File No. 33-68040
As filed on November ^22, 1996
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. ^ 4 X
-------- --
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
--
Amendment No. ^ 5 X
------------ --
INVESCO DIVERSIFIED 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)
-------------------
Copies to:
Ronald M. Feiman, Esq.
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
-------------------
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:
immediately upon filing pursuant to paragraph (b)
- ----
X on ^ December 1, 1996, pursuant to paragraph (b)
- ----
60 days after filing pursuant to paragraph (a)(i)
- ----
on _________________, pursuant to paragraph (a)(i)
- ----
75 days after filing pursuant to paragraph (a)(ii)
- ----
on , pursuant to paragraph (a)(ii) 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.
--------------------
Registrant has previously elected to register an indefinite number of shares of
its common stock pursuant to Rule 24f-2 under the Investment Company Act.
Registrant's Rule 24f-2 notice for the fiscal year ending July 31, ^ 1996 was
filed on or about September 18, ^ 1996.
Page 1 of 149
Exhibit index is located at page 76
<PAGE>
INVESCO DIVERSIFIED FUNDS, INC.
------------------------------------
CROSS-REFERENCE SHEET
Form N-1A
Item Caption
- --------- -------
Part A Prospectus
1....................... Cover Page
2....................... Annual Fund Expenses
3....................... Financial Highlights; Performance
Data
4....................... Investment Objectives and
Policies; The Fund and Its
Management
5....................... The Fund and Its Management;
Additional Information
5A...................... Not Applicable
6....................... Services Provided by the Fund;
Taxes, Dividends and Capital Gain
Distributions; Additional
Information
7....................... How Shares Can Be Purchased;
Services Provided by the Fund
8....................... Services Provided by the Fund;
How to Redeem Shares
9....................... Not Applicable
Part B Statement of Additional
Information
10....................... Cover Page
11....................... Table of Contents
-i-
<PAGE>
Form N-1A
Item Caption
- --------- -------
12....................... The Fund and Its Management
13....................... Investment Practices; Investment
Policies and Restrictions
14....................... The Fund and Its Management
15....................... The Fund and Its Management;
Additional Information
16....................... The Fund and Its Management;
Additional Information
17....................... Investment Practices; Investment
Policies and Restrictions
18....................... Additional Information
19....................... How Shares Can Be Purchased; How
Shares Are Valued; Services
Provided by the Fund;
Tax-Deferred Retirement Plans;
How to Redeem Shares
20....................... Dividends, Capital Gain
Distributions and Taxes
21....................... How Shares Can Be Purchased
22....................... Performance Data
23....................... Additional Information
Part C Other Information
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
-ii-
<PAGE>
PROSPECTUS
^ December 1, 1996
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 Fund. You should read it and keep it for future
reference. A Statement of Additional Information containing further information
about the Fund, dated ^ December 1, 1996, has been filed with the Securities and
Exchange Commission and is incorporated by reference into this Prospectus. You
can obtain a copy without charge by writing INVESCO Funds Group, Inc., Post
Office Box 173706, Denver, Colorado 80217-3706; ^ by calling 1-800-525-8085; or
on the World Wide Web: http://www.invesco.com.
----------
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.
<PAGE>
TABLE OF CONTENTS
Page
----
ANNUAL FUND EXPENSES 6
FINANCIAL HIGHLIGHTS ^ 8
PERFORMANCE DATA ^ 10
INVESTMENT OBJECTIVE AND POLICIES ^ 10
RISK FACTORS ^ 13
THE FUND AND ITS MANAGEMENT ^ 18
HOW SHARES CAN BE PURCHASED ^ 20
SERVICES PROVIDED BY THE FUND ^ 22
HOW TO REDEEM SHARES ^ 25
TAXES, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ^ 26
ADDITIONAL INFORMATION ^ 27
<PAGE>
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)(2) 0.34%
Transfer Agency ^ Fee(3) (0.09%)
General Services, Administrative
Services, Registration, Postage ^(4) (0.25%)
Total Fund Operating Expenses(1) 1.09%^
^(1) It should be noted that the Fund's actual total operating expenses
were lower than the figures shown, because the Fund's custodian fees and pricing
service expenses were reduced under an expense offset arrangements. However, as
a result of an SEC requirement for mutual funds to state their total operating
expenses without crediting any such expense offset arrangements, the figures
shown above DO NOT reflect these reductions. In comparing expenses for different
years, please note that the ratios of Expenses to Average Net Assets shown under
"Financial Highlights" DO reflect any reductions for periods prior to the fiscal
year ended July 31, 1995.
(2) Certain Fund expenses are being voluntarily absorbed by INVESCO Funds
Group, Inc. ("INVESCO") and INVESCO Management and Research, Inc. ("INVESCO
Management") ^. In the absence of such ^ absorbed expenses, the Fund's "Other
Expenses" and "Total Fund Operating Expenses" ^ would have been ^ 0.34% and ^
1.09%, respectively, ^ based on the Fund's actual expenses ^ for the fiscal year
ended July 31, ^ 1996. See "The Fund and Its Management."
^(3) Consists of the transfer agency fee described under "Additional
Information - Transfer and Dividend Disbursing Agent."
^(4) Includes, but is not limited to, fees and expenses of directors,
custodian bank, legal counsel and auditors, securities pricing services, costs
of administrative services furnished under an Administrative Services Agreement,
costs of registration of Fund shares under applicable laws, and costs of
printing and distributing reports to shareholders.
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:
<PAGE>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
^ $11 $35 $60 $133
The purpose of the foregoing expense table is to assist investors in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. Such expenses are paid from the Fund's assets. (See
"The Fund and Its Management.") The Fund charges no sales load, redemption fee
or exchange fee. THE 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 Each Period)
^ The following information has been audited by Price Waterhouse LLP,
independent accountants. This information should be read in conjunction with the
audited financial statements and the report of independent accountants thereon
appearing in the Fund's ^ 1996 Annual Report to Shareholders, which is
incorporated by reference into the Statement of Additional Information. Both are
available without charge by contacting INVESCO Funds Group, Inc. at the address
or telephone number shown below.
^ Period
Ended
Year Ended ^ July 31 July 31
------------------------- -------
1996 1995 1994^
PER SHARE DATA
Net Asset Value ^-
Beginning of Period ^ $11.77 $9.76 $10.00
------------------------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.08 0.05 0.06
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 0.68 2.05 (0.28)
------------------------- -------
Total from Investment Operations 0.76 2.10 (0.22)
------------------------- -------
LESS DISTRIBUTIONS
Dividends from Net
Investment Income ^ 0.08 0.09 0.02
^ Distributions from Capital Gains 0.26 0.00 0.00
------------------------- -------
Total Distributions 0.34 0.09 0.02
------------------------- -------
Net Asset Value -
End of Period $12.19 $11.77 $9.76
========================= =======
TOTAL RETURN 6.47% 21.64% (2.21%)*
RATIOS
Net Assets ^- End of Period
($000 Omitted) $46,693 $40,071 $13,474
Ratio of Expenses to
Average ^ Net Assets# 1.09%@ 1.00% 1.00%~
Ratio of Net Investment Income
to^ Average Net Assets# 0.61% 0.84% 1.20%~
Portfolio Turnover Rate 156% 73% 55%*
<PAGE>
^ From December 1, 1993, commencement of operations, to July 31, 1994.
* ^ Based on operations for the period shown and, accordingly, are not
representative of a full year.
# Various expenses of the Fund were voluntarily absorbed by ^ IFG and INVESCO
Management for the ^ years ended July 31, 1996, 1995 and for the period ended
July 31, 1994. If such expenses had not been voluntarily absorbed, ratio of
expenses to average net assets would have been 1.09%, 1.32% and 1.64%
(annualized), respectively, and ratio of net investment income to average net
assets would have been 0.61%, 0.52% and 0.56% (annualized), respectively.
@ Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
~ 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. ^ Total return is computed by calculating the
percentage change in value of an investment ^, assuming reinvestment of all
income dividends and capital gain distributions, to the end of a specified
period. Cumulative total return reflects actual performance over a stated period
of time. Average annual total return is a hypothetical rate of return that, if
achieved annually, would have produced the same cumulative total return if
performance had been constant over the entire period. 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)^. In making investments in
equity securities of small companies, the Fund will not invest in companies
whose equity capitalizations exceed one billion dollars at the time of initial
purchase. 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
<PAGE>
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 (collectively, "Fund Management") will seek to identify securities
of small companies that are expected by ^ Fund Management to produce an annual
total return ^ that is higher than the average annual total return of the
Russell 2000 over a full market cycle. These 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, Fund Management 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 Fund Management 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 ^ total assets in foreign securities,
and may invest up to 15% of its ^ total 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, ^ bankers' acceptances, and commercial
paper rated A-1 by Standard and Poor's ("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
<PAGE>
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 ^,
(ii) have total assets in excess of $5 billion, ^(iii) have received at least a
B ranking from Thompson Bank Watch Credit Rating Service or International Bank
Credit Analysis, and ^(iv) 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 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 categories 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 Fund Management.
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 (category Ba) are of poorer
quality and may have speculative characteristics. Lower rated bonds by S&P
(category BB) 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
<PAGE>
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
^ Fund Management 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
that may not be changed without prior approval by the holders of a majority of
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
<PAGE>
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. Fund Management 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 ^ immediately sell debt securities that go
into default, but may continue to hold such securities until such time as Fund
Management 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 Fund Management'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 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 Fund Management 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
<PAGE>
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.
Fund Management 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 Fund Management 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 ^
bankers' 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 that are the subject of the 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.
Illiquid and Rule 144A Securities
The Fund is authorized to invest in securities that 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 total assets
in illiquid securities. Repurchase agreements maturing in more than seven days
will be considered as illiquid for purposes of this restriction. Investments in
<PAGE>
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 if a liquid institutional trading market
exists. The liquidity of the Fund's investments in Rule 144A Securities could be
impaired if dealers or institutional investors become uninterested in purchasing
these securities. Rule 144A Securities shall constitute illiquid securities for
purposes of the 15% limitation noted above with the exception of 144A Securities
determined by the board of directors (or the Fund's investment adviser acting
pursuant to guidelines approved and authority delegated by the board of
directors) to have a readily available market. 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.
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
<PAGE>
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.
<PAGE>
Portfolio Turnover
There are no fixed limitations regarding portfolio turnover for the Fund.
Although the Fund does not trade for short-term profits, securities may be sold
without regard to the time they have been held in the Fund when, in the opinion
of Fund Management, market considerations warrant such action. In addition, the
Fund's portfolio turnover rate may increase as a result of large amounts of
purchases or redemptions of Fund shares due to economic, market, or other
factors that are not within the control of Fund Management. As a result, while
it is anticipated that the Fund's annual portfolio turnover rate generally will
not exceed 100%, under certain market conditions the portfolio turnover rate may
exceed 100%. The Fund's portfolio turnover rate is set forth under "Financial
Highlights", and, along with the Fund's brokerage allocation policies, is
discussed in the Statement of Additional Information.
THE FUND AND ITS MANAGEMENT
On November 4, 1996 an Agreement and Plan of Merger among INVESCO PLC,
INVESCO Group Services, Inc. ("Services") and AIM Management Group, Inc. ("AIM")
was signed under which AIM will be merged with Services. When this merger takes
effect, which is expected to occur in the first part of 1997, the Fund's
Investment Advisory, Sub-Advisory, Distribution, Administrative Services,
Transfer Agency, and Rule 12b-1 Agreements (the "Agreements") will automatically
terminate. Consummation of this merger is conditioned, among other things, on
new Agreements, essentially identical to the existing Agreements, including the
provisions governing fees, being presented to, and approved by, the Fund's
Boards of Directors, and where necessary, the Fund's shareholders prior to this
merger taking effect. The meeting of the Fund's shareholders to consider
approving the necessary new Agreements is expected to occur in early 1997. Fund
Management anticipates that the key personnel responsible for providing services
to the Fund will remain unchanged.
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. Under this agreement, INVESCO is primarily responsible for
providing the Fund with various administrative services and supervising the
Fund's daily business affairs. These services are subject to review by the
Company's board of directors.
INVESCO is an indirect wholly-owned subsidiary of INVESCO PLC. INVESCO PLC
is a financial holding company that, through its subsidiaries, engages in the
business of investment management on an international basis. INVESCO was
established in 1932 and, as of July 31, ^ 1996, managed 14 mutual funds,
consisting of ^ 39 separate portfolios, with combined assets of approximately ^
$12.2 billion on behalf of over ^ 821,000 shareholders.
Pursuant to an agreement with INVESCO, INVESCO Management and Research,
Inc. ("INVESCO Management"), 101 Federal Street, Boston, Massachusetts, serves
as the sub-adviser to the Fund. INVESCO Management, formerly Gardener and
<PAGE>
Preston Moss, Inc., also is an indirect, wholly-owned subsidiary of INVESCO
PLC, and provdies investment services to U.S. institutions and wealthy
individuals. Its products include actively managed equity, fixed income, and
balanced portfolios.^ 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 then sole shareholder of the Company.
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 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.
The Fund pays INVESCO a monthly advisory fee which is based upon a
percentage of the average net assets of the Fund, determined daily. The maximum
advisory fee is computed at the annual rate of 0.75% on the Fund's average net
assets. For the fiscal year ended July 31, ^ 1996, 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 0.75% advisory fee rate is higher than
those charged by most other investment advisers to mutual funds, it is 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.
The Company has also entered into an Administrative Service Agreement (the
"Administrative Agreement") with INVESCO. Pursuant to the Administrative
Agreement, INVESCO performs certain administrative, recordkeeping and internal
sub-accounting services, including without limitation, maintaining general
ledger and capital stock accounts, preparing a daily trial balance, calculating
net asset value daily, providing selected general ledger 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 year ended July 31, ^ 1996, including investment ^ management
fees (but excluding brokerage commissions which are included as a cost of
acquiring securities), amounted to ^ 1.09% of the Fund's average net assets.
<PAGE>
Certain Fund expenses are ^ voluntarily absorbed by INVESCO and INVESCO
Management ^ pursuant to a commitment to the Fund in order to ensure that the
Fund's total operating expenses do not exceed ^ 1.25% of the Fund's average net
assets. This commitment may be changed following consultation with the Company's
board of directors. In the absence of such voluntary expense limitation, the
Fund's total expenses for the fiscal year ended July 31, ^ 1996, would have been
^ 1.09% of the Fund's average net assets.
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of
their financial responsibility coupled with their ability to effect transactions
at the best available prices. 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 that recommend the Company,
or sell shares of the Fund to clients, or act as agent in the purchase of
Company shares for clients, if Fund Management believes that the quality of the
execution of the transaction and level of commission are comparable to those
available from other qualified brokerage firms.
Fund Management permits investment and other personnel to purchase and
sell securities for their own accounts, subject to a compliance policy governing
personal investing. This policy requires investment and other personnel to
conduct their personal investment activities in a manner that Fund Management
believes is not detrimental to the Fund or Fund Management's other advisory
clients. See the Statement of Additional Information for more detailed
information.
HOW SHARES CAN BE PURCHASED
Shares of the Fund are sold on a continuous basis by INVESCO, as the
Fund's Distributor, at the net asset value per share next calculated after
receipt of a purchase order in good form. No sales charge is imposed upon the
sale of shares of the Fund. To purchase shares of the Fund, send a check made
payable to INVESCO Funds Group, Inc., together with a completed application
form, to:
INVESCO FUNDS GROUP, INC.
Post Office Box 173706
Denver, Colorado 80217-3706
Purchase orders must specify the Fund in which the investment is to be
made.
The minimum initial purchase must be at least $1,000, with subsequent
investments of not less than $50, except that: (1) those shareholders
establishing an EasiVest or direct payroll purchase account, as described below
in the Prospectus section entitled "Services Provided by the Fund," may open an
account without making any initial investment if they agree to make regular,
<PAGE>
minimum purchases of at least $50; (2) those shareholders investing in an
Individual Retirement Account ("IRA"), or through omnibus accounts where
individual shareholder recordkeeping and sub-accounting are not required, may
make initial minimum purchases of $250; (3) Fund Management may permit a lesser
amount to be invested in the Fund under a federal income tax-deferred retirement
plan (other than an IRA, or under a group investment plan qualifying as a
sophisticated investor; and (4) Fund Management reserves the right to reduce or
waive the minimum purchase requirements in its sole discretion where it
determines such action is in the best interests of the Fund.
The 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. Generally, payments for telephone
orders must be received by the Fund within three business days or the
transaction may be cancelled. In the event of such cancellation, the purchaser
will be held responsible for any loss resulting from a decline in the value of
the shares. In order to avoid such losses, purchasers should send payments for
telephone purchases by overnight courier or bank wire. INVESCO has agreed to
indemnify the Fund for any losses resulting from the cancellation of telephone
purchases.
If your check does not clear, or if a telephone purchase must be cancelled
due to 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 by the broker for the handling of the
transaction if the broker so elects. Any investor may deal directly with the
Fund in any transaction. In that event, there is no such charge. INVESCO may
from time to time make payments from its revenues to securities dealers and
other financial institutions that provide distribution-related and/or
administrative services for the Fund.
<PAGE>
The Fund reserves the right in its sole discretion to reject any order for
purchase of its shares (including purchases by exchange) when, in the judgment
of Fund Management, such rejection is in the best interest of the Fund.
Net asset value per share is computed once each day that the New York
Stock Exchange is open as of the close of regular trading on that Exchange
(usually 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 the Fund's securities plus the value of its other
assets (including dividends and interest accrued but not collected), less all
liabilities (including accrued expenses), by the number of outstanding shares of
the Fund. If market quotations are not readily available, a security or other
asset will be valued at fair value as determined in good faith by the board of
directors. Debt securities with remaining maturities of 60 days or less at the
time of purchase will be valued at amortized cost, absent unusual circumstances,
so long as the Company's board of directors believes that such value represents
fair value.
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.
Reinvestment of Distributions. Dividends and other distributions are
automatically reinvested in additional shares of the Fund at the net asset value
per share of the Fund in effect on the ex-dividend date. A shareholder may,
however, elect to reinvest dividends and other distributions in certain of the
other no-load mutual funds advised and distributed by INVESCO, or to receive
payment of all dividends and other distributions in excess of $10.00 by check by
giving written notice to INVESCO at least two weeks prior to the record date on
which the change is to take effect. Further information concerning these options
can be obtained by contacting INVESCO.
<PAGE>
Periodic Withdrawal Plan. A Periodic Withdrawal Plan is available to
shareholders who own or purchase shares of any mutual funds advised by INVESCO
having a total value of $10,000 or more; provided, however, that at the time the
Plan is established, the shareholder owns shares having a value of at least
$5,000 in the fund from which 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 Opportunity
Funds, Inc., INVESCO Growth Fund, Inc., INVESCO Income Funds, Inc., INVESCO
Industrial Income Fund, Inc., INVESCO International Funds, Inc., INVESCO Money
Market Funds, Inc., INVESCO Multiple Asset Funds, Inc., INVESCO Specialty Funds,
Inc., INVESCO Strategic Portfolios, Inc., INVESCO Tax-Free Income Funds, Inc.,
INVESCO Value Trust.
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
determine whether to do so based on a consideration of both the number of
exchanges any particular shareholder or group of shareholders has requested and
<PAGE>
the time period over which those exchange requests have been made, together
with the level of expense to the Fund which will result from effecting
additional exchange requests. The exchange privilege 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 (the "1940 Act"), 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 one or more
of the mutual funds distributed by INVESCO may arrange for a fixed dollar amount
of their fund shares to be automatically exchanged for shares of any other
INVESCO mutual fund listed under "Exchange Privilege" on a monthly basis. The
minimum monthly exchange in this program is $50.00. This automatic exchange
program can be changed by the shareholder at any time by notifying INVESCO at
least two weeks prior to the date the change is to be made. Further information
regarding this service can be obtained by contacting INVESCO.
EasiVest. For shareholders who want to maintain a schedule of monthly
investments, EasiVest uses various methods to draw a preauthorized amount from
the shareholder's bank account to purchase Fund shares. This automatic
investment program can be changed by the shareholder at any time by writing to
INVESCO at least two weeks prior to the date the change is to be made. Further
information regarding this service can be obtained by contacting INVESCO.
Direct Payroll Purchase. Shareholders may elect to have their 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-Deferred Retirement Plans. Shares of the Fund may be purchased for
self-employed individual retirement plans, IRAs, simplified employee pension
plans, and corporate retirement plans. In addition, shares can be used to fund
tax qualified plans established under Section 403(b) of the Internal Revenue
Code 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
<PAGE>
accounts. IRAs receive the confirmations and quarterly statements described
under "Shareholder Accounts." For complete information, including prototype
forms and service charges, call INVESCO at the telephone number listed on the
cover of this Prospectus or send a written request to: Retirement Services,
INVESCO Funds Group, Inc., Post Office Box 173706, Denver, Colorado 80217-3706.
HOW TO REDEEM SHARES
Shares of the Fund may be redeemed at any time at their current net asset
value per share next determined after a request in proper form is received at
the Fund's office. (See "How Shares Can Be Purchased.") Net asset value per
share at the time of 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, or an emergency as defined by the Securities and
Exchange Commission exists. If the shares to be redeemed were purchased by check
and that check has not yet cleared, payment will be made promptly upon clearance
of the purchase check (which may take up to 15 days).
If a shareholder participates in EasiVest, the Fund's automatic monthly
investment program, and redeems all of the shares in his Fund account, INVESCO
will terminate any further EasiVest purchases unless otherwise instructed by the
shareholder.
Because of the high relative costs of handling small accounts, should the
value of any shareholder's account fall below $250 as a result of shareholder
action, the Fund reserves the right to effect the involuntary redemption of all
shares in such account, in which case the account would be liquidated and the
proceeds forwarded to the shareholder. Prior to any such redemption, a
shareholder will be notified and given 60 days to increase the value of the
account to $250 or more.
<PAGE>
Fund shareholders (other than shareholders holding Fund shares in accounts
of IRA plans) may request expedited redemption of shares having a minimum value
of $250 (or redemption of all shares if their value is less than $250) held in
accounts maintained in their name by telephoning redemption instructions to
INVESCO, using the telephone number on the cover of this Prospectus. The
redemption proceeds, at the shareholder's option, either will be mailed to the
address listed for the shareholder's Fund account, or wired (minimum of $1,000)
or mailed to the bank which the shareholder has designated to receive the
proceeds of telephone redemptions. The Fund charges no fee for effecting such
telephone redemptions. Unless Fund Management permits a larger redemption
request to be placed by telephone, a shareholder may not place a redemption
request by telephone in excess of $25,000. These telephone redemption privileges
may be modified or terminated in the future at the discretion of Fund
Management.
For INVESCO Trust Company-sponsored federal income tax- deferred
retirement plans, the term "shareholders" is defined to mean plan trustees that
file a written request to be able to redeem Fund shares by telephone.
Shareholders should understand that, while the Fund will attempt to process all
telephone redemption requests on an expedited basis, there may be times,
particularly in periods of severe economic or market disruption, when (a) they
may encounter difficulty in placing a telephone redemption request, and (b)
processing telephone redemptions may require up to seven days following receipt
of the telephone redemption request, or additional time because of postponements
resulting from the unusual circumstances set forth above.
The privilege of redeeming Fund shares by telephone is available to
shareholders automatically unless expressly declined. By signing a new account
Application, a Telephone 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.
TAXES, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Taxes. The Fund intends to distribute to shareholders substantially all of
its net investment income, net capital gains, and net gains from foreign
currency transactions if any, in order to continue to qualify for tax treatment
as a regulated investment company. Thus, the Fund does not expect to pay any
federal income or excise taxes.
Unless shareholders are exempt from income taxes, they must include all
dividends and capital gain distributions in taxable income for federal, state
and local income tax purposes. Dividends and other distributions are taxable
whether they are received in cash or automatically distributed in shares of the
Fund or another fund in the INVESCO group.
<PAGE>
The Fund may be subject to withholding of foreign taxes on dividends or
interest it receives on foreign securities. Foreign taxes withheld will be
treated as an expense of the Fund unless the Fund meets the qualifications to
enable it to pass these taxes through to shareholders for use by them as a
foreign tax credit or deduction.
Shareholders may be subject to backup withholding of 31% on dividends,
capital gain distributions and redemption proceeds. Unless a shareholder is
subject to backup withholding for other reasons, the shareholder can avoid
backup withholding on his Fund account by ensuring that INVESCO has a correct,
certified tax identification number.
Dividends and Capital Gain Distributions. The Fund earns ordinary or net
investment income in the form of dividends and interest on its investments. The
Fund's policy is to distribute substantially all of this income, less Fund
expenses, to shareholders on an annual basis, at the discretion of the Company's
board of directors.
In addition, the Fund realizes capital gains and losses when it sells
securities for more or less than it paid. If total gains on sales exceed total
losses (including losses carried forward from previous years), the Fund has a
net realized capital gain. Net realized capital gains, if any, are distributed
to shareholders at least annually, usually in December.
Dividends and capital gain distributions are paid to shareholders who hold
shares on the record date of the distribution regardless of how long the shares
have been held. The Fund's share price will then drop by the amount of the
distribution on the day the distribution is made. If a shareholder purchases
shares immediately prior to the distribution, the shareholder will, in effect,
have "bought" the distribution by paying the full purchase price, a portion of
which is then returned in the form of a taxable distribution.
At the end of each year, information regarding the tax status of dividends
and capital gain distributions is provided to shareholders. Net realized capital
gains are divided into short- term and long-term gains depending upon how long
the Fund held the security which gave rise to the gains. The capital gains
distribution consists of long-term capital gains which are taxed at the capital
gains rate. Short-term capital gains are included with income from dividends and
interest as ordinary income and are paid to shareholders as dividends.
Shareholders also may realize capital gains or losses when they sell their
Fund shares at more or less than the price originally paid.
Shareholders are encouraged to consult their tax advisers with respect to
these matters. For further information see "Dividends, Capital Gain
Distributions and Taxes" in the Statement of Additional Information.
ADDITIONAL INFORMATION
Voting Rights. All shares of the Fund have equal voting rights based on
one vote for each share owned and a corresponding fractional vote for each
fractional share owned. 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
<PAGE>
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 1940 Act. 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. If permitted by applicable
laws and policies then in effect, 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 an annual fee of ^ $20.00 per shareholder
account or omnibus account participant. The transfer agency fee is not charged
to each shareholder's or participant's account, but is an expense of the Fund to
be paid from the Fund's assets. Registered broker-dealers, third party
administrators of tax-qualified retirement plans and other entities, including
affiliates of INVESCO, may provide sub-transfer agency services to the Fund
which reduce or eliminate the need for identical services to be provided on
behalf of the Fund by INVESCO. In such cases, INVESCO may pay the third party an
annual sub-transfer agency or record-keeping fee of up to ^ $20.00 per
participant in the third party's omnibus account out of the transfer agency fee
which is paid to INVESCO by the Fund.
<PAGE>
INVESCO DIVERSIFIED FUNDS, INC.
A no-load mutual fund seeking
long-term capital growth.
INVESCO SMALL COMPANY FUND
PROSPECTUS
^ December 1, 1996
To receive general information and prospectuses on any of INVESCO's funds, or
retirement plans, or to obtain current account or price information or responses
to other questions, call toll-free:
1-800-525-8085
To reach PAL, your 24-hour Personal Account Line, call:
1-800-424-8085
You can find us on the World Wide Web:
http://www.invesco.com
Or write to:
INVESCO Funds Group, Inc., Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
If you're in Denver, please visit one of our convenient Investor Centers:
Cherry Creek
155-B Fillmore Street
Denver Tech Center
7800 E. Union Avenue
Lobby Level
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
^ December 1, 1996
INVESCO DIVERSIFIED FUNDS, INC.
A no-load mutual fund seeking
long-term capital growth
Address: Mailing Address:
7800 E. Union Avenue Post Office Box 173706
Denver, Colorado 80237 Denver, Colorado 80217-3706
Telephone:
In continental U.S., 1-800-525-8085
- --------------------------------------------------------------------------------
INVESCO DIVERSIFIED FUNDS, INC. (the "Company") is a diversified, no-load
management investment company currently consisting of one portfolio of
investments, the INVESCO Small Company Fund (the "Fund"). INVESCO Small Company
Fund seeks long-term capital growth. Additional funds may be offered in the
future.
INVESCO SMALL COMPANY FUND
The INVESCO Small Company Fund seeks to achieve its investment objective
through the investment of at least 65% of its net assets 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").
A Prospectus for the Fund dated ^ December 1, 1996 which provides the
basic information you should know before investing in the Fund, may be obtained
without charge from INVESCO Funds Group, Inc., Post Office Box 173706, Denver,
Colorado 80217-3706. This Statement of Additional Information is not a
Prospectus, but contains information in addition to and more detailed than that
set forth in the Prospectus. It is intended to provide additional information
regarding the activities and operations of the Fund and should be read in
conjunction with the Prospectus.
Investment Adviser and Distributor: INVESCO FUNDS GROUP, INC.
<PAGE>
TABLE OF CONTENTS
Page
INVESTMENT POLICIES AND RESTRICTIONS 32
THE FUND AND ITS MANAGEMENT 39
HOW SHARES CAN BE PURCHASED 50
HOW SHARES ARE VALUED 50
FUND PERFORMANCE 51
SERVICES PROVIDED BY THE FUND 52
TAX-DEFERRED RETIREMENT PLANS 53
HOW TO REDEEM SHARES 53
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES 54
INVESTMENT PRACTICES 56
ADDITIONAL INFORMATION 58
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
Reference is made to the section entitled "Investment Objective and
Policies" in the Prospectus for a discussion of the investment objective and
policies of the Fund. The following is additional information concerning the
Fund's investment policies.
Loans of Securities. As described in the Fund's Prospectus, the Fund may
lend its portfolio securities to brokers, dealers, and other financial
institutions, provided that such loans are callable at any time by the Fund and
are at all times secured by collateral consisting of cash or securities issued
or guaranteed by the United States government or its agencies, or any
combination thereof, equal to at least the market value, determined daily, of
the loaned securities. The advantage of such loans is that 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. Loans will
be made only to firms deemed by the Adviser or Sub-Adviser (under procedures
established by the Company's board of directors) to be creditworthy and when the
amount of interest to be received justifies the inherent risks. A loan may be
terminated by the borrower on one business day's notice, or by the Fund at any
time. If at any time the borrower fails to maintain the required amount of
collateral (at least 100% of the market value of the borrowed securities), the
Fund will require the deposit of additional collateral not later than the
business day following the day on which a collateral deficiency occurs or the
collateral appears inadequate. If the deficiency is not remedied by the end of
that period, the Fund will use the collateral to replace the securities while
holding the borrower liable for any excess of replacement cost over collateral.
Upon termination of the loan, the borrower is required to return the securities
to the Fund. Any gain or loss during the loan period would inure to the Fund.
