75%
Distribution and Service (12b-1) Fees(1) 0.25%
Other Expenses(2) 0.92%
Total Annual Fund Operating Expenses(2) 1.92%
INVESCO HEALTH SCIENCES FUND
Management Fees 0.64%
Distribution and Service (12b-1) Fees(1) 0.25%
Other Expenses(2) 0.33%
Total Annual Fund Operating Expenses(2) 1.22%
INVESCO LEISURE FUND
Management Fees 0.75%
Distribution and Service (12b-1) Fees(1) 0.25%
Other Expenses(2) 0.52%
Total Annual Fund Operating Expenses(2) 1.52%
INVESCO TECHNOLOGY FUND - CLASS II
Management Fees 0.65%
Distribution and Service (12b-1) Fees(1) 0.25%
Other Expenses(2) 0.34%
Total Annual Fund Operating Expenses(2) 1.24%
INVESCO UTILITIES FUND
Management Fees 0.75%
Distribution and Service (12b-1) Fees(1) 0.25%
Other Expenses(2)(3) 0.38%
Total Annual Fund Operating Expenses(2)(3) 1.38%
(1) Because the Funds pay a 12b-1 distribution fee which is based upon each
Fund's assets, if you own shares of a Fund for a long period of time, you
may pay more than the economic equivalent of the maximum front-end sales
charge permitted for mutual funds by the National Association of Securities
Dealers, Inc.
(2) Each Fund's actual Total Annual Fund Operating Expenses were lower than
the figures shown, because their transfer agent fees and/or custodian fees
were reduced under expense offset arrangements. Because of an SEC
requirement, the figures shown do not reflect these reductions.
(3) Certain expenses of the INVESCO Environmental Services Fund and INVESCO
Utilities Fund are being absorbed voluntarily by INVESCO pursuant to a
commitment to those Funds. After absorption, the INVESCO Environmental
Services Fund "Other Expenses" and "Total Annual Fund Operating Expenses"
were 0.92% and 1.92%, respectively, and the INVESCO Utilities Fund "Other
Expenses" and "Total Annual Fund Operating Expenses" were 0.29% and 1.29%,
respectively. This commitment may be changed at any time following
consultation with the Board of Directors.
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EXAMPLE
This Example is intended to help you compare the cost of investing in the
Funds to the cost of investing in other mutual funds.
The Example assumes that you invested $10,000 in a Fund for the time
periods indicated and then redeemed all of your shares at the end of those
periods. The Example also assumes that your investment had a hypothetical 5%
return each year, and assumes that a Fund's expenses remained the same. Although
a Fund's actual costs and performance may be higher or lower, based on these
assumptions your costs would have been:
The following reflects the costs without the absorption of expenses:(1)
1 year 3 years 5 years 10 years
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INVESCO Energy Fund $165 $512 $ 882 $1,923
INVESCO Environmental Services Fund $233 $717 $ 1,227 $2,628
INVESCO Financial Services Fund $116 $361 $ 625 $1,380
INVESCO Gold Fund $197 $608 $ 1,046 $2,259
INVESCO Health Sciences Fund $125 $389 $ 674 $1,484
INVESCO Leisure Fund $156 $484 $ 835 $1,823
INVESCO Technology Fund-Class II $127 $396 $ 685 $1,507
INVESCO Utilities Fund $141 $440 $ 760 $1,666
(1)The following reflects the costs with the absorption of expenses:
1 year 3 years 5 years 10 years
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INVESCO Enviromental Services Fund $197 $608 $1,046 $2,259
INVESCO Utilities Fund $132 $411 $712 $1,564
[ARROW ICON] INVESTMENT RISKS
BEFORE INVESTING IN A FUND, YOU SHOULD DETERMINE THE LEVEL OF RISK WITH WHICH
YOU ARE COMFORTABLE. TAKE INTO ACCOUNT FACTORS LIKE YOUR AGE, CAREER, INCOME
LEVEL, AND TIME HORIZON.
You should determine the level of risk with which you are comfortable
before you invest. The principal risks of investing in any mutual fund,
including these Funds, are:
NOT INSURED. Mutual funds are not insured by the Federal Deposit Insurance
Corporation ("FDIC") or any other agency, unlike bank deposits such as CDs or
savings accounts.
NO GUARANTEE. No mutual fund can guarantee that it will meet its investment
objectives.
POSSIBLE LOSS OF INVESTMENT. A mutual fund cannot guarantee its
performance, nor assure you that the market value of your investment will
increase. You may lose the money you invest, and the Funds will not reimburse
you for any of these losses.
VOLATILITY. The price of your mutual fund shares will increase or decrease
with changes in the value of a Fund's underlying investments.
NOT A COMPLETE INVESTMENT PLAN. An investment in any mutual fund does not
constitute a complete investment plan. The Funds are designed to be only a part
of your personal investment plan.
YEAR 2000. Many computer systems in use today may not be able to recognize
any date after December 31, 1999. If these systems are not fixed by that date,
it is possible that they could generate erroneous information or fail
<PAGE>
altogether. INVESCO has committed substantial resources in an effort to
make sure that its own major computer systems will continue to function on and
after January 1, 2000. Of course, INVESCO cannot fix systems that are beyond its
control. If INVESCO's own systems, or the systems of third parties upon which it
relies, do not perform properly after December 31, 1999, the Funds could be
adversely affected.
In addition, the markets for, or values of, securities in which the Funds
invest may possibly be hurt by computer failures affecting portfolio investments
or trading of securities beginning January 1, 2000. For example, improperly
functioning computer systems could result in securities trade settlement
problems and liquidity issues, production issues for individual companies and
overall economic uncertainties. Individual issuers may incur increased costs in
making their own systems Year 2000 compliant. The combination of market
uncertainty and increased costs means that there is a possibility that Year 2000
computer issues may adversely affect the Funds' investments. At this time, it is
generally believed that foreign issuers, particularly those in emerging and
other markets, may be more vulnerable to Year 2000 problems than will be issuers
in the U.S.
[ARROW ICON] RISKS ASSOCIATED WITH PARTICULAR INVESTMENTS
MARKET RISK
Equity stock prices vary and may fall, thus reducing the value of your
Fund's investment. Certain stocks selected for any Fund's portfolio may decline
in value more than the overall stock market.
CREDIT RISK
The Funds may invest in debt instruments, such as notes and bonds. There is
a possibility that the issuers of these instruments will be unable to meet
interest payments or repay principal. Changes in the financial strength of an
issuer may reduce the credit rating of its debt instruments and may affect their
value.
FOREIGN SECURITIES
Investments in foreign and emerging markets carry special risks, including
currency, political, regulatory and diplomatic risks. Energy, Financial
Services, Health Sciences, Leisure, Technology-Class II and Utilities Funds may
invest up to 25% of their respective assets in securities of non-U.S. issuers.
However, the impact of the euro may be even greater for Gold and Environmental
Services Funds, since these two Funds have the ability to invest more than 25%
of their respective assets in the securities of non-U.S. issuers.
CURRENCY RISK. A change in the exchange rate between U.S. dollars and a
foreign currency may reduce the value of a Fund's investment in a security
valued in the foreign currency, or based on that currency value.
POLITICAL RISK. Political actions, events or instability may result in
unfavorable changes in the value of a security.
REGULATORY RISK. Government regulations may affect the value of a security.
In foreign countries, securities markets that are less regulated than those
in the U.S. may permit trading practices that are not allowed in the U.S.
DIPLOMATIC RISK. A change in diplomatic relations between the U.S. and a
foreign country could affect the value or liquidity of investments.
EUROPEAN ECONOMIC AND MONETARY UNION. Austria, Belgium, Finland, France,
Germany, Ireland, Italy, Luxembourg, The Netherlands, Portugal and Spain
are presently members of the European Economic and Monetary Union (the
"EMU") which as of January 1, 1999, adopted the euro as a common currency.
<PAGE>
The national currencies will be sub-currencies of July 1, 2002, at which
time the old currencies will disappear entirely. Other European
countries may adopt the euro in the future.
The introduction of the euro presents some uncertainties and possible risks,
which could adversely affect the value of securities held by the Funds.
EMU countries, as a single market, may affect future investment decisions of
the Funds. As the euro is implemented, there may be changes in the relative
strength and value of the U.S. dollar and other major currencies, as well as
possible adverse tax consequences. The euro transition by EMU countries
present and future - may affect the fiscal and monetary levels of those
participating countries. There may be increased levels of price competition
among business firms within EMU countries and between businesses in EMU and
non-EMU countries. The outcome of these uncertainties could have
unpredictable effects on trade and commerce and result in increased
volatility for all financial markets.
INTEREST RATE RISK
Changes in interest rates will affect the resale value of debt securities
held in a Fund's portfolio. In general, as interest rates rise, the resale value
of debt securities decreases; as interest rates decline, the resale value of
debt securities generally increases. Debt securities with longer maturities
usually are more sensitive to interest rate movements.
DURATION RISK
Duration is a measure of a debt security's sensitivity to interest rate
changes. Duration is usually expressed in terms of years, with longer durations
usually more sensitive to interest rate fluctuations.
LIQUIDITY RISK
A Fund's portfolio is liquid if the Fund is able to sell the securities it
owns at a fair price within a reasonable time. Liquidity is generally related to
the market trading volume for a particular security. Investments in smaller
companies or in foreign companies or companies in emerging markets are subject
to a variety of risks, including potential lack of liquidity.
DERIVATIVES RISK
A derivative is a financial instrument whose value is "derived," in some
manner, from the price of another security, index, asset or rate. Derivatives
include options and futures contracts, among a wide range of other instruments.
The principal risk of investments in derivatives is that the fluctuations in
their values may not correlate perfectly with the overall securities markets.
Some derivatives are more sensitive to interest rate changes and market price
fluctuations than others. Also, derivatives are subject to counterparty risk.
OPTIONS AND FUTURES
Options and futures are common types of derivatives that a Fund may use to
hedge its investments. An option is the right to buy or sell a security at a
specific price on or before a specific date. A future is an agreement to buy or
sell a security at a specific price on a specific date.
COUNTERPARTY RISK
This is a risk associated primarily with repurchase agreements and some
derivatives transactions. It is the risk that the other party in such a
transaction will not fulfill its contractual obligation to complete a
transaction with a Fund.
<PAGE>
LACK OF TIMELY INFORMATION RISK
Timely information about a security or its issuer may be unavailable,
incomplete or inaccurate. This risk is more common to securities issued by
foreign companies and companies in emerging markets than it is to the securities
of U.S.-based companies.
Each Fund invests primarily in equity securities of companies in the
economic sector described by its name. However, in an effort to diversify their
holdings and provide some protection against the risk of other investments, the
Funds also may invest in other types of securities as indicated in the chart
below. These investments, which at any given time may constitute a significant
portion of a Fund's portfolio, have their own risks.
ENVIRON- FINANCIAL
INVESTMENT RISKS ENERGY MENTAL SERVICES GOLD
SERVICES
- --------------------------------------------------------------------------------
ILLIQUID SECURITIES Liquidity
A security that cannot Risk X X X X
be sold quickly at its
fair value.
- --------------------------------------------------------------------------------
RULE 144A SECURITIES Liquidity
Securities that are not Risk X X X X
registered, but which are
bought and sold solely by
institutional investors.
The Fund considers many
Rule 144A securities to
be "liquid," although the
market for such
securities typically is
less active than the
public securities
markets.
- --------------------------------------------------------------------------------
DEBT SECURITIES
Securities issued by Market,
private companies or Credit,
governments representing Interest
an obligation to pay Rate and X X X X
interest and to repay Duration
principal when the Risks
security matures.
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENTS Credit and
A contract under which Counter-
the seller of a security Party Risks X X X X
agrees to buy it back at
an agreed-upon price and
time in the future.
- --------------------------------------------------------------------------------
AMERICAN DEPOSITORY
RECEIPTS (ADRS)
These are securities
issued by U.S. banks that
represent shares of Market,
foreign corporations held Informa
by those banks. Although tion, Polit X X X X
traded in U.S. ical,
securities markets and Regula
valued in U.S. dollars, tory, Dip
ADRs carry most of the lomatic,
risks of investing Liquidity
directly in foreign and Cur
securities. rency
Risks
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT RISKS HEALTH LEISURE TECHNOLOGY UTILITIES
SCIENCES - CLASS II
- --------------------------------------------------------------------------------
ILLIQUID SECURITIES
A security that Liquidity
cannot be sold quickly Rish X X X X
at its fair value.
- --------------------------------------------------------------------------------
RULE 144A SECURITIES Liquidity
Securities that are Risk
not registered, but
which are bought and
sold solely by
institutional
investors. The Fund X X X X
considers many Rule
144A securities to be
"liquid," although the
market for such
securities typically
is less active than
the public securities
markets.
- --------------------------------------------------------------------------------
DEBT SECURITIES
Securities issued by
private companies or Market,
governments Credit, X X X X
representing an Interest
obligation to pay Rate and
interest and to repay Duration
principal when the Risks
security matures.
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
A contract Credit and
under which the seller Counter-
of a security agrees party Risks X X X X
to buy it back at an
agreed-upon price and
time in the future.
- --------------------------------------------------------------------------------
AMERICAN DEPOSITORY
RECEIPTS (ADRS)
These are securities
issued by U.S. banks
that represent shares
of foreign
corporations held by Market,
those banks. Although Informa X X X X
traded in U.S. tion, Polit
securities markets and ical,
valued in U.S. Regula
dollars, ADRs carry tory, Dip
most of the risks of lomatic,
investing directly in Liquidity
foreign and Cur
securities. rency
Risks
- --------------------------------------------------------------------------------
[ARROW ICON] TEMPORARY DEFENSIVE POSITIONS
When securities markets or economic conditions are unfavorable or
unsettled, we might try to protect the assets of any Fund by investing in
securities that are highly liquid such as high quality money market instruments,
like short-term U.S. government obligations, commercial paper or repurchase
agreements. We have the right to invest up to 100% of a Fund's assets in these
securities, although we are unlikely to do so. Even though the securities
purchased for defensive purposes often are considered
<PAGE>
the equivalent of cash, they also have their own risks. Investments that
are highly liquid or comparatively safe tend to offer lower returns. Therefore,
a Fund's performance could be comparatively lower if it concentrates in
defensive holdings.
[ARROW ICON] PORTFOLIO TURNOVER
We actively manage and trade the Funds' portfolios. Therefore, some of the
Funds may have a higher portfolio turnover rate compared to many other mutual
funds. The Funds with higher than average portfolio turnover rates for the
fiscal year ended October 31, 1998, are:
INVESCO Energy Fund 192%
INVESCO Environmental Services Fund 146%
INVESCO Gold Fund 133%
INVESCO Technology Fund - Class II 178%
A portfolio turnover rate of 200%, for example, is equivalent to a Fund
buying and selling all of the securities in its portfolio two times in the
course of a year. A comparatively high turnover rate may result in higher
brokerage commissions and taxable capital gain distributions to a Fund's
shareholders.
[INVESCO ICON] FUND MANAGEMENT
INVESCO IS A SUBSIDIARY OF AMVESCAP PLC, AN INTERNATIONAL INVESTMENT MANAGEMENT
COMPANY THAT MANAGES MORE THAN $275 BILLION IN ASSETS WORLDWIDE. AMVESCAP IS
BASED IN LONDON, WITH MONEY MANAGERS LOCATED IN EUROPE, NORTH AND SOUTH AMERICA,
AND THE FAR EAST. OF INVESCO, INVESCO DISTRIBUTORS, INC. ("IDI"), IS THE FUNDS'
DISTRIBUTOR AND IS RESPONSIBLE FOR THE SALE OF THE FUNDS' SHARES.
THE INVESTMENT ADVISER
INVESCO is the investment adviser of the Funds. INVESCO was founded in 1932 and
manages over $18.9 billion for more than 904,000 shareholders of 14 INVESCO
mutual funds. INVESCO performs a wide variety of other services for the Funds,
including administration and transfer agency functions (the processing of
purchases, sales and exchanges of Fund shares). A wholly owned subsidiary
INVESCO and IDI are subsidiaries of AMVESCAP PLC.
<PAGE>
The following table shows the fees the Funds paid to INVESCO for its
advisory services in the year ended October 31, 1998:
================================================================================
ADVISORY FEE AS A PERCENTAGE OF
FUND AVERAGE ANNUAL ASSETS UNDER MANAGEMENT
- --------------------------------------------------------------------------------
INVESCO Energy Fund 0.75%
INVESCO Environmental Services Fund 0.75%
INVESCO Financial Services Fund 0.62%
INVESCO Gold Fund 0.75%
INVESCO Health Sciences Fund 0.64%
INVESCO Leisure Fund 0.75%
INVESCO Technology Fund -- Class II 0.65%
INVESCO Utilities Fund 0.75%
================================================================================
[INVESCO ICON] PORTFOLIO MANAGERS
All of the Funds are managed by members of INVESCO's Sector Team, which is
headed by William R. Keithler and John R. Schroer. The people primarily
responsible for the day-to-day management of the Funds are:
ENERGY John S. Segner
ENVIRONMENTAL SERVICES John R. Schroer
FINANCIAL SERVICES Jeffrey G. Morris
GOLD John S. Segner
HEALTH SCIENCES John R. Schroer
LEISURE Mark Greenberg
TECHNOLOGY William R. Keithler
UTILITIES Brian Hayward
MARK GREENBERG, a Chartered Financial Analyst, has managed Leisure Fund
since 1996. He is a vice president of INVESCO. Mark was previously a vice
president and global media and entertainment analyst with Scudder, Stevens &
Clark (1990 to 1996); media, technology and telecommunications analyst with
Campbell Advisors (1988 to 1989); media and technology analyst with Irving Trust
Company (1983 to 1988); and an analyst with Argus Research and Bernstein
Macauley (1980 to 1983). He received a B.S.B.A. from Marquette University.
BRIAN B. HAYWARD, a Chartered Financial Analyst, has been the manager of
Utilities Fund since July 1997. He is a vice president of INVESCO. He also
manages INVESCO VIF - Utilities Fund and INVESCO Worldwide Communications Fund.
Brian began his investment career in 1985, and before joining INVESCO was the
senior equity analyst with Mississippi Valley Advisors in St. Louis, Missouri.
He received an M.A. in Economics and a B.A. in Mathematics from the University
of Missouri.
WILLIAM R. KEITHLER, a Chartered Financial Analyst, has been the portfolio
manager of Technology Fund since January 1, 1999. He also manages the INVESCO
VIF - Technology Fund and is a senior vice president of INVESCO. Bill was
previously a portfolio manager with Berger Associates, Inc. (1993 to 1998) and a
portfolio manager with INVESCO (1986 to 1993). He received an M.S. from the
University of Wisconsin - Madison and a B.A. from Webster College.
<PAGE>
JEFFREY G. MORRIS, a Chartered Financial Analyst, has been a co-portfolio
manager of Financial Services Fund since March 1997, and is a vice president of
INVESCO. He joined INVESCO in 1992 and served as a research analyst from 1994 to
1995. Jeff received an M.S. in Finance from the University of Colorado-Denver
and a B.S. in Business Administration from Colorado State University.
JOHN R. SCHROER, a Chartered Financial Analyst, leads INVESCO's Health Team
and manages Environmental Services Fund, Gold Fund and Health Sciences Fund. He
has been the portfolio manager of Environmental Services Fund since November
1998, of the Gold Fund since February 1999 and of Health Sciences Fund since
October 1997, and was Health Sciences Fund's co-manager since 1994. John also
manages INVESCO VIF - Health Sciences Fund and INVESCO Global Health Sciences
Fund. He is a senior vice president of INVESCO and a vice president of INVESCO
Global Health Sciences Fund. He was previously an assistant vice president with
Trust Company of the West. John received an M.B.A. and B.S. from the University
of Wisconsin-Madison.
JOHN S. SEGNER has been the portfolio manager of Energy Fund since February
1997 and of the Gold fund since February 1999. He is also a vice president of
INVESCO. John was previously a managing director and principal with The Mitchell
Group, Inc. (1990 to 1997), manager of marketing development (1988 to 1990) and
manager of financial analysis (1986 to 1988) with First Tennessee National
Corporation, a financial analyst with Amerada Hess Corporation (1985 to 1986)
and an engineer with Texaco Inc. (1980 to 1983). He received an M.B.A. in
Finance from the University of Texas-Austin and a B.S. in Civil Engineering from
the University of Alabama.
[INVESCO ICON] POTENTIAL REWARDS
NO SINGLE FUND SHOULD REPRESENT YOUR COMPLETE INVESTMENT PROGRAM NOR SHOULD YOU
ATTEMPT TO USE THE FUNDS FOR SHORT-TERM TRADING PURPOSES.
The Funds offer shareholders the potential to increase the value of their
capital over time; Utilities Fund also offers the opportunity for quarterly
income. like most mutual funds, each Fund seeks to provide higher returns than
the market or its competitors, but cannot guarantee that performance. While each
Fund invests in a single targeted market sector, each seeks to minimize risk by
investing in many different companies.
SUITABILITY FOR INVESTORS
Only you can determine if an investment in a Fund is right for you based
upon your own economic situation, the risk level with which you are comfortable
and other factors. In general, the Funds are most suitable for investors who:
o are willing to grow their capital over the long-term (at least five years)
o can accept the additional risks associated with sector investing
o understand that shares of a Fund can and likely will have significant
price fluctuations
o are investing tax-deferred retirement accounts, such as Traditional and
Roth Individual Retirment Accounts ("IRAs"), as well as employer-sponsored
qualified retirement plans, including 401(k)s and 403(b)s, all of which
have longer investment horizons.
<PAGE>
You probably do not want to invest in the Funds if you are:
o primarily seeking current dividend income (although Utilities Fund does
seek to provide income in addition to capital appreciation)
o unwilling to accept potentially significant changes in the price of Fund
shares
o speculating on short-term fluctuations in the stock markets.
[INVESCO ICON] SHARE PRICE
CURRENT MARKET VALUE OF FUND ASSETS + ACCRUED INTEREST AND DIVIDENDS - FUND
DEBTS, INCLUDING ACCRUED EXPENSES / NUMBER OF SHARES = YOUR SHARE PRICE (NAV).
The value of your fund shares is likely to change daily. This value is known as
the Net Asset Value per share, or NAV. INVESCO determines the market value of
each investment in each Fund's portfolio each day that the New York Stock
exchange ("NYSE") is open, at the close of trading on that exchange (normally,
4:00 p.m. New York time). Therefore, shares of the Funds are not priced on days
when the NYSE is closed, which, generally, is on weekends and national holidays
in the U.S.
NAV is calculated by adding together the current market price of all of a
Fund's investments and other assets, including accrued interest and dividends;
subtracting the Fund's debts, including accrued expenses; and dividing that
dollar amount by the total number of the Fund's outstanding shares.
All purchases, sales and exchanges of Fund shares are made by INVESCO at
the NAV next calculated after INVESCO receives proper instructions from you to
purchase, redeem or exchange shares of a Fund. Your instructions must be
received by INVESCO no later than the close of the NYSE to effect transactions
at that day's NAV. If INVESCO hears from you after that time, your instructions
will be processed at the NAV calculated at the end of the next day that the NYSE
is open.
In addition, foreign securities exchanges, which set the prices for foreign
securities held by the Funds, are not always open the same days as the NYSE, and
may be open for business on days the NYSE is not. For example, Thanksgiving Day
is a holiday observed by the NYSE and not by overseas exchanges. In this
situation, the Funds would not calculate NAV on Thanksgiving Day (and INVESCO
would not buy, sell or exchange shares for you on that day), even though
activity on foreign exchanges could result in changes in the value of
investments held by the Funds on that day.
[INVESCO ICON] HOW TO BUY SHARES
TO BUY SHARES AT THAT DAY'S CLOSING PRICE, YOU MUST CONTACT US BEFORE THE CLOSE
OF THE NYSE, NORMALLY, 4:00 P.M. EASTERN TIME.
The following chart shows several convenient ways to invest in the Funds.
There is no charge to invest, exchange or redeem shares when you make
transactions directly through INVESCO. However, if you invest in a Fund through
a securities broker, you may be charged a commission or transaction fee for
either purchases or sales of Fund shares. For all new accounts, please send a
completed application form, and specify the fund or funds you wish to purchase.
<PAGE>
INVESCO reserves the right to increase, reduce or waive each Fund's minimum
investment requirements in its sole discretion, if it determines this action is
in the best interests of that Fund's shareholders. INVESCO also reserves the
right in its sole discretion to reject any order to buy Fund shares, including
purchases by exchange.
MINIMUM INITIAL INVESTMENT. $1,000, which is waived for regular investment
plans, including EasiVest and Direct Payroll Purchase, and certain retirement
plans, including IRAs.
MINIMUM SUBSEQUENT INVESTMENT. $50 (Minimums are lower for certain
retirement plans.)
EXCHANGE POLICY. You may exchange your shares in any of the Funds for those
in another INVESCO mutual fund on the basis of their respective NAVs at the time
of the exchange.
FUND EXCHANGES CAN BE A CONVENIENT WAY FOR YOU TO DIVERSIFY YOUR INVESTMENTS, OR
TO REALLOCATE YOUR INVESTMENTS WHEN YOUR OBJECTIVES CHANGE.
Before making any exchange, be sure to review the prospectuses of the funds
involved and consider the differences between the funds. Also, be certain that
you qualify to purchase certain classes of shares in the new fund. An exchange
is the sale of shares from one fund immediately followed by the purchase of
shares in another. Therefore, any gain or loss realized on the exchange is
recognizable for federal income tax purposes (unless, of course, you or your
account qualifies as tax-deferred under the Internal Revenue Code). If the
shares of the fund you are selling have gone up in value since you bought them,
the sale portion of an exchange may result in taxable income to you.
We have the following policies governing exchanges:
o Both fund accounts involved in the exchange must be registered in exactly
the same name(s) and Social Security or federal tax I.D. number(s).
o You may make up to four exchanges out of each Fund per year.
o Each Fund reserves the right to reject any exchange request, or to modify
or terminate the exchange policy, in the best interests of the Fund and
its shareholders. Notice of all such modifications or termination that
affect all shareholders of the Fund will be given at least 60 days
prior to the effective date of the change, except in unusual instances,
including a suspension of redemption of the exchanged security under
Section 22(e) of the Investment Company Act of 1940.
In addition, the ability to exchange may be temporarily suspended at any
time that sales of the Fund into which you wish to exchange are temporarily
stopped.
Please remember that if you pay by check or wire and your funds do not
clear, you will be responsible for any related loss to any Fund or INVESCO. If
you are already an INVESCO funds shareholder, the Fund may seek reimbursement
for any loss from your existing account(s).
<PAGE>
<TABLE>
<CAPTION>
METHOD INVESTMENT MINIMUM PLEASE REMEMBER
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BY CHECK $1,000 for regular accounts;
Mail to: $250 for an IRA;
INVESCO Funds Group, Inc., $50 minimum for each
P.O. Box 173706, subsequent investment.
Denver, CO 80217-3706.
You may send your check
by overnight courier to:
7800 E. Union Ave.
Denver, CO 80237.
- ------------------------------------------------------------------------------------------------------------------
BY TELEPHONE OR WIRE $1,000 Payment must be received within 3
Call 1-800-525-8085 to request business days, or the transaction
your purchase. Then send your may be cancelled.
check by overnight courier to our
street address: 7800 E. Union Ave.,
Denver, CO 80237. Or you may
send your payment by
bank wire (call INVESCO for
instructions).
- ------------------------------------------------------------------------------------------------------------------
REGULAR INVESTING WITH EASIVEST $50 per month for EasiVest; $50 Like all regular investment plans,
OR DIRECT PAYROLL PURCHASE per pay period for Direct Payroll neither EasiVest nor Direct Payroll
You may enroll on your fund Purchase. You may start or stop Purchase ensures a profit or protects
application, or call us for a separate your regular investment plan at any against loss in a falling market.
form and more details. Investing time, with two weeks' notice to Because you'll invest continually,
the same amount on a monthly basis INVESCO. regardless of varying price levels,
allows you to buy more shares when consider your financial ability to
prices are low and fewer shares when keep buying through low price lev
prices are high. This "dollar cost els. And remember that you will
averaging" may help offset market lose money if you redeem your
fluctuations. Over a period of time, shares when the market value of all
your average cost per share may be your shares is less than their cost.
less than the actual average per
share.
- ------------------------------------------------------------------------------------------------------------------
BY PAL(R) $1,000 Be sure to write down the confirma
Your "Personal Account Line" is tion number provided by PAL
available for subsequent purchases (R). Payment must be received
and exchanges 24 hours a day. within 3 business days, or the
Simply call 1-800-525-8085. transaction may be cancelled.
- ------------------------------------------------------------------------------------------------------------------
BY EXCHANGE $1,000 to open a new account; $50 See "Exchange Policy."
Between two INVESCO funds. Call for written requests to purchase
1-800-525-8085 for prospectuses of additional shares for an existing
other INVESCO funds. Exchanges account. (The exchange minimum
may be made by phone or at our is $250 for exchanges requested by
Web site at www.invesco.com. You telephone.)
may also establish an automatic
monthly exchange service between
two INVESCO funds; call us for further
details and the correct form.
</TABLE>
<PAGE>
DISTRIBUTION EXPENSES. We have adopted a Plan and Agreement of Distribution
(commonly known as a "12b-1 Plan") for the Funds. The 12b-1 fees paid by each
Fund are used to defray all or part of the cost of preparing and distributing
prospectuses and promotional materials, as well as to pay for certain
distribution-related and other services. These services include compensation to
third party brokers, financial advisers and financial services companies that
sell Fund shares and/or service shareholder accounts.
Under the Plan, each Fund's payments are limited to an amount computed at
an annual rate of 0.25% of the Fund's average net assets. If distribution
expenses for a Fund exceed these computed amounts, INVESCO pays the difference.
[INVESCO ICON] YOUR ACCOUNT SERVICES
SHAREHOLDER ACCOUNTS. INVESCO maintains your share account, which contains
your current Fund holdings. The Funds no longer issue share certificates.
INVESCO PROVIDES YOU WITH SERVICES DESIGNED TO MAKE IT SIMPLE FOR YOU TO BUY,
SELL OR EXCHANGE YOUR SHARES OF ANY INVESCO MUTUAL FUND.
QUARTERLY INVESTMENT SUMMARIES. Each calendar quarter, you receive a
written statement which consolidates and summarizes account activity and value
at the beginning and end of the period for each of your INVESCO funds.
TRANSACTION CONFIRMATIONS. You receive detailed confirmations of individual
purchases, exchanges and sales. If you choose certain recurring transaction
plans (for instance, EasiVest), your transactions are confirmed on your
quarterly Investment Summaries.
TELEPHONE TRANSACTIONS. You may buy, exchange and sell Fund shares by
telephone, unless you specifically decline these privileges when you fill out
the INVESCO new account application.
YOU CAN CONDUCT MOST TRANSACTIONS AND CHECK ON YOUR ACCOUNT THROUGH OUR
TOLL-FREE TELEPHONE NUMBER. YOU MAY ALSO ACCESS PERSONAL ACCOUNT INFORMATION AT
OUR WEB SITE, WWW.INVESCO.COM.
Unless you decline the telephone transaction privileges when you fill out
and sign the new account application, a telephone transaction authorization
form, or otherwise use your telephone transaction privileges, you lose certain
rights if someone gives fraudulent or unauthorized instructions to invesco that
result in a loss to you. in general, if invesco has followed reasonable
procedures, such as recording telephone instructions and sending written
transaction confirmations, INVESCO is not liable for following telephone
instructions that it believes to be genuine. Therefore, you have the risk of
loss due to unauthorized or fraudulent instructions.
IRAS AND OTHER RETIREMENT PLANS. Shares of any INVESCO mutual fund may be
purchased for IRAs and many other types of tax-deferred retirement plans. Please
call INVESCO for information and forms to establish or transfer your existing
retirement plan or account.
<PAGE>
[INVESCO ICON] HOW TO SELL SHARES
The following chart shows several convenient ways to sell your Fund shares.
Shares of the Funds may be sold at any time at the next NAV calculated after
your request to sell in proper form is received by INVESCO. Depending on the
performance of any Fund, the NAV at the time you sell your shares may be more or
less than the price you paid to purchase your shares.
TO SELL SHARES AT THAT DAY'S CLOSING PRICE, YOU MUST CONTACT US BEFORE 4:00 P.M.
EASTERN TIME.
If you own shares in more than one INVESCO fund, please specify the fund
whose shares you wish to sell. Remember that any sale or exchange of shares in a
non-retirement account will likely result in a taxable gain or loss.
While INVESCO attempts to process telephone redemptions promptly, there may
be times - particularly in periods of severe economic or market disruption when
you may experience delays in redeeming shares by phone.
