SEMIANNUAL REPORT
December 31, 1995
INVESCO
TAX-FREE
INCOME
FUNDS,
INC.
Tax-Free Long-Term Bond Fund
Tax-Free Intermediate Bond Fund
Two Smart Choices
For Seeking Tax-Exempt Income
INVESCO FUNDS
<PAGE>
Economic Overview January 1996
1995 will long stand out as a banner year for U.S. investors. The S&P 500
achieved a total return of 37.46% for the 12 months ended 12/31/95; only the
fourth time in fifteen years the broad market returned over 25%. By other
measures, market results were even more exciting: The Dow Jones Industrial
Average broke 5000 for the first time in history. Fixed-income markets followed
suit, with the Lehman Government/Corporate Bond Index gaining 19.24%.1
This spectacular performance was influenced by a number of positive
economic factors. Inflation was low at a mere 2.5%, unemployment was down, and
growth in Gross Domestic Product slowed to apparently sustainable levels. In
addition, the Federal Reserve Board cut short-term interest rates twice during
the second half of 1995, and another 0.25%, in January '96.
By year-end, however, the broad market expansion appeared to be slowing
down, with the S&P 500 growing just 1.94% in December.1 And in January the stock
market whipsawed in the wake of stalled federal budget negotiations.
Until a budget settlement is reached in Washington, it seems likely that
the financial markets will remain volatile. However, we feel that budget
approval will ultimately restore the stock market to moderate growth levels,
heralding the beginning of a trend for both the U.S. stock and bond markets
throughout 1996.
This year, the markets should get some help from slow, steady economic
growth, but earnings improvements almost certainly won't see the dramatic gains
enjoyed in 1995. In addition, although business investment is expected to be
lower in '96, U.S. companies should continue to enjoy expanded sales overseas.
Therefore, although we may see corrections in some sectors, we expect advances
in securities prices to be in the single-digit range for 1996.
Municipal Bond Market
Compared to the Lehman Government/Corporate Bond Index 1995 total return
of 19.24%, the Lehman Municipal Bond Index reflected a slightly more limited
expansion at 17.46% for the year.1 This lower growth rate was due largely to
investor fears that municipals would lose their relative tax advantages as a
result of the various flat-tax proposals.
In our opinion, however, radical tax reform has a low probability of
implementation in the near future. Instead, modest reform such as tax
simplification with some reduction in marginal rates seems more likely.
Due to this uncertain legislative environment, market valuation levels
currently are attractive by historical standards, and seem to already reflect
price reductions which modest tax reform could produce. However, we expect to
see continued volatility in the municipal market until this issue is resolved.
/s/ R. Dalton Sim
- ------------------
R. Dalton Sim
Chairman and President
INVESCO Trust Company
<PAGE>
INVESCO Tax-Free Income Funds
Investment Philosophy
During the second quarter of 1995, INVESCO Tax-Free Income Funds'
management strategy was adjusted in an effort to enhance the funds' performance
within the current difficult municipal market environment. In making this
adjustment, our strategy has included three primary elements.
First, we manage the portfolios' interest rate risk. That is, we attempt
to make adjustments such as lengthening the portfolio during a bull market,
rather than trying to time the market's hills and valleys. This means that, to
the extent the municipal market expanded, we've been able to move with, and even
slightly ahead of, its overall growth.
Second, we have focused on the structure of each bond, basing our
selections on strong price/performance characteristics. For example, we have
removed securities with call features, anticipating that a falling rate
environment would erase any slight current increase in yield as the bonds were
pre-paid and the debt refinanced at lower rates.
Our third criteria for revising portfolio structure has been an emphasis
on superior credit quality. In 1995's strong market, with limited bond supply
and investors vying for high yields, the incremental increase in rates offered
by below-investment grade bonds simply did not justify their greater risk.
However, as a part of our regular strategy of evaluating the entire market's
specific opportunities, we sometimes purchased below-investment grade debt which
showed signs of impending rating improvement that could generate additional
income and capital gains to the funds.
The combined effects of these three portfolio adjustments can be seen in
each fund's improved performance during the fourth quarter, as described in the
following sections.2
INVESCO Tax-Free Long-Term Bond Fund
Tax-Free Long-Term Bond Fund
Average Annualized Total Return
as of 12/31/952
1 year 15.64%
-----------------------------------
5 years 8.44%
-----------------------------------
10 years 9.24%
-----------------------------------
The fund's total return for the one-year period ended 12/31/95 was 15.64%,
compared to a total return of 17.46% for the Lehman Brothers Municipal Bond
Index1 for the same period.2 The fund's annual performance was below the General
Municipal Debt Fund average of 16.84% for the same period as reported by Lipper
Analytical Services, Inc.3
Due to our revised management strategies described earlier, we have
significantly improved our performance versus the average in recent months.
