File No. 33-79290
As filed on ^ July 16, 1997
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No.
Post-Effective Amendment No. ^ 12 X
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. ^ 13 X
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INVESCO SPECIALTY 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)
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Copies to:
Ronald M. Feiman, Esq.
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
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Approximate Date of Proposed Public Offering: As soon as practicable after this
post-effective amendment becomes effective.
It is proposed that this filing will become effective
- --- immediately upon filing pursuant to paragraph (b)
- --- ^ on ________________, pursuant to paragraph (b)
- --- 60 days after filing pursuant to paragraph (a)(i)
- --- on _____________ pursuant to paragraph (a)(i)
- --- 75 days after filing pursuant to paragraph (a)(ii)
X on ^ October 1, 1997 pursuant to paragraph (a)(ii) of rule 485.
- ---
If appropriate, check the following box:
- --- this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has previously elected, pursuant to Rule 24f-2 under the Investment
Company Act of 1940, to register an indefinite number of its shares of common
stock for sale under the Securities Act of 1933. Registrant's Rule 24f-2 Notice
for the fiscal year ended July 31, 1996, was filed on or about September 18,
1996.
Page 1 of 156
Exhibit index is located at page 113
<PAGE>
NOTE
This Post-Effective Amendment (Form N-1A) is being filed to ^ add the
Prospectus for a new series, INVESCO ^ S&P 500 Index Fund and does not affect
the Prospectuses for the INVESCO Worldwide Capital Goods, INVESCO Worldwide
Communications, INVESCO European Small Company, INVESCO Latin American Growth ^,
INVESCO Asian Growth and INVESCO Realty Funds.
<PAGE>
INVESCO SPECIALTY FUNDS, INC.
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CROSS-REFERENCE SHEET
Form N-1A
Item Caption
Part A Prospectus
1....................... Cover Page
2....................... Annual Fund Expenses; Essential
Information
3....................... ^ Fund Price and Performance
4....................... Investment Objective and Strategy;
Investment Policies and Risks; The
Fund and Its Management
5....................... The Fund and Its Management
5A...................... Not Applicable
6....................... Fund Services; Taxes, Dividends and
Capital Gain Distributions;
Additional Information
7....................... How To Buy Shares; Fund Price and
Performance; Fund Services; The
Fund and Its Management
8....................... Fund Services; How to Sell Shares
9....................... Not Applicable
Part B Statement of Additional Information
10...................... Cover Page
11...................... Table of Contents
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<PAGE>
Form N-1A
Item Caption
12...................... The Funds and Their Management
13...................... Investment Practices; Investment
Policies and Restrictions
14...................... The Funds and Their Management
15...................... The Funds and Their Management;
Additional Information
16...................... The Funds and Their Management;
Additional Information
17...................... Investment Practices; Investment
Policies and Restrictions
18...................... Additional Information
19...................... How Shares Can Be Purchased; How
Shares Are Valued; Services
Provided by the Funds; Tax-Deferred
Retirement Plans; How to Redeem
Shares
20...................... Dividends, Capital Gain
Distributions and Taxes
21...................... How Shares Can Be Purchased
22...................... Performance Data
23...................... Additional Information; Unaudited
Financial Statements for INVESCO
Realty Fund
Part C Other Information
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
-ii-
<PAGE>
PROSPECTUS
October __, 1997
INVESCO S&P 500 INDEX FUND
Class I and Class II Shares
INVESCO S&P 500 Index Fund (the "Fund") seeks to provide both price
performance and income comparable to the Standard & Poor's 500 Composite Stock
Index (the "S&P 500" or the "Index"), which is composed of 500 selected large
capitalization stocks. In pursuing this objective, the Fund will invest in the
equity securities that comprise the S&P 500 in approximately the same
proportions that they are represented in the Index, and in other instruments
that are based upon the value of the Index.
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 October __, 1997, has been filed with the Securities and
Exchange Commission and is incorporated by reference into this Prospectus. To
obtain a free copy, write to INVESCO Funds Group, Inc., P.O. Box 173706, Denver,
Colorado 80217-3706; or call 1-800-525-8085; or on the World Wide Web:
http://www.invesco.com.
The Fund offers two classes of shares. Class I shares are not subject to
any distribution fee; Class II shares are subject to an annual distribution fee
of 0.25% of the Fund's average daily net assets attributable to Class II shares.
Both Class I and Class II shares may be subject to a redemption fee.
The Fund is a series of INVESCO Specialty Funds, Inc. (the "Company"), a
diversified, open-end managed no-load mutual fund consisting of seven separate
portfolios of investments. Separate Prospectuses are available upon request from
INVESCO Funds Group, Inc. for the Company's other funds: INVESCO Worldwide
Capital Goods Fund, INVESCO Worldwide Communications Fund, INVESCO European
Small Company Fund, INVESCO Latin American Growth Fund, INVESCO Asian Growth
Fund and INVESCO Realty Fund. Investors may purchase shares of any or all of the
Funds. Additional Funds may be offered by the Company in the future.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION. THE SHARES
OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Page
ESSENTIAL INFORMATION........................................................7
ANNUAL FUND EXPENSES.........................................................8
INVESTMENT OBJECTIVE AND STRATEGY...........................................10
INVESTMENT POLICIES AND RISKS...............................................11
THE FUND AND ITS MANAGEMENT.................................................14
FUND PRICE AND PERFORMANCE..................................................16
HOW TO BUY SHARES...........................................................17
FUND SERVICES...............................................................23
HOW TO SELL SHARES..........................................................24
TAXES, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS.............................27
ADDITIONAL INFORMATION......................................................29
<PAGE>
ESSENTIAL INFORMATION
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Investment Goal And Strategy. INVESCO S&P 500 Index Fund seeks to provide
price performance and income comparable to that of the S&P 500, an index
comprised of common stocks of U.S. companies that is weighted to companies with
large market capitalizations. The Fund also may invest in other instruments
whose value depends upon or derives from the value of the S&P 500. 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 a competitive long-term
investment return through a diversified portfolio. While not 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/Trust To Minors Account or systematic investing strategy. The Fund may be a
suitable investment for many types of retirement programs, including IRA,
SEP-IRA, SIMPLE IRA, 401(k), Profit Sharing, Money Purchase Pension, and 403(b)
plans.
Time Horizon. Since stock prices fluctuate on a daily basis, the Fund's
price per share varies daily. Stock prices may decline for extended periods.
Potential shareholders should consider this a long-term investment.
Risks. The Fund's investment strategy seeks to track the investment
composition and performance of the S&P 500 by investing in the common stocks
that comprise the Index in approximately the same proportions as they are
represented in the Index and in other instruments whose value depends upon or
derives from the value of the S&P 500. Accordingly, the Fund does not employ
traditional methods of investment management to select the securities held in
its portfolio. Since the Fund attempts to closely track the Index, when the
overall stock market rises or falls, the price of shares in the Fund can be
expected to rise and fall at the same time. The Fund does not eliminate market
risk; rather, it attempts to ensure that its returns will be comparable to those
of the overall stock market. 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 a series of the Company, a
diversified, managed no-load mutual fund. The Fund is owned by its shareholders.
It employs INVESCO Funds Group, Inc. ("IFG") (founded in 1932) to serve as
investment adviser, administrator, distributor and transfer agent. IFG employs
World Asset Management ("World") to serve as sub-adviser.
IFG is a subsidiary of AMVESCAP PLC, an international investment management
company that presently manages approximately $165 billion in assets. AMVESCAP
PLC is based in London with money managers located in Europe, North America,
South America and the Far East.
<PAGE>
Under an agreement with IFG, World serves as sub-advisor to the Fund. In
that capacity, World has the primary responsibility, under the supervision of
IFG, for providing portfolio management services to the Fund. See "The Fund and
Its Management."
This Fund offers all of the following services at no charge:
-----------------------------------------------------------
Class I and II Shares
---------------------
Telephone purchases
Telephone exchanges
Telephone redemptions
Automatic reinvestment of distributions
Class II Shares Only
--------------------
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: For Class I shares, the minimum initial
investment is [$250,000]. For Class II shares, the minimum initial investment is
$5000 for individual accounts and $2000 for Individual Retirement Accounts
("IRAs") which is waived for regular investment plans, including EasiVest and
Direct Payroll Purchase.
Minimum Subsequent Investment: For Class I shares, the minimum subsequent
investment is $25,000 and for Class II shares, the minimum subsequent investment
is $1,000. (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, other than a fee to redeem or exchange shares held less than three
months. See "Shareholder Transactions Expenses." The Fund is authorized to pay a
Rule 12b-1 distribution fee of one quarter of one percent of the average net
assets attributable to Class II shares of the Fund 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 benefit investors by increasing the Fund's total return. We
calculate annual operating expenses as a percentage of the Fund's estimated
expenses for the current fiscal year.
<PAGE>
Class I Class II
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Shareholder Transaction Expenses
- --------------------------------
Sales load "charge" on purchases None None
Sales load "charge" on reinvested
dividends None None
Redemption fees 1.00%* 1.00%*
Exchange fees 1.00%* 1.00%*
Annual Fund Operating Expenses
- ------------------------------
(as a percentage of average net assets)
Management Fee 0.25% 0.25%
12b-1 Fees None 0.25%
Other Expenses (1) [0.05%] [0.05%]
Total Fund Operating Expenses (1) [0.30%] [0.55%]
*There is a 1% fee retained by the Fund to offset transaction costs and other
expenses associated with short-term redemptions and exchanges, which is imposed
only on redemptions or exchanges of shares held less than three months.
(1) Based on estimated expenses for the current fiscal year, which may be more
or less than actual expenses. If necessary, certain Fund expenses will be
absorbed voluntarily for at least the first fiscal year of the Fund's operations
in order to ensure that expenses for the Fund will not exceed [0.30%] for Class
I shares and [0.55%] for Class II shares calculated on the basis of average
daily net assets of the respective class, pursuant to an agreement between IFG
and the Fund. If such voluntary expense limit were not in effect, the Fund's
"Other Expenses" and "Total Fund Operating Expenses" for the fiscal year ending
July 31, 1998 are estimated to be [0.65%] and [0.90%], respectively, of Class I
shares average net assets and [0.65%] and [2.05%], respectively, of Class II
shares average net assets. Actual expenses are not provided because the Fund did
not begin a public offering of its securities until October __, 1997.
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
------ -------
Class I $9 $29
Class II $12 $37
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."
<PAGE>
Because the Fund pays a distribution fee on Class II shares, investors who
own Class II shares of the Fund 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.
INVESTMENT OBJECTIVE AND STRATEGY
- ---------------------------------
The Fund seeks to track the aggregate price and income performance of the
S&P 500, an index comprised of common stocks of U.S. companies that emphasizes
large-capitalization companies. This investment objective is fundamental and
cannot be changed without the approval of the Fund's shareholders. The Fund
seeks to achieve its objective by investing in the common stocks that comprise
the Index in approximately the same proportions as they are represented in the
S&P 500. The Fund also may invest in other instruments that are based upon the
value of the Index, including Standard & Poor's Depository Receipts ("SPDRs"),
and it may likewise purchase and sell futures contracts and options on the
Index. There is no assurance that the Fund's investment objective will be met.
The S&P 500 is comprised of 500 common stocks that are chosen by Standard
& Poor's Corporation ("S&P") for inclusion in the Index. As of June 30, 1997 the
S&P 500 represented approximately ___% of the market capitalization of
publicly-traded common stocks in the United States. The Index is weighted by
market value. Because of this weighting, the ____ largest companies in the S&P
500 accounted for approximately _____ of the Index at June 30, 1997. Typically,
companies included in the S&P 500 are dominant firms in their industries, and
approximately 75% of them trade on the New York Stock Exchange.
The Fund is managed through the use of an "indexing" investment style,
which attempts to track the investment composition of the S&P 500 through
statistical methods. Therefore, the Fund does not employ typical methods of
mutual fund investment management, such as selecting securities on the basis of
economic, financial or market analysis. The Fund is managed without regard to
potential tax ramifications.
The Fund cannot precisely duplicate the investment composition or
performance of the Index because, unlike the Fund, the Index is unmanaged and
has no expenses. Moreover, the Fund must take into account sales and redemptions
of Fund shares and other factors that are inapplicable to the Index itself.
Although the Fund at any given time may not hold securities of all 500 companies
represented in the Index, it normally holds the securities of at least 95% of
those companies. Because at any given time the Fund likely will not precisely
mirror the S&P 500, the Fund would ordinarily place heavier concentration on
industry sectors dominated by large corporations, such as communications or
automobiles. Until the Fund's portfolio is fully invested (except for cash), the
Fund will attempt to identify sectors that are underrepresented in the Fund's
portfolio and purchase balancing securities until the Fund's portfolio sector
weightings closely match those of the Index.
Redemptions of large numbers of shares of the Fund could reduce the number
of issuers represented in the Fund's portfolio, which could adversely affect the
accuracy with which the Fund tracks the performance of the S&P 500.
<PAGE>
The inclusion of a stock in the Index does not imply that S&P believes
that stock to be an attractive investment. "Standard & Poor's", "S&P", "S&P
500", "Standard & Poor's 500" and "500" are trademarks of McGraw-Hill, Inc. that
have been licensed for use by the Fund. The Fund is not sponsored, endorsed,
sold or promoted by S&P, and S&P makes no representation regarding the
advisability of investing in the Fund. S&P's only relationship to the Fund and
the Company is the licensing of the above trademarks and trade names of S&P and
of the S&P 500 which is determined, composed and calculated by S&P without
regard to the Company or the Fund. S&P has no obligation to take into account
the needs of the Company, the Fund or the Fund's shareholders in determining,
composing or calculating the Index. S&P has no obligation or liability in
connection with the administration, marketing or trading of the Fund. S&P makes
no warranty, express or implied, and expressly disclaims all warranties of
merchantability, or of fitness for a particular purpose or use with respect to
the S&P 500 or any data included therein.
INVESTMENT POLICIES AND RISKS
- -----------------------------
Investors generally should expect to see their price per share of the Fund
vary with movements in the securities markets, changes in economic conditions
and other factors. Due to the composition of the Index, the Fund invests in many
different companies in a variety of industries; this diversification reduces the
Fund's overall exposure to investment and market risks, but cannot eliminate
them.
Limited Portfolio. While the S&P 500 includes the majority of large market
capitalization stocks in the U.S. stock market, it also excludes the stocks of
most medium and smaller sized companies that comprise the remaining ____% of the
capitalization of the U.S. stock market. Similarly, it excludes securities of
most foreign issuers. The Fund's portfolio, therefore, will exclude securities
excluded from the Index. While the large capitalization stocks that comprise the
S&P 500 historically have shown less price volatility than the stocks excluded
from the Index and the Fund, the excluded stocks may or may not offer better
price performance and income than those included in the Index and the Fund.
From time to time, the Fund may receive securities that are not included
in the Index as a result of a corporate reorganization of a S&P 500 company.
Such securities will be disposed of in due course in accordance with the Fund's
investment objective. Conversely, if an issuer included in the S&P 500 has a
change in rank within the Index, or is dropped from it entirely, the Fund may be
required to sell some or all of the common stock of that issuer held by the
Fund. Such sales may result in the Fund realizing lower prices, or losses, that
might not have been incurred if the Fund were not required to effect such sales.
<PAGE>
Indexing. In the event of a decline in the S&P 500, the Fund and its
shares will sustain a similar decline. Since the Fund's investment objective is
to track the aggregate price and income performance of the Index, the Fund will
not be actively managed in an attempt to reduce the risk inherent in the Index
or the stock market. Due to purchases and sales of portfolio securities to meet
investor purchases and redemptions, the Fund will not have a 100% correlation to
the Index. However, under ordinary circumstances, the Fund expects that the
composition of its portfolio will have at least a 95% correlation to the
composition of the S&P 500.
Investment Company Securities. To manage its daily cash positions, the
Fund may invest in securities issued by other investment companies that invest
in short-term debt securities and seek to maintain a net asset value of $1.00
per share ("money market funds"). The Fund also may invest in SPDRs and shares
of other investment companies that are structured to seek a similar correlation
to the performance of the S&P 500. SPDRs are traded on the American Stock
Exchange. SPDR holders such as the Fund are paid a "Dividend Equivalent Amount"
that corresponds to the amount of cash dividends accruing to the securities held
by the SPDR Trust, net of certain fees and expenses. Therefore, the dividend
yield of SPDRs may be less than that of the Index. The Investment Company Act of
1940 limits investments in securities of other investment companies, such as the
SPDR Trust. These limitations include, among others, that no more than 10% of
the Fund's total assets may be invested in securities of other investment
companies, and no more than 5% of its total assets in the securities of any one
investment company. As a shareholder of another investment company, the Fund
would bear its pro rata portion of the other investment company's expenses,
including advisory fees, in addition to the expenses the Fund bears directly in
connection with its own operations.
Futures Contracts and Options. The Fund may enter into futures contracts
for hedging or other non-speculative purposes within the meaning and intent of
applicable rules of the Commodity Futures Trading Commission ("CFTC"), or for
liquidity.
For example, futures contracts may be purchased or sold to attempt to
hedge against a price movement in the S&P at times when the Fund is not fully
invested in stocks included in the S&P 500. In such circumstances, purchasing a
futures contract may reduce the potential that cash inflows to the Fund will
interfere with its ability to track the Index, since futures contracts may serve
as a temporary substitute for stocks until the stocks can be purchased by the
Fund in a cost-effective manner. Inasmuch as futures contracts require a
comparatively small initial margin deposit, the Fund may be able to be fully
exposed to price movements in the S&P 500 while still keeping a cash reserve to
meet potential redemptions.
<PAGE>
The Fund also may use options to buy or sell futures contracts with
respect to the Index or securities comprising the Index. Put and call options on
futures contracts or securities may be traded by the Fund in order to protect
against declines in the values of portfolio securities or against increases in
the cost of securities to be acquired. Purchases of options on futures contracts
may present less dollar risk in hedging the 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 changes
sufficiently, the option may expire without value to the Fund. The writing of
covered options does not present less risk than the trading of futures contracts
and will constitute only a partial hedge, up to the amount of the premium
received. Additionally, if an option is exercised, the Fund may suffer a loss on
the transaction.
The Fund also may purchase put or call options on the Index and on the
Standard & Poor's 100 Composite Index (the "S&P 100") in order to have fuller
exposure to price movements in the Index pending investment of purchase orders
or to maintain liquidity in anticipation of potential Fund shareholder
redemptions.
The Fund may, from time to time, also sell ("write") covered call options
or cash secured puts in order to attempt to increase the yield on its portfolio
or to protect against declines in the value of its portfolio securities. By
writing a covered call option, the Fund, in return for the premium income
realized from the sale of the option, gives up the opportunity to profit from a
price increase in the underlying security above the option exercise price, if
the price increase occurs while the option is in effect. In addition, the Fund's
ability to sell the underlying security will be limited while the option is in
effect. By writing a cash secured put, the Fund, which receives the premium, has
the obligation during the option period, upon assignment of an exercise notice,
to buy the underlying security at a specified price. A put is secured by cash if
the Fund maintains at all times cash, Treasury bills or other high grade
short-term obligations with a value equal to the option exercise price in a
segregated account with its custodian.
Although the Fund will enter into options and futures contracts solely for
hedging, liquidity or other non-speculative purposes within the meaning and
intent of applicable rules of the CFTC, their use does involve certain risks.
For example, a lack of correlation between the value of an instrument underlying
an option or futures contract and the assets being hedged, or unexpected adverse
price movements, could render the Fund's hedging strategy unsuccessful and could
result in losses. In addition, there can be no assurance that a liquid secondary
market will exist for any contract purchased or sold, and the Fund may be
required to maintain a position until exercise or expiration, which could result
in losses. Transactions in futures contracts and options are subject to other
risks as well.
<PAGE>
The risks related to transactions in options and futures to be entered
into by the Fund are set forth in greater detail in the Statement of Additional
Information, which should be reviewed in conjunction with the foregoing
discussion.
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.
Repurchase Agreements. The Fund may invest money, for as short a time as
overnight, using repurchase agreements ("repos"). With a repo, the Fund buys a
debt instrument, agreeing simultaneously to sell it back to the prior owner at
an agreed-upon price. The Fund could incur costs or delays in seeking to sell
the instrument if the prior owner defaults on its repurchase obligation. To
reduce that risk, 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 set by the Fund's board of
directors.
Portfolio Turnover. Although the Fund seeks to invest for the long term,
the Fund retains the right to sell portfolio securities regardless of the length
of time they have been in the Fund's portfolio. The indexing method of portfolio
management is expected to generate a portfolio turnover rate of less than 50%,
which would occur if one-half of the Fund's portfolio securities were sold
within one year. Ordinarily, portfolio investments are sold by the Fund only to
reflect changes in the S&P 500 (for example, mergers involving companies
included in the Index, or new weightings of securities within the Index) or to
accommodate cash flows in and out of the Fund while attempting to maintain the
similarity of the Fund's portfolio to the composition of the S&P 500.
Investment Restrictions. Certain restrictions, which are set forth in the
Statement of Additional Information, may not be altered without the approval of
the Fund's shareholders. For example, with respect to 75% of the Fund's total
assets, the Fund limits to 5% of its total assets the amount which may be
invested in a single issuer. The Fund's ability to borrow money is limited to
borrowings from banks for temporary or emergency purposes in amounts not
exceeding 33-1/3% of net assets. Except where indicated to the contrary, the
investment objectives and policies described in this Prospectus are fundamental
and may not be changed without a vote of the Fund's shareholders.
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 an open-end, diversified, management investment company.
It was incorporated on April 12, 1994, under the laws of Maryland.
<PAGE>
The Company's board of directors has responsibility for overall
supervision of the Fund and reviews the services provided by the adviser and
sub-adviser. Under an agreement with the Fund, IFG, 7800 E. Union Avenue,
Denver, Colorado 80237, serves as the Fund's investment adviser; it is primarily
responsible for providing the Fund with various administrative services.
IFG is an indirect wholly-owned subsidiary of AMVESCAP PLC, a
publicly-traded holding company that, through its subsidiaries, engages in the
business of investment management on an international basis. AMVESCAP PLC has
approximately $160 billion in assets under management. IFG was established in
1932 and, as of May 31, 1997, managed 14 mutual funds, consisting of 45 separate
portfolios, with combined assets of approximately $14.8 billion on behalf of
more than 859,000 shareholders.
World Asset Management ("World") is the Fund's sub-adviser and is primarily
responsible for managing the Fund's investments. Under the terms of the
sub-advisory agreement, World provides the Fund with certain recordkeeping and
management services in connection with the Fund, including monitoring the Index
and determining which securities to purchase and sell in order to keep the
Fund's portfolio in balance with the Index. Although the Company is not a party
to the sub-advisory agreement, the agreement was approved by IFG as the then
sole shareholder of the Fund on _________, 1997. Together, IFG and World
constitute "Fund Management."
World is a general partnership organized by Munder Capital Management
("MCM"), a general partnership formed in December 1994 which engages in
investment management and advisory services. As of December 31, 1996, World's
total assets under management were approximately $11 billion (including index
mutual fund portfolios), and MCM's total assets under management were
approximately $38 billion. The principal business address for World is 255 Brown
Street Centre, 2nd Floor, Birmingham, Michigan 48009.
The Fund's investments are selected by a team of World portfolio managers
that is collectively responsible for the investment decisions relating to the
Fund.
Fund Management permits investment and other personnel to purchase and
sell securities for their own accounts, subject to a compliance policy governing
personal investing. This policy requires Fund Management's personnel to conduct
their personal investment activities in a manner that Fund Management believes
is not detrimental to the Fund or Fund Management's other advisory clients. See
the Statement of Additional Information for more detailed information.
The Fund pays IFG a monthly management fee which is based upon a
percentage of the Fund's average net assets determined daily. The management fee
is computed at the annual rate of 0.25% of the Fund's average net assets. Out of
this fee, IFG pays to World an amount equal to 0.07% of the Fund's average net
assets up to $10 million, 0.05% of the Fund's average net assets in excess of
$10 million up to $40 million, and 0.03% of the Fund's average net assets in
excess of $40 million. No fee is paid by the Fund to World.
<PAGE>
Under a Transfer Agency Agreement, IFG acts as registrar, transfer agent
and dividend disbursing agent for the Fund. The Fund pays an annual fee of
$20.00 per shareholder account or, where applicable, per participant in an
omnibus account per year. Registered broker-dealers, third party administrators
of tax-qualified retirement plans and other entities, including affiliates of
IFG, may provide equivalent services to the Fund. In these cases, IFG may pay,
out of the fee it receives from the Fund, an annual sub-transfer agency or
recordkeeping fee to the third party.
In addition, under an Administrative Services Agreement, IFG handles
additional administrative, record-keeping, and internal sub-accounting services
for the Fund.
The expenses of each class of the Fund, which are accrued daily, are
deducted from total income before dividends are paid. If necessary, certain Fund
expenses will be absorbed voluntarily by IFG in order to ensure that the Fund's
total operating expenses will not exceed [0.30%] for Class I shares and [0.55%]
for Class II shares.
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of
their financial responsibility coupled with their ability to effect transactions
at the best available prices. As discussed under "How to Buy Shares --
Distribution Expenses," the Fund may market its shares through intermediary
brokers or dealers that have entered into Dealer Agreements with IFG, as the
Fund's Distributor. The Fund may place orders for portfolio transactions with
qualified broker-dealers 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.
FUND PRICE AND PERFORMANCE
- --------------------------
Determining Price. The value of your investment in the Fund will vary
daily. The price per share of each class of the Fund is also known as the Net
Asset Value (NAV). IFG prices each class of the Fund every day that the New York
Stock Exchange is open, as of the close of regular trading (normally, 4:00 p.m.,
New York time). NAV for each class of shares is calculated separately by adding
together the current market value of all of the class's assets, including
accrued interest and dividends; then subtracting liabilities, including accrued
expenses; and finally dividing that dollar amount by the total number of shares
of the class 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-,
<PAGE>
and ten-year periods. Cumulative total return shows the actual rate of return on
an investment; average annual total return represents the average annual
percentage change in the value of an investment. Both cumulative and average
annual total returns tend to "smooth out" fluctuations in the Fund's investment
results, not showing the interim variations in performance over the periods
cited. 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 computed 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
semi-annual compounding.
When we quote mutual fund rankings published by Lipper Analytical Services,
Inc., we may compare the Fund to others in its category of ________________, 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 Fund offers two classes of shares. Each class represents an identical
interest in the investment portfolio of the Fund and has the same rights, except
that each class bears its own distribution and shareholder servicing charges.
The income attributable to each class and the dividends payable on the shares of
each class will be reduced by the amount of the distribution fee or service fee,
if applicable, payable by that class.
In deciding which class of shares to purchase, you should consider, among
other things, (i) the length of time you expect to hold your shares, (ii) the
charges of the distribution plan applicable to the class, if any, (iii)exchange
privileges between the classes, and (iv) the eligibility requirements that apply
to purchases of a particular class.
Generally, the minimum initial investment in Class I shares is [$250,000]
and the minimum subsequent investment is $25,000, except that IFG 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. Generally, the minimum initial investment in Class
II shares is $5,000 ($2,000 for IRA accounts) and the minimum subsequent
investment is $1,000.
The following chart shows several convenient ways to invest in the Fund.
Your new Fund shares will be priced at the NAV next determined after your order
is received in proper form. There is no charge to invest when you do so directly
through IFG, although in some circumstances a redemption fee may be charged on
<PAGE>
exchanges or redemptions. However, if you invest in the Fund through a
securities broker, you may be charged a commission or transaction fee. For all
new accounts, please send a completed application form. Please specify which
Fund and, if applicable, which class of shares, you wish to purchase.
IFG reserves the right to increase, reduce or waive the minimum purchase
requirements in its sole discretion, where it determines this action is in the
best interests of the Fund. Further, IFG 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.
<PAGE>
HOW TO BUY SHARES
================================================================================
Method Investment Minimum Please Remember
- --------------------------------------------------------------------------------
By Check
Mail to: Class I If your check does
-------
INVESCO Funds [$250,000]; not clear, you will
Group, Inc. [$25,000] for each be responsible for
P.O. Box 173706 subsequent any related loss
Denver, CO 80217- investment. the Fund or IFG
3706. incurs. If you are
Or you may send Class II already a
--------
your check by $5,000 for regular shareholder in the
overnight courier account; INVESCO funds, the
to: 7800 E. Union $2,000 for an Fund may seek
Ave., Denver, CO Individual reimbursement from
80237. Retirement Account; your existing
$1,000 minimum for account(s) for any
each subsequent loss incurred.
investment.
- --------------------------------------------------------------------------------
By Telephone or
Wire
Call 1-800-525-8085 Class I Payment must be
-------
to request your [$250,000]; received within 3
purchase. Then send [$25,000] for each business days, or
your check by subsequent the transaction may
overnight courier investment. be cancelled. If a
to our street telephone purchase
address: Class II is cancelled due to
--------
7800 E. Union Ave., $5,000 for regular nonpayment, you
Denver, CO 80237. account; will be responsible
Or you may transmit $2,000 for an for any related
your payment by Individual loss the Fund or
bank wire (call IFG Retirement Account; IFG incurs. If you
for instructions). $1,000 minimum for are already a
each subsequent shareholder in the
investment. INVESCO funds, the
Fund may seek
reimbursement from your
existing account(s) for
any loss incurred.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
With EasiVest or
Direct Payroll
Purchase
You may enroll on Class I Like all regular
-------
the fund EasiVest and Direct investment plans,
application, or Payroll Purchase neither EasiVest
call us for the plans are not nor Direct Payroll
correct form and available to class Purchase ensures a
more details. I purchasers or profit or protects
Investing the same shareholders. against loss in a
amount on a monthly falling market.
basis allows you to Class II Because you'll
--------
buy more shares $50 per month for invest continually,
when prices are low EasiVest; $50 per regardless of
and fewer shares pay period for varying price
when prices are Direct Payroll levels, consider
high. This "dollar- Purchase. You may your financial
cost averaging" may start or stop your ability to keep
help offset market regular investment buying through low
fluctuations. Over plan at any time, price levels. And
a period of time, with two weeks' remember that you
your average cost notice to IFG. will lose money if
per share may be you redeem your
less than the shares when the
actual average market value of all
price per share. your shares is less
than their cost.
- --------------------------------------------------------------------------------
By PAL
Your "Personal Class I Be sure to write
-------
account Line" is [$25,000] down the
available for confirmation number
subsequent Class II provided by PAL.
--------
purchases and $1,000 Payment must be
exchanges 24 hours received within 3
a day. Simply call business days, or
1-800-424-8085. the transaction may
be cancelled. If a
telephone purchase is
cancelled due to
nonpayment, you will be
responsible for any
related loss the Fund or
IFG incurs. If you are
already a shareholder in
the INVESCO funds, the
Fund may seek
reimbursement from your
existing account(s) for
any loss incurred.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
By Exchange
Between this and Class I See "Exchange
-------
another of the [$250,000] to open Privilege" below.
INVESCO funds. Call a new account;
1-800-525-8085 for [$25,000] for
prospectuses of written requests to
other INVESCO purchase additional
funds. You may also shares. The
establish an exchange minimum is
Automatic Monthly $1,000 for
Exchange service purchases requested
between two INVESCO by telephone.
funds; call IFG for
further details and Class II
--------
the correct form. $5,000 to open a
new account; $2,000
for Individual
Retirement
Accounts; $1,000
for written
requests to
purchase additional
shares. The
exchange minimum is
$250 for purchases
requested by
telephone.
================================================================================
Exchange Privilege. You may exchange your shares in this Fund for those in
another INVESCO fund, on the basis of their respective net asset values at the
time of the exchange. Before making any exchange, be sure to review the
prospectuses of the funds involved and consider their differences.
Upon the exchange of shares of the Fund held less than three months (other
than shares acquired through reinvestment of dividends or other distributions),
a fee of 1% of the current net asset value of the shares will be assessed and
retained by the Fund for the benefit of remaining shareholders. This fee is
intended to encourage long-term investments in the Fund, to avoid transaction
and other expenses caused by early redemptions, and to facilitate portfolio
management. The fee is not a deferred sales charge, is not a commission paid to
IFG, or otherwise result in a direct payment to IFG. The fee applies to
redemptions from the Fund and exchanges into any of the other no-load mutual
funds that are advised and distributed by IFG. The Fund will use the "first in,
first out" method to determine the three-month holding period. Under this
method, the date of exchange will be compared with the earliest purchase date of
shares held in the account. If this holding period is less than three months,
the redemption fee will be assessed on the current net asset value of the shares
being redeemed. IFG reserves the right, in the sole determination of IFG, to
waive the redemption fee.
<PAGE>
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, subject to a charge of 1% of the NAV of Fund shares held for
less than three months discussed above.