INVESCO usually mails you the proceeds from the sale of Fund shares within
seven days after we receive your request to sell in proper form. However,
payment may be postponed under unusual circumstances - for instance, if normal
trading is not taking place on the NYSE, or during an emergency as defined by
the Securities and Exchange Commission. If your INVESCO fund shares were
purchased by a check which has not yet cleared, payment will be made promptly
when your purchase check does clear; that can take up to 15 days.
If you participate in EasiVest, the Funds' automatic monthly investment
program, and sell all of the shares in your account, we will not make any
additional EasiVest purchases unless you give us other instructions.
Because of the Funds' expense structure, it costs as much to handle a small
account as it does to handle a large one. If the value of your account in any
Fund falls below $250 as a result of your actions (for example, sale of your
Fund shares), each Fund reserves the right to sell all of your shares, send the
proceeds of the sale to you and close your account. Before this is done, you
will be notified and given 60 days to increase the value of your account to $250
or more.
<TABLE>
<CAPTION>
<S> <C> <C>
METHOD INVESTMENT MINIMUM PLEASE REMEMBER
- ---------------------------------------------------------------------------------------------------------------------
BY TELEPHONE $250 (or, if less, full liquidation of INVESCO's telephone redemption
Call us tol-free at: the account) for a redemption privileges may be modified or
1-800-825-8085 check; $1,000 for a wire to your terminated in the future at
bank of record. The maximum INVESCO's discretion.
amount which may be redeemed by
telephone is generally $25,000.
- ----------------------------------------------------------------------------------------------------------------------
IN WRITING Any amount. The redemption INVESCO no longer issues paper
Mail our request to INVESCO request must be signed by all regis- certificates for shares. If the
Funds Group, Inc., P.O. Box tered account owners. Payment will you are selling are represented by
173706, Denver, CO 80217-3706. be mailed to your address as it stock certificates, the certificates
You may also send your request appears on INVESCO's records, or must be sent to INVESCO before we
by overnight courier to 7800 E. to a bank designated by you in can process your redemption.
Union Ave., Denver, CO 80217. writing
<PAGE>
BY EXCHANGE $1,000 to open a new account; $50 See "Exchange Policy."
Between two INVESCO funds. Call for written requests to purchase
1-800-525-8085 for prospectuses additional shares for an existing
of other INVESCO funds. Exchanges account. (The exchange minimum
may be made by phone or at our is $250 for exchanges requested by
Web site at www.invesco.com. telephone).
You may also establish an automatic
monthly exchange services between
two INVESCO funds; call us for
further details and the correct
form.
- -----------------------------------------------------------------------------------------------------------------------
PERIODIC WITHDRAWAL PLAN $100 per payment on a monthly or You may have at least $10,000 total
You may call us to request the or quarterly basis. The redemption invested with the INVESCO funds
appropriate form and more inform- check may be made payable to any with at least $5,000 of that total
ation at 1-800-525-8085. party you designate. invested in the fund from which
withdrawals will be made.
- -----------------------------------------------------------------------------------------------------------------------
PAYMENT TO THIRD PARTY Any amount. All registered account owners must
Mail your request to INVESCO sign the request, with signature
Funds Group, Inc. guarantees from an eligible guarantor
P.O. Box 173706 financial institution, such as a
commercial bank or a recognized
national or regional securities
firm.
</TABLE>
[GRAPH ICON] TAXES
Everyone's tax status is unique. We encourage you to consult your own tax
adviser on the tax impact to you of investing in the Funds.
TO AVOID BACKUP WITHHOLDING, BE SURE WE HAVE YOUR CORRECT SOCIAL SECURITY OR
TAXPAYER IDENTIFICATION NUMBER.
Each Fund customarily distributes to its shareholders substantially all of
its net investment income, net capital gains and net gains from foreign currency
transactions, if any. You receive a proportionate part of these distributions,
depending on the percentage of each Fund's shares that you own. These
distributions are required under federal tax laws governing mutual funds. It is
the policy of each Fund to distribute all investment company taxable income and
net capital gains. As a result of this policy and the Funds' qualification as a
regulated investment company, it is anticipated that none of the Funds will pay
any federal income or excise taxes. Instead, each Fund will be accorded conduit
or "pass through" treatment for federal income tax purposes.
However, unless you are (or your account is) exempt from income taxes, you
must include all dividends and capital gain distributions paid to you by a Fund
in your taxable income for federal, state and local income tax purposes. You
also may realize capital gains or losses when you sell shares of a Fund at more
or less than the price you originally paid. An exchange is treated as a sale,
and is a taxable event. Dividends and other distributions usually are taxable
whether you receive them in cash or automatically reinvest them in shares of the
distributing Fund(s) or other INVESCO funds.
If you have not provided INVESCO with complete, correct tax information,
the Funds are required by law to withhold 31% of your distributions and any
money that you receive from the sale of shares of the Funds as a backup
withholding tax.
<PAGE>
We will provide you with detailed information every year about your
dividends and capital gain distributions. Depending on the activity in your
individual account, we may also be able to assist with cost basis figures for
shares you sell.
[GRAPH ICON] DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
The Funds earn ordinary or investment income from dividends and interest on
their investments. Due to the nature of its investments, Gold Fund frequently
generates substantial ordinary income. Except for Utilities Fund, the Funds
expect to distribute substantially all of this investment income, less Fund
expenses, to shareholders annually, or at such other times as the Funds may
elect. Utilities Fund distributes income quarterly.
NET INVESTMENT INCOME AND NET REALIZED CAPITAL GAINS ARE DISTRIBUTED TO
SHAREHOLDERS AT LEAST ANNUALLY. DISTRIBUTIONS ARE TAXABLE WHETHER REINVESTED IN
ADDITIONAL SHARES OR PAID TO YOU IN CASH (EXCEPT FOR TAX-EXEMPT ACCOUNTS).
A Fund also realizes capital gains and losses when it sells securities in
its portfolio for more or less than it paid for them. If total gains on sales
exceed total losses (including losses carried forward from previous years), a
Fund has a net realized capital gain. Net realized capital gains, if any, are
distributed to shareholders at least annually, usually in December.
Under present federal income tax laws, capital gains may be taxable at
different rates, depending on how long a Fund has held the underlying
investment. Short-term capital gains which are derived from the sale of assets
held one year or less are taxed as ordinary income. Long-term capital gains
which are derived from the sale of assets held for more than one year are taxed
at the maximum capital gains rate, currently 20% for individuals.
Dividends and capital gain distributions are paid to you if you hold shares
on the record date of the distribution regardless of how long you have held your
shares. A Fund's NAV will drop by the amount of the distribution on the day the
distribution is made. If you buy shares of a Fund just before a distribution,
you may wind up "buying a dividend." This means that if the Fund makes a
dividend or capital gain distribution shortly after you buy, you will receive
some of your investment back as a taxable distribution. Most shareholders want
to avoid this. And, if you sell your shares at a loss for tax purposes and
purchase a substantially identical investment within 30 days before or after
that sale, the transaction is usually considered a "wash sale" and you will not
be able to claim a tax loss.
Dividends and capital gain distributions paid by each Fund are
automatically reinvested in additional Fund shares at the NAV on the ex-dividend
date, unless you choose to have them automatically reinvested in another INVESCO
fund or paid to you by check or electronic funds transfer. If you choose to be
paid by check, the minimum amount of the check must be at least $10; amounts
less than that will be automatically reinvested. Dividends and other
distributions, whether received in cash or reinvested in additional Fund shares,
may be subject to federal income tax.
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
The following information has been audited by PricewaterhouseCoopers LLP,
independent accountants. This information should be read in conjunction with the
audited financial statements and the Report of Independent Accountants thereon
appearing in the Company's 1998 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 information about
the Funds' performance.
<TABLE>
<CAPTION>
Year Ended October 31
-----------------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
ENERGY FUND
PER SHARE DATA
Net Asset Value -- Beginning of
Period $ 19.38 $ 15.03 $ 10.09 $ 10.77 $ 11.53
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income(a) 0.00 0.06 0.04 0.09 0.06
Net Gains or (Losses) on Securities (5.04) 5.56 4.94 (0.68) (0.76)
(Both Realized and Unrealized)
- -------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations (5.04) 5.62 4.98 (0.59) (0.70)
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income(b) 0.01 0.05 0.04 0.09 0.06
Distributions from Capital Gains 0.34 1.22 0.00 0.00 0.00
In Excess of Capital Gains 2.69 0.00 0.00 0.00 0.00
- -------------------------------------------------------------------------------------------------------------------------------
Total Distributions 3.04 1.27 0.04 0.09 0.06
- -------------------------------------------------------------------------------------------------------------------------------
Net Asset Value -- End of Period $ 11.30 $ 19.38 $ 15.03 $ 10.09 $ 10.77
===============================================================================================================================
TOTAL RETURN (28.51%) 40.65% 49.33% (5.45%) (6.04%)
RATIOS
Net Assets -- End of Period
($000 Omitted) $137,455 $319,651 $236,169 $48,284 $ 73,767
Ratio of Expenses to Average
Net Assets 1.58%(c) 1.21%(c) 1.30%(c) 1.53%(c) 1.35%
Ratio of Net Investment Income to
Average Net Assets 0.01% 0.39% 0.54% 0.72% 0.65%
Portfolio Turnover Rate 192% 249% 392% 300% 123%
(a) Net Investment Income aggregated less than $0.01 on a per share basis for
the year ended October 31, 1998.
(b) Distributions in excess of net investment income for the years ended
October 31, 1998 and 1996, aggregated less than $0.01 on a per share basis.
(c) Ratio is based on Total Expenses of the Fund, which is before any expense
offset arrangements.
<PAGE>
Financial Highlights (continued)
(For a Fund Share Outstanding Throughout Each Period)
Year Ended October 31
------------------------------------------------------------
1998 1997 1996 1995 1994(a)
ENVIRONMENTAL SERVICES FUND
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 11.44 $ 10.14 $ 8.12 $ 6.50 $ 6.80
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income (Loss)(b) 0.00 (0.04) 0.06 0.08 0.06
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (1.09) 1.89 2.02 1.62 (0.30)
- -------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations (1.09) 1.85 2.08 1.70 (0.24)
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.00 0.00 0.06 0.08 0.06
In Excess of Net Investment Income 0.00 0.01 0.00 0.00 0.00
Distributions from Capital Gains 2.79 0.54 0.00 0.00 0.00
In Excess of Capital Gains 0.28 0.00 0.00 0.00 0.00
- -------------------------------------------------------------------------------------------------------------------------------
Total Distributions 3.07 0.55 0.06 0.08 0.06
- -------------------------------------------------------------------------------------------------------------------------------
Net Asset Value End of Period $ 7.28 11.44 $ 10.14 8.12 6.50
===============================================================================================================================
TOTAL RETURN (12.09%) 19.13% 25.58% 26.09% (3.51%)
RATIOS
Net Assets -- End of Period
($000 Omitted) $14,875 $23,151 $26,794 $22,756 $29,276
Ratio of Expenses to Average
Net Assets(c) 1.92%(d) 1.72%(d) 1.61%(d) 1.57%(d) 1.29%
Ratio of Net Investment Income (Loss) to
Average Net Assets(c) (1.01%) (0.40%) 0.47% 0.65% 0.61%
Portfolio Turnover Rate 146% 187% 142% 195% 211%
(a) The per share information was computed based on weighted average shares.
(b) Net Investment Income aggregated less than $0.01 on a per share basis for
the year ended October 31, 1998.
(c) Various expenses of the Fund were voluntarily absorbed by INVESCO for
the years ended October 31, 1998, 1997, 1996, 1995 and 1994. If such
expenses had not been voluntarily absorbed, ratio of expenses to average
net assets would have been 2.20%, 2.16%, 1.85%, 1.93% and 1.43%,
respectively, and ratio of net investment income (loss) to average net
assets would have been (1.29%), (0.84%), 0.23%, 0.29% and 0.47%,
respectively.
(d) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
<PAGE>
Financial Highlights (continued)
(For a Fund Share Outstanding Throughout Each Period)
Year Ended October 31
-----------------------------------------------------------
1998 1997 1996 1995 1994
FINANCIAL SERVICES FUND
PER SHARE DATA
Net Asset Value --
Beginning of Period $ 29.14 $ 22.94 $ 18.95 $ 15.31 $ 20.28
- --------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.25 0.28 0.50 0.29 0.29
Net Gains or (Losses)on Securities
(Both Realized and Unrealized) 3.01 8.14 5.18 3.64 (0.66)
- --------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 3.26 8.42 5.68 3.93 (0.37)
- --------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment
Income 0.25 0.28 0.50 0.29 0.29
In Excess of Net Investment Income 0.00 0.00 0.05 0.00 0.00
Distributions from Capital Gains 3.70 1.94 1.14 0.00 4.31
- --------------------------------------------------------------------------------------------------------------------------------
Total Distributions 3.95 2.22 1.69 0.29 4.60
- --------------------------------------------------------------------------------------------------------------------------------
Net Asset Value -- End of Period $ 28.45 $ 29.14 $ 22.94 $ 18.95 $ 15.31
================================================================================================================================
TOTAL RETURN 11.76% 39.80% 31.48% 25.80% (2.24%)
RATIOS
Net Assets -- End of Period
($000 Omitted $1,417,655 $1,113,255 $542,688 $410,048 $266,170
Ratio of Expenses to
Average Net Assets 1.05%(a) 0.99%(a) 1.11%(a) 1.26%(a) 1.18%
Ratio of Net Investment Income to
Average Net Assets 0.85% 1.19% 2.48% 2.10% 1.66%
Portfolio Turnover Rate 52% 96% 141% 171% 88%
(a) Ratio is based on Total Expenses of the Fund, which is before any expense
offset arrangements.
<PAGE>
Financial Highlights (continued)
(For a Fund Share Outstanding Throughout Each Period)
Year Ended October 31
--------------------------------------------------------------
1998 1997(a) 1996 1995 1994
GOLD FUND
PER SHARE DATA
Net Asset Value -- Beginning of
Period $ 3.21 $ 8.00 $5.21 $ 5.68 $ 6.23
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income (Loss) 0.01 (0.02) (0.01) 0.01 (0.02)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (1.29) (2.62) 2.80 (0.47) (0.53)
- -------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations (1.28) (2.64) 2.79 (0.46) (0.55)
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.00 0.00 0.00 0.01 0.00
In Excess of Net Investment Income 0.03 2.15 0.00 0.00 0.00
- -------------------------------------------------------------------------------------------------------------------------------
Total Distributions 0.03 2.15 0.00 0.01 0.00
- -------------------------------------------------------------------------------------------------------------------------------
Net Asset Value -- End of Period $ 1.90 $ 3.21 $ 8.00 $ 5.21 $ 5.68
===============================================================================================================================
TOTAL RETURN (39.98%) (44.38%) 53.55% (8.12%) (8.83%)
RATIOS
Net Assets -- End of Period
($000 Omitted) $107,249 $151,085 $277,892 $151,779 $271,163
Ratio of Expenses to
Average Net Assets 1.90%(b) 1.47%(b) 1.22%(b) 1.32%(b) 1.07%
Ratio of Net Investment
Income (Loss) to Average Net Assets (0.93%) (0.41%) (0.08%) 0.13% (0.32%)
Portfolio Turnover Rate 133% 148% 155% 72% 97%
(a) The per share information was computed based on average shares.
(b) Ratio is based on Total Expenses of the Fund, which is before any expense
offset arrangements.
<PAGE>
Financial Highlights (continued)
(For a Fund Share Outstanding Throughout Each Period)
Year Ended October 31
---------------------------------------------------------------
1998 1997 1996 1995 1994
HEALTH SCIENCES FUND
PER SHARE DATA
Net Asset Value -- Beginning of
Period $ 57.50 $ 55.24 $ 50.47 $ 35.09 $ 33.49
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.13 0.06 0.07 (0.03) (0.24)
Net Gains on Securities
(Both Realized and Unrealized) 13.55 10.85 8.78 15.41 1.84
- ----------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 13.68 10.91 8.85 15.38 1.60
- ---------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income(a) 0.25 0.06 0.07 0.00 0.00
Distributions from Capital Gains 8.81 8.59 4.01 0.00 0.00
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions 9.06 8.65 4.08 0.00 0.00
- ---------------------------------------------------------------------------------------------------------------------------------
Net Asset Value -- End of Period $ 62.12 $ 57.50 $ 55.24 $ 50.47 $ 35.09
=================================================================================================================================
TOTAL RETURN 28.58% 22.96% 17.99% 43,83% 4.78%
RATIOS
Net Assets End of Period
($000 Omitted) $1,328,196 $ 944,498 $933,828 $ 860,926 $473,926
Ratio of Expenses to Average Net Assets 1.12%(b) 1.08%(b) 0.98%(b) 1.15%(b) 1.19%
Ratio of Net Investment Income (Loss) to
Average Net Assets 0.25% 0.11% 0.11% (0.08%) (0.57%)
Portfolio Turnover Rate 92% 143% 90% 107% 82%
(a) Distributions in excess of net investment income for the year ended October
31, 1998, aggregated less than $0.01 on a per share basis.
(b) Ratio is based on Total Expenses of the Fund, which is before any expense
offset arrangements.
<PAGE>
Financial Highlights (continued)
(For a Fund Share Outstanding Throughout Each Period)
Year Ended October 31
------------------------------------------------------------
1998 1997 1996 1995 1994
LEISURE FUND
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 27.21 $ 22.89 $ 23.78 $ 22.63 $ 25.47
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)(a) 0.00 0.02 0.04 0.08 (0.01)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 3.69 4.96 2.25 2.06 (0.94)
- -------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 3.69 4.98 2.29 2.14 (0.95)
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net
Investment Income(b) 0.00 0.02 0.04 0.08 0.00
Distributions from Capital Gains 2.98 0.64 2.25 0.91 1.89
In Excess of Capital Gains 0.00 0.00 0.89 0.00 0.00
- -------------------------------------------------------------------------------------------------------------------------------
Total Distributions 2.98 0.66 3.18 0.99 1.89
- -------------------------------------------------------------------------------------------------------------------------------
Net Asset Value -- End of Period $ 27.92 $ 27.21 $ 22.89 $ 23.78 $ 22.63
===============================================================================================================================
TOTAL RETURN 15.16% 22.32% 10.66% 9.98% (3.92%)
RATIOS
Net Assets -- End of Period
($000 Omitted) $ 228,681 $216,616 $252,297 $265,181 $282,649
Ratio of Expenses to Average Net Assets 1.41%(c) 1.41%(c) 1.30%(c) 1.29%(c) 1.17%
Ratio of Net Investment Income (Loss) to
Average Net Assets (0.09%) 0.05% 0.18% 0.32% 0.00%
Portfolio Turnover Rate 31% 25% 56% 119% 116%
(a) Net Investment Income aggregated less than $0.01 on a per share basis for
the year ended October 31, 1998.
(b) Distributions in excess of net investment income for the years ended
October 31, 1998, 1997, 1996 and 1995 aggregated less than $0.01 on a per
share basis.
(c) Ratio is based on Total Expenses of the Fund, which is before any expense
offset arrangements.
<PAGE>
Financial Highlights (continued)
(For a Fund Share Outstanding Throughout Each Period)
Year Ended October 31
------------------------------------------------------------
1998 1997 1996 1995 1994
TECHNOLOGY FUND CLASS II
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 35.97 $ 34.23 $ 34.33 $ 24.94 $ 26.99
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)(a) 0.00 0.13 0.07 (0.02) (0.02)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (1.45) 6.23 5.76 10.20 1.19
- -------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations (1.45) 6.36 5.83 10.18 1.17
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment
Income(b) 0.00 0.13 0.07 0.00 0.00
Distributions from Capital Gains 3.16 4.49 5.86 0.79 3.22
In Excess of Capital Gains 3.29 0.00 0.00 0.00 0.00
- -------------------------------------------------------------------------------------------------------------------------------
Total Distributions 6.45 4.62 5.93 0.79 3.22
- -------------------------------------------------------------------------------------------------------------------------------
Net Asset Value -- End of Period $ 28.07 $ 35.97 $ 34.23 $ 34.33 $ 24.94
===============================================================================================================================
TOTAL RETURN (2.47%) 20.71% 19.98% 42.19% 5.04%
RATIOS
Net Assets -- End of Period
($000 Omitted) $1,008,771 $1,039,968 $789,611 $563,109 $327,260
Ratio of Expenses Net Assets 1.17%(c) 1.05%(c) 1.08%(c) 1.12%(c) 1.17%
Ratio of Net Investment Income
(Loss) to Average Net Assets (0.49%) 0.41% 0.24% (0.06%) (0.55%)
Portfolio Turnover Rate 178% 237% 168% 191% 145%
(a) Net Investment Income aggregated less than $0.01 on a per share basis for
the year ended October 31, 1998.
(b) Distributions in excess of net investment income for the years ended
October 31, 1998 and 1996, aggregated less than $0.01 on a per share basis.
(c) Ratio is based on Total Expenses of the Fund, which is before any expense
offset arrangements.
<PAGE>
Financial Highlights (Continued)
(For a Fund Share Outstanding Throughout Each Period)
Year Ended October 31
------------------------------------------------------------
1998 1997 1996 1995 1994
UTILITIES FUND
PER SHARE DATA
Net Asset Value N Beginning of Period $ 12.42 $ 12.04 $ 10.61 $ 9.76 $ 12.80
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.30 0.32 0.37 0.44 0.33
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 2.56 1.25 1.43 0.84 (1.12)
- -------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.86 1.57 1.80 1.28 (0.79)
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income(a) 0.26 0.32 0.37 0.43 0.25
Distributions from Capital Gains 0.29 0.87 0.00 0.00 2.00
- -------------------------------------------------------------------------------------------------------------------------------
Total Distributions 0.55 1.19 0.37 0.43 2.25
- -------------------------------------------------------------------------------------------------------------------------------
Net Asset Value - End of Period $ 14.73 $ 12.42 $ 12.04 $ 10.61 $ 9.76
===============================================================================================================================
TOTAL RETURN 23.44% 14.37% 17.18% 13.48% (7.22%)
RATIOS
Net Assets - End of Period
($000 Omitted) $177,309 $132,423 $153,082 $134,468 $139,579
Ratio of Expenses to
Average Net Assets(b) 1.29%(c) 1.22%(c) 1.17%(c) 1.18%(c) 1.13%
Ratio of Net Investment Income
to Average Net Assets(b) 1.82% 2.74% 3.28% 4.47% 3.33%
Portfolio Turnover Rate 47% 55% 141% 185% 180%
(a) Distributions in excess of net investment income for the year ended October
31, 1996, aggregated less than $0.01 on a per share basis.
(b) Various expenses of the Fund were voluntarily absorbed by IFG for the years
ended October 31, 1998, 1997, 1996, 1995 and 1994. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have
been 1.36%, 1.27%, 1.25%, 1.30% and 1.14%, respectively, and ratio of net
investment income to average net assets would have been 1.75%, 2.69%, 3.20%,
4.34% and 3.32%, respectively.
(c) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
</TABLE>
<PAGE>
March 1, 1999
INVESCO SECTOR FUNDS, INC.
ENERGY FUND
ENVIRONMENTAL SERVICES FUND
FINANCIAL SERVICES FUND
GOLD FUND
HEALTH SCIENCES FUND
LEISURE FUND
TECHNOLOGY FUND CLASS II
UTILITIES FUND
You may obtain additional information about the Funds from several sources.
FINANCIAL REPORTS. Although this Prospectus describes the Funds anticipated
investments and operations, the Funds also prepare annual and semiannual reports
that detail the Funds actual investments at the report date. These reports
include discussion of each Funds recent performance, as well as market and
general economic trends affecting each Funds performance. The annual report also
includes the report of the Funds independent accountants.
STATEMENT OF ADDITIONAL INFORMATION. The SAI dated March 1, 1999, is a
supplement to this Prospectus, and has detailed information about the Funds and
their investment policies and practices. A current SAI for the Funds is on file
with the Securities and Exchange Commission and is incorporated in this
Prospectus by reference; in other words, the SAI is legally a part of this
Prospectus, and you are considered to be aware of the contents of the SAI.
INTERNET. The current Prospectus of the Funds may be accessed through the
INVESCO Web site at www.invesco.com. In addition, the Prospectus, annual report,
semiannual report and SAI of the Funds are available on the SEC Web site at
www.sec.gov.
To obtain a free copy of the current annual report, semiannual report or
SAI, write to INVESCO Distributors, Inc., P.O. Box 173706, Denver, Colorado
80217-3706; or call 1-800-525-8085. Copies of these materials are also available
(with a copying charge) from the SECs Public Reference Section at 450 Fifth
Street, N.W., Washington, D.C. Information on the Public Reference Section can
be obtained by calling 1-800-SEC-0330. The SEC file numbers for the Funds are
811-3826 and 002-85905.
To reach PAL(R), your 24-hour Personal Account Line, call: 1-800-424-8085.
If you're in Denver, please visit one of our convenient Investor Centers:
Cherry Creek
155-B Fillmore Street
Denver Tech Center
7800 East Union Avenue
811-3826
<PAGE>
PROSPECTUS | March 1, 1999
- -------------------------------------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS(TM)
- --------------------------------------------------------------------------------
SECTOR FUNDS
TECHNOLOGY FUND - CLASS I
A no-load mutual fund designed for investors seeking long-term growth from
the technology sector.
TABLE OF CONTENTS
Investment Goals And Strategies................... 38
Fees And Expenses................................. 38
Investment Risks.................................. 39
Risks Associated With Particular Investments...... 39
Temporary Defensive Positions..................... 42
Portfolio Turnover................................ 42
Fund Management................................... 42
Portfolio Manager................................. 43
Potential Rewards................................. 43
Share Price....................................... 43
How To Buy Shares................................. 44
Your Account Services............................. 45
How To Sell Shares................................ 46
Taxes............................................. 47
Dividends And Capital Gain Distributions.......... 48
INVESCO
The Securities and Exchange Commission has not approved or disapproved the
shares of these Funds. Likewise, it has not determined if this Prospectus is
truthful or complete. Anyone who tells you otherwise is committing a federal
crime.
<PAGE>
THIS PROSPECTUS WILL TELL YOU MORE ABOUT:
[KEY ICON] INVESTMENT OBJECTIVES & STRATEGIES
[ARROW ICON] POTENTIAL INVESTMENT RISKS
[GRAPH ICON] PAST PERFORMANCE & POTENTIAL ADVANTAGES
[INVESCO ICON] WORKING WITH INVESCO
================================================================================
[KEY ICON] INVESTMENT GOALS AND STRATEGIES
INVESCO Funds Group, Inc. ("INVESCO") is the investment adviser for the
Fund. Together with our affiliated companies, we at INVESCO control all aspects
of the management and sale of the Fund.
FOR MORE DETAILS ABOUT THE FUND'S CURRENT INVESTMENTS AND MARKET OUTLOOK, PLEASE
SEE THE MOST RECENT ANNUAL OR SEMIANNUAL REPORT.
The Fund attempts to make your investment grow. The Fund is aggressively
managed. Although the Fund can invest in debt securities, it primarily invests
in equity securities that INVESCO believes will rise in price faster than other
securities, as well as options and other investments whose value is based upon
the values of equity securities.
The Fund normally invests at least 80% of its assets in companies doing
business in the technology sector. To determine whether a potential investment
is truly doing business in the technology sector, a company must meet at least
one of the following tests:
o At least 50% of its gross income or its net sales must come from activities
in the sector;
o At least 50% of its assets must be devoted to producing revenues from the
sector; or
o Based on other available information, we determine that its primary business
is within the sector.
INVESCO uses a bottom-up investment approach to create the Fund's
investment portfolio, focusing on company fundamentals and growth prospects when
selecting securities. In general, the Fund emphasizes strongly managed companies
that INVESCO believes will generate above-average growth rates for the next
three to five years. We prefer markets and industries where leadership is in a
few hands, and we tend to avoid slower-growing markets or industries.
The Fund's investments are diversified across the sector on which it
focuses. However, because those investments are limited to a comparatively
narrow segment of the economy, the Fund's investments are not as diversified as
most mutual funds, and far less diversified than the broad securities markets.
This means that the Fund tends to be more volatile than other mutual funds, and
the values of its portfolio investments tend to go up and down more rapidly. As
a result, the value of your investment in the Fund may rise or fall rapidly.
<PAGE>
The Fund invests primarily in the equity securities of companies engaged in
technology-related industries. These include, but are not limited to, applied
technology, biotechnology, communications, computers, video, electronics,
oceanography, office and factory automation, and robotics. Many of these
products and services are subject to rapid obsolescence, which may lower the
market value of the securities of the companies in this sector.
A core portion of the Fund's portfolio is invested in market-leading
technology companies that we believe will maintain or improve their market share
regardless of overall economic conditions. These companies are usually large,
established firms which are leaders in their field and have a strategic
advantage over many of their competitors. The remainder of the Fund's portfolio
consists of faster-growing, more volatile technology companies that INVESCO
believes to be emerging leaders in their fields. The market prices of these
companies tend to rise and fall more rapidly than those of larger, more
established companies.
FEES AND EXPENSES
SHAREHOLDER FEES PAID DIRECTLY FROM YOUR ACCOUNT
You pay no fees to purchase Fund shares, to exchange to another INVESCO
fund, or to sell your shares. Accordingly, no fees are paid directly from your
shareholder account. The only Fund costs you pay are annual Fund operating
expenses that are deducted from Fund assets.
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS
TECHNOLOGY FUND - CLASS I
Management Fees 0.65%
Distribution and Service (12b-1) Fees None
Other Expenses 0.30%
Total Annual Fund Operating Expenses(1) 0.95%
(1) Based on estimated expenses for the fiscal year ending October 31,
1999. These expenses may be higher or lower than actual expenses. If
necessary, INVESCO will voluntarily absorb the Fund's expenses to keep
expenses at or below 0.95% of the Fund's average daily net assets. This
commitment may be changed at any time following consultation with the board
of directors.
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Fund to the cost of investing in other mutual funds.
The Example assumes that you invested $10,000 in the Fund for the time
periods indicated and then redeemed all of your shares at the end of those
periods. The Example also assumes that your investment had a hypothetical 5%
return each year, and assumes that the Fund's operating expenses remained the
same. Although the Fund's actual costs and performance may be higher or lower,
based on these assumptions your costs would has been:
1 year 3 years 5 years 10 years
$97 $304 $528 $1,171
<PAGE>
[ARROW LOGO] INVESTMENT RISKS
You should determine the level of risk with which you are comfortable
before you invest. The principal risks of investing in any mutual fund,
including the Fund, are:
BEFORE INVESTING IN THE FUND, YOU SHOULD DETERMINE THE LEVEL OF RISK WITH WHICH
YOU ARE COMFORTABLE. TAKE INTO ACCOUNT FACTORS LIKE YOUR AGE, CAREER, INCOME
LEVEL, AND TIME HORIZON.
NOT INSURED. Mutual funds are not insured by the Federal Deposit Insurance
Corporation ("FDIC") or any other agency, unlike bank deposits such as CDs or
savings accounts.
NO GUARANTEE. No mutual fund can guarantee that it will meet its investment
objectives.
POSSIBLE LOSS OF INVESTMENT. A mutual fund cannot guarantee its
performance, nor assure you that the market value of your investment will
increase. You may lose the money you invest, and the Fund will not reimburse you
for any of these losses.
VOLATILITY. The price of your mutual fund shares will increase or decrease
with changes in the value of the Fund's underlying investments.
NOT A COMPLETE INVESTMENT PLAN. An investment in any mutual fund does not
constitute a complete investment plan. The Fund is designed to be only a part of
your personal investment plan.
YEAR 2000. Many computer systems in use today may not be able to recognize
any date after December 31, 1999. If these systems are not fixed by that date,
it is possible that they could generate erroneous information or fail
altogether. INVESCO has committed substantial resources in an effort to make
sure that its own major computer systems will continue to function on and after
January 1, 2000. Of course, INVESCO cannot fix systems that are beyond its
control. If INVESCO's own systems, or the systems of third parties upon which it
relies, do not perform properly after December 31, 1999, the Fund could be
adversely affected.
In addition, the markets for, or values of, securities in which the Fund
invests may possible be hurt by computer failures affecting portfolio
investments or trading of securities beginning January 1, 2000. For example,
improperly functioning computer systems could result in securities trade
settlement problems and liquidity issues, production issues for individual
companies and overall economic uncertainties. Individual issuers may incur
increased costs in making their own systems Year 2000 compliant. The combination
of market uncertainty and increased costs means that there is a possibility that
Year 2000 computer issues may adversely affect the Fund's investments. At this
time, it is generally believed that foreign issuers, particularly those in
emerging and other markets, may be more vulnerable to Year 2000 problems than
will be issuers in the U.S.