For the three months ended 12/31/95 the fund achieved a 5.65% total
return2, exceeding the 4.67% Lipper category average.3 The chart and other total
return figures cited reflect the fund's operating expenses, but the indexes do
not have expenses, which would, of course, have lowered their performance.
Graph: Geographical Diversification
by market value as of 12/31/95
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 - 20% Midwest - 30% Northeast - 21%
South Central - 12% Southeast - 13% Puerto Rico - 4%
<PAGE>
Graph:
This line graph represents a comparison of the value of a $10,000
investment in the 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 12/31/95.
The line graph above represents 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 12/31/95.2
INVESCO Tax-Free Long-Term Bond Fund is intended to provide a high level
of current tax-exempt income over the long-term. As of 12/31/95, it had an
average duration well above the market average. This lengthening allows us to
fully capitalize on the municipal bond bull market, because the greatest
principal appreciation in the current falling rate environment is being realized
in the longest maturities.
At a special meeting held on October 19, 1995, shareholders approved a
modification to the fund's investment policies, permitting greater use of
futures contracts and options. Of the 16,574,600 shares of the fund outstanding
on the record date for this meeting, the holders of 7,784,333 shares voted for
the proposal, the holders of 1,443,453 shares voted against the proposal, and
the holders of 543,942 shares abstained. This change has significantly increased
the fund's liquidity and flexibility, enabling us to quickly react as market or
economic conditions change, and allowing us to more easily protect the portfolio
as well as take advantage of new opportunities.
INVESCO Tax-Free Intermediate Bond Fund
The fund's total return for the one-year period ended 12/31/95 was 12.95%,
compared to a total return of 17.16% for the Lehman Intermediate Municipal Bond
Index1 for the same period.2 While underperforming the index, the fund's annual
return exceeded the Intermediate Municipal Debt Fund average of 12.89% for the
same period as reported by Lipper Analytical Services, Inc.3
Since our second quarter adjustments in management strategy, Tax-Free
Intermediate Bond Fund has seen even stronger recent returns. Its total return
of 2.91% for the three months ended 12/31/952 was greater than the Lipper
category average of 2.74% for the same period.3
Tax-Free Intermediate Bond Fund
Average Annualized Total Return
as of 12/31/952
1 year 12.95%
-----------------------------------
Since inception (12/93) 4.36%
-----------------------------------
To maximize principal stability, we maintain a somewhat shorter duration
in Tax-Free Intermediate Bond Fund than in the long-term fund. However, in
keeping with our fundamental municipal bond strategy, duration is still longer
than the market average. Again, by exceeding the average, we are able to
capitalize upon the opportunities presented by the current bull market
environment.
As of 12/31/95, more than 80% of the portfolio was invested in bonds rated
A or better by Standard & Poor's.1 We continue to avoid callable bonds, and
focus on strong structural features.
The line graph below represents the value of a $10,000 investment in
INVESCO Tax-Free Intermediate Bond Fund, plus reinvested dividends and capital
gain distributions, from the fund's inception (12/93) through 12/31/95.2 The
chart and other total return figures cited reflect the fund's operating
expenses, but the indexes do not have expenses, which would, of course, have
lowered their performance.
<PAGE>
Graph:
This line graph represents a comparison of 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 Bond Index, assuming in each
case reinvestment of all dividends and capital gain distributions, for the
period from inception (12/93) through 12/31/95.
Graph: Geographical Diversification
by market value as of 12/31/95
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 - 44% Midwest - 12% Northeast - 20%
South Central - 8% Southeast - 9% Puerto Rico - 4% Guam - 1%
Looking Forward
During 1996, we plan to maintain portfolios with a longer-than-average
duration, high credit quality, and strong price/performance features. We
anticipate that INVESCO Tax-Free Long-Term and Intermediate Bond funds will be
well-positioned considering the current economic forecast.
Fund Manager
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 1995
was the manager of a municipal bond fund for Stein, Roe & Farnham Inc. in
Chicago.
1 The S&P 500 and Dow Jones Industrial Average are unmanaged indexes considered
representative of the performance of the broad U.S. stock market. The Lehman
Government/Corporate Bond Index is an unmanaged index illustrating the broad
fixed-income market. 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. Standard and Poor's is
an independent bond rating agency.
