N-CSR 1 imf0503.txt IMF0503 ANNUAL REPORT 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: 811-2606 INVESCO Money Market Funds, Inc. -------------------------------------------------- (Exact name of registrant as specified in charter) 4350 South Monaco Street, Denver, Colorado 80237 ---------------------------------------------------------- (Address of principal executive offices) (Zip code) Glen A. Payne, Esq., 4350 South Monaco Street, Denver, Colorado 80237 --------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 720-624-6300 Date of fiscal year end: May 31, 2003 Date of reporting period: May 31, 2003 ITEM 1. REPORT TO SHAREHOLDERS MAY 31, 2003 ANNUAL REPORT INVESCO MONEY MARKET FUNDS, INC. CASH RESERVES FUND TAX-FREE MONEY FUND U.S. GOVERNMENT MONEY FUND "IN JUNE, THE FED LOWERED THE FEDERAL FUNDS TARGET RATE 25 BASIS POINTS TO A 53-YEAR LOW OF 1%." SEE PAGE 5 [INVESCO ICON] INVESCO(R) FELLOW SHAREHOLDER: [PHOTOGRAPH OF RAYMOND R. CUNNINGHAM OMITTED] A HAVEN AND SMART CASH MANAGEMENT TOOL IN ONE The recent period of market volatility has provided challenges for every investor. Yet it is this kind of environment that underscores the value of investing at least a portion of your portfolio in money market funds, which provide both a short-term savings vehicle and a haven against market volatility. I'd like to reiterate our approach to money market management by providing some insight into our different investment alternatives. o CASH RESERVES FUND provides competitive current yields from a diversified portfolio of short-term obligations, as well as convenient access to your money through free check writing. (Checks subject to a minimum amount of $500.) o TAX-FREE MONEY FUND helps you shelter earnings from federal taxes by investing in the debt obligations of states and municipalities. (Income may be subject to state and local taxes, as well as the federal Alternative Minimum Tax.) o U.S. GOVERNMENT MONEY FUND is designed for investors who are primarily concerned with safeguarding their principal, and invests in securities backed by the federal government and its agencies. This fund offers the highest credit quality of all INVESCO money market alternatives. o TREASURER'S MONEY MARKET RESERVE FUND and TREASURER'S TAX-EXEMPT RESERVE FUND provide potentially low-cost, higher-yield money market options for institutions and individuals with more than $100,000 to invest ($1 million as of July 1, 2003, for new investors). The expense ratio of the two Treasurer's Funds is fixed at 0.25%, which is extremely competitive. (Treasurer's Tax-Exempt Reserve Fund income may be subject to state and local taxes, as well as the federal Alternative Minimum Tax.) Remember, money market funds are not insured or guaranteed by the federal government, Federal Deposit Insurance Corporation or any other government agency. And while the funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the funds. Nonetheless, we believe these funds provide investors with a low-risk and increasingly convenient cash management tool that offers both flexibility and protection against market volatility. Sincerely, /s/Ray Cunningham Ray Cunningham President and CEO, INVESCO Funds Group, Inc. "WHILE THE ECONOMY IS BEING STIMULATED ON MANY FRONT, IT REMAINS UP TO THE CORPORATE SECTOR TO START SPENDING AND HIRING BEFORE A SOLID ECONOMIC RECOVERY CAN OCCUR." -- SEE PAGE 5 TABLE OF CONTENTS LETTER FROM THE PRESIDENT & CEO........... 1 MARKET HEADLINES.......................... 3 AN INTERVIEW WITH LYMAN MISSIMER.......... 4 INVESTMENT HOLDINGS....................... 6 FINANCIAL STATEMENTS......................14 NOTES TO FINANCIAL STATEMENTS.............21 FINANCIAL HIGHLIGHTS......................25 OTHER INFORMATION.........................31 FOR THE LATEST YIELD INFORMATION, CALL US AT 1-800-525-8085 OR VISIT OUR WEB SITE AT INVESCOFUNDS.COM. INVESCO MUTUAL FUNDS PROXY VOTING POLICY The Boards of Directors of the INVESCO Mutual Funds have expressly delegated to INVESCO Funds Group, Inc. ("INVESCO") the responsibility to vote proxies related to the securities held in the funds' portfolios. Under this authority, INVESCO is required by the Boards of Directors to act solely in the interests of shareholders of the funds. Other INVESCO clients who have delegated proxy voting authority to INVESCO similarly require that proxy votes be cast in the best interests of the clients. On behalf of the funds and its other clients, INVESCO acquires and holds a company's securities in the portfolios it manages in the expectation that they will be a good investment and appreciate in value. As such, INVESCO votes proxies with a focus on the investment implications of each matter upon which a vote is solicited. A copy of the description of the funds' proxy voting policy and procedures, as administered by INVESCO, is available without charge by calling 1-800-525-8085. It is also available on the Web site of the Securities and Exchange Commission, at www.sec.gov, and on the funds' Web site, invescofunds.com. MARKET HEADLINES "...INVESTORS FLOCKED TO INVESTMENTS WITH DEFENSIVE REPUTATIONS." MARKET OVERVIEW: JUNE 2002 THROUGH MAY 2003 After two years of declines in the stock market, investors had hoped to see an improvement through 2002 and into 2003. Instead, the market continued downward, with the major stock indexes registering losses for the 12-month period ended May 31, 2003. There were a number of factors responsible for the year's decline. First, a series of corporate accounting scandals dominated the news well into summer 2002, tainting investors' perceptions of the market. Talk of Enron's collapse lingered -- and new scandals surrounding companies such as WorldCom Inc, Tyco International Ltd, and HealthSouth Corp followed. Furthermore, geopolitical uncertainty persisted throughout the year to varying degrees as threats of terrorist attacks, a nuclear standoff between India and Pakistan, speculation regarding the U.S.'s intentions toward Iraq, and North Korea's refusal to obey a 1994 arms agreement all clouded the landscape. In addition, oil prices surged, as inventories were pressured by strikes in Venezuela, violence in Nigeria, and concerns over a potential war with Iraq. In addition, a generally weak economy and disappointing corporate earnings were ongoing stories. Although a few rallies were ignited by hopes that a recovery might be forthcoming -- most notably, a two-month surge that began on October 10, 2002, a week-long rally during the first days of January 2003, and a mini-rebound in mid-March on the heels of the long-awaited start to the war in Iraq -- they could not be sustained in such an uncertain environment. Meanwhile, investors flocked to investments with defensive reputations. Fixed-income securities advanced, benefiting from the flight-to-quality trend as well as the Federal Reserve's decision to leave interest rates unchanged until November, when a surprisingly steep 50-basis-point cut was implemented. Gold stocks and real estate investment trusts were other top performers. Conversely, high-growth sectors, including technology and telecommunications, declined. As the fiscal period came to a close, investors seemed to be growing increasingly optimistic. For one, quick success by the American-led coalition in the liberation of Iraq muted one source of uncertainty. Additionally, investors were encouraged by the economic rebound in the weeks following the war, during which consumer confidence and manufacturing activity improved. To be sure, risks remained. However, the end of the fiscal year saw investors focusing on the positive rather than worrying about potential negatives. For example, the dollar's slide versus the euro could have stirred concerns that foreign investors might sell dollar-denominated assets. Instead, investors pointed to the potentially stimulative effects that the weak dollar might have on exports and manufacturing. Investors' newfound optimism was also reflected in the market's technical profile at period-end, which saw trading volume spike higher during rallies, while dropping as stocks slid, reflecting an overall desire on the part of investors to buy stocks. While we don't believe equity markets are necessarily out of the woods yet, the economic progress made since the resolution of the war has made the outlook for equities at the end of May 2003 brighter than it was this time last year. For this recovery to find its legs, investors and consumers will likely need to see a sustained upturn in the employment market before the bear market is officially pronounced dead. QUESTIONS & ANSWERS AN INTERVIEW WITH FUND MANAGER LYMAN MISSIMER [PHOTOGRAPH OF LYMAN MISSIMER OMITTED] LYMAN MISSIMER, CFA TEAM LEADER VICE PRESIDENT LYMAN MISSIMER III LEADS A TEAM OF MANAGERS FOR THE FUND. HE JOINED AIM CAPITAL MANAGEMENT, INC, WHICH IS THE SUB-ADVISOR FOR INVESCO'S MONEY MARKET PORTFOLIOS, IN 1995 AND HAS MORE THAN 20 YEARS OF INVESTING EXPERIENCE. LYMAN EARNED HIS BACHELOR'S DEGREE FROM DARTMOUTH COLLEGE AND AN M.B.A. FROM THE UNIVERSITY