INVESCO TAX-FREE LONG-TERM
INVESCO TAX-FREE INTERMEDIATE
Supplement to Prospectuses
dated November 1, 1994
The section of each Fund's prospectus entitled "The Fund and Its Management" is amended to delete the third and fourth paragraphs concerning William W. Veronda serving as portfolio manager of the Fund, and to substitute the following paragraphs for the deleted paragraphs:
The following individual serves as portfolio manager for the Fund and is primarily responsible for the day-to-day management of the Fund's portfolio of securities:
James S. Grabovac, CFA
Portfolio manager of the INVESCO Tax-Free Long-Term Bond Fund and the INVESCO Tax-Free Intermediate Bond Fund since 1995; portfolio manager and vice president of INVESCO Trust Company; formerly, principal and fund manager (1991 to 1995) and portfolio manager (1989 to 1991) with Stein Roe & Farnham Inc., futures and options trader with Continental Illinois National Bank (1987), corporate bond trader with The Chicago Corporation (1985 to 1987), and Midwest municipal underwriting manager with Continental Illinois National Bank (1982 to 1985); B.A., Lawrence University; M.B.A., University of Michigan; Chartered Financial Analyst.
This supplement is dated April 3, 1995.
November 1, 1994
INVESCO TAX-FREE INTERMEDIATE BOND FUND
INVESCO Tax-Free Intermediate Bond Fund (the "Fund") pursues its investment objective of seeking as high a level of current income exempt from federal income taxation as is consistent with the preservation of capital by investing in a diversified portfolio of intermediate-term obligations issued by states, territories and possessions of the United States and the District of Columbia and their political subdivisions, agencies and instrumentalities, the interest on which is exempt from federal taxes ("municipal bonds"). Such obligations may include any combination of general obligation bonds, revenue bonds, and industrial development bonds. The dollar weighted average maturity of the obligations in the Fund's portfolio normally will range from five to 10 years.
The Fund is a series of INVESCO Tax-Free Income Funds, Inc. (the "Company"), a diversified, managed, no-load mutual fund consisting of two separate portfolios of investments. This Prospectus relates to shares of the Fund. A separate prospectus is available upon request from INVESCO Funds Group, Inc. for the Company's other fund, INVESCO Tax-Free Long-Term Bond Fund. Investors may purchase shares of either or both funds. Additional funds may be offered in the future as series of the Company.
TABLE OF CONTENTS Page
ANNUAL FUND EXPENSES 5 FINANCIAL HIGHLIGHTS 7 PERFORMANCE DATA 8 INVESTMENT OBJECTIVE, POLICIES AND RISK FACTORS 9 THE FUND AND ITS MANAGEMENT 16 HOW SHARES CAN BE PURCHASED 19 SERVICES PROVIDED BY THE FUND 21 HOW TO REDEEM SHARES 24 DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS, AND TAXES 26 ADDITIONAL INFORMATION 27
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 (annualized)(after voluntary
expense limitation) (as a percentage of average net assets) Management Fee 0.50% 12b-1 Fees 0.25% Other Expenses (0.05%) Transfer Agency Fee 0.21% General Services, Administrative (0.26%) Services, Registration, Postage (1) Total Fund Operating Expenses 0.70%(2)
(1) Includes, but is not limited to, fees and expenses of directors, custodian bank, legal counsel and auditors, a securities pricing service, 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.
(2) Certain Fund expenses will be absorbed voluntarily by the Fund's investment adviser and sub-adviser in order to ensure that the Fund's total annual operating expenses do not exceed 0.70% of the Fund's average net assets. Thus, these expense figures reflect that voluntary expense limit. If such voluntary expense limit were not in effect, the Fund's "Other Expenses" and "Total Fund Operating Expenses" are estimated to be 2.40% and 3.14%, respectively of the Fund's average net assets.
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 ------ ------- ------- -------- $7 $22 $39 $87
The purpose of the foregoing 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 load, redemption fee, or exchange fee. The Example should not be considered a representation of past or future expenses, and actual expenses may be greater or less than those shown. The assumed 5% annual return is hypothetical and should not be considered a representation of past or future annual returns, which may be greater or less than the assumed amount.
As a result of the 0.25% Rule 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., which currently ranges from 6.25% to 8.5% of the amount invested.
(For a Fund Share Outstanding throughout the 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 Fund's 1994 Annual Report to Shareholders and in the Statement of Additional Information, both of which are available without charge by contacting INVESCO Funds Group, Inc. at the address or telephone number shown on the cover of this Prospectus.
