As filed on October 26, 1999 File No. 033-63498
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. __ _
Post-Effective Amendment No. 10 X
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 11 X
INVESCO INTERNATIONAL FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
7800 E. Union Avenue, Denver, Colorado 80237
(Address of Principal Executive Offices)
P.O. Box 173706, Denver, Colorado 80217-3706
(Mailing Address)
Registrant's Telephone Number, including Area Code: (303) 930-6300
Glen A. Payne, Esq.
7800 E. Union Avenue
Denver, Colorado 80237
(Name and Address of Agent for Service)
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Copies to:
Ronald M. Feiman, Esq.
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019-5820
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Approximate Date of Proposed Public Offering: As soon as practicable after this
post-effective amendment becomes effective.
It is proposed that this filing will become effective (check appropriate box)
___ immediately upon filing pursuant to paragraph (b)
___ on _____________, pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(1)
X on October 29, 1999, pursuant to paragraph (a)(1)
___ 75 days after filing pursuant to paragraph (a)(2)
___ on _________, pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box:
___ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
PROSPECTUS | October 31, 1999
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YOU SHOULD KNOW WHAT INVESCO KNOWS (TM)
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INVESCO
INTERNATIONAL
FUNDS, INC.
INVESCO LATIN AMERICAN GROWTH FUND
A NO-LOAD MUTUAL FUND DESIGNED FOR INVESTORS SEEKING INVESTMENT
OPPORTUNITIES IN LATIN AMERICA.
TABLE OF CONTENTS
Investment Goals, Strategies And Risks.............3
Fund Performance...................................4
Fees And Expenses..................................5
Investment Risks...................................6
Risks Associated With Particular Investments...... 7
Temporary Defensive Positions.....................10
Fund Management...................................11
Portfolio Manager.................................11
Potential Rewards.................................11
Share Price.......................................12
How To Buy Shares.................................12
Your Account Services.............................16
How To Sell Shares................................16
Taxes.............................................19
Dividends And Capital Gain Distributions..........20
Financial Highlights..............................21
[INVESCO ICON]
INVESCO
The Securities and Exchange Commission has not approved or disapproved the
shares of this Fund. Likewise, the Commission has not determined if this
Prospectus is truthful or complete. Anyone who tells you otherwise is committing
a federal crime.
<PAGE>
This Prospectus will tell you more about:
[KEY ICON] Investment Objectives & Strategies
[ARROW ICON] Potential Investment Risks
[GRAPH ICON] Past Performance
[INVESCO ICON] Working With INVESCO
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[ARROW ICON] INVESTMENT GOALS, STRATEGIES AND RISKS
INVESCO Funds Group, Inc. ("INVESCO") is the investment adviser for the
Fund. Together with our affiliated companies, we at INVESCO direct all aspects
of the management and sale of the Fund.
FOR MORE DETAILS ABOUT THE FUND'S CURRENT INVESTMENTS AND MARKET OUTLOOK, PLEASE
SEE THE MOST RECENT ANNUAL OR SEMI-ANNUAL REPORT.
The Fund attempts to make your investment grow. The Fund is aggressively
managed. Although the Fund can invest in debt securities, it primarily invests
in equity securities that INVESCO believes will rise in price faster than other
securities.
The Fund invests primarily in equity securities of Latin American issuers.
We prefer companies with proven track records that are strongly managed. We
define a Latin American company as one that has its principal business
activities in Latin America, which includes Mexico, Central America, South
America and the Spanish-speaking islands of the Caribbean. We look at several
factors to determine where a company's principal business activities are
located, including:
o The physical location of the company's management personnel; and
o Whether more than 50% of its assets are located in Latin America; or
o Whether more than 50% of its income is earned in Latin America.
The Fund's investment process combines a top-down and bottom-up evaluation
to select securities for its portfolio.
Our regional and country equity teams look at broad global economic trends and
other factors that can affect Latin American markets. On a country-by-country
basis, anticipated political and currency stability are also considered. Using
this analysis, we decide how much the Fund will invest in each country and
equity market sector. Minimum and maximum weightings for both countries and
sectors are used to develop portfolio diversification. And, in some cases, our
fundamental research, regular visits and local contacts may provide investment
insights into specific opportunities and risks involved in each country.
This analysis is particularly important for investments in "emerging" markets --
those countries that the international financial community considers to have
developing economies and securities markets that are not as established as those
in the United States. All countries in Latin America are considered to be
emerging markets. INVESCO also performs fundamental analysis and extensive
research on specific stocks, including visiting companies to meet with corporate
management and understand the businesses. We seek to invest in companies that
have an above-average earnings growth potential that we believe is not fully
reflected in the present market price of their securities. Also, we seek to
increase diversification by setting maximum limits on each security held in the
portfolio.
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[ARROW ICON] Investment in this Fund involves above-average investment
risk. The economies of Latin American countries may vary widely in their
conditions and may be subject to certain changes that could have a positive or
negative impact on the Fund. Emerging markets tend to be less liquid and less
well-regulated than the markets of more developed countries; political
instability and currency fluctuations may also be more extreme.
Other principal risks involved in investing in the Fund are foreign
securities, emerging market, market, liquidity and lack of timely information
risks. These risks are described and discussed later in this Prospectus under
the headings "Investment Risks" and "Risks Associated With Particular
Investments." An investment in the Fund is not a deposit of any bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation ("FDIC") or
any other government agency. As with any other mutual fund, there is always a
risk that you can lose money on your investment in the Fund.
[GRAPH ICON] FUND PERFORMANCE
The bar chart below shows the Fund's actual yearly performance for the
years ended December 31 (commonly known as its "total return") since inception.
The table below shows average annual total returns for various periods ended
December 31 for the Fund compared to the MSCI-Emerging Markets-Latin America
Index. The information in the chart and table illustrates the variability of the
Fund's return and how its performance compared to a broad measure of market
performance. Remember, past performance does not indicate how the Fund will
perform in the future.
The chart below contains the following plot points:
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ACTUAL ANNUAL TOTAL RETURN (1),(2),(3)
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Latin American Growth Fund
'96 '97 '98
25.87% 19.33% (45.71%)
Best calendar qtr. 6/97 16.66%
Worst calendar qtr. 9/98 (36.67%)
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<PAGE>
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AVERAGE ANNUAL TOTAL RETURN(1)(2)
As of 12/31/98
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1 YEAR SINCE INCEPTION(3)
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Latin American Growth Fund (45.71%) (1.90%)
MSCI-Emerging Markets-
Latin America Index(4) (35.29%) 4.74%
(1)Total return figures include reinvested dividends and capital gain
distributions, and include the effect of the Fund's expenses.
(2)Year-to-date return for the Fund was 13.84% as of the calendar quarter
ended September 30, 1999.
(3)The Fund commenced operations on February 15, 1995.
(4)The MSCI-Emerging Markets-Latin America Index is an unmanaged index
indicative of the Latin American markets. Please keep in mind that the
Index does not pay brokerage, management, administrative or distribution
expenses, all of which are paid by the Fund and are reflected in its annual
return.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund:
SHAREHOLDER FEES PAID DIRECTLY FROM YOUR ACCOUNT
LATIN AMERICAN GROWTH FUND
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends and Other Distributions None
Redemption Fee (as a percentage of amount redeemed) 2.00%*
Exchange Fee 2.00%*
Maximum Account Fee None
* A 2% fee is charged on redemptions or exchanges of shares held three
months or less other than shares acquired through the reinvestment of dividends
and other distributions.
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS
LATIN AMERICAN GROWTH FUND
Management Fees 0.75%
Distribution and Service (12b-1) Fees(1) 0.25%
Other Expenses (2)(3)(4) 2.41%
Total Annual Fund Operating Expenses(2)(3)(4) 3.41%
(1) Because the Fund pays 12b-1 distribution fees which are based upon the
Fund's assets, if you own shares of the Fund for a long period of time,
you may pay more than the economic equivalent of the maximum front-end
sales charge permitted for mutual funds by the National Association of
Securities Dealers, Inc.
<PAGE>
(2) The Fund's actual Total Annual Fund Operating Expenses were lower than
the figures shown, because its custodian fees were reduced under an
expense offset arrangement.
(3) The expense information presented in the table has been restated to
reflect a change in the administrative services fee.
(4) Certain expenses of the Fund were absorbed voluntarily by INVESCO and
INVESCO Asset Management Limited ("IAML") pursuant to a commitment to
the Fund. After absorption, the Fund's Other Expenses and Total Annual
Fund Operating Expenses were 1.17% and 2.17%, respectively. This
commitment may be changed at any time following consultation with the
board of directors.
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Fund to the cost of investing in other mutual funds.
The Example assumes that you invested $10,000 in the Fund for the time
periods indicated and redeemed all of your shares at the end of each period. The
Example also assumes that your investment had a hypothetical 5% return each
year, and assumes that the Fund's expenses remained the same. Although the
Fund's actual costs and performance may be higher or lower, based on these
assumptions your costs would have been:
1 year 3 years 5 years 10 years
$344 $1,047 $1,773 $3,693
[ARROW ICON] INVESTMENT RISKS
BEFORE INVESTING IN THE FUND, YOU SHOULD DETERMINE THE LEVEL OF RISK WITH
WHICH YOU ARE COMFORTABLE. TAKE INTO ACCOUNT FACTORS LIKE YOUR AGE, CAREER,
INCOME LEVEL, AND TIME HORIZON.
You should determine the level of risk with which you are comfortable
before you invest. The principal risks of investing in any mutual fund,
including this Fund, are:
NOT INSURED. Mutual funds are not insured by the FDIC or any other agency,
unlike bank deposits such as CDs or savings accounts.
NO GUARANTEE. No mutual fund can guarantee that it will meet its investment
objectives.
POSSIBLE LOSS OF INVESTMENT. A mutual fund cannot guarantee its
performance, nor assure you that the market value of your investment will
increase. You may lose the money you invest, and the Fund will not reimburse you
for any of these losses.
VOLATILITY. The price of your mutual fund shares will increase or decrease
with changes in the value of the Fund's underlying investments and changes in
the equity markets as a whole.
NOT A COMPLETE INVESTMENT PLAN. An investment in any mutual fund does not
constitute a complete investment plan. The Fund is designed to be only a part of
your personal investment plan.
YEAR 2000. Many computer systems in use today may not be able to recognize
any date after December 31, 1999. If these systems are not fixed by that date,
it is possible that they could generate erroneous information or fail
altogether. INVESCO has committed substantial resources in an effort to make
sure that its own major computer systems will continue to function on and after
January 1, 2000. Of course, INVESCO cannot fix systems that are beyond its
control. If INVESCO's own systems, or the systems of third parties upon which it
relies, do not perform properly after December 31, 1999, the Fund could be
adversely affected.
<PAGE>
In addition, the markets for, or values of, securities in which the Fund
invests may possibly be hurt by computer failures affecting portfolio
investments or trading of securities beginning January 1, 2000. For example,
improperly functioning computer systems could result in securities trade
settlement problems and liquidity issues, production issues for individual
companies and overall economic uncertainties. Individual issuers may incur
increased costs in making their own systems Year 2000 compliant. The combination
of market uncertainty and increased costs means that there is a possibility that
Year 2000 computer issues may adversely affect the Fund's investments. At this
time, it is generally believed that foreign issuers, particularly those in
emerging and other markets, may be more vulnerable to Year 2000 problems than
issuers in the U.S.
[ARROW ICON] RISKS ASSOCIATED WITH PARTICULAR INVESTMENTS
You should consider the special factors associated with the policies
discussed below in determining the appropriateness of investing in the Fund. See
the Statement of Additional Information for a discussion of additional risk
factors.
FOREIGN SECURITIES RISKS
Investments in foreign and emerging markets carry special risks, including
currency, political, regulatory and diplomatic risks.
CURRENCY RISK. A change in the exchange rate between U.S. dollars and a
foreign currency may reduce the value of the Fund's investment in a
security valued in the foreign currency, or based on that currency value.
POLITICAL RISK. Political actions, events or instability may result in
unfavorable changes in the value of a security.
REGULATORY RISK. Government regulations may affect the value of a security.
In foreign countries, securities markets that are less regulated than those
in the U.S. may permit trading practices that are not allowed in the U.S.
DIPLOMATIC RISK. A change in diplomatic relations between the U.S. and a
foreign country could affect the value or liquidity of investments.
EUROPEAN ECONOMIC AND MONETARY UNION. Austria, Belgium, Finland, France,
Germany, Ireland, Italy, Luxembourg, The Netherlands, Portugal and Spain
are presently members of the European Economic and Monetary Union (the
"EMU") which as of January 1, 1999, adopted the euro as a common currency.
The national currencies will be sub-currencies of the euro until July 1,
2002, at which time these currencies will disappear entirely. Other
European countries may adopt the euro in the future.
The introduction of the euro presents some uncertainties and possible
risks, which could adversely affect the value of securities held by the
Fund.
EMU countries, as a single market, may affect future investment
decisions of the Fund. As the euro is implemented, there may be changes
in the relative strength and value of the U.S. dollar and other major
currencies, as well as possible adverse tax consequences. The euro
transition by EMU countries - present and future - may affect the
fiscal and monetary levels of those participating countries. There may
be increased levels of price competition among business firms within
EMU countries and between businesses in EMU and non-EMU countries. The
outcome of these uncertainties could have unpredictable effects on
trade and commerce and result in increased volatility for all financial
markets.
<PAGE>
EMERGING MARKETS RISK
All of the countries in Latin America are considered to be emerging markets.
Investments in emerging markets carry additional risks beyond typical
investments in foreign securities. Emerging markets are countries that the
international financial community considers to have developing economies and
securities markets that are not as established as those in the United States.
Emerging markets are generally considered to include every country in the world
except the United States, Canada, Japan, Australia, New Zealand and nations in
Western Europe (other than Greece, Portugal and Turkey).
Investments in emerging markets have a higher degree of risk than
investments in more established markets. These countries generally have a
greater degree of social, political and economic instability than do developed
markets. Governments of emerging market countries tend to exercise more
authority over private business activities, and, in many cases, either own or
control large businesses in those countries. Businesses in emerging markets may
be subject to nationalization or confiscatory tax legislation that could result
in investors - including the Fund - losing their entire investment. Emerging
markets often have a great deal of social tension. Authoritarian governments and
military involvement in government is common. In such markets, there is often
social unrest, including insurgencies and terrorist activities.
Economically, emerging markets are generally dependent upon foreign trade
and foreign investment. Many of these countries have borrowed significantly from
foreign banks and governments. These debt obligations can affect not only the
economy of a developing country, but its social and political stability.
MARKET RISK
Equity stock prices vary and may fall, thus reducing the value of the
Fund's investment. Certain stocks selected for the Fund's portfolio may decline
in value more than the overall stock market. In general, the securities of large
businesses with outstanding securities worth $5 billion or more have less
volatility than those of mid-size businesses with outstanding securities worth
more than $1 billion, or small businesses with outstanding securities worth less
than $1 billion.
CREDIT RISK
The Fund may invest in debt instruments, such as notes, bonds and
commercial paper. There is a possibility that the issuers of these instruments
will be unable to meet interest payments or repay principal. Changes in the
financial strength of an issuer may reduce the credit rating of its debt
instruments and may affect their value.
INTEREST RATE RISK
Changes in interest rates will affect the resale value of debt securities
held in the Fund's portfolio. In general, as interest rates rise, the resale
value of debt securities decreases; as interest rates decline, the resale value
of debt securities generally increases. Debt securities with longer maturities
usually are more sensitive to interest rate movements.
DURATION RISK
Duration is a measure of a debt security's sensitivity to interest rate
changes. Duration is usually expressed in terms of years, with longer durations
usually more sensitive to interest rate fluctuations.
LIQUIDITY RISK
The Fund's portfolio is liquid if the Fund is able to sell the securities
it owns at a fair price within a reasonable time. Liquidity is generally related
to the market trading volume for a particular security. Investments in smaller
<PAGE>
companies or in foreign companies or companies in emerging markets are subject
to a variety of risks, including potential lack of liquidity.
COUNTERPARTY
This is a risk associated primarily with repurchase agreements and some
derivatives transactions. It is the risk that the other party in the transaction
will not fulfill its contractual obligation to complete the transaction with the
Fund.
LACK OF TIMELY INFORMATION RISK
Timely information about a security or its issuer may be unavailable,
incomplete or inaccurate. This risk is more common to securities issued by
foreign companies and companies in emerging markets than it is to the securities
of U.S.-based companies.
The Fund generally invests in equity securities of Latin American
companies. However, in an effort to diversify its holdings and provide some
protection against the risk of other investments, the Fund also may invest in
other types of securities and other financial instruments, as indicated in the
chart below. These investments, which at any given time may constitute a
significant portion of the Fund's portfolio, have their own risks.
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INVESTMENT RISKS
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AMERICAN DEPOSITORY RECEIPTS (ADRS) Market, Information, Political,
These are securities issued by U.S. banks that Regulatory, Diplomatic,
represent shares of foreign corporations held Liquidity and Currency Risks
by those banks. Although traded in U.S.
securities markets and valued in U.S. dollars,
ADRs carry most of the risks of investing
directly in foreign securities.
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COUNTRY FUNDS
Closed-end mutual funds that invest in the Market, Information, Political,
securities of particular countries may be Regulatory, Diplomatic,
used when non-residents may not invest Liquidity and Currency Risks
directly in securities of companies in those
countries. Country funds have operating
expenses, including management fees, which
reduce the investment return.
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DELAYED DELIVERY OR WHEN-ISSUED SECURITIES
Ordinarily, the Fund purchases securities and Market and
pays for them in cash at the normal trade Interest Rate
settlement time. When the Fund purchases a Risks
delayed delivery or when-issued security, it
promises to pay in the future for example,
when the security is actually available for
delivery to the Fund. The Fund's obligation
to pay and the interest rate it receives, in
the case of debt securities, usually are
fixed when the Fund promises to pay. Between the
date the Fund promises to pay and the date the
securities are actually received, the Fund
receives no interest on its investment, and
bears the risk that the market value of the
when-issued security may decline.
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<PAGE>
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INVESTMENT RISKS
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FORWARD FOREIGN CURRENCY CONTRACTS Currency, Political,
A contract to exchange an amount of currency Diplomatic,
on a date in the future at an agreed-upon Counterparty and
exchange rate might be used by the Fund to Regulatory Risks
hedge against changes in foreign currency
exchange rates when the Fund invests in
foreign securities. Does not reduce price
fluctuations in foreign securities, or prevent
losses if the prices of those securities
decline.
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ILLIQUID SECURITIES
A security that cannot be sold quickly at its Liquidity Risk
fair value.
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REPURCHASE AGREEMENTS
A contract under which the seller of a Credit and Counter-
security agrees to buy it back at an party Risks
agreed-upon price and time in the future.
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RULE 144A SECURITIES
Securities that are not registered, but Liquidity Risk
which are bought and sold solely by
institutional investors. The Fund
considers many Rule 144A securities to
be "liquid," although the market for
such securities typically is less active
than the public securities markets.
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[ARROW ICON] TEMPORARY DEFENSIVE POSITIONS
When securities markets or economic conditions are unfavorable or
unsettled, we might try to protect the assets of the Fund by investing in
securities that are highly liquid, such as high quality money market instruments
like short-term U.S. government obligations, commercial paper or repurchase
agreements, even though that is not the normal investment strategy of the Fund.
We have the right to invest up to 100% of the Fund's assets in these securities,
although we are unlikely to do so. Even though the securities purchased for
defensive purposes often are considered the equivalent of cash, they also have
their own risks. Investments that are highly liquid or comparatively safe tend
to offer lower returns. Therefore, the Fund's performance could be comparatively
lower if it concentrates in defensive holdings.
<PAGE>
[INVESCO ICON] FUND MANAGEMENT
INVESTMENT ADVISER
INVESCO IS A SUBSIDIARY OF AMVESCAP PLC, AN INTERNATIONAL INVESTMENT
MANAGEMENT COMPANY THAT MANAGES MORE THAN $296 BILLION IN ASSETS WORLDWIDE.
AMVESCAP IS BASED IN LONDON, WITH MONEY MANAGERS LOCATED IN EUROPE, NORTH AND
SOUTH AMERICA, AND THE FAR EAST.
INVESCO, located at 7800 East Union Avenue, Denver, Colorado, is the investment
adviser of the Fund. INVESCO was founded in 1932 and manages over $24.1 billion
for more than 930,000 shareholders of 44 INVESCO mutual funds. INVESCO performs
a wide variety of other services for the Fund, including administrative and
transfer agency functions (the processing of purchases, sales and exchanges of
Fund shares).
IAML is the sub-adviser to the Fund.
A wholly owned subsidiary of INVESCO, INVESCO Distributors, Inc. ("IDI"), is the
Fund's distributor and is responsible for the sale of the Fund's shares.
INVESCO, IAML and IDI are subsidiaries of AMVESCAP PLC.
The following table shows the fee the Fund paid to INVESCO for its advisory
services in the fiscal year ended July 31, 1999:
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ADVISORY FEE AS A PERCENTAGE OF AVERAGE
FUND ANNUAL NET ASSETS UNDER MANAGEMENT
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INVESCO Latin American Growth Fund 0.75%
[INVESCO ICON] PORTFOLIO MANAGER
The Fund is managed on a day-to-day basis by IAML, which serves as
sub-adviser to the Fund. The following person is primarily responsible for the
day-to-day management of the Fund:
DAVID MANUEL has been the portfolio manager of the Fund since 1998 and a
fund manager with INVESCO GT Asset Management since 1997, specializing in Latin
American equities. David was previously a senior fund manager with Abbey-Life
Investment Services. He received a B.A. (Hons) from Cambridge University and a
Ph.D. from London University.
[INVESCO ICON] POTENTIAL REWARDS
NO SINGLE FUND SHOULD REPRESENT YOUR COMPLETE INVESTMENT PROGRAM NOR SHOULD
YOU ATTEMPT TO USE THE FUND FOR SHORT-TERM TRADING PURPOSES.
The Fund offers shareholders the potential to increase the value of their
capital over time. Like most mutual funds, the Fund seeks to provide higher
returns than the market or its competitors, but cannot guarantee that
performance. The Fund seeks to minimize risk by investing in many different
companies in a variety of industries.
<PAGE>
SUITABILITY FOR INVESTORS
Only you can determine if an investment in the Fund is right for you based
upon your own economic situation, the risk level with which you are comfortable
and other factors. In general, the Fund is most suitable for investors who:
o are willing to grow their capital over the long-term (at least five years).
o can accept the additional risks associated with international investing.
o understand that shares of the Fund can, and likely will, have daily price
fluctuations.
o are investing in tax-deferred retirement accounts, such as Traditional and
Roth Individual Retirement Accounts ("IRAs"), as well as employer-sponsored
qualified retirement plans, including 401(k)s and 403(b)s, all of which
have longer investment horizons.
You probably do not want to invest in the Fund if you are:
o primarily seeking current dividend income.
o unwilling to accept potentially daily changes in the price of Fund shares.
o speculating on short-term fluctuations in the stock markets.
o are uncomfortable with the special risks associated with international
investing.
[INVESCO ICON] SHARE PRICE
CURRENT MARKET VALUE OF FUND ASSETS
+ ACCRUED INTEREST AND DIVIDENDS
- - FUND DEBTS,
INCLUDING ACCRUED EXPENSES
- -------------------------------
/ NUMBER OF SHARES
= YOUR SHARE PRICE (NAV).
The value of your Fund shares is likely to change daily. This value is known as
the Net Asset Value per share, or NAV. INVESCO determines the market value of
each investment in the Fund's portfolio each day that the New York Stock
Exchange ("NYSE") is open, at the close of trading on that exchange (normally
4:00 p.m. Eastern time). Therefore, shares of the Fund are not priced on days
when the NYSE is closed, which generally is on weekends and national holidays in
the U.S.
NAV is calculated by adding together the current market price of all of the
Fund's investments and other assets, including accrued interest and dividends;
subtracting the Fund's debts, including accrued expenses; and dividing that
dollar amount by the total number of the Fund's outstanding shares.
All purchases, sales and exchanges of Fund shares are made by INVESCO at
the NAV next calculated after INVESCO receives proper instructions from you to
purchase, redeem or exchange shares of the Fund. Your instructions must be
received by INVESCO no later than the close of the NYSE to effect transactions
at that day's NAV. If INVESCO hears from you after that time, your instructions
will be processed at the NAV calculated at the end of the next day that the NYSE
is open.
