PROSPECTUS
November 30, 1995
INVESCO Balanced Fund (the "Fund") seeks to achieve a high total return on
investment through capital appreciation and current income. The Fund invests in
a combination of common stocks (normally 50% to 70% of total assets) and
fixed-income securities (normally 25% or more).
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 November 30, 1995, has been filed with the Securities and
Exchange Commission, and is incorporated by reference into this prospectus. To
obtain a free copy, write to INVESCO Funds Group, Inc., P.O. Box 173706, Denver,
Colorado 80217-3706; or call 1-800-525-8085.
TABLE OF CONTENTS Page
ESSENTIAL INFORMATION....................................................... 2
ANNUAL FUND EXPENSES........................................................ 3
FINANCIAL HIGHLIGHTS........................................................ 4
INVESTMENT OBJECTIVE AND STRATEGY........................................... 5
INVESTMENT POLICIES AND RISKS............................................... 5
THE FUND AND ITS MANAGEMENT................................................. 7
FUND PRICE AND PERFORMANCE.................................................. 9
HOW TO BUY SHARES........................................................... 10
FUND SERVICES............................................................... 12
HOW TO SELL SHARES.......................................................... 12
TAXES, DIVIDENDS, AND CAPITAL GAIN DISTRIBUTIONS............................ 13
ADDITIONAL INFORMATION...................................................... 14
<PAGE>
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>
ESSENTIAL INFORMATION
Investment Objective And Strategy. Balanced Fund seeks to achieve its
objective - a high total return on investment through capital appreciation and
current income - by investing in a mixture of common stocks and fixed-income
securities, primarily debt obligations issued by the U.S. government and its
agencies or instrumentalities or investment grade corporate bonds. There is no
guarantee that the Fund will meet its objective. See "Investment Objective And
Strategy."
The Fund is Designed For: Investors seeking a combination of current
income and capital growth. While not intended as a complete investment program,
the Fund may be a valuable element of your investment portfolio. You also may
wish to consider the Fund as part of a Uniform Gift/Transfer To Minors Account
or systematic investing strategy. The Fund may be a suitable investment for many
types of retirement programs, including IRA, SEP-IRA, SARSEP, 401(k), Profit
Sharing, Money Purchase Pension, and 403(b) plans.
Time Horizon. Because the value of its holdings varies, the Fund's price
per share will fluctuate. Investors should consider this a medium- to long-term
investment.
Risks. The Fund's investments in fixed-income securities are subject to
credit risk and market risk. Its returns on foreign investments may be
influenced by currency fluctuations and other risks of investing overseas. The
Fund may experience rapid portfolio turnover, which may result in higher
brokerage commissions and the acceleration of taxable capital gains. See
"Investment Policies and Risks."
Organization and Management. The Fund is a series of INVESCO Multiple Asset
Funds, Inc. (the Company), a diversified, managed, no- load mutual fund. The
Fund is owned by its shareholders. It employs INVESCO Funds Group, Inc. (IFG),
founded in 1932, to serve as investment adviser, administrator, distributor, and
transfer agent. INVESCO Trust Company (INVESCO Trust), founded in 1969, serves
as sub-adviser.
The Fund is co-managed by INVESCO Vice President Brian F. Kelly and Senior
Vice President Donovan J. Paul. Mr. Kelly has managed the equity investments
since 1993; he is a Certified Public Accountant. Mr. Paul began managing the
fixed-income holdings in 1994; he is a Chartered Financial Analyst and Certified
Public Accountant. See "The Fund And Its Management."
IFG and INVESCO Trust are part of a global firm that managed approximately
$74 billion as of June 30, 1995. The parent company, INVESCO PLC, is based in
London, with money managers located in Europe, North America and the Far East.
<PAGE>
This Fund Offers All of the Following Services at No Charge:
Telephone purchases
Telephone exchanges
Telephone redemptions
Automatic reinvestment of distributions
Regular investment plans, such as EasiVest (the Fund's automatic monthly
investment program), Direct Payroll Purchase, and Automatic Monthly
Exchange Periodic withdrawal plans
See "How To Buy Shares" and "How To Sell Shares."
Minimum Initial Investment: $1,000, which is waived for regular investment
plans, including EasiVest and Direct Payroll Purchase.
Minimum Subsequent Investment: $50 (Minimums are lower for certain
retirement plans.)
ANNUAL FUND EXPENSES
The Fund is no-load; there are no fees to purchase, exchange or redeem
shares. The Fund is authorized to pay a Rule 12b-1 distribution fee of one
quarter of one percent of the Fund's average net assets each year. (See "How To
Buy Shares -- Distribution Expenses.")
Like any company, the Fund has operating expenses, such as portfolio
management, accounting, shareholder servicing, maintenance of shareholder
accounts, and other expenses. These expenses are paid from the Fund's assets.
Lower expenses therefore benefit investors by increasing the Fund's total
return.
We calculate annual operating expenses as a percentage of the Fund's
average annual net assets. To keep expenses competitive, IFG and INVESCO Trust
voluntarily reimburse the Fund for amounts in excess of 1.25% of average net
assets.
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fee 0.60%
12b-1 Fees 0.25%
Other Expenses (after absorbed expenses)(1) 0.40%
Total Fund Operating Expenses (after absorbed expenses)(1) 1.25%
(1) In the absence of the voluntary expense limitation, the Fund's "Other
Expenses" and "Total Fund Operating Expenses" would have been 0.74% and 1.59%,
respectively, based on the Fund's actual expenses for the fiscal year ended July
31, 1995.
<PAGE>
Example
A shareholder would pay the following expenses on a $1,000 investment for
the periods shown, assuming a hypothetical 5% annual return and redemption at
the end of each time period. (Of course, actual operating expenses are paid from
the Fund's assets, and are deducted from the amount of income available for
distribution to shareholders; they are not charged directly to shareholder
accounts.)
1 Year 3 Years 5 Years 10 Years
$13 $40 $69 $152
The purpose of this table is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly. THE EXAMPLE SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE OR EXPENSES,
AND ACTUAL ANNUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
For more information on the Fund's expenses, see "The Fund and Its Management"
and "How to Buy Shares -Distribution Expenses."
Since the Fund pays a distribution fee, investors who own Fund shares for
a long period of time may pay more than the economic equivalent of the maximum
front-end sales charge permitted for mutual funds by the National Association of
Securities Dealers, Inc.
<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 independent accountant's report appearing
in the Fund's 1995 Annual Report to Shareholders which is incorporated by
reference into the Statement of Additional Information, both of which are
available without charge by contacting INVESCO Funds Group, Inc. at the address
or telephone number on the cover of this Prospectus. The Annual Report also
contains more information about the Fund's performance.
Year Period
Ended Ended
July 31 July 31
------------ ------------
1995 1994^
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 10.30 $10.00
------------ ------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.29 0.12
Net Gain on Securities
(Both Realized and Unrealized) 2.03 0.30
------------ ------------
Total from Investment Operations 2.32 0.42
------------ ------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.29 0.12
Distributions from Capital Gains 0.25 0.00
------------ ------------
Total Distributions 0.54 0.12
------------ ------------
Net Asset Value -- End of Period $12.08 $10.30
============ ============
TOTAL RETURN 22.97% 4.16%*
RATIOS
Net Assets -- End of Period ($000 Omitted) $37,224 $4,252
Ratio of Expenses to Average Net Assets# 1.25% 1.25%~
Ratio of Net Investment Income to
Average Net Assets# 3.12% 2.87%~
Portfolio Turnover Rate 255% 61%*
^ From December 1, 1993, commencement of operations, to July 31, 1994.
<PAGE>
* These amounts are 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
Trust for the year ended July 31, 1995 and the period ended July 31, 1994. If
such expenses had not been voluntarily absorbed, the ratio of expenses to
average net assets would have been 1.59% and 4.37% (annualized),
respectively, and the ratio of net investment income to average net assets
would have been 2.77% and (0.25%) (annualized), respectively.
~ Annualized
INVESTMENT OBJECTIVE AND STRATEGY
INVESCO Balanced Fund is a diversified mutual fund that seeks to achieve a
high total return on investment through capital appreciation and current income.
This investment objective is fundamental and may not be changed without the
approval of the Fund's shareholders. The Fund pursues this objective by normally
investing 50% to 70% of its total assets in common stocks, and the remainder in
fixed-income securities, including cash reserves. At least 25% of the Fund's
assets normally will be invested in fixed income securities issued by the U.S.
government, its agencies and instrumentalities, or in investment grade corporate
bonds. This approach is designed to cushion a shareholder's investment from the
volatility typically associated with mutual funds that invest primarily in
common stocks. The capital appreciation component of total return includes both
realized and unrealized appreciation. There is no guarantee that the Fund will
meet its objective.
For the equity holdings, we look for companies with better-than- average
earnings growth potential, as well as companies within industries we've
identified as well-positioned for the current and expected economic climate.
Because current income is a component of total return, we also consider dividend
payout records. Most of these holdings are traded on national stock exchanges or
in the over-the-counter (OTC) market; we may also take positions in securities
traded on regional or foreign exchanges. In addition to common stocks, the Fund
also may hold preferred stocks and securities convertible into common stock.
For the fixed-income portion of the holdings, we select only obligations
of the U.S. government, its agencies and instrumentalities or investment grade
corporate bonds. These securities tend to offer lower income than bonds of lower
quality, but are more shielded from credit risk. Obligations issued by U.S.
government agencies or instrumentalities may include some supported only by the
credit of the issuer rather than backed by the full faith and credit of the U.S.
government. The Fund may hold securities of any maturity (from less than one
year up to 30 years), with the average maturity varying depending upon economic
<PAGE>
and market conditions. The Fund also may hold cash and cash equivalent
securities as cash reserves.
The amount invested in stocks, bonds and cash securities may be varied
from time to time depending upon Fund Management's assessment of business,
economic and market conditions. When we believe conditions are adverse, the Fund
may assume a defensive position by temporarily investing up to 100% of its
assets in U.S. government and agency securities, investment grade corporate
bonds, or cash securities, such as domestic certificates of deposit and bankers'
acceptances, commercial paper and repurchase agreements, in an attempt to
protect principal value until conditions stabilize.
INVESTMENT POLICIES AND RISKS
Investors generally should expect to see their price per share and income
levels vary with movements in the stock and fixed-income markets, changes in
economic conditions and other factors. The Fund invests in many different
companies in a variety of securities and industries; this diversification may
help reduce the Fund's overall exposure to investment and market risks, but
cannot eliminate these risks.
Debt Securities. When we assess an issuer's ability to meet its interest
rate obligations and repay its debt when due, we are referring to "credit risk."
Debt obligations are rated based on their estimated credit risk by independent
services such as Standard & Poor's Rating Group (S&P) or Moody's Investors
Service, Inc. (Moody's). "Market risk" for debt securities principally refers to
sensitivity to changes in interest rates: for instance, when interest rates go
up, the market value of a bond issued previously generally declines; on the
other hand, when interest rates go down, bonds generally see their prices
increase.
The lower a bond's quality, the more it is subject to credit risk and
market risk and the more speculative it becomes; this is also true of most
unrated debt securities. The Fund seeks to reduce these risks by investing only
in investment grade debt securities (those rated AAA, AA, A or BBB by S&P or
Aaa, Aa, A or Baa by Moody's or, if unrated, are judged by Fund Management to be
of equivalent quality). These bonds enjoy strong to adequate capacity to pay
principal and interest. Securities rated BBB or Baa are considered to be of
medium grade and may have speculative characteristics. While Fund Management
continuously monitors all of the debt securities in the Fund's portfolio for the
issuer's ability to make required principal and interest payments and other
quality factors, it may retain a bond whose rating is changed to one below the
minimum rating required for purchase of the security.
The Fund's investments in debt securities may include investments in zero
coupon bonds issued by the U.S. government, its agencies or instrumentalities,
step-up bonds, mortgage-backed securities and asset- backed securities. Zero
coupon bonds (zeros)
<PAGE>
make no periodic interest payments. Instead, they are sold at a discount
from their face value. The buyer of the zero receives the rate of return by the
gradual appreciation in the price of the security, which is redeemed at face
value at maturity. Step-up bonds initially make no (or low) cash interest
payments, but begin paying interest (or a higher rate of interest) at a fixed
time after issuance of the bond. Being extremely responsive to changes in
interest rates, the market prices of both zeros and step-up bonds may be more
volatile than other bonds. The Fund may be required to distribute income
recognized on these bonds, even though no cash interest payments may be
received, which could reduce the amount of cash available for investment by the
Fund.
Mortgage-backed securities represent interests in pools of mortgages.
Asset-backed securities generally represent interests in pools of consumer
loans. Both usually are structured as pass-through securities. Interest and
principal payments ultimately depend on payment of the underlying loans,
although the securities may be supported, at least in part, by letters of credit
or other credit enhancements or, in the case of mortgage-backed securities,
guarantees by the U.S. government, its agencies or instrumentalities. The
underlying loans are subject to prepayments that may shorten the securities'
weighted average lives and may lower their returns.
Foreign Securities. Up to 25% of the Fund's total assets, measured at the
time of purchase, may be invested directly in foreign equity or corporate debt
securities. Securities of Canadian issuers and American Depository Receipts
("ADRs") are not subject to this 25% limitation. ADRs are receipts representing
shares of a foreign corporation held by a U.S. bank that entitle the holder to
all dividends and capital gains. ADRs are denominated in U.S. dollars and trade
in the U.S. securities markets.
For U.S. investors, the returns on foreign securities are influenced not
only by the returns on the foreign investments themselves, but also by currency
fluctuations. That is, when the U.S. dollar generally rises against foreign
currencies, returns on foreign securities for a U.S. investor may decrease. By
contrast, in a period when the U.S. dollar generally declines, those returns may
increase.
Other aspects of international investing to consider include:
-less publicly available information than is generally available about U.S.
issuers;
-differences in accounting, auditing and financial reporting standards;
-generally higher commission rates on foreign portfolio transactions and
longer settlement periods;
<PAGE>
-smaller trading volumes and generally lower liquidity of foreign stock
markets, which may cause greater price volatility; and
-investments in certain countries may be subject to foreign withholding
taxes, which may reduce dividend income or capital gains payable to
shareholders.
There is also the possibility of expropriation or confiscatory taxation;
adverse changes in investment or exchange control regulations; political
instability; potential restrictions on the flow of international capital; and
the possibility of the Fund experiencing difficulties in pursuing legal remedies
and collecting judgments.
ADRs are subject to some of the same risks as direct investments in
foreign securities, including the risk that material information about the
issuer may not be disclosed in the United States and the risk that currency
fluctuations may adversely affect the value of the ADR.
Repurchase Agreements. The Fund may invest money, for as short a time as
overnight, using repurchase agreements ("repos"). With a repo, the Fund buys a
debt instrument, agreeing simultaneously to sell it back to the prior owner at
an agreed-upon price. The Fund could incur costs or delays in seeking to sell
the instrument if the prior owner defaults on its repurchase obligation. To
reduce that 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).
These agreements are entered into only with member banks of the Federal Reserve
System, registered broker-dealers, and registered U.S. government securities
dealers that are deemed creditworthy under standards established by the Fund's
board of directors.
Futures, Options and Other Derivative Instruments. In order to hedge its
portfolio, the Fund may purchase and write options on securities (including
index options and options on foreign securities), and may invest in futures
contracts for the purchase or sale of foreign currencies, fixed-income
securities and instruments based on financial indices (collectively, "futures
contracts"), options on futures contracts and forward contracts. These practices
and their risks are discussed under "Investment Policies and Restrictions" in
the Statement of Additional Information.
Other Securities. The Fund may invest in illiquid securities, including
securities that are subject to restrictions on resale and securities that are
not readily marketable, and in restricted securities that may be resold to
institutional investors, known as "Rule 144A Securities." The Fund also may
purchase and sell securities on a when- issued or delayed-delivery basis -- that
is, with settlement taking place in the future. In addition, the Fund
<PAGE>
may seek to earn additional income by lending securities to qualified brokers,
dealers, banks, or other financial institutions on a fully- collateralized
basis. For more information concerning these securities and investment
techniques, see "Investment Policies and Restrictions" in the Statement of
Additional Information.
Portfolio Turnover. There are no limitations regarding portfolio turnover
for either the equity or fixed income portions of the Fund's portfolio. Although
the Fund does not trade for short-term profits, securities may be sold without
regard to the time they have been held when, in the opinion of Fund Management,
investment considerations warrant such action. The Fund's portfolio turnover
rate therefore may be higher than other mutual funds with similar objectives.
Increased portfolio turnover may result in greater brokerage commissions and
acceleration of capital gains which are taxable when distributed to
shareholders. The Statement of Additional Information includes an expanded
discussion of the Fund's portfolio turnover rate, its brokerage practices and
certain federal income tax matters.
For a further discussion of risks associated with an investment in the
Fund, see "Investment Policies and Restrictions" and "Investment Practices" in
the Statement of Additional Information.
Investment Restrictions. Certain restrictions, which are set forth in the
Statement of Additional Information, may not be altered without the approval of
the Fund's shareholders. For example, with respect to 75% of its total assets,
the Fund limits to 5% the portion of its total assets that may be invested in
any one issuer (other than cash items and U.S. government securities). In
addition, the Fund limits to 25% the portion of its total assets that may be
invested in any one industry (other than U.S. government securities). Other
fundamental restrictions prohibit the Fund from lending more than 33-1/3% of its
total assets to other parties and from borrowing money, except that the Fund may
borrow amounts up to 33-1/3% of its total assets for temporary or emergency
purposes. Except where indicated to the contrary, the investment policies
described in this prospectus are not considered fundamental and may be changed
without a vote of the Fund's shareholders.
THE FUND AND ITS MANAGEMENT
The Company is a no-load mutual fund, registered with the Securities and
Exchange Commission as an open-end, diversified, management investment company.
It was incorporated on August 19, 1993, under the laws of Maryland.
The Company's board of directors has responsibility for overall supervision
of the Fund, and reviews the services provided by the adviser and sub-adviser.
Under an agreement with the Fund, INVESCO Funds Group, Inc. (IFG), 7800 E. Union
Avenue, Denver,
<PAGE>
Colorado 80237, serves as the Fund's investment manager; it is primarily
responsible for providing the Fund with various administrative services. IFG's
wholly-owned subsidiary, INVESCO Trust Company (INVESCO Trust), is the Fund's
sub-adviser and is primarily responsible for managing the Fund's investments.
Together, IFG and INVESCO Trust constitute "Fund Management."
Brian Kelly has served as co-portfolio manager for the Fund since 1993 and
is primarily responsible for the day-to-day management of the Fund's equity
holdings. His recent career includes these highlights: portfolio manager of the
INVESCO Strategic Utilities Portfolio and INVESCO VIF-Utilities Portfolio; vice
president (1994 to present) and portfolio manager (1993 to present) of INVESCO
Trust. Formerly (1986 to 1993), senior equity investment analyst with Sears
Investment Management Company. B.A., University of Notre Dame; M.B.A. and J.D.,
University of Iowa. He is a Certified Public Accountant.
Donovan J. (Jerry) Paul has served as co-portfolio manager for the Fund
since 1994, focusing on fixed-income investments. His recent career includes
these highlights: portfolio manager of INVESCO Select Income Fund, INVESCO High
Yield Fund, and INVESCO VIF-High Yield Portfolio; co- portfolio manager of
INVESCO Industrial Income Fund and INVESCO VIF- Industrial Income Portfolio;
portfolio manager and senior vice president (1994 to present) of INVESCO Trust.
