INVESCO Diversified Funds, Inc.
INVESCO Small Company Fund
(November 30, 1994)
INVESCO Dynamics Fund, Inc.
(August 31, 1994)
INVESCO Industrial Income Fund, Inc.
(November 1, 1994, As
Supplemented November 1, 1994)
INVESCO Multiple Asset Funds, Inc.
INVESCO Multi-Asset Allocation Fund
INVESCO Balanced Fund
(November 30, 1994)
Supplement to the Prospectuses of Above Funds,
Dates of Which are Indicated in Parentheses
The fourth paragraph in the section of INVESCO Industrial Income Fund, Inc.'s
Prospectus entitled "How Shares Can Be Purchased," and the fifth paragraph in
the sections of the remaining Funds' Prospectuses entitled "How Shares Can Be
Purchased," are hereby amended to read as follows:
Orders to purchase Fund shares can be placed by telephone. Shares of the
Fund will be issued at the net asset value next determined after receipt
of telephone instructions. Generally, payments for telephone orders must
be received by the Fund within three business days or the transaction may
be cancelled. In the event of such cancellation, the purchaser will be
held responsible for any loss resulting from a decline in the value of the
shares. In order to avoid such losses, purchasers should send payments for
telephone purchases by overnight courier or bank wire. INVESCO has agreed
to indemnify the Fund for any losses resulting from the cancellation of
telephone purchases.
The date of this Supplement is June 1, 1995.
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PROSPECTUS
November 30, 1994
INVESCO SMALL COMPANY FUND
INVESCO Small Company Fund (the "Fund") seeks long-term capital growth.
The Fund pursues this objective by investing its assets primarily in equity
securities of U.S. companies with market capitalizations that are below those of
the 1,000 U.S. companies having the largest market capitalizations ("small
companies"). Such market capitalization will be based on a company's equity
capitalization, which, for purposes of determining what is a small company, may
not exceed one billion dollars. The Fund is a series of INVESCO Diversified
Funds, Inc. (the "Company"), an open-end, diversified, no-load management
investment company. The Fund is currently the only investment portfolio of the
Company. However, additional portfolios may be offered in the future.
This Prospectus provides you with the basic information you should know
before investing in the INVESCO Small Company Fund. You should read it and keep
it for future reference. A Statement of Additional Information containing
further information about the Fund has been filed with the Securities and
Exchange Commission. You can obtain a copy without charge by writing INVESCO
Funds Group, Inc., Post Office Box 173706, Denver, Colorado 80217-3706; or
by calling 1-800-525-8085.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION. THE SHARES
OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED NOVEMBER 30, 1994, IS HEREBY
INCORPORATED BY REFERENCE INTO THIS PROSPECTUS.
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TABLE OF CONTENTS
Page
ANNUAL FUND EXPENSES 6
FINANCIAL HIGHLIGHTS 7
PERFORMANCE DATA 8
INVESTMENT OBJECTIVE AND POLICIES 8
RISK FACTORS 11
THE FUND AND ITS MANAGEMENT 16
HOW SHARES CAN BE PURCHASED 18
SERVICES PROVIDED BY THE FUND 20
HOW TO REDEEM SHARES 22
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS, AND TAXES 24
ADDITIONAL INFORMATION 25
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ANNUAL FUND EXPENSES
The Fund is 100% no-load; there are no fees to purchase, exchange or
redeem shares nor any ongoing marketing ("12b-1") expenses. Lower expenses
benefit Fund shareholders by increasing the Fund's investment return.
Shareholder Transaction Expenses
Sales load "charge" on purchases None
Sales load "charge" on reinvested dividends None
Redemption fees None
Exchange fees None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fee 0.75%
12b-1 Fees None
Other Expenses (after absorbed expenses)(1) 0.25%
Transfer Agency Fee 0.08%
General Services, Administrative
Services, Registration, Postage (2) 0.17%
Total Fund Operating Expenses(1) 1.00%
(1) Certain Fund expenses are being absorbed voluntarily by the Fund's
adviser and sub-adviser in order to ensure that the Fund's total operating
expenses do not exceed 1.00% of the Fund's average net assets, pursuant to an
agreement between the Fund, INVESCO Funds Group, Inc. and INVESCO Management &
Research, Inc. under which all expenses of the Fund above that amount will be
split evenly between these two companies. In the absence of such voluntary
expense limitation, the Fund's "Other Expenses" and "Total Fund Operating
Expenses" in the above table would have been 0.89% and 1.64%, respectively of
the Fund's average net assets based on the actual expenses of the Fund for the
fiscal period ended July 31, 1994. Such expenses are estimated. Actual expenses
are not provided because the Fund has been in operation for less than 12 months.
(2) Includes, but is not limited to, fees and expenses of directors,
custodian bank, legal counsel and auditors, a securities pricing service, costs
of administrative services under an Administrative Services Agreement, costs of
registration of Fund shares under applicable laws, and costs of printing and
distributing reports to shareholders.
Example
Based upon Total Operating Expenses as estimated above, a shareholder
would pay the following expenses on a $1,000 investment for the periods shown,
assuming (1) a 5% annual return and (2) redemption at the end of each time
period:
1 Year 3 Years
$10 $32
The purpose of the foregoing expense table and Example is to assist
investors in understanding the various costs and expenses that an investor in
the Fund will bear directly or indirectly. Such expenses are paid from the
Fund's assets. (See "The Fund and Its Management.") The Fund charges no sales
load, redemption fee or exchange fee. The expense table and the Example should
not be considered a representation of past or future expenses, and actual
expenses may be greater or less than those shown. The assumed 5% annual return
is hypothetical and should not be considered a representation of past or future
annual returns, which may be greater or less than the assumed amount.
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding throughout the Period)
Period Ended July 31 1994~
The following information has been audited by Price Waterhouse LLP,
independent accountants. This information should be read in conjunction with the
audited financial statements and the report of independent accountants thereon
appearing in the Fund's 1994 Annual Report to Shareholders and in the Statement
of Additional Information, both of which are available without charge by
contacting INVESCO Funds Group, Inc. at the address or telephone number shown
below.
PER SHARE DATA
Net Asset Value - Beginning of Period $10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.06
Net Gains on Securities
(Both Realized and Unrealized) (0.28)
Total From Investment Operations (0.22)
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) 0.02
Net Asset Value - End of Period $ 9.76
TOTAL RETURN (2.21%)@
RATIOS
Net Assets - End of Period ($000 Omitted) $13,474
Ratio of Expenses to Average Net Assets# 1.00%*
Ratio of Net Investment Income to
Average Net Assets# 1.20%*
Portfolio Turnover Rate 55%@
~ From December 1, 1993 commencement of operations, to July 31, 1994.
@ These amounts are based on operations for the period shown and, accordingly,
are not representative of a full year of operations.
# Various expenses of the fund were voluntarily absorbed for the period ended
July 31, 1994. If such expenses had not been absorbed, annualized ratio of
expenses to average net assets would have been 1.64%, and annualized ratio of
net investment income to average net assets would have been 0.56%.