[ARROW ICON] RISKS ASSOCIATED WITH PARTICULAR INVESTMENTS
MARKET RISK
Equity stock prices vary and may fall, thus reducing the value of your
Fund's investment. Certain stocks selected for the Fund's portfolio may decline
in value more than the overall stock market.
<PAGE>
CREDIT RISK
The Fund may invest in debt instruments, such as notes and bonds. There is
a possibility that the issuers of these instruments will be unable to meet
interest payments or repay principal. Changes in the financial strength of an
issuer may reduce the credit rating of its debt instruments and may affect their
value.
FOREIGN SECURITIES
Investments in foreign and emerging markets carry special risks, including
currency, political, regulatory and diplomatic risks. The Fund may invest up to
25% of its assets in securities of non-U.S. issuers.
CURRENCY RISK. A change in the exchange rate between U.S. dollars and a
foreign currency may reduce the value of the Fund's investment in a
security valued in the foreign currency, or based on that currency value.
POLITICAL RISK. Political actions, events or instability may result in
unfavorable changes in the value of a security.
REGULATORY RISK. Government regulations may affect the value of a
security. In foreign countries, securities markets that are less regulated
than those in the U.S. may permit trading practices that are not allowed in
the U.S.
DIPLOMATIC RISK. A change in diplomatic relations between the U.S. and a
foreign country could affect the value or liquidity of investments.
EUROPEAN ECONOMIC AND MONETARY UNION. Austria, Belgium, Finland, France,
Germany, Ireland, Italy, Luxembourg, The Netherlands, Portugal and Spain are
presently members of the European Economic and Monetary Union (the "EMU")
which as of January 1, 1999 adopted the euro as a common currency. The
national currencies will be sub-currencies of the euro until July 1, 2002,
at which time the old currencies will disappear entirely. Other European
countries may adopt the euro in the future.
The introduction of the euro presents some uncertainties and possible
risks, which could adversely affect the value of securities held by the Fund.
EMU countries, as a single market, may affect future investment decisions
of the Fund. As the euro is implemented, there may be changes in the relative
strength and value of the U.S. dollar and other major currencies, as well as
possible adverse tax consequences. The euro transition by EMU countries -
present and future - may affect the fiscal and monetary levels of those
participating countries. There may be increased levels of price competition
among business firms within EMU countries and between businesses in EMU and
non-EMU countries. The outcome of these uncertainties could have unpredict-
able effects on trade and commerce and result in increased volatility
for all financial markets.
INTEREST RATE RISK
Changes in interest rates will affect the resale value of debt securities
held in the Fund's portfolio. In general, as interest rates rise, the resale
value of debt securities decreases; as interest rates decline, the resale value
of debt securities generally increases. Debt securities with longer maturities
usually are more sensitive to interest rate movements.
DURATION RISK
Duration is a measure of a debt security's sensitivity to interest rate
changes. Duration is usually expressed in terms of years, with longer durations
usually more sensitive to interest rate fluctuations.
<PAGE>
LIQUIDITY RISK
The Fund's portfolio is liquid if the Fund is able to sell the securities
it owns at a fair price within a reasonable time. Liquidity is generally related
to the market trading volume for a particular security. Investments in smaller
companies or in foreign companies or companies emerging markets are subject to a
variety of risks, including potential lack of liquidity.
DERIVATIVES RISK
A derivative is a financial instrument whose value is "derived," in some
manner, from the price of another security, index, asset or rate. Derivatives
include options and futures contracts, among a wide range of other instruments.
The principal risk of investments in derivatives is that the fluctuations in
their values may not correlate perfectly with the overall securities markets.
Some derivatives are more sensitive to interest rate changes and market price
fluctuations than others. Also, derivatives are subject to counterparty risk.
OPTIONS AND FUTURES
Options and futures are common types of derivatives that the Fund may use
to hedge its investments. An option is the right to buy or sell a security at a
specific price on or before a specific date. A future is an agreement to buy or
sell a security at a specific price on a specific date.
COUNTERPARTY RISK
This is a risk associated primarily with repurchase agreements and some
derivatives transactions. It is the risk that the other party in such a
transaction will not fulfill its contractual obligation to complete a
transaction with the Fund.
LACK OF TIMELY INFORMATION RISK
Timely information about a security or its issuer may be unavailable,
incomplete or inaccurate. This risk is more common to securities issued by
foreign companies and companies in emerging markets than it is to the securities
of U.S.-based companies.
The Fund invests primarily in equity securities of companies in the
technology sector. However, in an effort to diversify its holdings and provide
some protection against the risk of other investments, the Fund also may invest
in other types of securities, as indicated in the chart below. These
investments, which at any given time may constititute a significant portion of
the Fund's portfolio, have their own risks.
- -------------------------------------------------------------------------------
INVESTMENT RISKS
- --------------------------------------------------------------------------------
ILLIQUID SECURITIES
A security that cannot be sold quickly at its fair value Liquidity Risk
- -------------------------------------------------------------------------------
RULE 144A SECURITIES
Securities that are not registered, but which are bought Liquidity Risk
and sold solely by institutional investors. The Fund
considers many Rule 144A securities to be "liquid,"
although the market for such securities typically is less
active than the public securities markets.
- --------------------------------------------------------------------------------
DEBT SECURITIES
Securities issued by private companies or governments Market, Credit,
representing an obligation to pay interest and to repay Interest Rate,
principal when the security matures. and Duration Risks.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT RISKS
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
A contract under which the seller of a security agrees Credit and
to buy it back at an agreed-upon price and time in the Counterparty Risks.
future.
- --------------------------------------------------------------------------------
AMERICAN DEPOSITORY RECEIPTS (ADRS)
These are securities issued by U.S. banks that represent Market, Informa-
shares of foreign corporations held by those banks. tion, Political,
Although traded in U.S. securities markets and valued in Regulatory,
U.S. dollars, ADRs carry most of the risks of investing Diplomatic,
directly in foreign securities. Liquidity and
Currency Risks.
- -------------------------------------------------------------------------------
[ARROW ICON] TEMPORARY DEFENSIVE POSITIONS
When securities markets or economic conditions are unfavorable or
unsettled, we might try to protect the assets of the Fund by investing in
securities that are highly liquid such as high quality money market instruments,
like short-term U.S. government obligations, commercial paper or repurchase
agreements. We have the right to invest up to 100% of the Fund's assets in these
securities, although we are unlikely to do so. Even though the securities
purchased for defensive purposes often are considered the equivalent of cash,
they also have their own risks. Investments that are highly liquid or
comparatively safe tend to offer lower returns. Therefore, the Fund's
performance could be comparatively lower if it concentrates in defensive
holdings.
[ARROW ICON] PORTFOLIO TURNOVER
We actively manage and trade the Fund's portfolio. Therefore, the Fund may
have a higher portfolio turnover rate compared to many other mutual funds. The
Fund's average portfolio turnover rate may exceed 200%.
A portfolio turnover rate of 200% is equivalent to the Fund buying and
selling all of the securities in its portfolio two times in the course of a
year. A comparatively high turnover rate may result in higher brokerage
commissions and taxable capital gain distributions to the Fund's shareholders.
[INVESCO ICON] FUND MANAGEMENT
THE INVESTMENT ADVISER
INVESCO IS A SUBSIDIARY OF AMVESCAP PLC, AN INTERNATIONAL INVESTMENT MANAGEMENT
COMPANY THAT MANAGES MORE THAN $275 BILLION IN ASSETS WORLDWIDE. AMVESCAP IS
BASED IN LONDON, WITH MONEY MANAGERS LOCATED IN EUROPE, NORTH AND SOUTH AMERICA,
AND THE FAR EAST.
INVESCO is the investment adviser of the Fund. INVESCO was founded in 1932
and manages over $18.9 billion for more than 904,000 shareholders of 14 INVESCO
mutual funds. INVESCO performs a wide variety of other services for the Fund,
including administration and transfer agency functions (the processing of
purchases, sales and exchanges of Fund shares). A wholly owned subsidiary of
INVESCO, INVESCO Distributors, Inc. ("IDI"), is the Fund's distributor and is
responsible for the sale of the Fund's shares.
INVESCO and IDI are subsidiaries of AMVESCAP PLC.
<PAGE>
[GRAPH ICON] PORTFOLIO MANAGER
The Fund is managed by a member of INVESCO's Sector Team, which is headed
by William R. Keithler and John R. Schroer. The person primarily responsible for
the day-to-day management of the Fund is:
WILLIAM R. KEITHLER, a Chartered Financial Analyst, has been the portfolio
manager of the Technology Fund since January 1, 1999. He also manages the
INVESCO VIF - Technology Fund and is a vice president of INVESCO. Bill was
previously a portfolio manager with Berger Associates, Inc. (1993 to 1998) and a
portfolio manager with INVESCO (1986 to 1993). He received an M.S. from the
University of Wisconsin - Madison and a B.A. from Webster College.
[INVESCO ICON] POTENTIAL REWARDS
NO SINGLE FUND SHOULD REPRESENT YOUR COMPLETE INVESTMENT PROGRAM NOR SHOULD YOU
ATTEMPT TO USE THE FUND FOR SHORT-TERM TRADING PURPOSES.
This Fund is offered only to institutional investors and qualified
retirement plans. The Fund offers shareholders the potential to increase the
value of their capital over time. like most mutual funds, the fund seeks to
provide higher returns than the market or its competitors, but cannot guarantee
that performance. While the Fund invests in a single targeted market sector, it
seeks to minimize risk by investing in many different companies.
SUITABILITY FOR INVESTORS
Only you can determine if an investment in the Fund is right for you based
upon your own economic situation, the risk level with which you are comfortable
and other factors. In general, the Fund is most suitable for investors who:
o are willing to grow their capital over the long-term (at least five years)
o can accept the additional risks associated with sector investing
o understand that shares of the Fund can and likely will have significant price
fluctuations
o are investing tax-deferred retirement accounts, such as Traditional and
Roth Individual Retirement Accounts ("IRAs"), as well as employer-sponsored
qualified retirement plans, including 401(k)s and 403(b)s, all of which have
longer investment horizons.
You probably do not want to invest in the Fund if you are:
o primarily seeking current dividend income
o unwilling to accept potentially significant changes in the price of Fund
shares
o speculating on short-term fluctuations in the stock markets.
[INVESCO LOGO] SHARE PRICE
CURRENT MARKET VALUE OF FUND ASSETS + ACCRUED INTEREST AND DIVIDENDS - FUND
DEBTS, INCLUDING ACCRUED EXPENSES / NUMBER OF SHARES = YOUR SHARE PRICE (NAV).
The value of your Fund shares is likely to change daily. This value is known as
the Net Asset Value per share, or NAV. INVESCO determines the market value of
each investment in the Fund's portfolio each day that the New York Stock
Exchange ("NYSE") is open, at the close of trading on that exchange (normally,
4:00 p.m. New York time). Therefore, shares of the Fund are not priced on days
<PAGE>
when the NYSE is closed, which, generally, is on weekends and national holidays
in the United States.
NAV is calculated by adding together the current market price of all of the
Fund's investments and other assets, including accrued interest and dividends,
subtracting the Fund's debts, including accrued expenses; and dividing that
dollar amount by the total number of the Fund's outstanding shares.
All purchases, sales and exchanges of Fund shares are made by INVESCO at the NAV
next calcualted after INVESCO receives proper instructions from you to purchase,
redeem or exchange shares of the Fund. Your instructions must be received by
INVESCO no later than the close of the NYSE to effect transactions at that
day's NAV. If INVESCO hears from you after that time, your instructions will
be processed at the NAV calculated at the end of the next day that the NYSE is
open.
In addition, foreign securities exchanges, which set the prices for foreign
securities held by the Fund, are not always open the same days as the NYSE, and
may be open for business on days the NYSE is not. For example, Thanksgiving
Day is a holidy observed by the NYSE and not by overseas exchanges. In this
situation, the Fund would not calculate NAV on Thanksgiving Day (and INVESCO
would not buy, sell or exchange shares for you on that day), even though
activity on foreign exchanges could result in changes in the value of invest-
ments held by the Fund on that day.
[INVESCO ICON] HOW TO BUY SHARES
TO BUY SHARES AT THAT DAY'S CLOSING PRICE, YOU MUST CONTACT US BEFORE THE CLOSE
OF THE NYSE, NORMALLY, 4:00 P.M. EASTERN TIME.
The Fund offers two classes of shares. Each class represents an identical
interest in the Technology Fund and has the same rights, except that each class
bears its own distribution and shareholder servicing charges. The income
attributable to each class and the dividends payable on the shares of each
class will be reduced by the amount of the distribution fee or service fee, if
applicable, payable by that class.
In deciding which class of shares to purchase, you should consider, among other
things, (i) the length of time you expect to hold you shares, (ii) the pro-
visions of the distribution plan applicable to the class, if any, and (iii) the
eligibility requirements that apply to purchases of a particular class.
This Fund is offered only to institutional investors and qualified retirement
plans. This Fund is not available to retail investors.
There is no charge to invest, exchange or redeem shares when you make trans-
actions directly through INVESCO. However, if you invest in the Fund through a
securities broker, you may be charged a commission or transaction fee for either
purchases or sales of Fund shares. For all new accounts, please send a
completed application form, and specify the fund or funds you wish to purchase.
FUND EXCHANGES CAN BE A CONVENIENT WAY FOR YOU TO DIVERSIFY YOUR INVESTMENTS,
OR TO REALLOCATE YOUR INVESTMENTS WHEN YOUR OBJECTIVES CHANGE.
EXCHANGE POLICY. You may exchange your shares in the Fund for those in
another INVEDSCO mutual fund on the basis of their respective NAVs at the time
of the exchange. Before making any exchange, be sure to review the prospectuses
of the funds involved and consider the differences between the funds. Also, be
certain that you qualify to purchase certain classes of shares in the new fund.
<PAGE>
An exchange is the sale of shares from one fund immediately followed by the
purchase of shares in another. Therefore, any gain or loss realized on the
exchange is recognizable for federal income tax purposes (unless, of course, you
or your account qualifies as tax-deferred under the Internal Revenue Code). If
the shares of the fund you are selling have gone up in value since you bought
them, the sale portion of an exchange may result in taxable income to you.
We have the following policies governing exchanges:
o Both fund accounts involved in the exchange must be registered in exactly
the same name(s) and Social Security or federal tax I.D. number(s).
o You may make up to four exchanges out of the Fund per year.
o The Fund reserves the right to reject any exchange request, or to modify
or terminate the exchange policy, in the best interests of the Fund and its
shareholders. Notice of all modifications or terminations that affect all
shareholders of the Fund will be given at least 60 days prior to the
effective date of the change, except in unusual instances, including a
suspension of redemption of the exchanged security under Section 22(e) of
the Investment Company Act of 1940.
In addition, the ability to exchange may be temporarily suspended at any
time that sales of the Fund into which you wish to exchange are temporarily
stopped.
Please remember that if you pay by check or wire and your funds do not
clear, you will be responsible for any related loss to the Fund or INVESCO. If
you are already an INVESCO funds shareholder, the Fund may seek reimbursement
for any loss from your existing account(s).
[INVESCO LOGY] YOUR ACCOUNT SERVICES
SHAREHOLDER ACCOUNTS. INVESCO maintains your share account, which contains
your current Fund holdings.
INVESCO PROVIDES YOU WITH SERVICES DESIGNED TO MAKE IT SIMPLE FOR YOU TO BUY,
SELL OR EXCHANGE YOUR SHARES OF ANY INVESCO MUTUAL FUND.
QUARTERLY INVESTMENT SUMMARIES. Each calendar quarter, you receive a
written statement which consolidates and summarizes account activity and value
at the beginning and end of the period for each of your INVESCO funds.
TRANSACTION CONFIRMATIONS. You receive detailed confirmations of individual
purchases, exchanges and sales. If you choose certain recurring transaction
plans, your transactions are confirmed on your quarterly Investment Summaries.
TELEPHONE TRANSACTIONS. You may buy, exchange and sell Fund shares by
telephone, unless you specifically decline these privileges when you fill out
the INVESCO new account Application.
YOU CAN CONDUCT MOST TRANSACTIONS AND CHECK ON YOUR ACCOUNT THROUGH OUR
TOLL-FREE TELEPHONE NUMBER. YOU MAY ALSO ACCESS PERSONAL ACCOUNT INFORMATION AT
OUR WEB SITE, WWW.INVESCO.COM.
Unless you decline the telephone transaction privileges when you fill out and
sign the new account Application, a Telephone Transaction Authorization Form, or
otherwise use your telephone transaction privileges, you lose certain rights if
someone gives fraudulent or unauthorized instructions to INVESCO that result in
a loss to you. In general, if INVESCO has followed reasonable procedures, such
as recording telephone instructions and sending written transaction
<PAGE>
confirmations, INVESCO is not liable for following telephone instructions
that it believes to be genuine. Therefore, you have the risk of loss due to
unauthorized or fraudulent instructions.
IRAS AND OTHER RETIREMENT PLANS. Shares of any INVESCO mutual fund may be
purchased for IRAs and many other types of tax-deferred retirement plans. Please
call INVESCO for information and forms to establish or transfer your existing
retirement plan or account.
[INVESCO ICON] HOW TO SELL SHARES
The following chart shows several convenient ways to sell your Fund shares.
Shares of the Fund may be sold at any time at the next NAV calculated after your
request to sell in proper form is received by INVESCO. Depending on the
performance of the Fund, the NAV at the time you sell your shares may be more or
less than the price you paid to purchase your shares.
TO SELL SHARES AT THAT DAY'S CLOSING PRICE, YOU MUST CONTACT US BEFORE 4:00 P.M.
EASTERN TIME.
If you own shares in more than one INVESCO fund, please specify the fund whose
shares you wish to sell. Remember that any sale or exchange of shares in a
non-retirement account will likely result in a taxable gain or loss.
While INVESCO attempts to process telephone redemptions promptly, there may
be times - particularly in periods of severe economic or market disruption -
when you may experience delays in redeeming shares by phone.
INVESCO usually mails you the proceeds from the sale of Fund shares within
seven days after we receive your request to sell in proper form. However,
payment may be postponed under unusual circumstances - for instance, if normal
trading is not taking place on the NYSE or during an emergency as defined by the
Securities and Exchange Commission. If your INVESCO fund shares were purchased
by a check which has not yet cleared, payment will be made promptly when your
purchase check does clear; that can take up to 15 days
<TABLE>
<CAPTION>
METHOD INVESTMENT MINIMUM PLEASE REMEMBER
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
BY TELEPHONE $250 (or, if less, full liquidation INVESCO's telephone redemp-
Call us toll-free at: the account) for a redemption tion privileges may be modified or
1-800-825-8085 check; $1,000 for a wire to your terminated in the future at
bank of record. The maximum INVESCO's discretion.
- ----------------------------------------------------------------------------------------------------
IN WRITING Any amount. The redemption
Mail your request to request must be signed by all
INVESCO Funds Group, registered account owners. Payment
Inc., P.O. Box 173706, will be mailed to your address as
Denver, CO 80217-3706. it appears on INVESCO's records,
You may also send your or to a bank designated by you in
request by overnight writing.
courier to 7800 E.
Union Ave., Denver,
CO 80217
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
METHOD INVESTMENT MINIMUM PLEASE REMEMBER
<S> <C> <C>
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BY EXCHANGE See "Exchange Policy."
Between two INVESCO
funds. Call
1-800-525-8085 for
prospectuses of other
INVESCO funds.
Exchanges may be made
by phone or at our Web
site at www.invesco.com.
You may also establish
an automatic monthly
exchange service between
two INVESCO funds; call
us for further details
and the correct form.
- ----------------------------------------------------------------------------------------------------
PERIODIC WITHDRAWAL PLAN This option is not available to
You may call us to request shareholders of the Fund.
appropriate form and more
information at 1-800-
525-8085.
- ----------------------------------------------------------------------------------------------------
PAYMENT TO THIRD PARTY Any amount. All registered account owners
Mail your request to must sign the request, with
INVESCO Funds Group, signature guaranteees from an
Inc., eligible guarantor financial
P.O. Box 173706 institution, such as a
Denver, CO 80217-3706 bank or a recognized national
securities firm.
[GRAPH ICON] TAXES
Everyone's tax status is unique. We encourage you to consult your own tax
adviser on the tax impact to you of investing in the Fund.
TO AVOID BACKUP WITHHOLDING, BE SURE WE HAVE YOUR CORRECT SOCIAL SECURITY OR
TAXPAYER IDENTIFICATION NUMBER.
The Fund customarily distributes to its shareholders substantially all of
its net investment income, net capital gains and net gains from foreign currency
transactions, if any. you receive a proportionate part of these distributions,
depending on the percentage of the Fund's shares that you own. These
distributions are required under federal tax laws governing mutual funds. It is
the policy of the Fund to distribute all investment company taxable income and
net capital gains. As a result of this policy and the Fund's qualification as a
regulated investment company, it is anticipated that the Fund will not pay any
federal income or excise taxes. Instead, the Fund will be accorded conduit or
"pass through" treatment for federal income tax purposes.
However, unless you are (or your account is) exempt from income taxes, you
must include all dividends and capital gain distributions paid to you by the
Fund in your taxable income for federal, state and local income tax purposes.
You also may realize capital gains or losses when you sell shares of the Fund at
more or less than the price you originally paid. An exchange is treated as a
sale, and is a taxable event. Dividends and other distributions usually are
taxable whether you receive them in cash or automatically reinvest them in
shares of the Fund or other INVESCO funds.
<PAGE>
If you have not provided INVESCO with complete, correct tax information,
the Fund is required by law to withhold 31% of your distributions and any money
that you receive from the sale of shares of the Fund as a backup withholding
tax.
We will provide you with detailed information every year about your
dividends and capital gain distributions. Depending on the activity in your
individual account, we may also be able to assist with cost basis figures for
shares you sell.
[GRAPH ICON] DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
The Fund earns ordinary or investment income from dividends and interest on
its investments. The Fund expects to distribute substantially all of this
investment income, less Fund expenses, to shareholders annually, or at such
other times as the Fund may elect.
The Fund also realizes capital gains and losses when it sells securities in
its portfolio for more or less than it paid for them. If total gains on sales
exceed total losses (including losses carried forward from previous years), the
Fund has a net realized capital gain. Net realized capital gains, if any, are
distributed to shareholders at least annually, usually in December.
NET INVESTMENT INCOME AND REALIZED CAPITAL GAINS ARE DISTRIBUTED TO SHAREHOLDERS
AT LEAST ANNUALLY. DISTRIBUTIONS ARE TAXABLE WHETHER REINVESTED IN ADDITIONAL
SHARES OR PAID TO YOU IN CASH (EXCEPT FOR TAX-EXEMPT ACCOUNTS).
Under present federal income tax laws, capital gains may be taxable at different
rates, depending on how long the Fund has held the underlying investment.
Short-term capital gains which are derived from the sale of assets held one
year or less are taxed as ordinary income. Long-term capital gains which are
derived from the sale of assets held for more than one year are taxed at the
maximum capital gains rate, currently 20% for individuals.
Dividends and capital gain distributions are paid to you if you hold shares
on the record date of the distribution regardless of how long you have held your
shares. The Fund's NAV will drop by the amount of the distribution on the day
the distribution is made. If you buy shares of the Fund just before a
distribution, you may wind up "buying a dividend." This means that if the Fund
makes a dividend or capital gain distribution shortly after you buy, you will
receive some of your investment back as a taxable distribution. Most
shareholders want to avoid this. And, if you sell your shares at a loss for tax
purposes and purchase a substantially identical investment within 30 days before
or after that sale, the transaction is usually considered a "wash sale" and you
will not be able to claim a tax loss.
Dividends and capital gain distributions paid by the Fund are automatically
reinvested in additional Fund shares at the NAV on the ex-dividend date, unless
you choose to have them automatically reinvested in another INVESCO fund or paid
to you by check or electronic funds transfer. If you choose to be paid by check,
the minimum amount of the check must be at least $10; amounts less than that
will be automatically reinvested. Dividends and other distributions, whether
received in cash or reinvested in additional Fund shares, may be subject to
federal income tax.
<PAGE>
MARCH 1, 1999
INVESCO SECTOR FUNDS, INC.
TECHNOLOGY FUND - CLASS I
You may obtain additional information about the Fund from several sources.
FINANCIAL REPORTS. Although this Prospectus describes the Fund's
anticipated investments and operations, the Fund also prepares annual and
semiannual reports that detail the Fund's actual investments at the report date.
These reports include discussion of the Fund's recent performance, as well as
market and general economic trends affecting the Fund's performance. The annual
report also includes the report of the Fund's independent accountants.
STATEMENT OF ADDITIONAL INFORMATION. The SAI dated March 1, 1999, is a
supplement to this Prospectus, and has detailed information about the Fund and
its investment policies and practices. A current SAI for the Fund is on file
with the Securities and Exchange Commission and is incorporated in this
Prospectus by reference; in other words, the SAI is legally a part of this
Prospectus, and you are considered to be aware of the contents of the SAI.
INTERNET. The current Prospectus of the Fund may be accessed through the
INVESCO Web site at www.invesco.com. In addition, the Prospectus, annual report,
semiannual report and SAI of the Fund are available on the SEC Web site at
www.sec.gov.
To obtain a free copy of the current annual report, semiannual report or
SAI, write to INVESCO Distributors, Inc., P.O. Box 173706, Denver, Colorado
80217-3706; or call 1-800-525-8085. Copies of these materials are also available
(with a copying charge) from the SEC's Public Reference Section at 450 Fifth
Street, N.W., Washington, D.C. Information on the Public Reference Section can
be obtained by calling 1-800-SEC-0330. The SEC file numbers for the Fund are
811-3826 and 002-85905.
To reach PAL(R), your 24-hour Personal Account Line, call: 1-800-424-8085.
If you're in Denver, please visit one of our convenient Investor Centers:
Cherry Creek
155-B Fillmore Street
Denver Tech Center
7800 East Union Avenue
811-3826
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
INVESCO SECTOR FUNDS, INC.
(formerly, INVESCO Strategic Portfolios, Inc.)
INVESCO Energy Fund
INVESCO Environmental Fund
INVESCO Financial Services Fund
INVESCO Gold Fund
INVESCO Health Sciences Fund
INVESCO Leisure Fund
INVESCO Technology Fund - Classes I and II
INVESCO Utilities Fund
Address: Mailing Address:
7800 E. Union Ave., Denver, CO 80237 P.O. Box 173706, Denver, CO 80217-3706
Telephone: 303-930-6300
In continental U.S., 1-800-525-8085
March 1, 1999
A Prospectus for Energy, Environmental Services, Financial Services, Gold,
Health Sciences, Leisure, Technology - Class II and Utilities Funds dated March
1, 1999, and a Prospectus for Technology Fund - Class I dated March 1, 1999,
provide the basic information you should know before investing in a Fund. This
Statement of Additional Information ("SAI") is incorporated by reference into
each Fund's Prospectus; in other words, this SAI is legally part of the Funds'
Prospectuses. Although this SAI is not a prospectus, it contains information in
addition to that set forth in the Prospectuses. It is intended to provide
additional information regarding the activities and operations of the Funds and
should be read in conjunction with the Prospectuses.
You may obtain, without charge, copies of the current Prospectuses of the Funds,
SAI and current annual and semi-annual reports by writing to INVESCO
Distributors, Inc., P.O. BOX 173706, DENVER, CO 80217-3706, or by calling
1-800-525-8085. Copies of the Prospectuses also are available through the
INVESCO web site at www.invesco.com.
<PAGE>
TABLE OF CONTENTS
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Investments, Policies and Risks . . . . . . . . . . . . . . . . . . . . . . 52
Management of the Funds . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Other Service Providers . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Brokerage Allocation and Other Practices . . . . . . . . . . . . . . . . . 106
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Tax Consequences of Owning Shares of the Fund . . . . . . . . . . . . . . . 110
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
<PAGE>
THE COMPANY
The Company was incorporated under the laws of Maryland as INVESCO Strategic
Portfolios, Inc. on August 10, 1983. On October 29, 1998, the name of the
Company was changed to INVESCO Sector Funds, Inc.
The Company is an open-end, diversified, no-load management investment
company currently consisting of eight portfolios of investments: Energy Fund,
Environmental Services Fund, Financial Services Fund, Gold Fund, Health Sciences
Fund, Leisure Fund, Technology Fund - Classes I and II and Utilities Fund (the
"funds").
"Open-end" means that each Fund issues an indefinite number of shares which it
continuously offers to redeem at net asset value per share ("NAV"). A
"management" investment company actively buys and sells securities for each
portfolio at the direction of a professional manager. Open-end management
investment companies (or one or more series of such companies, such as the
Funds) are commonly referred to as mutual funds. The Funds do not charge sales
fees to purchase their shares. However, all the Funds, with the exception of the
Technology Fund - Class I, do pay a 12b-1 distribution fee which is computed and
paid monthly at an annual rate of 0.25% of each Fund's average net assets.
INVESTMENTS, POLICIES AND RISKS
The principal investments and policies of the Funds are discussed in the
Prospectuses of the Funds. The Funds also may invest in the following securities
and engage in the following practices.
ADRS -- American Depository Receipts, or ADRs, are securities issued by American
banks. ADRs are receipts for the shares of foreign corporations that are held by
the bank issuing the receipt. An ADR entitles its holder to all dividends and
capital gains on the underlying foreign securities, less any fees paid to the
bank. Purchasing ADRs gives a Fund the ability to purchase the functional
equivalent of foreign securities without going to the foreign securities markets
to do so. ADRs are bought and sold in U.S. dollars, not foreign currencies. An
ADR that is "sponsored" means that the foreign corporation whose shares are
represented by the ADR is actively involved in the issuance of the ADR, and
generally provides material information about the corporation to the U.S.
market. An "unsponsored" ADR program means that the foreign corporation whose
shares are held by the bank is not obligated to disclose material information in
the United States, and, therefore, the market value of the ADR may not reflect
important facts known only to the foreign company.
Since they mirror their underlying foreign securities, ADRs generally have the
same risks as investing directly in the underlying foreign securities.
<PAGE>
DEBT SECURITIES -- Debt securities include bonds, notes and other
securities that give the holder the right to receive fixed amounts of principal,
interest, or both on a date in the future or on demand. Debt securities also are
often referred to as fixed income securities, even if the rate of interest
varies over the life of the security.
Debt securities are generally subject to credit risk and market risk.
Credit risk is the risk that the issuer of the security may be unable to meet
interest or principal payments or both as they come due. Market risk is the risk
that the market value of the security may decline for a variety of reasons,
including changes in interest rates. An increase in interest rates tends to
reduce the market values of debt securities in which a Fund has invested. A
decline in interest rates tends to increase the market values of debt securities
in which a Fund has invested.
Moody's Investors Services ("Moody's") and Standard & Poor's ("S&P")
ratings provide a useful guide to the credit risk of many debt securities. The
lower the rating of a debt security, the greater the credit risk the rating
service assigns to the security. To compensate investors for accepting that
greater risk, lower-rated debt securities tend to offer higher interest rates.
Lower-rated debt securities are often referred to as "junk bonds." Increasing
the amount of Fund assets invested in unrated or lower grade straight debt
securities may increase the yield produced by a Fund's debt securities but will
also increase the credit risk of those securities. A debt security is considered
lower grade if it is rated Ba or less by Moody's, BB or less by S&P.
A significant economic downturn or increase in interest rates may cause
issuers of debt securities to experience increased financial problems which
could adversely affect their ability to pay principal and interest obligations,
to meet projected business goals, and to obtain additional financing. These
conditions more severely impact issuers of lower-rated debt securities. The
market for lower-rated straight debt securities may not be as liquid as the
market for higher-rated straight debt securities. Therefore, a Fund's investment
adviser attempts to limit purchases of lower-rated securities to securities
having an established secondary market.
Lower-rated and non-rated debt securities of comparable quality are subject
to wider fluctuations in yields and market values than higher-rated debt
securities and may be considered speculative. Although a Fund may invest in debt
securities assigned lower grade ratings by S&P or Moody's, the Funds'
investments have generally been limited to debt securities rated B or higher by
either S&P or Moody's. Debt securities rated lower than B by either S&P or
Moody's are usually considered to be speculative. The Funds' investment adviser
will limit Fund investments to debt securities which the adviser believes are
not highly speculative and which are rated at least CCC by S&P or Caa by
Moody's.
Debt securities rated Caa by Moody's may be in default or may present risks
of non-payment of principal or interest. Lower-rated securities by S&P
(categories BB, B and CCC) include those which are predominantly speculative
because of the issuer's perceived capacity to pay interest and repay principal
in accordance with their terms; BB indicates the lowest degree of speculation
and CCC a high degree of speculation. While such debt securities will likely
have some quality and protective characteristics, these are usually outweighed
by large uncertainties or major risk exposures to adverse conditions.