OF CHICAGO GRADUATE SCHOOL OF BUSINESS. HE IS A CHARTERED FINANCIAL ANALYST CHARTERHOLDER AND A MEMBER OF THE ASSOCIATION OF INVESTMENT MANAGEMENT RESEARCH. SPUTTERING RECOVERY MAY LEAD TO LOWER RATES WHAT CONDITIONS AND EVENTS INFLUENCED MONEY MARKET PERFORMANCE DURING THE PAST YEAR? LYMAN MISSIMER: The past year was a tumultuous one for the markets beginning with corporate scandals, volatile oil and stock market prices, turmoil in the Middle East, a war with Iraq, the SARS scare, continuing terrorist threats, and talk of deflation from the Federal Reserve. The year started with the federal funds target already at an extremely stimulative 40-year low of 1.75%. But many market participants believed that the Fed would soon raise rates to bring the target up to a more neutral level. However, the economy, which had been fairly robust early in 2002, began to slow and the Fed changed the balance of risks to a better chance of a weakening economy in August. Expectations for lower rates were fueled further when two federal open market committee (FOMC) members dissented from the majority and voted to lower rates. Typically, the FOMC, which is the active arm of the Fed, presents a unified front to the public, so the dissension was an unusual occurrence. As it appeared that fourth quarter growth would slow considerably and geopolitical uncertainties were starting to increase, the Fed decided to lower rates by 50 basis points in November 2002. This was the twelfth rate decrease since January of 2001 and brought the federal funds target rate to 1.25%, the lowest level since the 1950s. As the New Year began, the markets focused on Iraq and whether Saddam Hussein would allow full and complete searches for weapons of mass destruction by the U.N. weapons inspection team. Oil prices surged as instability in Venezuela and uncertainty in Iraq had investors considering the potential for a large drop in oil supplies. This led to further concerns over the health of the U.S. economy. March was a historic month as the U.S.-led coalition invaded Iraq to remove the ruthless dictator and his alleged weapons of mass destruction. Once the war began and it became apparent that the U.S. and its allies would be successful, the markets looked for a post-war bounce from the stock market and the economy. Meanwhile, Fed Chairman Alan Greenspan announced to Congress in May that the risks for disinflation were now greater than the risks for inflation. As a result, the fixed-income markets assumed that there would be no pre-emptive tightening in the near future, and the Treasury yield curve flattened, as 10-year yields dropped to 40-year lows of about 3.30%. "DURING THE PERIOD, THE CORPORATE CREDIT SITUATION CONTINUED TO BE SHAKY, AND WE EMPHASIZED MAINTAINING HIGH CREDIT QUALITY ACROSS ALL PORTFOLIOS." Market participants are still debating whether the economy will show a post-war bounce, whether the Federal Reserve will continue to lower short-term rates, or whether they will have to resort to unconventional measures, such as buying longer-term securities to help stimulate the economy. WHAT IS YOUR CURRENT STRATEGY AND HOW HAVE SPECIFIC DECISIONS INFLUENCED THE PORTFOLIOS' PERFORMANCE? LYMAN MISSIMER: At the beginning of the period, the markets were expecting that the next move from the Fed would be to increase short-term rates. In response, we had shortened the funds' weighted average maturities (WAMs) to the 30-day range. As the year progressed, however, it became apparent that the economy was starting to struggle, and the yield curve flattened out. As that transition unfolded, we extended the portfolios to lock in the higher yields. The Fed reduced rates in November to 1.25%. From that time, our goal was to maintain the portfolios' WAMs in the 40- to 50-day range. Since cash flows generally remained volatile, we maintained this barbell strategy, with overnight cash positions held at high levels to provide liquidity. During the period, the corporate credit situation continued to be shaky, and we emphasized maintaining high credit quality across all portfolios. As high-quality credits grew increasingly rare and as spreads narrowed, we utilized more government-sponsored agencies across the portfolios to extend out along the yield curve. WHAT IS YOUR OUTLOOK FOR THE REMAINDER OF 2003? LYMAN MISSIMER: As the second quarter came to a close, the U.S. economy continued to struggle. Second quarter gross domestic product growth was expected to be in the 1% to 2% range. Most analysts now expect growth to increase to the 3% to 4% range during the second half of 2003, but many uncertainties remain. Low interest rates continue to stimulate the consumer and housing sectors, and it appears that the corporate scandals are largely behind us. All major stock markets have risen significantly since the end of the war. Hope is that the SARS situation has been contained and that diplomacy will continue to progress positively in the Middle East. This will help keep energy prices from rising. The recently passed tax cut should further stimulate demand, and a declining dollar should help increase U.S. exports and help push the U.S. manufacturing sector out of a recession-like environment. Although the Fed has discussed the potential for deflation, Chairman Greenspan still maintains that it is a remote possibility. While the economy is being stimulated on many fronts, it remains up to the corporate sector to start spending and hiring before a solid economic recovery can occur. HOW ARE YOU CURRENTLY POSITIONING THE PORTFOLIOS? LYMAN MISSIMER: In June, the Fed lowered the federal funds target rate 25 basis points to a 53-year low of 1%. The Fed's statement afterward was very similar to its announcement after its May meeting, with risks to the economy being balanced and concerns about disinflation rather than inflation. There is hope that this will be the last short-term rate decrease in this cycle, but unless the economy picks up, there is a risk of further rate reductions. In response, we have extended the portfolios' WAMs into the 50- to 55-day range to lock in yields, and we are looking to buy yields above the 1% target rate. Assuming that the economy does start to look healthier, we expect the Fed may begin to raise rates back up to a more neutral level sometime in 2004. INVESTMENT HOLDINGS STATEMENT OF INVESTMENT SECURITIES INVESCO MONEY MARKET FUNDS, INC. MAY 31, 2003
EFFECTIVE INTEREST PRINCIPAL % DESCRIPTION RATE% AMOUNT VALUE -------------------------------------------------------------------------------------------------------- CASH RESERVES FUND 103.53 SHORT-TERM INVESTMENTS 26.90 US Government Agency Obligations Federal Home Loan Bank, Bonds 4/21/2004 1.42 $ 5,000,000 $ 5,000,000 5/11/2004 1.38 10,000,000 10,000,000 6/4/2004 1.40 4,500,000 4,500,000 6/7/2004 1.30 13,000,000 13,000,000 Federal Home Loan Bank, 6/2/2003 1.28 100,000,000 99,996,500 Overseas Private Investment, Gtd Participation Certificates, F/VR, Series 497-2002-333-IG(a) 6/15/2009 1.23 28,300,000 28,300,000 ======================================================================================================== TOTAL US GOVERNMENT AGENCY OBLIGATIONS (Amortized Cost $160,796,500) 160,796,500 ======================================================================================================== 2.51 CORPORATE BONDS 2.51 ASSET-BACKED SECURITIES -- MULTI-PURPOSE Beta Finance, Medium-Term Notes(b), 6/2/2003 (Amortized Cost $15,000,400) 1.61 15,000,000 15,000,400 ======================================================================================================== 42.59 COMMERCIAL PAPER 5.84 ASSET-BACKED SECURITIES -- COMMERCIAL LOANS & LEASES Atlantis One Funding 8/27/2003 1.27 30,000,000 29,909,268 8/28/2003 1.23 5,000,000 4,985,205 ======================================================================================================== 34,894,473 4.18 ASSET-BACKED SECURITIES -- CONSUMER RECEIVABLES New Center Asset Trust, Series 1, 6/26/2003 1.29 25,000,000 24,977,861 ======================================================================================================== 17.54 ASSET-BACKED SECURITIES -- MULTI-PURPOSE Asset Securitization, 6/3/2003 1.25 35,000,000 34,997,604 Charta Corp, 7/7/2003 1.25 30,000,000 29,963,033 Edison Asset Securitization LLC, 11/10/2003 1.21 20,000,000 19,892,843 Mont Blanc Capital, 6/9/2003 1.29 20,000,000 19,994,348 ======================================================================================================== 104,847,828 5.01 ASSET BACKED SECURITIES -- TRADE RECEIVABLES Bills Securitisation Ltd, 6/10/2003 1.29 20,000,000 19,993,625 Eureka Securitization, 7/22/2003 1.28 10,000,000 9,982,125 ======================================================================================================== 29,975,750 5.01 BANKS Wachovia Corp, 8/6/2003 1.30 30,000,000 29,929,868 ======================================================================================================== EFFECTIVE INTEREST PRINCIPAL % DESCRIPTION RATE% AMOUNT VALUE -------------------------------------------------------------------------------------------------------- 1.66 CONSUMER FINANCE General Electric Capital International Funding, Series A, 10/20/2003 1.29 $ 10,000,000 $ 9,950,582 ======================================================================================================== 3.35 DIVERSIFIED FINANCIAL SERVICES Morgan Stanley Dean Witter & Co F/VR, 8/21/2003 1.46 20,000,000 20,000,000 ======================================================================================================== TOTAL COMMERCIAL PAPER (Amortized Cost $254,576,362) 254,576,362 ======================================================================================================== 2.07 ASSET-BACKED NOTES 0.40 FULLY BACKED Capital One Auto Finance Trust, Notes Series 2002-B, Class A1, 9/15/2003 1.76 2,411,784 2,411,784 ======================================================================================================== 1.67 RESIDENTIAL MORTGAGE LOANS Holmes Financing PLC, Notes, F/VR, Series 1 Class A, 4/15/2004 1.27 10,000,000 10,000,000 ======================================================================================================== TOTAL ASSET-BACKED NOTES (Amortized Cost $12,411,784) 12,411,784 ======================================================================================================== 5.02 CERTIFICATES OF DEPOSIT -- BANKS Credit Agricole Indosuez, 7/9/2003 (Cost $30,000,000) 1.23 30,000,000 30,000,000 ======================================================================================================== 5.69 PROMISSORY NOTES -- DIVERSIFIED FINANCIAL SERVICES Goldman Sachs Group, F/VR(e) 9/17/2003 1.51 14,000,000 14,000,000 10/2/2003 1.58 20,000,000 20,000,000 ======================================================================================================== TOTAL PROMISSORY NOTES (Cost $34,000,000) 34,000,000 ======================================================================================================== 1.17 FUNDING AGREEMENTS -- LIFE & HEALTH INSURANCE New York Life Insurance(e), 4/7/2004 (Cost $7,000,000) 1.38 7,000,000 7,000,000 ======================================================================================================== 17.58 REPURCHASE AGREEMENTS Repurchase Agreement with State Street dated 5/30/2003 due 6/2/2003 at 1.260%, repurchased at $105,123,227 (Collateralized by: Fannie Mae, Bonds, due 3/24/2005 at 1.720%, value $48,459,333, Fannie Mae, Notes, due 5/14/2003 at 1.450%, value $47,996,332 and Federal Farm Credit Bank , Bonds, due 10/1/2003 at 3.125%, value $11,342,076) (Cost $105,112,190) 105,112,190 105,112,190 ======================================================================================================== 103.53 TOTAL INVESTMENTS AT VALUE (AMORTIZED COST $618,897,236)(c) 618,897,236 ======================================================================================================== (3.53) OTHER ASSETS LESS LIABILITIES (21,113,102) ======================================================================================================== 100.00 NET ASSETS AT VALUE $ 597,784,134 ======================================================================================================== EFFECTIVE INTEREST PRINCIPAL % DESCRIPTION RATE% AMOUNT VALUE -------------------------------------------------------------------------------------------------------- TAX-FREE MONEY FUND 101.23 SHORT-TERM INVESTMENTS 99.40 Municipal Notes(a) 4.88 ALABAMA Birmingham Med Clinic Brd, Alabama (LOC - AmSouth Bank), AR, Med Clinic Rev, UAHSF Series 1991, 12/1/2026 1.35 $ 1,300,000 $ 1,300,000 ======================================================================================================== 5.86 FLORIDA Lee Cnty School Brd, Florida (FSA Insured), FR, Ctfs of Participation, Series 1993A, 8/1/2004 1.10 200,000 205,299 Seminole Cnty Indl Dev Auth, Florida (Florida Living Nursing Ctr Proj) (LOC - Bank of America), VR, Hlth Facil Rev, Series 1991, 2/1/2011 1.39 1,200,000 1,200,000 South Indian River Wtr Ctl Dist, Florida (Egret Landing - Phase I), FR, Sect 15 Impt Bds, Special Assmt, 11/1/2018 1.05 150,000 156,988 ======================================================================================================== 1,562,287 2.44 GEORGIA Floyd Cnty Dev Auth, Georgia (Shorter College Proj) (LOC - SunTrust Bank), AR, Rev, Series 1998, 6/1/2017 1.34 500,000 500,000 Newnan Hosp Auth, Georgia (Newnan Hosp Proj) (MBIA Insured), FR, Rev Anticipation Ctfs, Series 2002, 1/1/2004 1.29 150,000 151,051 ======================================================================================================== 651,051 9.70 ILLINOIS Hoffman Estates, Illinois (Hoffman Estates Econ Dev Proj Area) (AMBAC Insured), FR, Tax Increment Rev Ref, Series 1997, 11/15/2003 1.11 250,000 254,426 Illinois Dev Fin Auth (6 West Hubbard Street Proj) (LOC - LaSalle Natl Bank), F/FR, IDR, Series 1986, 12/1/2016 1.25 765,000 765,000 Illinois Hlth Facils Auth (Blessing Hosp) (FSA Insured), VRD, Rev, Series 1999B, 11/15/2029 1.20 200,000 200,000 Peoria, Illinois (Easter Seal Ctr Proj) (LOC - Bank One), AR, Hlth Care Facil Rev, Series 1997, 5/1/2007 1.30 1,050,000 1,050,000 Schillar Park School Dist #81, Illinois (Cook Cnty) (FSA Insured), FR, School Ref, Series 2002A, 12/1/2003 1.63 115,000 115,210 School Dist #U-46, Illinois (Kane, Cook & DuPage Cntys) (AMBAC Insured), FR, Gen Oblig School Bds, Series 2003A, 1/1/2004 1.10 200,000 201,038 ======================================================================================================== 2,585,674 2.63 INDIANA Newton Cnty, Indiana (Intec Group Proj) (LOC - LaSalle Natl Bank), A/FR, Econ Dev Rev, Series 1994, 9/1/2010 1.29 500,000 500,000 Purdue Univ Trustees, Indiana, FR, Purdue Univ Student Fee, Rev, Series R, 7/1/2003 1.67 200,000 200,379 ======================================================================================================== 700,379 EFFECTIVE INTEREST PRINCIPAL % DESCRIPTION RATE% AMOUNT VALUE -------------------------------------------------------------------------------------------------------- 3.75 IOWA Iowa Fin Auth (YMCA Proj) (LOC - Wells Fargo & Co), VR, Econ Dev Rev, Series 2000, 6/1/2010 1.30 $ 1,000,000 $ 1,000,000 ======================================================================================================== 1.13 KANSAS Unified Govt of Wyandotte Cnty/Kansas City, Kansas (MBIA Insured), FR, Gen Oblig Impt, Series 2002-A, 8/1/2003 1.50 300,000 300,247 ======================================================================================================== 0.94 KENTUCKY Kentucky Asset/Liability Commn, FR, Gen Fund, TRAN, 2002 Series A, 6/26/2003 1.67 250,000 250,184 ======================================================================================================== 6.69 MARYLAND Frederick Cnty, Maryland (Buckingham's Choice Facil) (LOC - Branch Banking & Trust), EXTRAS, Retirement Cmnty Rev, Series 1997 C, 1/1/2027 1.25 1,500,000 1,500,000 Mayor & City Council of Baltimore, Maryland (FGIC Insured), FR, Tax-Exempt Gen Oblig Cons Pub Impt, Series A, 10/15/2003 1.08 275,000 281,442 ======================================================================================================== 1,781,442 1.92 MICHIGAN Lowell, Michigan (Kent Cnty) (MBIA Insured), FR, Elec Supply System Rev, Series 2002, 8/1/2003 1.50 130,000 130,322 Muskegon, Michigan (Muskegon Cnty), FR, Michigan Transn Fund Ref, Series 2002, 6/1/2003 1.40 150,000 150,000 Ottawa Cnty, Michigan (Holland Area Sewage Disp System), FR, Gen Oblig, Ottawa Cnty 2001 Ref, 6/1/2004 1.10 225,000 230,230 ======================================================================================================== 510,552 1.13 MONTANA Havre, Montana (Safeway Inc Proj) (LOC - Duetsche Bank), VR, IDR, Ref, Series 1991, 6/1/2006 1.30 300,000 300,000 ======================================================================================================== 0.75 NEVADA Clark Cnty School Dist, Nevada (FGIC Insured), FR, Gen Oblig Bldg, Series July 1, 1999A, 6/15/2003 1.37 200,000 200,276 ======================================================================================================== 1.50 NEW JERSEY Gloucester Cnty, New Jersey (FGIC Insured), FR, Gen Oblig, Series 2001, 7/1/2003 1.45 400,000 400,991 ======================================================================================================== 4.20 NEW MEXICO New Mexico Hosp Equip Ln Council (Dialysis Clinic Proj) (LOC - SunTrust Bank), AR, Rev, Series 2000, 7/1/2025 1.34 1,120,000 1,120,000 ======================================================================================================== 0.57 NEW YORK Westchester Cnty, New York, FR, Gen Oblig, Series 1991B, 9/15/2003 1.00 150,000 152,042 ======================================================================================================== EFFECTIVE INTEREST PRINCIPAL % DESCRIPTION RATE% AMOUNT VALUE -------------------------------------------------------------------------------------------------------- 8.65 NORTH CAROLINA Carolinas HlthCare System (North Carolina) (Charlotte-Mecklenberg Hosp Auth), FR, Hlth Care Rev, Series 2003A, 1/15/2004 1.15 $ 150,000 $ 150,786 Carteret Cnty Indl Facils & Pollution Ctl Fing Auth, North Carolina (Texasgulf Proj) (LOC - BNP-Paribas), VR, PCR, Series 1985, 10/1/2005 1.33 2,000,000 2,000,000 North Carolina Eastern Muni Pwr Agency (MBIA Insured), FR, Pwr System Rev, Series 1996A, 1/1/2004 1.65 150,000 153,336 ======================================================================================================== 2,304,122 0.02 OHIO Univ of Toledo, Ohio (State Univ of Ohio) (FGIC Insured), VR, Gen Rcpts, Rev, Series 2002, 6/1/2032 1.25 5,000 5,000 ======================================================================================================== 2.00 OREGON Cent Lincoln People's Util Dist, Oregon (AMBAC Insured) , FR, Elec System Rev Ref, Series 2002, 12/1/2003 1.50 330,000 330,818 Emerald People's Util Dist, Oregon (Lane Cnty) (FSA Insured), FR, Elec System Ref Rev, 2003 Series A, 11/1/2003 1.10 200,000 200,744 ======================================================================================================== 531,562 3.21 PENNSYLVANIA Canon-McMillan School Dist, Pennsylvania (Washington Cnty) (FSA Insured), FR, Gen Oblig, Series C of 2002, 9/1/2003 1.55 250,000 250,279 Pennsylvania (AMBAC Insured), FR, Gen Oblig, Ref, Series of 1997, 9/15/2003 1.15 200,000 202,295 Pennsylvania Infrastructure Invt Auth (Pennvest Ln Pool Proj), A/FR, Series 1991A 9/1/2009 1.75 200,000 206,043 9/1/2010 1.65 190,000 195,790 ======================================================================================================== 854,407 0.94 SOUTH CAROLINA Anderson Cnty, South Carolina (Belton Inds Proj) (LOC - Bank of America), AR, Indl Rev, Series 1991A, 7/1/2004 1.35 100,000 100,000 Rock Hill, South Carolina (FSA Insured), FR, Combined Util System Rev Impt, Ref, Series 2003A, 1/1/2004 1.30 150,000 150,609 ======================================================================================================== 250,609 0.53 SOUTH DAKOTA South Dakota Brd of Regts (MBIA Insured), FR, Univ of South Dakota Hsg & Auxiliary Facils Rev, Series 2003, 4/1/2004 1.18 140,000 140,941 ======================================================================================================== EFFECTIVE INTEREST PRINCIPAL % DESCRIPTION RATE% AMOUNT VALUE -------------------------------------------------------------------------------------------------------- 23.07 TENNESSEE Hamilton Cnty Indl Dev Brd, Tennessee (LOC - Mellon Bank), AR, IDR, Ref, (Trade Ctr Hotel Assoc #1 Ltd Partnership Proj), Series 1998A, 9/1/2016 1.30 $ 1,400,000 $ 1,400,000 (Trade Ctr Hotel Assoc #3 Ltd Partnership Proj), Series 1998C, 9/1/2016 1.30 1,797,250 1,797,250 Hawkins Cnty Indl Dev Brd, Tennessee (LOC - Wachovia Bank), AR, IDR, Ref, 1998 Series B, 10/1/2027 1.30 1,450,000 1,450,000 Tullahoma Indl Dev Brd, Tennessee (Marine Master Project) (LOC - AmSouth Bank), AR, Rev, Series 2002, 10/1/2017 1.54 1,500,000 1,500,000 ======================================================================================================== 6,147,250 7.53 TEXAS Corpus Christi, Texas (FSA Insured), FR, Combination Tax & Muni Hotel Occupancy Tax, Rev, Ctfs of Oblig, Series 2002, 9/1/2003 1.40 200,000 200,000 Dallas, Texas, FR, Gen Oblig, Series 1994, 2/15/2011 1.20 250,000 257,733 Donna Indpt School Dist, Texas (Hidalgo Cnty) (PSFG Insured), FR, Unltd Tax School Bldg Bds, Series 1998, 2/15/2004 1.25 200,000 205,232 Grapevine-Colleyville Indpt School Dist, Texas (Tarrant & Dallas Cntys) (PSFG Insured), FR, Unltd Tax School Bldg & Ref, Series 1995, 8/15/2003 1.10 335,000 337,826 Houston Cmnty College System, Texas (Harris & Fort Bend Cntys) (AMBAC Insured), FR, Student Fee Rev, Series 1999, 4/15/2004 1.20 100,000 103,063 North East Indpt School Dist, Texas (Bexar Cnty) (PSFG Insured), FR, Unltd Tax School Bldg Bds, Series 1999, 10/1/2003 1.58 100,000 101,628 Northside Indpt School Dist, Texas (Bexar Cnty) (PSFG Insured), A/FR, Unltd Tax School Bldg Bds, Series 2001-A, 8/1/2003 1.60 200,000 200,132 Texas, FR, TRAN, Series 2002, 8/29/2003 1.48 600,000 601,829 ======================================================================================================== 2,007,443 1.13 UTAH Tremonton City, Utah (Box Elder Cnty) (La-Z-Boy Chair Proj) (LOC - Bank One), VRD, IDR, Series 1990, 6/1/2026 1.30 300,000 300,000 ======================================================================================================== 1.41 VIRGINIA Stafford Cnty Indl Dev Auth, Virginia (Safeway Inc Proj) (LOC - Duetsche Bank & Trust), AR, IDR, Ref, Series 1993, 6/1/2003 1.45 375,000 375,000 ======================================================================================================== 2.82 WISCONSIN Neenah-Menasha Sewerage Commn, Wisconsin (Winnebago Cnty) (MBIA Insured), FR, Sewerage System Rev, Series 2003A, 12/1/2003 1.20 200,000 200,797 EFFECTIVE INTEREST PRINCIPAL % DESCRIPTION RATE% AMOUNT VALUE -------------------------------------------------------------------------------------------------------- Wisconsin Hlth & Edl Facils Auth (Riverview Hosp Assn) (LOC - Firstar Bank), VRD, Rev, Series 2001, 10/1/2030 1.35 $ 550,000 $ 550,000 ======================================================================================================== 750,797 TOTAL MUNICIPAL NOTES (Amortized Cost $26,482,256) 26,482,256 ======================================================================================================== 1.83 REPURCHASE AGREEMENTS Repurchase Agreement with State Street dated 5/30/2003 due 6/2/2003 at 1.260% repurchased at $488,547 (Collateralized by Freddie Mac, Medium-Term Notes, due 1/21/2005 at 2.150%, value $501,694) (Cost $488,496) 488,496 488,496 ======================================================================================================== 101.23 TOTAL INVESTMENTS AT VALUE (AMORTIZED COST $26,970,752)(c) 26,970,752 ======================================================================================================== (1.23) OTHER ASSETS LESS LIABILITIES (327,325) ======================================================================================================== 100.00 NET ASSETS AT VALUE $ 26,643,427 ======================================================================================================== U.S. GOVERNMENT MONEY FUND 99.58 SHORT-TERM INVESTMENTS 85.34 US GOVERNMENT AGENCY OBLIGATIONS Fannie Mae 10/27/2003 1.20 $ 500,000 $ 507,739 11/15/2003 1.35 500,000 504,033 12/1/2003 1.22 500,000 510,558 Federal Farm Credit Bank 9/2/2003 1.85 1,610,000 1,625,228 11/6/2003 1.50 300,000 304,242 Federal Home Loan Bank 6/2/2003 1.28 17,000,000 16,999,405 6/11/2003 1.77 500,000 500,542 6/23/2003 1.75 500,000 501,281 6/24/2003 2.04 1,000,000 1,002,306 7/25/2003 2.24 2,000,000 2,000,000 8/15/2003 1.20 750,000 754,449 9/2/2003 1.85 1,000,000 1,009,463 11/4/2003 1.50 250,000 254,055 11/14/2003 1.50 2,545,000 2,591,252 4/12/2004 1.34 1,500,000 1,499,445 5/7/2004 1.40 1,000,000 1,000,000 6/18/2004 1.25 2,000,000 2,000,000 Federal Home Loan Bank, F/VR Series 300, 9/15/2003 1.15 5,000,000 4,999,277 Overseas Private Investment, Gtd Participation Certificates, VR Series 2000-044A, 5/15/2015(a) 1.18 5,700,000 5,700,000 Series 2000-044A3, 4/1/2014(a) 1.18 3,000,000 3,000,000 Sallie Mae, F/VR, 6/19/2003 1.27 10,000,000 10,000,000 ======================================================================================================== TOTAL US GOVERNMENT AGENCY OBLIGATIONS (Amortized Cost $57,263,275) 57,263,275 ======================================================================================================== EFFECTIVE INTEREST PRINCIPAL % DESCRIPTION RATE% AMOUNT VALUE -------------------------------------------------------------------------------------------------------- 14.24 REPURCHASE AGREEMENTS Repurchase Agreement with State Street dated 5/30/2003 due 6/2/2003 at 1.260% repurchased at $9,556,810 (Collateralized by Federal Home Loan Bank, Bonds, due 4/12/2004 at 1.300%, value $9,755,649) (Cost $9,555,807) $ 9,555,807 $ 9,555,807 ======================================================================================================== 99.58 TOTAL INVESTMENTS AT VALUE (AMORTIZED COST $66,819,082)(c) 66,819,082 ======================================================================================================== 0.42 OTHER ASSETS LESS LIABILITIES 278,265 ======================================================================================================== 100.00 NET ASSETS AT VALUE $ 67,097,347 ======================================================================================================== (a) All securities with a maturity date greater than one year have either a variable rate, demand feature, prerefunded, optional or mandatory put resulting in an effective maturity of one year or less. (b) Securities acquired pursuant to Rule 144A. The fund deems such securities to be "liquid" because an institutional market exists. (c) Also represents cost of investments for income tax purposes.
