File No. 33-79290
As filed on ^ November 24, 1997
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
--
Pre-Effective Amendment No.
Post-Effective Amendment No. ^ 14 X
-------- --
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
--
Amendment No. ^ 15 X
------------ --
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)
-------------------
Copies to:
Ronald M. Feiman, Esq.
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
-------------------
Approximate Date of Proposed Public Offering: As soon as practicable after this
post-effective amendment becomes effective.
It is proposed that this filing will become effective
___ ^ immediately upon filing pursuant to paragraph (b)
^X on December 1, 1997, pursuant to paragraph (b)
- ---
___ 60 days after filing pursuant to paragraph (a)(i)
___ on ________________, pursuant to paragraph (a)(i)
___ 75 days after filing pursuant to paragraph (a)(ii)
___ on ________________, pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has previously elected, 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, 1997, was filed on or about September 22,
1997.
Page 1 of 286
Exhibit index is located at page 252
<PAGE>
INVESCO SPECIALTY FUNDS, INC.
---------------------------
CROSS-REFERENCE SHEET
Form N-1A
Item Caption
--------- -------
Part A Prospectus
1....................... Cover Page
2....................... Annual Fund Expenses; Essential
Information
3....................... Financial Highlights; Fund Price
and Performance
4....................... Investment Objective and ^
Strategy/Investment Objective and
Policies; Investment Policies and
Risks; The ^ Fund/Funds and ^
Its/Their Management
5....................... The ^ Fund/Funds and ^ Its/Their
Management; Additional Information
5A...................... Not Applicable
6....................... ^ Services Provided by the
Funds/Fund Services; Taxes,
Dividends and ^ Other
Distributions; Additional
Information
7....................... How Shares Can Be Purchased/How To
Buy Shares; Fund Price and
Performance; ^ Services Provided by
the Funds/Fund Services; The ^
Funds and ^ Its/Their Management
8....................... ^ Services Provided by the
Funds/Fund Services; How to Redeem
Shares/How to Sell Shares
9....................... Not Applicable
-i-
<PAGE>
Form N-1A
Item Caption
--------- -------
Part B Statement of Additional Information
10...................... Cover Page
11...................... Table of Contents
^ 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, ^ Other Distributions
and Taxes
21...................... How Shares Can Be Purchased
22...................... Performance Data
23.^..................... Additional Information^
Part C Other Information
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
-ii-
<PAGE>
PROSPECTUS
December 1, ^ 1997
INVESCO WORLDWIDE CAPITAL GOODS FUND
INVESCO WORLDWIDE COMMUNICATIONS FUND
INVESCO Worldwide Capital Goods 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.
INVESCO Worldwide Communications Fund (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 Communications Fund's 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, each Fund will invest at least 65% of its
total assets in issuers domiciled in at least three countries, one of which may
be the United States, although the Funds' investment adviser expects each Fund's
investments to be allocated among a larger number of countries. The percentage
of each Fund's assets invested in securities of issuers domiciled in the United
States ^ normally will be higher than that invested in securities issued by
companies in any other single country. However, it is possible that at times a
Fund may have 65% or more of its total assets invested in foreign securities.
The Funds have adopted certain investment policies which may expose the Funds to
increased risks or costs. See "Risk Factors" and "Investment Objectives and
Policies-Portfolio Turnover."
Each Fund is a series of INVESCO Specialty Funds, Inc. (the "Company"), a
diversified, managed, no-load mutual fund consisting of ^ seven separate funds,
each of which represents a portfolio of investments. This Prospectus relates to
shares of the Capital Goods and Communications Funds. Separate prospectuses are
available upon request from INVESCO ^ Distributors, Inc. for the Company's other
funds, INVESCO European Small Company Fund, INVESCO Latin American Growth Fund
^, INVESCO Asian Growth Fund, INVESCO Realty Fund and INVESCO S&P 500 Index
Fund. Investors may purchase shares of any or all of the Funds. Additional funds
may be offered in the future.
<PAGE>
This Prospectus provides you with the basic information you should know
before investing in the Capital Goods Fund or Communications Fund. You should
read it and keep it for future reference. A Statement of Additional Information
dated December 1, 1997, containing further information about the Funds 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
Distributors, Inc., Post Office Box 173706, Denver, Colorado 80217-3706; call
1-800-525-8085; or visit our web site: http://www.invesco.com.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY ANY BANK OR OTHER FINANCIAL INSTITUTION. THE SHARES OF
THE FUNDS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
TABLE OF CONTENTS
Page
----
ANNUAL FUND EXPENSES.......................................................^ 6
FINANCIAL HIGHLIGHTS.......................................................^ 8
PERFORMANCE DATA............................................................12
INVESTMENT OBJECTIVES AND POLICIES..........................................12
RISK FACTORS................................................................18
THE FUNDS AND THEIR MANAGEMENT..............................................21
HOW SHARES CAN BE PURCHASED.................................................24
SERVICES PROVIDED BY THE FUNDS..............................................27
HOW TO REDEEM SHARES........................................................30
TAXES, DIVIDENDS AND ^ OTHER DISTRIBUTIONS..................................31
ADDITIONAL INFORMATION......................................................33
^
<PAGE>
ANNUAL FUND EXPENSES
The Funds are no-load; there are no fees to purchase, exchange or redeem
shares. The Funds, however, are authorized to pay a distribution fee pursuant to
Rule 12b-1 under the Investment Company Act of 1940. (See ^"How Shares Can Be
Purchased--Distribution ^ Expenses.") Lower expenses benefit Fund shareholders
by increasing the Funds' total return.
Capital Goods Communications
Fund Fund
------------- --------------
Shareholder Transaction Expenses
Sales load "charge" on purchases None None
Sales load "charge" on reinvested
dividends None None
Redemption fees None None
Exchange fees None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fee 0.65% 0.65%
12b-1 Fees 0.25% 0.25%
Other Expenses ^ 1.08%(2)(3) 0.80%
Transfer Agency ^ Fee(1) 0.57%(2)(3) 0.47%(2)
General Services,
Administrative 0.51%(2)(3) 0.33%(2) ^
Services, Registration,
Postage(4)
Total Fund Operating
Expenses ^ 1.98%(2)(3) 1.69%(2)
^(1) Consists of the transfer agency fee described under "Additional
Information - Transfer and Dividend Disbursing Agent."
(2) It should be noted that the Fund's actual total operating expenses
were lower than the figures shown because the Fund's ^ distribution expenses,
transfer agency and custodian fees were reduced under ^ expense offset ^
arrangements. However, as a result of an SEC requirement for mutual funds to
state their total operating expenses without crediting any such expense offset
arrangement, the figures shown above do not reflect these reductions. In
comparing expenses for different years, please note that the ratios of Expenses
to Average Net Assets shown under ^"Financial Highlights^" do reflect reductions
for periods prior to the fiscal year ended July 31, 1996. See ^"The Funds and
Their Management.^"
^(3) Certain Fund expenses are being voluntarily absorbed by INVESCO Funds
Group, Inc. ^ and INVESCO Trust Company. In the absence of such absorbed
expenses, the Capital Goods Fund's ^"Other Expenses^" and ^"Total Fund Operating
Expenses^" in the above table would have been ^ 1.68% and ^ 2.58%, respectively,
<PAGE>
of the Capital Goods Fund's average net assets based on the actual expenses of
the Fund for the fiscal year ended July 31, 1997. ^
(4) Includes, but is not limited to, fees and expenses of directors,
custodian bank, legal counsel and independent accountants, securities pricing
services, costs of administrative services furnished under an Administrative
Services Agreement, costs of registration of Fund shares under applicable laws,
and costs of printing and distributing reports to shareholders.
Example
A shareholder would pay the following expenses on a $1,000 investment for
the periods shown, assuming (1) a 5% annual return and (2) redemption at the end
of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Capital Goods Fund ^ $20 $63 $108 $232
Communications Fund $17 ^ $54 $92 $201
The purpose of the foregoing expense table and Example is to assist
investors in understanding the various costs and expenses that an investor in ^
a Fund will bear directly or indirectly. Such expenses are paid from the
respective Fund's assets. (See ^"The Funds and Their ^ Management.") The Funds
charge no sales loads, redemption fees, or exchange fees. THE EXAMPLE SHOULD NOT
BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES, AND ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE SHOWN. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or future
annual returns, which may be greater or less than the assumed amount.
As a result of the 0.25% 12b-1 fee paid by each Fund, investors who own
Fund shares for a long period of time may pay more than the economic equivalent
of the maximum front-end sales charge permitted for mutual funds by the National
Association of Securities Dealers, Inc.
<PAGE>
INVESCO Specialty Funds, Inc.
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
^
The following information has been audited by Price Waterhouse LLP,
independent accountants. This information should be read in conjunction with the
audited financial statements and the report of independent accountants thereon
appearing in the ^ Company's 1997 Annual Report to Shareholders which is
incorporated by reference into the Statement of Additional Information. Both are
available without charge by contacting INVESCO ^ Distributors, Inc. at the
address or telephone number shown below.
^ Year Ended July 31
--------------------------------
^ 1997 1996 1995^
Worldwide Capital Goods Fund
PER SHARE DATA
Net Asset Value -
Beginning of Period $9.61 $9.84 $10.00
--------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.05 0.01 0.01
Net Gains or (Losses) on
Securities ^(Both Realized
and Unrealized) 4.37 0.01 (0.16)
--------------------------------
Total from Investment
Operations 4.42 0.02 (0.15)
--------------------------------
LESS DISTRIBUTIONS
Dividends from Net
Investment Income 0.06 0.00 0.01
Distributions from Capital
Gains 1.27 0.25 0.00
--------------------------------
Total Distributions 1.33 0.25 0.01
--------------------------------
Net Asset Value -
End of Period $12.70 $9.61 $9.84
================================
^
TOTAL RETURN 50.86% 0.27% (1.49%)
<PAGE>
RATIOS
Net Assets - End of Period
($000 Omitted) $22,254 $7,731 $10,364
Ratio of Expenses to Average
Net Assets# 1.98%@ 2.11%@ 2.00%
Ratio of Net Investment Income
to^ Average Net Assets# 0.51% 0.05% 0.25%
Portfolio Turnover Rate 192% 247% 193%
Average Commission Rate Paid^^ ^ $0.0584 $0.0907 -
^ Commencement of investment operations was August 1, 1994.
# Various expenses of the Worldwide Capital Goods Fund were voluntarily absorbed
by ^ INVESCO Funds Group, Inc. and INVESCO Trust Company for the years ended
July 31, 1997, 1996 and 1995. If such expenses had not been voluntarily
absorbed, ratio of expenses to average net assets would have been 2.58%, 2.49%
and 2.96%, respectively, and ratio of net investment income to average net
assets would have been (0.09%), (0.33%) and (0.71%), respectively.
@ 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, which is required to be disclosed
for fiscal years beginning September 1, 1995 and thereafter.
<PAGE>
INVESCO Specialty Funds, Inc.
Financial Highlights (Continued)
(For a Fund Share Outstanding Throughout Each Period)
Year Ended July 31
--------------------------------
1997 1996 1995^
Worldwide Communications Fund
PER SHARE DATA
Net Asset Value -
Beginning of Period $12.43 $12.30 $10.00
--------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.06 0.22 0.11
Net Gains on Securities (Both
Realized and Unrealized) 3.90 1.38 2.35
--------------------------------
Total from Investment
Operations 3.96 1.60 2.46
LESS DISTRIBUTIONS
Dividends from Net Investment
Income 0.06 0.22 0.11
Distributions from Capital
Gains 1.02 1.25 0.05
--------------------------------
Total Distributions 1.08 1.47 0.16
--------------------------------
Net Asset Value -
End of Period $15.31 $12.43 $12.30
================================
TOTAL RETURN 33.93% 13.67% 24.83%
RATIOS
Net Assets - End of Period
($000 Omitted) $72,458 $50,516 $27,254
Ratio of Expenses to Average
Net Assets 1.69%@ 1.66%@ 1.95%
Ratio of Net Investment Income
to Average Net Assets 0.56% 1.78% 1.43%
Portfolio Turnover Rate 96% 157% 215%
Average Commission Rate Paid^^ $0.0611 $0.1285 -
^ Commencement of investment operations was August 1, 1994.
@ Ratio is based on Total Expenses of the Fund, which is before any expense
offset arrangements.
<PAGE>
^^ 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, which ^ is required to be disclosed
for fiscal years beginning September 1, 1995 and thereafter.
Further information about the performance of the Funds is contained in the
Company's Annual Report to Shareholders, which may be obtained without charge by
writing INVESCO ^ Distributors, Inc., P.O. Box 173706, Denver, Colorado
80217-3706 ^ or by calling 1-800- 525-8085.
<PAGE>
PERFORMANCE DATA
From time to time, the Funds advertise their total return performance.
These figures are based upon historical investment results and are not intended
to indicate future performance. The "total return" of a Fund refers to the
annual rate of return of an investment in the Fund. This figure is computed by
calculating the percentage change in value of an investment of $1,000, assuming
reinvestment of all income dividends and capital gain distributions, to the end
of a specified period. Periods of one year, five years, and ten years and/or
life of the Fund are used if available. ^ Any given report of total return
performance should not be considered as representative of future performance.
The Funds charge no sales loads, redemption fees, or exchange fees which would
affect the total return computation.
In conjunction with performance reports and/or analyses of shareholder
service for the Funds, comparative data between the Funds' performance for a
given period and the performance of recognized indices of investment results for
the same period, and/or assessments of the quality of shareholder service, may
be provided to shareholders. Such indices include indices provided by Dow Jones
& Company, Standard & Poor's, Lipper Analytical Services, Inc., Lehman Brothers,
National Association of Securities Dealers Automated Quotations, Frank Russell
Company, Value Line Investment Survey, the American Stock Exchange, Morgan
Stanley Capital International, Wilshire Associates, the Financial Times-Stock
Exchange, the New York Stock Exchange, the Nikkei Stock Average and the Deutcher
Aktienindex, all of which are unmanaged market indicators. In addition,
rankings, ratings, and comparisons of investment performance and/or assessments
of the quality of shareholder service appearing in publications such as Money,
Forbes, Kiplinger's Personal Finance, Morningstar, and similar sources which
utilize information compiled (i) internally; (ii) by Lipper Analytical Services,
Inc.; or (iii) by other recognized analytical services, may be used in
advertising. The Lipper Analytical Services, Inc. mutual fund rankings and
comparisons, which may be used by the Funds in performance reports, will be
drawn from the "Global Funds" Lipper mutual fund grouping, in addition to the
broad-based Lipper general fund grouping.
INVESTMENT OBJECTIVES AND POLICIES
INVESCO WORLDWIDE CAPITAL GOODS FUND
INVESCO Worldwide 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 foregoing investment objective is fundamental and
may not be changed in any material respect without the approval of the Capital
Goods Fund's shareholders. Capital goods include finished products and equipment
used by industrial and agricultural firms, such as industrial machinery,
construction equipment, computers, software, farm equipment, office equipment,
<PAGE>
and electrical and telecommunications equipment, as well as components and
sub-assemblies of such products. Raw materials and intermediate goods include
chemicals, timber, paper, metals, textiles, cement, gypsum and other
commodities.
INVESCO WORLDWIDE COMMUNICATIONS FUND
INVESCO Worldwide 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. The foregoing investment
objective is fundamental and may not be changed in any material respect without
the approval of the Communications Fund's shareholders. The Communications Fund
may invest in companies involved in services and products such as long distance,
local and cellular telephone service; wireless communications systems such as
personal communications networks, paging and special mobile radio; local and
wide area networks; fiber optic transmission; satellite communication; microwave
transmission; television and movie programming; broadcasting; and cable
television.
Up to 35% of the Communications Fund's 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. Infrastructure projects include
communications systems such as those described above, as well as electric
utilities, water and sewer projects, natural gas and oil pipelines,
environmental projects, housing, and transportation projects such as airports,
railroads, highways, bridges and ports.
Investment Policies Applicable to Both Funds
Each Fund has a policy regarding concentration of its investments which is
fundamental and may not be changed without the approval of the respective Fund's
shareholders. The Capital Goods Fund will concentrate its investments (i.e.,
invest more than 25% of its total assets) in the capital goods, raw materials
and intermediate goods industries described above. The Communications Fund will
concentrate its investments (i.e., invest more than 25% of its total assets) in
the communications industries described above. A particular company will be
deemed to be primarily engaged in the group of industries designated for
investment by a Fund if, in the determination of the Funds' investment adviser
and sub- adviser (collectively, ^"Fund Management"), more than 50% of its gross
income or net sales are derived from activities in such industries or more than
50% of its assets are dedicated to the production of revenues from such
industries. In circumstances where, based on available financial information, a
question exists whether a company meets one of these standards, the Fund may
invest in equity securities of such company only if Fund Management determines,
after review of information describing the company and its business activities,
that the company's primary business is within the group of industries designated
for investment by that Fund, as such industries are described above.
<PAGE>
Under normal circumstances, each Fund will invest at least 65% of its
total assets in issuers domiciled in at least three countries, one of which may
be the United States, although Fund Management expects each Fund's investments
to be allocated among a larger number of countries. The percentage of each
Fund's assets invested in securities of issuers domiciled in the United States ^
normally will be higher than that invested in securities issued by companies in
any other single country. However, it is possible that at times a Fund may have
65% or more of its total assets invested in foreign securities. Investments in
foreign securities involve certain risks which are discussed below under "Risk
Factors."
Under normal conditions, each Fund will invest primarily in equity
securities (common stocks and, to a lesser degree, preferred stocks and
securities convertible into common stocks, such as rights, warrants and
convertible debt securities) which are discussed more fully in the Statement of
Additional Information. In selecting the equity securities in which the Funds
invest, Fund Management attempts to identify companies that in Fund Management's
opinion have demonstrated or, ^ are likely to demonstrate in the future, strong
earnings growth relative to other companies in the same industry. The dividend
payment records of companies are also considered. Equity securities may be
issued by either established, well-capitalized companies or newly-formed,
small-cap companies, and may trade on regional or national stock exchanges or in
the over-the-counter market. The risks of investing in small capitalization
companies are discussed below under ^"Risk Factors.^"
Consistent with ^ its investment ^ objective, each Fund also may invest in
fixed-income securities (corporate bonds, commercial paper, debt securities
issued by the U.S. government, its agencies and instrumentalities, or foreign
governments and, to a lesser extent, municipal bonds, asset-backed securities
and zero coupon bonds). Each Fund may invest no more than 15% of its total
assets in debt securities that are rated below BBB by Standard & Poor's ^, a
division of The McGraw-Hill Companies, Inc. ("S&P") or Baa by Moody's Investors
Service, Inc. ^("Moody's") or, if unrated, ^ judged by Fund Management to be
equivalent in quality to debt securities having such ratings (commonly referred
to as ^"junk bonds"). In no event will a Fund ever invest in a debt security
rated below CCC by ^ S&P or Caa by Moody's or, if unrated, judged by Fund
Management to be equivalent in quality to debt securities having such ratings.
The risks of investing in lower rated debt securities are discussed below under
^"Risk Factors.^"
Each Fund may invest up to 35% of its total assets in securities of
companies that are engaged in businesses outside the field of business activity
in which at least 65% of the Fund's total assets is invested. These investments
may include equity securities or fixed-income securities selected to meet the
Capital Goods Fund's investment objective of capital appreciation or the
Communications Fund's objective of achieving a high total return on investment
through capital appreciation and current income, as the case may be. Such equity
securities may be issued by either established, well-capitalized companies or
newly-formed, small-cap companies, and may trade on regional or national stock
exchanges or in the over-the-counter market. Such fixed-income securities must
meet the quality standards described above. These equity and fixed-income
<PAGE>
securities may be issued by either U.S. or foreign companies or governments. The
risks of investing in lower rated debt securities and in foreign securities are
discussed below under ^"Risk Factors.^" In addition, the Funds may hold certain
cash and cash equivalent securities as cash reserves ^("cash securities").
The amount invested in stocks, bonds and cash securities may be varied
from time to time, depending upon Fund Management's assessment of business,
economic and market conditions. In periods of abnormal economic and market
conditions, as determined by Fund Management, either Fund may depart from its
basic investment objective and assume a temporary defensive position, with ^ up
to 100% of its assets invested in U.S. government and agency securities,
investment grade corporate bonds or cash securities such as domestic
certificates of deposit and ^ bankers' acceptances, repurchase agreements and
commercial paper. The Funds reserve the right to hold equity, fixed-income and
cash securities in whatever proportion is deemed desirable at any given time for
temporary defensive purposes. While a Fund is in a defensive position, the
opportunity to achieve capital appreciation will be limited; however, the
ability to maintain a defensive position enables the Funds to seek to avoid
capital losses during market downturns. Under normal market conditions, the
Funds do not expect to have a substantial portion of their assets invested in
cash securities.
In order to hedge their portfolios, the Funds may purchase and write
options on securities (including index options and options on foreign
securities), and may invest in futures contracts for the purchase or sale of
foreign currencies, fixed-income securities and instruments based on financial
indices (collectively, "futures contracts"), options on futures contracts,
forward contracts and interest rate 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. These practices and securities, some of which
are known as derivatives, and their risks are discussed below under "Risk
Factors" and in the Statement of Additional Information.
Additional information on certain of the types of securities in which the
Funds may invest is set forth below:
U.S. Government and Agency Securities
Investments in U.S. government securities may consist of securities issued
or guaranteed by the United States government ^ or any agency or instrumentality
of the United States government. In some cases, these securities are direct
obligations of the U.S. government, such as U.S. Treasury bills, notes and
bonds. In other cases, these securities are obligations guaranteed by the U.S.
government, such as Government National Mortgage Association obligations, or
obligations of U.S. government authorities, agencies or instrumentalities, such
as ^ Fannie Mae (formerly, Federal National Mortgage Association), Federal Home
Loan ^ Banks, Federal Financing Bank and Federal Farm Credit Bank, which are
supported only by the ^ creditworthiness of the issuer.
<PAGE>
When-Issued Securities
Each Fund may make commitments in an amount of up to 10% of the value of
its total assets at the time any commitment is made to purchase or sell equity
or debt securities on a when-issued or delayed delivery basis (i.e., securities
may be purchased or sold by the Fund with settlement taking place in the future,
often a month or more later). The payment obligation and, in the case of debt
securities, the interest rate that will be received on the securities generally
are fixed at the time the Fund enters into the commitment. During the period
between purchase and settlement, no payment is made by the Fund and no interest
accrues to the Fund. At the time of settlement, the market value of the security
may be more or less than the purchase price, and the Fund bears the risk of such
market value fluctuations. Each Fund maintains cash, U.S. government securities,
or other ^ liquid securities having an aggregate value equal to the amount of
such purchase commitments, in a segregated account until payment is made.
Illiquid and Rule 144A Securities
The Funds ^ may invest in securities which are illiquid because they are
subject to restrictions on their resale ^("restricted securities") or because,
based upon their nature or the market for such securities, they are not readily
marketable. However, a Fund will not purchase any such security if the purchase
would cause the Fund to invest more than 15% of its net assets in illiquid
securities. Repurchase agreements maturing in more than seven days will be
considered as illiquid for purposes of this restriction. Investments in illiquid
securities involve certain risks to the extent that a Fund may be unable to
dispose of such a security at the time desired or at a reasonable price. In
addition, in order to resell a restricted security, a Fund might have to bear
the expense and incur the delays associated with effecting registration.
Certain restricted securities that are not registered for sale to the
general public, but that can be resold to institutional investors ^("Rule 144A ^
Securities"), may be purchased without regard to the foregoing 15% limitation if
a liquid institutional trading market exists. The liquidity of the Fund's
investments in Rule 144A Securities could be impaired if dealers or
institutional investors become uninterested in purchasing these securities. The
Company's board of directors has delegated to Fund Management the authority to
determine the liquidity of Rule 144A Securities pursuant to guidelines approved
by the board. For more information concerning Rule 144A Securities, see the
Statement of Additional Information.
Repurchase Agreements
The Funds may enter into repurchase agreements with respect to debt
instruments eligible for investment by the Funds^ with member banks of the
Federal Reserve System, registered broker-dealers^ and registered government
<PAGE>
securities dealers, which are deemed creditworthy. A repurchase agreement, which
may be considered a "loan" under the Investment Company Act of 1940, is a means
of investing monies for a short period. In a repurchase agreement, a Fund
acquires a debt instrument (generally a security issued by the U.S. government
or an agency thereof, a banker's acceptance, or a certificate of deposit)
subject to resale to the seller at an agreed-upon price and date (normally, the
next business day). In the event that the original seller defaults on its
obligation to repurchase the security, the Fund could incur costs or delays in
seeking to sell such security. To minimize risk, the securities underlying each
repurchase agreement will be maintained with the Fund's custodian in an amount
at least equal to the repurchase price under the agreement (including accrued
interest), and such agreements will be effected only with parties that meet
certain creditworthiness standards established by the Company's board of
directors. A Fund will not enter into a repurchase agreement maturing in more
than seven days if as a result more than 15% of its net assets would be invested
in such repurchase agreements and other illiquid securities. The Funds have not
adopted any limit on the amount of their net assets that may be invested in
repurchase agreements maturing in seven days or less.
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 this Prospectus in pursuit of the Funds' investment objectives.
Loans of securities by a Fund will be collateralized by cash, letters of credit,
or securities issued or guaranteed by the U.S. government or its agencies equal
to at least 100% of the current market value of the loaned securities,
determined on a daily basis. 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. A Fund will not
lend any security if, as a result of the loan, the aggregate value of securities
then on loan would exceed 33-1/3% of the Fund's total assets (taken at market
value).
Portfolio Turnover
There are no fixed limitations regarding portfolio turnover for the Funds'
portfolios. Although the Funds do not trade for short-term profits, securities
may be sold without regard to the time they have been held in a Fund when, in
the opinion of Fund Management, investment considerations warrant such action.
In addition, portfolio turnover rates may increase as a result of large amounts
of purchases or redemptions of Fund shares due to economic, market or other
factors that are not within the control of Fund Management. As a result, while
it is anticipated that the portfolio turnover rates for the Funds' portfolios
generally will not exceed 200%, under certain market conditions these portfolio
<PAGE>
turnover rates may exceed 200%. Increased portfolio turnover would cause a Fund
to incur greater brokerage costs than would otherwise be the case, and may
result in the acceleration of capital gains that are taxable when distributed to
shareholders. The Funds' portfolio turnover rates are set forth under
^"Financial Highlights^" and, along with the Funds' brokerage allocation
policies, are discussed in the Statement of Additional Information.
Investment Restrictions
The Funds are subject to a variety of restrictions regarding their
investments that are set forth in this Prospectus and in the Statement of
Additional Information. Certain of the Funds' investment restrictions are
fundamental, and may not be altered without the approval of the respective
Fund's shareholders. Such fundamental investment restrictions include the
restrictions which prohibit a Fund from: lending more than 33-1/3% of its total
assets to other parties (excluding purchases of commercial paper, debt
securities and repurchase agreements); with respect to 75% of its total assets,
purchasing the securities of any one issuer (other than cash items and
government securities) if the purchase would cause the Fund to have more than 5%
of its total assets invested in the issuer or to own more than 10% of the
outstanding voting securities of the issuer; and borrowing money or issuing
senior securities except that a 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 its total
assets. However, unless otherwise noted, the Funds' investment restrictions and
their investment policies are not fundamental and may be changed by action of
the Company's board of directors. Unless otherwise noted, all percentage
limitations contained in the Funds' investment policies and restrictions apply
at the time an investment is made. Thus, subsequent changes in the value of an
investment after purchase or in the value of the Funds' total assets will not
cause any such limitation to have been violated or to require the disposition of
any investment, except as otherwise required by law. If the credit ratings of an
issuer are lowered below those specified for investment by the Funds, the Funds
are not required to dispose of the obligations of that issuer. The determination
of whether to sell such an obligation will be made by Fund Management based upon
an assessment of credit risk and the prevailing market price of the investment.
If a Fund borrows money, its share price may be subject to greater fluctuation
until the borrowing is repaid. Each Fund attempts to minimize such fluctuations
by not purchasing additional securities when borrowings, including reverse
repurchase agreements, are greater than 5% of the value of the Fund's total
assets. 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. See ^"Additional Information--
Master/Feeder Option.^"
RISK FACTORS
There can be no assurance that the Funds will achieve their investment
objectives. The Funds' investments in common stocks and other equity securities
may, of course, decline in value.
<PAGE>
Debt Securities. The Funds' investments in fixed-income securities
generally are subject to both credit risk and market risk. Credit risk relates
to the ability of the issuer to meet interest or principal payments, or both, as
they come due. The ratings given a security by S&P or Moody's provide a
generally useful guide to such credit risk. The lower the rating given a
security by such rating service, the greater the credit risk such rating service
perceives to exist with respect to such security. Increasing the amount of Fund
assets invested in unrated or lower grade securities, while intended to increase
the yield produced by those assets, also will increase the credit risk to which
those assets are subject.
Market risk relates to the fact that the market values of the debt
securities in which the Fund invests generally will be affected by changes in
the level of interest rates. An increase in interest rates will tend to reduce
the market values of debt securities, whereas a decline in interest rates will
tend to increase their values. Although ^ Fund Management limits the Funds'
investments in fixed-income securities to securities it believes are not highly
speculative, both kinds of risk are increased by investing in debt securities
rated below the top three grades by ^ S&P or Moody's or, if unrated, securities
determined by ^ Fund Management to be of equivalent quality. Although bonds in
the lowest investment grade debt category (those rated BBB by ^ S&P or Baa by
Moody's) are regarded as having adequate capability to pay principal and
interest, they have speculative characteristics. Adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than is the case for higher rated bonds. Lower
rated bonds by Moody's (categories Ba, B, Caa) are of poorer quality and also
have speculative characteristics. Bonds rated Caa may be in default or there may
be present elements of danger with respect to principal or interest. Lower rated
bonds by ^ S&P (categories BB, B, CCC) include those which are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with their terms; BB indicates
the lowest degree of speculation and CCC a high degree of speculation. While
such bonds likely will have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions. For a specific description of each corporate bond rating category,
please refer to Appendix B to the Statement of Additional Information.
Industry Concentration
While the Funds diversify their investments by investing, with respect to
75% of their total assets, not more than 5% of their total assets in the
securities of any one issuer, Fund Management normally will invest each Fund's
assets primarily in companies engaged in the particular fields of business
activity designated for investment by that Fund. As a result of this investment
policy, an investment in a Fund may be subject to greater fluctuations in value
than generally would be the case if an investment were made in an investment
company that did not concentrate its investments in a similar manner. Certain
economic factors or specific events may exert a disproportionate impact upon the
prices of equity securities of companies within a particular industry relative
to their impact on the prices of securities of companies engaged in other
industries. For example, the success of the companies in which the Capital Goods
<PAGE>
Fund may invest is closely related to overall capital spending levels.
Capital spending is influenced by broad factors such as economic cycles,
interest rates, technological obsolescence, foreign competition and governmental
regulation, as well as individual company factors such as profitability. The
Communications Fund may invest in companies that are developing new technologies
and, accordingly, are subject to the risks of intense competition, failure to
obtain adequate financing or necessary regulatory approvals and rapid product
obsolescence. In addition, the types of companies in which the Communications
Fund may invest generally are subject to substantial government regulation.
Companies engaged in infrastructure projects are subject to various risks,
including difficulties in securing financing for large projects and costs and
delays resulting from environmental considerations. In addition, changes in the
market price of the equity securities of a particular company which occupies a
dominant position in an industry may tend to influence the market prices of
other companies within the same industry. As a result of the foregoing factors,
an investment in one or both of the Funds may not constitute a complete,
balanced investment program.
Foreign Securities
For U.S. investors, the returns on foreign securities are influenced not
only by the returns on the foreign investments themselves, but also by currency
risk (i.e., changes in the value of the currencies in which the securities are
denominated relative to the U.S. dollar). In a period when the U.S. dollar
generally rises against a foreign ^ currency, returns ^ for a U.S. investor ^ on
foreign securities denominated in that foreign currency may decrease. By
contrast, in a period when the U.S. dollar generally declines, the returns on
foreign securities generally are enhanced.
Other risks and considerations of international investing include the
following: differences in accounting, auditing and financial reporting standards
which may result in less publicly available information than is generally
available with respect to U.S. issuers; generally higher commission rates on
foreign portfolio transactions and longer settlement periods; the smaller
trading volumes and generally lower liquidity of foreign stock markets, which
may result in greater price volatility; foreign withholding taxes payable on a
Fund's foreign securities, which may reduce dividend income payable to
shareholders; the possibility of expropriation or confiscatory taxation; adverse
changes in investment or exchange control regulations; political instability
which could affect U.S. investment in foreign countries; potential restrictions
on the flow of international capital; and the possibility of a Fund experiencing
difficulties in pursuing legal remedies and collecting judgments. The Fund's
investments in foreign securities may include investments in developing
countries. Many of these securities are speculative and their prices may be more
volatile than those of securities issued by companies located in more developed
countries.
Small Capitalization Companies
The Funds may invest in equity securities issued by small-cap companies.
The Funds' investments in small capitalization stocks may include companies that
have limited operating histories, product lines, and financial and managerial
<PAGE>
resources. These companies may be subject to intense competition from
larger companies, and their stock may be subject to more abrupt or erratic
market movements than the stocks of larger, more established companies. Due to
these and other factors, small cap companies may suffer significant losses as
well as realize substantial growth.
Futures, Options and Other Derivative Instruments
The use of futures, options, forward contracts and swaps exposes the Funds
to additional investment risks and transaction costs, and as a result, no more
than 5% of each Fund's total assets will be committed to such investments. If
Fund Management seeks to protect the Funds against potential adverse movements
in the securities, foreign currency or interest rate markets using these
instruments, and such markets do not move in a direction adverse to the Funds,
the Funds could be left in a less favorable position than if such strategies had
not been used. Risks inherent in the use of futures, options, forward contracts
and swaps include (1) the risk that interest rates, securities prices and
currency markets will not move in the directions anticipated; (2) imperfect
correlation between the price of futures, options and forward contracts and
movements in the prices of the securities or currencies being hedged; (3) the
fact that skills needed to use these strategies are different from those needed
to select portfolio securities; (4) the possible absence of a liquid secondary
market for any particular instrument at any time; and (5) the possible need to
defer closing out certain hedged positions to avoid adverse tax consequences.
Further information on the use of futures, options, forward foreign currency
contracts and swaps and swap-related products, and the associated risks, is
contained in the Statement of Additional Information.
THE FUNDS AND THEIR 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. The overall
supervision of each Fund is the responsibility of the Company's board of
directors.
Pursuant to an agreement with the Company, INVESCO Funds Group, Inc.
^("IFG"), 7800 E. Union Avenue, Denver, Colorado, serves as the Funds'
investment adviser. Under this agreement, ^ IFG is primarily responsible for
providing the Funds with various administrative services and supervising the
Funds' daily business affairs. These services are subject to review by the
Company's board of directors.
^
<PAGE>
Pursuant to an agreement with ^ IFG, INVESCO Trust Company ^("INVESCO
Trust"), 7800 E. Union Avenue, Denver, Colorado, serves as the sub-adviser to
each Fund. INVESCO Trust, a trust company founded in 1969, is a wholly-owned
subsidiary of ^ IFG that served as adviser or sub-adviser to ^ 59 investment
portfolios as of July 31, ^ 1997, including ^ 32 portfolios in the INVESCO
group. These ^ 59 portfolios had aggregate assets of approximately ^ $15.0
billion as of July 31, ^ 1997. In addition, INVESCO Trust provides investment
management services to private clients, including employee benefit plans that
may be invested in a collective trust sponsored by INVESCO Trust. INVESCO Trust,
subject to the supervision of ^ IFG, is primarily responsible for selecting and
managing the Funds' investments.
^ Pursuant to an agreement with the Company, effective September 30, 1997,
INVESCO Distributors, Inc. ("IDI") became the Funds' distributor. IDI,
established in 1997, is a registered broker-dealer that acts as distributor for
all retail mutual funds advised by IFG. Prior to September 30, 1997, IFG served
as the Funds' distributor.
IFG, INVESCO Trust and IDI are indirect wholly-owned subsidiaries of
AMVESCAP PLC. AMVESCAP PLC is a publicly-traded holding company that, through
its subsidiaries, engages in the business of investment management on an
international basis. INVESCO PLC changed its name to AMVESCO PLC on March 3,
1997, and to AMVESCAP PLC on May 8, 1997, as part of a merger between a direct
subsidiary of INVESCO PLC and A I M Management Group Inc., that created one of
the largest independent investment management businesses in the world. IFG and
INVESCO Trust continued to operate under their existing names. AMVESCAP PLC has
approximately $177.5 billion in assets under management. IFG was established in
1932 and, as of July 31, 1997, managed 14 mutual funds, consisting of 45
separate portfolios, with combined assets of approximately $16.4 billion on
behalf of over 858,000 shareholders.
The Funds are managed by members of INVESCO's Sector Team, which is headed
by Daniel B. Leonard. ^ The following individuals ^ are primarily responsible
for the day-to-day management of the Funds' ^ portfolio holdings:
Worldwide Capital Goods Fund: Albert M. Grossi ^ has been portfolio manager
of the Fund since 1995^. Mr. Grossi also co-manages INVESCO Balanced Fund and is
an assistant portfolio manager of INVESCO ^ Industrial Income Fund and INVESCO
VIF - Industrial Income Fund. Mr. Grossi is also a vice president of INVESCO
Trust Company. Mr. Grossi was previously portfolio manager/senior analyst ^ with
Westinghouse Pension Investments Corp. (1988 to 1995)^, retail equity marketing
coordinator ^ with E. F. Hutton (1981 to 1988)^, securities analyst ^ with
Shearson American Express (1975 to 1981)^, securities analyst ^ with Mutual
Benefit Life Insurance (1974 to 1975)^, M.B.A. in Finance and a B.A. in
Political Science/Economics from Rutgers University.
Worldwide Communications Fund: Brian B. Hayward, a Chartered Financial
Analyst, has been portfolio ^ manager of the Fund since ^ July 1997. Mr. Hayward
also manages INVESCO Strategic Utilities Portfolio and INVESCO VIF - Utilities ^
Fund. Mr. Hayward began his investment career in 1985 and was most recently the
<PAGE>
senior equity analyst with Mississippi Valley Advisors in St. Louis, Missouri.
Mr. Hayward received a M.A. in Economics and a B.A. in Mathematics from the
University of Missouri.
^ Each Fund pays IFG a monthly advisory fee which is based upon a
percentage of the average net assets of each Fund, determined daily. The maximum
advisory fee is computed 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.
Out of its advisory fee which it receives from the Funds, ^ IFG pays
INVESCO Trust, as sub-adviser to the Funds, a monthly fee, which is computed at
the annual rate of 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 in excess of $1 billion. No fee is paid
by the Funds to INVESCO Trust.
The Company also has entered into an Administrative Services Agreement
(the "Administrative Agreement") with ^ IFG. Pursuant to the Administrative
Agreement, ^ IFG performs certain administrative, recordkeeping and internal
sub-accounting services, including without limitation, maintaining general
ledger and capital stock accounts, preparing a daily trial balance, calculating
net asset value daily, providing selected general ledger reports and providing
sub-accounting and recordkeeping services for Fund shareholder accounts
maintained by certain retirement and employee benefit plans for the benefit of
participants in such plans. For such services, each Fund pays ^ IFG a fee
consisting of a base fee of $10,000 per year, plus an additional incremental fee
computed at the annual rate of 0.015% per year of the average net assets of the
Fund. ^ IFG also is paid a fee by each Fund for providing transfer agent
services. See "Additional Information."
Each Fund's expenses, which are accrued daily, are generally deducted from
^ each Fund's total income before dividends are paid. Total expenses (prior to
any expense offset arrangements) of the Capital Goods Fund ^ and the
Communications Fund for the fiscal year ended July 31, ^ 1997 including
investment management fees (but excluding brokerage commissions, which are
included as a cost of acquiring securities), amounted to ^ 1.98% and ^ 1.69%,
respectively, of each Fund's average net assets. Certain expenses for ^ the
Capital Goods Fund are voluntarily absorbed by ^ IFG and INVESCO Trust Company
pursuant to a commitment to the ^ Fund in order to ensure that ^ the Fund's
total operating expenses do not exceed 2.00%. This commitment may be changed
following consultation with the Company's board of directors. In the absence of
such voluntary expense limitation, the Capital Goods Fund's total expenses for
the fiscal year ended July 31, ^ 1997, would have been ^ 2.58% of the Fund's
average net assets.
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of ^
such broker-dealer's financial responsibility coupled with their ability to
<PAGE>
effect transactions at the best available prices. As discussed under ^"How
Shares Can Be Purchased - Distribution Expenses,^" the Company may market shares
of the Funds through intermediary brokers or dealers that have entered into
Dealer Agreements with ^ IFG or IDI as the ^ Funds' distributor. The Funds may
place orders for portfolio transactions with qualified broker-dealers that
recommend the Funds, or sell shares of the Funds to clients, or act as agent in
the purchase of Fund shares for clients, if Fund Management believes that the
quality of execution of the transaction and level of commission are comparable
to those available from other qualified brokerage firms.
Fund Management permits investment and other personnel to purchase and
sell securities for their own accounts, subject to a compliance policy governing
personal investing. This policy requires investment and other personnel to
conduct their personal investment activities in a manner that Fund Management
believes is not detrimental to the Funds or Fund Management's other advisory
clients. See the Statement of Additional Information for more detailed
information.
HOW SHARES CAN BE PURCHASED
Shares of each Fund are sold on a continuous basis by ^ IDI, as the Funds'
^ distributor, at the net asset value per share next calculated after receipt of
a purchase order in good form. No sales charge is imposed upon the sale of
shares of the Funds. To purchase shares of either or both Funds, send a check
made payable to INVESCO Funds Group, Inc., together with a completed application
form, to:
INVESCO Funds Group, Inc.
Post Office Box 173706
Denver, Colorado 80217-3706
PURCHASE ORDERS MUST SPECIFY THE FUND IN WHICH THE INVESTMENT IS TO BE
MADE.
The minimum initial purchase must be at least $1,000, with subsequent
investments of not less than $50, except that: (1) those shareholders
establishing an EasiVest or direct payroll purchase account, as described below
in the ^ section entitled ^"Services Provided ^ By The Fund,^" may open an
account without making any initial investment if they agree to make regular,
minimum purchases of at least $50; (2) those shareholders investing in an
Individual Retirement Account ^("IRA"), or through omnibus accounts where
individual shareholder recordkeeping and sub-accounting are not required, may
make initial minimum purchases of $250; (3) Fund Management may permit a lesser
amount to be invested in a Fund under a federal income tax-deferred retirement
plan (other than an IRA account), or under a group investment plan qualifying as
a sophisticated investor; and (4) Fund Management reserves the right to
increase, reduce or waive the minimum purchase requirements in its sole
discretion where it determines such action is in the best interests of the Fund.
<PAGE>
The purchase of Fund shares can be expedited by placing bank wire,
overnight courier or telephone orders. Overnight courier orders must meet the
above minimum requirements. In no case can a bank wire order or telephone order
be in an amount less than $1,000. For further information, the purchaser may
call the Funds' office by using the telephone number on the cover of this
Prospectus. Orders sent by overnight courier, including Express Mail, should be
sent to the street address, not Post Office Box, of INVESCO Funds Group, Inc.,
at 7800 E. Union Avenue, Denver, CO 80237.
Orders to purchase shares of either Fund can be placed by telephone.
Shares of the Funds will be issued at the net asset value per share next
determined after receipt of telephone instructions. Generally, payments for
telephone orders must be received by the respective Fund within three business
days or the transaction may be cancelled. In the event of such cancellation, the
purchaser will be held responsible for any loss resulting from a decline in the
value of the shares. In order to avoid such losses, purchasers should send
payments for telephone purchases by overnight courier or bank wire. ^ IFG has
agreed to indemnify the Funds for any losses resulting from such cancellations
of telephone purchases.
If your check does not clear, or if a telephone purchase must be cancelled
due to nonpayment, you will be responsible for any related loss a Fund or ^ IFG
incurs. If you are already a shareholder in the INVESCO funds, the Funds have
the option to redeem shares from any identically registered account in the Funds
or any other INVESCO fund as reimbursement for any loss incurred. You also may
be prohibited or restricted from making future purchases in any of the INVESCO
funds.
Persons who invest in the Funds through a securities broker may be charged
a commission or transaction fee by the broker for the handling of the
transaction if the broker so elects. Any investor may deal directly with a Fund
in any transaction. In that event, there is no such charge. ^ IDI or IFG may
from time to time make payments from its revenues to securities dealers and
other financial institutions that provide distribution-related and/or
administrative services for the Funds.
Each Fund reserves the right in its sole discretion to reject any order for
purchase of its shares (including purchases by exchange) when, in the judgment
of management, such rejection is in the best interest of the Fund.
Net asset value per share is computed once each day that the New York
Stock Exchange is open as of the close of regular trading on that Exchange
^(generally 4:00 p.m., New York time) and also may be computed on other days
under certain circumstances. Net asset value per share for each Fund is
calculated by dividing the market value of the Fund's securities plus the value
of its other assets (including dividends and interest accrued but not
collected), less all liabilities (including accrued expenses), by the number of
outstanding shares of that Fund. If market quotations are not readily available,
a security or other asset will be valued at fair value as determined in good
faith by the board of directors. Debt securities with remaining maturities of 60
<PAGE>
days or less at the time of purchase will be valued at amortized cost, absent
unusual circumstances, so long as the Company's board of directors believes that
such value represents fair value.
Distribution Expenses. Each Fund is authorized under a Plan and Agreement
of Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Plan") to use its assets to finance certain activities relating to the
distribution of its shares to investors. Under the Plan, monthly payments may be
made by the Fund to ^ IDI to permit IDI, at its discretion, to engage in certain
activities and provide certain services approved by the board of directors of
the 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 ^
IDI-affiliated companies, to obtain various distribution-related and/or
administrative services for the Fund. Such services may include, among other
things, processing new shareholder account applications, preparing and
transmitting 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, printing and distribution of sales literature, ^
printing and ^ distribution of prospectuses to prospective investors, and such
other services and promotional activities for the Funds 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 securities and activities may be conducted by the
staff of ^ IDI or its affiliates or by third parties.
Under the Plan, the Company's ^ payments to ^ IDI on behalf of each Fund ^
are limited to an amount computed at an annual rate of 0.25 ^% of each Fund's
average net assets during the month. ^ IDI is not entitled to ^ payment for
overhead expenses under the Plan, but may be ^ paid for all or a portion of the
compensation paid for salaries and other employee benefits for the personnel of
^ IFG or IDI whose primary responsibilities involve marketing shares of the
INVESCO funds, including the Funds. Payment amounts by each Fund under the Plan,
for any month, may only be made to ^ compensate IDI for permissible activities
engaged in and services provided by IDI during the rolling 12-month period in
which that month falls^. Therefore, any obligations incurred by IDI in excess of
the limitations described above ^ will not be paid by the Funds and will be
borne by ^ IDI. In addition, ^ IDI and its affiliates may from time to time make
additional payments from its revenues to securities dealers ^, financial
advisers and financial institutions that provide distribution-related and/or
administrative services for the Funds. No further payments will be made by a
Fund under the Plan in the event of ^ the Plan's termination. ^ Payments made by
a Fund may not be used to finance directly the distribution of shares of any
other ^ Fund of the Company or other mutual fund advised by ^ IFG. However,
payments received by IDI which are not used to finance the distribution of
<PAGE>
shares of the Fund became part of IDI's revenues and may be used by IDI for only
permissible activities for all of the mutual funds advised by IFG subject to
review by the Funds' directors. Payments made by each Fund under the Plan for
compensation of marketing personnel, as noted above, are based on an allocation
formula designed to ensure that all such payments are appropriate. IDI will bear
any distribution- and service-related expenses in excess of the amounts which
are compensated pursuant to the Plan. The Plan also authorizes any financing of
distribution which may result from IDI's use of its own resources, including
profits from investment advisory fees received from the Fund, provided that such
fees are legitimate and not excessive. For more information see "How Shares Can
Be Purchased -- Distribution Plan" in the Statement of Additional Information.
SERVICES PROVIDED BY THE FUNDS
Shareholder Accounts. ^ IFG maintains a share account that reflects the
current holdings of each shareholder. Share certificates will be issued only
upon specific request. Since certificates must be carefully safeguarded, and
must be surrendered in order to exchange or redeem Fund shares, most
shareholders do not request share certificates in order to facilitate such
transactions. Each shareholder is sent a detailed confirmation of each
transaction in shares of the Funds. Shareholders whose only transactions are
through the EasiVest, direct payroll purchase, automatic monthly exchange or
periodic withdrawal programs, or are reinvestments of dividends or capital gains
in the same or another fund, will receive confirmations of those transactions on
their quarterly statements. These programs are discussed below. For information
regarding a shareholder's account and transactions, the shareholder may call the
Funds' office by using the telephone number on the cover of this Prospectus.
Reinvestment of Distributions. Dividends and other distributions are
automatically reinvested in additional shares of the Fund making the
distribution at the net asset value per share of that Fund in effect on the
ex-dividend or ex-distribution date. A shareholder may, however, elect to
reinvest dividends and other distributions in certain of the other no-load
mutual funds advised by IFG and distributed by ^ IDI, or to receive payment of
all dividends and other distributions in excess of $10.00 by check by giving
written notice to ^ IFG at least two weeks prior to the record date on which the
change is to take effect. Further information concerning these options can be
obtained by contacting ^ IFG.
Periodic Withdrawal Plan. A Periodic Withdrawal Plan is available to
shareholders who own or purchase shares of any mutual funds advised by ^ IFG
having a total value of $10,000 or more; provided, however, that at the time the
Plan is established, the shareholder owns shares having a value of at least
$5,000 in the fund from which the withdrawals will be made. Under the Periodic
Withdrawal Plan, ^ IFG, as agent, will make specified monthly or quarterly
payments of any amount selected (minimum payment of $100) to the party
designated by the shareholder. Notice of all changes concerning the Periodic
Withdrawal Plan must be received by ^ IFG at least two weeks prior to the next
scheduled check. Further information regarding the Periodic Withdrawal Plan and
its requirements and tax consequences can be obtained by contacting ^ IFG.
<PAGE>
Exchange ^ Policy. Shares of either Fund may be exchanged for shares of
any other Fund of the Company, as well as for shares of any of the following
other no-load mutual funds, which are also advised by IFG and distributed by ^
IDI, on the basis of their respective net asset values at the time of the
exchange: 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 Value Trust.
An exchange involves the redemption of shares in a Fund and investment of
the redemption proceeds in shares of another Fund of the Company or in shares of
one of the funds listed above. Exchanges will be made at the net asset value per
share next determined after receipt of an exchange request in proper order. Any
gain or loss realized on such an exchange is recognizable for federal income tax
purposes by the shareholder. Exchange requests may be made either by telephone
or by written request to ^ IFG, using the telephone number or address on the
cover of this Prospectus. Exchanges made by telephone must be in an amount of at
least $250, if the exchange is being made into an existing account of one of the
INVESCO funds. All exchanges that establish a new account must meet the Fund's
applicable minimum initial investment requirements. Written exchange requests
into an existing account have no minimum requirements other than the Fund's
applicable minimum subsequent investment requirements.