Foreign securities exchanges, which set the prices for foreign
securities held by the Fund, are not always open the same days as the NYSE, and
may be open for business on days the NYSE is not. For example, Thanksgiving Day
is a holiday observed by the NYSE and not by overseas exchanges. In this
situation, the Fund would not calculate NAV on Thanksgiving Day (and INVESCO
would not buy, sell or exchange shares for you on that day), even though
activity on foreign exchanges could result in changes in the value of
investments held by the Fund on that day.
[INVESCO ICON] HOW TO BUY SHARES
TO BUY SHARES AT THAT DAY'S CLOSING PRICE, YOU MUST CONTACT US BEFORE THE
CLOSE OF THE NYSE, NORMALLY, 4:00 P.M. EASTERN TIME.
The following chart shows several convenient ways to invest in the Fund.
There is no charge to invest when you make transactions directly through
<PAGE>
INVESCO. However, upon a redemption or an exchange of shares held three months
or less (other than shares acquired through reinvestment of dividends or other
distributions), a fee of 2% of the current net asset value of the shares being
exchanged will be assessed and retained by the Fund for the benefit of the
remaining shareholders. If you invest in the Fund through a securities broker,
you may be charged a commission or transaction fee for either purchases or sales
of Fund shares. For all new accounts, please send a completed application form,
and specify the fund or funds you wish to purchase.
INVESCO reserves the right to increase, reduce or waive the Fund's minimum
investment requirements in its sole discretion if it determines this action is
in the best interests of the Fund's shareholders. INVESCO also reserves the
right in its sole discretion to reject any order to buy Fund shares, including
purchases by exchange.
MINIMUM INITIAL INVESTMENT. $1,000, which is waived for regular investment
plans, including EasiVest and Direct Payroll Purchase, and certain retirement
plans, including IRAs.
MINIMUM SUBSEQUENT INVESTMENT. $50 (Minimums are lower for certain
retirement plans.)
EXCHANGE POLICY. You may exchange your shares in the Fund for those in
another INVESCO mutual fund on the basis of their respective NAVs at the time of
the exchange.
FUND EXCHANGES CAN BE A CONVENIENT WAY FOR YOU TO DIVERSIFY YOUR
INVESTMENTS, OR TO REALLOCATE YOUR INVESTMENTS WHEN YOUR OBJECTIVES CHANGE.
Before making any exchange, be sure to review the prospectuses of the funds
involved and consider the differences between the funds. Also, be certain that
you qualify to purchase certain classes of shares in the new fund. An exchange
is the sale of shares from one fund immediately followed by the purchase of
shares in another. Therefore, any gain or loss realized on the exchange is
recognizable for federal income tax purposes unless, of course, you or your
account qualifies as tax-deferred under the Internal Revenue Code). If the
shares of the fund you are selling have gone up in value since you bought them,
the sale portion of an exchange may result in taxable income to you.
We have the following policies governing exchanges:
o Both fund accounts involved in the exchange must be registered in exactly
the same name(s) and Social Security or federal tax I.D. number(s).
o You may make up to four exchanges out of the Fund per 12-month period.
o The Fund reserves the right to reject any exchange request, or to modify or
terminate the exchange policy, if it is in the best interests of the Fund
and its shareholders. Notice of all such modifications or termination that
affect all shareholders of the Fund will be given at least 60 days prior to
the effective date of the change, except in unusual instances, including a
suspension of redemption of the exchanged security under Section 22(e) of
the Investment Company Act of 1940.
In addition, the ability to exchange may be temporarily suspended at any
time that sales of the fund into which you wish to exchange are temporarily
stopped.
Please remember that if you pay by check or wire and your funds do not
clear, you will be responsible for any related loss to the Fund or INVESCO. If
you are already an INVESCO funds shareholder, the Fund may seek reimbursement
for any loss from your existing account(s).
REDEMPTION FEE. If you exchange or redeem shares of the Fund after holding
them three months or less (other than shares acquired through reinvestment of
dividends or other distributions), a fee of 2% of the current net asset value of
the shares being exchanged will be assessed and retained by the Fund for the
benefit of the remaining shareholders. This fee is intended to encourage
<PAGE>
long-term investment in the Fund, to avoid transaction and other expenses
caused by early redemptions, and to facilitate portfolio management. The fee is
currently waived for institutional, qualified retirement plan and other
shareholders investing through omnibus accounts, due to certain economies
associated with these accounts. However, the Fund reserves the right to impose
redemption fees on shares held by such shareholders at any time, if warranted by
the Fund's future cost of processing redemptions. The redemption fee may be
modified or discontinued at any time or from time to time. This fee is not a
deferred sales charge, is not a commission paid to INVESCO and does not benefit
INVESCO in any way. The fee applies to redemptions from the Fund and exchanges
into any of the other no-load mutual funds that are also advised by INVESCO and
distributed by IDI. The Fund will use the "first-in, first-out" method to
determine your holding period. Under this method, the date of redemption or
exchange will be compared with the earliest purchase date of shares held in your
account. If your holding period is less than three months, the
redemption/exchange fee will be assessed on the current net asset value of those
shares.
INTERNET TRANSACTIONS. Investors may open new accounts, exchange and redeem
shares of any INVESCO Fund through the INVESCO Web site. To utilize this
service, you will need a web browser (presently Netscape version 1.2 or higher,
or Internet Explorer version 2.0 or higher) and the ability to utilize the
INVESCO Web site. INVESCO will accept Internet purchase instructions only for
exchanges or if the purchase price is paid to INVESCO through debiting your bank
account, and any Internet cash redemptions will be paid only to the same bank
account from which the payment to INVESCO originated. INVESCO imposes a limit of
$25,000 on Internet purchase and redemption transactions. You may also download
an application to open an account from the Web site, complete it by hand, and
mail it to INVESCO, along with a check.
INVESCO employs reasonable procedures to confirm that transactions entered
into over the Internet are genuine. These procedures include the use of
alphanumeric passwords, secure socket layering, encryption and other precautions
reasonably designed to protect the integrity, confidentiality and security of
shareholder information. In order to enter into a transaction on the INVESCO Web
site, you will need an account number, your Social Security Number and an
alphanumeric password. If INVESCO follows these procedures, neither INVESCO, its
affiliates nor any Fund will be liable for any loss, liability, cost or expense
for following instructions communicated via the Internet that are reasonably
believed to be genuine or that follow INVESCO's security procedures. By entering
into the user's agreement with INVESCO to open an account through our Web site,
you lose certain rights if someone gives fraudulent or unauthorized instructions
to INVESCO that result in a loss to you.
METHOD INVESTMENT MINIMUM PLEASE REMEMBER
- --------------------------------------------------------------------------------
BY CHECK $1,000 for regular
Mail to: accounts;
INVESCO Funds Group, $250 for an IRA;
Inc., $50 minimum for
P.O. Box 173706, each subsequent
Denver, CO 80217-3706. invest ment.
You may send your check
by overnight courier to:
7800 E. Union Ave.
Denver, CO 80237.
<PAGE>
METHOD INVESTMENT MINIMUM PLEASE REMEMBER
- --------------------------------------------------------------------------------
BY TELEPHONE OR WIRE $1,000 Payment must be
Call 1-800-525-8085 to received within 3
request your purchase. business days, or the
Then send your transaction maay be
check by overnight cancelled.
courier to our
street address: 7800 E.
Union Ave., Denver, CO
80237. Or you may send
your payment by
bank wire (call INVESCO
for instructions).
- --------------------------------------------------------------------------------
BY TELEPHONE WITH ACH $50 You must forward your
Call 1-800-525-8085 to bank account
request your pur- information to INVESCO
chase. INVESCO will prior to using this
move money from your option.
designated bank/credit
union checking or
savings account in order
to purchase shares, upon
your telephone instruc-
tions, whenever you wish.
- --------------------------------------------------------------------------------
BY INTERNET $1,000 for regular You will need a web
Go to the INVESCO Web accounts; $250 for browser to utilize
site at www.invesco.com an IRA; $50 this service. Internet
minimum for each purchase transactions
subsequent invest- are limited to $25,000.
ment.
- --------------------------------------------------------------------------------
REGULAR INVESTING WITH $50 per month for Like all regular
EASIVEST EasiVest; $50 investment plans, nei-
OR DIRECT PAYROLL per pay period for ther EasiVest nor
PURCHASE Direct Payroll Direct Payroll Pur-
You may enroll on your Purchase. You may chase ensures a profit
fund application, or call start or stop your or protects against
us for a separate form regular investment loss in a falling
and more details. plan at any time, market. Because you'll
Investing the same notice to INVESCO. invest continually,
amount on a monthly regardless of varying
basis allows you to price levels, consider
buy more shares when your financial ability
prices are low and to keep buying through
fewer shares when low price levels. And
prices are high. remember that you will
This "dollar cost lose money if you
averaging" may help redeem your shares when
offset market the market value of all
fluctuations. Over a your shares is less
period of time, your than their cost.
average cost per share
may be less than the
actual average value
per share.
- --------------------------------------------------------------------------------
BY PAL(R) $1,000 (The exchange Be sure to write down
Your "Personal Account minimum is $250 for the confirmation
Line" is available subsequent purchases number provided by
for subsequent requested by telephone). PAL(R). Payment must be
purchases and received within 3
exchanges 24 hours business days, or the
a day. Simply call transaction may be
1-800-424-8085. cancelled.
<PAGE>
METHOD INVESTMENT MINIMUM PLEASE REMEMBER
- --------------------------------------------------------------------------------
BY EXCHANGE $1,000 to open a See "Exchange Policy."
Between two INVESCO new account; $50
funds. Call for written
1-800-525-8085 for requests to pur-
prospectuses of chase additional
other INVESCO funds. shares for an
Exchanges existing account.
may be made by phone or (The exchange
at our minimum is $250
Web site at for exchanges
www.invesco.com. You requested by
may also establish an telephone.)
automatic
monthly exchange
service between
two INVESCO funds; call
us for further details
and the correct form.
DISTRIBUTION EXPENSES. We have adopted a Plan and Agreement of Distribution
(commonly known as a "12b-1 Plan") for the Fund. The 12b-1 fees paid by the Fund
are used to defray all or part of the cost of preparing and distributing
prospectuses and promotional materials, as well as to pay for certain
distribution-related and other services. These services include compensation to
third party brokers, financial advisers and financial services companies that
sell Fund shares and/or service shareholder accounts.
Under the Plan, the Fund's payments are limited to an amount computed at an
annual rate of 0.25% of the Fund's average net assets. If distribution expenses
for the Fund exceed these computed amounts, INVESCO pays the difference.
[INVESCO ICON] YOUR ACCOUNT SERVICES
INVESCO PROVIDES YOU WITH SERVICES DESIGNED TO MAKE IT SIMPLE FOR YOU TO BUY,
SELL OR EXCHANGE YOUR SHARES OF ANY INVESCO MUTUAL FUND.
SHAREHOLDER ACCOUNTS. INVESCO maintains your share account, which contains
your current Fund holdings. The Fund does not issue share certificates.
Quarterly Investment Summaries. Each calendar quarter, you receive a written
statement which consolidates and summarizes account activity and value at the
beginning and end of the period for each of your INVESCO funds.
TRANSACTION CONFIRMATIONS. You receive detailed confirmations of individual
purchases, exchanges and sales. If you choose certain recurring transaction
plans (for instance, EasiVest), your transactions are confirmed on your
quarterly Investment Summaries.
TELEPHONE TRANSACTIONS. You may buy, exchange and sell Fund shares by
telephone, unless you specifically decline these privileges when you fill out
the INVESCO new account application.
YOU CAN CONDUCT MOST TRANSACTIONS AND CHECK ON YOUR ACCOUNT THROUGH OUR
TOLL-FREE TELEPHONE NUMBER. YOU MAY ALSO ACCESS PERSONAL ACCOUNT INFORMATION AT
OUR WEB SITE, WWW.INVESCO.COM.
Unless you decline the telephone transaction privileges, when you fill out
and sign the new account Application, a Telephone Transaction Authorization
Form, or use your telephone transaction privileges, you lose certain rights if
someone gives fraudulent or unauthorized instructions to INVESCO that result in
a loss to you. In general, if INVESCO has followed reasonable procedures, such
as recording telephone instructions and sending written transaction
confirmations, INVESCO is not liable for following telephone instructions that
it believes to be genuine. Therefore, you have the risk of loss due to
unauthorized or fraudulent instructions.
IRAS AND OTHER RETIREMENT PLANS. Shares of any INVESCO mutual fund may be
purchased for IRAs and many other types of tax-deferred retirement plans. Please
call INVESCO for information and forms to establish or transfer your existing
retirement plan or account.
[INVESCO ICON] HOW TO SELL SHARES
The following chart shows several convenient ways to sell your Fund shares.
Shares of the Fund may be sold at any time at the next NAV calculated after your
request to sell in proper form is received by INVESCO. Depending on Fund
performance, the NAV at the time you sell your shares may be more or less than
the price you paid to purchase your shares.
<PAGE>
TO SELL SHARES AT THAT DAY'S CLOSING PRICE, YOU MUST CONTACT US BEFORE 4:00
P.M. EASTERN TIME.
If you own shares in more than one INVESCO fund, please specify the fund whose
shares you wish to sell. Remember that any sale or exchange of shares in a
non-retirement account will likely result in a taxable gain or loss.
While INVESCO attempts to process telephone redemptions promptly, there may
be times particularly in periods of severe economic or market disruption - when
you may experience delays in redeeming shares by phone.
INVESCO usually mails you the proceeds from the sale of Fund shares within
seven days after we receive your request to sell in proper form. However,
payment may be postponed under unusual circumstances -- for instance, if normal
trading is not taking place on the NYSE, or during an emergency as defined by
the Securities and Exchange Commission. If your INVESCO fund shares were
purchased by a check which has not yet cleared, payment will be made promptly
when your purchase check does clear; that can take up to 15 days.
If you participate in EasiVest, the Fund's automatic monthly investment
program, and sell all of the shares in your account, we will not make any
additional EasiVest purchases unless you give us other instructions.
Because of the Fund's expense structure, it costs as much to handle a small
account as it does to handle a large one. If the value of your account in the
Fund falls below $250 as a result of your actions (for example, sale of your
Fund shares), the Fund reserves the right to sell all of your shares, send the
proceeds of the sale to you and close your account. Before this is done, you
will be notified and given 60 days to increase the value of your account to $250
or more.
<PAGE>
METHOD REDEMPTION MINIMUM PLEASE REMEMBER
- --------------------------------------------------------------------------------
BY TELEPHONE $250 (or, if less, INVESCO's telephone
Call us toll-free at: full liquidation of redemption privileges
1-800-525-8085. the account) for a may be modified or
redemption check; terminated in the
$1,000 for a wire to future at INVESCO's
your bank of record. discretion.
The maximum amount
which may be redeemed
by telephone is
generally $25,000.
- --------------------------------------------------------------------------------
IN WRITING Any amount. The redemption
Mail your request to request must be
INVESCO Funds Group, signed by all
Inc., P.O. Box registered account
173706, Denver, CO owners. Payment will
80217-3706. You may be mailed to your
also send your address as it appears
request by overnight on INVESCO's records,
courier to 7800 E. or to a bank
Union Ave., designated by you in
Denver, CO 80237. writing.
- --------------------------------------------------------------------------------
BY TELEPHONE WITH ACH $50 You must forward your
Call 1-800-525-8085 bank account
to request your information to
redemption. INVESCO INVESCO prior to
will automatically using this option.
pay the proceeds into
your designated bank
account.
- --------------------------------------------------------------------------------
BY INTERNET None You will need a web
Go to the INVESCO Web browser to utilize
site at this service.
www.invesco.com Internet redemption
transactions are
limited to $25,000.
- --------------------------------------------------------------------------------
BY EXCHANGE $250 for exchanges See "Exchange Policy."
Between two INVESCO requested by When opening a new
funds. Call telephone. account, investment
1-800-525-8085 for minimums apply.
prospectuses of other
INVESCO funds.
Exchanges may be
made by phone or
at our Web site at
www.invesco.com. You
may also establish an
automatic monthly
exchange service
between two INVESCO
funds; call us for
further details and
the correct form.
<PAGE>
METHOD REDEMPTION MINIMUM PLEASE REMEMBER
- --------------------------------------------------------------------------------
PERIODIC WITHDRAWAL $100 per payment on a You must have at
PLAN monthly or quarterly least $10,000 total
You may call us to basis. The redemption invested with the
request the check may be made INVESCO funds with at
appropriate form and payable to any party least $5,000 of that
more informa tion at you designate. total invested in the
1-800-525-8085. fund from which
withdrawals will be
made.
- --------------------------------------------------------------------------------
PAYMENT TO THIRD Any amount. All registered
PARTY account owners must
Mail your request to sign the request,
INVESCO with signature
Funds Group, Inc., guarantees from an
P.O. Box 173706, eligible guarantor
Denver, CO 80217-3706. financial
institution, such as
a commercial bank or a
recognized national or
regional securities
firm.
[GRAPH ICON] TAXES
Everyone's tax status is unique. We encourage you to consult your own tax
adviser on the tax impact to you of investing in the Fund.
TO AVOID BACKUP WITHHOLDING, BE SURE WE HAVE YOUR CORRECT SOCIAL SECURITY OR
TAXPAYER IDENTIFICATION NUMBER.
The Fund customarily distributes to its shareholders substantially all of
its net investment income, net capital gains and net gains from foreign currency
transactions, if any. You receive a proportionate part of these distributions,
depending on the percentage of the Fund's shares that you own. These
distributions are required under federal tax laws governing mutual funds. It is
the policy of the Fund to distribute all investment company taxable income and
net capital gains. As a result of this policy and the Fund's qualification as a
regulated investment company, it is anticipated that the Fund will not pay any
federal income or excise taxes. Instead, the Fund will be accorded conduit or
"pass through" treatment for federal income tax purposes.
However, unless you are (or your account is) exempt from income taxes, you
must include all dividends and capital gain distributions paid to you by the
Fund in your taxable income for federal, state and local income tax purposes.
You also may realize capital gains or losses when you sell shares of the Fund at
more or less than the price you originally paid. An exchange is treated as a
sale, and is a taxable event. Dividends and other distributions usually are
taxable whether you receive them in cash or automatically reinvest them in
shares of the Fund or other INVESCO funds.
If you have not provided INVESCO with complete, correct tax information,
the Fund is required by law to withhold 31% of your distributions and any money
that you receive from the sale of shares of the Fund as a backup withholding
tax.
We will provide you with detailed information every year about your
dividends and capital gain distributions. Depending on the activity in your
individual account, we may also be able to assist with cost basis figures for
shares you sell.
<PAGE>
[GRAPH ICON] DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
The Fund earns ordinary or investment income from dividends and interest on
its investments. The Fund expects to distribute substantially all of this
investment income, less Fund expenses, to shareholders quarterly, or at such
other times as the Fund may elect.
NET INVESTMENT INCOME AND NET REALIZED CAPITAL GAINS ARE DISTRIBUTED TO
SHAREHOLDERS AT LEAST ANNUALLY. DISTRIBUTIONS ARE TAXABLE WHETHER REINVESTED IN
ADDITIONAL SHARES OR PAID TO YOU IN CASH (EXCEPT FOR TAX-EXEMPT ACCOUNTS).
The Fund also realizes capital gains and losses when it sells securities in its
portfolio for more or less than it had paid for them. If total gains on sales
exceed total losses (including losses carried forward from previous years), the
Fund has a net realized capital gain. Net realized capital gains, if any, are
distributed to shareholders at least annually, usually in December.
Under present federal income tax laws, capital gains may be taxable at
different rates, depending on how long the Fund has held the underlying
investment. Short-term capital gains which are derived from the sale of assets
held one year or less are taxed as ordinary income. Long-term capital gains
which are derived from the sale of assets held for more than one year are taxed
at the maximum capital gains rate, currently 20% for individuals.
Dividends and capital gain distributions are paid to you if you hold shares on
the record date of the distribution regardless of how long you have held your
shares. The Fund's NAV will drop by the amount of the distribution on the day
the distribution is made. If you buy shares of the Fund just before a
distribution is declared, you may wind up "buying a distribution." This means
that if the Fund makes a capital gain distribution shortly after you buy, you
will receive some of your investment back as a taxable distribution. Most
shareholders want to avoid this. And, if you sell your shares at a loss for tax
purposes and purchase a substantially identical investment within 30 days before
or after that sale, the transaction is usually considered a "wash sale" and you
will not be able to claim a tax loss.
Dividends and capital gain distributions paid by the Fund are automatically
reinvested in additional Fund shares at the NAV on the ex-dividend date, unless
you choose to have them automatically reinvested in another INVESCO fund or paid
to you by check or electronic funds transfer. If you choose to be paid by check,
the minimum amount of the check must be at least $10; amounts less than that
will be automatically reinvested. Dividends and other distributions, whether
received in cash or reinvested in additional Fund shares, may be subject to
federal income tax.
<PAGE>
Financial Highlights
The financial highlights table is intended to help you understand the
Fund's financial performance for the past five years (or, if shorter, the period
of the Fund's operations). Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned (or lost) on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP, independent accountants, whose report,
along with the financial statements, is included in INVESCO Specialty Funds,
Inc.'s 1999 Annual Report to Shareholders which is incorporated by reference
into the Statement of Additional Information. This Report is available without
charge by contacting IDI at the address or telephone number on the back cover of
this Prospectus.
<TABLE>
<CAPTION>
PERIOD ENDED
YEAR ENDED JULY 31 JULY 31
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LATIN AMERICAN GROWTH 1999 1998 1997 1996 1995(a)
FUND
PER SHARE DATA
Net Asset $11.18 $18.37 $12.86 $11.69 $10.00
Value-Beginning of
Period
- -----------------------------------------------------------------------------------------
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.04 0.00 0.13 0.08 0.02
(Loss)(b)
Net Gains or (Losses)
on Securities
(Both Realized and (2.83) (5.41) 5.88 1.62 1.69
Unrealized)
- -----------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT (2.79) (5.41) 6.01 1.70 1.71
OPERATIONS
- -----------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net 0.02 0.00 0.14 0.09 0.02
Investment Income(c)
Distributions from 0.00 1.02 0.36 0.44 0.00
Capital Gains
In Excess of Capital 0.11 0.76 0.00 0.00 0.00
Gains
- -----------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 0.13 1.78 0.50 0.53 0.02
- -----------------------------------------------------------------------------------------
Net Asset Value -- End $8.26 $11.18 $18.37 $12.86 $11.69
of Period
=========================================================================================
TOTAL RETURN(d) (24.87%) (30.64%) 48.06% 15.27% 17.09%(e)
RATIOS
Net Assets-End of $23,568 $34,725 $130,272 $32,064 $7,423
Period ($000
Omitted)
Ratio of Expenses to 2.17%(g) 1.99%(g) 1.76%(g) 2.14%(g) 2.00%(h)
Average Net
Assets(f)
Ratio of Net 0.52% 0.00% 1.35% 1.26% 0.79%(h)
Investment Income
to Average Net
Assets(f)
Portfolio Turnover Rate 90% 33% 72% 29% 30%(e)
(a) From February 15, 1995, commencement of investment operations, to July 31,1995.
(b) Net Investment Income (Loss) aggregated less than $0.01 on a per share
basis for the year ended July 31, 1998.
(c) Distributions in excess of net investment income for the year ended July 31,
1998, aggregated less than $0.01 on a per share basis.
(d) The applicable redemption fees are not included in the Total Return
calculation.
(e) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(f) Various expenses of the Fund were voluntarily absorbed by INVESCO and IAML
for the year ended July 31, 1999 and the period ended July 31, 1995. If such
expenses had not been voluntarily absorbed, ratio of expenses to average net
assets would have been 3.39% and 4.49% (annualized), respectively, and ratio
of net investment income to average net assets would have been (0.70%)
and (1.70%) (annualized), respectively.
(g) Ratio is based upon Total Expenses of the Fund, less Expenses absorbed by
INVESCO and IAML, where applicable, which is before any expense offset
arrangements.
(h) Annualized.