* Annualized
Further information about the performance of the Fund is contained in the
Company's annual report to shareholders, which may be obtained without charge by
writing INVESCO Funds Group, Inc., P.O. Box 173706, Denver, Colorado 80217-3706;
or by calling 1-800-525-8085.
<PAGE>
PERFORMANCE DATA
From time to time, the Fund advertises its total return performance. These
figures are based upon historical investment results and are not intended to
indicate future performance. The "total return" of the Fund refers to the
average annual rate of return of an investment in the Fund. This figure is
computed by calculating the percentage change in value of an investment of
$1,000, assuming reinvestment of all income dividends and capital gain
distributions, to the end of a specified period. Thus, a given report of total
return performance should not be considered as representative of future
performance. The Fund charges no sales load, redemption fee, or exchange fee
which would affect total return computations.
In conjunction with performance reports and/or analyses of shareholder
service for the Fund, comparative data between the Fund's performance for a
given period and 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 those provided by Dow Jones & Company,
Standard & Poor's, Lipper Analytical Services, Inc., Lehman Brothers, National
Association of Securities Dealers Automated Quotations, Frank Russell Company,
Value Line Investment Survey, the American Stock Exchange, Morgan Stanley
Capital International, Wilshire Associates, the Financial Times-Stock Exchange,
the New York Stock Exchange, the Nikkei Stock Average and the Deutcher
Aktienindex, all of which are unmanaged market indicators. In addition,
rankings, ratings, and comparisons of investment performance and/or assessments
of the quality of shareholder service appearing in publications such as Money,
Forbes, Kiplinger's Personal Finance, Morningstar, and similar sources which
utilize information compiled (i) internally; (ii) by Lipper Analytical Services,
Inc.; or (iii) by other recognized analytical services, may be used in
advertising. The Lipper Analytical Services, Inc., mutual fund rankings and
comparisons, which may be used by the Fund in performance reports will be drawn
from the "Small Company Growth" Lipper mutual fund grouping, in addition to the
broad-based Lipper general fund groupings.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of INVESCO Small Company Fund is to seek
long-term capital growth. The Fund pursues this objective by investing its
assets primarily in equity securities of U.S. companies with market
capitalizations that are below those of the 1,000 U.S companies having the
largest market capitalizations ("small companies"). Normally the Fund invests at
least 65% of its net assets in such securities. The balance of the Fund's assets
may be invested in equity securities of foreign companies and companies whose
capitalizations exceed that of small companies, U.S. Government securities,
short-term investments, and nonconvertible long-term debt securities. Small
companies are those U.S. companies with market capitalizations that are smaller
than those of companies included in the Russell 1000 Large Cap Stock Index. Such
companies will generally be companies within the range of companies included in
the Russell 2000 Small Stock Index (Russell 2000), having market capitalizations
of approximately $10 million to $600 million. In making investments in equity
securities of small companies, the Fund will not invest in companies whose
equity capitalizations exceed one billion dollars. Market capitalization is a
measure of the size of a company and is based upon such company's equity
capitalization. The equity securities in which the Fund invests may include
common and preferred stocks, convertible bonds and convertible preferred stocks,
and other securities having equity characteristics such as warrants and rights.
There can be no assurance that the Fund will be able to achieve its investment
objective.
In selecting investments for the Fund, the investment adviser or
sub-adviser will seek to identify securities of small companies that are
expected by the adviser to produce an annual total return on investment which is
higher than the average annual total return of the Russell 2000 over a full
market cycle. These
<PAGE>
securities typically pay lower dividends and possess higher rates of return on
invested capital and greater risks than securities of larger companies. The Fund
seeks to achieve a greater return than the Russell 2000 with a lower level of
volatility by using a portfolio optimization process to maximize expected return
after trading costs, while at the same time seeking to control risk. The Russell
2000 is an unmanaged index. It includes the common stocks of 2000 U.S. companies
having market capitalizations that are smaller than those of the 1000 U.S.
companies included in the Russell 1000 Index. Companies included in the Russell
1000 Index are the largest U.S. companies, whereas the companies included in the
Russell 2000 are the 2000 next largest companies, in each case measured by
market capitalization. Companies included in the indices are readjusted
annually. These indices are compiled by Frank Russell Company.
In managing the Fund, the investment adviser or sub-adviser will apply a
combination of quantitative strategies and traditional stock selection methods
to a very broad universe of stocks of small companies in order to uncover the
best possible values. Typically, over 2,500 stocks will be examined
quantitatively for their exposure to certain factors which the adviser or
sub-adviser has identified as helpful in selecting equities which can be
expected to have superior future performance. These factors may include
earnings-to-price and book value-to-price ratios, earnings estimate revision
momentum, relative market strength compared to competitors, inventory/sales
trend, and financial leverage. A stock's expected return is estimated based upon
its exposure to these and other factors, and when combined with proprietary
estimates of trading costs, a risk-controlled optimal portfolio is generated.
Once an initial suggested portfolio has been generated through the computer
optimization process, traditional fundamental analysis is used to provide a
final review before stocks are selected for purchase by the Fund.
The Fund may invest up to 25% of its net assets in foreign securities, and
may invest up to 15% of its net assets in illiquid securities. In addition, the
Fund may purchase and sell covered call options and cash secured puts. These
practices and their risks are discussed below under "Risk Factors."
The equity securities purchased for the Fund will be traded principally in
the over-the-counter ("OTC") market, although the Fund may purchase securities
traded on national, regional or foreign stock exchanges. The short-term
investments of the Fund may consist of U.S. government and agency securities,
domestic bank certificates of deposit, banker's acceptances, and commercial
paper rated A-1 by Standard and Poor's Ratings Group ("S&P") or P-1 by Moody's
Investors Service, Inc. ("Moody's"). The Fund may enter into repurchase
agreements with banks, registered broker-dealers and registered U.S. government
securities dealers with respect to any debt securities of the type in which the
Fund intends to invest. The Fund's assets invested in short-term investments
will normally be used to meet current cash requirements, such as to satisfy
requests to redeem shares of the Fund and to preserve investment flexibility.
Investments in short-term and longer-term U.S. government securities may consist
of securities issued or guaranteed by the United States government or any agency
or instrumentality of the United States government. In some cases, these
securities are direct obligations of the U.S. government, such as U.S. Treasury
Bills, Notes and Bonds. In other cases, these securities are obligations
guaranteed by the U.S. government, such as Government National Mortgage
Association obligations, or obligations of U.S. government authorities, agencies
or instrumentalities, consisting of the Federal National Mortgage Association,
Federal Home Loan Bank, Federal Financing Bank and Federal Farm Credit Bank,
which are supported only by the assets of the issuer. All bank certificates of
deposit and bankers' acceptances must be issued by domestic banks which, at the
time of purchase by the Fund (i) are members of the Federal Reserve System
having total assets in excess of $5 billion, (ii) have received at least a B
ranking from Thompson Bank Watch Credit Rating Service or International Bank
Credit Analysis, and (iii) either directly or through parent holding companies
have securities outstanding which have been rated Aaa, Aa or P-1 by Moody's or
AAA, AA or A-1 by S&P. Short-term
<PAGE>
investments may also include corporate short-term notes rated at the time of
purchase at least A-1 by S&P or Prime-1 by Moody's, and municipal short-term
notes rated at the time of purchase at least SP-1 by S&P or MIG-1 by Moody's
(the highest rating category for such notes indicating a very strong capacity to
make timely payments of principal and interest).