The following acronyms may be used in portfolio descriptions: A/FR(d) -- Adjustable/Fixed Rate AMBAC -- American Municipal Bond Assurance Corporation AR(d) -- Adjustable Rate EXTRAS -- Extendable Rate Adjustable Securities FGIC -- Financial Guaranty Insurance Company F/FR(d) -- Floating/Fixed Rate FR -- Fixed Rate FSA -- Financial Security Assurance F/VR(d) -- Floating/Variable Rate IDR -- Industrial Development Revenue LOC -- Letter of Credit MBIA -- Municipal Bond Investors Assurance Corporation PCR -- Pollution Control Revenue PSFG -- Permanent School Fund Guarantee Program TRAN -- Tax & Revenue Anticipation Notes UAHSF -- University of Alabama Health Services Foundation VR(d) -- Variable Rate VRD(d) -- Variable Rate Demand (d) Rate is subject to change. Rate shown reflects current rate. (e) The following are restricted and illiquid securities at May 31, 2003: SCHEDULE OF RESTRICTED AND ILLIQUID SECURITIES VALUE AS ACQUISITION ACQUISITION % OF DESCRIPTION DATE COST NET ASSETS -------------------------------------------------------------------------------- CASH RESERVES FUND Goldman Sachs Group, F/VR 9/17/2003 3/21/2003 $ 14,000,000 2.34% 10/2/2003 3/13/2003 20,000,000 3.35 New York Life Insurance, 4/7/2004 4/3/2003 7,000,000 1.17 ================================================================================ 6.86% ================================================================================ See Notes to Financial Statements FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES INVESCO MONEY MARKET FUNDS, INC. MAY 31, 2003 CASH TAX-FREE RESERVES MONEY FUND FUND -------------------------------------------------------------------------------- ASSETS Investment Securities: At Cost(a) $ 618,897,236 $ 26,970,752 ================================================================================ At Value(a) $ 618,897,236 $ 26,970,752 Cash 0 54 Receivables: Fund Shares Sold 4,212,973 79,615 Interest 596,021 123,705 Prepaid Expenses and Other Assets 122,494 27,137 ================================================================================ TOTAL ASSETS 623,828,724 27,201,263 ================================================================================ LIABILITIES Payables: Custodian 1,472 0 Distributions to Shareholders 8,466 675 Investment Securities Purchased 0 440,967 Fund Shares Repurchased 25,882,975 99,641 Accrued Distribution Expenses Class A 3,367 -- Class B 462 -- Class C 21,476 -- Accrued Expenses and Other Payables 126,372 16,553 ================================================================================ TOTAL LIABILITIES 26,044,590 557,836 ================================================================================ NET ASSETS AT VALUE, Applicable to Shares Outstanding $ 597,784,134 $ 26,643,427 ================================================================================ NET ASSETS AT VALUE: Investor Class $ 570,867,083 $ 26,643,427 ================================================================================ Class A $ 8,915,545 -- ================================================================================ Class B $ 599,070 -- ================================================================================ Class C $ 17,402,436 -- ================================================================================ Shares Outstanding(b) Investor Class 570,867,083 26,643,427 Class A 8,915,545 -- Class B 599,070 -- Class C 17,402,436 -- ================================================================================ NET ASSET VALUE, Offering and Redemption Price per Share Investor Class $ 1.00 $ 1.00 Class A $ 1.00 -- Class B $ 1.00 -- Class C $ 1.00 -- ================================================================================ (a) Investment securities at cost and value at May 31, 2003 include repurchase agreements of $105,112,190 and $488,496 for Cash Reserves and Tax-Free Money Funds, respectively. (b) The INVESCO Money Market Funds, Inc. have 20 billion authorized shares of common stock, par value of $0.01 per share. Of such shares, 18.8 billion have been allocated to Cash Reserves Fund and 500 million to Tax-Free Money Fund: 4.7 billion to each class of Cash Reserves Fund and 500 million to Tax-Free Money - Investor Class. Paid-in capital was $597,784,134 and $26,643,427 for Cash Reserves and Tax-Free Money Fund, respectively. See Notes to Financial Statements STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) INVESCO MONEY MARKET FUNDS, INC. MAY 31, 2003 U.S. GOVERNMENT MONEY FUND -------------------------------------------------------------------------------- ASSETS Investment Securities: At Cost(a) $ 66,819,082 ================================================================================ At Value(a) $ 66,819,082 Receivables: Fund Shares Sold 264,765 Interest 221,960 Prepaid Expenses and Other Assets 33,046 ================================================================================ TOTAL ASSETS 67,338,853 ================================================================================ LIABILITIES Payables: Custodian 38 Distributions to Shareholders 329 Fund Shares Repurchased 220,132 Accrued Expenses and Other Payables 21,007 ================================================================================ TOTAL LIABILITIES 241,506 ================================================================================ NET ASSETS AT VALUE, Applicable to Shares Outstanding $ 67,097,347 ================================================================================ Shares Outstanding(b) 67,097,347 ================================================================================ NET ASSET VALUE, Offering and Redemption Price per Share $ 1.00 ================================================================================ (a) Investment securities at cost and value at May 31, 2003 includes a repurchase agreement of $9,555,807 . (b) The INVESCO Money Market Funds, Inc. have 20 billion authorized shares of common stock, par value of $0.01 per share. Of such shares, 500 million has been allocated to U.S. Government Money Fund - Investor Class. Paid-in-capital for U.S. Government Money Fund was $67,097,347. See Notes to Financial Statements STATEMENT OF OPERATIONS INVESCO MONEY MARKET FUNDS, INC. YEAR ENDED MAY 31, 2003 CASH TAX-FREE RESERVES MONEY FUND FUND -------------------------------------------------------------------------------- INVESTMENT INCOME INTEREST INCOME $ 14,112,098 $ 445,552 ================================================================================ EXPENSES Investment Advisory Fees 3,445,659 156,418 Distribution Expenses Class A 15,627 -- Class B 5,535 -- Class C 342,484 -- Transfer Agent Fees Investor Class 2,865,888 96,636 Class A 4,446 -- Class B 1,192 -- Class C 171,315 -- Administrative Services Fees 406,849 24,078 Custodian Fees and Expenses 125,599 8,723 Directors' Fees and Expenses 80,566 10,586 Professional Fees and Expenses 89,697 27,154 Registration Fees and Expenses Investor Class 109,014 17,064 Class A 252 -- Class B 186 -- Class C 5,102 -- Reports to Shareholders 315,206 10,029 Other Expenses 35,563 5,718 ================================================================================ TOTAL EXPENSES 8,020,180 356,406 Fees and Expenses Absorbed/Reimbursed by Investment Adviser Investor Class 0 (89,606) Class B (4,102) -- Class C (268,032) -- Fees and Expenses Paid Indirectly (524) 0 ================================================================================ NET EXPENSES 7,747,522 266,800 ================================================================================ NET INVESTMENT INCOME AND NET INCREASE IN NET ASSETS FROM OPERATIONS $ 6,364,576 $ 178,752 ================================================================================ See Notes to Financial Statements STATEMENT OF OPERATIONS (CONTINUED) INVESCO MONEY MARKET FUNDS, INC. YEAR ENDED MAY 31, 2003 U.S. GOVERNMENT MONEY FUND -------------------------------------------------------------------------------- INVESTMENT INCOME INTEREST INCOME $ 1,162,651 ================================================================================ EXPENSES Investment Advisory Fees 368,428 Transfer Agent Fees 299,092 Administrative Services Fees 43,159 Custodian Fees and Expenses 11,788 Directors' Fees and Expenses 14,784 Professional Fees and Expenses 21,483 Registration Fees and Expenses 24,369 Reports to Shareholders 32,617 Other Expenses 4,677 ================================================================================ TOTAL EXPENSES 820,397 Fees and Expenses Absorbed by Investment Adviser (191,120) ================================================================================ NET EXPENSES 629,277 ================================================================================ NET INVESTMENT INCOME AND NET INCREASE IN NET ASSETS FROM OPERATIONS $ 533,374 ================================================================================ See Notes to Financial Statements STATEMENT OF CHANGES IN NET ASSETS CASH RESERVES FUND
YEAR ENDED MAY 31 ------------------------------------------------------------------------------------ 2003 2002 OPERATIONS AND DISTRIBUTIONS TO SHAREHOLDERS Net Investment Income Earned and Distributed to Shareholders Investor Class $ 6,227,342 $ 17,796,534 Class A 20,915 4,839 Class B 1,845 3,283 Class C 114,474 420,688 ====================================================================================== $ 6,364,576 $ 18,225,344 ====================================================================================== FUND SHARE TRANSACTIONS Proceeds from Sales of Shares Investor Class $ 19,488,956,950 $ 23,212,451,413 Class A 165,682,044 3,356,987 Class B 1,075,652 594,915 Class C 1,572,492,634 2,598,809,105 Reinvestment of Distributions Investor Class 5,434,912 14,770,191 Class A 9,588 4,551 Class B 1,327 3,065 Class C 62,702 162,324 ====================================================================================== 21,233,715,809 25,830,152,551 Amounts Paid for Repurchases of Shares Investor Class (20,045,506,084) (22,985,728,920) Class A (158,339,989) (1,798,690) Class B (886,595) (252,742) Class C (1,607,385,823) (2,561,512,041) ======================================================================================= (21,812,118,491) (25,549,292,393) NET INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE TRANSACTIONS (578,402,682) 280,860,158 NET ASSETS Beginning of Period 1,176,186,816 895,326,658 ======================================================================================= End of Period $ 597,784,134 $ 1,176,186,816 ======================================================================================= -------------------------------------------------------------- FUND SHARE TRANSACTIONS Shares Sold Investor Class 19,488,956,950 23,212,451,413 Class A 165,682,044 3,356,987 Class B 1,075,652 594,915 Class C 1,572,492,634 2,598,809,105 Shares Issued from Reinvestment of Distributions Investor Class 5,434,912 14,770,191 Class A 9,588 4,551 Class B 1,327 3,065 Class C 62,702 162,324 ====================================================================================== 21,233,715,809 25,830,152,551 Shares Repurchased Investor Class (20,045,506,084) (22,985,728,920) Class A (158,339,989) (1,798,690) Class B (886,595) (252,742) Class C (1,607,385,823) (2,561,512,041) ======================================================================================= (21,812,118,491) (25,549,292,393) NET INCREASE (DECREASE) IN FUND SHARES (578,402,682) 280,860,158 =======================================================================================
See Notes to Financial Statements
