PROSPECTUS
September 11, 1995
INVESCO EMERGING GROWTH FUND
INVESCO EMERGING GROWTH FUND, (the "Fund") seeks long-term capital growth.
It pursues this objective by investing its assets principally in a diversified
group of equity securities of emerging growth companies with market
capitalizations of $1 billion or less at the time of initial purchase ("small
cap companies"). In managing the Fund's investments, the Fund's investment
adviser or sub-adviser seeks to identify securities that are undervalued in the
marketplace, and/or have earnings that may be expected to grow faster than the
U.S. economy in general. Under normal circumstances, the Fund invests at least
65% of its total assets in the equity securities of small cap companies
(including common and preferred stocks, convertible debt securities, and other
securities having equity features). The balance of the Fund's assets may be
invested in the equity securities of companies with market capitalizations in
excess of $1 billion, debt securities and short-term investments. The Fund is
designed for investors seeking long-term capital appreciation with little or no
current income. The Fund cannot guarantee that it will achieve its investment
objective.
The Fund is a series of INVESCO Emerging Opportunity Funds,
Inc. (the "Company"), a no-load mutual fund. The Company may offer
additional funds in the future.
Investors should carefully consider the relative risks involved in
investing in the Fund and should be advised that such investment is not meant to
be a complete investment program and may not be suitable for all investors (see
"Investment Objective and Policies" and "Risk Factors").
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 September 11, 1995, has been filed with the Securities and
Exchange Commission and is incorporated by reference into this Prospectus. You
can obtain a copy without charge by writing INVESCO Funds Group, Inc., P.O. Box
173706, Denver, Colorado, 80217-3706; or by calling 1-800-525-8085.
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TABLE OF CONTENTS Page
ANNUAL FUND EXPENSES 3
FINANCIAL HIGHLIGHTS 5
PERFORMANCE DATA 6
INVESTMENT OBJECTIVE AND POLICIES 6
RISK FACTORS 13
THE FUND AND ITS MANAGEMENT 14
HOW SHARES CAN BE PURCHASED 16
SERVICES PROVIDED BY THE FUND 19
HOW TO REDEEM SHARES 22
TAXES, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS 25
ADDITIONAL INFORMATION 26
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION.
THE SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY.
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ANNUAL FUND EXPENSES
The Fund is no-load; there are no fees to purchase, exchange or redeem
shares. The Fund, however, is authorized to pay a distribution fee, pursuant to
Rule 12b-1 under the Investment Company Act of 1940. (See "How Shares Can Be
Purchased -- Distribution Expenses.") Lower expenses benefit Fund shareholders
by increasing the Fund's total return.
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 0.25%
Other Expenses
(after voluntary expense limitation)(1) 0.49%
Transfer Agency Fee(2) 0.35%
General Services, Administrative
Services, Registration, Postage(3) 0.14%
Total Fund Operating Expenses
(after voluntary expense limitation)(1) 1.49%
(1) Certain Fund expenses are voluntarily absorbed by INVESCO Funds Group,
Inc. ("INVESCO") in order to ensure that the Fund's total expenses do not exceed
1.50% of the Fund's average net assets. In the absence of such voluntary expense
limitation, the Fund's "Other Expenses" and "Total Fund Operating Expenses" in
the above table would have been 0.52% and 1.52%, respectively, of the Fund's
average net assets based on the Fund's actual expenses for the fiscal year ended
May 31, 1995.
(2) Consists of the transfer agency fee described under
"Additional Information - Transfer and Dividend Disbursing Agent."
(3) Includes, but is not limited to, fees and expenses of directors,
custodian bank, legal counsel and auditors, a securities pricing service, 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.
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
$15 $47 $82 $179
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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 Fund charges no sales load, redemption fee or exchange
fee. The Example should not be considered a representation of 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.
As a result of the 0.25% 12b-1 fee paid by the Fund, 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.
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FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding throughout each Period)
The following information has been audited by Price Waterhouse LLP,
independent accountants. This information should be read in conjunction with the
audited financial statements and the independent accountants' report appearing
in the Fund's 1995 Annual Report to Shareholders. The Annual Report also
contains more information about the Fund's performance. The Annual Report is
available without charge by contacting INVESCO Funds Group, Inc., at the address
or telephone number shown on the cover of this Prospectus.
Period
Ended
Year Ended May 31 May 31
-----------------------------------------
1995 1994 1993 1992^
PER SHARE DATA
Net Asset Value --
Beginning of Period $11.40 $9.89 $7.55 $7.50
------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss) 0.04 (0.01) (0.04) (0.02)
Net Gain on Securities
(Both Realized and
Unrealized) 0.46 1.53 2.38 0.07
Total from Investment
Operations 0.50 1.52 2.34 0.05
==========================================
LESS DISTRIBUTIONS
Dividends from Net
Investment Income 0.04 0.00 0.00 0.00
------------------------------------------
Distributions from Capital
Gains 2.49 0.01 0.00 0.00
------------------------------------------
Total Distributions 2.53 0.01 0.00 0.00
------------------------------------------
Net Asset Value --
End of Period $9.37 $11.40 $9.89 $7.55
------------------------------------------
TOTAL RETURN 4.98% 15.34% 30.95% 0.68%*
RATIOS
Net Assets -- End of Period
($000 Omitted) $153,727 $176,510 $103,029 $25,579
Ratio of Expenses to
Average Net Assets# 1.49% 1.37% 1.54% 1.93%~
Ratio of Net Investment
Income (Loss) to
Average Net Assets# 0.41% (0.26%) (0.70%) (0.95%)~
Portfolio Turnover Rate 228% 196% 153% 50%*
^From December 27, 1991, commencement of operations, to May 31,
1992.
*These amounts are based on operations for the period shown and, accordingly,
are not representative of a full year.
~Annualized
#Various expenses of the Fund were voluntarily absorbed by IFG for the year
ended May 31, 1995. If such expenses had not been voluntarily absorbed, ratio of
expenses to average net assets would have been 1.52% and ratio of net investment
income to average net assets would have been 0.38%.
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PERFORMANCE DATA
From time to time, the Fund advertises its total return performance.
Performance figures are based upon historical earnings and are not intended to
indicate future performance. The "total return" of the Fund refers to the
average annual rate of return of an investment in the Fund. This figure is
computed by calculating the percentage change in value of an investment of
$1,000, assuming reinvestment of all income dividends and other distributions to
the end of a specified period. Periods of one year and life of the Fund are
used.
Statements of the Fund's total return performance are based upon
investment results during a specified period and assume reinvestment of all
income dividends and other distributions, if any, paid during that period. Thus,
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 the total return computation.
In conjunction with performance reports and/or analyses of shareholder
service for the Fund, comparative data between the Fund's performance for a
given period and recognized indices of investment results for the same period,
and/or assessments of the quality of shareholder service may be provided to
shareholders. Such indices include indices provided by Dow Jones & Company,
Standard & Poor's, Lipper Analytical Services, Inc., Lehman Brothers, National
Association of Securities Dealers Automated Quotations, Frank Russell Company,
Value Line Investment Survey, the American Stock Exchange, Morgan Stanley
Capital International, Wilshire Associates, the Financial Times-Stock Exchange,
the New York Stock Exchange, the Nikkei Stock Average and Deutcher Aktienindex,
all of which are unmanaged market indicators. In addition, rankings, ratings and
comparisons of investment performance and assessments of the quality of
shareholder service appearing in publications such as Money, Forbes, Kiplinger's
Personal Finance, Financial World, 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 Small Company
Growth Funds mutual fund grouping, in addition to the broad-based Lipper general
fund groupings.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund, which may be changed only by a vote
of its shareholders, is to seek long-term capital growth. The Fund pursues this
objective by investing its assets principally in a diversified group of equity
securities of emerging growth companies with market capitalizations (i.e., the
market value of all equity securities issued by a company) of $1 billion
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or less at the time of initial purchase ("small cap companies"). In selecting
investments for the Fund, the Fund's investment adviser or sub-adviser
(collectively, "Fund Management") seeks to identify small cap companies that are
undervalued in the marketplace, have earnings that may be expected to grow
faster than the U.S. economy in general, and/or offer the possibility of
accelerating earnings growth because of management changes, rapid growth of
sales, new products or structural changes in the economy. These companies
typically pay no or only minimal dividends and possess a relatively high rate of
return on invested capital so that future growth can be financed from internal
sources. This Fund entails an element of risk that may not be appropriate for
all investors; this Fund is also not intended to be a complete investment
program. (See "Risk Factors").
Under normal circumstances, the Fund invests at least 65% of its total
assets in equity securities of small cap companies, consisting of common and
preferred stocks, convertible debt securities, and other securities having
equity features (consisting of warrants and rights). The balance of the Fund's
assets may be invested in the equity securities of companies with market
capitalizations in excess of $1 billion, debt securities and short-term
investments.
In selecting the small cap companies in which the Fund invests, Fund
Management attempts to identify companies in any industry that are thought to
have the best opportunity for capital appreciation within their industry
groupings, subject to the additional requirement that the companies are
determined to be in the developing stages of their life cycle, and have
demonstrated, or are expected to achieve, long-term earnings growth. In
selecting investments in equity securities of companies with market
capitalizations in excess of $1 billion at the time of initial purchase, Fund
Management seeks securities that are consistent with the Fund's objective of
long-term capital growth. The equity securities purchased for the Fund are
traded principally in the over-the-counter ("OTC") market, although the Fund may
purchase securities traded on national, regional or foreign stock exchanges.
The Fund's investments in debt securities include U.S. government and
corporate debt securities. Investments in U.S. government securities may consist
of securities issued or guaranteed by the U.S. government and any agency or
instrumentality of the U.S. government. In some cases, these securities are
direct obligations of the U.S. government, such as U.S. Treasury bills, notes
and bonds. In other cases, these securities are obligations guaranteed by the
U.S. government, consisting of Government National Mortgage Association
obligations, or obligations of U.S. government authorities, agencies or
instrumentalities, consisting of the Federal National Mortgage Association,
Federal Home Loan Bank, Federal Financing Bank and Federal Farm Credit Bank,
which are supported only by the assets of the issuer. The Fund may invest in
both investment grade and lower-rated corporate debt securities. However, the
Fund will not invest more than 5% of its
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total assets (measured at the time of purchase) in corporate debt securities
that are rated below BBB by Standard & Poor's Ratings Group ("Standard &
Poor's") or Baa by Moody's Investors Service, Inc. ("Moody's") or, if unrated,
are judged by Fund Management to be equivalent in quality to debt securities
having such ratings. In no event will the Fund invest in a debt security rated
below CCC by Standard & Poor's or Caa by Moody's. The risks of investing in debt
securities are discussed below under "Risk Factors." For a description of each
corporate bond rating category, please refer to Appendix B to the Statement of
Additional Information.
The short-term investments of the Fund may consist of U.S. government and
agency securities, domestic bank certificates of deposit and bankers'
acceptances, and commercial paper rated A-1 by Standard and Poor's or P-1 by
Moody's, as well as repurchase agreements with banks and registered
broker-dealers and registered government securities dealers with respect to the
foregoing securities. The Fund's assets invested in U.S. government securities
and short-term investments will be used to meet current cash requirements, such
as to satisfy requests to redeem shares of the Fund and to preserve investment
flexibility. A commercial paper rating of A-1 by Standard & Poor's or P-1 by
Moody's is the highest rating category assigned by such rating organizations and
indicates that the issuer has a very strong capacity to make timely payments of
principal and interest on its commercial paper obligations. All bank
certificates of deposit and bankers' acceptances at the time of purchase by the
Fund must be issued by domestic banks (i) which are members of the Federal
Reserve System having total assets in excess of $5 billion, (ii) which have
received at least a B ranking from Thomson Bank Watch Credit Rating Service or
International Bank Credit Analysis, and (iii) which either directly or through
parent holding companies have securities outstanding which have been rated Aaa,
Aa or P-1 by Moody's or AAA, AA or A-1 by Standard & Poor's. A repurchase
agreement is a means of investing monies for a short period. In a repurchase
agreement, a seller -- a U.S. commercial bank, registered government securities
dealer or broker dealer which is deemed creditworthy -- sells securities to the
Fund and agrees to repurchase the securities at the Fund's cost plus interest
within a specified period (normally one day). In the event that the original
seller defaults on its obligation to repurchase the security, the Fund could
incur costs or delays in seeking to sell such security. To minimize risk, the
securities underlying each repurchase agreement will be maintained with the
Fund's custodian in an amount at least equal to the repurchase price under the
agreement (including accrued interest), and such agreements will be effected
only with parties that meet certain creditworthiness standards established by
the Company's board of directors.
In addition, when Fund Management believes that market conditions warrant
such action, the Fund may assume a temporary defensive position and invest up to
100% of its assets in high grade (defined as a rating of AA or higher by
Standard & Poor's or Aa by Moody's) corporate bonds or notes, U. S. government
<PAGE>
securities, those types of short-term investments described above, or equity
securities (as defined above) of larger, more established companies, or hold its
assets in cash or cash equivalents. While the Fund is in a temporary defensive
position, the opportunity to achieve capital growth will be limited and, to the
extent that this assessment of market conditions is incorrect, the Fund will be
foregoing the opportunity to benefit from capital growth resulting from
increases in the value of equity investments; however, the ability to maintain a
temporary defensive investment position provides the flexibility for the Fund to
seek to avoid capital loss during market downturns.
Foreign Securities
The Fund's investments in equity securities and corporate debt obligations
may consist of securities issued by foreign issuers. Up to 25% of the Fund's
total assets, measured at the time of purchase, may be invested directly in
foreign securities. Securities of Canadian issuers and securities purchased by
means of American Depository Receipts ("ADRs") are not subject to this 25%
limitation. Investments in foreign securities involve certain risks. For U.S.
investors, the returns on foreign securities are influenced not only by the
returns on the foreign investments themselves, but also by currency fluctuations
(i.e., changes in the value of the currencies in which the securities are
denominated relative to the U.S. dollar). In a period when the U.S. dollar
generally rises against foreign currencies, the returns on foreign securities
for a U.S. investor are diminished. By contrast, in a period when the U.S.
dollar generally declines, the returns on foreign securities generally are
enhanced.
Other risks and considerations of international investing include the
following: differences in accounting, auditing and financial reporting standards
which may result in less publicly available information than is generally
available with respect to U.S. issuers; generally higher commission rates on
foreign portfolio transactions and, in some cases, longer settlement periods;
the smaller trading volumes and generally lower liquidity of foreign stock
markets, which may result in greater price volatility; foreign withholding taxes
payable on the Fund's foreign securities, which may reduce dividend income
payable to shareholders; the possibility of expropriation or confiscatory
taxation; adverse changes in investment or exchange control regulations;
political instability which could affect U.S. investment in foreign countries;
potential restrictions on the flow of international capital; and the possibility
of the Fund experiencing difficulties in pursuing legal remedies and collecting
judgments. Certain of these risks, as well as currency risks, also apply to
Canadian securities, which are not subject to the 25% limitation even though
they are foreign securities. The Fund's investments in foreign securities may
include investments in developing countries. Many of these securities are
speculative and their prices may be more volatile than those of securities
issued by companies located in more developed countries.