Period Ended --------- June 30 1994# PER SHARE DATA Net Asset Value-- Beginning of Period $10.00 --------- INCOME FROM INVESTMENT OPERATIONS Net Investment Income 0.19 Net Losses on Securities (Both Realized and Unrealized) (0.48) --------- Total From Investment Operations (0.29) LESS DISTRIBUTIONS Dividends (from Net Investment Income) 0.19 --------- Net Asset Value-- End of Period $ 9.52 ========= TOTAL RETURN (2.93%) @ RATIOS Net Assets-- End of Period ($000 Omitted) $5,083 Ratio of Expenses to Average Net Assets~ 0.70% * Ratio of Net Investment Income to Average Net Assets~ 3.75% * Portfolio Turnover Rate 55% @ # From December 1, 1993, commencement of operations, to June 30, 1994. @ These amounts are based on operations for the period shown and, accordingly, are not representative of a full year's operations. ~ Various expenses of the Fund were voluntarily absorbed by INVESCO Funds Group, Inc. for the period ended June 30, 1994. If such expenses had not been absorbed, annualized ratio of expenses to average net assets would have been 3.09%, and annualized ratio of net investment income to average net assets would have been 1.36%. * Annualized
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 Funds Group, Inc., P.O. Box 173706, Denver, Colorado 80217-3706; or by calling 1-800- 525-8085.
From time to time, the Fund advertises its yield and its total return performance. The Fund also may provide a "tax equivalent yield." Both the yield and total return performance 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.
The "yield" of the Fund refers to the income generated by an investment in the Fund over a 30-day or one-month period (which period will be stated in the advertisement). Yield quotations are computed by dividing investment income per share earned during the period as calculated according to a formula by the net asset value per share at the end of the period, then adjusting the result to provide for semiannual compounding.
Statements of the Fund's total return performance are based upon investment results during a specified period and assume reinvestment of all dividends and capital gains, if any, paid during that period. Any given report of total return should not be considered as representative of future performance. The Fund charges no sales load, redemption fee, or exchange fee which 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 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 "tax equivalent yield" of the Fund refers to the yield that a taxable income fund would have to generate in order to produce an after-tax yield equivalent to that of the Fund. The use of a tax equivalent yield allows investors to compare the yields of the Fund, which are exempt from federal personal income taxes, with yields of income funds which
are not tax-exempt. 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 "Intermediate Municipal Debt Funds" Lipper mutual fund grouping, in addition to the broad- based Lipper general fund groupings.
Further information about the performance of the Fund will be contained in the Company's annual report to shareholders, which may be obtained without charge by writing INVESCO Funds Group, Inc., P.O. Box 173706, Denver, Colorado 80217-3706; or by calling 1-800- 525-8085.
INVESTMENT OBJECTIVE, POLICIES AND RISK FACTORS
The Company consists of two separate portfolios of investments, each represented by a different class of the Company's common stock. This Prospectus relates to INVESCO Tax-Free Intermediate Bond Fund; a separate prospectus for INVESCO Tax-Free Long-Term Bond Fund is available by contacting INVESCO Funds Group, Inc. at the address or telephone number shown on the cover of this Prospectus. The investment objective of the Fund, which may be changed only by a vote of the shareholders, is to seek as high a level of current income exempt from federal income taxes as is consistent with the preservation of capital. While there can be no assurance that this objective will be achieved, the Fund seeks to achieve its objective through investment in a diversified portfolio of intermediate-term obligations 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, the interest on which is exempt from federal income taxes ("municipal bonds"). In this regard, the Fund's investment adviser or sub-adviser (collectively, "Fund Management") may rely on the determination of the issuer's legal counsel with regard to the tax-exempt status under federal law, at the time of issuance of such securities, of municipal securities held by the Fund. The dollar weighted average maturity of the obligations in the Fund's portfolio normally will range from five to ten years.
The value of the Fund's portfolio securities, and therefore the Fund's net asset value per share, may fluctuate in response to various factors, principally interest rate changes and the ability of the issuers of municipal obligations to pay interest and principal on those obligations. Investors should consider the Fund's policies with respect to ratings of bonds held in its portfolio, when-issued purchases and the purchase of certain non-tax-exempt temporary investments, as explained below.
