ANNUAL REPORT
June 30, 1995
INVESCO
TAX-FREE
INCOME
FUNDS,
INC.
Two Smart Choices
For Seeking Tax-Exempt Income
INVESCO FUNDS
<PAGE>
INVESCO Tax-Free Income Funds are managed by James S. Grabovac, vice
president of INVESCO Trust Company. A Chartered Financial Analyst, Jim is a
graduate of Lawrence University and has an MBA from the University of Michigan.
He began his investment career in 1982, and before joining INVESCO in April was
the manager of a municipal bond fund for Stein, Roe & Farnham Inc. in Chicago.
Jim succeeds William Veronda, who left INVESCO in March.
Market Overview July 1995
The economy has cooled significantly from the pace set in 1994. Gross
Domestic Product expanded by just 2.7% during the first quarter of 1995 and was
likely much lower during the second quarter. Inflation appears to have peaked
just above 3% on an annualized basis.
Taken altogether, this is good news. These signs may indicate that economic
growth is approaching a more moderate, sustainable level.
Analysts know that a rapidly growing economy puts stress on credit
availability. To meet increasing demand, companies may borrow to expand capacity
with new equipment and facilities. They add workers at a brisk rate, and those
workers are able to command higher wages in a "seller's market." Demand thus
outraces supply when it comes to the key resources of credit and employees.
Ultimately, something has to give -- and that something is interest rates. They
rise, and eventually the increased cost of borrowing slows the entire cycle
down.
Fearing the long-term corrosive effects of inflation, the Federal Reserve
Board actively sought to slow the U.S. economy in 1994. Over a period of 12
months beginning in February 1994, they doubled short-term interest rates.
For five quarters running, the GDP had racked up impressive gains, including
a solid +5.1% for the last quarter of 1994. Then, reacting to the pressure of
high short-term interest rates, growth contracted during the first half of 1995.
Near-Term Outlook
Now that they've reined in the galloping expansion, the Fed will act to keep it
going at a sustainable trot. Having cut the Fed Funds rate by .25% in July,
their strategy may well include additional cuts over the next several months.
(The Fed Funds rate is the rate charged on overnight loans between member
banks.)
In our opinion, interest rates will probably drop further in 1995 in response
to an easing of inflationary pressures. Short-term rates could drop to 5.5% or
less, compared to a 5.75% Fed Funds rate as of late July. The benchmark 30-year
Treasury bond is now yielding around 6.9%; we expect to see that gradually
decrease. Overall, taxable bond prices have strengthened since the fourth
quarter of 1994.
Municipal Bond Market
Last year witnessed the poorest-performing municipal market in nearly a
decade. Prices began to strengthen after the November 1994 elections, as a
slowdown in economic growth translated into a positive environment for municipal
bonds. The Orange County, California, bankruptcy in December threatened to
depress the market, but to date has had little impact overall. (The bankruptcy
could not affect INVESCO's funds directly, because neither fund has owned
securities issued by Orange County during this period.)
During the second quarter of 1995, the municipal bond market struggled as
investors' fears were raised by the attention surrounding various flat-tax
proposals from Washington D.C. By mid-July, the municipal market was trading at
the same levels as in early April, despite a 50-basis-point rally in the
Treasury market.
Overall, we view the current municipal market as representing excellent
value. Municipals are trading at historically attractive ratios relative to
Treasuries. In addition, the near-term prospect of slowing inflation enhances
the outlook for the bond market. We believe the municipal market has overreacted
to fears of a flat income tax. Serious debate concerning various proposals is
not likely to take place until after the 1996 elections, and the most extreme
reform proposals would appear to face significant obstacles to passage.
<PAGE>
INVESCO Tax-Free
Long-Term Bond Fund
The fund's total return was 6.16% for the fiscal year ended 6/30/95, compared
to a total return of 8.83% for the Lehman Brothers Municipal Bond Index for the
same period. (Of course, past performance is not a guarantee of future
results.)*
The fund's performance relative to the index was hampered by a high level of
cash going into 1995, as well as a significant portfolio allocation to
defensively structured bonds. Such bonds offer additional income, but do not
appreciate as much in an upward market, due to the risk that they will be
called.
Tax-Free Long-Term Bond Fund
Average Annual Total Return*
as of 6/30/95
1 year 6.16%
5 years 7.66%
10 years 9.32%
As part of a portfolio restructuring in recent months, we have increased the
allocation to bonds with longer maturities and improved call protection.
In addition, we have increased our holdings of higher-quality and insured
bonds, which we think offer better value at present market levels. Credit rating
spreads have been particularly narrow, and we believe the risk/reward profile
for lower-quality securities is unattractive.
Graph:
This line graph compares the value of a $10,000 investment in INVESCO
Tax-Free Long-Term Bond Fund 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
6/30/95.
Graph: Geographical Diversification
by value as of 6/30/95
This map of the United States is divided by region to show the geographical
diversification of the issuers of securities in the Tax-Free Long-Term Bond
Fund portfolio.
West - 26% Midwest - 22% Northeast - 23% South Central - 7%
Southeast - 13% Puerto Rico - 3% Net Cash and Short Term - 6%
The choice of portfolio holdings during the last few months has been dictated
by bond specifics, rather than geographical preference. Compared to a year ago,
fund holdings consist of a higher concentration by value in the West and the
Northeast, lower in the Midwest, and about the same in the Southeast and South
Central United States.
The average duration of fund holdings, excluding cash, has lengthened
significantly over the past three months. Longer bonds will allow us to
capitalize on possible price volatility. At the same time, we have decreased our
cash position; this reflects our belief in the improving long-term outlook for
municipal obligations.
The chart (below left) illustrates the value of a $10,000 investment in
INVESCO Tax-Free Long-Term Bond Fund, plus reinvested dividends and capital gain
distributions, for the 10-year period ended 6/30/95.*
The chart and other total return figures cited reflect the fund's operating
expenses, but of course, the benchmark index did not have expenses, which would
have lowered its performance.
As of 6/30/95, Tax-Free Long-Term Bond Fund had an annualized, 30-day yield
of 5.14%. Because there are no federal income taxes on the dividend, the yield
is equivalent to 7.45% from a taxable bond fund for an investor in the 31% tax
bracket -- and 8.51% for investors in the 39.6% bracket.*
<PAGE>
INVESCO Tax-Free
Intermediate Bond Fund
The fund had a total return of 6.67% for the year ended 6/30/95, compared to
a total return of 8.78% for the Lehman Brothers Intermediate Municipal Bond
Index for the same period. (Of course, past performance is no guarantee of
future results.)*
Tax-Free Intermediate Bond Fund
Average Annual Total Return*
as of 6/30/95
1 year 6.67%
Since inception (12/93) 2.23%
Compared with INVESCO Tax-Free Intermediate Bond Fund, the benchmark index
had a higher total return largely because the index represents a higher
proportion of longer-term bonds. The average duration of the Lehman Brothers
Intermediate Municipal Bond Index was 7.3 years as of 12/31/94 and 7.0 years as
of 6/30/95. That compares to INVESCO Tax-Free Intermediate Bond Fund, which had
average durations of 5.8 years as of 12/31/94 and 6.1 years as of 6/30/95.