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) TAX-FREE MONEY FUND YEAR ENDED MAY 31 ------------------------------------------------------------------------------------ 2003 2002 OPERATIONS AND DISTRIBUTIONS TO SHAREHOLDERS Net Investment Income Earned and Distributed to Shareholders $ 178,752 $ 415,165 ===================================================================================== FUND SHARE TRANSACTIONS Proceeds from Sales of Shares $ 36,281,861 $ 75,518,443 Reinvestment of Distributions 157,851 380,240 ===================================================================================== 36,439,712 75,898,683 Amounts Paid for Repurchases of Shares (41,933,785) (79,815,841) ===================================================================================== NET DECREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS (5,494,073) (3,917,158) NET ASSETS Beginning of Period 32,137,500 36,054,658 ===================================================================================== End of Period $ 26,643,427 $ 32,137,500 ===================================================================================== -------------------------------------------------------------- FUND SHARE TRANSACTIONS Shares Sold 36,281,861 75,518,443 Shares Issued from Reinvestment of Distributions 157,851 380,240 ===================================================================================== 36,439,712 75,898,683 Shares Repurchased (41,933,785) (79,815,841) ===================================================================================== NET DECREASE IN FUND SHARES (5,494,073) (3,917,158) =====================================================================================
See Notes to Financial Statements STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) U.S. GOVERNMENT MONEY FUND
YEAR ENDED MAY 31 ------------------------------------------------------------------------------------ 2003 2002 OPERATIONS AND DISTRIBUTIONS TO SHAREHOLDERS Net Investment Income Earned and Distributed to Shareholders $ 533,374 $ 1,540,454 ===================================================================================== FUND SHARE TRANSACTIONS Proceeds from Sales of Shares $ 231,418,527 $ 1,448,716,464 Reinvestment of Distributions 502,735 1,454,825 ===================================================================================== 231,921,262 1,450,171,289 Amounts Paid for Repurchases of Shares (240,544,136) (1,449,830,999) ===================================================================================== NET INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE TRANSACTIONS (8,622,874) 340,290 NET ASSETS Beginning of Period 75,720,221 75,379,931 ===================================================================================== End of Period $ 67,097,347 $ 75,720,221 ===================================================================================== -------------------------------------------------------------- FUND SHARE TRANSACTIONS Shares Sold 231,418,527 1,448,716,464 Shares Issued from Reinvestment of Distributions 502,735 1,454,825 ===================================================================================== 231,921,262 1,450,171,289 Shares Repurchased (240,544,136) (1,449,830,999) ===================================================================================== NET INCREASE (DECREASE) IN FUND SHARES (8,622,874) 340,290 =====================================================================================
See Notes to Financial Statements NOTES TO FINANCIAL STATEMENTS INVESCO MONEY MARKET FUNDS, INC. NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Money Market Funds, Inc. is incorporated in Maryland and presently consists of three separate funds: Cash Reserves Fund, Tax-Free Money Fund and U.S. Government Money Fund (individually the "Fund" and collectively, the "Funds"). The investment objectives of the Funds are: to seek a high level of current income for Cash Reserves Fund; to seek a high level of current income exempt from federal income taxation for Tax-Free Money Fund; and to seek current income by investing only in debt obligations issued or guaranteed by the U.S. Government or its agencies for U.S. Government Money Fund. INVESCO Money Market Funds, Inc. is registered under the Investment Company Act of 1940 (the "Act") as a diversified, open-end management investment company. 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. Cash Reserves Fund also offers Class A, Class B and Class C shares, which are subject to a contingent deferred sales charge paid by the redeeming shareholder. Class A and Class B shares are not appropriate for direct investment and are for exchange only from other INVESCO Funds' Class A and Class B shares. Class B shares convert to Class A shares after eight years along with a pro rata portion of its reinvested dividends and distributions. Effective April 1, 2002, the Investor Class shares are offered only to grandfathered investors who have established and maintained an account in any of the funds managed and distributed by INVESCO Funds Group, Inc. ("IFG") in Investor Class shares prior to April 1, 2002. 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. A. SECURITY VALUATION -- Securities held by the Funds are valued at their market value determined by the amortized cost method of valuation. If management believes that such valuation does not reflect the securities' fair value, or events or circumstances that may affect the value of portfolio securities are identified by the time that the net asset value per share is determined, these 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. B. REPURCHASE AGREEMENTS -- Repurchase agreements held by the Fund are fully collateralized by securities issued by the U.S. Government, its agencies or instrumentalities and such collateral is in the possession of the Fund's custodian. The collateral is evaluated daily to ensure its market value exceeds the current market value of the repurchase agreements including accrued interest. In the event of default on the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. In the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral or proceeds may be subject to legal proceedings. C. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Security transactions are accounted for on the trade 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. The Fund amortizes discounts or premiums paid on purchases of securities to the earliest put, call or maturity date. Cost is determined on the specific identification basis. 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. D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- All of the Fund's net investment income is distributed to shareholders by dividends declared daily and paid monthly. Such dividends are automatically reinvested at the month-end net asset value, unless the shareholder requests a cash payment. E. 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 are, for federal income tax purposes, taxable as ordinary income to shareholders. Of the distributions paid by Tax-Free Money Fund for the year ended May 31, 2003, 99.19% were exempt from federal income taxes. F. 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. IFG serves as the Funds' 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 is based on the annual rate of each Funds' average net assets as follows: 0.50% on the first $300 million of average net assets; reduced to 0.40% on the next $200 million of average net assets; and 0.30% on average net assets in excess of $500 million. A Sub-Advisory Agreement between IFG and AIM Capital Management, Inc. ("AIM"), affiliated with IFG, provides that investment decisions of the Funds are made by AIM. Fees for such sub-advisory services are paid by IFG. A master distribution plan and agreement for Cash Reserves Fund Class A, Class B & Class C shares pursuant to Rule 12b-1 of the Act (the "Plans") provides for compensation of certain promotional and other sales related costs to INVESCO Distributors, Inc. ("IDI" or the "Distributor"), a wholly owned subsidiary of IFG. Class A shares of the Fund pay compensation to IDI at a rate of 0.35% of annual average net assets. Class B and Class C shares of the Fund pay compensation to IDI at a rate of 1.00% of annual average net assets. Of these amounts, IDI 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 IDI incurs with respect to Class A and Class C shares in any fiscal year can not be recovered in subsequent years. Effective July 1, 2003, the Distributor will change to AIM Distributors, Inc., an affiliate of IFG. For the year ended May 31, 2003, amounts paid to the Distributor were as follows: CLASS CLASS CLASS FUND A B C -------------------------------------------------------------------------------- Cash Reserves Fund $ 12,456 $ 5,420 $ 355,481 If the Class B Plan is terminated, the board of directors may allow the Class B shares to continue payments of the asset-based sales charge to the Distributor for allowable unreimbursed expenses incurred for distributing shares before the Class B Plan was terminated. The Class B Plan allows for the carry-forward of distribution expenses, to be recovered from asset-based sales charges in subsequent fiscal periods. Distribution fees related to the Distributor for the year ended May 31, 2003, for Class B were as follows:
DISTRIBUTOR'S DISTRIBUTOR'S AGGREGATE UNREIMBURSED UNREIMBURSED EXPENSES AS % AMOUNT RETAINED EXPENSES OF NET ASSETS FUND BY DISTRIBUTOR UNDER PLAN OF CLASS ----------------------------------------------------------------------------------------------- Cash Reserves Fund - Class B Plan $ 4,405 $ 0 0.00%
IFG receives a transfer agent fee from each Class at an annual rate of $29.50 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 May 31, 2003 amounted to $226,250 for Cash Reserves Fund, $226 for Tax-Free Money Fund and $23,558 for U.S. Government Money Fund, of which $490, $127 and $1,839, respectively, were 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. 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 the Funds for the year ended May 31, 2003. IFG is entitled to reimbursement from a Fund share class that has fees and expenses voluntarily absorbed pursuant to this arrangement if such reimbursements do not cause a share class to exceed voluntary expense limitations and the reimbursement is made within three years after IFG incurred the expense. At May 31, 2003, the reimbursement that may be potentially made by the Funds to IFG that will expire during the years ended May 31, 2005 and 2006, are as follows:
INVESTOR CLASS CLASS CLASS FUND CLASS A B C ------------------------------------------------------------------------------------------- YEAR ENDED MAY 31, 2005 Cash Reserves Fund $ 0 $ 0 $ 176 $28,335 Tax-Free Money Fund 7,390 -- -- -- U.S. Government Money Fund 15,663 -- -- -- INVESTOR CLASS CLASS CLASS FUND CLASS A B C ------------------------------------------------------------------------------------------- YEAR ENDED MAY 31, 2006 Cash Reserves Fund $ 0 $ 0 $ 3,926 $239,697 Tax-Free Money Fund 82,216 -- -- -- U.S. Government Money Fund 175,457 -- -- --
