PROSPECTUS
January 1, 1999
INVESCO Intermediate Government Bond Fund
The INVESCO Intermediate Government Bond Fund (the "Fund") seeks to
achieve a high total return on investments through capital appreciation and
current income by investing primarily in obligations of the U.S. government and
its agencies and instrumentalities maturing in three to five years.
The Fund is a series of INVESCO Value Trust (the "Trust"), a diversified,
managed, no-load mutual fund consisting of three separate portfolios of
investments. This Prospectus relates to shares of the INVESCO Intermediate
Government Bond Fund. Separate prospectuses are available upon request from
INVESCO Distributors, Inc. for the Trust's other two funds, INVESCO Value Equity
Fund and INVESCO Total Return Fund. Investors may purchase shares of any or all
Funds. Additional funds may be offered in the future.
This Prospectus provides you with the basic information you should know
before investing in the Fund. You should read it and keep it for future
reference. A Statement of Additional Information containing further information
about the Fund, dated January 1, 1999, has been filed with the Securities and
Exchange Commission and is incorporated by reference into this Prospectus. To
request a free copy, write to INVESCO Distributors, Inc., P.O. Box 173706,
Denver, Colorado 80217-3706; call 1-800-525-8085; or visit our web site at
http://www.invesco.com.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION. THE SHARES
OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
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TABLE OF CONTENTS
Page
ANNUAL FUND EXPENSES.........................................................2
FINANCIAL HIGHLIGHTS.........................................................4
PERFORMANCE DATA.............................................................6
INVESTMENT OBJECTIVE AND POLICIES............................................6
RISK FACTORS.................................................................7
THE FUND AND ITS MANAGEMENT..................................................9
HOW SHARES CAN BE PURCHASED.................................................11
SERVICES PROVIDED BY THE FUND...............................................14
HOW TO REDEEM SHARES........................................................16
TAXES, DIVIDENDS AND OTHER DISTRIBUTIONS....................................17
ADDITIONAL INFORMATION......................................................18
<PAGE>
ANNUAL FUND EXPENSES
The Fund is no-load; there are no fees to purchase, exchange or redeem
shares. The Fund is authorized to pay a Rule 12b-1 distribution fee of up to one
quarter of one percent of the Fund's average net assets each year. The 12b-1 fee
is assessed against all shares, but only with respect to new sales of shares,
exchanges into the Fund and reinvestments of dividends and capital gain
distributions occurring on or after November 1, 1997 ("New Assets").
Annual operating expenses are calculated as a percentage of the Fund's
average annual net assets. To keep expenses competitive, INVESCO Funds Group,
Inc. ("INVESCO"), the Fund's investment adviser, voluntarily reimburses the Fund
for certain expenses in excess of 1.00% (excluding excess amounts that have been
offset by the expense offset arrangements described below), of the Fund's
average net assets.
Shareholder Transaction Expenses
Sales load "charge" on purchases None
Sales load "charge" on reinvested dividends None
Redemption fees None
Exchange fees None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fee 0.60%
12b-1 Fees(1) 0.25%
Other Expenses (after absorbed expenses)(2) 0.16%
Transfer Agency Fee(3) 0.54%
General Services, Administrative
Services, Registration, Postage (after
voluntary expense limitation)(2)(4) (0.38)%
Total Fund Operating Expenses
(after absorbed expenses)(2)(5) 1.01%
(1) 12b-1 fees for the period November 1, 1997 through August 31, 1998
were 0.08%.
(2) Certain Fund expenses are being voluntarily absorbed by INVESCO to
ensure that the Fund's annualized total operating expenses do not exceed 1.00%
of the Fund's average net assets. Ratio reflects total expenses less absorbed
expenses by INVESCO. In the absence of such voluntary expense limitation, the
Fund's "Other Expenses" and "Total Fund Operating Expenses" would have been
0.80% and 1.65%, respectively, based on the Fund's actual expenses for the
fiscal year ended August 31, 1998.
<PAGE>
(3) Consists of the transfer agency fee described under "Additional
Information - Transfer and Dividend Disbursing Agent."
(4) Includes, but is not limited to, fees and expenses of trustees,
custodian bank, legal counsel and independent accountants, securities pricing
services, costs of administrative services furnished under an Administrative
Services Agreement, costs of registration of Fund shares under applicable laws,
and costs of printing and distributing reports to shareholders.
(5) It should be noted that the Fund's actual total operating expenses
were lower than the figures shown because the Fund's custodian fees were reduced
under an expense offset arrangement. However, as a result of an SEC requirement,
the figures shown above do not reflect these reductions. In comparing expenses
for different years, please note that the Ratios of Expenses to Average Net
Assets shown under "Financial Highlights" do reflect reductions for periods
prior to the fiscal year ended August 31, 1996. (See "The Fund And Its
Management.")
Example
A shareholder would pay the following expenses on a $1,000 investment for
the periods shown, assuming (1) a 5% annual return and (2) redemption at the end
of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$10 $32 $56 $124
The purpose of the foregoing table and Example is to assist investors in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. Such expenses are paid from the Fund's assets. (See
"The Fund And Its Management.") The above figures for the INVESCO Intermediate
Government Bond Fund are based on fiscal year-end information. The Fund charges
no sales load, redemption fee or exchange fee. THE EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES, AND ACTUAL EXPENSES MAY
BE GREATER OR LESS THAN THOSE SHOWN. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or future
annual returns, which may be greater or less than the assumed amount.
Because the Fund pays a Rule 12b-1 distribution fee, investors who own
Fund shares for a long period of time may pay more than the economic equivalent
of the maximum front-end sales charge permitted for mutual funds by the National
Association of Securities Dealers, Inc.
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
The following information for each of the five years ended August 31,
1998, the eight-month fiscal period ended August 31, 1993, and each of the four
years ended December 31, 1992, has been audited by PricewaterhouseCoopers LLP,
independent accountants. Prior years' information was audited by another
independent accounting firm. This information should be read in conjunction with
the Report of Independent Accountants thereon appearing in the Trust's 1998
Annual Report to Shareholders which is incorporated by reference into the
Statement of Additional Information. Both are available without charge by
contacting INVESCO Distributors, Inc., at the address or telephone number on the
back cover of this Prospectus. All per share data has been adjusted to reflect
an 80 to 1 stock split which was effected on January 2, 1991.
<TABLE>
<CAPTION>
Period
Ended
Year Ended August 31 August 31 Year Ended December 31
-------------------------------------------- --------- ---------------------------------------
1998 1997 1996 1995 1994 1993^ 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value -
Beginning of Period $12.44 $12.30 $12.64 $12.16 $13.25 $12.68 $12.89 $12.13 $12.07 $11.90 $12.19
-------------------------------------------- -------- ---------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.64 0.66 0.73 0.73 0.70 0.48 0.90 0.89 1.00 1.03 0.81
Net Gains or (Losses)
on Securities (Both
Realized and
Unrealized) 0.32 0.14 (0.34) 0.48 (0.75) 0.57 (0.16) 0.77 0.05 0.17 (0.28)
-------------------------------------------- -------- ---------------------------------------
Total from Investment
Operations 0.96 0.80 0.39 1.21 (0.05) 1.05 0.74 1.66 1.05 1.20 0.53
-------------------------------------------- -------- ---------------------------------------
LESS DISTRIBUTIONS
Dividends from Net
Investment Income+ 0.64 0.66 0.73 0.73 0.70 0.48 0.90 0.90 0.99 1.03 0.82
Distributions from
Capital Gains 0.00 0.00 0.00 0.00 0.34 0.00 0.05 0.00 0.00 0.00 0.00
-------------------------------------------- -------- ---------------------------------------
<PAGE>
Total Distributions 0.64 0.66 0.73 0.73 1.04 0.48 0.95 0.90 0.99 1.03 0.82
-------------------------------------------- -------- --------------------------------------
Net Asset Value -
End of Period $12.76 $12.44 $12.30 $12.64 $12.16 $13.25 $12.68 $12.89 $12.13 $12.07 $11.90
============================================ ======== ======================================
TOTAL RETURN 7.92% 6.64% 3.12% 10.36% (0.37%) 8.38%* 6.03% 14.16% 9.08% 10.52% 5.48%
RATIOS
Net Assets - End
of Period
($000 Omitted) $37,281 $44,441 $39,949 $37,339 $31,861 $39,384 $29,649 $24,385 $18,380 $19,805 $18,042
Ratio of Expenses
to Average
Net Assets# 1.01%@ 1.02%@ 1.15%@ 1.20% 1.07% 0.96%~ 0.97% 0.93% 0.85% 0.85% 0.85%
Ratio of Net
Investment Income
to Average
Net Assets# 5.11% 5.32% 5.81% 6.04% 5.58% 5.48%~ 6.38% 7.28% 8.16% 8.45% 7.92%
Portfolio Turnover
Rate 57% 37% 63% 92% 49% 34%* 93% 51% 31% 52% 6%
</TABLE>
^ From January 1, 1993 to August 31, 1993.
+ Distributions in excess of net investment income for the year ended August 31,
1994 aggregated less than $0.01 on a per share basis.
* Based on operations for the period shown and, accordingly, are not
representative of a full year.
# Various expenses of the Fund were voluntarily absorbed by INVESCO for the
years ended August 31, 1998, 1997 and 1996, and the years ended December 31,
1990, 1989 and 1988. If such expenses had not been voluntarily absorbed, ^ Ratio
of Expenses to Average Net Assets would have been 1.48%, 1.37%, 1.24%, 0.96%,
1.00% and 1.08%, respectively, and ^ Ratio of Net Investment Income to Average
Net Assets would have been 4.64%, 4.97%, 5.72%, 8.05%, 8.30% and 7.69%,
respectively.
@ Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
~ Annualized
<PAGE>
PERFORMANCE DATA
From time to time, the Fund advertises its total return performance. These
figures are based upon historical investment results and are not intended to
indicate future performance. Total return is computed by calculating the
percentage change in value of an investment, assuming reinvestment of all income
dividends and capital gain distributions, to the end of a specified period.
Cumulative total return reflects actual performance over a stated period of
time. Average annual total return is a hypothetical rate of return that, if
achieved annually, would have produced the same cumulative total return if
performance had been constant over the entire period. Any given report of total
return performance should not be considered as representative of future
performance. The Fund charges no sales load, redemption fee or exchange fee
which would affect total return computations.
The yield of the Fund is calculated by utilizing the Fund's calculated
income, expenses and average outstanding shares for the most recent 30-day or
one-month period, dividing it by the month-end net asset value and annualizing
the resulting number. Unlike "total return" quotations, quotations of "yield" do
not include the effect of capital changes. The Fund charges no sales load,
redemption fee or exchange fee. Accordingly, both purchase price and redemption
price equal net asset value per share, and no adjustments are made in either
yield or total return performance calculations to reflect nonrecurring charges.
In conjunction with performance reports and/or analyses of shareholder
service for the Fund, comparative data between the Fund's performance or yield
for a given period and the performance of recognized bond indices and 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, a division of The
McGraw-Hill Companies, Inc., Lipper Analytical Services, Inc., Lehman Brothers,
National Association of Securities Dealers Automated Quotations, Frank Russell
Company, Value Line Investment Survey, the American Stock Exchange, Morgan
Stanley Capital International, Wilshire Associates, the Financial Times Stock
Exchange, the New York Stock Exchange, the Nikkei Stock Average and the 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 appearing in publications such as Money,
Forbes, Kiplinger's Personal Finance, Morningstar and similar sources which
utilize information compiled (i) internally; (ii) by Lipper Analytical Services,
Inc.; or (iii) by other recognized analytical services, may be used in
advertising. The Lipper Analytical Services, Inc. mutual fund rankings and
comparisons, which may be used by the Fund in performance reports, will be drawn
from the "Intermediate U.S. Government Funds" Lipper mutual fund groupings, in
addition to the broad-based Lipper general fund grouping.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Intermediate Government Bond Fund seeks to achieve a high total return
on investment through capital appreciation and current income. Funds having an
investment objective of seeking a high total return may be limited in their
ability to obtain their objective by the limitations on the types of securities
in which they may invest. No assurance can be given that the Fund will be able
to achieve its investment objective.
The Fund invests primarily in obligations of the U.S. government and its
agencies and instrumentalities maturing in three to five years. Under normal
circumstances, at least 65% of the Fund's total assets will be invested in
government obligations consisting of direct obligations of the U.S. government
(U.S. Treasury bills, notes and bonds), obligations guaranteed by the U.S.
government, such as Ginnie Mae obligations, and obligations of U.S. government
authorities, agencies and instrumentalities, which are supported only by the
assets of the issuer, such as Fannie Mae, Federal Home Loan Banks, Federal
Financing Bank and Federal Farm Credit Bank. The remaining 35% of the Fund's
total assets may be invested under normal circumstances in corporate debt
obligations which are rated by Moody's Investors Service, Inc. ("Moody's") in
its four highest ratings of corporate obligations (Aaa, Aa, A and Baa) or by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P") in its
four highest ratings of corporate obligations (AAA, AA, A and BBB) or, if not
rated, in the opinion of the Fund's investment adviser or sub-adviser
(collectively, "Fund Management") have investment characteristics similar to
those described in such ratings. A bond rating of Baa by Moody's indicates that
the bond issue is of "medium grade," neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present, but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and have speculative characteristics as
well. A bond rating of BBB by S&P indicates that the bond issue is in the lowest
"investment grade" security rating. Bonds rated BBB are regarded as having an
adequate capacity to pay principal and interest. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay principal
and interest for bonds in this category than for bonds in the A category, and
they may have speculative characteristics. (See Appendix A to the Statement of
Additional Information for specific descriptions of these corporate bond rating
categories.) The dollar weighted average maturity of the Fund's investments will
normally be from three to ten years.
Obligations of certain U.S. government agencies and instrumentalities may
not be supported by the full faith and credit of the United States. Some are
backed by the right of the issuer to borrow from the U.S. Treasury; others, such
as the obligations of Fannie Mae, by discretionary authority of the U.S.
government to purchase the agencies' obligations; while still others, such as
obligations of the Student Loan Marketing Association, are supported only by the
credit of the instrumentality. In the case of securities not backed by the full
faith and credit of the United States, the Fund must look principally to the
agency issuing or guaranteeing the obligation for ultimate repayment and may not
be able to assert a claim against the United States itself in the event the
agency or instrumentality does not meet its commitments. The Fund will invest in
securities of such instrumentalities only when Fund Management is satisfied that
the credit risk with respect to any such instrumentality is minimal.
<PAGE>
The investment objective of the Fund and its investment policies, where
indicated, are deemed to be fundamental policies and thus may not be changed
without prior approval by the holders of a majority of its outstanding voting
securities of the Fund, as defined in the Investment Company Act of 1940 (the
"1940 Act"). In addition, the Trust and this Fund are subject to certain
investment restrictions which are identified in the Statement of Additional
Information and which also may not be altered without approval of the Fund's
shareholders. One of those restrictions limits the Fund's borrowing of money to
borrowings from banks for temporary or emergency purposes (but not for
leveraging or investment) in an amount not exceeding 33 1/3% of the value of the
Fund's total assets.
RISK FACTORS
Investors should consider the special factors associated with the policies
discussed below in determining the appropriateness of an investment in the
INVESCO Intermediate Government Bond Fund. The Fund's policies regarding
investments in foreign securities and foreign currencies are not fundamental and
may be changed by vote of the Trust's board of trustees.
Year 2000 Computer Issue. Due to the fact that many computer systems in
use today cannot recognize the Year 2000, but will, unless corrected, revert to
1900 or 1980 or cease to function at that time, the markets for securities in
which the Fund invests may be detrimentally affected by computer failures
affecting portfolio investments or trading of securities beginning January 1,
2000. Improperly functioning trading systems may result in settlement problems
and liquidity issues. In addition, corporate and governmental data processing
errors may result in production issues for individual companies and overall
economic uncertainties. Earnings of individual issuers may be affected by
remediation costs, which may be substantial. The Fund's investments may be
adversely affected.
Interest Rate Risk. The obligations in which the Fund invests are subject
to interest rate risk, which means that their values and, therefore, the net
asset value of the Fund, can be expected to fall when interest rates rise. The
Fund attempts to reduce this risk through diversification, credit analysis and
attention to interest rate trends and other factors.
<PAGE>
Foreign Securities. The Fund may invest up to 25% of its total assets in
foreign securities, although it currently does not intend to invest more than 5%
of its total assets in foreign securities. Investments in securities of foreign
companies and in foreign debt or equity markets involve certain additional risks
not associated with investments in domestic companies and markets, including the
risks of fluctuations in foreign currency exchange rates and of political or
economic instability, the difficulty of predicting international trade patterns,
and the possibility of imposition of exchange controls or currency blockage. In
addition, there may be less information publicly available about a foreign
company than about a domestic company, and there is generally less government
regulation of stock exchanges, brokers and listed companies abroad than in the
United States. Moreover, with respect to certain foreign countries, there may be
a possibility of expropriation or confiscatory taxation. Further, economies of
particular countries or areas of the world may differ favorably or unfavorably
from the economy of the United States. As one way of managing exchange rate
risk, the Fund may enter into forward foreign currency exchange contracts (i.e.,
purchasing or selling foreign currencies at a future date). For additional
information regarding forward foreign currency exchange contracts, see the
Trust's Statement of Additional Information.
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"). The EMU has established a common
European currency for EMU countries which is known as the "euro." Each
participating country has adopted the euro as its currency effective January 1,
1999. The old national currencies are 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, including whether the payment and operational systems of banks and other
financial institutions will have been ready by January 1, 1999; whether exchange
rates for existing currencies and the euro will have been adequately
established; and whether suitable clearing and settlement systems for the euro
will have been in operation. These and other factors may cause market
disruptions after January 1, 1999 and could adversely affect the value of
securities held by the Fund.
After January 1, 1999, the introduction of the euro is expected to impact
European capital markets in ways that it is impossible to quantify at this time.
For example, investors may begin to view EMU countries as a single market, and
that may impact future investment decisions for the Fund. As the euro is
implemented, there may be changes in the relative strength and value of the U.S.
<PAGE>
dollar and other major currencies, as well as possible adverse tax
consequences. The euro transition by EMU countries - present and future - may
impact the fiscal and monetary policies 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.
Repurchase Agreements. The Fund may engage in repurchase agreements with
banks, registered broker-dealers and registered government securities dealers,
which are deemed creditworthy by Fund Management under guidelines established by
the board of trustees. A repurchase agreement is a transaction in which the Fund
purchases a security and simultaneously commits to sell the security to the
seller at an agreed upon price and date (usually not more than seven days) after
the date of purchase. The resale price reflects the purchase price plus an
agreed upon market rate of interest which is unrelated to the coupon rate or
maturity of the purchased security. The Fund's risk is limited to the ability of
the seller to pay the agreed upon amount on the delivery date. However, in the
event the seller should default, the underlying security constitutes collateral
for the seller's obligations to pay. This collateral will be held by the
custodian for the Fund's assets. In the event of the insolvency of a
counterparty to a repurchase agreement, the Fund could experience delays and
incur costs in realizing on the collateral. To the extent that the proceeds from
a sale upon a default in the obligation to repurchase are less than the
repurchase price, the Fund would suffer a loss. Although the Fund has not
adopted any limit on the amount of its total assets that may be invested in
repurchase agreements, the Fund intends that at no time will the market value of
the Fund's securities subject to repurchase agreements exceed 20% of the total
assets of the Fund.
Illiquid Securities. The Fund may invest from time to time in securities
subject to restrictions on disposition under the Securities Act of 1933
("restricted securities"), securities without readily available market
quotations or 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). However, on the date of purchase, no such investment may
increase the Fund's holdings of restricted securities to more than 2% of the
value of the Fund's total assets or its holdings of illiquid securities or those
without readily available market quotations to more than 5% of the value of the
Fund's total assets. The Fund is not required to receive registration rights in
connection with the purchase of restricted securities and, in the absence of
such rights, marketability and value can be adversely affected because the Fund
may be unable to dispose of such securities at the time desired or at a
reasonable price. In addition, in order to resell a restricted security, the
Fund might have to bear the expense and incur the delays associated with
effecting registrations.
<PAGE>
Securities Lending. The Fund may make loans of its portfolio securities
(not to exceed 10% of the Fund's total assets) to broker-dealers or other
institutional investors under contracts requiring such loans to be callable at
any time and to be secured continuously by collateral in cash, cash equivalents,
high quality short-term government securities or irrevocable letters of credit
maintained on a current basis at an amount at least equal to the market value of
the securities loaned, including accrued interest and dividends. The Fund will
continue to collect the equivalent of the interest or dividends paid by the
issuer on the securities loaned and will also receive either interest (through
investment of cash collateral) or a fee (if the collateral is government
securities). The Fund may pay finder's and other fees in connection with
securities loans.
Portfolio Turnover. There are no fixed limitations regarding portfolio
turnover for the Fund. Although the Fund does not trade for short-term profits,
securities may be sold without regard to the time they have been held in the
Fund when, in the opinion of Fund Management, market considerations warrant such
action. As a result, while it is anticipated that the Fund's annual portfolio
turnover rate generally will not exceed 100%, under certain market conditions
the portfolio turnover rate for the Fund may exceed 100%. Increased portfolio
turnover would cause the Fund to incur greater brokerage costs than would
otherwise be the case. The Fund's portfolio turnover rates are set forth under
"Financial Highlights" and, along with the Trust's brokerage allocation
policies, are discussed in the Statement of Additional Information.
THE FUND AND ITS MANAGEMENT
The Trust is a no-load mutual fund, registered with the Securities and
Exchange Commission as an open-end, diversified management investment company.
The Trust was organized on July 15, 1987, under the laws of the Commonwealth of
Massachusetts as "Financial Series Trust." On July 1, 1993, the Trust changed
its name to "INVESCO Value Trust."
The Trust's board of trustees has responsibility for overall supervision
of the Fund, and reviews the services provided by the adviser. Under an
agreement with the Trust, INVESCO, 7800 E. Union Avenue, Denver, Colorado,
serves as the Fund's investment adviser. Under this agreement, INVESCO is
primarily responsible for providing the Fund with various administrative
services and supervising the Fund's daily business affairs. These services are
subject to review by the Trust's board of trustees.
INVESCO has contracted with INVESCO Capital Management, Inc. ("ICM"), the
Fund's investment adviser prior to 1991, for investment sub-advisory and
research services on behalf of the Fund. ICM managed in excess of $^ 38.1
billion of assets on behalf of tax-exempt accounts (such as pension and
profit-sharing funds for corporations and state and local governments) and
<PAGE>
investment companies as of ^ September 30, 1998. ICM, subject to the
supervision of INVESCO, is primarily responsible for selecting and managing the
Fund's investments. Although the Trust is not a party to the sub-advisory
agreement, the agreement has been approved by the shareholders of the Trust.
Services provided by INVESCO and ICM are subject to review by the Trust's board
of trustees.^
Pursuant to an agreement with the Trust, INVESCO Distributors, Inc.
("IDI") is the Fund's distributor. IDI, established in 1997, is a registered
broker-dealer that acts as distributor for all retail mutual funds advised by
INVESCO. Prior to September 30, 1997, INVESCO served as the Fund's distributor.
INVESCO, ICM and IDI are indirect wholly-owned subsidiaries of AMVESCAP
PLC. AMVESCAP PLC is a publicly-traded holding company that, through its
subsidiaries, engages in the business of investment management on an
international basis. INVESCO PLC changed its name to AMVESCO PLC on March 3,
1997 and to AMVESCAP PLC on May 8, 1997, as part of a merger between a direct
subsidiary of INVESCO PLC and A I M Management Group Inc., that created one of
the largest independent investment management businesses in the world. AMVESCAP
PLC had approximately ^ $241 billion in assets under management as of ^
September 30, 1998. INVESCO was established in 1932 and, as of August 31, 1998,
managed 14 mutual funds, consisting of 49 separate portfolios, with combined
assets of approximately $17.1 billion on behalf of 899,439 shareholders.
The following individuals serve as portfolio managers for the Fund and are
primarily responsible for the day-to-day management of the Fund's portfolio of
securities:
James O. Baker Portfolio manager of the Fund since 1993;
portfolio manager of the INVESCO Total
Return Fund since 1997; portfolio manager
for INVESCO Capital Management, Inc.
(1992 to present); portfolio manager,
Willis Investment Counsel (1990 to 1992);
broker, Morgan Keegan (1989 to 1990);
broker, Drexel Burnham Lambert (1985 to
1990); began investment career in 1977;
B.A., Mercer University; Chartered
Financial Analyst.
Ralph H. Jenkins, Jr. Assistant portfolio manager of the Fund
since 1993; vice president (1991 to
present) and portfolio manager (1988 to
present) of INVESCO Capital Management,
Inc.; began investment career in 1969;
B.B.C., Auburn University; M.A.,
University of Alabama; Chartered
Financial Analyst; Chartered Investment
Counselor.
<PAGE>
Fund Management permits investment and other personnel to purchase and sell
securities for their own accounts, subject to a compliance policy governing
personal investing. This policy requires Fund Management's personnel to conduct
their personal investment activities in a manner that Fund Management believes
is not detrimental to the Fund or Fund Management's other advisory clients. See
the Statement of Additional Information for more detailed information.
The Fund pays INVESCO a monthly management fee which is based upon a
percentage of the Fund's average net assets determined daily. The management fee
is computed at the annual rate of 0.60% on the first $500 million of the Fund's
average net assets, 0.50% on the next $500 million of the Fund's average net
assets and 0.40% on the average net assets of the Fund in excess of $1 billion.
For the fiscal year ended August 31, 1998, the advisory fees paid to INVESCO
amounted to 0.60% of the average net assets of the Fund.
Out of the advisory fee which it receives from the Fund, INVESCO pays ICM,
as the Fund's sub-adviser, a monthly fee based upon the average daily value of
the Fund's net assets. Based upon approval of the Trust's board of trustees at a
meeting held May 14, 1998, the calculation of subadvisory fees of the Fund has
been changed from 33.33% of the advisory fee (0.20% on the first $500 million of
the Fund's average net assets, 0.1667% on the next $500 million of the Fund's
average net assets and 0.1333% on the Fund's average net assets in excess of $1
billion) to 40% of the advisory fee (0.24% on the first $500 million of the
Fund's average net assets, 0.20% on the next $500 million of the Fund's average
net assets and 0.16% on the Fund's average net assets in excess of $1 billion).
No fee is paid by the Fund to ICM.
The Trust also has entered into an Administrative Services Agreement (the
"Administrative Agreement") with INVESCO. Pursuant to the Administrative
Agreement, INVESCO performs certain administrative, recordkeeping and internal
sub-accounting services, including, without limitation, maintaining general
ledger and capital stock accounts, preparing a daily trial balance, calculating
net asset value daily, providing selected general ledger reports and providing
sub-accounting and recordkeeping services for the Fund shareholder accounts
maintained by certain retirement and employee benefit plans for the benefit of
participants in such plans. For such services, the Fund pays INVESCO a fee
consisting of a base fee of $10,000 per year, plus an additional incremental fee
computed at an annual rate of 0.015% per year of the average net assets of the
Fund.
The management and custodial services provided to the Fund by INVESCO and
the Fund's custodian, and the services provided to shareholders by INVESCO and
IDI, depend on the continued functioning of their computer systems. Many
computer systems in use today cannot recognize the Year 2000, but will revert to
1900 or 1980 or will cease to function due to the manner in which dates were
encoded and are calculated. That failure could have a negative impact on the
<PAGE>
handling of the Fund's securities trades, its share pricing and its account
services. The Fund and its service providers have been actively working on
necessary changes to their computer systems to deal with the Year 2000 issue and
expect that their computer systems will be adapted before that date, but there
can be no assurance that they will be successful. Furthermore, services may be
impaired at that time as a result of the interaction of their systems with the
noncomplying computer systems of others. INVESCO plans to test as many such
interactions as practicable prior to December 31, 1999 and to develop
contingency plans for reasonably anticipated failures.
The Fund bears those Trust expenses which are accrued daily that are
incurred on its behalf and, in addition, bears a portion of general Trust
expenses, allocated based upon the relative net assets of the three Funds of the
Trust. Such expenses are generally deducted from the Fund's total income before
dividends are paid. Total expenses of the Fund for the fiscal year ended August
31, 1998, including investment advisory fees (but excluding brokerage
commissions), amounted to 1.01% (prior to any expense offset arrangement) of the
Fund's average net assets. Certain Fund expenses are voluntarily absorbed by
INVESCO pursuant to a commitment to the Fund in order to ensure that the Fund's
total expenses do not exceed 1.00% of the Fund's average net assets. This
commitment may be changed following consultation with the Trust's board of
trustees.
The Declaration of Trust pursuant to which the Trust is organized contains
an express disclaimer of shareholder liability for acts or obligations of the
Trust and requires that notice of such disclaimer be given in each instrument
entered into or executed by the Trust. The Declaration of Trust also provides
for indemnification out of the Trust's property for any shareholder held
personally liable for any Trust obligation. Thus, the risk of a shareholder
being personally liable for obligations of the Trust is limited to the unlikely
circumstance in which the Trust itself would be unable to meet its obligations.
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of
such brokers' and dealers' financial responsibility coupled with their ability
to effect transactions at the best available prices. The Trust may place orders
for portfolio transactions with qualified brokers and dealers that recommend the
various funds of the Trust to clients, or act as agent in the purchase of Fund
shares for clients, if Fund Management believes that the quality of the
execution of the transaction and level of commission are comparable to those
available from other qualified brokerage firms. For further information, see
"Investment Practices - Placement of Portfolio Brokerage" in the Statement of
Additional Information.
HOW SHARES CAN BE PURCHASED
Shares of the Fund are sold on a continuous basis by IDI, as the Fund's
distributor, at the net asset value per share next calculated after receipt of a
purchase order in good form. No sales charge is imposed upon the sale of shares
of the Fund. To purchase shares of the Fund, send a check made payable to
INVESCO Funds Group, Inc., together with a completed application form, to:
INVESCO FUNDS GROUP, INC.
Post Office Box 173706
Denver, Colorado 80217-3706
<PAGE>
Purchase orders must specify the Fund in which the investment is to be
made.
The minimum initial purchase must be at least $1,000, with subsequent
investments of not less than $50, except that: (1) those shareholders
establishing an EasiVest or direct payroll purchase account, as described below
in the section entitled "Services Provided by the Fund," may open an account
without making any initial investment if they agree to make regular, minimum
purchases of at least $50; (2) those shareholders investing in an Individual
Retirement Account ("IRA"), or through omnibus accounts where individual
shareholder recordkeeping and sub-accounting are not required, may make initial
minimum purchases of $250; (3) Fund Management may permit a lesser amount to be
invested in the Fund under a federal income tax-deferred retirement plan (other
than an IRA), or under a group investment plan qualifying as a sophisticated
investor; and (4) Fund Management reserves the right to increase, reduce or
waive the minimum purchase requirements in its sole discretion where it
determines such action is in the best interests of the Fund. The minimum initial
purchase requirement of $1,000, as described above, does not apply to
shareholder account(s) in any of the INVESCO funds opened prior to January 1,
1993, and thus is not a minimum balance requirement for those existing accounts.
However, for shareholders already having accounts in any of the INVESCO funds,
all initial share purchases in a new fund account, including those made using
the exchange privilege, must meet the fund's applicable minimum investment
requirement.
The purchase of shares in the Fund can be expedited by placing bank wire,
overnight courier or telephone orders. For further information, the purchaser
may call the Fund's office by using the telephone number on the back cover of
this Prospectus. Orders sent by overnight courier, including Express Mail,
should be sent to the street address, not post office box, of INVESCO Funds
Group, Inc., 7800 E. Union Avenue, Denver, Colorado 80237.
Orders to purchase shares of the Fund can be placed by telephone. Shares
of the Fund will be issued at the net asset value next determined after receipt
of telephone instructions. Generally, payments for telephone orders must be
received by the Fund within three business days or the transaction may be
canceled. In the event of such cancellation, the purchaser will be held
responsible for any loss resulting from a decline in the value of the shares.
<PAGE>
In order to avoid such losses, purchasers should send payments for telephone
purchases by overnight courier or bank wire. INVESCO has agreed to indemnify the
Fund for any losses resulting from the cancellation of telephone purchases.
If your check does not clear, or if a telephone purchase must be canceled
due to nonpayment, you will be responsible for any related loss the Fund or
INVESCO incurs. If you are already a shareholder in the INVESCO funds, the Fund
has the option to redeem shares from any identically registered account in the
Fund or any other INVESCO fund as reimbursement for any loss incurred. You also
may be prohibited or restricted from making future purchases in any of the
INVESCO funds.
The Fund shares you order will not begin earning dividends or other
distributions until your payment can be converted into available federal funds
under regular banking procedures or, if you are acquiring shares in an exchange
from another INVESCO fund, the Fund receives the proceeds of the exchange.
Checks normally are converted into federal funds (moneys held on deposit within
the Federal Reserve System) within two or three business days after they have
been received by INVESCO, although this period may be longer for checks drawn on
banks that are not members of the Federal Reserve System.
Persons who invest in the Fund through a securities broker may be charged
a commission or transaction fee by the broker for the handling of the
transaction if the broker so elects. Any investor may deal directly with the
Fund in any transaction. In that event, there is no such charge. IDI or INVESCO
may from time to time make payments from their revenues to securities dealers
and other financial institutions that provide distribution-related and/or
administrative services for the Fund.