</TABLE>
<PAGE>
October 31, 1999
INVESCO INTERNATIONAL FUNDS, INC.
INVESCO LATIN AMERICAN GROWTH Fund
You may obtain additional information about the Fund from several sources:
FINANCIAL REPORTS. Although this Prospectus describes the Fund's
anticipated investments and operations, the Fund also prepares annual and
semiannual reports that detail the Fund's actual investments at the report date.
These reports include discussion of the Fund's recent performance, as well as
market and general economic trends affecting the Fund's performance. The annual
report also includes the report of the Fund's independent accountants.
STATEMENT OF ADDITIONAL INFORMATION. The SAI, dated October 31, 1999, is a
supplement to this Prospectus and has detailed information about the Fund and
its investment policies and practices. A current SAI for the Fund is on file
with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference; in other words, the SAI is legally a part of this
Prospectus, and you are considered to be aware of the contents of the SAI.
INTERNET. The current Prospectus of the Fund may be accessed through the
INVESCO Web site at www.invesco.com. In addition, the Prospectus, SAI, annual
report and semiannual report of the Fund are available on the SEC Web site at
www.sec.gov.
To obtain a free copy of the current Prospectus, SAI, annual report or
semiannual report, write to INVESCO Distributors, Inc., P.O. Box 173706, Denver,
Colorado 80217-3706; or call 1-800-525-8085. Copies of these materials are also
available (with a copying charge) from the SEC's Public Reference Section at 450
Fifth Street, N.W., Washington, D.C. Information on the Public Reference Section
can be obtained by calling 1-800-SEC-0330. The SEC file numbers for the Fund are
811-7758 and 033-63498.
811-7758
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
INVESCO INTERNATIONAL FUNDS, INC.
INVESCO Latin American Growth Fund
Address: Mailing Address:
7800 E. Union Ave., Denver, CO 80237 P.O. Box 173706, Denver, CO 80217-3706
Telephone:
In continental U.S., 1-800-525-8085
October 31, 1999
- --------------------------------------------------------------------------------
A Prospectus for INVESCO Latin American Growth Fund dated October 31, 1999
provides the basic information you should know before investing in the Fund.
This Statement of Additional Information ("SAI") is incorporated by reference
into the Fund's Prospectus; in other words, this SAI is legally part of the
Fund's Prospectus. Although this SAI is not a prospectus, it contains
information in addition to that set forth in the Prospectus. It is intended to
provide additional information regarding the activities and operations of the
Fund and should be read in conjunction with the Prospectus.
You may obtain, without charge, copies of the current Prospectus of the Fund,
SAI and current annual and semiannual reports by writing to INVESCO
Distributors, Inc., P.O. Box 173706, Denver, CO 80217-3706 , or by calling
1-800-525-8085. The Prospectus for the Fund is also available through the
INVESCO Web site at www.invesco.com.
<PAGE>
TABLE OF CONTENTS
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Investments, Policies and Risks. . . . . . . . . . . . . . . . . . . 25
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . . 43
Management of the Funds. . . . . . . . . . . . . . . . . . . . . . . 45
Other Service Providers. . . . . . . . . . . . . . . . . . . . . . . 65
Brokerage Allocation and Other Practices . . . . . . . . . . . . . . 66
Capital Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Tax Consequences of Owning Shares of the Fund. . . . . . . . . . . . 68
Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 73
Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
<PAGE>
THE COMPANY
The Company was incorporated under the laws of Maryland on April 2, 1993. On
October 29, 1999, the Company assumed all of the assets and liabilities of
INVESCO Latin American Growth Fund, a series of INVESCO Specialty Funds, Inc.
The Company is an open-end, diversified, no-load management investment company
currently consisting of four portfolios of investments: INVESCO European Fund,
INVESCO International Blue Chip Fund, INVESCO Latin American Growth Fund, and
INVESCO Pacific Basin Fund (the "Funds"). This Statement of Additional
Information ("SAI") pertains only to INVESCO Latin American Growth Fund (the
"Fund"). Additional funds may be offered in the future.
"Open-end" means that the Fund issues an indefinite number of shares which it
continuously offers to redeem at net asset value per share ("NAV"). A
"management" investment company actively buys and sells securities for the
portfolio of the Fund at the direction of a professional manager. Open-end
management investment companies (or one or more series of such companies, such
as the Funds) are commonly referred to as mutual funds. The Fund does not charge
sales fees to purchase its shares. However, the Fund does pay a 12b-1
distribution fee which is computed and paid monthly at an annual rate of 0.25%
of the Fund's average net assets.
INVESTMENTS, POLICIES AND RISKS
The principal investments and policies of the Fund are discussed in the
Prospectus of the Fund. The Fund also may invest in the following securities and
engage in the following practices.
ADRs -- American Depository Receipts, or ADRs, are securities issued by American
banks. ADRs are receipts for the shares of foreign corporations that are held by
the bank issuing the receipt. An ADR entitles its holder to all dividends and
capital gains on the underlying foreign securities, less any fees paid to the
bank. Purchasing ADRs gives the Fund the ability to purchase the functional
equivalent of foreign securities without going to the foreign securities markets
to do so. ADRs are bought and sold in U.S. dollars, not foreign currencies. An
ADR that is "sponsored" means that the foreign corporation whose shares are
represented by the ADR is actively involved in the issuance of the ADR, and
generally provides material information about the corporation to the U.S.
market. An "unsponsored" ADR program means that the foreign corporation whose
shares are held by the bank is not obligated to disclose material information in
the United States, and, therefore, the market value of the ADR may not reflect
important facts known only to the foreign company.
Since they mirror their underlying foreign securities, ADRs generally have the
same risks as investing directly in the underlying foreign securities.
CERTIFICATES OF DEPOSIT IN FOREIGN BANKS AND U.S. BRANCHES OF FOREIGN BANKS --
The Fund may maintain time deposits in and invest in U.S. dollar denominated CDs
issued by foreign banks and U.S. branches of foreign banks. The Fund limits
investments in foreign bank obligations to U.S. dollar denominated obligations
of foreign banks which have more than $10 billion in assets, have branches or
agencies in the U.S., and meet other criteria established by the board of
directors. Investments in foreign securities involve special considerations.
<PAGE>
There is generally less publicly available information about foreign issuers
since many foreign countries do not have the same disclosure and reporting
requirements as are imposed by the U.S. securities laws. Moreover, foreign
issuers are generally not bound by uniform accounting and auditing and financial
reporting requirements and standards of practice comparable to those applicable
to domestic issuers. Such investments may also entail the risks of possible
imposition of dividend withholding or confiscatory taxes, possible currency
blockage or transfer restrictions, expropriation, nationalization or other
adverse political or economic developments, and the difficulty of enforcing
obligations in other countries.
The Fund may also invest in bankers' acceptances, time deposits and
certificates of deposit of U.S. branches of foreign banks and foreign branches
of U.S. banks. Investments in instruments of U.S. branches of foreign banks will
be made only with branches that are subject to the same regulations as U.S.
banks. Investments in instruments issued by a foreign branch of a U.S. bank will
be made only if the investment risk associated with such investment is the same
as that involving an investment in instruments issued by the U.S. parent, with
the U.S. parent unconditionally liable in the event that the foreign branch
fails to pay on the investment for any reason.
COMMERCIAL PAPER -- Commercial paper is the term for short-term promissory notes
issued by domestic corporations to meet current working capital needs.
Commercial paper may be unsecured by the corporation's assets but may be backed
by a letter of credit from a bank or other financial institution. The letter of
credit enhances the paper's creditworthiness. The issuer is directly responsible
for payment but the bank "guarantees" that if the note is not paid at maturity
by the issuer, the bank will pay the principal and interest to the buyer.
INVESCO Funds Group, Inc. ("INVESCO"), the Fund's adviser, will consider the
creditworthiness of the institution issuing the letter of credit, as well as the
creditworthiness of the issuer of the commercial paper, when purchasing paper
enhanced by a letter of credit. Commercial paper is sold either as
interest-bearing or on a discounted basis, with maturities not exceeding 270
days.
DEBT SECURITIES -- Debt securities include bonds, notes and other securities
that give the holder the right to receive fixed amounts of principal, interest,
or both on a date in the future or on demand. Debt securities also are often
referred to as fixed income securities, even if the rate of interest varies over
the life of the security.
Debt securities are generally subject to credit risk and market risk. Credit
risk is the risk that the issuer of the security may be unable to meet interest
or principal payments or both as they come due. Market risk is the risk that the
market value of the security may decline for a variety of reasons, including
changes in interest rates. An increase in interest rates tends to reduce the
market values of debt securities in which the Fund has invested. A decline in
interest rates tends to increase the market values of debt securities in which
the Fund has invested.
Moody's Investor Services, Inc. ("Moody's") and Standard & Poor's ("S&P")
ratings provide a useful guide to the credit risk of many debt securities. The
lower the rating of a debt security, the greater the credit risk the rating
service assigns to the security. To compensate investors for accepting that
greater risk, lower-rated debt securities tend to offer higher interest rates.
<PAGE>
The Fund may invest up to 35% of its portfolio in lower-rated securities
commonly known as junk bonds. Increasing the amount of Fund assets invested in
unrated or lower-grade straight debt securities may increase the yield produced
by the Fund's debt securities but will also increase the credit risk of those
securities. A debt security is considered lower grade if it is rated Ba or less
by Moody's or BB or less by S&P. Lower-rated and non-rated debt securities of
comparable quality are subject to wider fluctuations in yields and market values
than higher-rated debt securities and may be considered speculative.
A significant economic downturn or increase in interest rates may cause issuers
of debt securities to experience increased financial problems which could
adversely affect their ability to pay principal and interest obligations, to
meet projected business goals, and to obtain additional financing. These
conditions more severely impact issuers of lower-rated debt securities. The
market for lower-rated straight debt securities may not be as liquid as the
market for higher-rated straight debt securities. Therefore, INVESCO attempts to
limit purchases of lower-rated securities to securities having an established
secondary market.
Lower-rated securities by S&P (categories BB and B) include those which are
predominantly speculative because of the issuer's perceived capacity to pay
interest and repay principal in accordance with their terms; BB indicates the
lowest degree of speculation and B a higher degree of speculation. While such
bonds will likely have some quality and protective characteristics, these are
usually outweighed by large uncertainties or major risk exposures to adverse
conditions.
Although bonds in the lowest investment grade debt category (those rated BBB by
S&P, Baa by Moody's or the equivalent) are regarded as having adequate
capability to pay principal and interest, they have speculative characteristics.
Adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to make principal and interest payments than is the case for
higher-rated bonds. Lower-rated bonds by Moody's (categories Ba, B and Caa) are
of poorer quality and also have speculative characteristics. Bonds having
equivalent ratings from other ratings services will have characteristics similar
to those of the corresponding S&P and Moody's ratings. For a specific
description of S&P and Moody's corporate bond rating categories, please refer to
Appendix A.
The Fund may invest in zero coupon bonds and step-up bonds. Zero coupon bonds do
not make regular interest payments. Zero coupon bonds are sold at a discount
from face value. Principal and accrued discount (representing interest earned
but not paid) are paid at maturity in the amount of the face value. Step-up
bonds initially make no (or low) cash interest payments but begin paying
interest (or a higher rate of interest) at a fixed time after issuance of the
bond. The market values of zero coupon and step-up bonds generally fluctuate
more in response to changes in interest rates than interest-paying securities of
comparable term and quality. The Fund may be required to distribute income
recognized on these bonds, even though no cash may be paid to the Fund until the
maturity or call date of a bond, in order for the Fund to maintain its
qualification as a regulated investment company. These required distributions
could reduce the amount of cash available for investment by the Fund.
DOMESTIC BANK OBLIGATIONS -- U.S. banks (including their foreign branches) issue
certificates of deposit (CDs) and bankers' acceptances which may be purchased by
the Fund if an issuing bank has total assets in excess of $5 billion and the
bank otherwise meets the Fund's credit rating requirements. CDs are issued
<PAGE>
against deposits in a commercial bank for a specified period and rate and are
normally negotiable. Eurodollar CDs are certificates issued by a foreign branch
(usually London) of a U.S. domestic bank, and, as such, the credit is deemed to
be that of the domestic bank. Bankers' acceptances are short-term credit
instruments evidencing the promise of the bank (by virtue of the bank's
"acceptance") to pay at maturity a draft which has been drawn on it by a
customer (the "drawer"). Bankers' acceptances are used to finance the import,
export, transfer, or storage of goods and reflect the obligation of both the
bank and the drawer to pay the face amount. Both types of securities are subject
to the ability of the issuing bank to meet its obligations, and are subject to
risks common to all debt securities. In addition, banker's acceptances may be
subject to foreign currency risk and certain other risks of investment in
foreign securities.
EQUITY SECURITIES -- The Fund may invest in common, preferred and convertible
preferred stocks, and securities whose values are tied to the price of stocks,
such as rights, warrants and convertible debt securities. Common stocks and
preferred stocks represent equity ownership in a corporation. Owners of stock,
such as the Fund, share in a corporation's earnings through dividends which may
be declared by the corporation, although the receipt of dividends is not the
principal benefit that the Fund seeks when it invests in stocks and similar
instruments.
Instead, the Fund seeks to invest in stocks that will increase in market value
and may be sold for more than the Fund paid to buy them. Market value is based
upon constantly changing investor perceptions of what the company is worth
compared to other companies. Although dividends are a factor in the changing
market value of stocks, many companies do not pay dividends, or pay
comparatively small dividends. The principal risk of investing in equity
securities is that their market values fluctuate constantly, often due to
factors entirely outside the control of the Fund or the company issuing the
stock. At any given time, the market value of an equity security may be
significantly higher or lower than the amount paid by the Fund to acquire it.
Owners of preferred stocks are entitled to dividends payable from the
corporation's earnings, which in some cases may be "cumulative" if prior
dividends on the preferred stock have not been paid. Dividends payable on
preferred stock have priority over distributions to holders of common stock, and
preferred stocks generally have a priority on the distribution of assets in the
event of the corporation's liquidation. Preferred stocks may be "participating,"
which means that they may be entitled to dividends in excess of the stated
dividend in certain cases. The holders of a company's debt securities generally
are entitled to be paid by the company before it pays anything to its
stockholders.
Rights and warrants are securities which entitle the holder to purchase the
securities of a company (usually, its common stock) at a specified price during
a specified time period. The value of a right or warrant is affected by many of
the same factors that determine the prices of common stocks. Rights and warrants
may be purchased directly or acquired in connection with a corporate
reorganization or exchange offer.
The Fund also may purchase convertible securities including convertible debt
obligations and convertible preferred stock. A convertible security entitles the
holder to exchange it for a fixed number of shares of common stock (or other
equity security), usually at a fixed price within a specified period of time.
Until conversion, the owner of convertible securities usually receives the
interest paid on a convertible bond or the dividend preference of a preferred
stock.
<PAGE>
A convertible security has an "investment value" which is a theoretical value
determined by the yield it provides in comparison with similar securities
without the conversion feature. Investment value changes are based upon
prevailing interest rates and other factors. It also has a "conversion value,"
which is the market value the convertible security would have if it were
exchanged for the underlying equity security. Convertible securities may be
purchased at varying price levels above or below their investment values or
conversion values.
Conversion value is a simple mathematical calculation that fluctuates directly
with the price of the underlying security. However, if the conversion value is
substantially below investment value, the market value of the convertible
security is governed principally by its investment value. If the conversion
value is near or above investment value, the market value of the convertible
security generally will rise above investment value. In such cases, the market
value of the convertible security may be higher than its conversion value, due
to the combination of the convertible security's right to interest (or dividend
preference) and the possibility of capital appreciation from the conversion
feature. However, there is no assurance that any premium above investment value
or conversion value will be recovered because prices change and, as a result,
the ability to achieve capital appreciation through conversion may be
eliminated.
EUROBONDS AND YANKEE BONDS -- Bonds issued by foreign branches of U.S.
banks ("Eurobonds") and bonds issued by a U.S. branch of a foreign bank and sold
in the United States ("Yankee bonds"). These bonds are bought and sold in U.S.
dollars, but generally carry with them the same risks as investing in foreign
securities.
FOREIGN SECURITIES -- Investments in the securities of foreign companies,
or companies that have their principal business activities outside the United
States, involve certain risks not associated with investments in U.S. companies.
Non-U.S. companies generally are not subject to the same uniform accounting,
auditing and financial reporting standards that apply to U.S. companies.
Therefore, financial information about foreign companies may be incomplete, or
may not be comparable to the information available on U.S. companies. There may
also be less publicly available information about a foreign company.
Although the volume of trading in foreign securities markets is growing,
securities of many non-U.S. companies may be less liquid and have greater swings
in price than securities of comparable U.S. companies. The costs of buying and
selling securities on foreign securities exchanges is generally significantly
higher than similar costs in the United States. There is generally less
government supervision and regulation of exchanges, brokers and issuers in
foreign countries than there is in the United States. Investments in non-U.S.
securities may also be subject to other risks different from those affecting
U.S. investments, including local political or economic developments,
expropriation or nationalization of assets, confiscatory taxation, and
imposition of withholding taxes on dividends or interest payments. If it becomes
necessary, it may be more difficult for the Fund to obtain or to enforce a
judgment against a foreign issuer than against a domestic issuer.
<PAGE>
Securities traded on foreign markets are usually bought and sold in local
currencies, not in U.S. dollars. Therefore, the market value of foreign
securities acquired by the Fund can be affected -- favorably or unfavorably --
by changes in currency rates and exchange control regulations. Costs are
incurred in converting money from one currency to another. Foreign currency
exchange rates are determined by supply and demand on the foreign exchange
markets. Foreign exchange markets are affected by the international balance of
payments and other economic and financial conditions, government intervention,
speculation and other factors, all of which are outside the control of the Fund.
Generally, the Funds' foreign currency exchange transactions will be conducted
on a cash or "spot" basis at the spot rate for purchasing or selling currency in
the foreign currency exchange markets.
FUTURES, OPTIONS AND OTHER FINANCIAL INSTRUMENTS
GENERAL. As discussed in the Prospectus, the adviser and/or sub-adviser may use
various types of financial instruments, some of which are derivatives, to
attempt to manage the risk of the Fund's investments or, in certain
circumstances, for investment (e.g., as a substitute for investing in
securities). These financial instruments include options, futures contracts
(sometimes referred to as "futures"), forward contracts, swaps, caps, floors and
collars (collectively, "Financial Instruments"). The policies in this section do
not apply to other types of instruments sometimes referred to as derivatives,
such as indexed securities, mortgage-backed and other asset-backed securities,
and stripped interest and principal of debt.
Hedging strategies can be broadly categorized as "short" hedges and "long" or
"anticipatory" hedges. A short hedge involves the use of a Financial Instrument
in order to partially or fully offset potential variations in the value of one
or more investments held in the Fund's portfolio. A long or anticipatory hedge
involves the use of a Financial Instrument in order to partially or fully offset
potential increases in the acquisition cost of one or more investments that the
Fund intends to acquire. In an anticipatory hedge transaction, the Fund does not
already own a corresponding security. Rather, it relates to a security or type
of security that the Fund intends to acquire. If the Fund does not eliminate the
hedge by purchasing the security as anticipated, the effect on the Fund's
portfolio is the same as if a long position were entered into. Financial
Instruments may also be used, in certain circumstances, for investment (e.g., as
a substitute for investing in securities).
Financial Instruments on individual securities generally are used to attempt to
hedge against price movements in one or more particular securities positions
that the Fund already owns or intends to acquire. Financial Instruments on
indexes, in contrast, generally are used to attempt to hedge all or a portion of
a portfolio against price movements of the securities within a market sector in
which the Fund has invested or expects to invest.
The use of Financial Instruments is subject to applicable regulations of the
Securities and Exchange Commission ("SEC"), the several exchanges upon which
they are traded, and the Commodity Futures Trading Commission ("CFTC"). In
addition, the Fund's ability to use Financial Instruments will be limited by tax
considerations. See "Tax Consequences of Owning Shares of the Funds."
<PAGE>
In addition to the instruments and strategies described below, the adviser
and/or sub-adviser may use other similar or related techniques to the extent
that they are consistent with the Fund's investment objective and permitted by
its investment limitations and applicable regulatory authorities. The Fund's
Prospectus or SAI will be supplemented to the extent that new products or
techniques become employed involving materially different risks than those
described below or in the Prospectus.
Special Risks. Financial Instruments and their use involve special
considerations and risks, certain of which are described below.
(1) Financial Instruments may increase the volatility of the Fund. If the
adviser and/or sub-adviser employs a Financial Instrument that correlates
imperfectly with the Fund's investments, a loss could result, regardless of
whether or not the intent was to manage risk. In addition, these techniques
could result in a loss if there is not a liquid market to close out a position
that the Fund has entered.
(2) There might be imperfect correlation between price movements of a Financial
Instrument and price movement of the investment(s) being hedged. For example, if
the value of a Financial Instrument used in a short hedge increased by less than
the decline in value of the hedged investment(s), the hedge would not be fully
successful. This might be caused by certain kinds of trading activity that
distorts the normal price relationship between the security being hedged and the
Financial Instrument. Similarly, the effectiveness of hedges using Financial
Instruments on indexes will depend on the degree of correlation between price
movements in the index and price movements in the securities being hedged.
The Funds are authorized to use options and futures contracts related to
securities with issuers, maturities or other characteristics different from the
securities in which it typically invests. This involves a risk that the options
or futures position will not track the performance of the Fund's portfolio
investments.
The direction of options and futures price movements can also diverge from the
direction of the movements of the prices of their underlying instruments, even
if the underlying instruments match the Fund's investments well. Options and
futures prices are affected by such factors as current and anticipated
short-term interest rates, changes in volatility of the underlying instrument,
and the time remaining until expiration of the contract, which may not affect
security prices the same way. Imperfect correlation may also result from
differing levels of demand in the options and futures markets and the securities
markets, from structural differences in how options and futures and securities
are traded, or from imposition of daily price fluctuation limits or trading
halts. The Fund may take positions in options and futures contracts with a
greater or lesser face value than the securities it wishes to hedge or intends
to purchase in order to attempt to compensate for differences in volatility
between the contract and the securities, although this may not be successful in
all cases.
(3) If successful, the above-discussed hedging strategies can reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable price
movements of portfolio securities. However, such strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements. For example, if the Fund entered into a short hedge because the
adviser and/or sub-adviser projected a decline in the price of a security in the
Fund's portfolio, and the price of that security increased instead, the gain
from that increase would likely be wholly or partially offset by a decline in
the value of the short position in the Financial Instrument. Moreover, if the
price of the Financial Instrument declined by more than the increase in the
price of the security, the Fund could suffer a loss.
<PAGE>
(4) The Fund's ability to close out a position in a Financial Instrument prior
to expiration or maturity depends on the degree of liquidity of the market or,
in the absence of such a market, the ability and willingness of the other party
to the transaction (the "counterparty") to enter into a transaction closing out
the position. Therefore, there is no assurance that any position can be closed
out at a time and price that is favorable to the Fund.
(5) As described below, the Fund is required to maintain assets as "cover,"
maintain segregated accounts or make margin payments when it takes positions in
Financial Instruments involving obligations to third parties (i.e., Financial
Instruments other than purchased options). If the Fund is unable to close out
its positions in such Financial Instruments, it might be required to continue to
maintain such assets or segregated accounts or make such payments until the
position expired. These requirements might impair the Fund's ability to sell a
portfolio security or make an investment at a time when it would otherwise be
favorable to do so, or require that the Fund sell a portfolio security at a
disadvantageous time.
Cover. Positions in Financial Instruments, other than purchased options, expose
the Fund to an obligation to another party. The Fund will not enter into any
such transaction unless it owns (1) an offsetting ("covered") position in
securities, currencies or other options, futures contracts or forward contracts,
or (2) cash and liquid assets with a value, marked-to-market daily, sufficient
to cover its obligations to the extent not covered as provided in (1) above. The
Fund will comply with SEC guidelines regarding cover for these instruments and
will, if the guidelines so require, designate cash or liquid assets as
segregated in the prescribed amount as determined daily.
Assets used as cover or held as segregated cannot be sold while the position in
the corresponding Financial Instrument is open unless they are replaced with
other appropriate assets. As a result, the commitment of a large portion of the
Fund's assets to cover or to hold as segregated could impede portfolio
management or the Fund's ability to meet redemption requests or other current
obligations.
