UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act File Number: 811-09913
INVESCO Counselor Series Funds, Inc.
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(Exact name of registrant as specified in charter)
4350 South Monaco Street, Denver, Colorado 80237
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(Address of principal executive offices) (Zip code)
Glen A. Payne, Esq., 4350 South Monaco Street, Denver, Colorado 80237
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(Name and address of agent for service)
Registrant's telephone number, including area code: 720-624-6300
Date of fiscal year end: August 31, 2003
Date of reporting period: August 31, 2003
ITEM 1. REPORT TO SHAREHOLDERS
AUGUST 31, 2003
ANNUAL REPORT
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INVESCO COUNSELOR SERIES FUNDS, INC.
EFFECTIVE OCTOBER 1, 2003, INVESCO COUNSELOR SERIES FUNDS, INC. WILL CHANGE ITS
NAME TO AIM COUNSELOR SERIES FUNDS, INC.
ADVANTAGE FUND
ADVANTAGE HEALTH SCIENCES FUND
(FORMERLY, ADVANTAGE GLOBAL HEALTH SCIENCES FUND)
"...OUR OPTIMISM ABOUT THE ECONOMY HAS NOT WAVERED."
SEE PAGE 4
[INVESCO ICON] INVESCO (R)
[PHOTOGRAPH OF RAY CUNNINGHAM OMITTED]
NEW DISTRIBUTOR FOR INVESCO FUNDS
FELLOW SHAREHOLDER:
In recent months, we at INVESCO have taken some key steps in our ongoing effort
to provide you with high-quality investment products and services. As you may
have already heard, we've begun working more closely with our affiliates at AIM
Investments,(SM)* a well-respected leader in the asset management industry. As a
result, A I M Distributors, Inc. became the distributor of INVESCO's U.S. retail
funds effective July 1, 2003. This move has allowed us to create a single
distribution system for both our companies that is supported by more than
200,000 financial consultants.
In addition, some of INVESCO's funds, including Advantage Fund, underwent
portfolio management shifts on July 1. You'll notice that while the investment
objectives for INVESCO Advantage remain the same, this fund is now under the
stewardship of a veteran portfolio management team from AIM. You can read more
about the new managers on page 4. And on September 30, 2003, INVESCO Advantage
Global Health Sciences Fund was renamed Advantage Health Sciences Fund.
Finally, the INVESCO Web site is now integrated into aiminvestments.com, which
has been rated the top financial Web site for 10 consecutive quarters by the
DALBAR financial professional MutualFund WebMonitor report.** You can access
important information about INVESCO's Counselor Series Funds, including share
prices, investment objectives, and portfolio manager biographies, at AIM's Web
site.
Thank you for your continued support. If you have questions about any of these
changes, please don't hesitate to call us at 1-800-959-4246.
Sincerely,
/s/Ray Cunningham
Ray Cunningham
President and CEO, INVESCO Funds Group, Inc.
* AIM INVESTMENTS IS A SERVICE MARK OF A I M MANAGEMENT GROUP INC., AND IS THE
SUBJECT OF A PENDING APPLICATION FOR TRADEMARK REGISTRATION. A I M ADVISORS,
INC., A I M CAPITAL MANAGEMENT, INC., A I M PRIVATE ASSET MANAGEMENT, INC. AND
A I M ALTERNATIVE ASSET MANAGEMENT COMPANY, INC. ARE THE INVESTMENT ADVISORS FOR
THE PRODUCTS AND SERVICES REPRESENTED BY AIM INVESTMENTS. A I M DISTRIBUTORS,
INC., IS THE DISTRIBUTOR FOR THE RETAIL MUTUAL FUNDS AND FUND MANAGEMENT COMPANY
IS THE DISTRIBUTOR FOR THE INSTITUTIONAL MONEY MARKET FUNDS REPRESENTED BY AIM
INVESTMENTS.
** DALBAR, INC., IS AN INDEPENDENT ORGANIZATION THAT PROVIDES BENCHMARKS AND
RATINGS FOR FINANCIAL SERVICES COMPANIES. THE DALBAR WEBMONITOR AWARD IS BASED
ON FOUR EVALUATION CRITERIA: SITE FUNCTIONS, USABILITY, CURRENCY AND RELEVANCE
OF CONTENT, AND CONSISTENCY OF WEB SITE IMAGE AND CONTENT.
"...SHORT SELLING REMAINS AN IMPORTANT TACTIC OF THE FUND'S LONG-TERM
STRATEGY..."
- -- PAGE 6
TABLE OF CONTENTS
LETTER FROM THE CHAIRMAN............................1
FUND REPORTS........................................3
INVESTMENT HOLDINGS.................................8
FINANCIAL STATEMENTS...............................18
NOTES TO FINANCIAL STATEMENTS......................24
FINANCIAL HIGHLIGHTS...............................32
OTHER INFORMATION..................................38
INVESCO COUNSELOR SERIES FUNDS, INC.
TOTAL RETURN
PERIODS ENDED 8/31/03*
10 years+ Manager's
Cumulative or Since Report
Fund (Inception) 6 months 1 year 5 years+ Inception^ Page #
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ADVANTAGE FUND - CLASS A WITH SALES CHARGE (8/00) 16.04% 3.31% N/A (17.69%)^+ 3
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ADVANTAGE FUND - CLASS A (8/00) 22.69% 9.35% N/A (16.14%)^+ 3
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ADVANTAGE FUND - CLASS B WITH CDSC (8/00) 17.44% 4.24% N/A (17.24%)^+ 3
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ADVANTAGE FUND - CLASS B (8/00) 22.44% 9.24% N/A (16.44%)^+ 3
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ADVANTAGE FUND - CLASS C WITH CDSC (8/00) 21.10% 7.81% N/A (16.66%)^+ 3
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ADVANTAGE FUND - CLASS C (8/00) 22.10% 8.81% N/A (16.66%)^+ 3
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ADVANTAGE HEALTH SCIENCES FUND -
CLASS A WITH SALES CHARGE (1/92) 10.83% 2.87% 1.39% 10.50% 5
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ADVANTAGE HEALTH SCIENCES FUND - CLASS A (1/92) 17.29% 8.87% 2.54% 11.13% 5
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ADVANTAGE HEALTH SCIENCES FUND -
CLASS B WITH CDSC (5/01) 11.33% 2.14% N/A (6.72%)^+ 5
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ADVANTAGE HEALTH SCIENCES FUND - CLASS B (5/01) 16.33% 7.14% N/A (5.47%)^+ 5
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ADVANTAGE HEALTH SCIENCES FUND -
CLASS C with CDSC (5/01) 14.43% 5.14% N/A (6.59%)^+ 5
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ADVANTAGE HEALTH SCIENCES FUND - CLASS C (5/01) 15.43% 6.14% N/A (6.59%)^+ 5
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* PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. TOTAL RETURN ASSUMES
REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL VARY SO THAT, WHEN REDEEMED, AN INVESTOR'S SHARES MAY BE
WORTH MORE OR LESS THAN WHEN PURCHASED. THE FUNDS' CLASS A PERFORMANCE REFLECTS
THE MAXIMUM SALES CHARGE OF 5.50%. THE FUNDS' CLASS B AND CLASS C PERFORMANCE
REFLECTS THE DEDUCTION OF THE APPLICABLE CONTINGENT DEFERRED SALES CHARGE FOR
THE PERIODS SHOWN. THE CDSC ON CLASS B SHARES DECLINES FROM 5% BEGINNING AT THE
TIME OF PURCHASE TO 0% AT THE BEGINNING OF THE SEVENTH YEAR. THE CDSC OF CLASS C
SHARES IS 1% FOR THE FIRST 13 MONTHS AFTER PURCHASE. EFFECTIVE AUGUST 18, 2003,
THE CDSC ON CLASS C SHARES IS 1% FOR THE FIRST 12 MONTHS AFTER PURCHASE. THE
PERFORMANCE OF THE FUND'S CLASS A, CLASS B AND CLASS C SHARES WILL DIFFER DUE TO
THE DIFFERENT SALES CHARGE STRUCTURES AND CLASS EXPENSES.
+ AVERAGE ANNUALIZED
^ FOR FUNDS OR SHARE CLASSES INTRODUCED MORE RECENTLY
PERFORMANCE INFORMATION PROVIDED IN THIS REPORT DOES NOT REFLECT THE DEDUCTION
OF TAXES SHAREHOLDERS PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND
SHARES.
THE INDUSTRIES AND/OR SECTORS USED FOR PORTFOLIO SECURITIES CLASSIFICATION THAT
MAY BE USED THROUGHOUT THIS REPORT ARE THE GLOBAL INDUSTRY CLASSIFICATION
STANDARD WHICH WAS DEVELOPED BY AND IS THE EXCLUSIVE PROPERTY AND A SERVICE MARK
OF MORGAN STANLEY CAPITAL INTERNATIONAL INC. AND STANDARD & POOR'S.(R)
YOUR FUND'S REPORT
ADVANTAGE FUND
FUND PERFORMANCE
DEAR SHAREHOLDER:
For the 12-month period ended August 31, 2003, the value of Advantage Fund --
Class A shares increased by 9.35% (without sales charge). This return trailed
the 13.92% gain recorded by its benchmark, the Russell 3000 Index. (Of course,
past performance is not a guarantee of future results.)(1),(2) For performance
of other share classes, please see page 2.
In absolute terms, it was a strong period for the fund, as many of its holdings
benefited from renewed strength in the stock market. Aside from a few months of
weakness in early 2003, when investors worried about the conflict in Iraq,
stocks generally trended higher throughout the period.
TECHNOLOGY STOCKS SURGED
The market's -- and the fund's -- best-performing sector was technology, which
benefited from investors' generally bullish attitude. The technology sector
rallied sharply after the Federal Reserve's final 2002 rate cut in November, a
move that encouraged investors and had them feeling more optimistic about the
likelihood of an increase in enterprise and consumer spending. Although the tech
sector paused in early 2003 when the market's anxieties relating to the war
tempered enthusiasm, for most of the period improved sentiment led to strong
gains in most technology industries. The fund benefited from its exposure to
Internet software and services companies, such as United Online; semiconductor
companies, such as Intel Corp; and software holdings, such as Microsoft Corp.
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ADVANTAGE FUND
TOP 10 COMMON STOCK HOLDINGS
% OF TOTAL NET ASSETS AS OF 8/31/03
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General Electric..............................................2.86%
Microsoft Corp................................................2.75%
Citigroup Inc.................................................2.73%
Intel Corp....................................................2.53%
Pfizer Inc....................................................2.14%
Semiconductor HOLDRs Trust....................................1.89%
Wal-Mart Stores...............................................1.77%
Cisco Systems.................................................1.74%
Johnson & Johnson.............................................1.71%
Teva Pharmaceutical Industries Ltd
Sponsored ADR Representing Ord Shrs...........................1.62%
HOLDINGS AND COMPOSITION OF HOLDINGS ARE SUBJECT TO CHANGE.
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The market's optimism about the economy also supported our consumer
discretionary stocks. Among the sub-sectors that made positive contributions to
the fund's performance were our holdings in the leisure, apparel, Internet
retailers, and specialty retailers. Individual standouts included online
auctioneer eBay Inc and Pacific Sunwear of California in specialty retailing.
HEALTH CARE SERVICE PROVIDERS HURT PERFORMANCE
The strong relative performance of the tech and consumer discretionary sectors
could not offset underperformance in other groups. In many of these weaker
areas, our holdings advanced during the period, but by less than the broader
market, accounting for the fund's relative performance shortfall. Lagging groups
included the fund's health care stocks, particularly our health care service
providers, which declined in the wake of concerns about Medicare pricing. The
fund's market-weighted pharmaceuticals position also detracted from relative
performance. Although our holdings in pharmaceuticals advanced strongly and
handily outperformed those drug stocks represented in the Russell 3000 Index,
the fact that the fund was heavily weighted in an underperforming area hurt our
relative showing.
The same was true for the fund's consumer staples weighting. Once again, our
stock selection worked well, as companies such as United Natural Foods and
Wal-Mart Stores outperformed the rest of the sector. However, our decision to
overweight the group, which lagged the broader market, undermined performance.
Meanwhile, we continued to employ several "plain vanilla" option strategies
during the period, many of which added value. In one strategy, we sold other
investors the right to buy individual stocks in our portfolio at significantly
higher prices. When everything worked well, we not only locked in healthy
profits on the sale, but also received a premium when we sold the right. In
another strategy known as selling "naked put" options, we sold other investors
the right to sell us blue chip stocks at prices that were significantly lower
than where they were trading. To us, these "naked put" transactions meant we
were being paid to buy what we believed were some of the world's greatest
companies at prices that we anticipate will prove to be exceptionally cheap over
the next three to five years.
As the market stabilized during the late spring and early summer, we ratcheted
back our options strategies. The risk/reward profile for these strategies became
less favorable, as the market became less nervous and was less willing to pay up
for options that would provide them the "portfolio insurance" that we were
selling earlier in the year.
ENERGY AND FINANCIAL SERVICES STOCKS ADVANCED BUT HURT RELATIVE PERFORMANCE
Other areas that made positive contributions to absolute performance but hurt
our showing when compared to the index included our stakes in the energy,
financial services, and telecommunications sectors. The fund's exposure to the
industrial and utilities sectors finished the period in the red.
Looking ahead, our optimism about the economy has not wavered. We continue to
believe business will improve in the coming year, and we have positioned the
portfolio in an effort to best capitalize on the recovery.
SINCE 7/1/03, THE FUND HAS BEEN MANAGED BY STEVEN A. BRASE, BRANT H. DEMUTH,
ROBERT C. LESLIE, AND CHARLES D. SCAVONE.
LINE GRAPH: INVESCO ADVANTAGE FUND - CLASS A, B & C, GROWTH OF $10,000(1)
This line graph compares the value of a $10,000 investment in INVESCO Advantage
Fund - Class A to the value of a $10,000, the value of a $10,000 investment in
INVESCO Advantage Fund - Class B, and the value of a $10,000 investment in
INVESCO Advantage Fund - Class C to the value of a $10,000 investment in the
Russell 3000 Index(2), assuming in each case reinvestment of all dividends and
capital gain distributions, and in the cases of INVESCO Advantage Fund - Class
A, Class B, and Class C inclusion of front-end sales charge and contingent
deferred sales charge, respectively, for the period since inception (8/01)
through 8/31/03.
INVESCO Advantage INVESCO Advantage INVESCO Advantage Russell 3000 Index(2)
Fund - Class A Fund - Class B Fund - Class C
8/00 $10,000 $10,000 $10,000 $10,000
8/01 $ 7,624 $ 8,004 $ 7,994 $ 7,644
8/02 $ 5,079 $ 5,323 $ 5,301 $ 6,321
8/03 $ 5,556 $ 5,649 $ 5,768 $ 7,202
PIE CHART: ADVANTAGE FUND
SECTOR DIVERSIFICATION
AS OF 8/31/03
[PIE CHART]
% OF TOTAL ASSETS
o Information Technology.......................20.20%
o Health Care..................................17.28%
o Financials...................................15.26%
o Consumer Staples.............................10.39%
o Consumer Discretionary.......................10.15%
o Industrials...................................7.19%
o Energy........................................5.82%
o Telecommunications Services...................3.96%
o Utilities.....................................2.60%
o Materials.....................................0.74%
o Derivatives-Options...........................0.40%
o Net Cash & Cash Equivalents...................6.01%
(1) PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. TOTAL RETURN ASSUMES
REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE SO THAT, WHEN REDEEMED, AN INVESTOR'S SHARES MAY
BE WORTH MORE OR LESS THAN WHEN PURCHASED. THE LINE GRAPH ILLUSTRATES THE VALUE
OF A $10,000 INVESTMENT, PLUS REINVESTED DIVIDENDS AND CAPITAL GAIN
DISTRIBUTIONS ALONG WITH APPLICABLE FRONT-END SALES CHARGES AND CDSC. THE CHARTS
AND OTHER TOTAL RETURN FIGURES CITED REFLECT THE FUND'S OPERATING EXPENSES, BUT
THE INDEX DOES NOT HAVE EXPENSES, WHICH WOULD HAVE LOWERED ITS PERFORMANCE.
(2) THE RUSSELL 3000 INDEX CONSISTS OF 3,000 STOCKS, PRIMARILY ISSUED BY U.S.
COMPANIES, THAT INCLUDES ISSUES OF ALL SIZES, FROM LARGE TO SMALL CAPITALIZATION
COMPANIES. THE INDEX IS NOT MANAGED; THEREFORE, ITS PERFORMANCE DOES NOT REFLECT
MANAGEMENT FEES AND OTHER EXPENSES ASSOCIATED WITH THE FUND, INCLUDING FRONT-END
SALES CHARGES AND CDSC. INVESTORS CANNOT INVEST DIRECTLY IN ANY MARKET INDEX.
INVESTORS SHOULD REALIZE THAT THE USE OF LEVERAGE COULD CAUSE THE NET ASSET
VALUE OF THE FUND'S SHARES TO DECREASE FASTER THAN IF THE FUND HAD NOT USED
LEVERAGE.
THE FUND MAY BE REQUIRED TO PAY A PREMIUM TO BORROW SECURITIES, AND JUST AS
THERE IS NO GUARANTEE A STOCK PURCHASED WILL RISE, THERE IS NO GUARANTEE A STOCK
"SHORTED" WILL FALL.
THE PRINCIPAL RISK OF INVESTING IN DERIVATIVES, SUCH AS OPTIONS, IS THAT THE
FLUCTUATIONS IN THEIR VALUES MAY NOT CORRELATE PERFECTLY WITH THE OVERALL
SECURITIES MARKETS AND MAY BE MORE SENSITIVE TO INTEREST RATE CHANGES AND MARKET
PRICE FLUCTUATIONS THAN OTHERS. FURTHER, THE USE OF OPTIONS MAY INCREASE MARKET
RISK FOR THE FUND.
AT ANY GIVEN TIME, THE FUND MAY BE SUBJECT TO SECTOR RISK, WHICH MEANS A CERTAIN
SECTOR MAY UNDERPERFORM OTHER SECTORS OR THE MARKET AS A WHOLE. THE FUND IS NOT
LIMITED WITH RESPECT TO THE SECTORS IN WHICH IT CAN INVEST.
MEET THE NEW MANAGEMENT TEAM
[PHOTOGRAPH OF STEVEN A. BRASE OMITTED] [PHOTOGRAPH OF BRANT H. DEMUTH OMITTED]
STEVEN A. BRASE, CFA (LEFT)
STEVEN BRASE HAS BEEN IN THE INVESTMENT BUSINESS SINCE 1995 AND JOINED AIM IN
1998. HE HAS A BS IN MECHANICAL ENGINEERING FROM THE UNIVERSITY OF CALIFORNIA AT
SANTA BARBARA. HE EARNED HIS MBA FROM THE UNIVERSITY OF VIRGINIA.
BRANT H. DEMUTH, CFA
BRANT DEMUTH JOINED AIM IN 1996 AS HEAD OF RISK MANAGEMENT AND WAS PROMOTED TO
HIS CURRENT POSITION IN 1998. HE BEGAN HIS INVESTMENT CAREER IN 1987. HE
RECEIVED A BS IN BUSINESS ADMINISTRATION FROM COLORADO STATE UNIVERSITY AND AN
MBA IN OIL AND GAS FINANCE FROM THE UNIVERSITY OF DENVER.
[PHOTOGRAPH OF ROBERT C. LESLIE OMITTED] [PHOTOGRAPH OF CHARLES D. SCAVONE
OMITTED]
ROBERT C. LESLIE, CFA (LEFT)
ROBERT LESLIE BEGAN HIS INVESTMENT CAREER IN 1985 AND JOINED AIM IN 1998. HE
RECEIVED HIS BA IN MUSIC PERFORMANCE FROM SUSQUEHANNA UNIVERSITY AND AN MBA IN
FINANCE FROM THE UNIVERSITY OF MARYLAND.
CHARLES D. SCAVONE, CFA
CHARLES SCAVONE HAS BEEN IN THE INVESTMENT BUSINESS SINCE 1991 AND JOINED AIM IN
1996. HE EARNED A BBA FROM SOUTHEASTERN LOUISIANA UNIVERSITY AND AN MBA FROM THE
UNIVERSITY OF HOUSTON.
YOUR FUND'S REPORT
ADVANTAGE HEALTH SCIENCES FUND
FUND PERFORMANCE
DEAR SHAREHOLDER:
For the 12-month period ended August 31, 2003, the value of Advantage Health
Sciences Fund-Class A shares advanced 8.87% (without sales charge), compared
with a 29.01% gain in the Morgan Stanley Health Care Products Index and a 3.89%
gain in the S&P 500 Health Care Index(R) during the same period. (Of course,
past performance is not a guarantee of future results.)(3),(4) For performance
of other share classes, please see page 2.
PRIVATE EQUITY AND HEALTH SERVICES WEIGHTINGS HAMPER PERFORMANCE
Although the fund logged a healthy gain for the fiscal year, it lagged its
benchmark. We attribute the underperformance in part to our weighting in private
equities, illiquid securities purchased by the fund's prior management team.
With venture capital opportunities continuing to dry up this past year, many of
these holdings suffered sharp losses.
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ADVANTAGE HEALTH SCIENCES FUND
TOP 10 COMMON STOCK HOLDINGS
% OF TOTAL NET ASSETS AS OF 8/31/03
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Amgen Inc.....................................................4.17%
Teva Pharmaceutical Industries Ltd
Sponsored ADR Representing Ord Shrs...........................3.91%
Boston Scientific.............................................3.57%
Alcon Inc.....................................................3.40%
Genentech Inc.................................................3.18%
Anthem Inc....................................................2.99%
Aetna Inc.....................................................2.93%
WellPoint Health Networks.....................................2.91%
UnitedHealth Group............................................2.87%
C.R. Bard ....................................................2.76%
HOLDINGS AND COMPOSITION OF HOLDINGS ARE SUBJECT TO CHANGE.