Formerly, senior vice president and director of fixed-income research (1989 to
1992) and portfolio manager (1987 to 1992) with Stein, Roe & Farnham Inc, and
president (1993 to 1994) of Quixote Investment Management, Inc. B.B.A.,
University of Iowa; M.B.A., University of Northern Iowa. He is a Chartered
Financial Analyst and Certified Public Accountant.
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 Fund Management's personnel to conduct
their personal investment activities in a manner that Fund Management believes
is not detrimental to the Fund or Fund Management's other advisory clients. See
the Statement of Additional Information for more detailed information.
The Fund pays IFG a monthly management fee which is based upon a
percentage of the Fund's average net assets determined daily. The management fee
is computed at the annual rate of 0.60% on the first $350 million of the Fund's
average net assets; 0.55% on the next $350 million of the Fund's average net
assets; and 0.50% on the Fund's average net assets over $700 million. For the
fiscal year ended July 31, 1995, investment advisory fees paid by the Fund
amounted to 0.60% of the Fund's average net assets. Out of this fee, IFG paid an
amount equal to 0.29% of the Fund's average net assets to INVESCO Trust as a
sub- advisory fee. No fee is paid by the Fund to INVESCO Trust.
<PAGE>
Under a Transfer Agency Agreement, IFG acts as registrar, transfer agent,
and dividend disbursing agent for the Fund. The Fund pays an annual fee of
$14.00 per shareholder account or omnibus account participant for these
services. Registered broker-dealers, third party administrators of tax-qualified
retirement plans and other entities, including affiliates of IFG, may provide
equivalent services to the Fund. In these cases, IFG may pay, out of the fee it
receives from the Fund, an annual sub-transfer agency or record-keeping fee to
the third party.
In addition, under an Administrative Services Agreement, IFG handles
additional administrative, record-keeping, and internal sub- accounting services
for the Fund. For the fiscal year ended July 31, 1995, the Fund paid IFG a fee
for these services equal to 0.07% of the Fund's average net assets.
The Fund's expenses, which are accrued daily, are deducted from total
income before dividends are paid. Total expenses of the Fund for the fiscal year
ended July 31, 1995, including investment management fees (but excluding
brokerage commissions, which are a cost of acquiring securities), amounted to
1.25% of the Fund's average net assets. Certain Fund expenses are absorbed
voluntarily by IFG and INVESCO Trust 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. The commitment may be changed following
consultation with the Company's board of directors. In the absence of this
voluntary expense limitation, the Fund's total operating expenses for the year
ended July 31, 1995, would have been 1.59% of the Fund's average net assets.
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of
their financial responsibility coupled with their ability to effect transactions
at the best available prices. As discussed under "How to Buy Shares --
Distribution Expenses," the Fund may market its shares through intermediary
brokers or dealers that have entered into Dealer Agreements with IFG, as the
Fund's Distributor. The Fund may place orders for portfolio transactions with
qualified broker/dealers which recommend the Fund, or sell shares of the Fund,
to clients, or act as agent in the purchase of Fund shares for clients, if Fund
Management believes that the quality of the execution of the transaction and
level of commission are comparable to those available from other qualified
brokerage firms. For further information, see "Investment Practices -- Placement
of Portfolio Brokerage" in the Statement of Additional Information.
The parent company for IFG and INVESCO Trust is INVESCO PLC, a publicly
traded holding company whose subsidiaries provide investment services around the
world. IFG was established in 1932 and, as of July 31, 1995, managed 14 mutual
funds, consisting of 38 separate portfolios, with combined assets of
approximately $10.1 billion on behalf of over 790,000 shareholders. INVESCO
Trust
<PAGE>
(founded in 1969) served as adviser or sub-adviser to 41 investment portfolios
as of July 31, 1995, including 27 portfolios in the INVESCO group. These 41
portfolios had aggregate assets of approximately $9.7 billion as of July 31,
1995. In addition, INVESCO Trust provides investment management services to
private clients, including employee benefit plans that may be invested in a
collective trust sponsored by INVESCO Trust.
FUND PRICE AND PERFORMANCE
Determining Price. The value of your investment in the Fund will vary
daily. The price per share is also known as the Net Asset Value (NAV). IFG
prices the Fund every day that the New York Stock Exchange is open, as of the
close of regular trading (normally, 4:00 p.m., New York time). NAV is calculated
by adding together the current market value of all of the Fund's assets,
including accrued interest and dividends; then subtracting liabilities,
including accrued expenses; and finally dividing that dollar amount by the total
number of shares outstanding.
Performance Data. To keep shareholders and potential investors informed,
we will occasionally advertise the Fund's total return for one-, five-, and
ten-year periods (or since inception). Total return figures show the rate of
return on a $1,000 investment in the Fund, assuming reinvestment of all
dividends and capital gain distributions for the periods cited. Cumulative total
return shows the actual rate of return on an investment; average annual total
return represents the average annual percentage change in the value of an
investment. Both cumulative and average annual total returns tend to "smooth
out" fluctuations in the Fund's investment results, not showing the interim
variations in performance over the periods cited. More information about the
Fund's recent and historical performance is contained in the Fund's Annual
Report to shareholders. You can get a free copy by calling or writing to IFG
using the phone number or address on the cover of this prospectus.
When we quote mutual fund rankings published by Lipper Analytical
Services, Inc., we may compare the Fund to others in its category of Balanced
Funds, as well as the broad-based Lipper general fund groupings. These rankings
allow you to compare the Fund to its peers. Other independent financial media
also produce performance- or service- related comparisons, which you may see in
our promotional materials. For more information see "Fund Performance" in the
Statement of Additional Information.
Performance figures are based on historical investment results and are not
intended to suggest future performance.
HOW TO BUY SHARES
The following chart shows several convenient ways to invest in the Fund.
Your new Fund shares will be priced at the NAV next determined after your order
is received in proper form. There is no charge to invest, exchange, or redeem
shares when you make
<PAGE>
transactions directly through IFG. However, if you invest in the Fund through a
securities broker, you may be charged a commission or transaction fee. For all
new accounts, please send a completed application form. Please specify which
Fund you wish to purchase.
Fund Management reserves the right to reduce or waive the minimum
investment requirements in its sole discretion, where it determines this action
is in the best interests of the Fund. Further, Fund Management reserves the
right in its sole discretion to reject any order for the purchase of Fund shares
(including purchases by exchange) when, in its judgment, such rejection is in
the Fund's best interests.
================================================================================
Method Investment Minimum Please Remember
- --------------------------------------------------------------------------------
By Check $1,000 for regular If your check does
Mail to: account; not clear, you will
INVESCO Funds $250 for an be responsible for
Group, Inc. Individual any related loss
P.O. Box 173706 Retirement Account; the Fund or IFG
Denver, CO 80217- $50 minimum for incurs. If you are
3706. each subsequent already a
Or you may send investment. shareholder in the
your check by INVESCO funds, the
overnight courier Fund may seek
to: 7800 E. Union reimbursement from
Ave., your existing
Denver, CO 80237. account(s) for any
loss incurred.
- --------------------------------------------------------------------------------
By Telephone or $1,000. Payment must be
Wire received within 3
Call 1-800-525-8085 business days, or
to request your the transaction may
purchase. Then send be cancelled. If a
your check by telephone purchase
overnight courier is cancelled due to
to our street nonpayment, you
address: will be responsible
7800 E. Union Ave., for any related
Denver, CO 80237. loss the Fund or
Or you may transmit IFG incurs. If you
your payment by are already a
bank wire (call IFG shareholder in the
for instructions). INVESCO funds, the
Fund may seek
reimbursement from your
existing account(s) for
any loss incurred.
<PAGE>
- --------------------------------------------------------------------------------
With EasiVest or $50 per month for Like all regular
Direct Payroll EasiVest; $50 per investment plans,
Purchase pay period for neither EasiVest
You may enroll on Direct Payroll nor Direct Payroll
the fund Purchase. You may Purchase ensures a
application, or start or stop your profit or protects
call us for the regular investment against loss in a
correct form and plan at any time, falling market.
more details. with two weeks' Because you'll
Investing the same notice to IFG. invest continually,
amount on a monthly regardless of
basis allows you to varying price
buy more shares levels, consider
when prices are low your financial
and fewer shares ability to keep
when prices are buying through low
high. This "dollar- price levels. And
cost averaging" may remember that you
help offset market will lose money if
fluctuations. Over you redeem your
a period of time, shares when the
your average cost market value of all
per share may be your shares is less
less than the than their cost.
actual average
price per share.
- --------------------------------------------------------------------------------
By PAL $1,000. Be sure to write
Your "Personal down the confirmation
Account Line" is number provided by Pal.
available for Payment must be received
subsequent within 3 business days,
purchases and or the transaction may
exchanges 24-hours be cancelled. If a
a day. Simply call telephone purchase is
1-800-424-8085. cancelled due to non-
payment, you will be
responsible for any
related loss the Fund or
IFG incurs. If you are
already a shareholder in
the INVESCO funds, the
Fund may seek reimburse-
ment from your existing
account(s) for any loss
incurred.
<PAGE>
- --------------------------------------------------------------------------------
By Exchange $1,000 to open a See "Exchange
Between this and new account; $50 Privilege" page 10.
another of the for written
INVESCO funds. Call requests to
1-800-525-8085 for purchase additional
prospectuses of other shares for an
INVESCO funds. You existing account.
may also establish an (The exchange minimum
Automatic Monthly is $250 for exchanges
Exchange service requested by telephone.)
between two INVESCO
funds; call IFG for
further details and
the correct form.
Exchange Privilege. You may exchange your shares in this Fund for those in
another INVESCO fund, on the basis of their respective net asset values at the
time of the exchange. Before making any exchange, be sure to review the
prospectuses of the funds involved and consider their differences.
Please note these policies regarding exchanges of fund shares:
1) The fund accounts must be identically registered.
2) You may make four exchanges out of each fund during each calendar year.
3) An exchange is the redemption of shares from one fund followed by the
purchase of shares in another. Therefore, any gain or loss realized on the
exchange is recognizable for federal income tax purposes (unless, of course,
your account is tax-deferred).
4) The Fund reserves the right to reject any exchange request, or to
modify or terminate exchange privileges, in the best interests of the Fund and
its shareholders. Notice of all such modifications or termination will be given
at least 60 days prior to the effective date of the change in privilege, except
for unusual instances (such as when redemptions of the exchanged shares are
suspended under Section 22(e) of the Investment Company Act of 1940, or when
sales of the fund into which you are exchanging are temporarily stopped).
Distribution Expenses. The Fund is authorized under a Plan and Agreement of
Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Plan") to use its assets to finance certain activities relating to the
distribution of shares. These expenditures may include 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 IFG-affiliated
companies, to obtain various distribution-related and/or administrative services
<PAGE>
for the Fund. Such services may include, among other things, processing new
shareholder account applications, preparing and transmitting to the Fund's
transfer agent computer-processable tapes of all transactions by customers, and
serving as the primary source of information to customers in answering questions
concerning the Fund and their transactions.
In addition, other reimbursable expenditures include advertising,
preparation and distribution of sales literature, printing and distribution of
prospectuses to prospective investors, public relations efforts, marketing
programs and other services and promotional activities agreed upon from time to
time by the Fund and its board of directors. These services and activities may
be conducted by the staff of IFG or its affiliates or by third parties.
IFG is not entitled to reimbursement for overhead expenses under the Plan,
but may be reimbursed for all or a portion of the compensation paid for salaries
and other employee benefits for IFG personnel whose primary responsibilities
involve marketing shares of the INVESCO funds, including the Fund. Also, any
payments made by the Fund may not be used to finance the distribution of shares
of any other mutual fund advised by IFG. 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.
Under the Plan, the Fund's reimbursement to IFG is limited to an amount
computed at a maximum annual rate of 0.25 of 1% of the Fund's average net
assets. Payments by the Fund under the Plan, for any month, may only be made to
reimburse expenditures incurred during the rolling 12-month period in which that
month falls, although this period is expanded to 24 months for expenses incurred
during the first 24 months of the Fund's operations. Therefore, any reimbursable
expenses incurred by IFG in excess of the limitations described above are not
reimbursable and will be borne by IFG. In addition, IFG may from time to time
make additional payments from its revenues to securities dealers and other
financial institutions that provide distribution-related and/or administrative
services for the Fund. No further payments will be made by the Fund under the
Plan in the event of its termination.
FUND SERVICES
Shareholder Accounts. IFG will maintain a share account that reflects your
current holdings. Share certificates will be issued only upon specific request.
You will have greater flexibility to conduct transactions if you do not request
certificates.
Transaction Confirmations. You will receive detailed confirmations of
individual purchases, exchanges, and redemptions. If you choose certain
recurring transaction plans (for instance, EasiVest), your transactions will be
confirmed on your quarterly Investment Summary.
<PAGE>
Investment Summaries. Each calendar quarter, shareholders receive a
written statement which consolidates and summarizes account activity and value
at the beginning and end of the period for each of their INVESCO funds.
Reinvestment of Distributions. Dividends and capital gain distributions
are automatically invested in additional fund shares at the NAV on the
ex-dividend date, unless you choose to have dividends and/or capital gain
distributions automatically reinvested in another INVESCO fund or paid by check
(minimum of $10.00).
Telephone Transactions. All shareholders may exchange and redeem Fund
shares by telephone, unless they expressly decline these privileges. By signing
the new account Application, a Telephone Transaction Authorization Form, or
otherwise using these privileges, the investor has agreed that, if the Fund has
followed reasonable procedures, such as recording telephone instructions and
sending written transaction confirmations, it will not be liable for following
telephoned instructions that it believes to be genuine. As a result of this
policy, the investor may bear the risk of any loss due to unauthorized or
fraudulent instructions.
Retirement Plans And IRAs. Fund shares may be purchased for Individual
Retirement Accounts (IRAs) and many types of tax-deferred retirement plans. IFG
can supply you with information and forms to establish or transfer your existing
plan or account.
HOW TO SELL SHARES
The following chart shows several convenient ways to redeem your Fund
shares. Shares of the Fund may be redeemed at any time at their current NAV next
determined after a request in proper form is received at the Fund's office. The
NAV at the time of the redemption may be more or less than the price you paid to
purchase your shares, depending primarily upon the Fund's investment
performance.
Please be specific from which fund you wish to redeem shares. Shareholders
have a separate account for each fund in which they invest.
================================================================================
Method Minimum Redemption Please Remember
================================================================================
By Telephone $250 (or, if less, This option is not
Call us toll-free full liquidation of available for
at 1-800-525-8085. the account) for a shares held in
redemption check; Individual
$1,000 for a wire Retirement Accounts
to bank of record. (IRAs).
The maximum amount
which may be
redeemed by
telephone is
generally $25,000.
These telephone
redemption
privileges may be
modified or
terminated in the
future at the
discretion of IFG.
<PAGE>
- --------------------------------------------------------------------------------
In Writing Any amount. The If the shares to be
Mail your request redemption request redeemed are
to INVESCO Funds must be signed by represented by
Group, Inc., all registered stock certificates,
P.O. Box 173706 shareholders(s). the certificates
Denver, CO 80217- Payment will be must be sent to
3706. You may also mailed to your IFG.
send your request address of record,
by overnight or to a pre-
courier to 7800 E. designated bank.
Union Ave., Denver,
CO 80237.
- --------------------------------------------------------------------------------
By Exchange $1,000 to open a See "Exchange
Between this and new account; $50 Privilege," page 10.
another of the for written
INVESCO funds. Call requests to
1-800-525-8085 for purchase additional
prospectuses of shares for an
other INVESCO existing account.
funds. You may also (The exchange
establish an minimum is $250 for
Automatic Monthly exchanges requested
Exchange service by telephone.)
between two INVESCO
funds; call IFG for
further details and
the correct form.
- --------------------------------------------------------------------------------
Periodic Withdrawal $100 per payment, You must have at
Plan on a monthly or least $10,000 total
You may call us to quarterly basis. invested with the
request the The redemption INVESCO funds, with
appropriate form check may be made at least $5,000 of
and more payable to any that total invested
information at 1- party you in the fund from
800-525-8085. designate. which withdrawals
will be made.
- --------------------------------------------------------------------------------
Payment To Third Any amount. All registered
Party owners of the
Mail your request account must sign
to INVESCO Funds the request, with a
Group, Inc., signature guarantee
P.O. Box 173706 from an eligible
Denver, CO 80217- guarantor financial
3706. institution, such
as a commercial
bank or recognized
national or regional
securities firm.
================================================================================
While the Fund will attempt to process telephone redemptions promptly,
there may be times -- particularly in periods of severe economic or market
disruption -- when you may experience delays in redeeming shares by phone.
Payments of redemption proceeds will be mailed within seven days following
receipt of the redemption request in proper form. However, payment may be
postponed under unusual circumstances -- for instance, if normal trading is not
<PAGE>
taking place on the New York Stock Exchange or during an emergency as defined by
the Securities and Exchange Commission. If your shares were purchased by a check
which has not yet cleared, payment will be made promptly upon clearance of the
purchase check (which may take up to 15 days).
If you participate in EasiVest, the Fund's automatic monthly investment
program, and redeem all of the shares in your account, we will terminate any
further EasiVest purchases unless you instruct us otherwise.
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 involuntarily redeem 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>
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.
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 you are subject to
backup withholding for other reasons, you can avoid backup withholding on your
Fund account by ensuring that we have 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 a quarterly basis, at the discretion of the Fund'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 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.
<PAGE>
At the end of each year, information regarding the tax status of dividends
and capital gain distributions is provided to shareholders. Net realized capital
gains are divided into short-term and long-term gains depending 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 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.
We encourage you to consult a tax adviser with respect to these matters.
For further information see "Dividends, Capital Gain Distributions and Taxes" in
the Statement of Additional Information.
<PAGE>
ADDITIONAL INFORMATION
Voting Rights. All shares of the Company have equal voting rights based on
one vote for each share owned. Voting with respect to certain matters, such as
ratification of independent accountants and the election of directors, will be
by all the funds of the Company voting together. In other cases, such as voting
upon an investment advisory contract, voting is on a fund-by-fund basis. To the
extent permitted by law, when not all funds are affected by a matter to be voted
upon, only shareholders of the fund or funds affected by the matter will be
entitled to vote thereon. The Company is not generally required and does not
expect to hold regular annual meetings of shareholders. However, when requested
to do so in writing by the holders of 10% or more of the outstanding shares of
the Company or as may be required by applicable law or the Company's Articles of
Incorporation, the board of directors will call special meetings of
shareholders. Directors may be removed by action of the holders of a majority of
the outstanding shares of the Company. The Fund will assist shareholders in
communicating with other shareholders as required by the Investment Company Act
of 1940.
Master/Feeder Option. As a matter of fundamental policy, 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 substantially the same
fundamental investment objective, policies and limitations. It is expected that
any such investment company would be managed by IFG in substantially the same
manner as the Fund. If permitted by applicable law, any such investment may be
made in the sole discretion of the Company's board of directors without a vote
of the Fund's shareholders. However, shareholders will be given at least 30 days
prior notice of any such investment. Such an investment would be made only if
the board of directors determines it to be in the best interests of the Fund and
its shareholders based on potential cost savings, operational efficiencies or
other factors. No assurance can be given that costs would be materially reduced
if this option were implemented.
<PAGE>
INVESCO BALANCED FUND A no-load mutual fund
seeking capital appreciation and current income.