Options. The Fund may engage in certain strategies involving options to attempt
to manage the risk of its investments or, in certain circumstances, for
investment (e.g., as a substitute for investing in securities). A call option
gives the purchaser the right to buy, and obligates the writer to sell the
underlying investment at the agreed-upon exercise price during the option
period. A put option gives the purchaser the right to sell, and obligates the
writer to buy the underlying investment at the agreed-upon exercise price during
the option period. Purchasers of options pay an amount, known as a premium, to
the option writer in exchange for the right under the option contract. See
"Options on Indexes" below with regard to cash settlement of option contracts on
index values.
<PAGE>
The purchase of call options can serve as a hedge against a price rise of the
underlier and the purchase of put options can serve as a hedge against a price
decline of the underlier. Writing call options can serve as a limited short
hedge because declines in the value of the hedged investment would be offset to
the extent of the premium received for writing the option. However, if the
security or currency appreciates to a price higher than the exercise price of
the call option, it can be expected that the option will be exercised and the
Fund will be obligated to sell the security or currency at less than its market
value.
Writing put options can serve as a limited long or anticipatory hedge because
increases in the value of the hedged investment would be offset to the extent of
the premium received for writing the option. However, if the security or
currency depreciates to a price lower than the exercise price of the put option,
it can be expected that the put option will be exercised and the Fund will be
obligated to purchase the security or currency at more than its market value.
The value of an option position will reflect, among other things, the current
market value of the underlying investment, the time remaining until expiration,
the relationship of the exercise price to the market price of the underlying
investment, the price volatility of the underlying investment and general market
and interest rate conditions. Options that expire unexercised have no value.
The Fund may effectively terminate its right or obligation under an option by
entering into a closing transaction. For example, the Fund may terminate its
obligation under a call or put option that it had written by purchasing an
identical call or put option; which is known as a closing purchase transaction.
Conversely, the Fund may terminate a position in a put or call option it had
purchased by writing an identical put or call option, which is known as a
closing sale transaction. Closing transactions permit the Fund to realize
profits or limit losses on an option position prior to its exercise or
expiration.
Risks of Options on Securities. Options embody the possibility of large amounts
of exposure, which will result in the Fund's net asset value being more
sensitive to changes in the value of the related investment. The Fund may
purchase or write both exchange-traded and OTC options. Exchange-traded options
in the United States are issued by a clearing organization affiliated with the
exchange on which the option is listed that, in effect, guarantees completion of
every exchange-traded option transaction. In contrast, OTC options are contracts
between the Fund and its counterparty (usually a securities dealer or a bank)
with no clearing organization guarantee. Thus, when the Fund purchases an OTC
option, it relies on the counterparty from whom it purchased the option to make
or take delivery of the underlying investment upon exercise of the option.
Failure by the counterparty to do so would result in the loss of any premium
paid by the Fund as well as the loss of any expected benefit of the transaction.
The Fund's ability to establish and close out positions in options depends on
the existence of a liquid market. However, there can be no assurance that such a
market will exist at any particular time. Closing transactions can be made for
OTC options only by negotiating directly with the counterparty, or by a
transaction in the secondary market if any such market exists. There can be no
assurance that the Fund will in fact be able to close out an OTC option position
at a favorable price prior to expiration. In the event of insolvency of the
counterparty, the Fund might be unable to close out an OTC option position at
any time prior to the option's expiration. If the Fund is not able to enter into
an offsetting closing transaction on an option it has written, it will be
required to maintain the securities subject to the call or the liquid assets
underlying the put until a closing purchase transaction can be entered into or
the option expires. However, there can be no assurance that such a market will
exist at any particular time.
<PAGE>
If the Fund were unable to effect a closing transaction for an option it had
purchased, it would have to exercise the option to realize any profit. The
inability to enter into a closing purchase transaction for a covered call option
written by the Fund could cause material losses because the Fund would be unable
to sell the investment used as cover for the written option until the option
expires or is exercised.
Options on Indexes. Puts and calls on indexes are similar to puts and calls on
securities or futures contracts except that all settlements are in cash and
changes in value depend on changes in the index in question. When the Fund
writes a call on an index, it receives a premium and agrees that, prior to the
expiration date, upon exercise of the call, the purchaser will receive from the
Fund an amount of cash equal to the positive difference between the closing
price of the index and the exercise price of the call times a specified multiple
("multiplier"), which determines the total dollar value for each point of such
difference. When the Fund buys a call on an index, it pays a premium and has the
same rights as to such call as are indicated above. When the Fund buys a put on
an index, it pays a premium and has the right, prior to the expiration date, to
require the seller of the put to deliver to the Fund an amount of cash equal to
the positive difference between the exercise price of the put and the closing
price of the index times the multiplier. When the Fund writes a put on an index,
it receives a premium and the purchaser of the put has the right, prior to the
expiration date, to require the Fund to deliver to it an amount of cash equal to
the positive difference between the exercise price of the put and the closing
level of the index times the multiplier.
The risks of purchasing and selling options on indexes may be greater than
options on securities. Because index options are settled in cash, when the Fund
writes a call on an index it cannot fulfill its potential settlement obligations
by delivering the underlying securities. The Fund can offset some of the risk of
writing a call index option by holding a diversified portfolio of securities
similar to those on which the underlying index is based. However, the Fund
cannot, as a practical matter, acquire and hold a portfolio containing exactly
the same securities as underlie the index and, as a result, bears a risk that
the value of the securities held will vary from the value of the index.
Even if the Fund could assemble a portfolio that exactly reproduced the
composition of the underlying index, it still would not be fully covered from a
risk standpoint because of the "timing risk" inherent in writing index options.
When an index option is exercised, the amount of cash that the holder is
entitled to receive is determined by the difference between the exercise price
and the closing index level. As with other kinds of options, the Fund as the
call writer will not learn what it has been assigned until the next business
day. The time lag between exercise and notice of assignment poses no risk for
the writer of a covered call on a specific underlying security, such as common
stock, because in that case the writer's obligation is to deliver the underlying
security, not to pay its value as of a moment in the past. In contrast, the
writer of an index call will be required to pay cash in an amount based on the
difference between the closing index value on the exercise date and the exercise
price. By the time the Fund learns what it has been assigned, the index may have
declined. This "timing risk" is an inherent limitation on the ability of index
call writers to cover their risk exposure.
<PAGE>
If the Fund has purchased an index option and exercises it before the closing
index value for that day is available, it runs the risk that the level of the
underlying index may subsequently change. If such a change causes the exercised
option to fall out-of-the-money, the Fund nevertheless will be required to pay
the difference between the closing index value and the exercise price of the
option (times the applicable multiplier) to the assigned writer.
OTC Options. Unlike exchange-traded options, which are standardized with respect
to the underlying instrument, expiration date, contract size, and strike price,
the terms of OTC options (options not traded on exchanges) generally are
established through negotiation with the other party to the option contract.
While this type of arrangement allows the Fund great flexibility to tailor the
option to its needs, OTC options generally involve greater risk than
exchange-traded options, which are guaranteed by the clearing organization of
the exchange where they are traded.
Generally, OTC foreign currency options used by the Fund are European-style
options. This means that the option is only exercisable immediately prior to its
expiration. This is in contrast to American-style options, which are exercisable
at any time prior to the expiration date of the option.
Futures Contracts and Options on Futures Contracts. When the Fund purchases or
sells a futures contract, it incurs an obligation respectively to take or make
delivery of a specified amount of the obligation underlying the contract at a
specified time and price. When the Fund writes an option on a futures contract,
it becomes obligated to assume a position in the futures contract at a specified
exercise price at any time during the term of the option. If the Fund writes a
call, on exercise it assumes a short futures position. If it writes a put, on
exercise it assumes a long futures position.
The purchase of futures or call options on futures can serve as a long or an
anticipatory hedge, and the sale of futures or the purchase of put options on
futures can serve as a short hedge. Writing call options on futures contracts
can serve as a limited short hedge, using a strategy similar to that used for
writing call options on securities or indexes. Similarly, writing put options on
futures contracts can serve as a limited long or anticipatory hedge.
In addition, futures strategies can be used to manage the "duration" (a measure
of anticipated sensitivity to changes in interest rates, which is sometimes
related to the weighted average maturity of a portfolio) and associated interest
rate risk of the Fund's fixed-income portfolio. If the adviser and/or
sub-adviser wishes to shorten the duration of the Fund's fixed-income portfolio
(i.e., reduce anticipated sensitivity), the Fund may sell an appropriate debt
futures contract or a call option thereon, or purchase a put option on that
futures contract. If the adviser and/or sub-adviser wishes to lengthen the
duration of the Fund's fixed-income portfolio (i.e., increase anticipated
sensitivity), the Fund may buy an appropriate debt futures contract or a call
option thereon, or sell a put option thereon.
<PAGE>
At the inception of a futures contract, the Fund is required to deposit "initial
margin" in an amount generally equal to 10% or less of the contract value.
Initial margin must also be deposited when writing a call or put option on a
futures contract, in accordance with applicable exchange rules. Subsequent
"variation margin" payments are made to and from the futures broker daily as the
value of the futures or written option position varies, a process known as
"marking-to-market." Unlike margin in securities transactions, initial margin on
futures contracts and written options on futures contracts does not represent a
borrowing on margin, but rather is in the nature of a performance bond or
good-faith deposit that is returned to the Fund at the termination of the
transaction if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, the Fund may be required to
increase the level of initial margin deposits. If the Fund has insufficient cash
to meet daily variation margin requirements, it might need to sell securities in
order to do so at a time when such sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures can enter
into offsetting closing transactions, similar to closing transactions on
options, by selling or purchasing, respectively, an instrument identical to the
instrument purchased or sold. However, there can be no assurance that a liquid
market will exist for a particular contract at a particular time. In such event,
it may not be possible to close a futures contract or options position.
Under certain circumstances, futures exchanges may establish daily limits on the
amount that the price of a futures contract or an option on a futures contract
can vary from the previous day's settlement price; once that limit is reached,
no trades may be made that day at a price beyond the limit. Daily price limits
do not limit potential losses because prices could move to the daily limit for
several consecutive days with little or no trading, thereby preventing
liquidation of unfavorable positions.
If the Fund were unable to liquidate a futures contract or an option on a
futures contract position due to the absence of a liquid market or the
imposition of price limits, it could incur substantial losses. The Fund would
continue to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Fund would continue to be required
to make daily variation margin payments and might be required to continue to
maintain the position being hedged by the futures contract or option or to
continue to maintain cash or securities in a segregated account.
To the extent that the Fund enters into futures contracts, options on futures
contracts and options on foreign currencies traded on a CFTC-regulated exchange,
in each case that is not for bona fide hedging purposes (as defined by the
CFTC), the aggregate initial margin and premiums required to establish these
positions (excluding the amount by which options are "in-the-money" at the time
of purchase) may not exceed 5% of the liquidation value of the Fund's portfolio,
after taking into account unrealized profits and unrealized losses on any
contracts the Fund has entered into. This policy does not limit to 5% the
percentage of the Fund's assets that are at risk in futures contracts, options
on futures contracts and currency options.
Risks of Futures Contracts and Options Thereon. The ordinary spreads at a given
time between prices in the cash and futures markets (including the options on
futures markets), due to differences in the natures of those markets, are
subject to the following factors. First, all participants in the futures market
are subject to margin deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through offsetting transactions, which could distort the normal relationship
between the cash and futures markets. Second, the liquidity of the futures
market depends on participants entering into offsetting transactions rather than
making or taking delivery. To the extent participants decide to make or take
<PAGE>
delivery, liquidity in the futures market could be reduced, thus producing
distortion. Due to the possibility of distortion, a hedge may not be successful.
Although stock index futures contracts do not require physical delivery, under
extraordinary market conditions, liquidity of such futures contracts also could
be reduced. Additionally, the adviser and/or sub-adviser may be incorrect in its
expectations as to the extent of various interest rates, currency exchange rates
or stock market movements or the time span within which the movements take
place.
Index Futures. The risk of imperfect correlation between movements in the price
of index futures and movements in the price of the securities that are the
subject of a hedge increases as the composition of the Fund's portfolio diverges
from the index. The price of the index futures may move proportionately more
than or less than the price of the securities being hedged. If the price of the
index futures moves proportionately less than the price of the securities that
are the subject of the hedge, the hedge will not be fully effective. Assuming
the price of the securities being hedged has moved in an unfavorable direction,
as anticipated when the hedge was put into place, the Fund would be in a better
position than if it had not hedged at all, but not as good as if the price of
the index futures moved in full proportion to that of the hedged securities.
However, if the price of the securities being hedged has moved in a favorable
direction, this advantage will be partially offset by movement of the price of
the futures contract. If the price of the futures contract moves more than the
price of the securities, the Fund will experience either a loss or a gain on the
futures contract that will not be completely offset by movements in the price of
the securities that are the subject of the hedge.
Where index futures are purchased in an anticipatory hedge, it is possible that
the market may decline instead. If the Fund then decides not to invest in the
securities at that time because of concern as to possible further market decline
or for other reasons, it will realize a loss on the futures contract that is not
offset by a reduction in the price of the securities it had anticipated
purchasing.
Foreign Currency Hedging Strategies--Special Considerations. The Fund may use
options and futures contracts on foreign currencies, as mentioned previously,
and forward currency contracts, as described below, to attempt to hedge against
movements in the values of the foreign currencies in which the Fund's securities
are denominated or, in certain circumstances, for investment (e.g., as a
substitute for investing in securities denominated in foreign currency).
Currency hedges can protect against price movements in a security that the Fund
owns or intends to acquire that are attributable to changes in the value of the
currency in which it is denominated.
The Fund might seek to hedge against changes in the value of a particular
currency when no Financial Instruments on that currency are available or such
Financial Instruments are more expensive than certain other Financial
Instruments. In such cases, the Fund may seek to hedge against price movements
in that currency by entering into transactions using Financial Instruments on
another currency or a basket of currencies, the value of which the adviser
and/or sub-adviser believes will have a high degree of positive correlation to
the value of the currency being hedged. The risk that movements in the price of
the Financial Instrument will not correlate perfectly with movements in the
price of the currency subject to the hedging transaction may be increased when
this strategy is used.
<PAGE>
The value of Financial Instruments on foreign currencies depends on the value of
the underlying currency relative to the U.S. dollar. Because foreign currency
transactions occurring in the interbank market might involve substantially
larger amounts than those involved in the use of such Financial Instruments, the
Fund could be disadvantaged by having to deal in the odd-lot market (generally
consisting of transactions of less than $1 million) for the underlying foreign
currencies at prices that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign currencies
or any regulatory requirement that quotations available through dealers or other
market sources be firm or revised on a timely basis. Quotation information
generally is representative of very large transactions in the interbank market
and thus might not reflect odd-lot transactions where rates might be less
favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Financial Instruments until they reopen.
Settlement of hedging transactions involving foreign currencies might be
required to take place within the country issuing the underlying currency. Thus,
the Fund might be required to accept or make delivery of the underlying foreign
currency in accordance with any U.S. or foreign regulations regarding the
maintenance of foreign banking arrangements by U.S. residents and might be
required to pay any fees, taxes and charges associated with such delivery
assessed in the issuing country.
Forward Currency Contracts and Foreign Currency Deposits. The Fund may enter
into forward currency contracts to purchase or sell foreign currencies for a
fixed amount of U.S. dollars or another foreign currency. A forward currency
contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days (term) from the date of the
forward currency contract agreed upon by the parties, at a price set at the time
the forward currency contract is entered. Forward currency contracts are
negotiated directly between currency traders (usually large commercial banks)
and their customers.
Such transactions may serve as long or anticipatory hedges. For example, the
Fund may purchase a forward currency contract to lock in the U.S. dollar price
of a security denominated in a foreign currency that the Fund intends to
acquire. Forward currency contracts may also serve as short hedges. For example,
the Fund may sell a forward currency contract to lock in the U.S. dollar
equivalent of the proceeds from the anticipated sale of a security or a dividend
or interest payment denominated in a foreign currency.
The Fund may also use forward currency contracts to hedge against a decline in
the value of existing investments denominated in foreign currency. Such a hedge
would tend to offset both positive and negative currency fluctuations, but would
not offset changes in security values caused by other factors. The Fund could
also hedge the position by entering into a forward currency contract to sell
another currency expected to perform similarly to the currency in which the
Fund's existing investments are denominated. This type of hedge could offer
advantages in terms of cost, yield or efficiency, but may not hedge currency
exposure as effectively as a simple hedge against U.S. dollars. This type of
hedge may result in losses if the currency used to hedge does not perform
similarly to the currency in which the hedged securities are denominated.
<PAGE>
The Fund may also use forward currency contracts in one currency or a basket of
currencies to attempt to hedge against fluctuations in the value of securities
denominated in a different currency if the adviser anticipates that there will
be a positive correlation between the two currencies.
The cost to the Fund of engaging in forward currency contracts varies with
factors such as the currency involved, the length of the contract period and the
market conditions then prevailing. Because forward currency contracts are
usually entered into on a principal basis, no fees or commissions are involved.
When the Fund enters into a forward currency contract, it relies on the
counterparty to make or take delivery of the underlying currency at the maturity
of the contract. Failure by the counterparty to do so would result in the loss
of some or all of any expected benefit of the transaction.
As is the case with futures contracts, purchasers and sellers of forward
currency contracts can enter into offsetting closing transactions, similar to
closing transactions on futures contracts, by selling or purchasing,
respectively, an instrument identical to the instrument purchased or sold.
Secondary markets generally do not exist for forward currency contracts, with
the result that closing transactions generally can be made for forward currency
contracts only by negotiating directly with the counterparty. Thus, there can be
no assurance that the Fund will in fact be able to close out a forward currency
contract at a favorable price prior to maturity. In addition, in the event of
insolvency of the counterparty, the Fund might be unable to close out a forward
currency contract. In either event, the Fund would continue to be subject to
market risk with respect to the position, and would continue to be required to
maintain a position in securities denominated in the foreign currency or to
segregate cash or liquid assets.
The precise matching of forward currency contract amounts and the value of the
securities, dividends or interest payments involved generally will not be
possible because the value of such securities, dividends or interest payments,
measured in the foreign currency, will change after the forward currency
contract has been established. Thus, the Fund might need to purchase or sell
foreign currencies in the spot (cash) market to the extent such foreign
currencies are not covered by forward currency contracts. The projection of
short-term currency market movements is extremely difficult, and the successful
execution of a short-term hedging strategy is highly uncertain.
Forward currency contracts may substantially change the Fund's investment
exposure to changes in currency exchange rates and could result in losses to the
Fund if currencies do not perform as the adviser anticipates. There is no
assurance that the adviser's and/or sub-adviser's use of forward currency
contracts will be advantageous to the Fund or that it will hedge at an
appropriate time.
The Fund may also purchase and sell foreign currency and invest in foreign
currency deposits. Currency conversion involves dealer spreads and other costs,
although commissions usually are not charged.
<PAGE>
Combined Positions. The Fund may purchase and write options or futures in
combination with each other, or in combination with futures or forward currency
contracts, to manage the risk and return characteristics of its overall
position. For example, the Fund may purchase a put option and write a call
option on the same underlying instrument, in order to construct a combined
position whose risk and return characteristics are similar to selling a futures
contract. Another possible combined position would involve writing a call option
at one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial price
increase. Because combined options positions involve multiple trades, they
result in higher transaction costs.
Turnover. The Fund's options and futures activities may affect their turnover
rates and brokerage commission payments. The exercise of calls or puts written
by the Fund, and the sale or purchase of futures contracts, may cause it to sell
or purchase related investments, thus increasing its turnover rate. Once the
Fund has received an exercise notice on an option it has written, it cannot
effect a closing transaction in order to terminate its obligation under the
option and must deliver or receive the underlying securities at the exercise
price. The exercise of puts purchased by the Fund may also cause the sale of
related investments, increasing turnover. Although such exercise is within the
Fund's control, holding a protective put might cause it to sell the related
investments for reasons that would not exist in the absence of the put. The Fund
will pay a brokerage commission each time it buys or sells a put or call or
purchases or sells a futures contract. Such commissions may be higher than those
that would apply to direct purchases or sales.
Swaps, Caps, Floors and Collars. The Fund is authorized to enter into swaps,
caps, floors and collars. Swaps involve the exchange by one party with another
party of their respective commitments to pay or receive cash flows, e.g., an
exchange of floating rate payments for fixed rate payments. The purchase of a
cap or a floor entitles the purchaser, to the extent that a specified index
exceeds in the case of a cap, or falls below in the case of a floor, a
predetermined value, to receive payments on a notional principal amount from the
party selling such instrument. A collar combines elements of buying a cap and
selling a floor.
INVESTMENT COMPANY SECURITIES -- To manage their daily cash positions, the Fund
may invest in securities issued by other investment companies that invest in
short-term debt securities and seek to maintain a net asset value of $1.00 per
share ("money market funds"). The Fund also may invest in Standard & Poor's
Depository Receipts ("SPDRs") and shares of other investment companies. SPDRs
are investment companies whose portfolios mirror the compositions of specific
S&P indices, such as the S&P 500 and the S&P 400. SPDRs are traded on the
American Stock Exchange. SPDR holders such as the Fund are paid a "Dividend
Equivalent Amount" that corresponds to the amount of cash dividends accruing to
the securities held by the SPDR Trust, net of certain fees and expenses. The
Investment Company Act of 1940 limits investments in securities of other
investment companies, such as the SPDR Trust. These limitations include, among
others, that, subject to certain exceptions, no more than 10% of the Fund's
total assets may be invested in securities of other investment companies and no
more than 5% of its total assets may be invested in the securities of any one
investment company. As a shareholder of another investment company, the Fund
would bear its pro rata portion of the other investment company's expenses,
including advisory fees, in addition to the expenses the Fund bears directly in
connection with its own operations.
<PAGE>
ILLIQUID SECURITIES -- Securities which do not trade on stock exchanges or in
the over the counter market, or have restrictions on when and how they may be
sold, are generally considered to be "illiquid." An illiquid security is one
that the Fund may have difficulty -- or may even be legally precluded from --
selling at any particular time. The Fund may invest in illiquid securities,
including restricted securities and other investments which are not readily
marketable. The Fund will not purchase any such security if the purchase would
cause the Fund to invest more than 15% of its net assets, measured at the time
of purchase, in illiquid securities. Repurchase agreements maturing in more than
seven days are considered illiquid for purposes of this restriction.
The principal risk of investing in illiquid securities is that the Fund may be
unable to dispose of them at the time desired or at a reasonable price. In
addition, in order to resell a restricted security, the Fund might have to bear
the expense and incur the delays associated with registering the securities with
the SEC, and otherwise obtaining listing on a securities exchange or in the over
the counter market.
REITS -- Real Estate Investment Trusts are investment trusts that invest
primarily in real estate and securities of businesses connected to the real
estate industry.
REPURCHASE AGREEMENTS -- The Fund may enter into repurchase agreements, or
REPOs, on debt securities that the Fund is allowed to hold in its portfolio.
This is a way to invest money for short periods. A REPO is an agreement under
which the Fund acquires a debt security and then resells it to the seller at an
agreed upon price and date (normally, the next business day). The repurchase
price represents an interest rate effective for the short period the debt
security is held by the Fund, and is unrelated to the interest rate on the
underlying debt security. A repurchase agreement is often considered as a loan
collateralized by securities. The collateral securities acquired by the Fund
(including accrued interest earned thereon) must have a total value in excess of
the value of the repurchase agreement. The collateral securities are held by the
Fund's custodian bank until the repurchase agreement is completed.
The Fund may enter into repurchase agreements with commercial banks, registered
broker-dealers or registered government securities dealers that are creditworthy
under standards established by the Company's board of directors. The Company's
board of directors has established standards that the investment adviser and
sub-adviser must use to review the creditworthiness of any bank, broker or
dealer that is party to a REPO. REPOs maturing in more than seven days are
considered illiquid securities. The Fund will not enter into repurchase
agreements maturing in more than seven days if as a result more than 15% of the
Fund's net assets would be invested in these repurchase agreements and other
illiquid securities.