The ^ option to exchange Fund shares by telephone is available to
shareholders automatically unless expressly declined. By signing the New Account
Application, a Telephone Transaction Authorization Form or otherwise utilizing
the telephone exchange ^ option, the investor has agreed that the Funds will not
be liable for following instructions communicated by telephone that they
reasonably believe to be genuine. The Funds employ procedures, which they
believe are reasonable, designed to confirm that exchange instructions are
genuine. These may include recording telephone instructions and providing
written confirmations of exchange transactions. As a result of this policy, the
investor may bear the risk of any loss due to unauthorized or fraudulent
instructions; provided, however, that if a Fund fails to follow these or other
reasonable procedures, the Fund may be liable.
In order to prevent abuse of this ^ policy to the disadvantage of other
shareholders, each Fund reserves the right to terminate the exchange ^ option of
any shareholder who requests more than four exchanges in a year. A Fund will
determine whether to do so based on a consideration of both the number of
exchanges any particular shareholder or group of shareholders has requested and
the time period over which those exchange requests have been made, together with
the level of expense to the Fund which will result from effecting additional
exchange requests. The exchange ^ policy also may be modified or terminated at
any time. Except for those limited instances where redemptions of the exchanged
security are suspended under Section 22(e) of the Investment Company Act of
1940, or where sales of the fund into which the shareholder is exchanging are
temporarily stopped, notice of all such modifications or termination of the
exchange ^ policy will be given at least 60 days prior to the date of
termination or the effective date of the modification.
<PAGE>
Before making an exchange, the shareholder should review the prospectuses
of the funds involved and consider their differences^. Shareholders interested
in exercising the exchange ^ option may contact ^ IFG for information concerning
their particular exchanges.
Automatic Monthly Exchange. Shareholders who have accounts in any one or
more of the mutual funds distributed by ^ IDI may arrange for a fixed dollar
amount of their fund shares to be automatically exchanged for shares of any
other INVESCO mutual fund listed under ^"Exchange Policy" on a monthly basis.
The minimum monthly exchange in this program is $50.00. This automatic exchange
program can be changed by the shareholder at any time by notifying ^ IFG at
least two weeks prior to the date the change is to be made. Further information
regarding this service can be obtained by contacting ^ IFG.
EasiVest. For shareholders who want to maintain a schedule of monthly
investments, EasiVest uses various methods to draw a preauthorized amount from
the shareholder's bank account to purchase Fund shares. This automatic
investment program can be changed by the shareholder at any time by ^ contacting
IFG at least two weeks prior to the date the change is to be made. Further
information regarding this service can be obtained by contacting ^ IFG.
Direct Payroll Purchase. Shareholders may elect to have their employer
make automatic purchases of Fund shares for them by deducting a specified amount
from their regular paychecks. This automatic investment program can be modified
or terminated at any time by the shareholder, by notifying the employer. Further
information regarding this service can be obtained by contacting ^ IFG.
Tax-Deferred Retirement Plans. Shares of either Fund may be purchased for
self-employed individual retirement plans, IRAs, SIMPLE IRAs, simplified
employee pension plans and corporate retirement plans. In addition, shares can
be used to fund tax qualified plans established under Section 403(b) of the
Internal Revenue Code by educational institutions, including public school
systems and private schools, and certain kinds of non-profit organizations,
which provide deferred compensation arrangements for their employees.
Prototype forms for the establishment of these various plans, including,
where applicable, disclosure statements required by the Internal Revenue
Service, are available from ^ IFG. INVESCO Trust ^, a subsidiary of ^ IFG, is
qualified to serve as trustee or custodian under these plans and provides the
required services at competitive rates. Retirement plans (other than IRAs)
receive monthly statements reflecting all transactions in their Fund accounts.
IRAs receive the confirmations and quarterly statements described under
"Shareholder Accounts." For complete information, including prototype forms and
service charges, call ^ IFG at the telephone number listed on the cover of this
Prospectus or send a written request to: Retirement Services, INVESCO Funds
Group, Inc., Post Office Box 173706, Denver, Colorado 80217-3706.
<PAGE>
HOW TO REDEEM SHARES
Shares of either Fund may be redeemed at any time at their current net
asset value per share next determined after a request in proper form is received
at the Funds' office. (See ^"How Shares Can Be ^ Purchased.") Net asset value
per share at the time of redemption may be more or less than the price you paid
to purchase your shares, depending primarily upon the Fund's investment
performance.
If the shares to be redeemed are represented by stock certificates, a
written request for redemption signed by the registered shareholder(s) and the
certificates must be forwarded to INVESCO Funds Group, Inc., Post Office Box
173706, Denver, Colorado 80217-3706. Redemption requests sent by overnight
courier, including Express Mail, should be sent to the street address, not Post
Office Box, of INVESCO Funds Group, Inc. at 7800 E. Union Avenue, Denver, CO
80237. If no certificates have been issued, a written redemption request signed
by each registered owner of the account may be submitted to ^ IFG at the address
noted above. If shares are held in the name of a corporation, additional
documentation may be necessary. Call or write for ^ specific information. If
payment for the redeemed shares is to be made to someone other than the
registered owner(s), the signature(s) must be guaranteed by a financial
institution which qualifies as an eligible guarantor institution. Redemption
procedures with respect to accounts registered in the names of broker-dealers
may differ from those applicable to other shareholders.
BE CAREFUL TO SPECIFY THE ACCOUNT FROM WHICH THE REDEMPTION IS TO BE MADE.
SHAREHOLDERS HAVE A SEPARATE ACCOUNT FOR EACH FUND IN WHICH THEY INVEST.
Payment of redemption proceeds will be mailed within seven days following
receipt of the required documents. However, payment may be postponed under
unusual circumstances, such as when normal trading is not taking place on the
New York Stock Exchange, or when an emergency as defined by the Securities and
Exchange Commission exists. If the shares to be redeemed were purchased by check
and that check has not yet cleared, payment will be made promptly upon clearance
of the purchase check (which ^ will take up to 15 days).
If a shareholder participates in EasiVest, the Fund's automatic monthly
investment program, and redeems all of the shares in ^ a Fund account, ^ IFG
will terminate any further EasiVest purchases unless otherwise instructed by the
shareholder.
Because of the high relative costs of handling small accounts, should the
value of any shareholder's account fall below $250 as a result of shareholder
action, each Fund reserves the right to effect the involuntary redemption of all
shares in such account, in which case the account would be liquidated and the
proceeds forwarded to the shareholder. Prior to any such redemption, a
shareholder will be notified and given 60 days to increase the value of the
account to $250 or more.
<PAGE>
Fund shareholders (other than shareholders holding Fund shares in accounts
of IRA plans) may request expedited redemption of shares having a minimum value
of $250 (or redemption of all shares if their value is less than $250) held in
accounts maintained in their name by telephoning redemption instructions to ^
IFG, using the telephone number on the cover of this Prospectus. The redemption
proceeds, at the shareholder's option, either will be mailed to the address
listed for the shareholder's Fund account, or wired (minimum of $1,000) or
mailed to the bank which the shareholder has designated to receive the proceeds
of telephone redemptions. The Funds charge no fee for effecting such telephone
redemptions. Unless Fund Management permits a larger redemption request to be
placed by telephone, a shareholder may not place a redemption request by
telephone in excess of $25,000. These telephone redemption privileges may be
modified or terminated in the future at the discretion of Fund Management.
For ^ federal income tax-deferred retirement plans sponsored by INVESCO
Trust, the term "shareholders" is defined to mean plan trustees that file a
written request to be able to redeem Fund shares by telephone. Shareholders
should understand that, while the Funds will attempt to process all telephone
redemption requests on an expedited basis, there may be times, particularly in
periods of severe economic or market disruption, when (a) they may encounter
difficulty in placing a telephone redemption request, and (b) processing
telephone redemptions will require up to seven days following receipt of the
redemption request, or additional time because of the unusual circumstances set
forth above.
The privilege of redeeming Fund shares by telephone is available to
shareholders automatically unless expressly declined. By signing a New Account
Application, a Telephone Transaction Authorization Form or otherwise utilizing
telephone redemption privileges, the shareholder has agreed that the Funds will
not be liable for following instructions communicated by telephone that they
reasonably believe to be genuine. The Funds employ procedures, which they
believe are reasonable, designed to confirm that telephone instructions are
genuine. These may include recording telephone instructions and providing
written confirmation of transactions initiated by telephone. As a result of this
policy, the investor may bear the risk of any loss due to unauthorized or
fraudulent instructions; provided, however, that if a Fund fails to follow these
or other reasonable procedures, the Fund may be liable.
TAXES, DIVIDENDS AND ^ OTHER DISTRIBUTIONS
Taxes. Each Fund intends to distribute to shareholders ^ 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 Funds do not expect to pay any federal
income or excise taxes.
<PAGE>
Unless shareholders are exempt from income taxes, they must include all
dividends and ^ other 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 ^ each Fund
or another fund in the INVESCO group.
Net realized capital gains of the Funds are classified as short-term and
long-term gains depending upon how long each Fund held the security that gave
rise to the gains. Short-term capital gains are included in income from
dividends and interest as ordinary income and are taxed at the taxpayer's
marginal tax rate. The Taxpayer Relief Act of 1997 (the "Tax Act"), enacted in
August 1997, changed the taxation of long-term capital gains for individuals by
applying different capital gains rates depending on the taxpayer's holding
period and marginal rate of federal income tax. Long-term gains realized on the
sale of securities held for more than one year but not for more than 18 months
are taxable at a rate of 28%. This category of long-term gains is often referred
to as "mid-term" gains but is technically termed "28% rate gains". Long-term
gains realized on the sale of securities held for more than 18 months are
taxable at a rate of 20%. Shareholders should consult their tax advisers as to
the effect of the Tax Act on distributions by the Funds of net capital gains.
Shareholders also may realize capital gains or losses when they sell their
Fund shares at more or less than the price originally paid. Capital gains on
shares held for more than one year will be long-term capital gains, in which
event they will be subject to federal income tax at the rates indicated above.
Each 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 ^ Funds.
^ Individuals and certain other non-corporate shareholders may be subject
to backup withholding of 31% on dividends, capital ^ gains and other
distributions and redemption proceeds. 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.
We encourage you to consult a tax adviser with respect to these matters.
For further information see "Dividends, Other Distributions and Taxes" in the
Statement of Additional Information.
Dividends and Other ^ Distributions. Each Fund earns ordinary or net
investment income^ in the form of dividends and interest on its investments. ^
Dividends paid by each Fund will be based solely on the income earned by it.
Each Fund's policy is to distribute substantially all of this income, less Fund
expenses, to shareholders on an annual basis, at the discretion of the ^ Fund's
board of directors. Dividends are automatically reinvested in additional shares
of the Fund at the net asset value on the payable date unless otherwise
requested.
In addition, each 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 ^
<PAGE>
net realized capital ^ gains. Net realized capital gains, if any, together
with gains, if any, realized on foreign currency transactions, are distributed
to shareholders at least annually, usually in December. Capital gains
distributions are automatically reinvested in additional shares of the Fund at
net asset value on the payable date unless otherwise requested.
Dividends and other ^ distributions are paid to ^ holders of shares on the
record date of ^ distribution regardless of how long the Fund shares have been
held^ by the shareholder. The Fund's share price will then drop by the amount of
the distribution on the ^ ex-dividend or ex-distribution ^ date. If a
shareholder purchases shares immediately prior to the distribution, the
shareholder will, in effect, have ^"bought" the distribution by paying the full
purchase price, a portion of which is then returned in the form of a taxable
distribution.
^
ADDITIONAL INFORMATION
Voting Rights. All shares of the Funds have equal voting rights, based on
one vote for each share owned. Voting with respect to certain matters, such as
ratification of independent accountants and the election of directors, will be
by all ^ funds of the Company voting together. In other cases, such as voting
upon an investment advisory contract, voting is on a ^ fund-by-^ fund basis.
When not all ^ funds are affected by a matter to be voted upon, only
shareholders of the ^ fund or ^ funds affected by the matter will be entitled to
vote thereon. The Company is not generally required, and does not expect, to
hold regular annual meetings of shareholders. However, the board of directors
will call special meetings of shareholders for the purpose, among other reasons,
of voting upon the question of removal of a director or directors when requested
to do so in writing by the holders of 10% or more of the outstanding shares of
the Company or as may be required by applicable law or the Company's Articles of
Incorporation. The Company will assist shareholders in communicating with other
shareholders as required by the Investment Company Act of 1940. Directors may be
removed by action of the holders of a majority or more of the outstanding shares
of the Company.
Master/Feeder Option. The Company may in the future seek to achieve ^ a
Fund's investment objective by investing all of the Fund's assets in another
investment company having the same investment objective and substantially the
same investment policies and restrictions as those applicable to the Fund. It is
expected that any such investment company would be managed by ^ IFG in
substantially the same manner as the existing Fund. If permitted by applicable
laws and policies then in effect, any such investment may be made in the sole
discretion of the Company's board of directors without further approval of the
shareholders of the ^ affected Fund. However, Fund shareholders will be given at
least 30 days prior notice of any such investment. Such investment would be made
only if the Company's board of directors determines it to be in the best
interests of the respective Fund and its shareholders. In making that
<PAGE>
determination, the board will consider, among other things, the benefits to
shareholders and/or the opportunity to reduce costs and achieve operational
efficiencies. No assurance can be given that costs will be materially reduced if
this option is implemented.
Shareholder Inquiries. All inquiries regarding the Funds should be
directed to the Funds at the telephone number or mailing address set forth on
the cover page of this Prospectus.
Transfer and Dividend Disbursing Agent. INVESCO Funds Group, Inc., 7800 E.
Union Ave., Denver, Colorado 80237, also acts as registrar, transfer agent, and
dividend disbursing agent for the Funds pursuant to a Transfer Agency Agreement
which provides that each Fund will pay an annual fee of $20.00 per shareholder
account or, where applicable, per participant in an omnibus account ^. The
transfer agency fee is not charged to each shareholder's or participant's
account, but is an expense of the Fund to be paid from the Fund's assets.
Registered broker-dealers, third party administrators of tax-qualified
retirement plans and other entities, including affiliates of ^ IFG, may provide
sub-transfer agency or ^ recordkeeping services to a Fund which reduce or
eliminate the need for identical services to be provided on behalf of the Fund
by ^ IFG. In such cases, ^ IFG may pay the third party an annual sub-transfer
agency or ^ recordkeeping fee out of the transfer agency fee which is paid to
IFG by the Fund.
<PAGE>
^
PROSPECTUS
December 1, ^ 1997
INVESCO Worldwide Capital Goods Fund
INVESCO Worldwide Communications Fund
Two no-load mutual funds investing globally
in designated market sectors.
INVESCO FUNDS
INVESCO Distributors, Inc.
Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
1-800-525-8085
PAL(R): 1-800-424-8085
http://www.invesco.com
^ In Denver, visit one of our
convenient Investor Centers:
Cherry Creek
155-B Fillmore Street
Denver Tech Center
7800 East Union Avenue
Lobby Level
In addition, all documents
filed by the Company with
the Securities & Exchange Commission
can be located on a Web site
maintained by the Commission at
http://www.sec.gov.
<PAGE>
PROSPECTUS
December 1, ^ 1997
INVESCO EUROPEAN SMALL COMPANY FUND
INVESCO European Small Company Fund (the ^"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 as companies in approximately the lowest 25% of market capitalization of
companies that have equity securities listed on a U.S. national securities
exchange or trade in the NASDAQ system ^("small companies"). Based on this
policy, the companies held by the Fund will typically have equity market
capitalizations under $1 billion. Additionally, the Fund will, under normal
circumstances, invest at least 65% of its total assets in ^ issuers domiciled in
at least five countries, although the Fund's investment adviser expects the
Fund's investments to be allocated among a larger number of countries. In this
regard, no more than 50% of the Fund's total assets will be invested in any one
country. For a description of risks inherent in investing in the Fund see ^"Risk
Factors^" and "Portfolio Turnover^." The Fund is not intended as a complete
investment program due to risks of investing in the Fund. See the section
entitled ^"Risk Factors.^"
The Fund is a series of INVESCO Specialty Funds, Inc. (the "Company"), a
diversified, managed, no-load mutual fund consisting of ^ seven separate funds,
each of which represents a separate portfolio of investments. This Prospectus
relates to shares of the INVESCO European Small Company Fund. Separate
prospectuses are available upon request from INVESCO ^ Distributors, Inc. for
the Company's other funds^: INVESCO Worldwide Capital Goods Fund, INVESCO
Worldwide Communications Fund, INVESCO Latin American Growth Fund ^, INVESCO
Asian Growth Fund, INVESCO Realty Fund and INVESCO S&P 500 Index Fund. Investors
may purchase shares of any or all of the Funds. Additional funds may be offered
in the future.
This Prospectus provides you with the basic information you should know
before investing in the Fund. You should read it and keep it for future
reference. A Statement of Additional Information dated December 1, 1997
containing further information about the Fund 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 Distributors, Inc., Post Office Box
173706, Denver, Colorado 80217-3706; ^ call 1-800-525-8085; or ^ visit our web
site: http://www.invesco.com.
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION. THE SHARES
OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
TABLE OF CONTENTS
Page
----
ANNUAL FUND EXPENSES........................................................38
FINANCIAL HIGHLIGHTS........................................................40
PERFORMANCE DATA............................................................42
INVESTMENT OBJECTIVE AND POLICIES...........................................42
RISK FACTORS................................................................48
THE FUND AND ITS MANAGEMENT.................................................50
HOW SHARES CAN BE PURCHASED.................................................52
SERVICES PROVIDED BY THE FUND...............................................55
HOW TO REDEEM SHARES........................................................58
TAXES, DIVIDENDS AND ^ OTHER DISTRIBUTIONS..................................60
ADDITIONAL INFORMATION......................................................61
^
<PAGE>
ANNUAL FUND EXPENSES
The Fund is no-load; there are no fees to purchase, exchange or redeem
shares. The Fund, however, is authorized to pay a distribution fee pursuant to
Rule 12b-1 under the Investment Company Act of 1940. (See "How Shares Can Be
Purchased--Distribution Expenses.") Lower expenses benefit Fund shareholders by
increasing the Fund's total return.
Shareholder Transaction Expenses
Sales load "charge" on purchases None
Sales load "charge" on reinvested dividends None
Redemption fees None
Exchange fees None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fee 0.75%
12b-1 Fees 0.25%
Other Expenses(1)(2) ^ 0.62%
Transfer Agency Fee(3) ^ 0.29%
General Services, Administrative ^ 0.33%
Services, Registration, Postage(4)
Total Fund Operating Expenses ^ 1.62%
(after voluntary expense limitation)(1)(2)
(1) It should be noted that the Fund's actual total operating expenses were
lower than the figures shown because the Fund's custodian and transfer agency
fees and pricing expenses were reduced under ^ expense offset ^ arrangements.
However, as a result of an SEC requirement for mutual funds to state their total
operating expenses without crediting any such expense offset arrangement, the
figures shown above do not reflect these reductions. In comparing expenses for
different years, please note that the ratios of Expenses to Average Net Assets
shown under ^"Financial Highlights^" do reflect reductions for periods prior to
the fiscal year ended July 31, 1996. See ^"The Fund and Its Management.^"
(2) Ratio is based on Total Expenses of the ^ Fund, which is before any
expense offset arrangements.
(3) Consists of the transfer agency fee described under ^"Additional
Information - Transfer and Dividend Disbursing Agent.^"
(4) Includes, but is not limited to, fees and expenses of directors,
custodian bank, legal counsel and independent accountants, ^ securities pricing
^ services, costs of administrative services furnished under an Administrative
Services Agreement, costs of registration of Fund shares under applicable laws,
and costs of printing and distributing reports to shareholders.
<PAGE>
Example
A shareholder would pay the following expenses on a $1,000 investment for
the periods shown, assuming (1) a 5% annual return and (2) redemption at the end
of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$17 ^ $52 $89 $194
The purpose of the foregoing expense table and Example is to assist
investors in understanding the various costs and expenses that an investor in
the Fund will bear directly or indirectly. Such expenses are paid from the
Fund's assets. (See ^"The Fund and Its ^ Management.") The Fund charges no sales
loads, redemption fees, or exchange fees. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN. The assumed 5% annual return is hypothetical and should
not be considered a representation of past or future annual returns, which may
be greater or less than the assumed amount.
As a result of the 0.25% 12b-1 fee paid by the Fund, investors who own
Fund shares for a long period of time may pay more than the economic equivalent
of the maximum front-end sales charge permitted for mutual funds by the National
Association of Securities Dealers, Inc.
<PAGE>
INVESCO Specialty Funds, Inc.
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
^
The following information has been audited by Price Waterhouse LLP,
independent accountants. This information should be read in conjunction with the
audited financial statements and the report of independent accountants thereon
appearing in the ^ Company's 1997 Annual Report to Shareholders which is
incorporated by reference into the Statement of Additional Information. Both are
available without charge by contacting INVESCO ^ Distributors, Inc. at the
address or telephone number shown below.
^ Period
Ended
Year Ended ^ July 31 July 31
---------------------- --------
1997 1996 1995^
European Small Company Fund
PER SHARE DATA
Net Asset Value -
Beginning of Period $15.08 $11.56 $10.00
---------------------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income (Loss) (0.05) 0.07 0.04
Net Gains on Securities ^(Both
Realized and Unrealized) 1.79 3.52 1.56
---------------------- --------
Total from Investment
Operations 1.74 3.59 1.60
---------------------- --------
LESS DISTRIBUTIONS
Dividends from Net
Investment Income 0.00 0.07 0.04
Distributions from Capital
Gains 0.53 0.00 0.00
---------------------- --------
Total Distributions 0.53 0.07 0.04
---------------------- --------
Net Asset Value -
End of Period $16.29 $15.08 $11.56
====================== ========
TOTAL RETURN 11.71% 31.07% 15.98%*
<PAGE>
RATIOS
Net Assets - End of Period
($000 Omitted) $75,057 $94,261 $3,801
Ratio of Expenses to Average
Net Assets# 1.62%@ 1.68%@ 2.00%~
Ratio of Net Investment Income
^(Loss) to Average Net Assets# (0.18%) 1.23% 2.37%~
Portfolio Turnover Rate 87% 141% 0%*
Average Commission Rate Paid^^ ^ $0.0108 $0.0125 -
^ From February 15, 1995, commencement of investment operations, to July 31,
1995.
* Based on operations for the period shown and, accordingly, are not
representative of a full year.
# Various expenses of the ^ Fund were voluntarily absorbed by ^ INVESCO Funds
Group, Inc., MIM International Limited and INVESCO Asset Management Limited for
the period ended July 31, 1995. If such expenses had not been voluntarily
absorbed, ratio of expenses to average net assets would have been 10.17%
(annualized), and ratio of net investment income to average net assets would
have been (5.80%) (annualized).
@ Ratio is based on Total Expenses of the Fund,^ which is before any expense
offset arrangements.
~ Annualized
^^ 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, which ^ is required to be disclosed
for fiscal years beginning September 1, 1995 and thereafter.
Further information about the performance of the Fund is contained in the
Company's Annual Report to Shareholders, which may be obtained without charge by
writing INVESCO ^ Distributors, Inc., P.O. Box 173706, Denver, Colorado
80217-3706; or by calling 1-800- 525-8085.
<PAGE>
PERFORMANCE DATA
From time to time, the Fund may advertise its total return performance.
These figures are based upon historical earnings and are not intended to
indicate future performance. The ^"total return^" of the Fund refers to the
annual rate of return of an investment in the Fund. This figure is computed by
calculating the percentage change in value of an investment of $1,000, assuming
reinvestment of all income dividends and other distributions, to the end of a
specified period. Periods of one year, five years, ten years and/or life of the
Fund are used if available. Thus, a report of total return performance should
not be considered as representative of future performance. The Fund charges no
sales loads, redemption fees, or exchange fees which would affect the total
return computation.
In conjunction with performance reports and/or analyses of shareholder
service for the Fund, comparative data between the Fund's performance for a
given period and performance of recognized indices of investment results for the
same period, and/or assessments of the quality of shareholder service, may be
provided to shareholders. Such indices include indices provided by Dow Jones &
Company, Standard & Poor's, Lipper Analytical Services, Inc., Lehman Brothers,
National Association of Securities Dealers Automated Quotations, Frank Russell
Company, Value Line Investment Survey, the American Stock Exchange, Morgan
Stanley Capital International, Wilshire Associates, the Financial Times-Stock
Exchange, the New York Stock Exchange, the Nikkei Stock Average, the James Capel
European Smaller Companies Index, the Hoare Govette Smaller Companies Index, the
FT-Actuaries Europe Index and the Deutcher Aktienindex, all of which are
unmanaged market indicators. In addition, rankings, ratings, and comparisons of
investment performance and/or assessments of the quality of shareholder service
appearing in publications such as Money, Forbes, Kiplinger's Personal Finance,
Morningstar, and similar sources which utilize information compiled (i)
internally; (ii) by Lipper Analytical Services, Inc.; or (iii) by other
recognized analytical services, may be used in advertising. The Lipper
Analytical Services, Inc. mutual fund rankings and comparisons, which may be
used by the Fund in performance reports, will be drawn from the ^"International
Small Company^" Lipper mutual fund grouping, in addition to the broad-based
Lipper general fund grouping.
INVESTMENT OBJECTIVE AND POLICIES
INVESCO 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 or traded in the NASDAQ system ^("small companies"). Based on this
policy, the companies held by the Fund will typically have equity market
capitalizations under $1 billion. The foregoing investment objective is
<PAGE>
fundamental and may not be changed without the approval of the INVESCO European
Small Company shareholders. The balance of the Fund's assets may be invested in
securities of companies other than European companies and companies whose ^
capitalization exceeds that of small companies. The Fund defines securities of
European companies as follows: (1) securities of companies organized under the
laws of a European country; (2) securities of companies for which the principal
securities trading market is in Europe; (3) securities issued or guaranteed by a
government agency, instrumentality, political subdivision, or central bank of a
European country; (4) securities of companies, wherever organized, with at least
50% of the issuer's assets, gross revenues, or profit in any one of the two most
^ recent fiscal years derived from activities or assets in Europe; or (5)
securities of European companies, as defined above, in the form of depository
receipts or shares. The Fund has not established any minimum investment
standards, such as earnings history, type of industry, dividend payment history,
etc., with respect to the Fund's investments in foreign equity securities and,
therefore, investors in the Fund should consider that investments may consist in
part of securities which may be deemed to be speculative.
Additionally, under normal circumstances, the Fund will invest at least
65% of its total assets in issuers domiciled in at least five countries,
although the Fund's adviser or sub-adviser (collectively, "Fund Management")
expects the Fund's investments to be allocated among a larger number of
countries. For purposes of this Fund, investments may be made in any countries
located on the European continent (which extends as far east as Russia)
including, but not limited to, Austria, Belgium, Denmark, Finland, France,
Germany, Greece, Holland, Ireland, Italy, Luxembourg, Norway, Portugal, Spain,
Sweden, Switzerland, Turkey and the United Kingdom. In that regard, no more than
50% of the Fund's total assets will be invested in securities issued by
companies domiciled in any one ^ country. The economies of European countries
may vary widely in their condition, and may be subject to sudden changes that
could have a positive or negative impact on the Fund. The securities in which
the Fund invests will typically be listed on the principal stock exchanges in
these countries, or in the secondary or junior markets, although the Fund may
purchase securities listed on the over-the-counter market in these countries.
While the Fund's investment adviser believes that smaller companies can offer
greater growth potential than larger, more established firms, the former also
involve greater risk and price volatility. To help reduce risk, ^ Fund
Management expects, under normal market conditions, to vary its portfolio
investments by company, industry and country. Investments in foreign securities
involve certain risks which are discussed below under ^"Risk Factors.^"
Under normal conditions, the Fund will invest primarily in equity
securities (common stocks and, to a lesser degree, preferred stocks and
securities convertible into common stocks, such as rights, warrants and
convertible debt securities) which are discussed more fully in the Statement of
Additional Information. In selecting the equity securities in which the Fund
invests, Fund Management attempts to identify small companies it believes offer
favorable long-term growth potential. It also invests in companies which may
receive greater market recognition over time. The Fund's investments in small
capitalization stocks may include companies that have limited operating
histories, product lines, and financial and managerial resources. These
companies may be subject to intense competition from larger companies, and their
<PAGE>
stock may be subject to more abrupt or erratic market movements than the stocks
of larger, more established companies. Due to these and other factors, small
companies may suffer significant losses as well as realize substantial growth.
Consistent with its investment objectives, the balance of the Fund's
assets may be invested in fixed-income securities (corporate bonds, commercial
paper, debt securities issued by the U.S. government, its agencies and
instrumentalities, or foreign governments and, to a lesser extent, municipal
bonds, asset-backed securities and zero coupon bonds). The Fund may invest ^ up
to 15% of its total assets in debt securities that are rated below BBB by
Standard & Poor's ^, a division of The McGraw-Hill Companies, Inc. ("S&P") or
Baa by Moody's Investors Service, Inc. ^("Moody's") or, if unrated, that are
judged by Fund Management to be equivalent in quality to debt securities having
such ratings (commonly referred to as ^"junk bonds"). In no event will a Fund
ever invest in a debt security rated below CCC by ^ S&P or Caa by Moody's or, if
unrated, judged by Fund Management to be equivalent in quality to debt
securities having such ratings. The risks of investing in lower rated debt
securities are discussed below under ^"Risk Factors.^"
The amounts invested in stocks, bonds and cash securities may be varied
from time to time, depending upon Fund Management's assessment of business,
economic and market conditions. In periods of abnormal economic and market
conditions, as determined by Fund Management, the Fund may depart from its basic
investment objective and assume a temporary defensive position, with ^ up to
100% of its assets invested in U.S. government and agency securities, investment
grade corporate bonds, or cash securities such as domestic certificates of
deposit and ^ bankers' acceptances, repurchase agreements and commercial paper.
The Fund reserves the right to hold equity, fixed income and cash securities in
whatever proportion is deemed desirable at any given time for temporary
defensive purposes. While a Fund is in a ^ defensive position, the opportunity
to achieve capital appreciation will be limited; however, the ability to
maintain a temporary defensive position enables the Fund to seek to avoid
capital losses during market downturns. Under normal market conditions, the Fund
does not expect to have a substantial portion of its assets invested in cash
securities.
In order to hedge its portfolio, the Fund may purchase and write options
on securities (including index options and options on securities), and may
invest in futures contracts for the purchase or sale of foreign currencies,
fixed-income securities and instruments based on financial indices
(collectively, "futures contracts"), options on futures contracts, forward
contracts and interest rate swaps and swap-related products. Interest rate swaps
involve the exchange by the 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. These practices and instruments, some of which
are known as derivatives, and their risks are discussed below under ^"Risk
Factors^" and in the Statement of Additional Information.
Additional information on certain types of securities in which the Fund
may invest is set forth below:
<PAGE>
When-Issued Securities
The Fund may make commitments in an amount of up to 10% of the value of
its total assets at the time any commitment is made to purchase or sell equity
or debt securities on a when-issued or delayed delivery basis (i.e., securities
may be purchased or sold by the Fund with settlement taking place in the future,
often a month or more later). The payment obligation and, in the case of debt
securities, the interest rate that will be received on the securities are
generally fixed at the time the Fund enters into the commitment. During the
period between purchase and settlement, no payment is made by the Fund and no
interest accrues to the Fund. At the time of settlement, the market value of the
security may be more or less than the purchase price, and the Fund bears the
risk of such market value fluctuations. The Fund maintains cash, U.S. government
securities, or other ^ liquid securities having an aggregate value equal to the
amount of such purchase commitments in a segregated account until payment is
made.
Illiquid and Rule 144A Securities
The Fund ^ may invest in securities which are illiquid because they are
subject to restrictions on their resale ("restricted securities") or because,
based upon their nature or the market for such securities, they are not readily
marketable. However, the Fund will not purchase any such security if the
purchase would cause the Fund to invest more than 15% of its net assets in
illiquid securities. Repurchase agreements maturing in more than seven days will
be considered as illiquid for purposes of this restriction. Investments in
illiquid securities involve certain risks to the extent that the Fund may be
unable to dispose of such a security at the time desired or at a reasonable
price. In addition, in order to resell a restricted security, the Fund might
have to bear the expense and incur the delays associated with effecting
registration.
Certain restricted securities that are not registered for sale to the
general public, but that can be resold to institutional investors ^("Rule 144A ^
Securities"), may be purchased without regard to the foregoing 15% limitation if
a liquid institutional trading market exists. The liquidity of the Fund's
investments in Rule 144A Securities could be impaired if dealers or
institutional investors become uninterested in purchasing these securities. The
Company's board of directors has delegated to the adviser the authority to
determine the liquidity of Rule 144A Securities pursuant to guidelines approved
by the board. For more information concerning Rule 144A Securities, see the
Statement of Additional Information.
The settlement period of securities transactions in foreign markets may be
longer than in domestic markets. These considerations generally are more of a
concern in developing countries. For example, the possibility of political
upheaval and the dependence on foreign economic assistance may be greater in
these countries than in developed countries.
<PAGE>
Repurchase Agreements
The Fund may enter into repurchase agreements with respect to debt
instruments eligible for investment by the Fund^ with member banks of the
Federal Reserve System, registered broker-dealers^ and registered government
securities dealers, which are deemed creditworthy. A repurchase agreement, which
may be considered a "loan" under the Investment Company Act of 1940, is a means
of investing monies for a short period. In a repurchase agreement, the Fund
acquires a debt instrument (generally a security issued by the U.S. government
or an agency thereof, a banker's acceptance, or a certificate of deposit)
subject to resale to the seller at an agreed-upon price and date (normally, the
next business day). In the event that the original seller defaults on its
obligation to repurchase the security, the Fund could incur costs or delays in
seeking to sell such security. To minimize risk, the securities underlying each
repurchase agreement will be maintained with the Fund's custodian in an amount
at least equal to the repurchase price under the agreement (including accrued
interest), and such agreements will be effected only with parties that meet
certain creditworthiness standards established by the Company's board of
directors. The Fund will not enter into a repurchase agreement maturing in more
than seven days if as a result more than ^ 15% of its ^ net assets would be
invested in such repurchase agreements and other illiquid securities. The Fund
has not adopted any limit on the amount of its net assets that may be invested
in repurchase agreements maturing in seven days or less.
Securities Lending
The Fund also may lend its securities to qualified brokers, dealers, banks,
or other financial institutions. This practice permits the Fund to earn income,
which, in turn, can be invested in additional securities of the type described
in this Prospectus in pursuit of the Fund's investment objective. Loans of
securities by a Fund will be collateralized by cash, letters of credit, or
securities issued or guaranteed by the U.S. government or its agencies equal to
at least 100% of the current market value of the loaned securities, determined
on a daily basis. 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 Fund monitors the creditworthiness of
borrowers in order to minimize such risks. The Fund will not lend any security
if, as a result of the loan, the aggregate value of securities then on loan
would exceed 33-1/3% of the Fund's total assets (taken at market value).
Portfolio Turnover
There are no fixed limitations regarding portfolio turnover for the Fund's
portfolio. Although the Fund does not trade for short-term profits, securities
may be sold without regard to the time they have been held in the Fund when, in
the opinion of Fund Management, investment considerations warrant such action.
<PAGE>
In addition, portfolio turnover rates may increase as a result of large amounts
of purchases or redemptions of Fund shares due to economic, market or other
factors that are not within the control of Fund Management. As a result, while
it is anticipated that the portfolio turnover rates for the Fund's portfolio
generally will not exceed 200%, under certain market conditions these portfolio
turnover rates may exceed 200%. Increased portfolio turnover would cause the
Fund to incur greater brokerage costs than would otherwise be the case, and may
result in the acceleration of realized capital gains or losses that are taxable
when distributed to shareholders. The Fund's portfolio turnover rates are set
forth under ^"Financial Highlights^" and, along with the Fund's brokerage
allocation policies, are discussed in the Statement of Additional Information.
Investment Restrictions
The Fund is subject to a variety of restrictions regarding its investments
that are set forth in this Prospectus and in the Statement of Additional
Information. Certain of the Fund's investment restrictions are fundamental, and
may not be altered without the approval of the Fund's shareholders. Such
fundamental investment restrictions include the restrictions which prohibit the
Fund from: lending more than 33-1/3% of its total assets to other parties
(excluding purchases of commercial paper, debt securities and repurchase
agreements); investing more than 25% of the value of the Fund's total assets in
any one industry (other than government securities); with respect to 75% of its
total assets, purchasing the securities of any one issuer (other than cash items
and government securities) if the purchase would cause the Fund to have more
than 5% of its total assets invested in the issuer or to own more than 10% of
the outstanding voting securities of the issuer; and borrowing money or issuing
senior securities except that the Fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) including entering into
reverse repurchase agreements ^. However, unless otherwise noted, the Fund's
investment restrictions and its investment policies are not fundamental and may
be changed by action of the Company's board of directors. Unless otherwise
noted, all percentage limitations contained in the Fund's investment policies
and restrictions apply at the time an investment is made. Thus, subsequent
changes in the value of an investment after purchase or in the value of the
Fund's total assets will not cause any such limitation to have been violated or
to require the disposition of any investment, except as otherwise required by
law. If the credit ratings of an issuer are lowered below those specified for
investment by the Fund, the Fund is not required to dispose of the obligations
of that issuer. The determination of whether to sell such an obligation will be
made by Fund Management based upon an assessment of credit risk and the
prevailing market price of the investment. If the Fund borrows money, its share
price may be subject to greater fluctuation until the borrowing is repaid. The
Fund attempts to minimize such fluctuations by not purchasing additional
securities when borrowings, including reverse repurchase agreements, are greater
than 5% of the value of the Fund's total assets. As a fundamental policy in
addition to the above, the Fund may, notwithstanding any other investment policy
or limitation (whether or not fundamental), invest all of its assets in the
<PAGE>
securities of a single open-end management investment company with substantially
the same fundamental investment objectives, policies and limitations as the
Fund. See ^"Additional Information -- Master/Feeder Option.^"
RISK FACTORS
There can be no assurance that the Fund will achieve its investment
objective. The Fund's investments in common stocks and other equity securities
may, of course, decline in value. There is typically less publicly available
information concerning foreign and small companies than for domestic and larger,
more established companies. Some small companies have limited product lines,
distribution channels and financial and managerial resources. Also, because
smaller companies normally have fewer shares outstanding than larger companies
and trade less frequently, it may be more difficult for the Fund to buy and sell
significant amounts ^ of such shares without an unfavorable impact on prevailing
market prices. Some of the companies in which the Fund may invest may
distribute, sell or produce products which have recently been brought to market
and may be dependent on key personnel with varying degrees of experience.
Foreign Securities
For U.S. investors, the returns on foreign securities are influenced not
only by the returns on the foreign investments themselves, but also by currency
risk (i.e., changes in the value of the currencies in which the securities are
denominated relative to the U.S. dollar). In a period when the U.S. dollar
generally rises against a foreign ^ currency, the returns ^ for a U.S. investor
^ on foreign securities denominated in that foreign currency may decrease. By
contrast, in a period when the U.S. dollar generally declines, the returns on
foreign securities generally are enhanced.
Other risks and considerations of international investing include the
following: differences in accounting, auditing and financial reporting standards
which may result in less publicly available information than is generally
available with respect to U.S. issuers; generally higher commission rates on
foreign portfolio transactions and longer settlement periods; the smaller
trading volumes and generally lower liquidity of foreign stock markets, which
may result in greater price volatility; foreign withholding taxes payable on the
Fund's foreign securities, which may reduce dividend or capital gains income
payable to shareholders; the possibility of expropriation or confiscatory
taxation; adverse changes in investment or exchange control regulations;
political instability which could affect U.S. investment in foreign countries;
potential restrictions on the flow of international capital; and the possibility
of a Fund experiencing difficulties in pursuing legal remedies and collecting
judgments. The Fund's investments in foreign securities may include investments
in developing countries. Many of these securities are speculative and their
prices may be more volatile than those of securities issued by companies located
in more developed countries.
<PAGE>
Lower Rated Securities
The Fund's investments in fixed-income securities generally are subject to
both credit risk and market risk. Credit risk relates to the ability of the
issuer to meet interest or principal payments, or both, as they come due. The
ratings given a security by S&P and Moody's provide a generally useful guide as
to such credit risk. The lower the rating given a security by such rating
service, the greater the credit risk such rating service perceives to exist with
respect to such security. Increasing the amount of Fund assets invested in
unrated or lower grade securities, while intended to increase the yield produced
by those assets, also will increase the credit risk to which those assets are
subject.
Market risk relates to the fact that the market values of the debt
securities in which the Fund invests generally will be affected by changes in
the level of interest rates. An increase in interest rates will tend to reduce
the market values of debt securities, whereas a decline in interest rates will
tend to increase their values. Although ^ Fund Management limits the Fund's
investments in fixed-income securities to securities it believes are not highly
speculative, both kinds of risk are increased by investing in debt securities
rated below the top three grades by ^ S&P or Moody's or, if unrated, securities
determined by ^ Fund Management to be of equivalent quality. Although bonds in
the lowest investment grade debt category (those rated BBB by ^ S&P or Baa by
Moody's) are regarded as having adequate capability to pay principal and
interest, they have speculative characteristics. Adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than is the case for higher rated bonds. Lower
rated bonds are commonly known as ^"junk bonds.^" Those so rated by Moody's
(categories Ba, B, Caa) are of poorer quality and also have speculative
characteristics. Bonds rated Caa may be in default or there may be present
elements of danger with respect to principal or interest. Lower rated bonds by ^
S&P (categories BB, B, CCC) include those which are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with their terms; BB indicates the lowest
degree of speculation and CCC a high degree of speculation. While such bonds
likely will have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
For a specific description of each corporate bond rating category, please refer
to Appendix B to the Statement of Additional Information.
Futures, Options and Other Derivative Instruments
The use of futures, options, forward contracts and swaps exposes the Fund
to additional investment risks and transaction costs, and as a result, no more
than 5% of the Fund's total assets will be committed to such investments. If
Fund Management seeks to protect the Fund against potential adverse movements in
the securities, foreign currency or interest rate markets using these
instruments, and such markets do not move in a direction adverse to the Fund,
the Fund could be left in a less favorable position than if such strategies had
not been used. Risks inherent in the use of futures, options, forward contracts
<PAGE>
and swaps include (1) the risk that interest rates, securities prices and
currency markets will not move in the directions anticipated; (2) imperfect
correlation between the price of futures, options and forward contracts and
movements in the prices of the securities or currencies being hedged; (3) the
fact that skills needed to use these strategies are different from those needed
to select portfolio securities; (4) the possible absence of a liquid secondary
market for any particular instrument at any time; and (5) the possible need to
defer closing out certain hedged positions to avoid adverse tax consequences.
Further information on the use of futures, options, forward foreign currency
contracts and swaps and swap-related products, and the associated risks, is
contained 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. The overall
supervision of the Fund is the responsibility of the Company's board of
directors.
Pursuant to an agreement with the Company, INVESCO Funds Group, Inc.
^("IFG"), 7800 E. Union Avenue, Denver, Colorado, serves as the Fund's
investment adviser. Under this agreement, ^ IFG is primarily responsible for
providing the Fund with various administrative services and supervising the
Fund's daily business affairs. These services are subject to review by the
Company's board of directors.
^
Pursuant to an agreement with ^ IFG, INVESCO Asset Management Limited
("IAML") serves as the sub-adviser to the Fund.^ IAML also acts as sub-adviser
to the INVESCO European Fund, the INVESCO Pacific Basin Fund, the INVESCO
International Growth Fund and the INVESCO Latin American Growth Fund. IAML,
subject to the supervision of ^ IFG, is primarily responsible for selecting and
managing the Fund's investments. Although the Company is not a party to the
sub-advisory agreement, the agreement has been approved by ^ IFG as the then
sole shareholder of the Company.
Pursuant to an agreement with the Company, effective September 30, 1997,
INVESCO Distributors, Inc. ("IDI") became the Fund's distributor. IDI,
established in 1997, is a registered broker-dealer that acts as distributor for
all retail mutual funds advised by IFG. Prior to September 30, 1997, IFG served
as the Fund's distributor.
IFG, IAML and IDI are indirect wholly-owned subsidiaries of AMVESCAP PLC.
AMVESCAP PLC is a publicly-traded holding company that, through its
subsidiaries, engages in the business of investment management on an
international basis. INVESCO PLC changed its name to AMVESCO PLC on March 3,
1997, and to AMVESCAP PLC on May 8, 1997, as part of a merger between a direct
<PAGE>
subsidiary of INVESCO PLC and A I M Management Group Inc., that created one of
the largest independent investment management businesses in the world. IFG and
IAML continued to operate under their existing names. AMVESCAP PLC has
approximately $177.5 billion in assets under management. IFG was established in
1932 and, as of July 31, 1997, managed 14 mutual funds, consisting of 45
separate portfolios, with combined assets of approximately $16.4 billion on
behalf of over 858,000 shareholders.
The following individuals serve as lead portfolio managers for the Fund
and are supported by a team of fund managers primarily responsible for
determining, in accordance with a senior investment policy group, the
country-by-country allocation of the portfolio's assets, overall stock selection
and the ongoing implementation and risk control policies applicable to the
portfolio:
Andy Crossley Co-portfolio manager of the Fund since 1995
(inception); Fund manager of INVESCO Asset
Management Limited (1991 to present); began
investment career in 1988; B.S.-Banking and
Finance, Loughborough University; Associate
of the Chartered Institute of Bankers.
Claire Griffiths Co-portfolio manager of the Fund since
1995 (inception); Fund manager of INVESCO
Asset Management Limited (1991 to
present); began investment career in
1989; M.A. St. John's College, Cambridge.
Mr. Crossley and Ms. Griffiths head a team of individual country
specialists who are responsible for managing security selection for their
assigned country and sector within the parameters established by the investment
policy group of IAML, sub- adviser to the Fund.
The Fund pays ^ IFG a monthly advisory fee which is based upon a
percentage of the average net assets of the Fund, determined daily. The maximum
advisory fee is computed at the annual rate of 0.75% on the first $500 million
of the Fund's average net assets, 0.65% on the next $500 million of the Fund's
average net assets and 0.55% on the Fund's average net assets over $1 billion.
Out of its advisory fee which it receives from the Fund, ^ IFG pays IAML,
as sub-adviser to the Fund, a monthly fee, which is computed at the annual rate
of 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. No fee is paid by the Funds to IAML.
The Company also has entered into an Administrative Services Agreement
(the "Administrative Agreement") with ^ IFG. Pursuant to the Administrative
Agreement, ^ IFG performs certain administrative, recordkeeping and internal
<PAGE>
sub-accounting services, including without limitation, maintaining general
ledger and capital stock accounts, preparing a daily trial balance, calculating
net asset value daily, providing selected general ledger reports and providing
sub-accounting and recordkeeping services for Fund shareholder accounts
maintained by certain retirement and employee benefit plans for the benefit of
participants in such plans. For such services, the Fund pays ^ IFG a fee
consisting of a base fee of $10,000 per year, plus an additional incremental fee
computed at the annual rate of 0.015% per year of the average net assets of the
Fund. ^ IFG also is paid a fee by the Fund for providing transfer agent
services. See ^"Additional Information.^"
The Fund's expenses, which are accrued daily, are generally deducted from
the Fund's total income before dividends are paid. Total expenses (prior to any
expense offset arrangement) of the Fund for the fiscal period ended July 31, ^
1997, including investment management fees (but excluding brokerage commissions,
which are included as a cost of acquiring securities), amounted to ^ 1.62% of
the Fund's average net assets. Certain expenses for the Fund are voluntarily
absorbed by ^ IFG and IAML pursuant to a commitment to the Fund in order to
ensure that the Fund's total operating expenses do not exceed 2.00%. This
commitment may be changed following consultation with the Company's board of
directors.
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of ^
such broker-dealer's financial responsibility coupled with their ability to
effect transactions at the best available prices. As discussed under "How Shares
Can Be Purchased - Distribution Expenses," the Company may market shares of the
Funds through intermediary brokers or dealers that have entered into Dealer
Agreements with ^ IFG or IDI, as the Fund's distributor. The Fund may place
orders for portfolio transactions with qualified broker-dealers that recommend
the Funds, or sell shares of the Funds to clients, or act as agent in the
purchase of Fund shares for clients, if Fund Management believes that the
quality of execution of the transaction and level of commission are comparable
to those available from other qualified brokerage firms.
Fund Management permits investment and other personnel to purchase and
sell securities for their own accounts, subject to a compliance policy governing
personal investing. This policy requires investment and other personnel to
conduct their personal investment activities in a manner that Fund Management
believes is not detrimental to the Funds or Fund Management's other advisory
clients. See the Statement of Additional Information for more detailed
information.
HOW SHARES CAN BE PURCHASED
Shares of the Fund are sold on a continuous basis by ^ IDI, as the Fund's
^ distributor, at the net asset value per share next calculated after receipt of
a purchase order in good form. No sales charge is imposed upon the sale of
shares of the Fund. To purchase shares of the Fund, send a check made payable to
INVESCO Funds Group, Inc., together with a completed application form, to:
<PAGE>
INVESCO Funds Group, Inc.
Post Office Box 173706
Denver, Colorado 80217-3706
PURCHASE ORDERS MUST SPECIFY THE FUND IN WHICH THE INVESTMENT IS TO BE
MADE.
The minimum initial purchase must be at least $1,000, with subsequent
investments of not less than $50, except that: (1) those shareholders
establishing an EasiVest or direct payroll purchase account, as described below
in the ^ section entitled ^"Services Provided ^ By The Fund,^" may open an
account without making any initial investment if they agree to make regular,
minimum purchases of at least $50; (2) those shareholders investing in an
Individual Retirement Account ^("IRA"), or through omnibus accounts where
individual shareholder recordkeeping and sub-accounting are not required, may
make initial minimum purchases of $250; (3) Fund Management may permit a lesser
amount to be invested in a Fund under a federal income tax-deferred retirement
plan (other than an IRA account), or under a group investment plan qualifying as
a sophisticated investor; and (4) Fund Management reserves the right to
increase, reduce or waive the minimum purchase requirements in its sole
discretion where it determines such action is in the best interests of the Fund.
The purchase of Fund shares can be expedited by placing bank wire,
overnight courier or telephone orders. Overnight courier orders must meet the
above minimum requirements. In no case can a bank wire order or telephone order
be in an amount less than $1,000. For further information, the purchaser may
call the Fund's office by using the telephone number on the cover of this
Prospectus. Orders sent by overnight courier, including Express Mail, should be
sent to the street address, not Post Office Box, of INVESCO Funds Group, Inc.,
at 7800 E. Union Avenue, Denver, CO 80237.
Orders to purchase shares of the Fund can be placed by telephone. Shares
of the Fund will be issued at the net asset value per share next determined
after receipt of telephone instructions. Generally, payments for telephone
orders must be received by the Fund within three business days or the
transaction may be cancelled. In the event of such cancellation, the purchaser
will be held responsible for any loss resulting from a decline in the value of
the shares. In order to avoid such losses, purchasers should send payments for
telephone purchases by overnight courier or bank wire. ^ IFG has agreed to
indemnify the Fund for any losses resulting from such cancellations of telephone
purchases.