3) An exchange is the redemption of shares from one fund followed by
the purchase of shares in another. Therefore, any gain or loss
realized on the exchange is recognizable for federal income tax
purposes (unless, of course, your account is tax-deferred).
4) The Fund reserves the right to reject any exchange request, or to
modify or terminate exchange privileges, in the best interests of
the Fund and its shareholders. Notice of all such modifications or
terminations will be given at least 60 days prior to the effective
date of the change in privilege, except for unusual instances (such
as when redemptions of the exchanged shares are suspended under
Section 22(e) of the Investment Company Act of 1940, or when sales
of the fund into which you are exchanging are temporarily stopped).
Distribution Expenses. The Fund is authorized under a Plan and Agreement
of Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Plan") to use its assets to finance certain activities relating to the
distribution of its Class II shares to investors. Under the Plan, monthly
payments may be made by the Fund to IFG to permit IFG, at its discretion, to
engage in certain activities and provide certain services approved by the board
of directors of the Company 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
IFG-affiliated companies, to obtain various distribution-related and/or
administrative services for the Fund. Such services may include, among other
things, processing new shareholder account applications, preparing and
transmitting to the Fund's Transfer Agent computer processable tapes of all
transactions by customers, and serving as the primary source of information to
customers in answering questions concerning the Fund and their transactions with
the Fund.
In addition, other permissible activities and services include advertising,
the preparation and distribution of sales literature, printing and distributing
prospectuses to prospective investors, and such other services and promotional
activities for the Fund as may from time to time be agreed upon by the Company
and 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 IFG or its affiliates or by
third parties.
<PAGE>
Under the Plan, the Company's payments to IFG on behalf of the Fund are
limited to an amount computed at an annual rate of 0.25% of the Fund's average
net assets attributable to the Fund's Class II shares during the month. IFG 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 IFG whose primary responsibilities involve
marketing shares of the INVESCO funds, including the Fund. Payment amounts by
the Fund under the Plan, for any month, may be made to compensate IFG for
permissible activities engaged in and services provided by IFG during the
rolling 12-month period in which that month falls, although this period is
expanded to 24 months for obligations incurred during the first 24 months of the
Fund's operations. Therefore, any obligations incurred by IFG in excess of the
limitations described above will not be paid by the Fund under the Plan and will
be borne by IFG. In addition, IFG may from time to time make additional payments
from its revenues to securities dealers and other financial institutions that
provide distribution-related and/or administrative services for the Fund. No
further payments will be made by the Fund under the Plan in the event of its
termination. Also, any payments made by the Fund may not be used to finance
directly the distribution of shares of any other fund of the Company or other
mutual fund advised by IFG. 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. For more
information see "How Shares Can Be Purchased -- Distribution Plan" in the
Statement of Additional Information.
There is no distribution fee applicable to Class I shares.
FUND SERVICES
- -------------
Shareholder Accounts. IFG will maintain a share account that reflects your
current holdings. Share certificates will be issued only upon specific request.
You will have greater flexibility to conduct transactions if you do not request
certificates.
Transaction Confirmations. You will receive detailed confirmations of
individual purchases, exchanges, and redemptions. If you choose certain
recurring transaction plans (for instance, EasiVest), your transactions will be
confirmed on your quarterly Investment Summary.
Investment Summaries. Each calendar quarter, shareholders receive a
written statement which consolidates and summarizes account activity and value
at the beginning and end of the period for each of their INVESCO funds.
Reinvestment of Distributions. Dividends and capital gain distributions are
automatically invested in additional fund shares at the NAV on the ex-dividend
date, unless you choose to have dividends and/or capital gain distributions
automatically reinvested in another INVESCO fund or paid by check (minimum of
$10.00).
<PAGE>
Telephone Transactions. All shareholders may exchange and redeem Fund
shares by telephone, unless they expressly decline these privileges. By signing
the new account Application or 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
telephone instructions that it believes to be genuine. As a result of this
policy, the investor may bear the risk of any loss due to unauthorized or
fraudulent instructions.
Retirement Plans And IRAs. Fund shares may be purchased for Individual
Retirement Accounts (IRAs) and many types of tax-deferred retirement plans. IFG
can supply you with information and forms to establish or transfer your existing
plan or account.
HOW TO SELL SHARES
- ------------------
The following chart shows several convenient ways to redeem your Fund
shares. Shares of each class of the Fund may be redeemed at any time at their
current NAV next determined after a request in proper form is received at the
Fund's office. The NAV at the time of the redemption may be more or less than
the price you paid to purchase your shares, depending primarily upon the Fund's
investment performance.
Upon the redemption of shares held less than three months (other than
shares acquired through reinvestment of dividends or other distributions), a fee
of 1% of the current net asset value of the shares will be assessed and retained
by the Fund for the benefit of remaining shareholders. This fee is intended to
encourage long-term investments in the Fund, to avoid transaction and other
expenses caused by early redemptions, and to facilitate portfolio management.
The fee is not a deferred sales charge, is not a commission paid to IFG, and
does not benefit IFG in any way. The fee applies to redemptions from the Fund
and exchanges into any of the other no-load mutual funds that are advised and
distributed by IFG. The Fund will use the "first in, first out" method to
determine the three-month holding period. Under this method, the date of
redemption or exchange will be compared with the earliest purchase date of
shares held in the account. If this holding period is less than three months,
the redemption/exchange fee will be assessed on the current net asset value of
the shares being redeemed. IFG reserves the right, in the sole determination of
IFG, to waive the redemption fee.
Please specify from which fund and class, if any, you wish to redeem
shares. Shareholders that invest in multiple INVESCO mutual funds have a
separate account for each fund in which they invest.
<PAGE>
HOW TO SELL SHARES
================================================================================
Method Minimum Redemption Please Remember
================================================================================
By Telephone
Call us toll-free Class I This option is not
-------
at 1-800-525-8085. $1,000 (or, if available for
less, full shares held in
liquidation of the Individual
account) for a Retirement Accounts
redemption check; ("IRAs").
no minimum for a
wire to bank of
record.
Class II
--------
$250 (or, if less,
full liquidation of
the account) for a
redemption check;
$1,000 for a wire
to bank of record.
The maximum amount
which may be
redeemed by
telephone is
generally $25,000.
These telephone
redemption
privileges may be
modified or
terminated in the
future at the
discretion of IFG.
- --------------------------------------------------------------------------------
In Writing
Mail your request Any amount. The If the shares to be
to INVESCO Funds redemption request redeemed are
Group, Inc., P.O. must be signed by represented by
Box 173706 all registered stock certificates,
Denver, CO 80217- owners of the the certificates
3706. You may also account. Payment must be sent to
send your request will be mailed to IFG.
by overnight your address of
courier to 7800 E. record or to a pre-
Union Ave., Denver, designated bank.
CO 80237.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
By Exchange
Between this and Class I See "Exchange
-------
another of the [$250,000] to open Privilege," page
INVESCO funds. Call a new account; 22.
1-800-525-8085 for [$25,000] for
prospectuses of written requests to
other INVESCO purchase additional
funds. You may also shares. The
establish an exchange minimum is
automatic monthly $1,000 for
exchange service purchases requested
between two INVESCO by telephone.
funds; call IFG for
further details and Class II
--------
the correct form. $5,000 to open a
new account; $2,000
for Individual
Retirement
Accounts; $1,000
for written
requests to
purchase additional
shares. The
exchange minimum is
$250 for purchases
requested by
telephone.
- --------------------------------------------------------------------------------
Periodic Withdrawal
Plan
You may call us to $100 per payment, You must have at
request the on a monthly or least $10,000 total
appropriate form quarterly basis. invested with the
and more The redemption INVESCO funds, with
information at 1- check may be made at least $5,000 of
800-525-8085. payable to any that total invested
party you in the fund from
designate. which withdrawals
will be made.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Payment To Third
Party
Mail your request Any amount. All registered
to INVESCO Funds owners of the
Group, Inc., P.O. account must sign
Box 173706 the request, with a
Denver, CO 80217- signature guarantee
3706. 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 [$250,000] for Class I shares, or
$5,000 for Class II shares ($2,000 for Individual Retirement Accounts) 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 the above minimums.
TAXES, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
- -----------------------------------------------
Taxes. The Fund intends to distribute to shareholders substantially all of
its net investment income, net capital gains and net gains from foreign currency
transactions, if any, in order to continue to qualify for tax treatment as a
regulated investment company. Thus, the Fund does not expect to pay any federal
income or excise taxes.
<PAGE>
Unless shareholders are exempt from income taxes, they must include all
dividends and capital gain distributions in taxable income for federal, state,
and local income tax purposes. Dividends and other distributions are taxable
whether they are received in cash or automatically reinvested in shares of the
Fund or another fund in the INVESCO group.
The Fund may be subject to withholding of foreign taxes on dividends or
interest it receives on foreign securities. Foreign taxes withheld will be
treated as an expense of the Fund unless the Fund meets the qualifications to
enable it to pass these taxes through to shareholders for use by them as a
foreign tax credit or deduction.
Shareholders may be subject to backup withholding of 31% on dividends,
capital gain distributions and redemption proceeds. Unless you are subject to
backup withholding for other reasons, you can avoid backup withholding on your
Fund account by ensuring that we have a correct, certified tax identification
number.
Dividends and Capital Gain Distributions. The Fund may earn ordinary or
net investment income in the form of dividends and interest on its investments.
The Fund's policy is to distribute substantially all of this income, less Fund
expenses, to shareholders on a quarterly basis, at the discretion of the
Company's board of directors.
In addition, the Fund realizes capital gains and losses when it sells
securities for more or less than it paid. If total gains on sales exceed total
losses (including losses carried forward from previous years), the Fund has a
net realized capital gain. Net realized capital gains, if any, are distributed
to shareholders at least annually, usually in December.
Dividends and capital gain distributions are paid to shareholders who hold
shares on the record date of distribution regardless of how long the shares have
been held. The Fund's share price will then drop by the amount of the
distribution on the day the distribution is made. If a shareholder purchases
shares immediately prior to the distribution, the shareholder will, in effect,
have "bought" the distribution by paying the full purchase price, a portion of
which is then returned in the form of a taxable distribution.
At the end of each year, information regarding the tax status of dividends
and capital gain distributions is provided to shareholders. Net realized capital
gains are divided into short-term and long-term gains depending upon how long
the Fund held the security which gave rise to the gains. The capital gains
distribution consists of long-term capital gains which are taxed at the capital
gains rate. Short-term capital gains are included with income from dividends and
interest as ordinary income and are paid to shareholders as taxable dividends.
<PAGE>
Shareholders also may realize capital gains or losses when they sell their
Fund shares at more or less than the price originally paid.
We encourage you to consult a tax adviser with respect to these matters.
For further information see "Dividends, Capital Gain Distributions and Taxes" in
the Statement of Additional Information.
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, except that only shares of a class are entitled to vote
on matters concerning only that class of shares, and holders of each class of
shares have separate voting rights on matters in which the interests of the
class differ from the interests of the other class, to the extent required by
applicable law, regulation and regulatory interpretation. The Company is not
generally required and does not expect to hold regular annual meetings of
shareholders. However, when requested to do so in writing by the holders of 10%
or more of the outstanding shares of the 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.
Master/Feeder Option. As a matter of fundamental policy, the Company may,
in the future, seek to achieve the Fund's investment objective by investing all
of the Fund's assets in another investment company having substantially the same
investment objectives, policies and limitations. It is expected that any such
investment company would be managed by IFG in substantially the same manner as
the Fund. If permitted by applicable law, any such investment may be made in the
sole discretion of the Company's board of directors without a vote of the Fund's
shareholders. However, shareholders will be given at least 30 days prior notice
of any such investment. Such an investment would be made only if the board of
directors determines it to be in the best interests of the Fund and its
shareholders based on potential cost savings, operational efficiencies or other
factors. No assurance can be given that costs would be materially reduced if the
option were implemented.
<PAGE>
INVESCO S&P 500 Index Fund
PROSPECTUS
October __, 1997
To receive general information and prospectuses on any of the INVESCO funds or
retirement plans, or to obtain current account or price information or responses
to other questions, call toll-free:
1-800-525-8085
To reach PAL, your 24-hour Personal Account Line (PAL) call:
1-800-424-8085
You can find us on the World Wide Web:
http://www.invesco.com
Or write to:
INVESCO Funds Group, Inc., Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
If you're in Denver, please visit one of our convenient Investor Centers:
Cherry Creek
155-B Fillmore Street
Denver Tech Center
7800 East Union Avenue, Lobby Level
In addition, all documents filed by the Company with the Securities and Exchange
commission can be located on a Web site maintained by the Commission at
http://www.sec.gov.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
^ October __, 1997
INVESCO SPECIALTY FUNDS, INC.
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 SPECIALTY FUNDS, INC. (the "Company") is a diversified, managed,
no-load mutual fund consisting of ^ seven separate portfolios of investments,
INVESCO Worldwide Capital Goods Fund (the "Capital Goods Fund"); INVESCO
Worldwide Communications Fund (the "Communications Fund"); INVESCO European
Small Company Fund (the "European Small Company Fund"); INVESCO Latin American
Growth Fund (the "Latin American Growth Fund"); INVESCO Asian Growth Fund (the
"Asian Growth Fund"); and INVESCO Realty Fund (the "Realty Fund"); and INVESCO
S&P 500 Index Fund (the "S&P 500 Index Fund") (collectively, the "Funds" and
individually, a "Fund").
The Capital Goods Fund seeks to achieve capital appreciation by investing,
under normal circumstances, at least 65% of its total assets in companies that
are primarily engaged in the design, development, manufacture, distribution,
sale or service of capital goods, or in the mining, processing, manufacture or
distribution of raw materials and intermediate goods used by industry and
agriculture. The Communications Fund seeks to achieve a high total return on
investment through capital appreciation and current income by investing, under
normal circumstances, at least 65% of its total assets in companies that are
primarily engaged in the design, development, manufacture, distribution or sale
of communications services and equipment. Up to 35% of the Communication Fund's
total assets will be invested, under normal circumstances, in companies that are
engaged in developing, constructing or operating infrastructure projects
throughout the world, or in supplying equipment or services to such companies.
Under normal circumstances, the Capital Goods Fund and Communications Fund will
each invest at least 65% of their total assets in issuers domiciled in at least
three countries, one of which may be the United States, although the Capital
Goods Fund's and Communications Fund's investment adviser expects the Capital
Goods Fund's and Communications Fund's investments to be allocated among a
larger number of countries. The percentage of the Capital Goods Fund's and
Communication Fund's assets invested in United States securities normally will
be higher than that invested in securities issued by companies in any other
single country. However, it is possible that at times the Capital Goods Fund or
the Communications Fund may have 65% or more of its total assets invested in
foreign securities.
<PAGE>
The European Small Company Fund seeks to achieve capital appreciation by
investing, under normal circumstances, at least 65% of its total assets in
equity securities of European companies whose individual equity market
capitalizations would place them (at the time of purchase) in the same size
range of companies in approximately the lowest 25% of market capitalization of
companies that have equity securities listed on a U.S. national securities
exchange. Under normal circumstances, the European Small Company Fund will
invest at least 65% of its total assets in issuers domiciled in at least five
countries, although the European Small Company Fund's investment adviser expects
the European Small Company Fund's investments to be allocated among a larger
number of countries. In this regard, no more than 50% of the European Small
Company Fund's total assets will be invested in issuers domiciled in any one
country.
The Latin American Growth Fund seeks to achieve capital appreciation by
investing, under normal circumstances, at least 65% of its total assets in
securities of issuers domiciled in Latin America. For purposes of this Fund,
Latin America will include: Mexico, Central America, South America, and the
Spanish speaking islands of the Caribbean.
The Asian Growth Fund seeks to achieve capital appreciation by investing,
under normal circumstances, at least 65% of its total assets in equity
securities of companies domiciled or with primary operations in Asia and the
Pacific Rim, excluding Japan. For purposes of this prospectus, Asia and Pacific
Rim territories will include, but not necessarily be limited to: China, Hong
Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan
and Thailand, as well as Pakistan and Indochina as their markets become more
accessible.
The Realty Fund seeks to achieve above average current income by
investing, under normal circumstances, at least 65% of its total assets in
publicly-traded stocks of companies primarily engaged in the real estate
industry.
The S&P 500 Index Fund seeks to provide both price performance and income
comparable to the Standard & Poor's 500 Composite Index (the "Index" or the "S&P
500") by investing in the equity securities that comprise the S&P 500 in
approximately the same proportion that they are represented in the Index and in
other instruments whose value depends upon or derives from the value of the
Index.
Investors may purchase shares of any or all of the Funds. Additional funds
may be added in the future.
Prospectuses for the Capital Goods Fund, the Communications Fund, the
European Small Company Fund, the Latin American Growth Fund, and the Asian
Growth Fund, dated December 1, 1996, ^ the Realty Fund dated June 30, 1997 and
the S&P 500 Index Fund dated October __, 1997, which provide the basic
information you should know before investing in a Fund, may be obtained without
<PAGE>
charge from INVESCO Funds Group, Inc., P.O. Box 173706, Denver, Colorado
80217-3706. This Statement of Additional Information is not a Prospectus, but
contains information in addition to and more detailed than that set forth in the
Prospectus. It is intended to provide you with additional information regarding
the activities and operations of the Funds and should be read in conjunction
with the Prospectus.
Investment Adviser and Distributor: INVESCO FUNDS GROUP, INC.
<PAGE>
TABLE OF CONTENTS Page
INVESTMENT POLICIES AND RESTRICTIONS 35
THE FUNDS AND THEIR MANAGEMENT 47
HOW SHARES CAN BE PURCHASED 63
HOW SHARES ARE VALUED 67
FUND PERFORMANCE 69
SERVICES PROVIDED BY THE FUNDS 70
TAX-DEFERRED RETIREMENT PLANS 71
HOW TO REDEEM SHARES 71
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES 72
INVESTMENT PRACTICES 74
ADDITIONAL INFORMATION 78
APPENDIX A 82
APPENDIX B 86
FINANCIAL STATEMENTS 88
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
- ------------------------------------
As discussed in each Fund's Prospectus in the section entitled "Investment
Objective and Policies," the Funds may invest in a variety of securities, and
employ a broad range of investment techniques in seeking to achieve their
respective investment objectives. Such securities and techniques include the
following:
Types of Equity Securities
- --------------------------
As described in the Prospectuses, equity securities which may be purchased
by the Funds consist of common, preferred and convertible preferred stocks, and
securities having equity characteristics such as rights, warrants and
convertible debt securities. Common stocks and preferred stocks represent equity
ownership interests in a corporation and participate in the corporation's
earnings through dividends which may be declared by the corporation. Unlike
common stocks, preferred stocks are entitled to stated dividends payable from
the corporation's earnings, which in some cases may be "cumulative" if prior
stated dividends have not been paid. Dividends payable on preferred stock have
priority over distributions to holders of common stock, and preferred stocks
generally have preferences on the distribution of assets in the event of the
corporation's liquidation. Preferred stocks may be "participating," which means
that they may be entitled to dividends in excess of the stated dividend in
certain cases. The rights of common and preferred stocks are generally
subordinate to rights associated with a corporation's debt securities. Rights
and warrants are securities which entitle the holder to purchase the securities
of a company (generally, its common stock) at a specified price during a
specified time period. Because of this feature, the values of rights and
warrants are affected by factors similar to those which determine the prices of
common stocks and exhibit similar behavior. Rights and warrants may be purchased
directly or acquired in connection with a corporate reorganization or exchange
offer.
Convertible securities which may be purchased by the Funds include
convertible debt obligations and convertible preferred stock. A convertible
security entitles the holder to exchange it for a fixed number of shares of
common stock (or other equity security), usually at a fixed price within a
specified period of time. Until conversion, the holder receives the interest
paid on a convertible bond or the dividend preference of a preferred stock.
Convertible securities have an "investment value" which is the theoretical
value determined by the yield they provide in comparison with similar securities
without the conversion feature. Investment value changes are based upon
prevailing interest rates and other factors. They also have a "conversion value"
which is the worth in market value if the securities were exchanged for their
underlying equity securities. Conversion value fluctuates directly with the
price of the underlying security. If conversion value is substantially below
investment value, the price of the convertible security is governed principally
by its investment value. If the conversion value is near or above investment
value, the price of the convertible security generally will rise above
<PAGE>
investment value and may represent a premium over conversion value due to the
combination of the convertible security's right to interest (or dividend
preference) and the possibility of capital appreciation from the conversion
feature. A convertible security's price, when price is influenced primarily by
its conversion value, generally will yield less than a senior non-convertible
security of comparable investment value. Convertible securities may be purchased
at varying price levels above their investment values or conversion values.
However, there is no assurance that any premium above investment value or
conversion value will be recovered because prices change and, as a result, the
ability to achieve capital appreciation through conversion may be eliminated.
Restricted/144A Securities
- --------------------------
In recent years, a large institutional market has developed for certain
securities that are not registered under the Securities Act of 1933 (the "1933
Act"). Institutional investors generally will not seek to sell these instruments
to the general public, but instead will often depend on an efficient
institutional market in which such unregistered securities can 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.
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 restricted securities
that might develop as a result of Rule 144A could provide both readily
ascertainable values for restricted securities and the ability to liquidate an
investment in order to satisfy share redemption orders. An insufficient number
of qualified institutional buyers interested in purchasing a Rule 144A-eligible
security held by a Fund, however, could affect adversely the marketability of
such portfolio security and the Fund might be unable to dispose of such security
promptly or at reasonable prices.
Municipal Bonds
- ---------------
^ Except for the S&P 500 Index Fund, the Funds may invest in municipal
bonds, the interest from which is exempt from federal income taxes, when their
investment adviser and sub-adviser (collectively, "Fund Management") believes
that the potential total return on the investment is better than the return that
otherwise would be achieved by investing in fixed-income securities issued by
corporations or the U.S. government or its agencies, the interest from which is
not exempt from federal income taxes. Municipal bonds are issued by or on behalf
of states, territories and possessions of the United States and the District of
Columbia, and their political subdivisions, agencies and instrumentalities, to
obtain funds for various public purposes, including: the construction of a wide
<PAGE>
range of public facilities such as airports, bridges, highways, housing,
hospitals, mass transportation, schools, streets, and water and sewer works;
refunding outstanding obligations; and obtaining funds for general operating
expenses. The Funds' investments in municipal bonds, as is true for any debt
securities, generally will be subject to both credit risk and market risk. See
the section of the Prospectuses entitled "Risk Factors."
Obligations of Domestic Banks
- -----------------------------
These obligations consist of certificates of deposit ("CDs") and banker's
acceptances issued by domestic banks (including their foreign branches) having
total assets in excess of $5 billion, which meet the Funds' minimum rating
requirements. CDs are issued against deposits in a commercial bank for a
specified period and rate and are normally negotiable. Eurodollar CDs are
certificates issued by a foreign branch (usually London) of a U.S. domestic
bank, and, as such, the credit is deemed to be that of the domestic bank.
Bankers' acceptances are short-term credit instruments evidencing the
promise of the bank (by virtue of the bank's "acceptance") to pay at maturity a
draft which has been drawn on it by a customer (the "drawer"). These instruments
are used to finance the import, export, transfer, or storage of goods and
reflect the obligation of both the bank and the drawer to pay the face amount.
Securities Lending
- ------------------
The Funds also may lend their securities to qualified brokers, dealers,
banks, or other financial institutions. This practice permits the Funds to earn
income, which, in turn, can be invested in additional securities of the type
described in a Fund's Prospectus in pursuit of the Fund's investment objective.
Loans of securities by the Funds will be collateralized by cash, letters of
credit, or securities issued or guaranteed by the U.S. government or its
agencies equal to at least 100% of the current market value of the loaned
securities, plus accrued interest and dividends, determined on a daily basis.
Cash collateral will be invested only in high quality short-term investments
offering maximum liquidity. Lending securities involves certain risks, the most
significant of which is the risk that a borrower may fail to return a portfolio
security. The Funds monitor the creditworthiness of borrowers in order to
minimize such risks. The Funds will not lend any security if, as a result of the
loan, the aggregate value of securities then on loan would exceed 33-1/3% of
each Fund's total assets (taken at market value).
Commercial Paper
- ----------------
The Funds may invest in these obligations, which are short-term promissory
notes issued by domestic corporations to meet current working capital
requirements. Such paper may be unsecured or backed by a letter of credit.
Commercial paper issued with a letter of credit is, in effect, "two party
paper," with the issuer directly responsible for payment, plus a bank's
guarantee that if the note is not paid at maturity by the issuer, the bank will
pay the principal and interest to the buyer. Commercial paper is sold either as
interest-bearing or on a discounted basis, with maturities not exceeding 270
days. The Funds will only invest in commercial paper which at the date of
purchase is rated A-2 or higher by Standard & Poor's or Prime-2 or higher by
<PAGE>
Moody's Investors Service, Inc. or, if unrated, commercial paper that is judged
by Fund Management to be equivalent in quality to commercial paper having such
ratings. A commercial paper rating of A-2 or Prime-2 indicates a strong capacity
for repayment of short-term promissory obligations.
Mortgage-Backed Securities
- --------------------------
The Funds may invest in mortgage-backed securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities, or institutions such as
banks, insurance companies, and savings and loans. Some of these securities,
such as Government National Mortgage Association ("GNMA") certificates, are
backed by the full faith and credit of the U.S. Treasury while others, such as
Federal Home Loan Mortgage Corporation ("Freddie Mac") certificates, are not.
The Funds, with the exception of the Realty Fund, currently do not intend to
invest more than 5% of their respective net assets in mortgage-backed
securities.
Mortgage-backed securities represent interests in a pool of mortgages.
Principal and interest payments made on the mortgages in the underlying mortgage
pool are passed through to the Funds. Unscheduled prepayments of principal
shorten the securities' weighted average life and may lower their total return.
The value of these securities also may change because of changes in the market's
perception of the creditworthiness of the federal agency or private institution
that issued them. In addition, the mortgage securities market in general may be
adversely affected by changes in governmental regulation or tax policies.
The Realty Fund also may invest in a variety of mortgage-backed securities
known as commercial mortgage-backed securities ("CMBs"). CMBs are derivative
multiple-class mortgage-backed securities. CMBs are generally structured with
two classes, each receiving a different proportion of interest and principal
distributions on a pool of mortgage assets. In general, one class will receive
most of the principal payments and some of the interest, with the other class
receiving some of the principal and most of the interest payments.
Zero Coupon Bonds and Pay-In-Kind Bonds
- ---------------------------------------
The Funds may invest in zero coupon bonds or "strips." Zero coupon bonds do
not make regular interest payments; rather, they are sold at a discount from
face value. Principal and accredited discount (representing interest accrued but
not paid) are paid at maturity. "Strips" are debt securities that are stripped
of their interest after the securities are issued, but otherwise are comparable
to zero coupon bonds. The issuers of all zero coupon bonds, and the obligor of
all "strips" purchased by the Funds, will be the U.S. government or its agencies
or instrumentalities. The market value of "strips" and zero coupon bonds
generally fluctuates in response to changes in interest rates to a greater
degree than interest-paying securities of comparable term and quality. In order
for a Fund to maintain its qualification as a regulated investment company, it
may be required to distribute income recognized on zero coupon bonds or "strips"
even though no cash may be paid to the Fund until the maturity or call date of
the bond, and any such distribution could reduce the amount of cash available
for investment by the Fund. The Funds currently do not intend to invest more
than 5% of their respective net assets in zero coupon bonds or "strips."
<PAGE>
The Realty Fund may invest in zero coupon bonds and pay-in- kind ("PIK")
bonds if Fund Management determines that the risk of a default on the security,
which could result in adverse tax consequences, is not significant. PIK bonds
pay interest in cash or additional securities, at the issuer's option, for a
specified period. Being extremely responsive to changes in interest rates, the
market price of zero coupon and PIK bonds may be more volatile than other bonds.
The Realty Fund may be required to distribute income recognized on these bonds,
even though no cash interest payments are received, which could reduce the
amount of cash available for investment by the Fund.
Asset-Backed Securities
- -----------------------
Asset-backed securities represent interests in pools of consumer loans
(other than mortgage loans) and most often are structured as pass-through
securities. Interest and principal payments ultimately depend on payment of the
underlying loans by individuals, although the securities may be supported by
letters of credit or other credit enhancements. The underlying assets (e.g.,
loans) are subject to prepayments which shorten the securities' weighted average
life and may lower their returns. If the credit support or enhancement is
exhausted, losses or delays in payment may result if the required payments of
principal and interest are not made. The value of these securities also may
change because of changes in the market's perception of the creditworthiness of
the servicing agent for the pool, the originator of the pool, or the financial
institution providing the credit support or enhancement. The Funds currently do
not intend to invest more than 5% of their respective net assets in asset-backed
securities.
The Realty Fund may invest in real estate mortgage investment conduit
certificates ("REMICs"). REMICs are a specialized form of CMOs that qualify for
favorable tax treatment because they invest in certain mortgages secured by
interests in real estate and other permitted investments. Investors may purchase
"regular" and "residual" interest shares of beneficial interest in REMIC trusts.
REMICs are subject to the same general risks as CMOs.
Futures and Options on Futures ^, Securities and Indices
- --------------------------------------------------------
As described in each Fund's Prospectus, the Funds may enter into futures
contracts, and purchase and sell ("write") options to buy or sell futures
contracts and other securities or indices, which are included in the types of
instruments sometimes referred to as "derivatives^," because their value depends
upon or derives from the value of an underlying asset, reference rate or index.
The Funds will comply with and adhere to all limitations in the manner and
extent to which they effect transactions in futures and options on such futures
currently imposed by the rules and policy guidelines of the Commodity Futures
Trading Commission (the "CFTC") as conditions for exemption of a mutual fund, or
investment advisers thereto, from registration as a commodity pool operator.
Under those restrictions, a Fund will not, as to any positions, whether long,
short or a combination thereof, enter into futures and options thereon for which
the aggregate initial margins and premiums exceed 5% of the fair market value of
the Fund's total assets after taking into account unrealized profits and losses
<PAGE>
on options it has entered into. In the case of an option that is "in-the-money,"
as defined in the Commodity Exchange Act (the "CEA"), the in-the-money amount
may be excluded in computing such 5%. (In general a call option on a future is
"in-the-money" if the value of the future exceeds the exercise ("strike") price
of the call; a put option on a future is "in-the-money" if the value of the
future which is the subject of the put is exceeded by the strike price of the
put.) The Funds may use futures and options thereon solely for bona fide hedging
or for other non-speculative purposes within the meaning and intent of the
applicable provisions of the CEA and the regulations thereunder. As to long
positions which are used as part of the Funds' portfolio management strategies
and are incidental to their activities in the underlying cash market, the
"underlying commodity value" of the Funds' futures and options thereon must not
exceed the sum of (i) cash set aside in an identifiable manner, or liquid
securities so set aside, plus sums deposited on margin; (ii) cash proceeds from
existing investments due in 30 days; and (iii) accrued profits held at the
futures commission merchant. The "underlying commodity value" of a future is
computed by multiplying the size of the future by the daily settlement price of
the future. For an option on a future, that value is the underlying commodity
value of the future underlying the option.
Unlike when a Fund purchases or sells a security, no price is paid or
received by a Fund upon the purchase or sale of a futures contract. Instead, the
Fund will be required to deposit in a segregated asset account with the broker
an amount of cash or qualifying securities (currently U.S. Treasury bills),
currently in a minimum amount of $15,000. This is called "initial margin." Such
initial margin is in the nature of a performance bond or good faith deposit on
the contract. However, since losses on open contracts are required to be
reflected in cash in the form of variation margin payments, the Fund may be
required to make additional payments during the term of the contracts to its
broker. Such payments would be required, for example, where, during the term of
an interest rate futures contract purchased by a Fund, there was a general
increase in interest rates, thereby making the Fund's portfolio securities less
valuable. In all instances involving the purchase of financial futures contracts
by a Fund, an amount of cash together with such other securities as permitted by
applicable regulatory authorities to be utilized for such purpose, at least
equal to the market value of the futures contracts, will be deposited in a
segregated account with the Fund's custodian to collateralize the position. At
any time prior to the expiration of a futures contract, the Fund may elect to
close its position by taking an opposite position which will operate to
terminate the Fund's position in the futures contract. For a more complete
discussion of the risks involved in futures and options on futures and other
securities, refer to Appendix A ("Description of Futures and Options
Contracts").
Where futures are purchased to hedge against a possible increase in the
price of a security before a Fund is able in an orderly fashion to invest in the
security, it is possible that the market may decline instead. If the Fund, as a
result, concluded not to make the planned investment at that time because of
concern as to possible further market decline or for other reasons, the Fund
would realize a loss on the futures contract that is not offset by a reduction
in the price of securities purchased.