As a matter of fundamental investment policy, at least 80% of the Fund's total assets will, under normal circumstances, consist of municipal bonds which are rated at the time of purchase within the four highest grades assigned by Moody's Investors Service, Inc. ("Moody's") (ratings of Aaa, Aa, A or Baa); Standard & Poor's Corporation ("S&P") (ratings of AAA, AA, A or BBB); Fitch Investors Services, Inc. ("Fitch") (ratings of AAA, AA, A or BBB); or Duff &
Phelps, Inc. ("D&P") (ratings of AAA, AA+, AA, or AA-). The Fund may invest no more than 10% of its total assets in debt securities that are rated below BBB by S&P or Baa by Moody's or, if unrated, they 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 the Fund ever invest in a debt security rated below CCC by S&P or Caa by Moody's. A bond rating of Baa by Moody's indicates that the bond issue is of "medium grade," neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present, but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics, and have speculative characteristics as well. A bond rating of BBB by S&P indicates that the bond issue is in the lowest "investment grade" security rating. Bonds rated BBB are regarded as having an adequate capacity to pay principal and interest. Whereas they normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay principal and interest for bonds in this category than the bonds in the A category. A bond rating of BBB by Fitch indicates that the bond issue is of "investment grade." Bonds rated BBB are regarded as having adequate capacity to pay principal and interest. A bond rating of AA- by D&P indicates that the bond issue is of "investment grade" with modest risk. 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 detailed description of these ratings, see the Statement of Additional Information and the "Appendix" therein. While Fund Management continuously monitors all of the municipal securities in the Fund's portfolio for the issuers' ability to make required principal and interest payments and other quality factors, the adviser may retain in the portfolio a municipal security whose rating is changed to one below the minimum rating required for purchase of such a security.
The Fund's investments in municipal securities, as is true for any debt securities, will generally be 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. Market risk relates to the fact that the market values of municipal 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 municipal securities, whereas a decline in interest rates will tend to
increase their values. Although Fund Management limits the Fund's municipal security investments to securities it believes are not highly speculative, both kinds of risk are increased by investing in municipal 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. In order to decrease its risk in investing in municipal securities, the Fund will invest no more than 10% of its total assets (measured at the time any investment is purchased) in securities rated below BBB by S&P or Baa by Moody's. For more information on the Fund's investments and municipal securities, see the Statement of Additional Information.
The balance of the Fund's total assets, in an amount under normal circumstances not to exceed 20% of the Fund's total assets (measured at the time any investment is purchased), may be invested in (1) short-term taxable securities, (2) securities rated below BBB by S&P or Baa by Moody's, (up to 10% of the Fund's total assets), (3) AMT bonds as described below, and (4) cash. The Fund's investments in taxable short-term investments ("Taxable Investments") will normally consist of: notes of issuers having, at the time of purchase, a quality rating within the two highest grades of Moody's, S&P's, Fitch's or D&P's; obligations of the U.S. government, its agencies or instrumentalities; commercial paper not rated lower than P-1 by Moody's, A-1 by S&P's or F-1 by Fitch's; certificates of deposit of U.S. domestic banks, including foreign branches of domestic banks, with assets of one billion dollars or more; time deposits; banker's acceptances and other short-term bank obligations; and repurchase agreements in respect of any of the foregoing. Dividends paid by the Fund that are attributable to income earned by the Fund from Taxable Investments will be taxable to investors. See "Dividends, Distributions and Taxes." Except for temporary defensive purposes, at no time will more than 20% of the Fund's total assets be invested in Taxable Investments. Under normal market conditions, the Fund anticipates that not more than 5% of the value of its total assets will be invested in any one category of Taxable Investments. Taxable Investments are more fully described in the Fund's Statement of Additional Information.
The Fund may also invest in "AMT" bonds. AMT bonds are tax exempt "private activity" bonds issued after August 7, 1986, whose proceeds are directed at least in part to a private, for-profit organization. While the income from AMT bonds is exempt from federal income tax, it is a tax preference item for purposes of the "alternative minimum tax." The alternative minimum tax is a special tax that applies to taxpayers who have certain adjustments to income or tax preference items.
Additionally, the Fund may invest in the following variable and fixed rate debt securities: asset-backed securities; zero coupon bonds; commercial paper; repurchase agreements; and tender options. Asset-backed securities represent interests in pools of consumer loans (generally unrelated to mortgage loans) and most often are structured as pass-through securities. Interest and principal payments ultimately depend on payment of the underlying
loans by individuals, although the securities may be supported by letters of credit or other credit enhancements. The value of asset-backed securities also may depend on the creditworthiness of the servicing agent for the loan pool, the originator of the loans, or the financial institution providing the credit enhancement.