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Our position in health services companies during the fourth quarter of 2002 was
another negative factor. Leading up to the annual period ended August 31, the
fund's health services holdings had performed extremely well through the market
downturn -- particularly during the second and third quarters of 2002.
Consequently, our weighting in the health care services sub-sector had become
significant, with our hospital holdings in particular appreciating to become a
substantial portion of the portfolio.
However, at the end of October 2002, Tenet Healthcare (no longer a fund holding)
fell under scrutiny for its Medicare pricing tactics -- news that quickly
clouded the entire services area. Following this development, the fund's
exposure to Tenet and other services leaders proved detrimental, hampering
performance and negatively affecting our overall return for the year. Indeed,
although we quickly liquidated our position in Tenet, our remaining holdings in
other hospitals that fell in sympathy with Tenet proved detrimental to results.
In addition, the fund was hurt on a relative basis by its lack of exposure to
small-cap biotechnology companies. Preferring to focus on profitable biotech
stocks with products already on the market plus improving pipelines, we avoided
the more speculative stocks in this sub-sector. Although we believe that this is
the most prudent approach for long-term investors, the strategy held us back
somewhat this past year, as many of the more speculative biotech stocks surged
during the market rally that unfolded in the spring and summer of 2003.
MEDICAL DEVICE AND SPECIALTY PHARMACEUTICALS PROVIDE A BOOST
Throughout the period, we maintained a substantial weighting in medical device
companies, and many of the fund's holdings representing this sub-sector
performed quite well. One major contributor was Boston Scientific, one of two
companies (the other is Johnson & Johnson, also a fund holding) that we believe
are poised to dominate the promising drug-coated stent market -- potentially the
largest new therapeutic market in health care. (Drug-coated stents are devices
used to prop open arteries, and contain drugs to keep them unclogged.) We
purchased Boston Scientific in the fall of 2002 and have seen its stock rise
sharply since then.
The fund's specialty pharmaceutical holdings also had a favorable impact on
performance. We maintained a strong presence in this group throughout the
period, to the fund's benefit. Strong contributors included Teva Pharmaceutical
Industries Ltd and Forest Laboratories, the latter of which the fund had owned
for three years. We recently took profits in Forest Laboratories, allowing us to
realize material gains on that stock.
LINE GRAPH: INVESCO ADVANTAGE HEALTH SCIENCES FUND - CLASS A GROWTH OF
$10,000(3)
This line graph compares the value of a $10,000 investment in INVESCO Advantage
Health Sciences Fund - Class A to the value of a $10,000 investment in the S&P
500 Health Care Index(R)(4), assuming in each case reinvestment of all dividends
and capital gain distributions, and in the case of INVESCO Advantage Health
Sciences Fund - Class A, inclusion of sales charge, for the ten year period
ended 8/31/03.
INVESCO Advantage Health
Sciences Fund - Class A S&P 500 Health Care Index(R)(4)
8/93 $10,000 $10,000
8/94 $10,336 $11,817
8/95 $14,683 $15,886
8/96 $18,828 $20,999
8/97 $21,483 $29,369
8/98 $23,937 $38,327
8/99 $28,531 $46,874
8/00 $43,271 $51,590
8/01 $30,683 $51,682
8/02 $24,934 $43,749
8/03 $27,145 $45,451
NOTE: THE MORGAN STANLEY HEALTH CARE PRODUCT INDEX(4) DOES NOT HAVE A 10-YEAR
PERFORMANCE HISTORY.
STRATEGY INCLUDES OPPORTUNISTIC SHORT SELLING
During the period, we reduced the fund's exposure to short positions following
strong gains attributable to this strategy in the second and third quarters of
2002. However, short selling remains an important tactic of the fund's long-term
strategy, and we will continue to monitor potential opportunities for both short
selling and the use of leverage -- another tactic provided for by the fund's
flexible charter.
LINE GRAPH: INVESCO ADVANTAGE HEALTH SCIENCES FUND - CLASS B & C GROWTH
OF $10,000(3)
This line graph compares the value of a $10,000 investment in INVESCO Advantage
Health Sciences Fund - Class B and the value of a $10,000 investment in INVESCO
Advantage Health Sciences Fund - Class C to the value of a $10,000 investment in
the S&P 500 Health Index(R)(4) and to the value of a $10,000 investment in the
Morgan Stanley Health Care Product Index(4), assuming in each case reinvestment
of all dividends and capital gain distributions, and in the cases of INVESCO
Advantage Health Sciences Fund - Class B and Class C inclusion contingent
deferred sales charge, respectively, for the period since inception (5/01)
through 8/31/03.
INVESCO Advantage INVESCO Advantage S&P 500 Health Care Morgan Stanley Health
Health Sciences Health Sciences Index(R)(4) Care Product Index(4)
Fund - Class B Fund - Class C
5/01 $10,000 $10,000 $10,000 $10,000
8/01 $10,230 $10,069 $ 9,884 $10,509
8/02 $ 8,202 $ 8,055 $ 8,367 $ 8,852
8/03 $ 8,524 $ 8,550 $ 8,692 $11,420
FUND MANAGEMENT
[PHOTOGRAPH OF THOMAS R. WALD OMITTED]
THOMAS R. WALD, CFA
TOM WALD IS A VICE PRESIDENT OF INVESCO FUNDS GROUP. HE BEGAN HIS INVESTMENT
CAREER IN 1988 AND JOINED INVESCO IN 1997. TOM RECEIVED HIS BA FROM TULANE
UNIVERSITY AND HIS MBA FROM THE UNIVERSITY OF PENNSYLVANIA.
------------------------------
ON SEPTEMBER 30, 2003, THE FUND WAS RENAMED INVESCO ADVANTAGE HEALTH SCIENCES
FUND.
Recently, we have been increasing the fund's exposure to the managed care
sub-sector. We've also purchased some leading pharmacy benefit managers, as we
believe growth prospects look strong for these companies. At the same time, we
have reduced the fund's overall weighting in medical device companies.
Turning to large-cap pharmaceuticals, we've maintained positions in key
companies like Pfizer Inc, Wyeth, Eli Lilly & Co, and Bristol-Myers Squibb. We
are cautiously awaiting these firms' new product cycles, which could lead to
accelerated earnings going forward.
PIE CHART: ADVANTAGE HEALTH SCIENCES FUND
INDUSTRY DIVERSIFICATION
AS OF 8/31/03
[PIE CHART]
% OF TOTAL NET ASSETS
LONG SHORT
o Pharmaceuticals.......................40.71% (1.31%)
o Health Care Equipment.................25.16% (0.00%)
o Biotechnology.........................19.87% (0.31%)
o Managed Health Care...................17.82% (0.00%)
o Health Care Distributors..............10.03% (0.00%)
o Health Care Facilities.................8.09% (0.00%)
o Health Care Supplies...................0.37% (0.00%)
Net Cash &
Cash Equivalents.....................(22.05%)
(3) PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. TOTAL RETURN ASSUMES
REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE SO THAT, WHEN REDEEMED, AN INVESTOR'S SHARES MAY
BE WORTH MORE OR LESS THAN WHEN PURCHASED. THE LINE GRAPHS ILLUSTRATE THE VALUE
OF A $10,000 INVESTMENT, PLUS REINVESTED DIVIDENDS AND CAPITAL GAIN
DISTRIBUTIONS ALONG WITH APPLICABLE FRONT-END SALES CHARGES AND CDSC. THE CHARTS
AND OTHER TOTAL RETURN FIGURES CITED REFLECT THE FUND'S OPERATING EXPENSES, BUT
THE INDEXES DO NOT HAVE EXPENSES, WHICH WOULD HAVE LOWERED THEIR PERFORMANCE.
(4) THE S&P 500 HEALTH CARE INDEX(R) AND THE MORGAN STANLEY HEALTH CARE PRODUCT
INDEX ARE BOTH UNMANAGED INDEXES REPRESENTATIVE OF THE STOCKS IN THE HEALTH CARE
SECTOR. THE S&P 500 INDEX(R) IS AN UNMANAGED INDEX OF THE 500 LARGEST COMMON
STOCKS (IN TERMS OF MARKET VALUE), WEIGHTED BY MARKET CAPITALIZATION AND
CONSIDERED REPRESENTATIVE OF THE BROAD STOCK MARKET. THE INDEXES ARE NOT
MANAGED; THEREFORE, THEIR PERFORMANCE DOES NOT REFLECT MANAGEMENT FEES AND OTHER
EXPENSES ASSOCIATED WITH THE FUND, INCLUDING APPLICABLE FRONT-END SALES CHARGES
AND CDSC. INVESTORS CANNOT INVEST DIRECTLY IN ANY MARKET INDEX.
INVESTORS SHOULD REALIZE THAT THE USE OF LEVERAGE COULD CAUSE THE NET ASSET
VALUE OF THE FUND'S SHARES TO DECREASE FASTER THAN IF THE FUND HAD NOT USED
LEVERAGE.
THE FUND MAY BE REQUIRED TO PAY A PREMIUM TO BORROW SECURITIES, AND JUST AS
THERE IS NO GUARANTEE A STOCK PURCHASED WILL RISE, THERE IS NO GUARANTEE A STOCK
"SHORTED" WILL FALL.
THE PRINCIPAL RISK OF INVESTING IN DERIVATIVES, SUCH AS OPTIONS, IS THAT THE
FLUCTUATIONS IN THEIR VALUES MAY NOT CORRELATE PERFECTLY WITH THE OVERALL
SECURITIES MARKETS AND MAY BE MORE SENSITIVE TO INTEREST RATE CHANGES AND MARKET
PRICE FLUCTUATIONS THAN OTHERS. FURTHER, THE USE OF OPTIONS MAY INCREASE MARKET
RISK FOR THE FUND.
SECTOR FUNDS MAY EXPERIENCE GREATER SHORT-TERM PRICE VOLATILITY THAN MORE
DIVERSIFIED EQUITY FUNDS, AND ARE MOST SUITABLE FOR THE AGGRESSIVE PORTION OF AN
INVESTMENT PORTFOLIO.
INVESTMENT HOLDINGS
STATEMENT OF INVESTMENT SECURITIES
INVESCO COUNSELOR SERIES FUNDS, INC.
AUGUST 31, 2003
SHARES OR
NUMBER OF
% DESCRIPTION CONTRACTS VALUE
- --------------------------------------------------------------------------------
ADVANTAGE FUND
93.59 COMMON STOCKS
0.74 ADVERTISING
Lamar Advertising Class A Shrs(a) 1,500 $ 50,115
Omnicom Group 600 46,860
================================================================================
96,975
1.07 AGRICULTURAL PRODUCTS
Bunge Ltd 4,600 139,196
================================================================================
1.76 AIR FREIGHT & COURIERS
Expeditors International of Washington 1,900 71,649
FedEx Corp 1,100 73,810
UTI Worldwide 2,300 83,950
================================================================================
229,409
0.83 APPAREL RETAIL
Pacific Sunwear of California(a) 3,200 108,160
================================================================================
0.77 APPLICATION SOFTWARE
Mercury Interactive(a) 1,900 83,391
Software HOLDRs Trust(b) 500 16,800
================================================================================
100,191
0.61 BIOTECHNOLOGY
Biotech HOLDRs Trust(a)(b) 600 79,104
================================================================================
0.55 BREWERS
Anheuser-Busch Cos 1,400 72,156
================================================================================
1.24 BROADCASTING - RADIO/TV
Grupo Televisa SA de CV Sponsored ADR
Representing 20 Ord Participation
Certificates 2,100 78,750
Univision Communications Class A Shrs(a) 2,200 82,478
================================================================================
161,228
0.98 CABLE & SATELLITE OPERATORS
Cablevision Systems New York Group(a) 3,100 62,465
Comcast Corp Class A Shrs(a) 2,300 65,228
================================================================================
127,693
0.39 COMMUNICATIONS EQUIPMENT
Corning Inc(a) 6,200 51,150
================================================================================
2.54 COMPUTER HARDWARE
Dell Inc(a) 4,600 150,098
International Business Machines 2,200 180,422
================================================================================
330,520
0.38 CONSUMER ELECTRONICS
Harman International Industries 500 49,825
================================================================================
SHARES OR
NUMBER OF
% DESCRIPTION CONTRACTS VALUE
- --------------------------------------------------------------------------------
1.59 CONSUMER FINANCE
Providian Financial(a) 7,300 $ 74,825
SLM Corp 3,300 132,594
================================================================================
207,419
1.14 DATA PROCESSING SERVICES
First Data 1,900 72,960
Paychex Inc 2,100 75,600
================================================================================
148,560
3.03 DIVERSIFIED BANKS
Bank of America 2,100 166,425
First Tennessee National 1,900 78,565
FleetBoston Financial 2,700 79,893
Wells Fargo & Co 1,400 70,196
================================================================================
395,079
4.17 DIVERSIFIED FINANCIAL SERVICES
American Express 1,600 72,080
Citigroup Inc 8,200 355,470
Goldman Sachs Group 1,300 115,037
================================================================================
542,587
0.41 DIVERSIFIED METALS & MINING
Freeport McMoRan Copper & Gold Class B Shrs 1,800 54,000
================================================================================
0.33 DRUG RETAIL
Walgreen Co 1,300 42,341
================================================================================
2.32 ELECTRIC UTILITIES
Ameren Corp 900 38,250
American Electric Power 1,400 39,634
Cleco Corp 2,300 35,972
DPL Inc 2,500 38,625
DQE Inc 2,400 35,400
Hawaiian Electric Industries 900 38,682
Southern Co 1,300 36,894
Xcel Energy 2,600 38,090
================================================================================
301,547
0.91 FOOD DISTRIBUTORS
United Natural Foods(a) 4,000 119,000
================================================================================
1.00 FOOD RETAIL
Dean Foods(a) 4,500 130,725
================================================================================
0.29 GAS UTILITIES
Nicor Inc 1,100 37,389
================================================================================
2.64 HEALTH CARE EQUIPMENT
Becton, Dickinson & Co 800 29,232
C.R. Bard 500 33,500
Medtronic Inc 1,800 89,244
Quality Systems(a) 2,000 86,040
Varian Medical Systems(a) 600 33,510
SHARES OR
NUMBER OF
% DESCRIPTION CONTRACTS VALUE
- --------------------------------------------------------------------------------
Zimmer Holdings(a) 1,400 $ 72,436
================================================================================
343,962
1.02 HOME IMPROVEMENT RETAIL
Home Depot 2,600 83,616
Lowe's Cos 900 49,374
================================================================================
132,990
1.83 HOUSEHOLD PRODUCTS
Colgate-Palmolive Co 1,300 71,864
Procter & Gamble 1,900 165,851
================================================================================
237,715
1.77 HYPERMARKETS & SUPER CENTERS
Wal-Mart Stores 3,900 230,763
================================================================================
3.41 INDUSTRIAL CONGLOMERATES
General Electric 12,600 372,582
3M Co 500 71,235
================================================================================
443,817
0.81 INSURANCE BROKERS
Marsh & McLennan 2,100 105,000
================================================================================
1.33 INTEGRATED OIL & GAS
Murphy Oil 3,000 173,190
================================================================================
0.48 INTEGRATED TELECOMMUNICATION SERVICES
Deutsche Telekom AG Sponsored ADR
Representing Ord Shrs(a) 4,400 63,096
================================================================================
0.60 INTERNET RETAIL
eBay Inc(a) 1,400 77,742
================================================================================
3.30 INTERNET SOFTWARE & SERVICES
j2 Global Communications(a) 1,000 62,720
Netease.com Inc Sponsored ADR Representing
100 Ord Shrs(a) 2,100 106,911
SINA Corp(a) 3,900 121,212
Sohu.com Inc(a) 2,200 66,044
United Online(a) 1,900 72,409
================================================================================
429,296
2.22 INVESTMENT ADVISER/BROKER DEALER SERVICES
Legg Mason 1,300 93,379
Lehman Brothers Holdings 1,500 98,595
Morgan Stanley 2,000 97,580
================================================================================
289,554
0.40 INVESTMENT COMPANIES
iShares Trust NASDAQ Biotechnology Index
Fund(a) 700 51,674
================================================================================
1.05 LEISURE FACILITIES
InterActiveCorp(a) 3,700 136,937
================================================================================
0.61 LEISURE PRODUCTS
Marvel Enterprises(a) 3,600 78,840
================================================================================
SHARES OR
NUMBER OF
% DESCRIPTION CONTRACTS VALUE
- --------------------------------------------------------------------------------
1.25 MANAGED HEALTH CARE
Aetna Inc 1,300 $ 74,100
UnitedHealth Group 1,800 88,974
================================================================================
163,074
1.47 MOVIES & ENTERTAINMENT
AOL Time Warner(a) 5,900 96,524
Viacom Inc Class B Shrs 2,100 94,500
================================================================================
191,024
1.60 MULTI-LINE INSURANCE
American International Group 3,500 208,495
================================================================================
1.74 NETWORKING EQUIPMENT
Cisco Systems(a) 11,800 225,970
================================================================================
0.74 OFFICE ELECTRONICS
Zebra Technologies Class A Shrs(a) 1,800 96,516
================================================================================
0.80 OIL & GAS DRILLING
Nabors Industries Ltd(a) 800 32,120
Noble Corp(a) 2,000 72,360
================================================================================
104,480
0.95 OIL & GAS EQUIPMENT & SERVICES
Halliburton Co 2,800 67,704
Weatherford International Ltd(a) 1,500 56,370
================================================================================
124,074
2.74 OIL & GAS EXPLORATION & PRODUCTION
Apache Corp 2,095 144,513
Devon Energy 1,300 67,275
Pogo Producing 1,600 73,536
Talisman Energy 1,500 71,175
================================================================================
356,499
0.72 PACKAGED FOODS & MEATS
General Mills 1,400 64,904
SYSCO Corp 900 28,314
================================================================================
93,218
0.54 PERSONAL PRODUCTS
Avon Products 1,100 70,510
================================================================================
12.78 PHARMACEUTICALS
Alcon Inc 1,800 94,050
Barr Laboratories(a) 650 43,986
Bristol-Myers Squibb 2,000 50,740
Eli Lilly & Co 1,100 73,183
Eon Labs(a) 1,200 40,524
Forest Laboratories(a) 800 37,600
Johnson & Johnson 4,500 223,110
Merck & Co 3,600 181,152
Pfizer Inc 9,300 278,256
Pharmaceutical HOLDRs Trust(b) 1,600 118,128
Pharmaceutical Resources(a) 2,000 111,880
SHARES OR
NUMBER OF
% DESCRIPTION CONTRACTS VALUE
- --------------------------------------------------------------------------------
Taro Pharmaceutical Industries Ltd(a) 1,400 $ 75,586
Teva Pharmaceutical Industries Ltd
Sponsored ADR Representing Ord Shrs 3,600 211,363
Wyeth 2,900 124,265
================================================================================
1,663,823
1.44 PROPERTY & CASUALTY INSURANCE
SAFECO Corp 1,800 64,908
Travelers Property Casualty Class A Shrs 3,800 58,482
W.R. Berkley 1,950 64,506
================================================================================
187,896
1.23 PUBLISHING & PRINTING
Gannett Co 700 54,894
Knight-Ridder Inc 800 54,288
Tribune Co 1,100 50,875
================================================================================
160,057
0.35 RAILROADS
Norfolk Southern 2,400 45,696
================================================================================
0.76 SEMICONDUCTOR EQUIPMENT
Applied Materials(a) 4,600 99,360
================================================================================
6.44 SEMICONDUCTORS
Intel Corp 11,500 329,130
Maxim Integrated Products 2,900 130,239
OmniVision Technologies(a) 1,400 62,146
Semiconductor HOLDRs Trust(b) 6,600 246,774
Xilinx Inc(a) 2,300 70,932
================================================================================
839,221
1.67 SOFT DRINKS
Coca-Cola Co 1,700 73,984
Cott Corp(a) 3,100 72,044
PepsiCo Inc 1,600 71,264
================================================================================
217,292
0.33 SPECIALTY CHEMICALS
Eastman Chemical 1,200 42,972
================================================================================
3.52 SYSTEMS SOFTWARE
Microsoft Corp 13,500 358,020
Oracle Corp(a) 7,900 100,962
================================================================================
458,982
0.53 TRUCKING
C.H. Robinson Worldwide 1,800 68,346
================================================================================
3.47 WIRELESS TELECOMMUNICATION SERVICES
AT&T Wireless Services(a) 16,200 139,644
Vimple-Communications Sponsored ADR
Representing 3/4 Ord Shr(a) 800 43,128
Vodafone Group PLC Sponsored ADR Representing
10 Ord Shrs 6,500 118,950
SHARES OR
NUMBER OF
% DESCRIPTION CONTRACTS VALUE
- --------------------------------------------------------------------------------
Wireless HOLDRs Trust(b) 3,700 $ 150,331
================================================================================
452,053
TOTAL COMMON STOCKS (COST $10,481,119) 12,188,388
================================================================================
4.69 SHORT-TERM INVESTMENTS - INVESTMENT COMPANIES
INVESCO Treasurer's Series Money Market
Reserve Fund(c) 0.934% (Cost $610,770) 610,770 610,770
================================================================================
0.40 OPTIONS PURCHASED - PUTS
0.40 SECURITIES INDEX OPTIONS
S&P 500 Index, 12/20/2003
950, $25.50 15 33,225
995, $38.00 5 18,225
================================================================================
TOTAL OPTIONS PURCHASED (COST $89,060) 51,450
================================================================================
98.68 TOTAL INVESTMENTS AT VALUE
(COST $11,180,949) 12,850,608
================================================================================
1.32 OTHER ASSETS LESS LIABILITIES 172,098
================================================================================
100.00 NET ASSETS AT VALUE $ 13,022,706
================================================================================
ADVANTAGE GLOBAL HEALTH SCIENCES FUND
106.55 COMMON STOCKS & WARRANTS
17.10 BIOTECHNOLOGY
Amgen Inc(a)(d) 146,900 $ 9,680,710
Biotech HOLDRs Trust(a)(b) 45,400 5,985,536
Chiron Corp(a) 65,400 3,323,628
Exelixis Inc(a) 7,126 51,664
Genentech Inc(a) 92,800 7,368,320
GenoPlex Inc(a)(c)(g) 3,663,120 1
Genzyme Corp-General Division(a) 101,200 4,771,580
Gilead Sciences(a) 64,960 4,332,832
Invitrogen Corp(a) 10,300 594,001
MGI Pharma(a) 90,000 3,473,100
Neurogenetics Inc(a)(g) 67,828 67,828
Orchid BioSciences Warrants(a) (Exp 2004) 179,910 16,192
================================================================================
39,665,392
2.78 HEALTH CARE DISTRIBUTORS
AdvancePCS Class A Shrs(a) 100,800 4,050,144
Express Scripts(a) 37,000 2,397,970
================================================================================
6,448,114
19.80 HEALTH CARE EQUIPMENT
AeroGen Inc(a) 94,896 47,448
Biomet Inc 141,100 4,194,903
Boston Scientific(a) 137,700 8,275,770
C.R. Bard 95,600 6,405,200
Dade Behring Holdings(a) 50,000 1,395,000
Guidant Corp 80,200 4,026,040
Medtronic Inc(e) 116,100 5,756,238
SHARES OR
NUMBER OF
% DESCRIPTION CONTRACTS VALUE
- --------------------------------------------------------------------------------
Sensys Medical Warrants
(Exp 8/2006)(a)(c)(g) 8,264 $ 2
(Exp 9/2006)(a)(c)(g) 3,305 1
(Exp 10/2006)(a)(c)(g) 3,305 1
St Jude Medical(a) 47,220 2,458,745
Stryker Corp 67,600 5,124,080
Varian Medical Systems(a) 58,540 3,269,459
Zimmer Holdings(a) 96,420 4,988,771