<PAGE>
In addition to the possibility that there may be an imperfect correlation
or no correlation at all between movements in the futures contract and the
portion of the portfolio being hedged, the price of futures may not correlate
perfectly with movements in the prices due to certain market distortions. All
participants in the futures market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions which
could distort the normal relationship between the underlying securities and the
value of the futures contract. Moreover, the deposit requirements in the futures
market are less onerous than margin requirements in the securities market and
may therefore cause increased participation by speculators in the futures
market. Such increased participation may also cause temporary price distortions.
Due to the possibility of price distortion in the futures market and because of
the imperfect correlation between movements in the value of the underlying
securities and movements in the prices of futures contracts, the value of
futures contracts as a hedging device may be reduced.
In addition, if a 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 ^ which may be disadvantageous to the Fund.
Options on Futures Contracts
- ----------------------------
The Funds may buy and write options on futures contracts for hedging
purposes, ^ options are also included in the types of instruments sometimes
known as derivatives. The purchase of a call option on a futures contract is
similar in some respects to the purchase of a call option on an individual
security. Depending on the pricing of the option compared to either the price of
the futures contract upon which it is based or the price of the underlying
instrument, ownership of the option may or may not be less risky than ownership
of the futures contract or the underlying instrument. As with the purchase of
futures contracts, when a Fund is not fully invested it may buy a call option on
a futures contract to hedge against a market advance.
The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the security or foreign currency which is
deliverable under, or of the index comprising, the futures contract. If the
futures price at the expiration of the option is below the exercise price, a
Fund will retain the full amount of the option premium which provides a partial
hedge against any decline that may have occurred in the Fund's portfolio
holdings. The writing of a put option on a futures contract constitutes a
partial hedge against increasing prices of the security or foreign currency
which is deliverable under, or of the index comprising, the futures contract. If
the futures price at expiration of the option is higher than the exercise price,
a 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
<PAGE>
considering buying. If a call or put option a Fund has written is exercised, the
Fund will incur a loss which will be reduced by the amount of the premium it
received. Depending on the degree of correlation between change in the value of
its portfolio securities and changes in the value of the futures positions, a
Fund's losses from existing options on futures may to some extent be reduced or
increased by changes in the value of portfolio securities.
The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities. For
example, a Fund may buy a put option on a futures contract to hedge the Fund's
portfolio against the risk of falling prices.
The amount of risk a Fund assumes when it buys an option on a futures
contract is the premium paid for the option plus related transaction costs. In
addition to the correlation risks discussed above, the purchase of an option
also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the options bought.
Forward Foreign Currency Contracts
- ----------------------------------
The Funds may enter into forward currency contracts, which are included in
the types of instruments sometimes known as derivatives, to purchase or sell
foreign currencies (i.e., non-U.S. currencies) as a hedge against possible
variations in foreign exchange rates. These instruments are sometimes referred
to as "derivatives." A forward foreign currency contract is an agreement between
the contracting parties to exchange an amount of currency at some future time at
an agreed upon rate. The rate can be higher or lower than the spot rate between
the currencies that are the subject of the contract. A forward contract
generally has no deposit requirement, and such transactions do not involve
commissions. By entering into a forward contract for the purchase or sale of the
amount of foreign currency invested in a foreign security transaction, a Fund
can hedge against possible variations in the value of the dollar versus the
subject currency either between the date the foreign security is purchased or
sold and the date on which payment is made or received or during the time the
Fund holds the foreign security. Hedging against a decline in the value of a
currency in the foregoing manner does not eliminate fluctuations in the prices
of portfolio securities or prevent losses if the prices of such securities
decline. Furthermore, such hedging transactions preclude the opportunity for
gain if the value of the hedged currency should rise. The Funds will not
speculate in forward currency contracts. Although the Funds have not adopted any
limitations on their ability to use forward contracts as a hedge against
fluctuations in foreign exchange rates, the Funds do not attempt to hedge all of
their non-U.S. portfolio positions and will enter into such transactions only to
the extent, if any, deemed appropriate by their investment adviser or
sub-adviser. The Funds will not enter into forward contracts for a term of more
than one year.
Swaps and Swap-Related Products
- -------------------------------
Interest rate swaps involve the exchange by a Fund with another party of
their respective commitments to pay or receive interest, e.g., an exchange of
floating rate payments for fixed rate payments. The exchange commitments can
<PAGE>
involve payments to be made in the same currency or in different currencies. The
purchase of an interest rate cap entitles the purchaser, to the extent that a
specified index exceeds a predetermined interest rate, to receive payments of
interest on a contractually-based principal amount from the party selling the
interest rate cap. The purchase of an interest rate floor entitles the
purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest on a contractually-based
principal amount from the party selling the interest rate floor.
The Funds may enter into interest rate swaps, caps and floors, which are
included in the types of instruments sometimes known as derivatives, on either
an asset-based or liability-based basis, depending upon whether they are hedging
their assets or their liabilities, and usually will enter into interest rate
swaps on a net basis, i.e., the two payment streams are netted out, with a Fund
receiving or paying, as the case may be, only the net amount of the two
payments. The net amount of the excess, if any, of a Fund's obligations over its
entitlement with respect to each interest rate swap will be calculated on a
daily basis, and an amount of cash or high-grade liquid assets having an
aggregate net asset value at least equal to the accrued excess will be
maintained in a segregated account by the Funds' custodian. If a Fund enters
into an interest rate swap on other than a net basis, the Fund would maintain a
segregated account in the full amount accrued on a daily basis of the Fund's
obligations with respect to the swap. The Funds will not enter into any interest
rate swap, cap or floor transaction unless the unsecured senior debt or the
claims-paying ability of the other party thereto is rated in one of the three
highest rating categories of at least one nationally recognized statistical
rating organization at the time of entering into such transaction. The Funds'
adviser or sub-adviser will monitor the creditworthiness of all counterparties
on an ongoing basis. If there is a default by the other party to such a
transaction, a Fund would have contractual remedies pursuant to the agreements
related to the transaction.
The swap market has grown substantially in recent years with a large
number of banks and investment banking firms acting both as principals and as
agents utilizing standardized swap documentation. Caps and floors are more
recent innovations for which standardized documentation has not yet been
developed and, accordingly, they are less liquid than swaps. To the extent a
Fund sells (i.e., writes) caps and floors, it will maintain in a segregated
account cash or high-grade liquid assets having an aggregate net asset value at
least equal to the full amount, accrued on a daily basis, of the Fund's
obligations with respect to any caps or floors.
There is no limit on the amount of interest rate swap transactions that
may be entered into by a Fund. These transactions may in some instances involve
the delivery of securities or other underlying assets by a Fund or its
counterparty to collateralize obligations under the swap. The documentation
currently used in those markets attempts to limit the risk of loss with respect
to interest rate swaps to the net amount of the payments that a party is
contractually obligated to make. If the other party to an interest rate swap
<PAGE>
that is not collateralized defaults, the Fund would anticipate losing the net
amount of the payments that the Fund contractually is entitled to receive over
the payments that the Fund is contractually obligated to make. The Funds may buy
and sell (i.e., write) caps and floors without limitation, subject to the
segregated account requirement described above as well as the Funds' other
investment restrictions set forth below.
Investment Restrictions
- -----------------------
As described in the ^ Funds' Prospectuses ^, the Funds operate under
certain investment restrictions which are fundamental and may not be changed
with respect to a particular Fund without the prior approval of the holders of a
majority, as defined in the Investment Company Act of 1940 (the "1940 Act"), of
the outstanding voting securities of that Fund. For purposes of the following
limitations, all percentage limitations apply immediately after a purchase or
initial investment. Any subsequent change in a particular percentage resulting
from fluctuations in value does not require elimination of any security from a
Fund.
Each Fund, unless otherwise indicated, may not:
1. With respect to seventy-five percent (75%) of each Fund's total
assets, purchase the securities of any one issuer (except cash items
and "government securities" as defined under the 1940 Act, if the
purchase would cause the Fund to have more than 5% of the value of
its total assets invested in the securities of such issuer or to own
more than 10% of the outstanding voting securities of such issuer;
2. Borrow money or issue senior securities (as defined in the 1940 Act),
except that the Fund may borrow money for temporary or emergency
purposes (not for leveraging or investment) and may enter into
reverse repurchase agreements in an aggregate amount not exceeding
33-1/3% of the value of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings
that come to exceed 33-1/3% of the value of the Fund's total assets
by reason of a decline in total assets will be reduced within three
business days to the extent necessary to comply with the 33-1/3%
limitation. This restriction shall not prohibit deposits of assets
to margin or guarantee positions in futures, options, swaps
or forward contracts, or the segregation of assets in connection
with such contracts.
3. Invest directly in real estate or interests in real estate; however,
the Fund may own debt or equity securities issued by companies
engaged in those businesses. This restriction shall not prohibit the
Realty Fund from directly holding real estate if such real estate is
acquired by that Fund as a result of a default on debt securities
held by that Fund.
<PAGE>
4. Purchase or sell physical commodities other than foreign currencies
unless acquired as a result of ownership of securities (but this
shall not prevent the Fund from purchasing or selling options,
futures, swaps and forward contracts or from investing in securities
or other instruments backed by physical commodities).
5. Lend any security or make any other loan if, as a result, more than
33-1/3% of its total assets would be lent to other parties (but this
limitation does not apply to purchases of commercial paper, debt
securities or to repurchase agreements.)
6. Act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the
disposition of portfolio securities of the Fund.
7. The European Small Company Fund, the Latin American Growth Fund and
the Asian Growth Fund may not invest more than 25% of the value of
their respective total assets in any particular industry (other than
Government securities). The Realty Fund may invest more than 25% of
the value of its total assets in securities of the Real Estate
Industry.
As a fundamental policy in addition to the above, each Fund may,
notwithstanding any other investment policy or limitation (whether or not
fundamental), invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental investment
objectives, policies and limitations as the Fund.
In applying restriction 7 above, the European Small Company Fund, the
Latin American Growth Fund and the Asian Growth Fund use an industry
classification system for international securities based on the information
obtained from Bloomberg L.P., Moody's International and the O'Neil Database
published by William O'Neil & Co., Inc.
Furthermore, the board of directors has adopted additional investment
restrictions for each Fund, unless specifically noted to the contrary. These
restrictions are operating policies of each Fund and may be changed by the board
of directors without shareholder approval. The additional investment
restrictions adopted by the board of directors to date with respect to each Fund
^ include the following:
(a) The Fund's investments in warrants, valued at the lower of cost or
market, may not exceed 5% of the value of its net assets. Included
within that amount, but not to exceed 2% of the value of the Fund's
net assets, may be warrants that are not listed on the New York or
American Stock Exchanges. Warrants acquired by the Fund in units or
attached to securities shall be deemed to be without value unless
such warrants are separately transferable and current market prices
are available, or unless otherwise determined by the board of
directors.
<PAGE>
(b) The Fund will not (i) enter into any futures contracts or options on
futures contracts if immediately thereafter the aggregate margin
deposits on all outstanding futures contracts positions held by the
Fund and premiums paid on outstanding options on futures contracts,
after taking into account unrealized profits and losses, would exceed
5% of the market value of the total assets of the Fund, or (ii) enter
into any futures contracts if the aggregate net amount of the Fund's
commitments under outstanding futures contracts positions of the Fund
would exceed the market value of the total assets of the Fund.
(c) The Fund does not currently intend to sell securities short, unless
it owns or has the right to obtain securities equivalent in kind and
amount to the securities sold short without the payment of any
additional consideration therefor, and provided that transactions in
options, swaps and forward futures contracts are not deemed to
constitute selling securities short.
(d) The Fund does not currently intend to purchase securities on margin,
except that the Fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments and other deposits in connection with transactions in
options, futures, swaps and forward contracts shall not be deemed to
constitute purchasing securities on margin.
(e) The Fund does not currently intend to (i) purchase securities of
closed end investment companies, except in the open market where no
commission except the ordinary broker's commission is paid, or (ii)
purchase or retain securities issued by other open-end investment
companies. Limitations (i) and (ii) do not apply to money market
funds or to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or
merger. If the Fund invests in a money market fund, the Fund's
investment adviser will waive its advisory fee on the assets of the
Fund which are invested in the money market fund during the time that
those assets are so invested.
(f) The Fund may not mortgage or pledge any securities owned or held by
the Fund in amounts that exceed, in the aggregate, 15% of the Fund's
net assets, provided that this limitation does not apply to reverse
repurchase agreements or in the case of assets deposited to margin or
guarantee positions in futures, options, swaps or forward contracts
or placed in a segregated account in connection with such contracts.
(g) The Fund does not currently intend to purchase securities of any
issuer (other than U.S. Government agencies and instrumentalities or
instruments guaranteed by an entity with a record of more than three
years' continuous operation, including that of predecessors) with a
record of less than three years' continuous operation (including
that of predecessors) if such purchase would cause the Fund's
investments in all such issuers to exceed 5% of the Fund's total
assets taken at market value at the time of such purchase.
<PAGE>
(h) The Fund does not currently intend to invest directly in oil, gas, or
other mineral development or exploration programs or leases; however,
the Fund may own debt or equity securities of companies engaged in
those businesses.
(i) The Fund does not currently intend to purchase any security or enter
into a repurchase agreement if, as a result, more than 15% of its net
assets would be invested in repurchase agreements not entitling the
holder to payment of principal and interest within seven days and in
securities that are illiquid by virtue of legal or contractual
restrictions on resale or the absence of a readily available market.
The board of directors, or the Fund's investment adviser acting
pursuant to authority delegated by the board of directors, may
determine that a readily available market exists for securities
eligible for resale pursuant to Rule 144A under the Securities Act
of 1933, or any successor to such rule, and therefore that such
securities are not subject to the foregoing limitation.
(j) The Fund may not invest in companies for the purpose of exercising
control or management, except to the extent that exercise by the Fund
of its rights under agreements related to portfolio securities would
be deemed to constitute such control.
With respect to investment restriction (i) above, the board of directors
has delegated to Fund Management the authority to determine that a liquid market
exists for securities eligible for resale pursuant to Rule 144A under the 1933
Act, or any successor to such rule, and that such securities are not subject to
restriction (i) above. Under guidelines established by the board of directors,
Fund Management will consider the following factors, among others, in making
this determination: (1) the unregistered nature of a Rule 144A security, (2) the
frequency of trades and quotes for the security; (3) the number of dealers
willing to purchase or sell the security and the number of other potential
purchasers; (4) dealer undertakings to make a market in the security; and (5)
the nature of the security and the nature of marketplace trades (e.g., the time
needed to dispose of the security, the method of soliciting offers and the
mechanics of transfer).
^
The Company has voluntarily undertaken that the European Small Company
Fund will invest in no more than 15% of its total assets in lower rated debt
securities, commonly known as "junk bonds."
THE FUNDS AND THEIR MANAGEMENT
- ------------------------------
The Company. The Company was incorporated on April 12, 1994, under the laws
of Maryland.
<PAGE>
The Investment Adviser. INVESCO Funds Group, Inc., a Delaware corporation
("IFG"), is employed as the Company's investment adviser. IFG was established in
1932 and also serves as an investment adviser to INVESCO Capital Appreciation
Funds, Inc. (formerly, INVESCO Dynamics Fund, Inc.), INVESCO Diversified Funds,
Inc.^, INVESCO Emerging Opportunity Funds, Inc., INVESCO Growth Fund, Inc.,
INVESCO Income Funds, Inc., INVESCO Industrial Income Fund, Inc., INVESCO
International Funds, Inc., INVESCO Money Market Funds, Inc., INVESCO Multiple
Asset Funds, Inc., INVESCO Strategic Portfolios, Inc., INVESCO Tax-Free Income
Funds, Inc., INVESCO Value Trust, and INVESCO Variable Investment Funds, Inc.
IFG is an indirect, wholly-owned subsidiary of AMVESCAP PLC, a
publicly-traded holding company that, through its subsidiaries, engages on an
international basis in the business of investment management. 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 $165 billion in assets
under management. IFG was established in 1932 and as of July 31, 1996, managed
14 mutual funds, consisting of 39 separate portfolios, on behalf of over 821,000
shareholders. AMVESCAP PLC's North American subsidiaries include the following:
--INVESCO Capital Management, Inc. of Atlanta, Georgia, manages
institutional investment portfolios, consisting primarily of discretionary
employee benefit plans for corporations and state and local governments, and
endowment funds. INVESCO Capital Management, Inc. is the sole shareholder of
INVESCO Services, Inc., a registered broker-dealer whose primary business is the
distribution of shares of two registered investment companies.
--INVESCO Management & Research, Inc. (formerly Gardner and Preston Moss,
Inc.) of Boston, Massachusetts, primarily manages pension and endowment
accounts.
--PRIMCO Capital Management, Inc. of Louisville, Kentucky, specializes in
managing stable return investments, principally on behalf of Section 401(k)
retirement plans.
--INVESCO Realty Advisors, Inc. of Dallas, Texas, is responsible for
providing advisory services in the U.S. real estate markets for AMVESCAP PLC's
clients worldwide. Clients include corporate plans, public pension funds as well
as endowment and foundation accounts.
--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
variable insurance companies.
<PAGE>
--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.
The Sub-Advisers. IFG, as investment adviser, has contracted with INVESCO
Trust Company ("INVESCO Trust") to provide investment advisory and research
services on behalf of the Capital Goods Fund and Communications Fund. INVESCO
Trust has the primary responsibility for providing portfolio investment
management services to these Funds. INVESCO Trust, a trust company founded in
1969, is a wholly-owned subsidiary of IFG.
Additionally, IFG has contracted with INVESCO Asset Management Limited
("IAML") to provide investment advisory and research services on behalf of the
European Small Company Fund and Latin American Growth Fund. IAML has the primary
responsibility for providing portfolio investment management services to these
Funds. IAML is an indirect, wholly-owned subsidiary of AMVESCAP PLC.
Additionally, IFG has contracted with INVESCO Asia Ltd. ("INVESCO Asia") to
provide investment advisory and research services on behalf of the Asian Growth
Fund. INVESCO Asia has primary responsibility for providing portfolio investment
management services to this Fund. INVESCO Asia is an indirect wholly-owned
subsidiary of AMVESCAP PLC.
Additionally, IFG has contracted with INVESCO Realty Advisors, Inc.
("IRAI") to provide investment advisory and research services on behalf of the
Realty Fund. IRAI has the primary responsibility for providing portfolio
investment management services to the Fund. IRAI is an indirect, wholly-owned
subsidiary of AMVESCAP PLC.
<PAGE>
Additionally, IFG has contracted with World Asset Management ("World") to
provide investment advisory and certain recordkeeping services to the S&P 500
Index Fund. World has the primary responsibility for providing portfolio
investment management services to this Fund. World is unaffiliated with any IFG
entity.
As indicated in the Prospectuses, IFG 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 IFG and its North American affiliates. The policy requires
officers, inside directors, investment and other personnel of IFG 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 if, among
other reasons, the proposed personal transaction would be contrary to the
provisions of the policy or would be deemed to adversely affect any transaction
then known to be under consideration for or to have been effected on behalf of
any client account, including the Funds. INVESCO Asia ^, IAML, IRAI and World
are subject to similar policies.
In addition to the pre-clearance requirement described above, the policy
subjects officers, inside directors, investment and other personnel of IFG 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 IFG.
Investment Advisory Agreement. IFG 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 Company, including a
majority of the directors who are not "interested persons" of the Company or IFG
at a meeting called for such purpose. Shareholders of the Capital Goods Fund,
the Communications Fund, the European Small Company Fund, the Latin American
Growth Fund and the Asian Growth Fund approved the Agreement on January 31, 1997
for an initial term expiring February 28, 1999. With respect to the Realty Fund,
the Agreement was approved by IFG on December 9, 1996^ for an initial term
expiring December 9, 1998. With respect to the S&P 500 Index Fund, the Agreement
was approved by IFG on _______________, 1997 for an initial term ending
___________, 1999. Thereafter, the Agreement may be continued from year to year
as to each Fund as long as each such continuance is specifically approved at
least annually by the board of directors of the Company, or by a vote of the
holders of a majority, as defined in the 1940 Act, of the outstanding shares of
the Fund. Any such continuance also must be approved by a majority of the
Company's directors who are not parties to the Agreement or interested persons
(as defined in the 1940 Act) of any such party, cast in person at a meeting
called for the purpose of voting on such continuance. The Agreement may be
terminated at any time without penalty by either party upon sixty (60) days'
written notice and terminates automatically in the event of an assignment to the
extent required by the 1940 Act and the rules thereunder.
<PAGE>
The Agreement provides that IFG shall manage the investment portfolios of
the Funds in conformity with the Funds' investment policies (either directly or
by delegation to a sub-adviser, which may be a party affiliated with IFG).
Further, IFG shall perform all administrative, internal accounting (including
computation of net asset value), clerical, statistical, secretarial and all
other services necessary or incidental to the administration of the affairs of
the Funds excluding, however, those services that are the subject of any
separate agreement between the Company and IFG 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 IFG discussed below.
Services provided under the Agreement include, but are not limited to: supplying
the Company with officers, clerical staff and other employees, if any, who are
necessary in connection with the Funds' operations; furnishing office space,
facilities, equipment, and supplies; providing personnel and facilities required
to respond to inquiries related to shareholder accounts; conducting periodic
compliance reviews of the Funds' operations; preparation and review of required
documents, reports and filings by IFG's in-house legal and accounting staff
(including the prospectus, statement of additional information, proxy
statements, shareholder reports, tax returns, reports to the SEC, and other
corporate documents of the Funds), except insofar as the assistance of
independent accountants or attorneys is necessary or desirable; supplying basic
telephone service and other utilities; and preparing and maintaining certain of
the books and records required to be prepared and maintained by the Funds under
the 1940 Act. Expenses not assumed by IFG are borne by the Funds.
As full compensation for its advisory services to the Company, IFG receives
a monthly fee. The fee is based upon a percentage of each Fund's average net
assets, determined daily. With respect to the Capital Goods Fund and the
Communications Fund, the fee is calculated at the annual rate of: 0.65% on the
first $500 million of each Fund's average net assets; 0.55% on the next $500
million of each Fund's average net assets; and 0.45% on each Fund's average net
assets over $1 billion. With respect to the European Small Company Fund, the
Latin American Growth Fund and the Asian Growth Fund, the fee is calculated at
the annual rate of: 0.75% on the first $500 million of each Fund's average net
assets; 0.65% on the next $500 million of each Fund's average net assets; and
0.55% on each Fund's average net assets over $1 billion. With respect to the
Realty Fund, the fee is calculated at the annual rate of 0.75% of the Fund's
average net assets. With respect to the S&P 500 Index Fund, the fee is
calculated at the annual rate of 0.25% of the Fund's average net assets.
Sub-Advisory Agreements. INVESCO Trust serves as sub-adviser to the
Capital Goods Fund and Communications Fund pursuant to a sub-advisory agreement
dated February 28, 1997 (the "Capital Goods and Communications Sub-Agreement")
with IFG which was approved by the board of directors of the Company 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
Company, IFG or INVESCO Trust at a meeting called for such purpose. Shareholders
of the Capital Goods and Communications Funds approved the Capital Goods and
Communications Sub-Agreement on January 31, 1997 for an initial term expiring
February 28, 1999. Thereafter, the Capital Goods and Communications
Sub-Agreement may be continued from year to year as to each Fund as long as each
<PAGE>
such continuance is specifically approved by the board of directors of the
Company, or by a vote of the holders of a majority, as defined in the 1940 Act,
of the outstanding shares of the Fund. Each such continuance also must be
approved by a majority of the directors who are not parties to the Capital Goods
and Communications 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 Capital Goods and Communications Sub-Agreement
may be terminated at any time without penalty by either party or the Company
upon sixty (60) days' written notice, and terminates automatically in the event
of an assignment to the extent required by the 1940 Act and the rules
thereunder.
IAML serves as sub-adviser to the European Small Company Fund and the Latin
American Growth Fund pursuant to a sub-advisory agreement dated February 28,
1997 (the "European and Latin American Sub-Agreement") with IFG. The European
and Latin American Sub- Agreement was approved by the board of directors of the
Company 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 Company, IFG or IAML at a meeting called for such
purpose. Shareholders of the European Small Company and Latin American Growth
Funds approved the European and Latin American Sub-Agreement on January 31, 1997
for an initial term expiring February 28, 1999. Thereafter, the European and
Latin American Sub-Agreement may be continued from year to year as to each Fund
as long as each such continuance is specifically approved by the board of
directors of the Company, or by a vote of the holders of a majority, as defined
in the Investment Company Act of 1940, of the outstanding shares of the Fund.
Each such continuance also must be approved by a majority of the directors who
are not parties to the European and Latin American 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 European and
Latin American Sub-Agreement may be terminated at any time without penalty by
either party or the Company upon sixty (60) days' written notice, and terminates
automatically in the event of an assignment to the extent required by the 1940
Act and the rules thereunder.
INVESCO Asia serves as sub-adviser to the Asian Growth Fund pursuant to a
sub-advisory agreement dated February 28, 1997 (the "Asian Growth
Sub-Agreement") with IFG. The Asian Growth Sub-Agreement was approved by the
board of directors of the Company on November 6, 1996 by a vote cast in person
by a majority of the directors, including a majority of the directors who are
not "interested persons" of the Company, IFG or INVESCO Asia at a meeting called
for such purpose. Shareholders of the Asian Growth Fund approved the Asian
Growth Sub-Agreement on January 31, 1997 for an initial term expiring February
28, 1999. Thereafter the Asian Growth Sub-Agreement may be continued from year
to year as long as it is specifically approved by the board of directors of the
Company, or by a vote of the holders of a majority, as defined in the 1940 Act,
of the outstanding shares of the Fund. Each such continuance also must be
approved by a majority of directors who are not parties to the Asian Growth
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 Asian Growth Sub-Agreement may be terminated at any time
without penalty by either party or the Company upon sixty (60) days' written
notice, and terminates automatically in the event of an assignment to the extent
required by the 1940 Act and the rules thereunder.
<PAGE>
IRAI serves as sub-adviser to the Realty Fund pursuant to a sub-advisory
agreement dated December 9, 1996 (the "Realty Sub-Agreement") with IFG ^. The
Realty Sub-Agreement was approved by the board of directors of the Company on
November 6, 1996 by a vote cast in person by a majority of the directors
including a majority of the directors who are not "interested persons" of the
Company, IFG or IRAI at a meeting called for such purpose. The Realty Sub-
Agreement was approved for an initial term expiring December 9, 1998.
Thereafter, the Realty Sub-Agreement may be continued from year-to-year as long
as it is specifically approved by the board of directors of the Company, or by a
vote of the holders of a majority, as defined in the 1940 Act, of the
outstanding shares of the Fund. Each such continuance also must be approved by a
majority of directors who are not parties to the Realty 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
Realty Sub-Agreement may be terminated at any time without penalty by either
party or the Company upon sixty (60) days' written notice, and terminates
automatically in the event of an assignment to he extent required by the 1940
Act and the rules thereunder.
World serves as sub-adviser to the S&P 500 Index Fund pursuant to a
sub-advisory agreement dated __________, 1997 (the "S&P 500 Index
Sub-Agreement") with IFG which was approved by the board of directors on August
12, 1996, by a vote cast in person by a majority of the directors, including a
majority of the directors who are not "interested persons" of the Company, IFG
or World at a meeting called for such purpose. IFG approved the S&P 500 Index
Sub-Agreement on ______________, for an initial term expiring ___________.
Thereafter, the S&P 500 Index Sub-Agreement may be continued from year to year
as long as it is specifically approved by the board of directors of the Company,
or by a vote of the holders of a majority, as defined in the 1940 Act, of the
outstanding shares of the Fund. Each such continuance also must be approved by a
majority of directors who are not parties to the S&P 500 Index 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
S&P 500 Index Sub-Agreement may be terminated at any time without penalty by
either party or the Company upon sixty (60) days' written notice, and terminates
automatically in the event of an assignment to the extent required by the 1940
Act and the rules thereunder.
The Sub-Agreements provide that INVESCO Trust, IAML, INVESCO Asia ^, IRAI
and World, subject to the supervision of IFG, shall manage the investment
portfolios of the respective Funds in conformity with each Fund's investment
policies. These management services include: (a) managing the investment and
reinvestment of all the assets, now or hereafter acquired, of the Funds, and
executing all purchases and sales of portfolio securities; (b) maintaining a
continuous investment program for the Funds, consistent with (i) each Fund's
investment policies as set forth in the Company's Articles of Incorporation,
Bylaws, and Registration Statement, as from time to time amended, under the 1940
Act, and in any prospectus and/or statement of additional information of the
Company, as from time to time amended and in use under the 1933 Act, and (ii)
the Company's status as a regulated investment company under the Internal
Revenue Code of 1986, as amended; (c) determining what securities are to be
<PAGE>
purchased or sold for each of the Funds, unless otherwise directed by the
directors of the Company or IFG, and executing transactions accordingly; (d)
providing the Funds the benefit of all of the investment analysis and research,
the reviews of current economic conditions and trends, and the consideration of
long-range investment policy now or hereafter generally available to investment
advisory customers of the Sub-Advisers; (e) determining what portion of each of
the Funds should be invested in the various types of securities authorized for
purchase by each Fund; and (f) making recommendations as to the manner in which
voting rights, rights to consent to Company action and any other rights
pertaining to the portfolio securities of each Fund shall be exercised.
The Capital Goods and Communications Sub-Agreements provide that as
compensation for its services, INVESCO Trust shall receive from IFG, at the end
of each month, a fee based upon the average daily value of the Capital Goods
Fund's and Communications Fund's net assets at the following annual rates:
0.325% on the first $500 million of each Fund's average net assets; 0.275% on
the next $500 million of each Fund's average net assets; and 0.225% on each
Fund's average net assets over $1 billion. The European and Latin American
Sub-Agreement provides that as compensation for its services, IAML shall receive
from IFG, at the end of each month, a fee based upon the average daily value of
the European Small Company Fund's and Latin American Growth Fund's net assets at
the following annual rates: 0.375% on the first $500 million of each Fund's
average net assets; 0.325% on the next $500 million of each Fund's average net
assets; and 0.275% on each Fund's average net assets over $1 billion. The Asian
Growth Sub-Agreement provides that, as compensation for its services, INVESCO
Asia shall receive from IFG, at the end of each month, a fee based upon the
average daily value of the Asian Growth Fund's net assets at the following
rates: 0.375% on the first $500 million of the Fund's average net assets; 0.325%
on the next $500 million of the Fund's average net assets; and 0.275% on the
Fund's average net assets in excess of $1 billion. The Realty Sub-Agreement
provides that as compensation for its services, IRAI shall receive a fee from
IFG, at the end of each month, at the rate of 0.30% of the Fund's average daily
net assets. The S&P 500 Index Sub-Agreement provides that as compensation for
its services, World shall receive a fee from IFG at the end of each month, at
the rate of 0.07% of the Fund's average net assets up to $10 million, 0.05% of
the Fund's average net assets in excess of $10 million up to $40 million, and
0.03% of the Fund's average net assets in excess of $40 million. The
Sub-Advisory fees are paid by IFG, NOT the Funds.
Administrative Services Agreement. IFG, either directly or through
affiliated companies, provides certain administrative, sub-accounting, and
recordkeeping services to the Funds pursuant to an Administrative Services
Agreement dated February 28, 1997 (the "Administrative Agreement"). The
Administrative Agreement was approved on November 6, 1996, by a vote cast in
person by all of the directors of the Company, including all of the directors
who are not "interested persons" of the Company or IFG at a meeting called for
such purpose. The Administrative Agreement was for an initial term expiring
February 28, 1998 and has been extended by action of the board of directors
<PAGE>
until May 15, 1998. The Administrative Agreement may be continued from year to
year thereafter as long as each such continuance is specifically approved by the
board of directors of the Company, including a majority of the directors who are
not parties to the Administrative Agreement or interested persons (as defined in
the 1940 Act) of any such party, cast in person at a meeting called for the
purpose of voting on such continuance. The Administrative Agreement may be
terminated at any time without penalty by IFG on sixty (60) days' written
notice, or by the Company upon thirty (30) days' written notice, and terminates
automatically in the event of an assignment unless the Company's board of
directors approves such assignment.
The Administrative Agreement provides that IFG shall provide the following
services to the Funds: (A) such sub-accounting and recordkeeping services and
functions as are reasonably necessary for the operation of the Funds; and (B)
such sub-accounting, recordkeeping, and administrative services and functions,
which may be provided by affiliates of IFG, as are reasonably necessary for the
operation of Fund shareholder accounts maintained by certain retirement plans
and employee benefit plans for the benefit of participants in such plans.
As full compensation for services provided under the Administrative
Agreement, each Fund pays a monthly fee to IFG 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.
