File Nos. 33-69904
811-8066
As filed with the Securities and Exchange Commission on May 28, 1999
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. X
---
Post-Effective Amendment No. 7 X
---
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
---
Amendment No. 8 X
----- ---
INVESCO COMBINATION STOCK & BOND FUNDS, INC.
(formerly INVESCO Flexible Funds, Inc., formerly INVESCO Multiple Asset
Funds, Inc.)
(Exact Name of Registrant as Specified in Charter)
7800 E. Union Avenue, Denver, Colorado 80237
(Address of Principal Executive Offices)
P.O. Box 173706, Denver, Colorado 80217-3706
(Mailing Address)
Registrant's Telephone Number, including Area Code: (303) 930-6300
Glen A. Payne, Esq.
7800 E. Union Avenue
Denver, Colorado 80237
(Name and Address of Agent for Service)
-------------------
Copies to:
Clifford J. Alexander, Esq.
Robert H. Sirmans, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036-1800
Telephone: (202) 778-9000
-------------------
Approximate Date of Proposed Public Offering: As soon as practicable after this
Post-Effective Amendment becomes effective.
<PAGE>
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[X] on May 28, 1999 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on , pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on _________________, pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
Part C Other Information
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
<PAGE>
PROSPECTUS
May 28, 1999
INVESCO INDUSTRIAL INCOME FUND
INVESCO INDUSTRIAL INCOME FUND, (the "Fund") is actively managed to
seek the best possible current income, while following sound investment
practices. Capital growth potential is an additional consideration in the
selection of portfolio securities. The Fund normally invests at least 65% of its
total assets in dividend-paying common stocks. Up to 10% of the Fund's total
assets may be invested in equity securities that do not pay regular dividends.
The remaining assets are invested in other income-producing securities, such as
corporate bonds. The Fund also has the flexibility to invest in other types of
securities.
The Fund is a series of INVESCO Combination Stock & Bond Funds, Inc.
(formerly, INVESCO Flexible Funds, Inc.)(the "Company"), a diversified, managed
no-load mutual fund. Separate prospectuses are available upon request from
INVESCO Distributors, Inc. for the Company's other Funds, INVESCO Balanced Fund
and INVESCO Total Return Fund. Investors may purchase shares of any or all of
the Funds. Additional funds may be offered in the future.
This Prospectus provides you with the basic information you should know
before investing in the Fund. You should read it and keep it for future
reference. A Statement of Additional Information containing further information
about the Fund, dated May 28, 1999, has been filed with the Securities and
Exchange Commission, and is incorporated by reference into this Prospectus. To
request a free copy, write to INVESCO Distributors, Inc., P.O. Box 173706,
Denver, Colorado 80217-3706; call 1-800-525-8085; or visit our web site at
http://www.invesco.com.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK OR OTHER FINANCIAL INSTITUTION. THE SHARES OF THE FUND ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
PAGE
ESSENTIAL INFORMATION..........................................................1
ANNUAL FUND EXPENSES...........................................................2
FINANCIAL HIGHLIGHTS...........................................................5
INVESTMENT OBJECTIVE AND STRATEGY..............................................7
INVESTMENT POLICIES AND RISKS..................................................7
THE FUND AND ITS MANAGEMENT...................................................11
FUND PRICE AND PERFORMANCE....................................................14
HOW TO BUY SHARES.............................................................15
FUND SERVICES.................................................................20
HOW TO SELL SHARES............................................................21
TAXES, DIVIDENDS AND OTHER DISTRIBUTIONS......................................24
ADDITIONAL INFORMATION........................................................25
<PAGE>
ESSENTIAL INFORMATION
- ----------------------
INVESTMENT GOAL AND STRATEGY: The Fund seeks the best possible current
income, while following sound investment practices, with the added potential
for capital appreciation. It invests primarily in dividend-paying common
stocks of U.S. companies traded on national securities exchanges or
over-the-counter. The Fund also may invest in equity securities that do not
pay regular dividends and other income-producing securities, such as
corporate bonds. There is no guarantee that the Fund will meet its
objective. See "Investment Objective And Strategy" and "Investment Policies
And Risks."
DESIGNED FOR: Investors primarily seeking current income, but who do not
wish to sacrifice the potential for capital growth over the long term. 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 Act Account or systematic investing strategy.
The Fund may be a suitable investment for many types of retirement programs,
including various Individual Retirement Accounts ("IRAs"), 401(k), Profit
Sharing, Money Purchase Pension, and 403(b) plans.
TIME HORIZON: Stock and bond prices fluctuate on a daily basis, and the
Fund's price per share therefore varies daily. Potential shareholders should
consider this a long-term investment.
RISKS: The Fund generally uses a moderate investment strategy, but may
hold securities rated below investment grade and foreign debt securities, and
may experience relatively rapid portfolio turnover. The Fund's investments in
debt securities are subject to credit risk and market risk, both of which are
increased by investing in lower rated securities. The returns on foreign
investments may be influenced by the risks of investing overseas. Rapid
portfolio turnover may result in higher brokerage commissions and the
acceleration of taxable capital gains. These policies make the Fund unsuitable
for that portion of your savings dedicated to preservation of capital over the
short-term. See "Investment Objective And Strategy" and "Investment Policies And
Risks."
ORGANIZATION AND MANAGEMENT: The Fund is owned by its shareholders. It
employs INVESCO Funds Group, Inc. ("INVESCO"), founded in 1932 to serve as
investment adviser, administrator and transfer agent. INVESCO Distributors, Inc.
("IDI"), founded in 1997 as a wholly-owned subsidiary of INVESCO, is the Fund's
distributor.
The Fund's investments are selected by two experienced INVESCO portfolio
managers: INVESCO senior vice presidents Charles Mayer, who has 27 years of
investment experience, and Donovan J. (Jerry) Paul, with 21 years of experience.
A Chartered Financial Analyst, Mr. Mayer earned his M.B.A. from St. John's
University and a B.A. from St. Peter's College. Mr. Paul holds an M.B.A. from
the University of Northern Iowa and a B.B.A. from the University of Iowa; he is
both a Chartered Financial Analyst and Certified Public Accountant. See "The
Fund And Its Management."
<PAGE>
INVESCO and IDI are indirect, wholly-owned subsidiaries of AMVESCAP PLC,
an international investment management company that managed approximately $261
billion in assets as of June 30, 1998. AMVESCAP PLC is based in London, England
with money managers located in Europe, North America, South America and the Far
East.
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, and certain retirement
plans; $250 for an IRA.
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 share economies of scale and to keep expenses
competitive, INVESCO voluntarily reduced the management fees on the Fund's daily
net assets over $5 billion.
2
<PAGE>
Annual Fund Operating Expenses
- ------------------------------
(as a percentage of average net assets)
Management Fee (after expense limitation) 0.47%
12b-1 Fees 0.25%
Other Expenses(1)(2) 0.18%
Total Fund Operating Expenses
(after expense limitation)(1)(2) 0.90%
(1)It should be noted that the Fund's actual total operating expenses were
lower than the figures shown, because the Fund's custodian fees, transfer agency
fees and distribution fees were reduced under expense offset arrangements.
However, as a result of an SEC requirement, the figures shown above DO NOT
reflect these reductions. In comparing expenses for different years, please note
that the Ratios of Expenses to Average Net Assets shown under "Financial
Highlights" DO reflect any reductions for periods prior to the fiscal year ended
June 30, 1996. See "The Fund And Its Management."
(2)Under an expense limitation voluntarily agreed to by INVESCO, which
became mandatory on May 15, 1997, the management fee paid by the Fund has been
reduced to the following annual rates: 0.45% on daily net assets over $2 billion
but less than $4 billion, 0.40% on daily net assets over $4 billion but less
than $5 billion. In addition, in order to share economies of scale and to keep
expenses competitive, INVESCO voluntarily reduced the management fees on the
Fund's daily net assets over $5 billion. In the absence of the voluntary expense
limitation, the Fund's "Management Fee" and "Total Fund Operating Expenses"
would not have changed significantly.
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
------ ------- ------- --------
$9 $29 $50 $111
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."
3
<PAGE>
Because the Fund pays a Rule 12b-1 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.
4
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- --------------------
(For a Fund Share Outstanding Throughout Each Period)
The following information, except for the information for the six months ended December 31, 1998 labeled unaudited,
has been audited by PricewaterhouseCoopers LLP, independent accountants. This information should be read in conjunction
with the audited financial statements and the Report of Independent Accountants thereon appearing in the Fund's 1998
Annual Report to Shareholders and the unaudited financial statements and accompanying notes in the Fund's Semi-Annual
Report to Shareholders for the six-month period ended December 31, 1998 which are incorporated by reference into the
Statement of Additional Information. Both are available without charge by contacting IDI at the address or telephone
number on the back cover of this Prospectus. The Annual Report and Semi-Annual Report also contain more information
about the Fund's performance.
Year Ended June 30
SIX
MONTHS
ENDED
December 31
1998 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
UNAUDITED
PER SHARE DATA
Net Asset Value -
Beginning of
Period $16.18 $15.31 $13.21 $11.92 $11.32 $11.53
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment
Income 0.19 0.38 0.35 0.41 0.42 0.36
Net Gains on
Securities (Both
Realized and
Unrealized) 0.38 2.54 3.05 1.53 1.14 0.02
Total from
Investment
Operations 0.57 2.92 3.40 1.94 1.56 0.38
LESS DISTRIBUTIONS
Dividends from
Net Investment
Income 0.18 0.38 0.35 0.41 0.42 0.36
In Excess of Net
Investment Income 0.00 0.00+ 0.00 0.00 0.00 0.11
Distributions from
Capital Gains 1.51 1.67 0.95 0.24 0.54 0.12
Total Distributions 1.69 2.05 1.30 0.65 0.96 0.59
</TABLE>
5
<PAGE>
Year Ended June 30
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value -
Beginning of
Period $10.67 $9.74 $9.39 $8.88 $7.98
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment
Income 0.31 0.28 0.36 0.38 0.42
Net Gains on
Securities (Both
Realized and
Unrealized) 1.33 1.38 0.81 1.43 1.01
Total from
Investment
Operations 1.64 1.66 1.17 1.81 1.43
LESS DISTRIBUTIONS
Dividends from
Net Investment
Income 0.32 0.29 0.34 0.40 0.39
In Excess of Net
Investment Income 0.00 0.00 0.00 0.00 0.00
Distributions from
Capital Gains 0.46 0.44 0.48 0.90 0.14
Total Distributions 0.78 0.73 0.82 1.30 0.53
</TABLE>
5A
<PAGE>
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
December 31
1998 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
UNAUDITED
Net Asset Value -
End of Period 15.06 $16.18 $15.31 $13.21 $11.92
TOTAL RETURN 4.00%(*) 20.55% 27.33% 16.54% 14.79%
RATIOS
Net Assets -
End of Period
($000 Omitted) $4,901,933 $5,080,735 $4,574,675 $4,170,536 $4,009,609
Ratio of Expenses
to Average Net
Assetss(#) 0.46%*(@) 0.90%(@) 0.95%(@) 0.93%(@) 0.94%
Ratio of Net
Investment Income
to Average
Net Assets(#) 1.19%(*) 2.35% 2.54% 3.17% 3.61%
Portfolio Turnover
Rate 21.0%(*) 58% 47% 63% 54%
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value -
End of Period $11.32 $11.53 $10.67 $9.74 $9.39 $8.88
TOTAL RETURN 3.24% 15.66% 17.04% 13.06% 21.08% 18.45%
RATIOS
Net Assets -
End of Period
($000 Omitted) $3,913,322 $3,412,527 $2,092,955 $881,226 $572,373 $399,538
Ratio of Expenses
to Average Net
Assets(#) 0.92% 0.96% 0.98% 0.94% 0.76% 0.78%
Ratio of Net
Investment Income
to Average
Net Assets(#) 3.11% 2.94% 2.75% 3.92% 4.14% 5.08%
Portfolio Turnover
Rate 56% 121% 119% 104% 132% 124%
(+) Distributions in excess of net investment income for the year ended June 30, 1998 aggregated less than $0.01
on a per share basis.
(*) 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 INVESCO for the six months ended December 31, 1998 and
for the years ended June 30, 1998, 1997, 1996, 1995, 1994 and 1993. If such expenses had not been voluntarily
absorbed, ratio of expenses to average net assets would have been 0.46% (not annualized) 0.90%, 0.98%, 0.96%,
0.97%, 0.95% and 0.98%, respectively, and ratio of net investment income to average net assets would have been
1.19% (not annualized) 2.35%, 2.51%, 3.14%, 3.58%, 3.08% and 2.92%, respectively.
(@) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by Investment Adviser, which is before any
expense offset arrangements.
</TABLE>
6A
<PAGE>
INVESTMENT OBJECTIVE AND STRATEGY
- ---------------------------------
The Fund seeks the best possible current income while following sound
investment practices. This investment objective is fundamental and cannot be
changed without the approval of the Fund's shareholders. Capital growth
potential is an additional consideration in the selection of portfolio
securities. The Fund normally invests at least 65% of its total assets in
dividend-paying common stocks. Up to 10% of the Fund's total assets may be
invested in equity securities that do not pay regular dividends. The remaining
assets are invested in other income-producing securities, such as corporate
bonds. The Fund also has the flexibility to invest in preferred stocks and
convertible bonds. There is no maximum limit on the amount of equity or debt
securities in which the Fund may invest. There is no assurance that the Fund's
investment objective will be met.
The Fund's investments in equity securities are limited to those that are
readily marketable in the United States. These securities include American
Depository Receipts ("ADRs"), which represent 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.
The Fund's investment portfolio is actively traded. Economic conditions
and market circumstances vary from day to day; securities may be bought and sold
relatively frequently as their suitability for the Fund's portfolio changes.
This policy may result in increased 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.
When we believe market or economic conditions are unfavorable, the Fund
may assume a defensive position by temporarily investing up to 100% of its
assets in high-quality corporate bonds, notes or U.S. government obligations, or
money market instruments such as commercial paper or repurchase agreements,
seeking to protect its assets until conditions stabilize.
INVESTMENT POLICIES AND RISKS
- -----------------------------
Investors generally should expect to see the price per share of the Fund
vary with movements in the stock market, changes in economic conditions and
other factors. The Fund invests in many different securities and industries;
this diversification may help reduce the Fund's overall exposure to particular
investment and market risks, but cannot eliminate these risks.
YEAR 2000 COMPUTER ISSUE. Due to the fact that many computer systems in
use today cannot recognize the Year 2000, but will, unless corrected, revert to
1900 or 1980 or cease to function at that time, the markets for securities in
which the Fund invests may be detrimentally affected by computer failure
affecting portfolio investments or trading of securities beginning January 1,
2000. Improperly functioning trading systems may result in settlement problems
and liquidity issues. In addition, corporate and governmental data processing
errors may result in production issues for individual companies and overall
economic uncertainties. Earnings of individual issuers may be affected by
8
<PAGE>
remediation costs, which may be substantial. The Fund's investments may be
adversely affected.
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 credit risk as estimated by
independent services such as Moody's Investors Service, Inc. ("Moody's") or
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P").
"Market risk" refers to interest rates. For instance, when interest rates go up,
the market value of a previously issued bond generally declines; on the other
hand, when interest rates go down, prices of bonds generally 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. Therefore, the Fund does not invest in obligations it
believes to be highly speculative. Corporate bonds rated Aaa, Aa, A or Baa by
Moody's or AAA, AA, A or BBB by S&P ("investment grade") enjoy strong to
adequate capacity to pay principal and interest. No more than 15% of the Fund's
total assets may be invested in issues rated below investment grade quality
(commonly called "junk bonds" and rated BB or below by S&P or Ba or below by
Moody's); these include issues which are of poorer quality and may have some
speculative characteristics, according to the ratings services. Never, under any
circumstances, does the Fund invest in bonds rated below Caa by Moody's or CCC
by S&P. Bonds rated Caa or CCC may be in default or there may be present
elements of danger with respect to payment of principal or interest. While
INVESCO 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, the Fund may retain a bond whose rating is changed to one
below the minimum rating required for purchase of the security. For more
information on debt securities and the foregoing corporate bond rating
categories, see the Statement of Additional Information.
For the fiscal year ended June 30, 1998, the following percentages of the
Fund's total assets were invested in corporate bonds rated investment grade by
Moody's or S&P at the time they were purchased: AAA--0.00%; AA--0.10%; A--3.09%;
and BBB--3.67%, and the following percentages were invested in corporate bonds
rated below investment grade at the time of purchase: BB--2.89%; B--5.20%;
CCC--0.25%; and D--0.00%. Finally, 0.41% of total assets were invested in
unrated corporate bonds. All of these percentages were determined on a
dollar-weighted basis, calculated by averaging the Fund's month-end portfolio
holdings during the fiscal year. Keep in mind that the Fund's holdings are
actively traded, and bond ratings are occasionally adjusted by ratings services,
so these figures do not represent the Fund's actual holdings or quality ratings
as of June 30, 1998.
9
<PAGE>
The Fund's investments in debt securities may include investments in zero
coupon bonds, step-up bonds 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. Because they are extremely
responsive to changes in interest rates, the market prices of both zeros and
step-up bonds may be more volatile than the market prices of 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. Asset-backed securities generally
represent interests in pools of consumer 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, at least in part, by letters of credit or other credit enhancements.
The underlying loans are subject to prepayments that may shorten the securities'
weighted average life and may lower their returns.
FOREIGN SECURITIES. The Fund's investments in debt obligations may include
securities issued by foreign governments and foreign corporations. Up to 25% of
the Fund's total assets, measured at the time of purchase, may be invested
directly in foreign equity and corporate debt securities, provided that all such
securities are denominated and pay interest in U.S. dollars (such as Eurobonds
and Yankee bonds). Securities of Canadian issuers and ADRs are not subject to
this 25% limitation. Investments in foreign securities involve certain risks.
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 a foreign
currency, returns for a U.S. investor on foreign securities denominated in that
foreign currency may decrease. By contrast, in a period when the U.S. dollar
generally declines, those returns may increase. The Fund attempts to minimize
these risks by limiting its investments in foreign securities to those which are
denominated and pay interest in U.S. dollars.
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;
10
<PAGE>
-smaller trading volumes and generally lower liquidity of foreign stock
markets, which may cause greater price volatility; and
-investment income on certain foreign securities 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 the Fund may experience 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.
Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg,
The Netherlands, Portugal and Spain are presently members of the European
Economic and Monetary Union (the "EMU"). EMU intends to establish a common
European currency for EMU countries which will be known as the "euro." Each
participating country presently plans to adopt the euro as its currency on
January 1, 1999. The old national currencies will be sub-currencies of the euro
until July 1, 2002, at which time the old currencies will disappear entirely.
Other European countries may adopt the euro in the future.
The planned introduction of the euro presents some uncertainties and
possible risks, including whether the payment and operational systems of banks
and other financial institutions will be ready by January 1, 1999; whether
exchange rates for existing currencies and the euro will be adequately
established; and whether suitable clearing and settlement systems for the euro
will be in operation. These and other factors may cause market disruptions
before or after January 1, 1999 and could adversely affect the value of
securities held by the Fund.
RULE 144A SECURITIES. The Fund may not purchase securities that are not
readily marketable. However, the Fund may purchase certain securities that are
not registered for sale to the general public but that can be resold to
institutional investors ("Rule 144A Securities") if a liquid trading market
exists. The Fund's board of directors has delegated to INVESCO the authority to
determine the liquidity of Rule 144A Securities pursuant to guidelines approved
by the board. In the event that a Rule 144A Security held by the Fund is
subsequently determined to be illiquid, the security will be sold as soon as
that can be done in an orderly fashion consistent with the best interests of the
Fund's shareholders. For more information concerning Rule 144A Securities, see
"Investment Policies And Restrictions" in the Statement of Additional
Information.
11
<PAGE>
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 and date. The Fund could incur costs or delays in seeking
to sell the security, 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.
SECURITIES LENDING. The Fund may seek to earn additional income by lending
securities to qualified brokers, dealers, banks, or other financial
institutions, on a fully collateralized basis. For further information on this
policy, see "Investment Policies And Restrictions" in the Statement of
Additional Information.
INVESTMENT RESTRICTIONS. Certain restrictions, which are identified in the
Statement of Additional Information, may not be altered without the approval of
the Fund's shareholders. For example, the Fund limits to 5% the portion of its
total assets that may be invested in a single company and to 25% the portion
that may be invested in any one industry.
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.
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. On September
10, 1998, the name of the Company was changed to INVESCO Flexible Funds, Inc. On
October 29, 1998, the name of the Company was changed to INVESCO Combination
Stock & Bond Funds, Inc. On May 28, 1999, the Company assumed all of the assets
and liabilities of INVESCO Industrial Income Fund, Inc., which was incorporated
on March 20, 1959 under the laws of Maryland and first publicly offered shares
on February 1, 1960.
The Fund's board of directors has responsibility for overall supervision
of the Fund and reviews the services provided by the investment adviser. Under
an agreement with the Fund, INVESCO, 7800 E. Union Avenue, Denver, Colorado
80237, serves as the Fund's investment adviser; it is primarily responsible for
providing the Fund with portfolio management and various administrative
services.
12
<PAGE>
INVESCO and IDI are indirect wholly owned subsidiaries of AMVESCAP PLC.
AMVESCAP PLC is a publicly-traded holding company that, through its
subsidiaries, engages in the business of investment management on an
international basis. INVESCO PLC changed its name to AMVESCO PLC on March 3,
1997 and to AMVESCAP PLC on May 8, 1997, as part of a merger between a direct
subsidiary of INVESCO PLC and A I M Management Group Inc. that created one of
the largest independent investment management businesses in the world. AMVESCAP
PLC had approximately $261 billion in assets under management as of June 30,
1998. INVESCO was established in 1932 and, as of June 30, 1998, managed 14
mutual funds, consisting of 49 separate portfolios, with combined assets of
approximately $19.6 billion on behalf of over 878,000 shareholders.
Prior to February 3, 1998, Institutional Trust Company doing business as
INVESCO Trust Company ("ITC") provided sub-advisory services to the Fund;
termination of ITC's sub-advisory services in no way changed the basis upon
which investment advice is provided to the Fund, the cost of those services to
the Fund or the persons actually performing the investment advisory and other
services. INVESCO now provides such day-to-day portfolio management services.
The following managers share responsibility for the day-to-day management
of the Fund's holdings:
Charles P. Mayer has served as co-portfolio manager for the Fund since
1993, focusing on equity investments. He is also co-portfolio manager of INVESCO
Balanced Fund and INVESCO-VIF Industrial Income Portfolio. Mr. Mayer began his
investment career in 1969 and is now a senior vice president of INVESCO; from
1994 to 1998 he was a senior vice president of ITC; from 1993 to 1994, he was a
vice president of ITC. From 1984 to 1993, he was a portfolio manager with
Westinghouse Pension. B.A., St. Peter's College; M.B.A., St. John's University.
Donovan J. (Jerry) Paul has served as co-portfolio manager for the Fund
since 1994, focusing on fixed-income investments. He also is the portfolio
manager of INVESCO High Yield Fund, INVESCO Select Income Fund, and INVESCO
VIF-High Yield Portfolio, as well as co-portfolio manager of INVESCO Short-Term
Bond Fund, INVESCO VIF-Industrial Income Portfolio and INVESCO Balanced Fund. A
senior vice president of INVESCO since 1998 and ITC from 1994 to 1998, he
entered the investment management industry in 1976. Mr. Paul's career includes
these highlights: From 1989 to 1992, he served as senior vice president and
director of fixed-income research, and from 1987 to 1992, as portfolio manager,
with Stein, Roe & Farnham Inc. From 1993 to 1994, he was president of Quixote
Investment Management, Inc. B.B.A., University of Iowa; M.B.A., University of
Northern Iowa; Chartered Financial Analyst; Certified Public Accountant.
INVESCO 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 INVESCO's personnel to conduct their
personal investment activities in a manner that INVESCO believes is not
detrimental to the Fund or INVESCO's other advisory clients. See the Statement
of Additional Information for more detailed information.
13
<PAGE>
The Fund pays INVESCO a monthly management fee that is based upon a
percentage of the Fund's average net assets determined daily. Effective May 15,
1997, 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; 0.50% on the Fund's average net assets over $700
million but less than $2 billion; 0.45% on the Fund's average net assets over $2
billion but less than $4 billion; and 0.40% on the Fund's average net assets
over $4 billion. From October 15, 1992 through May 14, 1997, INVESCO voluntarily
waived that portion of its fee which exceeded 0.45% of the average net assets of
the Fund in excess of $2 billion pursuant to a commitment to the Fund. In
addition, from October 21, 1993 through May 14, 1997, INVESCO voluntarily waived
that portion of its fee which exceeded 0.40% of the average net assets of the
Fund in excess of $4 billion pursuant to a commitment to the Fund. In addition,
effective May 15, 1997, the above two voluntary expense limitations became
mandatory, and INVESCO voluntarily reduced management fees on the Fund's daily
net assets over $5 billion. For the fiscal year ended June 30, 1998, investment
advisory fees paid by the Fund amounted to 0.47% of the Fund's average net
assets. In the absence of such voluntary expense limitation, the investment
advisory fees paid by the Fund for the fiscal year ended June 30, 1998 would not
have changed significantly.
Under a Distribution Agreement, IDI provides services related to the
distribution and sale of the Fund's shares. IDI, established in 1997, is a
registered broker-dealer that acts as distributor for all retail funds advised
by INVESCO. Prior to September 30, 1997, INVESCO served as the Fund's
distributor.
Under a Transfer Agency Agreement, INVESCO acts as registrar, transfer
agent, and dividend disbursing agent for the Fund. The Fund pays an annual fee
of $20.00 per shareholder account or, where applicable, per participant in an
omnibus account. Registered broker-dealers, third party administrators of
tax-qualified retirement plans and other entities, including affiliates of
INVESCO, may provide equivalent services to the Fund. In these cases, INVESCO
may pay, out of the fee it receives from the Fund, an annual sub-transfer agency
fee or recordkeeping fee to the third party.
Under an Administrative Services Agreement, INVESCO handles additional
administrative, recordkeeping and internal sub-accounting services for the Fund.
For the fiscal year ended June 30, 1998, the Fund paid INVESCO a fee for these
services equal to 0.015% of the Fund's average net assets.
The management and custodial services provided to the Fund by INVESCO and
the Fund's custodian, and the services provided to shareholders by INVESCO and
IDI and other service providers, depend on the continued functioning of their
computer systems. Many computer systems in use today cannot recognize the Year
2000, but will revert to 1900 or 1980 or will cease to function due to the
manner in which dates were encoded and are calculated. That failure could have a
negative impact on the handling of the Fund's securities trades, its share
pricing and its account services. The Fund and its service providers have been
actively working on necessary changes to their computer systems to deal with the
Year 2000 issue and expect that their systems will be adapted before that date,
14
<PAGE>
but there can be no assurance that they will be successful. Furthermore,
services may be impaired at that time as a result of the interaction of their
systems with noncomplying computer systems. INVESCO plans to test as many such
interactions as practicable prior to December 31, 1999 and to develop
contingency plans for reasonably expected failures.
The Fund's expenses, which are accrued daily, are deducted from total
income before dividends are paid. Total expenses of the Fund (prior to any
expense offset arrangements but after INVESCO absorbed certain expenses) for the
fiscal year ended June 30, 1998, including investment management fees (but
excluding brokerage commissions, which are a cost of acquiring securities),
amounted to 0.90% of the Fund's average net assets. However, in the absence of
the voluntary expense limitation discussed above, the total expenses of the Fund
for the year ended June 30, 1998, would have been 0.90% of the Fund's average
net assets.
INVESCO places orders for the purchase and sale of portfolio securities
with brokers and dealers based upon INVESCO's evaluation of such brokers' and
dealers' financial responsibility coupled with their ability to effect
transactions at the best available prices. The Fund may place orders for
portfolio transactions with qualified brokers and dealers that recommend the
Fund, or sell shares of the Fund, to clients, or act as agent in the purchase of
Fund shares for clients, if INVESCO 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.
FUND PRICE AND PERFORMANCE
- --------------------------
DETERMINING PRICE. The value of your investment in the Fund may vary
daily. The price per share is also known as the Net Asset Value ("NAV"). INVESCO
prices the Fund every day that the New York Stock Exchange is open, as of the
close of regular trading (generally, 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; subtracting liabilities, including
accrued expenses; and 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 and yield. 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 one-, five-,
and ten-year periods. Cumulative total return shows the actual rate of return on
an investment for the period cited; average annual total return represents the
average annual percentage change in the value of an investment. Both cumulative
and average annual total returns tend to "smooth out" fluctuations in the Fund's
investment results, because they do not show the interim variations in
performance over the periods cited.
The yield of the Fund refers to the income generated by an investment in
the Fund over a 30 day or one-month period and is calculated by dividing the net
investment income per share earned during the period by the net asset value per
share at the end of the period, then adjusting the result to provide for
15
<PAGE>
semi-annual compounding. 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 IDI using the phone number or address
on the back 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 Equity
Income 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 chart below 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 INVESCO. However, if you
invest in the Fund through a securities broker, you may be charged a commission
or transaction fee. INVESCO may from time to time make payments from its
revenues to securities dealers and other financial institutions that provide
distribution-related and/or administrative services for the Fund. For all new
accounts, please send a completed application form. Please specify which fund's
shares you wish to purchase.
INVESCO reserves the right to increase, reduce or waive the minimum
investment requirements in its sole discretion, where it determines this action
is in the best interests of the Fund. INVESCO 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.
16
<PAGE>
HOW TO BUY SHARES
================================================================================
METHOD INVESTMENT MINIMUM PLEASE REMEMBER
- --------------------------------------------------------------------------------
BY CHECK
Mail to: $1,000 for regular If your check does
INVESCO Funds Group, account; not clear, you will
Inc. $250 for an IRA; be responsible for
P.O. Box 173706 $50 minimum for any related loss the
Denver, CO 80217-3706. each subsequent Fund or INVESCO
Or you may send your investment. incurs. If you are
check by overnight already a shareholder
courier to: 7800 E. in the INVESCO funds,
Union Ave., the Fund may seek
Denver, CO 80237. reimbursement from
your existing
account(s) for any
loss incurred.
- --------------------------------------------------------------------------------
BY TELEPHONE OR WIRE
Call 1-800-525-8085 to $1,000. Payment must be
request your purchase. received within 3
Then send your check business days, or the
by overnight courier transaction may be
to our street address: canceled. If a
7800 E. Union Ave., telephone purchase is
Denver, CO 80237. canceled due to
Or you may transmit nonpayment, you will
your payment by bank be responsible for
wire (call INVESCO for any related loss the
instructions). Fund or INVESCO
incurs. If you are already a
shareholder in the INVESCO funds,
the Fund may seek reimbursement
from your existing account(s) for
any loss incurred.
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
WITH EASIVEST OR
DIRECT PAYROLL PURCHASE
You may enroll on the $50 per month for Like all regular
fund application, or EasiVest; $50 per investment plans,
call us for the pay period for neither EasiVest nor
correct form and more Direct Payroll Direct Payroll
details. Investing Purchase. You may Purchase ensures a
the same amount on a start or stop your profit or protects
monthly basis allows regular investment against loss in a
you to buy more shares plan at any time, falling market.
when prices are low with two weeks' Because you'll invest
and fewer shares when notice to INVESCO. continually,
prices are high. This regardless of varying
"dollar-cost price levels,
averaging" may help consider your
offset market financial ability to
fluctuations. Over a keep buying through
period of time, your low price levels.
average cost per share And remember that you
may be less than the will lose money if
actual average price you redeem your
per share. shares when the
market value of all
your shares is less
than their cost.
- --------------------------------------------------------------------------------
BY PAL(REGISTERED)
Your "Personal Account $1,000; $250 for an Be sure to write down
Line" is available for IRA. the confirmation
subsequent purchases number provided by
and exchanges 24-hours PAL. Payment must be
a day. Simply call received within 3
1-800-424-8085. business days, or the
transaction may be canceled. If a
telephone purchase is canceled
due to nonpayment, you will be
responsible for any related loss
the Fund or INVESCO incurs. If
you are already a shareholder in
the INVESCO funds, the Fund may
seek reimbursement from your
existing account(s) for any loss
incurred.
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
BY EXCHANGE
Between this and $1,000 to open a See "Exchange Policy"
another of the INVESCO new account; $50 below.
funds. Call for written
1-800-525-8085 for requests to
prospectuses of other purchase additional
INVESCO funds. You shares for an
may also establish an existing account.
Automatic Monthly (The exchange
Exchange service minimum is $250 for
between two INVESCO purchases requested
funds; call INVESCO by telephone.)
for further details
and the correct form.
================================================================================
EXCHANGE POLICY. 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) In order to prevent abuse of this policy to the disadvantage of other
shareholders, the Fund reserves the right to temporarily or
permanently terminate the exchange option of any shareholder who
requests more than four exchanges in a year, or at any time the Fund
determines the actions of the shareholder are detrimental to Fund
performance and shareholders. The Fund will determine whether to do
so based on a consideration of both the number of exchanges any
particular shareholder, or group of shareholders, has requested and
the time period over which those exchange requests have been made,
together with the level of expense to the Fund which will result from
effecting additional exchange requests. The Fund is intended to be a
long-term investment vehicle and is not designed to provide investors
the means of speculation on short-term market movements.
5) Notice of all modifications or terminations that would affect all
Fund shareholders will be given at least 60 days prior to the
effective date of the change in policy, except in unusual
19
<PAGE>
circumstances (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 suspended).
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 its shares to investors. Under the Plan, monthly payments may be
made by the Fund to IDI to permit IDI, at its discretion, to engage in certain
activities, and provide certain services approved by the board of directors of
the Fund in connection with the distribution of the Fund's shares to investors.
These activities and services may include the payment of compensation (including
incentive compensation and/or continuing compensation based on the amount of
customer assets maintained in the Fund) to securities dealers and other
financial institutions and organizations, which may include INVESCO- and IDI-
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 electronically 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 with the Fund.
In addition, other permissible activities and services include
advertising, preparation, printing and distribution of sales literature,
printing and distribution of prospectuses to prospective investors and such
other services and promotional activities for the Fund as may from time to time
be agreed upon by the Fund and its board of directors, including public
relations efforts and marketing programs to communicate with investors and
prospective investors. These services and activities may be conducted by the
staff of INVESCO, IDI or their affiliates or by third parties.
Under the Plan, the Fund's payments to IDI are limited to an amount
computed at an annual rate of 0.25% of the Fund's average net assets. IDI is not
entitled to payment for overhead expenses under the Plan, but may be paid for
all or a portion of the compensation paid for salaries and other employee
benefits for the personnel of INVESCO or IDI whose primary responsibilities
involve marketing shares of the INVESCO funds, including the Fund. Payments by
the Fund under the Plan, for any month, may be made to compensate IDI for
permissible activities engaged in and services provided by IDI during the
rolling 12-month period in which that month falls. Therefore, any obligations
incurred by IDI in excess of the limitations described above will not be paid by
the Fund under the Plan, and will be borne by IDI. In addition, IDI and its
affiliates may from time to time make additional payments from their revenues to
securities dealers, financial advisers 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 the
Plan's termination. Payments made by the Fund may not be used to finance
directly the distribution of shares of any other mutual fund advised by INVESCO
and distributed by IDI. However, payments received by IDI which are not used to
finance the distribution of shares of the Fund become part of IDI's revenues and
may be used by IDI for activities that promote distribution of any of the mutual
20
<PAGE>
funds advised by INVESCO. Subject to review by the Fund's directors, payments
made by the Fund under the Plan for compensation of marketing personnel, as
noted above, are based on an allocation formula designed to ensure that all such
payments are appropriate. IDI will bear any distribution- and service-related
expenses in excess of the amounts which are compensated pursuant to the Plan.