PROSPECTUS
November 30, 1995
To receive general information and prospectuses on any of the INVESCO
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(R), your 24-hour Personal Account Line (PAL(R)) call:
1-800-424-8085
Or write to:
INVESCO Funds Group, Inc., Distributor
7800 E. Union Avenue
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 East Union Avenue, Lobby Level
<PAGE>
PROSPECTUS
November 30, 1995
INVESCO Multi-Asset Allocation Fund (the "Fund") seeks to achieve a high
total return on investment through capital appreciation and current income. The
Fund invests in six asset classes: stocks of large- capitalization companies,
stocks of small-capitalization companies, equity real estate securities,
international equity securities, fixed-income securities, and cash securities.
Allocating assets among these different classes allows the Fund to take
advantage of attractive investment opportunities in various sectors of the
capital markets, while providing diversification to reduce risk.
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 November 30, 1995, has been filed with the Securities and
Exchange Commission, and is incorporated by reference into this prospectus. To
obtain a free copy, write to INVESCO Funds Group, Inc., P.O. Box 173706, Denver,
Colorado 80217-3706; or call 1-800-525-8085.
TABLE OF CONTENTS Page
ESSENTIAL INFORMATION....................................................... 2
ANNUAL FUND EXPENSES........................................................ 3
FINANCIAL HIGHLIGHTS........................................................ 4
INVESTMENT OBJECTIVE AND STRATEGY........................................... 5
INVESTMENT POLICIES AND RISKS............................................... 7
THE FUND AND ITS MANAGEMENT................................................. 9
FUND PRICE AND PERFORMANCE.................................................. 11
HOW TO BUY SHARES........................................................... 11
FUND SERVICES............................................................... 13
HOW TO SELL SHARES.......................................................... 14
TAXES, DIVIDENDS, AND CAPITAL GAIN DISTRIBUTIONS............................ 15
ADDITIONAL INFORMATION...................................................... 16
<PAGE>
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>
ESSENTIAL INFORMATION
Investment Objective And Strategy. Multi-Asset Allocation Fund pursues its
objective - a high total return on investment through capital appreciation and
current income - by investing in a strategic mixture of common stocks (both
large- and small-cap), foreign equities, equity real estate securities
(primarily real estate investment trusts), fixed-income securities, and cash.
Allocations are based upon the projected investment returns for each class.
There is no guarantee that the Fund will meet its objective. See "Investment
Objective And Strategy."
The Fund is Designed For: Investors who want to diversify their portfolios
among various types of investments in a single fund. While not intended as a
complete investment program, the Fund may be a valuable element of your
investment portfolio. You also may wish to consider the Fund as part of a
Uniform Gift/Transfer To Minors Account or systematic investing strategy. The
Fund may be a suitable investment for many types of retirement programs,
including IRA, SEP-IRA, SARSEP, 401(k), Profit Sharing, Money Purchase Pension,
and 403(b) plans.
Time Horizon. Because the value of its holdings varies, the Fund's price
per share will fluctuate. Investors should consider this a medium- to long-term
investment.
Risks. The Fund's investments in fixed-income securities are subject to
credit risk and market risk. Its returns on foreign investments may be
influenced by currency fluctuations and other risks of investing overseas. The
market prices of the small cap stocks in which the Fund invests may be more
volatile than those of large cap stocks. The Fund's investments in real estate
securities have many of the same risks as the direct ownership of real estate.
See "Investment Objective and Strategy" and "Investment Policies and Risks."
Organization and Management. The Fund is a series of INVESCO Multiple Asset
Funds, Inc. (the Company), a diversified, managed, no- load mutual fund. The
Fund is owned by its shareholders. It employs INVESCO Funds Group, Inc. (IFG),
founded in 1932, to serve as investment adviser, administrator, distributor, and
transfer agent. INVESCO Management & Research, Inc. (IMR) serves as sub-adviser.
The Fund is team-managed; Bob Slotpole leads this group and makes the final
determination of asset allocations. Mr. Slotpole has 20 years of investment
experience, and holds degrees from Stanford University and the State University
of New York at Buffalo. See "The Fund And Its Management."
IFG and IMR are part of a global firm that managed approximately $74
billion as of June 30, 1995. The parent company, INVESCO PLC, is based in
London, with money managers located in Europe, North America and the Far East.
<PAGE>
This Fund Offers All of the Following Services at No Charge:
Telephone purchases
Telephone exchanges
Telephone redemptions
Automatic reinvestment of distributions
Regular investment plans, such as EasiVest (the Fund's automatic
monthly investment program),
Direct Payroll Purchase, and
Automatic Monthly Exchange Periodic withdrawal plans
See "How To Buy Shares" and "How To Sell Shares."
Minimum Initial Investment: $1,000, which is waived for regular investment
plans, including EasiVest and Direct Payroll Purchase.
Minimum Subsequent Investment: $50 (Minimums are lower for certain
retirement plans.)
ANNUAL FUND EXPENSES
The Fund is no-load; there are no fees to purchase, exchange or redeem
shares. The Fund is authorized to pay a Rule 12b-1 distribution fee of one
quarter of one percent of the Fund's average net assets each year. (See "How To
Buy Shares -- Distribution Expenses.")
Like any company, the Fund has operating expenses, such as portfolio
management, accounting, shareholder servicing, maintenance of shareholder
accounts, and other expenses. These expenses are paid from the Fund's assets.
Lower expenses therefore benefit investors by increasing the Fund's total
return.
We calculate annual operating expenses as a percentage of the Fund's
average annual net assets. To keep expenses competitive, IFG and IMR voluntarily
reimburse the Fund for amounts in excess of 1.50% of average net assets.
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fee 0.75%
12b-1 Fees 0.25%
Other Expenses (after absorbed expenses)(1) 0.50%
Total Fund Operating Expenses (after absorbed expenses)(1) 1.50%
(1) In the absence of the voluntary expense limitation, the Fund's "Other
Expenses" and "Total Fund Operating Expenses" would have been 1.47% and
2.47%, respectively, based on the Fund's actual expenses for the fiscal
year ended July 31, 1995.
<PAGE>
Example
A shareholder would pay the following expenses on a $1,000 investment for
the periods shown, assuming a hypothetical 5% annual return and redemption at
the end of each time period. (Of course, actual operating expenses are paid from
the Fund's assets, and are deducted from the amount of income available for
distribution to shareholders; they are not charged directly to shareholder
accounts.)
1 Year 3 Years 5 Years 10 Years
$15 $48 $82 $180
The purpose of this table is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly. The example should
not be considered a representation of past or future performance or expenses,
and actual annual returns and expenses may be greater or less than those shown.
For more information on the Fund's expenses, see "The Fund and Its Management"
and "How to Buy Shares -Distribution Expenses."
Since the Fund pays a distribution fee, investors who own Fund shares for
a long period of time may pay more than the economic equivalent of the maximum
front-end sales charge permitted for mutual funds by the National Association of
Securities Dealers, Inc.
<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 independent accountant's report appearing
in the Fund's 1995 Annual Report to Shareholders which is incorporated by
reference into the Statement of Additional Information, both of which are
available without charge by contacting INVESCO Funds Group, Inc. at the address
or telephone number on the cover of this Prospectus. The Annual Report also
contains more information about the Fund's performance.
Year Period
Ended Ended
July 31 July 31
------------ ------------
1995 1994^
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 9.68 $10.00
------------ ------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.28 0.06
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 1.16 (0.32)
------------ ------------
Total from Investment Operations 1.44 (0.26)
------------ ------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.28 0.06
------------ ------------
Net Asset Value -- End of Period $10.84 $9.68
============ ============
TOTAL RETURN 15.13% (2.60%)*
RATIOS
Net Assets -- End of Period ($000 Omitted) $7,778 $4,958
Ratio of Expenses to Average Net Assets# 1.50% 1.50%~
Ratio of Net Investment Income to
Average Net Assets# 2.99% 2.23%~
Portfolio Turnover Rate 79% 42%*
^ From December 1, 1993, commencement of operations, to July 31, 1994.
* These amounts are based on operations for the period shown and, accordingly,
are not representative of a full year.
<PAGE>
# Various expenses of the Fund were voluntarily absorbed by IFG and IMR for the
year ended July 31, 1995 and the period ended July 31, 1994. If such expenses
had not been voluntarily absorbed, the ratio of expenses to average net
assets would have been 2.47% and 5.14% (annualized), respectively, and the
ratio of net investment income to average net assets would have been 2.02%
and (1.41%) (annualized), respectively.
~ Annualized
INVESTMENT OBJECTIVE AND STRATEGY
INVESCO Multi-Asset Allocation Fund is a diversified mutual fund that
seeks a high total return on investment through capital appreciation and current
income. This investment objective is fundamental and may not be changed without
the approval of the Fund's shareholders. The Fund pursues this objective by
allocating its assets among six asset classes: stocks of large capitalization
companies (large cap stocks); stocks of small capitalization companies (small
cap stocks); equity real estate securities, primarily real estate investment
trusts; international equity securities; fixed income securities; and cash
securities. The capital appreciation component of total return includes both
realized and unrealized appreciation. There is no guarantee that the Fund will
meet its objective.
The Fund may allocate its assets among these six classes within specified
ranges. Current allocations are based on Fund Management's projections of
investment returns for each class. The Fund's "benchmark mix" of assets
represents the expected allocation when the projected returns for all six
classes are normal relative to the others based on historical investment
returns. If we believe the return for a particular class will be higher than
normal relative to the others, the Fund invests more heavily in that class than
the benchmark suggests. Conversely, if we estimate lower-than-normal returns for
a particular class relative to the others, it is underweighted relative to the
benchmark mix. The historical performance of each class is measured by using a
comparative index of securities for the class. The Fund's six asset classes,
investment ranges, benchmark mix and comparative indices are set forth below:
<PAGE>
Percentage Bench-
Asset of Fund's mark
Class Total Assets Mix Comparative Index
- --------------------------------------------------------------------------------
Large-cap stocks 0-70% 35% S&P 500
Small-cap stocks 0-30% 10% Russell 2000
Real estate equity
securities 0-30% 10% NAREIT Equity
REIT Index
International
stocks 0-30% 10% MSCI-EAFE
Fixed-income 0-50% 25% Lehman Brothers
Aggregate Bond
Cash Securities 0-30% 10% 90-day T-bills
Fund Management regularly reviews the Fund's investment allocations, and
will vary the amount invested in each class within the ranges set forth above
depending upon its assessment of business, economic and market conditions.
However, we do not attempt to "time" the various markets or make sudden, major
shifts in weightings. Any allocation adjustments are made gradually and in
accordance with the Fund's objective of seeking a high total return. While the
percentage of the Fund's assets invested in each class will vary from time to
time, the Fund does not anticipate altering the benchmark mix. However, Fund
Management reserves the right to add or delete asset classes, and to adjust the
percentage of each class in the benchmark mix accordingly. The Fund will not add
or delete asset classes without giving shareholders such notice as may be
required under the circumstances.
When we believe conditions are adverse, the Fund may assume a defensive
position by temporarily investing up to 100% of its assets in cash and fixed
income securities, in an attempt to protect principal value until conditions
stabilize. Under normal market conditions, the Fund does not expect to have a
substantial portion of its assets invested in cash securities.
Equity Holdings
In managing the equity portions of the Fund's portfolio (large cap stocks,
small cap stocks, equity real estate securities and international stocks), Fund
Management applies a combination of quantitative strategies and traditional
stock selection methods to a broad universe of stocks in order to uncover
attractive values. Typically, common stocks and, to a lesser degree, preferred
stocks and securities convertible into common stocks, will be examined
quantitatively for their exposure to certain factors that we believe are helpful
<PAGE>
in selecting equities that can be expected to show superior future performance.
These factors include earnings-to-price ratio, book value-to-price ratio,
earnings estimate revision momentum, relative market strength compared to
competitors, inventory/sales trend, and financial leverage. A stock's expected
return is estimated based on these factors and estimated trading costs. Next a
computer optimization process suggests a portfolio that seeks to maximize
expected return at a controlled level of risk. Traditional fundamental analysis
is then employed to make the final selection of holdings.
Large-cap stocks. These holdings are selected from the 1,000 largest
publicly-traded U.S. companies. Size is determined by measuring a firm's market
capitalization -- the market value of all of a company's equity securities.
These securities are traded principally on U.S. national stock exchanges, but
also may be traded on regional stock exchanges or in the over-the-counter (OTC)
market. Large-cap stocks may offer higher dividends than the stocks of
smaller-cap firms.
The index used to measure the historical performance of large-cap stocks
is the Standard & Poor's 500, which is composed of 500 widely held common stocks
listed on the New York or American Stock Exchange, or on the NASDAQ
over-the-counter market.
Small-cap stocks. The Fund seeks its small-cap holdings from companies
having market capitalizations smaller than the 1,000 largest publicly-traded
U.S. companies. These small-cap stocks typically pay no or only minimal
dividends, and may involve greater risks than securities of larger, more
established companies. However, because of their long-term prospects, they may
offer the potential for greater price appreciation.
The index used to measure the historical performance of small-cap stocks
is the Russell 2000, which is composed of the 2,000 publicly traded U.S.
companies that are next in size after the 1,000 largest publicly traded U.S.
companies, measured by market capitalization.
Real estate equity securities. The Fund focuses its real estate
investments on equity real estate investment trusts (REITs), but may also invest
in real estate development and real estate operating companies, as well as other
real estate-related businesses. Equity REITs are trusts that sell shares to
investors and invest the proceeds in real estate. The index used is the NAREIT
Equity REIT, which is composed of all tax-qualified REITs listed on the New York
and American Stock Exchanges, plus those listed on the NASDAQ National Market
System.
International stocks. The Fund may invest in international equity
securities directly or through American Depository Receipts (ADRs). Up to 25% of
the Fund's total assets, measured at the time of purchase, may be invested
directly in foreign securities. Investments in Canadian securities and ADRs are
not included in this limitation. ADRs are receipts representing shares of a
<PAGE>
foreign corporation held by a U.S. bank that entitle the holder to all dividends
and capital gains. ADRs are denominated in U.S. dollars and trade in the U.S.
securities markets. The index used is the Morgan Stanley Capital Index-Europe,
Australia, and Far East (MSCI-EAFE), which is composed of companies listed on
exchanges in countries of those specific regions.
Fixed Income and Cash Holdings
Fixed-income. For the fixed-income portion of the holdings, we select only
obligations of the U.S. government, its agencies and instrumentalities or
investment grade corporate bonds. These securities tend to offer lower income
than bonds of lower quality, but are more shielded from credit risk. Obligations
issued by government agencies or instrumentalities may include some supported
only by the credit of the issuer rather than backed by the full faith and credit
of the U.S. government. The Fund also may invest up to 25% of its total assets
in fixed income securities issued by foreign companies. The Fund may hold
securities of any maturity (from less than one year up to 30 years), with the
average maturity varying depending upon economic and market conditions.
The index used to measure the historical performance of fixed income
securities is the Lehman Brothers Aggregate Bond, which is composed of
fixed-rate, investment grade domestic corporate bond issues, plus U.S.
government treasury and agency securities, Yankee bonds (U.S. traded debt issued
or guaranteed by foreign governments), and mortgage-backed securities.
Cash securities. The Fund's cash securities may include domestic
certificates of deposit and banker's acceptances, repurchase agreements,
commercial paper and U.S. government and agency securities and investment grade
corporate bonds with remaining maturities of one year or less.
INVESTMENT POLICIES AND RISKS
Investors generally should expect to see their price per share and income
levels vary with movements in the stock and fixed-income markets, changes in
economic conditions and other factors. The Fund invests in many different
companies in a variety of securities and industries; this diversification may
help reduce the Fund's overall exposure to investment and market risks, but
cannot eliminate these risks.
Small-Cap Stocks. Small-cap companies frequently have limited operating
histories, product lines, and financial and managerial resources. They may
experience intense competitive pressures from larger, more established firms in
the same industry. The market prices of small cap stocks may be more volatile
than those of large cap stocks both because they typically trade in lower
volumes and because small-cap firms may be more vulnerable to changes in their
<PAGE>
earnings or prospects. As a result, small cap companies may experience
substantial losses as well as significant growth.
Real Estate Securities. Real estate securities have many of the same risks
as the direct ownership of real estate, including the risk that the property
will decline in value, and risks related to general and local economic
conditions, overbuilding, property tax and operating expense increases, and
fluctuating rental income. REITs have the additional factors of management
skill, potentially inadequate diversification, and favorable financing to
consider. REITs are also subject to the possibility of failing to qualify for
tax-free pass-through of income under the Internal Revenue Code of 1986 and
failing to maintain exemption from the Investment Company Act of 1940.
Foreign Securities. For U.S. investors, the returns on foreign securities
are influenced not only by the returns on the foreign investments themselves,
but also by currency fluctuations. That is, when the U.S. dollar generally rises
against foreign currencies, returns on foreign securities for a U.S. investor
may decrease. By contrast, in a period when the U.S. dollar generally declines,
those returns may increase.
Other aspects of international investing to consider include:
-less publicly available information than is generally available about U.S.
issuers;
-differences in accounting, auditing and financial reporting standards;
-generally higher commission rates on foreign portfolio transactions and
longer settlement periods;
-smaller trading volumes and generally lower liquidity of foreign stock
markets, which may cause greater price volatility; and
-investments in certain countries may be subject to foreign withholding
taxes, which may reduce dividend income or capital gains payable to
shareholders.
There is also the possibility of expropriation or confiscatory taxation;
adverse changes in investment or exchange control regulations; political
instability; potential restrictions on the flow of international capital; and
the possibility of the Fund experiencing difficulties in pursuing legal remedies
and collecting judgments.
ADRs are subject to some of the same risks as direct investments in
foreign securities, including the risk that material information about the
issuer may not be disclosed in the United States and the risk that currency
fluctuations may adversely affect the value of the ADR.
<PAGE>
Debt Securities. When we assess an issuer's ability to meet its interest
rate obligations and repay its debt when due, we are referring to "credit risk."
Debt obligations are rated based on their estimated credit risk by independent
services such as Standard & Poor's Rating Group (S&P) or Moody's Investors
Service, Inc. (Moody's). "Market risk" for debt securities principally refers to
sensitivity to changes in interest rates: for instance, when interest rates go
up, the market value of a bond issued previously generally declines; on the
other hand, when interest rates go down, bonds generally see their prices
increase.
The lower a bond's quality, the more it is subject to credit risk and
market risk and the more speculative it becomes; this is also true of most
unrated debt securities. The Fund seeks to reduce these risks by investing only
in investment grade debt securities (those rated AAA, AA, A or BBB by S&P or
Aaa, Aa, A or Baa by Moody's or, if unrated, are judged by Fund Management to be
of equivalent quality). These bonds enjoy strong to adequate capacity to pay
principal and interest. Securities rated BBB or Baa are considered to be of
medium grade and may have speculative characteristics. While Fund Management
continuously monitors all of the debt securities in the Fund's portfolio for the
issuer's ability to make required principal and interest payments and other
quality factors, it may retain a bond whose rating is changed to one below the
minimum rating required for purchase of the security.
The Funds investments in debt securities may include investments in zero
coupon bonds issued by the U.S. government, its agencies or instrumentalities,
step-up bonds, mortgage-backed securities and asset- backed securities. Zero
coupon bonds (zeros) make no periodic interest payments. Instead, they are sold
at a discount from their face value. The buyer of the zero receives the rate of
return by the gradual appreciation in the price of the security, which is
redeemed at face value at maturity. Step-up bonds initially make no (or low)
cash interest payments, but begin paying interest (or a higher rate of interest)
at a fixed time after issuance of the bond. Being extremely responsive to
changes in interest rates, the market prices of both zeros and step-up bonds may
be more volatile than other bonds. The Fund may be required to distribute income
recognized on these bonds, even though no cash interest payments may be
received, which could reduce the amount of cash available for investment by the
Fund.