Transfer Agency Agreement. IFG also performs transfer agent, dividend
disbursing agent, and registrar services for the Funds pursuant to a Transfer
Agency Agreement dated February 28, 1997 which was approved by the board of
directors of the Company, including a majority of the Company's directors who
are not parties to the Transfer Agency Agreement or "interested persons" of any
such party, on November 6, 1996. The Transfer Agency Agreement was for an
initial term expiring February 28, 1998 and has been extended by the board of
directors until May 15, 1998. Thereafter, the Transfer Agency Agreement may be
continued from year to year as to each Fund as long as such continuance is
specifically approved at least annually by the board of directors of the
Company, or by a vote of the holders of a majority of the outstanding shares of
the Fund. Any such continuance also must be approved by a majority of the
Company's directors who are not parties to the Transfer Agency Agreement or
interested persons (as defined by the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such continuance. The
Transfer Agency Agreement may be terminated at any time without penalty by
either party upon sixty (60) days' written notice and terminates automatically
in the event of assignment.
The Transfer Agency Agreement provides that the Funds will pay to IFG an
annual fee of $20.00 per shareholder account and omnibus account participant.
This fee is paid monthly at 1/12 of the annual fee and is based upon the actual
number of shareholder accounts and omnibus account participants in existence
during each month.
<PAGE>
Rule 18f-3 under the 1940 Act ("Rule 18f-3") permits a fund to use a
multiclass system, including separate class arrangements for distribution of
shares and related exchange privileges applicable to the classes. The S&P 500
Index Fund's Plan Pursuant to Rule 18f-3 provides that advisory and
administrative services fees that are expenses of the Fund but are not otherwise
attributable to a particular class of Fund shares shall be allocated to each
class on the basis of its net asset value relative to the net asset value of the
Fund.
<PAGE>
Set forth below is a table showing the advisory fees, administrative
services fees, and transfer agency fees paid by each of the Funds for the period
shown.
<TABLE>
<CAPTION>
Year Ended Year Ended
July 31, 1996(1) July 31, 1995(1)
---------------------------------- -----------------------------------
Adminis- Adminis-
Transfer trative Transfer trative
Advisory Agency Services Advisory Agency Services
Fees Fees Fees Fees Fees Fees
---------- --------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Worldwide Capital Goods $52,495 $35,801 $11,211 $32,382 $20,517 $10,747
Worldwide Communications $255,873 $151,435 $15,905 $101,129 $64,043 $12,334
European Small Company $271,008 $66,181 $15,420 $4,159(2) $2,300(2) $3,417(2)
Latin American Growth $130,913 $47,581 $12,618 $12,530(2) $5,295(2) $3,584(2)
Asian Growth Fund(3) $26,564 $16,399 $3,031 -0- -0- -0-
Realty Fund(4) $72,430 $45,182 $4,782 -0- -0- -0-
S&P 500 Index Fund(5) -0- -0- -0- -0- -0- -0-
</TABLE>
(1) These amounts do not reflect the voluntary expense limitations described in
the Funds' prospectuses.
(2) For the period February 15, 1995 (commencement of operations) through July
31, 1995.
(3) The Asian Growth Fund did not pay any of the fees listed in this table for
the year ended July 31, 1995 since it did not commence a public offering of its
shares until March 1, 1996. In addition, the fees listed in the table for the
year ended July 31, 1996 are for the five month period begining March 1, 1996
(commencement of operations).
(4) For the period January 2, 1997 (commencement of operations) through May 31,
1997.
(5) The S&P 500 Index Fund paid IFG no advisory, administrative or transfer
agency fees as of the date of this Statement of Additional Information since it
did not commence a public offering of its securities until October __, 1997.
<PAGE>
Officers and Directors of the Company. The overall direction and
supervision of the Company is the responsibility of the board of directors,
which has the primary duty of seeing that the general investment policies and
programs of each of the Funds are carried out and that the Funds are properly
administered. The officers of the Company, all of whom are officers and
employees of, and are paid by, IFG, are responsible for the day-to-day
administration of the Company and each of the Funds. The investment adviser for
each Fund has the primary responsibility for making investment decisions on
behalf of that Fund. These investment decisions are reviewed by the investment
committee of IFG.
All of the officers and directors of the Company hold comparable positions
with INVESCO Capital Appreciation Funds, Inc. (formerly, INVESCO Dynamics Fund,
Inc.), INVESCO Diversified Funds, Inc.^, INVESCO Emerging Opportunity Funds,
Inc., INVESCO Growth Fund, Inc., INVESCO Income Funds, Inc., INVESCO Industrial
Income Fund, Inc., INVESCO International Funds, Inc., INVESCO Money Market
Funds, Inc., INVESCO Multiple Asset Funds, Inc., INVESCO Strategic Portfolios,
Inc., INVESCO Tax-Free Income Funds, Inc. and INVESCO Variable Investment Funds,
Inc. All of the directors of the Company also serve as trustees of INVESCO Value
Trust. In addition, all of the directors of the Company, with the exception of
Mr. Hesser, are also trustees of INVESCO Treasurer's Series Trust. All of the
officers of the Company also hold comparable positions with INVESCO Value Trust.
Set forth below is information with respect to each of the Company's officers
and directors. Unless otherwise indicated, the address of the directors and
officers is Post Office Box 173706, Denver, Colorado 80217-3706. Their
affiliations represent their principal occupations during the past five years.
CHARLES W. BRADY,*+ Chairman of the Board. Chief Executive Officer and
Director of AMVESCAP PLC, London, England, and of various subsidiaries thereof;
Chairman of the Board of INVESCO Treasurer's Series Trust^. Address: 1315
Peachtree Street, NE, Atlanta, Georgia. Born: May 11, 1935.
FRED A. DEERING,+# Vice Chairman of the Board. Vice Chairman of INVESCO
Treasurer's Series Trust. 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, Urbaine Life Insurance Company and Midwestern
United Life Insurance Company. Address: Security Life Center, 1290 Broadway,
Denver, Colorado. Born: January 12, 1928.
DAN J. HESSER,+* President, CEO and Director. Chairman of the Board,
President, and Chief Executive Officer of INVESCO Funds Group, Inc. and
President and Director of INVESCO Trust Company. President and Chief Operating
Officer of INVESCO Global Health Sciences Fund. Born: December 27, 1939.
VICTOR L. ANDREWS,** Director. Professor Emeritus, Chairman Emeritus and
Chairman of the CFO Roundtable of the Department of Finance at Georgia State
University, Atlanta, Georgia; President, Andrews Financial Associates, Inc.
(consulting firm); formerly, member of the faculties of the Harvard Business
<PAGE>
School and the Sloan School of Management of MIT. Dr. Andrews is also a director
of the Southeastern Thrift and Bank Fund, Inc. and The Sheffield Funds, Inc.
Address: 4625 Jettridge Drive, Atlanta, Georgia. Born: June 23, 1930.
BOB R. BAKER,+** Director. President and Chief Executive Officer of AMC
Cancer Research Center, Denver, Colorado, since January 1989; until mid-December
1988, Vice Chairman of the Board of First Columbia Financial Corporation (a
financial institution), Englewood, Colorado. Formerly, Chairman of the Board and
Chief Executive Officer of First Columbia Financial Corporation. Address: 1775
Sherman Street, #1000, Denver, Colorado. Born: August 7, 1936.
LAWRENCE H. BUDNER,# Director. Trust Consultant; prior to June 30, 1987,
Senior Vice President and Senior Trust Officer of InterFirst Bank, Dallas,
Texas. Address: 7608 Glen Albens Circle, Dallas, Texas. Born: July 25, 1930.
DANIEL D. CHABRIS,+# Director. Financial Consultant; Assistant Treasurer of
Colt Industries Inc., New York, New York, from 1966 to 1988. Address: 19
Kingsbridge Way, Madison, Connecticut. Born: August 1, 1923.
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 Corp. and
Citizens and Southern National Bank. Director of Golden Poultry Co., Inc.
Trustee of INVESCO Global Health Sciences Fund and Gables Residential Trust.
Address: 7 Piedmont Center, Suite 100, Atlanta, GA. 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 its 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.
GLEN A. PAYNE, Secretary. Senior Vice President (since 1995), General
Counsel and Secretary of INVESCO Funds Group, Inc. and INVESCO Trust Company;
Vice President (May 1989 to April 1995), Secretary and General Counsel of
INVESCO Funds Group, Inc. and INVESCO Trust Company. Formerly, employee of a
U.S. regulatory agency, Washington, D.C. (June 1973 through May 1989). Born:
September 25, 1947.
RONALD L. GROOMS, Treasurer. Senior Vice President and Treasurer of INVESCO
Funds Group, Inc. and INVESCO Trust Company since January 1988. Born: October 1,
1946.
<PAGE>
WILLIAM J. GALVIN, JR., Assistant Secretary. Senior Vice President of
INVESCO Funds Group, Inc. and Trust Officer of INVESCO Trust Company since July
1995 and formerly (August 1992 to July 1995) Vice President of INVESCO Funds
Group, Inc. and trust officer of INVESCO Trust Company. Formerly, Vice President
of 440 Financial Group from June 1990 to August 1992 and Assistant Vice
President of Putnam Companies from November 1986 to June 1990. Born: August 21,
1956.
ALAN I. WATSON, Assistant Secretary. Vice President of INVESCO Funds Group,
Inc. and Trust Officer of INVESCO Trust Company. Born: September 14, 1941.
JUDY P. WIESE, Assistant Treasurer. Vice President of INVESCO Funds Group,
Inc. and Trust Officer of INVESCO Trust Company. Born: February 3, 1948.
#Member of the audit committee of the Company.
+Member of the executive committee of the Company. On occasion, the
executive committee acts upon the current and ordinary business of the Company
between meetings of the board of directors. Except for certain powers which,
under applicable law, may only be exercised by the full board of directors, the
executive committee may exercise all powers and authority of the board of
directors in the management of the business of the Company. All decisions are
subsequently submitted for ratification by the board of directors.
*These directors are "interested persons" of the Company as defined in the
Investment Company Act of 1940.
**Member of the management liaison committee of the Company.
As of ^ July 2, 1997, officers and directors of the Company, as a group,
beneficially owned less than 1% of the Company's outstanding shares broken down
as ^ 0.00115% of the Worldwide Capital Goods Fund, ^ 0.00023% of the Worldwide
Communications Fund, ^ 0.00032% of the European Small Company Fund, ^ 0.00133%
of the Latin American Growth Fund, ^ 0.00021% of the Asian Growth Fund and ^
0.00118% of the Realty Fund.
Director Compensation
The following table sets forth, for the fiscal year ending July 31, 1996:
the compensation paid by the Company to its eight eligible independent directors
for services rendered in their capacities as directors of the Company; the
benefits accrued as Company expenses with respect to the Defined Benefit
Deferred Compensation Plan discussed below; and the estimated annual benefits to
be received by these directors upon retirement as a result of their service to
the Company. In addition, the table sets forth the total compensation paid by
all of the mutual funds distributed by INVESCO Funds Group, Inc. (including the
<PAGE>
Company), INVESCO Advisor Funds, Inc., INVESCO Treasurer's Series Trust 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, 1995. As of December 31, 1995, there
were 49 funds in the INVESCO Complex. Dr. Soll became an independent director of
the Company effective May 15, 1997, and is not included in the following chart.
Total
Compensa-
Benefits Estimated tion From
Aggregate Accrued Annual INVESCO
Name of Compensa- As Part Benefits Complex
Person, tion From of Fund Upon Re- Paid To
Position Fund(1) Expenses(2) tirement(3) Directors(1)
Fred A.Deering, $2,388 $71 $59 $ 87,350
Vice Chairman of
the Board
Victor L. Andrews 2,363 62 65 68,000
Bob R. Baker 2,370 64 87 73,000
Lawrence H. Budner 2,353 67 65 68,350
Daniel D. Chabris 2,371 76 46 73,350
A. D. Frazier Jr.(4) 2,342 0 0 63,500
Kenneth T. King 2,364 73 53 70,000
John W. ^ McIntyre 2,350 0 0 67,850
------- ---- ---- --------
Total $18,901(5) $413 $375 $571,400
% of Net Assets 0.0095%(6) 0.0002% .0043%(7)
(1)The vice chairman of the board, the chairmen of the audit, management
liaison and compensation committees, and the members of the executive and
valuation committees each receive compensation for serving in such capacities in
addition to the compensation paid to all independent directors.
(2)Represents estimated benefits accrued with respect to the Defined
Benefit Deferred Compensation Plan discussed below, and not compensation
deferred at the election of the directors.
<PAGE>
(3)These figures represent the Company's share of the estimated annual
benefits payable by the INVESCO Complex (excluding INVESCO Global Health
Sciences Fund, which does not participate in any retirement plan) upon the
directors' retirement, calculated using the current method of allocating
director compensation among the funds in the INVESCO Complex. These estimated
benefits assume retirement at age 72 and that the basic retainer payable to the
directors will be adjusted periodically for inflation, for increases in the
number of funds in the INVESCO Complex, and for other reasons during the period
in which retirement benefits are accrued on behalf of the respective directors.
This results in lower estimated benefits for directors who are closer to
retirement and higher estimated benefits for directors who are further from
retirement. With the exception of Messrs. Frazier and McIntyre, each of these
directors has served as a director/trustee of one or more of the funds in the
INVESCO Complex for the minimum five-year period required to be eligible to
participate in the Defined Benefit Deferred Compensation Plan.
(4)Effective February 28, 1997, Mr. Frazier resigned as a director of the
Company. Effective November 1, 1996, Mr. Frazier was employed by AMVESCAP PLC, a
company affiliated with IFG. Because it was possible that Mr. Frazier would be
employed with AMVESCAP PLC, ^ he was deemed to be an "interested person" of the
Company and of the other funds in the INVESCO Complex effective May 1, 1996.
Effective November 1, 1996, Mr. Frazier no longer received any director's fees
or other compensation from the Company or other funds in the INVESCO Complex for
his service as a director.
(5)Amount includes Worldwide Communications Fund for the fiscal year ended
July 31, 1996, Worldwide Capital Goods Fund for the period October 1, 1995
through July 31, 1996, and Latin American Growth and European Small Company
Funds for the period April 1, 1996 through July 31, 1996. The Asian Growth Fund
did not accrue directors fees as of July 31, 1996.
(6)Totals as a percentage of the Company's net assets as of July 31, 1996.
(7)Total as a percentage of the net assets of the INVESCO Complex as of
December 31, 1995.
Messrs. Brady and Hesser, as ^"interested persons^" of the Company and of
the other funds in the INVESCO Complex, receive compensation as officers or
employees of IFG or its affiliated companies, and do not receive any director's
fees or other compensation from the Company or the other funds in the INVESCO
Complex for their service as directors.
The boards of directors/trustees of the mutual funds managed by IFG and
INVESCO Treasurer's Series Trust have adopted a Defined Benefit Deferred
Compensation Plan for the non-interested directors and trustees of the funds.
Under this plan, each director or trustee who is not an interested person of the
funds (as defined in the 1940 Act) and who has served for at least five years (a
"qualified director") is entitled to receive, upon retiring from the boards at
the retirement age of 72 (or the retirement age of 73 to 74, if the retirement
<PAGE>
date is extended by the boards for one or two years, but less than three years)
continuation of payment for one year (the "first year retirement benefit") of
the annual basic retainer payable by the funds to the qualified director at the
time of his retirement (the "basic retainer"). Commencing with any such
director's second year of retirement, and commencing with the first year of
retirement of a director whose retirement has been extended by the board for
three years, a qualified director shall receive quarterly payments at an annual
rate equal to 40% of the basic retainer. These payments will continue for the
remainder of the qualified director's life or ten years, whichever is longer
(the "reduced retainer payments"). If a qualified director dies or becomes
disabled after age 72 and before age 74 while still a director of the funds, the
first year retirement benefit and the reduced retainer payments will be made to
him or to his beneficiary or estate. If a qualified director becomes disabled or
dies either prior to age 72 or during his/her 74th year while still a director
of the funds, the director will not be entitled to receive the first year
retirement benefit; however, the reduced retainer payments will be made to his
beneficiary or estate. The plan is administered by a committee of three
directors who are also participants in the plan and one director who is not a
plan participant. The cost of the plan will be allocated among the IFG and
Treasurer's Series funds in a manner determined to be fair and equitable by the
committee. The Company is not making any payments to directors under the plan as
of the date of this Statement of Additional Information. The Company has no
stock options or other pension or retirement plans for management or other
personnel and pays no salary or compensation to any of its officers.
The Company has an audit committee which is comprised of four of the
directors who are not interested persons of the Company. The committee meets
periodically with the Company's independent accountants and officers to review
accounting principles used by the Company, the adequacy of internal controls,
the responsibilities and fees of the independent accountants, and other matters.
The Company also has a management liaison committee which meets quarterly
with various management personnel of IFG in order (a) to facilitate better
understanding of management and operations of the Company, and (b) to review
legal and operational matters which have been assigned to the committee by the
board of directors in furtherance of the board of directors' overall duty of
supervision.
HOW SHARES CAN BE PURCHASED
- ---------------------------
Shares of each Fund are sold on a continuous basis at the respective net
asset value per share of the Fund next calculated after receipt of a purchase
order in good form. The net asset value per share is computed separately for
each Fund and is determined once each day that the New York Stock Exchange is
open as of the close of regular trading on that Exchange, but may also be
computed at other times. See "How Shares Are Valued." IFG acts as the Funds'
distributor under a distribution agreement with the Company under which it
receives no compensation and bears all expenses, including the costs of printing
and distributing prospectuses, incident to marketing of the Funds' shares,
except for such distribution expenses which are paid out of Fund assets under
the Company's Plan of Distribution which has been adopted by the Company in
accordance with Rule 12b-1 under the 1940 Act.
<PAGE>
Distribution Plan. As discussed under "How To Buy Shares ^-- Distribution
Expenses" in the Prospectuses, the Company 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. There is no distribution fee applicable to
Class I shares of the S&P 500 Index Fund. The Plan provides that each ^ Fund may
make monthly payments to IFG of amounts computed at an annual rate no greater
than 0.25% of ^ a Fund's average net assets to permit IFG, at its discretion, to
engage in certain activities and provide certain services in connection with the
distribution of each Fund's shares to investors. Payment amounts by a Fund under
the Plan, for any month, may be made to compensate IFG for permissible
activities engaged in and services provided by IFG during the rolling 12-month
period in which that month falls, although this period is extended to 24 months
for obligations incurred during the first 24 months of a Fund's operations.
During the fiscal year ended July 31, 1996, the Capital Goods Fund, ^
Communications Fund, European Small Company Fund and Latin American Growth Fund
incurred $20,544, $93,172, $64,913 and $38,021 in distribution expenses,
respectively, prior to the voluntary absorption of certain Fund expenses by IFG
and the applicable sub-adviser. During the period ended July 31, 1996, the Asian
Growth Fund incurred $5,613 in distribution expenses, prior to the voluntary
absorption of certain Fund expenses by IFG and the applicable sub-adviser. In
addition, as of July 31, 1996 the Worldwide Capital Goods Fund, Worldwide
Communications Fund, European Small Company Fund, Latin American Growth Fund and
Asian Growth Fund incurred $1,746, $11,017, $26,038, $7,098 and $3,241 of
additional distribution expenses which were approved by the Company's directors
on October 30, 1996. During the period January 2, 1997 (commencement of
operations) through May 31, 1997, the Realty Fund incurred $17,909 in
distribution expenses, prior to the voluntary absorption of certain Fund
expenses by IFG. 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 IFG-affiliated companies, in order to
obtain various distribution-related and/or administrative services for the
Funds. Each Fund is authorized by the Plan to use its assets to finance the
payments made to obtain those services. Payments will be made by IFG to
broker-dealers who sell shares of the Funds and may be made to banks, savings
and loan associations and other depository institutions. Although the
Glass-Steagall Act limits the ability of certain banks to act as underwriters of
mutual fund shares, the Company does not believe that these limitations would
affect the ability of such banks to enter into arrangements with IFG, but can
give no assurance in this regard. However, to the extent it is determined
otherwise in the future, arrangements with banks might have to be modified or
terminated, and, in that case, the size of one or more of the Funds possibly
could decrease to the extent that the banks would no longer invest customer
assets in a particular Fund. Neither the Company nor its investment adviser will
give any preference to banks or other depository institutions which enter into
such arrangements when selecting investments to be made by each Fund.
For the fiscal year ended July 31, 1996, allocation of 12b-1 amounts paid
by the Capital Goods Fund for the following categories of expenses were:
advertising--$4,874; sales literature, printing and postage--$8,620; direct
mail--$507; public relations/promotion- -$646; compensation to securities
<PAGE>
dealers and other organizations-- $2,959; marketing personnel--$2,938. For
the fiscal year ended July 31, 1996, allocation of 12b-1 amounts paid by the
Communications Fund for the following categories of expenses were:
advertising--$44,031; sales literature, printing and postage-- $23,855; direct
mail--$12,178; public relations/promotion--$1,218; compensation to securities
dealers and other organizations--$5,673; marketing personnel--$6,217. For the
fiscal year ended July 31, 1996, allocation of 12b-1 amounts paid by the
European Small Company Fund for the following categories of expenses were:
advertising--$30,195; sales literature, printing and postage-- $16,374; direct
mail--$3,195; public relations/promotion--$1,185; compensation to securities
dealers and other organizations--$6,934; marketing personnel--$7,031. For the
fiscal year ended July 31, 1996, allocation of 12b-1 amounts paid by the Latin
American Growth Fund for the following categories of expenses were:
advertising-- $18,145; sales literature, printing and postage--$9,468; direct
mail--$760; public relations/promotion--$925; compensation to securities dealers
and other organizations--$4,151; marketing personnel--$4,572. For the period
March 1, 1996 (inception) through July 31, 1996, allocation of 12b-1 amounts
paid by the Asian American Growth Fund for the following categories of expenses
were: advertising--$1,440; sales literature, printing and postage- -$1,233;
direct mail--$2,781; public relations/promotion--$40; compensation to securities
dealers and other organizations--$47; marketing personnel--$72. For the period
January 2, 1997 (commencement of operations) through May 31, 1997, allocation of
12b-1 amounts paid by the Realty Fund for the following categories of expenses
were: advertising--$1,107; sales literature, printing and postage--$4,310;
direct mail--$10,618; public relations/promotion--$524; compensation to
securities dealers and other organizations--$614; marketing personnel--$736.
The nature and scope of services which are provided by securities dealers
and other organizations may vary by dealer but include, among other things,
processing new stockholder account applications, preparing and transmitting to
the Company's Transfer Agent computer-processable tapes of each Fund's
transactions by customers, serving as the primary source of information to
customers in answering questions concerning each Fund, and assisting in other
customer transactions with each Fund.
The Plan was approved on April 20, 1994, at a meeting called for such
purpose by a majority of the directors of the Company, including a majority of
the directors who neither are "interested persons" of the Company nor have any
financial interest in the operation of the Plan ("12b-1 directors"). The Plan
was approved by IFG on July 12, 1994, as the then sole shareholder of the
Capital Goods Fund and Communications Fund for an initial term expiring April
30, 1995 and has been continued by action of the board of directors until May
15, 1998. With respect to the INVESCO European Small Company Fund and Latin
American Growth Fund, the Plan was approved by IFG on February 8, 1995 as the
then sole shareholder of each Fund and has been continued by action of the board
of directors until May 15, 1998. With respect to the Asian Growth Fund, the Plan
was approved by IFG on September 12, 1995 as the then sole shareholder of the
<PAGE>
Fund and has been continued by action of the board of directors until May 15,
1998. With respect to the Realty Fund, the Plan was approved by IFG on December
9, 1996^ and has been continued by action of the board of directors until May
15, 1998. With respect to all of the Funds, the board of directors on February
4, 1997, approved amending the Plan, effective January 1, 1997, to convert the
Plan to a compensation type Rule 12b-1 plan. This amendment of the Plan ^ did
not result in increasing the amount of any Fund's payments thereunder. With
respect to Class II shares of the S&P 500 Index Fund, the Plan was approved by
action of the board of directors of the Company on August 12, 1996 for a period
running to May 15, 1998.
The Plan provides that it shall continue in effect with respect to each
Fund for so long as such continuance is approved at least annually by the vote
of the board of directors of the Company cast in person at a meeting called for
the purpose of voting on such continuance. The Plan also can be terminated at
any time with respect to any Fund, without penalty, if a majority of the 12b-1
directors, or shareholders of such Fund, vote to terminate the Plan. The Company
may, in its absolute discretion, suspend, discontinue or limit the offering of
the shares of any Fund at any time. In determining whether any such action
should be taken, the board of directors intends to consider all relevant factors
including, without limitation, the size of the Funds, the investment climate for
any particular Fund, general market conditions, and the volume of sales and
redemptions of Fund shares. The Plan may continue in effect and payments may be
made under the Plan following any such temporary suspension or limitation of the
offering of a Fund's shares; however, the Company is not contractually obligated
to continue the Plan for any particular period of time. Suspension of the
offering of a Fund's shares would not, of course, affect a shareholder's ability
to redeem his shares. So long as the Plan is in effect, the selection and
nomination of persons to serve as independent directors of the Company shall be
committed to the independent directors then in office at the time of such
selection or nomination. The Plan may not be amended to increase materially the
amount of any Fund's payments thereunder without approval of the shareholders of
that Fund, and all material amendments to the Plan must be approved by the board
of directors of the Company, including a majority of the 12b-1 directors. Under
the agreement implementing the Plan, IFG or the Funds, the latter by vote of a
majority of the 12b-1 directors or of the holders of a majority of any Fund's
outstanding voting securities, may terminate such agreement without penalty upon
30 days' written notice to the other party. No further payments will be made by
any Fund under the Plan in the event of its termination as to that Fund.
To the extent that the Plan constitutes a plan of distribution adopted
pursuant to Rule 12b-1 under the Act, it shall remain in effect as such, so as
to authorize the use of each Fund's assets in the amounts and for the purposes
set forth therein, notwithstanding the occurrence of an assignment, as defined
by the Act, and rules thereunder. To the extent it constitutes an agreement
pursuant to a plan, each Fund's obligation to make payments to IFG shall
terminate automatically, in the event of such "assignment," in which event the
Funds may continue to make payments, pursuant to the Plan, to IFG or another
organization only upon the approval of new arrangements, which may or may not be
with IFG, regarding the use of the amounts authorized to be paid by it under the
Plan, by the directors, including a majority of the 12b-1 directors, by a vote
cast in person at a meeting called for such purpose.
<PAGE>
Information regarding the services rendered under the Plan and the amounts
paid therefor by each Fund are provided to, and reviewed by, the directors on a
quarterly basis. On an annual basis, the directors consider the continued
appropriateness of the Plan at the level of compensation provided therein.
The only directors or interested persons, as that term is defined in
Section 2(a)(19) of the Act, of the Company who have a direct or indirect
financial interest in the operation of the Plan are the officers and directors
of the Company listed under "Officers and Directors of the Company" who are also
officers either of IFG or companies affiliated with IFG. The benefits which the
Company believes will be reasonably likely to flow to the Funds and their
shareholders under the Plan include the following:
(1) Enhanced marketing efforts, if successful, should result in an
increase in net assets through the sale of additional shares and
afford greater resources with which to pursue the investment
objectives of the Funds;
(2) The sale of additional shares reduces the likelihood that redemption
of shares will require the liquidation of securities of the Funds in
amounts and at times that are disadvantageous for investment
purposes;
(3) The positive effect which increased Fund assets will have on its
revenues could allow IFG:
(a) To have greater resources to make the financial commitments
necessary to improve the quality and level of each Fund's
shareholder services (in both systems and personnel),
(b) To increase the number and type of mutual funds available to
investors from IFG (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 Funds' Prospectuses entitled "How
Shares Can Be Purchased," the net asset value of shares or class of shares of
each Fund of the Company is computed once each day that the New York Stock
Exchange is open as of the close of regular trading on that Exchange (usually
4:00 p.m., New York time) and applies to purchase and redemption orders received
<PAGE>
prior to that time. Net asset value per share is also computed on any other day
on which there is a sufficient degree of trading in the securities held by a
Fund that the current net asset value per share of such Fund might be materially
affected by changes in the value of the securities held, but only if on such day
the Fund receives a 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 or class of shares of each Fund is calculated
by dividing the value of all securities held by the Fund and its other assets
(including dividends and interest accrued but not collected), less the ^
liabilities of the Fund or class (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 Company's
board of directors or pursuant to procedures adopted by the board of directors.
The above procedures may include the use of valuations furnished by a pricing
service which employs a matrix to determine valuations for normal
institutional-size trading units of debt securities. Prior to utilizing a
pricing service, the Company's board of directors reviews the methods used by
such service to assure itself that securities will be valued at their fair
values. The Company's board of directors also periodically monitors the methods
used by such pricing services. Debt securities with remaining maturities of 60
days or less at the time of purchase are normally valued at amortized cost.
The ^ value of securities held by the Funds 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 Funds' net asset value. However, in the event that the closing
price of a foreign security is not available in time to calculate a Fund's net
asset value on a particular day, the Company's board of directors has authorized
the use of the market price for the security obtained from an approved pricing
service at an established time during the day which may be prior to the close of
regular trading in the security. The value of all assets and liabilities
initially expressed in foreign currencies will be converted into U.S. dollars at
the spot rate of such currencies against U.S. dollars provided by an approved
pricing service.
<PAGE>
FUND PERFORMANCE
- ----------------
As discussed in the Funds' Prospectuses, the Company advertises the total
return performance of the Funds. The total return performance for the Capital
Goods, Communications, European Small Company and Latin American Growth Funds
for the fiscal year ended July 31, 1996, for the Asian Growth Fund for the
period from March 1, 1996 (commencement of operations) through July 31, 1996 and
for the Realty Fund for the period January 2, 1997 (commencement of operations)
through May 31, 1997 was as follows:
Fund One Year Life of Fund
---- -------- ------------
Capital Goods Fund* 0.27% (0.61)%
Communications Fund* 13.67% 19.12%
European Small Company Fund~ 31.07% 32.21%
Latin American Growth Fund~ 15.27% 22.13%
Asian Growth Fund^ N/A (10.31)%
Realty Fund> N/A 0.75%
*Commencement of Operations: August 1, 1994
~Commencement of Operations: February 15, 1995
^Commencement of Operations: March 1, 1996
>Commencement of Operations: January 2, 1997
Average annual total return performance is computed by finding the average
annual compounded rates of return that would equate the initial amount invested
to the ending redeemable value, according to the following formula:
P(1 + T)n = ERV
where: P = initial payment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of initial payment
In conjunction with performance reports, comparative data between the
Funds' 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
Funds. Sources for Fund performance information and articles about the Funds
include, but are not limited to, the following:
American Association of Individual Investors' Journal
Banxquote
Barron's
Business Week
<PAGE>
CDA Investment Technologies
CNBC
CNN
Consumer Digest
Financial Times
Financial World
Forbes
Fortune
Ibbotson Associates, Inc.
Institutional Investor
Investment Company Data, Inc.
Investor's Business Daily
Kiplinger's Personal Finance
Lipper Analytical Services, Inc.'s Mutual Fund
Performance Analysis
Money
Morningstar
Mutual Fund Forecaster
No-Load Analyst
No-Load Fund X
Personal Investor
Smart Money
The New York Times
The No-Load Fund Investor
U.S. News and World Report
United Mutual Fund Selector
USA Today
Wall Street Journal
Wiesenberger Investment Companies Services
Working Woman
Worth
SERVICES PROVIDED BY THE FUNDS
- ------------------------------
Periodic Withdrawal Plan. As described in the Funds' Prospectuses, each
Fund offers a Periodic Withdrawal Plan. All dividends and distributions on
shares owned by shareholders participating in this Plan are reinvested in
additional shares. Because withdrawal payments represent the proceeds from sales
of shares, the amount of shareholders' investments in a Fund will be reduced to
the extent that withdrawal payments exceed dividends and other distributions
paid and reinvested. Any gain or loss on such redemptions must be reported for
tax purposes. In each case, shares will be redeemed at the close of business on
or 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 the Periodic Withdrawal Plan do not represent
income or a return on investment.
<PAGE>
^ Participation in the Periodic Withdrawal Plan may be terminated at any
time by sending a written request to IFG. Upon termination, all future dividends
and capital gain distributions will be reinvested in additional shares unless
the shareholder requests otherwise.
Exchange Privilege. As discussed in the Funds' Prospectuses, the Funds
offer shareholders the privilege of exchanging shares of the Funds for shares of
another fund or for shares of certain other no-load mutual funds advised by IFG.
Exchange requests may be made either by telephone or by written request to
INVESCO Funds Group, Inc., using the telephone number or address on the cover of
this Statement of Additional Information. Exchanges made by telephone must be in
an amount of at least $250, if the exchange is being made into an existing
account of one of the ^ INVESCO funds. All exchanges that have established a new
account must meet the fund's applicable minimum initial investment requirements.