The fund is well positioned to take advantage of what we expect will be an
improving market for municipal bonds in the next six months. No restructuring of
the portfolio currently is anticipated, as we believe the market has overreacted
to flat-tax suggestions.
Going forward, we probably will increase duration modestly, as we move into
higher quality, non-callable bonds with the potential to appreciate in price.
For example, as of 6/30/95, 72.6% of the holdings in the fund were rated A minus
or better; and 21.3% were rated AAA. Six months ago, 70.3% of the holdings were
rated A minus or better, and 0.6% were rated AAA.
Graph: Geographical Diversification
by value as of 6/30/95
This map of the United States is divided by region to show the geographical
diversification of the issuers of securities in the Tax-Free Intermediate Bond
Fund portfolio.
West - 33% Midwest - 15% Northeast - 17% South Central - 9%
Southeast - 16% Guam - 1% Puerto Rico - 3% Net Cash and Short Term - 6%
In general, our buying decisions are based on bond specifics, rather than
geographic preference. Compared to a year ago, the fundAEs geographic
distribution reflects a slightly higher concentration by value in the Northeast
and slightly lower concentration in the West and the Midwest.
Graph:
This line graph compares the value of a $10,000 investment in INVESCO
Tax-Free Intermediate Bond Fund to the value of a $10,000 investment in the
Lehman Intermediate Municipal Bond Index, assuming in each case reinvestment
of all dividends and capital gain distributions, for the the period from
inception (12/1/93) through 6/30/95.
The chart above illustrates the value of a $10,000 investment in Tax-Free
Intermediate Bond Fund, plus reinvested dividends and capital gain
distributions, for the period from inception (12/93) through 6/30/95.*
The chart and other total return figures cited reflect the fund's operating
expenses, but of course, the benchmark index did not have expenses, which would
have lowered its performance.
As of 6/30/95, INVESCO Tax-Free Intermediate Bond Fund had an annualized
30-day yield of 4.55%. Because there is no federal income tax on the dividend,
this yield is equivalent to 6.59% for an investor in the 31% tax bracket -- and
7.53% for investors in the 39.6% bracket.*
<PAGE>
* Yield calculated according to SEC regulations. Total return assumes
reinvestment of dividends and capital gain distributions for the periods
indicated. 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 originally purchased. Income may be
subject to state and local taxes, and the federal Alternative Minimum Tax. The
Lehman Brothers Municipal Bond Index is an unmanaged index of long-term bonds
considered representative of the overall tax-exempt market; the Lehman
Intermediate Municipal Bond Index is an unmanaged index indicative of
intermediate-term tax-exempt obligations.
<PAGE>
<TABLE>
<CAPTION>
INVESCO Tax-Free Income Funds, Inc.
Statement of Investment Securities
June 30, 1995
<S> <C> <C> <C>
Principal
Description Amount Cost Value
TAX-FREE INTERMEDIATE BOND Fund
MUNICIPAL BONDS 95.69%
ALASKA 4.83%
Alaska Indl Dev & Export Auth,
Ref Revolving Fund, Series 1994A,
Lots 1-29, 5.700%, 4/1/2004 $200,000 $200,000 $199,500
Municipality of Anchorage, Alaska,
Gen Oblig Ref, Gen Purpose, 1993
Series B, 4.900%, 8/1/2003 25,000 25,000 24,469
--------------- ---------------
225,000 223,969
--------------- ---------------
ARIZONA 2.15%
Pinal Cnty, Arizona (Mammoth-San Manuel
Unified School Dist No 8), Ref,
Series 1994, 6.000%, 7/1/2001 100,000 100,000 99,875
--------------- ---------------
CALIFORNIA 12.53%
Duarte, California (City of Hope Natl Med
Ctr), Ctfs of Participation, Hosp Rev,
5.500%, 4/1/2000 150,000 147,744 147,562
Oxnard Redev Agency, California (Central
City Revitilization Proj), Tax Allocation
Ref, Series 1994A, 6.500%, 9/1/2004 230,000 230,000 232,875
West Covina, California (Queen of the Valley
Hosp), Ctfs of Participation,
5.700%, 8/15/2000 200,000 194,904 201,000
--------------- ---------------
572,648 581,437
--------------- ---------------
COLORADO 3.29%
Montrose Cnty, Colorado, Ctfs of
Participation, 6.350%, 6/15/2006 150,000 148,500 152,437
--------------- ---------------
DISTRICT OF COLUMBIA 0.50%
District of Columbia, Gen Oblig Ref,
Series 1994A, 5.200%, 6/1/2003 25,000 24,815 23,188
--------------- ---------------
FLORIDA 1.62%
Miami Beach Redev Agency, Florida
(City Ctr/Historic Convention Village),
Tax Increment Rev, Series 1993, 5.100%,
12/1/2003 80,000 80,000 75,200
--------------- ---------------
GEORGIA 2.64%
Fulco Hosp Auth, Georgia (Saint Joseph's Hosp
of Atlanta), Rev Anticipation Ctfs,
Series 1994,
5.000%, 10/1/2004 70,000 69,994 65,712
4.900%, 10/1/2003 30,000 29,769 28,313
Muni Elec Auth of Georgia, Pwr Rev, Series CC,
4.500%, 1/1/2002 30,000 29,832 28,200
--------------- ---------------
129,595 122,225
--------------- ---------------
<PAGE>
GUAM 0.61%
Guam Pwr Auth, Rev, 1993 Series A, 5.200%,
10/1/2004 30,000 29,700 28,313
--------------- ---------------
ILLINOIS 6.20%
Alton, Illinois (Barnes-Jewish Inc/Christian
Hlth Svcs), Hlth Facils Rev,
Series 1993, 4.800%, 5/15/2003 225,000 207,163 208,969
Illinois Hsg Dev Auth, Hsg Dev Rev, 1993
Series A, 5.000%, 1/1/2001 20,000 20,188 19,425
Illinois Toll Hwy Auth, Toll Hwy Ref Rev,
1993 Series A, 4.700%, 1/1/2001 60,000 60,673 59,175