If your check does not clear, or if a telephone purchase must be 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 has
the option to redeem shares from any identically registered account in the Fund
or any other INVESCO fund as reimbursement for any loss incurred. You also may
be prohibited or restricted from making future purchases in any of the INVESCO
funds.
<PAGE>
Persons who invest in the Fund through a securities broker may be charged
a commission or transaction fee by the broker for the handling of the
transaction if the broker so elects. Any investor may deal directly with the
Fund in any transaction. In that event, there is no such charge. ^ IDI or IFG
may from time to time make payments from its revenues to securities dealers and
other financial institutions that provide distribution-related and/or
administrative services for the Fund.
The Fund reserves the right in its sole discretion to reject any order for
purchase of its shares (including purchases by exchange) when, in the judgment
of management, such rejection is in the best interest of the Fund.
Net asset value per share is computed once each day that the New York
Stock Exchange is open as of the close of regular trading on that Exchange
^(generally 4:00 p.m., New York time) and also may be computed on other days
under certain circumstances. Net asset value per share for the Fund is
calculated by dividing the market value of the Fund's securities plus the value
of its other assets (including dividends and interest accrued but not
collected), less all liabilities (including accrued expenses), by the number of
outstanding shares of that Fund. If market quotations are not readily available,
a security or other asset will be valued at fair value as determined in good
faith by the board of directors. Debt securities with remaining maturities of 60
days or less at the time of purchase will be valued at amortized cost, absent
unusual circumstances, so long as the Company's board of directors believes that
such value represents fair value.
Distribution Expenses. The Fund is authorized under a Plan and Agreement
of Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Plan") to use its assets to finance certain activities relating to the
distribution of its shares to investors. Under the Plan, monthly payments may be
made by the Fund to ^ IDI to permit IDI, at its discretion, to engage in certain
activities and provide certain services approved by the board of directors of
the 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 ^
IDI-affiliated companies, to obtain various distribution-related and/or
administrative services for the Fund. Such services may include, among other
things, processing new shareholder account applications, preparing and
transmitting 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, printing and distribution of sales literature, ^
printing and ^ distribution of prospectuses to prospective investors, and such
other services and promotional activities for the Fund as may from time to time
be agreed upon by the 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 ^ IDI or its affiliates or by third parties.
<PAGE>
Under the Plan, the Company's ^ payments to ^ IDI on behalf of the Fund ^
are limited to an amount computed at an annual rate of 0.25 ^% of the Fund's
average net assets during the month. ^ IDI is not entitled to ^ payment for
overhead expenses under the Plan, but may be ^ paid for all or a portion of the
compensation paid for salaries and other employee benefits for the personnel of
^ IFG or IDI 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 only be made to ^ compensate IDI for permissible activities
engaged in and services provided by IDI during the rolling 12-month period in
which that month falls^. Therefore, any obligations incurred by IDI in excess of
the limitations described above ^ will not be paid by the Funds and will be
borne by ^ IDI. In addition, ^ IDI and its affiliates may from time to time make
additional payments from its revenues to securities dealers ^, financial
advisers and financial institutions that provide ^ distribution-related and/or
administrative services for the Fund. No further payments will be made by the
Fund under the Plan in the event of ^ the Plan's termination. ^ Payments made by
the Fund may not be used to finance directly the distribution of shares of any
other ^ Fund of the Company or other mutual fund advised by ^ IFG. However,
payments received by IDI which are not used to finance the distribution of
shares of the Fund become part of IDI's revenues and may be used by IDI for any
permissible activities for all of the mutual funds advised by IFG subject to
review by the Fund's directors. Payments made by the Fund under the Plan for
compensation of marketing personnel, as noted above, are based on an allocation
formula designed to ensure that all such payments are appropriate. IDI will bear
any distribution- and service-related expenses in excess of the amounts which
are compensated pursuant to the Plan. The Plan also authorizes any financing of
distribution which may result from IDI's use of its own resources, including
profits from investment advisory fees received from the Fund, provided that such
fees are legitimate and not excessive. For more information see "How Shares Can
Be Purchased -- Distribution Plan" in the Statement of Additional Information.
SERVICES PROVIDED BY THE FUND
Shareholder Accounts. ^ IFG maintains a share account that reflects the
current holdings of each shareholder. Share certificates will be issued only
upon specific request. Since certificates must be carefully safeguarded, and
must be surrendered in order to exchange or redeem Fund shares, most
shareholders do not request share certificates in order to facilitate such
transactions. Each shareholder is sent a detailed confirmation of each
transaction in shares of the Fund. Shareholders whose only transactions are
through the EasiVest, direct payroll purchase, automatic monthly exchange or
periodic withdrawal programs, or are reinvestments of dividends or capital gains
in the same or another fund, will receive confirmations of those transactions on
their quarterly statements. These programs are discussed below. For information
regarding a shareholder's account and transactions, the shareholder may call the
Fund's office by using the telephone number on the cover of this Prospectus.
<PAGE>
Reinvestment of Distributions. Dividends and other distributions are
automatically reinvested in additional shares of the Fund at the net asset value
per share in effect on the ex- dividend or ex-distribution date. A shareholder
may, however, elect to reinvest dividends and other distributions in certain of
the other no-load mutual funds advised by IFG and distributed by ^ IDI, or to
receive payment of all dividends and other distributions in excess of $10.00 by
check by giving written notice to ^ IFG at least two weeks prior to the record
date on which the change is to take effect. Further information concerning these
options can be obtained by contacting INVESCO.
Periodic Withdrawal Plan. A Periodic Withdrawal Plan is available to
shareholders who own or purchase shares of any mutual funds advised by ^ IFG
having a total value of $10,000 or more; provided, however, that at the time the
Plan is established, the shareholder owns shares having a value of at least
$5,000 in the fund from which the withdrawals will be made. Under the Periodic
Withdrawal Plan, ^ IFG, as agent, will make specified monthly or quarterly
payments of any amount selected (minimum payment of $100) to the party
designated by the shareholder. Notice of all changes concerning the Periodic
Withdrawal Plan must be received by ^ IFG at least two weeks prior to the next
scheduled check. Further information regarding the Periodic Withdrawal Plan and
its requirements and tax consequences can be obtained by contacting ^ IFG.
Exchange ^ Policy. Shares of the Fund may be exchanged for shares of any
other fund of the Company, as well as for shares of any of the following other
no-load mutual funds, which are also advised by IFG and distributed by ^ IDI, on
the basis of their respective net asset values at the time of the exchange:
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 Value Trust.
An exchange involves the redemption of shares in the Fund and investment of
the redemption proceeds in shares of another fund of the Company or in shares of
one of the funds listed above. Exchanges will be made at the net asset value per
share next determined after receipt of an exchange request in proper order. Any
gain or loss realized on such an exchange is recognizable for federal income tax
purposes by the shareholder. Exchange requests may be made either by telephone
or by written request to ^ IFG using the telephone number or address on the
cover of this Prospectus. Exchanges made by telephone must be in an amount of at
least $250, if the exchange is being made into an existing account of one of the
INVESCO funds. All exchanges that establish a new account must meet the Fund's
applicable minimum initial investment requirements. Written exchange requests
into an existing account have no minimum requirements other than the Fund's
applicable minimum subsequent investment requirements.
The ^ option to exchange Fund shares by telephone is available to
shareholders automatically unless expressly declined. By signing the New Account
Application, a Telephone Transaction Authorization Form or otherwise utilizing
the telephone exchange ^ option, the investor has agreed that the ^ Fund will
<PAGE>
not be liable for following instructions communicated by telephone that it
reasonably believes to be genuine. The Fund employs procedures, which it
believes are reasonable, designed to confirm that exchange instructions are
genuine. These may include recording telephone instructions and providing
written confirmations of exchange transactions. As a result of this policy, the
investor may bear the risk of any loss due to unauthorized or fraudulent
instructions; provided, however, that if the Fund fails to follow these or other
reasonable procedures, the Fund may be liable.
In order to prevent abuse of this ^ policy to the disadvantage of other
shareholders, the Fund reserves the right to terminate the exchange ^ option of
any shareholder who requests more than four exchanges in a year. The Fund will
determine whether to do so based on a consideration of both the number of
exchanges any particular shareholder or group of shareholders has requested and
the time period over which those exchange requests have been made, together with
the level of expense to the Fund which will result from effecting additional
exchange requests. The exchange ^ policy also may be modified or terminated at
any time. Except for those limited instances where redemptions of the exchanged
security are suspended under Section 22(e) of the Investment Company Act of
1940, or where sales of the fund into which the shareholder is exchanging are
temporarily stopped, notice of all such modifications or termination of the
exchange ^ policy will be given at least 60 days prior to the date of
termination or the effective date of the modification.
Before making an exchange, the shareholder should review the prospectuses
of the funds involved and consider their differences^. Shareholders interested
in exercising the exchange ^ option may contact ^ IFG for information concerning
their particular exchanges.
Automatic Monthly Exchange. Shareholders who have accounts in any one or
more of the mutual funds distributed by ^ IDI may arrange for a fixed dollar
amount of their fund shares to be automatically exchanged for shares of any
other INVESCO mutual fund listed under ^"Exchange Policy" on a monthly basis.
The minimum monthly exchange in this program is $50.00. This automatic exchange
program can be changed by the shareholder at any time by notifying ^ IFG at
least two weeks prior to the date the change is to be made. Further information
regarding this service can be obtained by contacting ^ IFG.
EasiVest. For shareholders who want to maintain a schedule of monthly
investments, EasiVest uses various methods to draw a preauthorized amount from
the shareholder's bank account to purchase Fund shares. This automatic
investment program can be changed by the shareholder at any time by ^ contacting
IFG at least two weeks prior to the date the change is to be made. Further
information regarding this service can be obtained by contacting ^ IFG.
Direct Payroll Purchase. Shareholders may elect to have their employer
make automatic purchases of Fund shares for them by deducting a specified amount
from their regular paychecks. This automatic investment program can be modified
or terminated at any time by the shareholder, by notifying the employer. Further
information regarding this service can be obtained by contacting ^ IFG.
<PAGE>
Tax-Deferred Retirement Plans. Shares of the Fund may be purchased for
self-employed individual retirement plans, IRAs, SIMPLE IRAs, simplified
employee pension plans and corporate retirement plans. In addition, shares can
be used to fund tax qualified plans established under Section 403(b) of the
Internal Revenue Code by educational institutions, including public school
systems and private schools, and certain kinds of non-profit organizations,
which provide deferred compensation arrangements for their employees.
Prototype forms for the establishment of these various plans, including,
where applicable, disclosure statements required by the Internal Revenue
Service, are available from ^ IFG. INVESCO Trust ^, a subsidiary of ^ IFG, is
qualified to serve as trustee or custodian under these plans and provides the
required services at competitive rates. Retirement plans (other than IRAs)
receive monthly statements reflecting all transactions in their Fund accounts.
IRAs receive the confirmations and quarterly statements described under
^"Shareholder Accounts.^" For complete information, including prototype forms
and service charges, call ^ IFG at the telephone number listed on the cover of
this Prospectus or send a written request to: Retirement Services, INVESCO Funds
Group, Inc., Post Office Box 173706, Denver, Colorado 80217-3706.
HOW TO REDEEM SHARES
Shares of the Fund may be redeemed at any time at their current net asset
value per share next determined after a request in proper form is received at
the Fund's office. (See ^"How Shares Can Be ^ Purchased.") Net asset value per
share at the time of redemption may be more or less than the price you paid to
purchase your shares, depending primarily upon the Fund's investment
performance.
If the shares to be redeemed are represented by stock certificates, a
written request for redemption signed by the registered shareholder(s) and the
certificates must be forwarded to INVESCO Funds Group, Inc., Post Office Box
173706, Denver, Colorado 80217-3706. Redemption requests sent by overnight
courier, including Express Mail, should be sent to the street address, not Post
Office Box, of INVESCO Funds Group, Inc. at 7800 E. Union Avenue, Denver, CO
80237. If no certificates have been issued, a written redemption request signed
by each registered owner of the account must be submitted to ^ IFG at the
address noted above. If shares are held in the name of a corporation, additional
documentation may be necessary. Call or write for ^ specific information. If
payment for the redeemed shares is to be made to someone other than the
registered owner(s), the signature(s) must be guaranteed by a financial
institution which qualifies as an eligible guarantor institution. Redemption
procedures with respect to accounts registered in the names of broker-dealers
may differ from those applicable to other shareholders.
BE CAREFUL TO SPECIFY THE ACCOUNT FROM WHICH THE REDEMPTION IS TO BE MADE.
SHAREHOLDERS HAVE A SEPARATE ACCOUNT FOR EACH FUND IN WHICH THEY INVEST.
<PAGE>
Payment of redemption proceeds will be mailed within seven days following
receipt of the required documents. However, payment may be postponed under
unusual circumstances, such as when normal trading is not taking place on the
New York Stock Exchange, or an emergency as defined by the Securities and
Exchange Commission exists. If the shares to be redeemed were purchased by check
and that check has not yet cleared, payment will be made promptly upon clearance
of the purchase check (which ^ will take up to 15 days).
If a shareholder participates in EasiVest, the Fund's automatic monthly
investment program, and redeems all of the shares in ^ a Fund account, ^ IFG
will terminate any further EasiVest purchases unless otherwise instructed by the
shareholder.
Because of the high relative costs of handling small accounts, should the
value of any shareholder's account fall below $250 as a result of shareholder
action, the Fund reserves the right to effect the involuntary redemption of all
shares in such account, in which case the account would be liquidated and the
proceeds forwarded to the shareholder. Prior to any such redemption, a
shareholder will be notified and given 60 days to increase the value of the
account to $250 or more.
Fund shareholders (other than shareholders holding Fund shares in accounts
of IRA plans) may request expedited redemption of shares having a minimum value
of $250 (or redemption of all shares if their value is less than $250) held in
accounts maintained in their name by telephoning redemption instructions to ^
IFG, using the telephone number on the cover of this Prospectus. The redemption
proceeds, at the shareholder's option, either will be mailed to the address
listed for the shareholder's Fund account, or wired (minimum of $1,000) or
mailed to the bank which the shareholder has designated to receive the proceeds
of telephone redemptions. The Fund charges no fee for effecting such telephone
redemptions. Unless Fund Management permits a larger redemption request to be
placed by telephone, a shareholder may not place a redemption request by
telephone in excess of $25,000. These telephone redemption privileges may be
modified or terminated in the future at the discretion of the Fund's management.
For ^ federal income tax-deferred retirement plans sponsored by INVESCO
Trust, the term "shareholders" is defined to mean plan trustees that file a
written request to be able to redeem Fund shares by telephone. Shareholders
should understand that, while the Fund will attempt to process all telephone
redemption requests on an expedited basis, there may be times, particularly in
periods of severe economic or market disruption, when (a) they may encounter
difficulty in placing a telephone redemption request, and (b) processing
telephone redemptions will require up to seven days following receipt of the
redemption request, or additional time because of the unusual circumstances set
forth above.
<PAGE>
The privilege of redeeming Fund shares by telephone is available to
shareholders automatically unless expressly declined. By signing a New Account
Application, a Telephone Transaction Authorization Form or otherwise utilizing
telephone redemption privileges, the shareholder has agreed that the Fund will
not be liable for following instructions communicated by telephone that it
reasonably believe to be genuine. The Fund employs procedures, which it believes
are reasonable, designed to confirm that telephone instructions are genuine.
These may include recording telephone instructions and providing written
confirmation of transactions initiated by telephone. As a result of this policy,
the investor may bear the risk of any loss due to unauthorized or fraudulent
instructions; provided, however, that if the Fund fails to follow these or other
reasonable procedures, the Fund may be liable.
TAXES, DIVIDENDS AND ^ OTHER DISTRIBUTIONS
Taxes. The Fund intends to distribute to shareholders ^ all of its net
investment income, net capital gains and net gains from foreign currency
transactions, if any, in order to continue to qualify for tax treatment as a
regulated investment company. Thus, the Fund does not expect to pay any federal
income or excise taxes.
Unless shareholders are exempt from income taxes, they must include all
dividends and ^ other 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.
Net realized capital gains of the Fund are classified as short-term and
long-term gains depending upon how long the Fund held the security that gave
rise to the gains. Short-term capital gains are included in income from
dividends and interest as ordinary income and are taxed at the taxpayer's
marginal tax rate. The Taxpayer Relief Act of 1997 (the "Tax Act"), enacted in
August 1997, changed the taxation of long-term capital gains for individuals by
applying different capital gains rates depending on the taxpayer's holding
period and marginal rate of federal income tax. Long-term gains realized on the
sale of securities held for more than one year but not for more than 18 months
are taxable at a rate of 28%. This category of long-term gains is often referred
to as "mid-term" gains but is technically termed "28% rate gains". Long-term
gains realized on the sale of securities held for more than 18 months are
taxable at a rate of 20%. At the end of each year, information regarding the tax
status of dividends and other distributions is provided to shareholders.
Shareholders should consult their tax advisers as to the effect of the Tax Act
on distributions by the Fund of net capital gains.
Shareholders also may realize capital gains or losses when they sell their
Fund shares at more or less than the price originally paid. Capital gains on
shares held for more than one year will be long-term capital gains, in which
event they will be subject to federal income tax at the rates indicated above.
The Fund may be subject to ^ withholding of foreign taxes on dividends or
interest ^ received on foreign securities. Foreign taxes withheld will be
treated as an expense of the Fund ^.
<PAGE>
^ Individuals and certain other non-corporate shareholders may be subject
to backup withholding of 31% on dividends, capital ^ gains and other
distributions and redemption proceeds. 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.
We encourage you to consult a tax adviser with respect to these matters.
For further information see "Dividends, Other Distributions and Taxes" in the
Statement of Additional Information.
Dividends and Other ^ Distributions. The Fund earns ordinary or net
investment income^ in the form of dividends and interest on its investments. ^
Dividends paid by the Fund will be based solely on the income earned by it. The
Fund's policy is to distribute substantially all of this income, less Fund
expenses, to shareholders on an annual basis, at the discretion of the ^ Fund's
board of directors. Dividends are automatically reinvested in additional shares
of the Fund at the net asset value on the payable date unless otherwise
requested.
In addition, the Fund realizes capital gains and losses when it sells
securities 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 ^
net realized capital ^ gains. Net realized capital gains, if any, together with
gains, if any, realized on foreign currency transactions, are distributed to
shareholders at least annually, usually in December. Capital gains distributions
are automatically reinvested in shares of the Fund at the net asset value on the
payable date unless otherwise requested.
Dividends and other ^ distributions are paid to ^ holders of shares on the
record date of ^ distribution regardless of how long the Fund shares have been
held by the shareholder. The ^ Fund's share price will then drop by the amount
of the distribution on the ^ ex-dividend or ex-distribution ^ date. If a
shareholder purchases shares immediately prior to the distribution, the
shareholder will, in effect, have ^"bought" the distribution by paying the full
purchase price, a portion of which is then returned in the form of a taxable
distribution.
^
ADDITIONAL INFORMATION
Voting Rights. All shares of the Fund have equal voting rights, based on
one vote for each share owned. Voting with respect to certain matters, such as
ratification of independent accountants and the election of directors, will be
by all Funds of the Company voting together. In other cases, such as voting upon
an investment advisory contract, voting is on a Fund-by-Fund basis. When not all
Funds are affected by a matter to be voted upon, only shareholders of the Fund
or Funds affected by the matter will be entitled to vote thereon. The Company is
not generally required, and does not expect, to hold regular annual meetings of
<PAGE>
shareholders. However, the board of directors will call special meetings of
shareholders for the purpose, among other reasons, of voting upon the question
of removal of a director or directors when requested to do so in writing by the
holders of 10% or more of the outstanding shares of the Company or as may be
required by applicable law or the Company's Articles of Incorporation. The
Company will assist shareholders in communicating with other shareholders as
required by the Investment Company Act of 1940. Directors may be removed by
action of the holders of a majority or more of the outstanding shares of the
Company.
Master/Feeder Option. The Company may in the future seek to achieve the
Fund's investment objective by investing all of the Fund's assets in another
investment company or partnership having the same investment objective and
substantially the same investment policies and restrictions as those applicable
to the Fund. It is expected that any such investment company would be managed by
^ IFG in substantially the same manner as the existing Fund. If permitted by
applicable laws and policies then in effect, any such investment may be made in
the sole discretion of the Company's board of directors without further approval
of the shareholders of the Fund. However, Fund shareholders will be given at
least 30 days prior notice of any such investment. Such investment would be made
only if the Company's board of directors determines it to be in the best
interests of the Fund and its shareholders. In making that determination, the
board will consider, among other things, the benefits to shareholders and/or the
opportunity to reduce costs and achieve operational efficiencies. No assurance
can be given that costs will be materially reduced if this option is
implemented.
Shareholder Inquiries. All inquiries regarding the Fund should be directed
to the Fund at the telephone number or mailing address set forth on the cover
page of this Prospectus.
Transfer and Dividend Disbursing Agent. INVESCO Funds Group, Inc., 7800 E.
Union Ave., Denver, Colorado 80237, also acts as registrar, transfer agent, and
dividend disbursing agent for the Fund pursuant to a Transfer Agency Agreement
which provides that the Fund will pay an annual fee of $20.00 per shareholder
account or, where applicable, per participant in an omnibus account ^. The
transfer agency fee is not charged to each shareholder's or participant's
account, but is an expense of the Fund to be paid from the Fund's assets.
Registered broker-dealers, third party administrators of tax-qualified
retirement plans and other entities, including affiliates of ^ IFG, may provide
sub-transfer agency or ^ recordkeeping services to the Fund which reduce or
eliminate the need for identical services to be provided on behalf of the Fund
by ^ IFG. In such cases, ^ IFG may pay the third party an annual sub-transfer
agency or ^ recordkeeping fee out of the transfer agency fee which is paid to
IFG by the Fund.
<PAGE>
^
PROSPECTUS
December 1, ^ 1997
INVESCO European Small Company Fund
A no-load mutual fund seeking capital
appreciation.
INVESCO FUNDS
INVESCO Distributors, Inc.
Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
1-800-525-8085
PAL(R): 1-800-424-8085
http://www.invesco.com
^ In Denver, visit one of our
convenient Investor Centers:
Cherry Creek
155-B Fillmore Street
Denver Tech Center
7800 East Union Avenue
Lobby Level
In addition, all documents
filed by the Company with the
Securities & Exchange Commission
can be located on a Web site
maintained by the Commission at
http://www.sec.gov.
<PAGE>
PROSPECTUS
December 1, ^ 1997
INVESCO LATIN AMERICAN GROWTH FUND
INVESCO Latin American Growth Fund (the ^"Fund") seeks to achieve capital
appreciation by investing, under normal circumstances, at least 65% of its total
assets in equity securities (common stocks and, to a lesser degree, depository
receipts, preferred stocks and securities convertible into common stocks, such
as rights, warrants and convertible debt securities) of Latin American issuers.
For purposes of this Fund, Latin America will include: Mexico, Central America,
South America, and the Spanish speaking islands of the Caribbean. The Fund is
not intended as a complete investment program due to risks of investing in the
Fund. For a description of risks inherent in investing in the Fund ^, see "Risk
Factors" and "Investment Objective And Policies -- Portfolio Turnover^".
The Fund is a series of INVESCO Specialty Funds, Inc. (the "Company"), a
diversified, managed, no-load mutual fund consisting of ^ seven separate
portfolios of investments. This Prospectus relates to shares of the INVESCO
Latin American Growth Fund. Separate prospectuses are available upon request
from INVESCO ^ Distributors, Inc. for the Company's other funds, INVESCO
Worldwide Capital Goods Fund, INVESCO Worldwide Communications Fund, INVESCO
European Small Company Fund ^, INVESCO Asian Growth Fund, INVESCO Realty Fund
and INVESCO S&P 500 Index Fund. Investors may purchase shares of any or all of
the Funds. Additional funds may be offered in the future.
This Prospectus provides you with the basic information you should know
before investing in the Fund. You should read it and keep it for future
reference. A Statement of Additional Information dated December 1, 1997
containing further information about the Fund 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 Distributors, Inc., Post Office Box
173706, Denver, Colorado 80217-3706; ^ call 1-800-525-8085; or ^ visit our web
site: http://www.invesco.com.
The Fund may invest up to 35% of its assets in lower rated bonds and
foreign debt securities, commonly known as "junk bonds." Investments of this
type are subject to greater risks, including default risks, than those found in
higher rated securities. Purchaser should carefully assess the risks associated
with an investment in this Fund. See "Investment Objective and Policies" and
"Risk Factors."
^
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION. THE SHARES
OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
^
TABLE OF CONTENTS
Page
----
ANNUAL FUND EXPENSES 66
FINANCIAL HIGHLIGHTS 68
PERFORMANCE DATA 70
INVESTMENT OBJECTIVE AND POLICIES 70
RISK FACTORS 76
THE FUND AND ITS MANAGEMENT 83
HOW SHARES CAN BE PURCHASED 85
SERVICES PROVIDED BY THE FUND 88
HOW TO REDEEM SHARES 91
TAXES, DIVIDENDS AND ^ OTHER DISTRIBUTIONS 93
ADDITIONAL INFORMATION 94
<PAGE>
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 Transaction ^ Expenses.") The Fund, however, is
authorized to pay a distribution fee pursuant to Rule 12b-1 under the Investment
Company Act of 1940. (See ^"How Shares Can Be Purchased--Distribution ^
Expenses.") Lower expenses benefit Fund shareholders by increasing the Fund's
total return.
Shareholder Transaction Expenses
Sales load ^"charge" on purchases None
Sales load ^"charge" on reinvested dividends None
Redemption fees 1.00%*
Exchange fees 1.00%*
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fee 0.75%
12b-1 Fees 0.25%
Other Expenses(1)(2) ^ 0.76%
Transfer Agency Fee(3) 0.27%
General Services, Administrative ^ 0.49%
Services, Registration, Postage (4)
Total Fund Operating Expenses(1)(2) ^ 1.76%
*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) It should be noted that the Fund's actual total operating expenses
were lower than the figures shown because the Fund's custodian fees ^ were
reduced under an expense offset arrangement. However, as a result of an SEC
requirement for mutual funds to state their total operating expenses without
crediting any such expense offset arrangement, the figures shown above do not
reflect these reductions. In comparing expenses for different years, please note
that the ratios of Expenses to Average Net Assets shown under ^"Financial
Highlights^" do reflect reductions for periods prior to the fiscal year ended
July 31, 1996. See ^"The Fund and Its Management.^"
(2) Ratio is based on Total Expenses of the Fund, which is before any
expense offset arrangement.
(3) Consists of the transfer agency fee described under ^"Additional
Information-Transfer and Dividend Disbursing Agent.^"
(4) Includes, but is not limited to, fees and expenses of directors,
custodian bank, legal counsel and auditors, ^ securities pricing ^ services,
costs of administrative services furnished under an Administrative Services
Agreement, costs of registration of Fund shares under applicable laws, and costs
of printing and distributing reports to shareholders.
<PAGE>
Example
A shareholder would pay the following expenses on a $1,000 investment for
the periods shown, assuming (1) a 5% annual return and (2) redemption at the end
of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
^ $18 $56 $96 $209
The purpose of the foregoing expense table and Example is to assist
investors in understanding the various costs and expenses that an investor in
the Fund will bear directly or indirectly. Such expenses are paid from the
Fund's assets. (See ^"The Fund and Its ^ Management.") THE EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES, AND ACTUAL EXPENSES MAY
BE GREATER OR LESS THAN THOSE SHOWN. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or future
annual returns, which may be greater or less than the assumed amount.
As a result of the 0.25% 12b-1 fee paid by the Fund, investors who own
Fund shares for a long period of time may pay more than the economic equivalent
of the maximum front-end sales charge permitted for mutual funds by the National
Association of Securities Dealers, Inc.
<PAGE>
INVESCO Specialty Funds, Inc.
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
^
The following information has been audited by Price Waterhouse LLP,
independent accountants. This information should be read in conjunction with the
audited financial statements and the report of independent accountants thereon
appearing in the ^ Company's 1997 Annual Report to Shareholders, which is
incorporated by reference into the Statement of Additional Information. Both are
available without charge by contacting INVESCO ^ Distributors, Inc. at the
address or telephone number shown below.
^ Period
Ended
Year Ended ^ July 31 July 31
---------------------- -------
1997 1996 1995^
Latin American Growth Fund
PER SHARE DATA
Net Asset Value -
Beginning of Period $12.86 $11.69 $10.00
---------------------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.13 0.08 0.02
Net Gains on Securities ^(Both
Realized and Unrealized) 5.88 1.62 1.69
---------------------- -------
Total from Investment
Operations 6.01 1.70 1.71
---------------------- -------
LESS DISTRIBUTIONS
Dividends from Net
Investment Income 0.14 0.09 0.02
Distributions from Capital
Gains 0.36 0.44 0.00
---------------------- -------
Total Distributions 0.50 0.53 0.02
---------------------- -------
Net Asset Value -
End of Period $18.37 $12.86 $11.69
====================== =======
TOTAL RETURN+ 48.06% 15.27% 17.09%*
<PAGE>
RATIOS
Net Assets - End of Period
($000 Omitted) $130,272 $32,064 $7,423
Ratio of Expenses to Average
Net Assets# 1.76% 2.14%@ 2.00%~
Ratio of Net Investment Income
to^ Average Net Assets# 1.35% 1.26% 0.79%~
Portfolio Turnover Rate 72% 29% 30%*
Average Commission Rate Paid^^ ^ $0.0002 $0.0001 -
^^ From February 15, 1995, commencement of investment operations, to July 31,
1995.
+ Total return does not reflect the effect of the applicable redemption fees.
* Based on operations for the period shown and, accordingly, are not
representative of a full year.
# Various expenses of the ^ Fund were voluntarily absorbed by ^ INVESCO Funds
Group, Inc., MIM International Limited and INVESCO Asset Management Limited for
the period ended July 31, 1995. If such expenses had not been voluntarily
absorbed, ratio of expenses to average net assets would have been 4.49%
(annualized), and ratio of net investment income to average net assets would
have been (1.70%) (annualized).
@ Ratio is based on Total Expenses of the Fund, ^ which is before any expense
offset arrangements.
~ Annualized
^^ 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 which ^ is required to be disclosed
for fiscal years beginning September 1, 1995 and thereafter.
Further information about the performance of the Fund is contained in the
Company's Annual Report to Shareholders, which may be obtained without charge by
writing INVESCO ^ Distributors, Inc., P.O. Box 173706, Denver, Colorado
80217-3706 ^ or by calling 1-800- 525-8085.
<PAGE>
PERFORMANCE DATA
From time to time, the Fund may advertise its total return performance.
These figures are based upon historical investment results and are not intended
to indicate future performance. The "total return" of the Fund refers to the
annual rate of return of an investment in the Fund. This figure is computed by
calculating the percentage change in value of an investment of $1,000, assuming
reinvestment of all income dividends and other distributions, to the end of a
specified period. Periods of one year, five years, ten years and/or life of the
Fund are used if available. ^ A report of total return performance should not be
considered as representative of future performance. The Fund charges no sales
loads which would affect the total return computation. However, the total return
computation may be affected as a result of the 1% redemption or exchange fee
which is retained by the Fund to offset transaction costs and other expenses
associated with short-term redemptions and exchanges, which is imposed on
redemptions or exchanges of shares held less than ^ three months.
In conjunction with performance reports and/or analyses of shareholder
service for the Fund, comparative data between the Fund's performance for a
given period and the performance of recognized indices of investment results for
the same period, and/or assessments of the quality of shareholder service, may
be provided to shareholders. Such indices include indices provided by Dow Jones
& Company, Standard & Poor's, Lipper Analytical Services, Inc., Lehman Brothers,
National Association of Securities Dealers Automated Quotations, Frank Russell
Company, Value Line Investment Survey, the American Stock Exchange, Morgan
Stanley Capital International, Wilshire Associates, the Financial Times-Stock
Exchange, the New York Stock Exchange, the Nikkei Stock Average and the Deutcher
Aktienindex, all of which are unmanaged market indicators. In addition,
rankings, ratings, and comparisons of investment performance and/or assessments
of the quality of shareholder service appearing in publications such as Money,
Forbes, Kiplinger's Personal Finance, Morningstar, and similar sources which
utilize information compiled (i) internally; (ii) by Lipper Analytical Services,
Inc.; or (iii) by other recognized analytical services, may be used in
advertising. The Lipper Analytical Services, Inc. mutual fund rankings and
comparisons, which may be used by the Fund in performance reports, will be drawn
from the "Latin American" Lipper mutual fund grouping, in addition to the
broad-based Lipper general fund grouping.
INVESTMENT OBJECTIVE AND POLICIES
INVESCO Latin American Growth Fund seeks to achieve capital appreciation by
investing, under normal circumstances, at least 65% of its total assets in
equity securities (common stocks and, to a lesser degree, depository receipts,
preferred stocks and securities convertible into common stocks, such as rights,
warrants and convertible debt securities) of Latin American issuers. The
foregoing investment objective is fundamental and may not be changed in any
material respect without the approval of the Fund's shareholders. For purposes
of this Fund, Latin America will include: Mexico, Central America, South
America, and the Spanish speaking islands of the Caribbean. The Fund defines
<PAGE>
securities of Latin American issuers as follows: (1) securities of companies
organized under the laws of a Latin American country; (2) securities of
companies for which the principal securities trading market is in Latin America;
(3) securities issued or guaranteed by a government agency, instrumentality,
political subdivision, or central bank of a Latin American country; (4)
securities of issuers, wherever organized, with at least 50% of the issuer's
assets, capitalization, gross revenues, or profit in any one of the two most ^
recent fiscal years derived from activities or assets in Latin America; or (5)
securities of Latin American issuers, as defined above, in the form of
depository shares.
The economies of Latin American countries may vary widely in their
condition, and may be subject to certain changes that could have a positive or
negative impact on the Fund. Investments in foreign securities involve certain
risks which are discussed below under "Risk Factors."
Investment in this Fund involves above-average investment risk. It is
designed as a long-term investment and not for short-term trading purposes, and
should not be considered a complete investment program. A ^ 1% fee, described
more fully under ^"Services Provided by the Fund^" and ^"How to Redeem Shares,^"
is payable to the Fund for the benefit of remaining shareholders for redemption
or exchange of shares held less than three months.
Under normal conditions, the Fund will invest primarily in equity
securities (common stocks and, to a lesser degree, depository receipts,
preferred stocks and securities convertible into common stocks, such as rights,
warrants and convertible debt securities) which are discussed more fully in the
Statement of Additional Information. In selecting the equity securities in which
the Fund invests, the Fund's investment adviser and sub- adviser (collectively,
^"Fund Management") attempt to identify companies that in Fund Management's
opinion have demonstrated or, ^ are likely to demonstrate in the future, strong
earnings growth that reflects the underlying economic activity within the
country or countries in which they operate. The dividend payment records of
companies are also considered. Equity securities may be issued by either
established, well-capitalized companies or newly-formed, small-cap companies,
and may trade on regional or national stock exchanges or in the over-the-counter
market. The Fund's investments in small capitalization stocks may include
companies that have limited operating histories, product lines, and financial
and managerial resources. These companies may be subject to intense competition
from larger companies, and their stock may be subject to more abrupt or erratic
market movements than the stocks of larger, more established companies. Due to
these and other factors, small-cap companies may suffer significant losses as
well as realize substantial growth.
The balance of the Fund's assets may be invested in securities of U.S. and
other non-Latin American corporate or governmental issuers. These investments
may include equity securities or fixed-income securities selected to meet the
Fund's investment objective of capital appreciation. Such equity securities may
<PAGE>
be issued by either established, well-capitalized companies or newly-formed,
small-cap companies, and may trade on regional or national stock exchanges or in
the over-the-counter market. Such fixed-income securities must meet the quality
standards described below. The risks of investing in lower rated debt securities
and in foreign securities are discussed below under ^"Risk Factors.^" In
addition, the Fund may hold certain cash and cash equivalent securities as cash
reserves ^("cash securities").
As discussed above, consistent with its investment objective, the Fund may
invest in fixed-income securities (corporate bonds, commercial paper, debt
securities issued by the U.S. government, its agencies and instrumentalities, or
foreign governments and, to a lesser extent, municipal bonds, asset-backed
securities and zero coupon bonds). The Fund may invest up to 35% of its total
assets in debt securities that are rated below BBB by Standard & Poor's Ratings
Group^, a division of The McGraw-Hill Companies, Inc. ("S&P") or Baa by Moody's
Investors Service, Inc. ^("Moody's") or, if unrated, ^ judged by Fund Management
to be equivalent in quality to debt securities having such ratings (commonly
referred to as ^"junk bonds"). The Fund expects that most foreign debt
securities in which it invests will not be rated by U.S. rating services, as
discussed more fully below. In no event will the Fund ever invest in a debt
security rated below CCC by ^ S&P or Caa by Moody's or, if unrated, judged by
Fund Management to be equivalent in quality to debt securities having such
ratings. The risks of investing in lower rated debt securities are discussed
below under ^"Risk Factors.^"
The amounts invested in stocks, bonds and cash securities may be varied
from time to time, depending upon Fund Management's assessment of business,
economic and market conditions. In periods of ^ abnormal economic and market
conditions, as determined by Fund Management, the Fund may depart from its basic
investment objective and assume a temporary defensive position, with up to 100%
of its assets invested in U.S. government and agency securities, investment
grade corporate bonds^ or cash securities such as domestic certificates of
deposit and bankers' acceptances, repurchase agreements and commercial paper.
The Fund reserves the right to hold equity, fixed-income and cash securities in
whatever proportion is deemed desirable at any given time for ^ defensive
purposes. While the Fund is in a ^ defensive position, the opportunity to
achieve capital appreciation will be limited; however, the ability to maintain a
temporary defensive position enables the Fund to seek to avoid capital losses
during market downturns. Under normal market conditions, the Fund does not
expect to have a substantial portion of its assets invested in cash securities.
In order to hedge its portfolio, the Fund may purchase and write options
on securities (including index options and options on foreign securities), and
may invest in futures contracts for the purchase or sale of foreign currencies,
fixed-income securities and instruments based on financial indices
(collectively, "futures contracts"), options on futures contracts, forward
contracts and interest rate swaps and swap-related products. Interest rate swaps
involve the exchange by the 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. These practices and securities, some of which
are known as derivatives, and their risks are discussed below under ^"Risk
Factors^" and in the Statement of Additional Information.
<PAGE>
Additional information on certain types of securities in which the Fund
may invest is set forth below:
When-Issued Securities
The Fund may make commitments in an amount of up to 10% of the value of
its total assets at the time any commitment is made to purchase or sell equity
or debt securities on a when-issued or delayed delivery basis (i.e., securities
may be purchased or sold by the Fund with settlement taking place in the future,
often a month or more later). The payment obligation and, in the case of debt
securities, the interest rate that will be received on the securities generally
are fixed at the time the Fund enters into the commitment. During the period
between purchase and settlement, no payment is made by the Fund and no interest
accrues to the Fund. At the time of settlement, the market value of the security
may be more or less than the purchase price, and the Fund bears the risk of such
market value fluctuations. The Fund maintains cash, U.S. government securities,
or other ^ liquid securities having an aggregate value equal to the amount of
such purchase commitments in a segregated account until payment is made.
Illiquid and Rule 144A Securities
The Fund ^ may invest in securities that are illiquid because they are
subject to restrictions on their resale ^("restricted securities") or because,
based upon their nature or the market for such securities, they are not readily
marketable. However, the Fund will not purchase any such security if the
purchase would cause the Fund to invest more than 15% of its net assets in
illiquid securities. Repurchase agreements maturing in more than seven days will
be considered as illiquid for purposes of this restriction. Investments in
illiquid securities involve certain risks to the extent that the Fund may be
unable to dispose of such a security at the time desired or at a reasonable
price. In addition, in order to resell a restricted security, the Fund might
have to bear the expense and incur the delays associated with effecting
registration.
Certain restricted securities that are not registered for sale to the
general public, but that can be resold to institutional investors ^("Rule 144A ^
Securities"), may be purchased without regard to the foregoing 15% limitation if
a liquid institutional trading market exists. The liquidity of the Fund's
investments in Rule 144A Securities could be impaired if dealers or
institutional investors become uninterested in purchasing these securities. The
Company's board of directors has delegated to Fund Management the authority to
determine the liquidity of Rule 144A Securities pursuant to guidelines approved
by the board. For more information concerning Rule 144A Securities, see the
Statement of Additional Information.
<PAGE>
The settlement period of securities transactions in foreign markets may be
longer than in domestic markets. These considerations generally are more of a
concern in developing countries. For example, the possibility of political
upheaval and the dependence on foreign economic assistance may be greater in
these countries than in developed countries.
Repurchase Agreements
The Fund may enter into repurchase agreements with respect to debt
instruments eligible for investment by the Fund^ with member banks of the
Federal Reserve System, registered broker-dealers, and registered government
securities dealers, which are deemed creditworthy. A repurchase agreement, which
may be considered a "loan" under the Investment Company Act of 1940, is a means
of investing monies for a short period. In a repurchase agreement, the Fund
acquires a debt instrument (generally a security issued by the U.S. government
or an agency thereof, a banker's acceptance, or a certificate of deposit)
subject to resale to the seller at an agreed-upon price and date (normally, the
next business day). In the event that the original seller defaults on its
obligation to repurchase the security, the Fund could incur costs or delays in
seeking to sell such security. To minimize risk, the securities underlying each
repurchase agreement will be maintained with the Fund's custodian in an amount
at least equal to the repurchase price under the agreement (including accrued
interest), and such agreements will be effected only with parties that meet
certain creditworthiness standards established by the Company's board of
directors. The Fund will not enter into a repurchase agreement maturing in more
than seven days if as a result more than ^ 15% of its total assets would be
invested in such repurchase agreements and other illiquid securities. The Fund
has not adopted any limit on the amount of its net assets that may be invested
in repurchase agreements maturing in seven days or less.
Securities Lending
The Fund also may lend its securities to qualified brokers, dealers,
banks, or other financial institutions. This practice permits the Fund to earn
income, which, in turn, can be invested in additional securities of the type
described in this Prospectus in pursuit of the Fund's investment objective.
Loans of securities by the Fund will be collateralized by cash, letters of
credit, or securities issued or guaranteed by the U.S. government or its
agencies equal to at least 100% of the current market value of the loaned
securities, determined on a daily basis. 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 Fund monitors the
creditworthiness of borrowers in order to minimize such risks. The Fund will not
lend any security if, as a result of the loan, the aggregate value of securities
then on loan would exceed 33-1/3% of the Fund's total assets (taken at market
value).
<PAGE>
Portfolio Turnover
There are no fixed limitations regarding portfolio turnover for the Fund's
portfolio. Although the Fund does not trade for short-term profits, securities
may be sold without regard to the time they have been held in the Fund when, in
the opinion of Fund Management, investment considerations warrant such action.
In addition, portfolio turnover rates may increase as a result of large amounts
of purchases or redemptions of Fund shares due to economic, market or other
factors that are not within the control of Fund Management. As a result, while
it is anticipated that the portfolio turnover rate for the Fund's portfolio
generally will not exceed 200%, under certain market conditions the portfolio
turnover rate may exceed 200%, and may be higher than that of other investment
companies seeking capital appreciation. Increased portfolio turnover would cause
the Fund to incur greater brokerage costs than would otherwise be the case, and
may result in the acceleration of capital gains that are taxable when
distributed to shareholders. The Fund's portfolio turnover rates are set forth
under "Financial Highlights" and, along with the Fund's brokerage allocation
policies, are discussed in the Statement of Additional Information.
Investment Restrictions
The Fund is subject to a variety of restrictions regarding its investments
that are set forth in this Prospectus and in the Statement of Additional
Information. Certain of the Fund's investment restrictions are fundamental, and
may not be altered without the approval of the Fund's shareholders. Such
fundamental investment restrictions include the restrictions which prohibit the
Fund from: lending more than 33-1/3% of its total assets to other parties
(excluding purchases of commercial paper, debt securities and repurchase
agreements); investing more than 25% of the value of the Fund's total assets in
any one industry (other than government securities); with respect to 75% of its
total assets, purchasing the securities of any one issuer (other than cash items
and government securities) if the purchase would cause the Fund to have more
than 5% of its total assets invested in the issuer or to own more than 10% of
the outstanding voting securities of the issuer; and borrowing money or issuing
senior securities 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 its total
assets. However, unless otherwise noted, the Fund's investment restrictions and
its investment policies are not fundamental and may be changed by action of the
Company's board of directors. Unless otherwise noted, all percentage limitations
contained in the Fund's investment policies and restrictions apply at the time
an investment is made. Thus, subsequent changes in the value of an investment
after purchase or in the value of the Fund's total assets will not cause any
such limitation to have been violated or to require the disposition of any
investment, except as otherwise required by law. If the credit ratings of an
issuer are lowered below those specified for investment by the Fund, the Fund is
not required to dispose of the obligations of that issuer. The determination of
whether to sell such an obligation will be made by Fund Management based upon an
assessment of credit risk and the prevailing market price of the investment. If
the Fund borrows money, its share price may be subject to greater fluctuation
until the borrowing is repaid. The Fund attempts to minimize such fluctuations
by not purchasing additional securities when borrowings, including reverse
repurchase agreements, are greater than 5% of the value of the Fund's total
<PAGE>
assets. As a fundamental policy in addition to the above, the Fund may,
notwithstanding any other investment policy or limitation (whether or not
fundamental), invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental investment
objectives, policies and limitations as the Fund. See ^"Additional Information
- -- Master/Feeder Option.^"
RISK FACTORS
There can be no assurance that the Fund will achieve its investment
objective. The Fund's investments in common stocks and other equity securities
may, of course, decline in value. The Fund's assets will be invested primarily
in non-U.S. issuers. Investors should recognize that investing in securities of
non-U.S. issuers involves certain risks and special considerations, including
those set forth below, which are not typically associated with investing in
securities of U.S. issuers. Further, certain investments that the Fund may
purchase, and investment techniques that the Fund may use, involve risks,
including those set forth below.
Social Political and Economic Risks
The Fund may make investments in developing countries that involve exposure
to economic structures that generally are less diverse and mature than in the
United States, and to political systems that may be less stable. A developing
country can be considered to be a country that is in the initial stages of its
industrialization cycle. In the past, markets of developing countries have been
more volatile than the markets of developed countries; however, such markets
often have provided higher rates of return to investors.
The Latin American countries in which the Fund will invest may be subject
to a substantially greater degree of social, political and economic instability
than is the case in the United States, Japan and Western European countries.
Such instability may result from, among other things, the following: (i)
authoritarian governments or military involvement in political and economic
decision-making, and changes in government through extra- constitutional means;
(ii) popular unrest associated with demands for improved political, economic and
social conditions; (iii) internal insurgencies and terrorist activities; (iv)
hostile relations with neighboring countries; and (v) drug trafficking. Social,
political and economic instability could significantly disrupt the principal
financial markets in which the Fund invests and adversely affect the value of
the Fund's assets.
The economies of individual Latin American countries may differ favorably
or unfavorably and significantly from the U.S. economy in such respects as the
rate of growth of gross domestic product or gross national product, rate of
inflation, currency depreciation, capital reinvestment, resource
self-sufficiency, structural unemployment and balance of payments position.
Governments of many Latin American countries have exercised and continue to
exercise substantial influence over many aspects of the private sector. In some
<PAGE>
cases, the government owns or controls many companies, including some of the
largest in the country. Accordingly, government actions in the future could have
a significant effect on economic conditions in a Latin American country, which
could affect private sector companies and the Fund, and on market conditions,
which could have a significant effect on prices and yields of securities in the
Fund's portfolio. There may be the possibility of nationalization, asset
expropriations or future confiscatory levels of taxation affecting the Fund. In
the event of nationalization, expropriation or other confiscation, the Fund may
not be fairly compensated for its loss and could lose its entire investment in
the country involved. The economies of most Latin American countries are heavily
dependent upon international trade and accordingly are affected by protective
trade barriers and the economic conditions of their trading partners. The
enactment by the United States or other principal trading partners of
protectionist trade legislation, reduction of foreign investment in the local
economies and general declines in the international securities markets could
have a significant adverse effect upon the securities markets of these
countries. The economies of Latin American countries are vulnerable to
weaknesses in world prices for their commodity exports and natural resources.
Certain of the Latin American countries are among the largest debtors to
commercial banks and foreign governments. Currently, due to its size, Brazil is
the largest debtor among developing countries followed by Mexico. Since 1982,
certain Latin American countries, including Argentina, Brazil, Chile and Mexico,
have experienced difficulty in servicing their sovereign debt obligations in a
timely manner. Many such countries have negotiated with foreign creditors to
restructure such sovereign debt and may enter into such negotiations in the
future. Obligations arising from past restructuring agreements have affected,
and those arising from future restructuring agreements may affect, the economic
performance and political and social stability of Latin American countries.
Changes in the political leadership or policies of the governments of the
Latin American countries in which the Fund invests or in other countries that
influence them, may effect a deterioration of the current climate for foreign
investment and result in a reduction in value of the Fund's investments there.
In the past, upon the assumption of power by authoritarian regimes in particular
Latin American countries, those governments expropriated significant real and
personal property holdings, without any or adequate compensation. There can be
no assurance that companies in which the Fund holds securities, property held by
such companies or the Fund's securities themselves, will not also be
expropriated, nationalized, or otherwise confiscated, resulting in substantial
losses to the Fund and its shareholders. The Fund's investments would similarly
be adversely affected by exchange control regulations in any of those countries.
Securities Markets
The market capitalizations of listed equity securities on exchanges in
Latin American nations is significantly smaller than those of the United States
and other major economies. Only a few issuers may constitute a major portion of
the market capitalization and trading equity. A large segment of the ownership
<PAGE>
of many Latin American companies may be held by a limited number of persons and
families, which may limit the number of shares available for investment by the
Fund. As a consequence, individual Latin American securities markets are
vulnerable to the effect of large investors trading significant blocks of
securities or by large dispositions of securities, e.g., as a result of margin
calls. The resulting limitations on the liquidity of Latin American securities
will influence the Fund's capability for acquiring and disposing of such
securities at the price and time it desires to do so.
Foreign Securities
Due to the absence of established securities markets in certain Latin
American countries, there may be restrictions on investment by foreigners in the
securities of companies in these countries, and difficulties in removing from
certain of these countries the dollars invested in such companies. The Fund's
ability to invest may be restricted to the use of investment vehicles authorized
by the local government, investment in shares of other investment companies; or
investments in American Depository Receipts ^("ADRs"); American Depository
Shares, and Global Depository Shares.
ADRs are instruments, usually issued by a U.S. bank or trust company,
evidencing ownership of securities of a foreign issuer into which the ADRs may
be convertible. ADRs are designed for use in ^ U.S. markets and may be traded on
U.S. securities exchanges or over-the-counter markets. They are denominated in
dollars rather than the currency of the country in which the underlying
securities are issued.