Written exchange requests into an existing account have no minimum requirements
other than the fund's applicable minimum subsequent investment requirements. Any
gain or loss realized on such an exchange is recognized for federal income tax
purposes. This privilege is not an option or right to purchase securities, but
is a revocable privilege permitted under the present policies of each of the
funds and is not available in any state or other jurisdiction where the shares
of the mutual fund into which transfer is to be made are not qualified for sale,
or when the net asset value of the shares presented for exchange is less than
the minimum dollar purchase required by the appropriate prospectus.
TAX-DEFERRED RETIREMENT PLANS
- -----------------------------
As described in the Funds' Prospectuses, shares of a Fund may be purchased
as the investment medium for various tax-deferred retirement plans. Persons who
request information regarding these plans from IFG 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 other
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
Funds' ^ Prospectuses 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
a Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets; or (d) the ^ SEC by order so permits.
<PAGE>
It is possible that in the future conditions may exist which would, in the
opinion of the Company's investment adviser, make it undesirable for a Fund to
pay for redeemed shares in cash. In such cases, the investment adviser may
authorize payment to be made in portfolio securities or other property of the
Fund. However, the Company is obligated under the 1940 Act to redeem for cash
all shares of a Fund presented for redemption by any one shareholder having a
value up to $250,000 (or 1% of the Fund's net assets if that is less) in any
90-day period. Securities delivered in payment of redemptions are selected
entirely by the investment adviser based on what is in the best interests of the
Fund and its shareholders, and are valued at the value assigned to them in
computing the Fund's net asset value per share. Shareholders receiving such
securities are likely to incur brokerage costs on their subsequent sales of the
securities.
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES
- -----------------------------------------------
Each Fund intends to continue to conduct its business and satisfy the
applicable diversification of assets and source of income requirements to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. Each Fund so qualified in the fiscal year
ended July 31, 1996, and intends to continue to qualify during its current
fiscal year. As a result, it is anticipated that each 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 each 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,
each Fund sends shareholders information regarding the amount and character of
dividends paid in the year, including the dividends eligible for the
dividends-received deduction for corporations. Such amounts will be limited to
the aggregate amount of qualifying dividends which each Fund derives from its
portfolio investments.
Distributions by each 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 a Fund. Such distributions are
identified as such and are not eligible for the dividends-received deduction.
All dividends and other distributions are regarded as taxable to the
investor, whether or not such dividends and distributions are reinvested in
additional shares. If the net asset value of Fund shares should be reduced below
a shareholder's cost as a result of a distribution, such distribution would be
taxable to the shareholder although a portion would be, in effect, a return of
invested capital. The net asset value of shares of a Fund reflects accrued net
investment income and undistributed realized capital and foreign currency gains;
therefore, when a distribution is made, the net asset value is reduced by the
amount of the distribution. If shares are purchased shortly before a
<PAGE>
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.
Dividends and interest received by each Fund may give rise to withholding
and other taxes imposed by foreign countries. Tax conventions between certain
countries and the United States may reduce or eliminate such taxes.
IFG 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 IFG will be computed using the single-category
average cost method, although neither IFG nor a 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 a Fund in past
years, the shareholder must continue to use the method previously used, unless
the shareholder applies to the IRS for permission to change methods.
If a 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.
Each Fund will be subject to a nondeductible 4% excise tax to the extent
it fails to distribute by the end of any calendar year substantially all of its
ordinary income for that year and capital gain net income for the one-year
period ending on October 31 of that year, plus certain other amounts.
Dividends and interest received by a Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors. If more than 50% of the value of a
Fund's total assets at the close of any taxable year consists of securities of
foreign corporations, the Fund will be eligible to, and may, file an election
with the Internal Revenue Service that will enable its shareholders, in effect,
to receive the benefit of the foreign tax credit with respect to any foreign and
U.S. possessions income taxes paid by it. Each Fund will report to its
shareholders shortly after each taxable year their respective shares of the
Fund's income from sources within, and taxes paid to, foreign countries and U.S.
possessions if it makes this election.
Each Fund, except the S&P 500 Index 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
<PAGE>
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 a Fund distributes the PFIC income as a taxable dividend to its
shareholders. The balance of the PFIC income will be included in a Fund's
investment company taxable income and, accordingly, will not be taxable to it to
the extent that income is distributed to its shareholders.
Gains or losses (1) from the disposition of foreign currencies, (2) from
the disposition of debt securities denominated in foreign currency that are
attributable to fluctuations in the value of the foreign currency between the
date of acquisition of each security and the date of disposition, and (3) that
are attributable to fluctuations in exchange rates that occur between the time a
Fund accrues interest, dividends or other receivables or accrues expenses or
other liabilities denominated in a foreign currency and the time each 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 a Fund's investment company taxable income to be
distributed to its shareholders.
Shareholders should consult their own tax advisers regarding specific
questions as to federal, state and local taxes. Dividends and capital gain
distributions will generally be subject to applicable state and local taxes.
Qualification as a regulated investment company under the Internal Revenue Code
of 1986, as amended, for income tax purposes does not entail government
supervision of management or investment policies.
INVESTMENT PRACTICES
- --------------------
Portfolio Turnover. There are no fixed limitations regarding the portfolio
turnover of the Funds. Brokerage costs to these Funds are commensurate with the
rate of portfolio activity. Portfolio turnover rates for the fiscal years ended
July 31, 1996 and 1995 were 247% and 193%, respectively, for the Worldwide
Capital Goods Fund and 157% and 215%, respectively, for the Worldwide
Communications Fund. Portfolio turnover rates for the fiscal year ended July 31,
1996 and the period ended July 31, 1995 were 141% and 0.00%, respectively for
the European Small Company Fund and 29% and 30%, respectively, for the Latin
American Growth Fund. For the period March 1, 1996 (inception) through July 31,
1996, the portfolio turnover rate for the Asian Growth Fund was 2%. For the
period January 2, 1997 (commencement of operations) through May 31, 1997, the
portfolio turnover rate for the Realty Fund was 57%. The higher portfolio
turnover rate for the Worldwide Capital Goods Fund was primarily due to a
repositioning of the Fund's portfolio. The high portfolio turnover rate for the
European Small Company Fund was primarily due to the increase in the size of the
Fund and the fact that the fiscal year 1996 figure reflects a full year of
operations. In computing portfolio turnover rates, all investments with
maturities or expiration dates at the time of acquisition of one year or less
are excluded. Subject to this exclusion, the turnover rate is calculated by
dividing (A) the lesser of purchases or sales of portfolio securities for the
fiscal year by (B) the monthly average of the value of portfolio securities
owned by the Fund during the fiscal year.
<PAGE>
Placement of Portfolio Brokerage. Either IFG, as the Company's investment
adviser, or INVESCO Trust, IAML, INVESCO Asia ^, IRAI or World, as the ^ Funds'
sub-advisers, places orders for the purchase and sale of securities with brokers
and dealers based upon IFG's, INVESCO Trust's, IAML's ^, INVESCO Asia's, IRAI's
or World's evaluation of their financial responsibility, subject to their
ability to effect transactions at the best available prices. Fund Management
evaluates the overall reasonableness of brokerage commissions paid by reviewing
the quality of executions obtained on portfolio transactions of each Fund,
viewed in terms of the size of transactions, prevailing market conditions in the
security purchased or sold, and general economic and market conditions. In
seeking to ensure that the commissions charged the Funds are consistent with
prevailing and reasonable commissions, Fund Management 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 Fund Management seeks reasonably competitive rates, the Funds
do not necessarily pay the lowest commission or spread available.
Consistent with the standard of seeking to obtain the best execution on
portfolio transactions, Fund Management may select brokers that provide research
services to effect such transactions. Research services consist of statistical
and analytical reports relating to issuers, industries, securities and economic
factors and trends, which may be of assistance or value to Fund Management in
making informed investment decisions. Research services prepared and furnished
by brokers through which the Funds effect securities transactions may be used by
Fund Management in servicing all of their respective accounts and not all such
services may be used by Fund Management in connection with the Funds.
In recognition of the value of the above-described brokerage and research
services provided by certain brokers, Fund Management, consistent with the
standard of seeking to obtain the best execution on portfolio transactions, may
place orders with such brokers for the execution of transactions for the Funds
on which the commissions are in excess of those which other brokers might have
charged for effecting the same transactions.
Portfolio transactions may be effected through qualified broker-dealers
that recommend the Funds 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 Company's adviser may consider the sale of Fund shares by a
broker or dealer in selecting among qualified broker-dealers.
Certain financial institutions (including brokers who may sell shares of
the Funds, 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 Funds through no transaction fee
<PAGE>
programs ("NTF" Programs") offered by the financial institution or its
affiliate 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 Company have authorized the Funds to apply dollars generated
from the Company'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 Company's directors have authorized the Funds to pay transfer
agency fees to IFG based on the number of investors who have beneficial
interests in the NTF Program Sponsor's omnibus accounts in the Funds. IFG, 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 Company have authorized the Company 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. IFG itself pays the portion of
each Fund's Services Fee, if any, that exceeds the sum of the sub-transfer
agency or recordkeeping fee and Rule 12b-1 fee. The Company's directors have
further authorized IFG to place a portion of each Fund's brokerage transactions
with certain NTF Program Sponsors or their affiliated brokers, if IFG 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 Funds 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 Funds, 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 IFG and the NTF Program
Sponsor. Thus, the Funds pay 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 Funds to IFG with respect to investors who have beneficial
interests in a particular NTF Program Sponsor's omnibus accounts in a Fund
exceeds the Services Fee applicable to the Fund, after application of credits,
IFG may carry forward the excess and apply it to future Services Fees payable to
that NTF Program Sponsor with respect to a Fund. The amount of excess transfer
agency fees carried forward will be reviewed for possible adjustment by IFG
prior to each fiscal year-end of the Funds. The Company's board of directors has
also authorized the Funds to pay to IFG the full Rule 12b-1 fees contemplated by
the Plan ^ as payment for expenses incurred by IFG in engaging in the activities
and providing the services on behalf of the Funds 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 ^ pay IFG for payments to such NTF Program Sponsor absent such
credits.
<PAGE>
The aggregate amount of brokerage commissions paid for the fiscal years
ended July 31, 1996 and 1995 were $141,314 and $54,814, respectively, for the
Worldwide Capital Goods Fund and $239,095 and $129,085 for the Worldwide
Communications Fund. The aggregate amount of brokerage commissions paid for the
fiscal year ended July 31, 1996 and the period ended July 31, 1995 were $417,140
and $141, respectively, for the European Small Company Fund and $102,029 and
$2,012, respectively, for the Latin American Growth Fund. The aggregate amount
of brokerage commission paid for the period March 1, 1996 (inception) through
July 31, 1996 for the Asian Growth Fund was $105,714. The aggregate amount of
brokerage commissions paid for the period January 2, 1997 (commencement of
operations) through May 31, 1997 for the Realty Fund was $132,935. For the
fiscal years ended July 31, 1996 and 1995, brokers providing research services
received commissions on portfolio transactions of $32,164 and $27,515,
respectively, for the Worldwide Capital Goods Fund and $64,810 and $39,843,
respectively, for the Worldwide Communications Fund. For the fiscal year ended
July 31, 1996 and the period ended July 31, 1995, brokers providing research
services received commissions on portfolio transactions of $38 and $0,
respectively, for the European Small Company Fund and $0 and $0, respectively,
for the Latin American Growth Fund. For the period March 1, 1996 (inception)
through July 31, 1996, brokers providing research services received commissions
on portfolio transactions of $0 for the Asian Growth Fund. For the period
January 2, 1997 (commencement of operations) through May 31, 1997, brokers
providing research services received commissions on portfolio transactions of $0
for the Realty Fund. The aggregate amount of such portfolio transactions was
$15,731,437 and $10,973,188, respectively, for the Worldwide Capital Goods Fund;
$27,956,526 and $15,947,023, respectively, for the Worldwide Communications
Fund; $19,063 and $0, respectively, for the European Small Company Fund; and
$53,125 and $0, respectively, for the Latin American Growth Fund. For the period
January 2, 1997 (commencement of operations) through May 31, 1997, the aggregate
amount of such portfolio transactions for the Realty Fund was $0. The Funds paid
no compensation to brokers for the sales of shares of the Funds during the year
ended July 31, 1996.
At July 31, 1996, the Funds held securities of their regular brokers or
dealers, or their parents, as follows:
Value of
Securities
Fund Broker or Dealer at 7/31/96
- ---- ---------------- ----------
Capital Goods Fund State Street Bank and
Trust North America 1,506,000
Communications Fund State Street Bank and
Trust North America 11,109,000
Latin American Growth Fund None
European Small Company Fund None
Asian Growth Fund State Street Bank and
Trust North America 1,485,000
<PAGE>
Neither IFG, INVESCO Trust, IAML, INVESCO Asia ^, IRAI nor World receives
any brokerage commissions on portfolio transactions effected on behalf of the
Funds, and there is no affiliation between IFG, INVESCO Trust, IAML, INVESCO
Asia ^, IRAI and World, or any person affiliated with IFG, INVESCO Trust, IAML,
INVESCO Asia ^, IRAI and World, or the Funds and any broker or dealer that
executes transactions for the Funds.
ADDITIONAL INFORMATION
- ----------------------
Common Stock. The Company has ^ 900,000,000 authorized shares of common
stock with a par value of $0.01 per share. Of the Company's authorized shares,
100,000,000 shares have been allocated to each of the Capital Goods,
Communications, European Small Company, Latin American Growth, Asian Growth and
Realty Funds, and 200,000,000 shares have been allocated to the S&P 500 Index
Fund -- 100,000,000 shares to each Class. As of ^ June 30, 1997, ^ 1,605,932
shares of the Capital Goods Fund, ^ 4,391,558 shares of the Communications Fund,
^ 6,250,882 shares of the European Small Company Fund, ^ 7,163,898 shares of the
Latin American Growth Fund, ^ 2,931,885 shares of the Asian Growth Fund, and ^
3,199,973 shares of the Realty Fund were outstanding. The S&P 500 Index Fund has
been allocated 100,000,000 shares to each of its classes; however, no shares
were outstanding as of the date of this Statement of Additional Information. The
board of directors has the authority to designate additional series of common
stock without seeking the approval of shareholders, and may classify and
reclassify any authorized but unissued shares.
Shares of each series represent the interests of the shareholders of such
series in a particular portfolio of investments of the Company. Each series of
the Company's shares is preferred over all other series ^ with respect ^ to the
assets specifically allocated to that series, and all income, earnings, profits
and proceeds from such assets, subject only to the rights of creditors, are
allocated to shares of that series. The assets of each series are segregated on
the books of account and are charged with the liabilities of that series and
with a share of the Company's general liabilities. The board of directors
determines those assets and liabilities deemed to be general assets or
liabilities of the Company, and these items are allocated among series in a
manner deemed by the board of directors to be fair and equitable. Generally,
such allocation will be made based upon the relative total net assets of each
series. In the unlikely event that a liability allocable to one series exceeds
the assets belonging to the series, all or a portion of such liability may have
to be borne by the holders of shares of the Company's other series.
All Fund shares, regardless of series, have equal voting rights. Voting
with respect to certain matters, such as ratification of independent accountants
or election of directors, will be by all series of the Company. When not all
series are affected by a matter to be voted upon, such as approval of an
investment advisory contract or changes in a Fund's investment policies, only
shareholders of the series affected by the matter may be entitled to vote.
Company shares have noncumulative voting rights, which means that the holders of
a majority of the shares voting for the election of directors can elect 100% of
<PAGE>
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 Company's shareholders. It is the intention
of the Company not to hold annual meetings of shareholders. The directors will
call annual or special meetings of shareholders for action by shareholder vote
as may be required by the 1940 Act or the Company's Articles of Incorporation,
or at their discretion.
Principal Shareholders. As of ^ July 1, 1997, the following entities held
more than 5% of the Funds' outstanding equity securities.
Amount and Nature Percent
Name and Address of Ownership of Class
- ---------------- ----------------- --------
INVESCO Worldwide
Capital Goods Fund
Charles Schwab & Co. Inc. ^ 326,973.9970 21.073
Special Custody Acct. for the
Exclusive Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104
National Financial Services Corp. 156,390.2870 10.079
The Exclusive Benefit of Cust.
One World Financial Center
200 Liberty St. 5th Floor
New York, NY 10281
FTC & Co. 116,551.9620 7.512 ^
Attn: Datalynx
#B38
P.O. Box 5508
Denver, CO 80217
INVESCO Worldwide
Communications Fund
Charles Schwab & Co. Inc. ^ 835,447.9080 18.796
Special Custody Acct. for the
Exclusive Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104
<PAGE>
INVESCO European
Small Company Fund
Charles Schwab & Co. Inc. ^ 2,469,543.7780 41.057
Special Custody Acct. for the
Exclusive Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104
Donaldson Lufkin & Jenrette 313,348.9120 5.209
Securities Corp.
Mutual Funds
Fifth Floor
P.O. Box 2052
Jersey City, NJ 07303
INVESCO Latin American Growth Fund
Charles Schwab & Co. Inc. ^ 2,405,497.9200 33.379
Special Custody Acct. for the
Exclusive Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104
^ INVESCO Asian Growth Fund
Charles Schwab & Co. Inc. ^ 974,527.5970 33.229
Special Custody Acct. for the
Exclusive Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104
INVESCO Realty Fund
Charles Schwab & Co. Inc. ^ 529,476.1250 15.253
Special Custody Acct. for the
Exclusive Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104
Independent Accountants. Price Waterhouse LLP, 950 Seventeenth Street,
Denver, Colorado, has been selected as the independent accountants of the
Company. The independent accountants are responsible for auditing the financial
statements of the Company.
Custodian. State Street Bank and Trust Company, P.O. Box 351, Boston,
Massachusetts, has been designated as custodian of the cash and investment
securities of the Company. The bank is also responsible for, among other things,
receipt and delivery of the investment securities of the Company's Funds in
accordance with procedures and conditions specified in the custody agreement.
Under the contract with the Company, the custodian is authorized to establish
separate accounts in foreign countries and to cause foreign securities owned by
<PAGE>
the Company to be held outside the United States in branches of U.S. banks and,
to the extent permitted by applicable regulations, in certain foreign banks and
securities depositories.
Transfer Agent. The Company is provided with transfer agent, registrar and
dividend disbursing agent services by INVESCO Funds Group, Inc., 7800 E. Union
Avenue, Denver, Colorado 80237, pursuant to the Transfer Agency Agreement
described herein. Such services include the issuance, cancellation and transfer
of shares of the Funds, and the maintenance of records regarding the ownership
of such shares.
Reports to Shareholders. The Company's fiscal year ends on July 31. The
Company distributes reports at least semiannually to its shareholders. Financial
statements regarding the Company, audited by the independent accountants, are
sent to shareholders annually.
Legal Counsel. The firm of Kirkpatrick & Lockhart LLP, Washington, D.C., is
legal counsel for the Company. The firm of Moye, Giles, O'Keefe, Vermeire &
Gorrell LLP, Denver, Colorado, acts as special counsel to the Company.
Financial Statements. The audited financial statements for the ^
Communications, ^ Capital Goods, European Small Company^ and Latin American
Growth Funds for the fiscal year ended July 31, 1996 and for the Asian Growth
Fund for the period ended July 31, 1996, and the notes thereto, and the report
of Price Waterhouse LLP with respect to such financial statements, are
incorporated by reference from the Company's Annual Report to Shareholders for
the fiscal period ended July 31, 1996. The Company's unaudited financial
statements for the Funds and the notes thereto are incorporated by reference
from the Company's Semi-Annual Report to Shareholders for the period ended
January 31, 1997. The unaudited financial statements for the Realty Fund for the
period January 2, 1997 (commencement of operations) through May 31, 1997 are
attached hereto.
Prospectus. The Company will furnish, without charge, a copy of any Fund's
Prospectus upon request. Such requests should be made to the Company at the
mailing address or telephone number set forth on the first page of this
Statement of Additional Information.
Registration Statement. This Statement of Additional Information and the
related Prospectuses do not contain all of the information set forth in the
Registration Statement the Company has filed with the Securities and Exchange
Commission. The complete Registration Statement may be obtained from the
Securities and Exchange Commission upon payment of the fee prescribed by the
rules and regulations of the Commission.
<PAGE>
APPENDIX A
DESCRIPTION OF FUTURES AND OPTIONS CONTRACTS
- --------------------------------------------
Options on Securities
- ---------------------
An option on a security provides the purchaser, or "holder," with the
right, but not the obligation, to purchase, in the case of a "call" option, or
sell, in the case of a "put" option, the security or securities underlying the
option, for a fixed exercise price up to a stated expiration date. The holder
pays a non-refundable purchase price for the option, known as the "premium." The
maximum amount of risk the purchaser of the option assumes is equal to the
premium plus related transaction costs, although the entire amount may be lost.
The risk of the seller, or "writer," however, is potentially unlimited, unless
the option is "covered," which is generally accomplished through the writer's
ownership of the underlying security, in the case of a call option, or the
writer's segregation of an amount of cash or securities equal to the exercise
price, in the case of a put option. If the writer's obligation is not so
covered, it is subject to the risk of the full change in value of the underlying
security from the time the option is written until exercise.
Upon exercise of the option, the holder is required to pay the purchase
price of the underlying security, in the case of a call option, or to deliver
the security in return for the purchase price, in the case of a put option.
Conversely, the writer is required to deliver the security, in the case of a
call option, or to purchase the security, in the case of a put option. Options
on securities which have been purchased or written may be closed out prior to
exercise or expiration by entering into an offsetting transaction on the
exchange on which the initial position was established, subject to the
availability of a liquid secondary market.
Options on securities are traded on national securities exchanges, such as
the Chicago Board of Options Exchange and the New York Stock Exchange, which are
regulated by the Securities and Exchange Commission. The Options Clearing
Corporation guarantees the performance of each party to an exchange-traded
option, by in effect taking the opposite side of each such option. A holder or
writer may engage in transactions in exchange-traded options on securities and
options on indices of securities only through a registered broker/dealer which
is a member of the exchange on which the option is traded.
An option position in an exchange-traded option may be closed out only on
an exchange which provides a secondary market for an option of the same series.
Although the Funds will generally purchase or write only those options for which
there appears to be an active secondary market, there is no assurance that a
liquid secondary market on an exchange will exist for any particular option at
any particular time. In such event it might not be possible to effect closing
transactions in a particular option with the result that the Funds would have to
exercise the option in order to realize any profit. This would result in the
Funds incurring brokerage commissions upon the disposition of underlying
securities acquired through the exercise of a call option or upon the purchase
of underlying securities upon the exercise of a put option. If these Funds as
<PAGE>
covered call option writers are unable to effect a closing purchase transaction
in a secondary market, unless the Funds are required to deliver the securities
pursuant to the assignment of an exercise notice, they will not be able to sell
the underlying security until the option expires.
Reasons for the potential absence of a liquid secondary market on an
exchange include the following: (i) there may be insufficient trading interest
in certain options; (ii) restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular classes or
series of options or underlying securities: (iv) unusual or unforeseen
circumstances may interrupt normal operations on an exchange; (v) the facilities
of an exchange or a clearing corporation may not at all times be adequate to
handle current trading volume or (vi) one or more exchanges could, for economic
or other reasons, decide or be compelled at some future date to discontinue the
trading of options (or particular class or series of options) in which event the
secondary market on that exchange (or in the class or series of options) would
cease to exist, although outstanding options on that exchange which had been
issued by a clearing corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms. There is no assurance
that higher than anticipated trading activity or other unforeseen events might
not, at a particular time, render certain of the facilities of any of the
clearing corporations inadequate and thereby result in the institution by an
exchange of special procedures which may interfere with the timely execution of
customers' orders. However, the Options Clearing Corporation, based on forecasts
provided by the U.S. exchanges, believes that its facilities are adequate to
handle the volume of reasonably anticipated options transactions, and such
exchanges have advised such clearing corporation that they believe their
facilities will also be adequate to handle reasonably anticipated volume.
In addition, options on securities may be traded over-the-counter through
financial institutions dealing in such options as well as the underlying
instruments. OTC options are purchased from or sold (written) to dealers or
financial institutions which have entered into direct agreements with the Funds.
With OTC options, such variables as expiration date, exercise price and premium
will be agreed upon between the Funds and the transacting dealer, without the
intermediation of a third party such as the OCC. If the transacting dealer fails
to make or take delivery of the securities underlying an option it has written,
in accordance with the terms of that option as written, the Funds would lose the
premium paid for the option as well as any anticipated benefit of the
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
<PAGE>
for a specified settlement date on which, in the case of the majority of
interest rate and foreign currency futures contracts, the fixed income
securities or currency underlying the contract are delivered by the seller and
paid for by the purchaser, or on which, in the case of stock index futures
contracts and certain interest rate and foreign currency futures contracts, the
difference between the price at which the contract was entered into and the
contract's closing value is settled between the purchaser and seller in cash.
Futures Contracts differ from options in that they are bilateral agreements,
with both the purchaser and the seller equally obligated to complete the
transaction. In addition, Futures Contracts call for settlement only on the
expiration date, and cannot be "exercised" at any other time during their term.
The purchase or sale of a Futures Contract also differs from the purchase
or sale of a security or the purchase of an option in that no purchase price is
paid or received. Instead, an amount of cash or cash equivalent, which varies
but may be as low as 5% or less of the value of the contract, must be deposited
with the broker as "initial margin." Subsequent payments to and from the broker,
referred to as "variation margin," are made on a daily basis as the value of the
index or instrument underlying the Futures Contract fluctuates, making positions
in the Futures Contract more or less valuable, a process known as "marking to
market."
A Futures Contract may be purchased or sold only on an exchange, known as
a "contract market," designated by the Commodity Futures Trading Commission for
the trading of such contract, and only through a registered futures commission
merchant which is a member of such contract market. A commission must be paid on
each completed purchase and sale transaction. The contract market clearing house
guarantees the performance of each party to a Futures Contract, by in effect
taking the opposite side of such Contract. At any time prior to the expiration
of a Futures Contract, a trader may elect to close out its position by taking an
opposite position on the contract market on which the position was entered into,
subject to the availability of a secondary market, which will operate to
terminate the initial position. At that time, a final determination of variation
margin is made and any loss experienced by the trader is required to be paid to
the contract market clearing house while any profit due to the trader must be
delivered to it.
Interest rate futures contracts currently are traded on a variety of fixed
income securities, including long-term U.S. Treasury Bonds, Treasury Notes,
Government National Mortgage Association modified pass-through mortgage-backed
securities, U.S. Treasury Bills, bank certificates of deposit and commercial
paper. In addition, interest rate futures contracts include contracts on indices
of municipal securities. Foreign currency futures contracts currently are traded
on the British pound, Canadian dollar, Japanese yen, Swiss franc, West German
mark and on Eurodollar deposits.
Options on Futures Contracts
- ----------------------------
An Option on a Futures Contract provides the holder with the right to
enter into a "long" position in the underlying Futures Contract, in the case of
a call option, or a "short" position in the underlying Futures Contract, in the
<PAGE>
case of a put option, at a fixed exercise price to a stated expiration date.
Upon exercise of the option by the holder, the contract market clearing house
establishes a corresponding short position for the writer of the option, in the
case of a call option, or a corresponding long position, in the case of a put
option. In the event that an option is exercised, the parties will be subject to
all the risks associated with the trading of Futures Contracts, such as payment
of variation margin deposits. In addition, the writer of an Option on a Futures
contract, unlike the holder, is subject to initial and variation margin
requirements on the option position.
A position in an Option on a Futures Contract may be terminated by the
purchaser or seller prior to expiration by effecting a closing purchase or sale
transaction, subject to the availability of a liquid secondary market, which is
the purchase or sale of an option of the same series (i.e., the same exercise
price and expiration date) as the option previously purchased or sold. The
difference between the premiums paid and received represents the trader's profit
or loss on the transaction.
An option, whether based on a Futures Contract, a stock index or a
security, becomes worthless to the holder when it expires. Upon exercise of an
option, the exchange or contract market clearing house assigns exercise notices
on a random basis to those of its members which have written options of the same
series and with the same expiration date. A brokerage firm receiving such
notices then assigns them on a random basis to those of its customers which have
written options of the same series and expiration date. A writer therefore has
no control over whether an option will be exercised against it, nor over the
time of such exercise.
<PAGE>
APPENDIX B
BOND RATINGS
- ------------
The following is a description of Standard & Poor's Ratings Services
("S&P") and Moody's Investors Service, Inc. ("Moody's") bond rating categories:
Moody's Investors Service, Inc. Corporate Bond Ratings
Aaa - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa - Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risk appear somewhat larger than in Aaa securities.
A - Bonds rated A possess many favorable investment attributes, and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds rated Ba are judged to have speculative elements. Their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B - Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of other
terms of the contract over any longer period of time may be small.
Caa - Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
<PAGE>
Standard & Poor's Ratings Services 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.
<PAGE>
FINANCIAL STATEMENTS
- --------------------
INVESCO Specialty Funds, Inc. - Realty Fund
STATEMENT OF INVESTMENT SECURITIES
May 31,1997
UNAUDITED
<TABLE>
<CAPTION>
Shares or
Industry Principal
Description Code Amount Value
- ----------- -------- --------- -----
<S> <C> <C> <C> <C>
COMMON STOCKS 100.00%
CANADA 3.92%
Four Seasons Hotels Ltd Voting Shrs LH 11,600 $ 301,600
Trizec Hahn RE 39,000 843,375
-------
1,144,975
-------------
HONG KONG 2.08%
Cheung Kong Holdings Ltd ADR RE 18,300 186,294
New World Development Ltd Sponsored ADR RE 18,600 235,988
Sun Hung Kai Properties Ltd Sponsored ADR RE 15,100 185,618
-------
607,900
-------
SINGAPORE 0.86%
Singapore Land Ltd ADR RE 49,000 250,223
-------
UNITED STATES 93.14%
American General Hospitality RE 39,600 1,024,650
Amerin Corp* FN 12,500 293,750
AMRESCO INC* FN 29,200 514,650
Arden Realty Group RE 30,900 799,537
Bay Apartment Communities RE 15,040 530,160
Beacon Properties RE 32,500 1,007,500
Bedford Property Investors RE 25,100 470,625
CBL & Associates Properties RE 22,600 536,750
Cali Realty RE 18,600 551,025
Capstead Mortgage RE 12,700 304,800
Catellus Development* RE 44,800 756,000
Centex Corp BD 3,600 143,550
Chelsea GCA Realty RE 8,200 298,275
Crescent Real Estate Equities RE 22,200 604,950
Duke Realty Investments RE 20,100 766,312
Equity Residential Properties Trust SBI RE 20,450 966,262
Essex Property Trust RE 33,700 998,362
FelCor Suite Hotels RE 34,900 1,300,025
<PAGE>
Shares or
Industry Principal
Description Code Amount Value
- ------------ ---- ------ -----
First Industrial Realty Trust RE 37,700 1,112,150
Gables Residential Trust SBI RE 21,400 535,000
Glenborough Realty Trust RE 13,800 300,150
Healthcare Realty Trust RE 27,700 720,200
Highwoods Properties RE 9,100 275,275
Irvine Apartment Communities RE 20,800 585,000
JDN Realty RE 13,500 389,812
JP Realty RE 5,000 129,375
Kilroy Realty RE 34,460 827,040
Kimco Realty RE 15,100 475,650
Koger Equity RE 41,000 681,625
Liberty Property Trust SBI RE 41,400 993,600
MGI Properties RE 27,500 577,500
Meridian Industrial Trust RE 15,100 347,300
Merry Land & Investment RE 20,700 434,700
Patriot American Hospitality RE 48,400 1,046,650
Prentiss Properties Trust SBI RE 24,900 585,150
Price REIT RE 19,300 735,813
Public Storage RE 20,300 540,488
RFS Hotel Investors RE 18,100 337,113
Rouse Co RE 12,300 342,863
Shurgard Storage Centers Class A RE 25,900 725,200
Simon DeBartolo Group RE 23,630 714,808
Starwood Lodging Trust SBI RE 10,000 372,500
Sun Communities RE 16,100 525,263
Sunstone Hotel Investors RE 28,100 358,275
TriNet Corporate Realty Trust RE 20,100 658,275
-------
27,193,958
TOTAL INVESTMENT
SECURITIES AT VALUE 100.00%
(Cost $29,634,349#) $ 29,197,056
============
</TABLE>
* Security is non-income producing.
