^ SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[^]Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S)240.14a-11(C) or (S)240.14a-12
INVESCO DIVERSIFIED FUNDS, INC.
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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4. Proposed maximum aggregate value of transaction:
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5. Total fee paid:
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[ ] Fee paid previously by written preliminary materials.
[ ] Check box is any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)92) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid: ------------------------------------------
2. Form Schedule or Registration Statement No.: ---------------------
3. Filing Party: ----------------------------------------------------
4. Date Filed: ------------------------------------------------------
<PAGE>
^ INVESCO DIVERSIFIED FUNDS, INC.
March 30, 1998
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Dear INVESCO Diversified Funds, Inc. Shareholder:
Enclosed is a Proxy Statement for the May 6, 1998 special meeting of
shareholders of INVESCO Small Company Value Fund (the "Fund"), the sole series
of INVESCO Diversified Funds, Inc. (the "Company").
As explained more fully in the attached Proxy Statement, shareholders of
the Fund will be asked to approve a Plan and Agreement of Distribution (the
"Plan") assessed based on new assets added to the Fund after the Plan is
implemented.
The board of directors of the Company believes that adoption of the Plan
is in the best interests of the Fund's shareholders. Therefore, we ask that you
read the enclosed materials and vote promptly. Should you have any questions,
please feel free to call our client services representatives at 1-800-646-8372.
They will be happy to answer any questions that you might have.
YOUR VOTE IS IMPORTANT. THE PLAN WE ARE SUBMITTING FOR YOUR CONSIDERATION
IS SIGNIFICANT TO THE COMPANY, THE FUND AND TO YOU AS A SHAREHOLDER. IF WE DO
NOT RECEIVE YOUR COMPLETED PROXY CARDS AFTER SEVERAL WEEKS, YOU MAY BE CONTACTED
BY OUR PROXY SOLICITOR, SHAREHOLDER COMMUNICATIONS CORPORATION. OUR PROXY
SOLICITOR WILL REMIND YOU TO VOTE YOUR SHARES OR WILL RECORD YOUR VOTE OVER THE
PHONE IF YOU CHOOSE TO VOTE IN THAT MANNER. YOU MAY ALSO CALL SHAREHOLDER
COMMUNICATIONS CORPORATION DIRECTLY AT 1-800-733-8481, EXTENSION 466 AND VOTE BY
PHONE. IF WE DO NOT RECEIVE SUFFICIENT VOTES TO APPROVE THESE PROPOSALS, WE MAY
HAVE TO SEND ADDITIONAL MAILINGS OR CONDUCT ADDITIONAL TELEPHONE CANVASSING
WHICH WOULD INCREASE COSTS TO SHAREHOLDERS. THEREFORE, PLEASE TAKE THE TIME TO
READ THE PROXY STATEMENT AND CAST YOUR VOTE ON THE ENCLOSED PROXY CARD, AND
RETURN IT IN THE ENCLOSED PRE-ADDRESSED, POSTAGE-PAID ENVELOPE.
Sincerely,
/s/ Dan J. Hesser
- ---------------------------------
Dan J. Hesser
President
INVESCO Diversified Funds, Inc.
INVESCO Small Company Value Fund
^
<PAGE>
INVESCO DIVERSIFIED FUNDS, INC.
7800 East Union Avenue
Denver, Colorado 80237
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 6, 1998
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Notice is hereby given that a special meeting of shareholders (the
"Meeting") of INVESCO Small Company Value Fund (the "Fund"), a series of INVESCO
Diversified Funds, Inc. (the "Company"), will be held at the Hyatt Regency Tech
Center, 7800 E. Tufts Avenue, Denver, Colorado 80237 on Wednesday, May 6, 1998,
at 10:00 a..m., Mountain Time, for the following purposes:
1. To approve or disapprove a Plan and Agreement of Distribution
(the "Plan") for the Fund.
2. To transact such other business as may properly come before the
Meeting or any adjournment(s) thereof.
The board of directors of the Company has fixed the close of business on
March 20, 1998, as the record date for the determination of shareholders
entitled to notice of and to vote at the Meeting or any adjournment(s) thereof.
A complete list of shareholders of the Fund entitled to vote at the
Meeting will be available and open to the examination of any shareholder of the
Fund for any purpose germane to the Meeting during ordinary business hours after
March 31, 1998, at the offices of the Company, 7800 East Union Avenue, Denver,
Colorado 80237.
You are cordially invited to attend the Meeting. Shareholders who do not
expect to attend the Meeting in person are requested to complete, date and sign
the enclosed form of proxy and return it promptly in the enclosed envelope that
requires no postage if mailed in the United States. The enclosed proxy is being
solicited on behalf of the board of directors of the Company.
<PAGE>
IMPORTANT
Please mark, sign, date and return the enclosed proxy in the accompanying
envelope as soon as possible in order to ensure a full representation at the
Meeting.
The Meeting will have to be adjourned without conducting any business if
less than a majority of the eligible shares is represented, and the Company will
have to continue to solicit votes until a quorum is obtained. The Meeting also
may be adjourned, if necessary, to continue to solicit votes if less than the
required shareholder vote has been obtained to approve Proposal 1.
Your vote, then, could be critical in allowing the Company to hold the
Meeting as scheduled. By marking, signing, and promptly returning the enclosed
proxy, you may eliminate the need for additional solicitation. Your cooperation
is appreciated.
By Order of the Board of Directors,
/s/ Glen A. Payne
----------------------------------
Glen A. Payne
Secretary
Denver, Colorado
Dated: March 30, 1998
<PAGE>
^ INVESCO DIVERSIFIED FUNDS, INC.
March 30, 1998
- --------------------------------------------------------------------------------
INVESCO DIVERSIFIED FUNDS, INC.
7800 East Union Avenue
Denver, Colorado 80237
PROXY STATEMENT
FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 6, 1998
INTRODUCTION
The enclosed proxy is being solicited by the board of directors (the
"Board" or the "Directors") of INVESCO Diversified Funds, Inc. (the "Company")
on behalf of INVESCO Small Company Value Fund (the "Fund"), a series of the
Company, for use in connection with the special meeting of shareholders of the
Fund (the "Meeting") to be held at 10:00 a.m., Mountain Time, on Wednesday, May
6, 1998, at the Hyatt Regency Tech Center, 7800 E. Tufts Avenue, Denver,
Colorado 80237, and at any adjournment(s) thereof for the purpose set forth in
the foregoing notice. THE COMPANY'S ANNUAL REPORT, INCLUDING FINANCIAL
STATEMENTS OF THE COMPANY FOR THE FISCAL YEAR ENDED JULY 31, 1997, IS AVAILABLE
WITHOUT CHARGE UPON REQUEST FROM GLEN A. PAYNE, SECRETARY OF THE COMPANY, AT
P.O. BOX 173706, DENVER, COLORADO 80217-3706 (TELEPHONE NUMBER 1-800-646-8372).
The approximate mailing date of proxies and this Proxy Statement is March 30,
1998.
The primary purpose of the Meeting is to allow shareholders to consider a
Plan and Agreement of Distribution (the "Plan") for the Fund.