ADRs may be issued in sponsored or unsponsored programs. In sponsored
programs, the issuer makes arrangements to have its securities traded in the
form of ADRs; in unsponsored programs, the issuer may not be directly involved
in the creation of the program. Although the regulatory requirements with
respect to sponsored and unsponsored programs are generally similar, the issuers
of unsponsored ADRs are not obligated to disclose material information in the
U.S. and, therefore, such information may not be reflected in the market value
of the ADRs. ADRs are subject to certain of the same risks as direct investments
in foreign securities, including the risk that changes in the value of the
currency in which the security underlying an ADR is denominated relative to the
U.S. dollar may adversely affect the value of the ADR.
As indicated above, the Fund may deem it most practical to invest in
certain countries through other investment companies or similar vehicles,
although there can be no assurance that any such vehicles will be available or
will themselves have invested in the securities found most desirable by the
Fund. The Fund will not invest through other entities unless, in the opinion of
Fund Management, the potential advantages of such investment justify the Fund's
bearing its ratable share of the expenses of such entity (constituting duplicate
levels of advisory fees to be borne by the Fund and its shareholders) and its
share of any premium encompassed in the market value of such entity at the time
<PAGE>
of the Fund's investment over the market value of the entity's underlying
holdings. In addition, there may be tax ramifications relating to investment in
such entities. Investments by the Fund in other investment companies are subject
to the following limits imposed by the Investment Company Act of 1940: subject
to certain exceptions, no more than 5% of the Fund's total assets may be
invested in any one investment company (but no more than 3% of the voting stock
of the underlying investment company) and no more than 10% of the Fund's total
assets may be invested in other investment companies in the aggregate.
For U.S. investors, the returns on foreign securities are influenced not
only by the returns on the foreign investments themselves, but also by currency
fluctuations (i.e., changes in the value of the currencies in which the
securities are denominated relative to the U.S. dollar). In a period when the
U.S. dollar generally rises against a foreign ^ currency, returns ^ for a U.S.
investor ^ on foreign securities denominated in that foreign currency may
decrease. By contrast, in a period when the U.S. dollar generally declines, the
returns on foreign securities generally are enhanced. Currencies of certain
Latin American countries have undergone sudden devaluations relative to the U.S.
dollar as a result of corresponding inflationary trends or other reasons. Any
such devaluation may have a deleterious effect on the Fund's investments.
Inflation may have strong negative consequences for the economy and political
stability of a country that experiences it, and may seriously affect its
securities markets.
The currencies of certain Latin American countries are not commonly traded
in foreign exchange markets. Certain Latin American countries have managed
currencies that, for foreign exchange purposes, do not float freely against the
U.S. dollar. Other governmental restrictions on the convertibility of ^ the
country's currency may be imposed.
Securities exchanges and broker-dealers in most Latin American countries
are subject to less regulatory scrutiny than in the United States, as are Latin
American companies in such countries. The limited size of the markets for
securities may enable adverse publicity, investors' perceptions or traders'
positions or strategies to affect prices unduly, at times decreasing not only
the value but also the liquidity of the Fund's investments. The Fund may invest
no more than 15% of its net assets at the time of investment in illiquid
securities. Securities the proceeds of which are subject to limitations on
repatriation of principal or profits for more than seven days, and those for
which there ceases to be a ready market, will be deemed illiquid for this
purpose.
Other risks and considerations of international investing include the
following: differences in accounting, auditing and financial reporting standards
which may result in less publicly available information than is generally
available with respect to U.S. issuers; generally higher commission rates on
foreign portfolio transactions and longer settlement periods; the smaller
trading volumes and generally lower liquidity of foreign stock markets, which
may result in greater price volatility; foreign withholding taxes payable on
income and/or gains from the Fund's foreign securities, which may reduce
<PAGE>
dividend income or capital gains available for distribution to shareholders; the
possibility of expropriation or confiscatory taxation; adverse changes in
investment or exchange control regulations; political instability which could
affect U.S. investment in foreign countries; potential restrictions on the flow
of international capital; and the possibility of a Fund experiencing
difficulties in pursuing legal remedies and collecting judgments.
Debt Securities
The Fund's investments in fixed-income securities generally are subject to
both credit risk and market risk. Credit risk relates to the ability of the
issuer to meet interest or principal payments, or both, as they come due. The
ratings given a security by S&P and Moody's ^ provide a generally useful guide
as to such credit risk. The lower the rating given a security by such rating
service, the greater the credit risk such rating service perceives to exist with
respect to such security. Increasing the amount of Fund assets invested in
unrated or lower grade securities, while intended to increase the yield produced
by those assets, also will increase the credit risk to which those assets are
subject.
Market risk relates to the fact that the market values of the debt
securities in which the Fund invests generally will be affected by changes in
the level of interest rates. An increase in interest rates will tend to reduce
the market values of debt securities, whereas a decline in interest rates will
tend to increase their values. Medium and lower rated securities (Baa or BBB and
lower) and non-rated securities of comparable quality tend to be subject to
wider fluctuations in yields and market values than higher rated securities and
may have speculative characteristics. Although Fund Management limits the Fund's
investments in fixed-income securities to securities it believes are not highly
speculative, both kinds of risk are increased by investing in debt securities
rated below the top three grades by ^ S&P or Moody's or, if unrated, securities
determined by Fund Management to be of equivalent quality. Of course, relying in
part on ratings assigned by credit agencies in making investments will not
protect the Fund from the risk that the securities in which it invests will
decline in value, since credit ratings represent evaluations of the safety of
principal, dividend and interest payments on preferred stocks and debt
securities, not the market value of such securities, and such ratings may not be
changed on a timely basis to reflect subsequent events. The Fund is not required
to sell immediately debt securities that go into default, but may continue to
hold such securities until such time as Fund Management determines it is in the
best interests of the Fund to sell such securities. Because investment in medium
and lower rated securities involves both greater credit risk and market risk,
achievement of the Fund's investment objectives may be more dependent on Fund
Management's own credit analysis than is the case for funds investing in higher
quality securities. In addition, the share price and yield of the Fund may be
expected to fluctuate more than in the case of funds investing in higher
quality, shorter term securities. Moreover, a significant economic downturn or
major increase in interest rates may result in issuers of lower rated securities
experiencing increased financial stress, which would adversely affect their
ability to service their principal, dividend and interest obligations, meet
projected business goals, and obtain additional financing. Expenses incurred to
<PAGE>
recover an investment in a defaulted security may adversely affect the Fund's
net asset value. Finally, while Fund Management attempts to limit purchases of
medium and lower rated securities to securities having an established secondary
market, the secondary market for such securities may be less liquid than the
market for higher quality securities. The reduced liquidity of the secondary
market for such securities may adversely affect the market price of, and ability
of the Fund to value, particular securities at certain times, thereby making it
difficult to make specific valuation determinations.
^ Although bonds in the lowest investment grade debt category (those rated
BBB by ^ S&P or Baa by Moody's) are regarded as having adequate capability to
pay principal and interest, they have speculative characteristics. Adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to make principal and interest payments than is the case for
higher rated bonds. Lower rated bonds by Moody's (categories Ba, B, Caa) are of
poorer quality and also have speculative characteristics. Bonds rated Caa may be
in default or there may be present elements of danger with respect to principal
or interest. Lower rated bonds by ^ S&P (categories BB, B, CCC) include those
that are regarded, on balance, as predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal in accordance with their
terms; BB indicates the lowest degree of speculation and CCC a high degree of
speculation. While such bonds likely will have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions. For a specific description of each corporate
bond rating category, please refer to Appendix B to the Statement of Additional
Information. Note, however, that the Fund expects that most foreign debt
securities in which it will invest will not be rated by U.S. rating services.
In certain Latin American countries, the central government and its
agencies are the largest debtors to local and foreign banks and others.
Argentina, Brazil and Mexico are the three largest debtors among the developing
countries. Sovereign debt involves the risk that the government, as a result of
political considerations or cash flow difficulties, may fail to make scheduled
payments of interest or principal and may require holders to participate in
rescheduling of payments or even to make additional loans. If a Latin American
government defaults on its sovereign debt, there is likely to be no legal
proceeding under which the debt may be ordered repaid, in whole or in part. The
ability or willingness of a foreign sovereign debtor to make payments of
principal and interest in a timely manner may be influenced by, among other
factors, its cash flow, the magnitude of its foreign reserves, the availability
of foreign exchange on the payment date, the debt service burden to the economy
as a whole, the debtor's then current relationship with the International
Monetary Fund and its then current political constraints. Some of the countries
issuing such instruments have experienced high rates of inflation in recent
years and have extensive internal debt. Among other effects, high inflation and
internal debt service requirements may adversely affect the cost and
availability of future domestic sovereign borrowing to finance governmental
programs, and may have other adverse social, political and economic
consequences, including effects on the willingness of such countries to service
their sovereign debt. A Latin American government's willingness and ability to
<PAGE>
make timely payments on its sovereign debt are also likely to be heavily
affected by the country's balance of trade and its access to trade and other
international credits. If a country's exports are concentrated in a few
commodities, such country would be more significantly exposed to a decline in
the international prices of one or more of such commodities. A rise in
protectionism on the part of its trading partners, or unwillingness by such
partners to make payment for goods in hard currency, could also adversely affect
the country's ability to export its products and repay its debts. Sovereign
debtors may also be dependent on expected receipts from such agencies and others
abroad to reduce principal and interest arrearages on their debt. ^ In addition,
failure by the sovereign debtor or other entity to implement economic reforms
negotiated with multilateral agencies or others, to achieve specified levels of
economic performance, or to make other debt payments when due, may cause third
parties to terminate their commitments to provide funds to the sovereign debtor,
which may further impair such debtor's willingness or ability to service its
debts. In the past, some of the Latin American countries in which the Fund
expects to invest have encountered difficulties in servicing their sovereign
debt, withholding certain payments of interest or principal. Certain of these
obligations, particularly commercial bank loans, have been restructured, usually
by rescheduling principal payments, reducing interest rates and extending new
credits to finance interest payments on existing debt. Holders of sovereign
debt, including the Fund, may be asked to participate in similar restructurings.
The Fund may invest in debt securities issued under the ^"Brady Plan^" in
connection with restructurings in Latin American debt markets or earlier loans.
These securities, often referred to as "Brady Bonds," are, in some cases,
denominated in U.S. dollars and collateralized as to principal by U.S. Treasury
zero coupon bonds having the same maturity. At least one year's interest
payments, on a rolling basis, are collateralized by cash or other investments.
Brady Bonds are actively traded on an over-the-counter basis in the secondary
market for Latin American debt securities. ^"Brady Bonds^" are lower rated bonds
and highly volatile. See ^"Risk Factors - Debt Securities.^"
Futures, Options and Other Derivative Instruments
The use of futures, options, forward contracts and swaps exposes the Fund
to additional investment risks and transaction costs, and as a result, no more
than 5% of the Fund's total assets will be committed to such investments. If
Fund Management seeks to protect the Fund against potential adverse movements in
the securities, foreign currency or interest rate markets using these
instruments, and such markets do not move in a direction adverse to the Fund,
the Fund could be left in a less favorable position than if such strategies had
not been used. Risks inherent in the use of futures, options, forward contracts
and swaps include (1) the risk that interest rates, securities prices and
currency markets will not move in the directions anticipated; (2) imperfect
correlation between the price of futures, options and forward contracts and
movements in the prices of the securities or currencies being hedged; (3) the
fact that skills needed to use these strategies are different from those needed
to select portfolio securities; (4) the possible absence of a liquid secondary
market for any particular instrument at any time; and (5) the possible need to
defer closing out certain hedged positions to avoid adverse tax consequences.
Further information on the use of futures, options, forward foreign currency
contracts and swaps and swap-related products, and the associated risks, is
contained in the Statement of Additional Information.
<PAGE>
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. The overall
supervision of the Fund is the responsibility of the ^ Company's board of
directors.
Pursuant to an agreement with the Company, INVESCO Funds Group, Inc.
^("IFG"), 7800 E. Union Avenue, Denver, Colorado, serves as the Fund's
investment adviser. Under this agreement, ^ IFG is primarily responsible for
providing the Fund with various administrative services and supervising the
Fund's daily business affairs. These services are subject to review by the
Company's board of directors.
^
Pursuant to an agreement with ^ IFG, INVESCO Asset Management Limited
("IAML") serves as the sub-adviser to the Fund. ^ IAML also acts as sub-adviser
to the INVESCO European Fund, the INVESCO Pacific Basin Fund ^, the INVESCO
International Growth Fund and the INVESCO European Small Company Fund. IAML,
subject to the supervision of ^ IFG, is primarily responsible for selecting and
managing the Fund's investments.
^ Pursuant to an agreement with the Company, effective September 30, 1997,
INVESCO Distributors, Inc. ("IDI") became the Fund's distributor. IDI,
established in 1997, is a registered broker-dealer that acts as distributor for
all retail mutual funds advised by IFG. Prior to September 30, 1997, IFG served
as the Fund's distributor.
IFG, IAML and IDI are indirect wholly-owned subsidiaries of AMVESCAP PLC.
AMVESCAP PLC is a publicly-traded holding company that, through its
subsidiaries, engages in the business of investment management on an
international basis. INVESCO PLC changed its name to AMVESCO PLC on March 3,
1997, and to AMVESCAP PLC on May 8, 1997, as part of a merger between a direct
subsidiary of INVESCO PLC and A I M Management Group Inc., that created one of
the largest independent investment management businesses in the world. IFG and
IAML continued to operate under their existing names. AMVESCAP PLC has
approximately $177.5 billion in assets under management. IFG was established in
1932 and, as of July 31, 1997, managed 14 mutual funds, consisting of 45
separate portfolios, with combined assets of approximately $16.4 billion on
behalf of over 858,000 shareholders.
The following individuals serve as co-portfolio managers for the Fund and
are primarily responsible for determining, in consultation with the senior
investment policy group of IAML, the country-by-country allocation of the
portfolio's assets, overall stock selection methodology and the ongoing
implementation and risk control policies applicable to the portfolio:
<PAGE>
Peter Jarvis Co-portfolio manager of the Fund since 1996; fund
manager with INVESCO Asset Management Limited
since 1993 specializing in Latin American
equities. Mr. Jarvis earned a B.A. from St. John's
College, Oxford University.
Jane Lyon Co-portfolio manager of the Fund since 1996; fund
manager with INVESCO Asset Management Limited
specializing in Latin American equities; began
investment career in 1986. Ms. Lyon earned a B.A.
from Oxford University.
Mr. Jarvis and Ms. Lyon head a team of individual country specialists who
are responsible for managing security selection for their assigned country's
share of the allocation within the parameters established by IAML's investment
policy group.
The Fund pays ^ IFG a monthly advisory fee which is based upon a
percentage of the average net assets of the Fund, determined daily. The maximum
advisory fee is computed at the annual rate of 0.75% on the first $500 million
of the Fund's average net assets, 0.65% on the next $500 million of the Fund's
average net assets and 0.55% on the Fund's average net assets over $1 billion. ^
Out of its advisory fee which it receives from the Fund, ^ IFG pays IAML,
as sub-adviser to the Fund, a monthly fee, which is computed at the annual rate
of 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. No fee is paid by the Fund to IAML.
The Company also has entered into an Administrative Services Agreement (the
^"Administrative Agreement") with IFG. Pursuant to the Administrative Agreement,
^ IFG performs certain administrative, recordkeeping and internal sub-accounting
services, including without limitation, maintaining general ledger and capital
stock accounts, preparing a daily trial balance, calculating net asset value
daily, providing selected general ledger reports and providing sub-accounting
and recordkeeping services for Fund shareholder accounts maintained by certain
retirement and employee benefit plans for the benefit of participants in such
plans. For such services, the Fund pays ^ IFG a fee consisting of a base fee of
$10,000 per year, plus an additional incremental fee computed at the annual rate
of 0.015% per year of the average net assets of the Fund. ^ IFG also is paid a
fee by the Fund for providing transfer agent services. See ^"Additional
Information.^"
The Fund's expenses, which are accrued daily, are generally deducted from
the Fund's total income before dividends are paid. Total expenses ^(prior to any
expense offset arrangement) of the Fund for the fiscal ^ year ended July 31, ^
1997, including investment management fees (but excluding brokerage commissions,
which are a cost of acquiring securities), amounted to ^ 1.76% of the Fund's
average net assets.
<PAGE>
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of ^
such broker-dealer's financial responsibility coupled with their ability to
effect transactions at the best available prices. As discussed under ^"How
Shares Can Be Purchased - Distribution Expenses,^" the Company may market shares
of the Fund through intermediary brokers or dealers that have entered into
Dealer Agreements with ^ IFG or IDI, 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 execution of the transaction and level of commission are comparable
to those available from other qualified brokerage firms.
Fund Management permits investment and other personnel to purchase and
sell securities for their own accounts, subject to a compliance policy governing
personal investing. This policy requires investment and other personnel to
conduct their personal investment activities in a manner that Fund Management
believes is not detrimental to the Funds or Fund Management's other advisory
clients. See the Statement of Additional Information for more detailed
information.
HOW SHARES CAN BE PURCHASED
Shares of the Fund are sold on a continuous basis by ^ IDI, as the Fund's
^ distributor, at the net asset value per share next calculated after receipt of
a purchase order in good form. No sales charge is imposed upon the sale of
shares of the Fund. To purchase shares of the Fund, send a check made payable to
INVESCO Funds Group, Inc., together with a completed application form, to:
INVESCO Funds Group, Inc.
Post Office Box 173706
Denver, Colorado 80217-3706
PURCHASE ORDERS MUST SPECIFY THE FUND IN WHICH THE INVESTMENT IS TO BE
MADE.
The minimum initial purchase must be at least $1,000, with subsequent
investments of not less than $50, except that: (1) those shareholders
establishing an EasiVest or direct payroll purchase account, as described below
in the ^ section entitled ^"Services Provided ^ By The Fund,^" may open an
account without making any initial investment if they agree to make regular,
minimum purchases of at least $50; (2) those shareholders investing in an
Individual Retirement Account ^("IRA"), or through omnibus accounts where
individual shareholder recordkeeping and sub-accounting are not required, may
make initial minimum purchases of $250; (3) Fund Management may permit a lesser
amount to be invested in a Fund under a federal income tax-deferred retirement
plan (other than an IRA account), or under a group investment plan qualifying as
a sophisticated investor; and (4) Fund Management reserves the right to
increase, reduce or waive the minimum purchase requirements in its sole
discretion where it determines such action is in the best interests of the Fund.
<PAGE>
The purchase of Fund shares can be expedited by placing bank wire,
overnight courier or telephone orders. Overnight courier orders must meet the
above minimum requirements. In no case can a bank wire order or telephone order
be in an amount less than $1,000. For further information, the purchaser may
call the Fund's office by using the telephone number on the cover of this
Prospectus. Orders sent by overnight courier, including Express Mail, should be
sent to the street address, not Post Office Box, of INVESCO Funds Group, Inc.,
at 7800 E. Union Avenue, Denver, CO 80237.
Orders to purchase shares of the Fund can be placed by telephone. Shares
of the Fund will be issued at the net asset value per share next determined
after receipt of telephone instructions. Generally, payments for telephone
orders must be received by the Fund within three business days or the
transaction may be cancelled. In the event of such cancellation, the purchaser
will be held responsible for any loss resulting from a decline in the value of
the shares. In order to avoid such losses, purchasers should send payments for
telephone purchases by overnight courier or bank wire. ^ IFG has agreed to
indemnify the Fund for any losses resulting from such cancellations of telephone
purchases.
If your check does not clear, or if a telephone purchase must be 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 has
the option to redeem shares from any identically registered account in the Fund
or any other INVESCO fund as reimbursement for any loss incurred. You also may
be prohibited or restricted from making future purchases in any of the INVESCO
funds.
Persons who invest in the Fund through a securities broker may be charged
a commission or transaction fee by the broker for the handling of the
transaction if the broker so elects. Any investor may deal directly with the
Fund in any transaction. In that event, there is no such charge. ^ IDI or IFG
may from time to time make payments from its revenues to securities dealers and
other financial institutions that provide distribution-related and/or
administrative services for the Fund.
The Fund reserves the right in its sole discretion to reject any order for
purchase of its shares (including purchases by exchange) when, in the judgment
of management, such rejection is in the best interest of the Fund.
Net asset value per share is computed once each day that the New York
Stock Exchange is open, as of the close of regular trading on that Exchange
^(generally 4:00 p.m., New York time) and also may be computed on other days
under certain circumstances. Net asset value per share for the Fund is
calculated by dividing the market value of the Fund's securities plus the value
of its other assets (including dividends and interest accrued but not
collected), less all liabilities (including accrued expenses), by the number of
outstanding shares of that Fund. If market quotations are not readily available,
a security or other asset will be valued at fair value as determined in good
faith by the board of directors. Debt securities with remaining maturities of 60
days or less at the time of purchase will be valued at amortized cost, absent
unusual circumstances, so long as the Company's board of directors believes that
such value represents fair value.
<PAGE>
Distribution Expenses. The Fund is authorized under a Plan and Agreement
of Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Plan") to use its assets to finance certain activities relating to the
distribution of its shares to investors. Under the Plan, monthly payments may be
made by the Fund to ^ IDI to permit IDI, at its discretion, to engage in certain
activities and provide certain services approved by the board of directors of
the 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 ^
IDI-affiliated companies, to obtain various distribution-related and/or
administrative services for the Fund. Such services may include, among other
things, processing new shareholder account applications, preparing and
transmitting 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, printing and distribution of sales literature, ^
printing and ^ distribution of prospectuses to prospective investors, and such
other services and promotional activities for the Fund as may from time to time
be agreed upon by the 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 ^ IDI or its affiliates or by third parties.
Under the Plan, the Company's ^ payments to ^ IDI on behalf of the Fund ^
are limited to an amount computed at an annual rate of 0.25 ^% of the Fund's
average net assets ^. IDI is not entitled to ^ payment for overhead expenses
under the Plan, but may be ^ paid for all or a portion of the compensation paid
for salaries and other employee benefits for the personnel of ^ IFG or IDI 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 only be made to ^ compensate IDI for permissible activities engaged in and
services provided by IDI during the rolling 12-month period in which that month
falls, although this period is expanded to 24 months for expenses incurred
during the first 24 months of the Fund's operations. Therefore, any ^
obligations incurred by ^ IDI in excess of the limitations described above ^
will not ^ be paid by the Fund and will be borne by ^ IDI. In addition, ^ IDI
and its affiliates may from time to time make additional payments from its
revenues to securities dealers ^, financial advisers and financial institutions
that provide ^ distribution-related and/or administrative services for the Fund.
No further payments will be made by the Fund under the Plan in the event of ^
the Plan's termination. ^ 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. However, payments received by IDI which
are not used to finance the distribution of shares of the Fund become part of
IDI's revenues and may be used by IDI for any permissible activities for all of
the mutual funds advised by IFG subject to review by the Fund's directors.
Payments made by the Fund under the Plan for compensation of marketing
<PAGE>
personnel, as noted above, are based on an allocation formula designed to ensure
that all such payments are appropriate. IDI will bear any distribution- and
service-related expenses in excess of the amounts which are compensated pursuant
to the Plan. The Plan also authorizes any financing of distribution which may
result from IDI's use of its own resources, including profits from investment
advisory fees received from the Fund, provided that such fees are legitimate and
not excessive. For more information see "How Shares Can Be Purchased --
Distribution Plan" in the Statement of Additional Information.
SERVICES PROVIDED BY THE FUND
Shareholder Accounts. ^ IFG maintains a share account that reflects the
current holdings of each shareholder. Share certificates will be issued only
upon specific request. Since certificates must be carefully safeguarded, and
must be surrendered in order to exchange or redeem Fund shares, most
shareholders do not request share certificates in order to facilitate such
transactions. Each shareholder is sent a detailed confirmation of each
transaction in shares of the Fund. Shareholders whose only transactions are
through the EasiVest, direct payroll purchase, automatic monthly exchange or
periodic withdrawal programs, or are reinvestments of dividends or capital gains
in the same or another fund, will receive confirmations of those transactions on
their quarterly statements. These programs are discussed below. For information
regarding a shareholder's account and transactions, the shareholder may call the
Fund's office by using the telephone number on the cover of this Prospectus.
Reinvestment of Distributions. Dividends and other distributions are
automatically reinvested in additional shares of the Fund at the net asset value
per share of the Fund in effect on the ex-dividend or ex-distribution date. A
shareholder may, however, elect to reinvest dividends and other distributions in
certain of the other no-load mutual funds advised by IFG and distributed by ^
IDI, or to receive payment of all dividends and other distributions in excess of
$10.00 by check by giving written notice to ^ IFG at least two weeks prior to
the record date on which the change is to take effect. Further information
concerning these options can be obtained by contacting ^ IFG.
Periodic Withdrawal Plan. A Periodic Withdrawal Plan is available to
shareholders who own or purchase shares of any mutual funds advised by ^ IFG
having a total value of $10,000 or more; provided, however, that at the time the
Plan is established, the shareholder owns shares having a value of at least
$5,000 in the fund from which the withdrawals will be made. Under the Periodic
Withdrawal Plan, ^ IFG, as agent, will make specified monthly or quarterly
payments of any amount selected (minimum payment of $100) to the party
designated by the shareholder. Notice of all changes concerning the Periodic
Withdrawal Plan must be received by ^ IFG at least two weeks prior to the next
scheduled check. Further information regarding the Periodic Withdrawal Plan and
its requirements and tax consequences can be obtained by contacting ^ IFG.
Exchange ^ Policy. Shares of the Fund may be exchanged for shares of any
other fund of the Company, as well as for shares of any of the following other
no-load mutual funds, which are also advised by IFG and distributed by ^ IDI, on
the basis of their respective net asset values at the time of the exchange:
<PAGE>
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 Value Trust.
Upon an exchange 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 being exchanged will be assessed
and retained by the Fund for the benefit of the remaining shareholders. This fee
is intended to encourage long-term investment 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 which are
also advised by IFG and distributed by ^ IDI. 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.
An exchange involves the redemption of shares in the Fund and investment
of the redemption proceeds in shares of another fund of the Company or in shares
of one of the funds listed above. Exchanges will be made at the net asset value
per share next determined after receipt of an exchange request in proper order.
Any gain or loss realized on such an exchange is recognizable for federal income
tax purposes by the shareholder. Exchange requests may be made either by
telephone or by written request to ^ IFG, using the telephone number or address
on the cover of this Prospectus. Exchanges made by telephone must be in an
amount of at least $250, if the exchange is being made into an existing account
of one of the INVESCO funds. All exchanges that establish a new account must
meet the Fund's applicable minimum initial investment requirements. Written
exchange requests into an existing account have no minimum requirements other
than the Fund's applicable minimum subsequent investment requirements.
The ^ option to exchange Fund shares by telephone is available to
shareholders automatically unless expressly declined. By signing the New Account
Application, a Telephone Transaction Authorization Form or otherwise utilizing
the telephone exchange ^ option, the investor has agreed that the Fund will not
be liable for following instructions communicated by telephone that it
reasonably believes to be genuine. The Fund employs procedures, which it
believes are reasonable, designed to confirm that exchange instructions are
genuine. These may include recording telephone instructions and providing
written confirmations of exchange transactions. As a result of this policy, the
investor may bear the risk of any loss due to unauthorized or fraudulent
instructions; provided, however, that if the Fund fails to follow these or other
reasonable procedures, the Fund may be liable.
<PAGE>
In order to prevent abuse of this ^ policy to the disadvantage of other
shareholders, the Fund reserves the right to terminate the exchange ^ option of
any shareholder who requests more than four exchanges in a year. The Fund will
determine whether to do so based on a consideration of both the number of
exchanges any particular shareholder or group of shareholders has requested and
the time period over which those exchange requests have been made, together with
the level of expense to the Fund which will result from effecting additional
exchange requests. The exchange ^ policy also may be modified or terminated at
any time. Except for those limited instances where redemptions of the exchanged
security are suspended under Section 22(e) of the Investment Company Act of
1940, or where sales of the fund into which the shareholder is exchanging are
temporarily stopped, notice of all such modifications or termination of the
exchange ^ policy will be given at least 60 days prior to the date of
termination or the effective date of the modification.
Before making an exchange, the shareholder should review the prospectuses
of the funds involved and consider their differences^. Shareholders interested
in exercising the exchange ^ option may contact ^ IFG for information concerning
their particular exchanges.
Automatic Monthly Exchange. Shareholders who have accounts in any one or
more of the mutual funds distributed by ^ IDI may arrange for a fixed dollar
amount of their fund shares to be automatically exchanged for shares of any
other INVESCO mutual fund listed under ^"Exchange Policy" on a monthly basis.
The minimum monthly exchange in this program is $50.00. This automatic exchange
program can be changed by the shareholder at any time by notifying ^ IFG at
least two weeks prior to the date the change is to be made. Further information
regarding this service can be obtained by contacting ^ IFG.
EasiVest. For shareholders who want to maintain a schedule of monthly
investments, EasiVest uses various methods to draw a preauthorized amount from
the shareholder's bank account to purchase Fund shares. This automatic
investment program can be changed by the shareholder at any time by ^ contacting
IFG at least two weeks prior to the date the change is to be made. Further
information regarding this service can be obtained by contacting ^ IFG.
Direct Payroll Purchase. Shareholders may elect to have their employer
make automatic purchases of Fund shares for them by deducting a specified amount
from their regular paychecks. This automatic investment program can be modified
or terminated at any time by the shareholder, by notifying the employer. Further
information regarding this service can be obtained by contacting ^ IFG.
Tax-Deferred Retirement Plans. Shares of the Fund may be purchased for
self-employed individual retirement plans, IRAs, SIMPLE IRAs, simplified
employee pension plans and corporate retirement plans. In addition, shares can
be used to fund tax qualified plans established under Section 403(b) of the
Internal Revenue Code by educational institutions, including public school
systems and private schools, and certain kinds of non-profit organizations,
which provide deferred compensation arrangements for their employees.
<PAGE>
Prototype forms for the establishment of these various plans, including,
where applicable, disclosure statements required by the Internal Revenue
Service, are available from ^ IFG. INVESCO Trust Company, a subsidiary of ^ IFG,
is qualified to serve as trustee or custodian under these plans and provides the
required services at competitive rates. Retirement plans (other than IRAs)
receive monthly statements reflecting all transactions in their Fund accounts.
IRAs receive the confirmations and quarterly statements described under
^"Shareholder Accounts.^" For complete information, including prototype forms
and service charges, call ^ IFG at the telephone number listed on the cover of
this Prospectus or send a written request to: Retirement Services, INVESCO Funds
Group, Inc., Post Office Box 173706, Denver, Colorado 80217-3706.
HOW TO REDEEM SHARES
Shares of the Fund may be redeemed at any time at their current net asset
value per share next determined after a request in proper form is received at
the Fund's office. (See ^"How Shares Can Be ^ Purchased.") Net asset value per
share at the time of redemption may be more or less than the price you paid to
purchase your shares, depending primarily upon the Fund's investment
performance. 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 investment 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, which
are also advised by IFG and distributed by ^ IDI. 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.
If the shares to be redeemed are represented by stock certificates, a
written request for redemption signed by the registered shareholder(s) and the
certificates must be forwarded to INVESCO Funds Group, Inc., Post Office Box
173706, Denver, Colorado 80217-3706. Redemption requests sent by overnight
courier, including Express Mail, should be sent to the street address, not Post
Office Box, of INVESCO Funds Group, Inc. at 7800 E. Union Avenue, Denver, CO
80237. If no certificates have been issued, a written redemption request signed
by each registered owner of the account must be submitted to ^ IFG at the
address noted above. If shares are held in the name of a corporation, additional
documentation may be necessary. Call or write for ^ specific information. If
payment for the redeemed shares is to be made to someone other than the
registered owner(s), the signature(s) must be guaranteed by a financial
institution which qualifies as an eligible guarantor institution. Redemption
procedures with respect to accounts registered in the names of broker-dealers
may differ from those applicable to other shareholders.
<PAGE>
BE CAREFUL TO SPECIFY THE ACCOUNT FROM WHICH THE REDEMPTION IS TO BE MADE.
SHAREHOLDERS HAVE A SEPARATE ACCOUNT FOR EACH FUND IN WHICH THEY INVEST.
Payment of redemption proceeds will be mailed within seven days following
receipt of the required documents. However, payment may be postponed under
unusual circumstances, such as when normal trading is not taking place on the
New York Stock Exchange or an emergency as defined by the Securities and
Exchange Commission exists. If the shares to be redeemed were purchased by check
and that check has not yet cleared, payment will be made promptly upon clearance
of the purchase check (which ^ will take up to 15 days).
If a shareholder participates in EasiVest, the Fund's automatic monthly
investment program, and redeems all of the shares in ^ a Fund account, ^ IFG
will terminate any further EasiVest purchases unless otherwise instructed by the
shareholder.
Because of the high relative costs of handling small accounts, should the
value of any shareholder's account fall below $250 as a result of shareholder
action, the Fund reserves the right to effect the involuntary redemption of all
shares in such account, in which case the account would be liquidated and the
proceeds forwarded to the shareholder. Prior to any such redemption, a
shareholder will be notified and given 60 days to increase the value of the
account to $250 or more.
Fund shareholders (other than shareholders holding Fund shares in accounts
of IRA plans) may request expedited redemption of shares having a minimum value
of $250 (or redemption of all shares if their value is less than $250) held in
accounts maintained in their name by telephoning redemption instructions to ^
IFG, using the telephone number on the cover of this Prospectus. The redemption
proceeds, at the shareholder's option, either will be mailed to the address
listed for the shareholder's Fund account, or wired (minimum of $1,000) or
mailed to the bank which the shareholder has designated to receive the proceeds
of telephone redemptions. The Fund charges no fee for effecting such telephone
redemptions. Unless Fund Management permits a larger redemption request to be
placed by telephone, a shareholder may not place a redemption request by
telephone in excess of $25,000. These telephone redemption privileges may be
modified or terminated in the future at the discretion of Fund Management.
For ^ federal income tax-deferred retirement plans sponsored by INVESCO
Trust, the term ^"shareholders" is defined to mean plan trustees that file a
written request to be able to redeem Fund shares by telephone. Shareholders
should understand that, while the Fund will attempt to process all telephone
redemption requests on an expedited basis, there may be times, particularly in
periods of severe economic or market disruption, when (a) they may encounter
difficulty in placing a telephone redemption request, and (b) processing
telephone redemptions will require up to seven days following receipt of the
redemption request, or additional time because of the unusual circumstances set
forth above.
<PAGE>
The privilege of redeeming Fund shares by telephone is available to
shareholders automatically unless expressly declined. By signing a New Account
Application, a Telephone Transaction Authorization Form or otherwise utilizing
telephone redemption privileges, the shareholder has agreed that the Fund will
not be liable for following instructions communicated by telephone that it
reasonably believe to be genuine. The Fund employs procedures, which it believes
are reasonable, designed to confirm that telephone instructions are genuine.
These may include recording telephone instructions and providing written
confirmation of transactions initiated by telephone. As a result of this policy,
the investor may bear the risk of any loss due to unauthorized or fraudulent
instructions; provided, however, that if the Fund fails to follow these or other
reasonable procedures, the Fund may be liable.
TAXES, DIVIDENDS AND ^ OTHER DISTRIBUTIONS
Taxes. The Fund intends to distribute to shareholders ^ all of its net
investment income, net capital gains and net gains from foreign currency
transactions, if any, in order to continue to qualify for tax treatment as a
regulated investment company. Thus, the Fund does not expect to pay any federal
income or excise taxes.
Unless shareholders are exempt from income taxes, they must include all
dividends and ^ other 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.
Net realized capital gains of the Fund are classified as short-term and
long-term gains depending upon how long the Fund held the security that gave
rise to the gains. Short-term capital gains are included in income from
dividends and interest as ordinary income and are taxed at the taxpayer's
marginal tax rate. The Taxpayer Relief Act of 1997 (the "Tax Act"), enacted in
August 1997, changed the taxation of long-term capital gains for individuals by
applying different capital gains rates depending on the taxpayer's holding
period and marginal rate of federal income tax. Long-term gains realized on the
sale of securities held for more than one year but not for more than 18 months
are taxable at a rate of 28%. This category of long-term gains is often referred
to as "mid-term" gains but is technically termed "28% rate gains". Long-term
gains realized on the sale of securities held for more than 18 months are
taxable at a rate of 20%. At the end of each year, information regarding the tax
status of dividends and other distributions is provided to shareholders.
Shareholders should consult their tax advisers as to the effect of the Tax Act
on distributions by the Fund of net capital gains.
Shareholders also may realize capital gains or losses when they sell their
Fund shares at more or less than the price originally paid. Capital gains on
shares held for more than one year will be long-term capital gains, in which
event they will be subject to federal income tax at the rates indicated above.
The Fund may be subject to ^ withholding of foreign taxes on dividends or
interest ^ received on foreign securities. Foreign taxes withheld will be
treated as an expense of the Fund ^.
<PAGE>
^ Individuals and certain other non-corporate shareholders may be subject
to backup withholding of 31% on dividends, capital ^ gains and other
distributions and redemption proceeds. 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.
We encourage you to consult a tax adviser with respect to these matters.
For further information see "Dividends, Other Distributions and Taxes" in the
Statement of Additional Information.
Dividends and Other ^ Distributions. The Fund earns ordinary or net
investment income^ in the form of dividends and interest on its investments. ^
Dividends paid by the Fund will be based solely on the income earned by it. The
Fund's policy is to distribute substantially all of this income, less Fund
expenses, to shareholders on an annual basis, at the discretion of the ^ Fund's
board of directors. Dividends are automatically reinvested in additional shares
of the Fund at the net asset value on the payable date unless otherwise
requested.
In addition, the Fund realizes capital gains and losses when it sells
securities 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 ^
net realized capital ^ gains. Net realized capital gains, if any, together with
gains, if any, realized on foreign currency transactions, are distributed to
shareholders at least annually, usually in December. Capital gains distributions
are automatically reinvested in shares of the Fund at the net asset value on the
payable date unless otherwise requested.
Dividends and other ^ distributions are paid to ^ holders of shares on the
record date of ^ distribution regardless of how long the Fund shares have been
held by the shareholder. The ^ Fund's share price will then drop by the amount
of the distribution on the ^ ex-dividend or ex-distribution ^ date. If a
shareholder purchases shares immediately prior to the distribution, the
shareholder will, in effect, have ^"bought" the distribution by paying the full
purchase price, a portion of which is then returned in the form of a taxable
distribution.
^
ADDITIONAL INFORMATION
Voting Rights. All shares of the Fund have equal voting rights, based on
one vote for each share owned. Voting with respect to certain matters, such as
ratification of independent accountants and the election of directors, will be
by all Funds of the Company voting together. In other cases, such as voting upon
an investment advisory contract, voting is on a Fund-by-Fund basis. When not all
Funds are affected by a matter to be voted upon, only shareholders of the Fund
or Funds affected by the matter will be entitled to vote thereon. The Company is
not generally required, and does not expect, to hold regular annual meetings of
<PAGE>
shareholders. However, the board of directors will call special meetings of
shareholders for the purpose, among other reasons, of voting upon the question
of removal of a director or directors when requested to do so in writing by the
holders of 10% or more of the outstanding shares of the Company or as may be
required by applicable law or the Company's Articles of Incorporation. The
Company will assist shareholders in communicating with other shareholders as
required by the Investment Company Act of 1940. Directors may be removed by
action of the holders of a majority or more of the outstanding shares of the
Company.
Master/Feeder Option. The Company may in the future seek to achieve the
Fund's investment objective by investing all of the Fund's assets in another
investment company or partnership having the same investment objective and
substantially the same investment policies and restrictions as those applicable
to the Fund. It is expected that any such investment company would be managed by
^ IFG in substantially the same manner as the existing Fund. If permitted by
applicable laws and policies then in effect, any such investment may be made in
the sole discretion of the Company's board of directors without further approval
of the shareholders of the Fund. However, Fund shareholders will be given at
least 30 days prior notice of any such investment. Such investment would be made
only if the Company's board of directors determines it to be in the best
interests of the respective Fund and its shareholders. In making that
determination, the board will consider, among other things, the benefits to
shareholders and/or the opportunity to reduce costs and achieve operational
efficiencies. No assurance can be given that costs will be materially reduced if
this option is implemented.
Shareholder Inquiries. All inquiries regarding the Fund should be directed
to the Fund at the telephone number or mailing address set forth on the cover
page of this Prospectus.
Transfer and Dividend Disbursing Agent. INVESCO Funds Group, Inc., 7800 E.
Union Ave., Denver, Colorado 80237, also acts as registrar, transfer agent, and
dividend disbursing agent for the Fund pursuant to a Transfer Agency Agreement
which provides that the Fund will pay an annual fee of $20.00 per shareholder
account or, where applicable, per participant in an omnibus account ^. The
transfer agency fee is not charged to each shareholder's or participant's
account, but is an expense of the Fund to be paid from the Fund's assets.
Registered broker-dealers, third party administrators of tax-qualified
retirement plans and other entities, including affiliates of ^ IFG, may provide
sub-transfer agency or ^ recordkeeping services to the Fund which reduce or
eliminate the need for identical services to be provided on behalf of the Fund
by ^ IFG. In such cases, ^ IFG may pay the third party an annual sub-transfer
agency or ^ recordkeeping fee out of the transfer agency fee which is paid to
IFG by the Fund.
<PAGE>
^
PROSPECTUS
December 1, ^ 1997
INVESCO Latin American Growth Fund
A no-load mutual fund seeking capital
appreciation.
INVESCO FUNDS
INVESCO Distributors, Inc.
Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
1-800-525-8085
PAL(R): 1-800-424-8085
http://www.invesco.com
^ In Denver, visit one of our
convenient Investor Centers:
Cherry Creek
155-B Fillmore Street
Denver Tech Center
7800 East Union Avenue
Lobby Level
In addition, all documents
filed by the Company with the
Securities & Exchange Commission
can be located on a Web site
maintained by the Commission at
http://www.sec.gov.
<PAGE>
PROSPECTUS
December 1, ^ 1997
INVESCO ASIAN GROWTH FUND
INVESCO Asian Growth Fund (the ^"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
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
^("Asian Issuers.") The Fund is not intended as a complete investment program
due to risks of investing in the Fund. For a description of risks inherent in
investing in the Fund see "Risk Factors" ^ and "Portfolio Turnover^."
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. This Prospectus relates to shares of the
INVESCO Asian Growth Fund. Separate prospectuses are available upon request from
INVESCO ^ Distributors, 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 Realty Fund
and INVESCO S&P 500 Index Fund. Investors may purchase shares of any or all of
the Funds. Additional funds may be offered in the future.
This ^ Prospectus provides you with the basic information you should know
before investing in the Fund. You should read it and keep it for future
reference. A Statement of Additional Information dated December 1, 1997,
containing further information about the Fund^ 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., Post
Office Box 173706, Denver, Colorado 80217-3706; ^ call 1-800-525-8085; or ^
visit our web site: http://www.invesco.com.
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION. THE SHARES
OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. ^
TABLE OF CONTENTS
Page
----
ANNUAL FUND EXPENSES 99
FINANCIAL HIGHLIGHTS 101
PERFORMANCE DATA 103
INVESTMENT OBJECTIVE AND POLICIES 103
RISK FACTORS 108
THE FUND AND ITS MANAGEMENT 112
HOW SHARES CAN BE PURCHASED 114
SERVICES PROVIDED BY THE FUND 117
HOW TO REDEEM SHARES 120
TAXES, DIVIDENDS AND ^ OTHER DISTRIBUTIONS 122
ADDITIONAL INFORMATION 124
<PAGE>
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 Transaction ^ Expenses"). The Fund, however, is
authorized to pay a distribution fee pursuant to Rule 12b-1 under the Investment
Company Act of 1940. (See ^"How Shares Can Be Purchased--Distribution ^
Expenses.") Lower expenses benefit Fund shareholders by increasing the Fund's
total return.
Shareholder Transaction Expenses
Sales load "charge" on purchases None
Sales load "charge" on reinvested dividends None
Redemption fees 1.00%*
Exchange fees 1.00%*
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fee 0.75%
12b-1 Fees 0.25%
Other Expenses(1)(2) ^ 1.05%
Transfer Agency Fee(3) ^ 0.39%
General Services, Administrative ^ 0.66%
Services, Registration, Postage(4)
Total Fund Operating Expenses ^ 2.05%
(after voluntary expense limitation)(1)(2)
*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) It should be noted that the Fund's actual total operating expenses
were lower than the figures shown because the Fund's custodian fees and pricing
expenses were reduced under an expense offset arrangement. However, as a result
of an SEC requirement, the figures shown above do not reflect these reductions.
In comparing expenses for different years, please note that the ratios of
Expenses to Average Net Assets shown under ^"Financial Highlights^" do reflect
reductions for periods prior to the fiscal year ended July 31, 1996. See ^"The
Fund and Its Management.^"
(2) Certain Fund expenses are voluntarily absorbed by INVESCO Funds Group,
Inc. ^ and INVESCO Asia Ltd. In the absence of such absorbed expenses, the
Fund's "Other Expenses" and ^"Total Fund Operating Expenses^" in the above table
would have been ^ 1.10% and 2.10%, of the Fund's average net assets based on the
actual expenses of the Fund for the fiscal year ended July 31, ^ 1997.
See ^"The Fund and Its Management.^"
(3) Consists of the transfer agency fee described under ^"Additional
Information-Transfer and Dividend Disbursing Agent.^"
<PAGE>
(4) Includes, but is not limited to, fees and expenses of directors,
custodian bank, legal counsel and independent accountants, securities pricing
services, costs of administrative services under an Administrative Services
Agreement, costs of registration of Fund shares under applicable laws, and costs
of printing and distributing reports to shareholders.
Example
A shareholder would pay the following expenses on a $1,000 investment for
the periods shown, assuming (1) a 5% annual return and (2) redemption at the end
of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
^ $21 $65 $111 $240
The purpose of the foregoing expense table and Example is to assist
investors in understanding the various costs and expenses that an investor in
the Fund will bear directly or indirectly. Such expenses are paid from the
Fund's assets. (See ^"The Fund and Its ^ Management.") THE EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES, AND ACTUAL EXPENSES MAY
BE GREATER OR LESS THAN THOSE SHOWN. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or future
annual returns, which may be greater or less than the assumed amount.
As a result of the 0.25% 12b-1 fee paid by the Fund, investors who own
Fund shares for a long period of time may pay more than the economic equivalent
of the maximum front-end sales charge permitted for mutual funds by the National
Association of Securities Dealers, Inc.
<PAGE>
INVESCO Specialty Funds, Inc.
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
^
The following information has been audited by Price Waterhouse LLP,
independent accountants. This information should be read in conjunction with the
audited financial statements and the report of independent accountants thereon
appearing in the ^ Company's 1997 Annual Report to Shareholders which is
incorporated by reference into the Statement of Additional Information. Both are
available without charge by contacting INVESCO ^ Distributors, Inc. at the
address or telephone number shown below.
Year Period
Ended Ended
July 31 July 31
---------- ----------
1997 1996^
Asian Growth Fund ^
PER SHARE DATA
Net Asset Value - Beginning of Period $8.95 $10.00
---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.02) 0.02
Net ^ Gains or (Losses) on Securities
(Both Realized and Unrealized) 2.42 (1.05)
---------- ----------
Total from Investment Operations 2.40 (1.03)
---------- ----------
LESS DISTRIBUTIONS
Dividends from Net Investment Income ^ 0.00 0.02
^---------- ----------
Net Asset Value - End of Period $11.35 $8.95
========== ==========
TOTAL RETURN+ 27.04% (10.31%)*
RATIOS
Net Assets - End of Period
($000 Omitted) $32,969 $14,315
Ratio of Expenses to Average
Net Assets# 2.05%@ 2.19%^~@
Ratio of Net Investment Income (Loss)
to ^ Average Net Assets# (0.20%) 0.94%~
Portfolio Turnover Rate 161% 2%*
Average Commission Rate Paid^^ $0.0047 $0.0198*
<PAGE>
^ From March 1, 1996, commencement of investment operations, to July 31, 1996.
+ Total return ^ does not reflect the effect of the applicable redemption fees.
* Based on operations for the period shown and, accordingly, are not
representative of a full year.
# Various expenses of the ^ Fund were voluntarily absorbed by ^ INVESCO Funds
Group, Inc. and INVESCO Asia for the year ended July 31, 1997 and for the period
ended July 31, 1996. If such expenses had not been voluntarily absorbed, ratio
of expenses to average net assets would have been 2.10% and 2.79% (annualized),
respectively, and ratio of net investment income to average net assets would
have been (0.25%) and 0.34% (annualized), respectively.
@ Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser^ and Sub-Adviser, which is before any expense offset
arrangements.
~ Annualized
^^ 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 which ^ is required to be disclosed
for fiscal years beginning September 1, 1995 and thereafter.
Further information about the performance of the Funds is contained in the
Company's Annual Report to Shareholders, which may be obtained without charge by
writing INVESCO ^ Distributors, Inc., P.O. Box 173706, Denver, Colorado
80217-3706; or by calling 1-800- 525-8085.
<PAGE>
PERFORMANCE DATA
From time to time, the Fund may advertise its total return performance.
These figures are based upon historical investment results and are not intended
to indicate future performance. The "total return" of the Fund refers to the
average annual rate of return of an investment in the Fund. This figure is
computed by calculating the percentage change in value of an investment of
$1,000, assuming reinvestment of all income dividends and capital gain
distributions, to the end of a specified period. Periods of one year, five
years, ten years and/or life of the Fund are used if available. ^ A report of
total return performance should not be considered as representative of future
performance. The Fund charges no sales loads that would affect the total return
computation. However, the total return computation may be affected as a result
of the 1% redemption or exchange fee which is retained by the Fund to offset
transaction costs and other expenses associated with short-term redemptions and
exchanges, which is imposed on redemptions or exchanges of shares held less than
three months.
In conjunction with performance reports and/or analyses of shareholder
service for the Fund, comparative data between the Fund's performance for a
given period and the performance of recognized indices of investment results for
the same period, and/or assessments of the quality of shareholder service, may
be provided to shareholders. Such indices include indices provided by Dow Jones
& Company, Standard & Poor's, Lipper Analytical Services, Inc., Lehman Brothers,
National Association of Securities Dealers Automated Quotations, Frank Russell
Company, Value Line Investment Survey, the American Stock Exchange, Morgan
Stanley Capital International, Wilshire Associates, the Financial Times-Stock
Exchange, the New York Stock Exchange, the Nikkei Stock Average and the Deutcher
Aktienindex, all of which are unmanaged market indicators. In addition,
rankings, ratings, and comparisons of investment performance and/or assessments
of the quality of shareholder service appearing in publications such as Money,
Forbes, Kiplinger's Personal Finance, Morningstar, and similar sources which
utilize information compiled (i) internally; (ii) by Lipper Analytical Services,
Inc.; or (iii) by other recognized analytical services may be used in
advertising. The Lipper Analytical Services, Inc. mutual fund rankings and
comparisons, which may be used by the Fund in performance reports, will be drawn
from the "Pacific Region" Lipper mutual fund grouping, in addition to the
broad-based Lipper general fund grouping.