Futures and Options on Futures. As described in the Fund's Prospectus, the
Fund may enter into futures contracts, and purchase and sell ("write") options
to buy or sell futures contracts. The Fund will comply with and adhere to all
limitations in the manner and extent to which it effects transactions in futures
and options on such futures currently imposed by the rules and policy guidelines
of the Commodity Futures Trading Commission as conditions for exemption of a
mutual fund, or investment advisers thereto, from registration as a commodity
pool operator. Under those restrictions, the Fund will not, as to any positions,
whether long, short or a combination thereof, enter into futures and options
thereon for which the aggregate initial margins and premiums exceed 5% of the
fair market value of its assets after taking into account unrealized profits and
losses on options it has entered into. In the case of an option that is
"in-the-money," as defined in the Commodity Exchange Act (the "CEA"), the
in-the-money amount may be excluded in computing such 5%. (In general a call
option on a future is "in-the-money" if the value of the future exceeds the
exercise ("strike") price of the call; a put option on a future is
"in-the-money" if the value of the future which is the subject of the put is
exceeded by the strike price of the put.) The Fund may use futures and options
thereon solely for bona fide hedging or for other non-speculative purposes
within the meaning and intent of the applicable provisions of the CEA. As to
long positions which are used as part of the Fund's portfolio strategies and are
incidental to its activities in the underlying cash market, the "underlying
commodity value" of the Fund's futures and options thereon must not exceed the
sum of (i) cash set aside in an identifiable manner, or short-term U.S. debt
obligations or other dollar-denominated high-quality, short-term money
instruments so set aside, plus sums deposited on margin; (ii) cash proceeds from
<PAGE>
existing investments due in 30 days; and (iii) accrued profits held at the
futures commission merchant. The "underlying commodity value" of a future is
computed by multiplying the size of the future by the daily settlement price of
the future. For an option on a future, that value is the underlying commodity
value of the future underlying the option.
Unlike when the Fund purchases or sells a security, no price is paid or
received by the Fund upon the purchase or sale of a futures contract. Instead,
the Fund will be required to deposit in its segregated asset account an amount
of cash or qualifying securities (currently U.S. Treasury bills), currently in a
minimum amount of $15,000. This is called "initial margin." Such initial margin
is in the nature of a performance bond or good faith deposit on the contract.
However, since losses on open contracts are required to be reflected in cash in
the form of variation margin payments, the Fund may be required to make
additional payments during the term of the contracts to its broker. Such
payments would be required, for example, where, during the term of an interest
rate futures contract purchased by the Fund, there was a general increase in
interest rates, thereby making the Fund's portfolio securities less valuable. In
all instances involving the purchase of financial futures contracts by the Fund,
an amount of cash together with such other securities as permitted by applicable
regulatory authorities to be utilized for such purpose, at least equal to the
market value of the futures contracts, will be deposited in a segregated account
with the Fund's custodian to collateralize the position. At any time prior to
the expiration of a futures contract, the Fund may elect to close its position
by taking an opposite position which will operate to terminate the Fund's
position in the futures contract. For a more complete discussion of the risks
involved in futures and options on futures and other securities, refer to
Appendix A ("Description of Futures, Options and Forward Contracts").
Where futures are purchased to hedge against a possible increase in the
price of a security before the Fund is able in an orderly fashion to invest in
the security, it is possible that the market may decline instead. If the Fund,
as a result, concluded not to make the planned investment at that time because
of concern as to possible further market decline or for other reasons, the Fund
would realize a loss on the futures contract that is not offset by a reduction
in the price of securities purchased.
In addition to the possibility that there may be an imperfect correlation
or no correlation at all between movements in the futures contracts and the
portion of the portfolio being hedged, the price of futures may not correlate
perfectly with movements in the prices due to certain market distortions. All
participants in the futures market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions which
could distort the normal relationship between underlying instruments and the
value of the futures contract. Moreover, the deposit requirements in the futures
market are less onerous than margin requirements in the securities market and
may therefore cause increased participation by speculators in the futures
market. Such increased participation may also cause temporary price distortions.
Due to the possibility of price distortion in the futures market and because of
the imperfect correlation between movements in the underlying instrument and
movements in the prices of futures contracts, the value of futures contracts as
a hedging device may be reduced.
<PAGE>
In addition, if the Fund has insufficient available cash, it may at times
have to sell securities to meet variation margin requirements. Such sales may
have to be effected at a time when it may be disadvantageous to do so.
Options on Futures Contracts The Fund may buy and write options on futures
contracts for hedging purposes. The purchase of a call option on a futures
contract is similar in some respects to the purchase of a call option on an
individual security. Depending on the pricing of the option compared to either
the price of the futures contract upon which it is based or the price of the
underlying instrument, ownership of the option may or may not be less risky than
ownership of the futures contract or the underlying instrument. As with the
purchase of futures contracts, when the Fund is not fully invested it may buy a
call option on a futures contract to hedge against a market advance.
The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the security or foreign currency which is
deliverable under, or of the index comprising, the futures contract. If the
futures price at the expiration of the option is below the exercise price, the
Fund will retain the full amount of the option premium which provides a partial
hedge against any decline that may have occurred in the Fund's portfolio
holdings. The writing of a put option on a futures contract constitutes a
partial hedge against increasing prices of the security or foreign currency
which is deliverable under, or of the index comprising, the futures contract. If
the futures price at expiration of the option is higher than the exercise price,
the Fund will retain the full amount of the option premium which provides a
partial hedge against any increase in the price of securities which the Fund is
considering buying. If a call or put option which the Fund has written is
exercised, the Fund will incur a loss which will be reduced by the amount of the
premium it received. Depending on the degree of correlation between change in
the value of its portfolio securities and changes in the value of the futures
positions, the Fund's losses from existing options on futures may to some extent
be reduced or increased by changes in the value of portfolio securities.
The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities. For
example, the Fund may buy a put option on a futures contract to hedge the Fund's
portfolio against the risk of falling prices.
The amount of risk the Fund assumes when it buys an option on a futures
contract is the premium paid for the option plus related transaction costs. In
addition to the correlation risks discussed above, the purchase of an option
also entails the risk that changes in the value of the underlying futures
contract will not be reflected fully in the value of the options bought.
Foreign Securities
As discussed in the Fund's Prospectus, the Fund may invest up to 25% of
its total assets, at the time of purchase, in securities of foreign issuers.
There is generally less publicly available information, reports and ratings
about foreign companies and other foreign issuers than that which is available
about companies and issuers in the United States. Foreign issuers are also
generally subject to fewer uniform accounting and auditing and financial
<PAGE>
reporting standards, practices, and requirements as compared to those
applicable to United States issuers.
The Fund's investment adviser or sub-adviser (collectively, "Fund
Management") will normally purchase foreign securities in over-the-counter
markets or on exchanges located in the countries in which the respective
principal offices of the issuers of the various equity securities are located,
as such markets or exchanges are generally the best available market for foreign
securities. Foreign securities markets are generally not as developed or
efficient as those in the United States. While growing in volume, they usually
have substantially less volume than the New York Stock Exchange, and securities
of some foreign issuers are less liquid and more volatile than securities of
comparable United States issuers. Fixed commissions on foreign exchanges are
generally higher than negotiated commissions on United States exchanges,
although the Fund will endeavor to achieve favorable net results on its
portfolio transactions. There is generally less government supervision and
regulation of securities exchanges, brokers and listed issuers than in the
United States.
With respect to certain foreign countries, there is the possibility of
adverse changes in investment or exchange control regulations, expropriation or
confiscatory taxation, limitations on the removal of funds or other assets of
the Fund, political or social instability, or diplomatic developments which
could affect United States investments in those countries. Moreover, the
economics of individual countries may differ favorably or unfavorably from the
United States' economy in such respects as growth of gross national product,
rate of inflation, capital reinvestment, resource self-sufficiency and balance
of payment position.
The dividends and interest payable on certain of the Fund's foreign
securities may be subject to foreign withholding taxes, thus reducing the net
amount of income available for distribution to the Fund's shareholders.
Restricted/144A Securities
In recent years, a large institutional market has developed for certain
securities that are not registered under the Securities Act of 1933 (the "1993
Act"). Institutional investors generally will not seek to sell these instruments
to the general public, but instead will often depend on an efficient
institutional market in which such unregistered securities can be readily resold
or on an issuer's ability to honor a demand for repayment. Therefore, the fact
that there are contractual or legal restrictions on resale to the general public
or certain institutions is not dispositive of the liquidity of such investments.
Rule 144A under the 1993 Act establishes a "safe harbor" from the
registration requirements of the 1993 Act for resales of certain securities to
qualified institutional buyers. Institutional markets for restricted securities
that might develop as a result of Rule 144A could provide both readily
ascertainable values for restricted securities and the ability to liquidate an
investment in order to satisfy share redemption orders. An insufficient number
of qualified institutional buyers interested in purchasing Rule 144A-eligible
securities held by a Fund, however, could affect adversely the marketability of
such portfolio securities and the Fund might be unable to dispose of such
securities promptly or at reasonable prices.
<PAGE>
Repurchase Agreements
As discussed in the Fund's Prospectus, the Fund may enter into repurchase
agreements with commercial banks, registered brokers or registered government
securities dealers. A repurchase agreement is an agreement under which the Fund
acquires a debt security subject to resale to the seller at an agreed upon price
and date (normally, the next business day). A repurchase agreement may be
considered a loan collateralized by securities. The resale price reflects an
agreed upon interest rate effective for the period the instrument is held by the
Fund and is unrelated to the interest rate on the underlying security. In these
transactions, the securities acquired by the Fund (including accrued interest
earned thereon) must have a total value in excess of the value of the repurchase
agreement and are held by the Fund's Custodian Bank until repurchased. In
addition, the Company's board of directors will monitor the Fund's repurchase
agreement transactions and will establish guidelines and standards for review by
the investment adviser or sub-adviser of the creditworthiness of any bank,
broker or dealer party to a repurchase agreement with the Fund. The Fund will
not enter into a repurchase agreement maturing in more than seven days if as a
result more than 15% of the Fund's net assets would be invested in such
repurchase agreements and other illiquid securities.
The use of repurchase agreements involves certain risks. For example, if
the other party to the agreement defaults on its obligation to repurchase the
underlying security at a time when the value of the security has declined, the
Fund may incur a loss upon disposition of the security. If the other party to
the agreement becomes insolvent and subject to liquidation or reorganization
under the Bankruptcy Code or other laws, a court may determine that the
underlying security is collateral for a loan by the Fund not within the control
of the Fund and therefore the realization by the Fund on such collateral may
automatically be stayed. Finally, it is possible that the Fund may not be able
to substantiate its interest in the underlying security and may be deemed an
unsecured creditor of the other party to the agreement. While the Fund's
management acknowledges these risks, it is expected that they can be controlled
through careful monitoring procedures.
Investment Restrictions. As described in the Prospectus, the Fund is
subject to certain investment restrictions which are fundamental and may not be
changed with respect to the Fund without the prior approval of the holders of a
majority, as defined in the Investment Company Act of 1940 (the "1940 Act"), of
the outstanding voting securities of the Fund. For purposes of the Fund's
investment restrictions and its investment policies, 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.
Under the Fund's fundamental investment restrictions, the Fund may not:
(1) With respect to seventy-five percent (75%) of the value of its
total assets, purchase the securities of any one issuer
(except cash items and Government securities" as defined
under the 1940 Act, as amended (the "1940 Act")), if the
purchase would cause the Fund to have more than 5% of the
value of its total assets invested in the securities of such
issuer or to own more than 10% of the outstanding voting
securities of such issuer;
<PAGE>
(2) Borrow money, except that the Fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) and may enter
into reverse repurchase agreements in an aggregate amount not
exceeding 33 1/3% of the value of its total assets (including the
amount borrowed) less liabilities (other than borrowings). Any
borrowings that come to exceed 33 1/3% of the value of the Fund's
total assets by reason of a decline in net assets will be reduced
within three business days to the extent necessary to comply with
the 33 1/3% limitation. This restriction shall not prohibit deposits
of assets to margin or guarantee positions in futures, options,
swaps, or forward contracts, or the segregation of assets in
connection with such contracts.
(3) Invest more than 25% of the value of its assets in any particular
industry (other than Government securities).
(4) Invest directly in real estate or interests in real estate; however,
the Fund may own debt or equity securities issued by companies
engaged in those businesses.
(5) Purchase or sell physical commodities other than foreign currencies
unless acquired as a result of ownership of securities (but this
shall not prevent the Fund from purchasing or selling options,
futures, and forward contracts or from investing in securities or
other instruments backed by physical commodities).
(6) Lend any security or make any other 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 purchases of commercial paper, debt
securities or to repurchase agreements.)
(7) Act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the
disposition of portfolio securities of the Fund.
In applying the industry concentration investment restriction (no. 3
above), the Fund uses an industry classification system based on the O'Neil
Database published by William O'Neil & Co., Inc.
As a fundamental policy in addition to the above, the Fund may,
notwithstanding any other investment policy or limitation (whether or not
fundamental), 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.
Additional investment restrictions adopted by the Company on behalf of the
Fund and which may be changed by the directors, at their discretion, without
shareholder approval, include the following:
(1) The Fund's investments in warrants, valued at the lower of cost or
market, may not exceed 5% of the value of its net assets. Included
within that amount, but not to exceed 2% of the value of the Fund's
net assets, may be warrants that are not listed on the New York or
American Stock Exchanges.
<PAGE>
Warrants acquired by the Fund in units or attached to securities
shall be deemed to be without value.
(2) The Fund will not (i) enter into any futures contracts or options on
futures contracts if immediately thereafter the aggregate margin
deposits on all outstanding futures contracts positions held by the
Fund and premiums paid on outstanding options on futures contracts,
after taking into account unrealized profits and losses, would
exceed 5% of the market value of the total assets of the Fund, or
(ii) enter into any futures contracts if the aggregate amount of the
Fund's commitments under outstanding futures contracts positions of
the Fund would exceed the market value of the total assets of the
Fund.
(3) The Fund does not currently intend to sell securities short, unless
it owns or has the right to obtain securities equivalent in kind and
amount to the securities sold short, and provided that transactions
in options and forward futures contracts are not deemed to
constitute selling securities short.
(4) The Fund does not currently intend to purchase securities on margin,
except that the Fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that
margin payments and other deposits in connection with transactions
in options, futures, and forward contracts shall not be deemed to
constitute purchasing securities on margin.
(5) The Fund does not currently intend to (i) purchase securities of
other investment companies, except in the open market where no
commission except the ordinary broker's commission is paid, or (ii)
purchase or retain securities issued by other open-end investment
companies. Limitations (i) and (ii) do not apply to money market
funds or to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or
merger. If the Fund invests in a money market fund, the Fund's
investment adviser will reduce its advisory fee by the amount of any
investment advisory and administrative services fees paid to the
investment manager of the money market fund.
(6) The Fund may not mortgage or pledge any securities owned or held by
the Fund in amounts that exceed, in the aggregate, 15% of the Fund's
net asset value, provided that this limitation does not apply to
reverse repurchase agreements or in the case of assets deposited to
margin or guarantee positions in futures, options, swaps or forward
contracts or placed in a segregated account in connection with such
contracts.
(7) The Fund does not currently intend to invest directly in oil, gas,
or other mineral development or exploration programs or leases;
however, the Fund may own debt or equity securities of companies
engaged in those businesses.
(8) The Fund does not currently intend to purchase any illiquid
securities or enter into a repurchase agreement if, as a result,
more than 15% of its net assets would be invested in repurchase
agreements not entitling the holder to payment of principal and
interest within seven days and in securities that are illiquid by
<PAGE>
virtue of legal or contractual restrictions on resale or for which
there is no readily available market. The board of directors, or
the Fund's investment adviser acting pursuant to authority delegated
by the board of directors, may determine that a readily available
market exists for securities eligible for resale pursuant to Rule
144A under the Securities Act of 1933, or any successor to such
rule, and that such securities are not subject to the foregoing
limitation.
(9) The Fund may not invest in companies for the purpose of exercising
control or management.
With respect to the non-fundamental investment restriction (8) above, the
board of directors has delegated to the Fund's investment adviser the authority
to determine whether a liquid market exists for securities eligible for resale
pursuant to Rule 144A under the 1933 Act, or any successor to such rule, and
that whether or not such securities are subject to the non-fundamental
restriction (8) above. Under guidelines established by the board of directors,
the adviser will consider the following factors, among others, in making this
determination: (1) the unregistered nature of a Rule 144A security, (2) the
frequency of trades and quotes for the security; (3) the number of dealers
willing to purchase or sell the security and the number of other potential
purchasers; (4) dealer undertakings to make a market in the security; and (5)
the nature of the security and the nature of marketplace trades (e.g., the time
needed to dispose of the security, the method of soliciting offers and the
mechanics of transfer).
The Company has voluntarily undertaken to ^ comply with the Guidelines for
Registration of Master Fund/Feeder Funds adopted by the membership of the North
American Securities Administrators Association, Inc. then in effect in the event
that, in the future, any of the ^ Funds is converted into a feeder fund in a
master fund/feeder fund structure. The Company has additionally voluntarily
undertaken that, in the event that in the future the Company determines that any
of the Funds will be so converted, and if the NASAA Guidelines at such time
include a requirement for shareholder approval of conversion of a fund into a
feeder fund in a Master Fund/Feeder Fund structure, the Company expressly agrees
to obtain such approval prior to effecting the conversion.
THE FUND AND ITS MANAGEMENT
The Company. The Company was incorporated on April 2, 1993, under the laws
of Maryland.
The Investment Adviser. INVESCO Funds Group, Inc., a Delaware corporation
("INVESCO"), is employed as the Company's investment adviser. INVESCO was
established in 1932 and also serves as an investment adviser to INVESCO Dynamics
Fund, Inc., INVESCO Emerging Opportunity Funds, Inc., INVESCO Growth Fund, Inc.,
INVESCO Income Funds, Inc., INVESCO Industrial Income Fund, Inc., INVESCO
International Funds, Inc., INVESCO Money Market Funds, Inc., INVESCO Multiple
Asset Funds, Inc., INVESCO Specialty Funds, Inc., INVESCO Strategic Portfolios,
Inc., INVESCO Tax-Free Income Funds, Inc., INVESCO Value Trust, and INVESCO
Variable Investment Funds, Inc.
The Sub-Adviser. INVESCO, as investment adviser, has contracted with
INVESCO Management & Research, Inc. ("INVESCO Management") to provide investment
advisory and research services to the Company. INVESCO Management has the
<PAGE>
primary responsibility for providing portfolio investment management
services to the Funds.
INVESCO is an indirect wholly-owned subsidiary of INVESCO PLC, a
publicly-traded holding company traded on the New York and London Stock
Exchanges organized in 1935. Through subsidiaries located in London, Denver,
Atlanta, Boston, Louisville, Dallas, Tokyo, Hong Kong, and the Channel Islands,
INVESCO PLC provides investment services around the world. INVESCO was acquired
by INVESCO PLC in 1982 and, as of July 31, ^ 1996, managed 14 mutual funds,
consisting of ^ 39 separate portfolios, on behalf of over ^ 821,000
shareholders. INVESCO PLC's other North American subsidiaries include the
following:
--INVESCO Capital Management, Inc. of Atlanta, Georgia manages
institutional investment portfolios, consisting primarily of discretionary
employee benefit plans for corporations and state and local governments, and
endowment funds. INVESCO Capital Management, Inc. is the sole shareholder of
INVESCO Services, Inc., a registered ^ broker-dealer whose primary business is
the distribution of shares of two registered investment companies.
--INVESCO Management & Research, Inc. (formerly Gardner and Preston Moss,
Inc.) of Boston, Massachusetts primarily manages pension and endowment accounts.
--PRIMCO Capital Management, Inc. of Louisville, Kentucky specializes in
managing stable return investments, principally on behalf of Section 401(k)
retirement plans.
--INVESCO Realty Advisors, Inc. of Dallas, Texas is responsible for
providing advisory services in the U.S. real estate markets for INVESCO PLC's
clients worldwide. Clients include corporate plans, public pension funds as well
as endowment and foundation accounts.
The corporate headquarters of INVESCO PLC are located at 11 Devonshire
Square, London, EC2M 4YR, England.
As indicated in the Prospectus, INVESCO and INVESCO Management permit
investment and other personnel to purchase and sell securities for their own
accounts in accordance with a compliance policy governing personal investing by
directors, officers and employees of INVESCO, INVESCO Management and their North
American affiliates. The policy requires officers, inside directors, investment
and other personnel of INVESCO, INVESCO Management and their North American
affiliates to pre- clear all transactions in securities not otherwise exempt
under the policy. Requests for trading authority will be denied when, among
other reasons, the proposed personal transaction would be contrary to the
provisions of the policy or would be deemed to adversely affect any transaction
then known to be under consideration for or to have been effected on behalf of
any client account, including the Fund.
In addition to the pre-clearance requirement described above, the policy
subjects officers, inside directors, investment and other personnel of INVESCO,
INVESCO Management and their North American affiliates to various trading
restrictions and reporting obligations. All reportable transactions are reviewed
for compliance with the policy. The provisions of this poicy are administered by
and subject to exceptions authorized by INVESCO or INVESCO Management.
Investment Advisory Agreement. INVESCO serves as investment adviser
pursuant to an investment advisory agreement (the "Agreement") with the Company
<PAGE>
which was approved on April 21, 1993, and October 20, 1993, as revised, by
a vote cast in person by a majority of the directors of the Company, including a
majority of the directors who are not "interested persons" of the Company or
INVESCO at a meeting called for such purpose. The Agreement was approved by
INVESCO Funds Group, Inc. on October 20, 1993, as the then sole shareholder of
the Fund. The Agreement ^ was for an initial term expiring April 30, 1995 and
has been continued by action of the board of directors until April 30, ^ 1997.
Thereafter, the Agreement may be continued from year to year as long as each
such continuance is specifically approved at least annually by the board of
directors of the Company, or by a vote of the holders of a majority, as defined
in the 1940 Act, of the outstanding shares of the Fund. Any such continuance
also must be approved by a majority of the Company's directors who are not
parties to the Agreement or interested persons (as defined in the 1940 Act) of
any such party, cast in person at a meeting called for the purpose of voting on
such continuance. The Agreement may be terminated at any time without penalty by
either party upon sixty (60) days' written notice and terminates automatically
in the event of an assignment to the extent required by the 1940 Act and the
rules thereunder.
The Agreement provides that INVESCO shall manage the investment portfolio
of the Fund in conformity with the Fund's investment policies (either directly
or by delegation to a sub-adviser which may be affiliated with INVESCO).
Further, INVESCO shall perform all administrative, internal accounting
(including computation of net asset value), clerical, statistical, secretarial
and all other services necessary or incidental to the administration of the
affairs of the Fund excluding, however, those services which are the subject of
separate agreement between the Company and INVESCO or any affiliate thereof,
including the distribution and sale of Fund shares and provision of transfer
agency, dividend disbursing agency, and registrar services, and services
furnished under an Administrative Services Agreement with INVESCO discussed
below. Services provided under the Agreement include, but are not limited to:
supplying the Company with officers, clerical staff and other employees, if any,
who are necessary in connection with the Fund's operation; furnishing office
space, facilities, equipment, and supplies; providing personnel and facilities
required to respond to inquiries related to shareholder accounts; conducting
periodic compliance reviews of the Fund's operations; preparation and review of
required documents, reports and filings by INVESCO's in-house legal and
accounting staff (including the prospectus, statement of additional information,
proxy statements, shareholder reports, tax returns, reports to the SEC, and
other corporate documents of the Fund), with the assistance of independent
accountants or attorneys to the extent necessary or desirable; supplying basic
telephone service and other utilities; and preparing and maintaining certain of
the books and records required to be prepared and maintained by the Fund under
the 1940 Act. Expenses not assumed by INVESCO are borne by the Fund.
As full compensation for its advisory services provided to the Company,
INVESCO receives a monthly fee. The fee with respect to INVESCO Small Company
Fund is based upon a percentage of the Fund's average net assets determined
daily at an annual rate of 0.75% of the Fund's average net assets. The advisory
fee is calculated daily at the applicable annual rate and paid monthly. While
the fee is higher than those generally charged by investment advisers to mutual
funds, it is not higher than those charged by most other investment advisers to
funds comparable to the Fund, whose assets are primarily invested in securities
of small companies. For the fiscal ^ years ended July 31, 1996 and 1995 and the
period ended July 31, 1994, the Fund incurred advisory fees in the amount of
<PAGE>
$409,030, $135,262 and $52,145, respectively, prior to the voluntary
absorption of certain Fund expenses by INVESCO and INVESCO Management.
^
Sub-Advisory Agreement. INVESCO Management serves as sub-adviser to the
Fund, pursuant to a sub-advisory agreement (the "Sub-Agreement") with INVESCO
which was approved on October 20, 1993 by a vote cast in person by a majority of
the directors of the Company, including a majority of the directors who are not
"interested persons" of the Company, INVESCO, or INVESCO Management at a meeting
called for such purpose. The Sub-Agreement was approved on October 20, 1993, by
INVESCO as the then sole shareholder of the Fund for an initial term expiring
April 30, 1995. The Sub-Agreement has been continued by action of the board of
directors until April 30, ^ 1997. Thereafter, the Sub- Agreement may be
continued from year to year as long as each such continuance is specifically
approved by the board of directors of the Company, or by a vote of the holders
of a majority, as defined in the 1940 Act, of the outstanding shares of the
Fund. Each such continuance also must be approved by a majority of the directors
who are not parties to the Sub-Agreement or interested persons (as defined in
the 1940 Act) of any such party, cast in person at a meeting called for the
purpose of voting on such continuance. The Sub-Agreement may be terminated at
any time without penalty by either party or the Company upon sixty (60) days'
written notice, and terminates automatically in the event of an assignment to
the extent required by the 1940 Act and the rules thereunder.
The Sub-Agreement provides that INVESCO Management, 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 and in any prospectus and/or statement
of additional information of the Company, as from time to time amended and in
use under the Securities Act of 1933 (the "1933 Act"), as amended, 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
the Sub-Adviser; (e) determining what portion of the Fund should be invested in
the various types of securities authorized for purchase by the Fund; and (f)
making recommendations as to the manner in which voting rights, rights to
consent to Company action and any other rights pertaining to the portfolio
securities of the Fund shall be exercised.
The Sub-Agreement provides that as compensation for its services, INVESCO
Management shall receive from INVESCO, at the end of each month, a fee based on
the average daily value of the Fund's net assets at the annual rates of 0.375%
of the Fund's average net assets. The Sub- Advisory fee is paid by INVESCO, NOT
the Fund.
<PAGE>
Administrative Services Agreement. INVESCO, either directly or through
affiliated companies, provides certain administrative, sub-accounting, and
recordkeeping services to the Fund pursuant to an Administrative Services
Agreement dated April 30, 1993 (the "Administrative Agreement"). The
Administrative Agreement was approved on April 21, 1993, by a vote cast in
person by all of the directors of the Company, including all of the directors
who are not "interested persons" of the Company or INVESCO at a meeting called
for such purpose. The Administrative Agreement was for an initial term of one
year expiring April 30, 1994, and has been continued by action of the board of
directors through April 30, ^ 1997. The Administrative 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
directors who are not parties to the Administrative Agreement or interested
persons (as defined in the 1940 Act) of any such party, cast in person at a
meeting called for the purpose of voting on such continuance. The Administrative
Agreement may be terminated at any time without penalty by INVESCO on sixty (60)
days' written notice, or by the Company upon thirty (30) days' written notice,
and terminates automatically in the event of an assignment unless the Company's
board of directors approves such assignment.
The Administrative Agreement provides that INVESCO shall provide the
following services to the Fund: (A) such sub- accounting and recordkeeping
services and functions as are reasonably necessary for the operation of the
Fund; and (B) such sub-accounting, recordkeeping, and administrative services
and functions, which may be provided by affiliates of INVESCO, as are reasonably
necessary for the operation of Fund shareholder accounts maintained by certain
retirement plans and employee benefit plans for the benefit of participants in
such plans. As full compensation for services provided under the Administrative
Agreement, the Fund pays a monthly fee to INVESCO consisting of a base fee of
$10,000 per year, plus an additional incremental fee computed daily and paid
monthly at an annual rate of 0.015% per year of the average net assets of the
Fund.
During the fiscal ^ years ended July 31, 1996 and 1995 and the period
ended July 31, 1994, the Fund incurred $18,180, $12,705 and $7,709,
respectively, in administrative fees prior to the voluntary absorption of
certain Fund expenses by INVESCO and INVESCO Management.
Transfer Agency Agreement. INVESCO also performs transfer agent, dividend
disbursing agent, and registrar services for the Fund pursuant to a Transfer
Agency Agreement approved by the board of directors of the Company, including a
majority of the Company's directors who are not parties to the Transfer Agency
Agreement or "interested persons" of any such party, on April 21, 1993, for an
initial term expiring April 30, 1994. The Transfer Agency Agreement has been
continued by action of the board of directors until April 30, ^ 1997, and
thereafter may be continued from year to year as long as such continuance is
specifically approved at least annually by the board of directors of the
Company, or by a vote of the holders of a majority of the outstanding shares of
the Fund. Any such continuance must also be approved by a majority of the
Company's directors who are not parties to the Transfer Agency Agreement or
interested persons (as defined by the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such continuance. The
Transfer Agency Agreement may be terminated at any time without penalty by
either party upon sixty (60) days' written notice and terminates automatically
in the event of an assignment.
<PAGE>
The Transfer Agency Agreement provides that the Fund shall pay to INVESCO
an annual fee of ^ $20.00 per shareholder account or omnibus account
participant. This fee is paid monthly at 1/12 of the annual fee and is based
upon the number of shareholder accounts and omnibus account participants in
existence at any time during each month.
During the fiscal ^ years ended July 31, 1996 and 1995 and the period
ended July 31, 1994, the Fund incurred transfer agency fees in the amount of
$47,778, $14,764 and $2,956, respectively, prior to the voluntary absorption of
certain Fund expenses by INVESCO and INVESCO Management.
Officers and Directors of the Company. The overall direction and
supervision of the Company is the responsibility of the board of directors,
which has the primary duty of seeing that the general investment policies and
programs of the Fund are carried out and that the Fund is properly administered.
The officers of the Company, all of whom are officers and employees of, and are
paid by, INVESCO, are responsible for the day-to-day administration of the
Company and the Fund. The investment adviser for the Fund has the primary
responsibility for making investment decisions on behalf of the Fund. These
investment decisions are reviewed by the investment committee of INVESCO.
All of the officers and directors of the Company hold comparable positions
with INVESCO Dynamics Fund, Inc., INVESCO Emerging Opportunity Funds, Inc.,
INVESCO Growth Fund, Inc., INVESCO Income Funds, Inc., INVESCO Industrial Income
Fund, Inc., INVESCO International Funds, Inc., INVESCO Money Market Funds, Inc.,
INVESCO Multiple Asset Funds, Inc., INVESCO Specialty Funds, Inc., INVESCO
Strategic Portfolios, Inc., INVESCO Tax-Free Income Funds, Inc., and INVESCO
Variable Investment Funds, Inc. All of the directors of the Company ^ also serve
as trustees of INVESCO Value Trust. In addition, all of the directors of the
Company also are directors of INVESCO Advisor Funds, Inc. (formerly known as The
EBI Funds); and, with the exception of ^ Mr. Hesser ^, trustees of INVESCO
Treasurer's Series Trust ^. All of the officers of the Company also hold
comparable positions with INVESCO Value Trust. Set forth below is information
with respect to each of the Company's officers and directors. Unless otherwise
indicated, the address of the directors and officers is Post Office Box 173706,
Denver, Colorado 80217-3706. Their affiliations represent their principal
occupations during the past five years.