================================================================================
45,941,658
8.09 HEALTH CARE FACILITIES
Community Health Systems(a) 107,500 2,471,425
HCA Inc 115,400 4,384,046
Health Management Associates Class A Shrs 151,200 3,368,736
Triad Hospitals(a) 135,200 4,380,480
Universal Health Services Class B Shrs(a) 83,900 4,176,542
================================================================================
18,781,229
0.37 HEALTH CARE SUPPLIES
Smith & Nephew PLC 133,900 859,893
================================================================================
17.82 MANAGED HEALTH CARE
Aetna Inc 119,400 6,805,800
Anthem Inc(a) 94,800 6,939,360
Caremark Rx(a) 138,900 3,490,557
Coventry Health Care(a) 68,300 3,206,002
Health Net(a) 103,000 3,278,490
Mid Atlantic Medical Services(a) 62,600 3,071,156
UnitedHealth Group 134,700 6,658,221
WellChoice Inc(a) 40,000 1,160,800
WellPoint Health Networks(a) 86,500 6,747,000
================================================================================
41,357,386
40.59 PHARMACEUTICALS
Abbott Laboratories 139,600 5,625,880
Alcon Inc 150,800 7,879,300
Allergan Inc 63,600 5,053,656
AstraZeneca PLC Sponsored ADR
Representing Ord Shrs 145,000 5,749,250
Barr Laboratories(a) 58,950 3,989,146
Bristol-Myers Squibb 157,100 3,985,627
Eli Lilly & Co 73,400 4,883,302
Eon Labs(a) 1,100 37,147
GlaxoSmithKline PLC Sponsored ADR
Representing 2 Ord Shrs 62,400 2,422,992
Johnson & Johnson(e) 116,760 5,788,961
Medco Health Solutions(a) 112,107 2,993,257
Merck & Co 86,300 4,342,616
Novartis AG Sponsored ADR Representing
Ord Shrs 102,700 3,796,819
Pfizer Inc 156,608 4,685,711
Pharmaceutical Resources(a) 104,400 5,840,136
Predix Pharmaceuticals Warrants(a)(c)(g)
(Exp 2004) 80,010 1
Ranbaxy Laboratories Ltd Sponsored GDR
Representing Ord Shrs 125,000 2,911,250
SHARES OR
NUMBER OF
% DESCRIPTION CONTRACTS VALUE
- --------------------------------------------------------------------------------
Roche Holdings AG Ltd Genusscheine 73,200 $ 5,605,441
Shire Pharmaceuticals Group PLC
Sponsored ADR
Representing 3 Ord Shrs 207,700 4,829,025
Teva Pharmaceutical Industries Ltd
Sponsored ADR
Representing Ord Shrs 154,340 9,061,610
Wyeth 109,600 4,696,360
================================================================================
94,177,487
TOTAL COMMON STOCKS & WARRANTS
(COST $208,541,565) 247,231,159
================================================================================
15.50 PREFERRED STOCKS & WARRANTS
2.77 BIOTECHNOLOGY
Cellomics Inc, Pfd, Series AA Shrs(a)(g) 8,869,999 2,413,058
Cengent Therapeutics, Conv Pfd, Series
D Shrs(a)(g) 650,407 4,000,003
Ingenex Inc, Conv Pfd, Series B Shrs(a)(g) 103,055 1
================================================================================
6,413,062
7.25 HEALTH CARE DISTRIBUTORS
Dexcom Inc, Pfd
Series B Shrs(a)(c)(g) 694,444 1,597,221
Series C Shrs(a)(c)(g) 434,782 1,000,000
Locus Discovery, Pfd
Series C Shrs(a)(c)(g) 2,000,000 8,000,000
Series D Shrs(a)(c)(g) 588,235 2,352,940
NeoThermia Corp, Pfd, Series C
Shrs(a)(c)(g) 2,439,026 2,463,416
Syrrx Inc, Pfd, Series C Shrs(a)(g) 615,385 1,415,386
================================================================================
16,828,963
5.36 HEALTH CARE EQUIPMENT
Adeza Biomedical, Pfd
Series 2 Shrs(a)(c)(g) 416,666 1,929,164
Series 5 Shrs(a)(c)(g) 97,192 449,999
AFx Inc, Pfd, Series AA Shrs(a)(c)(g) 1,500,000 705,000
Athersys Inc, Conv Pfd, Class F
Shrs(a)(g) 416,667 5,416,667
Masimo Corp, Pfd
Series C Shrs(a)(g) 125,000 1,000,000
Series F Shrs(a)(g) 15,909 174,999
Optimize Inc, Pfd
Series 4 Shrs(a)(c)(g) 7,000,000 1
Series 5 Shrs(a)(c)(g) 3,211,336 1
Warrants (to purchase Pfd Shrs)(a)(c)(g)
(Exp 2007) 676,105 1
Scimagix Inc, Pfd, Series C Shrs(a)(g) 641,635 1,350,000
Sensys Medical, Pfd
Series C Shrs(a)(c)(g) 586,748 488,368
Series D Shrs(a)(c)(f)(g) 369,967 923,808
UltraGuide Inc, Pfd
Series E Shrs(a)(g) 445,050 1
Series F Shrs(a)(g) 50,000 1
================================================================================
12,438,010
0.12 PHARMACEUTICALS
Predix Pharmaceuticals, Conv Pfd, Series A
Shrs(a)(c)(g) 32,418 286,362
================================================================================
SHARES OR
NUMBER OF
% DESCRIPTION CONTRACTS VALUE
- --------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS & WARRANTS
(COST $56,792,726) $ 35,966,397
================================================================================
0.01 SHORT-TERM INVESTMENTS - INVESTMENT COMPANIES
INVESCO Treasurer's Series Money Market
Reserve Fund(c)
0.934% (Cost $29,726) 29,726 29,726
================================================================================
122.06 TOTAL INVESTMENTS AT VALUE
(COST $265,364,017) 283,227,282
================================================================================
(22.06) OTHER ASSETS LESS LIABILITIES (51,195,016)
================================================================================
100.00 NET ASSETS AT VALUE $ 232,032,266
================================================================================
(a) Security is non-income producing.
(b) HOLDRs - Holding Company Depositary Receipts.
(c) Security is an affiliated company (Note 4).
(d) A portion of the security is pledged with broker as collateral for
securities sold short.
(e) A portion of the security has been designated as collateral for remaining
commitments to purchase additional shares of Sensys Medical, Pfd, Series D
Shrs.
(f) The Advantage Global Health Sciences Fund has remaining commitments of
$333,335 to purchase 133,494 shares of Sensys Medical, Pfd, Series D Shrs,
which are subject to terms of the agreement.
(g) The following are restricted and illiquid securities that are valued at fair
value at August 31, 2003:
SCHEDULE OF RESTRICTED AND ILLIQUID
SECURITIES
VALUE AS A %
ACQUISITION ACQUISITION OF NET ASSETS
DESCRIPTION DATE(S) COST VALUE AT VALUE
- -----------------------------------------------------------------------------------------------------------------
ADVANTAGE GLOBAL HEALTH SCIENCES FUND
Adeza Biomedical, Pfd
Series 2 Shrs 12/21/94 $ 999,998 $ 1,929,164 0.83%
Series 5 Shrs 9/20/01 449,999 449,999 0.19
AFx Inc, Pfd, Series AA Shrs 8/14/98 3,000,000 705,000 0.30
Athersys Inc, Conv Pfd, Class F Shrs 4/17/00 5,000,000 5,416,667 2.34
Cellomics Inc, Pfd, Series AA Shrs 10/2/00 6,999,992 2,413,058 1.04
Cengent Therapeutics (formerly Structural
Bioinformatics), Conv
Pfd, Series D Shrs 3/24/00 4,000,003 4,000,003 1.72
Dexcom Inc, Pfd
Series B Shrs 12/20/00 1,000,000 1,597,221 0.69
Series C Shrs 6/3/02 1,000,000 1,000,000 0.43
GenoPlex Inc 9/15/97-
6/25/98 408,490 1 0.00
Ingenex Inc, Conv Pfd, Series B Shrs 9/27/94 600,000 1 0.00
Locus Discovery, Pfd
Series C Shrs 11/21/00 4,500,000 8,000,000 3.45
Series D Shrs 9/6/01 2,352,940 2,352,940 1.02
Masimo Corp, Pfd
Series C Shrs 10/7/98 1,000,000 1,000,000 0.43
Series F Shrs 9/14/99 174,999 174,999 0.08
NeoThermia Corp, Pfd, Series C Shrs 3/26/01 2,000,001 2,463,416 1.06
Neurogenetics Inc 9/15/97-
6/25/98 202,031 67,828 0.03
SCHEDULE OF RESTRICTED AND ILLIQUID
SECURITIES (CONTINUED)
VALUE AS A %
ACQUISITION ACQUISITION OF NET ASSETS
DESCRIPTION DATE(S) COST VALUE AT VALUE
- -----------------------------------------------------------------------------------------------------------------
ADVANTAGE GLOBAL HEALTH SCIENCES FUND (CONTINUED)
Optimize Inc, Pfd
Series 4 Shrs 8/15/00 $ 7,000,000 $ 1 0.00%
Series 5 Shrs 6/7/02-
10/11/02 1,506,029 1 0.00
Warrants (Exp 2007) 6/27/02-
9/11/02 4 1 0.00
Predix Pharmaceuticals (formerly
Physiome Sciences)
Conv Pfd, Series A Shrs 11/7/97 1,499,993 286,362 0.12
Warrants (Exp 2004) 8/26/03 5 1 0.00
Scimagix Inc, Pfd, Series C Shrs 5/24/01 1,350,000 1,350,000 0.58
Sensys Medical
Pfd, Series C Shrs 2/25/98-
8/31/00 5,934,956 488,368 0.21
Pfd, Series D Shrs 8/16/01-
5/29/02 923,808 923,808 0.40
Warrants
(Exp 8/2006) 10/18/01 2 2 0.00
(Exp 9/2006) 10/5/01 1 1 0.00
(Exp 10/2006) 11/7/01 1 1 0.00
Syrrx Inc, Pfd, Series C Shrs 1/10/01 4,000,003 1,415,386 0.61
UltraGuide Inc, Pfd
Series E Shrs 6/1/01 1,348,502 1 0.00
Series F Shrs 6/1/01 151,500 1 0.00
=================================================================================================================
$ 57,403,257 $ 36,034,231 15.53%
=================================================================================================================
SECURITIES SOLD SHORT
DESCRIPTION SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------
ADVANTAGE GLOBAL HEALTH SCIENCES FUND
Genta Inc (45,000) $ (721,800)
Schering-Plough Corp (200,000) (3,038,000)
=================================================================================================================
$ (3,759,800)
=================================================================================================================
See Notes to Financial Statements
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
INVESCO COUNSELOR SERIES FUNDS, INC.
AUGUST 31, 2003
ADVANTAGE
ADVANTAGE GLOBAL HEALTH
FUND SCIENCES FUND
- -----------------------------------------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost $11,180,949 $ 265,364,017
================================================================================================================
At Value $12,850,608 $ 283,227,282
Foreign Currency (Cost $790 and $0, respectively) 766 0
Deposits with Broker for Securities Sold Short 169,727 5,430,789
Receivables:
Investment Securities Sold 0 4,086,108
Fund Shares Sold 5,056 184,570
Dividends and Interest 10,876 239,390
Prepaid Expenses and Other Assets 18,151 75,293
================================================================================================================
TOTAL ASSETS 13,055,184 293,243,432
================================================================================================================
LIABILITIES
Securities Sold Short at Value
(Proceeds $0 and $3,468,018, respectively) 0 3,759,800
Payables:
Custodian 0 111,501
Investment Securities Purchased 0 2,633,831
Securities Sold Short Purchased 0 1,595,250
Fund Shares Repurchased 12,408 884,798
Borrowings on Line of Credit 0 52,000,000
Accrued Distribution Expenses
Class A 1,286 63,290
Class B 4,914 645
Class C 2,305 282
Accrued Expenses and Other Payables 11,565 161,769
================================================================================================================
TOTAL LIABILITIES 32,478 61,211,166
================================================================================================================
NET ASSETS AT VALUE $13,022,706 $ 232,032,266
================================================================================================================
NET ASSETS
Paid-in Capital(a) $54,848,638 $ 280,532,572
Accumulated Undistributed Net Investment Loss (2,067) (187,267)
Accumulated Undistributed Net Realized Loss on
Investment Securities, Securities Sold Short,
Foreign Currency Transactions and Option Contracts (43,493,500) (65,443,705)
Net Appreciation of Investment Securities,
Securities Sold Short, Foreign Currency Transactions
and Option Contracts 1,669,635 17,130,666
================================================================================================================
NET ASSETS AT VALUE, Applicable to Shares Outstanding $13,022,706 $ 232,032,266
================================================================================================================
NET ASSETS AT VALUE:
Class A $ 4,420,441 $ 230,955,127
================================================================================================================
Class B $ 5,883,100 $ 761,150
================================================================================================================
Class C $ 2,719,165 $ 315,989
================================================================================================================
STATEMENT OF ASSETS AND LIABILITIES
(CONTINUED)
INVESCO COUNSELOR SERIES FUNDS, INC.
AUGUST 31, 2003
ADVANTAGE
ADVANTAGE GLOBAL HEALTH
FUND SCIENCES FUND
(CONTINUED) (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------
Shares Outstanding
Class A 794,175 17,911,290
Class B 1,068,121 60,360
Class C 496,889 25,743
=================================================================================================================
NET ASSET VALUE PER SHARE:
Class A
Redemption Price per Share $ 5.57 $ 12.89
Offering Price per Share (Maximum sales charge of 5.50%) $ 5.89 $ 13.64
Class B, Offering and Redemption Price per Share $ 5.51 $ 12.61
Class C, Offering and Redemption Price per Share $ 5.47 $ 12.27
=================================================================================================================
(a) The INVESCO Counselor Series Funds, Inc. have 4 billion authorized shares of common stock, par value of $0.01
per share. Of such shares, 600 million have been allocated to Advantage Fund and 600 million to Advantage
Global Health Sciences Fund: 200 million to each Class.
See Notes to Financial Statements
STATEMENT OF OPERATIONS
INVESCO COUNSELOR SERIES FUNDS, INC.
YEAR ENDED AUGUST 31, 2003
ADVANTAGE
ADVANTAGE GLOBAL HEALTH
FUND SCIENCES FUND
- -----------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 138,000 $ 2,201,250
Dividends from Affiliated Investment Companies 976 6
Interest 42,905 221,982
Securities Loaned Income 0 12,432
Foreign Taxes Withheld 0 (39,301)
=================================================================================================================
TOTAL INCOME 181,881 2,396,369
=================================================================================================================
EXPENSES
Investment Advisory Fees 129,351 1,246,546
Distribution Expenses 110,469 303,671
Transfer Agent Fees 101,508 692,847
Administrative Services Fees 16,434 119,204
Custodian Fees and Expenses 20,331 97,418
Directors' Fees and Expenses 9,538 26,078
Interest Expenses 9,451 1,345,715
Professional Fees and Expenses 45,896 91,363
Registration Fees and Expenses
Class A 11,536 23,454
Class B 9,403 4,032
Class C 8,821 4,022
Reports to Shareholders 13,712 135,226
Dividends on Securities Sold Short 6,450 46,950
Other Expenses 6,318 97,534
=================================================================================================================
TOTAL EXPENSES 499,218 4,234,060
Fees and Expenses Absorbed/Reimbursed by Investment Adviser 0 (151,826)
Fees and Expenses Paid Indirectly (189) (1,101)
=================================================================================================================
NET EXPENSES 499,029 4,081,133
=================================================================================================================
NET INVESTMENT LOSS (317,148) (1,684,764)
=================================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities (1,382,040) 1,978,067
Securities Sold Short (463,837) 573,236
Foreign Currency Transactions 0 6,237
Option Contracts 679,597 132,646
=================================================================================================================
Total Net Realized Gain (Loss) (1,166,280) 2,690,186
=================================================================================================================
Change in Net Appreciation/Depreciation of:
Investment Securities 2,210,284 18,204,129
Securities Sold Short 182,137 (1,308,095)
Foreign Currency Transactions 0 536,204
Option Contracts (69,655) 0
=================================================================================================================
Total Change in Net Appreciation/Depreciation 2,322,766 17,432,238
=================================================================================================================
NET GAIN ON INVESTMENT SECURITIES,
SECURITIES SOLD SHORT, FOREIGN CURRENCY
TRANSACTIONS AND OPTION CONTRACTS 1,156,486 20,122,424
=================================================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 839,338 $ 18,437,660
=================================================================================================================
See Notes to Financial Statements
STATEMENT OF CHANGES IN NET ASSETS
ADVANTAGE FUND
YEAR ENDED AUGUST 31
- --------------------------------------------------------------------------------
2003 2002
OPERATIONS
Net Investment Loss $ (317,148) $ (706,293)
Net Realized Loss (1,166,280) (13,398,937)
Change in Net Appreciation/Depreciation 2,322,766 (277,010)
===============================================================================
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS 893,338 (14,382,240)
===============================================================================
DISTRIBUTIONS TO SHAREHOLDERS -- RETURN OF CAPITAL
Class A (33,820) 0
Class B (40,746) 0
Class C (22,060) 0
===============================================================================
TOTAL DISTRIBUTIONS (96,626) 0
===============================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares
Class A 584,185 733,419
Class B 45,695 422,729
Class C 40,217 758,204
Reinvestment of Distributions
Class A 23,565 0
Class B 17,179 0
Class C 14,885 0
===============================================================================
725,726 1,914,352
Amounts Paid for Repurchases of Shares
Class A (3,163,734) (22,297,404)
Class B (2,343,100) (6,961,035)
Class C (2,076,063) (8,037,898)
===============================================================================
(7,582,897) (37,296,337)
NET DECREASE IN NET ASSETS
FROM FUND SHARE TRANSACTIONS (6,857,171) (35,381,985)
===============================================================================
TOTAL DECREASE IN NET ASSETS (6,114,459) (49,764,225)
NET ASSETS
Beginning of Period 19,137,165 68,901,390
===============================================================================
End of Period (Including Accumulated Undistributed
Net Investment Loss of ($2,067)
and ($1,590), respectively) $13,022,706 $ 19,137,165
===============================================================================
See Notes to Financial Statements
STATEMENT OF CHANGES IN NET ASSETS
(CONTINUED)
ADVANTAGE GLOBAL HEALTH SCIENCES FUND
YEAR ENDED AUGUST 31
- --------------------------------------------------------------------------------
2003 2002
OPERATIONS
Net Investment Loss $ (1,684,764) $ (6,135,983)
Net Realized Gain (Loss) 2,690,186 (65,759,719)
Change in Net Appreciation/Depreciation 17,432,238 (2,856,747)
===============================================================================
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS 18,437,660 (74,752,449)
===============================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares
Class A 217,446,224 2,135,388
Class B 118,288 1,089,786
Class C 1,679,546 1,166,849
===============================================================================
219,244,058 4,392,023
Amounts Paid for Repurchases of Shares
Class A (279,916,500) (131,628,708)
Class B (282,279) (272,668)
Class C (1,869,781) (844,055)
===============================================================================
(282,068,560) (132,745,431)
NET DECREASE IN NET ASSETS
FROM FUND SHARE TRANSACTIONS (62,824,502) (128,353,408)
===============================================================================
(44,386,842) (203,105,857)
TOTAL DECREASE IN NET ASSETS
NET ASSETS
Beginning of Period 276,419,108 479,524,965
===============================================================================
End of Period (Including Accumulated
Undistributed Net Investment Loss of
($187,267) and ($181,959), respectively) $232,032,266 $ 276,419,108
===============================================================================
See Notes to Financial Statements
STATEMENT OF CASH FLOWS
ADVANTAGE GLOBAL HEALTH SCIENCES FUND
YEAR ENDED
AUGUST 31
- --------------------------------------------------------------------------------
2003
INCREASE (DECREASE) IN CASH
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPEATING ACTIVITIES:
Dividends and Interest Income Received, Net of Foreign Taxes
Withheld $ 2,419,090
Expenses Paid (4,194,021)
Purchases Net of Sales of Short-Term Investments (29,726)
Purchases of Investment Securities (381,607,280)
Sales of Investment Securities 440,030,705
Proceeds of Securiites Sold Short 55,168,899
Cover for Securities Sold Short (95,814,684)
Realized Gain from Foreign Currency Transactions 6,237
Realized Gain from Written Option Contracts 132,646
Change in Deposits with Broker for Securities Sold Short 40,434,526
Change in Prepaid Expenses and Other Assets 18,770
Change in Other Investments (Note 5) 10,440,000
Change in Payable for Securities Loaned (10,440,000)
================================================================================
Net Cash Flows From Operating Activities 56,565,162
================================================================================
CASH FLOWS USED FOR FINANCING ACTIVITIES:
Net Borrowings on Line of Credit 6,500,000
Sales of Fund Shares 219,081,395
Repurchases of Fund Shares (282,157,730)
Increase in Payable to Custodian 11,173
================================================================================
Net Cash Flows Used for Financing Activities (56,565,162)
================================================================================
Net Increase in Cash 0
Cash at Beginning of Year 0
================================================================================
Cash at End of Year $ 0
================================================================================
RECONCILIATION OF NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
TO NET CASH FLOWS FROM OPERATING ACTIVITIES
Net Increase in Net Assets from Operations $ 18,437,660
================================================================================
Decrease in Investment Securities and Securities Sold Short 61,238,596
Net Realized Gain on Investment Securities, Securities Sold Short,
Option Contracts and Foreign Currency Transactions (2,690,186)
Change in Appreciation/Depreciation of Investment Securities,
Securities Sold Short and Foreign Currency Transactions (17,432,238)
Increase in Receivable for Investment Securities Sold (3,253,477)
Decrease in Payable for Investment Securities Purchased (413,171)
Decrease in Dividends and Interest Receivable 22,721
Decrease in Deposits with Broker for Securities Sold Short 40,434,526
Decrease in Prepaid Expenses and Other Assets 18,770
Increase in Accrued Expenses and Other Payables 112,888
Decrease in Payable for Securities Sold Short Purchased (39,910,927)
================================================================================
Total Adjustments 38,127,502
================================================================================
Net Cash Flows From Operating Activities $ 56,565,162
================================================================================
Supplemental disclosure of cash flow information: Interest Paid $1,345,503.