# Also represents cost for income tax purposes.
<PAGE>
Summary of Investments by Industry
<TABLE>
<CAPTION>
% of
Industry Investment
Industry Code Securities Value
- --------- ------ ---------- -----------
<S> <C> <C> <C>
Building Materials BD 0.49% $ 143,550
Financial FN 2.77% 808,400
Lodging - Hotels LH 1.03% 301,600
Real Estate Investment Trust RE 95.71% 27,943,506
---------- ------------
100.00% $29,197,056
</TABLE>
See Notes to Financial Statements
<PAGE>
INVESCO Specialty Funds, Inc. - Realty Fund
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1997
UNAUDITED
ASSETS
Investment Securities at Value
(Cost $29,634,349) $ 29,197,056
Receivables:
Investment Securities Sold 580,973
Fund Shares Sold 156,161
Dividends and Interest 5,567
Prepaid Expenses 95,689
----------
TOTAL ASSETS 30,035,446
--------------
LIABILITIES
Payables:
Custodian 491,024
Investment Securities Purchased 148,973
Fund Shares Repurchased 482,160
Accrued Distribution Expenses 6,234
Accrued Expenses and Other Payables 14,895
---------
TOTAL LIABILITIES 1,143,286
---------
Net Assets at Value $ 28,892,160
==============
NET ASSETS
Paid-in Capital* $ 29,931,039
Accumulated Undistributed Net Investment Income 37,302
Accumulated Undistributed Net Realized Loss on Investment
Securities and Foreign Currency Transactions (638,888)
Net Depreciation of Investment Securities and
Foreign Currency Transactions (437,293)
Net Assets at Value $ 28,892,160
==============
Net Asset Value, Offering and Redemption
Price per Share $9.95
* The Fund has 100 million authorized shares of common stock, par value of
$0.01 per share, of which 2,902,326 were outstanding at May 31, 1997.
See Notes to Financial Statements
<PAGE>
INVESCO Specialty Funds, Inc. - Realty Fund
STATEMENT OF OPERATIONS Period Ended May 31, 1997 (Note 1)
UNAUDITED
INVESTMENT INCOME
INCOME
Dividends $ 476,315
Interest 36,042
-------
TOTAL INCOME 512,357
-------
EXPENSES
Investment Advisory Fees 72,430
Distribution Expenses 24,143
Transfer Agent Fees 45,182
Administrative Fees 4,782
Custodian Fees and Expenses 7,961
Directors' Fees and Expenses 1,313
Professional Fees and Expenses 15,810
Registration Fees and Expenses 12,758
Reports to Shareholders 1,595
Other Expenses 354
-------
TOTAL EXPENSES 186,328
Fees and Expenses Absorbed by Investment Adviser (57,277)
-------
NET EXPENSES 129,051
-------
NET INVESTMENT INCOME 383,306
-------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Loss on Investment Securities
and Foreign Currency Transactions (638,888)
Change in Net Depreciation of Investment Securities
and Foreign Currency Transactions (437,293)
-------------
NET LOSS ON INVESTMENT SECURITIES (1,076,181)
-------------
Net Decrease in Net Assets from Operations $ (692,875)
=============
See Notes to Financial Statements
<PAGE>
INVESCO Specialty Funds, Inc. - Realty Fund
STATEMENT OF CHANGES IN NET ASSETS
Period Ended May 31, 1997 (Note 1)
UNAUDITED
OPERATIONS
Net Investment Income $ 383,306
Net Realized Loss
on Investment Securities and
Foreign Currency Transactions (638,888)
Change in Net Depreciation of Investment
Securities and Foreign Currency
Transactions (437,293)
---------
NET DECREASE IN NET
ASSETS FROM OPERATIONS (692,875)
---------
DISTRIBUTIONS TO SHAREHOLDERS
FROM NET INVESTMENT INCOME (346,004)
---------
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 62,630,582
Reinvestment of Distributions 341,038
-------
62,971,620
Amounts Paid for Repurchases of Shares (33,040,581)
---------------
NET INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 29,931,039
Total Increase in Net Assets 28,892,160
NET ASSETS
Beginning of Period 0
-----------
End of Period (Including
Accumulated Undistributed Net
Investment Income of $37,302) $ 28,892,160
==============
FUND SHARE TRANSACTIONS
Shares Sold 6,127,517
Shares Issued from Reinvestment of Distributions 35,636
--------
6,163,153
Shares Repurchased (3,260,827)
--------------
Net Increase in Fund Shares 2,902,326
==============
See Notes to Financial Statements
<PAGE>
INVESCO Specialty Funds, Inc. - Realty Fund
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout the Period) Period Ended May 31, 1997
(Note 1)
UNAUDITED
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 10.00
-----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.13
Net Losses on Securities
(Both Realized and Unrealized) (0.06)
------------
Total from Investment Operations 0.07
-----------
LESS DISTRIBUTIONS FROM NET INVESTMENT
INCOME 0.12
-----------
Net Asset Value -- End of Period $ 9.95
===========
TOTAL RETURN* 0.75%*
RATIOS
Net Assets -- End of Period ($000 Omitted) $28,892
Ratio of Expenses to Average Net Assets# 0.49%*@
Ratio of Net Investment Income to
Average Net Assets# 1.47%*
Portfolio Turnover Rate* 57%*
Average Commission Rate Paid^^ $0.0537*
* Based on operations for the period shown and, accordingly, are not
representative of a full year.
# Various expenses of the Fund were voluntarily absorbed by IFG for the
period ended May 31, 1997. If such expenses had not been voluntarily
absorbed, ratio of expenses to average net assets would have been 0.71%
(not annualized) and ratio of net investment income to average net assets
would have been 1.25% (not annualized).
@ Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
^^ The average commission rate paid is the total brokerage commissions paid
on applicable purchases and sales of securities for the period divided by
the total number of related shares purchased or sold.
<PAGE>
INVESCO Specialty Funds, Inc. -- Realty Fund
NOTES TO FINANCIAL STATEMENTS
UNAUDITED
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Specialty
Funds, Inc., was incorporated in Maryland and presently consists of seven
separate Funds: Asian Growth Fund, European Small Company Fund, Latin American
Growth Fund, Realty Fund, Worldwide Capital Goods Fund and Worldwide
Communications Fund. Realty Fund (the "Fund") is presented herein. The
investment objective of the Fund is to achieve current income. The Fund is
registered under the Investment Company Act of 1940 (the "Act") as a
diversified, open-end management investment company. Investment operations of
the Fund commenced on January 2, 1997.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
A. SECURITY VALUATION -- Equity securities traded on national securities
exchanges or in the over-the-counter market are valued at the last
sales price in the market where such securities are primarily traded.
If last sales prices are not available, securities are valued at the
highest closing bid price obtained from one or more dealers making a
market for such securities or by a pricing service approved by the Fund's
board of directors.
Foreign securities are valued at the closing price on the principal
stock exchange on which they are traded. In the event that closing prices
are not available for foreign securities, prices will be obtained from the
principal stock exchange at or prior to the close of the New York Stock
Exchange. Foreign currency exchange rates are determined daily prior to
the close of the New York Stock Exchange.
If market quotations or pricing service valuations are not readily
available, securities are valued at fair value as determined in good faith
by the Fund's board of directors.
Assets and liabilities initially expressed in terms of foreign
currencies are translated into U.S. dollars at the prevailing market rates
as quoted by one or more banks or dealers on the date of valuation. The
cost of securities is translated into U.S. dollars at the rates of exchange
prevailing when such securities were acquired. Income and expenses are
translated into U.S. dollars at rates of exchange prevailing when accrued.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Security
transactions are accounted for on the trade date and dividend income is
recorded on the ex dividend date. Certain dividends from foreign
securities will be recorded as soon as the Fund is informed of the
dividend if such information is obtained subsequent to the ex dividend date.
Interest income, which may be comprised of stated coupon rate, market
discount, original issue discount and amortized premium is recorded on the
accrual basis. Cost is determined on the specific identification basis.
<PAGE>
The Fund may have elements of risk due to concentrated investments
in specific industries or foreign issuers located in a specific country.
Such concentrations may subject the Fund to additional risks resulting
from future political or economic conditions and/or possible impositions
of adverse foreign governmental laws or currency exchange restrictions.
Net realized and unrealized gain or loss from investments includes
fluctuations from currency exchange rates and fluctuations in market
value.
The Fund's use of short-term forward foreign currency contracts may
subject it to certain risks as a result of unanticipated movements in
foreign exchange rates. The Fund does not hold short-term forward foreign
currency contracts for trading purposes. The Fund may hold foreign
currency in anticipation of settling foreign security transactions and not
for investment purposes.
C. FEDERAL AND STATE TAXES -- The Fund has complied and continues to comply
with the provisions of the Internal Revenue Code applicable to regulated
investment companies and, accordingly, has made or intends to make
sufficient distributions of net investment income and net realized capital
gains, if any, to relieve it from all federal and state income taxes and
federal excise taxes.
To the extent future capital gains are offset by capital loss
carryovers, such gains will not be distributed to shareholders.
Dividends paid by the Fund from net investment income and
distributions of net realized short-term capital gains are, for federal
income tax purposes, taxable as ordinary income to shareholders.
Investment income received from foreign sources may be subject to
foreign withholding taxes. Dividend and interest income is shown gross of
foreign withholding taxes in the accompanying financial statements.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions
to shareholders are recorded by the Fund on the ex dividend/distribution
date. The Fund distributes net realized capital gains, if any, to its
shareholders at least annually, if not offset by capital loss carryovers.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments for foreign currency transactions, nontaxable
dividends, net operating losses and expired capital loss carryforwards.
E. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund enters into short-term
forward foreign currency contracts in connection with planned purchases or
sales of securities as a hedge against fluctuations in foreign exchange
rates pending the settlement of transactions in foreign securities. A
forward foreign currency contract is an agreement between contracting
parties to exchange an amount of currency at some future time at an agreed
upon rate. These contracts are marked-to-market daily and the related
appreciation or depreciation of the contracts is presented in the Statement
of Assets and Liabilities.
F. EXPENSES -- Each of the Funds bears expenses incurred specifically on its
behalf and, in addition, each Fund bears a portion of general expenses,
based on the relative net assets of each Fund.
NOTE 2 -- INVESTMENT ADVISORY AND OTHER AGREEMENTS. INVESCO Funds Group, Inc.
("IFG") serves as the Fund's investment adviser. As compensation for its
services to the Fund, IFG receives an investment advisory fee which is accrued
daily at the applicable rate and paid monthly. The fee is based on the annual
rate of 0.75% of the Fund's average net assets.
<PAGE>
In accordance with a Sub-Advisory Agreement between IFG and INVESCO Realty
Advisors ("INVESCO Realty"), an affiliate of IFG, investment decisions of the
Fund are made by INVESCO Realty. Fees for such sub-advisory services are paid by
IFG.
In accordance with an Administrative Agreement, the Fund pays IFG an
annual fee of $10,000, plus an additional amount computed at an annual rate of
0.015% of average net assets to provide administrative, accounting and clerical
services. The fee is accrued daily and paid monthly.
IFG receives a transfer agent fee at an annual rate of $20.00 per
shareholder account, or, where applicable, per participant in an omnibus
account, per year. IFG may pay such fee for participants in omnibus accounts to
affiliates or third parties. The fee is paid monthly at one-twelfth of the
annual fee and is based upon the actual number of accounts in existence during
each month.
A plan of distribution pursuant to Rule 12b-1 of the Act has provided for
compensation of marketing and advertising expenditures to IFG (the
"Distributor") to a maximum of 0.25% of average annual net assets. Amounts
accrued by the Fund are available to compensate the Distributor for actual
expenditures incurred within a rolling twenty-four-month period ending December
31, 1998 for the Fund and for a rolling twelve-month period thereafter. For the
period ended May 31, 1997, the Fund paid the distributor $17,909 for
compensation of expenses incurred.
IFG has voluntarily agreed, in some instances, to absorb certain fees and
expenses incurred by the Fund.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the period ended
May 31, 1997, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were $46,096,107 and $15,822,856, respectively.
There were no purchases or sales of U.S. Government securities.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At May 31, 1997, the gross appreciation
of securities in which there was an excess of value over tax cost amounted to
$583,959 and the gross depreciation of securities in which there was an excess
of tax cost over value amounted to $1,021,252, resulting in net depreciation of
$437,293.
NOTE 5 -- TRANSACTIONS WITH AFFILIATES. Certain of the Fund's officers and
directors are also officers and directors of IFG or INVESCO Realty.
The Fund has adopted an unfunded deferred compensation plan covering all
independent directors of the Fund who will have served as an independent
director for at least five years at the time of retirement. Benefits under this
plan are based on an annual rate of 40% of the retainer fee at the time of
retirement.
Pension expenses for the period ended May 31, 1997, included in Directors'
Fees and Expenses in the Statement of Operations, and unfunded accrued pension
costs and pension liability included in Prepaid Expenses and Accrued Expenses,
respectively, in the Statement of Assets and Liabilities were insignificant.
<PAGE>
NOTE 6 -- LINE OF CREDIT. The Fund has available a Redemption Line of Credit
Facility ("LOC"), from a consortium of national banks, to be used for temporary
or emergency purposes to fund redemptions of investor shares. The LOC permits
borrowings to a maximum of 10% of the Net Assets at Value of the Fund. The Fund
agrees to pay annual fees and interest on the unpaid principal balance based on
prevailing market rates as defined in the agreement. At May 31, 1997, there were
no such borrowings.
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Page in
Prospectus
----------
(1) Financial statements and
schedules included in
Prospectus (Part A):
^ None.
Page in
Statement
of Addi-
tional In-
formation
----------
(2) Unaudited Statement of 88
Investment Securities for the
Realty Fund as of May 31,
1997.
Unaudited Statement of Assets 91
and Liabilities for the
Realty Fund as of May 31, 1997.
Unaudited Statement of 92
Operations for the Realty Fund
for the period January 2, 1997
(commencement of operations)
through May 31, 1997.
Unaudited Statement of Changes 93
in Net Assets for the Realty
Fund for the period January 2,
1997 (commencement of operations)
through May 31, 1997.
Unaudited Financial Highlights 94
for the Realty Fund for the
period January 2, 1997
(commencement of operations)
through May 31, 1997.
The following financial
statements for the Worldwide
Communications, Worldwide
Capital Goods, European Small
Company, Latin American Growth
and Asian Growth Funds and the
notes thereto for the period
<PAGE>
ended July 31, 1996, and the
report of Price Waterhouse LLP
with respect to such financial
statements, are incorporated
herein by reference from the
Company's Annual Report to
Shareholders for the fiscal year
ended July 31, 1996: Statement
of Investment Securities as of
July 31, 1996; Statement of
Assets and Liabilities as of
July 31, 1996; Statement of
Operations for the year ended
July 31, 1996; Statement of
Changes in Net Assets for the
year ended July 31, 1996 and
the period ended July 31, 1995;
and Financial Highlights for the
year ended July 31, 1996 and the
period ended July 31, 1995.
The following unaudited financial
statements for the Worldwide
Communications, Worldwide Capital
Goods, European Small Company,
Latin American Growth, Asian
Growth and Realty Funds and the
notes thereto for the period ended
January 31, 1997 are incorporated
by reference from the Company's
Semi-Annual Report to Shareholders
for the period ended January 31,
1997; Statement of Investment
Securities as of January 31,
1997; Statement of Assets and
Liabilities as of January
31, 1997; Statement of Operations
as of January 31, 1997; Statement
of Changes in Net Assets as of
January 31, 1997; and Financial
Highlights as of January 31, 1997.
<PAGE>
(3) Financial statements and
schedules included in Part C:
None
(b) Exhibits:
(1) (a) Articles of Incorporation
(Charter).(3)
(b) Articles Supplementary to
the Company's Articles of
Incorporation dated January 6,
1995.(3)
(c) Articles supplementary to
the Company's Articles of
Incorporation dated June 20,
1995.(3)
(d) Articles Supplementary to
the Company's Articles of
Incorporation dated November ^
7, 1996.(4)
(e) Form of Articles
Supplementary to the Company's
Articles of Incorporation
dated July 14, 1997.
(2) Bylaws.(3)
(3) Not applicable.
(4) Not required to be filed on
EDGAR.
(5) (a) Investment Advisory
Agreement Between Registrant
and INVESCO Funds Group, Inc.
dated February 28, 1997.
(i) Form of Amendment to
Investment Advisory
Agreement dated July __,
1997.
<PAGE>
(b) Sub-Advisory Agreement
Between INVESCO Funds Group,
Inc. and INVESCO Trust Company
dated February 28, ^ 1997.(4)
(c) Sub-advisory Agreement
between INVESCO Funds Group,
Inc. and INVESCO Asia Ltd.
dated February 28, ^ 1997.(4)
(d) Sub-advisory Agreement
between INVESCO Funds Group,
Inc. and INVESCO Asset
Management Limited dated
February 28, ^ 1997.(4)
(e) Sub-Advisory Agreement
between INVESCO Funds Group,
Inc. and INVESCO Realty
Advisors dated December 9, ^
1996.(4)
(f) Form of Sub-Advisory
Agreement between INVESCO
Funds Group, Inc. and World
Asset Management.
(6) Distribution Agreement Between
Registrant and INVESCO Funds
Group, Inc. dated February 28,
^ 1997.(4)
(7) Defined Benefit Deferred
Compensation Plan for Non-
Interested Directors and ^
Trustees.(4)
(8) Custody Agreement Between
Registrant and State Street
Bank and Trust Company dated
May 2, 1994.(3)
(a) Amendment to Custody
Agreement dated October 25,
1995.(3)
(b) Data Access Services
Addendum.
<PAGE>
(9) (a) Transfer Agency Agreement
Between Registrant and INVESCO
Funds Group, Inc. dated
February 28, ^ 1997.(4)
(b) Administrative Services
Agreement between Registrant
and INVESCO Funds Group, Inc.
dated February 28, ^ 1997.(4)
(10) Opinion and consent of counsel
as to the legality of the
securities being registered,
indicating whether they will,
when sold, be legally issued,
fully paid and nonassessable
dated May 18, ^ 1994.(4)
(11) Consent of Independent
Accountants.
(12) Not applicable.
(13) Not applicable.
(14) Copies of model plans used in
the establishment of
retirement plans as follows:
Non-standardized Profit
Sharing Plan; Non-standardized
Money Purchase Pension Plan;
Standardized Profit Sharing
Plan Adoption Agreement;
Standardized Money Purchase
Pension Plan; Non-standardized
401(k) Plan Adoption
Agreement; Standardized 401(k)
Paired Profit Sharing Plan;
Standardized Simplified Profit
Sharing Plan; Standardized
Simplified Money Purchase
Plan; Defined Contribution
Master Plan & Trust Agreement;
and Financial 403(b)
Retirement Plan, all filed
with Registration Statement
No. 33-63498 of INVESCO
International Funds, Inc.
filed May 27, 1993, and herein
incorporated by reference.
<PAGE>
(15) Plan and Agreement of
Distribution dated May 2, 1994
adopted pursuant to Rule 12b-1
under the Investment Company
Act of 1940.(1)
(a) Amendment of Plan and
Agreement of Distribution
dated July 19, 1995.(1)
(b) Amended Plan and Agreement
of Distribution Pursuant to
12b-1 dated January 1, ^
1997.(4)
(16) (a) Schedule for Computation
of Performance Data for
Worldwide Capital Goods ^
Fund.(4)
(b) Schedule for Computation
of Performance Data for
Worldwide Communications ^
Fund.(4)
(17) (a) Financial Data Schedule
for Worldwide Capital Goods
Fund for the period ended
January 31, 1997.
(b) Financial Data Schedule
for Worldwide Communications
Fund for the period ended
January 31, 1997.
(c) Financial Data Schedule
for Latin American Growth Fund
for the period ended January
31, 1997.
(d) Financial Data Schedule
for European Small Company
Fund for the period ended
January 31, 1997.
(e) Financial Data Schedule
for Asian Growth Fund for the
period ended January 31, 1997.
(f) Financial Data Schedule
for Realty Fund for the period
January 2, 1997 through May 31, 1997.
<PAGE>
(18) ^ Form of Plan Pursuant to Rule
18f-3 under the Investment Company
Act of 1940 by the Registrant
adopted by the Board of Directors
May 16, 1997.
- ---------------
(1)Previously filed on EDGAR with Post-Effective Amendment No. 6 to the
Registration Statement on August 30, 1995, and incorporated by reference herein.
(2)Previously filed on EDGAR with Post-Effective Amendment No. 9 to the
Registration Statement on October 11, 1996, and incorporated by reference
herein.
(3)Previously filed on EDGAR with Post-Effective Amendment No. 10 to the
Registration Statement on November 22, 1996, and incorporated by reference
herein.
(4)Previously filed on EDGAR with Post-Effective Amendment No. 11 to the
Registration Statement on June 27, 1997, and incorporated by reference herein.^
Item 25. Persons Controlled by or Under Common Control With Registrant
-------------------------------------------------------------
No person is presently controlled by or under common control with
Registrant.
Item 26. Number of Holders of Securities
-------------------------------
Number of Record
Holders as of
Title of Class ^ June 30, 1997
-------------- ---------------
INVESCO Worldwide Capital Goods Fund ^ 1,662
INVESCO Worldwide Communications Fund ^ 9,250
INVESCO European Small Company Fund ^ 10,327
INVESCO Latin American Growth Fund ^ 10,988
INVESCO Asian Growth Fund ^ 4,489
INVESCO Realty Fund ^ 5,768
<PAGE>
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 Funds and Their Management" in the Funds' Prospectuses and
in the Statement of Additional Information for information regarding the
business of the investment adviser. For information as to the business,
profession, vocation or employment of a substantial nature of each of the
officers and directors of INVESCO Funds Group, Inc., reference is made to the
Schedule Ds to the Form ADV filed under the Investment Advisers Act of 1940 by
INVESCO Funds Group, Inc., which schedules are herein incorporated by reference.
Item 29. Principal Underwriters
----------------------
(a) INVESCO Capital Appreciation Funds, Inc.
INVESCO Diversified Funds, Inc.
^ INVESCO Emerging Opportunity Funds, Inc.
INVESCO Growth Fund, Inc.
INVESCO Income Funds, Inc.
INVESCO Industrial Income Fund, Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Multiple Asset Funds, Inc.
INVESCO Strategic Portfolios, Inc.
INVESCO Tax-Free Income Funds, Inc.
INVESCO Value Trust
INVESCO Variable Investment Funds, Inc.
<PAGE>
(b)
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------ ------------- -------------
Charles W. Brady Chairman of
1315 Peachtree Street NE the Board
Atlanta, GA 30309
Darryl C. Celkupa Vice President
7800 E. Union Avenue
Denver, CO 80237
Robert D. Cromwell Assistant Vice
7800 E. Union Avenue President
Denver, CO 80237
William J. Galvin, Jr. Senior Vice Asst. Sec.
7800 E. Union Avenue President
Denver, CO 80237
Linda J. Gieger Vice President
7800 E. Union Avenue
Denver, CO 80237
Ronald L. Grooms Senior Vice Treasurer,
7800 E. Union Avenue President Chief Fin'l
Denver, CO 80237 & Treasurer Officer, and
Chief Acctg.
Officer
Hubert L. Harris, Jr. Director
1315 Peachtree Street NE
Atlanta, GA 30309
Dan J. Hesser Chairman of the President, CEO
7800 E. Union Avenue Board, President, & Director
Denver, CO 80237 CEO & Director
Thomas M. Hurley Vice President
7800 E. Union Avenue
Denver, CO 80237
<PAGE>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------ ------------- -------------
Gregory E. Hyde Vice President
7800 E. Union Avenue
Denver, CO 80237
Jeraldine E. Kraus Assistant Secretary
7800 E. Union Avenue
Denver, CO 80237
Michael D. Legoski Asst. Vice
7800 E. Union Avenue President
Denver, CO 80237
James F. Lummanick Vice President;
7800 E. Union Avenue Asst. General
Denver, CO 80237 Counsel
Charles P. Mayer Director
7800 E. Union Avenue
Denver, CO 80237
^
Robert J. O'Connor Director
1201 Peachtree Street NE
Atlanta, GA 30361
Donald R. Paddack Asst. Vice
7800 E. Union Avenue President
Denver, CO 80237
Laura M. Parsons Vice President
7800 E. Union Avenue
Denver, CO 80237
Glen A. Payne Sr. Vice President Secretary
7800 E. Union Avenue Secretary
Denver, CO 80237 General Counsel
Pamela J. Piro Asst. Vice
7800 E. Union Avenue President
Denver, CO 80237
<PAGE>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------ ------------- -------------
Gary J. Ruhl Vice President
7800 E. Union Avenue
Denver, CO 80237
Kent T. Schmeckpeper Assistant Vice
7800 E. Union Avenue President
Denver, CO 80237
Terri Berg Smith Vice President
7800 E. Union Avenue
Denver, CO 80237
Larry Soll Director
345 Poorman Road
Boulder, CO 80302
Tane T. Tyler Assistant
7800 E. Union Avenue Vice President
Denver, CO 80237
Alan I. Watson Vice President Asst. Sec.
7800 E. Union Avenue
Denver, CO 80237
Judy P. Wiese Vice President Asst. Treas.
7800 E. Union Avenue
Denver, CO 80237
Allyson B. Zoellner Vice President
7800 E. Union Avenue
Denver, CO 80237
<PAGE>
The following is a list of officers of INVESCO Retirement Plan Services, Inc.
("IRPS"), a division of INVESCO Funds Group, Inc., the underwriter:
Name and Principal Positions and Offices
Business Address with IRPS
- ------------------ ---------------------
Fredrick W. Braley Chief Financial Officer
400 Colony Square, Suite 2200 and Treasurer
1201 Peachtree St., N.E.
Atlanta, GA 30361
Scott P. Brogan Senior Vice President
400 Colony Square, Suite 2200
1201 Peachtree St., N.E.
Atlanta, GA 30361
Rayane S. Clark Vice President - Defined
400 Colony Square, Suite 2200 Contributions Operations
1201 Peachtree St., N.E.
Atlanta, GA 30361
M. Anthony Cox Senior Vice President
400 Colony Square, Suite 2200
1201 Peachtree St., N.E.
Atlanta, GA 30361
Mary Ann Dallenbach Senior Vice President
400 Colony Square, Suite 2200
1201 Peachtree St., N.E.
Atlanta, GA 30361
Douglas P. Dohm Regional Vice President
400 Colony Square, Suite 2200
1201 Peachtree St., N.E.
Atlanta, GA 30361
Joseph B. Jennings Senior Vice President
400 Colony Square, Suite 2200
1201 Peachtree St., N.E.
Atlanta, GA 30361
Mark A. Jones Senior Vice President
400 Colony Square, Suite 2200
1201 Peachtree St., N.E.
Atlanta, GA 30361
<PAGE>
Name and Principal Positions and Offices
Business Address with IRPS
- ------------------ ---------------------
Barbara L. March Senior Vice President
400 Colony Square, Suite 2200
1201 Peachtree St., N.E.
Atlanta, GA 30361
Robert J. O'Connor Chief Executive Officer
400 Colony Square, Suite 2200
1201 Peachtree St., N.E.
Atlanta, GA 30361
E. Eric Starr Secretary and General
400 Colony Square, Suite 2200 Counsel
1201 Peachtree St., N.E.
Atlanta, GA 30361
(c) Not applicable.
Item 30. Location of Accounts and Records
--------------------------------
Dan J. Hesser
7800 E. Union Avenue
Denver, CO 80237
Item 31. Management Services
-------------------
Not applicable.
Item 32. Undertakings
------------
(a) The Registrant shall furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
(b) The Registrant hereby undertakes to file a post-effective
amendment containing reasonably current financial statements
for INVESCO S&P 500 Index Fund within four to six months from
the effective date of Post-Effective Amendment No. 12.
<PAGE>
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the registrant certifies that it ^ 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 16th day of ^ July, 1997.
Attest: INVESCO Specialty Funds, Inc.
/s/ Glen A. Payne /s/ Dan J. Hesser
- ------------------------------------ ------------------------------------
Glen A. Payne, Secretary Dan J. Hesser, President
Pursuant to the requirements of the Securities Act of 1933, this
post-effective amendment to Registrant's Registration Statement has been signed
by the following persons in the capacities indicated on this 16th day of ^ July,
1997.
/s/ Dan J. Hesser /s/ Lawrence H. Budner
- ------------------------------------ ------------------------------------
Dan J. Hesser, President & Lawrence H. Budner, Director
Director (Chief Executive Officer)
/s/ Ronald L. Grooms /s/ Daniel D. Chabris
- ------------------------------------ ------------------------------------
Ronald L. Grooms, Treasurer Daniel D. Chabris, Director
(Chief Financial and
Accounting Officer)
/s/ Victor L. Andrews /s/ Fred A. Deering
- ------------------------------------ ------------------------------------
Victor L. Andrews, Trustee Fred A. Deering, Director
/s/ Bob R. Baker /s/ Larry Soll
- ------------------------------------ ------------------------------------
Bob R. Baker, Director Larry Soll, Director
/s/ Charles W. Brady /s/ Kenneth T. King
- ------------------------------------ ------------------------------------
Charles W. Brady, Director Kenneth T. King, Director
/s/ John W. McIntyre
------------------------------------
^ John W. McIntyre, Director
By*--------------------------------- By* /s/ Glen A. Payne
-----------------------------
Edward F. O'Keefe Glen A. Payne
Attorney in Fact Attorney in Fact
* Original Powers of Attorney authorizing Edward F. O'Keefe and Glen A. Payne,
and each of them, to execute this post-effective amendment to the Registration
Statement of the Registrant on behalf of the above-named directors and officers
of the Registrant have been filed with the Securities and Exchange Commission on
May 23, 1994, June 22, 1995, August 25, 1995, August 30, 1996 ^, November 22,
1996 and June 27, 1997.
<PAGE>
Exhibit Index
Page in
Exhibit Number Registration Statement
- -------------- ----------------------
^ 1(e) 114
5(a) 116
5(a)(i) 124
5(f) 125
8(b) 132
11 147
17(a) 148
17(b) 149
17(c) 150
17(d) 151
17(e) 152
17(f) 153
^ 18 154
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
INVESCO SPECIALTY FUNDS, INC.
INVESCO Specialty Funds, Inc., a corporation organized and existing under
the General Corporation Law of the State of Maryland, registered as an open-end
investment company under the Investment Company Act of 1940, and having its
registered office in Baltimore, Maryland (hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: By unanimous approval, at a meeting held on May 16, 1997, the board
of directors of the Corporation has created an additional class of shares of
common stock of the Corporation designated as the INVESCO S&P 500 Index Fund,
and has authorized 200,000,000 additional shares of stock to be allocated to
INVESCO S&P 500 Index Fund. The aggregate number of shares of stock of all
series which the Corporation shall have the authority to issue after creation of
a new series of Common Stock, is eight hundred million (800,000,000) shares of
Common Stock. The newly designated series of common stock designated as INVESCO
S&P 500 Index Fund has a par value of $.01 per share.
SECOND: Shares of each class have been duly classified by the board of
directors pursuant to authority and power contained in the Articles of
Incorporation of the Corporation.
THIRD: A description of the common stock so classified, including the
powers, preferences, participating, voting or other special rights and
qualifications, restrictions and limitations thereof, is as outlined in the
Articles of Incorporation of the Corporation.
FOURTH: The Corporation is registered as an open-end management investment
company under the Investment Company Act of 1940.
FIFTH: The undersigned, the president of the Corporation, who is executing
on behalf of the Corporation the foregoing Articles Supplementary, of which this
paragraph is a part, hereby acknowledges, in the name of and on behalf of the
Corporation, that the foregoing Articles Supplementary are the corporate act of
the Corporation 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 Specialty Funds, Inc. has caused these Articles
Supplementary to be signed in its name and on its behalf by its president and
witnessed by its secretary on the 14th day of July, 1997.
<PAGE>
These Articles Supplementary shall be effective upon acceptance by the
Maryland State Department of Assessments and Taxation.
INVESCO SPECIALTY FUNDS, INC.
By:
------------------------------------
Dan J. Hesser, President
ATTEST:
By:
------------------------
Glen A. Payne, Secretary
I, Ruth Christensen, a notary public in and for the City and County of
Denver, and State of Colorado, do hereby certify that Dan J. Hesser, personally
known to me to be the person whose name is subscribed to the foregoing Articles
Supplementary, 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 14th day of July, 1997.
------------------------------------
Notary Public
My Commission Expires:
-------------------
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made this 28th day of February, 1997, in Denver,
Colorado, by and between INVESCO FUNDS GROUP, INC. (the "Adviser"), a Delaware
corporation, and INVESCO Specialty Funds, Inc., a Maryland corporation (the
"Company").
WITNESSETH:
WHEREAS, the Company is a corporation organized under the laws of the State
of Maryland; and
WHEREAS, the Company is registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"), as a diversified, open end
management investment company and has one class of shares (the "Shares"), which
is divided into five series, each representing an interest in a separate
portfolio of investments (such series initially being the INVESCO Worldwide
Capital Goods Fund, INVESCO Worldwide Communications Fund, INVESCO European
Small Company Fund, INVESCO Latin American Growth Fund, INVESCO Asian Growth
Fund and INVESCO Realty Fund (individually, the "Fund" and collectively, the
"Funds")); and
WHEREAS, the Company desires that the Adviser manage its investment
operations and the Adviser desires to manage said operations;
NOW, THEREFORE, in consideration of these premises and of the mutual
covenants and agreements hereinafter contained, the parties hereto agree as
follows:
1. Investment Management Services. The Adviser hereby agrees to manage the
investment operations of the Company and its Funds, subject to the terms of this
Agreement and to the supervision of the Company's directors (the "Directors").