Zero coupon securities are debt securities issued or sold at a discount from their face value which do not entitle the holder to any periodic payment of interest prior to maturity or a specified redemption date (or cash payment date). The amount of the discount varies depending on the time remaining until maturity or cash payment date, prevailing interest rates, liquidity of the security and perceived credit quality of the issuer. Zero coupon securities also may take the form of debt securities that have been stripped of their unmatured interest coupons, the coupons themselves and receipts or certificates representing interests in such stripped debt obligations and coupons. The market prices of zero coupon securities generally are more volatile than the market prices of interest-bearing securities and are likely to respond to a greater degree to changes in interest rates than interest-bearing securities having similar maturities and credit qualities. Of the 10% that may be invested in securities rated below BBB by S&P or Baa by Moody's, the Fund may invest up to 5% of its total assets in zero coupon bonds which are rated below investment grade. Federal income tax law requires the holder of a zero coupon security to take into account annually a portion of the discount (or deemed discount) at which such securities were issued, prior to the receipt of cash payments. To maintain its qualification as a regulated investment company, the Fund may be required to distribute such portion of the discount and may have to dispose of portfolio securities under disadvantageous circumstances in order to generate cash to satisfy these distribution requirements.
The Fund may enter into repurchase agreements with respect to debt instruments eligible for investment by the Fund. These agreements are entered into 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 Company'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 any repurchase agreement maturing in more than seven days if as a result more than 10% of the Fund's 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.
A tender option bond is a municipal bond (generally held pursuant to a custodial arrangement) having a relatively long maturity and bearing interest at a fixed rate substantially higher than prevailing short-term tax exempt rates, that has been coupled with the agreement of a third party, such as a bank, broker-dealer or other financial institution, pursuant to which such institution grants the bond holders the option, at periodic intervals, to tender their bonds to the institution and receive the face value thereof. As consideration for providing the option, the financial institution receives periodic fees equal to the difference between the municipal bond's fixed coupon rate and the rate, as determined by a remarketing or similar agent at or near the commencement of such period, that would cause the securities, coupled with the tender option, to trade at par on the date of such determination. Thus, after payment of this fee, the security holder effectively holds a demand obligation that bears interest at the prevailing short-term tax exempt rate. Fund Management will consider on an ongoing basis the creditworthiness of the issuers of the underlying municipal bond, of any custodian and of the third party provider of the tender option. In certain instances and for certain tender option bonds, the option may be terminable in the event of a default in payment of principal or interest on the underlying municipal bonds and for other reasons. The Fund will not invest more than 10% of the value of its net assets in securities that are illiquid, which would include tender option bonds as to which it cannot exercise the tender feature on not more than seven days' notice if there is no secondary market available for these obligations.
For defensive purposes, Fund Management may cause the Fund from time to time to invest a portion of its assets on a temporary basis in "temporary investments," the income from which may be subject to federal income tax, or hold a portion of its assets in cash. Such investments may consist only of obligations issued or guaranteed as to interest and principal by the United States government or its agencies or instrumentalities; obligations of banks regulated by the U.S., including negotiable certificates of deposit and bankers' acceptances; and commercial paper which at the date of purchase is rated A-2 or higher by S&P's or Prime-2 or higher by Moody's. A rating of A-2 or Prime-2 indicates a strong capacity for repayment of short-term promissory obligations.
Municipal obligations may at times be purchased or sold on a delayed delivery or a when-issued 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
the interest rate that will be received on the securities 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. When the Fund purchases securities on a when-issued basis, its custodian bank will place cash or liquid debt securities in a separate account of the Fund in an amount equal to the amount of the purchase obligation.
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"). A futures contract is an agreement to buy or sell a specific amount of a commodity or financial instrument at a particular price at a future date. Futures contracts are purchased or sold to attempt to hedge against the effects of price changes on the Fund's current or intended investments in securities. In the event that an anticipated decrease in the value of portfolio securities occurs as a result of a general decrease in prices, the adverse effects of such changes may be offset, in whole or part, by gains on the sale of futures contracts. Conversely, the increased cost of portfolio securities to be acquired, caused by a general increase in prices, may be offset, 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 securities. Such investment strategies will be used as a hedge and not for speculation.
Put and call options on futures contracts 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. Put and call options are contracts which grant the right to sell at a specified price a specific number of shares by a certain date. The put option buyer gains this right in return for a premium. Purchases of options on futures contracts may present less dollar risk in hedging the portfolio of the Fund 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 Fund may, from time to time, also sell ("write") covered call options or cash secured puts in order to attempt to increase the return on its portfolio or to protect against declines in the value of its portfolio securities. Such covered call options and cash secured puts will not exceed 20% of the Fund's total assets. A covered call option is backed by the securities underlying the option. 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, where 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 a 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. The writing of such covered options, however, 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, and, if an option is exercised, the Fund may suffer a loss on the transaction.
Although the Fund will enter into futures contracts and options on securities solely for hedging or other nonspeculative 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, which are set forth in greater detail in the Statement of Additional Information and Appendix "B" therein, which should be reviewed in conjunction with the foregoing discussion.