The Fund reserves the right in its sole discretion to reject any order for
purchase of its shares (including purchases by exchange) when, in the judgment
of Fund Management, such rejection is in the best interest of the Fund.
Net asset value per share is computed once each day that the New York
Stock Exchange is open as of the close of regular trading on that Exchange
(generally 4:00 p.m., New York time) and also may be computed on other days
under certain circumstances. Net asset value per share for the Fund is
calculated by dividing the market value of the Fund's securities plus the value
of its other assets (including dividends and interest accrued but not
collected), less all liabilities (including accrued expenses), by the number of
outstanding shares of the Fund. If market quotations are not readily available,
a security will be valued at fair value as determined in good faith by the board
of trustees. Debt securities with remaining maturities of 60 days or less at the
time of purchase will be valued at amortized cost, absent unusual circumstances,
so long as the Trust's board of trustees believes that such value represents
fair value.
<PAGE>
Under certain circumstances, the Fund may offer its shares, in lieu of
cash payment, for securities to be purchased by the Fund. Such a transaction can
benefit the Fund by allowing it to acquire securities for its portfolio without
paying brokerage commissions. For the same reason, the transaction also may be
beneficial to the party exchanging the securities. The Fund shall not enter into
such transactions, however, unless the securities to be exchanged for Fund
shares are readily marketable and not restricted as to transfer either by law or
liquidity of the market, comply with the investment policies and objectives of
the Fund, are of the type and quality which would normally be purchased for the
Fund's portfolio, are acquired for investment and not for resale, have a value
which is readily ascertainable as evidenced by a listing on the American Stock
Exchange, the New York Stock Exchange or NASDAQ, and are securities which the
Fund would otherwise purchase on the open market. The value of Fund shares used
to purchase portfolio securities as stated herein will be the net asset value as
of the effective time and date of the exchange. The securities to be received by
the Fund will be valued in accordance with the same procedure used in valuing
the Fund's portfolio securities. Any investor wishing to acquire shares of the
Fund in exchange for securities should contact either the president or the
secretary of the Trust at the address or telephone number shown on the back
cover of this Prospectus.
Distribution Expenses. The Fund is authorized under a Plan and Agreement
of Distribution pursuant to Rule 12b-1 under the ^ 1940 Act (the "Plan") to use
its assets to finance certain activities relating to the distribution of its
shares to investors. The Plan applies to New Assets (new sales of shares,
exchanges into the Fund and reinvestments of dividends and capital gain
distributions) of the Fund after November 1, 1997. Under the Plan, monthly
payments may be made by the Fund to IDI to permit IDI, at its discretion, to
engage in certain activities and provide certain services approved by the board
of trustees of the Trust in connection with the distribution of the Fund's
shares to investors. These activities and services may include the payment of
compensation (including incentive compensation and/or continuing compensation
based on the amount of customer assets maintained in the Fund) to securities
dealers and other financial institutions and organizations, which may include
INVESCO- and IDI-affiliated companies, to obtain various distribution-related
and/or administrative services for the Fund. Such services may include, among
other things, processing new shareholder account applications, preparing and
transmitting to the Fund's transfer agent computer processable tapes of all
transactions by customers, and serving as the primary source of information to
customers in answering questions concerning the Fund and their transactions with
the Fund.
In addition, other permissible activities and services include advertising,
preparation, printing and distribution of sales literature, printing and
distribution of prospectuses to prospective investors, and such other services
and promotional activities for the Fund as may from time to time be agreed upon
by the Trust and its board of trustees, including public relations efforts and
marketing programs to communicate with investors and prospective investors.
These services and activities may be conducted by the staff of INVESCO, IDI or
their affiliates or by third parties.
<PAGE>
Under the Plan, the Fund's payments to IDI are limited to an amount
computed at an annual rate of 0.25% of the Fund's New Assets. IDI is not
entitled to payment for overhead expenses under the Plan, but may be paid for
all or a portion of the compensation paid for salaries and other employee
benefits for the personnel of INVESCO or IDI whose primary responsibilities
involve marketing shares of the INVESCO mutual funds, including the Fund.
Payment amounts by the Fund under the Plan, for any month, may be made to
compensate IDI for permissible activities engaged in and services provided by
IDI during the rolling 12-month period in which that month falls. Therefore, any
obligations incurred by IDI in excess of the limitations described above will
not be paid by the Fund and will be borne by IDI. In addition, IDI and its
affiliates may from time to time make additional payments from their revenues to
securities dealers, financial advisers and financial institutions that provide
distribution-related and/or administrative services for the Fund. No further
payments will be made by the Fund under the Plan in the event of the Plan's
termination. Payments made by the Fund may not be used to finance directly the
distribution of shares of any other Fund of the Trust or other mutual fund
advised by INVESCO and distributed by IDI. However, payments received by IDI
which are not used to finance the distribution of shares of the Fund become part
of IDI's revenues and may be used by IDI for activities that promote
distribution of any of the mutual funds advised by INVESCO. Subject to review by
the Trust's trustees, payments made by the Fund under the Plan for compensation
of marketing personnel, as noted above, are based on an allocation formula
designed to ensure that all such payments are appropriate. IDI will bear any
distribution- and service-related expenses in excess of the amounts which are
compensated pursuant to the Plan. The Plan also authorizes any financing of
distribution which may result from INVESCO's or IDI's use of fees received from
the Fund for services rendered by INVESCO, provided that such fees are
legitimate and not excessive. For more information see "How Shares Can Be
Purchased - Distribution Plan" in the Statement of Additional Information.
SERVICES PROVIDED BY THE FUND
Shareholder Accounts. INVESCO maintains a share account that reflects the
current holdings of each shareholder. A separate account will be maintained for
a shareholder for each fund in which the shareholder invests. As a business
trust, the Trust does not issue share certificates. Each shareholder is sent a
detailed confirmation of each transaction in shares of the Fund. Shareholders
whose only transactions are through the EasiVest, direct payroll purchase,
automatic monthly exchange or periodic withdrawal programs, or are reinvestments
of dividends or capital gains in the same or another fund, will receive
confirmations of those transactions on their quarterly statements. These
programs are discussed below. For information regarding a shareholder's account
and transactions, the shareholder may call INVESCO by using the telephone number
on the back cover of this Prospectus.
<PAGE>
Reinvestment of Distributions. Dividends and other distributions are
automatically reinvested in additional shares of the Fund at the net asset value
per share of the Fund in effect on the ex-dividend or ex-distribution date. A
shareholder may, however, elect to reinvest dividends and other distributions in
certain of the other no-load mutual funds advised by INVESCO and distributed by
IDI, or to receive payment of all dividends and other distributions in excess of
$10.00 by check by giving written notice to INVESCO at least two weeks prior to
the record date on which the change is to take effect. Further information
concerning these options can be obtained by contacting INVESCO.
Periodic Withdrawal Plan. A Periodic Withdrawal Plan is available to
shareholders who own or purchase shares of any mutual funds advised by INVESCO
having a total value of $10,000 or more; provided, however, that at the time the
Plan is established, the shareholder owns shares having a value of at least
$5,000 in the fund from which the withdrawals will be made. Under the Periodic
Withdrawal Plan, INVESCO, as agent, will make specified monthly or quarterly
payments of any amount selected (minimum payment of $100) to the party
designated by the shareholder. Notice of all changes concerning the Periodic
Withdrawal Plan must be received by INVESCO at least two weeks prior to the next
scheduled check. Further information regarding the Periodic Withdrawal Plan and
its requirements and tax consequences can be obtained by contacting INVESCO.
Exchange Policy. Shares of the Fund may be exchanged for shares of any
other fund of the Trust, as well as for shares of any of the following other
no-load mutual funds, which are also advised by INVESCO, on the basis of their
respective net asset values at the time of the exchange: 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.) and INVESCO Tax-Free Income Funds, Inc.
An exchange involves the redemption of shares in the Fund and investment
of the redemption proceeds in shares of another fund of the Trust or in shares
of one of the funds listed above. Exchanges will be made at the net asset value
per share next determined after receipt of an exchange request in proper order.
Any gain or loss realized on such an exchange is recognizable for federal income
<PAGE>
tax purposes by the shareholder. Exchange requests may be made either by
telephone or by written request to INVESCO, using the telephone number or
address on the back cover of this Prospectus. Exchanges made by telephone must
be in the amount of at least $250, if the exchange is being made into an
existing account of one of the INVESCO funds. All exchanges that establish a new
account must meet the fund's applicable minimum initial investment requirements.
Written exchange requests into an existing account have no minimum requirements
other than the Fund's applicable minimum subsequent investment requirements.
The option to exchange Fund shares by telephone is available to
shareholders automatically unless expressly declined. By signing the new account
Application or a Telephone Transaction Authorization Form or otherwise utilizing
the telephone exchange option, the investor has agreed that the Fund will not be
liable for following instructions communicated by telephone that it reasonably
believes to be genuine. The Fund employs procedures, which it believes are
reasonable, designed to confirm that exchange transactions are genuine. These
may include recording telephone instructions and providing written confirmations
of exchange transactions. As a result of this policy, the investor may bear the
risk of any loss due to unauthorized or fraudulent instructions; provided,
however, that if the Fund fails to follow these or other reasonable procedures,
the Fund may be liable.
In order to prevent abuse of this policy to the disadvantage of other
shareholders, the Fund reserves the right to temporarily or permanently
terminate the exchange option of any shareholder who requests more than four
exchanges in a year, or at any time the Fund determines the actions of the
shareholder are detrimental to Fund performance and shareholders. The Fund will
determine whether to do so based on a consideration of both the number of
exchanges any particular shareholder or group of shareholders has requested and
the time period over which those exchange requests have been made, together with
the level of expense to the Fund which will result from effecting additional
exchange requests. The exchange policy also may be modified or terminated at any
time. Except in unusual circumstances where redemptions of the exchanged
security are suspended under Section 22(e) of the 1940 Act, or where sales of
the fund into which the shareholder is exchanging are temporarily suspended,
notice of all such modifications to the policy or terminations that would affect
all Fund shareholders will be given at least 60 days prior to the effective date
of the change in policy.
Before making an exchange, the shareholder should review the prospectuses
of the funds involved and consider their differences. Shareholders interested in
exercising the exchange option may contact INVESCO for information concerning
their particular exchanges.
<PAGE>
Automatic Monthly Exchange. Shareholders who have accounts in any one or
more of the mutual funds distributed by IDI may arrange for a fixed dollar
amount of their fund shares to be automatically exchanged for shares of any
other INVESCO mutual fund listed under "Exchange Policy" on a monthly basis,
subject to the Fund's minimum initial investment or subsequent investment
requirements. This automatic exchange program can be changed by the shareholder
at any time by notifying INVESCO at least two weeks prior to the date the change
is to be made. Further information regarding this service can be obtained by
contacting INVESCO.
EasiVest. For shareholders who want to maintain a schedule of monthly
investments, EasiVest uses various methods to draw a preauthorized amount from
the shareholder's bank account to purchase Fund shares. This automatic
investment program can be changed by the shareholder at any time by contacting
INVESCO at least two weeks prior to the date the change is to be made. Further
information regarding this service can be obtained by contacting INVESCO.
Direct Payroll Purchase. Shareholders may elect to have their employers
make automatic purchases of Fund shares for them by deducting a specified amount
from their regular paychecks. This automatic investment program can be modified
or terminated at any time by the shareholder by notifying the employer. Further
information regarding this service can be obtained by contacting INVESCO.
Tax-Deferred Retirement Plans. Shares of the Fund may be purchased for
self-employed individual retirement plans, various IRAs, simplified employee
pension plans and corporate retirement plans. In addition, shares can be used to
fund tax qualified plans established under Section 403(b) of the Internal
Revenue Code by educational institutions, including public school systems and
private schools, and certain kinds of non-profit organizations, which provide
deferred compensation arrangements for their employees.
Prototype forms for the establishment of these various plans, including,
where applicable, disclosure statements required by the Internal Revenue
Service, are available from INVESCO. Institutional Trust Company, doing business
as INVESCO Trust Company ("ITC"), an affiliate of INVESCO, is qualified to serve
as trustee or custodian under these plans and provides the required services at
competitive rates. Retirement plans (other than IRAs) receive monthly statements
reflecting all transactions in their Fund accounts. IRAs receive the
confirmations and quarterly statements described under "Shareholder Accounts."
For complete information, including prototype forms and service charges, call
INVESCO at the telephone number listed on the back cover of this Prospectus or
send a written request to: Retirement Services, INVESCO Funds Group, Inc., Post
Office Box 173706, Denver, Colorado 80217-3706.
<PAGE>
HOW TO REDEEM SHARES
Shares of the Fund may be redeemed at any time at their current net asset
value next determined after a request in proper form is received at the Fund's
office. (See "How Shares Can Be Purchased.") Net asset value per share of the
Fund at the time of the redemption may be more or less than the price originally
paid to purchase shares, depending primarily upon the Fund's investment
performance.
In order to redeem shares, a written redemption request signed by each
registered owner of the account may be submitted to INVESCO at the address noted
above. Redemption requests sent by overnight courier, including Express Mail,
should be sent to the street address, not post office box, of INVESCO at 7800 E.
Union Avenue, Denver, CO 80237. If shares are held in the name of a corporation,
additional documentation may be necessary. Call or write for specific
information. If payment for the redeemed shares is to be made to someone other
than the registered owner(s), the signature(s) must be guaranteed by a financial
institution which qualifies as an eligible guarantor institution. Redemption
procedures with respect to accounts registered in the names of broker-dealers
may differ from those applicable to other shareholders.
Be careful to specify the account from which the redemption is to be made.
Shareholders have a separate account for each fund in which they invest.
Payment of redemption proceeds will be mailed within seven days following
receipt of the required documents. However, payment may be postponed under
unusual circumstances, such as when normal trading is not taking place on the
New York Stock Exchange or when an emergency as defined by the Securities and
Exchange Commission exists. If the shares to be redeemed were purchased by check
and that check has not yet cleared, payment will be made promptly upon clearance
of the purchase check (which will take up to 15 days).
If a shareholder participates in EasiVest, the Fund's automatic monthly
investment program, and redeems all of the shares in a Fund account, INVESCO
will terminate any further EasiVest purchases unless otherwise instructed by the
shareholder.
Because of the high relative costs of handling small accounts, should the
value of any shareholder's account fall below $250 as a result of shareholder
action, the Fund reserves the right to effect the involuntary redemption of all
shares in such account, in which case the account would be liquidated and the
proceeds forwarded to the shareholder. Prior to any such redemption, a
shareholder will be notified and given 60 days to increase the value of the
account to $250 or more.
<PAGE>
Fund shareholders (other than shareholders holding Fund shares in accounts
of IRA plans) may request expedited redemption of shares having a minimum value
of $250 (or redemption of all shares if their value is less than $250), held in
accounts maintained in their name by telephoning redemption instructions to
INVESCO, using the telephone number on the back cover of this Prospectus.
At the shareholder's option, the redemption proceeds either will be mailed
to the address listed for the shareholder's Fund account, or wired (minimum of
$1,000) or mailed to the bank which the shareholder has designated to receive
the proceeds of telephone redemptions. Unless INVESCO permits a larger
redemption request to be placed by telephone, a shareholder may not place a
redemption request by telephone in excess of $25,000. These telephone redemption
privileges may be modified or terminated in the future at the discretion of
INVESCO. For ITC-sponsored federal income tax-deferred retirement plans, the
term "shareholders" is defined to mean plan trustees that file a written request
to be able to redeem Fund shares by telephone. Shareholders should understand
that while the Fund will attempt to process all telephone redemption requests on
an expedited basis, there may be times, particularly in periods of severe
economic or market disruption, when (a) they may encounter difficulty in placing
a telephone redemption request, and (b) processing telephone redemptions will
require up to seven days following receipt of the redemption request, or
additional time because of the unusual circumstances set forth above.
Redeeming Fund shares by telephone is available to shareholders
automatically unless expressly declined. By signing a new account Application, a
Telephone Transaction Authorization Form or otherwise utilizing telephone
redemption option privileges, the shareholder has agreed that the Fund will not
be liable for following instructions communicated by telephone that it
reasonably believes to be genuine. The Fund employs procedures, which it
believes are reasonable, designed to confirm that telephone instructions are
genuine. These may include recording telephone instructions and providing
written confirmation of transactions initiated by telephone. As a result of this
policy, the investor may bear the risk of any loss due to unauthorized or
fraudulent instructions; provided, however, that if the Fund fails to follow its
established procedures, the Fund may be liable.
TAXES, DIVIDENDS AND OTHER DISTRIBUTIONS
Taxes. The Fund intends to distribute to shareholders substantially all of
its net investment income, net capital gains and net gains from certain foreign
currency transactions, if any. Distribution of substantially all net investment
income to shareholders allows the Fund to maintain its tax status as a regulated
investment company. The Fund does not expect to pay any federal income or excise
taxes because of its distribution policies and tax status as a regulated
investment company.
<PAGE>
Shareholders must include all dividends and other distributions as taxable
income for federal, state and local income tax purposes, unless they are exempt
from income taxes. Dividends and other distributions are taxable whether they
are received in cash or automatically reinvested in shares of the Fund or
another fund in the INVESCO group.
Net realized capital gains of the Fund are classified as short-term and
long-term gains depending upon how long the Fund held the security that gave
rise to the gains. Short-term capital gains are included in income from
dividends and interest as ordinary income and are taxed at the taxpayer's
marginal tax rate. During 1997, the Taxpayer Relief Act established a new
maximum capital gains tax rate of 20%. Depending on the holding period of the
asset giving rise to the gain, a capital gain was taxable at a maximum rate of
either 20% or 28%. Beginning January 1, 1998, all long-term gains realized on
the sale of securities held for more than 12 months will be taxable at a maximum
rate of 20%. In addition, legislation signed in October 1998 provides that all
capital gain distributions from a mutual fund paid to shareholders during 1998
will be taxed at a maximum rate of 20%. Accordingly, all capital gain
distributions paid in 1998 will be taxable at a maximum rate of 20%. Note that
the rate of capital gains tax is dependent on the shareholder's marginal tax
rate and may be lower than the above rates. At the end of each year, information
regarding the tax status of dividends and other distributions is provided to
shareholders. Shareholders should consult their tax advisers as to the effect of
distributions by the Fund.
Shareholders may realize capital gains or losses when they sell their Fund
shares at more or less than the price originally paid. Capital gain on shares
held for more than one year will be long-term capital gain, in which event it
will be subject to federal income tax at the rates indicated above.
The Fund may be subject to withholding of foreign taxes on dividends or
interest it receives on foreign securities. Foreign taxes withheld will be
treated as an expense of the Fund.
Individuals and certain other non-corporate shareholders may be subject to
backup withholding of 31% on dividends, capital gain and other distributions and
redemption proceeds. Shareholders can avoid backup withholding on their Fund
account by ensuring that INVESCO has a correct, certified tax identification
number, unless a shareholder is subject to backup withholding for other reasons.
Shareholders should consult a tax adviser with respect to these matters.
For further information see "Dividends, Other Distributions And Taxes" in the
Statement of Additional Information.
Dividends and Other Distributions. The Fund earns ordinary or net
investment income in the form of interest and dividends on its investments.
Dividends paid by the Fund will be based solely on net investment income earned
by it. The Fund's policy is to distribute substantially all of this income, less
expenses, to shareholders. Dividends from net investment income are declared
daily and paid monthly at the discretion of the Trust's board of trustees.
Dividends are automatically reinvested in additional shares of the Fund at the
net asset value on the payable date unless otherwise requested.
<PAGE>
In addition, the Fund realizes capital gains and losses when it sells
securities or derivatives for more or less than it paid. If total gains on sales
exceed total losses (including losses carried forward from previous years), the
Fund has a net realized capital gain. Net realized capital gains, if any,
together with gains realized on foreign currency transactions, if any, are
distributed to shareholders at least annually, usually in December. Capital gain
distributions are automatically reinvested in additional shares of the Fund at
the net asset value on the payable date unless otherwise requested.
Dividends and other distributions are paid to shareholders on the record
date of distribution, regardless of how long the Fund shares have been held by
the shareholder. The Fund's share price will then drop by the amount of the
distribution on the ex-dividend or ex-distribution date. If a shareholder
purchases shares immediately prior to the distribution, the shareholder will, in
effect, have "bought" the distribution by paying the full purchase price, a
portion of which is then returned in the form of a taxable distribution.
ADDITIONAL INFORMATION
Voting Rights. All shares of the Fund have equal voting rights based on
one vote for each share owned and a corresponding fractional vote for each
fractional share owned. Voting with respect to certain matters, such as
ratification of independent accountants and the election of trustees, will be by
all funds of the Trust voting together. In other cases, such as voting upon the
investment advisory contract for the individual funds, voting is on a
fund-by-fund basis. To the extent permitted by law, when not all funds are
affected by a matter to be voted upon, only shareholders of the fund or funds
affected by the matter will be entitled to vote thereon. The Trust is not
generally required, and does not expect, to hold regular annual meetings of
shareholders. However, the board of trustees will call such special meetings of
shareholders for the purpose, among other reasons, of voting the question of
removal of a trustee or trustees when requested to do so in writing by the
holders of 10% or more of the outstanding shares of the Fund or as may be
required by applicable law or the Trust's Declaration of Trust, and the Trust
will assist shareholders in communicating with other shareholders as required by
the 1940 Act. Trustees may be removed by action of the holders of two-thirds of
the outstanding shares of the Trust.
Shareholder Inquiries. All inquiries regarding the Fund should be directed
to the Trust at the telephone number or mailing address set forth on the back
cover ^ of this Prospectus.
<PAGE>
Transfer and Dividend Disbursing Agent. INVESCO, 7800 E. Union Avenue,
Denver, Colorado 80237, acts as registrar, transfer agent and dividend
disbursing agent for the Fund pursuant to a Transfer Agency Agreement which
provides that the Fund will pay an annual fee of $26.00 per shareholder account
or where applicable, per participant in an omnibus account. The transfer agency
fee is not charged to each shareholder's or participant's account but is an
expense of the Fund to be paid from the Fund's assets. Registered
broker-dealers, third party administrators of tax-qualified retirement plans and
other entities, including affiliates of INVESCO, may provide sub-transfer agency
or recordkeeping services to the Fund which reduce or eliminate the need for
identical services to be provided on behalf of the Fund by INVESCO. In such
cases, INVESCO may pay the third party an annual sub-transfer agency or
recordkeeping fee out of the transfer agency fee which is paid to INVESCO by the
Fund.
<PAGE>
^ INVESCO Intermediate
Government Bond Fund
PROSPECTUS
January 1, 1999
^ We're easy to stay in touch with:
^ Investor services: 1-800-525-8085
^ PAL(R), your Personal Account Line: 1-800-424-8085
^ On the World Wide Web: www.invesco.com
In Denver, visit one of our
convenient Investor Centers:
Cherry Creek
155-B Fillmore Street;
Denver Tech Center
7800 East Union Avenue
Lobby Level
INVESCO Distributors, Inc.,(SM)
Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
In addition, all documents You should know what
filed by the Trust with the INVESCO knows.(TM)
Securities and Exchange
Commission can be located on INVESCO Funds
a web site maintained by the
Commission at
http://www.sec.gov.
<PAGE>
PROSPECTUS
January 1, 1999
INVESCO Value Equity Fund
The INVESCO Value Equity Fund (the "Fund") seeks to achieve a high total
return on investment through capital appreciation and current income by
investing substantially all of its assets in common stocks and, to a lesser
degree, securities convertible into common stock. Such securities generally will
be issued by companies that are listed on a national securities exchange and
which usually pay regular dividends. This Fund's investments may consist in part
of securities which may be deemed to be speculative. (See "Investment Objective
And Policies.")
The Fund is a series of INVESCO Value Trust (the "Trust"), a diversified,
managed no-load mutual fund consisting of three separate portfolios of
investments. This Prospectus relates to shares of the INVESCO Value Equity Fund.
Separate prospectuses are available upon request from INVESCO Distributors, Inc.
for the Trust's other two funds, INVESCO Intermediate Government Bond Fund and
INVESCO Total Return Fund. Investors may purchase shares of any or all Funds.
Additional funds may be offered in the future.
This Prospectus provides you with the basic information you should know
before investing in the Fund. You should read it and keep it for future
reference. A Statement of Additional Information containing further information
about the Fund, dated January 1, 1999, has been filed with the Securities and
Exchange Commission and is incorporated by reference into this Prospectus. To
request a free copy, write to INVESCO Distributors, Inc., P.O. Box 173706,
Denver, Colorado 80217-3706; call 1-800-525-8085; or visit our web site at
http://www.invesco.com.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER FINANCIAL
INSTITUTION. THE SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
----------
<PAGE>
TABLE OF CONTENTS
Page
ANNUAL FUND EXPENSES 2
FINANCIAL HIGHLIGHTS 4
PERFORMANCE DATA 6
INVESTMENT OBJECTIVE AND POLICIES 6
RISK FACTORS 7
THE FUND AND ITS MANAGEMENT 10
HOW SHARES CAN BE PURCHASED 12
SERVICES PROVIDED BY THE FUND 14
HOW TO REDEEM SHARES 16
TAXES, DIVIDENDS AND OTHER DISTRIBUTIONS 17
ADDITIONAL INFORMATION 19
<PAGE>
ANNUAL FUND EXPENSES
The Fund is no-load; there are no fees to purchase, exchange or redeem
shares. The Fund is authorized to pay a Rule 12b-1 distribution fee of up to one
quarter of one percent of the Fund's average net assets each year. The 12b-1 fee
is assessed against all shares, but only with respect to new sales of shares,
exchanges into the Fund and reinvestments of dividends and capital gain
distributions occurring on or after November 1, 1997 ("New Assets"). Lower
expenses benefit Fund shareholders by increasing the Fund's total return. (See
"How Shares Can Be Purchased.")
Annual operating expenses are calculated as a percentage of the Fund's
average annual net assets. To keep expenses competitive, INVESCO Funds Group,
Inc. ("INVESCO"), the Fund's investment adviser, voluntarily reimburses the Fund
for certain expenses in excess of 1.25% (excluding excess amounts that have been
offset by the expense offset arrangements described below), of the Fund's
average net assets.
Shareholder Transaction Expenses
Sales load "charge" on purchases None
Sales load "charge" on reinvested dividends None
Redemption fees None
Exchange fees None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fee 0.75%
12b-1 Fees(1) 0.25%
Other Expenses(2) 0.26%
Transfer Agency Fee(3) 0.22%
General Services, Administrative
Services, Registration, Postage(2)(4) 0.04%
Total Fund Operating Expenses(1)(2)(5) 1.25%
(1) 12b-1 fees for the period November 1, 1997 through August 31, 1998
were 0.13%.
(2) Certain Fund expenses are being voluntarily absorbed by INVESCO to
ensure that the Fund's annualized total operating expenses do not exceed 1.25%
of the Fund's averate net assets. Ratio reflects total expenses before any
expense offset arrangements less absorbed expenses by INVESCO. In the absence of
such voluntary expense limitation, the Fund's "Other Expenses" and "Total Fund
Operating Expenses" would have been 0.31% and 1.31%, respectively, based on the
Fund's actual expenses for the fiscal year ended August 31, 1998.
<PAGE>
(3) Consists of the transfer agency fee described under "Additional
Information - Transfer and Dividend Disbursing Agent."
(4) Includes, but is not limited to, fees and expenses of trustees,
custodian bank, legal counsel and independent accountants, securities pricing
services, costs of administrative services furnished under an Administrative
Services Agreement, costs of registration of Fund shares under applicable laws,
and costs of printing and distributing reports to shareholders.
(5) It should be noted that the Fund's actual total operating expenses
were lower than the figures shown because the Fund's custodian fees and transfer
agent fees were reduced under expense offset arrangements. However, as a result
of an SEC requirement, the figures shown above do not reflect these reductions.
In comparing expenses for different years, please note that the Ratio of
Expenses to Average Net Assets shown under "Financial Highlights" do reflect
reductions for periods prior to the fiscal year ended August 31, 1996. (See "The
Fund And Its Management.")
Example
A shareholder would pay the following expenses on a $1,000 investment for
the periods shown, assuming (1) a 5% annual return and (2) redemption at the end
of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$13 $40 $70 $153
The purpose of the foregoing table and Example is to assist investors in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. Such expenses are paid from the Fund's assets. (See
"The Fund And Its Management.") The above figures for INVESCO Value Equity Fund
are based on fiscal year-end information. The Fund charges no sales load,
redemption fee or exchange fee. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN. The assumed 5% annual return is hypothetical and should
not be considered a representation of past or future annual returns, which may
be greater or less than the assumed amount.
Because the Fund pays a Rule 12b-1 distribution fee, investors who own
Fund shares for a long period of time may pay more than the economic equivalent
of the maximum front-end sales charge permitted for mutual funds by the National
Association of Securities Dealers, Inc.
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
The following information for each of the five years ended August 31,
1998, the eight-month fiscal period ended August 31, 1993, and each of the four
years ended December 31, 1992, has been audited by PricewaterhouseCoopers LLP,
independent accountants. Prior years' information was audited by another
independent accounting firm. This information should be read in conjunction with
the Report of Independent Accountants thereon appearing in the Trust's 1998
Annual Report to Shareholders which is incorporated by reference into the
Statement of Additional Information. Both are available without charge by
contacting INVESCO Distributors, Inc., at the address or telephone number on the
back cover of this Prospectus. All per share data has been adjusted to reflect
an 80 to 1 stock split which was effected on January 2, 1991.
<TABLE>
<CAPTION>
Period
Ended
Year Ended August 31 August 31 Year Ended December 31
------------------------------------------ -------- -------------------------------------------
1998 1997 1996 1995 1994 1993^ 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value -
Beginning of Period $28.30 $22.24 $19.53 $18.12 $17.79 $16.91 $16.57 $13.88 $15.30 $13.72 $12.40
--------------------------------------------------- -------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.26 0.35 0.35 0.39 0.36 0.24 0.36 0.40 0.44 0.48 0.37
Net Gains (or Losses)
on Securities
(Both Realized
and Unrealized) (0.43) 6.62 3.09 2.58 1.20 0.88 0.45 4.54 (1.33) 2.42 1.62
--------------------------------------------------- -------------------------------------------
Total from Investment
Operations (0.17) 6.97 3.44 2.97 1.56 1.12 0.81 4.94 (0.89) 2.90 1.99
--------------------------------------------------- -------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net
Investment Income 0.26 0.35 0.35 0.39 0.31 0.24 0.34 0.40 0.47 0.49 0.36
In Excess of Net
Investment Income 0.00 0.00 0.00 0.00 0.04 0.00 0.00 0.00 0.00 0.00 0.00
<PAGE>
Distributions from
Capital Gains 2.19 0.56 0.38 1.17 0.88 0.00 0.13 1.85 0.06 0.83 0.31
---------------------------------------------------- -------------------------------------------
Total Distributions 2.45 0.91 0.73 1.56 1.23 0.24 0.47 2.25 0.53 1.32 0.67
---------------------------------------------------- -------------------------------------------
Net Asset Value -
End of Period $25.68 $28.30 $22.24 $19.53 $18.12 $17.79 $16.91 $16.57 $13.88 $15.30 $13.72
=================================================== ===========================================
TOTAL RETURN (1.06)% 32.04% 17.77% 17.84% 9.09% 6.65%* 4.98% 35.84% (5.80%) 21.34% 16.89%
RATIOS
Net Assets - End of
Period
($000 Omitted) $349,984 $369,766 $200,046 $153,171 $111,850 $81,914 $78,609 $39,741 $29,825 $36,592 $27,434
Ratio of Expenses
to Average
Net Assets# 1.15%@ 1.04%@ 1.01%@ 0.97% 1.01% 1.00%~ 0.91% 0.98% 1.00% 1.00% 1.00%
Ratio of Net
Investment Income
to Average
Net Assets# 0.86% 1.35% 1.64% 2.17% 1.80% 2.07%~ 2.19% 2.39% 3.00% 3.29% 3.48%
Portfolio Turnover
Rate 48% 37% 27% 34% 53% 35%* 37% 64% 23% 30% 16%
</TABLE>
^ From January 1, 1993 to August 31, 1993.
* Based on operations for the period shown and, accordingly, are not
representative of a full year.
# Various expenses of the Fund were voluntarily absorbed by INVESCO for the
years ended August 31, 1998 and December 31, 1990, 1989 and 1988. If such
expenses had not been voluntarily absorbed, ratio of expenses to average net
assets would have been 1.19%, 1.04%, 1.09% and 1.19%, respectively, and ratio of
net investment income to average net assets would have been 0.82%, 2.96%, 3.20%
and 3.29%, respectively.
@ Ratio is based on Total Expenses of the Fund, less expenses absorbed by
investment adviser, which is before any expense offset arrangements.
~ Annualized
<PAGE>
PERFORMANCE DATA
From time to time, the Fund advertises its total return performance. These
figures are based upon historical investment results and are not intended to
indicate future performance. Total return is computed by calculating the
percentage change in value of an investment, assuming reinvestment of all income
dividends and capital gain distributions, to the end of a specified period.