As noted above, the Fund uses REPOs as a means of investing cash for short
periods of time. Although REPOs are considered to be highly liquid and
comparatively low-risk, the use of REPOs does involve some risks. For example,
if the other party to the agreement defaults on its obligation to repurchase the
underlying security at a time when the value of the security has declined, the
Fund may incur a loss on the sale of the collateral security. If the other party
to the agreement becomes insolvent and subject to liquidation or reorganization
under the Bankruptcy Code or other laws, a court may determine that the
underlying security is collateral for a loan by the Fund not within the control
of the Fund and therefore the realization by the Fund on such collateral may
automatically be stayed. Finally, it is possible that the Fund may not be able
to substantiate its interest in the underlying security and may be deemed an
unsecured creditor of the other party to the agreement.
<PAGE>
RULE 144A SECURITIES -- The Fund also may invest in securities that can be
resold to institutional investors pursuant to Rule 144A under the Securities Act
of 1933, as amended (the "1933 Act"). In recent years, a large institutional
market has developed for many Rule 144A Securities. Institutional investors
generally cannot sell these securities to the general public but instead will
often depend on an efficient institutional market in which Rule 144A Securities
can readily be resold to other institutional investors, or on an issuer's
ability to honor a demand for repayment. Therefore, the fact that there are
contractual or legal restrictions on resale to the general public or certain
institutions does not necessarily mean that a Rule 144A Security is illiquid.
Institutional markets for Rule 144A Securities may provide both reliable market
values for Rule 144A Securities and enable the Fund to sell a Rule 144A
investment when appropriate. For this reason, the Company's board of directors
has concluded that if a sufficient institutional trading market exists for a
given Rule 144A security, it may be considered "liquid," and not subject to the
Fund's limitations on investment in restricted securities. The Company's board
of directors has given INVESCO the day-to-day authority to determine the
liquidity of Rule 144A Securities, according to guidelines approved by the
board. The principal risk of investing in Rule 144A Securities is that there may
be an insufficient number of qualified institutional buyers interested in
purchasing a Rule 144A Security held by the Fund, and the Fund might be unable
to dispose of such security promptly or at reasonable prices.
SECURITIES LENDING -- The Fund may lend its portfolio securities. The advantage
of lending portfolio securities is that the Fund continues to have the benefits
(and risks) of ownership of the loaned securities, while at the same time
receiving interest from the borrower of the securities. The primary risk in
lending portfolio securities is that a borrower may fail to return a portfolio
security.
SOVEREIGN DEBT -- In certain emerging countries, the central government and its
agencies are the largest debtors to local and foreign banks and others.
Sovereign debt involves the risk that the government, as a result of political
considerations or cash flow difficulties, may fail to make scheduled payments of
interest or principal and may require holders to participate in rescheduling of
payments or even to make additional loans. If an emerging country government
defaults on its sovereign debt, there is likely to be no legal proceeding under
which the debt may be ordered repaid, in whole or in part. The ability or
willingness of a foreign sovereign debtor to make payments of principal and
interest in a timely manner may be influenced by, among other factors, its cash
flow, the magnitude of its foreign reserves, the availability of foreign
exchanges on the payment date, the debt service burden to the economy as a
whole, the debtor's then current relationship with the International Monetary
Fund and its then current political constraints. Some of the emerging countries
issuing such instruments have experienced high rates of inflation in recent
years and have extensive internal debt. Among other effects, high inflation and
internal debt service requirements may adversely affect the cost and
availability of future domestic sovereign borrowing to finance government
programs, and may have other adverse social, political and economic
consequences, including effects on the willingness of such countries to service
their sovereign debt. An emerging country government's willingness and ability
to make timely payments on its sovereign debt also are likely to be heavily
affected by the country's balance of trade and its access to trade and other
international credits. If a country's exports are concentrated in a few
commodities, such country would be more significantly exposed to a decline in
the international prices of one or more of such commodities. A rise in
protectionism on the part of its trading partners, or unwillingness by such
partners to make payment for goods in hard currency, could also adversely affect
the country's ability to export its products and repay its debts. Sovereign
debtors may also be dependent on expected receipts from such agencies and other
abroad to reduce principal and interest arrearages on their debt. However,
failure by the sovereign debtor or other entity to implement economic reforms
negotiated with multilateral agencies or others, to achieve specified levels of
economic performance, or to make other debt payments when due, may cause third
parties to termine their commitments to provide funds to the sovereign debtor,
which may further impair such debtor's willingness or ability to service its
debts.
The Fund may invest in debt securities issued under the "Brady Plan" in
connection with restructurings in emerging country debt markets or earlier
loans. These securities, often referred to as "Brady Bonds," are, in some cases,
denominated in U.S. dollars and collateralized as to principal by U.S. Treasury
zero coupon bonds have the same maturity. At least one year's interest payments,
on a rolling basis, are collateralized by cash or other investments. Brady Bonds
are actively traded on an over-the-counter basis in the secondary market for
emergin country debt securities. Brady Bonds are lower-rated bonds and highly
volatile.
<PAGE>
U.S. GOVERNMENT SECURITIES -- The Fund may, from time to time, purchase debt
securities issued by the U.S. government. These securities include Treasury
bills, notes, and bonds. Treasury bills have a maturity of one year or less,
Treasury notes generally have a maturity of one to ten years, and Treasury bonds
generally have maturities of more than ten years.
U.S. government debt securities also include securities issued or guaranteed by
agencies or instrumentalities of the U.S. government. Some obligations of U.S.
government agencies, which are established under the authority of an act of
Congress, such as Government National Mortgage Association ("GNMA")
participation certificates, are supported by the full faith and credit of the
U.S. Treasury. GNMA Certificates are mortgage-backed securities representing
part ownership of a pool of mortgage loans. These loans -- issued by lenders
such as mortgage bankers, commercial banks and savings and loan associations --
are either insured by the Federal Housing Administration or guaranteed by the
Veterans Administration. A "pool" or group of such mortgages is assembled and,
after being approved by GNMA, is offered to investors through securities
dealers. Once approved by GNMA, the timely payment of interest and principal on
each mortgage is guaranteed by GNMA and backed by the full faith and credit of
the U.S. government. The market value of GNMA Certificates is not guaranteed.
GNMA Certificates are different from bonds because principal is paid back
monthly by the borrower over the term of the loan rather than returned in a lump
sum at maturity, as is the case with a bond. GNMA Certificates are called
"pass-through" securities because both interest and principal payments
(including prepayments) are passed through to the holder of the GNMA
Certificate.
Other United States government debt securities, such as securities of the
Federal Home Loan Banks, are supported by the right of the issuer to borrow from
the Treasury. Others, such as bonds issued by Fannie Mae, a federally chartered
private corporation, are supported only by the credit of the corporation. In the
case of securities not backed by the full faith and credit of the United States,
the Fund must look principally to the agency issuing or guaranteeing the
obligation in the event the agency or instrumentality does not meet its
commitments. The Fund will invest in securities of such instrumentalities only
when its investment adviser and sub-advisers are satisfied that the credit risk
with respect to any such instrumentality is comparatively minimal.
WHEN-ISSUED/DELAYED DELIVERY -- Ordinarily, the Fund buys and sells securities
on an ordinary settlement basis. That means that the buy or sell order is sent,
and the Fund actually takes delivery or gives up physical possession of the
security on the "settlement date," which is three business days later. However,
the Fund also may purchase and sell securities on a when-issued or delayed
delivery basis.
When-issued or delayed delivery transactions occur when securities are purchased
or sold by the Fund and payment and delivery take place at an agreed-upon time
in the future. The Fund may engage in this practice in an effort to secure an
advantageous price and yield. However, the yield on a comparable security
available when delivery actually takes place may vary from the yield on the
security at the time the when-issued or delayed delivery transaction was entered
into. When the Fund engages in when-issued and delayed delivery transactions, it
relies on the seller or buyer to consummate the sale at the future date. If the
seller or buyer fails to act as promised, that failure may result in the Fund
missing the opportunity of obtaining a price or yield considered to be
advantageous. No payment or delivery is made by the Fund until it receives
delivery or payment from the other party to the transaction. However,
fluctuation in the value of the security from the time of commitment until
delivery could adversely affect the Fund.
INVESTMENT RESTRICTIONS. The Fund operates under certain investment
restrictions. For purposes of the following restrictions, all percentage
limitations apply immediately after a purchase or initial investment. Any
subsequent change in a particular percentage resulting from fluctuations in
value does not require elimination of any security from the Fund.
The following restrictions are fundamental and may not be changed without prior
approval of a majority of the outstanding voting securities of the Fund, as
defined in the Investment Company Act of 1940, as amended (the "1940 Act"). The
Fund may not:
1. purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities or municipal securities) if, as a result, more than 25%
of the Fund's total assets would be invested in the securities of
companies whose principal business activities are in the same industry;
<PAGE>
2. with respect to 75% of the Fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities, or securities of
other investment companies) if, as a result, (i) more than 5% of the
Fund's total assets would be invested in the securities of that issuer, or
(ii) the Fund would hold more than 10% of the outstanding voting
securities of that issuer;
3. underwrite securities of other issuers, except insofar as it may be
deemed to be an underwriter under the Securities Act of 1933, as amended
(the "1933 Act"), in connection with the disposition of the Fund's
portfolio securities;
4. borrow money, except that the Fund may borrow money in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings);
5. issue senior securities, except as permitted under the 1940 Act;
6. lend any security or make any loan if, as a result, more than 33 1/3%
of its total assets would be lent to other parties, but this limitation
does not apply to the purchase of debt securities or to repurchase
agreements;
7. purchase or sell physical commodities; however, this policy shall not
prevent the Fund from purchasing and selling foreign currency, futures
contracts, options, forward contracts, swaps, caps, floors, collars and
other financial instruments; or
8. purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the Fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business).
9. the Fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company managed by INVESCO or an affiliate
or a successor thereof, with substantially the same fundamental investment
objective, policies and limitations as the Fund.
In addition, the Fund has the following non-fundamental policies, which may be
changed without shareholder approval:
A. The Fund may not sell securities short (unless it owns or has the right
to obtain securities equivalent in kind and amount to the securities sold
short) or purchase securities on margin, except that (i) this policy does
not prevent the Fund from entering into short positions in foreign
currency, futures contracts, options, forward contracts, swaps, caps,
floors, collars and other financial instruments, (ii) the Fund may obtain
such short-term credits as are necessary for the clearance of
transactions, and (iii) the Fund may make margin payments in connection
with futures contracts, options, forward contracts, swaps, caps, floors,
collars and other financial instruments.
B. The Fund may borrow money only from a bank or from an open-end
management investment company managed by INVESCO or an affiliate or a
successor thereof for temporary or emergency purposes (not for leveraging
or investing) or by engaging in reverse repurchase agreements with any
party (reverse repurchase agreements will be treated as borrowings for
purposes of fundamental limitation (4)).
<PAGE>
C. The Fund does not currently intend to purchase any security if, as a
result, more than 15% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
D. The Fund may invest in securities issued by other investment companies
to the extent that such investments are consistent with the Fund's
investment objective and policies and permissible under the 1940 Act.
E. With respect to fundamental limitation (1), domestic and foreign
banking will be considered to be different industries.
In addition, the following non-fundamental policy applies, which may be changed
without shareholder approval:
Each state (including the District of Columbia and Puerto Rico), territory
and possession of the United States, each political subdivision, agency,
instrumentality and authority thereof, and each multi-state agency of
which a state is a member is a separate "issuer." When the assets and
revenues of an agency, authority, instrumentality or other political
subdivision are separate from the government creating the subdivision and
the security is backed only by assets and revenues of the subdivision,
such subdivision would be deemed to be the sole issuer. Similarly, in the
case of an Industrial Development Bond or Private Activity bond, if that
bond is backed only by the assets and revenues of the non-governmental
user, then that non-governmental user would be deemed to be the sole
issuer. However, if the creating government or another entity guarantees a
security, then to the extent that the value of all securities issued or
guaranteed by that government or entity and owned by the Fund exceeds 10%
of the Fund's total assets, the guarantee would be considered a separate
security and would be treated as issued by that government or entity.
MANAGEMENT OF THE FUND
THE INVESTMENT ADVISER
INVESCO, a Delaware corporation, located at 7800 East Union Avenue,
Denver, Colorado, is the Company's investment adviser. INVESCO was founded in
1932 and serves as an investment adviser to:
INVESCO Bond Funds, Inc. (formerly, INVESCO Income Funds, Inc.)
INVESCO Combination Stock & Bond Funds, Inc. (formerly,
INVESCO Flexible Funds, Inc.)
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Sector Funds, Inc. (formerly, INVESCO Strategic Portfolios, Inc.)
INVESCO Specialty Funds, Inc.
<PAGE>
INVESCO Stock Funds, Inc. (formerly, INVESCO Equity Funds, Inc.)
INVESCO Treasurer's Series Funds, Inc. (formerly, INVESCO
Treasurer's Series Trust)
INVESCO Variable Investment Funds, Inc.
As of September 30, 1999, INVESCO managed 44 mutual funds having combined assets
of $24.1 billion, on behalf of more than 930,000 shareholders.
INVESCO is an indirect wholly owned subsidiary of AMVESCAP PLC, a publicly
traded holding company. Through its subsidiaries, AMVESCAP PLC engages in the
business of investment management on an international basis. AMVESCAP PLC is one
of the largest independent investment management businesses in the world, with
approximately $296 billion in assets under management on June 30, 1999.
AMVESCAP PLC's North American subsidiaries include:
INVESCO Retirement and Benefit Services, Inc. ("IRBS"), Atlanta, Georgia,
develops and provides domestic and international defined contribution
retirement plan services to plan sponsors, institutional retirement plan
sponsors, institutional plan providers and foreign governments.
INVESCO Retirement Plan Services ("IRPS"), Atlanta, Georgia, a division of
IRBS, provides recordkeeping and investment selection services to defined
contribution plan sponsors of plans with between $2 million and $200 million
in assets. Additionally, IRPS provides investment consulting services to
institutions seeking to provide retirement plan products and services.
Institutional Trust Company, doing business as INVESCO Trust Company
("ITC"), Denver, Colorado, a division of IRBS, provides retirement account
custodian and/or trust services for individual retirement accounts ("IRAs")
and other retirement plan accounts. This includes services such as
recordkeeping, tax reporting and compliance. ITC acts as trustee or
custodian to these plans. ITC accepts contributions and provides complete
transfer agency functions: correspondence, sub-accounting, telephone
communications and processing of distributions.
INVESCO Capital Management, Inc., Atlanta, Georgia, manages institutional
investment portfolios, consisting primarily of discretionary employee
benefit plans for corporations and state and local governments, and
endowment funds.
INVESCO Management & Research, Inc., Boston, Massachusetts, primarily
manages pension and endowment accounts.
PRIMCO Capital Management, Inc., Louisville, Kentucky, specializes in
managing stable return investments, principally on behalf of Section 401(k)
retirement plans.
INVESCO Realty Advisors, Inc., Dallas, Texas, is responsible for providing
advisory services in the U.S. real estate markets for AMVESCAP PLC's clients
worldwide. Clients include corporate pension plans and public pension funds
as well as endowment and foundation accounts.
<PAGE>
INVESCO (NY), Inc., New York, is an investment adviser for separately
managed accounts, such as corporate and municipal pension plans,
Taft-Hartley Plans, insurance companies, charitable institutions and private
individuals. INVESCO NY further serves as investment adviser to several
closed-end investment companies, and as sub-adviser with respect to certain
commingled employee benefit trusts.
A I M Advisors, Inc., Houston, Texas, provides investment advisory and
administrative services for retail and institutional mutual funds.
A I M Capital Management, Inc., Houston, Texas, provides investment
advisory services to individuals, corporations, pension plans and other
private investment advisory accounts and also serves as a sub-adviser to
certain retail and institutional mutual funds, one Canadian mutual fund and
one portfolio of an open-end registered investment company that is offered
to separate accounts of variable insurance companies.
A I M Distributors, Inc. and Fund Management Company, Houston, Texas, are
registered broker-dealers that act as the principal underwriters for retail
and institutional mutual funds.
The corporate headquarters of AMVESCAP PLC are located at 11 Devonshire Square,
London, EC2M4YR, England.
THE INVESTMENT ADVISORY AGREEMENT
INVESCO serves as investment adviser to the Fund under an investment advisory
agreement dated February 28, 1997 (the "Agreement") with the Company.
The Agreement requires that INVESCO manage the investment portfolio of the Fund
in a way that conforms with the Fund's investment policies. INVESCO may directly
manage the Fund itself, or may hire a sub-adviser, which may be an affiliate of
INVESCO, to do so. Specifically, INVESCO is responsible for:
o managing the investment and reinvestment of all the assets of the Fund, and
executing all purchases and sales of portfolio securities;
o 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 Fund, as from time to time amended and in use
under the 1933 Act, and (ii) the Company's status as a regulated investment
company under the Internal Revenue Code of 1986, as amended;
o determining what securities are to be purchased or sold for the Fund,
unless otherwise directed by the directors of the Company, and executing
transactions accordingly;
<PAGE>
o 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 a long-range investment policy now or hereafter generally
available to the investment advisory customers of the adviser or any
sub-adviser;
o determining what portion of the Fund's assets should be invested in the
various types of securities authorized for purchase by the Fund; and
o making recommendations as to the manner in which voting rights, rights to
consent to Fund action and any other rights pertaining to the Fund's
portfolio securities shall be exercised.
INVESCO also performs all of the following services for the Fund:
o administrative
o internal accounting (including computation of net asset value)
o clerical and statistical
o secretarial
o all other services necessary or incidental to the administration of
the affairs of the Fund
o supplying the Company with officers, clerical staff and other
employees
o furnishing office space, facilities, equipment, and supplies; providing
personnel and facilities required to respond to inquiries related to
shareholder accounts
o conducting periodic compliance reviews of the Fund's operations;
preparation and review of required documents, reports and filings by
INVESCO's in-house legal and accounting staff or in conjunction with
independent attorneys and accountants (including the prospectus, statement
of additional information, proxy statements, shareholder reports, tax
returns, reports to the SEC, and other corporate documents of the Fund)
o supplying basic telephone service and other utilities
o preparing and maintaining certain of the books and records required to be
prepared and maintained by the Fund under the 1940 Act.
Expenses not assumed by INVESCO are borne by the Fund. As full compensation for
its advisory services to the Company, INVESCO receives a monthly fee from the
Fund. The fee is calculated at the annual rate of:
o 0.75% on the first $500 million of the Fund's average net assets;
o 0.65% on the next $500 million of the Fund's average net assets;
<PAGE>
o 0.55% of the Fund's average net assets from $1 billion;
o 0.45% of the Fund's average net assets from $2 billion;
o 0.40% of the Fund's average net assets from $4 billion;
o 0.375% of the Fund's average net assets from $6 billion; and
o 0.35% of the Fund's average net assets from $8 billion.
During the fiscal years ended July 31, 1999, 1998 and 1997, the Fund paid
INVESCO advisory fees in the dollar amounts shown below. If applicable, the
advisory fees were offset by credits in the amounts shown below, so that
INVESCO's fees were not in excess of the expense limitations shown below, which
have been voluntarily agreed to by the Company and INVESCO.
Advisory Total Expense Total Expense
Fee Dollars Reimbursements Limitations
July 31, 1999 $176,481 $286,269 2.00%
July 31, 1998 $552,409 N/A 2.00%
July 31, 1997 $485,690 N/A 2.00%
THE SUB-ADVISORY AGREEMENT
INVESCO Asset Management Limited ("IAML") serves as sub-adviser to the Fund
pursuant to a sub-advisory agreement dated February 28, 1997.
The Sub-Agreement provides that IAML, subject to the supervision of INVESCO,
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, as amended, and in any prospectus and/or statement of
additional information of the Company, as from time to time amended and in use
under the 1933 Act and (ii) the Company's status as a regulated investment
company under the Internal Revenue Code of 1986, as amended; (c) determining
what securities are to be purchased or sold for 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 IAML; (e) determining what portion
of the Fund's assets 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.
<PAGE>
The Sub-Agreements provide that, as compensation for its services, IAML shall
receive from INVESCO, at the end of each month, a fee based upon the average
daily value of the Fund's net assets. The fee is calculated at the following
annual rates:
o 0.30% on the first $500 million of the Fund's average net assets;
o 0.26% on the next $500 million of the Fund's average net assets;
o 0.22% of the Fund's average net assets from $1 billion;
o 0.18% of the Fund's average net assets from $2 billion;
o 0.16% of the Fund's average net assets from $4 billion;
o 0.15% of the Fund's average net assets from $6 billion; and
o 0.14% of the Fund's average net assets from $8 billion.
ADMINISTRATIVE SERVICES AGREEMENT
INVESCO, either directly or through affiliated companies, provides certain
administrative, sub-accounting, and recordkeeping services to the Fund pursuant
to an Administrative Services Agreement.
The Administrative Services Agreement was for an initial term expiring in one
year and has been extended by action of the board of directors through May 15,
2000. The Administrative Services Agreement may be continued from year to year
as long as each such continuance is specifically approved by the board of
directors of the Company, including a majority of the Company's directors who
are not affiliated with INVESCO ("Independent Directors"). The Administrative
Services Agreement may be terminated at any time without penalty by INVESCO on
sixty (60) days' written notice, or by the Fund upon thirty (30) days' written
notice, and ends automatically in the event of an assignment unless the
Company's board of directors, including a majority of the Company's Independent
Directors, approves such assignment.
The Administrative Services Agreement requires INVESCO to provide the following
services to the Fund:
o such sub-accounting and recordkeeping services and functions as are
reasonably necessary for the operation of the Fund; and
o such sub-accounting, recordkeeping, and administrative services and
functions, which may be provided by affiliates of INVESCO, as are
reasonably necessary for the operation of Fund shareholder accounts
maintained by certain retirement plans and employee benefit plans for the
benefit of participants in such plans.
<PAGE>
As full compensation for services provided under the Administrative Services
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 prior to May 13, 1999, and 0.045% per year of the average net assets of the
Fund effective May 13, 1999.
TRANSFER AGENCY AGREEMENT
INVESCO also performs transfer agent, dividend disbursing agent, and registrar
services for the Fund pursuant to a Transfer Agency Agreement.
The Transfer Agency Agreement provides that the Fund pay INVESCO an annual fee
of $20.00 per shareholder account, or, where applicable, per participant in an
omnibus account. This fee is paid monthly at the rate of 1/12 of the annual fee
and is based upon the actual number of shareholder accounts and omnibus account
participants in the Fund at any time during each month.
FEES PAID TO INVESCO
For the fiscal years ended July 31, 1999, 1998 and 1997, the Fund paid the
following fees to INVESCO (prior to the absorption of certain Fund expenses by
INVESCO):
Type of Fee 1999 1998 1997
- ----------- ---- ---- ----
Advisory $176,481 $552,409 $485,690
Administrative Services $ 15,500 21,048 19,714
Transfer Agency $320,395 338,846 177,930
DIRECTORS AND OFFICERS OF THE COMPANY
The overall direction and supervision of the Company come from the board of
directors. The board of directors is responsible for making sure that the Fund's
general investment policies and programs are carried out and that the Fund is
properly administered.
The board of directors has an audit committee comprised of four Independent
Directors. The committee meets quarterly with the Company's independent
accountants and officers to review accounting principles used by the Company,
the adequacy of internal controls, the responsibilities and fees of the
independent accountants, and other matters.
The Company has a management liaison committee which meets quarterly with
various management personnel of INVESCO in order to facilitate better
understanding of management and operations of the Company, and to review legal
and operational matters which have been assigned to the committee by the board
of directors, in furtherance of the board of directors' overall duty of
supervision.
<PAGE>
The Company has a soft dollar brokerage committee. The committee meets
periodically to review soft dollar and other brokerage transactions by the Fund,
and to review policies and procedures of INVESCO with respect to brokerage
transactions. It reports on these matters to the Company's board of directors.
The Company has a derivatives committee. The committee meets periodically to
review derivatives investments made by the Fund. It monitors derivatives usage
by the Fund and the procedures utilized by INVESCO to ensure that the use of
such instruments follows the policies on such instruments adopted by the
Company's board of directors. It reports on these matters to the Company's board
of directors.
The officers of the Company, all of whom are officers and employees of INVESCO,
are responsible for the day-to-day administration of the Company and the Fund.
