KNOWLEDGE * DISCIPLINE * SERVICE * CHOICE
- -------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS (R)
- -------------------------------------------------
INVESCO BOND FUNDS
HIGH YIELD FUND
SELECT INCOME FUND
TAX-FREE BOND FUND
U.S. GOVERNMENT SECURITIES FUND
SEMIANNUAL
[INVESCO ICON] INVESCO FUNDS
SEMIANNUAL REPORT | February 29, 2000
<PAGE>
"HOLDERS OF BONDS ARE ENJOYING HIGH REAL YIELDS PAID BY ISSUERS, BOTH
CORPORATIONS AND MUNICIPALITIES, THAT ARE ESPECIALLY SOLVENT BASED ON HISTORICAL
STANDARDS."(PAGE 4)
Graph: High Yield Fund-Investor Class 10-Year Total Return
vs. Merrill Lynch High Yield Master Index
This line graph compares the value of a $10,000 investment in INVESCO
High Yield Fund-Investor Class to the value of a $10,000 investment in
the Merrill Lynch High Yield Master Index, assuming in each case
reinvestment of all dividends and capital gain distributions, for the
ten year period ended February 29, 2000.
Graph: Select Income Fund-Investor Class 10-Year Total Return vs.
Lehman Government/Corporate Bond Index
This line graph compares the value of a $10,000 investment in INVESCO
Select Income Fund-Investor Class to the value of a $10,000 investment
in the Lehman Government/Corporate Bond Index, assuming in each case
reinvestment of all dividends and capital gain distributions, for the
ten year period ended February 29, 2000.
Because the inception of C-class shares for INVESCO Bond Funds took place
immediately before the reporting period, we are not including performance
figures for this class of shares. Future reports will include separate
performance tables and charts for C-class shares.
TOTAL RETURN--INVESTOR CLASS
PERIODS ENDED 2/29/2000(1)
Cumulative Average Annualized
6 months 1 year 5 years 10 years
- --------------------------------------------------------------------------------
High Yield Fund 2.50% 6.61% 10.41% 10.17%
Select Income Fund 1.37% (0.12%) 7.52% 8.69%
Tax-Free Bond Fund (0.34%) (3.22%) 4.64% 6.23%
U.S. Government Securities Fund 2.08% (1.28%) 6.81% 7.16%
<PAGE>
Graph: U.S. Government Securities Fund-Investor Class 10-Year Total Return
vs. Lehman Government Long Bond Index
This line graph compares the value of a $10,000 investment in INVESCO
U.S. Government Securities Fund-Investor Class to the value of a
$10,000 investment in the Lehman Government Long Bond Index, assuming
in each case reinvestment of all dividends and capital gain
distributions, for the ten year period ended February 29, 2000.
Graph: Tax-Free Bond Fund-Investor Class 10-Year Total Return vs.
Lehman Municipal Bond Index
This line graph compares the value of a $10,000 investment in INVESCO
Tax-Free Bond Fund-Investor Class to the value of a $10,000 investment
in the Lehman Municipal Bond Index, assuming in each case reinvestment
of all dividends and capital gain distributions, for the ten year
period ended February 29, 2000.
The line graphs illustrate the value of a $10,000 investment, plus reinvested
dividends and capital gain distributions, for the 10-year period through
2/29/00. The charts and other total return figures cited reflect the funds'
operating expenses, but the indexes do not have expenses, which would, of
course, have lowered their performance. (Of course, past performance is not a
guarantee of future results.)(1),(2)
MANAGER OF THE YEAR
- --------------------------------------------------------------------------------
INVESCO IS PROUD TO NOTE THAT DIRECTOR OF FIXED-INCOME INVESTMENTS JERRY PAUL,
MANAGER OF HIGH YIELD AND SELECT INCOME FUNDS, WAS RECENTLY NAMED "FIXED-INCOME
MANAGER OF THE YEAR" BY INDEPENDENT MUTUAL FUND ANALYST MORNINGSTAR.
<PAGE>
INVESCO'S BOND FUNDS
A REPORT FROM THE MANAGERS
- --------------------------------------------------------------------------------
Dear Shareholder:
The past six months have been another uninspiring period for bond investors,
although fixed-income investments have recently performed much more in line with
the broad equity markets. Indeed, bonds have shared the same fate suffered by
many stocks: With returns so high in the technology-driven sectors of the equity
market, investors have been reluctant to allocate funds to slower-growing asset
classes. Thus demand for bonds has languished, weighing in turn on prices.
As you know, the other key determinant of bond fund performance is the direction
of interest rates. Here, too, bondholders have been swimming against the
current. In the past six months, the Federal Reserve Board raised short-term
interest rates twice, continuing the monetary tightening cycle it began last
June. Most investors expect the central bank to continue tightening in 2000 in
an attempt to slow the economy to a pace that it perceives to be sustainable.
Finally, the high yield sector of the bond market has suffered moderately from
default concerns. Of course, high-yield bonds issued by corporations always
carry some risk, and issuers have experienced some well-publicized defaults over
the past several months. Nonetheless, we are seeing little evidence of any
systemic credit problems, caused either by lax lending standards or a slowing
economy. Indeed, our avoidance of the bulk of these defaults has helped our
performance relative to other high yield bond funds.
While these conditions have created frustrating conditions for bond sellers,
they have also resulted in what we believe are extremely attractive valuations
in the corporate and municipal bond markets. Holders of bonds are enjoying high
real yields paid by issuers, both corporations and municipalities, that are
especially solvent based on historical standards.
We should note, however, that our optimism is based on our view of the
longer-term outlook for this market. We would be surprised if the bond markets
rocketed back this year, as they did in the early 1990s following a similarly
difficult period. For the corporate bond markets to enjoy a sustained recovery,
buyers will have to return en masse -- as they seem unlikely to do as long as
the equity markets continue to offer the potential for double-digit returns.
Nonetheless, we expect that more investors ultimately will be attracted to the
combination of return and relative security offered by corporate bonds.
HIGH YIELD FUND
In High Yield Fund, our investment themes have continued to play out as we
expected, although the good news we received about several of our holdings has
come against an extremely difficult market backdrop. Mixing our favorable bond
selections with an unfavorable market environment has resulted in a small gain
for the fund over the past six months.
<PAGE>
For the six-month period ended February 29, 2000, the value of your shares in
High Yield Fund-Investor Class rose 2.50%. This return exceeded that of the
Merrill Lynch High Yield Master Index, which rose 0.24% over the same period.
(Of course, past performance is no guarantee of future results.)(1),(2)
Our telecommunications theme has continued to grow in importance. As competitive
carriers continue to grow and grab market share from established companies, they
have borrowed extensively in the high yield market to fund their expansions. We
have benefited from credit upgrades in several of our holdings.
Bondholders have enjoyed not only high income from this debt, but also
improvements in the strength of the credits as many of these same companies have
turned to the equity markets to provide another layer of financing beneath their
debt. A prime example is Level 3 Communications, which now boasts a roughly $40
billion equity cushion that will protect bondholders in the event the company
experiences difficulties.
Telecommunications bondholders also stand to prosper from the ongoing round of
consolidation taking place in this industry. Recently, we saw an increase in the
price of our bonds in the Irish telecommunications firm Esat Holdings Ltd when
first the Norwegian firm Telenor, and then British Telecom, announced plans to
take over the company. We fully anticipate that large European telecommunication
firms will next turn their sights to American carriers. Like beachfront
property, the number of possible entry points into the U.S. market is limited --
and we have positions in them all.
Moving forward, we will continue to position the fund for such potential credit
improvements, which result from the ongoing shifts in the market structures of
industries. Because we believe these processes are somewhat visible -- and thus
predictable -- this approach seems to us to be a relatively low-risk way to add
value for our shareholders, while providing high current income. We do not feel
the same way about other techniques, including investing in emerging market debt
and the overuse of convertible securities.
SELECT INCOME FUND
For the six-month period ended February 29, 2000, the value of your shares in
Select Income Fund-Investor Class rose 1.37%. This return slightly trailed that
of the Lehman Government/Corporate Bond Index, which rose 1.72% over the same
period. (Of course, past performance is no guarantee of future results.)(1),(2)
<PAGE>
One of the notable features of the credit markets recently has been the widening
gap between yields on corporate and government debt. Given the growing demand
for capital from expanding firms, the real cost of capital for even the
highest-rated borrowers has increased -- not only absolutely, but also in
relation to Treasury securities. Thus, for corporate borrowers and investors in
their bonds, the rising government and mortgage rates that have dominated the
business news over the past several months have told only part of the story.
Within the corporate bond universe, our fund's relatively long average duration
has left us particularly vulnerable to these rising rates.
On the other hand, we have continued to benefit from increases in the prices of
our bonds flowing from our investment themes. Consolidation in the
telecommunications industry, explained above, has benefited the fund. A
continuing theme of some importance has been electric utility deregulation,
which has seen utilities improve their credit ratings as a result. Other
investment themes, including gaming and broadcasting, have been less important
for the fund, but we expect that they may benefit the portfolio going forward.
TAX-FREE BOND FUND
For the six-month period ended February 29, 2000, the value of your shares in
Tax-Free Bond Fund-Investor Class declined 0.34%. This return was below that of
the Lehman Municipal Bond Index, which fell 0.02% over the same period. (Of
course, past performance is no guarantee of future results.)(1),(2)
Yet another unusual feature of the current bond markets is the near parity
between yields on municipal bonds and Treasury bonds of the same duration.
Investors in municipal bonds can now enjoy post-tax effective yields that are
often 2% greater than those offered by Treasurys.
While this situation creates attractive values for municipal bond buyers, it is
also indicative of a difficult period in the municipal markets. Past heavy
issuance by municipalities resulted in an oversupply of municipal bonds, a
situation that was aggravated by a lack of buyers. Over the past year, the
prices of municipal securities have declined fairly steadily. As with corporate
bonds, any sort of sustained recovery in this market will rely on investors
shifting from equities and placing a higher emphasis on security of return.
U.S. GOVERNMENT SECURITIES FUND
For the six-month period ended February 29, 2000, the value of your shares in
U.S. Government Securities Fund-Investor Class rose 2.08%. This return lagged
that of the Lehman Government Long Bond Index, which rose 2.88% over the same
period. (Of course, past performance is no guarantee of future results.)(1),(2)
The good news for investors in longer-term government securities is that
government interest rates -- after nearly 18 months of increases -- have
recently shown signs of trending downward; indeed, long bond yields have
declined dramatically. Of course, the main question now is whether this is a
temporary pause before rates resume their climb, or whether we have seen a real
inflection point.
Evidence suggesting that rates may remain subdued hinges largely on the superb
U.S. economic environment. Banks are healthy, the government is showing
exemplary fiscal discipline, and technology is expanding productivity. Most
important, inflationary pressures -- at least at the consumer level -- remain
<PAGE>
largely absent. But a number of more troublesome signs remain as well. The yield
curve's recent inversion does not bode well for the current expansion, as
several times in the past such inversions led to recessions within the year. A
tight labor market remains a real inflationary concern, especially if it
combines with higher raw material and energy prices to further increase producer
prices. Finally, the government's buyback of its debt -- which has led rates
lower recently -- may introduce uncertainties into the credit markets. A number
of institutions, such as mortgage lenders, rely on stable long-term rates on
government debt to conduct their operations.
It is difficult to foresee how these various and often contradictory forces will
affect the fund. But within these uncertain parameters, we feel confident in our
current approach, which mixes government agency mortgage-backed securities in
roughly equal proportion with U.S. Treasury bonds. The mortgage-backed
securities provide our fund somewhat higher yields, whereas our longer-duration
Treasury bonds are perfectly situated for government buybacks.
Finally, it is worth noting that the uncertainties in the interest rate
environment are dwarfed by those in the equity markets. Recently, several
observers have speculated that bonds deserve no risk premium over stocks. Should
many prominent stocks fall from their rarefied levels, we expect that many
investors will revisit this assumption -- and the bond markets might welcome
back many former buyers.
/s/ Donovan J. Paul /s/ Richard Hinderlie
DONOVAN (JERRY) PAUL RICHARD HINDERLIE
Senior Vice President and Vice President
Director of Fixed-Income Investments Manager of U.S. Government
Manager of Select Income Fund, Securities Fund
High Yield Fund and Tax-Free Bond Fund
- --------------------------------------------------------------------------------
FUND MANAGERS
DONOVAN J. (JERRY) PAUL, CFA, CPA (FIXED-INCOME)
Jerry Paul is the Director of Fixed-Income investments at INVESCO Funds Group.
He received his BBA from the University of Iowa, and an MBA from the University
of Northern Iowa. Before joining INVESCO, Jerry worked for Stein, Roe & Farnham
Inc., as well as Quixote Investment Management. He began his investment career
in 1976. He is a Chartered Financial Analyst and CPA.
RICHARD HINDERLIE
Dick Hinderlie received his BA in economics from Pacific Lutheran University and
his MBA from Arizona State University. He began his investment career in 1973,
and has extensive experience in fixed-income analysis and portfolio management.
<PAGE>
INVESCO | SEMIANNUAL REPORT | FEBRUARY 29, 2000
MOVING FORWARD
- --------------------------------------------------------------------------------
MARKET HEADLINES:
SEPTEMBER 1999 - FEBRUARY 2000
In the months surrounding the ballyhooed (and ultimately uneventful) Y2K
deadline, the broad markets continued to confound many analysts. Detractors
termed the markets "schizophrenic," while more optimistic observers noted that
the markets were merely "bifurcated." In any case, investors continued to punish
most "Old Economy" stocks while rewarding "New Economy" firms in the favored
sectors of telecommunications and technology.
Why had stock performance diverged so drastically? One possibility was simply
that investors were chasing performance, throwing more money after the few
stocks that had worked in the recent past. Indeed, speculation seemed on the
rise worldwide. In Hong Kong, near-riot conditions accompanied the investor
stampede to participate in Tom.com, an initial public offering for an Internet
firm with no revenues -- much less earnings.
But another possibility was that investors were simply putting their money where
the profits were. With easy comparisons back to 1998 now out of the way, fewer
firms could boast aggressive annual profits or sales growth. Those that could
were concentrated around new technologies, such as fiber optics, that seemed to
enjoy unlimited demand as businesses and consumers re-tooled for the information
age.
The tension between avoiding speculation on the one hand, and accommodating
real, structural change on the other, preoccupied policymakers as well. Federal
Reserve Chairman Alan Greenspan spoke several times of a "special period" of
innovation, while warning that the expansion was nonetheless running too hot to
keep inflation subdued.
In an attempt to bring the economy to a "soft landing," the Federal Reserve
Board raised short-term interest rates on two occasions over the period,
bringing medium-term interest rates to their highest levels in over two years.
As the federal government surplus began to affect the long-term Treasury market,
however, long-term rates headed lower -- resulting in an unusual situation where
borrowers paid more for medium-term debt.
Did the Fed's medicine work? If you were a homebuilder, you probably thought so:
New and existing home sales cooled off as buyers contemplated higher mortgage
rates. You probably concurred if you were a value investor in the stock market,
where many "Old Economy" stocks languished at levels they had hit in the depths
of 1998's emerging markets crisis.
But that wasn't the whole picture. Auto dealers remained content as sales boomed
even after the second rate increase in February 2000, helped by generous
manufacturer incentives. In the stock market, technology and telecommunication
investors saw their holdings soar, fueled by expectations of rocketing global
demand. Indeed, many such firms, flush with cash from the equity markets,
remained immune to higher short-term interest rates because they carried little
or no debt.
<PAGE>
Meanwhile, most Americans continued to see the glass as half full -- with wage
increases strong and consumer price inflation subdued, it was difficult to be
too pessimistic. As the quick rebound in 1998 had proved, it was the average
consumer that mattered most. If he or she stayed optimistic even while paying
more for gas and higher rates on credit card debt, the economy seemed firmly
fixed to its tracks. Whether the market would be as well remained, as always,
open to question.