The following factors should be considered by shareholders in determining
whether to approve the Plan:
o The Plan has been approved by the Board, including the directors who are
completely independent of any INVESCO-affiliated Company ("the Independent
Directors").
o The relationship of the Plan to the overall cost structure of the Fund.
o The potential long-term benefits of the Plan to the Fund and its
shareholders.
o The effect of the Plan on existing shareholders.
<PAGE>
If the enclosed form of proxy is duly executed and returned in time to be
voted at the Meeting, and not subsequently revoked, all shares represented by
the proxy will be voted in accordance with the instructions marked thereon. If
no instructions are given, such shares will be voted FOR Proposal 1. A majority
of the outstanding shares of the Fund entitled to vote, represented in person or
by proxy, will constitute a quorum at the Meeting.
Shares held by shareholders present in person or represented by proxy at
the Meeting will be counted both for the purpose of determining the presence of
a quorum and for calculating the votes cast on the issues before the Meeting. An
abstention by a shareholder, either by proxy or by vote in person at the
Meeting, has the same effect as a negative vote. Shares held by a broker or
other fiduciary as record owner for the account of the beneficial owner are
counted toward the required quorum if the beneficial owner has executed and
timely delivered the necessary instructions for the broker to vote the shares or
if the broker has and exercises discretionary voting power. Where the broker or
fiduciary does not receive instructions from the beneficial owner and does not
have discretionary voting power as to the issue before the Meeting, but grants a
proxy for or votes such shares, the shares will be counted toward the required
quorum but will have the effect of a negative vote on the proposal if they are
not voted.
In order to reduce costs, the notices to shareholders having more than one
account in the Fund listed under the same Social Security number at a single
address have been combined. The proxy cards have been coded so that each
shareholder's votes will be counted for all such accounts.
Execution of the enclosed proxy card will not affect a shareholder's right
to attend the Meeting and vote in person, and a shareholder giving a proxy has
the power to revoke it (by written notice to the Company at P.O. Box 173706,
Denver, Colorado 80217-3706, execution of a subsequent proxy card, or oral
revocation at the Meeting) at any time before it is exercised.
Shareholders of record of the Fund at the close of business on March 20,
1998 (the "Record Date"), are entitled to vote at the Meeting, including any
adjournment(s) thereof, and are entitled to one vote for each share, and
corresponding fractional votes for fractional shares, on the matter to be acted
upon at the Meeting. On the Record Date, ^ 5,712,601 shares of beneficial
interest of the Company, $.01 par value per share, were outstanding, all of
which are shares of the Small Company Value Fund, the Company's only series.
In addition to the solicitations of proxies by use of the mail, proxies
may be solicited by officers of the Company, by officers and employees of
INVESCO Funds Group, Inc. ("IFG"), the investment adviser and transfer agent of
the Fund, INVESCO Management and Research, Inc. ("IMR"), the sub-adviser to the
Fund and by officers and employees of INVESCO Distributors, Inc. ("IDI"), the
distributor of the Fund, personally or by telephone or telegraph, without
special compensation. IFG, IMR and IDI are referred to collectively as
"INVESCO." In addition, Shareholder Communications Corporation ("SCC") has been
retained to assist in the solicitation of proxies.
<PAGE>
As the meeting date approaches, certain shareholders whose votes the
Company has not yet received may receive telephone calls from representatives of
SCC requesting that they authorize SCC, by telephonic or electronically
transmitted instructions, to execute proxy cards on their behalf. Telephone
authorizations will be recorded in accordance with the procedures set forth
below. INVESCO believes that these procedures are reasonably designed to ensure
that the identity of the shareholder casting the vote is accurately determined
and that the voting instructions of the shareholder are accurately determined.
SCC has received an opinion of Maryland counsel that addresses the
validity, under the applicable laws of the State of Maryland, of authorization
given orally to execute a proxy. The opinion given by Maryland counsel concludes
that a Maryland court would find that there is no Maryland law or public policy
against the acceptance of proxies signed by an orally authorized agent, provided
it adheres to the procedures set forth below.
In all cases where a telephonic proxy is solicited, the SCC representative
is required to ask the shareholder for such shareholder's full name, address,
Social Security or employer identification number, title (if the person giving
the proxy is authorized to act on behalf of an entity, such as a corporation),
and the number of shares owned, and to confirm that the shareholder has received
the Proxy Statement in the mail. If the information solicited agrees with
the information provided to SCC by the Company, the SCC representative has the
responsibility to explain the voting process, read the proposal listed on the
proxy card, and ask for the shareholder's instructions on the proposal. Although
he or she is permitted to answer questions about the process, the SCC
representative is not permitted to recommend to the shareholder how to vote,
other than to read any recommendation set forth in the Proxy Statement. SCC will
record the shareholder's instructions on a proxy card. Within 72 hours, SCC will
send the shareholder a letter or mailgram confirming the shareholder's vote and
asking the shareholder to call SCC immediately if the shareholder's instructions
are not correctly reflected in the confirmation.
If a shareholder wishes to participate in the Meeting, but does not wish
to give a proxy by telephone, such shareholder may still submit the proxy card
originally sent with the Proxy Statement or attend in person. Any proxy given by
a shareholder, whether in writing or by telephone, is revocable. A shareholder
may revoke the accompanying proxy or a proxy given telephonically at any time
prior to its use by filing with the Company a written revocation or duly
executed proxy bearing a later date. In addition, any shareholder who attends
the Meeting in person may vote by ballot at the Meeting, thereby canceling any
proxy previously given.
ALL COSTS OF PRINTING AND MAILING PROXY MATERIALS AND THE COSTS AND
EXPENSES OF HOLDING THE MEETING AND SOLICITING PROXIES, INCLUDING ANY AMOUNT
PAID TO SCC, WILL BE PAID BY INVESCO.
The Board may seek one or more adjournments of the Meeting to solicit
additional shareholders, if necessary, to obtain a quorum for the Meeting, or to
obtain the required shareholder vote to approve Proposal 1. An adjournment would
require the affirmative vote of the holders of a majority of the shares present
at the Meeting (or an adjournment thereof) in person or by proxy and entitled to
<PAGE>
vote. If adjournment is proposed in order to obtain the required shareholder
vote on proposal 1, the persons named as proxies will vote in favor of
adjournment those shares which they are entitled to vote in favor of such
proposal and will vote against adjournment those shares which they are required
to vote against such proposal.
PROPOSAL 1: APPROVAL OR DISAPPROVAL OF THE PLAN AND AGREEMENT OF
DISTRIBUTION FOR INVESCO SMALL COMPANY VALUE FUND
Background
At the Meeting, shareholders of the Fund are to consider a Plan and
Agreement of Distribution (the "Plan") approved by the Board on February 3,
1998. The reasons why the Directors, including all of the Independent Directors
present at the meeting, determined that it was reasonably likely that the Plan
would contribute to an increase in sales of shares of the Fund, with resulting
benefits to the Fund and its shareholders, are set forth in detail below.
Briefly, the Board determined that an enhanced marketing effort by IDI on behalf
of the Fund would benefit the Fund in maintaining and improving its market
share, and that such an effort would be enhanced by adoption of the Plan, under
which the Fund's assets will be available to compensate IDI for a portion of the
costs of marketing and distributing the Fund's shares.