Mortgage-backed securities represent interests in pools of mortgages.
Asset-backed securities generally represent interests in pools of consumer
loans. Both usually are structured as pass-through securities. Interest and
principal payments ultimately depend on payment of the underlying loans,
although the securities may be supported, at least in part, by letters of credit
or other credit enhancements or, in the case of mortgage-backed securities,
guarantees by the U.S. government, its agencies or instrumentalities. The
underlying loans are subject to prepayments that may shorten the securities'
<PAGE>
weighted average lives and may lower their returns.
The Fund also may invest in stripped mortgage- or asset-backed securities,
in which the principal and interest payments on the underlying pool of loans are
separated or "stripped" to create two classes of securities. In general, the
interest-only, or IO, class receives all of the interest payments and the
principal-only, or PO, class receives all of the principal payments. The market
prices of these securities generally are more sensitive to changes in interest
and prepayment rates than traditional mortgage and asset-backed securities, and
may be extremely volatile.
When-Issued Securities. Up to 10% of the value of the Fund's total assets
may be committed to purchase or sell securities on a when-issued or
delayed-delivery basis -- that is, with settlement taking place in the future.
The payment obligation and the interest rate received on the securities
generally are fixed at the time the Fund enters into the commitment. Between the
date of purchase and the settlement date, the market value of the securities may
vary, and no interest is payable to the Fund prior to settlement.
Futures, Options and Other Derivative Instruments. In order to hedge its
portfolio, the Fund may purchase and write options on securities (including
index options and options on foreign securities), and may invest in futures
contracts for the purchase or sale of foreign currencies, fixed-income
securities and instruments based on financial indices (collectively, "futures
contracts"), options on futures contracts and forward contracts. These practices
and their risks are discussed under "Investment Policies and Restrictions" in
the Statement of Additional Information.
Repurchase Agreements. The Fund may invest money, for as short a time as
overnight, using repurchase agreements (repos). With a repo, the Fund buys a
debt instrument, agreeing simultaneously to sell it back to the prior owner at
an agreed-upon price. The Fund could incur costs or delays in seeking to sell
the instrument if the prior owner defaults on its repurchase obligation. To
reduce that 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).
These agreements are entered into only with member banks of the Federal Reserve
System, registered broker-dealers, and registered U.S. government securities
dealers that are deemed creditworthy under standards established by the Fund's
board of directors.
Other Securities. The Fund may invest in illiquid securities, including
securities that are subject to restrictions on resale and securities that are
not readily marketable, and in restricted securities that may be resold to
institutional investors, known as "Rule 144A Securities." In addition, the Fund
may seek to earn additional income by lending securities to qualified brokers,
<PAGE>
dealers, banks, or other financial institutions on a fully- collateralized
basis. For more information concerning these securities and investment
techniques, see "Investment Policies and Restrictions" in the Statement of
Additional Information.
Portfolio Turnover. There are no limitations regarding portfolio turnover
for either the equity or fixed income portions of the Fund's portfolio. Although
the Fund does not trade for short-term profits, securities may be sold without
regard to the time they have been held when, in the opinion of Fund Management,
investment considerations warrant such action. Increased portfolio turnover may
result in greater brokerage commissions and acceleration of capital gains which
are taxable when distributed to shareholders. The Statement of Additional
Information includes an expanded discussion of the Fund's portfolio turnover
rate, its brokerage practices and certain federal income tax matters.
For a further discussion of risks associated with an investment in the
Fund, see "Investment Policies and Restrictions" and "Investment Practices" in
the Statement of Additional Information.
Investment Restrictions. Certain restrictions, which are set forth in the
Statement of Additional Information, may not be altered without the approval of
the Fund's shareholders. For example, with respect to 75% of its total assets,
the Fund limits to 5% the portion of its total assets that may be invested in
any one issuer (other than cash items and U.S. government securities). In
addition, the Fund limits to 25% the portion of its total assets that may be
invested in any one industry (other than U.S. government securities). Other
fundamental restrictions prohibit the Fund from lending more than 33-1/3% of its
total assets to other parties and from borrowing money, except that the Fund may
borrow amounts up to 33-1/3% of its total assets for temporary or emergency
purposes. Except where indicated to the contrary, the investment policies
described in this prospectus are not considered fundamental and may be changed
without a vote of the Fund's shareholders.
<PAGE>
THE FUND AND ITS MANAGEMENT
The Company is a no-load mutual fund, registered with the Securities and
Exchange Commission as a diversified, open-end, management investment company.
It was incorporated on August 19, 1993, under the laws of Maryland.
The Company's board of directors has responsibility for overall
supervision of the Fund, and reviews the services provided by the adviser and
sub-adviser. Under an agreement with the Fund, INVESCO Funds Group, Inc. (IFG),
7800 E. Union Avenue, Denver, Colorado 80237, serves as the Fund's investment
manager; it is primarily responsible for providing the Fund with various
administrative services. An affiliate of IFG, INVESCO Management & Research,
Inc. (IMR), 101 Federal Street, Boston, Massachusetts, is the Fund's sub-adviser
and is primarily responsible for managing the Fund's investments. Together, IFG
and IMR constitute "Fund Management."
The Fund is managed by a team of specialists with expertise in the various
asset classes in which the Fund invests. Bob Slotpole, portfolio manager since
1993 for INVESCO Management & Research, Inc., has served as lead portfolio
manager for the Fund since 1994, and is primarily responsible for the overall
allocation of the Fund's investments among the six asset classes. He is also the
portfolio manager of INVESCO Small Company Fund. His recent career includes
these highlights: he developed the program trading department at First Boston
(1985 to 1992) and served with the proprietary options department at Lehman
Brothers (1983 to 1984). B.S., State University of New York at Buffalo; M.B.A.,
Stanford University.
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 Fund Management's personnel to conduct
their personal investment activities in a manner that Fund Management believes
is not detrimental to the Fund or Fund Management's other advisory clients. See
the Statement of Additional Information for more detailed information.
The Fund pays IFG a monthly management fee which is based upon a percentage
of the Fund's average net assets determined daily. The management fee is
computed at the annual rate of 0.75% on the first $500 million of the Fund's
average net assets; 0.65% on the next $500 million of the Fund's average net
assets; and 0.50% on the Fund's average net assets over $1 billion. While the
portion of the management fee that is equal to 0.75% of the Fund's average net
assets is higher than the management fees incurred by most other mutual funds,
it is not higher than the management fees paid by most other asset allocation
funds on comparable levels of assets. For the fiscal year ended July 31, 1995,
investment advisory fees paid by the Fund amounted to 0.75% of the Fund's
average net assets. Out of this fee, IFG paid an amount equal to 0.375% of the
<PAGE>
Fund's average net assets to IMR as a sub-advisory fee. No fee is paid by the
Fund to IMR.
Under a Transfer Agency Agreement, IFG acts as registrar, transfer agent,
and dividend disbursing agent for the Fund. The Fund pays an annual fee of
$14.00 per shareholder account or omnibus account participant for these
services. Registered broker-dealers, third party administrators of tax-qualified
retirement plans and other entities, including affiliates of IFG, may provide
equivalent services to the Fund. In these cases, IFG may pay, out of the fee it
receives from the Fund, an annual sub-transfer agency or record-keeping fee to
the third party.
In addition, under an Administrative Services Agreement, IFG handles
additional administrative, record-keeping, and internal sub- accounting services
for the Fund. For the fiscal year ended July 31, 1995, the Fund paid IFG a fee
for these services equal to 0.17% of the Fund's average net assets.
The Fund's expenses, which are accrued daily, are deducted from total
income before dividends are paid. Total expenses of the Fund for the fiscal year
ended July 31, 1995, including investment management fees (but excluding
brokerage commissions, which are a cost of acquiring securities), amounted to
1.50% of the Fund's average net assets. Certain Fund expenses are absorbed
voluntarily by IFG and IMR pursuant to a commitment to the Fund in order to
ensure that the Fund's total operating expenses do not exceed 1.50% 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 this voluntary expense
limitation, the Fund's total operating expenses for the year ended July 31,
1995, would have been 2.47% of the Fund's average net assets.
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of
their financial responsibility coupled with their ability to effect transactions
at the best available prices. As discussed under "How to Buy Shares --
Distribution Expenses," the Fund may market its shares through intermediary
brokers or dealers that have entered into Dealer Agreements with IFG, as the
Fund's Distributor. The Fund may place orders for portfolio transactions with
qualified broker/dealers which recommend the Fund, or sell shares of the Fund,
to clients, or act as agent in the purchase of Fund shares for clients, if Fund
Management believes that the quality of the execution of the transaction and
level of commission are comparable to those available from other qualified
brokerage firms. For further information, see "Investment Practices -- Placement
of Portfolio Brokerage" in the Statement of Additional Information.
The parent company for IFG and IMR is INVESCO PLC, a publicly traded
holding company whose subsidiaries provide investment services around the world.
IFG was established in 1932 and, as of July 31, 1995, managed 14 mutual funds,
consisting of 38 separate portfolios, with combined assets of approximately
<PAGE>
$10.1 billion on behalf of over 790,000 shareholders. IMR also acts as
sub-adviser to the INVESCO Small Company Fund and offers investment services to
U.S. institutions and wealthy individuals.
FUND PRICE AND PERFORMANCE
Determining Price. The value of your investment in the Fund will vary
daily. The price per share is also known as the Net Asset Value (NAV). IFG
prices the Fund every day that the New York Stock Exchange is open, as of the
close of regular trading (normally, 4:00 p.m., New York time). NAV is calculated
by adding together the current market value of all of the Fund's assets,
including accrued interest and dividends; then subtracting liabilities,
including accrued expenses; and finally dividing that dollar amount by the total
number of shares outstanding.
Performance Data. To keep shareholders and potential investors informed,
we will occasionally advertise the Fund's total return for one-, five-, and
ten-year periods (or since inception). Total return figures show the rate of
return on a $1,000 investment in the Fund, assuming reinvestment of all
dividends and capital gain distributions for the periods cited. Cumulative total
return shows the actual rate of return on an investment; average annual total
return represents the average annual percentage change in the value of an
investment. Both cumulative and average annual total returns tend to "smooth
out" fluctuations in the Fund's investment results, not showing the interim
variations in performance over the periods cited. More information about the
Fund's recent and historical performance is contained in the Fund's Annual
Report to shareholders. You can get a free copy by calling or writing to IFG
using the phone number or address on the cover of this prospectus.
When we quote mutual fund rankings published by Lipper Analytical
Services, Inc., we may compare the Fund to others in its category of Flexible
Portfolio Funds, as well as the broad-based Lipper general fund groupings. These
rankings allow you to compare the Fund to its peers. Other independent financial
media also produce performance- or service- related comparisons, which you may
see in our promotional materials. For more information see "Fund Performance" in
the Statement of Additional Information.
Performance figures are based on historical investment results and are not
intended to suggest future performance.
<PAGE>
HOW TO BUY SHARES
The following chart shows several convenient ways to invest in the Fund.
Your new Fund shares will be priced at the NAV next determined after your order
is received in proper form. There is no charge to invest, exchange, or redeem
shares when you make transactions directly through IFG. However, if you invest
in the Fund through a securities broker, you may be charged a commission or
transaction fee. For all new accounts, please send a completed application form.
Please specify which Fund you wish to purchase.
Fund Management reserves the right to reduce or waive the minimum
investment requirements in its sole discretion, where it determines this action
is in the best interests of the Fund. Further, Fund Management reserves the
right in its sole discretion to reject any order for the purchase of Fund shares
(including purchases by exchange) when, in its judgment, such rejection is in
the Fund's best interests.
================================================================================
Method Investment Minimum Please Remember
- --------------------------------------------------------------------------------
By Check $1,000 for regular If your check does
Mail to: account; not clear, you will
INVESCO Funds $250 for an be responsible for
Group, Inc. Individual any related loss
P.O. Box 173706 Retirement Account; the Fund or IFG
Denver, CO 80217- $50 minimum for incurs. If you are
3706. each subsequent already a
Or you may send investment. shareholder in the
your check by INVESCO funds, the
overnight courier Fund may seek
to: 7800 E. Union reimbursement from
Ave., your existing
Denver, CO 80237. account(s) for any
loss incurred.
- --------------------------------------------------------------------------------
By Telephone or $1,000. Payment must be
Wire received within 3
Call 1-800-525-8085 business days, or
to request your the transaction may
purchase. Then send be cancelled. If a
your check by telephone purchase
overnight courier is cancelled due to
to our street nonpayment, you
address: will be responsible
7800 E. Union Ave., for any related
Denver, CO 80237. loss the Fund or
Or you may transmit IFG incurs. If you
your payment by are already a
bank wire (call IFG shareholder in the
for instructions). INVESCO funds, the
Fund may seek
reimbursement from your
existing account(s) for
any loss incurred.
<PAGE>
- --------------------------------------------------------------------------------
With EasiVest or $50 per month for Like all regular
Direct Payroll EasiVest; $50 per investment plans,
Purchase pay period for neither EasiVest
You may enroll on Direct Payroll nor Direct Payroll
the fund Purchase. You may Purchase ensures a
application, or start or stop your profit or protects
call us for the regular investment against loss in a
correct form and plan at any time, falling market.
more details. with two weeks' Because you'll
Investing the same notice to IFG. invest continually,
amount on a monthly regardless of
basis allows you to varying price
buy more shares levels, consider
when prices are low your financial
and fewer shares ability to keep
when prices are buying through low
high. This "dollar- price levels. And
cost averaging" may remember that you
help offset market will lose money if
fluctuations. Over you redeem your
a period of time, shares when the
your average cost market value of all
per share may be your shares is less
less than the than their cost.
actual average
price per share.
- --------------------------------------------------------------------------------
By PAL(R) $1,000. Be sure to write
Your "Personal down the confirmation
Account Line" is number provided by
available for PAL(R). Payment must
subsequent be received within 3
purchases and business days, or the
exchanges 24-hours transaction may be
a day. Simply call cancelled. If a
1-800-424-8085. telephone purchase is
cancelled due to
nonpayment, you will
be responsible for any
related loss the Fund
or IFG incurs. If you
are already a share-
holder in the INVESCO
funds, the Fund may
seek reimbursement
from your existing
account(s) for
any loss incurred.
<PAGE>
- --------------------------------------------------------------------------------
By Exchange $1,000 to open a See "Exchange
Between this and new account; $50 Privilege," page 11.
another of the for written
INVESCO funds. Call requests to
1-800-525-8085 for purchase additional
prospectuses of other shares for an
INVESCO funds. You existing account.
may also establish (The exchange minimum
an Automatic Monthly is $250 for exchanges
Exchange service requested by telephone.)
between two INVESCO
funds; call IFG for
further details and
the correct form.
Exchange Privilege. You may exchange your shares in this Fund for those in
another INVESCO fund, on the basis of their respective net asset values at the
time of the exchange. Before making any exchange, be sure to review the
prospectuses of the funds involved and consider their differences.
Please note these policies regarding exchanges of fund shares:
1. The fund accounts must be identically registered.
2. You may make four exchanges out of each fund during each calendar year.
<PAGE>
3. An exchange is the redemption of shares from one fund followed by the
purchase of shares in another. Therefore, any gain or loss realized on the
exchange is recognizable for federal income tax purposes (unless, of course,
your account is tax-deferred).
4. The Fund reserves the right to reject any exchange request, or to modify
or terminate exchange privileges, in the best interests of the Fund and its
shareholders. Notice of all such modifications or termination will be given at
least 60 days prior to the effective date of the change in privilege, except for
unusual instances (such as when redemptions of the exchanged shares are
suspended under Section 22(e) of the Investment Company Act of 1940, or when
sales of the fund into which you are exchanging are temporarily stopped).
Distribution Expenses. The Fund is authorized under a Plan and Agreement
of Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Plan") to use its assets to finance certain activities relating to the
distribution of shares. These expenditures may include 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 IFG-affiliated
companies, to obtain various distribution-related and/or administrative services
for the Fund. Such services may include, among other things, processing new
shareholder account applications, preparing and transmitting to the Fund's
transfer agent computer-processable tapes of all transactions by customers, and
serving as the primary source of information to customers in answering questions
concerning the Fund and their transactions.
In addition, other reimbursable expenditures include advertising,
preparation and distribution of sales literature, printing and distribution of
prospectuses to prospective investors, public relations efforts, marketing
programs and other services and promotional activities agreed upon from time to
time by the Fund and its board of directors. These services and activities may
be conducted by the staff of IFG or its affiliates or by third parties.
IFG is not entitled to reimbursement for overhead expenses under the Plan,
but may be reimbursed for all or a portion of the compensation paid for salaries
and other employee benefits for IFG personnel whose primary responsibilities
involve marketing shares of the INVESCO funds, including the Fund. Also, any
payments made by the Fund may not be used to finance the distribution of shares
of any other mutual fund advised by IFG. 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.
Under the Plan, the Fund's reimbursement to IFG is limited to an amount
computed at a maximum annual rate of 0.25 of 1% of the Fund's average net
<PAGE>
assets. Payments by the Fund under the Plan, for any month, may only be made to
reimburse expenditures incurred during the rolling 12-month period in which that
month falls, although this period is expanded to 24 months for expenses incurred
during the first 24 months of the Fund's operations. Therefore, any reimbursable
expenses incurred by IFG in excess of the limitations described above are not
reimbursable and will be borne by IFG. In addition, IFG may from time to time
make additional payments from its revenues to securities dealers and other
financial institutions that provide distribution-related and/or administrative
services for the Fund. No further payments will be made by the Fund under the
Plan in the event of its termination.
FUND SERVICES
Shareholder Accounts. IFG will maintain a share account that reflects your
current holdings. Share certificates will be issued only upon specific request.
You will have greater flexibility to conduct transactions if you do not request
certificates.
Transaction Confirmations. You will receive detailed confirmations of
individual purchases, exchanges, and redemptions. If you choose certain
recurring transaction plans (for instance, EasiVest), your transactions will be
confirmed on your quarterly Investment Summary.
Investment Summaries. Each calendar quarter, shareholders receive a
written statement which consolidates and summarizes account activity and value
at the beginning and end of the period for each of their INVESCO funds.
Reinvestment of Distributions. Dividends and capital gain distributions
are automatically invested in additional fund shares at the NAV on the
ex-dividend date, unless you choose to have dividends and/or capital gain
distributions automatically reinvested in another INVESCO fund or paid by check
(minimum of $10.00).
Telephone Transactions. All shareholders may exchange and redeem Fund
shares by telephone, unless they expressly decline these privileges. By signing
the new account Application, a Telephone Transaction Authorization Form, or
otherwise using these privileges, the investor has agreed that, if the Fund has
followed reasonable procedures, such as recording telephone instructions and
sending written transaction confirmations, it will not be liable for following
telephoned instructions that it believes to be genuine. As a result of this
policy, the investor may bear the risk of any loss due to unauthorized or
fraudulent instructions.
Retirement Plans And IRAs. Fund shares may be purchased for Individual
Retirement Accounts (IRAs) and many types of tax-deferred retirement plans. IFG
can supply you with information and forms to establish or transfer your existing
plan or account.