SINCE THE FUNDS ARE ACTIVELY MANAGED, HOLDINGS WILL CHANGE OVER TIME.
(1) TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN
DISTRIBUTIONS. PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. INVESTMENT
RETURN AND PRINCIPAL VALUE WILL VARY SO THAT, WHEN REDEEMED, AN INVESTOR'S
SHARES MAY BE WORTH MORE OR LESS THAN WHEN PURCHASED. INCOME FROM TAX-FREE BOND
FUND MAY BE SUBJECT TO STATE AND LOCAL TAXES, AS WELL AS TO THE FEDERAL
ALTERNATIVE MINIMUM TAX.
(2) THE MERRILL LYNCH HIGH YIELD MASTER TRUST, LEHMAN GOVERNMENT/CORPORATE BOND,
LEHMAN GOVERNMENT LONG BOND, AND LEHMAN MUNICIPAL BOND INDEXES ARE UNMANAGED
INDEXES INDICATIVE OF THE HIGH YIELD BOND, OVERALL DOMESTIC FIXED-INCOME,
LONGER-TERM GOVERNMENT BOND, AND BROAD TAX-EXEMPT BOND MARKETS, RESPECTIVELY.
LIPPER ANALYTICAL SERVICES IS AN INDEPENDENT MUTUAL FUND ANALYST.
<PAGE>
STATEMENT OF INVESTMENT SECURITIES
INVESCO BOND FUNDS, INC.
FEBRUARY 29, 2000
UNAUDITED
<TABLE>
<CAPTION>
SHARES, UNITS
OR PRINCIPAL
% DESCRIPTION AMOUNT VALUE
<S> <C> <C>
HIGH YIELD FUND
89.67 FIXED INCOME SECURITIES
89.67 CORPORATE BONDS
0.18 AUTO PARTS
MascoTech Inc, Conv Sub Deb, 4.500%, 12/15/2003 $ 1,800,000 $ 1,347,750
========================================================================================================
0.95 BIOTECHNOLOGY
Packard BioScience, Sr Sub Notes, Series B, 9.375%, 3/1/2007 $ 8,100,000 7,006,500
========================================================================================================
5.23 BROADCASTING
Chancellor Media of Los Angeles, Gtd Sr Sub Notes
Series B, 10.500%, 1/15/2007 $ 9,600,000 10,320,000
LIN Holdings, Sr Discount Step-Up Notes
Zero Coupon(a), 3/1/2008 $ 14,785,000 9,499,363
LIN Television, Gtd Sr Sub Notes, 8.375%, 3/1/2008 $ 9,925,000 8,845,656
Sinclair Broadcast Group, Sr Sub Notes, 10.000%, 9/30/2005 $ 4,000,000 3,865,000
Young Broadcasting, Gtd Sr Sub Notes, Series B
9.000%, 1/15/2006 $ 6,700,000 6,113,750
========================================================================================================
38,643,769
3.79 CABLE
Charter Communications Holdings LLC/Charter
Communications Holdings Capital, Sr Discount
Step-Up Notes, Zero Coupon(a), 4/1/2011 $ 7,250,000 4,168,750
Comcast Cable Partners Ltd, Sr Discount Step-Up Deb
Zero Coupon(a), 11/15/2007 $ 9,414,000 9,037,440
Mediacom LLC/Mediacom Capital, Sr Notes
7.875%, 2/15/2011 $ 1,750,000 1,509,375
NTL Inc
Conv Sub Notes(b), 5.750%, 12/15/2009 $ 1,800,000 1,836,000
Sr Deferred Step-Up Notes, Zero Coupon(a), 4/1/2008 $ 5,250,000 3,491,250
Renaissance Media Group LLC/Renaissance Media
Capital, Gtd Sr Discount Step-Up Notes
Zero Coupon(a), 4/15/2008 $ 12,000,000 7,980,000
========================================================================================================
28,022,815
2.80 CHEMICALS
Huntsman Corp, Sr Sub Notes(b), 9.500%, 7/1/2007 $ 8,500,000 7,947,500
Huntsman Polymers, Sr Notes, 11.750%, 12/1/2004 $ 12,291,000 12,751,912
========================================================================================================
20,699,412
<PAGE>
SHARES, UNITS
OR PRINCIPAL
% DESCRIPTION AMOUNT VALUE
2.99 COMMUNICATIONS -- EQUIPMENT & MANUFACTURING
Metromedia Fiber Network, Sr Notes, Series B
10.000%, 11/15/2008 $ 13,000,000 $ 12,772,500
World Access, Sr Notes, Series B, 13.250%, 1/15/2008 $ 6,750,000 6,159,375
Worldwide Fiber, Sr Notes, 12.500%, 12/15/2005 $ 3,050,000 3,194,875
========================================================================================================
22,126,750
3.36 COMPUTER RELATED
PSINet Inc
Sr Notes, 11.000%, 8/1/2009 $ 8,770,000 8,791,925
Sr Notes(b), 10.500%, 12/1/2006 $ 13,000,000 12,772,500
WAM!NET, Gtd Sr Discount Step-Up Notes, Series B
Zero Coupon(a), 3/1/2005 $ 5,700,000 3,249,000
========================================================================================================
24,813,425
1.49 ELECTRIC UTILITIES
El Paso Electric, 1st Mortgage, Series D, 8.900%, 2/1/2006 $ 6,000,000 6,170,868
Niagara Mohawk Power, Sr Discount Step-Up Notes
Series H, Zero Coupon(a), 7/1/2010 $ 6,500,000 4,858,750
========================================================================================================
11,029,618
0.53 ELECTRICAL EQUIPMENT
Alpine Group, Gtd Sr Secured Notes, Series B
12.250%, 7/15/2003 $ 3,800,000 3,914,000
========================================================================================================
0.65 ENGINEERING & CONSTRUCTION
Ryland Group, Sr Sub Notes, 8.250%, 4/1/2008 $ 5,750,000 4,830,000
========================================================================================================
0.12 ENTERTAINMENT
AMC Entertainment, Sr Sub Notes, 9.500%, 2/1/2011 $ 1,200,000 906,000
========================================================================================================
1.53 FINANCIAL
Madison River Capital LLC/Madison River Financial
Sr Notes(b), 13.250, 3/1/2010 $ 11,500,000 11,270,000
========================================================================================================
3.55 GAMING
Aztar Corp, Sr Sub Notes, 8.875%, 5/15/2007 $ 13,000,000 11,992,500
Isle of Capri Casinos, Gtd Sr Sub Notes, 8.750%, 4/15/2009 $ 8,250,000 7,311,563
Park Place Entertainment, Sr Sub Notes(b), 9.375%, 2/15/2007 $ 3,000,000 2,959,758
Station Casinos, Sr Sub Notes, 9.750%, 4/15/2007 $ 4,040,000 3,999,600
========================================================================================================
26,263,421
1.56 HEALTH CARE RELATED
PharMerica Inc, Gtd Sr Sub Notes, 8.375%, 4/1/2008 $ 20,955,000 11,525,250
========================================================================================================
0.09 HOMEBUILDING
US Home, Sr Sub Notes, 8.875%, 2/15/2009 $ 650,000 630,500
========================================================================================================
0.99 HOUSEHOLD PRODUCTS
Home Products International, Gtd Sr Sub Notes
9.625%, 5/15/2008 $ 8,100,000 7,290,000
========================================================================================================
<PAGE>
SHARES, UNITS
OR PRINCIPAL
% DESCRIPTION AMOUNT VALUE
1.92 IRON & STEEL
Inland Steel, 1st Mortgage, Series R, 7.900%, 1/15/2007 $ 9,980,000 $ 9,094,275
National Steel, 1st Mortgage, 8.375%, 8/1/2006 $ 5,636,000 5,072,400
========================================================================================================
14,166,675
0.46 METALS MINING
Bulong Operations Property Ltd, Sr Secured Notes
12.500%, 12/15/2008 $ 5,515,000 3,419,300
========================================================================================================
5.23 OIL & GAS RELATED
Belco Oil & Gas, Sr Sub Notes, Series B
8.875%, 9/15/2007 $ 1,780,000 1,655,400
Canadian Forest Oil Ltd, Gtd Sr Sub Notes
8.750%, 9/15/2007 $ 15,450,000 14,368,500
Cliffs Drilling, Gtd Sr Notes, Series B
10.250%, 5/15/2003 $ 2,900,000 2,885,500
Coda Energy, Gtd Sr Sub Notes, Series B
10.500%, 4/1/2006 $ 4,300,000 4,364,500
Forest Oil, Gtd Sr Sub Notes, 10.500%, 1/15/2006 $ 1,650,000 1,666,500
GulfMark Offshore, Gtd Sr Notes, 8.750%, 6/1/2008 $ 5,250,000 4,751,250
Houston Exploration, Sr Sub Notes, Series B
8.625%, 1/1/2008 $ 6,250,000 5,843,750
Ocean Energy, Gtd Sr Sub Notes, Series B
8.875%, 7/15/2007 $ 3,200,000 3,144,000
========================================================================================================
38,679,400
1.22 PAPER & FOREST PRODUCTS
Bear Island Paper LLC/Bear Island Finance II, Sr Secured
Notes, Series B, 10.000%, 12/1/2007 $ 9,100,000 8,997,625
========================================================================================================
0.44 PERSONAL CARE
Revlon Consumer Products, Sr Notes, 8.125%, 2/1/2006 $ 4,650,000 3,278,250
========================================================================================================
0.33 POLLUTION CONTROL
Allied Waste North America, Gtd Sr Sub Notes, Series B
10.000%, 8/1/2009 $ 3,000,000 2,475,000
========================================================================================================
4.25 SERVICES
Heritage Media, Sr Sub Notes, 8.750%, 2/15/2006 $ 7,045,000 7,062,612
NationsRent Inc, Gtd Sr Sub Notes, 10.375%, 12/15/2008 $ 6,250,000 5,718,750
United Rentals, Gtd Sr Sub Notes, Series B
9.250%, 1/15/2009 $ 5,000,000 4,650,000
9.000%, 4/1/2009 $ 3,600,000 3,321,000
8.800%, 8/15/2008 $ 11,675,000 10,624,250
========================================================================================================
31,376,612
0.28 SHIPPING
TBS Shipping International Ltd, 1st Pfd Shipping
Mortgage Notes(c), 10.000%, 5/1/2005 $ 5,750,000 2,070,000
========================================================================================================
<PAGE>
SHARES, UNITS
OR PRINCIPAL
% DESCRIPTION AMOUNT VALUE
2.24 SPECIALTY PRINTING
MDC Communications, Sr Sub Notes, 10.500%, 12/1/2006 $ 9,500,000 $ 9,120,000
World Color Press, Sr Sub Notes, 7.750%, 2/15/2009 $ 7,950,000 7,440,326
========================================================================================================
16,560,326
3.61 TELECOMMUNICATIONS -- CELLULAR & WIRELESS
Esat Holdings Ltd, Sr Deferred Step-Up Notes, Series B
Zero Coupon(a), 2/1/2007 $ 15,850,000 14,265,000
Telecorp PCS, Gtd Sr Sub Discount Step-Up Notes
Zero Coupon(a), 4/15/2009 $ 6,550,000 4,290,250
Williams Communications Group, Sr Notes
10.875%, 10/1/2009 $ 8,000,000 8,160,000
========================================================================================================
26,715,250
15.26 TELECOMMUNICATIONS -- LONG DISTANCE
Allegiance Telecom, Sr Discount Step-Up Notes
Series B, Zero Coupon(a), 2/15/2008 $ 6,790,000 4,956,700
Call-Net Enterprises, Sr Discount Step-Up Notes
Zero Coupon(a), 8/15/2007 $ 3,900,000 2,252,250
Esprit Telecom Group PLC, Sr Notes, 11.500%, 12/15/2007 $ 8,250,000 7,837,500
GCI Inc, Sr Notes, 9.750%, 8/1/2007 $ 7,850,000 7,359,375
GlobeNet Communications Group, Sr Notes(b)
13.000%, 7/15/2007 $ 6,000,000 5,700,000
Level 3 Communications
Sr Discount Step-Up Notes, Zero Coupon(a), 12/1/2008 $ 72,100,000 42,268,625
Sr Discount Step-Up Notes(b), Zero Coupon(a), 3/15/2010 $ 17,500,000 9,318,750
Sr Notes(b), 11.000%, 3/15/2008 $ 6,500,000 6,516,250
Sr Notes, 9.125%, 5/1/2008 $ 550,000 497,750
Primus Telecommunications Group
Conv Sub Deb(b), 5.750%, 2/15/2007 $ 3,750,000 3,900,000
Sr Notes, Series B, 9.875%, 5/15/2008 $ 6,000,000 5,400,000
Qwest Communications International, Sr Discount
Step-Up Notes, Series B, Zero Coupon(a), 2/1/2008 $ 3,750,000 2,892,521
Startec Global Communications, Sr Notes
12.000%, 5/15/2008 $ 3,850,000 3,214,750
Viatel Inc, Sr Dollar Notes, 11.500%, 3/15/2009 $ 11,250,000 10,631,250
========================================================================================================
112,745,721
23.62 TELEPHONE
Covad Communications Group, Sr Notes(b)
12.000%, 2/15/2010 $ 4,000,000 3,930,000
Diamond Cable Communications PLC, Sr Discount
Step-Up Notes, Zero Coupon(a)
12/15/2005 $ 10,000,000 9,575,000
2/15/2007 $ 3,600,000 2,862,000
<PAGE>
SHARES, UNITS
OR PRINCIPAL
% DESCRIPTION AMOUNT VALUE
Focal Communications, Sr Discount Step-Up Notes
Zero Coupon(a), 2/15/2008 $ 8,250,000 $ 5,568,750
Intermedia Communications
Sr Discount Step-Up Notes, Series B
Zero Coupon(a), 3/1/2009 $ 27,150,000 16,561,500
Sr Notes, Series B, 8.500%, 1/15/2008 $ 1,920,000 1,766,400
McLeodUSA Inc
Sr Discount Step-Up Notes, Zero Coupon(a), 3/1/2007 $ 5,650,000 4,576,500
Sr Notes, 8.125%, 2/15/2009 $ 7,000,000 6,265,000
MetroNet Communications
Sr Discount Step-Up Notes, Zero Coupon(a)
11/1/2007 $ 3,250,000 2,712,554
6/15/2008 $ 26,650,000 20,960,172
Netia Holdings BV, Gtd Sr Discount Step-Up Notes
Series B, Zero Coupon(a), 11/1/2007 $ 8,300,000 5,976,000
NEXTLINK Communications
Sr Discount Step-Up Notes, Zero Coupon(a), 4/15/2008 $ 11,600,000 7,250,000
Sr Notes
10.750%, 11/15/2008 $ 5,750,000 5,764,375
9.625%, 10/1/2007 $ 5,950,000 5,712,000
NEXTLINK Communications LLC/NEXTLINK Capital
Sr Notes, 12.500%, 4/15/2006 $ 17,160,000 18,318,300
NorthPoint Communications Group, Sr Notes(b)
12.875%, 2/15/2010 $ 5,500,000 5,417,500
RCN Corp
Sr Discount Step-Up Notes, Series B
Zero Coupon(a), 2/15/2008 $ 21,000,000 12,915,000
Sr Notes, 10.125%, 1/15/2010 $ 8,000,000 7,440,000
Splitrock Services, Gtd Sr Notes, Series B
11.750%, 7/15/2008 $ 7,000,000 7,455,000
United Pan-Europe Communications NV
Sr Discount Step-Up Notes, Zero Coupon(a), 8/1/2009 $ 18,750,000 10,312,500
Sr Discount Step-Up Notes(b), Zero Coupon(a), 2/1/2010 $ 12,250,000 6,431,250
Sr Notes(b), 10.875%, 11/1/2007 $ 3,500,000 3,539,375
US WEST Communications, Notes, 5.650%, 11/1/2004 $ 3,475,000 3,220,623
========================================================================================================
174,529,799
1.00 TEXTILE -- APPAREL MANUFACTURING
WestPoint Stevens, Sr Notes, 7.875%, 6/15/2005 $ 8,500,000 7,395,000
========================================================================================================
TOTAL FIXED INCOME SECURITIES (Cost $714,353,266) 662,728,168
========================================================================================================
9.99 PREFERRED STOCKS & WARRANTS
0.64 BROADCASTING
Granite Broadcasting, Exchangeable Pfd(d), 12.750% 4,600 4,738,000
========================================================================================================
<PAGE>
SHARES, UNITS
OR PRINCIPAL
% DESCRIPTION AMOUNT VALUE
0.35 COMPUTER RELATED
PSINet Inc, Conv Pfd(b), Series D, 7.000% 46,000 $ 2,351,750
WAM!NET Warrants(b)(e) (Exp 2005) 17,100 198,787
========================================================================================================
2,550,537
1.06 PUBLISHING
PRIMEDIA Inc, Exchangeable Pfd, Series H Shrs, 8.625% 91,500 7,869,000
========================================================================================================
2.21 TELECOMMUNICATIONS -- CELLULAR & WIRELESS
Nextel Communications, Exchangeable Pfd(d), Series E Shrs, 11.125% 16,839 16,333,830
========================================================================================================
5.30 TELECOMMUNICATIONS -- LONG DISTANCE
Global Crossing Holdings Ltd, Sr Exchangeable Pfd(d), 10.500% 186,220 18,249,560
IXC Communications, Jr Exchangeable Pfd(d), Series B Shrs, 12.500% 19,281 20,823,480
Startec Global Communications, Warrants(b)(e) (Exp 2008) 3,850 69,300
========================================================================================================
39,142,340
0.43 TELEPHONE
Intermedia Communications, Pfd(d), Series B Shrs, 13.500% 3,197 3,181,015
========================================================================================================