Changing Mutual Fund Distribution Patterns
In years past, no-load mutual funds such as those offered by the Company
were sold directly by their distributors. Today, no-load mutual funds
increasingly are sold through the efforts of third parties such as full-service
brokerage firms, discount brokers, banks, investment advisers, consultants
and others. Some of these third parties are compensated for sales efforts;
others are compensated for ongoing services that they provide to mutual fund
shareholders; still others are compensated for both. According to Strategic
Insight Mutual Fund Research and Consulting LLC ("Strategic Insight"), retail
equity mutual funds with similar capital appreciation objectives to that of the
Fund, which are primarily distributed through financial intermediaries, offer,
with very few exceptions, distribution or service fees to such third party
intermediaries. Among such funds during 1997, Strategic Insight estimated that
90% of net cash flows (new sales less redemptions plus net exchanges) were
captured by funds with stated annual fees to intermediaries of 25 basis points
or higher; only 9% of net flows were captured by such funds not offering such
fees. The INVESCO Mutual Funds are no different from the rest of the industry in
this respect. IFG has advised the Company that nearly ^ 83% of the gross sales
of all INVESCO Mutual Funds in calendar year 1997 came through third party
intermediaries.
<PAGE>
While the mutual fund industry has evolved increasingly toward fee-based
compensation of third party intermediaries and advisory services asset
allocation, the Company's pricing structure has remained unchanged.
Historically, IFG has compensated these third parties, and paid a wide variety
of marketing expenses, out of the revenues it derives from the Fund for
portfolio management and other services provided to the Fund. In the judgment of
IFG and the Board, continuing this approach places the Fund at a competitive
marketing disadvantage to its peers.
Although the INVESCO Mutual Funds have grown significantly in the past
five years, INVESCO and the Company compete against management companies having
far greater resources at their command. The costs of distributing the INVESCO
Mutual Funds (including the Fund) have increased substantially over the last few
years. While INVESCO cannot outspend its competitors, it believes it must spend
at least enough to provide what its competitors offer to third parties to
distribute and provide services to their mutual funds and generally to inform
investors that the Fund offers attractive alternatives to other mutual funds.
INVESCO has advised the Board that to do both requires a significant increase in
the money and personnel devoted to marketing shares of the Fund.
This is a need that is not unique to the Company, or to the INVESCO Mutual
Funds as a group. In order to increase revenue available for spending in the
areas of advertising, sales promotion, and maintenance of an effective sales
effort, many competing mutual fund groups, both load and no-load, have adopted
distribution plans pursuant to Rule 12b-1 of the 1940 Act, under which fund
assets are available to pay certain expenses of distributing fund shares and
providing ongoing services to shareholders.
Several of the INVESCO Mutual Funds adopted distribution plans in 1990,
and most new INVESCO Mutual Funds started since that time have such plans. In
October and November 1997, shareholders of the INVESCO Value Equity Fund and
INVESCO Intermediate Government Bond Fund of INVESCO Value Trust, eight
portfolios of INVESCO Strategic Portfolios, Inc. and all portfolios of INVESCO
International Funds, Inc. approved such plans. Again, this is not unique. Data
on the mutual fund industry compiled by Lipper Analytical Services, Inc. shows
that at December 31, 1997, 7,233 of the 11,628 open-end mutual funds registered
with the SEC (62.2%) were using fund assets to pay for distribution expenses,
either through Rule 12b-1 plans or a direct charge against fund assets. In 1990,
only 54.6% of all such funds had such ^ plans in place. According to INVESCO,
one reason why many no-load funds have adopted Rule 12b-1 plans is to give them
a means, through payment of service fees, to compensate third party
intermediaries for helping to sell fund shares and providing ongoing services to
shareholders.
It is important to note that adoption of the Plan will not result in a
windfall of revenue for INVESCO. INVESCO has committed to the Board, and the
Board has acted in reliance on such commitment, that it will continue bearing
<PAGE>
expenses of marketing the INVESCO Mutual Funds at least equal to the level
of expenses that it has currently committed to the Board to bear (at least $3.5
million annually). Thus, adoption of the proposed Plan will have the effect of
making additional monies available for promotion and marketing of the Fund, but
will not result in increased profits to INVESCO from INVESCO's reducing ^ its
own marketing expenditures below the commitment level.
The Board and INVESCO believe that the adoption of the Plan is reasonably
likely to improve the sales of the Fund shares by providing third party
intermediaries with an incentive to provide ongoing services to Fund
shareholders and sell shares of the Fund, and by providing monies for INVESCO to
embark on an enhanced distribution effort on behalf of the Fund which the Board
and INVESCO believe should assist the Fund to remain competitive in the
marketplace.
Impact Of The Proposed Plan On The Cost Structures Of The Fund
The proposed Plan is PROSPECTIVE in nature. Thus, the fee will only be
assessed based on new sales of shares, exchanges into the Fund and reinvestments
of dividends and capital gains distributions (collectively "New Assets") of the
Fund which occur after the Plan is implemented. If approved by shareholders, the
Plan will become effective on the first business day of the month following the
month in which shareholder approval is received, and the first payments under
the Plan will be made in the second month following shareholder approval. To
illustrate how the Plan will work, assume that the Plan was in effect on April
1, 1997, when the Fund had $34.2 million in assets. During the month of April
1997, the Fund added $10.4 million in New Assets. Under this illustration, the
fees assessed under the Plan would have been applied to the $10.4 million in New
Assets added after adoption of the Plan. Under the Plan, the resulting fees
would be absorbed pro rata by all Fund shareholders. Investment performance of
the Fund's assets and redemptions will have no impact on the Plan. Redemptions
of shares acquired with New Assets will not reduce the dollar amounts to which
the Plan's fees will be applied. Any increase or decrease in the net asset value
of New Assets will not affect the dollar amounts to which the Plan's fees will
be applied. Increases in the net asset value of shares of the Fund existing
prior to implementation of the Plan also will not increase the dollar amounts to
which the Plan's fees will be applied. At no time will the fees under the Plan
be applied to a level of New Assets higher than the net assets of the Fund.
The proposed Plan would authorize use of a small percentage of assets of
the Fund to compensate IDI for expenditures it undertakes to promote
distribution of the Fund's shares. The Plan would limit the amount of the Fund's
assets which could be used for this purpose during any 12-month period to a
maximum of 0.25 of 1% (25 basis points) of New Assets of the Fund added after
the Plan is implemented. Any increase in this rate would require approval of the
Board and shareholders of the Fund. The compensation allowed under the proposed
Plan is modest in comparison to Rule 12b-1 plans that have been adopted by many
other mutual funds. Some funds have adopted distribution plans authorizing up to
1% of fund assets on an annual basis to be used to compensate the distributor
for the costs of distributing fund shares.