See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS
INVESCO COUNSELOR SERIES FUNDS, INC.
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Counselor
Series Funds, Inc. is incorporated in Maryland and presently consists of two
separate Funds: Advantage Fund and Advantage Global Health Sciences Fund
(individually the "Fund" and collectively, the "Funds"). The investment
objectives of the Funds are: to seek aggressive capital appreciation for
Advantage Fund and to seek capital appreciation through investments in the
health science related business sectors for Advantage Global Health Sciences
Fund. INVESCO Counselor Series Funds, Inc. is registered under the Investment
Company Act of 1940 (the "Act") as an open-end management investment company.
Effective September 30, 2003, Advantage Global Health Sciences Fund will change
its name to Advantage Health Sciences Fund. Effective October 1, 2003, the name
of INVESCO Counselors Series Funds, Inc. will change to A I M Counselor Series
Funds, Inc.
Income, expenses (other than those attributable to a specific class) and
realized and unrealized gains and losses are allocated daily to each class of
shares based on the relative proportion of net assets represented by such class.
Operating expenses directly attributable to a specific class are charged against
operations of that class. Class A shares are sold with a front-end sales charge
ranging from 5.50% to 2.00% of the offering price on purchases of less than
$1,000,000. Class B shares and Class C shares are subject to a contingent
deferred sales charge paid by the redeeming shareholder. Class B shares convert
to Class A shares after eight years along with a pro rata portion of its
reinvested dividends and distributions.
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
As disclosed in the Statement of Investment Securities and the accompanying
Schedule of Restricted and Illiquid Securities for the Advantage Global Health
Sciences Fund, securities valued at $36,034,231 (15.53 percent of net assets),
have been estimated by the Board of Directors in the absence of readily
available market values. Those estimated values may differ significantly from
the values that would have been used had a ready market for the securities
existed, and the differences could be material.
A. SECURITY VALUATION -- Domestic (U.S.) equity securities traded on national
securities exchanges or in the over-the-counter market are valued at the last
sales price at the close of the regular trading day on the exchange (generally
4:00 p.m. Eastern time) where such securities are primarily traded. If last
sales prices are not available, securities are valued at the closing bid price
for the regular trading day as obtained from one or more dealers making a market
for such securities or by a pricing service approved by the Fund's board of
directors.
Foreign equity securities are valued at the closing price. The closing price is
designated by the principal stock exchange in the country in which the
securities are traded. In the event that closing prices are not available for
foreign securities, a snapshot of prices will be obtained from the principal
stock exchange at or prior to the close of the New York Stock Exchange. Foreign
currency exchange rates are determined daily prior to the close of the New York
Stock Exchange.
Option Contracts are valued at the average of the closing bid and ask prices
from the exchange with the highest trading volume on that particular day.
Investments in shares of investment companies are valued at the net asset value
of the respective fund as calculated each day.
If market quotations or pricing service valuations are not readily available, or
events or cicumstances that may affect the value of portfolio securities are
identified between the closing of their principal markets and the time that the
net asset value per share is determined, securities are valued at fair value as
determined in good faith under procedures established by the Fund's board of
directors. Restricted and illiquid securities are valued in accordance with
procedures established by the Fund's board of directors.
Short-term securities are stated at amortized cost (which approximates market
value) if maturity is 60 days or less at the time of purchase, or market value
if maturity is greater than 60 days.
Assets and liabilities initially expressed in terms of foreign currencies are
translated into U.S. dollars at the prevailing market rates as quoted by one or
more banks or dealers on the date of valuation.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Security transactions
are accounted for on the trade date and dividend income is recorded on the
ex-dividend date. Interest income, which may be comprised of stated coupon rate,
market discount, original issue discount or amortized premium, is recorded on
the accrual basis. Cost is determined on the specific identification basis.
Certain dividends from foreign securities will be recorded as soon as the Fund
is informed of the dividend if such information is obtained subsequent to the
ex-dividend date. Investment income received from foriegn sources may be subject
to foreign withholding taxes. Dividend and interest income is shown gross of
foreign withholding taxes in the accompanying financial statements. Income and
expenses on foreign securities are translated into U.S. dollars at rates of
exchange prevailing when accrued. The cost of foreign securities is translated
into U.S. dollars at the rates of exchange prevailing when such securities are
acquired. The receivable for investment securities sold for Advantage Global
Health Sciences Fund is net of an allowance for doubtful accounts of $440,974
for Norian Corp, Conv Pfd, Series D Shares.
Each Fund may invest in securities issued by other INVESCO investment companies
that invest in short-term debt securities and seek to maintain a net asset value
of one dollar per share. During the year ended August 31, 2003, Advantage and
Advantage Global Health Sciences Funds invested in INVESCO Treasurer's Series
Money Market Reserve Fund. The income from this investment is recorded in the
Statement of Operations.
The Fund may have elements of risk due to investments in specific industries or
foreign issuers located in a specific country. Such investments may subject the
Fund to additional risks resulting from future political or economic conditions
and/or possible impositions of adverse foreign governmental laws or currency
exchange restrictions. Net realized and unrealized gain or loss from investment
securities includes fluctuations from currency exchange rates and fluctuations
in market value.
The Fund's use of short-term forward foreign currency contracts may subject it
to certain risks as a result of unanticipated movements in foreign exchange
rates. The Fund does not hold short-term forward foreign currency contracts for
trading purposes. The Fund may hold foreign currency in anticipation of settling
foreign security transactions and not for investment purposes.
Restricted securities held by a Fund may not be sold except in exempt
transactions or in a public offering registered under the Securities Act of
1933. The risk of investing in such securities is generally greater than the
risk of investing in the securities of widely held, publicly traded companies.
Lack of a secondary market and resale restrictions may result in the inability
of a Fund to sell a security at a fair price and may substantially delay the
sale of the security which each Fund seeks to sell. In addition, these
securities may exhibit greater price volatility than securities for which
secondary markets exist.
C. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions to
shareholders are recorded by the Fund on the ex-dividend/distribution date. The
Fund distributes net realized capital gains, if any, to its shareholders at
least annually, if not offset by capital loss carryovers.
D. TAX INFORMATION -- The Fund has complied, and continues to comply, with the
provisions of the Internal Revenue Code applicable to regulated investment
companies and, accordingly, has made or intends to make sufficient distributions
of net investment income and net realized capital gains, if any, to relieve it
from all federal and state income taxes and federal excise taxes.
Dividends paid by the Fund from net investment income and distributions of net
realized short-term capital gains are, for federal income tax purposes, taxable
as ordinary income to shareholders. The tax composition of distributions from
ordinary income, long-term capital gains and of the ordinary income
distributions declared for the year ended August 31, 2003, was a tax return of
capital of $96,626 for Advantage Fund.
The tax components of the Fund at August 31, 2003 include:
COST OF GROSS TAX GROSS TAX NET TAX
INVESTMENTS FOR UNREALIZED UNREALIZED APPRECIATION
FUND TAX PURPOSES APPRECIATION DEPRECIATION ON INVESTMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
Advantage Fund $ 11,231,344 $ 1,814,984 $ 195,720 $ 1,619,264
Advantage Global Health Sciences Fund 270,543,942 43,365,886 30,682,546 12,683,340
ACCUMULATED CUMULATIVE EFFECT
CAPITAL LOSS OF OTHER
FUND CARRYOVERS TIMING DIFFERENCES
- ------------------------------------------------------------------------------------------------------------------------------------
Advantage Fund $ (43,292,395) $ (152,777)
Advantage Global Health Sciences Fund (60,263,780) (187,267)
The primary difference between book and tax appreciation/depreciation is wash
sale loss deferrals. The net tax appreciation/depreciation on investments
excludes the effect of securities sold short, written options activity,
allowance for doubtful accounts and foreign currency transactions.
Capital loss carryovers expire in the years 2010 and 2011. To the extent future
capital gains and income are offset by capital loss carryovers and deferred
post-October 31 losses, such gains and income will not be distributed to
shareholders. The cumulative effect of other timing differences includes
deferred post-October 31 capital losses deferred director's fees and foreign
currency transactions. Deferred post-October 31 capital losses are: Advantage
Fund $188,320.
Due to inherent differences in the recognition of income, expenses and realized
gain/losses under accounting principles generally accepted in the United States
and Federal income tax purposes, permanent and temporary differences between
book and tax basis reporting have been identified and appropriately reclassed on
the Statement of Assets and Liabilities. Advantage and Advantage Global Health
Sciences Funds reclassified $413,195 and $1,710,850, respectively, of net
investment losses to paid-in capital.
E. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund enters into short-term forward
foreign currency contracts in connection with planned purchases or sales of
securities as a hedge against fluctuations in foreign exchange rates pending the
settlement of transactions in foreign securities. The Fund may also use
derivatives in an attempt to improve performance, although there is no guarantee
that it will be successful in that effort. A forward foreign currency contract
is an agreement between contracting parties to exchange an amount of currency at
some future time at an agreed upon rate. These contracts are marked-to-market
daily and the related appreciation or depreciation of the contracts is presented
in the Statement of Assets and Liabilities. Any realized gain or loss incurred
by the Fund upon the sale of securities is included in the Statement of
Operations.
F. OPTION CONTRACTS -- The Fund may buy or write put and call options, including
securities index options, on portfolio securities for hedging purposes or as a
substitute for an investment. The Funds generally invest in options to hedge
against adverse movements in the value of portfolio holdings.
When an option is written, the Fund receives a premium and becomes obligated to
sell or purchase the underlying security at a fixed price, upon exercise of the
option. In writing an option, the Fund bears the market risk of an unfavorable
change in the price of the security underlying the written option. Exercise of
an option written by the Fund could result in the Fund buying or selling a
security at a price different from the current market value.
When an option is exercised, the proceeds on sales for a written call option,
the purchase cost for a written put option, or the cost of the security for a
purchased put or call option is adjusted by the amount of premium received or
paid.
Securities designated to cover outstanding written options are noted in the
Statement of Investment Securities where applicable. Options written are
reported as a liability in the Statement of Assets and Liabilities. Gains and
losses are reported in the Statement of Operations.
The risk in writing a call option is that the Fund gives up the opportunity for
profit if the market price of the security increases and the option is
exercised. The risk in writing a put option is that the Fund may incur a loss if
the market price of the security decreases and the option is exercised. The risk
in buying an option is that the Fund pays a premium whether or not the option is
exercised. The use of such instruments may involve certain additional risks as a
result of unanticipated movements in the market. A lack of correlation between
the value of an instrument underlying an option and the asset being hedged, or
unexpected adverse price movements, could render the Fund's hedging strategy
unsuccessful. In addition, there can be no assurance that a liquid secondary
market will exist for any option purchased or sold.
Written option activity for the year ended August 31, 2003, was as follows:
CALL OPTIONS PUT OPTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER AMOUNT NUMBER AMOUNT
OF OPTIONS OF PREMIUMS OF OPTIONS OF PREMIUMS
- ------------------------------------------------------------------------------------------------------------------------------------
ADVANTAGE FUND
Options outstanding at August 31, 2002 (48) $ 19,005 (642) $ 101,108
Options written (5,291) 289,327 (9,661) 736,527
Options closed or expired 4,745 (268,650) 10,191 (823,491)
Options exercised 594 (39,682) 112 (14,144)
Options outstanding at August 31, 2003 0 $ 0 0 $ 0
ADVANTAGE GLOBAL HEALTH SCIENCES FUND
Options outstanding at August 31, 2002 0 $ 0
Options written (1,000) 132,646
Options closed or expired 1,000 (132,646)
Options outstanding at August 31, 2003 0 $ 0
G. SHORT SALES -- The Advantage Fund and Advantage Global Health Sciences Fund
engage in short sales as part of their normal investment activities. Short sales
are transactions in which the Fund sells a security it does not own in
anticipation of an expected decline in the price of that security. The Fund will
incur a loss as a result of the short sale if the price of the borrowed security
increases between the date of the short sale and the date on which the Fund
replaces such security. The Fund will realize a gain if there is a decline in
price of the security between those dates, if the decline exceeds the cost of
borrowing the security and other transaction costs. There can be no assurance
that the Fund will be able to close out a short position at any particular time.
Although the potential for gain is limited to the difference between the price
at which the Fund sold the security short and the cost of borrowing the
security, its potential for loss could be unlimited because there is no limit to
the replacement cost of the borrowed security. Until the Fund replaces a
borrowed security, it will maintain at all times cash or liquid securities or
other collateral with a broker or other custodian in an amount equal or higher
than the current market value of the security sold short. The Fund receives
interest on the collateral it deposits. Short sales are fully collateralized by
other securities which are noted in the Statement of Investment Securities. The
liability account is valued to reflect the current value of the securities sold
short and is presented in the Statement of Assets and Liabilities. Dividend
expense on short sales is recorded on the ex-dividend date.
H. CASH FLOWS -- The cash amount shown in the Statement of Cash Flows is the
amount reported as cash in the Statement of Assets and Liabilities and
represents cash on hand in its Custodian bank account and does not include any
short-term investments or deposits with broker for securities sold short at
August 31, 2003.
I. EXPENSES -- Each Fund or Class bears expenses incurred specifically on its
behalf and, in addition, each Fund or Class bears a portion of general expenses,
based on the relative net assets of each Fund or Class.
Under an agreement between each Fund and the Fund's Custodian, certain Custodian
Fees and Expenses are reduced by credits granted by the Custodian from any
temporarily uninvested cash. Such credits are included in Fees and Expenses Paid
Indirectly in the Statement of Operations.
NOTE 2 -- INVESTMENT ADVISORY AND OTHER AGREEMENTS. INVESCO Funds Group, Inc.
("IFG") serves as the Fund's investment adviser. As compensation for its
services to the Funds, IFG receives an investment advisory fee which is accrued
daily at the applicable rate and paid monthly. The fee for Advantage and
Advantage Global Health Sciences Funds is based on the annual rate of 1.50% (the
"Base Fee") of average daily net assets. For these Funds the Base Fee will be
adjusted, on a monthly basis (i) upward at a rate of 0.20%, on a pro rata basis,
for each percentage point that investment performance of the Class A shares of
the Fund exceeds the sum of 2.00% plus the investment record of the Index (the
"Index", the Russell 3000 Index for Advantage Fund and the Morgan Stanley Health
Care Product Index for Advantage Global Health Sciences Fund), or (ii) downward
at the rate of 0.20%, on a pro rata basis, for each percentage point that the
investment record of the Index less 2.00% exceeds the investment performance of
the Class A shares of the Fund (the "Fee Adjustment"). The maximum or minimum
Fee Adjustment, if any, will be 1.00% annually. Therefore, the maximum annual
fee payable to IFG will be 2.50% of average daily net assets and the minimum
annual fee will be 0.50% for Advantage and Advantage Global Health Sciences
Funds.
A master distribution plan and agreement for each Class of shares pursuant to
Rule 12b-1 of the Act (the "Plans") provides for compensation of certain
promotional and other sales related costs to A I M Distributors, Inc. ("ADI" or
the "Distributor") effective July 1, 2003, and prior to July 1, 2003 to INVESCO
Distributors, Inc. ("IDI"), both are subsidiaries of AMVESCAP PLC. Class A
shares of the Fund pay compensation to the Distributor at a rate of 0.35% of
annual average net assets. During any period that Class A shares of the Fund are
closed to new investors, the Fund will reduce this payment for Class A shares
from 0.35% to 0.25% per annum. Class B and Class C shares of the Fund pay
compensation to the Distributor at a rate of 1.00% of annual average net assets.
Of these amounts, the Distributor may pay a service fee of 0.25% of the average
net assets of the Class A, Class B or Class C shares to selected dealers and
financial institutions who furnish continuing personal shareholder services to
their customers who purchase and own the applicable class of shares of the Fund.
Any amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose caps on the total sales charges,
including asset-based sales charges, that may be paid by the respective class.
Any unreimbursed expenses the Distributor incurs with respect to each Fund in
any fiscal year cannot be recovered in subsequent years. For the year ended
August 31, 2003, amounts paid to the Distributor were as follows:
CLASS CLASS CLASS
FUND A B C
- --------------------------------------------------------------------------------------------
Advantage Fund $ 18,281 $ 62,108 $ 34,630
Advantage Global Health Sciences Fund 229,023 8,191 4,526
Distribution Expenses for each class as presented in the Statement of Operations
for the year ended August 31, 2003 were as follows:
CLASS CLASS CLASS
FUND A B C
- -------------------------------------------------------------------------------------------
Advantage Fund $ 17,503 $ 60,108 $ 32,858
Advantage Global Health Sciences Fund 291,229 8,070 4,372
IFG receives a transfer agent fee from each Class at an annual rate of $22.50
per shareholder account, or, where applicable, per participant in an omnibus
account, per year. IFG may pay such fee for participants in omnibus accounts to
affiliates or third parties. Aggregate fees collected for such omnibus accounts
for the year ended August 31, 2003 amounted to $29,621 for Advantage Fund and
$72,775 for Advantage Global Health Sciences Fund, respectively, of which
$17,666 and $33,390, respectively, was retained by IFG. The fee is paid monthly
at one-twelfth of the annual fee and is based upon the actual number of accounts
in existence during each month. Effective October 1, 2003, A I M Fund Services,
Inc. will assume all responsibilities under the existing Transfer Agency
Agreement. Transfer agent fees for each class as presented in the Statement of
Operations for the year ended August 31, 2003 were as follows:
CLASS CLASS CLASS
FUND A B C
- --------------------------------------------------------------------------------------------
Advantage Fund $ 48,008 $ 30,801 $ 22,699
Advantage Global Health Sciences Fund 687,223 3,049 2,575
In accordance with an Administrative Services Agreement, each Fund pays IFG an
annual fee of $10,000, plus an additional amount computed at an annual rate of
0.045% of average net assets to provide administrative, accounting and clerical
services. The fee is accrued daily and paid monthly.
IFG has voluntarily agreed to absorb and assume certain fees and expenses
incurred by Advantage Global Health Sciences Fund. For the year ended August 31,
2003, total fees and expenses voluntarily abosrbed for Advantage Global Health
Sciences Fund were: Class A $151,119, Class B $490 and Class C $217,
respectively.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the year ended
August 31, 2003, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were as follows:
FUND PURCHASES SALES
- --------------------------------------------------------------------------------
Advantage Fund $ 24,666,269 $ 31,513,724
Advantage Global Health Sciences Fund 381,194,109 440,657,471
There were no purchases or sales of U.S. Government securities.
NOTE 4 -- TRANSACTIONS WITH AFFILIATES AND AFFILIATED COMPANIES. Certain of the
Funds' officers and directors are also officers and directors of IFG, ADI or
IDI. At August 31, 2003, 5.66% of the outstanding shares of Advantage Fund -
Class A shares were held by affiliated parties.
Each Fund has adopted an unfunded retirement plan covering all independent
directors of the Fund who will have served as an independent director for at
least five years at the time of retirement. Benefits under this plan are based
on an annual rate as defined in the plan agreement, as amended March 1, 2001.
Effective November 8, 2002, the plan provides that a director, prior to
retirement, may elect to convert amounts accrued under this plan into a new
deferred retirement plan and all eligible directors have elected to convert to
the new deferred retirement plan.
Pension expenses for the year ended August 31, 2003, included in Directors' Fees
and Expenses in the Statement of Operations, and unfunded accrued pension costs
and pension liability included in Prepaid Expenses and Accrued Expenses,
respectively, in the Statement of Assets and Liabilities were as follows:
PENSION PENSION
FUND EXPENSES LIABILITY
- --------------------------------------------------------------------------------
Advantage Fund $ 543 $ 566
Advantage Global Health Sciences Fund 5,700 3,786
The independent directors have contributed to a deferred fee agreement plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of the INVESCO Funds. The
deferred amounts may be invested in the shares of any of the INVESCO Funds,
excluding the INVESCO Variable Investment Funds.