Investments in bonds and other long-term debt securities, convertible and
non-convertible issues will be made for purposes of achieving the Fund's
objective of long-term capital growth, and will not be rated below Ba by Moody's
or BB by S&P or, if unrated, will be of a quality similar to securities so
rated, as determined by the investment adviser.
In order to decrease its risk in investing in straight debt securities,
the Fund will invest no more than 15% of its net assets in straight debt
securities rated below AAA, AA, A or BBB by S&P, or Aaa, Aa, A or Baa by
Moody's, (sometimes referred to as "junk bonds") and in no event will the Fund
ever invest in a straight debt security rated below Ba by Moody's or BB by S&P.
A bond rating of Baa by Moody's indicates that the bond issue is of "medium
grade," neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics, and have
speculative characteristics as well. A bond rating of BBB by S&P indicates that
the bond issue is in the lowest "investment grade" security rating. Bonds rated
BBB, while having speculative characteristics, are regarded as having an
adequate capacity to pay principal and interest. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay principal
and interest for bonds in this category than the bonds in the A category. High
yield, high risk debt securities rated by Moody's (categories Ba, B, Caa) are of
poorer quality and may have speculative characteristics. Lower rated bonds by
S&P (categories BB, B, CCC) include those which are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with their terms; BB indicates the lowest
degree of speculation. While such bonds will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions. For more information on straight debt
securities and the foregoing corporate bond rating categories, see the Statement
of Additional Information and the Appendix therein.
As a temporary defensive measure, more than 35% of the Fund's total assets
(and up to 100% of such assets) may be held as cash or invested in debt
securities having maturities of less than three years at the time of purchase if
the adviser determines it to be appropriate for purposes of enhancing liquidity
or preserving capital in light of prevailing market or economic conditions.
During such times, the Fund will not be pursuing its objective of long-term
capital growth.
The Fund also may lend its securities to qualified brokers, dealers,
banks, or other financial institutions. This practice permits the Fund to earn
income, which, in turn, can be invested in additional securities to pursue the
Fund's investment objective. Loans of securities by the Fund will be
collateralized by cash, letters of credit, or securities issued or guaranteed by
the U.S. government or its agencies equal to at least 100% of the current market
value of the loaned securities, determined on a daily basis. Lending securities
involves certain risks, the most significant of which is the risk that a
borrower may fail to return a portfolio security. The Fund monitors the
creditworthiness of borrowers in order to minimize such risks. The Fund will not
lend any security if, as a result of the loan, the aggregate value of securities
then on loan would exceed 33 1/3% of the Fund's total assets (taken at market
value).
The investment objective of the Fund is deemed to be a fundamental policy
which may not be changed without prior approval by the holders of a majority of
<PAGE>
the Fund's outstanding voting securities, as defined in the Investment Company
Act of 1940. One fundamental policy allows the Fund, notwithstanding any other
investment policy or limitation (whether or not fundamental), to invest all of
its assets in the securities of a single open-end management investment company
with substantially the same fundamental investment objectives, policies and
limitations as the Fund. In addition, the Company and the Fund are subject to
various investment restrictions set forth in the Statement of Additional
Information. Certain of those restrictions may not be altered without approval
of shareholders. One restriction limits the Fund's borrowing of money to
borrowings from banks for temporary or emergency purposes (but not for
investment) in an amount not to exceed 33 1/3% of the total assets of the Fund.
RISK FACTORS
Investors should consider the special factors associated with the policies
discussed below in determining the appropriateness of an investment in the Fund.
Risks of Investing in Debt Securities Under the Fund's Investment Policies.
The debt securities in which the Fund invests are generally subject to two
kinds of risk, credit risk and market risk. Credit risk relates to the ability
of the issuer to meet interest or principal payments, or both, as they come due.
The ratings given a debt security by Moody's and S&P provide a generally useful
guide as to such credit risk. The lower the rating given a debt security by such
rating service, the greater the credit risk such rating service perceives to
exist with respect to such security. Increasing the amount of Fund assets
invested in unrated or lower grade debt securities, while intended to increase
the yield produced by those assets, will also increase the credit risk to which
those assets are subject, and, given the fact that the Fund may invest in
unrated or lower grade debt securities, commonly referred to as junk bonds, the
securities held by the Fund generally will be subject to a greater degree of
credit risk.
Market risk relates to the fact that the market values of debt securities
in which the Fund invests generally will be affected by changes in the level of
interest rates. An increase in interest rates will tend to reduce the market
values of such securities, whereas a decline in interest rates will tend to
increase their values. Medium and lower rated debt securities (Baa or BBB and
lower) and non-rated debt securities of comparable quality tend to be subject to
wider fluctuations in yields and market values than higher rated debt securities
and may have speculative characteristics. Although the Fund may invest in debt
securities assigned low ratings by S&P or Moody's, the Fund's investments will
be limited to debt securities rated BB or higher by S&P or Ba or higher by
Moody's. The Fund's investment adviser intends to continue to limit the Fund's
investments to securities which are not believed by the adviser to be highly
speculative. Of course, relying in part on ratings assigned by credit agencies
in making investments will not protect the Fund from the risk that the debt
securities in which it invests will decline in value, since credit ratings
represent evaluations of the safety of principal, dividend and interest payments
on preferred stocks and debt securities, not the market values of such
securities, and such ratings may not be changed on a timely basis to reflect
subsequent events. The Fund is not required to sell immediately debt securities
that go into default, but may continue to hold such securities until such time
as the adviser determines it is in the best interests of the Fund to sell such
securities.
Because investment in medium and lower rated debt securities involves both
greater credit risk and market risk, achievement of the Fund's investment
objectives may be more dependent on the Fund's investment adviser's own credit
analysis than is the case for funds investing in higher quality securities. In
addition, the share price and yield of the Fund may be expected to fluctuate
more than in the case of funds investing in higher quality, shorter term debt
securities. Moreover, a significant economic downturn or major increase in
interest rates may result in issuers of lower rated debt securities experiencing
increased financial stress, which would adversely affect their ability to
service
<PAGE>
their principal, dividend and interest obligations, meet projected business
goals, and obtain additional financing. In this regard, it should be noted that
while the market for high yield corporate bonds has been in existence for many
years and from time to time has experienced economic downturns in recent years,
this market has involved a significant increase in the use of high yield
corporate debt securities to fund highly leveraged corporate acquisitions and
restructurings. Past experience may not, therefore, provide an accurate
indication of future performance of the high yield bond market, particularly
during periods of economic recession. Furthermore, expenses incurred to recover
an investment in a defaulted debt security may adversely affect the Fund's net
asset value. Finally, while the Fund's investment adviser attempts to limit
purchases of medium and lower rated debt securities to securities having an
established secondary market, the secondary market for such debt securities may
be less liquid than the market for higher quality debt securities. The reduced
liquidity of the secondary market for such securities may adversely affect the
market price of, and ability of the Fund to value, particular debt securities at
certain times, thereby making it difficult to make specific valuation
determinations. The Fund does not invest in any medium and lower rated debt
securities which present special tax consequences, such as zero coupon bonds or
pay-in-kind bonds.