<PAGE>
HOW TO SELL SHARES
The chart on page 15 shows several convenient ways to redeem your Fund
shares. Shares of the Fund may be redeemed at any time at their current NAV next
determined after a request in proper form is received at the Fund's office. The
NAV at the time of the redemption may be more or less than the price you paid to
purchase your shares, depending primarily upon the Fund's investment
performance.
Please be specific from which fund you wish to redeem shares. Shareholders
have a separate account for each fund in which they invest.
================================================================================
Method Minimum Redemption Please Remember
================================================================================
By Telephone $250 (or, if less, These telephone
Call us toll-free full liquidation of redemption privileges
at 1-800-525-8085. the account) for a may be modified or
redemption check; terminated in the
$1,000 for a wire future at the
to bank of record. discretion of IFG.
The maximum amount This option is not
which may be available for shares
redeemed by held in Individual
telephone is Retirement Accounts
generally $25,000. (IRAs).
- --------------------------------------------------------------------------------
In Writing Any amount. The If the shares to be
Mail your request redemption request redeemed are
to INVESCO Funds must be signed by represented by
Group, Inc., P.O. all registered stock certificates,
Box 173706 shareholders(s). the certificates
Denver, CO 80217- Payment will be must be sent to
3706. You may also mailed to your IFG.
send your request address of record,
by overnight or to a pre-
courier to 7800 E. designated bank.
Union Ave., Denver,
CO 80237.
<PAGE>
- --------------------------------------------------------------------------------
By Exchange $1,000 to open a See "Exchange
Between this and new account; $50 Privilege," page 11.
another of the for written
INVESCO funds. Call requests to
1-800-525-8085 for purchase additional
prospectuses of shares for an
other INVESCO existing account.
funds. You may also (The exchange
establish an minimum is $250 for
Automatic Monthly exchanges requested
Exchange service by telephone.)
between two INVESCO
funds; call IFG for
further details and
the correct form.
- --------------------------------------------------------------------------------
Periodic Withdrawal $100 per payment You must have at
Plan on a monthly or least $10,000 total
You may call us to quarterly basis. invested with the
request the The redemption INVESCO funds, with
appropriate form check may be made at least $5,000 of
and more payable to any that total invested
information at party you in the fund from
1-800-525-8085. designate. which withdrawals
will be made.
- --------------------------------------------------------------------------------
Payment To Third Any amount. All registered
Party owners of the
Mail your request account must sign
to INVESCO Funds the request, with a
Group, Inc., P.O. signature guarantee
Box 173706 from an eligible
Denver, CO 80217- guarantor financial
3706. institution, such
as a commercial
bank or recognized
national or regional
securities firm.
================================================================================
While the Fund will attempt to process telephone redemptions promptly,
there may be times -- particularly in periods of severe economic or market
disruption -- when you may experience delays in redeeming shares by phone.
Payments of redemption proceeds will be mailed within seven days following
receipt of the redemption request in proper form. However, payment may be
postponed under unusual circumstances -- for instance, if normal trading is not
taking place on the New York Stock Exchange or during an emergency as defined by
the Securities and Exchange Commission. If your shares were purchased by a check
which has not yet cleared, payment will be made promptly upon clearance of the
purchase check (which may take up to 15 days).
<PAGE>
If you participate in EasiVest, the Fund's automatic monthly investment
program, and redeem all of the shares in your account, we will terminate any
further EasiVest purchases unless you instruct us otherwise.
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 involuntarily redeem 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.
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.
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 you are subject to
backup withholding for other reasons, you can avoid backup withholding on your
Fund account by ensuring that we have 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 a quarterly basis, at the discretion of the Fund'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
<PAGE>
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 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 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.
We encourage you to consult a tax adviser with respect to these matters.
For further information see "Dividends, Capital Gain Distributions and Taxes" in
the Statement of Additional Information.
<PAGE>
ADDITIONAL INFORMATION
Voting Rights. All shares of the Company have equal voting rights based on
one vote for each share owned. Voting with respect to certain matters, such as
ratification of independent accountants and the election of directors, will be
by all the funds of the Company voting together. In other cases, such as voting
upon an investment advisory contract, voting is on a fund-by-fund basis. To the
extent permitted by law, when not all funds are affected by a matter to be voted
upon, only shareholders of the fund or funds affected by the matter will be
entitled to vote thereon. The Company is not generally required and does not
expect to hold regular annual meetings of shareholders. However, when requested
to do so in writing by the holders of 10% or more of the outstanding shares of
the Company or as may be required by applicable law or the Company's Articles of
Incorporation, the board of directors will call special meetings of
shareholders. Directors may be removed by action of the holders of a majority of
the outstanding shares of the Company. The Fund will assist shareholders in
communicating with other shareholders as required by the Investment Company Act
of 1940.
Master/Feeder Option. As a matter of fundamental policy, 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 substantially the same
fundamental investment objective, policies and limitations. It is expected that
any such investment company would be managed by IFG in substantially the same
manner as the Fund. If permitted by applicable law, any such investment may be
made in the sole discretion of the Company's board of directors without a vote
of the Fund's shareholders. However, shareholders will be given at least 30 days
prior notice of any such investment. Such an investment would be made only if
the board of directors determines it to be in the best interests of the Fund and
its shareholders based on potential cost savings, operational efficiencies or
other factors. No assurance can be given that costs would be materially reduced
if this option were implemented.
<PAGE>
INVESCO MULTI-ASSET ALLOCATION FUND A no-load
mutual fund seeking capital appreciation and
current income.
PROSPECTUS
November 30, 1995
To receive general information and prospectuses on any of the INVESCO
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(R), your 24-hour Personal Account Line (PAL(R)) call:
1-800-424-8085
Or write to:
INVESCO Funds Group, Inc., Distributor
7800 E. Union Avenue
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 East Union Avenue, Lobby Level
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
November 30, 1995
INVESCO MULTIPLE ASSET FUNDS, INC.
Two no-load portfolios seeking
capital appreciation and current income
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 MULTIPLE ASSET FUNDS, INC., (the "Company") is a diversified,
managed, no-load mutual fund consisting of two separate portfolios of
investments, INVESCO Multi-Asset Allocation Fund (the "Multi-Asset Allocation
Fund") and INVESCO Balanced Fund (the "Balanced Fund") (collectively, the
"Funds" and individually, a "Fund"). The investment objective of each Fund is to
provide investors with a high total return on investments through capital
appreciation and current income. Each Fund pursues its objective by investing in
a combination of equity securities and fixed income securities. Investors may
purchase shares of either or both Funds. Additional funds may be added in the
future.
Separate Prospectuses for each of the Funds, dated November 30, 1995,
which provide the basic information you should know before investing in a Fund,
may be obtained without charge from INVESCO Funds Group, Inc., P.O. 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 each Prospectus. It is intended to provide you with additional
information regarding the activities and operations of the Fund and should be
read in conjunction with the Prospectus.
Investment Adviser and Distributor: INVESCO FUNDS GROUP, INC.
<PAGE>
TABLE OF CONTENTS Page
INVESTMENT POLICIES AND RESTRICTIONS 3
THE FUND AND ITS MANAGEMENT 18
HOW SHARES CAN BE PURCHASED 30
HOW SHARES ARE VALUED 34
FUND PERFORMANCE 35
SERVICES PROVIDED BY THE FUND 37
TAX-DEFERRED RETIREMENT PLANS 38
HOW TO REDEEM SHARES 38
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES 39
INVESTMENT PRACTICES 41
ADDITIONAL INFORMATION 44
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
As discussed in their respective Prospectuses in the sections entitled
"Investment Objective and Strategy" and "Investment Policies and Risks," the
Funds may invest in a variety of securities, and employ a broad range of
investment techniques, in seeking to achieve their respective investment
objectives. Such securities and techniques
include the following:
Types of Equity Securities
As described in the Prospectuses, equity securities which may be purchased
by the Funds consist of common, preferred and convertible preferred stocks, and
securities having equity characteristics such as rights, warrants and
convertible debt securities. Common stocks and preferred stocks represent equity
ownership interests in a corporation and participate in the corporation's
earnings through dividends which may be declared by the corporation. Unlike
common stocks, preferred stocks are entitled to stated dividends payable from
the corporation's earnings, which in some cases may be "cumulative" if prior
stated dividends have not been paid. Dividends payable on preferred stock have
priority over distributions to holders of common stock, and preferred stocks
generally have preferences on the distribution of assets in the event of the
corporation's liquidation. Preferred stocks may be "participating" which means
that they may be entitled to dividends in excess of the stated dividend in
certain cases. The rights of common and preferred stocks are generally
subordinate to rights associated with a corporation's debt securities. Rights
and warrants are securities which entitle the holder to purchase the securities
of a company (generally, its common stock) at a specified price during a
specified time period. Because of this feature, the values of rights and
warrants are affected by factors similar to those which determine the prices of
common stocks and exhibit similar behavior. Rights and warrants may be purchased
directly or acquired in connection with a corporate reorganization or exchange
offer.
Convertible securities which may be purchased by the Funds include
convertible debt obligations and convertible preferred stock. A convertible
security entitles the holder to exchange it for a fixed number of shares of
common stock (or other equity security), usually at a fixed price within a
specified period of time. Until conversion, the holder receives the interest
paid on a convertible bond or the dividend preference of a preferred stock.
Convertible securities have an "investment value" which is the theoretical
value determined by the yield it provides in comparison with similar securities
without the conversion feature. Investment value changes are based upon
prevailing interest rates and other factors. They also have a "conversion value"
which is the worth in market value if the security were exchanged for the
underlying equity security. Conversion value fluctuates directly with the price
of the underlying security. If conversion value is substantially below
<PAGE>
investment value, the price of the convertible security is governed principally
by its investment value. If the conversion value is near or above investment
value, the price of the convertible security generally will rise above
investment value and may represent a premium over conversion value due to the
combination of the convertible security's right to interest (or dividend
preference) and the possibility of capital appreciation from the conversion
feature. A convertible security's price, when price is influenced primarily by
its conversion value, generally will yield less than a senior non-convertible
security of comparable investment value. Convertible securities may be purchased
at varying price levels above their investment values or conversion values.
However, there is no assurance that any premium above investment value or
conversion value will be recovered because prices change and, as a result, the
ability to achieve capital appreciation through conversion may be eliminated.
Illiquid and Rule 144A Securities. Each Fund may 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, a Fund will not
purchase any such security if the purchase would cause the Fund to invest more
than 15% of its net assets, measured at the time of purchase, in illiquid
securities, and neither Fund currently intends to invest more than 5% of its net
assets in illiquid securities. Repurchase agreements maturing in more than seven
days will be considered as illiquid for purposes of this restriction.
Investments in illiquid securities involve certain risks to the extent that a
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, a Fund
might have to bear the expense and incur the delays associated with effecting
registration.
Each Fund also may invest in restricted securities that can be resold to
institutional investors pursuant to Rule 144A under the Securities Act of 1933,
as amended (the "1933 Act") (hereinafter referred to as "Rule 144A Securities").
These securities may be purchased without regard to the foregoing 15% limitation
if a liquid institutional trading market exists. The Company's board of
directors has delegated to Fund management the authority to determine the
liquidity of Rule 144A Securities pursuant to guidelines approved by the board.
In recent years, a large institutional market has developed for Rule 144A
Securities. Institutional investors generally will not seek to sell these
instruments to the general public, but instead will often depend on an efficient
institutional market in which Rule 144A Securities can readily be resold or on
an issuer's ability to honor a demand for repayment. Therefore, the fact that
there are contractual or legal restrictions on resale to the general public or
certain institutions is not dispositive of the liquidity of such investments.
Institutional markets for Rule 144A Securities may provide both readily
ascertainable values for Rule 144A Securities and the ability to liquidate an
investment in order to satisfy share redemption orders. An insufficient number
<PAGE>
of qualified institutional buyers interested in purchasing a Rule 144A Security
held by the Fund, however, could adversely affect the marketability of such
security, and the Fund might be unable to dispose of such security promptly or
at reasonable prices. Each Fund has agreed with certain states that no more than
10% of its total assets will be invested in restricted securities which are not
eligible for resale pursuant to Rule 144A.
American Depository Receipts
As discussed in the Prospectuses, the Funds may invest in American
Depository Receipts ("ADRs"). ADRs are receipts representing shares of a foreign
corporation held by a U.S. bank that entitle the holder to all dividends and
capital gains. ADRs are denominated in U.S. dollars and trade in the U.S.
securities markets. ADRs may be issued in sponsored or unsponsored programs. In
sponsored programs, the issuer makes arrangements to have its securities traded
in the form of ADRs; in unsponsored programs, the issuer may not be directly
involved in the creation of the program. Although the regulatory requirements
with respect to sponsored and unsponsored programs are generally similar, the
issuers of unsponsored ADRs are not obligated to disclose material information
in the United States and, therefore, such information may not be reflected in
the market value of the ADRs.
Obligations of Domestic Banks
These obligations consist of certificates of deposit ("CDs") and banker's
acceptances issued by domestic banks (including their foreign branches) having
total assets in excess of $5 billion, which meet the Funds' minimum rating
requirements. CDs are issued against deposits in a commercial bank for a
specified period and rate and are normally negotiable. Eurodollar CDs are
certificates issued by a foreign branch (usually London) of a U.S. domestic
bank, and, as such, the credit is deemed to be that of the domestic bank.
Bankers' acceptances are short-term credit instruments evidencing the
promise of the bank (by virtue of the bank's "acceptance") to pay at maturity a
draft which has been drawn on it by a customer (the "drawer"). These instruments
are used to finance the import, export, transfer, or storage of goods and
reflect the obligation of both the bank and the drawer to pay the face amount.
<PAGE>
Commercial Paper
The Funds may invest in these obligations, which are short-term promissory
notes issued by domestic corporations to meet current working capital
requirements. Such paper may be unsecured or backed by a letter of credit.
Commercial paper issued with a letter of credit is, in effect, "two party
paper," with the issuer directly responsible for payment, plus a bank's
guarantee that if the note is not paid at maturity by the issuer, the bank will
pay the principal and interest to the buyer. Commercial paper is sold either as
interest-bearing or on a discounted basis, with maturities not exceeding 270
days. The Funds will only invest in commercial paper which at the date of
purchase is rated A-2 or higher by Standard & Poor's Ratings Group or Prime-2 or
higher by Moody's Investors Service, Inc. or, if unrated, commercial paper that
is judged by Fund Management to be equivalent in quality to commercial paper
having such ratings. A commercial paper rating of A-2 or Prime-2 indicates a
strong capacity for repayment of short-term promissory obligations.
Mortgage-Backed Securities
The Funds may invest in mortgage-backed securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities, or institutions such as
banks, insurance companies, and savings and loans. Some of these securities,
such as GNMA certificates, are backed by the full faith and credit of the U.S.
Treasury while others, such as Freddie Mac certificates, are not.
Mortgage-backed securities represent interests in a pool of mortgages.
Principal and interest payments made on the mortgages in the underlying mortgage
pool are passed through to the Funds. Unscheduled prepayments of principal
shorten the securities' weighted average life and may lower their total return.
The value of these securities also may change because of changes in the market's
perception of the creditworthiness of the federal agency or private institution
that issued them. In addition, the mortgage securities market in general may be
adversely affected by changes in governmental regulation or tax policies.
Asset-Backed Securities
Asset-backed securities represent interests in pools of consumer loans
(generally unrelated to mortgage loans) and most often are structured as
pass-through securities. Interest and principal payments ultimately depend on
payment of the underlying loans by individuals, although the securities may be
supported by letters of credit or other credit enhancements. The underlying
assets (e.g., loans) are subject to prepayments which shorten the securities'
weighted average life and may lower their returns. If the credit support or
enhancement is exhausted, losses or delays in payment may result if the required
payments of principal and interest are not made. The value of these securities
also may change because of changes in the market's perception of the
<PAGE>
creditworthiness of the servicing agent for the pool, the originator of the
pool, or the financial institution providing the credit support or enhancement.
Zero Coupon Bonds
The Funds may invest in zero coupon bonds or "strips." Zero coupon bonds
do not make regular interest payments; rather, they are sold at a discount from
face value. Principal and accreted discount (representing interest accrued but
not paid) are paid at maturity. "Strips" are debt securities that are stripped
of their interest after the securities are issued, but otherwise are comparable
to zero coupon bonds. The issuers of all zero coupon bonds, and the obligor of
all "strips," purchased by the Funds will be the U.S. government or its agencies
or instrumentalities. The market value of "strips" and zero coupon bonds
generally fluctuates in response to changes in interest rates to a greater
degree than interest-paying securities of comparable term and quality. In order
for a Fund to maintain its qualification as a regulated investment company, it
may be required to distribute income recognized on zero coupon bonds even though
no cash may be paid to the Fund until the maturity or call date of the bond, and
such distribution could reduce the amount of cash available for investment by
the Fund.
When-Issued Securities
Each Fund may make commitments in an amount of up to 10% of the value of
its total assets at the time any commitment is made to purchase or sell
securities on a when-issued or delayed delivery basis (i.e., securities may be
purchased or sold by the Fund with settlement taking place in the future, often
a month or more later). The payment obligation and, in the case of debt
securities, the interest rate that will be received on the securities are
generally fixed at the time the Fund enters into the commitment. During the
period between purchase and settlement, no payment is made by the Fund and no
interest accrues to the Fund. At the time of settlement, the market value of the
security may be more or less than the purchase price, and the Fund bears the
risk of such market value fluctuations. The Fund maintains cash, U.S. government
securities, or other high-grade debt obligations readily convertible into cash
having an aggregate value equal to the amount of such purchase commitments in a
segregated account with its custodian until payment is made.
Securities Lending
Each 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
<PAGE>
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).
Futures and Options on Futures and Securities
As described in the Funds' Prospectuses, the Funds may enter into futures
contracts, and purchase and sell ("write") options to buy or sell futures
contracts and other securities. The Funds will comply with and adhere to all
limitations in the manner and extent to which they effect transactions in
futures and options on such futures currently imposed by the rules and policy
guidelines of the Commodity Futures Trading Commission (the "CFTC") as
conditions for exemption of a mutual fund, or investment advisers thereto, from
registration as a commodity pool operator. Under those restrictions, a 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 the Fund's total 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 Funds 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 and the regulations thereunder. As to long positions which
are used as part of the Funds' portfolio strategies and are incidental to their
activities in the underlying cash market, the "underlying commodity value" of
the Funds' 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 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 a Fund purchases or sells a security, no price is paid or
received by a Fund upon the purchase or sale of a futures contract. Instead, the
Fund will be required to deposit in a segregated asset account with the broker
<PAGE>
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 a 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 a 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 and Options
Contracts").
Where futures are purchased to hedge against a possible increase in the
price of a security before a 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 contract 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 the underlying securities 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 value of the underlying
securities 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 Funds 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 a 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, a
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 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, a 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 a 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
<PAGE>
also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the options bought.
Forward Foreign Currency Contracts
The Funds may enter into forward currency contracts to purchase or sell
foreign currencies (i.e., non-U.S. currencies) as a hedge against possible
variations in foreign exchange rates. A forward foreign currency exchange
contract is an agreement between the contracting parties to exchange an amount
of currency at some future time at an agreed upon rate. The rate can be higher
or lower than the spot rate between the currencies that are the subject of the
contract. A forward contract generally has no deposit requirement, and such
transactions do not involve commissions. By entering into a forward contract for
the purchase or sale of the amount of foreign currency invested in a foreign
security transaction, a Fund can hedge against possible variations in the value
of the dollar versus the subject currency either between the date the foreign
security is purchased or sold and the date on which payment is made or received
or during the time the Fund holds the foreign security. Hedging against a
decline in the value of a currency in the foregoing manner does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Furthermore, such hedging transactions
preclude the opportunity for gain if the value of the hedged currency should
rise. The Funds will not speculate in forward currency contracts. Although the
Funds have not adopted any limitations on their ability to use forward contracts
as a hedge against fluctuations in foreign exchange rates, the Funds do not
attempt to hedge all of their non-U.S. portfolio positions and will enter into
such transactions only to the extent, if any, deemed appropriate by their
investment adviser or sub-adviser. The Funds will not enter into forward
contracts for a term of more than one year.