--------------- ---------------
288,024 287,569
--------------- ---------------
LOUISIANA 4.44%
Louisiana Pub Facils Auth, Student Ln Rev,
Series 1992A-1,
6.200%, 3/1/2001 200,000 204,150 206,000
--------------- ---------------
MASSACHUSETTS 0.46%
Massachusetts Muni Wholesale Elec, Pwr
Supply System Rev, 1992 Series B,
6.375%, 7/1/2001 20,000 21,379 21,175
--------------- ---------------
MISSOURI 0.51%
Missouri Hlth & Edl Facils Auth
(Barnes-Jewish Inc/Christian Hlth Svcs),
Hlth Facils Rev, Series 1993, 4.600%,
5/15/2003 25,000 24,340 23,562
--------------- ---------------
NEVADA 3.08%
Nevada Hsg Div (Single Family Prog),
1994 Issue B-1, Sr Rev,
5.900%, 4/1/2003 140,000 140,000 142,800
--------------- ---------------
NEW HAMPSHIRE 4.80%
New Hampshire Hsg Fin Auth, Single Family
Residential Mtg, 1994 Series D,
5.850%, 1/1/2001 220,000 220,000 222,475
--------------- ---------------
NORTH CAROLINA 3.40%
North Carolina Eastern Muni Pwr Agency,
Pwr System Rev Ref,
Series 1993 C, 5.250%, 1/1/2004 140,000 143,987 134,225
North Carolina Med Care Commn (Moore
Regl Hosp Proj), Hosp Rev,
Series 1993, 4.500%, 10/1/2002 25,000 24,490 23,438
--------------- ---------------
168,477 157,663
--------------- ---------------
OHIO 1.03%
Ohio Bldg Auth, State Correctional Facils,
Ref, 1994 Series A,
4.600%, 10/1/2003 50,000 49,658 47,875
--------------- ---------------
OREGON 0.52%
Oregon Hsg & Cmnty Svcs Dept (Single
Family Mtg Prog), Mtg Rev,
1993 Series A, 4.500%, 7/1/2001 25,000 24,875 24,219
--------------- ---------------
<PAGE>
PENNSYLVANIA 13.01%
Philadelphia Hosp & Higher Ed Facils Auth,
Pennsylvania (Northwestern Corp),
Rev, 1994 Series, 6.500%, 6/1/2004 200,000 198,546 201,750
Philadelphia, Pennsylvania, Gas Wks Rev,
Fifteenth Series, Sub Series 3,
5.100%, 8/1/2004 175,000 163,376 170,625
5.000%, 8/1/2003 65,000 64,756 63,538
Philadelphia, Pennsylvania, Wtr & Wastewtr
Rev, Series 1995, 6.750%, 8/1/2005 150,000 166,385 167,437
--------------- ---------------
593,063 603,350
--------------- ---------------
PUERTO RICO 3.56%
Commonwealth of Puerto Rico, Pub Impt 1995,
Genl Oblig, 6.500%, 7/1/2003 150,000 164,104 165,000
--------------- ---------------
SOUTH DAKOTA 6.90%
Sioux Falls, South Dakota, Sales Tax Rev,
Series 1991B, 6.300%, 11/15/2001 60,000 65,408 64,050
South Dakota, Student Ln Fin, Student Ln Rev,
Series 1994-A, 5.850%, 8/1/2000 250,000 250,000 255,937
--------------- ---------------
315,408 319,987
--------------- ---------------
TENNESSEE 0.43%
Knoxville, Tennessee, Wtr Rev Ref & Impt,
Series M-1993, 4.500%, 3/1/1999 20,000 20,128 19,825
--------------- ---------------
TEXAS 0.52%
Trinity River Indl Dev Auth, Texas
(Intl Paper Proj), Rev Ref, 1993 Series,
4.900%, 12/1/2002 25,000 24,813 24,313
--------------- ---------------
VIRGINIA 8.66%
Norfolk Indl Dev Auth, Virginia (Sentara
Hosps), Hosp Rev Ref,
Series 1994A, 4.400%, 11/1/2002 175,000 164,651 162,531
Rivanna Wtr & Swr Auth, Virginia, Regl Wtr
& Swr System Rev Ref,
Series 1993, 4.500%, 10/1/2000 50,000 50,581 49,312
Southeastern Pub Svc Auth, Virginia, Regl
Solid Waste System, Sr Rev Ref Bonds,
Series 1993A, 5.150%, 7/1/2009 200,000 193,422 190,000
--------------- ---------------
408,654 401,843
--------------- ---------------
WASHINGTON 8.67%
Tacoma, Washington, Swr Rev, 1995 Series B,
5.500%, 12/1/2011 200,000 196,806 191,750
Washington Pub Pwr Supply System, Ref Elec Rev,
Nuclear Proj #1, Series 1993-1A,
5.100%, 7/1/2000 20,000 20,307 19,675
Nuclear Proj #3, Series 1993-3A,
4.900%, 7/1/2004 135,000 128,521 127,575
Wenatchee, Washington, Wtr & Swr Rev Ref,
1994, 4.600%, 12/1/2002 65,000 65,000 63,375
--------------- ---------------
410,634 402,375
--------------- ---------------
<PAGE>
WISCONSIN 1.33%
Saint Croix Cnty, Wisconsin, Gen Oblig
Govt Ctr Ref, Series 1994A,
4.650%, 10/1/2003 65,000 65,000 61,831
--------------- ---------------
TOTAL MUNICIPAL BONDS 4,452,965 4,438,506
--------------- ---------------
SHORT-TERM INVESTMENTS -- MUNICIPAL NOTES 4.31% TEXAS 4.31% Grapevine Indl Dev,
Texas (American Airlines
Proj), Multi-Mode Rev, Issue A4,
4.350%, 12/1/2024~ 200,000 200,000 200,000
--------------- ---------------
TOTAL INVESTMENT SECURITIES 100.00%<< $4,652,965# $4,638,506
=============== ===============
TAX-FREE LONG-TERM BOND Fund MUNICIPAL BONDS 93.96% ALASKA 0.31% Alaska Hsg Fin
Corp (Veterans Mtg Prog),
Collateralized Gen Oblig,
1990 First Series, 7.500%, 12/1/2030+ 770,000 767,112 799,837
--------------- ---------------
ARIZONA 0.42%
Arizona Edl Ln Marketing, 1992 Edl Ln Rev,
Series B, 7.000%, 3/1/2005 1,000,000 988,750 1,061,250
--------------- ---------------
CALIFORNIA 8.88%
Foothill/Eastern Transportation Corridor
Agency, California, FR, Toll Rd, Rev,
Series 1995A, 6.000%, 1/1/2034 2,000,000 1,794,911 1,802,500
Los Angeles Cnty Metro Transportation Auth,
California, Proposition C Sales Tax Rev,
2nd Sr Bonds, Series 1993-B,
5.250%, 7/1/2023 6,255,000 5,710,085 5,543,494
San Diego, California (AMBAC Proj), Swr Rev,
Series A, 5.000%, 5/15/2023 3,500,000 3,050,086 2,988,125
San Francisco Bay Area Rapid Transit Dist,
California, Sales Tax Rev,
Series 1995, 5.500%, 7/1/2020 1,565,000 1,493,354 1,445,669
Southern California Pub Pwr Auth (San Juan
Unit 3 Pwr Proj), Rev,
1993 Series A, 5.000%, 1/1/2020 7,500,000 6,820,222 6,459,375
University of California, Multi Purpose Proj-C,