TOTAL PREFERRED STOCKS & WARRANTS (Cost $75,810,801) 73,814,722
========================================================================================================
0.34 OTHER SECURITIES
GT Group Telecom, Units(b)(Each unit consists of one $1,000 Face Amount
Sr Discount Step-Up Note, Zero Coupon(a), 2/1/2010
and 1 wrnt to purchase 4.9106 Class B non-voting shrs of cmn stk)
(Cost $2,208,503) 4,150 2,490,000
========================================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $792,372,570)
(Cost for Income Tax Purposes $792,591,451) $ 739,032,890
========================================================================================================
SELECT INCOME FUND
98.12 FIXED INCOME SECURITIES
0.86 US GOVERNMENT OBLIGATIONS
US Treasury Notes, 6.000%, 8/15/2009 (Cost $4,602,905) $ 4,650,000 $ 4,472,719
========================================================================================================
2.16 US GOVERNMENT AGENCY OBLIGATIONS
Freddie Mac, Gold, Participation Certificates
6.500%, 9/1/2011 (Cost $11,319,742) $ 11,622,342 11,226,762
========================================================================================================
95.10 CORPORATE BONDS
1.33 AIRLINES
Delta Air Lines, Deb, 10.375%, 12/15/2022 $ 6,007,000 6,903,773
========================================================================================================
4.28 BROADCASTING
Chancellor Media of Los Angeles
Gtd Sr Sub Notes
9.000%, 10/1/2008 $ 4,975,000 5,062,062
Series B, 8.750%, 6/15/2007 $ 8,500,000 8,510,625
Sr Sub Notes, Series B, 8.125%, 12/15/2007 $ 6,000,000 5,955,000
<PAGE>
SHARES, UNITS
OR PRINCIPAL
% DESCRIPTION AMOUNT VALUE
LIN Television, Gtd Sr Sub Notes, 8.375%, 3/1/2008 $ 3,000,000 $ 2,673,750
========================================================================================================
22,201,437
3.82 BUILDING MATERIALS
USG Corp, Sr Notes, 8.500%, 8/1/2005 $ 19,549,000 19,783,177
========================================================================================================
1.40 CABLE
Charter Communications Holdings LLC/Charter
Communications Holdings Capital, Sr Discount
Step-Up Notes, Zero Coupon(a), 4/1/2011 $ 2,000,000 1,150,000
Tele-Communications Inc, Sr Deb, 9.800%, 2/1/2012 $ 3,718,000 4,295,658
TeleWest PLC, Sr Discount Step-Up Deb
Zero Coupon(a), 10/1/2007 $ 1,910,000 1,802,563
========================================================================================================
7,248,221
0.81 CHEMICALS
Equistar Chemicals LP, Deb, 7.550%, 2/15/2026 $ 5,050,000 4,208,271
========================================================================================================
25.54 ELECTRIC UTILITIES
Appalachian Power, 1st Mortgage, Medium-Term Notes
8.000%, 6/1/2025 $ 4,000,000 3,862,912
Central Power & Light, 1st Mortgage, Series II
7.500%, 4/1/2023 $ 3,551,000 3,285,428
Cleveland Electric Illuminating
1st Mortgage
Series B, 9.500%, 5/15/2005 $ 4,477,000 4,632,074
Series E, 9.000%, 7/1/2023 $ 2,750,000 2,814,174
Sr Secured Notes, Series D
7.880%, 11/1/2017 $ 5,000,000 4,821,265
7.430%, 11/1/2009 $ 8,275,000 7,894,962
CMS Energy, Sr Notes, Series B, 6.750%, 1/15/2004 $ 6,900,000 6,432,477
Commonwealth Edison, 1st Mortgage
Series 76, 8.250%, 10/1/2006 $ 500,000 513,651
Series 81, 8.625%, 2/1/2022 $ 965,000 973,994
Series 83, 8.000%, 5/15/2008 $ 6,100,000 6,276,668
Consumers Energy, 1st Mortgage, 7.375%, 9/15/2023 $ 9,425,000 8,559,776
Duquesne Light, 1st Collateral Trust, 7.550%, 6/15/2025 $ 6,500,000 6,469,203
El Paso Electric, 1st Mortgage
Series D, 8.900%, 2/1/2006 $ 8,100,000 8,330,672
Series E, 9.400%, 5/1/2011 $ 2,875,000 3,032,392
Kentucky Utilities, 1st Mortgage, Series R
7.550%, 6/1/2025 $ 5,500,000 5,079,794
Metropolitan Edison
Secured Medium-Term Notes, Series B
8.150%, 1/30/2023 $ 500,000 483,240
6.970%, 10/19/2023 $ 3,500,000 3,028,260
New York State Electric & Gas, 1st Mortgage
8.300%, 12/15/2022 $ 4,800,000 4,648,320
<PAGE>
SHARES, UNITS
OR PRINCIPAL
% DESCRIPTION AMOUNT VALUE
Niagara Mohawk Power
1st Mortgage
9.750%, 11/1/2005 $ 1,000,000 $ 1,082,345
8.500%, 7/1/2023 $ 11,900,000 11,586,756
Sr Discount Step-Up Notes, Series H
Zero Coupon(a), 7/1/2010 $ 15,000,000 11,212,500
Pacific Gas & Electric, 1st Refunding Mortgage
Series 92D, 8.250%, 11/1/2022 $ 2,223,000 2,175,964
Pennsylvania Power, 1st Mortgage, 8.500%, 7/15/2022 $ 2,000,000 1,929,584
Potomac Edison, 1st Mortgage, 8.000%, 12/1/2022 $ 5,200,000 5,050,833
Public Service Electric & Gas, 1st Mortgage
6.375%, 5/1/2008 $ 2,000,000 1,843,620
Public Service of New Mexico, Sr Notes
Series A, 7.100%, 8/1/2005 $ 10,825,000 10,380,320
Toledo Edison, Medium-Term Notes, Series A
9.220%, 12/15/2021 $ 1,975,000 2,044,771
Union Electric, 1st Mortgage, 8.250%, 10/15/2022 $ 4,000,000 3,968,548
========================================================================================================
132,414,503
0.49 ENGINEERING & CONSTRUCTION
Ryland Group, Sr Sub Notes, 8.250%, 4/1/2008 $ 3,000,000 2,520,000
========================================================================================================
3.72 ENTERTAINMENT
Paramount Communications, Sr Deb, 8.250%, 8/1/2022 $ 19,500,000 19,271,850
========================================================================================================
0.87 GAMING
Aztar Corp, Sr Sub Notes, 8.875%, 5/15/2007 $ 2,750,000 2,536,875
Park Place Entertainment, Sr Sub Notes(b)
9.375%, 2/15/2007 $ 2,000,000 1,973,172
========================================================================================================
4,510,047
0.48 HEALTH CARE DRUGS -- PHARMACEUTICALS
McKesson HBOC Corp, Sub Deb, 4.500%, 3/1/2004 $ 2,960,000 2,516,000
========================================================================================================
1.69 HEALTH CARE RELATED
FHP International, Sr Notes, 7.000%, 9/15/2003 $ 6,535,000 6,196,585
PharMerica Inc, Gtd Sr Sub Notes, 8.375%, 4/1/2008 $ 4,700,000 2,585,000
========================================================================================================
8,781,585
5.15 INSURANCE
Equitable Cos, Sr Notes, 9.000%, 12/15/2004 $ 23,457,000 24,700,033
Veritas Holdings GmbH, Sr Notes, 9.625%, 12/15/2003 $ 2,115,000 1,998,675
========================================================================================================
26,698,708
0.26 IRON & STEEL
National Steel, 1st Mortgage, 8.375%, 8/1/2006 $ 1,500,000 1,350,000
========================================================================================================
1.70 LODGING -- HOTELS
Hilton Hotels, Sr Notes, 7.200%, 12/15/2009 $ 10,000,000 8,837,060
========================================================================================================
0.74 NATURAL GAS
NorAm Energy, Conv Sub Deb, 6.000%, 3/15/2012 $ 4,588,000 3,830,980
========================================================================================================
<PAGE>
SHARES, UNITS
OR PRINCIPAL
% DESCRIPTION AMOUNT VALUE
9.92 OIL & GAS RELATED
Atlantic Richfield, Deb
10.875%, 7/15/2005 $ 3,400,000 $ 3,875,089
9.125%, 3/1/2011 $ 1,569,000 1,737,376
9.125%, 8/1/2031 $ 4,650,000 5,286,227
9.000%, 5/1/2031 $ 4,250,000 4,779,376
8.750%, 3/1/2032 $ 500,000 552,503
Canadian Forest Oil Ltd, Gtd Sr Sub Notes
8.750%, 9/15/2007 $ 4,500,000 4,185,000
CMS Panhandle Holding, Sr Notes
7.000%, 7/15/2029 $ 6,000,000 5,235,294
6.500%, 7/15/2009 $ 11,400,000 10,310,160
Gulf Canada Resources Ltd, Sr Notes
8.250%, 3/15/2017 $ 5,900,000 5,225,394
Ocean Energy, Gtd Sr Sub Notes, Series B
8.875%, 7/15/2007 $ 3,000,000 2,947,500
Sun Inc, Deb, 9.375%, 6/1/2016 $ 3,000,000 3,063,510
Texaco Capital, Gtd Notes, 5.500%, 1/15/2009 $ 4,900,000 4,233,213
========================================================================================================
51,430,642
2.93 PAPER & FOREST PRODUCTS
Bowater Inc, Deb, 9.000%, 8/1/2009 $ 8,575,000 9,059,891
Chesapeake Corp, Deb, 7.200%, 3/15/2005 $ 4,400,000 4,024,970
Quno Corp, Sr Notes, 9.125%, 5/15/2005 $ 2,000,000 2,096,792
========================================================================================================
15,181,653
1.29 SERVICES
Heritage Media, Sr Sub Notes, 8.750%, 2/15/2006 $ 3,000,000 3,007,500
United Rentals, Gtd Sr Sub Notes, Series B
9.000%, 4/1/2009 $ 4,000,000 3,690,000
========================================================================================================
6,697,500
2.50 TELECOMMUNICATIONS -- CELLULAR & WIRELESS
Esat Holdings Ltd, Sr Deferred Step-Up Notes, Series B
Zero Coupon(a), 2/1/2007 $ 4,150,000 3,735,000
Rogers Cantel, Sr Secured Deb, 9.750%, 6/1/2016 $ 8,365,000 9,211,956
========================================================================================================
12,946,956
9.42 TELECOMMUNICATIONS -- LONG DISTANCE
AT&T Corp
Deb, 8.125%, 7/15/2024 $ 3,950,000 3,869,183
Notes, 6.000%, 3/15/2009 $ 10,000,000 8,930,670
Esprit Telecom Group PLC, Sr Notes, 11.500%, 12/15/2007 $ 1,500,000 1,425,000
GCI Inc, Sr Notes, 9.750%, 8/1/2007 $ 3,000,000 2,812,500
Global Crossing Holdings Ltd, Gtd Sr Notes
9.625%, 5/15/2008 $ 1,700,000 1,657,500
<PAGE>
SHARES, UNITS
OR PRINCIPAL
% DESCRIPTION AMOUNT VALUE
Level 3 Communications
Sr Discount Step-Up Notes, Zero Coupon(a), 12/1/2008 $ 14,650,000 $ 8,588,562
Sr Notes(b), 11.000%, 3/15/2008 $ 8,000,000 8,020,000
Qwest Communications International
Sr Discount Step-Up Notes, Series B, Zero Coupon(a)
10/15/2007 $ 5,450,000 4,466,302
2/1/2008 $ 10,500,000 8,099,060
Sr Notes, Series B, 7.250%, 11/1/2008 $ 1,000,000 950,743
========================================================================================================
48,819,520
16.42 TELEPHONE
Centel Capital, Deb, 9.000%, 10/15/2019 $ 5,325,000 5,890,930
Diamond Cable Communications PLC
Sr Discount Notes, 13.250%, 9/30/2004 $ 2,000,000 2,140,000
Sr Discount Step-Up Notes, Zero Coupon(a), 12/15/2005 $ 2,900,000 2,776,750
GTE Corp, Deb
7.900%, 2/1/2027 $ 2,000,000 1,905,036
7.830%, 5/1/2023 $ 9,870,000 9,349,851
McLeodUSA Inc, Sr Discount Step-Up Notes
Zero Coupon(a), 3/1/2007 $ 6,000,000 4,860,000
MetroNet Communications
Sr Discount Step-Up Notes, Zero Coupon(a)
11/1/2007 $ 2,000,000 1,669,264
6/15/2008 $ 28,440,000 22,368,003
NEXTLINK Communications
Sr Discount Step-Up Notes, Zero Coupon(a), 4/15/2008 $ 9,000,000 5,625,000
Sr Notes
10.750%, 11/15/2008 $ 3,200,000 3,208,000
9.625%, 10/1/2007 $ 3,000,000 2,880,000
NEXTLINK Communications LLC/NEXTLINK Capital
Sr Notes, 12.500%, 4/15/2006 $ 3,500,000 3,736,250
RCN Corp, Sr Notes, 10.125%, 1/15/2010 $ 5,000,000 4,650,000
Splitrock Services, Gtd Sr Notes, Series B
11.750%, 7/15/2008 $ 5,640,000 6,006,600
United Pan-Europe Communications NV, Sr Notes(b),
Series B, 11.250%, 2/1/2010 $ 1,500,000 1,511,250
US WEST Communications, Notes, 5.650%, 11/1/2004 $ 7,100,000 6,580,266
========================================================================================================
85,157,200
0.34 TEXTILE -- APPAREL MANUFACTURING
WestPoint Stevens, Sr Notes, 7.875%, 6/15/2005 $ 2,000,000 1,740,000
========================================================================================================
TOTAL CORPORATE BONDS (Cost $529,145,878) 493,049,083
========================================================================================================
TOTAL FIXED INCOME SECURITIES (Cost $545,068,525) 508,748,564
========================================================================================================
<PAGE>
SHARES, UNITS
OR PRINCIPAL
% DESCRIPTION AMOUNT VALUE
1.42 PREFERRED STOCKS
1.42 TELECOMMUNICATIONS -- LONG DISTANCE
Global Crossing Holdings Ltd, Sr Exchangeable Pfd(d), 10.500% 20,000 $ 1,960,000
IXC Communications, Jr Exchangeable Pfd
Series B Shrs(d), 12.500% 5,000 5,400,000
========================================================================================================
TOTAL PREFERRED STOCKS (Cost $7,573,750) 7,360,000
========================================================================================================
0.46 SHORT-TERM INVESTMENTS - REPURCHASE AGREEMENTS
Repurchase Agreement with State Street dated 2/29/2000
due 3/1/2000 at 5.620%, repurchased at $2,366,369
(Collateralized by US Treasury Inflationary Index
Notes due 1/15/2007 at 3.375%, value $2,566,461)
(Cost $2,366,000) $ 2,366,000 2,366,000
========================================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $555,008,275)(f) $ 518,474,564
========================================================================================================
TAX-FREE BOND FUND
89.05 MUNICIPAL BONDS
0.15 ALASKA
Alaska Hsg Fin (Veterans Mtg Prog) (GNMA/FNMA Insured),
Collateralized Rev, 1990 First Series, 7.500%, 12/1/2030 $ 95,000 $ 96,551
Alaska Indl Dev & Export Auth, Ref Revolving Fund,
Series 1994A, Lots 1-29, 5.700%, 4/1/2004 $ 165,000 167,722
========================================================================================================
264,273
0.61 ARIZONA
Arizona Edl Ln Mktng (Student Lns Insured), Edl Ln Rev,
Series 1992B, 7.000%, 3/1/2005 $ 1,000,000 1,040,590
========================================================================================================
2.65 CALIFORNIA
Big Bear Lake Dept of Wtr & Pwr, California (MBIA Insured),
Wtr Rev Ref, Series 1996, 6.000%, 4/1/2022 $ 2,000,000 2,054,400
California (MBIA Insured), Gen Oblig Ref, 5.250%, 10/1/2011 $ 2,425,000 2,440,714
========================================================================================================
4,495,114
3.33 COLORADO
Denver City & Cnty, Colorado, Gen Oblig Ref, Series 1998A,
5.250%, 8/1/2006 $ 3,000,000 3,020,460
Denver Hlth & Hosp Auth, Colorado, Hlthcare Rev,
Series 1998A, 5.125%, 12/1/2005 $ 1,205,000 1,153,559
Fountain Valley Auth, Colorado, Wtr Treatment Ref Rev,
Series 1991, 6.800%, 12/1/2019 $ 1,140,000 1,171,282
<PAGE>
SHARES, UNITS
OR PRINCIPAL
% DESCRIPTION AMOUNT VALUE
Montrose Cnty Bldg Auth, Colorado, Ctfs of Participation,
Series 1994, 6.350%, 6/15/2006 $ 300,000 $ 310,038
========================================================================================================
5,655,339
0.01 DISTRICT OF COLUMBIA
District of Columbia, Gen Oblig Ref, Series 1994A-3,
5.200%, 6/1/2003 $ 10,000 10,094
========================================================================================================
4.72 FLORIDA
Broward Cnty, Florida (AMBAC Insured), Airport System Rev,
Series G, 4.200%, 10/1/2008 $ 200,000 179,928
Miami Beach Redev Agency, Florida (City Ctr/Historic
Convention Village), Tax Increment Rev, Series 1993,
5.100%, 12/1/2003 $ 80,000 79,483
Miami-Dade Cnty School Dist, Florida (FSA Insured),
Gen Oblig Ref, Series 1998, 5.375%, 8/1/2015 $ 3,000,000 2,923,980