Swaps and Swap-Related Products
Interest rate swaps involve the exchange by a Fund with another party of
their respective commitments to pay or receive interest, e.g., an exchange of
floating rate payments for fixed rate payments. The exchange commitments can
involve payments to be made in the same currency or in different currencies. The
purchase of an interest rate cap entitles the purchaser, to the extent that a
specified index exceeds a predetermined interest rate, to receive payments of
interest on a contractually-based principal amount from the party selling the
interest rate cap. The purchase of an interest rate floor entitles the
purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest on a contractually-based
principal amount from the party selling the interest rate floor.
Although the Funds currently do not intend to use interest rate swaps, caps
and floors, such transactions may be entered into on either an asset-based or
liability-based basis, depending upon whether they are hedging their assets or
<PAGE>
their liabilities. Interest rate swaps usually are entered into on a net basis,
i.e., the two payment streams are netted out, with a Fund receiving or paying,
as the case may be, only the net amount of the two payments. The net amount of
the excess, if any, of a Fund's obligations over its entitlement with respect to
each interest rate swap will be calculated on a daily basis, and an amount of
cash or high-grade liquid assets having an aggregate net asset value at least
equal to the accrued excess will be maintained in a segregated account by the
Funds' custodian. If a Fund enters into an interest rate swap on other than a
net basis, the Fund would maintain a segregated account in the full amount
accrued on a daily basis of the Fund's obligations with respect to the swap. The
Funds will not enter into any interest rate swap, cap or floor transaction
unless the unsecured senior debt or the claims-paying ability of the other party
thereto is rated in one of the three highest rating categories of at least one
nationally recognized statistical rating organization at the time of entering
into such transaction. The Funds' adviser or sub- adviser will monitor the
creditworthiness of all counterparties on an ongoing basis. If there is a
default by the other party to such a transaction, a Fund would have contractual
remedies pursuant to the agreements related to the transaction.
The swap market has grown substantially in recent years with a large
number of banks and investment banking firms acting both as principals and as
agents utilizing standardized swap documentation. Caps and floors are more
recent innovations for which standardized documentation has not yet been
developed and, accordingly, they are less liquid than swaps. To the extent a
Fund sells (i.e., writes) caps and floors, it will maintain in a segregated
account cash or high-grade liquid assets having an aggregate net asset value at
least equal to the full amount, accrued on a daily basis, of the Fund's
obligations with respect to any caps or floors.
There is no limit on the amount of interest rate swap transactions that
may be entered into by a Fund. These transactions may in some instances involve
the delivery of securities or other underlying assets by a Fund or its
counterparty to collateralize obligations under the swap. The documentation
currently used in those markets attempts to limit the risk of loss with respect
to interest rate swaps to the net amount of the payments that a party is
contractually obligated to make. If the other party to an interest rate swap
that is not collateralized defaults, the Fund would anticipate losing the net
amount of the payments that the Fund contractually is entitled to receive over
the payments that the Fund is contractually obligated to make. The Funds may buy
and sell (i.e., write) caps and floors without limitation, subject to the
segregated account requirement described above as well as the Funds' other
investment restrictions set forth below.
<PAGE>
Investment Restrictions
As described in the section of each Fund's Prospectus entitled "Investment
Objective and Policies," the Funds operate under certain investment restrictions
which are fundamental and may not be changed with respect to a particular Fund
without the prior approval of the holders of a majority, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), of the outstanding
voting securities of that Fund. For purposes of the following limitations, 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 a Fund.
Each Fund may not:
1. With respect to seventy-five percent (75%) of its total assets,
purchase the securities of any one issuer (except cash items and
"Government securities" as defined under 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;
2. Borrow money, except that the Fund may borrow money for
temporary or emergency purposes (not for leveraging or invest-
ment) 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 restric-
tion shall not prohibit deposits of assets to margin or guaran-
tee 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 total 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, swaps and forward
<PAGE>
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.
As a fundamental policy in addition to the above, each 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.
Furthermore, the board of directors has adopted additional investment
restrictions for each Fund. These restrictions are operating policies of each
Fund and may be changed by the board of directors without shareholder approval.
The additional investment restrictions adopted by the board of directors to date
include the following:
(a) 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. Warrants acquired by the Fund in units or
attached to securities shall be deemed to be without value.
(b) 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 net 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.
(c) 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 without the payment of any
additional consideration therefor, and provided that transactions
<PAGE>
in options, swaps and forward futures contracts are not deemed to
constitute selling securities short.
(d) 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, swaps and forward contracts shall not be deemed
to constitute purchasing securities on margin.
(e) The Fund does not currently intend to (i) purchase securities
of closed end 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
waive its advisory fee on the assets of the Fund which are
invested in the money market fund during the time that those
assets are so invested.
(f) 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.
(g) The Fund does not currently intend to purchase securities of
any issuer (other than U.S. Government agencies and
instrumentalities or instruments guaranteed by an entity with
a record of more than three years' continuous operation,
including that of predecessors) with a record of less than
three years' continuous operation (including that of
predecessors) if such purchase would cause the Fund's
investments in all such issuers to exceed 5% of the Fund's
total assets taken at market value at the time of such
purchase.
(h) 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.
(i) The Fund does not currently intend to purchase any security or enter
into a repurchase agreement if, as a result, more than 15% of its
net assets would be invested in repurchase agreements not
<PAGE>
entitling the holder to payment of principal and interest within
seven days and in securities that are illiquid by virtue of legal or
contractual restrictions on resale or the absence of a 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 1933 Act, or any successor to such rule, and therefore
that such securities are not subject to the foregoing limitation.
(j) The Fund may not invest in companies for the purpose of exercising
control or management, except to the extent that exercise by the
Fund of its rights under agreements related to portfolio securities
would be deemed to constitute such control.
In applying the industry concentration investment restriction (no.3,
above) the Funds use an industry classification system based on the O'Neil
Database published by William O'Neil & Co., Inc.
With respect to investment restriction (i) above, the board of directors
has delegated to the Funds' investment adviser the authority to determine that 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 such securities are
not subject to restriction (i) 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 given an undertaking to the States of Kentucky, Texas and
Massachusetts that it will comply with the Guidelines for Registration of Master
Fund/Feeder Funds adopted by the membership of the North American Securities
Administrators Association, Inc. in the event that, in the future, either or
both of the Funds is converted into a feeder fund in a master fund/feeder fund
structure. The Company also has given an undertaking to the State of Texas that
the Funds will not purchase or sell real property, including real estate limited
partnership interests.
The Company has given undertakings to the State of Arkansas that: neither
Fund will purchase securities of issuers which the Fund is restricted from
selling to the public without registration under the 1933 Act (excluding
securities eligible for resale pursuant to Rule 144A under the 1933 Act) if, by
reason thereof, the value of the Fund's aggregate investment in such securities
<PAGE>
would exceed 10% of the Fund's total assets; neither Fund will purchase puts,
calls, straddles, spreads or any combination thereof if, by reason thereof, the
value of the Fund's aggregate investment in such classes of securities would
exceed 5% of the Fund's total assets; and the assets of the Company, within a
period of two years after the commencement of the initial public offering of the
Company's securities or such additional period as the Arkansas securities
administrator may permit, will not be less than $1,000,000.
The Company has given an undertaking to the State of California that its
option transactions will comply with Rule 260.140.85(b) under the California
Corporate Securities Law of 1968, and that the aggregate value of the securities
underlying the calls written by a Fund, or the obligations underlying the puts
written by a Fund, as of the date the options are sold shall not exceed 25% of
the Fund's net assets.
The Company has given undertaking to the State of Ohio that: neither Fund
will purchase or retain the securities of any issuer if the officers, directors,
advisors or managers of the Fund owning beneficially more than .50% of the
securities of an issuer together own beneficially more than 5% of the securities
of that issuer; and neither Fund will invest more than 15% of the Fund's net
assets in the securities of issuers which, together with any predecessors, have
a record of less than three years continuous operation, or securities of issuers
which are restricted as to disposition.
<PAGE>
THE FUND AND ITS MANAGEMENT
The Company. The Company was incorporated on August 19, 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
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 Specialty Funds, Inc., INVESCO Strategic
Portfolios, Inc., INVESCO Tax-Free Income Funds, Inc., INVESCO Value Trust, and
INVESCO Variable Investment Funds, Inc.
The Sub-Advisers. INVESCO, as investment adviser, has contracted with
INVESCO Management & Research, Inc. ("INVESCO Management") for investment
advisory and research services on behalf of INVESCO Multi- Asset Allocation
Fund, and with INVESCO Trust Company ("INVESCO Trust") to provide such services
on behalf of INVESCO Balanced Fund. INVESCO Management and INVESCO Trust have
the primary responsibility for providing portfolio investment management
services to the respective Funds. INVESCO Management, formerly Gardner and
Preston Moss, Inc. is a wholly-owned subsidiary of INVESCO North American
Holdings, Inc. ("INAH"), which is also the parent company of INVESCO. INVESCO
Trust, a trust company founded in 1969, is a wholly-owned subsidiary of INVESCO.
INVESCO is an indirect, wholly-owned subsidiary of INVESCO PLC, a
publicly-traded holding company organized in 1935. Through subsidiaries located
in London, Denver, Atlanta, Boston, Louisville, Dallas, Tokyo, Hong Kong, and
the Channel Islands, INVESCO PLC provides investment services around the world.
INVESCO was acquired by INVESCO PLC in 1982 and as of July 31, 1995, managed 14
mutual funds, consisting of 38 separate portfolios, on behalf of over 790,000
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. 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.
<PAGE>
--INVESCO Realty Advisors of Dallas, Texas, is responsible for providing
advisory services in the U.S. real estate markets for INVESCO PLC's clients
worldwide. Clients include corporate plans, public pension funds as well as
endowment and foundation accounts.
The corporate headquarters of INVESCO PLC are located at 11 Devonshire
Square, London, EC2M 4YR, England.
As indicated in the Prospectuses, INVESCO, INVESCO Management and INVESCO
Trust permit investment and other personnel to purchase and sell securities for
their own accounts in accordance with a compliance policy governing personal
investing by directors, officers and employees of INVESCO and its North American
affiliates. The policy requires officers, inside directors, investment and other
personnel of INVESCO and its 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 Funds.
In addition to the pre-clearance requirement described above, the policy
subjects officers, inside directors, investment and other personnel of INVESCO
and its North American affiliates to various trading restrictions and reporting
obligations. All reportable transactions are reviewed for compliance with the
policy. The provisions of the policy are administered by and subject to
exceptions authorized by INVESCO, INVESCO Management or INVESCO Trust.
Investment Advisory Agreement. INVESCO serves as investment adviser
pursuant to an investment advisory agreement (the "Agreement") with the Company
which was approved on 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 or INVESCO at a meeting called for such
purpose. The Agreement was approved by INVESCO Funds Group, Inc. on November 19,
1993, as the then sole shareholder of the Fund. The Agreement is for an initial
term expiring April 30, 1995. The Agreement has been continued by action of the
board of directors through April 30, 1996. Thereafter, the Agreement may be
continued from year to year as to each Fund as long as each such continuance is
specifically approved at least annually by the board of directors of the
Company, or by a vote of the holders of a majority, as defined in the 1940 Act,
of the outstanding shares of the Fund. 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
<PAGE>
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 portfolios
of the Funds in conformity with the Funds' investment policies (either directly
or by delegation to a sub-adviser, which may be a party 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 Funds excluding, however, those services that are the subject of
separate agreement between the Company and INVESCO or any affiliate thereof,
including the distribution and sale of Fund shares and provision of transfer
agency, dividend disbursing agency, and registrar services, and services
furnished under an Administrative Services Agreement 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 Funds' operations; furnishing office
space, facilities, equipment, and supplies; providing personnel and facilities
required to respond to inquiries related to shareholder accounts; conducting
periodic compliance reviews of the Funds' 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 Funds), except insofar as the assistance of
independent accountants or attorneys is necessary or desirable; supplying basic
telephone service and other utilities; and preparing and maintaining certain of
the books and records required to be prepared and maintained by the Funds under
the 1940 Act. Expenses not assumed by INVESCO are borne by the Funds.
As full compensation for its advisory services to the Company, INVESCO
receives a monthly fee. The fee is based upon a percentage of each Fund's
average net assets, determined daily. With respect to the Multi-Asset Allocation
Fund, the fee is calculated at the annual rate of: 0.75% of the first $500
million of the Fund's average net assets; 0.65% of the next $500 million of the
Fund's average net assets; and 0.50% of the Fund's average net assets over $1
billion. While the portion of the advisory fee which is equal to 0.75% of the
Fund's average net assets is higher than the advisory fees incurred by most
other mutual funds, this fee is not higher than the advisory fees paid by most
other asset allocation funds on comparable levels of assets. With respect to the
Balanced Fund, the fee is calculated at the annual rate of: 0.60% of the first
$350 million of the Fund's average net assets; 0.55% of the next $350 million of
the Fund's average net assets; and 0.50% of the Fund's average net assets over
$700 million.
For the fiscal year ended July 31, 1995 and the period ended July 31, 1994,
prior to the voluntary absorption of certain Fund expenses by INVESCO and the
applicable sub-adviser, the Multi-Asset Allocation Fund paid INVESCO advisory
<PAGE>
fees of $47,678 and $10,021, respectively, and the Balanced Fund paid INVESCO
advisory fees of $109,635 and $9,081, respectively.
Certain states in which the shares of the Funds are qualified for sale
currently impose limitations on the expenses of each of the Funds. At the date
of this Statement of Additional Information, the most restrictive state-imposed
annual expense limitation requires that INVESCO absorb the amount necessary to
prevent any Fund's aggregate ordinary operating expenses (excluding interest,
taxes, Rule 12b-1 fees, brokerage fees and commissions, and extraordinary
charges such as litigation costs) from exceeding in any fiscal year 2.5% of that
Fund's first $30 million of average net assets, 2.0% of the next $70 million of
average net assets and 1.5% of the remaining average net assets. No payment of
the investment advisory fee will be made to INVESCO which would result in a
Fund's expenses exceeding on a cumulative annualized basis this state
limitation.
Sub-Advisory Agreements. INVESCO Management serves as sub-adviser to the
Multi-Asset Allocation Fund and INVESCO Trust serves as sub-adviser to the
Balanced Fund pursuant to separate sub-advisory agreements (the
"Sub-Agreements") with INVESCO which were 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, INVESCO Trust or INVESCO Management at a meeting called for such
purpose. The Sub- Agreements were approved on November 19, 1993, by INVESCO as
the then sole shareholder of the Funds for an initial term expiring April 30,
1995, and has been continued by action of the board of directors until April 30,
1996. Thereafter, the Sub-Agreements 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 to which the Sub-Agreement relates.
Each such continuance also must be approved by a majority of the directors who
are not parties to the Sub-Agreements 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-Agreements 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 Investment Company Act of 1940 and the rules thereunder.
The Sub-Agreements provide that INVESCO Management as sub-adviser to the
Multi-Asset Allocation Fund and INVESCO Trust as sub-adviser to the Balanced
Fund, subject to the supervision of INVESCO, shall manage the investment
portfolios of the applicable Funds in conformity with each Fund's investment
policies. These management services would include: (a) managing the investment
and reinvestment of all the assets, now or hereafter acquired, of the Funds, and
executing all purchases and sales of portfolio securities; (b) maintaining a
<PAGE>
continuous investment program for the Funds, consistent with (i) each Fund's
investment policies as set forth in the Company's Articles of Incorporation,
Bylaws, and Registration Statement, as from time to time amended, under the 1940
Act, as amended, and in any prospectus and/or statement of additional
information of the Company, as from time to time amended and in use under the
1933 Act, 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 each of the Funds, unless
otherwise directed by the directors of the Company or INVESCO, and executing
transactions accordingly; (d) providing the Funds 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 each of the Funds should be invested in the various
types of securities authorized for purchase by each 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
each Fund shall be exercised.
The Sub-Agreements provide that as compensation for their services,
INVESCO Management and INVESCO Trust shall receive from INVESCO, at the end of
each month, a fee based upon the average daily value of the applicable Fund's
net assets. With respect to the INVESCO Multi-Asset Allocation Fund, the fee is
calculated at the annual rate of: 0.375% of the first $500 million of the Fund's
average net assets; 0.325% of the next $500 million of the Fund's average net
assets; and 0.25% of the Fund's average net assets over $1 billion. With respect
to the INVESCO Balanced Fund, the fee is calculated at the annual rate of: 0.30%
of the first $350 million of the Fund's average net assets; 0.275% of the next
$350 million of the Fund's average net assets; and 0.25% of the Fund's average
net assets over $700 million. The Sub-Advisory fees are paid by INVESCO, NOT the
Funds.
Administrative Services Agreement. INVESCO, either directly or through
affiliated companies, provides certain administrative, sub-accounting, and
recordkeeping services to the Funds pursuant to an Administrative Services
Agreement dated October 20, 1993 (the "Administrative Agreement"). The
Administrative Agreement was approved on October 20, 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 expiring
April 30, 1994, and has been continued by action of the board of directors until
April 30, 1996. The Administrative Agreement may be continued from year to year
thereafter as long as each such continuance is specifically approved by the
board of directors of the Company, including a majority of the directors who are
not parties to the Administrative Agreement or interested persons (as defined in
the 1940 Act) of any such party, cast in person at a meeting called for the
purpose of voting on such continuance. The Administrative Agreement may be
<PAGE>
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 Funds: (A) such sub-accounting and recordkeeping
services and functions as are reasonably necessary for the operation of the
Funds; 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, each 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 year ended July 31, 1995 and the period ended July 31,
1994, prior to the voluntary absorption of certain Fund expenses by INVESCO and
the applicable sub-adviser, the Multi-Asset Allocation Fund paid INVESCO
administrative services fees in the amount of $10,954 and $6,867, respectively,
and the Balanced Fund paid INVESCO administrative services fees in the amount of
$12,806 and $6,894, respectively.
Transfer Agency Agreement. INVESCO also performs transfer agent, dividend
disbursing agent, and registrar services for the Funds pursuant to a Transfer
Agency Agreement which was approved by the board of directors of the Company,
including a majority of the Company's directors who are not parties to the
Transfer Agency Agreement or "interested persons" of any such party, on October
20, 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,
1996, and thereafter may be continued from year to year as to each Fund 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 also must be approved by a
majority of the Company's directors who are not parties to the Transfer Agency
Agreement or interested persons (as defined by the 1940 Act) of any such party,
cast in person at a meeting called for the purpose of voting on such
continuance. The Transfer Agency Agreement may be terminated at any time without
penalty by either party upon sixty (60) days' written notice and terminates
automatically in the event of assignment.
The Transfer Agency Agreement provides that the Funds will pay to INVESCO a
fee of $14.00 per shareholder account or omnibus account participant per year.