Rev Ref, Series B, 5.125%, 9/1/2018 5,000,000 4,513,630 4,400,000
--------------- ---------------
23,382,288 22,639,163
--------------- ---------------
COLORADO 5.03%
Colorado Springs, Colorado, Utils Systems Impt
and Ref Rev, Series 1994A,
5.125%, 11/15/2019 1,000,000 892,505 890,000
5.125%, 11/15/2023 4,780,000 4,352,573 4,188,475
Denver, Colorado, City and Cnty Airport System,
Rev, Series 1995A,
5.700%, 11/15/2025 6,400,000 6,168,000 6,000,000
Fountain Valley Auth, Colorado, Wtr Treatment
Ref Rev, Series 1991,
6.800%, 12/1/2019 1,140,000 1,167,137 1,204,125
Montrose Cnty, Colorado, Ctfs of Participation,
6.350%, 6/15/2006 150,000 148,500 152,437
San Miguel, Colorado (School Dist #R1 of
Telluride), MBIA, 5.500%, 12/1/2012~~ 400,000 389,077 388,000
--------------- ---------------
13,117,792 12,823,037
--------------- ---------------
<PAGE>
FLORIDA 2.24%
Greater Orlando Aviation Auth, Florida,
Airport Facils Rev, Series 1988,
8.375%, 10/1/2016 490,000 488,801 554,312
Orlando Utils Commn, Florida, Wtr and
Elec Rev, Series 1993,
5.000%, 10/1/2023 6,000,000 5,375,533 5,152,500
--------------- ---------------
5,864,334 5,706,812
--------------- ---------------
GEORGIA 3.13%
Atlanta, Georgia, Airport Facils Rev,
Series 1990, 7.250%, 1/1/2017 2,000,000 2,057,510 2,162,500
Atlanta, Georgia (Delta Air Lines Proj),
Special Purpose Facils Rev, Series 1989B,
7.900%, 12/1/2018 2,500,000 2,553,464 2,634,375
7.400%, 12/1/1999 3,000,000 3,099,794 3,168,750
--------------- ---------------
7,710,768 7,965,625
--------------- ---------------
ILLINOIS 8.63%
Chicago, Illinois (Chicago-O'Hare Intl
Airport), Gen Airport Rev,
1988 Series A, 8.200%, 1/1/2018 2,750,000 2,807,452 2,915,000
1990 Series A, 7.500%, 1/1/2016 3,000,000 2,880,000 3,236,250
Chicago, Illinois (Peoples Gas Light & Coke),
First & Ref Mtg, Series CC,
Medium Term Nts, 6.875%, 3/1/2015 2,875,000 2,977,023 3,083,437
Chicago, Illinois, Skyway Toll Bridge Ref Rev,
Series 1994, 6.750%, 1/1/2014 2,775,000 2,806,366 2,781,938
Cook Cnty, Illinois, Gen Oblig, Series 1993A,
5.000%, 11/15/2023+ 5,540,000 4,997,481 4,695,150
Illinois Hlth Facils Auth (Northwestern Mem
Hosp), Rev, Series 1991,
6.750%, 8/15/2011 5,000,000 4,950,000 5,287,500
--------------- ---------------
21,418,322 21,999,275
--------------- ---------------
INDIANA 10.29%
Dekalb Cnty Redev Auth, Indiana (Mini-Mill
Loc Pub Impt Proj), Rev,
Series A 1995, 6.500%, 1/15/2014 1,900,000 1,796,123 1,824,000
Indiana Bond Bank (State Revolving Fund Prog),
State Match Rev, Series 1993A,
6.000%, 2/1/2015 4,500,000 4,212,865 4,291,875
Indiana Transportation Fin Auth, Airport
Facils Lease Rev, Series A,
6.750%, 11/1/2011 1,500,000 1,479,940 1,563,750
5.500%, 11/1/2017 7,000,000 6,490,847 6,221,250
Indianapolis Airport Auth, Indiana, Airport
Rev of 1988, 8.400%, 7/1/2008 2,000,000 2,086,441 2,202,500
Indianapolis Airport Auth, Indiana (United
Air Lines/Indianapolis Maintenance
Ctr Proj), Special Facil Rev, Series
1995A, 6.500%, 11/15/2031 2,750,000 2,646,875 2,646,875
Indianapolis, Indiana, Gas Util System Rev
Ref, Series 1993A, 5.375%, 6/1/2021 1,265,000 1,161,948 1,133,756
<PAGE>
Indianapolis Local Pub Impt Bond Bank,
Indiana, Impt Rev, Series 1991C,
6.700%, 1/1/2017 3,750,000 3,578,438 3,834,375
Princeton, Indiana (Pub Svc of Indiana
Proj B), PCR Ref, 1979 Series,
6.625%, 3/1/2004 2,500,000 2,071,220 2,506,250
--------------- ---------------
25,524,697 26,224,631
--------------- ---------------
KENTUCKY 2.42%
Kenton Cnty Airport Brd, Kentucky (Greater
Cincinnati Intl Airport), Airport Rev,
Series 1987A, 8.750%, 3/1/2015 1,645,000 1,603,875 1,764,262
Kentucky Turnpike Auth (Revitalization Proj),
Econ Dev Road and Rev Ref,
Series 1995, 6.500%, 7/1/2007 4,000,000 4,364,616 4,395,000
--------------- ---------------
5,968,491 6,159,262
--------------- ---------------
MASSACHUSETTS 6.60%
Massachusetts Bay Transportation Auth, Gen
Transportation System, 1995 Series A,
5.600%, 3/1/2008 3,000,000 2,986,170 2,988,750
Massachusetts Indl Fin Agency (Massachusetts
REFUSETECH Proj), Resource
Recovery Rev Ref, Series 1993A,
6.300%, 7/1/2005 8,000,000 7,687,060 8,130,000
Massachusetts Wtr Resources Auth, Gen Rev,
1993 Series C, 5.250%, 12/1/2020 6,500,000 5,790,180 5,703,750
--------------- ---------------
16,463,410 16,822,500
--------------- ---------------
MICHIGAN 2.94%
Battle Creek, Tax Increment Fin Auth, Michigan,
Rev, 1994 Dev, 7.300%, 5/1/2010 1,195,000 1,193,068 1,293,587
Detroit Convention Facil, Michigan (Cobo Hall
Expansion Proj), Ltd Tax Rev Ref,
Series 1993, 5.250%, 9/30/2012 2,185,000 2,090,084 1,955,575
Michigan Pub Pwr Agency (Belle River Proj),
Rev Ref, 1993 Series B, 5.000%, 1/1/2019 3,000,000 2,751,571 2,576,250
Michigan State Trunk Line Fund, Rev, Series
1992A, Cap Appreciation, 10/1/2012 4,635,000 1,654,138 1,674,394
--------------- ---------------
7,688,861 7,499,806
--------------- ---------------
MISSISSIPPI 1.17%
Claiborne Cnty, Mississippi (System Energy
Resources Proj), A/FR, PCR,
Series A, 9.500%, 12/1/2013 750,000 750,000 855,937
Series E, 9.500%, 4/1/2016 2,000,000 1,990,000 2,117,500
--------------- ---------------
2,740,000 2,973,437
--------------- ---------------
NEVADA 1.63%
Clark Cnty, Nevada (Las Vegas/Macarran Airport
Proj), Pass Facil Chg Rev,
Series A, 5.750%, 7/1/2023~~ 4,500,000 4,165,290 4,151,250
--------------- ---------------
NEW HAMPSHIRE 0.44%
New Hampshire Hsg Fin Auth, Single Family