<PAGE>
ADRs are receipts, typically issued by a U.S. bank or trust company,
evidencing ownership of the underlying foreign securities. ADRs are denominated
in U.S. dollars and trade in the U.S. securities markets. ADRs may be issued in
sponsored or unsponsored programs. In sponsored programs, the issuer makes
arrangements to have its securities traded in the form of ADRs; in unsponsored
programs, the issuer may not be directly involved in the creation of the
program. Although the regulatory requirements with respect to sponsored and
unsponsored programs are generally similar, the issuers of unsponsored ADRs are
not obligated to disclose material information in the United States and,
therefore, such information may not be reflected in the market value of the
ADRs. ADRs are subject to certain of the same risks as direct investments in
foreign securities, including the risk that changes in the value of the currency
in which the security underlying an ADR is denominated relative to the U.S.
dollar may adversely affect the value of the ADR.
Other Investment Practices
When-Issued Securities. The Fund may make commitments in an amount of up
to 10% of the value of its total assets at the time any commitment is made to
purchase or sell securities on a when-issued or delayed delivery basis (i.e.,
securities may be purchased or sold by the Fund with settlement taking place in
the future, often a month or more later). The securities purchased or sold on a
when-issued or delayed delivery basis will consist principally of common stocks
and common stock equivalents. The payment obligation and the interest rate that
will be received on the securities generally are fixed at the time the Fund
enters into the commitment. As is described under "Risk Factors," purchasing or
selling securities on such a basis involves risks. The Fund attempts to limit
these risks when it purchases securities on a when-issued basis by maintaining
in a segregated account with its custodian cash, U.S. government securities or
other high-grade debt obligations readily convertible into cash having an
aggregate value equal to the amount of such purchase commitments, until payment
is made.
Warrants. The Fund also may invest up to 5% of its total assets in
warrants, valued at the lower of cost or market, but not more than 2% of its
total assets in warrants which are not listed on the New York or American Stock
Exchange or another U.S. securities exchange. Warrants acquired in units or
attached to securities are not included in these percentage restrictions.
Illiquid and Rule 144A Securities
The Fund is authorized to invest in securities which are illiquid because
they are subject to restrictions on their resale ("restricted securities") or
because, based upon their nature or the market for such securities, they are not
readily marketable. However, the Fund will not purchase any such security if the
purchase would cause the Fund to invest more than 10% of its total
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assets, measured at the time of purchase, in illiquid securities. Repurchase
agreements maturing in more than seven days will be considered as illiquid for
purposes of this restriction. Investments in illiquid securities involve certain
risks to the extent that the Fund may be unable to dispose of such a security 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.
Certain restricted securities that are not registered for sale to the
general public, but that can be resold to institutional investors ("Rule 144A
Securities"), may be purchased without regard to the foregoing 10% limitation if
a liquid institutional trading market exists. The liquidity of the Fund's
investments in Rule 144A Securities could be impaired if dealers or
institutional investors become uninterested in purchasing these securities. The
Company's board of directors has delegated to Fund Management the authority to
determine the liquidity of Rule 144A Securities pursuant to guidelines approved
by the board. For more information concerning Rule 144A Securities, see the
Statement of Additional Information.
Securities Lending. Another practice in which the Fund may engage is to
lend its securities to qualified institutional investors. This practice permits
the Fund to earn income, that, in turn, can be invested in additional securities
to pursue the Fund's investment objective. Loans of securities by the Fund will
be collateralized by cash, letters of credit, or securities issued or guaranteed
by the U.S. government or its agencies. The collateral will equal at least 100%
of the current market value of the loaned securities, marked-to-market on a
daily basis. Lending securities involves certain risks, the most significant of
which is the risk that a borrower may fail to return a portfolio security. The
Fund monitors the creditworthiness of borrowers in order to minimize such risks.
The Fund will not lend any security if, as a result of such loan, the aggregate
value of securities then on loan would exceed 33-1/3% of the Fund's total
assets.
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Portfolio Turnover
While the Fund purchases portfolio securities with the view of retaining
them on a long-term basis, and does not intend to purchase securities with the
intent to engage in short-term securities trading, based on market conditions it
may sell any security without regard to the period of time it has been held.
This trading policy may cause the Fund's portfolio turnover rate to exceed that
of other investment companies seeking capital growth. Increased portfolio
turnover may cause the Fund to incur greater brokerage commissions than would
otherwise be the case, and may result in the acceleration of capital gains that
are taxable when distributed to shareholders. The Fund's portfolio turnover rate
is set forth under "Financial Highlights." See the section of this Prospectus
entitled, "Taxes, Dividends and Capital Gain Distributions" for a discussion of
the potential tax consequences of the Fund's sale of securities.
Investment Restrictions
The Fund is subject to a variety of restrictions regarding its investments
that are set forth in this Prospectus and in the Statement of Additional
Information. Certain of the Fund's investment restrictions are fundamental, and
may not be altered without the approval of the Fund's shareholders. Such
fundamental investment restrictions include the restrictions that limit the
percentage of Fund assets subject to securities loans, limit the percentages of
the value of the Fund's total assets which may be invested in any one company
(under which the Fund is required to operate as a diversified investment
company), and prohibit the Fund from investing more than 25% of its assets in
any one particular industry. Another fundamental restriction prohibits the Fund
from borrowing money, exept that the Fund may borrow from banks in amounts not
exceeding 10% of its total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) as a temporary measure for
emergency purposes. However, unless otherwise noted, the Fund's investment
restrictions and its investment policies are not fundamental and may be changed
by action of the Company's board of directors. Unless otherwise noted, all
percentage limitations contained in the Fund's investment policies and
restrictions apply at the time an investment is made. Thus, subsequent changes
in the value of an investment after purchase or in the value of the Fund's total
assets will not cause any such limitation to have been violated or to require
the disposition of any investment, except as otherwise required by law. If the
credit ratings of an issuer are lowered below those specified for investment by
the Fund, the Fund is not required to dispose of the obligations of that issuer.
The determination of whether to sell such an obligation will be made by Fund
Management based upon an assessment of credit risk and the prevailing market
price of the investment.
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RISK FACTORS
The investment performance of the Fund will be primarily dependent upon
the investment return of the securities in which the Fund invests. The ability
of Fund Management to select equity securities for investment which increase in
market value will determine whether the Fund will be able to achieve its
objective of long-term capital growth. In this regard, it should be noted that
companies in which the Fund is likely to invest may have limited product lines,
markets or financial resources, may be in the early stages of development, and
may lack management depth. The securities of these companies in some cases may
have limited marketability and may be subject to more abrupt or erratic market
movements than securities of larger, more established companies or the market
averages in general. In addition, the securities of many such companies are
traded in the over-the-counter ("OTC") market, and will not be listed on any
national, regional or foreign stock exchange. While the OTC market has grown
rapidly in recent years, many OTC securities trade less frequently and in
smaller volume than exchange-listed securities. The values of these securities
may fluctuate more sharply than exchange-listed securities, and the Fund may
experience some difficulty in acquiring or disposing of positions in these
securities at prevailing market prices. There is no assurance that the Fund will
attain its investment objective.
The Fund's investments in debt securities generally are subject to both
credit risk and market risk. Credit risk relates to the ability of the issuer to
meet interest or principal payments, or both, as they come due. Market risk
relates to the fact that the market values of the debt securities generally will
be affected by changes in the level of interest rates. An increase in interest
rates will tend to reduce the market values of debt securities, whereas a
decline in interest rates will tend to increase their values. Although Fund
Management limits the Fund's investments in debt securities to securities it
believes are not highly speculative, both kinds of risk are increased by
investing in debt securities rated BBB or lower by Standard & Poor's, Baa or
lower by Moody's or, if unrated, securities determined by Fund Management to be
of equivalent quality.
In addition to these investment performance risks, it should be recognized
that certain of the Fund's investment practices involve various risks. These
include the risks of investing in foreign securities and illiquid securities and
the risks involved in purchasing or selling securities on a when-issued or
delayed delivery basis. When purchasing or selling securities on a when-issued
or delayed delivery basis, the price and yield are normally fixed on the date of
the purchase commitment. During the period between purchase and settlement, no
payment is made by the Fund and no interest accrues to the Fund. At the time of
settlement, the market value of the security may be more or less than the
purchase price, and the Fund bears the risk of such market value fluctuations.
An additional risk is that, when the Fund enters into a repurchase agreement or
makes a securities loan, the other party to the transaction may default on its
obligation to
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repurchase or return the security involved in such transaction. See "Foreign
Securities" and "Other Investment Practices." The Fund's practice of obtaining
appropriate collateral in these transactions provides protection against this
risk, but the Fund could suffer a loss in the event its ability to promptly
dispose of
the collateral is delayed or restricted.
THE FUND AND ITS MANAGEMENT
The Company is a no-load mutual fund, registered with the Securities and
Exchange Commission as an open-end, diversified, management investment company.
It was incorporated on December 6, 1990, under the laws of Maryland. The overall
supervision of the Fund is the responsibility of the Company's board of
directors.
Pursuant to an agreement with the Company, INVESCO Funds Group, Inc.
("INVESCO"), 7800 E. Union Avenue, Denver, Colorado, serves as the Fund's
investment adviser. 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 Company's board of
directors.
INVESCO is an indirect wholly-owned subsidiary of INVESCO PLC. INVESCO PLC
is a financial holding company that, through its subsidiaries, engages in the
business of investment management on an international basis. INVESCO was
established in 1932 and, as of May 31, 1995, managed 14 mutual funds, consisting
of 38 separate portfolios, with combined assets of approximately $9.9 billion on
behalf of approximately 797,000 shareholders.
Pursuant to an agreement with INVESCO, INVESCO Trust Company ("INVESCO
Trust"), 7800 E. Union Avenue, Denver, Colorado, serves as the Fund's
sub-adviser. INVESCO Trust, a trust company founded in 1969, is a wholly-owned
subsidiary of INVESCO that served as adviser or sub-adviser to 41 investment
portfolios as of May 31, 1995, including 27 portfolios in the INVESCO group.
These 41 portfolios had aggregate assets of approximately $9.5 billion as of May
31, 1995. In addition, INVESCO Trust provides investment management services to
private clients, including employee benefit plans that may be invested in a
collective trust sponsored by INVESCO Trust. INVESCO Trust, subject to the
supervision of INVESCO, is primarily responsible for selecting and managing the
Fund's investments. Although the Company is not a party to the sub-advisory
agreement, the agreement has been approved by the shareholders of the Company.
The following individual serves as the portfolio manager for the Fund and
is primarily responsible for the day-to-day management of the Fund's portfolio
of securities:
John Schroer Portfolio manager of the Fund since 1995;
co-portfolio manager of the Health Sciences
Portfolio of INVESCO Strategic Portfolios, Inc.;
vice president (since 1995) and portfolio manager
(1993 to present) of INVESCO Trust Company.
Formerly (1990 to 1993), assistant vice president
with Trust Company of the West; began investment
career in 1990; B.S. and M.B.A., University of
Wisconsin-Madison.
<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 investment and other 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 fee is computed at the
annual rate of 0.75% on the first $350 million of the Fund's average net assets,
0.65% on the next $350 million of the Fund's average net assets, and 0.55% on
the Fund's average net assets over $700 million. For the fiscal year ended May
31, 1995, investment advisory fees paid by the Fund amounted to 0.75% of the
Fund's average net assets.
Out of its advisory fee which it receives from the Fund, INVESCO pays
INVESCO Trust, as the Fund's sub-adviser, a monthly fee, which is computed at
the annual rate of 0.25% on the first $200 million of the average net assets of
the Fund, and 0.20% on the Fund's average net assets in excess of $200 million.
No fee is paid by the Fund to INVESCO Trust. While the portions of INVESCO's
fees which are equal to or higher than 0.75% of the Fund's net assets are higher
than those generally charged by investment advisers to mutual funds, they are
not higher than those charged by most other investment advisers to funds of
comparable asset levels to the Fund, or funds that invest primarily in equity
securities of emerging growth companies.
The Company also has entered into an Administrative Services Agreement,
dated December 31, 1991 (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 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 the annual rate of 0.015% per year of the
average net assets of the Fund. INVESCO also is paid a fee by the Fund for
providing transfer agent services. See "Additional Information."
<PAGE>
The Fund's expenses, which are accrued daily, are deducted from total
income before dividends are paid. Total expenses of the Fund for the fiscal year
ended May 31, 1995, including investment advisory fees (but excluding brokerage
commissions, which are a cost of acquiring securities), amounted to 1.49% of the
Fund's average net assets. Certain Fund expenses are voluntarily absorbed by
INVESCO in order to ensure that the Fund's total expenses do not exceed 1.50% of
the Fund's average net assets. In the absence of such voluntary expense
limitation, the Fund's total expenses for the fiscal year ended May 31, 1995
would have been 1.52% of the Fund's average net assets.
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of
their financial responsibility coupled with their ability to effect transactions
at the best available prices. As discussed under "How Shares Can be Purchased -
Distribution Expenses," the Company may market shares of the Fund through
intermediary brokers or dealers that have entered into Dealer Agreements with
INVESCO, as the Company's distributor. The Fund may place orders for portfolio
transactions with qualified broker/dealers that recommend the Fund, or sell
shares of the Fund, to clients, or act as agent in the purchase of Fund shares
for clients, if Fund Management believes that the quality of the execution of
the transaction and level of commission are comparable to those available from
other qualified brokerage firms.
HOW SHARES CAN BE PURCHASED
Shares of the Fund are sold on a continuous basis by INVESCO, 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 Prospectus 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
<PAGE>
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 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 Fund shares can be expedited by placing bank wire,
overnight courier or telephone orders. Overnight courier orders must meet the
above minimum investment requirements. In no case can a bank wire order or a
telephone order be in an amount less than $1,000. For further information, the
purchaser may call the Fund's office by using the telephone number on the 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., at 7800 E. Union Avenue, Suite 800, Denver, CO 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
cancelled. 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 cancelled
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 may
also 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.
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 of the Fund is computed once each day that the
New York Stock Exchange is open as of the close of regular trading on that
Exchange (usually 4:00 p.m., New York time) and also may be computed on other
days under certain circumstances. Net asset value per share is calculated by
dividing the market value of all 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
or other asset will be valued at fair value as determined in good faith by the
board of directors. 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 Company's board of directors believes that such
value represents fair value.