NOTE 3 -- TRANSACTIONS WITH AFFILIATES. Certain of the Funds' officers and directors are also officers and directors of IFG, AIM or IDI. Each Fund has adopted a 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. Pension expenses for the year ended May 31, 2003 included in Directors' Fees and Expenses in the Statement of Operations, and pension liability included in Accrued Expenses, in the Statement of Assets and Liabilities were as follows: PENSION PENSION FUND EXPENSES LIABILITY -------------------------------------------------------------------------------- Cash Reserves Fund $ 32,418 $ 65,406 Tax-Free Money Fund 977 3,701 U.S. Government Money Fund 3,375 7,181 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. NOTE 4 -- 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 1.00% 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 the 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. 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 May 31, 2003, the Distributor received the following CDSC from Class A, Class B and Class C shareholders:
FUND CLASS A CLASS B CLASS C ------------------------------------------------------------------------------------------ Cash Reserves Fund $ 15,024 $ 4,141 $ 67,864
NOTE 5 -- SUBSEQUENT EVENTS. On June 9, 2003, the Board of Directors for the INVESCO Cash Reserves Fund and INVESCO Tax-Free Money Fund ("Selling Funds") unanimously approved an Agreement and Plan of Reorganization ("the Plan") pursuant to which the Selling Funds, would transfer all of its assets and liabilities to AIM Money Market Fund and AIM Tax-Exempt Cash Fund, a series of AIM Investment Securities Funds and AIM Tax-Exempt Funds, respectively. The Plan is more fully described in a proxy statement to be presented for shareholder consideration on or around August 25, 2003. REPORT OF INDEPENDENT AUDITORS To the Board of Directors and Shareholders of INVESCO Money Market Funds, Inc. In our opinion, the accompanying statements of assets and liabilities, including the statement of investment securities, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of INVESCO Cash Reserves Fund, INVESCO Tax-Free Money Fund and INVESCO U.S. Government Money Fund (constituting INVESCO Money Market Funds, Inc., hereafter referred to as the "Fund") at May 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 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 Fund's 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 May 31, 2003 by correspondence with the custodian 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 June 27, 2003 FINANCIAL HIGHLIGHTS
CASH RESERVES FUND -- INVESTOR CLASS -------------------------------------------------------------------------------------------------------------------- (FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD) YEAR ENDED MAY 31 -------------------------------------------------------------------------------------------------------------------- 2003 2002 2001 2000 1999 PER SHARE DATA Net Asset Value -- Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ==================================================================================================================== INCOME AND DISTRIBUTIONS FROM INVESTMENT OPERATIONS NET INVESTMENT INCOME EARNED AND DISTRIBUTED TO SHAREHOLDERS 0.01 0.02 0.05 0.05 0.04 ==================================================================================================================== Net Asset Value -- End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ==================================================================================================================== TOTAL RETURN 0.68% 1.76% 5.34% 4.87% 4.45% RATIOS Net Assets -- End of Period ($000 Omitted) $ 570,867 $ 1,121,981 $ 880,489 $ 912,135 $ 814,158 Ratio of Expenses to Average Net Assets(a)(b) 0.86% 0.82% 0.90% 0.91% 0.90% Ratio of Net Investment Income to Average Net Assets(b) 0.74% 1.76% 5.14% 4.75% 4.36% (a) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment Adviser, if applicable, which is before any expense offset arrangements (which may include custodian fees). (b) Various expenses of the Class were voluntarily absorbed by IFG for the years ended May 31, 2001, 2000 and 1999. If such expenses had not been voluntarily absorbed, ratio of expenses to average net assets would have been 0.90%, 0.94% and 0.91%, respectively, and ratio of net investment income to average net assets would have been 5.14%, 4.72% and 4.35%, respectively.
FINANCIAL HIGHLIGHTS
CASH RESERVES FUND -- CLASS A ----------------------------------------------------------------------------------------------------- (FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD) PERIOD ENDED YEAR ENDED MAY 31 MAY 31 ----------------------------------------------------------------------------------------------------- 2003 2002 2001(a) PER SHARE DATA Net Asset Value -- Beginning of Period $ 1.00 $ 1.00 $ 1.00 ===================================================================================================== INCOME AND DISTRIBUTIONS FROM INVESTMENT OPERATIONS NET INVESTMENT INCOME EARNED AND DISTRIBUTED TO SHAREHOLDERS 0.01 0.01 0.02 ===================================================================================================== Net Asset Value -- End of Period $ 1.00 $ 1.00 $ 1.00 ===================================================================================================== TOTAL RETURN 0.51% 1.32% 2.43%(b) RATIOS Net Assets -- End of Period ($000 Omitted) $ 8,916 $ 1,564 $ 1 Ratio of Expenses to Average Net Assets(c)(d) 0.96% 1.06% 1.32%(e) Ratio of Net Investment Income to Average Net Assets(d) 0.47% 1.40% 5.41%(e) (a) From August 25, 2000, inception of Class, to May 31, 2001. (b) Based on operations for the period shown and, accordingly, is not representative of a full year. (c) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment Adviser, if applicable, which is before any expense offset arrangements (which may include custodian fees). (d) Various expenses of the Class were voluntarily absorbed by IFG for the year ended May 31, 2002 and the period ended May 31, 2001. If such expenses had not been voluntarily absorbed, ratio of expenses to average net assets would have been 1.12% and 1.67%(annualized), respectively, and ratio of net investment income to average net assets would have been 1.34% and 5.06% (annualized), respectively. (e) Annualized
FINANCIAL HIGHLIGHTS
CASH RESERVES FUND -- CLASS B ----------------------------------------------------------------------------------------------------- (FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD) PERIOD ENDED YEAR ENDED MAY 31 MAY 31 ----------------------------------------------------------------------------------------------------- 2003 2002 2001(a) PER SHARE DATA Net Asset Value -- Beginning of Period $ 1.00 $ 1.00 $ 1.00 ===================================================================================================== INCOME AND DISTRIBUTIONS FROM INVESTMENT OPERATIONS NET INVESTMENT INCOME EARNED AND DISTRIBUTED TO SHAREHOLDERS(B) 0.00 0.01 0.03 ===================================================================================================== Net Asset Value -- End of Period $ 1.00 $ 1.00 $ 1.00 ===================================================================================================== TOTAL RETURN(c) 0.36% 1.07% 2.96%(d) RATIOS Net Assets -- End of Period ($000 Omitted) $ 599 $ 409 $ 63 Ratio of Expenses to Average Net Assets(e)(f) 1.21% 1.52% 1.82%(g) Ratio of Net Investment Income to Average Net Assets(f) 0.33% 0.87% 2.99%(g) (a) From August 25, 2000, inception of Class, to May 31, 2001. (b) Net Investment Income Earned and Distributed to Shareholders aggregated less than $0.01 on a per share basis for the year ended May 31, 2003. (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 Adviser, 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 years ended May 31, 2003 and 2002 and the period ended May 31, 2001. If such expenses had not been voluntarily absorbed, ratio of expenses to average net assets would have been 1.95%, 1.65% and 1.89% (annualized), respectively, and ratio of net investment income (loss) to average net assets would have been (0.41%), 0.74% and 2.92% (annualized), respectively. (g) Annualized
FINANCIAL HIGHLIGHTS
CASH RESERVES FUND -- CLASS C ----------------------------------------------------------------------------------------------------- (FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD) PERIOD ENDED YEAR ENDED MAY 31 MAY 31 ----------------------------------------------------------------------------------------------------- 2003 2002 2001 2000(a) PER SHARE DATA Net Asset Value -- Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 ===================================================================================================== INCOME AND DISTRIBUTIONS FROM INVESTMENT OPERATIONS NET INVESTMENT INCOME EARNED AND DISTRIBUTED TO SHAREHOLDERS(B) 0.00 0.01 0.04 0.01 ===================================================================================================== Net Asset Value -- End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 ===================================================================================================== TOTAL RETURN(c) 0.29% 0.96% 4.43% 1.36%(d) RATIOS Net Assets -- End of Period ($000 Omitted) $ 17,402 $ 52,233 $ 14,774 $ 4,186 Ratio of Expenses to Average Net Assets(e)(f) 1.27% 1.44% 1.64% 1.54%(g) Ratio of Net Investment Income to Average Net Assets(f) 0.33% 1.03% 4.07% 4.73%(g) (a) From February 15, 2000, inception of Class, to May 31, 2000. (b) Net Investment Income Earned and Distributed to Shareholders aggregated less than $0.01 on a per share basis for the year ended May 31, 2003. (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 Adviser, 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 years ended May 31, 2003 and 2002. If such expenses had not been absorbed, ratio of expenses to average net assets would have been 2.05% and 1.77%, respectively, and ratio of net investment income (loss) to average net assets would have been (0.45%) and 0.70%, respectively. (g) Annualized
FINANCIAL HIGHLIGHTS
TAX-FREE MONEY FUND -- INVESTOR CLASS -------------------------------------------------------------------------------------------------------------------- (FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD) YEAR ENDED MAY 31 -------------------------------------------------------------------------------------------------------------------- 2003 2002 2001 2000 1999 PER SHARE DATA Net Asset Value -- Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ==================================================================================================================== INCOME AND DISTRIBUTIONS FROM INVESTMENT OPERATIONS NET INVESTMENT INCOME EARNED AND DISTRIBUTED TO SHAREHOLDERS 0.01 0.01 0.03 0.03 0.03 ==================================================================================================================== Net Asset Value -- End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ==================================================================================================================== TOTAL RETURN 0.57% 1.22% 3.22% 2.86% 2.63% RATIOS Net Assets -- End of Period ($000 Omitted) $ 26,643 $ 32,138 $ 36,055 $ 40,396 $ 50,697 Ratio of Expenses to Average Net Assets(a)(b) 0.85% 0.85% 0.86% 0.87% 0.77% Ratio of Net Investment Income to Average Net Assets(b) 0.57% 1.21% 3.16% 2.82% 2.61% (a) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment Adviser, which is before any expense offset arrangements (which may include custodian fees). (b) Various expenses of the Fund were voluntarily absorbed by IFG for the years ended May 31, 2003, 2002, 2001, 2000 and 1999. If such expenses had not been voluntarily absorbed, ratio of expenses to average net assets would have been 1.14%, 1.14%, 1.17%, 1.11% and 1.02%, respectively, and ratio of net investment income to average net assets would have been 0.28%, 0.92%, 2.85%, 2.58% and 2.36%, respectively.