2 Total return assumes reinvestment of dividends and capital gain distributions
for the periods indicated. Investment return and principal value will fluctuate
so that, when redeemed, an investor's shares may be worth more or less than when
purchased. Of course, past performance is not a guarantee of future results.
3 Rankings provided by Lipper Analytical Services, an independent fund analyst,
are based on total return performance unadjusted for commissions.
<PAGE>
INVESCO Tax-Free Income Funds, Inc.
Statement of Investment Securities
December 31, 1995
UNAUDITED
<TABLE>
<CAPTION>
Principal
Description Amount Cost Value
- ----------------------------------------------------------------------------------------------
TAX-FREE INTERMEDIATE BOND Fund
<S> <C> <C> <C> <C>
MUNICIPAL BONDS 94.63%
ALASKA 7.13%
Alaska Indl Dev & Export Auth, Ref
Revolving Fund, Series 1994A,
Lots 1-29, 5.700%, 4/1/2004 $200,000 $200,000 $211,750
Municipality of Anchorage, Alaska,
Gen Oblig Ref, Gen Purpose,
1993 Series B, 4.900%, 8/1/2003 25,000 25,000 25,344
Municipality of Anchorage, Alaska,
Port Rev Ref, 1995, 6.000%, 2/1/2004 150,000 159,842 161,437
-------------------------
384,842 398,531
-------------------------
ARIZONA 1.83%
Pinal Cnty, Arizona (Mammoth-San Manuel
Unified School Dist No 8), Ref, Series
1994, 6.000%, 7/1/2001 100,000 100,000 102,500
-------------------------
CALIFORNIA 6.33%
San Diego Cnty, California, Regl Transn
Commn, 2nd Sr Ltd Sales Tax Rev Ref,
1993 Series A, 5.250%, 4/1/2007 200,000 197,758 204,500
San Francisco City & Cnty Airports Commn,
California (San Francisco Intl Airport),
<2nd Series Rev, Issue 9A, 5.250%,
5/1/2008 150,000 147,976 149,437
-------------------------
345,734 353,937
-------------------------
COLORADO 12.46%
Arapahoe Cnty, Colorado, Cap Impt
Trust Fund (E-470 Proj), Hwy Rev,
Veh Regn Fee, 5.300%, 8/31/2006 200,000 200,000 210,000
Arapahoe Cnty, Colorado (Cherry Creek
School Dist No 5), Gen Oblig Ref,
Series 1995A, 5.250%, 12/15/2002 200,000 207,614 209,500
Montrose Cnty, Colorado, Ctfs of
Participation, 6.350%, 6/15/2006 150,000 148,500 159,562
Regents of Univ of Colorado, Research
Bldg Revolving Fund, Ref Rev,
Series 1995, 5.100%, 6/1/2006 115,000 114,713 117,013
-------------------------
670,827 696,075
-------------------------
DISTRICT OF COLUMBIA 0.43%
District of Columbia, Gen Oblig Ref,
Series 1994A, 5.200%, 6/1/2003 25,000 24,815 23,719
-------------------------
FLORIDA 1.40%
Miami Beach Redev Agency, Florida
(City Ctr/Historic Convention Village),
Tax Increment Rev, Series 1993,
5.100%, 12/1/2003 80,000 80,000 78,300
-------------------------
<PAGE>
GEORGIA 0.53%
Muni Elec Auth of Georgia, Pwr Rev,
Series CC, 4.500%, 1/1/2002 30,000 29,840 29,700
-------------------------
GUAM 0.53%
Guam Pwr Auth, Rev, 1993 Series A,
5.200%, 10/1/2004 30,000 29,700 29,550
-------------------------
ILLINOIS 3.73%
Illinois Hsg Dev Auth, Hsg Dev Rev,
1993 Series A, 5.000%, 1/1/2001 20,000 20,171 19,900
Illinois State, Gen Oblig, Series 1995,
5.125%, 12/1/2005 125,000 127,182 127,500
Illinois Toll Hwy Auth, Toll Hwy Ref
Rev, 1993 Series A, 4.700%, 1/1/2001 60,000 60,606 60,750
-------------------------
207,959 208,150
-------------------------
LOUISIANA 3.81%
Louisiana Pub Facils Auth, Student Ln Rev,
Series 1992A-1, 6.200%, 3/1/2001 200,000 203,780 213,000
-------------------------