Distribution Expenses. The Fund is authorized under a Plan and Agreement
of Distribution adopted pursuant to Rule 12b-1 under the Investment Company Act
of 1940 (the "Plan") to use its assets to finance certain activities relating to
the distribution of its shares to investors. Under the Plan, monthly payments
may be made by the Fund to INVESCO to reimburse it for particular expenditures
incurred by INVESCO during the rolling 12-month period in which that month falls
in connection with the distribution of the Fund's shares to investors. These
expenditures 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-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 reimbursable expenditures include those incurred for
advertising, the preparation and distribution of sales literature, the cost of
printing and distributing prospectuses to prospective investors, and such other
services and promotional activities as may from time to time be agreed upon by
the Fund and its board of directors, including public relations efforts and
marketing programs to communicate with investors and prospective investors.
These services and activities may be conducted by the staff of INVESCO or its
affiliates or by third parties.
Under the Plan, the Company's reimbursement to INVESCO on behalf of the
Fund is limited to an amount computed at the annual rate of 0.25 of 1% of the
Fund's average net assets during the month. INVESCO is not entitled to
reimbursement for overhead
<PAGE>
expenses under the Plan, but may be reimbursed for all or a portion of the
compensation paid for salaries and other employee benefits for the personnel of
INVESCO, whose primary responsibilities involve marketing shares of the INVESCO
funds, including the Fund. Payment amounts by the Fund under the Plan, for any
month, may only be made to reimburse or pay expenditures incurred during the
rolling 12-month period in which that month falls; therefore, any reimbursable
expenses incurred by INVESCO in excess of the limitation described above are not
reimbursable and will be borne by INVESCO. In addition, INVESCO may from time to
time make additional payments from its revenues to securities dealers and other
financial institutions that provide distribution-related and/or administrative
services for the Fund. No further payments will be made by the Fund under the
Plan in the event of its termination. Also, any payments made by the Fund may
not be used to finance the distribution of shares of any other mutual fund
advised by INVESCO. 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.
SERVICES PROVIDED BY THE FUND
Shareholder Accounts. INVESCO maintains a share account that reflects the
current holdings of each shareholder. Share certificates will be issued only
upon specific request. Since certificates must be carefully safeguarded, and
must be surrendered in order to exchange or redeem Fund shares, most
shareholders do not request share certificates in order to faciliate such
transactions. 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. For information regarding a shareholder's account
and transactions, the shareholder may call the Fund's office by using the
telephone number on the 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 in effect on the ex- dividend date. A shareholder may, however, elect
to reinvest dividends and other distributions in certain of the other no-load
mutual funds advised and distributed by INVESCO, 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.
<PAGE>
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 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 Privilege. Shares of the Fund may be exchanged 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 Diversified Funds, Inc., INVESCO Dynamics Fund,
Inc., INVESCO Growth Fund, Inc., INVESCO Income Funds, Inc., INVESCO Industrial
Income Fund, Inc., INVESCO International Funds, Inc., INVESCO Money Market
Funds, Inc., INVESCO Multiple Asset Funds, INVESCO Specialty Funds, Inc.,
INVESCO Strategic Portfolios, Inc., INVESCO Tax-Free Income Funds, Inc. and
INVESCO Value Trust.
An exchange involves the redemption of shares in the Fund and investment
of the redemption proceeds in shares of the other Fund of the Company 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 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 Funds Group, Inc., using the
telephone number or address on the cover of this Prospectus. Exchanges made by
telephone must be in an amount of at least $250, if the exchange is being made
into an existing account of one of the INVESCO Funds. All exchanges that
establish a new account must meet the Fund's applicable minimum initial
investment requirements. Written exchange requests into an existing account have
no minimum requirements other than the Fund's applicable minimum subsequent
investment requirements.
The privilege of exchanging Fund shares by telephone is available to
shareholders automatically unless expressly declined. By signing the new account
Application, a Telephone Transaction Authorization Form or otherwise utilizing
telephone exchange privileges, 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 instructions 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.
<PAGE>
In order to prevent abuse of this privilege to the disadvantage of other
shareholders, the Fund reserves the right to terminate the exchange privilege of
any shareholder who requests more than four exchanges a year. 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 privilege also may be modified or terminated at
any time. Except for those limited instances where redemptions of the exchanged
security are suspended under Section 22(e) of the Investment Company Act of
1940, or where sales of the fund into which the shareholder is exchanging are
temporarily stopped, notice of all such modifications or termination of the
exchange privilege will be given at least 60 days prior to the date of
termination or the effective date of the modification.
Before making an exchange, the shareholder should review the prospectuses
of the funds involved and consider their differences, and should be aware that
the exchange privilege may only be available in those states where exchanges may
be legally made, which will require that the shares being acquired are
registered for sale in the shareholder's state of residence. Shareholders
interested in exercising the exchange privilege 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 INVESCO 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 Privilege" on a monthly basis.
The minimum monthly exchange in this program is $50.00. 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 writing to
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.
<PAGE>
Tax-Deferred Retirement Plans. Shares of the Fund may be purchased for
self-employed individual retirement plans, 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 of 1986 by educational institutions, including public school systems and
private schools, and certain types 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. INVESCO Trust Company, a subsidiary 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
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 per share 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 at the time of the redemption may be more or less than the price you paid
to purchase your shares, depending primarily upon the Fund's investment
performance.
If the shares to be redeemed are represented by stock certificates, a
written request for redemption signed by the registered shareholder(s) and the
certificates must be forwarded to INVESCO Funds Group, Inc., Post Office Box
173706, Denver, Colorado 80217-3706. 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. If no certificates have been issued, 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 specifics. 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.
<PAGE>
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 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 may 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 his 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 cover of this Prospectus. The
redemption proceeds, at the shareholder's option, 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. The Fund charges no fee for effecting such
telephone redemptions. Unless Fund Management 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. The Fund charges no fee for effecting
such telephone redemptions. These telephone redemption privileges may be
modified or terminated in the future at the discretion of Fund Management.
For INVESCO Trust Company-sponsored federal income tax-sheltered
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
<PAGE>
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
may require up to seven days following receipt of the telephone redemption
request, or additional time because of postponements resulting from the unusual
circumstances set forth above.
The privilege of redeeming Fund shares by telephone is available to
shareholders automatically unless expressly declined. By signing a new account
Application, a Telephone Redemption 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 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 CAPITAL GAIN DISTRIBUTIONS
Taxes. The Fund intends to distribute to shareholders substantially all of
its net investment income, net capital gains and net gains from foreign currency
transactions, if any, in order to qualify for tax treatment as a regulated
investment company. Thus, the Fund does not expect to pay any federal income or
excise taxes.
Unless shareholders are exempt from income taxes, they must include all
dividends and capital gain distributions in taxable income for federal, state,
and local income tax purposes. Dividends and other distributions are taxable
whether they are received in cash or automatically invested in shares of the
Fund or another fund in the INVESCO group.
The Fund may be subject to the withholding of foreign taxes on dividends
or interest it receives on foreign securities. Foreign taxes withheld will be
treated as an expense of the Fund unless the Fund meets the qualifications to
enable it to pass these taxes through to shareholders for use by them as a
foreign tax credit or deduction.
Shareholders may be subject to backup withholding of 31% on dividends,
capital gain distributions and redemption proceeds. Unless a shareholder is
subject to backup withholding for other reasons, the shareholder can avoid
backup withholding on his Fund account by ensuring that INVESCO has a correct,
certified tax identification number.
Dividends and Capital Gain Distributions. The Fund earns ordinary or net
investment income, in the form of dividends and interest on its investments. The
Fund's policy is to distribute substantially all of this income, less Fund
expenses, to shareholders on an annual basis, at the discretion of the Company's
board of directors.
In addition, the Fund realizes capital gains and losses when it sells
securities for more or less than it paid. If total gains on sales exceed total
losses (including losses carried forward from previous years), the Fund has a
net realized capital gain. Net realized capital gains, if any, are distributed
to shareholders at least annually, usually in December.
Dividends and capital gain distributions are paid to shareholders who hold
shares on the record date of the distribution regardless of how long the shares
have been held. The Fund's share price will then drop by the amount of the
distribution on the day the distribution is made. If a shareholder purchases
shares immediately prior to the distribution, the shareholder will, in effect,
have "bought" the distribution by paying full purchase price, a portion of which
is then returned in the form of a taxable distribution.
<PAGE>
At the end of each year, information regarding the tax status of dividends
and capital gain distributions is provided to shareholders. Net realized capital
gains are divided into short-term and long-term gains depending on how long the
Fund held the security which gave rise to the gains. The capital gain
distribution consists of long-term capital gains which are taxed at the capital
gains rate. Short-term capital gains are included with income from dividends and
interest as ordinary income and are paid to shareholders as dividends.
Shareholders also may realize capital gains or losses when they sell Fund
shares at more or less than the price originally paid.
Shareholders are encouraged to consult their tax advisers with respect to
these matters. For further information see "Dividends, Capital Gain
Distributions and Taxes" in the Statement of Additional Information.
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 directors, will be
by all funds of the Company voting together. In other cases, such as voting upon
an investment advisory contract, voting is on a fund-by-fund basis. When all
funds are not affected by a matter to be voted upon, only shareholders of the
fund affected by the matter will be entitled to vote thereon. The Company is not
generally required, and does not expect, to hold regular annual meetings of
shareholders. However, the board of directors will call special meetings of
shareholders for the purpose, among other reasons, of voting upon the question
of removal of a director or directors when requested to do so in writing by the
holders of 10% or more of the outstanding shares of the Company or as may be
required by applicable law or the Company's Articles of Incorporation. The
Company will assist shareholders in communicating with other shareholders as
required by the Investment Company Act of 1940. Directors may be removed by
action of the holders of a majority or more of the outstanding shares of the
Company.
Shareholder Inquiries. All inquiries regarding the Fund should be directed
to the Fund at the telephone number or mailing address set forth on the cover
page of this Prospectus.
Transfer and Dividend Disbursing Agent. INVESCO Funds Group, Inc., 7800 E.
Union Ave., 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 $14.00 per shareholder
account or omnibus account participant. The transfer agency fee is not charged
to each shareholder's or participant's account, but is an
<PAGE>
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 fee of up to $14.00 per
participant in the third party's omnibus account out of the transfer agency fee
which is paid to INVESCO by the Fund.
<PAGE>
INVESCO EMERGING GROWTH FUND A no-load mutual
fund seeking long-term capital growth
PROSPECTUS
SEPTEMBER 11, 1995
To receive general information and prospectuses on any of INVESCO's funds or
retirement plans, or to obtain current account or price information, call
toll-free:
1-800-525-8085
To reach PAL, your 24-hour Personal Account Line, call:
1-800-424-8085
Or write to:
INVESCO Funds Group, Inc., Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
If you're in Denver, visit one of our convenient Investor Centers:
Cherry Creek
155-B Fillmore Street
Denver Tech Center
7800 East Union Avenue
Lobby Level
<PAGE>
SEPTEMBER 11, 1995
INVESCO EMERGING OPPORTUNITY FUNDS, INC.
Address: Mailing Address:
7800 East Union Avenue Post Office Box 173706
Denver, Colorado 80237 Denver, Colorado 80217-3706
Telephone:
In Continental U.S., 1-800-525-8085
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INVESCO EMERGING OPPORTUNITY FUNDS, Inc. (the "Company") is an open-end,
diversified management investment company ("mutual fund"). As of the date of
this Statement of Additional Information, the Company offers one portfolio of
investments, INVESCO Emerging Growth Fund (the "Fund"). Additional funds may be
offered in the future.
The Fund seeks long-term capital growth. It pursues this objective by
investing its assets principally in a diversified group of equity securities of
emerging growth companies with market capitalizations of $1 billion or less at
the time of initial purchase ("small cap companies"). In managing the Fund's
investments the Fund's investment adviser or sub-adviser seeks to identify
securities that are undervalued in the marketplace, and/or have earnings that
may be expected to grow faster than the U.S. economy in general. Under normal
circumstances, the Fund invests at least 65% of its total assets in the equity
securities of small cap companies (consisting of common and preferred stocks,
convertible debt securities, and other securities having equity features). The
balance of the Fund's assets may be invested in the equity securities of
companies with market capitalizations in excess of $1 billion, debt securities
and short-term investments. The Fund is designed for investors seeking long-term
capital appreciation with little or no current income.
<PAGE>
A Prospectus for the Fund, dated September 11, 1995, which provides the
basic information you should know before investing in the Fund, may be obtained
without charge from INVESCO Funds Group, Inc., Post Office Box 173706, Denver,
Colorado 80217-3706. This Statement of Additional Information is not a
Prospectus, but contains information in addition to and more detailed than that
set forth in the Prospectus. It is intended to provide you with additional
information regarding the activities and operations of the Fund, and should be
read in conjunction with the Prospectus.
Investment Adviser and Distributor: INVESCO Funds Group, Inc.
TABLE OF CONTENTS Page
INVESTMENT POLICIES AND RESTRICTIONS 31
THE FUND AND ITS MANAGEMENT 40
HOW SHARES CAN BE PURCHASED 52
HOW SHARES ARE VALUED 56
FUND PERFORMANCE 57
SERVICES PROVIDED BY THE FUND 58
TAX-DEFERRED RETIREMENT PLANS 59
HOW TO REDEEM SHARES 60
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS, AND TAXES 60
INVESTMENT PRACTICES 63
ADDITIONAL INFORMATION 65
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
As discussed in the Fund's Prospectus in the section entitled "Investment
Objective and Policies," the Fund may invest in a variety of securities, and
employ a broad range of investment techniques, in seeking to achieve its
investment objectives. Such securities and techniques include the following:
Types of Equity Securities
As described in the Prospectus, equity securities which may be purchased
by the Fund consist of common, preferred and convertible preferred stocks, and
securities having equity characteristics such as rights, warrants and
convertible debt securities. Common stocks and preferred stocks represent equity
ownership interests in a corporation and participate in the corporation's
earnings through dividends which may be declared by the corporation. Unlike
common stocks, preferred stocks are entitled to stated dividends payable from
the corporation's earnings, which in some cases may be "cumulative" if prior
stated dividends have not been paid. Dividends payable on preferred stock have
priority over distributions to holders of common stock, and preferred stocks
generally have preferences on the distribution of assets in the event of the
corporation's liquidation. Preferred stocks may be "participating" which means
that they may be entitled to dividends in excess of the stated dividend in
certain cases. The rights of common and preferred stocks are generally
subordinate to rights associated with a corporation's debt securities. Rights
and warrants are securities which entitle the holder to purchase the securities
of a company (generally, its common stock) at a specified price during a
specified time period. Because of this feature, the values of rights and
warrants are affected by factors similar to those which determine the prices of
common stocks and exhibit similar behavior. Rights and warrants may be purchased
directly or acquired in connection with a corporate reorganization or exchange
offer.