This fee is paid monthly at 1/12 of the annual fee and is based upon the number
of shareholder accounts or omnibus account participants in existence at any time
<PAGE>
during each month. For the fiscal year ended July 31, 1995 and the period ended
July 31, 1994, prior to the voluntary absorption of certain Fund expenses by
INVESCO and the applicable sub-adviser, the Multi-Asset Allocation Fund paid
INVESCO transfer agency fees of $18,599 and $3,810, respectively, and the
Balanced Fund paid INVESCO transfer agency fees of $56,538 and $3,241,
respectively.
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 each of the Funds are carried out and that the Funds are properly
administered. The officers of the Company, all of whom are officers and
employees of, and paid by, INVESCO, are responsible for the day-to-day
administration of the Company and each of the Funds. The investment adviser for
each Fund has the primary responsibility for making investment decisions on
behalf of that Fund. These investment decisions are reviewed by the investment
committee of INVESCO.
All of the officers and directors of the Company hold comparable positions
with INVESCO Diversified Funds, Inc., INVESCO Dynamics Fund, Inc., INVESCO
Emerging Growth Fund, Inc., INVESCO Opportunity Funds, Inc., INVESCO Income
Funds, Inc., INVESCO Industrial Income Fund, Inc., INVESCO International Funds,
Inc., INVESCO Money Market 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: with the exception of Messrs. Hesser and Sim, directors of The
EBI Funds, Inc. and 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 The EBI 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 The EBI
Funds, Inc. and INVESCO Treasurer's Series Trust. Trustee of The Global Health
Sciences Fund. Formerly, Chairman of the Executive Committee and Chairman of the
Board of Security Life of Denver Insurance Company, Denver, Colorado; Director
of NN Financial, Toronto, Ontario, Canada. Director and Chairman of the
Executive Committee of ING America Life, Life Insurance Co. of Georgia and
Southland Life Insurance Company. Address: Security Life Center, 1290 Broadway,
Denver, Colorado. Born: January 12, 1928.
DAN J. HESSER,+* President and Director. Chairman of the Board, President
and Chief Executive Officer of INVESCO Funds Group, Inc. and Director of INVESCO
Trust Company. Trustee of The Global Health Sciences Fund. Born: December 27,
1939.
VICTOR L. ANDREWS,** Director. Mills Bee Lane Professor of Banking and
<PAGE>
Finance and Chairman of the Department of Finance at Georgia State University,
Atlanta, Georgia, since 1968; since October 1984, Director of the Center for the
Study of Regulated Industry at Georgia State University; formerly, member of the
faculties of the Harvard Business School and the Sloan School of Management of
MIT. Dr. Andrews is also a Director of The Southeastern Thrift and Bank Fund,
Inc. and The Sheffield Funds, Inc. Address: Department of Finance, Georgia State
University, University Plaza, Atlanta, Georgia. Born: June 23, 1930.
BOB R. BAKER,+** Director. President and Chief Executive Officer of AMC
Cancer Research Center, Denver, Colorado, since January 1989; until mid-December
1988, Vice Chairman of the Board of First Columbia Financial Corporation (a
financial institution), Englewood, Colorado. Formerly, Chairman of the Board and
Chief Executive Officer of First Columbia Financial Corporation. Address: 1775
Sherman Street, #1000, Denver, Colorado. Born: August 7, 1936.
FRANK M. BISHOP*, Director. President and Chief Operating Officer of
INVESCO Inc. since February, 1993; Director of INVESCO Funds Group, Inc.;
Director (since February 1993), Vice President (since December 1991), and
Portfolio Manager (since February 1987), of INVESCO Capital Management, Inc.
(and predecessor firms) Atlanta, Georgia. Address: 1315 Peachtree Street, N.E.,
Atlanta, Georgia. Born: December 7, 1943.
LAWRENCE H. BUDNER,# Director. Trust Consultant; prior to June 30, 1987,
Senior Vice President and Senior Trust Officer of InterFirst Bank, Dallas,
Texas. Address: 7608 Glen Albens, Dallas, Texas. Born: July 25, 1930.
DANIEL D. CHABRIS,+# Director. Financial Consultant; Assistant Treasurer of
Colt Industries Inc., New York, New York, from 1966 to 1988. Address: 15
Sterling Road, Armonk, New York. Born: August 1, 1923.
A. D. FRAZIER, JR.,** Director. Chief Operating Officer of the Atlanta
Committee for the Olympic Games. From 1982 to 1991, Mr. Frazier was employed in
various capacities by First Chicago American Banking Group. Trustee of The
Global Health Sciences Fund. Address: 250 Williams Street, Suite 6000, Atlanta,
Georgia 30301. Born: June 29, 1944.
<PAGE>
KENNETH T. KING,** Director. Formerly, Chairman of the Board of The Capitol
Life Insurance Company, Providence Washington Insurance Company, and Director of
numerous subsidiaries thereof in the U.S. Formerly, Chairman of the Board of The
Providence Capitol Companies in the United Kingdom and Guernsey. Chairman of the
Board of the Symbion Corporation (a high technology company) until 1987.
Address: 4080 North Circulo Manzanillo, Tucson, Arizona. Born: November 16,
1925.
JOHN W. MCINTYRE,# Director. Retired. Formerly, Vice Chairman of the Board
of Directors of the Citizens and Southern Corporation and Chairman of the Board
and Chief Executive Officer of the Citizens and Southern Georgia Corporation and
Citizens and Southern National Bank. Director of Golden Poultry Co., Inc.
Trustee of The Global Health Sciences Fund and Gables Residential Trust.
Address: Seven Piedmont Center, Suite 100, Atlanta, Georgia 30305. Born:
September 14, 1930.
R. DALTON SIM*, Director. Chairman of the Board (since March 1993) and
President (since January 1991) of INVESCO Trust Company; Director since June
1987 and, formerly, Executive Vice President and Chief Investment Officer (June
1987 to January 1991) of INVESCO Funds Group, Inc.; President (since 1994) and
Trustee (since 1991) of The Global Health Sciences Fund. Born: July 18, 1939.
GLEN A. PAYNE, Secretary. Senior Vice President, General Counsel and
Secretary of INVESCO Funds Group, Inc. and INVESCO Trust Company; formerly,
employee of a U.S. regulatory agency, Washington, D.C., (June 1973 through May
1989). Born: September 25, 1947.
RONALD L. GROOMS, Treasurer. Senior Vice President and Treasurer of INVESCO
Funds Group, Inc. and INVESCO Trust Company. Born: October 1, 1946.
WILLIAM J. GALVIN, JR., Assistant Secretary. Senior Vice President of
INVESCO Funds Group, Inc. and Trust Officer of INVESCO Trust Company; Vice
President of 440 Financial Group from June 1990 to August 1992; Assistant Vice
President of Putnam Companies from November 1986 to June 1990. Born: August 21,
1956.
ALAN I. WATSON, Assistant Secretary. Vice President of INVESCO Funds Group,
Inc. and Trust Officer of INVESCO Trust Company. Born: September 14, 1941.
JUDY P. WIESE, Assistant Treasurer. Vice President of INVESCO Funds Group,
Inc. and Trust Officer of INVESCO Trust Company. Born: February 3, 1948.
#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
<PAGE>
between meetings of the board of directors. Except for certain powers which,
under applicable law, may only be exercised by the full board of directors, the
executive committee may exercise all powers and authority of the board of
directors in the management of the business of the Company. All decisions are
subsequently submitted for ratification by the board of directors.
*These directors are "interested persons" of the Company as defined in the
1940 Act.
**Member of the management liaison committee of the Company.
As of September 13, 1995, 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 each Fund's outstanding shares.
Director Compensation
The following table sets forth, for the fiscal year ended July 31, 1995:
the compensation paid by the Company to its eight independent directors for
services rendered in their capacities as directors of the Company; the benefits
accrued as Company expenses with respect to the Defined Benefit Deferred
Compensation Plan discussed below; and the estimated annual benefits to be
received by these directors upon retirement as a result of their service to the
Company. In addition, the table sets forth the total compensation paid by all of
the mutual funds distributed by INVESCO Funds Group, Inc. (including the
Company), The EBI Funds, Inc., INVESCO Treasurer's Series Trust and The Global
Health Sciences Fund (collectively, the "INVESCO Complex") to these directors
for services rendered in their capacities as directors or trustees during the
year ended December 31, 1994. As of December 31, 1994, there were 45 funds in
the INVESCO Complex.
Total
Compensa-
Benefits Estimated tion From
Aggregate Accrued As Annual INVESCO
Compensa- Part of Benefits Complex
tion From Company Upon Paid To
Company1 Expenses2 Retirement3 Directors1
Fred A.Deering, $1,304 $44 $22 $89,350
Vice Chairman of
the Board
Victor L. Andrews 1,290 41 26 68,000
Bob R. Baker 1,299 37 34 75,350
Lawrence H. Budner 1,290 41 26 68,000
<PAGE>
Daniel D. Chabris 1,299 47 18 73,350
A. D. Frazier, Jr.4 519 0 0 32,500
Kenneth T. King 1,295 46 20 71,000
John W. McIntyre4 519 0 0 33,000
Total $8,815 $256 $146 $510,550
% of Net Assets 0.0196%5 0.0006%5 0.0052%6
1The vice chairman of the board, the chairmen of the audit, management
liaison and compensation committees, and the members of the executive and
valuation committees each receive compensation for serving in such capacities in
addition to the compensation paid to all independent directors.
2Represents benefits accrued with respect to the Defined Benefit Deferred
Compensation Plan discussed below, and not compensation deferred at the election
of the directors.
3These amounts 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.
4Messrs. Frazier and McIntyre began serving as directors of the Company on
April 19, 1995.
5Total as a percentage of the Company's net assets as of July 31, 1995.
6Total as a percentage of the net assets of the INVESCO Complex as of
December 31, 1994.
Messrs. Bishop, Brady, Hesser, and Sim, as "interested persons" of the
Company and other funds in the INVESCO Complex, receive compensation as officers
or employees of INVESCO or its affiliated companies, and do not receive any
<PAGE>
director's fees or other compensation from the Company or other funds in the
INVESCO Complex for their services as directors.
The boards of directors/trustees of the mutual funds managed by INVESCO,
The EBI Funds, Inc. and INVESCO Treasurer's Series Trust have adopted a Defined
Benefit Deferred Compensation Plan for the non- interested directors and
trustees of the funds. Under this plan, each director or trustee who is not an
interested person of the funds (as defined in the 1940 Act) and who has served
for at least five years (a "qualified director") is entitled to receive, upon
retiring from the boards at the retirement age of 72 (or the retirement age of
73 to 74, if the retirement date is extended by the boards for one or two years,
but less than three years) continuation of payment for one year (the "first year
retirement benefit") of the annual basic retainer payable by the funds to the
qualified director at the time of his retirement (the "basic retainer").
Commencing with any such director's second year of retirement, and commencing
with the first year of retirement of a director whose retirement has been
extended by the board for three years, a qualified director shall receive
quarterly payments at an annual rate equal to 25% of the basic retainer. These
payments will continue for the remainder of the qualified director's life or ten
years, whichever is longer (the "reduced retainer payments"). If a qualified
director dies or becomes disabled after age 72 and before age 74 while still a
director of the funds, the first year retirement benefit and the reduced
retainer payments will be made to him or to his beneficiary or estate. If a
qualified director becomes disabled or dies either prior to age 72 or during
his/her 74th year while still a director of the funds, the director will not be
entitled to receive the first year retirement benefit; however, the reduced
retainer payments will be made to his beneficiary or estate. The plan is
administered by a committee of three directors who are also participants in the
plan and one director who is not a plan participant. The cost of the plan will
be allocated among the INVESCO, EBI and Treasurer's Series funds in a manner
determined to be fair and equitable by the committee. The Company is not making
any payments to directors under the plan as of the date of this Statement of
Additional Information. The Company has no stock options or other pension or
retirement plans for management or other personnel and pays no salary or
compensation to any of its officers.
The Company has an audit committee comprised of four of the directors who
are not interested persons of the Company. The committee meets periodically with
the Company's independent accountants and officers to review accounting
principles used by the Company, the adequacy of internal controls, the
responsibilities and fees of the independent accountants, and other matters.
The Company also has a management liaison committee which meets quarterly
with various management personnel of INVESCO in order (a) to facilitate better
understanding of management and operations of the Company, and (b) to review
<PAGE>
legal and operational matters which have been assigned to the committee by the
board of directors, in furtherance of the board of directors' overall duty of
supervision.
HOW SHARES CAN BE PURCHASED
Shares of each Fund 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 is computed separately for
each Fund and is determined 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 Funds'
Distributor under a distribution agreement with the Company under which it
receives no compensation and bears all expenses, including the costs of printing
and distributing prospectuses, incident to marketing of the Funds' shares,
except for such distribution expenses which are paid out of Fund assets under
the Company's Plan of Distribution which has been adopted by the Company
pursuant to Rule 12b-1 under the 1940 Act.
Distribution Plan. As discussed under "How to Buy Shares - Distribution
Expenses" in the Prospectus, the Company has adopted a Plan and Agreement of
Distribution (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. The Plan
provides that each of the Funds may make monthly payments to INVESCO of amounts
computed at an annual rate no greater than 0.25% of the Fund's average net
assets to reimburse it for expenses incurred by it in connection with the
distribution of each Fund's shares to investors. Payment amounts by a Fund under
the Plan, for any month, may only be made to reimburse or pay expenditures
incurred during the rolling 12-month period in which that month falls, although
this period is expanded to 24 months for expenses incurred during the first 24
months of the Fund's operations. During the fiscal period ended July 31, 1995,
the Multi-Asset Allocation Fund and Balanced Fund incurred $15,173 and $39,896
in distribution expenses, respectively, prior to the voluntary absorption of
certain Fund expenses by INVESCO and the applicable sub-adviser. In addition, as
of July 31, 1995, $3,286 and $13,711 of additional distribution expenses had
been incurred for Multi- Asset Allocation Fund and Balanced Fund, respectively,
subject to payment upon approval by the Company's directors, which payments were
approved on October 25, 1995. As noted in the Prospectuses, one type of
reimbursable expenditure is the payment of compensation to securities companies
and other financial institutions and organizations, which may include
INVESCO-affiliated companies, in order to obtain various distribution-related
and/or administrative services for the Funds. Each Fund is authorized by the
Plan to use its assets to finance the payments made to obtain those services.
Payments will be made by INVESCO to broker-dealers who sell shares of the Funds
and may be made to banks, savings and loan associations and other depository
institutions. Although the Glass-Steagall Act limits the ability of certain
banks to act as underwriters of mutual fund shares, the Company does not believe
<PAGE>
that these limitations would affect the ability of such banks to enter into
arrangements with INVESCO, but can give no assurance in this regard. However, to
the extent it is determined otherwise in the future, arrangements with banks
might have to be modified or terminated, and, in that case, the size of one or
more of the Funds possibly could decrease to the extent that the banks would no
longer invest customer assets in a particular Fund. Neither the Company nor its
investment adviser will give any preference to banks or other depository
institutions which enter into such arrangements when selecting investments to be
made by each Fund.
For the fiscal year ended July 31, 1995, allocation of 12b-1 amounts paid
by the Multi-Asset Allocation Fund for the following categories of expenses
were: advertising -- $974; sales literature, printing and postage -- $8,989;
direct mail -- $729; public relations/promotion -- $1,016; compensation to
securities dealers and other organizations -- $487; marketing personnel --
$2,978. For the fiscal year ended July 31, 1995, allocation of 12b-1 amounts
paid by the Balanced Fund for the following categories of expenses were:
advertising -- $12,975; sales literature, printing and postage -- $7,527; direct
mail -- $18,311; public relations/promotion -- $332; compensation to securities
dealers and other organizations -- $105; marketing personnel -- $646.
The nature and scope of services which are provided by securities dealers
and other organizations may vary by dealer but include, among other things,
processing new stockholder account applications, preparing and transmitting to
the Company's Transfer Agent computer-processable tapes of each Fund's
transactions by customers, serving as the primary source of information to
customers in answering questions concerning each Fund, and assisting in other
customer transactions with each Fund.
The Plan was approved on October 20, 1993, at a meeting called for such
purpose by a majority of the directors of the Company, including a majority of
the directors who neither are "interested persons" of the Company nor have any
financial interest in the operation of the Plan ("12b-1 directors"). The Plan
was approved by INVESCO on November 19, 1993, as the then sole shareholder of
the Funds for an initial term expiring April 30, 1994, and has been continued by
action of the board of directors until April 30, 1996.
The Plan provides that it shall continue in effect with respect to each
Fund for so long as such continuance is approved at least annually by the vote
of the board of directors of the Company cast in person at a meeting called for
the purpose of voting on such continuance. The Plan also can be terminated at
any time with respect to any Fund, without penalty, if a majority of the 12b-1
directors, or shareholders of such Fund, vote to terminate the Plan. The Company
may, in its absolute discretion, suspend, discontinue or limit the offering of
the shares of any Fund at any time. In determining whether any such action
should be taken, the board of directors intends to consider all relevant factors
<PAGE>
including, without limitation, the size of the Funds, the investment climate for
any particular Fund, general market conditions, and the volume of sales and
redemptions of Fund shares. The Plan may continue in effect and payments may be
made under the Plan following any such temporary suspension or limitation of the
offering of a Fund's shares; however, the Company is not contractually obligated
to continue the Plan for any particular period of time. Suspension of the
offering of a Fund's shares would not, of course, affect a shareholder's ability
to redeem his shares. So long as the Plan is in effect, the selection and
nomination of persons to serve as independent directors of the Company shall be
committed to the independent directors then in office at the time of such
selection or nomination. The Plan may not be amended to increase materially the
amount of any Fund's payments thereunder without approval of the shareholders of
that Fund, and all material amendments to the Plan must be approved by the board
of directors of the Company, including a majority of the 12b-1 directors. Under
the agreement implementing the Plan, INVESCO or the Funds, the latter by vote of
a majority of the 12b-1 directors or of the holders of a majority of any Fund's
outstanding voting securities, may terminate such agreement without penalty upon
30 days' written notice to the other party. No further payments will be made by
any Fund under the Plan in the event of its termination as to that Fund.
To the extent that the Plan constitutes a plan of distribution adopted
pursuant to Rule 12b-1 under the 1940 Act, it shall remain in effect as such, so
as to authorize the use of each Fund's assets in the amounts and for the
purposes set forth therein, notwithstanding the occurrence of an assignment, as
defined by the 1940 Act, and rules thereunder. To the extent it constitutes an
agreement pursuant to a plan, each Fund's obligation to make payments to INVESCO
shall terminate automatically, in the event of such "assignment," in which event
the Funds may continue to make payments, pursuant to the Plan, to INVESCO or
another organization only upon the approval of new arrangements, which may or
may not be with INVESCO, regarding the use of the amounts authorized to be paid
by it under the Plan, by the directors, including a majority of the 12b-1
directors, by a vote cast in person at a meeting called for such purpose.
Information regarding the services rendered under the Plan and the amounts
paid therefor by each Fund are provided to, and reviewed by, the directors on a
quarterly basis. In the quarterly review, the directors determine whether, and
to what extent, INVESCO will be reimbursed for expenditures which it has made
that are reimbursable under the Company's Rule 12b-1 Plan. On an annual basis,
the directors consider the continued appropriateness of the Plan at the level of
compensation provided therein.