The Plan also authorizes any financing of distribution which may result from
INVESCO's or IDI's use of fees received from the Fund for services rendered by
INVESCO, providing that such fees are legitimate and not excessive. For more
information see "How Shares Can Be Purchased Distribution Plan" in the Statement
of Additional Information.
FUND SERVICES
- -------------
SHAREHOLDER ACCOUNTS. INVESCO 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 reinvested in additional Fund shares at the NAV on the
ex-dividend or ex-distribution 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 IRAs and many
types of tax-deferred retirement plans. INVESCO can supply you with information
and forms to establish or transfer your existing plan or account.
HOW TO SELL SHARES
- ------------------
The chart on page 28 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
21
<PAGE>
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 specify from which fund you wish to redeem shares. Shareholders
have a separate account for each fund in which they invest.
HOW TO SELL SHARES
================================================================================
METHOD MINIMUM REDEMPTION PLEASE REMEMBER
================================================================================
BY TELEPHONE
Call us toll-free at $250 (or, if less, These telephone
1-800-525-8085. full liquidation of redemption
the account) for a privileges may be
redemption check; modified or
$1,000 for a wire terminated in the
to bank of record. future at the
The maximum amount discretion of
which may be INVESCO.
redeemed by
telephone is
generally $25,000.
- --------------------------------------------------------------------------------
IN WRITING
Mail your request to Any amount. The If the shares to be
INVESCO Funds Group, redemption request redeemed are
Inc., P.O. Box 173706 must be signed by represented by
Denver, CO all registered stock certificates,
80217-3706. You may account owners. the certificates
also send your request Payment will be must be sent to
by overnight courier mailed to your INVESCO.
to 7800 E. Union Ave., address of record
Denver, CO 80237. or to a
pre-designated bank.
- --------------------------------------------------------------------------------
BY EXCHANGE
Between this and $1,000 to open a See "Exchange
another of the INVESCO new account; $50 Policy," page 23.
funds. Call for written
1-800-525-8085 for requests to
prospectuses of other purchase additional
INVESCO funds. You shares for an
may also establish an existing account.
automatic monthly (The exchange
exchange service minimum is $250 for
between two INVESCO exchanges requested
funds; call INVESCO by telephone.)
for further details
and the correct form.
- --------------------------------------------------------------------------------
22
<PAGE>
- --------------------------------------------------------------------------------
PERIODIC WITHDRAWAL
PLAN $100 per payment, You must have at
You may call us to on a monthly or least $10,000 total
request the quarterly basis. invested with the
appropriate form and The redemption INVESCO funds, with
more information at check may be made at least $5,000 of
1-800-525-8085. payable to any that total invested
party you designate. in the fund from
which withdrawals
will be made.
- --------------------------------------------------------------------------------
PAYMENT TO THIRD PARTY
Mail your request to Any amount. All registered
INVESCO Funds Group, account owners must
Inc., sign the request,
P.O. Box 173706 with a signature
Denver, CO 80217-3706. guarantee from an
eligible guarantor financial
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 will 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.
23
<PAGE>
TAXES, DIVIDENDS AND OTHER 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. Distribution of all net investment income to shareholders
allows the Fund to maintain its tax status as a regulated investment company.
The Fund does not expect to pay any federal income or excise taxes because of
its tax status as a regulated investment company.
Shareholders must include all dividends and other distributions as taxable
income for federal, state, and local income tax purposes unless they are exempt
from income taxes. Dividends and other distributions are taxable whether they
are received in cash or automatically reinvested in shares of the Fund or
another fund in the INVESCO group.
Net realized capital gains of the Fund are classified as short-term or
long-term gains depending upon how long the Fund held the security that gave
rise to the gains. Short-term capital gains are included in income from
dividends and interest as ordinary income and are taxed at the taxpayer's
marginal tax rate. Long-term gains realized between May 7, 1997 and July 28,
1997 on the sale of securities held for more than 12 months are taxable at a
maximum rate of 20%. Long-term gains realized between July 29, 1997 and December
31, 1997 on the sale of securities held for more than one year but not for more
than 18 months are taxable at a maximum rate of 28%. Long-term gains realized
between July 29, 1997 and December 31, 1997 on the sale of securities held for
more than 18 months are taxable at a maximum rate of 20%. Beginning January 1,
1998, the IRS Restructuring and Reform Act of 1998, signed into law on July 24,
1998, lowers the holding period for long-term capital gains entitled to the 20%
capital gains tax rate from 18 months to 12 months. Accordingly, all long-term
gains realized after December 31, 1997 on the sale of securities held for more
than 12 months will be taxable at a maximum rate of 20%. Note that the rate of
capital gains tax is dependent on the shareholder's marginal tax rate and may be
lower than the above rates. At the end of each year, information regarding the
tax status of dividends and other distributions is provided to shareholders.
Shareholders should consult their tax advisers as to the effect of distributions
by the Fund.
Shareholders may realize capital gains or losses when they sell their Fund
shares at more or less than the price originally paid. Capital gains on shares
held for more than one year will be long-term capital gains, in which event they
will be subject to federal income tax at the rates indicated above.
The Fund may be subject to withholding of foreign taxes on dividends or
interest it receives on foreign securities. Foreign taxes withheld may be
treated as an expense of the Fund.
Individuals and certain other non-corporate shareholders may be subject to
backup withholding of 31% on dividends, capital gains and other distributions
and redemption proceeds. You can avoid backup withholding on your account by
ensuring that we have a correct, certified tax identification number, unless you
are subject to backup withholding for other reasons.
24
<PAGE>
We encourage you to consult a tax adviser with respect to these matters.
For further information, see "Dividends, Other Distributions And Taxes" in the
Statement of Additional Information.
DIVIDENDS AND OTHER DISTRIBUTIONS. The Fund earns ordinary or net
investment income in the form of interest and dividends on investments.
Dividends paid by the Fund will be based solely on the net investment income
earned by it. The Fund's policy is to distribute substantially all of this
income, less expenses, to shareholders on an annual or semiannual basis, at the
discretion of the Fund's board of directors. Dividends are automatically
reinvested in additional shares of the Fund at the net asset value on the
payable date unless otherwise requested.
In addition, the Fund realizes capital gains and losses when it sells
securities or derivatives 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,
together with gains realized on certain foreign currency transactions, if any,
are distributed to shareholders at least annually, usually in December. Capital
gain distributions are automatically reinvested in additional shares of the Fund
at the net asset value on the payable date unless otherwise requested.
Dividends and other distributions are paid to shareholders who hold shares
on the record date of the distribution, regardless of how long the shares have
been held by the shareholder. The Fund's share price will then drop by the
amount of the distribution on the ex-dividend or ex-distribution date. If a
shareholder purchases shares immediately prior to a distribution, the
shareholder will, in effect, have "bought" the distribution by paying full
purchase price, a portion of which is then returned in the form of a taxable
distribution.
ADDITIONAL INFORMATION
- ----------------------
VOTING RIGHTS. All shares of the Fund have equal voting rights based on
one vote for each share owned and a corresponding fractional vote for each
fractional share owned. The Fund 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
Fund or as may be required by applicable law or the Fund'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 Fund. The Fund will assist shareholders in
communicating with other shareholders as required by the Investment Company Act
of 1940.
25
<PAGE>
PROSPECTUS
May 28, 1999
INVESCO INDUSTRIAL INCOME FUND
A no-load mutual fund seeking current income
with capital growth as an additional factor.
INVESCO FUNDS
INVESCO Distributors, Inc.
Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
1-800-525-8085
PAL(R): 1-800-424-8085
http://www.invesco.com
In Denver, visit one of our
convenient Investor Centers:
Cherry Creek
155-B Fillmore Street
Denver Tech Center
7800 East Union Avenue
Lobby Level
In addition, all documents You should know what INVESCO
filed by the Company with knows.(TradeMark)
the Securities and Exchange
Commission can be located INVESCO FUNDS
on a web site maintained
by the Commission at
http://www.sec.gov.
26
<PAGE>
PROSPECTUS
May 28, 1999
INVESCO TOTAL RETURN FUND
The INVESCO Total Return Fund (the "Fund") seeks to achieve a high
total return on investment through capital appreciation and current income by
investing in a combination of equity securities (consisting of common stocks
and, to a lesser degree, securities convertible into common stock) and fixed
income securities. The equity securities purchased by the Fund generally will be
issued by companies which are listed on a national securities exchange and which
usually pay regular dividends. This Fund seeks reasonably consistent total
returns over a variety of market cycles.
The Fund is a series of INVESCO Combination Stock & Bond Funds, Inc. (the
"Company"), a diversified, managed, no-load mutual fund. This Prospectus relates
to shares of the INVESCO Total Return Fund. Separate prospectuses are available
upon request from INVESCO Distributors, Inc. for the Company's other funds.
Investors may purchase shares of any or all Funds. Additional funds may be
offered in the future.
This Prospectus provides you with the basic information you should know
before investing in the Fund. You should read it and keep it for future
reference. A Statement of Additional Information containing further information
about the Fund, dated May 28, 1999, has been filed with the Securities and
Exchange Commission and is incorporated by reference into this Prospectus. To
request a free copy, write to INVESCO Distributors, Inc., P.O. Box 173706,
Denver, Colorado 80217-3706; call 1-800-525-8085; or visit our web site at:
http://www.invesco.com.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION. THE SHARES
OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
----------
<PAGE>
TABLE OF CONTENTS
PAGE
ANNUAL FUND EXPENSES..........................................................1
FINANCIAL HIGHLIGHTS..........................................................3
PERFORMANCE DATA..............................................................6
INVESTMENT OBJECTIVE AND POLICIES.............................................6
RISK FACTORS..................................................................8
THE FUND AND ITS MANAGEMENT..................................................12
HOW SHARES CAN BE PURCHASED..................................................16
SERVICES PROVIDED BY THE FUND................................................19
HOW TO REDEEM SHARES.........................................................23
TAXES, DIVIDENDS AND OTHER DISTRIBUTIONS.....................................24
ADDITIONAL INFORMATION.......................................................26
<PAGE>
ANNUAL FUND EXPENSES
The Fund is 100% 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. The 12b-1
fee is assessed against all shares, but only with respect to new sales of
shares, exchanges into the Fund and reinvestments of dividends and capital gain
distributions ("New Assets") occurring on or after June 1, 1998. (See "How
Shares Can Be Purchased - Distribution Expenses.")
Annual operating expenses are calculated as a percentage of the Fund's
average annual net assets.
SHAREHOLDER TRANSACTION EXPENSES
Sales load "charge" on purchases None
Sales load "charge" on reinvested dividends None
Redemption fees None
Exchange fees None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fee(1) 0.58%
12b-1 Fees(2) 0.25%
Other Expenses 0.20%
Transfer Agency Fee(3) 0.16%
General Services, Administrative
Services, Registration, Postage(3) 0.04%
Total Fund Operating Expenses(2)(5) 1.03%
(1) Under a voluntary expense limitation agreed to by INVESCO, the
management fee paid by the Fund has been reduced to an annual rate of 0.45% on
daily net assets over $2 billion, 0.40% on annual daily net assets over $4
billion, 0.375% on annual daily net assets over $5 billion, and to an annual
rate of 0.35% on daily net assets over $6 billion. In the absence of the
voluntary expense limitation, the Fund's "Management Fee" and "Total Fund
Operating Expenses" would have been 0.58% and 1.04%, respectively, based on the
Fund's actual expenses for the fiscal year ended August 31, 1998.
(2) 12b-1 fees for the period ending August 31, 1998 are less than
0.25% of average net assets.
(3) Consists of the transfer agency fee described under "Additional
Information - Transfer And Dividend Disbursing Agent."
(4) Includes, but is not limited to, fees and expenses of trustees,
custodian bank, legal counsel and independent accountants, securities pricing
<PAGE>
services, costs of administrative services furnished under an Administrative
Services Agreement, costs of registration of Fund shares under applicable laws,
and costs of printing and distributing reports to shareholders.
(5) It should be noted that the Fund's actual total operating expenses
were lower than the figures shown, because the Fund's custodian and transfer
agent fees were reduced under expense offset arrangements. However, as a result
of an SEC requirement for mutual funds to state their total operating expenses
without crediting any such offset arrangements, the figures shown above DO NOT
reflect these reductions. In comparing expenses for different years, please note
that the Ratios of Expenses to Average Net Assets shown under "Financial
Highlights" DO reflect any reductions for periods prior to the fiscal year ended
August 31, 1996.
EXAMPLE
A shareholder would pay the following expenses on a $1,000 investment
for the periods shown, assuming (1) a 5% annual return and (2) redemption at the
end of each time period:
1 Year 3 Years 5 Years 10 Years
-------------------------------------------------
$11 $33 $51 $126
The purpose of the foregoing table is to assist investors in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. Such expenses are paid from the Fund's assets. (See
"The Fund And Its Management.") The above figures for INVESCO Total Return Fund
are based on fiscal year-end information. The Fund charges no sales load,
redemption fee or exchange fee. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN. The assumed 5% annual return is hypothetical and should
not be considered a representation of past or future annual returns, which may
be greater or less than the assumed amount.
Because the Fund pays a Rule 12b-1 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.
2
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
The following information for each of the five years ended August 31, 1998, the eight-month fiscal period ended August 31,
1993 and each of the four years ended December 31, 1992 has been audited by PricewaterhouseCoopers LLP, independent accountants.
This information should be read in conjunction with the Report of Independent Accountants thereon appearing in the Fund's 1998
Annual Report to Shareholders and the unaudited financial statements and accompanying notes in the Fund's Semi-Annual Report to
Shareholders for the six-month period ended February 28, 1999 which are incorporated by reference into the Statement of Additional
Information. Both are available without charge by contacting INVESCO Distributors, Inc., at the address or telephone number on the
back cover of this Prospectus. All per share data has been adjusted to reflect an 80 to 1 stock split which was effected on
January 2, 1991.
SIX MONTHS Period
ENDED Ended
February 28 Year Ended August 31 August 31
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995 1994 1993(^) 1992
UNAUDITED
PER SHARE DATA
Net Asset Value -
Beginning of
Period $28.16 $27.77 $22.60 $20.95 $18.54 $18.27 $17.18 $16.43
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment 0.37 0.83 0.77 0.73 0.72 0.69 0.40 0.66
Income
Net Gains on
Securities (Both
Realized and
Unrealized) 3.30 0.87 5.26 1.78 2.46 0.60 1.09 0.93
Total from
Investment
Operations 3.67 1.70 6.03 2.51 3.18 1.29 1.49 1.59
LESS DISTRIBUTIONS
Dividends from
Net Investment
Income 0.37 0.83 0.77 0.73 0.72 0.60 0.40 0.65
In Excess of Net
Investment Income 0.00 0.00 0.00 0.00 0.00 0.09 0.00 0.00
Distributions from
Capital Gains 0.82 0.48 0.09 0.13 0.05 0.17 0.00 0.19
Total Distributions
Net Asset Value - 0.00 0.00 0.00 0.00 0.00 0.16 0.00 0.00
End of Period
TOTAL RETURN
1.19 1.31 0.86 0.86 0.77 1.02 0.40 0.84
RATIOS
Net Assets -
End of Period $30.64 $28.16 $27.77 $22.60 $20.95 $18.54 $18.27 $17.18
($000 Omitted)
Ratio of Expenses 13.05%(*) 6.02% 27.01% 12.06% 17.54% 7.22% 8.72%(*) 9.84%
to Average Net
Assets(#)
Ratio of Net
Investment Income
to Average $3,236,926 $2,561,036 $1,845,594 $1,032,151 $563,468 $292,765 $220,224 $137,196
Net Assets(#)
Portfolio Turnover
Rate 0.41%*(@) 0.79%(@) 0.86%(@) 0.89%(@) 0.95% 0.96% 0.93%(~) 0.88%
Ratio of Net
Investment Income
to Average
Net Assets(#) 1.24%(*) 2.82% 3.11% 3.44% 3.97% 3.31% 3.51%(~) 4.06%
Portfolio Turnover
Rate 5%(*) 17% 4% 10% 30% 12% 19%(*) 13%
3
<PAGE>
Year ended December 31
<S> <C> <C> <C>
1991 1990 1989
PER SHARE DATA
Net Asset Value -
Beginning of
Period $14.21 $15.08 $13.46
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment 0.71 0.74 0.79
Income
Net Gains on
Securities (Both
Realized and
Unrealized) 2.78 (0.80) 1.74
Total from
Investment
Operations 3.49 (0.06) 2.53
LESS DISTRIBUTIONS
Dividends from
Net Investment
Income 0.72 0.75 0.78
In Excess of Net
Investment Income 0.00 0.00 0.00
Distributions from
Capital Gains 0.55 0.06 0.13
Total Distributions
Net Asset Value - 0.00 0.00 0.00
End of Period
TOTAL RETURN
1.27 0.81 0.91
RATIOS
Net Assets -
End of Period $16.43 $14.21 $15.08
($000 Omitted)
Ratio of Expenses 24.96% (0.35%) 19.13%
to Average Net
Assets(# )
Ratio of Net
Investment Income
to Average $82,219 $54,874 $44,957
Net Assets(#)
Portfolio Turnover
Rate 0.92% 1.00% 1.00%
Ratio of Net
Investment Income
to Average
Net Assets(# ) 4.62% 5.22% 5.46%
Portfolio Turnover
Rate 49% 24% 28%
</TABLE>
4
<PAGE>
(^) From January 1, 1993 to August 31, 1993.
(+) Distributions in excess of net investment income for the year ended August
31,1995 aggregated less than $0.01 on a per share basis.
(*) 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 INVESCO for the
six months ended February 28, 1999 and the years ended August 31, 1998, December
31, 1989 and 1988. If such expenses had not been voluntarily absorbed, Ratio of
Expenses to Average Net Assets would have been 0.42% (not annualized), 0.80%,
1.05% and 1.21%, respectively, and Ratio of Net Investment Income to Average Net
Assets would have been 1.23% (not annualized), 2.81%, 5.41% and 5.35%,
respectively.
(@) Ratio is based on Total Expenses of the Fund, less expenses absorbed by
investment adviser, which is before any expense offset arrangements.
~ Annualized
5
<PAGE>
PERFORMANCE DATA
From time to time, the Fund advertises its total return performance.
These figures are based upon historical investment results and are not intended
to indicate future performance. Total return is computed by calculating the
percentage change in value of an investment, assuming reinvestment of all income
dividends and capital gain distributions, to the end of a specified period.
Cumulative total return reflects actual performance over a stated period of
time. Average annual total return is a hypothetical rate of return that, if
achieved annually, would have produced the same cumulative total return if
performance had been constant over the entire period. Any given report of total
return performance should not be considered as representative of future
performance. The Fund charges no sales load, redemption fee or exchange fee
which would affect total return computations.
In conjunction with performance reports and/or analyses of shareholder
service for the Fund, comparative data between the Fund's performance for a
given period and the performance of recognized bond indices and 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, a division of The
McGraw-Hill Companies, Inc. ("S&P"), Lipper Analytical Services, Inc., Lehman
Brothers, National Association of Securities Dealers Automated Quotations, Frank
Russell Company, Value Line Investment Survey, the American Stock Exchange,
Morgan Stanley Capital International, Wilshire Associates, the Financial Times
Stock Exchange, the New York Stock Exchange, the Nikkei Stock Average and the
Deutcher Aktienindex, all of which are unmanaged market indicators. In addition,
rankings, ratings and comparisons of investment performance and/or assessments
of the quality of shareholder service appearing in publications such as Money,
Forbes, Kiplinger's Personal Finance, Morningstar and similar sources which
utilize information compiled (i) internally; (ii) by Lipper Analytical Services,
Inc.; or (iii) by other recognized analytical services, may be used in
advertising. The Lipper Analytical Services, Inc. mutual fund rankings and
comparisons, which may be used by the Fund in performance reports, will be drawn
from the "Flexible Portfolio Funds" Lipper mutual fund groupings, in addition to
the broad-based Lipper general fund grouping.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to seek a high total return on
investment through capital appreciation and current income. Funds having an
investment objective of seeking a high total return may be limited in their
ability to attain their objective by the limitations on the types of securities
in which they may invest. No assurance can be given that the Fund will be able
to achieve its investment objective.
The Fund intends to accomplish its objective by investing in a
combination of equity securities and fixed income securities. The equity
6
<PAGE>
securities to be acquired by the Fund will consist of common stocks and, to a
lesser extent, securities convertible into common stocks. Such securities
generally will be issued by companies which are listed on a national securities
exchange, such as the New York Stock Exchange, and which usually pay regular
dividends, although the Fund also may invest in securities traded on regional
stock exchanges or on the over-the-counter market. The Company has not
established any minimum investment standards, such as an issuer's asset level,
earnings history, type of industry, dividend payment history, etc. with respect
to the Fund's investments in common stocks, although in selecting common stocks
for the Fund, the investment adviser and sub-adviser (collectively, "Fund
Management") generally apply an investment discipline which seeks to achieve a
yield higher than the overall equity market. Therefore, because smaller
companies may be subject to more significant losses, as well as have the
potential for more substantial growth, than larger, more established companies,
investors in the Fund should consider that the Fund's investments may consist in
part of securities which may be deemed to be speculative.
The income securities to be acquired by the Fund primarily will include
obligations of the U.S. government and its agencies. These U.S. government
obligations consist of direct obligations of the U.S. government (U.S. Treasury
bills, notes and bonds), obligations guaranteed by the U.S. government, such as
Ginnie Mae obligations, and obligations of U.S. government authorities, agencies
and instrumentalities, which are supported only by the assets of the issuer,
such as Fannie Mae, Federal Home Loan Banks, Federal Financing Bank and Federal
Farm Credit Bank. The Fund also may invest in corporate debt obligations which
are rated by Moody's Investors Service, Inc. ("Moody's") in its four highest
ratings of corporate obligations (Aaa, Aa, A and Baa) or by S&P in its four
highest ratings of corporate obligations (AAA, AA, A and BBB) or, if not rated,
in Fund Management's opinion have investment characteristics similar to those
described in such ratings. A bond rating of Baa by Moody's indicates that the
bond issue is of "medium grade," neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present, but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and have speculative characteristics as well. A bond rating of
BBB by S&P indicates that the bond issue is in the lowest "investment grade"
security rating. Bonds rated BBB are regarded as having an adequate capacity to
pay principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category, and they may have speculative
characteristics. (See Appendix A to the Statement of Additional Information for
specific descriptions of these corporate bond rating categories.) Although there
is no limitation on the maturity of the Fund's investment in income securities,
the dollar weighted average maturity of such investments normally will be from 3
to 15 years.
Obligations of certain U.S. government agencies and instrumentalities
may not be supported by the full faith and credit of the United States. Some are
backed by the right of the issuer to borrow from the U.S. Treasury; others, such
7
<PAGE>
as Fannie Mae, by discretionary authority of the U.S. government to purchase the
agencies' obligations; while still others, such as the Student Loan Marketing
Association, are supported only by the credit of the instrumentality. In the
case of securities not backed by the full faith and credit of the United States,
the Fund must look principally to the agency issuing or guaranteeing the
obligation for ultimate repayment, and may not be able to assert a claim against
the United States itself in the event the agency or instrumentality does not
meet its commitments. The Fund will invest in securities of such
instrumentalities only when Fund Management is satisfied that the credit risk
with respect to any such instrumentality is minimal.
Typically, the Fund will maintain a minimum investment in equities of
30% of total assets, and a minimum of 30% of total assets will be invested in
fixed and variable income securities. The remaining 40% of the portfolio will
vary in asset allocation according to Fund Management's assessment of business,
economic and market conditions. The analytical process associated with making
allocation decisions is based upon a combination of demonstrated historic
financial results, current prices for stocks and the current yield to maturity
available in the market for bonds. The premium return available from one
category relative to the other determines the actual asset deployment. Fund
Management's asset allocation process is systematic and is based on current
information rather than forecasted change. The Fund seeks reasonably consistent
returns over a variety of market cycles. (See "Risk Factors" section of this
Prospectus for an analysis of the risks presented by this Fund's ability to
enter into futures contracts, and its ability to use options to purchase or sell
futures contracts or securities.)
The investment objective of the Fund and its investment policies, where
indicated, are fundamental policies and thus may not be changed without prior
approval by the holders of a majority of the outstanding voting securities of
the Fund, as defined in the Investment Company Act of 1940 (the "1940 Act"). In
addition, the Company and the Fund are also subject to certain investment
restrictions which also are identified in the Statement of Additional
Information and which may not be altered without approval of the Fund's
shareholders. One of those restrictions limits the Fund's borrowing of money to
borrowings from banks for temporary or emergency purposes (but not for
leveraging or investment) in an amount not exceeding 33 1/3% of the value of the
Fund's total assets.
RISK FACTORS
Investors should consider the special factors associated with the
policies discussed below in determining the appropriateness of an investment in
the Fund. The Fund's policies regarding investments in foreign securities and
foreign currencies are not fundamental and may be changed by vote of the
Company's board of directors (the "Board").
YEAR 2000 COMPUTER ISSUE. Due to the fact that many computer systems in
use today cannot recognize the Year 2000, but will, unless corrected, revert to
1900 or 1980 or cease to function at that time, the markets for securities in
8
<PAGE>
which the Fund invests may be detrimentally affected by computer failures
affecting portfolio investments or trading of securities beginning January 1,
2000. Improperly functioning trading systems may result in settlement problems
and liquidity issues. In addition, corporate and governmental data processing
errors may result in production issues for individual companies and overall
economic uncertainties. Earnings of individual issuers may be affected by
remediation costs, which may be substantial. The Fund's investments may be
adversely affected.
FOREIGN SECURITIES. The Fund may invest up to 25% of its total assets
in foreign equity or debt securities. Investments in securities of foreign
companies and in foreign markets involve certain additional risks not associated
with investments in domestic companies and markets, including the risks of
fluctuations in foreign currency exchange rates and of political or economic
instability, the difficulty of predicting international trade patterns, and the
possibility of imposition of exchange controls or currency blockage. In
addition, there may be less information publicly available about a foreign
company than about a domestic company, and there is generally less government
regulation of stock exchanges, brokers and listed companies abroad than in the
United States. Moreover, with respect to certain foreign countries, there may be
a possibility of expropriation or confiscatory taxation. Further, economies of
particular countries or areas of the world may differ favorably or unfavorably
from the economy of the United States.
Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg,
The Netherlands, Portugal and Spain are presently members of the European
Economic and Monetary Union (the "EMU"). The EMU has established a common
European currency for EMU countries which is known as the "euro." Each
participating country has adopted the euro as its currency effective January 1,
1999. The old national currencies are sub-currencies of the euro until July 1,
2002, at which time the old currencies will disappear entirely. Other European
countries may adopt the euro in the future.
The introduction of the euro presents some uncertainties and possible
risks, including whether the payment and operational systems of banks and other
financial institutions will have been ready by January 1, 1999; whether exchange
rates for existing currencies and the euro will have been adequately
established; and whether suitable clearing and settlement systems for the euro
will have been in operation. These and other factors may cause market
disruptions after January 1, 1999 and could adversely affect the value of
securities held by the Fund.
After January 1, 1999, the introduction of the euro is expected to
impact European capital markets in ways that it is impossible to quantify at
this time. For example, investors may begin to view EMU countries as a single
market, and that may impact future investment decisions for the Fund. As the
euro is implemented, there may be changes in the relative strength and value of
the U.S. dollar and other major currencies, as well as possible adverse tax
consequences. The euro transition by EMU countries - present and future - may
impact the fiscal and monetary policies of those participating countries. There
may be increased levels of price competition among business firms within EMU
9
<PAGE>
countries and between businesses in EMU and non-EMU countries. The outcome of
these uncertainties could have unpredictable effects on trade and commerce and
result in increased volatility for all financial markets.
FORWARD FOREIGN CURRENCY CONTRACTS. The Fund may enter into contracts
to purchase or sell foreign currencies at a future date ("forward contracts") as
a hedge against fluctuations in foreign exchange rates pending the settlement of
transactions in foreign securities or during the time the Fund holds foreign
securities. A forward contract is an agreement between contracting parties to
exchange an amount of currency at some future time at an agreed upon rate.
Although the Fund has not adopted any limitations on its ability to use forward
contracts as a hedge against fluctuations in foreign exchange rates, it does not
attempt to hedge all of its foreign investment positions and will enter into
forward contracts only to the extent, if any, deemed appropriate by Fund
Management. The Fund will not enter into a forward contract for a term of more
than one year or for purposes of speculation. Investors should be aware that
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 may preclude the opportunity for gain if the value of the hedged
currency should rise. No predictions can be made with respect to whether the
total of such transactions will result in a better or a worse position than had
the Fund not entered into any forward contracts. Forward contracts may, from
time to time, be considered illiquid, in which case they would be subject to the
Fund's limitation on investing in illiquid securities, discussed below. For
additional information regarding foreign securities, see the Fund's Statement of
Additional Information.
REPURCHASE AGREEMENTS. The Fund may engage in repurchase agreements
with banks, registered broker-dealers, and registered government securities
dealers which are deemed creditworthy by Fund Management under guidelines
established by the Board. A repurchase agreement is a transaction in which the
Fund purchases a security and simultaneously commits to sell the security to the
seller at an agreed upon price and date (usually not more than seven days) after
the date of purchase. The resale price reflects the purchase price plus an
agreed upon market rate of interest which is unrelated to the coupon rate or
maturity of the purchased security. The Fund's risk is limited to the ability of
the seller to pay the agreed upon amount on the delivery date. However, in the
event the seller should default, the underlying security constitutes collateral
for the seller's obligations to pay. This collateral will be held by the
custodian for the Fund's assets. In the event of insolvency of a counterparty to
a repurchase agreement, the Fund could experience delays and incur costs in
realizing on the collateral. To the extent that the proceeds from a sale upon a
default in the obligation to repurchase are less than the repurchase price, the
Fund would suffer a loss. Although the Fund has not adopted any limit on the
amount of its total assets that may be invested in repurchase agreements, the
Fund intends that at no time will the market value of its securities subject to
repurchase agreements exceed 20% of the Fund's total assets.
ILLIQUID SECURITIES. The Fund may invest from time to time in
securities subject to restrictions on disposition under the Securities Act of
10
<PAGE>
1933 ("restricted securities"), securities without readily available market
quotations or illiquid securities (those which cannot be sold in the ordinary
course of business within seven days at approximately the valuation given to
them by the Fund). However, on the date of purchase, no such investment may
increase the Fund's holdings of restricted securities to more than 2% of the
value of the Fund's total assets or its holdings of illiquid securities or those
without readily available market quotations to more than 5% of the value of the
Fund's total assets. The Fund is not required to receive registration rights in
connection with the purchase of restricted securities and, in the absence of
such rights, marketability and value can be adversely affected because the Fund
may be unable to dispose of such securities at the time desired or at a
reasonable price. In addition, in order to resell a restricted security, the
Fund might have to bear the expense and incur the delays associated with
effecting registrations.
FUTURES AND OPTIONS. A futures contract is an agreement to buy or sell
a specific amount of a financial instrument or commodity at a particular price
on a particular date. The Fund will use futures contracts only to hedge against
price changes in the value of its current or intended investments in securities.
In the event that an anticipated decrease in the value of portfolio securities
occurs as a result of a general decrease in prices, the adverse effects of such
changes may be offset, at least in part, by gains on the sale of futures
contracts. Conversely, the increased cost of portfolio securities to be
acquired, caused by a general increase in prices, may be offset, at least in
part, by gains on futures contracts purchased by the Fund. Brokerage fees are
paid to trade futures contracts, and the Fund is required to maintain margin
deposits.
Put and call options on futures contracts or securities may be traded
by the Fund in order to protect against declines in the value of portfolio
securities or against increases in the cost of securities to be acquired. The
purchaser of an option purchases the right to effect a transaction in the
underlying future or security at a specified price (the "strike price") before a
specified date (the "expiration date"). In exchange for the right, the purchaser
pays a "premium" to the seller, which represents the price of the right to buy
or to sell the underlying instrument. In exchange for the premium, the seller of
the option becomes obligated to effect a transaction in the underlying future or
security, at the strike price, at any time prior to the expiration date, should
the buyer choose to exercise the option. A call option contract grants the
purchaser the right to buy the underlying future or security, at the strike
price, before the expiration date. A put option contract grants the purchaser
the right to sell the underlying future or security, at the strike price, before
the expiration date. Purchases of options on futures contracts may present less
dollar risk in hedging the Fund's portfolio than the purchase and sale of the
underlying futures contracts, since the potential loss is limited to the amount
of the premium plus related transaction costs. The premium paid for such a put
or call option plus any transaction costs will reduce the benefit, if any,
realized by the Fund upon exercise or liquidation of the option, and, unless the
price of the underlying futures contract or security changes sufficiently, the
option may expire without value to the Fund.
11
<PAGE>
Although the Fund will enter into futures contracts and options on
futures contracts and securities solely for hedging or other nonspeculative
purposes, within the meaning and intent of applicable rules of the Commodity
Futures Trading Commission (the "CFTC"), their use does involve certain risks.
For example, a lack of correlation between the value of an instrument underlying
an option or futures contract and the assets being hedged, or unexpected adverse
price movements, could render the Fund's hedging strategy unsuccessful and could
result in losses. In addition, there can be no assurance that a liquid secondary
market will exist for any contract purchased or sold, and the Fund may be
required to maintain a position until exercise or expiration, which could result
in losses. Transactions in futures contracts and options are subject to other
risks as well, which are set forth in greater detail in the Statement of
Additional Information and Appendix B therein.
SECURITIES LENDING. The Fund may make loans of its portfolio securities
(not to exceed 10% of the Fund's total assets) to broker-dealers or other
institutional investors under contracts requiring such loans to be callable at
any time and to be secured continuously by collateral in cash, cash equivalents,
high quality short-term government securities or irrevocable letters of credit
maintained on a current basis at an amount at least equal to the market value of
the securities loaned, including accrued interest and dividends. The Fund will
continue to collect the equivalent of the interest or dividends paid by the
issuer on the securities loaned and will also receive either interest (through
investment of cash collateral) or a fee (if the collateral is government
securities). The Fund may pay finder's and other fees in connection with
securities loans.
PORTFOLIO TURNOVER. There are no fixed limitations regarding portfolio
turnover for the Fund. Although the Fund does not trade for short-term profits,
securities may be sold without regard to the time they have been held in the
Fund when, in the opinion of Fund Management, market considerations warrant such
action. As a result, while it is anticipated that the Fund's annual portfolio
turnover rate generally will not exceed 100%, under certain market conditions
the portfolio turnover rate for the Fund may exceed 100%. Increased portfolio
turnover would cause the Fund to incur greater brokerage costs than would
otherwise be the case. The Fund's portfolio turnover rates are set forth under
"Financial Highlights" and, along with the Trust's brokerage allocation
policies, are discussed in the Statement of Additional Information.
THE FUND AND ITS MANAGEMENT
The Company is a no-load mutual fund, registered with the Securities
and Exchange Commission as an open-end, diversified management investment
company. The Company was organized on August 19, 1993, under the laws of
Maryland. On September 10, 1998, the name of the Company was changed to INVESCO
Flexible Funds, Inc. On October 29, 1998, the name of the Company was changed to
INVESCO Combination Stock & Bond Funds, Inc. On May 28, 1999, the Company
assumed all of the assets and liabilities of INVESCO Total Return Fund, a series
of INVESCO Value Trust. INVESCO Value Trust was organized under the laws of
Massachusetts on July 15, 1987.
12
<PAGE>
The Board has responsibility for overall supervision of the Fund, and
reviews the services provided by the adviser. Under an agreement with the
Company, INVESCO, 7800 E. Union Avenue, Denver, Colorado, serves as the Fund's
investment adviser. Under this agreement, INVESCO is primarily responsible for
providing the Fund with various administrative services and supervises the
Fund's daily business affairs. These services are subject to review by the
Board.