Convertible securities which may be purchased by the Fund include
convertible debt obligations and convertible preferred stock. A convertible
security entitles the holder to exchange it for a fixed number of shares of
common stock (or other equity security), usually at a fixed price within a
specified period of time. Until conversion, the holder receives the interest
paid on a convertible bond or the dividend preference of a preferred stock.
Convertible securities have an "investment value" which is the theoretical
value determined by the yield they provide in comparison with similar securities
without the conversion feature. Investment value changes are based upon
prevailing interest rates and other factors. They also have a "conversion value"
which is the worth in market value if the security were exchanged for the
underlying equity security. Conversion value fluctuates directly
<PAGE>
with the price of the underlying security. If conversion value is substantially
below investment value, the price of the convertible security is governed
principally by its investment value. If the conversion value is near or above
investment value, the price of the convertible security generally will rise
above investment value and may represent a premium over conversion value due to
the combination of the convertible security's right to interest (or dividend
preference) and the possibility of capital appreciation from the conversion
feature. A convertible security's price, when price is influenced primarily by
its conversion value, generally will yield less than a senior non-convertible
security of comparable investment value. Convertible securities may be purchased
at varying price levels above their investment values or conversion values.
However, there is no assurance that any premium above investment value or
conversion value will be recovered because prices change and, as a result, the
ability to achieve capital appreciation through conversion may be eliminated.
Foreign Securities
As discussed in the section of the Fund's Prospectus entitled "Investment
Objective and Policies--Foreign Securities," the Fund may invest up to 25% of
its total assets, measured at the time of purchase, in foreign securities.
Securities of Canadian issuers and securities purchased by means of sponsored
American Depository Receipts ("ADRs") are not subject to this 25% limitation.
There is generally less publicly available information, reports and ratings
about foreign companies and other foreign issuers than that which is available
about companies and issuers in the United States. Foreign issuers are also
generally subject to fewer uniform accounting and auditing and financial
reporting standards, practices, and requirements as compared to those applicable
to United States issuers.
The Fund's investment adviser normally will purchase foreign securities in
over-the-counter markets or on exchanges located in the countries in which the
respective principal offices of the issuers of the various securities are
located, as such markets or exchanges are generally the best available market
for foreign securities. Foreign securities markets are generally not as
developed or efficient as those in the United States. While growing in volume,
they usually have substantially less volume than the New York Stock Exchange,
and securities of some foreign issuers are less liquid and more volatile than
securities of comparable United States issuers. Fixed commissions on foreign
exchanges are generally higher than negotiated commissions on United States
exchanges, although the Fund will endeavor to achieve the most favorable net
results on its portfolio transactions. There is generally less government
supervision and regulation of securities exchanges, brokers and listed issuers
than in the United States.
<PAGE>
With respect to certain foreign countries, there is the possibility of
adverse changes in investment or exchange control regulations, expropriation or
confiscatory taxation, limitations on the removal of funds or other assets of
the Fund, political or social instability, or diplomatic developments which
could affect United States investments in those countries. Moreover, the
economies of foreign countries may differ favorably or unfavorably from the
United States' economy in such respects as growth of gross national product,
rate of inflation, capital reinvestment, resource self-sufficiency and balance
of payment position.
The dividends and interest payable on certain of the Fund's foreign
portfolio securities may be subject to foreign withholding taxes, thus reducing
the net amount of income available for distribution to the Fund's shareholders.
Illiquid and 144A Securities
As discussed in the section of the Fund's Prospectus entitled "Investment
Objective and Policies," the Fund may invest in illiquid securities, including
restricted securities and other investments which are not readily marketable.
Restricted securities are securities which are subject to restrictions on resale
because they have not been registered under the Securities Act of 1933 (the
"1933 Act"). These limitations on resale and marketability may have the effect
of preventing the Fund from disposing of such a security 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. In purchasing restricted securities, the Fund does not
intend to engage in underwriting activities, except to the extent the Fund may
be deemed to be a statutory underwriter under the Securities Act in disposing of
such securities. Restricted securities will be purchased for investment purposes
only and not for the purpose of exercising control or management of other
companies.
The Fund also may invest in restricted securities that can be resold to
institutional investors pursuant to Rule 144A under the 1933 Act ("Rule 144A
Securities"). In recent years, a large institutional market has developed for
Rule 144A Securities. Institutional investors generally will not seek to sell
these instruments to the general public, but instead will often depend on an
efficient institutional market in which Rule 144A Securities can readily be
resold or on an issuer's ability to honor a demand for repayment. Therefore, the
fact that there are contractual or legal restrictions on resale to the general
public or certain institutions is not dispositive of the liquidity of such
investments. Institutional markets for Rule 144A Securities may provide both
readily ascertainable values for Rule 144A Securities and the ability to
liquidate an investment in order to satisfy share redemption orders. An
insufficient number of qualified
<PAGE>
institutional buyers interested in purchasing a Rule 144A Security held by the
Fund, however, could adversely affect the marketability of such security, and
the Fund might be unable to dispose of such security promptly or at reasonable
prices.
The board of directors has delegated to Fund Management the authority to
determine whether a liquid market exists for securities eligible for resale
pursuant to Rule 144A under the 1933 Act, or any successor to such rule, and
whether such securities are subject to the Fund's restriction against investing
more than 10% of its total assets in illiquid securities. Under guidelines
established by the board of directors, Fund Management will consider the
following factors, among others, in making this determination: (1) the
unregistered nature of a Rule 144A security, (2) the frequency of trades and
quotes for the security; (3) the number of dealers willing to purchase or sell
the security and the number of other potential purchasers; (4) dealer
undertakings to make a market in the security; and (5) the nature of the
security and the nature of marketplace trades (e.g., the time needed to dispose
of the security, the method of soliciting offers and the mechanics of transfer).
When-Issued and Delayed Delivery Securities
As discussed in the section of the Fund's Prospectus entitled "Investment
Objective and Policies," the Fund may purchase and sell securities on a
when-issued or delayed delivery basis. When-issued or delayed delivery
transactions arise when securities (normally, equity obligations of issuers
eligible for investment by the Fund) are purchased or sold by the Fund with
payment and delivery taking place in the future in order to secure what is
considered to be an advantageous price and yield. However, the yield on a
comparable security available when delivery takes place may vary from the yield
on the security at the time that the when-issued or delayed delivery transaction
was entered into. When the Fund engages in when-issued and delayed delivery
transactions, it relies on the seller or buyer, as the case may be, to
consummate the sale. Failure to do so may result in the Fund missing the
opportunity of obtaining a price or yield considered to be advantageous.
When-issued and delayed delivery transactions generally may be expected to
settle within one month from the date the transactions are entered into, but in
no event later than 90 days. However, no payment or delivery is made by the Fund
until it receives delivery or payment from the other party to the transaction.
To the extent that the Fund remains substantially fully invested at the
same time that it has purchased when-issued securities, as it would normally
expect to do, there may be greater fluctuations in its net assets than if the
Fund set aside cash to satisfy its purchase commitments.
<PAGE>
When the Fund purchases securities on a when-issued basis, it will
maintain in a segregated account cash, U.S. government securities or other
high-grade debt obligations readily convertible into cash having an aggregate
value equal to the amount of such purchase commitments, until payment is made.
If necessary, additional assets will be placed in the account daily so that the
value of the account will equal or exceed the amount of the Fund's purchase
commitments.
Repurchase Agreements
As discussed in the section of the Fund's Prospectus entitled "Investment
Objective and Policies," the Fund may invest in repurchase agreements with
commercial banks, registered brokers or registered government securities
dealers. A repurchase agreement is an agreement under which the Fund acquires a
debt instrument (generally a security issued by the U.S. government or an agency
thereof, a banker's acceptance or a certificate of deposit) from a commercial
bank, broker or dealer, subject to resale to the seller at an agreed upon price
and date (normally, the next business day). A repurchase agreement may be
considered a loan collateralized by securities. The resale price reflects an
agreed upon interest rate effective for the period the instrument is held by the
Fund and is unrelated to the interest rate on the underlying instrument. In
these transactions, the securities acquired by the Fund (including accrued
interest earned thereon) must have a total value in excess of the value of the
repurchase agreement and are held by the Fund's custodian bank until
repurchased. In addition, the Company's board of directors monitors the Fund's
repurchase agreement transactions and has established guidelines and standards
for review by the investment adviser of the creditworthiness of any bank, broker
or dealer party to a repurchase agreement with the Fund. The Fund will not enter
into repurchase agreements maturing in more than seven days if as a result more
than 10% of its total assets would be invested in such repurchase agreements and
other illiquid securities.
The use of repurchase agreements involves certain risks. For example, if
the other party to the agreement defaults on its obligation to repurchase the
underlying security at a time when the value of the security has declined, the
Fund may incur a loss upon disposition of the security. If the other party to
the agreement becomes insolvent and subject to liquidation or reorganization
under the Bankruptcy Code or other laws, a court may determine that the
underlying security is collateral for a loan by the Fund not within the control
of the Fund and therefore the realization by the Fund on such collateral may
automatically be stayed. Finally, it is possible that the Fund may not be able
to substantiate its interest in the underlying security and may be deemed an
unsecured creditor of the other party to the agreement. While the Fund's
management acknowledges these risks, it is expected that they can be controlled
through careful monitoring procedures.
<PAGE>
Lending of Securities
The Fund may lend its securities to qualified institutional investors who
need to borrow securities in order to complete certain transactions, such as
covering short sales, avoiding failures to deliver securities, or completing
arbitrage operations. By lending its securities, the Fund will be attempting to
generate income through the receipt of interest on the loan which, in turn, can
be invested in additional securities to pursue the Fund's investment objective.
Any gain or loss in the market price of the securities loaned that might occur
during the term of the loan would be for the account of the Fund. The Fund may
lend its portfolio securities to qualified brokers, dealers, banks or other
financial institutions, so long as the terms, structure and the aggregate amount
of such loans are not inconsistent with the Investment Company Act of 1940, as
amended (the "1940 Act") or the rules and regulations or interpretations of the
Securities and Exchange Commission (the "Commission") thereunder. Loans of
securities by the Fund will be collateralized by cash, letters of credit, or
securities issued or guaranteed by the U.S. government or its agencies equal to
at least 100% of the current market value of the loaned securities, determined
on a daily basis. Cash collateral will be invested only in high quality
short-term investments offering maximum liquidity. Lending securities involves
certain risks, the most significant of which is the risk that a borrower may
fail to return a portfolio security. The Fund monitors the creditworthiness of
borrowers in order to minimize such risks. The Fund will not lend any security
if, as a result of the loan, the aggregate value of securities then on loan
would exceed 33-1/3% of the Fund's total assets (taken at market value).
At the present time, the Fund may pay reasonable negotiated finder's fees
in connection with loaned securities, so long as such fees are set forth in a
written contract and approved by the Company's board of directors. In addition,
voting rights may pass with the loaned securities, but if a material event
(e.g., proposed merger, sale of assets, or liquidation) will occur affecting an
investment on loan, the loan must be called and the securities voted.
U.S. Government Obligations
These securities consist of treasury bills, treasury notes, and treasury
bonds, which differ only in their interest rates, maturities, and dates of
issuance. Treasury bills have a maturity of one year or less. Treasury notes
generally have a maturity of one to ten years, and treasury bonds generally have
maturities of more than ten years. As discussed in the Fund's Prospectus, U.S.
government obligations also include securities issued or guaranteed by agencies
or instrumentalities of the U.S. government.
<PAGE>
Some obligations of United States government agencies, which are
established under the authority of an act of Congress, such as Government
National Mortgage Association (GNMA) participation certificates, are supported
by the full faith and credit of the United States Treasury. GNMA Certificates
are mortgage-backed securities representing part ownership of a pool of mortgage
loans. These loans -- issued by lenders such as mortgage bankers, commercial
banks and savings and loan associations -- are either insured by the Federal
Housing Administration or guaranteed by the Veterans Administration. A "pool" or
group of such mortgages is assembled and, after being approved by GNMA, is
offered to investors through securities dealers. Once approved by GNMA, the
timely payment of interest and principal on each mortgage is guaranteed by GNMA
and backed by the full faith and credit of the U.S. government. The market value
of GNMA Certificates is not guaranteed. GNMA Certificates differ from bonds in
that principal is paid back monthly by the borrower over the term of the loan
rather than returned in a lump sum at maturity. GNMA Certificates are called
"pass-through" securities because both interest and principal payments
(including prepayments) are passed through to the holder of the Certificate.
Upon receipt, principal payments will be used by the Fund to purchase additional
securities under its investment objective and investment policies.
Other United States government obligations, such as securities of the
Federal Home Loan Banks, are supported by the right of the issuer to borrow from
the Treasury to repay its obligations. Still others, such as bonds issued by the
Federal National Mortgage Association, a federally chartered private
corporation, are supported only by the credit of the instrumentality.
Obligations of Domestic Banks
These obligations consist of certificates of deposit ("CDs") and bankers'
acceptances issued by domestic banks (including their foreign branches) having
total assets in excess of $5 billion, which meet the Fund's minimum rating
requirements. CDs are issued against deposits in a commercial bank for a
specified period and rate and are normally negotiable. Eurodollar CDs are
certificates issued by a foreign branch (usually London) of a U.S. domestic
bank, and, as such, the credit is deemed to be that of the domestic bank.
Bankers' acceptances are short-term credit instruments evidencing the
promise of the bank (by virtue of the bank's "acceptance") to pay at maturity a
draft which has been drawn on it by a customer (the "drawer"). These instruments
are used to finance the import, export, transfer, or storage of goods and
reflect the obligation of both the bank and the drawer to pay the face amount.
<PAGE>
Commercial Paper
These obligations are short-term promissory notes issued by domestic
corporations to meet current working capital requirements. Such paper may be
unsecured or backed by a bank letter of credit. Commercial paper issued with a
letter of credit is, in effect, "two party paper," with the issuer directly
responsible for payment, plus a bank's guarantee that if the note is not paid at
maturity by the issuer, the bank will pay the principal and interest to the
buyer. Commercial paper is sold either as interest-bearing or on a discounted
basis, with maturities not exceeding 270 days.