An affiliated company represents ownership by a Fund of at least 5% of the
voting securities of the issuer or may be affiliated with other INVESCO
investment companies during the period, as defined in the Act. A summary of the
transactions during the year ended August 31, 2003, in which the issuer was an
affiliate of the Fund, is as follows:
PURCHASES/OTHER TRANSACTIONS SALES/OTHER TRANSACTIONS
---------------------------------------------------------- REALIZED GAIN
SHARES OR SHARES OR (LOSS) ON
PRINCIPAL PRINCIPAL INVESTMENT VALUE AT
AFFILIATE AMOUNT COST AMOUNT PROCEEDS SECURITIES 8/31/2003
- ------------------------------------------------------------------------------------------------------------------------------------
ADVANGATE FUND
INVESCO Treasurer's
Series Money
Market Reserve
Fund 1,470,786 $ 1,470,786 860,016 $ 860,016 $ 0 $ 610,770
ADVANTAGE GLOBAL
HEALTH SCIENCES FUND
Adeza Biomedical, Pfd
Series 2 Shrs -- -- -- -- -- $ 1,929,164
Series 5 Shrs -- -- -- -- -- 449,999
AFx Inc, Pfd
Series AA Shrs -- -- -- -- -- 705,000
Dexcom Inc, Pfd
Series B Shrs -- -- -- -- -- 1,597,221
Series C Shrs -- -- -- -- -- 1,000,000
GenoPlex Inc -- -- -- -- -- 1
INVESCO Treasurer's
Series Money
Market Reserve
Fund 119,952,949 $119,952,949 130,363,223 $ 130,363,223 $ 0 29,726
Locus Discovery, Pfd
Series C Shrs -- -- -- -- -- 8,000,000
Series D Shrs -- -- -- -- -- 2,352,940
PURCHASES/OTHER TRANSACTIONS SALES/OTHER TRANSACTIONS
-------------------------------------------------------- REALIZED GAIN
SHARES OR SHARES OR (LOSS) ON
PRINCIPAL PRINCIPAL INVESTMENT VALUE AT
AFFILIATE AMOUNT COST AMOUNT PROCEEDS SECURITIES 8/31/2003
- ------------------------------------------------------------------------------------------------------------------------------------
ADVANTAGE GLOBAL
HEALTH SCIENCES FUND (CONTINUED)
NeoThermia Corp
Pfd, Series C Shrs -- -- -- -- -- $ 2,463,416
Optimize Inc
Conv Bridge Notes, 8.000%
12/3/2002 -- -- $ 232,929 $ 232,929 $ 0 --
2/5/2003 -- -- $ 144,308 144,308 0 --
3/11/2003 $ 172,153 $ 172,153 $ 172,153 172,153 0 --
Pfd
Series C Shrs -- -- 2,631,579 7,000,000 0 --
Series 4 Shrs 7,000,000 7,000,000 -- -- -- 1
Series 5 Shrs 3,211,336 1,509,160 -- -- -- 1
Warrants (to purchase Pfd
Shrs) (Exp 2007) 676,106 5 4 4 0 1
Predix Pharmaceuticals (formerly
Physiome Sciences)
Conv Pfd, Series A Shrs 32,418 1,499,994 -- -- -- 286,362
Conv Pfd, Series B Shrs -- -- 909,090 1,499,999 0 --
Warrants (Exp 8/2004) 80,010 5 -- -- -- 1
Sensys Medical (formerly
Instrumentation Metrics)
Pfd
Series C Shrs -- -- -- -- -- 488,368
Series D Shrs -- -- -- -- -- 923,808
Warrants
(Exp 8/2006) -- -- -- -- -- 2
(Exp 9/2006) -- -- -- -- -- 1
(Exp 10/2006) -- -- -- -- -- 1
Warrants (to purchase Pfd,
Series D Shrs) (Exp 2003) -- -- 89,205 1 0 --
====================================================================================================================================
$20,226,013
====================================================================================================================================
Dividend income from INVESCO Treasurer's Series Money Market Reserve Fund is
disclosed in the Statement of Operations. No dividend or interest income was
received from any other of these affiliated companies.
NOTE 5 -- SECURITIES LOANED. The Funds have entered into a securities lending
agreement with the custodian. Under the terms of the agreement, the Funds
receive income, recorded monthly, after deduction of other amounts payable to
the custodian or to the borrower from lending transactions. In exchange for such
fees, the custodian is authorized to loan securities on behalf of the Funds,
against receipt of collateral at least equal in value to the value of the
securities loaned. Cash collateral is invested by the custodian in the INVESCO
Treasurer's Series Money Market Reserve Fund or securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities. The Fund bears the
risk of any deficiency in the amount of collateral available for return to a
borrower due to a loss in an approved investment. The securities loaned income
is recorded in the Statement of Operations. Of the securities lending income
received for Advantage Global Health Sciences Fund $12,432 was received from
INVESCO Treasurer's Series Money Market Reserve Fund. During the year ended
August 31, 2003, there were no such securities lending arrangements for
Advantage Fund.
NOTE 6 -- INTERFUND BORROWING AND LENDING. Each Fund is party to an interfund
lending agreement between each Fund and other INVESCO sponsored mutual funds,
which permits it to borrow or lend cash, at rates beneficial to both the
borrowing and lending funds. Loans totaling 10% or more of a borrowing Fund's
total assets are collateralized at 102% of the value of the loan; loans of less
than 10% are unsecured. Pursuant to each Fund's prospectus, Advantage Fund and
Advantage Global Health Sciences Fund may borrow up to 33 1/3% of its total
assets for temporary or emergency purposes and for purchasing securities, or by
engaging in reverse repurchase agreements with any party. During the year ended
August 31, 2003, there were no such borrowings and/or lendings for any Fund.
NOTE 7 -- LINES OF CREDIT. The Funds have available a Line of Credit Facility
("LOC"), from a bank, to be used for temporary or emergency purposes to fund
redemptions of investor shares or to borrow for the purpose of investment
activities. The LOC permits borrowings to a maximum of 33 1/3% of the net assets
at value for the Funds. The Funds agree to pay periodic fees and interest on the
unpaid principal balance at prevailing market rates as defined in the LOC
agreement. During the year ended August 31, 2003, Advantage and Advantage Global
Health Sciences Funds borrowed cash at a weighted average rate ranging from
1.96% to 2.16%, respectively, and interest expense amounted to $9,451 and
$1,345,503, respectively, for purposes of investing. At August 31, 2003,
Advantage Global Health Sciences Fund had outstanding lines of credit at an
estimtated interest rate of 1.79%. The amount of the borrowing and the related
accrued interest are presented in the Statement of Assets and Liabilities.
NOTE 8 -- CONTINGENT DEFERRED SALES CHARGE ("CDSC"). Class A shares may charge a
1.00% CDSC if a shareholder purchased $1,000,000 or more and redeemed these
shares within 18 months from the date of purchase. Effective November 15, 2002,
qualified plans investing in Class A shares may pay a 1% CDSC if a shareholder
redeemed these shares within 12 months from the date of purchase. A CDSC is
charged by Class B shares on redemptions or exchanges of shares at a maximum of
5.00% beginning at time of purchase to 0.00% at the beginning of the seventh
year. A 1.00% CDSC is charged by Class C shares on redemptions or exchanges held
thirteen months or less. Effective August 18, 2003, the 1.00% CDSC charged by
Class C shares for redemptions or exchanges held thirteen months or less will
change to twelve months or less. Shares acquired through reinvestment of
dividends or other distributions are not charged a CDSC. The CDSC may be reduced
or certain sales charge exceptions may apply. The CDSC is paid by the redeeming
shareholder and therefore it is not an expense of the Fund. For the year ended
August 31, 2003, the Distributor received the following CDSC from Class A, Class
B and Class C shareholders:
FUND CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
Advantage Fund $ 7 $ 153,163 $ 1,575
Advantage Global Health Sciences Fund 115 12,241 315
NOTE 9 -- SHARE INFORMATION. Changes in fund share transactions during the years
ended August 31, 2003 and 2002 were as follows:
ADVANTAGE GLOBAL
ADVANTAGE FUND HEALTH SCIENCES FUND
YEAR ENDED AUGUST 31 YEAR ENDED AUGUST 31
- ------------------------------------------------------------------------------------------------------------------------------------
2003 2002 2003 2002
Shares Sold
Class A 113,212 96,825 17,876,194 154,981
Class B 9,263 59,324 9,839 72,936
Class C 8,095 103,048 139,927 83,681
Shares Issued from
Reinvestment of Distributions
Class A 5,079 0 0 0
Class B 3,743 0 0 0
Class C 3,250 0 0 0
====================================================================================================================================
142,642 259,197 18,025,960 311,598
Shares Repurchased
Class A (640,073) (3,207,346) (23,191,673) (9,799,857)
Class B (473,557) (1,056,351) (24,387) (20,982)
Class C (427,645) (1,224,817) (157,490) (61,927)
====================================================================================================================================
(1,541,275) (5,488,514) (23,373,550) (9,882,766)
NET DECREASE
IN FUND SHARES (1,398,633) (5,229,317) (5,347,590) (9,571,168)
====================================================================================================================================
NOTE 10 -- ADDITIONAL INFORMATION. On June 9, 2003, the board of directors for
Advantage Fund ("Selling Fund") unanimously approved an Agreement and Plan of
Reorganization (the "Plan") pursuant to which the Selling Fund, would transfer
all of its assets and liabilities to A I M Opportunities Fund III, a series of
A I M Special Opportunities Funds. The Plan has proposals for a new investment
advisory agreement and a new administrative services agreement with A I M
Advisors, Inc. The Plan is also seeking approval for a redomestication of the
Funds, changing the domicile and form of organization of the Funds (which are
currently organized as Maryland corporations) to a Delaware statutory trust. The
Plan is more fully described in a proxy statement presented for shareholder
consideration on August 25, 2003.
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of
INVESCO Counselor Series Funds, Inc.
In our opinion, the accompanying statements of assets and liabilities, including
the statement of investment securities, and the related statements of
operations, of changes in net assets and of cash flows and the financial
highlights present fairly, in all material respects, the financial position of
the Advantage Fund and the Advantage Global Health Sciences Fund (constituting
INVESCO Counselor Series Funds, Inc., and hereafter referred to as the "Funds")
at August 31, 2003, the results of each of their operations for the year then
ended, the changes in each of their net assets for each of the two years in the
period then ended, the cash flows for Advantage Global Health Sciences Fund for
the year then ended and the financial highlights for each of the periods
indicated, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fundsi management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at August 31, 2003 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where securities purchased had not been received, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Denver, Colorado
October 9, 2003
FINANCIAL HIGHLIGHTS
ADVANTAGE FUND -- CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED AUGUST 31 AUGUST 31
- ------------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a)
PER SHARE DATA
Net Asset Value-- Beginning of Period $ 5.13 $ 7.70 $ 10.24 $ 10.00
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Income (Loss)(c) (0.11) (0.09) (0.04) 0.00
Net Gains or (Losses) on Securities (Both Realized and Unrealized) 0.58 (2.48) (2.02) 0.24
====================================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS 0.47 (2.57) (2.06) 0.24
====================================================================================================================================
Less Dividends and Distributions 0.00 0.00 0.48 0.00
Tax Return of Capital 0.03 0.00 0.00 0.00
====================================================================================================================================
TOTAL DISTRIBUTIONS 0.03 0.00 0.48 0.00
====================================================================================================================================
Net Asset Value -- End of Period $ 5.57 $ 5.13 $ 7.70 $ 10.24
====================================================================================================================================
TOTAL RETURN(d) 9.35% (33.38%) (21.20%) 2.40%(e)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 4,420 $ 6,753 $ 34,086 $ 41,413
Ratio of Expenses to Average Net Assets (including dividends on
securities sold short)(f) 3.42% 2.50% 2.51% 1.82%(g)
Ratio of Expenses to Average Net Assets (excluding dividends on
securities sold short)(f) 3.38% 2.34% 2.41% 1.82%(g)
Ratio of Net Investment Income (Loss) to Average Net Assets (2.15%) (1.35%) (0.26%) 3.28%(g)
Portfolio Turnover Rate 174% 961%(h) 1,713%(h) 5%(e)
(a) From August 25, 2000, inception of Class, to August 31, 2000.
(b) The per share information was computed based on average shares for the years ended August 31, 2003, 2002 and 2001.
(c) Net Investment Income aggregated less than $0.01 on a per share basis for the period ended August 31, 2000.
(d) The applicable sales charge is not included in the Total Return calculation.
(e) Based on operations for the period shown and, accordingly, is not representative of a full year.
(f) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian
fees).
(g) Annualized.
(h) Portfolio Turnover is greater than most funds due to the investment style of the Fund.
FINANCIAL HIGHLIGHTS
ADVANTAGE FUND -- CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED AUGUST 31 AUGUST 31
- ------------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 5.08 $ 7.64 $ 10.24 $ 10.00
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Income (Loss)(c) (0.10) (0.12) (0.03) 0.00
Net Gains or (Losses) on Securities (Both Realized and Unrealized) 0.56 (2.44) (2.09) 0.24
====================================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS 0.46 (2.56) (2.12) 0.24
====================================================================================================================================
Less Dividends and Distributions 0.00 0.00 0.48 0.00
Tax Return of Capital 0.03 0.00 0.00 0.00
====================================================================================================================================
TOTAL DISTRIBUTIONS 0.03 0.00 0.48 0.00
====================================================================================================================================
Net Asset Value -- End of Period $ 5.51 $ 5.08 $ 7.64 $ 10.24
====================================================================================================================================
TOTAL RETURN(d) 9.24% (33.51%) (21.83%) 2.40%(e)
RATIOS
Net Assets-- End of Period ($000 Omitted) $ 5,883 $ 7,762 $ 19,292 $ 10,878
Ratio of Expenses to Average Net Assets
(including dividends on securities sold short)(f) 3.41% 2.88% 3.45% 2.56%(g)
Ratio of Expenses to Average Net Assets
(excluding dividends on securities sold short)(f) 3.36% 2.73% 3.31% 2.56%(g)
Ratio of Net Investment Income (Loss) to Average Net Assets (2.13%) (1.75%) (1.23%) 2.53%(g)
Portfolio Turnover Rate 174% 961%(h) 1,713%(h) 5%(e)
(a) From August 25, 2000, inception of Class, to August 31, 2000.
(b) The per share information was computed based on average shares for the years ended August 31, 2003 and 2002.
(c) Net Investment Income aggregated less than $0.01 on a per share basis for the period ended August 31, 2000.
(d) The applicable CDSC is not included in the Total Return calculation.
(e) Based on operations for the period shown and, accordingly, is not representative of a full year.
(f) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian
fees).
(g) Annualized.
(h) Portfolio Turnover is greater than most funds due to the investment style of the Fund.
FINANCIAL HIGHLIGHTS
ADVANTAGE FUND-- CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED AUGUST 31 AUGUST 31
- ------------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 5.06 $ 7.63 $ 10.24 $ 10.00
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)(b) (0.11) (0.09) (0.05) 0.00
Net Gains or (Losses) on Securities (Both Realized and Unrealized) 0.55 (2.48) (2.08) 0.24
====================================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS 0.44 (2.57) (2.13) 0.24
====================================================================================================================================
Less Dividends and Distributions 0.00 0.00 0.48 0.00
Tax Return of Capital 0.03 0.00 0.00 0.00
====================================================================================================================================
TOTAL DISTRIBUTIONS 0.03 0.00 0.48 0.00
====================================================================================================================================
Net Asset Value -- End of Period $ 5.47 $ 5.06 $ 7.63 $ 10.24
====================================================================================================================================
TOTAL RETURN(c) 8.81% (33.68%) (21.94%) 2.40%(d)
RATIOS
Net Assets-- End of Period ($000 Omitted) $ 2,719 $ 4,622 $ 5,523 $ 8,482
Ratio of Expenses to Average Net Assets
(including dividends on securities sold short)(e) 3.75% 3.02% 3.61% 2.57%(f)
Ratio of Expenses to Average Net Assets
(excluding dividends on securities sold short)(e) 3.71% 2.86% 3.47% 2.57%(f)
Ratio of Net Investment Income (Loss) to Average Net Assets (2.48%) (1.90%) (1.39%) 2.53%(f)
Portfolio Turnover Rate 174% 961%(g) 1,713%(g) 5%(d)
(a) From August 25, 2000, inception of Class, to August 31, 2000.
(b) Net Investment Income aggregated less than $0.01 on a per share basis for the period ended August 31, 2000.
(c) The applicable CDSC is not included in the Total Return calculation.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian
fees).
(f) Annualized
(g) Portfolio Turnover is greater than most funds due to the investment style of the Fund.
FINANCIAL HIGHLIGHTS
ADVANTAGE GLOBAL HEALTH SCIENCES FUND -- CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED AUGUST 31 AUGUST 31 YEAR ENDED OCTOBER 31
- ------------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001(a) 2000 1999 1998
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 11.84 $ 14.57 $ 24.25 $ 17.96 $ 21.08 $ 21.25
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss(c) (0.00) (0.00) (0.12) (0.13) (0.02)(d) (0.00)
Net Gains or (Losses) on Securities (Both
Realized and Unrealized) 1.05 (2.77) (6.19) 8.83 0.99(d) 3.76
====================================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS 1.05 (2.77) (6.31) 8.70 0.97 3.76
====================================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 3.44 2.41 4.09 3.93
====================================================================================================================================
REDEMPTION FEES -- 0.04 0.07 -- -- --
====================================================================================================================================
Net Asset Value -- End of Period $ 12.89 $ 11.84 $ 14.57 $ 24.25 $ 17.96 $ 21.08
====================================================================================================================================
TOTAL RETURN -- NAV 8.87%(e) (18.74%)(e) (28.88%)(e)(f) 52.72% 4.90% 20.74%
TOTAL RETURN -- SHARE PRICE -- -- -- 40.75%(g) 4.74%(g) 40.29%(g)
RATIOS
Net Assets -- End of Period ($000 Omitted) $230,955 $275,037 $478,876 $938,494 $678,030 $586,263
Ratio of Expenses to Average Net Assets
(including dividends on securities sold
short)(h)(i) 1.67% 2.35% 1.60%(k) 1.16% 1.20% 1.21%
Ratio of Expenses to Average Net Assets
(excluding dividends on securities sold
short)(h)(j) 1.65% 2.33% 1.55%(k) -- -- --
Ratio of Net Investment Loss to Average
Net Assets(i) (0.68%) (1.52%) (0.79%)(k) (0.62%) (0.13%) (0.17%)
Portfolio Turnover Rate 125% 127% 183%(f) 196% 129% 87%
(a) From November 1, 2000 to August 31, 2001.
(b) The per share information was computed based on average shares for the period ended August 31, 2001 and the years ended October
31, 2000 and 1999.
(c) Net Investment Loss aggregated less than $0.01 on a per share basis for the years ended August 31, 2003 and 2002 and the year
ended October 31, 1998.
(d) Per share data includes an additional 7,601,529 shares attributed to the Rights Offering at June 21, 1999.
(e) The applicable sales charge is not included in the Total Return calculation.
(f) Based on operations for the period shown and, accordingly, is not representative of a full year.
(g) Total investment return is calculated assuming a purchase of common stock at the current market price on the first day and a
sale at the current market price on the last day of each period reported. Dividends and distributions, if any, were assumed, for
purposes of this calculation, to be reinvested at prices obtained under the Fund's dividend reinvestment plan (prior to Fund's
reorganization on May 16, 2001). Total investment return does not reflect sales charges or brokerage commissions.
(h) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment Advisor, if applicable, which is before any
expense offset arrangements (which may include custodian fees).
(i) Various expenses of the Class were voluntarily absorbed by IFG for the year ended August 31, 2003. If such expenses had not been
voluntarily absorbed, ratio of expenses to average net assets (including dividends on securities sold short) would have been
1.74% and ratio of net investment loss to average net assets (including dividends on securities sold short) would have been
(0.75%).
(j) Various expenses of the Class were voluntarily absorbed by IFG for the year ended August 31, 2003. If such expenses had not been
voluntarily absorbed, ratio of expenses to average net assets (excluding dividends on securities sold short) would have been
1.72%.
(k) Annualized.
FINANCIAL HIGHLIGHTS
ADVANTAGE GLOBAL HEALTH SCIENCES FUND -- CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED AUGUST 31 AUGUST 31
- ------------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 11.77 $ 14.68 $ 14.35
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.22) (0.11) (0.05)
Net Gains or (Losses) on Securities (Both Realized and Unrealized) 1.06 (2.80) 0.38
====================================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS 0.84 (2.91) 0.33
====================================================================================================================================
Net Asset Value -- End of Period $ 12.61 $ 11.77 $ 14.68
====================================================================================================================================
TOTAL RETURN(c) 7.14% (19.82%) 2.30%(d)
RATIOS
Net Assets-- End of Period ($000 Omitted) $ 761 $ 882 $ 337
Ratio of Expenses to Average Net Assets
(including dividends on securities sold short)(e)(f) 3.27% 3.44% 4.14%(h)
Ratio of Expenses to Average Net Assets
(excluding dividends on securities sold short)(e)(g) 3.25% 3.43% 3.74%(h)
Ratio of Net Investment Loss to Average Net Assets(f) (2.27%) (2.54%) (2.68%)(h)
Portfolio Turnover Rate 125% 127% 183%(i)
(a) From May 16, 2001, inception of Class, to August 31, 2001.
(b) The per share information was computed based on average shares for the period ended August 31, 2001.
(c) The applicable CDSC is not included in the Total Return calculation.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment Advisor, if applicable, which is before any
expense offset arrangements (which may include custodian fees).