INVESTMENT OBJECTIVE AND POLICIES
INVESCO Asian Growth Fund seeks to achieve capital appreciation by
investing, under normal circumstances, at least 65% of its total assets in
equity securities (common stocks and, to a lesser degree, shares of other
investment companies, preferred stocks and securities convertible into common
stocks such as rights, warrants and convertible debt securities) of large and
<PAGE>
small companies domiciled or with primary operations in Asia and the Pacific
Rim, excluding Japan. The foregoing investment objective is fundamental and may
not be changed without the approval of the Fund's shareholders. For purposes of
the Fund, 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 Fund defines securities of Asian
Issuers as any issuer which, in the opinion of the Fund's investment adviser or
sub-adviser (collectively, ^"Fund Management"), issues: (1) securities of
companies organized under the laws of an Asian territory, other than Japan; (2)
securities of companies for which the principal securities trading market is in
Asian territories; (3) securities issued or guaranteed by a government agency,
instrumentality, political subdivision, or central bank of an Asian territory;
(4) securities of issuers, wherever organized, with at least 50% of the issuer's
assets, gross revenues, or profit in any one of the two most ^ recent fiscal
years derived from activities or assets in Asian territories, other than Japan;
or (5) securities of Asian Issuers, as defined above, in the form of depository
shares or receipts. Under normal circumstances, the Fund will invest at least
65% of its total assets in issuers domiciled in at least five different
countries, although Fund Management expects the Fund's investments to be
allocated among a larger number of countries. While more than 25% of the Fund's
total assets on occasion may be invested in securities of Asian issuers
domiciled in, or with primary operations in, a single country, Fund Management
does not normally intend to manage the Fund's investments with the view of
investing more than 25% of the Fund's total assets in securities of Asian
Issuers domiciled in, or with primary operations in, any one particular country.
The Fund has not established any minimum investment standards, such as
earnings history, type of industry, dividend payment history, etc. with respect
to the Fund's investments in foreign equity securities and, therefore, investors
in the Fund should consider that investments may consist of securities that may
be deemed to be speculative.
The economies of Asian countries may vary widely in their condition, and
may be subject to certain changes that could have a positive or negative impact
on the Fund. Investments in foreign securities involve certain risks which are
discussed below under ^"Risk Factors.^"
The securities in which the Fund invests will typically be listed on the
principal stock exchanges in these countries, or in the secondary or junior
markets, although the Fund may purchase securities listed on the
over-the-counter market in these countries. While Fund Management believes that
smaller companies can offer greater growth potential than larger, more
established firms, the former also involve greater risk and price volatility. To
help reduce risk, Fund Management expects, under normal market conditions, to
vary its portfolio investments by company, industry and country. Investments in
foreign securities involve certain risks which are discussed below under ^"Risk
Factors.^"
<PAGE>
Consistent with its investment objective, the balance of the Fund's assets
may be invested in debt securities (corporate bonds, commercial paper, debt
securities issued by the U.S. government, its agencies and instrumentalities,
Asian Issuers or foreign governments and, to a lesser extent, municipal bonds,
asset-backed securities and zero coupon bonds). The Fund may invest no more than
30% of its total assets in debt securities that are rated below BBB by Standard
& Poor's^, a division of The McGraw-Hill Companies, Inc. ("S&P") or Baa by
Moody's Investors Service, Inc. ("Moody's") or, if unrated, ^ judged by Fund
Management to be equivalent in quality to debt securities having such ratings
(commonly referred to as "junk bonds"). In no event will the Fund ever invest in
a debt security rated below CCC by S&P or Caa by Moody's or, if unrated, ^
judged by Fund Management to be equivalent in quality to debt securities having
such ratings. The risks of investing in lower rated debt securities are
discussed below under ^"Risk Factors.^"
The amounts invested in stocks, bonds and cash securities may be varied
from time to time, depending upon Fund Management's assessment of business,
economic and market conditions. However, the Fund does not currently intend to
invest any portion of its assets in Japan. In periods of abnormal economic and
market conditions, as determined by Fund Management, the Fund may depart from
its basic investment objective and assume a temporary defensive position, with
up to 100% of its assets invested in U.S. government and agency securities,
investment grade corporate bonds, or cash securities such as domestic
certificates of deposit and banker's acceptances, repurchase agreements and
commercial paper. The Fund reserves the right to hold equity, fixed-income and
cash securities in whatever proportion is deemed desirable at any given time for
temporary defensive purposes. While the Fund is in a ^ defensive position, the
opportunity to achieve capital appreciation will be limited; however, the
ability to maintain a ^ defensive position enables the Fund to seek to avoid
capital losses during market downturns. Under normal market conditions, the Fund
does not expect to have a substantial portion of its assets invested in cash
securities.
As a non-fundamental policy, in order to hedge its portfolio the Fund may
purchase and write options on securities (including index options and options on
foreign securities) and may invest in futures contracts for the purchase or sale
of foreign currencies, fixed-income securities and instruments based on
financial indices (collectively, ^"futures contracts"), options on futures
contracts, forward contracts and interest rate swaps and swap-related products^.
Interest rate swaps involve the exchange by the 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. These practices and instruments, some of
which are known as derivatives, and their risks are discussed below under ^"Risk
Factors^" and in the Statement of Additional Information.
Additional information on certain types of securities in which the Fund
may invest is set forth below:
When-Issued Securities
The Fund may make commitments in an amount of up to 10% of the value of
its total assets at the time any commitment is made to purchase or sell equity
or debt securities on a when-issued or delayed delivery basis (i.e., securities
<PAGE>
may be purchased or sold by the Fund with settlement taking place in the future,
often a month later or more). The payment obligation and, in the case of debt
securities, the interest rate that will be received on the securities generally
are fixed at the time the Fund enters into the commitment. During the period
between purchase and settlement, no payment is made by the Fund and no interest
accrues to the Fund. At the time of settlement, the market value of the security
may be more or less than the purchase price, and the Fund bears the risk of such
market value fluctuations. The Fund maintains cash, U.S. government securities,
or other ^ liquid securities having an aggregate value equal to the amount of
such purchase commitments in a segregated account until payment is made.
Illiquid and Rule 144A Securities
The Fund ^ may invest in securities that are illiquid because they are
subject to restrictions on their resale ^("restricted securities") or because,
based upon their nature or the market for such securities, they are not readily
marketable. However, as a non-fundamental policy the Fund will not purchase any
such security if the purchase would cause the Fund to invest more than 15% of
its net assets in illiquid securities. Repurchase agreements maturing in more
than seven days will be considered as illiquid for purposes of this restriction.
Investments in illiquid securities involve certain risks to the extent that the
Fund may be unable to dispose of such a security at the time desired or at a
reasonable price. In addition, in order to resell a restricted security, the
Fund might have to bear the expense and incur the delays associated with
effecting registration.
Certain restricted securities that are not registered for sale to the
general public, but that can be resold to institutional investors ("Rule 144A
Securities"), may be purchased without regard to the foregoing 15% limitation if
a liquid institutional trading market exists. The liquidity of the Fund's
investments in Rule 144A Securities could be impaired if dealers or
institutional investors become uninterested in purchasing these securities. The
Company's board of directors has delegated to Fund Management the authority to
determine the liquidity of Rule 144A Securities pursuant to guidelines approved
by the board. For more information concerning Rule 144A Securities, see the
Statement of Additional Information.
Repurchase Agreements
The Fund may enter into repurchase agreements with respect to debt
instruments eligible for investment by the Fund^ with member banks of the
Federal Reserve System, registered broker-dealers, and registered government
securities dealers, which are deemed creditworthy by Fund Management. A
repurchase agreement, which may be considered a ^"loan" under the Investment
Company Act of 1940 (the ^"1940 Act"), is a means of investing monies for a
short period. In a repurchase agreement, the Fund acquires a debt instrument
(generally a security issued by the U.S. government or an agency thereof, a
banker's acceptance, or a certificate of deposit) subject to resale to the
seller at an agreed upon price and date (normally, the next business day). In
<PAGE>
the event that the original seller defaults on its obligation to repurchase the
security, the Fund could incur costs or delays in seeking to sell such security.
To minimize risk, the securities underlying each repurchase agreement will be
maintained with the Fund's custodian in an amount at least equal to the
repurchase price under the agreement (including accrued interest), and such
agreements will be effected only with parties that meet certain creditworthiness
standards established by the Company's board of directors. The Fund will not
enter into a repurchase agreement maturing in more than seven days if as a
result more than 15% of its net assets would be invested in such repurchase
agreements and other illiquid securities. The Fund has not adopted any limit on
the amount of its net assets that may be invested in repurchase agreements
maturing in seven days or less.
Portfolio Turnover
^ There are no fixed limitations regarding portfolio turnover for the
Fund's portfolio. Although the Fund does not trade for short-term profits,
securities may be sold without regard to the time they have been held in the
Fund when, in the opinion of Fund Management, investment considerations warrant
such action. In addition, portfolio turnover rates may increase as a result of
large amounts of purchases or redemptions of Fund shares due to economic, market
or other factors that are not within the control of Fund Management. As a
result, while it is anticipated that the portfolio turnover rate for the Fund's
portfolio generally will not exceed 200%, under certain market conditions the
portfolio turnover rate may exceed 200%. A portfolio turnover rate in excess of
100% may be considered higher than that of other investment companies seeking
capital appreciation. Increased portfolio turnover would cause the Fund to incur
greater brokerage costs than would otherwise be the case, and may result in the
acceleration of capital gains that are taxable when distributed to shareholders.
The Fund's portfolio turnover rate, along with the Fund's brokerage allocation
policies, are discussed further in the Statement of Additional Information.
Investment Restrictions
The Fund is subject to a variety of restrictions regarding its investments
that are set forth in this ^ Prospectus and in the Statement of Additional
Information. Certain of the Fund's investment restrictions are fundamental, and
may not be altered without the approval of the Fund's shareholders. Such
fundamental investment restrictions include the restrictions which prohibit a
Fund from: lending more than 33-1/3% of its total assets to other parties
(excluding purchases of commercial paper, debt securities and repurchase
agreements); investing more than 25% of the value of the Fund's total assets in
one industry (other than government securities); with respect to 75% of its
total assets, purchasing the securities of any one issuer (other than cash items
and government securities) if the purchase would cause the Fund to have more
than 5% of its total assets invested in the issuer or to own more than 10% of
the outstanding voting securities of the issuer; and borrowing money or issuing
senior securities, except that the Fund may borrow money for temporary or
emergency purposes (not for leveraging or investment), ^ and may enter into
<PAGE>
reverse repurchase agreements in an aggregate amount not exceeding 33-1/3% of
its total assets. However, unless otherwise noted, the Fund's investment
restrictions and its investment policies are not fundamental and may be changed
by action of the Company's board of directors. Unless otherwise noted, all
percentage limitations contained in the Fund's investment policies and
restrictions apply at the time an investment is made. Thus, subsequent changes
in the value of an investment after purchase or in the value of the Fund's total
assets will not cause any such limitation to have been violated or to require
the disposition of any investment, except as otherwise required by law. If the
credit ratings of an issuer are lowered below those specified for investment by
the Fund, the Fund is not required to dispose of the obligations of that issuer.
The determination of whether to sell such an obligation will be made by Fund
Management based upon an assessment of credit risk and the prevailing market
price of the investment. If the Fund borrows money, its share price may be
subject to greater fluctuation until the borrowing is repaid. The Fund attempts
to minimize such fluctuations by not purchasing additional securities when
borrowings, including reverse repurchase agreements, are greater than 5% of the
value of the Fund's total assets. The Fund does not intend to invest more than
5% of its assets in reverse repurchase agreements. As a fundamental policy in
addition to the above, the Fund may, notwithstanding any other investment policy
or limitation (whether or not fundamental), invest all of its assets in the
securities of a single open-end management investment company with substantially
the same fundamental investment objectives, policies and limitations as the
Fund. See ^"Additional Information-- Master/Feeder Option.^"
RISK FACTORS
There can be no assurance that the Fund will achieve its investment
objective. The Fund's investments in common stocks and other equity securities
may, of course, decline in value. The Fund's assets will be invested primarily
in Asian Issuers. Investors should realize that investing in securities of Asian
Issuers involves certain risks and special considerations, including those set
forth below, which are not typically associated with investing in securities of
U.S. issuers. Further, certain investments that the Fund may purchase, and
investment techniques that the Fund may use, involve risks including those set
forth below.
Investment in the Fund involves above-average investment risk. It is
designed as a long-term investment and not for short-term trading purposes, and
should not be considered a complete investment program.
Political and Economic Risks
The Fund may make investments in developing countries which involve
exposure to economic structures that generally are less diverse and mature than
in the United States, and to political systems which may be less stable. A
developing country can be considered to be a country which is in the initial
stages of its industrialization cycle. In the past, markets of developing
countries have been more volatile than the markets of developed countries;
however, such markets often have provided higher rates of return to investors.
<PAGE>
Investing in securities of issuers in Asian countries involves certain
considerations not typically associated with investing in securities of United
States companies, including (1) restrictions on foreign investment and on
repatriation of capital invested in Asian countries, (2) currency fluctuations,
(3) the cost of converting foreign currency into United States dollars, (4)
potential price volatility and lesser liquidity of shares traded on Asian
country securities markets and (5) political and economic risks, including the
risk of nationalization or expropriation of assets and the risk of war.
Certain Asian countries are more vulnerable to the ebb and flow of
international trade, trade barriers and other protectionist or retaliatory
measures. Investments in countries that have recently opened their capital
market, including China, which appear to have relaxed their central planning
requirement and those that have privatized some of their state-owned industries
toward free markets, should be regarded as speculative.
Securities Markets
The settlement period of securities transactions in foreign markets may be
longer than in domestic markets. These considerations are generally more of a
concern in developing countries. For example, the possibility of political
upheaval and the dependence on foreign economic assistance may be greater in
these countries than developed countries.
Securities exchanges and broker-dealers in some Asian countries are
subject to less regulatory scrutiny than in the United States, as are Asian
Issuers in such countries. The limited size of the markets for securities may
enable adverse publicity, investors' perceptions or traders' positions or
strategies to affect prices unduly, at times decreasing not only the value but
also the liquidity of the Fund's investments. The Fund may invest no more than
15% of its net assets at the time of investment in illiquid securities.
Securities the proceeds of which are subject to limitations on repatriation of
principal or profits for more than seven days, and those for which there ceases
to be a ready market, will be deemed illiquid for this purpose.
Foreign Securities
Due to the absence of established securities markets in certain Asian
countries there may be restrictions on investment by foreigners in the
securities of companies in these countries, and difficulties in removing from
certain of these countries the dollars invested in such companies; the Fund's
ability to invest in certain countries may be restricted to the use of
investment vehicles authorized by the local government, investment in shares of
other investment companies; or investments in American Depository Receipts
^("ADRs"), American Depository Shares, and Global Depository Shares.
ADRs are ^ instruments, usually issued by a U.S. bank or trust company,
evidencing ownership of ^ securities of a foreign issuer into which the ADRs may
be convertible. ADRs are designed for use in United States markets and may be
traded on U.S. securities exchanges or over-the-counter. They are denominated in
dollars rather than the currency of the country in which the underlying
securities are issued.
<PAGE>
ADRs may be issued in sponsored or unsponsored programs. In sponsored
programs, the issuer makes arrangements to have its securities traded in the
form of ADRs; in unsponsored programs, the issuer may not be directly involved
in the creation of the program. Although the regulatory requirements with
respect to sponsored and unsponsored programs are generally similar, the issuers
of unsponsored ADRs are not obligated to disclose material information in the
United States and, therefore, such information may not be reflected in the
market value of the ADRs. ADRs are subject to certain of the same risks as
direct investments in foreign securities, including the risk that changes in the
value of the currency in which the security underlying an ADR is denominated
relative to the U.S. dollar may adversely affect the value of the ADR.
As indicated above, the Fund may deem it most practical to invest in
certain countries through other investment companies or similar vehicles,
although there can be no assurance that any such vehicles will be available or
will themselves have invested in the securities found most desirable by the
Fund. The Fund will not invest through other entities unless, in the opinion of
Fund Management, the potential advantages of such investment justify the Fund's
bearing its ratable share of the expenses of such entity (constituting duplicate
levels of advisory fees to be borne by the Fund and its shareholders) and its
share of any premium encompassed in the market value of such entity at the time
of the Fund's investment over the market value of the entity's underlying
holdings. In addition, there may be tax ramifications relating to investment in
such entities. Investments by the Fund in other investment companies are subject
to the following limits imposed by the 1940 Act: subject to certain exceptions,
no more than 5% of the Fund's total assets may be invested in any one investment
company (but no more than 3% of the voting stock of the underlying investment
company ^ may be purchased) and no more than 10% of the Fund's total assets may
be invested in other investment companies in the aggregate.
For U.S. investors, the returns on foreign securities are influenced not
only by the returns on the foreign investments themselves, but also by currency
fluctuation (i.e., changes in the value of the currencies in which the
securities are denominated relative to the U.S. dollar). In a period when the
U.S. dollar generally rises against a foreign ^ currency, returns ^ for a U.S.
investor ^ on foreign securities denominated in that foreign currency may
decline. By contrast, in a period when the U.S. dollar generally declines, the
returns on foreign securities generally may be enhanced.
Other risks and considerations of international investing include the
following: differences in accounting, auditing and financial reporting
standards, which may result in less publicly available information than is
generally available with respect to U.S. issuers; generally higher commission
rates on foreign portfolio transactions and longer settlement periods; the
smaller trading volumes and generally lower liquidity of foreign stock markets,
which may result in greater price volatility; foreign withholding taxes payable
on income and/or gains from the Fund's foreign securities, which may reduce
dividend and/or interest income or capital gains available for distribution to
shareholders; the possibility of expropriation or confiscatory taxation; adverse
changes in investment or exchange control regulations; political instability
which could affect U.S. investment in foreign countries; potential restrictions
on the flow of international capital; and the possibility of the Fund
experiencing difficulties in pursuing legal remedies and collecting judgments.
<PAGE>
Debt Securities
The Fund's investments in debt securities generally are subject to both
credit risk and market risk. Credit risk relates to the ability of the issuer to
meet interest or principal payments, or both, as they come due. The ratings
given a security by S&P or Moody's provide a generally useful guide to such
credit risk. The lower rating given a security by said rating service, the
greater the credit risk such rating service perceives to exist with respect to
such seurity. Increasing the amount of Fund assets invested in unrated or lower
grade securities, while intended to increase the yield produced by these assets,
also will increase the credit risk to which those assets are subject.
Market risk relates to the fact that the market values of the debt
securities in which the Fund invests generally will be affected by changes in
the level of interest rates. An increase in interest rates will tend to reduce
the market values of debt securities, whereas a decline in interest rates will
tend to increase their values. Although Fund Management limits the Fund's
investments in fixed-income securities to securities it believes are not highly
speculative, both kinds of risk are increased by investing in debt securities
rated below the top three grades by ^ S&P or Moody's or, if unrated, securities
determined by Fund Management to be of equivalent quality. ^ Although bonds in
the lowest investment grade debt category (those rated BBB by ^ S&P or Baa by
Moody's) are regarded as having adequate capability to pay principal and
interest, they have speculative characteristics. Adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than is the case for higher rated bonds. Lower
rated bonds by Moody's (categories Ba, B, Caa) are of poorer quality and also
have speculative characteristics. Bonds rated Caa may be in default or there may
be present elements of danger with respect to principal or interest. Lower rated
bonds by ^ S&P (categories BB, B, CCC) include those which are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with their terms; BB indicates
the lowest degree of speculation and CCC a high degree of speculation. While
such bonds likely will have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions. For a specific description of each corporate bond rating category,
please refer to Appendix B to the Statement of Additional Information. Note,
however, that the Fund expects that most foreign debt securities in which it
would invest will not be rated by U.S. rating services.
Futures, Options and Other Derivative Instruments
The use of futures, options, forward contracts and swaps exposes the Fund
to additional investment risks and transaction costs and, as a result, no more
than 5% of the Fund's total assets will be committed to such investments. If
Fund Management seeks to protect the Fund against potential adverse movements in
the securities, foreign currency or interest rate markets using these
instruments, and such markets do not move in a direction adverse to the Fund,
the Fund could be left in a less favorable position than if such strategies had
not been used. Risks inherent in the use of futures, options, forward contracts
and swaps include (1) the risk that interest rates, securities prices and
currency markets will not move in the directions anticipated; (2) imperfect
<PAGE>
correlation between the price of futures, options and forward contracts and
movements in the prices of the securities or currencies being hedged; (3) the
fact that skills needed to use these strategies are different from those needed
to select portfolio securities; (4) the possible absence of a liquid secondary
market for any particular instrument at any time; and (5) the possible need to
defer closing out certain hedged positions to avoid adverse tax consequences.
Further information on the use of futures, options, forward foreign currency
contracts and swaps and swap-related products, and the associated risks, is
contained in the Statement of Additional Information.
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.
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. The overall
supervision of the Fund is the responsibility of the Company's board of
directors.
Pursuant to an agreement with the Company, INVESCO Funds Group, Inc.
^("IFG"), 7800 E. Union Avenue, Denver, Colorado, serves as the Fund's
investment adviser. Under this agreement, ^ IFG is primarily responsible for
providing the Fund with various administrative services and supervising the
Fund's daily business affairs. These services are subject to review by the
Company's board of directors.
^
Pursuant to an agreement with ^ IFG, INVESCO Asia Limited ^("INVESCO
Asia") serves as the sub-adviser to the Fund. In that capacity, INVESCO Asia has
the primary responsibility, under the supervision of ^ IFG, for providing
portfolio management services to the Fund. ^ INVESCO Asia, subject to the
supervision of ^ IFG, is primarily responsible for selecting and managing the
Fund's investments.
^ Pursuant to an agreement with the Company, effective September 30, 1997,
INVESCO Distributors, Inc. ("IDI") became the Fund's distributor. IDI,
established in 1997, is a registered broker-dealer that acts as distributor for
all retail mutual funds advised by IFG. Prior to September 30, 1997, IFG served
as the Fund's distributor.
<PAGE>
IFG, INVESCO Asia and IDI are indirect wholly-owned subsidiaries of
AMVESCAP PLC. AMVESCAP PLC is a publicly-traded holding company that, through
its subsidiaries, engages in the business of investment management on an
international basis. INVESCO PLC changed its name to AMVESCO PLC on March 3,
1997, and to AMVESCAP PLC on May 8, 1997, as part of a merger between a direct
subsidiary of INVESCO PLC and A I M Management Group Inc., that created one of
the largest independent investment management businesses in the world. IFG and
INVESCO Asia continued to operate under their existing names. AMVESCAP PLC has
approximately $177.5 billion in assets under management. IFG was established in
1932 and, as of July 31, 1997, managed 14 mutual funds, consisting of 45
separate portfolios, with combined assets of approximately $16.4 billion on
behalf of over 858,000 shareholders.
The following individual serves as lead portfolio manager for the Fund and
is primarily responsible for determining, in accordance with senior investment
policy group, the country-by- country allocation of the portfolio's assets,
overall stock selection methodology and the ongoing implementation and risk
control policies applicable to the portfolio:
William Barron Portfolio manager of the Fund since 1996
(inception); Director and portfolio manager for
INVESCO Asia Limited since 1995; formerly
(1990-1995), portfolio manager, Aetna Investment
Management Hong Kong, Limited and (1985-1990)
portfolio manager for Chase Manhattan Trust; began
investment career in 1986; BA in Government from
Harvard University. He is a Chartered Financial
Analyst.
Mr. Barron heads a team of individual country specialists who are
responsible for managing security selections for their assigned country's share
of the allocation within the parameters established by INVESCO Asia's investment
policy group.
The Fund pays ^ a monthly advisory fee which is based upon a percentage of
the net assets of the Fund, determined daily. The maximum advisory fee is
computed at the annual rate of 0.75% on the first $500 million of the Fund's
average net assets, 0.65% on the next $500 million of the Fund's average net
assets and 0.55% on the Fund's average net assets over $1 billion.
^ Out of its advisory fee which it receives from the Fund, ^ IFG pays
INVESCO Asia, as sub-adviser to the Fund, a monthly fee, which is computed at
the annual rate of 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. No fee is paid
by the Fund to INVESCO Asia.
The Company also has entered into an Administrative Services Agreement
(the ^"Administrative Agreement") with IFG. Pursuant to the Administrative
Agreement, ^ IFG performs certain administrative, recordkeeping and internal
sub-accounting services, including without limitation, maintaining general
ledger and capital stock accounts, preparing a daily trial balance, calculating
<PAGE>
net asset value daily, providing selected general ledger reports and providing
sub-accounting and recordkeeping services for Fund shareholder accounts
maintained by certain retirement and employee benefit plans for the benefit of
participants in such plans. For such services, the Fund pays ^ IFG a fee
consisting of a base fee of $10,000 per year, plus an additional incremental fee
computed at the annual rate of 0.015% per year of the average net assets of the
Fund. ^ IFG also is paid a fee by the Fund for providing transfer agent
services. See ^"Additional Information.^"
The Fund's expenses, which are accrued daily, are generally deducted from
the Fund's total income before dividends are paid. Total expenses (prior to any
expense offset arrangement) of the Fund for the fiscal year ended July 31, ^
1997, including investment management fees (but excluding brokerage commissions,
which are included as a cost of acquiring securities), amounted to ^ 2.05% of
the Fund's average net assets. Certain expenses of the Fund are voluntarily
absorbed by ^ IFG and INVESCO Asia pursuant to a commitment to the Fund in order
to ensure that the Fund's total operating expenses do not exceed 2.00%. This
commitment may be changed following consultation with the Company's board of
directors. In the absence of such voluntary expense limitation, the Fund's total
expenses for the fiscal year ended July 31, ^ 1997 would have been ^ 2.10%
(annualized) of the Fund's average net assets.
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of ^
such broker-dealer's financial responsibility coupled with their ability to
effect transactions at the best available prices. As discussed under ^"How
Shares Can Be Purchased - Distribution Expenses,^" the Company may market shares
of the Fund through intermediary brokers or dealers that have entered into
Dealer Agreements with ^ IFG or IDI, 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.
Fund Management permits investment and other personnel to purchase and sell
securities for their own accounts, subject to a compliance policy governing
personal investing. This policy requires investment and other personnel to
conduct their personal investment activities in a manner that Fund Management
believes is not detrimental to the Funds or Fund Management's other advisory
clients. See the Statement of Additional Information for more detailed
information.
HOW SHARES CAN BE PURCHASED
Shares of the Fund are sold on a continuous basis by ^ IDI, as the Fund's
distributor, at the net asset value per share next calculated after receipt of a
purchase order in good form. No sales charge is imposed upon the sale of shares
of the Fund. To purchase shares of the Fund, send a check made payable to
INVESCO Funds Group, Inc., together with a completed application form, to:
<PAGE>
INVESCO Funds Group, Inc.
Post Office Box 173706
Denver, Colorado 80217-3706
PURCHASE ORDERS MUST SPECIFY THE FUND IN WHICH THE INVESTMENT IS TO BE
MADE.
The minimum initial purchase must be at least $1,000, with subsequent
investments of not less than $50, except that: (1) those shareholders
establishing an EasiVest or direct payroll purchase account, as described below
in the ^ section entitled ^"Services Provided ^ By The Fund,^" may open an
account without making any initial investment if they agree to make regular,
minimum purchases of at least $50; (2) those shareholders investing in an
Individual Retirement Account ("IRA"), or through omnibus accounts where
individual shareholder recordkeeping and sub-accounting are not required, may
make initial minimum purchases of $250; (3) Fund Management may permit a lesser
amount to be invested in a Fund under a federal income tax-deferred retirement
plan (other than an IRA account), or under a group investment plan qualifying as
a sophisticated investor; and (4) Fund Management reserves the right to
increase, reduce or waive the minimum purchase requirements in its sole
discretion where it determines such action is in the best interests of the Fund.
The purchase of Fund shares can be expedited by placing bank wire,
overnight courier or telephone orders. Overnight courier orders must meet the
above minimum requirements. In no case can a bank wire order or telephone order
be in an amount less than $1,000. For further information, the purchaser may
call the Fund's office by using the telephone number on the cover of this ^
Prospectus. Orders sent by overnight courier, including Express Mail, should be
sent to the street address, not Post Office Box, of INVESCO Funds Group, Inc.,
at 7800 E. Union Avenue, Denver, CO 80237.
Orders to purchase shares can be placed by telephone. Shares of the Fund
will be issued at the net asset value next determined after receipt of telephone
instructions. Generally, payments for telephone orders must be received by the
Fund within three business days or the transaction may be cancelled. In the
event of such cancellation, the purchaser will be held responsible for any loss
resulting from a decline in the value of the shares. In order to avoid such
losses, purchasers should send payments for telephone purchases by overnight
courier or bank wire. ^ IFG has agreed to indemnify the Fund for any losses
resulting from the cancellation of telephone purchases.
If your check does not clear, or if a telephone purchase must be cancelled
due to 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 has
the option to redeem shares from any identically registered account in the Fund
or any other INVESCO fund as reimbursement for any loss incurred. You also may
be prohibited or restricted from making future purchases in any of the INVESCO
funds.
Persons who invest in the Fund through a securities broker may be charged
a commission or transaction fee by the broker for the handling of the
transaction if the broker so elects. Any investor may deal directly with the
<PAGE>
Fund in any transaction. In that event, there is no such charge. ^ IDI or IFG
may from time to time make payments from its revenues to securities dealers and
other financial institutions that provide distribution-related and/or
administrative services for the Fund.
The Fund reserves the right in its sole discretion to reject any order for
purchase of its shares (including purchases by exchange) when, in the judgment
of Fund Management, such rejection is in the best interest of the Fund.
Net asset value per share is computed once each day that the New York
Stock Exchange is open as of the close of regular trading on that Exchange
^(generally 4:00 p.m., New York time) and also may be computed on other days
under certain circumstances. Net asset value per share for the Fund is
calculated by dividing the market value of the Fund's securities plus the value
of its other assets (including dividends and interest accrued but not
collected), less all liabilities (including accrued expenses), by the number of
outstanding shares of ^ the Fund. If market quotations are not readily
available, a security or other asset will be valued at fair value as determined
in good faith by the board of directors. Debt securities with remaining
maturities of 60 days or less at the time of purchase will be valued at
amortized cost, absent unusual circumstances, so long as the Company's board of
directors believes that such value represents fair value.
Distribution Expenses. The Fund is authorized under a Plan and Agreement of
Distribution pursuant to Rule 12b-1 under the 1940 Act (the ^"Plan") to use its
assets to finance certain activities relating to the distribution of its shares
to investors. Under the Plan, monthly payments may be made by the Fund to ^ IDI
to permit IDI, at its discretion, to engage in certain activities and provide
certain services approved by the board of directors of the 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 ^ IDI- affiliated companies,
to obtain various distribution-related and/or administrative services for the
Fund. Such services may include, among other things, processing new shareholder
account applications, preparing and transmitting 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, printing and distribution of sales literature, ^
printing and ^ distribution of prospectuses to prospective investors, and such
other services and promotional activities for the Fund as may from time to time
be agreed upon by the 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 ^ IDI or its affiliates or by third parties.
<PAGE>
Under the Plan, the Company's ^ payments to ^ IDI on behalf of the Fund ^
are limited to an amount computed at an annual rate of ^ 0.25% of the Fund's
average net assets during the month. ^ IDI is not entitled to ^ payment for
overhead expenses under the Plan, but may be ^ paid for all or a portion of the
compensation paid for salaries and other employee benefits for the personnel of
^ IFG or IDI 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 only be made to ^ compensate IDI for permissible activities
engaged in and services provided by IDI during the rolling 12-month period in
which that month falls, although this period is expanded to 24 months for
expenses incurred during the first 24 months of the Fund's operations.
Therefore, any ^ obligations incurred by ^ IDI in excess of the limitations
described above ^ will not ^ be paid by the Fund and will be borne by ^ IDI. In
addition, ^ IDI and its associates may from time to time make additional
payments from its revenues to securities dealers, financial advisers and other
financial institutions that provide distribution-related and/or administrative
services for the Fund. No further payments will be made by the Fund under the
Plan in the event of ^ the Plan's termination. ^ Any payments made by the Fund
may not be used to finance the distribution of shares of any other ^ Fund of the
Company or other mutual fund advised by ^ IFG. However, payments received by IDI
which are not used to finance the distribution of shares of the Fund become part
of IDI's revenues and may be used by IDI for any permissible activities for all
of the mutual funds advised by IFG subject to review by the fund's directors.
Payments made by the Fund under the Plan for compensation of marketing
personnel, as noted above, are based on an allocation formula designed to ensure
that all such payments are appropriate. IDI will bear any distribution- and
service-related expenses in excess of the amounts which are compensated pursuant
to the Plan. The Plan also authorizes any financing of distribution which may
result from IDI's use of its own resources, including profits from investment
advisory fees received from the Fund, provided that such fees are legitimate and
not excessive. For more information see "How Shares Can Be
Purchased--Distribution Plan" in the Statement of Additional Information.
SERVICES PROVIDED BY THE FUND
Shareholder Accounts. ^ IFG maintains a share account that reflects the
current holdings of each shareholder. Share certificates will be issued only
upon specific request. Since certificates must be carefully safeguarded, and
must be surrendered in order to exchange or redeem Fund shares, most
shareholders do not request share certificates in order to facilitate such
transactions. Each shareholder is sent a detailed confirmation of each
transaction in shares of the Fund. Shareholders whose only transactions are
through the EasiVest, direct payroll purchase, automatic monthly exchange or
periodic withdrawal programs, or are reinvestments of dividends or capital gains
in the same or another fund, will receive confirmations of those transactions on
their quarterly statements. These programs are discussed below. For information
regarding a shareholder's account and transactions, the shareholder may call the
Fund's office by using the telephone number on the cover of this Prospectus.
<PAGE>
Reinvestment of Distributions. Dividends and other distributions are
automatically reinvested in additional shares of the Fund at the net asset value
per share in effect on the ex- dividend or ex-distribution date. A shareholder
may, however, elect to reinvest dividends and other distributions in certain of
the other no-load mutual funds advised by IFG and distributed by ^ IDI, or to
receive payment of all dividends and other distributions in excess of $10.00 by
check by giving written notice to ^ IFG at least two weeks prior to the record
date on which the change is to take effect. Further information concerning these
options can be obtained by contacting ^ IFG.
Periodic Withdrawal Plan. A Periodic Withdrawal Plan is available to
shareholders who own or purchase shares of any mutual funds advised by ^ IFG
having a total value of $10,000 or more; provided, however, that at the time the
Plan is established, the shareholder owns shares having a value of at least
$5,000 in the fund from which the withdrawals will be made. Under the Periodic
Withdrawal Plan, ^ IFG, as agent, will make specified monthly or quarterly
payments of any amount selected (minimum payment of $100) to the party
designated by the shareholder. Notice of all changes concerning the Periodic
Withdrawal Plan must be received by INVESCO at least two weeks prior to the next
scheduled check. Further information regarding the Periodic Withdrawal Plan and
its requirements and tax consequences can be obtained by contacting ^ IFG.
Exchange ^ Policy. Shares of the Fund may be exchanged for shares of any
other fund of the Company, as well as for shares of any of the following other
no-load mutual funds, which are also advised by IFG and distributed by ^ IDI, on
the basis of their respective net asset values at the time of the exchange:
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 Value Trust.
Upon an exchange 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 being exchanged will be assessed
and retained by the Fund for the benefit of the remaining shareholders. This fee
is intended to encourage long-term investment in the Fund, to avoid transaction
and other expenses caused by early redemptions or exchanges, 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 which are also advised by IFG and distributed by ^ IDI. 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 as to any shares, the redemption/exchange fee will be
assessed on the current net asset value of those shares.
An exchange involves the redemption of shares in the Fund and investment
of the redemption proceeds in shares of another fund of the Company or in shares
of one of the funds listed above. Exchanges will be made at the net asset value
per share next determined after receipt of an exchange request in proper order.
<PAGE>
Any gain or loss realized on such an exchange is recognizable for federal income
tax purposes by the shareholder. Exchange requests may be made either by
telephone or by written request to ^ IFG, using the telephone number or address
on the cover of this ^ Prospectus. Exchanges made by telephone must be in an
amount of at least $250, if the exchange is being made into an existing account
of one of the INVESCO funds. All exchanges that establish a new account must
meet the Fund's applicable minimum initial investment requirements. Written
exchange requests into an existing account have no minimum requirements other
than the Fund's applicable minimum subsequent investment requirements.
The ^ option to exchange Fund shares by telephone is available to
shareholders automatically unless expressly declined. By signing the New Account
Application, a Telephone Transaction Authorization Form or otherwise utilizing
the telephone exchange ^ option, the investor has agreed that the Fund will not
be liable for following instructions communicated by telephone that it
reasonably believes to be genuine. The Fund employs procedures, which it
believes are reasonable, designed to confirm that exchange instructions are
genuine. These may include recording telephone instructions and providing
written confirmations of exchange transactions. As a result of this policy, the
investor may bear the risk of any loss due to unauthorized or fraudulent
instructions; provided, however, that if the Fund fails to follow these or other
reasonable procedures, the Fund may be liable.
In order to prevent abuse of this ^ policy to the disadvantage of other
shareholders, the Fund reserves the right to terminate the exchange ^ option of
any shareholder who requests more than four exchanges in a year. The Fund will
determine whether to do so based on a consideration of both the number of
exchanges any particular shareholder or group of shareholders has requested and
the time period over which those exchange requests have been made, together with
the level of expense to the Fund which will result from effecting additional
exchange requests. The exchange ^ policy also may be modified or terminated at
any time. Except for those limited instances where redemptions of the exchanged
security are suspended under Section 22(e) of the 1940 Act, or where sales of
the fund into which the shareholder is exchanging are temporarily stopped,
notice of all such modifications or termination of the exchange ^ policy will be
given at least 60 days prior to the date of termination or the effective date of
the modification.
Before making an exchange, the shareholder should review the prospectuses
of the funds involved and consider their differences^. Shareholders interested
in exercising the exchange ^ option may contact ^ IFG for information concerning
their particular exchanges.
Automatic Monthly Exchange. Shareholders who have accounts in any one or
more of the mutual funds distributed by ^ IDI may arrange for a fixed dollar
amount of their fund shares to be automatically exchanged for shares of any
other INVESCO mutual fund listed under ^"Exchange Policy" on a monthly basis.
The minimum monthly exchange in this program is $50.00. This automatic exchange
program can be changed by the shareholder at any time by notifying ^ IFG at
least two weeks prior to the date the change is to be made. Further information
regarding this service can be obtained by contacting ^ IFG.
<PAGE>
EasiVest. For shareholders who want to maintain a schedule of monthly
investments, EasiVest uses various methods to draw a preauthorized amount from
the shareholder's bank account to purchase Fund shares. This automatic
investment program can be changed by the shareholder at any time by ^ contacting
IFG at least two weeks prior to the date the change is to be made. Further
information regarding this service can be obtained by contacting ^ IFG.
Direct Payroll Purchase. Shareholders may elect to have their employer
make automatic purchases of Fund shares for them by deducting a specified amount
from their regular paychecks. This automatic investment program can be modified
or terminated at any time by the shareholder, by notifying the employer. Further
information regarding this service can be obtained by contacting ^ IFG.
Tax-Deferred Retirement Plans. Shares of the Fund may be purchased for
self-employed individual retirement plans, IRAs, SIMPLE IRAs, simplified
employee pension plans and corporate retirement plans. In addition, shares can
be used to fund tax qualified plans established under Section 403(b) of the
Internal Revenue Code of 1986 by educational institutions, including public
school systems and private schools, and certain kinds of non-profit
organizations, which provide deferred compensation arrangements for their
employees.
Prototype forms for the establishment of these various plans, including,
where applicable, disclosure statements required by the Internal Revenue
Service, are available from ^ IFG. INVESCO Trust ^, a subsidiary of ^ IFG, is
qualified to serve as trustee or custodian under these plans and provides the
required services at competitive rates. Retirement plans (other than IRAs)
receive monthly statements reflecting all transactions in their Fund accounts.
IRAs receive the confirmations and quarterly statements described under
^"Shareholder Accounts.^" For complete information, including prototype forms
and service charges, call ^ IFG at the telephone number listed on the cover of
this prospectus or send a written request to: Retirement Services, INVESCO Funds
Group, Inc., Post Office Box 173706, Denver, Colorado 80217-3706.
HOW TO REDEEM SHARES
Shares of the Fund may be redeemed at any time at their current net asset
value per share next determined after a request in proper form is received at
the Fund's office. (See ^"How Shares Can Be ^ Purchased.") Net asset value per
share at the time of redemption may be more or less than the price you paid to
purchase your shares, depending primarily upon the Fund's investment
performance. 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 investment in the Fund, to avoid transaction and
other expenses caused by early redemptions or exchanges, 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
<PAGE>
funds which are also advised by IFG and distributed by ^ IDI. 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 as to any shares, the redemption/exchange fee
will be assessed on the current net asset value of those shares.
If the shares to be redeemed are represented by stock certificates, a
written request for redemption signed by the registered shareholder(s) and the
certificates must be forwarded to INVESCO Funds Group, Inc., Post Office Box
173706, Denver, Colorado 80217-3706. Redemption requests sent by overnight
courier, including Express Mail, should be sent to the street address, not Post
Office Box, of INVESCO Funds Group, Inc. at 7800 E. Union Avenue, Denver, CO
80237. If no certificates have been issued, a written redemption request signed
by each registered owner of the account must be submitted to ^ IFG at the
address noted above. If shares are held in the name of a corporation, additional
documentation may be necessary. Call or write for ^ specific information. If
payment for the redeemed shares is to be made to someone other than the
registered owner(s), the signature(s) must be guaranteed by a financial
institution which qualifies as an eligible guarantor institution. Redemption
procedures with respect to accounts registered in the names of broker-dealers
may differ from those applicable to other shareholders.
BE CAREFUL TO SPECIFY THE ACCOUNT FROM WHICH THE REDEMPTION IS TO BE MADE.
SHAREHOLDERS HAVE A SEPARATE ACCOUNT FOR EACH FUND IN WHICH THEY INVEST.
Payment of redemption proceeds will be mailed within seven days following
receipt of the required documents. However, payment may be postponed under
unusual circumstances, such as when normal trading is not taking place on the
New York Stock Exchange, or an emergency as defined by the Securities and
Exchange Commission exists. If the shares to be redeemed were purchased by check
and that check has not yet cleared, payment will be made promptly upon clearance
of the purchase check (which ^ will take up to 15 days).
If a shareholder participates in EasiVest, the Fund's automatic monthly
investment program, and redeems all of the shares in ^ a Fund account, ^ IFG
will terminate any further EasiVest purchases unless otherwise instructed by the
shareholder.
Because of the high relative costs of handling small accounts, should the
value of any shareholder's account fall below $250 as a result of shareholder
action, the Fund reserves the right to effect the involuntary redemption of all
shares in such account, in which case the account would be liquidated and the
proceeds forwarded to the shareholder. Prior to any such redemption, a
shareholder will be notified and given 60 days to increase the value of the
account to $250 or more.
<PAGE>
Fund shareholders (other than shareholders holding Fund shares in accounts
of IRA plans) may request expedited redemption of shares having a minimum value
of $250 (or redemption of all shares if their value is less than $250) held in
accounts maintained in their name by telephoning redemption instructions to ^
IFG, using the telephone number on the cover of this prospectus. The redemption
proceeds, at the shareholder's option, either will be mailed to the address
listed for the shareholder's Fund account, or wired (minimum of $1,000) or
mailed to the bank which the shareholder has designated to receive the proceeds
of telephone redemptions. The Fund charges no fee for effecting such telephone
redemptions. Unless Fund Management permits a larger redemption request to be
placed by telephone, a shareholder may not place a redemption request by
telephone in excess of $25,000. These telephone redemption privileges may be
modified or terminated in the future at the discretion of Fund Management.
For ^ federal income tax-deferred retirement plans sponsored by INVESCO
Trust, the term "shareholders" is defined to mean plan trustees that file a
written request to be able to redeem Fund shares by telephone. Shareholders
should understand that, while the Fund will attempt to process all telephone
redemption requests on an expedited basis, there may be times, particularly in
periods of severe economic or market disruption, when (a) they may encounter
difficulty in placing a telephone redemption request, and (b) processing
telephone redemptions will require up to seven days following receipt of the
redemption request, or additional time because of the unusual circumstances set
forth above.
The privilege of redeeming Fund shares by telephone is available to
shareholders automatically unless expressly declined. By signing a New Account
Application, a Telephone Transaction Authorization Form or otherwise utilizing
telephone redemption privileges, the shareholder has agreed that the Fund will
not be liable for following instructions communicated by telephone that it
reasonably believes to be genuine. The Fund employs procedures, which it
believes are reasonable, designed to confirm that telephone instructions are
genuine. These may include recording telephone instructions and providing
written confirmation of transactions initiated by telephone. As a result of this
policy, the investor may bear the risk of any loss due to unauthorized or
fraudulent instructions; provided, however, that if the Fund fails to follow
these or other reasonable procedures, the Fund may be liable.
TAXES, DIVIDENDS AND ^ OTHER DISTRIBUTIONS
Taxes. The Fund intends to distribute to shareholders ^ 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 ^ other 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.
Net realized capital gains of the Fund are classified as short-term and
long-term gains depending upon how long the Fund held the security that gave
rise to the gains. Short-term capital gains are included in income from
dividends and interest as ordinary income and are taxed at the taxpayer's
marginal tax rate. The Taxpayer Relief Act of 1997 (the "Tax Act"), enacted in
August 1997, changed the taxation of long-term capital gains for individuals by
applying different capital gains rates depending on the taxpayer's holding
period and marginal rate of federal income tax. Long-term gains realized on the
sale of securities held for more than one year but not for more than 18 months
are taxable at a rate of 28%. This category of long-term gains is often referred
to as "mid-term" gains but is technically termed "28% rate gains". Long-term
gains realized on the sale of securities held for more than 18 months are
taxable at a rate of 20%. At the end of each year, information regarding the tax
status of dividends and other distributions is provided to shareholders.
Shareholders should consult their tax advisers as to the effect of the Tax Act
on distributions by the Fund of net capital gains.
Shareholders also may realize capital gains or losses when they sell their
Fund shares at more or less than the price originally paid. Capital gains on
shares held for more than one year will be long-term capital gains, in which
event they will be subject to federal income tax at the rates indicated above.
The Fund may be subject to ^ withholding of foreign taxes on dividends or
interest it receives on foreign securities. Foreign taxes withheld will be
treated as an expense of the Fund ^.
^ Individuals and certain other non-corporate shareholders may be subject
to backup withholding of 31% on dividends, capital ^ gains and other
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.
We encourage you to consult a tax adviser with respect to these matters.
For further information see "Dividends, Other Distributions and Taxes" in the
Statement of Additional Information.
Dividends and Other ^ Distributions. The Fund earns ordinary or net
investment income^ in the form of dividends and interest on its investments. ^
Dividends paid by the Fund will be based solely on the income earned by it. The
Fund's policy is to distribute substantially all of this income, less Fund
expenses, to shareholders ^ on a quarterly basis, at the discretion of the ^
Fund's board of directors. Dividends are automatically reinvested in additional
shares of the Fund at the net asset value on the payable date unless otherwise
requested.
<PAGE>
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, together with
gains, if any, realized on foreign currency transactions, are distributed to
shareholders at least annually, usually in December. Capital gains distributions
are automatically reinvested in shares of the Fund at the net asset value on the
payable date unless otherwise requested.
Dividends and other ^ distributions are paid to ^ holders of shares on the
record date of ^ distribution regardless ^ how long the Fund shares have been
held by the shareholder. The ^ Fund's share price will then drop by the amount
of the distribution on the ^ ex-dividend or ex-distribution ^ date. If a
shareholder purchases shares immediately prior to the distribution, the
shareholder will, in effect, have ^"bought" the distribution by paying the full
purchase price, a portion of which is then returned in the form of a taxable
distribution.
^
ADDITIONAL INFORMATION
Voting Rights. All shares of the Fund have equal voting rights, based on
one vote for each share owned and a corresponding fractional vote for each
fractional share owned. Voting with respect to certain matters, such as
ratification of independent accountants and the election of directors, will be
by all funds of the Company voting together. In other cases, such as voting upon
the investment advisory contract, voting is on a fund-by-fund basis. To the
extent permitted by law, when not all funds are affected by a matter to be voted
upon, only shareholders of the Fund or funds affected by the matter will be
entitled to vote thereon. The Company is not generally required, and does not
expect, to hold regular annual meetings of shareholders. However, the board of
directors will call special meetings of shareholders for the purpose, among
other reasons, of voting upon the question of removal of a director or directors
when requested to do so in writing by the holders of 10% or more of the
outstanding shares of the Company or as may be required by applicable law or the
Company's Articles of Incorporation. The Company will assist shareholders in
communicating with other shareholders as required by the 1940 Act. Directors may
be removed by action of the holders of a majority or more of the outstanding
shares of the Company.
Master/Feeder Option. The Company may in the future seek to achieve the
Fund's investment objective by investing all of the Fund's assets in another
investment company or partnership having the same investment objective and
substantially the same investment policies and restrictions as those applicable
to the Fund. It is expected that any such investment company would be managed by
^ IFG in substantially the same manner as the existing Fund. If permitted by
applicable laws and policies then in effect, any such investment may be made in
the sole discretion of the Company's board of directors without further approval
of the shareholders of the Fund. However, Fund shareholders will be given at
least 30 days prior notice of any such investment. Such investment would be made
<PAGE>
only if the Company's board of directors determines it to be in the best
interests of the Fund and its shareholders. In making that determination, the
board will consider, among other things, the benefits to shareholders and/or the
opportunity to reduce costs and achieve operational efficiencies. No assurance
can be given that costs will be materially reduced if this option is
implemented.
Shareholder Inquiries. All inquiries regarding the Fund should be directed
to the Fund at the telephone number or mailing address set forth on the cover
page of this prospectus.
Transfer and Dividend Disbursing Agent. INVESCO Funds Group, Inc., 7800 E.
Union Ave., Denver, Colorado 80237, also acts as registrar, transfer agent, and
dividend disbursing agent for the Fund pursuant to a Transfer Agency Agreement
which provides that the Fund will pay an annual fee of $20.00 per shareholder
account or, where applicable, per participant in an omnibus account ^. The
transfer agency fee is not charged to each shareholder's or participant's
account, but is an expense of the Fund to be paid from the Fund's assets.
Registered broker-dealers, third party administrators of tax-qualified
retirement plans and other entities, including affiliates of ^ IFG, may provide
sub-transfer agency or ^ recordkeeping services to the Fund which reduce or
eliminate the need for identical services to be provided on behalf of the Fund
by ^ IFG. In such cases, ^ IFG may pay the third party an annual sub-transfer
agency or ^ recordkeeping fee out of the transfer agency fee which is paid to
IFG by the Fund.
<PAGE>
^
PROSPECTUS
December 1, ^ 1997
INVESCO Asian Growth Fund
A no-load mutual fund seeking capital
appreciation.
INVESCO FUNDS
INVESCO Distributors, Inc.
Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
1-800-525-8085
PAL(R): 1-800-424-8085
http://www.invesco.com
^ In Denver, visit one of our
convenient Investor Centers:
Cherry Creek
155-B Fillmore Street
Denver Tech Center
7800 East Union Avenue
Lobby Level
In addition, all documents
filed by the Company with the
Securities & Exchange Commission
can be located on a Web site
maintained by the Commission at
http://www.sec.gov.