The officers of the Company receive no direct compensation from the Company or
the Fund for their services as officers. INVESCO 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
the following funds, which, with the Company, are collectively referred to as
the "INVESCO Funds":
INVESCO Bond Funds, Inc. (formerly, INVESCO Income Funds, Inc.)
INVESCO Combination Stock & Bond Funds, Inc. (formerly, INVESCO
Flexible Funds, Inc.)
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Sector Funds, Inc. (formerly, INVESCO Strategic Portfolios, Inc.)
INVESCO Specialty Funds, Inc.
INVESCO Stock Funds, Inc. (formerly, INVESCO Equity Funds, Inc.)
INVESCO Treasurer's Series Funds, Inc. (formerly, INVESCO
Treasurer's Series Trust)
INVESCO Variable Investment Funds, Inc.
The table below provides information about each of the Company's directors and
officers. Unless otherwise indicated, the address of the directors and officers
is P.O. Box 173706, Denver, CO 80217-3706 . Their affiliations represent their
principal occupations.
<PAGE>
<TABLE>
Position(s) Held Principal Occupation(s)
Name, Address, and Age With Company During Past Five Years
<S> <C> <C>
Charles W. Brady *+ Director and Chairman of the Board of
1315 Peachtree St., N.E. Chairman of the Board INVESCO Global Health Sciences
Atlanta, Georgia Fund; Chief Executive Officer
Age: 64 and Director of AMVESCAP PLC,
London, England and various
subsidiaries of AMVESCAP PLC.
Fred A. Deering +# Director and Vice Trustee of INVESCO Global
Security Life Center Chairman of the Board Health Sciences Fund;
1290 Broadway formerly, Chairman of the
Denver, Colorado Executive Committee and
Age: 71 Chairman of the Board of
Security Life of Denver
Insurance Company; Director of
ING American Holdings Company
and First ING Life Insurance
Company of New York.
Mark H. Williamson *+ President, Chief President, Chief Executive
7800 E. Union Avenue Executive Officer Officer and Director of
Denver, Colorado and Director INVESCO Funds Group, Inc.;
Age: 48 President, Chief Executive
Officer and Director of
INVESCO Distributors, Inc.;
President, Chief Operating
Officer and Trustee of INVESCO
Global Health Sciences Fund;
formerly, Chairman and Chief
Executive Officer of Nations
Banc Advisors, Inc.; formerly,
Chairman of NationsBanc
Investments, Inc.
<PAGE>
Position(s) Held Principal Occupation(s)
Name, Address, and Age With Company During Past Five Years
Victor L. Andrews, Ph.D. Director Professor Emeritus, Chairman
**! 34 Seawatch Drive Emeritus and Chairman of the
Savannah, Georgia CFO Roundtable of the
Age: 69 Department of Finance of
Georgia State University;
President, Andrews Financial
Associates, Inc. (consulting
firm); formerly, member of the
faculties of the Harvard
Business School and the Sloan
School of Management of MIT;
Director of The Sheffield
Funds, Inc.
Bob R. Baker +** AMC Director President and Chief Executive
Cancer Research Center Officer of AMC Cancer Research
1600 Pierce Street Center, Denver, Colorado,
Denver, Colorado since January 1989; until
Age: 62 mid-December 1988, Vice
Chairman of the Board of First
Columbia Financial
Corporation, Englewood,
Colorado; formerly, Chairman
of the Board and Chief
Executive Officer of First
Columbia Financial
Corporation.
Lawrence H. Budner # @ Director Trust Consultant; prior to
7608 Glen Albens Circle June 30, 1987, Senior Vice
Dallas, Texas President and Senior Trust
Age: 69 Officer of InterFirst Bank,
Dallas, Texas.
<PAGE>
Position(s) Held Principal Occupation(s)
Name, Address, and Age With Company During Past Five Years
Wendy L. Gramm, Ph.D.**! Director Self-employed (since 1993);
4201 Yuma Street, N.W. Professor of Economics and
Washington, DC Public Administration,
Age: 54 University of Texas at
Arlington; formerly, Chairman,
Commodity Futures Trading
Commission; Administrator for
Information and Regulatory
Affairs at the Office of
Management and Budget;
Executive Director of the
Presidential Task Force on
Regulatory Relief; and
Director of the Federal Trade
Commission's Bureau of
Economics; also, Director of
Chicago Mercantile Exchange,
Enron Corporation, IBP, Inc.,
State Farm Insurance Company,
Independent Women's Forum,
International Republic
Institute, and the Republican
Women's Federal Forum. Also,
Member of Board of Visitors,
College of Business
Administration, University of
Iowa, and Member of Board of
Visitors, Center for Study of
Public Choice, George Mason
University.
<PAGE>
Position(s) Held Principal Occupation(s)
Name, Address, and Age With Company During Past Five Years
Kenneth T. King +#@ Director Retired. Formerly, Chairman of
4080 North Circulo the Board of The Capitol Life
Manzanillo Insurance Company, Providence
Tucson, Arizona Washington Insurance Company
Age: 73 and Director of numerous U.S.
subsidiaries thereof; formerly,
Chairman of the Board of The
Providence Capitol Companies in
the United Kingdom and
Guernsey; Chairman of the Board
of the Symbion Corporation
until 1987.
John W. McIntyre + #@ Director Retired. Formerly, Vice
7 Piedmont Center Chairman of the Board of
Suite 100 Directors of the Citizens and
Atlanta, Georgia Southern Corporation and
Age: 68 Chairman of the Board and Chief
Executive Officer of the
Citizens and Southern Georgia
Corp. and the Citizens and
Southern National Bank; Trustee
of INVESCO Global Health
Sciences Fund, Gables
Residential Trust, Employee's
Retirement System of GA, Emory
University and J.M. Tull
Charitable Foundation; Director
of Kaiser Foun dation Health
Plans of Georgia, Inc.
<PAGE>
Position(s) Held Principal Occupation(s)
Name, Address, and Age With Company During Past Five Years
Larry Soll, Ph.D.!** Director Retired. Formerly, Chairman of
345 Poorman Road the Board (1987 to 1994), Chief
Boulder, Colorado Executive Officer (1982 to 1989
Age: 57 and 1993 to 1994) and President
(1982 to 1989) of Synergen
Inc.; Director of Synergen
since incorporation in 1982;
Director of Isis
Pharmaceuticals, Inc.; Trustee
of INVESCO Global Health
Sciences Fund.
Glen A. Payne Secretary Senior Vice President, General
7800 E. Union Avenue Counsel and Sec retary of
Denver, Colorado INVESCO Funds Group, Inc.;
Age: 51 Senior Vice President,
Secretary and General Counsel
of INVESCO Distributors, Inc.;
Secretary, INVESCO Global
Health Sciences Fund; formerly,
General Counsel of INVESCO
Trust Company (1989 to1998);
formerly, employee of a U.S.
regulatory agency, Washington,
D.C. (1973 to 1989).
<PAGE>
Position(s) Held Principal Occupation(s)
Name, Address, and Age With Company During Past Five Years
Ronald L. Grooms Chief Accounting Senior Vice President,
7800 E. Union Avenue Officer, Chief Fina- Treasurer and Director of
Denver, Colorado ncial Officer and INVESCO Funds Group, Inc.;
Age: 52 Treasurer Senior Vice President,
Treasurer and Director of
INVESCO Distributors, Inc.;
Treasurer, Principal Financial
and Accounting Officer of
INVESCO Global Health Sciences
Fund; formerly, Senior Vice
President and Treasurer of
INVESCO Trust Company (1988 to
1998).
William J. Galvin, Jr. Assistant Secretary Senior Vice President and
7800 E. Union Avenue Assistant Secretary of INVESCO
Denver, Colorado Funds Group, Inc.; Senior Vice
Age: 42 President and Assistant
Secretary of INVESCO
Distributors, Inc.; formerly,
Trust Officer of INVESCO Trust
Company.
Pamela J. Piro Assistant Treasurer Vice President and Assistant
7800 E. Union Avenue Treasurer of INVESCO Funds
Denver, Colorado Group, Inc.; Assistant
Age: 39 Treasurer of INVESCO
Distributors Inc.; formerly,
Assistant Vice President (1996
to 1997), Director - Portfolio
Accounting (1994 to 1996),
Portfolio Accounting Manager
(1993 to 1994) and Assistant
Accounting Manager (1990 to
1993).
<PAGE>
Position(s) Held Principal Occupation(s)
Name, Address, and Age With Company During Past Five Years
Alan I. Watson Assistant Secretary Vice President of INVESCO Funds
7800 E. Union Avenue Group, Inc.; formerly, Trust
Denver, Colorado Officer of INVESCO Trust
Age: 57 Company.
Judy P. Wiese Assistant Secretary Vice President and Assistant
7800 E. Union Avenue Secretary of INVESCO Funds
Denver, Colorado Group, Inc.; Assistant
Age: 51 Secretary of INVESCO
Distributors, Inc.; formerly,
Trust Officer of INVESCO Trust
Company.
</TABLE>
[FN]
# 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.
@ Member of the soft dollar brokerage committee of the Company.
! Member of the derivatives committee of the Company.
</FN>
The following table shows the compensation paid by the Company to its
Independent Directors for services rendered in their capacities as directors of
the Company; the benefits accrued as Company expenses with respect to the
Defined Benefit Deferred Compensation Plan discussed below; and the estimated
annual benefits to be received by these directors upon retirement as a result of
their service to the Company, all for the period ended October 31, 1998.
In addition, the table sets forth the total compensation paid by all of the
INVESCO Funds and INVESCO Global Health Sciences Fund (collectively, the
"INVESCO Complex") to these directors or trustees for services rendered in their
capacities as directors or trustees during the year ended December 31, 1998. As
of December 31, 1998, there were 53 funds in the INVESCO Complex.
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Name of Person Aggregate Compen- Benefits Accrued As Estimated Annual Total Compensation
and Position sation From Company(1) Part of Company Benefits Upon From INVESCO Complex
Expenses(2) Retirement(3) Paid To Directors(6)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fred A. Deering, Vice $4,395 $1,355 $870 $103,700
Chairman of the Board
- --------------------------------------------------------------------------------------------------------------------
Victor L. Andrews 4,306 1,281 1,007 80,350
- --------------------------------------------------------------------------------------------------------------------
Bob R. Baker 4,421 1,143 1,349 84,000
- --------------------------------------------------------------------------------------------------------------------
Lawrence H. Budner 4,240 1,281 1,007 79,350
- --------------------------------------------------------------------------------------------------------------------
Daniel D. Chabris(4) 4,330 1,384 751 70,000
- --------------------------------------------------------------------------------------------------------------------
Wendy L. Gramm 4,163 0 0 79,000
- --------------------------------------------------------------------------------------------------------------------
Kenneth T. King 4,151 1,407 789 77,050
- --------------------------------------------------------------------------------------------------------------------
John W. McIntyre 4,198 0 0 98,500
- --------------------------------------------------------------------------------------------------------------------
Larry Soll 4,198 0 0 96,000
- --------------------------------------------------------------------------------------------------------------------
Total $38,402 $7,851 $5,773 767,950
- --------------------------------------------------------------------------------------------------------------------
% of Net Assets 0.0050%(5) 0.0010%(5) 0.0035%(6)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The vice chairman of the board, the chairmen of the Fund's committees who
are Independent Directors, and the members of the Fund's committees who are
Independent Directors each receive compensation for serving in such capacities
in addition to the compensation paid to all Independent Directors.
(2) Represents estimated benefits accrued with respect to the Defined Benefit
Deferred Compensation Plan discussed below, and not compensation deferred at the
election of the directors.
(3) These amounts represent the Company's share of the estimated annual benefits
payable by the INVESCO Funds upon the directors' retirement, calculated using
the current method of allocating director compensation among the INVESCO Funds.
These estimated benefits assume retirement at age 72 and that the basic retainer
payable to the directors will be adjusted periodically for inflation, for
increases in the number of funds in the INVESCO Funds, and for other reasons
during the period in which retirement benefits are accrued on behalf of the
respective directors. This results in lower estimated benefits for directors who
<PAGE>
are closer to retirement and higher estimated benefits for directors who are
further from retirement. With the exception of Drs. Soll and Gramm, each of
these directors has served as a director of one or more of the funds in the
INVESCO Funds for the minimum five-year period required to be eligible to
participate in the Defined Benefit Deferred Compensation Plan. Although Mr.
McIntyre became eligible to participate in the Defined Benefit Deferred
Compensation Plan as of November 1, 1998, he will not be included in the
calculation of retirement benefits until November 1, 1999.
(4) Mr. Chabris retired as a director of the Company on September 30, 1998.
(5) Totals as a percentage of the Company's net assets as of July 31, 1999.
(6) Total as a percentage of the net assets of the INVESCO Complex as of
December 31, 1998.
Messrs. Brady and Williamson, as "interested persons" of the Company and the
other INVESCO Funds, receive compensation as officers or employees of INVESCO or
its affiliated companies, and do not receive any director's fees or other
compensation from the Company or the other funds in the INVESCO Funds for their
service as directors.
The boards of directors of the mutual funds in the INVESCO Funds have adopted a
Defined Benefit Deferred Compensation Plan (the "Plan") for the Independent
Directors of the funds. Under this Plan, each director who is not an interested
person of the funds (as defined in Section 2(a)(19) of the 1940 Act) and who has
served for at least five years (a "Qualified Director") is entitled to receive,
upon termination of service as a director (normally, at the retirement age of 72
or the retirement age of 73 or 74, if the retirement date is extended by the
boards for one or two years, but less than three years), continuation of payment
for one year (the "First Year Retirement Benefit") of the annual basic retainer
and annualized board meeting fees payable by the funds to the Qualified Director
at the time of his/her retirement (the "Basic Benefit"). Commencing with any
such director's second year of retirement, and commencing with the first year of
retirement of any director whose retirement has been extended by the board for
three years, a Qualified Director shall receive quarterly payments at an annual
rate equal to 50% of the Basic Benefit. These payments will continue for the
remainder of the Qualified Director's life or ten years, whichever is longer
(the "Reduced Benefit Payments"). If a Qualified Director dies or becomes
disabled after age 72 and before age 74 while still a director of the funds, the
First Year Retirement Benefit and Reduced Benefit Payments will be made to
him/her or to his/her beneficiary or estate. If a Qualified Director becomes
disabled or dies either prior to age 72 or during his/her 74th year while still
a director of the funds, the director will not be entitled to receive the First
Year Retirement Benefit; however, the Reduced Benefit Payments will be made to
his/her beneficiary or estate. The Plan is administered by a committee of three
directors who are also participants in the Plan and one director who is not a
Plan participant. The cost of the Plan will be allocated among the INVESCO Funds
in a manner determined to be fair and equitable by the committee. The Company
began making payments under the Plan to Mr. Chabris as of October 1, 1998. The
Company has no stock options or other pension or retirement plans for management
or other personnel and pays no salary or compensation to any of its officers. A
similar plan has been adopted by INVESCO Global Health Sciences Fund's board of
trustees. All trustees of INVESCO Global Health Sciences Fund are also directors
of the INVESCO Funds.
<PAGE>
The Independent Directors have contributed to the Plan, pursuant to which they
have deferred receipt of a portion of the compensation which they would
otherwise have been paid as directors of certain of the INVESCO Funds. Certain
of the deferred amounts have been invested in the shares of all INVESCO Funds,
except Funds offered by INVESCO Variable Investment Funds, Inc., in which the
directors are legally precluded from investing. Each Independent Director may,
therefore, be deemed to have an indirect interest in shares of each such INVESCO
Fund, in addition to any INVESCO Fund shares the Independent Director may own
either directly or beneficially.
CONTROL PERSONS AND PRINCIPAL SHAREHOLDER
As of September 30, 1999, the following persons owned more than 5% of the
outstanding shares of the Fund. This level of share ownership is considered to
be a "principal shareholder" relationship with the Fund under the 1940 Act.
Shares that are owned "of record" are held in the name of the person indicated.
Shares that are owned "beneficially" are held in another name, but the owner has
the full economic benefit of ownership of those shares:
Latin American Growth Fund
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage Owned
(Record/Beneficial)
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Charles Schwab & Co. Inc.
Special Custody Acct For The Record 34.51%
Exclusive Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
- ---------------------------------------------------------------------------------------------
</TABLE>
As of October 19, 1999, officers and directors of the Company, as a group,
beneficially owned less than 1% of the Fund's outstanding shares.
DISTRIBUTOR
INVESCO Distributors, Inc. ("IDI"), a wholly owned subsidiary of INVESCO, is the
distributor of the Fund. IDI receives no compensation and bears all expenses,
including the cost of printing and distributing prospectuses, incident to
marketing of the Fund's shares, except for such distribution expenses as are
paid out of Fund assets under the Company's plan of distribution which has been
adopted by the Fund pursuant to Rule 12b-1 under the 1940 Act.
<PAGE>
The Company has adopted a Plan and Agreement of Distribution (the "Plan") which
provides that the Fund will make monthly payments to IDI computed at an annual
rate no greater than 0.25% of the Fund's average net assets. These payments
permit IDI, at its discretion, to engage in certain activities and provide
services in connection with the distribution of the Fund's shares to investors.
Payments by the Fund under the Plan, for any month, may be made to compensate
IDI for permissible activities engaged in and services provided during the
rolling 12-month period in which that month falls.
A significant expenditure under the Plan is compensation paid to securities
companies and other financial institutions and organizations, which may include
INVESCO-affiliated companies, in order to obtain various distribution-related
and/or administrative services for the Fund. The Fund is authorized by the Plan
to use its assets to finance the payments made to obtain those services.
Payments will be made by IDI to broker-dealers who sell shares of the Fund and
may be made to banks, savings and loan associations and other depository
institutions. Although the Glass-Steagall Act limits the ability of certain
banks to act as underwriters of mutual fund shares, INVESCO does not believe
that these limitations would affect the ability of such banks to enter into
arrangements with IDI, but can give no assurance in this regard. However, to the
extent it is determined otherwise in the future, arrangements with banks might
have to be modified or terminated, and, in that case, the size of the 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.
During the period ended July 31, 1999, the Fund made payments to IDI under the
Plan in the amounts of $60,568. In addition, as of July 31, 1999, $6,125 of
additional distribution accruals had been incurred for the Fund and will be paid
during the fiscal period ended July 31, 2000. For the fiscal year ended July 31,
1999, allocation of 12b-1 amounts paid by the Fund for the following categories
of expenses were:
Advertising--$19,097;
Sales literature, printing, and postage--$10,196;
Direct Mail--$1,466;
Public Relations/Promotion--$2,792;
Compensation to securities dealers and other organizations--$17,554; and
Marketing personnel--$9,463
The services which are provided by securities dealers and other organizations
may vary by dealer but include, among other things, processing new shareholder
account applications, preparing and transmitting to the Company's Transfer Agent
computer-processable tapes of all Fund transactions by customers, serving as the
primary source of information to customers in answering questions concerning the
Fund, and assisting in other customer transactions with the Fund.
<PAGE>
The Plan provides that it shall continue in effect with respect to the Fund as
long as such continuance is approved at least annually by the vote of the board
of directors of the Company cast in person at a meeting called for the purpose
of voting on such continuance, including the vote of a majority of the
Independent Directors. The Plan can also be terminated at any time by the Fund,
without penalty, if a majority of the Independent Directors, or shareholders of
the Fund, vote to terminate the Plan. The Company may, in its absolute
discretion, suspend, discontinue or limit the offering of its shares at any
time. In determining whether any such action should be taken, the board of
directors intends to consider all relevant factors including, without
limitation, the size of the Fund, the investment climate for the Fund, general
market conditions, and the volume of sales and redemptions of the Fund's shares.
The Plan may continue in effect and payments may be made under the Plan
following any temporary suspension or limitation of the offering of Fund shares;
however, the Company is not contractually obligated to continue the Plan for any
particular period of time. Suspension of the offering of the Fund's shares would
not, of course, affect a shareholder's ability to redeem his or her shares.
So long as the Plan is in effect, the selection and nomination of persons to
serve as independent directors of the Company shall be committed to the
Independent Directors then in office at the time of such selection or
nomination. The Plan may not be amended to increase the amount of the Fund's
payments under the Plan 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 Independent Directors. Under the
agreement implementing the Plan, IDI or the Fund, the latter by vote of a
majority of the Independent Directors or the holders of a majority of the Fund's
outstanding voting securities, may terminate such agreement without penalty upon
30 days' written notice to the other party. No further payments will be made by
the Fund under the Plan in the event of its termination.
To the extent that the Plan constitutes a plan of distribution adopted pursuant
to Rule 12b-1 under the 1940 Act, it shall remain in effect as such, so as to
authorize the use of Fund assets in the amounts and for the purposes set forth
therein, notwithstanding the occurrence of an assignment, as defined by the 1940
Act, and rules thereunder. To the extent it constitutes an agreement pursuant to
a plan, the Fund's obligation to make payments to IDI shall terminate
automatically, in the event of such "assignment." In this event, the Fund may
continue to make payments pursuant to the Plan only upon the approval of new
arrangements regarding the use of the amounts authorized to be paid by the Fund
under the Plan. Such new arrangements must be approved by the directors,
including a majority of the Independent Directors, by a vote cast in person at a
meeting called for such purpose. These new arrangements might or might not be
with IDI. On a quarterly basis, the directors review information about the
distribution services that have been provided to the Fund and the 12b-1 fees
paid for such services. On an annual basis, the directors consider whether the
Plan should be continued and, if so, whether any amendment to the Plan,
including changes in the amount of 12b-1 fees paid by the Fund, should be made.
The only Company directors and interested persons, as that term is defined in
Section 2(a)(19) of the 1940 Act, who have a direct or indirect financial
interest in the operation of the Plan are the officers and directors of the
Company who are also officers either of IDI or other companies affiliated with
IDI. The benefits which the Company believes will be reasonably likely to flow
to the Fund and its shareholders under the Plan include the following:
<PAGE>
o Enhanced marketing efforts, if successful, should result in an increase in
net assets through the sale of additional shares and afford greater
resources with which to pursue the investment objectives of the Fund;
o 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; and
o Increased Fund assets may result in reducing each investor's share of
certain expenses through economies of scale (e.g., exceeding established
breakpoints in an advisory fee schedule and allocating fixed expenses over
a larger asset base), thereby partially offsetting the costs of the plan.
The positive effect which increased Fund assets will have on INVESCO's revenues
could allow INVESCO and its affiliated companies:
o To have greater resources to make the financial commitments necessary to
improve the quality and level of the Fund' shareholder services (in both
systems and personnel);
o To increase the number and type of mutual funds available to investors from
INVESCO and its affiliated companies (and support them in their infancy),
and thereby expand the investment choices available to all shareholders;
and
o To acquire and retain talented employees who desire to be associated with a
growing organization.
OTHER SERVICE PROVIDERS
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 950 Seventeenth Street, Suite 2500, Denver,
Colorado, are the independent accountants of the Company. The independent
accountants are responsible for auditing the financial statements of the Fund.
CUSTODIAN
State Street Bank and Trust Company, P.O. Box 351, Boston, Massachusetts, is the
custodian of the cash and investment securities of the Company. The custodian is
also responsible for, among other things, receipt and delivery of the Fund's
investment securities in accordance with procedures and conditions specified in
the custody agreement with the Company. The custodian is authorized to establish
separate accounts in foreign countries and to cause foreign securities owned by
the Fund to be held outside the United States in branches of U.S. banks and, to
the extent permitted by applicable regulations, in certain foreign banks and
securities depositories.
<PAGE>
TRANSFER AGENT
INVESCO, 7800 E. Union Avenue, Denver, Colorado is the Company's transfer agent,
registrar, and dividend disbursing agent. Services provided by INVESCO include
the issuance, cancellation and transfer of shares of the Fund, and the
maintenance of records regarding the ownership of such shares.
LEGAL COUNSEL
The firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., 2nd
Floor, Washington, D.C., is legal counsel for the Company. The firm of Moye,
Giles, O'Keefe, Vermeire & Gorrell LLP, 1225 17th Street, Suite 2900, Denver,
Colorado, acts as special counsel to the Company.
BROKERAGE ALLOCATION AND OTHER PRACTICES
As the investment adviser to the Fund, INVESCO places orders for the purchase
and sale of securities with broker-dealers based upon an evaluation of the
financial responsibility of the brokers and dealers and the ability of the
broker-dealers to effect transactions at the best available prices.