Cumulative total return reflects actual performance over a stated period of
time. Average annual total return is a hypothetical rate of return that, if
achieved annually, would have produced the same cumulative total return if
performance had been constant over the entire period. Any given report of total
return performance should not be considered as representative of future
performance. The Fund charges no sales load, redemption fee or exchange fee
which would affect total return computations.
In conjunction with performance reports and/or analyses of shareholder
service for the Fund, comparative data between the Fund's performance for a
given period and the performance of recognized bond indices and 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, a division of The
McGraw-Hill Companies, Inc. ("S&P"), Lipper Analytical Services, Inc., Lehman
Brothers, National Association of Securities Dealers Automated Quotations, Frank
Russell Company, Value Line Investment Survey, the American Stock Exchange,
Morgan Stanley Capital International, Wilshire Associates, the Financial Times
Stock Exchange, the New York Stock Exchange, the Nikkei Stock Average and the
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 appearing in publications such as Money,
Forbes, Kiplinger's Personal Finance, Morningstar and similar sources which
utilize information compiled (i) internally; (ii) by Lipper Analytical Services,
Inc.; or (iii) by other recognized analytical services, may be used in
advertising. The Lipper Analytical Services, Inc. mutual fund rankings and
comparisons, which may be used by the Fund in performance reports, will be drawn
from the "Growth and Income Funds" Lipper mutual fund groupings, in addition to
the broad-based Lipper general fund grouping.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Value Equity Fund is to seek a high total
return on investment through capital appreciation and current income. Funds
having an investment objective of seeking a high total return may be limited in
their ability to obtain their objective by the limitations on the types of
securities in which they may invest. No assurance can be given that the Fund
will be able to achieve its investment objective.
<PAGE>
Substantially all of the Fund's assets will be invested in common stocks
and, to a lesser extent, securities convertible into common stocks
(collectively, "equity securities"). Such securities generally will be issued by
companies which are listed on a national securities exchange, such as the New
York Stock Exchange, and which usually pay regular dividends, although the Fund
also may invest in securities traded on regional stock exchanges or on the
over-the-counter market. During normal market conditions, at least 65% of the
Fund's investments will consist of equity securities. The Trust has not
established any minimum investment standards such as an issuer's asset level,
earnings history, type of industry, dividend payment history, etc. with respect
to the Fund's investments in common stocks, although in selecting common stocks
for the Fund, the investment adviser and sub-adviser (collectively, "Fund
Management") generally apply an investment discipline which seeks to achieve a
yield higher than the overall equity market. Therefore, because smaller
companies may be subject to more significant losses as well as have the
potential for more substantial growth than larger, more established companies,
investors in the Fund should consider that the Fund's investments may consist in
part of securities which may be deemed to be speculative. When market or
economic conditions indicate, in the judgment of Fund Management, that a
defensive investment stance should be assumed, all or part of the assets of the
Fund may be invested temporarily in other securities consisting of high quality
(rated AA or above by S&P or Aa by Moody's Investors Service, Inc.) corporate
preferred stocks, bonds, debentures or other evidences of indebtedness, and in
obligations issued or guaranteed by the United States or any instrumentality
thereof, or held in cash.
The investment objective of the Fund and its investment policies, where
indicated, are fundamental policies and thus may not be changed without prior
approval by the holders of a majority of the outstanding voting securities of
the Fund, as defined in the Investment Company Act of 1940 (the "1940 Act"). In
addition, the Trust and this Fund are subject to certain investment restrictions
which are identified in the Statement of Additional Information and which also
may not be altered without approval of the Fund's shareholders. One of those
restrictions limits the Fund's borrowing of money to borrowings from banks for
temporary or emergency purposes (but not for leveraging or investment) in an
amount not exceeding 33 1/3% of the value of the Fund's total assets.
RISK FACTORS
Investors should consider the special factors associated with the policies
discussed below in determining the appropriateness of an investment in the
INVESCO Value Equity Fund. The Fund's policies regarding investments in foreign
securities and foreign currencies are not fundamental and may be changed by vote
of the Trust's board of trustees.
Year 2000 Computer Issue. Due to the fact that many computer systems in use
today cannot recognize the Year 2000, but will, unless corrected, revert to 1900
or 1980 or cease to function at that time, the markets for securities in which
the Fund invests may be detrimentally affected by computer failures affecting
portfolio investments or trading of securities beginning January 1, 2000.
Improperly functioning trading systems may result in settlement problems and
liquidity issues. In addition, corporate and governmental data processing errors
may result in production issues for individual companies and overall economic
uncertainties. Earnings of individual issuers may be affected by remediation
costs, which may be substantial. The Fund's investments may be adversely
affected.
<PAGE>
Foreign Securities. The Fund may invest up to 25% of its total assets in
foreign equity or debt securities. Investments in securities of foreign
companies and in foreign markets involve certain additional risks not associated
with investments in domestic companies and markets, including the risks of
fluctuations in foreign currency exchange rates and of political or economic
instability, the difficulty of predicting international trade patterns and the
possibility of imposition of exchange controls or currency blockage. In
addition, there may be less information publicly available about a foreign
company than about a domestic company, and there is generally less government
regulation of stock exchanges, brokers and listed companies abroad than in the
United States. Moreover, with respect to certain foreign countries, there may be
a possibility of expropriation or confiscatory taxation. Further, economies of
particular countries or areas of the world may differ favorably or unfavorably
from the economy of the United States.
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"). The EMU has established a common
European currency for EMU countries which is known as the "euro." Each
participating country has adopted the euro as its currency effective January 1,
1999. The old national currencies are 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, including whether the payment and operational systems of banks and other
financial institutions will have been ready by January 1, 1999; whether exchange
rates for existing currencies and the euro will have been adequately
established; and whether suitable clearing and settlement systems for the euro
will have been in operation. These and other factors may cause market
disruptions after January 1, 1999 and could adversely affect the value of
securities held by the Fund.
After January 1, 1999, the introduction of the euro is expected to impact
European capital markets in ways that it is impossible to quantify at this time.
For example, investors may begin to view EMU countries as a single market, and
that may impact future investment decisions for 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 impact the
fiscal and monetary policies 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.
<PAGE>
Forward Foreign Currency Contracts. The Fund may enter into contracts to
purchase or sell foreign currencies at a future date ("forward contracts") as a
hedge against fluctuations in foreign exchange rates pending the settlement of
transactions in foreign securities or during the time the Fund holds foreign
securities. A forward contract is an agreement between contracting parties to
exchange an amount of currency at some future time at an agreed upon rate.
Although the Fund has not adopted any limitations on its ability to use forward
contracts as a hedge against fluctuations in foreign exchange rates, it does not
attempt to hedge all of its foreign investment positions and will enter into
forward contracts only to the extent, if any, deemed appropriate by Fund
Management. The Fund will not enter into a forward contract for a term of more
than one year or for purposes of speculation. Investors should be aware that
hedging against a decline in the value of a currency in the foregoing manner
does not eliminate fluctuations in the prices of portfolio securities or prevent
losses if the prices of such securities decline. Furthermore, such hedging
transactions may preclude the opportunity for gain if the value of the hedged
currency should rise. No predictions can be made with respect to whether the
total of such transactions will result in a better or a worse position than had
the Fund not entered into any forward contracts. Forward contracts may from time
to time be considered illiquid, in which case they would be subject to the
Fund's limitation on investing in illiquid securities, discussed below. For
additional information regarding forward contracts, see the Trust's Statement of
Additional Information.
Repurchase Agreements. The Fund may engage in repurchase agreements with
banks, registered broker-dealers and registered government securities dealers
which are deemed creditworthy by Fund Management, under guidelines established
by the board of trustees. A repurchase agreement is a transaction in which the
Fund purchases a security and simultaneously commits to sell the security to the
seller at an agreed upon price and date (usually not more than seven days) after
the date of purchase. The resale price reflects the purchase price plus an
agreed upon market rate of interest which is unrelated to the coupon rate or
maturity of the purchased security. The Fund's risk is limited to the ability of
the seller to pay the agreed upon amount on the delivery date. However, in the
<PAGE>
event the seller should default, the underlying security constitutes
collateral for the seller's obligations to pay. This collateral will be held by
the custodian for the Fund's assets. In the event of the insolvency of a
counterparty to a repurchase agreement, the Fund could experience delays and
incur costs in realizing on the collateral. To the extent that the proceeds from
a sale upon a default in the obligation to repurchase are less than the
repurchase price, the Fund would suffer a loss. Although the Fund has not
adopted any limit on the amount of its total assets that may be invested in
repurchase agreements, the Fund intends that at no time will the market value of
its securities subject to repurchase agreements exceed 20% of the total assets
of the Fund.
Illiquid Securities. The Fund may invest from time to time in securities
subject to restrictions on disposition under the Securities Act of 1933
("restricted securities"), securities without readily available market
quotations or 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). However, on the date of purchase, no such investment may
increase the Fund's holdings of restricted securities to more than 2% of the
value of the Fund's total assets or its holdings of illiquid securities or those
without readily available market quotations to more than 5% of the Fund's total
assets. The Fund is not required to receive registration rights in connection
with the purchase of restricted securities and, in the absence of such rights,
marketability and value can be adversely affected because the Fund may be unable
to dispose of such securities at the time desired or at a reasonable price. In
addition, in order to resell a restricted security, the Fund might have to bear
the expense and incur the delays associated with effecting registration.
Futures and Options. A futures contract is an agreement to buy or sell a
specific amount of a financial instrument or commodity at a particular price on
a particular date. The Fund will use futures contracts only to hedge against
price changes in the value of its current or intended investments in securities.
In the event that an anticipated decrease in the value of portfolio securities
occurs as a result of a general decrease in prices, the adverse effects of such
changes may be offset, at least in part, by gains on the sale of futures
contracts. Conversely, the increased cost of portfolio securities to be
acquired, caused by a general increase in prices, may be offset, at least in
part, by gains on futures contracts purchased by the Fund. Brokerage fees are
paid to trade futures contracts, and the Fund is required to maintain margin
deposits.
Put and call options on futures contracts or securities may be traded by
the Fund in order to protect against declines in the value of portfolio
securities or against increases in the cost of securities to be acquired. The
purchaser of an option purchases the right to effect a transaction in the
underlying future or security at a specified price (the "strike price") before a
specified date (the "expiration date"). In exchange for the right, the purchaser
pays a "premium" to the seller, which represents the price of the right to buy
or to sell the underlying instrument. In exchange for the premium, the seller of
the option becomes obligated to effect a transaction in the underlying future or
security, at the strike price, at any time prior to the expiration date, should
the buyer choose to exercise the option. A call option contract grants the
purchaser the right to buy the underlying future or security, at the strike
price, before the expiration date. A put option contract grants the purchaser
the right to sell the underlying future or security, at the strike price, before
the expiration date. Purchases of options on futures contracts may present less
dollar risk in hedging the Fund's portfolio than the purchase and sale of the
underlying futures contracts, since the potential loss is limited to the amount
of the premium plus related transaction costs. The premium paid for such a put
or call option plus any transaction costs will reduce the benefit, if any,
realized by the Fund upon exercise or liquidation of the option, and, unless the
price of the underlying futures contract or security changes sufficiently, the
option may expire without value to the Fund.
<PAGE>
Although the Fund will enter into futures contracts and options on futures
contracts and securities solely for hedging or other nonspeculative purposes,
their use does involve certain risks. For example, a lack of correlation between
the value of an instrument underlying an option or futures contract and the
assets being hedged, or unexpected adverse price movements, could render a
Fund's hedging strategy unsuccessful and could result in losses. In addition,
there can be no assurance that a liquid secondary market will exist for any
contract purchased or sold, and the Fund may be required to maintain a position
until exercise or expiration, which could result in losses. Transactions in
futures contracts and options are subject to other risks as well, which are set
forth in greater detail in the Statement of Additional Information and Appendix
B therein.
Securities Lending. The Fund may make loans of its portfolio securities
(not to exceed 10% of the Fund's total assets) to broker-dealers or other
institutional investors under contracts requiring such loans to be callable at
any time and to be secured continuously by collateral in cash, cash equivalents,
high quality short-term government securities or irrevocable letters of credit
maintained on a current basis at an amount at least equal to the market value of
the securities loaned, including accrued interest and dividends. The Fund will
continue to collect the equivalent of the interest or dividends paid by the
issuer on the securities loaned and will also receive either interest (through
investment of cash collateral) or a fee (if the collateral is government
securities). The Fund may pay finder's and other fees in connection with
securities loans.
Portfolio Turnover. There are no fixed limitations regarding portfolio
turnover for the Fund. Although the Fund does not trade for short-term profits,
securities may be sold without regard to the time they have been held in the
Fund when, in the opinion of Fund Management, market considerations warrant such
action. As a result, while it is anticipated that the Fund's annual portfolio
turnover rate generally will not exceed 100%, under certain market conditions
the portfolio turnover rate for the Fund may exceed 100%. Increased portfolio
turnover would cause the Fund to incur greater brokerage costs than would
otherwise be the case. The Fund's portfolio turnover rates are set forth under
"Financial Highlights" and, along with the Trust's brokerage allocation
policies, are discussed in the Statement of Additional Information.
THE FUND AND ITS MANAGEMENT
The Trust is a no-load mutual fund, registered with the Securities and
Exchange Commission as an open-end, diversified management investment company.
The Trust was organized on July 15, 1987, under the laws of the Commonwealth of
Massachusetts as "Financial Series Trust." On July 1, 1993, the Trust changed
its name to "INVESCO Value Trust."
<PAGE>
The Trust's board of trustees has responsibility for overall supervision
of the Fund, and reviews the services provided by the adviser. Under an
agreement with the Trust, INVESCO Funds Group, Inc. ("INVESCO"), 7800 E. Union
Avenue, Denver, Colorado, serves as the Fund's investment adviser. Under this
agreement, INVESCO is primarily responsible for providing the Fund with various
administrative services and supervises the Fund's daily business affairs. These
services are subject to review by the Trust's board of trustees.
INVESCO has contracted with INVESCO Capital Management, Inc. ("ICM"), the
Fund's investment adviser prior to 1991, for investment sub-advisory and
research services on behalf of the Fund. ICM managed in excess of $^ 38.1
billion of assets on behalf of tax-exempt accounts (such as pension and
profit-sharing funds for corporations and state and local governments) and
investment companies as of ^ September 30, 1998. ICM, subject to the supervision
of INVESCO, is primarily responsible for selecting and managing the Fund's
investments. Although the Trust is not a party to the sub-advisory agreement,
the agreement has been approved by the shareholders of the Trust. Services
provided by INVESCO and ICM are subject to review by the Trust's board of
trustees. Together, INVESCO and ICM constitute "Fund Management."
Pursuant to an agreement with the Trust, INVESCO Distributors, Inc. ("IDI")
is the Fund's distributor. IDI, established in 1997, is a registered
broker-dealer that acts as distributor for all retail mutual funds advised by
INVESCO. Prior to September 30, 1997, INVESCO served as the Fund's distributor.
INVESCO, ICM and IDI are indirect wholly-owned subsidiaries of AMVESCAP
PLC. AMVESCAP PLC is a publicly-traded holding company that, through its
subsidiaries, engages in the business of investment management on an
international basis. INVESCO PLC changed its name to AMVESCO PLC on March 3,
1997 and to AMVESCAP PLC on May 8, 1997, as part of a merger between a direct
subsidiary of INVESCO PLC and A I M Management Group Inc., that created one of
the largest independent investment management businesses in the world. AMVESCAP
PLC had approximately $261 billion in assets under management as of June 30,
1998. INVESCO was established in 1932 and, as of August 31, 1998, managed 14
mutual funds, consisting of 49 separate portfolios, with combined assets of
approximately $17.1 billion on behalf of 899,439 shareholders.
The following individuals serve as portfolio managers for the Fund and are
primarily responsible for the day-to-day management of the Fund's portfolio of
securities:
Michael C. Harhai Portfolio manager of the Fund since 1993;
portfolio manager for INVESCO Capital
Management, Inc. (1993 to present);
senior vice president and manager, Sovran
Capital Management Corp. (1992 to 1993);
senior vice president and portfolio
manager, C&S/Sovran Capital Management
(1991 to 1992); senior vice president and
portfolio manager, Citizens & Southern
Investment Advisors, Inc. (1984 to 1991);
began investment career in 1972; B.A.,
University of South Florida; M.B.A.,
University of Central Florida; Chartered
Financial Analyst; trustee, Atlanta
Society of Financial Analysts.
Terrence Irrgang Assistant portfolio manager of the Fund
since 1993; portfolio manager for INVESCO
Capital Management, Inc. (1992 to
present); consultant, Towers, Perrin &
Forster & Crosby (1988 to 1992); began
investment career in 1981; B.A.,
Gettysburg College; M.B.A., Temple
University; Chartered Financial Analyst.
<PAGE>
Fund Management permits investment and other personnel to purchase and
sell securities for their own accounts, subject to a compliance policy governing
personal investing. This policy requires Fund Management's personnel to conduct
their personal investment activities in a manner that Fund Management believes
is not detrimental to the Fund or Fund Management's other advisory clients. See
the Statement of Additional Information for more detailed information.
The Fund pays INVESCO a monthly fee which is based upon a percentage of
the Fund's average net assets determined daily. The management fee is computed
at the annual rate of 0.75% on the first $500 million of the Fund's average net
assets; 0.65% on the next $500 million of the Fund's average net assets; and
0.50% on the average net assets of the Fund in excess of $1 billion. For the
fiscal year ended August 31, 1998, the advisory fees paid to INVESCO amounted to
0.75% of the average net assets of the Fund.
Out of the advisory fee which it receives from the Fund, INVESCO pays ICM,
as the Fund's sub-adviser, a monthly fee based upon the average daily value of
the Fund's net assets. Based upon approval of the Trust's board of trustees at a
meeting held May 14, 1998, the calculation of subadvisory fees of the Fund has
been changed from 33.33% of the advisory fee (0.25% on the first $500 million of
the Fund's average net assets, 0.2167% on the next $500 million of the Fund's
average net assets and 0.1667% on the Fund's average net assets in excess of $1
billion) to 40% of the advisory fee (0.30% on the first $500 million of the
Fund's average net assets, 0.26% on the next $500 million of the Fund's average
net assets and 0.20% on the Fund's average net assets in excess of $1 billion).
No fee is paid by the Fund to ICM.
The Trust also has entered into an Administrative Services Agreement (the
"Administrative Agreement") with INVESCO. Pursuant to the Administrative
Agreement, INVESCO performs certain administrative, recordkeeping and internal
sub-accounting services, including without limitation, maintaining general
ledger and capital stock accounts, preparing a daily trial balance, calculating
net asset value daily and providing selected general ledger reports and
providing sub-accounting and recordkeeping services for Fund shareholder
accounts maintained by certain retirement and employee benefit plans for the
benefit of participants in such plans. For such services, the Fund pays INVESCO
a fee consisting of a base fee of $10,000 per year, plus an additional
incremental fee computed at an annual rate of 0.015% per annum of the average
net assets of the Fund.
The management and custodial services provided to the Fund by INVESCO and
the Fund's custodian, and the services provided to shareholders by INVESCO and
IDI, depend on the continued functioning of their computer systems. Many
computer systems in use today cannot recognize the Year 2000, but will revert to
1900 or 1980 or will cease to function due to the manner in which dates were
encoded and are calculated. That failure could have a negative impact on the
handling of the Fund's securities trades, its share pricing and its account
services. The Fund and its service providers have been actively working on
necessary changes to their computer systems to deal with the Year 2000 issue and
expect that their computer systems will be adapted before that date, but there
can be no assurance that they will be successful. Furthermore, services may be
impaired at that time as a result of the interaction of their systems with
noncomplying computer systems of others. INVESCO plans to test as many such
interactions as practicable prior to December 31, 1999 and to develop
contingency plans for reasonably anticipated failures.
The Fund bears those Trust expenses which are accrued daily that are
incurred on its behalf and, in addition, bears a portion of general Trust
expenses allocated based upon the relative net assets of the three Funds of the
Trust. Such expenses are generally deducted from the Fund's total income before
dividends are paid. Total expenses of the Fund, as a percentage of its average
net assets for the fiscal year ended August 31, 1998, including investment
advisory fees (but excluding brokerage commissions), were 1.15%.
<PAGE>
The Declaration of Trust pursuant to which the Trust is organized contains
an express disclaimer of shareholder liability for acts or obligations of the
Trust and requires that notice of such disclaimer be given in each instrument
entered into or executed by the Trust. The Declaration of Trust also provides
for indemnification out of the Trust's property for any shareholder held
personally liable for any Trust obligation. Thus, the risk of a shareholder
being personally liable for obligations of the Trust is limited to the unlikely
circumstance in which the Trust itself would be unable to meet its obligations.
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of
the brokers' and dealers' financial responsibility coupled with their ability to
effect transactions at the best available prices. The Trust may place orders for
portfolio transactions with qualified brokers and dealers that recommend the
various funds of the Trust to clients, or act as agent in the purchase of Fund
shares for clients, if Fund Management believes that the quality of the
execution of the transaction and level of commission are comparable to those
available from other qualified brokerage firms. For further information, see
"Investment Practices - Placement of Portfolio Brokerage" in the Statement of
Additional Information.
HOW SHARES CAN BE PURCHASED
Shares of the Fund are sold on a continuous basis by IDI, as the Fund's
distributor, at the net asset value per share next calculated after receipt of a
purchase order in good form. No sales charge is imposed upon the sale of shares
of the Fund. To purchase shares of the Fund, send a check made payable to
INVESCO Funds Group, Inc., together with a completed application form, to:
INVESCO FUNDS GROUP, INC.
Post Office Box 173706
Denver, Colorado 80217-3706
PURCHASE ORDERS MUST SPECIFY THE FUND IN WHICH THE INVESTMENT IS TO BE
MADE.
The minimum initial purchase must be at least $1,000, with subsequent
investments of not less than $50, except that: (1) those shareholders
establishing an EasiVest or direct payroll purchase account, as described below
in the section entitled "Services Provided By The Fund," may open an account
without making any initial investment if they agree to make regular, minimum
purchases of at least $50; (2) those shareholders investing in an Individual
<PAGE>
Retirement Account ("IRA"), or through omnibus accounts where individual
shareholder recordkeeping and sub-accounting are not required, may make initial
minimum purchases of $250; (3) Fund Management may permit a lesser amount to be
invested in the Fund under a federal income tax-deferred retirement plan (other
than an IRA), or under a group investment plan qualifying as a sophisticated
investor; and (4) Fund Management reserves the right to increase, reduce or
waive the minimum purchase requirements in its sole discretion where it
determines such action is in the best interests of the Fund. The minimum initial
purchase requirement of $1,000, as described above, does not apply to
shareholder account(s) in any of the INVESCO funds opened prior to January 1,
1993, and thus is not a minimum balance requirement for those existing accounts.
However, for shareholders already having accounts in any of the INVESCO funds,
all initial share purchases in a new fund account, including those made using
the exchange privilege, must meet the fund's applicable minimum investment
requirement.
The purchase of shares in the Fund can be expedited by placing bank wire,
overnight courier or telephone orders. For further information, the purchaser
may call the Fund's office by using the telephone number on the back cover of
this Prospectus. Orders sent by overnight courier, including Express Mail,
should be sent to the street address, not post office box, of INVESCO Funds
Group, Inc., 7800 E. Union Avenue, Denver, Colorado 80237.
Orders to purchase shares of the Fund can be placed by telephone. Shares
of the Fund will be issued at the net asset value next determined after receipt
of telephone instructions. Generally, payments for telephone orders must be
received by the Fund within three business days or the transaction may be
canceled. In the event of such cancellation, the purchaser will be held
responsible for any loss resulting from a decline in the value of the shares. In
order to avoid such losses, purchasers should send payments for telephone
purchases by overnight courier or bank wire. INVESCO has agreed to indemnify the
Fund for any losses resulting from the cancellation of telephone purchases.
If your check does not clear, or if a telephone purchase must be canceled
due to nonpayment, you will be responsible for any related loss the Fund or
INVESCO incurs. If you are already a shareholder in the INVESCO funds, the Fund
has the option to redeem shares from any identically registered account in the
Fund or any other INVESCO fund as reimbursement for any loss incurred. You also
may be prohibited or restricted from making future purchases in any of the
INVESCO funds.
Persons who invest in the Fund through a securities broker may be charged a
commission or transaction fee by the broker for the handling of the transaction
if the broker so elects. Any investor may deal directly with the Fund in any
transaction. In that event, there is no such charge. IDI or INVESCO may from
time to time make payments from its revenues to securities dealers and
otherfinancial institutions that provide distribution-related and/or
administrative services for the Fund.
<PAGE>
The Fund reserves the right in its sole discretion to reject any order for
purchase of its shares (including purchases by exchange) when, in the judgment
of Fund Management, such rejection is in the best interest of the Fund.
Net asset value per share is computed once each day that the New York
Stock Exchange is open as of the close of regular trading on that Exchange
(generally 4:00 p.m., New York time) and also may be computed on other days
under certain circumstances. Net asset value per share for the Fund is
calculated by dividing the market value of the Fund's securities plus the value
of its other assets (including dividends and interest accrued but not
collected), less all liabilities (including accrued expenses), by the number of
outstanding shares of the Fund. If market quotations are not readily available,
a security will be valued at fair value as determined in good faith by the board
of trustees. Debt securities with remaining maturities of 60 days or less at the
time of purchase will be valued at amortized cost, absent unusual circumstances,
so long as the Trust's board of trustees believes that such value represents
fair value.
Under certain circumstances, the Fund may offer its shares, in lieu of
cash payment, for securities to be purchased by the Fund. Such a transaction can
benefit the Fund by allowing it to acquire securities for its portfolio without
paying brokerage commissions. For the same reason, the transaction also may be
beneficial to the party exchanging the securities. The Fund shall not enter into
such transactions, however, unless the securities to be exchanged for Fund
shares are readily marketable and not restricted as to transfer either by law or
liquidity of the market, comply with the investment policies and objectives of
the Fund, are of the type and quality which would normally be purchased for the
Fund's portfolio, are acquired for investment and not for resale, have a value
which is readily ascertainable as evidenced by a listing on the American Stock
Exchange, the New York Stock Exchange or NASDAQ, and are securities which the
Fund would otherwise purchase on the open market. The value of Fund shares used
to purchase portfolio securities as stated herein will be the net asset value as
of the effective time and date of the exchange. The securities to be received by
the Fund will be valued in accordance with the same procedure used in valuing
the Fund's portfolio securities. Any investor wishing to acquire shares of the
Fund in exchange for securities should contact either the president or the
secretary of the Trust at the address or telephone number shown on the back
cover of this Prospectus.
Distribution Expenses. The Fund is authorized under a Plan and Agreement
of Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Plan") to use its assets to finance certain activities relating to the
distribution of its shares to investors. The Plan applies to New Assets (new
<PAGE>
sales of shares, exchanges into the Fund and reinvestments of dividends and
capital gain distributions) of the Fund after November 1, 1997. Under the Plan,
monthly payments may be made by the Fund to IDI to permit IDI, at its
discretion, to engage in certain activities and provide certain services
approved by the board of trustees of the Trust in connection with the
distribution of the Fund's shares to investors. These activities and services
may include the payment of compensation (including incentive compensation and/or
continuing compensation based on the amount of customer assets maintained in the
Fund) to securities dealers and other financial institutions and organizations,
which may include INVESCO- and IDI-affiliated companies, to obtain various
distribution-related and/or administrative services for the Fund. Such services
may include, among other things, processing new shareholder account
applications, preparing and electronically transmitting to the Fund's transfer
agent computer processable tapes of all transactions by customers, and serving
as the primary source of information to customers in answering questions
concerning the Fund and their transactions with the Fund.
In addition, other permissible activities and services include
advertising, preparation, printing and distribution of sales literature,
printing and distribution of prospectuses to prospective investors, and such
other services and promotional activities for the Fund as may from time to time
be agreed upon by the Trust and its board of trustees, including public
relations efforts and marketing programs to communicate with investors and
prospective investors. These services and activities may be conducted by the
staff of INVESCO, IDI or their affiliates or by third parties.
Under the Plan, the Fund's payments to IDI are limited to an amount
computed at an annual rate of 0.25% of the Fund's New Assets. IDI is not
entitled to payment for overhead expenses under the Plan, but may be paid for
all or a portion of the compensation paid for salaries and other employee
benefits for the personnel of INVESCO or IDI whose primary responsibilities
involve marketing shares of the INVESCO mutual funds, including the Fund.
Payment amounts by the Fund under the Plan, for any month, may be made to
compensate IDI for permissible activities engaged in and services provided by
IDI during the rolling 12-month period in which that month falls. Therefore, any
obligations incurred by IDI in excess of the limitations described above will
not be paid by the Fund and will be borne by IDI. In addition, IDI and its
affiliates may from time to time make additional payments from their revenues to
securities dealers, financial advisers and financial institutions that provide
distribution-related and/or administrative services for the Fund. No further
payments will be made by the Fund under the Plan in the event of the Plan's
termination. Payments made by the Fund may not be used to finance directly the
distribution of shares of any other Fund of the Trust or other mutual fund
advised by INVESCO and distributed by IDI. However, payments received by IDI
which are not used to finance the distribution of shares of the Fund become part
<PAGE>
of IDI's reserves and may be used by IDI for activities that provide
distribution of any of the mutual funds advised by INVESCO. Subject to review by
the Trust's trustees, payments made by the Fund under the Plan for compensation
of marketing personnel, as noted above, are based on an allocation formula
designed to ensure that all such payments are appropriate. IDI will bear any
distribution- and service-related expenses in excess of the amounts which are
compensated pursuant to the Plan. The Plan also authorizes any financing of
distribution which may result from INVESCO's or IDI's use of fees received from
the Fund for services rendered by INVESCO, provided that such fees are
legitimate and not excessive. For more information see see "How Shares Can Be
Purchased - Distribution Plan" in the Statement of Additional Information.
SERVICES PROVIDED BY THE FUND
Shareholder Accounts. INVESCO maintains a share account that reflects the
current holdings of each shareholder. A separate account will be maintained for
a shareholder for each fund in which the shareholder invests. As a business
trust, the Trust does not issue share certificates. Each shareholder is sent a
detailed confirmation of each transaction in shares of the Fund. Shareholders
whose only transactions are through the EasiVest, direct payroll purchase,
automatic monthly exchange or periodic withdrawal programs, or are reinvestments
of dividends or capital gains in the same or another fund, will receive
confirmations of those transactions on their quarterly statements. These
programs are discussed below. For information regarding a shareholder's account
and transactions, the shareholder may call INVESCO by using the telephone number
on the back cover of this Prospectus.
Reinvestment of Distributions. Dividends and other distributions are
automatically reinvested in additional shares of the Fund at the net asset value
per share of the Fund in effect on the ex-dividend or ex-distribution date. A
shareholder may, however, elect to reinvest dividends and other distributions in
certain of the other no-load mutual funds advised by INVESCO and distributed by
IDI, or to receive payment of all dividends and other distributions in excess of
$10.00 by check by giving written notice to INVESCO at least two weeks prior to
the record date on which the change is to take effect. Further information
concerning these options can be obtained by contacting INVESCO.
Periodic Withdrawal Plan. A Periodic Withdrawal Plan is available to
shareholders who own or purchase shares of any mutual funds advised by INVESCO
having a total value of $10,000 or more; provided, however, that at the time the
Plan is established, the shareholder owns shares having a value of at least
$5,000 in the fund from which the withdrawals will be made. Under the Periodic
Withdrawal Plan, INVESCO, as agent, will make specified monthly or quarterly
payments of any amount selected (minimum payment of $100) to the party
designated by the shareholder. Notice of all changes concerning the Periodic
Withdrawal Plan must be received by INVESCO at least two weeks prior to the next
scheduled check. Further information regarding the Periodic Withdrawal Plan and
its requirements and tax consequences can be obtained by contacting INVESCO.
<PAGE>
Exchange Policy. Shares of the Fund may be exchanged for shares of any
other fund of the Trust, as well as for shares of any of the following other
no-load mutual funds, which are also advised by INVESCO, on the basis of their
respective net asset values at the time of the exchange: 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.) and INVESCO Tax-Free Income Funds, Inc.
An exchange involves the redemption of shares in the Fund and investment
of the redemption proceeds in shares of another fund of the Trust or in shares
of one of the funds listed above. Exchanges will be made at the net asset value
per share next determined after receipt of an exchange request in proper order.
Any gain or loss realized on such an exchange is recognizable for federal income
tax purposes by the shareholder. Exchange requests may be made either by
telephone or by written request to INVESCO, using the telephone number or
address on the back cover of this Prospectus. Exchanges made by telephone must
be in the amount of at least $250, if the exchange is being made into an
existing account of one of the INVESCO funds. All exchanges that establish a new
account must meet the fund's applicable minimum initial investment requirements.
Written exchange requests into an existing account have no minimum requirements
other than the fund's applicable minimum subsequent investment requirements.
The option to exchange Fund shares by telephone is available to
shareholders automatically unless expressly declined. By signing the new account
Application or a Telephone Transaction Authorization Form or otherwise utilizing
the telephone exchange option, the investor has agreed that the Fund will not be
liable for following instructions communicated by telephone that it reasonably
believes to be genuine. The Fund employs procedures, which it believes are
reasonable, designed to confirm that exchange transactions are genuine. These
may include recording telephone instructions and providing written confirmations
of exchange transactions. As a result of this policy, the investor may bear the
risk of any loss due to unauthorized or fraudulent instructions; provided,
however, that if the Fund fails to follow these or other reasonable procedures,
the Fund may be liable.