CHARLES W. BRADY,*+ Chairman of the Board. Chief Executive Officer and
Director of INVESCO PLC, London, England, and of various subsidiaries thereof;
Chairman of the Board of ^ INVESCO Advisor Funds, Inc., INVESCO Treasurer's
Series Trust, and The Global Heath Sciences Fund. Address: 1315 Peachtree
Street, NE, Atlanta, Georgia. Born: May 11, 1935.
FRED A. DEERING,+# Vice Chairman of the Board. Vice Chairman of ^ INVESCO
Advisor Funds, Inc. and INVESCO Treasurer's Series Trust. Trustee of The Global
Health Sciences Fund. Formerly, Chairman of the Executive Committee and Chairman
of the Board of Security Life of Denver Insurance Company, Denver, Colorado;
Director ^ of ING America Life Insurance ^ Company, Urbaine Life Insurance
Company and Midwestern United Life Insurance Company. Address: Security Life
Center, 1290 Broadway, Denver, Colorado. Born: January 12, 1928.
<PAGE>
DAN J. HESSER,+* President and Director. Chairman of the Board, President,
and Chief Executive Officer of INVESCO Funds Group, Inc. and Director of INVESCO
Trust Company. Director of INVESCO Advisor Funds, Inc. Trustee of The Global
Health Sciences Fund. Born: December 27, 1939.
VICTOR L. ANDREWS,** Director. ^ Professor Emeritus, Chairman Emeritus and
Chairman of the CFO Roundtable of the Department of Finance at Georgia State
University, Atlanta, Georgia^; President, Andrews Financial Associates, Inc.
(consulting firm); since October 1984, Director of the Center for the Study of
Regulated Industry at Georgia State University; formerly, member of the
faculties of the Harvard Business School and the Sloan School of Management of
MIT. Dr. Andrews is also a Director of ^ the Southeastern Thrift and Bank Fund,
Inc. and The Sheffield Funds, Inc. Address: ^ 4625 Jettridge Drive, Atlanta,
Georgia. Born: June 23, 1930.
BOB R. BAKER,+** Director. President and Chief Executive Officer of AMC
Cancer Research Center, Denver, Colorado, since January 1989; until mid-December
1988, Vice Chairman of the Board of First Columbia Financial Corporation (a
financial institution), Englewood, Colorado. Formerly, Chairman of the Board and
Chief Executive Officer of First Columbia Financial Corporation. Address: 1775
Sherman Street, #1000, Denver, Colorado. Born: August 7, 1936.
^ LAWRENCE H. BUDNER,# Director. Trust Consultant; prior to June 30, 1987,
Senior Vice President and Senior Trust Officer of InterFirst Bank, Dallas,
Texas. Address: 7608 Glen Albens Circle, Dallas, Texas. Born: July 25, 1930.
DANIEL D. CHABRIS,+# Director. Financial Consultant; Assistant Treasurer of
Colt Industries Inc., New York, New York, from 1966 to 1988. Address: 15
Sterling Road, Armonk, New York. Born: August 1, 1923.
A. D. FRAZIER, JR.,*^,** Director. Executive Vice President of INVESCO PLC
(since November 1996). Formerly, Senior Executive Vice President and Chief
Operating Officer of the Atlanta Committee for the Olympic Games. From 1982 to
1991, Mr. Frazier was employed in various capacities by First Chicago Bank^ .
Trustee of The Global Health Sciences Fund. Director of Magellan Health
Services, Inc. and Charter Medical Corporation, Atlanta, Georgia. Address: 250
Williams Street, Suite 6000, Atlanta, Georgia 30301. Born: June ^ 23, 1944.
HUBERT L. HARRIS, JR.,* Director. President of INVESCO Services, Inc.
(since January 1990). Director of INVESCO PLC and Chief Financial Officer of
INVESCO Individual Services Group. Member of the Executive Committee of the
Alumni Board of Trustees of Georgia Institute of Technology. Address: 1315
Peachtree Street, NE, Atlanta, Georgia. Born: July 15, 1943.
KENNETH T. KING,** Director. Formerly, Chairman of the Board of The Capitol
Life Insurance Company, Providence Washington Insurance Company, and Director of
numerous subsidiaries thereof in the U.S. Formerly, Chairman of the Board of The
Providence Capitol Companies in the United Kingdom and Guernsey. Chairman of the
Board of the Symbion Corporation (a high technology company) until 1987.
Address: 4080 North Circulo Manzanillo, Tucson, Arizona. Born: November 16,
1925.
<PAGE>
JOHN W. MCINTYRE,# Director. Retired. Formerly, Vice Chairman of the Board
of Directors of the Citizens and Southern Corporation and Chairman of the Board
and Chief Executive Officer of the Citizens and Southern Georgia Corporation and
Citizens and Southern National Bank. Director of Golden Poultry Co., Inc.
Trustee of The Global Health Sciences Fund and Gables Residential Trust.
Address: ^ 7 Piedmont Center, Suite 100, Atlanta, Georgia ^. Born: September 14,
1930.
^
GLEN A. PAYNE, Secretary. Senior Vice President, General Counsel and
Secretary of INVESCO Funds Group, Inc. and INVESCO Trust Company since April
1995 and formerly (May 1989 to April 1995) Vice President, Secretary and General
Counsel of INVESCO Funds Group, Inc. and INVESCO Trust Company. Formerly,
employee of a U.S. regulatory agency, Washington, D.C., (June 1973 through May
1989). Born: September 25, 1947.
RONALD L. GROOMS, Treasurer. Senior Vice President and Treasurer of INVESCO
Funds Group, Inc. and INVESCO Trust Company since January 1988. Born: October 1,
1946.
WILLIAM J. GALVIN, JR., Assistant Secretary. Senior Vice President of
INVESCO Funds Group, Inc. and Trust Officer of INVESCO Trust Company ^ since
July 1995 and formerly (August 1992 to July 1995), Vice President of INVESCO
Funds Group, Inc. and Trust Officer of INVESCO Trust Company. Formerly, Vice
President of 440 Financial Group from June 1990 to August 1992 ^ and Assistant
Vice President of Putnam Companies from November 1986 to June 1990. Born: August
21, 1956.
ALAN I. WATSON, Assistant Secretary. Vice President of INVESCO Funds Group,
Inc. and Trust Officer of INVESCO Trust Company. Born: September 14, 1941.
JUDY P. WIESE, Assistant Treasurer. Vice President of INVESCO Funds Group,
Inc. and Trust Officer of INVESCO Trust Company. Born: February 3, 1948.
#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
Investment Company Act of 1940.
**Member of the management liaison committee of the Company.
As of ^ November 11, 1996, officers and directors of the Company, as a
group, beneficially owned less than ^1% of the Company's outstanding shares and
less than ^1% of the Fund's outstanding shares.
<PAGE>
Director Compensation
The following table sets forth, for the fiscal year ended July 31, ^ 1996:
the compensation paid by the Fund to its eight independent directors for
services rendered in their capacities as directors of the Company; the benefits
accrued as Fund 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
Fund. In addition, the table sets forth the total compensation paid by all of
the mutual funds distributed by INVESCO Funds Group, Inc. (including the Fund),
^ INVESCO Advisor Funds, Inc., INVESCO Treasurer's Series Trust and The Global
Health Sciences Fund (collectively, the "INVESCO Complex") to these directors
for services rendered in their capacities as directors or trustees during the
year ended December 31, ^ 1995. As of December 31, ^ 1995, there were ^ 48 funds
in the INVESCO Complex.
Total
Compensa-
Benefits Estimated tion From
Aggregate Accrued As Annual INVESCO
Compensa- Part of Benefits Complex
tion From Company Upon Paid To
Company(1) Expenses(2) Retirement(3) Directors(1)
Fred A.Deering, ^ $1,131 $ ^ 76 $ ^ 64 $87,350
Vice Chairman of
the Board
Victor L. Andrews ^ 1,111 67 70 68,000
Bob R. Baker ^ 1,117 69 94 73,000
Lawrence H. Budner ^ 1,103 72 70 68,350
Daniel D. Chabris ^ 1,119 82 50 73,350
A. D. Frazier, Jr.4 ^ 1,088 0 0 ^ 63,500
Kenneth T. King ^ 1,111 79 58 70,000
John W. McIntyre4 ^ 1,098 0 0 ^ 67,850
--------- ---- ---- ----------
Total ^ $8,878 $445 $406 $571,400
% of Net Assets ^ 0.0190%5 0.0010%5 0.0043%6
<PAGE>
(1)The vice chairman of the board, the chairmen of the audit, management
liaison and compensation committees, and the members of the executive and
valuation committees each receive compensation for serving in such capacities in
addition to the compensation paid to all independent directors.
(2)Represents 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 figures represent the Company's share of the estimated annual
benefits payable by the INVESCO Complex (excluding ^ The Global Health Sciences
Fund which does not participate in any retirement plan) upon the directors'
retirement, calculated using the current method of allocating director
compensation among the funds in the INVESCO Complex. These estimated benefits
assume retirement at age 72 and that the basic retainer payable to the directors
will be adjusted periodically for inflation, for increases in the number of
funds in the INVESCO Complex, and for other reasons during the period in which
retirement benefits are accrued on behalf of the respective directors. This
results in lower estimated benefits for directors who are closer to retirement
and higher estimated benefits for directors who are further from retirement.
With the exception of Messrs. Frazier and McIntyre, each of these directors has
served as a director/trustee of one or more of the funds in the INVESCO Complex
for the minimum five-year period required to be eligible to participate in the
Defined Benefit Deferred Compensation Plan.
(4)Messrs. Frazier and McIntyre began serving as directors of the Company
on April 19, 1995.
(5)Effective November 1, 1996, A. D. Frazier, Jr. was employed by INVESCO
PLC, a company affiliated with INVESCO. Because it was possible that Mr. Frazier
would be employed with INVESCO PLC effective May 1, 1996, he was deemed to be an
"interested person" of the Company and of the other funds in the INVESCO
Complex. Effective November 1, 1996, Mr. Frazier will no longer receive any
director's fees or other compensation from the Company or other funds in the
INVESCO Complex for his service as a director.
(6)Total ^ as a percentage of the Fund's net assets as of July 31, ^ 1996.
^(7)Total as a percentage of the net assets of the INVESCO Complex as of
December 31, ^ 1995.
Messrs. Bishop, ^ Harris, Hesser and Frazier (effective November 1, 1996),
as "interested persons" of the Company and other funds in the INVESCO Complex,
receive compensation as officers or employees of INVESCO or its affiliated
companies, and do not receive any director's fees or other compensation from the
Company or other funds in the INVESCO Complex for their services as directors.
<PAGE>
The boards of directors/trustees of the mutual funds managed by INVESCO, ^
INVESCO Advisor Funds, Inc. and INVESCO Treasurer's Series Trust have adopted a
Defined Benefit Deferred Compensation Plan for the non-interested directors and
trustees of the funds. Under this plan, each director or trustee who is not an
interested person of the funds (as defined in the 1940 Act) and who has served
for at least five years (a "qualified director") is entitled to receive, upon
retiring from the boards at the retirement age of 72 (or the retirement age of
73 to 74, if the retirement date is extended by the boards for one or two years,
but less than three years) continuation of payment for one year (the "first year
retirement benefit") of the annual basic retainer payable by the funds to the
qualified director at the time of his retirement (the "basic retainer").
Commencing with any such director's second year of retirement, and commencing
with the first year of retirement of a director whose retirement has been
extended by the board for three years, a qualified director shall receive
quarterly payments at an annual rate equal to 25% of the basic retainer. These
payments will continue for the remainder of the qualified director's life or ten
years, whichever is longer (the "reduced retainer payments"). If a qualified
director dies or becomes disabled after age 72 and before age 74 while still a
director of the funds, the first year retirement benefit and the reduced
retainer payments will be made to him or to his beneficiary or estate. If a
qualified director becomes disabled or dies either prior to age 72 or during
his/her 74th year while still a director of the funds, the director will not be
entitled to receive the first year retirement benefit; however, the reduced
retainer payments will be made to his beneficiary or estate. The plan is
administered by a committee of 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, ^ INVESCO Advisor Funds, Inc. and Treasurer's
Series ^ Trust in a manner determined to be fair and equitable by the committee.
The Company is not making any payments to directors under the plan as of the
date of this Statement of Additional Information. The Company has no stock
options or other pension or retirement plans for management or other personnel
and pays no salary or compensation to any of its officers.
The Company has an audit committee which is comprised of four of the
directors who are not interested persons of the Company. The committee meets
periodically with the Company's independent accountants and officers to review
accounting principles used by the Company, the adequacy of internal controls,
the responsibilities and fees of the independent accountants, and other matters.
The Company also has a management liaison committee which meets quarterly
with various management personnel of INVESCO in order (a) to facilitate better
understanding of management and operations of the Company, and (b) to review
legal and operational matters which have been assigned to the committee by the
board of directors, in furtherance of the board of directors' overall duty of
supervision.
<PAGE>
HOW SHARES CAN BE PURCHASED
The Fund's shares are sold on a continuous basis at the respective net
asset value per share of the Fund next calculated after receipt of a purchase
order in good form. The net asset value per share of the Fund is computed once
each day that the New York Stock Exchange is open as of the close of regular
trading on that Exchange, but may also be computed at other times. See "How
Shares Are Valued." INVESCO acts as the Fund's distributor under a distribution
agreement with the Company under which it receives no compensation and bears all
expenses, including the costs of printing and distribution of prospectuses
incident to direct sales and distribution of Fund shares on a no-load basis.
HOW SHARES ARE VALUED
As described in the section of the Fund's Prospectus entitled "How Shares
Can Be Purchased," the net asset value of shares of the Fund of the Company is
computed once each day that the New York Stock Exchange is open as of the close
of regular trading on that Exchange (usually 4:00 p.m., New York time) and
applies to purchase and redemption orders received prior to that time. Net asset
value per share is also computed on any other day on which there is a sufficient
degree of trading in the securities held by the Fund that the current net asset
value per share of the Fund might be materially affected by changes in the value
of the securities held, but only if on such day the Fund receives a request to
purchase or redeem shares. Net asset value per share is not calculated on days
the New York Stock Exchange is closed, such as federal holidays including New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving, and Christmas.
The net asset value per share of the Fund is calculated by dividing the
value of all securities held by the Fund and its other assets (including
dividends and interest accrued but not collected), less the Fund's liabilities
(including accrued expenses), by the number of outstanding shares of the Fund.
Securities traded on national securities exchanges, the NASDAQ National Market
System, the NASDAQ Small Cap Market and foreign markets are valued at their last
sale prices on the exchanges or markets where such securities are primarily
traded. Securities traded in the over-the-counter market for which last sale
prices are not available, and listed securities for which no sales were reported
on a particular date, are valued at their highest closing bid prices (or, for
debt securities, yield equivalents thereof) obtained from one or more dealers
making markets for such securities. If market quotations are not readily
available, securities will be valued at their fair values as determined in good
faith by the Company's board of directors or pursuant to procedures adopted by
the board of directors. The above procedures may include the use of valuations
furnished by a pricing service which employs a matrix to determine valuations
for normal institutional-size trading units of debt securities. Prior to
utilizing a pricing service, the Company's board of directors reviews the
methods used by such service to assure itself that securities will be valued at
their fair values. The Company's board of directors also periodically monitors
the methods used by such pricing services. Debt securities with remaining
maturities of 60 days or less at the time of purchase are normally valued at
amortized cost.
<PAGE>
The values of securities held by the Funds and other assets used in
computing net asset value generally are determined as of the time regular
trading in such securities or assets is completed each day. Since regular
trading in most foreign securities markets is completed simultaneously with, or
prior to, the close of regular trading on the New York Stock Exchange, closing
prices for foreign securities usually are available for purposes of computing
the Fund's net asset value. However, in the event that the closing price of a
foreign security is not available in time to calculate a Fund's net asset value
on a particular day, the Company's board of directors has authorized the use of
the market price for the security obtained from an approved pricing service at
an established time during the day which may be prior to the close of regular
trading in the security. The value of all assets and liabilities initially
expressed in foreign currencies will be converted into U.S. dollars at the spot
rate of such currencies against U.S. dollars provided by an approved pricing
service.
FUND PERFORMANCE
As described in the Fund's Prospectus, the Company advertises the total
return performance of the Fund. The average annual total return performance for
the fiscal year ended July 31, ^ 1996 and ^ the period ended December 1, 1993
(inception) through July 31, ^ 1996 was 6.47% and 9.26%, respectively. Average
annual return performance is computed by finding the average annual compounded
rates of return that would equate the initial amount invested to the ending
redeemable value, according to the following formula:
P(1 + T)n = ERV
where: P = initial payment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of initial payment
In conjunction with performance reports, comparative data between the
Fund's performance for a given period and other types of investment vehicles,
including certificates of deposit, may be provided to prospective investors and
shareholders.
From time to time, evaluations of performance made by independent sources
may also be used in advertisements, sales literature or shareholder reports,
including reprints of, or selections from, editorials or articles about the
Fund. Sources for Fund performance information and articles about the Fund
include, but are not limited to, the following:
<PAGE>
American Association of Individual Investors' Journal
Banxquote
Barron's
Business Week
CDA Investment Technologies
CNBC
CNN
Consumer Digest
Financial Times
Financial World
Forbes
Fortune
Ibbotson Associates, Inc.
Institutional Investor
Investment Company Data, Inc.
Investor's Business Daily
Kiplinger's Personal Finance
Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis
Money
Morningstar
Mutual Fund Forecaster
No-Load Analyst
No-Load Fund X
Personal Investor
Smart Money
The New York Times
The No-Load Fund Investor
U.S. News and World Report
United Mutual Fund Selector
USA Today
Wall Street Journal
Wiesenberger Investment Companies Services
Working Woman
Worth
SERVICES PROVIDED BY THE FUND
Periodic Withdrawal Plan. As described in the section of the Fund's
Prospectus entitled "Services Provided by the Fund," the Fund offers a Periodic
Withdrawal Plan. All dividends and distributions on shares owned by shareholders
participating in this Plan are reinvested in additional shares. Since withdrawal
payments represent the proceeds from sales of shares, the amount of
shareholders' investments in the Fund will be reduced to the extent that
withdrawal payments exceed dividends and other distributions paid and
reinvested. Any gain or loss on such redemptions must be reported for tax
purposes. In each case, shares will be redeemed at the close of business on or
about the 20th day of each month preceding payment and payments will be mailed
within five business days thereafter.
The Periodic Withdrawal Plan involves the use of principal and is not a
guaranteed annuity. Payments under such Plan do not represent income or a return
on investment.
<PAGE>
A Periodic Withdrawal Plan may be terminated at any time by sending a
written request to INVESCO. Upon termination, all future dividends and capital
gain distributions will be reinvested in additional shares unless a shareholder
requests otherwise.
Exchange Privilege. As discussed in the section of the Fund's Prospectus
entitled "Services Provided by the Fund," the Fund offers shareholders the
privilege of exchanging shares of the Fund for shares of another fund or for
shares of certain other mutual funds advised by INVESCO. Exchange requests may
be made either by telephone or by written request to INVESCO Funds Group, Inc.
using the telephone number or address on the cover of this Statement of
Additional Information. Exchanges made by telephone must be in an amount of at
least $250, if the exchange is being made into an existing account of one of the
INVESCO funds. All exchanges that establish a new account must meet the fund's
applicable minimum initial investment requirements. Written exchange requests
into an existing account have no minimum requirements other than the fund's
applicable minimum subsequent investment requirements. Any gain or loss realized
on such an exchange is recognized for federal income tax purposes. This
privilege is not an option or right to purchase securities, but is a revocable
privilege permitted under the present policies of each of the funds and is not
available in any state or other jurisdiction where the shares of the mutual fund
into which transfer is to be made are not qualified for sale, or when the net
asset value of the shares presented for exchange is less than the minimum dollar
purchase required by the appropriate prospectus.
TAX-DEFERRED RETIREMENT PLANS
As described in the section of the Prospectus entitled "Services Provided
by the Fund," shares of the Fund may be purchased as the investment medium for
various tax-deferred retirement plans. Persons who request information regarding
these plans from INVESCO will be provided with prototype documents and other
supporting information regarding the type of plan requested. Each of these plans
involves a long-term commitment of assets and is subject to possible regulatory
penalties for excess contributions, premature distributions or for insufficient
distributions after age 70-1/2. The legal and tax implications may vary
according to the circumstances of the individual investor. Therefore, the
investor is urged to consult with an attorney or tax adviser prior to the
establishment of such a plan.
HOW TO REDEEM SHARES
Normally, payments for shares redeemed will be mailed within seven days
following receipt of the required documents as described in the section of the
Fund's Prospectus entitled "How to Redeem Shares." The right of redemption may
be suspended and payment postponed when: (a) the New York Stock Exchange is
closed for other than customary weekends and holidays; (b) trading on that
exchange is restricted; (c) an emergency exists as a result of which disposal by
the Fund of securities owned by it is not reasonably practicable, or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets; or (d) the Securities and Exchange Commission by order so permits.
<PAGE>
It is possible that in the future conditions may exist which would, in the
opinion of the Company's investment adviser, make it undesirable for the Fund to
pay for redeemed shares in cash. In such cases, the investment adviser may
authorize payment to be made in portfolio securities or other property of the
Fund. However, the Company has obligated itself under the Investment Company Act
of 1940 to redeem for cash all shares of the Fund presented for redemption by
any one shareholder having a value up to $250,000 (or 1% of the Fund's net
assets if that is less) in any 90-day period. Securities delivered in payment of
redemptions are selected entirely by the investment adviser based on what is in
the best interests of the Fund and its shareholders, and are valued at the value
assigned to them in computing the Fund's net asset value per share. Shareholders
receiving such securities are likely to incur brokerage costs on their
subsequent sales of the securities.
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES
The Fund intends to continue to conduct its business and satisfy the
applicable diversification of assets and source of income requirements to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. The Fund so qualified for the fiscal year
ended July 31, ^ 1996 and intends to continue to qualify during its current
fiscal year. As a result, it is anticipated that the Fund will pay no federal
income or excise taxes and will be accorded conduit or "pass through" treatment
for federal income tax purposes.
Dividends paid by the Fund from net investment income, as well as
distributions of net realized short-term capital gains and net realized gains
from certain foreign currency transactions are, for federal income tax purposes,
taxable as ordinary income to shareholders. After the end of each calendar year,
the Fund sends shareholders information regarding the amount and character of
dividends paid in the year, information on foreign source income and foreign
taxes, and the dividends eligible for the dividends-received deduction for
corporations. Such amounts will be limited to the aggregate amount of qualifying
dividends which the Fund derives from its portfolio investments.
Distributions by the Fund of net capital gain (the excess of net long-term
capital gain over net short-term capital loss) are, for federal income tax
purposes, taxable to the shareholder as long-term capital gains regardless of
how long a shareholder has held shares of the Fund. Such distributions are
identified as such and are not eligible for the dividends-received deduction.
All dividends and other distributions are regarded as taxable to the
investor, whether or not such dividends and distributions are reinvested in
additional shares. If the net asset value of shares of the Fund should be
reduced below a shareholder's cost as a result of a distribution, such
distribution would be taxable to the shareholder although a portion would be, in
effect, a return of invested capital. The net asset value of shares of the Fund
reflects accrued net investment income and undistributed realized capital and
foreign currency gains; therefore, when a distribution is made, the net asset
<PAGE>
value is reduced by the amount of the distribution. If shares are purchased
shortly before a distribution, the full price for the shares will be paid and
some portion of the price may then be returned to the shareholder as a taxable
dividend or capital gain. However, the net asset value per share will be reduced
by the amount of the distribution, which would reduce any gain (or increase any
loss) for tax purposes on any subsequent redemption of shares.
INVESCO may provide Fund shareholders with information concerning the
average cost basis of their shares in order to help them prepare their tax
returns. This information is intended as a convenience to shareholders, and will
not be reported to the Internal Revenue Service (the "IRS"). The IRS permits the
use of several methods to determine the cost basis of mutual fund shares. The
cost basis information provided by INVESCO will be computed using the
single-category average cost method, although neither INVESCO nor the Fund
recommends any particular method of determining cost basis. Other methods may
result in different tax consequences. If a shareholder has reported gains or
losses for the Fund in past years, the shareholder must continue to use the
method previously used, unless the shareholder applies to the IRS for permission
to change methods.
If Fund shares are sold at a loss after being held for six months or less,
the loss will be treated as long-term, instead of short-term, capital loss to
the extent of any capital gain distributions received on those shares.
The Fund will be subject to a nondeductible 4% excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of its
ordinary income for that year and capital gain net income for the one-year
period ending on October 31 of that year, plus certain other amounts.
Dividends and interest received by the Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors.
The Fund may invest in the stock of "passive foreign investment companies"
(PFICs"). A PFIC is a foreign corporation that, in general, meets either of the
following tests: (1) at least 75% of its gross income is passive or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, the Fund will be subject to
federal income tax on a portion of any "excess distribution" received on the
stock of a PFIC or of any gain on disposition of the stock (collectively "PFIC
income"), plus interest thereon, even if the Fund distributes the PFIC income as
a taxable dividend to its shareholders. The balance of the PFIC income will be
included in the Fund's investment company taxable income and, accordingly, will
not be taxable to it to the extent that income is distributed to its
shareholders.
<PAGE>
Gains or losses (1) from the disposition of foreign currencies, (2) from
the disposition of debt securities denominated in foreign currency that are
attributable to fluctuations in the value of the foreign currency between the
date of acquisition of each security and the date of disposition, and (3) that
are attributable to fluctuations in exchange rates that occur between the time a
Fund accrues interest, dividends or other receivables or accrues expenses or
other liabilities denominated in a foreign currency and the time the Fund
actually collects the receivables or pays the liabilities, generally will be
treated as ordinary income or loss. These gains or losses may increase or
decrease the amount of the Fund's investment company taxable income to be
distributed to its shareholders.
Shareholders should consult their own tax advisers regarding specific
questions as to federal, state and local taxes. Dividends and capital gain
distributions will generally be subject to applicable state and local taxes.
Qualification as a regulated investment company under the Internal Revenue Code
of 1986, as amended for income tax purposes does not entail government
supervision of management or investment policies.
INVESTMENT PRACTICES
Portfolio Turnover. There are no fixed limitations regarding the portfolio
turnover for the Fund. The rate of portfolio turnover can fluctuate under
constantly changing economic conditions and market circumstances. Securities
initially satisfying the basic policies and objectives of the Fund may be
disposed of when they are no longer suitable. Brokerage costs to the Fund are
commensurate with the rate of portfolio activity. The portfolio turnover rates
for the fiscal ^ years ended July 31, 1996 and 1995 and the period ended July
31, 1994, were 156%, 73% and 55%, respectively. The increase in portfolio
turnover was due in part to significant redemptions of Fund shares in the second
and third quarters of 1996. In computing the portfolio turnover rate, all
investments with maturities or expiration dates at the time of acquisition of
one year or less are excluded. Subject to this exclusion, the turnover rate is
calculated by dividing (A) the lesser of purchases or sales of portfolio
securities for the fiscal year by (B) the monthly average of the value of
portfolio securities owned by the Fund during the fiscal year.
Placement of Portfolio Brokerage. INVESCO, as the Company's investment
adviser, and INVESCO Management, as the Company's sub-adviser, place orders for
the purchase and sale of securities with brokers and dealers based upon
INVESCO's or INVESCO Management's evaluation of their financial responsibility
subject to their ability to effect transactions at the best available prices.
INVESCO or INVESCO Management evaluates the overall reasonableness of brokerage
commissions or underwriting discounts (the difference between the full
acquisition price to acquire the new offering and the discount offered to
<PAGE>
members of the underwriting syndicate) paid by reviewing the quality of
executions obtained on portfolio transactions of the Fund, viewed in terms of
the size of transactions, prevailing market conditions in the security purchased
or sold, and general economic and market conditions. In seeking to ensure that
the commissions or discounts charged the Fund are consistent with prevailing and
reasonable commissions or discounts, INVESCO or INVESCO Management also
endeavors to monitor brokerage industry practices with regard to the commissions
or discounts charged by brokers and dealers on transactions effected for other
comparable institutional investors. While INVESCO or INVESCO Management seeks
reasonably competitive rates, the Fund does not necessarily pay the lowest
commission, discount, or spread available.
Consistent with the standard of seeking to obtain the best execution on
portfolio transactions, INVESCO or INVESCO Management may select brokers that
provide research services to effect such transactions. Research services consist
of statistical and analytical reports relating to issuers, industries,
securities and economic factors and trends, which may be of assistance or value
to INVESCO or INVESCO Management in making informed investment decisions.
Research services prepared and furnished by brokers through which the Fund
effects securities transactions may be used by INVESCO or INVESCO Management in
servicing all of their respective accounts and not all such services may be used
by INVESCO or INVESCO Management in connection with the Fund.
In recognition of the value of the above-described brokerage and research
services provided by certain brokers, INVESCO or INVESCO Management, consistent
with the standard of seeking to obtain competitive execution on portfolio
transactions, may place orders with such brokers for the execution of
transactions for the Fund on which the commissions or discounts are in excess of
those which other brokers might have charged for effecting the same
transactions.
Fund transactions may be effected through qualified ^ broker-dealers who
recommend the Fund to their clients, or who act as agent in the purchase of the
Fund's shares for their clients. When a number of brokers and dealers can
provide comparable price and execution on a particular transaction, the
Company's adviser may consider the sale of Fund shares by a broker or dealer in
selecting among qualified ^ broker-dealers.
The aggregate dollar amount of brokerage commissions paid by the Fund for
the fiscal ^ years ended July 31, 1996 and 1995 and the period ended July 31,
1994 were $386,415, $111,650 and ^ $24,172, respectively. The higher level of
brokerage commissions paid by the Fund for the year ended July 31, 1995, was
principally due to the increased size of the Fund ^. During the fiscal year
ended July 31, ^ 1996, brokers providing research received ^ $71,310 in
commissions on portfolio transactions effected for the Fund. The aggregate
dollar amount of such portfolio transactions was ^ $26,409,281. Commissions of
$0 were allocated to certain brokers in recognition of their sales of shares of
the Fund during the fiscal year ended July 31, ^ 1996.
At July 31, ^ 1996, the Fund ^ did not hold securities of its regular
brokers or dealers, or their parents.^
Neither INVESCO nor INVESCO Management receives any brokerage commissions
on portfolio transactions effected on behalf of the Fund, and there is no
affiliation between INVESCO or INVESCO Management, or any person affiliated with
INVESCO, INVESCO Management, or the Fund and any broker or dealer that executes
transactions for the Fund.
<PAGE>
ADDITIONAL INFORMATION
Common Stock. The Company was incorporated with 100 million authorized
shares of common stock with a par value of $0.01 per share. As of July 31, ^
1996, 3,831,339 shares of the INVESCO Small Company Fund were outstanding. All
shares currently outstanding and being offered are of one class with equal
rights as to voting, dividends and liquidation. All shares offered hereby, when
issued, will be fully paid and nonassessable. Shares have no preemptive rights
and are fully tradeable on the books of the Fund. 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.