Risks of Investing in Equity Securities Under the Fund's Investment Policies.
The Fund's investment adviser or sub-adviser seeks to reduce the overall
risks associated with the Fund's investments in equity securities through
diversification and consideration of factors affecting the value of securities
it considers relevant. No assurance can be given, however, regarding the degree
of success that will be achieved in this regard or in the Fund's achieving its
investment objectives.
The ability of the Fund's investment adviser or sub-adviser to select
equity securities for investment which increase in market value is the primary
factor that will determine whether the Fund will be able to achieve its
investment objective. In this regard, it should be noted that companies in which
the Fund is likely to invest may have limited product lines, markets or
financial resources, may be in the early stages of development, and may lack
management depth. The securities of these companies may in some cases have
limited marketability and may be subject to more abrupt or erratic market
movements than securities of larger, more established companies or the market
averages in general. While the over-the-counter ("OTC") market has grown rapidly
in recent years, many OTC securities trade less frequently and in smaller volume
than exchange-listed securities. The values of these securities may fluctuate
more sharply than exchange-listed securities, and the Fund may experience some
difficulty in acquiring or disposing of positions in these securities at
prevailing market prices.
Other Investment Practices
Repurchase Agreements. As noted above, the Fund may enter into repurchase
agreements. A repurchase agreement is a means of investing monies for a short
period. In a repurchase agreement, the Fund acquires a debt instrument
(generally a security issued by the U.S. government or an agency thereof, a
banker's acceptance, or a certificate of deposit) subject to resale to the
seller at an agreed upon price and date (normally, the next business day). In
the event that the original seller defaults on its obligation to repurchase the
security, the Fund could incur costs or delays in seeking to sell such security.
To minimize risk, the securities underlying each repurchase agreement will be
maintained with the Fund's custodian in an amount at least equal to the
repurchase price under the agreement (including accrued interest), and such
agreements will be effected only with parties that meet certain creditworthiness
standards established by the Company's board of directors. The Fund will not
enter into a repurchase agreement maturing in more than seven days if as a
result more than 15% of its net assets would be invested in such repurchase
agreements and other illiquid securities.
<PAGE>
Illiquid Securities
The Fund is authorized to invest in securities which are illiquid because
they are subject to restrictions on their resale ("restricted securities") or
because, based upon their nature or the market for such securities, they are not
readily marketable. However, the Fund will not purchase any such security if the
purchase would cause the Fund to invest more than 15% of its net assets,
measured at the time of purchase, in illiquid securities. Repurchase agreements
maturing in more than seven days will be considered as illiquid for purposes of
this restriction. Investments in illiquid securities involve certain risks to
the extent that the Fund may be unable to dispose of such a security at the time
desired or at a reasonable price. In addition, in order to resell a restricted
security, the Fund might have to bear the expense and incur the delays
associated with effecting registration.
Certain restricted securities that are not registered for sale to the
general public, but that can be resold to institutional investors ("Rule 144A
Securities"), may be purchased without regard to the foregoing 15% limitation if
an institutional trading market exists. The liquidity of the Fund's investments
in Rule 144A Securities could be impaired if dealers or institutional investors
become uninterested in purchasing these securities. The Company's board of
directors has delegated to the adviser the authority to determine the liquidity
of Rule 144A Securities pursuant to guidelines approved by the board. The Fund
has agreed with certain states that no more than 5% of its total assets will be
invested in restricted securities which are not eligible for resale pursuant to
Rule 144A. For more information concerning Rule 144A securities, see the
Statement of Additional Information.
Foreign Securities
The Fund may also invest up to 25% of its total assets in foreign
securities. It should be recognized that investments in securities of foreign
companies involve certain risks not associated with investments in the
securities of domestic companies, including the risks of fluctuations in foreign
currency exchange rates and of political or economic instability in the country
of issue, the difficulty of predicting international trade patterns, and the
possibility of imposition of exchange controls or currency blockage. In
addition, there may be less information publicly available about a foreign
company than about a domestic company, and there is generally less government
regulation of foreign stock exchanges, brokers, and listed companies abroad than
in the United States. Moreover, with respect to certain foreign countries, there
may be a possibility of expropriation or confiscatory taxation. Further,
economies of particular countries or areas of the world may differ favorably or
unfavorably from the economy of the United States. For additional information
regarding foreign securities, see the Fund's Statement of Additional
Information.
Futures, Contracts and Options
The Fund may enter into futures contracts for hedging or other
non-speculative purposes within the meaning and intent of applicable rules of
the Commodity Futures Trading Commission ("CFTC"). Futures contracts are
purchased or sold to attempt to hedge against the effects of price changes on
the Fund's current or intended investments in securities. In the event that an
anticipated decrease in the value of portfolio securities occurs as a result of
a general decrease in prices, the adverse effects of such changes may be offset,
in whole or part, by gains on the sale of futures contracts. Conversely, the
increased cost of portfolio securities to be acquired, caused by a general
increase in prices, may be offset, in whole or part, by gains on futures
contracts purchased by the Fund. The Fund will incur brokerage fees when it
purchases and sells futures contracts, and it will be required to maintain
margin deposits. The Fund also may use options to buy or sell futures contracts
or securities. Such investment strategies will be used as a hedge and not for
speculation.
<PAGE>
Put and call options on futures contracts may be traded by the Fund in
order to protect against declines in the values of portfolio securities or
against increases in the cost of securities to be acquired. Purchases of options
on futures contracts may present less dollar risk in hedging the portfolio of
the Fund than the purchase and sale of the underlying futures contracts since
the potential loss is limited to the amount of the premium plus related
transaction costs. The premium paid for such a put or call option plus any
transaction costs will reduce the benefit, if any, realized by the Fund upon
exercise of liquidation of the option, and, unless the price of the underlying
futures contract changes sufficiently, the option may expire without value to
the Fund. The writing of such covered options, however, does not present less
risk than the trading of futures contracts, and will constitute only a partial
hedge, up to the amount of the premium received, and, if an option is exercised,
the Fund may suffer a loss on the transaction.
The Fund will purchase put or call options on securities in anticipation
of changes in factors which may adversely affect the value of its portfolio or
the prices of securities which the Fund anticipates purchasing at a later date.
The Fund may be able to offset such adverse effects on its portfolio, in whole
or part, through the options purchased. The premium paid for a put or a call
option plus any transaction costs will reduce the benefit, if any, realized by
the Fund upon exercise or liquidation of the option, and, unless the price of
the underlying security changes sufficiently, the option may expire without
value to the Fund.
The Fund may, from time to time, also sell ("write") covered call options
or cash secured puts in order to attempt to increase the return on its portfolio
or to protect against declines in the value of its portfolio securities. Such
covered call options and cash secured puts will not exceed 25% of the Fund's
total assets. By writing a covered call option, the Fund, in return for the
premium income realized from the sale of the option, gives up the opportunity to
profit from a price increase in the underlying security above the option
exercise price, where the price increase occurs while the option is in effect.