INVESCO has contracted with INVESCO Capital Management, Inc. ("ICM"),
the Fund's investment adviser prior to 1991, for investment sub-advisory and
research services on behalf of the Fund. ICM currently manages in excess of
$38.1 billion of assets on behalf of tax-exempt accounts (such as pension and
profit-sharing funds for corporations and state and local governments) and
investment companies. ICM, subject to the supervision of INVESCO, is primarily
responsible for selecting and managing the Fund's investments. Although the
Company is not a party to the sub-advisory agreement, the agreement has been
approved by the shareholders of the Company.
Services provided by INVESCO and ICM are subject to review by the Board.
Pursuant to an agreement with the Company, INVESCO Distributors, Inc.
("IDI") is the Fund's distributor. IDI, established in 1997, is a registered
broker-dealer that acts as distributor for all retail mutual funds advised by
INVESCO. Prior to September 30, 1997, INVESCO served as the Fund's distributor.
INVESCO, ICM and IDI are indirect wholly-owned subsidiaries of AMVESCAP
PLC. AMVESCAP PLC is a publicly-traded holding company that, through its
subsidiaries, engages in the business of investment management on an
international basis. INVESCO PLC changed its name to AMVESCO PLC on March 3,
1997 and to AMVESCAP PLC on May 8, 1997, as part of a merger between a direct
subsidiary of INVESCO PLC and A I M Management, Inc. that created one of the
largest independent investment management businesses in the world. AMVESCAP PLC
had approximately $241 billion in assets under management as of September 30,
1998. INVESCO was established in 1932 and, as of August 31, 1998, managed 14
mutual funds, consisting of 49 separate portfolios, with combined assets of
approximately 17.1 billion on behalf of 899,439 shareholders.
The following individuals serve as portfolio managers for the Fund and
are primarily responsible for the day-to-day management of the Fund's portfolio
of securities:
Edward C. Mitchell, Jr., C.F.A. Portfolio manager of the Fund since 1987;
Chairman (1997 to present), president
(1992 to 1997), vice president (1979 to
1991) and director (1979 to present) for
INVESCO Capital Management, Inc.; began
investment career in 1969; B.A.,
University of Virginia; M.B.A.,
University of Colorado; Chartered
Financial Analyst; Chartered Investment
Counselor.
13
<PAGE>
James O. Baker Portfolio manager of the Fund since 1997;
portfolio manager of the INVESCO
Intermediate Government Bond Fund since
1993; portfolio manager for INVESCO
Capital Management, Inc. (1992 to
present); portfolio manager, Willis
Investment Counsel (1990 to 1992);
broker, Morgan Keegan (1989 to 1990);
broker, Drexel Burnham Lambert (1985 to
1990); began investment career in 1977;
B.A., Mercer University; Chartered
Financial Analyst.
Margaret W. Durkes Assistant portfolio manager of the Fund
since 1997; assistant portfolio manager
of AIM Advisor Flex Fund since 1997;
assistant portfolio manager for INVESCO
Capital Management, Inc. (1993 to
present); vice president and portfolio
manager for Sovran Capital Management
(1991 to 1993); B.A., The Colorado
College; Chartered Financial Analyst.
David S. Griffin Assistant portfolio manager of the Fund
since 1993; portfolio manager for INVESCO
Capital Management, Inc. (1991 to
present); mutual fund sales
representative, INVESCO Services, Inc.
(1986 to 1991); began investment career
in 1982; B.A., Ohio Wesleyan University;
M.B.A., William and Mary; Chartered
Financial Analyst.
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 INVESCO a monthly 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 average net assets of the Fund in excess of $1 billion. For the
fiscal year ended August 31, 1998, the advisory fees paid to INVESCO amounted to
0.58% of the average net assets of the Fund.
Out of the advisory fee which it receives from the Fund, INVESCO pays
ICM, as the Fund's sub-adviser, a monthly fee based upon the average daily value
of the Fund's net assets. Based upon approval of the board of trustees at a
14
<PAGE>
meeting held May 14, 1998, the calculation of subadvisory fees of the Fund has
been changed from 33.33% of the advisory fee (0.25% on the first $500 million of
the Fund's average net assets, 0.2167% on the next $500 million of the Fund's
average net assets and 0.1667% on the Fund's average net assets in excess of $1
billion) to 40% of the advisory fee (0.30% on the first $500 million of the
Fund's average net assets, 0.26% on the next $500 million of the Fund's average
net assets and 0.20% on the Fund's average net assets in excess of $1 billion).
No fee is paid by the Fund to ICM.
The Company also has entered into an Administrative Services Agreement
(the "Administrative Agreement") with INVESCO. Pursuant to the Administrative
Agreement, INVESCO performs certain administrative, recordkeeping and internal
sub-accounting services, including without limitation, maintaining general
ledger and capital stock accounts, preparing a daily trial balance, calculating
net asset value daily and providing selected general ledger reports and
providing sub-accounting and recordkeeping services for shareholder accounts
maintained by certain retirement and employee benefit plans for the benefit of
participants in such plans. For such services, the Fund pays INVESCO a fee
consisting of a base fee of $10,000 per year, plus an additional incremental fee
computed at an annual rate of 0.015% per year of the average net assets of the
Fund.
The Fund bears those Company expenses which are accrued daily that are
incurred on its behalf and, in addition, bears a portion of general Company
expenses, allocated based upon the relative net assets of the three Funds of the
Company. Such expenses are generally deducted from the Fund's total income
before dividends are paid. Total expenses of the Fund, as a percentage of its
average net assets for the fiscal year ended August 31, 1998, including
investment advisory fees (but excluding brokerage commissions), were 0.79%.
The management and custodial services provided to the Fund by INVESCO
and the Fund's custodian, and the services provided to shareholders by INVESCO
and IDI, depend on the continued functioning of their computer systems. Many
computer systems in use today cannot recognize the Year 2000, but will revert to
1900 or 1980 or will cease to function due to the manner in which dates were
encoded and are calculated. That failure could have a negative impact on the
handling of the Fund's securities trades, its share pricing and its account
services. The Fund and its service providers have been actively working on
necessary changes to their computer systems to deal with the Year 2000 issue and
expect that their computer systems will be adapted before that date, but there
can be no assurance that they will be successful. Furthermore, services may be
impaired at that time as a result of the interaction of their systems with the
noncomplying computer systems of others. INVESCO plans to test as many such
interactions as practicable prior to December 31, 1999 and to develop
contingency plans for reasonably anticipated failures.
15
<PAGE>
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of
such brokers' and dealers' financial responsibility coupled with their ability
to effect transactions at the best available prices. The Fund may place orders
for portfolio transactions with qualified brokers and dealers that 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.
HOW SHARES CAN BE PURCHASED
Shares of the Fund are sold on a continuous basis by IDI, as the Fund's
distributor, at the net asset value per share next calculated after receipt of a
purchase order in good form. No sales charge is imposed upon the sale of shares
of the Fund. To purchase shares of the Fund, send a check made payable to
INVESCO Funds Group, Inc., together with a completed application form, to:
INVESCO FUNDS GROUP, INC.
Post Office Box 173706
Denver, Colorado 80217-3706
PURCHASE ORDERS MUST SPECIFY THE FUND IN WHICH THE INVESTMENT IS TO BE
MADE.
The minimum initial purchase must be at least $1,000, with subsequent
investments of not less than $50, except that: (1) those shareholders
establishing an EasiVest or direct payroll purchase account, as described below
in the section entitled "Services Provided by the Fund," may open an account
without making any initial investment if they agree to make regular, minimum
purchases of at least $50; (2) those shareholders investing in an Individual
Retirement Account ("IRA"), or through omnibus accounts where individual
shareholder recordkeeping and sub-accounting are not required, may make initial
minimum purchases of $250; (3) Fund Management may permit a lesser amount to be
invested in the Fund under a federal income tax-deferred retirement plan (other
than an IRA), or under a group investment plan qualifying as a sophisticated
investor; and (4) Fund Management reserves the right to increase, reduce or
waive the minimum purchase requirements in its sole discretion where it
determines such action is in the best interests of the Fund. The minimum initial
purchase requirement of $1,000, as described above, does not apply to
shareholder account(s) in any of the INVESCO funds opened prior to January 1,
1993, and thus is not a minimum balance requirement for those existing accounts.
However, for shareholders already having accounts in any of the INVESCO funds,
16
<PAGE>
all initial share purchases in a new fund account, including those made using
the exchange privilege, must meet the fund's applicable minimum investment
requirement.
The purchase of shares in the Fund can be expedited by placing bank
wire, overnight courier or telephone orders. For further information, the
purchaser may call the Fund's office by using the telephone number on the back
cover of this Prospectus. Orders sent by overnight courier, including Express
Mail, should be sent to the street address, not post office box, of INVESCO
Funds Group, Inc., 7800 E. Union Avenue, Denver, Colorado 80237.
Orders to purchase Fund shares can be placed by telephone. Shares of
the Fund will be issued at the net asset value next determined after receipt of
telephone instructions. Generally, payments for telephone orders must be
received by the Fund within three business days or the transaction may be
canceled. In the event of such cancellation, the purchaser will be held
responsible for any loss resulting from a decline in the value of the shares. In
order to avoid such losses, purchasers should send payments for telephone
purchases by overnight courier or bank wire. INVESCO has agreed to indemnify the
Fund for any losses resulting from the cancellation of telephone purchases.
If your check does not clear, or if a telephone purchase must be
canceled due to nonpayment, you will be responsible for any related loss the
Fund or INVESCO incurs. If you are already a shareholder in the INVESCO funds,
the Fund has the option to redeem shares from any identically registered account
in the Fund or any other INVESCO fund as reimbursement for any loss incurred.
You also may be prohibited or restricted from making future purchases in any of
the INVESCO funds.
Persons who invest in the Fund through a securities broker may be
charged a commission or transaction fee by the broker for the handling of the
transaction if the broker so elects. Any investor may deal directly with the
Fund in any transaction. In that event, there is no such charge. IDI or INVESCO
may from time to time make payments from their revenues to securities dealers
and other financial institutions that provide distribution-related and/or
administrative services for the Fund.
The Fund reserves the right in its sole discretion to reject any order
for purchase of its shares (including purchases by exchange) when, in the
judgment of Fund Management, such rejection is in the best interest of the Fund.
Net asset value per share is computed once each day that the New York
Stock Exchange is open as of the close of regular trading on that Exchange
(generally 4:00 p.m., New York time) and also may be computed on other days
under certain circumstances. Net asset value per share for the Fund is
calculated by dividing the market value of the Fund's securities plus the value
of its other assets (including dividends and interest accrued but not
collected), less all liabilities (including accrued expenses), by the number of
outstanding shares of the Fund. If market quotations are not readily available,
a security will be valued at fair value as determined in good faith by the board
17
<PAGE>
of trustees. Debt securities with remaining maturities of 60 days or less at the
time of purchase will be valued at amortized cost, absent unusual circumstances,
so long as the Board believes that such value represents fair value.
Under certain circumstances, the Fund may offer its shares, in lieu of
cash payment, for securities to be purchased by the Fund. Such a transaction can
benefit the Fund by allowing it to acquire securities for its portfolio without
paying brokerage commissions. For the same reason, the transaction also may be
beneficial to the party exchanging the securities. The Fund shall not enter into
such transactions, however, unless the securities to be exchanged for Fund
shares are readily marketable and not restricted as to transfer either by law or
liquidity of the market, comply with the investment policies and objectives of
the Fund, are of the type and quality which would normally be purchased for the
Fund's portfolio, are acquired for investment and not for resale, have a value
which is readily ascertainable as evidenced by a listing on the American Stock
Exchange, the New York Stock Exchange or NASDAQ, and are securities which the
Fund would otherwise purchase on the open market. The value of Fund shares used
to purchase portfolio securities as stated herein will be the net asset value as
of the effective time and date of the exchange. The securities to be received by
the Fund will be valued in accordance with the same procedure used in valuing
the Fund's portfolio securities. Any investor wishing to acquire shares of the
Fund in exchange for securities should contact either the president or the
secretary of the Trust at the address or telephone number shown on the back
cover of this Prospectus.
DISTRIBUTION EXPENSES. The Fund is authorized under a Plan and
Agreement of Distribution pursuant to Rule 12b-1 under the 1940 Act (the "Plan")
to use its assets to finance certain activities relating to the distribution of
its shares to investors. The Plan applies to New Assets (new sales of shares,
exchanges into the Fund and reinvestments of dividends and capital gains
distributions) of the Fund on or after June 1, 1998. Under the Plan, monthly
payments may be made by the Fund to IDI to permit IDI, at its discretion, to
engage in certain activities and provide certain services approved by the Board
in connection with the distribution of the Fund's shares to investors. These
activities and services may include the payment of compensation (including
incentive compensation and/or continuing compensation based on the amount of
customer assets maintained in the Fund) to securities dealers and other
financial institutions and organizations, which may include INVESCO- and
IDI-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
electronically 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 with the Fund.
In addition, other permissible activities and services include
advertising, preparation, printing and distribution of sales literature,
printing and distribution of prospectuses to prospective investors, and such
other services and promotional activities for the Fund as may from time to time
18
<PAGE>
be agreed upon by the Company and its board of trustees, including public
relations efforts and marketing programs to communicate with investors and
prospective investors. These services and activities may be conducted by the
staff of INVESCO, IDI or their affiliates or by third parties.
Under the Plan, the Fund's payments to IDI are limited to an amount
computed at an annual rate of 0.25% of the Fund's average net New Assets. IDI is
not entitled to payment for overhead expenses under the Plan, but may be paid
for all or a portion of the compensation paid for salaries and other employee
benefits for the personnel of INVESCO or IDI whose primary responsibilities
involve marketing shares of the INVESCO mutual funds, including the Fund.
Payment amounts by the Fund under the Plan, for any month, may be made to
compensate IDI for permissible activities engaged in and services provided by
IDI during the rolling 12-month period in which that month falls. Therefore, any
obligations incurred by IDI in excess of the limitations described above will
not be paid by the Fund and will be borne by IDI. In addition, IDI and its
affiliates may from time to time make additional payments from their revenues to
securities dealers, financial advisers and financial institutions that provide
distribution-related and/or administrative services for the Fund. No further
payments will be made by the Fund under the Plan in the event of the Plan's
termination. Payments made by the Fund may not be used to finance directly the
distribution of shares of any other fund of the Company or other mutual funds
advised by INVESCO and distributed by IDI. However, payments received by IDI
which are not used to finance the distribution of shares of the Fund become part
of IDI's revenues and may be used by IDI for activities that promote
distribution of any of the mutual funds advised by INVESCO. Subject to review by
the Company's directors, payments made by the Fund under the Plan for
compensation of marketing personnel, as noted above, are based on an allocation
formula designed to ensure that all such payments are appropriate. IDI will bear
any distribution- and service-related expenses in excess of the amounts which
are compensated pursuant to the Plan. The Plan also authorizes any financing of
distribution which may result from INVESCO's or IDI's use of fees received from
the Fund for services rendered by INVESCO, provided that such fees are
legitimate and not excessive. For more information, see "How Shares Can Be
Purchased - Distribution Plan" in the Statement of Additional Information.
SERVICES PROVIDED BY THE FUND
SHAREHOLDER ACCOUNTS. INVESCO maintains a share account that reflects
the current holdings of each shareholder. A separate account will be maintained
for a shareholder for each Fund in which the shareholder invests. As a business
trust, the Company does not issue share certificates. Each shareholder is sent a
detailed confirmation of each transaction in shares of the Company. Shareholders
whose only transactions are through the EasiVest, direct payroll purchase,
automatic monthly exchange or periodic withdrawal programs, or are reinvestments
of dividends or capital gains in the same or another fund, will receive
confirmations of those transactions on their quarterly statements. These
programs are discussed below. For information regarding a shareholder's account
19
<PAGE>
and transactions, the shareholder may call INVESCO by using the telephone number
on the back cover of this Prospectus.
REINVESTMENT OF DISTRIBUTIONS. Dividends and other distributions are
automatically reinvested in additional shares of the Fund at the net asset value
per share of the Fund in effect on the ex-dividend or ex-distribution date. A
shareholder may, however, elect to reinvest dividends and other distributions in
certain of the other no-load mutual funds advised by INVESCO and distributed by
IDI, or to receive payment of all dividends and other distributions in excess of
$10.00 by check by giving written notice to INVESCO at least two weeks prior to
the record date on which the change is to take effect. Further information
concerning these options can be obtained by contacting INVESCO.
PERIODIC WITHDRAWAL PLAN. A Periodic Withdrawal Plan is available to
shareholders who own or purchase shares of any mutual funds advised by INVESCO
having a total value of $10,000 or more; provided, however, that at the time the
Plan is established, the shareholder owns shares having a value of at least
$5,000 in the fund from which the withdrawals will be made. Under the Periodic
Withdrawal Plan, INVESCO, as agent, will make specified monthly or quarterly
payments of any amount selected (minimum payment of $100) to the party
designated by the shareholder. Notice of all changes concerning the Periodic
Withdrawal Plan must be received by INVESCO at least two weeks prior to the next
scheduled check. Further information regarding the Periodic Withdrawal Plan and
its requirements and tax consequences can be obtained by contacting INVESCO.
EXCHANGE POLICY. Shares of the Fund may be exchanged for shares of any
other fund of the Company, as well as for shares of any of the following other
no-load mutual funds, which are also advised and distributed by INVESCO, on the
basis of their respective net asset values at the time of the exchange: INVESCO
Bond Funds, Inc. (formerly, INVESCO Income Funds, Inc.), INVESCO Combination
Stock & Bond Funds, Inc. (formerly, INVESCO Flexible Funds, Inc. and INVESCO
Multiple Asset Funds, Inc.), INVESCO Diversified Funds, Inc., INVESCO Emerging
Opportunity Funds, Inc., INVESCO Growth Funds, Inc. (formerly, INVESCO Growth
Fund, Inc.), INVESCO Industrial Income Fund, Inc., INVESCO International Funds,
Inc., INVESCO Money Market Funds, Inc., INVESCO Sector Funds, Inc. (formerly,
INVESCO Strategic Portfolios, Inc.), INVESCO Specialty Funds, Inc., INVESCO
Stock Funds, Inc. (formerly, INVESCO Equity Funds, Inc.) and INVESCO Tax-Free
Income Funds, Inc.
An exchange involves the redemption of shares in the Fund and
investment of the redemption proceeds in shares of another fund of the Trust or
in shares of one of the funds listed above. Exchanges will be made at the net
asset value per share next determined after receipt of an exchange request in
proper order. Any gain or loss realized on such an exchange is recognizable for
federal income tax purposes by the shareholder. Exchange requests may be made
either by telephone or by written request to INVESCO, using the telephone number
or address on the back cover of this Prospectus. Exchanges made by telephone
20
<PAGE>
must be in the amount of at least $250 if the exchange is being made into an
existing account of one of the INVESCO funds. All exchanges that establish a NEW
account must meet the fund's applicable minimum initial investment requirements.
Written exchange requests into an existing account have no minimum requirements
other than the Fund's applicable minimum subsequent investment requirements.
The option to exchange Fund shares by telephone is available to
shareholders automatically unless expressly declined. By signing the new account
Application or a Telephone Transaction Authorization Form or otherwise utilizing
the telephone exchange, the investor has agreed that the Fund will not be liable
for following instructions communicated by telephone that it reasonably believes
to be genuine. The Fund employs procedures, which it believes are reasonable,
designed to confirm that exchange transactions are genuine. These may include
recording telephone instructions and providing written confirmations of exchange
transactions. As a result of this policy, the investor may bear the risk of any
loss due to unauthorized or fraudulent instructions; provided, however, that if
the Fund fails to follow these or other reasonable procedures, the Fund may be
liable.
In order to prevent abuse of this policy to the disadvantage of other
shareholders, the Fund reserves the right to temporarily or permanently
terminate the exchange option of any shareholder who requests more than four
exchanges in a year, or at any time the Fund determines the actions of the
shareholder are detrimental to Fund performance and shareholders. The Fund will
determine whether to do so based on a consideration of both the number of
exchanges any particular shareholder or group of shareholders has requested and
the time period over which those exchange requests have been made, together with
the level of expense to the Fund which will result from effecting additional
exchange requests. The exchange policy also may be modified or terminated at any
time. Except in unusual circumstances where redemptions of the exchanged
security are suspended under Section 22(e) of the 1940 Act, or where sales of
the fund into which the shareholder is exchanging are temporarily suspended,
notice of all such modifications to the policy or terminations that would affect
all Fund shareholders will be given at least 60 days prior to the date of the
change in policy.
Before making an exchange, the shareholder should review the
prospectuses of the funds involved and consider their differences. Shareholders
interested in exercising the exchange option may contact INVESCO for information
concerning their particular exchanges.
AUTOMATIC MONTHLY EXCHANGE. Shareholders who have accounts in any one
or more of the mutual funds distributed by IDI may arrange for a fixed dollar
amount of their fund shares to be automatically exchanged for shares of any
other INVESCO mutual fund listed under "Exchange Policy" on a monthly basis,
subject to the Fund's minimum initial investment or subsequent investment
requirements. This automatic exchange program can be changed by the shareholder
21
<PAGE>
at any time by notifying INVESCO at least two weeks prior to the date the change
is to be made. Further information regarding this service can be obtained by
contacting INVESCO.
EASIVEST. For shareholders who want to maintain a schedule of monthly
investments, EasiVest uses various methods to draw a preauthorized amount from
the shareholder's bank account to purchase Fund shares. This automatic
investment program can be changed by the shareholder at any time by contacting
INVESCO at least two weeks prior to the date the change is to be made. Further
information regarding this service can be obtained by contacting INVESCO.
DIRECT PAYROLL PURCHASE. Shareholders may elect to have their employers
make automatic purchases of Fund shares for them by deducting a specified amount
from their regular paychecks. This automatic investment program can be modified
or terminated at any time by the shareholder by notifying the employer. Further
information regarding this service can be obtained by contacting INVESCO.
TAX-DEFERRED RETIREMENT PLANS. Shares of the Fund may be purchased for
self-employed individual retirement plans, various IRAs, simplified employee
pension plans and corporate retirement plans. In addition, shares can be used to
fund tax qualified plans established under Section 403(b) of the Internal
Revenue Code by educational institutions, including public school systems and
private schools, and certain kinds of non-profit organizations, which provide
deferred compensation arrangements for their employees.
Prototype forms for the establishment of these various plans including,
where applicable, disclosure statements required by the Internal Revenue
Service, are available from INVESCO. Institutional Trust Company, doing business
as INVESCO Trust Company ("ITC"), an affiliate of INVESCO, is qualified to serve
as trustee or custodian under these plans and provides the required services at
competitive rates. Retirement plans (other than IRAs) receive monthly statements
reflecting all transactions in their Fund accounts. IRAs receive the
confirmations and quarterly statements described under "Shareholder Accounts."
For complete information, including prototype forms and service charges, call
IDI at the telephone number listed on the back cover of this Prospectus or send
a written request to: Retirement Services, INVESCO Funds Group, Inc., Post
Office Box 173706, Denver, Colorado 80217-3706.
22
<PAGE>
HOW TO REDEEM SHARES
Shares of the Fund may be redeemed at any time at their current net
asset value next determined after a request in proper form is received at the
Fund's office. Redemption requests sent by overnight courier, including Express
Mail, should be sent to the street address, not post office box, of INVESCO
Funds Group, Inc. at 7800 E. Union Avenue, Denver, CO 80237. (See "How Shares
Can Be Purchased.") Net asset value per share of the Fund at the time of the
redemption may be more or less than the price originally paid to purchase
shares, depending primarily upon the Fund's investment performance.
In order to redeem shares, a written redemption request signed by each
registered owner of the account may be submitted to INVESCO at the address noted
above. If shares are held in the name of a corporation, additional documentation
may be necessary. Call or write for specific information. If payment for the
redeemed shares is to be made to someone other than the registered owner(s), the
signature(s) must be guaranteed by a financial institution which qualifies as an
eligible guarantor institution. Redemption procedures with respect to accounts
registered in the names of broker-dealers may differ from those applicable to
other shareholders.
BE CAREFUL TO SPECIFY THE ACCOUNT FROM WHICH THE REDEMPTION IS TO BE
MADE. SHAREHOLDERS HAVE A SEPARATE ACCOUNT FOR EACH FUND IN WHICH THEY INVEST.
Payment of redemption proceeds will be mailed within seven days
following receipt of the required documents. However, payment may be postponed
under unusual circumstances, such as when normal trading is not taking place on
the New York Stock Exchange or when an emergency as defined by the Securities
and Exchange Commission exists. If the shares to be redeemed were purchased by
check and that check has not yet cleared, payment will be made promptly upon
clearance of the purchase check (which will take up to 15 days).
If a shareholder participates in EasiVest, the Fund's automatic monthly
investment program, and redeems all of the shares in a Fund account, INVESCO
will terminate any EasiVest purchases unless otherwise instructed by the
shareholder.
Because of the high relative costs of handling small accounts, should
the value of any shareholder's account fall below $250 as a result of
shareholder action, the Fund reserves the right to effect the involuntary
redemption of all shares in such account, in which case the account would be
liquidated and the proceeds forwarded to the shareholder. Prior to any such
redemption, a shareholder will be notified and given 60 days to increase the
value of the account to $250 or more.
Fund shareholders (other than shareholders holding Fund shares in
accounts of IRA plans) may request expedited redemption of shares having a
minimum value of $250 (or redemption of all shares if their value is less than
23
<PAGE>
$250) held in accounts maintained in their name by telephoning redemption
instructions to INVESCO, using the telephone number on the back cover of this
Prospectus.
At the shareholder's option, the redemption proceeds either will be
mailed to the address listed for the shareholder's Fund account, or wired
(minimum of $1,000) or mailed to the bank which the shareholder has designated
to receive the proceeds of telephone redemptions. Unless INVESCO permits a
longer redemption request to be placed by telephone, a shareholder may not place
a redemption request by telephone in excess of $25,000. These telephone
redemption privileges may be modified or terminated in the future at the
discretion of INVESCO. For ITC sponsored federal income tax-deferred retirement
plans, the term "shareholders" is defined to mean plan trustees that file a
written request to be able to redeem Fund shares by telephone. Shareholders
should understand that while the Fund will attempt to process all telephone
redemption requests on an expedited basis, there may be times, particularly in
periods of severe economic or market disruption, when (a) they may encounter
difficulty in placing a telephone redemption request, and (b) processing
telephone redemptions will require up to seven days following receipt of the
redemption request, or additional time because of the unusual circumstances set
forth above.
Redeeming Fund shares by telephone is available to shareholders
automatically unless expressly declined. By signing a new account Application, a
Telephone Transaction Authorization Form or otherwise utilizing telephone
redemption privileges, the shareholder has agreed that the Fund will not be
liable for following instructions communicated by telephone that it reasonably
believes to be genuine. The Fund employs procedures, which it believes are
reasonable, designed to confirm that telephone instructions are genuine. These
may include recording telephone instructions and providing written confirmations
of transactions initiated by telephone. As a result of this policy, the investor
may bear the risk of any loss due to unauthorized or fraudulent instructions;
provided, however, that if the Fund fails to follow these or other reasonable
procedures, the Fund may be liable.
TAXES, DIVIDENDS AND OTHER DISTRIBUTIONS
TAXES. The Fund intends to distribute to shareholders substantially all
of its net investment income, net capital gains and net gains from certain
foreign currency transactions, if any. Distribution of substantially all net
investment income to shareholders allows the Fund to maintain its tax status as
a regulated investment company. The Fund does not expect to pay any federal
income or excise taxes because of its distribution policies and tax status as a
regulated investment company.
Shareholders must include all dividends and other distributions in
taxable income for federal, state and local income tax purposes, unless their
accounts are exempt from income taxes. Dividends and other distributions are
taxable whether they are received in cash or automatically reinvested in shares
of either the Fund or another fund in the INVESCO group.
24
<PAGE>
Net realized capital gains of the Fund are classified as short-term and
long-term gains depending upon how long the Fund held the security that gave
rise to the gains. Short-term capital gains are included in income from
dividends and interest as ordinary income and are taxed at the taxpayer's
marginal tax rate. During 1997, the Taxpayer Relief Act established a new
maximum capital gains tax rate of 20%. Depending on the holding period of the
asset giving rise to the gain, a capital gain was taxable at a maximum rate of
either 20% or 28%. Beginning January 1, 1998, all long-term gains realized on
the sale of securities held for more than 12 months will be taxable at a maximum
rate of 20%. In addition, legislation signed in October 1998 provides that all
capital gain distributions from a mutual fund paid to shareholders during 1998
will be taxed at a maximum rate of 20%. Accordingly, all capital gain
distributions paid in 1998 will be taxable at a maximum rate of 20%. At the end
of each year, information regarding the tax status of dividends and other
distributions is provided to shareholders. Shareholders should consult their tax
advisers as to the effect of distributions by the Fund.
Shareholders may realize capital gains or losses when they sell their
Fund shares at more or less than the price originally paid. Capital gain on
shares held for more than one year will be long-term capital gain, in which
event it will be subject to federal income tax at the rates indicated above.
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.
Individuals and certain other non-corporate shareholders may be subject
to backup withholding of 31% on dividends, capital gain and other distributions
and redemption proceeds. Shareholders can avoid backup withholding on their Fund
accounts by ensuring that INVESCO has a correct, certified tax identification
number.
Shareholders should consult a tax adviser with respect to these
matters. For further information see "Dividends, Other Distributions And Taxes"
in the Statement of Additional Information.
DIVIDENDS AND OTHER DISTRIBUTIONS. The Fund earns ordinary or net
investment income in the form of interest and dividends on its investments.
Dividends paid by the Fund will be based solely on net investment income earned
by it. The Fund's policy is to distribute substantially all of this income, less
expenses, to shareholders. Dividends from net investment income are paid on a
quarterly basis, at the end of November, February, May and August, at the
discretion of the Company's Board. Dividends are automatically reinvested in
additional shares of the Fund at the net asset value on the payable date unless
otherwise requested.
In addition, the Fund realizes capital gains and losses when it sells
securities or derivatives for more or less than it paid. If total gains on sales
25
<PAGE>
exceed total losses (including losses carried forward from previous years), the
Fund has a net realized capital gain. Net realized capital gains, if any,
together with gains realized on foreign currency transactions, if any, are
distributed to shareholders at least annually, usually in December. Capital gain
distributions are automatically reinvested in additional shares of the Fund at
the net asset value on the payable date unless otherwise requested.
Dividends and other distributions are paid to shareholders on the
record date of distribution regardless of how long the Fund shares have been
held by the shareholder. The Fund's share price will then drop by the amount of
the distribution on the ex-dividend or ex-distribution date. 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.
ADDITIONAL INFORMATION
VOTING RIGHTS. All shares of the Fund have equal voting rights based on
one vote for each share owned and a corresponding fractional vote for each
fractional share owned. Voting with respect to certain matters, such as
ratification of independent accountants and the election of directors, will be
by all funds of the Company voting together. In other cases, such as voting upon
the investment advisory contract for the individual funds, 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, the Board will call such special meetings of shareholders
for the purpose, among other reasons, of voting the question of removal of a
director or directors when requested to do so in writing by the holders of 10%
or more of the outstanding shares of the Fund or as may be required by
applicable law or the Company's Articles of Incorporation. The Company will
assist shareholders in communicating with other shareholders as required by the
1940 Act. Directors may be removed by action of the holders of two-thirds of the
outstanding shares of the Company.
SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be
directed to the Company at the telephone number or mailing address set forth on
the back cover of this Prospectus.
TRANSFER AND DIVIDEND DISBURSING AGENT. INVESCO, 7800 E. Union Avenue,
Denver, Colorado 80237, acts as registrar, transfer agent and dividend
disbursing agent for the Fund pursuant to a Transfer Agency Agreement which
provides that the Fund will pay an annual fee of $20.00 per shareholder account
or, where applicable, per participant in an omnibus account. The transfer agency
fee is not charged to each shareholder s or participant s account but is an
expense of the Fund to be paid from the Fund s assets. Registered
26
<PAGE>
broker-dealers, third party administrators of tax-qualified retirement plans and
other entities, including affiliates of INVESCO, may provide sub-transfer agency
services to the Fund which reduce or eliminate the need for identical services
to be provided on behalf of the Fund by INVESCO. In such cases, INVESCO may pay
the third party an annual sub-transfer agency or recordkeeping fee out of the
transfer agency fee which is paid to INVESCO by the Fund.
27
<PAGE>
INVESCO Total Return Fund
PROSPECTUS
May 28, 1999
We're easy to stay in touch with:
Investor services: 1-800-525-8085
PAL(R), your Personal Account Line: 1-800-424-8085
On the World Wide Web: www.invesco.com
In Denver, visit one of our convenient Investor Centers:
Cherry Creek
155-B Fillmore Street;
Denver Tech Center
7800 East Union Avenue
Lobby Level
INVESCO Distributors, Inc.,
Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
In addition, all documents You should know what
filed by the Trust with the INVESCO knows.(TradeMark)
Securities and Exchange
Commission can be located on INVESCO Funds
a web site maintained by the
Commission at
http://www.sec.gov.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
May 28, 1999
INVESCO COMBINATION STOCK & BOND FUNDS, INC.
INVESCO INDUSTRIAL INCOME FUND
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 Industrial Income Fund (the "Fund") seeks, as its investment
objective, the best possible current income while following sound investment
practices. Capital growth potential is a secondary factor in the selection of
portfolio securities of the Fund. The Fund will pursue this objective by
investing its assets in securities with the potential to provide a relatively
high yield and stable return and which, over a period of years, may also provide
capital appreciation. The Fund is a series of INVESCO Combination Stock & Bond
Funds, Inc. (the "Company"), which is an open-end, diversified investment
management company. The Company may offer additional Funds in the future.
A Prospectus for the Fund dated May 28, 1999, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge from INVESCO Distributors, Inc., Post Office Box 173706, Denver,
Colorado 80217-3706. This Statement of Additional Information is not a
prospectus, but contains information in addition to and more detailed than that
set forth in the Prospectus. It is intended to provide additional information
regarding the activities and operations of the Fund, and should be read in
conjunction with the Prospectus.
Investment Adviser: INVESCO FUNDS GROUP, INC.
Distributor: INVESCO DISTRIBUTORS, INC.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
INVESTMENT POLICIES AND RESTRICTIONS.... ......................................1
THE FUND AND ITS MANAGEMENT....................................................5
HOW SHARES CAN BE PURCHASED...................................................17
HOW SHARES ARE VALUED.........................................................21
FUND PERFORMANCE..............................................................22
SERVICES PROVIDED BY THE FUND.................................................24
TAX-DEFERRED RETIREMENT PLANS.................................................25
HOW TO REDEEM SHARES..........................................................25
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES......................................26
INVESTMENT PRACTICES..........................................................28
ADDITIONAL INFORMATION........................................................31
APPENDIX A....................................................................33
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
- ------------------------------------
In pursuing its investment objective, the Fund endeavors to select and
purchase securities providing reasonably secure dividend or interest income.
Sometimes warrants are acquired when offered with income-producing securities,
but the warrants are disposed of as soon as that can be done in an orderly
fashion consistent with the best interests of the Fund's shareholders. Acquiring
warrants involves a risk that the Fund will lose the premium it pays to acquire
warrants if the Fund does not exercise a warrant before it expires. The major
portion of the investment portfolio normally consists of common stocks,
convertible bonds and debentures, and preferred stocks; however, there may also
be substantial holdings of non-convertible debt securities, including
non-investment grade and unrated debt securities.
DEBT SECURITIES. As discussed in the section of the Fund's Prospectus
entitled "Investment Policies And Risks," the straight debt securities in which
the Fund invests are generally subject to two kinds of risk, credit risk and
market risk. The ratings given a straight debt security by Moody's Investors
Service, Inc. ("Moody's") and Standard & Poor's, a division of The McGraw-Hill
Companies, Inc. ("S&P") provide a generally useful guide as to such credit risk.