In order to prevent abuse of this policy to the disadvantage of other
shareholders, the Fund reserves the right to temporarily or permanently
terminate the exchange option of any shareholder who requests more than four
exchanges in a year, or at any time the Fund determines the actions of the
shareholders are detrimental to Fund performance and shareholders. The Fund will
determine whether to do so based on a consideration of both the number of
exchanges any particular shareholder or group of shareholders has requested and
<PAGE>
the time period over which those exchange requests have been made, together with
the level of expense to the Fund which will result from effecting additional
exchange requests. The exchange policy also may be modified or terminated at any
time. Except in unusual circumstances where redemptions of the exchanged
security are suspended under Section 22(e) of the 1940 Act, or where sales of
the fund into which the shareholder is exchanging are temporarily stopped,
notice of all such modifications to the policy or terminations that would affect
all Fund shareholders will be given at least 60 days prior to the effective date
of the change in policy.
Before making an exchange, the shareholder should review the prospectuses
of the funds involved and consider their differences. Shareholders interested in
exercising the exchange option may contact INVESCO for information concerning
their particular exchanges.
Automatic Monthly Exchange. Shareholders who have accounts in any one or
more of the mutual funds distributed by IDI may arrange for a fixed dollar
amount of their fund shares to be automatically exchanged for shares of any
other INVESCO mutual fund listed under "Exchange Policy" on a monthly basis,
subject to the Fund's minimum initial investment or subsequent investment
requirements. This automatic exchange program can be changed by the shareholder
at any time by notifying INVESCO at least two weeks prior to the date the change
is to be made. Further information regarding this service can be obtained by
contacting INVESCO.
EasiVest. For shareholders who want to maintain a schedule of monthly
investments, EasiVest uses various methods to draw a preauthorized amount from
the shareholder's bank account to purchase Fund shares. This automatic
investment program can be changed by the shareholder at any time by contacting
INVESCO at least two weeks prior to the date the change is to be made. Further
information regarding this service can be obtained by contacting INVESCO.
Direct Payroll Purchase. Shareholders may elect to have their employers
make automatic purchases of Fund shares for them by deducting a specified amount
from their regular paychecks. This automatic investment program can be modified
or terminated at any time by the shareholder by notifying the employer. Further
information regarding this service can be obtained by contacting INVESCO.
Tax-Deferred Retirement Plans. Shares of the Fund may be purchased for
self-employed individual retirement plans, various IRAs, simplified employee
pension plans and corporate retirement plans. In addition, shares can be used to
fund tax qualified plans established under Section 403(b) of the Internal
Revenue Code by educational institutions, including public school systems and
private schools, and certain kinds of non-profit organizations, which provide
deferred compensation arrangements for their employees.
<PAGE>
Prototype forms for the establishment of these various plans, including,
where applicable, disclosure statements required by the Internal Revenue
Service, are available from INVESCO. Institutional Trust Company, doing business
as INVESCO Trust Company ("ITC"), an affiliate of INVESCO, is qualified to serve
as trustee or custodian under these plans and provides the required services at
competitive rates. Retirement plans (other than IRAs) receive monthly statements
reflecting all transactions in their Fund accounts. IRAs receive the
confirmations and quarterly statements described under "Shareholder Accounts."
For complete information, including prototype forms and service charges, call
INVESCO at the telephone number listed on the back cover of this Prospectus or
send a written request to: Retirement Services, INVESCO Funds Group, Inc., Post
Office Box 173706, Denver, Colorado 80217-3706.
HOW TO REDEEM SHARES
Shares of the Fund may be redeemed at any time at their current net asset
value next determined after a request in proper form is received at the Fund's
office. (See "How Shares Can Be Purchased.") Net asset value per share of the
Fund at the time of the redemption may be more or less than the price originally
paid to purchase shares, depending primarily upon the Fund's investment
performance.
In order to redeem shares, a written redemption request signed by each
registered owner of the account may be submitted to INVESCO at the address noted
above. Redemption requests sent by overnight courier, including Express Mail,
should be sent to the street address, not post office box, of INVESCO at 7800 E.
Union Avenue, Denver, CO 80237. If shares are held in the name of a corporation,
additional documentation may be necessary. Call or write for specific
information. If payment for the redeemed shares is to be made to someone other
than the registered owner(s), the signature(s) must be guaranteed by a financial
institution which qualifies as an eligible guarantor institution. Redemption
procedures with respect to accounts registered in the names of broker-dealers
may differ from those applicable to other shareholders.
BE CAREFUL TO SPECIFY THE ACCOUNT FROM WHICH THE REDEMPTION IS TO BE MADE.
SHAREHOLDERS HAVE A SEPARATE ACCOUNT FOR EACH FUND IN WHICH THEY INVEST.
<PAGE>
Payment of redemption proceeds will be mailed within seven days following
receipt of the required documents. However, payment may be postponed under
unusual circumstances, such as when normal trading is not taking place on the
New York Stock Exchange or when an emergency as defined by the Securities and
Exchange Commission exists. If the shares to be redeemed were purchased by check
and that check has not yet cleared, payment will be made promptly upon clearance
of the purchase check (which will take up to 15 days).
If a shareholder participates in EasiVest, the Fund's automatic monthly
investment program, and redeems all of the shares in a Fund account, INVESCO
will terminate any further EasiVest purchases unless otherwise instructed by the
shareholder.
Because of the high relative costs of handling small accounts, should the
value of any shareholder's account fall below $250 as a result of shareholder
action, the Fund reserves the right to effect the involuntary redemption of all
shares in such account, in which case the account would be liquidated and the
proceeds forwarded to the shareholder. Prior to any such redemption, a
shareholder will be notified and given 60 days to increase the value of the
account to $250 or more.
Fund shareholders (other than shareholders holding Fund shares in accounts
of IRA plans) may request expedited redemption of shares having a minimum value
of $250 (or redemption of all shares if their value is less than $250) held in
accounts maintained in their name by telephoning redemption instructions to
INVESCO, using the telephone number on the back cover of this Prospectus.
At the shareholder's option, the redemption proceeds either will be mailed
to the address listed for the shareholder's Fund account, or wired (minimum of
$1,000) or mailed to the bank which the shareholder has designated to receive
the proceeds of telephone redemptions. Unless INVESCO permits a larger
redemption request to be placed by telephone, a shareholder may not place a
redemption request by telephone in excess of $25,000. These telephone redemption
privileges may be modified or terminated in the future at the discretion of
INVESCO. For ITC sponsored federal income tax-deferred retirement plans, the
term "shareholders" is defined to mean plan trustees that file a written request
to be able to redeem Fund shares by telephone. Shareholders should understand
that while the Fund will attempt to process all telephone redemption requests on
an expedited basis, there may be times, particularly in periods of severe
economic or market disruption, when (a) they may encounter difficulty in placing
a telephone redemption request, and (b) processing telephone redemptions will
require up to seven days following receipt of the redemption request, or
additional time because of the unusual circumstances set forth above.
<PAGE>
Redeeming Fund shares by telephone is available to shareholders
automatically unless expressly declined. By signing a new account Application, a
Telephone Transaction Authorization Form or otherwise utilizing telephone
redemption privileges, the shareholder has agreed that the Fund will not be
liable for following instructions communicated by telephone that it reasonably
believes to be genuine. The Fund employs procedures, which it believes are
reasonable, designed to confirm that telephone instructions are genuine. These
may include recording telephone instructions and providing written confirmation
of transactions inititated by telephone. As a result of this policy, the
investor may bear the risk of any loss due to unauthorized or fraudulent
instructions; provided, however, that if the Fund fails to follow these or other
reasonable procedures, the Fund may be liable.
TAXES, DIVIDENDS AND OTHER DISTRIBUTIONS
Taxes. The Fund intends to distribute to shareholders substantially all of
its net investment income, net capital gains and net gains from certain foreign
currency transactions, if any. Distribution of substantially all net investment
income to shareholders allows the Fund to maintain its tax status as a regulated
investment company. The Fund does not expect to pay any federal income or excise
taxes because of its distribution policies and tax status as a regulated
investment company.
Shareholders must include all dividends and other distributions as taxable
income for federal, state and local income tax purposes, unless they are exempt
from income taxes. Dividends and other distributions are taxable whether they
are received in cash or automatically reinvested in shares of either the Fund or
another fund in the INVESCO group.
Net realized capital gains of the Fund are classified as short-term and
long-term gains depending upon how long the Fund held the security that gave
rise to the gains. Short-term capital gains are included in income from
dividends and interest as ordinary income and are taxed at the taxpayer's
marginal tax rate. During 1997, the Taxpayer Relief Act established a new
maximum capital gains tax rate of 20%. Depending on the holding period of the
asset giving rise to the gain, a capital gain was taxable at a maximum rate of
either 20% or 28%. Beginning January 1, 1998, all long-term gains realized on
the sale of securities held for more than 12 months will be taxable at a maximum
rate of 20%. In addition, legislation signed in October 1998 provides that all
capital gain distributions from a mutual fund paid to shareholders during 1998
will be taxed at a maximum rate of 20%. Accordingly, all capital gain
distributions paid in 1998 will be taxable at a maximum rate of 20%. Note that
the rate of capital gains tax is dependent on the shareholder's marginal tax
rate and may be lower than the above rates. At the end of each year, information
regarding the tax status of dividends and other distributions is provided to
shareholders. Shareholders should consult their tax advisers as to the effect of
distributions by the Fund.
Shareholders may realize capital gains or losses when they sell their Fund
shares at more or less than the price originally paid. Capital gain on shares
held for more than one year will be long-term capital gain, in which event it
will be subject to federal income tax at the rates indicated above.
<PAGE>
The Fund may be subject to withholding of foreign taxes on dividends or
interest it receives on foreign securities. Foreign taxes withheld will be
treated as an expense of the Fund.
Individuals and certain other non-corporate shareholders may be subject to
backup withholding of 31% on dividends, capital gain and other distributions and
redemption proceeds. Shareholders can avoid backup withholding on their Fund
accounts by ensuring that INVESCO has a correct, certified tax identification
number.
Shareholders should consult a tax adviser with respect to these matters.
For further information see "Dividends, Other Distributions And Taxes" in the
Statement of Additional Information.
Dividends and Other Distributions. The Fund earns ordinary or net
investment income in the form of interest and dividends on its investments.
Dividends paid by the Fund will be based solely on net investment income earned
by it. The Fund's policy is to distribute substantially all of this income, less
expenses, to shareholders. Dividends from net investment income are paid on a
quarterly basis, at the end of November, February, May and August, at the
discretion of the Trust's board of trustees. Dividends are automatically
reinvested in additional shares of the Fund at the net asset value on the
payable date unless otherwise requested.
In addition, the Fund realizes capital gains and losses when it sells
securities or derivatives for more or less than it paid. If total gains on sales
exceed total losses (including losses carried forward from previous years), the
Fund has a net realized capital gain. Net realized capital gains, if any,
together with gains realized on foreign currency transactions, if any, are
distributed to shareholders at least annually, usually in December. Capital gain
distributions are automatically reinvested in additional shares of the Fund at
the net asset value on the payable date unless otherwise requested.
Dividends and other distributions are paid to shareholders on the record
date of distribution regardless of how long the Fund shares have been held by
the shareholder. The Fund's share price will then drop by the amount of the
distribution on the ex-dividend or ex-distribution date. If a shareholder
purchases shares immediately prior to the distribution, the shareholder will, in
effect, have "bought" the distribution by paying the full purchase price, a
portion of which is then returned in the form of a taxable distribution.
<PAGE>
ADDITIONAL INFORMATION
Voting Rights. All shares of the Fund have equal voting rights based on one
vote for each share owned and a corresponding fractional vote for each
fractional share owned. Voting with respect to certain matters, such as
ratification of independent accountants and the election of trustees, will be by
all funds of the Trust voting together. In other cases, such as voting upon the
investment advisory contract for the individual funds, voting is on a
fund-by-fund basis. To the extent permitted by law, when not all funds are
affected by a matter to be voted upon, only shareholders of the fund or funds
affected by the matter will be entitled to vote thereon. The Trust is not
generally required, and does not expect, to hold regular annual meetings of
shareholders. However, the board of trustees will call such special meetings of
shareholders for the purpose, among other reasons, of voting the question of
removal of a trustee or trustees when requested to do so in writing by the
holders of 10% or more of the outstanding shares of the Fund or as may be
required by applicable law or the Trust's Declaration of Trust. The Trust will
assist shareholders in communicating with other shareholders as required by the
1940 Act. Trustees may be removed by action of the holders of two-thirds of the
outstanding shares of the Trust.
Shareholder Inquiries. All inquiries regarding the Fund should be directed
to the Trust at the telephone number or mailing address set forth on the cover
page of this Prospectus.
Transfer and Dividend Disbursing Agent. INVESCO, 7800 E. Union Avenue,
Denver, Colorado 80237, acts as registrar, transfer agent and dividend
disbursing agent for the Fund pursuant to a Transfer Agency Agreement which
provides that the Fund will pay an annual fee of $20.00 per shareholder account
or, where applicable, per participant in an omnibus account. The transfer agency
fee is not charged to each shareholder's or participant's account but is an
expense of the Fund to be paid from the Fund's assets. Registered
broker-dealers, third party administrators of tax-qualified retirement plans and
other entities, including affiliates of INVESCO, may provide sub-transfer agency
or recordkeeping services to the Fund which reduce or eliminate the need for
identical services to be provided on behalf of the Fund by INVESCO. In such
cases, INVESCO may pay the third party an annual sub-transfer agency or
recordkeeping fee out of the transfer agency fee which is paid to INVESCO by the
Fund.
<PAGE>
^ INVESCO Value Equity Fund
PROSPECTUS
January 1, 1999
^ We're easy to stay in touch with:
^ Investor services: 1-800-525-8085
^ PAL(R), your Personal Account Line: 1-800-424-8085
^ On the World Wide Web: www.invesco.com
In Denver, visit one of our
convenient Investor Centers:
Cherry Creek
155-B Fillmore Street;
Denver Tech Center
7800 East Union Avenue
Lobby Level
INVESCO Distributors, Inc.,(SM)
Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
In addition, all documents You should know what
filed by the Trust with the INVESCO knows.(TM)
Securities and Exchange
Commission can be located on INVESCO Funds
a web site maintained by the
Commission at
http://www.sec.gov.
<PAGE>
PROSPECTUS
January 1, 1999
INVESCO Total Return Fund
The INVESCO Total Return Fund (the "Fund") seeks to achieve a high total
return on investment through capital appreciation and current income by
investing in a combination of equity securities (consisting of common stocks
and, to a lesser degree, securities convertible into common stock) and fixed
income securities. The equity securities purchased by the Fund generally will be
issued by companies which are listed on a national securities exchange and which
usually pay regular dividends. This Fund seeks reasonably consistent total
returns over a variety of market cycles.
The Fund is a series of INVESCO Value Trust (the "Trust"), a diversified,
managed, no-load mutual fund consisting of three separate portfolios of
investments. This Prospectus relates to shares of the INVESCO Total Return Fund.
Separate prospectuses are available upon request from INVESCO Distributors, Inc.
for the Trust's other two funds, INVESCO Value Equity Fund and INVESCO
Intermediate Government Bond Fund. Investors may purchase shares of any or all
Funds. Additional funds may be offered in the future.
This Prospectus provides you with the basic information you should know
before investing in the Fund. You should read it and keep it for future
reference. A Statement of Additional Information containing further information
about the Fund, dated January 1, 1999, has been filed with the Securities and
Exchange Commission and is incorporated by reference into this Prospectus. To
request a free copy, write to INVESCO Distributors, Inc., P.O. Box 173706,
Denver, Colorado 80217-3706; call 1-800-525-8085; or visit our web site at:
http://www.invesco.com.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER FINANCIAL
INSTITUTION. THE SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
----------
<PAGE>
TABLE OF CONTENTS
Page
ANNUAL FUND EXPENSES 2
FINANCIAL HIGHLIGHTS 4
PERFORMANCE DATA 6
INVESTMENT OBJECTIVE AND POLICIES 6
RISK FACTORS 8
THE FUND AND ITS MANAGEMENT 11
HOW SHARES CAN BE PURCHASED 13
SERVICES PROVIDED BY THE FUND 15
HOW TO REDEEM SHARES 17
TAXES, DIVIDENDS AND OTHER DISTRIBUTIONS 19
ADDITIONAL INFORMATION 20
<PAGE>
ANNUAL FUND EXPENSES
The Fund is 100% no-load; there are no fees to purchase, exchange or
redeem shares. The Fund is authorized to pay a Rule 12b-1 distribution fee of
one quarter of one percent of the Fund's average net assets each year. The 12b-1
fee is assessed against all shares, but only with respect to new sales of
shares, exchanges into the Fund and reinvestments of dividends and capital gain
distributions ("New Assets") occurring on or after June 1, 1998. (See "How
Shares Can Be Purchased - Distribution Expenses.")
Annual operating expenses are calculated as a percentage of the Fund's
average annual net assets.
Shareholder Transaction Expenses
Sales load "charge" on purchases None
Sales load "charge" on reinvested dividends None
Redemption fees None
Exchange fees None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fee(1) 0.58%
12b-1 Fees(2) 0.25%
Other Expenses 0.20%
Transfer Agency Fee(3) 0.16%
General Services, Administrative
Services, Registration, Postage(3) 0.04%
Total Fund Operating Expenses(2)(5) 1.03%
(1) Under a voluntary expense limitation agreed to by INVESCO, the
management fee paid by the Fund has been reduced to an annual rate of 0.45% on
daily net assets over $2 billion, 0.40% on annual daily net assets over $4
billion, 0.375% on annual daily net assets over $5 billion, and to an annual
rate of 0.35% on daily net assets over $6 billion. In the absence of the
voluntary expense limitation, the Fund's "Management Fee" and "Total Fund
Operating Expenses" would have been 0.58% and 1.04%, respectively, based on the
Fund's actual expenses for the fiscal year ended August 31, 1998.
(2) 12b-1 fees for the period ending August 31, 1998 are less than 0.25%
of average net assets.
(3) Consists of the transfer agency fee described under "Additional
Information - Transfer And Dividend Disbursing Agent."
<PAGE>
(4) Includes, but is not limited to, fees and expenses of trustees,
custodian bank, legal counsel and independent accountants, securities pricing
services, costs of administrative services furnished under an Administrative
Services Agreement, costs of registration of Fund shares under applicable laws,
and costs of printing and distributing reports to shareholders.
(5) It should be noted that the Fund's actual total operating expenses
were lower than the figures shown, because the Fund's custodian and transfer
agent fees were reduced under expense offset arrangements. However, as a result
of an SEC requirement for mutual funds to state their total operating expenses
without crediting any such offset arrangements, the figures shown above do not
reflect these reductions. In comparing expenses for different years, please note
that the Ratios of Expenses to Average Net Assets shown under "Financial
Highlights" do reflect any reductions for periods prior to the fiscal year ended
August 31, 1996.
Example
A shareholder would pay the following expenses on a $1,000 investment for
the periods shown, assuming (1) a 5% annual return and (2) redemption at the end
of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$11 $33 $51 $126
The purpose of the foregoing table is to assist investors in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. Such expenses are paid from the Fund's assets. (See "The Fund And
Its Management.") The above figures for INVESCO Total Return Fund are based on
fiscal year-end information. The Fund charges no sales load, redemption fee or
exchange fee. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The assumed 5% annual return is hypothetical and should not be considered a
representation of past or future annual returns, which may be greater or less
than the assumed amount.
Because the Fund pays a Rule 12b-1 distribution fee, investors who own
Fund shares for a long period of time may pay more than the economic equivalent
of the maximum front-end sales charge permitted for mutual funds by the National
Association of Securities Dealers, Inc.
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
The following information for each of the five years ended August 31,
1998, the eight-month fiscal period ended August 31, 1993 and each of the four
years ended December 31, 1992 has been audited by PricewaterhouseCoopers LLP,
independent accountants. Prior years' information was audited by another
independent accounting firm. This information should be read in conjunction with
the Report of Independent Accountants thereon appearing in the Trust's 1998
Annual Report to Shareholders which is incorporated by reference into the
Statement of Additional Information. Both are available without charge by
contacting INVESCO Distributors, Inc., at the address or telephone number on the
back cover of this Prospectus. All per share data has been adjusted to reflect
an 80 to 1 stock split which was effected on January 2, 1991.
<TABLE>
<CAPTION>
Period
Ended
Year Ended August 31 August 31 Year Ended December 31
-------------------------------------------- -------- -------------------------------------------
1998 1997 1996 1995 1994 1993^ 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value -
Beginning of
Period $27.77 $22.60 $20.95 $18.54 $18.27 $17.18 $16.43 $14.21 $15.08 $13.46 $12.56
--------------------------------------------- -------- -------------------------------------------
INCOME FROM
INVESTMENT OPERATIONS
Net Investment
Income 0.83 0.77 0.73 0.72 0.69 0.40 0.66 0.71 0.74 0.79 0.39
Net Gains or
(Losses) on
Securities (Both
Realized and
Unrealized) 0.87 5.26 1.78 2.46 0.60 1.09 0.93 2.78 (0.80) 1.74 0.93
--------------------------------------------- -------- -------------------------------------------
Total from
Investment
Operations 1.70 6.03 2.51 3.18 1.29 1.49 1.59 3.49 (0.06) 2.53 1.32
--------------------------------------------- -------- -------------------------------------------
<PAGE>
LESS DISTRIBUTIONS
Dividends from Net
Investment
Income 0.83 0.77 0.73 0.72 0.60 0.40 0.65 0.72 0.75 0.78 0.40
In Excess of Net
Investment
Income+ 0.00 0.00 0.00 0.00 0.09 0.00 0.00 0.00 0.00 0.00 0.00
Distributions from
Capital Gains 0.48 0.09 0.13 0.05 0.17 0.00 0.19 0.55 0.06 0.13 0.02
In Excess of
Capital Gains 0.00 0.00 0.00 0.00 0.16 0.00 0.00 0.00 0.00 0.00 0.00
--------------------------------------------- -------- -------------------------------------------
Total
Distributions 1.31 0.86 0.86 0.77 1.02 0.40 0.84 1.27 0.81 0.91 0.42
-------------------------------------------- --------- -------------------------------------------
Net Asset Value -
End of Period $28.16 $27.77 $22.60 $20.95 $18.54 $18.27 $17.18 $16.43 $14.21 $15.08 $13.46
============================================= ======== ============================================
TOTAL RETURN 6.02% 27.01% 12.06% 17.54% 7.22% 8.72%* 9.84% 24.96% (0.35%) 19.13% 11.53%
RATIOS
Net Assets - End
of Period
($000 Omitted) $2,561,036$1,845,594 $1,032,151 $563,468 $292,765 $220,224 $137,196 $82,219 $54,874 $44,957 $28,432
Ratio of Expenses
to Average Net
Assets# 0.79%@ 0.86%@ 0.89%@ 0.95% 0.96% 0.93%~ 0.88% 0.92% 1.00% 1.00% 1.00%
Ratio of Net
Investment Income
to Average
Net Assets# 2.82% 3.11% 3.44% 3.97% 3.31% 3.51%~ 4.06% 4.62% 5.22% 5.46% 5.56%
Portfolio Turnover
Rate 17% 4% 10% 30% 12% 19%* 13% 49% 24% 28% 13%
</TABLE>
<PAGE>
^ From January 1, 1993 to August 31, 1993.
+ Distributions in excess of net investment income for the year ended August
31,1995 aggregated less than $0.01 on a per share basis.
* Based on operations for the period shown and, accordingly, are not
representative of a full year.
# Various expenses of the Fund were voluntarily absorbed by INVESCO for the
years ended August 31, 1998, December 31, 1989 and 1988. If such expenses had
not been voluntarily absorbed, ^ Ratio of Expenses to Average Net Assets would
have been 0.80%, 1.05% and 1.21%, respectively, and ^ Ratio of Net Investment
Income to Average Net Assets would have been 2.81%, 5.41% and 5.35%,
respectively.
@ Ratio is based on Total Expenses of the Fund, less expenses absorbed by
investment adviser, which is before any expense offset arrangements.
~ Annualized
PERFORMANCE DATA
From time to time, the Fund advertises its total return performance. These
figures are based upon historical investment results and are not intended to
indicate future performance. Total return is computed by calculating the
percentage change in value of an investment, assuming reinvestment of all income
dividends and capital gain distributions, to the end of a specified period.
Cumulative total return reflects actual performance over a stated period of
time. Average annual total return is a hypothetical rate of return that, if
achieved annually, would have produced the same cumulative total return if
performance had been constant over the entire period. Any given report of total
return performance should not be considered as representative of future
performance. The Fund charges no sales load, redemption fee or exchange fee
which would affect total return computations.
In conjunction with performance reports and/or analyses of shareholder
service for the Fund, comparative data between the Fund's performance for a
given period and the performance of recognized bond indices and 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, a division of The
McGraw-Hill Companies, Inc. ("S&P"), Lipper Analytical Services, Inc., Lehman
Brothers, National Association of Securities Dealers Automated Quotations, Frank
Russell Company, Value Line Investment Survey, the American Stock Exchange,
Morgan Stanley Capital International, Wilshire Associates, the Financial Times
Stock Exchange, the New York Stock Exchange, the Nikkei Stock Average and the
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 appearing in publications such as Money,
Forbes, Kiplinger's Personal Finance, Morningstar and similar sources which
utilize information compiled (i) internally; (ii) by Lipper Analytical Services,
Inc.; or (iii) by other recognized analytical services, may be used in
advertising. The Lipper Analytical Services, Inc. mutual fund rankings and
comparisons, which may be used by the Fund in performance reports, will be drawn
from the "Flexible Portfolio Funds" Lipper mutual fund groupings, in addition to
the broad-based Lipper general fund grouping.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Total Return Fund is to seek a high total
return on investment through capital appreciation and current income. Funds
having an investment objective of seeking a high total return may be limited in
their ability to attain their objective by the limitations on the types of
securities in which they may invest. No assurance can be given that the Fund
will be able to achieve its investment objective.
The Fund intends to accomplish its objective by investing in a combination
of equity securities and fixed income securities. The equity securities to be
acquired by the Fund will consist of common stocks and, to a lesser extent,
securities convertible into common stocks. Such securities generally will be
issued by companies which are listed on a national securities exchange, such as
the New York Stock Exchange, and which usually pay regular dividends, although
the Fund also may invest in securities traded on regional stock exchanges or on
the over-the-counter market. The Trust has not established any minimum
investment standards, such as an issuer's asset level, earnings history, type of
industry, dividend payment history, etc. with respect to the Fund's investments
in common stocks, although in selecting common stocks for the Fund, the
investment adviser and sub-adviser (collectively, "Fund Management") generally
apply an investment discipline which seeks to achieve a yield higher than the
overall equity market. Therefore, because smaller companies may be subject to
more significant losses, as well as have the potential for more substantial
growth, than larger, more established companies, investors in the Fund should
consider that the Fund's investments may consist in part of securities which may
be deemed to be speculative.
The income securities to be acquired by the Fund primarily will include
obligations of the U.S. government and its agencies. These U.S. government
obligations consist of direct obligations of the U.S. government (U.S. Treasury
bills, notes and bonds), obligations guaranteed by the U.S. government, such as
Ginnie Mae obligations, and obligations of U.S. government authorities, agencies
and instrumentalities, which are supported only by the assets of the issuer,
such as Fannie Mae, Federal Home Loan Banks, Federal Financing Bank and Federal
Farm Credit Bank. The Fund also may invest in corporate debt obligations which
are rated by Moody's Investors Service, Inc. ("Moody's") in its four highest
ratings of corporate obligations (Aaa, Aa, A and Baa) or by ^ S&P in its four
highest ratings of corporate obligations (AAA, AA, A and BBB) or, if not rated,
in Fund Management's opinion have investment characteristics similar to those
described in such ratings. A bond rating of Baa by Moody's indicates that the
bond issue is of "medium grade," neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present, but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and have speculative characteristics as well. A bond rating of
BBB by S&P indicates that the bond issue is in the lowest "investment grade"
security rating. Bonds rated BBB are regarded as having an adequate capacity to
pay principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category, and they may have speculative
characteristics. (See Appendix A to the Statement of Additional Information for
specific descriptions of these corporate bond rating categories.) Although there
is no limitation on the maturity of the Fund's investment in income securities,
the dollar weighted average maturity of such investments normally will be from 3
to 15 years.
<PAGE>
Obligations of certain U.S. government agencies and instrumentalities may
not be supported by the full faith and credit of the United States. Some are
backed by the right of the issuer to borrow from the U.S. Treasury; others, such
as Fannie Mae, by discretionary authority of the U.S. government to purchase the
agencies' obligations; while still others, such as the Student Loan Marketing
Association, are supported only by the credit of the instrumentality. In the
case of securities not backed by the full faith and credit of the United States,
the Fund must look principally to the agency issuing or guaranteeing the
obligation for ultimate repayment, and may not be able to assert a claim against
the United States itself in the event the agency or instrumentality does not
meet its commitments. The Fund will invest in securities of such
instrumentalities only when Fund Management is satisfied that the credit risk
with respect to any such instrumentality is minimal.
Typically, the Fund will maintain a minimum investment in equities of 30%
of total assets, and a minimum of 30% of total assets will be invested in fixed
and variable income securities. The remaining 40% of the portfolio will vary in
asset allocation according to Fund Management's assessment of business, economic
and market conditions. The analytical process associated with making allocation
decisions is based upon a combination of demonstrated historic financial
results, current prices for stocks and the current yield to maturity available
in the market for bonds. The premium return available from one category relative
to the other determines the actual asset deployment. Fund Management's asset
allocation process is systematic and is based on current information rather than
forecasted change. The Fund seeks reasonably consistent returns over a variety
of market cycles. (See "Risk Factors" section of this Prospectus for an analysis
of the risks presented by this Fund's ability to enter into futures contracts,
and its ability to use options to purchase or sell futures contracts or
securities.)
The investment objective of the Fund and its investment policies, where
indicated, are fundamental policies and thus may not be changed without prior
approval by the holders of a majority of the outstanding voting securities of
the Fund, as defined in the ^ Investment Company Act of 1940 (the "1940 Act").
In addition, the Trust and this Fund are also subject to certain investment
restrictions which also are identified in the Statement of Additional
Information and which may not be altered without approval of the Fund's
shareholders. One of those restrictions limits the Fund's borrowing of money to
borrowings from banks for temporary or emergency purposes (but not for
leveraging or investment) in an amount not exceeding 33 1/3% of the value of the
Fund's total assets.
<PAGE>
RISK FACTORS
Investors should consider the special factors associated with the policies
discussed below in determining the appropriateness of an investment in the
INVESCO Total Return Fund. The Fund's policies regarding investments in foreign
securities and foreign currencies are not fundamental and may be changed by vote
of the Trust's board of trustees.
Year 2000 Computer Issue. Due to the fact that many computer systems in
use today cannot recognize the Year 2000, but will, unless corrected, revert to
1900 or 1980 or cease to function at that time, the markets for securities in
which the Fund invests may be detrimentally affected by computer failures
affecting portfolio investments or trading of securities beginning January 1,
2000. Improperly functioning trading systems may result in settlement problems
and liquidity issues. In addition, corporate and governmental data processing
errors may result in production issues for individual companies and overall
economic uncertainties. Earnings of individual issuers may be affected by
remediation costs, which may be substantial. The Fund's investments may be
adversely affected.
Foreign Securities. The Fund may invest up to 25% of its total assets in
foreign equity or debt securities. Investments in securities of foreign
companies and in foreign markets involve certain additional risks not associated
with investments in domestic companies and markets, including the risks of
fluctuations in foreign currency exchange rates and of political or economic
instability, the difficulty of predicting international trade patterns, and the
possibility of imposition of exchange controls or currency blockage. In
addition, there may be less information publicly available about a foreign
company than about a domestic company, and there is generally less government
regulation of stock exchanges, brokers and listed companies abroad than in the
United States. Moreover, with respect to certain foreign countries, there may be
a possibility of expropriation or confiscatory taxation. Further, economies of
particular countries or areas of the world may differ favorably or unfavorably
from the economy of the United States.
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"). The EMU has established a common
European currency for EMU countries which is known as the "euro." Each
participating country has adopted the euro as its currency effective January 1,
1999. The old national currencies are 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, including whether the payment and operational systems of banks and other
financial institutions will have been ready by January 1, 1999; whether exchange
rates for existing currencies and the euro will have been adequately
established; and whether suitable clearing and settlement systems for the euro
will have been in operation. These and other factors may cause market
disruptions after January 1, 1999 and could adversely affect the value of
securities held by the Fund.
<PAGE>
After January 1, 1999, the introduction of the euro is expected to impact
European capital markets in ways that it is impossible to quantify at this time.
For example, investors may begin to view EMU countries as a single market, and
that may impact future investment decisions for 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 impact the
fiscal and monetary policies 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.