The only directors or interested persons, as that term is defined in
Section 2(a)(19) of the 1940 Act, of the Company who have a direct or indirect
financial interest in the operation of the Plan are the officers and directors
<PAGE>
of the Company listed under "The Fund and Its Management - Officers and
Directors of the Company" who are also officers either of INVESCO or companies
affiliated with INVESCO. The benefits which the Company believes will be
reasonably likely to flow to the Funds and their shareholders under the Plan
include the following:
(1) Enhanced marketing efforts, if successful, should result in an
increase in net assets through the sale of additional shares and
afford greater resources with which to pursue the investment
objectives of the Funds;
(2) The sale of additional shares reduces the likelihood that redemption
of shares will require the liquidation of securities of the Funds in
amounts and at times that are disadvantageous for investment
purposes;
(3) The positive effect which increased Fund assets will have on its
revenues could allow INVESCO:
(a) To have greater resources to make the financial commitments
necessary to improve the quality and level of each Fund's
shareholder services (in both systems and personnel),
(b) To increase the number and type of mutual funds available to
investors from INVESCO (and support them in their infancy),
and thereby expand the investment choices available to all
shareholders, and
(c) To acquire and retain talented employees who desire to be
associated with a growing organization; and
(4) Increased Fund assets may result in reducing each investor's share
of certain expenses through economies of scale (e.g. exceeding
established breakpoints in the advisory fee schedule and allocating
fixed expenses over a larger asset base), thereby partially
offsetting the costs of the Plan.
HOW SHARES ARE VALUED
As described in the section of each Fund's Prospectus entitled "Fund Price
and Performance," the net asset value of shares of each 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 (generally 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 a Fund that the current net asset
value per share of such Fund might be materially affected by changes in the
value of the securities held, but only if on such day the Fund receives a
<PAGE>
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 each Fund is calculated by dividing the
value of all securities held by the Fund and its other assets (including
dividends and interest accrued but not collected), less the Fund's liabilities
(including accrued expenses), by the number of outstanding shares of the Fund.
Securities traded on national securities exchanges, the NASDAQ National Market
System, the NASDAQ Small Cap Market and foreign markets are valued at their last
sale prices on the exchanges or markets where such securities are primarily
traded. Securities traded in the over-the-counter market for which last sale
prices are not available, and listed securities for which no sales were reported
on a particular date, are valued at their highest closing bid prices (or, for
debt securities, yield equivalents thereof) obtained from one or more dealers
making markets for such securities. If market quotations are not readily
available, securities will be valued at their fair values as determined in good
faith by the board of directors or pursuant to procedures adopted by the board
of directors. The above procedures may include the use of valuations furnished
by a pricing service which employs a matrix to determine valuations for normal
institutional-size trading units of debt securities. Prior to utilizing a
pricing service, the Company's board of directors reviews the methods used by
such service to assure itself that securities will be valued at their fair
values. The Company's board of directors also periodically monitors the methods
used by such pricing services. Debt securities with remaining maturities of 60
days or less at the time of purchase are normally valued at amortized cost.
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 Funds' 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.
<PAGE>
FUND PERFORMANCE
As discussed in the section of each Fund's Prospectus entitled "Fund Price
and Performance," the Funds advertise their total return performance. The total
return performance for each Fund for the indicated periods ended July 31, 1995
was as follows:
Fund 1 Year Life of Fund*
Multi-Asset Allocation Fund 15.13% 7.10%
Balanced Fund 22.97% 16.13%
*20 months (1.67 years)
Average annual total return performance is computed by finding the average
annual compounded rates of return that would equate the initial amount invested
to the ending redeemable value, according to the following formula:
P(1 + T)n = ERV
where: P = initial payment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of initial payment
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.
In conjunction with performance reports and/or analyses of shareholder
service for the Funds, comparative data between a Fund's performance for a given
period and recognized indices of investment results for the same period, and/or
assessments of the quality of shareholder service, may be provided to
shareholders. Such indices include indices provided by Dow Jones & Company,
Standard & Poor's, Lipper Analytical Services, Inc., Lehman Brothers, National
Association of Securities Dealers Automated Quotations, Frank Russell Company,
Value Line Investment Survey, the American Stock Exchange, Morgan Stanley
Capital International, Wilshire Associates, the Financial Times Stock Exchange,
the New York Stock Exchange, the Nikkei Stock Average and Deutcher Aktienindex,
all of which are unmanaged market indicators. In addition, rankings, ratings,
and comparisons of investment performance and/or assessments of the quality of
shareholder service made by independent sources may be used in advertisements,
sales literature or shareholder reports, including reprints of, or selections
from, editorials or articles about the Funds. These sources utilize information
compiled (i) internally; (ii) by Lipper Analytical Services, Inc.; or (iii) by
other recognized analytical services. The Lipper Analytical Services, Inc.
mutual fund rankings and comparisons which may be used by the Multi-Asset
Allocation Fund and the Balanced Fund in performance reports will be drawn from
<PAGE>
the Flexible Portfolio Funds and Balanced Funds mutual fund groupings,
respectively, in addition to the broad-based Lipper general fund groupings.
Sources for Fund performance information and articles about the Funds include,
but are not limited to, the following:
American Association of Individual Investors' Journal
Banxquote
Barron's
Business Week
CDA Investment Technologies
CNBC
CNN
Consumer Digest
Financial Times
Financial World
Forbes
Fortune
Ibbotson Associates, Inc.
Institutional Investor
Investment Company Data, Inc.
Investor's Business Daily
Kiplinger's Personal Finance
Lipper 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 each Fund's
Prospectus entitled "How to Sell Shares," each 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 a 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
<PAGE>
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.
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 each Fund's Prospectus
entitled "How to Buy Shares - Exchange Privilege," the Funds offer shareholders
the privilege of exchanging shares of the Funds for shares of another fund or
for shares of certain other no-load mutual funds advised by INVESCO. Exchange
requests may be made either by telephone or by written request to INVESCO Funds
Group, Inc., using the telephone number or address on the cover of this
Statement of Additional Information. Exchanges made by telephone must be in an
amount of at least $250, if the exchange is being made into an existing account
of one of the INVESCO funds. All exchanges that have established 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 each Fund's Prospectus entitled "Fund
Services," shares of a Fund may be purchased as the investment medium for
various tax-deferred retirement plans. Persons who request information regarding
these plans from INVESCO will be provided with prototype documents and other
supporting information regarding the type of plan requested. Each of these plans
involves a long-term commitment of assets and is subject to possible regulatory
penalties for excess contributions, premature distributions or for insufficient
distributions after age 70-1/2. The legal and tax implications may vary
according to the circumstances of the individual investor. Therefore, the
investor is urged to consult with an attorney or tax adviser prior to the
establishment of such a plan.
<PAGE>
HOW TO REDEEM SHARES
Normally, payments for shares redeemed will be mailed within seven days
following receipt of the required documents as described in the section of each
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
a 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 (the "SEC") by order so
permits.
It is possible that in the future conditions may exist which would, in the
opinion of the Company's investment adviser, make it undesirable for a Fund to
pay for redeemed shares in cash. In such cases, the investment adviser may
authorize payment to be made in portfolio securities or other property of the
Fund. However, the Company is obligated under the 1940 Act to redeem for cash
all shares of a 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
Each 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. Each Fund so qualified in the fiscal year
ended July 31, 1995, and intends to continue to qualify during its current
fiscal year. As a result, it is anticipated that the Funds 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 Funds 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,
each Fund sends shareholders information regarding the amount and character of
dividends paid in the year, including the dividends eligible for the
dividends-received deduction for corporations. Such amounts will be limited to
the aggregate amount of qualifying dividends which the Fund derives from its
portfolio investments.
<PAGE>
Distributions by the Funds 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 a Fund. Such distributions are
identified as such and are not eligible for the dividends-received deduction.
All dividends and distributions are regarded as taxable to the investor,
whether or not such dividends and distributions are reinvested in additional
shares. If the net asset value of the shares of the Funds 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 Funds reflects
accrued net investment income and undistributed realized capital and foreign
currency gains; therefore, when a distribution is made, the net asset value is
reduced by the amount of the distribution. If shares 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 Company
recommends any particular method of determining cost basis. Other methods may
result in different tax consequences. If a shareholder has reported gains or
losses for a 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.
A 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 a Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
<PAGE>
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors. If more than 50% of the value of a
Fund's total assets at the close of any taxable year consists of securities of
foreign corporations, the Fund will be eligible to, and may, file an election
with the IRS that will enable its shareholders, in effect, to receive the
benefit of the foreign tax credit with respect to any foreign and U.S.
possessions income taxes paid by it. The Fund will report to its shareholders
shortly after each taxable year their respective shares of the Fund's income
from sources within, and taxes paid to, foreign countries and U.S. possessions
if it makes this election.
Each 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, a Fund will be subject to
federal income tax on a portion of any "excess distribution" received on the
stock of a PFIC or of any gain on disposition of the stock (collectively "PFIC
income"), plus interest thereon, even if the Fund distributes the PFIC income as
a taxable dividend to its shareholders. The balance of the PFIC income will be
included in the Fund's investment company taxable income and, accordingly, will
not be taxable to it to the extent that income is distributed to its
shareholders.
Gains or losses (1) from the disposition of foreign currencies, (2) from
the disposition of debt securities denominated in foreign currency that are
attributable to fluctuations in the value of the foreign currency between the
date of acquisition of each security and the date of disposition, and (3) that
are attributable to fluctuations in exchange rates that occur between the time 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
for income tax purposes does not entail government supervision of management or
investment policies.
<PAGE>
INVESTMENT PRACTICES
Portfolio Turnover. There are no fixed limitations regarding the portfolio
turnover of the Funds. The rate of portfolio turnover can fluctuate under
constantly changing economic conditions and market circumstances. Securities
initially satisfying the basic policies and objectives of a Fund may be disposed
of when they are no longer suitable. Brokerage costs to these Funds are
commensurate with the rate of portfolio activity. For the fiscal year ended July
31, 1995 and the period ended July 31, 1994, the Multi-Asset Allocation Fund's
portfolio turnover rates were 79% and 42% (unannualized), respectively. For the
fiscal year ended July 31, 1995 and the period ended July 31, 1994, the Balanced
Fund's portfolio turnover rates were 255% and 61% (unannualized), respectively.
The higher portfolio turnover rates for the Funds during the fiscal year ended
July 31, 1995, were primarily due to the increase in the size of the Funds and
the fact that the fiscal 1995 figures reflect a full year of operations. In
computing portfolio turnover rates, all investments with maturities or
expiration dates at the time of acquisition of one year or less are excluded.
Subject to this exclusion, the turnover rate is calculated by dividing (A) the
lesser of purchases or sales of portfolio securities for the fiscal year by (B)
the monthly average of the value of portfolio securities owned by the Fund
during the fiscal year.
Placement of Portfolio Brokerage. Either INVESCO, as the Company's
investment adviser, or INVESCO Trust or INVESCO Management, as the Company's
sub-advisers, places orders for the purchase and sale of securities with brokers
and dealers based upon INVESCO's or the sub- advisers' evaluation of their
financial responsibility, subject to their ability to effect transactions at the
best available prices. INVESCO or the applicable sub-adviser evaluates the
overall reasonableness of brokerage commissions or underwriting discounts (the
difference between the full acquisition price to acquire the new offering and
the discount offered to members of the underwriting syndicate) paid by reviewing
the quality of executions obtained on portfolio transactions of each 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 Funds are
consistent with prevailing and reasonable commissions or discounts, INVESCO or
the sub-advisers also endeavor to monitor brokerage industry practices with
regard to the commissions or discounts charged by brokers and dealers on
transactions effected for other comparable institutional investors. While
INVESCO or the sub-advisers seek reasonably competitive rates, the Funds do not
necessarily pay the lowest commission, spread or discount available.
Consistent with the standard of seeking to obtain the best execution on
portfolio transactions, INVESCO or the sub-advisers may select brokers that
provide research services to effect such transactions. Research services consist
of statistical and analytical reports relating to issuers, industries,
<PAGE>
securities and economic factors and trends, which may be of assistance or value
to INVESCO or the sub-advisers in making informed investment decisions. Research
services prepared and furnished by brokers through which the Funds effect
securities transactions may be used by INVESCO or the sub- advisers in servicing
all of their respective accounts and not all such services may be used by
INVESCO or the sub-advisers in connection with the Funds.
In recognition of the value of the above-described brokerage and research
services provided by certain brokers, INVESCO or the sub- advisers, consistent
with the standard of seeking to obtain the best execution on portfolio
transactions, may place orders with such brokers for the execution of
transactions for the Funds on which the commissions or discounts are in excess
of those which other brokers might have charged for effecting the same
transactions.
Portfolio transactions may be effected through qualified broker/dealers who
recommend the Funds to their clients, or who act as agent in the purchase of any
of the Fund's shares for their clients. When a number of brokers and dealers can
provide comparable best price and execution on a particular transaction, the
Company's adviser may consider the sale of Fund shares by a broker or dealer in
selecting among qualified broker/dealers.
The aggregate dollar amounts of brokerage commissions paid by the
Multi-Asset Allocation Fund for the year ended July 31, 1995 and the period
ended July 31, 1994 were $11,217 and $5,556, respectively. The aggregate dollar
amounts of brokerage commissions paid by the Balanced Fund for the year ended
July 31, 1995 and the period ended July 31, 1994 were $302,143 and $9,805,
respectively. The higher levels of brokerage commissions paid by the Funds for
the year ended July 31, 1995 were primarily due to the increased size of the
Funds, increased portfolio turnover and the fact that the fiscal 1995 figures
reflect a full year of operations. For the fiscal year ended July 31, 1995,
brokers providing research services received $105,565 in commissions on
portfolio transactions effected for the Funds. The aggregate dollar amount of
such portfolio transactions was $39,049,725. On a Fund-by- Fund basis this
figure breaks down as follows: Multi-Asset Allocation, $258,544 and Balanced,
$38,791,181. As a result of selling shares of the Funds, brokers received $260
in commissions on portfolio transactions effected for the Funds during the
fiscal year ended July 31, 1995.
At July 31, 1995, each of the Funds held securities of its regular brokers
or dealers, or their parents, as follows:
<PAGE>
Value of Securities
Fund Broker or Dealer at 7/31/95
Multi-Asset State Street Bank & Tr. Co. $1,015,000.00
Allocation Fund Merrill Lynch & Co., Inc. 55,500.00
Chevron Corporation 74,062.50
The Bear Stearns Co., Inc. 19,969.86
Balanced Fund State Street Bank & Tr. Co. $1,275,000.00
Neither INVESCO, INVESCO Trust nor INVESCO Management receives any
brokerage commissions on portfolio transactions effected on behalf of the Funds,
and there is no affiliation between INVESCO, INVESCO Trust, INVESCO Management,
or any person affiliated with INVESCO, INVESCO Trust, INVESCO Management, or the
Funds and any broker or dealer that executes transactions for the Funds.
ADDITIONAL INFORMATION
Common Stock. The Company has 500,000,000 authorized shares of common
stock with a par value of $0.01 per share. Of the Company's authorized shares,
100,000,000 shares have been allocated to each of two classes, representing the
Company's two Funds. As of July 31, 1995, 717,499 shares of the INVESCO
Multi-Asset Allocation Fund and 3,080,421 shares of the INVESCO Balanced Fund
were outstanding. The board of directors has the authority to designate
additional classes of common stock without seeking the approval of shareholders,
and may classify and reclassify any authorized but unissued shares.
Shares of each class represent the interests of the shareholders of such
class in a particular portfolio of investments of the Company. Each class of the
Company's shares is preferred over all other classes in respect of the assets
specifically allocated to that class, and all income, earnings, profits and
proceeds from such assets, subject only to the rights of creditors, are
allocated to shares of that class. The assets of each class are segregated on
the books of account and are charged with the liabilities of that class and with
a share of the Company's general liabilities. The board of directors determines
those assets and liabilities deemed to be general assets or liabilities of the
Company, and these items are allocated among classes in a manner deemed by the
board of directors to be fair and equitable. Generally, such allocation will be
made based upon the relative total net assets of each class. In the unlikely
event that a liability allocable to one class exceeds the assets belonging to
the class, all or a portion of such liability may have to be borne by the
holders of shares of the Company's other classes.
All shares, regardless of class, have equal voting rights. Voting with
respect to certain matters, such as ratification of independent accountants or
election of directors, will be by all classes of the Company. When not all
classes are affected by a matter to be voted upon, such as approval of an
<PAGE>
investment advisory contract or changes in a Fund's investment policies, only
shareholders of the class affected by the matter may be entitled to vote.
Company shares have noncumulative voting rights, which means that the holders of
a majority of the shares voting for the election of directors can elect 100% of
the directors if they choose to do so. In such event, the holders of the
remaining shares voting for the election of directors will not be able to elect
any person or persons to the board of directors. After they have been elected by
shareholders, the directors will continue to serve until their successors are
elected and have qualified or they are removed from office, in either case by a
shareholder vote, or until death, resignation, or retirement. They may appoint
their own successors, provided that always at least a majority of the directors
have been elected the Company's shareholders. It is the intention of the Company
not to hold annual meetings of shareholders. The directors will call annual or
special meetings of shareholders for action by shareholder vote as may be
required by the Investment Company Act of 1940 or the Company's Articles of
Incorporation, or at their discretion.
Principal Shareholders. As of September 2, 1995, the following persons held
more than 5% of the Funds' outstanding equity securities.
Shares Held and
Name and Address Nature of Ownership Percent of Class
Multi-Asset
Allocation Fund
Koehler Manufacturing 160,829.88 21.3%
Retirement Income Plan Record &
123 Felton St. Beneficial
Marlborough, MA 01752
Charles Schwab & Co., Inc. 143,803.93 19.1%
Reinvest Acct. Record
Attn: Mutual Fund Dept.
101 Montgomery St.
San Francisco, CA 94104
Balanced Fund
Charles Schwab & Co., Inc. 490,017.95 13.6%
Reinvest Acct. Record
Attn: Mutual Fund Dept.
101 Montgomery St.
San Francisco, CA 94104
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
<PAGE>
statements of the Company.
Custodian. State Street Bank and Trust Company, P.O. Box 351, Boston,
Massachusetts, has been designated as custodian of the cash and investment
securities of the Company. The bank is also responsible for, among other things,
receipt and delivery of the investment securities of the Company's Funds in
accordance with procedures and conditions specified in the custody agreement.
Transfer Agent. The Company is provided with transfer agent, registrar,
and dividend disbursing agent services by INVESCO Funds Group, Inc., 7800 E.
Union Avenue, Denver, Colorado 80237, pursuant to the Transfer Agency Agreement
described herein. Such services include the issuance, cancellation and transfer
of shares of the Funds, 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, 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 Funds' audited financial statements and the
notes thereto for the fiscal year ended July 31, 1995, and the report of Price
Waterhouse LLP with respect to such financial statements, are incorporated
herein by reference from the Funds' Annual Report to Shareholders for the fiscal
year ended July 31, 1995.
Prospectuses. The Company will furnish, without charge, a copy of the
applicable Prospectus for each of its Funds upon request. There is a separate
Prospectus available for each Fund. 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
Prospectuses do not contain all of the information set forth in the Registration
Statement the Company has filed with the SEC. The complete Registration
Statement may be obtained from the SEC upon payment of the fee prescribed by the
rules and regulations of the SEC.
<PAGE>
APPENDIX A
DESCRIPTION OF FUTURES AND OPTIONS 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 Funds 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
<PAGE>
transactions in a particular option with the result that the Funds would have to
exercise the option in order to realize any profit. This would result in the
Funds 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.
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 Funds.
With OTC options, such variables as expiration date, exercise price and premium
will be agreed upon between the Funds 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 Funds would lose the
premium paid for the option as well as any anticipated benefit of the
<PAGE>
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
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
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.
<PAGE>
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
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>