In addition, the Fund's ability to sell the underlying security will be limited
while the option is in effect. By writing a cash secured put the Fund, which
receives a premium, has the obligation during the option period, upon assignment
of an exercise notice, to buy the underlying security at a specified price. A
put is secured by cash if the Fund maintains at all times cash, Treasury bills
or other high grade short-term obligations with a value equal to the option
exercise price in a segregated account with its custodian.
Although the Fund will enter into futures contracts and options on
securities solely for hedging or other nonspeculative purposes, within the
meaning and intent of applicable rules of the CFTC, their use does involve
certain risks. For example, a lack of correlation between the value of an
instrument underlying an option or futures contract and the assets being hedged,
or unexpected adverse price movements, could render the Fund's hedging strategy
unsuccessful and could result in losses. In addition, there can be no assurance
that a liquid secondary market will exist for any contract purchased or sold,
and the Fund may be required to maintain a position until exercise or expiration
which could result in losses. Transactions in futures contracts and options are
subject to other risks as well, which are set forth in greater detail in the
Statement of Additional Information, which should be reviewed in conjunction
with the foregoing discussion.
Portfolio Turnover
There are no fixed limitations regarding portfolio turnover for the Fund.
Although the Fund does not trade for short-term profits, securities may be sold
without regard to the time they have been held in the Fund when, in the opinion
of management, market considerations warrant such action. It is anticipated that
the Fund's annual portfolio turnover rate generally will not exceed 100%. The
Fund's portfolio turnover rate is set forth under "Financial Highlights", and,
<PAGE>
along with the Fund's brokerage allocation policies, is discussed in the
Statement of Additional Information.
THE FUND AND ITS MANAGEMENT
The Company is a no-load mutual fund, registered with the Securities and
Exchange Commission as an open-end, diversified management investment company.
It was incorporated on April 2, 1993, under the laws of Maryland. The overall
supervision of the Fund is the responsibility of the Company's board of
directors.
Pursuant to an agreement with the Company, INVESCO Funds Group, Inc.
("INVESCO"), 7800 E. Union Avenue, Denver, Colorado, serves as the Fund's
investment adviser. INVESCO is primarily responsible for providing the Fund with
various administrative services and supervising the Fund's daily business
affairs. These services are subject to review by the Company's board of
directors.
The following individual serves as portfolio manager for the Fund and is
primarily responsible for the day-to-day management of the Fund's portfolio of
securities:
Bob Slotpole Portfolio manager of the Fund since 1994; lead portfolio
manager of INVESCO Multi-Asset Allocation Fund since 1994;
portfolio manager for INVESCO Management & Research, Inc.
since 1993; began investment career in 1975; formerly employed
in proprietary options department at Lehman Brothers (1983-
1984); developed program trading department at First Boston
(1985-1992); B.S., State University of New York at Buffalo;
M.B.A., Stanford University.
INVESCO is an indirect wholly-owned subsidiary of INVESCO PLC. INVESCO PLC
is a financial holding company which, through its subsidiaries, engages in the
business of investment management on an international basis. INVESCO was
established in 1932 and, as of July 31, 1994, managed 13 mutual funds,
consisting of 34 separate portfolios, with combined assets of approximately $9.6
billion on behalf of over 860,000 shareholders.
Pursuant to an agreement with INVESCO, INVESCO Management & Research, Inc.
("INVESCO Management"), 101 Federal Street, Boston, Massachussetts, serves as
the sub-adviser to the Fund. INVESCO Management, formerly Gardner and Preston
Moss, Inc., also is an indirect, wholly-owned subsidiary of INVESCO PLC, and has
been offering investment services to U.S. institutions and wealthy individuals.
Its products include actively managed equity, fixed income, and balanced
portfolios. INVESCO Management also acts as sub-adviser to INVESCO Multi-Asset
Allocation Fund. INVESCO Management, subject to the supervision of INVESCO, is
primarily responsible for selecting and managing the Fund's investments.
Although the Company is not a party to the sub-advisory agreement between
INVESCO and INVESCO Management, the agreement has been approved by INVESCO as
the initial sole shareholder of the Company.
The Fund pays INVESCO a monthly advisory fee which is based upon a
percentage of the net assets of the Fund, determined daily. The maximum advisory
fee is computed at the annual rate of 0.75% of the Fund's average net assets.
For the eight-month period ended July 31, 1994, the investment advisory fees
paid by the Fund amounted to 0.75% of the Fund's average net assets. Out of its
advisory fee which it receives from the Fund, INVESCO pays INVESCO Management,
as sub-adviser to the Fund, a monthly fee, which is computed at an annual rate
of 0.375% of the Fund's average net assets. No fee is paid by the Fund to
INVESCO Management. While the portions of these advisory fee rates which are
equal to 0.75% of the Fund's average net assets are higher than those charged by
most other investment advisers to mutual funds, they are not higher than those
charged by a great many other investment advisers to funds comparable to the
Fund that invest their assets predominately in equity securities of small
companies.
<PAGE>
The Company has also entered into an Administrative Service Agreement
dated April 30, 1993 (the "Administrative Agreement") with INVESCO. Pursuant to
the Administrative Agreement, INVESCO performs certain administrative,
recordkeeping and internal sub-accounting services, including without
limitation, maintaining general ledger and capital stock accounts, preparing a
daily trial balance, calculating net asset value daily, providing selected
general ledger report, and providing sub-accounting and recordkeeping services
for Fund shareholder accounts maintained by certain retirement and employee
benefit plans for the benefit of participants in such plans. For such services,
the Fund pays INVESCO a fee consisting of a base fee of $10,000 per year, plus
an additional incremental fee computed at an annual rate of 0.015% per year of
the average net assets of the Fund. INVESCO also is paid a fee by the Fund for
providing transfer agent services. See "Additional Information."
The Fund's expenses, which are accrued daily, are generally deducted from
the Fund's total income before dividends are paid. Total expenses of the Fund
for the fiscal period ended July 31, 1994, including investment advisory fees
(but excluding brokerage commissions which are included as a cost of acquiring
securities), amounted to 1.00% of the Fund's average net assets. Certain Fund
expenses are being absorbed by INVESCO and INVESCO Management voluntarily in
order to ensure that the Fund's total expenses do not exceed 1.00% of the Fund's
average net assets. If such voluntary expense limitation had not been in effect
the Fund's total expenses for the fiscal period ended July 31, 1994, would have
been 1.64% of the Fund's average net assets.
INVESCO, as the Company's investment adviser, or INVESCO Management, as
the Company's sub-adviser, places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon INVESCO's evaluation of this
financial responsibility coupled with their ability to effect transactions at
the best available prices. Although the Company does not market its shares
through intermediary brokers or dealers, the Company may place orders for
portfolio transactions with qualified broker-dealers which recommend the Company
to clients, or act as agent in the purchase of Company shares for clients, if
management of the Company believes that the quality of the transaction and
commission are comparable to those available from other qualified brokerage
firms.