Investment Restrictions. As described in the section of the Fund's
Prospectus entitled "Investment Objective and Policies," the Fund has adopted
certain fundamental investment restrictions. Under these restrictions, which may
not be changed without prior approval by the holders of a majority, as defined
in the 1940 Act, of the outstanding voting securities of the Fund, the Fund may
not:
(1) sell short or buy on margin, except if the Fund ever commences
writing put or call options (which the Fund currently does not
anticipate doing) and except for such short-term credits as are
necessary for the clearance of purchases of securities;
(2) issue senior securities as defined in the Investment Company Act of
1940 or borrow money, except that the Fund may borrow from banks in
an amount not in excess of 10% of the value of its total assets
(including the amount borrowed) less liabilities (not including the
amount borrowed) at the time the borrowing is made, as a temporary
measure for emergency purposes (the Fund will not purchase
securities while any such borrowings exist);
(3) invest in the securities of any other investment company except for
a purchase or acquisition in accordance with a plan of
reorganization, merger or consolidation;
(4) purchase the securities of any one issuer (other than U.S.
government securities) if as a result more than 5% of the value of
its total assets would be invested in the securities of any one
issuer or the Fund would own more than 10% of the voting securities
of such issuer;
(5) lend money or securities to any person, provided, however, that this
shall not be deemed to prohibit the purchase of debt securities or
entering into repurchase agreements in accordance with the Fund's
investment policies, or to prohibit the Fund from lending portfolio
securities in an amount up to 33-1/3% of the Fund's total assets
(taken at current value);
<PAGE>
(6) buy or sell commodities, commodity contracts or real estate
(however, the Fund may purchase securities of companies investing in
real estate);
(7) invest in any company for the purpose of exercising
control or management;
(8) engage in the underwriting of any securities (except to the extent
the Fund may be deemed an underwriter under the Securities Act of
1933 in disposing of a security);
(9) purchase securities of any company in which any officer or director
of the Fund or its investment adviser owns more than 1/2 of 1% of
the outstanding securities, or in which all of the officers and
directors of the Fund and its investment adviser, as a group, own
more than 5% of such securities;
(10) invest more than 25% of the value of the Fund's assets in one
particular industry.
(11) pledge, hypothecate, mortgage or otherwise encumber its
assets, except as necessary to secure permitted
borrowings;
(12) purchase oil, gas or other mineral leases, rights or royalty
contracts or development programs (except that the Fund may invest
in the securities of issuers engaged in the foregoing activities);
(13) purchase the securities (other than United States government
securities) of an issuer having a record, together with
predecessors, of less than three years' continuous operations, if as
a result of such purchase more than 5% of the value of the Fund's
total assets would be invested in such securities.
The Fund is not prohibited from purchasing or writing put and call options
on securities, but does not anticipate doing so in the foreseeable future.
In applying restriction (10) above, the Fund uses an industry
classification system based on the O'Neil Database published by William O'Neil &
Co., Inc.
The Company also has given the following undertaking to the State of
Texas. The Fund will not buy or sell real property (including limited
partnership interests therein), but may buy or sell readily marketable interests
in real estate investment trusts or readily marketable securities of companies
which invest in real estate.
<PAGE>
The Company also has given an undertaking to the State of Arkansas that
the Fund may purchase or write put and call options on securities, or straddles,
spreads, or combinations thereof, only if by reason thereof the value of its
aggregate investment in such classes of securities will be 5% or less of its
total assets.
Unless otherwise noted, the Fund's investment restrictions and its
investment policies are not fundamental and may be changed by action of the
Company's board of directors. Unless otherwise noted, all percentage limitations
contained in the Fund's investment policies and restrictions apply at the time
an investment is made. Thus, subsequent changes in the value of an investment
after purchase or in the value of the Fund's total assets will not cause any
such limitation to have been violated or to require the disposition of any
investment, except as otherwise required by law.
THE FUND AND ITS MANAGEMENT
The Company. The Company was incorporated under the laws of
Maryland on December 6, 1990. On December 2, 1994, the Company's
name was changed from "INVESCO Emerging Growth Fund, Inc." to
"INVESCO Emerging Opportunity Funds, Inc."
The Investment Adviser. INVESCO Funds Group, Inc. ("INVESCO") is employed
as the Fund's investment adviser. INVESCO was established in 1932 and also
serves as an investment adviser to INVESCO Diversified Funds, Inc., INVESCO
Dynamics Fund, Inc., INVESCO Growth Fund, Inc., INVESCO Income Funds, Inc.,
INVESCO Industrial Income Fund, Inc., INVESCO International Funds, Inc., INVESCO
Money Market Funds, Inc., INVESCO Multiple Asset Funds, Inc., INVESCO Specialty
Funds, Inc., INVESCO Strategic Portfolios, Inc., INVESCO Tax-Free Income Funds,
Inc., INVESCO Value Trust and INVESCO Variable Investment Funds, Inc.
The Sub-Adviser. INVESCO, as investment adviser, has contracted with
INVESCO Trust Company ("INVESCO Trust") to provide investment advisory and
research services on behalf of the Fund. INVESCO Trust has the primary
responsibility for providing portfolio investment management services to the
Fund. INVESCO Trust, a trust company founded in 1969, is a wholly-owned
subsidiary of INVESCO.
INVESCO is an indirect, wholly-owned subsidiary of INVESCO PLC, a
publicly-traded holding company organized in 1935. Through subsidiaries located
in London, Denver, Atlanta, Boston, Louisville, Dallas, Tokyo, Hong Kong, and
the Channel Islands, INVESCO PLC provides investment services around the world.
INVESCO was acquired by INVESCO PLC in 1982 and as of May 31, 1995, managed 14
mutual funds, consisting of 38 separate portfolios, on behalf of approximately
797,000 shareholders. INVESCO PLC's other North American subsidiaries include
the following:
<PAGE>
--INVESCO Capital Management, Inc. of Atlanta, Georgia,
manages institutional investment portfolios, consisting primarily
of discretionary employee benefit plans for corporations and state
and local governments, and endowment funds. INVESCO Capital
Management, Inc. is the sole shareholder of INVESCO Services, Inc.,
a registered broker-dealer whose primary business is the
distribution of shares of two registered investment companies.
--INVESCO Management & Research, Inc. (formerly Gardner and
Preston Moss, Inc.) of Boston, Massachusetts, primarily manages
pension and endowment accounts.
--PRIMCO Capital Management, Inc. of Louisville, Kentucky,
specializes in managing stable return investments, principally on
behalf of Section 401(k) retirement plans.
--INVESCO Realty Advisors of Dallas, Texas, is responsible for providing
advisory services in the U.S. real estate markets for INVESCO PLC's clients
worldwide. Clients include corporate plans, public pension funds as well as
endowment and foundation accounts.
The corporate headquarters of INVESCO PLC are located at 11 Devonshire
Square, London, EC2M 4YR, England.
As indicated in the Prospectus, INVESCO and INVESCO Trust permit
investment and other personnel to purchase and sell securities for their own
accounts in accordance with a compliance policy governing personal investing by
directors, officers and employees of INVESCO, INVESCO Trust and their North
American affiliates. The policy requires officers, inside directors, investment
and other personnel of INVESCO, INVESCO Trust and their North American
affiliates to pre-clear all transactions in securities not otherwise exempt
under the policy. Requests for trading authority will be denied when, among
other reasons, the proposed personal transaction would be contrary to the
provisions of the policy or would be deemed to adversely affect any transaction
then known to be under consideration for or to have been effected on behalf of
any client account, including the Fund.
In addition to the pre-clearance requirement described above, the policy
subjects officers, inside directors, investment and other personnel of INVESCO,
INVESCO Trust and their North American affiliates to various trading
restrictions and reporting obligations. All reportable transactions are reviewed
for compliance with the policy. The provisions of this policy are administered
by and subject to exceptions authorized by INVESCO or INVESCO Trust.
Investment Advisory Agreement. INVESCO serves as investment adviser
pursuant to an investment advisory agreement (the "Agreement") with the Company
which was approved on April 24, 1991, by a vote cast in person by all of the
directors of the Company,
<PAGE>
including all of the directors who are not "interested persons" of the Company
or INVESCO at a meeting called for such purpose. The Agreement was approved by
INVESCO on December 31, 1991 as the then sole shareholder of the Fund, and was
approved by the Fund's public shareholders on May 24, 1993. The Agreement was
for an initial term of two years expiring December 31, 1993, and has been
continued by action of the board of directors until April 30, 1996. Thereafter,
the Agreement may be continued from year to year as to the Fund as long as each
such continuance is specifically approved at least annually by the board of
directors of the Company, or by a vote of the holders of a majority, as defined
in the 1940 Act, of the outstanding shares of the Fund. Each such continuance
also must be approved by a majority of the directors who are not parties to the
Agreement or interested persons (as defined in the 1940 Act) of any such party,
cast in person at a meeting called for the purpose of voting on such
continuance. The Agreement may be terminated at any time without penalty by
either party upon sixty (60) days' written notice, and terminates automatically
in the event of an assignment to the extent required by the 1940 Act and the
rules thereunder.
The Agreement provides that INVESCO shall manage the investment portfolio
of the Fund in conformity with the Fund's investment policies (either directly
or by delegation to a sub-adviser which may be a company affiliated with
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 Fund excluding, however, those services that are the subject of
separate agreement between the Company and INVESCO or any affiliate thereof,
including the distribution and sale of Fund shares and provision of transfer
agency, dividend disbursing agency, and registrar services, and services
furnished under an Administrative Services Agreement dated as of April 30, 1991,
with INVESCO. Services provided under the Agreement include, but are not limited
to: supplying the Company with officers, clerical staff and other employees, if
any, who are necessary in connection with the Fund's operations; furnishing
office space, facilities, equipment, and supplies; providing personnel and
facilities required to respond to inquiries related to shareholder accounts;
conducting periodic compliance reviews of the Fund's operations; preparation and
review of required documents, reports and filings by 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 Fund), except insofar as the
assistance of independent accountants or attorneys is necessary or desirable;
supplying basic telephone service and other utilities; and preparing and
maintaining certain of the books and records required to be prepared and
maintained by the Fund under the 1940 Act. Expenses not assumed by INVESCO are
borne by the Fund.
<PAGE>
As full compensation for its advisory services provided to the Company
under the Agreement, INVESCO receives a monthly fee. The fee is based upon a
percentage of the Fund's average net assets, determined daily. With respect to
the Fund, the fee is calculated at an annual rate of 0.75% on the first $350
million of the Fund's average net assets, 0.65% on the next $350 million of the
Fund's average net assets, and 0.55% on the Fund's average net assets over $700
million. For the fiscal years ended May 31, 1995, 1994 and 1993, the Fund paid
INVESCO advisory fees of $1,370,549 (prior to the voluntary absorption of
certain Fund expenses by INVESCO), $1,359,701 and $564,219, respectively.
Certain states in which the shares of the Fund are qualified for sale
currently impose limitations on the expenses of the Fund. At the date of this
Statement of Additional Information, the most restrictive state-imposed annual
expense limitation requires that INVESCO absorb any amount necessary to prevent
the Fund's aggregate ordinary operating expenses (excluding interest, taxes,
Rule 12b-1 fees, brokerage fees and commissions, and extraordinary charges such
as litigation costs) from exceeding in any fiscal year 2.5% on the Fund's first
$30 million of average net assets, 2.0% on the next $70 million of average net
assets and 1.5% on the remaining average net assets. No payment of the
investment advisory fee will be made to INVESCO which would result in the Fund's
expenses exceeding on a cumulative annualized basis this state limitation.
During the past fiscal year, INVESCO did not absorb any amounts under this
provision.
Sub-Advisory Agreement. INVESCO Trust serves as sub-adviser to the Fund
pursuant to a sub-advisory agreement (the "Sub-Agreement") with INVESCO which
was approved on April 24, 1991, by a vote cast in person by all of the directors
of the Company, including all of the directors who are not "interested persons"
of the Company, INVESCO, or INVESCO Trust at a meeting called for such purpose.
The Sub-Agreement was approved on December 31, 1991, by INVESCO as the then sole
shareholder of the Fund, and by the Fund's public shareholders on May 24, 1993.
The Sub-Agreement was for an initial term of two years expiring December 31,
1993, and has been continued by action of the board of directors until April 30,
1996. Thereafter, the Sub-Agreement may be continued from year to year as long
as each such continuance is specifically approved by the board of directors of
the Company, or by a vote of the holders of a majority, as defined in the 1940
Act, of the outstanding shares of the Fund. Each such continuance also must be
approved by a majority of the directors who are not parties to the Sub-Agreement
or interested persons (as defined in the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such continuance. The
Sub-Agreement may be terminated at any time without penalty by either party or
the Company 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.
<PAGE>
The Sub-Agreement provides that INVESCO Trust, subject to the supervision
of INVESCO and the Company's board of directors, shall manage the investment
portfolio of the Fund in conformity with the Fund's investment policies. These
management services include: (a) managing the investment and reinvestment of all
the assets, now or hereafter acquired, of the Fund, and executing all purchases
and sales of portfolio securities; (b) maintaining a continuous investment
program for the Fund, consistent with (i) the Fund's investment policies as set
forth in the Company's Articles of Incorporation, Bylaws, and Registration
Statement, as from time to time amended, under the 1940 Act, and in any
prospectus and/or statement of additional information of the Company, as from
time to time amended and in use under the 1933 Act, and (ii) the Company's
status as a regulated investment company under the Internal Revenue Code of
1986, as amended; (c) determining what securities are to be purchased or sold
for the Fund, unless otherwise directed by the directors of the Company or
INVESCO, and executing transactions accordingly; (d) providing the Fund the
benefit of all of the investment analysis and research, the reviews of current
economic conditions and trends, and the consideration of long-range investment
policy now or hereafter generally available to investment advisory customers of
INVESCO Trust; (e) determining what portion of the Fund should be invested in
the various types of securities authorized for purchase by the Fund; and (f)
making recommendations as to the manner in which voting rights, rights to
consent to Company action and any other rights pertaining to the portfolio
securities of the Fund shall be exercised.
The Sub-Agreement provides that as compensation for its services, INVESCO
Trust shall receive from INVESCO, at the end of each month, a fee based upon the
average daily value of the Fund's net assets at the following annual rate: 0.25%
on the first $200 million of the average net assets of the Fund, and 0.20% on
the Fund's average net assets over $200 million. The Sub-Advisory fees are paid
by INVESCO, NOT the Fund.
Administrative Services Agreement. INVESCO, either directly or through
affiliated companies, provides certain administrative, sub-accounting, and
recordkeeping services to the Fund pursuant to an Administrative Services
Agreement dated December 31, 1991 (the "Administrative Agreement"). The
Administrative Agreement was approved on April 24, 1991, by a vote cast in
person by all of the directors of the Company, including all of the directors
who are not "interested persons" of the Company or INVESCO at a meeting called
for such purpose. The Administrative Agreement was for an initial term of one
year expiring December 31, 1992, and has been continued by action of the board
of directors until April 30, 1996. The Administrative Agreement may be continued
from year to year thereafter as long as each such continuance is specifically
approved by the board of directors of the Company, including a majority of the
directors who are not parties to the Administrative Agreement or interested
persons (as defined in the 1940 Act) of any
<PAGE>
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 Company upon
thirty (30) days' written notice, and terminates automatically in the event of
an assignment unless the Company's board of directors approves such assignment.