(f) Various expenses of the Class were voluntarily absorbed by IFG for the year ended August 31, 2003. If such expenses had not been
voluntarily absorbed, ratio of expenses to average net assets (including dividends on securities sold short) would have been
3.33% and ratio of net investment loss to average net assets (including dividends on securities sold short) would have been
(2.33%).
(g) Various expenses of the Class were voluntarily absorbed by IFG for the year ended August 31, 2003. If such expenses had not been
voluntarily absorbed, ratio of expenses to average net assets (excluding dividends on securities sold short) would have been
3.31%.
(h) Annualized.
(i) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 2000 to August 31, 2001.
FINANCIAL HIGHLIGHTS
ADVANTAGE GLOBAL HEALTH SCIENCES FUND -- CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED AUGUST 31 AUGUST 31
- ------------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 11.57 $ 14.45 $ 14.35
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.46) (0.13) (0.04)
Net Gains or (Losses) on Securities (Both Realized and Unrealized) 1.16 (2.75) 0.14
====================================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS 0.70 (2.88) 0.10
====================================================================================================================================
Net Asset Value -- End of Period $ 12.27 $ 11.57 $ 14.45
====================================================================================================================================
TOTAL RETURN(c) 6.14% (20.00%) 0.70%(d)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 316 $ 501 $ 312
Ratio of Expenses to Average Net Assets
(including dividends on securities sold short)(e)(f) 4.02% 3.54% 4.51%(h)
Ratio of Expenses to Average Net Assets
(excluding dividends on securities sold short)(e)(g) 4.00% 3.52% 3.93%(h)
Ratio of Net Investment Loss to Average Net Assets(f) (3.09%) (2.63%) (2.86%)(h)
Portfolio Turnover Rate 125% 127% 183%(i)
(a) From May 16, 2001, inception of Class, to August 31, 2001.
(b) The per share information was computed based on average shares for the period ended August 31, 2001.
(c) The applicable CDSC is not included in the Total Return calculation.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment Advisor, if applicable, which is before any
expense offset arrangements (which may include custodian fees).
(f) Various expenses of the Class were voluntarily absorbed by IFG for the year ended August 31, 2003. If such expenses had not been
voluntarily absorbed, ratio of expenses to average net assets (including dividends on securities sold short) would have been
4.07% and ratio of net investment loss to average net assets (including dividends on securities sold short) would have been
(3.14%).
(g) Various expenses of the Class were voluntarily absorbed by IFG for the year ended August 31, 2003. If such expenses had not been
voluntarily absorbed, ratio of expenses to average net assets (excluding dividends on securities sold short) would have been
4.05%.
(h) Annualized.
(i) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 2000 to August 31, 2001.
OTHER INFORMATION
UNAUDITED
The table below provides information about each of the Independent and
Interested Directors. Their affiliations represent their principal occupations.
NUMBER OF
FUNDS IN
POSITION(S) HELD WITH FUND
COMPANY, TERM OF COMPLEX OTHER
OFFICE AND LENGTH PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS
NAME, ADDRESS AND AGE OF TIME SERVED* DURING PAST FIVE YEARS* DIRECTOR HELD BY DIRECTOR
- ------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT DIRECTORS
Bob R. Baker Vice Chairman of Consultant (2000-present). 47
37 Castle Pines Dr. N. the Board Formerly, President and Chief
Castle Rock, Colorado (Since 2003) Executive Officer (1988-2000)
of AMC Cancer Research Center,
Age: 67 Denver, Colorado. Until
Mid-December 1988, Vice
Chairman of the Board of First
Columbia Financial
Corporation, Englewood,
Colorado; formerly, Chairman
of the Board and Chief
Executive Officer of First
Columbia Financial
Corporation.
Sueann Ambron, Ph.D. Director Dean of the Business School, 47
University of Colorado (Since 2003) College of Business,
at Denver University of Colorado of
1250 14th Street Denver (2000-present).
Denver, Colorado Formerly, President and Chief
Executive Officer of Avulet,
Age: 58 Inc., Sunnyvale, California
(1998-1999); and formerly Vice
President and General Manager,
Multimedia Services Division,
Motorola, Inc., Schaumburg,
Illinois (1996-1998).
Victor L. Andrews, Ph.D. Director Professor Emeritus, Chairman 47
34 Seawatch Drive Emeritus and Chairman and CFO
Savannah, Georgia of the Roundtable of the
Department of Finance of
Age: 73 Georgia State University; and
President, Andrews Financial
Associates, Inc. (consulting
firm). Formerly, member of the
faculties of the Harvard
Business School; and the Sloan
School of Management of MIT.
Lawrence H. Budner Director Trust Consultant. Formerly, 47
7608 Glen Albens Circle Senior Vice President and
Dallas, Texas Senior Trust Officer of
InterFirst Bank, Dallas,
Age: 73 Texas.
OTHER INFORMATION
UNAUDITED
NUMBER OF
FUNDS IN
POSITION(S) HELD WITH FUND
COMPANY, TERM OF COMPLEX OTHER
OFFICE AND LENGTH PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS
NAME, ADDRESS AND AGE OF TIME SERVED* DURING PAST FIVE YEARS* DIRECTOR HELD BY DIRECTOR
- ------------------------------------------------------------------------------------------------------------------------------------
James T. Bunch Director Co-President and Founder of 47
3600 Republic Plaza (since 2000) Green, Manning & Bunch, Ltd.,
370 Seventeenth Street Denver, Colorado
Denver, Colorado (1988-present); (investment
banking firm); Director,
Age: 60 Policy Studies, Inc. and Van
Gilder Insurance Corporation.
Formerly, General Counsel and
Director of Boettcher &
Company, Denver, Colorado; and
formerly, Chairman and
Managing Partner of Davis,
Graham & Stubbs, Denver,
Colorado.
Gerald J. Lewis Director Chairman of Lawsuit Resolution 47 Director of General
701 "B" Street (since 2000) Services, San Diego, Chemical Group, Inc.,
Suite 2100 California (1987-present). Hampdon, New Hampshire
San Diego, California Formerly, Associate Justice of (1996- present). Director
the California Court of of Wheelabrator
Age: 69 Appeals; and Of Counsel, Technologies, Inc.,
Latham & Watkins, San Diego, Fisher Scientific, Inc.,
California (1987-1997). Henley Manufacturing,
Inc., and California
Coastal Properties, Inc.
John W. McIntyre Director Retired. Trustee of Gables 47
7 Piedmont Center Residential Trust. Trustee and
Suite 100 Chairman of the J.M. Tull
Atlanta, Georgia Charitable Foundation;
Director of Kaiser Foundation
Age: 72 Health Plans of Georgia, Inc.
Formerly, Vice Chairman of the
Board of Directors of The
Citizens and Southern
Corporation and Chairman of
the Board and Chief Executive
Officer of The Citizens and
Southern Georgia Corporation
and The Citizens and Southern
National Bank. Formerly,
Trustee of INVESCO Global
Health Sciences Fund and
Trustee of Employee's
Retirement System of Georgia,
Emory University.
Larry Soll, Ph. D. Director Retired. Formerly, Chairman of 47 Director of Synergen
2358 Sunshine Canyon Dr. (since 1997) the Board (1987-1994), Chief since incorporation in
Boulder, Colorado Executive Officer (1982-1989 1982; Director of Isis
and 1993-1994) and President Pharmaceuticals, Inc.
Age: 61 (1982-1989) of Synergen Inc.;
and formerly, Trustee of
INVESCO Global Health Sciences
Fund.
OTHER INFORMATION
UNAUDITED
NUMBER OF
FUNDS IN
POSITION(S) HELD WITH FUND
COMPANY, TERM OF COMPLEX OTHER
OFFICE AND LENGTH PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS
NAME, ADDRESS AND AGE OF TIME SERVED* DURING PAST FIVE YEARS* DIRECTOR HELD BY DIRECTOR
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED DIRECTORS AND OFFICERS
These directors are "interested persons" of IFG as defined in the Act, and they are interested persons by virtue of the fact that
he/she is an officer or director of IFG, IDI or an affiliate of IFG.
Mark H. Williamson Chairman of the President and Chief Executive 47
4350 South Monaco Street Board (since Officer A I M Investment
Denver, Colorado 1999). Formerly, Management and Chief Executive
President (1998- Officer of the A I M Division
Age: 52 2002); and Chief of AMVESCAP PLC
Executive (2003-present). Formerly,
Officer (1998- Chief Executive Officer,
2002). Managed Products Division,
AMVESCAP PLC (2001-2002).
Formerly, Chairman of the Board
(1998-2002), President
(1998-2002), and Chief
Executive Officer (1998-2002)
of INVESCO Funds Group, Inc.
and of INVESCO Distributors,
Inc. Formerly, Chief Operating
Officer and Chairman of the
Board of INVESCO Global Health
Sciences Fund; formerly,
Chairman and Chief Executive
Officer of NationsBanc
Advisors, Inc.; and formerly,
Chairman of NationsBanc
Investments, Inc.
Raymond R. Cunningham President (2001- President (2001-present) and 47 Director of INVESCO Funds
4350 South Monaco Street present), Chief Chief Executive Officer Group, Inc. and Chairman
Denver, Colorado Executive Officer (2003-present) of INVESCO of the Board of INVESCO
(2003-present) and Funds Group, Inc.; Chairman of Distributors, Inc.
Age: 52 Director (2001- the Board (2003- present),
present). President (2003-present), and
Formerly, Vice Chief Executive Officer
President (2001- (2003-present) of INVESCO
2002). Distributors, Inc. Formerly,
Chief Operating Officer
(2001-2003) and Senior Vice
President (1999-2002) of
INVESCO Funds Group, Inc. and
INVESCO Distributors, Inc.;
and Formerly, Senior Vice
President of GT Global - North
America (1992-1998).
Richard W. Healey Director Senior Vice President of 39 Director of INVESCO Funds
4350 South Monaco Street (since 2000) INVESCO Funds Group, Inc.; Group, Inc. and INVESCO
Denver, Colorado Senior Vice President of Distributors, Inc.
INVESCO Distributors, Inc.
Age: 48 Formerly, Senior Vice
President of GT Global - North
America (1996-1998) and The
Boston Company (1993-1996).
OTHER INFORMATION
UNAUDITED
NUMBER OF
FUNDS IN
POSITION(S) HELD WITH FUND
COMPANY, TERM OF COMPLEX OTHER
OFFICE AND LENGTH PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS
NAME, ADDRESS AND AGE OF TIME SERVED* DURING PAST FIVE YEARS* DIRECTOR HELD BY DIRECTOR
- ------------------------------------------------------------------------------------------------------------------------------------
Glen A. Payne Secretary Senior Vice President, General
4350 South Monaco Street Counsel and Secretary of
Denver, Colorado INVESCO Funds Group, Inc.;
Senior Vice President,
Age: 55 Secretary and General Counsel
of INVESCO Distributors, Inc.
Formerly, Secretary of INVESCO
Global Health Sciences Fund;
General Counsel of INVESCO
Trust Company (1989-1998); and
employee of a U.S. regulatory
agency, Washington, D.C.
(1973-1989).
Ronald L. Grooms Chief Accounting Senior Vice President and Director of INVESCO Funds
4350 South Monaco Street Officer, Chief Treasurer of INVESCO Funds Group, Inc. and INVESCO
Denver, Colorado Financial Officer Group, Inc.; and Senior Vice Distributors, Inc.
and Treasurer President and Treasurer of
Age: 56 INVESCO Distributors, Inc.
Formerly, Treasurer and
Principal Financial and
Accounting Officer of INVESCO
Global Health Sciences Fund;
and Senior Vice President and
Treasurer of INVESCO Trust
Company (1988-1998).
William J. Galvin, Jr. Assistant Senior Vice President and Director of INVESCO Funds
4350 South Monaco Street Secretary Assistant Secretary of INVESCO Group, Inc. and INVESCO
Denver, Colorado Funds Group, Inc.; and Senior Distributors, Inc.
Vice President and Assistant
Age: 47 Secretary of INVESCO
Distributors, Inc. Formerly,
Trust Officer of INVESCO Trust
Company (1995-1998).
Pamela J. Piro Assistant Vice President and Assistant
4350 South Monaco Street Treasurer Treasurer of INVESCO Funds
Denver, Colorado Group, Inc.; and Assistant
Treasurer of INVESCO
Age: 43 Distributors, Inc. Formerly,
Assistant Vice President
(1996-1997).
Tane T. Tyler Assistant Vice President and Assistant
4350 South Monaco Street Secretary General Counsel of INVESCO
Denver, Colorado (since 2002) Funds Group, Inc.
Age: 38
* Except as otherwise indicated, each individual has held the position(s) shown
for at least the last five years.
The Statement of Additional Information ("SAI") includes additional information
about Fund directors and is available, without charge, upon request. To obtain a
free copy of the current SAI, call 1-800-525-8085.
For dividends paid during the fiscal year ended August 31, 2003, the Funds
designate qualified dividend income to the maximum extent allowable.
[INVESCO ICON] INVESCO (R)
1-800-525-8085
1-800-959-4246
Automated AIM Investor Line: 1-800-246-5463
AIMinvestments.com
Effective 7/1/03 A I M Distributors, Inc.,(SM) became the distributor of the
retail INVESCO funds
11 Greenway Plaza, Suite 100, Houston, Texas 77046
This information must be preceded or accompanied by a current prospectus.
ACOU 900526 9/03 I-CSE-AR-1
ITEM 2. CODE OF ETHICS
INVESCO FUNDS GROUP, INC. & INVESCO DISTRIBUTORS, INC.
CODE OF ETHICS AND BUSINESS POLICIES
REVISED JULY 2002
INTRODUCTION
------------
INVESCO's code of ethics and business policies adhere strictly to sound
investment principles and practices and to the highest of ethical standards. Our
policies are intended to ensure full conformity to the rules and regulations of
our regulatory organizations.
The responsibility for following the policies and procedures rests with you, the
employee. While INVESCO has a variety of procedures to oversee compliance, a
conscientious, professional, and ethical attitude on your part will ensure that
we fulfill the rules, regulations and business customs of our industry.
Every attempt has been made to cover all requirements, however, your good
judgment is required for the success of INVESCO's compliance program. You should
be familiar with the procedures and policies in this manual.
Occasionally, questions may arise which cannot be answered through this manual.
In this instance, questions should be directed to the Legal & Compliance
department.
Disciplinary sanctions such as suspension, with or without pay, or termination
of employment may be imposed against any person who fails to adhere to the
policies and procedures set forth in this manual.
On an annual basis, each INVESCO officer, director, and employee will be
required to provide a written certification that he or she has read and
understands the policies in the manual, recognizing that he or she is subject to
the policies. In addition, on an annual basis each INVESCO officer, director,
and employee will be required to certify in writing the disclosure of all
personal securities transactions and reportable accounts.
Questions regarding the contents of this manual should be directed to:
Stephanie Barres, Director Broker Dealer Compliance, ext. 6475
Jim Lummanick, Chief Compliance Officer, ext. 6526
CODE OF ETHICS
--------------
As members of an organization serving the public, all employees are guided in
their actions by the highest ethical and professional standards.
1. The general conduct of all employees must at all times reflect the
professional nature of the business we are in. INVESCO employees are
judicious, accurate, objective and reasonable in dealing with both clients
and other parties. The personal integrity of all employees must be beyond
the slightest shadow of a doubt.
2. All INVESCO personnel must act within the spirit and the letter of all
federal, state, and local laws and regulations pertaining to the securities
business.
3. At all times, the interest of the client has precedence over any personal
interest.
4. All officers, directors and employees shall obtain prior written approval
before placing a securities transaction (as listed in the following INVESCO
policies).
5. INVESCO personnel will not accept compensation of any sort for services,
from any outside source without the permission of the CEO or their
representative.
6. When personal interests conflict with the interests of INVESCO and its
clients, the employee will report the conflict to the Legal & Compliance
department for resolution.
7. Recommendations and actions of INVESCO are confidential and private matters
between INVESCO and its clients. It is INVESCO's policy to prohibit, prior
to general public release, the transmission, distribution or communication
of any information regarding securities transaction of client accounts
except to broker/dealers in the ordinary course of business.
8. No information obtained during the course of employment regarding
particular securities (including reports and recommendations of INVESCO)
may be transmitted, distributed, or communicated to anyone who is not
affiliated with INVESCO. In addition, an employee in possession of this
information may not use this information for their own personal gain.
9. The policies and guidelines set forth in this Code of Ethics must be
strictly adhered to by all INVESCO employees. Severe disciplinary actions,
including dismissal, may be imposed for violations of this Code, including
the guidelines that follow.
FIDUCIARY CONDUCT
-----------------
The following principles will assist us as INVESCO and AMVESCAP employees in
governing our conduct as fiduciaries:
1. AMVESCAP seeks to maintain the same high fiduciary standards throughout the
world, even though those standards may not be legally required, or even
recognized, in some countries.
2. Clients must be provided with timely and accurate information regarding
their accounts.
3. Processes have been established for the proper maintenance, control and
protection of client assets. Fiduciary assets must be segregated from
AMVESCAP assets and property.
4. Fiduciary duties are delegated only when the client consents, and where
permitted by applicable law. Reasonable care, skill and caution must be
exercised in selection of agents and the review of their performance.
5. INVESCO and AMVESCAP are each responsible for making investment decisions
on behalf of clients which conform to the prospectus, contract , or other
controlling document.
6. INVESCO and all employees should seek open and responsive relationships
with the various industry regulators.
GUIDELINES FOR AVOIDING PROHIBITED ACTS
---------------------------------------
INVESCO employees are prohibited from the following ("Prohibited Acts"):
1. Soliciting or recommending purchases, sales or reinvestment in securities
not in accordance with the client's investment objectives and guidelines.
2. Attempting to use their influence to cause any client account to purchase,
sell or retain any securities for the purpose of seeking any form of
personal gain.
3. Warranting the value or price of any security or guaranteeing its future
performance.
4. Promising or representing that an issuer of securities will meet its
obligations or will fulfill its investment or business objectives in the
future.
5. Agreeing to protect a client against loss by repurchasing a security at
some future time.
6. Owning or taking title to any funds or assets of a client.
7. Maintaining a joint brokerage or bank account with any client; sharing any
benefit, profit or loss resulting from securities transactions with any
client; or entering into any business transaction with any client.
8. Borrowing money or securities from any client, regardless of the
relationship between the client and INVESCO representative.
9. Owning, operating, managing or otherwise engaging in or being employed by
any outside business activity on either a full-time or part-time basis
without the prior written approval of the President or CEO or their
representative.
10. Violating or failing to abide by INVESCO's policy designed to detect and
prevent insider trading, and INVESCO policy regarding buying and selling
AMVESCAP shares or ADRs.
11. Entering orders in any account for which there is no client. Any employee
who becomes aware of any conduct which might violate the Prohibited Acts
listed above, any laws or regulations, or improper or unauthorized actions,
should report such conduct to their supervisor. Any questions about the
conduct required by INVESCO should be directed to the Legal & Compliance
department.
NEED-TO-KNOW POLICY
-------------------
THIS POLICY IS TO BE READ IN CONJUNCTION WITH THE INVESCO PERSONAL SECURITIES
TRADING POLICIES.
In conjunction with the policies regarding insider trading and material
information, INVESCO maintains a Need-to-Know Policy. This policy has been
adopted to prevent even the appearance of impropriety.
As INVESCO diversifies its products and services, we must be aware that
potential conflicts may arise. For instance, in the normal course of business
with a retirement plan, INVESCO may receive confidential information about the
plan's company (such as imminent lay-offs, poor earnings, etc.) that may be
material to a portfolio manager holding the stock and trying to determine to buy
or sell the securities.
In consideration of our professional responsibilities, and under law, INVESCO
must not use nonpublic information improperly to benefit INVESCO, a client, or
an individual. INVESCO personnel should always make every effort to avoid even
the appearance of misusing nonpublic information.
In light of this, INVESCO employees who have nonpublic information must not
disclose it to anyone who does not have a "need to know." This policy, also know
as a "Fire Wall," is designed to keep the information confidential. While there
may be times in which trading or other activities must be restricted, reliance
on a successful operating Fire Wall allows INVESCO to minimize such
restrictions. The Fire Wall permits INVESCO personnel in non-affected areas to
continue to engage in activities involving a particular company's securities.
Under the Fire Wall policy, those on the "informed" side of the wall have a
special duty to ensure that appropriate standards or confidentiality are
maintained. For those on the "uninformed" side of the wall, a corresponding duty
exists. All INVESCO personnel are prohibited from making any effort to obtain
nonpublic information that may be in the possession of other parts of the
organization. Again, INVESCO employees who have nonpublic information must not
disclose it to anyone who does not have a need to know.
When material information is communicated, whether to other personnel or to
those outside the organization, the second person is then "brought over the
wall" and is then prohibited from effecting transactions in the concerned
company securities until the information is made public. Therefore, extreme care
should be taken to ensure that they are not put in a position of nonpublic
information about other transactions that might prejudice or inhibit the
appropriate performance of their other functions in their normal area of
operation.
Any questions as to whether a piece of information is material or should not be
communicated should be directed to the Legal & Compliance department of INVESCO.
ANTI-MONEY LAUNDERING
---------------------
The attempted use of financial institutions and instruments to launder money is
a significant problem that has resulted in the passage of strict laws in many
countries. Money laundering attempts to disguise money derived from illegal
activity including drug trafficking, terrorism, organized crime, fraud, and many
other crimes. Money launderers go to great lengths to hide the sources of their
funds. Among the most common stratagems are placing cash in legitimate financial
institutions (such as mutual funds), layering between numerous financial
institutions, and integrating the laundered proceeds back into the economy as
apparently legitimate funds.
INVESCO maintains strict policies regarding this matter. Such policies are
outlined in the Supervisory Procedures Manual and should be reviewed for
compliance with such procedures. The manual may be obtained through the Legal &
Compliance Department.