The Fund may invest from time to time in securities subject to restrictions on disposition under the Securities Act of 1933, securities without readily available market quotations or illiquid securities (those which cannot be sold in the ordinary course of business within seven days at approximately the valuation given to them by the Portfolio) ("restricted securities"). However, on the date of purchase, no such investment may increase the Fund's holdings of such securities to more than 10% of the value of the Fund's net assets. However, the Fund has agreed with certain states that no more than 5% of its total assets will be invested in restricted securities. The Fund is not required to receive registration rights in connection with the purchase of restricted securities and, in the absence of such rights, marketability and value can be adversely affected because the Fund may be unable to dispose of such securities at the time desired or at a reasonable price. In addition, in order to resell a restricted security, the Fund might have to bear the expense and incur the delays associated with effecting registration.
Another practice in which the Fund may engage is to lend its securities to qualified brokers, dealers, banks, or other financial institutions. This practice permits the Fund to earn income, which, in turn, can be invested in additional securities to pursue the Fund's investment objective. Loans of securities by the Fund will be collateralized by cash, letters of credit, or securities issued or guaranteed by the U.S. government or its agencies, equal to at least 100% of the current market value of the loaned securities, determined on a daily basis. Lending securities involves certain risks, the most significant of which is the risk that a borrower may fail to return a portfolio security. The Fund monitors the creditworthiness of borrowers in order to minimize such risks. The Fund will not lend any security if, as a result of such loan, the aggregate value of securities then on loan would exceed 33-1/3% of the Fund's total assets (taken at market value).
The Fund is subject to certain restrictions upon its investments, which are set forth in the Statement of Additional Information, which may not be altered without the approval of the Fund's shareholders. Those restrictions include, among others, limitations with respect to the percentages of the value of its total assets which may be invested in any one company or in one industry. In addition, except where indicated to the contrary, the investment policies described in this section are not considered fundamental and may be changed without a vote of the Fund's shareholders.
THE FUND AND ITS MANAGEMENT
The Company is a no-load mutual fund registered with the Securities and Exchange Commission as an open-end, diversified, management investment company. The Company was incorporated on April 2, 1993, 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. ("INVESCO"), 7800 E. Union Avenue, Denver, Colorado, serves as the Fund's investment adviser. INVESCO 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.
The following individual serves as portfolio manager for the Fund and is primarily responsible for the day-to-day management of the Fund's portfolio of securities:
William W. Veronda Portfolio manager of the Fund since 1993 (inception); portfolio manager of INVESCO Tax-Free Long-Term Bond Fund since 1984; senior vice president (1989 to present) and vice president (1985 to 1989) of INVESCO Trust Company; B.S.- Economics, The Wharton School, University of Pennsylvania; Chartered Financial Analyst.
INVESCO is an indirect wholly-owned subsidiary of INVESCO PLC. INVESCO PLC is a financial holding company which, through its subsidiaries, engages in the business of investment management on an international basis. INVESCO was established in 1932 and, as of June 30, 1994, managed thirteen mutual funds, consisting of 34 separate portfolios, with combined assets of approximately $9.3 billion on behalf of over 860,500 shareholders.
Pursuant to an agreement with INVESCO, INVESCO Trust Company ("INVESCO Trust"), 7800 E. Union Avenue, Denver, Colorado, serves as the Fund's sub-adviser. INVESCO Trust, a trust company founded in 1969, is a wholly-owned subsidiary of INVESCO that served as adviser or sub-adviser to 31 investment portfolios as of June 30, 1994, including 25 portfolios in the INVESCO group. These 31 portfolios had aggregate assets of approximately $9.3 billion as of June 30, 1994. 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 INVESCO, is primarily responsible for selecting and managing the Fund's investments. Although the Fund is not a party to the sub- advisory agreement, the agreement has been approved by the shareholders of the Fund.
The Fund pays INVESCO 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 0.50% of the first $300 million of the Fund's average net assets; 0.40% of the next $200 million of the Fund's average net assets; and 0.30% of the Fund's average net assets over $500 million. For the fiscal period ended June 30, 1994, investment advisory fees paid by the Fund amounted to 0.29% of the Fund's average net assets. Of the Fund's total net assets the fees would amount to 0.50% annualized. Out of its advisory fee which it receives from the Fund, INVESCO pays INVESCO Trust, as sub-adviser to the Fund, a monthly fee, which is computed at the annual rate of 0.25% of the first $300
million of the Fund's average net assets; 0.20% of the next $200 million of the Fund's average net assets; and 0.15% of the Fund's average net assets over $500 million. No fee is paid by the Fund to INVESCO Trust.