HOW SHARES CAN BE PURCHASED
Shares of the Fund are sold on a continuous basis by INVESCO, as the
Fund's Distributor, at the net asset value per share next calculated after
receipt of a purchase order in good form. No sales charge is imposed upon the
sale of shares of the Fund. To purchase shares of the Fund, send a check made
payable to INVESCO Funds Group, Inc., together with a completed application
form, to:
INVESCO FUNDS GROUP, INC.
Post Office Box 173706
Denver, Colorado 80217-3706
Purchase orders must specify the Fund in which the investment is to be
made.
Only the following investors may make initial investments in the INVESCO
Small Company Fund: (1) investors that either make a minimum initial investment
in the Fund of $10,000 or can be anticipated by Fund management to invest
$10,000 or more in the Fund within a reasonable period of time; (2) directors,
officers and employees of any company affiliated with INVESCO, and their
immediate family members, who invest a minimum of $1,000 in the Fund; and (3)
investors whose minimum initial investment in the Fund is less than $10,000 but
whose investment is determined by Fund management to be in the best interests of
the Fund. Following an initial purchase meeting the Fund's requirements,
subsequent investments may be made in amounts of not less than $50.
<PAGE>
The purchase of Fund shares can be expedited by placing bank wire,
overnight courier or telephone orders. Overnight courier orders must meet the
above minimum investment requirements. In no case can a bank wire order or a
telephone order be in an amount less than $1,000. For further information, the
purchaser may call the Fund's office by using the telephone number on the cover
of this Prospectus. Orders sent by overnight courier, including Express Mail,
should be sent to the street address, not Post Office Box, of INVESCO Funds
Group, Inc., at 7800 E. Union Avenue, Denver, CO 80237.
Orders to purchase shares of the Fund can be placed by telephone. Shares
of the Fund will be issued at the net asset value per share next determined
after receipt of telephone instructions. Payments for telephone orders must be
received by the Fund within seven business days of the transaction. In the event
payment is not received, the shares will be redeemed by INVESCO and the
purchaser will be held responsible for any loss resulting from a decline in the
value of the shares. INVESCO has agreed to indemnify the Fund for any losses
resulting from such cancellations.
If your check does not clear, or if a telephone purchase must be cancelled
due to non-payment, you will be responsible for any related loss the Fund or
INVESCO incurs. If you are already a shareholder in the INVESCO funds, the Fund
has the option to redeem shares from any identically registered account either
in the Fund or in any other INVESCO fund as reimbursement for any loss incurred.
You also may be prohibited or restricted from making future purchases in any of
the INVESCO funds.
Persons who invest in the Fund through a securities broker may be charged a
commission or transaction fee for the handling of the transaction if the broker
so elects. Any investor may deal directly with the Fund in any transaction. In
that event, there is no such charge.
The Fund reserves the right in its sole discretion to reject any order for
purchase of its shares (including purchases by exchange) when, in the judgment
of management, such rejection is in the best interest of the Fund.
Net asset value per share is computed once each day that the New York
Stock Exchange is open as of the close of regular trading on that Exchange
(presently 4:00 p.m., New York time) and may also be computed on other days
under certain circumstances. Net asset value per share of the Fund is calculated
by dividing the market value of all of the Fund's securities plus the value of
its other assets (including dividends and interest accrued but not collected),
less all liabilities (including accrued expenses), by the number of outstanding
shares of the Fund. If market quotations are not readily available, a security
or other asset will be valued at fair value as determined in good faith by the
board of directors. Debt securities with remaining maturities of 60 days or less
will be valued at amortized cost, absent unusual circumstances, so long as the
Company's board of directors believes that such value represents fair value.
SERVICES PROVIDED BY THE FUND
Shareholder Accounts. INVESCO maintains a share account that reflects the
current holdings of each shareholder. Share certificates will be issued only
upon specific request. Since certificates must be carefully safeguarded and must
be surrendered in order to exchange or redeem Fund shares, most shareholders do
not request share certificates in order to facilitate such transactions. Each
shareholder is sent a detailed confirmation of each transaction in shares of the
Fund. Shareholders whose only transactions are through the EasiVest, automatic
monthly exchange, direct payroll purchase or periodic withdrawal programs, or
are reinvestments of dividends or capital gains in the same or another fund,
will receive confirmations of those transactions on their quarterly statements.
These programs are discussed below. For information regarding a shareholder's
account and transactions, the shareholder may call the Fund's office by using
the telephone number on the cover of this Prospectus.
<PAGE>
Reinvestment of Distributions. Income dividends and capital gain
distributions are automatically reinvested in additional shares of the Fund at
the net asset value per share of the Fund in effect on the ex-dividend date. A
shareholder may, however, elect to reinvest dividends and capital gain
distributions in certain of the other no-load mutual funds advised and
distributed by INVESCO, or to receive payment of all dividends and distributions
in excess of $10.00 by check by giving written notice to INVESCO at least two
weeks prior to the record date on which the change is to take effect. Further
information concerning these options can be obtained by contacting INVESCO.
Periodic Withdrawal Plan. A Periodic Withdrawal Plan is available to
shareholders who own or purchase shares of any mutual funds advised by INVESCO
having a total value of $10,000 or more; provided, however, that at the time the
Plan is established, the shareholder owns shares having a value of at least
$5,000 in the fund from which the withdrawals will be made. Under the Periodic
Withdrawal Plan, INVESCO, as agent, will make specified monthly or quarterly
payments of any amount selected (minimum payment of $100) to the party
designated by the shareholder. Notice of all changes concerning the Periodic
Withdrawal Plan must be received by INVESCO at least two weeks prior to the next
scheduled check. Further information regarding the Periodic Withdrawal Plan and
its requirements and tax consequences can be obtained by contacting INVESCO.
Exchange Privilege. Shares of the Fund may be exchanged for shares of any
of the following other no-load mutual funds, which are also advised and
distributed by INVESCO, on the basis of their respective net asset values at the
time of the exchange: INVESCO Dynamics Fund, Inc., INVESCO Emerging Growth Fund,
Inc., INVESCO Growth Fund, Inc., INVESCO Income Funds, Inc., INVESCO Industrial
Income Fund, Inc., INVESCO International Funds, Inc., INVESCO Money Market
Funds, Inc., INVESCO Multiple Asset Funds, Inc., INVESCO Specialty Funds, Inc.,
INVESCO Strategic Portfolios, Inc., INVESCO Tax-Free Income Funds, Inc., INVESCO
Value Trust.
An exchange involves the redemption of shares in the Fund and investment
of the redemption proceeds in shares of one of the funds listed above. Exchanges
will be made at the net asset value per share next determined after receipt of
an exchange request in proper order. Any gain or loss realized on such an
exchange is recognizable for federal income tax purposes by the shareholder.
Exchange requests may be made either by telephone or by written request to
INVESCO Funds Group, Inc., using the address or telephone number on the cover of
this Prospectus. Exchanges made by telephone must be in an amount of at least
$250, if the exchange is being made into an existing account of one of the
INVESCO funds. All exchanges that establish a new account must meet the Fund's
applicable minimum initial investment requirements. Written exchange requests
into an existing account have no minimum requirements other than the Fund's
applicable minimum subsequent investment requirements.