Sunrise, Florida (AMBAC Insured), Util System Ref Rev,
Series 1998, 5.500%, 10/1/2018 $ 5,000,000 4,824,300
========================================================================================================
8,007,691
1.22 GEORGIA
Atlanta, Georgia (MBIA Insured), Airport Facils Rev,
Series 1990, 7.250%, 1/1/2017 $ 2,000,000 2,066,300
========================================================================================================
6.36 ILLINOIS
Boone, McHenry & DeKalb Cntys, Illinois (Cmnty Unit School
Dist #100 (Belvidere)) (FSA Insured), Gen Oblig,
Series 1997, Cap Appreciation, 12/1/2010 $ 2,995,000 1,635,300
Chicago, Illinois (AMBAC Insured), Gen Oblig, Ref,
Series 1993B, 5.125%, 1/1/2022 $ 2,465,000 2,176,546
Chicago, Illinois (Peoples Gas Light & Coke), Gas Supply Rev,
1st & Ref Mtg, Medium-Term Notes, Series CC,
6.875%, 3/1/2015 $ 2,875,000 3,025,420
Chicago Pub Bldg Commn, Illinois (Chicago School Reform)
(FGIC Insured), Rev Ref, Series B, 5.250%, 12/1/2018 $ 2,500,000 2,319,175
Illinois Dev Fin Auth (Catholic Charities Hsg Dev Proj), Rev,
Series 1995, 6.350%, 1/1/2025 $ 1,500,000 1,346,385
McCormick Place Receipts-Metro Pier & Exposition Auth,
Illinois (50% McCormick Place Expansion Proj #3)
(FGIC Insured), Dedicated State Tax Rev, Series 1998B,
Cap Appreciation, 6/15/2009 $ 500,000 297,725
========================================================================================================
10,800,551
<PAGE>
SHARES, UNITS
OR PRINCIPAL
% DESCRIPTION AMOUNT VALUE
10.35 INDIANA
DeKalb Cnty Redev Auth, Indiana (Mini-Mill Loc Pub
Impt Proj), Rev, Series A 1995, 6.500%, 1/15/2014 $ 900,000 $ 928,359
Indiana Transn Fin Auth, Airport Facils Lease Rev, Series A,
6.750%, 11/1/2011 $ 1,500,000 1,597,020
Indiana Transn Fin Auth (AMBAC Insured), Hwy Rev,
Series 1993A, Cap Appreciation, 12/1/2017 $ 5,000,000 1,703,450
Indianapolis Loc Pub Impt Bank, Indiana, Rev, Series 1991C,
6.700%, 1/1/2017 $ 3,750,000 3,941,025
Petersburg, Indiana (Indianapolis Pwr & Light Proj)
(MBIA Insured), PCR Ref, Series 1993B, 5.400%, 8/1/2017 $ 9,850,000 9,408,818
========================================================================================================
17,578,672
0.10 LOUISIANA
Louisiana Pub Facils Auth (Student Lns Insured), Student
Ln Rev, Series 1992A-1, 6.200%, 3/1/2001 $ 165,000 167,698
========================================================================================================
2.00 MARYLAND
Maryland Transn Dept, Cons Transn Ref, Series 1998,
5.500%, 9/1/2006 $ 3,315,000 3,388,891
========================================================================================================
7.35 MASSACHUSETTS
Boston Wtr & Swr Commn, Massachusetts (MBIA Insured),
Gen Rev, 1993 Sr Series A, 5.250%, 11/1/2019 $ 5,385,000 4,967,770
Massachusetts Dev Fin Agency (Boston Univ Issue)
(Institution Insured), Rev, Series P,
6.000%, 05/15/2059 $ 4,500,000 4,180,860
5.450%, 05/15/2059 $ 4,000,000 3,337,600
========================================================================================================
12,486,230
6.68 MICHIGAN
Michigan Hosp Fin Auth (Ascension Hlth Credit Group), Rev,
Series 1999A, 5.500%, 11/15/2007 $ 3,000,000 3,005,310
Michigan Muni Bd Auth, Clean Wtr Revolving Rev,
Series 1999, 5.625%, 10/1/2010 $ 3,500,000 3,569,615
Michigan Trunk Line Fund (MBIA Insured), Ref,
Series 1998A, 5.250%, 11/1/2015 $ 5,000,000 4,762,300
========================================================================================================
11,337,225
2.55 MINNESOTA
Minneapolis-St Paul Metro Airports Commn, Minnesota,
Gen Oblig Rev Ref, Series 13, 5.000%, 1/1/2009 $ 2,000,000 1,924,100
Univ of Minnesota Regents, Minnesota (University Insured),
Gen Oblig, Series 1996A, 5.500%, 7/1/2021 $ 2,500,000 2,414,450
========================================================================================================
4,338,550
3.09 MISSISSIPPI
Mississippi (FGIC Insured), Gen Oblig, Loc Govts Cap
Impts Act Issue, Series I, 6.000%, 11/1/2008 $ 5,000,000 5,251,650
========================================================================================================
<PAGE>
SHARES, UNITS
OR PRINCIPAL
% DESCRIPTION AMOUNT VALUE
5.21 MONTANA
Forsyth, Montana (Portland Gen Elec Proj), VR, PCR Ref,
Series 1998B, 4.750%, 5/1/2033 $ 9,000,000 $ 8,854,290
========================================================================================================
3.39 NEVADA
Nevada Hsg Div (Single Family Prog), Sr Rev, 1994 Issue B-1,
5.900%, 4/1/2003 $ 80,000 81,775
Nevada (Nevada Muni Bank Projs #66 & #67) (FGIC Insured),
Gen Oblig Ltd Tax, Series July 1, 1998A, 5.500%, 5/15/2007 $ 5,580,000 5,668,666
========================================================================================================
5,750,441
0.61 NEW JERSEY
New Jersey Hlth Care Facils Fing Auth (Kennedy Hlth System
Obligated Group) (MBIA Insured), Rev & Ref,
Series 1997B, 5.750%, 7/1/2008 $ 1,000,000 1,027,290
========================================================================================================
3.05 NEW MEXICO
Los Alamos Cnty, New Mexico (FSA Insured), Util System Rev,
Series 1994A, 6.000%, 7/1/2009 $ 5,000,000 5,176,700
========================================================================================================
7.88 NEW YORK
New York Dorm Auth, New York, State Univ Edl Facils Rev,
Series 1997, 6.000%, 5/15/2008 $ 2,500,000 2,594,975
New York Transitional Fin Auth, New York, Future Tax
Secured Rev, Fiscal 1999 Series A, 5.250%, 11/15/2013 $ 1,000,000 959,020
New York & New Jersey Port Auth, Consolidated Gen Oblig,
Rev, Ninety-Third Series, 6.125%, 6/1/2094 $ 5,250,000 5,292,578
Triborough Bridge & Tunnel Auth, New York, Gen Purpose Rev,
Series 1993B, 5.000%, 1/1/2020 $ 1,935,000 1,692,351
Series Y, 5.500%, 1/1/2017 $ 2,900,000 2,844,523
========================================================================================================
13,383,447
1.96 NORTH DAKOTA
Ward Cnty, North Dakota (St Joseph's Hosp Proj), Hlth Care
Facil Rev, Series 1994, 8.875%, 11/15/2024 $ 2,850,000 3,333,674
========================================================================================================
3.40 OHIO
Cleveland, Ohio (MBIA Insured), Wtrwks Impt First Mtg Ref Rev,
Series G, 1993, 5.500%, 1/1/2021 $ 3,000,000 2,846,280
Ohio Wtr Dev Auth (Cleveland Elec Illum Proj), PCR Ref,
Series 1999-A, 5.580%, 6/15/2033 $ 3,000,000 2,919,840
========================================================================================================
5,766,120
0.94 RHODE ISLAND
Rhode Island Depositors Econ Protection, Special Oblig,
1992 Series A, 6.950%, 8/1/2022 $ 1,500,000 1,598,925
========================================================================================================
2.40 TENNESSEE
Shelby Cnty Hlth, Edl & Hsg Facil Brd, Tennessee
(Methodist Hlthcare) (MBIA Insured), Hosp Rev,
Series 1998, 5.500%, 4/1/2008 $ 4,075,000 4,082,865
========================================================================================================
<PAGE>
SHARES, UNITS
OR PRINCIPAL
% DESCRIPTION AMOUNT VALUE
2.12 TEXAS
Austin, Texas, Wtr Swr & Elec Ref Rev, Series 1982,
14.000%, 11/15/2001
Prerefunded 1995 $ 5,000 $ 5,387
Refunded 1998 $ 35,000 37,655
Unrefunded Balance 1998 $ 235,000 254,796
Austin, Texas (AMBAC Insured), Combined Util Systems
Rev Ref, Series 1992, Cap Appreciation, 11/15/2011 $ 1,400,000 722,778
Galena Park Indpt School Dist, Texas (Harris Cnty)
(PSFG Insured), Unltd Tax School Bldg & Ref, Series 1996,
Cap Appreciation, 8/15/2023 $ 3,220,000 749,552
Lubbock Hlth Facils Dev, Texas (St Joseph Hlth System), Rev,
Series 1998, 5.250%, 7/1/2013 $ 2,000,000 1,826,680
========================================================================================================
3,596,848
0.30 UTAH
Utah Hsg Fin Agency (FHA/VA/FHMA Insured), Single Family
Mtg, 1994 Issue D-1 Term Mezzanine, 6.450%, 7/1/2011 $ 490,000 501,486
========================================================================================================
0.61 VERMONT
Vermont Hsg Fin Agency, Single Family Hsg Rev, Series 5,
6.875%, 11/1/2016 $ 1,000,000 1,030,470
========================================================================================================
1.19 VIRGINIA
Virginia Pub School Auth, School Fing & Ref,
Series 1998 A, 5.250%, 8/1/2007 $ 2,000,000 2,015,720
========================================================================================================
1.15 WASHINGTON
North Thurston Cnty School Dist #3, Washington, Unltd
Tax Gen Oblig, Series 1992, 6.500%, 12/1/2009 $ 1,400,000 1,446,214
Washington Hlth Care Facils Auth (Catholic Hlth Initiatives)
(MBIA Insured), Rev, Series 1997A, 5.100%, 12/1/2009 $ 100,000 96,807
Washington Pub Pwr Supply System (Nuclear Proj #1),
Ref Rev, Series 1993A, 5.300%, 7/1/2002 $ 400,000 402,316
========================================================================================================
1,945,337
3.67 WISCONSIN
Adams Cnty, Wisconsin (Adams-Friendship School Dist)
(AMBAC Insured), Gen Oblig Ref, 6.500%, 4/1/2015 $ 1,340,000 1,455,669
Southeast Wisconsin Professional Baseball Park Dist
(MBIA Insured), Sales Tax Rev Ref, Series 1998A,
5.500%, 12/15/2019 $ 5,000,000 4,778,450
========================================================================================================
6,234,119
TOTAL MUNICIPAL BONDS (Cost $155,993,474) 151,186,600
========================================================================================================
10.95 SHORT-TERM INVESTMENTS -- MUNICIPAL NOTES
0.35 ARIZONA
Maricopa Cnty, Arizona (Arizona Pub Svc Palo Verde Proj)
(LOC-Bank of America), AR, PCR Ref, 1994 Series F,
3.750%, 5/1/2029(g) $ 600,000 600,000
========================================================================================================
<PAGE>
SHARES, UNITS
OR PRINCIPAL
% DESCRIPTION AMOUNT VALUE
1.12 CALIFORNIA
Los Angeles Regl Airports Impt, California (American
Airlines/Los Angeles Intl Airport), AR, Facils Sublease FDR,
Issue 1984,
(LOC-Societe Generale),
Series LAX 2, 3.750%, 12/1/2025(g) $ 700,000 $ 700,000
(LOC-Wachovia Bank),
Series A, 3.750%, 12/1/2024(g) $ 400,000 400,000
(LOC-Wachovia Bank),
Series G, 3.750%, 12/1/2024(g) $ 800,000 800,000
========================================================================================================
1,900,000
2.18 INDIANA
Indiana Hlth Facil Fing Auth (Indiana Rehabilitation Hosp)
(LOC-Toronto-Dominion Bank), ACES, Hosp Rev, Series 1990,
3.850%, 11/1/2020(g) $ 3,100,000 3,100,000
Indiana Hosp Equip Fing Auth (MBIA Insured), VR, Rev,
Series A, 3.850%, 12/1/2015(g) $ 600,000 600,000
========================================================================================================
3,700,000
0.94 IOWA
Iowa Fin Auth (Burlington Med Ctr) (FSA Insured),
AR, Demand Rev, Series 1997, 3.950%, 6/1/2027(g) $ 1,600,000 1,600,000
========================================================================================================
0.59 MICHIGAN
Delta Cnty Econ Dev, Michigan (Mead-Escanaba Paper Proj)
(LOC-Nova Scotia Bank), DATES, Environmental Impt Rev Ref,
1985 Series E, 3.800%, 12/1/2023(g) $ 1,000,000 1,000,000
========================================================================================================
1.00 NEW YORK
New York, New York (AMBAC Insured), AR, Gen Oblig,
Fiscal 1995 Series B Subseries B7, 3.800%, 8/15/2018(g) $ 200,000 200,000
New York Muni Wtr Fin Auth, New York (FGIC Insured),
AR, Wtr & Swr System Rev,
Fiscal 1993 Series C, 3.800%, 6/15/2022(g) $ 200,000 200,000
Fiscal 1994 Series C, 3.800%, 6/15/2023(g) $ 1,300,000 1,300,000
========================================================================================================
1,700,000
1.82 NORTH CAROLINA
Charlotte, North Carolina (MBIA Insured), VRD, Airport Rev,
Series 1999D, 3.900%, 7/1/2029(g) $ 1,500,000 1,500,000
North Carolina Med Care Commn (Carol Woods Proj)
(LOC-Bank of Scotland), VRD, Hlth Care Facils Rev,
Series 1991, 3.850%, 4/1/2021(g) $ 100,000 100,000
North Carolina Med Care Commn (Pooled Fing Proj)
(LOC-First Union Natl Bank), ACES, Hosp Rev, Series 1991B,
3.850%, 10/1/2013(g) $ 1,500,000 1,500,000
========================================================================================================
3,100,000
<PAGE>
SHARES, UNITS
OR PRINCIPAL
% DESCRIPTION AMOUNT VALUE
0.71 NORTH DAKOTA
Grand Forks, North Dakota (United Hosp Oblig Group)
(LOC-LaSalle National Bank), VR, Hosp Hlthcare Facils Rev,
Series 1992B, 3.750%, 12/1/2016(g) $ 200,000 $ 200,000
Series 1996A, 3.750%, 12/1/2025(g) $ 1,000,000 1,000,000
========================================================================================================
1,200,000
0.12 OHIO
Ohio Wtr Dev Auth (Environmental Meade)
(LOC-Bank of America), DATES, Rev, Series 1986B,
3.650%, 11/1/2015(g) $ 200,000 200,000
========================================================================================================
0.35 OREGON
Port of Portland, Oregon (Reynolds Metals Projs)
(LOC-Nova Scotia Bank), DATES, PCR Ref, Series 1985,
3.750%, 12/1/2009(g) $ 600,000 600,000
========================================================================================================
0.77 PENNSYLVANIA
Delaware Valley Regl Fin Auth, Pennsylvania (Bucks, Chester,
Delaware & Montgomery Cntys) (LOC-Credit Suisse
First Boston), AR, Loc Govt Rev, Series 1985C,
3.850%, 12/1/2020(g) $ 1,000,000 1,000,000
Lehigh Cnty Gen Purpose Auth, Pennsylvania (Lehigh
Valley Hosp) (AMBAC Insured), AR, Hosp Rev, Series A 1997,
3.700%, 7/1/2028(g) $ 300,000 300,000
========================================================================================================
1,300,000
0.41 TENNESSEE
Metro Nashville Airport Auth, Tennessee
(American Airlines Proj) (LOC-Credit Suisse), AR,
Special Facil Rev, Series 1995A, 3.750%, 10/1/2012(g) $ 700,000 700,000
========================================================================================================
0.59 TEXAS
Harris Cnty Hlth Facils Dev, Texas
(St Lukes Episcopal Hosp), UPDATES, Rev,
Series 1997A, 3.750%, 2/15/2027(g) $ 295,000 295,000
Lone Star Airport Impt Auth, Texas (American Airlines Proj)
(LOC-Royal Bank of Canada), VR, Multiple Mode Demand Rev,
1984 Series A-5, 3.750%, 12/1/2014(g) $ 400,000 400,000
1984 Series B-2, 3.750%, 12/1/2014(g) $ 300,000 300,000
========================================================================================================
995,000
TOTAL MUNICIPAL SHORT-TERM NOTES
(Cost $18,595,000) 18,595,000
========================================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $174,588,474)(f) $ 169,781,600
========================================================================================================