The Company also has entered into an Administrative Services Agreement (the "Administrative Agreement") with INVESCO. Pursuant
to the Administrative Agreement, INVESCO performs certain administrative, recordkeeping and internal sub-accounting services, including without limitation, maintaining general ledger and capital stock accounts, preparing a daily trial balance, calculating net asset value daily, providing selected general ledger reports, and providing sub-accounting and recordkeeping services for shareholder accounts maintained by certain retirement and employee benefit plans for the benefit of participants in such plans. For such services, the Fund pays INVESCO a fee consisting of a base fee of $10,000 per year, plus an additional incremental fee computed at the annual rate of 0.015% per year of the average net assets of the Fund. INVESCO 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 deducted from the Fund's total income before dividends are paid. Total expenses of the Fund for the fiscal period ended June 30, 1994, including investment advisory fees (but excluding brokerage commissions, which are a cost of acquiring securities), amounted to 0.70% of the Fund's average net assets. Certain Fund expenses will be absorbed by INVESCO and INVESCO Trust voluntarily in order to ensure that the Fund's total annual operating expenses do not exceed 0.70% of the Fund's average net assets. If such voluntary expense limit were not in effect the Fund's total expenses for the fiscal period ended June 30, 1994, would have been 3.14% of the Fund's average net assets.
INVESCO, as the Company's investment adviser, or INVESCO Trust, as the Company's sub-adviser, places orders for the purchase and sale of portfolio securities with brokers and dealers based upon INVESCO's evaluation of their financial responsibility coupled with their ability to effect transactions at the best available prices. The Company may market shares of the Fund through intermediary brokers or dealers that have entered into Dealer Agreements with INVESCO, as the Company's Distributor, under which such intermediary brokers or dealers generally are compensated through the payment of continuing quarterly fees at an annual rate of up to 0.25% of the average net asset value of outstanding Fund shares sold by such entities, measured on each business day during a calendar quarter. The Fund may place orders for portfolio transactions with qualified broker/dealers which recommend the Fund, or sell shares of the Fund to clients, or act as agent in the purchase of Fund shares for clients, if management of the Fund believes that the quality of the transaction and commission are comparable to those available from other qualified brokerage firms.
HOW SHARES CAN BE PURCHASED
Shares of the Fund are sold on a continuous basis by INVESCO, as the Company'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 account or direct payroll purchase, as described below in the Prospectus 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) Fund management may permit a lesser amount to be invested in the Fund under a group investment plan qualifying as a sophisticated investor; and (3) Fund management reserves the right to reduce or waive the minimum purchase requirements in its sole discretion where it determines such action is in the best interests of the Fund.
An order to purchase shares will not begin earning dividends or other distributions until the investor's check can be converted into available federal funds (i.e., moneys held on deposit within the Federal Reserve System) under regular banking procedures. Checks drawn on a member bank of the Federal Reserve System normally are converted into federal funds within two or three business days following receipt of the checks by the Fund. In the case of checks drawn on banks which are not members of the Federal Reserve System, it may take longer for federal funds to become available.
The purchase of Fund shares can be expedited by placing bank wire orders or using overnight courier. Overnight courier orders must meet the above minimum investment requirements. In no case can a bank wire 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.
If your check does not clear, you will be responsible for any related loss the Fund or INVESCO incurs. If you are already a shareholder in the INVESCO funds, the Fund has the option to redeem shares from any identically registered account in the Fund or any other INVESCO fund as reimbursement for any loss incurred. You also may be prohibited or restricted from making future purchases in any of the INVESCO funds.
Persons who invest in the Fund through a securities broker may be charged a commission or transaction fee 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.
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 trading on that Exchange (presently 4:00 p.m., New York time) and also may be computed on other days under certain circumstances. Net asset value per share of 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 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 INVESCO to reimburse it for particular expenditures incurred by INVESCO during the rolling 12-month period in which that month falls in connection with the distribution of the Fund's shares to investors. These expenditures 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 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 reimbursable expenditures include those incurred for advertising, the preparation and distribution of sales literature, the cost of printing and distributing prospectuses to prospective investors, and such other services and promotional activities for the Fund as may from time to time be agreed upon by the Company and its board of directors, including public relations efforts and marketing programs to communicate with investors and prospective investors.