The lower the rating given a debt security by such rating service, the greater
the credit risk such rating service perceives to exist with respect to such
security. Increasing the amount of Fund assets invested in unrated or lower
grade (Ba or less by Moody's, BB or less by S&P) debt securities, while intended
to increase the yield produced by the Fund's debt securities, will also increase
the credit risk to which those debt securities are subject.
Lower rated debt securities and non-rated securities of comparable quality
tend to be subject to wider fluctuations in yields and market values than higher
rated debt securities and may have speculative characteristics. Although the
Fund may invest in debt securities assigned lower grade ratings by S&P or
Moody's, the Fund's investments have generally been limited to debt securities
rated B or higher by either Moody's or S&P. Debt securities rated lower than B
by either Moody's or S&P may be highly speculative. The Fund's investment
adviser intends to limit such Fund investments to straight debt securities which
the adviser believes are highly speculative and which are rated at least Caa or
CCC, respectively, by Moody's or S&P. A significant economic downturn or major
increase in interest rates may well result in issuers of lower rated debt
securities experiencing increased financial stress which would adversely affect
their ability to meet their obligations to pay principal and interest, to meet
projected business goals, and to obtain additional financing. While the Fund's
investment adviser attempts to limit purchases of lower rated debt securities to
securities having an established retail secondary market, the market for such
securities may not be as liquid as the market for higher rated debt securities.
Bonds rated Caa by Moody's may be in default or there may be present elements of
danger with respect to principal or interest. Bonds that are lower rated by S&P
(categories BB, B, CCC) include those which are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with their terms; BB indicates the lowest
degree of speculation and CCC a high degree of speculation. While such bonds
<PAGE>
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
For a specific description of each corporate bond rating category, please refer
to Appendix A.
REPURCHASE AGREEMENTS. As discussed in the section of the Fund's Prospectus
entitled "Investment Policies And Risks," the Fund may invest in repurchase
agreements with respect to instruments eligible for investment by the Fund with
member banks of the Federal Reserve System, registered broker-dealers or
registered government securities dealers, which are believed to be creditworthy
under standards established by the Fund's board of directors. A repurchase
agreement is an agreement under which the Fund acquires a debt instrument
(generally a security issued by the U.S. government or an agency thereof, a
banker's acceptance or a certificate of deposit) from a commercial bank, broker
or dealer, subject to resale to the seller at an agreed-upon price and date
(normally, the next business day). A repurchase agreement may be considered a
loan collateralized by securities. The resale price reflects an agreed-upon
interest rate effective for the period the instrument is held by the Fund and is
unrelated to the interest rate on the underlying instrument. In these
transactions, the securities acquired by the Fund (including accrued interest
earned thereon) must have a total value at least equal to the value of the
repurchase agreement, and are held as collateral by the Fund's custodian bank
until the repurchase agreement is completed. The Fund's board of directors
monitors the Fund's repurchase agreement transactions.
The use of repurchase agreements involves certain risks. For example, if
the other party to the agreement defaults on its obligation to repurchase the
underlying security at a time when the value of the security has declined, the
Fund may incur a loss upon disposition of the security. If the other party to
the agreement becomes insolvent, the Fund may experience costs and delays in
realizing on the collateral. While INVESCO Funds Group, Inc. ("INVESCO")
acknowledges these risks, it is expected that the risks can be minimized through
careful monitoring procedures.
RESTRICTED/144A SECURITIES. The Fund may invest in restricted securities
that can be resold to institutional investors pursuant to Rule 144A and the
Securities Act of 1933 ("Rule 144A Securities").
Rule 144A under the 1933 Act establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. 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 of qualified institutional buyers interested in
purchasing a Rule 144A Security held by the Fund could affect adversely the
marketability of such security and the Fund might be unable to dispose of such
security promptly or at reasonable prices.
2
<PAGE>
In recent years, a large institutional market has developed for Rule 144A
Securities. Institutional investors will not generally 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.
SECURITIES LENDING. As discussed in the section of the Fund's Prospectus
entitled "Investment Policies And Risks," the Fund also may lend its portfolio
securities to qualified brokers, dealers, banks, or other financial
institutions, provided that such loans are callable at any time by the Fund and
are at all times secured by collateral consisting of cash, letters of credit, or
securities issued or guaranteed by the U.S. government or its agencies, or any
combination thereof, equal to at least the market value, determined daily, of
the loaned securities. The advantage of such loans is that the Fund continues to
have the benefits (and risks) of ownership of the loaned securities, while at
the same time receiving income from the borrower of the securities. 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 such loan, the aggregate value of
securities then on loan would exceed 33-1/3% of the Fund's net assets (taken at
market value). While voting rights may pass with the loaned securities, if a
material event (e.g., proposed merger, sale of assets, or liquidation) is to
occur affecting an investment on loan, the loan must be called and the
securities voted. Loans of securities made by the Fund will comply with all
other applicable regulatory requirements.
INVESTMENT RESTRICTIONS. As described in the section of the Fund's
Prospectus entitled "Investment Policies And Risks," the Fund operates under
certain fundamental investment restrictions. For purposes of the following
limitation, all percentage limitations apply immediately after a purchase or
initial investment. Any subsequent change in a particular percentage resulting
from fluctuations in value does not require elimination of any security from the
Fund.
The second and third restrictions set forth below are contained in the
Fund's charter and may not be changed without prior approval by the holders of
two-thirds of the outstanding shares of the Fund. The Fund's other investment
restrictions may not be changed without the prior approval of the holders of a
majority of the outstanding voting securities of the Fund as defined in the 1940
Act. Under these restrictions, the Fund may NOT:
(1) issue preference shares or create any funded debt;
(2) sell short or buy on margin;
3
<PAGE>
(3) borrow money in excess of 5% of the value of its total net assets and
then only from banks, and when borrowing, it is a temporary measure
for emergency purposes;
(4) buy or sell real estate, commodities, commodity contracts
(however, the Fund may purchase securities of companies investing in
real estate);
(5) invest in securities of any other investment company except for a
purchase or acquisition in accordance with a plan of reorganization,
merger or consolidation;
(6) invest in any company for the purpose of exercising control or
management;
(7) buy other than readily marketable securities;
(8) purchase securities if the purchase would cause the Fund, at the
time, to have more than 5% of its total assets invested in the
securities of any one company or to own more than 10% of the voting
securities of any one company (except obligations issued or guaranteed
by the U.S. Government);
(9) engage in the underwriting of any securities;
(10) make loans to any person, except through the purchase of debt
securities in accordance with the Fund's investment policies, or the
lending of portfolio securities to broker-dealers or other
institutional investors, or the entering into repurchase agreements
with member banks of the Federal Reserve System, registered
broker-dealers and registered government securities dealers. The
aggregate value of all portfolio securities loaned may not exceed
33-1/3% of the Fund's total net assets (taken at current value);
(11) purchase securities of any company in which any officer or
director of the Fund or its investment adviser owns more than 1/2 of
1% of the outstanding securities, or in which all of the officers and
directors of the Fund and its investment supervisor, as a group, own
more than 5% of such securities; or
(12) invest more than 25% of the value of the Fund's assets in one
particular industry.
The Fund has no written policy regarding the writing of put and call
options but has not engaged in such practices and does not anticipate doing so.
With respect to investment restriction (7) above, the board of directors
has delegated to the Fund's investment adviser the authority to determine
whether a liquid market exists for securities eligible for resale pursuant to
4
<PAGE>
Rule 144A under the Securities Act of 1933, or any successor to such rule, and
whether or not such securities are subject to restriction (7) 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).
In applying restriction (12) above, the Fund uses a modified S&P industry
code classification schema which uses various sources to classify securities.
Under the 1940 Act, Fund directors and officers cannot be protected against
liability to the Fund or its shareholders to which they would be subject because
of willful misfeasance, bad faith, gross negligence or reckless disregard of
duties of their office.
THE FUND AND ITS MANAGEMENT
- ---------------------------
THE COMPANY. The Company was incorporated under the laws of Maryland on
August 19, 1993. On September 10, 1998, the name of the Company was changed to
INVESCO Flexible Funds, Inc. On October 25, 1998, the name of the Company was
changed to INVESCO Combination Stock & Bond Funds, Inc. On May 28, 1999 the
Company assumed all of the assets and liabilities of INVESCO Industrial Income
Fund, Inc., which was incorporated on March 20, 1959 under the laws of Maryland
and first publicly offered shares on February 1, 1960.
THE INVESTMENT ADVISER. INVESCO Funds Group, Inc., a Delaware corporation
("INVESCO"), is employed as the Fund's investment adviser. INVESCO was
established in 1932 and also serves as an investment adviser to INVESCO Bond
Funds, Inc. (formerly, INVESCO Income Funds, Inc.), INVESCO Blue Chip Growth
Fund, Inc. (formerly, INVESCO Growth Fund, Inc.), INVESCO Diversified Funds,
Inc., INVESCO Emerging Opportunity Funds, Inc., INVESCO International Funds,
Inc., INVESCO Money Market Funds, Inc., INVESCO Sector Funds, Inc. (formerly,
INVESCO Strategic Portfolios, Inc.), INVESCO Specialty Funds, Inc., INVESCO
Stock Funds, Inc. (formerly, INVESCO Equity Funds, Inc. and INVESCO Capital
Appreciation Funds, Inc.), INVESCO Tax-Free Income Funds, Inc., INVESCO
Treasurer's Series Funds, Inc., INVESCO Value Trust and INVESCO Variable
Investment Funds, Inc.
Prior to February 3, 1998, Institutional Trust Company, doing business as
INVESCO Trust Company ("ITC"), provided sub-advisory services to the Funds.
Effective February 3, 1998, ITC no longer provided sub-advisory services to the
Funds, INVESCO provides such day-to-day portfolio management services as the
investment adviser to the Funds. This change did not change the basis upon which
investment advice is provided to the Funds, the cost of those services to the
5
<PAGE>
Funds or the persons actually performing the investment advisory and other
services previously provided by ITC.
THE DISTRIBUTOR. Effective September 30, 1997, INVESCO Distributors, Inc.
("IDI") became the Fund's distributor. IDI, established in 1997, is a registered
broker-dealer that acts as distributor for all retail mutual funds advised by
INVESCO. Prior to September 30, 1997, INVESCO served as the Fund's distributor.
INVESCO and IDI are indirect wholly-owned subsidiaries of AMVESCAP PLC, a
publicly-traded holding company that, through its subsidiaries, engages in the
business of investment management on an international basis. INVESCO PLC changed
its name to AMVESCO PLC on March 3, 1997 and to AMVESCAP PLC on May 8, 1997, as
part of a merger between a direct subsidiary of INVESCO PLC and A I M Management
Group, Inc. that created one of the largest independent management businesses in
the world with approximately $261 billion in assets under management as of June
30, 1998. INVESCO was established in 1932 and as of June 30, 1998, managed 14
mutual funds, consisting of 49 separate portfolios, on behalf of 878,073
shareholders.
AMVESCAP PLC's North American subsidiaries include the following:
--INVESCO Retirement and Benefit Services, Inc. ("IRBS") of Atlanta,
Georgia, develops and provides domestic and international defined contribution
retirement plan services to plan sponsors, institutional retirement plan
sponsors, institutional plan providers and foreign governments.
--INVESCO Retirement Plan Services ("IRPS") of Atlanta, Georgia, a division
of IRBS, provides recordkeeping and investment selection services to defined
contribution plan sponsors of plans with between $2 and $200 million in assets.
Additionally, IRPS provides investment consulting services to institutions
seeking to provide INVESCO products and services in their retirement plan
products and services.
--ITC of Denver, Colorado, a division of IRBS, provides retirement account
custodian and/or trust services for individual retirement accounts (IRAs) and
other retirement plan accounts. This includes services such as recordkeeping,
tax reporting and compliance. ITC acts as trustee or custodian to these plans.
ITC accepts contributions and provides, through INVESCO, complete transfer
agency functions: correspondence, subaccounting, telephone communications and
processing of distributions.
--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 one registered investment company.
6
<PAGE>
--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.
--INVESCO Realty Advisors, Inc. of Dallas, Texas is responsible for
providing advisory services in the U.S. real estate markets for pension plans
and public pension funds, as well as endowment and foundation accounts.
--INVESCO (NY), Inc. of New York, is an investment adviser for separately
managed accounts, such as corporate and municipal pension plans, Taft-Hartley
Plans, insurance companies, charitable institutions and private individuals.
INVESCO NY also offers the opportunity for its clients to invest both directly
and indirectly through partnerships in primarily private investments or
privately negotiated transactions. INVESCO NY further serves as investment
adviser to several closed-end investment companies, and as sub-adviser with
respect to certain commingled employee benefit trusts. INVESCO NY specializes in
the fundamental research investment approach, with the help of quantitative
tools.
--A I M Advisors, Inc. of Houston, Texas provides investment advisory and
administrative services for retail and institutional mutual funds.
--A I M Capital Management, Inc. of Houston, Texas provides investment
advisory services to individuals, corporations, pension plans and other private
investment advisory accounts and also serves as a sub-adviser to certain retail
and institutional mutual funds, one Canadian mutual fund and one portfolio of an
open-end registered investment company that is offered to separate accounts of
insurance companies that issue variable annuity and/or variable life contracts.
--A I M Distributors, Inc. and Fund Management Company of Houston, Texas
are registered broker-dealers that act as the principal underwriters for retail
and institutional mutual funds.
The corporate headquarters of AMVESCAP PLC are located at 11 Devonshire
Square, London, EC2M4YR, England.
As indicated in the Fund's Prospectus, INVESCO permits 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
7
<PAGE>
to the provisions of the policy or would be deemed to adversely affect any
transaction then known to be under consideration for or to have been effected on
behalf of any client account, including the Fund.
In addition to the pre-clearance requirement described above, the policy
subjects officers, inside directors, investment and other personnel of INVESCO
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 this policy are administered by and subject to
exceptions authorized by INVESCO.
INVESTMENT ADVISORY AGREEMENT. INVESCO serves as investment adviser
pursuant to an investment advisory agreement dated February 28, 1997 (the
"Agreement") with the Company which was approved by the board of directors on
November 6, 1996, by a vote cast in person by a majority of the directors of the
Fund, including a majority of the directors who are not "interested persons" of
the Fund or INVESCO at a meeting called for such purpose. The Agreement was
approved by the shareholders of the other series of the Company on January 31,
1997, for an initial term expiring February 28, 1999. On May 13, 1998, this
period was extended by the Fund's board of directors to May 15, 1999.
Thereafter, the Agreement may be continued from year to year as long as such
continuance is specifically approved at least annually by the board of directors
of the Fund, 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 Fund'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 was approved with respect to the Fund by the Fund's
shareholder on May 28, 1999. The Agreement may be terminated at any time without
penalty by either party or the Fund upon sixty (60) days' written notice and
terminates automatically in the event of an assignment to the extent required by
the 1940 Act and the Rules thereunder.
The Agreement provides that INVESCO shall manage the investment portfolio
of the Fund in conformity with the Fund's investment policies (either directly
or by delegation to a sub-adviser which may be a company affiliated with
INVESCO). Further, INVESCO shall perform all administrative, internal accounting
(including computation of net asset value), clerical, statistical, secretarial
and all other services necessary or incidental to the administration of the
affairs of the Fund excluding, however, those services that are the subject of
separate agreement between the Fund 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 Fund with officers, clerical staff and other employees, if any,
who are necessary in connection with the Fund's 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 Fund's operations; preparation and review of
8
<PAGE>
required documents, reports and filings by INVESCO's in-house legal and
accounting staff (including the prospectus, statement of additional information,
proxy statements, shareholder reports, tax returns, reports to the SEC, and
other corporate documents of the Fund), 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 Fund under
the 1940 Act. Expenses not assumed by INVESCO are borne by the Fund.
As full compensation for its advisory services to the Fund, INVESCO
receives a monthly fee. Effective May 15, 1997, the 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; 0.50%
of the Fund's average net assets in excess of $700 million but less than $2
billion; 0.45% on the Fund's average net assets in excess of $2 billion but less
than $4 billion; and 0.40% on the Fund's average net assets in excess of $4
billion. October 15, 1992 through May 14, 1997, INVESCO voluntarily waived that
portion of its fee which exceeded 0.45% of the average net assets of the Fund in
excess of $2 billion. In addition, effective October 21, 1993 through May 14,
1997, INVESCO voluntarily waived that portion of its fee which exceeded 0.40% of
the average net assets of the Fund in excess of $4 billion. In addition,
effective May 15, 1997, INVESCO voluntarily reduced management fees on the
Fund's daily net assets over $5 billion. For the fiscal years ended June 30,
1998, 1997 and 1996, the Fund paid INVESCO (prior to the voluntary absorption of
certain Fund expenses by INVESCO) advisory fees of $23,205,917, $21,791,002 and
$21,541,300, respectively.
ADMINISTRATIVE SERVICES AGREEMENT. INVESCO, either directly or through
affiliated companies, also provides certain administrative, sub-accounting, and
recordkeeping services to the Fund pursuant to an Administrative Services
Agreement dated February 28, 1997 (the "Administrative Agreement"). The
Administrative Agreement was approved by the board of directors on November 6,
1996 by a vote cast in person by all of the directors of the Fund, including all
of the directors who are not "interested persons" of the Fund or INVESCO at a
meeting called for such purpose. The Administrative Agreement is for an initial
term expiring February 28, 1998, and has been continued by action of the board
of directors until May 15, 1999. The Administrative Agreement may be continued
from year to year as long as each such continuance is specifically approved by
the board of directors of the Fund, including a majority of the directors who
are not parties to the Administrative Agreement or interested persons (as
defined in the 1940 Act) of any such party, cast in person at a meeting called
for the purpose of voting on such continuance. The Administrative Agreement may
be terminated at any time without penalty by INVESCO on sixty (60) days' written
notice, or by the Fund upon thirty (30) days' written notice, and terminates
automatically in the event of an assignment unless the Fund's board of directors
approves such assignment.
The Administrative Agreement provides that INVESCO shall provide the
following services to the Fund: (a) such sub-accounting and recordkeeping
services and functions as are reasonably necessary for the operation of the
9
<PAGE>
Fund; and (b) such sub-accounting, recordkeeping, and administrative services
and functions, which may be provided by affiliates of INVESCO, as are reasonably
necessary for the operation of Fund shareholder accounts maintained by certain
retirement plans and employee benefit plans for the benefit of participants in
such plans.
As full compensation for services provided under the Administrative
Agreement, the Fund pays a fee to INVESCO consisting of a base fee of $10,000
per year, plus an additional incremental fee computed daily and paid monthly at
an annual rate of 0.015% per year of the average net assets of the Fund. During
the fiscal years ended June 30, 1998, 1997 and 1996, the Fund paid INVESCO
administrative services fees in the amount of $748,034, $648,015 and $640,468,
respectively.
TRANSFER AGENCY AGREEMENT. INVESCO also performs transfer agent, dividend
disbursing agent, and registrar services for the Fund pursuant to a Transfer
Agency Agreement dated February 28, 1997, which was approved by the board of
directors of the Fund, including a majority of the Fund's directors who are not
parties to the Transfer Agency Agreement or "interested persons" of any such
party, on November 6, 1996, for an initial term expiring February 28, 1998 and
has been extended by action of the board of directors until May 15, 1999.
Thereafter, the Transfer Agency Agreement may be continued from year to year as
long as such continuance is specifically approved at least annually by the board
of directors of the Fund, 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 Fund'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 Fund shall pay to INVESCO a
fee of $20.00 per shareholder account or, where applicable, per participant in
an omnibus account. This fee is paid monthly at a rate of 1/12 of the annual fee
and is based upon the actual number of shareholder accounts or omnibus account
participants at any given time. For the fiscal years ended June 30, 1998, 1997
and 1996, the Fund paid INVESCO transfer agency fees of $6,122,313, $6,785,271
and $5,698,274, respectively.
OFFICERS AND DIRECTORS OF THE FUND. The overall direction and supervision
of the Fund is the responsibility of the board of directors, which has the
primary duty of seeing that the Fund's general investment policies and programs
are carried out and that the Fund is properly administered. The officers of the
Fund, all of whom are officers and employees of and paid by INVESCO, are
responsible for the day-to-day administration of the Fund. The investment
adviser for the Fund has the primary responsibility for making investment
decisions on behalf of the Fund. These investment decisions are reviewed by the
investment committee of INVESCO.
10
<PAGE>
All of the officers and directors of the Fund hold comparable positions
with INVESCO Bond Funds, Inc. (formerly, INVESCO Income Funds, Inc.), INVESCO
Blue Chip Growth Fund, Inc. (formerly, INVESCO Growth Fund, Inc.), INVESCO
Diversified Funds, Inc., INVESCO Emerging Opportunity Funds, Inc., INVESCO
International Funds, Inc., INVESCO Money Market Funds, Inc., INVESCO Sector
Funds, Inc. (formerly, INVESCO Strategic Portfolios, Inc.), INVESCO Specialty
Funds, Inc., INVESCO Stock Funds, Inc. (formerly, INVESCO Equity Funds, Inc. and
INVESCO Capital Appreciation Funds, Inc.), INVESCO Tax-Free Income Funds, Inc.,
INVESCO Treasurer's Series Funds, Inc., INVESCO Value Trust and INVESCO Variable
Investment Funds, Inc. All of the directors and officers of the Fund also serve
as trustees of INVESCO Value Trust and INVESCO Treasurer's Series Funds, Inc.
Set forth below is information with respect to each of the Fund'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 AMVESCAP PLC, London, England, and of various subsidiaries thereof.
Chairman of the Board of INVESCO Global Health Sciences Fund. Address: 1315
Peachtree Street, NE, Atlanta, Georgia. Born: May 11, 1935.
FRED A. DEERING,+# Vice Chairman of the Board. Trustee of INVESCO Global
Health Sciences Fund. Formerly, Chairman of the Executive Committee and Chairman
of the Board of Security Life of Denver Insurance Company, Denver, Colorado;
Director of ING America Life Insurance Company. Address: Security Life Center,
1290 Broadway, Denver, Colorado. Born: January 12, 1928.
VICTOR L. ANDREWS,**@ Director. Professor Emeritus, Chairman Emeritus and
Chairman of the CFO Roundtable of the Department of Finance at Georgia State
University, Atlanta, Georgia; President, Andrews Financial Associates, Inc.
(consulting firm); since October 1984, Director of the Center for the Study of
Regulated Industry at Georgia State University; formerly, member of the
faculties of the Harvard Business School and the Sloan School of Management of
MIT. Dr. Andrews is also a Director of the Southeastern Thrift and Bank Fund,
Inc. and The Sheffield Funds, Inc. Address: 34 Seawatch Drive, Savannah,
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.
11
<PAGE>
LAWRENCE H. BUDNER,#@@ Director. Trust Consultant; prior to June 30, 1987,
Senior Vice President and Senior Trust Officer of InterFirst Bank, Dallas,
Texas. Address: 7608 Glen Albens Circle, Dallas, Texas. Born: July 25, 1930.
WENDY L. GRAMM, Ph.D.,**@ Director. Self-employed (since 1993); Professor
of Economics and Public Administration, University of Texas at Arlington.
Formerly, Chairman, Commodity Futures Trading Commission from 1988 to 1993,
administrator for Information and Regulatory Affairs at the Office of Management
and Budget from 1985 to 1988, Executive Director of the Presidential Task Force
on Regulatory Relief and Director of the Federal Trade Commission's Bureau of
Economics. Dr. Gramm is also a director of the Chicago Mercantile Exchange,
Enron Corporation, IBP, Inc., State Farm Insurance Company, State Farm Life
Insurance Company, Independent Women's Forum, International Republic Institute,
and the Republican Women's Federal Forum. Dr. Gramm is also a member of the
Board of Visitors, College of Business Administration, University of Iowa, and a
member of the Board of Visitors, Center for Study of Public Choice, George Mason
University. Address: 4201 Yuma Street, N.W., Washington, D.C. Born: January 10,
1945.
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. Trustee of INVESCO Global
Health Sciences Fund and Gables Residential Trust. Address: 7 Piedmont Center,
Suite 100, Atlanta, Georgia. Born: September 14, 1930.
LARRY SOLL, Ph.D.,**@ Director. Retired. Formerly, Chairman of the Board
(1987 to 1994), Chief Executive Officer (1982 to 1989 and 1993 to 1994) and
President (1982 to 1989) of Synergen Corp. Director of Synergen since
incorporation in 1982. Director of ISI Pharmaceuticals, Inc., Trustee of INVESCO
Global Health Sciences Fund. Address: 345 Poorman Road, Boulder, Colorado. Born:
April 26, 1942.
MARK H. WILLIAMSON,+* President, CEO and Director. President, CEO and
Director of IDI; President, CEO and Director of INVESCO and President of INVESCO
Global Health Sciences Fund. Formerly, Chairman and CEO of NationsBanc Advisors,
Inc. (1995 to 1997) and Chairman of NationsBanc Investments, Inc. (1997 to
1998). Born: May 24, 1951.
12
<PAGE>
GLEN A. PAYNE, Secretary. Senior Vice President (since 1995), General
Counsel (since 1989) and Secretary (since 1989) of INVESCO and Senior Vice
President, General Counsel and Secretary of IDI (since 1997); Vice President
(May 1989 to April 1995) of INVESCO; Senior Vice President, (since 1995),
General Counsel (since 1989) and Secretary (1989 to 1998) of ITC. 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
(since 1988). Senior Vice President and Treasurer of IDI (since 1997). Senior
Vice President and Treasurer of ITC (1988 to 1998). Born: October 1, 1946.
WILLIAM J. GALVIN, JR., Assistant Secretary. Senior Vice President of
INVESCO (since 1995) and of IDI (since 1997); Trust Officer of ITC (1995 to
1998); and formerly (August 1992 to July 1995) Vice President of INVESCO.
Formerly, 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 (since
1984). Formerly, Trust Officer of ITC. Born: September 14, 1941.
JUDY P. WIESE, Assistant Treasurer. Vice President of INVESCO (since 1984).
Formerly, Trust Officer of ITC. Born: February 3, 1948.
*These directors are "interested persons" of the Fund as defined in the
1940 Act.
#Member of the audit committee of the Fund's board of directors.
@Member of the derivatives committee of the Fund's board of directors.
@@Member of the soft dollar brokerage committee of the Fund's board of
directors.
+Member of the executive committee of the Fund. On occasion, the executive
committee acts upon the current and ordinary business of the Fund 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 Fund. All decisions are
subsequently submitted for ratification by the board of directors.
**Member of the management liaison committee of the Fund.
As of May 21, 1999, officers and directors of the Fund, as a group,
beneficially owned less than 1% of the Fund's outstanding shares.
13
<PAGE>
DIRECTOR COMPENSATION
- ---------------------
The following table sets forth, for the fiscal year ended June 30, 1998, the
compensation paid by the Fund to its independent directors for services rendered
in their capacities as directors of the Fund; the benefits accrued as Fund
expenses with respect to the Defined Benefit Deferred Compensation Plan
discussed below; and the estimated annual benefits to be received by these
directors upon retirement as a result of their service to the Fund. In addition,
the table sets forth the total compensation paid by all of the mutual funds
distributed by INVESCO Distributors, Inc. and INVESCO (including the Fund),
INVESCO Treasurer's Series Funds, Inc. and INVESCO 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,
1997. As of December 31, 1997, there were 49 funds in the INVESCO Complex.
14
<PAGE>
<TABLE>
<CAPTION>
Total
Compensa-
Benefits Estimated tion From
Aggregate Accrued As Annual INVESCO
Compensa- Part of Benefits Complex
tion From Fund Upon Paid To
Fund (1) Expenses (2) Retirement(3) Directors(1)
<S> <C> <C> <C> <C>
Fred A. Deering, $12,933 $11,683 $ 7,497 $113,350
Vice Chairman of
the Board
Victor L. Andrews 12,283 11,040 8,678 92,700
Bob R. Baker 13,314 9,859 11,630 96,050
Lawrence H. Budner 11,623 11,040 8,678 91,000
Daniel D. Chabris(4) 12,371 11,934 6,476 89,350
Wendy L. Gramm 10,388 0 0 39,000
Kenneth T. King 10,728 12,133 6,800 94,350
John W. McIntyre 10,967 0 0 104,000
Larry Soll 10,967 0 0 78,000
-------------------------------------------------------------
Total $105,574 $67,689 $49,759 $797,800
% of Net Assets 0.0021%(5) 0.0013%(5) 0.0046%(6)
</TABLE>
(1) The vice chairman of the board, the chairmen of the audit, management
liaison, derivatives, soft dollar brokerage and compensation committees, and the
members of the executive and valuation committees of each receive compensation
for serving in such capacities in addition to the compensation paid to all
independent directors.
(2) Represents benefits accrued with respect to the Defined Benefit
Deferred Compensation Plan discussed below, and not compensation deferred at the
election of the directors.
(3) These figures represent the Fund's share of the estimated annual
benefits payable by the INVESCO Complex (excluding INVESCO Global Health
Sciences Fund which does not participate in this retirement plan) upon the
directors retirement, calculated using the current method of allocating director
15
<PAGE>
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 Mr. McIntyre and Drs. Soll and Gramm, each of these
directors has served as a director of one or more of the funds in the INVESCO
Complex for the minimum five-year period required to be eligible to participate
in the Defined Benefit Deferred Compensation Plan.
(4) Mr. Chabris retired as a director effective September 30, 1998.
(5) Total as a percentage of the Fund's net assets as of June 30, 1998.
(6) Total as a percentage of the net assets of the INVESCO Complex as of
December 31, 1997.
Messrs. Brady and Williamson, as "interested persons" of the Fund and of
the other funds in the INVESCO Complex, receive compensation as officers or
employees of INVESCO or its affiliated companies, and do not receive any
director's fees or other compensation from the Fund or other funds in the
INVESCO Complex for their services as directors.
The boards of directors/trustees of the mutual funds managed by INVESCO and
INVESCO Treasurer's Series Funds, Inc. 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 termination of service as a
director (normally 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 and annualized board meeting
fees payable by the funds to the qualified director at the time of his or her
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
50% of the basic retainer and annualized board meeting fees. 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 her or to his or her beneficiary or estate. If a
qualified director becomes disabled or dies either prior to age 72 or during his
or her 74th year while still a director of the funds, the director will not be
16
<PAGE>
entitled to receive the first year retirement benefit; however, the reduced
retainer payments will be made to his or her beneficiary or estate. The plan is
administered by a committee of three directors who are also participants in the
plan and one director who is not a plan participant. The cost of the plan will
be allocated among the INVESCO and INVESCO Treasurer's Series Funds, Inc. in a
manner determined to be fair and equitable by the committee. The Fund began
making payments to Mr. Chabris as of October 1, 1998. The Fund 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 independent directors have contributed to a deferred compensation plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of certain of the INVESCO
funds. The deferred amounts are being invested in shares of certain of the
INVESCO funds. Each independent director is, therefore, an indirect owner of
shares of such INVESCO funds.
The Fund has an audit committee that is comprised of four of the directors
who are not interested persons of the Fund. The committee meets periodically
with the Fund's independent accountants and officers to review accounting
principles used by the Fund, the adequacy of internal controls, the
responsibilities and fees of the independent accountants, and other matters.
The Fund 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 Fund, and (b) to review legal
and operational matters which have been assigned to the committee by the board
of directors, in furtherance of the board of directors' overall duty of
supervision.
The Fund has a soft dollar brokerage committee. The committee meets
periodically to review soft dollar brokerage transactions by the Fund, and to
review policies and procedures of the Fund's adviser with respect to soft dollar
brokerage transactions. It reports on these matters to the Fund's board of
directors.
The Fund has a derivatives committee. The committee meets periodically to
review derivatives investments made by the Fund. It monitors derivatives usage
by the Fund and the procedures utilized by the Fund's adviser to ensure that the
use of such instruments follows the policies on such instruments adopted by the
board of directors. It reports on these matters to the Fund's board of
directors.
HOW SHARES CAN BE PURCHASED
- ---------------------------
The Fund's shares are sold on a continuous basis at the 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 once each day that the New York
Stock Exchange is open as of the close of regular trading on that Exchange, but
17
<PAGE>
may also be computed at other times. See "How Shares Are Valued."
The Fund has authorized one or more brokers to accept purchase orders on
the Fund's behalf. Such brokers are authorized to designate other intermediaries
to accept purchase orders on the Fund's behalf. The Fund will be deemed to have
received a purchase order when an authorized broker or, if applicable, a
broker's authorized designee, accepts the order. A purchase order will be priced
at the Fund's net asset value next calculated after the order has been accepted
by an authorized broker or the broker's authorized designee.
IDI acts as the Fund's distributor under a distribution agreement with the
Fund and bears all expenses, including the costs of printing and distributing
prospectuses, incident to direct sales and distribution of the Fund's shares on
a no-load basis.
DISTRIBUTION PLAN. As discussed in the section of the Fund's Prospectus
entitled "How To Buy Shares Distribution Expenses," the Fund has adopted a Plan
and Agreement of Distribution (the "Plan") pursuant to Rule 12b-1 under the 1940
Act, which was implemented on November 1, 1990. The Plan provides that the Fund
may make monthly payments to IDI of amounts computed at an annual rate no
greater than 0.25% of the Fund's average net assets to permit IDI, at its
discretion, to engage in certain activities and provide services in connection
with the distribution of the Fund's shares to investors. Payment by the Fund
under the Plan, for any month, may be made to compensate IDI for permissible
activities engaged in and services provided by IDI during the rolling 12-month
period in which that month falls. For the fiscal year ended June 30, 1998 the
Fund made payments to INVESCO (the predecessor of IDI as distributor of shares
of the Fund) and IDI under the 12b-1 Plan (prior to the voluntary absorption of
certain Fund expenses by INVESCO) in the amount of $12,162,095. In addition, as
of June 30, 1998, $1,038,123 of additional distribution accruals had been
incurred by the Fund, and will be paid to IDI during the fiscal year ended June
30, 1999. As noted in the Prospectus, one type of 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 Fund.
The Fund is authorized by the Plan to use its assets to finance the payments
made to obtain those services. Payments will be made by IDI to broker-dealers
who sell shares of the Fund and may be made to banks, savings and loan
associations and other depository institutions. Although the Glass-Steagall Act
limits the ability of certain banks to act as underwriters of mutual fund
shares, the Fund does not believe that these limitations would affect the
ability of such banks to enter into arrangements with IDI, but can give no
assurance in this regard. However, to the extent it is determined otherwise in
the future, arrangements with banks might have to be modified or terminated,
and, in that case, the size of the Fund possibly could decrease to the extent
that the banks would no longer invest customer assets in the Fund. Neither the
Fund nor its investment adviser will give any preference to banks or other
depository institutions which enter into such arrangements when selecting
investments to be made by the Fund.
18
<PAGE>
For the fiscal year ended June 30, 1998, allocations of 12b-1 amounts paid
by the Fund for the following categories of expenses were: advertising --
$3,264,533; sales literature, printing and postage -- $786,905; direct mail --
$1,058,990; public relations/promotion -- $287,465; compensation to securities
dealers and other organizations -- $5,381,075; marketing personnel --
$1,383,127.
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 Fund's Transfer Agent computer-processable tapes of the Fund's transactions
by customers, serving as the primary source of information to customers in
answering questions concerning the Fund, and assisting in other customer
transactions with the Fund.
The Plan was approved on April 17, 1990, at a meeting called for such
purpose by a majority of the directors of the Fund, including a majority of the
directors who neither are "interested persons" of the Fund nor have any
financial interest in the operation of the Plan ("independent directors"). The
board of directors, on February 4, 1997, approved amending the Plan effective
January 1, 1997, to convert the Plan to a compensation type 12b-1 plan. This
amendment of the Plan did NOT result in increasing the amount of the Fund's
payments thereunder. Pursuant to authorization granted by the Fund's board of
directors on September 2, 1997, a new Plan became effective on September 30,
1997, under which IDI assumed all obligations related to distribution from
INVESCO. The Plan was continued by action of the board of directors until May
15, 1999.