The Administrative Agreement provides that INVESCO shall provide the
following services to the Fund: (A) such sub-accounting and recordkeeping
services and functions as are reasonably necessary for the operation of the
Fund; and (B) such sub-accounting, recordkeeping, and administrative services
and functions, which may be provided by affiliates of INVESCO, as are reasonably
necessary for the operation of Fund shareholder accounts maintained by certain
retirement plans and employee benefit plans for the benefit of participants in
such plans.
As full compensation for services provided under the Administrative
Agreement, the Fund pays a monthly fee to INVESCO consisting of a base fee of
$10,000 per year, plus an additional incremental fee computed daily and paid
monthly at an annual rate of 0.015% per year of the average net assets of the
Fund. For the fiscal years ended May 31, 1995, 1994 and 1993, the Fund paid
INVESCO administrative services fees in the amount of $37,411 (prior to the
voluntary absorption of certain Fund expenses by INVESCO), $37,194 and $21,284,
respectively.
Transfer Agency Agreement. INVESCO also performs transfer agent, dividend
disbursing agent, and registrar services for the Fund pursuant to a Transfer
Agency Agreement dated December 31, 1991, which was approved by the board of
directors of the Company, including a majority of the Company's directors who
are not parties to the Transfer Agency Agreement or "interested persons" of any
such party, in April 1992, for a term of one year. The Transfer Agency Agreement
has been continued by action of the board of directors until April 30, 1996, and
thereafter may be continued from year to year as long as such continuance is
specifically approved at least annually by the board of directors of the
Company. Any such continuance also must be approved by a majority of the
Company's directors who are not parties to the Transfer Agency Agreement or
interested persons (as defined by the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such continuance. The
Transfer Agency Agreement may be terminated at any time without penalty by
either party upon sixty (60) days' written notice and terminates automatically
in the event of assignment.
The Transfer Agency Agreement provides that the Fund shall pay to INVESCO
an annual fee of $14.00 per shareholder account or omnibus account participant.
This fee is paid monthly at 1/12 of the annual fee and is based upon the number
of shareholder accounts and omnibus account participants in existence at any
time during each month. For the fiscal years ended May 31, 1995, 1994 and 1993,
the Fund paid INVESCO transfer agency fees of $635,770 (prior to the voluntary
absorption of certain Fund expenses by INVESCO), $362,259 and $203,346,
respectively.
<PAGE>
Officers and Directors of the Company. The overall direction and
supervision of the Company is the responsibility of the board of directors,
which has the primary duty of seeing that the general investment policies and
programs of the Fund are carried out and that the Fund is properly administered.
The officers of the Company, all of whom are officers and employees of, and are
paid by, INVESCO, are responsible for the day-to-day administration of the
Company and the Fund. The investment adviser for the Fund has the primary
responsibility for making investment decisions on behalf of the Fund. These
investment decisions are reviewed by the investment committee of INVESCO.
All of the officers and directors of the Company hold comparable positions
with INVESCO Diversified Funds, Inc., INVESCO Dynamics Fund, Inc., INVESCO
Growth Fund, Inc., INVESCO Income Funds, Inc., INVESCO Industrial Income Fund,
Inc., INVESCO International Funds, Inc., INVESCO Money Market Funds, Inc.,
INVESCO Multiple Asset Funds, Inc., INVESCO Specialty Funds, Inc., INVESCO
Strategic Portfolios, Inc., INVESCO Tax-Free Income Funds, Inc. and INVESCO
Variable Investment Funds, Inc. All of the directors of the Company are also
trustees of INVESCO Value Trust. In addition, all of the directors of the
Company also are, with the exception of Messrs. Hesser and Sim, trustees of
INVESCO Treasurer's Series Trust and directors of The EBI Funds, Inc. All of the
officers of the Company also hold comparable positions with INVESCO Value Trust.
Set forth below is information with respect to each of the Company's officers
and directors. Unless otherwise indicated, the address of the directors and
officers is Post Office Box 173706, Denver, Colorado 80217-3706. Their
affiliations represent their principal occupations during the past five years.
CHARLES W. BRADY,*+ Chairman of the Board. Chief Executive
Officer and Director of INVESCO PLC, London, England, and of
various subsidiaries thereof; Chairman of the Board of The EBI
Funds, Inc., INVESCO Treasurer's Series Trust, and The Global
Health Sciences Fund. Address: 1315 Peachtree Street, NE,
Atlanta, Georgia. Born May 11, 1935.
FRED A. DEERING,+# Vice Chairman of the Board. Vice Chairman
of The EBI Funds, Inc. and INVESCO Treasurer's Series Trust.
Trustee of The 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 NN
Financial, Toronto, Ontario, Canada; Director and Chairman of the
Executive Committee of ING America Life, Life Insurance Co. of
Georgia and Southland Life Insurance Company. Address: Security
Life Center, 1290 Broadway, Denver, Colorado. Born: January 12,
1928.
DAN J. HESSER,*+ President and Director. Chairman of the
Board, President, and Chief Executive Officer of INVESCO Funds
Group, Inc., and Director of INVESCO Trust Company. Trustee of The
Global Health Sciences Fund. Born: December 27, 1939.
VICTOR L. ANDREWS,** Director. Mills Bee Lane Professor of
Banking and Finance and Chairman of the Department of Finance at
Georgia State University, Atlanta, Georgia, since 1968; 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: Department of Finance, Georgia State University,
University Plaza, Atlanta, Georgia. Born: June 23, 1930.
BOB R. BAKER,+** Director. President and Chief Executive
Officer of AMC Cancer Research Center, Denver, Colorado, since
January 1989; until mid-December 1988, Vice Chairman of the Board
of First Columbia Financial Corporation (a financial institution),
Englewood, Colorado. Formerly, Chairman of the Board and Chief
Executive Officer of First Columbia Financial Corporation.
Address: 1775 Sherman Street, #1000, Denver, Colorado. Born:
August 7, 1936.
<PAGE>
FRANK M. BISHOP,* Director. President and Chief Operating
Officer of INVESCO Inc. since February, 1993; Director of INVESCO
Funds Group, Inc. since March 1993; Director (since February 1993),
Vice President (since December 1991), and Portfolio Manager (since
February 1987), of INVESCO Capital Management, Inc. (and
predecessor firms) Atlanta, Georgia. Address: 1315 Peachtree
Street, N.E., Atlanta, Georgia. Born: December 7, 1943.
LAWRENCE H. BUDNER,# Director. Trust Consultant; prior to
June 30, 1987, Senior Vice President and Senior Trust Officer of
InterFirst Bank, Dallas, Texas. Address: 7608 Glen Albens,
Dallas, Texas. Born: July 25, 1930.
DANIEL D. CHABRIS,+# Director. Financial Consultant;
Assistant Treasurer of Colt Industries Inc., New York, New York,
from 1966 to 1988. Address: 15 Sterling Road, Armonk, New York.
Born: August 1, 1923.
A. D. FRAZIER, JR.,** Director. Chief Operating Officer of
the Atlanta Committee for the Olympic Games. From 1982 to 1991,
Mr. Frazier was employed in various capacities by First Chicago
Bank, most recently as Executive Vice President of the North
American Banking Group. Trustee of The Global Health Sciences
Fund. Address: 250 Williams Street, Suite 6000, Atlanta, Georgia
30301. Born: June 29, 1944.
KENNETH T. KING,** Director. Formerly, Chairman of the Board
of The Capitol Life Insurance Company, Providence Washington
Insurance Company, and Director of numerous subsidiaries thereof in
the U.S. Formerly, Chairman of the Board of The Providence Capitol
Companies in the United Kingdom and Guernsey. Chairman of the
Board of the Symbion Corporation (a high technology company) until
1987. Address: 4080 North Circulo Manzanillo, Tucson, Arizona.
Born: November 16, 1925.
JOHN W. MCINTYRE,# Director. Retired. Formerly, Vice
Chairman of the Board of Directors of the Citizens and Southern
Corporation and Chairman of the Board and Chief Executive Officer
of the Citizens and Southern Georgia Corporation and Citizens and
Southern National Bank. Director of Golden Poultry Co., Inc.
Trustee of The Global Health Sciences Fund and Gables Residential
Trust. Address: Seven Piedmont Center, Suite 100, Atlanta, Georgia
30305. Born: September 14, 1930.
R. DALTON SIM*, Director. Chairman of the Board (since March
1993) and President (since January 1991) of INVESCO Trust Company;
Director since June 1987 and, formerly, Executive Vice President
and Chief Investment Officer (June 1987 to January 1991) of INVESCO
Funds Group, Inc.; President (since 1994) and Trustee (since 1991)
of The Global Health Sciences Fund. Born: July 18, 1939.
GLEN A. PAYNE, Secretary. Senior Vice President, General
Counsel and Secretary of INVESCO Funds Group, Inc. and INVESCO
Trust Company; formerly, employee of a U.S. regulatory agency,
Washington, D.C., (June 1973 through May 1989). Born: September
25, 1947.
RONALD L. GROOMS, Treasurer. Senior Vice President and
Treasurer of INVESCO Funds Group, Inc. and INVESCO Trust Company.
Born: October 1, 1946.
WILLIAM J. GALVIN, JR., Assistant Secretary. Vice President
of INVESCO Funds Group, Inc. and Trust Officer of INVESCO Trust
Company since August 1992; Vice President of 440 Financial Group
from June 1990 to August 1992; Assistant Vice President of Putnam
Companies from November 1986 to June 1990. Born: August 21, 1956.
ALAN I. WATSON, Assistant Secretary. Vice President of
INVESCO Funds Group, Inc. and Trust Officer of INVESCO Trust
Company. Born: September 14, 1941.
JUDY P. WIESE, Assistant Treasurer. Vice President of INVESCO
Funds Group, Inc. and Trust Officer of INVESCO Trust Company.
Born: February 3, 1948.
<PAGE>
#Member of the audit committee of the Company.
+Member of the executive committee of the Company. On occasion, the
executive committee acts upon the current and ordinary business of the Company
between meetings of the board of directors. Except for certain powers which,
under applicable law, may only be exercised by the full board of directors, the
executive committee may exercise all powers and authority of the board of
directors in the management of the business of the Company. All decisions are
subsequently submitted for ratification by the board of directors.
*These directors are "interested persons" of the Company as
defined in the 1940 Act.
**Member of the management liaison committee of the Company.
As of June 30, 1995, the officers and directors of the Company, as a
group, beneficially owned less than 1% of the Company's outstanding shares and
less than 1% of the Fund's outstanding shares.
Director Compensation
The following table sets forth, for the fiscal year ended May 31, 1995:
the compensation paid by the Company to its eight independent directors for
services rendered in their capacities as directors of the Company; the benefits
accrued as Company expenses with respect to the Defined Benefit Deferred
Compensation Plan discussed below; and the estimated annual benefits to be
received by these directors upon retirement as a result of their service to the
Company. In addition, the table sets forth the total compensation paid by all of
the mutual funds distributed by INVESCO Funds Group, Inc. (including the
Company), The EBI Funds, Inc., INVESCO Treasurer's Series Trust and The Global
Health Sciences Fund (collectively, the "INVESCO Complex") to these directors
for services rendered in their capacities as directors or trustees during the
year ended December 31, 1994. As of December 31, 1994, there were 45 funds in
the INVESCO Complex.
<PAGE>
Total
Compensa-
Benefits Estimated tion From
Aggregate Accrued As Annual INVESCO
Compensa- Part of Benefits Complex
tion From Company Upon Paid To
Company1 Expenses2 Retirement3 Directors1
Fred A.Deering, $1,763 $698 $388 $89,350
Vice Chairman of
the Board
Victor L. Andrews 1,554 660 449 68,000
Bob R. Baker 1,691 589 602 75,350
Lawrence H. Budner 1,554 660 449 68,000
Daniel D. Chabris 1,654 753 319 73,350
A. D. Frazier, Jr.4 355 0 0 32,500
Kenneth T. King 1,626 725 352 71,000
John W. McIntyre4 355 0 0 33,000
Total $10,552 $4,085 $2,559 $510,550
% of Net Assets 0.0069%5 0.0027%5 0.0052%6
1The vice chairman of the board, the chairmen of the audit, management
liaison and compensation committees, and the members of the executive and
valuation committees each receive compensation for serving in such capacities in
addition to the compensation paid to all independent directors.
2Represents benefits accrued with respect to the Defined Benefit Deferred
Compensation Plan discussed below, and not compensation deferred at the election
of the directors.
3These figures represent the Company's share of the estimated annual
benefits payable by the INVESCO Complex (excluding the Global Health Sciences
Fund which does not participate in any retirement plan) upon the directors'
retirement, calculated using the current method of allocating director
compensation among the funds in the INVESCO Complex. These estimated benefits
assume retirement at age 72 and that the basic retainer payable to the directors
will be adjusted periodically for inflation, for increases in the number of
funds in the INVESCO Complex, and for other reasons during the period in which
retirement benefits are accrued on behalf of the respective directors. This
results in lower estimated benefits for directors who are closer to retirement
<PAGE>
and higher estimated benefits for directors who are further from retirement.
With the exception of Messrs. Frazier and McIntyre, each of these directors has
served as a director/trustee of one or more of the funds in the INVESCO Complex
for the minimum five-year period required to be eligible to participate in the
Defined Benefit Deferred Compensation Plan.
4Messrs. Frazier and McIntyre began serving as directors of
the Company on April 19, 1995.
5Totals as a percentage of the Company's net assets as of May
31, 1995.
6Total as a percentage of the net assets of the INVESCO
Complex as of December 31, 1994.
Messrs. Bishop, Brady, Hesser, and Sim, as "interested persons" of the
Company and other funds in the INVESCO Complex, receive compensation as officers
or employees of INVESCO or its affiliated companies, and do not receive any
director's fees or other compensation from the Company or other funds in the
INVESCO Complex for their services as directors.
The boards of directors/trustees of the mutual funds managed by INVESCO,
The EBI Funds, Inc. and INVESCO Treasurer's Series Trust have adopted a Defined
Benefit Deferred Compensation Plan for the non-interested directors and trustees
of the funds. Under this plan, each director or trustee who is not an interested
person of the funds (as defined in the 1940 Act) and who has served for at least
five years (a "qualified director") is entitled to receive, upon retiring from
the boards at the retirement age of 72 (or the retirement age of 73 to 74, if
the retirement date is extended by the boards for one or two years, but less
than three years) continuation of payment for one year (the "first year
retirement benefit") of the annual basic retainer payable by the funds to the
qualified director at the time of his retirement (the "basic retainer").