Forward Foreign Currency Contracts. The Fund may enter into contracts to
purchase or sell foreign currencies at a future date ("forward contracts") as a
hedge against fluctuations in foreign exchange rates pending the settlement of
transactions in foreign securities or during the time the Fund holds foreign
securities. A forward contract is an agreement between contracting parties to
exchange an amount of currency at some future time at an agreed upon rate.
Although the Fund has not adopted any limitations on its ability to use forward
contracts as a hedge against fluctuations in foreign exchange rates, it does not
attempt to hedge all of its foreign investment positions and will enter into
forward contracts only to the extent, if any, deemed appropriate by Fund
Management. The Fund will not enter into a forward contract for a term of more
than one year or for purposes of speculation. Investors should be aware that
hedging against a decline in the value of a currency in the foregoing manner
does not eliminate fluctuations in the prices of portfolio securities or prevent
losses if the prices of such securities decline. Furthermore, such hedging
transactions may preclude the opportunity for gain if the value of the hedged
currency should rise. No predictions can be made with respect to whether the
total of such transactions will result in a better or a worse position than had
the Fund not entered into any forward contracts. Forward contracts may, from
time to time, be considered illiquid, in which case they would be subject to the
Fund's limitation on investing in illiquid securities, discussed below. For
additional information regarding foreign securities, see the Trust's Statement
of Additional Information.
<PAGE>
Repurchase Agreements. The Fund may engage in repurchase agreements with
banks, registered broker-dealers, and registered government securities dealers
which are deemed creditworthy by Fund Management under guidelines established by
the board of trustees. A repurchase agreement is a transaction in which the Fund
purchases a security and simultaneously commits to sell the security to the
seller at an agreed upon price and date (usually not more than seven days) after
the date of purchase. The resale price reflects the purchase price plus an
agreed upon market rate of interest which is unrelated to the coupon rate or
maturity of the purchased security. The Fund's risk is limited to the ability of
the seller to pay the agreed upon amount on the delivery date. However, in the
event the seller should default, the underlying security constitutes collateral
for the seller's obligations to pay. This collateral will be held by the
custodian for the Fund's assets. In the event of insolvency of a counterparty to
a repurchase agreement, the Fund could experience delays and incur costs in
realizing on the collateral. To the extent that the proceeds from a sale upon a
default in the obligation to repurchase are less than the repurchase price, the
Fund would suffer a loss. Although the Fund has not adopted any limit on the
amount of its total assets that may be invested in repurchase agreements, the
Fund intends that at no time will the market value of its securities subject to
repurchase agreements exceed 20% of the total assets of the Fund.
Illiquid Securities. The Fund may invest from time to time in securities
subject to restrictions on disposition under the Securities Act of 1933
("restricted securities"), securities without readily available market
quotations or 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). However, on the date of purchase, no such investment may
increase the Fund's holdings of restricted securities to more than 2% of the
value of the Fund's total assets or its holdings of illiquid securities or those
without readily available market quotations to more than 5% of the value of the
Fund's total assets. The Fund is not required to receive registration rights in
connection with the purchase of restricted securities and, in the absence of
such rights, marketability and value can be adversely affected because the Fund
may be unable to dispose of such securities at the time desired or at a
reasonable price. In addition, in order to resell a restricted security, the
Fund might have to bear the expense and incur the delays associated with
effecting registrations.
Futures and Options. A futures contract is an agreement to buy or sell a
specific amount of a financial instrument or commodity at a particular price on
a particular date. The Fund will use futures contracts only to hedge against
price changes in the value of its current or intended investments in securities.
In the event that an anticipated decrease in the value of portfolio securities
occurs as a result of a general decrease in prices, the adverse effects of such
changes may be offset, at least in part, by gains on the sale of futures
contracts. Conversely, the increased cost of portfolio securities to be
acquired, caused by a general increase in prices, may be offset, at least in
part, by gains on futures contracts purchased by the Fund. Brokerage fees are
paid to trade futures contracts, and the Fund is required to maintain margin
deposits.
<PAGE>
Put and call options on futures contracts or securities may be traded by
the Fund in order to protect against declines in the value of portfolio
securities or against increases in the cost of securities to be acquired. The
purchaser of an option purchases the right to effect a transaction in the
underlying future or security at a specified price (the "strike price") before a
specified date (the "expiration date"). In exchange for the right, the purchaser
pays a "premium" to the seller, which represents the price of the right to buy
or to sell the underlying instrument. In exchange for the premium, the seller of
the option becomes obligated to effect a transaction in the underlying future or
security, at the strike price, at any time prior to the expiration date, should
the buyer choose to exercise the option. A call option contract grants the
purchaser the right to buy the underlying future or security, at the strike
price, before the expiration date. A put option contract grants the purchaser
the right to sell the underlying future or security, at the strike price, before
the expiration date. Purchases of options on futures contracts may present less
dollar risk in hedging the Fund's portfolio than the purchase and sale of the
underlying futures contracts, since the potential loss is limited to the amount
of the premium plus related transaction costs. The premium paid for such a put
or call option plus any transaction costs will reduce the benefit, if any,
realized by the Fund upon exercise or liquidation of the option, and, unless the
price of the underlying futures contract or security changes sufficiently, the
option may expire without value to the Fund.
Although the Fund will enter into futures contracts and options on futures
contracts and securities solely for hedging or other nonspeculative purposes,
within the meaning and intent of applicable rules of the ^ Commodity Futures
Trading Commission (the "CFTC"), their use does involve certain risks. For
example, a lack of correlation between the value of an instrument underlying an
option or futures contract and the assets being hedged, or unexpected adverse
price movements, could render the Fund's hedging strategy unsuccessful and could
result in losses. In addition, there can be no assurance that a liquid secondary
market will exist for any contract purchased or sold, and the Fund may be
required to maintain a position until exercise or expiration, which could result
in losses. Transactions in futures contracts and options are subject to other
risks as well, which are set forth in greater detail in the Statement of
Additional Information and Appendix B therein.
Securities Lending. The Fund may make loans of its portfolio securities
(not to exceed 10% of the Fund's total assets) to broker-dealers or other
institutional investors under contracts requiring such loans to be callable at
any time and to be secured continuously by collateral in cash, cash equivalents,
high quality short-term government securities or irrevocable letters of credit
maintained on a current basis at an amount at least equal to the market value of
the securities loaned, including accrued interest and dividends. The Fund will
continue to collect the equivalent of the interest or dividends paid by the
issuer on the securities loaned and will also receive either interest (through
investment of cash collateral) or a fee (if the collateral is government
securities). The Fund may pay finder's and other fees in connection with
securities loans.
<PAGE>
Portfolio Turnover. There are no fixed limitations regarding portfolio
turnover for the Fund. Although the Fund does not trade for short-term profits,
securities may be sold without regard to the time they have been held in the
Fund when, in the opinion of Fund Management, market considerations warrant such
action. As a result, while it is anticipated that the Fund's annual portfolio
turnover rate generally will not exceed 100%, under certain market conditions
the portfolio turnover rate for the Fund may exceed 100%. Increased portfolio
turnover would cause the Fund to incur greater brokerage costs than would
otherwise be the case. The Fund's portfolio turnover rates are set forth under
"Financial Highlights" and, along with the Trust's brokerage allocation
policies, are discussed in the Statement of Additional Information.
THE FUND AND ITS MANAGEMENT
The Trust is a no-load mutual fund, registered with the Securities and
Exchange Commission as an open-end, diversified management investment company.
The Trust was organized on July 15, 1987, under the laws of the Commonwealth of
Massachusetts as "Financial Series Trust." On July 1, 1993, the Trust changed
its name to "INVESCO Value Trust."
The Trust's board of trustees has responsibility for overall supervision
of the Fund, and reviews the services provided by the adviser. Under an
agreement with the Trust, INVESCO, 7800 E. Union Avenue, Denver, Colorado,
serves as the Fund's investment adviser. Under this agreement, INVESCO is
primarily responsible for providing the Fund with various administrative
services and supervises the Fund's daily business affairs. These services are
subject to review by the Trust's board of trustees.
INVESCO has contracted with INVESCO Capital Management, Inc. ("ICM"), the
Fund's investment adviser prior to 1991, for investment sub-advisory and
research services on behalf of the Fund. ICM currently manages in excess of $^
38.1 billion of assets on behalf of tax-exempt accounts (such as pension and
profit-sharing funds for corporations and state and local governments) and
investment companies. ICM, subject to the supervision of INVESCO, is primarily
responsible for selecting and managing the Fund's investments. Although the
Trust is not a party to the sub-advisory agreement, the agreement has been
approved by the shareholders of the Trust. Services provided by INVESCO and ICM
are subject to review by the Trust's board of trustees.^
<PAGE>
Pursuant to an agreement with the Trust, INVESCO Distributors, Inc.
("IDI") is the Fund's distributor. IDI, established in 1997, is a registered
broker-dealer that acts as distributor for all retail mutual funds advised by
INVESCO. Prior to September 30, 1997, INVESCO served as the Fund's distributor.
INVESCO, ICM and IDI are indirect wholly-owned subsidiaries of AMVESCAP
PLC. AMVESCAP PLC is a publicly-traded holding company that, through its
subsidiaries, engages in the business of investment management on an
international basis. INVESCO PLC changed its name to AMVESCO PLC on March 3,
1997 and to AMVESCAP PLC on May 8, 1997, as part of a merger between a direct
subsidiary of INVESCO PLC and A I M Management, Inc. that created one of the
largest independent investment management businesses in the world. AMVESCAP PLC
had approximately ^ $241 billion in assets under management as of ^ September
30, 1998. INVESCO was established in 1932 and, as of August 31, 1998, managed 14
mutual funds, consisting of 49 separate portfolios, with combined assets of
approximately 17.1 billion on behalf of 899,439 shareholders.
The following individuals serve as portfolio managers for the Fund and are
primarily responsible for the day-to-day management of the Fund's portfolio of
securities:
Edward C. Mitchell, Jr., C.F.A. Portfolio manager of the Fund
since 1987; Chairman (1997 to
present), president (1992 to
1997), vice president (1979 to
1991) and director (1979 to
present) for INVESCO Capital
Management, Inc.; began
investment career in 1969;
B.A., University of Virginia;
M.B.A., University of Colorado;
Chartered Financial Analyst;
Chartered Investment Counselor.
James O. Baker Portfolio manager of the Fund
since 1997; portfolio manager
of the INVESCO Intermediate
Government Bond Fund since
1993; portfolio manager for
INVESCO Capital Management,
Inc. (1992 to present);
portfolio manager, Willis
Investment Counsel (1990 to
1992); broker, Morgan Keegan
(1989 to 1990); broker, Drexel
Burnham Lambert (1985 to 1990);
began investment career in
1977; B.A., Mercer University;
Chartered Financial Analyst.
<PAGE>
Margaret W. Durkes Assistant portfolio manager of
the Fund since 1997; assistant
portfolio manager of AIM
Advisor Flex Fund since 1997;
assistant portfolio manager for
INVESCO Capital Management,
Inc. (1993 to present); vice
president and portfolio manager
for Sovran Capital Management
(1991 to 1993); B.A., The
Colorado College; Chartered
Financial Analyst.
David S. Griffin Assistant portfolio manager of
the Fund since 1993; portfolio
manager for INVESCO Capital
Management, Inc. (1991 to
present); mutual fund sales
representative, INVESCO
Services, Inc. (1986 to 1991);
began investment career in
1982; B.A., Ohio Wesleyan
University; M.B.A., William and
Mary; Chartered Financial
Analyst.
Fund Management permits investment and other personnel to purchase and
sell securities for their own accounts, subject to a compliance policy governing
personal investing. This policy requires Fund Management's personnel to conduct
their personal investment activities in a manner that Fund Management believes
is not detrimental to the Fund or Fund Management's other advisory clients. See
the Statement of Additional Information for more detailed information.
The Fund pays INVESCO a monthly fee which is based upon a percentage of
the Fund's average net assets determined daily. The management fee is computed
at the annual rate of 0.75% on the first $500 million of the Fund's average net
assets; 0.65% on the next $500 million of the Fund's average net assets; and
0.50% on the average net assets of the Fund in excess of $1 billion. For the
fiscal year ended August 31, 1998, the advisory fees paid to INVESCO amounted to
0.58% of the average net assets of the Fund.
Out of the advisory fee which it receives from the Fund, INVESCO pays ICM,
as the Fund's sub-adviser, a monthly fee based upon the average daily value of
the Fund's net assets. Based upon approval of the Trust's board of trustees at a
meeting held May 14, 1998, the calculation of subadvisory fees of the Fund has
been changed from 33.33% of the advisory fee (0.25% on the first $500 million of
the Fund's average net assets, 0.2167% on the next $500 million of the Fund's
average net assets and 0.1667% on the Fund's average net assets in excess of $1
billion) to 40% of the advisory fee (0.30% on the first $500 million of the
Fund's average net assets, 0.26% on the next $500 million of the Fund's average
net assets and 0.20% on the Fund's average net assets in excess of $1 billion).
No fee is paid by the Fund to ICM.
<PAGE>
The Trust also has entered into an Administrative Services Agreement (the
"Administrative Agreement") with INVESCO. Pursuant to the Administrative
Agreement, INVESCO performs certain administrative, recordkeeping and internal
sub-accounting services, including without limitation, maintaining general
ledger and capital stock accounts, preparing a daily trial balance, calculating
net asset value daily and providing selected general ledger reports and
providing sub-accounting and recordkeeping services for shareholder accounts
maintained by certain retirement and employee benefit plans for the benefit of
participants in such plans. For such services, the Fund pays INVESCO a fee
consisting of a base fee of $10,000 per year, plus an additional incremental fee
computed at an annual rate of 0.015% per year of the average net assets of the
Fund.
The Fund bears those Trust expenses which are accrued daily that are
incurred on its behalf and, in addition, bears a portion of general Trust
expenses, allocated based upon the relative net assets of the three Funds of the
Trust. Such expenses are generally deducted from the Fund's total income before
dividends are paid. Total expenses of the Fund, as a percentage of its average
net assets for the fiscal year ended August 31, 1998, including investment
advisory fees (but excluding brokerage commissions), were 0.79%.
The management and custodial services provided to the Fund by INVESCO and
the Fund's custodian, and the services provided to shareholders by INVESCO and
IDI, depend on the continued functioning of their computer systems. Many
computer systems in use today cannot recognize the Year 2000, but will revert to
1900 or 1980 or will cease to function due to the manner in which dates were
encoded and are calculated. That failure could have a negative impact on the
handling of the Fund's securities trades, its share pricing and its account
services. The Fund and its service providers have been actively working on
necessary changes to their computer systems to deal with the Year 2000 issue and
expect that their computer systems will be adapted before that date, but there
can be no assurance that they will be successful. Furthermore, services may be
impaired at that time as a result of the interaction of their systems with the
noncomplying computer systems of others. INVESCO plans to test as many such
interactions as practicable prior to December 31, 1999 and to develop
contingency plans for reasonably anticipated failures.
The Declaration of Trust pursuant to which the Trust is organized contains
an express disclaimer of shareholder liability for acts or obligations of the
Trust and requires that notice of such disclaimer be given in each instrument
entered into or executed by the Trust. The Declaration of Trust also provides
for indemnification out of the Trust's property for any shareholder held
personally liable for any Trust obligation. Thus, the risk of a shareholder
being personally liable for obligations of the Trust is limited to the unlikely
circumstance in which the Trust itself would be unable to meet its obligations.
<PAGE>
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of
such brokers' and dealers' financial responsibility coupled with their ability
to effect transactions at the best available prices. The Fund may place orders
for portfolio transactions with qualified brokers and dealers that recommend the
Fund or sell shares of the Fund to clients, or act as agent in the purchase of
fund shares for clients, if Fund Management believes that the quality of the
execution of the transaction and level of commission are comparable to those
available from other qualified brokerage firms. For further information, see
"Investment Practices - Placement of Portfolio Brokerage" in the Statement of
Additional Information.
HOW SHARES CAN BE PURCHASED
Shares of the Fund are sold on a continuous basis by IDI, as the Fund's
distributor, at the net asset value per share next calculated after receipt of a
purchase order in good form. No sales charge is imposed upon the sale of shares
of the Fund. To purchase shares of the Fund, send a check made payable to
INVESCO Funds Group, Inc., together with a completed application form, to:
INVESCO FUNDS GROUP, INC.
Post Office Box 173706
Denver, Colorado 80217-3706
Purchase orders must specify the Fund in which the investment is to be
made.
The minimum initial purchase must be at least $1,000, with subsequent
investments of not less than $50, except that: (1) those shareholders
establishing an EasiVest or direct payroll purchase account, as described below
in the section entitled "Services Provided by the Fund," may open an account
without making any initial investment if they agree to make regular, minimum
purchases of at least $50; (2) those shareholders investing in an Individual
Retirement Account ("IRA"), or through omnibus accounts where individual
shareholder recordkeeping and sub-accounting are not required, may make initial
minimum purchases of $250; (3) Fund Management may permit a lesser amount to be
invested in the Fund under a federal income tax-deferred retirement plan (other
than an IRA), or under a group investment plan qualifying as a sophisticated
investor; and (4) Fund Management reserves the right to increase, reduce or
waive the minimum purchase requirements in its sole discretion where it
determines such action is in the best interests of the Fund. The minimum initial
<PAGE>
purchase requirement of $1,000, as described above, does not apply to
shareholder account(s) in any of the INVESCO funds opened prior to January 1,
1993, and thus is not a minimum balance requirement for those existing accounts.
However, for shareholders already having accounts in any of the INVESCO funds,
all initial share purchases in a new fund account, including those made using
the exchange privilege, must meet the fund's applicable minimum investment
requirement.
The purchase of shares in the Fund can be expedited by placing bank wire,
overnight courier or telephone orders. For further information, the purchaser
may call the Fund's office by using the telephone number on the back cover of
this Prospectus. Orders sent by overnight courier, including Express Mail,
should be sent to the street address, not post office box, of INVESCO Funds
Group, Inc., 7800 E. Union Avenue, Denver, Colorado 80237.
Orders to purchase Fund shares can be placed by telephone. Shares of the
Fund will be issued at the net asset value next determined after receipt of
telephone instructions. Generally, payments for telephone orders must be
received by the Fund within three business days or the transaction may be
canceled. In the event of such cancellation, the purchaser will be held
responsible for any loss resulting from a decline in the value of the shares. In
order to avoid such losses, purchasers should send payments for telephone
purchases by overnight courier or bank wire. INVESCO has agreed to indemnify the
Fund for any losses resulting from the cancellation of telephone purchases.
If your check does not clear, or if a telephone purchase must be canceled
due to nonpayment, you will be responsible for any related loss the Fund or
INVESCO incurs. If you are already a shareholder in the INVESCO funds, the Fund
has the option to redeem shares from any identically registered account in the
Fund or any other INVESCO fund as reimbursement for any loss incurred. You also
may be prohibited or restricted from making future purchases in any of the
INVESCO funds.
Persons who invest in the Fund through a securities broker may be charged
a commission or transaction fee by the broker for the handling of the
transaction if the broker so elects. Any investor may deal directly with the
Fund in any transaction. In that event, there is no such charge. IDI or INVESCO
may from time to time make payments from their revenues to securities dealers
and other financial institutions that provide distribution-related and/or
administrative services for the Fund.
The Fund reserves the right in its sole discretion to reject any order for
purchase of its shares (including purchases by exchange) when, in the judgment
of Fund Management, such rejection is in the best interest of the Fund.
<PAGE>
Net asset value per share is computed once each day that the New York Stock
Exchange is open as of the close of regular trading on that Exchange (generally
4:00 p.m., New York time) and also may be computed on other days under certain
circumstances. Net asset value per share for the Fund is calculated by dividing
the market value of the Fund's securities plus the value of its other assets
(including dividends and interest accrued but not collected), less all
liabilities (including accrued expenses), by the number of outstanding shares of
the Fund. If market quotations are not readily available, a security will be
valued at fair value as determined in good faith by the board of trustees. Debt
securities with remaining maturities of 60 days or less at the time of purchase
will be valued at amortized cost, absent unusual circumstances, so long as the
Trust's board of trustees believes that such value represents fair value.
Under certain circumstances, the Fund may offer its shares, in lieu of
cash payment, for securities to be purchased by the Fund. Such a transaction can
benefit the Fund by allowing it to acquire securities for its portfolio without
paying brokerage commissions. For the same reason, the transaction also may be
beneficial to the party exchanging the securities. The Fund shall not enter into
such transactions, however, unless the securities to be exchanged for Fund
shares are readily marketable and not restricted as to transfer either by law or
liquidity of the market, comply with the investment policies and objectives of
the Fund, are of the type and quality which would normally be purchased for the
Fund's portfolio, are acquired for investment and not for resale, have a value
which is readily ascertainable as evidenced by a listing on the American Stock
Exchange, the New York Stock Exchange or NASDAQ, and are securities which the
Fund would otherwise purchase on the open market. The value of Fund shares used
to purchase portfolio securities as stated herein will be the net asset value as
of the effective time and date of the exchange. The securities to be received by
the Fund will be valued in accordance with the same procedure used in valuing
the Fund's portfolio securities. Any investor wishing to acquire shares of the
Fund in exchange for securities should contact either the president or the
secretary of the Trust at the address or telephone number shown on the back
cover of this Prospectus.
Distribution Expenses. The Fund is authorized under a Plan and Agreement
of Distribution pursuant to Rule 12b-1 under the ^ 1940 Act (the "Plan") to use
its assets to finance certain activities relating to the distribution of its
shares to investors. The Plan applies to New Assets (new sales of shares,
exchanges into the Fund and reinvestments of dividends and capital gains
distributions) of the Fund on or after June 1, 1998. Under the Plan, monthly
payments may be made by the Fund to IDI to permit IDI, at its discretion, to
engage in certain activities and provide certain services approved by the board
of trustees of the Trust in connection with the distribution of the Fund's
shares to investors. These activities and services may include the payment of
compensation (including incentive compensation and/or continuing compensation
based on the amount of customer assets maintained in the Fund) to securities
dealers and other financial institutions and organizations, which may include
<PAGE>
INVESCO- and IDI-affiliated companies, to obtain various
distribution-related and/or administrative services for the Fund. Such services
may include, among other things, processing new shareholder account
applications, preparing and electronically transmitting to the Fund's Transfer
Agent computer processable tapes of all transactions by customers, and serving
as the primary source of information to customers in answering questions
concerning the Fund and their transactions with the Fund.
In addition, other permissible activities and services include
advertising, preparation, printing and distribution of sales literature,
printing and distribution of prospectuses to prospective investors, and such
other services and promotional activities for the Fund as may from time to time
be agreed upon by the Trust and its board of trustees, including public
relations efforts and marketing programs to communicate with investors and
prospective investors. These services and activities may be conducted by the
staff of INVESCO, IDI or their affiliates or by third parties.
Under the Plan, the Fund's payments to IDI are limited to an amount
computed at an annual rate of 0.25% of the Fund's average net New Assets. IDI is
not entitled to payment for overhead expenses under the Plan, but may be paid
for all or a portion of the compensation paid for salaries and other employee
benefits for the personnel of INVESCO or IDI whose primary responsibilities
involve marketing shares of the INVESCO mutual funds, including the Fund.
Payment amounts by the Fund under the Plan, for any month, may be made to
compensate IDI for permissible activities engaged in and services provided by
IDI during the rolling 12-month period in which that month falls. Therefore, any
obligations incurred by IDI in excess of the limitations described above will
not be paid by the Fund and will be borne by IDI. In addition, IDI and its
affiliates may from time to time make additional payments from their revenues to
securities dealers, financial advisers and financial institutions that provide
distribution-related and/or administrative services for the Fund. No further
payments will be made by the Fund under the Plan in the event of the Plan's
termination. Payments made by the Fund may not be used to finance directly the
distribution of shares of any other fund of the Trust or other mutual funds
advised by INVESCO and distributed by IDI. However, payments received by IDI
which are not used to finance the distribution of shares of the Fund become part
of IDI's revenues and may be used by IDI for activities that promote
distribution of any of the mutual funds advised by INVESCO. Subject to review by
the Trust's trustees, payments made by the Fund under the Plan for compensation
of marketing personnel, as noted above, are based on an allocation formula
designed to ensure that all such payments are appropriate. IDI will bear any
distribution- and service-related expenses in excess of the amounts which are
compensated pursuant to the Plan. The Plan also authorizes any financing of
distribution which may result from INVESCO's or IDI's use of fees received from
the Fund for services rendered by INVESCO, provided that such fees are
legitimate and not excessive. For more information, see "How Shares Can Be
Purchased - Distribution Plan" in the Statement of Additional Information.
<PAGE>
SERVICES PROVIDED BY THE FUND
Shareholder Accounts. INVESCO maintains a share account that reflects the
current holdings of each shareholder. A separate account will be maintained for
a shareholder for each Fund in which the shareholder invests. As a business
trust, the Trust does not issue share certificates. Each shareholder is sent a
detailed confirmation of each transaction in shares of the Trust. Shareholders
whose only transactions are through the EasiVest, direct payroll purchase,
automatic monthly exchange or periodic withdrawal programs, or are reinvestments
of dividends or capital gains in the same or another fund, will receive
confirmations of those transactions on their quarterly statements. These
programs are discussed below. For information regarding a shareholder's account
and transactions, the shareholder may call INVESCO by using the telephone number
on the back cover of this Prospectus.
Reinvestment of Distributions. Dividends and other distributions are
automatically reinvested in additional shares of the Fund at the net asset value
per share of the Fund in effect on the ex-dividend or ex-distribution date. A
shareholder may, however, elect to reinvest dividends and other distributions in
certain of the other no-load mutual funds advised by INVESCO and distributed by
IDI, or to receive payment of all dividends and other distributions in excess of
$10.00 by check by giving written notice to INVESCO at least two weeks prior to
the record date on which the change is to take effect. Further information
concerning these options can be obtained by contacting INVESCO.
Periodic Withdrawal Plan. A Periodic Withdrawal Plan is available to
shareholders who own or purchase shares of any mutual funds advised by INVESCO
having a total value of $10,000 or more; provided, however, that at the time the
Plan is established, the shareholder owns shares having a value of at least
$5,000 in the fund from which the withdrawals will be made. Under the Periodic
Withdrawal Plan, INVESCO, as agent, will make specified monthly or quarterly
payments of any amount selected (minimum payment of $100) to the party
designated by the shareholder. Notice of all changes concerning the Periodic
Withdrawal Plan must be received by INVESCO at least two weeks prior to the next
scheduled check. Further information regarding the Periodic Withdrawal Plan and
its requirements and tax consequences can be obtained by contacting INVESCO.
Exchange Policy. Shares of the Fund may be exchanged for shares of any
other fund of the Trust, as well as for shares of any of the following other
no-load mutual funds, which are also advised and distributed by INVESCO, on the
basis of their respective net asset values at the time of the exchange: 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.) and INVESCO Tax-Free Income Funds, Inc.
<PAGE>
An exchange involves the redemption of shares in the Fund and investment
of the redemption proceeds in shares of another fund of the Trust or in shares
of one of the funds listed above. Exchanges will be made at the net asset value
per share next determined after receipt of an exchange request in proper order.
Any gain or loss realized on such an exchange is recognizable for federal income
tax purposes by the shareholder. Exchange requests may be made either by
telephone or by written request to INVESCO, using the telephone number or
address on the back cover of this Prospectus. Exchanges made by telephone must
be in the amount of at least $250 if the exchange is being made into an existing
account of one of the INVESCO funds. All exchanges that establish a new account
must meet the fund's applicable minimum initial investment requirements. Written
exchange requests into an existing account have no minimum requirements other
than the Fund's applicable minimum subsequent investment requirements.
The option to exchange Fund shares by telephone is available to
shareholders automatically unless expressly declined. By signing the new account
Application or a Telephone Transaction Authorization Form or otherwise utilizing
the telephone exchange, the investor has agreed that the Fund will not be liable
for following instructions communicated by telephone that it reasonably believes
to be genuine. The Fund employs procedures, which it believes are reasonable,
designed to confirm that exchange transactions are genuine. These may include
recording telephone instructions and providing written confirmations of exchange
transactions. As a result of this policy, the investor may bear the risk of any
loss due to unauthorized or fraudulent instructions; provided, however, that if
the Fund fails to follow these or other reasonable procedures, the Fund may be
liable.
In order to prevent abuse of this policy to the disadvantage of other
shareholders, the Fund reserves the right to temporarily or permanently
terminate the exchange option of any shareholder who requests more than four
exchanges in a year, or at any time the Fund determines the actions of the
shareholder are detrimental to Fund performance and shareholders. The Fund will
determine whether to do so based on a consideration of both the number of
exchanges any particular shareholder or group of shareholders has requested and
the time period over which those exchange requests have been made, together with
the level of expense to the Fund which will result from effecting additional
exchange requests. The exchange policy also may be modified or terminated at any
time. Except in unusual circumstances where redemptions of the exchanged
security are suspended under Section 22(e) of the 1940 Act, or where sales of
the fund into which the shareholder is exchanging are temporarily suspended,
notice of all such modifications to the policy or terminations that would affect
all Fund shareholders will be given at least 60 days prior to the date of the
change in policy.
<PAGE>
Before making an exchange, the shareholder should review the prospectuses
of the funds involved and consider their differences. Shareholders interested in
exercising the exchange option may contact INVESCO for information concerning
their particular exchanges.
Automatic Monthly Exchange. Shareholders who have accounts in any one or
more of the mutual funds distributed by IDI may arrange for a fixed dollar
amount of their fund shares to be automatically exchanged for shares of any
other INVESCO mutual fund listed under "Exchange Policy" on a monthly basis,
subject to the Fund's minimum initial investment or subsequent investment
requirements. This automatic exchange program can be changed by the shareholder
at any time by notifying INVESCO at least two weeks prior to the date the change
is to be made. Further information regarding this service can be obtained by
contacting INVESCO.
EasiVest. For shareholders who want to maintain a schedule of monthly
investments, EasiVest uses various methods to draw a preauthorized amount from
the shareholder's bank account to purchase Fund shares. This automatic
investment program can be changed by the shareholder at any time by contacting
INVESCO at least two weeks prior to the date the change is to be made. Further
information regarding this service can be obtained by contacting INVESCO.
Direct Payroll Purchase. Shareholders may elect to have their employers
make automatic purchases of Fund shares for them by deducting a specified amount
from their regular paychecks. This automatic investment program can be modified
or terminated at any time by the shareholder by notifying the employer. Further
information regarding this service can be obtained by contacting INVESCO.
Tax-Deferred Retirement Plans. Shares of the Fund may be purchased for
self-employed individual retirement plans, various IRAs, simplified employee
pension plans and corporate retirement plans. In addition, shares can be used to
fund tax qualified plans established under Section 403(b) of the Internal
Revenue Code by educational institutions, including public school systems and
private schools, and certain kinds of non-profit organizations, which provide
deferred compensation arrangements for their employees.
Prototype forms for the establishment of these various plans including,
where applicable, disclosure statements required by the Internal Revenue
Service, are available from INVESCO. Institutional Trust Company, doing business
as INVESCO Trust Company ("ITC"), an affiliate of INVESCO, is qualified to serve
as trustee or custodian under these plans and provides the required services at
competitive rates. Retirement plans (other than IRAs) receive monthly statements
reflecting all transactions in their Fund accounts. IRAs receive the
confirmations and quarterly statements described under "Shareholder Accounts."
For complete information, including prototype forms and service charges, call
IDI at the telephone number listed on the back cover of this Prospectus or send
a written request to: Retirement Services, INVESCO Funds Group, Inc., Post
Office Box 173706, Denver, Colorado 80217-3706.
<PAGE>
HOW TO REDEEM SHARES
Shares of the Fund may be redeemed at any time at their current net asset
value next determined after a request in proper form is received at the Fund's
office. Redemption requests sent by overnight courier, including Express Mail,
should be sent to the street address, not post office box, of INVESCO Funds
Group, Inc. at 7800 E. Union Avenue, Denver, CO 80237. (See "How Shares Can Be
Purchased.") Net asset value per share of the Fund at the time of the redemption
may be more or less than the price originally paid to purchase shares, depending
primarily upon the Fund's investment performance.
In order to redeem shares, a written redemption request signed by each
registered owner of the account may be submitted to INVESCO at the address noted
above. If shares are held in the name of a corporation, additional documentation
may be necessary. Call or write for specific information. If payment for the
redeemed shares is to be made to someone other than the registered owner(s), the
signature(s) must be guaranteed by a financial institution which qualifies as an
eligible guarantor institution. Redemption procedures with respect to accounts
registered in the names of broker-dealers may differ from those applicable to
other shareholders.
BE CAREFUL TO SPECIFY THE ACCOUNT FROM WHICH THE REDEMPTION IS TO BE MADE.
SHAREHOLDERS HAVE A SEPARATE ACCOUNT FOR EACH FUND IN WHICH THEY INVEST.
Payment of redemption proceeds will be mailed within seven days following
receipt of the required documents. However, payment may be postponed under
unusual circumstances, such as when normal trading is not taking place on the
New York Stock Exchange or when an emergency as defined by the Securities and
Exchange Commission exists. If the shares to be redeemed were purchased by check
and that check has not yet cleared, payment will be made promptly upon clearance
of the purchase check (which will take up to 15 days).