<PAGE>
EQUITY SECURITIES -- As discussed in the Prospectuses, the Funds may invest
in common, preferred and convertible preferred stocks, and securities whose
values are tied to the price of stocks, such as rights, warrants and convertible
debt securities. Common stocks and preferred stocks represent equity ownership
in a corporation. Owners of stock, such as the Funds, share in a corporation's
earnings through dividends which may be declared by the corporation, although
the receipt of dividends is not the principal benefit that the Funds seek when
they invest in stocks and similar instruments.
Instead, the Funds seek to invest in stocks that will increase in market
value and may be sold for more than a Fund paid to buy them. Market value is
based upon constantly changing investor perceptions of what the company is worth
compared to other companies. Although dividends are a factor in the changing
market value of stocks, many companies do not pay dividends, or pay
comparatively small dividends. As discussed in the Prospectuses, the principal
risk of investing in equity securities is that their market value fluctuates
constantly, often due to factors entirely outside the control of the Funds or
the company issuing the stock. At any given time, the market value of an equity
security may be significantly higher or lower than the amount paid by a Fund to
acquire it.
Owners of preferred stocks are entitled to dividends payable from the
corporation's earnings, which in some cases may be "cumulative" if prior
dividends on the preferred stock have not been paid. Dividends payable on
preferred stock have priority over distributions to holders of common stock, and
preferred stocks generally have a priority on the distribution of assets in the
event of the corporation's liquidation. Preferred stocks may be "participating,"
which means that they may be entitled to dividends in excess of the stated
dividend in certain cases. The holders of a company's debt securities generally
are entitled to be paid by the company before it pays anything to its
stockholders.
Rights and warrants are securities which entitle the holder to purchase the
securities of a company (usually, its common stock) at a specified price during
a specified time period. The value of a right or warrant is affected by many of
the same factors that determine the prices of common stocks. Rights and warrants
may be purchased directly or acquired in connection with a corporate
reorganization or exchange offer.
The Funds also may purchase convertible securities including convertible
debt obligations and convertible preferred stock. A convertible security
entitles the holder to exchange it for a fixed number of shares of common stock
(or other equity security), usually at a fixed price within a specified period
of time. Until conversion, the owner of convertible securities usually receives
the interest paid on a convertible bond or the dividend preference of a
preferred stock.
A convertible security has an "investment value" which is a theoretical
value determined by the yield it provides in comparison with similar securities
without the conversion feature. Investment value changes are based upon
prevailing interest rates and other factors. It also has a "conversion value,"
which is the market value the convertible security would have if it were
exchanged for the underlying equity security. Convertible securities may be
purchased at varying price levels above or below their investment values or
conversion values.
<PAGE>
Conversion value is a simple mathematical calculation that fluctuates
directly with the price of the underlying security. However, if the conversion
value is substantially below the investment value, the market value of the
convertible security is governed principally by its investment value. If the
conversion value is near or above the investment value, the market value of the
convertible security generally will rise above investment value. In such cases,
the market value of the convertible security may be higher than its conversion
value, due to the combination of the convertible security's right to interest
(or dividend preference) and the possibility of capital appreciation from the
conversion feature. However, there is no assurance that any premium above
investment value or conversion value will be recovered because prices change
and, as a result, the ability to achieve capital appreciation through conversion
may be eliminated.
FOREIGN SECURITIES -- As discussed in the Prospectuses, investments in the
securities of foreign companies, or companies that have their principal business
activities outside the United States, involve certain risks not associated with
investment in U.S. companies. Non-U.S. companies generally are not subject to
the same uniform accounting, auditing and financial reporting standards that
apply to U.S. companies. Therefore, financial information about foreign
companies may be incomplete, or may not be comparable to the information
available on U.S. companies. There may also be less publicly available
information about a foreign company.
Although the volume of trading in foreign securities markets is growing,
securities of many non-U.S. companies may be less liquid and have greater swings
in price than securities of comparable U.S. companies. The costs of buying and
selling securities on foreign securities exchanges are generally significantly
higher than similar costs in the United States. There is generally less
government supervision and regulation of exchanges, brokers and issuers in
foreign countries than there is in the United States. Investment in non-U.S.
securities may also be subject to other risks different from those affecting
U.S. investments, including local political or economic developments,
expropriation or nationalization of assets, confiscatory taxation, and
imposition of withholding taxes on dividends or interest payments. If it becomes
necessary, it may be more difficult for a Fund to obtain or to enforce a
judgment against a foreign issuer than against a domestic issuer.
Securities traded on foreign markets are usually bought and sold in local
currencies, not in U.S. dollars. Therefore, the market value of foreign
securities acquired by a Fund can be affected -- favorably or unfavorably -- by
changes in currency rates and exchange control regulations. Costs are incurred
in converting money from one currency to another. Foreign currency exchange
rates are determined by supply and demand on the foreign exchange markets.
Foreign exchange markets are affected by the international balance of payments
and other economic and financial conditions, government intervention,
speculation and other factors, all of which are outside the control of each
Fund. Generally, the Funds' foreign currency exchange transactions will be
conducted on a cash or "spot" basis at the spot rate for purchasing or selling
currency in the foreign currency exchange markets.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The Funds may enter into
contracts to purchase or sell foreign currencies in the future, for example, as
a hedge against possible changes in foreign exchange rates before settlement of
a pending trade. A forward foreign currency exchange contract is an agreement
between the contracting parties to exchange an amount of cur rency at some
future time at an agreed upon rate. The rate can be higher or lower than the
cash or "spot" rate between the currencies that are the subject of the contract.
<PAGE>
A forward contract generally has no deposit requirement, and such
transactions do not involve commissions. A Fund can hedge against possible
variations in the value of the dollar versus another currency by entering into a
forward contract for the purchase or sale of all or part of the amount of
foreign currency invested in a foreign security. A hedge can be used between the
date the foreign security transaction is executed and the date on which payment
is made or received, or a hedge may be used during the time a Fund holds the
foreign security. Hedging against a change in the value of a currency does not
eliminate fluctuations in the prices of securities or prevent losses if the
prices of the securities decline. Furthermore, such hedging transactions
preclude the opportunity for gain if the value of the hedged currency should
rise. There can be no assurance that a Fund will be in a better or a worse
position than if it had not entered into any forward contracts.
The Funds will not speculate in forward foreign currency exchange
contracts. Although the Funds have no limit on their ability to use forward
foreign currency exchange contracts as a hedge against fluctuations in foreign
exchange rates (except to the extent that in certain situations hedging
instruments may not be available), the Funds do not attempt to hedge all of
their non-U.S. portfolio positions. The Funds will enter into forward foreign
currency exchange contracts only to the extent, if any, deemed appropriate by
the adviser and sub-adviser. Forward contracts may, from time to time, be
considered illiquid, in which case they would be subject to a Fund's limitations
on investing in illiquid securities. The Funds will not enter into forward
contracts for a term of more than one year.
FUTURES AND OPTIONS -- Each of the Funds has adopted a policy which permits
each Fund to purchase or sell put and call options on individual securities,
securities indexes and currencies, or financial futures or options on financial
futures. The following sub-sections entitled "Put and Call Options," "Futures
and Options," and "Options on Futures Contracts," apply to each of the Funds,
except the Environmental Services Fund.
PUT AND CALL OPTIONS. An option on a security provides the purchaser, or
"holder," with the right, but not the obligation, to purchase, in the case of a
"call" option or sell, in the case of a "put" option, the security or securities
underlying the option, for a fixed exercise price up to a stated expiration
date. The holder pays a non-refundable purchase price for the option, known as
the "premium." The maximum amount of risk the purchaser of the option assumes is
equal to the premium plus related transaction costs, althought the entire amount
may be lost. The risk of the seller, or "writer," however, is potentially
unlimited, unless the option is "covered," which is generally accomplished
through the writer's ownership of the underlying security, in the case of a call
option, or the writer's segregation of an amount of cash or securities equal to
the exercise price, in the case of a put option. If the writer's obligation is
not so covered, it is subject to the risk of the full change in value of the
underlying security from the time the option is written until exercise.
Upon exercise of the option, the holder is required to pay the purchase
price of the underlying security, in the case of a call option, or to deliver
the security in return for the purchase price, in the case of a put option.
Conversely, the writer is required to deliver the security, in the case of a
<PAGE>
call option, or to purchase the security, in the case of a put option.
Options on securities which have been purchased or written may be closed out
prior to exercise or expiration by entering into an offsetting transaction on
the exchange on which the initial position was established, subject to the
availability of a liquid secondary market.
Options on securities are traded on national securities exchanges, such as
the Chicago Board of Options Exchange and the New York Stock Exchange, which are
regulated by the Securities and Exchange Commission. The Options Clearing
Corporation ("OCC") guarantees the performance of each party to an
exchange-traded option, by in effect taking the opposite side of each such
option. A holder or writer may engage in transactions in exchange-traded options
on securities and options on indices of securities only through a registered
broker/dealer which is a member of the exchange on which the option is traded.
An option position in an exchange-traded option may be closed out only on
an exchange which provides a secondary market for an option of the same series.
Although a Fund will generally purchase or write only those options for which
there appears to be an active secondary market, there is no assurance that a
liquid secondary market on an exchange will exist for any particular option at
any particular time. In such event it might not be possible to effect closing
transactions in a particular option with the result that a Fund would have to
exercise the option in order to realize any profit. This would result in a
Fund's incurring brokerage commissions upon the disposition of underlying
securities acquired through the exercise of a call option or upon the purchase
of underlying securities upon the exercise of a put option. If the Fund as
covered call option writer is unable to effect a closing purchase transaction in
a secondary market, unless such Fund is required to deliver the securities
pursuant to the assignment of an exercise notice, it will not be able to sell
the underlying security until the option expires.
Reasons for the potential absence of a liquid secondary market on an
exchange include the following: (i) there may be insufficient trading interest
in certain options; (ii) restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular classes or
series of options or underlying securities; (iv) unusual or unforeseen
circumstances may interrupt normal operations on an exchange; (v) the facilities
of an exchange or a clearing corporation may not at all times be adequate to
handle current trading volume; or (vi) one or more exchanges could, for economic
or other reasons, decide or be compelled at some future date to discontinue the
trading of options (or particular classes or series of options) in which event
the secondary market on that exchange (or in the class or series of options)
would cease to exist, although outstanding options on that exchange which had
been issued by a clearing corporation as a result of trades on that exchange
would continue to be exercisable in accordance with their terms. There is no
assurance that higher than anticipated trading activity or other unforeseen
events might not, at a particular time, render certain of the facilities of any
of the clearing corporations inadequate and thereby result in the institution by
an exchange of special procedures which may interfere with the timely execution
of customers' orders. However, the OCC, based on forecasts provided by the U.S.
<PAGE>
exchanges, believes that its facilities are adequate to handle the volume of
reasonably anticipated options transactions, and such exchanges have advised the
OCC that they believe their facilities will also be adequate to handle
reasonably anticipated volume.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. As described in the
Funds' Prospectuses, each Fund may enter into futures contracts, and purchase
and sell ("write") options to buy or sell futures contracts. The Funds will
comply with and adhere to all limitations in the manner and extent to which they
effect transactions in futures and options on such futures currently imposed by
the rules and policy guidelines of the Commodity Futures Trading Commission
("CFTC") as conditions for exemption of a mutual fund, or investment advisers
thereto, from registration as a commodity pool operator. No Fund will, as to any
positions, whether long, short or a combination thereof, enter into futures and
options thereon for which the aggregate initial margins and premiums exceed 5%
of the fair market value of its assets after taking into account unrealized
profits and losses on options it has entered into. In the case of an option that
is "in-the-money," as defined in the Commodity Exchange Act (the "CEA"), the
"in-the-money" amount may be excluded in computing such 5%. (In general a call
option on a future is "in-the-money" if the value of the future exceeds the
exercise ("strike") price of the call; a put option on a future is
"in-the-money" if the value of the future which is the subject of the put is
exceeded by the strike price of the put.) Each Fund may use futures and options
thereon for bona fide hedging or for other non- speculative purposes within the
meaning and intent of the applicable provisions of the CEA.
Unlike when a Fund purchases or sells a security, no price is paid or
received by a Fund upon the purchase or sale of a futures contract. Instead, the
Fund will be required to deposit in its segregated asset account an amount of
cash or qualifying securities (currently U.S. Treasury bills), currently in a
minimum amount of $15,000. This is called "initial margin." Such initial margin
is in the nature of a performance bond or good faith deposit on the contract.
However, since losses on open contracts are required to be reflected in cash in
the form of variation margin payments, a Fund may be required to make additional
payments during the term of the contracts to its broker. Such payments would be
required, for example, where, during the term of an interest rate futures
contract purchased by a Fund, there was a general increase in interest rates,
thereby making such Fund's securities less valuable. In all instances involving
the purchase of futures contracts by a Fund, an amount of cash together with
such other securities as permitted by applicable regulatory authorities to be
utilized for such purpose, at least equal to the market value of the futures
contracts, will be deposited in a segregated account with such Fund's custodian
to collateralize the position. At any time prior to the expiration of a futures
contract, a Fund may elect to close its position by taking an opposite position
which will operate to terminate its position in the futures contract.
Where futures are purchased to hedge against a possible increase in the
price of a security before a Fund is able in an orderly fashion to invest in the
security, it is possible that the market may decline instead. If the Fund, as a
result, concluded not to make the planned investment at that time because of
concern as to possible further market decline or for other reasons, the Fund
would realize a loss on the futures contract that is not offset by a reduction
in the price of securities purchased.
<PAGE>
In addition to the possibility that there may be an imperfect correlation
or no correlation at all between movements in the futures contracts and the
portion of the portfolio being hedged, the price of a futures contract may not
correlate perfectly with movements in the prices due to certain market
distortions. All participants in the futures market are subject to margin
deposit and maintenance requirements. Rather than meeting additional margin
deposit requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between underlying
instruments and the value of the futures contract. Moreover, the deposit
requirements in the futures market are less onerous than margin requirements in
the securities market and may therefore cause increased participation by
speculators in the futures market. Such increased participation may also cause
temporary price distortions. Due to the possibility of price distortion in the
futures market and because of the imperfect correlation between movements in the
underlying instrument and movements in the price of futures contracts, the value
of futures contracts as a hedging device may be reduced.
In addition, if a Fund has insufficient available cash, it may at times
have to sell securities to meet variation margin requirements. Such sales may
have to be effected at a time when it may be disadvantageous to do so.
As noted above, a Fund may buy and write options on futures contracts for
hedging purposes. The purchase of a call option on a futures contract is similar
in some respects to the purchase of a call option on an individual security.
Depending on the pricing of the option compared to either the price of the
futures contract upon which it is based or the price of the underlying
instrument, ownership of the option may or may not be less risky than ownership
of the futures contract or the underlying instrument. As with the purchase of
futures contracts, when a Fund is not fully invested it may buy a call option on
a futures contract to hedge against a market advance.
The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the security or foreign currency which is
deliverable under, or of the index comprising, the futures contract. If the
futures price at the expiration of the option is below the exercise price, a
Fund will retain the full amount of the option premium which provides a partial
hedge against any decline that may have occurred in such Fund's holdings. The
writing of a put option on a futures contract constitutes a partial hedge
against increasing prices of the security or foreign currency which is
deliverable under, or of the index comprising, the futures contract. If the
futures price at expiration of the option is higher than the exercise price, a
Fund will retain the full amount of the option premium which provides a partial
hedge against any increase in the price of securities which the Fund is
considering buying. If a call or put option which a Fund has written is
exercised, such Fund will incur a loss which will be reduced by the amount of
the premium it received. Depending on the degree of correlation between changes
<PAGE>
in the value of its portfolio securities and changes in the value of the
futures positions, a Fund's losses from existing options on futures may to some
extent be reduced or increased by changes in the value of portfolio securities.
The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities. For
example, a Fund may buy a put option on a futures contract to hedge its
portfolio against the risk of falling prices.
The amount of risk a Fund assumes when it buys an option on a futures
contract is the premium paid for the option plus related transactions costs. In
addition to the correlation risks discussed above, the purchase of an option
also entails the risk that changes in the value of the underlying futures
contract will not be reflected fully in the value of the options bought.
For a more complete discussion of the risks involved in futures and options
on futures and other securities, refer to Appendix A ("Description of Futures,
Options and Forward Contracts").
OPTIONS, FUTURES AND OTHER FINANCIAL INSTRUMENTS AND THEIR STRATEGIC USES
(TECHNOLOGY FUND - CLASS I ONLY)
GENERAL. As discussed in its Prospectus, INVESCO may use various types of
financial instruments, some of which are derivatives, to attempt to manage the
risk of the Fund's investments or, in certain circumstances, for investment
(e.g., as a substitute for investing in securities). These financial instruments
include options, futures contracts (sometimes referred to as "futures"), forward
contracts, swaps, caps, floors and collars (collectively, "Financial
Instruments"). The policies in this section do not apply to other types of
instruments sometimes referred to as derivatives, such as indexed securities,
mortgage-backed and other asset-backed securities, and stripped interest and
principal of debt.
Generally, the Fund is authorized to use any type of Financial Instrument.
However, as a non-fundamental policy, the Fund will only use a particular
Financial Instrument (other than those related to foreign currency) if the Fund
is authorized to take a position in the type of asset to which the return on, or
value of, the Financial Instrument is primarily related. Therefore, for example,
if the Fund is authorized to invest in a particular type of security (such as an
equity security), it could take a position in an option on an index relating to
equity securities. With respect to foreign currency Financial Instruments, as a
non-fundamental policy the Fund will only use these Financial Instruments if the
Fund is authorized to invest in foreign securities. In addition, the Fund
presently has a non-fundamental policy to utilize only exchange-traded Financial
Instruments, other than forward currency contracts. This policy would not,
however, prevent the Fund from investing in a security, such as an indexed
security, with an imbedded component, such as a cap or a floor.
<PAGE>
Hedging strategies can be broadly categorized as "short" hedges and "long"
or "anticipatory" hedges. A short hedge involves the use of a Financial
Instrument in order to partially or fully off- set potential variations in the
value of one or more investments held in the Fund's portfolio. A long or
anticipatory hedge involves the use of a Financial Instrument in order to
partially or fully offset potential increases in the acquisition cost of one or
more investments that the Fund intends to acquire. In an anticipatory hedge
transaction, the Fund does not already own a corresponding security. Rather, it
relates to a security or type of security that the Fund intends to acquire. If
the Fund does not eliminate the hedge by purchasing the security as anticipated,
the effect on the Fund's portfolio is the same as if a long position were
entered into. Financial Instruments may also be used, in certain circumstances,
for investment (e.g., as a substitute for investing in securities).
Financial Instruments on individual securities generally are used to
attempt to hedge against price movements in one or more particular securities
positions that the Fund already owns or intends to acquire. Financial
Instruments on indexes, in contrast, generally are used to attempt to hedge all
or a portion of a portfolio against price movements of the securities within a
market sector in which the Fund has invested or expects to invest.
The use of Financial Instruments is subject to applicable regulations of
the Securities and Exchange Commission ("SEC"), the several exchanges upon which
they are traded, and the Commodity Futures Trading Commission ("CFTC"). In
addition, the Fund's ability to use Financial Instruments will be limited by tax
considerations. See "Dividends, Capital Gains Distributions and Taxes."
In addition to the instruments and strategies described below, INVESCO may
use other similar or related techniques to the extent that they are consistent
with the Fund's investment objective and permitted by the Fund's investment
limitations and applicable regulatory authorities. The Fund's Prospectus or
Statement of Additional Information ("SAI") will be supplemented to the extent
that new products or techniques become employed involving materially different
risks than those described below or in the Prospectus.
COVER. Positions in Financial Instruments, other than purchased options,
expose the Fund to an obligation to another party. The Fund will not enter into
any such transactions unless it owns either (1) an offsetting ("covered")
position in securities, currencies or other options, futures contracts or
forward contracts, or (2) cash and liquid assets with a value, marked-to-market
daily, sufficient to cover its potential obligations to the extent not covered
as provided in (1) above. The Fund will comply with SEC guidelines regarding
cover for these instruments and will, if the guidelines so require, set aside
cash or liquid assets in a segregated account with its custodian in the
prescribed amount as determined daily.
Assets used as cover or held in a segregated account cannot be sold while
the position in the corresponding Financial Instrument is open unless they are
replaced with other appropriate assets. As a result, the commitment of a large
portion of the Fund's assets to cover or in segregated accounts could impede
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.
<PAGE>
OPTIONS. The Fund may engage in certain strategies involving options to
attempt to manage the risk of its investments or, in certain circumstances, for
investment (e.g., as a substitute for investing in securities). A call option
gives the purchaser the right to buy, and obligates the writer to sell, the
underlying investment at the agreed-upon exercise price during the option
period. A put option gives the purchaser the right to sell, and obligates the
writer to buy, the underlying investment at the agreed-upon exercise price
during the option period. Purchasers of options pay an amount, known as a
premium, to the option writer in exchange for the right under the option
contract. See "Options on Indexes" below with regard to cash settlement of
option contracts on index values.
The purchase of call options can serve as a hedge against a price rise of
the underlier and the purchase of put options can serve as a hedge against a
price decline of the underlier. Writing call options can serve as a limited
short hedge because declines in the value of the hedged investment would be
offset to the extent of the premium received for writing the option. However, if
the security or currency appreciates to a price higher than the exercise price
of the call option, it can be expected that the option will be exercised and the
Fund will be obligated to sell the security or currency at less than its market
value.
Writing put options can serve as a limited long or anticipatory hedge
because increases in the value of the hedged investment would be offset to the
extent of the premium received for writing the option. However, if the security
or currency depreciates to a price lower than the exercise price of the put
option, it can be expected that the put option will be exercised and the Fund
will be obligated to purchase the security or currency at more than its market
value.
The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of the
underlying investment, the price volatility of the underlying investment and
general market and interest rate conditions. Options that expire unexercised
have no value.
The Fund may effectively terminate its right or obligation under an option
by entering into a closing transaction. For example, the Fund may terminate its
obligation under a call or put option that it had written by purchasing an
identical call or put option; this is known as a closing purchase transaction.
Conversely, the Fund may terminate a position in a put or call option it had
purchased by writing an identical put or call option; this is known as a closing
sale transaction. Closing transactions permit the Fund to realize profits or
limit losses on an option position prior to its exercise or expiration.
<PAGE>
RISKS OF OPTIONS ON SECURITIES. Options embody the possibility of large
amounts of exposure, which will result in the Fund's net asset value being more
sensitive to changes in the value of the related investment.
The Fund's ability to establish and close out positions in exchange-listed
options depends on the existence of a liquid market. If the Fund is not able to
enter into an offsetting closing transaction on an option it has written, it
will be required to maintain the securities subject to the call or the liquid
assets underlying the put until a closing purchase transaction can be entered
into or the option expires. However, there can be no assurance that such a
market will exist at any particular time.
If the Fund were unable to effect a closing transaction for an option it
had purchased, it would have to exercise the option to realize any profit. The
inability to enter into a closing purchase transaction for a covered call option
written by the Fund could cause material losses because the Fund would be unable
to sell the investment used as cover for the written option until the option
expires or is exercised.
OPTIONS ON INDEXES. Puts and calls on indexes are similar to puts and calls
on securities or futures contracts except that all settlements are in cash and
changes in value depend on changes in the index in question. When the Fund
writes a call on an index, it receives a premium and agrees that, prior to the
expiration date, upon exercise of the call, the purchaser will receive from the
Fund an amount of cash equal to the positive difference between the closing
price of the index and the exercise price of the call times a specified multiple
("multiplier"), which determines the total dollar value for each point of such
difference. When the Fund buys a call on an index, it pays a premium and has the
same rights as to such call as are indicated above. When the Fund buys a put on
an index, it pays a premium and has the right, prior to the expiration date, to
require the seller of the put to deliver to the Fund an amount of cash equal to
the positive difference between the exercise price of the put and the closing
price of the index times the multiplier. When the Fund writes a put on an index,
it receives a premium and the purchaser of the put has the right, prior to the
expiration date, to require the Fund to deliver to it an amount of cash equal to
the positive difference between the exercise price of the put and the closing
level of the index times the multiplier.
The risks of purchasing and selling options on indexes may be greater than
options on securities. Because index options are settled in cash, when the Fund
writes a call on an index it cannot fulfill its potential settlement obligations
by delivering the underlying securities. The Fund can offset some of the risk of
writing a call index option by holding a diversified portfolio of securities
similar to those on which the underlying index is based. However, the Fund
cannot, as a practical matter, acquire and hold a portfolio containing exactly
the same securities as underlie the index and, as a result, bears a risk that
the value of the securities held will vary from the value of the index.
<PAGE>
Even if the Fund could assemble a portfolio that exactly reproduced the
composition of the underlying index, it still would not be fully covered from a
risk standpoint because of the "timing risk" inherent in writing index options.
When an index option is exercised, the amount of cash that the holder is
entitled to receive is determined by the difference between the exercise price
and the closing index level. As with other kinds of options, the Fund as the
call writer will not learn that the Fund has been assigned until the next
business day. The time lag between exercise and notice of assignment poses no
risk for the writer of a covered call on a specific underlying security, such as
common stock, because in that case the writer's obligation is to deliver the
underlying security, not to pay its value as of a moment in the past. In
contrast, the writer of an index call will be required to pay cash in an amount
based on the difference between the closing index value on the exercise date and
the exercise price. By the time it learns that it has been assigned, the index
may have declined. This "timing risk" is an inherent limitation on the ability
of index call writers to cover their risk exposure.
If the Fund has purchased an index option and exercises it before the
closing index value for that day is available, it runs the risk that the level
of the underlying index may subsequently change. If such a change causes the
exercised option to fall out-of-the-money, the Fund nevertheless will be
required to pay the difference between the closing index value and the exercise
price of the option (times the applicable multiplier) to the assigned writer.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. When the Fund purchases
or sells a futures contract, it incurs an obligation respectively to take or
make delivery of a specified amount of the obligation underlying the contract at
a specified time and price. When the Fund writes an option on a futures
contract, it becomes obligated to assume a position in the futures contract at a
specified exercise price at any time during the term of the option. If the Fund
writes a call, on exercise it assumes a short futures position. If it writes a
put, on exercise it assumes a long futures position.
The purchase of futures or call options on futures can serve as a long or
an anticipatory hedge, and the sale of futures or the purchase of put options on
futures can serve as a short hedge. Writing call options on futures contracts
can serve as a limited short hedge, using a strategy similar to that used for
writing call options on securities or indexes. Similarly, writing put options on
futures contracts can serve as a limited long or anticipatory hedge.
In addition, futures strategies can be used to manage the duration and
associated interest rate risk of the Fund's fixed-income portfolio. If INVESCO
wishes to shorten the duration of the Fund's fixed-income portfolio, the Fund
may sell an appropriate debt futures contract or a call option thereon, or
purchase a put option on that futures contract. If INVESCO wishes to lengthen
the duration of the Fund's fixed-income portfolio, the Fund may buy an
appropriate debt futures contract or a call option thereon, or sell a put option
thereon.
<PAGE>
At the inception of a futures contract, the Fund is required to deposit
"initial margin" in an amount generally equal to 10% or less of the contract
value. Initial margin must also be deposited when writing a call or put option
on a futures contract, in accordance with applicable exchange rules. Subsequent
"variation margin" payments are made to and from the futures broker daily as the
value of the futures or written option position varies, a process known as
"marking-to-market." Unlike margin in securities transactions, initial margin on
futures contracts and written options on futures contracts does not represent a
borrowing on margin, but rather is in the nature of a performance bond or
good-faith deposit that is returned to the Fund at the termination of the
transaction if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, the Fund may be required to
increase the level of initial margin payments. If the Fund has insufficient cash
to meet daily variation margin requirements, it might need to sell securities in
order to do so at a time when such sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures can
enter into offsetting closing transactions, similar to closing transactions on
options, by selling or purchasing, respectively, an instrument identical to the
instrument purchased or sold. Positions in futures and options on futures used
by the Fund may be closed only on an exchange or board of trade that provides a
market. However, there can be no assurance that a liquid market will exist for a
particular contract at a particular time. In such event, it may not be possible
to close a futures contract or options position. Under certain circumstances,
futures exchanges may establish daily limits on the amount that the price of a
futures contract or an option on a futures contract can vary from the previous
day's settlement price; once that limit is reached, no trades may be made that
day at a price beyond the limit. Daily price limits do not limit potential
losses because prices could move to the daily limit for several consecutive days
with little or no trading, thereby preventing liquidation of unfavorable
positions.
If the Fund were unable to liquidate a futures contract or an option on a
futures contract position due to the absence of a liquid market or the
imposition of price limits, it could incur substantial losses. The Fund would
continue to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Fund would continue to be required
to make daily variation margin payments and might be required to continue to
maintain the position being hedged by the futures contract or option or to
continue to maintain cash or securities in a segregated account.
To the extent that the Fund enters into futures contracts, options on
futures contracts and options on foreign currencies traded on a CFTC-regulated
exchange, in each case that is not for bona fide hedging purposes (as defined by
the CFTC), the aggregate initial margin and premiums required to establish these
positions (excluding the amount by which options are "in-the-money" at the time
of purchase) may not exceed 5% of the liquidation value of the Fund's portfolio,
after taking into account unrealized profits and unrealized losses on any
contracts the Fund has entered into.
<PAGE>
This policy does not limit to 5% the percentage of the Fund's assets that
are at risk in futures contracts, options on futures contracts and currency
options.
RISKS OF FUTURES CONTRACTS AND OPTIONS THEREON. The ordinary spreads at a
given time between prices in the cash and futures markets (including the options
on futures markets), due to differences in the natures of those markets, are
subject to the following factors. First, all participants in the futures market
are subject to margin deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through offsetting transactions, which could distort the normal relationship
between the cash and futures markets. Second, the liquidity of the futures
market depends on participants entering into offsetting transactions rather than
making or taking delivery. To the extent participants decide to make or take
delivery, liquidity in the futures market could be reduced, thus producing
distortion. Due to the possibility of distortion, a hedge may not be successful.
Additionally, INVESCO may be incorrect in its expectations as to the extent of
various interest rate, currency exchange rate or stock market movements or the
time span within which the movements take place.
INDEX FUTURES. The risk of imperfect correlation between movements in the
price of index futures and movements in the price of the securities that are the
subject of a hedge increases as the composition of the Fund's portfolio diverges
from the index. The price of the index futures may move proportionately more
than or less than the price of the securities being hedged. If the price of the
index futures moves proportionately less than the price of the securities that
are the subject of the hedge, the hedge will not be fully effective. However, if
the price of the securities being hedged has moved in an unfavorable direction,
the Fund would be in a better position than if it had not hedged at all. If the
price of the securities being hedged has moved in a favorable direction, this
advantage will be partially offset by movement of the price of the futures
contract. If the price of the futures contract moves more than the price of the
securities, the Fund will experience either a loss or a gain on the futures
contract that will not be completely offset by movements in the price of the
securities that are the subject of the hedge.
Where index futures are purchased in an anticipatory hedge, it is possible
that the market may decline instead. If the Fund then decides not to invest in
the securities at that time because of concern as to possible further market
decline or for other reasons, it will realize a loss on the futures contract
that is not offset by a reduction in the price of the securities it had
anticipated purchasing.
FOREIGN CURRENCY HEDGING STRATEGIES--SPECIAL CONSIDERATIONS. The Fund may
use options and futures contracts on foreign currencies, as mentioned
previously, and forward currency contracts, as described below, to attempt to
hedge against movements in the values of the foreign currencies in which the
Fund's securities are denominated or, in certain circumstances, for investment
(e.g., as a substitute for investing in securities denominated in foreign
currency). Currency hedges can protect against price movements in a security
that the Fund owns or intends to acquire that are attributable to changes in the
value of the currency in which it is denominated.
<PAGE>
The Fund might seek to hedge against changes in the value of a particular
currency when no Financial Instruments on that currency are available or such
Financial Instruments are more expensive than certain other Financial
Instruments. In such cases, the Fund may seek to hedge against price movements
in that currency by entering into transactions using Financial Instruments on
another currency or a basket of currencies, the value of which INVESCO believes
will have a high degree of positive correlation to the value of the currency
being hedged. The risk that movements in the price of the Financial Instrument
will not correlate perfectly with movements in the price of the currency subject
to the hedging transaction may be increased when this strategy is used.
The value of Financial Instruments on foreign currencies depends on the
value of the underlying currency relative to the U.S. dollar. Because foreign
currency transactions occurring in the interbank market might involve
substantially larger amounts than those involved in the use of such Financial
Instruments, the Fund could be disadvantaged by having to deal in the odd lot
market (generally consisting of transactions of less than $1 million) for the
underlying foreign currencies at prices that are less favorable than for round
lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information generally is representative of very large transactions in the
interbank market and thus might not reflect odd-lot transactions where rates
might be less favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Financial Instruments until they reopen.