Under the Plan, the Company's reimbursement to INVESCO on behalf of the Fund is limited to an amount computed at an annual rate of 0.25% of the Fund's average net assets during the month. INVESCO is not entitled to reimbursement for overhead expenses under the Plan, but may be reimbursed for all or a portion of the compensation paid for salaries and other employee benefits for the personnel of INVESCO 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 reimburse or pay expenditures incurred during the rolling 12- month period in which that month falls. Any reimbursable expenses in excess of the limitation described above are not reimbursable and will be borne by INVESCO. No further payments will be made by the Fund under the Plan in the event of its termination. Also, any payments made by the Fund may not be used to finance the distribution of shares of any other fund of the Company or other mutual fund advised by INVESCO. 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.
SERVICES PROVIDED BY THE FUND
Shareholder Accounts. INVESCO maintains a share account that reflects the current holdings of each shareholder. A separate account will be maintained for a shareholder for each fund in which the shareholder invests. 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. Income dividends and capital gain 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 date. A shareholder may, however, elect to reinvest dividends and capital gains distributions in certain of the other no-load mutual funds advised and distributed by INVESCO, or to receive payment of all dividends and distributions in excess of $10.00 by check by giving written notice to INVESCO at least two weeks prior to the record date on which the change is to take effect. Further information concerning these options can be obtained by contacting INVESCO.
Periodic Withdrawal Plan. A Periodic Withdrawal Plan is available to shareholders who own or purchase shares of any mutual funds advised by INVESCO having a total value of $10,000 or more; provided, however, that at the time the Plan is established, the shareholder owns shares having a value of at least $5,000 in the fund from which the withdrawals will be made. Under the Periodic Withdrawal Plan, INVESCO, as agent, will make specified monthly or quarterly payments of any amount selected (minimum payment of $100) to the party designated by the shareholder. Notice of all changes concerning the Periodic Withdrawal Plan must be received by INVESCO at least two weeks prior to the next scheduled check. Further information regarding the Periodic Withdrawal Plan and its requirements and tax consequences can be obtained by contacting INVESCO.
Exchange Privilege. Shares of the Fund may be exchanged for shares of any other fund of the Company, as well as for shares of any of the following other no-load mutual funds, which are also advised and distributed by INVESCO, on the basis of their respective net asset values at the time of the exchange: INVESCO Diversified Funds, Inc., INVESCO Dynamics Fund, Inc., INVESCO Emerging Growth Fund, 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 Specialty Funds, Inc., INVESCO Strategic Portfolios, 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 INVESCO Funds Group, Inc., 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 privilege of exchanging 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 telephone exchange privileges, 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 privilege to the disadvantage of other shareholders, the Fund reserves the right to terminate the exchange privilege 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 privilege 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 privilege 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, and should be aware that the exchange privilege may only be available in those states where exchanges legally may be made, which will require that the shares being acquired are registered for sale in the shareholder's state of residence. Shareholders interested in exercising the exchange privilege may contact INVESCO for information concerning their particular exchanges.
Automatic Monthly Exchange. Shareholders who have accounts in any one or more of the mutual funds distributed by INVESCO may arrange for a fixed dollar amount of their fund shares to be exchanged automatically for shares of any other INVESCO mutual fund listed under "Exchange Privilege" 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 INVESCO at least two weeks prior to the date the change is to be made. Further information regarding this service can be obtained by contacting INVESCO.
EasiVest. For shareholders who want to maintain a schedule of monthly investments, EasiVest uses various methods to draw a preauthorized amount from the shareholder's bank account to purchase Fund shares. This automatic investment program can be changed by the shareholder at any time by writing to INVESCO at least two weeks prior to the date the change is to be made. Further information regarding this service can be obtained by contacting INVESCO.
Direct Payroll Purchase. Shareholders may elect to have their employers make automatic purchases of Fund shares for them, by
deducting a specified amount from their regular paychecks. This automatic investment program can be modified or terminated at any time by the shareholder, by notifying the employer. Further information regarding this service can be obtained by contacting INVESCO.
HOW TO REDEEM SHARES
You may redeem all or any portion of the shares in your account at any time by telephone or mail as described below. Shares of the Fund may be redeemed 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 mail, 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 INVESCO at the address noted above. If shares are held in the name of a corporation, additional documentation may be necessary. Call or write for specifics. 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, an emergency as defined by the Securities and Exchange Commission exists, or the shares to be redeemed were purchased by check and that check has not yet cleared; provided, however, that all redemption proceeds will be paid out promptly upon clearance of the purchase check (which may take up to 15 days).
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 INVESCO, using the telephone number on the cover of this Prospectus. Unless the Fund's 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. The redemption proceeds, at the shareholder's option, either will be mailed to the address listed on 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. These telephone redemption privileges may be modified or terminated in the future at the discretion of the Fund's management. 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 postponements resulting from 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 confirmations of transactions initiated by telephone. As a result of this policy, the investor may bear the risk of any loss due to unauthorized or fraudulent instructions; provided, however, that if the Fund fails to follow these or other reasonable procedures, the Fund may be liable.