All shares have equal voting rights. Company shares have noncumulative
voting rights, which means that the holders of a majority of the shares voting
for the election of directors of the Company can elect 100% of the directors if
they choose to do so. In such event, the holders of the remaining shares voting
for the election of directors will not be able to elect any person or persons to
the board of directors. After they have been elected by shareholders, the
directors will continue to serve until their successors are elected and have
qualified or they are removed from office, in either case by a shareholder vote,
or until death, resignation, or retirement. Directors may appoint their own
successors, provided that at least two-thirds of the directors have been elected
by the Company's shareholders. It is the intention of the Company not to hold
annual meetings of shareholders. The directors will call annual or special
meetings of shareholders for action by shareholder vote as may be required by
the 1940 Act or the Company's Articles of Incorporation, or at their discretion.
Principal Shareholders. As of ^ November 1, 1996, the following persons
held more than 5% of the Fund's outstanding equity securities.
Name and Address
of Beneficial Owner Number of Shares Percent of Class
- ------------------- ---------------- ----------------
INVESCO Small Company
Fund
^
H. Al Ward Tr. 712,175.1360 18.847%
Salvation Army
1424 Northeast Expressway
Atlanta, GA 30329
H. Al Ward Tr. 566,877.4930 15.002%
Salvation Army
1424 Northeast Expressway
Atlanta, GA 30329
Mac & Co. 380,734.0750 10.076%
A/C 866-952
CTBF 8669522
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230
<PAGE>
Mac & Co. 244,492.5470 6.470%
Acct. #860-611
Mellon Bank NA
Mutual Funds Dept.
P.O. Box 320
Pittsburgh, PA 15230
Eastern Michigan University 242,389.7780 6.415%
Foundation
Vicky Englebert
Society Bank of Michigan
P.O. Box 94871
Cleveland, OH 44101
Independent Accountants. Price Waterhouse LLP, 950 Seventeenth Street,
Denver, Colorado, has been selected as the independent accountants of the
Company. The independent accountants are responsible for auditing the financial
statements of the Company.
Custodian. State Street Bank and Trust Company, P.O. Box 351, Boston,
Massachusetts, has been designated as custodian of the cash and investment
securities of the Fund. The bank is also responsible for, among other things,
receipt and delivery of the investment securities of the Company's Fund in
accordance with procedures and conditions specified in the custody agreement.
Under its contract with the Fund, the custodian is authorized to establish
separate accounts in foreign currencies 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.
Transfer Agent. The Company is provided with transfer agent, registrar,
and dividend disbursing agent services by INVESCO Funds Group, Inc., 7800 E.
Union Ave., Denver, CO 80237, pursuant to the Transfer Agency Agreement
described herein. Such services include the issuance, cancellation and transfer
of shares of the Fund, and the maintenance of records regarding the ownership of
such shares.
Reports to Shareholders. The Company's fiscal year ends on July 31. The
Company distributes reports at least semiannually to its shareholders. Financial
statements regarding the Company, audited by the independent accountants, are
sent to shareholders annually.
Legal Counsel. The firm of Kirkpatrick & Lockhart LLP, Washington, D.C., is
legal counsel for the Company. The firm of Moye, Giles, O'Keefe, Vermeire &
Gorrell, Denver, Colorado, acts as special counsel to the Company.
Financial Statements. The Company's audited financial statements and the
notes thereto for the fiscal year ended July 31, ^ 1996, and the report of Price
Waterhouse LLP with respect to such financial statements are incorporated herein
by reference from the Company's Annual Report to Shareholders for the fiscal
year ended July 31, ^ 1996.
Prospectus. The Company will furnish, without charge, a copy of the
Prospectus for the Fund upon request. Such requests should be made to the
Company at the mailing address or telephone number set forth on the first page
of this Statement of Additional Information.
Registration Statement. This Statement of Additional Information and the
Prospectus do not contain all of the information set forth in the Registration
<PAGE>
Statement the Company has filed with the Securities and Exchange
Commission. The complete Registration Statement may be obtained from the
Securities and Exchange Commission upon payment of the fee prescribed by the
rules and regulations of the Commission.
<PAGE>
APPENDIX A
DESCRIPTION OF FUTURES, OPTIONS AND FORWARD CONTRACTS
Options on Securities
An option on a security provides the purchaser, or "holder," with the
right, but not the obligation, to purchase, in the case of a "call" option, or
sell, in the case of a "put" option, the security or securities underlying the
option, for a fixed exercise price up to a stated expiration date. The holder
pays a non-refundable purchase price for the option, known as the "premium." The
maximum amount of risk the purchaser of the option assumes is equal to the
premium plus related transaction costs, although the entire amount may be lost.
The risk of the seller, or "writer," however, is potentially unlimited, unless
the option is "covered," which is generally accomplished through the writer's
ownership of the underlying security, in the case of a call option, or the
writer's segregation of an amount of cash or securities equal to the exercise
price, in the case of a put option. If the writer's obligation is not so
covered, it is subject to the risk of the full change in value of the underlying
security from the time the option is written until exercise.
Upon exercise of the option, the holder is required to pay the purchase
price of the underlying security, in the case of a call option, or to deliver
the security in return for the purchase price, in the case of a put option.
Conversely, the writer is required to deliver the security, in the case of a
call option, or to purchase the security, in the case of a put option. Options
on securities which have been purchased or written may be closed out prior to
exercise or expiration by entering into an offsetting transaction on the
exchange on which the initial position was established, subject to the
availability of a liquid secondary market.
Options on securities are traded on national securities exchanges, such as
the Chicago Board of Options Exchange and the New York Stock Exchange, which are
regulated by the Securities and Exchange Commission. The Options Clearing
Corporation guarantees the performance of each party to an exchange-traded
option, by in effect taking the opposite side of each such option. A holder or
writer may engage in transactions in exchange-traded options on securities and
options on indices of securities only through a registered broker/dealer which
is a member of the exchange on which the option is traded.
An option position in an exchange-traded option may be closed out only on
an exchange which provides a secondary market for an option of the same series.
Although the Fund will generally purchase or write only those options for which
there appears to be an active secondary market, there is no assurance that a
liquid secondary market on an exchange will exist for any particular option at
any particular time. In such event it might not be possible to effect closing
transactions in a particular option with the result that this Fund would have to
exercise the option in order to realize any profit. This would result in this
Fund incurring brokerage commissions upon the disposition of underlying
securities acquired through the exercise of a call option or upon the purchase
of underlying securities upon the exercise of a put option. If these Funds as
covered call option writers are unable to effect a closing purchase transaction
in a secondary market, unless the Funds are required to deliver the securities
pursuant to the assignment of an exercise notice, they will not be able to sell
the underlying security until the option expires.
<PAGE>
Reasons for the potential absence of a liquid secondary market on an
exchange include the following: (i) there may be insufficient trading interest
in certain options; (ii) restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular classes or
series of options or underlying securities: (iv) unusual or unforeseen
circumstances may interrupt normal operations on an exchange; (v) the facilities
of an exchange or a clearing corporation may not at all times be adequate to
handle current trading volume or (vi) one or more exchanges could, for economic
or other reasons, decide or be compelled at some future date to discontinue the
trading of options (or particular class or series of options) in which event the
secondary market on that exchange (or in the class or series of options) would
cease to exist, although outstanding options on that exchange which had been
issued by a clearing corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms. There is no assurance
that higher than anticipated trading activity or other unforeseen events might
not, at a particular time, render certain of the facilities of any of the
clearing corporations inadequate and thereby result in the institution by an
exchange of special procedures which may interfere with the timely execution of
customers' orders. However, the Options Clearing Corporation, based on forecasts
provided by the U.S. exchanges, believes that its facilities are adequate to
handle the volume of reasonably anticipated options transactions, and such
exchanges have advised such clearing corporation that they believe their
facilities will also be adequate to handle reasonably anticipated volume.
In addition, options on securities may be traded over-the- counter through
financial institutions dealing in such options as well as the underlying
instruments. OTC options are purchased from or sold (written) to dealers or
financial institutions which have entered into direct agreements with the Fund.
With OTC options, such variables as expiration date, exercise price and premium
will be agreed upon between the Fund and the transacting dealer, without the
intermediation of a third party such as the OCC. If the transacting dealer fails
to make or take delivery of the securities underlying an option it has written,
in accordance with the terms of that option as written, the Fund would lose the
premium paid for the option as well as any anticipated benefit of the
transaction. The Fund will engage in OTC option transactions only with primary
U.S. Government securities dealers recognized by the Federal Reserve Bank of New
York.
Futures Contracts
A Futures Contract is a bilateral agreement providing for the purchase and
sale of a specified type and amount of a financial instrument or foreign
currency, or for the making and acceptance of a cash settlement, at a stated
time in the future, for a fixed price. By its terms, a Futures Contract provides
for a specified settlement date on which, in the case of the majority of
interest rate and foreign currency futures contracts, the fixed income
securities or currency underlying the contract are delivered by the seller and
paid for by the purchaser, or on which, in the case of stock index futures
contracts and certain interest rate and foreign currency futures contracts, the
difference between the price at which the contract was entered into and the
contract's closing value is settled between the purchaser and seller in cash.
Futures Contracts differ from options in that they are bilateral agreements,
with both the purchaser and the seller equally obligated to complete the
<PAGE>
transaction. In addition, Futures Contracts call for settlement only on the
expiration date, and cannot be "exercised" at any other time during their term.
The purchase or sale of a Futures Contract also differs from the purchase
or sale of a security or the purchase of an option in that no purchase price is
paid or received. Instead, an amount of cash or cash equivalent, which varies
but may be as low as 5% or less of the value of the contract, must be deposited
with the broker as "initial margin." Subsequent payments to and from the broker,
referred to as "variation margin," are made on a daily basis as the value of the
index or instrument underlying the Futures Contract fluctuates, making positions
in the Futures Contract more or less valuable, a process known as "marking to
the market."
A Futures Contract may be purchased or sold only on an exchange, known as
a "contract market," designated by the Commodity Futures Trading Commission for
the trading of such contract, and only through a registered futures commission
merchant which is a member of such contract market. A commission must be paid on
each completed purchase and sale transaction. The contract market clearing house
guarantees the performance of each party to a Futures Contract, by in effect
taking the opposite side of such Contract. At any time prior to the expiration
of a Futures Contract, a trader may elect to close out its position by taking an
opposite position on the contract market on which the position was entered into,
subject to the availability of a secondary market, which will operate to
terminate the initial position. At that time, a final determination of variation
margin is made and any loss experienced by the trader is required to be paid to
the contract market clearing house while any profit due to the trader must be
delivered to it.
Interest rate futures contracts currently are traded on a variety of fixed
income securities, including long-term U.S. Treasury Bonds, Treasury Notes,
Government National Mortgage Association modified pass-through mortgage-backed
securities, U.S. Treasury Bills, bank certificates of deposit and commercial
paper. In addition, interest rate futures contracts include contracts on indices
of municipal securities. Foreign currency futures contracts currently are traded
on the British pound, Canadian dollar, Japanese yen, Swiss franc, West German
mark and on Eurodollar deposits.
Options on Futures Contracts
An Option on a Futures Contract provides the holder with the right to
enter into a "long" position in the underlying Futures Contract, in the case of
a call option, or a "short" position in the underlying Futures Contract, in the
case of a put option, at a fixed exercise price to a stated expiration date.
Upon exercise of the option by the holder, the contract market clearing house
establishes a corresponding short position for the writer of the option, in the
case of a call option, or a corresponding long position, in the case of a put
option. In the event that an option is exercised, the parties will be subject to
all the risks associated with the trading of Futures Contracts, such as payment
of variation margin deposits. In addition, the writer of an Option on a Futures
contract, unlike the holder, is subject to initial and variation margin
requirements on the option position.
A position in an Option on a Futures Contract may be terminated by the
purchaser or seller prior to expiration by effecting a closing purchase or sale
transaction, subject to the availability of a liquid secondary market, which is
the purchase or sale of an option of the same series (i.e., the same exercise
<PAGE>
price and expiration date) as the option previously purchased or sold. The
difference between the premiums paid and received represents the trader's profit
or loss on the transaction.
An option, whether based on a Futures Contract, a stock index or a
security, becomes worthless to the holder when it expires. Upon exercise of an
option, the exchange or contract market clearing house assigns exercise notices
on a random basis to those of its members which have written options of the same
series and with the same expiration date. A brokerage firm receiving such
notices then assigns them on a random basis to those of its customers which have
written options of the same series and expiration date. A writer therefore has
no control over whether an option will be exercised against it, nor over the
time of such exercise.
<PAGE>
APPENDIX B
BOND RATINGS
The following is a description of Standard & Poor's ("S&P") and Moody's
Investors Service, Inc. ("Moody's") bond rating categories:
Moody's Investors Service, Inc. Corporate Bond Ratings
Aaa - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa - Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risk appear somewhat larger than in Aaa securities.
A - Bonds rated A possess many favorable investment attributes, and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds rated Ba are judged to have speculative elements. Their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B - Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of other
terms of the contract over any longer period of time may be small.
Caa - Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
Standard & Poor's 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.
<PAGE>
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 24. Financial Statements and Exhibits
(a) Financial Statements:
Page in
Prospectus
----------
(1) Financial statements and schedules included in
Prospectus (Part A):
Financial Highlights for the fiscal ^ years 8
ended July 31, 1996 and 1995 and for the period
from Commencement of Operations (December 1, 1993)
through July 31, 1994.
Page in
Statement
of Addi-
tional In-
formation
----------
(2) The following audited financial statements
of the Small Company Fund and the notes
thereto for the fiscal year ended July 31, ^
1996 and the report of Price Waterhouse LLP
with respect to such financial statements
are incorporated in the Statement of Additional
Information by reference from the Company's
Annual Report to Shareholders for the fiscal
year ended July 31, ^ 1996: Statement of
Investment Securities as of July 31, ^ 1996;
Statement of Assets and Liabilities as of
July 31, ^ 1996; Statement of Operations as
of July 31, ^ 1996; Statement of Changes in
Net Assets for the fiscal ^ years ended July
31, 1996 and 1995; Financial Highlights for
the years ended July 31, 1996 and 1995 and the
eight-month period December 1, 1993 (commence-
ment of operations) through July 31, 1994.
(3) Financial statements and schedules included
in Part C:
None: Schedules have been omitted as all
information has been presented in the
financial statements.
<PAGE>
(b) Exhibits:
(1) Articles of Incorporation ^(Charter).
(2) ^ Bylaws.
(3) Not applicable.
(4) ^ Not required to be filed on EDGAR.
(5) (a) Investment Advisory Agreement Between
Registrant and INVESCO Funds Group, Inc.
dated October 31, ^ 1993.
(b) Sub-Advisory Agreement Between INVESCO
Funds Group, Inc. and INVESCO Management
and Research, dated October 31, ^ 1993.
(6) General Distribution Agreement Between
Registrant and INVESCO Funds Group, Inc.
dated April 30, ^ 1993.
(7) Defined Benefit Deferred Compensation
Plan for Non-Interested Directors and
^ Trustees.
(8) Custody Agreement Between Registrant and
State Street Bank and Trust Company dated
July 1, ^ 1993.(2)
(a) Amendment to Custody Agreement dated
October 25, ^ 1995.(1)
(9) (a) Transfer Agency Agreement Between
Registrant and INVESCO Funds Group, Inc.
dated April 30, ^ 1993.
(i) Amendment to fee schedule dated ^ May
1, ^ 1996.(1)
(b) Administrative Services Agreement
between the Registrant and INVESCO Funds
Group, Inc. dated April 30, ^ 1993.
(10) 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 nonassessable
dated August 13, ^ 1993.(3)
<PAGE>
(11) Consent of Independent Accountants.
(12) Not applicable.
(13) Not applicable.
(14) Copies of model plans used in the
establishment of retirement plans as
follows: Non-standardized Profit
Sharing Plan; Non-standardized Money
Purchase Pension Plan; Standardized
Profit Sharing Plan Adoption Agreement;
Standardized Money Purchase Pension
Plan; Non-standardized 401(k) Plan
Adoption Agreement; Standardized 401(k)
Paired Profit Sharing Plan; Standardized
Simplified Profit Sharing Plan;
Standardized Simplified Money Purchase
Plan; Defined Contribution Master Plan
& Trust Agreement; and Financial 403(b)
Retirement Plan, all filed with
Registration Statement No. 33-63498 of
INVESCO International Funds, Inc. filed
May 27, 1993, and herein incorporated by
reference.
(15) Not applicable.
(16) Schedule for computation of performance data.(4)
(17) Financial Data Schedule.
(18) Not applicable.
- -------------------------------
(1)Previously filed on EDGAR with Post-Effective Amendment No. 3 to the
Registrant's Registration Statement on November 15, 1995, and incorporated
herein by reference.
(2)Previously filed with Pre-Effective Amendment No. 1 to the Registrant's
Registration Statement on November 16, 1993, and incorporated herein by
reference.
(3)Previously filed with the Registrant's original Registration Statement
on Form N-1A on August 26, 1993 and incorporated herein by reference.
^
(4)Previously filed with Post-Effective Amendment No. 1 to the Registrant's
Registration Statement on May 23, 1994 and incorporated herein by reference.
Item 25. Persons Controlled by or Under Common Control With
Registrant
No person is presently controlled by or under common control with Registrant.
<PAGE>
Item 26. Number of Holders of Securities
Number of Record
Holders as of
Title of Class ^ October 31, 1996
-------------- ----------------
Common Stock ^ 1,149
Item 27. Indemnification
Indemnification provisions for officers and directors of Registrant are set
forth in Article VII, Section 2 of the Articles of Incorporation, and are hereby
incorporated by reference. See Item 24(b)(1) above. Under these Articles,
officers and directors 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 Company
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 Company also maintains liability insurance policies covering
its directors and officers.
Item 28. Business and Other Connections of Investment Adviser
See "The Fund and Its Management" in the Fund's Prospectus and in the
Statement of Additional Information for information regarding the business of
the investment adviser. For information as to the business, profession, vocation
or employment of a substantial nature of each of the officers and directors of
INVESCO Funds Group, Inc., reference is made to the Schedule Ds to the Form ADV
filed under the Investment Advisers Act of 1940 by INVESCO Funds Group, Inc.,
which schedules are herein incorporated by reference.
Item 29. Principal Underwriters
(a) INVESCO Dynamics Fund, Inc.
INVESCO Emerging Opportunity Funds, Inc.
INVESCO Growth Fund, Inc.
INVESCO Income Funds, Inc.
INVESCO Industrial Income Fund, Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Multiple Asset Funds, Inc.
INVESCO Specialty Funds, Inc.
INVESCO Strategic Portfolios, Inc.
INVESCO Tax-Free Income Funds, Inc.
INVESCO Value Trust
INVESCO Variable Investment Funds, Inc.
<PAGE>
(b)
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------ ------------- -------------
^
Frank M. Bishop Director ^
1315 Peachtree Street NE
Atlanta, GA 30309
Charles W. Brady Chairman of
1315 Peachtree Street NE the Board
Atlanta, GA 30309
^
M. Anthony Cox Senior Vice
1315 Peachtree Street NE President
Atlanta, GA 30309
Steven T. Cox, Jr. Regional Vice
7800 E. Union Avenue President
Denver, CO 80237
Robert D. Cromwell ^ Regional Vice
7800 E. Union Avenue President
^ Denver, CO 80237
Samuel T. DeKinder Director
1315 Peachtree Street NE
Atlanta, GA 30309
^ Douglas P. Dhom Regional Vice
^ 1315 Peachtree Street NE President
^ Atlanta, GA 30309
William J. Galvin, Jr. Senior Vice Asst. Sec.
7800 E. Union Avenue President
Denver, CO 80237
Linda J. Gieger Vice President
7800 E. Union Avenue
Denver, CO 80237
Ronald L. Grooms Senior Vice Treasurer,
7800 E. Union Avenue President Chief Fin'l
Denver, CO 80237 & Treasurer Officer, and
Chief Acctg.
Officer
<PAGE>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------ ------------- -------------
Wylie G. Hairgrove Vice President
7800 E. Union Avenue
Denver, CO 80237
^ Hubert L. Harris ^, Jr. Director
1315 Peachtree Street N.E. ^
Atlanta, GA 30309
Dan J. Hesser Chairman of the President
7800 E. Union Avenue Board, President, & Dir.
Denver, CO 80237 CEO & Director
Mark A. Jones Regional Vice
1315 Peachtree Street NE President
Atlanta, GA 30309
Jeraldine E. Kraus Assistant Secretary
7800 E. Union Avenue
Denver, CO 80237
Michael D. Legoski Assistant
7800 E. Union Avenue Vice President
Denver, CO 80237
^ James F. Lummanick Vice President
^ 7800 E. Union Avenue and Asst.
^ Denver, CO 80237 General Counsel
Brian N. Minturn Executive Vice
7800 E. Union Avenue President
Denver, CO 80237
Robert J. O'Connor Director
1315 Peachtree Street N.E.
Atlanta, GA 30309
Donald R. Paddack Asst. Vice
7800 E. Union Avenue President
Denver, CO 80237
<PAGE>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------ ------------- -------------
Laura M. Parsons Vice President
7800 E. Union Avenue
Denver, CO 80237
Glen A. Payne Senior Vice Secretary
7800 E. Union Avenue President, Secretary
Denver, CO 80237 & General Counsel
Pamela J. Piro Asst. Vice
7800 E. Union Avenue President
Denver, CO 80237
Gary J. Ruhl Vice President
7800 E. Union Avenue
Denver, CO 80237
R. Dalton Sim Director ^
7800 E. Union Avenue
Denver, CO 80237
James S. Skesavage Regional Vice
1315 Peachtree Street N.E. President
Atlanta, GA 30309
Terri Berg Smith Vice President
7800 E. Union Avenue
Denver, CO 80237
^ Tane T. Tyler Asst. Vice
^ 7800 E. Union Avenue President
^ Denver, CO 80237
Alan I. Watson Vice President Asst. Sec.
7800 E. Union Avenue
Denver, CO 80237
<PAGE>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------ ------------- -------------
Judy P. Wiese Vice President Asst. Treas.
7800 E. Union Avenue
Denver, CO 80237
Allyson Zoellner Vice President
7800 E. Union Avenue
Denver, CO 80237
(c) Not applicable.
Item 30. Location of Accounts and Records
Dan J. Hesser
7800 E. Union Avenue
Denver, CO 80237
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) The Registrant shall furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
(b) The Registrant hereby undertakes that the board of directors
will call a special shareholders meeting for the purpose of
voting on the question of removal of a director or directors
of the Company if requested to do so in writing by the holders
of at least 10% of the outstanding shares of the Company, and
to assist the shareholders in communicating with other
shareholders as required by the Investment Company Act of 1940.
<PAGE>
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
pre-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 ^22nd day of November, ^ 1996.
Attest: INVESCO Diversified Funds, Inc.
/s/ Glen A. Payne /s/ Dan J. Hesser
- ------------------------------------ ------------------------------------
Glen A. Payne, Secretary Dan J. Hesser, President
Pursuant to the requirements of the Securities Act of 1933, this
pre-effective amendment to Registrant's Registration Statement has been signed
by the following persons in the capacities indicated on this ^22nd day of
November, ^ 1996.
/s/ Dan J. Hesser /s/ Lawrence H. Budner
- ------------------------------------ ------------------------------------
Dan J. Hesser, President & Lawrence H. Budner, Director
Director (Chief Executive Officer)
/s/ Ronald L. Grooms /s/ Daniel D. Chabris
- ------------------------------------ ------------------------------------
Ronald L. Grooms, Treasurer Daniel D. Chabris, 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/ A. D. Frazier, Jr.
- ------------------------------------ ------------------------------------
Bob R. Baker, Director A. D. Frazier, Jr., Director
/s/ ^ Hubert L. Harris, Jr. /s/ Kenneth T. King, Director
- ------------------------------------ ------------------------------------
^ Hubert L. Harris, Director Kenneth T. King, Director
/s/ Charles W. Brady /s/ John W. McIntyre
- ------------------------------------ ------------------------------------
Charles W. Brady, Director John W. McIntyre, 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
August 26, 1993, November 15, 1995.
<PAGE>
Exhibit Index
Page in
Exhibit Number Registration Statement
- -------------- ----------------------
^ 1 77
^ 2 86
5(a) 103
5(b) 111
6 116
7 124
9(a) 128
9(a)(i) 141
9(b) 142
11 146
17 147
99 POA HARRIS 148
ARTICLES OF INCORPORATION
OF
INVESCO DIVERSIFIED FUNDS, INC.
THIS IS TO CERTIFY to the Maryland State Department of Assessments
that the undersigned, Dan J. Hesser, whose post office address is 7800 E. Union
Avenue, Suite 800, Denver, Colorado 80237, and being at least 18 years of age,
does hereby declare that he is an incorporator intending to form a corporation
under and by virtue of the general laws of the State of Maryland authorizing the
formation of corporations.
ARTICLE I
NAME AND TERM
The name of the corporation is INVESCO Diversified Funds, Inc. The
corporation shall have perpetual existence.
ARTICLE II
POWERS AND PURPOSES
The nature of the business and the objects and purposes to be transacted,
promoted and carried on by the corporation are as follows:
1. To engage in the business of an incorporated investment company of
open-end management type and to engage in all legally permissible
activities and operations usual, customary, or necessary in
connection therewith.
2. In general, to engage in any other business permitted to
corporations by the laws of the State of Maryland and to have and
exercise all powers conferred upon or permitted to corporations by
the Maryland General Corporation Law and any other laws of the State
of Maryland; provided, however, that the corporation shall be
restricted from engaging in any activities or taking any actions
which would preclude its compliance with applicable provisions of
the Investment Company Act of 1940, as amended, applicable to open-
end management type investment companies or applicable rules
promulgated thereunder.
ARTICLE III
CAPITALIZATION
Section 1. The aggregate number of shares the corporation shall have the
authority to issue is five hundred million (500,000,000) shares of Common Stock,
having a par value of one cent ($0.01) per share. The aggregate par value of all
shares which the corporation shall have the authority to issue is five million
dollars ($5,000,000). Such stock may be issued as full shares or as fractional
shares.
<PAGE>
In the exercise of the powers granted to the board of directors pursuant
to Section 3 of this Article III, the board of directors initially designates
two classes of shares of Common Stock of the corporation, to be designated as
the INVESCO Small Company Value Fund and the INVESCO Multi-Asset Allocation
Fund, respectively. Initially, one hundred million (100,000,000) shares of the
corporation's Common Stock are classified as and are allocated to each such
designated class.
Unless otherwise prohibited by law, so long as the corporation is
registered as an open-end investment company under the Investment Company Act of
1940, as amended, the total number of shares which the corporation is authorized
to issue may be increased or decreased by the board of directors in accordance
with the applicable provisions of the Maryland General Corporation Law.
Section 2. No holder of stock of the corporation shall be entitled as a
matter of right to purchase or subscribe for any shares of the capital stock of
the corporation which it may issue or sell, whether out of the number of shares
authorized by these articles of incorporation, or out of any shares of the
capital stock of the corporation acquired by it after the issue thereof.
Section 3. The corporation is authorized to issue its stock in one or more
series or one or more classes of shares, and, subject to the requirements of the
Investment Company Act of 1940, as amended, particularly Section 18(f) thereof
and Rule 18f-2 thereunder, the different series and classes, if any, shall be
established and designated, and the variations in the relative preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption as between the
different series or classes shall be fixed and determined and may be classified
and reclassified by the board of directors; provided that the board of directors
shall not classify or reclassify any of such shares into any class or series of
stock which is prior to any class or series of stock then outstanding with
respect to rights upon the liquidation, dissolution or winding up of the affairs
of, or upon any distribution of the general assets of, the corporation, except
that there may be variations so fixed and determined between different series or
classes as to investment objective, purchase price, right of redemption, special
rights as to dividends and on liquidation with respect to assets and income
belonging to a particular series or class, voting powers and conversion rights.
All references to shares in these articles of incorporation shall be deemed to
be shares of any or all series and classes of shares of the corporation's
capital stock as the context may require.
(a) The number of authorized shares allocated to each series or class
and the number of shares of each series or of each class that may be
issued shall be in such number as may be determined by the board of
directors. The directors may classify or reclassify any unissued
shares or any shares previously issued and reacquired of any series
or class into one or more series or one or more classes that may be
established and designated by the board of directors from time to
time. The directors may hold as treasury shares (of the same or
some other series or class), reissue for such consideration and on
such terms as they may determine, or cancel any shares of any series
or any class reacquired by the corporation at their discretion from
time to time.
<PAGE>
(b) All consideration received by the corporation for the issue or sale
of shares of a particular series or class, together with all assets
in which such consideration is invested or reinvested, all income,
earnings, profits and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets, and
any funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, shall irrevocably belong to that
series or class for all purposes, subject only to the rights of
creditors of that series or class, and shall be so recorded upon the
books of account of the corporation. In the event that there are
any assets, income, earnings, profits and proceeds thereof, funds,
or payments which are not readily identifiable as belonging to any
particular series or class, the directors shall allocate them among
any one or more of the series or classes established and designated
from time to time in such manner and on such basis as they, in their
sole discretion, deem fair and equitable. Each such allocation by
the corporation shall be conclusive and binding upon the
stockholders of all series or classes for all purposes. The
directors shall have full discretion, to the extent not inconsistent
with the Investment Company Act of 1940, as amended, and the
Maryland General Corporation Law to determine which items shall be
treated as income and which items shall be treated as capital; and
each such determination and allocation shall be conclusive and
binding upon the stockholders.
(c) The assets belonging to each particular class or series shall be
charged with the liabilities of the corporation in respect to that
class or series and all expenses, costs, charges and reserves
attributable to that class or series, and any general liabilities,
expenses, costs, charges or reserves of the corporation which are
not readily identifiable as belonging to any particular class or
series shall be allocated and charged by the directors to and among
any one or more of the classes or series established and designated
from time to time in such manner and on such basis as the directors
in their sole discretion deem fair and equitable. Each allocation
of liabilities, expenses, costs, charges and reserves by the
directors shall be conclusive and binding upon the stockholders of
all series and classes for all purposes.
(d) Dividends and distributions on shares of a particular series or
class may be paid with such frequency as the directors may
determine, which may be daily or otherwise, pursuant to a standing
resolution or resolutions adopted only once or with such frequency
as the board of directors may determine, to the holders of shares of
that series or class, from such of the income and capital gains,
accrued or realized, from the assets belonging to that series or
class, as the directors may determine, after providing for actual
and accrued liabilities belonging to that series or class. All
dividends and distributions on shares of a particular series or
class shall be distributed pro rata to the holders of that series or
class in proportion to the number of shares of that series or class
held by such holders at the date and time of record established for
the payment of such dividends or distributions except that in
connection with any dividend or distribution program or procedure,
<PAGE>
the board of directors may determine that no dividend or
distribution shall be payable on shares as to which the
stockholder's purchase order and/or payment have not been received
by the time or times established by the board of directors under
such program or procedure.