While INVESCO seeks reasonably competitive commission rates, the Fund does not
necessarily pay the lowest commission or spread available. INVESCO is permitted
to, and does, consider qualitative factors in addition to price in the selection
of brokers. Among other things, INVESCO considers the quality of executions
obtained on the Fund's portfolio transactions, viewed in terms of the size of
transactions, prevailing market conditions in the security purchased or sold,
and general economic and market conditions. INVESCO has found that a broker's
consistent ability to execute transactions is at least as important as the price
the broker charges for those services.
In seeking to ensure that the commissions charged the Fund are consistent with
prevailing and reasonable commissions, INVESCO monitors brokerage industry
practices and commissions charged by broker-dealers on transactions effected for
other institutional investors like the Fund.
Consistent with the standard of seeking to obtain favorable execution on
portfolio transactions, INVESCO may select brokers that provide research
services to INVESCO and the Company, as well as other INVESCO mutual funds and
other accounts managed by INVESCO. Research services include statistical and
analytical reports relating to issuers, industries, securities and economic
factors and trends, which may be of assistance or value to INVESCO in making
informed investment decisions. Research services prepared and furnished by
brokers through which the Fund effects securities transactions may be used by
INVESCO in servicing all of its accounts and not all such services may be used
by INVESCO in connection with the Fund. Conversely, the Fund receives benefits
of research acquired through the brokerage transactions of other clients of
INVESCO.
In order to obtain reliable trade execution and research services, INVESCO may
utilize brokers that charge higher commissions than other brokers would charge
for the same transaction. This practice is known as "paying up." However, even
when paying up, INVESCO is obligated to obtain favorable execution of the Fund's
transactions.
<PAGE>
Portfolio transactions also may be effected through broker-dealers that
recommend the Fund to their clients, or that act as agent in the purchase of the
Fund's shares for their clients. When a number of broker-dealers can provide
comparable best price and execution on a particular transaction, INVESCO may
consider the sale of the Fund's shares by a broker-dealer in selecting among
qualified broker-dealers.
Certain of the INVESCO Funds utilize fund brokerage commissions to pay custody
fees for the respective fund. This program requires that the funds participating
receive favorable execution.
The aggregate dollar amount of brokerage commissions paid by the Fund for the
fiscal years ended July 31, 1999, 1998 and 1997 were:
1999 $135,557
1998 $187,853
1997 $400,001
For the fiscal year ended July 31, 1999, brokers providing research services
received $0 in commissions on portfolio transactions effected for the Fund. The
aggregate dollar amount of such portfolio transactions was $0. Commissions
totaling $0 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 July 31, 1999.
At July 31, 1999, the Fund held debt securities of its regular brokers or
dealers, or their parents, as follows:
- --------------------------------------------------------------------------------
Fund Broker or Dealer Value of Securities
at July 31, 1999
- --------------------------------------------------------------------------------
Latin American Growth None
- --------------------------------------------------------------------------------
Neither INVESCO nor any affiliate of INVESCO receives any brokerage commissions
on portfolio transactions effected on behalf of the Fund, and there is no
affiliation between INVESCO or any person affiliated with INVESCO or the Fund
and any broker or dealer that executes transactions for the Fund.
CAPITAL STOCK
The Company is authorized to issue up to eight hundred million shares of common
stock with a par value of $0.01 per share. As of September 30, 1999, 2,599,215
shares of the Fund were outstanding.
<PAGE>
All shares of the Fund are of one class with equal rights as to voting,
dividends and liquidation. All shares issued and outstanding are, and all shares
offered hereby when issued will be, fully paid and nonassessable. The board of
directors has the authority to designate additional classes of common stock
without seeking the approval of shareholders and may classify and reclassify any
authorized but unissued shares.
Shares have no preemptive rights and are freely transferable on the books of the
Fund.
All shares of the Company have equal voting rights based on one vote for each
share owned. The Company is not generally required and does not expect to hold
regular annual meetings of shareholders. However, when requested to do so in
writing by the holders of 10% or more of the outstanding shares of the Company
or as may be required by applicable law or the Company's Articles of
Incorporation, the board of directors will call special meetings of
shareholders.
Directors may be removed by action of the holders of a majority of the
outstanding shares of the Company. The Fund will assist shareholders in
communicating with other shareholders as required by the 1940 Act.
Fund shares have noncumulative voting rights, which means that the holders of a
majority of the shares of the Company voting for the election of directors of
the Company can elect 100% of the directors if they choose to do so. If that
occurs, the holders of the remaining shares voting for the election of directors
will not be able to elect any person or persons to the board of directors.
Directors may be removed by action of the holders of a majority of the
outstanding shares of the Company.
TAX CONSEQUENCES OF OWNING SHARES OF THE FUND
The Fund intends to continue to conduct its business and satisfy the applicable
diversification of assets, distribution and source of income requirements to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. The Fund qualified as a regulated investment
company and intends to continue to qualify during its current fiscal year. It is
the policy of the Fund to distribute all investment company taxable income and
net capital gains. As a result of this policy and the Fund's qualification as
regulated investment companies, it is anticipated that the Fund will not pay
federal income or excise taxes and that the Fund will be accorded conduit or
"pass through" treatment for federal income tax purposes. Therefore, any taxes
that the Fund would ordinarily owe are paid by its shareholders on a pro-rata
basis. If the Fund does not distribute all of its net investment income or net
capital gains, it will be subject to income and excise tax on the amount that is
not distributed. If the Fund does not qualify as a regulated investment company,
it will be subject to corporate tax on its net investment income and net capital
gains at the corporate tax rates.
Dividends paid by 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 taxable for federal income tax purposes 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. Dividends eligible for the dividends received
deduction will be limited to the aggregate amount of qualifying dividends that
the Fund derives from its portfolio investments.
<PAGE>
The Fund realizes a capital gain or loss when it sells a portfolio security for
more or less than it paid for that security. Capital gains and losses are
divided into short-term and long-term, depending on how long the Fund held the
security which gave rise to the gain or loss. If the security was held one year
or less the gain or loss is considered short-term, while holding a security for
more than one year will generate a long-term gain or loss. A capital gain
distribution consists of long-term capital gains which are taxed at the capital
gains rate. Short-term capital gains are included with income from dividends and
interest as ordinary income and are paid to shareholders as dividends, as
discussed above. If total long-term gains on sales exceed total short-term
losses, including any losses carried forward from previous years, the Fund will
have a net capital gain. Distributions by the Fund of net capital gains are, for
federal income tax purposes, taxable to the shareholder as a long-term capital
gain regardless of how long a shareholder has held shares of the Fund. Such
distributions are not eligible for the dividends received deduction. After the
end of each calendar year, the Fund sends information to shareholders regarding
the amount and character of distributions paid during the year.
All dividends and other distributions are taxable income to the shareholder,
whether or not such dividends and distributions are reinvested in additional
shares or paid in cash. If the net asset value of the Fund's shares should be
reduced below a shareholder's cost as a result of a distribution, such
distribution would be taxable to the shareholder although a portion would be a
return of invested capital. The net asset value of shares of the Fund reflects
accrued net investment income and undistributed realized capital and foreign
currency gains; therefore, when a distribution is made, the net asset value is
reduced by the amount of the distribution. If shares of the Fund are purchased
shortly before a distribution, the full price for the shares will be paid and
some portion of the price may then be returned to the shareholder as a taxable
dividend or capital gain. However, the net asset value per share will be reduced
by the amount of the distribution, which would reduce any gain (or increase any
loss) for tax purposes on any subsequent redemption of shares.
If it invests in foreign securities, 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 and makes the election to enable it to pass these taxes
through to shareholders for use by them as a foreign tax credit or deduction.
Tax conventions between certain countries and the United States may reduce or
eliminate such taxes.
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 value of at least 50% of its assets produce, or are held for the
production of, passive income. The Fund intends to "mark to market" its stock in
any PFIC. In this context, "marking to market" means including in ordinary
income for each taxable year the excess, if any, of the fair market value of the
PFIC stock over the Fund's adjusted basis in the PFIC stock as of the end of the
year. In certain circumstances, the Fund will also be allowed to deduct from
ordinary income the excess, if any, of its adjusted basis in PFIC stock over the
fair market value of the PFIC stock as of the end of the year. The deduction
will only be allowed to the extent of any PFIC mark-to-market gains recognized
as ordinary income in prior years. The Fund's adjusted tax basis in each PFIC
stock for which it makes this election will be adjusted to reflect the amount of
income included or deduction taken under the election.
<PAGE>
Gains or losses (1) from the disposition of foreign currencies, (2) from the
disposition of debt securities denominated in foreign currencies that are
attributable to fluctuations in the value of the foreign currency between the
date of acquisition of each security and the date of disposition, and (3) that
are attributable to fluctuations in exchange rates that occur between the time
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.
INVESCO may provide Fund shareholders with information concerning the average
cost basis of their shares in order to help them prepare their tax returns. This
information is intended as a convenience to shareholders, and will not be
reported to the Internal Revenue Service (the "IRS"). The IRS permits the use of
several methods to determine the cost basis of mutual fund shares. The cost
basis information provided by INVESCO will be computed using the single-category
average cost method, although neither INVESCO nor the Fund recommend any
particular method of determining cost basis. Other methods may result in
different tax consequences. If you have reported gains or losses for the Fund in
past years, you must continue to use the method previously used, unless you
apply to the IRS for permission to change methods.
If you sell Fund shares at a loss after holding them for six months or less,
your loss will be treated as long-term (instead of short-term) capital loss to
the extent of any capital gain distributions that you may have received on those
shares.
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 its net capital gains for the one-year period ending on
October 31 of that year, plus certain other amounts.
You should consult your own tax adviser regarding specific questions as to
federal, state and local taxes. Dividends and capital gain distributions will
generally be subject to applicable state and local taxes. Qualification as a
regulated investment company under the Internal Revenue Code of 1986, as
amended, for income tax purposes does not entail government supervision of
management or investment policies.
PERFORMANCE
To keep shareholders and potential investors informed, INVESCO will occasionally
advertise the Fund's total return for one-, five-, and ten-year periods (or
since inception). Total return figures show the rate of return on a $10,000
investment in the Fund, assuming reinvestment of all dividends and capital gain
distributions for the periods cited.
<PAGE>
Cumulative total return shows the actual rate of return on an investment for the
period cited; average annual total return represents the average annual
percentage change in the value of an investment. Both cumulative and average
annual total returns tend to "smooth out" fluctuations in the Fund's investment
results, because they do not show the interim variations in performance over the
periods cited. More information about the Fund's recent and historical
performance is contained in the Company's Annual Report to Shareholders. You can
get a free copy by calling or writing to INVESCO using the phone number or
address on the back cover of the Fund's Prospectus.
When we quote mutual fund rankings published by Lipper Inc., we may compare the
Fund to others in its appropriate Lipper category, as well as the broad-based
Lipper general fund groupings. These rankings allow you to compare the Fund to
its peers. Other independent financial media also produce performance- or
service-related comparisons, which you may see in our promotional materials.
Performance figures are based on historical earnings and are not intended to
suggest future performance.
Average annual total return performance for the one-, five-, and ten-year
periods (or since inception) ended July 31, 1999 was:
1 Year 5 Year Since Inception
(24.87)% N/A 0.92%(1)
(1) The Fund commenced operations on February 15, 1995.
Average annual total return performance for each of the periods indicated was
computed by finding the average annual compounded rates of return that would
equate the initial amount invested to the ending redeemable value, according to
the following formula:
P(1 + T)n = ERV
where: P = a hypothetical initial payment of $10,000
T = average annual total return
n = number of years
ERV = ending redeemable value of initial payment
The average annual total return performance figures shown above were determined
by solving the above formula for "T" for each time period indicated.
In conjunction with performance reports, comparative data between 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.
<PAGE>
In conjunction with performance reports and/or analyses of shareholder services
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, S&P,
Lipper, Inc., Lehman Brothers, National Association of Securities Dealers
Automated Quotations, Frank Russell Company, Value Line Investment Survey, the
American Stock Exchange, Morgan Stanley Capital International, Wilshire
Associates, the Financial Times Stock Exchange, the New York Stock Exchange, the
Nikkei Stock Average and Deutcher Aktienindex, all of which are unmanaged market
indicators. In addition, rankings, ratings, and comparisons of investment
performance and/or assessments of the quality of shareholder service made by
independent sources may be used in advertisements, sales literature or
shareholder reports, including reprints of, or selections from, editorials or
articles about the Fund. These sources utilize information compiled (i)
internally; (ii) by Lipper Inc.; or (iii) by other recognized analytical
services. The Lipper Inc. mutual fund rankings and comparisons which may be used
by the Fund in performance reports will be drawn from the Latin American Funds
mutual fund groupings, in addition to the broad-based Lipper general fund
groupings.
Sources for Fund performance information and articles about the Fund include,
but are not limited to, the following:
AMERICAN ASSOCIATION OF INDIVIDUAL INVESTORS' JOURNAL
BANXQUOTE
BARRON'S
BUSINESS WEEK
CDA INVESTMENT TECHNOLOGIES
CNBC
CNN
CONSUMER DIGEST
FINANCIAL TIMES
FINANCIAL WORLD
FORBES
FORTUNE
IBBOTSON ASSOCIATES, INC.
INSTITUTIONAL INVESTOR
INVESTMENT COMPANY DATA, INC.
INVESTOR'S BUSINESS DAILY
KIPLINGER'S PERSONAL FINANCE
LIPPER INC.'S MUTUAL FUND PERFORMANCE ANALYSIS
MONEY
MORNINGSTAR
MUTUAL FUND FORECASTER
NO-LOAD ANALYST
NO-LOAD FUND X
PERSONAL INVESTOR
SMART MONEY
THE NEW YORK TIMES
<PAGE>
THE NO-LOAD FUND INVESTOR
U.S. NEWS AND WORLD REPORT
UNITED MUTUAL FUND SELECTOR
USA TODAY
THE WALL STREET JOURNAL
WIESENBERGER INVESTMENT COMPANIES SERVICES
WORKING WOMAN
WORTH
FINANCIAL STATEMENTS
The financial statements for the Fund for the fiscal year ended July 31, 1999,
are incorporated herein by reference from INVESCO Specialty Funds, Inc.'s Annual
Report to Shareholders dated July 31, 1999.
<PAGE>
APPENDIX A
BOND RATINGS
The following is a description of Moody's and S&P's bond ratings:
Moody's Corporate Bond Ratings
Aaa - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa - Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group, they comprise what are generally known as high grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the long
term risk appear somewhat larger than in Aaa securities.
A - Bonds rated A possess many favorable investment attributes, and are to be
considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds rated Baa are considered as medium grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba - Bonds rated Ba are judged to have speculative elements. Their future cannot
be considered as well assured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class.
B - Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or maintenance of other terms of
the contract over any longer period of time may be small.
Caa - Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
<PAGE>
S&P Corporate Bond Ratings
AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB - Bonds rated BBB are regarded as having an adequate capability to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
BB - Bonds rated BB have less near-term vulnerability to default than other
speculative issues. However, they face major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments.
B - Bonds rated B have a greater vulnerability to default but currently have the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal.
CCC - Bonds rated CCC have a currently identifiable vulnerability to default and
are dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, they are not likely to have
the capacity to pay interest and repay principal.
<PAGE>
PART C. OTHER INFORMATION
ITEM 23. Exhibits
(a) Articles of Incorporation filed April 2, 1993.(2)
(1) Articles Supplementary to the Fund's Articles of
Incorporation filed November 17, 1997.(4)
(2) Articles Supplementary to Articles of Incorporation
filed December 7, 1998.(6)
(3) Form of Articles of Transfer of INVESCO Specialty Funds,
Inc. and INVESCO International Funds, Inc.
(b) Bylaws as of July 21, 1993.(3)
(c) Not applicable.
(d) (1) Investment Advisory Agreement dated February 28, 1997.(2)
(a) Amendment to Advisory Agreement dated January 30,
1998.(4)
(b) Amendment to Advisory Agreement dated September 18,
1998.(6)
(c) Form of Amendment to Advisory Agreement dated
___________, 1999.
(2) (a) Sub-advisory Agreement dated February 28, 1998
between INVESCO Funds Group, Inc. and INVESCO Asset
Management Limited with respect to European, Pacific
Basin and International Funds.(2)
(b) Sub-advisory Agreement dated January 30, 1998 between
INVESCO Funds Group, Inc. and INVESCO Asset Management
Limited with respect to Emerging Markets Fund.(4)
(c) Sub-advisory Agreement dated September 18, 1998
between INVESCO Funds Group, Inc. and INVESCO Global
Asset Management (N.A.) with respect to International
Blue Chip Fund.(6)
(d) Form of Sub-advisory Agreement dated ________, 1999,
between INVESCO Funds Group, Inc. and INVESCO Asset
Management Limited with respect to Latin American Growth
Fund.
(e) (1) General Distribution Agreement dated February 28,
1997.(2)
(2) Distribution Agreement between Registrant and INVESCO
Distributors, Inc. dated September 30, 1997.(3)
(f) (1) Defined Benefit Deferred Compensation Plan for
Non-Interested Directors and Trustees.(5)
<PAGE>
(2) Amended Defined Benefit Deferred Compensation Plan
for Non-Interested Directors and Trustees.(7)
(g) Custody Agreement between Registrant and State Street
Bank and Trust Company dated July 1, 1993.(3)
(1) Amendment to Custody Agreement dated October 25,
1995.(1)
(2) Data Access Services Addendum.(3)
(3) Additional Fund Letter dated November 13, 1994.(4)
(4) Additional Fund Letter dated July 23, 1998.(6)
(h) (1) Transfer Agency Agreement dated February 28, 1997.(2)
(2) Administrative Services Agreement between the Fund and
INVESCO Funds Group, Inc. dated February 28, 1997.(2)
(i) Opinion and consent of counsel as to the legality of the
securities being registered, indicating whether they will, when
sold, be legally issued, fully paid and non-assessable dated May
21, 1993.(3)
(j) Consent of Independent Accountants.
(k) Not applicable.
(l) Not applicable.
(m) (1) Plan and Agreement of Distribution dated November 1, 1997
adopted pursuant to Rule 12b-1 under the Investment Company
Act of 1940.(3)
(n) Not applicable.
(1) Previously filed with Post-Effective Amendment No. 3 to the Registration
Statement on December 22, 1995, and incorporated by reference herein.
(2) Previously filed with Post-Effective Amendment No. 4 to the Registration
Statement on February 25, 1997 and incorporated by reference herein.
(3) Previously filed with Post-Effective Amendment No. 5 to the Registration
Statement on November 17, 1997, and incorporated by reference herein.
(4) Previously filed with Post-Effective Amendment No. 6 to the Registration
Statement on February 26, 1998, and incorporated by reference herein.
(5) Previously filed with Post-Effective Amendment No. 7 to the Registration
Statement on July 10, 1998, and incorporated by reference herein.
<PAGE>
(6) Previously filed with Post-Effective Amendment No. 8 to the Registration
Statement on December 30, 1998, and incorporated by reference herein.
(7) Previously filed with Post-Effective Amendment No. 9 to the Registration
Statement on March 1, 1999, and incorporated by reference herein.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND
No person is presently controlled by or under common control with the Fund.
ITEM 25. INDEMNIFICATION
Indemnification provisions for officers, directors and employees of Registrant
are set forth in Article X of the Amended Bylaws and Article Seventh (3) of the
Articles of Restatement of the Articles of Incorporation, and are hereby
incorporated by reference. See Item 24(b)(1) and (2) above. Under these
Articles, directors and officers will be indemnified to the fullest extent
permitted to directors by the Maryland General Corporation Law, subject only to
such limitations as may be required by the Investment Company Act of 1940, as
amended, and the rules thereunder. Under the Investment Company Act of 1940,
Fund directors and officers cannot be protected against liability to the Fund or
its shareholders to which they would be subject because of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties of their office.
The Fund also maintains liability insurance policies covering its directors and
officers.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
See "Fund Management" in the Fund's Prospectus and "Management of the Fund" in
the Statement of Additional Information for information regarding the business
of the investment adviser, INVESCO.
Following are the names and principal occupations of each director and officer
of the investment adviser, INVESCO. Certain of these persons hold positions with
IDI, a subsidiary of INVESCO.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Name Position with Adviser Principal Occupation and Company Affiliation
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mark H. Williamson Chairman, Director and President & Chief Executive Officer
Officer INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------------------------------------------
Raymond R.Cunningham Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------------------------------------------
William J. Galvin, Jr. Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------------------------------
Ronald L. Grooms Officer & Director Senior Vice President & Treasurer
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Richard W. Healey Officer & Director Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
William R. Keithler Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Charles P. Mayer Officer & Director Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Timothy J. Miller Officer & Director Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Donovan J. (Jerry) Paul Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Glen A. Payne Officer Senior Vice President, Secretary
& General Counsel
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
John R. Schroer, II Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Marie E. Aro Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Ingeborg S. Cosby Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------------------------------
Stacie Cowell Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Dawn Daggy-Mangerson Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Elroy E. Frye, Jr. Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Linda J. Gieger Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Mark D. Greenberg Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Brian B. Hayward Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Richard R. Hinderlie Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Thomas M. Hurley Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Patricia F. Johnston Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Campbell C. Judge Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Peter M. Lovell Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
James F. Lummanick Officer Vice President & Assistant
General Counsel
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
<PAGE>
- -----------------------------------------------------------------------------------------------------
Thomas A. Mantone, Jr. Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Trent E. May Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Corey M. McClintock Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Douglas J. McEldowney Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Frederick R. (Fritz) Meyer Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Stephen A. Moran Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Jeffrey G. Morris Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Laura M. Parsons Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Jon B. Pauley Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Pamela J. Piro Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Anthony R. Rogers Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------------------------------
Gary L. Rulh Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
James B. Sandidge Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
John S. Segner Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Terri B. Smith Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Tane T. Tyler Officer Vice President &
Assistant General Counsel
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Thomas R. Wald Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Alan I. Watson Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Judy P. Wiese Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Thomas H. Scanlan Officer Regional Vice President
INVESCO Funds Group, Inc.
12028 Edgepark Court
Potomac, MD 20854
- ------------------------------------------------------------------------------------------------------
Reagan A. Shopp Officer Regional Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Michael D. Legoski Officer Assistant Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------------------------------
Donald R. Paddack Officer Assistant Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Kent T. Schmeckpeper Officer Assistant Vice President
Account Relationship Manager
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ------------------------------------------------------------------------------------------------------
Jeraldine E. Kraus Officer Assistant Secretary
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
ITEM 27. (A) PRINCIPAL UNDERWRITERS
INVESCO Bond Funds, Inc.
INVESCO Combination Stock & Bond Funds, Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Sector Funds, Inc.
INVESCO Specialty Funds, Inc.
INVESCO Stock Funds, Inc.
INVESCO Variable Investment Funds, Inc.
(b)
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter the Company
- ------------------ ------------ -------------
William J. Galvin, Jr. Senior Vice Assistant Secretary
7800 E. Union Avenue President &
Denver, CO 80237 Asst. Secretary
Ronald L. Grooms Senior Vice Treasurer,
7800 E. Union Avenue President, Chief Fin'l
Denver, CO 80237 Treasurer, & Officer, and
Director Chief Acctg.
Off.
Richard W. Healey Senior Vice
7800 E. Union Avenue President &
Denver, CO 80237 Director
Charles P. Mayer Director
7800 E. Union Avenue
Denver, CO 80237
Timothy J. Miller Director
7800 E. Union Avenue
Denver, CO 80237
<PAGE>
Glen A. Payne Senior Vice Secretary
7800 E. Union Avenue President,
Denver, CO 80237 Secretary &
General Counsel
Pamela J. Piro Assistant Treasurer Assistant Treasurer
Assistant Treasurer
7800 E. Union Avenue
Denver, CO 80237
Judy P. Wiese Assistant Secretary Assistant Secretary
7800 E. Union Avenue
Denver, CO 80237
Mark H. Williamson Chairman of the Board, President,
7800 E. Union Avenue President, & Chief CEO & Director
Denver, CO 80237 Executive Officer
(c) Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
Mark H. Williamson
7800 E. Union Avenue
Denver, CO 80237
ITEM 29. MANAGEMENT SERVICES
Not applicable.