Commencing with any such director's second year of retirement, and commencing
with the first year of retirement of a director whose retirement has been
extended by the board for three years, a qualified director shall receive
quarterly payments at an annual rate equal to 25% of the basic retainer. These
payments will continue for the remainder of the qualified director's life or ten
years, whichever is longer (the "reduced retainer payments"). If a qualified
director dies or becomes disabled after age 72 and before age 74 while still a
director of the funds, the first year retirement benefit and the reduced
retainer payments will be made to him or to his beneficiary or estate. If a
qualified director becomes disabled or dies either prior to age 72 or during
his/her 74th year while still a director of the funds, the director will not be
entitled to receive the first year retirement benefit; however, the reduced
retainer payments will be made to his beneficiary or estate. The plan is
administered by a committee of
<PAGE>
three directors who are also participants in the plan and one director who is
not a plan participant. The cost of the plan will be allocated among the
INVESCO, EBI and Treasurer's Series funds in a manner determined to be fair and
equitable by the committee. The Company is not making any payments to directors
under the plan as of the date of this Statement of Additional Information. The
Company has no stock options or other pension or retirement plans for management
or other personnel and pays no salary or compensation to any of its officers.
The Company has an audit committee comprised of four of the directors who
are not interested persons of the Company. The committee meets periodically with
the Company's independent accountants and officers to review accounting
principles used by the Company, the adequacy of internal controls, the
responsibilities and fees of the independent accountants, and other matters.
The Company also has a management liaison committee which meets quarterly
with various management personnel of INVESCO in order (a) to facilitate better
understanding of management and operations of the Company, and (b) to review
legal and operational matters which have been assigned to the committee by the
board of directors, in furtherance of the board of directors' overall duty of
supervision.
HOW SHARES CAN BE PURCHASED
Shares of the 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 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." INVESCO acts
as the Fund's Distributor under a distribution agreement with the Company under
which it receives no compensation and bears all expenses, including the costs of
printing and distributing prospectuses, incident to marketing of the Fund's
shares, except for such distribution expenses which are paid out of Fund assets
under the Company's Plan of Distribution which has been adopted by the Company
in accordance with Rule 12b-1 under the 1940 Act.
Distribution Plan. As discussed under "How Shares Can Be Purchased" in the
Prospectus, the Company has adopted a Plan and Agreement of Distribution (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act. The Plan provides that the
Fund may make monthly payments to INVESCO of amounts computed at an annual rate
no greater than 0.25% on the Fund's average net assets to reimburse it for
expenses incurred by it in connection with the distribution of the Fund's shares
to investors. Payment amounts by the Fund under the Plan, for any month, may
only be made to reimburse or pay expenditures incurred during the rolling
12-month period in which
<PAGE>
that month falls, although this period is expanded to 24 months for expenses
incurred during the first 24 months of a new fund's operations. For the fiscal
year ended May 31, 1995, the Fund made payments to INVESCO under the Plan in the
amount of $459,782. In addition, as of May 31, 1995, $35,518 of additional
distribution expenses had been incurred for the Fund and were subject to payment
upon approval of the Company's directors, which approval was obtained on July
19, 1995. As noted in the Prospectuses, one type of reimbursable 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 Fund. The Fund is authorized by the Plan to use its assets to finance
the payments made to obtain those services. Payments may be made by INVESCO to
broker-dealers, who sell shares of the Fund and may be made to banks, savings
and loan associations and other depository institutions. Although the
Glass-Steagall Act limits the ability of certain banks to act as underwriters of
mutual fund shares, the Company does not believe that these limitations affect
the ability of such banks to enter into arrangements with INVESCO, but can give
no assurance in this regard. However, to the extent it is determined otherwise
in the future, arrangements with banks might have to be modified or terminated,
and, in that case, the size of the Fund possibly could decrease to the extent
that the banks would no longer invest customer assets in the Fund. Neither the
Company nor its investment adviser will give any preference to banks or other
depository institutions which enter into such arrangements when selecting
investments to be made by the Fund.
For the 12 months ended May 31, 1995, allocation of 12b-1 amounts paid by
the Fund for the following categories of expenses were: advertising--$40,948;
sales literature, printing, and postage--$108,698; direct mail--$47,180; public
relations/promotion--$48,793 compensation to securities dealers and other
organizations--$68,311; and marketing personnel--$145,852.
The nature and scope of services which are provided by securities dealers
and other organizations may vary by dealer but include, among other things,
processing new stockholder account applications, preparing and transmitting to
the Company's Transfer Agent computer-processable tapes of the Fund's
transactions by customers, serving as the primary source of information to
customers in answering questions concerning the Fund, and assisting in other
customer transactions with the Fund.
The Plan was approved on April 24, 1991, at a meeting called for such
purpose by a majority of the directors of the Company, including a majority of
the directors who neither are "interested persons" of the Company nor have any
financial interest in the operation of the Plan ("12b-1 directors"). The Plan
was approved by INVESCO on December 31, 1991, as the then sole shareholder of
<PAGE>
the Fund, and by the public shareholders of the Fund on May 24, 1993.
Continuation of the Plan for another year was approved by the board of directors
of the Company, including a majority of the 12b-1 directors, on April 19, 1995.
The Plan provides that it shall continue in effect for so long as such
continuance is approved at least annually by the vote of the board of directors,
including a majority of the 12b-1 directors of the Company cast in person at a
meeting called for the purpose of voting on such continuance. The Plan can be
terminated at any time with respect to the Fund, without penalty, if a majority
of the 12b-1 directors, or shareholders of the Fund, vote to terminate the Plan.
The Company may, in its absolute discretion, suspend, discontinue or limit the
offering of the shares of the Fund at any time. In determining whether any such
action should be taken, the board of directors intends to consider all relevant
factors including, without limitation, the size of the Fund, the investment
climate for the Fund, general market conditions, and the volume of sales and
redemptions of Fund shares. The Plan may continue in effect and payments may be
made under the Plan following any such temporary suspension or limitation of the
offering of the Fund's shares; however, the Company is not contractually
obligated to continue the Plan for any particular period of time. Suspension of
the offering of the 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 directors of the Company shall
be committed to the independent directors then in office at the time of such
selection or nomination. The Plan may not be amended to increase materially the
amount of the Fund's payments thereunder without approval of the shareholders of
the Fund, and all material amendments to the Plan must be approved by the board
of directors of the Company, including a majority of the 12b-1 directors. Under
the agreement implementing the Plan, INVESCO or the Fund, the latter by vote of
a majority of the 12b-1 directors or of the holders of a majority of the Fund's
outstanding voting securities, may terminate such agreement without penalty upon
30 days' written notice to the other party. No further payments will be made by
the Fund under the Plan in the event of its termination as to the 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 the Fund's assets in the amounts and for the purposes
set forth therein, notwithstanding the occurrence of an assignment, as defined
by the 1940 Act, and rules thereunder. To the extent it constitutes an agreement
pursuant to a plan, the Fund's obligation to make payments to INVESCO under the
Plan shall terminate automatically, in the event of an "assignment," in which
event the Fund may continue to make payments, pursuant to the Plan, to INVESCO
or another organization only upon the approval of new arrangements, which may or
may not be with INVESCO, regarding the use of the
<PAGE>
amounts authorized to be paid by it under the Plan, by the directors, including
a majority of the 12b-1 directors, by a vote cast in person at a meeting called
for such purpose.
Information regarding the services rendered under the Plan and the amounts
paid therefor by the Fund are provided to, and reviewed by, the directors on a
quarterly basis. In the quarterly review, the directors determine whether, and
to what extent, INVESCO will be reimbursed for expenditures which it has made
that are reimbursable under the Company's Rule 12b-1 Plan. On an annual basis,
the directors consider the continued appropriateness of the Plan and the level
of compensation provided therein.
The only directors or interested persons, as that term is defined in
Section 2(a)(19) of the 1940 Act, of the Company who have a direct or indirect
financial interest in the operation of the Plan are the officers and directors
of the Company listed under "Officers and Directors of the Company" who are also
officers either of INVESCO or companies affiliated with INVESCO. The benefits
which the Company believes will be reasonably likely to flow to the Fund 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 Fund;
(2) The sale of additional shares reduces the likelihood that redemption
of shares will require the liquidation of securities of the Fund in
amounts and at times that are disadvantageous for investment
purposes;
(3) The positive effect which increased Fund assets will have on its
revenues could allow INVESCO:
(a) To have greater resources to make the financial commitments
necessary to improve the quality and level of the Fund's
shareholder services (in both systems and personnel),
(b) To increase the number and type of mutual funds available to
investors from INVESCO (and support them in their infancy),
and thereby expand the investment choices available to all
shareholders, and
(c) To acquire and retain talented employees who desire
to be associated with a growing organization; and
(4) Increased Fund assets may result in reducing each
investor's share of certain expenses through economies of
scale (e.g. exceeding established breakpoints in the
advisory fee schedule and allocating fixed expenses over
a larger asset base) thereby partially offsetting the
costs of the Plan.
<PAGE>
HOW SHARES ARE VALUED
As described in the section of the Fund's Prospectus entitled "How Shares
Can Be Purchased," the net asset value of shares of the Fund is computed once
each day that the New York Stock Exchange is open as of the close of regular
trading on that Exchange (usually 4:00 p.m., New York time) and applies to
purchase and redemption orders received prior to that time. Net asset value per
share is also computed on any other day on which there is a sufficient degree of
trading in the securities held by the Fund that the current net asset value per
share of the Fund might be materially affected by changes in the value of the
securities held, but only if on such day the Fund receives a request to purchase
or redeem shares. Net asset value per share is not calculated on days the New
York Stock Exchange is closed, such as federal holidays, including New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving, and Christmas.
The net asset value per share of the Fund is calculated by dividing the
value of all securities held by the 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 the Fund.
Securities traded on national securities exchanges, the NASDAQ National Market
System, the NASDAQ Small Cap Market and foreign markets are valued at their last
sale prices on the exchanges or markets where such securities are primarily
traded. Securities traded in the over-the-counter 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 will be valued at their fair values as determined in good
faith by the board of directors or pursuant to procedures adopted by the board
of directors. The above procedures may include the use of valuations furnished
by a pricing service which employs a matrix to determine valuations for normal
institutional- size trading units of debt securities. Prior to utilizing a
pricing service, the Company's board of directors reviews the methods used by
such service to assure itself that securities will be valued at their fair
values. The Company's board of directors also periodically monitors the methods
used by such pricing services. Debt securities with remaining maturities of 60
days or less at the time of purchase are normally valued at amortized cost.
<PAGE>
The values of securities held by the Fund, and other assets used in
computing net asset value, generally are determined as of the time regular
trading in such securities or assets is completed each day. Since regular
trading in most foreign securities markets is completed simultaneously with, or
prior to, the close of regular trading on the New York Stock Exchange, closing
prices for foreign securities usually are available for purposes of computing
the Fund's net asset value. However, in the event that the closing price of a
foreign security is not available in time to calculate the Fund's net asset
value on a particular day, the Company's board of directors has authorized the
use of the market price for the security obtained from an approved pricing
service at an established time during the day which may be prior to the close of
regular trading in the security. The value of all assets and liabilities
initially expressed in foreign currencies will be converted into U.S. dollars at
the spot rate of such currencies against U.S. dollars provided by an approved
pricing service.
FUND PERFORMANCE
As discussed in the Fund's Prospectus, the Company advertises the total
return performance of the Fund. Average annual total return performance for the
Fund for the one-year period ended May 31, 1995 and the period December 27, 1991
(commencement of operations of the Fund) to May 31, 1995 (life of the Fund), was
4.98% and 14.31%, respectively.
Average annual total return performance is computed by finding the average
annual compounded rates of return that would equate the initial amount invested
to the ending redeemable value, according to the following formula:
P(1 + T)n = ERV
where: P = initial payment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of initial payment
The total return performance figures shown are determined by solving the
above formula for "T" for a particular time period.
In conjunction with performance reports, comparative data between the
Fund's performance for a given period and other types of investment vehicles,
including certificates of deposit, may be provided to prospective investors and
shareholders.
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 Fund. Sources
for Fund performance information and articles about the Fund
include, but are not limited to, the following:
<PAGE>
American Association of Individual Investors' Journal
Banxquote
Barron's
Business Week
CDA Investment Technologies
CNBC
CNN
Consumer Digest
Financial Times
Financial World
Forbes
Fortune
Ibbotson Associates, Inc.
Institutional Investor
Investment Company Data, Inc.
Investor's Business Daily
Kiplinger's Personal Finance
Lipper Analytical Services, Inc.'s Mutual Fund
Performance Analysis
Money
Morningstar
Mutual Fund Forecaster
No-Load Analyst
No-Load Fund X
Personal Investor
Smart Money
The New York Times
The No-Load Fund Investor
U.S. News and World Report
United Mutual Fund Selector
USA Today
The Wall Street Journal
Wiesenberger Investment Companies Services
Working Woman
Worth
SERVICES PROVIDED BY THE FUND
Periodic Withdrawal Plan. As described in the section of the Fund's
Prospectus entitled "Services Provided by the Fund," the Fund offers a Periodic
Withdrawal Plan. All dividends and distributions on shares owned by shareholders
participating in this Plan are reinvested in additional shares. Since withdrawal
payments represent the proceeds from sales of shares, the amount of
shareholders' investments in the Fund will be reduced to the extent that
withdrawal payments exceed dividends and other distributions paid and
reinvested. Any gain or loss on such redemptions must be reported for tax
purposes. In each case, shares will be redeemed at the close of business on or
about the 20th day of each month preceding payment and payments will be mailed
within five business days thereafter.
<PAGE>
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.
A 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 Privilege. As discussed in the section of the Fund's Prospectus
entitled "Services Provided by the Fund," the Fund offers shareholders the
privilege of exchanging shares of the Fund for shares of certain other no-load
mutual funds advised by INVESCO. Exchange requests may be made either by
telephone or by written request to INVESCO Funds Group, Inc. using the telephone
number or address on the cover of this Statement of Additional Information.
Exchanges made by telephone must be in an amount of at least $250, if the
exchange is being made into an existing account of one of the INVESCO funds. All
exchanges that establish a new account must meet the fund's applicable minimum
initial investment requirements. Written exchange requests into an existing
account have no minimum requirements other than the fund's applicable minimum
subsequent investment requirements. Any gain or loss realized on an exchange is
recognized for federal income tax purposes. This privilege is not an option or
right to purchase securities, but is a revocable privilege permitted under the
present policies of each of the funds and is not available in any state or other
jurisdiction where the shares of the mutual fund into which transfer is to be
made are not qualified for sale, or when the net asset value of the shares
presented for exchange is less than the minimum dollar purchase required by the
appropriate prospectus.