<PAGE>
SHARES, UNITS
OR PRINCIPAL
% DESCRIPTION AMOUNT VALUE
U.S. GOVERNMENT SECURITIES FUND
99.67% FIXED INCOME SECURITIES
49.78% US GOVERNMENT OBLIGATIONS
US Treasury Bonds
8.125%, 8/15/2019 $ 10,000,000 $ 11,821,880
7.500%, 11/15/2016 $ 10,000,000 11,018,750
6.125%, 8/15/2029 $ 4,000,000 3,930,000
5.250%, 2/15/2029 $ 10,000,000 8,625,000
========================================================================================================
TOTAL US GOVERNMENT OBLIGATIONS
(Cost $38,535,630) 35,395,630
========================================================================================================
49.89% US GOVERNMENT AGENCY OBLIGATIONS
Freddie Mac, Gold, Participation Certificates
6.500%, 7/01/2008 $ 7,775,459 7,562,541
6.500%, 8/01/2008 $ 1,817,655 1,767,882
Government National Mortgage Association I
Pass-Through Certificates
6.000%, 12/15/2028 $ 9,703,958 8,784,390
6.000%, 2/15/2029 $ 9,736,605 8,795,901
6.000%, 3/15/2029 $ 9,472,319 8,557,149
========================================================================================================
TOTAL US GOVERNMENT AGENCY OBLIGATIONS
(Cost $38,124,908) 35,467,863
========================================================================================================
TOTAL FIXED INCOME SECURITIES (Cost $76,660,538) 70,863,493
========================================================================================================
0.33% SHORT-TERM INVESTMENTS -- REPURCHASE AGREEMENTS
Repurchase Agreement with State Street dated 2/29/2000
due 3/1/2000 at 5.620%, repurchased at $233,036
(Collateralized by US Treasury Inflationary Index
Notes due 1/15/2007 at 3.375%, valued $257,066)
(Cost $233,000) $ 233,000 233,000
========================================================================================================
100.00 TOTAL INVESMENT SECURITIES AT VALUE
(Cost $76,893,538)
(Cost for Income Tax Purposes $76,999,043) $ 71,096,493
========================================================================================================
</TABLE>
(a) Step-up bonds are obligations which increase the interest payment rate at a
specified point in time. Rate shown reflects current rate which may step up
at a future date.
(b) Securities are acquired pursuant to Rule 144A. The Fund deems such
securities to be "liquid" because an institutional market exists.
(c) Security is a defaulted security with respect to cumulative interest
payments of $575,000 at February 29, 2000.
(d) Security is a payment-in-kind (PIK) security. PIK securities may make
interest payments in additional securities.
(e) Security is non-income producing.
(f) Also represents cost for income tax purposes.
(g) All securities with a maturity date greater than one year have either a
variable rate, demand feature, optional or mandatory put resulting in an
effective maturity of one year or less. Rate shown reflects current rate.
<PAGE>
The following abbreviations may be used in portfolio descriptions:
AMBAC - American Municipal Bond Assurance Corporation
AR(h) - Adjustable Rate
ATS - Adjustable Tender Securities
FGIC - Flexible Guaranty Insurance Company
DATES(h) - Daily Adjustable Tax-Exempt Securities
FDR(h) - Flexible Demand Revenue
FSA - Financial Security Assurance
LOC - Letter of Credit
MBIA - Municipal Bond Investors Association
PCR - Pollution Control Revenue
PSFG - Permanent School Fund Guarantee Program
UPDATES(h) - Unit Price Demand Tax-Exempt Securities
VR(h) - Variable Rate
(h) Rate is subject to change. Rate shown reflects current rate.
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INVESCO BOND FUNDS, INC.
FEBRUARY 29, 2000
UNAUDITED
<TABLE>
<CAPTION>
HIGH SELECT
YIELD INCOME
FUND FUND
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investment Securities:
At Cost(a) $ 792,372,570 $ 555,008,275
========================================================================================================
At Value(a) $ 739,032,890 $ 518,474,564
Foreign Currency (Cost $4,332,593 and $0, respectively) 4,332,593 0
Receivables:
Investment Securities Sold 6,177,134 0
Fund Shares Sold 4,662,849 1,696,229
Dividends and Interest 10,972,056 8,292,925
Appreciation on Forward Foreign Currency Contracts 46,093 0
Prepaid Expenses and Other Assets 92,003 426,818
========================================================================================================
TOTAL ASSETS 765,315,618 528,890,536
========================================================================================================
LIABILITIES
Payables:
Custodian 2,580,363 731
Distributions to Shareholders 759,737 226,595
Investment Securities Purchased 4,977,162 0
Fund Shares Repurchased 2,122,472 761,714
Accrued Distribution Expenses(b) - Investor Class 148,987 104,891
Accrued Expenses and Other Payables 61,478 43,711
========================================================================================================
TOTAL LIABILITIES 10,650,199 1,137,642
========================================================================================================
NET ASSETS AT VALUE $ 754,665,419 $ 527,752,894
========================================================================================================
NET ASSETS
Paid-in Capital(c) $ 849,893,565 $ 576,382,996
Accumulated Undistributed Net Investment Income 30,844 73,708
Accumulated Undistributed Net Realized Loss on
Investment Securities and Foreign Currency Transactions (42,005,694) (12,170,099)
Net Depreciation of Investment Securities
and Foreign Currency Transactions (53,253,296) (36,533,711)
========================================================================================================
NET ASSETS AT VALUE, Applicable to Shares Outstanding $ 754,665,419 $ 527,752,894
========================================================================================================
NET ASSETS AT VALUE:
Investor Class $ 754,660,425 $ 527,751,842
========================================================================================================
Class C $ 4,994 $ 1,052
========================================================================================================
Shares Outstanding
Investor Class 120,483,649 87,700,035
Class C 798 175
NET ASSET VALUE, Offering and Redemption Price per Share
Investor Class $ 6.26 $ 6.02
Class C $ 6.26 $ 6.01
========================================================================================================
(a) Investment securities at cost and value at February 29, 2000 includes a repurchase agreement of
$2,366,000 for Select Income Fund.
(b) Accrued Distribution Expenses for Class C shares were insignificant.
(c) The Fund has 2 billion authorized shares of common stock, par value $0.01 per share. Of such shares,
600 million have been allocated to each individual Fund: 300 million to each Investor Class and
300 million to each Class C.
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
INVESCO BOND FUNDS, INC.
FEBRUARY 29, 2000
UNAUDITED
U.S.
TAX-FREE GOVERNMENT
BOND SECURITIES
FUND FUND
- --------------------------------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a) $ 174,588,474 $ 76,893,538
========================================================================================================
At Value(a) $ 169,781,600 $ 71,096,493
Receivables:
Fund Shares Sold 37,214 13,560
Interest 2,324,279 482,244
Prepaid Expenses and Other Assets 229,464 266,969
========================================================================================================
TOTAL ASSETS 172,372,557 71,859,266
========================================================================================================
LIABILITIES
Payables:
Custodian 2,135 3,485
Distributions to Shareholders 168,170 23,374
Fund Shares Repurchased 133,617 1,051,695
Accrued Distribution Expenses(b) - Investor Class 33,982 14,262
Accrued Expenses and Other Payables 48,508 21,166
========================================================================================================
TOTAL LIABILITIES 386,412 1,113,982
========================================================================================================
NET ASSETS AT VALUE $ 171,986,145 $ 70,745,284
========================================================================================================
NET ASSETS
Paid-in Capital(c) $ 178,290,162 $ 77,405,507
Accumulated Undistributed Net Investment Income 15,741 44,131
Accumulated Undistributed Net Realized Loss
on Investment Securities (1,512,884) (907,309)
Net Depreciation of Investment Securities (4,806,874) (5,797,045)
========================================================================================================
NET ASSETS AT VALUE, Applicable to Shares Outstanding $ 171,986,145 $ 70,745,284
========================================================================================================
NET ASSETS AT VALUE:
Investor Class $ 171,985,140 $ 70,744,274
========================================================================================================
Class C $ 1,005 $ 1,010
========================================================================================================
Shares Outstanding
Investor Class 12,190,776 10,445,455
Class C 71 149
NET ASSET VALUE, Offering and Redemption Price per Share
Investor Class $ 14.11 $ 6.77
Class C $ 14.11 $ 6.78
========================================================================================================
(a) Investment securities at cost and value at February 29, 2000 includes a repurchase agreement of
$233,000 for U.S. Government Securities Fund.
(b) Accrued Distribution Expenses for Class C shares were insignificant.
(c) The Fund has 2 billion authorized shares of common stock, par value $0.01 per share. Of such shares,
200 million have been allocated to each individual Fund: 100 million to each Investor Class and
100 million to each Class C.
See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS
INVESCO Bond Funds, Inc.
SIX MONTHS ENDED FEBRUARY 29, 2000
(NOTE 1)
UNAUDITED
HIGH SELECT
YIELD INCOME
FUND FUND
- --------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 2,862,797 $ 156,250
Interest 36,309,473 21,666,582
========================================================================================================
TOTAL INCOME 39,172,270 21,822,832
========================================================================================================
EXPENSES
Investment Advisory Fees 1,528,652 1,344,514
Distribution Expenses(a) - Investor Class 942,365 676,215
Transfer Agent Fees 850,497 875,573
Administrative Fees 174,626 126,719
Custodian Fees and Expenses 40,458 41,755
Directors' Fees and Expenses 25,750 20,190
Interest Expense 279 0
Professional Fees and Expenses 22,917 19,127
Registration Fees and Expenses - Investor Class 80,335 73,073
Reports to Shareholders 78,443 55,076
Other Expenses 16,071 14,175
========================================================================================================
TOTAL EXPENSES 3,760,393 3,246,417
Fees and Expenses Absorbed by Investment Adviser 0 (372,631)
Fees and Expenses Paid Indirectly (35,321) (33,254)
========================================================================================================
NET EXPENSES 3,725,072 2,840,532
========================================================================================================
NET INVESTMENT INCOME 35,447,198 18,982,300
========================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Loss on:
Investment Securities (5,579,891) (4,405,925)
Foreign Currency Transactions (126,919) 0
========================================================================================================
Total Net Realized Loss (5,706,810) (4,405,925)
========================================================================================================
Change in Net Appreciation (Depreciation) of:
Investment Securities (11,597,004) (7,186,784)
Foreign Currency Transactions 716,907 0
========================================================================================================
Total Net Depreciation (10,880,097) (7,186,784)
========================================================================================================
NET LOSS ON INVESTMENT SECURITIES
AND FOREIGN CURRENCY TRANSACTIONS (16,586,907) (11,592,709)
========================================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 18,860,291 $ 7,389,591
========================================================================================================
(a) Distribution Expenses for Class C Shares were insignificant.
See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS (CONTINUED)
INVESCO BOND FUNDS, INC.
SIX MONTHS ENDED FEBRUARY 29, 2000 (NOTE 1)
UNAUDITED
U.S.
TAX-FREE GOVERNMENT
BOND SECURITIES
FUND FUND
- --------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INTEREST INCOME $ 4,821,164 $ 2,476,969
========================================================================================================
EXPENSES
Investment Advisory Fees 496,510 215,650
Distribution Expenses(a) - Investor Class 225,686 98,023
Transfer Agent Fees 123,582 216,427
Administrative Fees 45,624 22,644
Custodian Fees and Expenses 7,557 7,424
Directors' Fees and Expenses 10,021 6,930
Professional Fees and Expenses 13,321 11,517
Registration Fees and Expenses - Investor Class 40,604 36,479
Reports to Shareholders 31,858 22,706
Other Expenses 16,835 1,982
========================================================================================================
TOTAL EXPENSES 1,011,598 639,782
Fees and Expenses Absorbed by Investment Adviser (193,439) (241,718)
Fees and Expenses Paid Indirectly (6,067) (5,575)
========================================================================================================
NET EXPENSES 812,092 392,489
========================================================================================================
NET INVESTMENT INCOME 4,009,072 2,084,480
========================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES
Net Realized Loss on Investment Securities (1,257,291) (599,257)
Change in Net Appreciation (Depreciation) of Investment Securities (3,572,576) 37,315
========================================================================================================
NET LOSS ON INVESTMENT SECURITIES (4,829,867) (561,942)
========================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (820,795) $ 1,522,538
========================================================================================================
(a) Distribution Expenses for Class C Shares were insignificant.