<PAGE>
Adoption of the proposed Plan will increase expenses a shareholder would
pay on a $1,000 investment in the Fund (assuming a 5% annual return and
assessment of the full ^ 0.25% fee) by approximately $2.63 for one year. Another
way of looking at the effect of this proposal is to consider the fact that, if
the Fund had a net asset value per share of $10, the deduction of the maximum
distribution and service fee charge would reduce the price per share by two and
one-half cents ($.025) for the entire year ($.00007 per share per day). Daily
changes in the market price of the Fund's securities often result in a
fluctuation in the Fund's net asset value per share by an amount greater than
the yearly amount of the reduction in the per share net asset value that
will result from the distribution and service charge. If the Plan had been
effective at January 1, 1997, based on the average daily net assets of the
Fund's portfolio and the New Assets added to the Fund after that date,as of
December 31, 1997, the estimated maximum annual payments of the Fund under the
Plan for the twelve months then ended would have been $121,387.
Operating expenses of the Fund are paid from the Fund's assets. Lower
expenses therefore benefit investors by increasing the Fund's total return.
Annual operating expenses are calculated as a percentage of the Fund's average
annual net assets. The table below shows the expense ratios for the Fund for the
twelve months ended December 31, 1997, and the estimated pro forma expense
ratios for the Fund if the proposed Plan had been in effect from January 1, 1997
through December 31, 1997.
<TABLE>
<CAPTION>
Pro Forma
Estimated Expenses
Expenses at Including Proposed
December 31, 1997(1) Plan at December 31, 1997(2)
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<S> <C> <C>
Management Fee 0.75% 0.75%
12b-1 Fee None 0.22%
Other Expenses 0.50% 0.28%
Total Fund Operating Expenses 1.25% 1.25%
</TABLE>
Benefits To Existing Shareholders Of The Fund
In addition to benefiting the Fund and INVESCO, adoption of the Plan will
benefit Fund shareholders.
<PAGE>
First, as noted above, it is important to understand that the Plan is
PROSPECTIVE in nature and will ONLY be assessed based on New Assets of the Fund
after the Plan is implemented. Therefore, the initial increase in the expenses
of the Fund is expected to be less than the 0.25% maximum amount for which
approval is sought, because payments will be made only as to New Assets added on
or after the date on which the Plan is implemented. As the proportion of the
Fund's New Assets on or after that date to the total Fund assets increases, the
actual expenses caused by Plan payments also will increase (but in no event will
exceed the annual rate of 0.25% of the average daily net assets of the Fund).
The Board and INVESCO believe that there is a reasonable likelihood that
there will be benefits to existing shareholders, including:
o Enhanced marketing efforts, if successful, should result in an
increase in net assets through the sale of additional shares and
afford greater resources with which to pursue the investment
objectives of the Fund;
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(1)If a portion of such expenses had not been voluntarily absorbed, Other
Expenses would have been 0.52% and Total Fund Operating Expenses would have
been 1.27%.
(2)Assumes that a portion of such expenses would have been voluntarily absorbed.
If a portion of such expenses were not voluntarily absorbed, pro forma
Other Expenses would be 0.52% and pro forma Total Fund Operating Expenses
would be 1.49%.
<PAGE>
o The sale of additional shares reduces the likelihood that redemption
of shares will require the liquidation of the Fund's securities in
amounts and at times that are disadvantageous for investment
purposes and, therefore, disadvantageous to the remaining
shareholders;
o The positive effect which increased Fund assets will have on its
revenues could allow INVESCO:
o To have greater resources to make the financial commitments
necessary to continue to improve the quality and level of the
Fund and shareholder services (in both systems and personnel)
that Fund shareholders have come to expect;
o To increase the number and type of mutual funds available to
investors from INVESCO (and support them in their infancy),
and thereby expand the investment choices available to all
shareholders;
o To acquire and retain talented employees who desire to be
associated with a growing organization.
Moreover, increased Fund assets may result in reducing each investor's
share of certain expenses through economies of scale (e.g., allocating fixed
expenses over a larger asset base), thereby partially offsetting the costs of
the Plan. To the extent that Fund assets are increased as the result of
increased sales, breakpoints in the investment advisory fee schedule (i.e.,
asset levels at which the investment advisory fee rate is reduced) may ^
voluntarily be added by INVESCO, although there is no guarantee that this will
occur. If this would happen, it could have the effect of reducing the Fund's
management fee. This, however, may not necessarily lead to a reduction in ^ the
Fund's overall expense ratio compared to the Fund's expense ratio prior to
implementation of the Plan.
Although INVESCO believes that there is a reasonable likelihood that these
benefits to shareholders will occur, INVESCO can make no guarantee that these
benefits will have any impact on investment performance of the Fund.
Protections Afforded Shareholders Under The Proposed Plan
The proposed Plan is described in detail below. However, the Board and
INVESCO believe that shareholders should be aware of certain protections that
are either in the proposed Plan itself or are embedded in the proposed Plan
under the terms of Rule 12b-1 under the 1940 Act.
No Carryover Of Expenses
The proposed Plan does not permit carrying over distribution expenses in
excess of the above 25 basis points to subsequent periods. As you may know, many
distribution plans of other mutual funds permit the carrying over of such excess
<PAGE>
expenses (subject to the approval of those funds' boards), and the resultant
buildup of large expense accruals subject to compensation. Building up of large
expense accruals is a major complaint that is often raised concerning the
operation of distribution plans.
Quarterly Review By The Board Of Directors
INVESCO will be required to submit reports to the Board on a quarterly
basis concerning the marketing expenses that have been compensated under the
Plan; and, very importantly, the Directors will be able to terminate the Plan at
any time, which would terminate subsequent Plan payments. The Board must approve
the continuation of the Plan annually, or the Plan will terminate automatically
along with the payments under it by the Fund.
Description Of The Plan
On February 3, 1998, the Board adopted the proposed Plan, subject to
approval by shareholders of the Fund. A copy of the Plan is attached as Exhibit
A. The distribution and service expenses borne by the Fund will be in addition
to the distribution expenses that INVESCO currently bears, and that it intends
to continue bearing, pursuant to a commitment INVESCO has made to the INVESCO
Mutual Funds. The Plan will obligate INVESCO to submit quarterly reports of
expenditures under the Plan to the Board. Such quarterly reports will be
reviewed by the Board, including a majority of the Independent Directors. In
addition, INVESCO has made a commitment to the Directors to provide them with
the proposed annual budget for its marketing efforts on behalf of the INVESCO
Mutual Funds, including the Fund.
The Fund is authorized under the proposed Plan to use its assets to
finance certain activities relating to the distribution of its shares to
investors. Under the Plan, monthly payments may be made by the Fund to IDI to
permit it, at IDI's discretion, to engage in certain activities, and provide
certain services approved by the Board in connection with the distribution of
the Fund's shares to investors. These activities and services may include the
payment of compensation (including incentive compensation and/or continuing
compensation based on the amount of customer assets maintained in the Fund) to
securities dealers and other financial institutions and organizations, which may
include INVESCO-affiliated companies, to obtain various distribution-related
and/or administrative services (except administrative services already provided
under separate agreements with INVESCO-affiliated companies) for the Fund. Such
services may include, among other things, processing new shareholder account
applications, preparing and transmitting to the Fund's Transfer Agent computer
processable tapes of all transactions by customers, providing recordkeeping
administration for full service 401(k) plans, and serving as the primary source
of information to customers in answering questions concerning the Fund and their
transactions with the Fund.