<PAGE>
PROSPECTUS
December 1, 1997
INVESCO SPECIALTY FUNDS, INC. ^
INVESCO REALTY FUND
INVESCO Realty Fund (the ^"Fund") seeks to provide above-average current
income. Long-term capital growth potential is an additional consideration in
selecting securities for the Fund's investment portfolio. The Fund normally
invests at least 65% of its total assets in dividend-paying, publicly-traded
stocks of companies in the real estate industry. The remaining assets are
invested in other income-producing securities such as corporate bonds.
The Fund is a series of INVESCO Specialty Funds, Inc. (The "Company"), a
diversified, managed no-load mutual fund consisting of seven separate portfolios
of investments. Separate prospectuses are available upon request from INVESCO
Distributors, Inc. for the Company's other funds: INVESCO Worldwide Capital
Goods Fund, INVESCO Worldwide Communications Fund, INVESCO European Small
Company Fund, INVESCO Asian Growth Fund INVESCO Latin American Growth Fund and
INVESCO S&P 500 Index Fund. Investors may purchase shares of any and all of the
Funds. Additional funds may be offered in the future.
This Prospectus ^ provides you with the basic information you should know
before investing in the Fund. You should read it and keep it for future
reference. A Statement of Additional Information dated December 1, 1997,
containing further information about the Fund^ 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 ^ Distributors, Inc., P.O.
Box 173706, Denver, Colorado 80217-3706; ^ call 1-800-525-8085; or ^ visit our
web site at http://www.invesco.com.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION 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......................................................129
ANNUAL FUND EXPENSES.......................................................130
FINANCIAL HIGHLIGHTS.......................................................132
INVESTMENT OBJECTIVE AND STRATEGY..........................................134
INVESTMENT POLICIES AND RISKS..............................................134
THE FUND AND ITS MANAGEMENT................................................141
FUND PRICE AND PERFORMANCE.................................................143
HOW TO BUY SHARES..........................................................144
FUND SERVICES..............................................................148
HOW TO SELL SHARES.........................................................149
TAXES, DIVIDENDS AND ^ OTHER DISTRIBUTIONS.................................152
ADDITIONAL INFORMATION.....................................................153
<PAGE>
ESSENTIAL INFORMATION
Investment Goal And Strategy^: INVESCO Realty Fund seeks to provide
above-average current income. Long-term capital growth potential is an
additional consideration in selecting securities for the Fund's investment
portfolio. The Fund normally invests at least 65% of its total assets in
publicly-traded stocks of companies primarily engaged in the real estate
industry. The remaining assets are invested in other income-producing securities
such as mortgage-backed securities and corporate bonds. There is no guarantee
that the Fund will meet its objective. See ^"Investment Objective and Strategy^"
and ^"Investment Policies and Risks.^"
Designed For: Investors primarily seeking above-average current income
consistent with reasonable risk, without sacrificing the potential for long-term
capital growth. 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 ^ Gifts/Transfer To Minors Act Account or systematic
investing strategy. The Fund may be a suitable investment for many types of
retirement programs, including ^ Individual Retirement Account ("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. Potential shareholders should consider this a
long-term investment.
Risks^: The Fund focuses on equity securities of companies principally
engaged in the real estate industry. As such, in addition to the normal market
risks associated with investments in securities generally, the Fund is
particularly sensitive to conditions in the real estate industry. Real estate is
a cyclical industry that is sensitive to, among other things, interest rates,
property tax rates, national, regional and local economic conditions and
availability of materials. The Fund's investments in debt securities are subject
to credit risk and market risk, both of which are increased by investing in
lower-rated securities. The returns on foreign investments may be influenced by
the risks of investing overseas. Rapid portfolio turnover may result in higher
brokerage commissions and the acceleration of taxable capital gains. These
policies make the Fund unsuitable for that portion of your savings dedicated to
preservation of capital over the short term. See ^"Investment Objective And
Strategy^" and ^"Investment Policies And Risks.^"
Organization and Management^: The Fund is a series of INVESCO Specialty
Funds, Inc., a diversified, managed no-load mutual fund. The Fund is owned by
its shareholders. ^ The Company employs INVESCO Funds Group, Inc. ^("IFG"),
founded in 1932^, to serve as investment adviser, administrator^ and transfer
agent^. INVESCO Realty Advisors, Inc. ^("IRAI") serves as the Fund's
sub-adviser. Together, IFG and IRAI constitute "Fund Management." Prior to
September 30, 1997, IFG served as the Fund's distributor. Effective September
30, 1997, INVESCO Distributors, Inc. ("IDI"), founded in 1997 as a wholly-owned
subsidiary of IFG, became the Fund's distributor.
<PAGE>
^ The Fund's investments are selected by a team of IRAI portfolio managers
that is collectively responsible for the investment decisions relating to the
Fund.
IFG, IRAI and IDI are subsidiaries of AMVESCAP PLC, an international
investment management company^ that manages approximately ^ $177.5 billion in
assets. AMVESCAP PLC is based in London, with money managers located in Europe,
North America, and the Far East.
^
This Fund offers all of the following services at no charge:
Telephone purchases
Telephone exchanges
Telephone redemptions
Automatic reinvestment of distributions
Regular investment plans, such as EasiVest (the Fund's automatic monthly
investment program), Direct Payroll Purchase, and Automatic Monthly Exchange
Periodic withdrawal plans
See ^"How To Buy Shares^" and ^"How To Sell Shares.^"
Minimum Initial Investment: $1,000, which is waived for regular investment
plans, including EasiVest and Direct Payroll Purchase, and certain retirement
plans.
Minimum Subsequent Investment: $50 (Minimums are lower for certain retirement
plans.)
ANNUAL FUND EXPENSES
The Fund is no-load; there are no fees to purchase, exchange or redeem
shares. The Fund, however, is authorized to pay a Rule 12b-1 distribution fee of
one quarter of one percent of the Fund's average net assets each year. (See
^"How To Buy Shares --Distribution ^ Expenses.")
Like any company, the Fund has operating expenses -- such as portfolio
management, accounting, shareholder servicing, maintenance of shareholder
accounts and other expenses. These expenses are paid from the Fund's assets.
Lower expenses benefit investors by increasing the Fund's total return.
We calculate annual operating expenses as a percentage of the Fund's
average annual net assets. To keep expenses competitive, the Fund's adviser
voluntarily reimburses the Fund for expenses in excess of 1.20% of the Fund's
average net assets.
<PAGE>
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fee 0.75%~
12b-1 Fees 0.25%~
Other Expenses (after expense ^ limitation)1,2 0.20%~
Total Fund Operating Expenses
(after expense ^ limitation)1,2 1.20%~
^~ Annualized
(1) It should be noted that the Fund's actual operating expenses were lower than
the figures shown because the Fund's custodian fees were reduced under an
expense offset arrangement. However, as a result of an SEC requirement for
mutual funds to state their total operating expenses without crediting any such
expense offset arrangement, the figures shown above do not reflect these
reductions.
(2) Certain expenses of the Fund are absorbed voluntarily by IFG ^. In the
absence of such absorbed expenses the Fund's "Other Expenses" and "Total Fund
Operating Expenses" ^ would have been 0.83% (annualized) and 1.83% (annualized),
respectively, of the ^ Fund's actual expenses for the period January 1, 1997
(commencement of operations) through July 31, 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 5 Years 10 Years
------ ------- ------- --------
$12 $38 $66 $146
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.^"
Because the Fund pays a distribution fee, investors who own Fund shares
for a long period of time may pay more than the economic equivalent of the
maximum front-end sales charge permitted for mutual funds by the National
Association of Securities Dealers, Inc.
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout the Period)
^
The following information is for the period January 2, 1997 (commencement
of operations) to ^ July 31, 1997 and has been audited by Price Waterhouse LLP,
independent accountants. This information should be read in conjunction with the
^ audited financial statements and the independent accountant's report thereon
appearing in the Company's ^ 1997 Annual Report to Shareholders which is
incorporated by reference into the Statement of Additional Information ^. Both
are available without charge by contacting INVESCO ^ Distributors, Inc. at the
address or telephone number shown ^ below. The Annual Report also contains more
information about the Fund's performance.
Period
Ended
July 31
----------
1997^
Realty Fund
PER SHARE DATA
Net Asset Value - ^ Beginning of Period ^ $10.00
----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income ^(Loss) 0.22
^ Net Gains or (Losses) on Securities
(Both Realized and Unrealized) ^ 0.99
----------
Total from Investment Operations ^ 1.21
----------
LESS DISTRIBUTIONS
^ Dividends from Net Investment Income 0.22
^----------
Net Asset Value - ^ End of Period ^ $10.99
==========
TOTAL RETURN ^ 12.24%*
RATIOS
Net Assets ^- End of Period ($000 Omitted) ^ $36,658
Ratio of Expenses to Average Net Assets# ^ 1.20%~@
Ratio of Net Investment Income
to^ Average Net Assets# ^ 4.08%~
Portfolio Turnover Rate ^ 70%*
Average Commission Rate Paid^^ ^ $0.0666
<PAGE>
^ From January 1, 1997, commencement of investment operations, to July 31, 1997.
* Based on operations for the period shown and, accordingly, ^ are not
representative of a full year.
# Various expenses of ^ Realty Fund were voluntarily absorbed by ^ INVESCO Funds
Group, Inc. ("IFG") for the period ended ^ July 31, 1997. If such expenses had
not been voluntarily absorbed, ratio of expenses to average net assets would
have been ^ 1.83% (annualized) and ratio of net investment income to average net
assets would have been ^ 3.45% (annualized).
@ Ratio is based on Total Expenses of the Fund, ^ which is before any expense
offset arrangements.
~ Annualized
^^ 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 which is required to be disclosed for
fiscal years beginning September 1, 1995 and thereafter.
Further information about the performance of the Fund is contained in the
Company's Annual Report to Shareholders, which may be obtained without charge by
writing INVESCO Distributors, Inc., P.O. Box 173706, Denver, Colorado 80217-3706
or by calling 1-800- 525-8085.
<PAGE>
INVESTMENT OBJECTIVE AND STRATEGY
The Fund seeks to provide above-average current income while following
sound investment practices. This investment objective is fundamental and cannot
be changed without the approval of the Fund's shareholders. Long-term capital
growth potential is an additional, but secondary, consideration in the selection
of portfolio securities. There is no assurance that the Fund's investment
objective will be met.
The Fund normally invests at least 65% of its total assets in equity
securities of companies principally engaged in the real estate industry. A
company is ^"principally engaged^" in that industry if at least 50% of its
assets, gross income or net profits are attributable to the ownership,
construction, management or sale of residential, commercial or industrial real
estate. Such companies may include, for example, real estate investment trusts
^("REITs"), real estate brokers, home builders or real estate developers,
companies with substantial real estate holdings (such as paper and lumber
producers, agricultural businesses and lodging and entertainment companies) and
companies with significant involvement in the real estate industry, such as
building supply companies and financial institutions that write real estate
mortgages. In addition to common stocks, ^"equity securities^" may include
preferred stocks, securities convertible into common stock and warrants.
The Fund's investments in equity securities are diversified by both
property type and geographic region. ^ Under normal circumstances, no one
property type ^ will represent more than 50% of the Fund's total assets. The
remaining assets of the Fund are invested in debt securities, including
mortgage-backed securities and debt or equity securities of companies which may
or may not be principally involved in the real estate industry, including
non-investment grade and unrated debt securities. The Fund may invest up to 25%
of its total assets in foreign securities.
Although the Fund seeks to invest for the long term, the Fund retains the
right to sell portfolio securities without regard to how long they have been in
the Fund's portfolio. The Fund anticipates a portfolio turnover rate of between
60% and 75%. A portfolio turnover rate of 75% would occur if three-quarters of
the Fund's portfolio securities were sold within one year.
When the Fund believes market or economic conditions are ^ unfavorable,
the Fund may ^ assume a defensive position by temporarily ^ investing up to 100%
of its total assets in ^ high-quality money market instruments, such as
short-term U.S. government obligations, commercial paper or repurchase
agreements, seeking to protect its assets until conditions stabilize.
INVESTMENT POLICIES AND RISKS
Investors generally should expect to see their price per share vary with
movements in the securities markets, changes in economic conditions and interest
rates, and other factors.
<PAGE>
Concentration. The Fund's performance is tied closely to conditions
affecting the real estate industry, which has historically been cyclical. The
real estate industry is highly sensitive to national, regional and local
economic conditions, in addition to such factors as interest rates, changes in
property taxes and real estate values, overbuilding, and changes in rental
income. The structure, management and cash flow of many of the companies in the
industry also may heavily impact their performance. Although the Fund does not
intend to invest directly in private real estate assets, it conceivably could
own real estate directly as a result of default on debt securities that it holds
in its portfolio. Therefore, the Fund may be subject to certain risks associated
with the direct ownership of real estate, including, among others, difficulties
in valuing and trading real estate and declines in the value of real estate.
^ Debt Securities. When we assess an issuer's ability to meet its interest
rate obligations and repay its debt when due, we are referring to ^"credit
risk.^" Debt obligations are rated based on their estimated credit risk by
independent services such as Standard & Poor's, a division of The McGraw-Hill
Companies, Inc. ^("S&P") or Moody's Investors Services, Inc. ^("Moody's").
"Market risk" refers to sensitivity to changes in interest rates. For instance,
when interest rates go up, the market value of a previously issued bond
generally declines; on the other hand, when interest rates go down, the prices
of bonds generally increase.
^ The lower a bond's quality, the more it is subject to credit risk and
market risk and the more speculative it becomes. This is also true of most
unrated securities. No more than 15% of the total assets of the Fund may be
invested in issues rated below investment grade quality (commonly called "junk
bonds," and rated BB or lower by S&P or Ba or lower by Moody's or, if unrated,
are judged by ^ Fund Management to be of equivalent quality). These include
issues which are of poorer quality and may have some speculative
characteristics, according to the ratings services. Investments in unrated
securities may not exceed 25% of the Fund's total assets. Never, under any
circumstances, is the Fund permitted to purchase bonds which are rated below B
by Moody's or B- by S&P or, if unrated, judged by Fund Management to be of
equivalent quality. Bonds rated B or B- generally lack characteristics of a
desirable investment and are deemed speculative with respect to the issuer's
capacity to pay interest and repay principal over a long period of time. While
Fund Management continuously monitors all of the corporate bonds in the Fund's
investment portfolio for the issuer's ability to make required principal and
interest payments and other quality factors, it may retain a bond whose rating
is changed to one below the minimum rating required for purchase of the
security.
Because investment in medium- and lower-rated securities involves both
greater credit risk and market risk, achievement of the Fund's investment
objective may be more dependent on Fund Management's own credit analysis than is
the case for funds investing in higher quality securities. In addition, the
share price and yield of the Fund may be expected to fluctuate more than in ^
that of funds investing in higher quality, shorter term securities. Moreover, a
significant economic downturn or major increase in interest rates may result in
issuers of lower-rated securities experiencing increased financial stress, which
would adversely affect their ability to service their principal, dividend and
<PAGE>
interest obligations; meet projected business goals; and obtain additional
financing. In this regard, it should be noted that while the market for high
yield corporate bonds has been in existence for many years and from time to time
has experienced economic downturns, this market has ^ experienced a significant
increase in the use of high yield corporate debt securities to fund highly
leveraged corporate acquisitions and restructurings. Past experience may not,
therefore, provide an accurate indication of future performance of the high
yield bond market, particularly during periods of economic recession.
Furthermore, expenses incurred to recover an investment in a defaulted security
may adversely affect the Fund's net asset value. Finally, while Fund Management
attempts to limit purchases of medium- and lower-rated securities to securities
having an established secondary market, the secondary market for such securities
may be less liquid than the market for higher-quality securities. The reduced
liquidity of the secondary market for such securities may adversely affect the
market price of, and ability of the Fund to value, particular securities at
certain times, thereby making it difficult to make specific valuation
determinations.
For a detailed description of corporate bond ratings, refer to Appendix B
to the Statement of Additional Information.
REITs. Real estate investment trusts (REITs) are pooled investment vehicles
that invest primarily in income-producing real estate or real estate related
loans or interests. REITs are generally classified as either equity or mortgage,
or a combination of the two. An equity REIT invests the majority of its assets
directly in real estate and derives most of its income from rents. A mortgage
REIT invests the majority of its assets in real estate mortgages and derives
most of its income from interest payments. In addition to the risks inherent in
any investment in the real estate industry, investments in REITs have certain
unique risks. Equity REITs can be affected by changes in the value of the
underlying property owned by them; mortgage REITs are affected by the quality of
the credit extended. REITs are not diversified, and are subject to the risks of
real estate financing, including cash flow dependency and defaults by borrowers.
REITs attempt to qualify for beneficial tax treatment by distributing 95% of
their taxable income to their interest holders. If a REIT fails to qualify for
such beneficial tax treatment, it would be taxed as a corporation, and
distributions to its shareholders (including the Fund) would be reduced. By
investing in REITs indirectly through the Fund, a Fund shareholder will bear not
only a proportionate share of the expenses of the Fund, but also, indirectly,
similar expenses of the REIT. For taxable shareholders, a portion of the
dividends paid by a REIT may be considered return on capital and would not
currently be regarded as taxable income. Therefore, depending upon an
individual's tax bracket, the dividend yield may have a higher tax-effective
yield.
Mortgage-Backed Securities. The Fund may invest in mortgage-backed
securities issued or guaranteed by the U.S. government or federal agencies such
as Government National Mortgage Association ^("GNMA"), Fannie Mae (formerly
known as the Federal National Mortgage Association) and Federal Home Loan
Mortgage Corporation ^("FHLMC"). Some of these securities, such as GNMA
certificates, are backed by the full faith and credit of the U.S. Treasury while
<PAGE>
others, such as FHLMC certificates, are not. Mortgage-backed securities
represent interests in pools of mortgages which have been purchased from loan
institutions such as banks and savings & loans, and packaged for resale in the
secondary market. Interest and principal are ^"passed through^" to the holders
of the securities. The timely payment of interest and principal is guaranteed by
a federal agency, but the market value of the security is not guaranteed and
will vary. The Fund also may invest in mortgage-backed securities issued by
private, non-governmental issuers such as banks and broker-dealers. When
interest rates drop, many home buyers choose to refinance their mortgages. These
resulting prepayments of the initial margin may shorten the average weighted
lives of mortgage-backed securities and may lower their returns. Prepayment
rates cannot be predicted with any accuracy. Under certain interest rate and
prepayment rate structures, it is possible that the Fund may fail to recoup the
full amount of its investment in mortgage-backed securities, despite any direct
or indirect governmental or agency guarantee. When the Fund reinvests amounts
received representing unscheduled prepayments of principal, it likely will
receive a rate of interest that is lower than the rate on then-existing
adjustable rate mortgage pass-through securities.
Collateralized mortgage obligations ^("CMOs") may be issued by, among
others, U.S. government agencies and instrumentalities. CMOs are issued in
classes, with the principal of, and interest on, the underlying mortgage assets
allocated among the several classes. Each class is commonly referred to as a
^"tranche," and is issued at a specific or adjustable interest rate. Each
tranche must be fully retired no later than its final distribution date.
Generally, interest is paid or accrued monthly. CMOs typically are
collateralized by GNMA, Fannie Mae or FHLMC certificates. They also may be
collateralized by other mortgage assets, including whole loans or private
mortgage pass-through securities. CMOs are paid from payments of principal and
interest on collateral of mortgaged assets and any reinvestment income thereon.
Risks of investing in CMOs, in addition to the general risks of investing in the
real estate industry, include failure of the counter-party to meet its
commitments, the effects of prepayment on mortgage cash flows and adverse
interest rate changes. Investing in the lower tranches of CMOs presents risks
similar to investments in equity securities. The yield of CMOs may be affected
by adjustability of interest rates and the possibility that prepayments of
principal may be made significantly earlier than the final distribution dates.
These practices and risks are discussed under ^"Investment Policies and
Restrictions^" in the Statement of Additional Information.
Interest Rate Futures Contracts. The Fund may buy and sell interest rate
futures contracts relating to U.S. government securities for the purpose of
hedging the value of its securities portfolio. These practices and their risks
are discussed under ^"Investment Policies and Restrictions^" in the Statement of
Additional Information.
Foreign Securities. The Fund's investments may include debt and equity
securities issued by foreign governments and foreign corporations. As a matter
of policy, which may be changed without a vote of shareholders, up to 25% of the
Fund's total assets, measured at the time of purchase, may be invested directly
in foreign securities. Securities of Canadian issuers are not subject to this
25% limitation.
<PAGE>
^ For U.S. investors, the returns on foreign securities are influenced not
only by the returns on the foreign investments themselves, but also by currency
fluctuations. That is, when the U.S. dollar generally rises against a foreign ^
currency, returns ^ for a U.S. investor on foreign securities denominated in
that foreign currency may decrease. By contrast, in a period when the U.S.
dollar generally declines, those returns may increase.
Other aspects of international investing to consider include:
-less publicly available information than is generally available about
U.S. issuers;
-differences in accounting, auditing and financial reporting standards;
-generally higher commission rates on foreign portfolio transactions and
longer settlement periods;
-smaller trading volumes and generally lower liquidity of foreign stock
markets, which may cause greater price volatility; and
-investments in certain countries may be subject to foreign withholding
taxes, which may reduce dividends or capital gains payable to shareholders.
There is also the possibility of expropriation or confiscatory taxation;
adverse changes in investment or exchange control regulations; political
instability; potential restrictions on the flow of international capital; and
the possibility of the Fund experiencing difficulties in pursuing legal remedies
and collecting judgments.
Illiquid and Rule 144A Securities. The Fund may invest up to 15% of its ^
net assets, measured at the time of purchase, in securities which are illiquid
because they are subject to restrictions on their resale ^("restricted
securities") or because, based upon the nature of the market for such
securities, they are not readily marketable. Investments in illiquid securities
involve the risk that the Fund may not be able to sell such securities at the
time or price desired. In addition, in order to resell a restricted security,
the Fund might have to bear the expense and incur the delays associated with
registration of the security. The Fund may purchase certain securities that are
not registered for sale to the general public, but that can be resold to
institutional investors ^("Rule 144A ^ Securities"), without regard to the
foregoing ^ 15% limitation, if a liquid trading market exists. The Company's
board of directors has delegated to Fund Management the authority to determine
the liquidity of Rule 144A Securities pursuant to guidelines approved by the
board. In the event that a Rule 144A Security held by the Fund is subsequently
determined to be illiquid, the security will be sold as soon as that can be done
in an orderly fashion consistent with the best interests of the Fund's
shareholders. For more information concerning Rule 144A Securities, see
^"Investment Policies and Restrictions^" in the Statement of Additional
Information.
<PAGE>
Delayed Delivery or When-Issued Purchases. Securities may at times be
purchased or sold by the Fund with settlement taking place in the future. The
Fund may invest, and hold, up to 10% of its net assets in when-issued
securities. In the case of debt securities, the payment obligations and the
interest rates that will be received on the securities generally are fixed at
the time the Fund enters into the commitment. Between the date of purchase and
the settlement date, the value of the securities is subject to market
fluctuations, and no interest is payable to the Fund prior to the settlement
date. For more information concerning delayed delivery and when-issued
purchases, see the Statement of Additional Information.
Futures Contracts and Options. The Fund may enter into futures contracts
for hedging or other non-speculative purposes within the meaning and intent of
applicable rules of the Commodity Futures Trading Commission ^("CFTC"). For
example, futures contracts may be purchased or sold to attempt to hedge against
the effects of interest or exchange rate changes on the Fund's current or
intended investments. If an anticipated decrease in the value of portfolio
securities occurs as a result of a general increase in interest rates or a
change in exchange rates, the adverse effects of such changes may be offset, in
whole or part, by gains on the sale of futures contracts. Conversely, an
increase in the cost of portfolio securities to be acquired caused by a general
decline in interest rates or a change in exchange rates may be offset, in whole
or part, by gains on futures contracts purchased by the Fund. The Fund will
incur brokerage fees when it purchases and sells futures contracts, and it will
be required to maintain margin deposits.
The Fund also may use options to buy or sell futures contracts or debt
securities. Such investment strategies will be used as a hedge and not for
speculation.
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 may purchase put or call options in anticipation of changes in
interest rates or other factors which may adversely affect the value of its
portfolio or the prices of securities which the Fund anticipates purchasing at a
later date. The Fund may be able to offset such adverse effects on its
portfolio, in whole or in part, through the options purchased.
<PAGE>
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 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.
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 and an agreed-upon date. The Fund could incur costs or
delays in seeking to sell the instrument if the prior owner defaults on its
repurchase obligation. To reduce that risk, the securities which 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 ^ Company's board of directors.
^
<PAGE>
For a further discussion of risks associated with an investment in the
Fund, see "Investment Policies and Restrictions" and "Investment Practices" in
the Statement of Additional Information.
Investment Restrictions. Certain restrictions, which are set forth in the
Statement of Additional Information, may not be altered without the approval of
the Fund's shareholders. For example, with respect to 75% of 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, and reverse
repurchase agreements, in amounts as aggregated not exceeding 33-1/3% of total
assets.
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.
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 ^ Company, 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. ^ IRAI
is the Fund's sub-adviser and is primarily responsible for managing the Fund's
investments. ^
The Fund's investments are selected by a team of IRAI 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 concerning
this policy.
The Fund pays IFG a monthly management fee which is based upon a
percentage of the Fund's average net assets determined daily. The management fee
is computed at the annual rate of 0.75% of the Fund's average net assets. Out of
this advisory fee, IFG pays to IRAI an amount equal to 0.30% of the Fund's
average net assets ^. No fee is paid by the Fund to IRAI.
Under a Distribution Agreement effective September 30, 1997, IDI became
the Fund's distributor. IDI, established in 1997, is a registered broker-dealer
that acts as distributor for all retail funds advised by IFG. Prior to September
30, 1997, IFG served as the Fund's distributor.
<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 ^. 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, ^ recordkeeping, and internal sub-accounting services
for the Fund. For such services, IFG was paid for the period January 2, 1997
(commencement of operations) through July 31, 1997, a fee equal to 0.03% of the
Fund's average net assets (prior to the absorption of certain Fund expenses).
The Fund's expenses, which are accrued daily, are deducted from total
income before dividends are paid. Total expenses of the Fund for the period
January 2, 1997 (commencement of operations) through ^ July 31, 1997, including
investment management fees (but excluding brokerage commissions, which are a
cost of acquiring securities), amounted to ^ 1.20% (annualized) of the Fund's
average net assets. ^ Certain Fund expenses ^ were absorbed voluntarily by IFG
in order to ensure that the ^ Fund's total operating expenses ^ did not exceed ^
2.00% of the ^ Fund's average net assets. This commitment may be changed
following consultation with the Company's board of directors.
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of ^
such broker-dealer's 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 or IDI, 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.
IFG ^, IRAI and IDI are indirect wholly owned ^ subsidiaries of AMVESCAP
PLC. AMVESCAP PLC is a publicly-traded holding company that, through its
subsidiaries, engages in the business of investment management on an
international basis. INVESCO PLC changed its name to AMVESCO PLC on March 3,
1997, and to AMVESCAP PLC on May 8, 1997, as part of a merger between a direct
subsidiary of INVESCO PLC and A I M Management Group Inc., that created one of
the largest independent investment management businesses in the world. IFG and
IRAI ^ continued to operate under their existing names. AMVESCAP PLC has
approximately ^ $177.5 billion in assets under management. IFG was established
in 1932 and, as of ^ July 31, 1997, managed 14 mutual funds, consisting of 45
separate portfolios, with combined assets of approximately ^ $16.4 billion on
behalf of over ^ 858,000 shareholders. IRAI^, founded in 1983 ^, is a registered
investment adviser that currently manages ^ $3.2 billion of assets (both
securities and direct investments in real estate) for its clients. IRAI's
clients include corporate plans and public pension funds, as well as endowment
<PAGE>
and foundation accounts. It presently serves as sub-adviser to ^ two other
mutual fund portfolios as well as other collective investment vehicles. As of
July 31, 1997, the portfolio of direct investments in real estate managed by
IRAI for its clients contained ^ 98 properties totalling more than ^ 25 million
square feet of commercial real estate and ^ 14,425 apartment units.
FUND PRICE AND PERFORMANCE
Determining Price. The value of your investment in the Fund will vary
daily. The price per share is also known as the Net Asset Value ^("NAV"). IFG
prices the Fund every day that the New York Stock Exchange is open, as of the
close of regular trading ^(generally, 4:00 p.m., New York time). NAV is
calculated by adding together the current market value of ^ the Fund's assets,
including accrued interest and dividends; then subtracting liabilities,
including accrued expenses; and finally dividing that dollar amount by the total
number of shares outstanding.
Performance Data. To keep shareholders and potential investors informed,
we will occasionally advertise the Fund's total return and yield. Total return
figures show the rate of return on a $1,000 investment in the Fund, assuming
reinvestment of all dividends and capital gain distributions for one-, five-,
and ten-year periods. Cumulative total return shows the actual rate of return on
an investment; average annual total return represents the average annual
percentage change in the value of an investment. Both cumulative and average
annual total returns tend to ^"smooth out^" fluctuations in the Fund's
investment results, ^ because they do not show interim variations in performance
^ that occur during 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. More information about the Fund's performance is
contained in the Company's Annual Report to Shareholders. You can get a free
copy by calling or writing IDI using the phone number or address on the cover of
this Prospectus.
When we quote mutual fund rankings published by Lipper Analytical
Services, Inc., we may compare the Fund to others in its category of Real Estate
Funds, as well as the broad-based Lipper general fund groupings. These rankings
allow you to compare the Fund to its peers. Other independent financial media
also produce performance- or service-related comparisons, which you may see in
our promotional materials. For more information see "Fund Performance" in the
Statement of Additional Information.
Performance figures are based on historical investment results and are not
intended to suggest future performance.
<PAGE>
HOW TO BUY SHARES
The following chart ^ shows several convenient ways to invest in the Fund.
Your new Fund shares will be priced at the NAV next determined after your order
is received in proper form. There is no charge to invest, exchange or redeem
shares when you make transactions directly through IFG. However, if you invest
in the Fund through a securities broker, you may be charged a commission or
transaction fee. For all new accounts, please send a completed application
form.^
Fund Management reserves the right to increase, reduce or waive the
minimum investment requirements in its sole discretion, where it determines this
action is in the best interests of the Fund. 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.
HOW TO BUY SHARES
================================================================================
Method Investment Minimum Please Remember
- --------------------------------------------------------------------------------
By Check
Mail to: $1,000 for regular If your check does
INVESCO Funds account; not clear, you will
Group, Inc. $250 for an ^ IRA; be responsible for
P.O. Box 173706 $50 minimum for any related loss
Denver, CO 80217- each subsequent the Fund or IFG
3706. investment. incurs. If you are
Or you may send already a
your check by shareholder in the
overnight courier INVESCO funds, the
to: 7800 E. Union Fund may seek
Ave., Denver, CO reimbursement from
80237. your existing
account(s) for any
loss incurred.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
By Telephone or
Wire
Call 1-800-525-8085 $1,000. Payment must be
to request your received within 3
purchase. Then send business days, or
your check by the transaction may
overnight courier be cancelled. If a
to our street telephone purchase
address: is cancelled due to
7800 E. Union Ave., nonpayment, you
Denver, CO 80237. will be responsible
Or you may transmit for any related
your payment by loss the Fund or
bank wire (call IFG IFG incurs. If you
for instructions). are already a
shareholder in the
INVESCO funds, the
Fund may seek
reimbursement from
your existing
account(s) for any
loss incurred.
- --------------------------------------------------------------------------------
With EasiVest or
Direct Payroll
Purchase
You may enroll on $50 per month for Like all regular
the fund EasiVest; $50 per investment plans,
application, or pay period for neither EasiVest
call us for the Direct Payroll nor Direct Payroll
correct form and Purchase. You may Purchase ensures a
more details. start or stop your profit or protects
Investing the same regular investment against loss in a
amount on a monthly plan at any time, falling market.
basis allows you to with two weeks' Because you'll
buy more shares notice to IFG. invest continually,
when prices are low regardless of
and fewer shares varying price
when prices are levels, consider
high. This "dollar- your financial
cost averaging" may ability to keep
help offset market buying through low
fluctuations. Over price levels. And
a period of time, remember that you
your average cost 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.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
By PAL
Your "Personal $1,000. Be sure to write
Account Line" is down the
available for confirmation number
subsequent provided by PAL.
purchases and 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.
- --------------------------------------------------------------------------------
By Exchange
Between this and $1,000 to open a See "Exchange ^
another of the new account; $50 Policy" below.
INVESCO funds. Call for written
1-800-525-8085 for requests to
prospectuses of purchase additional
other INVESCO shares for an
funds. You may also existing account.
establish an (The exchange
Automatic Monthly minimum is $250 for
Exchange service purchases requested
between two INVESCO by telephone.)
funds; call IFG for
further details and
the correct form.
================================================================================
Exchange ^ Policy. You may exchange your shares in this Fund for those in
another INVESCO fund, on the basis of their respective net asset values at the
time of the exchange. Before making any exchange, be sure to review the
prospectuses of the funds involved and consider their differences.
<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.
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 the exchange ^ policy, in the best interests of
the Fund and its shareholders. Notice of all such modifications or
termination will be given at least 60 days prior to the effective
date of the change in ^ policy, 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 1940 Act (the ^"Plan") to use its
assets to finance certain activities relating to the distribution of its shares
to investors. Under the Plan, monthly payments may be made by the Fund to ^ IDI
to permit ^ IDI at its discretion, to engage in certain activities, and provide
certain services approved by the board of directors of the 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 ^ IDI-affiliated companies, to
obtain various distribution-related and/or administrative services for the Fund.
Such services may include, among other things, processing new shareholder
account applications, preparing and transmitting 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, printing and distribution of sales literature,
printing and ^ distribution of prospectuses to prospective investors, and such
other services and promotional activities for the Fund as may from time to time
be agreed upon by the 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 ^ IDI or its affiliates or by third parties.
<PAGE>
Under the Plan, the Company's payments to ^ IDI on behalf of the Fund are
limited to an amount computed at an annual rate of 0.25% of the Fund's average
net assets ^. IDI is not entitled to payment for overhead expenses under the
Plan, but may be paid for all or a portion of the compensation paid for salaries
and other employee benefits for the personnel of IFG or IDI 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 only be
made to compensate ^ IDI for permissible activities engaged in and services
provided by ^ IDI during the rolling 12-month period in which that month falls,
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 ^ IDI in excess of the limitations described above will not be paid
by the Fund under the Plan, and will be borne by ^ IDI. In addition, ^ IDI may
from time to time make additional payments from its revenues to securities
dealers ^, financial advisers and financial institutions that provide
distribution-related and/or administrative services for the Fund. No further
payments will be made by the Fund under the Plan in the event of the Plan's
termination. ^ Payments made by the Fund may not be used to finance directly the
distribution of shares of any other ^ Fund of the Company or other mutual fund
advised by IFG. However, payments received by IDI which are not used to finance
the distribution of shares of the Fund become part of IDI's revenues and may be
used for only permissible activities for all of the mutual funds advised by IFG
subject to review by the Fund's directors. Payments made by the Fund under the
Plan for compensation of marketing personnel, as noted above, are based on an
allocation formula designed to ensure that all such payments are appropriate.
IDI will bear any distribution- and service-related expenses in excess of the
amounts which are compensated pursuant to the Plan. The Plan also authorizes any
financing of distribution which may result from IDI's use of its own resources,
including profits from investment advisory fees received from the Fund, provided
that such fees are legitimate and not excessive. For more information see "How
Shares Can Be Purchased - Distribution Plan" in the Statement of Additional
Information.
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.
<PAGE>
Reinvestment of Distributions. Dividends and capital gain distributions
are automatically invested in additional ^ Fund shares at the NAV on the
ex-dividend or ex-distribution date, unless you choose to have dividends and/or
capital gain distributions automatically reinvested in another INVESCO fund or
paid by check (minimum of $10.00).
Telephone Transactions. All shareholders may exchange and redeem Fund
shares by telephone, unless they expressly decline these privileges. By signing
the new account Application, a Telephone Transaction Authorization Form, or
otherwise using these privileges, the investor has agreed that, if the Fund has
followed reasonable procedures, such as recording telephone instructions and
sending written transaction confirmations, it will not be liable for following ^
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 ^ IRAs and
many types of tax-deferred retirement plans. IFG can supply you with information
and forms to establish or transfer your existing plan or account.
HOW TO SELL SHARES
The following chart ^ shows several convenient ways to redeem your Fund
shares. Shares of the Fund may be redeemed at any time at their current NAV next
determined after a request in proper form is received at the Fund's office. The
NAV at the time of the redemption may be more or less than the price you paid to
purchase your shares, depending primarily upon the Fund's investment
performance.
Please specify from which fund you wish to redeem shares. Shareholders
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 $250 (or, if less, This option is not
at 1-800-525-8085. full liquidation of available for
the account) for a shares held in ^
redemption check; IRAs.
$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.
- --------------------------------------------------------------------------------
By Exchange
Between this and $1,000 to open a See ^"Exchange
another of the new account; $50 Policy" page ^ 146.
INVESCO funds. Call for written
1-800-525-8085 for requests to
prospectuses of purchase additional
other INVESCO shares for an
funds. You may also existing account.
establish an (The exchange
automatic monthly minimum is $250 for
exchange service exchanges requested
between two INVESCO by telephone.)
funds; call IFG for
further details and
the correct form.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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 as a result of shareholder
action, the Fund reserves the right to ^ redeem all shares in such account, in
which case the account would be liquidated and the proceeds forwarded to the
shareholder. Prior to any such redemption, a shareholder will be notified and
given 60 days to increase the value of the account to $250 or more.
<PAGE>
TAXES, DIVIDENDS AND ^ OTHER DISTRIBUTIONS
Taxes. The Fund intends to distribute to shareholders ^ all of its net
investment income, net capital gains and net gains from foreign currency
transactions, if any, in order to continue to qualify for tax treatment as a
regulated investment company. Thus, the Fund does not expect to pay any federal
income or excise taxes.
Unless shareholders are exempt from income taxes, they must include all
dividends and ^ other 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.
Net realized capital gains of the Fund are classified as short-term and
long-term gains depending upon how long the Fund held the security that gave
rise to the gains. Short-term capital gains are included in income from
dividends and interest as ordinary income and are taxed at the taxpayer's
marginal tax rate. The Taxpayer Relief Act of 1997 (the "Tax Act"), enacted in
August 1997, changed the taxation of long-term capital gains for individuals by
applying different capital gains rates depending on the taxpayer's holding
period and marginal rate of federal income tax. Long-term gains realized on the
sale of securities held for more than one year but not for more than 18 months
are taxable at a rate of 28%. This category of long-term gains is often referred
to as "mid-term" gains but is technically termed "28% rate gains". Long-term
gains realized on the sale of securities held for more than 18 months are
taxable at a rate of 20%. At the end of each year, information regarding the tax
status of dividends and other distributions is provided to shareholders.
Shareholders should consult their tax advisers as to the effect of the Tax Act
on distributions by the Fund of net capital gains.
Shareholders also may realize capital gains or losses when they sell their
Fund shares at more or less than the price originally paid. Capital gains on
shares held for more than one year will be long-term capital gains, in which
event they will be subject to federal income tax at the rates indicated above.
The Fund may be subject to withholding of foreign taxes on dividends or
interest it receives on foreign securities. Foreign taxes withheld will be
treated as an expense of the Fund ^.
^ Individuals and certain other non-corporate shareholders may be subject
to backup withholding of 31% on dividends, capital ^ gains and other
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.
We encourage you to consult a tax adviser with respect to these matters.
For further information see "Dividends, Other Distributions and Taxes" in the
Statement of Additional Information.
<PAGE>
Dividends and Other ^ Distributions. The Fund earns ordinary or net
investment income in the form of dividends and interest on its investments. ^
Dividends paid by the Fund will be based solely on the income earned by it. The
Fund's policy is to distribute substantially all of this income, less Fund
expenses, to shareholders on a quarterly basis, at the discretion of the ^
Fund's board of directors. Dividends are automatically reinvested in additional
shares of the Fund at the net asset value on the payable date unless otherwise
requested.
In addition, the Fund realizes capital gains and losses when it sells
securities for more or less than it paid. If total gains on sales exceed total
losses (including losses carried forward from previous years), the Fund has a
net realized capital gain. Net realized capital gains, if any, together with
gains, if any, realized on foreign currency transactions, are distributed to
shareholders at least annually, usually in December. Capital gains distributions
are automatically reinvested in shares of the Fund at the net asset value on the
payable date unless otherwise requested.
Dividends and other ^ distributions are paid to ^ holders of shares on the
record date of distribution regardless ^ how long the Fund shares have been held
by the shareholder. The ^ Fund's share price will then drop by the amount of the
distribution on the ^ ex- dividend or ex-distribution ^ date. If a shareholder
purchases shares immediately prior to the distribution, the shareholder will, in
effect, have ^"bought" the distribution by paying the full purchase price, a
portion of which is then returned in the form of a taxable distribution.
^
ADDITIONAL INFORMATION
Voting Rights. All shares of the Fund have equal voting rights based on
one vote for each share owned and a corresponding fractional vote for each
fractional share owned. The Fund is not generally required and does not expect
to hold regular annual meetings of shareholders. However, when requested to do
so in writing by the holders of 10% or more of the outstanding shares of the
Fund or as may be required by applicable law or the Fund's Articles of
Incorporation, the board of directors will call special meetings of
shareholders. Directors may be removed by action of the holders of a majority of
the outstanding shares of the Fund. The ^ Company 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 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 these options were implemented.
<PAGE>
PROSPECTUS
^ December 1, 1997
INVESCO Realty Fund
A no-load mutual fund seeking to provide
above-average current income.
INVESCO FUNDS
INVESCO Distributors, Inc.
Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
1-800-525-8085
PAL(R): 1-800-424-8085
http://www.invesco.com
^ In Denver, visit one of our
convenient Investor Centers:
Cherry Creek
155-B Fillmore Street
Denver Tech Center
7800 East Union Avenue^
Lobby Level
In addition, all documents
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>
PROSPECTUS
^ December 1, 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
Price 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.
^
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 Distributors, 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.
This Prospectus provides you with the basic information you should know
before investing in the Fund. You should read it and keep it for future
reference. A Statement of Additional Information containing further information
about the Fund, dated December 1, 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 Distributors, Inc., P.O. Box 173706,
Denver, Colorado 80217-3706; call 1-800-525-8085; or visit our web site at
http://www.invesco.com.
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION. THE SHARES
OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. ^
TABLE OF CONTENTS
Page
ESSENTIAL INFORMATION......................................................157
ANNUAL FUND EXPENSES.......................................................158
INVESTMENT OBJECTIVE AND STRATEGY..........................................160
INVESTMENT POLICIES AND RISKS..............................................161
^ THE FUND AND ITS MANAGEMENT..............................................165
FUND PRICE AND PERFORMANCE.................................................167
HOW TO BUY SHARES..........................................................168
FUND SERVICES..............................................................174
HOW TO SELL SHARES.........................................................174
TAXES, DIVIDENDS AND ^ OTHER DISTRIBUTIONS.................................178
ADDITIONAL INFORMATION.....................................................180
<PAGE>
ESSENTIAL INFORMATION
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 ^
Gifts/Transfers To Minors Act Account or systematic investing strategy. The Fund
may be a suitable investment for many types of retirement programs, including ^
Individual Retirement Account ("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 S&P 500 Index ^ or 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 will attempt to 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 and transfer agent. World Asset Management
("World") serves as sub-adviser. Together, IFG and World constitute "Fund
Management." INVESCO Distributors, Inc. ("IDI"), founded in 1997 as a
wholly-owned subsidiary of IFG, is the Fund's distributor.
IFG and IDI are subsidiaries of AMVESCAP PLC, an international investment
management company that manages approximately ^ $177.5 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 ^ $2,000 for 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 ^ Transaction Expenses." The Fund is, however,
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 therefore 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. To keep expenses competitive,
the Fund's adviser will voluntarily reimburse the Fund for amounts in excess of
0.30% of average net assets relating to Class I shares and 0.55% of average net
assets relating to Class II shares.
<PAGE>
Class I Class II
------- --------
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 by IFG 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%
of average daily net assets relating to Class I shares and 0.55% of average
daily net assets relating to Class II shares. If such voluntary expense limits
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 0.42% and
0.67%, respectively, of Class I shares average net assets and 0.60% and 1.10%,
respectively, of Class II shares average net assets. Actual expenses are not
provided because the Fund does not expect to begin a public offering of its
securities until on or about ^ January 1, 1998.
Example
A shareholder would pay the following expenses on a $1,000 investment for
the periods shown, assuming a hypothetical 5% annual return and redemption at
the end of each time period. (Of course, actual operating expenses are paid from
the Fund's assets, and are deducted from the amount of income available for
distribution to shareholders; they are not charged directly to shareholder
accounts.)
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class I $3 $10 $17 $38
Class II $6 $18 $31 $69
<PAGE>
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."
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 will
seek 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 also 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 ^, a division of The McGraw-Hill Companies, Inc. ("S&P") for inclusion
in the Index. As of June 30, 1997, the S&P 500 represented approximately 71% 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 144
largest companies in the S&P 500 accounted for approximately 75% 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, and at commencement of operations it will hold
<PAGE>
securities of a relatively small number of those companies. As assets in the
Fund increase, it normally will hold 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.
The Fund is not sponsored, endorsed, sold or promoted by S&P. S&P makes no
representation or warranty, express or implied, to the owners of the Fund or any
member of the public regarding the advisability of investing in securities
generally or in the Fund particularly or the ability of the S&P 500 to trace
general stock market performance. S&P's only relationship to the Company is the
licensing of certain 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 the needs of the Company or the owners
of the Fund into consideration in determining, composing or calculating the S&P
500. S&P is not responsible for and has not participated in the determination of
the prices and amount of the Fund or the timing of the issuance or sale of Fund
shares or in the determination of calculation of the equation by which the Fund
is to be converted into cash. S&P has no obligation or liability in connection
with administration, marketing or trading of the Fund.
S&P DOES NOT ^ GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P
500 OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY ERRORS,
OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED,
AS TO RESULTS TO BE OBTAINED BY THE COMPANY, OWNERS OF THE FUND, OR ANY OTHER
PERSON OR ENTITY FROM THE USE OF THE S&P 500 OR ANY DATA INCLUDED THEREIN. S&P
MAKES NO EXPRESS OR IMPLIED WARRANTY, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE
S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE,
INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF
THE POSSIBILITY OF SUCH DAMAGES.
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.
<PAGE>
Limited Portfolio. While the S&P 500 includes the majority of large market
capitalization stocks in the U.S. stock market, it excludes the stocks of most
medium and smaller sized companies that comprise the remaining 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.
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. At commencement of operations, the Fund expects that the composition
of its portfolio will have approximately an 80% correlation to the composition
of the S&P 500. 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, subject to certain
exceptions, no more than 10% of the Fund's total assets may be invested in
securities of other investment companies, and, with respect to 75% of the Fund's
total assets, no more than 5% of its total assets may be invested 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.
<PAGE>
For example, futures contracts may be purchased or sold to attempt to
hedge against a price movement in the S&P 500 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.
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 liquid obligations
with a value equal to the option exercise price in a segregated account with its
custodian.
<PAGE>
Although the Fund will enter into options and futures contracts solely for
hedging, liquidity or other non-speculative purposes ^, 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.
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 ^ Company'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.
<PAGE>
For a further discussion of risks associated with an investment in the
Fund, see "Investment Policies and Restrictions" and "Investment Practices" in
the Statement of Additional Information.
Investment Restrictions. Certain restrictions, which are ^ so identified
in the Statement of Additional Information, are fundamental and 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.
^ 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.
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 Company, 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.^
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. The agreement was approved by IFG as the then sole shareholder
of the Fund on October 1,1997.
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.
<PAGE>
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.
IDI acts as distributor of the Fund. IDI, established in 1997, is a
registered broker-dealer that acts as distributor for all retail funds advised
by IFG.
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. 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, ^ recordkeeping, 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. This commitment may be changed following consultation with the
Company's board of directors.
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of ^
such broker-dealer's 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 or IDI, 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.
<PAGE>
IFG and IDI are indirect wholly-owned subsidiaries of AMVESCAP PLC.
AMVESCAP PLC is a publicly-traded holding company that, through its
subsidiaries, engages in the business of investment management on an
international basis. INVESCO PLC changed its name to AMVESCO PLC on March 3,
1997 and to AMVESCAP PLC on May 8, 1997, as part of a merger between a direct
subsidiary of INVESCO PLC and A I M Management Group Inc., that created one of
the largest independent investment management businesses in the world. IFG
continues to operate under its existing name. AMVESCAP PLC has approximately
$177.5 billion in assets under management. IFG was established in 1932 and, as
of July 31, 1997, managed 14 mutual funds, consisting of 45 separate portfolios,
with combined assets of approximately $16.4 billion on behalf of more than
858,000 shareholders.
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 ^(generally,
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' assets,
including accrued interest and dividends; then subtracting liabilities,
including accrued expenses attributable to the class; 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-,
and ten-year periods (or since inception). Cumulative total return shows the
actual rate of return on an investment for the periods cited; average annual
total return represents the average annual percentage change in the value of an
investment. Both cumulative and average annual total returns tend to "smooth
out" fluctuations in the Fund's investment results, because they do not show
interim variations in performance that occur during 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 large-cap
funds and/or S&P 500 indices, as well as the broad-based Lipper general fund
groupings. These rankings allow you to compare the Fund to its peers. Other
independent financial media also produce performance- or service-related
comparisons, which you may see in our promotional materials. For more
information see "Fund Performance" in the Statement of Additional Information.
Performance figures are based on historical investment results and are not
intended to suggest future performance.
<PAGE>
HOW TO BUY SHARES
The 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, and (iii) 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 fee may be charged on 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 which class of
shares you wish to purchase.
IFG reserves the right to increase, reduce or waive the minimum investment
requirements in its sole discretion, where it determines this action is in the
best interests of the Fund. 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; $25,000 not clear, you will
Group, Inc. for each subsequent be responsible for
P.O. Box 173706 investment. any related loss
Denver, CO 80217- the Fund or IFG
3706. Class II incurs. If you are
--------
Or you may send $5,000 for regular already a
your check by account; shareholder in the
overnight courier $2,000 for an IRA; INVESCO funds, the
to: 7800 E. Union $1,000 minimum for Fund may seek
Ave., Denver, CO each subsequent reimbursement from
80237. investment. your existing
account(s) for any
loss incurred.
- --------------------------------------------------------------------------------
By Telephone or
Wire
Call 1-800-525-8085 Class I Payment must be
-------
to request your $250,000; $25,000 received within 3
purchase. Then send for each subsequent business days, or
your check by investment. the transaction may
overnight courier be cancelled. If a
to our street Class II telephone purchase
--------
address: $5,000 for regular is cancelled due to
7800 E. Union Ave., account; nonpayment, you
Denver, CO 80237. $2,000 for an IRA; will be responsible
Or you may transmit $1,000 minimum for for any related
your payment by each subsequent loss the Fund or
bank wire (call IFG investment. IFG incurs. If you
for instructions). are already a
shareholder in the
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 ^ Purchase ensures a
more details. Class I purchasers profit or protects
Investing the same or 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.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
By Exchange
Between this and Class I See "Exchange
another of the $250,000 to open a Policy" ^ below.