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
HIGH YIELD FUND
SIX MONTHS YEAR
ENDED ENDED
FEBRUARY 29 AUGUST 31
- --------------------------------------------------------------------------------------------------------
2000 1999
(Note 1)
UNAUDITED
OPERATIONS
Net Investment Income $ 35,447,198 $ 74,434,588
Net Realized Loss on Investment Securities and
Foreign Currency Transactions (5,706,810) (36,200,631)
Change in Net Appreciation (Depreciation) of Investment
Securities and Foreign Currency Transactions (10,880,097) 24,051,849
========================================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS 18,860,291 62,285,806
========================================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income
Investor Class (35,447,224) (74,435,367)
Class C (6) 0
In Excess of Net Realized Gain on Investment Securities - Investor Class 0 (24,616,173)
========================================================================================================
TOTAL DISTRIBUTIONS (35,447,230) (99,051,540)
========================================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares
Investor Class 225,434,132 1,378,371,257
Class C 4,998 0
Reinvestment of Distributions
Investor Class 30,597,370 86,094,100
Class C 6 0
========================================================================================================
256,036,506 1,464,465,357
Amounts Paid for Repurchases of Shares - Investor Class (278,120,721) (1,275,757,061)
========================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS FROM
FUND SHARE TRANSACTIONS (22,084,215) 188,708,296
========================================================================================================
TOTAL INCREASE (DECREASE) IN NET ASSETS (38,671,154) 151,942,562
NET ASSETS
Beginning of Period 793,336,573 641,394,011
========================================================================================================
End of Period (Including Accumulated Undistributed
Net Investment Income of $30,844 and $30,876, respectively) $ 754,665,419 $ 793,336,573
========================================================================================================
________________________________________________________________________________________
FUND SHARE TRANSACTIONS
Shares Sold
Investor Class 35,361,130 210,553,094
Class C 797 0
Shares Issued from Reinvestment of Distributions
Investor Class 4,817,813 13,182,355
Class C 1 0
========================================================================================================
40,179,741 223,735,449
Shares Repurchased - Investor Class (43,637,988) (194,736,532)
========================================================================================================
NET INCREASE (DECREASE) IN FUND SHARES (3,458,247) 28,998,917
========================================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
SELECT INCOME FUND
SIX MONTHS YEAR
ENDED ENDED
FEBRUARY 29 AUGUST 31
- --------------------------------------------------------------------------------------------------------
2000 1999
(Note 1)
UNAUDITED
OPERATIONS
Net Investment Income $ 18,982,300 $ 35,050,788
Net Realized Loss on Investment Securities (4,405,925) (6,529,232)
Change in Net Depreciation of Investment Securities (7,186,784) (29,276,206)
========================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 7,389,591 (754,650)
========================================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income
Investor Class (18,981,557) (35,047,792)
Class C (3) 0
Net Realized Gain on Investment Securities - Investor Class (6,232) (1,765,695)
In Excess of Net Realized Gain on Investment Securities - Investor Class 0 (7,747,843)
========================================================================================================
TOTAL DISTRIBUTIONS (18,987,792) (44,561,330)
========================================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares
Investor Class 130,621,258 421,924,213
Class C 1,050 0
Reinvestment of Distributions
Investor Class 17,519,432 41,699,537
Class C 3 0
Net Assets Received from Acquisition of
Short-Term Bond Fund (Note 3) 0 17,295,250
========================================================================================================
148,141,743 480,919,000
Amounts Paid for Repurchases of Shares - Investor Class (158,228,810) (388,789,138)
========================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS FROM
FUND SHARE TRANSACTIONS (10,087,067) 92,129,862
========================================================================================================
TOTAL INCREASE (DECREASE) IN NET ASSETS (21,685,268) 46,813,882
NET ASSETS
Beginning of Period 549,438,162 502,624,280
========================================================================================================
End of Period (Including Accumulated Undistributed
Net Investment Income of $73,708 and $72,968, respectively) $ 527,752,894 $ 549,438,162
========================================================================================================
________________________________________________________________________________________
FUND SHARE TRANSACTIONS
Shares Sold
Investor Class 21,468,317 64,797,931
Class C 174 0
Shares Issued from Reinvestment of Distributions
Investor Class 2,880,552 6,431,237
Class C 1 0
Shares Issued in Connection with Acquisition of
Short-Term Bond Fund (Note 3) 0 2,767,609
========================================================================================================
24,349,044 73,996,777
Shares Repurchased - Investor Class (26,028,505) (59,917,117)
========================================================================================================
NET INCREASE (DECREASE) IN FUND SHARES (1,679,461) 14,079,660
========================================================================================================
See Notes to Financial Statements
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
TAX-FREE BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS PERIOD YEAR
ENDED ENDED ENDED
FEBRUARY 29 AUGUST 31 JUNE 30
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2000 1999 1999
(Note 1) (Note 1)
UNAUDITED
OPERATIONS
Net Investment Income $ 4,009,072 $ 1,372,424 $ 8,423,076
Net Realized Gain (Loss) on Investment Securities (1,257,291) (224,714) 2,734,848
Change in Net Depreciation of Investment Securities (3,572,576) (2,213,390) (8,012,486)
============================================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS (820,795) (1,065,680) 3,145,438
============================================================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income
Investor Class (4,009,070) (1,372,389) (8,422,999)
Class C (2) 0 0
Net Realized Gain on Investment Securities
and Futures Contracts - Investor Class (689,096) 0 (6,238,148)
============================================================================================================================
TOTAL DISTRIBUTIONS (4,698,168) (1,372,389) (14,661,147)
============================================================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares
Investor Class 12,821,121 4,467,683 76,105,580
Class C 1,000 0 0
Reinvestment of Distributions
Investor Class 3,498,281 1,001,308 11,143,364
Class C 2 0 0
Net Assets Received from Acquisition of Tax-Free
Intermediate Bond Fund (Note 3) 0 0 6,067,497
============================================================================================================================
16,320,404 5,468,991 93,316,441
Amounts Paid for Repurchases of Shares -
Investor Class (30,651,100) (12,986,028) (91,480,968)
============================================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS FROM
FUND SHARE TRANSACTIONS (14,330,696) (7,517,037) 1,835,473
============================================================================================================================
TOTAL DECREASE IN NET ASSETS (19,849,659) (9,955,106) (9,680,236)
NET ASSETS
Beginning of Period 191,835,804 201,790,910 211,471,146
============================================================================================================================
End of Period (Including Accumulated Undistributed
Net Investment Income of $15,741, $15,741
and $15,706 respectively) $ 171,986,145 $191,835,804 $ 201,790,910
============================================================================================================================
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
TAX-FREE BOND FUND (CONTINUED)
SIX MONTHS PERIOD YEAR
ENDED ENDED ENDED
FEBRUARY 29 AUGUST 31 JUNE 30
- ----------------------------------------------------------------------------------------------------------------------------
2000 1999 1999
(Note 1) (Note 1)
UNAUDITED
FUND SHARE TRANSACTIONS
Shares Sold
Investor Class 902,400 306,314 4,882,612
Class C 71 0 0
Shares Issued from Reinvestment of Distributions -
Investor Class 245,927 68,476 724,248
Shares Issued in Connection with Acquisition of
Tax-Free Intermediate Bond Fund (Note 3) 0 0 406,050
============================================================================================================================
1,148,398 374,790 6,012,910
Shares Repurchased
Investor Class (2,156,965) (890,035) (5,883,609)
============================================================================================================================
NET INCREASE (DECREASE) IN FUND SHARES (1,008,567) (515,245) 129,301
============================================================================================================================
See Notes to Financial Statements
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
U.S. GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
FEBRUARY 29 AUGUST 31
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
2000 1999
(Note 1)
UNAUDITED
OPERATIONS
Net Investment Income $ 2,084,480 $ 3,451,333
Net Realized Gain (Loss) on Investment Securities (599,257) 110,430
Change in Net Appreciation (Depreciation) of Investment Securities 37,315 (6,306,012)
========================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 1,522,538 (2,744,249)
========================================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income
Investor Class (2,084,478) (3,451,333)
Class C (2) 0
Net Realized Gain on Investment Securities - Investor Class (4,763) (4,863,438)
In Excess of Net Realized Gain on Investment Securities - Investor Class 0 (305,306)
========================================================================================================
TOTAL DISTRIBUTIONS (2,089,243) (8,620,077)
========================================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares
Investor Class 32,303,136 177,382,649
Class C 1,000 0
Reinvestment of Distributions
Investor Class 1,878,469 8,027,013
Class C 2 0
Net Assets Received from Acquisition of Intermediate
Government Bond Fund (Note 3) 0 22,786,723
========================================================================================================
34,182,607 208,196,385
Amounts Paid for Repurchases of Shares - Investor Class (42,769,311) (196,418,206)
========================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS FROM
FUND SHARE TRANSACTIONS (8,586,704) 11,778,179
========================================================================================================
TOTAL INCREASE (DECREASE) IN NET ASSETS (9,153,409) 413,853
NET ASSETS
Beginning of Period 79,898,693 79,484,840
========================================================================================================
End of Period (Including Accumulated Undistributed
Net Investment Income of $44,131 and $44,131, respectively) $ 70,745,284 $ 79,898,693
========================================================================================================
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
U.S. GOVERNMENT SECURITIES FUND (CONTINUED)
SIX MONTHS YEAR
ENDED ENDED
FEBRUARY 29 AUGUST 31
- --------------------------------------------------------------------------------------------------------
2000 1999
UNAUDITED
FUND SHARE TRANSACTIONS
Shares Sold
Investor Class 4,782,234 23,153,199
Class C 149 0
Shares Issued from Reinvestment of Distributions - Investor Class 277,670 1,080,738
Shares Issued in Connection with Acquisition of Intermediate
Government Bond Fund (Note 3) 0 3,275,274
========================================================================================================
5,060,053 27,509,211
Shares Repurchased - Investor Class (6,351,212) (25,723,274)
========================================================================================================
NET INCREASE (DECREASE) IN FUND SHARES (1,291,159) 1,785,937
========================================================================================================
See Notes to Financial Statements
</TABLE>
<PAGE>
INVESCO Notes to financial statements -
UNAUDITED
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Bond Funds,
Inc. is incorporated in Maryland and presently consists of four separate Funds:
High Yield Fund, Select Income Fund, Tax-Free Bond Fund and U.S. Government
Securities Fund (individually the "Fund" and collectively, the "Funds"). The
investment objectives of the Funds are: To seek a high level of current income
for High Yield and Select Income Funds; to seek as high a level of current
income exempt from federal income taxes as is consistent with preservation of
capital for Tax-Free Bond Fund; and to seek a high level of current income by
investing in debt obligations issued by the U.S. Government or its agencies for
U.S. Government Securities Fund. The Fund is registered under the Investment
Company Act of 1940 (the "Act") as a diversified, open-end management investment
company.
High Yield, Select Income, Tax-Free Bond and U.S. Government Securities Funds
offer two classes of shares, referred to as Investor Class and Class C shares
effective February 15, 2000. Investor Class and Class C shares are subject to an
annual distribution fee to a maximum of 0.25% and 1.00%, respectively, of the
Fund's annual average net assets attributable to each Class' shares. Income,
expenses (other than those attributable to a specific class) and 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.
On May 20, 1999, shareholders of Tax-Free Bond Fund approved an Agreement and
Plan of Conversion and Termination providing for the conversion of Tax-Free Bond
Fund from a separate series of INVESCO Tax-Free Income Funds, Inc. to a separate
series of INVESCO Bond Funds, Inc., effective August 20, 1999.
On May 20, 1999, shareholders of the Funds approved an Agreement and Plan of
Reorganization and Termination in which the following Funds which were
previously series' of INVESCO Bond Funds, Inc., INVESCO Tax-Free Income Funds,
Inc. and INVESCO Value Trust, respectively, merged: Short-Term Bond Fund
("Target Fund") into INVESCO Bond Funds, Inc. - Select Income Fund ("Surviving
Fund"), Tax-Free Intermediate Bond Fund ("Target Fund") into INVESCO Tax-Free
Income Fund, Inc. - Tax-Free Bond Fund ("Surviving Fund") and Intermediate
Government Bond Fund ("Target Fund") into INVESCO Bond Funds, Inc. - U.S.
Government Securities Fund ("Surviving Fund"). Shareholders of the Target Funds
became shareholders of the Surviving Funds and received shares of the Surviving
Funds equal in dollar value to the then current value of their shares in the
Target Funds, effective close of business of June 4, 1999.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with 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 -- Debt securities are valued at evaluated bid prices as
determined by a pricing service approved by the Fund's board of directors. If
evaluated bid prices are not available, debt securities are valued by averaging
the bid prices obtained from one or more dealers making a market for such
securities.
Municipal securities (including commitments to purchase such securities on a
when-issued basis) are valued on the basis of prices provided by a pricing
service approved by the Fund's board of directors which, in determining values,
uses information with respect to transactions in bonds, quotations from bond
dealers, market transactions in comparable securities and various relationships
between securities. Under these procedures, municipal securities are valued
based upon market quotations, if available.
<PAGE>
Equity securities traded on national securities exchanges or in the
over-the-counter market are valued at the last sales price at the close of the
regular trading day on that exchange (generally 4:00 p.m. Eastern time) in the
market where such securities are primarily traded. If last sales prices are not
available, securities are valued at the highest closing bid prices at the close
of the regular trading day and obtained from one or more dealers making a market
for such securities or by a pricing service approved by the Fund's board of
directors.
Foreign currency exchange rates are determined daily prior to the close of the
New Stock Exchange.
If market quotations or pricing service valuations are not readily available,
securities are valued at fair value as determined in good faith under procedures
established by the Fund's board of directors.
Short-term securities are stated at amortized cost (which approximates market
value) if maturity is 60 days or less at the time of purchase, or market value
if maturity is greater than 60 days.
Assets and liabilities initially expressed in terms of foreign currencies are
translated into U.S. dollars at the prevailing market rates as quoted by one or
more banks or dealers on the date of valuation.
B. REPURCHASE AGREEMENTS -- Repurchase agreements held by the Fund are fully
collateralized by U.S. Government securities 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.
C. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Security transactions
are accounted for on the trade date and dividend income is recorded on the
ex-dividend date. Interest income, which may be comprised of stated coupon rate,
market discount, original issue discount and amortized premium, is recorded on
the accrual basis. Interest on payment-in-kind debt securities is accrued based
on the yield to maturity at purchase date method. Income and expenses on foreign
securities are translated into U.S. dollars at rates of exchange prevailing when
accrued. Discounts and premiums on debt securities purchased are amortized over
the life of the respective security as adjustments to interest income. Cost is
determined on the specific identification basis. The cost of foreign securities
is translated into U.S. dollars at the rates of exchange prevailing when such
securities are acquired.
Mortgage paydown gain/loss is treated as ordinary income for tax purposes and is
included in interest income in the Statement of Operations.
High Yield Fund invests primarily in high yield bonds, some of which may be
rated below investment grade. These high yield bonds may be more susceptible
than higher grade bonds to real or perceived adverse economic or industry
conditions. The secondary market, on which high yield bonds are traded, may also
be less liquid than the market for higher grade bonds.