The corporation intends to have each series that may be established
to represent interests of a separate investment portfolio qualify as
a "regulated investment company" under the Internal Revenue Code of
1986, or any successor comparable statute thereto, and regulations
promulgated thereunder. Inasmuch as the computation of net income
and gains for federal income tax purposes may vary from the
computation thereof on the books of the corporation, the board of
directors shall have the power, in its sole discretion, to
distribute in any fiscal year as dividends, including dividends
designated in whole or in part as capital gains distributions,
amounts sufficient, in the opinion of the board of directors, to
enable the respective series to qualify as regulated investment
companies and to avoid liability of such series for federal income
tax in respect of that year. However, nothing in the foregoing shall
limit the authority of the board of directors to make distributions
greater than or less than the amount necessary to qualify the series
as regulated investment companies and to avoid liability of such
series for such tax.
(e) Dividends and distributions may be made in cash, property or
additional shares of the same or another class or series, or a
combination thereof, as determined by the board of directors or
pursuant to any program that the board of directors may have in
effect at the time for the election by each stockholder of the mode
of the making of such dividend or distribution to that stockholder.
Any such dividend or distribution paid in shares will be paid at the
net asset value thereof as defined in section (4) below.
(f) In the event of the liquidation or dissolution of the corporation or
of a particular class or series, the stockholders of each class or
series that has been established and designated and is being
liquidated shall be entitled to receive, as a class or series, when
and as declared by the board of directors, the excess of the assets
belonging to that class or series over the liabilities belonging to
that class or series. The holders of shares of any particular class
or series shall not be entitled thereby to any distribution upon
liquidation of any other class or series. The assets so
distributable to the stockholders of any particular class or series
shall be distributed among such stockholders in proportion to the
number of shares of that class or series held by them and recorded
on the books of the corporation. The liquidation of any particular
class or series in which there are shares then outstanding may be
authorized by vote of a majority of the board of directors then in
office, subject to the approval of a majority of the outstanding
securities of that class or series, as defined in the Investment
<PAGE>
Company Act of 1940, as amended, and without the vote of the holders
of any other class or series. The liquidation or dissolution of a
particular class or series may be accomplished, in whole or in part,
by the transfer of assets of such class or series to another class
or series or by the exchange of shares of such class or series for
the shares of another class or series.
(g) On each matter submitted to a vote of the stockholders, each holder
of a share shall be entitled to one vote for each share standing in
his name on the books of the corporation, irrespective of the class
or series thereof, and all shares of all classes or series shall
vote as a single class or series ("single class voting"); provided,
however that (i) as to any matter with respect to which a separate
vote of any class or series is required by the Investment Company
Act of 1940, as amended, or by the Maryland General Corporation Law,
such requirement as to a separate vote by that class or series shall
apply in lieu of single class voting as described above; (ii) in the
event that the separate vote requirements referred to in (i) above
apply with respect to one or more but not all classes or series,
then, subject to (iii) below, the shares of all other classes or
series shall vote as a single class or series; and (iii) as to any
matter which does not affect the interest of a particular class or
series, only the holders of shares of the one or more affected
classes shall be entitled to vote. Holders of shares of the stock
of the corporation shall not be entitled to exercise cumulative
voting in the election of directors or on any other matter.
(h) The establishment and designation of any series or class of shares,
in addition to the initial class of shares which has been
established in section (1) above, shall be effective upon the
adoption by a majority of the then directors of a resolution setting
forth such establishment and designation and the relative rights and
preferences of such series or class, or as otherwise provided in
such instrument and the filing with the proper authority of the
State of Maryland of Articles Supplementary setting forth such
establishment and designation and relative rights and preferences.
Section 4. The corporation shall, upon due presentation of a share or
shares of stock for redemption, redeem such share or shares of stock at a
redemption price prescribed by the board of directors in accordance with
applicable laws and regulations; provided that in no event shall such price be
less than the applicable net asset value per share of such class or series as
determined in accordance with the provisions of this section (4), less such
redemption or other charge as is determined by the board of directors. Subject
to applicable law, the corporation may redeem shares, not offered by a
stockholder for redemption, held by any stockholder whose shares of a class or
series had a value less than such minimum amount as may be fixed by the board of
directors from time to time or prescribed by applicable law, other than as a
result of a decline in value of such shares because of market action; provided
that before the corporation redeems such shares it must notify the shareholder
by first-class mail that the value of his shares is less than the required
minimum value and allow him 60 days to make an additional investment in an
amount which will increase the value of his account to the required minimum
value. Unless otherwise required by applicable law, the price to be paid for
<PAGE>
shares redeemed pursuant to the preceding sentence shall be the aggregate net
asset value of the shares at the close of business on the date of redemption,
and the shareholder shall have no right to object to the redemption of his
shares. The corporation shall pay redemption prices in cash, except that the
corporation may at its sole option pay redemption prices in kind in such manner
as is consistent with and not in contravention of Section 18(f) of the
Investment Company Act of 1940, as amended, and any Rules or Regulations
thereunder. Redemption prices shall be paid exclusively out of the assets of the
class or series whose shares are being redeemed.
Notwithstanding the foregoing, the corporation may postpone payment of
redemption proceeds and may suspend the right of the holders of shares of any
class or series to require the corporation to redeem shares of that class or
series during any period or at any time when and to the extent permissible under
the Investment Company Act of 1940, as amended, or any rule or order thereunder.
The net asset value of a share of any class or series of common stock of
the corporation shall be determined in accordance with applicable laws and
regulations or under the supervision of such persons and at such time or times
as shall from time to time be prescribed by the board of directors.
Section 5. The corporation may issue, sell, redeem, repurchase and
otherwise deal in and with shares of its stock in fractional denominations and
such fractional denominations shall, for all purposes, be shares having
proportionately to the respective fractions represented thereby all the rights
of whole shares, including without limitation, the right to vote, the right to
receive dividends and distributions, and the right to participate upon
liquidation of the corporation; provided that the issue of shares in fractional
denominations shall be limited to such transactions and be made upon such terms
as may be fixed by or under authority of the bylaws.
Section 6. The corporation shall not be obligated to issue certificates
representing shares of any class or series unless it shall receive a written
request therefor from the record holder thereof in accordance with procedures
established in the bylaws or by the board of directors.
ARTICLE IV
PREEMPTIVE RIGHTS
No stockholder of the corporation of any class or series, whether now or
hereafter authorized, shall have any preemptive or preferential or other right
of purchase of or subscription to any share of any class or series of stock, or
shares convertible into, exchangeable for or evidencing the right to purchase
stock of any class or series whatsoever, whether or not the stock in question be
of the same class or series as may be held by such stockholder, and whether now
or hereafter authorized and whether issued for cash, property, services or
otherwise, other than such, if any, as the board of directors in its discretion
may from time to time fix.
<PAGE>
ARTICLE V
PRINCIPAL OFFICE AND REGISTERED AGENT
The post office address of the principal office of the corporation in the
State of Maryland is 32 South Street, Baltimore, Maryland 21202. The resident
agent of the corporation is The Corporation Trust Incorporated, whose post
office address is 32 South Street, Baltimore, Maryland 21202. Said resident
agent is a corporation of the State of Maryland.
ARTICLE VI
DIRECTORS
Section 1. The initial board of directors shall consist of three members
who need not be residents of the State of Maryland or stockholders of the
corporation.
Section 2. The names of the persons who shall act as directors until the
first meeting of stockholders or until their successors shall have been elected
and qualified are as follows:
Charles W. Brady 1315 Peachtree Street, N.E., Atlanta, Georgia
John M. Butler 7800 E. Union Avenue, Denver, Colorado
Dan J. Hesser 7800 E. Union Avenue, Denver, Colorado
Section 3. The number of directors may be increased or decreased in
accordance with the bylaws, provided that the number shall not be reduced to
less than three.
Section 4. A majority of the directors shall constitute a quorum for the
transaction of business, unless the bylaws shall provide that a different number
shall constitute a quorum; provided, however, that in no case shall a quorum be
less than one-third (1/3) of the total number of directors or less than two (2)
directors.
Section 5. No person shall serve as a director, unless elected by the
stockholders at an annual meeting or a special meeting called for such purpose;
except that vacancies occurring between such meetings may be filled by the
directors in accordance with the bylaws, and subject to such limitations as may
be set forth by applicable laws and regulations.
Section 6. The board of directors of the corporation is hereby empowered
to authorize the issuance from time to time of shares of stock, whether of a
class or series now or hereafter authorized, for such consideration as it deems
advisable, subject to such limitations as may be set forth herein, in the
bylaws, in the Maryland General Corporation Law, and in the Investment Company
Act of 1940, as amended.
Section 7. The board of directors of the corporation may make, alter or
repeal from time to time any of the bylaws of the corporation except any
particular bylaw which is specified as not subject to alternation or repeal by
the board of directors.
<PAGE>
ARTICLE VII
LIABILITY AND INDEMNIFICATION
Section 1. Directors and officers of the corporation, including persons
who formerly have served in such capacities, shall have limitations on, and/or
immunity from, liability of such directors and officers to the fullest extent
permitted by the Maryland General Corporation Law, subject only to such
restrictions as may be required by the Investment Company Act of 1940, as
amended, and the rules thereunder. Such limitations and/or immunity will apply
to acts or omissions occurring at the time an individual serves as a director or
officer of the corporation, whether such person is a director or officer of the
corporation at the time of any proceeding in which liability is asserted against
the director or officer. No amendment to these Articles of Incorporation or
repeal of any of its provisions shall limit or eliminate the benefits provided
to directors and officers under this provision with respect to any act or
omission which occurred prior to such amendment or repeal.
Section 2. The corporation shall indemnify and advance expenses to its
directors and officers, including persons who formerly have served in such
capacities, to the fullest extent permitted to directors by the Maryland General
Corporation Law and the bylaws of the corporation, as such Law and bylaws now or
in the future may be in effect, subject only to such limitations as may be
required by the Investment Company Act of 1940, as amended, and the rules
thereunder.
ARTICLE VIII
SPECIAL VOTING AND MEETING PROVISIONS
Section 1. Notwithstanding any provision of Maryland law requiring a
greater proportion than a majority of the votes of all classes or of any class
of stock entitled to be cast to take or authorize any action, the corporation
may take or authorize any such action upon the concurrence of a majority of the
aggregate number of the votes entitled to be cast thereon.
Section 2. The presence in person or by proxy of the holders of one-third
of the shares of stock of the corporation entitled to vote without regard to
class shall constitute a quorum at any meeting of stockholders, except with
respect to any matter which by law requires the approval of one or more classes
of stock, in which case the presence in person or by proxy of the holders of
one-third of the shares of stock of each class entitled to vote on the matter
shall constitute a quorum.
Section 3. So long as the corporation is registered pursuant to the
Investment Company Act of 1940, as amended, the corporation will not be required
to hold annual shareholder meetings in years in which the election of directors
is not required to be acted upon under the Investment Company Act of 1940, as
amended.
<PAGE>
ARTICLE IX
AMENDMENT
The corporation reserves the right from time to time to make any amendment
of its articles of incorporation now or hereafter authorized by law, including
any amendment which alters the contract rights, as expressly set forth in such
articles, of any outstanding stock by classification, reclassification or
otherwise, but no such amendment which changes the terms or rights of any of its
outstanding shares shall be valid unless such amendment shall have been
authorized by not less than a majority of the aggregate number of votes entitled
to be cast thereon, by a vote at a meeting or in writing with or without a
meeting.
IN WITNESS WHEREOF, I have signed these articles of incorporation on this
___ day of April, 1993.
/s/ Dan J. Hesser
-----------------
Dan J. Hesser
Attest: /s/ Glen A. Payne
-----------------
Glen A. Payne
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
I hereby certify that on the 1st day of April, 1993, before me, the
subscriber, a Notary Public of the State of Colorado, in and for the City and
County of Denver, personally appeared Dan J. Hesser who acknowledged the
foregoing articles of incorporation to be his act.
WITNESS my hand and notarial seal, the day and year first above written.
/s/ Cheryl K. Howlett
---------------------
Notary Public
My commission expires: February 22, 1995.
BYLAWS
OF
INVESCO DIVERSIFIED FUNDS, INC.
AS OF APRIL 5, 1993
ARTICLE I.
SHAREHOLDERS
Section 1. Annual Meeting. Unless otherwise determined by the board of
directors or required by applicable law, no annual meeting of
shareholders shall be required to be held in any year in which
the election of directors is not required under the Investment
Company Act of 1940. If the corporation is required to hold
a meeting of shareholders to elect directors, the meeting
shall be designated as the annual meeting of shareholders for
that year, and shall be held no later than 120 days after
occurrence of the event requiring the meeting at a place
within or without the State of Maryland.
Section 2. Special Meetings. Special meetings of the shareholders
entitled to vote shall be called upon the request in writing
of the president or, in his absence, a vice president, or by a
vote of a majority of the board of directors, or upon the
request in writing of shareholders of the Company representing
not less than ten percent (10%) of the votes entitled to be
cast at the meeting.
Section 3. Place of Meetings. Each annual and any special meeting of
the shareholders shall be held at the principal office of the
corporation in Denver, Colorado, or at such alternate site as
may be determined by the board of directors.
Section 4. Notices. Notices of every meeting, annual or special, shall
specify the place, day and hour of the meeting and shall be
mailed not less than ten (10) days nor more than ninety (90)
days before such meeting. Such notice shall be given by the
Secretary of the Corporation to each shareholder entitled to
notice of and entitled to vote at the meeting. In the event
that a special meeting is called by the shareholders entitled
to vote, the Secretary of the Corporation shall inform the
shareholders who make the request of the reasonably estimated
cost of preparing and mailing a notice of the meeting, and
upon payment of these costs to the Corporation, shall notify
each shareholder entitled to notice of the meeting. Notice of
every special meeting shall indicate briefly its purpose.
Notice shall be deemed delivered where it is personally
delivered to the individual, left at the individual's usual
place of business, or mailed to the individual at the
individual's address as it appears on the records of the
Corporation.
<PAGE>
Section 5. Quorum. At every meeting of the shareholders, the presence in
person or by proxy of the holders of one-third of all of the
shares of stock of the corporation issued and outstanding and
entitled to vote without regard to class shall constitute a
quorum, except with respect to any matter which by law
requires the approval of one or more classes of stock, in
which case the presence in person or by proxy of the holders
of one-third of the shares of stock of each class entitled to
vote on the matter shall constitute a quorum; provided,
however, that at every meeting of the shareholders, the
representation of a larger number of shareholders shall
constitute a quorum if required by the Investment Company Act
of 1940, as amended, other applicable law, or by the Articles
of Incorporation.
Section 6. Voting. At every meeting of the shareholders at which a
quorum is present, each shareholder entitled to vote shall be
entitled to vote in person, or by proxy appointed by
instrument in writing subscribed by such shareholder, or his
duly authorized attorney, and he shall have one (1) vote for
each share of stock standing registered in his name on each
matter submitted at the meeting on which such share is
entitled to vote and for each director to be elected.
Fractional shares shall be entitled to proportionate
fractional votes. Every proxy shall be dated and no proxy
shall be valid after eleven (11) months from its date unless
otherwise provided in the proxy. There shall be no cumulative
voting in the election of directors. Except as otherwise
provided by law, by the charter of the corporation, or by
these bylaws, at each meeting of stockholders at which a
quorum is present, all matters shall be decided by a majority
of the votes cast by the stockholders present in person or
represented by proxy and entitled to vote with respect to any
such matter.
Section 7. Qualification of Voters. At every meeting of shareholders,
unless the voting is conducted by inspectors, the proxies and
ballots shall be received, and all questions with respect to
the qualification of voters and the validity of proxies and
the acceptance or rejection of votes shall be decided by the
chairman of the meeting. If demanded by shareholders present
in person or by proxy entitled to cast twenty-five per cent
(25%) in number of votes, or if ordered by the chairman of the
meeting, the vote upon any election or question shall be taken
by ballot and, upon such demand or order, the voting shall be
conducted by two (2) inspectors appointed by the chairman, in
which event the proxies and ballots shall be received and all
questions with respect to the qualification of votes and the
validity of proxies and the acceptance or rejection of votes
shall be decided by such inspectors. Unless so demanded or
ordered, no vote need be by ballot and the voting need not be
conducted by inspectors.
<PAGE>
Section 8. Waiver of Notice. A waiver of notice of any meeting of
shareholders signed by any shareholder entitled to such notice
filed with the records of the meeting, whether before or after
the holding thereof or actual attendance at the meeting in
person or by proxy, shall be deemed equivalent to the giving
of notice to such shareholder.
Section 9. Adjournment. A meeting of shareholders convened on the date
for which it was called may be adjourned from time to time
without further notice to a date not more than 120 days after
the original record date of the meeting.
Section 10. Action by Shareholders Without Meeting. Except as
otherwise provided by law, the provisions of these bylaws
relating to notices and meetings to the contrary
notwithstanding, any action required or permitted to be taken
at any meeting of shareholders may be taken without a meeting
if a consent in writing setting forth the action shall be
signed by all the shareholders entitled to vote upon the
action and such consent shall be filed with the records of the
corporation.
ARTICLE II.
BOARD OF DIRECTORS
Section 1. Powers. The business and property of the corporation shall
be conducted and managed by its board of directors, which may
exercise all of the powers of the corporation, except such as
are by statute, by the charter or by the bylaws, conferred
upon or reserved to the shareholders. The board of directors
shall keep full and complete records of its transactions.
Section 2. Number. By vote of a majority of the entire board of
directors, the number of directors may be increased or
decreased from time to time; provided that, in no event, may
the number be decreased to less than three.
Section 3. Election. The members of the board of directors shall be
elected by the shareholders by plurality vote at the annual
meeting, or at any special meeting called for such purpose.
Each director shall hold office until his successor shall have
been duly chosen and qualified, or until he shall have
resigned or shall have been removed in the manner provided by
law. Any vacancy, including one created by an increase in the
number of directors on the board (except where such vacancy is
created by removal by the shareholders), may be filled by the
vote of a majority of the remaining directors, although such
majority is less than a quorum; provided, however, that
immediately after filling any vacancy by such action of the
board of directors, at least two-thirds (2/3) of the directors
then holding office shall have been elected by the
shareholders at an annual or special meeting.
<PAGE>
Section 4. Regular Meetings. The board of directors shall schedule an
Annual Meeting at such place and time as they may designate
for the purpose of organization, the election of officers, and
the transaction of other business. Other regular meetings may
be held as scheduled by a majority of the directors.
Section 5. Special Meetings. Special meetings of the board of directors
may be called at any time by the president or by a majority of
the directors or by a majority of the executive committee.
Section 6. Notice of Meetings. Notice of the place, day and hour of
every special meeting shall be given to each director at least
two (2) days before the meeting, by written announcement,
telephone, telegraph and/or mail addressed to him at his post
office address, according to the records of the corporation.
Unless required by resolution of the board of directors, no
notice of any meeting of the board of directors need state the
business to be transacted thereat. No notice of any meeting
of the board of directors need be given to any director who
attends, or to any director who, in writing executed and filed
with the records of the meeting either before or after the
holding thereof, waives such notice. Any meeting of the board
of directors may adjourn from time to time to reconvene at the
same or some other place, and no notice need be given of any
such adjourned meeting other than by announcement.
Section 7. Quorum. At all meetings of the board of directors,
one-third of the total number of directors or not less than
two (2) directors shall constitute a quorum for the
transaction of business. In the absence of a quorum, the
directors present by a majority vote and without notice other
than by announcement may adjourn the meeting from time to time
until a quorum shall be present. At any such adjourned
meeting, any business may be transacted which might have been
transacted at the meeting as originally notified.
Section 8. Compensation of Directors. Directors shall be entitled to
receive such compensation from the corporation for their
services as may from time to time be voted by the board of
directors. All directors shall be reimbursed for their
reasonable expenses of attendance, if any, at the board and
committee meetings. Any director of the corporation may also
serve the corporation in any other capacity and receive
compensation therefor.
Section 9. Vacancies. Any vacancy occurring in the board of directors
may be filled by the affirmative vote of a majority of the
remaining directors though less than a quorum of the board of
directors. A director elected to fill a vacancy shall be
elected for the unexpired term of his predecessor in office.
Any directorship to be filled by reason of an increase in the
number of directors may be filled by election by the board of
directors for a term of office continuing only until the next
election of directors by the shareholders.
<PAGE>
Section 10. Resignation and Removal of Directors. Any director or
member of any committee may resign at any time. Such
resignation shall be made in writing and shall take effect at
the time specified therein. If no time is specified, it shall
take effect from the time of its receipt by the Secretary, who
shall record such resignation, noting the day and hour of its
reception. The acceptance of a resignation shall not be
necessary to make it effective. Notwithstanding anything to
the contrary in Article I, Section 2 hereof, a meeting for
removing a director shall be called in accordance with the
procedures specified in Section 16(c) of the Investment
Company Act of 1940, and the shareholder communications
provisions of said Section 16(c) shall be following by the
corporation. At any meeting of shareholders, duly called and
at which a quorum is present, the shareholders may, by
affirmative vote of the holders of a majority of the votes
entitled to be cast thereon, remove any director or directors
from office and may elect a successor or successors to fill
any resulting vacancies to hold office until the next annual
meeting of shareholders or until a successor or successors are
elected and qualify.
Section 11. Telephone Meetings. Any member or members of the board of
directors or of any committee designated by the board of
directors, may participate in a meeting of the board, or any
such committee, as the case may be, by means of a conference
telephone or similar communications equipment if all persons
participating in the meeting can hear each other at the same
time. Participation in a meeting by these means constitutes
presence in person at the meeting. This Section 11 shall not
be applicable to meetings held for the purpose of voting in
respect of approval of contracts or agreements whereby a
person undertakes to serve or act as investment adviser of, or
principal underwriter for, the corporation or in respect to
other matters as to which the Investment Company Act of 1940
or the rules thereunder require that votes be cast in person.
Section 12. Action by Directors Without Meeting. The provisions of
these bylaws covering notices and meetings to the contrary
notwithstanding, and except as required by law (including
Section 15 of the Investment Company Act of 1940), any action
required or permitted to be taken at any meeting of the board
of directors may be taken without a meeting if a consent in
writing setting forth the action shall be signed by all of the
directors entitled to vote upon the action and such written
consent is filed with the minutes of proceedings of the board
of directors.
<PAGE>
ARTICLE III.
COMMITTEES
Section 1. Executive Committee. The board of directors, by resolution
adopted by a majority of the whole board of directors, may
provide for an executive committee of three (3) or more
directors. If provision be made for an executive committee,
the members thereof shall be elected by the board of directors
to serve during the pleasure of the board of directors.
Unless otherwise provided by resolution of the board of
directors, the president shall be a member and the chairman of
the executive committee shall preside at all meetings thereof.
During the intervals between the meetings of the board of
directors, the executive committee shall possess and may
exercise all of the powers of the board of directors in the
management of the business and affairs of the corporation
conferred by the bylaws or otherwise, to the extent authorized
by the resolution providing for such executive committee or by
subsequent resolution adopted by a majority of the whole board
of directors, in all cases in which specific directions shall
not have been given by the board of directors.
Notwithstanding the foregoing, the executive committee shall
not have the power to: (i) declare dividends or distributions
on stock; (ii) issue stock other than as provided by the
Maryland General Corporation Law; (iii) recommend to the
shareholders any action which requires shareholder approval;
(iv) amend these bylaws; or (v) approve any merger or share
exchange which does not require shareholder approval. The
executive committee shall maintain written records of its
transactions. All action by the executive committee shall be
reported to the board of directors at its meeting next
succeeding such action, and shall be subject to ratification,
with or without revision or alteration, by such vote of the
board of directors as would have been required under Article
II, Section 7, hereof, had such action been taken by the board
of directors. Vacancies in the executive committee shall be
filled by the board of directors.
Section 2. Meetings of the Executive Committee. The executive committee
shall fix its own rules of procedure and shall meet as
provided by such rules or by resolution of the board of
directors, and it shall also meet at the call of the chairman
or of any two (2) members of the committee. A majority of the
executive committee shall constitute a quorum. Except in
cases in which it is otherwise provided by resolution of the
board of directors, the vote of a majority of such quorum at
a duly constituted meeting shall be sufficient to elect and to
pass any measure, subject to ratification by the board of
directors as provided in Section 1 of this Article III.
Section 3. Other Committees. The board of directors may by resolution
provide for such other standing or special committees as it
deems desirable, and discontinue the same at its pleasure.
Each such committee shall have such powers and perform such
duties as may be assigned to it by the board of directors.
<PAGE>
Section 4. Committee Action Without Meeting. The provisions of these
bylaws covering notices and meetings to the contrary
notwithstanding, and except as required by law, any action
required or permitted to be taken at any meeting of any
committee of the board of directors appointed pursuant to
these bylaws may be taken without a meeting if a consent in
writing setting forth the action shall be signed by all
members of the committee entitled to vote upon the action, and
such written consent is filed with the records of the
proceedings of the committee.
ARTICLE IV.
OFFICERS
Section 1. Numbers; Qualifications; Term of Office; Vacancies. The board
of directors may select one of their number as chairman of the
board and may select one of their number as vice chairman of
the board (neither of which positions shall be considered to
be the designation of a position as an officer of the
corporation), and shall choose as officers a president from
among the directors and a treasurer and a secretary who need
not be directors. The board of directors may also choose one
or more vice presidents, one or more assistant secretaries and
one or more assistant treasurers, none of whom need be a
director. Any two or more of such offices, except those of
president and vice president, may be held by the same person,
but no officer shall execute, acknowledge or verify any
instrument in more than one capacity if such instrument is
required by law or by the certificate of incorporation or by
these bylaws or by resolution of the board of directors to be
executed, acknowledged or verified by any two or more
officers. Each such officer shall hold office until the first
meeting of the board of directors after the annual meeting of
the shareholders next following his election or, if no such
annual meeting of the shareholders is held, until the annual
meeting of the board of directors in the year following his
election, and, until his successor is chosen and qualified or
until he shall have resigned or died, or until he shall have
been removed as hereinafter provided in Section 3 of this
Article IV. Any vacancy in any of the above offices may be
filled by the board of directors at any regular or special
meeting. All officers and agents of the corporation, as
between themselves and the corporation, shall have such
authority and perform such duties in the management of the
corporation as may be provided in or pursuant to these bylaws,
or, to the extent not so provided, as may be prescribed by the
board of directors; provided, that no rights of any third
party shall be affected or impaired by any such bylaws or
resolution of the board unless the third party has knowledge
thereof.
Section 2. Subordinate Officers. The board of directors, or any
officer thereunto authorized by it, may appoint from time to
time such other officers and agents for such terms of office
and with such powers and duties as may be prescribed by the
board of directors or the officer making such appointment.
<PAGE>
Section 3. Removal. Any officer or agent may be removed by the board
of directors whenever, in its judgment, the best interests of
the corporation will be served thereby, but such removal shall
be without prejudice to the contractual rights, if any, of the
person so removed.
Section 4. Chairman of the Board. The chairman of the board, if one
shall be elected, shall preside at all meetings of the board
of directors, and shall appoint all committees except such as
are required by statute, these bylaws or a resolution of the
board of directors or of the executive committee to be
otherwise appointed, and shall have other such duties as may
be assigned to him from time to time by the board of
directors. In recognition of notable and distinguished
services to the corporation, the board of directors may
designate one of its members as honorary chairman, who shall
have such duties as the board may, from time to time, assign
him by appropriate resolution, excluding, however, any
authority or duty vested by law or these bylaws in any other
officer.
Section 5. Vice Chairman of the Board. The vice chairman of the board,
if one shall be elected, shall preside at all meetings of the
board of directors at which the chairman of the board is not
present, shall call at his discretion and shall preside at
meetings of those directors of the corporation who are not
affiliated with the corporation's investment adviser,
distributor, or affiliates thereof, and shall perform such
other duties as may be assigned to the vice chairman from time
to time by the board of directors.
Section 6. President. The president shall preside at all meetings of the
shareholders and, in the absence of the chairman and the vice
chairman of the board or if a chairman and vice chairman of
the board are not elected, at all meetings of the board of
directors. Unless otherwise provided by the board of
directors, he shall have direct control of and any authority
over the business and affairs and over the officers of the
corporation, and shall preside at all meetings of the
executive committee. The president shall also perform all
such other duties as are incident to his office and as may be
assigned to him from time to time by the board of directors.
Section 7. Vice Presidents. The vice president or vice presidents, at
the request of the president or in his absence or inability to
act, shall perform the duties and exercise the functions of
the president in such manner as may be directed by the
president, the board of directors or the executive committee.
The vice president or vice presidents shall have such other
powers and perform all such other duties as may be assigned to
them by the board of directors, the executive committee, or
the president.
<PAGE>
Section 8. Secretary. The secretary shall see that all notices are duly
given in accordance with these bylaws; he shall keep the
minutes of all meetings of the shareholders and, if directed
to do so by the chairman of the meeting, of meetings of the
board of directors and of the executive committee at which he
shall be present; he shall have charge of the books and
records and the corporate seal or seals of the corporation; he
shall see that the corporate seal is affixed to all documents,
the execution of which under the seal of the corporation is
duly authorized and is necessary; and he shall make such
reports and perform all such other duties as are incident to
his office and as may be assigned to him from time to time by
the board of directors or by the president.
Section 9. Treasurer. The treasurer shall be the chief financial officer
of the corporation, and as such shall have supervision of the
custody of all funds, securities and valuable documents of the
corporation, subject to such arrangements as may be authorized
or approved by the board of directors with respect to the
custody of assets of the corporation; shall receive, or cause
to be received, and give, or cause to be given, receipts for
all funds, securities or valuable documents paid or delivered
to, or for the account of, the corporation, and cause such
funds, securities or valuable documents to be deposited for
the account of the corporation with such banks or trust
companies as shall be designated by the board of directors;
shall pay or cause to be paid out of the funds of the
corporation all just debts of the corporation upon their
maturity; shall maintain, or cause to be maintained, accurate
records of all receipts, disbursements, assets, liabilities,
and transactions of the corporation; shall see that adequate
audits thereof are regularly made; shall, when required by the
board of directors, render accurate statements of the
condition of the corporation; and shall perform all such other
duties as are incident to his office and as may be assigned to
him by the board of directors or by the president.
Section 10. Assistant Secretaries, Assistant Treasurers. The assistant
secretaries and assistant treasurers shall have such duties as
from time to time may be assigned to them by the board of
directors, or by the president.
Section 11. Compensation. The board of directors shall have the power
to fix the compensation of all officers and agents of the
corporation, but may delegate to any officer or committee the
power of determining the amount of salary to be paid to any
officer or agent of the corporation other than the chairman of
the board, the president, the vice presidents, the secretary
and the treasurer.
Section 12. Contracts. Except as otherwise provided by law or by the
charter, no contract or transaction between the corporation
and any partnership or corporation, and no act of the
corporation, shall in any way be affected or invalidated by
the fact that any officer or director of the corporation is
<PAGE>
pecuniarily or otherwise interested therein or is a member,
officer or director of such other partnership or corporation
if such interest shall be known to the board of directors of
the corporation. Specifically, but without limitation of the
foregoing, the corporation may enter into one or more
contracts appointing INVESCO Funds Group, Inc. investment
adviser of the corporation, and may otherwise do business with
INVESCO Funds Group, Inc., notwithstanding the fact that one
or more of the directors of the corporation and some or all of
its officers are, have been or may become directors, officers,
members, employees, or shareholders of INVESCO Funds Group,
Inc. and may deal freely with each other, and neither such
contract appointing INVESCO Funds Group, Inc. investment
adviser to the corporation nor any other contract or
transaction between the corporation and INVESCO Funds Group,
Inc. shall be invalidated or in any way affected thereby, nor
shall any director or officer of the corporation by reason
thereof be liable to the corporation or to any shareholder or
creditor of the corporation or to any other person for any
loss incurred under or by reason of any such contract or
transaction. For purposes of this paragraph, any reference to
"INVESCO Funds Group, Inc." shall be deemed to include said
company and any parent, subsidiary or affiliate of said
company and any successor (by merger, consolidation or
otherwise) to said company or any such parent, subsidiary or
affiliate.