ITEM 30. UNDERTAKINGS
Not applicable
<PAGE>
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Fund has duly caused this post-effective amendment to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Denver, County of Denver, and State of Colorado, on the 26th day of
October, 1999.
Attest: INVESCO International Funds, Inc.
/s/ Glen A. Payne /s/ Mark H. Williamson
- ------------------------- ----------------------------------
Glen A. Payne, Secretary Mark H. Williamson, President
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities and
on the date indicated.
/s/ Mark H. Williamson /s/ Lawrence H. Budner*
- ---------------------------------- ----------------------------------
Mark H. Williamson, President & Lawrence H. Budner, Director
Director (Chief Executive Officer)
/s/ Ronald L. Grooms /s/ John W. McIntyre*
- ---------------------------------- ----------------------------------
Ronald L. Grooms, Treasurer John W. McIntyre, Director
(Chief Financial and Accounting
Officer)
/s/ Victor L. Andrews* /s/ Fred A. Deering*
- ---------------------------------- ----------------------------------
Victor L. Andrews, Director Fred A. Deering, Director
/s/ Bob R. Baker* /s/ Larry Soll*
- ---------------------------------- ----------------------------------
Bob R. Baker, Director Larry Soll, Director
/s/ Charles W. Brady* /s/ Kenneth T. King*
- ---------------------------------- ----------------------------------
Charles W. Brady, Director Kenneth T. King, Director
/s/ Wendy L. Gramm*
- ----------------------------------
Wendy L. Gramm, Director
By ________________________________ By /s/ Glen A. Payne
-----------------------------
Edward F. O'Keefe Glen A. Payne
Attorney in Fact Attorney in Fact
* Original Powers of Attorney authorizing Edward F. O'Keefe and Glen A. Payne,
and each of them, to execute this post-effective amendment to the Registration
Statement of the Registrant on behalf of the above-named directors and officers
of the Registrant have been filed with the Securities and Exchange Commission on
June 29, 1993, February 24, 1994, February 17, 1995, December 22, 1995, November
17, 1997.
<PAGE>
Exhibit Index
Page in
Exhibit Number Registration Statement
- -------------- ----------------------
a(3) 87
d(1)(c) 90
d(2)(d) 91
j 100
FORM OF
ARTICLES OF TRANSFER
OF
INVESCO SPECIALTY FUNDS, INC.
AND
INVESCO INTERNATIONAL FUNDS, INC.
These Articles of Transfer are entered into and effective as of October
29, 1999 pursuant to the provisions of Section 3-109 of the Corporations and
Associations Article of the Annotated Code of Maryland, by and between the
undersigned corporation, INVESCO International Funds, Inc., a Maryland
corporation, and the undersigned corporation, INVESCO Specialty Funds, Inc., a
Maryland corporation on behalf of its series, INVESCO Latin American Growth Fund
("Fund"), with respect to the transfer of all the assets and liabilities of the
Fund in exchange for shares of common stock in INVESCO Latin American Growth
Fund, a series of INVESCO International Funds, Inc. in accordance with an
Agreement and Plan of Conversion and Termination made as of March 21, 1999
("Plan"), a copy of which is attached hereto as Exhibit A and incorporated
herein by reference.
FIRST: INVESCO Specialty Funds, Inc. - INVESCO Latin American Growth Fund
agrees to transfer all of its property and assets to INVESCO International
Funds, Inc. in accordance with the Plan.
SECOND: INVESCO International Funds, Inc. is a corporation incorporated
under the laws of the State of Maryland.
THIRD: INVESCO Latin American Growth Fund is a series of INVESCO Specialty
Funds, Inc., a corporation organized under the laws of the State of Maryland.
FOURTH: The address and principal place of business of INVESCO Specialty
Funds, Inc. is:
7800 East Union Avenue
Denver, Colorado 80237
FIFTH: The principal office of INVESCO International Funds, Inc. in the
State of Maryland is:
c/o The Corporation Trust Incorporated
32 South Street
Baltimore, Maryland 21202
SIXTH: The principal office of INVESCO Specialty Funds, Inc. in the State
of Maryland is:
c/o The Corporation Trust Incorporated
32 South Street
Baltimore, Maryland 21202
SEVENTH: Neither INVESCO International Funds, Inc. nor INVESCO Specialty
Funds, Inc. owns an interest in land located in the State of Maryland.
EIGHTH: The terms and conditions of the transfer as set forth in the Plan
and incorporated by reference into these Articles were advised, authorized, and
approved in the manner and by any vote required by INVESCO International Fund,
Inc.'s Articles of Incorporation, as amended, and the Maryland General
Corporation Law, and INVESCO Specialty Funds, Inc.'s Articles of Incorporation,
as amended, and the Maryland General Corporation Law. The Plan was approved by
INVESCO Specialty Funds, Inc.'s Board of Directors at a meeting on August 5,
1998, and the holders of a majority of the outstanding shares of INVESCO
Specialty Funds, Inc.'s common stock entitled to vote at a meeting of
shareholders on May 28, 1999. The Plan was approved by INVESCO International
Funds, Inc.'s Board of Directors at a meeting on August 5, 1998; no approval by
shareholders of INVESCO International Funds, Inc. was required.
<PAGE>
NINTH: The nature and amount of the consideration paid by INVESCO
International Funds, Inc. for the transfer of assets of INVESCO Latin American
Growth Fund to INVESCO International Funds, Inc. has been determined in
accordance with the terms and conditions of the Plan.
IN WITNESS WHEREOF, INVESCO International Funds, Inc. and INVESCO
Specialty Funds, Inc., on behalf of INVESCO Latin American Growth Fund, has each
caused these presents to be signed in its name and on its behalf by the
undersigned officers.
INVESCO INTERNATIONAL FUNDS,
INC., on behalf of
INVESCO Latin American Growth Fund
Attest:
By: By:
---------------------------- ---------------------------------
Glen A. Payne, Secretary Mark H. Williamson, President
INVESCO SPECIALTY FUNDS,
INC., on behalf of
INVESCO Latin American Growth Fund
Attest:
By: By:
---------------------------- ---------------------------------
Glen A. Payne, Secretary Ronald L. Grooms, Treasurer & Chief
Financial & Accounting Officer
THE UNDERSIGNED, the President of INVESCO International Funds, Inc., a
corporation organized under the laws of the State of Maryland on April 2, 1993,
who executed on behalf of said Corporation the foregoing Articles of Transfer of
which this certificate is made a part, hereby acknowledges, in the name and on
behalf of said Corporation, the foregoing Articles of Transfer to be the
corporate act of said Corporation and further certifies that to the best of
his/her knowledge, information and belief, the matters and facts set forth
therein with respect to the approval thereof are true in all material respects,
under the penalties of perjury.
INVESCO INTERNATIONAL
FUNDS, INC.
-----------------------------
Mark H. Williamson, President
<PAGE>
THE UNDERSIGNED, the Treasurer and Chief Financial and Accounting Officer
of INVESCO Specialty Funds, Inc., a corporation organized under the laws of the
State of Maryland on April 12, 1994, who executed on behalf of said Corporation
the foregoing Articles of Transfer of which this certificate is made a part,
hereby acknowledges, in the name and on behalf of said Corporation, the
foregoing Articles of Transfer to be the corporate act of said Corporation and
further certifies that to the best of his/her knowledge, information and belief,
the matters and facts set forth therein with respect to the approval thereof are
true in all material respects, under the penalties of perjury.
INVESCO SPECIALTY FUNDS, INC.
-----------------------------------
Ronald L. Grooms, Treasurer & Chief
Financial & Accounting Officer
Form of
Amendment to Investment Advisory Agreement
This is an amendment to the Investment Advisory Agreement made and entered
into between INVESCO International Funds, Inc., a Maryland corporation (the
"Company") and INVESCO Funds Group, Inc., a Delaware corporation ("IFG"), as of
the 29th day of October, 1999 (the "Agreement").
WHEREAS, the Company desires to have IFG perform investment advisory,
statistical, research, and certain administrative and clerical services with
respect to the management of the assets of the Company allocable to the INVESCO
Latin American Growth Fund, and IFG is willing and able to perform such services
on the terms and conditions as set forth in the Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in the Agreement, it is agreed that the terms and conditions of the
Agreement shall be applicable to the Company's assets allocable to the INVESCO
Latin American Growth Fund, to the same extent as if the INVESCO Latin American
Growth Fund was to be added to the definition of "Funds" as utilized in the
Agreement, and that INVESCO Latin American Growth Fund shall pay IFG a fee for
services provided to them by IFG under the Agreement as follows: 0.75% on the
first $500 million of the Fund's average net assets; 0.65% on the next $500
million of the Fund's average net assets; 0.55% of the Fund's average net assets
from $1 billion; 0.45% of the Fund's average net assets from $2 billion; 0.40%
of the Fund's average net assets from $4 billion; 0.375% of the Fund's average
net assets from $6 billion; and 0.35% of the Fund's average net assets from $8
billion.
IN WITNESS WHEREOF, the parties have executed this Agreement on this 29th
day of October, 1999.
INVESCO INTERNATIONAL FUNDS, INC.
By:
---------------------------------------
ATTEST: Mark H. Williamson, President
- -------------------------
Glen A. Payne, Secretary
INVESCO FUNDS GROUP, INC.
By:
---------------------------------------
ATTEST: Ronald L. Grooms, Senior Vice President
- ---------------------------
Glen A. Payne, Secretary
FORM OF
SUB-ADVISORY AGREEMENT
AGREEMENT made this 29th day of October, 1999, by and between INVESCO
Funds Group, Inc. ("INVESCO"), a Delaware corporation, and INVESCO Asset
Management Limited, a United Kingdom corporation ("the Sub-Adviser").
W I T N E S S E T H:
WHEREAS, INVESCO INTERNATIONAL FUNDS, INC. (the "Company") is engaged in
business as a diversified, open-end management investment company registered
under the Investment Company Act of 1940, as amended (hereinafter referred to as
the "Investment Company Act") and has one class of shares (the "Shares"), which
is divided into five series, each representing an interest in a separate
portfolio of investments, with one such series being designated the INVESCO
Latin American Growth Fund, (the "Fund"); and
WHEREAS, INVESCO and the Sub-Adviser are engaged in rendering investment
advisory services and are registered as investment advisers under the Investment
Advisers Act of 1940; and
WHEREAS, the Sub-Adviser is a member of the Investment Management
Regulatory Organization Limited (AIMRO@) in the United Kingdom and as such is
regulated by IMRO in the conduct of its business; further the Sub-Adviser shall
provide services to INVESCO as a "Business Investor" as defined under the Rules
of IMRO and as such certain rules designed for the protection of private
customers shall not apply; and
WHEREAS, INVESCO has entered into an Investment Advisory Agreement with
the Company (the "INVESCO Investment Advisory Agreement"), pursuant to which
INVESCO is required to provide investment advisory services to the Company, and,
upon receipt of written approval of the Company, is authorized to retain
companies which are affiliated with INVESCO to provide such services; and
WHEREAS, the Sub-Adviser is willing to provide investment advisory
services to the Company on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, INVESCO and the Sub-Adviser hereby agree as follows:
<PAGE>
ARTICLE I
DUTIES OF THE SUB-ADVISER
INVESCO hereby employs the Sub-Adviser to act as investment adviser to the
Company and to furnish the investment advisory services described below, subject
to the broad supervision of INVESCO and Board of Directors of the Company, for
the period and on the terms and conditions set forth in this Agreement. The
Sub-Adviser hereby accepts such assignment and agrees during such period, at its
own expense, to render such services and to assume the obligations herein set
forth for the compensation provided for herein. The Sub-Adviser shall for all
purposes herein be deemed to be an independent contractor and, unless otherwise
expressly provided or authorized herein, shall have no authority to act for or
represent the Company in any way or otherwise be deemed an agent of the Company.
The Sub-Adviser hereby agrees to manage the investment operations of the
Fund, subject to the supervision of the Company's directors (the "Directors")
and INVESCO. Specifically, the Sub-Adviser agrees to perform the following
services:
(a) to manage the investment and reinvestment of all the assets, now or
hereafter acquired, of the Fund, and to execute all purchases and
sales of portfolio securities;
(b) to maintain 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 Investment
Company Act of 1940, as amended (the "1940 Act"), and in any
prospectus and/or statement of additional information of the Fund,
as from time to time amended and in use under the Securities Act
of 1933, as amended, and (ii) the Company's status as a regulated
investment company under the Internal Revenue Code of 1986, as
amended;
(c) to determine what securities are to be purchased or sold for the
Fund, unless otherwise directed by the Directors of the Company or
INVESCO, and to execute transactions accordingly;
<PAGE>
(d) to provide to 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
the Sub-Adviser;
(e) to determine what portion of the Fund should be invested in the
various types of securities authorized for purchase by the Fund; and
(f) to make recommendations as to the manner in which voting rights,
rights to consent to Fund action and any other rights pertaining to
the Fund's portfolio securities shall be exercised.
With respect to execution of transactions for the Fund, the Sub-Adviser is
authorized to employ such brokers or dealers as may, in the Sub-Adviser's best
judgment, implement the policy of the Fund to obtain prompt and reliable
execution at the most favorable price obtainable. In assigning an execution or
negotiating the commission to be paid therefor, the Sub-Adviser is authorized to
consider the full range and quality of a broker's services which benefit the
Fund, including but not limited to research and analytical capabilities,
reliability of performance, and financial soundness and responsibility. Research
services prepared and furnished by brokers through which the Sub-Adviser effects
securities transactions on behalf of the Fund may be used by the Sub-Adviser in
servicing all of its accounts, and not all such services may be used by the
Sub-Adviser in connection with the Fund. In the selection of a broker or dealer
for execution of any negotiated transaction, the Sub-Adviser shall have no duty
or obligation to seek advance competitive bidding for the most favorable
negotiated commission rate for such transaction, or to select any broker solely
on the basis of its purported or "posted" commission rate for such transaction,
provided, however, that the Sub-Adviser shall consider such "posted" commission
rates, if any, together with any other information available at the time as to
the level of commissions known to be charged on comparable transactions by other
qualified brokerage firms, as well as all other relevant factors and
circumstances, including the size of any contemporaneous market in such
securities, the importance to the Fund of speed, efficiency, and confidentiality
of execution, the execution capabilities required by the circumstances of the
particular transactions, and the apparent knowledge or familiarity with sources
from or to whom such securities may be purchased or sold. Where the commission
rate reflects services, reliability and other relevant factors in addition to
the cost of execution, the Sub-Adviser shall have the burden of demonstrating
<PAGE>
that such expenditures were bona fide and for the benefit of the Fund.
The Sub-Adviser may recommend transactions in which it has directly or
indirectly a material interest, in unregulated collective investment schemes
including any operated or advised by the Sub-Adviser or in margined
transactions. Advice on investments may extend to investments not traded or
exchanges recognized or designated by the Securities and Investments Board.
Both parties acknowledge that the advice given under this Agreement may
involve liabilities in one currency matched by assets in another currency and
that accordingly movements in rates of exchange may have a separate effect,
unfavorable as well as favorable on the gain or loss experienced on an
investment.
In carrying out its duties hereunder, the Sub-Adviser shall comply with
all instructions of INVESCO in connection therewith such instructions may be
given by letter, telex, telephone or facsimile by any Director or Officer of
INVESCO or by any other person authorized by INVESCO.
Any instructions which appear to conflict with the terms of this Agreement
may be confirmed by the Sub-Adviser with INVESCO prior to execution.
ARTICLE II
ALLOCATION OF CHARGES AND EXPENSES
The Sub-Adviser assumes and shall pay for maintaining the staff and
personnel necessary to perform its obligations under this Agreement, and shall,
at its own expense, provide the office space, equipment and facilities necessary
to perform its obligations under this Agreement. Except to the extent expressly
assumed by the Sub-Adviser herein and except to the extent required by law to be
paid by the Sub-Adviser, INVESCO and/or the Company shall pay all costs and
expenses in connection with the operations of the Funds.
ARTICLE III
COMPENSATION OF THE SUB-ADVISER
For the services rendered, facilities furnished, and expenses assumed by
the Sub-Adviser, INVESCO shall pay to the Sub-Adviser a fee, computed daily and
paid as of the last day of each month, using for each daily calculation the most
recently determined net asset value of the Funds, as determined by a valuation
made in accordance with the Fund's procedures for calculating its net asset
value as described in the Fund's Prospectus and/or Statement of Additional
<PAGE>
Information. The advisory fee to the Sub-Adviser shall be computed at the annual
rate of 0.30% on the first $500 million of the Fund=s average net assets; 0.26%
on the next $500 million of the Fund=s average net assets; 0.22% of the Fund=s
average net assets from $1 billion; 0.18% of the Fund=s average net assets from
$2 billion; 0.16% of the Fund=s average net assets from $4 billion; 0.15% of the
Fund=s average net assets from $6 billion; and 0.14% of the Fund=s average net
assets from $8 billion. During any period when the determination of the Funds'
net asset value is suspended by the Directors of the Fund, the net asset value
of a share of the Funds as of the last business day prior to such suspension
shall, for the purpose of this Article III, be deemed to be the net asset value
at the close of each succeeding business day until it is again determined.
However, no such fee shall be paid to the Sub-Adviser with respect to any assets
of the Fund which may be invested in any other investment company for which the
Sub-Adviser serves as investment adviser or sub-adviser. The fee provided for
hereunder shall be prorated in any month in which this Agreement is not in
effect for the entire month. The Sub-Adviser shall be entitled to receive fees
hereunder only for such periods as the INVESCO Investment Advisory Agreement
remains in effect.
ARTICLE IV
ACTIVITIES OF THE SUB-ADVISER
The services of the Sub-Adviser to the Fund are not to be deemed to be
exclusive, the Sub-Adviser and any person controlled by or under common control
with the Sub-Adviser (for purposes of this Article IV referred to as
"affiliates") being free to render services to others. It is understood that
directors, officers, employees and shareholders of the Fund are or may become
interested in the Sub-Adviser and its affiliates, as directors, officers,
employees and shareholders or otherwise and that directors, officers, employees
and shareholders of the Sub-Adviser, INVESCO and their affiliates are or may
become interested in the Fund as directors, officers and employees.
ARTICLE V
AVOIDANCE OF INCONSISTENT POSITIONS AND COMPLIANCE WITH
APPLICABLE LAWS
In connection with purchases or sales of securities for the investment
portfolios of the Fund, neither the Sub-Adviser nor any of its directors,
officers or employees will act as a principal or agent for any party other than
the Fund or receive any commissions. The Sub-Adviser will comply with all
applicable laws in acting hereunder including, without limitation, the 1940 Act;
<PAGE>
the Investment Advisers Act of 1940, as amended; the Rules and Regulations of
IMRO; and all rules and regulations duly promulgated under the foregoing.
ARTICLE VI
DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall become effective as of the date it is approved by a
majority of the outstanding voting securities of the Fund of the Company, unless
sooner terminated, as hereinafter provided. Thereafter, this Agreement shall
remain in force for an initial term of two years from the date of execution, and
from year to year thereafter until its termination in accordance with this
Article VI, but only so long as such continuance is specifically approved at
least annually by (i) the Directors of the Company, or by the vote of a majority
of the outstanding voting securities of the Fund, and (ii) a majority of those
Directors who are not parties to this Agreement or interested persons of any
such party cast in person at a meeting called for the purpose of voting on such
approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by INVESCO, the Fund by vote of the Directors of the Company, or by
vote of a majority of the outstanding voting securities of the Fund, or by the
Sub-Adviser. A termination by INVESCO or the Sub-Adviser shall require sixty
days' written notice to the other party and to the Company, and a termination by
the Company shall require such notice to each of the parties. This Agreement
shall automatically terminate in the event of its assignment to the extent
required by the Investment Company Act of 1940 and the Rules thereunder.
The Sub-Adviser agrees to furnish to the Directors of the Company such
information on an annual basis as may reasonably be necessary to evaluate the
terms of this Agreement.
Termination of this Agreement shall not affect the right of the
Sub-Adviser to receive payments on any unpaid balance of the compensation
described in Article III hereof earned prior to such termination.
ARTICLE VII
LIABILITY
The Sub-Adviser agrees to use its best efforts and judgement and due care
in carrying out its duties under this Agreement provided however that the
Sub-Adviser shall not be liable to INVESCO for any loss suffered by INVESCO or
<PAGE>
the funds advised in connection with the subject matter of this Agreement unless
such loss arises from the willful misfeasance, bad faith or negligence in the
performance of the Sub-Adviser's duties and subject and without prejudice to the
foregoing. INVESCO hereby undertakes to indemnify and to keep indemnified the
Sub-Adviser from and against any and all liabilities, obligations, losses,
damages, suits and expenses which may be incurred by or asserted against the
Sub-Adviser for which it is responsible pursuant to Article I hereof provided
always that the Sub-Adviser shall send to INVESCO as soon as possible all
claims, letters, summonses, writs or documents which it receives from third
parties and provide whatever information and assistance INVESCO may require and
no liability of any sort shall be admitted and no undertaking shall be given nor
shall any offer, promise or payment be made or legal expenses incurred by the
Sub-Adviser without written consent of INVESCO who shall be entitled if it so
desires to take over and conduct in the name of the Sub-Adviser the defense of
any action or to prosecute any claim for indemnity or damages or otherwise
against any third party.
ARTICLE VIII
AMENDMENTS OF THIS AGREEMENT
No provision of this Agreement may be orally changed or discharged, but
may only be modified by an instrument in writing signed by the Sub-Adviser and
INVESCO. In addition, no amendment to this Agreement shall be effective unless
approved by (1) the vote of a majority of the Directors of the Company,
including a majority of the Directors who are not parties to this Agreement or
interested persons of any such party cast in person at a meeting called for the
purpose of voting on such amendment and (2) the vote of a majority of the
outstanding voting securities of the Fund (other than an amendment which can be
effective without shareholder approval under applicable law).
ARTICLE IX
DEFINITIONS OF CERTAIN TERMS
In interpreting the provisions of this Agreement, the terms "vote of a
majority of the outstanding voting securities," "assignments," "affiliated
person" and "interested person," when used in this Agreement, shall have the
respective meanings specified in the Investment Company Act and the Rules and
Regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under said Act.
<PAGE>
ARTICLE X
GOVERNING LAW
This Agreement shall be construed in accordance with the laws of the State
of Colorado and the applicable provisions of the Investment Company Act. To the
extent that the applicable laws of the State of Colorado, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
ARTICLE XI
MISCELLANEOUS
Advice. Any recommendation or advice given by the Sub-Adviser to INVESCO
hereunder shall be given in writing or by mail, telex, telefacsimile or by
telephone, such telephone advice to be confirmed by mail, telex, telefacsimile
or in writing to such place as INVESCO shall from time to time require; further
the Sub-Adviser shall be free to telephone INVESCO as it sees fit in the
performance of its duties.
Complaints. The Sub-Adviser has in operation a written procedure for the
proper handling of complaints from clients; if the matter of complaint cannot be
resolved to INVESCO's satisfaction, INVESCO has the right of recourse to IMRO.
Notice. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for the receipt of such notice.
Severability. Each provision of this Agreement is intended to be
severable. If any provision of this Agreement shall be held illegal or made
invalid by a court decision, statute, rule or otherwise, such illegality or
invalidity shall not affect the validity or enforceability of the remainder of
this Agreement.
Headings. The headings in this Agreement are inserted for convenience and
identification only and are in no way intended to describe, interpret, define or
limit the size, extent or intent of this Agreement or any provision hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
INVESCO FUNDS GROUP, INC.
ATTEST:
By:
-------------------------
Mark H. Williamson
President
- -----------------------------
Glen A. Payne
Secretary INVESCO ASSET MANAGEMENT LIMITED
By:___________________________
ATTEST: Name:
Title:
- -----------------------------
Name:
Title: Secretary
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting part of this Post-Effective
Amendment No. 10 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated September 8, 1999, relating to the financial
statements and financial highlights appearing in the July 31, 1999 Annual Report
to Shareholders of INVESCO Specialty Funds, Inc., which is also incorporated by
reference into the Registration Statement. We also consent to the references to
us under the heading "Financial Highlights" in the Prospectus and under the
heading "Independent Accountants" in the Statement of Additional Information.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Denver, Colorado
October 22, 1999