AML Policy
----------
ANTI-TRUST
----------
The laws of many countries are designed to protect consumers from illegal
competitive actions such as price fixing and dividing markets. It is AMVESCAP's
policy and practice to compete based on the merits of our products and services.
We do not fix or control prices with competitors, divide up territories or
markets, limit the production or sale of products, boycott certain suppliers or
customers, unfairly control or restrict trade in any way, restrict a
competitor's marketing practices, or disparage a competitor. We should never
discuss products, pricing or markets with competitors with the intent to fix
prices or divide markets.
INTERNATIONAL TRADE CONTROLS
----------------------------
From time to time, various countries may impose restrictions upon the ability of
businesses in their jurisdiction to engage in commerce with designated
individuals, countries or companies. These laws are commonly referred to as
boycotts or trade embargoes.
Similarly, many countries contribute the names of criminal or terrorist
organizations or individuals to a common database and require financial
institutions to screen customer lists against the database as part of their
"Know Your Customer" obligations. We must be aware of and, where appropriate,
adhere to any such restrictions.
GIFTS AND GRATUITIES
--------------------
This policy is in compliance with the National Association of Securities Dealers
Regulation, Inc. (NASDR) Conduct Rule 3060 (a), which states:
No officer, director, or employee of INVESCO shall directly or indirectly accept
in any one-year gifts, gratuities or favors in excess of $100 per individual per
year from any one broker/dealer without the prior written approval of the Legal
& Compliance Department.
In connection with the retail sale or distribution of shares of the INVESCO
Funds products (retail, variable, etc.), no officer director, or employee
covered by this policy may offer or pay to any broker/dealer anything of
material value over $50, and no broker/dealer may solicit or accept anything of
material value (over $50). See NASDR Conduct Rules 2820 & 2830.
Gifts or gratuities of any amount to any fiduciary of an existing or prospective
ERISA account, or any associated person thereof, should be pre-approved in
writing by the Legal & Compliance Department. The U.S. Department of Labor (DOL)
has specific regulations regarding this issue which may necessitate a review for
individual clients.
Lavish or frequent entertainment may be considered a gift.
NASDR Rules require that the receipt of a gift or the giving of a gift must be
documented. Recordkeeping for gifts received is maintained in the Legal &
Compliance Department. Recordkeeping for National and Institutional Sales is
maintained by the administrative group of that area and is to be available to
regulators or Compliance upon request.
To report a gift, complete the GIFT REPORTING FORM and forward to Stephanie
Barres, Mail Stop 50-101.
ACTIVITIES OUTSIDE OF INVESCO
-----------------------------
If you wish to accept a position with a corporation (public or private),
charitable organization, foundation or similar group, you should seek prior
approval. Submit a memorandum, detailing the proposed activity to your
supervisor, the President or Chief Executive Officer and to the General Counsel.
Please use the OUTSIDE ACTIVITIES FORM to report your proposed employment.
The memorandum should state the compensation or benefits, direct or indirect,
that you will receive from your participation and the nature of the time
commitment involved. These types of requests will be treated on a case-by-case
basis with the interests of INVESCO and its clients being paramount.
PARTICIPATING IN A BOARD OF DIRECTORS
-------------------------------------
Employees may be asked to serve on the Board of Directors of another company,
whether for profit or not-for-profit, charitable foundations, etc. Approval for
such a position must be obtained.
If authorization to serve on the board of directors of a company is granted, the
INVESCO officer, director or employee serving as a director shall refrain from
any direct or indirect involvement in the consideration for purchase or sale and
in the purchase or sale by any INVESCO client. For example, securities of the
company of which the INVESCO officer, director or employee serves as a director,
or any securities of an affiliate of such company, should not be purchased for
INVESCO clients.
As an outside board member or officer, an employee may come into possession of
material non-public information about the outside company, or other public
companies. It is critical that a proper information barrier be in place between
AMVESCAP business units and the outside organization, and that the employee does
not communicate such information to other AMVESCAP employees or business units
in violation of any such information barrier.
GUIDELINES
----------
There is no absolute prohibition on an INVESCO employee participating in outside
activities. As a practical matter, however, there may be circumstances in which
it would not be in INVESCO's best interest to allow employees to participate in
outside activities. The first consideration must be whether the activity will
take so much of the employee's time that it will affect his or her performance.
As important, however, is whether the activity will subject the employee to
conflicts of interest that will reflect poorly on both him or her and INVESCO.
Our business is such that we must adhere strictly to the highest ethical
standards and strive to avoid even the appearance of impropriety and conflict.
It is impossible to anticipate every conflict that may arise, but activities
should be limited to those that have the least probability of creating them. For
example, serving on the board of a publicly traded company has clear potential
for conflict, while serving on the board of a charitable organization generally
does not normally pose a conflict.
Another consideration is that under the law, INVESCO and its employees must not
use non-public material information improperly to benefit themselves or
INVESCO's clients. It is conceivable, for example, that as an advisory board
member, you may receive material non-public information about certain public
companies. If this occurs, you would be prohibited from effecting transactions
(either for your account or client accounts) until the information either is
made available to the public or ceases to be material. You would also be
required to keep the information confidential and, pursuant to our Code of
Ethics and Insider Trading Policies, avoid using the information to effect
trades.
Additionally, even if you are positive that you do not have any "insider
information," unforeseen market events may make it look as if you did -- e.g.,
you sell securities of a company that subsequently reports an adverse event
(e.g., loss of a major customer, departure of key employees, etc.). It is
virtually impossible to prove a negative -- that you didn't know about the event
- -- and it may make it difficult to win any lawsuit that is brought or to
mitigate any resulting adverse publicity.
BUSINESS CARD POLICY
--------------------
It is the policy of INVESCO, that the business cards of the officers and
employees of INVESCO be accurate, clear, and not misleading to the recipient.
The SEC and NASDR categorize business cards as advertising material, and thus
apply all general marketing rules to business cards. Accordingly, when
developing and disseminating business cards, certain guidelines should be
followed. Also, as with all advertising and marketing materials, approval should
be obtained from the Legal & Compliance department.
Standard INVESCO business cards prepared by the Marketing Communications group
meet all the necessary requirements. INVESCO Funds employees should only use
business cards ordered from the Communications group.
All business cards and stationary must list the appropriate Office of
Supervisory Jurisdiction (OSJ) as registered with the NASD.
ANTI-BRIBERY AND DEALINGS WITH GOVERNMENT OFFICIALS
---------------------------------------------------
Many of the countries in which AMVESCAP conducts its business prohibit the
improper influencing of governmental officials by the payment of bribes, gifts,
political contributions, lavish hospitality or by other means. Our policy
requires adherence to those restrictions.
In general, all travel and entertainment we provide to governmental officials
must be pre-approved within the appropriate AMVESCAP business unit. If approved,
a written confirmation that such expenses do not violate local law must be
obtained from an appropriate third party (e.g., the business unit's legal
counsel or the government official's supervisor).
Gifts, other than those of nominal value, may not be given to or accepted from
such officials. These prohibitions extend to any consultants or agents we may
retain on behalf of AMVESCAP.
EMPLOYEE POLITICAL AND CHARITABLE CONTRIBUTIONS
-----------------------------------------------
INVESCO realizes, as active members of the community and involved citizens, its
employees often participate in political and charitable projects and activities
that may include donations and contributions by employees to political
candidates or charitable organizations.
Although INVESCO encourages civic and community involvement by its employees,
INVESCO desires to avoid any situation that raises a conflict of interest or
that creates an appearance of impropriety in the context of INVESCO's business
relationships. Specifically, this policy prohibits employees from making
political or charitable contributions when the solicitation or request for such
contributions implies that continued or future business with INVESCO depends on
making such a contribution. Similarly, no contribution should be made that
creates the appearance that INVESCO stands to benefit from a business
relationship because of an employee's contribution.
We may not, under any circumstances, use Company funds to make political
contributions without prior approval, nor may we represent our personal
political views as being those of the Company.
CAMPAIGN CONTRIBUTIONS
----------------------
Both federal and state campaign finance laws include limits on political
contributions that employees may make. Under federal law, the maximum amount an
individual may contribute to a political candidate is $1,000 per election. The
limits imposed by state law vary.
All contributions made by employees must be entirely voluntary and should only
be in an amount that is determined by the employee. Additionally, the
contribution should be unlikely to influence the candidate's judgment regarding
any continued or future business with INVESCO. No contributions should be made
that create the appearance of any of the conflicts discussed. In no case may any
contribution exceed the applicable federal or state limitations.
If an employee is unsure if a particular political contribution would be in
compliance with this policy, they should consult the Legal & Compliance
department.
CONTRACT RECORDKEEPING & REVIEW
-------------------------------
INVESCO requires that all contractual relationships entered into with
unaffiliated entities be in writing, reviewed and approved by the Legal and
Compliance Department, and fully executed by all parties. In addition, INVESCO
monitors all current contracts for amendment to reflect changed circumstances,
tracks the expiration date for timely renewal if necessary, superceding events,
and other activities that could affect the contractual relationship.
INVESCO's Legal and Compliance Department has instituted procedures to ensure
that these minimum requirements are fully met. All contracts should be submitted
to the Legal & Compliance Department for review prior to signing the contract.
All signed original agreements entered into on behalf of INVESCO should be sent
to the Legal & Compliance department for inclusion in the contract database and
for disaster recovery purposes.
Only officers (Assistant Vice President, Vice President, and Senior Vice
President) of INVESCO Funds Group, Inc., and of INVESCO Distributors, Inc., may
sign contracts on behalf of INVESCO. Contact your department head to determine
the appropriate officer to sign a contract.
PERFORMANCE DATA SOURCE
-----------------------
Mutual fund performance calculations provide a way to measure whether a mutual
fund's investments are providing a profit to its shareholders. Performance
measurement also offers a common basis for investors to compare one mutual fund
against another mutual fund. To provide information that accurately reflects the
financial status of a fund, the SEC and other industry organizations and
accounting authorities specify various methods of computing mutual fund
"performance." These methods include "total return" and "average annual return,"
among others.
In addition, the SEC and the NASD specify very strictly not only the performance
calculation methods, but the way in which those calculations must be presented
in prospectuses, advertising and sales literature, and indeed, in every
communication of mutual fund "performance" to the public.
The SEC and other regulators impose penalties for violation of the various
regulations relating to calculation and use of performance numbers. To ensure
total compliance, INVESCO must strictly control the source and use of its mutual
funds' performance statistics. The Financial Reports area of the INVESCO
Portfolio Accounting Department is the sole source of INVESCO Mutual Fund
performance calculations. Reference may be made to invescofunds.com website
total return performance displays, as the Financial Reports department reviews
this information on a daily and monthly basis.
ONLY FINANCIAL REPORTS' PERFORMANCE CALCULATIONS MAY BE USED OR REFERENCED BY
ANY EMPLOYEE, CLIENT REPRESENTATIVE, OR OTHER PERSON IN ANY CAPACITY PURPORTING
TO SPEAK ON BEHALF OF THE INVESCO MUTUAL FUNDS.
COMPLAINTS
----------
The complaint process is governed by both the SEC and NASD. If a complaint is
received in an official letter from the SEC, NASD, State or other regulatory
organization, immediately send all original paperwork to Director of Broker
Dealer Compliance in Legal & Compliance Department.
Complaints from shareholders are addressed through the Transfer Agency as
outlined in INVESCO's Supervisory Procedures Manual.
Complaints regarding non-shareholder matters (for example, complaints regarding
separately-managed accounts) are generally resolved by the Investment Division
and/or Institutional Sales. The Legal & Compliance Department should be advised
of the existence of such complaints and the ultimate resolution.
Employee's should ensure that all complaints are addressed in a timely fashion.
Contact Legal and Compliance with questions regarding such items.
COMMUNICATIONS WITH REGULATORS
------------------------------
It is the policy of INVESCO to cooperate fully with regulatory agencies. Most
inquiries from regulators are of a routine nature. At the same time, however,
even a casual inquiry from a regulatory agency may develop into a non-routine
matter. This most often occurs due to misunderstandings over the information
that the regulator is seeking, or statements made by people without a full
knowledge of the facts. Moreover, even routine regulatory requests often involve
interview with employees and production of records, which can be time-consuming.
Finally, there have been instances in which persons have attempted to obtain
confidential information by impersonating regulators. While such
misrepresentation is blatantly illegal, it has occurred.
Our principal regulators - the Securities and Exchange Commission (SEC) and the
National Association of Securities Dealers, Inc. (NASD) - are aware of the
issues that their requests can raise. For that reason, the SEC, NASD and other
regulators generally initiate their contacts with INVESCO through the Legal and
Compliance Department. That way, the Legal and Compliance Department can
ascertain quickly the scope of the inquiry and arrange to provide any
information sought in a manner that is most efficient for the regulator and
least disruptive to our business operations.
For these reasons, any contact by a regulatory agency must be referred
immediately to the Chief Compliance Officer, Assistant General Counsel or
General Counsel. If the initial contact is made by telephone, simply and
politely advise the caller that it is INVESCO's policy to direct any regulatory
inquiry to the Legal and Compliance Department, and then transfer the call.
PENDING OR THREATENED LITIGATION
--------------------------------
INVESCO continuously strives to meet and exceed the highest standards in the
conduct of its own business, and expects no less of the companies and personnel
with which it has legal, commercial and investment relationships. However, the
possibility always exists that INVESCO may become involved in litigation, either
in its own respect or as a result of its advisory or other status with respect
to the INVESCO Mutual Funds and its other investment accounts.
In virtually all instances, INVESCO receives formal notice of litigation by what
is called "service of process." This is often done by hand delivery of the legal
complaint and accompanying documents to the INVESCO offices, and, occasionally,
by mail. When process is presented for service upon INVESCO Funds Group, INVESCO
Distributors, Inc., the INVESCO Mutual Funds or other INVESCO affiliated entity,
the INVESCO public receptionist is directed to call the INVESCO Legal &
Compliance Department, which shall notify and direct an appropriate Company
officer to accept such service on behalf of INVESCO. The INVESCO public
receptionist and INVESCO mailroom are directed to forward to the INVESCO Legal &
Compliance Department all litigation materials received via hand delivery, U.S.
Postal Service, or any other delivery service.
INVESCO's General Counsel is responsible for all matters involving litigation
initiated by or filed against INVESCO, although the General Counsel may delegate
to selected Legal and Compliance Department staff such matters as the General
Counsel deems appropriate and necessary. The General Counsel (or designee) shall
coordinate with INVESCO's Company Affairs (Public Relations) department
preparation and release of all litigation-related communications directed to the
public. INVESCO's General Counsel reports on all pending, threatened or existing
litigation to the executive management of INVESCO on a periodic basis, and as
events develop, and shall proceed in litigation matters as the executive
management of INVESCO may direct.
Corporate Information Systems Security Policy
---------------------------------------------
This policy is an addendum to the IFG and IDI Code of Ethics and Business
Policies Manual. All employees are responsible for the compliance with the
Corporate Information Systems Security Policy.
Questions regarding this policy should be addressed with each employees
department manager and then with their department's IT liaison.
INVESCO PERSONAL SECURITIES TRADING POLICIES
(Substantially identical to the policies applicable to
all AMVESCAP entities Globally)
I. CORE PRINCIPLES (ALL EMPLOYEES)
A. Employees have a duty to serve the best interests of clients and not
to engage in conduct that is in conflict with such interests.
B. Employees are prohibited from misusing "inside information".
C. Employees are permitted to acquire shares of AMVESCAP PLC ("AMVESCAP")
through authorized share purchase schemes (including the AMVESCAP
International Sharesave Plan) and otherwise in a manner consistent
with applicable law.
D. Employees are encouraged to invest in mutual funds, unit trusts and
other collective investment vehicles sponsored by subsidiaries of
AMVESCAP.
E. Subject to certain exceptions set forth in these Policies employees
are permitted to invest in other securities if they observe applicable
laws and regulations and both the letter and spirit of these Policies.
II. PROHIBITION AGAINST INSIDER TRADING (ALL EMPLOYEES)
A. TERMS AND DEFINITIONS - As used in this Section II, certain key terms
have the following meanings:
1. "INSIDER" - The concept of "Insider" is broad, and includes at a
minimum all directors, officers and employees of a company.
Directors, officers and employees of AMVESCAP and its subsidiary
companies are deemed to be Insiders of AMVESCAP. In addition, any
person may be a temporary Insider if he/she enters into a
special, confidential relationship with a company in the conduct
of its affairs and, as a result, has access to non-public
information developed for the company's purposes. Thus, any
person associated with AMVESCAP or any of its subsidiaries may
become a temporary Insider of a company which is advised by a
subsidiary or for which a subsidiary performs other services.
Temporary Insiders of a company may also include, for example,
its attorneys, accountants, consultants and other agents, or
employees of its bank lenders and major customers.
2. "INSIDER TRADING" - While the law concerning "Insider Trading" is
not static, it generally includes: (1) trading by an Insider
while in possession of Material or Market/Price Sensitive
Non-Public Information; (2) trading by non-insiders while in
possession of Material or Market/Price Sensitive Non-Public
Information either improperly obtained by the non-insider or
disclosed to the non-insider by an Insider in violation of the
Insider's duty to keep it confidential; and (3) communicating
Material or Market/Price Sensitive Non-Public Information to
others.
3. "MATERIAL INFORMATION" (U.S. terminology) and "Market or Price
Sensitive Information" (U.K. terminology) - These terms generally
include (1) any information that a reasonable investor would
likely consider to be important to making an investment decision;
and (2) any information that is reasonably certain to have a
substantial effect on the price of a company's securities.
Examples of Material or Market/Price Sensitive Information
include (but are not limited to) changes in dividends or dividend
policy, earnings estimates or changes in previously released
earnings estimates, developments concerning significant merger or
acquisition proposals, developments in major litigation, and
significant changes in management.
4. "NON-PUBLIC INFORMATION" - Information is "non-public" until it
has been effectively communicated to the market and the market
has had time to "absorb" the information. For example,
information found in a report filed with the Securities and
Exchange Commission, or appearing in Dow Jones, Reuters Economic
Services, The Wall Street Journal or other publications of
general circulation would be considered public.
B. GENERAL PROHIBITION - All Directors, officers and employees (including
contract employees and part-time personnel) of AMVESCAP, its
subsidiaries and affiliated companies worldwide, are prohibited from
engaging in Insider Trading. This prohibition applies to both personal
and client accounts.
C. REPORTING OBLIGATION - Any Director, officer or employee (including
any contract or part-time employee) who possesses or believes that
he/she may possess Material or Market/Price Sensitive Non-Public
Information about any issuer of securities must report the matter
immediately to the Legal & Compliance department, which will review
the matter and provide further instructions as to the appropriate
handling of the information.
III. POLICIES AND PROCEDURES GOVERNING PERSONAL SECURITIES
TRANSACTIONS GENERALLY
A. COVERED PERSONS - The policies and procedures set forth in this
Section III apply to Directors, officers and employees of AMVESCAP,
its subsidiaries and affiliated companies ("AMVESCAP Companies") who
are deemed to be "Covered Persons" as defined herein. The term
"Covered Persons" includes all such Directors, officers and employees
except those who have been determined to be "Exempt Persons" by the
relevant management committee of an operating division of AMVESCAP or
its designee ("Relevant Management Committee").
B. EXEMPT PERSONS - An "Exempt Person" must meet all of the following
criteria:
1. Work in a position which is unrelated to any AMVESCAP
Company's investment management, investment policy or
investment strategy activities and who has no day-to-day
access to information on current investment strategy,
portfolio holdings and portfolio transactions;
2. Demonstrate lack of day-to-day access to such information by
factors such as physical separation (e.g. employment in a
facility physically separated from the locations where
investment-related activities occur) and lack of access to
computer systems that would provide access to portfolio
information;
3. Annually sign a statement to the effect that such person has
no actual access to such information, and that if he/she
comes into contact with such information he/she will
promptly notify the Legal & Compliance department who will
determine, based on a review of the employee's
circumstances, whether he/she may continue to be designated
as an "Exempt Person".
NOTE: Each exempt person's status will be reviewed
periodically by the Legal & Compliance Department. If any
one of the above requirements is not met, the employee will
immediately be considered to be a covered person.
C. GENERAL POLICY
1. Covered Persons may not engage in personal securities
transactions that create an actual or potential conflict of
interest with client trading activity. Thus Covered Persons
have a fiduciary responsibility to ensure that all client
trading activity in a security is completed before engaging
in personal securities transact
2. For purposes of this Section III the term "personal
securities transaction" includes any transaction by a
Covered Person for a "Covered Account", defined as any
account: (a) in which a Covered Person has a direct or
indirect financial interest; or (b) over which such Covered
Person has direct or indirect control over the purchase or
sale of securities. Such Covered Accounts may include, but
are not limited to, accounts of a spouse, minor child,
relative, friend, or personal business associate.
D. PRE-CLEARANCE REQUIREMENTS
1. General Requirement:
a. A Covered Person may not engage in a personal securities
transaction unless it has been pre-cleared by the Legal &
Compliance department following a determination that the
transaction does not give rise to an actual or potential
conflict of interest with client activity in the same
security. This determination shall not be made, and
pre-clearance shall not be given, if there has been a client
account transaction in the same security within seven (7)
calendar days of the proposed personal securities
transaction (the "7-Day Rule").
b. Subject to oversight by the Relevant Management Committee,
the Legal & Compliance department has responsibility for
setting the policy for determining which client accounts
will be matched against each Covered Person's personal
securities transactions.
c. The pre-clearance requirements and procedures set forth in
this paragraph D apply to personal securities transactions
in any security that is not the subject of an exception set
forth in paragraph F below, and specifically apply to
transactions in shares of AMVESCAP and to transactions in
shares of closed-end investment companies and closed-end
investment trusts managed by an AMVESCAP company.
d. In the case of personal securities transactions involving
the purchase or sale of an option on an equity security, the
Legal & Compliance department will determine whether to
pre-clear the transaction by matching the personal
securities transaction against client account activity in
both the option and the underlying security.
e. It shall be the responsibility of the Legal & Compliance
department following pre-clearance of a personal securities
transaction, to monitor client account activity in the same
security for the following seven (7) calendar days to
determine whether the appearance of a conflict is present,
either in conjunction with a particular transaction or as
the result of a pattern of trading activity and, if so,
whether any additional action (such as disgorgement of
profits) is warranted.