In addition, other permissible activities and services under the Plan
include advertising, the preparation, printing and distribution of sales
literature, printing and distributing prospectuses to prospective investors, and
such other services and promotional activities for the Fund as may from time to
time be agreed upon by the Company and the Board, including public relations
efforts and marketing programs to communicate with investors and prospective
investors. These services and activities may be conducted by the staff of
INVESCO or its affiliates or by third parties.
<PAGE>
Under the Plan, the Company's payments to IDI on behalf of the Fund are
limited to an amount computed at an annual rate of 0.25% of the Fund's average
net assets added after the Plan is implemented. IDI is not entitled to payment
for overhead expenses under the Plan, but may be paid for all or a portion of
the compensation paid for salaries and other employee benefits to the personnel
of IDI whose primary responsibilities involve marketing shares of the INVESCO
Mutual Funds, including the Fund. Payment amounts by the Fund under the Plan,
for any month, may be made to compensate IDI for permissible activities engaged
in and services provided by IDI during the rolling 12-month period in which that
month falls. Therefore, any obligations incurred by IDI in excess of the
limitations described above will not be paid by the Fund under the Plan, and
will be borne by IDI. In addition, IDI may from time to time make additional
payments from its revenues to securities dealers, financial advisers and
financial institutions that provide distribution-related and/or administrative
services for the Fund. No further payments will be made by the Fund under the
Plan in the event of the Plan's termination. Payments made by the Fund may not
be used to finance directly the distribution of shares of any other Fund of the
Company or other mutual fund advised by IFG. However, payments received by IDI
which are not used to finance the distribution of shares of the Fund become part
of IDI's revenues and may be used by IDI for activities that promote
distribution of any of the mutual funds advised by IFG. Subject to review by the
Fund's Directors, payments made by the Fund under the Plan for compensation of
marketing personnel, as noted above, are based on an allocation formula designed
to ensure that all such payments are appropriate.
INVESCO will bear any distribution- and service-related expenses in excess
of the amounts which are paid pursuant to the Plan. The Plan also authorizes any
financing of distribution which may result from INVESCO's use of its own
resources, including profits from investment advisory fees received from the
Fund, provided that such fees are legitimate and not excessive.
The Plan is subject to the requirements of Rule 12b-1 under the 1940 Act.
The Plan has been approved by the Company's Board, including all of the
Independent Directors present at the meeting at which the Plan was considered ,
and is being submitted to the shareholders of the Fund for approval at this
shareholders' meeting. Under this Rule, the Board must review expenditures under
the Plan no less often than quarterly, and the Plan may continue in effect only
so long as such continuance is approved at least annually by the Board,
including a majority of the Independent Directors. A material amendment to the
Plan requires approval by the Board, including a majority of the Independent
Directors, and any amendment which would materially increase the amount which
the Fund may expend under the Plan also requires approval by a majority of the
outstanding shares of the Fund. The Plan and any agreements relating to its
implementation may be terminated, in the case of the Plan, at any time, and in
case of any agreements, upon sixty days' written notice to the other party, by
vote of a majority of the Independent Directors or by the vote of a majority of
the outstanding shares of the Fund. Such agreements will also terminate
automatically if assigned. So long as the Plan continues in effect, the
selection and nomination of the disinterested Directors of the Company are
committed to the discretion of the Independent Directors.
<PAGE>
Basis Of Board Of Directors' Recommendations
The Independent Directors had available to them the assistance of outside
legal counsel throughout the process of determining whether to approve the Plan.
Prior to and during the February 3, 1998 meeting, the Independent Directors
requested and received all information they deemed necessary to enable them to
determine whether the Plan is in the best interests of the Company, the Fund and
its shareholders. At the meeting, the Independent Directors reviewed and
discussed materials furnished by Fund management and also met with
representatives of INVESCO.
In connection with their consideration of the proposed Plan, the Directors
were furnished with a draft of the Plan and related materials, including a
memorandum from INVESCO, which outlined the uses and benefits of distribution
plans under Rule 12b-1 of the 1940 Act currently being used in the mutual fund
industry, and certain data concerning such plans prepared by IFG. In addition,
the Company's legal counsel provided additional information, summarized the
provisions of the proposed Plan, and discussed the legal and regulatory
considerations in adopting such Plan.
In approving the Plan, the Directors determined, in the exercise of their
business judgment and in light of their fiduciary duties under state law and the
1940 Act, that, based upon the material requested and evaluated by them, the
Plan is reasonably likely to benefit the Fund and its shareholders.
The Directors considered various factors relevant to the Fund's situation,
including the investment and sales history of the Fund, the Fund's marketing
experience using IFG/IDI as distributor, possible ways in which sales of shares
could be increased, and the effect of the proposed Plan on the Fund and its
shareholders. The Board also noted that while shareholders of several INVESCO
Mutual Funds did not approve distribution plans similar to the Proposed Plan in
1990, shareholders of several others did approve such plans. During the last
five years that those current Rule 12b-1 Plans have been in effect, there have
been positive results. The table below, prepared by INVESCO, summarizes certain
of these results by noting the percentage increase in gross sales during
calendar years 1993, 1994, 1995, 1996 and 1997 of both the INVESCO 12b-1 and
non-12b-1 Mutual Funds which were in existence when the current 12b-1 Plans were
instituted in 1990. These figures were calculated by comparing the gross sales
of the relevant INVESCO 12b-1 and non-12b-1 Funds over these years to these
Funds' gross sales during calendar year 1990. They include exchanges and
dividend reinvestments, but do not include information with respect to INVESCO
Value Trust, which was not distributed by INVESCO in 1990.
Percent of Gross Sales Increase
Type of Funds
1993 1994 1995 1996 1997
INVESCO 538.96% 442.01% 307.33% 331.58% 384.32%
12b-1 Funds
INVESCO 225.79% 122.27% 147.45% 291.47% 319.99%
Non-12b-1 Funds
<PAGE>
These figures show that the gross sales of the INVESCO 12b-1 Mutual Funds
compare favorably to the gross sales of the INVESCO Mutual Funds without such
plans over this entire time period. In short, the addition of 12b-1 plans for
certain of the INVESCO Mutual Funds in 1990 ^ appears to have contributed to
increased gross sales of those INVESCO Mutual Funds, compared to the INVESCO
Mutual Funds without such plans.
It was also represented to the Board that there would be no diminution in
the promotional and marketing efforts currently made by INVESCO in connection
with promoting sales of shares of the Fund. At the meeting, it was suggested
that the monies made available under the proposed Plan could be used for direct
support of targeted advertising and promotional campaigns for the Fund in
specific regional areas, as well as for general promotion and advertising of the
Fund. The Directors specifically questioned IFG as to why it believed adoption
of the proposed Plan could be expected to stimulate additional sales of shares
of the Fund, thereby assisting the Fund by increasing it's asset base. After
discussion, it was agreed that it was reasonable to expect that an enhanced
marketing effort by INVESCO on behalf of the Fund, together with the ability to
compensate third party intermediaries for helping to sell the Fund's shares
and/or providing services to Fund shareholders, would have a reasonable
likelihood of producing these results. The Board also placed importance on the
fact that the Board and, in particular, the Independent Directors, would be able
to monitor the nature, manner and amount of expenditures of the Fund under the
Plan by reviewing the quarterly reports of IDI's distribution expenditures that
IDI is obligated to provide the Board, and by being able to terminate the Plan,
and thereby end all obligations of the Fund to make payments thereunder, at any
time.