Residential Mtg, 1994 Series D,
6.850%, 7/1/2006 1,080,000 1,080,000 1,119,150
--------------- ---------------
<PAGE>
NEW YORK 9.41%
New York Loc Govt Assistance Corp (Pub Benefit
Corp of the State of New York),
Series 1993D, 5.000%, 4/1/2023 2,500,000 2,091,729 2,100,000
Series 1993E Ref, 5.000%, 4/1/2021 5,000,000 4,407,318 4,250,000
New York Pwr Auth, Gen Purpose, Series CC,
5.250%, 1/1/2018 5,000,000 4,627,865 4,518,750
Oneida-Herkimer Solid Waste Mgmt Auth,
New York, Solid Waste System Rev,
Series 1992, 6.750%, 4/1/2014 2,000,000 1,825,163 2,047,500
Rensselaer Muni Leasing Corp, New York
(Rensselaer Cnty Nursing Home Proj),
Leasehold Mtg Rev, Series 1994B, 6.250%,
6/1/2004 1,700,000 1,582,512 1,685,125
Triborough Bridge and Tunnel Auth, New York,
Gen Purpose Rev,
Series 1994A, 5.000%, 1/1/2024 3,565,000 3,091,613 3,039,162
Series B, 5.000%, 1/1/2020 1,935,000 1,755,120 1,700,381
Series Y, 5.500%, 1/1/2017 4,900,000 4,689,589 4,636,625
--------------- ---------------
24,070,909 23,977,543
--------------- ---------------
NORTH CAROLINA 2.45%
Greensboro, North Carolina, Combined
Enterprise System Rev, Series 1995A,
5.375%, 6/1/2019 2,500,000 2,428,125 2,337,500
North Carolina Muni Pwr Agency Number 1,
Catawba Elec Rev, Series 1992,
6.250%, 1/1/2017 4,000,000 3,816,520 3,905,000
--------------- ---------------
6,244,645 6,242,500
--------------- ---------------
OHIO 0.41%
Ohio Air Quality Dev Auth (Cincinnati Gas
& Elec Proj), PCR, 1985 Series,
10.125%, 12/1/2015 1,000,000 995,000 1,045,000
--------------- ---------------
PENNSYLVANIA 4.93%
Allegheny Cnty Indl Dev Auth, Pennsylvania
(FHA Insured Mtg-Baldwin Hlth Ctr),
Specialized Enterprise Rev, 8.350%, 2/1/2016 650,000 671,974 677,625
Montgomery Cnty Higher Ed & Hlth Auth,
Pennsylvania (Northwestern Corp),
Rev, 1994 Series,
7.125%, 6/1/2018 2,050,000 2,020,993 2,001,313
7.000%, 6/1/2012 700,000 691,180 679,875
Pennsylvania Convention Ctr Auth, Ref Rev,
1994 Series A, 6.600%, 9/1/2009 4,465,000 4,422,984 4,504,069
Philadelphia Hosps & Higher Edl Facils Auth,
Pennsylvania (Northwestern Corp),
Rev, 1994 Series,
7.000%, 6/1/2012 1,530,000 1,510,722 1,493,663
6.500%, 6/1/2004 1,080,000 1,072,148 1,089,450
Philadelphia, Pennsylvania, Wtr & Wastewtr Rev,
Series 1995, 6.250%, 8/1/2012 2,050,000 2,166,907 2,126,875
--------------- ---------------
12,556,908 12,572,870
--------------- ---------------
<PAGE>
PUERTO RICO 3.38%
Commonwealth of Puerto Rico, Gen Oblig, Pub
Impt Ref, Series 1995, 6.250%, 7/1/2008 4,975,000 5,388,596 5,385,438
Univ of Puerto Rico, Univ System Rev,
Series M, 5.250%, 6/1/2025 3,525,000 3,216,949 3,225,375
--------------- ---------------
8,605,545 8,610,813
--------------- ---------------
RHODE ISLAND 1.43%
Rhode Island Depositors Econ Protection,
Special Oblig,
1992 Series A, 6.950%, 8/1/2022 1,500,000 1,500,000 1,711,875
1993 Series A, 5.750%, 8/1/2012 2,000,000 1,903,815 1,927,500
--------------- ---------------
3,403,815 3,639,375
--------------- ---------------
SOUTH CAROLINA 4.48%
Myrtle Beach Pub Facils Corp, South Carolina
(City of Myrtle Beach Convention
Ctr Proj), Ctfs of Participation,
Series 1992, 6.875%, 7/1/2017 2,500,000 2,512,233 2,559,375
South Carolina Pub Svc Auth, Rev, 1993
Ref Series C, 5.125%, 1/1/2021 6,365,000 5,623,922 5,633,025
South Carolina Sch Fing (School District
#2 of Sumter Cnty Proj), Ctfs of
Participation, Series 1990A, 8.125%,
4/1/2010 3,000,000 3,229,562 3,228,750
--------------- ---------------
11,365,717 11,421,150
--------------- ---------------
TEXAS 3.87%
Austin, Texas, Combined Util Systems Rev Ref
- Sub Lien Rev Ref, Series 1985,
7.000%, 11/15/2015 1,000,000 925,513 1,011,250
Austin, Texas, Wtr, Swr & Elec Ref Rev,
Series 1982, 14.000%, 11/15/2001 500,000 499,063 677,538
Dallas-Fort Worth Intl Airport Facil Impt,
Texas (Delta Air Lines),
Rev Ref, Series 1993, 6.250%, 11/1/2013 1,375,000 1,375,000 1,318,281
San Antonio, Texas, Elec & Gas Systems Rev
Ref, Series 1991-B, Cap Appreciation,
2/1/2010 10,000,000 4,189,957 4,175,000
Texas Muni Pwr Agency, Ref Rev, Series 1989,
Cap Appreciation, 9/1/2010 6,650,000 2,700,630 2,676,625
--------------- ---------------
9,690,163 9,858,694
--------------- ---------------
UTAH 3.46%
Intermountain Pwr Agency, Utah, Pwr Supply Rev
Ref, 1993 Series A, 5.000%, 7/1/2023 2,055,000 1,772,698 1,762,163
Salt Lake City, Utah (IHC Hosps), Hosp Rev,
Series 1992, 6.300%, 2/15/2015 5,000,000 4,971,500 5,043,750
Utah Hsg Fin Agency (Federally Insured or
Gtd Mtg Lns), Single Family Mtg,
1994 Issue E-1 Term Mezzanine,
6.450%, 7/1/2011 2,000,000 2,000,000 2,017,500
--------------- ---------------
8,744,198 8,823,413
--------------- ---------------
<PAGE>
VERMONT 0.40%
Vermont Hsg Fin Agency, Single Family Hsg,
Series 5, 6.875%, 11/1/2016 1,000,000 1,000,000 1,025,000
--------------- ---------------
WASHINGTON 5.61%
Grant Cnty Pub Util Dist #2, Washington,
Hydro-Elec Dev Rev, Second Series 1990,
(Priest Rapids), 7.700%, 1/1/2018 3,000,000 2,985,000 3,236,250
(Wanapum), 7.700%, 1/1/2018 1,050,000 1,036,875 1,136,625
Vancouver, Washington, Wtr & Swr Rev,
Series 1993, 5.500%, 6/1/2013 1,955,000 1,943,153 1,842,588
Washington, Gen Oblig, Motor Vehicle Fuel
Tax Rev, Series 1993B, 5.500%, 5/1/2018 2,500,000 2,427,000 2,343,750
Washington Pub Pwr Supply System Ref Elec Rev,
Nuclear Proj #2, Series 1990B,
7.000%, 7/1/2012 2,800,000 2,835,694 2,940,000