Settlement of hedging transactions involving foreign currencies might be
required to take place within the country issuing the underlying currency. Thus,
the Fund might be required to accept or make delivery of the underlying foreign
currency in accordance with any U.S. or foreign regulations regarding the
maintenance of foreign banking arrangements by U.S. residents and might be
required to pay any fees, taxes and charges associated with such delivery
assessed in the issuing country.
FORWARD CURRENCY CONTRACTS AND FOREIGN CURRENCY DEPOSITS. The Fund may
enter into forward currency contracts to purchase or sell foreign currencies for
a fixed amount of U.S. dollars or another foreign currency. A forward currency
contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days (term) from the date of the
forward currency contract agreed upon by the parties, at a price set at the time
the forward currency contract is entered. Forward currency contracts are
negotiated directly between currency traders (usually large commercial banks)
and their customers.
<PAGE>
Such transactions may serve as long or anticipatory hedges; for example,
the Fund may purchase a forward currency contract to lock in the U.S. dollar
price of a security denominated in a foreign currency that the Fund intends to
acquire. Forward currency contracts may also serve as short hedges; for example,
the Fund may sell a forward currency contract to lock in the U.S. dollar
equivalent of the proceeds from the anticipated sale of a security or a dividend
or interest payment denominated in a foreign currency.
The Fund may also use forward currency contracts to hedge against a decline
in the value of existing investments denominated in foreign currency. Such a
hedge would tend to offset both positive and negative currency fluctuations, but
would not offset changes in security values caused by other factors. The Fund
could also hedge the position by entering into a forward currency contract to
sell another currency expected to perform similarly to the currency in which the
Fund's existing investments are denominated. This type of hedge could offer
advantages in terms of cost, yield or efficiency, but may not hedge currency
exposure as effectively as a simple hedge against U.S. dollars. This type of
hedge may result in losses if the currency used to hedge does not perform
similarly to the currency in which the hedged securities are denominated.
The Fund may also use forward currency contracts in one currency or a
basket of currencies to attempt to hedge against fluctuations in the value of
securities denominated in a different currency if INVESCO anticipates that there
will be a positive correlation between the two currencies.
The cost to the Fund of engaging in forward currency contracts varies with
factors such as the currency involved, the length of the contract period and the
market conditions then prevailing. Because forward currency contracts are
usually entered into on a principal basis, no fees or commissions are involved.
When the Fund enters into a forward currency contract, it relies on the
counterparty to make or take delivery of the underlying currency at the maturity
of the contract. Failure by the counterparty to do so would result in the loss
of some or all of any expected benefit of the transaction.
As is the case with futures contracts, purchasers and sellers of forward
currency contracts can enter into offsetting closing transactions, similar to
closing transactions on futures contracts, by selling or purchasing,
respectively, an instrument identical to the instrument purchased or sold.
Secondary markets generally do not exist for forward currency contracts, with
the result that closing transactions generally can be made for forward currency
contracts only by negotiating directly with the counterparty. Thus, there can be
no assurance that the Fund will in fact be able to close out a forward currency
contract at a favorable price prior to maturity. In addition, in the event of
insolvency of the counterparty, the Fund might be unable to close out a forward
currency contract. In either event, the Fund would continue to be subject to
market risk with respect to the position, and would continue to be required to
maintain a position in securities denominated in the foreign currency or to
maintain cash or liquid assets in a segregated account.
<PAGE>
The precise matching of forward currency contract amounts and the value of
the securities, dividends or interest payments involved generally will not be
possible because the value of such securities, dividends or interest payments,
measured in the foreign currency, will change after the forward currency
contract has been established. Thus, the Fund might need to purchase or sell
foreign currencies in the spot (cash) market to the extent such foreign
currencies are not covered by forward currency contracts. The projection of
short-term currency market movements is extremely difficult, and the successful
execution of a short-term hedging strategy is highly uncertain.
Forward currency contracts may substantially change the Fund's investment
exposure to changes in currency exchange rates and could result in losses to the
Fund if currencies do not perform as INVESCO anticipates. There is no assurance
that INVESCO's use of forward currency contracts will be advantageous to the
Fund or that it will hedge at an appropriate time.
The Fund may also purchase and sell foreign currency and invest in foreign
currency deposits. Currency conversion involves dealer spreads and other costs,
although commissions usually are not charged.
COMBINED POSITIONS. The Fund may purchase and write options in combination
with each other, or in combination with futures or forward currency contracts,
to manage the risk and return characteristics of its overall position. For
example, the Fund may purchase a put option and write a call option on the same
underlying instrument, in order to construct a combined position whose risk and
return characteristics are similar to selling a futures contract. Another
possible combined position would involve writing a call option at one strike
price and buying a call option at a lower price, in order to reduce the risk of
the written call option in the event of a substantial price increase. Because
combined options positions involve multiple trades, they result in higher
transaction costs.
TURNOVER. The Fund's options and futures activities may affect its turnover
rate and brokerage commission payments. The exercise of calls or puts written by
the Fund, and the sale or purchase of futures contracts, may cause it to sell or
purchase related investments, thus increasing its turnover rate. Once the Fund
has received an exercise notice on an option it has written, it cannot effect a
closing transaction in order to terminate its obligation under the option and
must deliver or receive the underlying securities at the exercise price. The
exercise of puts purchased by the Fund may also cause the sale of related
investments, also increasing turnover; although such exercise is within the
Fund's control, holding a protective put might cause it to sell the related
investments for reasons that would not exist in the absence of the put. The Fund
will pay a brokerage commission each time it buys or sells a put or call or
purchases or sells a futures contract. Such commissions may be higher than those
that would apply to direct purchases or sales.
<PAGE>
SWAPS, CAPS, FLOORS AND COLLARS. The Fund is authorized to enter into
swaps, caps, floors and collars. However, these instruments are not
exchange-traded and the Fund presently has a non-fundamental policy to utilize
only exchange-traded Financial Instruments.
Swaps involve the exchange by one party with another party of their
respective commitments to pay or receive cash flows, e.g., an exchange of
floating rate payments for fixed rate payments. The purchase of a cap or a floor
entitles the purchaser, to the extent that a specified index exceeds in the case
of a cap, or falls below in the case of a floor, a predetermined value, to
receive payments on a notional principal amount from the party selling such
instrument. A collar combines elements of buying a cap and selling a floor.
SPECIAL RISKS. Financial Instruments and their use involve special
considerations and risks, certain of which are described below.
(1) If INVESCO employs a Financial Instrument that correlates imperfectly
with the Fund's investments, a loss could result, regardless of
whether or not the intent was to manage risk. Financial Instruments
may increase the volatility of the Fund. In addition, these
techniques could result in a loss if there is not a liquid market to
close out a position that the Fund has entered.
(2) There might be imperfect correlation between price movements of a
Financial Instrument and price movements of the investments being
hedged. For example, if the value of a Financial Instrument used in
a short hedge increased by less than the decline in value of the
hedged investment, the hedge would not be fully successful. This
might be caused by certain kinds of trading activity that distorts the
normal price relationship between the security being hedged
and the Financial Instrument. Similarly, the effectiveness of
hedges using Financial Instruments on indexes will depend on the
degree of correlation between price movements in the index and price
movements in the securities being hedged.
The Fund presently has a non-fundamental policy to utilize only
exchange-traded Financial Instruments, other than forward currency contracts.
Because there are a limited number of types of exchange-traded options and
futures contracts, it is likely that the standardized contracts available will
not match the Fund's current or anticipated investments exactly. The Fund is
authorized to use options and futures contracts related to securities with
issuers, maturities or other characteristics different from the securities in
which it typically invests. This involves a risk that the options or futures
position will not track the performance of the Fund's portfolio investments.
The direction of options and futures price movements can also diverge from
the direction of the movements of the prices of their underlying instruments,
even if the underlying instruments match the Fund's investments well. Options
and futures prices are affected by such factors as current and anticipated
short-term interest rates, changes in volatility of the
<PAGE>
underlying instrument, and the time remaining until expiration of the
contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options and
futures markets and the securities markets, from structural differences in how
options and futures and securities are traded, or from imposition of daily price
fluctuation limits or trading halts. The Fund may take positions in options and
futures contracts with a greater or lesser face value than the securities it
wishes to hedge or intends to purchase in order to attempt to compensate for
differences in volatility between the contract and the securities, although this
may not be successful in all cases.
(3) If successful, the above-discussed hedging strategies can reduce risk
of loss by wholly or partially offsetting the negative effect of unfavorable
price movements of portfolio securities. However, such strategies can also
reduce opportunity for gain by offsetting the positive effect of favorable price
movements. For example, if the Fund entered into a short hedge because INVESCO
projected a decline in the price of a security in the Fund's portfolio, and the
price of that security increased instead, the gain from that increase would
likely be wholly or partially offset by a decline in the value of the short
position in the Financial Instrument. Moreover, if the price of the Financial
Instrument declined by more than the increase in the price of the security, the
Fund could suffer a loss.
(4) The Fund's ability to close out a position in an exchange-traded
Financial Instrument prior to expiration or maturity depends on the degree of
liquidity of the market.
(5) As described below, the Fund is required to maintain assets as "cover,"
maintain segregated accounts or make margin payments when it takes positions in
Financial Instruments involving obligations to third parties (i.e., Financial
Instruments other than purchased options). If the Fund were unable to close out
its positions in such Financial Instruments, it might be required to continue to
maintain such assets or segregated accounts or make such payments until the
position expired. These requirements might impair the Fund's ability to sell a
portfolio security or make an investment at a time when it would otherwise be
favorable to do so, or require that the Fund sell a portfolio security at a
disadvantageous time.
GOLD BULLION -- The Gold Fund may invest up to 10% of its assets directly
in gold bullion. The two largest national producers of gold bullion are the
Republic of South Africa and the Commonwealth of Independent States (the former
Soviet Union). Changes in political and economic conditions affecting either
country may have a direct impact on its sales of gold bullion. The Gold Fund
will purchase gold bullion from, and sell gold bullion to, banks (both U.S. and
foreign) and dealers who are members of, or affiliated with members of, a
regulated U.S. commodities exchange, in accordance with applicable investment
laws. Values of gold bullion held by the Gold Fund are based upon daily quotes
provided by banks or brokers dealing in such commodities.
ILLIQUID SECURITIES -- Securities which do not trade on stock exchanges or
in the over the counter market, or have restrictions on when and how they may be
sold, are generally considered to be "illiquid." An illiquid security is one
<PAGE>
that a Fund may have difficulty -- or may even be legally precluded from --
selling at any particular time. The Funds may invest in illiquid securities,
including restricted securities and other investments which are not readily
marketable. A Fund will not purchase any such security if the purchase would
cause the Fund to invest more than 15% of its TOTAL assets, measured at the time
of purchase, in illiquid securities. Repurchase agreements maturing in more than
seven days are considered illiquid for purposes of this restriction.
The principal risk of investing in illiquid securities is that a Fund may
be unable to dispose of them at the time desired or at a reasonable price. In
addition, in order to resell a restricted security, a Fund might have to bear
the expense and incur the delays associated with registering the securities with
the SEC, and otherwise obtaining listing on a securities exchange or in the over
the counter market.
144A SECURITIES -- A Fund also may invest in securities that can be resold
to institutional investors pursuant to Rule 144A under the Securities Act of
1933, as amended (the "1933 Act"). In recent years, a large institutional market
has developed for many Rule 144A Securities. Institutional investors generally
cannot sell these securities to the general public but instead will often depend
on an efficient institutional market in which Rule 144A Securities can readily
be resold to other institutional investors, or on an issuer's ability to honor a
demand for repayment. Therefore, the fact that there are contractual or legal
restrictions on resale to the general public or certain institutions does not
necessarily mean that a Rule 144A Security is illiquid. Institutional markets
for Rule 144A Securities may provide both reliable market values for Rule 144A
Securities and enable a Fund to sell a Rule 144A investment when appropriate.
For this reason, the Company's board of directors has concluded that if a
sufficient institutional trading market exists for a given Rule 144A security,
it may be considered "liquid," and not subject to a Fund's limitations on
investment in restricted securities. The Company's board of directors has given
INVESCO the day-to-day authority to determine the liquidity of Rule 144A
Securities, according to guidelines approved by the board. The principal risk of
investing in Rule 144A Securities is that there may be an insufficient number of
qualified institutional buyers interested in purchasing a Rule 144A Security
held by a Fund, and the Fund might be unable to dispose of such security
promptly or at reasonable prices.
LEVERAGE -- If shareholders of Class II of INVESCO Technology Fund approve
its use (INVESCO as initial shareholder of Class I having done so), INVESCO
Technology Fund would be permitted to borrow for the purpose of purchasing
portfolio securities. This is a speculative technique commonly known as
leverage. Since the Technology Fund's inception, leverage has never been
employed, and it may not be employed by any of the Funds without express
authorization of the Company's board of directors. Such authorization is not
presently contemplated. Should the leverage technique be employed at some future
date, it would be employed with the expectation that portfolio gains
attributable to the investment of borrowed monies will exceed the interest costs
on such monies. If this expectation were not realized and the market value of
securities so purchased declined, however, the impact of such market decline
would be increased by the amount of interest paid on such borrowings.
<PAGE>
REPURCHASE AGREEMENTS -- A Fund may enter into repurchase agreements, or
REPOs, on debt securities that the Fund is allowed to hold in its portfolio.
This is a way to invest money for short periods. A REPO is an agreement under
which the Fund acquires a debt security and then resells it to the seller at an
agreed upon price and date (normally, the next business day). The repurchase
price represents an interest rate effective for the short period the debt
security is held by the Fund, and is unrelated to the interest rate on the
underlying debt security. A repurchase agreement is often considered as a loan
collateralized by securities. The collateral securities acquired by the Fund
(including accrued interest earned thereon) must have a total value in excess of
the value of the repurchase agreement. The collateral securities are held by the
Fund's custodian bank until the repurchase agreement is completed.
The Funds may enter into repurchase agreements with commercial banks,
registered broker-dealers or registered government securities dealers that are
creditworthy under standards established by the Company's board of directors.
The Company's board of directors has established standards that the investment
adviser and sub-adviser must use to review the creditworthiness of any bank,
broker or dealer that is party to a REPO. REPOs maturing in more than seven days
are considered illiquid securities. A Fund will not enter into repurchase
agreements maturing in more than seven days if as a result more than 10% of the
Fund's assets would be invested in these repurchase agreements and other
illiquid securities.
As noted above, the Funds use REPOs as a means of investing cash for short
periods of time. Although REPOs are considered to be highly liquid and
comparatively low-risk, the use of REPOs does involve some risks. For example,
if the other party to the agreement defaults on its obligation to repurchase the
underlying security at a time when the value of the security has declined, the
Fund may incur a loss on the sale of the collateral security. If the other party
to the agreement becomes insolvent and subject to liquidation or reorganization
under the Bankruptcy Code or other laws, a court may determine that the
underlying security is collateral for a loan by the Fund not within the control
of the Fund and therefore the realization by the Fund on such collateral may
automatically be stayed. Finally, it is possible that the Fund may not be able
to substantiate its interest in the underlying security and may be deemed an
unsecured creditor of the other party to the agreement.
SECURITIES LENDING -- Although they do not do so at this time, and have no
present intention of doing so, the Funds may lend their portfolio securities to
qualified brokers, dealers, banks, or other financial institutions. The
advantage of lending portfolio securities is that a Fund continues to have the
benefits (and risks) of ownership of the loaned securities, while at the same
time receiving interest from the borrower of the securities. The primary risk in
lending portfolio securities is that a borrower may fail to return a portfolio
security.
WHEN-ISSUED/DELAYED DELIVERY -- Ordinarily, the Funds buy and sell
securities on an ordinary settlement basis. That means that the buy or sell
order is sent, and a Fund actually takes delivery or gives up physical
possession of the security on the "settlement date," which is three business
days later. However, the Funds also may purchase and sell securities on a
when-issued or delayed delivery basis.
<PAGE>
When-issued or delayed delivery transactions occur when securities are
purchased or sold by a Fund and payment and delivery take place at an
agreed-upon time in the future. The Funds may engage in this practice in an
effort to secure an advantageous price and yield. However, the yield on a
comparable security available when delivery actually takes place may vary from
the yield on the security at the time the when-issued or delayed delivery
transaction was entered into. When a Fund engages in when-issued and delayed
delivery transactions, it relies on the seller or buyer to consummate the sale
at the future date. If the seller or buyer fails to act as promised, that
failure may result in the Fund missing the opportunity of obtaining a price or
yield considered to be advantageous. No payment or delivery is made by a Fund
until it receives delivery or payment from the other party to the transaction.
However, fluctuation in the value of the security from the time of commitment
until delivery could adversely affect a Fund.
INVESTMENT RESTRICTIONS AND STRATEGIES (ENERGY, ENVIRONMENTAL SERVICES,
FINANCIAL SERVICES, GOLD, HEALTH SCIENCES, LEISURE AND UTILITIES FUNDS)
The Funds operate under certain investment restrictions. For purposes of
the following restrictions, all percentage limitations apply immediately after a
purchase or initial investment. Any subsequent change in a particular percentage
resulting from fluctuations in value does not require the sale of any security
from a portfolio of a Fund.
The following restrictions are fundamental and may not be changed with
respect to the above-named Funds without prior approval of a majority of the
outstanding voting securities of the Fund, as defined in the Investment Company
Act of 1940, as amended (the "1940 Act"). Each of the aforementioned Funds,
unless otherwise indicated, may not:
(1) issue senior securities as defined in the 1940 Act (except insofar as
the Fund may be deemed to have issued a senior security by reason of entering
into a repurchase agreement, or borrowing money, in accordance with the
restrictions described below, and in accordance with the position of the staff
of the Securities and Exchange Commission set forth in Investment Company Act
Release No. 10666);
(2) mortgage, pledge or hypothecate portfolio securities or borrow money,
except that borrowings from banks for temporary or emergency purposes (but not
for investment) are permitted in an amount not exceeding with respect to the
Financial Services, Health Sciences, Leisure, Technology or Utilities Funds 10%,
or, with respect to the Energy, Environmental Services and Gold Funds, 33-1/3%
of the value of the Fund's total assets, i.e., its total assets (including the
amount borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed the relevant 10% or 33-1/3% limitation by reason of a decline in
total assets will be reduced within three business days to the extent necessary
to comply with the relevant 10% or 33-1/3% limitation. A Fund will not purchase
additional securities while any borrowings on behalf of that Fund exist;
<PAGE>
(3) buy or sell commodities or commodity contracts (however, the Fund may
purchase securities of companies which invest in the foregoing). The
Environmental Services Fund also may not buy or sell oil, gas or other mineral
interests or exploration programs (however, the Environmental Services Fund may
purchase securities of companies which invest in the foregoing). This
restriction shall not prevent the Funds from purchasing or selling options on
individual securities, security indexes, and currencies, or financial futures or
options on financial futures, or undertaking forward currency contracts. This
restriction shall not prevent the Gold Fund from investing up to 10% of its
total assets in gold bullion;
(4) purchase the securities of any company if as a result of such purchase
more than 10% of total assets would be invested in securities which are subject
to legal or contractual restrictions on resale ("restricted securities") and in
securities for which there are no readily available market quotations; or enter
into a repurchase agreement maturing in more than seven days, if as a result,
such repurchase agreements, together with restricted securities and securities
for which there are no readily available market quotations, would constitute
more than 10% of total assets;
(5) sell short or buy on margin. This restriction shall not prevent the
Funds from purchasing or selling options on futures, or writing, purchasing, or
selling puts and calls;
(6) buy or sell real estate or interests therein (however, securities
issued by companies which invest in real estate or interests therein may be
purchased and sold);
(7) invest in the securities of any other investment company except for a
purchase or acquisition in accordance with a plan of reorganization, merger or
consolidation;
(8) invest in any company for the purpose of exercising control or
management;
(9) engage in the underwriting of any securities, except insofar as the
Fund may be deemed an underwriter under the Securities Act of 1933 in disposing
of a portfolio security;
(10) make loans to any person, except through the purchase of debt
securities in accordance with the investment policies of the Funds, 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 a Fund's total assets (taken at current value). No more
than 10% of a Fund's total assets may be invested in repurchase agreements
maturing in more than seven days;
<PAGE>
(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 of such company and in which the officers and directors of the Fund
and its investment adviser, as a group, own more than 5% of such securities;
(12) with respect to seventy-five percent (75%) of each Fund's total
assets, purchase the securities of any one issuer (except cash items and
"government securities" as defined under the 1940 Act), if the purchase would
cause a Fund to have more than 5% of the value of its total assets invested in
the securities of such issuer or to own more than 10% of the outstanding voting
securities of such issuer;
(13) invest more than 5% of its total assets in an issuer having a record,
together with predecessors, of less than three years' continuous operation.
In applying restriction (4) above, each Fund also includes illiquid
securities (those which cannot be sold in the ordinary course of business within
seven days at approximately the valuation given to them by the Fund) among the
securities subject to the 10% of assets limit.
With respect to investment restriction (4) above, the board of
directors has delegated to the Funds' investment adviser the authority to
determine that a liquid market exists for securities eligible for resale
pursuant to Rule 144A under the 1933 Act, or any successor to such rule, and
that such securities are not subject to a Fund's limitations on investing in
illiquid securities and securities for which there are no readily available
market quotations. Under guidelines established by the board of directors, the
adviser will consider the following factors, among others, in making this
determination: (1) the unregistered nature of a Rule 144A security; (2) the
frequency of trades and quotes for the security; (3) the number of dealers
willing to purchase or sell the security and the number of other potential
purchasers; (4) dealer undertakings to make a market in the security; and (5)
the nature of the security and the nature of marketplace trades (e.g., the time
needed to dispose of the security, the method of soliciting offers and the
mechanics of transfer). However, illiquid Rule 144A Securities are still subject
to a Fund's limitation on investments in restricted securities
(securities for which there are legal or contractual restrictions on resale).
An additional investment restriction adopted by the Company on behalf
of each of the Funds, which may be changed by the directors at their discretion,
provides that the Funds will not:
(a) enter into any futures contracts, options on futures, puts and
calls if immediately thereafter the aggregate margin deposits on all outstanding
derivative positions held by the Fund and premiums paid on outstanding
positions, after taking into account unrealized profits and losses, would exceed
5% of the market value of the total assets of the Fund, or (b) enter into any
<PAGE>
derivative positions if the aggregate net amount of a Fund's commitments under
outstanding derivative positions of the Fund would exceed the market value of
the total assets of the Fund.
INVESTMENT RESTRICTIONS AND STRATEGIES (TECHNOLOGY FUND ONLY)
The shareholders of Class I and Class II of INVESCO Technology Fund have
approved separate statements of investment restrictions, both of which apply to
the Fund.
The shareholders of INVESCO Technology Fund - Class I have adopted the
following nine restrictions as fundamental, which, therefore, may not be changed
without the prior approval of a majority, as defined in the 1940 Act, of the
outstanding Class I voting securities of the Fund. (Unless and until changed by
the Class II shareholders of the Fund, the fourteen fundamental policies adopted
by the Class II shareholders set forth below will also apply to the Fund, but
they have not been adopted as fundamental by Class I shareholders, and will
therefore be treated as non-fundamental with respect to them.)
(1) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or instrumentalities or
municipal securities) if, as a result, more than 25% of the Fund's total assets
would be invested in the securities of companies whose principal business
activities are in the same industry;
(2) with respect to 75% of the Fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S. government
or any of its agencies or instrumentalities, or securities of other investment
companies) if, as a result, (i) more than 5% of the Fund's total assets would be
invested in the securities of that issuer, or (ii) the Fund would hold more than
10% of the outstanding voting securities of that issuer;
(3) underwrite securities of other issuers, except insofar as it may be
deemed to be an underwriter under the Securities Act of 1933, as amended, in
connection with the disposition of the Portfolio's portfolio securities;
(4) borrow money, except that the Fund may borrow money in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings).
(5) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(6) lend any security or make any loan if, as a result, more than 33 1/3%
of its total assets would be lent to other parties, but this limitation does not
apply to the purchase of debt securities or to repurchase agreements;
<PAGE>
(7) purchase or sell physical commodities; however, this policy shall not
prevent the Fund from purchasing and selling foreign currency, futures
contracts, options, forward contracts, swaps, caps, floors, collars and other
financial instruments;
(8) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the Fund from
investing in securities or other instruments backed by real estate or securities
of companies engaged in the real estate business);
(9) The Fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single open-end
management investment company managed by INVESCO Funds Group, Inc. or an
affiliate or successor thereof with substantially the same fundamental
investment objective, policies and limitations as the Fund.
The INVESCO Technology Fund - Class II has adopted the following
restrictions which are fundamental and may not be changed without the prior
approval of a majority, as defined in the 1940 Act, of the outstanding Class II
voting securities of the Fund. The INVESCO Technology Fund - Class II will not:
(1) issue senior securities as defined in the 1940 Act (except insofar as
the Fund may be deemed to have issued a senior security by reason of entering
into a repurchase agreement, or borrowing money, in accordance with the
restrictions described below, and in accordance with the position of the staff
of the Securities and Exchange Commission set forth in Investment Company Act
Release No. 10666);
(2) mortgage, pledge or hypothecate portfolio securities or borrow money,
except that borrowings from banks for temporary or emergency purposes (but not
for investment) are permitted in an amount not exceeding 10% of the value of the
Fund's total assets, i.e., its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed the 10%
limitation by reason of a decline in total assets will be reduced within three
business days to the extent necessary to comply with the 10% limitation. The
Fund will not purchase additional securities while any borrowings on behalf of
the Fund exist;
(3) buy or sell commodities or commodity contracts (however, the Fund may
purchase securities of companies which invest in the foregoing). This
restriction shall not prevent the Fund from purchasing or selling options on
individual securities, security indexes, and currencies, or financial futures or
options on financial futures, or undertaking forward currency contracts.
(4) purchase the securities of any company if as a result of such purchase
more than 10% of total assets would be invested in securities which are subject
to legal or contractual restrictions on resale ("restricted securities") and in
securities for which there are no readily available market quotations; or enter
into a repurchase agreement maturing in more than seven days, if
<PAGE>
as a result, such repurchase agreements, together with restricted
securities and securities for which there are no readily available market
quotations, would constitute more than 10% of total assets;
(5) sell short or buy on margin. This restriction shall not prevent the
Fund from purchasing or selling options on futures, or writing, purchasing, or
selling puts and calls;
(6) buy or sell real estate or interests therein (however, securities
issued by companies which invest in real estate or interests therein may be
purchased and sold);
(7) invest in the securities of any other investment company except for a
purchase or acquisition in accordance with a plan of reorganization, merger or
consolidation;
(8) invest in any company for the purpose of exercising control or
management;
(9) engage in the underwriting of any securities, except insofar as the
Fund may be deemed an underwriter under the Securities Act of 1933 in disposing
of a portfolio security;
(10) make loans to any person, except through the purchase of debt
securities in accordance with the investment policies of the Fund, or the
lending of portfolio securities to broker-dealers or other institutional
investors, or the entering into repurchase agreements with member banks of the
Federal Reserve System, registered broker-dealers and registered government
securities dealers. The aggregate value of all portfolio securities loaned may
not exceed 33-1/3% of the Fund's total assets (taken at current value). No more
than 10% of the Fund's total assets may be invested in repurchase agreements
maturing in more than seven days;
(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 of such company and in which the officers and directors of the Fund
and its investment adviser, as a group, own more than 5% of such securities;
(12) with respect to seventy-five percent (75%) of the Fund's total assets,
purchase the securities of any one issuer (except cash items and "government
securities" as defined under the 1940 Act), if the purchase would cause the Fund
to have more than 5% of the value of its total assets invested in the securities
of such issuer or to own more than 10% of the outstanding voting securities of
such issuer;
(13) invest more than 5% of its total assets in an issuer having a record,
together with predecessors, of less than three years' continuous operation.
In addition to the above restrictions, a fundamental policy of the
Technology Fund - Class II is not to invest more than 25% of its total assets
(taken at market value at the time of each investment) in the securities of
<PAGE>
issuers in any one industry (e.g., computer software within the technology
business sector). In applying this restriction, the Technology Fund - Class II
uses an industry classification system based on a modified S&P industry code
classification schema which uses various sources to classify securities.
In applying restriction (4) above, the Fund also includes illiquid
securities (those which cannot be sold in the ordinary course of business within
seven days at approximately the valuation given to them by the Fund) among the
securities subject to the 10% of total assets limit.
With respect to investment restriction (4) above, the board of directors
has delegated to the Fund's investment adviser the authority to determine that a
liquid market exists for securities eligible for resale pursuant to Rule 144A
under the 1933 Act, or any successor to such rule, and that such securities are
not subject to the Fund's limitations on investing in illiquid securities and
securities for which there are no readily available market quotations. Under
guidelines established by the board of directors, the adviser will consider the
following factors, among others, in making this determination: (1) the
unregistered nature of a Rule 144A security; (2) the frequency of trades and
quotes for the security; (3) the number of dealers willing to purchase or sell
the security and the number of other potential purchasers; (4) dealer
undertakings to make a market in the security; and (5) the nature of the
security and the nature of marketplace trades (e.g., the time needed to dispose
of the security, the method of soliciting offers and the mechanics of transfer).
However, illiquid Rule 144A Securities are still subject to the Fund's
limitation on investments in restricted securities (securities for which there
are legal or contractual restrictions on resale).
In addition, the INVESCO Technology Fund has the following non-fundamental
policies, which may be changed without shareholder approval:
(a) The Fund may not sell securities short(unless it owns or has the right
to obtain securities equivalent in kind and amount to the securities sold short)
or purchase securities on margin, except that (i) this policy does not prevent
the Fund from entering into short positions in foreign currency, futures
contracts, options, forward contracts, swaps, caps, floors, collars and other
financial instruments, (ii) the Fund may obtain such short-term credits as are
necessary for the clearance of transactions, and (iii) the Fund may make margin
payments in connection with futures contracts, options, forward contracts,
swaps, caps, floors, collars and other financial instruments;
(b) The Fund may borrow money only from a bank or by engaging in reverse
repurchase agreements with any party (reverse repurchase agreements will be
treated as borrowings for purposes of fundamental limitation (4)). The Fund will
not purchase any security while borrowings representing more than 5% of its
total assets are outstanding.
<PAGE>
(c) The Fund does not currently intend to purchase any security if, as a
result, more than 15% of its net assets would be invested in securities that are
deemed to be illiquid because they are subject to legal or contractual
restrictions on resale or because they cannot be sold or disposed of in the
ordinary course of business at approximately the prices at which they are
valued.
(d) The Fund may invest in securities issued by other investment companies
to the extent that such investments are consistent with the Fund's investment
objective and policies and permissible under the 1940 Act.
(e) With respect to the fundamental limitation (1), domestic and foreign
banking will be considered to be different industries.
In applying restriction (c) above, the board of directors has delegated to the
Fund's investment adviser the authority to determine that a liquid market exists
for securities eligible for resale pursuant to Rule 144A under the 1933 Act, or
any successor to such rule, and that such securities are not subject to the
Fund's 15% of total assets limitations on investing in securities that are not
readily marketable, discussed below. Under guidelines established by the board
of directors, the adviser will consider the following factors, among others, in
making this determination: (1) the unregistered nature of a Rule 144A security;
(2) the frequency of trades and quotes for the security; (3) the number of
dealers willing to purchase or sell the security and the number of other
potential purchasers; (4) dealer undertakings to make a market in the security;
and (5) the nature of the security and the nature of marketplace trades (e.g.,
the time needed to dispose of the security, the method of soliciting offers and
the mechanics of transfer).
MANAGEMENT OF THE FUNDS
THE INVESTMENT ADVISER
INVESCO Funds Group, Inc., a Delaware corporation ("INVESCO"), is the Company's
investment adviser. INVESCO was founded in 1932 and serves as an investment
adviser to:
INVESCO Bond Funds, Inc. (formerly, INVESCO Income Funds, Inc.)
INVESCO Combination Stock & Bond Funds, Inc. (formerly, INVESCO Flexible
Funds, Inc.)
INVESCO Diversified Funds, Inc.
INVESCO Emerging Opportunity Funds, Inc.
INVESCO Growth Funds, Inc. (formerly, INVESCO Growth Fund, Inc.)
INVESCO Industrial Income Fund, Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Sector Funds, Inc. (formerly, INVESCO Strategic Portfolios, Inc.)
INVESCO Specialty Funds, Inc.
INVESCO Stock Funds, Inc. (formerly, INVESCO Equity Funds, Inc.)
INVESCO Tax-Free Income Funds, Inc.
INVESCO Value Trust
INVESCO Variable Investment Funds, Inc.