In approving the proposed Plan, the Board took into account, among other
things, the following factors: the nature and causes of the problems or
circumstances which made implementation of the Plan advisable and appropriate;
the way in which the Plan would address these problems or circumstances,
including the nature and potential amount of the expenditures; the relationship
of such expenditures to the overall cost structure of the Fund; the nature of
the anticipated benefits; the time it might take for those benefits to be
achieved; the merits of possible alternative plans; the interrelationship
between the Plan and the activities of INVESCO; and the effect of the Plan on
existing shareholders.
The Directors concluded that there was a reasonable likelihood that the
Fund and its shareholders will benefit from the adoption of the Plan in the
following ways:
o The sale of additional shares reduces the likelihood that redemption of
shares will require the liquidation of portfolio securities in amounts and
at times that are disadvantageous for investment purposes;
o Enhanced marketing efforts, if successful, should result in an increase in
net assets and afford greater flexibility in pursuing the investment
objectives of the Fund;
<PAGE>
o Increased ^ assets of the Fund could allow INVESCO to: have greater
resources to make the financial commitments necessary to improve the
quality and level of Fund and shareholder services (in both systems and
personnel); increase the number and type of mutual funds in the group (and
support them in their infancy) and thereby expand the investment choices
available to all shareholders; and acquire and retain talented employees
who desire to be associated with a growing organization; and
o The cost to the Fund of the Plan would be partly offset to the extent that
increased Fund assets result in economies of scale (e.g., sharing fixed
expenses over a larger asset base ^).
The Directors concluded that the various possible benefits described above
would be of substantially equal significance to both new and existing
shareholders of the Fund, and thus no unfair burden will fall on any group of
Fund shareholders from adoption of the proposed Plan. In addition, while INVESCO
will benefit from increased management fees as a result of growth in Fund
assets, the Directors concluded that such benefit to INVESCO will not be
disproportionate to the above-described anticipated benefits to the Fund and
shareholders of the Fund resulting from growth in Fund assets. Finally, while
adoption of the proposed Plan will increase the expense ratio of the Fund by the
amount of the distribution payments from assets of the Fund (less any economies
of scale attributable to the Plan), the Directors were satisfied that the
increased expense ratio will not be out of line with the expense ratios of
comparable mutual funds.
The Directors recognized that there is no assurance that the expenditures
of assets of the Fund to finance distribution of shares of the Fund will result
in additional sales of shares or in an increase in the net assets of the Fund,
upon which the above benefits depend. The Directors determined, however, that
there is a reasonable likelihood that one or more of such benefits will result
and that ^ the Directors will be in a position to monitor the distribution
expenses of the Fund and to evaluate the benefit of such expenditures in
deciding whether to continue the Plan.
Vote Required
As provided under the 1940 Act, approval of the Plan with respect to the
Fund will require the affirmative vote of a majority of the outstanding shares
of the Fund voting separately as a class. Such a majority is defined in the 1940
Act as the lesser of: (a) 67% or more of the shares present at such meeting, if
the holders of more than 50% of the outstanding shares of the Fund are present
or represented by proxy, or (b) more than 50% of the total outstanding shares of
the Fund.
If the shareholders of the Fund fail to approve the Plan, the Plan will
not go into effect for the Fund, and the Fund will not participate in the
enhanced advertising and marketing effort by IDI on behalf of the INVESCO Mutual
Funds.
<PAGE>
THE DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMEND THAT
THE FUND'S SHAREHOLDERS VOTE TO APPROVE THE PLAN.
INFORMATION CONCERNING ADVISER, SUB-ADVISER, DISTRIBUTOR AND
AFFILIATED COMPANIES
IFG, a Delaware corporation, serves as the Company's investment adviser,
and provides other services to the Company. IDI, a Delaware corporation that
serves as the Fund's distributor, is a wholly-owned subsidiary of IFG. IMR, a ^
Massachusetts corporation, serves as the Fund's sub-adviser. IFG is a
wholly-owned subsidiary of INVESCO North American Holdings, Inc. ("INAH"), 1315
Peachtree Street, N.E., Atlanta, Georgia 30309. INAH is an indirect wholly-owned
subsidiary of AMVESCAP PLC ("AMVESCAP").3 The corporate headquarters of AMVESCAP
are located at 11 Devonshire Square, London EC2M 4YR, England. IFG's and IDI's
offices are located at 7800 East Union Avenue, Denver, Colorado 80237. IMR's
offices are located at 101 Federal Street, Boston, Massachusetts 02110. IFG
currently serves as investment adviser of 14 open-end investment companies
having aggregate net assets of $16.7 billion as of December 31, 1997.
The principal executive officers and directors of IFG and their principal
occupations are:
Dan J. Hesser, Chairman of the Board, also, Director of IDI; Mark H.
Williamson, President, Chief Executive Officer and Director, also, President and
Chief Executive Officer^ of IDI; and Charles P. Mayer, Director and Senior Vice
President, also, Senior Vice President and Director of IDI^.
The address of each of the foregoing officers and directors is 7800 East
Union Avenue, Denver, Colorado 80237^.
INVESCO Management & Research, Inc. ("IMR") serves as the sub-adviser to
the Fund. IMR is a wholly-owned subsidiary of INAH. IFG, as investment adviser,
has contracted with IMR for investment advisory and research services on behalf
of the Fund. IMR has the primary responsibility for providing portfolio
investment advisory services to the Fund. IMR also acts as adviser to the
INVESCO Multi-Asset Allocation Fund of INVESCO Multiple Asset Funds, Inc. ^
- ----------------------------------
(3)
The intermediary companies between INAH and AMVESCAP are as follows:
INVESCO, Inc., INVESCO Group Services, Inc. and INVESCO North American Group,
Ltd., each of which is wholly-owned by it's immediate parent.
<PAGE>
The principal executive officers and directors of IMR and their principal
occupations are ^:
^ Frank J. Keeler, President and Chief Executive Officer, also, Corporate
Secretary of INVESCO North American Holdings; Frank A. Bisagano, Vice President,
Treasurer, Director and Director of IT Group; Kathleen A. Greenberg, Secretary;
A. D. Frazier, Director, also, President and Chief Executive Officer of INVESCO,
Inc., and Director of INVESCO Capital Management, INVESCO Realty Advisors, Inc.
and PRIMCO Capital Management; William M. McCarthy, Senior Vice President,
Director of Fixed Income and Director; and Robert S. Slotpole, Senior Vice
President, Director of Equities and Director.
The address of each of the foregoing officers and directors is 101 Federal
Street, Boston, Massachusetts 02110.
Pursuant to an Administrative Services Agreement between the Company and
IFG, IFG provides administrative services to the Company, including
sub-accounting and recordkeeping services and functions. During the fiscal year
ended July 31, 1997, the Company paid IFG total compensation of $17,517 in
payment for such services.
During the fiscal year ended July 31, 1997, the Company paid IFG, which
also serves as the Company's registrar, transfer agent and dividend disbursing
agent, total compensation of $131,681 for such services.