Nuclear Proj #3, Series 1990B,
7.250%, 7/1/2015 2,500,000 2,526,249 2,796,875
--------------- ---------------
13,753,971 14,296,088
--------------- ---------------
TOTAL MUNICIPAL BONDS 237,310,986 239,457,481
--------------- ---------------
SHORT-TERM INVESTMENTS -- MUNICIPAL NOTES 6.04% ARIZONA 0.51% Maricopa Cnty,
Arizona (Arizona Pub Svc,
Palo Verde Proj), AR, PCR Ref,
1994 Series B, 4.200%, 5/1/2029~ 1,300,000 1,300,000 1,300,000
--------------- ---------------
COLORADO 0.98%
Colorado Hlth Facils Auth (Sisters of
Charity Hlth Care Systems Proj), ATS,
Series 1992C, 4.000%, 5/15/2022~ 2,500,000 2,500,000 2,500,000
--------------- ---------------
KANSAS 0.20%
Kansas City, Kansas (PQ Corp-Kansas City
Proj), Indl Ref Rev, ATS, Series 1985,
4.350%, 8/1/2015~ 500,000 500,000 500,000
--------------- ---------------
MICHIGAN 0.35%
Michigan Strategic Fund (Consumers Pwr
Proj), VRD, PCR Ref,
Series 1988A, 4.250%, 4/15/2018~ 900,000 900,000 900,000
--------------- ---------------
MISSISSIPPI 0.39%
Jackson Cnty, Mississippi (Chevron USA
Proj), AR, PCR Ref,
Series 1993, 4.050%, 6/1/2023~ 1,000,000 1,000,000 1,000,000
--------------- ---------------
NEW YORK 1.18%
New York City Muni Wtr Fin Auth, Wtr & Swr
System Rev, AR, 1993 Series C,
4.250%, 6/15/2022~ 1,000,000 1,000,000 1,000,000
4.250%, 6/15/2023~ 2,000,000 2,000,000 2,000,000
--------------- ---------------
3,000,000 3,000,000
--------------- ---------------
PENNSYLVANIA 0.75%
Allegheny Cnty Hosp Dev Auth, Pennsylvania
(Presbyterian-Univ Hlth System, Inc),
VR, Hlth Ctr Rev, Series 1990 D,
3.950%, 3/1/2020~ 1,000,000 1,000,000 1,000,000
<PAGE>
Bucks Cnty Indl Dev Auth, Pennsylvania
(SHV Real Estate Inc Proj), VRD, IDR Ref,
1985 Series, 2.900%, 7/1/2015~ 900,000 900,000 900,000
--------------- ---------------
1,900,000 1,900,000
--------------- ---------------
TEXAS 0.39%
North Central Texas Hlth Facils Dev Corp
(Presbyterian Med Ctr Proj), Hosp Rev,
DATES, Series 1985C, 4.350%, 12/1/2015~ 1,000,000 1,000,000 1,000,000
--------------- ---------------
VIRGINIA 0.82%
Peninsula Ports Auth of Virginia (Dominion
Terminal Assoc Proj), Coal Terminal
Rev Ref, DATES, Series 1987-C,
4.250%, 7/1/2016~ 100,000 100,000 100,000
Peninsula Ports Auth of Virginia (Shell
Coal & Terminal Proj), Port Facil
Ref Rev, UPDATES, 1987 Series,
4.150%, 12/1/2005~ 2,000,000 2,000,000 2,000,000
--------------- ---------------
2,100,000 2,100,000
--------------- ---------------
WYOMING 0.47%
Sublette Cnty, Wyoming (Exxon Proj),
PCR, DATES, Series 1984,
4.200%, 11/1/2014~ 1,200,000 1,200,000 1,200,000
--------------- ---------------
TOTAL MUNICIPAL SHORT-TERM NOTES 15,400,000 15,400,000
--------------- ---------------
TOTAL INVESTMENT SECURITIES 100.00%<< $252,710,986# $254,857,481
=============== ===============
<FN>
The following abbreviations may be used in portfolio descriptions: A/FR* --
Adjustable/Fixed Rate AR* -- Adjustable Rate ATS* -- Adjustable Tender
Securities DATES* -- Daily Adjustable Tax-Exempt Securities FR -- Fixed Rate
F/FR -- Floating/Fixed Rate IDR -- Industrial Development Revenue PCR --
Pollution Control Revenue TEAMS* -- Tax-Exempt Adjustable Mode Securities TECP
-- Tax-Exempt Commercial Paper TRAN -- Tax & Revenue Anticipation Notes VR* --
Variable Rate VRD* -- Variable Rate Demand
* Rate is subject to change. Rate shown reflects current rate.
~ 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.
<< Percentages are expressed in relation to total investment value.
# Also represents cost for income tax purposes.
+ Security has been designated as collateral for when-issued securities.
~~ Security is a when-issued security.
</FN>
</TABLE>
See Notes to Financial Statements
<PAGE>
INVESCO Tax-Free Income Funds, Inc.
Statement of Assets and Liabilities
June 30, 1995
Tax-Free Tax-Free
Intermediate Long-Term
Bond Fund Bond Fund
ASSETS
Investment Securities:
At Cost $4,652,965 $252,710,986
============== ==============
At Value $4,638,506 $254,857,481
Cash 59,859 94,664
Receivables:
Investment Securities Sold 121,500 342,717
Fund Shares Sold 6,264 6,902
Interest 73,640 4,566,466
Prepaid Expenses and Other Assets 9,779 44,679
-------------- --------------
TOTAL ASSETS 4,909,548 259,912,909
-------------- --------------
LIABILITIES
Payables:
Distributions to Shareholders 1,317 253,523
Investment Securities Purchased 0 4,914,839
Fund Shares Repurchased 0 99,951
Accrued Distribution Expenses 1,033 53,549
Accrued Expenses and Other Payables 134 6,759
-------------- --------------
TOTAL LIABILITIES 2,484 5,328,621
-------------- --------------
Net Assets at Value $4,907,064 $254,584,288
============== ==============
NET ASSETS
Paid-in Capital* $5,059,028 $249,281,887
Accumulated Undistributed Net Realized
Gain (Loss) on Investment Securities (137,505) 3,155,906
Net Appreciation (Depreciation) of
Investment Securities (14,459) 2,146,495
-------------- --------------
Net Assets at Value $4,907,064 $ 254,584,288
============== ==============
Shares Outstanding 506,037 16,896,247
Net Asset Value, Offering and Redemption
Price per Share $9.70 $15.07
============== ==============
* The Fund has 500 million authorized shares of common stock, par value of
$0.01 per share. Of such shares, 100 million have been allocated to each
individual Fund.
See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
INVESCO Tax-Free Income Funds, Inc.