<PAGE>
As of October 31, 1998, INVESCO managed 14 mutual funds having combined assets
of $18.9 billion, consisting of 51 separate portfolios, on behalf of more than
904,000 shareholders.
INVESCO is an indirect wholly owned subsidiary of AMVESCAP PLC, a publicly
traded holding company. Through its subsidiaries, AMVESCAP PLC engages in the
business of investment management on an international basis. AMVESCAP PLC is one
of the largest independent investment management businesses in the world with
approximately $275 billion in assets under management on December 31, 1998.
AMVESCAP PLC's North American subsidiaries include:
INVESCO Retirement and Benefit Services, Inc. ("IRBS"), Atlanta,
Georgia, develops and provides domestic and international defined
contribution retirement plan services to plan sponsors, institutional
retirement plan sponsors, institutional plan providers and foreign
governments.
INVESCO Retirement Plan Services ("IRPS"), Atlanta, Georgia, a
division of IRBS, provides recordkeeping and investment selection services
to defined contribution plan sponsors of plans with between $2 million and
$200 million in assets. Additionally,
IRPS provides investment consulting services to institutions seeking
to provide retirement plan products and services.
Institutional Trust Company, doing business as INVESCO Trust Company
("ITC"), Denver, Colorado, a division of IRBS, provides retirement account
custodian and/or trust services for individual retirement accounts ("IRAs")
and other retirement plan accounts. This includes services such as
recordkeeping, tax reporting and compliance. ITC acts as trustee or
custodian to these plans. ITC accepts contributions and provides, through
INVESCO, complete transfer agency functions: correspondence,
sub-accounting, telephone communications and processing of distributions.
INVESCO Capital Management, Inc., 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 one registered investment
company.
INVESCO Management & Research, Inc., Boston, Massachusetts, primarily
manages pension and endowment accounts.
PRIMCO Capital Management, Inc., Louisville, Kentucky, specializes in
managing stable return investments, principally on behalf of Section 401(k)
retirement plans.
<PAGE>
INVESCO Realty Advisors, Inc., Dallas, Texas, is responsible for
providing advisory services in the U.S. real estate markets for AMVESCAP
PLC's clients worldwide. Clients include corporate pension plans and public
pension funds as well as endowment and foundation accounts.
INVESCO (NY), Inc., New York, is an investment adviser for separately
managed accounts, such as corporate and municipal pension plans,
Taft-Hartley Plans, insurance companies, charitable institutions and
private individuals. INVESCO NY also offers the opportunity for its clients
to invest both directly and indirectly through partnerships in primarily
private investments or privately negotiated transactions. INVESCO NY
further serves as investment adviser to several closed-end investment
companies, and as sub-adviser with respect to certain commingled employee
benefit trusts. INVESCO NY specializes in the fundamental research
investment approach, with the help of quantitative tools.
A I M Advisors, Inc., Houston, Texas, provides investment advisory and
administrative services for retail and institutional mutual funds.
A I M Capital Management, Inc., Houston, Texas, provides investment
advisory services to individuals, corporations, pension plans and other
private investment advisory accounts and also serves as a sub-adviser to
certain retail and institutional mutual funds, one Canadian mutual fund and
one portfolio of an open-end registered investment company that is offered
to separate accounts of insurance companies that offer variable life and
variable annuity insurance products.
A I M Distributors, Inc. and Fund Management Company, Houston, Texas,
are registered broker-dealers that act as the principal underwriters for
retail and institutional mutual funds.
The corporate headquarters of AMVESCAP PLC are located at 11 Devonshire Square,
London, EC2M4YR, England.
THE INVESTMENT ADVISORY AGREEMENT
INVESCO serves as investment adviser to the Funds under an investment advisory
agreement dated February 28, 1997 (the "Agreement") with the Company which was
last approved by the board of directors for a term expiring May 15, 1999. The
board vote was cast in person, at a meeting called for this purpose, by a
majority of the directors of the Company, including a majority of the directors
who are not "interested persons" of the Company or INVESCO ("Independent
Directors"). Shareholders of each Fund approved the Agreement on January 31,
1997.
The Agreement may be continued from year to year if each such continuance is
specifically approved at least annually by the board of directors of the
Company, or by a vote of the holders of a majority, as defined in the 1940 Act,
of the outstanding shares of the Fund. Any continuance also must be approved by
<PAGE>
a majority of the Company's Independent Directors, cast in person at a
meeting called for the purpose of voting on such continuance. The Agreement may
be terminated at any time without penalty by either party upon sixty (60) days'
written notice and terminates automatically in the event of an assignment to the
extent required by the 1940 Act and the rules thereunder.
The Agreement requires that INVESCO manage the investment portfolio of each Fund
in a way that conforms with the Fund's investment policies. INVESCO may directly
manage a Fund itself, or may hire a sub-adviser, which may be an affiliate of
INVESCO, to do so. Specifically, INVESCO is responsible for:
o managing the investment and reinvestment of all the assets of the Funds,
and executing all purchases and sales of portfolio securities;
o maintaining a continuous investment program for the Funds, consistent
with (i) each Fund's investment policies as set forth in the Company's
Bylaws and Registration Statement, as from time to time amended, under the
1940 Act, and in any prospectus and/or statement of additional information
of the Funds, as from time to time amended and in use under the 1933 Act,
and (ii) the Company's status as a regulated investment company under the
Internal Revenue Code of 1986, as amended;
o determining what securities are to be purchased or sold for the Funds,
unless otherwise directed by the directors of the Company, and executing
transactions accordingly;
o providing the Funds the benefit of the investment analysis and research,
the reviews of current economic conditions and trends, and the
consideration of a long-range investment policy now or hereafter generally
available to INVESCO's investment advisory customers;
o determining what portion of each Fund's assets should be invested in the
various types of securities authorized for purchase by the Fund; and
o making recommendations as to the manner in which voting rights, rights to
consent to Fund action and any other rights pertaining to a Fund's
portfolio securities shall be exercised.
INVESCO also performs all of the following services for the Funds:
o administrative
o internal accounting (including computation of net asset value)
o clerical and statistical
o secretarial
o all other services necessary or incidental to the administration of the
affairs of the Funds
<PAGE>
o supplying the Company with officers, clerical staff and other employees
o furnishing office space, facilities, equipment, and supplies; providing
personnel and facilities required to respond to inquiries related to
shareholder accounts
o conducting periodic compliance reviews of the Funds' operations;
preparation and review of required documents, reports and filings by
INVESCO's in-house legal and accounting staff or in conjunction with
independent attorneys and accountants (including the prospectus, statement
of additional information, proxy statements, shareholder reports, tax
returns, reports to the SEC, and other corporate documents of the Funds)
o supplying basic telephone service and other utilities
o preparing and maintaining certain of the books and records required to be
prepared and maintained by the Funds under the 1940 Act.
Expenses not assumed by INVESCO are borne by the Funds. As full compensation for
its advisory services to the Company, INVESCO receives a monthly fee from each
Fund. The fee is calculated at the annual rate of:
0.75% on the first $350 million of each Fund's average net assets;
0.65% on the next $350 million of each Fund's average net assets; and
0.55% on each Fund's average net assets in excess of $700 million.
During the fiscal years ended October 31, 1998, 1997 and 1996, the Funds paid
INVESCO advisory fees in the dollar amounts shown below. The expenses were
offset by credits in the amounts shown below, in order that total expenses of
the Funds were not in excess of the expense limitations shown below, which have
been agreed to by the Funds and INVESCO.
Advisory Total Expense Total Expense
Fee Dollars Reimbursements Limitations
----------- -------------- --------------
ENERGY
1998 $1,366,009 N/A N/A
1997 1,788,892 N/A N/A
1996 813,779 N/A N/A
ENVIRONMENTAL SERVICES
1998 $ 146,230 $ 54,154 1.90%
1997 188,133 111,723 1.90%
1996 237,561 76,382 1.60%
<PAGE>
FINANCIAL SERVICES
1998 $8,971,562 N/A N/A
1997 5,705,247 N/A N/A
1996 3,306,980 N/A N/A
GOLD
1998 $ 902,210 N/A N/A
1997 1,703,349 N/A N/A
1996 2,136,116 N/A N/A
HEALTH SCIENCES
1998 $7,138,414 N/A N/A
1997 6,276,181 N/A N/A
1996 7,016,028 N/A N/A
LEISURE
1998 $1,743,033 N/A N/A
1997 1,598,185 N/A N/A
1996 2,026,976 N/A N/A
TECHNOLOGY - CLASS II
1998 $6,846,934 N/A N/A
1997 6,217,324 N/A N/A
1996 4,677,778 N/A N/A
UTILITIES
1998 $1,327,773 $135,673 1.25%
1997 1,063,655 67,385 1.25%
1996 1,032,013 104,595 1.10%
The Technology Fund - Class I paid no advisory fees as of October 31, 1998, as
it did not commence operations until December 14, 1998.
ADMINISTRATIVE SERVICES AGREEMENT
INVESCO, either directly or through affiliated companies, provides certain
administrative, sub-accounting, and recordkeeping services to the Funds pursuant
to an Administrative Services Agreement dated February 28, 1997. The
Administrative Services Agreement was approved on November 6, 1996, at a meeting
called for that purpose, by a vote cast in person by all of the directors of the
Company, including all of the Independent Directors of the Company or INVESCO.
The Administrative Services Agreement was for an initial term expiring in one
year and has been extended by action of the board of directors through MAY 15,
1999. The Administrative Services Agreement may be continued from year to year
as long as each such continuance is specifically approved by the board of
directors of the Company, including a majority of the Company's Independent
Directors. The Administrative Services Agreement may be terminated at any time
without penalty by INVESCO on sixty (60) days' written notice, or by the Funds
upon thirty (30) days' written notice, and ends automatically in the event of an
assignment unless the Company's board of directors, including a majority of the
Company's Independent Directors, approves such assignment.
<PAGE>
The Administrative Services Agreement requires INVESCO to provide the following
services to the Funds:
o such sub-accounting and recordkeeping services and functions as are
reasonably necessary for the operation of the Funds; and
o such sub-accounting, recordkeeping, and administrative services and
functions, which may be provided by affiliates of INVESCO, as are
reasonably necessary for the operation of Fund shareholder accounts
maintained by certain retirement plans and employee benefit plans for the
benefit of participants in such plans.
The Administrative Services Agreement provides that the Funds pay INVESCO an
annual base fee per Fund of $10,000 plus an additional incremental fee computed
daily and paid monthly, by each Fund, at an annual rate of 0.015% of the average
net assets of each Fund.
TRANSFER AGENCY AGREEMENT
INVESCO also performs transfer agent, dividend disbursing agent, and registrar
services for the Funds pursuant to a Transfer Agency Agreement dated February
28, 1997 which was approved by the board of directors of the Company on November
6, 1996 for an initial term expiring in one year, and has been extended by
action of the board of directors through May 15, 1999. The Transfer Agency
Agreement may be continued from year to year as long as such continuance is
specifically approved at least annually by the board of directors of the
Company, including a majority of the Company's Independent Directors. The
Transfer Agency Agreement may be terminated at any time without penalty by
either party upon sixty (60) days' written notice and terminates automatically
in the event of assignment.
The Transfer Agency Agreement provides that the Funds pay INVESCO an annual fee
of $20.00 per shareholder account, or, where applicable, per participant in an
omnibus account. This fee is paid monthly at 1/12 of the annual fee and is based
upon the actual number of shareholder accounts and omnibus account participants
in a Fund at any time during each month.
FEES PAID TO INVESCO
For the fiscal years ended OCTOBER 31, 1998, 1997 AND 1996, the Funds paid the
following fees to INVESCO (prior to the voluntary absorption of certain Fund
expenses by INVESCO):
ENERGY FUND
Type of Fee 1998 1997 1996
- ----------- ---- ---- ----
Advisory $1,366,009 $1,788,892 $ 813,779
<PAGE>
Administrative Services 37,320 45,876 26,275
Transfer Agency 778,806 710,090 385,446
ENVIRONMENTAL SERVICES FUND
Type of Fee
- -----------
Advisory $ 146,230 $ 188,133 $ 237,561
Administrative Services 12,925 13,763 14,751
Transfer Agency 156,042 208,784 227,295
FINANCIAL SERVICES FUND
Type of Fee
- -----------
Advisory $8,971,562 $5,705,247 $3,306,980
Administrative Services 226,043 137,504 78,234
Transfer Agency 2,663,985 1,995,619 1,298,961
GOLD FUND
Type of Fee
- -----------
Advisory $ 902,210 $1,703,349 $2,136,116
Administrative Services 28,044 44,069 52,965
Transfer Agency 789,720 982,788 889,509
HEALTH SCIENCES FUND
Type of Fee
- -----------
Advisory $7,138,414 $6,276,181 $7,016,028
Administrative Services 176,048 152,539 172,697
Transfer Agency 2,690,463 2,910,149 2,584,098
LEISURE FUND
Type of Fee
- -----------
Advisory $ 1,743,033 $1,598,185 $2,026,976
Administrative Services 44,861 41,964 50,540
Transfer Agency 881,727 1,048,771 1,133,674
TECHNOLOGY FUND - CLASS II
Type of Fee
- -----------
Advisory $6,846,934 $6,217,324 $4,677,778
Administrative Services 168,098 150,934 110,454
Transfer Agency 2,681,507 2,686,039 1,863,571
<PAGE>
UTILITIES FUND
Type of Fee
- -----------
Advisory $1,327,773 $1,063,655 $1,032,013
Administrative Services 36,556 31,273 30,640
Transfer Agency 494,273 530,316 471,705
The Technology Fund - Class I did not pay any fees to INVESCO as of October 31,
1998, as it did not commence operations until December 14, 1998.
DIRECTORS AND OFFICERS OF THE COMPANY
The overall direction and supervision of the Company come from the board of
directors. The board of directors is responsible for making sure that the Funds'
general investment policies and programs are carried out and that the Funds are
properly administered.
The board of directors has an audit committee comprised of four of the directors
who are not affiliated with INVESCO ("Independent Directors"). The committee
meets periodically with the Company's independent accountants and officers to
review accounting principles used by the Company, the adequacy of internal
controls, the responsibilities and fees of the independent accountants, and
other matters.
The Company has a management liaison committee which meets quarterly with
various management personnel of INVESCO in order to facilitate better
understanding of management and operations of the Company, and to review legal
and operational matters which have been assigned to the committee by the board
of directors, in furtherance of the board of directors' overall duty of
supervision.
The Company has a soft dollar brokerage committee. The committee meets
periodically to review soft dollar brokerage transactions by the Funds, and to
review policies and procedures of the Funds' adviser with respect to soft dollar
brokerage transactions. It reports on these matters to the Company's board of
directors.
<PAGE>
The Company has a derivatives committee. The committee meets periodically to
review derivatives investments made by the Funds. It monitors derivatives usage
by the Funds and the procedures utilized by the Funds' adviser to ensure that
the use of such instruments follows the policies on such instruments adopted by
the Company's board of directors. It reports on these matters to the Company's
board of directors.
The officers of the Company, all of whom are officers and employees of
INVESCO, are responsible for the day-to-day administration of the Company and
the Funds. The officers of the Company receive no direct compensation from the
Company for their services as officers. The investment adviser for the Funds has
the primary responsibility for making investment decisions on behalf of the
Funds. These investment decisions are reviewed by the investment committee of
INVESCO.
All of the officers and directors of the Company hold comparable positions with
the following funds which, with the Company, are collectively referred to as the
"INVESCO funds":
INVESCO Bond Funds, Inc. (formerly, INVESCO Income Funds, Inc.)
INVESCO Combination Stock & Bond Funds, Inc. (formerly, INVESCO Flexible
Funds, Inc.)
INVESCO Diversified Funds, Inc.
INVESCO Emerging Opportunity Funds, Inc.
INVESCO Growth Funds, Inc. (formerly, INVESCO Growth Fund, Inc.)
INVESCO Industrial Income Fund, Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Sector Funds, Inc. (formerly, INVESCO Strategic Portfolios, Inc.)
INVESCO Specialty Funds, Inc.
INVESCO Stock Funds, Inc. (formerly, INVESCO Equity Funds, Inc.)
INVESCO Tax-Free Income Funds, Inc.
INVESCO Treasurer's Series Trust
INVESCO Value Trust
INVESCO Variable Investment Funds, Inc.
The table below provides information about each of the Company's directors and
officers. Unless otherwise indicated, the address of the directors and officers
is P.O. Box 173706, Denver, CO 80217-3706. Their affiliations represent their
principal occupations.
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Name, Address, and Age Position(s) Held Principal Occupation(s)
With Fund During Past Five Years
- ---------------------- ---------------- ------------------------
<S> <C> <C>
Charles W. Brady *+ Director and Chairman Chairman of the Board of
1315 Peachtree St., of the Board INVESCO Global Health
N.E. Sciences Fund; Chief
Atlanta, Georgia Executive Officer and
Age: 62 Director of AMVESCAP
PLC, London, England and
various subsidiaries of
AMVESCAP PLC
Fred A. Deering +# Director and Vice Trustee of INVESCO
Security Life Center Chairman of the Board Global Health Sciences
1290 Broadway Fund; formerly, Chairman
Denver, Colorado of the Executive
Age: 70 Committee and Chairman
of the Board of
Security Life of
Denver Insurance
Company; Director of
ING American Holdings
Company and First ING
Life Insurance Company
of New York.
Mark H. Williamson *+ President, Chief President and Chief
7800 E. Union Avenue Executive Officer and Executive Officer and
Denver, Colorado Director Director of INVESCO
Age: 47 Distributors, Inc.;
President, Chief
Executive Officer and
Director of INVESCO
Funds Group, Inc.;
President, Chief
Operating Officer and
Trustee of INVESCO
Global Health Sciences
Fund; formerly,
Chairman and Chief
Executive Officer of
NationsBanc Advisors,
Inc.
Victor L. Andrews, Director Professor Emeritus,
Ph.D. **! Chairman Emeritus and
34 Seawatch Drive Chairman of the CFO
Savannah, Georgia Roundtable of the
Age: 67 Department of Finance of
Georgia State
University; President,
Andrews Financial
Associates, Inc.
(consulting firm);
formerly, member of the
faculties of the Harvard
Business School and the
Sloan School of
Management of MIT;
Director of The
Sheffield Funds, Inc.
<PAGE>
Bob R. Baker +** Director President and Chief
AMC Cancer Research Executive Officer of AMC
Center Cancer Research Center,
1600 Pierce Street Denver, Colorado, since
Denver, Colorado January 1989; until mid-
Age: 61 December, 1988, Vice
Chairman of the Board of
First Columbia Financial
Corporation, Englewood,
Colorado; formerly,
Chairman of the Board
and Chief Executive
Officer of First
Columbia Financial
Corporation
Lawrence H. Budner #@ Director Trust Consultant; prior
7608 Glen Albens to June 30, 1987, Senior
Circle Vice President and
Dallas, Texas Senior Trust Officer of
Age: 67 InterFirst Bank, Dallas,
Texas
Wendy L. Gramm, Director Self-employed (since
Ph.D**! 1993); Professor of
4201 Yuma Street, N.W. Economics and Public
Washington, DC Administration,
Age: 53 University of Texas at
Arlington; formerly,
Chairman, Commodity
Futures Trading
Commission,Administrator
for Information and
Regulatory Affairs at
the Office of
Management and Budget,
Executive Director of
the Presidential Task
Force on Regulatory
Relief, and Director
of the Federal Trade
Commission's Bureau of
Economics. Also,
Director of Chicago
Mercantile Exchange,
Enron Corporation,
IBP, Inc., State Farm
Insurance Company,
Independent Women's
Forum, International
Republic Institute,
and the Republican
Women's Forum. Also,
Member of Board of
Visitors, College of
Business Administration,
University of Iowa,
and Member of Board of
Visitors, Center for
Study of Public
Choice, George Mason
University.
<PAGE>
Kenneth T. King +#@ Director Formerly, Chairman of
4080 North Circulo the Board of The Capitol
Manzanillo Life Insurance Company,
Tucson, Arizona Providence Washington
Age: 72 Insurance Company and
Director of numerous
U.S. subsidiaries
thereof; formerly,
Chairman of the Board
of The Providence
Capitol Companies in
the United Kingdom and
Guernsey; Chairman of
the Board of the
Symbion Corporation
until 1987.
John W. McIntyre +#@ Director Retired. Formerly, Vice
7 Piedmont Center Chairman of the Board of
Suite 100 Directors of The
Atlanta, Georgia Citizens and Southern
Age: 68 Corporation and Chairman
of the Board and Chief
Executive Officer of the
Citizens and Southern
Georgia Corp. and the
Citizens and Southern
National Bank; Trustee
of INVESCO Global Health
Sciences Fund, Gables
Residential Trust,
Employee's Retirement
System of GA, Emory
University, and J.M.
Tull Charitable
Foundation; Director of
Kaiser Foundation Health
Plans of Georgia, Inc.
Larry Soll, Ph.D.!** Director Retired. Formerly,
345 Poorman Road Chairman of the Board
Boulder, Colorado (1987 to 1994), Chief
Age: 55 Executive Officer (1982
to 1989 and 1993 to
1994) and President
(1982 to 1989) of
Synergen Inc.,
Director of Synergen
since incorporation in
1982; Director of Isis
Pharmaceuticals, Inc.;
Trustee of INVESCO
Global Health Sciences
Fund.
<PAGE>
Glen A. Payne Secretary Senior Vice President,
7800 E. Union Avenue General Counsel and
Denver, Colorado Secretary of INVESCO
Age: 50 Funds Group, Inc.;
Senior Vice President,
Secretary and General
Counsel of INVESCO
Distributors, Inc.;
Secretary of INVESCO
Global Health Sciences
Fund; formerly,
General Counsel of
INVESCO Trust Company
(1989 to 1998) and
employee of a U.S.
regulatory agency,
Washington, D.C. (1973
to 1989).
Ronald L. Grooms Treasurer Senior Vice President
7800 E. Union Avenue and Treasurer of INVESCO
Denver, Colorado Funds Group, Inc.;
Age: 51 Senior Vice President
and Treasurer of INVESCO
Distributors, Inc.;
Treasurer and Principal
Financial and Accounting
Officer of INVESCO
Global Health Sciences
Fund; formerly,
Senior Vice President
and Treasurer of INVESCO
Trust Company (1988 to
1998)
William J. Galvin, Jr. Assistant Secretary Senior Vice President of
7800 E. Union Avenue INVESCO Funds Group,
Denver, Colorado Inc.; Senior Vice
Age: 41 President of INVESCO
Distributors, Inc.;
formerly, Trust
Officer of INVESCO
Trust Company (1995 to
1998), formerly Vice
President of INVESCO
Funds Group, Inc.;
Vice President of 440
Financial Group;
Assistant Vice
President of Putnam
Companies
Alan I. Watson Assistant Secretary Vice President of
7800 E. Union Avenue INVESCO Funds Group,
Denver, Colorado Inc.; formerly, Trust
Age: 56 Officer of INVESCO Trust
Company
Judy P. Wiese Assistant Treasurer Vice President of
7800 E. Union Avenue INVESCO Funds Group,
Denver, Colorado Inc.; formerly, Trust
Age: 49 Officer of INVESCO Trust
Company
</TABLE>
<PAGE>
# Member of the audit committee of the Company.
+ Member of the executive committee of the Company. On occasion, the execu-
tive 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
1940 Act.
** Member of the management liaison committee of the Company.
@ Member of the soft dollar brokerage committee of the Company.
! Member of the derivatives committee of the Company.
The following table shows the compensation paid by the Company to its
Independent Directors for services rendered in their capacities as directors of
the Company; the benefits accrued as Company expenses with respect to the
Defined Benefit Deferred Compensation Plan discussed below; and the estimated
annual benefits to be received by these directors upon retirement as a result of
their service to the Company, all for the fiscal year ended October 31, 1998.
In addition, the table sets forth the total compensation paid by all of the
mutual funds distributed by INVESCO Distributors, Inc. and advised by INVESCO
Funds Group, Inc. (including the Company) and INVESCO Global Health Sciences
Fund (collectively, the "INVESCO Funds") to these directors for services
rendered in their capacities as directors or trustees during the year ended
December 31, 1998. As of October 31, 1998, there were 16 funds in the INVESCO
Funds.
<PAGE>
<TABLE>
<CAPTION>
Name of Aggregate Benefits Accrued Estimated Total Compensation
Person and Compensation As Part of Annual Benefits From INVESCO
Position From Company(1) Company Upon Retirement(3) Funds Paid To
Expenses(2) Directors(6)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fred A. Deering, Vice $18,066 $10,018 $6,429 $103,700
Chairman of the Board
- ------------------------------------------------------------------------------------------------------------
Victor L. Andrews 17,422 9,467 7,422 80,350
- ------------------------------------------------------------------------------------------------------------
Bob R. Baker 18,311 8,454 9,973 84,000
- ------------------------------------------------------------------------------------------------------------
Lawrence H. Budner 16,934 9,467 7,442 79,350
- ------------------------------------------------------------------------------------------------------------
Daniel D. Chabris(4) 17,581 10,234 5,553 70,000
- ------------------------------------------------------------------------------------------------------------
Wendy Gramm 16,350 0 0 79,000
- ------------------------------------------------------------------------------------------------------------
Kenneth T. King 15,966 10,404 5,831 77,050
- ------------------------------------------------------------------------------------------------------------
John W. McIntyre 16,606 0 0 98,500
- ------------------------------------------------------------------------------------------------------------
Larry Soll 16,606 0 0 96,000
- ------------------------------------------------------------------------------------------------------------
Total 153,842 58,044 42,670 767,950
- ------------------------------------------------------------------------------------------------------------
% of Net Assets 0.0035% 0.0013% 0.0035%(6)
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(1) The vice chairman of the board, the chairmen of the Funds'committees
who are Independent Directors, and the members of the Funds' committees who are
Independent Directors, each receive compensation for serving in such capacities
in addition to the compensation paid to all Independent Directors.
(2) Represents estimated benefits accrued with respect to the Defined
Benefit Deferred Compensation Plan discussed below, and not compensation
deferred at the election of the directors.
(3) These amounts represent the Company's share of the estimated annual
benefits payable by the INVESCO Funds upon the directors' retirement, calculated
using the current method of allocating director compensation among the INVESCO
Funds. These estimated benefits assume retirement at age 72 and further assume
that the basic retainer payable to the directors will be adjusted periodically
for inflation, for increases in the number of funds in the INVESCO Funds, and
for other reasons during the period in which retirement benefits are accrued on
behalf of the respective directors. This results in lower estimated benefits for
directors who are closer to retirement and higher estimated benefits for
directors who are further from retirement. With the exception of Drs. Soll and
Gramm, each of these directors has served as a director/trustee of one or more
of the funds in the INVESCO Funds for the minimum five-year period required to
be eligible to participate in the Defined Benefit Deferred Compensation Plan.
Although Mr. McIntyre became eligible to participate in the Defined Benefit
Deferred Compensation Plan as of November 1, 1998, he will not be included in
the calculation of retirement benefits until November 1, 1999.
(4) Mr. Chabris retired as a director of the Company on September 30, 1998.
(5) Totals as a percentage of the Company's net assets as of October 31,
1998.
(6) Total as a percentage of the net assets of the INVESCO Complex as of
December 31, 1998.
Messrs. Brady and Williamson, as "interested persons" of the Company and
the other funds and investment companies in the INVESCO Funds, receive
compensation as officers or employees of INVESCO or its affiliated companies,
and do not receive any director's fees or other compensation from the Company or
the other funds in the INVESCO Funds for their service as directors.
<PAGE>
The boards of directors/trustees of the mutual funds in the INVESCO Funds have
adopted a Defined Benefit Deferred Compensation Plan (the "Plan") for the
Independent 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 termination of service as a director (normally, at the
retirement age of 72 or the retirement age of 73 or 74, if the retirement date
is extended by the boards for one or two years, but less than three years,
continuation of payment for one year (the "First Year Retirement Benefit") of
the annual basic retainer and annualized board meeting fees payable by the funds
to the qualified director at the time of his retirement (the "Basic Benefit").
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 50% of the Basic Benefit. These
payments will continue for the remainder of the qualified director's life or ten
years, whichever is longer (the "Reduced Benefit Payments"). If a qualified
director dies or becomes disabled after age 72 and before age 74 while still a
director of the funds, the First Year Retirement Benefit and Reduced Benefit
Payments will be made to him/her or to his/her beneficiary or estate. If a
qualified director becomes disabled or dies either prior to age 72 or during
his/her 74th year while still a director of the funds, the director will not be
entitled to receive the First Year Retirement Benefit; however, the Reduced
Benefit Payments will be made to his/her beneficiary or estate. The Plan is
administered by a committee of three directors who are also participants in the
plan and one director who is not a plan participant. The cost of the plan will
be allocated among the INVESCO Funds in a manner determined to be fair and
equitable by the committee. The Company began making payments under the plan to
Mr. Chabris as of October 1, 1998. The Company has no stock options or other
pension or retirement plans for management or other personnel and pays no salary
or compensation to any of its officers.
The Independent Directors have contributed to a deferred compensation plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of selected INVESCO
Funds. The deferred amounts are being invested in the shares of all of the
INVESCO Funds. Each Independent Director is, therefore, an indirect owner of
shares of each INVESCO Fund.
CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS
As of January 31, 1999, the following persons owned more than 5% of the
outstanding shares of the Funds indicated below. This level of share ownership
is considered to be a "principal shareholder" relationship with a Fund under the
1940 Act. Shares that are owned "of record" are held in the name of the person
indicated. Shares that are owned "beneficially" are held in another name, but
the owner has the full economic benefit of ownership of those shares:
<PAGE>
ENERGY FUND
- --------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage Owned
(Record/Beneficial)
================================================================================
Charles Schwab & Co. Record 40.66%
Inc. Special Custody
for the Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA
94104-4122
- --------------------------------------------------------------------------------
National Financial Record 7.64%
Services Corp.
The Exclusive Benefit
of Customers
One World Financial
Center
200 Liberty Street
5th Floor
Attn: Kate - Recon.
New York, NY
10281-5500
- --------------------------------------------------------------------------------
ENVIRONMENTAL SERVICES FUND
- --------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage Owned
(Record/Beneficial)
================================================================================
Charles Schwab & Co Record 22.65%
Special Custody Acct For
The Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104
- --------------------------------------------------------------------------------
FINANCIAL SERVICES FUND
- --------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage Owned
(Record/Beneficial)
================================================================================
Charles Schwab & Co Record 32.37%
Special Custody Acct
For The Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA
94104
- --------------------------------------------------------------------------------
Nat'l Financial Record 5.26%
Services Corp.
The Excl. Ben. of
Cust.
200 Liberty St., 5th
Flr.
New York, NY 10281
- --------------------------------------------------------------------------------
<PAGE>
GOLD FUND
- --------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage Owned
(Record/Beneficial)
================================================================================
Charles Schwab & Co Record 30.04%
Special Custody Acct
For The Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA
94104
- --------------------------------------------------------------------------------
Nat'l Financial Record 6.46%
Services Corp.
The Excl. Ben. of
Cust.
200 Liberty St., 5th
Flr.
New York, NY 10281
- -------------------------------------------------------------------------------
HEALTH SCIENCES FUND
- --------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage Owned
(Record/Beneficial)
================================================================================
Charles Schwab & Co Record 26.27%
Special Custody Acct
For The Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA
94104
- --------------------------------------------------------------------------------
LEISURE FUND
- --------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage Owned
(Record/Beneficial)
================================================================================
Charles Schwab & Co Record 25.89%
Special Custody Acct
For The Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA
94104
- --------------------------------------------------------------------------------
<PAGE>
TECHNOLOGY FUND - CLASS II
- --------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage Owned
(Record/Beneficial)
================================================================================
Charles Schwab & Co Record 31.16%
Special Custody Acct For
The Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104
- --------------------------------------------------------------------------------
UTILITIES FUND
- --------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage Owned
(Record/Beneficial)
================================================================================
Charles Schwab & Co Record 40.19%
Special Custody Acct
For The Exclusive
Benefit of Customers
101 Montgomery St.
San Francisco, CA
94104
- --------------------------------------------------------------------------------
As of February 11, 1999, officers and directors of the Company, as a group,
beneficially owned less than 1% of any Fund's outstanding shares.
<PAGE>
DISTRIBUTOR
INVESCO Distributors, Inc. ("IDI"), a wholly-owned subsidiary of INVESCO,
is the distributor of the Funds. IDI receives no compensation and bears all
expenses, including the cost of printing and distributing prospectuses, incident
to marketing of the Funds' shares, except for such distribution expenses as are
paid out of Fund assets under the Company's Plan of distribution which has been
adopted by each Fund pursuant to Rule 12b-1 under the 1940 Act.