<PAGE>
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND FUND MANAGEMENT
The following table sets forth, as of the Record Date, the beneficial
ownership of the Fund's issued and outstanding shares of beneficial interest by
each 5% or greater shareholder.
- -----------------------------------------
<TABLE>
<CAPTION>
Percent of
Name and Address Amount & Nature of Shares of
of Beneficial Owner Beneficial Ownership(4) Beneficial Interest
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Turtle & Co. 449,849.6540 8.02%
S1-RR
P.O. Box 9242
Boston, MA 02209-9242
Enele & Co. 402,457.9620 7.17%
Freightliner Corp.
Copper Mountain Trust Corp.
1211 S.W. Fifth Ave., Ste. 1900
Portland, OR 97204-3719
Donaldson, Lufkin & Jenrette 370,528.8500 6.60%
Mutual Funds, Fifth Floor
P.O. Box 2052
Jersey City, NJ 07303-2052
Mac & Co. 358,608.3070 6.39%
Mellon Bank N.A.
Mutual Funds Dept.
P.O. Box 320
Pittsburgh, PA 15230-0320
INVESCO Trust Co. TR 350,622.3570 6.25%
Blue Cross Blue Shield Assoc.
Natl 401K Plan
Attn: Larkin Hays
1201 Peachtree St., NE, Ste. 2200
Atlanta, GA 30361-3500
Charles Schwab & Co., Inc. 316,691.7470 5.64%
Special Custody Acct. For The
Exclusive Benefit of Customers
Attn: Mutual Funds
101 Montgomery
San Francisco, CA 94104-4122
- ------------------------------
</TABLE>
(4) Each beneficial owner named above shares investment power with respect
to the shares listed next to its respective row, but its customers retain sole
voting power.
<PAGE>
As of the Record Date, officers and directors of the Company, as a group,
beneficially owned less than 1% of the Fund's outstanding shares.
OTHER BUSINESS
The management of the Company has no business to bring before the Meeting
other than the matters described above. Should any other business be presented
at the Meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
SHAREHOLDER PROPOSALS
The Company does not hold annual meetings of shareholders. Shareholders
wishing to submit proposals for inclusion in a proxy statement and form of proxy
for a subsequent shareholders' meeting should send their written proposals to
the Secretary of the Company, 7800 East Union Avenue, Denver, Colorado 80237.
The Company has not received any shareholder proposals to be presented at this
Meeting.
By Order of the Board of Directors,
/s/ Glen A. Payne
------------------------------------
Glen A. Payne
Secretary
March 30, 1998
<PAGE>
EXHIBIT A
PLAN AND AGREEMENT OF DISTRIBUTION PURSUANT TO RULE 12b-1
PLAN AND AGREEMENT made as of the [------] day of [--------], 1998, by and
between INVESCO DIVERSIFIED FUNDS, INC., a Maryland corporation (hereinafter
called the "Company") and INVESCO DISTRIBUTORS, Inc., a Delaware corporation
("INVESCO").
WHEREAS, the Company engages in business as an open-end management
investment company, and is registered as such under the Investment Company Act
of 1940, as amended (the "Act"); and
WHEREAS, the Company desires to finance the distribution of the shares of
its sole class or series of common stock, namely, INVESCO Small Company Value
Fund, which represents an interest in a separate portfolio of investments,
together with any additional such classes or series that may hereafter be
offered to the public by INVESCO Small Company Value Fund (the "Fund"), in
accordance with this Plan and Agreement of Distribution pursuant to Rule 12b-1
under the Act (the "Plan and Agreement"); and
WHEREAS, INVESCO desires to be retained to perform services in accordance
with such Plan and Agreement and on said terms and conditions; and
WHEREAS, this Plan and Agreement has been approved by a vote of the board
of Directors of the Company, including a majority of the directors who are not
interested persons of the Company, as defined in the Act, and who have no direct
or indirect financial interest in the operation of this Plan and Agreement (the
"Disinterested Directors") cast in person at a meeting called for the purpose of
voting on this Plan and Agreement;
NOW, THEREFORE, the Company hereby adopts the Plan set forth herein and
the Company and INVESCO hereby enter into this Agreement pursuant to the Plan in
accordance with the requirements of Rule 12b-1 under the Act, and provide and
agree as follows:
1. The Plan is defined as those provisions of this document by which
the Company adopts a Plan pursuant to Rule 12b- 1 under the Act and
authorizes payments as described herein. The Agreement is defined as those
provisions of this document by which the Company retains INVESCO to provide
distribution services beyond those required by the General Distribution
Agreement between the parties, as are described herein. The Company may
retain the Plan notwithstanding termination of the Agreement. Termination
of the Plan will automatically terminate the Agreement. The Company is
hereby authorized to utilize the assets of the Company to finance certain
activities in connection with distribution of the Company's shares.
<PAGE>
2. Subject to the supervision of the board of directors, the Company
hereby retains INVESCO to promote the distribution of shares of the Fund by
providing services and engaging in activities beyond those specifically
required by the Distribution Agreement between the Company and INVESCO and
to provide related services. The activities and services to be provided by
INVESCO hereunder shall include one or more of the following: (a) the
payment of compensation (including trail commissions and incentive
compensation) to securities dealers, financial institutions and other
organizations, which may include INVESCO-affiliated companies, that
render distribution and administrative services in connection with the
distribution of the shares of the Fund; (b) the printing and distribution
of reports and prospectuses for the use of potential investors in the Fund;
^(c) the preparing and distributing of sales literature; (d) the providing
of advertising and engaging in other promotional activities, including
direct mail solicitation, and television, radio, newspaper and other media
advertisements; and (e) the providing of such other services and activities
as may from time to time be agreed upon by the Company. Such reports and
prospectuses, sales literature, advertising and promotional activities and
other services and activities may be prepared and/or conducted either by
INVESCO's own staff, the staff of INVESCO-affiliated companies, or third
parties.
3. INVESCO hereby undertakes to use its best efforts to promote sales
of shares of the Fund to investors by engaging in those activities
specified in paragraph (2) above as may be necessary and as it from time to
time believes will best further sales of such shares.
4. The Fund is hereby authorized to expend, out of its assets, on a
monthly basis, and shall pay INVESCO to such extent, to enable INVESCO at
its discretion to engage over a rolling twelve-month period (or the rolling
twenty-four month period specified below) in the activities and provide the
services specified in paragraph (2) above, an amount computed at an annual
rate of 0.25 of 1% of the average daily net assets of the Fund during the
month. The amount paid by the Fund under the Plan and Agreement is
calculated on the amount of new assets (new sales of shares, exchanges into
the Fund, and reinvestments of dividends and capital gain distributions) of
the Fund after -------------------, 1998, regardless of any redemptions or
capital appreciation or depreciation after such date. INVESCO shall not be
entitled hereunder to payment for overhead expenses (overhead expenses
defined as customary overhead not including the --- costs of INVESCO's
personnel whose primary responsibilities involve marketing of the INVESCO
Funds). Payments by the Fund hereunder, for any month, may be used to
compensate INVESCO for: (a) activities engaged in and services provided by
INVESCO during the rolling twelve-month period in which that month falls,
or (b) to the extent permitted by applicable law, for any month during the
first twenty-four months following a Fund's commencement of operations,
activities engaged in and services provided by INVESCO during the rolling
twenty-four month period in which that month falls, and any obligations
incurred by INVESCO in excess of the limitation described above shall not
<PAGE>
be paid for out of Fund assets. The Fund shall not be authorized to expend,
for any month, a greater percentage of its assets to pay INVESCO for
activities engaged in and services provided by INVESCO during the rolling
twenty-four month period referred to above than it would otherwise be
authorized to expend out of its assets to pay INVESCO for activities
engaged in and services provided by INVESCO during the rolling twelve-month
period referred to above. No payments will be made by the Company hereunder
after the date of termination of the Plan and Agreement.