FINANCIAL HIGHLIGHTS
U.S. GOVERNMENT MONEY FUND -- INVESTOR CLASS -------------------------------------------------------------------------------------------------------------------- (FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD) YEAR ENDED MAY 31 -------------------------------------------------------------------------------------------------------------------- 2003 2002 2001 2000 1999 PER SHARE DATA Net Asset Value -- Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ==================================================================================================================== INCOME AND DISTRIBUTIONS FROM INVESTMENT OPERATIONS NET INVESTMENT INCOME EARNED AND DISTRIBUTED TO SHAREHOLDERS 0.01 0.02 0.05 0.05 0.04 ==================================================================================================================== Net Asset Value -- End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ==================================================================================================================== TOTAL RETURN 0.72% 1.67% 5.24% 4.74% 4.36% RATIOS Net Assets -- End of Period ($000 Omitted) $ 67,097 $ 75,720 $ 75,380 $ 86,060 $ 91,509 Ratio of Expenses to Average Net Assets(a)(b) 0.85% 0.85% 0.86% 0.86% 0.86% Ratio of Net Investment Income to Average Net Assets(b) 0.72% 1.65% 5.10% 4.63% 4.28% (a) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by Investment Adviser, which is before any expense offset arrangements (which may include custodian fees). (b) Various expenses of the Fund were voluntarily absorbed by IFG and for the years ended May 31, 2003, 2002, 2001, 2000 and 1999. If such expenses had not been voluntarily absorbed, ratio of expenses to average net assets would have been 1.11%, 1.04%, 1.18%, 1.16% and 1.08%, respectively, and ratio of net investment income to average net assets would have been 0.46%, 1.46%, 4.78%, 4.33% and 4.06%, respectively.
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 A. Baker Vice Chairman of Consultant (2000-present). 48 37 Castle Pines Dr. N. the Board Formerly, President and Castle Rock, Colorado (Since 2003) Chief Executive Officer (1988-2000) of AMC Cancer Age: 66 Research Center, 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, 48 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 Age: 58 Avulet, Inc., Sunnyvale, California (1998-1999), Vice President and General Manager, Multimedia Services Division, Motorola, Inc., Schoumburg, Illinois (1996-1998). Victor L. Andrews, Ph.D. Director Professor Emeritus, Chairman 48 34 Seawatch Drive Emeritus and Chairman and Savannah, Georgia CFO of the Roundtable of the Department of Finance of Age: 72 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, 48 7608 Glen Albens Circle Senior Vice President and Dallas, Texas Senior Trust Officer of InterFirst Bank, Dallas, Age: 72 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 48 Green, Manning & Bunch, 3600 Republic Plaza (since 2000) Ltd., Denver, Colorado 370 Seventeenth Street (1988-present); Director and Denver, Colorado Vice President of Western Golf Association and Evans Age: 60 Scholars Foundation; and Excutive Committee, United States Golf Association. 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 48 Director of General Chemical 701 "B" Street (since 2000) Resolution Services, San Group, Inc., Hampdon, New Suite 2100 Diego, California Hampshire (1996-present). San Diego, California (1987-present). Formerly, Director of Wheelabrator Associate Justice of the Technologies, Inc., Fisher California Court of Appeals; Scientific, Inc., Henley Age: 69 and of Counsel, Latham & Manufacturing, Inc., and Watkins, San Diego, California Coastal Properties, California (1987-1997). Inc. John W. McIntyre Director Retired. Trustee of Gables 48 7 Piedmont Center Residential Trust. Trustee Suite 100 and 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 48 Director of Synergen since 2358 Sunshine Canyon Dr. (since 1997) of the Board (1987-1994), incorporation in 1982; Boulder, Colorado Chief Executive Officer Director of Isis (1982-1989 and 1993-1994) and Pharmaceuticals, Inc. Age: 60 President (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 Board President and Chief Executive 48 4350 South Monaco Street (since 1999). Formerly, Officer AIM Investment Denver, Colorado President (1998-2002); Management and Chief and Chief Executive Executive Officer of the AIM Age: 51 Officer (1998-2002). Division of AMVESCAP PLC (2003-present). Formerly, Chief Executive Officer, Managed Products Division, AMVESCAP PLC (2001-present). 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 (2003-present), President (2003-present) and 48 Director of INVESCO Funds 4350 South Monaco Street Chief Executive Officer Chief Executive Officer Group, Inc. and Chairman of Denver, Colorado (2003-present) and (2003-present) of INVESCO the Board of INVESCO Director (2001-present). Funds Group, Inc.; Distributors, Inc. Age: 52 Formerly, Vice President Chairman of the Board (2003- (2001-2002). present), President (2003-present), and Chief Executive Officer (2003-present) of INVESCO Distributors, Inc. Formerly, Chief Operating Officer (2002-2003) 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 40 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, 4350 South Monaco Street General Counsel and Secretary Denver, Colorado of 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 Secretary Senior Vice President and Director of INVESCO Funds 4350 South Monaco Street Assistant Secretary of Group, Inc. and INVESCO Denver, Colorado INVESCO Funds Group, Inc.; Distributors, Inc. and Senior Vice President and Age: 46 Assistant Secretary of INVESCO Distributors, Inc. Formerly, Trust Officer of INVESCO Trust Company (1995-1998). Pamela J. Piro Assistant Treasurer Vice President and Assistant 4350 South Monaco Street Treasurer of INVESCO Funds Denver, Colorado Group, Inc.; and Assistant Treasurer of INVESCO Age: 42 Distributors, Inc. Formerly, Assistant Vice President (1996-1997). Tane T. Tyler Assistant Secretary Vice President and Assistant 4350 South Monaco Street (since 2002) General Counsel of INVESCO Denver, Colorado Funds Group, Inc. Age: 37 * 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.
[INVESCO ICON] INVESCO(R) 1-800-525-8085 Personal Account Line: 1-800-424-8085 Advisor Services: 1-800-959-4246 invescofunds.com INVESCO Distributors, Inc.,(SM) Distributor Post Office Box 173706 Denver, Colorado 80217-3706 Effective 7/1/03, A I M Distributors, Inc. 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. AMF 900472 7/03 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 MONEY MARKET FUNDS, INC. By: /s/ Raymond R. Cunningham ------------------------------------------------------------ Raymond R. Cunningham, President and Chief Executive Officer Date: July 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 MONEY MARKET FUNDS, INC. By: /s/ Ronald L. Grooms -------------------------------------------------------------------- Ronald L. Grooms, Treasurer & Chief Financial and Accounting Officer Date: July 31, 2003