Section 13. Delegation of Duties. Whenever an officer is absent or
disabled, or whenever for any reason the board of directors
may deem it desirable, the board may delegate the powers and
duties of an officer to any other officer or officers or to
any director or directors.
ARTICLE V.
CAPITAL STOCK
Section 1. Issuance of Stock. The corporation shall not issue its shares
of capital stock except as approved by the board of directors.
Upon the sale of each share of its common stock, except as
otherwise permitted by applicable laws and regulations, the
corporation shall receive in cash or in securities valued as
provided in Article VIII of these bylaws, not less than the
current net asset value thereof, exclusive of any distributing
commission or discount, and in no event less than the par
value thereof.
Section 2. Certificates. Certificates for the Corporation's classes of
Common Stock shall be issued only upon the specific request of
a shareholder. If certificates are requested, they shall be
issued in such a form as may be approved by the board of
directors, they shall be respectively numbered serially for
each class of shares, or series thereof, as they are issued,
<PAGE>
and shall be signed by, or bear a facsimile of the signatures
of, the president or a vice president, and shall also be
signed by, or bear a facsimile of the signature of some other
person who is one of the following: the treasurer, an
assistant treasurer, the secretary, or an assistant secretary;
and shall be sealed with, or bear a facsimile of, the seal of
the corporation. In case any officer of the corporation whose
signature or facsimile signature appears on such certificates
shall cease to be such officer, whether because of death,
resignation or otherwise, certificates may nevertheless be
issued and delivered as though such person had not ceased to
be an officer.
Section 3. Transfers. Subject to the Maryland General Corporation Law,
the board of directors shall have power and authority to make
all such rules and regulations as it may deem expedient
concerning the issue, transfer and registration of
certificates of stock; and may appoint transfer agents and
registrars thereof. The duties of transfer agent and registrar
may be combined.
Section 4. Stock Ledgers. Original or duplicate stock ledgers,
containing the names and addresses of the shareholders of the
corporation and the number of shares of each class held by
them respectively, shall be kept at an office or agency of the
corporation in such city or town as may be designated by the
board of directors.
Section 5. Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining shareholders entitled to notice of or
to vote at any meeting of shareholders or any adjournment
thereof, or shareholders entitled to receive payment of any
dividend, or in order to make a determination of shareholders
for any other purpose, the board of directors of the
Corporation may provide that the share transfer books shall be
closed for a stated period but not to exceed, in any case,
twenty days. If the share transfer books shall be closed for
the purpose of determining shareholders entitled to notice of
or to vote at a meeting of shareholders, such books shall be
closed for at least ten days immediately preceding such
meeting. In lieu of closing the share transfer books, the
board of directors may fix in advance a date as the record
date for any such determination of shareholders, such date in
any case to be not more than ninety days and, in case of a
meeting of shareholders, not less than ten days prior to the
date on which the particular action, requiring such
determination of shareholders, is to be taken. If the share
transfer books are not closed and no record date is fixed for
the determination of shareholders entitled to notice of or to
vote at a meeting of shareholders, the later of the close of
business on the date on which notice of the meeting is mailed
or the thirtieth day before the meeting shall be the record
date for determining shareholders entitled to notice of or to
vote at a meeting of shareholders. The record date for
determining shareholders entitled to receive payment of a
<PAGE>
dividend or an allotment of any rights shall be the close of
business on the day on which the resolution of the board of
directors declaring such dividend or allotment of rights is
adopted. But the payment or allotment may not be made more
than 60 days after the date on which the resolution is
adopted. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided
in this section, such determination shall apply to any
adjournment thereof.
Section 6. New Certificates. In case any certificate of stock is lost,
stolen, mutilated or destroyed, the board of directors may
authorize the issue of a new certificate in place thereof upon
such terms and conditions as it may deem advisable; or the
board of directors may delegate such power to any officer or
officers of the corporation; but the board of directors or
such officer or officers, in their discretion, may refuse to
issue such new certificate, save upon the order of some court
having jurisdiction in the premises.
Section 7. Registered Owners of Stock. The corporation shall be entitled
to recognize the exclusive right of a person registered on its
books as the owner of shares of stock to receive dividends,
and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of
shares of stock, and shall not be bound to recognize any
equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it
shall have express or other notice thereof, except as
otherwise provided by the laws of Maryland.
Section 8. Fractional Denominations. Subject to any applicable
provisions of law and the charter of the corporation, the
corporation may issue shares of its capital stock in
fractional denominations, provided that the transactions in
which and the terms and conditions upon which shares in
fractional denominations may be issued from time to time be
limited or determined by or under the authority of the board
of directors.
ARTICLE VI.
FINANCES
Section 1. Checks, drafts, etc. All instruments, documents, and other
papers shall be executed in the name and on behalf of the
corporation, and all drafts, checks, notes and other
obligations for the payment of money by the corporation shall,
unless otherwise provided by resolution of the board of
directors, be signed by the president or vice president and
countersigned by the secretary or treasurer.
<PAGE>
Section 2. Annual Reports. A statement of the affairs of the corporation
shall be submitted at the annual meeting of the shareholders
and, within twenty (20) days after the meeting, shall be
placed on file at the corporation's principal office. If the
corporation is not required to hold an annual meeting of
shareholders, the corporation's statement of affairs shall be
placed on file at the corporation's principal office within
one hundred and twenty (120) days after the end of its fiscal
year. Such statement shall be prepared by such executive
officer of the corporation as may be designated by resolution
of the board of directors. If no other executive officer is
so designated, it shall be the duty of the president to
prepare such statement.
Section 3. Fiscal Year. The fiscal year of the corporation shall begin
on 1st day of April in each year and end on the 31st day of
March following.
Section 4. Dividends and Distributions. Subject to any applicable
provisions of law and the charter of the corporation,
dividends and distributions upon the common stock of the
corporation may be declared at such intervals as the board of
directors may determine, in cash, in securities or other
property, or in shares of stock of the corporation, from any
sources permitted by law, all as the board of directors shall
from time to time determine.
Section 5. Location of Books and Records. The books and records of the
corporation may be kept outside the State of Maryland at the
principal office of the corporation or at such place or places
as the board of directors may from time to time determine,
except as otherwise required by law.
ARTICLE VII.
REDEMPTION OF STOCK
The registered owner of the outstanding stock of the corporation shall
have the right to require the corporation to redeem his shares at the asset
value thereof, as hereinafter defined in Article VIII of these bylaws, upon
delivery to the corporation of any certificate, or certificates, properly
endorsed, which have been issued as evidence of ownership of such stock, and a
written request for redemption in a form satisfactory to the corporation.
Stock of the corporation shall be redeemed at the current net asset value
per share next determined after a request in proper form has been received from
the registered owner or owner's designee at the office of the corporation
designated to receive redemption requests. Any certificates delivered at the
designated principal place of business of the corporation on a day which is not
a business day as herein defined, shall be deemed to have been received on the
<PAGE>
business day next succeeding the day of such delivery. Subject to the
limitations of the Investment Company Act of 1940, the board of directors shall
have authority to fix a reasonable service charge for redemption of its stock,
including redemption pursuant to any periodic withdrawal or variable payment
plan or contract.
ARTICLE VIII.
DETERMINATION OF ASSET VALUE
Section 1. Net Asset Value. The net asset value of a share of common
stock of the corporation shall be determined in accordance
with applicable laws and regulations under the supervision of
such persons and at such time or times, including the close of
business on each business day, as shall be prescribed by the
board of directors. Each such determination shall be made by
subtracting from the value of the assets of the corporation
(as determined pursuant to Section 2 of this Article of the
bylaws) the amount of its liabilities, dividing the remainder
by the number of shares of common stock issued and
outstanding, and adjusting the results to the nearest full
cent per share.
Section 2. Valuation of Portfolio Securities and Other Assets. Except
as otherwise required by any applicable law or regulation of
any regulatory agency having jurisdiction over the activities
of the corporation, the corporation shall determine the value
of its portfolio securities and other assets as follows:
(a) securities for which market quotations are readily
available shall be valued at current market value
determined in such manner as the board of directors may
from time to time prescribe;
(b) all other securities and assets shall be valued at
amounts deemed best to reflect their fair value as
determined in good faith by or under the supervision of
such persons and at such time or times as shall from
time to time be prescribed by the board of directors;
All quotations, sale prices, bid and asked prices and other
information shall be obtained from such sources as the persons
making such determination believe to be reliable, and any
determination of net asset value based thereon shall be
conclusive.
ARTICLE IX.
PERIOD OF EMERGENCY
During any period of emergency, the board of directors, at its option, may
suspend the computation of asset value for the purpose of issuing or redeeming
<PAGE>
it stock, and may suspend any obligation to accept payments for the acquisition
of additional stock of the corporation and may suspend the obligation of the
corporation to redeem stock. A period of emergency is defined to be:
(a) A period during which the New York Stock Exchange is closed other
than customary weekend and holiday closings, or during which trading
on the New York Stock Exchange is restricted;
(b) A period during which disposal by the corporation of securities
owned by it is not reasonably practicable, or during which it is not
reasonably practicable for the corporation to fairly to determine
the value of its net assets; or
(c) Such other periods as the Securities and Exchange Commission
pursuant to the provisions of the Investment Company Act of 1940 may
by order declare as an emergency period or periods.
ARTICLE X.
MISCELLANEOUS PROVISIONS
Section 1. Seal. The board of directors shall provide a suitable seal,
bearing the name of the corporation, which shall be in the
charge of the secretary. The board of directors may authorize
one or more duplicate seals and provide for the custody
thereof.
Section 2. Bonds. The board of directors may require any officer,
agent or employee of the corporation to give a bond to the
corporation, conditioned upon the faithful discharge of his
duties, with one or more sureties and in such amount as may be
satisfactory to the board of directors.
Section 3. Voting upon Stock in Other Corporations. Any stock in other
corporations or associations, which may from time to time be
held by the corporation, may be voted at any meeting of the
shareholders thereof by the president or a vice president of
the corporation or by proxy or proxies appointed by the
president or one of the vice presidents of the corporation.
The board of directors, however, may by resolution appoint
some other person or persons to vote such stock, in which
case, such person or persons shall be entitled to vote such
stock upon the production of a certified copy of such
resolution.
Section 4. Bylaws. The board of directors shall have the power to make,
amend and repeal the bylaws of the corporation which may
contain any provision for regulation and management of the
affairs of the corporation not inconsistent with law or the
certificate of incorporation; provided that any and all
provisions of the bylaws, notwithstanding the power of the
directors to act with respect thereto, may be altered or
repealed, and new provisions may be adopted by the
shareholders or at any annual meeting or any special meeting
called for that purpose.
<PAGE>
Section 5. Appointment and Duties of Custodian. The corporation shall
at all times employ a bank or trust company having the
qualifications specified by the Investment Company Act of
1940, as amended, as custodian with authority as its agent,
but subject to such restrictions, limitations and other
requirements, if any, as may be contained in these bylaws and
the Investment Company Act of 1940, as amended:
(1) to receive and hold the securities owned by the
corporation and deliver the same upon written order;
(2) to receive and receipt for any moneys due to the
corporation and deposit the same in its own banking
department or elsewhere as the board of directors may
direct;
(3) to disburse such funds upon orders or vouchers;
(4) and to provide such additional services as may be
requested by the corporation;
all upon such basis of compensation as may be agreed upon
between the board of directors and the custodian.
The board of directors may also authorize the custodian to employ one or
more sub-custodians from time to time to perform such of the acts and
services of the custodian, and upon such terms and conditions, as may be
agreed upon between the custodian and such sub-custodian and approved by
the board of directors.
Section 6. Central Certification System. Subject to such rules,
regulations and orders as the U.S. Securities and Exchange
Commission may adopt, the board of directors may direct the
custodian to deposit all or any part of the securities owned
by the corporation in a system for the central handling of
securities established by a national securities exchange or a
national securities association registered with the SEC under
the Securities Exchange Act of 1934, or such other person as
may be permitted by the SEC or its staff in accordance with
the Investment Company Act of 1940, as amended, and any rule
or staff interpretation thereof, pursuant to which system all
securities of any particular class or series of any issuer
deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical
delivery of such securities, provided that all such deposits
shall be subject to withdrawal only upon the order of the
corporation.
Section 7. Compliance with Federal Regulations. The board of directors
is hereby empowered to take such action as it may deem to be
necessary, desirable or appropriate so that the corporation is
or shall be in compliance with any federal or state statute,
rule or regulation with which compliance by the corporation is
required.
<PAGE>
Section 8. Waiver of Notice. Whenever any notice of the time, place or
purpose of any meeting of shareholders, directors, or of any
committee is required to be given under the provisions of
statute or under the provisions of the charter of the
corporation or these bylaws, a waiver thereof in writing,
signed by the person or person entitled to such notice and
filed with the records of the meeting, whether before or after
the holding thereof, or actual attendance at the meeting of
directors or committee in person, shall be deemed equivalent
to the giving of such notice to such person.
Section 9. Offices. The principal office of the corporation in the
State of Maryland shall be in the City of Baltimore. In
addition to its principal office in the State of Maryland, the
corporation may have an office or offices in the City of
Denver, State of Colorado, and at such other places as the
board of directors may from time to time designate or the
business of the corporation may require.
Section 10. Definitions. For all purposes of the certificate of
incorporation and these bylaws, the terms:
(a) "business day" shall be defined as a day with respect to
which the New York Stock Exchange is open for business,
and with respect to which the actual time of closing of
such exchange is that time which shall have been
scheduled for such closing in advance of the opening of
such exchange;
(b) "the close of business" shall be defined as the time of
closing of the New York Stock Exchange.
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made this 31st day of October 1993, Denver, Colorado, by
and between INVESCO Funds Group, Inc. (the "Adviser"), a Delaware corporation,
and INVESCO Diversified Funds, Inc., a Maryland Corporation (the "Fund").
W I T N E S S E T H :
WHEREAS, the Fund is a corporation organized under the laws of the State
of Maryland; and
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), as a diversified, open-end management
investment company and has one class of shares (the "Shares"), which may be
divided into additional series, each representing an interest in a separate
portfolio of investments, with the first such series being designated as the
INVESCO Small Company Fund (the "Portfolio"); and
WHEREAS, the Fund desires that the Adviser manage its investment
operations and the Adviser desires to manage said operations;
NOW, THEREFORE, in consideration of these premises and of the mutual
covenants and agreements hereinafter contained, the parties hereto agree as
follows:
1. Investment Management Services. The Adviser hereby agrees to manage
the investment operations of the Fund and its Portfolio, subject to
the terms of this Agreement and to the supervision of the Fund's
directors (the "Directors"). The Adviser agrees to perform, or
arrange for the performance of, the following specific services for
the Fund:
(a) to manage the investment and reinvestment of all the assets,
now or hereafter acquired, of the Fund and the Portfolio of
the Fund;
(b) to maintain a continuous investment program for the Fund and
each Portfolio of the Fund, consistent with (i) the Fund's and
Portfolio's investment policies as set forth in the Fund'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 or any
Portfolio of the Fund, as from time to time amended and in use
under the Securities Act of 1933, as amended, and (ii) the
Fund'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 and the Portfolio, unless otherwise directed by the
Directors of the Fund, and to execute transactions
accordingly;
<PAGE>
(d) to provide to the Fund and the Portfolio of the Fund the
benefit of all of the investment analyses 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
Adviser;
(e) to determine what portion of the Fund and each Portfolio of
the Fund should be invested in common stocks, preferred
stocks, Government obligations, commercial paper, certificates
of deposit, bankers' acceptances, variable amount notes,
corporate debt obligations, and any other authorized
securities;
(f) to make recommendations as to the manner in which voting
rights, rights to consent to Fund and/or Portfolio action and
any other rights pertaining to the Fund's portfolio securities
shall be exercised; and
(g) to calculate the net asset value of the Fund and each
Portfolio, as applicable, as required by the 1940 Act, subject
to such procedures as may be established from time to time by
the Fund's Directors, based upon the information provided to
the Adviser by the Fund or by the custodian, co-custodian or
sub-custodian of the Fund's or any of the Portfolio's assets
(the "Custodian") or such other source as designated by the
Directors from time to time.
With respect to execution of transactions for the Fund and for the
Portfolio, the Adviser shall place, or arrange for the placement of,
all orders for the purchase or sale of portfolio securities with
brokers or dealers selected by the Adviser. In connection with the
selection of such brokers or dealers and the placing of such orders,
the Adviser is directed at all times to obtain for the Fund and the
Portfolio the most favorable execution and price; after fulfilling
this primary requirement of obtaining the most favorable execution
and price, the Adviser is hereby expressly authorized to consider as
a secondary factor in selecting brokers or dealers with which such
orders may be placed whether such firms furnish statistical,
research and other information or services to the Adviser. Receipt
by the Adviser of any such statistical or other information and
services should not be deemed to give rise to any requirement for
adjustment of the advisory fee payable pursuant to paragraph 3
hereof. The Adviser may follow a policy of considering sales of
shares of the Fund as a factor in the selection of broker/dealers to
execute portfolio transactions, subject to the requirements of best
execution discussed above.
The Adviser shall for all purposes herein provided be deemed to be
an independent contractor.
<PAGE>
2. Allocation of Costs and Expenses. The Adviser shall reimburse the
Fund monthly for any salaries paid by the Fund to officers,
Directors, and full-time employees of the Fund who also are
officers, general partners or employees of the Adviser or its
affiliates. Except for such subaccounting, recordkeeping, and
administrative services which are to be provided by the Adviser to
the Fund under the Administrative Services Agreement between the
Fund and the Adviser dated April 30, 1993, which was approved on
April 21, 1993, by the Fund's board of directors, including all of
the independent directors, at the Fund's request the Adviser shall
also furnish to the Fund, at the expense of the Adviser, such
competent executive, statistical, administrative, internal
accounting and clerical services as may be required in the judgment
of the Directors of the Fund. These services will include, among
other things, the maintenance (but not preparation) of the Fund's
accounts and records, and the preparation (apart from legal and
accounting costs) of all requisite corporate documents such as tax
returns and reports to the Securities and Exchange Commission and
Fund shareholders. The Adviser also will furnish, at the Adviser's
expense, such office space, equipment and facilities as may be
reasonably requested by the Fund from time to time.
Except to the extent expressly assumed by the Adviser herein and
except to the extent required by law to be paid by the Adviser, the
Fund shall pay all costs and expenses in connection with the
operations and organization of the Fund. Without limiting the
generality of the foregoing, such costs and expenses payable by the
Fund include the following:
(a) all brokers' commissions, issue and transfer taxes, and other
costs chargeable to the Fund and any Portfolio in connection
with securities transactions to which the Fund or any
Portfolio is a party or in connection with securities owned by
the Fund or any Portfolio;
(b) the fees, charges and expenses of any independent public
accountants, custodian, depository, dividend disbursing agent,
dividend reinvestment agent, transfer agent, registrar,
independent pricing services and legal counsel for the Fund or
for any Portfolio;
(c) the interest on indebtedness, if any, incurred by the Fund or
any Portfolio;
(d) the taxes, including franchise, income, issue, transfer,
business license, and other corporate fees payable by the Fund
or any Portfolio to federal, state, county, city, or other
governmental agents;
(e) the fees and expenses involved in maintaining the registration
and qualification of the Fund and of its shares under laws
administered by the Securities and Exchange Commission or
<PAGE>
under other applicable regulatory requirements, including the
preparation and printing of prospectuses and statements of
additional information;
(f) the compensation and expenses of its Directors;
(g) the costs of printing and distributing reports, notices of
shareholders' meetings, proxy statements, dividend notices,
prospectuses, statements of additional information and other
communications to the Fund's shareholders, as well as all
expenses of shareholders' meetings and Directors' meetings;
(h) all costs, fees or other expenses arising in connection with
the organization and filing of the Fund's Articles of
Incorporation, including its initial registration and
qualification under the 1940 Act and under the Securities Act
of 1933, as amended, the initial determination of its tax
status and any rulings obtained for this purpose, the initial
registration and qualification of its securities under the
laws of any state and the approval of the Fund's operations by
any other federal or state authority;
(i) the expenses of repurchasing and redeeming shares of the Fund;
(j) insurance premiums;
(k) the costs of designing, printing, and issuing certificates
representing shares of beneficial interest of the Fund;
(l) extraordinary expenses, including fees and disbursements of
Fund counsel, in connection with litigation by or against the
Fund or any Portfolio;
(m) premiums for the fidelity bond maintained by the Fund pursuant
to Section 17(g) of the 1940 Act and rules promulgated
thereunder (except for such premiums as may be allocated to
the Adviser as an insured thereunder);
(n) association and institute dues; and
(o) the expenses, if any, of distributing shares of the Fund paid
by the Fund pursuant to a Plan and Agreement of Distribution
adopted under Rule 12b-1 of the Investment Company Act of
1940.
3. Use of Affiliated Companies. In connection with the rendering of
the services required to be provided by the Adviser under this
Agreement, the Adviser may, to the extent it deems appropriate and
subject to compliance with the requirements of applicable laws and
regulations, and upon receipt of written approval of the Fund, make
use of its affiliated companies and their employees; provided that
the Adviser shall supervise and remain fully responsible for all
such services in accordance with and to the extent provided by this
<PAGE>
Agreement and that all costs and expenses associated with the
providing of services by any such companies or employees and
required by this Agreement to be borne by the Adviser shall be borne
by the Adviser or its affiliated companies.
4. Compensation of the Adviser. For the services to be rendered and
the charges and expenses to be assumed by the Adviser hereunder, the
Fund shall pay to the Adviser an advisory fee which will be computed
on a daily basis and paid as of the last day of each month, using
for each daily calculation the most recently determined net asset
value of the Portfolio of the Fund, as determined by valuations made
in accordance with the Fund's procedure for calculating the
Portfolio's net asset value as described in the Fund's Prospectus
and/or Statement of Additional Information. On an annual basis the
advisory fee applicable to the Portfolio shall be computed at the
annual rate of 0.75% of the Portfolio's average net assets.
During any period when the determination of the Portfolio's net
asset value is suspended by the Directors of the Fund, the net asset
value of a share of the Portfolio as of the last business day prior
to such suspension shall, for the purpose of this Paragraph 4, 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 Adviser with respect to any assets of the Fund
or any Portfolio thereof which may be invested in any other
investment company for which the Adviser serves as investment
adviser. The fee provided for hereunder shall be prorated in any
month in which this Agreement is not in effect for the entire month.
If, in any given year, the sum of the Portfolio's expenses exceeds
the most restrictive state imposed annual expense limitation, the
Adviser will be required to reimburse the Portfolio for such excess
expenses promptly. Interest, taxes and extraordinary items such as
litigation costs are not deemed expenses for purposes of this
paragraph and shall be borne by the Fund or Portfolio in any event.
Expenditures, including costs incurred in connection with the
purchase or sale of portfolio securities, which are capitalized in
accordance with generally accepted accounting principles applicable
to investment companies, are accounted for as capital items and
shall not be deemed to be expenses for purposes of this paragraph.
5. Avoidance of Inconsistent Positions and Compliance with Laws.
In connection with purchases or sales of securities for the
investment portfolio of the Fund or any Portfolio, neither the
Adviser nor its officers or employees will act as a principal or
agent for any party other than the Fund or Portfolio or receive any
commissions. The Adviser will comply with all applicable laws in
acting hereunder including, without limitation, the 1940 Act; the
Investment Advisers Act of 1940, as amended; and all rules and
regulations duly promulgated under the foregoing.
<PAGE>
6. Duration and Termination. This Agreement shall become effective as
of the date it is approved by a majority of the outstanding voting
securities of the Portfolio of the Fund, and unless sooner
terminated as hereinafter provided, shall remain in force for an
initial term ending two years from the date of execution, and from
year to year thereafter, but only as long as such continuance is
specifically approved at least annually (i) by a vote of a majority
of the outstanding voting securities of the Portfolio of the Fund or
by the Directors of the Fund, and (ii) by a majority of the
Directors of the Fund who are not interested persons of the Adviser
or the Fund by votes cast in person at a meeting called for the
purpose of voting on such approval.
This Agreement may, on 60 days' prior written notice, be terminated
without the payment of any penalty, by the Directors of the Fund, or
by the vote of a majority of the outstanding voting securities of
the Fund or Portfolio, as the case may be, or by the Adviser. This
Agreement shall immediately terminate in the event of its
assignment, unless an order is issued by the Securities and Exchange
Commission conditionally or unconditionally exempting such
assignment from the provisions of Section 15(a) of the 1940 Act, in
which event this Agreement shall remain in full force and effect
subject to the terms and provisions of said order. In interpreting
the provisions of this paragraph 6, the definitions contained in
Section 2(a) of the 1940 Act and the applicable rules under the 1940
Act (particularly the definitions of "interested person,"
"assignment" and "vote of a majority of the outstanding voting
securities") shall be applied.
The Adviser agrees to furnish to the Directors of the Fund 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
Adviser to receive payments on any unpaid balance of the
compensation described in paragraph 3 earned prior to such
termination.
7. Non-Exclusive Services. The Adviser shall, during the term of this
Agreement, be entitled to render investment advisory services to
others, including, without limitation, other investment companies
with similar objectives to those of the Fund or any Portfolio of the
Fund. The Adviser may, when it deems such to be advisable,
aggregate orders for its other customers together with any
securities of the same type to be sold or purchased for the Fund or
any Portfolio in order to obtain best execution and lower brokerage
commissions. In such event, the Adviser shall allocate the shares
so purchased or sold, as well as the expenses incurred in the
transaction, in the manner it considers to be most equitable and
consistent with its fiduciary obligations to the Fund or any
Portfolio and the Adviser's other customers.
8. Liability. The Adviser shall have no liability to the Fund or any
Portfolio or to the Fund's shareholders or creditors, for any error
of judgment, mistake of law, or for any loss arising out of any
investment, nor for any other act or omission, in the performance of
<PAGE>
its obligations to the Fund or any Portfolio not involving willful
misfeasance, bad faith, gross negligence or reckless disregard of
its obligations and duties hereunder.
9. Miscellaneous Provisions.
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.
Amendments Hereof. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument
in writing signed by the Fund and the Adviser, and no material
amendment of this Agreement shall be effective unless approved by
(1) the vote of a majority of the Directors of the Fund, 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 Portfolio;
provided, however, that this paragraph shall not prevent any
immaterial amendment(s) to this Agreement, which amendment(s) may be
made without shareholder approval, if such amendment(s) are made
with the approval of (1) the Directors and (2) a majority of the
Directors of the Fund who are not interested persons of the Adviser
or the Fund.
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.
Applicable Law. This Agreement shall be construed in accordance with
the laws of the State of Colorado and the applicable provisions of
the 1940 Act. To the extent that the applicable laws of the State of
Colorado, or any of the provisions herein, conflict with applicable
provisions of the 1940 Act, the latter shall control.
<PAGE>
IN WITNESS WHEREOF, the Adviser and the Fund each has caused this
Agreement to be duly executed on its behalf by an officer thereunto duly
authorized, the day and year first above written.
INVESCO DIVERSIFIED FUNDS, INC.
ATTEST:
By: /s/ John M. Butler
/s/ Glen A. Payne ---------------------------
- ----------------- John M. Butler
Glen A. Payne President
Secretary
INVESCO FUNDS GROUP, INC.
ATTEST:
By: /s/ Dan J. Hesser
/s/ Glen A. Payne ---------------------------
- ----------------- Dan J. Hesser
Glen A. Payne President
SUB-ADVISORY AGREEMENT
AGREEMENT made this 30th day of April, 1993, by and between INVESCO Funds
Group, Inc. ("INVESCO"), a Delaware corporation, and INVESCO Management &
Research, Inc., a Massachusetts corporation ("the Sub-Adviser").
W I T N E S S E T H:
WHEREAS, INVESCO DIVERSIFIED 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
may be divided into additional series, each representing an interest in a
separate portfolio of investments, with the first such series being designated
the INVESCO Small Company 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, 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:
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;
<PAGE>
(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;
(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
that such expenditures were bona fide and for the benefit of the Fund.
<PAGE>
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 Fund.
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 Fund, 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
Information. The advisory fee to the Sub-Adviser shall be computed at the annual
rate of 0.375% of the Fund's average net assets. During any period when the
determination of the Fund's net asset value is suspended by the Directors of the
Fund, the net asset value of a share of the Fund 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 V 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.
<PAGE>
ARTICLE V
AVOIDANCE OF INCONSISTENT POSITIONS AND COMPLIANCE WITH APPLICABLE LAWS
In connection with purchases or sales of securities for the investment
portfolio 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;
the Investment Advisers Act of 1940, as amended; 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, and 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 Fund, 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
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).
<PAGE>
ARTICLE VIII
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.
ARTICLE IX
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 X
MISCELLANEOUS
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.
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: /s/ Dan J. Hesser
/s/ Glen A. Payne ---------------------
- ----------------- Dan J. Hesser
Glen A. Payne President
Secretary
INVESCO MANAGEMENT & RESEARCH, INC.
ATTEST:
By: /s/ Frank J. Keeler
/s/ Kathy Greenberg -------------------------------
- ------------------- Frank J. Keeler
Kathy Greenberg President
Secretary
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made this 30th day of April, 1993 between INVESCO
DIVERSIFIED FUNDS, INC., a Maryland corporation (the "Fund"), and INVESCO FUNDS
GROUP, INC., a Delaware corporation (the "Underwriter").
W I T N E S S E T H:
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), as a diversified, open-end management
investment company and currently proposes to have one class or series of
outstanding shares (the "Shares"), which shares may be divided into additional
classes or series, each representing an interest in a separate portfolio of
investments, and it is in the interest of the Fund to offer the Shares for sale
continuously; and
WHEREAS, the Underwriter is engaged in the business of selling shares of
investment companies either directly to investors or through other securities
dealers; and
WHEREAS, the Fund and the Underwriter wish to enter into an agreement with
each other with respect to the continuous offering of the Shares in order to
promote growth of the Fund and facilitate the distribution of the Shares;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto as follows:
1. The Fund hereby appoints the Underwriter its agent for the
distribution of Shares in jurisdictions wherein such Shares may
legally be offered for sale; provided, however, that the Fund in its
absolute discretion may (a) issue or sell Shares directly to
purchasers, or (b) issue or sell Shares to the shareholders of any
other investment company, for which the Underwriter or any affiliate
thereof shall act as exclusive distributor, who wish to exchange all
or a portion of their investment in Shares or in shares of such
other investment company for the Shares. Notwithstanding any other
provision hereof, the Fund may terminate, suspend or withdraw the
offering of Shares whenever, in its sole discretion, it deems such
action to be desirable. The Fund reserves the right to reject any
subscription in whole or in part for any reason.