The privilege of exchanging Fund shares by telephone is available to
shareholders automatically unless expressly declined. By signing the new account
Application, a Telephone Transaction Authorization Form or otherwise utilizing
telephone exchange privileges, the investor has agreed that the Fund will not be
liable for following instructions communicated by telephone that it reasonably
believes to be genuine. The Fund employs procedures, which it believes are
reasonable, designed to confirm that exchange instructions are genuine. These
may include recording telephone instructions and providing written confirmation
of exchange transactions. As a result of this policy, the investor may bear the
risk of any loss due to unauthorized or fraudulent instructions; provided,
however, that if the Fund fails to follow these or other reasonable procedures,
the Fund may be liable.
In order to prevent abuse of this privilege to the disadvantage of other
shareholders, the Fund reserves the right to terminate the exchange privilege of
any shareholder who requests more than four exchanges in a year. The Fund will
<PAGE>
determine whether to do so based on a consideration of both the number of
exchanges any particular shareholder or group of shareholders has requested and
the time period over which those exchange requests have been made, together with
the level of expense to the Fund which will result from effecting additional
exchange requests. The exchange privilege also may be modified or terminated at
any time. Except for those limited instances where redemptions of the exchanged
security are suspended under Section 22(e) of the Investment Company Act of
1940, or where sales of the fund into which the shareholder is exchanging are
temporarily stopped, notice of all such modifications or termination of the
exchange privilege will be given at least 60 days prior to the date of
termination or the effective date of the modification.
Before making an exchange, the shareholder should review the prospectuses
of the funds involved and consider their differences, and should be aware that
the exchange privilege may only be available in those states where exchanges
legally may be made, which will require that the shares being acquired are
registered for sale in the shareholder's state of residence. Shareholders
interested in exercising the exchange privilege may contact INVESCO for
information concerning their particular exchanges.
Automatic Monthly Exchange. Shareholders who have accounts in the mutual
funds distributed by INVESCO may arrange for a fixed dollar amount of their fund
shares to be automatically exchanged for shares of any other INVESCO mutual fund
listed under "Exchange Privilege" on a monthly basis. The minimum monthly
exchange in this program is $50.00. This automatic exchange program can be
changed by the shareholder at any time by notifying INVESCO at least two weeks
prior to the date the change is to be made. Further information regarding this
service can be obtained by contacting INVESCO.
EasiVest. For shareholders who want to maintain a schedule of monthly
investments, EasiVest uses various methods to draw a preauthorized amount from
the shareholder's bank account to purchase Fund shares. When a new account is
being established, the initial investment must meet the applicable minimum
investment requirements of the Fund. Monthly investments into an existing
account have no minimum requirements other than the Fund's applicable minimum
subsequent investment requirements. This automatic investment program can be
changed by the shareholder at any time by writing to INVESCO at least two weeks
prior to the date the change is to be made. Further information regarding this
service can be obtained by contacting INVESCO.
Direct Payroll Purchase. Shareholders may elect to have their employer
make automatic purchases of Fund shares for them, by deducting a specified
amount from their regular paychecks. This automatic investment program can be
modified or terminated at any time by the shareholder, by notifying the
employer. Further information regarding this service can be obtained by
contacting INVESCO.
Tax-Sheltered Retirement Plans. Shares of the Fund may be purchased for
self-employed retirement plans, individual retirement accounts (IRAs),
simplified employee pension plans, and corporate retirement plans. In addition,
shares can be used to fund tax qualified plans established under Section 403(b)
of the Internal Revenue Code by educational institutions, including public
school systems and private schools, and certain kinds of non-profit
organizations, which provide deferred compensation arrangements for their
employees.
Prototype forms for the establishment of these various plans, including,
where applicable, disclosure statements required by the Internal Revenue
Service, are available from INVESCO. INVESCO Trust Company, a subsidiary of
INVESCO, is qualified to serve as trustee or custodian under these plans and
provides the required services at competitive rates. Retirement plans (other
than IRAs) receive monthly statements reflecting all transactions in their Fund
accounts. IRAs receive the confirmations and quarterly statements described
under "Shareholder Accounts." For complete information, including prototype
forms and
<PAGE>
service charges, call INVESCO at the telephone number listed on the cover of
this Prospectus or send a written request to: Retirement Services, INVESCO Funds
Group, Inc., Post Office Box 173706, Denver, Colorado 80217-3706.
HOW TO REDEEM SHARES
You may redeem all or any portion of the shares in your account at any
time by telephone or mail as described below. Shares of the Fund will be
redeemed at their current net asset value per share next determined after a
request in proper form is received at the Fund's office. (See "How Shares Can Be
Purchased.") Net asset value per share at the time of redemption may be more or
less than the price you paid to purchase your shares, depending primarily upon
the Fund's investment performance.
If the shares to be redeemed are represented by stock certificates, a
written request for redemption signed by the registered shareholder(s) and the
certificates must be forwarded to INVESCO Funds Group, Inc., Post Office Box
173706, Denver, Colorado 80217-3706. Redemption requests sent by overnight
courier, including Express Mail, should be sent to the street address, not Post
Office Box, of INVESCO Funds Group, Inc. at 7800 E. Union Avenue, Denver, CO
80237. If no certificates have been issued, a written redemption request signed
by each registered owner of the account may be submitted to INVESCO at the
address noted above. If shares are held in the name of a corporation, additional
documentation may be necessary. Call or write for specifics. If payment for the
redeemed shares is to be made to someone other than the registered owner(s), the
signature(s) must be guaranteed by a financial institution which qualifies as an
eligible guarantor institution. Redemption procedures with respect to accounts
registered in the names of broker/dealers may differ from those applicable to
other shareholders.
Be careful to specify the account from which the redemption is to be made.
INVESCO shareholders have a separate account for each fund in which they invest.
Payment of redemption proceeds will be mailed within seven days following
receipt of the required documents. However, payment may be postponed under
unusual circumstances, such as when normal trading is not taking place on the
New York Stock Exchange, an emergency as defined by the Securities and Exchange
Commission exists, or the shares to be redeemed were purchased by check and that
check has not yet cleared; provided, however, that all redemption proceeds will
be paid promptly upon clearance of the purchase check (which may take up to 15
days).
Because of the high relative costs of handling small accounts, should the
value of any shareholder's account fall below $250 as a result of shareholder
action, the Fund reserves the right to effect the involuntary redemption of all
shares in such account, in which case the account would be liquidated and the
proceeds forwarded to the shareholder. Prior to any such redemption, a
shareholder will be notified and given 60 days to increase the value of the
account to $250 or more.
Fund shareholders (other than shareholders holding Fund shares in accounts
of IRA plans) may request expedited redemption of shares having a minimum value
of $250 (or redemption of all shares if their value is less than $250) held in
accounts maintained in their name by telephoning redemption instructions to
INVESCO, using the telephone number on the cover of this Prospectus. The
redemption proceeds, at the shareholder's option, either will be mailed to the
address listed for the shareholder's Fund account, or wired (minimum of $1,000)
or mailed to the bank which the shareholder has designated to receive the
proceeds of telephone redemptions. The Fund charges no fee for effecting such
telephone redemptions. Unless the Fund's management permits a larger redemption
request to be placed by telephone, a shareholder may not place a redemption
request by telephone in excess of $25,000. These telephone redemption privileges
may be
<PAGE>
modified or terminated in the future at the discretion of the Fund's management.