The Plan provides that it shall continue in effect with respect to the Fund
for so long as such continuance is approved at least annually by the vote of the
board of directors of the Fund cast in person at a meeting called for the
purpose of voting on such continuance. The Plan can also be terminated at any
time with respect to the Fund, without penalty, if a majority of the independent
directors, or shareholders of the Fund, vote to terminate the Plan. The Fund
may, in its absolute discretion, suspend, discontinue or limit the offering of
its shares of the Fund at any time. In determining whether any such action
should be taken, the board of directors intends to consider all relevant factors
including, without limitation, the size of the Fund, the investment climate for
the Fund, general market conditions, and the volume of sales and redemptions of
the Fund's shares. The Plan may continue in effect and payments may be made
under the Plan following any such temporary suspension or limitation of the
offering of the Fund's shares; however, the Fund is not contractually obligated
to continue the Plan for any particular period of time. Suspension of the
offering of the Fund's shares would not, of course, affect a shareholder's
ability to redeem his or her shares. So long as the Plan is in effect, the
selection and nomination of persons to serve as independent directors of the
Fund shall be committed to the independent directors then in office at the time
of such selection or nomination. The Plan may not be amended to increase the
amount of the Fund's payments thereunder without approval of the shareholders of
the Fund, and all material amendments to the Plan must be approved by the board
of directors of the Fund, including a majority of the independent directors.
19
<PAGE>
Under the agreement implementing the Plan, IDI or the Fund, the latter by vote
of a majority of the independent directors, or of the holders of a majority of
the Fund's outstanding voting securities, may terminate such agreement without
penalty upon 30 days' written notice to the other party. No further payments
will be made by the Fund under the Plan in the event of its termination.
To the extent that the Plan constitutes a plan of distribution adopted
pursuant to Rule 12b-1 under the 1940 Act, it shall remain in effect as such, so
as to authorize the use of the 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, the Fund's obligation to make payments to IDI shall
terminate automatically, in the event of such "assignment," in which case the
Fund may continue to make payments pursuant to the Plan to IDI or another
organization only upon the approval of new arrangements, which may or may not be
with IDI, regarding the use of the amounts authorized to be paid by it under the
Plan, by the directors, including a majority of the independent 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 the Fund are provided to, and reviewed by, the directors on a
quarterly basis. On an annual basis, the directors consider the continued
appropriateness of the Plan and 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 Fund who have a direct or indirect
financial interest in the operation of the Plan are the officers and directors
of the Fund listed herein under the section entitled "The Fund And Its
Management - Officers and Directors of the Fund" who are also officers either of
IDI or companies affiliated with IDI. The benefits which the Fund believes will
be reasonably likely to flow to it and its 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 Fund;
(2) The sale of additional shares reduces the likelihood that redemption of
shares will require the liquidation of securities of the Fund in
amounts and at times that are disadvantageous for investment purposes;
(3) The positive effect which increased Fund assets will have on its
revenues could allow INVESCO and its affiliated companies:
(a) To have greater resources to make the financial commitments
necessary to improve the quality and level of the Fund's
shareholder services (in both systems and personnel),
20
<PAGE>
(b) To increase the number and type of mutual funds available to
investors from INVESCO and its affiliated companies (and support
them in their infancy), and thereby expand the investment choices
available to all shareholders, and
(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 the Fund's Prospectus entitled "Fund Price
And Performance" the net asset value of shares of the Fund is computed once each
day that the New York Stock Exchange is open as of the close of regular trading
on that Exchange (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 the Fund that the current net asset value per share of
the Fund might be materially affected by changes in the value of the securities
held, but only if on such day the Fund receives a request to purchase or redeem
shares. Net asset value per share is not calculated on days the New York Stock
Exchange is closed, such as federal holidays, including New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving, and Christmas.
The net asset value per share of the Fund is calculated by dividing the
value of all securities held by the Fund plus 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 markets 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 or other assets will be valued at their fair value as
determined in good faith by the Fund's board of directors or pursuant to
procedures adopted by the board of directors. The above procedures may include
the use of valuations furnished by a pricing service which employs a matrix to
determine valuations for normal institutional-size trading units of debt
securities. Prior to a pricing service, the Fund's board of directors reviews
the methods used by such service to assure itself that securities will be valued
21
<PAGE>
at their fair values. The Fund'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 normally are valued at
amortized cost.
The values of securities held by the Fund 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. Because regular
trading in most foreign securities markets is completed simultaneously with, or
prior to, the close of regular trading on the New York Stock Exchange, closing
prices for foreign securities usually are available for purposes of computing
the Fund's net asset value. However, in the event that the closing price of a
foreign security is not available in time to calculate the Fund's net asset
value on a particular day, the Fund'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.
FUND PERFORMANCE
- ----------------
As discussed in the section of the Fund's Prospectus entitled "Fund Price
and Performance," the Fund advertises its yield and total return performance. In
calculating yield quotations for the Fund, interest earned is determined by
computing yield to maturity (or yield to call, if applicable) of each obligation
held by the Fund, based upon the market value of each obligation (including
actual accrued interest) at the close of business on the last business day of
each month, or, with respect to an obligation purchased during the month, the
purchase price plus accrued interest. The resultant yield to maturity is divided
by 360 and multiplied by the market value of the obligation (including actual
accrued interest), and the result is multiplied by the number of days in the
subsequent month that the obligation is in the Fund (assuming that each month
has 30 days). Dividends received held by the Fund are recognized, for purposes
of yield calculations, on a daily accrual basis. The Fund's yield for the 30
days ended June 30, 1998, was 2.60%.
Average annual total return performance for the one-, five- and ten-year
periods ended June 30, 1998, was 20.55%, 16.21% and 16.62%, respectively.
Average annual total return performance for each of the periods indicated was
computed by finding the average annual compounded rates of return that would
equate the initial amount invested to the ending redeemable value, according to
the following formula:
n
P(1 + T) = ERV
where: P = initial payment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of initial payment
22
<PAGE>
The average annual total return performance figures shown above were
determined by solving the above formula for "T" for each time period.
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 Fund, comparative data between the Fund's performance for a
given period and recognized indices of investment results for the same period,
and/or assessments of the quality of shareholder service, may be provided to
shareholders. Such indices include indices provided by Dow Jones & Company, S&P,
Lipper 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 Fund. 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 Fund in
performance reports will be drawn from the "Equity Income Funds" mutual fund
grouping, in addition to the broad-based Lipper general fund groupings. Sources
for Fund performance information and articles about the Fund include, but are
not limited to, the following:
AMERICAN ASSOCIATION OF INDIVIDUAL INVESTORS' JOURNAL
BANXQUOTE
BARRON'S
BUSINESS WEEK
CDA INVESTMENT TECHNOLOGIES
CNBC
CNN
CONSUMER DIGEST
FINANCIAL TIMES
FINANCIAL WORLD
FORBES
FORTUNE
IBBOTSON ASSOCIATES, INC.
INSTITUTIONAL INVESTOR
INVESTMENT COMPANY DATA, INC.
INVESTOR'S BUSINESS DAILY
23
<PAGE>
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
PERFORMANCE ANALYSIS
PERSONAL INVESTOR
SMART MONEY
THE NEW YORK TIMES
THE NO-LOAD FUND INVESTOR
U.S. NEWS AND WORLD REPORT
UNITED MUTUAL FUND SELECTOR
USA TODAY
WALL STREET JOURNAL
WIESENBERGER INVESTMENT COMPANIES SERVICES
WORKING WOMAN
WORTH
SERVICES PROVIDED BY THE FUND
- -----------------------------
PERIODIC WITHDRAWAL PLAN. As described in the section of the Fund's
Prospectus entitled "How To Sell Shares," the Fund offers a Periodic Withdrawal
Plan. All dividends and distributions on shares owned by shareholders
participating in this Plan are reinvested in additional shares. Because
withdrawal payments represent the proceeds from sales of shares, the amount of
shareholders' investments in the Fund will be reduced to the extent that
withdrawal payments exceed dividends and other distributions paid and
reinvested. Any gain or loss on such redemptions must be reported for tax
purposes. In each case, shares will be redeemed at the close of business on or
about the 20th day of each month preceding payment, and payments will be mailed
within five business days thereafter.
The Periodic Withdrawal Plan involves the use of principal and is not a
guaranteed annuity. Payments under such Plan do not represent income or a return
on investment.
Participation in the 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 POLICY. As discussed in the section of the Prospectus entitled
"How To Buy Shares - Exchange Policy," the Fund offers shareholders the ability
to exchange shares of the Fund for shares of certain other mutual funds advised
24
<PAGE>
by INVESCO. Exchange requests may be made either by telephone or by written
request to INVESCO using the telephone number or address on the cover of this
Statement of Additional Information. Exchanges made by telephone must be in an
amount of at least $250, if the exchange is being made into an existing account
of one of the INVESCO funds. All exchanges that establish a NEW account must
meet the fund's applicable minimum initial investment requirements. Written
exchange requests into an existing account have no minimum requirements other
than the fund's applicable minimum subsequent investment requirements. Any gain
or loss realized on an exchange is recognized for federal income tax purposes.
This ability is not an option or right to purchase securities and is not
available in any state or other jurisdiction where the shares of the mutual fund
into which transfer is to be made are not qualified for sale, or when the net
asset value of the shares presented for exchange is less than the minimum dollar
purchase required by the appropriate prospectus.
TAX-DEFERRED RETIREMENT PLANS
- -----------------------------
As described in the section of the Prospectus entitled "Fund Services,"
shares of the Fund may be purchased as the investment medium for various
tax-deferred retirement plans. Persons who request information regarding these
plans from INVESCO will be provided with prototype documents and other
supporting information regarding the type of plan requested. Each of these plans
involves a long-term commitment of assets and is subject to possible regulatory
penalties for excess contributions, premature distributions or for insufficient
distributions after age 70-1/2. The legal and tax implications may vary
according to the circumstances of the individual investor. Therefore, the
investor is urged to consult with an attorney or tax adviser prior to the
establishment of such a plan.
HOW TO REDEEM SHARES
- --------------------
Normally, payments for shares redeemed will be mailed within seven (7) days
following receipt of the required documents as described in the section of the
Prospectus entitled "How To Sell Shares." The right of redemption may be
suspended and payment postponed when: (a) the New York Stock Exchange is closed
for other than customary weekends and holidays; (b) trading on that exchange is
restricted; (c) an emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund fairly to determine the value of its net assets; or (d)
the SEC by order so permits.
The Fund has authorized brokers to accept redemption orders on the Fund's
behalf. Such brokers are authorized to designate other intermediaries to accept
redemption orders on the Fund's behalf. The Fund will be deemed to have received
a redemption order when an authorized broker or, if applicable, a broker's
authorized designee, accepts the order. A redemption order will be priced at the
Fund's Net Asset Value next calculated after the order has been accepted by an
authorized broker or the broker's authorized designee.
25
<PAGE>
It is possible that in the future conditions may exist which would, in the
opinion of the Fund's investment adviser, make it undesirable for the Fund to
pay for redeemed shares in cash. In such cases, the investment adviser may
authorize payment to be made in portfolio securities or other property of the
Fund. However, the Fund is obligated under the 1940 Act to redeem for cash all
shares of the Fund presented for redemption by any one shareholder having a
value up to $250,000 (or 1% of the Fund's net assets if that is less) in any
90-day period. Securities delivered in payment of redemptions are selected
entirely by the investment adviser based on what is in the best interests of the
Fund and its shareholders, and are valued at the value assigned to them in
computing the Fund's net asset value per share. Shareholders receiving such
securities are likely to incur brokerage costs on their subsequent sales of the
securities.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
- ----------------------------------------
The Fund intends to conduct its business and satisfy the applicable
diversification of assets and source of income requirements to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). The Fund so qualified in the fiscal year ended
June 30, 1998, and intends to qualify during the current fiscal year. As a
result, it is anticipated that the Fund will pay no federal income or excise
taxes and will be accorded conduit or "pass through" treatment for federal
income tax purposes.
Dividends paid by the Fund from net investment income as well as
distributions of net realized short-term capital gains and net realized gains
from certain foreign currency transactions are, for federal income tax purposes,
taxable as ordinary income to shareholders. After the end of each calendar year,
the Fund sends shareholders information regarding the amount and character of
dividends paid in the year.
Distributions by the Fund of net capital gain (the excess of net long-term
capital gain over net short-term capital loss) are, for federal income tax
purposes, taxable to the shareholder as long-term capital gains regardless of
how long a shareholder has held shares of the Fund. Long-term gains realized
between May 7, 1997 and July 28, 1997 on the sale of securities held for more
than 12 months are taxable at a maximum rate of 20%. Long-term gains realized
between July 29, 1997 and December 31, 1997 on the sale of securities held for
more than one year but not for more than 18 months are taxable at the maximum
rate of 28%. Long-term gains realized between July 29, 1997 and December 31,
1997 on the sale of securities held for more than 18 months are taxable at a
maximum rate of 20%. Beginning January 1, 1998, the IRS Restructuring and Reform
Act of 1998, signed into law on July 24, 1998, lowers the holding period for
long-term capital gains entitled to the 20% capital gains tax rate from 18
months to 12 months. Accordingly, all long-term gains realized after December
31, 1997 on the sale of securities held for more than 12 months will be taxable
at a maximum rate of 20%. Note that the rate of capital gains tax is dependent
on the shareholder's marginal tax rate and may be lower than the above rates. At
the end of each year, information regarding the tax status of dividends and
26
<PAGE>
other distributions is provided to shareholders. Shareholders should consult
their tax adviser as to the effect of distributions by the Fund.
All dividends and other distributions are regarded as taxable to the
investor, regardless of whether such dividends and distributions are reinvested
in additional shares of the Fund or another fund in the INVESCO group. The net
asset value of Fund shares 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 the net asset value of Fund shares were 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. If shares are purchased shortly before a distribution, the
full price for the shares will be paid and some portion of the price may then be
returned to the shareholder as a taxable dividend or capital gain. However, the
net asset value per share will be reduced by the amount of the distribution,
which would reduce any gain (or increase any loss) for tax purposes on any
subsequent redemption of shares.
INVESCO may provide Fund shareholders with information concerning the
average cost basis of their shares in order to help them prepare their tax
returns. This information is intended as a convenience to shareholders, and will
not be reported to the Internal Revenue Service (the "IRS"). The IRS permits the
use of several methods to determine the cost basis of mutual fund shares. The
cost basis information provided by INVESCO will be computed using the
single-category average cost method, although neither INVESCO nor the Fund
recommends any particular method of determining cost basis. Other methods may
result in different tax consequences. If a shareholder has reported gains or
losses with respect to shares of 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 the method.
If the Fund's shares are sold at a loss after being held for six months or
less, the loss will be treated as long-term, instead of short-term, capital loss
to the extent of any capital gain distributions received on those shares.
The Fund will be subject to a nondeductible 4% excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of its
ordinary income for that year and capital gain net income for the one-year
period ending on October 31 of that year, plus certain other amounts.
Dividends and interest received by the Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors.
27
<PAGE>
The Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation that, in general, meets either of the
following tests: (1) at least 75% of its gross income is passive or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, the Fund will be subject to
federal income tax on a portion of any "excess distribution" received on the
stock of a PFIC or of any gain on disposition of the stock (collectively "PFIC
income"), plus interest thereon, even if the Fund distributes the PFIC income as
a taxable dividend to its shareholders. The balance of the PFIC income will be
included in the Fund's investment company taxable income and, accordingly, will
not be taxable to it to the extent that income is distributed to its
shareholders.
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 Code for income tax
purposes does not entail government supervision of management or investment
policies.
INVESTMENT PRACTICES
- --------------------
PORTFOLIO TURNOVER. There are no fixed limitations regarding the Fund's
portfolio turnover. Since the Fund started business, the rate of portfolio
turnover has fluctuated under constantly changing economic conditions and market
circumstances. Portfolio turnover rates for the fiscal years ended June 30,
1998, 1997 and 1996 were 58%, 47% and 63%, respectively. Securities initially
satisfying the basic policies and objectives of the Fund may be disposed of when
they are no longer suitable. Brokerage costs to the Fund are commensurate with
the rate of portfolio activity. In computing the portfolio turnover rate, all
investments with maturities or expiration dates at the time of acquisition of
one year or less were excluded. Subject to this exclusion, the turnover rate is
calculated by dividing (A) the lesser of purchases or sales of portfolio
securities for the fiscal year by (B) the monthly average of the value of
portfolio securities owned by the Fund during the fiscal year.
PLACEMENT OF PORTFOLIO BROKERAGE. INVESCO, as the Fund's investment
adviser, places orders for the purchase and sale of securities with brokers and
dealers based upon INVESCO's evaluation of such brokers' and dealers' financial
responsibility subject to their ability to effect transactions at the best
available prices. INVESCO evaluates the overall reasonableness of brokerage
commissions paid by reviewing the quality of executions obtained on the Fund's
portfolio transactions, viewed in terms of the size of transactions, prevailing
market conditions in the security purchased or sold, and general economic and
market conditions. In seeking to ensure that any commissions charged the Fund
are consistent with prevailing and reasonable commissions or discounts, INVESCO
also endeavors to monitor brokerage industry practices with regard to the
commissions or discounts charged by brokers and dealers on transactions effected
for other comparable institutional investors. While INVESCO seeks reasonably
competitive rates, the Fund does not necessarily pay the lowest commission,
spread, or discount available.
28
<PAGE>
Consistent with the standard of seeking to obtain the best execution on
portfolio transactions, INVESCO may select brokers that provide research
services to effect such transactions. Research services consist of statistical
and analytical reports relating to issuers, industries, securities and economic
factors and trends, which may be of assistance or value to INVESCO in making
informed investment decisions. Research services prepared and furnished by
brokers through which the Fund effects securities transactions may be used by
INVESCO in servicing all of its accounts and not all such services may be used
by INVESCO in connection with the Fund.
In recognition of the value of the above-described brokerage and research
services provided by certain brokers, INVESCO, consistent with the standard of
seeking to obtain the best execution of portfolio transactions, may place orders
with such brokers for the execution of Fund transactions 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 brokers and
dealers that recommend the Fund to their clients, or that act as agent in the
purchase of the Fund's shares for their clients. When a number of brokers and
dealers can provide comparable best price and execution on a particular
transaction, INVESCO may consider the sale of Fund shares by a broker or dealer
in selecting among qualified brokers and dealers.
Certain financial institutions (including brokers who may sell shares of
the Fund, or affiliates of such brokers) are paid a fee (the "Services Fee") for
recordkeeping, shareholder communications and other services provided by the
brokers to investors purchasing shares of the Fund through no transaction fee
programs ("NTF Programs") offered by the financial institution or its affiliated
broker (an "NTF Program Sponsor"). The Services Fee is based on the average
daily value of the investments in each Fund made in the name of such NTF Program
Sponsor and held in omnibus accounts maintained on behalf of investors
participating in the NTF Program. With respect to certain NTF Programs, the
directors of the Fund have authorized the Fund to apply dollars generated from
the Fund's Plan and Agreement of Distribution pursuant to Rule 12b-1 under the
1940 Act (the "Plan") to pay the entire Services Fee, subject to the maximum
Rule 12b-1 fee permitted by the Plan. With respect to other NTF Programs, the
Fund's directors have authorized the Fund to pay transfer agency fees to INVESCO
based on the number of investors who have beneficial interests in the NTF
Program Sponsor's omnibus accounts in the Fund. INVESCO, in turn, pays these
transfer agency fees to the NTF Program Sponsor as a sub-transfer agency or
recordkeeping fee in payment of all or a portion of the Services Fee. In the
event that the sub-transfer agency or recordkeeping fee is insufficient to pay
all of the Services Fee with respect to these NTF Programs, the directors of the
Fund have authorized the Fund to apply dollars generated from the Plan to pay
the remainder of the Services Fee, subject to the maximum Rule 12b-1 fee
permitted by the Plan. INVESCO itself pays the portion of the Fund's Services
Fee, if any, that exceeds the sum of the sub-transfer agency or recordkeeping
fee and Rule 12b-1 fee. The Fund's directors have further authorized INVESCO to
29
<PAGE>
place a portion of the Fund's brokerage transactions with certain NTF Program
Sponsors or their affiliated brokers, if INVESCO reasonably believes that, in
effecting the Fund's transactions in portfolio securities, the broker is able to
provide the best execution of orders at the most favorable prices. A portion of
the commissions earned by such a broker from executing portfolio transactions on
behalf of the Fund may be credited by the NTF Program Sponsor against its
Services Fee. Such credit may be applied against any sub-transfer agency or
recordkeeping fee payable with respect to the Fund, or against any Rule 12b-1
fees used to pay a portion of the Services Fee, on a basis which has resulted
from negotiations between INVESCO or IDI and the NTF Program Sponsor. Thus, the
Fund pays sub-transfer agency or recordkeeping fees to the NTF Program Sponsor
in payment of the Services Fee only to the extent that such fees are not offset
by the Fund's credits. In the event that the transfer agency fee paid by the
Fund to INVESCO with respect to investors who have beneficial interests in a
particular NTF Program Sponsor's omnibus accounts in the Fund exceeds the
Services Fee applicable to the Fund, after application of credits, INVESCO may
carry forward the excess and apply it to future Services Fees payable to that
NTF Program Sponsor with respect to the Fund. The amount of excess transfer
agency fees carried forward will be reviewed for possible adjustment by INVESCO
prior to each fiscal year-end of the Fund. The Fund's board of directors has
also authorized the Fund to pay to IDI the full Rule 12b-1 fees contemplated by
the Plan in compensation of expenses incurred by IDI in engaging in the
activities and providing the services on behalf of the Fund contemplated by the
Plan, subject to the maximum Rule 12b-1 fee permitted by the Plan,
notwithstanding that credits have been applied to reduce the portion of the
12b-1 fee that would have been used to compensate IDI for payments to such NTF
Program Sponsor absent such credits.
The aggregate dollar amounts of brokerage commissions paid by the Fund for
the fiscal years ended June 30, 1998, 1997 and 1996 were $6,092,269, $4,594,928
and $4,668,404, respectively. For the fiscal year ended June 30, 1998, brokers
providing research services received $2,135,896 in commissions on portfolio
transactions effected for the Fund. The aggregate dollar amount of such
portfolio transactions was $1,932,746,961. As a result of selling shares of the
Fund, brokers received $15,000 in commissions on portfolio transactions effected
for the Fund during the fiscal year ended June 30, 1998.
At June 30, 1998, the Fund held securities of its regular brokers or
dealers, or their parents, as follows:
Value of Securities
BROKER OR DEALER AT 6/30/98
Sears Roebuck Acceptance $ 89,009,000.00
American Express Credit $ 22,690,000.00
Cigna Corp. $ 43,447,000.00
General Electric Capital $ 28,000,000.00
General Electric $127,400,000.00
30
<PAGE>
General Motors Acceptance $ 11,781,250.00
Ford Motor Credit $ 44,250,000.00
Donaldson Lufkin & Jenrette Securities $ 5,985,953.98
Lehman Brothers Holdings $ 4,192,263.84
INVESCO does not receive any brokerage commissions on portfolio
transactions effected on behalf of the Fund, and there is no affiliation between
INVESCO or any person affiliated with INVESCO or the Fund and any broker or
dealer that executes transactions for the Fund.
ADDITIONAL INFORMATION
- ----------------------
COMMON STOCK. The Company has one billion six hundred million authorized
shares of common stock with a par value of $1.00 per share. All shares are of
one class with equal rights as to voting, dividends and liquidation. All shares
issued and outstanding are, and all shares offered hereby, when issued, will be,
fully paid and nonassessable. Shares have no preemptive rights and are freely
transferable on the books of the Fund.
Fund shares have noncumulative voting rights, which means that the holders
of a majority of the shares voting for the election of directors of the Fund can
elect 100% of the directors if they choose to do so. In such event, the holders
of the remaining shares voting for the election of directors will not be able to
elect any person or persons to the board of directors. After they have been
elected by shareholders, the directors will continue to serve until their
successors are elected and have qualified or they are removed from office, in
either case by a shareholder vote, or until death, resignation, or retirement.
Directors may appoint their own successors, provided that always at least a
majority of the directors have been elected by the Fund's shareholders. It is
the intention of the Fund not to hold annual meetings of shareholders. The
directors may 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 April 30, 1999, the following entities held
more than 5% of the Fund's outstanding equity securities.
Amount and Class and
Nature of Percent
NAME AND ADDRESS OWNERSHIP OF CLASS
- --------------------------------------------------------------------------------
Charles Schwab & Co., Inc. 41,165,979.7780 13.38%
Special Custody Acct. for the
Exclusive Benefit of Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122
31
<PAGE>
INDEPENDENT ACCOUNTANTS. PricewaterhouseCoopers LLP, 950 Seventeenth
Street, Denver, Colorado, has been selected as the independent accountants of
the Fund. The independent accountants are responsible for auditing the financial
statements of the Fund.
CUSTODIAN. State Street Bank and Trust Company, P.O. Box 351, Boston,
Massachusetts, has been designated as custodian of the cash and investment
securities of the Fund. The bank is also responsible for, among other things,
receipt and delivery of the Fund's investment securities in accordance with
procedures and conditions specified in the custody agreement. Under its contract
with the Fund, the custodian is authorized to establish separate accounts in
foreign countries and to cause foreign securities owned by the Fund to be held
outside the United States in branches of U.S. banks and, to the extent permitted
by applicable regulations, in certain foreign banks and foreign securities
depositories.
TRANSFER AGENT. The Fund is provided with transfer 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 Fund, and the
maintenance of records regarding the ownership of such shares.
REPORTS TO SHAREHOLDERS. The Fund's fiscal year ends on June 30. The Fund
distributes reports at least semiannually to its shareholders. Financial
statements regarding the Fund, audited by the independent accountants, are sent
to shareholders annually.
LEGAL COUNSEL. The firm of Kirkpatrick & Lockhart LLP, Washington, D.C., is
legal counsel for the Fund. The firm of Moye, Giles, O'Keefe, Vermeire &
Gorrell, Denver, Colorado, acts as special counsel to the Fund.
FINANCIAL STATEMENTS. The Fund's audited financial statements and the notes
thereto for the fiscal year ended June 30, 1998 and the report of
PricewaterhouseCoopers LLP with respect to such financial statements, are
incorporated herein by reference from the Fund's Annual Report to Shareholders
for the fiscal year ended June 30, 1998.
PROSPECTUS. The Fund will furnish, without charge, a copy of the Prospectus
upon request. Such requests should be made to the Fund 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
related Prospectus do not contain all of the information set forth in the
Registration Statement the Fund 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.
32
<PAGE>
APPENDIX A
BOND RATINGS
- ------------
The following is a description of Moody's and S&P's bond ratings:
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATINGS
Aaa - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa - Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risk appear somewhat larger than in Aaa securities.
A - Bonds rated A possess many favorable investment attributes, and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds rated Ba are judged to have speculative elements. Their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B - Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of other
terms of the contract over any longer period of time may be small.
Caa - Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
33
<PAGE>
S&P CORPORATE BOND RATINGS
AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity
to pay principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB - Bonds rated BBB are regarded as having an adequate capability to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
BB - Bonds rated BB have less near-term vulnerability to default than other
speculative issues. However, they face major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments.
B - Bonds rated B have a greater vulnerability to default but currently
have the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal.
CCC - Bonds rated CCC have a currently identifiable vulnerability to
default and are dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial, or economic conditions, they are not
likely to have the capacity to pay interest and repay principal.
34
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
May 28, 1999
INVESCO COMBINATION STOCK & BOND FUNDS, INC.
INVESCO Total Return Fund
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 Total Return Fund (the "Fund") seeks to provide investors with a high
total return on investment through capital appreciation and current income. The
Fund is a series of INVESCO Combination Stock & Bond Funds, Inc. (the
"Company"), which is an open-end management investment company. The Company may
offer additional Funds in the future.
The Fund's prospectus dated May 28, 1999 which provides the basic
information you should know before investing in the Fund, may be obtained
without charge from INVESCO Distributors, Inc., Post Office Box 173706, Denver,
Colorado 80217-3706. This Statement of Additional Information is not a
prospectus but contains information in addition to and more detailed than that
set forth in the Prospectus. It is intended to provide additional information
regarding the activities and operations of the Fund and should be read in
conjunction with the Prospectus.
Investment Adviser: INVESCO FUNDS GROUP, INC.
Distributor: INVESCO DISTRIBUTORS, INC.
<PAGE>
TABLE OF CONTENTS
Page
INVESTMENT POLICIES AND RESTRICTIONS...........................................1
THE FUNDS AND THEIR MANAGEMENT................................................10
HOW SHARES CAN BE PURCHASED...................................................23
HOW SHARES ARE VALUED.........................................................26
FUND PERFORMANCE..............................................................27
SERVICES PROVIDED BY THE TRUST................................................29
TAX-DEFERRED RETIREMENT PLANS.................................................30
HOW TO REDEEM SHARES..........................................................30
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES......................................31
INVESTMENT PRACTICES..........................................................33
ADDITIONAL INFORMATION........................................................36
APPENDIX A....................................................................38
APPENDIX B....................................................................40
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
Reference is made to the section entitled "Investment Objectives And
Policies" in the Prospectus for a discussion of the investment objectives and
policies of the Fund. In addition, set forth below is further information
relating to the INVESCO Total Return Fund.
LOANS OF PORTFOLIO SECURITIES. As discussed in the section entitled "Risk
Factors" in the Prospectus, the Fund may lend its portfolio securities to
brokers, dealers, and other financial institutions, provided that such loans are
callable at any time by the Fund and are at all times secured by collateral held
by the Fund's custodian consisting of cash or securities issued or guaranteed by
the United States Government or its agencies, or any combination thereof, equal
to at least the market value, determined daily, of the loaned securities. The
advantage of such loans is that the Fund continues to earn income on the loaned
securities, while at the same time receiving interest from the borrower of the
securities. Loans will be made only to firms deemed by the adviser or
sub-adviser (collectively, "Fund Management"), under procedures established by
the Company's board of directors (the "Board"), to be creditworthy and when the
amount of interest to be received justifies the inherent risks. A loan may be
terminated by the borrower on one business day's notice, or by the Fund at any
time. If at any time the borrower fails to maintain the required amount of
collateral (at least 100% of the market value of the borrowed securities), the
Fund will require the deposit of additional collateral not later than the
business day following the day on which a collateral deficiency occurs or the
collateral appears inadequate. If the deficiency is not remedied by the end of
that period, the Fund will use the collateral to replace the securities while
holding the borrower liable for any excess of replacement cost over collateral.
Upon termination of the loan, the borrower is required to return the securities
to the Fund. Any gain or loss during the loan period would inure the Fund.
FUTURES AND OPTIONS ON FUTURES. As discussed in the Prospectus, the Fund
may enter into futures contracts, and purchase and sell ("write") options to buy
or sell futures contracts. The Fund will comply with and adhere to all
limitations in the manner and extent to which it effects transactions in futures
and options on such futures currently imposed by the rules and policy guidelines
of the Commodity Futures Trading Commission ("CFTC") as conditions for exemption
of a mutual fund, or investment advisers thereto, from registration as a
commodity pool operator. The Fund will not, as to any positions, whether long,
short or a combination thereof, enter into futures and options thereon for which
the aggregate initial margins and premiums exceed 5% of the fair market value of
its assets after taking into account unrealized profits and losses on options it
has entered into. In the case of an option that is "in-the-money," as defined in
the Commodity Exchange Act (the "CEA"), the in-the-money amount may be excluded
in computing such 5%. (In general a call option on a future is "in-the-money" if
the value of the future exceeds the exercise ("strike") price of the call; a put
option on a future is "in-the-money" if the value of the future which is the
subject of the put is exceeded by the strike price of the put.) The Fund may use
futures and options thereon solely for bona fide hedging or for other
non-speculative purposes within the meaning and intent of the applicable
provisions of the CEA.
<PAGE>
Unlike when the Fund purchases or sells a security, no price is paid or
received by the Fund upon the purchase or sale of a futures contract. Instead,
the Fund will be required to deposit in its segregated asset account an amount
of cash or qualifying securities (currently U.S. Treasury bills), currently in a
minimum amount of $15,000. This is called "initial margin." Such initial margin
is in the nature of a performance bond or good faith deposit on the contract.
However, since losses on open contracts are required to be reflected in cash in
the form of variation margin payments, the Fund may be required to make
additional payments during the term of the contracts to its broker. Such
payments would be required, for example, where, during the term of an interest
rate futures contract purchased by the Fund, there was a general increase in
interest rates, thereby making the Fund's portfolio securities less valuable. In
all instances involving the purchase of futures contracts by the Fund, an amount
of cash together with such other securities as permitted by applicable
regulatory authorities to be utilized for such purpose, at least equal to the
market value of the futures contracts, will be deposited in a segregated account
with the Fund's custodian to collateralize the position. At any time prior to
the expiration of a futures contract, the Fund may elect to close its position
by taking an opposite position which will operate to terminate its 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 B
("Description of Futures, Options and Forward Contracts").
Where futures are purchased to hedge against a possible increase in the
price of a security before the Fund is able in an orderly fashion to invest in
the security, it is possible that the market may decline instead. If the Fund,
as a result, concluded not to make the planned investment at that time because
of concern as to possible further market decline or for other reasons, the Fund
would realize a loss on the futures contract that is not offset by a reduction
in the price of securities purchased.
In addition to the possibility that there may be an imperfect correlation
or no correlation at all between movements in the futures contracts and the
portion of the portfolio being hedged, the price of futures may not correlate
perfectly with movements in the prices due to certain market distortions. All
participants in the futures market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions which
could distort the normal relationship between underlying instruments and the
value of the futures contract. Moreover, the deposit requirements in the futures
market are less onerous than margin requirements in the securities market and
may therefore cause increased participation by speculators in the futures
market. Such increased participation may also cause temporary price distortions.
Due to the possibility of price distortion in the futures market and because of
the imperfect correlation between movements in the underlying instrument and
movements in the prices of futures contracts, the value of futures contracts as
a hedging device may be reduced.
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.
FORWARD FOREIGN CURRENCY CONTRACTS. The Fund may enter into forward
currency contracts to purchase or sell foreign currencies (i.e., non-U.S.
currencies) ("forward contracts") as a hedge against possible variations in
foreign exchange rates. A forward contract is an agreement between the
2
<PAGE>
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, the 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 Fund will not speculate in forward
contracts. The Fund will not attempt to hedge all of its non-U.S. portfolio
positions and will enter into such transactions only to the extent, if any,
deemed appropriate by its investment adviser. The Fund will not enter into
forward contracts for a term of more than one year. Forward contracts may, from
time to time, be considered illiquid, in which case they would be subject to the
Fund's limitation on investing in illiquid securities, discussed in its
Prospectus.
REAL ESTATE INVESTMENT TRUSTS. Although the Fund is not permitted to
invest in real estate directly, it may invest in real estate investment trusts
("REITs"). A REIT is a trust which sells shares to investors and uses the
proceeds to invest in real estate or interests in real estate.
The Fund has adopted a policy which permits it to write, purchase or sell
put and call options on individual securities, securities indexes and
currencies, or financial futures or options on financial futures, or undertake
forward currency contracts.
PUT AND CALL OPTIONS. 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
3
<PAGE>
option or to purchase the security in the case of a put option. Options on
securities which have been purchased or written may be closed out prior to
exercise or expiration by entering into an offsetting transaction on the
exchange on which the initial position was established, subject to the
availability of a liquid secondary market.
Options on securities are traded on national securities exchanges, such as
the Chicago Board of Options Exchange and the New York Stock Exchange, which are
regulated by the Securities and Exchange Commission. The Options Clearing
Corporation guarantees the performance of each party to an exchange-traded
option, by in effect taking the opposite side of each such option. A holder or
writer may engage in transactions in exchange-traded options on securities and
options on indices of securities only through a registered broker/dealer which
is a member of the exchange on which the option is traded.