2. The Underwriter hereby agrees to serve as agent for the distribution
of the Shares and agrees that it will use its best efforts with
reasonable promptness to sell such part of the authorized Shares
remaining unissued as from time to time shall be effectively
registered under the Securities Act of 1933, as amended (the "1933
Act"), at such prices and on such terms as hereinafter set forth,
all subject to applicable federal and state securities laws and
regulations. Nothing herein shall be construed to prohibit the
Underwriter from engaging in other related or unrelated businesses.
3. In addition to serving as the Fund's agent in the distribution of
the Shares, the Underwriter shall also provide to the holders of the
Shares certain maintenance, support or similar services
("Shareholder Services"). Such services shall include, without
limitation, answering routine shareholder inquiries regarding the
Fund, assisting shareholders in considering whether to change
<PAGE>
dividend options and helping to effectuate such changes, arranging
for bank wires, and providing such other services as the Fund may
reasonably request from time to time. It is expressly understood
that the Underwriter or the Fund may enter into one or more
agreements with third parties pursuant to which such third parties
may provide the Shareholder Services provided for in this paragraph.
Nothing herein shall be construed to impose upon the Underwriter any
duty or expense in connection with the services of any registrar,
transfer agent or custodian appointed by the Fund, the computation
of the asset value or offering price of Shares, the preparation and
distribution of notices of meetings, proxy soliciting material,
annual and periodic reports, dividends and dividend notices, or any
other responsibility of the Fund.
4. Except as otherwise specifically provided for in this Agreement, the
Underwriter shall sell the Shares directly to purchasers, or through
qualified broker-dealers or others, in such manner, not inconsistent
with the provisions hereof and the then effective Registration
Statement of the Fund under the 1933 Act (the "Registration
Statement") and related Prospectus (the "Prospectus") and Statement
of Additional Information ("SAI") of the Fund as the Underwriter may
determine from time to time; provided that no broker-dealer or other
person shall be appointed or authorized to act as agent of the Fund
without the prior consent of the directors (the "Directors") of the
Fund. The Underwriter will require each broker-dealer to conform to
the provisions hereof and of the Registration Statement (and related
Prospectus and SAI) at the time in effect under the 1933 Act with
respect to the public offering price of the Shares. The Fund will
have no obligation to pay any commissions or other remuneration to
such broker-dealers.
5. The Shares offered for sale or sold by the Underwriter shall be
offered or sold at the net asset value per share determined in
accordance with the then current Prospectus and/or SAI relating to
the sale of the Shares except as departure from such prices shall be
permitted by the then current Prospectus and/or SAI of the Fund, in
accordance with applicable rules and regulations of the Securities
and Exchange Commission. The price the Fund shall receive for the
Shares purchased from the Fund shall be the net asset value per
share of such Share, determined in accordance with the Prospectus
and/or SAI applicable to the sale of the Shares.
6. Except as may be otherwise agreed to by the Fund, the Underwriter
shall be responsible for issuing and delivering such confirmations
of sales made by it pursuant to this Agreement as may be required;
provided, however, that the Underwriter or the Fund may utilize the
services of other persons or entities believed by it to be competent
to perform such functions. Shares shall be registered on the
transfer books of the Fund in such names and denominations as the
Underwriter may specify.
7. The Fund will execute any and all documents and furnish any and all
information which may be reasonably necessary in connection with the
qualification of the Shares for sale (including the qualification of
the Fund as a broker-dealer where necessary or advisable) in such
<PAGE>
states as the Underwriter may reasonably request (it being
understood that the Fund shall not be required without its consent
to comply with any requirement which in the opinion of the Directors
of the Fund is unduly burdensome). The Underwriter, at its own
expense, will effect all qualifications of itself as broker or
dealer, or otherwise, under all applicable state or Federal laws
required in order that the Shares may be sold in such states or
jurisdictions as the Fund may reasonably request.
8. The Fund shall prepare and furnish to the Underwriter from time to
time the most recent form of the Prospectus and/or SAI of the Fund.
The Fund authorizes the Underwriter to use the Prospectus and/or
SAI, in the forms furnished to the Underwriter from time to time, in
connection with the sale of the Shares of the Fund. The Fund will
furnish to the Underwriter from time to time such information with
respect to the Fund and the Shares as the Underwriter may reasonably
request for use in connection with the sale of the Shares. The
Underwriter agrees that it will not use or distribute or authorize
the use, distribution or dissemination by broker-dealers or others
in connection with the sale of the Shares any statements, other than
those contained in a current Prospectus and/or SAI of the Fund,
except such supplemental literature or advertising as shall be
lawful under Federal and state securities laws and regulations, and
that it will promptly furnish the Fund with copies of all such
material.
9. The Underwriter will not make, or authorize any broker-dealers or
others to make any short sales of the Shares of the Fund or
otherwise make any sales of the Shares unless such sales are made in
accordance with a then current Prospectus and/or SAI relating to the
sale of the applicable Shares.
10. The Underwriter, as agent of and for the account of the Fund, may
cause the redemption or repurchase of the Shares at such prices and
upon such terms and conditions as shall be specified in a then
current Prospectus and/or SAI. In selling, redeeming or
repurchasing the Shares for the account of the Fund, the Underwriter
will in all respects conform to the requirements of all state and
federal laws and the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., relating to such sale,
redemption or repurchase, as the case may be. The Underwriter will
observe and be bound by all the provisions of the Articles of
Incorporation or Bylaws of the Fund and of any provisions in the
Registration Statement, Prospectus and SAI, as such may be amended
or supplemented from time to time, notice of which shall have been
given to the Underwriter, which at the time in any way require,
limit, restrict or prohibit or otherwise regulate any action on the
part of the Underwriter.
11. (a) The Fund shall indemnify, defend and hold harmless the
Underwriter, its officers and directors and any person who
controls the Underwriter within the meaning of the 1933 Act,
from and against any and all claims, demands, liabilities and
expenses (including the cost of investigating or defending
such claims, demands or liabilities and any attorney fees
<PAGE>
incurred in connection therewith) which the Underwriter, its
officers and directors or any such controlling person, may
incur under the federal securities laws, the common law or
otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in the Registration
Statement or any related Prospectus and/or SAI or arising out
of or based upon any alleged omission to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading.
Notwithstanding the foregoing, this indemnity agreement, to
the extent that it might require indemnity of the Underwriter
or any person who is an officer, director or controlling
person of the Underwriter, shall not inure to the benefit of
the Underwriter or officer, director or controlling person
thereof unless a court of competent jurisdiction shall
determine, or it shall have been determined by controlling
precedent, that such result would not be against public policy
as expressed in the federal securities laws and in no event
shall anything contained herein be so construed as to protect
the Underwriter against any liability to the Fund, the
Directors or the Fund's shareholders to which the Underwriter
would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of its duties
or by reason of its reckless disregard of its obligations and
duties under this Agreement.
This indemnity agreement is expressly conditioned upon the
Fund's being notified of any action brought against the
Underwriter, its officers or directors or any such controlling
person, which notification shall be given by letter or by
telegram addressed to the Fund at its principal address in
Denver, Colorado and sent to the Fund by the person against
whom such action is brought within ten (10) days after the
summons or other first legal process shall have been served
upon the Underwriter, its officers or directors or any such
controlling person. The failure to notify the Fund of any such
action shall not relieve the Fund from any liability which it
may have to the person against whom such action is brought by
reason of any such alleged untrue statement or omission
otherwise than on account of the indemnity agreement contained
in this paragraph. The Fund shall be entitled to assume the
defense of any suit brought to enforce such claim, demand, or
liability, but in such case the defense shall be conducted by
counsel chosen by the Fund and approved by the Underwriter,
which approval shall not be unreasonably withheld. If the Fund
elects to assume the defense of any such suit and retain
counsel approved by the Underwriter, the defendant or
defendants in such suit shall bear the fees and expenses of an
additional counsel obtained by any of them. Should the Fund
elect not to assume the defense of any such suit, or should
the Underwriter not approve of counsel chosen by the Fund, the
Fund will reimburse the Underwriter, its officers and
directors or the controlling person or persons named as
defendant or defendants in such suit, for the reasonable fees
<PAGE>
and expenses of any counsel retained by the Underwriter or
them. In addition, the Underwriter shall have the right to
employ counsel to represent it, its officers and directors and
any such controlling person who may be subject to liability
arising out of any claim in respect of which indemnity may be
sought by the Underwriter against the Fund hereunder if in the
reasonable judgment of the Underwriter it is advisable for the
Underwriter, its officers and directors or such controlling
person to be represented by separate counsel, in which event
the reasonable fees and expenses of such separate counsel
shall be borne by the Fund. This indemnity agreement and the
Fund's representations and warranties in this Agreement shall
remain operative and in full force and effect and shall
survive the delivery of any of the Shares as provided in this
Agreement. This indemnity agreement shall inure exclusively to
the benefit of the Underwriter and its successors, the
Underwriter's officers and directors and their respective
estates and any such controlling person and their successors
and estates. The Fund shall promptly notify the Underwriter of
the commencement of any litigation or proceeding against it in
connection with the issue and sale of the Shares.
(b) The Underwriter agrees to indemnify, defend and hold harmless
the Fund, its Directors and any person who controls the Fund
within the meaning of the 1933 Act, from and against any and
all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or
liabilities and any attorney fees incurred in connection
therewith) which the Fund, its Directors or any such
controlling person may incur under the Federal securities
laws, the common law or otherwise, but only to the extent that
such liability or expense incurred by the Fund, its Directors
or such controlling person resulting from such claims or
demands shall arise out of or be based upon (a) any alleged
untrue statement of a material fact contained in information
furnished in writing by the Underwriter to the Fund
specifically for use in the Registration Statement or any
related Prospectus and/or SAI or shall arise out of or be
based upon any alleged omission to state a material fact in
connection with such information required to be stated in the
Registration Statement or the related Prospectus and/or SAI or
necessary to make such information not misleading and (b) any
alleged act or omission on the Underwriter's part as the
Fund's agent that has not been expressly authorized by the
Fund in writing.
Notwithstanding the foregoing, this indemnity agreement, to
the extent that it might require indemnity of the Fund or any
Director or controlling person of the Fund, shall not inure to
the benefit of the Fund or Director or controlling person
thereof unless a court of competent jurisdiction shall
determine, or it shall have been determined by controlling
precedent, that such result would not be against public policy
as expressed in the federal securities laws and in no event
<PAGE>
shall anything contained herein be so construed as to protect
any Director of the Fund against any liability to the Fund or
the Fund's shareholders to which the Director would otherwise
be subject by reason of willful misfeasance, bad faith or
gross negligence or reckless disregard of the duties involved
in the conduct of his office.
This indemnity agreement is expressly conditioned upon the
Underwriter's being notified of any action brought against the
Fund, its Directors or any such controlling person, which
notification shall be given by letter or telegram addressed to
the Underwriter at its principal office in Denver, Colorado,
and sent to the Underwriter by the person against whom such
action is brought, within ten (10) days after the summons or
other first legal process shall have been served upon the
Fund, its Directors or any such controlling person. The
failure to notify the Underwriter of any such action shall not
relieve the Underwriter from any liability which it may have
to the person against whom such action is brought by reason of
any such alleged untrue statement or omission otherwise than
on account of the indemnity agreement contained in this
paragraph. The Underwriter shall be entitled to assume the
defense of any suit brought to enforce such claim, demand, or
liability, but in such case the defense shall be conducted by
counsel chosen by the Underwriter and approved by the Fund,
which approval shall not be unreasonably withheld. If the
Underwriter elects to assume the defense of any such suit and
retain counsel approved by the Fund, the defendant or
defendants in such suit shall bear the fees and expenses of an
additional counsel obtained by any of them. Should the
Underwriter elect not to assume the defense of any such suit,
or should the Fund not approve of counsel chosen by the
Underwriter, the Underwriter will reimburse the Fund, its
Directors or the controlling person or persons named as
defendant or defendants in such suit, for the reasonable fees
and expenses of any counsel retained by the Fund or them. In
addition, the Fund shall have the right to employ counsel to
represent it, its Directors and any such controlling person
who may be subject to liability arising out of any claim in
respect of which indemnity may be sought by the Fund against
the Underwriter hereunder if in the reasonable judgment of the
Fund it is advisable for the Fund, its Directors or such
controlling person to be represented by separate counsel, in
which event the reasonable fees and expenses of such separate
counsel shall be borne by the Underwriter. This indemnity
agreement and the Underwriter's representations and warranties
in this Agreement shall remain operative and in full force and
effect and shall survive the delivery of any of the Shares as
provided in this Agreement. This indemnity agreement shall
inure exclusively to the benefit of the Fund and its
successors, the Fund's Directors and their respective estates
and any such controlling person and their successors and
estates. The Underwriter shall promptly notify the Fund of the
commencement of any litigation or proceeding against it in
connection with the issue and sale of the Shares.
<PAGE>
12. The Fund will pay or cause to be paid (a) expenses (including the
fees and disbursements of its own counsel) of any registration of
the Shares under the 1933 Act, as amended, (b) expenses incident to
the issuance of the Shares, and (c) expenses (including the fees and
disbursements of its own counsel) incurred in connection with the
preparation, printing and distribution of the Fund's Prospectuses,
SAIs, and periodic and other reports sent to holders of the Shares
in their capacity as such. The Underwriter shall prepare and
provide necessary copies of all sales literature subject to the
Fund's approval thereof.
13. This Agreement shall become effective as of the date it is approved
by a majority vote of the Directors of the Fund, as well as a
majority vote of the Directors who, except for their positions as
Directors of the Fund, are not "interested persons" (as defined in
the Investment Company Act) of the Fund, and shall continue in
effect for an initial term of two years from the date of execution,
and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually (a)(i) by a
vote of the Directors of the Fund or (ii) by a vote of a majority of
the outstanding voting securities of the Fund, and (b) by a vote of
a majority of the Directors of the Fund who, except for their
positions as Directors of the Fund, are not "interested persons," as
defined in the Investment Company Act, of the Fund cast in person at
a meeting for the purpose of voting on this Agreement.
Either party hereto may terminate this Agreement on any date,
without the payment of a penalty, by giving the other party at least
60 days' prior written notice of such termination specifying the
date fixed therefor. In particular, this Agreement may be terminated
at any time, without payment of any penalty, by vote of a majority
of the members of the Directors of the Fund or by a vote of a
majority of the outstanding voting securities of the Fund on not
more than 60 days' written notice to the Underwriter.
Without prejudice to any other remedies of the Fund provided for in
this Agreement or otherwise, the Fund may terminate this Agreement
at any time immediately upon the Underwriter's failure to fulfill
any of the obligations of the Underwriter hereunder.
14. The Underwriter expressly agrees that, notwithstanding anything to
the contrary herein, or in any applicable law, that it will look
solely to the assets of the Fund for any obligations of the Fund
hereunder and nothing herein shall be construed to create any
personal liability on the part of any Director or any shareholder of
the Fund.
15. This Agreement shall automatically terminate in the event of its
assignment. In interpreting the provisions of this Section 15, the
definition of "assignment" contained in the Investment Company Act
shall be applied.
<PAGE>
16. 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.
17. No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by
the Fund and the Underwriter and, if applicable, approved in the
manner required by the Investment Company Act.
18. 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.
19. This Agreement and the application and interpretation hereof shall
be governed exclusively by the laws of the State of Colorado.
IN WITNESS WHEREOF, the Fund and the Underwriter have each caused this
Agreement to be executed on its behalf by an officer thereunto duly authorized
and the Underwriter has caused its corporate seal to be affixed as of the day
and year first above written.
INVESCO DIVERSIFIED FUNDS, INC.
ATTEST:
By: /s/ John M. Butler
/s/ Glen A. Payne --------------------------
- ----------------- John M. Butler
Glen A. Payne Butler
Secretary
INVESCO FUNDS GROUP, INC.
ATTEST:
By: /s/ Dan J. Hesser
/s/ Glen A. Payne --------------------------
- ----------------- Dan J. Hesser
Glen A. Payne President
Secretary
DEFINED BENEFIT DEFERRED COMPENSATION PLAN
FOR NON-INTERESTED DIRECTORS AND TRUSTEES
The registered, open-end management investment companies referred to on
Schedule A as the Schedule may hereafter be revised by the addition and deletion
of investment companies (the "Funds") have adopted this Defined Benefit Deferred
Compensation Plan ("Plan") for the benefit of those directors and trustees of
the Funds who are not interested directors or trustees thereof as defined in
Section 2(a)(19) of the Investment Company Act of 1940, as amended ("Independent
Directors").
The Plan has been adopted as an alternative to providing an increase in
the present compensation payable to each Fund's Independent Directors for
serving in such capacity. The increase in present compensation was considered by
all directors of each Fund and was determined to be reasonable in relation to
the services which are currently being performed by the Independent Directors
and the responsibilities and obligations which are imposed upon the directors in
the performance of such services.
1. Eligibility
Each Independent Director who has served as such ("Eligible Service") on
the boards of any of the Funds and their predecessor and successor entities, if
any, or as an Independent Director of the now-defunct investment management
company known as FG Series for an aggregate of at least five years at the time
of his Service Termination Date (as defined in paragraph 2) will be entitled to
receive benefits under the Plan. An Independent Director's period of Eligible
Service commences on the date of election to the board of directors or trustees
of any one or more of the Funds ("Board"). Hereafter, references in this Plan to
Independent Directors shall be deemed to include only those Directors who have
met the Eligible Service requirement for Plan participation.
2. Service Termination and Service Termination Date
Service Termination includes termination of service (other than by
disability or death) of an Independent Director which results from the
Director's having reached his Service Termination Date, which is the date not
later than the last day of the calendar quarter in which such Director's
seventy-second birthday occurs.
3. Defined Benefit
Commencing as of his Service Termination Date, each Independent Director
will receive, for the remainder of his life, a benefit (the "Benefit"), payable
quarterly, at an annual rate equal to 25 percent of the annual basic retainer
payable by each Fund to the Independent Director on his Service Termination Date
(excluding any fees relating to attending meetings or chairing committees). If
an Independent Director should die after his Service Termination Date and before
forty quarterly payments are made, payments will continue to be made to the
Independent Director's designated beneficiary until the aggregate of forty
quarterly payments has been made to the Independent Director and the Director's
beneficiary.
<PAGE>
If an Independent Director's service as a Director is terminated because
of his death prior to the occurrence of his Service Termination Date, the
designated beneficiary of the Independent Director shall receive the Benefit for
a period of ten years, with quarterly payments to be made to the designated
beneficiary.
If an Independent Director's service as a Director is terminated because
of his disability prior to the occurrence of his Service Termination Date, the
Independent Director will receive the Benefit for the remainder of his life,
with quarterly payments to be made to the disabled Independent Director. If the
disabled Independent Director should die before forty quarterly payments are
made, payments will continue to be made to the Independent Director's designated
beneficiary until the aggregate of forty quarterly payments has been made to the
disabled Independent Director and the Director's beneficiary.
If the Independent Director and his designated beneficiary should die
before a total of forty quarterly payments are made, the remaining value of the
Independent Director's benefit shall be determined as of the date of the death
of the Independent Director's designated beneficiary and shall be paid to the
estate of the designated beneficiary in one lump sum or in periodic payments,
with the determinations with respect to the value of the benefit and the method
and frequency of payment to be made by the Committee (as defined in paragraph
8.a.) in its sole discretion.
4. Designated Beneficiary
The beneficiary referred to in paragraph 3 may be designated or changed by
the Independent Director without the consent of any prior beneficiary on a form
provided by the Committee (as defined in paragraph 8.a.) and delivered to the
Committee before the Independent Director's death. If no such beneficiary shall
have been designated, or if no designated beneficiary shall survive the
Independent Director, the value or remaining value of the Independent Director's
benefit shall be determined as of the date of the death of the Independent
Director and shall be paid as promptly a possible in one lump sum to the estate
of the designated beneficiary.
5. Disability
An Independent Director shall be deemed to have become disabled for the
purposes of paragraph 3 if the Committee shall find on the basis of medical
evidence satisfactory to it that the Independent Director is disabled, mentally
or physically, as a result of an accident or illness, so as to be prevented from
performing each of the duties which are incumbent upon an Independent Director
in fulfilling his responsibilities as such.
6. Time of Payment
The Benefit for each year will be paid in quarterly installments that are
as nearly equal as possible.
<PAGE>
7. Payment of Benefit; Allocation of Costs
Each Fund is responsible for the payment of the amount of the Benefit
applicable to the Fund, as well as its proportionate share of all expenses of
administration of the Plan, including without limitation all accounting and
legal fees and expenses and fees and expenses of any Actuary. The obligations of
each Fund to pay such Benefits and expenses will not be secured or funded in any
manner, and such obligations will not have any preference over the lawful claims
of each Fund's creditors and shareholders. To the extent that the Benefit is
paid by more than one Fund, such costs and expenses will be allocated among such
Funds in a manner that is determined by the Committee to be fair and equitable
under the circumstances. To the extent that one or more of such Funds consist of
one or more separate portfolios, such costs and expenses allocated to any such
Fund will thereafter be allocated among such portfolios by the Board of the Fund
in a manner that is determined by such Board to be fair and equitable under the
circumstances.
8. Administration
a. The Committee. Any questions involving entitlement to payments
under or the administration of the Plan will be referred to a committee (the
"Committee") of three Independent Directors designated by all of the Independent
Directors of the Funds. Except as otherwise provided herein, the Committee will
make all interpretations and determinations necessary or desirable for the
Plan's administration, and such interpretations and determinations will be final
and conclusive. Committee members will be elected annually by the Independent
Directors.
b. Powers of the Committee. The Committee will represent and act on
behalf of the Funds in respect of the Plan and, subject to the other provisions
of the Plan, the Committee may adopt, amend or repeal bylaws or other
regulations relating to the administration of the Plan, the conduct of the
Committee's affairs, its rights or powers, or the rights or powers of its
members. The Committee will report to the Independent Directors and to the
Boards of the Funds from time to time on its activities in respect of the Plan.
The Committee or persons designated by it will cause such records to be kept as
may be necessary for the administration of the Plan.
9. Miscellaneous Provisions
a. Rights Not Assignable. Other than as is specifically provided in
paragraph 3, the right to receive any payment under the Plan is not transferable
or assignable, and nothing in the Plan shall create any benefit, cause of
action, right of sale, transfer, assignment, pledge, encumbrance, or other such
right in any heirs or the estate of any Independent Director.
b. Amendment, etc. The Committee, with the concurrence of the Board
of any Fund, may as to the specific Fund at any time amend or terminate the Plan
or waive any provision of the Plan; provided, however, that subject to the
limitations imposed by paragraph 7, no amendment, termination or waiver will
impair the rights of an Independent Director to receive the payments which would
have been made to such Independent Director had there been no such amendment,
termination, or waiver.
<PAGE>
c. No Right to Reelection. Nothing in the Plan will create any
obligation on the part of the Board of any Fund to nominate any Independent
Director for reelection.
d. Consulting. Subsequent to his Service Termination Date, an
Independent Director may render such services for any Fund, for such
compensation, as may be agreed upon from time to time by such Independent
Director and the Board of the Fund which desires to procure such services.
e. Effectiveness. The Plan will be effective for all Independent
Directors who have Service Termination Dates occurring on and after October 20,
1993. Periods of Eligible Service shall include periods commencing prior and
subsequent to such date. Upon its adoption by the Board of a Fund, the Plan will
become effective as to that Fund on the date when the Committee determines that
any regulatory approval or advice that may be necessary or appropriate in
connection with the Plan have been obtained.
Adopted October 20, 1993.
TRANSFER AGENCY AGREEMENT
AGREEMENT made as of this 30th day of April, 1993, between INVESCO
Diversified Funds, Inc., a Maryland corporation, having its principal office and
place of business at 7800 East Union Avenue, Denver, Colorado, 80237
(hereinafter referred to as the "Fund") and INVESCO Funds Group, Inc., a
Delaware corporation, having its principal place of business at 7800 E. Union
Avenue, Denver, CO 80237 (hereinafter referred to as the "Transfer Agent").
WITNESSETH:
That for and in consideration of mutual promises hereinafter set forth,
the Fund and the Transfer Agent agree as follows:
1. Definitions. Whenever used in this Agreement, the following words
and phrases, unless the context otherwise requires, shall have the
following meanings:
(a) "Authorized Person" shall be deemed to include the President,
any Vice President, the Secretary, Treasurer, or any other
person, whether or not any such person is an officer or
employee of the Fund, duly authorized to give Oral
Instructions and Written Instructions on behalf of the Fund as
indicated in a certification as may be received by the
Transfer Agent from time to time;
(b) "Certificate" shall mean any notice, instruction or other
instrument in writing, authorized or required by this
Agreement to be given to the Transfer Agent, which is actually
received by the Transfer Agent and signed on behalf of the
Fund by any two officers thereof;
(c) "Commission" shall have the meaning given it in the 1940 Act;
(d) "Custodian" refers to the custodian of all of the securities
and other moneys owned by the Fund;
(e) "Oral Instructions" shall mean verbal instructions actually
received by the Transfer Agent from a person reasonably
believed by the Transfer Agent to be an Authorized Person;
(f) "Prospectus" shall mean the currently effective prospectus
relating to the Fund's Shares registered under the Securities
Act of 1933;
(g) "Shares" refers to the shares of common stock, $.01 par value,
of the Fund;
(h) "Shareholder" means a record owner of Shares;
(i) "Written Instructions" shall mean a written communication
actually received by the Transfer Agent where the receiver is
able to verify with a reasonable degree of certainty the
authenticity of the sender of such communication; and
<PAGE>
(j) The "1940 Act" refers to the Investment Company Act of 1940
and the Rules and Regulations thereunder, all as amended from
time to time.
2. Representation of Transfer Agent. The Transfer Agent does hereby
represent and warrant to the Fund that it has an effective
registration statement on SEC Form TA-1 and, accordingly, has duly
registered as a transfer agent as provided in Section 17A(c) of the
Securities Exchange Act of 1934.
3. Appointment of the Transfer Agent. The Fund hereby appoints and
constitutes the Transfer Agent as transfer agent for all of the
Shares of the Fund authorized as of the date hereof, and the
Transfer Agent accepts such appointment and agrees to perform the
duties herein set forth. If the board of directors of the Fund
hereafter reclassifies the Shares, by the creation of one or more
additional series or otherwise, the Transfer Agent agrees that it
will act as transfer agent for the Shares so reclassified on the
terms set forth herein.
4. Compensation.
(a) The Fund will initially compensate the Transfer Agent for its
services rendered under this Agreement in accordance with the
fees set forth in the Fee Schedule annexed hereto and
incorporated herein.
(b) The parties hereto will agree upon the compensation for acting
as transfer agent for any series of Shares hereafter
designated and established at the time that the Transfer Agent
commences serving as such for said series, and such agreement
shall be reflected in a Fee Schedule for that series, dated
and signed by an authorized officer of each party hereto, to
be attached to this Agreement.
(c) Any compensation agreed to hereunder may be adjusted from time
to time by attaching to this Agreement a revised Fee Schedule,
dated and signed by an authorized officer of each party
hereto, and a certified copy of the resolution of the board of
directors of the Fund authorizing such revised Fee Schedule.
(d) The Transfer Agent will bill the Fund as soon as practicable
after the end of each calendar month, and said billings will
be detailed in accordance with the Fee Schedule for the Fund.
The Fund will promptly pay to the Transfer Agent the amount of
such billing.
5. Documents. In connection with the appointment of the Transfer
Agent, the Fund shall, on or before the date this Agreement goes
into effect, file with the Transfer Agent the following documents:
(a) A certified copy of the Articles of Incorporation of the Fund,
including all amendments thereto, as then in effect;
<PAGE>
(b) A certified copy of the Bylaws of the Fund, as then in effect;
(c) Certified copies of the resolutions of the board of directors
authorizing this Agreement and designating Authorized Persons
to give instructions to the Transfer Agent;
(d) A specimen of the certificate for Shares of the Fund in the
form approved by the board of directors, with a certificate of
the Secretary of the Fund as to such approval;
(e) All account application forms and other documents relating to
Shareholder accounts;
(f) A certified list of Shareholders of the Fund with the name,
address and tax identification number of each Shareholder, and
the number of Shares held by each, certificate numbers and
denominations (if any certificates have been issued), lists of
any accounts against which stops have been placed, together
with the reasons for said stops, and the number of Shares
redeemed by the Fund;
(g) Copies of all agreements then in effect between the Fund and
any agent with respect to the issuance, sale, or cancellation
of Shares; and
(h) An opinion of counsel for the Fund with respect to the
validity of the Shares.
6. Further Documentation. The Fund will also furnish from time to time
the following documents:
(a) Each resolution of the board of directors authorizing the
original issue of Shares;
(b) Each Registration Statement filed with the Commission, and
amendments and orders with respect thereto, in effect with
respect to the sale of Shares of the Fund;
(c) A certified copy of each amendment to the Articles of
Incorporation and the Bylaws of the Fund;
(d) Certified copies of each resolution of the board of directors
designating Authorized Persons to give instructions to the
Transfer Agent;
(e) Certificates as to any change in any officer, director, or
Authorized Person of the Fund;
(f) Specimens of all new certificates for Shares accompanied by
the Fund's resolutions of the board of directors approving
such forms; and
<PAGE>
(g) Such other certificates, documents or opinions as may mutually
be deemed necessary or appropriate for the Transfer Agent in
the proper performance of its duties.
7. Certificates for Shares and Records Pertaining Thereto.
(a) At the expense of the Fund, the Transfer Agent shall maintain
an adequate supply of blank share certificates to meet the
Transfer Agent's requirements therefor. Such share
certificates shall be properly signed by facsimile. The Fund
agrees that, notwithstanding the death, resignation, or
removal of any officer of the Fund whose signature appears on
such certificates, the Transfer Agent may continue to
countersign certificates which bear such signatures until
otherwise directed by the Fund.
(b) The Transfer Agent agrees to prepare, issue and mail
certificates as requested by the Shareholders for Shares of
the Fund in accordance with the instructions of the Fund and
to confirm such issuance to the Shareholder and the Fund or
its designee.
(c) The Fund hereby authorizes the Transfer Agent to issue
replacement share certificates in lieu of certificates which
have been lost, stolen or destroyed, without any further
action by the board of directors or any officer of the Fund,
upon receipt by the Transfer Agent of properly executed
affidavits or lost certificate bonds, in form satisfactory to
the Transfer Agent, with the Fund and the Transfer Agent as
obligees under any such bond.
(d) The Transfer Agent shall also maintain a record of each
certificate issued, the number of Shares represented thereby
and the holder of record. The Transfer Agent shall further
maintain a stop transfer record on lost and/or replaced
certificates.
(e) The Transfer Agent may establish such additional rules and
regulations governing the transfer or registration of
certificates for Shares as it may deem advisable and
consistent with such rules and regulations generally adopted
by transfer agents.
8. Sale of Fund Shares.
(a) Whenever the Fund or its authorized agent shall sell or cause
to be sold any Shares, the Fund or its authorized agent shall
provide or cause to be provided to the Transfer Agent
information including: (i) the number of Shares sold, trade
date, and price; (ii) the amount of money to be delivered to
the Custodian for the sale of such Shares; (iii) in the case
of a new account, a new account application or sufficient
information to establish an account.