High Yield and Select Income Funds may have elements of risk due to concentrated
investments in specific industries or foreign issuers located in a specific
country. Such concentrations may subject these Funds to additional risks
resulting from future political or economic conditions and/or possible
impositions of adverse foreign governmental laws or currency exchange
restrictions.
The Fund's use of short-term forward foreign currency contracts may subject it
to certain risks as a result of unanticipated movements in foreign exchange
rates. The Fund does not hold short-term forward foreign currency contracts for
trading purposes. The Fund may hold foreign currency in anticipation of settling
foreign security transactions and not for investment purposes.
Investments in securities of governmental agencies may only be guaranteed by the
respective agency's limited authority to borrow from the U.S. Government and may
not be guaranteed by the full faith and credit of the U.S. Government.
<PAGE>
D. FEDERAL AND STATE TAXES -- The Fund has complied, and continues to comply,
with the provisions of the Internal Revenue Code applicable to regulated
investment companies and, accordingly, has made or intends to make sufficient
distributions of net investment income and net realized capital gains, if any,
to relieve it from all federal and state income taxes and federal excise taxes.
High Yield, Select Income and U.S. Government Securities Funds incurred and
elected to defer post-October 31 net capital losses of $34,244,653, $7,757,789
and $308,126, respectively, to the year ended August 31, 2000. At August 31,
1999, High Yield Fund had $2,045,175 and Tax-Free Bond Fund had $30,762 and
$224,714 in net capital loss carryovers which expire in the years 2007, 2001 and
2007, respectively. The capital loss carryover from INVESCO Tax-Free Funds, Inc.
- - Tax-Free Intermediate Bond Fund (which was acquired by Tax-Free Bond Fund on
June 4, 1999), is subject to certain limitations under the Internal Revenue
Code.
To the extent future capital gains and income are offset by capital loss
carryovers and deferred post-October 31 losses, such gains and income will not
be distributed to shareholders.
Dividends paid by the Fund from net investment income and distributions of net
realized short-term capital gains are, for federal income tax purposes, taxable
as ordinary income to shareholders.
Investment income received from foreign sources may be subject to foreign
withholding taxes. Dividend and interest income is shown gross of foreign
withholding taxes in the accompanying financial statements.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- All of the Fund's net
investment income is distributed to shareholders by dividends declared daily and
paid monthly. Income dividends are reinvested at the month-end net asset value.
The Fund distributes net realized capital gains, if any, to its shareholders at
least annually, if not offset by capital loss carryovers. Income distributions
and capital gain distributions are determined in accordance with income tax
regulations which may differ from accounting principles generally accepted in
the United States. These differences are primarily due to differing treatments
for mortgaged-backed securities, market discounts, amortized premiums, foreign
currency transactions, nontaxable dividends, net operating losses and expired
capital loss carryforwards.
F. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund enters into short-term forward
foreign currency contracts in connection with planned purchases or sales of
securities as a hedge against fluctuations in foreign exchange rates pending the
settlement of transactions in foreign securities. A forward foreign currency
contract is an agreement between contracting parties to exchange an amount of
currency at some future time at an agreed upon rate. These contracts are
marked-to-market daily and the related appreciation or depreciation of the
contracts is presented in the Statement of Assets and Liabilities. Any realized
gain or loss incurred by the Fund upon the sale of securities is included in the
Statement of Operations.
G. EXPENSES -- Each Fund/Class bears expenses incurred specifically on its
behalf and, in addition, each Fund/Class bears a portion of general expenses,
based on the relative net assets of each Fund/Class.
Under an agreement between each Fund and the Fund's Custodian, agreed upon
Custodian Fees and Expenses are reduced by credits granted by the Custodian from
any temporarily uninvested cash. Such credits are included in Fees and Expenses
Paid Indirectly in the Statement of Operations.
NOTE 2 -- INVESTMENT ADVISORY AND OTHER AGREEMENTS. INVESCO Funds Group, Inc.
("IFG") serves as the 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 Fund's average net assets as follows:
AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
$0 TO $300 TO OVER
$300 $500 $500
FUND MILLION MILLION MILLION
- --------------------------------------------------------------------------------
High Yield Fund 0.50% 0.40% 0.30%
Select Income Fund 0.55% 0.45% 0.35%
Tax-Free Bond Fund 0.55% 0.45% 0.35%
U.S. Government Securities Fund 0.55% 0.45% 0.35%
<PAGE>
A plan of distribution pursuant to Rule 12b-1 of the Act (the "Plan") provides
for compensation of marketing and advertising expenditures to INVESCO
Distributors, Inc. ("IDI" or the "Distributor"), a wholly owned subsidiary of
IFG, to a maximum of 0.25% of annual average net assets of Investor Class
shares. A master distribution plan and agreement pursuant to Rule 12b-1 of the
Act provides for financing the distribution and shareholder servicing of Class C
shares up to a maximum of 1.00% per annum of average daily net assets. For the
six months ended February 29, 2000, High Yield - Investor Class, Select Income
Investor Class, Tax-Free Bond - Investor Class and U.S. Government Securities -
Investor Class Funds paid the Distributor $951,633, $684,341, $231,900 and
$100,187 respectively, under the plan of distribution. For High Yield - Class C,
Select Income - Class C, Tax-Free Bond - Class C and U.S. Government Securities
- - Class C, the amounts paid to the Distributor were insignificant.
IFG receives a transfer agent fee from each Fund at an annual rate of $26.00 per
shareholder account, or, where applicable, per participant in an omnibus
account, per year. IFG may pay such fee for participants in omnibus accounts to
affiliates or third parties. The fee is paid monthly at one-twelfth of the
annual fee and is based upon the actual number of accounts in existence during
each month.
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 certain fees and expenses incurred by
Select Income, Tax-Free Bond and U.S. Government Securities Funds for the six
months ended February 29, 2000.
A 2% redemption fee is retained by High Yield Fund to offset transaction costs
and other expenses associated with short-term redemptions and exchanges. The fee
is imposed on redemptions or exchanges of shares held less than three months.
The redemption fee is accounted for as an addition to Paid-in Capital by High
Yield Fund. Total redemption fees received by High Yield Fund for the six months
ended February 29, 2000 were $318,111.
NOTE 3 -- ACQUISITION OF INVESCO BOND FUNDS, INC. - SHORT-TERM BOND FUND
("TARGET FUND I"), INVESCO TAX-FREE INCOME FUNDS, INC. - TAX-FREE INTERMEDIATE
BOND FUND ("TARGET FUND II") AND ACQUISITION OF INVESCO VALUE TRUST -
INTERMEDIATE GOVERNMENT BOND FUND ("TARGET FUND III"). On June 4, 1999, Select
Income Fund acquired all the net assets of Target Fund I pursuant to an
Agreement and Plan of Reorganization and Termination approved by Target Fund I
shareholders on May 20, 1999. The acquisition was accomplished by a tax-free
exchange of 2,767,609 shares of Select Income Fund (valued at $17,295,250) for
1,816,970 shares of Target Fund I outstanding on June 4, 1999. Target Fund I's
net assets at that date ($17,295,250) including $61,116 of unrealized
depreciation, were combined with those of Select Income Fund. The aggregate net
assets of Select Income Fund and Target Fund I immediately before the
acquisition were $543,762,931 and $17,295,250, respectively. The net assets of
Select Income Fund after the acquisition were $561,058,181.
On June 4, 1999, Tax-Free Bond Fund acquired all the net assets of Target Fund
II pursuant to an Agreement and Plan of Reorganization and Termination approved
by Target Fund II shareholders on May 20, 1999. The acquisition was accomplished
by a tax-free exchange of 406,050 shares of Tax-Free Bond Fund (valued at
$6,067,497) for 605,338 shares of Target Fund II outstanding on June 4, 1999.
Target Fund II's net assets at that date ($6,067,497) including $74,932 of
unrealized appreciation, were combined with those of Tax-Free Bond Fund. The
aggregate net assets of Tax-Free Bond Fund and Target Fund II immediately before
the acquisition were $200,325,490 and $6,067,497, respectively. The net assets
of Tax-Free Bond Fund after the acquisition were $206,392,987.
On June 4, 1999, U.S. Government Securities Fund acquired all the net assets of
Target Fund III pursuant to an Agreement and Plan of Reorganization and
Termination approved by Target Fund III shareholders on May 20, 1999. The
acquisition was accomplished by a tax-free exchange of 3,275,274 shares of U.S.
Government Securities Fund (valued at $22,786,723) for 1,845,823 shares of
Target Fund III outstanding on June 4, 1999. Target Fund III's net assets at
that date ($22,786,723) including $238,936 of unrealized depreciation, were
combined with those of U.S. Government Securities Fund. The aggregate net assets
of U.S. Government Securities Fund and Target Fund III immediately before the
acquisition were $64,047,158 and $22,786,723, respectively. The net assets of
U.S. Government Securities Fund after the acquisition were $86,833,881.
<PAGE>
NOTE 4 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the six months ended
February 29, 2000, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were as follows:
FUND PURCHASES SALES
- --------------------------------------------------------------------------------
High Yield Fund $ 454,131,563 $ 448,751,937
Select Income Fund 258,264,637 257,212,071
Tax-Free Bond Fund 30,481,927 56,214,004
For the six months ended February 29, 2000, the aggregate cost of purchases and
proceeds from the sales of U.S. Government securities were as follows:
FUND PURCHASES SALES
- --------------------------------------------------------------------------------
Select Income Fund $ 2,961,562 $ 9,366,422
U.S. Government Securities Fund 6,845,156 10,595,057
NOTE 5 -- APPRECIATION AND DEPRECIATION. At February 29, 2000, the gross
appreciation of securities in which there was an excess of value over tax cost,
the gross depreciation of securities in which there was an excess of tax cost
over value and the resulting net depreciation by Fund were as follows:
GROSS GROSS NET
FUND APPRECIATION DEPRECIATION DEPRECIATION
- --------------------------------------------------------------------------------
High Yield Fund $3,617,593 $57,176,154 $53,558,561
Select Income Fund 289,855 36,823,566 36,533,711
Tax-Free Bond Fund 1,169,118 5,975,992 4,806,874
U.S. Government Securities Fund 0 5,902,550 5,902,550
NOTE 6 -- TRANSACTIONS WITH AFFILIATES. Certain of the Funds' officers and
directors are also officers and directors of IFG or IDI.
Each Fund has adopted an unfunded defined benefit deferred compensation plan
covering all independent directors of the Fund who will have served as an
independent director for at least five years at the time of retirement. Benefits
under this plan are based on an annual rate equal to 50% of the sum of the
retainer fee at the time of retirement plus the meeting attendance fees.
Pension expenses for the six months ended February 29, 2000, included in
Directors' Fees and Expenses in the Statement of Operations, and unfunded
accrued pension costs and pension liability included in Prepaid Expenses and
Accrued Expenses, respectively, in the Statement of Assets and Liabilities were
as follows:
UNFUNDED
PENSION ACCRUED PENSION
FUND EXPENSES PENSION COSTS LIABILITY
- --------------------------------------------------------------------------------
High Yield Fund $ 10,701 $ 12,619 $ 57,783
Select Income Fund 8,202 8,576 40,527
Tax-Free Bond Fund 3,192 11,863 35,513
U.S. Government Securities Fund 1,610 3,861 12,918
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 selected INVESCO
Funds. The deferred amounts may be invested in the shares of any of the INVESCO
Funds, excluding the INVESCO Variable Investment Funds.
<PAGE>
NOTE 7 -- LINE OF CREDIT. Each Fund has available a Redemption Line of Credit
Facility ("LOC"), from a consortium of national banks, to be used for temporary
or emergency purposes to fund redemptions of investor shares. The LOC permits
borrowings to a maximum of 10% of the Net Assets at Value of each respective
Fund. Each Fund agrees to pay annual fees and interest on the unpaid principal
balance based on prevailing market rates as defined in the agreement. At
February 29, 2000, there were no such borrowings.
NOTE 8 --CONTINGENT DEFERRED SALES CHARGE ("CDSC"). A 1.00% CDSC is charged by
each Fund's Class C shares on redemptions or exchanges of shares held thirteen
months or less (other than shares acquired through reinvestment of dividends or
other distributions). The CDSC is paid by the redeeming shareholder; it is not
an expense of the Fund. For the period ended February 29, 2000, the Distributor
received an insignificant amount of CDSC from shareholder redemptions for High
Yield - Class C, Select Income - Class C, Tax-Free Bond Class C and U.S.
Government Securities - Class C Funds.
<PAGE>
FINANCIAL HIGHLIGHTS
HIGH YIELD FUND - INVESTOR CLASS
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FEBRUARY 29 YEAR ENDED AUGUST 31
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
2000 1999 1998 1997 1996 1995
UNAUDITED
PER SHARE DATA
Net Asset Value --
Beginning of Period $ 6.40 $ 6.76 $ 7.45 $ 6.84 $ 6.73 $ 6.73
=================================================================================================================
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.30 0.60 0.64 0.62 0.63 0.66
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (0.14) (0.19) (0.29) 0.64 0.11 0.03
=================================================================================================================
TOTAL FROM INVESTMENT
OPERATIONS 0.16 0.41 0.35 1.26 0.74 0.69
=================================================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment
Income(a) 0.30 0.60 0.64 0.62 0.63 0.66
Distributions from Capital Gains 0.00 0.00 0.40 0.03 0.00 0.00
In Excess of Capital Gains 0.00 0.17 0.00 0.00 0.00 0.03
=================================================================================================================
TOTAL DISTRIBUTIONS 0.30 0.77 1.04 0.65 0.63 0.69
=================================================================================================================
Net Asset Value--End of Period $ 6.26 $ 6.40 $ 6.76 $ 7.45 $ 6.84 $ 6.73
=================================================================================================================
TOTAL RETURN 2.50%(b) 6.53% 4.44% 19.27% 11.38% 11.12%
RATIOS
Net Assets -- End of Period
($000 Omitted) $ 754,660 $ 793,337 $ 641,394 $ 470,965 $ 375,201 $ 288,959
Ratio of Expenses to Average
Net Assets(c) 0.50%(b)(d) 0.99%(d) 0.86%(d) 1.00%(d) 0.99%(d) 1.00%
Ratio of Net Investment Income
to Average Net Assets(c) 4.68%(b) 9.13% 8.72% 8.71% 9.13% 10.01%
Portfolio Turnover Rate 61%(b) 154% 282% 129% 266% 201%
</TABLE>
(a)Distributions in excess of net investment income for the year ended August
31, 1996, aggregated less than $0.01 on a per share basis.
(b)Based on operations for the period shown and, accordingly, are not
representative of a full year.
(c)Various expenses of the Fund were voluntarily absorbed by IFG for the years
ended August 31, 1996 and 1995. If such expenses had not been voluntarily
absorbed, ratio of expenses to average net assets would have been 0.99% and
1.07%, respectively, and ratio of net investment income to average net assets
would have been 9.13% and 9.94%, respectively.
(d)Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, if applicable, which is before any expense offset
arrangements.
<PAGE>
FINANCIAL HIGHLIGHTS
HIGH YIELD FUND - CLASS C
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
FEBRUARY 29
- --------------------------------------------------------------------------------
2000(a)
UNAUDITED
PER SHARE DATA
Net Asset Value-- Beginning of Period $ 6.31
================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.02
Net Losses on Securities (Both Realized and Unrealized) (0.05)
================================================================================
TOTAL FROM INVESTMENT OPERATIONS (0.03)
================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.02
================================================================================
Net Asset Value-- End of Period $ 6.26
================================================================================
TOTAL RETURN (0.42%)(b)
RATIOS
Net Assets-- End of Period ($000 Omitted) $ 5
Ratio of Expenses to Average Net Assets(c) 0.06%(b)
Ratio of Net Investment Income to Average Net Assets 0.56%(b)
Portfolio Turnover Rate 61%(d)
(a) From February 15, 2000,commencement of investment operations, to February
29, 2000.
(b) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(c) Ratio is based on Total Expenses of the Fund,which is before any expense
offset arrangements.
(d) Portfolio Turnover is calculated at the Fund level, and therefore,
represents the six months ended February 29, 2000.