5. To the extent that obligations incurred by INVESCO out of its own
resources to finance any activity primarily intended to result in the sale
of shares of the Fund, pursuant to this Plan and Agreement or otherwise,
may be deemed to constitute the indirect use of Fund assets, such indirect
use of Fund assets is hereby authorized in addition to, and not in lieu of,
any other payments authorized under this Plan and Agreement.
6. The Treasurer of INVESCO shall provide to the board of directors of
the Company, at least quarterly, a written report of all moneys spent by
INVESCO on the activities and services specified in paragraph (2) above
pursuant to the Plan and Agreement. Each such report shall itemize the
activities engaged in and services provided by INVESCO to a Fund as
authorized by the penultimate sentence of paragraph (4) above. Upon
request, but no less frequently than annually, INVESCO shall provide to the
board of directors of the Company such information as may reasonably be
required for it to review the continuing appropriateness of the Plan and
Agreement.
7. This Plan and Agreement shall each become effective immediately
upon approval by a vote of a majority of the outstanding voting securities
of the Company as defined in the Act, and shall continue in effect until
[--------------], 1998 unless terminated as provided below. Thereafter, the
Plan and Agreement shall continue in effect from year to year, provided
that the continuance of each is approved at least annually by a vote of the
board of Directors of the Company, including a majority of the
Disinterested Directors, cast in person at a meeting called for the purpose
of voting on such continuance. The Plan may be terminated at any time,
without penalty, by the vote of a majority of the Disinterested Directors
or by the vote of a majority of the outstanding voting securities of the
Fund. INVESCO, or the Company, by vote of a majority of the Disinterested
Directors or of the holders of a majority of the outstanding voting
securities of the Fund, may terminate the Agreement under this Plan as to
the Fund, without penalty, upon 30 days' written notice to the other party.
In the event that neither INVESCO nor any affiliate of INVESCO serves the
Company as investment adviser, the agreement with INVESCO pursuant to this
Plan shall terminate at such time. The board of directors may determine to
approve a continuance of the Plan, but not a continuance of the Agreement,
hereunder.
<PAGE>
8. So long as the Plan remains in effect, the selection and nomination
of persons to serve as directors of the Company who are not "interested
persons" of the Company shall be committed to the discretion of the
directors then in office who are not "interested persons" of the Company.
However, nothing contained herein shall prevent the participation of other
persons in the selection and nomination process, provided that a final
decision on any such selection or nomination is within the discretion of,
and approved by, a majority of the directors of the Company then in office
who are not "interested persons" of the Company.
9. This Plan may not be amended to increase the amount to be spent by
the Fund hereunder without approval of a majority of the outstanding voting
securities of the Fund. All material amendments to the Plan and Agreement
must be approved by the vote of the board of directors of the Company,
including a majority of the Disinterested Directors, cast in person at a
meeting called for the purpose of voting on such amendment.
10. To the extent that this Plan and Agreement constitutes a Plan of
Distribution adopted pursuant to Rule 12b-1 under the Act it shall remain
in effect as such, so as to authorize the use by the Fund of its assets in
the amounts and for the purposes set forth herein, notwithstanding the
occurrence of an "assignment," as defined by the Act and the rules
thereunder. To the extent it constitutes an agreement with INVESCO pursuant
to a plan, it shall terminate automatically in the event of such
"assignment." Upon a termination of the agreement with INVESCO, the Fund
may continue to make payments pursuant to the Plan only upon the approval
of a new agreement under this Plan and Agreement, which may or may not be
with INVESCO, or the adoption of other arrangements regarding the use of
the amounts authorized to be paid by the Fund hereunder, by the Company's
board of directors in accordance with the procedures set forth in paragraph
7 above.
11. The Company shall preserve copies of this Plan and Agreement and
all reports made pursuant to paragraph 6 hereof, together with minutes of
all board of directors meetings at which the adoption, amendment or
continuance of the Plan were considered (describing the factors considered
and the basis for decision), for a period of not less than six years from
the date of this Plan and Agreement, or any such reports or minutes, as the
case may be, the first two years in an easily accessible place.
<PAGE>
12. This Plan and Agreement shall be construed in accordance with the
laws of the State of Colorado and applicable provisions of the Act. To the
extent the applicable laws of the State of Colorado, or any 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
Plan and Agreement on the --th day of -----------, 1998.
INVESCO DIVERSIFIED FUNDS, INC.
By:
-------------------------------
Dan J. Hesser, President
ATTEST:
--------------------------
Glen A. Payne, Secretary
INVESCO DISTRIBUTORS, INC.
By:
--------------------------------
Ronald L. Grooms,
Senior Vice President
ATTEST:
--------------------------
Glen A. Payne, Secretary
<PAGE>
INVESCO DIVERSIFIED FUNDS, INC.
INVESCO Small Company Value Fund
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS
May 6, 1998
The undersigned hereby appoints Fred A. Deering, Dan J. Hesser and Glen A.
Payne, and each of them, proxy for the undersigned, with the power of
substitution, to vote with the same force and effect as the undersigned at the
Special Meeting of the Shareholders of the INVESCO Small Company Value Fund (the
"Fund") of INVESCO Diversified Funds, Inc., to be held at the Hyatt Regency Tech
Center, 7800 E. Tufts Avenue, Denver, Colorado 80237, on Wednesday, May 6, 1998
at 10:00 a.m. (Mountain Time) and at any adjournment thereof, upon the matters
set forth below, all in accordance with, and as more fully described in, the
Notice of Special Meeting and Proxy Statement, dated March 30, 1998, receipt of
which is hereby acknowledged.
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the meeting or any adjournment thereof.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholders. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" PROPOSAL 1.
TO BE SURE YOU ARE REPRESENTED, PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY IN
THE ACCOMPANYING ENVELOPE AS SOON AS POSSIBLE. THANK YOU.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: ------------
KEEP THIS PORTION FOR YOUR RECORDS
- -------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED
INVESCO DIVERSIFIED FUNDS, INC.
INVESCO Small Company Value Fund
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES, WHICH RECOMMENDS A VOTE "FOR":
Please sign exactly as name appears hereon. If stock is held in the name of
joint owners, each should sign. Attorneys-in-fact, executors, administrators,
etc. should so indicate. If shareholder is a corporation or partnership, please
sign in full corporate or partnership name by authorized person.
Vote on Proposal For Against Abstain
1. Proposal to approve a Plan and Agreement of --- --- ---
Distribution (the "Plan") for the Fund.
- ---------------------------------- -------------------------------------------
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