Statement of Operations
Year Ended June 30, 1995
Tax-Free Tax-Free
Intermediate Long-Term
Bond Fund Bond Fund
<S> <C> <C>
INVESTMENT INCOME
INTEREST INCOME $250,382 $16,650,519
-------------- --------------
EXPENSES
Investment Advisory Fees 23,812 1,471,474
Distribution Expenses 11,906 668,852
Transfer Agent Fees 12,446 390,390
Administrative Fees 10,714 50,131
Custodian Fees and Expenses 0 19,806
Directors' Fees and Expenses 3,636 24,217
Pricing Expenses 8,155 17,222
Professional Fees and Expenses 12,441 36,066
Registration Fees and Expenses 29,208 56,076
Reports to Shareholders 2,428 48,718
Other Expenses 2,002 10,425
-------------- --------------
TOTAL EXPENSES 116,748 2,793,377
Fees and Expenses Absorbed by Investment Adviser (83,417) (337,331)
-------------- --------------
NET EXPENSES 33,331 2,456,046
-------------- --------------
NET INVESTMENT INCOME 217,051 14,194,473
-------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Gain (Loss) on Investment Securities (56,737) 4,076,999
Change in Net Appreciation (Depreciation)
of Investment Securities 136,725 (2,732,724)
-------------- --------------
NET GAIN ON INVESTMENT SECURITIES 79,988 1,344,275
-------------- --------------
Net Increase in Net Assets from Operations $ 297,039 $15,538,748
============== ==============
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INVESCO Tax-Free Income Funds, Inc.
Statement of Changes in Net Assets
Tax-Free Tax-Free
Intermediate Long-Term
Bond Fund Bond Fund
Year Period
Ended Ended
June 30 June 30 Year Ended June 30
-------------- ----------------- ----------------- ----------------
1995 1994 1995 1994
(Note 1)
<S> <C> <C> <C> <C>
OPERATIONS
Net Investment Income $217,051 $74,379 $14,194,473 $16,666,737
Net Realized Gain (Loss) on
Investment Securities (56,737) (80,768) 4,076,999 5,656,623
Change in Net Appreciation
(Depreciation) of Investment
Securities 136,725 (151,184) (2,732,724) (24,787,358)
-------------- ----------------- ----------------- ----------------
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS 297,039 (157,573) 15,538,748 (2,463,998)
-------------- ----------------- ----------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (217,051) (74,379) (14,194,473) (16,666,737)
Net Realized Gain on Investment
Securities 0 0 (5,294,008) (1,283,708)
-------------- ----------------- ----------------- ----------------
TOTAL DISTRIBUTIONS (217,051) (74,379) (19,488,481) (17,950,445)
-------------- ----------------- ----------------- ----------------
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 6,937,416 10,723,526 79,885,898 169,873,081
Reinvestment of Distributions 200,954 68,051 15,594,840 14,182,038
-------------- ----------------- ----------------- ----------------
7,138,370 10,791,577 95,480,738 184,055,119
Amounts Paid for Repurchases
of Shares (7,394,573) (5,476,346) (119,353,364) (213,473,274)
-------------- ----------------- ----------------- ----------------
NET INCREASE (DECREASE) IN
NET ASSETS FROM FUND
SHARE TRANSACTIONS (256,203) 5,315,231 (23,872,626) (29,418,155)
-------------- ----------------- ----------------- ----------------
Total Increase (Decrease)
in Net Assets (176,215) 5,083,279 (27,822,359) (49,832,598)
NET ASSETS
Beginning of Period 5,083,279 0 282,406,647 332,239,245
-------------- ----------------- ----------------- ----------------
End of Period $4,907,064 $5,083,279 $254,584,288 $282,406,647
============== ================= ================= ================
FUND SHARE TRANSACTIONS
Shares Sold 726,499 1,093,812 5,319,259 10,559,603
Shares Issued from Reinvestment
of Distributions 21,115 7,078 1,046,647 878,062
-------------- ----------------- ----------------- ----------------
747,614 1,100,890 6,365,906 11,437,665
Shares Repurchased (775,587) (566,880) (7,938,397) (13,294,922)
-------------- ----------------- ----------------- ----------------
Net Increase (Decrease)
in Fund Shares (27,973) 534,010 (1,572,491) (1,857,257)
============== ================= ================= ================
See Notes to Financial Statements
</TABLE>
<PAGE>
INVESCO Tax-Free Income Funds, Inc.
Notes to Financial Statements
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO
Tax-Free Income Funds, Inc. (the "Fund") a Maryland Corporation, consists of two
separate Funds: Tax-Free Intermediate Bond Fund and Tax-Free Long-Term Bond
Fund. The Fund is registered under the Investment Company Act of 1940 (the
"Act") as a diversified, open-end management investment company. Investment
operations of Tax-Free Intermediate Bond Fund commenced on December 1, 1993.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
A. SECURITY VALUATION -- The Fund values municipal securities (including
commitments to purchase such securities on a when-issued basis) 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. Non-tax-exempt securities for which market quotations are
readily available are valued at market value based upon such quotations.
If market quotations or pricing service valuations are not readily
available, securities are valued at fair value as determined in good faith
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, or at market
value if maturity is greater than 60 days.
B. WHEN-ISSUED SECURITIES --When-issued securities held by the Fund are fully
collateralized by other securities which are notated in the accompanying
Statement of Investment Securities. Such collateral is in the possession
of the Fund's custodian. The collateral is evaluated daily to ensure its
market value equals or exceeds the current market value of the when-issued
securities.
C. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Security
transactions are accounted for on the trade date. Securities purchased or
sold on a when-issued or delayed-delivery basis may be settled a month or
more after trade date. Interest income is recorded on the accrual basis.
The Fund amortizes original issue discounts and premiums paid on the
purchase of securities as adjustments to interest income. Cost is
determined on the specific identification basis.
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. At June 30, 1995, Tax-Free Intermediate Bond Fund
had $136,695 in net capital loss carryovers which expire in the year 2003.
Tax-Free Intermediate Bond Fund incurred and elected to defer
post-October 31 net capital losses of $810 to the year ended June 30,
1996. To the extent future capital gains are offset by capital loss
carryovers and deferred post-October 31 losses, such gains 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.
Of the ordinary income distributions declared for the year ended
June 30, 1995, 97.55% and 99.41% were exempt from federal income taxes for
Tax-Free Intermediate Bond and Tax-Free Long-Term Bond Funds,
respectively.
<PAGE>
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- All the Fund's net
investment income is distributed to shareholders by dividends declared
daily and paid monthly. Reinvestment of dividends is effected 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.
F. EXPENSES -- Each of the Funds bears expenses incurred specifically on its
behalf and, in addition, each Fund bears a portion of general expenses,
based on the relative net assets of each Fund.
NOTE 2 -- INVESTMENT ADVISORY AND OTHER AGREEMENTS. INVESCO Funds Group,
Inc. ("IFG") serves as the Fund's investment adviser. As compensation for its
services to the Fund, 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 Million Over
$300 to $500 $500
Fund Million Million Million
-------------------------------------------------------------------------------
Tax-Free Intermediate Bond Fund 0.50% 0.40% 0.30%
Tax-Free Long-Term Bond Fund 0.55% 0.45% 0.35%
In accordance with a Sub-Advisory Agreement between IFG and INVESCO Trust
Company ("ITC"), a wholly owned subsidiary of IFG, investment decisions of each
Fund are made by ITC. Fees for such sub-advisory services are paid by IFG.