<PAGE>
(b) The Transfer Agent will, upon receipt by it of a check or
other payment identified by it as an investment in Shares of
the Fund and drawn or endorsed to the Transfer Agent as agent
for, or identified as being for the account of, the Fund,
promptly deposit such check or other payment to the
appropriate account postings necessary to reflect the
investment. The Transfer Agent will notify the Fund, or its
designee, and the Custodian of all purchases and related
account adjustments.
(c) Upon receipt of the notification required under paragraph (a)
hereof and the notification from the Custodian that such money
has been received by it, the Transfer Agent shall issue to the
purchaser or his authorized agent such Shares as he is
entitled to receive, based on the appropriate net asset value
of the Fund's Shares, determined in accordance with applicable
federal law or regulation, as described in the Prospectus for
the Fund. In issuing Shares to a purchaser or his authorized
agent, the Transfer Agent shall be entitled to rely upon the
latest written directions, if any, previously received by the
Transfer Agent from the purchaser or his authorized agent
concerning the delivery of such Shares.
(d) The Transfer Agent shall not be required to issue any Shares
of the Fund where it has received Written Instructions from
the Fund or written notification from any appropriate federal
or state authority that the sale of the Shares of the Fund has
been suspended or discontinued, and the Transfer Agent shall
be entitled to rely upon such Written Instructions or written
notification.
(e) Upon the issuance of any Shares of the Fund in accordance with
the foregoing provision of this Article, the Transfer Agent
shall not be responsible for the payment of any original issue
or other taxes required to be paid by the Fund in connection
with such issuance.
9. Returned Checks. In the event that any check or other order for the
payment of money is returned unpaid for any reason, the Transfer
Agent will: (i) give prompt notice of such return to the Fund or
its designee; (ii) place a stop transfer order against all Shares
issued or held on deposit as a result of such check or order; (iii)
in the case of any Shareholder who has obtained redemption checks,
place a stop payment order on the checking account on which such
checks are issued; and (iv) take such other steps as the Transfer
Agent may, in its discretion, deem appropriate or as the Fund or its
designee may instruct.
10. Redemptions.
(a) Redemptions By Mail or In Person. Shares of the Fund will be
redeemed upon receipt by the Transfer Agent of: (i) a written
request for redemption, signed by each registered owner
exactly as the Shares are registered; (ii) certificates
<PAGE>
properly endorsed for any Shares for which certificates have
been issued; (iii) signature guarantees to the extent required
by the Transfer Agent as described in the Prospectus for the
Fund; and (iv) any additional documents required by the
Transfer Agent for redemption by corporations, executors,
administrators, trustees and guardians.
(b) Wire Orders or Telephone Redemptions. The Transfer Agent
will, consistent with procedures which may be established by
the Fund from time to time for redemption by wire or
telephone, upon receipt of such a wire order or telephone
redemption request, redeem Shares and transmit the proceeds of
such redemption to the redeeming Shareholder as directed. All
wire or telephone redemptions will be subject to such
additional requirements as may be described in the Prospectus
for the Fund. Both the Fund and the Transfer Agent reserve
the right to modify or terminate the procedures for wire order
or telephone redemptions at any time.
(c) Processing Redemptions. Upon receipt of all necessary
information and documentation relating to a redemption, the
Transfer Agent will issue to the Custodian an advice setting
forth the number of Shares of the Fund received by the
Transfer Agent for redemption and that such shares are valid
and in good form for redemption. The Transfer Agent shall,
upon receipt of the moneys paid to it by the Custodian for the
redemption of Shares, pay such moneys to the Shareholder, his
authorized agent or legal representative.
11. Transfers and Exchanges. The Transfer Agent is authorized to review
and process transfers of Shares of the Fund and to the extent, if
any, permitted in the Prospectus for the Fund, exchanges between the
Fund and other mutual funds advised by INVESCO Funds Group, Inc., on
the records of the Fund maintained by the Transfer Agent. If Shares
to be transferred are represented by outstanding certificates, the
Transfer Agent will, upon surrender to it of the certificates in
proper form for transfer, and upon cancellation thereof, countersign
and issue new certificates for a like number of Shares and deliver
the same. If the Shares to be transferred are not represented by
outstanding certificates, the Transfer Agent will, upon an order
therefor by or on behalf of the registered holder thereof in proper
form, credit the same to the transferee on its books. If Shares are
to be exchanged for Shares of another mutual fund, the Transfer
Agent will process such exchange in the same manner as a redemption
and sale of Shares, except that it may in its discretion waive
requirements for information and documentation.
12. Right to Seek Assurances. The Transfer Agent reserves the right to
refuse to transfer or redeem Shares until it is satisfied that the
requested transfer or redemption is legally authorized, and it shall
incur no liability for the refusal, in good faith, to make transfers
or redemptions which the Transfer Agent, in its judgment, deems
improper or unauthorized, or until it is satisfied that there is no
<PAGE>
basis for any claims adverse to such transfer or redemption. The
Transfer Agent may, in effecting transfers, rely upon the provisions
of the Uniform Act for the Simplification of Fiduciary Security
Transfers or the Uniform Commercial Code, as the same may be amended
from time to time, which in the opinion of legal counsel for the
Fund or of its own legal counsel protect it in not requiring certain
documents in connection with the transfer or redemption of Shares of
the Fund, and the Fund shall indemnify the Transfer Agent for any
act done or omitted by it in reliance upon such laws or opinions of
counsel to the Fund or of its own counsel.
13. Distributions.
(a) The Fund will promptly notify the Transfer Agent of the
declaration of any dividend or distribution. The Fund shall
furnish to the Transfer Agent a resolution of the board of
directors of the Fund certified by the Secretary authorizing
the declaration of dividends and authorizing the Transfer
Agent to rely on Oral Instructions or a Certificate specifying
the date of the declaration of such dividend or distribution,
the date of payment thereof, the record date as of which
Shareholders entitled to payment shall be determined, the
amount payable per share to Shareholders of record as of that
date, and the total amount payable to the Transfer Agent on
the payment date.
(b) The Transfer Agent will, on or before the payable date of any
dividend or distribution, notify the Custodian of the
estimated amount of cash required to pay said dividend or
distribution, and the Fund agrees that, on or before the
mailing date of such dividend or distribution, it shall
instruct the Custodian to place in a dividend disbursing
account funds equal to the cash amount to be paid out. The
Transfer Agent, in accordance with Shareholder instructions,
will calculate, prepare and mail checks to, or (where
appropriate) credit such dividend or distribution to the
account of, Fund Shareholders, and maintain and safeguard all
underlying records.
(c) The Transfer Agent will replace lost checks upon receipt of
properly executed affidavits and maintain stop payment orders
against replaced checks.
(d) The Transfer Agent will maintain all records necessary to
reflect the crediting of dividends which are reinvested in
Shares of the Fund.
(e) The Transfer Agent shall not be liable for any improper
payments made in accordance with the resolution of the board
of directors of the Fund.
<PAGE>
(f) If the Transfer Agent shall not receive from the Custodian
sufficient cash to make payment to all Shareholders of the
Fund as of the record date, the Transfer Agent shall, upon
notifying the Fund, withhold payment to all Shareholders of
record as of the record date until such sufficient cash is
provided to the Transfer Agent.
14. Other Duties. In addition to the duties expressly provided for
herein, the Transfer Agent shall perform such other duties and
functions as are set forth in the Fee Schedules(s) hereto from time
to time.
15. Taxes. It is understood that the Transfer Agent shall file such
appropriate information returns concerning the payment of dividends
and capital gain distributions with the proper federal, state and
local authorities as are required by law to be filed by the Fund and
shall withhold such sums as are required to be withheld by
applicable law.
16. Books and Records.
(a) The Transfer Agent shall maintain records showing for each
investor's account the following: (i) names, addresses, tax
identifying numbers and assigned account numbers; (ii) numbers
of Shares held; (iii) historical information regarding the
account of each Shareholder, including dividends paid and date
and price of all transactions on a Shareholder's account; (iv)
any stop or restraining order placed against a Shareholder's
account; (v) information with respect to withholdings in the
case of a foreign account; (vi) any capital gain or dividend
reinvestment order, plan application, dividend address and
correspondence relating to the current maintenance of a
Shareholder's account; (vii) certificate numbers and
denominations for any Shareholders holding certificates; and
(viii) any information required in order for the Transfer
Agent to perform the calculations contemplated or required by
this Agreement.
(b) Any records required to be maintained by Rule 31a-1 under the
1940 Act will be preserved for the periods prescribed in Rule
31a-2 under the 1940 Act. Such records may be inspected by
the Fund at reasonable times. The Transfer Agent may, at its
option at any time, and shall forthwith upon the Fund's
demand, turn over to the Fund and cease to retain in the
Transfer Agent's files, records and documents created and
maintained by the Transfer Agent in performance of its
services or for its protection. At the end of the six-year
retention period, such records and documents will either be
turned over to the Fund, or destroyed in accordance with the
Fund's authorization.
<PAGE>
17. Shareholder Relations.
(a) The Transfer Agent will investigate all Shareholder inquiries
related to Shareholder accounts and respond promptly to
correspondence from Shareholders.
(b) The Transfer Agent will address and mail all communications to
Shareholders or their nominees, including proxy material and
periodic reports to Shareholders.
(c) In connection with special and annual meetings of
Shareholders, the Transfer Agent will prepare Shareholder
lists, mail and certify as to the mailing of proxy materials,
process and tabulate returned proxy cards, report on proxies
voted prior to meetings, and certify to the Secretary of the
Fund Shares to be voted at meetings.
18. Reliance by Transfer Agent; Instructions.
(a) The Transfer Agent shall be protected in acting upon any paper
or document believed by it to be genuine and to have been
signed by an Authorized Person and shall not be held to have
any notice of any change of authority of any person until
receipt of written certification thereof from the Fund. It
shall also be protected in processing Share certificates which
it reasonably believes to bear the proper manual or facsimile
signatures of the officers of the Fund and the proper
countersignature of the Transfer Agent.
(b) At any time the Transfer Agent may apply to any Authorized
Person of the Fund for Written Instructions, and, at the
expense of the Fund, may seek advice from legal counsel for
the Fund, with respect to any matter arising in connection
with this Agreement, and it shall not be liable for any action
taken or not taken or suffered by it in good faith in
accordance with such Written Instructions or with the opinion
of such counsel. In addition, the Transfer Agent, its
officers, agents or employees, shall accept instructions or
requests given to them by any person representing or acting on
behalf of the Fund only if said representative is known by the
Transfer Agent, its officers, agents or employees, to be an
Authorized Person. The Transfer Agent shall have no duty or
obligation to inquire into, nor shall the Transfer Agent be
responsible for, the legality of any act done by it upon the
request or direction of Authorized Persons of the Fund.
(c) Notwithstanding any of the foregoing provisions of this
Agreement, the Transfer Agent shall be under no duty or
obligation to inquire into, and shall not be liable for: (i)
the legality of the issue or sale of any Shares of the Fund,
or the sufficiency of the amount to be received therefor; (ii)
the legality of the redemption of any Shares of the Fund, or
<PAGE>
the propriety of the amount to be paid therefor; (iii) the
legality of the declaration of any dividend by the Fund, or
the legality of the issue of any Shares of the Fund in payment
of any stock dividend; or (iv) the legality of any
recapitalization or readjustment of the Shares of the Fund.
19. Standard of Care and Indemnification.
(a) The Transfer Agent may, in connection with this Agreement,
employ agents or attorneys in fact, and shall not be liable
for any loss arising out of or in connection with its actions
under this Agreement so long as it acts in good faith and with
due diligence, and is not negligent or guilty of any willful
misconduct.
(b) The Fund hereby agrees to indemnify and hold harmless the
Transfer Agent from and against any and all claims, demands,
expenses and liabilities (whether with or without basis in
fact or law) of any and every nature which the Transfer Agent
may sustain or incur or which may be asserted against the
Transfer Agent by any person by reason of, or as a result of:
(i) any action taken or omitted to be taken by the Transfer
Agent in good faith in reliance upon any Certificate,
instrument, order or stock certificate believed by it to be
genuine and to be signed, countersigned or executed by any
duly Authorized Person, upon the Oral Instructions or Written
Instructions of an Authorized Person of the Fund or upon the
opinion of legal counsel for the Fund or its own counsel; or
(ii) any action taken or omitted to be taken by the Transfer
Agent in connection with its appointment in good faith in
reliance upon any law, act, regulation or interpretation of
the same even though the same may thereafter have been
altered, changed, amended or repealed. However,
indemnification hereunder shall not apply to actions or
omissions of the Transfer Agent or its directors, officers,
employees or agents in cases of its own gross negligence,
willful misconduct, bad faith, or reckless disregard of its or
their own duties hereunder.
20. Affiliation Between Fund and Transfer Agent. It is understood that
the directors, officers, employees, agents and Shareholders of the
Fund, and the officers, directors, employees, agents and
shareholders of the Fund's investment adviser, INVESCO Funds Group,
Inc. (the "Adviser"), are or may be interested in the Transfer Agent
as directors, officers, employees, agents, shareholders, or
otherwise, and that the directors, officers, employees, agents or
shareholders of the Transfer Agent may be interested in the Fund as
directors, officers, employees, agents, shareholders, or otherwise,
or in the Adviser as officers, directors, employees, agents,
shareholders or otherwise.
<PAGE>
21. Term.
(a) This Agreement shall become effective on the date on which it
is approved by vote of a majority (as defined in the 1940 Act)
of the Fund's board of directors, including a majority of the
directors who are not interested persons of the Fund (as
defined in the 1940 Act), or the date on which the Transfer
Agent's registration statement on SEC Form TA-1 becomes
effective (whichever occurs later), and shall continue in
effect for an initial term of one year, and from year to year
thereafter, so long as such continuance is specifically
approved at least annually both: (i) by either the board of
directors or the vote of a majority of the outstanding voting
securities of the Fund; and (ii) by a vote of the majority of
the directors who are not interested persons of the Fund (as
defined in the 1940 Act) cast in person at a meeting called
for the purpose of voting upon such approval.
(b) Either of the parties hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the
date of such termination, which shall not be less than 60 days
after the date of receipt of such notice. In the event such
notice is given by the Fund, it shall be accompanied by a
resolution of the board of directors, certified by the
Secretary, electing to terminate this Agreement and
designating a successor transfer agent.
22. Amendment. This Agreement may not be amended or modified in any
manner except by a written agreement executed by both parties with
the formality of this Agreement, and (i) authorized or approved by
the resolution of the board of directors, including a majority of
the directors of the Fund who are not interested persons of the Fund
as defined in the 1940 Act, or (ii) authorized and approved by such
other procedures as may be permitted or required by the 1940 Act.
23. Subcontracting. The Fund agrees that the Transfer Agent may, in its
discretion, subcontract for certain of the services to be provided
hereunder; provided, however, that the transfer agent will be liable
to the Fund for any loss arising out of or in connection with the
actions of any subcontractor, if the subcontractor fails to act in
good faith and with due diligence or is negligent or guilty of any
willful misconduct.
24. Miscellaneous.
(a) Any notice and other instrument in writing, authorized or
required by this Agreement to be given to the Fund or the
Transfer Agent, shall be sufficiently given if addressed to
that party and mailed or delivered to it at its office set
forth below or at such other place as it may from time to time
designate in writing.
<PAGE>
To the Fund:
INVESCO Diversified Funds, Inc.
Post Office Box 173706
Denver, Colorado 80217-3706
Attention: John M. Butler, President
To the Transfer Agent:
INVESCO Funds Group, Inc.
Post Office Box 173706
Denver, Colorado 80217-3706
Attention: Dan J. Hesser, President
(b) This Agreement shall not be assignable and in the event of its
assignment (in the sense contemplated by the 1940 Act), it
shall automatically terminate.
(c) This Agreement shall be construed in accordance with the laws
of the State of Colorado.
(d) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original; but such
counterparts shall, together, constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate officers thereunder duly authorized and
their respective corporate seals to be hereunto affixed, as of the day and year
first above written.
INVESCO DIVERSIFIED FUNDS, INC.
By: /s/ John M. Butler
---------------------------
John M. Butler, President
ATTEST:
/s/ Glen A. Payne
- ------------------------
Glen A. Payne, Secretary
INVESCO FUNDS GROUP, INC.
By: /s/ Dan J. Hesser
---------------------------
Dan J. Hesser, President
ATTEST:
/s/ Glen A. Payne
- ------------------------
Glen A. Payne, Secretary
<PAGE>
AMENDED FEE SCHEDULE
for
Services Pursuant to Transfer Agency Agreement, dated April 30, 1993,
between INVESCO Diversified Funds, Inc. (the "Fund") and INVESCO Funds Group,
Inc. as Transfer Agent (the "Agreement").
Account Maintenance Charges. Fees are based on an annual charge set forth
below per shareholder account or omnibus account participant for account
maintenance, as described in the Agreement. This charge, in the amount of $14.00
per shareholder account per year or, in the case of omnibus accounts that are
invested in the Fund, $14.00 per participant in such accounts per year, is
billable monthly at the rate of one-twelfth (1/12) of the annual fee. A charge
is made for an account in the month that it opens or closes, as well as in each
month which the account remains open, regardless of the account balance.
Expenses. The Fund shall not be liable for reimbursement to the Transfer
Agent of expenses incurred by it in the performance of services pursuant to the
Agreement, provided, however, that nothing herein or in the Agreement shall be
construed as affecting in any manner any obligations assumed by the Fund with
respect to expense payment or reimbursement pursuant to a separate written
agreement between the Fund and the Transfer Agent or any affiliate thereof.
Effective this 1st day of April, 1994.
INVESCO DIVERSIFIED FUNDS, INC.
By: /s/ Dan J. Hesser
---------------------------
Dan J. Hesser, President
ATTEST:
/s/ Glen A. Payne
- ------------------------
Glen A. Payne, Secretary
INVESCO FUNDS GROUP, INC.
By: /s/ Ronald L. Grooms
------------------------
Ronald L. Grooms,
Senior Vice President
ATTEST:
/s/ Glen A. Payne
- ------------------------
Glen A. Payne, Secretary
AMENDMENT NO. 2
to
FEE SCHEDULE
for
Services pursuant to a Transfer Agency Agreement, dated April 30, 1993
between INVESCO Diversified Funds, Inc. (the "Fund") and INVESCO Funds Group,
Inc. as Transfer Agent (the "Agreement").
Account Maintenance Charges. Fees are based on an annual charge set forth
below per shareholder account or omnibus account participant for account
maintenance, as described in the Agreement. This charge, in the amount of $20.00
per shareholder account per year, or in the case of omnibus accounts that are
invested in the Fund $20.00 per participant in such accounts per year, is
billable monthly at the rate of one-twelfth (1/12) of the annual fee. A charge
is made for an account in the month that is opens or closes, as well as in each
month which the account remains open, regardless of the account balance.
Expenses. The Fund shall not be liable for reimbursement to the Transfer
Agent of expenses incurred by it in the performance of services pursuant to the
Agreement, provided, however, that nothing herein or in the Agreement shall be
construed as affecting in any manner any obligations assumed by the Fund with
respect to expense payment or reimbursement pursuant to a separate written
agreement between the Fund and the Transfer Agent or any affiliate thereof.
Effective this 1st day of May, 1996.
INVESCO DIVERSIFIED FUNDS, INC.
By: /s/ Dan J. Hesser
------------------------
Dan J. Hesser, President
ATTEST:
/s/ Glen A. Payne
- -------------------------
Glen A. Payne, Secretary
INVESCO FUNDS GROUP, INC.
By: /s/ Ronald L. Grooms
---------------------------------------
Ronald L. Grooms, Senior Vice President
ATTEST:
/s/ Glen A. Payne
- -----------------------------
Glen A. Payne, Secretary
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT made as of the 30th day of April, 1993, in Denver, Colorado, by
and between INVESCO Diversified Funds, Inc., a Maryland corporation (the
"Fund"), and INVESCO Funds Group, Inc., a Delaware corporation (hereinafter
referred to as "INVESCO").
WHEREAS, the Fund is engaged in business as an open-end management
investment company, is registered as such under the Investment Company Act of
1940, as amended (the "Act"); and
WHEREAS, INVESCO is registered as an investment adviser under the
Investment Advisers Act of 1940, and engages in the business of acting as
investment adviser and providing certain other administrative, sub-accounting,
and recordkeeping services to certain investment companies, including the Fund;
and
WHEREAS, the Fund desires to retain INVESCO to render certain
administrative, sub-accounting, and recordkeeping services (the "Services") in
the manner and on the terms and conditions hereinafter set forth; and
WHEREAS, INVESCO desires to be retained to perform such services on said
terms and conditions;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the Fund and INVESCO agree as follows:
1. The Fund hereby retains INVESCO to provide, or, upon receipt of
written approval of the Fund arrange for other companies, including
affiliates of INVESCO, to provide to the Fund: A) such
sub-accounting and recordkeeping services and functions as are
reasonably necessary for the operation of the Fund. Such services
shall include, but shall not be limited to, preparation and
maintenance of the following required books, records and other
documents: (1) journals containing daily itemized records of all
purchases and sales, and receipts and deliveries of securities and
all receipts and disbursements of cash and all other debits and
credits, in the form required by Rule 31a-1(b)(1) under the Act; (2)
general and auxiliary ledgers reflecting all asset, liability,
reserve, capital, income and expense accounts, in the form required
by Rules 31a-1(b)(2)(i) - (iii) under the Act; (3) a securities
record or ledger reflecting separately for each portfolio security
as of trade date all "long" and "short" positions carried by the
Fund for the account of the Fund, if any, and showing the location
of all securities long and the off-setting position to all
securities short, in the form required by Rule 31a-1(b)(3) under the
Act; (4) a record of all portfolio purchases or sales, in the form
required by Rule 31a-1(b)(6) under the Act; (5) a record of all
puts, calls, spreads, straddles and all other options, if any, in
which the Fund has any direct or indirect interest or which the Fund
has granted or guaranteed, in the form required by Rule 31a-1(b)(7)
under the Act; (6) a record of the proof of money balances in all
ledger accounts maintained pursuant to this Agreement, in the form
required by Rule 31a-1(b)(8) under the Act; and (7) price make-up
<PAGE>
sheets and such records as are necessary to reflect the
determination of the Fund's net asset value. The foregoing books
and records shall be maintained and preserved by INVESCO in
accordance with and for the time periods specified by applicable
rules and regulations, including Rule 31a-2 under the Act. All such
books and records shall be the property of the Fund and, upon
request therefor, INVESCO shall surrender to the Fund such of the
books and records so requested; and B) such sub-accounting,
recordkeeping, and administrative services and functions, which
shall be furnished by INVESCO's wholly-owned subsidiary, INVESCO
Solutions, Inc., 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. Such services and functions shall include, but shall not be
limited to: (1) establishing new retirement plan participant
accounts; (2) receipt and posting of weekly, bi-weekly and monthly
retirement plan contributions; (3) allocation of contributions to
each participant's individual Fund account; (4) maintenance of
separate account balances for each source of retirement plan money
(i.e., Company, Employee, Voluntary, Rollover) invested in the Fund;
(5) purchase, sale, exchange or transfer of monies in the retirement
plan as directed by the relevant party; (6) distribution of monies
for participant loans, hardships, terminations, death or disability
payments; (7) distribution of periodic payments for retired
participants; (8) posting of distributions of interest, dividends
and long-term capital gains to participants by the Fund; (9)
production of monthly, quarterly and/or annual statements of all
Fund activity for the relevant parties; (10) processing of
participant maintenance information for investment election changes,
address changes, beneficiary changes and Qualified Domestic
Relations Orders; (11) responding to telephone and written inquiries
concerning Fund investments, retirement plan provisions and
compliance issues; (12) performing discrimination testing and
counseling employers on cure options on failed tests; (13)
preparation of 1099R and W2P participant IRS tax forms; (14)
preparation of, or assisting in the preparation of, 5500 Series tax
forms, Summary Plan Descriptions and Determination Letters; and (15)
reviewing legislative and IRS changes to keep the retirement plan in
compliance with applicable law.
2. INVESCO shall, at its own expense, maintain such staff and employ or
retain such personnel and consult with such other persons as it
shall from time to time determine to be necessary or useful to the
performance of its obligations under this Agreement. Without
limiting the generality of the foregoing, such staff and personnel
shall be deemed to include officers of INVESCO and persons employed
or otherwise retained by INVESCO to provide or assist in providing
the Services to the Fund.
3. INVESCO shall, at its own expense, provide such office space,
facilities and equipment (including, but not limited to, computer
equipment, communication lines and supplies) and such clerical help
and other services as shall be necessary to provide the Services to
the Fund. In addition, INVESCO may arrange on behalf of the Fund to
obtain pricing information regarding the Fund's investment
<PAGE>
securities from such company or companies as are approved by a
majority of the Fund's board of directors; and, if necessary, the
Fund shall be financially responsible to such company or companies
for the reasonable cost of providing such pricing information.
4. The Fund will, from time to time, furnish or otherwise make
available to INVESCO such information relating to the business and
affairs of the Fund as INVESCO may reasonably require in order to
discharge its duties and obligations hereunder.
5. For the services rendered, facilities furnished, and expenses
assumed by INVESCO under this Agreement, the Fund shall pay to the
Investment Adviser a $10,000 per year base fee, plus an additional
fee, computed on a daily basis and paid on a monthly basis. For
purposes of each daily calculation of this additional fee, the most
recently determined net asset value of the Fund, as determined by a
valuation made in accordance with the Fund's procedure for
calculating Fund net asset value as described in the Fund's
Prospectus and/or Statement of Additional Information, shall be
used. The additional fee to INVESCO under this Agreement shall be
computed at the annual rate of 0.015% of the Fund's daily net assets
as so determined. During any period when the determination of the
Fund's net asset value is suspended by the directors of the Fund,
the net asset value of a share of the Fund as of the last business
day prior to such suspension shall, for the purpose of this
Paragraph 5, be deemed to be the net asset value at the close of
each succeeding business day until it is again determined.
6. INVESCO will permit representatives of the Fund including the Fund's
independent auditors to have reasonable access to the personnel and
records of INVESCO in order to enable such representatives to
monitor the quality of services being provided and the level of fees
due INVESCO pursuant to this Agreement. In addition, INVESCO shall
promptly deliver to the board of directors of the Fund such
information as may reasonably be requested from time to time to
permit the board of directors to make an informed determination
regarding continuation of this Agreement and the payments
contemplated to be made hereunder.
7. This Agreement shall remain in effect until no later than April 21,
1994 and from year to year thereafter provided such continuance is
approved at least annually by the vote of a majority of the
directors of the Fund who are not parties to this Agreement or
"interested persons" (as defined in the Act) of any such party,
which vote must be cast in person at a meeting called for the
purpose of voting on such approval; and further provided, however,
that (a) the Fund may, at any time and without the payment of any
penalty, terminate this Agreement upon thirty days written notice to
the Investment Adviser; (b) the Agreement shall immediately
terminate in the event of its assignment (within the meaning of the
Act and the Rules thereunder) unless the Board of Directors of the
Fund approves such assignment; and (c) the Investment Adviser may
terminate this Agreement without payment of penalty on sixty days
written notice to the Fund. Any notice under this Agreement shall
be given in writing, addressed and delivered, or mailed postage
prepaid, to the other party at the principal office of such party.
<PAGE>
8. This Agreement shall be construed in accordance with the laws of the
State of Colorado and the applicable provisions of the Act. To the
extent the applicable law of the State of Colorado or any of the
provisions herein conflict with the applicable provisions of the
Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written.
INVESCO DIVERSIFIED FUNDS, INC.
By: /s/ John M. Butler
---------------------------
John M. Butler
President
INVESCO FUNDS GROUP, INC.
By: /s/ Dan J. Hesser
---------------------------
Dan J. Hesser
President
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 4 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated August 30, 1996, relating to the financial
statements and financial highlights appearing in the July 31, 1996 Annual Report
to Shareholders of Small Company Fund (constituting INVESCO Diversified 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 headings "Independent Accountants" and
"Financial Statements" in the Statement of Additional Information.
/s/ Price Waterhouse LLP
- ------------------------
Price Waterhouse LLP
Denver, Colorado
November 22, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> INVESCO SMALL COMPANY FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 47331143
<INVESTMENTS-AT-VALUE> 47838135
<RECEIVABLES> 509634
<ASSETS-OTHER> 25071
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 48372840
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1679655
<TOTAL-LIABILITIES> 1679655
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 39965809
<SHARES-COMMON-STOCK> 3831339
<SHARES-COMMON-PRIOR> 3403624
<ACCUMULATED-NII-CURRENT> 4778
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 6215606
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 506992
<NET-ASSETS> 46693185
<DIVIDEND-INCOME> 775309
<INTEREST-INCOME> 139811
<OTHER-INCOME> 0
<EXPENSES-NET> 583886
<NET-INVESTMENT-INCOME> 331234
<REALIZED-GAINS-CURRENT> 6672541
<APPREC-INCREASE-CURRENT> (2961051)
<NET-CHANGE-FROM-OPS> 3711490
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 328765
<DISTRIBUTIONS-OF-GAINS> 1179375
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11466923
<NUMBER-OF-SHARES-REDEEMED> 11162000
<SHARES-REINVESTED> 122792
<NET-CHANGE-IN-ASSETS> 6622117
<ACCUMULATED-NII-PRIOR> 2309
<ACCUMULATED-GAINS-PRIOR> 722440
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 409030
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 594776
<AVERAGE-NET-ASSETS> 54513715
<PER-SHARE-NAV-BEGIN> 11.77
<PER-SHARE-NII> 0.08
<PER-SHARE-GAIN-APPREC> 0.68
<PER-SHARE-DIVIDEND> 0.08
<PER-SHARE-DISTRIBUTIONS> 0.26
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.19
<EXPENSE-RATIO> 1
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
POWER OF ATTORNEY
The person executing this Power of Attorney hereby appoints Edward F.
O'Keefe and Glen A. Payne, or either of them, as his attorney-in-fact to execute
and to file such Registration Statements under federal and state securities laws
and such Post-Effective Amendments to such Registration Statements of the
hereinafter described entities as such attorney-in-fact, or either of them, may
deem appropriate:
INVESCO Diversified Funds, Inc.
INVESCO Dynamics Fund, Inc.
INVESCO Emerging Opportunity Funds, Inc.
INVESCO Growth Fund, Inc.
INVESCO Income Funds, Inc.
INVESCO Industrial Income Fund, Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Multiple Asset Funds, Inc.
INVESCO Specialty Funds, Inc.
INVESCO Strategic Portfolios, Inc.
INVESCO Tax-Free Income Funds, Inc.
INVESCO Value Trust
INVESCO Variable Investment Funds, Inc.
This Power of Attorney, which shall not be affected by the disability of
the undersigned, is executed and effective as of the 23rd day of July, 1996.
/s/ Hubert L. Harris, Jr.
------------------------------------------
Hubert L. Harris, Jr.
STATE OF GEORGIA )
)
COUNTY OF DEKALB )
SUBSCRIBED, SWORN TO AND ACKNOWLEDGED before me by Hubert L. Harris, Jr.,
as a director or trustee of each of the above-described entities, this 23rd day
of July, 1996.
/s/ Cecilia Underwood
------------------------------------------
Notary Public
My Commission Expires: October 14, 1997