An option position in an exchange-traded option may be closed out only on
an exchange which provides a secondary market for an option of the same series.
Although the Fund will generally purchase or write only those options for which
there appears to be an active secondary market, there is no assurance that a
liquid secondary market on an exchange will exist for any particular option at
any particular time. In such event it might not be possible to effect closing
transactions in a particular option with the result that the Fund would have to
exercise the option in order to realize any profit. This would result in the
Fund incurring brokerage commissions upon the disposition of underlying
securities acquired through the exercise of a call option or upon the purchase
of underlying securities upon the exercise of a put option. If the Fund as
covered call option writer is unable to effect a closing purchase transaction in
a secondary market, unless the Fund is required to deliver the securities
pursuant to the assignment of an exercise notice, it 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
customer's 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. For a
4
<PAGE>
more complete discussion of the risks involved in futures and options on futures
and other securities, refer to Appendix B ("Description of Futures, Options and
Forward Contracts").
FUTURES AND OPTIONS ON FUTURES. As described in the Fund's Prospectus, the
Fund may enter into futures contracts and purchase and sell ("write") options to
buy or sell futures contracts. The Fund will comply with and adhere to all
limitations in the manner and extent to which it effects transactions in futures
and options on such futures currently imposed by the rules and policy guidelines
of the Commodity Futures Trading Commission ("CFTC") as conditions for exemption
of a mutual fund, or investment advisers thereto, from registration as a
commodity pool operator. The Fund will not, as to any positions, whether long,
short or a combination thereof, enter into futures and options thereon for which
the aggregate initial margins and premiums exceed 5% of the fair market value of
its assets after taking into account unrealized profits and losses on options it
has entered into. In the case of an option that is "in-the-money," as defined in
the commodity Exchange Act (the "CEA"), the in-the-money amount may be excluded
in computing such 5%. (In general a call option on a future is "in-the-money" if
the value of the future exceeds the exercise ("strike") price of the call; a put
option on a future is "in-the-money" if the value of the future which is the
subject of the put is exceeded by the strike price of the put.) The Fund may use
futures and options thereon solely for bona fide hedging or for other
non-speculative purposes within the meaning and intent of the applicable
provisions of the CEA.
Unlike when the Fund purchases or sells a security, no price is paid or
received by the Fund upon the purchase or sale of a futures contract. Instead,
the Fund will be required to deposit in its segregated asset account an amount
of cash or qualifying securities (currently U.S. Treasury bills). This is called
"initial margin." Such initial margin is in the nature of a performance bond or
good faith deposit on the contract. However, since losses on open contracts are
required to be reflected in cash in the form of variation margin payments, the
Fund may be required to make additional payments during the term of the
contracts to its broker. Such payments would be required, for example, where,
during the term of an interest rate futures contract purchased by the Fund,
there was a general increase in interest rates, thereby making the Fund's
portfolio securities less valuable. In all instances involving the purchase of
futures contracts by the Fund, an amount of cash together with such other
securities as permitted by applicable regulatory authorities to be utilized for
such purpose, at least equal to the market value of the futures contracts, will
be deposited in a segregated account with the Fund's custodian to collateralize
the position. At any time prior to the expiration of a futures contract, the
Fund may elect to close its position by taking an opposite position which will
operate to terminate its position in the futures contract.
Where futures are purchased to hedge against a possible increase in the
price of a security before the Fund is able in an orderly fashion to invest in
the security, it is possible that the market may decline instead. If the Fund,
as a result, concluded not to make the planned investment at that time because
of concern as to possible further market decline or for other reasons, the Fund
would realize a loss on the futures contract that is not offset by a reduction
in the price of securities purchased.
5
<PAGE>
In addition to the possibility that there may be an imperfect correlation
or no correlation at all between movements in the futures contracts and the
portion of the portfolio being hedged, the price of futures may not correlate
perfectly with movements in the prices due to certain market distortions. All
participants in the futures market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions which
could distort the normal relationship between underlying instruments and the
value of the futures contract. Moreover, the deposit requirements in the futures
market are less onerous than margin requirements in the securities market and
may therefore cause increased participation by speculators in the futures
market. Such increased participation may also cause temporary price distortions.
Due to the possibility of price distortion in the futures market and because of
the imperfect correlation between movements in the underlying instrument and
movements in the prices of futures contracts, the value of futures contracts as
a hedging device may be reduced.
In addition, if the Fund has insufficient available cash, it may at times
have to sell securities to meet variation margin requirements. Such sales may
have to be effected at a time when it may be disadvantageous to do so.
OPTIONS ON FUTURES CONTRACTS. The Fund may buy and write options on
futures contracts for hedging purposes. The purchase of a call option on a
futures contract is similar in some respects to the purchase of a call option on
an individual security. Depending on the pricing of the option compared to
either the price of the futures contract upon which it is based or the price of
the underlying instrument, ownership of the option may or may not be less risky
than ownership of the futures contract or the underlying instrument. As with the
purchase of futures contracts, when the Fund is not fully invested it may buy a
call option on a futures contract to hedge against a market advance.
The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the security or foreign currency which is
deliverable under, or of the index comprising, the futures contract. If the
futures price at the expiration of the option is below the exercise price, the
Fund will retain the full amount of the option premium which provides a partial
hedge against any decline that may have occurred in the Fund's portfolio
holdings. The writing of a put option on a futures contract constitutes a
partial hedge against increasing prices of the security or foreign currency
which is deliverable under, or of the index comprising, the futures contract. If
the futures price at expiration of the option is higher than the exercise price,
the Fund will retain the full amount of the option premium which provides a
partial hedge against any increase in the price of securities which the Fund is
considering buying. If a call or put option which the Fund has written is
exercised, the Fund will incur a loss which will be reduced by the amount of the
premium it received. Depending on the degree of correlation between changes 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.
6
<PAGE>
The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put option on portfolio securities. For
example, the Fund may buy a put option on a futures contract to hedge its
portfolio against the risk of falling prices.
The amount of risk the Fund assumes when it buys an option on a futures
contract is the premium paid for the option plus related transaction costs. In
addition to the correlation risks discussed above, the purchase of an option
also entails the risk that changes in the value of the underlying futures
contract will not be reflected fully in the value of the options bought.
For a more complete discussion of the risks involved in futures and
options on futures and other securities, refer to Appendix B ("Description of
Futures, Options and Forward Contracts").
INVESTMENT RESTRICTIONS. As discussed in the section of the Fund's
Prospectus entitled "Investment Policies and Risks," the Fund is subject to
certain investment restrictions. For purposes of the following investment
restrictions, all percentage limitations apply immediately after a purchase or
initial investment. Any subsequent change in a particular percentage resulting
from fluctuations in value does not require elimination of any security from the
Fund.
The following restrictions are fundamental and may not be changed without
the prior approval of the holders of a majority, as defined in the Investment
Company Act of 1940 (the "1940 Act"), of the outstanding voting securities of
the Fund. The Fund, unless otherwise indicated, may not:
(1) Other than investments by the Fund, in obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities,
invest in the securities of issuers conducting their principal
business activities in the same industry (investments in obligations
issued by a foreign government, including the agencies or
instrumentalities of a foreign government, are considered to be
investments in a single industry), if immediately after such
investment the value of the Fund's investments in such industry would
exceed 25% of the value of it's total assets;
(2) with respect to seventy-five percent (75%) of the Fund's total
assets, purchase the securities of any one issuer (except cash items
and "government issuers" 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.
(3) Underwrite securities of other issuers, except insofar as it may
technically be deemed an "underwriter" under the Securities Act of
1933, as amended, in connection with the disposition of the Fund's
portfolio securities.
(4) Invest in companies for the purpose of exercising control or
management.
7
<PAGE>
(5) Issue any class of senior securities or borrow money, except
borrowings from banks for temporary or emergency purposes (not for
leveraging or investment) in an amount not exceeding 33 1/3% of the
value of the Fund's total assets at the time the borrowing is made.
(6) Mortgage, pledge, hypothecate or in any manner transfer as security
for indebtedness any securities owned or held except to an extent not
greater than 5% of the value of the Fund's total assets.
(7) Sell short, except the Fund may purchase or sell options or futures,
or write, purchase or sell puts and calls.
(8) Buy on margin, except the Fund may purchase or sell options or
futures, or write, purchase or sell puts and calls.
(9) Purchase or sell real estate except that the Fund may invest in
securities secured by real estate or interests therein or issued by
companies, including real estate investment trusts, which invest in
real estate or interests therein.
(10) Buy or sell commodities contracts (however the Fund may purchase
securities of companies which invest in the foregoing). This
restriction shall not prevent the Fund from purchasing or selling
options on individual securities, security indexes, and currencies or
financial futures or options on financial futures, or undertaking
forward currency contracts.
(11) Make loans to other persons, provided that the Fund may purchase debt
obligations consistent with its investment objectives and policies
and the Fund may lend limited amounts (not to exceed 10% of its total
assets) of its portfolio securities to broker-dealers or other
institutional investors.
(12) Purchase securities of other investment companies except (i) in
connection with a merger, consolidation, acquisition or
reorganization, or (ii) by purchase in the open market of securities
of other investment companies involving only customary brokers'
commissions and only if immediately thereafter (i) no more than 3% of
the voting securities of any one investment company are owned by the
Fund, (ii) no more than 5% of the value of the total assets of the
Fund would be invested in any one investment company, and (iii) no
more than 10% of the value of the total assets of the Fund would be
invested in the securities of such investment companies. The Company
may invest from time to time a portion of the Fund's cash in
investment companies to which the Adviser serves as investment
adviser; provided that no management or distribution fee will be
charged by the Adviser with respect to any such assets so invested
and provided further that at no time will more than 3% of the Fund's
assets be so invested. Should the Fund purchase securities of other
investment companies, shareholders may incur additional management
and distribution fees.
(13) Invest in securities for which there are legal or contractual
restrictions on resale, except that the Fund may invest no more than
2% of the value of its total assets in such securities; or invest in
8
<PAGE>
securities for which there is no readily available market, except
that the Fund may invest no more than 5% of the value its total
assets in such securities.
In applying the industry concentration investment restriction (no. 1
above), the Fund uses a modified S&P industry code classification schema which
uses various sources to classify securities.
In applying restriction (13) above, the Fund also includes illiquid
securities (those which cannot be sold in the ordinary course of business within
seven days at approximately the valuation given to them by the Fund) among the
securities subject to the 5% of total assets limit.
Additional investment restrictions adopted by the Company on behalf of the
Fund and which may be changed by the Board at its discretion provide that the
Fund may not:
(1) (a) enter into any futures contracts, options on futures, puts and
calls if immediately thereafter the aggregate margin deposits on all
outstanding derivative positions held by the Fund and premiums paid
on outstanding positions, after taking into account unrealized
profits and losses, would exceed 5% of the market value of the total
assets of the Fund, or (b) enter into any derivative positions if the
aggregate net amount of the Fund's commitments under outstanding
derivative positions of the Fund would exceed the market value of the
total assets of the Fund.
(2) Purchase or sell interests in oil, gas or other mineral leases or
exploration or development programs. The Fund, however, may purchase
or sell securities issued by entities which invest in such interests.
(3) Invest more than 5% of the Fund's total assets in securities of
companies having a record, together with predecessors, of less than
three years of continuous operation.
(4) Purchase or retain the securities of any issuer if any individual
officers and directors of the Company, the Adviser, or any subsidiary
thereof owns individually more than 0.5% of the securities of that
issuer and all such officers and directors together own more than 5%
of the securities of that issuer.
(5) Engage in arbitrage transactions.
(6) To the extent the Fund invests in warrants, the investment in
warrants, valued at the lower of cost or market, may not exceed 5% of
the value of the Fund's net assets. Included within that amount, but
not to exceed 2% of the value of the Fund's net assets may be
warrants which are not listed on the New York or American Stock
Exchanges. Warrants acquired by the Fund as part of a unit or
attached to securities may be deemed to be without value.
(7) Invest more than 25% of the value of the Fund's total assets in
securities of foreign issuers. Investing in securities issued by
companies whose principal business activities are outside the United
9
<PAGE>
States may involve significant risks not present in domestic
investments.
THE FUND AND ITS MANAGEMENT
THE COMPANY. The Company was organized under the laws of Maryland on
August 19, 1993. On September 10, 1998, the name of the Company was changed to
INVESCO Flexible Funds, Inc. On October 29, 1998, the name of the Company was
changed to INVESCO Combination Stock & Bond Funds, Inc. On May 28, 19999, the
Company assumed all of the assets and liabilities of INVESCO Total Return Fund,
a Series of INVESCO Value Trust. INVESCO Value Trust was organized under the
laws of Massachusetts on July 15, 1987.
THE INVESTMENT ADVISER. INVESCO Funds Group, Inc., a Delaware corporation
("INVESCO"), is employed as the Fund's investment adviser. INVESCO was
established in 1932 and also serves as an investment adviser to INVESCO Bond
Funds, Inc. (formerly, INVESCO Income Funds, Inc.), INVESCO Combination Stock &
Bond Funds, Inc. (formerly, INVESCO Flexible Funds, Inc. and INVESCO Multiple
Asset Funds, Inc.), INVESCO Diversified Funds, Inc., INVESCO Emerging
Opportunity Funds, Inc., INVESCO Growth Funds, Inc. (formerly INVESCO Growth
Fund, Inc.), INVESCO Industrial Income Fund, Inc., INVESCO International Funds,
Inc., INVESCO Money Market Funds, Inc., INVESCO Sector Funds, Inc. (formerly,
INVESCO Strategic Portfolios, Inc.), INVESCO Specialty Funds, Inc., INVESCO
Stock Funds, Inc. (formerly, INVESCO Equity Funds, Inc.), INVESCO Tax-Free
Income Funds, Inc., INVESCO Treasurer's Series Funds, Inc., INVESCO Value Trust
and INVESCO Variable Investment Funds, Inc.
THE INVESTMENT SUB-ADVISER. INVESCO has contracted with INVESCO Capital
Management, Inc. ("ICM") to provide investment advisory and research services to
the Fund ICM, the Fund's investment adviser from inception of the Fund to 1991,
has the primary responsibility for providing portfolio investment management
services to the Fund.
THE DISTRIBUTOR. INVESCO Distributors, Inc. ("IDI") is the Fund's
distributor. IDI, established in 1997, is a registered broker-dealer that acts
as distributor for all retail mutual funds advised by INVESCO. Prior to
September 30, 1997, INVESCO served as the Fund's distributor.
INVESCO, ICM and IDI are indirect wholly-owned subsidiaries of AMVESCAP
PLC, a publicly-traded holding company that, through its subsidiaries, engages
in the business of investment management on an international basis. INVESCO PLC
changed its name to AMVESCO PLC on March 3, 1997, and to AMVESCAP PLC on May 8,
1997 as part of a merger between a direct subsidiary of INVESCO PLC and A I M
Management Group, Inc., that created one of the largest independent investment
management businesses in the world with approximately $261 billion in assets
under management as of June 30, 1998. INVESCO was established in 1932 and, as of
August 31, 1998 managed 14 mutual funds, consisting of 49 separate portfolios,
on behalf of 899,439 shareholders.
AMVESCAP PLC's other North American subsidiaries include the following:
10
<PAGE>
--INVESCO Retirement and Benefit Services, Inc. ("IRBS") of Atlanta,
Georgia, develops and provides domestic and international defined contribution
retirement plan services to plan sponsors, institutional retirement plan
sponsors, institutional plan providers and foreign governments.
--INVESCO Retirement Plan Services ("IRPS") of Atlanta, Georgia, a
division of IRBS, provides recordkeeping and investment selection services to
defined contribution plan sponsors of plans with between $2 million and $200
million in assets. Additionally, IRPS provides investment consulting services to
institutions seeking to provide retirement plan products and services.
--Institutional Trust Company doing business as INVESCO Trust Company
("ITC") of Denver, Colorado, a division of IRBS, provides retirement account
custodian and/or trust services for individual retirement accounts ("IRAs") and
other retirement plan accounts. This includes services such as recordkeeping,
tax reporting and compliance. ITC acts as trustee or custodian to these plans.
ITC accepts contributions and provides, through INVESCO, complete transfer
agency functions: correspondence, sub-accounting, telephone communications and
processing of distributions.
--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.
--INVESCO Management & Research, Inc. of Boston, Massachusetts primarily
manages pension and endowment accounts.
--INVESCO Realty Advisors, Inc. of Dallas, Texas is responsible for
providing advisory services in the U.S. real estate markets for AMVESCAP PLC's
clients worldwide. Clients include corporate plans, public pension funds, and
endowment and foundation accounts.
--PRIMCO Capital Management, Inc. of Louisville, Kentucky specializes in
managing stable return investments, principally on behalf of Section 401(k)
retirement plans.
--INVESCO (NY), Inc. of New York, is an investment adviser for separately
managed accounts, such as corporate and municipal pension plans, Taft-Hartley
Plans, insurance companies, charitable institutions and private individuals.
INVESCO NY also offers the opportunity for its clients to invest both directly
and indirectly through partnerships in primarily private investments or
privately negotiated transactions. INVESCO NY further serves as investment
adviser to several closed-end investment companies, and as subadviser with
respect to certain commingled employee benefit trusts. INVESCO NY specializes in
the fundamental research investment approach, with the help of quantitative
tools.
11
<PAGE>
--A I M Advisors, Inc. of Houston, Texas provides investment advisory and
administrative services for retail and institutional mutual funds.
--A I M Capital Management, Inc. of Houston, Texas provides investment
advisory services to individuals, corporations, pension plans and other private
investment advisory accounts and also serves as a sub-adviser to certain retail
and institutional mutual funds, one Canadian mutual fund and one portfolio of an
open-end registered investment company that is offered to separate accounts of
insurance companies that issue variable annuity and/or variable life insurance
products.
--A I M Distributors, Inc. and Fund Management Company of Houston, Texas
are registered broker-dealers that act as the principal underwriters for retail
and institutional mutual funds.
The corporate headquarters of AMVESCAP PLC are located at 11 Devonshire
Square, London, EC2M 4YR, England.
As indicated in the Fund's Prospectus, INVESCO and ICM 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, ICM and their North American affiliates. The
policy requires officers, inside directors, investment and other personnel of
INVESCO, ICM and their North American affiliates to pre-clear all transactions
in securities not otherwise exempt under the policy. Requests for trading
authority will be denied when, among other reasons, the proposed personal
transaction would be contrary to the provisions of the policy or would be deemed
to adversely affect any transaction then known to be under consideration for or
to have been effected on behalf of any client account, including the Fund.
In addition to the pre-clearance requirement described above, the policy
subjects officers, inside directors, investment and other personnel of INVESCO,
ICM and their North American affiliates to various trading restrictions and
reporting obligations. All reportable transactions are reviewed for compliance
with the policy. The provisions of this policy are administered by and subject
to exceptions authorized by INVESCO or ICM.
INVESTMENT ADVISORY AGREEMENT. INVESCO serves as investment adviser
pursuant to an investment advisory agreement dated February 28, 1997 with the
Company (the "Agreement") which was approved by the Board on November 6, 1996 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 Fund or
INVESCO at a meeting called for such purpose. Shareholders of the other series
of the Company approved the Agreement on January 31, 1997 for an initial term
expiring February 28, 1999. On May 13, 1998, this period was extended by the
Board through May 15, 1999. Thereafter, the Agreement may be continued from year
to year with respect to the Fund as long as such continuance is specifically
approved at least annually by the Board, 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 Fund who are not
12
<PAGE>
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 was approved with respect to the Fund by the
Fund's shareholder on May 28, 1999. The Agreement may be terminated at any time
without penalty by either party upon sixty (60) days written notice and
terminates automatically in the event of an assignment to the extent required by
the 1940 Act and the rules thereunder.
The Agreement provides that INVESCO shall manage the investment portfolios
of the Fund in conformity with the Fund's 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 Fund, excluding, however, those services that are the subject of
separate agreement between the Fund and INVESCO or any affiliate thereof,
including 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. INVESCO will
pay the fee of any sub-adviser. Services provided include, but are not limited
to: supplying the Fund with officers, clerical staff and other employees, if
any, who are necessary in connection with the Fund's 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 Fund's operations; preparation and
review of required documents, reports and filings by INVESCO's in-house legal
and accounting staff (including the Fund's prospectus, statement of additional
information, proxy statements, shareholder reports, tax returns, reports to the
SEC, and other corporate documents), 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 Fund under
the 1940 Act. Expenses not assumed by INVESCO are borne by the Fund. The
responsibility for making decisions to buy, sell, or hold a particular security
rests with INVESCO, as well as ICM as the Sub-Adviser, subject to review by the
Board.
As full compensation for its advisory services to the Fund, INVESCO
receives a monthly fee. This fee is based upon a percentage of the Fund's
average net assets, determined daily. The fee is calculated 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 in excess of $1 billion.
SUB-ADVISORY AGREEMENT. ICM serves as sub-adviser to the Fund pursuant to
a sub-advisory agreement dated February 28, 1997 (the "Sub-Agreement") with
INVESCO which was approved by the Board on August 5, 1998, including a majority
of the directors who are not "interested persons" of the Company, INVESCO or
ICM. The Shareholder of the Fund approved the Sub-Agreement on May 28, 1999 for
an initial term expiring February 28, 2000. The Sub-Agreement may be continued
from year to year by the Fund so long as each such continuance is specifically
approved by the Board, or by a vote of the holders of a majority, as defined in
the 1940 Act, of the outstanding shares of the Fund. Each such continuance also
must be approved by a majority of the Board who are not parties to the
13
<PAGE>
Sub-Agreement or interested persons (as defined in the 1940 Act) of any such
party, cast in person at a meeting called for the purpose of voting on such
continuance. The Sub-Agreement may be terminated at any time without penalty by
either party or the Fund upon sixty (60) days' written notice and terminates
automatically in the event of an assignment to the extent required by the 1940
Act and the rules thereunder.
The Sub-Agreement provides that ICM, subject to the supervision of
INVESCO, shall manage the investment portfolios of the Fund in conformity with
the Fund's investment policies. These management services include: (a) managing
the investment and reinvestment of all the assets, now or hereafter acquired, of
the Fund, and executing all purchases and sales of portfolio securities; (b)
maintaining a continuous investment program for the Fund, consistent with (i)
the Fund's investment policies as set forth in the Fund's Articles of
Incorporation, Bylaws, and Registration Statement, as from time to time amended,
under the 1940 Act, and in any prospectus and/or statement of additional
information of the Fund, as from time to time amended and in use under the 1933
Act, and (ii) the Fund's status as a regulated investment company under the
Internal Revenue Code of 1986, as amended; (c) determining what securities are
to be purchased or sold for the Fund, unless otherwise directed by the Board of
the Fund or INVESCO, and executing transactions accordingly; (d) providing the
Fund the benefit of all of the investment analysis and research, the reviews of
current economic conditions and trends, and the consideration of long-range
investment policy now or hereafter generally available to investment advisory
customers of the Sub-Advisers; (e) determining what portion of the Fund should
be invested in the various types of securities authorized for purchase by the
Fund; and (f) making recommendations as to the manner in which voting rights,
rights to consent to Fund action and any other rights pertaining to the
portfolio securities of the Fund shall be exercised.
The Sub-Agreement provides that as compensation for its services, ICM
shall receive from INVESCO, at the end of each month, a fee based on the average
daily value of the Fund's net assets. Based upon the approval of the Board at a
meeting held May 14, 1998, the calculation of the sub-advisory fee has been
changed from 33.33% of the advisory fee (0.25% on the first $500 million of the
Fund's average net assets; 0.2167% on the next $500 million of the Fund's
assets; and 0.1667% on the Fund's average net assets in excess of $1 billion) to
40% of the advisory fee (0.30% on the first $500 million of the Fund's average
net assets; 0.26% on the next $500 million of the Fund's assets; and 0.20% on
the Fund's average net assets in excess of $1 billion;). The sub-advisory fees
are paid by INVESCO, not the Fund.
ADMINISTRATIVE SERVICES AGREEMENT. INVESCO, either directly or through
affiliated companies, also provides certain administrative, sub-accounting, and
recordkeeping services to the Fund pursuant to an Administrative Services
Agreement with the Company dated February 28, 1997 (the "Administrative
Agreement"). The Administrative Agreement was approved by the Board on November
6, 1996 by a vote cast in person by all of the directors, 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 February 28, 1998, and has been continued by action of the Board
through May 15, 1999. The Administrative Agreement may be continued from year to
year thereafter as long as each such continuance is specifically approved by the
14
<PAGE>
Board, including a majority of the directors who are not parties to the
Administrative Agreement or interested persons (as defined in the 1940 Act) of
any such party, cast in person at a meeting called for the purpose of voting on
such continuance. The Administrative Agreement may be terminated at any time
without penalty by INVESCO on sixty (60) days' written notice, or by the Fund
upon thirty (30) days' written notice, and terminates automatically in the event
of an assignment unless the board of trustees approves such assignment.
The Administrative Agreement provides that INVESCO shall provide the
following services to the Fund: required administrative and internal accounting
services, including without limitation, maintaining general ledger and capital
stock accounts, preparing a daily trial balance, calculating net asset value
daily, and providing selected general ledger reports.
As full compensation for services provided under the Administrative
Agreement, the Fund pays a monthly fee to INVESCO consisting of a base fee of
$10,000 per year, plus an additional incremental fee computed daily and paid
monthly at an annual rate of 0.015% per year of the average net assets of the
Fund. For providing such services, INVESCO received administrative services fees
in the amount of $455,075 for the fiscal year ended August 31, 1998.
TRANSFER AGENCY AGREEMENT. INVESCO performs transfer agent, dividend
disbursing agent, and registrar services for the Fund pursuant to a Transfer
Agency Agreement with the Company dated February 28, 1997, which was approved
November 6, 1996 by the Board, including a majority of the Fund's directors who
are not parties to the Transfer Agency Agreement or "interested persons" of any
such party. The Transfer Agency Agreement was for an initial term expiring
February 28, 1998 and has been extended by the Board through May 15, 1999.
Thereafter, the Transfer Agency Agreement may be continued from year to year so
long as such continuance is specifically approved at least annually by the
Board, 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
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.
The Transfer Agency Agreement provides that the Fund shall pay to INVESCO
an annual fee of $20.00 per shareholder account or, where applicable, per
participant in an omnibus account. These fees are paid monthly at the rate of
1/12 of the annual fee and are based upon the number of shareholder accounts or,
where applicable, per participant in an omnibus account. For the year ended
August 31, 1998, the Fund paid INVESCO transfer agency fees of $4,890,325.
Set forth below is a table showing the advisory fees, transfer agency fees
and administrative fees paid by the Fund for the fiscal years ended August 31,
1998, 1997 and 1996.
15
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fiscal year Fiscal year Fiscal year
ended August 31, 1998 ended August 31, 1997 ended August 31, 1996
----------------------------------------------------------------------------------
- -----------------------------------------------------
Transfer Adminis- Transfer Adminis- Transfer Adminis-
Advisory Agency trative Advisory Agency trative Advisory Agency trative
Portfolio Fees Fees Fees Fees Fees Fees Fees Fees Fees
- ------------- --------------------------------------------------------------------------------------------------
INVESCO Total Return $13,926,522 $3,767,444 $367,796 $9,140,227 $2,332,422 $224,249 $6,025,905 $953,383 $137,623
</TABLE>
16
<PAGE>
OFFICERS AND DIRECTORS. The overall direction and supervision of the
Company is the responsibility of the Board, which has the primary duty of seeing
that the general investment policies and programs of the Fund are carried out
and that the Fund is properly administered. The officers of the Company, all of
whom are officers and employees of, and are paid by, INVESCO, are responsible
for the day-to-day administration of the Company. INVESCO, along with ICM, has
the primary responsibility for making investment decisions on behalf of the
Company. 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 Bond Funds, Inc. (formerly, INVESCO Income Fund, Inc.), INVESCO
Diversified Funds, Inc., INVESCO Emerging Opportunity Funds, Inc., INVESCO
Growth Funds, Inc. (formerly, INVESCO Growth Fund, Inc.), INVESCO International
Funds, Inc., INVESCO Money Market Funds, Inc., INVESCO Sector Funds, Inc.
(formerly, INVESCO Strategic Portfolios, Inc.), INVESCO Specialty Funds, Inc.,
INVESCO Stock Funds, Inc. (formerly, INVESCO Equity Funds, Inc.) and INVESCO
Tax-Free Income Funds, Inc. In addition, all of the directors of the Fund are
also trustees of INVESCO Treasurer's Series Funds, Inc. and INVESCO Value Trust.
Set forth below is information with respect to each of the Company's officers
and trustees. Unless otherwise indicated, the address of the officers and
trustees 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 AMVESCAP PLC, London, England, and of various subsidiaries thereof.
Chairman of the Board of INVESCO Global Health Sciences Fund. Address: 1315
Peachtree Street, NE, Atlanta, Georgia. Born: May 11, 1935.
FRED A. DEERING,+# Vice Chairman of the Board. Trustee of INVESCO Global
Health Sciences Fund. Formerly, Chairman of the Executive Committee and Chairman
of the Board of Security Life of Denver Insurance Company, Denver, Colorado;
Director of ING America Life Insurance Company. Address: Security Life Center,
1290 Broadway, Denver, Colorado. Born: January 12, 1928.
VICTOR L. ANDREWS,**@ Director. Professor Emeritus, Chairman Emeritus and
Chairman of the CFO Roundtable of the Department of Finance at Georgia State
University, Atlanta, Georgia; President, Andrews Financial Associates, Inc.
(consulting firm); since October 1984, Director of the Center for the Study of
Regulated Industry at Georgia State University; formerly, member of the
faculties of the Harvard Business School and the Sloan School of Management of
MIT. Dr. Andrews is also a Director of the Southeastern Thrift and Bank Fund,
Inc. and The Sheffield Funds, Inc. Address: 34 Seawatch Drive, Savannah,
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: 1600
17
<PAGE>
Pierce Street, Lakewood, Colorado. Born: August 7, 1936.
LAWRENCE H. BUDNER,#@@ Director. Trust Consultant; prior to June 30, 1987,
Senior Vice President and Senior Trust Officer of InterFirst Bank, Dallas,
Texas. Address: 7608 Glen Albens Circle, Dallas, Texas. Born: July 25, 1930.
WENDY L. GRAMM, Ph.D.,**@ Director. Self-employed (since 1993); Professor
of Economics and Public Administration, University of Texas at Arlington.
Formerly, Chairman, Commodity Futures Trading Commission from 1988 to 1993,
administrator for Information and Regulatory Affairs at the Office of Management
and Budget from 1985 to 1988, Executive Director of the Presidential Task Force
on Regulatory Relief and Director of the Federal Trade Commission's Bureau of
Economics. Dr. Gramm is also a director of the Chicago Mercantile Exchange,
Enron Corporation, IBP, Inc., State Farm Insurance Company, State Farm Life
Insurance Company, Independent Women's Forum, International Republic Institute,
and the Republican Women's Federal Forum. Dr. Gramm is also a member of the
Board of Visitors, College of Business Administration, University of Iowa, and a
member of the Board of Visitors, Center for Study of Public Choice, George Mason
University. Address: 4201 Yuma Street, N.W., Washington, D.C. Born: January 10,
1945.
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. Trustee of INVESCO Global
Health Sciences Fund and Gables Residential Trust. Address: 7 Piedmont Center,
Suite 100, Atlanta, Georgia. Born: September 14, 1930.
LARRY SOLL, Ph.D.,**@ Director. Retired. Formerly, Chairman of the Board
(1987 to 1994), Chief Executive Officer (1982 to 1989 and 1993 to 1994) and
President (1982 to 1989) of Synergen Corp. Director of Synergen since
incorporation in 1982. Director of ISD Pharmaceuticals, Inc., Trustee of INVESCO
Global Health Sciences Fund. Address: 345 Poorman Road, Boulder, Colorado. Born:
April 26, 1942.
MARK H. WILLIAMSON, +* President, CEO and Director. President, CEO and
Director of IDI; President, CEO and Director of INVESCO and President of INVESCO
Global Health Sciences Fund. Formerly, Chairman and CEO of NationsBanc Advisors,
Inc. (1995 to 1997) and Chairman of NationsBanc Investments, Inc. (1997 to
1998). Born: May 24, 1951.
18
<PAGE>
GLEN A. PAYNE, Secretary. Senior Vice President (since 1995), General
Counsel (since 1989) and Secretary (since 1989) of INVESCO and Senior Vice
President, Secretary and General Counsel of IDI (since 1997); Secretary of
INVESCO Global Health Sciences Fund, Vice President (May 1989 to April 1995) of
INVESCO; Senior Vice President (1995 to 1998), Secretary (1989 to 1998) and
General Counsel (1989 to 1998) of ITC. 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 (since 1988). Senior Vice President and Treasurer of IDI (since 1997).
Treasurer, Principal Financial and Accounting Officer, INVESCO Global Health
Sciences Fund. Senior Vice President and Treasurer of ITC (1988 to 1998). Born:
October 1, 1946.
WILLIAM J. GALVIN, JR., Assistant Secretary. Senior Vice President of
INVESCO (since 1995) and of IDI (since 1997) and formerly, Trust Officer of ITC
(1995 to 1998) and Vice President of INVESCO (1992 to 1995). Formerly, 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 (since
1984). Formerly, Trust Officer of ITC. Born: September 14, 1941.
JUDY P. WIESE, Assistant Treasurer. Vice President of INVESCO (since 1984)
and of IDI (since 1997). Formerly, Trust Officer of ITC. Born: February 3, 1948.
*These directors are "interested persons" of the Company as defined in the
1940 Act.
#Member of the audit committee of the Company.
@Member of the derivatives committee of the Company.
@@Member of the soft dollar brokerage committee of the Company.
+Member of the executive committee of the Company. On occasion, the
executive committee acts upon the current and ordinary business of the Company
between meetings of the Board. Except for certain powers which, under applicable
law, may only be exercised by the full Board, the executive committee may
exercise all powers and authority of the board in the management of the business
of the Company. All decisions are subsequently submitted for ratification by the
Board.
**Member of the management liaison committee of the Company.
As of May 21, 1999, 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 any Fund's outstanding shares.
19
<PAGE>
Director Compensation
- ---------------------
The following table sets forth, for the fiscal year ended August 31, 1998,
the compensation paid by Value Trust, the predecessor of the Company with
respect to the Fund, to the independent directors of the Company for services
rendered in their capacities as trustees of Value Trust; the benefits accrued as
Fund expenses with respect to the Defined Benefit Deferred Compensation Plan
discussed below; and the estimated annual benefits to be received by these
directors upon retirement as a result of their service to Value Trust. In
addition, the table sets forth the total compensation paid by all of the mutual
funds distributed by IDI and advised by INVESCO (including the Company), INVESCO
Treasurer's Series Funds, Inc. and INVESCO 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,
1997. As of December 31, 1997, there were 49 funds in the INVESCO Complex.
20
<PAGE>
<TABLE>
<CAPTION>
Total
Compensa-
Benefits Estimated tion From
Aggregate Accrued As Annual INVESCO
Compensa- Part of Benefits Complex
tion From Value Trust Upon Paid To
Value Trust(1) Expenses(2) Retirement(3) Directors/Trustees(1)
<S> <C> <C> <C> <C>
Fred A. Deering, $9,418 $5,735 $3,680 $113,350
Vice Chairman of
the Board
Victor L. Andrews 9,004 5,420 4,260 92,700
Bob R. Baker 9,568 4,840 5,709 96,050
Lawrence H. Budner 8,697 5,420 4,260 91,000
Daniel D. Chabris (4) 9,106 5,858 3,179 89,350
Wendy L. Gramm 8,368 0 0 39,000
Kenneth T. King 8,085 5,956 3,338 94,350
John W. McIntyre 8,486 0 0 104,000
Larry Soll 8,486 0 0 78,000
------ ------- ------- -------
Total $79,218 $33,229 $24,426 $797,800
% of Net Assets 0.0027%(5) 0.0011%(5) 0.0046%(6)
</TABLE>
(1)The vice chairman of the board, the chairmen of the audit, management
liaison, derivatives, soft dollar brokerage 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 trustees.