INVESCO funds. Call new account;
1-800-525-8085 for $25,000 for written
prospectuses of 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 IRAs; $1,000
for written requests
to purchase additional
shares. The exchange
minimum is $1,000 for
purchases requested by
telephone.
================================================================================
<PAGE>
Exchange Policy. You may exchange your shares in this Fund for those in
another INVESCO fund on the basis of their respective net asset values at the
time of the exchange. Before making any exchange, be sure to review the
prospectuses of the funds involved and consider their differences.
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 ^ results 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 by IFG and distributed by IDI. 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 ^ method results in the redemption
of shares deemed held for less than three months, the redemption fee will be
assessed ^ against such shares. IFG reserves the right, in the sole
determination of IFG, to waive the redemption fee.
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 the exchange policy, 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
<PAGE>
payments may be made by the Fund to IDI to permit IDI, at its discretion, to
engage in certain activities and provide certain services approved by the board
of directors of the Company in connection with the distribution of the Fund's
Class II 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 IDI-affiliated companies, to obtain various distribution-related and/or
administrative services for the Fund. Such services may include, among other
things, processing new shareholder account applications, preparing and
transmitting electronically to the Fund's Transfer Agent 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, printing and distribution of sales literature and
printing and distribution of prospectuses to prospective investors, and such
other services and promotional activities for the Fund as may from time to time
be agreed upon by the 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 IDI or its affiliates or by third parties.
Under the Plan, the Company's payments to IDI on behalf of the Fund are
limited to an amount computed at an annual rate of 0.25% of the Fund's average
net assets attributable to the Fund's Class II shares ^. IDI is not entitled to
payment for overhead expenses under the Plan, but may be paid for all or a
portion of the compensation paid for salaries and other employee benefits for
the personnel of IFG or IDI 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 IDI for permissible
activities engaged in and services provided by IDI 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 IDI in excess of the limitations
described above will not be paid by the Fund under the Plan and will be borne by
IDI. In addition, IDI and its affiliates may from time to time make additional
payments from its revenues to securities dealers ^, financial advisers and
financial institutions that provide distribution-related and/or administrative
services for the Fund. No further payments will be made by the Fund under the
Plan in the event of ^ the Plan's termination. ^ Payments made by the Fund may
not be used to finance directly the distribution of shares of any other ^ Fund
of the Company or other mutual fund advised by IFG. However, payments received
by IDI which are not used to finance the distribution of shares of the Fund
become part of IDI's revenues and may be used by IDI for only permissible
activities for all of the mutual funds advised by IFG subject to review by the
Fund's directors. Payments made by the Fund under the Plan for compensation of
marketing personnel, as noted above, are based on an allocation formula designed
to ensure that all such payments are appropriate. IDI will bear any
distribution- and service-related expenses in excess of the amounts which are
<PAGE>
compensated pursuant to the Plan. The Plan also authorizes any financing of
distribution which may result from IDI's use of its own resources, including
profits from investment advisory fees received from the Fund, provided that such
fees are legitimate and not excessive. 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 separate 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 or ex-distribution date, unless you choose to have dividends and/or
capital gain distributions automatically reinvested in another INVESCO fund or
paid by check (minimum of $10.00).
Telephone Transactions. All shareholders may exchange and redeem Fund
shares by telephone, unless they expressly decline these privileges. By signing
the new account Application 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 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
<PAGE>
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 by IFG
and distributed by IDI. 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 its sole discretion, to
waive the redemption fee.
Please specify from which fund and class, if any, you wish to redeem
shares. Shareholders 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 IRAs.
account) for a
redemption check;
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 a Policy," ^ page 172.
INVESCO funds. Call new account in the
1-800-525-8085 for Fund; $1,000 to
prospectuses of open a new account
other INVESCO in the other
funds. You may also INVESCO funds;
establish an $25,000 for written
automatic monthly requests to
exchange service purchase additional
between two INVESCO shares for an
funds; call IFG for existing account. ^
further details and
the correct form. Class II
--------
$5,000 to open a new
account in the Fund;
$1,000 to open a new
account in the other
INVESCO funds; $2,000
for IRAs; $1,000 for
written requests to
purchase additional
shares for an existing
account. The exchange
minimum is $1,000 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 $50,000 for Class I shares, or
$5,000 for Class II shares ($2,000 for IRAs) 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 ^ OTHER DISTRIBUTIONS
Taxes. The Fund intends to distribute to shareholders ^ 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 ^ other 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.
^ Net realized capital gains of the Fund are classified as short-term^ and
long-term gains depending ^ upon how long the Fund held the security ^ that gave
rise to the gains. Short-term capital gains are included in income from
dividends and interest as ordinary income and are taxed at the taxpayer's
marginal tax rate. The Taxpayer Relief Act of 1997 (the "Tax Act"), enacted in
August 1997, changed the taxation of long-term capital gains for individuals by
applying different capital gains rates depending on the taxpayer's holding
period and marginal rate of federal income tax. Long-term gains realized on the
sale of securities held for more than one year but not for more than 18 months
are taxable at a rate of 28%. This category of long-term gains is often referred
to as "mid-term" gains but is technically termed "28% rate gains". Long-term
gains realized on the sale of securities held for more than 18 months are
taxable at a rate of 20%. At the end of each year, information regarding the tax
status of dividends and other distributions is provided to shareholders.
Shareholders should consult their tax advisers as to the effect of the Tax Act
on distributions by the Fund of net capital gains.
Shareholders also may realize capital gains or losses when they sell their
Fund shares at more or less than the price originally paid. Capital gains on
shares held for more than one year will be long-term capital gains, in which
event they will be subject to federal income tax at the rates indicated above. ^
The Fund may be subject to withholding of foreign taxes on dividends or
interest it receives on foreign securities. Foreign taxes withheld will be
treated as an expense of the Fund ^.
Individuals and certain other non-corporate shareholders may be subject to
backup withholding of 31% on dividends, capital ^ gains and other 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.
We encourage you to consult a tax adviser with respect to these matters.
For further information^ see "Dividends, ^ Other Distributions and Taxes" in the
Statement of Additional
Information.
Dividends and ^ Other Distributions. The Fund ^ earns ordinary or net
investment income in the form of dividends and interest on its investments. ^
Dividends paid by the Fund will be based solely on the income earned by it. The
Fund's policy is to distribute substantially all of this income, less Fund
expenses, to shareholders on a quarterly basis, at the discretion of the ^
Fund's board of directors. Dividends are automatically reinvested in additional
shares of the Fund at the net asset value on the payable date unless otherwise
requested.
<PAGE>
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, together with
gains, if any, realized on foreign currency transactions, are distributed to
shareholders at least annually, usually in December. Capital gains distributions
are automatically reinvested in shares of the Fund at the net asset value on the
payable date unless otherwise requested.
Dividends and other ^ distributions are paid to ^ holders of shares on the
record date of distribution regardless ^ how long the Fund shares have been held
by the shareholder. The ^ Fund's share price will then drop by the amount of the
distribution on the ^ ex- dividend or ex-distribution ^ date. If a shareholder
purchases shares immediately prior to the distribution, the shareholder will, in
effect, have ^"bought" the distribution by paying the full purchase price, a
portion of which is then returned in the form of a taxable distribution.
ADDITIONAL INFORMATION
Voting Rights. All shares of the Fund of the Company 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 Company.
The Fund will assist shareholders in communicating with other shareholders as
required by the Investment Company Act of 1940.
Master/Feeder Option. As a matter of fundamental policy, the Company may,
in the future, seek to achieve the Fund's investment objective by investing all
of the Fund's assets in another investment company having substantially the same
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>
PROSPECTUS
December 1, 1997 ^
INVESCO S&P 500 Index Fund
^ A no-load mutual fund seeking to
provide price performance and income
comparable to the Standard & Poor's
500 Composite Stock Index.
INVESCO FUNDS
INVESCO Distributors, Inc.
Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
1-800-525-8085
PAL(R): 1-800-424-8085
http://www.invesco.com
^ In Denver, visit one of our
convenient Investor Centers:
Cherry Creek
155-B Fillmore Street
Denver Tech Center
7800 East Union Avenue^
Lobby Level
In addition, all documents
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
^ December 1, 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"); 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 securities of issuers ^ of at
least three different 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 securities of issuers domiciled in
the United States ^ normally will be higher than that invested in securities
issued by companies domiciled 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 securities of issuers domiciled in at
least five different 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 ^ Funds, dated December 1, 1997, which provide the
basic information you should know before investing in a Fund, may be obtained
without charge from INVESCO ^ Distributors, 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: INVESCO FUNDS GROUP, INC.
Distributor: INVESCO DISTRIBUTORS, INC.
<PAGE>
TABLE OF CONTENTS
Page
INVESTMENT POLICIES AND RESTRICTIONS 185
THE FUNDS AND THEIR MANAGEMENT 198
HOW SHARES CAN BE PURCHASED 214
HOW SHARES ARE VALUED 218
FUND PERFORMANCE 219
SERVICES PROVIDED BY THE FUNDS 221
TAX-DEFERRED RETIREMENT PLANS 222
HOW TO REDEEM SHARES 222
DIVIDENDS, ^ OTHER DISTRIBUTIONS AND TAXES 223
INVESTMENT PRACTICES 225
ADDITIONAL INFORMATION 229
APPENDIX A 234
APPENDIX B 238
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
As discussed in each Fund's Prospectus, 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 investment value and may represent a premium over conversion value
<PAGE>
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.
Foreign Securities. Up to 25% of each Fund's total assets, measured at the
time of purchase, may be invested directly in foreign equity or corporate debt
securities. Securities of Canadian issuers and American Depository Receipts
("ADRs") are not subject to this 25% limitation. ADRs are receipts representing
shares of a foreign corporation held by a U.S. bank that entitle the holder to
all dividends and capital gains. ADRs are denominated in U.S. dollars and trade
in the U.S. securities markets.
For U.S. investors, the returns on foreign securities are influenced not
only by the returns on the foreign investments themselves, but also by currency
fluctuations. That is, when the U.S. dollar generally rises against a foreign
currency, returns for a U.S. investor on foreign securities denominated in that
foreign currency may decrease. By contrast, in a period when the U.S. dollar
generally declines, those returns may increase.
Other aspects of international investing to consider include:
-less publicly available information than is generally available about
U.S. issuers;
-differences in accounting, auditing and financial reporting standards;
-generally higher commission rates on foreign portfolio transactions and
longer settlement periods;
-smaller trading volumes and generally lower liquidity of foreign stock
markets, which may cause greater price volatility; and
-investments in certain countries may be subject to foreign withholding
taxes, which may reduce dividend or interest income or capital gains payable to
shareholders.
There is also the possibility of expropriation or confiscatory taxation;
adverse changes in investment or exchange control regulations; political
instability; foreign currencies fluctuations; potential restrictions on the flow
of international capital; and the possibility of the Fund experiencing
difficulties in pursuing legal remedies and collecting judgments.
<PAGE>
ADRs are subject to some of the same risks as direct investments in
foreign securities, including the risk that material information about the
issuer may not be disclosed in the United States and the risk that currency
fluctuations may adversely affect the value of the ADR.
Restricted/144A Securities
As discussed in The Funds' Prospectuses, each Fund may invest in
restricted securities, including restricted securities that can be resold to
institutional investors pursuant to Rule 144A under the Securities Act of 1933
("Rule 144A Securities").
In recent years, a large institutional market has developed for ^ Rule
144A Securities. Institutional investors generally will not seek to sell these
instruments to the general public, but instead will often depend on an efficient
institutional market in which ^ Rule 144A Securities can readily be resold or on
an issuer's ability to honor a demand for repayment. Therefore, the fact that
there are contractual or legal restrictions on resale to the general public or
certain institutions is not dispositive of the liquidity of such investments.
Rule 144A under the 1933 Act establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. Institutional markets for ^ Rule 144A Securities
may provide both readily ascertainable values for ^ Rule 144A Securities and the
ability to liquidate an investment in order to satisfy share redemption orders.
An insufficient number of qualified institutional buyers interested in
purchasing a Rule 144A ^ Security held by a Fund, however, could affect
adversely the marketability of such ^ 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
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
investments in debt securities, generally will be subject to both credit risk
and market risk. See the section of the Prospectuses entitled "Risk Factors."
<PAGE>
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 ^ a Fund to earn
income, which, in turn, can be invested in additional securities of the type
described in ^ the 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. ^ Fund Management monitors 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, a division of The
<PAGE>
McGraw-Hill Companies, Inc. ("S&P") or Prime-2 or higher by Moody's Investors
Service, Inc. ("Moody's") 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
Except for the S&P 500 Index Fund, 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 interest rates, 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
Except for the S&P 500 Index Fund, 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
<PAGE>
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."
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. ^ Because they are 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
Except for the S&P 500 Index Fund, the Funds may invest in 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 ^ Collateralized
Mortgage Obligations ("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" ^ shares
of beneficial interest in ^ REMICs. 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
<PAGE>
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.
^ A Fund will not, as to any positions, whether long, short or a combination
thereof, enter into futures and options thereon for which the aggregate initial
margins and premiums exceed 5% of the fair market value of the Fund's total
assets after taking into account unrealized profits and losses on options it has
entered into. In the case of an option that is "in-the-money," as defined in the
Commodity Exchange Act (the "CEA"), the in-the-money amount may be excluded in
computing such 5%. (In general a call option on a future is ^"in-the-money^" if
the value of the future exceeds the exercise ^("strike") price of the call; a
put option on a future is ^"in-the-money^" if the value of the future which is
the subject of the put is exceeded by the strike price of the put.) The Funds
may use futures and options thereon solely for bona fide hedging or for other
non-speculative purposes within the meaning and intent of the applicable
provisions of the CEA. ^ The S&P 500 Fund may also use futures and options for
liquidity.
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 ^ an amount of
cash or qualifying securities (currently U.S. Treasury bills)^. This is called
^"initial margin.^" Such initial margin is in the nature of a performance bond
or good faith deposit on the contract. However, since losses on open contracts
are required to be reflected in cash in the form of variation margin payments,
the Fund may be required to make additional payments during the term of the
contracts to its broker. Such payments would be required, for example, where,
during the term of an interest rate futures contract purchased by 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, determined 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
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.
<PAGE>
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. A forward foreign currency contract
("forward 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 ^ contracts.
Although the Funds have not adopted any limitations on their ability to use
forward contracts as a hedge against fluctuations in foreign exchange rates, the
Funds do not attempt to hedge all of their non-U.S. portfolio positions and will
enter into such transactions only to the extent, if any, deemed appropriate by
their investment adviser or sub-adviser. The Funds will not enter into forward
contracts for a term of more than one year.
Swaps and Swap-Related Products
Interest rate swaps involve the exchange by a Fund with another party of
their respective commitments to pay or receive interest, e.g., an exchange of
floating rate payments for fixed rate payments. The exchange commitments can
involve payments to be made in the same currency or in different currencies. The
purchase of an interest rate cap entitles the purchaser, to the extent that a
specified index exceeds a predetermined interest rate, to receive payments of
interest on a contractually-based principal amount from the party selling the
interest rate cap. The purchase of an interest rate floor entitles the
purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest on a contractually-based
principal amount from the party selling the interest rate floor.
<PAGE>
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 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 ^ liquid assets having an aggregate net asset value at least
equal to the full amount, accrued on a daily basis, of the Fund's obligations
with respect to any caps or floors.
There is no limit on the amount of interest rate swap transactions that
may be entered into by a Fund. These transactions may in some instances involve
the delivery of securities or other underlying assets by a Fund or its
counterparty to collateralize obligations under the swap. The documentation
currently used in those markets attempts to limit the risk of loss with respect
to interest rate swaps to the net amount of the payments that a party is
contractually obligated to make. If the other party to an interest rate swap
that is not collateralized defaults, the Fund would anticipate losing the net
amount of the payments that the Fund contractually is entitled to receive over
the payments that the Fund is contractually obligated to make. The Funds may buy
and sell (i.e., write) caps and floors without limitation, subject to the
segregated account requirement described above as well as the Funds' other
investment restrictions set forth below.
<PAGE>
Investment Restrictions
As described in the Funds' Prospectuses, the Funds operate under certain
investment restrictions. ^ The following restrictions 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 ^ investment restrictions, all percentage limitations apply
immediately after a purchase or initial investment. Any subsequent change in a
particular percentage resulting from fluctuations in value does not require
elimination of any security from a Fund.
Each Fund, unless otherwise indicated, may not:
1. With respect to seventy-five percent (75%) of ^ its 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.
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.)
<PAGE>
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 2 above, if the ^ Fund has borrowed money in an
amount exceeding 5% of the value of the Fund's net assets, the Fund will not
purchase additional securities while any such borrowings exist.
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 ^ a modified S&P
industry code classification schema which uses various sources to classify
securities.
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
futures, options, swaps and forward ^ 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, ^ under the 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 Worldwide Capital Goods
and Worldwide Communications Funds will invest no more than 15%, the European
Small Company Fund will invest in no more than 15% ^, the Latin American Growth
Fund will invest no more than 25%, the Asian Growth Fund will invest no more
than 30% and the Realty Fund will invest no more than 15% of their respective
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.
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,
<PAGE>
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.
^
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.
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.
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.
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.
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.
The Distributor. Effective September 30, 1997, INVESCO Distributors, Inc.
("IDI") became the Funds' distributor. IDI, established in 1997, is a registered
broker-dealer that acts as distributor for all retail mutual funds advised by
IFG. Prior to September 30, 1997, IFG served as the Funds' distributor.
IFG, INVESCO Trust, IAML, INVESCO Asia, IRAI and IDI are indirect,
wholly-owned subsidiaries of AMVESCAP PLC, a publicly-traded holding company
that, through its subsidiaries, engages in the business of investment management
on an international basis. INVESCO PLC changed its name to AMVESCO PLC on March
3, 1997, and to AMVESCAP PLC on May 8, 1997 as part of a merger between a direct
subsidiary of INVESCO PLC and A I M Management Group Inc., that created one of
the largest independent investment management businesses in the world with
<PAGE>
approximately $177.5 billion in assets under management. IFG was established in
1932 and as of July 31, 1997, managed 14 mutual funds, consisting of 45 separate
portfolios, on behalf of over 858,000 shareholders. AMVESCAP PLC's other North
American subsidiaries include the following:
--INVESCO Capital Management, Inc. of Atlanta, Georgia manages
institutional investment portfolios, consisting primarily of discretionary
employee benefit plans for corporations and state and local governments, and
endowment funds. INVESCO Capital Management, Inc. is the sole shareholder of
INVESCO Services, Inc., a registered broker-dealer whose primary business is the
distribution of shares of two registered investment companies.
--INVESCO Management & Research, Inc. of Boston, Massachusetts, primarily
manages pension and endowment accounts.
--PRIMCO Capital Management, Inc. of Louisville, Kentucky specializes in
managing stable return investments, principally on behalf of Section 401(k)
retirement plans.
--A I M Advisors, Inc. of Houston, Texas provides investment advisory and
administrative services for retail and institutional mutual funds.
--A I M Capital Management, Inc. of Houston, Texas provides investment
advisory services to individuals, corporations, pension plans and other private
investment advisory accounts and also serves as a sub-adviser to certain retail
and institutional mutual funds, one Canadian mutual fund and one portfolio of an
open-end registered investment company that is offered to separate accounts of
insurance companies offering variable annuities and variable life insurance
products.
--A I M Distributors, Inc. and Fund Management Company of Houston, Texas
are registered broker-dealers that act as the principal underwriters for retail
and institutional mutual funds.
The corporate headquarters of AMVESCAP PLC are located at 11 Devonshire
Square, London, EC2M 4YR, England.
As indicated in the ^ Funds' Prospectuses, IFG ^, INVESCO Trust and IRAI
permit investment and other personnel to purchase and sell securities for their
own accounts in accordance with a compliance policy governing personal investing
by directors, officers and employees of 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^ and World are subject to similar policies.
<PAGE>
In addition to the pre-clearance requirement described above, the policy
subjects officers, inside directors, investment and other personnel of IFG,
INVESCO Trust and their North American affiliates to various trading
restrictions and reporting obligations. All reportable transactions are reviewed
for compliance with the policy. The provisions of this policy are administered
by and subject to exceptions authorized by IFG.
Investment Advisory Agreement. IFG serves as investment adviser to each of
the Funds 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 October 1, 1997 for
an initial term ending October 1, 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, or by a Fund with respect to that Fund, upon sixty (60) days'
written notice and terminates automatically in the event of an assignment to the
extent required by the 1940 Act and the rules thereunder.
The Agreement provides that IFG shall manage the investment portfolios of
the Funds in conformity with each Fund's 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
<PAGE>
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 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 with respect to a Fund 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
<PAGE>
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.
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 and approved by IFG as
the then sole shareholder of the Realty Fund on December 9, 1996. 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 ^ the extent required by the 1940
Act and the rules thereunder.
<PAGE>
World serves as sub-adviser to the S&P 500 Index Fund pursuant to a
sub-advisory agreement dated October 1, 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 October 1, 1997, for an initial term expiring October 1, 1999.
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 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 ^ annual ^ rate of 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
<PAGE>
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 ^ annual ^ rate of 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 ^ in excess of $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 ^ rate of
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 by the board of directors 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 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.
<PAGE>
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 each Fund will pay to IFG an
annual fee of $20.00 per shareholder account or, where applicable, per
participant in an omnibus account. This fee is paid monthly at a rate of 1/12 of
the annual fee and is based upon the actual number of shareholder accounts and
omnibus account participants in existence during each month.
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 ^ July 31, 1997 Year Ended July 31, 1996(1) Year Ended July 31, 1995(1)
----------------------------------------------------------------------------------------------
Adminis- Adminis- Adminis-
Transfer trative Transfer trative Transfer trative
Advisory Agency Services Advisory Agency Services Advisory Agency Services
Fees Fees Fees Fees Fees Fees Fees Fees Fees
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Worldwide Capital Goods $48,575 $42,296 $11,121 $52,495 $35,801 $11,211 $32,382 $20,517 $10,747
Worldwide
Communications $358,300 $261,010 $18,269 $255,873 $151,435 $15,905 $101,129 $64,043 $12,334
European Small Company $928,226 $353,726 $28,565 $271,008 $66,181 $15,420 $4,159(2) $2,300(2) $3,417(2)
Latin American Growth $485,690 $177,930 $19,714 $130,913 $47,581 $12,618$12,530(2) $5,295(2) $3,584(2)
Asian Growth Fund(3) $218,813 $113,451 $14,376 $26,564 $16,399 $3,031 -0- -0- -0-
Realty Fund(4) ^ $112,846 $74,155 $7,257 -0- -0- -0- -0- -0- -0-
S&P 500 Index Fund(5) -0- -0- -0- -0- -0- -0- -0- -0- -0-
(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 ^ July
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
is not anticipated that the Fund will commence a public offering of its
securities until ^ January 1, 1998.
<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' portfolios 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 sub-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 INVESCO
Distributors, Inc.; President and Director of INVESCO Trust Company. President
and Chief Operating Officer of INVESCO Global Health Sciences Fund. Born:
December 27, 1939.
<PAGE>
VICTOR L. ANDREWS,** Director. Professor Emeritus, Chairman Emeritus and
Chairman of the CFO Roundtable of the Department of Finance at Georgia State
University, Atlanta, Georgia; President, Andrews Financial Associates, Inc.
(consulting firm); since October 1984, Director of the Center for the Study of
Regulated Industry of Georgia State University; formerly, member of the
faculties of the Harvard Business School and the Sloan School of Management of
MIT. Dr. Andrews is also a director of the Southeastern Thrift and Bank Fund,
Inc. and The Sheffield Funds, Inc. Address: 4625 Jettridge Drive, Atlanta,
Georgia. Born: June 23, 1930.
BOB R. BAKER,+** Director. President and Chief Executive Officer of AMC
Cancer Research Center, Denver, Colorado, since January 1989; until mid-December
1988, Vice Chairman of the Board of First Columbia Financial Corporation (a
financial institution), Englewood, Colorado. Formerly, Chairman of the Board and
Chief Executive Officer of First Columbia Financial Corporation. Address: 1775
Sherman Street, #1000, Denver, Colorado. Born: August 7, 1936.
LAWRENCE H. BUDNER,# Director. Trust Consultant; prior to June 30, 1987,
Senior Vice President and Senior Trust Officer of InterFirst Bank, Dallas,
Texas. Address: 7608 Glen Albens Circle, Dallas, Texas. Born: July 25, 1930.
DANIEL D. CHABRIS,+# Director. Financial Consultant; Assistant Treasurer of
Colt Industries Inc., New York, New York, from 1966 to 1988. Address: 19
Kingsbridge Way, Madison, Connecticut. Born: August 1, 1923.
WENDY L. GRAMM, Ph.D.,** ^ Director. Self-employed (since 1993); Professor
of Economics and Public Administration, University of Texas at Arlington.
Formerly, Chairman, Commodity Futures Trading Commission from 1988 to 1993,
administrator for Information and Regulatory Affairs at the Office of Management
and Budget from 1985 to 1988, Executive Director of the Presidential Task Force
on Regulatory Relief and Director of the Federal Trade Commission's Bureau of
Economics. Dr. Gramm is also a director of the Chicago Mercantile Exchange,
Enron Corporation, IBP, Inc., State Farm Insurance Company, State Farm Life
Insurance Company, ^ Independant Women's Forum, International Republic
Institute, and the Republican Women's Federal Forum. Dr. Gramm is also a member
of the Board of Visitors, College of Business Administration, University of
Iowa, and a member of the Board of Visitors, Center for Study of Public Choice,
George Mason University. Address: 4201 Yuma Street, N.W., Washington, D.C. Born:
January 10, 1945.
HUBERT L. HARRIS, JR.,* Director. Chairman (since 1996) and President
(January 1990 to May 1996) of INVESCO Services, Inc.; Chief Executive Officer of
INVESCO Individual Services Group. Member of the Executive Committee of the
Alumni Board of Trustees of Georgia Institute of Technology. Address: 1315
Peachtree Street, NE, Atlanta, Georgia. Born: July 15, 1943.
<PAGE>
KENNETH T. KING,^# Director. Formerly, Chairman of the Board of The Capitol
Life Insurance Company, Providence Washington Insurance Company, and Director of
numerous subsidiaries thereof in the U.S. Formerly, Chairman of the Board of The
Providence Capitol Companies in the United Kingdom and Guernsey. Chairman of the
Board of the Symbion Corporation (a high technology company) until 1987.
Address: 4080 North Circulo Manzanillo, Tucson, Arizona. Born: November 16,
1925.
JOHN W. MCINTYRE,# Director. Retired. Formerly, Vice Chairman of the Board
of Directors of The Citizens and Southern Corporation and Chairman of the Board
and Chief Executive Officer of The Citizens and Southern Georgia 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
(since ^ 1989) and ^ INVESCO Distributors, Inc. (since 1997); Vice President
(May 1989 to April 1995), Secretary and General Counsel of INVESCO Funds Group,
Inc. ^; 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 1988) ^. Senior Vice
President and Treasurer of INVESCO Distributors, Inc. (since 1997). Born:
October 1, 1946.
WILLIAM J. GALVIN, JR., Assistant Secretary. Senior Vice President of
INVESCO Funds Group, Inc. (since 1995) and of INVESCO Distributors, Inc. (since
1997) 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. (since 1984) ^ and Trust Officer of INVESCO Trust Company. Born: September
14, 1941.
JUDY P. WIESE, Assistant Treasurer. Vice President of INVESCO Funds Group,
Inc. (since 1984) and of INVESCO Distributors, Inc. (since 1997) and Trust
Officer of INVESCO Trust Company. Born: February 3, 1948.
<PAGE>
#Member of the audit committee of the Company.
+Member of the executive committee of the Company. On occasion, the
executive committee acts upon the current and ordinary business of the Company
between meetings of the board of directors. Except for certain powers which,
under applicable law, may only be exercised by the full board of directors, the
executive committee may exercise all powers and authority of the board of
directors in the management of the business of the Company. All decisions are
subsequently submitted for ratification by the board of directors.
*These directors are "interested persons" of the Company as defined in the
Investment Company Act of 1940.
**Member of the management liaison committee of the Company.
As of ^ November 7, 1997^ officers and directors of the Company, as a
group, beneficially owned less than 1% of the Company's outstanding shares ^.
Director Compensation
The following table sets forth, for the fiscal year ending July 31, ^
1997: the compensation paid by the Company to its ^ 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 IDI (including the Company), 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, ^ 1996.
As of December 31, ^ 1996, there were 49 funds in the INVESCO Complex. Dr. Soll
became an independent director of the Company effective May 15, 1997^. Dr. Gramm
became an independent director of the Company effective July 29, 1997, and is
not included in the following chart. Mr. Frazier resigned as a director of the
Company effective February 28, 1997.
<PAGE>
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, ^ $6,019 $426 $415 $ 98,850
Vice Chairman of
the Board
Victor L. Andrews ^ 5,992 403 481 84,350
Bob R. Baker ^ 6,034 360 644 84,850
Lawrence H. Budner ^ 5,953 403 481 80,350
Daniel D. Chabris ^ 5,980 460 342 84,850
A. D. Frazier Jr.(4) ^ 2,735 0 0 81,500
Kenneth T. King 5,814 443 377 71,350
John W. McIntyre 5,918 0 0 90,350
Larry Soll 1,610 0 0 17,500
------- ------ ------ --------
Total $46,055 $2,495 $2,740 $693,950
% of Net Assets 0.0124%(5) 0.0007%(5) 0.0045%(6)
(1)The vice chairman of the board, the chairmen of the audit, management
liaison and compensation committees, ^ the members of the executive and
valuation committees, and the members of specially appointed task forces of the
board of directors 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.
(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
<PAGE>
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 and Drs. Gramm
and Soll, 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 INVESCO PLC
(the predecessor to AMVESCAP PLC), a company affiliated with IFG^ and did not
receive any director's fees or other compensation from the Company or other
funds in the INVESCO Complex ^ for his service as a director.
^ (5)Totals as a percentage of the Company's net assets as of July 31, ^
1997.
^ (6)Total as a percentage of the net assets of the INVESCO Complex as of
December 31, ^ 1996.
Messrs. Brady, Harris 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
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/her 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
<PAGE>
year retirement benefit; however, the reduced retainer payments will be made to
^ his/her beneficiary or estate. The plan is administered by a committee of
three directors who are also participants in the plan and one director who is
not a plan participant. The cost of the plan will be allocated among the IFG and
Treasurer's Series Trust 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 ^ that is comprised of five 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." IDI 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.
Distribution Plan. As discussed in the Prospectuses, the Company has
adopted a Plan and Agreement of Distribution (the "Plan") pursuant to Rule 12b-1
under the 1940 Act. There is no distribution fee applicable to Class I shares of
the S&P 500 Index Fund. The initial 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
<PAGE>
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 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 as the then sole shareholder of the Fund and
has been continued by action of the board of directors until May 15, 1998. 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. Pursuant to authorization
granted by the Company's board of directors on September 2, 1997, a new Plan
became effective on September 29, 1997, under which IDI assumed all obligations
related to distribution from IFG.
The Plan provides that each Fund may make monthly payments to IDI of
amounts computed at an annual rate no greater than 0.25% of a Fund's average net
assets to permit IDI, 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 IDI for permissible activities engaged in and services
provided by IDI 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. All distribution expenses paid by
the Funds for the fiscal year ended July 31, ^ 1997, were paid to IFG, the
predecessor of IDI, distributor of shares of the Funds. During the fiscal year
ended July 31, ^ 1997, the Capital Goods Fund, Communications Fund, European
Small Company Fund ^, Latin American Growth Fund ^, Asian Growth Fund and Realty
Fund incurred $16,318, $133,882, $316,214, $140,784, $69,220 and $30,262 in
distribution expenses, respectively, prior to the voluntary absorption of
certain Fund expenses by IFG and the applicable sub-adviser. ^ In addition, as
of July 31, ^ 1997 the Worldwide Capital Goods Fund, Worldwide Communications
Fund, European Small Company Fund, Latin American Growth Fund and Asian Growth
Fund ^ and Realty Fund incurred $4,111, $14,942, $19,233, $28,211, $6,958 and
$7,353, respectively, of additional distribution ^ accruals had been incurred
for the Funds, and will be paid during the fiscal year ended July 31, 1998. 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 IDI-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 IDI 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 IDI, but can give no assurance in this
regard. However, to the extent it is determined otherwise in the future,
<PAGE>
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, ^ 1997, allocation of 12b-1 amounts paid
by the Capital Goods Fund for the following categories of expenses were:
advertising--^ $6,992; sales literature, printing and postage--^ $3,841; direct
mail--^ $4,003; public relations/promotion--^ $457; compensation to securities
dealers and other organizations--^ $486; marketing personnel--^ $539. For the
fiscal year ended July 31, ^ 1997, allocation of 12b-1 amounts paid by the
Communications Fund for the following categories of expenses were:
advertising--^ $44,663; sales literature, printing and postage--^ $29,968;
direct mail--^ $29,874; public relations/promotion--^ $3,187; compensation to
securities dealers and other organizations--^ $16,788; marketing personnel--^
$9,402. 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--^ $156,477; sales literature, printing and postage--^
$58,474; direct mail--^ $25,919; public relations/promotion--^ $3,657;
compensation to securities dealers and other organizations--^ $44,880; marketing
personnel--^ $26,807. For the fiscal year ended July 31, ^ 1997, allocation of
12b-1 amounts paid by the Latin American Growth Fund for the following
categories of expenses were: advertising--^ $42,212; sales literature, printing
and postage--^ $45,859; direct mail--^ $13,209; public relations/promotion--^
$1,855; compensation to securities dealers and other organizations--^ $23,100;
marketing personnel--^ $14,549. For the fiscal year ended July 31, 1997,
allocation of 12b-1 amounts paid by the Asian Growth Fund for the following
categories of expenses were: advertising--^ $14,631; sales literature, printing
and postage--^ $27,417; direct mail--^ $9,542; public relations/promotion--^
$841; compensation to securities dealers and other organizations--^ $8,120;
marketing personnel--^ $8,669. For the period January 2, 1997 (commencement of
operations) through ^ July 31, 1997, allocation of 12b-1 amounts paid by the
Realty Fund for the following categories of expenses were: advertising--^
$6,396; sales literature, printing and postage--^ $11,986; direct mail--^
$4,172; public relations/promotion--^ $368; compensation to securities dealers
and other organizations--^ $3,550; marketing personnel--^ $3,790.
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.
^
<PAGE>
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 or her 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, IDI 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 IDI shall
terminate automatically, in the event of such "assignment," in which event the
Funds may continue to make payments, pursuant to the Plan, to IDI or another
organization only upon the approval of new arrangements, which may or may not be
with IDI, regarding the use of the amounts authorized to be paid by it under the
Plan, by the directors, including a majority of the 12b-1 directors, by a vote
cast in person at a meeting called for such purpose.
Information regarding the services rendered under the Plan and the amounts
paid therefor by each Fund are provided to, and reviewed by, the directors on a
quarterly basis. 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 "The Funds and Their Management -- 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:
<PAGE>
(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 and its affiliated companies:
(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 its affiliated companies (and support
them in their infancy), and thereby expand the investment
choices available to all shareholders, and
(c) To acquire and retain talented employees who desire to be
associated with a growing organization; and
(4) Increased Fund assets may result in reducing each investor's share
of certain expenses through economies of scale (e.g. exceeding
established breakpoints in the advisory fee schedule and allocating
fixed expenses over a larger asset base), thereby partially
offsetting the costs of the Plan.
HOW SHARES ARE VALUED
As described in the Funds' Prospectuses, 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 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 that 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
<PAGE>
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 is determined as of the time
regular trading in such securities or assets is completed each day. Because
regular trading in most foreign securities markets is completed simultaneously
with, or prior to, the close of regular trading on the New York Stock Exchange,
closing prices for foreign securities usually are available for purposes of
computing the 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.
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 ^, Latin American Growth, Asian
Growth and Realty Funds for the fiscal year ^ or period ended July 31, 1997,
were as follows:
<PAGE>
Fund One Year Life of Fund
---- -------- ------------
Capital Goods Fund* ^ 50.86% 14.22%
Communications Fund* ^ 33.93% 23.86%
European Small Company Fund~ ^ 11.71% 23.59%
Latin American Growth Fund~ ^ 48.06% 31.91%
Asian Growth Fund^ ^ 27.04% 9.65%
Realty Fund> N/A ^ 21.89%
*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) exponent 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
CDA Investment Technologies
CNBC
CNN
Consumer Digest
Financial Times
Financial World
Forbes
Fortune
Ibbotson Associates, Inc.
Institutional Investor
Investment Company Data, Inc.
<PAGE>
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.
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 Policy. As discussed in the Funds' Prospectuses, the Funds offer
shareholders the ability to exchange 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 ^
IFG, 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
<PAGE>
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 (7)
days following receipt of the required documents as described in the Funds'
Prospectuses. 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.
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
three-month 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.
<PAGE>
DIVIDENDS, ^ OTHER 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 (the "Code"). Each Fund so qualified ^ for the
^ taxable year ended July 31, ^ 1997 (except the S&P 500 Index Fund, which began
in the fiscal year ended July 31, 1998), and intends to continue to ^ qualify
during its current ^ taxable year. As a result, because the Funds intend to
distribute all of its income and recognized gains, it is anticipated that ^ the
Fund will pay no federal income or excise taxes and will be accorded conduit or
^"pass through^" treatment for federal income tax purposes.
Dividends paid by 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^.
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 ^ how long a shareholder has held shares of ^ the Fund. The Taxpayer
Relief Act of 1997 (the "Tax Act"), enacted in August 1997, changed the taxation
of long-term capital gains for individuals by applying different capital gains
rates depending on the taxpayer's holding period and marginal rate of federal
income tax. Long-term gains realized on the sale of securities held for more
than one year but not for more than 18 months are taxable at a rate of 28%. This
category of long-term gains is often referred to as "mid-term" gains but is
technically termed "28% rate gains". Long-term gains realized on the sale of
securities held for more than 18 months are taxable at a rate of 20%. At the end
of each year, information regarding the tax status of dividends and other
distributions is provided to shareholders. Shareholders should consult their tax
advisers as to the effect of the Tax Act on distributions by a Fund of net
capital gains.
All dividends and other distributions are regarded as taxable to the
investor, regardless whether ^ such dividends and distributions are reinvested
in additional shares^ of the Fund or another fund in the INVESCO group. The net
asset value of Fund shares ^ reflects accrued net investment income and
undistributed realized capital and foreign currency gains; therefore, when a
distribution is made, the net asset value is reduced by the amount of the
distribution. If the net asset value of Fund shares were reduced below a
shareholder's cost as a result of a distribution, such distribution would be
taxable to the shareholder although a portion would be, in effect, a return of
invested capital. ^ However, the net asset value per share will be reduced by
the amount of the distribution, which would reduce any ^ gains or increase any ^
losses for tax purposes on any subsequent redemption of shares by the
shareholder.
<PAGE>
IFG may provide shareholders of the Funds^ 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 ^ with
respect to shares a Fund in past years, the shareholder must continue to use the
cost basis method previously used^ unless the shareholder applies to the IRS for
permission to change ^ the method.
If ^ Fund shares are sold at a loss after being held for six months or
less, the loss will be treated as a long-term, instead of short-term, capital
loss to the extent of any capital ^ gains distributions received on those
shares.
Each Fund will be subject to a ^ non-deductible 4% excise tax to the
extent it fails to distribute by the end of any calendar year substantially all
of ^ it ordinary income for that year and net capital ^ gains for the one-year
period ending on October 31 of that year, plus certain other amounts.
Dividends and interest received by 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. ^ Foreign taxes withheld will be
treated as an expense of the Fund.
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 (other than a controlled foreign corporation) that, in general,
meets either of the following tests: (1) at least 75% of its gross income is
passive or (2) an average of at least 50% of its assets produce, or are held for
the production of, passive income. Under certain circumstances, ^ the Fund will
be subject to federal income tax on a portion of any ^"excess distribution^"
received on the stock of a PFIC or of any gain on disposition of the stock
(collectively ^"PFIC income"), plus interest thereon, even if a Fund distributes
the PFIC income as a taxable dividend to its shareholders. The balance of the
PFIC income will be included in ^ the Fund's investment company taxable income
and, accordingly, will not be taxable to ^ a Fund to the extent that income is
distributed to its shareholders.
Each Fund may elect to "mark-to-market" its stock in any PFIC.
Marking-to-market, in this context, means including in ordinary income for each
taxable year the excess, if any, of the fair market value of the PFIC stock over
a Fund's adjusted tax basis therein as of the end of that year. Once the
election has been made, a Fund also will be allowed to deduct from ordinary
income the excess, if any, of its adjusted basis in PFIC stock over the fair
market value thereof as of the end of the year, but only to the extent of any
<PAGE>
net mark-to-market gains with respect to that PFIC stock included by a Fund for
prior taxable years. A Fund's adjusted tax basis in each PFIC's stock with
respect to which it makes this election will be adjusted to reflect the amounts
of income included and deductions taken under the election.
Gains or losses (1) from the disposition of foreign currencies, (2) from
the disposition of debt securities denominated in foreign currency that are
attributable to fluctuations in the value of the foreign currency between the
date of acquisition of each security and the date of disposition, and (3) that
are attributable to fluctuations in exchange rates that occur between the time 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 ^ other
distributions ^ generally will be subject to applicable state and local taxes.
Qualification as a regulated investment company under the ^ Code for federal
income tax purposes does not entail government supervision of management or
investment policies.
INVESTMENT PRACTICES
Portfolio Turnover. There are no fixed limitations regarding 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, 1997, 1996 and 1995 were 192%, 247% and 193%, respectively, for the
Worldwide Capital Goods Fund and 96%, 157% and 215%, respectively, for the
Worldwide Communications Fund. Portfolio turnover rates for the fiscal years
ended July 31, 1997 and 1996 and the period ended July 31, 1995 were 87%, 141%
and 0%, respectively for the European Small Company Fund and 72%, 29% and 30%,
respectively, for the Latin American Growth Fund. Portfolio turnover rates for
the fiscal year ended July 31, ^ 1997 and the period March 1, 1996 (inception)
through July 31, 1996^ for the Asian Growth Fund ^ were 161% and 2%,
respectively. For the period January 2, 1997 (commencement of operations)
through ^ July 31, 1997, the portfolio turnover rate for the Realty Fund was ^
70%. 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 ^ Asian Growth Fund was primarily due to the increase in
the size of the Fund ^. 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 ^ such broker-dealer's financial responsibility, subject
to their ability to effect transactions at the best available prices. Fund
Management evaluates the overall reasonableness of brokerage commissions or
underwriting discounts (the difference between the full acquisition price to
acquire the new offering and the discount offered to members of the underwriting
syndicate) paid by reviewing the quality of executions obtained on each Fund's
portfolio transactions, viewed in terms of the size of transactions, prevailing
market conditions in the security purchased or sold, and general economic and
market conditions. In seeking to ensure that any commissions or discounts
charged the Funds are consistent with prevailing and reasonable commissions^,
each Fund's ^ adviser or sub-^ adviser also ^ endeavors to monitor brokerage
industry practices with regard to the commissions charged by ^ broker-dealers on
transactions effected for other comparable institutional investors. While each
Fund's ^ adviser or sub-^ adviser seeks reasonably competitive rates, the Funds
do not necessarily pay the lowest commission ^, spread or discount available.
Consistent with the standard of seeking to obtain the best execution on
portfolio transactions, 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
programs ("NTF Programs") offered by the financial institution or its affiliate
broker (an "NTF Program Sponsor"). The Services Fee is based on the average
<PAGE>
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 or IDI
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 IDI the
full Rule 12b-1 fees contemplated by the Plan to compensate IDI for expenses
incurred by IDI in engaging in the activities and providing the services on
behalf of the 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 compensate IDI
for payments to such NTF Program Sponsor absent such credits.
The aggregate amount of brokerage commissions paid for the fiscal years
ended July 31, 1997, 1996 and 1995 were $109,449, $141,314 and $54,814,
respectively, for the Worldwide Capital Goods Fund and $397,609, $239,095 and
$129,085 for the Worldwide Communications Fund. The aggregate amount of
brokerage commissions paid for the fiscal ^ years ended July 31, 1997 and 1996
and the period ended July 31, 1995 were $479,539, $417,140 and $141,
<PAGE>
respectively, for the European Small Company Fund and $400,001, $102,029
and $2,012, respectively, for the Latin American Growth Fund. The aggregate
amount of brokerage commission paid for the fiscal year ended July 31, 1997 and
the period March 1, 1996 (inception) through July 31, 1996 for the Asian Growth
Fund was $341,623 and $105,714, respectively. The aggregate amount of brokerage
commissions paid for the period January 2, 1997 (commencement of operations)
through ^ July 31, 1997 for the Realty Fund was ^ $182,397. For the fiscal years
ended July 31, 1997, 1996 and 1995, brokers providing research services received
commissions on portfolio transactions of $23,278, $32,164 and $27,515,
respectively, for the Worldwide Capital Goods Fund and $75,818, $64,810 and
$39,843, respectively, for the Worldwide Communications Fund. For the fiscal ^
years ended July 31, 1997 and 1996 and the period ended July 31, 1995, brokers
providing research services received commissions on portfolio transactions of
$0, $38 and $0, respectively, for the European Small Company Fund and $0, $0 and
$0, respectively, for the Latin American Growth Fund. For the fiscal year ended
July 31, 1997 and the period March 1, 1996 (inception) through July 31, 1996,
brokers providing research services received commissions on portfolio
transactions of $0 and $0 for the Asian Growth Fund. For the period January 2,
1997 (commencement of operations) through ^ July 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
$11,523,672, $15,731,437 and $10,973,188, respectively, for the Worldwide
Capital Goods Fund; $36,516,217, $27,956,526 and $15,947,023, respectively, for
the Worldwide Communications Fund; $0, $19,063 and $0, respectively, for the
European Small Company Fund; and $0, $53,125 and $0, respectively, for the Latin
American Growth Fund. For the fiscal year ended July 31, 1997 and the period
March 1, 1996 (inception) through July 31, 1996, the aggregate amount of such
portfolio transactions was $0 and $0, respectively, for Asian Growth Fund. For
the period January 2, 1997 (commencement of operations) through ^ July 31, 1997,
the aggregate amount of such portfolio transactions for the Realty Fund was $0.
^ For the fiscal year ended July 31, ^ 1997, the Worldwide Capital Goods,
Worldwide Communications, European Small Company, Latin American Growth and
Asian Growth Funds paid $270, $5,808, $0 and $0, respectively, as compensation
to brokers for the sales of shares of the Funds. For the period January 2, 1997
(commencement of investment operations) through July 31, 1997, Realty Fund paid
$0 as compensation to brokers for the sales of shares of the Funds.
^ At July 31, 1997, the Funds held securities of their regular brokers or
dealers, or their ^ parent companies, as follows:
<PAGE>
Value of
Securities
Fund Broker or Dealer at ^7/31/97
- ---- ---------------- -----------
Capital Goods Fund State Street Bank and
Trust North America ^ 3,035,000
Communications Fund State Street Bank and
Trust North America ^ 11,180,000
Latin American Growth Fund
^
European Small Company Fund ^
Asian Growth Fund State Street Bank and
Trust North America ^ 2,465,000
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 800,000,000 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 to each class. As of ^ July 31, 1997, ^ 1,751,600 shares of
the Capital Goods Fund, ^ 4,733,450 shares of the Communications Fund, ^
4,608,602 shares of the European Small Company Fund, ^ 7,092,642 shares of the
Latin American Growth Fund, ^ 2,903,612 shares of the Asian Growth Fund, and ^
3,334,988 shares of the Realty Fund were outstanding. ^ With regard to the S&P
500 Index Fund ^, 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 or class of series in a particular portfolio of investments of the
Company. Each series or class of series of the Company's shares is preferred
over all other series or ^ classes of series with respect to the assets
specifically allocated to that series or class ^, and all income, earnings,
profits and proceeds from such assets, subject only to the rights of creditors,
are allocated to shares of that series or class ^. The assets of each series or
<PAGE>
class ^ are segregated on the books of account and are charged with the
liabilities of that series or class of 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 and classes ^ in a manner deemed by the board
of directors to be fair and equitable. Generally, such allocation will be made
based upon the relative total net assets of each series or class ^. In the
unlikely event that a liability allocable to one series or class ^ exceeds the
assets belonging to the series or class ^, all or a portion of such liability
may have to be borne by the holders of shares of the Company's other series or
class ^.
All Fund shares 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 or classes
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 or class affected by the matter may be entitled to vote. Company
shares have noncumulative voting rights, which means that the holders of a
majority of the shares voting for the election of directors can elect 100% of
the directors if they choose to do so. In such event, the holders of the
remaining shares voting for the election of directors will not be able to elect
any person or persons to the board of directors. After they have been elected by
shareholders, the directors will continue to serve until their successors are
elected and have qualified or they are removed from office, in either case by a
shareholder vote, or until death, resignation, or retirement. 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 ^ November 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. ^ 363,472.2770 20.931%
Special Custody Acct. for the
Exclusive Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104
<PAGE>
^ Investor Fiduciary Trust Co. Cust 173,209.5250 9.975%
^ Centurion Trust Company
^ 127 W. 10th St.
^ Kansas City, MO 64105
National Financial Services Corp. ^ 102,413.0980 5.898%
The Exclusive Benefit of Cust.
One World Financial Center
200 Liberty St. 5th Floor
New York, NY 10281
INVESCO Worldwide
Communications Fund
Charles Schwab & Co. Inc. ^ 1,013,799.5580 20.573%
Special Custody Acct. for the
Exclusive Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104
INVESCO European
Small Company Fund
Charles Schwab & Co. Inc. ^ 1,333,027.6530 36.862%
Special Custody Acct. for the
Exclusive Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104
Donaldson Lufkin & Jenrette ^ 239,016.9790 6.609%
Securities Corp.
Mutual Funds
Fifth Floor
P.O. Box 2052
Jersey City, NJ 07303
INVESCO Latin American Growth Fund
Charles Schwab & Co. Inc. ^ 2,078,472.1410 37.384%
Special Custody Acct. for the
Exclusive Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104
<PAGE>
INVESCO Asian Growth Fund
Charles Schwab & Co. Inc. ^ 519,612.6410 25.604%
Special Custody Acct. for the
Exclusive Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104
INVESCO Realty Fund
Charles Schwab & Co. Inc. ^ 610,233.4130 17.786%
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
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.
<PAGE>
Financial Statements. The audited financial statements for the
Communications, Capital Goods, European Small Company and Latin American Growth
and Asian Growth Funds for the fiscal year ended July 31, ^ 1997 and for the
Asian Growth Fund and Realty Fund for the period ended July 31, ^ 1997, 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, ^ 1997.