TAX-DEFERRED RETIREMENT PLANS
As described in the section of the 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.
<PAGE>
HOW TO REDEEM SHARES
Normally, payments for shares redeemed will be mailed within seven (7)
days following receipt of the required documents as described in the section of
the 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 Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets; or (d) the Securities and Exchange Commission by order so permits.
It is possible that in the future conditions may exist which would, in the
opinion of the Company's investment adviser, make it undesirable for the Fund to
pay for redeemed shares in cash. In such cases, the investment adviser may
authorize payment to be made in portfolio securities or other property of the
Fund. However, the Company is obligated under the 1940 Act to redeem for cash
all shares of the Fund presented for redemption by any one shareholder having a
value up to $250,000 (or 1% of the Fund's net assets if that is less) in any
90-day period. Securities delivered in payment of redemptions are selected
entirely by the investment adviser based on what is in the best interests of the
Fund and its shareholders, and are valued at the value assigned to them in
computing the Fund's net asset value per share. Shareholders receiving such
securities are likely to incur brokerage costs on their subsequent sales of the
securities.
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS, AND TAXES
The Fund intends to conduct its business and satisfy the applicable
diversification of assets and source of income requirements to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended. The Fund so qualified in the fiscal year ended May 31, 1995,
and intends to qualify during the current fiscal year. As a result, it is
anticipated that the Fund will pay no federal income or excise taxes and will be
accorded conduit or "pass through" treatment for federal income tax purposes.
Dividends paid by the Fund from net investment income as well as
distributions of net realized short-term capital gains 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,
the Fund sends shareholders information regarding the amount and character of
dividends paid in the year, including the dividends eligible for the
dividends-received deduction for corporations. Such amounts will be limited to
the aggregate amount of qualifying dividends which the Fund derives from its
portfolio investments.
<PAGE>
Distributions by the Fund of net capital gain (the excess of 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. Such distributions are
identified as such and are not eligible for the dividends-received deduction.
All dividends and other distributions are regarded as taxable to the
investor, whether or not such dividends and distributions are reinvested in
additional shares. If the net asset value of the shares of the Fund should be
reduced below a shareholder's cost as a result of a distribution, such
distribution would be taxable to the shareholder although a portion would be, in
effect, a return of invested capital. The net asset value of shares of the Fund
reflects accrued net investment income and undistributed realized capital and
foreign currency gain; therefore, when a distribution is made, the net asset
value is reduced by the amount of the distribution. If shares are purchased
shortly before a distribution, the full price for the shares will be paid and
some portion of the price may then be returned to the shareholder as a taxable
dividend or capital gain. However, the net asset value per share will be reduced
by the amount of the distribution, which would reduce any gain (or increase any
loss) for tax purposes on any subsequent redemption of shares.
Dividends and interest received by the Fund may give rise to withholding
and other taxes imposed by foreign countries. Tax treaties between certain
countries and the United States may reduce or eliminate such taxes.
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 Company
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 the Fund in past years, the shareholder must continue to use the
method previously used, unless the shareholder applies to the IRS for permission
to change methods.
If the Fund's shares are sold at a loss after being held for six months or
less, the loss will be treated as long-term, instead of short-term, capital loss
to the extent of any capital gain distributions received on those shares.
The Fund will be subject to a nondeductible 4% excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of its
ordinary income for that year and capital gain net income for the one-year
period ending on October 31 of that year, plus certain other amounts.
<PAGE>
Dividends and interest received by the Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors. If more than 50% of the value of
the Fund's total assets at the close of any taxable year consists of securities
of foreign corporations, the Fund will be eligible to, and may, file an election
with the Internal Revenue Service that will enable its shareholders, in effect,
to receive the benefit of the foreign tax credit with respect to any foreign and
U.S. possessions income taxes paid by it. The Fund will report to its
shareholders shortly after each taxable year their respective shares of the
Fund's income from sources within, and taxes paid to, foreign countries and U.S.
possessions if it makes this election.
The Fund may invest in the stock of "passive foreign investment companies"
(PFICs"). A PFIC is a foreign corporation that, in general, meets either of the
following tests: (1) at least 75% of its gross income is passive or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, the Fund will be subject to
federal income tax on a portion of any "excess distribution" received on the
stock of a PFIC or of any gain on disposition of the stock (collectively "PFIC
income"), plus interest thereon, even if the Fund distributes the PFIC income as
a taxable dividend to its shareholders. The balance of the PFIC income will be
included in the Fund's investment company taxable income and, accordingly, will
not be taxable to it to the extent that income is distributed to its
shareholders.
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.
<PAGE>
Shareholders should consult their own tax advisers regarding specific
questions as to federal, state and local taxes. Dividends and capital gain
distributions will generally be subject to applicable state and local taxes.
Qualification as a regulated investment company under the Internal Revenue Code
of 1986, as amended, for income tax purposes does not entail government
supervision of management or investment policies.
INVESTMENT PRACTICES
Portfolio Turnover. There are no fixed limitations regarding the portfolio
turnover of the Fund. The rate of portfolio turnover can fluctuate under
constantly changing economic conditions and market circumstances. Securities
initially satisfying the basic policies and objectives of the Fund may be
disposed of when they are no longer suitable. Brokerage costs to the Fund are
commensurate with the rate of portfolio activity. The portfolio turnover rates
for the Fund for the fiscal years ended May 31, 1995, 1994 and 1993 were 228%,
196% and 153%, respectively. 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. Either INVESCO, as the Company's
investment adviser, or INVESCO Trust, as the Company's sub-adviser, places
orders for the purchase and sale of securities with brokers and dealers based
upon INVESCO's or INVESCO Trust's evaluation of their financial responsibility,
subject to their ability to effect transactions at the best available prices.
INVESCO or INVESCO Trust evaluates the overall reasonableness of brokerage
commissions or underwriting discounts (the difference between the full
acquisition price to acquire the new offering and the discount offered to
members of the underwriting syndicate) paid by reviewing the quality of
executions obtained on portfolio transactions of the Fund, viewed in terms of
the size of transactions, prevailing market conditions in the security purchased
or sold, and general economic and market conditions. In seeking to ensure that
the commissions charged the Fund are consistent with prevailing and reasonable
commissions or discounts, INVESCO and INVESCO Trust also endeavor to monitor
brokerage industry practices with regard to the commissions or discounts charged
by brokers and dealers on transactions effected for other comparable
institutional investors. While INVESCO and INVESCO Trust seek reasonably
competitive rates, the Fund does not necessarily pay the lowest commission,
spread or discount available.
<PAGE>
Consistent with the standard of seeking to obtain the best execution on
portfolio transactions, INVESCO or INVESCO Trust may select brokers that provide
research services to effect such transactions. Research services consist of
statistical and analytical reports relating to issuers, industries, securities
and economic factors and trends, which may be of assistance or value to INVESCO
or INVESCO Trust in making informed investment decisions. Research services
prepared and furnished by brokers through which the Fund effects securities
transactions may be used by INVESCO or INVESCO Trust in servicing all of their
accounts and not all such services may be used by INVESCO or INVESCO Trust in
connection with the Fund.
In recognition of the value of the above-described brokerage and research
services provided by certain brokers, INVESCO or INVESCO Trust, consistent with
the standard of seeking to obtain the best execution on portfolio transactions,
may place orders with such brokers for the execution of transactions for the
Fund on which the commissions or discounts are in excess of those which other
brokers might have charged for effecting the same transactions.
Portfolio transactions may be effected through qualified broker/dealers
who recommend the Fund to their clients, or who act as agent in the purchase of
the Fund's shares for their clients. When a number of brokers and dealers can
provide comparable best price and execution on a particular transaction, the
Company's adviser or sub-adviser may consider the sale of Fund shares by a
broker or dealer in selecting among qualified broker/dealers.
The aggregate dollar amounts of brokerage commissions paid by the Fund for
the fiscal years ended May 31, 1995, 1994 and 1993 were $1,223,859, $2,276,525
and $1,028,661, respectively. For the fiscal year ended May 31, 1995, brokers
providing research services received $458,026 in commissions on portfolio
transactions effected for the Fund. The aggregate dollar amount of such
portfolio transactions was $127,727,666. Commissions of $53,533 were allocated
to certain brokers in recognition of their sales of shares of the Fund on
portfolio transactions of the Fund effected during the fiscal year ended May 31,
1995.
At May 31, 1995, the Fund held securities of its regular brokers or
dealers, or their parents, as follows:
Value of Securities
Broker or Dealer at 5/31/95
Associates Corporation of North America 6,954,000.00
Chevron Oil Finance 7,096,000.00
American Express Credit 6,964,000.00
Prudential Funding 6,430,000.00
Neither INVESCO nor INVESCO Trust receives any brokerage commissions on
portfolio transactions effected on behalf of the Fund, and there is no
affiliation between INVESCO or INVESCO Trust, or any person affiliated with
INVESCO or INVESCO Trust, or the Fund and any broker or dealer that executes
transactions for the Fund.
<PAGE>
ADDITIONAL INFORMATION
Common Stock. The Company was incorporated with 600,000,000 authorized
shares of common stock, with a par value of $0.01 per share. Of the Company's
authorized shares, 200,000,000 shares have been allocated to the Fund. As of May
31, 1995, 16,401,894 shares of the Fund were outstanding. The board of directors
has the authority to designate additional series of common stock without seeking
the approval of shareholders, and may reclassify any authorized but unissued
shares.
Shares of each series represent the interests of the shareholders of such
series in a particular portfolio of investments of the Company. Each series of
the Company's shares is preferred over all other series 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 Company's general liabilities. The board of directors
determines those assets and liabilities deemed to be general assets or
liabilities of the Company, and these items are allocated among series in a
manner deemed by the board of directors to be fair and equitable. Generally,
such allocation will be made based upon the relative total net assets of each
series. In the unlikely event that a liability allocable to one series exceeds
the assets belonging to the series, all or a portion of such liability may have
to be borne by the holders of shares of the Company's other series.
All shares, regardless of series, have equal voting rights. Voting with
respect to certain matters, such as ratification of independent accountants or
election of directors, will be by all series of the Company. When not all series
are affected by a matter to be voted upon, such as approval of an investment
advisory contract or changes in a fund's investment policies, only shareholders
of the series affected by the matter may be entitled to vote. Company shares
have noncumulative voting rights, which means that the holders of a majority of
the shares voting for the election of directors can elect 100% of the directors
if they choose to do so. In such event, the holders of the remaining shares
voting for the election of directors will not be able to elect any person or
persons to the board of directors. After they have been elected by shareholders,
the directors will continue to serve until their successors are elected and have
qualified or they are removed from office, in either case by a shareholder vote,
or until death, resignation, or retirement. They may appoint their own
successors, provided that always at least a majority of the
<PAGE>
directors have been elected the Company's shareholders. It is the intention of
the Company not to hold annual meetings of shareholders. The directors will call
annual or special meetings of shareholders for action by shareholder vote as may
be required by the 1940 Act or the Company's Articles of Incorporation, or at
their discretion.
Principal Shareholders. As of June 30, 1995, the following
entities held more than 5% of the Fund's outstanding equity
securities.
Class and
Amount and Nature Percent
Name and Address of Ownership of Class
Charles Schwab & Co. Inc. 3,818,228.1 23.5%
Reinvest Acct. Record
101 Montgomery St.
San Francisco, CA 94104
Connecticut General Life Ins. 980,264.3 6.0%
P.O. Box 2975 Record and
Hartford, CT 06104 Beneficial
Independent Accountants. Price Waterhouse LLP, 950 Seventeenth Street,
Denver, Colorado, has been selected as the independent accountants of the
Company. The independent accountants are responsible for auditing the financial
statements of the Company.
Custodian. State Street Bank and Trust Company, P.O. Box 351, Boston,
Massachusetts, has been designated as custodian of the cash and investment
securities of the Company. The bank is also responsible for, among other things,
receipt and delivery of the Fund's investment securities in accordance with
procedures and conditions specified in the custody agreement.
Transfer Agent. The Company is provided with transfer agent, registrar,
and dividend disbursing agent services by INVESCO Funds Group, Inc., 7800 E.
Union Avenue, Denver, Colorado 80237, 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 Fund, and the maintenance of records
regarding the ownership of such shares.
Reports to Shareholders. The Company's fiscal year ends on May 31. The
Company distributes reports at least semiannually to its shareholders. Financial
statements regarding the Company, audited by the independent accountants, are
sent to shareholders annually.
<PAGE>
Legal Counsel. The firm of Kirkpatrick & Lockhart LLP, Washington, D.C., is
legal counsel for the Company. The firm of Moye, Giles, O'Keefe, Vermeire &
Gorrell, Denver, Colorado, acts as special counsel to the Company.
Financial Statements. The following audited financial statements of the
Fund and the notes thereto for the fiscal year ended May 31, 1995, and the
report of Price Waterhouse LLP with respect to such financial statements, are
incorporated herein by reference from the Company's Annual Report to
Shareholders for the fiscal year ended May 31, 1995: Statement of Investment
Securities as of May 31, 1995; Statement of Assets and Liabilities as of May 31,
1995; Statement of Operations for the year ended May 31, 1995; Statement of
Changes in Net Assets for each of the two years in the period ended May 31,
1995; Financial Highlights for each of the three years ended May 31, 1995 and
the period from commencement of the Fund's operations (December 27, 1991) until
May 31, 1992.
Prospectus. The Company will furnish, without charge, a copy of the Fund's
Prospectus upon request. Such requests should be made to the Company at the
mailing address or telephone number set forth on the first page of this
Statement of Additional Information.
Registration Statement. This Statement of Additional Information and the
related Prospectus do not contain all of the information set forth in the
Registration Statement the Company has filed with the Securities and Exchange
Commission. The complete Registration Statement may be obtained from the
Securities and Exchange Commission upon payment of the fee prescribed by the
rules and regulations of the Commission.
<PAGE>
APPENDIX B
BOND RATINGS
The following is a description of Standard & Poor's Ratings Group
("Standard & Poor's") and Moody's Investors Service, Inc.
("Moody's") bond rating categories:
Moody's Investors Service, Inc. Corporate Bond Ratings
Aaa - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa - Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risk appear somewhat larger than in Aaa securities.
A - Bonds rated A possess many favorable investment attributes, and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds rated Ba are judged to have speculative elements. Their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B - Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of other
terms of the contract over any longer period of time may be small.
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Caa - Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
Standard & Poor's Ratings Group 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.
BB - Bonds rated BB have less near-term vulnerability to default than
other speculative issues. However, they face major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments.
B - Bonds rated B have a greater vulnerability to default but currently
have the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal.
CCC - Bonds rated CCC have a currently identifiable vulnerability to
default and are dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial, or economic conditions, they are not
likely to have the capacity to pay interest and repay principal.