Shareholders should understand that, while the Fund will attempt to process all
telephone redemption requests on an expedited basis, there may be times,
particularly in periods of severe economic or market disruption, when (a) they
may encounter difficulty in placing a telephone redemption request, and (b)
processing telephone redemptions may require up to seven days following receipt
of the telephone redemption request, or additional time because of postponements
resulting from the unusual circumstances set forth above. For INVESCO Trust
Company sponsored federal income tax-sheltered retirement plans, the term
"shareholders" is defined to mean plan trustees that file a written request to
be able to redeem Fund shares by telephone.
The privilege of redeeming Fund shares by telephone is available to
shareholders automatically unless expressly declined. By signing a new account
Application, a Telephone Transaction Authorization Form or otherwise utilizing
telephone redemption privileges, the shareholder has agreed that the Fund will
not be liable for following instructions communicated by telephone that it
reasonably believes to be genuine. The Fund employs procedures, which it
believes are reasonable, designed to confirm that telephone instructions are
genuine. These may include recording telephone instructions and providing
written confirmations of transactions initiated by telephone. As a result of
this policy, the investor may bear the risk of any loss due to unauthorized or
fraudulent instructions; provided, however, that if the Fund fails to follow
these or other reasonable procedures, the Fund may be liable.
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS, AND TAXES
Dividends. In addition to any increase in the value of your shares which
may occur from increases in the value of the Fund's investments, the Fund may
earn income in the form of dividends and interest on its investments. Dividends
paid by the Fund will be based solely on the income earned by it. The Fund's
policy is to distribute substantially all of this income, less expenses, to
shareholders on an annual basis at the discretion of the Company's board of
directors. Dividends are automatically reinvested in additional shares of the
Fund at the net asset value on the ex-dividend date, unless otherwise requested.
See "Services Provided by the Fund - Reinvestment of Distributions."
Capital Gains. Capital gains or losses are the result of the Fund's sale
of its securities at prices that are higher or lower than the prices paid by the
Fund to purchase such securities. Total gains from such sales, less any losses
from such sales (including losses carried forward from prior years) represent
net realized capital gains. The Fund intends to distribute its net realized
capital gains, if any, to its shareholders annually, usually in December.
Capital gain distributions are automatically reinvested in additional shares of
the Fund at net asset value per share on the ex-dividend date, unless otherwise
requested. See "Services Provided by the Fund - Reinvestment of Distributions."
Taxes. The Fund intends to distribute substantially all of its net
investment income and capital gains, if any, to shareholders, and to continue to
qualify for tax treatment under Subchapter M of the Internal Revenue Code as a
regulated investment company. Thus, it is not expected that the Fund will be
required to pay any federal income taxes. Shareholders (other than those exempt
from income tax) normally will have to pay federal income taxes, and any state
and local income taxes, on the dividends and distributions they receive from the
Fund, whether such dividends and distributions are received in cash or
reinvested in additional shares of the same or another fund. Shareholders of the
Fund are advised to consult their own tax advisers with respect to these
matters.
Dividends paid by the Fund from net investment income and distributions of
net realized short-term capital gains are, for federal income tax purposes,
taxable as ordinary income to shareholders. At the end of each calendar year,
shareholders are sent full information on dividends and capital gain
<PAGE>
distributions, including information as to the portions taxable as ordinary
income and long-term capital gains. Information concerning the amount of
dividends eligible for the dividends-received deduction available for
corporations is contained in the Fund's annual report or may be obtained upon
request.
The Fund is required to withhold and remit to the U.S. Treasury 31% of
dividend payments, capital gains distributions, and redemption proceeds for any
account on which the owner provides an incorrect taxpayer identification number,
no number, or no certified number.
ADDITIONAL INFORMATION
Voting Rights. All shares of the Fund have equal voting rights. When
shareholders are entitled to vote upon a matter, each shareholder is entitled to
one vote for each share owned. The Company is not generally required, and does
not expect, to hold regular annual meetings of shareholders. However, the board
of directors will call special meetings of shareholders for the purpose, among
other reasons, of voting upon the question of removal of a director or directors
when requested to do so in writing by the holders of 10% or more of the
outstanding shares of the Company or as may be required by applicable law or the
Company's Articles of Incorporation. The Company will assist shareholders in
communicating with other shareholders as required by the Investment Company Act
of 1940. Directors may be removed by action of the holders of a majority of the
outstanding shares of the Company.
Master/Feeder Option. The Company may in the future seek to achieve the
Fund's investment objective by investing all of the Fund's assets in another
investment company having the same investment objective and substantially the
same investment policies and restrictions as those applicable to the Fund. It is
expected that any such investment company would be managed by INVESCO in
substantially the same manner as the existing Fund. Any such investment may be
made in the sole discretion of the Company's board of directors without further
approval of the shareholders of the Fund. However, Fund shareholders will be
given at least 30 days prior notice of any such investment. Such investment
would be made only if the Company's board of directors determines it to be in
the best interests of the Fund and its shareholders. In making that
determination, the board will consider, among other things, the benefits to
shareholders and/or the opportunity to reduce costs and achieve operational
efficiencies. No assurance can be given that costs will be materially reduced if
this option is implemented.
Shareholder Inquiries. All inquiries regarding the Fund should be directed
to the Fund at the telephone number or mailing address set forth on the cover
page of this Prospectus.
Transfer and Dividend Disbursing Agent. INVESCO Funds Group, Inc., 7800 E.
Union Ave., Denver, Colorado 80237, acts as registrar, transfer agent, and
dividend disbursing agent for the Fund pursuant to a Transfer Agency Agreement
which provides that the Fund will pay a fee of $14.00 per shareholder account or
omnibus account participant per year. The transfer agency fee is not charged to
each shareholder's or participant's account, but is an expense of the Fund to be
paid from the Fund's assets. In addition, registered broker-dealers, third party
administrators of tax-qualified retirement plans and other entities may provide
sub-transfer agency services to the Fund which reduce or eliminate the need for
identical services to be provided on behalf of the Fund by INVESCO. In such
cases, INVESCO is authorized to pay the third party an annual sub-transfer
agency fee of up to $14.00 per participant in the third party's omnibus account
out of the transfer agency fee which is paid to INVESCO by the Fund.
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INVESCO DIVERSIFIED FUNDS, INC.
A no-load mutual fund seeking
long-term capital growth.
INVESCO SMALL COMPANY FUND
PROSPECTUS
November 30, 1994
To receive general information and prospectuses on any of INVESCO's funds, or
retirement plans, or to obtain current account or price information, call toll-
free:
1-800-525-8085
To reach PAL, your 24-hour Personal Account Line, call:
1-800-424-8085
Or write to:
INVESCO Funds Group, Inc., Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
If you're in Denver, visit one of our convenient Investor Centers:
Cherry Creek
155-B Fillmore Street
Denver Tech Center
7800 E. Union Avenue
Lobby Level