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
for a specified settlement date on which, in the case of the majority of
interest rate and foreign currency futures contracts, the fixed income
<PAGE>
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
case of a put option, at a fixed exercise price to a stated expiration date.
<PAGE>
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 the Moody's and S&P bond rating
categories:
Moody's ^ 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>
S&P Corporate Bond Ratings
AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA - Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority of
instances they differ from AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB - Bonds rated BBB are regarded as having an adequate capability to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
BB - Bonds rated BB have less near-term vulnerability to default than
other speculative issues. However, they face major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments.
B - Bonds rated B have a greater vulnerability to default but currently
have the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal.
CCC - Bonds rated CCC have a currently identifiable vulnerability to
default and are dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial, or economic conditions, they are not
likely to have the capacity to pay interest and repay principal.
<PAGE>
^ PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Page in
Prospectus
----------
(1) Financial statements and
schedules included in
Prospectus (Part A):
Financial Highlights for the 8
Worldwide Capital Goods and
Worldwide Communications Funds
for each of the three years
ended July 31, 1997.
Financial Highlights for the 40
European Small Company Fund
for each of the two years
ended July 31, 1997 and the
period February 15, 1995
(inception) through July 31,
1995.
Financial Highlights for the 68
Latin American Growth Fund
for each of the two years
ended July 31, 1997 and the
period February 15, 1995
(inception) through July 31,
1995.
Financial Highlights for the 101
Asian Growth Fund for the
year ended July 31, 1997 and
the period March 1, 1996
(commencement of operations)
through July 31, 1996.
Financial Highlights for the 132
Realty Fund for the period
January 1, 1997 (commencement
of operations) through July
31, 1997. ^
<PAGE>
Page in
Statement
of Addi-
tional In-
formation
----------
(2) The following ^ 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 ^ year or
period ended July 31, 1997,
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 or period
ended ^ July 31, 1997^:
Statement of Investment
Securities as of ^ July 31,
1997; Statement of Assets and
Liabilities as of ^ July 31,
1997; Statement of Operations
^ for the year ended July 31,
1996 for the European Small
Company, Latin American
Growth, Worldwide Capital
Goods, Worldwide
Communications Funds, and the
Asian Growth Fund for the
period ended July 31, 1997 for
the Realty Fund; Statement of
Changes in Net Assets ^ for
the years ended July 31, 1997
and July 31, 1996 for the
Worldwide Capital Goods,
Worldwide Communications,
European Small Company and
Latin American Growth Funds
for the years ended July 31,
1997 and 1996 and for the year
ended July 31, 1997 and the
period ended July 31, 1996 for
the Asian Growth Fund; and the
period ended July 31, 1997 for
the Realty Fund; and Financial
Highlights for the year ended
July 31, 1997, July 31, 1996
<PAGE>
and July 31, 1995 for the
Worldwide Capital Goods and
Worldwide Communications Funds;
for the years ended July
31, 1997, July 31, 1996 and
the period ended July 31,
1995 for the European Small
Company and Latin American
Growth Funds; for the year
ended July 31, 1997 and the
period ended July 31, 1996
for the Asian Growth Fund
and for the period ended
July 31, 1997 for the
Realty Fund.
(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) Articles Supplementary to
the Company's Articles of
Incorporation dated September
25, ^ 1997.(6)
(2) Bylaws.(3)
(3) Not applicable.
(4) Not required to be filed on
EDGAR.
<PAGE>
(5) (a) Investment Advisory
Agreement Between Registrant
and INVESCO Funds Group, Inc.
dated February 28, 1997.(5)
(i) Amendment to
Investment Advisory
Agreement dated October
1, ^ 1997.(6)
(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 February 28,
1997.(4)
(f) Sub-Advisory Agreement
between INVESCO Funds Group,
Inc. and World Asset ^
Management.(6)
(6) (a) Distribution Agreement
Between Registrant and
INVESCO Funds Group, Inc.
dated February 28, 1997.(4)
<PAGE>
(b) ^ Distribution
Agreement Between
Registrant and
INVESCO
Distributors, Inc.
dated ^ September
30, 1997.
(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.(5)
(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.
<PAGE>
(14) Copies of model plans used in
the establishment of
retirement plans as follows:
Non-standardized Profit
Sharing Plan; Non-standardized
Money Purchase Pension Plan;
Standardized Profit Sharing
Plan Adoption Agreement;
Standardized Money Purchase
Pension Plan; Non-standardized
401(k) Plan Adoption
Agreement; Standardized 401(k)
Paired Profit Sharing Plan;
Standardized Simplified Profit
Sharing Plan; Standardized
Simplified Money Purchase Plan;
Defined Contribution Master Plan
& Trust Agreement; and
Financial 403(b) Retirement
Plan, all filed with
Registration Statement No.
33-63498 of INVESCO
International Funds, Inc.
filed May 27, 1993, and herein
incorporated by reference.
(15) (a) Plan and Agreement of
Distribution dated May
2, 1994 adopted pursuant
to Rule 12b-1 under the
Investment Company Act of
1940.(1)
^(b) Amendment of Plan and
Agreement of Distribution
dated July 19, 1995.(1)
^(c) Amended Plan and
Agreement of Distribution
Pursuant to 12b-1 dated
January 1, 1997.(4)
<PAGE>
^(d) Amended Plan and
Agreement of
Distribution ^
between the ^
Applicant and
INVESCO
Distributors, Inc.
adopted pursuant to
Rule 12b-1 under the
Investment Company
Act of 1940 dated
September 30, 1997.
(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)
(c) Schedule for Computation
of Performance Data for
European Small Company
Fund.
(d) Schedule for Computation
of Performance Data for
Latin American Growth
Fund.
(e) Schedule for Computation
of Performance Data for
Asian Growth Fund.
(f) Schedule for Computation
of Performance Data for
Realty Fund.
(17) (a) Financial Data Schedule for
Worldwide Capital Goods
Fund for the ^ fiscal
year ended ^ July 31,
1997.
(b) Financial Data Schedule
for Worldwide Communications
Fund for the ^ fiscal year
ended ^ July 31, 1997.
<PAGE>
(c) Financial Data Schedule for
Latin American Growth Fund
for the ^ fiscal year ended
^ July 31, 1997.
(d) Financial Data Schedule for
European Small Company
Fund for the ^ fiscal year
ended ^ July 31, 1997.
(e) Financial Data Schedule for
Asian Growth Fund for
the ^ fiscal year ended
^ July 31, 1997.
(f) Financial Data Schedule for
Realty Fund for the period
January 2, 1997 through ^
July 31, 1997.
(18) ^ 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.
(5)Previously filed on EDGAR with Post-Effective Amendment No. 12 to the
Registration Statement on July 16, 1997, and incorporated by reference herein.
(6)Previously field on EDGAR with Post-Effective Amendment No. 13 to the
Registration Statement on October 1, 1997, and incorporated by reference herein.
<PAGE>
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 ^ October 31, 1997
-------------- ------------------
INVESCO Worldwide Capital Goods Fund ^ 2,543
INVESCO Worldwide Communications Fund ^ 10,339
INVESCO European Small Company Fund ^ 7,631
INVESCO Latin American Growth Fund ^ 10,662
INVESCO Asian Growth Fund ^ 3,977
INVESCO Realty Fund ^ 6,134
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.
<PAGE>
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.
(b)
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------ ------------- -------------
^
William J. Galvin, Jr. Senior Vice Assistant
7800 E. Union Avenue President Secretary
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.
Off.
^
Dan J. Hesser Chairman of ^ President,
7800 E. Union Avenue the Board, ^ CEO & Dir.
Denver, CO 80237 President ,
Chief Executive
Officer, &
Director
^
Gregory E. Hyde Vice President
7800 E. Union Avenue
Denver, CO 80237
^
Charles P. Mayer Director
^ 7800 E. Union Avenue
Denver, CO 80237
<PAGE>
Glen A. Payne Senior Vice Secretary
7800 E. Union Avenue President,
Denver, CO 80237 Secretary &
General Counsel
^
Judy P. Wiese Vice President Asst. Treas.
7800 E. Union Avenue
Denver, CO 80237
^
(c) Not applicable.
Item 30. Location of Accounts and Records
Dan J. Hesser
7800 E. Union Avenue
Denver, CO 80237
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) The Registrant shall furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
^
<PAGE>
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
rule 485(b) under the Securities Act of 1933 and has duly caused this
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 ^24th day of ^ November, 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 ^24th day of ^
November, 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/ Hubert L. Harris, Jr. /s/ John W. McIntyre
- ------------------------------------ ------------------------------------
Hubert L. Harris, Jr. Director John W. McIntyre, Director
/s/ Wendy L. Gramm
- ------------------------------------
Wendy L. Gramm, Director
By* By* /s/ Glen A. Payne
------------------------------ ------------------------------
Edward F. O'Keefe Glen A. Payne
Attorney in Fact Attorney in Fact
* Original Powers of Attorney authorizing Edward F. O'Keefe and Glen A. Payne,
and each of them, to execute this post-effective amendment to the Registration
Statement of the Registrant on behalf of the above-named directors and officers
of the Registrant ^ have been filed with the Securities and Exchange Commission
on May 23, 1994, June 22, 1995, August 25, 1995, August 30, 1996, November 22,
1996 ^, June 27, 1997 and October 1, 1997.
<PAGE>
Exhibit Index
Page in
Exhibit Number Registration Statement
- -------------- ----------------------
^
6(b) 253
11 262
15(d) 263
16(c) 268
16(d) 269
16(e) 270
16(f) ^ 271
17(a) 272
17(b) 274
17(c) 276
17(d) 278
17(e) 280
17(f) 282
18 284
^
</TABLE>
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made this 30th day of September, 1997 between INVESCO
SPECIALTY FUNDS, INC., a Maryland corporation (the "Fund"), and INVESCO
DISTRIBUTORS, INC., a Delaware corporation (the "Underwriter").
W I T N E S S E T H:
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), as a diversified, open-end management
investment company and currently proposes to have one class of shares (the
"Shares") which is divided into six series, and which may be divided into
additional series (the "Series"), each representing an interest in a separate
portfolio of investments, and it is in the interest of the Fund to offer the
Shares for sale continuously; and
WHEREAS, the Underwriter is engaged in the business of selling shares of
investment companies either directly to investors or through other securities
dealers; and
WHEREAS, the Fund and the Underwriter wish to enter into an agreement with
each other with respect to the continuous offering of the Shares of each Series
in order to promote growth of the Fund and facilitate the distribution of the
Shares;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto as follows:
1. The Fund hereby appoints the Underwriter its agent for the
distribution of Shares of each Series in jurisdictions wherein such
Shares legally may be offered for sale; provided, however, that the
Fund in its absolute discretion may (a) issue or sell Shares of each
Series directly to eligible purchasers, or (b) issue or sell Shares of
a particular Series to the shareholders of any other Series or to the
shareholders of any other investment company, for which the
Underwriter or any affiliate thereof shall act as exclusive
distributor, who wish to exchange all or a portion of their investment
in Shares of such Series or in shares of such other investment company
for the Shares of a particular Series, provided that such shareholders
are eligible to purchase shares. Notwithstanding any other provision
hereof, the Fund may terminate, suspend or withdraw the offering of
Shares whenever, in its sole discretion, it deems such action to be
desirable. The Fund reserves the right to reject any subscription in
whole or in part for any reason.
2. The Underwriter hereby agrees to serve as agent for the distribution
of the Shares and agrees that it will use its best efforts with
reasonable promptness to sell such part of the authorized Shares
remaining unissued as from time to time shall be effectively
registered under the Securities Act of 1933, as amended (the "1933
Act"), at such prices and on such terms as hereinafter set forth, all
subject to applicable federal and state securities laws and
regulations. Nothing herein shall be construed to prohibit the
Underwriter from engaging in other related or unrelated businesses.
<PAGE>
3. In addition to serving as the Fund's agent in the distribution of the
Shares, the Underwriter shall also provide to the holders of the
Shares certain maintenance, support or similar services ("Shareholder
Services"). Such services shall include, without limitation, answering
routine shareholder inquiries regarding the Fund, assisting
shareholders in considering whether to change dividend options and
helping to effectuate such changes, arranging for bank wires, and
providing such other services as the Fund may reasonably request from
time to time. It is expressly understood that the Underwriter or the
Fund may enter into one or more agreements with third parties pursuant
to which such third parties may provide the Shareholder Services
provided for in this paragraph. Nothing herein shall be construed to
impose upon the Underwriter any duty or expense in connection with the
services of any registrar, transfer agent or custodian appointed by
the Fund, the computation of the asset value or offering price of
Shares, the preparation and distribution of notices of meetings, proxy
soliciting material, annual and periodic reports, dividends and
dividend notices, or any other responsibility of the Fund.
4. Except as otherwise specifically provided for in this Agreement, the
Underwriter shall sell the Shares directly to purchasers, or through
qualified broker-dealers or others, in such manner, not inconsistent
with the provisions hereof and the then effective Registration
Statement of the Fund under the 1933 Act (the "Registration
Statement") and related Prospectus (the "Prospectus") and Statement of
Addtiional Information ("SAI") of the Fund as the Underwriter may
determine from time to time; provided that no broker-dealer or other
person shall be appointed or authorized to act as agent of the Fund
without the prior consent of the directors (the "Directors") of the
Fund. The Underwriter will require each broker-dealer to conform to
the provisions hereof and of the Registration Statement (and related
Prospectus and SAI) at the time in effect under the 1933 Act with
respect to the public offering price of the Shares of any Series. The
Fund will have no obligation to pay any commissions or other
remuneration to such broker-dealers.
5. The Shares of each Series offered for sale or sold by the Underwriter
shall be offered or sold at the net asset value per share determined
in accordance with the then current Prospectus and/or SAI relating to
the sale of the Shares of the appropriate Series except as departure
from such prices shall be permitted by the then current Prospectus
and/or SAI of the Fund, in accordance with applicable rules and
regulations of the Securities and Exchange Commission. The price the
Fund shall receive for the Shares of each Series purchased from the
Fund shall be the net asset value per share of such Share, determined
in accordance with the Prospectus and/or SAI applicable to the sale of
the Shares of such Series.
6. Except as may be otherwise agreed to by the Fund, the Underwriter
shall be responsible for issuing and delivering such confirmations of
sales made by it pursuant to this Agreement as may be required;
provided, however, that the Underwriter or the Fund may utilize the
services of other persons or entities believed by it to be competent
<PAGE>
to perform such functions. Shares shall be registered on the transfer
books of the Fund in such names and denominations as the Underwriter
may specify.
7. The Fund will execute any and all documents and furnish any and all
information which may be reasonably necessary in connection with the
qualification of the Shares for sale (including the qualification of
the Fund as a broker-dealer where necessary or advisable) in such
states as the Underwriter may reasonably request (it being understood
that the Fund shall not be required without its consent to comply with
any requirement which in the opinion of the Directors of the Fund is
unduly burdensome). The Underwriter, at its own expense, will effect
all qualifications of itself as broker or dealer, or otherwise, under
all applicable state or Federal laws required in order that the Shares
may be sold in such states or jurisdictions as the Fund may reasonably
request.
8. The Fund shall prepare and furnish to the Underwriter from time to
time the most recent form of the Prospectus and/or SAI of the Fund
and/or of each Series of the Fund. The Fund authorizes the Underwriter
to use the Prospectus and/or SAI, in the forms furnished to the
Underwriter from time to time, in connection with the sale of the
Shares of the Fund and/or of each Series of the Fund. The Fund will
furnish to the Underwriter from time to time such information with
respect to the Fund, each Series, and the Shares as the Underwriter
may reasonably request for use in connection with the sale of the
Shares. The Underwriter agrees that it will not use or distribute or
authorize the use, distribution or dissemination by broker-dealers or
others in connection with the sale of the Shares any statements, other
than those contained in a current Prospectus and/or SAI of the Fund or
applicable Series, except such supplemental literature or advertising
as shall be lawful under Federal and state securities laws and
regulations, and that it will promptly furnish the Fund with copies of
all such material.
9. The Underwriter will not make, or authorize any broker- dealers or
others to make, any short sales of the Shares of the Fund or otherwise
make any sales of the Shares unless such sales are made in accordance
with a then current Prospectus and/or SAI relating to the sale of the
applicable Shares.
10. The Underwriter, as agent of and for the account of the Fund, may
cause the redemption or repurchase of the Shares at such prices and
upon such terms and conditions as shall be specified in a then current
Prospectus and/or SAI. In selling, redeeming or repurchasing the
Shares for the account of the Fund, the Underwriter will in all
respects conform to the requirements of all state and federal laws and
the Rules of Fair Practice of the National Association of Securities
Dealers, Inc., relating to such sale, redemption or repurchase, as the
case may be. The Underwriter will observe and be bound by all the
provisions of the Articles of Incorporation or Bylaws of the Fund and
<PAGE>
of any provisions in the Registration Statement, Prospectus and SAI,
as such may be amended or supplemented from time to time, notice of
which shall have been given to the Underwriter, which at the time in
any way require, limit, restrict or prohibit or otherwise regulate any
action on the part of the Underwriter.
11. (a) The Fund shall indemnify, defend and hold harmless the
Underwriter, its officers and directors and any person who
controls the Underwriter within the meaning of the 1933 Act,
from and against any and all claims, demands, liabilities and
expenses (including the cost of investigating or defending such
claims, demands or liabilities and any attorney fees incurred
in connection therewith) which the Underwriter, its officers
and directors or any such controlling person, may incur under
the federal securities laws, the common law or otherwise,
arising out of or based upon any alleged untrue statement of a
material fact contained in the Registration Statement or any
related Prospectus and/or SAI or arising out of or based
upon any alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein
not misleading.
Notwithstanding the foregoing, this indemnity agreement, to the
extent that it might require indemnity of the Underwriter or any
person who is an officer, director or controlling person of the
Underwriter, shall not inure to the benefit of the Underwriter or
officer, director or controlling person thereof unless a court of
competent jurisdiction shall determine, or it shall have been
determined by controlling precedent, that such result would not
be against public policy as expressed in the federal securities
laws and in no event shall anything contained herein be so
construed as to protect the Underwriter against any liability to
the Fund, the Directors or the Fund's shareholders to which the
Underwriter would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of
its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement.
This indemnity agreement is expressly conditioned upon the Fund's
being notified of any action brought against the Underwriter, its
officers or directors or any such controlling person, which
notification shall be given by letter or by telegram addressed to
the Fund at its principal address in Denver, Colorado and sent to
the Fund by the person against whom such action is brought within
ten (10) days after the summons or other first legal process
shall have been served upon the Underwriter, its officers or
directors or any such controlling person. The failure to notify
the Fund of any such action shall not relieve the Fund from any
liability which it may have to the person against whom such
action is brought by reason of any such alleged untrue statement
or omission otherwise than on account of the indemnity agreement
<PAGE>
contained in this paragraph. The Fund shall be entitled to assume
the defense of any suit brought to enforce such claim, demand, or
liability, but in such case the defense shall be conducted by
counsel chosen by the Fund and approved by the Underwriter, which
approval shall not be unreasonably withheld. If the Fund elects
to assume the defense of any such suit and retain counsel
approved by the Underwriter, the defendant or defendants in such
suit shall bear the fees and expenses of an additional counsel
obtained by any of them. Should the Fund elect not to assume the
defense of any such suit, or should the Underwriter not approve
of counsel chosen by the Fund, the Fund will reimburse the
Underwriter, its officers and directors or the controlling person
or persons named as defendant or defendants in such suit, for the
reasonable fees and expenses of any counsel retained by the
Underwriter or them. In addition, the Underwriter shall have the
right to employ counsel to represent it, its officers and
directors and any such controlling person who may be subject to
liability arising out of any claim in respect of which indemnity
may be sought by the Underwriter against the Fund hereunder if in
the reasonable judgment of the Underwriter it is advisable for
the Underwriter, its officers and directors or such controlling
person to be represented by separate counsel, in which event the
reasonable fees and expenses of such separate counsel shall be
borne by the Fund. This indemnity agreement and the Fund's
representations and warranties in this Agreement shall remain
operative and in full force and effect and shall survive the
delivery of any of the Shares as provided in this Agreement. This
indemnity agreement shall inure exclusively to the benefit of the
Underwriter and its successors, the Underwriter's officers and
directors and their respective estates and any such controlling
person and their successors and estates. The Fund shall promptly
notify the Underwriter of the commencement of any litigation or
proceeding against it in connection with the issue and sale of
the Shares.
(b) The Underwriter agrees to indemnify, defend and hold harmless the
Fund, its Directors and any person who controls the Fund within
the meaning of the 1933 Act, from and against any and all claims,
demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities
and any attorney fees incurred in connection therewith) which the
Fund, its Directors or any such controlling person may incur
under the Federal securities laws, the common law or otherwise,
but only to the extent that such liability or expense incurred by
the Fund, its Directors or such controlling person resulting from
such claims or demands shall arise out of or be based upon (a)
any alleged untrue statement of a material fact contained in
information furnished in writing by the Underwriter to the Fund
specifically for use in the Registration Statement or any related
Prospectus and/or SAI or shall arise out of or be based upon any
alleged omission to state a material fact in connection with such
information required to be stated in the Registration Statement
or the related Prospectus and/or SAI or necessary to make such
<PAGE>
information not misleading and (b) any alleged act or omission on
the Underwriter's part as the Fund's agent that has not been
expressly authorized by the Fund in writing.
Notwithstanding the foregoing, this indemnity agreement, to the
extent that it might require indemnity of the Fund or any
Director or controlling person of the Fund, shall not inure to
the benefit of the Fund or Director or controlling person thereof
unless a court of competent jurisdiction shall determine, or it
shall have been determined by controlling precedent, that such
result would not be against public policy as expressed in the
federal securities laws and in no event shall anything contained
herein be so construed as to protect any Director of the Fund
against any liability to the Fund or the Fund's shareholders to
which the Director would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence or reckless
disregard of the duties involved in the conduct of his office.
This indemnity agreement is expressly conditioned upon the
Underwriter's being notified of any action brought against the
Fund, its Directors or any such controlling person, which
notification shall be given by letter or telegram addressed to
the Underwriter at its principal office in Denver, Colorado, and
sent to the Underwriter by the person against whom such action is
brought, within ten (10) days after the summons or other first
legal process shall have been served upon the Fund, its Directors
or any such controlling person. The failure to notify the
Underwriter of any such action shall not relieve the Underwriter
from any liability which it may have to the person against whom
such action is brought by reason of any such alleged untrue
statement or omission otherwise than on account of the indemnity
agreement contained in this paragraph. The Underwriter shall be
entitled to assume the defense of any suit brought to enforce
such claim, demand, or liability, but in such case the defense
shall be conducted by counsel chosen by the Underwriter and
approved by the Fund, which approval shall not be unreasonably
withheld. If the Underwriter elects to assume the defense of any
such suit and retain counsel approved by the Fund, the defendant
or defendants in such suit shall bear the fees and expenses of an
additional counsel obtained by any of them. Should the
Underwriter elect not to assume the defense of any such suit, or
should the Fund not approve of counsel chosen by the Underwriter,
the Underwriter will reimburse the Fund, its Directors or the
controlling person or persons named as defendant or defendants in
such suit, for the reasonable fees and expenses of any counsel
retained by the Fund or them. In addition, the Fund shall have
the right to employ counsel to represent it, its Directors and
any such controlling person who may be subject to liability
arising out of any claim in respect of which indemnity may be
sought by the Fund against the Underwriter hereunder if in the
reasonable judgment of the Fund it is advisable for the Fund, its
Directors or such controlling person to be represented by
<PAGE>
separate counsel, in which event the reasonable fees and expenses
of such separate counsel shall be borne by the Underwriter. This
indemnity agreement and the Underwriter's representations and
warranties in this Agreement shall remain operative and in full
force and effect and shall survive the delivery of any of the
Shares as provided in this Agreement. This indemnity agreement
shall inure exclusively to the benefit of the Fund and its
successors, the Fund's Directors and their respective estates and
any such controlling person and their successors and estates. The
Underwriter shall promptly notify the Fund of the commencement of
any litigation or proceeding against it in connection with the
issue and sale of the Shares.
12. The Fund will pay or cause to be paid (a) expenses (including the fees
and disbursements of its own counsel) of any registration of the
Shares under the 1933 Act, as amended, (b) expenses incident to the
issuance of the Shares, and (c) expenses (including the fees and
disbursements of its own counsel) incurred in connection with the
preparation, printing and distribution of the Fund's Prospectuses,
SAIs, and periodic and other reports sent to holders of the Shares in
their capacity as such. The Underwriter shall prepare and provide
necessary copies of all sales literature subject to the Fund's
approval thereof.
13. This Agreement shall become effective as of the date it is approved by
a majority vote of the Directors of the Fund, as well as a majority
vote of the Directors who are not "interested persons" (as defined in
the Investment Company Act) of the Fund, and shall continue in effect
for an initial term expiring September 30, 1998, and from year to year
thereafter, but only so long as such continuance is specifically
approved at least annually (a)(i) by a vote of the Directors of the
Fund or (ii) by a vote of a majority of the outstanding voting
securities of the Fund, and (b) by a vote of a majority of the
Directors of the Fund who are not "interested persons," as defined in
the Investment Company Act, of the Fund cast in person at a meeting
for the purpose of voting on this Agreement.
Either party hereto may terminate this Agreement on any date, without
the payment of a penalty, by giving the other party at least 60 days'
prior written notice of such termination specifying the date fixed
therefor. In particular, this Agreement may be terminated at any time,
without payment of any penalty, by vote of a majority of the members
of the Directors of the Fund or by a vote of a majority of the
outstanding voting securities of the Fund on not more than 60 days'
written notice to the Underwriter.
Without prejudice to any other remedies of the Fund provided for in
this Agreement or otherwise, the Fund may terminate this Agreement at
any time immediately upon the Underwriter's failure to fulfill any of
the obligations of the Underwriter hereunder.
<PAGE>
14. The Underwriter expressly agrees that, notwithstanding anything to the
contrary herein, or in any applicable law, it will look solely to the
assets of the Fund for any obligations of the Fund hereunder and
nothing herein shall be construed to create any personal liability on
the part of any Director or any shareholder of the Fund.
15. This Agreement shall automatically terminate in the event of its
assignment. In interpreting the provisions of this Section 15, the
definition of "assignment" contained in the Investment Company Act
shall be applied.
16. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate for the receipt of such
notice.
17. No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the
Fund and the Underwriter and, if applicable, approved in the manner
required by the Investment Company Act.
18. Each provision of this Agreement is intended to be severable. If any
provision of this Agreement shall be held illegal or made invalid by a
court decision, statute, rule or otherwise, such illegality or
invalidity shall not affect the validity or enforceability of the
remainder of this Agreement.
19. This Agreement and the application and interpretation hereof shall be
governed exclusively by the laws of the State of Colorado.
<PAGE>
IN WITNESS WHEREOF, the Fund and the Underwriter have each caused this
Agreement to be executed on its behalf by an officer thereunto duly authorized
and the Underwriter has caused its corporate seal to be affixed as of the day
and year first above written.
INVESCO SPECAILTY FUNDS, INC.
ATTEST:
By: /s/ Dan J. Hesser
-------------------------
Dan J. Hesser
/s/ Glen A. Payne President
- -----------------
Glen A. Payne
Secretary
INVESCO DISTRIBUTORS, INC.
ATTEST:
By: /s/ Ronald L. Grooms
------------------------
Ronald L. Grooms
/s/ Glen A. Payne Senior Vice President
- -----------------
Glen A. Payne
Secretary
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 14 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated September 5, 1997, relating to the financial
statements and financial highlights appearing in the July 31, 1997 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 heading "Financial Highlights" in the Prospectus and under the
headings "Independent Accountants" and "Financial Statements" in the Statement
of Additional Information.
/s/ Price Waterhouse LLP
- -------------------------
Price Waterhouse LLP
Denver, Colorado
November 21, 1997
AMENDED PLAN AND AGREEMENT OF DISTRIBUTION PURSUANT TO RULE 12b-1
PLAN AND AGREEMENT made as of 30th of September, 1997, by and between
INVESCO SPECIALTY FUNDS, INC., a Maryland corporation (hereinafter called the
"Company"), and INVESCO DISTRIBUTORS, INC., a Delaware corporation ("INVESCO").
WHEREAS, the Company engages in business as an open-end management
investment company, and is registered as such under the Investment Company Act
of 1940, as amended (the "Act"); and
WHEREAS, the Company desires to finance the distribution of its shares in
accordance with this Plan and Agreement of Distribution pursuant to Rule 12b-1
under the Act (the "Plan and Agreement"); and
WHEREAS, INVESCO desires to be retained to perform services in accordance
with such Plan and Agreement and on said terms and conditions; and
WHEREAS, this Plan and Agreement has been approved by a vote of the board
of directors of the Company, including a majority of the directors who are not
interested persons of the Company, as defined in the Act, and who have no direct
or indirect financial interest in the operation of this Plan and Agreement (the
"Disinterested Directors") cast in person at a meeting called for the purpose of
voting on this Plan and Agreement;
NOW, THEREFORE, the Company hereby adopts the Plan set forth herein and the
Company and INVESCO hereby enter into this Agreement pursuant to the Plan in
accordance with the requirements of Rule 12b-1 under the Act, and provide and
agree as follows:
1. The Plan is defined as those provisions of this document by which the
Company adopts a Plan pursuant to Rule 12b- 1 under the Act and
authorizes payments as described herein. The Agreement is defined as
those provisions of this document by which the Company retains INVESCO
to provide distribution services beyond those required by the General
Distribution Agreement between the parties, as are described herein.
The Company may retain the Plan notwithstanding termination of the
Agreement. Termination of the Plan will automatically terminate the
Agreement. The Company is hereby authorized to utilize the assets of
the Company to finance certain activities in connection with
distribution of the Company's shares.
2. Subject to the supervision of the board of directors, the Company
hereby retains INVESCO to promote the distribution of shares of the
Company by providing services and engaging in activities beyond those
specifically required by the Distribution Agreement between the
Company and INVESCO and to provide related services. The activities
and services to be provided by INVESCO hereunder shall include one or
more of the following: (a) the payment of compensation (including
trail commissions and incentive compensation) to securities dealers,
financial institutions and other organizations, which may include
INVESCO-affiliated companies, that render distribution and
administrative services in connection with the distribution of the
Company's shares; (b) the printing and distribution of reports and
prospectuses for the use of potential investors in the Company; (c)
<PAGE>
the preparing and distributing of sales literature; (d) the providing
of advertising and engaging in other promotional activities, including
direct mail solicitation, and television, radio, newspaper and other
media advertisements; and (e) the providing of such other services and
activities as may from time to time be agreed upon by the Company.
Such reports and prospectuses, sales literature, advertising and
promotional activities and other services and activities may be
prepared and/or conducted either by INVESCO's own staff, the staff of
INVESCO-affiliated companies, or third parties.
3. INVESCO hereby undertakes to use its best efforts to promote sales of
shares of the Company to investors by engaging in those activities
specified in paragraph (2) above as may be necessary and as it from
time to time believes will best further sales of such shares.
4. The Company is hereby authorized to expend, out of its assets, on a
monthly basis, and shall pay INVESCO to such extent, to enable INVESCO
at its discretion to engage over a rolling twelve-month period (or the
rolling twenty-four month period specified below) in the activities
and provide the services specified in paragraph (2) above, an amount
computed at an annual rate of .25 of 1% of the average daily net
assets of the Company during the month. INVESCO shall not be entitled
hereunder to payment for overhead expenses (overhead expenses defined
as customary overhead not including the --- costs of INVESCO's
personnel whose primary responsibilities involve marketing of the
INVESCO Funds). Payments by the Company hereunder, for any month, may
be used to compensate INVESCO for: (a) activities engaged in and
services provided by INVESCO during the rolling twelve-month period in
which that month falls, or (b) to the extent permitted by applicable
law, for any month during the first twenty-four months following the
Company's commencement of operations, activities engaged in and
services provided by INVESCO during the rolling twenty-four month
period in which that month falls, and any obligations incurred by
INVESCO in excess of the limitation described above shall not be paid
for out of Fund assets. The Company shall not be authorized to expend,
for any month, a greater percentage of its assets to pay INVESCO for
activities engaged in and services provided by INVESCO during the
rolling twenty-four month period referred to above than it would
otherwise be authorized to expend out of its assets to pay INVESCO for
activities engaged in and services provided by INVESCO during the
rolling twelve-month period referred to above. No payments will be
made by the Company hereunder after the date of termination of the
Plan and Agreement.
5. To the extent that obligations incurred by INVESCO out of its own
resources to finance any activity primarily intended to result in the
sale of shares of the Company, pursuant to this Plan and Agreement or
otherwise, may be deemed to constitute the indirect use of Company
assets, such indirect use of Company assets is hereby authorized in
addition to, and not in lieu of, any other payments authorized under
this Plan and Agreement.
<PAGE>
6. The Treasurer of INVESCO shall provide to the board of directors of
the Company, at least quarterly, a written report of all moneys spent
by INVESCO on the activities and services specified in paragraph (2)
above pursuant to the Plan and Agreement. Each such report shall
itemize the activities engaged in and services provided by INVESCO to
a Fund as authorized by the penultimate sentence of paragraph (4)
above. Upon request, but no less frequently than annually, INVESCO
shall provide to the board of directors of the Company such
information as may reasonably be required for it to review the
continuing appropriateness of the Plan and Agreement.
7. This Plan and Agreement shall become effective on November 1, 1997
and shall continue in effect until November 1, 1998. Thereafter,
the Plan and Agreement shall continue in effect from year to year,
provided that the continuance of each is approved at least annually
by a vote of the board of directors of the Company, including a
majority of the Disinterested Directors, cast in person at a meeting
called for the purpose of voting on such continuance. The Plan may be
terminated at any time, without penalty, by the vote of a majority of
the Disinterested Directors or by the vote of a majority of the
outstanding voting securities of the Company. INVESCO, or the Company,
by vote of a majority of the Disinterested Directors or of the holders
of a majority of the outstanding voting securities of the Company, may
terminate the Agreement under this Plan, without penalty, upon 30
days' written notice to the other party. In the event that neither
INVESCO nor any affiliate of INVESCO serves the Company as investment
adviser, the agreement with INVESCO pursuant to this Plan shall
terminate at such time. The board of directors may determine to
approve a continuance of the Plan, but not a continuance of the
Agreement, hereunder.
8. So long as the Plan remains in effect, the selection and nomination of
persons to serve as directors of the Company who are not "interested
persons" of the Company shall be committed to the discretion of the
directors then in office who are not "interested persons" of the
Company. However, nothing contained herein shall prevent the
participation of other persons in the selection and nomination
process, provided that a final decision on any such selection or
nomination is within the discretion of, and approved by, a majority of
the directors of the Company then in office who are not "interested
persons" of the Company.
9. This Plan may not be amended to increase the amount to be spent by the
Company hereunder without approval of a majority of the outstanding
voting securities of the Company. All material amendments to the Plan
and to the Agreement must be approved by the vote of the board of
directors of the Company, including a majority of the Disinterested
Directors, cast in person at a meeting called for the purpose of
voting on such amendment.
<PAGE>
10. To the extent that this Plan and Agreement constitutes a Plan of
Distribution adopted pursuant to Rule 12b-1 under the Act it shall
remain in effect as such, so as to authorize the use by the Company of
its assets in the amounts and for the purposes set forth herein,
notwithstanding the occurrence of an "assignment," as defined by the
Act and the rules thereunder. To the extent it constitutes an
agreement with INVESCO pursuant to a plan, it shall terminate
automatically in the event of such "assignment." Upon a termination of
the agreement with INVESCO, the Company may continue to make payments
pursuant to the Plan only upon the approval of a new agreement under
this Plan and Agreement, which may or may not be with INVESCO, or the
adoption of other arrangements regarding the use of the amounts
authorized to be paid by the Funds hereunder, by the Company's board
of directors in accordance with the procedures set forth in paragraph
7 above.
11. The Company shall preserve copies of this Plan and Agreement and all
reports made pursuant to paragraph 6 hereof, together with minutes of
all board of directors meetings at which the adoption, amendment or
continuance of the Plan were considered (describing the factors
considered and the basis for decision), for a period of not less than
six years from the date of this Plan and Agreement, or any such
reports or minutes, as the case may be, the first two years in an
easily accessible place.
12. This Plan and Agreement shall be construed in accordance with the laws
of the State of Colorado and applicable provisions of the Act. To the
extent the applicable laws of the State of Colorado, or any provisions
herein, conflict with the applicable provisions of the Act, the latter
shall control.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Plan and
Agreement on the 30th day of September, 1997.
INVESCO SPECIALTY FUNDS, INC.
By: /s/ Dan J. Hesser
----------------------------
Dan J. Hesser, President
ATTEST: /s/ Glen A. Payne
------------------------
Glen A. Payne, Secretary
INVESCO DISTRIBUTORS, INC.
By: /s/ Ronald L. Grooms
------------------------------
Ronald L. Grooms,
Senior Vice President
ATTEST: /s/ Glen A. Payne
------------------------
Glen A. Payne, Secretary
SCHEDULE FOR COMPUTATION OF PERFORMANCE DATA
Total return performance for the one-year, five-year, and life of fund (33
months) periods ended October 31, 1997, was 4.06%, N/A, and 11.41%,
respectively. Total return performance for each of the periods indicated was
computed by finding the average annual compounded rates of return that would
equate the initial ammount invested to the ending redeemable value, according to
the following formula:
P(1 + T) exponent n = ERV
where: P = initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of initial payment
The total return performance figures shown above were determined by solving the
above formula for "T" for each time period and Portfolio indicated.
SEC REPORTING
TOTAL RETURN
Formula in release:
P = $1,000 initial payment T = average annual report return n = number of years
ERV = ending redeemable value
P(1+T) exponent n = ERV
The formula given on pages 64 and 65 of the Release is written to solve for
Ending Redeemable Value. However, the quantity to be reported is T (Average
Annual Total Return).
Because P, n, and ERV are known values, we have solved for T as follows:
T = nth root of (ERV/P) - 1
and have reported those amounts as the total return.
SCHEDULE FOR COMPUTATION OF PERFORMANCE DATA
Total return performance for the one-year, five-year, and life of fund (33
months) periods ended October 31, 1997, was 12.82%, N/A, and 17.73%,
respectively. Total return performance for each of the periods indicated was
computed by finding the average annual compounded rates of return that would
equate the initial ammount invested to the ending redeemable value, according to
the following formula:
P(1 + T) exponent n = ERV
where: P = initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of initial payment
The total return performance figures shown above were determined by solving the
above formula for "T" for each time period and Portfolio indicated.
SEC REPORTING
TOTAL RETURN
Formula in release:
P = $1,000 initial payment T = average annual report return n = number of years
ERV = ending redeemable value
P(1+T) exponent n = ERV
The formula given on pages 64 and 65 of the Release is written to solve for
Ending Redeemable Value. However, the quantity to be reported is T (Average
Annual Total Return).
Because P, n, and ERV are known values, we have solved for T as follows:
T = nth root of (ERV/P) - 1
and have reported those amounts as the total return.
SCHEDULE FOR COMPUTATION OF PERFORMANCE DATA
Total return performance for the one-year, five-year, and life of fund (20
months) periods ended October 31, 1997, was (25.19)%, N/A, and (19.09)%,
respectively. Total return performance for each of the periods indicated was
computed by finding the average annual compounded rates of return that would
equate the initial ammount invested to the ending redeemable value, according to
the following formula:
P(1 + T) exponent n = ERV
where: P = initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of initial payment
The total return performance figures shown above were determined by solving the
above formula for "T" for each time period and Portfolio indicated.
SEC REPORTING
TOTAL RETURN
Formula in release:
P = $1,000 initial payment T = average annual report return n = number of years
ERV = ending redeemable value
P(1+T) exponent n = ERV
The formula given on pages 64 and 65 of the Release is written to solve for
Ending Redeemable Value. However, the quantity to be reported is T (Average
Annual Total Return).
Because P, n, and ERV are known values, we have solved for T as follows:
T = nth root of (ERV/P) - 1
and have reported those amounts as the total return.
SCHEDULE FOR COMPUTATION OF PERFORMANCE DATA
Total return performance for the one-year, five-year, and life of fund (10
months) periods ended October 31, 1997, was N/A, N/A, and 21.17%, respectively.
Total return performance for each of the periods indicated was computed by
finding the average annual compounded rates of return that would equate the
initial ammount invested to the ending redeemable value, according to the
following formula:
P(1 + T) exponent n = ERV
where: P = initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of initial payment
The total return performance figures shown above were determined by solving the
above formula for "T" for each time period and Portfolio indicated.
SEC REPORTING
TOTAL RETURN
Formula in release:
P = $1,000 initial payment T = average annual report return n = number of years
ERV = ending redeemable value
P(1+T) exponent n = ERV
The formula given on pages 64 and 65 of the Release is written to solve for
Ending Redeemable Value. However, the quantity to be reported is T (Average
Annual Total Return).
Because P, n, and ERV are known values, we have solved for T as follows:
T = nth root of (ERV/P) - 1
and have reported those amounts as the total return.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> WORLDWIDE CAPITAL GOODS FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> JUL-31-1997
<INVESTMENTS-AT-COST> 20561060
<INVESTMENTS-AT-VALUE> 22962478
<RECEIVABLES> 561507
<ASSETS-OTHER> 15780
<OTHER-ITEMS-ASSETS> 3018
<TOTAL-ASSETS> 23842783
<PAYABLE-FOR-SECURITIES> 1531450
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 57797
<TOTAL-LIABILITIES> 1589247
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 19020364
<SHARES-COMMON-STOCK> 1751600
<SHARES-COMMON-PRIOR> 804518
<ACCUMULATED-NII-CURRENT> 838
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 830913
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2401421
<NET-ASSETS> 22253536
<DIVIDEND-INCOME> 106324
<INTEREST-INCOME> 76265
<OTHER-INCOME> (1599)
<EXPENSES-NET> 143097
<NET-INVESTMENT-INCOME> 37893
<REALIZED-GAINS-CURRENT> 1139730
<APPREC-INCREASE-CURRENT> 2381692
<NET-CHANGE-FROM-OPS> 3521422
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 40745
<DISTRIBUTIONS-OF-GAINS> 487207
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3284566
<NUMBER-OF-SHARES-REDEEMED> 2392625
<SHARES-REINVESTED> 55141
<NET-CHANGE-IN-ASSETS> 14522571
<PAGE>
<ACCUMULATED-NII-PRIOR> 4840
<ACCUMULATED-GAINS-PRIOR> 177193
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 48575
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 192753
<AVERAGE-NET-ASSETS> 8099024
<PER-SHARE-NAV-BEGIN> 9.61
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 4.37
<PER-SHARE-DIVIDEND> 0.06
<PER-SHARE-DISTRIBUTIONS> 1.27
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.70
<EXPENSE-RATIO> 2
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> WORLDWIDE COMMUNICATIONS FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> JUL-31-1997
<INVESTMENTS-AT-COST> 63432941
<INVESTMENTS-AT-VALUE> 75526643
<RECEIVABLES> 326335
<ASSETS-OTHER> 21322
<OTHER-ITEMS-ASSETS> 263352
<TOTAL-ASSETS> 76137652
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3679355
<TOTAL-LIABILITIES> 3679355
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 56082857
<SHARES-COMMON-STOCK> 4733450
<SHARES-COMMON-PRIOR> 4064157
<ACCUMULATED-NII-CURRENT> (61753)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4343767
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12093426
<NET-ASSETS> 72458297
<DIVIDEND-INCOME> 897919
<INTEREST-INCOME> 383572
<OTHER-INCOME> (52236)
<EXPENSES-NET> 920046
<NET-INVESTMENT-INCOME> 309209
<REALIZED-GAINS-CURRENT> 4688859
<APPREC-INCREASE-CURRENT> 11765158
<NET-CHANGE-FROM-OPS> 16454017
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 307162
<DISTRIBUTIONS-OF-GAINS> 3964664
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7791340
<NUMBER-OF-SHARES-REDEEMED> 7446966
<SHARES-REINVESTED> 324919
<NET-CHANGE-IN-ASSETS> 21941911
<PAGE>
<ACCUMULATED-NII-PRIOR> 3625
<ACCUMULATED-GAINS-PRIOR> 3539034
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 358300
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 930547
<AVERAGE-NET-ASSETS> 55485450
<PER-SHARE-NAV-BEGIN> 12.43
<PER-SHARE-NII> 0.06
<PER-SHARE-GAIN-APPREC> 3.90
<PER-SHARE-DIVIDEND> 0.06
<PER-SHARE-DISTRIBUTIONS> 1.02
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 15.31
<EXPENSE-RATIO> 2
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> LATIN AMERICAN GROWTH FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> JUL-31-1997
<INVESTMENTS-AT-COST> 101972437
<INVESTMENTS-AT-VALUE> 122783954
<RECEIVABLES> 2032747
<ASSETS-OTHER> 25010
<OTHER-ITEMS-ASSETS> 5818561
<TOTAL-ASSETS> 130660272
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 388112
<TOTAL-LIABILITIES> 388112
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 103074800
<SHARES-COMMON-STOCK> 7092642
<SHARES-COMMON-PRIOR> 2493265
<ACCUMULATED-NII-CURRENT> (119953)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 6510783
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 20806530
<NET-ASSETS> 130272160
<DIVIDEND-INCOME> 1819443
<INTEREST-INCOME> 200926
<OTHER-INCOME> (71325)
<EXPENSES-NET> 1074706
<NET-INVESTMENT-INCOME> 874338
<REALIZED-GAINS-CURRENT> 6819951
<APPREC-INCREASE-CURRENT> 19631044
<NET-CHANGE-FROM-OPS> 26450995
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 898745
<DISTRIBUTIONS-OF-GAINS> 763367
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9413898
<NUMBER-OF-SHARES-REDEEMED> 4922997
<SHARES-REINVESTED> 108476
<NET-CHANGE-IN-ASSETS> 98208260
<PAGE>
<ACCUMULATED-NII-PRIOR> 28380
<ACCUMULATED-GAINS-PRIOR> 330273
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 485690
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1139415
<AVERAGE-NET-ASSETS> 66218508
<PER-SHARE-NAV-BEGIN> 12.86
<PER-SHARE-NII> 0.13
<PER-SHARE-GAIN-APPREC> 5.88
<PER-SHARE-DIVIDEND> 0.14
<PER-SHARE-DISTRIBUTIONS> 0.36
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 18.37
<EXPENSE-RATIO> 2
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> EUROPEAN SMALL COMPANY FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> JUL-31-1997
<INVESTMENTS-AT-COST> 65260575
<INVESTMENTS-AT-VALUE> 70191543
<RECEIVABLES> 4183897
<ASSETS-OTHER> 52852
<OTHER-ITEMS-ASSETS> 1265742
<TOTAL-ASSETS> 75694034
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 637098
<TOTAL-LIABILITIES> 637098
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 61539489
<SHARES-COMMON-STOCK> 4608602
<SHARES-COMMON-PRIOR> 6248937
<ACCUMULATED-NII-CURRENT> (6316)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 8595868
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4927895
<NET-ASSETS> 75056936
<DIVIDEND-INCOME> 1681529
<INTEREST-INCOME> 318632
<OTHER-INCOME> (255735)
<EXPENSES-NET> 1963897
<NET-INVESTMENT-INCOME> (219471)
<REALIZED-GAINS-CURRENT> 8995970
<APPREC-INCREASE-CURRENT> 5896544
<NET-CHANGE-FROM-OPS> 14892514
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 3874335
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 24262011
<NUMBER-OF-SHARES-REDEEMED> 26142644
<SHARES-REINVESTED> 240298
<NET-CHANGE-IN-ASSETS> (19204071)
<PAGE>
<ACCUMULATED-NII-PRIOR> 4726
<ACCUMULATED-GAINS-PRIOR> 3682662
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 928226
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2010297
<AVERAGE-NET-ASSETS> 119919357
<PER-SHARE-NAV-BEGIN> 15.08
<PER-SHARE-NII> (0.05)
<PER-SHARE-GAIN-APPREC> 1.79
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.53
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 16.29
<EXPENSE-RATIO> 2
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> ASIAN GROWTH FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> JUL-31-1997
<INVESTMENTS-AT-COST> 31942556
<INVESTMENTS-AT-VALUE> 32866340
<RECEIVABLES> 93675
<ASSETS-OTHER> 11746
<OTHER-ITEMS-ASSETS> 196393
<TOTAL-ASSETS> 33168154
<PAYABLE-FOR-SECURITIES> 99475
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 99349
<TOTAL-LIABILITIES> 198824
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 29462899
<SHARES-COMMON-STOCK> 2903612
<SHARES-COMMON-PRIOR> 1599695
<ACCUMULATED-NII-CURRENT> (138)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2621021
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 885548
<NET-ASSETS> 32969330
<DIVIDEND-INCOME> 444531
<INTEREST-INCOME> 128856
<OTHER-INCOME> (54848)
<EXPENSES-NET> 575810
<NET-INVESTMENT-INCOME> (57271)
<REALIZED-GAINS-CURRENT> 2717229
<APPREC-INCREASE-CURRENT> 2533318
<NET-CHANGE-FROM-OPS> 5250547
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5695778
<NUMBER-OF-SHARES-REDEEMED> 4391861
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 18654626
<PAGE>
<ACCUMULATED-NII-PRIOR> 2591
<ACCUMULATED-GAINS-PRIOR> (39075)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 218813
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 613944
<AVERAGE-NET-ASSETS> 28901239
<PER-SHARE-NAV-BEGIN> 8.95
<PER-SHARE-NII> (0.02)
<PER-SHARE-GAIN-APPREC> 2.42
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.35
<EXPENSE-RATIO> 2
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> REALTY FUND
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> JUL-31-1997
<INVESTMENTS-AT-COST> 36109021
<INVESTMENTS-AT-VALUE> 38309117
<RECEIVABLES> 657719
<ASSETS-OTHER> 30536
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 38997372
<PAYABLE-FOR-SECURITIES> 579091
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1760746
<TOTAL-LIABILITIES> 2339837
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 34538046
<SHARES-COMMON-STOCK> 3334988
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 34791
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (115069)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2199767
<NET-ASSETS> 36657535
<DIVIDEND-INCOME> 809009
<INTEREST-INCOME> 46094
<OTHER-INCOME> (776)
<EXPENSES-NET> 193901
<NET-INVESTMENT-INCOME> 660426
<REALIZED-GAINS-CURRENT> (81769)
<APPREC-INCREASE-CURRENT> 2199767
<NET-CHANGE-FROM-OPS> 2117998
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 658935
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8503849
<NUMBER-OF-SHARES-REDEEMED> 5231150
<SHARES-REINVESTED> 62289
<NET-CHANGE-IN-ASSETS> 36657535
<PAGE>
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 112846
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 297007
<AVERAGE-NET-ASSETS> 30027079
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.22
<PER-SHARE-GAIN-APPREC> 0.99
<PER-SHARE-DIVIDEND> 0.22
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.99
<EXPENSE-RATIO> 1
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
INVESCO S&P 500 INDEX FUND PLAN PURSUANT TO RULE 18f-3
May 16, 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 one or
more classes of that Fund:
(1) may 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 same rights and obligations
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.
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
<PAGE>
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
<PAGE>
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 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 May 16, 1997.