<PAGE>
FINANCIAL HIGHLIGHTS
SELECT INCOME FUND - INVESTOR CLASS
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FEBRUARY 29 YEAR ENDED AUGUST 31
- -----------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
UNAUDITED
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value --
Beginning of Period $ 6.15 $ 6.68 $ 6.66 $ 6.35 $ 6.54 $ 6.18
=================================================================================================================
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.21 0.43 0.43 0.45 0.47 0.47
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (0.13) (0.41) 0.19 0.34 (0.17) 0.36
=================================================================================================================
TOTAL FROM INVESTMENT
OPERATIONS 0.08 0.02 0.62 0.79 0.30 0.83
=================================================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment
Income 0.21 0.43 0.43 0.45 0.46 0.47
In Excess of Net Investment Income(a) 0.00 0.00 0.00 0.00 0.01 0.00
Distributions from Capital Gains(b) 0.00 0.02 0.17 0.03 0.02 0.00
In Excess of Capital Gains 0.00 0.10 0.00 0.00 0.00 0.00
=================================================================================================================
TOTAL DISTRIBUTIONS 0.21 0.55 0.60 0.48 0.49 0.47
=================================================================================================================
Net Asset Value --
End of Period $ 6.02 $ 6.15 $ 6.68 $ 6.66 $ 6.35 $ 6.54
=================================================================================================================
TOTAL RETURN 1.37%(c) 0.15% 9.58% 12.89% 4.78% 14.01%
RATIOS
Net Assets -- End of Period
($000 Omitted) $ 527,752 $ 549,438 $ 502,624 $ 287,618 $ 258,093 $ 216,597
Ratio of Expenses to Average
Net Assets(d) 0.53%(c)(e) 1.06%(e) 1.06%(e) 1.03%(e) 1.01%(e) 1.00%
Ratio of Net Investment Income
to Average Net Assets(d) 3.49%(c) 6.56% 6.36% 6.98% 7.14% 7.38%
Portfolio Turnover Rate 50%(c) 135% 140% 263% 210% 181%
</TABLE>
(a) Distributions in excess of net investment income for the year ended August
31, 1995, aggregated less than $0.01 on a per share basis.
(b) Distributions from Capital Gains for the six months ended February 29,
2000, aggregated less than $0.01 on a per share basis.
(c) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(d) Various expenses of the Fund were voluntarily absorbed by IFG for the six
months end February 29, 2000 and the years ended August 31, 1999, 1998,
1997, 1996, and 1995. If such expenses had not been voluntarily absorbed,
ratio of expenses to average net assets would have been 0.60%, 1.16%,
1.10%, 1.21%, 1.16% and 1.22%, respectively, and ratio of net investment
income to average net assets would have been 3.42%, 6.46%, 6.32%, 6.80%,
6.99% and 7.16%, respectively.
(e) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser,if applicable, which is before any expense offset
arrangements.
<PAGE>
FINANCIAL HIGHLIGHTS
SELECT INCOME FUND - CLASS C
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
FEBRUARY 29
- --------------------------------------------------------------------------------
2000(a)
UNAUDITED
PER SHARE DATA
Net Asset Value-- Beginning of Period $ 6.02
================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.02
Net Losses on Securities (Both Realized and Unrealized) (0.01)
================================================================================
TOTAL FROM INVESTMENT OPERATIONS 0.01
================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.02
================================================================================
Net Asset Value-- End of Period $ 6.01
================================================================================
TOTAL RETURN 0.12%(b)
RATIOS
Net Assets-- End of Period ($000 Omitted) $ 1
Ratio of Expenses to Average Net Assets(c)(d) 0.06%(b)
Ratio of Net Investment Income to Average Net Assets(c) 0.31%(b)
Portfolio Turnover Rate 50%(e)
(a) From February 15, 2000, commencement of investment operations, to February
29, 2000.
(b) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(c) Various expenses of the Fund were voluntarily absorbed by IFG for the
period ended February 29, 2000. If such expenses had not been voluntarily
absorbed, ratio of expenses to average net assets would have been 0.06% and
ratio of net investment income to average net assets would have been 0.31%.
(d) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, if applicable, which is before any expense offset
arrangements.
(e) Portfolio Turnover is calculated at the Fund level, and therefore,
represents the six months ended February 29, 2000.
<PAGE>
FINANCIAL HIGHLIGHTS
TAX-FREE BOND FUND - INVESTOR CLASS
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS PERIOD
ENDED ENDED
FEBRUARY 29 AUGUST 31 YEAR ENDED JUNE 30
- ---------------------------------------------------------------------------------------------------------------------------------
2000 1999(a) 1999 1998 1997 1996 1995
UNAUDITED
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value --
Beginning of
Period $ 14.53 $ 14.71 $ 15.57 $ 15.34 $ 15.20 $ 15.07 $ 15.29
=================================================================================================================================
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.32 0.10 0.62 0.63 0.66 0.73 0.80
Net Gains or (Losses) on
Securities (Both Realized
and Unrealized) (0.37) (0.18) (0.40) 0.40 0.38 0.32 0.09
=================================================================================================================================
TOTAL FROM INVESTMENT
OPERATIONS (0.05) (0.08) 0.22 1.03 1.04 1.05 0.89
=================================================================================================================================
LESS DISTRIBUTIONS
Dividends from Net
Investment Income 0.32 0.10 0.62 0.63 0.66 0.73 0.80
In Excess of Net
Investment Income 0.00 0.00 0.00 0.00 0.01 0.00 0.00
Distributions from
Capital Gains 0.05 0.00 0.46 0.17 0.23 0.19 0.31
=================================================================================================================================
TOTAL DISTRIBUTIONS 0.37 0.10 1.08 0.80 0.90 0.92 1.11
=================================================================================================================================
Net Asset Value --
End of Period $ 14.11 $ 14.53 $ 14.71 $ 15.57 $ 15.34 $ 15.20 $ 15.07
=================================================================================================================================
TOTAL RETURN (0.34%)(b) (0.53%)(b) 1.30% 6.87% 7.05% 7.01% 6.16%
RATIOS
Net Assets --
End of Period
($000 Omitted) $ 171,985 $ 191,836 $ 201,791 $ 211,471 $ 220,410 $ 250,890 $ 254,584
Ratio of Expenses
to Average Net Assets(c) 0.45%(b)(d) 0.90%(d)(e) 0.91%(d) 0.91%(d) 0.90%(d) 0.91%(d) 0.92%
Ratio of Net
Investment Income to
Average Net Assets(c) 2.21%(b) 4.08%(e) 4.03% 4.06% 4.36% 4.76% 5.31%
Portfolio Turnover Rate 18%(b) 3%(b) 66% 173% 123% 146% 99%
</TABLE>
(a) From July 1, 1999 to August 31, 1999, the Fund's current fiscal year end.
(b) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(c) Various expenses of the Fund were voluntarily absorbed by IFG for the six
months ended February 29, 2000, for the period ended August 31, 1999 and
for the years ended June 30, 1999, 1998, 1997, 1996 and 1995. If such
expenses had not been voluntarily absorbed, ratio of expenses to average
net assets would have been 0.56%, 1.14% (annualized), 1.06%, 1.04%, 1.05%,
1.04% and 1.05%, respectively, and ratio of net investment income to
average net assets would have been 2.10%, 3.84% (annualized), 3.88%, 3.93%,
4.21%, 4.63% and 5.18%, respectively.
(d) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
(e) Annualized
<PAGE>
FINANCIAL HIGHLIGHTS
TAX-FREE BOND FUND - CLASS C
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
FEBRUARY 29
- --------------------------------------------------------------------------------
2000(a)
UNAUDITED
PER SHARE DATA
Net Asset Value--Beginning of Period $ 14.05
================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.02
Net Gains on Securities (Both Realized and Unrealized) 0.06
================================================================================
TOTAL FROM INVESTMENT OPERATIONS 0.08
================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.02
================================================================================
Net Asset Value--End of Period $ 14.11
================================================================================
TOTAL RETURN 0.59%(b)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 1
Ratio of Expenses to Average Net Assets(c)(d) 0.07%(b)
Ratio of Net Investment Income to Average Net Assets(c) 0.17%(b)
Portfolio Turnover Rate 18%(e)
(a) From February 15, 2000, commencement of investment operations, to February
29, 2000.
(b) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(c) Various expenses of the Fund were voluntarily absorbed by IFG for the
period ended February 29, 2000. If such expenses had not been voluntarily
absorbed, ratio of expenses to average net assets would have been 0.07% and
ratio of net investment income to average net assets would have been 0.17%.
(d) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
(e) Portfolio Turnover is calculated at the Fund level, and therefore,
represents the six months ended February 29, 2000.
<PAGE>
FINANCIAL HIGHLIGHTS
U.S. GOVERNMENT SECURITIES FUND - INVESTOR CLASS
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FEBRUARY 29 YEAR ENDED AUGUST 31
- -----------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
UNAUDITED
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value --
Beginning of Period $ 6.81 $ 7.99 $ 7.49 $ 7.15 $ 7.49 $ 7.10
=================================================================================================================
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.18 0.35 0.40 0.43 0.44 0.45
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (0.04) (0.58) 0.67 0.34 (0.34) 0.39
=================================================================================================================
TOTAL FROM INVESTMENT
OPERATIONS 0.14 (0.23) 1.07 0.77 0.10 0.84
=================================================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment
Income 0.18 0.35 0.40 0.43 0.43 0.45
In Excess of Net Investment
Income(a) 0.00 0.00 0.00 0.00 0.01 0.00
Distributions from Capital Gains(b) 0.00 0.56 0.17 0.00 0.00 0.00
In Excess of Capital Gains 0.00 0.04 0.00 0.00 0.00 0.00
=================================================================================================================
TOTAL DISTRIBUTIONS 0.18 0.95 0.57 0.43 0.44 0.45
=================================================================================================================
Net Asset Value --
End of Period $ 6.77 $ 6.81 $ 7.99 $ 7.49 $ 7.15 $ 7.49
=================================================================================================================
TOTAL RETURN 2.08%(d) (3.40%) 14.75% 11.01% 1.31% 12.37%
RATIOS
Net Assets -- End of Period
($000 Omitted) $ 70,744 $ 79,899 $ 79,485 $ 51,581 $ 54,614 $ 38,087
Ratio of Expenses to Average
Net Assets(c) 0.55%(d)(e) 1.01%(e) 1.01%(e) 1.01%(e) 1.02%(e) 1.00%
Ratio of Net Investment Income
to Average Net Assets(c) 2.90%(d) 4.80% 5.22% 5.78% 5.76% 6.24%
Portfolio Turnover Rate 9%(d) 114% 323% 139% 212% 99%
</TABLE>
(a) Distributions in excess of net investment income for the year ended August
31, 1995, aggregated less than $0.01 on a per share basis.
(b) Distributions from Capital Gains for the six months ended February 29,
2000, aggregated less than $0.01 on a per share basis.
(c) Various expenses of the Fund were voluntarily absorbed by IFG for the six
months ended February 29, 2000 and for the years ended August 31, 1999,
1998, 1997, 1996 and 1995. If such expenses had not been voluntarily
absorbed, ratio of expenses to average net assets would have been 0.89%,
1.60%, 1.41%, 1.32%, 1.48% and 1.51%, respectively, and ratio of net
investment income to average net assets would have been 2.56%, 4.21%,
4.82%, 5.47%, 5.30% and 5.73%, respectively.
(d) Based on operations for the period shown and, accordingly, are not
representive of a full year.
(e) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
<PAGE>
FINANCIAL HIGHLIGHTS
U.S. GOVERNMENT SECURITIES FUND - CLASS C
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
FEBRUARY
- --------------------------------------------------------------------------------
2000(a)
UNAUDITED
PER SHARE DATA
Net Asset Value-- Beginning of Period $ 6.72
================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.01
Net Gains on Securities (Both Realized and Unrealized) 0.06
================================================================================
TOTAL FROM INVESTMENT OPERATIONS 0.07
================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.01
================================================================================
Net Asset Value-- End of Period $ 6.78
================================================================================
TOTAL RETURN 1.08%(b)
RATIOS
Net Assets-- End of Period ($000 Omitted) $ 1
Ratio of Expenses to Average Net Assets(c)(d) 0.08%(b)
Ratio of Net Investment Income to Average Net Assets(c) 0.20%(b)
Portfolio Turnover Rate 9%(e)
(a) From February 15, 2000, commencement of investment operations, since
inception of Class C, to February 29, 2000.
(b) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(c) Various expenses of the Fund were voluntarily absorbed by IFG for the period
ended February 29, 2000. If such expenses had not been voluntarily absorbed,
ratio of net investment loss to average net assets would have been 0.08% and
ratio of net investment loss to average net assets would have been 0.20%.
(d) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
(e) Portfolio Turnover is calculated at the Fund level, and therefore,
represents the six-months ended February 29, 2000.
<PAGE>
INVESCO FAMILY OF FUNDS
Investor Class Newspaper
Fund Name Fund Code Ticker Symbol Abbreviation
- --------------------------------------------------------------------------------
STOCK
Growth & Income 21 IVGIX Gro&Inc
Blue Chip Growth 10 FLRFX BlChpGro
Dynamics 20 FIDYX Dynm
Small Company Growth 60 FIEGX SmCoGth
INVESCO Endeavor 61 IVENX Endeavor
Value Equity 46 FSEQX ValEq
S&P 500 Index Fund 23 ISPIX SP500II
- --------------------------------------------------------------------------------
BOND
U.S. Government Securities 32 FBDGX USGvt
Select Income 30 FBDSX SelInc
High Yield 31 FHYPX HiYld
Tax-Free Bond 35 FTIFX TxFreeBd
- --------------------------------------------------------------------------------
COMBINATION STOCK & BOND
Equity Income 15 FIIIX EquityInc
Total Return 48 FSFLX TotRtn
Balanced 71 IMABX Bal
- --------------------------------------------------------------------------------
SECTOR
Energy 50 FSTEX Enrgy
Financial Services 57 FSFSX FinSvc
Gold 51 FGLDX Gold
Health Sciences 52 FHLSX HlthSc
Leisure 53 FLISX Leisur
Real Estate Opportunity 42 IVSRX Realty
Technology 55 FTCHX Tech
Telecommunications 39 ISWCX Telecom
Utilities 58 FSTUX Util
- --------------------------------------------------------------------------------
INTERNATIONAL
International Blue Chip 09 IIBCX ItlBlChp
Pacific Basin 54 FPBSX PcBas
European 56 FEURX Europ
Latin American Growth 34 IVSLX LtnAmerGr
- --------------------------------------------------------------------------------
MONEY MARKET
U.S. Government Money 44 FUGXX InvGvtMF
Cash Reserves 25 FDSXX InvCshR
Tax-Free Money 40 FFRXX InvTaxFree
Treasurer's Money Market Reserve 96 IMRXX INVESCOMMR
Treasurer's Tax-Exempt Reserve 95 ITTXX INVESCOTTE
FOR MORE INFORMATION ABOUT ANY OF THE INVESCO FUNDS, INCLUDING MANAGEMENT FEES,
RISKS, AND EXPENSES, PLEASE VISIT OUR WEB SITE, CONSULT YOUR FINANCIAL ADVISOR,
OR CALL US AT 1-800-525-8085 FOR A PROSPECTUS. READ IT CAREFULLY BEFORE YOU
INVEST OR SEND MONEY.
<PAGE>
[INVESCO ICON] INVESCO FUNDS
YOU SHOULD
KNOW WHAT
INVESCO KNOWS(R)
We're easy to stay in touch with:
Investor Services: 1-800-525-8085
Personal Account Line: 1-800-424-8085
Advisor Sales: 1-800-6-INVESCO
On the World Wide Web: www.invesco.com
INVESCO Distributors, Inc.,(SM) Distributor
Post Office Box 173707
Denver, Colorado 80217-3707
This information must be preceded or accompanied
by a current prospectus.
SINC 9050 4/00