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS, AND TAXES
Dividends and Capital Gain Distributions. All of the Fund's net investment income is paid out to shareholders. Net investment income consists of all interest income accrued on portfolio securities, less all expenses of the Fund for the applicable period. Dividends from net investment income are declared daily and paid monthly. Distributions of net realized capital gains, if
any, will be made at least annually, usually in December. Dividends and capital gains, if any, are automatically reinvested in additional shares of the Fund at the net asset value on the ex- dividend date, unless otherwise requested. (See "Services Provided by the Fund - Reinvestment of Distributions.")
Taxes. The Fund intends to continue to comply with the provisions of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to make sufficient distributions of investment income and capital gains to relieve it from all federal income taxes. In addition, the Fund intends to qualify during each fiscal year to pay "exempt-interest dividends" to its shareholders. Exempt-interest dividends, which are derived from net income earned by the Fund on municipal obligations, will be excludable from gross income of the shareholders for federal income tax purposes and, therefore, free from regular income tax. Any distributions to shareholders from net interest income earned by the Fund from taxable temporary investments, or from net capital gains, whether paid in cash or reinvested in additional shares of the same or another fund, would be subject to federal income taxation. Distributions of net realized short-term capital gains are, for federal income tax purposes, taxable as ordinary income to shareholders. Under the Tax Reform Act of 1986, interest on certain "private activity bonds" issued after August 7, 1986, is an item of tax preference for purposes of the alternative minimum tax in taxable years beginning after December 31, 1986. The Fund intends to limit its investments in such "private activity bonds" to not more than 20% of the Fund's total assets. The portion of exempt-interest dividends paid by the Fund which is attributable to such "private activity bonds" would be an item of tax preference to shareholders. Additionally, certain corporations also may have to include exempt-interest dividends in calculating alternative minimum taxable income in situations where the "adjusted current earnings" of the corporation exceed its alternative minimum taxable income.
At the end of each calendar year, shareholders are sent full information on dividends and capital gain distributions for tax purposes. The Fund anticipates that substantially all of the dividends to be paid by the Fund in 1994 will be exempt from federal income taxes. During the fiscal period ended June 30, 1994, 97.54% of the dividends declared by the Fund were exempt from federal income taxes. There is no assurance that this will be the case in future years. If any portion of such dividends is not exempt, the Fund will advise shareholders of the proportion thereof in its annual tax notice. Exemption of exempt-interest dividends for federal income tax purposes does not necessarily result in exemption under the income or other tax laws of any state or local taxing authority. Although these dividends generally will be subject to such state and local taxes, the laws of the several states and local taxing authorities vary with respect to the taxation of such exempt-interest dividends, other dividends, and distributions of capital gains. Shareholders of the Fund are
advised to consult their own tax advisers with respect to these matters.
Voting Rights. All shares of the Fund and the other fund of the Company have equal voting rights based on one vote for each share owned. Voting with respect to certain matters, such as ratification of independent accountants and the election of directors, will be by all the funds of the Company voting together. In other cases, such as voting upon an investment advisory contract, voting is on a fund-by-fund basis. To the extent permitted by law, when not all funds are affected by a matter to be voted upon, only shareholders of the fund or funds affected by the matter will be entitled to vote thereon. The Company is not generally required, and does not expect, to hold regular annual meetings of shareholders. However, 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.
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, 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 a fee of $20.00 per shareholder account or omnibus account participant per year. 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. In addition, registered broker-dealers, third party administrators of tax-qualified retirement plans and other entities may provide sub- transfer agency services to the Fund which reduce or eliminate the need for identical services to be provided on behalf of the Fund by INVESCO. In such cases, INVESCO is authorized to pay the third party an annual sub-transfer agency fee of up to $20.00 per participant in the third party's omnibus account out of the transfer agency fee which is paid to INVESCO by the Fund.
INVESCO TAX-FREE INTERMEDIATE BOND FUND A no-load mutual fund seeking as high a level of current income exempt from federal income taxes as is consistent with the preservation of capital
November 1, 1994
To receive general information and prospectuses on any of INVESCO's funds or retirement plans, or to obtain current account or price information, call toll-free:
To reach PAL, your 24-hour Personal Account Line, call:
Or write to:
INVESCO Funds Group, Inc., Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
If you're in Denver, visit one of our convenient Investor Centers:
155-B Fillmore Street
Denver Tech Center
7800 E. Union Avenue