(2)Represents benefits accrued with respect to the Defined Benefit
Deferred Compensation Plan discussed below, and not compensation deferred at the
election of the trustees.
(3)These figures represent Value Trust's share of the estimated annual
benefits payable by the INVESCO Complex (excluding INVESCO Global Health
Sciences Fund which does not participate in this retirement plan) upon the
trustees retirement, calculated using the current method of allocating trustee
compensation among the funds in the INVESCO Complex. These estimated benefits
assume retirement at age 72 and that the basic retainer payable to the trustees
21
<PAGE>
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 trustees. This
results in lower estimated benefits for trustees who are closer to retirement
and higher estimated benefits for directors who are further from retirement.
With the exception of Drs. Soll and Gramm, each of these trustees has served as
a director/trustee of one or more of the funds in the INVESCO Complex for the
minimum five-year period required to be eligible to participate in the Defined
Benefit Deferred Compensation Plan.
(4)Mr. Chabris retired as a trustee effective September 30, 1998.
(5)Total as a percentage of the Value Trust's net assets as of August 31,
1998.
(6)Total as a percentage of the net assets of the INVESCO Complex as of
December 31, 1997.
Messrs. Brady and Williamson, 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
directors fees or other compensation from the Fund or other funds in the INVESCO
Complex for their services as trustees.
The boards of directors/trustees of the mutual funds managed by INVESCO,
INVESCO Treasurer's Series Funds, Inc. 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 termination of service as a
director (normally 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
and annualized board meeting fees payable by the funds to the qualified director
at the time of his or her retirement (the "basic retainer"). Commencing with any
such qualified 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 50% of the basic retainer and annualized board meeting
fees. 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 her or to his or her beneficiary or
estate. If a qualified director becomes disabled or dies either prior to age 72
or during his or 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 or her beneficiary or estate. The
plan is administered by a committee of three director who are also participants
in the plan and one director who is not a plan participant. The cost of the plan
will be allocated among the INVESCO, INVESCO Treasurer's Series Fund's, Inc. in
a manner determined to be fair and equitable by the committee. The Fund began
making payments to Mr. Chabris on October 1, 1998. The Fund has no stock options
or other pension or retirement plans for management or other personnel and pays
22
<PAGE>
no salary or compensation to any of its officers.
The independent directors have contributed to a deferred compensation plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of selected INVESCO
Funds. The deferred amounts are being invested in the shares of certain of the
INVESCO and INVESCO Treasurer's Series funds. Each independent director is,
therefore, an indirect owner of shares of each such INVESCO and INVESCO
Treasurer's Series Fund's, Inc. fund.
The Company has an audit committee that is comprised of four of the
directors who are not interested persons of the Fund. The committee meets
periodically with the Fund's independent accountants and officers to review
accounting principles used by the Fund, the adequacy of internal controls, the
responsibilities and fees of the independent accountants, and other matters.
The Company has a management liaison committee which meets quarterly with
various management personnel of INVESCO in order (a) to facilitate better
understanding of management and operations of the Company, and (b) to review
legal and operational matters which have been assigned to the committee by the
Board, in furtherance of the Board's overall duty of supervision.
The Company has a soft dollar brokerage committee. The committee meets
periodically to review soft dollar brokerage transactions by the Fund, and to
review policies and procedures of the Fund's adviser with respect to soft dollar
brokerage transactions. It reports on these matters to the Board.
The Company has a derivatives committee. The committee meets periodically
to review derivatives investments made by the Fund. It monitors derivatives
usage by the Fund and the procedures utilized by the Fund's adviser to ensure
that the use of such instruments follows the policies on such instruments
adopted by the Board. It reports on these matters to the Board.
HOW SHARES CAN BE PURCHASED
- ---------------------------
Shares of the Fund are sold on a continuous basis at the net asset value
per share of the Fund next calculated after receipt of a purchase order in good
form. The net asset value per share of the Fund is computed once each day that
the New York Stock Exchange is open as of the close of regular trading on that
Exchange, but may also be computed at other times. See "How Shares Are Valued."
The Fund has authorized one or more brokers to accept purchase orders on
the Fund's behalf. Such brokers are authorized to designate other intermediaries
to accept purchase orders on the Fund's behalf. The Fund will be deemed to have
received a purchase order when an authorized broker, or, if applicable, a
broker's authorized designee, accepts the order. A purchase order will be priced
23
<PAGE>
at a Fund's net asset value next calculated after the order has been accepted by
an authorized broker or the broker's authorized designee.
IDI acts as the Fund's distributor under a distribution agreement with the
Fund and bears all expenses, including the costs of printing and distributing of
prospectuses, incident to direct sales and distribution of Fund shares on a
no-load basis.
DISTRIBUTION PLAN. As described in the Prospectuses, the Fund has adopted
a Plan and Agreement of Distribution (the "Plan") pursuant to Rule 12b-1 under
the 1940 Act. The Plan was approved February 3, 1998 at meetings called for such
purpose by a majority of the directors of the Fund, including a majority of the
directors who neither are "interested persons" of the Fund nor have any
financial interest in the operation of the Plan ("independent trustees"). The
Plan was approved by shareholders of the Fund on May 6, 1998.
The Plan provides that the Fund may make monthly payments to IDI of
amounts computed at an annual rate no greater than 0.25% of its new sales of
shares, exchanges into the Fund and reinvestments of dividends and capital gain
distributions added on or after June 1, 1998 to compensate IDI for expenses
incurred by it in connection with the distribution of the Fund's shares to
investors.
Payment by the Fund under the Plan, for any month, may only be made to
compensate IDI for permissible activities engaged in and services provided by
IDI during the rolling 12-month period in which that month falls. All
distribution expenses paid by the Fund for the fiscal year ended August 31, 1998
were paid to IDI. For the fiscal year ended August 31, 1998, Total Return Fund
$46,730 in distribution expenses, prior to the voluntary absorption of certain
Fund expenses by INVESCO. In addition, as of August 31, 1998, the Fund incurred
$54,925 of additional distribution accruals which will be paid during the fiscal
year ended August 31, 1999. As noted in the Prospectuses, one type of
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 Fund. The Fund is authorized by the Plan to use its assets to
finance the payments made to obtain those services. Payments will be made by IDI
to broker-dealers who sell shares of the Fund and may be made to banks, savings
and loan associations and other depository institutions. Although the
Glass-Steagall Act limits the ability of certain banks to act as underwriters of
mutual fund shares, the Fund does not believe that these limitations would
affect the ability of such banks to enter into arrangements with IDI, but can
give no assurance in this regard. However, to the extent it is determined
otherwise in the future, arrangements with banks might have to be modified or
terminated, and, in that case, the size of the Fund possibly could decrease to
the extent that the banks would no longer invest customer assets. Neither the
Fund nor its investment adviser will give any preference to banks or other
depository institutions which enter into such arrangements when selecting
investments to be made by the Fund.
For the fiscal year ended August 31, 1998, allocations of 12b-1 amounts
paid by the Fund for the following categories were: advertising -- $3,231; sales
literature, printing and postage -- $6,483; direct mail -- $1,079; public
24
<PAGE>
relations/promotion -- $12,038; compensation to securities dealers and other
organizations -- $0; marketing personnel -- $23,899.
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 Fund's Transfer Agent computer processable tapes of the Fund's transactions
by customers, serving as the primary source of information to customers in
answering questions concerning the Fund, and assisting in other customer
transactions with the Fund.
The Plan provides that it shall continue in effect for so long as such
continuance is approved at least annually by the vote of the Board cast in
person at a meeting called for the purpose of voting on such continuance. The
Plan can also be terminated at any time, without penalty, if a majority of the
independent directors, or shareholders vote to terminate the Plan. The Fund may,
in its absolute discretion, suspend, discontinue or limit the offering of its
shares at any time. In determining whether any such action should be taken, the
Board intends to consider all relevant factors including, without limitation,
the size of the Fund, the investment climate for the Fund, general market
conditions, and the volume of sales and redemptions of the Fund's shares. The
Plan may continue in effect and payments may be made under the Plan following
any such temporary suspension or limitation of the offering of the Fund's
shares; however, none the Fund is not contractually obligated to continue the
Plan for any particular period of time. Suspension of the offering of the Fund's
shares would not, of course, affect a shareholder's ability to redeem his
shares. So long as the Plan is in effect, the selection and nomination of
persons to serve as independent trustees of the Fund 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 the
Fund's payments thereunder without approval of the shareholders, and all
material amendments to the Plan must be approved by the Board, including a
majority of the independent directors. Under the agreement implementing the
Plan, IDI or the Fund, the latter by vote of a majority of the independent
directors, or of the holders of a majority of the Fund's outstanding voting
securities, may terminate such agreement penalty upon 30 days' written notice to
the other party. No further payments will be made by the Fund under the Plan in
the event of its termination.
To the extent that the Plan constitutes a plan of distribution adopted
pursuant to Rule 12b-1 under the 1940 Act, it shall remain in effect as such, so
as to authorize the use of the 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, the Fund's obligation to make payments to IDI shall
terminate automatically, in the event of such "assignment," in which case the
Fund may continue to make payments pursuant to the Plan to IDI or another
organization only upon the approval of new arrangements, which may or may not be
with IDI, regarding the use of the amounts authorized to be paid by it under the
Plan, by the directors, including a majority of the independent directors, by a
vote cast in person at a meeting called for such purpose.
25
<PAGE>
Information regarding the services rendered under the Plan and the amounts
paid therefor by the Fund is provided to, and reviewed by, the directors on a
quarterly basis. On an annual basis, the directors consider the continued
appropriateness of the Plan and 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 Fund who have a direct or indirect
financial interest in the operation of the Plan are the officers and directors
of the Fund listed herein under the section entitled "The Fund And Its
Management--Officers and Directors of the Trust" who are also officers either of
IDI or companies affiliated with IDI. The benefits which the Fund believes will
be reasonably likely to flow to it and its 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 Fund;
(2) The sale of additional shares reduces the likelihood that redemption
of shares will require the liquidation of securities of the Fund in
amounts and at times that are disadvantageous for investment
purposes;
(3) The positive effect which increased Fund assets will have on its
revenues could allow INVESCO and its affiliated companies:
(a) To have greater resources to make the financial commitments
necessary to improve the quality and level of the 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 its affiliated companies (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 the Fund's Prospectus entitled "How Shares
Can Be Purchased," the net asset value of shares of the Fund is computed once
each day that the New York Stock Exchange is open as of the close of regular
trading on that Exchange (generally 4:00 p.m., New York time) and applies to
26
<PAGE>
purchase and redemption orders received prior to that time. Net asset value per
share is also computed on any other day on which there is a sufficient degree of
trading in the securities held by the Fund that the current net asset value per
share might be materially affected by changes in the value of the securities
held, but only if on such day the Fund receives a request to purchase or redeem
shares. Net asset value per share is not calculated on days the New York Stock
Exchange is closed, such as federal holidays including New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas.
The net asset value per share 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 or other assets will be valued at their fair values as determined in
good faith by the Fund's Board or pursuant to procedures adopted by the Board.
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 Fund's Board reviews the methods used by such service to
assure itself that securities will be valued at their fair values. The Fund's
board 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 value of securities and other assets held by the Fund used in
computing net asset value generally is determined as of the time regular trading
in such securities or assets is completed each day. Because regular trading in
most foreign securities markets is completed simultaneously with, or prior to,
the close of regular trading on the New York Stock Exchange, closing prices for
foreign securities usually are available for purposes of computing the Fund's
net asset value. However, in the event that the closing price of a foreign
security is not available in time to calculate the net asset value on a
particular day, the Fund's Board 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.
27
<PAGE>
FUND PERFORMANCE
- ----------------
As discussed in the section of the Fund's Prospectus entitled "Performance
Data," the Fund advertises its total return performance. The average annual
total return as of August 31, 1998 for shares of the Fund for the periods listed
below were as follows:
Portfolio 1 Year 5 Years 10 Years
- --------- ------ ------- --------
INVESCO Total Return Fund (-1.06%) 14.60% 13.71%
Average annual total return performance for the Fund reflects the
deduction of a proportional share of Fund expenses allocated to the Fund for the
periods indicated. In each case, average annual total return was computed by
finding the average annual compounded rates of return that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:
n
P(1 + T) = ERV
where: P = initial payment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of initial payment
The average annual total return performance figures shown above were
determined by solving the above formula for "T" for each time period indicated.
In conjunction with performance reports, comparative data between the
Fund's performance for a given period and other types of investment vehicles,
including certificates of deposit, may be provided to prospective investors and
shareholders.
From time to time, evaluations of performance made by independent sources
may also be used in advertisements, sales literature or shareholder reports,
including reprints of, or selections from, editorials or articles about the
Fund. Sources for Fund performance information and articles about the Fund
include, but are not limited to, the following:
AMERICAN ASSOCIATION OF INDIVIDUAL INVESTORS' JOURNAL
BANXQUOTE
BARRON'S
BUSINESS WEEK
CDA INVESTMENT TECHNOLOGIES
CNBC
CNN
CONSUMER DIGEST
FINANCIAL TIMES
FINANCIAL WORLD
FORBES
FORTUNE
28
<PAGE>
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 TRUST
- ------------------------------
PERIODIC WITHDRAWAL PLAN. As described in the section of the Fund's
Prospectus entitled "Services Provided by the Fund," the Fund offers a Periodic
Withdrawal Plan. All dividends and other distributions on shares owned by
shareholders participating in this Plan are reinvested in additional shares.
Since withdrawal payments represent the proceeds from sales of shares, the
amount of shareholders' investments in the Fund will be reduced to the extent
that withdrawal payments exceed dividends and other distributions paid and
reinvested. Any gain or loss on such redemptions must be reported for tax
purposes. In each case, shares will be redeemed at the close of business on or
about the 20th day of each month preceding payment and payments will be mailed
within five business days thereafter.
The Periodic Withdrawal Plan involves the use of principal and is not a
guaranteed annuity. Payments under such a Plan do not represent income or a
return on investment.
Participation in the 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 POLICY. As discussed in the section of the Fund's Prospectus
entitled "Services Provided by the Fund," the Fund offers shareholders the
ability to exchange shares of the Fund for shares of certain other mutual funds
29
<PAGE>
advised by INVESCO. Exchange requests may be made either by telephone or by
written request to INVESCO using the telephone number or address on the cover of
this Statement of Additional Information. Exchanges made by telephone must be in
an amount of at least $250, if the exchange is being made into an existing
account of one of the INVESCO funds. All exchanges that establish a NEW account
must meet the fund's applicable initial minimum 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 ability is not an option or right to purchase securities and is
not available in any state or other jurisdiction where the shares of the mutual
fund into which transfer is to be made are not qualified for sale, or when the
net asset value of the shares presented for exchange is less than the minimum
dollar purchase required by the appropriate prospectus.
TAX-DEFERRED RETIREMENT PLANS
- -----------------------------
As described in the section of the Fund's Prospectus entitled "Services
Provided by the Fund," shares of the Fund may be purchased as the investment
medium for various tax-deferred retirement plans. Persons who request
information regarding these plans from INVESCO will be provided with prototype
documents and other supporting information regarding the type of plan requested.
Each of these plans involves a long-term commitment of assets and is subject to
possible regulatory penalties for excess contributions, premature distributions
or for insufficient distributions after age 70-1/2. The legal and tax
implications may vary according to the circumstances of the individual investor.
Therefore, the investor is urged to consult with an attorney or tax adviser
prior to the establishment of such a plan.
HOW TO REDEEM SHARES
- --------------------
Normally, payments for shares redeemed will be mailed within seven days
following receipt of the required documents as described in the section of the
Fund's Prospectus entitled "How To Redeem Shares." The right of redemption may
be suspended and payment postponed when: (a) the New York Stock Exchange is
closed for other than customary weekends and holidays; (b) trading on that
exchange is restricted; (c) an emergency exists as a result of which disposal by
the Fund of securities owned by it is not reasonably practicable, or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets; or (d) the Securities and Exchange Commission ("SEC") by order so
permits.
The Fund has authorized one or more brokers to accept redemption orders on
the Fund's behalf. Such brokers are authorized to designate other intermediaries
to accept redemption orders on the Fund's behalf. The Fund will be deemed to
have received a redemption order when an authorized broker, or, if applicable, a
broker's authorized designee, accepts the order. A redemption order will be
priced at the Fund's net asset value next calculated after the order has been
accepted by an authorized broker or the broker's authorized designee.
It is possible that in the future conditions may exist which would, in the
opinion of the Fund's investment adviser, make it undesirable for the Fund to
pay for redeemed shares in cash. In such cases, the Fund's investment adviser
30
<PAGE>
may authorize payment to be made in portfolio securities or other property of
the Fund. However, the Fund is obligated under the 1940 Act to redeem for cash
all shares presented for redemption by any one shareholder having a value up to
$250,000 (or 1% of the applicable Fund's net assets if that is less) in any
90-day period. Securities delivered in payment of redemptions are selected
entirely by the Fund's 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, OTHER DISTRIBUTIONS AND TAXES
- ----------------------------------------
The Fund intends to continue to conduct its business and satisfy the
applicable diversification of assets and source of income requirements to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). The Fund so qualified for the
taxable year ended August 31, 1998, and intends to continue to qualify during
its current taxable year. As a result, it is anticipated that the Fund will pay
no federal income or excise taxes and that the Fund will be accorded conduit or
"pass through" treatment for federal income tax purposes.
Dividends paid by the Fund from net investment income as well as
distributions of net realized short-term capital gains and net realized gains
from certain foreign currency transactions are, for federal income tax purposes,
taxable as ordinary income to shareholders. After the end of each calendar year,
the Fund sends shareholders information regarding the amount and character of
dividends paid in the year.
Distributions by the Fund of net capital gain (the excess of net long-term
capital gain over net short-term capital loss) are, for federal income tax
purposes, taxable to the shareholder as long-term capital gains regardless of
how long a shareholder has held shares of the Fund. During 1997, the Taxpayer
Relief Act established a new maximum capital gains tax rate of 20%. Depending on
the holding period of the asset giving rise to the gain, a capital gain was
taxable at a maximum rate of either 20% or 28%. Beginning January 1, 1998, all
long-term gains realized on the sale of securities held for more than 12 months
will be taxable at a maximum rate of 20%. In addition, legislation signed in
October 1998 provides that all capital gain distributions from a mutual fund
paid to shareholders during 1998 will be taxed at a maximum rate of 20%.
Accordingly, all capital gain distributions paid in 1998 will be taxable at a
maximum rate of 20%. Note that the rate of capital gains tax is dependent on the
shareholder's marginal tax rate and may be lower than the above rates. At the
end of each year, information regarding the tax status of dividends and other
distributions is provided to shareholders. Shareholders should consult their tax
advisers as to the effect of distributions by the Fund.
All dividends and other distributions are regarded as taxable to the
investor, regardless of whether such dividends and distributions are reinvested
in additional shares of the Fund or another Fund in the INVESCO group. The net
asset value of Fund shares reflects accrued net investment income and
undistributed realized capital and foreign currency gains; therefore, when a
31
<PAGE>
distribution is made, the net asset value is reduced by the amount of the
distribution. If the net asset value of Fund shares were 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. If shares are purchased shortly before a distribution, the
full price for the shares will be paid and some portion of the price may then be
returned to the shareholder as a taxable dividend or capital gain. However, the
net asset value per share will be reduced by the amount of the distribution,
which would reduce any gain (or increase any loss) for tax purposes on any
subsequent redemption of shares.
INVESCO may provide Fund shareholders with information concerning the
average cost basis of their shares in order to help them prepare their tax
returns. This information is intended as a convenience to shareholders and will
not be reported to the Internal Revenue Service (the "IRS'). The IRS permits the
use of several methods to determine the cost basis of mutual fund shares. The
cost basis information provided by INVESCO will be computed using the
single-category average cost method, although neither INVESCO nor the Fund
recommends any particular method of determining cost basis. Other methods may
result in different tax consequences. If a shareholder has reported gains or
losses for the Fund in past years, the shareholder must continue to use the cost
basis method previously used unless the shareholder applies to the IRS for
permission to change the method.
If Fund shares are sold at a loss after being held for six months or less,
the loss will be treated as a long-term, instead of short-term, capital loss to
the extent of any capital gain distributions received on those shares.
The Fund will be subject to a non-deductible 4% excise tax to the extent
it fails to distribute by the end of any calendar year substantially all of it
ordinary income for that year and net capital gains for the one-year period
ending on October 31 of that year, plus certain other amounts.
Dividends and interest received by the Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not imposes taxes on capital gains in
respect of investments by foreign investors. Foreign taxes withheld will be
treated as an expense of the Fund.
The Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation (other than a controlled 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
32
<PAGE>
investment company taxable income and, accordingly, will not be taxable to the
Fund to the extent that income is distributed to its shareholders.
The Fund may elect to "mark-to-market" its stock in any PFIC.
Marking-to-market, in this context, means including in ordinary income for each
taxable year the excess, if any, of the fair market value of the PFIC stock over
the Fund's adjusted tax basis therein as of the end of that year. Once the
election has been made, the Fund also will be allowed to deduct from ordinary
income the excess, if any, of its adjusted basis in PFIC stock over the fair
market value thereof as of the end of the year, but only to the extent of any
net mark-to-market gains with respect to that PFIC stock included by the Fund
for prior taxable years beginning after December 31, 1997. The Fund's adjusted
tax basis in each PFIC's stock with respect to which it makes this election will
be adjusted to reflect the amounts of income included and deductions taken under
the election.
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
the Fund accrues interest, dividends or other receivables or accrues expenses or
other liabilities denominated in a foreign currency and the time the Fund
actually collects the receivables or pays the liabilities, generally will be
treated as ordinary income or loss. These gains or losses may increase or
decrease the amount of the Fund's investment company taxable income to be
distributed to its shareholders.
Shareholders should consult their own tax advisers regarding specific
questions as to federal, state and local taxes. Dividends and other
distributions generally will be subject to applicable state and local taxes.
Qualification as a regulated investment company under the Code for federal
income tax purposes does not entail government supervision of management or
investment policies.
INVESTMENT PRACTICES
- --------------------
PORTFOLIO TURNOVER. There are no fixed limitations regarding portfolio
turnover for Fund. Brokerage costs to the Fund are commensurate with the rate of
portfolio activity. Portfolio turnover rates for the fiscal years ended August
31, 1998, 1997 and 1996, were as follows:
FUND 1998 1997 1996
- ---- ---- ---- ----
INVESCO Total Return 17% 4% 10%
In computing the portfolio turnover rate, all investments with maturities
or expiration dates at the time of acquisition of one year or less are excluded.
Subject to this exclusion, the turnover rate is calculated by dividing (a) the
lesser of purchases or sales of portfolio securities for the fiscal year by (b)
the monthly average of the value of portfolio securities owned by the Fund
during the fiscal year.
33
<PAGE>
PLACEMENT OF PORTFOLIO BROKERAGE. INVESCO, as the Fund's investment
adviser, and ICM, as sub-adviser of the Fund under the direct supervision of
INVESCO, place orders for the purchase and sale of securities with brokers and
dealers based upon INVESCO's or ICM's evaluation of such brokers' and dealers'
financial responsibility subject to their ability to effect transactions at the
best available prices. INVESCO or ICM evaluates the overall reasonableness of
brokerage commissions paid by reviewing the quality of executions obtained on
the Fund's portfolio transactions, viewed in terms of the size of transactions,
prevailing market conditions in the security purchased or sold, and general
economic and market conditions. In seeking to ensure that the commissions
charged the Fund are consistent with prevailing and reasonable commissions,
INVESCO or ICM also endeavors to monitor brokerage industry practices with
regard to the commissions charged by brokers and dealers on transactions
effected for other comparable institutional investors. While INVESCO or ICM
seeks reasonably competitive rates, the Fund does not necessarily pay the lowest
commission or spread available.
Consistent with the standard of seeking to obtain the best execution on
portfolio transactions, INVESCO or ICM may select brokers that provide research
services to effect such transactions. Research services consist of statistical
and analytical reports relating to issuers, industries, securities and economic
factors and trends, which may be of assistance or value to INVESCO and ICM in
making informed investment decisions. Research services prepared and furnished
by brokers through which the Fund effects securities transactions may be used by
INVESCO or ICM in servicing all of their respective accounts and not all such
services may be used by INVESCO or ICM in connection with the Fund.
In recognition of the value of the above-described brokerage and research
services provided by certain brokers, INVESCO or ICM, consistent with the
standard of seeking to obtain the best execution of portfolio transactions, may
place orders with such brokers for the execution of Fund transactions on which
the commissions are in excess of those which other brokers might have charged
for effecting the same transactions.
Portfolio transactions may be effected through qualified brokers and
dealers that recommend the Fund to their clients, or that 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 Fund's adviser or sub-adviser may consider the sale of Fund
shares by a broker or dealer in selecting among qualified brokers and dealers.
Certain financial institutions (including brokers who may sell shares of
the Fund, or affiliates of such brokers) are paid a fee (the "Services Fee") for
recordkeeping, shareholder communications and other services provided by the
brokers to investors purchasing shares of the Fund through no transaction fee
programs ("NTF Programs") offered by the financial institution or its affiliated
broker (an "NTF Program Sponsor"). The Services Fee is based on the average
daily value of the investments in the Fund made in the name of such NTF Program
Sponsor and held in omnibus accounts maintained on behalf of investors
participating in the NTF Program. With respect to certain NTF Programs, the
directors of the Fund have authorized the Fund to apply dollars generated from
the Fund's Plan and Agreement of Distribution pursuant to Rule 12b-1 under the
1940 Act (the "Plan") to pay the entire Services Fee, subject to the maximum
34
<PAGE>
Rule 12b-1 fee permitted by the Plan. With respect to other NTF Programs, the
Fund's directors have authorized the Fund to pay transfer agency fees to INVESCO
based on the number of investors who have beneficial interests in the NTF
Program Sponsor's omnibus accounts in the Fund. INVESCO, in turn, pays these
transfer agency fees to the NTF Program Sponsor as a sub-transfer agency or
recordkeeping fee in payment of all or a portion of the Services Fee. In the
event that the sub-transfer agency or recordkeeping fee is insufficient to pay
all of the Services Fee with respect to these NTF Programs, the directors of the
Fund have authorized the Fund to apply dollars generated from the Plan to pay
the remainder of the Services Fee, subject to the maximum Rule 12b-1 fee
permitted by the Plan. INVESCO itself pays the portion of the Fund's Services
Fee, if any, that exceeds the sum of the sub-transfer agency or recordkeeping
fee and Rule 12b-1 fee. The Fund's directors have further authorized INVESCO to
place a portion of the Fund's brokerage transactions with certain NTF Program
Sponsors or their affiliated brokers, if INVESCO reasonably believes that, in
effecting the Fund's transactions in portfolio securities, the broker is able to
provide the best execution of orders at the most favorable prices. A portion of
the commissions earned by such a broker from executing portfolio transactions on
behalf of the Fund may be credited by the NTF Program Sponsor against its
Services Fee. Such credit shall be applied first against any sub-transfer agency
or recordkeeping fee payable with respect to the Fund, and second against any
Rule 12b-1 fees used to pay a portion of the Services Fee, on a basis which has
resulted from negotiations between INVESCO or IDI and the NTF Program Sponsor.
Thus, the Fund pays sub-transfer agency or recordkeeping fees to the NTF Program
Sponsor in payment of the Services Fee only to the extent that such fees are not
offset by a Fund's credits. In the event that the transfer agency fee paid by
the Fund to INVESCO with respect to investors who have beneficial interests in a
particular NTF Program Sponsor's omnibus accounts in the Fund exceeds the
Services Fee applicable to the Fund, after application of credits, INVESCO may
carry forward the excess and apply it to future Services Fees payable to that
NTF Program Sponsor with respect to the Fund. The amount of excess transfer
agency fees carried forward will be reviewed for possible adjustment by INVESCO
prior to each fiscal year-end of the Fund. The Fund's board has also authorized
the Fund to pay to IDI the full Rule 12b-1 fees contemplated by the Plan to
compensate IDI for expenses incurred by IDI in engaging in the activities and
providing the services on behalf of the Fund contemplated by the Plan, subject
to the maximum Rule 12b-1 fee permitted by the Plan, notwithstanding that
credits have been applied to reduce the portion of the 12b-1 fee that would have
been used to compensate IDI for payments to such NTF Program Sponsor absent such
credits.
The aggregate dollar amount of brokerage commissions paid by Total Return
Fund for the fiscal year ended August 31, 1998 were $330,263. For the fiscal
year ended August 31, 1998 brokers providing research services received $0 in
commissions on portfolio transactions effected for the Fund. Neither the Fund,
INVESCO, nor ICM paid any compensation to brokers for the sale of shares of the
Fund during the fiscal year ended August 31, 1998.
At August 31, 1998, the Fund held securities of their regular brokers or
dealers, or their parents, as follows:
35
<PAGE>
Value of
Securities at
Fund Broker or Dealer August 31, 1998
- ---- ---------------- ---------------
INVESCO Total Return State Street Bank 87,853,000
Fund
Neither INVESCO nor ICM receive any brokerage commissions on portfolio
transactions effected on behalf of the Fund, and there is no affiliation between
INVESCO, ICM, or any person affiliated with INVESCO, ICM, or the Fund and any
broker or dealer that executes transactions for the Fund.
ADDITIONAL INFORMATION
- ----------------------
COMMON STOCK. The Company has one billion six hundred million authorized
shares of common stock with a par value of $1.00 per share. All shares are of
one class with equal rights as to voting, dividends and liquidation. All shares
issued and outstanding are, and all shares offered hereby, when issued, will be,
fully paid and nonassessable. Shares have no preemptive rights and are freely
transferable on the books of the Fund.
Fund shares have noncumulative voting rights, which means that the holders
of a majority of the shares voting for the election of directors of the Fund can
elect 100% of the directors if they choose to do so. In such event, the holders
of the remaining shares voting for the election of directors will not be able to
elect any person or persons to the board of directors. After they have been
elected by shareholders, the directors will continue to serve until their
successors are elected and have qualified or they are removed from office, in
either case by a shareholder vote, or until death, resignation, or retirement.
Directors may appoint their own successors, provided that always at least a
majority of the directors have been elected by the Fund's shareholders. It is
the intention of the Fund not to hold annual meetings of shareholders. The
directors may 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 April 30, 1999, the following entities held
more than 5% of the Fund's outstanding equity securities.
Name and Address Percent
of Beneficial Owner Number of Shares of Class
- ------------------- ---------------- ---------
Charles Schwab & Co. Inc. 20,501,786.1460 19.63%
Special Custody Acct.
for the Exclusive Benefit
of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
36
<PAGE>
Connecticut General Life Ins. 12,884,016.3210 12.34%
c/o Liz Pezda M-110
P.O. Box 2975 H 19B
Hartford, CT 06104-2975
Bankers Trust Company 7,414,073.3070 7.10%
Siemens Savings Plan
100 Plaza One Ste M53048
Jersey City, NJ 07311-3999
FII0C Agent 5,903,792.6530 5.65%
Employee Benefit Plans
100 Magellan Way KWIC
Covington, KY 41015-1987
INDEPENDENT ACCOUNTANTS. PricewaterhouseCoopers LLP, 950 Seventeenth
Street, Denver, Colorado, has been selected as the independent accountants of
the Fund. The independent accountants are responsible for auditing the financial
statements of the Fund.
CUSTODIAN. State Street Bank and Trust Company, P.O. Box 351, Boston,
Massachusetts, has been designated as the custodian of the cash and investment
securities of the Fund. The bank is responsible for, among other things, receipt
and delivery of the Fund's investment securities in accordance with procedures
and conditions specified in the custody agreement. Under its contract with the
Fund, the custodian is authorized to establish separate accounts in foreign
countries and to cause foreign securities owned by the Fund to be held outside
the United States in branches of U.S. banks and, to the extent permitted by
applicable regulations, in certain foreign banks and securities depositories.
TRANSFER AGENT. INVESCO, 7800 E. Union Avenue, Denver, Colorado 80237,
acts as registrar, dividend disbursing agent, and transfer agent for the Fund
pursuant to the Transfer Agency Agreement described in "The Fund And Its
Management." Such services include the issuance, cancellation and transfer of
shares of the Fund, and the maintenance of records regarding the ownership of
such shares.
REPORTS TO SHAREHOLDERS. The Fund's fiscal year ends on August 31. The
Fund distributes reports at least semiannually to its shareholders. Financial
statements regarding the Fund, audited by the independent accountants, are sent
to shareholders annually.
LEGAL COUNSEL. The firm of Kirkpatrick & Lockhart LLP, Washington, D.C.,
is legal counsel for the Fund. The firm of Moye, Giles, O'Keefe, Vermeire &
Gorrell, Denver, Colorado, acts as special counsel to the Fund.
FINANCIAL STATEMENTS. The Fund audited financial statements and the notes
thereto for the year ended August 31, 1998, and the report of
PricewaterhouseCoopers LLP with respect to such financial statements are
incorporated herein by reference from the Fund's Annual Report to Shareholders
for the fiscal year ended August 31, 1998.
PROSPECTUSES. The Fund will furnish, without charge, a copy of the
Prospectus upon request. Such requests should be made to the Fund at the mailing
address or telephone number set forth on the first page of this Statement of
Additional Information.
37
<PAGE>
REGISTRATION STATEMENT. This Statement of Additional Information and the
Prospectuses do not contain all of the information set forth in the Registration
Statement the Fund 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.
38
<PAGE>
APPENDIX A
BOND RATINGS. Description of Moody's and S&P's four highest bond rating
categories:
MOODY'S CORPORATE BOND RATINGS:
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risk appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes,
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
S&P'S Corporate Bond Ratings:
----------------------------
AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA - Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority of
instances they differ from AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB - Bonds rated BBB are regarded as having an adequate capability to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
39
<PAGE>
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
40
<PAGE>
APPENDIX B
DESCRIPTION OF FUTURES, OPTIONS AND FORWARD CONTRACTS
-----------------------------------------------------
OPTIONS ON SECURITIES
An option on a security provides the purchaser, or "holder," with the
right, but not the obligation, to purchase, in the case of a "call" option, or
sell, in the case of a "put" option, the security or securities underlying the
option, for a fixed exercise price up to a stated expiration date. The holder
pays a non-refundable purchase price for the option, known as the "premium." The
maximum amount of risk the purchaser of the option assumes is equal to the
premium plus related transaction costs, although the entire amount may be lost.
The risk of the seller, or "writer," however, is potentially unlimited, unless
the option is "covered," which is generally accomplished through the writer's
ownership of the underlying security, in the case of a call option, or the
writer's segregation of an amount of cash or securities equal to the exercise
price, in the case of a put option. If the writer's obligation is not so
covered, it is subject to the risk of the full change in value of the underlying
security from the time the option is written until exercise.
Upon exercise of the option, the holder is required to pay the purchase
price of the underlying security, in the case of a call option, or to deliver
the security in return for the purchase price, in the case of a put option.
Conversely, the writer is required to deliver the security, in the case of a
call option, or to purchase the security, in the case of a put option. Options
on securities which have been purchased or written may be closed out prior to
exercise or expiration by entering into an offsetting transaction on the
exchange on which the initial position was established, subject to the
availability of a liquid secondary market.
Options on securities are traded on national securities exchanges, such as
the Chicago Board of Options Exchange and the New York Stock Exchange, which are
regulated by the Securities and Exchange Commission. The Options Clearing
Corporation ("OCC") guarantees the performance of each party to an
exchange-traded option, by in effect taking the opposite side of each such
option. A holder or writer may engage in transactions in exchange-traded options
on securities and options on indices of securities only through a registered
broker/dealer which is a member of the exchange on which the option is traded.