2. PRE-CLEARANCE PROCEDURES - The Legal & Compliance Department
shall be responsible for setting appropriate procedures (and
documentation) to carry out the pre-clearance requirements set
forth in this paragraph D. These procedures shall include the
following:
a. A Covered Person must complete and submit to the Legal &
Compliance department a pre-clearance request form setting forth
details of each proposed personal securities transaction;
b. The Legal & Compliance department will review the form and notify
the covered person whether the request is authorized or denied
(as time-stamped on the form).
1. Investment Division personnel should seek final approval
from the Chief Investment Officer; and Trading Desk
personnel should seek approval from the Head Trader.
c. The Covered Person is permitted to trade WITHIN ONE TRADING DAY
following the date of approval. If the trade is not executed
during the time period a new pre-clearance request form must be
submitted.
3. DE MINIMIS EXEMPTION
A pre-clearance request relating to a proposed personal
securities transaction involving 2,000 or fewer shares (or 20 or
fewer contracts, in the case of options) of an issuer that has at
least US $1 billion (or non-US. currency equivalent) in market
capitalization shall not be subject to the 7-Day Rule or other
provisions of sub-paragraph D.1, provided that:
(a) Any pre-clearance approval given for such transaction shall
be valid for ten (10) calendar days only; and
(b) The de minimis exemption may be used once every thirty (30)
days for a specific security.
E. REPORTING REQUIREMENTS
1. INITIAL REPORTS BY COVERED PERSONS - Within 10 days of
commencement of employment each Covered Person must provide to
the Legal & Compliance department a complete list of all of his
or her Covered Accounts, including individual securities held
within those accounts or in certificate form.
2. REPORTS OF TRADE CONFIRMATIONS - Within (ten) 10 calendar days of
settlement of each personal securities transaction, the Covered
Person engaging in the transaction must submit or ensure their
broker mails a duplicate copy of the broker-dealer confirmation
for such transaction to the Legal & Compliance department. (Note:
The duplicate confirmation must be generated by the broker-dealer
and mailed directly to the legal/compliance department. Employee
delivered Photostat copies are not acceptable unless requested by
the Legal & Compliance department.)
3. ANNUAL UPDATE AND CERTIFICATION - No later that February 1 of
each year, each Covered Person must file with the
legal/compliance department an annual account statement that
lists, as of December 31 of each prior year, all Covered Accounts
of such Covered Person and all securities holdings of such
Covered Accounts. Annually, each Covered Person must execute and
provide his/her legal/compliance department with a certificate of
compliance with these Policies and any other personal trading
policies then in effect which apply to such Covered Person.
F. EXCEPTIONS TO PRE-CLEARANCE AND REPORTING REQUIREMENTS
1. The following securities are not subject to either the
pre-clearance requirements or the reporting requirements set
forth in this Section III:
a. Open-end mutual funds and open-end unit trusts, other than
INVESCO Funds accounts.
b. Variable annuities, variable life products and other similar
unit-based insurance products issued by insurance companies
and insurance company separate accounts.
c. U.S. (Federal) Government Securities, and d. Money market
instruments (as defined by the Legal & Compliance
department).
2. INDEPENDENT DIRECTORS - Personal securities transactions of an
Independent Director of AMVESCAP are not subject to either the
pre-clearance or reporting requirements set forth in this Section
III except with respect to personal securities transactions in
the shares of AMVESCAP or shares of any closed-end investment
company or investment trust served by such Independent Director
in a Director or Trustee capacity. For purposes of this
exception, the term "Independent Director" includes (a) any
Director of AMVESCAP (i) who is neither an officer nor employee
of AMVESCAP or of any AMVESCAP Company, or (ii) who is not
otherwise "connected with" AMVESCAP or any AMVESCAP Company
within the meaning of the London Stock Exchange Yellow Book;
3. Personal securities transactions in the following are NOT SUBJECT
TO THE PRE-CLEARANCE REQUIREMENTS set forth in this Section III
BUT ARE SUBJECT TO THE REPORTING REQUIREMENTS:
o INVESCO Funds mutual fund accounts;
o Securities acquired through automatic dividend
reinvestment plans;
o Securities acquired through the receipt or exercise of
rights or warrants issued by a company on a pro rata
basis to all holders of a class of security;
o A City Index (e.g., IG Index) (UK only);
o Futures contracts;
o Commodities contracts;
o Futures or Options on a stock market index, a foreign
currency or commodity; and
o Exchange Traded Funds (ETFs) such as NASDAQ 100 shares,
S & P Depository Receipts, etc.
4. DELEGATED DISCRETIONARY ACCOUNTS - Pre-clearance is not required
for transactions in a Covered Account as to which a Covered
Person is not exercising power over investment discretion,
provided that:
a. The Covered Account is the subject of a written
contract providing for the delegation by the Covered
Person of substantially all investment discretion to
another party;
b. The Covered Person has provided the Legal & Compliance
department with a copy of such written agreement and a
Pre-Approval Request;
c. The Covered Person certifies in writing that he/she has
not discussed, and will not discuss, potential
investment decisions with the party to whom investment
discretion has been delegated; and
d. The Covered Person complies with all reporting
requirements outlined in paragraph E above, and also
provides or makes provision for the delivery of monthly
and/or quarterly statements of discretionary account
holdings to the Legal & Compliance department.
THE FOREGOING EXCEPTION FROM THE PRE-CLEARANCE REQUIREMENT DOES
NOT APPLY TO TRANSACTIONS BY A DELEGATED DISCRETIONARY ACCOUNT IN
SHARES OF AMVESCAP. All employees are required to notify parties
to whom they have delegated investment discretion that such
discretion may not be exercised to purchase shares of AMVESCAP
and that any sales of AMVESCAP shares by a Covered Account which
is the subject of delegated investment discretion are subject to
the pre-clearance and reporting requirements set forth in this
Section III and the policies and provisions set forth in Section
IV below.
G. RESTRICTIONS ON CERTAIN ACTIVITIES
In order to avoid even the appearance of conduct that might be deemed
contrary to a client's best interests, Covered Persons (other than
Independent Directors of AMVESCAP) are subject to the following additional
restrictions and prohibitions relating to certain investment activities and
related conduct:
1. PROHIBITION AGAINST TRADING IN SECURITIES ON "RESTRICTED LISTS":
It is recognized that there may be occasions when AMVESCAP, an
AMVESCAP Company, or a Covered Person who is a key executive of
AMVESCAP or an AMVESCAP Company, may have a special relationship
with an issuer of securities. In such occasions the Board of
Directors of AMVESCAP or the Relevant Management Committee may
decide to place the securities of such issuer on a "restricted
list", to be maintained by the Legal & Compliance department. All
employees are prohibited from engaging in any personal securities
transactions in a security on a "restricted list".
2. PROHIBITION AGAINST SHORT-TERM TRADING ACTIVITIES: Covered
Persons are prohibited from profiting in an "opposite
transaction" in the same security within 60 days of its purchase
or sale. Generally, only those securities requiring pre-clearance
are subject to this Short-Term Trading Prohibition. However,
while options and futures transactions are generally not subject
to this Short-Term Trading Prohibition, such transactions may not
be used to circumvent the prohibition.
3. PROHIBITION AGAINST SHORT SALES:
Covered Persons are prohibited from engaging in short sales of
securities.
4. PROHIBITION AGAINST PURCHASES IN INITIAL PUBLIC OFFERINGS:
Covered Persons are prohibited from purchasing securities in
initial public offerings except in those circumstances where
different amounts of such offerings are specified for different
investor types (e.g. private investors and institutional
investors) and the purchase has been pre-cleared by the Legal &
Compliance department on the basis that it is not likely to
create any actual or potential conflict of interest.
5. RESTRICTIONS ON THE PURCHASE OF RESTRICTED SECURITIES ISSUED BY
PUBLIC COMPANIES:
Generally, Covered Persons are discouraged from investing in
restricted securities of public companies. A Covered Person may
purchase such securities if the purchase has been pre-cleared by
the Legal & Compliance department following a determination that
the proposed transaction does not present any actual or potential
conflict of interest.
6. RESTRICTIONS ON PRIVATE PLACEMENTS (INCLUDING HEDGE FUNDS):
A Covered Person may not purchase or sell any security obtained
through a private placement (including the purchase or sale of an
interest in a so-called "hedge fund") unless such transaction has
been pre-cleared by the Legal & Compliance department following a
determination that the proposed transaction does not present any
actual or potential conflict of interest.
In addition, if a Covered Person owning securities of a privately
held company knows that the company is proposing to engage in a
public offering involving securities of that company (whether or
not such securities are of the same class as the securities held
by such Covered Person), he/she must disclose this information to
the Legal & Compliance department which will determine whether
further action should be taken.
7. PARTICIPATION IN INVESTMENT CLUBS:
A Covered Person is prohibited from participating in an
investment club unless such participation has been pre-cleared
(form) by the Legal & Compliance department following its
determination that the following conditions have been satisfied:
a. the Covered Person's participation does not create any
actual or potential conflict of interest;
b. the Covered Person does not control investment
decision-making for the investment club; and
c. the Covered Person has made satisfactory arrangements
to ensure that duplicate trade confirmations of
investment club activity and quarterly statements of
investment club holdings are provided to the Legal &
Compliance department by brokers acting on behalf of
the investment club.
Should the Covered Person contribute, but not necessarily
control, investment decision-making for the investment club, all
transactions by the investment club would be subject to
pre-clearance.
Note: Exemption from trading pre-clearance for Investment Club
participation may be made by the Legal & Compliance department.
Such account activity will be periodically reviewed and if deemed
necessary, the pre-clearance exemption may be revoked at any
time.
THE FOREGOING EXCEPTION FROM THE PRE-CLEARANCE REQUIREMENT DOES
NOT APPLY TO TRANSACTIONS IN SHARES OF AMVESCAP PLC. All
employees are required to notify parties with whom they
participate in investment clubs with, that the club may not
purchase or sell shares of AMVESCAP without prior clearance, and
such transaction in AMVESCAP shares by a Covered Account are
subject to the pre-clearance and reporting requirements set forth
in this Section III and the policies and provisions set forth in
Section IV below.
IV. TRANSACTIONS IN SHARES OF AMVESCAP PLC
(ALL EMPLOYEES)
A. Personal securities transactions in shares of AMVESCAP PLC by
Directors, officers and employees of AMVESCAP and the AMVESCAP
Companies are governed by AMVESCAP's Share Dealing Code (the
"Code", a copy of which is attached hereto) adopted in accordance
with requirements of the London Stock Exchange. The Code is
incorporated by reference and made a part of these Policies so
that a violation of the Code is also deemed a violation of these
Policies. Among other provisions the Code generally prohibits all
trading in AMVESCAP shares during certain defined "closed
periods" which are typically two calendar months before annual
results and earnings announcements and one calendar month before
quarterly results and earnings announcements.
B. The prohibitions against insider trading set forth above in
Section II of these Policies and the pre-clearance and reporting
provisions set forth above in Section III of these Policies apply
to personal securities transactions in shares of AMVESCAP.
C. The foregoing provisions apply to all Directors, officers and
employees of AMVESCAP, including both Covered Persons and Exempt
Persons as defined in Section III, and apply to all personal
securities transactions by or for the benefit of such persons,
including transactions in discretionary accounts maintained for
such persons.
AMVESCAP OPTIONS AND SHARES TRANSACTIONS
Purchases and sales of AMVESCAP shares (including ordinary shares
and ADRs) is any INVESCO or AMVESCAP employee benefit accounts
are subject to controls enforced by the plan administrator.
Accordingly, these transactions are not subject to pre-clearance.
ANY OTHER PURCHASES AND SALES OF AMVESCAP ORDINARY SHARES AND
ADRS, HOWEVER, ARE SUBJECT TO PRE-CLEARANCE UNDER THE ABOVE RULES
AND PROCEDURES.
Additionally, except as part of an INVESCO or AMVESCAP employee
benefit program, Covered Persons are prohibited from engaging in
any transactions in options on AMVESCAP securities.
V. ADMINISTRATION OF POLICIES (ALL EMPLOYEES)
A. WITH THE EXCEPTION OF PART IV ABOVE, administration of these
Policies is the responsibility of the various Legal & Compliance
departments within the AMVESCAP group, subject to general
oversight by the Relevant Management Committees.
B. RESPONSIBILITY for the administration of these Policies as they
relate to transactions in AMVESCAP shares (Part IV above) rests
jointly with the AMVESCAP Company Secretary, responsible for
interpretations of the Code; its Group Compliance Officer,
responsible for determinations made in the event of possible
violations of the Code or of these Policies; and its various
Legal & Compliance departments, responsible for pre-clearance and
reporting of transactions. In any event, responsibility for these
Policies as they pertain to trading in AMVESCAP shares is subject
to general oversight by the AMVESCAP Board of Directors.
C. ADMINISTRATIVE RESPONSIBILITY FOR THESE POLICIES INCLUDES:
1. The authority to adopt such forms and procedures as may be
appropriate to implement these Policies;
2. The authority to recommend and to implement policies that
are more restrictive than those set forth in these Policies;
3. The authority, on a case by case basis, and to a limited
extent, to approve exceptions from any of the prohibitions,
restrictions or procedures set forth in Part III of these
Policies; and
4. The authority to review violations of the Policies and to
recommend to the Relevant Management Committee (or to the
AMVESCAP Board of Directors in the case of violation of the
Policies set forth in Part IV), such penalties and sanctions
as may be appropriate under the circumstances.
D. EXCEPTIONS - Where exceptions are approved under subparagraph C
(3) above, a determination shall be made, in the case of each
such exception, that it is consistent with the Core Principles
set forth in Section I of these Policies and that it does not
create an actual or potential conflict of interest. The approval
of the exception and the circumstances surrounding such approval
shall be noted in writing and reported to the Relevant Management
Committee at the next available opportunity.
E. PENALTIES AND SANCTIONS
1. Persons who are found to have violated the prohibitions
against Insider Trading set forth in Section II of these
Policies may be subject to severe penalties and sanctions
including, but not limited to, disgorgement of profits and
suspension or termination of employment. These penalties and
sanctions shall be in addition to any penalties that may be
imposed by law, including (a) civil injunctions; (b)
revocation of licenses and registrations; (c) substantial
fines; and/or (d) imprisonment.
2. Persons who are found to have knowingly violated any of the
other provisions of these Policies, including the
pre-clearance and reporting requirements, the restrictions
against certain defined activities and the rules governing
trading in shares of AMVESCAP, shall be subject to a range
of possible sanctions including, among other actions: (a)
required special education or training; (b) letters of
admonition or censure; (c) restrictions on further personal
securities transactions; (d) disgorgement of profits; and
(e) reassignment, demotion, suspension or termination of
employment.
POLICY FOR DIRECTOR AND EMPLOYEE PERSONAL DEALINGS
IN THE SHARES AND OPTIONS OF AMVESCAP PLC
(AMVESCAP POLICY 07/18/2001)
INTRODUCTION
The London Stock Exchange requires all listed companies to adopt a share dealing
policy and procedures designed to prevent members of the Board of Directors and
employees from improperly using material non-public information. We must comply
with this policy if we wish to deal in the Ordinary Shares, American Depository
Receipts ("ADRs"), or exercise share options of AMVESCAP PLC.
PERSONS COVERED BY THE POLICY
All members of the AMVESCAP PLC Board of Directors, Executive Board, and all
employees are subject to this policy. In addition, all "connected persons" of
Board members or employees are also covered.
Persons connected to directors or employees includes:
o Our spouses;
o Our dependent children under the age of 18 (including adopted,
illegitimate or step-children);
o Any body corporate, or other business entity, with which the director
or employee is "associated" i.e., where 20% or more of the equity
share capital or voting power is controlled by the director or
employee and their connected persons;
o The trustees of any trust where the beneficiaries of the trust include
any of the above connected persons (with the exception of employee
share schemes and pension schemes);
o Our business partners i.e., a person or business entity with which we
share a mutual economic interest under an agreement to share that
interest.
DEALING PROCEDURES
All of our transactions in AMVESCAP PLC ordinary shares or ADRs must be approved
in advance, including those in plans or trusts sponsored by the Company. Members
of the Board of Directors and Executive Board must obtain prior clearance from
the Group Compliance Officer. Employees must obtain approval in accordance with
the personal share dealing policies in effect in their business unit. Generally
this will mean seeking approval via their local compliance team which will be
notified by the Company Secretary of any dates when employees are not free to
deal. Details of "close periods", namely periods when employees are not free to
deal, are also circulated to all employees on the internal e-mail system.
All of our options transactions, including those through plans or trusts
sponsored by the Company, must also be approved in advance. Members of the Board
of Directors, Executive Board members, and employees must obtain approval from
the Group Company Secretary. The Request for Authorization to Deal Form must be
used for dealing in shares and ADRs. The Application Form for the Purpose of
Exercises of Share Options must be used for options transactions. We are
obligated to inform our connected persons that they are also subject to these
requirements. Any dealing they may do must be approved as described above.
PROHIBITED DEALINGS
In order to prevent even the appearance of impropriety, we must be careful to
deal in AMVESCAP shares or options only when not in possession of material
non-public information. This includes, but is not limited to the following:
o No share dealing within two months before the Company announces its
annual results or dividends;
o No share dealing within one month before the announcement of
semi-annual or quarterly results;
o The exercise of an option or right to purchase under an employee share
scheme is generally not permissible where the final exercise date
falls within the above periods, although certain transactions may be
permissible depending upon the circumstances. In any event, if you are
unsure as to your ability to exercise an option you should contact the
Company Secretary;
o No short term or day trading of shares or ADRs, i.e. purchases and
sales within a 30 day period.
Any questions regarding this policy or procedures should be referred to the
Group Compliance Officer or Group Company Secretary.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
The Audit Committee of the Boards of Directors of the INVESCO Mutual Funds is
composed of four of the Fund's directors who are not affiliated with the Funds'
investment adviser. All members are independent. The Board has determined that
each of the Committee members is "financially literate" and that at least two
members have "accounting or related financial management expertise" as used in
the New York Stock Exchange definitions of the terms.
Under the recently enacted Sarbanes-Oxley Act, if the Boards of Directors have
not determined that an "audit committee financial expert," a new term defined by
the SEC and based on criteria contained in the Act, is serving on the Audit
Committee, it must disclose this fact and explain why it does not have such an
expert. The Boards of Directors have determined that none of the members of the
Audit Committee meet the technical requirements of the definition. Moreover, the
Boards believe that for the following reasons it is not necessary for registered
investment companies such as the Funds, with an audit committee that meets the
New York Stock Exchange requirements of financial literacy, to have a "financial
expert" as a member of the committee.
1. The financial statements of and accounting principles applying to
registered investment companies such as the Funds are relatively
simple, straightforward and transparent compared to operating
companies. The significant accounting issues are valuation of
securities and other assets (regulated under the Investment Company
Act of 1940 and computed daily), accrual of expenses, allocation of
joint expenses shared with other entities such as insurance premiums
and disclosures of all related party transactions. Equally important
is a knowledge of the tax laws applying to registered investment
companies. None of the accounting issues involving corporate America
that have received recent publicity such as sophisticated derivative
transactions and special purpose entities are present in financial
reporting for registered investment companies.
2. During the years that the Funds has been filing financial reports
under the 1940 Act since their inception, there has never been a
requirement for a financial report or statement to be restated.
3. The current members of the Audit Committee have the experience of 23.5
years serving on this Audit Committee and in the Boards' judgement,
through this experience and experience with other public corporation's
financial affairs, they have an understanding of the relevant
generally accepted accounting principles governing the Funds'
financial statements, tax laws applying to the Funds, the Funds
internal accounting controls and audit committee functions necessary
to satisfy the objectives of the Sarbanes-Oxley Act with respect to
the financial statements, auditing process and internal controls of
the Funds.
4. The Audit Committee has the capability of employing a consultant who
satisfies the technical definition of a "financial expert" and will do
so from time to time if circumstances warrant."
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not applicable to this filing.
ITEM 5. [RESERVED]
ITEM 6. [RESERVED]
ITEM 7. NOT APPLICABLE
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES
(a) Based on their evaluation of the Registrant's Disclosure Controls and
Procedures as of a date within 90 days of the Filing Date, the
Registrant's President and Treasurer & Chief Financial and Accounting
Officer have determined that the Disclosure Controls and Procedures
(as defined in Rule 30a-2(c) under the Act) are designed to ensure
that information required to be disclosed by the Registrant is
recorded, processed, summarized and reported by the filing date, and
that information required to be disclosed in the report is
communicated to the Registrant's management, as appropriate, to allow
timely decisions regarding required disclosure.
(b) There were no significant changes in the Registrant's internal
controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation, and there were no
corrective actions with regard to the significant deficiencies and
material weaknesses.
ITEM 10. EXHIBITS
(a) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the Registrant
intends to satisfy the Item 2 requirements through filing of an
exhibit.
Not applicable to this filing.
(b) A separate certification for each principal executive officer and
principal financial officers of the Registrant as required by Rule
30a-2 under the Act.
"Attached hereto"
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto authorized.
INVESCO COUNSELOR SERIES FUNDS, INC.
By: /s/ Raymond R. Cunningham
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Raymond R. Cunningham, President and Chief Executive Officer
Date: October 31, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto authorized.
INVESCO COUNSELOR SERIES FUNDS, INC.
By: /s/ Ronald L. Grooms
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Ronald L. Grooms, Treasurer & Chief Financial and Accounting Officer
Date: October 31, 2003