If a shareholder participates in EasiVest, the Fund's automatic monthly
investment program, and redeems all of the shares in a Fund account, INVESCO
will terminate any EasiVest purchases unless otherwise instructed by the
shareholder.
<PAGE>
Because of the high relative costs of handling small accounts, should the
value of any shareholder's account fall below $250 as a result of shareholder
action, the Fund reserves the right to effect the involuntary redemption of all
shares in such account, in which case the account would be liquidated and the
proceeds forwarded to the shareholder. Prior to any such redemption, a
shareholder will be notified and given 60 days to increase the value of the
account to $250 or more.
Fund shareholders (other than shareholders holding Fund shares in accounts
of IRA plans) may request expedited redemption of shares having a minimum value
of $250 (or redemption of all shares if their value is less than $250) held in
accounts maintained in their name by telephoning redemption instructions to
INVESCO, using the telephone number on the back cover of this Prospectus.
At the shareholder's option, the redemption proceeds either will be mailed
to the address listed for the shareholder's Fund account, or wired (minimum of
$1,000) or mailed to the bank which the shareholder has designated to receive
the proceeds of telephone redemptions. Unless INVESCO permits a longer
redemption request to be placed by telephone, a shareholder may not place a
redemption request by telephone in excess of $25,000. These telephone redemption
privileges may be modified or terminated in the future at the discretion of
INVESCO. For ITC sponsored federal income tax-deferred retirement plans, the
term "shareholders" is defined to mean plan trustees that file a written request
to be able to redeem Fund shares by telephone. Shareholders should understand
that while the Fund will attempt to process all telephone redemption requests on
an expedited basis, there may be times, particularly in periods of severe
economic or market disruption, when (a) they may encounter difficulty in placing
a telephone redemption request, and (b) processing telephone redemptions will
require up to seven days following receipt of the redemption request, or
additional time because of the unusual circumstances set forth above.
Redeeming Fund shares by telephone is available to shareholders
automatically unless expressly declined. By signing a new account Application, a
Telephone Transaction Authorization Form or otherwise utilizing telephone
redemption privileges, the shareholder has agreed that the Fund will not be
liable for following instructions communicated by telephone that it reasonably
believes to be genuine. The Fund employs procedures, which it believes are
reasonable, designed to confirm that telephone instructions are genuine. These
may include recording telephone instructions and providing written confirmations
of transactions initiated by telephone. As a result of this policy, the investor
may bear the risk of any loss due to unauthorized or fraudulent instructions;
provided, however, that if the Fund fails to follow these or other reasonable
procedures, the Fund may be liable.
<PAGE>
TAXES, DIVIDENDS AND OTHER DISTRIBUTIONS
Taxes. The Fund intends to distribute to shareholders substantially all of
its net investment income, net capital gains and net gains from certain foreign
currency transactions, if any. Distribution of substantially all net investment
income to shareholders allows the Fund to maintain its tax status as a regulated
investment company. The Fund does not expect to pay any federal income or excise
taxes because of its distribution policies and tax status as a regulated
investment company.
Shareholders must include all dividends and other distributions in taxable
income for federal, state and local income tax purposes, unless their accounts
are exempt from income taxes. Dividends and other distributions are taxable
whether they are received in cash or automatically reinvested in shares of
either the Fund or another fund in the INVESCO group.
Net realized capital gains of the Fund are classified as short-term and
long-term gains depending upon how long the Fund held the security that gave
rise to the gains. Short-term capital gains are included in income from
dividends and interest as ordinary income and are taxed at the taxpayer's
marginal tax rate. During 1997, the Taxpayer Relief Act established a new
maximum capital gains tax rate of 20%. Depending on the holding period of the
asset giving rise to the gain, a capital gain was taxable at a maximum rate of
either 20% or 28%. Beginning January 1, 1998, all long-term gains realized on
the sale of securities held for more than 12 months will be taxable at a maximum
rate of 20%. In addition, legislation signed in October 1998 provides that all
capital gain distributions from a mutual fund paid to shareholders during 1998
will be taxed at a maximum rate of 20%. Accordingly, all capital gain
distributions paid in 1998 will be taxable at a maximum rate of 20%. At the end
of each year, information regarding the tax status of dividends and other
distributions is provided to shareholders. Shareholders should consult their tax
advisers as to the effect of distributions by the Fund.
Shareholders may realize capital gains or losses when they sell their Fund
shares at more or less than the price originally paid. Capital gain on shares
held for more than one year will be long-term capital gain, in which event it
will be subject to federal income tax at the rates indicated above.
The Fund may be subject to withholding of foreign taxes on dividends or
interest it receives on foreign securities. Foreign taxes withheld will be
treated as an expense of the Fund.
Individuals and certain other non-corporate shareholders may be subject to
backup withholding of 31% on dividends, capital gain and other distributions and
redemption proceeds. Shareholders can avoid backup withholding on their Fund
accounts by ensuring that INVESCO has a correct, certified tax identification
number.
<PAGE>
Shareholders should consult a tax adviser with respect to these matters.
For further information see "Dividends, Other Distributions And Taxes" in the
Statement of Additional Information.
Dividends and Other Distributions. The Fund earns ordinary or net
investment income in the form of interest and dividends on its investments.
Dividends paid by the Fund will be based solely on net investment income earned
by it. The Fund's policy is to distribute substantially all of this income, less
expenses, to shareholders. Dividends from net investment income are paid on a
quarterly basis, at the end of November, February, May and August, at the
discretion of the Trust's board of trustees. Dividends are automatically
reinvested in additional shares of the Fund at the net asset value on the
payable date unless otherwise requested.
In addition, the Fund realizes capital gains and losses when it sells
securities or derivatives for more or less than it paid. If total gains on sales
exceed total losses (including losses carried forward from previous years), the
Fund has a net realized capital gain. Net realized capital gains, if any,
together with gains realized on foreign currency transactions, if any, are
distributed to shareholders at least annually, usually in December. Capital gain
distributions are automatically reinvested in additional shares of the Fund at
the net asset value on the payable date unless otherwise requested.
Dividends and other distributions are paid to shareholders on the record
date of distribution regardless of how long the Fund shares have been held by
the shareholder. The Fund's share price will then drop by the amount of the
distribution on the ex-dividend or ex-distribution date. If a shareholder
purchases shares immediately prior to the distribution, the shareholder will, in
effect, have "bought" the distribution by paying the full purchase price, a
portion of which is then returned in the form of a taxable distribution.
ADDITIONAL INFORMATION
Voting Rights. All shares of the Fund have equal voting rights based on one
vote for each share owned and a corresponding fractional vote for each
fractional share owned. Voting with respect to certain matters, such as
ratification of independent accountants and the election of trustees, will be by
all funds of the Trust voting together. In other cases, such as voting upon the
investment advisory contract for the individual funds, voting is on a
fund-by-fund basis. To the extent permitted by law, when not all funds are
affected by a matter to be voted upon, only shareholders of the fund or funds
affected by the matter will be entitled to vote thereon. The Trust is not
generally required and does not expect, to hold regular annual meetings of
shareholders. However, the board of trustees will call such special meetings of
shareholders for the purpose, among other reasons, of voting the question of
removal of a trustee or trustees when requested to do so in writing by the
holders of 10% or more of the outstanding shares of the Fund or as may be
required by applicable law or the Trust's Declaration of Trust. The Trust will
assist shareholders in communicating with other shareholders as required by the
1940 Act. Trustees may be removed by action of the holders of two-thirds of the
outstanding shares of the Trust.
<PAGE>
Shareholder Inquiries. All inquiries regarding the Fund should be directed
to the Trust at the telephone number or mailing address set forth on the back
cover ^ of this Prospectus.
Transfer and Dividend Disbursing Agent. INVESCO, 7800 E. Union Avenue,
Denver, Colorado 80237, acts as registrar, transfer agent and dividend
disbursing agent for the Fund pursuant to a Transfer Agency Agreement which
provides that the Fund will pay an annual fee of $20.00 per shareholder account
or, where applicable, per participant in an omnibus account. The transfer agency
fee is not charged to each shareholder's or participant's account but is an
expense of the Fund to be paid from the Fund's assets. Registered
broker-dealers, third party administrators of tax-qualified retirement plans and
other entities, including affiliates of INVESCO, may provide sub-transfer agency
services to the Fund which reduce or eliminate the need for identical services
to be provided on behalf of the Fund by INVESCO. In such cases, INVESCO may pay
the third party an annual sub-transfer agency or recordkeeping fee out of the
transfer agency fee which is paid to INVESCO by the Fund.
<PAGE>
^ INVESCO Total Return Fund
PROSPECTUS
January 1, 1999
^ We're easy to stay in touch with:
^ Investor services: 1-800-525-8085
^ PAL(R), your Personal Account Line: 1-800-424-8085
^ On the World Wide Web: www.invesco.com
In Denver, visit one of our
convenient Investor Centers:
Cherry Creek
155-B Fillmore Street;
Denver Tech Center
7800 East Union Avenue
Lobby Level
INVESCO Distributors, Inc.,(SM)
Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
In addition, all documents You should know what
filed by the Trust with the INVESCO knows.(TM)
Securities and Exchange
Commission can be located on INVESCO Funds
a web site maintained by the
Commission at
http://www.sec.gov.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
January 1, 1999
INVESCO VALUE TRUST
INVESCO Intermediate Government Bond Fund
INVESCO Total Return Fund
INVESCO Value Equity Fund
Address: Mailing Address:
7800 E. Union Avenue Post Office Box 173706
Denver, Colorado 80237 Denver, Colorado 80217-3706
Telephone:
In continental U.S., 1-800/525-8085
INVESCO VALUE TRUST (the "Trust"), is an open-end management investment
company organized in series form in which all of the Funds seek to provide
investors with a high total return on investment through capital appreciation
and current income. Each of the Trust's three individual funds (collectively,
the "Funds") has separate investment policies. Investors may purchase shares of
any or all Funds. The following Funds are available:
INVESCO INTERMEDIATE GOVERNMENT BOND Fund (the "Intermediate
Government Bond Fund")
INVESCO TOTAL RETURN Fund (the "Total Return Fund")
INVESCO VALUE EQUITY
Fund (the "Value Equity Fund")
Additional Funds may be offered in the future.
Prospectuses for the Funds dated January 1, 1999, which provide the basic
information you should know before investing in a Fund, may be obtained without
charge from INVESCO Distributors, Inc., Post Office Box 173706, Denver, Colorado
80217-3706. This Statement of Additional Information is not a prospectus but
contains information in addition to and more detailed than that set forth in
each Prospectus. It is intended to provide additional information regarding the
activities and operations of the Trust and should be read in conjunction with
the Prospectuses.
Investment Adviser: INVESCO FUNDS GROUP, INC.
Distributor: INVESCO DISTRIBUTORS, INC.
<PAGE>
TABLE OF CONTENTS
Page
INVESTMENT POLICIES AND RESTRICTIONS 3
THE FUNDS AND THEIR MANAGEMENT 15
HOW SHARES CAN BE PURCHASED 32
HOW SHARES ARE VALUED 36
FUND PERFORMANCE 38
SERVICES PROVIDED BY THE TRUST 39
TAX-DEFERRED RETIREMENT PLANS 40
HOW TO REDEEM SHARES 41
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES 42
INVESTMENT PRACTICES 45
ADDITIONAL INFORMATION 48
APPENDIX A 53
APPENDIX B 55
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
Reference is made to the section entitled "Investment Objectives And
Policies" in the Prospectuses for a discussion of the investment objectives and
policies of the Funds. In addition, set forth below is further information
relating to the INVESCO Value Equity, Intermediate Government Bond and Total
Return Funds.
Loans of Portfolio Securities. As discussed in the section entitled "Risk
Factors" in the Prospectuses, all of the Funds may lend their portfolio
securities to brokers, dealers, and other financial institutions, provided that
such loans are callable at any time by the Funds and are at all times secured by
collateral held by the Funds' custodian consisting of cash or securities issued
or guaranteed by the United States Government or its agencies, or any
combination thereof, equal to at least the market value, determined daily, of
the loaned securities. The advantage of such loans is that such a Fund continues
to earn income on the loaned securities, while at the same time receiving
interest from the borrower of the securities. Loans will be made only to firms
deemed by the adviser or sub-adviser (collectively, "Fund Management"), under
procedures established by the Trust's Board of Trustees, to be creditworthy and
when the amount of interest to be received justifies the inherent risks. A loan
may be terminated by the borrower on one business day's notice, or by such Fund
at any time. If at any time the borrower fails to maintain the required amount
of collateral (at least 100% of the market value of the borrowed securities),
the Fund will require the deposit of additional collateral not later than the
business day following the day on which a collateral deficiency occurs or the
collateral appears inadequate. If the deficiency is not remedied by the end of
that period, such Fund will use the collateral to replace the securities while
holding the borrower liable for any excess of replacement cost over collateral.
Upon termination of the loan, the borrower is required to return the securities
to such Fund. Any gain or loss during the loan period would inure to such Fund.
Futures and Options on Futures. As discussed in the Value Equity and Total
Return Funds' Prospectuses, the Value Equity and Total Return Funds 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 it effects 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
<PAGE>
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 solely for bona fide hedging
or for other non-speculative purposes within the meaning and intent of the
applicable provisions of the CEA.
Unlike when 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 portfolio 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. For a more complete discussion of the risks involved in
futures and options on futures and other securities, refer to Appendix B
("Description of Futures, Options and Forward Contracts").
Where futures are purchased to hedge against a possible increase in the
price of a security before 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 futures may not correlate
perfectly with movements in the prices due to certain market distortions. All
participants in the futures market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions which
could distort the normal relationship between underlying instruments and the
value of the futures contract. Moreover, the deposit requirements in the futures
market are less onerous than margin requirements in the securities market and
may therefore cause increased participation by speculators in the futures
market. Such increased participation may also cause temporary price distortions.
Due to the possibility of price distortion in the futures market and because of
the imperfect correlation between movements in the underlying instrument and
movements in the prices of futures contracts, the value of futures contracts as
a hedging device may be reduced.
In addition, if 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.
Forward Foreign Currency Contracts. The Value Equity and Total Return
Funds may enter into forward currency contracts to purchase or sell foreign
currencies (i.e., non-U.S. currencies) ("forward contracts") as a hedge against
possible variations in foreign exchange rates. A forward contract is an
agreement between the contracting parties to exchange an amount of currency at
some future time at an agreed upon rate. The rate can be higher or lower than
the spot rate between the currencies that are the subject of the contract. A
forward contract generally has no deposit requirement, and such transactions do
not involve commissions. By entering into a forward contract for the
purchase or sale of the amount of foreign currency invested in a foreign
security transaction, a Fund can hedge against possible variations in the value
of the dollar versus the subject currency either between the date the foreign
security is purchased or sold and the date on which payment is made or received
or during the time the Fund holds the foreign security. Hedging against a
decline in the value of a currency in the foregoing manner does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Furthermore, such hedging transactions
preclude the opportunity for gain if the value of the hedged currency should
rise. The Funds will not speculate in forward contracts. The Funds will not
attempt to hedge all of their non-U.S. portfolio positions and will enter into
such transactions only to the extent, if any, deemed appropriate by their
investment adviser. The Funds will not enter into forward contracts for a term
of more than one year. Forward contracts may, from time to time, be considered
illiquid, in which case they would be subject to a Fund's limitation on
investing in illiquid securities, discussed in its Prospectus.
<PAGE>
Real Estate Investment Trusts. Although they are not permitted to invest
in real estate directly, the Funds may invest in real estate investment trusts
("REITs"). A REIT is a trust which sells shares to investors and uses the
proceeds to invest in real estate or interests in real estate.
The Total Return and Value Equity Funds have adopted a policy which
permits each Fund to write, purchase or sell put and call options on individual
securities, securities indexes and currencies, or financial futures or options
on financial futures, or undertake forward currency contracts. The following
subsections entitled "Put and Call Options," "Futures and Options on Futures"
and "Options on Futures Contracts" apply only to the Total Return and Value
Equity Funds.
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, although the entire amount
may be lost. The risk of the seller, or "writer," however, is potentially
unlimited, unless the option is "covered," which is generally accomplished
through the writer's ownership of the underlying security in the case of a call
option, or the writer's segregation of an amount of cash or securities equal to
the exercise price in the case of a put option. If the writer's obligation is
not so covered, it is subject to the risk of the full change in value of the
underlying security from the time the option is written until exercise.
Upon exercise of the option, the holder is required to pay the purchase
price of the underlying security in the case of a call option or to deliver the
security in return for the purchase price in the case of a put option.
Conversely, the writer is required to deliver the security in the case of a call
option or to purchase the security in the case of a put option. Options on
securities which have been purchased or written may be closed out prior to
exercise or expiration by entering into an offsetting transaction on the
exchange on which the initial position was established, subject to the
availability of a liquid secondary market.
<PAGE>
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 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 a Fund as covered
call option writer is unable to effect a closing purchase transaction in a
secondary market, unless a 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 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
<PAGE>
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, believes that its facilities are adequate to
handle the volume of reasonably anticipated options transactions, and such
exchanges have advised such clearing corporation that they believe their
facilities will also be adequate to handle reasonably anticipated volume. For a
more complete discussion of the risks involved in futures and options on futures
and other securities, refer to Appendix B ("Description of Futures, Options and
Forward Contracts").
Futures and Options on Futures. 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. Each Fund will comply with and adhere
to all limitations in the manner and extent to which it effects transactions in
futures and options on such futures currently imposed by the rules and policy
guidelines of the Commodity Futures Trading Commission ("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 solely for bona fide hedging or for other non-speculative purposes
within the meaning and intent of the applicable provisions of the CEA.
Unlike when 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, a
Fund will be required to deposit in its segregated asset account an amount of
cash or qualifying securities (currently U.S. Treasury bills). 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
portfolio 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
<PAGE>
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.
In addition to the possibility that there may be an imperfect correlation
or no correlation at all between movements in the futures contracts and the
portion of the portfolio being hedged, the price of futures may not correlate
perfectly with movements in the prices due to certain market distortions. All
participants in the futures market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions which
could distort the normal relationship between underlying instruments and the
value of the futures contract. Moreover, the deposit requirements in the futures
market are less onerous than margin requirements in the securities market and
may therefore cause increased participation by speculators in the futures
market. Such increased participation may also cause temporary price distortions.
Due to the possibility of price distortion in the futures market and because of
the imperfect correlation between movements in the underlying instrument and
movements in the prices of futures contracts, the value of futures contracts as
a hedging device may be reduced.
In addition, if 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.
Options on Futures Contracts. The Value Equity and Total Return Funds 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.
<PAGE>
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 portfolio
holdings. The writing of a put option on a futures contract constitutes a
partial hedge against increasing prices of the security or foreign currency
which is deliverable under, or of the index comprising, the futures contract. If
the futures price at expiration of the option is higher than the exercise price,
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
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 option 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 transaction costs. In
addition to the correlation risks discussed above, the purchase of an option
also entails the risk that changes in the value of the underlying futures
contract will not be reflected fully in the value of the options bought.
For a more complete discussion of the risks involved in futures and
options on futures and other securities, refer to Appendix B ("Description of
Futures, Options and Forward Contracts").
Investment Restrictions. As discussed in the section of each Fund's
Prospectus entitled "Investment Policies and Risks", the Funds are subject to
certain investment restrictions. For purposes of the following investment
restrictions, all percentage limitations apply immediately after a purchase or
initial investment. Any subsequent change in a particular percentage resulting
from fluctuations in value does not require elimination of any security from the
Fund.
<PAGE>
The following restrictions are fundamental and may not be changed with
respect to a particular Fund without the prior approval of the holders of a
majority, as defined in the Investment Company Act of 1940 (the "1940 Act"), of
the outstanding voting securities of that Fund. Each Fund, unless otherwise
indicated, may not:
(1) Other than investments by the Funds, including the INVESCO
Intermediate Government Bond Fund, in obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities, invest in
the securities of issuers conducting their principal business
activities in the same industry (investments in obligations issued by
a foreign government, including the agencies or instrumentalities of a
foreign government, are considered to be investments in a single
industry), if immediately after such investment the value of a Fund's
investments in such industry would exceed 25% of the value of such
Fund's total assets;
(2) With respect to the total assets of the Intermediate
Government Bond Fund and the Value Equity Fund and with respect to
seventy-five percent (75%) of the Total Return Fund's total assets,
purchase the securities of any one issuer (except cash items and
"government issuers" 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.
(3) Underwrite securities of other issuers, except insofar as it
may technically be deemed an "underwriter" under the Securities Act of
1933, as amended, in connection with the disposition of a Fund's
portfolio securities.
(4) Invest in companies for the purpose of exercising control or
management.
<PAGE>
(5) Issue any class of senior securities or borrow money, except
borrowings from banks for temporary or emergency purposes (not for
leveraging or investment) in an amount not exceeding 33 1/3% of the
value of a Fund's total assets at the time the borrowing is made.
(6) Mortgage, pledge, hypothecate or in any manner transfer as
security for indebtedness any securities owned or held except to an
extent not greater than 5% of the value of a Fund's total assets.
(7) Sell short, except the Value Equity and Total Return Funds
may purchase or sell options or futures, or write, purchase or sell
puts and calls.
(8) Buy on margin, except the Value Equity and Total Return Funds
may purchase or sell options or futures, or write, purchase or sell
puts and calls.
(9) Purchase or sell real estate or interests in real estate
(except for the Total Return and Value Equity Funds). Each of the
Funds may invest in securities secured by real estate or interests
therein or issued by companies, including real estate investment
trusts, which invest in real estate or interests therein.
(10) Buy or sell commodities contracts (however the Value Equity
and Total Return Funds may purchase securities of companies which
invest in the foregoing). This restriction shall not prevent the Value
Equity and Total Return 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. The Intermediate Government Bond Fund may enter
into interest rate futures contracts if immediately after such a
commitment the sum of the then aggregate futures market prices of
financial instruments required to be delivered under open futures
contract sales and the aggregate purchase prices under futures
contract purchases would not exceed 30% of the Intermediate Government
Bond Fund's total assets.
(11) Make loans to other persons, provided that a Fund may
purchase debt obligations consistent with its investment objectives
and policies and the INVESCO Value Equity, Intermediate Government
Bond, and Total Return Funds may lend limited amounts (not to exceed
10% of their total assets) of their portfolio securities to broker-
dealers or other institutional investors.
<PAGE>
(12) Purchase securities of other investment companies except (i)
in connection with a merger, consolidation, acquisition or
reorganization, or (ii) by purchase in the open market of securities
of other investment companies involving only customary brokers'
commissions and only if immediately thereafter (i) no more than 3% of
the voting securities of any one investment company are owned by such
a Fund, (ii) no more than 5% of the value of the total assets of such
a Fund would be invested in any one investment company, and (iii) no
more than 10% of the value of the total assets of such a Fund would be
invested in the securities of such investment companies. The Trust may
invest from time to time a portion of the INVESCO Value Equity,
Intermediate Government Bond, and Total Return Funds' cash in
investment companies to which the Adviser serves as investment
adviser; provided that no management or distribution fee will be
charged by the Adviser with respect to any such assets so invested and
provided further that at no time will more than 3% of such a Fund's
assets be so invested. Should such a Fund purchase securities of other
investment companies, shareholders may incur additional management and
distribution fees.
(13) Invest in securities for which there are legal or
contractual restrictions on resale, except that each of the Funds may
invest no more than 2% of the value of its total assets in such
securities; or invest in securities for which there is no readily
available market, except that each of the Funds may invest no more
than 5% of the value its total assets in such securities.
In applying the industry concentration investment restriction (no. 1
above), the Funds use a modified S&P industry code classification schema which
uses various sources to classify securities.
In applying restriction (13) 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 5% of total assets limit.
Additional investment restrictions adopted by the Trust on behalf of the
Funds and which may be changed by the Trustees at their discretion provide that
the Funds may not:
<PAGE>
(1) (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 each 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 derivative positions if
the aggregate net amount of the Fund's commitments under outstanding
derivative positions of the Fund would exceed the market value of
the total assets of the Fund. The INVESCO Intermediate Government
Bond Fund may not enter into future contracts, options on futures,
puts or calls.
(2) Purchase or sell interests in oil, gas or other mineral leases or
exploration or development programs. All of the Funds, however, may
purchase or sell securities issued by entities which invest in such
interests.
(3) Invest more than 5% of a Fund's total assets in securities of
companies having a record, together with predecessors, of less than
three years of continuous operation.
(4) Purchase or retain the securities of any issuer if any individual
officers and trustees/directors of the Trust, the Adviser, or any
subsidiary thereof owns individually more than 0.5% of the
securities of that issuer and all such officers and
trustees/directors together own more than 5% of the securities of
that issuer.
(5) Engage in arbitrage transactions.
(6) To the extent a Fund invests in warrants, such a Fund's investment
in warrants, valued at the lower of cost or market, may not exceed
5% of the value of such Fund's net assets. Included within that
amount, but not to exceed 2% of the value of each Fund's net assets
may be warrants which are not listed on the New York or American
Stock Exchanges. Warrants acquired by such a Fund as part of a unit
or attached to securities may be deemed to be without value.
(7) Invest more than 25% of the value of such a Fund's total assets in
securities of foreign issuers. Investing in securities issued by
companies whose principal business activities are outside the United
States may involve significant risks not present in domestic
investments.
<PAGE>
THE FUNDS AND THEIR MANAGEMENT
The Trust. The Trust was organized under the laws of Massachusetts on July
15, 1987 as "Financial Series Trust." On July 1, 1993, the Trust changed its
name to "INVESCO Value Trust." In addition, the names INVESCO Intermediate
Government Bond Fund, INVESCO Value Equity Fund and INVESCO Total Return Fund
were adopted as the names of the Intermediate Government Bond Fund, Equity Fund
and Flex Fund series of the Trust, respectively, effective July 1, 1993.
The Investment Adviser. INVESCO Funds Group, Inc., a Delaware corporation
("INVESCO"), is employed as the Trust's investment adviser. INVESCO was
established in 1932 and also serves as an investment adviser to INVESCO ^ Bond
Funds, Inc. (formerly, INVESCO Income Funds, Inc.), INVESCO Combination Stock
and 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 and INVESCO Variable Investment
Funds, Inc.
The Investment Sub-Adviser. INVESCO has contracted with INVESCO Capital
Management, Inc. ("ICM") to provide investment advisory and research services to
the Trust. ICM, the Trust's investment adviser from inception of the Trust to
1991, has the primary responsibility for providing portfolio investment
management services to the Funds.
The Distributor. INVESCO Distributors, Inc. ("IDI") is the Funds'
distributor. IDI, established in 1997, is a registered broker-dealer that acts
as distributor for all retail mutual funds advised by INVESCO. Prior to
September 30, 1997, INVESCO served as the Funds' distributor.
INVESCO, ICM and IDI are indirect wholly-owned subsidiaries of AMVESCAP
PLC, a publicly-traded holding company that, through its subsidiaries, engages
in the business of investment management on an international basis. INVESCO PLC
changed its name to AMVESCO PLC on March 3, 1997, and to AMVESCAP PLC on May 8,
1997 as part of a merger between a direct subsidiary of INVESCO PLC and A I M
Management Group, Inc., that created one of the largest independent investment
management businesses in the world with approximately $261 billion in assets
under management as of June 30, 1998. INVESCO was established in 1932 and, as of
August 31, 1998 managed 14 mutual funds, consisting of 49 separate portfolios,
on behalf of 899,439 shareholders.
<PAGE>
AMVESCAP PLC's other North American subsidiaries include the following:
--INVESCO Retirement and Benefit Services, Inc. ("IRBS") of 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") of 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") of 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. of Atlanta, Georgia manages
institutional investment portfolios, consisting primarily of discretionary
employee benefit plans for corporations and state and local governments, and
endowment funds. INVESCO Capital Management, Inc. is the sole shareholder of
INVESCO Services, Inc., a registered broker-dealer.
--INVESCO Management & Research, Inc. of Boston, Massachusetts primarily
manages pension and endowment accounts.
--INVESCO Realty Advisors, Inc. of Dallas, Texas is responsible for
providing advisory services in the U.S. real estate markets for AMVESCAP PLC's
clients worldwide. Clients include corporate plans, public pension funds, and
endowment and foundation accounts.
--PRIMCO Capital Management, Inc. of Louisville, Kentucky specializes in
managing stable return investments, principally on behalf of Section 401(k)
retirement plans.
<PAGE>
--INVESCO (NY), Inc. of 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 subadviser 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. of Houston, Texas provides investment advisory and
administrative services for retail and institutional mutual funds.
--A I M Capital Management, Inc. of Houston, Texas provides investment
advisory services to individuals, corporations, pension plans and other private
investment advisory accounts and also serves as a sub-adviser to certain retail
and institutional mutual funds, one Canadian mutual fund and one portfolio of an
open-end registered investment company that is offered to separate accounts of
insurance companies that issue variable annuity and/or variable life insurance
products.
--A I M Distributors, Inc. and Fund Management Company of Houston, Texas
are registered broker-dealers that act as the principal underwriters for retail
and institutional mutual funds.
The corporate headquarters of AMVESCAP PLC are located at 11 Devonshire
Square, London, EC2M 4YR, England.
As indicated in the Funds' Prospectuses, INVESCO and ICM permit investment
and other personnel to purchase and sell securities for their own accounts in
accordance with a compliance policy governing personal investing by directors,
officers and employees of INVESCO, ICM and their North American affiliates. The
policy requires officers, inside directors, investment and other personnel of
INVESCO, ICM and their North American affiliates to pre-clear all transactions
in securities not otherwise exempt under the policy. Requests for trading
authority will be denied when, among other reasons, the proposed personal
transaction would be contrary to the provisions of the policy or would be deemed
to adversely affect any transaction then known to be under consideration for or
to have been effected on behalf of any client account, including the Funds.
In addition to the pre-clearance requirement described above, the policy
subjects officers, inside directors, investment and other personnel of INVESCO,
ICM and their North American affiliates to various trading restrictions and
reporting obligations. All reportable transactions are reviewed for compliance
with the policy. The provisions of this policy are adminstered by and subject to
exceptions authorized by INVESCO or ICM.
<PAGE>
Investment Advisory Agreement. INVESCO serves as investment adviser
pursuant to an investment advisory agreement dated February 28, 1997 with the
Trust (the "Agreement") which was approved by the board of trustees on November
6, 1996 by a vote cast in person by a majority of the trustees of the Trust,
including a majority of the trustees who are not "interested persons" of the
Trust or INVESCO at a meeting called for such purpose. Shareholders of the Funds
approved the Agreement on Janaury 31, 1997 for an initial term expiring February
28, 1999. On May 13, 1998, this period was extended by the Trust's board of
trustees ^ through May 15, 1999. Thereafter, the Agreement may be continued from
year to year with respect to each Fund as long as such continuance is
specifically approved at least annually by the board of trustees of the Trust,
or by a vote of the holders of a majority, as defined in the 1940 Act, of the
outstanding shares of the applicable Fund. Any such continuance also must be
approved by a majority of the Trust's trustees who are not parties to the
Agreement or interested persons (as defined in the 1940 Act) of any such party,
cast in person at a meeting called for the purpose of voting on such
continuance. The Agreement may be terminated at any time without penalty by
either party upon sixty (60) days' written notice and terminates automatically
in the event of an assignment to the extent required by the 1940 Act and the
rules thereunder.
The Agreement provides that INVESCO shall manage the investment portfolios
of the Funds in conformity with the Funds' investment policies (either directly
or by delegation to a sub-adviser, which may be a party affiliated with
INVESCO). Further, INVESCO shall perform all administrative, internal accounting
(including computation of net asset value), clerical, statistical, secretarial
and all other services necessary or incidental to the administration of the
affairs of the Funds, excluding, however, those services that are the subject of
separate agreement between the Trust and INVESCO or any affiliate thereof,
including distribution and sale of Trust shares and provision of transfer
agency, dividend disbursing agency, and registrar services, and services
furnished under an Administrative Services Agreement with INVESCO discussed
below. INVESCO will pay the fee of any sub-adviser. Services provided include,
but are not limited to: supplying the Trust with officers, clerical staff and
other employees, if any, who are necessary in connection with the Funds'
operations; furnishing office space, facilities, equipment and supplies;
providing personnel and facilities required to respond to inquiries related to
shareholder accounts; conducting periodic compliance reviews of the Funds'
operations; preparation and review of required documents, reports and filings by
INVESCO's in-house legal and accounting staff (including the prospectus,
statement of additional information, proxy statements, shareholder reports, tax
returns, reports to the SEC, and other corporate documents of the Funds), except
insofar as the assistance of independent accountants or attorneys is necessary
or desirable; supplying basic telephone service and other utilities; and
preparing and maintaining certain of the books and records required to be
prepared and maintained by the Funds under the 1940 Act. Expenses not assumed by
INVESCO are borne by the Funds. The responsibility for making decisions to buy,
sell, or hold a particular security rests with INVESCO, as well as ICM as the
Sub-Adviser, subject to review by the board of trustees.