An option position in an exchange-traded option may be closed out only on
an exchange which provides a secondary market for an option of the same series.
Although the Fund will generally purchase or write only those options for which
there appears to be an active secondary market, there is no assurance that a
liquid secondary market on an exchange will exist for any particular option at
any particular time. In such event it might not be possible to effect closing
transactions in a particular option with the result that the Fund would have to
exercise the option in order to realize any profit. This would result in the
Fund's 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 the Fund as
covered call option writer is unable to effect a closing purchase transaction in
a secondary market, unless the Fund is required to deliver the securities
41
<PAGE>
pursuant to the assignment of an exercise notice, it 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 OCC, 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 ("OTC")
through financial institutions dealing in such options as well as the underlying
instruments. OTC options are purchased from or sold (written) to dealers or
financial institutions which have entered into direct agreements with the Fund.
With OTC options, such variables as expiration date, exercise price and premium
will be agreed upon between the Fund and the transacting dealer, without the
intermediation of a third party such as the OCC. If the transacting dealer fails
to make or take delivery of the securities underlying an option it has written,
in accordance with the terms of that option as written, the Fund would lose the
premium paid for the option as well as any anticipated benefit of the
transaction. The Fund will engage in OTC option transactions only with primary
U.S. Government securities dealers recognized by the Federal Reserve Bank of New
York.
Futures Contracts
-----------------
A futures contract is a bilateral agreement providing for the purchase and
sale of a specified type and amount of a financial instrument or foreign
currency, or for the making and acceptance of a cash settlement, at a stated
time in the future, for a fixed price. By its terms, a futures contract provides
for a specified settlement date on which, in the case of the majority of
interest rate and foreign currency futures contracts, the fixed income
securities or currency underlying the contract are delivered by the seller and
paid for by the purchaser, or on which, in the case of stock index futures
contracts and certain interest rate and foreign currency futures contracts, the
difference between the price at which the contract was entered into and the
42
<PAGE>
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
the market."
A futures contract may be purchased or sold only on an exchange, known as
a "contract market," designated by the Commodity Futures Trading Commission for
the trading of such contract, and only through a registered futures commission
merchant which is a member of such contract market. A commission must be paid on
each completed purchase and sale transaction. The contract market clearing house
guarantees the performance of each party to a futures contract, by in effect
taking the opposite side of such contract. At any time prior to the expiration
of a futures contract, a trader may elect to close out its position by taking an
opposite position on the contract market on which the position was entered into,
subject to the availability of a secondary market, which will operate to
terminate the initial position. At that time, a final determination of variation
margin is made and any loss experienced by the trader is required to be paid to
the contract market clearing house while any profit due to the trader must be
delivered to it.
Interest rate futures contracts currently are traded on a variety of fixed
income securities, including long-term U.S. Treasury bonds, Treasury notes,
Government National Mortgage Association modified pass-through mortgage-backed
securities, U.S. Treasury bills, bank certificates of deposit and commercial
paper. In addition, interest rate futures contracts include contracts on indices
of municipal securities. Foreign currency futures contracts currently are traded
on the British pound, Canadian dollar, Japanese yen, Swiss franc, 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
43
<PAGE>
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.
44
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits:
(a) Financial Statements:
(1) Financial statements and schedules included in
Prospectus (Part A):
Financial Highlights for INVESCO Balanced Fund for the
period December 1, 1993 (commencement of investment
operations) through July 31, 1994 and the years ended
July 31, 1995, 1996, 1997 and 1998.
Financial Highlights for INVESCO Multi-Asset Allocation
Fund for the period December 1, 1993 (commencement of
operations) through July 31, 1994 and the years ended
July 31, 1995, 1996, 1997 and 1998.
Financial Highlights for INVESCO Industrial Income Fund
for the fiscal years ending June 30, 1989 through 1998
and unaudited Financial Highlights for the six months
ended December 31, 1998.
Financial Highlights for INVESCO Total Return Fund for
the fiscal years ended December 31, 1989 through 1992;
the eight-month fiscal period ended August 31, 1993 and
the fiscal years ending August 31, 1994 through 1998 and
unaudited Financial Highlights for the six-months ended
February 28, 1999.
(2) The following audited financial statements of INVESCO
Combination Stock & Bond Funds, Inc. and the notes
thereto for the fiscal year ended July 31, 1998, and the
report of PricewaterhouseCoopers LLP with respect to
such financial statements, are incorporated into the
Statement of Additional Information by reference from
the Company's Annual Report to Shareholders for the
fiscal year ended July 31, 1998; Statement of Investment
Securities as of July 31, 1998; Statement of Assets and
Liabilities as of July 31, 1998; Statement of Operations
for the year ended July 31, 1998; Statement of Changes
in Net Assets for each of the two years in the period
ended July 31, 1998; Financial Highlights for each of
the four years in the period ended July 31, 1998 and the
<PAGE>
period from commencement of the Funds' investment
operations (December 1, 1993) through July 31, 1994.
The following audited financial statements of the
INVESCO Industrial Income Fund and the notes thereto for
the fiscal year ended June 30, 1998, and the report of
PricewaterhouseCoopers LLP with respect to such
financial statements, are incorporated into the
Statement of Additional Information by reference from
INVESCO Industrial Income Fund, Inc.'s (now known as
INVESCO Industrial Income Fund) Annual Report to
Shareholders for the fiscal year ended June 30, 1998:
Statement of Investment Securities as of June 30, 1998;
Statement of Assets and Liabilities as of June 30, 1998;
Statement of Operations for the year ended June 30,
1998; Statement of Changes in Net Assets for each of the
two years in the period ended June 30, 1998; Financial
Highlights for each of the five years in the Period
ended June 30, 1998.
The following audited financial statements of the
INVESCO Total Return Fund, one of the portfolios
comprising INVESCO Value Trust, and the notes thereto
for the fiscal year ended August 31, 1998, and the
report of PricewaterhouseCoopers LLP with respect to
such financial statements, are incorporated into the
Statement of Additional Information by reference from
INVESCO Value Trusts's Annual Report to Shareholders for
the fiscal year ended August 31, 1998: Statement of
Investment Securities as of August 31, 1998; Statement
of Assets and Liabilities as of August 31, 1998;
Statement of Operations for the year ended August 31,
1998; Statement of Changes in Net Assets for each of the
two years in the period ended August 31, 1998; Financial
Highlights for each of the five years in the Period
ended August 31, 1998.
The following unaudited financial statements of INVESCO
Combination Stock & Bond Funds, Inc. and the notes
thereto for the six-month period ended January 31, 1999
are incorporated herein by reference to the SemiAnnual
Report to Shareholders dated January 31, 1999 and filed
March 23, 1999 with the Securities and Exchange
Commission on EDGAR Accession Number
0000913126-99-000003.
The following unaudited financial statements of INVESCO
Industrial Income Fund and the notes thereto for the
six-month period ended December 31, 1998 are
incorporated herein by reference to the SemiAnnual
Report to Shareholders dated December 31, 1998 and filed
on February 22, 1999 with the Securities and Exchange
Commission EDGAR Accession Number 0000035732-99-000001.
The following unaudited financial statements of INVESCO
Total Return Fund and the notes thereto for the
six-month period ended February 28, 1999 are
incorporated herein by reference to the SemiAnnual
Report to Shareholders dated February 28, 1999 and filed
on April 28, 1999 with the Securities and Exchange
Commission EDGAR Accession Number 0000789940-99-000006.
(3) Financial Statements and schedules included in Part C:
None. Schedules have been omitted as all information has
been presented in the financial statements.
<PAGE>
(b) Exhibits:
(1) Articles of Incorporation (Charter).(2)
(a) Articles of Amendment to Articles of Incorporation
filed September 10, 1998.(4)
(b) Articles of Amendment of Articles of Incorporation filed
May 24, 1999 (filed herewith).
(2) Bylaws.(2)
(3) Not applicable.
(4) Provisions of instruments defining the rights of holders of
Registrant's securities are contained in Articles III, IV, VI
and VIII of the Articles of Incorporation and Articles I, II,
V, VI, VII, VIII, IX and X of the Bylaws of the Registrant.
(5) (a) Form of Investment Advisory Agreement Between Registrant
and INVESCO Funds Group, Inc. dated February 28,
1997.(3)
(b) Form of Sub-Advisory Agreement Between INVESCO Funds
Group, Inc. and INVESCO Management & Research, Inc.
dated February 28, 1997.(3)
(6) (a) Form of General Distribution Agreement Between
Registrant and INVESCO Funds Group, Inc. dated
February 28, 1997.(3)
- 2 -
<PAGE>
(b) Form of General Distribution Agreement between
Registrant and INVESCO Distributors, Inc. dated
September 30, 1997.(3)
(7) (a) Form of Defined Benefit Deferred Compensation Plan for
Non-Interested Directors and Trustees.(3)
(b) Form of Amended Defined Benefit Deferred Compensation
Plan for Non-Interested Directors and Trustees.(4)
(8) Form of Custody Agreement Between Registrant and State
Street Bank and Trust Company dated October 20, 1993.(2)
(a) Form of Amendment to Custody Agreement dated October 25,
1995.(2)
(b) Form of Data Access Services Addendum dated May 19,
1997.(3)
(9) (a) Form of Transfer Agency Agreement Between Registrant
and INVESCO Funds Group, Inc. dated February 28,
1997.(3)
(b) Form of Administrative Services Agreement between
Registrant and INVESCO Funds Group, Inc. dated
February 28, 1997.(3)
(10) (a) Opinion and Consent of Counsel as to the legality of
the securities being registered, indicating whether they
will, when sold, be legally issued, fully paid and
nonassessable dated September 30, 1993.(3)
(b) Opinion and Consent of Counsel with respect to INVESCO
Industrial Income Fund as to the legality of the
securities being registered dated May 28, 1999 (filed
herewith).
(c) Opinion and Consent of Counsel with respect to INVESCO
Total Return Fund as to the legality of the securities
being registered dated May 28, 1999 (filed herewith).
(11) Consent of Independent Accountants (filed herewith).
(12) None.
(13) Not applicable.
(14) Copies of model plans used in the establishment of retirement
plans as follows:
- 3 -
<PAGE>
(a) Non-standardized Profit Sharing Plan (4);
(b) Non-standardized Money Purchase Pension Plan (4);
(c) Standardized Profit Sharing Plan Adoption Agreement (4);
(d) Standardized Money Purchase Pensions Plan (4);
(e) Non-standardized 401(k) Plan Adoption Agreement (4);
(f) Standardized 401(k) Paired Profit Sharing Plan (4);
(g) Standardized Simplified Profit Sharing Plan (4);
(h) Defined Contribution Master Plan & Trust Agreement (4).
(15) (a) Form of Plan and Agreement of Distribution pursuant
to Rule 12b-1 under the Investment Company Act of 1940
dated October 20, 1993.(2)
(b) Form of Amendment of Plan and Agreement of Distribution
pursuant to 12b-1 under the Investment Company Act of
1940 dated July 19, 1995.(3)
(c) Form of Amended Plan and Agreement of Distribution
adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940 dated January 1, 1997.(3)
(d) Form of Amended Plan and Agreement of Distribution
adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940 dated September 30, 1997.(3)
(16) (a) Schedule for computation of performance data for
INVESCO Balanced Fund.(3)
(b) Schedule for computation of performance data for INVESCO
Multi-Asset Allocation Fund.(3)
(c) Schedule for computation of performance data for INVESCO
Industrial Income Fund.(5)
(d) Schedule for computation of performance data for INVESCO
Total Return Fund.(6)
- 4 -
<PAGE>
(17) (a) Financial Data Schedule for the period ended July 31,
1998, for INVESCO Balanced Fund.(4)
(b) Financial Data Schedule for the period ended July 31,
1998, for INVESCO Multi-Asset Allocation Fund.(4)
(c) Financial Data Schedule for the period ended June 30,
1998 for INVESCO Industrial Income Fund.(7)
(d) Financial Data Schedule for the period ended July 31,
1998 for INVESCO Total Return Fund.(8)
(18) Not applicable.
- --------------------------
(1) Previously filed on EDGAR with the Registrant's Post-Effective Amendment No.
3 to the Registrant's Registration Statement on Form N-1A on September 21, 1995,
and incorporated herein by reference.
(2) Previously filed on EDGAR with Post-Effective Amendment No. 4 dated
November 27, 1996 and incorporated herein by reference.
(3) Previously filed on EDGAR with Post-Effective Amendment No. 5 dated
November 24, 1997 and incorporated herein by reference.
(4) Previously filed on EDGAR with Post-Effective Amendment No. 6 filed on
September 29, 1998 and incorporated herein by reference.
(5) Previously filed on EDGAR with Post-Effective Amendment No. 57 to the
Registration Statement of INVESCO Industrial Income Fund, Inc. on October 24,
1997 and incorporated herein by reference.
(6) Previously filed on EDGAR with Post-Effective Amendment No. 22 to the
Registration Statement of INVESCO Value Trust on December 23, 1997 and
incorporated herein by reference.
(7) Previously filed on EDGAR with Post Effective Amendment No. 59 to the
Registration Statement of INVESCO Industrial Income Fund, Inc. on October 27,
1998 and incorporated herein by reference.
(8) Previously filed on EDGAR with Post-Effective Amendment No. 23 to the
Registration Statement of INVESCO Value Trust on October 30, 1998 and
incorporated herein by reference.
- 5 -
<PAGE>
Item 25. Persons Controlled by or Under Common Control With Registrant
None.
Item 26. Number of Holders of Securities
Number of Record Holders as of
August 31, 1998
Title of Class
--------------
INVESCO Multi-Asset Allocation Fund 1,958
INVESCO Balanced Fund 16,846
Number of Record Holders as of
September 30, 1998
INVESCO Industrial Income Fund 193,122
INVESCO Total Return Fund 19,157
Item 27. Indemnification
Indemnification provisions for officers and directors of Registrant
are set forth in Article VII, Section 2 of the Articles of Incorporation and are
hereby incorporated by reference. See Item 24(b)(1) above. Under these Articles,
officers and directors will be indemnified to the fullest extent permitted to
directors by the Maryland General Corporation Law, subject only to such
limitations as may be required by the Investment Company Act of 1940, as
amended, and the rules thereunder. Under the Investment Company Act of 1940,
Fund directors and officers cannot be protected against liability to the Company
or its shareholders to which they would be subject because of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties of
their office. The Company also maintains liability insurance policies covering
its directors and officers.
Item 28. Business and other Connections of Investment Adviser
See "The Fund and Its Management" in the Prospectuses and "The Funds
and Their Management" in the Statement of Additional Information for information
regarding the business of the investment advisor, INVESCO.
Following are the names and principal occupations of each director
and officer of the investment adviser, INVESCO, and who, during the past two
fiscal years, have held positions with Institutional Trust Company d.b.a.
INVESCO Trust Company, an affiliate of INVESCO.
Name Position with Adviser Principal Occupation and
Company Affiliation
- ---------- --------------------- ------------------------
Dan J. Hesser Chairman and Director Chairman
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- 6 -
<PAGE>
Mark H. Williamson Officer & Director President & Chief
Executive Officer
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
William J. Galvin, Jr. Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Ronald L. Grooms Officer Senior Vice President &
Treasurer
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Richard W. Healey Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Daniel B. Leonard Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Charles P. Mayer Officer & Director Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Timothy J. Miller Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Donovan J. (Jerry) Paul Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- 7 -
<PAGE>
Glen A. Payne Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
John R. Schroer, II Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Ingeborg S. Cosby Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Elroy E. Frye, Jr. Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Linda J. Gieger Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Mark D. Greenberg Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Gerard F. Hallaren, Jr. Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Richard R. Hinderlie Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Thomas M. Hurley Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- 8 -
<PAGE>
Patricia F. Johnston Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
James F. Lummanick Officer Vice President &
Assistant General Counsel
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Thomas A. Mantone, Jr. Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Trent E. May Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Frederick R. (Fritz) Meyer Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Jeffrey G. Morris Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Laura M. Parsons Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Pamela J. Piro Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- 9 -
<PAGE>
Gary L. Rulh Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
John S. Segner Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Terri B. Smith Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Alan I. Watson Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Judy P. Wiese Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Ronald C. Lively Officer Senior Regional Vice
President
INVESCO Funds Group, Inc.
17406 Brown Road
Odessa, FL 33556
Scott E. Stapley Officer Senior Regional Vice
President
INVESCO Funds Group, Inc.
1615 Arch Bay Drive
Newport Beach, CA 94660
David B. McElroy Officer Regional Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Ryland K. Pruett, Jr. Officer Regional Vice President
INVESCO Funds Group, Inc.
2337 Mirow Place
Charlotte, NC 28270
- 10 -
<PAGE>
Thomas H. Scanlan Officer Regional Vice President
INVESCO Funds Group, Inc.
12028 Edgepark Court
Potomac, MD 20854
Michael D. Legoski Officer Assistant Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Stephen A. Moran Officer Assistant Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Donald R. Paddack Officer Assistant Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Kent T. Schmeckpeper Officer Assistant Vice President
Account Relationship
Manager
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Tane' T. Tyler Officer Assistant Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Jeraldine E. Kraus Officer Assistant Secretary
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Item 28. Principal Underwriters
(a) INVESCO Diversified Funds, Inc.
INVESCO Emerging Opportunity Funds, inc.
INVESCO Equity Funds, Inc.
INVESCO Income Funds, Inc.
- 11 -
<PAGE>
INVESCO Growth Fund, 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
INVESCO Variable Investment Funds, inc.
(b)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
- ------------------ --------------------- ---------------------
William J. Galvin, Jr. Senior Vice President & Assistant Secretary
7800 E. Union Avenue Assistant Secretary
Denver, CO 80237
Ronald L. Grooms Senior Vice President & Treasurer, Chief
7800 E. Union Avenue Treasurer Financial Officer, and
Denver, CO 80237 Chief Accounting Officer
Richard W. Healey Senior Vice President
7800 E. Union Avenue
Denver, CO 80237
Dan J. Hesser Chairman of the Board &
7800 E. Union Avenue Director
Denver, CO 80237
Charles P. Mayer Director
7800 E. Union Avenue
Denver, CO 80237
Glen A. Payne Senior Vice President, Secretary
7800 E. Union Avenue Secretary & General
Denver, CO 80237 Counsel
Judy P. Wiese Vice President & Assistant Treasurer
7800 E. Union Avenue Assistant Treasurer
Denver, CO 80237
Mark H. Williamson President, Chief President, Chief
7800 E. Union Avenue Executive Officer & Executive Officer &
Denver, CO 80237 Director Director
- 12 -
<PAGE>
(c) Not applicable.
Item 30. Location of Accounts and Records
Mark H. Williamson
7800 E. Union Avenue
Denver, CO 80237
Item 31. Management Services
Not applicable.
Item 32. Undertakings.
(a) The Registrant shall furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
(b) The Registrant hereby undertakes that the board of directors
will call a special shareholders meeting for the purpose of
voting on the question of removal of a director or directors
of the Company if requested to do so in writing by the holders
of at least 10% of the outstanding shares of the Company, and
to assist the shareholders in communicating with other
shareholders as required by the Investment Company Act of
1940.
- 13 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Fund certifies that it meets all the
requirements for effectiveness of this Registration Statement under Rule 485(b)
under the Securities Act and has duly caused this Post-Effective Amendment to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Denver, County of Denver, and State of Colorado, on the 28th day of May,
1999.
INVESCO Combination Stock & Bond Funds,
Inc.
(formerly, INVESCO Flexible Funds, Inc.,
formerly, INVESCO Multiple Asset Funds,
Inc.)
Attest:
/s/ Glen A. Payne /s/ Mark H. Williamson
- -------------------------- -----------------------------
Glen A. Payne, Secretary Mark H. Williamson, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
/s/ Mark H. Williamson */s/Lawrence H. Budner
- ------------------------------ --------------------------------
Mark H. Williamson, President, Lawrence H. Budner, Director
Director and Chief Executive Officer
*/s/ John W. McIntyre
/s/ Ronald L. Grooms --------------------------------
- ------------------------------ John W. McIntyre, Director
Ronald L. Grooms, Treasurer (Chief
Financial and Accounting Officer) */s/ Fred A. Deering
--------------------------------
Fred A. Deering, Director
*/s/Victor L. Andrews */s/Larry Soll
- ------------------------------ --------------------------------
Victor L. Andrews, Director Larry Soll, Director
*/s/Bob R. Baker */s/Kenneth T. King
- ------------------------------ --------------------------------
Bob R. Baker, Director Kenneth T. King, Director
*/s/Charles W. Brady
- --------------------------------
Charles W. Brady, Director
- 14 -
<PAGE>
*/s/Wendy L. Gramm
- ------------------------------
Wendy L. Gramm, Director
*By *By /s/Glen A. Payne
- ------------------------------ --------------------------------
Edward F. O'Keefe Glen A. Payne
Attorney in Fact Attorney in Fact
* Original Powers of Attorney authorizing Edward F. O'Keefe and Glen A. Payne,
and each of them, to execute this Post-Effective Amendment to the Registration
Statement of the Registrant on behalf of the above-named directors and officers
of the Registrant have been filed with the Securities and Exchange Commission on
October 4, 1993, November 24, 1993, September 20, 1995, November 27, 1996 and
November 24, 1997.
- 15 -
<PAGE>
Exhibit Index
(1) Articles of Incorporation (Charter).(2)
(a) Articles of Amendment to Articles of Incorporation
filed September 10, 1998.(4)
(b) Articles of Amendment of Articles of Incorporation filed
May 24, 1999 (filed herewith).
(2) Bylaws.(2)
(3) Not applicable.
(4) Provisions of instruments defining the rights of holders of
Registrant's securities are contained in Articles III, IV, VI
and VIII of the Articles of Incorporation and Articles I, II,
V, VI, VII, VIII, IX and X of the Bylaws of the Registrant.
(5) (a) Form of Investment Advisory Agreement Between Registrant
and INVESCO Funds Group, Inc. dated February 28,
1997.(3)
(b) Form of Sub-Advisory Agreement Between INVESCO Funds
Group, Inc. and INVESCO Management & Research, Inc.
dated February 28, 1997.(3)
(6) (a) Form of General Distribution Agreement Between
Registrant and INVESCO Funds Group, Inc. dated February
28, 1997.(3)
(b) Form of General Distribution Agreement between
Registrant and INVESCO Distributors, Inc. dated
September 30, 1997.(3)
(7) (a) Form of Defined Benefit Deferred Compensation Plan for
Non-Interested Directors and Trustees.(3)
(b) Form of Amended Defined Benefit Deferred Compensation
Plan for Non-Interested Directors and Trustees.(4)
(8) Form of Custody Agreement Between Registrant and State
Street Bank and Trust Company dated October 20, 1993.(2)
(a) Form of Amendment to Custody Agreement dated October 25,
1995.(2)
- 16 -
<PAGE>
(b) Form of Data Access Services Addendum dated May 19,
1997.(3)
(9) (a) Form of Transfer Agency Agreement Between Registrant and
INVESCO Funds Group, Inc. dated February 28, 1997.(3)
(b) Form of Administrative Services Agreement between
Registrant and INVESCO Funds Group, Inc. dated February
28, 1997.(3)
(10) (a) Opinion and Consent of Counsel as to the legality of the
securities being registered, indicating whether they
will, when sold, be legally issued, fully paid and
nonassessable dated September 30, 1993. (3)
(b) Opinion and Consent of Counsel with respect to INVESCO
Industrial Income Fund as to the legality of the
securities being registered dated May 28, 1999 (filed
herewith).
(c) Opinion and Consent of Counsel with respect to INVESCO
Total Return Fund as to the legality of the securities
being registered dated May 28, 1999 (filed herewith).
(11) Consent of Independent Accountants (filed herewith).
(12) None.
(13) Not applicable.
(14) Copies of model plans used in the establishment of retirement
plans as follows:
(a) Non-standardized Profit Sharing Plan (4);
(b) Non-standardized Money Purchase Pension Plan (4);
(c) Standardized Profit Sharing Plan Adoption Agreement (4);
(d) Standardized Money Purchase Pensions Plan (4);
(e) Non-standardized 401(k) Plan Adoption Agreement (4);
(f) Standardized 401(k) Paired Profit Sharing Plan (4);
(g) Standardized Simplified Profit Sharing Plan (4);
(h) Defined Contribution Master Plan & Trust Agreement (4).
- 17 -
<PAGE>
(15) (a) Form of Plan and Agreement of Distribution pursuant to
Rule 12b-1 under the Investment Company Act of 1940
dated October 20, 1993.(2)
(b) Form of Amendment of Plan and Agreement of Distribution
pursuant to 12b-1 under the Investment Company Act of
1940 dated July 19, 1995.(3)
(c) Form of Amended Plan and Agreement of Distribution
adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940 dated January 1, 1997.(3)
(d) Form of Amended Plan and Agreement of Distribution
adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940 dated September 30, 1997.(3)
(16) (a) Schedule for computation of performance data for INVESCO
Balanced Fund.(3)
(b) Schedule for computation of performance data for INVESCO
Multi-Asset Allocation Fund.(3)
(c) Schedule for computation of performance data for INVESCO
Industrial Income Fund.(5)
(d) Schedule for computation of performance data for INVESCO
Total Return Fund.(6)
(17) (a) Financial Data Schedule for the period ended July 31,
1998, for INVESCO Balanced Fund.(4)
(b) Financial Data Schedule for the period ended July 31,
1998, for INVESCO Multi-Asset Allocation Fund.(4)
(c) Financial Data Schedule for the period ended June 30,
1998 for INVESCO Industrial Income Fund.(7)
(d) Financial Data Schedule for the period ended July 31,
1998 for INVESCO Total Return Fund.(8)
(18) Not applicable.
- --------------------------
- 18 -
<PAGE>
(1) Previously filed on EDGAR with the Registrant's Post-Effective Amendment No.
3 to the Registrant's Registration Statement on Form N-1A on September 21, 1995,
and incorporated herein by reference.
(2) Previously filed on EDGAR with Post-Effective Amendment No. 4 dated
November 27, 1996 and incorporated herein by reference.
(3) Previously filed on EDGAR with Post-Effective Amendment No. 5 dated
November 24, 1997 and incorporated herein by reference.
(4) Previously filed on EDGAR with Post-Effective Amendment No. 6 filed on
September 29, 1998 and incorporated herein by reference.
(5) Previously filed on EDGAR with Post-Effective Amendment No. 57 to the
Registration Statement of INVESCO Industrial Income Fund, Inc. on October 24,
1997 and incorporated herein by reference.
(6) Previously filed on EDGAR with Post-Effective Amendment No. 22 to the
Registration Statement of INVESCO Value Trust on December 23, 1997 and
incorporated herein by reference.
(7) Previously filed on EDGAR with Post Effective Amendment No. 59 to the
Registration Statement of INVESCO Industrial Income Fund, Inc. on October 27,
1998 and incorporated herein by reference.
(8) Previously filed on EDGAR with Post-Effective Amendment No. 23 to the
Registration Statement of INVESCO Value Trust on October 30, 1998 and
incorporated herein by reference.
- 19 -
Exhibit (1)(b)
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
INVESCO COMBINATION STOCK & BOND FUNDS, INC.
INVESCO Combination Stock & Bond Funds, Inc., a corporation organized and
existing under the General Corporation Law of the State of Maryland (the
"Company"), hereby certifies to the State Department of Assessments and Taxation
of Maryland that:
FIRST: Article III, Section 1 of the Articles of Incorporation of the
company is hereby amend to read as follows:
SECTION 1. The aggregate number of shares of stock of all series
which the Company shall have the authority to issue is one billion six
hundred million 1,600,000,000 shares of Common Stock, having a par value
of one cent ($0.01) per share. The aggregate par value of all shares which
the Company shall have authority to issue is sixteen million dollars
$16,000,000. Such stock may be issued as full shares or as fractional
shares.
In the exercise of the powers granted to the Board of Directors
pursuant to Section 3 of this Article III, the Board of Directors
designates three series of shares of common stock of the Company to be
designated as the INVESCO Industrial Income Fund, the INVESCO Balanced
Fund, and the INVESCO Total Return Fund. One billion (1,000,000,000)
shares of the Company Common Stock are classified as and are allocated to
the INVESCO Industrial Income Fund. One hundred million (100,000,000)
shares of the Company's Common Stock are classified as and are allocated
to the INVESCO Balanced Fund. Three hundred million (300,000,000) shares
of the Company's Common Stock are classified as and are allocated to the
INVESCO Total Return Fund.
Unless otherwise prohibited by law, so long as the Company is
registered as an open-end investment company under the Investment Company
Act of 1940, as amended, the total number of shares which the Company is
authorized to issue may be increased or decreased by the board of
directors in accordance with the applicable provisions of the Maryland
General Corporation Law.
SECOND: Shares of each class have been duly authorized and classified by
the board of directors pursuant to authority and power contained in the Articles
of Incorporation of the Company.
THIRD: The foregoing amendment, in accordance with the requirements of
Section 2-605 of the General Corporation Law of Maryland, was unanimously
approved by the board of directors of the Company on February 3, 1999.
<PAGE>
The undersigned, President of the Company, who is executing on behalf of
the Company the foregoing Articles of Amendment, of which this paragraph is made
a part, hereby acknowledges, in the name and on behalf of the Company, the
foregoing Articles of Amendment to be the corporate act of the Company and
further verifies under oath that, to the best of his knowledge, information and
belief, the matters and facts set forth herein are true in all material
respects, under the penalties of perjury.
IN WITNESS WHEREOF, INVESCO Combination Stock & Bond Funds, Inc. has
caused these Articles of Amendment to be signed in its name and on its behalf by
its President and witnessed by its Secretary on the 24th day of May, 1999.
These Articles of Amendment shall be effective as of the 28th day of May,
1999 by the Maryland State Department of Assessments and Taxation.
INVESCO COMBINATION STOCK
& BOND FUNDS, INC.
By: /s/ Mark H. Williamson
-----------------------------
Mark H. Williamson, President
WITNESSED:
By: /s/ Glen A. Payne
------------------------
Glen A. Payne, Secretary
CERTIFICATION
I, Cheryl K. Howlett, a notary public in and for the City and County of
Denver, and State of Colorado, do hereby certify that Mark H. Williamson,
personally known to me to be the person whose name is subscribed to the
foregoing Articles of Amendment, appeared before me this date in person and
acknowledged that he signed, sealed and delivered said instrument as his full
and voluntary act and deed for the uses and purposes therein set forth.
Given my hand and official seal this 24th day of May, 1999.
/s/ Cheryl K. Howlett
---------------------
Notary Public
My Commission Expires: February 22, 2003
Exhibit 10(b)
KIRKPATRICK & LOCKHART LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036-1800
Telephone 202-778-9000
May 28, 1999
INVESCO Combination Stock & Bond Funds, Inc.
7800 E. Union Avenue
Denver, Colorado 80237
Dear Sir or Madam:
You have requested our opinion, as counsel to INVESCO Combination Stock &
Bond Funds, Inc. (the "Company"), a corporation organized under the laws of
Maryland on August 19, 1993, as to certain matters regarding the issuance of
Shares of the Company in connection with the reorganization of INVESCO
Industrial Income Fund (the "Acquired Fund"), a series of a Maryland
corporation, into the Company, as provided for in the Agreement and Plan of
Conversion and Termination between the Company and Acquired Fund ("Plan"). The
Plan provides for Acquired Fund to transfer all of its assets to a new series of
the Company ("Acquiring Fund") in exchange solely for the issuance of Shares and
Acquiring Fund's assumption of the liabilities of Acquired Fund. (As used in
this letter, the term "Shares" means the shares of common stock of the Acquiring
Fund to be issued in connection with the Plan.)
We have, as counsel, participated in various corporate and other matters
relating to the Company. We have examined copies, either certified or otherwise
proved to be genuine, of its Articles of Incorporation and By-Laws, the minutes
of meetings of its board of directors and other documents relating to the
organization and operation of the Company, and we are generally familiar with
its business affairs. Based upon the foregoing, it is our opinion that the
Shares of the Company may be legally and validly issued in accordance with the
Company's Articles of Incorporation and By-Laws and subject to compliance with
the Securities Act of 1933, the Investment Company Act of 1940 and applicable
state laws regulating the offer and sale of securities; and when so issued, the
Shares will be legally issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion in connection with
Post-Effective Amendment No. 7 to the Company's Registration Statement on Form
N-1A (File No. 33-69904) to be filed with the Securities and Exchange
Commission. We also consent to the reference to our firm under the caption
"Legal Counsel" in the Statement of Additional Information filed as part of the
Registration Statement.
Very truly yours,
/s/ KIRKPATRICK & LOCKHART LLP
KIRKPATRICK & LOCKHART LLP
Exhibit 10(c)
KIRKPATRICK & LOCKHART LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036-1800
Telephone 202-778-9000
May 28, 1999
INVESCO Combination Stock & Bond Funds, Inc.
7800 E. Union Avenue
Denver, Colorado 80237
Dear Sir or Madam:
You have requested our opinion, as counsel to INVESCO Combination Stock &
Bond Funds, Inc. (the "Company"), a corporation organized under the laws of the
State of Maryland on August 19, 1993, as to certain matters regarding the
issuance of Shares of the Company in connection with the reorganization of
INVESCO Total Return Fund (the "Acquired Fund"), a Maryland corporation, into
the Company, as provided for in the Agreement and Plan of Conversion and
Termination between the Company and Acquired Fund ("Plan"). The Plan provides
for Acquired Fund to transfer all of its assets to a new series of the Company
("Acquiring Fund") in exchange solely for the issuance of Shares and Acquiring
Fund's assumption of the liabilities of Acquired Fund. (As used in this letter,
the term "Shares" means shares of common stock of the Acquiring Fund to be
issued in connection with the Plan.)
We have, as counsel, participated in various corporate and other matters
relating to the Company. We have examined copies, either certified or otherwise
proved to be genuine, of its Articles of Incorporation and By-Laws, the minutes
of meetings of its board of directors and other documents relating to the
organization and operation of the Company, and we are generally familiar with
its business affairs. Based upon the foregoing, it is our opinion that the
Shares of the Company may be legally and validly issued in accordance with the
Company's Articles of Incorporation and By-Laws and subject to compliance with
the Securities Act of 1933, the Investment Company Act of 1940 and applicable
state laws regulating the offer and sale of securities; and when so issued, the
Shares will be legally issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion in connection with
Post-Effective Amendment No. 7 to the Company's Registration Statement on Form
N-1A (File No. 33-69904) to be filed with the Securities and Exchange
Commission. We also consent to the reference to our firm under the caption
"Legal Counsel" in the Statement of Additional Information filed as part of the
Registration Statement.
Very truly yours,
/s/ KIRKPATRICK & LOCKHART LLP
KIRKPATRICK & LOCKHART LLP
Exhibit 11
----------
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses and
Statements of Additional Information constituting parts of this Post-Effective
Amendment No. 7 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated July 31, 1998, relating to the financial
statements and financial highlights appearing in the June 30, 1998 Annual Report
to Shareholders of INVESCO Industrial Income Fund, Inc. (now known as Industrial
Income Fund, one of the portfolios comprising INVESCO Combination Stock and Bond
Funds, Inc., formerly INVESCO Flexible Funds, Inc., which was formerly INVESCO
Multiple Asset Funds, Inc.) and of our report dated September 30, 1998, relating
to the financial statements and financial highlights of INVESCO Total Return
Fund appearing in the August 31, 1998 Annual Report to Shareholders of INVESCO
Value Trust (now one of the portfolios comprising INVESCO Combination Stock and
Bonds Funds, Inc.), which is also incorporated by reference into the
Registration Statement. We also consent to the references to us under the
heading "Financial Highlights" in the Prospectuses and under the headings
"Independent Accountants" and "Financial Statements" in the Statements of
Additional Information.
PricewaterhouseCoopers LLP
Denver, Colorado
May 28, 1999