The Adviser agrees to perform, or arrange for the performance of, the following
specific services for the Company:
(a) to manage the investment and reinvestment of all the assets, now or
hereafter acquired, of the Company and the Funds of the Company;
(b) to maintain a continuous investment program for the Company and each
Fund of the Company, consistent with (i) the Company's and each Fund's
investment policies as set forth in the Company's Registration Statement, as
from time to time amended, under the Investment Company Act of 1940, as
amended (the "1940 Act"), and in any prospectus and/or statement of
additional information of the Company or any Fund of the Company, as from
time to time amended and in use under the Securities Act of 1933, as amended,
and (ii) the Company's status as a regulated investment company under the
Internal Revenue Code of 1986, as amended;
(c) to determine what securities are to be purchased or sold for the
Company and its Funds, unless otherwise directed by the Directors of the
Company, and to execute transactions accordingly;
<PAGE>
(d) to provide to the Company and the Funds of the Company the benefit of
all of the investment analyses and research, the reviews of current economic
conditions and trends, and the consideration of long range investment policy
now or hereafter generally available to investment advisory customers of the
Adviser;
(e) to determine what portion of the Company and each Fund of the Company
should be invested in common stocks, preferred stocks, Government
obligations, commercial paper, certificates of deposit, bankers' acceptances,
variable amount notes, corporate debt obligations, and any other authorized
securities;
(f) to make recommendations as to the manner in which voting rights,
rights to consent to Company and/or Fund action and any other rights
pertaining to the Company's portfolio securities shall be exercised; and
(g) to calculate the net asset value of the Company and each Fund, as
applicable, as required by the 1940 Act, subject to such procedures as may be
established from time to time by the Company's Directors, based upon the
information provided to the Adviser by the Company or by the custodian,
co-custodian or sub-custodian of the Company's or any of the Funds' assets
(the "Custodian") or such other source as designated by the Directors from
time to time.
With respect to execution of transactions for the Company and for the
Funds, the Adviser shall place, or arrange for the placement of, all orders for
the purchase or sale of portfolio securities with brokers or dealers selected by
the Adviser. In connection with the selection of such brokers or dealers and the
placing of such orders, the Adviser is directed at all times to obtain for the
Company and the Funds the most favorable execution and price; after fulfilling
this primary requirement of obtaining the most favorable execution and price,
the Adviser is hereby expressly authorized to consider as a secondary factor in
selecting brokers or dealers with which such orders may be placed whether such
firms furnish statistical, research and other information or services to the
Adviser. Receipt by the Adviser of any such statistical or other information and
services should not be deemed to give rise to any requirement for adjustment of
the advisory fee payable pursuant to paragraph 4 hereof. The Adviser may follow
a policy of considering sales of shares of the Company as a factor in the
selection of broker/dealers to execute portfolio transactions, subject to the
requirements of best execution discussed above.
The Adviser shall for all purposes herein provided be deemed to be an
independent contractor.
2. Allocation of Costs and Expenses. The Adviser shall reimburse the Company
monthly for any salaries paid by the Company to officers, Directors, and full
time employees of the Company who also are officers, general partners or
employees of the Adviser or its affiliates. Except for such sub- accounting,
recordkeeping, and administrative services which are to be provided by the
Adviser to the Company under the Administrative Services Agreement between the
Company and the Adviser dated February 28, 1997, which was approved on December
6, 1996, by the Company's board of directors, including all of the independent
directors, at the Company's request the Adviser shall also furnish to the
Company, at the expense of the Adviser, such competent executive, statistical,
<PAGE>
administrative, internal accounting and clerical services as may be required in
the judgment of the Directors of the Company. These services will include, among
other things, the maintenance (but not preparation) of the Company's accounts
and records, and the preparation (apart from legal and accounting costs) of all
requisite corporate documents such as tax returns and reports to the Securities
and Exchange Commission and Company shareholders. The Adviser also will furnish,
at the Adviser's expense, such office space, equipment and facilities as may be
reasonably requested by the Company from time to time.
Except to the extent expressly assumed by the Adviser herein and except to
the extent required by law to be paid by the Adviser, the Company shall pay all
costs and expenses in connection with the operations and organization of the
Company. Without limiting the generality of the foregoing, such costs and
expenses payable by the Company include the following:
(a) all brokers' commissions, issue and transfer taxes, and other costs
chargeable to the Company and any Fund in connection with securities
transactions to which the Company or any Fund is a party or in connection
with securities owned by the Company or any Fund;
(b) the fees, charges and expenses of any independent public accountants,
custodian, depository, dividend disbursing agent, dividend reinvestment agent,
transfer agent, registrar, independent pricing services and legal counsel for
the Company or for any Fund;
(c) the interest on indebtedness, if any, incurred by the Company or any
Fund;
(d) the taxes, including franchise, income, issue, transfer, business
license, and other corporate fees payable by the Company or any Fund to
federal, state, county, city, or other governmental agents;
(e) the fees and expenses involved in maintaining the registration and
qualification of the Company and of its shares under laws administered by the
Securities and Exchange Commission or under other applicable regulatory
requirements, including the preparation and printing of prospectuses and
statements of additional information;
(f) the compensation and expenses of its Directors;
(g) the costs of printing and distributing reports, notices of
shareholders' meetings, proxy statements, dividend notices, prospectuses,
statements of additional information and other communications to the
Company's shareholders, as well as all expenses of shareholders' meetings and
Directors' meetings;
(h) all costs, fees or other expenses arising in connection with the
organization and filing of the Company's Articles of Incorporation, including
its initial registration and qualification under the 1940 Act and under the
Securities Act of 1933, as amended, the initial determination of its tax
status and any rulings obtained for this purpose, the initial registration
and qualification of its securities under the laws of any state and the
approval of the Company's operations by any other federal or state authority;
<PAGE>
(i) the expenses of repurchasing and redeeming shares of the Company;
(j) insurance premiums;
(k) the costs of designing, printing, and issuing certificates representing
shares of common stock of the Company;
(l) extraordinary expenses, including fees and disbursements of Company
counsel, in connection with litigation by or against the Company or any Fund;
(m) premiums for the fidelity bond maintained by the Company pursuant to
Section 17(g) of the 1940 Act and rules promulgated thereunder (except for
such premiums as may be allocated to the Adviser as an insured thereunder);
(n) association and institute dues; and
(o) the expenses, if any, of distributing shares of the Company paid by
the Company pursuant to a Plan and Agreement of Distribution adopted under
Rule 12b-1 of the Investment Company Act of 1940.
3. Use of Affiliated Companies. In connection with the rendering of the
services required to be provided by the Adviser under this Agreement, the
Adviser may, to the extent it deems appropriate and subject to compliance with
the requirements of applicable laws and regulations, and upon receipt of written
approval of the Company, make use of its affiliated companies and their
employees; provided that the Adviser shall supervise and remain fully
responsible for all such services in accordance with and to the extent provided
by this Agreement and that all costs and expenses associated with the providing
of services by any such companies or employees and required by this Agreement to
be borne by the Adviser shall be borne by the Adviser or its affiliated
companies.
4. Compensation of the Adviser. For the services to be rendered and the
charges and expenses to be assumed by the Adviser hereunder, the Company shall
pay to the Adviser an advisory fee which will be computed on a daily basis and
paid as of the last day of each month, using for each daily calculation the most
recently determined net asset value of each Fund of the Company, as determined
by valuations made in accordance with the Company's procedure for calculating
the Funds' net asset value as described in the Company's Prospectus and/or
Statement of Additional Information. The advisory fee to the Adviser with
respect to the INVESCO Worldwide Capital Goods Fund and INVESCO Worldwide
Communications Fund shall be computed at the following annual rate: 0.65% of the
first $500 million of each Fund's average net assets, 0.55% of the Fund's
average net assets in excess of $500 million but not more than $1 billion, and
0.45% of the Fund's average net assets in excess of $1 billion. The advisory fee
to the Adviser with respect to the INVESCO European Small Company Fund, INVESCO
Latin American Growth Fund and INVESCO Asian Growth Fund shall be computed at
the following annual rate: 0.75% of the first $500 million of each Fund's
average net assets, 0.65% of the next $500 million of each Fund's average net
assets and 0.55% of each Fund's average net assets over $1 billion. The advisory
fee to the Adviser with respect to the INVESCO Realty Fund shall be computed at
the annual rate of 0.25% of the Fund's average net assets.
<PAGE>
During any period when the determination of the Funds' net asset value is
suspended by the Directors of the Company, the net asset value of a share of the
Funds as of the last business day prior to such suspension shall, for the
purpose of this Paragraph 4, be deemed to be the net asset value at the close of
each succeeding business day until it is again determined. However, no such fee
shall be paid to the Adviser with respect to any assets of the Company or any
Fund thereof which may be invested in any other investment company for which the
Adviser serves as investment adviser. The fee provided for hereunder shall be
prorated in any month in which this Agreement is not in effect for the entire
month.
If, in any given year, the sum of a Fund's expenses exceeds the most
restrictive state imposed annual expense limitation, the Adviser will be
required to reimburse the Fund for such excess expenses promptly. Interest,
taxes and extraordinary items such as litigation costs are not deemed expenses
for purposes of this paragraph and shall be borne by the Company or such Fund in
any event. Expenditures, including costs incurred in connection with the
purchase or sale of portfolio securities, which are capitalized in accordance
with generally accepted accounting principles applicable to investment
companies, are accounted for as capital items and shall not be deemed to be
expenses for purposes of this paragraph.
5. Avoidance of Inconsistent Positions and Compliance with Laws. In
connection with purchases or sales of securities for the investment portfolio of
the Company or any Fund, neither the Adviser nor its officers or employees will
act as a principal or agent for any party other than the Company or any Fund or
receive any commissions. The Adviser will comply with all applicable laws in
acting hereunder including, without limitation, the 1940 Act; the Investment
Advisers Act of 1940, as amended; and all rules and regulations duly promulgated
under the foregoing.
6. Duration and Termination. This Agreement shall become effective as of the
date it is approved by a majority of the outstanding voting securities of the
Funds of the Company, and unless sooner terminated as hereinafter provided,
shall remain in force for an initial term of two years from the date of
execution, and from year to year thereafter, but only as long as such
continuance is specifically approved at least annually (i) by a vote of a
majority of the outstanding voting securities of the Funds of the Company or by
the Directors of the Company, and (ii) by a majority of the Directors of the
Company who are not interested persons of the Adviser or the Company by votes
cast in person at a meeting called for the purpose of voting on such approval.
In the event of the disapproval of this Agreement, or of the continuation
hereof, by the shareholders of a particular Fund (or by the Directors of the
Company as to a particular Fund), the parties intend that such disapproval shall
be effective only as to such Fund, and that such disapproval shall not affect
the validity or effectiveness of the approval of this Agreement, or of the
continuation hereof, by the shareholders of any other Fund (or by the Directors,
including a majority of the disinterested Directors) as to such other Fund; in
such case, this Agreement shall be deemed to have been validly approved or
continued, as the case may be, as to such other Fund.
This Agreement may, on 60 days' prior written notice, be terminated without
the payment of any penalty, by a majority of the Directors of the Company, or by
<PAGE>
the vote of a majority of the outstanding voting securities of the Company or,
with respect to a particular Fund, by a majority of the outstanding voting
securities of that Fund, as the case may be, or by the Adviser. This Agreement
shall immediately terminate in the event of its assignment, unless an order is
issued by the Securities and Exchange Commission conditionally or
unconditionally exempting such assignment from the provisions of Section 15(a)
of the 1940 Act, in which event this Agreement shall remain in full force and
effect subject to the terms and provisions of said order. In interpreting the
provisions of this paragraph 6, the definitions contained in Section 2(a) of the
1940 Act and the applicable rules under the 1940 Act (particularly the
definitions of "interested person," "assignment" and "vote of a majority of the
outstanding voting securities") shall be applied.
The Adviser agrees to furnish to the Directors of the Company such
information on an annual basis as may reasonably be necessary to evaluate the
terms of this Agreement.
Termination of this Agreement shall not affect the right of the Adviser to
receive payments on any unpaid balance of the compensation described in
paragraph 4 earned prior to such termination.
7. Non Exclusive Services. The Adviser shall, during the term of this
Agreement, be entitled to render investment advisory services to others,
including, without limitation, other investment companies with similar
objectives to those of the Company or any Fund of the Company. The Adviser may,
when it deems such to be advisable, aggregate orders for its other customers
together with any securities of the same type to be sold or purchased for the
Company or any Fund in order to obtain best execution and lower brokerage
commissions. In such event, the Adviser shall allocate the shares so purchased
or sold, as well as the expenses incurred in the transaction, in the manner it
considers to be most equitable and consistent with its fiduciary obligations to
the Company or any Fund and the Adviser's other customers.
8. Liability. The Adviser shall have no liability to the Company or any Fund
or to the Company's shareholders or creditors, for any error of judgment,
mistake of law, or for any loss arising out of any investment, nor for any other
act or omission, in the performance of its obligations to the Company or any
Fund not involving willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties hereunder.
9. Miscellaneous Provisions.
Notice. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for the receipt of such notice.
Amendments Hereof. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the Company and the Adviser, and no material amendment of this Agreement shall
<PAGE>
be effective unless approved by (1) the vote of a majority of the Directors of
the Company, including a majority of the Directors who are not parties to this
Agreement or interested persons of any such party cast in person at a meeting
called for the purpose of voting on such amendment, and (2) the vote of a
majority of the outstanding voting securities of any Fund of the Company
affected by such amendment; provided, however, that this paragraph shall not
prevent any immaterial amendment(s) to this Agreement, which amendment(s) may be
made without shareholder approval, if such amendment(s) are made with the
approval of (1) the Directors and (2) a majority of the Directors of the Company
who are not interested persons of the Adviser or the Company. In the event of
the disapproval of an amendment of this Agreement by the shareholders of a
particular Fund (or by the Directors of the Company as to a particular Fund),
the parties intend that such disapproval shall be effective only as to such
Fund, and that such disapproval shall not affect the validity or effectiveness
of the approval of the amendment by the shareholders of any other Fund (or by
the Directors, including a majority of the disinterested Directors) as to such
other Fund; in such case, this Agreement shall be deemed to have been validly
amended as to such other Fund.
Severability. Each provision of this Agreement is intended to be severable.
If any provision of this Agreement shall be held illegal or made invalid by a
court decision, statute, rule or otherwise, such illegality or invalidity shall
not affect the validity or enforceability of the remainder of this Agreement.
Headings. The headings in this Agreement are inserted for convenience and
identification only and are in no way intended to describe, interpret, define or
limit the size, extent or intent of this Agreement or any provision hereof.
Applicable Law. This Agreement shall be construed in accordance with the laws
of the State of Colorado and the applicable provisions of the 1940 Act. To the
extent that the applicable laws of the State of Colorado, or any of the
provisions herein, conflict with applicable provisions of the 1940 Act, the
latter shall control.
<PAGE>
IN WITNESS WHEREOF, the Adviser and the Company each has caused this
Agreement to be duly executed on its behalf by an officer thereunto duly
authorized, the day and year first above written.
INVESCO SPECIALTY FUNDS, INC.
By: /s/ Dan J. Hesser
-------------------------
President
ATTEST:
/s/ Glen A. Payne
- -----------------
Secretary
INVESCO FUNDS GROUP, INC.
By: /s/ Ronald L. Grooms
--------------------
Senior Vice President
ATTEST:
/s/ Glen A. Payne
- -----------------
Secretary
Amendment to Investment Advisory Agreement
This is an Amendment to the Investment Advisory Agreement made and entered
into between INVESCO Specialty Funds, Inc., a Maryland corporation (the
"Company") and INVESCO Funds Group, Inc., a Delaware corporation ("IFG"), as of
the 28th day of February, 1997 (the "Agreement").
WHEREAS, the Company desires to have IFG perform investment advisory,
statistical, research, and certain administrative and clerical services with
respect to management of the assets of the Company allocable to the INVESCO S&P
500 Index Fund, and IFG is willing and able to perform such services on the
terms and conditions set forth in the Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in the Agreement, it is agreed that the terms and conditions of the
Agreement shall be applicable to the Company's assets allocable to the INVESCO
S&P 500 Index Fund, to the same extent as if the INVESCO S&P 500 Index Fund were
to be added to the definition of "Funds" as utilized in the Agreement, and that
INVESCO S&P 500 Index Fund shall pay IFG a fee for services provided to them by
IFG under the Agreement as follows: 0.25% of the Fund's average net assets.
IN WITNESS WHEREOF, the parties have executed this Agreement on this ___
day of July, 1997.
INVESCO SPECIALTY FUNDS, INC.
By:
----------------------
Dan J. Hesser,
ATTEST: President
- ------------------------
Glen A. Payne, Secretary
INVESCO FUNDS GROUP, INC.
By:
----------------------
Ronald L. Grooms,
ATTEST: Senior Vice President
- -------------------------
Glen A. Payne, Secretary
SUB ADVISORY AGREEMENT
AGREEMENT made this ___ day of _______, 1997, by and between INVESCO Funds
Group, Inc. ("INVESCO"), a Delaware corporation, and World Asset management, a
general partnership organized under the laws of ___________________ ("the Sub
Adviser").
W I T N E S S E T H:
WHEREAS, INVESCO SPECIALTY FUNDS, INC. (the "Company") is engaged in
business as a diversified, open end management investment company registered
under the Investment Company Act of 1940, as amended (hereinafter referred to as
the "Investment Company Act") and has one class of shares (the "Shares"), which
is divided into series, each representing an interest in a separate portfolio of
investments, with one such series being designated the INVESCO S&P 500 Index
Fund (the "Fund"); and
WHEREAS, INVESCO and the Sub Adviser are engaged in rendering investment
advisory services and are registered as investment advisers under the Investment
Advisers Act of 1940; and
WHEREAS, INVESCO has entered into an Investment Advisory Agreement with
the Company (the "INVESCO Investment Advisory Agreement"), pursuant to which
INVESCO is required to provide investment advisory services to the Company, and,
upon receipt of written approval of the Company, is authorized to retain other
parties to provide such services; and
WHEREAS, the Sub Adviser is willing to provide investment advisory
services to the Company on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, INVESCO and the Sub Adviser hereby agree as follows:
ARTICLE I
DUTIES OF THE SUB ADVISER
INVESCO hereby employs the Sub Adviser to act as investment adviser to the
Company and to furnish the investment advisory services described below, subject
to the broad supervision of INVESCO and Board of Directors of the Company, for
the period and on the terms and conditions set forth in this Agreement. The Sub
Adviser hereby accepts such assignment and agrees during such period, at its own
expense, to render such services and to assume the obligations herein set forth
for the compensation provided for herein. The Sub Adviser shall for all purposes
herein be deemed to be an independent contractor and, unless otherwise expressly
provided or authorized herein, shall have no authority to act for or represent
the Company in any way or otherwise be deemed an agent of the Company.
The Sub Adviser hereby agrees to manage the investment operations of the
Funds, subject to the supervision of the Company's directors (the "Directors")
and INVESCO. Specifically, the Sub Adviser agrees to perform the following
services:
<PAGE>
(a) to manage the investment and reinvestment of all the assets, now or
hereafter acquired, of the Funds, to execute all purchases and sales of
portfolio securities and to vote all proxies of portfolio securities;
(b) to maintain a continuous investment program for the Funds, consistent
with (i) the Funds' investment policies as set forth in the Company's Articles
of Incorporation, Bylaws, and Registration Statement, as from time to time
amended, under the Investment Company Act of 1940, as amended (the "1940 Act"),
and in any prospectus and/or statement of additional information of the Funds,
as from time to time amended and in use under the Securities Act of 1933, as
amended, and (ii) the Company's status as a regulated investment company under
the Internal Revenue Code of 1986, as amended;
(c) to determine what securities are to be purchased or sold for the
Funds, unless otherwise directed by the Directors of the Company or INVESCO, and
to execute transactions accordingly;
(d) to provide to the Funds the benefit of all of the investment analysis
and research, the reviews of current economic conditions and trends, and the
consideration of long range investment policy now or hereafter generally
available to investment advisory customers of the Sub Adviser;
(e) to determine what portion of the Funds should be invested in the
various types of securities authorized for purchase by the Funds; and
(f) to make recommendations as to the manner in which voting rights,
rights to consent to Funds action and any other rights pertaining to the Funds'
portfolio securities shall be exercised.
With respect to execution of transactions for the Funds, the Sub Adviser
is authorized to employ such brokers or dealers as may, in the Sub Adviser's
best judgment, implement the policy of the Funds to obtain prompt and reliable
execution at the most favorable price obtainable. In assigning an execution or
negotiating the commission to be paid therefor, the Sub Adviser is authorized to
consider the full range and quality of a broker's services which benefit the
Funds, including but not limited to research and analytical capabilities,
reliability of performance, and financial soundness and responsibility. Research
services prepared and furnished by brokers through which the Sub Adviser effects
securities transactions on behalf of the Funds may be used by the Sub Adviser in
servicing all of its accounts, and not all such services may be used by the Sub
Adviser in connection with the Funds. In the selection of a broker or dealer for
execution of any negotiated transaction, the Sub Adviser shall have no duty or
obligation to seek advance competitive bidding for the most favorable negotiated
commission rate for such transaction, or to select any broker solely on the
basis of its purported or "posted" commission rate for such transaction,
provided, however, that the Sub Adviser shall consider such "posted" commission
rates, if any, together with any other information available at the time as to
the level of commissions known to be charged on comparable transactions by other
qualified brokerage firms, as well as all other relevant factors and
<PAGE>
circumstances, including the size of any contemporaneous market in such
securities, the importance to the Funds of speed, efficiency, and
confidentiality of execution, the execution capabilities required by the
circumstances of the particular transactions, and the apparent knowledge or
familiarity with sources from or to whom such securities may be purchased or
sold. Where the commission rate reflects services, reliability and other
relevant factors in addition to the cost of execution, the Sub Adviser shall
have the burden of demonstrating that such expenditures were bona fide and for
the benefit of the Funds.
The Sub-Adviser may recommend transactions in which it has directly or
indirectly a material interest, in unregulated collective investment schemes
including any operated or advised by the Sub-Adviser or in margined
transactions. Advice on investments may extend to investments not traded or
exchanges recognized or designated by the Securities and Investments Board.
Both parties acknowledge that the advice given under this Agreement may
involve liabilities in one currency matched by assets in another currency and
that accordingly movements in rates of exchange may have a separate effect,
unfavorable as well as favorable on the gain or loss experienced on an
investment.
In carrying out its duties hereunder, the Sub-Adviser shall comply with
all instructions of INVESCO in connection therewith such instructions may be
given by letter, telex, telephone or facsimile by any Director or Officer of
INVESCO or by any other person authorized by INVESCO.
Any instructions which appear to conflict with the terms of this Agreement
may be confirmed by the Sub-Adviser with INVESCO prior to execution.
ARTICLE II
ALLOCATION OF CHARGES AND EXPENSES
The Sub Adviser assumes and shall pay for maintaining the staff and
personnel necessary to perform its obligations under this Agreement, and shall,
at its own expense, provide the office space,
equipment and facilities necessary to perform its obligations under this
Agreement. Except to the extent expressly assumed by the Sub Adviser herein and
except to the extent required by law to be paid by the Sub Adviser, INVESCO
and/or the Company shall pay all costs and expenses in connection with the
operations of the Funds.
ARTICLE III
COMPENSATION OF THE SUB ADVISER
For the services rendered, facilities furnished, and expenses assumed by
the Sub Adviser, INVESCO shall pay to the Sub Adviser a fee, computed daily and
paid as of the last day of each month, using for each daily calculation the most
<PAGE>
recently determined net asset value of the Funds, as determined by a valuation
made in accordance with the Fund's procedures for calculating its net asset
value as described in the Fund's Prospectus and/or Statement of Additional
Information. The advisory fee to the Sub Adviser with respect to the Fund shall
be computed at the annual rate of 0.07% of the Fund's daily net assets up to $10
million; 0.05% of the Fund's daily net assets in excess of $10 million but not
more than $50 million; and 0.03% of the Fund's daily net assets in excess of
$$50 million. During any period when the determination of the Funds' net asset
value is suspended by the Directors of the Funds, the net asset value of a share
of the Funds as of the last business day prior to such suspension shall, for the
purpose of this Article III, be deemed to be the net asset value at the close of
each succeeding business day until it is again determined. However, no such fee
shall be paid to the Sub Adviser with respect to any assets of the Funds which
may be invested in any other investment company for which the Sub Adviser serves
as investment adviser or sub adviser. The fee provided for hereunder shall be
prorated in any month in which this Agreement is not in effect for the entire
month. The Sub Adviser shall be entitled to receive fees hereunder only for such
periods as the INVESCO Investment Advisory Agreement remains in effect.
ARTICLE IV
ACTIVITIES OF THE SUB ADVISER
The services of the Sub Adviser to the Funds are not to be deemed to be
exclusive, the Sub Adviser and any person controlled by or under common control
with the Sub Adviser (for purposes of this Article IV referred to as
"affiliates") being free to render services to others. It is understood that
directors, officers, employees and shareholders of the Funds are or may become
interested in the Sub Adviser and its affiliates, as directors, officers,
employees and shareholders or otherwise and that directors, officers, employees
and shareholders of the Sub Adviser, INVESCO and their affiliates are or may
become interested in the Funds as directors, officers and employees.
ARTICLE V
AVOIDANCE OF INCONSISTENT POSITIONS AND COMPLIANCE WITH
APPLICABLE LAWS
In connection with purchases or sales of securities for the investment
portfolios of the Funds, neither the Sub Adviser nor any of its directors,
officers or employees will act as a principal or agent for any party other than
the Funds or receive any commissions. The Sub Adviser will comply with all
applicable laws in acting hereunder including, without limitation, the 1940 Act;
the Investment Advisers Act of 1940, as amended; and all rules and regulations
duly promulgated under the foregoing.
<PAGE>
ARTICLE VI
DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall become effective as of the date it is approved by a
majority of the outstanding voting securities of the Fund. Thereafter, this
Agreement shall remain in force for an initial term of two years from the date
of execution, and from year to year thereafter until its termination in
accordance with this Article VI, but only so long as such continuance is
specifically approved at least annually by (i) the Directors of the Company, or
by the vote of a majority of the outstanding voting securities of the Funds, and
(ii) a majority of those Directors who are not parties to this Agreement or
interested persons of any such party cast in person at a meeting called for the
purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by INVESCO, the Funds by vote of the Directors of the Company, or by
vote of a majority of the outstanding voting securities of the Funds, or by the
Sub Adviser. A termination by INVESCO or the Sub Adviser shall require sixty
days' written notice to the other party and to the Company, and a termination by
the Company shall require such notice to each of the parties. This Agreement
shall automatically terminate in the event of its assignment to the extent
required by the Investment Company Act of 1940 and the Rules thereunder.
The Sub Adviser agrees to furnish to the Directors of the Company such
information on an annual basis as may reasonably be necessary to evaluate the
terms of this Agreement.
Termination of this Agreement shall not affect the right of the Sub
Adviser to receive payments on any unpaid balance of the compensation described
in Article III hereof earned prior to such termination.
ARTICLE VII
LIABILITY
The Sub Adviser agrees to use its best efforts and judgement and due care
in carrying out its duties under this Agreement provided however that the Sub
Adviser shall not be liable to INVESCO for any loss suffered by INVESCO or the
funds advised in connection with the subject matter of this Agreement unless
such loss arises from the willful misfeasance, bad faith or negligence in the
performance of the Sub-Adviser's duties and subject and without prejudice to the
foregoing. INVESCO hereby undertakes to indemnify and to keep indemnified the
Sub Adviser from and against any and all liabilities, obligations, losses,
damages, suits and expenses which may be incurred by or asserted against the Sub
Adviser for which it is responsible pursuant to Article I hereof provided always
that the Sub-Adviser shall send to INVESCO as soon as possible all claims,
letters, summonses, writs or documents which it receives from third parties and
provide whatever information and assistance INVESCO may require and no liability
<PAGE>
of any sort shall be admitted and no undertaking shall be given nor shall any
offer, promise or payment be made or legal expenses incurred by the Sub Adviser
without written consent of INVESCO who shall be entitled if it so desires to
take over and conduct in the name of the Sub Adviser the defense of any action
or to prosecute any claim for indemnity or damages or otherwise against any
third party.
ARTICLE VIII
AMENDMENTS OF THIS AGREEMENT
No provision of this Agreement may be orally changed or discharged, but
may only be modified by an instrument in writing signed by the Sub Adviser and
INVESCO. In addition, no amendment to this Agreement shall be effective unless
approved by (1) the vote of a majority of the Directors of the Company,
including a majority of the Directors who are not parties to this Agreement or
interested persons of any such party cast in person at a meeting called for the
purpose of voting on such amendment and (2) the vote of a majority of the
outstanding voting securities of the Funds (other than an amendment which can be
effective without shareholder approval under applicable law).
ARTICLE IX
DEFINITIONS OF CERTAIN TERMS
In interpreting the provisions of this Agreement, the terms "vote of a
majority of the outstanding voting securities," "assignments," "affiliated
person" and "interested person," when used in this Agreement, shall have the
respective meanings specified in the Investment Company Act and the Rules and
Regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under said Act.
ARTICLE X
GOVERNING LAW
This Agreement shall be construed in accordance with the laws of the State
of Colorado and the applicable provisions of the Investment Company Act. To the
extent that the applicable laws of the State of Colorado, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
ARTICLE XI
MISCELLANEOUS
Advice. Any recommendation or advice given by the Sub Adviser to INVESCO
hereunder shall be given in writing or by mail, telex, telefacsimile or by
telephone, such telephone advice to be confirmed by mail, telex, telefacsimile
or in writing to such place as INVESCO shall from time to time require; further
the Sub Adviser shall be free to telephone INVESCO as it sees fit in the
performance of its duties.
<PAGE>
Notice. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for the receipt of such notice.
Severability. Each provision of this Agreement is intended to be
severable. If any provision of this Agreement shall be held illegal or made
invalid by a court decision, statute, rule or otherwise, such illegality or
invalidity shall not affect the validity or enforceability of the remainder of
this Agreement.
Headings. The headings in this Agreement are inserted for convenience and
identification only and are in no way intended to describe, interpret, define or
limit the size, extent or intent of this Agreement or any provision hereof.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
INVESCO FUNDS GROUP, INC.
ATTEST:
By:
-------------------
- ------------------------ President
Glen A. Payne, Secretary
WORLD ASSET MANAGEMENT
ATTEST:
- ------------------------ By:
------------------
DATA ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT
AGREEMENT between each Fund listed on Appendix A, (individually a
"Customer" and collectively, the "Customers") and State Street Bank and Trust
Company ("State Street").
PREAMBLE
WHEREAS, State Street has been appointed as custodian of certain assets of
each Customer pursuant to a certain Custodian Agreement (the "Custodian
Agreement") for each of the respective Customers;
WHEREAS, State Street has developed and utilizes proprietary accounting
and other systems, including State Street's proprietary Multicurrency HORIZONR
Accounting System, in its role as custodian of each Customer, and maintains
certain Customer-related data ("Customer Data") in databases under the control
and ownership of State Street (the "Data Access Services"); and
WHEREAS, State Street makes available to each Customer certain Data Access
Services solely for the benefit of the Customer, and intends to provide
additional services, consistent with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the parties
agree as follows:
1. SYSTEM AND DATA ACCESS SERVICES
a. System. Subject to the terms and conditions of this Agreement, State
Street hereby agrees to provide each Customer with access to State Street's
Multicurrency HORIZONR Accounting System and the other information systems
(collectively, the "System") as described in Attachment A, on a remote basis for
the purpose of obtaining reports, solely on computer hardware, system software
and telecommunication links, as listed in Attachment B (the "Designated
Configuration") of the Customer, or certain third parties approved by State
Street that serve as investment advisors or investment managers (the "Investment
Advisor") or independent auditors (the "Independent Auditors") of a Customer and
solely with respect to the Customer or on any designated substitute or back-up
equipment configuration with State Street's written consent, such consent not to
be unreasonably withheld.
b. Data Access Services. State Street agrees to make available to each
Customer the Data Access Services subject to the terms and conditions of this
Agreement and data access operating standards and procedures as may be issued by
State Street from time to time. The ability of each Customer to originate
electronic instructions to State Street on behalf of each Customer in order to
(i) effect the transfer or movement of cash or securities held under custody by
State Street or (ii) transmit accounting or other information (such transactions
are referred to herein as "Client Originated Electronic Financial
Instructions"), and (iii) access data for the purpose of reporting and analysis,
shall be deemed to be Data Access Services for purposes of this Agreement.