The Company has adopted a Plan and Agreement of Distribution (the "Plan").
The Plan, which was originally implemented on November 1, 1997, with respect to
the Energy, Financial Services, Gold, Health Sciences, Leisure, Technology -
Class II and Utilities Funds and on December 1, 1997 with respect to the
Environmental Services Fund, is permitted under Rule 12b-1 under the 1940 Act.
The Plan provides that each Fund, with the exception of the Technology - Class I
Fund, will make monthly payments to IDI, a wholly-owned subsidiary of INVESCO,
computed at an annual rate no greater than 0.25% of a Fund's average net assets.
These payments permit IDI, at its discretion, to engage in certain activities
and provide services in connection with the distribution of a Fund's shares to
investors. Payments by a Fund under the Plan, for any month, may be made to
compensate IDI for permissible activities engaged in and services provided
during the rolling 12-month period in which that month falls.
A significant expenditure under the Plan is compensation paid to securities
companies and other financial institutions and organizations, which may include
INVESCO-affiliated companies, in order to obtain various distribution-related
and/or administrative services for the Funds. Each Fund is authorized by 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 a Fund and may
be made to banks, savings and loan associations and other depository
institutions, or their affiliates.
During the fiscal year ended October 31, 1998, the Funds made payments to IDI
under the Plan in the amounts of $340,026, $30,504, $2,083,025, $233,587,
$1,378,830, $285,064, $1,697,694 and $374,297 for Energy, Environmental
Services, Financial Services, Gold, Health Sciences, Leisure, Technology - Class
II and Utilities Funds, respectively. In addition, as of October 31, 1998,
$29,706, $3,334, $282,598, $27,255, $271,483, $44,424, $199,185 AND $37,050 of
additional distribution accruals had been incurred by the Energy, Environmental
Services, Financial Services, Gold, Health Sciences, Leisure, Technology - Class
II and Utilities Funds, respectively, and will be paid during the fiscal year
ended OCTOBER 31, 1999. For the fiscal year ended October 31, 1998, allocation
of Rule 12b-1 amounts paid by the Fund for the following categories of expenses
were:
ENERGY FUND
Advertising- $131,541;
Sales literature, printing, and postage--$53,463;
Direct mail--$22,646;
Public relations/promotion--$21,859;
Compensation to securities dealers and other organizations--$40,006; and
Marketing personnel--$70,511.
<PAGE>
ENVIRONMENTAL SERVICES FUND
Advertising--$12,998;
Sales literature, printing, and postage--$5,868;
Direct mail--$1,763;
Public relations/promotion--$1,879;
Compensation to securities dealers and other organizations--$2,103; and
Marketing personnel--$5,893.
FINANCIAL SERVICES FUND
Advertising--$696,550;
Sales literature, printing, and postage--$254,267;
Direct mail--$114,994;
Public relations/promotion--$99,103;
Compensation to securities dealers and other organizations--$591,172; and
Marketing personnel--$326,939.
GOLD FUND
Advertising--$91,043;
Sales literature, printing, and postage--$40,525;
Direct mail--$16,519;
Public relations/promotion--$14,955;
Compensation to securitiesd ealers and other organizations--$18,692; and
Marketing personnel--$51,853.
HEALTH SCIENCES FUND
Advertising--$414,477;
Sales literature, printing, and postage--$288,288;
Direct mail--$61,922;
Public relations/promotion--$69,168;
Compensation to securities dealers and other organizations--$316,203; and
Marketing personnel--$228,772.
LEISURE FUND
Advertising--$96,514;
Sales literature, printing, and postage--$38,666;
Direct mail--$13,644;
Public relations/promotion--$18,469;
Compensation to securities dealers and other organizations--$69,376; and
Marketing personnel--$48,395.
TECHNOLOGY FUND - CLASS II
Advertising--$540,182;
Sales literature, printing, and postage--$201,589;
Direct mail--$85,601;
Public relations/promotion--$89,381;
Compensation to securities dealers and other organizations--$493,337;
and Marketing personnel--$287,604.
UTILITIES FUND
Advertising--$108,134;
Sales literature, printing, and postage--$53,004;
Direct mail--$48,872;
Public relations/promotion--$19,206;
Compensation to securities dealers and other organizations--$75,786; and
Marketing personnel--$69,295.
<PAGE>
The services which are provided by securities dealers and other organizations
may vary by dealer but include, among other things, processing new shareholder
account applications, preparing and transmitting to the Company's Transfer Agent
computer-processable tapes of all Fund transactions by customers, serving as the
primary source of information to customers in answering questions concerning the
Funds, and assisting in other customer transactions with the Funds.
The Plan was adopted on May 16, 1997, at a meeting called for that purpose, by a
majority of the directors of the Company, including a majority of the directors
who neither are "interested persons" of the Company nor have any financial
interest in the operation of the Plan ("Independent Directors"). On October 28,
1997, the plan was approved by the shareholders of the Funds, except the
Environmental Services Fund, for an initial term expiring in one year. The Plan
was approved by the shareholders of the Environmental Services Fund on November
25, 1997 and was implemented on December 1, 1997. The Plan has been continued by
action of the board of directors through MAY 15, 1999. With respect to each
Fund, the board of directors, on February 4, 1997, approved amending the Plan,
effective January 1, 1997, to convert the Plan to a compensation type plan.
This amendment of the Plan did NOT result in increasing the amount of the
Funds' payments thereunder.
The Plan provides that it shall continue in effect with respect to each
Fund as long as such continuance is approved at least annually by the vote of
the board of directors of the Company cast in person at a meeting called for the
purpose of voting on such continuance, including the vote of a majority of the
Independent Directors. The Plan can also be terminated at any time by a Fund,
without penalty, if a majority of the Independent Directors, or shareholders of
the Fund, vote to terminate the Plan. The Company may, in its absolute
discretion, suspend, discontinue or limit the offering of its shares at any
time. In determining whether any such action should be taken, the board of
directors intends to consider all relevant factors including, without
limitation, the size of a Fund, the investment climate for a Fund, general
market conditions, and the volume of sales and redemptions of a Fund's shares.
The Plan may continue in effect and payments may be made under the Plan
following any temporary suspension or limitation of the offering of Fund shares;
however, the Company is not contractually obligated to continue the Plan for any
particular period of time. Suspension of the offering of a Fund's shares would
not, of course, affect a shareholder's ability to redeem his or her shares.
So long as the Plan is in effect, the selection and nomination of persons to
serve as independent directors of the Company 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 the amount of a Fund's
payments under the Plan without approval of the shareholders of that Fund, and
all material amendments to the Plan must be approved by the board of directors
of the Company, including a majority of the Independent Directors. Under the
agreement implementing the Plan, IDI or a Fund, the latter by vote of a majority
of the Independent Directors, or 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 Fund assets in the amounts and for the purposes set forth
therein, notwithstanding the occurrence of an assignment, as defined by the 1940
Act, and rules thereunder. To the extent it constitutes an agreement pursuant to
a plan, a Fund's obligation to make payments to IDI shall terminate
automatically in the event of such "assignment." In this event, a Fund may
continue to make payments pursuant to the Plan only upon the approval of new
arrangements regarding the use of the amounts authorized to be paid by the Fund
under the Plan. Such new arrangements must be approved by the directors,
including a majority of the Independent Directors, by a vote cast in person at a
meeting called for such purpose. These new arrangements might or might not be
<PAGE>
with IDI. On a quarterly basis, the directors review information about the
distribution services that have been provided to each Fund and the 12b-1 fees
paid for such services. On an annual basis, the directors consider whether the
Plan should be continued and, if so, whether any amendment to the Plan,
including changes in the amount of 12b-1 fees paid by each Fund, should be made.
The only Company directors and interested persons, as that term is defined in
Section 2(a)(19) of the 1940 Act, who have a direct or indirect financial
interest in the operation of the Plan are the officers and directors of the
Company who are also officers either of IDI or other companies affiliated with
IDI. The benefits which the Company believes will be reasonably likely to flow
to a Fund and its shareholders under the Plan include the following:
o Enhanced marketing efforts, if successful, should result in an increase
in net assets through the sale of additional shares and afford greater
resources with which to pursue the investment objectives of the Funds;
o The sale of additional shares reduces the likelihood that redemption of
shares will require the liquidation of securities of the Funds in amounts
and at times that are disadvantageous for investment purposes; and
o Increased Fund assets may result in reducing each investor's share of
certain expenses
through economies of scale (e.g., exceeding established breakpoints in an
advisory fee schedule and allocating fixed expenses over a larger asset
base), thereby partially offsetting the costs of the Plan.
The positive effect which increased Fund assets will have on INVESCO's revenues
could allow INVESCO and its affiliated companies:
o To have greater resources to make the financial commitments necessary to
improve the quality and level of the Funds' shareholder services (in both
systems and personnel);
o To increase the number and type of mutual funds available to investors
from INVESCO and its affiliated companies (and support them in their
infancy), and thereby expand the investment choices available to all
shareholders; and
o To acquire and retain talented employees who desire to be associated with
a growing organization.
OTHER SERVICE PROVIDERS
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 950 Seventeenth Street, Denver, Colorado, are the
independent accountants of the Company. The independent accountants are
responsible for auditing the financial statements of the Funds.
CUSTODIAN
State Street Bank and Trust Company, P.O. Box 351, Boston, Massachusetts, is the
custodian of the cash and investment securities of the Company. The custodian is
also responsible for, among other things, receipt and delivery of each Fund's
investment securities in accordance with procedures and conditions specified in
the custody agreement with the Company. The custodian is authorized to establish
separate accounts in foreign countries and to cause foreign securities owned by
the Funds to be held outside the United States in branches of U.S. banks and, to
the extent permitted by applicable regulations, in certain foreign banks and
securities depositories.
<PAGE>
TRANSFER AGENT
INVESCO Funds Group, Inc., 7800 E. Union Avenue, Denver, Colorado, is the
Company's transfer agent, registrar, and dividend disbursing agent. Services
provided by INVESCO include the issuance, cancellation and transfer of shares of
the Funds, and the maintenance of records regarding the ownership of such
shares.
LEGAL COUNSEL
The firm of Kirkpatrick & Lockhart LLP, Washington, D.C., is legal counsel for
the Company. The firm of Moye, Giles, O'Keefe, Vermeire & Gorrell, Denver,
Colorado, acts as special counsel to the Company.
BROKERAGE ALLOCATION AND OTHER PRACTICES
As the investment adviser to the Funds, INVESCO places orders for the purchase
and sale of securities with broker-dealers based upon an evaluation of the
financial responsibility of the brokers and dealers and the ability of the
broker-dealers to effect transactions at the best available prices.
While INVESCO seeks reasonably competitive commission rates, the Funds do not
necessarily pay the lowest commission or spread available. INVESCO is permitted
to, and does, consider qualitative factors in addition to price in the selection
of brokers. Among other things, INVESCO considers the quality of executions
obtained on a Fund's portfolio transactions, viewed in terms of the size of
transactions, prevailing market conditions in the security purchased or sold,
and general economic and market conditions. INVESCO has found that a broker's
consistent ability to execute transactions is at least as important as the price
the broker charges for those services.
In seeking to ensure that the commissions charged a Fund are consistent with
prevailing and reasonable commissions, INVESCO monitors brokerage industry
practices and commissions charged by broker-dealers on transactions effected for
other institutional investors like the Funds.
Consistent with the standard of seeking to obtain the best qualitative execution
on portfolio transactions, INVESCO may select brokers that provide research
services to INVESCO and the Company, as well as other INVESCO mutual funds and
other accounts managed by INVESCO. Research services include statistical and
analytical reports relating to issuers, industries, securities and economic
factors and trends, which may be of assistance or value to INVESCO in making
informed investment decisions. Research services prepared and furnished by
brokers through which a Fund effects securities transactions may be used by
INVESCO in servicing all of their accounts and not all such services may be used
by INVESCO in connection with a particular Fund. Conversely, a Fund receives
benefits of research acquired through the brokerage transactions of other
clients of INVESCO.
In order to obtain reliable trade execution and research services, INVESCO may
utilize brokers that charge higher commissions than other brokers would charge
for the same transaction. This practice is known as "paying up." However, even
when paying up, INVESCO is obligated to obtain best qualitative execution of a
Fund's transactions.
Portfolio transactions also may be effected through brokers and dealers
that recommend the Funds to their clients, or that act as agent in the purchase
of a Fund's shares for their clients. When a number of brokers and dealers can
provide comparable best price and execution on a particular transaction, INVESCO
may consider the sale of a Fund's shares by a broker or dealer in selecting
among qualified broker-dealers.
<PAGE>
Certain financial institutions (including brokers who may sell shares of a Fund,
or affiliates of such brokers) are paid a fee (the "Services Fee") for
recordkeeping, shareholder communications and other services provided by the
institutions to investors purchasing shares of the Funds through no transaction
fee programs ("NTF Programs") offered by the financial institution or its
affiliated broker (an "NTF Program Sponsor"). The Services Fee is based on the
average 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 Programs. With respect to certain NTF Programs, the
directors of the Company have authorized the Funds to apply dollars generated
from the Funds' Plan and Agreement of Distribution to pay the entire Services
Fee, subject to the maximum Rule 12b-1 fee permitted by the Plan, which
presently is 0.25%.
With respect to other NTF Programs, the Company's directors have authorized the
Funds to pay transfer agency fees to INVESCO based on the number of investors
who have beneficial interests in the NTF Program Sponsor's omnibus accounts in a
Fund. INVESCO, in turn, pays these transfer agency fees to the NTF Program
Sponsor as a sub-transfer agency or recordkeeping fee in payment of all or a
portion of the Services Fee. In the event that the sub-transfer agency or
recordkeeping fee is insufficient to pay all of the Services Fee with respect to
these NTF Programs, the directors of the Company have authorized the Company to
apply dollars generated from the Plan to pay the remainder of the Services Fee,
subject to the maximum Rule 12b-1 fee permitted by the Plan. INVESCO itself pays
the portion of a Fund's Services Fee, if any, that exceeds the sum of the
sub-transfer agency or recordkeeping fee and Rule 12b-1 fee.
The Company's directors have further authorized INVESCO to place a portion of a
Fund's brokerage transactions with certain NTF Program Sponsors or their
affiliated brokers, if INVESCO reasonably believes that, in effecting a 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 a
Fund may be credited by the NTF Program Sponsor against its Services Fee.
In the event that the transfer agency fee paid by a Fund to INVESCO with respect
to investors who have beneficial interests in a particular NTF Program Sponsor's
onmnibus accounts in that Fund exceed the Services Fee applicable to the Fund,
after application of credits, INVESCO may carry forward the excess and apply it
to future Services Fees payable to that NTF Program Sponsor with respect to that
Fund. The amount of excess transfer agency fees carried forward will be
reviewed for possible adjustmenht by INVESCO prior to the fiscal year-end of
each Fund.
The Company's board of directors has also authorized the Funds to pay to IDI the
full Rule 12b-1 fees contemplated by the Plan to compensate IDI for expenses it
incurs in engaging in the activities and providing the services on behalf of the
Funds contemplated by the Plan, subject to the maximum Rule 12b-1 fees permitted
by the Plan, notwithstanding that credits have been applied to reduce the por-
tion of the 12b-1 fee that would have been used to reimburse IDI for payments
to such NTF Program Sponsor absent such credits.
The aggregate dollar amount of brokerage commissions paid by each Fund for the
fiscal years ended October 31, 1998, 1997 AND 1996 were:
NAME OF FUND
Energy $2,480,249 $2,930,676 $1,939,241
Environmental Services 325,611 389,416 427,834
Financial Services 2,803,446 2,984,942 2,169,216
Gold 1,415,900 2,041,911 3,182,937
Health Sciences 2,344,485 3,867,011 3,221,908
<PAGE>
Leisure 671,367 678,711 1,066,529
Technology 6,480,241 6,214,757 4,119,351
Utilities 456,621 481,479 929,933
For the fiscal year ended October 31, 1998, brokers providing research services
received $8,606,875 in commissions on portfolio transactions effected for the
Funds. The aggregate dollar amount of such portfolio transactions was
$4,700,280,902. Commissions totaling $1,412,433 were allocated to certain
brokers in recognition of their sales of shares of the Funds on portfolio
transactions of the Funds effected during the fiscal year ended October 31,
1998.
At October 31, 1998, each Fund held debt securities of its regular brokers or
dealers, or their parents, as follows:
- --------------------------------------------------------------------------------
Fund Broker or Dealer Value of Securities at
================================================================================
Energy State Street Bank and $ 8,291,000.00
Trust Company
- --------------------------------------------------------------------------------
Chevron Corporation 4,890,000.00
- --------------------------------------------------------------------------------
Environmental Services State Street Bank and 812,000.00
Trust Company
- --------------------------------------------------------------------------------
Financial Services General Motors Accep- 39,795,000.00
tance Corporation
- --------------------------------------------------------------------------------
American Express Com- 32,513,162.50
pany
- --------------------------------------------------------------------------------
Merrill Lynch and Com- 16,239,750.00
pany Incorporated
- --------------------------------------------------------------------------------
Morgan Stanley Dean 19,463,850.00
Witter and Company
- --------------------------------------------------------------------------------
State Street Bank and 32,123,125.00
Trust Company
- --------------------------------------------------------------------------------
Sears Roebuck Accep- 41,701,000.00
tance Corporation
- --------------------------------------------------------------------------------
Gold State Street Bank and 6,546,000.00
Trust Company
- --------------------------------------------------------------------------------
Health Sciences American Express Credit 26,649,000.00
Corporation
- --------------------------------------------------------------------------------
Sears Roebuck Accep- 20,009,000.00
tance Corporation
- --------------------------------------------------------------------------------
Leisure State Street Bank and 19,917,000.00
Trust Company
- --------------------------------------------------------------------------------
<PAGE>
Technology State Street Bank and 3,874,000.00
Trust Company
- --------------------------------------------------------------------------------
American Express Credit 35,943,000.00
Corporation
- --------------------------------------------------------------------------------
Utilities State Street Bnak and 16,189,000.00
Trust Company
- --------------------------------------------------------------------------------
Neither INVESCO nor any affiliate of INVESCO receives any brokerage commissions
on portfolio transactions effected on behalf of the Funds, and there is no
affiliation between INVESCO or any person affiliated with INVESCO or the Funds
and any broker or dealer that executes transactions for the Funds.
CAPITAL STOCK
The Company is authorized to issue up to one billion shares of common stock with
a par value of $0.01 per share. As of JANUARY 31, 1999, the following shares of
each Fund were outstanding:
Energy Fund 10,372,758
Environmental Services Fund 1,808,749
Financial Services Fund 49,688,858
Gold Fund 51,293,035
Health Sciences Fund 26,703,005
Leisure Fund 8,920,468
Technology Fund - Class I 5,567,969
Technology Fund - Class II 33,346,438
Utilities Fund 11,865,814
All shares of each Fund, including the shares of each class of the Technology
Fund, have equal rights as to voting, dividends and liquidation. All shares
issued and outstanding are, and all shares offered hereby, when issued, will be,
fully paid and nonassessable. The board of directors has the authority to
designate additional classes of common stock without seeking the approval of
shareholders and may classify and reclassify any authorized but unissued shares.
<PAGE>
Shares have no preemptive rights and are freely transferable on the books of
each Fund.
All shares of the Company have equal voting rights based on one vote for each
share owned. The Company is not generally required and does not expect to hold
regular annual meetings of shareholders. However, when requested to do so in
writing by the holders of 10% or more of the outstanding shares of the Company
or as may be required by applicable law or the Company's Articles of
Incorporation, the board of directors will call special meetings of
shareholders.
Directors may be removed by action of the holders of a majority of the
outstanding shares of the Company. The Funds will assist shareholders in
communicating with other shareholders as required by the Investment Company Act
of 1940.
Fund shares have noncumulative voting rights, which means that the holders of a
majority of the shares of the Company voting for the election of directors of
the Company can elect 100% of the directors if they choose to do so. If that
occurs, the holders of the remaining shares voting for the election of directors
will not be able to elect any person or persons to the board of directors.
TAX CONSEQUENCES OF OWNING SHARES OF THE FUND
Each Fund intends to continue to conduct its business and satisfy the applicable
diversification of assets, distribution and source of income requirements to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. Each Fund qualified as a regulated investment
company in the fiscal year ended October 31, 1998, and intends to continue to
qualify during its current fiscal year. It is the policy of each Fund to
distribute all investment company taxable income and net capital gains. As a
result of this policy and the Funds' qualification as regulated investment
companies, it is anticipated that none of the Funds will pay federal income or
excise taxes and that all of the Funds will be accorded conduit or "pass
through" treatment for federal income tax purposes. Therefore, any taxes that a
Fund would ordinarily owe will be paid by its shareholders on a pro-rata basis.
If a Fund does not distribute all of its net investment income or net capital
gains, it will be subject to tax on the amount that is not distributed. If a
Fund does not qualify as a regulated investment company, it will be subject to
corporate tax on its net investment income and net capital gains at the
corporate tax rates.
Dividends paid by a Fund from net investment income as well as distributions of
net realized short-term capital gains and net realized gains from certain
foreign currency transactions are taxable for federal income tax purposes as
ordinary income to shareholders. After the end of each calendar year, the Funds
send shareholders information regarding the amount and character of dividends
paid in the year, including the dividends eligible for the
dividends-received-deduction for corporations. Dividends eligible for the
dividends-received-deduction will be limited to the aggregate amount of
qualifying dividends that a Fund derives from its portfolio investments.
<PAGE>
A Fund realizes a capital gain or loss when it sells a portfolio security
for more or less than it paid for that security. Capital gains and losses are
divided into short-term and long-term, depending on how long the Fund held the
security which gave rise to the gain or loss. If the security was held one year
or less, the gain or less is considered short-term, while holding a security for
more than one year will generate a long-term gain or loss. A capital gain
distribution consists of long-term capital gains which are taxed at the capital
gains rate. Short-term capital gains are included with income from dividends and
interest as ordinary income and are paid to shareholders as dividends. If total
long-term gains on sales exceed total short-term losses, including any losses
carried forward from previous years, a Fund will have a net capital gain.
Distributions by a Fund of net capital gain (the excess of net long-term capital
gain over net short-term capital loss) are, for federal income tax purposes,
taxable to the shareholder as a long-term capital gain regardless of how long a
shareholder has held shares of the particular Fund. Such distributions are not
eligible for the dividends-received-deduction. After the end of each calendar
year, the Funds send information to shareholders regarding the amount and
character of distributions paid during the year.
All dividends and other distributions are taxable income to the shareholder,
whether or not such dividends and distributions are reinvested in additional
shares or paid in cash. If the net asset value of a Fund's shares should be
reduced below a shareholder's cost as a result of a distribution, such
distribution would be taxable to the shareholder although a portion would be a
return of invested capital. The net asset value of shares of a Fund reflects
accrued net investment income and undistributed realized capital and foreign
currency gains; therefore, when a distribution is made, the net asset value is
reduced by the amount of the distribution. If shares of a Fund are purchased
shortly before a distribution, the full price for the shares will be paid and
some portion of the price may then be returned to the shareholder as a taxable
dividend or capital gain. However, the net asset value per share will be reduced
by the amount of the distribution, which would reduce any gain (or increase any
loss) for tax purposes on any subsequent redemption of shares.
If it invests in foreign securities, a Fund may be subject to the
withholding of foreign taxes on dividends or interest it receives on foreign
securities. Foreign taxes withheld will be treated as an expense of the Fund
unless the Fund meets the qualifications and makes the election to enable it to
pass these taxes through to shareholders for use by them as a foreign tax credit
or deduction. Tax conventions between certain countries and the United States
may reduce or eliminate such taxes.
A Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation that, in general, meets either of the
following tests: (1) at least 75% of its gross income is passive (i.e.,
interest) or (2) an average value of at least 50% of its assets produce, or are
held for the production of, passive income. Each Fund intends to "mark to
market" its stock in any PFIC. In this context, "marking to market" means
including in ordinary income for each taxable year the excess, if any, of the
fair market value of the PFIC stock over the Fund's adjusted basis in the PFIC
stock as of the end of the year. In certain circumstances, a Fund will also be
allowed to deduct from ordinary income the excess, if any, of its adjusted basis
in PFIC stock over the fair market value of the PFIC stock as of the end of the
year. The deduction will only be allowed to the extent of any PFIC
mark-to-market gains recognized as ordinary income in prior years (for tax years
beginning after December 31, 1997). A Fund's adjusted tax basis in each PFIC
stock for which it makes this election will be adjusted to reflect the amount of
income included or deduction taken under the election.
<PAGE>
Gains or losses (1) from the disposition of foreign currencies, (2) from
the disposition of debt securities denominated in foreign currencies that are
attributable to fluctuations in the value of the foreign currency between the
date of acquisition of each security and the date of disposition, and (3) that
are attributable to fluctuations in exchange rates that occur between the time a
Fund accrues interest, dividends or other receivables or accrues expenses or
other liabilities denominated in a foreign currency and the time the Fund
actually collects the receivables or pays the liabilities, generally will be
treated as ordinary income or loss. These gains or losses may increase or
decrease the amount of a Fund's investment company taxable income to be
distributed to its shareholders.
INVESCO may provide Fund shareholders with information concerning the
average cost basis of their shares in order to help them prepare their tax
returns. This information is intended as a convenience to shareholders, and will
not be reported to the Internal Revenue Service (the "IRS"). The IRS permits the
use of several methods to determine the cost basis of mutual fund shares. The
cost basis information provided by INVESCO will be computed using the
single-category average cost method, although neither INVESCO nor the Funds
recommend any particular method of determining cost basis. Other methods may
result in different tax consequences. If you have reported gains or losses for a
Fund in past years, you must continue to use the method previously used, unless
you apply to the IRS for permission to change methods.
If you sell Fund shares at a loss after holding them for six months or less,
your loss will be treated as long-term (instead of short-term) capital loss to
the extent of any capital gain distributions that you may have received on those
shares.
Each Fund will be subject to a nondeductible 4% excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of its
ordinary income for that year and its net capital gain for the one-year period
ending on October 31 of that year, plus certain other amounts.
You should consult your own tax adviser regarding specific questions as to
federal, state and local taxes. Dividends and capital gain distributions will
generally be subject to applicable state and local taxes. Qualification as a
regulated investment company under the Internal Revenue Code of 1986, as
amended, for income tax purposes does not entail government supervision of
management or investment policies.
PERFORMANCE
To keep shareholders and potential investors informed, INVESCO will occasionally
advertise the Funds' total return for one-, five-, and ten-year periods (or
since inception). Total return figures show the rate of return on a $10,000
investment in a Fund, assuming reinvestment of all dividends and capital gain
distributions for the periods cited.
<PAGE>
Cumulative total return shows the actual rate of return on an investment
for the period cited; average annual total return represents the average annual
percentage change in the value of an investment. Both cumulative and average
annual total returns tend to "smooth out" fluctuations in a Fund's investment
results, because they do not show the interim variations in performance over the
periods cited. More information about the Funds' recent and historical
performance is con tained in the Company's Annual Report to Shareholders. You
can get a free copy by calling or writing to INVESCO using the phone number or
address on the back cover of the Funds' prospectus.
When we quote mutual fund rankings published by Lipper Inc., we may compare a
Fund to others in its appropriate Lipper category, as well as the broad-based
Lipper general fund groupings. These rankings allow you to compare a Fund to its
peers. Other independent financial media also produce performance- or
service-related comparisons, which you may see in our promotional materials.
Performance figures are based on historical earnings and are not intended to
suggest future performance.
Average annual total return performance for the one-, five-, and ten-year
periods ended October 31, 1998 was:
Name of Fund 1 Year 5 Year 10 Year
- ------------ ------ ------ -------
Energy -28.51% 5.93% 5.70%
Environmental Services -12.09% 9.86% N/A
Financial Services 11.76% 20.37% 23.46%
Gold -39.98% -15.55% -6.00%
Health Sciences 28.58% 22.96% 23.42%
Leisure 15.16% 10.49% 17.98%
Technology - Class II -2.47% 16.10% 21.48%
Utilities 23.44% 11.74% 13.49%
There is no stated average annual return performance for the Technology Fund
Class I as it did not commence operations until December 14, 1998.
Average annual total return performance for each of the periods indicated was
computed by finding the average annual compounded rates of return that would
equate the initial amount invested to the ending redeemable value, according to
the following formula:
P(1 + T)exponent n = ERV
where: P = a hypothetical initial payment of $10,000
T = average annual total return
n = number of years
ERV = ending redeemable value of initial payment
The average annual total return performance figures shown above were determined
by solving the above formula for "T" for each time period indicated.
<PAGE>
In conjunction with performance reports, comparative data between a Fund's
performance for a given period and other types of investment vehicles, including
certificates of deposit, may be provided to prospective investors and
shareholders.
In conjunction with performance reports and/or analyses of shareholder services
for a Fund, comparative data between that Fund's performance for a given period
and recognized indices of investment results for the same period, and/or
assessments of the quality of shareholder service, may be provided to
shareholders. Such indices include indices provided by Dow Jones & Company,
Standard & Poor's, Lipper, 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; or (iii) by other recognized analytical services.
The Lipper mutual fund rankings and comparisons which may be used by the Fund
in performance reports will be drawn from the following Lipper Categories mutual
fund grouping, in addition to the broad-based Lipper general fund groupings.
Lipper Mutual
Fund Fund Category
---- -------------
Energy Natural Resources
Environmental Services Environmental
Financial Services Financial Services
Gold Gold Oriented
Health Sciences Health/Biotechnology
Leisure Specialty/Miscellaneous
Technology Science and Technology
Utilities Utility
Sources for Fund performance information and articles about the Funds include,
but are not limited to, the following:
American Association of Individual Investors' Journal
Banxquote
Barron's
Business Week
CDA Investment Technologies
CNBC
CNN
Consumer Digest
Financial Times
Financial World
<PAGE>
Forbes
Fortune
Ibbotson Associates, Inc.
Institutional Investor
Investment Company Data, Inc.
Investor's Business Daily
Kiplinger's Personal Finance
Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis
Money
Morningstar
Mutual Fund Forecaster
No-Load Analyst
No-Load Fund X
Personal Investor
Smart Money
The New York Times
The No-Load Fund Investor
U.S. News and World Report
United Mutual Fund Selector
USA Today
The Wall Street Journal
Wiesenberger Investment Companies Services
Working Woman
Worth
Financial Statements
The financial statements for the Company for the fiscal year ended Octoer 31,
1998, are incorporated herein by reference from the Company's Annual Report to
Shareholders dated October 31, 1998.
<PAGE>
APPENDIX A
DESCRIPTION OF FUTURES, OPTIONS AND FORWARD CONTRACTS
Options on Securities
- ---------------------
An option on a security provides the purchaser, or holder," with the right, but
not the obligation, to purchase, in the case of a "call" option or sell, in the
case of a "put" option, the security or securities underlying the option, for a
fixed exercise price up to a stated expiration date. The holder pays a
non-refundable purchase price for the option, known as the "premium." The
maximum amount of risk the purchase of the option assumes is equal to the
premium plus related transaction costs, although the entire amount may be lost
The risk of the seller, or "writer," however, is potentially unlimited, unless
the option is "covered," which is generally accomplished through the writer's
segregation of an amount of cash or securities equal to the exercise price, in
the case of a put option. If the writer's obligation is not so covered, it is
subject to the risk of the full change in value of the underlying security from
the time the option is written until exercise.
Upon exercise of the option, the holder is required to pay the purchase price of
the underlying security, in the case of a call option, or to deliver the
security in return for the purchase price, in the case of a put option.
Conversely, the writer is required to deliver the security, in the case of a
call option, or to purchase the security, in the case of a put option. Options
on securities which have been purchased or written may be closed out prior to
exercise or expiration by entering into an offsetting transaction on the
exchange on which the initial position was established, subject to the
availability of a liquid secondary market.
Options on securities are traded on national securities exchanges, such as the
Chicago Board of Options Exchange and the New York Stock Exchange, which are
regulated by the Securities and Exchange Commission. The Options Clearing
Corporation guarantees the performance of each party to an exchange-traded
option, by in effect taking the opposite side of each such option. A holder or
writer may engage in transactions in exchange-traded options on securities and
options on indices of securities only through a registered broker-dealer which
is a member of the exchange on which the option is traded.
An option position in an exchange-traded option may be closed out only on
an exchange which provides a secondary market for an option of the same series.
Although the Fund will generally purchase or write only those options for which
there appears to be an active secondary market, there is no assurance that a
liquid secondary market on an exchange will exist for any particular option at
any particular time. In such event it might not be possible to effect closing
transactions in a particular option with the result that the Fund would have to
exercise the option in order to realize any profit. This would result in the
Fund's incurring brokerage commissions upon the disposition of underlying
securities acquired through the exercise of a call option or upon the pur chase
of underlying securities upon the exercise of a put option. If the Fund as
covered call option writer is unable to effect a closing purchase transaction in
a secondary market, unless the Fund is required to deliver the securities
pursuant to the assignment of an exercise note, it will not be able to sell the
underlying security until the option expires.