<PAGE>
As full compensation for its advisory services to the Trust, INVESCO
receives a monthly fee. The fee is based upon a percentage of each Fund's
average net assets, determined daily. With respect to the INVESCO Value Equity
and Total Return Funds, the fee is calculated at the annual rate of: 0.75% on
the first $500 million of the average net assets of each Fund; 0.65% on the next
$500 million of average net assets of each Fund; and 0.50% on average net assets
in excess of $1 billion. With respect to the INVESCO Intermediate Government
Bond Fund, the fee is calculated at the annual rate of: 0.60% on the first $500
million of the average net assets of the Fund; 0.50% on the next $500 million of
the average net assets of the Fund; and 0.40% on average net assets in excess of
$1 billion.
Sub-Advisory Agreement. ICM serves as sub-adviser to the Funds pursuant to
a sub-advisory agreement dated February 28, 1997 (the "Sub-Agreement") with
INVESCO which was approved by the board of trustees of the Trust on November 6,
1996, including a majority of the trustees who are not "interested persons" of
the Trust, INVESCO or ICM at a meeting called for such purpose. Shareholders of
each of the Funds approved the Sub-Agreement on January 31, 1997 for an initial
term expiring February 28, 1999. On May 13, 1998, this period was extended by
the Trust's board of trustees ^ through May 15, 1999. The Sub-Agreement may be
continued from year to year as to each Fund as long as each such continuance is
specifically approved by the board of trustees of the Trust, or by a vote of the
holders of a majority, as defined in the 1940 Act, of the outstanding shares of
each of the Funds. Each such continuance also must be approved by a majority of
the trustees who are not parties to the Sub-Agreement or interested persons (as
defined in the 1940 Act) of any such party, cast in person at a meeting called
for the purpose of voting on such continuance. The Sub-Agreement may be
terminated as to any Fund at any time without penalty by either party or the
Trust upon sixty (60) days' written notice and terminates automatically in the
event of an assignment to the extent required by the 1940 Act and the rules
thereunder.
The Sub-Agreement provides that ICM, subject to the supervision of
INVESCO, shall manage the investment portfolios of the respective Funds in
conformity with each Fund's investment policies. These management services
include: (a) managing the investment and reinvestment of all the assets, now or
<PAGE>
hereafter acquired, of the Funds, and executing all purchases and sales of
portfolio securities; (b) maintaining a continuous investment program for the
Funds, consistent with (i) each Fund's investment policies as set forth in the
Trust's Declaration of Trust , 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 Trust, as from time to time amended and in use
under the 1933 Act, and (ii) the Trust's status as a regulated investment
company under the Internal Revenue Code of 1986, as amended; (c) determining
what securities are to be purchased or sold for each of the Funds, unless
otherwise directed by the trustees of the Trust or INVESCO, and executing
transactions accordingly; (d) providing the Funds the benefit of all of the
investment analysis and research, the reviews of current economic conditions and
trends, and the consideration of long-range investment policy now or hereafter
generally available to investment advisory customers of the Sub-Advisers; (e)
determining what portion of each of the Funds should be invested in the various
types of securities authorized for purchase by each Fund; and (f) making
recommendations as to the manner in which voting rights, rights to consent to
Trust action and any other rights pertaining to the portfolio securities of each
Fund shall be exercised.
The Sub-Agreement provides that as compensation for its services, ICM
shall receive from INVESCO, at the end of each month, a fee based on the average
daily value of each Fund's net assets. Based upon the approval of the Trust's
board of trustees at a meeting held May 14, 1998, the calculation of the
subadvisory fees of the Funds has been changed from 33.33% of the advisory fee
(with respect to the Value Equity and Total Return Funds, 0.25% on the first
$500 million of each Fund's average net assets; 0.2167% on the next $500 million
of each Fund's assets; and 0.1667% on each Fund's average net assets in excess
of $1 billion; and with respect to the Intermediate Government Bond Fund, 0.20%
on the first $500 million of the Fund's average net assets; 0.1667% on the next
$500 million of the Fund's average net assets; and 0.1333% on the Fund's average
net assets in excess of $1 billion) to 40% of the advisory fee (with respect to
the Value Equity and Total Return Funds, 0.30% on the first $500 million of each
Fund's average net assets; 0.26% on the next $500 million of each Fund's assets;
and 0.20% on each Fund's average net assets in excess of $1 billion; and with
respect to the Intermediate Government Bond Fund, 0.24% on the first $500
million of the Fund's average net assets; 0.20% on the next $500 million of the
Fund's average net assets; and 0.16% on the Fund's average net assets in excess
of $1 billion). The sub-advisory fees are paid by INVESCO, not the Funds.
Administrative Services Agreement. INVESCO, either directly or through
affiliated companies, also provides certain administrative, sub-accounting, and
recordkeeping services to the Trust pursuant to an Administrative Services
Agreement dated February 28, 1997 (the "Administrative Agreement"). The
Administrative Agreement was approved by the board of trustees on November 6,
1996 by a vote cast in person by all of the trustees of the Trust, including all
of the trustees who are not "interested persons" of the Trust or INVESCO at a
meeting called for such purpose. The Administrative Agreement was for an initial
term expiring February 28, 1998, and has been continued by action of the board
of trustees ^ through May 15, 1999. The Administrative Agreement may be
continued from year to year thereafter as long as each such continuance is
specifically approved by the board of trustees of the Trust, including a
majority of the trustees who are not parties to the Administrative Agreement or
interested persons (as defined in the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such continuance. The
Administrative Agreement may be terminated at any time without penalty by
INVESCO on sixty (60) days' written notice, or by the Trust upon thirty (30)
days' written notice, and terminates automatically in the event of an assignment
unless the board of trustees approves such assignment.
<PAGE>
The Administrative Agreement provides that INVESCO shall provide the
following services to the Funds: required administrative and internal accounting
services, including without limitation, maintaining general ledger and capital
stock accounts, preparing a daily trial balance, calculating net asset value
daily, and providing selected general ledger reports.
As full compensation for services provided under the Administrative
Agreement, the Trust pays a monthly fee to INVESCO consisting of a base fee of
$10,000 per year, plus an additional incremental fee computed daily and paid
monthly at an annual rate of 0.015% per year of the average net assets of each
Fund of the Trust. For providing such services, INVESCO received administrative
services fees in the amount of $455,075 for the fiscal year ended August 31,
1998.
Transfer Agency Agreement. INVESCO performs transfer agent, dividend
disbursing agent, and registrar services for the Trust pursuant to a Transfer
Agency Agreement dated February 28, 1997, which was approved November 6, 1996 by
the board of trustees of the Trust, including a majority of the Trust's trustees
who are not parties to the Transfer Agency Agreement or "interested persons" of
any such party. The Transfer Agency Agreement was for an initial term expiring
February 28, 1998 and has been extended by the board of trustees ^ through May
15, 1999. Thereafter, the Transfer Agency Agreement may be continued from year
to year as to each Fund as long as such continuance is specifically approved at
least annually by the board of trustees of the Trust, or by a vote of the
holders of a majority of the outstanding shares of each Fund of the Trust. Any
such continuance also must be approved by a majority of the Trust's
trustees who are not parties to the Transfer Agency Agreement or interested
persons (as defined by the 1940 Act) of any such party, cast in person at a
meeting called for the purpose of voting on such continuance. The Transfer
Agency Agreement may be terminated at any time without penalty by either party
upon sixty (60) days' written notice.
<PAGE>
The Transfer Agency Agreement provides that the Trust shall pay to INVESCO
an annual fee of $20.00 per shareholder account or, where applicable, per
participant in an omnibus account with respect to the INVESCO Value Equity and
Total Return Funds, and $26.00 per shareholder account or omnibus account with
respect to INVESCO Intermediate Government Bond Fund. These fees are paid
monthly at the rate of 1/12 of the annual fee and are based upon the number of
shareholder accounts or, where applicable, per participant in an omnibus
account. For the year ended August 31, 1998, the Trust paid INVESCO transfer
agency fees of $4,890,325.
Set forth below is a table showing the advisory fees, transfer agency fees
and administrative fees paid by each of the Funds for the fiscal years ended
August 31, 1998, 1997 and 1996.
<PAGE>
<TABLE>
<CAPTION>
Fiscal year Fiscal year Fiscal year
ended August 31, 1998 ended August 31, 1997 ended August 31, 1996
------------------------------------ ----------------------------- ---------------------------------------
Transfer Adminis- Transfer Adminis- Transfer Adminis-
Advisory Agency trative Advisory Agency trative Advisory Agency trative
Portfolio Fees Fees Fees Fees Fees Fees Fees Fees Fees
- --------- -------- -------- --------- -------- --------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INVESCO Intermediate
Government Bond $ 226,874 $ 204,187 $ 15,672 $ 268,593 $ 251,070 $ 16,115 $ 235,160 $156,123 $ 15,879
INVESCO Value Equity $ 3,080,351 $ 918,694 $ 71,607 $2,250,039 $ 610,115 $ 55,001 $1,382,049 $282,255 $ 37,641
INVESCO Total Return $13,926,522 $3,767,444 $ 367,796 $9,140,227 $2,332,422 $224,249 $6,025,905 $953,383 $137,623
</TABLE>
<PAGE>
Officers and Trustees of the Trust. The overall direction and supervision
of the Trust is the responsibility of the board of trustees, which has the
primary duty of seeing that the general investment policies and programs of the
Trust are carried out and that the Funds are properly administered. The officers
of the Trust, all of whom are officers and employees of, and are paid by,
INVESCO, are responsible for the day-to-day administration of the Trust.
INVESCO, along with ICM, has the primary responsibility for making investment
decisions on behalf of each of the Funds of the Trust. These investment
decisions are reviewed by the investment committee of INVESCO.
All of the officers and trustees of the Trust hold comparable positions
with INVESCO ^ Bond Funds, Inc. (formerly, INVESCO Income Fund, Inc.), INVESCO
Combination Stock and 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.) and INVESCO Tax-Free Income Funds, Inc.
In addition, all of the trustees of the Trust are also trustees of INVESCO
Treasurer's Series Trust. Set forth below is information with respect to each of
the Trust's officers and trustees. Unless otherwise indicated, the address of
the trustees and officers is Post Office Box 173706, Denver, Colorado
80217-3706. Their affiliations represent their principal occupations during the
past five years.
CHARLES W. BRADY,*+ Chairman of the Board. Chief Executive Officer and
Director of AMVESCAP PLC, London, England, and of various subsidiaries thereof.
Chairman of the Board of INVESCO Global Health Sciences Fund. Address: 1315
Peachtree Street, NE, Atlanta, Georgia. Born: May 11, 1935.
FRED A. DEERING,+# Vice Chairman of the Board. Trustee of INVESCO Global
Health Sciences Fund. Formerly, Chairman of the Executive Committee and Chairman
of the Board of Security Life of Denver Insurance Company, Denver, Colorado;
Director of ING America Life Insurance Company. Address: Security Life Center,
1290 Broadway, Denver, Colorado. Born: January 12, 1928.
VICTOR L. ANDREWS,**@ Trustee. Professor Emeritus, Chairman Emeritus and
Chairman of the CFO Roundtable of the Department of Finance at Georgia State
University, Atlanta, Georgia; President, Andrews Financial Associates, Inc.
(consulting firm); since October 1984, Director of the Center for the Study of
Regulated Industry at Georgia State University; formerly, member of the
faculties of the Harvard Business School and the Sloan School of Management of
MIT. Dr. Andrews is also a Director of the Southeastern Thrift and Bank Fund,
Inc. and The Sheffield Funds, Inc. Address: 34 Seawatch Drive, Savannah,
Georgia. Born: June 23, 1930.
<PAGE>
BOB R. BAKER,+** Trustee. President and Chief Executive Officer of AMC
Cancer Research Center, Denver, Colorado, since January 1989; until mid-December
1988, Vice Chairman of the Board of First Columbia Financial Corporation (a
financial institution), Englewood, Colorado. Formerly, Chairman of the Board and
Chief Executive Officer of First Columbia Financial Corporation. Address: 1600
Pierce Street, Lakewood, Colorado. Born: August 7, 1936.
LAWRENCE H. BUDNER,#@@ Trustee. Trust Consultant; prior to June 30, 1987,
Senior Vice President and Senior Trust Officer of InterFirst Bank, Dallas,
Texas. Address: 7608 Glen Albens Circle, Dallas, Texas. Born: July 25, 1930.
WENDY L. GRAMM, Ph.D.,**@ Trustee. Self-employed (since 1993); Professor of
Economics and Public Administration, University of Texas at Arlington. Formerly,
Chairman, Commodity Futures Trading Commission from 1988 to 1993, administrator
for Information and Regulatory Affairs at the Office of Management and Budget
from 1985 to 1988, Executive Director of the Presidential Task Force on
Regulatory Relief and Director of the Federal Trade Commission's Bureau of
Economics. Dr. Gramm is also a director of the Chicago Mercantile Exchange,
Enron Corporation, IBP, Inc., State Farm Insurance Company, State Farm Life
Insurance Company, Independant Women's Forum, International Republic Institute,
and the Republican Women's Federal Forum. Dr. Gramm is also a member of the
Board of Visitors, College of Business Administration, University of Iowa, and a
member of the Board of Visitors, Center for Study of Public Choice, George Mason
University. Address: 4201 Yuma Street, N.W., Washington, D.C. Born: January 10,
1945.
KENNETH T. KING,#+@@ Trustee. Formerly, Chairman of the Board of The
Capitol Life Insurance Company, Providence Washington Insurance Company, and
Director of numerous subsidiaries thereof in the U.S. Formerly, Chairman of the
Board of The Providence Capitol Companies in the United Kingdom and Guernsey.
Chairman of the Board of the Symbion Corporation (a high technology company)
until 1987. Address: 4080 North Circulo Manzanillo, Tucson, Arizona. Born:
November 16, 1925.
JOHN W. MCINTYRE,#+@@ Trustee. Retired. Formerly, Vice Chairman of the
Board of Directors of The Citizens and Southern Corporation and Chairman of the
Board and Chief Executive Officer of The Citizens and Southern Georgia
Corporation and Citizens and Southern National Bank. Trustee of INVESCO Global
Health Sciences Fund and Gables Residential Trust. Address: 7 Piedmont Center,
Suite 100, Atlanta, Georgia. Born: September 14, 1930.
<PAGE>
LARRY SOLL, Ph.D.,**@ Trustee. Retired. Formerly, Chairman of the Board
(1987 to 1994), Chief Executive Officer (1982 to 1989 and 1993 to 1994) and
President (1982 to 1989) of Synergen Corp. Director of Synergen since
incorporation in 1982. Director of ISD Pharmaceuticals, Inc., Trustee of INVESCO
Global Health Sciences Fund. Address: 345 Poorman Road, Boulder, Colorado. Born:
April 26, 1942.
MARK H. WILLIAMSON, +* President, CEO and Director. President, CEO and
Director of IDI; President, CEO and Director of INVESCO and President of INVESCO
Global Health Sciences Fund. Formerly, Chairman and CEO of NationsBanc Advisors,
Inc. (1995 to 1997) and Chairman of NationsBanc Investments, Inc. (1997 to
1998). Born: May 24, 1951.
GLEN A. PAYNE, Secretary. Senior Vice President (since 1995), General
Counsel (since 1989) and Secretary (since 1989) of INVESCO and Senior Vice
President, Secretary and General Counsel of IDI (since 1997); Secretary of
INVESCO Global Health Sciences Fund, Vice President (May 1989 to April 1995) of
INVESCO; Senior Vice President (1995 to 1998), Secretary (1989 to 1998) and
General Counsel (1989 to 1998) of ITC. Formerly, employee of a U.S. regulatory
agency, Washington, D.C.,(June 1973 through May 1989). Born: September 25, 1947.
RONALD L. GROOMS, Treasurer. Senior Vice President and Treasurer of INVESCO
(since 1988). Senior Vice President and Treasurer of IDI (since 1997).
Treasurer, Principal Financial and Accounting Officer, INVESCO Global Health
Sciences Fund. Senior Vice President and Treasurer of ITC (1988 to 1998). Born:
October 1, 1946.
WILLIAM J. GALVIN, JR., Assistant Secretary. Senior Vice President of
INVESCO (since 1995) and of IDI (since 1997) and formerly, Trust Officer of ITC
(1995 to 1998) and Vice President of INVESCO (1992 to 1995). Formerly, Vice
President of 440 Financial Group from June 1990 to August 1992; Assistant Vice
President of Putnam Companies from November 1986 to June 1990. Born: August 21,
1956.
ALAN I. WATSON, Assistant Secretary. Vice President of INVESCO (since
1984). Formerly, Trust Officer of ITC. Born: September 14, 1941.
JUDY P. WIESE, Assistant Treasurer. Vice President of INVESCO (since 1984)
and of IDI (since 1997). Formerly, Trust Officer of ITC. Born: February 3, 1948.
<PAGE>
*These directors are "interested persons" of the Trust as defined in the
1940 Act.
#Member of the audit committee of the Trust.
@Member of the derivatives committee of the Trust.
@@Member of the soft dollar brokerage committee of the Trust.
+Member of the executive committee of the Trust. On occasion, the executive
committee acts upon the current and ordinary business of the Trust between
meetings of the board of trustees. Except for certain powers which, under
applicable law, may only be exercised by the full board of trustees, the
executive committee may exercise all powers and authority of the board of
trustees in the management of the business of the Trust. All decisions are
subsequently submitted for ratification by the board of trustees.
**Member of the management liaison committee of the Trust.
As of October 19, 1998, officers and trustees of the Trust, as a group,
beneficially owned less than 1% of the Trust's outstanding shares and less than
1% of any Fund's outstanding shares.
Director Compensation
The following table sets forth, for the fiscal year ended August 31, 1998,
the compensation paid by the Trust to its eligible independent trustees for
services rendered in their capacities as trustees of the Trust; the benefits
accrued as Trust expenses with respect to the Defined Benefit Deferred
Compensation Plan discussed below; and the estimated annual benefits to be
received by these trustees upon retirement as a result of their service to the
Trust. In addition, the table sets forth the total compensation paid by all of
the mutual funds distributed by IDI and advised by INVESCO (including the
Funds), INVESCO Treasurer's Series Trust and INVESCO Global Health Sciences Fund
(collectively, the "INVESCO Complex") to these trustees for services rendered in
their capacities as directors or trustees during the year ended December 31,
1997. As of December 31, 1997, there were 49 funds in the INVESCO Complex.
<PAGE>
Total
Compensa-
Benefits Estimated tion From
Aggregate Accrued As Annual INVESCO
Compensa- Part of Benefits Complex
tion From Trust Upon Paid To
Trust(1) Expenses(2) Retirement(3) Trustees(1)
Fred A.Deering, $9,418 $5,735 $3,680 $113,350
Vice Chairman of
the Board
Victor L. Andrews 9,004 5,420 4,260 92,700
Bob R. Baker 9,568 4,840 5,709 96,050
Lawrence H. Budner 8,697 5,420 4,260 91,000
Daniel D. Chabris (4) 9,106 5,858 3,179 89,350
Wendy L. Gramm 8,368 0 0 39,000
Kenneth T. King 8,085 5,956 3,338 94,350
John W. McIntyre 8,486 0 0 104,000
Larry Soll 8,486 0 0 78,000
------ ------- ------- -------
Total $79,218 $33,229 $24,426 $797,800
% of Net Assets 0.0027%(5) 0.0011%(5) 0.0046%(6)
(1)The vice chairman of the board, the chairmen of the audit, management
liaison, derivatives, soft dollar brokerage and compensation committees and the
members of the executive and valuation committees each receive compensation for
serving in such capacities in addition to the compensation paid to all
independent trustees.
(2)Represents benefits accrued with respect to the Defined Benefit Deferred
Compensation Plan discussed below, and not compensation deferred at the election
of the trustees.
(3)These figures represent the Trust's share of the estimated annual
benefits payable by the INVESCO Complex (excluding INVESCO Global Health
Sciences Fund which does not participate in this retirement plan) upon the
trustees' retirement, calculated using the current method of allocating trustee
compensation among the funds in the INVESCO Complex. These estimated benefits
<PAGE>
assume retirement at age 72 and that the basic retainer payable to the
trustees will be adjusted periodically for inflation, for increases in the
number of funds in the INVESCO Complex and for other reasons during the period
in which retirement benefits are accrued on behalf of the respective trustees.
This results in lower estimated benefits for trustees who are closer to
retirement and higher estimated benefits for trustees who are further from
retirement. With the exception of Drs. Soll and Gramm, each of these trustees
has served as a director/trustee of one or more of the funds in the INVESCO
Complex for the minimum five-year period required to be eligible to participate
in the Defined Benefit Deferred Compensation Plan.
(4)Mr. Chabris retired as a trustee effective September 30, 1998.
(5)Total as a percentage of the Trust's net assets as of August 31, 1998.
(6)Total as a percentage of the net assets of the INVESCO Complex as of
December 31, 1997.
Messrs. Brady and Williamson, as "interested persons" of the Trust, the
Funds and other funds in the INVESCO Complex, receive compensation as officers
or employees of INVESCO or its affiliated companies and do not receive any
trustee's fees or other compensation from the Trust or other funds in the
INVESCO Complex for their services as trustees.
The boards of directors/trustees of the mutual funds managed by INVESCO
and INVESCO Treasurer's Series Trust have adopted a Defined Benefit Deferred
Compensation Plan for the non-interested directors and trustees of the funds.
Under this plan, each director or trustee who is not an interested person of the
funds (as defined in the 1940 Act) and who has served for at least five years (a
"qualified director") is entitled to receive, upon termination of service as a
director (normally upon retiring from the boards at the retirement age of 72),
or the retirement age of 73 to 74, if the retirement date is extended by the
boards for one or two years, but less than three years) continuation of payment
for one year (the "first year retirement benefit") of the annual basic retainer
and annualized board meeting fees payable by the funds to the qualified trustee
at the time of his or her retirement (the "basic retainer"). Commencing with any
such trustee's second year of retirement, and commencing with the first year of
retirement of a trustee whose retirement has been extended by the board for
three years, a qualified trustee shall receive quarterly payments at an annual
rate equal to 50% of the basic retainer and annualized board meeting fees. These
payments will continue for the remainder of the qualified trustee's life or ten
<PAGE>
years, whichever is longer (the "reduced retainer payments"). If a
qualified trustee dies or becomes disabled after age 72 and before age 74 while
still a trustee of the funds, the first year retirement benefit and the reduced
retainer payments will be made to him or her or to his or her beneficiary or
estate. If a qualified trustee becomes disabled or dies either prior to age 72
or during his or her 74th year while still a trustee of the funds, the trustee
will not be entitled to receive the first year retirement benefit; however, the
reduced retainer payments will be made to his or her beneficiary or estate. The
plan is administered by a committee of three trustees who are also participants
in the plan and one trustee who is not a plan participant. The cost of the plan
will be allocated among the INVESCO and Treasurer's Series Trust funds in a
manner determined to be fair and equitable by the committee. The Trust began
making payments to Mr. Chabris on October 1, 1998. The Trust 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 trustees 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 and INVESCO Treasurer's Series Trust Funds. Each independent trustee is,
therefore, an indirect owner of shares of each INVESCO and INVESCO Treasurer's
Series Trust Fund.
The Trust has an audit committee that is comprised of four of the trustees
who are not interested persons of the Trust. The committee meets periodically
with the Trust's independent accountants and officers to review accounting
principles used by the Trust, the adequacy of internal controls, the
responsibilities and fees of the independent accountants, and other matters.
The Trust has a management liaison committee which meets quarterly with
various management personnel of INVESCO in order (a) to facilitate better
understanding of management and operations of the Trust, and (b) to review legal
and operational matters which have been assigned to the committee by the board
of trustees, in furtherance of the board of trustees' overall duty of
supervision.
The Trust 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 Trust's board of
trustees.
The Trust has a derivatives committee. The committee meets periodically to
review derivatives investments made by the Funds.
<PAGE>
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 Trust's board of trustees. It reports on
these matters to the Trust's board of trustees.
HOW SHARES CAN BE PURCHASED
Shares of each Fund are sold on a continuous basis at the net asset value
per share of the Fund next calculated after receipt of a purchase order in good
form. The net asset value per share of each Fund is computed once each day that
the New York Stock Exchange is open as of the close of regular trading on that
Exchange, but may also be computed at other times. See "How Shares Are Valued."
The Trust has authorized one or more brokers to accept purchase orders on
the Funds' behalf. Such brokers are authorized to designate other intermediaries
to accept purchase orders on the Funds' behalf. The Funds will be deemed to have
received a purchase order when an authorized broker, or, if applicable, a
broker's authorized designee, accepts the order. A purchase order will be priced
at a Fund's net asset value next calculated after the order has been accepted by
an authorized broker or the broker's authorized designee.
IDI acts as the Fund's distributor under a distribution agreement with the
Trust and bears all expenses, including the costs of printing and distributing
of prospectuses, incident to direct sales and distribution of Fund shares on a
no-load basis.
Distribution Plan. As described in the Prospectuses, the Trust has adopted
a Plan and Agreement of Distribution (the "Plan") pursuant to Rule 12b-1 under
the 1940 Act. The Plan was approved on May 16, 1997 with respect to the Value
Equity and Intermediate Government Bond Funds and February 3, 1998 with respect
to the Total Return Fund, at meetings called for such purpose by a majority of
the trustees of the Trust, including a majority of the trustees who neither are
"interested persons" of the Trust nor have any financial interest in the
operation of the Plan ("independent trustees"). The Plan was approved by
shareholders of the Value Equity and Intermediate Government Bond Funds on
October 28, 1997 and by shareholders of the Total Return Fund on May 6, 1998.
The Plan provides that these Funds may make monthly payments to IDI of
amounts computed at an annual rate no greater than 0.25% of each Fund's new
sales of shares, exchanges into the Fund and reinvestments of dividends and
capital gain distributions added on or after November 1, 1997 with respect to
the Value Equity and Intermediate Government Bond Funds and June 1, 1998 with
respect to the Total Return Fund to compensate IDI for expenses incurred by it
in connection with the distribution of a Fund's shares to investors.
<PAGE>
Payment by a Fund under the Plan, for any month, may only be made to
compensate IDI for permissible activities engaged in and services provided by
IDI during the rolling 12-month period in which that month falls. All
distribution expenses paid by the Funds for the fiscal year ended August 31,
1998 were paid to IDI. For the fiscal year ended August 31, 1998, the
Intermediate Government Bond Fund, Total Return Fund and Value Equity Fund
incurred $24,404, $46,730 and $441,207 in distribution expenses, respectively,
prior to the voluntary absorption of certain Fund expenses by INVESCO. In
addition, as of August 31, 1998, the Intermediate Government Bond Fund, Total
Return Fund and Value Equity Fund incurred $4,814, $54,925 and $79,421,
respectively, of additional distribution accruals which will be paid during the
fiscal year ended August 31, 1999. As noted in the Prospectuses, one type of
expenditure is the payment of compensation to securities companies and other
financial institutions and organizations, which may include INVESCO-affiliated
companies, in order to obtain various distribution-related and/or administrative
services for the 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. Although the
Glass-Steagall Act limits the ability of certain banks to act as underwriters of
mutual fund shares, the Trust does not believe that these limitations would
affect the ability of such banks to enter into arrangements with IDI, but can
give no assurance in this regard. However, to the extent it is determined
otherwise in the future, arrangements with banks might have to be modified or
terminated, and, in that case, the size of one or more of the Funds possibly
could decrease to the extent that the banks would no longer invest customer
assets in a particular Fund. Neither the Trust nor its investment adviser will
give any preference to banks or other depository institutions which enter into
such arrangements when selecting investments to be made by each Fund.
For the fiscal year ended August 31, 1998, allocations of 12b-1 amounts
paid by the Intermediate Government Bond Fund for the following categories were:
advertising -- $8,464; sales literature, printing and postage -- $4,164; direct
mail -- $1,240; public relations/promotion -- $1,232; compensation to securities
dealers and other organizations -- $5,401; marketing personnel -- $3,903. For
the fiscal year ended August 31, 1998, allocations of 12b-1 amounts paid by the
Total return Fund for the following categories were: advertising -- $3,231;
sales literature, printing and postage -- $6,483; direct mail -- $1,079; public
relations/promotion --$12,038; compensation to securities dealers and other
organizations -- $0; marketing personnel -- $23,899. For the fiscal year ended
August 31, 1998, allocations of 12b-1 amounts paid by the Value Equity Fund for
the following categories were: advertising --$98,563; sales literature, printing
and postage -- $48,086; direct mail -- $13,779; public relations/promotion --
$15,542; compensation to securities dealers and other organizations --$219,445;
marketing personnel -- $45,792.
<PAGE>
The nature and scope of services which are provided by securities dealers
and other organizations may vary by dealer but include, among other things,
processing new stockholder account applications, preparing and transmitting to
the Trust's Transfer Agent computer processable tapes of each Fund's
transactions by customers, serving as the primary source of information to
customers in answering questions concerning each Fund, and assisting in other
customer transactions with each Fund.
The Plan provides that it shall continue in effect with respect to each
Fund for so long as such continuance is approved at least annually by the vote
of the board of trustees cast in person at a meeting called for the purpose of
voting on such continuance. The Plan can also be terminated at any time with
respect to any Fund, without penalty, if a majority of the independent trustees,
or shareholders of such Fund, vote to terminate the Plan. The Trust may, in its
absolute discretion, suspend, discontinue or limit the offering of its shares of
any Fund at any time. In determining whether any such action should be taken,
the board of trustees intends to consider all relevant factors including,
without limitation, the size of a particular Fund, the investment climate for
any particular 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 such temporary suspension or limitation of
the offering of a Fund's shares; however, none of the Funds is 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 shares. So long as the Plan is in effect, the selection
and nomination of persons to serve as independent trustees of the Trust shall be
committed to the independent trustees then in office at the time of such
selection or nomination. The Plan may not be amended to increase materially the
amount of any Fund's payments thereunder without approval of the shareholders of
that Fund, and all material amendments to the Plan must be approved by the board
of trustees, including a majority of the independent trustees. Under the
agreement implementing the Plan, IDI or the Funds, the latter by vote of a
majority of the independent trustees, or of the holders of a majority of a
Fund's outstanding voting securities, may terminate such agreement as to that
Fund without penalty upon 30 days' written notice to the other party. No further
payments will be made by a Fund under the Plan in the event of its termination
as to that Fund.
To the extent that the Plan constitutes a plan of distribution adopted
pursuant to Rule 12b-1 under the 1940 Act, it shall remain in effect as such, so
as to authorize the use of each Fund's assets in the amounts and for the
purposes set forth therein, notwithstanding the occurrence of an assignment, as
<PAGE>
defined by the 1940 Act, and rules thereunder. To the extent it constitutes
an agreement pursuant to a plan, each Fund's obligation to make payments to IDI
shall terminate automatically, in the event of such "assignment," in which case
the Funds may continue to make payments pursuant to the Plan to IDI or another
organization only upon the approval of new arrangements, which may or may not be
with IDI, regarding the use of the amounts authorized to be paid by it under the
Plan, by the trustees, including a majority of the independent trustees, by a
vote cast in person at a meeting called for such purpose.
Information regarding the services rendered under the Plan and the amounts
paid therefor by the Funds are provided to, and reviewed by, the trustees on a
quarterly basis. On an annual basis, the trustees consider the continued
appropriateness of the Plan and the level of compensation provided therein.
The only trustees or interested persons, as that term is defined in
Section 2(a)(19) of the 1940 Act, of the Trust who have a direct or indirect
financial interest in the operation of the Plan are the officers and trustees of
the Trust listed herein under the section entitled "The Fund And Its
Management--Officers and Trustees of the Trust" who are also officers either of
IDI or companies affiliated with IDI. The benefits which the Trust believes will
be reasonably likely to flow to it and its shareholders under the Plan include
the following:
(1) Enhanced marketing efforts, if successful, should result in an
increase in net assets through the sale of additional shares and
afford greater resources with which to pursue the investment
objectives of the Funds;
(2) The sale of additional shares reduces the likelihood that redemption
of shares will require the liquidation of securities of the Funds in
amounts and at times that are disadvantageous for investment
purposes;
(3) The positive effect which increased Fund assets will have on its
revenues could allow INVESCO and its affiliated companies:
(a) To have greater resources to make the financial commitments
necessary to improve the quality and level of each Fund's
shareholder services (in both systems and personnel),
(b) To increase the number and type of mutual funds available to
investors from INVESCO and its affiliated companies (and
support them in their infancy), and thereby expand the
investment choices available to all shareholders, and
(c) To acquire and retain talented employees who desire to be
associated with a growing organization; and
<PAGE>
(4) Increased Fund assets may result in reducing each investor's share
of certain expenses through economies of scale (e.g. exceeding
established breakpoints in the advisory fee schedule and allocating
fixed expenses over a larger asset base), thereby partially
offsetting the costs of the Plan.
HOW SHARES ARE VALUED
As described in the section of each Fund's Prospectus entitled "How Shares
Can Be Purchased," the net asset value of shares of each Fund of the Trust is
computed once each day that the New York Stock Exchange is open as of the close
of regular trading on that Exchange (generally 4:00 p.m., New York time) and
applies to purchase and redemption orders received prior to that time. Net asset
value per share is also computed on any other day on which there is a sufficient
degree of trading in the securities held by a Fund that the current net asset
value per share might be materially affected by changes in the value of the
securities held, but only if on such day the Trust receives a request to
purchase or redeem shares of that Fund. Net asset value per share is not
calculated on days the New York Stock Exchange is closed, such as federal
holidays including New Year's Day, Martin Luther King, Jr. Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
The net asset value per share of each Fund is calculated by dividing the
value of all securities held by that Fund and its other assets (including
dividends and interest accrued but not collected), less the Fund's liabilities
(including accrued expenses), by the number of outstanding shares of that Fund.