In accordance with an Administrative Agreement, each Fund pays IFG an
annual fee of $10,000, plus an additional amount computed at an annual rate of
0.015% of average net assets to provide administrative, accounting and clerical
services. The fee is accrued daily and paid monthly.
IFG receives a transfer agent fee at an annual rate of $20.00 per
shareholder account, or per participant in an omnibus account. 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.
A plan of distribution pursuant to Rule 12b-1 of the Act provides for
reimbursement of marketing and advertising expenditures to IFG (the
"Distributor") to a maximum of 0.25% of average annual net assets. Amounts
accrued by the Tax-Free Long-Term Bond Fund are available to reimburse the
Distributor for actual expenditures incurred within a rolling twelve-month
period. Amounts accrued by the Tax-Free Intermediate Bond Fund are available to
reimburse the Distributor for actual expenditures incurred within a rolling
twenty-four-month period (ending November 30, 1995), and for a rolling
twelve-month period thereafter. For the year ended June 30, 1995, Tax-Free
Intermediate Bond and Tax-Free Long-Term Bond Funds paid the Distributor $11,963
and $677,992, respectively, for reimbursement of expenses incurred.
IFG has voluntarily agreed, in some instances, to absorb certain fees and
expenses incurred by each Fund commencing December 1, 1993 and September 1, 1994
for Tax-Free Intermediate and Long- Term Bond Funds, respectively.
<PAGE>
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the year ended June
30, 1995, 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
--------------------------------------------------------------------------------
Tax-Free Intermediate Bond Fund $971,193 $1,254,681
Tax-Free Long-Term Bond Fund 229,715,705 251,769,746
There were no purchases or sales of U.S. Government securities.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At June 30, 1995, 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 appreciation (depreciation) by Fund were as
follows:
Net
Gross Gross Appreciation
Fund Appreciation Depreciation (Depreciation)
--------------------------------------------------------------------------------
Tax-Free Intermediate Bond Fund $40,177 $54,636 $(14,459)
Tax-Free Long-Term Bond Fund 5,390,059 3,243,564 2,146,495
NOTE 5 -- TRANSACTIONS WITH AFFILIATES. Certain of the Fund's officers and
directors are also officers and directors of IFG or ITC.
The Fund has adopted an unfunded noncontributory defined benefit pension 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 25% of the retainer fee at
the time of retirement. Pension expenses for Tax-Free Long-Term Bond Fund for
the year ended June 30, 1995, included in Directors' Fees and Expenses in the
Statement of Operations were $5,553. Unfunded accrued pension costs of $9,800
and pension liability of $15,353 are included in prepaid expenses and accrued
expenses, respectively, in the Statement of Assets and Liabilities. There were
no pension expenses for Tax-Free Intermediate Bond Fund for the year ended June
30, 1995.
<PAGE>
INVESCO Tax-Free Income Funds, Inc.
Financial Highlights
(For a Fund Share Outstanding throughout Each Period)
Year Period
Ended Ended
June 30 June 30
1995 1994^
------------ ------------
Tax-Free Intermediate Bond Fund
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 9.52 $10.00
------------ ------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.44 0.19
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 0.18 (0.48)
------------ ------------
Total from Investment Operations 0.62 (0.29)
------------ ------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.44 0.19
------------ ------------
Net Asset Value -- End of Period $9.70 $ 9.52
============ ============
TOTAL RETURN 6.67% (2.93%)*
RATIOS
Net Assets -- End of Period ($000 Omitted) $4,907 $5,083
Ratio of Expenses to Average Net Assets# 0.70% 0.70%~
Ratio of Net Investment Income to
Average Net Assets# 4.56% 3.75%~
Portfolio Turnover Rate 23% 55%*
^ From December 1, 1993, commencement of operations, to June 30, 1994.
* These amounts are based on operations for the period shown and, accordingly,
are not representative of a full year.
# Various expenses of the Fund were voluntarily absorbed by IFG for the year
ended June 30, 1995 and for the period ended June 30, 1994. If such expenses
had not been voluntarily absorbed, ratio of expenses to average net assets
would have been 2.45% and 3.09%, respectively, and ratio of net investment
income to average net assets would have been 2.81% and 1.36%, respectively.
~ Annualized
<PAGE>
<TABLE>
<CAPTION>
INVESCO Tax-Free Income Funds, Inc.
Financial Highlights (Continued)
(For a Fund Share Outstanding throughout Each Period)
Year Ended June 30
<S> <C> <C> <C> <C> <C>
---------- ---------- ---------- ---------- ----------
1995 1994 1993 1992 1991
Tax-Free Long-Term Bond Fund
PER SHARE DATA
Net Asset Value-- Beginning of Period $ 15.29 $16.35 $15.69 $15.05 $ 14.90
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.80 0.83 0.87 0.92 0.96
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 0.09 (1.00) 1.04 0.95 0.27
---------- ---------- ---------- ---------- ----------
Total from Investment Operations 0.89 (0.17) 1.91 1.87 1.23
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.80 0.83 0.87 0.92 0.96
Distributions from Capital Gains 0.31 0.06 0.38 0.31 0.12
---------- ---------- ---------- ---------- ----------
Total Distributions 1.11 0.89 1.25 1.23 1.08
---------- ---------- ---------- ---------- ----------
Net Asset Value-- End of Period $ 15.07 $15.29 $ 16.35 $ 15.69 $ 15.05
========== ========== ========== ========== ==========
TOTAL RETURN 6.16% (1.16%) 12.57% 12.79% 8.55%
RATIOS
Net Assets -- End of Period
($000 Omitted) $254,584 $282,407 $332,239 $272,382 $208,100
Ratio of Expenses to Average
Net Assets# 0.92% 1.00% 1.03% 1.02% 0.93%
Ratio of Net Investment Income to
Average Net Assets# 5.31% 5.14% 5.43% 5.90% 6.39%
Portfolio Turnover Rate 99% 28% 30% 28% 25%
<FN>
# Various expenses of the Fund were voluntarily absorbed by IFG for the year
ended June 30, 1995. If such expenses had not been voluntarily absorbed, ratio
of expenses to average net assets would have been 1.05%, and ratio of net
investment income to average net assets would have been 5.18%.
</FN>
</TABLE>
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of
INVESCO Tax-Free Income Funds, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investment securities, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of INVESCO Tax-Free Intermediate Bond
Fund and INVESCO Tax-Free Long-Term Bond Fund (constituting the INVESCO Tax-Free
Income Funds, Inc., hereafter referred to as the "Fund") at June 30, 1995, the
results of its operations, the changes in its net assets and the financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at June 30, 1995 by correspondence with the custodian
and the application of alternative auditing procedures for unsettled security
transactions, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Denver, Colorado
August 4, 1995
<PAGE>
INVESCO FUNDS
To receive general information and prospectuses on any of INVESCO's funds or
retirement plans, or to obtain current account or price information,
Call toll-free: 1-800-525-8085
To reach PAL(R), your 24-hour Personal
Account Line, call: 1-800-424-8085
Or write to:
INVESCO Funds Group, Inc., Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
This information must be preceded or accompanied by an effective prospectus.