<PAGE>
Reasons for the potential absence of a liquid secondary market on an exchange
include the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an exchange on opening transactions
or closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (v) the facilities of an exchange or
a clearing corporation may not at all times be adequate to handle current
trading volume; or (vi) one or more exchange could, for economic or other
reasons, decide or be compelled at some future date to discontinue the trading
of options (or particular class or series of options) in which event the
secondary market on that exchange (or in the class or series of options) would
cease to exist, although outstanding options on that exchange which had been
issued by a clearing corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms. There is no assurance
that higher than anticipated trading activity or other unforeseen events might
not, at a particular time, render certain of the facilities of any of the
clearing corporations inadequate and thereby result in the institution by an
exchange of special procedures which may interfere with the timely execution of
customers' orders. However, the Options Clearing Corporation, based on forecasts
provided by the U.S. exchanges, believe that its facilities are adequate to
handle the volume of reasonably anticipated options transactions, and such
exchanges have advised such clearing corporation that they believe their
facilities will also be adequate to handle reasonable anticipated volume.
In addition, options on securities may be traded over-the-counter through
financial institutions dealing in such options as well as the underlying
instruments. OTC options are purchased from or sole (written) to dealers or
financial institutions which have enters into direct agreements with a Fund.
With OTC options, such variables as expiration date, exercise price and premium
will be agreed upon between a Fund and the transacting dealer, without the
intermediation of a third party such as the OCC. If the transacting dealer fails
to make or take delivery of the securities underlying an option it has written,
in accordance with the terms of that option as written, the Fund would lose the
premium paid for the option as well as any anticipated benefit of the
transaction. A Fund will engage OTC option transactions only with primary U.S.
Government securities dealers recognized by the Federal Reserve Bank of New
York.
Futures Contracts
- -----------------
A Futures Contract is a bilateral agreement providing for the purchase and
sale of a specified type and amount of a financial instrument or foreign
currency, or for the making and acceptance of a cash settlement, at a stated
time in the future, for a fixed price. By its terms, a Futures Contract provides
for a specified settlement date on which, in the case of the majority of
interest rate and foreign currency futures contracts, the fixed income
securities or currency underlying the contract are delivered by the seller and
paid for by the purchaser, or on which, in the case of stock index futures
contracts and certain interest rate and foreign currency futures contracts, the
difference between the price at which the contract was entered into and the
contract's closing value is settled between the purchaser and seller in cash.
Futures Contracts differ from options in that they are bilateral agreements,
with both the purchaser and the seller equally obligated to complete the
transaction. In addition, Futures Contracts call for settlement only on the
expiration date, and cannot be "exercised" at any other time during their term.
The purchase or sale of a Futures Contract also differs from the purchase or
sale of a security or the purchase of an option in that no purchase price is
paid or receive. Instead, an amount of cash or cash equivalent, which varies but
may be as low as 5% or less of the value of the contract, must be deposited with
the broker as "initial margin." Subsequent payments to and from the broker,
referred to as "variation margin," are made on a daily basis as the value of the
index or instrument underlying the futures Contract fluctuates, making positions
in the Futures Contract more or less valuable, a process known as "marking to
the market."
<PAGE>
A Futures Contract may be purchased or sold only on an exchange, known as a
"contract market," designated by the Commodity Futures Trading Commission for
the trading of such contract, and only through a registered futures commission
merchant which is a member of such contract market. A commission must be paid on
each completed purchase and sale transaction. The contract market clearing house
guarantees the performance of each party to a Futures Contract, by in effect
taking the opposite side of such Contract. At any time prior to the expiration
of a Futures Contract, a trader may elect to close out its position by taking an
opposite position on the contract market on which the position was entered into,
subject to the availability of a secondary market, which will operate to
terminate the initial position. At that time, a final determination of variation
margin is made and any loss experienced by the trader is required to be paid to
the contract market clearing house while any profit due to the trader must be
delivered to it.
Interest rate futures contracts currently are traded on a variety of fixed
income securities, including long-term U.S. Treasury Bonds, Treasury Notes,
Government National Mortgage Association modified pass-through mortgage-backed
securities, U.S. Treasury Bills, bank certificates of deposit and commercial
paper. In addition, interest rate futures contracts include contracts on indices
of municipal securities. Foreign currency futures contracts currently are traded
on the British pound, Canadian dollar, Japanese yen, Swiss franc, German mark
and on Eurodollar deposits.
Options on Futures Contracts
- ----------------------------
An Option on a Futures Contract provides the holder with the right to enter into
a "long" position in the underlying Futures Contract, in the case of a call
option, or a "short" position in the underlying Futures Contract, in the case of
a put option, at a fixed exercise price to a stated expiration date. Upon
exercise of the option by the holder, the contract market clearing house
establishes a corresponding short position for the writer of the option, in the
case of a call option, or a corresponding long position, int he case of a put
option. In the event that an option is exercised, the parties will be subject to
all the risks associated with the trading of Futures Contracts, such as payment
of variation margin deposits. In addition, the writer of an Option on a Futures
Contract, unlike the holder, is subject to initial and variation margin
requirements on the option position.
A position in an Option on a Futures Contract may be terminated by the purchaser
or seller prior to expiration by effecting a closing purchase or sale
transaction, subject to the availability of a liquid secondary market, which is
the purchase or sale of an option of the same series (i.e., the same exercise
price and expiration date) as the option previously purchased or sold. The
difference between the premiums paid and received represents the trader's profit
or loss on the transaction.
An option, whether based on a Futures Contract, a stock index or a security,
becomes worthless to the holder when it expires. Upon exercise of an option, the
exchange or contract market clearing house assigns exercise notices on a random
basis to those of its members which have written options of the same series and
with the same expiration date. A brokerage firm receiving such notices then
assigns them on a random basis to those of its customers which have written
options of the same series and expiration ate. A writer therefore has no control
over whether an option will be exercised against it, nor over the time of such
exercise.
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits
(a) Articles of Restatement of the Articles of Incorporation filed
November 24, 1989.(1)
(i) Articles Supplementary to the Fund's Articles of Incorpor-
ation filed December 26, 1990.(1)
(ii) Articles of Amendment of the Articles of
Incorporation filed December 2, 1994.(1)
(iii) Articles of Amendment of the Articles of Incorporation
filed October 29, 1998.(3)
(iv) Articles Supplementary to Articles of Incorporation filed
December 29, 1998.(3)
(v) Articles Supplementary to Articles of Incorporation filed
December 29, 1998.
(b) Bylaws as of July 21, 1993.(1)
(c) Not applicable.
(d) Investment Advisory Agreement dated February 28, 1997.(2)
(e) General Distribution Agreement dated February 28, 1997.(2)
(f) (i) Defined Benefit Deferred Compensation Plan for Non-
Interested Directors and Trustees.(1)
(ii) Amended Defined Benefit Deferred Compensation Plan
for Non-Interested Directors and Trustees.
(g) Custody Agreement between Registrant and State Street Bank and
Trust Company dated 1993.(2)
(i) Amendment to Custody Agreement dated October 25, 1995.(2)
(ii) Data Access Services Addendum.(2)
(h) (i) Transfer Agency Agreement dated February 28, 1997.(2)
(ii) Administrative Services Agreement between the Fund and
INVESCO Funds Group, Inc. dated February 28, 1997.(2)
<PAGE>
(i) Opinion and consent of counsel as to the legality of the
securities being registered, indicating whether they will, when
sold, be legally issued, fully paid and non-assessable.(2)
(j) Consent of Independent Accountants.
(k) Not applicable.
(l) Not applicable.
(m) (i) Plan and Agreement of Distribution dated November 1, 1997
adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940.(2)
(ii) Amended Plan and Agreement of Distribution dated
December 1, 1997.(2)
(n) (i) Financial Data Schedule for the year ended October 31,
1998 for the Energy Fund.
(ii) Financial Data Schedule for the year ended October 31,
1998 for the Environmental Services Fund.
(iii) Financial Data Schedule for the year ended October 31,
1998 for the Financial Services Fund.
(iv) Financial Data Schedule for the year ended October 31,
1998 for the Gold Fund.
(v) Financial Data Schedule for the year ended October 31,
1998 for the Health Sciences Fund.
(vi) Financial Data Schedule for the year ended October 31,
1998 for the Leisure Fund.
(vii)Financial Data Schedule for the year ended October 31,
1998 for the Technology Fund - Class II.
(viii)Financial Data Schedule for the year ended October 31,
1998 for the Utilities Fund.
(o) Plan Pursuant to Rule 18f-3 under the Investment Company Act of
1940 by the Registrant adopted by the Board of Directors
October 11, 1998.(3)
(1) Previously filed on EDGAR with Post-Effective Amendment No. 20 to the
Registration Statement on December 30, 1996, and incorporated by reference
herein.
(2) Previously filed on EDGAR with Post-Effective Amendment No. 21 to the
Registration Statement on December 24, 1997 and incorporated by reference
herein.
(3) Previously filed on EDGAR with Post-Effective Amendment No. 22 to the
Registration Statement on December 30, 1998 and incorporated by reference
herein.
<PAGE>
Item 24. Persons Controlled by or Under Common Control with the Fund
No person is presently controlled by or under common control with the Fund.
ITEM 25. INDEMNIFICATION
Indemnification provisions for officers, directors and employees of Registrant
are set forth in Article X of the Amended Bylaws and Article Seventh (3) of the
Articles of Restatement of the Articles of Incorporation, and are hereby
incorporated by reference. See Item 24(b)(1) and (2) above. Under these
Articles, directors and officers will be indemnified to the fullest extent
permitted to directors by the Maryland General Corporation Law, subject only to
such limitations as may be required by the Investment Company Act of 1940, as
amended, and the rules thereunder. Under the Investment Company Act of 1940,
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 the duties of their office.
The Fund also maintains liability insurance policies covering its directors and
officers.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
See "The Fund and Its Management" in the Fund's Prospectus and in the Statement
of Additional Information for information regarding the business of the
investment adviser, INVESCO.
Following are the names and principal occupations of each director and officer
of the investment adviser, INVESCO. Certain of these persons hold positions
with IDI, a subsidiary of INVESCO, and, during the past two fiscal years, have
held positions with Institutional Trust Company d.b.a. INVESCO Trust Company, an
affiliate of INVESCO.
<TABLE>
<CAPTION>
<S> <C> <C>
Position with Principal Occupation and
Name Adviser Company Affiliation
------------------------------------------------------------------------------------------
Mark H. Williamson Chairman, Director President & Chief Executive Officer
and Officer INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
William J. Galvin, Jr. Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Ronald L. Grooms Officer Senior Vice President & Treasurer
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Richard W. Healey Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Charles P. Mayer Officer & Director Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
<PAGE>
Timothy J. Miller Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Donovan J. (Jerry) Officer Senior Vice President
Paul INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Glen A. Payne Officer Senior Vice President, Secretary & General
Counsel
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
John R. Schroer, II Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Marie E. Aro Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Ingeborg S. Cosby Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Stacie Cowell Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Dawn Daggy-Mangerson Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Elroy E. Frye, Jr. Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Linda J. Gieger Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Mark D. Greenberg Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
<PAGE>
Brian B. Hayward Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Richard R. Hinderlie Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Thomas M. Hurley Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Patricia F. Johnston Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Peter M. Lovell Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
James F. Lummanick Officer Vice President & Assistant General Counsel
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Thomas A. Mantone, Jr. Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Trent E. May Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Frederick R. (Fritz) Officer Vice President
Meyer INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Stephen A. Moran Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Jeffrey G. Morris Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
<PAGE>
Laura M. Parsons Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Jon B. Pauley Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Pamela J. Piro Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Gary L. Rulh Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
John S. Segner Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Terri B. Smith Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Tane T. Tyler Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Thomas A. Wald Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Alan I. Watson Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Judy P. Wiese Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Ronald C. Lively Officer Senior Regional Vice President
INVESCO Funds Group, Inc.
17406 Brown Road
Odessa, FL 33556
------------------------------------------------------------------------------------------
<PAGE>
Scott E. Stapley Officer Senior Regional Vice President
INVESCO Funds Group, Inc.
1615 Arch Bay Drive
Newport Beach, CA 92660
------------------------------------------------------------------------------------------
Thomas H. Scanlan Officer Regional Vice President
INVESCO Funds Group, Inc.
12028 Edgepark Court
Potomac, MD 20854
------------------------------------------------------------------------------------------
Reagan A. Shopp Officer Regional Vice President
INVESCO Funds Group, Inc.
12028 Edgepark Court
Potomac, MD 20854
------------------------------------------------------------------------------------------
Michael D. Legoski Officer Assistant Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Donald R. Paddack Officer Assistant Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Kent T. Schmeckpeper Officer Assistant Vice President
Account Relationship Manager
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
Jeraldine E. Kraus Officer Assistant Secretary
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Item 27. PRINCIPAL UNDERWRITERS
INVESCO Bond Funds, Inc.
INVESCO Combination Stock & Bond Funds, Inc.
INVESCO Diversified Funds, Inc.
INVESCO Emerging Opportunity Funds, Inc.
INVESCO Growth Funds, Inc.
INVESCO Industrial Income Funds, Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Sector Funds, Inc.
INVESCO Specialty Funds, Inc.
INVESCO Stock Funds, Inc.
INVESCO Tax-Free Income Funds, Inc.
INVESCO Value Trust
INVESCO Variable Investment Funds, Inc.
<PAGE>
(b)
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter the Fund
- ------------------ ------------- -----------
William J. Galvin, Jr. Sr. Vice Assistant
7800 E. Union Avenue President & Secretary
Denver, CO 80237 Assistant
Secretary
Ronald L. Grooms Sr. Vice Treasurer,
7800 E. Union Avenue President Chief Fin'l
Denver, CO 80237 & Treasurer Officer, and
Chief Acctg.
Off.
Richard W. Healey Sr. Vice
7800 E. Union Avenue President
Denver, CO 80237
Charles P. Mayer Director
7800 E. Union Avenue
Denver, CO 80237
Glen A. Payne Senior Vice Secretary
7800 E. Union Avenue President,
Denver, CO 80237 Secretary &
General Counsel
Judy P. Wiese Vice President Asst. Treas.
7800 E. Union Avenue & Assistant
Denver, CO 80237 Treasurer
Mark H. Williamson Chairman of the President,
7800 E. Union Avenue Board, President, CEO & Director
Denver, CO 80237 CEO & Director
(c) Not applicable.
Item 28. Location of Accounts and Records
--------------------------------
Mark H. Williamson
7800 E. Union Avenue
Denver, CO 80237
<PAGE>
Item 29. Management Services
-------------------
Not applicable.
Item 30. Undertakings
------------
Not applicable
<PAGE>
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Fund has duly caused this post-effective amendment to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Denver, County of Denver, and State of Colorado, on the 1st day of
March, 1999.
ATTEST: INVESCO Sector Funds, Inc.
/s/ Glen A. Payne /s/ Mark H. Williamson
- ------------------------- -------------------------------------
Glen A. Payne, Secretary Mark H. Williamson, President
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities and
on the date indicated.
/s/ Mark H. Williamson /s/ Lawrence H. Budner
- ------------------------------- ------------------------------------
Mark H. Williamson, President Lawrence H. Budner, Director
and Director (CEO)
/s/ Ronald L. Grooms /s/ John W. McIntyre
- ------------------------------- ------------------------------------
Ronald L. Grooms, Treasurer John W. McIntyre, Director
(Chief Financial and Accounting
Officer
/s/ Victor L. Andrews /s/ Fred A. Deering
- ------------------------------- ------------------------------------
Victor L. Andrews, Director Fred A. Deering, Director
/s/ Bob R. Baker /s/ Larry Soll
- ------------------------------- ------------------------------------
Bob R. Baker, Director Larry Soll, Director
/s/ Charles W. Brady /s/ Kenneth T. King
- ------------------------------- ------------------------------------
Charles W. Brady, Director Kenneth T. King, Director
/s/ Wendy L. Gramm
- ------------------------------
Wendy L. Gramm, Director
By*_____________________________ By* /s/ Glen A. Payne
___________________________________
Edward F. O'Keefe Glen A. Payne
Attorney in Fact Attorney in Fact
* Original Powers of Attorney authorizing Edward F. O'Keefe and Glen A. Payne,
and each of them, to execute this post-effective amendment to the Registration
Statement of the Registrant on behalf of the above-named directors and officers
of the Registrant have been filed with the Securities and Exchange Commission on
July 20, 1989, January 9, 1990, May 22, 1992, September 1, 1993, December 1,
1993, December 21, 1995, December 30, 1996 and December 24, 1997.
<PAGE>
Exhibit Index
Page in
Exhibit Number Registration Statement
- -------------- ----------------------
a(v) 131
f(ii) 133
j 138
n(i) 139
n(ii) 140
n(iii) 141
n(iv) 142
n(v) 143
n(vi) 144
n(vii) 145
n(viii) 146
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
INVESCO SECTOR FUNDS, INC.
INVESCO Sector Funds, Inc., a corporation organized and existing under the
General Corporation Law of the State of Maryland, registered as an open-end
investment company under the Investment Company Act of 1940, and having its
registered office in Baltimore, Maryland (hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: By a unanimous written consent resolution dated October 11, 1998,
the board of directors of the Corporation voted to allocate an additional one
hundred million (100,000,000) shares of common stock of the Corporation to one
of the currently existing funds known as INVESCO Technology Fund - Class I.
INVESCO Technology Fund - Class I is currently allocated one hundred million
(200,000,000) shares of common stock of the Corporation. After this
reallocation, the INVESCO Technology Fund - Class i shall have three hundred
million (300,000,000) authorized shares. The aggregate number of shares of stock
of all series which the Corporation had the authority to issue before this
reallocation was one billion (1,000,000,000) shares of Common Stock with a par
value of $0.01 per share. The aggregate number of shares of stock of all series
which the Corporation shall have the authority to issue after this reallocation
is one billion two hundred million (1,200,000,000) shares of Common Stock with a
par value of $0.01 per share.
SECOND: Shares of each class have been duly classified by the board of
directors pursuant to authority and power contained in the Articles of
Incorporation of the Corporation.
THIRD: A description of the common stock so classified, including the
powers, preferences, participating, voting or other special rights and
qualifications, restrictions and limitations thereof, is as outlined in the
Articles of Incorporation of the Corporation.
FOURTH: The Corporation is registered as an open-end management investment
company under the Investment Company Act of 1940.
FIFTH: The undersigned, the President of the Corporation, who is executing
on behalf of the Corporation the foregoing Articles Supplementary, of which this
paragraph is a part, hereby acknowledges, in the name of and on behalf of the
Corporation, that the foregoing Articles Supplementary are the corporate act of
the Corporation and further verifies under oath that, to the best of his
knowledge, information and belief, the matters and facts set forth herein are
true in all material respects, under the penalties of perjury.
<PAGE>
IN WITNESS WHEREOF, INVESCO Sector Funds, Inc. has caused these Articles
Supplementary to be signed in its name and on its behalf by its President and
witnessed by its Secretary on the 28th day of December, 1998.
These Articles Supplementary shall be effective upon acceptance by the
Maryland State Department of Assessments and Taxation.
INVESCO SECTOR FUNDS, INC.
By: /s/ Ronald L. Grooms
-----------------------------
Ronald L. Grooms, Treasurer
ATTEST:
By: /s/ Glen A. Payne
------------------------
Glen A. Payne, Secretary
I, Michael T. Branstiter, a notary public in and for the State of
Colorado, do hereby certify that Mark H. Williamson, personally known to me to
be the person whose name is subscribed to the foregoing Articles Supplementary,
appeared before me this date in person and acknowledged that he signed, sealed
and delivered said instrument as his full and voluntary act and deed for the
uses and purposes therein set forth.
Given my hand and official seal this 28th day of December, 1998.
/s/ Michael T. Branstiter
------------------------------------
Notary Public
DEFINED BENEFIT DEFERRED COMPENSATION PLAN
FOR NON-INTERESTED DIRECTORS AND TRUSTEES
As Amended Effective July 1, 1998
The registered, open-end management investment companies referred to on
Schedule A as the Schedule may hereafter be revised by the addition and deletion
of investment companies (the "Funds") have adopted this Defined Benefit Deferred
Compensation Plan ("Plan") for the benefit of those directors and trustees of
the Funds who are not interested directors or trustees thereof as defined in
Section 2(a)(19) of the Investment Company Act of 1940, as amended ("Independent
Directors").
1. Eligibility
Each Independent Director who has served as such ("Eligible Service") on
the boards of any of the Funds and their predecessor and successor entities, if
any, for an aggregate of at least five years at the time of his/her Service
Termination Date (as defined in paragraph 2) will be entitled to receive
benefits under the Plan. An Independent Director's period of Eligible Service
commences on the date of election to the board of directors or trustees of any
one or more of the Funds ("Board"). Hereafter, references in this Plan to
Independent Directors shall be deemed to include only those Directors who have
met the Eligible Service requirement for Plan participation.
2. Service Termination and Service Termination Date
a. Service Termination. Service Termination means termination of
service (other than by disability or death) of an Independent Director which
results from the Director's having reached his/her Service Termination Date.
b. Service Termination Date. An Independent Director's Service
Termination Date is that date upon which he or she no longer serves as a
director. Mormally, an Independent Director's Service Termination Date will be
the last day of the calendar quarter in which such Director's seventy-second
birthday occurs. A majority of the Board of a Fund may annually extend a
Director's Service Termination Date for a maximum period of three years,
through the date not later than the last day of the calendar quarter in which
such Director's seventy-fifth birthday occurs.
As used in this Plan unless otherwise stipulated, Service Termination Date
shall mean the date upon which the Director no longer serves as a director.
3. Defined Payments and Benefit
a. Payments. If an Independent Director's Service Termination Date
occurs on a date not later than the last day of the calendar quarter in which
such Director's seventy-fourth birthday occurs, the Independent Director will
receive four quarterly payments during the first twelve months subsequent to
his/her Service Termination Date (the "First Year Retirement Payments"), with
<PAGE>
each payment to be equal to 25 percent of the sum of the annual basic retainer
and annualized quarterly Board meeting fees payable by each Fund to the
Independent Director on his/her Service Termination Date (excluding any fees
relating to attending or chairing committee meetings or other fees payable to an
Independent Director).
b. Benefit. Commencing with the first anniversary of the
Service Termination Date of any Independent Director who has received the
First Year Retirement Payments, and commencing as of the Service Termination
Date of an Independent Director whose Service Termination Date is subsequent to
the date of the last day of the calendar quarter in which such Director's
seventy-fourth birthday occurred, the Independent Director will receive, for
the remainder of his/her life, a benefit (the "Benefit"), payable quarterly,
with each quarterly payment to be equal to 12.50 percent of the sum of the
annual basic retainer and annualized quarterly Board meeting fees payable
by each Fund to the Independent Director on his/her Service Termination Date
(excluding any fees relating to attending or chairing committee meetings or
other fees payable to an Independent Director).
Example: As of July 1, 1998, the annual Benefit would be $34,000
(annual basic retainer of $56,000 plus annualized quarterly Board meeting fees
of $12,000 times 12.50 percent of the total each quarter: $56,000 + $12,000 =
$68,000 x .125 = $8,500 x 4 = $34,000). As of July 1, 1998, the vice chairman
of the Funds receives an aggregate annual retainer of $62,000. The vice
chairman's annual Benefit wold be $37,000. The annual Benefit may increase or
decrease in the future in accordance with changes in the Independent Director's
annual basic retainer and/or Board meeting fees.
c. Death Provisions. If an Independent Director's service as a
Director is terminated because of his/her death subsequent to the last day
of the calendar quarter in which such Director's seventy-second birthday
occurred and prior to the last day of the calendar quarter in which such
Director's seventy-fourth birthday occurs, the designated beneficiary of the
Independent Director shall receive the First Year Retirement Payments and
shall, commencing with the quarter following the quarter in which the last
First Year Retirement Payment is made, receive the Benefit for a period of ten
years, with quarterly payments to be made to the designated beneficiary.
If an Independent Director's service as a Director is terminated because
of his/her death prior to the last day of the calendar quarter in which
such Director's seventy-second birthday occurs or subsequent to the last day
of the calendar quarter in which such Director's seventy-fourth birthday
occurred, the designated beneficiary of the Independent Director shall receive
the Benefit for a period of ten years, with quarterly payments to be made to
the designated beneficiary commencing in the first quarter following the
Director's death.
d. Disability Provisions. If an Independent Director's service as a
Director is terminated because of his/her disability subsequent to the last
day of the calendar quarter in which such Director's seventy-second birthday
occurred and prior to the last day of the calendar quarter in which such
Director's seventy-fourth birthday occurs, the Independent Director shall
receive the First Year Retirement Payments and shall, commencing with the
quarter following the quarter in which the last First Year Retirement Payment
is made, receive the Benefit for the remainder of his/her life, with quarterly
payments to be made to the disabled Independent Director. If the disabled
Independent Director should die before the First Year Retirement Payments are
completed and before forty quarterly Benefit payments are made, such
payments will continue to be made to the Independent Director's designated
beneficiary until the aggregate of the First Year Retirement Payments and
forty quarterly Benefit payments have been made to the disabled Independent
Director and the Director's designated beneficiary.
<PAGE>
If an Independent Director's service as a Director is terminated because
of his/her disability prior to the last day of the calendar quarter in which
such Director's seventy-second birthday occurs or subsequent to the last day
of the calendar quarter in which such Director's seventy-fourth birthday
occurred, the Independent Director shall receive the Benefit for the
remainder of his/her life, with quarterly payments to be made to the
disabled Independent Director commencing in the first quarter following
the Director's termination for disability. If the disabled Independent
Director should die before forty quarterly payments are made, payments
will continue to be made to the Independent Director's designated
beneficiary until the aggregate of forty quarterly payments has been made
to the disabled Independent Director and the Director's designated
beneficiary.
e. Death of Independent Director and Beneficiary. If, subsequent to the
death of the Independent Director, his/her designated beneficiary should die
before the First Year Retirement Payments and/or a total of forty quarterly
Benefit payments are made, the remaining value of the Independent Director's
First Year Retirement Payments and/or Benefit (which Benefit shall in no
event exceed the value of forty quarterly payments minus the number of payments
made) shall be determined as of the date of the death of the Independent
Director's designated beneficiary and shall be paid to the estate of the
designated beneficiary in one lump sum or in periodic payments, with the
determinations with respect to the value of the First Year Retirement Payments
and/or Benefit and the method and frequency of payment to be made by the
Committee (as defined in paragraph 8.a.) in its sole discretion.
4. Designated Beneficiary
The beneficiary referred to in paragraph 3 may be designated or changed by
the Independent Director without the consent of any prior beneficiary on a form
provided by the Committee (as defined in paragraph 8.a.) and delivered to the
Committee (or its designee as described on the form) before the Independent
Director's death. If no such beneficiary shall have been designated, or if
no designated beneficiary shall survive the Independent Director, the value
or remaining value of the Independent Director's First Year Retirement Payments
and/or Benefit (which Benefit shall in no event exceed the value of forty
quarterly payments minus the number of payments made) shall be determined as of
the date of the death of the Independent Director by the Committee and shall
be paid as promptly as possible in one lump sum to the Independent Director's
estate.
5. Disability
An Independent Director shall be deemed to have become disabled for the
purposes of paragraph 3 if the Committee shall find on the basis of medical
evidence satisfactory to it that the Independent Director is disabled, mentally
or physically, as a result of an accident or illness, so as to be prevented from
performing each of the duties which are incumbent upon an Independent Director
in fulfilling his/her responsibilities as such.
6. Time of Payment
The First Year Retirement Payments and/or the Benefit for each year will
be paid in quarterly installments that are as nearly equal as possible.
7. Payment of First Year Retirement Payments and/or Benefit: Allocation
of Costs
Each Fund is responsible for the payment of the amount of the First Year
Retirement Payments and/or Benefit applicable to the Fund, as well as its
proportionate share of all expenses of administration of the Plan, including
without limitation all accounting and legal fees and expenses and fees and
expenses of any Actuary. The obligations of each Fund to pay such First Year
<PAGE>
Retirement Payments and/or Benefit and expenses will not be secured or
funded in any manner, and such obligations will not have any preference over
the lawful claims of each Fund's creditors and shareholders. To the extent
that the First Year Retirement Payments and/or Benefit is paid by more than
one Fund, such costs and expenses will be allocated among such Funds in a
manner that is determined by the Committee to be fair and equitable under the
circumstances. To the extent that one or more of such Funds consist of one or
more separate portfolios, such costs and expenses allocated to any such Fund
will thereafter be allocated among such portfolios by the Board of the Fund in a
manner that is determined by such Board to be fair and equitable under the
circumstances.
8. Administration
a. The Committee. Any question involving entitlement to payments
under or the administration of the Plan will be referred to a four-person
committee (the "Committee") composed of three Independent Directors designated
by all of the Independent Directors of the Funds and one director of the Funds
who is not an Independent Director, designated by the non-Independent
Directors. Except as otherwise provided herein, the Committee will make all
interpretations and determinations necessary or desirable for the Plan's
administration, and such interpretations and determinations will be final
and conclusive. Committee members will be elected annually.
b. Powers of the Committee. The Committee will represent and act on
behalf of the Funds in respect of the Plan and, subject to the other provisions
of the Plan, the Committee may adopt, amend or repeal bylaws or other
regulations relating to the administration of the Plan, the conduct of the
Committee's affairs, its rights or powers, or the rights or powers of its
members. The Committee will report to the Independent Directors and to the
Boards of the Funds from time to time on its activities in respect of the Plan.
The Committee or persons designated by it will cause such records to be
kept as may be necessary for the administration of the Plan.
9. Miscellaneous Provisions
a. Rights Not Assignable. Other than as is specifically provided in
paragraph 3, the right to receive any payment under the Plan is not transferable
or assignable, and nothing in the Plan shall create any benefit, cause of
action, right of sale, transfer, assignment, pledge, encumbrance, or other
such right in any heirs or the estate of any Independent Director.
b. Amendment, etc. The Committee, with the concurrence of the Board
of any Fund, may as to the specific Fund at any time amend or terminate the
Plan or waive any provision of the Plan; provided, however, that subject
to the limitations imposed by paragraph 7, no amendment, termination or
waiver will impair the rights of an Independent Director to receive the payments
which would have been made to such Independent Director had there been no such
amendment, termination, or waiver.
c. No Right to Reelection. Nothing in the Plan will create any
obligation on the part of the Board of any Fund to nominate any Independent
Director for reelection.
d. Consulting. Subsequent to his/her Service Termination Date, an
Independent Director may render such services for any Fund, for such
compensation, as may be agreed upon from time to time by such Independent
Director and the Board of the Fund which desires to procure such services.
e. Effectiveness. The Plan will be effective for all Independent
Directors who have Service Termination Dates occurring on and after
October 20, 1993. Periods of Eligible Service shall include periods
commencing prior and subsequent to such date. Upon its adoption by the Board
of a Fund, the Plan will become effective as to that Fund on the date when the
Committee determines that any regulatory approval or advice that may be
necessary or appropriate in connection with the Plan have been obtained.
Adopted October 20, 1993.
Amended October 19, 1994.
Amended May 1, 1996, effective July 1, 1996.
Amended May 14, 1998, effective July 14, 1998.
<PAGE>
SCHEDULE A
TO
DEFINED BENEFIT DEFERRED COMPENSATION PLAN
FOR NON-INTERESTED DIRECTORS AND TRUSTEES
INVESCO Capital Appreciation Funds, Inc.
INVESCO Diversified Funds, Inc.
INVESCO Emerging Opportunity Funds, Inc.
INVESCO Growth Fund, Inc.
INVESCO Income Funds, Inc.
INVESCO Industrial Income Fund, Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Multiple Asset Funds, Inc.
INVESCO Specialty Funds, Inc.
INVESCO Strategic Portfolios, Inc.
INVESCO Tax-Free Income Funds, Inc.
INVESCO Value Trust
INVESCO Variable Investment Funds, Inc.
INVESCO Treasurer's Series Trust
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectuses and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 24 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated December 8, 1998, relating to the financial
statements and financial highlights appearing in the October 31, 1998 Annual
Report to Shareholders of INVESCO Strategic Funds, Inc. (formerly known as
INVESCO Strategic Portfolios, Inc., now known as INVESCO Sector Funds, inc.)
which is also incorporated by reference into the Registration Statement. We also
consent to the references to us under the heading "Financial Highlights" in the
Prospectuses and under the heading "Independent Accountants" in the Statement of
Additional Information.
PricewaterhouseCoopers LLP
Denver, Colorado
February 26, 1999
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