<PAGE>
c. Additional Services. State Street may from time to time agree to make
available to a Customer additional Systems that are not described in the
attachments to this Agreement. In the absence of any other written agreement
concerning such additional systems, the term "System" shall include, and this
Agreement shall govern, a Customer's access to and use of any additional System
made available by State Street and/or accessed by the Customer.
2. NO USE OF THIRD PARTY SOFTWARE
State Street and each Customer acknowledge that in connection with the
Data Access Services provided under this Agreement, each Customer will have
access, through the Data Access Services, to Customer Data and to functions of
State Street's proprietary systems; provided, however that in no event will the
Customer have direct access to any third party systems-level software that
retrieves data for, stores data from, or otherwise supports the System.
3. LIMITATION ON SCOPE OF USE
a. Designated Equipment; Designated Location. The System and the Data
Access Services shall be used and accessed solely on and through the Designated
Configuration at the offices of a Customer or the Investment Advisor or
Independent Auditor located in Denver, Colorado ("Designated Location").
b. Designated Configuration; Trained Personnel. State Street shall be
responsible for supplying, installing and maintaining the Designated
Configuration at the Designated Location. State Street and each Customer agree
that each will engage or retain the services of trained personnel to enable both
State Street and the Customer to perform their respective obligations under this
Agreement. State Street agrees to use commercially reasonable efforts to
maintain the System so that it remains serviceable, provided, however, that
State Street does not guarantee or assure uninterrupted remote access use of the
System.
c. Scope of Use. Each Customer will use the System and the Data Access
Services only for the processing of securities transactions, the keeping of
books of account for the Customer and accessing data for purposes of reporting
and analysis. Each Customer shall not, and shall cause its employees and agents
not to (i) permit any third party to use the System or the Data Access Services,
(ii) sell, rent, license or otherwise use the System or the Data Access Services
in the operation of a service bureau or for any purpose other than as expressly
authorized under this Agreement, (iii) use the System or the Data Access
Services for any fund, trust or other investment vehicle without the prior
written consent of State Street, (iv) allow access to the System or the Data
Access Services through terminals or any other computer or telecommunications
facilities located outside the Designated Locations, (v) allow or cause any
information (other than portfolio holdings, valuations of portfolio holdings,
and other information reasonably necessary for the management or distribution of
the assets of the Customer) transmitted from State Street's databases, including
data from third party sources, available through use of the System or the Data
Access Services to be redistributed or retransmitted to another computer,
terminal or other device for other than use for or on behalf of the Customer or
<PAGE>
(vi) modify the System in any way, including without limitation, developing any
software for or attaching any devices or computer programs to any equipment,
system, software or database which forms a part of or is resident on the
Designated Configuration.
d. Other Locations. Except in the event of an emergency or of a planned
System shutdown, each Customer's access to services performed by the System or
to Data Access Services at the Designated Location may be transferred to a
different location only upon the prior written consent of State Street. In the
event of an emergency or System shutdown, each Customer may use any back-up site
included in the Designated Configuration or any other back-up site agreed to by
State Street, which agreement will not be unreasonably withheld. Each Customer
may secure from State Street the right to access the System or the Data Access
Services through computer and telecommunications facilities or devices complying
with the Designated Configuration at additional locations only upon the prior
written consent of State Street and on terms to be mutually agreed upon by the
parties.
e. Title. Title and all ownership and proprietary rights to the System,
including any enhancements or modifications thereto, whether or not made by
State Street, are and shall remain with State Street.
f. No Modification. Without the prior written consent of State Street, a
Customer shall not modify, enhance or otherwise create derivative works based
upon the System, nor shall the Customer reverse engineer, decompile or otherwise
attempt to secure the source code for all or any part of the System.
g. Security Procedures. Each Customer shall comply with data access
operating standards and procedures and with user identification or other
password control requirements and other security procedures as may be issued
from time to time by State Street for use of the System on a remote basis and to
access the Data Access Services. Each Customer shall have access only to the
Customer Data and authorized transactions agreed upon from time to time by State
Street and, upon notice from State Street, the Customer shall discontinue remote
use of the System and access to Data Access Services for any security reasons
cited by State Street; provided, that, in such event, State Street shall, for a
period not less than 180 days (or such other shorter period specified by the
Customer) after such discontinuance, assume responsibility to provide accounting
services under the terms of the Custodian Agreement.
h. Inspections. State Street shall have the right to inspect the use of the
System and the Data Access Services by the Customer and the Investment Advisor
to ensure compliance with this Agreement. The on-site inspections shall be upon
prior written notice to Customer and the Investment Advisor and at reasonably
convenient times and frequencies so as not to result in an unreasonable
disruption of the Customer's or the Investment Advisor's business.
4. PROPRIETARY INFORMATION
a. Proprietary Information. Each Customer acknowledges and State Street
represents that the System and the databases, computer programs, screen formats,
report formats, interactive design techniques, documentation and other
<PAGE>
information made available to the Customer by State Street as part of the Data
Access Services and through the use of the System constitute copyrighted, trade
secret, or other proprietary information of substantial value to State Street.
Any and all such information provided by State Street to each Customer shall be
deemed proprietary and confidential information of State Street (hereinafter
"Proprietary Information"). Each Customer agrees that it will hold such
Proprietary Information in confidence and secure and protect it in a manner
consistent with its own procedures for the protection of its own confidential
information and to take appropriate action by instruction or agreement with its
employees who are permitted access to the Proprietary Information to satisfy its
obligations hereunder. Each Customer further acknowledges that State Street
shall not be required to provide the Investment Advisor or the Investment
Auditor with access to the System unless it has first received from the
Investment Advisor of the Investment Auditor an undertaking with respect to
State Street's Proprietary Information in the form of Attachment C and/or
Attachment C-1 to this Agreement. Each Customer shall use all commercially
reasonable efforts to assist State Street in identifying and preventing any
unauthorized use, copying or disclosure of the Proprietary Information or any
portions thereof or any of the logic, formats or designs contained therein.
b. Cooperation. Without limitation of the foregoing, each Customer shall
advise State Street immediately in the event the Customer learns or has reason
to believe that any person to whom the Customer has given access to the
Proprietary Information, or any portion thereof, has violated or intends to
violate the terms of this Agreement, and each Customer will, at its expense,
co-operate with State Street in seeking injunctive or other equitable relief in
the name of the Customer or State Street against any such person.
c. Injunctive Relief. Each Customer acknowledges that the disclosure of
any Proprietary Information, or of any information which at law or equity ought
to remain confidential, will immediately give rise to continuing irreparable
injury to State Street inadequately compensable in damages at law. In addition,
State Street shall be entitled to obtain immediate injunctive relief against the
breach or threatened breach of any of the foregoing undertakings, in addition to
any other legal remedies which may be available.
d. Survival. The provisions of this Section 4 shall survive the termination
of this Agreement.
5. LIMITATION ON LIABILITY
a. Limitation on Amount and Time for Bringing Action. Each Customer agrees
any liability of State Street to the Customer or any third party arising out of
State Street's provision of Data Access Services or the System under this
Agreement shall be limited to the amount paid by the Customer for the preceding
24 months for such services. In no event shall State Street be liable to the
Customer or any other party for any special, indirect, punitive or consequential
damages even if advised of the possibility of such damages. No action,
regardless of form, arising out of this Agreement may be brought by the Customer
more than two years after the Customer has knowledge that the cause of action
has arisen.
<PAGE>
b. NO OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, ARE MADE BY STATE STREET. IN NO EVENT WILL STATE STREET BE
LIABLE TO THE CUSTOMER OR ANY OTHER PARTY FOR ANY CONSEQUENTIAL OR INCIDENTAL
DAMAGES WHICH MAY ARISE FROM THE CUSTOMER'S ACCESS TO THE SYSTEM OR USE OF
INFORMATION OBTAINED THEREBY.
c. Third-Party Data. Organizations from which State Street may obtain
certain data included in the System or the Data Access Services are solely
responsible for the contents of such data, and State Street shall have no
liability for claims arising out of the contents of such third-party data,
including, but not limited to, the accuracy thereof.
d. Regulatory Requirements. As between State Street and each Customer, the
Customer shall be solely responsible for the accuracy of any accounting
statements or reports produced using the Data Access Services and the System and
the conformity thereof with any requirements of law.
e. Force Majeure. Neither State Street or a Customer shall be liable for
any costs or damages due to delay or nonperformance under this Agreement arising
out of any cause or event beyond such party's control, including without
limitation, cessation of services hereunder or any damages resulting therefrom
to the other party, or the Customer as a result of work stoppage, power or other
mechanical failure, computer virus, natural disaster, governmental action, or
communication disruption.
6. INDEMNIFICATION
Each Customer agrees to indemnify and hold State Street harmless from any
loss, damage or expense including reasonable attorney's fees, (a "loss")
suffered by State Street arising from (i) the negligence or willful misconduct
in the use by the Customer of the Data Access Services or the System, including
any loss incurred by State Street resulting from a security breach at the
Designated Location or committed by the Customer's employees or agents or the
Investment Advisor or the Independent Auditor of the Customer and (ii) any loss
resulting from incorrect Client Originated Electronic Financial Instructions.
State Street shall be entitled to rely on the validity and authenticity of
Client Originated Electronic Financial Instructions without undertaking any
further inquiry as long as such instruction is undertaken in conformity with
security procedures established by State Street from time to time.
7. FEES
Fees and charges for the use of the System and the Data Access Services and
related payment terms shall be as set forth in the Custody Fee Schedule in
effect from time to time between the parties (the "Fee Schedule"). Any tariffs,
duties or taxes imposed or levied by any government or governmental agency by
reason of the transactions contemplated by this Agreement, including, without
limitation, federal, state and local taxes, use, value added and personal
property taxes (other than income, franchise or similar taxes which may be
imposed or assessed against State Street) shall be borne by each Customer. Any
claimed exemption from such tariffs, duties or taxes shall be supported by
proper documentary evidence delivered to State Street.
<PAGE>
8. TRAINING, IMPLEMENTATION AND CONVERSION
a. Training. State Street agrees to provide training, at a designated State
Street training facility or at the Designated Location, to the Customer's
personnel in connection with the use of the System on the Designated
Configuration. Each Customer agrees that it will set aside, during regular
business hours or at other times agreed upon by both parties, sufficient time to
enable all operators of the System and the Data Access Services, designated by
the Customer, to receive the training offered by State Street pursuant to this
Agreement.
b. Installation and Conversion. State Street shall be responsible for the
technical installation and conversion ("Installation and Conversion") of the
Designated Configuration. Each Customer shall have the following
responsibilities in connection with Installation and Conversion of the System:
(i) The Customer shall be solely responsible for the timely acquisition
and maintenance of the hardware and software that attach to the
Designated Configuration in order to use the Data Access Services at
the Designated Location.
(ii) State Street and the Customer each agree that they will assign
qualified personnel to actively participate during the Installation
and Conversion phase of the System implementation to enable both
parties to perform their respective obligations under this Agreement.
9. SUPPORT
During the term of this Agreement, State Street agrees to provide the
support services set out in Attachment D to this Agreement.
10. TERM OF AGREEMENT
a. Term of Agreement. This Agreement shall become effective on the date of
its execution by State Street and shall remain in full force and effect until
terminated as herein provided.
b. Termination of Agreement. Any party may terminate this Agreement (i)
for any reason by giving the other parties at least one-hundred and eighty days'
prior written notice in the case of notice of termination by State Street to the
Customer or thirty days' notice in the case of notice from the Customer to State
Street of termination; or (ii) immediately for failure of the other party to
comply with any material term and condition of the Agreement by giving the other
party written notice of termination. In the event the Customer shall cease doing
business, shall become subject to proceedings under the bankruptcy laws (other
than a petition for reorganization or similar proceeding) or shall be
adjudicated bankrupt, this Agreement and the rights granted hereunder shall, at
the option of State Street, immediately terminate with notice to the Customer.
Termination of this Agreement with respect to any given Customer shall in no way
affect the continued validity of this Agreement with respect to any other
Customer. This Agreement shall in any event terminate as to any Customer within
90 days after the termination of the Custodian Agreement applicable to such
Customer.
<PAGE>
c. Termination of the Right to Use. Upon termination of this Agreement for
any reason, any right to use the System and access to the Data Access Services
shall terminate and the Customer shall immediately cease use of the System and
the Data Access Services. Immediately upon termination of this Agreement for any
reason, the Customer shall return to State Street all copies of documentation
and other Proprietary Information in its possession; provided, however, that in
the event that either State Street or the Customer terminates this Agreement or
the Custodian Agreement for any reason other than the Customer's breach, State
Street shall provide the Data Access Services for a period of time and at a
price to be agreed upon by State Street and the Customer.
11. MISCELLANEOUS
a. Assignment; Successors. This Agreement and the rights and obligations of
each Customer and State Street hereunder shall not be assigned by any party
without the prior written consent of the other parties, except that State Street
may assign this Agreement to a successor of all or a substantial portion of its
business, or to a party controlling, controlled by, or under common control with
State Street.
b. Survival. All provisions regarding indemnification, warranty, liability
and limits thereon, and confidentiality and/or protection of proprietary rights
and trade secrets shall survive the termination of this Agreement.
c. Entire Agreement. This Agreement and the attachments hereto constitute
the entire understanding of the parties hereto with respect to the Data Access
Services and the use of the System and supersedes any and all prior or
contemporaneous representations or agreements, whether oral or written, between
the parties as such may relate to the Data Access Services or the System, and
cannot be modified or altered except in a writing duly executed by the parties.
This Agreement is not intended to supersede or modify the duties and liabilities
of the parties hereto under the Custodian Agreement or any other agreement
between the parties hereto except to the extent that any such agreement
specifically refers to the Data Access Services or the System. No single waiver
or any right hereunder shall be deemed to be a continuing waiver.
d. Severability. If any provision or provisions of this Agreement shall be
held to be invalid, unlawful, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired.
e. Governing Law. This Agreement shall be interpreted and construed in
accordance with the internal laws of The Commonwealth of Massachusetts without
regard to the conflict of laws provisions thereof.
<PAGE>
IN WITNESS WHEREOF, each of the undersigned Funds severally has caused this
Agreement to be duly executed in its name and through its duly authorized
officer as of the date hereof.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Ronald E. Logue
------------------------
Title: Executive Vice President
------------------------
Date:
------------------------
EACH FUND LISTED ON APPENDIX A
By: /s/ Glen A. Payne
------------------------
Title: Secretary
------------------------
Date: May 19, 1997
------------------------
<PAGE>
APPENDIX A
INVESCO FUNDS
INVESCO Diversified Funds, Inc.
INVESCO Small Company Value Fund
INVESCO Dynamics Fund, Inc.
INVESCO Dynamics Fund, Inc.
INVESCO Emerging Opportunity Funds, Inc.
INVESCO Small Company Growth Fund
INVESCO Worldwide Emerging Markets Fund
INVESCO Growth Fund, Inc.
INVESCO Growth Fund, Inc.
INVESCO Income Funds, Inc.
INVESCO High Yield Fund
INVESCO Select Income Fund
INVESCO Short-Term Bond Fund
INVESCO U.S. Government Bond Fund
INVESCO Industrial Income Fund, Inc.
INVESCO Industrial Income Fund, Inc.
INVESCO International Funds, Inc.
INVESCO European Fund
INVESCO International Growth Fund
INVESCO Pacific Basin Fund
INVESCO Money Market Funds, Inc.
INVESCO Cash Reserves Fund
INVESCO Tax-Free Money Fund
INVESCO U.S. Government Money Fund
INVESCO Multiple Asset Funds, Inc.
INVESCO Balanced Fund
INVESCO Multi-Asset Allocation Fund
<PAGE>
INVESCO Specialty Funds, Inc.
INVESCO Asian Growth Fund
INVESCO European Small Company Fund
INVESCO Latin American Growth Fund
INVESCO Realty Fund
INVESCO Worldwide Capital Goods Fund
INVESCO Worldwide Communications Fund
INVESCO Strategic Portfolios, Inc.
Energy Portfolio
Environmental Services Portfolio
Financial Services Portfolio
Gold Portfolio
Health Sciences Portfolio
Leisure Portfolio
Technology Portfolio
Utilities Portfolio
INVESCO Tax-Free Income Funds, Inc.
INVESCO Tax-Free Intermediate Bond Fund
INVESCO Tax-Free Long-Term Bond Fund
INVESCO Treasurer's Series Trust
INVESCO Treasurer's Money Market Reserve Fund
INVESCO Treasurer's Prime Reserve Fund
INVESCO Treasurer's Special Reserve Fund
INVESCO Treasurer's Tax-Exempt Reserve Fund
INVESCO Value Trust
INVESCO Intermediate Government Bond Fund
INVESCO Total Return Fund
INVESCO Value Equity Fund
INVESCO Variable Investment Funds, Inc.
INVESCO VIF-Dynamics Portfolio
INVESCO VIF-Health Sciences Portfolio
INVESCO VIF-High Yield Portfolio
INVESCO VIF-Industrial Income Portfolio
INVESCO VIF-Small Company Growth Portfolio
INVESCO VIF-Technology Portfolio
INVESCO VIF-Total Return Portfolio
INVESCO VIF-Utilities Portfolio
INVESCO VIF-Growth Portfolio*
*Effective May 1, 1997.
<PAGE>
ATTACHMENT A
Multicurrency HORIZON(R) Accounting System
System Product Description
I. The Multicurrency HORIZON(R) Accounting System is designed to provide
lot level portfolio and general ledger accounting for SEC and ERISA type
requirements and includes the following services: 1) recording of general ledger
entries; 2) calculation of daily income and expense; 3) reconciliation of daily
activity with the trial balance, and 4) appropriate automated feeding mechanisms
to (i) domestic and international settlement systems, (ii) daily, weekly and
monthly evaluation services, (iii) portfolio performance and analytic services,
(iv) customer's internal computing systems and (v) various State Street provided
information services products.
II. GlobalQuest(R) GlobalQuest(R) is designed to provide customer access to the
following information maintained on The Multicurrency HORIZON(R) Accounting
System: 1) cash transactions and balances; 2) purchases and sales; 3) income
receivables; 4) tax refund receivables; 5) daily priced positions; 6) open
trades; 7) settlement status; 8) foreign exchange transactions; 9) trade
history; and 10) daily, weekly and monthly evaluation services.
III. HORIZON(R) Gateway. HORIZON(R) Gateway provides customers with the
ability to (i) generate reports using information maintained on the
Multicurrency HORIZON(R) Accounting System which may be viewed or printed at the
customer's location; (ii) extract and download data from the Multicurrency
HORIZON(R) Accounting System; and (iii) access previous day and historical data.
The following information which may be accessed for these purposes: 1) holdings;
2) holdings pricing; 3) transactions, 4) open trades; 5) income; 6) general
ledger and 7) cash.
<PAGE>
ATTACHMENT B
Designated Configuration
<PAGE>
ATTACHMENT C
Undertaking
The undersigned understands that in the course of its employment as
Investment Advisor to each of the Funds (individually a, "Customer",
collectively, the "Customers") it will have access to State Street Bank and
Trust Company's ("State Street") Multicurrency HORIZON Accounting System and
other information systems (collectively, the "System").
The undersigned acknowledges that the System and the databases, computer
programs, screen formats, report formats, interactive design techniques,
documentation, and other information made available to the Undersigned by State
Street as part of the Data Access Services provided to the Customer and through
the use of the System constitute copyrighted, trade secret, or other proprietary
information of substantial value to State Street. Any and all such information
provided by State Street to the Undersigned shall be deemed proprietary and
confidential information of State Street (hereinafter "Proprietary
Information"). The Undersigned agrees that it will hold such Proprietary
Information in confidence and secure and protect it in a manner consistent with
its own procedures for the protection of its own confidential information and to
take appropriate action by instruction or agreement with its employees who are
permitted access to the Proprietary Information to satisfy its obligations
hereunder.
The Undersigned will not attempt to intercept data, gain access to data in
transmission, or attempt entry into any system or files for which it is not
authorized. It will not intentionally adversely affect the integrity of the
System through the introduction of unauthorized code or data, or through
unauthorized deletion.
Upon notice by State Street for any reason, any right to use the System and
access to the Data Access Services shall terminate and the Undersigned shall
immediately cease use of the System and the Data Access Services. Immediately
upon notice by State Street for any reason, the Undersigned shall return to
State Street all copies of documentation and other Proprietary Information in
its possession.
By: /s/ Glen A. Payne
-----------------
Title: Secretary
-----------------
Date: May 19, 1997
-----------------
<PAGE>
ATTACHMENT C-1
Undertaking
The undersigned understands that in the course of its employment as
Independent Auditor to each of the Funds (individually a, "Customer",
collectively, the "Customers") it will have access to State Street Bank and
Trust Company's ("State Street") Multicurrency HORIZON Accounting System and
other information systems (collectively, the "System").
The undersigned acknowledges that the System and the databases, computer
programs, screen formats, report formats, interactive design techniques,
documentation, and other information made available to the Undersigned by State
Street as part of the Data Access Services provided to the Customer and through
the use of the System constitute copyrighted, trade secret, or other proprietary
information of substantial value to State Street. Any and all such information
provided by State Street to the Undersigned shall be deemed proprietary and
confidential information of State Street (hereinafter "Proprietary
Information"). The Undersigned agrees that it will hold such Proprietary
Information in confidence and secure and protect it in a manner consistent with
its own procedures for the protection of its own confidential information and to
take appropriate action by instruction or agreement with its employees who are
permitted access to the Proprietary Information to satisfy its obligations
hereunder.
The Undersigned will not attempt to intercept data, gain access to data in
transmission, or attempt entry into any system or files for which it is not
authorized. It will not intentionally adversely affect the integrity of the
System through the introduction of unauthorized code or data, or through
unauthorized deletion.
Upon notice by State Street for any reason, any right to use the System and
access to the Data Access Services shall terminate and the Undersigned shall
immediately cease use of the System and the Data Access Services. Immediately
upon notice by State Street for any reason, the Undersigned shall return to
State Street all copies of documentation and other Proprietary Information in
its possession.
By: /s/ Glen A. Payne
------------------------
Title: Secretary
------------------------
Date: May 19, 1997
------------------------
<PAGE>
ATTACHMENT D
Support
During the term of this Agreement, State Street agrees to provide the
following on-going support services:
a. Telephone Support. The Customer Designated Persons may contact State
Street's HORIZON(R) Help Desk and Customer Assistance Center between the hours
of 8 a.m. and 6 p.m. (Eastern time) on all business days for the purpose of
obtaining answers to questions about the use of the System, or to report
apparent problems with the System. From time to time, the Customer shall provide
to State Street a list of persons, not to exceed five in number, who shall be
permitted to contact State Street for assistance (such persons being referred to
as "the Customer Designated Persons").
b. Technical Support. State Street will provide technical support to assist
the Customer in using the System and the Data Access Services. The total amount
of technical support provided by State Street shall not exceed 10 resource days
per year. State Street shall provide such additional technical support as is
expressly set forth in the fee schedule in effect from time to time between the
parties (the "Fee Schedule"). Technical support, including during installation
and testing, is subject to the fees and other terms set forth in the Fee
Schedule.
c. Maintenance Support. State Street shall use commercially reasonable
efforts to correct system functions that do not work according to the System
Product Description as set forth on Attachment A in priority order in the next
scheduled delivery release or otherwise as soon as is practicable.
d. System Enhancements. State Street will provide to the Customer any
enhancements to the System developed by State Street and made a part of the
System; provided that, sixty (60) days prior to installing any such enhancement,
State Street shall notify the Customer and shall offer the Customer reasonable
training on the enhancement. Charges for system enhancements shall be as
provided in the Fee Schedule. State Street retains the right to charge for
related systems or products that may be developed and separately made available
for use other than through the System.
e. Custom Modifications. In the event the Customer desires custom
modifications in connection with its use of the System, the Customer shall make
a written request to State Street providing specifications for the desired
modification. Any custom modifications may be undertaken by State Street in its
sole discretion in accordance with the Fee Schedule.
f. Limitation on Support. State Street shall have no obligation to support
the Customer's use of the System: (1) for use on any computer equipment or
telecommunication facilities which does not conform to the Designated
Configuration or (ii) in the event the Customer has modified the System in
breach of this Agreement.
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Statement of
Additional Information constituting part of this Post-Effective Amendment No. 12
to the registration statement on Form N-1A (the "Registration Statement") of our
report dated August 30, 1996, relating to the financial statements and financial
highlights appearing in the July 31, 1996 Annual Report to Shareholders of
INVESCO Specialty Funds, Inc., which is also incorporated by reference into the
Registration Statement. We also consent to the references to us under the
headings "Independent Accountants" and "Financial Statements" in the Statement
of Additional Information.
/S/ Price Waterhouse LLP
- -------------------------
PRICE WATERHOUSE LLP
Denver, Colorado
July ___, 1997
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<EXPENSES-NET> 52798
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<DISTRIBUTIONS-OF-INCOME> 20500
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<NUMBER-OF-SHARES-SOLD> 3437947
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
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<NAME> INVESCO SPECIALTY FUNDS, INC.
<SERIES>
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<NAME> LATIN AMERICAN GROWTH FUND
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<INTEREST-INCOME> 37264
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<OTHER-INCOME> (111)
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<DISTRIBUTIONS-OF-INCOME> 0
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<NUMBER-OF-SHARES-SOLD> 3865041
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000923705
<NAME> INVESCO SPECIALTY FUNDS, INC.
<SERIES>
<NUMBER> 6
<NAME> INVESCO REALTY FUND
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 29,634,349
<INVESTMENTS-AT-VALUE> 29,197,056
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<OTHER-ITEMS-ASSETS> 0
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<PAYABLE-FOR-SECURITIES> 148,973
<SENIOR-LONG-TERM-DEBT> 0
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<TOTAL-LIABILITIES> 1,143,286
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 29,931,039
<SHARES-COMMON-STOCK> 2,902,326
<SHARES-COMMON-PRIOR> 0
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<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (638,888)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (437,293)
<NET-ASSETS> 28,892,160
<DIVIDEND-INCOME> 476,315
<INTEREST-INCOME> 36,042
<OTHER-INCOME> 0
<EXPENSES-NET> 129,051
<NET-INVESTMENT-INCOME> 383,306
<REALIZED-GAINS-CURRENT> (638,888)
<APPREC-INCREASE-CURRENT> (437,293)
<NET-CHANGE-FROM-OPS> (1,076,181)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 346,004
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,127,517
<NUMBER-OF-SHARES-REDEEMED> 3,260,827
<SHARES-REINVESTED> 35,636
<NET-CHANGE-IN-ASSETS> 28,892,160
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 72,430
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 186,328
<AVERAGE-NET-ASSETS> 28,892,160
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.13
<PER-SHARE-GAIN-APPREC> (0.06)
<PER-SHARE-DIVIDEND> 0.12
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.95
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
INVESCO S&P 500 INDEX FUND PLAN PURSUANT TO RULE 18F-3
_________________, 1997
1. The Plan. This Plan is the written multiple class plan for the INVESCO
S&P 500 Index Fund (the "Fund") for INVESCO Funds Group, Inc., the general
distributor of shares of the Fund and the investment adviser of the Fund
("INVESCO"). It is the written plan contemplated by Rule 18f-3 (the
"Rule") under the Investment Company Act of 1940 (the "1940 Act"),
pursuant to which the Fund may issue multiple classes of shares. The terms
and provisions of this Plan shall be interpreted and defined in a manner
consistent with the provisions and definitions contained in the Rule.
2. Similarities and Differences Among Classes. The Fund agrees that each
class of that Fund:
(1) shall have a separate service plan or distribution and
service plan ("12b-1 Plan"), and shall pay all of the expenses
incurred pursuant to that arrangement, and may pay a different share
of expenses ("Class Expenses") if such expenses are actually
incurred in a different amount by that class, or if the class
receives services of a different kind or to a different degree than
that of other classes. Class Expenses are those expenses
specifically attributable to the particular class of shares, namely
(a) 12b-1 Plan fees, (b) transfer and shareholder servicing agent
fees and administrative service fees, (c) shareholder meeting
expenses, (d) blue sky and SEC registration fees and (e) any other
incremental expenses subsequently identified that should be allocated
to one class which shall be approved by a vote of that Fund's Board
of Directors (the "Directors"). Expenses identified in Items (c)
through (e) may involve issues relating either to a specific class or
to the entire Fund; such expenses constitute Class Expenses only when
they are attributable to a specific class. Because Class Expenses
may be accrued at different rates for each class of the Fund,
dividends distributable to shareholders and net asset values per
share may differ for shares of different classes of the Fund.
(2) shall have exclusive voting rights on any matters that relate
solely to that class's arrangements, including without limitation
voting with respect to a 12b-1 Plan for that class; (3) shall have
separate voting rights on any matter submitted to shareholders in
which the interests of one class differ from the interests of any
other class;
(4) may have a different arrangement for shareholder services, including
different sales charges, sales charge waivers, purchase and redemption
features, exchange privileges, loan privileges, the availability
of certificated shares and/or conversion features; and
(5) shall have in all other respects the sobligations as each other class.
3. Allocations of Income, Capital Gains and Losses and Expenses. Income,
realized and unrealized capital gains and losses, and expenses of the Fund
other than Class Expenses allocated to a particular class shall be
allocated to each class on the basis of the net asset value of that class
in relation to the net asset value of the Fund.
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4. Expense Waivers and Reimbursements. From time to time the Adviser may
voluntarily undertake to (i) waive any portion of the management fee charged
to the Fund, and/or (ii) reimburse any portion of the expenses of the Fund
or of one or more of its classes, but is not required to do so or to
continue to do so for any period of time. The quarterly report by the
Advisor to the Directors of Fund expense reimbursements shall disclose any
reimbursements that are not equal for all classes of the Fund.
5. Disclosure. The classes of shares to be offered by the Fund, and other
material distribution arrangements with respect to such classes, shall be
disclosed in the prospectus and/or statement of additional information used
to offer that class of shares. Such prospectus or statement of additional
information shall be supplemented or amended to reflect any change(s) in
classes of shares to be offered or in the material distribution arrangements
with respect to such classes.
6. Independent Audit. The methodology and procedures for calculating the net
asset value, dividends and distributions of each class shall be reviewed by
an independent auditing firm (the "Expert"). At least annually, the Expert,
or an appropriate substitute expert, will render a report to the Funds on
policies and procedures placed in operation and tests of operating
effectiveness as defined and described in SAS 70 of the AICPA.
7. Offers and Sales of Shares. INVESCO will maintain compliance standards as to
when each class of shares may appropriately be sold to particular investors,
and will require all persons selling shares of the Fund to agree to conform
to such standards.
8. Rule 12b-1 Payments. The Treasurer of INVESCO Specialty Funds, Inc. (the
"Company") shall provide to the Directors of the Company, and the Directors
shall review, at least quarterly, the written report required by the
Company's 12b-1 Plan. The report shall include information on (i) the
amounts expended pursuant to the 12b-1 Plan, (ii) the purposes for which
such expenditures were made and (iii) the amount of INVESCO's unpaid
distribution costs (if recovery of such costs in future periods is permitted
by that 12b-1 Plan), taking into account 12b-1 Plan payments paid to
INVESCO.
9. Conflicts. On an ongoing basis, the Directors of the Company, pursuant to
their fiduciary responsibilities under the 1940 Act and otherwise, will
monitor the Fund for the existence of any material conflicts among the
interests of the classes. INVESCO will be responsible for reporting any
potential or existing conflicts to the Directors. In the event a conflict
arises, the Directors shall take such action as they deem appropriate.
10. Effectiveness and Amendment. This Plan takes effect for the Fund as of the
date of adoption shown below. This Plan has been approved by a majority
vote of the Board of the Company and of the Company's Board members who are
not "interested persons" (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of the Plan or any
agreements relating to the Plan (the "Independent Directors") of the Fund
at meetings called on this Plan. Prior to that vote, (i) the Board was
furnished by the methodology used for net asset value and dividend and
distribution determinations for the Fund, and (ii) a majority of the Board
and its Independent Directors determined that the Plan as proposed to be
adopted, including the expenses allocation, is in the best interests of the
Fund as a whole and to each class of the Fund individually. Prior to any
material amendment to the Plan, the Board shall request and evaluate, and
INVESCO shall furnish, such information as may be reasonably necessary to
evaluate such amendment, and a majority of the Board and its Independent
Directors shall find that the Plan as proposed to be amended, including the
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expense allocation, is in the best interest of each class, the Fund as a
whole and each class of the Fund individually. No material amendment to
the Plan shall be made by any Fund's Prospectus or Statement of Additional
Information or any supplement to either of the foregoing, unless such
amendment has first been approved by a majority of the Fund's Board and
its Independent Directors.
Adopted by the Board of INVESCO Specialty Funds, Inc. on ____________, 1997.
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