Securities traded on national securities exchanges, the NASDAQ National Market
System, the NASDAQ Small Cap market and foreign markets are valued at their last
sale prices on the exchanges or markets where such securities are primarily
traded. Securities traded in the over-the-counter market for which last sale
prices are not available, and listed securities for which no sales were reported
on a particular date, are valued at their highest closing bid prices (or, for
debt securities, yield equivalents thereof) obtained from one or more dealers
making markets for such securities. If market quotations are not readily
available, securities or other assets will be valued at their fair values as
determined in good faith by the Trust's board of trustees or pursuant to
procedures adopted by the board of trustees. The above procedures may include
the use of valuations furnished by a pricing service which employs a matrix to
determine valuations for normal institutional-size trading units of debt
securities. Prior to utilizing a pricing service, the Trust's board of trustees
reviews the methods used by such service to assure itself that securities will
be valued at their fair values. The Trust's board of trustees also periodically
monitors the methods used by such pricing services. Debt securities with
remaining maturities of 60 days or less at the time of purchase are normally
valued at amortized cost.
<PAGE>
The value of securities and other assets held by each Fund used in
computing net asset value generally is determined as of the time regular trading
in such securities or assets is completed each day. Because regular trading in
most foreign securities markets is completed simultaneously with, or prior to,
the close of regular trading on the New York Stock Exchange, closing prices for
foreign securities usually are available for purposes of computing the Funds'
net asset value. However, in the event that the closing price of a foreign
security is not available in time to calculate a Fund's net asset value on a
particular day, the Trust's board of trustees has authorized the use of the
market price for the security obtained from an approved pricing service at an
established time during the day which may be prior to the close of regular
trading in the security. The value of all assets and liabilities initially
expressed in foreign currencies will be converted into U.S. dollars at the spot
rate of such currencies against U.S. dollars provided by an approved pricing
service.
FUND PERFORMANCE
As discussed in the section of each Fund's Prospectus entitled
"Performance Data," all of the Funds advertise their total return performance.
In addition, the INVESCO Intermediate Government Bond Fund advertises its yield.
The average annual total return as of August 31, 1998 for shares of each of the
following Funds for the periods listed below were as follows:
Portfolio 1 Year 5 Years 10 Years
- --------- ------ ------- --------
INVESCO Intermediate
Government Bond Fund 7.92% 5.47% 7.73%
INVESCO Total Return Fund (-1.06^%) 14.60% 13.71%
INVESCO Value Equity Fund 6.02% 13.72% 13.41%
Average annual total return performance for each Fund reflects the
deduction of a proportional share of Trust expenses allocated to the Fund for
the periods indicated. In each case, average annual total return was computed by
finding the average annual compounded rates of return that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:
P(1 + T)exponent n = ERV
where: P = initial payment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of initial payment
The average annual total return performance figures shown above were
determined by solving the above formula for "T" for each time period and Fund
indicated.
The yield of the INVESCO Intermediate Government Bond Fund for the 30 days
ended August 31, 1998, was 4.71%. This yield was computed by dividing the net
investment income per share earned during the period as calculated according to
a prescribed formula by the net asset value per share on August 31, 1998.
<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.
From time to time, evaluations of performance made by independent sources
may also be used in advertisements, sales literature or shareholder reports,
including reprints of, or selections from, editorials or articles about the
Funds. Sources for Fund performance information and articles about the Funds
include, but are not limited to, the following:
American Association of Individual Investors' Journal
Banxquote
Barron's
Business Week
CDA Investment Technologies
CNBC
CNN
Consumer Digest
Financial Times
Financial World
Forbes
Fortune
Ibbotson Associates, Inc.
Institutional Investor
Investment Company Data, Inc.
Investor's Business Daily
Kiplinger's Personal Finance
Lipper Analytical Services, Inc.'s Mutual Fund Performance
Analysis
Money
Morningstar
Mutual Fund Forecaster
No-Load Analyst
No-Load Fund X
Personal Investor
Smart Money
The New York Times
The No-Load Fund Investor
U.S. News and World Report
United Mutual Fund Selector
USA Today
Wall Street Journal
Wiesenberger Investment Companies Services
Working Woman
Worth
<PAGE>
SERVICES PROVIDED BY THE TRUST
Periodic Withdrawal Plan. As described in the section of each Fund's
Prospectus entitled "Services Provided by the Fund," each Fund offers a Periodic
Withdrawal Plan. All dividends and other distributions on shares owned by
shareholders participating in this Plan are reinvested in additional shares.
Since withdrawal payments represent the proceeds from sales of shares, the
amount of shareholders' investments in the Trust will be reduced to the extent
that withdrawal payments exceed dividends and other distributions paid and
reinvested. Any gain or loss on such redemptions must be reported for tax
purposes. In each case, shares will be redeemed at the close of business on or
about the 20th day of each month preceding payment and payments will be mailed
within five business days thereafter.
The Periodic Withdrawal Plan involves the use of principal and is not a
guaranteed annuity. Payments under such a Plan do not represent income or a
return on investment.
Participation in the Periodic Withdrawal Plan may be terminated at any
time by sending a written request to INVESCO. Upon termination, all future
dividends and capital gain distributions will be reinvested in additional shares
unless a shareholder requests otherwise.
Exchange Policy. As discussed in the section of each Fund's Prospectus
entitled "Services Provided by the Fund," each Fund offers shareholders the
ability to exchange shares of any Fund of the Trust for shares of certain other
mutual funds advised by INVESCO. Exchange requests may be made either by
telephone or by written request to INVESCO using the telephone number or address
on the cover of this Statement of Additional Information. Exchanges made by
telephone must be in an amount of at least $250, if the exchange is being made
into an existing account of one of the INVESCO funds. All exchanges that
establish a new account must meet the fund's applicable initial minimum
investment requirements. Written exchange requests into an existing account have
no minimum requirements other than the fund's applicable minimum subsequent
investment requirements. Any gain or loss realized on such an exchange is
recognized for federal income tax purposes. This ability is not an option or
right to purchase securities and is not available in any state or other
jurisdiction where the shares of the mutual fund into which transfer is to be
made are not qualified for sale, or when the net asset value of the shares
presented for exchange is less than the minimum dollar purchase required by the
appropriate prospectus.
<PAGE>
TAX-DEFERRED RETIREMENT PLANS
As described in the section of each Fund's Prospectus entitled "Services
Provided by the Fund," shares of a Fund may be purchased as the investment
medium for various tax-deferred retirement plans. Persons who request
information regarding these plans from INVESCO will be provided with prototype
documents and other supporting information regarding the type of plan requested.
Each of these plans involves a long-term commitment of assets and is subject to
possible regulatory penalties for excess contributions, premature distributions
or for insufficient distributions after age 70-1/2. The legal and tax
implications may vary according to the circumstances of the individual investor.
Therefore, the investor is urged to consult with an attorney or tax adviser
prior to the establishment of such a plan.
HOW TO REDEEM SHARES
Normally, payments for shares redeemed will be mailed within seven days
following receipt of the required documents as described in the section of each
Fund's Prospectus entitled "How To Redeem Shares." The right of redemption may
be suspended and payment postponed when: (a) the New York Stock Exchange is
closed for other than customary weekends and holidays; (b) trading on that
exchange is restricted; (c) an emergency exists as a result of which disposal by
the Trust of securities owned by it is not reasonably practicable, or it is not
reasonably practicable for the Trust fairly to determine the value of its net
assets; or (d) the Securities and Exchange Commission ("SEC") by order so
permits.
The Trust has authorized one or more brokers to accept redemption orders
on the Funds' behalf. Such brokers are authorized to designate other
intermediaries to accept redemption orders on the Funds' behalf. The Funds will
be deemed to have received a redemption order when an authorized broker, or, if
applicable, a broker's authorized designee, accepts the order. A redemption
order will be priced at a Fund's net asset value next calculated after the order
has been accepted by an authorized broker or the broker's authorized designee.
It is possible that in the future conditions may exist which would, in the
opinion of the Trust's investment adviser, make it undesirable for a Fund to pay
for redeemed shares in cash. In such cases, the Trust's investment adviser may
authorize payment to be made in portfolio securities or other property of the
Fund. However, the Trust is obligated under the 1940 Act to redeem for cash all
shares of a Fund presented for redemption by any one shareholder having a value
up to $250,000 (or 1% of the applicable Fund's net assets if that is less) in
any 90-day period. Securities delivered in payment of redemptions are selected
entirely by the Trust's investment adviser based on what is in the best
interests of the Trust and its shareholders, and are valued at the value
assigned to them in computing the Fund's net asset value per share. Shareholders
receiving such securities are likely to incur brokerage costs on their
subsequent sales of the securities.
<PAGE>
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
Each Fund intends to continue to conduct its business and satisfy the
applicable diversification of assets and source of income requirements to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). Each Fund so qualified for the
taxable year ended August 31, 1998, and intends to continue to qualify during
its current taxable year. As a result, it is anticipated that the Funds will pay
no federal income or excise taxes and that the Funds will be accorded conduit or
"pass through" treatment for federal income tax purposes.
Dividends paid by the Funds from net investment income as well as
distributions of net realized short-term capital gains and net realized gains
from certain foreign currency transactions are, for federal income tax purposes,
taxable as ordinary income to shareholders. After the end of each calendar year,
each Fund sends shareholders information regarding the amount and character of
dividends paid in the year.
Distributions by each Fund of net capital gain (the excess of net
long-term capital gain over net short-term capital loss) are, for federal income
tax purposes, taxable to the shareholder as long-term capital gains regardless
of how long a shareholder has held shares of the Fund. During 1997, the Taxpayer
Relief Act established a new maximum capital gains tax rate of 20%. Depending on
the holding period of the asset giving rise to the gain, a capital gain was
taxable at a maximum rate of either 20% or 28%. Beginning January 1, 1998, all
long-term gains realized on the sale of securities held for more than 12 months
will be taxable at a maximum rate of 20%. In addition, legislation signed in
October 1998 provides that all capital gain distributions from a mutual fund
paid to shareholders during 1998 will be taxed at a maximum rate of 20%.
Accordingly, all capital gain distributions paid in 1998 will be taxable at a
maximum rate of 20%. Note that the rate of capital gains tax is dependent on the
shareholder's marginal tax rate and may be lower than the above rates. At the
end of each year, information regarding the tax status of dividends and other
distributions is provided to shareholders. Shareholders should consult their tax
advisers as to the effect of distributions by a Fund.
All dividends and other distributions are regarded as taxable to the
investor, regardless of whether such dividends and distributions are reinvested
in additional shares of one of the Funds or another Fund in the INVESCO group.
The net asset value of Fund shares reflects accrued net investment income and
undistributed realized capital and foreign currency gains; therefore, when a
distribution is made, the net asset value is reduced by the amount of the
<PAGE>
distribution. If the net asset value of Fund shares were reduced below a
shareholder's cost as a result of a distribution, such distribution would be
taxable to the shareholder although a portion would be, in effect, a return of
invested capital. If shares are purchased shortly before a distribution, the
full price for the shares will be paid and some portion of the price may then be
returned to the shareholder as a taxable dividend or capital gain. However, the
net asset value per share will be reduced by the amount of the distribution,
which would reduce any gain (or increase any loss) for tax purposes on any
subsequent redemption of shares.
INVESCO may provide Fund shareholders with information concerning the
average cost basis of their shares in order to help them prepare their tax
returns. This information is intended as a convenience to shareholders and will
not be reported to the Internal Revenue Service (the "IRS"). The IRS permits the
use of several methods to determine the cost basis of mutual fund shares. The
cost basis information provided by INVESCO will be computed using the
single-category average cost method, although neither INVESCO nor the Fund
recommends any particular method of determining cost basis. Other methods may
result in different tax consequences. If a shareholder has reported gains or
losses for a Fund in past years, the shareholder must continue to use the cost
basis method previously used unless the shareholder applies to the IRS for
permission to change the method.
If Fund shares are sold at a loss after being held for six months or less,
the loss will be treated as a long-term, instead of short-term, capital loss to
the extent of any capital gain distributions received on those shares.
Each Fund will be subject to a non-deductible 4% excise tax to the extent
it fails to distribute by the end of any calendar year substantially all of it
ordinary income for that year and net capital gains for the one-year period
ending on October 31 of that year, plus certain other amounts.
Dividends and interest received by each Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not imposes taxes on capital gains in
respect of investments by foreign investors. Foreign taxes withheld will be
treated as an expense of the Fund.
Each Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation (other than a controlled foreign
corporation) that, in general, meets either of the following tests: (1) at least
75% of its gross income is passive or (2) an average of at least 50% of its
assets produce, or are held for the production of, passive income. Under certain
circumstances, a Fund will be subject to federal income tax on a portion of any
"excess distribution" received on the stock of a PFIC or of any gain on
disposition of the stock (collectively "PFIC income"), plus interest thereon,
even if the Fund distributes the PFIC income as a taxable dividend to its
shareholders. The balance of the PFIC income will be included in the Fund's
investment company taxable income and, accordingly, will not be taxable to the
Fund to the extent that income is distributed to its shareholders.
<PAGE>
Each Fund may elect to "mark-to-market" its stock in any PFIC.
Marking-to-market, in this context, means including in ordinary income for each
taxable year the excess, if any, of the fair market value of the PFIC stock over
the Fund's adjusted tax basis therein as of the end of that year. Once the
election has been made, a Fund also will be allowed to deduct from ordinary
income the excess, if any, of its adjusted basis in PFIC stock over the fair
market value thereof as of the end of the year, but only to the extent of any
net mark-to-market gains with respect to that PFIC stock included by the Fund
for prior taxable years beginning after December 31, 1997. The Fund's adjusted
tax basis in each PFIC's stock with respect to which it makes this election will
be adjusted to reflect the amounts of income included and deductions taken under
the election.
Gains or losses (1) from the disposition of foreign currencies, (2) from
the disposition of debt securities denominated in foreign currency that are
attributable to fluctuations in the value of the foreign currency between the
date of acquisition of each security and the date of disposition, and (3) that
are attributable to fluctuations in exchange rates that occur between the time
the Fund accrues interest, dividends or other receivables or accrues expenses or
other liabilities denominated in a foreign currency and the time the Fund
actually collects the receivables or pays the liabilities, generally will be
treated as ordinary income or loss. These gains or losses may increase or
decrease the amount of the Fund's investment company taxable income to be
distributed to its shareholders.
Shareholders should consult their own tax advisers regarding specific
questions as to federal, state and local taxes. Dividends and other
distributions generally will be subject to applicable state and local taxes.
Qualification as a regulated investment company under the Code for federal
income tax purposes does not entail government supervision of management or
investment policies.
INVESTMENT PRACTICES
Portfolio Turnover. There are no fixed limitations regarding portfolio
turnover for any of the Trust's Funds. Brokerage costs to the Trust are
commensurate with the rate of portfolio activity. Portfolio turnover rates for
the fiscal years ended August 31, 1998, 1997 and 1996, were as follows:
Fund 1998 1997 1996
- ---- ---- ---- ----
INVESCO Intermediate
Government Bond 57% 37% 63%
INVESCO Total Return 17% 4% 10%
INVESCO Value Equity 48% 37% 27%
<PAGE>
In computing the portfolio turnover rate, all investments with maturities
or expiration dates at the time of acquisition of one year or less are excluded.
Subject to this exclusion, the turnover rate is calculated by dividing (a) the
lesser of purchases or sales of portfolio securities for the fiscal year by (b)
the monthly average of the value of portfolio securities owned by the Fund
during the fiscal year.
Placement of Portfolio Brokerage. INVESCO, as the Funds' investment
adviser, and ICM, as sub-adviser of the Funds under the direct supervision of
INVESCO, place orders for the purchase and sale of securities with brokers and
dealers based upon INVESCO's or ICM's evaluation of such brokers' and dealers'
financial responsibility subject to their ability to effect transactions at the
best available prices. INVESCO or ICM evaluates the overall reasonableness of
brokerage commissions paid by reviewing the quality of executions obtained on
the Trust's portfolio transactions, viewed in terms of the size of transactions,
prevailing market conditions in the security purchased or sold, and general
economic and market conditions. In seeking to ensure that the commissions
charged the Trust are consistent with prevailing and reasonable commissions,
INVESCO or ICM also endeavors to monitor brokerage industry practices with
regard to the commissions charged by brokers and dealers on transactions
effected for other comparable institutional investors. While INVESCO or ICM
seeks reasonably competitive rates, the Trust does not necessarily pay the
lowest commission or spread available.
Consistent with the standard of seeking to obtain the best execution on
portfolio transactions, INVESCO or ICM may select brokers that provide research
services to effect such transactions. Research services consist of statistical
and analytical reports relating to issuers, industries, securities and economic
factors and trends, which may be of assistance or value to INVESCO and ICM in
making informed investment decisions. Research services prepared and furnished
by brokers through which the Funds effect securities transactions may be used by
INVESCO or ICM in servicing all of their respective accounts and not all such
services may be used by INVESCO or ICM in connection with the Funds.
In recognition of the value of the above-described brokerage and research
services provided by certain brokers, INVESCO or ICM, consistent with the
standard of seeking to obtain the best execution of portfolio transactions, may
place orders with such brokers for the execution of Trust transactions on which
the commissions are in excess of those which other brokers might have charged
for effecting the same transactions.
Portfolio transactions may be effected through qualified brokers and
dealers that recommend the Funds to their clients, or that act as agent in the
purchase of any of the Fund's shares for their clients. When a number of brokers
and dealers can provide comparable best price and execution on a particular
transaction, the Trust's adviser or sub-adviser may consider the sale of Fund
shares by a broker or dealer in selecting among qualified brokers and dealers.
<PAGE>
Certain financial institutions (including brokers who may sell shares of
the Funds, or affiliates of such brokers) are paid a fee (the "Services Fee")
for recordkeeping, shareholder communications and other services provided by the
brokers to investors purchasing shares of the Funds through no transaction fee
programs ("NTF Programs") offered by the financial institution or its affiliated
broker (an "NTF Program Sponsor"). The Services Fee is based on the average
daily value of the investments in each Fund made in the name of such NTF
Program Sponsor and held in omnibus accounts maintained on behalf of investors
participating in the NTF Program. With respect to certain NTF Programs, the
trustees of the Trust have authorized the Funds to apply dollars generated from
the Trust's Plan and Agreement of Distribution pursuant to Rule 12b-1 under the
1940 Act (the "Plan") to pay the entire Services Fee, subject to the maximum
Rule 12b-1 fee permitted by the Plan. With respect to other NTF Programs, the
Trust's trustees have authorized all 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 the Funds. 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 trustees of the
Trust have authorized the Trust 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 each Fund's Services
Fee, if any, that exceeds the sum of the sub-transfer agency or recordkeeping
fee and Rule 12b-1 fee. The Trust's trustees have further authorized INVESCO to
place a portion of each Fund's brokerage transactions with certain NTF Program
Sponsors or their affiliated brokers, if INVESCO reasonably believes that, in
effecting the Fund's transactions in portfolio securities, the broker is able to
provide the best execution of orders at the most favorable prices. A portion of
the commissions earned by such a broker from executing portfolio transactions on
behalf of the Funds may be credited by the NTF Program Sponsor against its
Services Fee. Such credit shall be applied first against any sub-transfer agency
or recordkeeping fee payable with respect to the Funds, and second against any
Rule 12b-1 fees used to pay a portion of the Services Fee, on a basis which has
resulted from negotiations between INVESCO or IDI and the NTF Program Sponsor.
Thus, the Funds pay sub-transfer agency or recordkeeping fees to the NTF Program
Sponsor in payment of the Services Fee only to the extent that such fees are not
offset by a Fund's credits. In the event that the transfer agency fee paid by
the Funds to INVESCO with respect to investors who have beneficial interests in
a particular NTF Program Sponsor's omnibus accounts in a Fund exceeds the
Services Fee applicable to the Fund, after application of credits, INVESCO may
carry forward the excess and apply it to future Services Fees payable to that
NTF Program Sponsor with respect to a Fund. The amount of excess transfer agency
fees carried forward will be reviewed for possible adjustment by INVESCO prior
to each fiscal year-end of the Funds. The Trust's board of trustees has also
authorized the Funds to pay to IDI the full Rule 12b-1 fees contemplated by the
Plan to compensate IDI for expenses incurred by IDI in engaging in the
activities and providing the services on behalf of the Funds contemplated by the
Plan, subject to the maximum Rule 12b-1 fee permitted by the Plan,
notwithstanding that credits have been applied to reduce the portion of the
12b-1 fee that would have been used to compensate IDI for payments to such NTF
Program Sponsor absent such credits.
The aggregate dollar amount of brokerage commissions paid by the
Intermediate Government Bond, Value Equity and Total Return Funds for the fiscal
year ended August 31, 1998 were $0, $194,473 and $330,263, respectively. For the
fiscal year ended August 31, 1998 brokers providing research services received
$0 in commissions on portfolio transactions effected for each Fund. Neither the
Trust, INVESCO, nor ICM paid any compensation to brokers for the sale of shares
of the Trust during the fiscal year ended August 31, 1998.
<PAGE>
At August 31, 1998, the Funds held securities of their regular brokers or
dealers, or their parents, as follows:
Value of
Securities at
Fund Broker or Dealer August 31, 1998
- ---- ---------------- ---------------
INVESCO Value Equity State Street Bank $6,724,000
Fund & Trust
INVESCO Intermediate State Street Bank 3,429,000
Government Bond Fund & Trust
INVESCO Total Return State Street Bank 87,853,000
Fund & Trust
Neither INVESCO nor ICM receive any brokerage commissions on portfolio
transactions effected on behalf of the Trust, and there is no affiliation
between INVESCO, ICM, or any person affiliated with INVESCO, ICM, or the Trust
and any broker or dealer that executes transactions for the Trust.
ADDITIONAL INFORMATION
Shares of Beneficial Interest. As a Massachusetts business trust, the
Trust has an unlimited number of authorized shares of beneficial interest. The
board of trustees has the authority to designate additional series of beneficial
shares for any new fund of the Trust without seeking the approval of
shareholders and may classify and reclassify any unissued shares.
Shares of each series represent the interests of the shareholders of such
series in a particular portfolio of investments of the Trust. Each series of the
Trust's shares is preferred over all other series in respect of the assets
specifically allocated to that series, and all income, earnings, profits and
proceeds from such assets, subject only to the rights of creditors, are
allocated to shares of that series. The assets of each series are segregated on
the books of account and are charged with the liabilities of that series and
with a share of the Trust's general liabilities. The board of trustees
determines those assets and liabilities deemed to be general assets or
liabilities of the Trust, and these items are allocated among series in
proportion to the relative net assets of each series. In the unlikely event that
a liability allocable to one series exceeds the assets belonging to the series,
all or a portion of such liability may have to be borne by the holders of shares
of the Trust's other series.
All Fund shares, regardless of series, have equal voting rights. Voting
with respect to certain matters, such as ratification of independent accountants
or election of trustees, will be by all series of the Trust. When not all series
are affected by a matter to be voted upon, such as approval of an investment
advisory contract or changes in a Fund's investment policies, only shareholders
of the series affected by the matter may be entitled to vote. Trust shares have
noncumulative voting rights, which means that the holders of a majority of the
shares voting for the election of trustees can elect 100% of the trustees if
they choose to do so. In such event, the holders of the remaining shares voting
for the election of trustees will not be able to elect any person or persons to
the board of trustees. After they have been elected by shareholders, the
trustees will continue to serve until their successors are elected and have
qualified or they are removed from office, in either case by a shareholder vote,
or until death, resignation, or retirement. Trustees may appoint their own
successors, provided that always at least a majority of the trustees have been
elected by the Trust's shareholders. As a Massachusetts Business Trust, it is
the intention of the Trust not to hold annual meetings of shareholders. The
trustees will call annual or special meetings of shareholders for action by
shareholder vote as may be required by the 1940 Act or the Trust's Declaration
of Trust, or at their discretion.
Principal Shareholders. As of September 30, 1998, the following entities
held more than 5% of each Fund's outstanding equity securities.
<PAGE>
Name and Address Percent
of Beneficial Owner Number of Shares of Class
- ------------------- ---------------- --------
INVESCO Value Equity Fund
Charles Schwab & Co. Inc. 864,976.7110 6.40%
Special Custody Acct.
for the Exclusive Benefit
of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
INVESCO Trust Co. Trustee 835,018.3840 6.18%
HNTB Corporation Retirement &
Savings Plan
c/o Joan Watanabie
1201 Walnut, Suite 700
Kansas City, MO 64106
INVESCO Trust Company Tr 731,705.8790 5.42%
Morris Communications Corp
Employees' Profit Sharing Ret Plan
725 Broad Street
Augusta, GA 30901-1336
INVESCO Intermediate Government Bond Fund
Charles Schwab & Co. Inc. 598,491.5390 20.01%
Special Custody Acct.
for the Exclusive Benefit
of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
INVESCO Total Return Fund
Charles Schwab & Co. Inc. 15,686,779.0540 17.21%
Special Custody Acct.
for the Exclusive Benefit
of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
<PAGE>
Connecticut General Life Ins. 13,246,467.4570 14.53%
c/o Liz Pezda M-110
P.O. Box 2975
Hartford, CT 06104
Bankers Trust Company 7,338,602.5630 8.05%
Siemens Savings Plan
100 Plaza One Ste M53048
Jersey City, NJ 07311-3999
Independent Accountants. PricewaterhouseCoopers LLP, 950 Seventeenth
Street, Denver, Colorado, has been selected as the independent accountants of
the Trust. The independent accountants are responsible for auditing the
financial statements of the Trust.
Custodian. State Street Bank and Trust Company, P.O. Box 351, Boston,
Massachusetts, has been designated as the custodian of the cash and investment
securities of the Trust. The bank is responsible for, among other things,
receipt and delivery of the Funds' investment securities in accordance with
procedures and conditions specified in the custody agreement. Under its contract
with the Trust, the custodian is authorized to establish separate accounts in
foreign countries and to cause foreign securities owned by the Trust to be held
outside the United States in branches of U.S. banks and, to the extent permitted
by applicable regulations, in certain foreign banks and securities depositories.
Transfer Agent. INVESCO, 7800 E. Union Avenue, Denver, Colorado 80237,
acts as registrar, dividend disbursing agent, and transfer agent for the Trust
pursuant to the Transfer Agency Agreement described in "The Fund And Its
Management." Such services include the issuance, cancellation and transfer of
shares of the Trust, and the maintenance of records regarding the ownership of
such shares.
Reports to Shareholders. The Trust's fiscal year ends on August 31. The
Trust distributes reports at least semiannually to its shareholders. Financial
statements regarding the Trust, audited by the independent accountants, are sent
to shareholders annually.
Legal Counsel. The firm of Kirkpatrick & Lockhart LLP, Washington, D.C., is
legal counsel for the Trust. The firm of Moye, Giles, O'Keefe, Vermeire &
Gorrell, Denver, Colorado, acts as special counsel to the Trust.
Financial Statements. The Trust's audited financial statements and the
notes thereto for the year ended August 31, 1998, and the report of
PricewaterhouseCoopers LLP with respect to such financial statements are
incorporated herein by reference from the Trust's Annual Report to Shareholders
for the fiscal year ended August 31, 1998.
<PAGE>
Prospectuses. The Trust will furnish, without charge, a copy of the
Prospectus for any Fund upon request. Such requests should be made to the Trust
at the mailing address or telephone number set forth on the first page of this
Statement of Additional Information.
Registration Statement. This Statement of Additional Information and the
Prospectuses do not contain all of the information set forth in the Registration
Statement the Trust has filed with the SEC. The complete Registration Statement
may be obtained from the SEC upon payment of the fee prescribed by the rules and
regulations of the SEC.
Declaration of Trust Provisions. The Declaration of Trust establishing the
Trust dated July 9, 1987, a copy of which, together with all amendments thereto
(the "Declaration"), is on file in the office of the Secretary of the
Commonwealth of Massachusetts, provides that the name of the Trust refers to the
Trustees under the Declaration collectively as Trustees, but not as individuals
or personally; and no Trustee, shareholder, officer, employee or agent of the
Trust shall be held to any personal liability; nor shall resort be had to their
private property for the satisfaction of any obligation or claim of the Trust,
but the "Trust Property" only shall be liable.
<PAGE>
APPENDIX A
Bond Ratings. Description of Moody's and S&P's four highest
bond rating categories:
Moody's Corporate Bond Ratings:
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risk appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes,
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
S&P's Corporate Bond Ratings:
AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA - Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority of
instances they differ from AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB - Bonds rated BBB are regarded as having an adequate capability to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
<PAGE>
APPENDIX B
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 purchaser of the option assumes is equal to the
premium plus related transaction costs, although the entire amount may be lost.
The risk of the seller, or "writer," however, is potentially unlimited, unless
the option is "covered," which is generally accomplished through the writer's
ownership of the underlying security, in the case of a call option, or the
writer's segregation of an amount of cash or securities equal to the exercise
price, in the case of a put option. If the writer's obligation is not so
covered, it is subject to the risk of the full change in value of the underlying
security from the time the option is written until exercise.
Upon exercise of the option, the holder is required to pay the purchase
price of the underlying security, in the case of a call option, or to deliver
the security in return for the purchase price, in the case of a put option.
Conversely, the writer is required to deliver the security, in the case of a
call option, or to purchase the security, in the case of a put option. Options
on securities which have been purchased or written may be closed out prior to
exercise or expiration by entering into an offsetting transaction on the
exchange on which the initial position was established, subject to the
availability of a liquid secondary market.
Options on securities are traded on national securities exchanges, such as
the Chicago Board of Options Exchange 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 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
<PAGE>
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 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 the Fund is required to deliver the securities
pursuant to the assignment of an exercise notice, it will not be able to sell
the underlying security until the option expires.
Reasons for the potential absence of a liquid secondary market on an
exchange include the following: (i) there may be insufficient trading interest
in certain options; (ii) restrictions may be imposed by an exchange on opening
transactions or closing 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 class or series of options) in which event the
secondary market on that exchange (or in the class or series of options) would
cease to exist, although outstanding options on that exchange which had been
issued by a clearing corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms. There is no assurance
that higher than anticipated trading activity or other unforeseen events might
not, at a particular time, render certain of the facilities of any of the
clearing corporations inadequate and thereby result in the institution by an
exchange of special procedures which may interfere with the timely execution of
customers' orders. However, the OCC, based on forecasts provided by the U.S.
exchanges, believes that its facilities are adequate to handle the volume of
reasonably anticipated options transactions, and such exchanges have advised
such clearing corporation that they believe their facilities will also be
adequate to handle reasonably anticipated volume.
In addition, options on securities may be traded over-the-counter ("OTC")
through financial institutions dealing in such options as well as the underlying
instruments. OTC options are purchased from or sold (written) to dealers or
financial institutions which have entered into direct agreements with the Trust
on behalf of the Funds. 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 in OTC option
transactions only with primary U.S. Government securities dealers recognized by
the Federal Reserve Bank of New York.
<PAGE>
Futures Contracts
A futures contract is a bilateral agreement providing for the purchase and
sale of a specified type and amount of a financial instrument or foreign
currency, or for the making and acceptance of a cash settlement, at a stated
time in the future, for a fixed price. By its terms, a futures contract provides
for a specified settlement date on which, in the case of the majority of
interest rate and foreign currency futures contracts, the fixed income
securities or currency underlying the contract are delivered by the seller and
paid for by the purchaser, or on which, in the case of stock index futures
contracts and certain interest rate and foreign currency futures contracts, the
difference between the price at which the contract was entered into and the
contract's closing value is settled between the purchaser and seller in cash.
Futures contracts differ from options in that they are bilateral agreements,
with both the purchaser and the seller equally obligated to complete the
transaction. In addition, futures contracts call for settlement only on the
expiration date, and cannot be "exercised" at any other time during their term.
The purchase or sale of a futures contract also differs from the purchase
or sale of a security or the purchase of an option in that no purchase price is
paid or received. Instead, an amount of cash or cash 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."
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.
<PAGE>
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, in the case of a put
option. In the event that an option is exercised, the parties will be subject to
all the risks associated with the trading of futures contracts, such as payment
of variation margin deposits. In addition, the writer of an Option on a futures
contract, unlike the holder, is subject to initial and variation margin
requirements on the option position.
A position in an option on a futures contract may be terminated by the
purchaser or seller prior to expiration by effecting a closing purchase or sale
transaction, subject to the availability of a liquid secondary market, which is
the purchase or sale of an option of the same series (i.e., the same exercise
price and expiration date) as the option previously purchased or sold. The
difference between the premiums paid and received represents the trader's profit
or loss on the transaction.
An option, whether based on a futures contract, a stock index or a
security, becomes worthless to the holder when it expires. Upon exercise of an
option, the exchange or contract market clearing house assigns exercise notices
on a random basis to those of its members which have written options of the same
series and with the same expiration date. A brokerage firm receiving such
notices then assigns them on a random basis to those of its customers which have
written options of the same series and expiration date. A writer therefore has
no control over whether an option will be exercised against it, nor over the
time of such exercise. ^^^