MASSACHUSETTS 4.60%
Commonwealth of Massachusetts, Gen Oblig,
Cons Ln of 1995, Series C,
5.250%, 8/1/2005 20,000 21,265 21,925
Massachusetts Muni Wholesale Elec, Pwr
Supply System Rev, 1992 Series B,
6.375%, 7/1/2001 225,000 227,234 234,844
-------------------------
248,499 256,769
-------------------------
MISSOURI 0.44%
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 24,750
-------------------------
NEVADA 2.63%
Nevada Hsg Div (Single Family Prog),
1994 Issue B-1, Sr Rev, 5.900%,
4/1/2003 140,000 140,000 147,000
-------------------------
NEW HAMPSHIRE 4.08%
New Hampshire Hsg Fin Auth, Single Family
Residential Mtg, 1994 Series D,
5.850%, 1/1/2001 220,000 220,000 227,975
-------------------------
NORTH CAROLINA 2.48%
North Carolina Eastern Muni Pwr Agency,
Pwr System Rev Ref, Series 1993 C,
5.250%, 1/1/2004 140,000 143,751 138,600
-------------------------
OHIO 0.89%
Ohio Bldg Auth, State Correctional Facils,
Ref, 1994 Series A, 4.600%, 10/1/2003 50,000 49,671 49,937
-------------------------
<PAGE>
OREGON 0.45%
Oregon Hsg & Cmnty Svcs Dept (Single
Family Mtg Prog), Mtg Rev, 1993 Series A,
4.500%, 7/1/2001 25,000 24,875 25,094
-------------------------
PENNSYLVANIA 11.04%
Philadelphia Hosps & Higher Ed Facils
Auth, Pennsylvania (Northwestern Corp),
Rev, 1994 Series, 6.500%, 6/1/2004 200,000 198,546 205,250
Philadelphia, Pennsylvania, Gas Wks Rev,
Fifteenth Series, Sub Series 3,
5.100%, 8/1/2004 175,000 164,096 173,906
5.000%, 8/1/2003 65,000 64,756 64,594
Philadelphia, Pennsylvania, Wtr & Wastewtr
Rev, Series 1995, 6.750%, 8/1/2005 150,000 165,563 173,062
-------------------------
592,961 616,812
-------------------------
PUERTO RICO 6.09%
Commonwealth of Puerto Rico, Gen Oblig,
Pub Impt Ref, Series 1995,
6.500%, 7/1/2003 150,000 163,211 169,687
Puerto Rico Elec Pwr Auth, Pwr Rev Ref,
Series W, 6.500%, 7/1/2006 150,000 165,482 170,438
-------------------------
328,693 340,125
-------------------------
SOUTH DAKOTA 5.83%
Sioux Falls, South Dakota, Sales Tax Rev,
Series 1991B, 6.300%, 11/15/2001 60,000 64,979 65,625
South Dakota, Student Ln Fin, Student Ln
Rev, Series 1994-A, 5.850%, 8/1/2000 250,000 250,000 260,313
-------------------------
314,979 325,938
-------------------------
TENNESSEE 0.36%
Knoxville, Tennessee, Wtr Rev Ref & Impt,
Series M-1993, 4.500%, 3/1/1999 20,000 20,110 20,275
-------------------------
TEXAS 0.45%
Trinity River Indl Dev Auth, Texas
(Intl Paper Proj), Rev Ref, 1993 Series,
4.900%, 12/1/2002 25,000 24,813 25,313
-------------------------
VIRGINIA 4.54%
Rivanna Wtr & Swr Auth, Virginia, Regl
Wtr & Swr System Rev Ref, Series 1993,
4.500%, 10/1/2000 50,000 50,525 50,750
Southeastern Pub Svc Auth, Virginia, Regl
Solid Waste System, Sr Rev Ref,
Series 1993A, 5.150%, 7/1/2009 200,000 193,422 202,750
-------------------------
243,947 253,500
-------------------------
WASHINGTON 11.42%
Clark Cnty, Washington (Pub Util Dist
No 1), Generating System Rev, Series
1995, 6.000%, 1/1/2006 200,000 213,885 215,750
Tacoma, Washington, Swr Rev, 1995 Series B,
5.500%, 12/1/2011 200,000 196,806 202,250
<PAGE>
Washington Pub Pwr Supply System,
Ref Elec Rev, Nuclear Proj #1, Series
1993-1A, 5.100%, 7/1/2000 20,000 20,276 20,400
Nuclear Proj #3, Series 1993-3A,
4.900%, 7/1/2004 135,000 128,950 133,650
Wenatchee, Washington, Wtr & Swr Rev Ref,
1994, 4.600%, 12/1/2002 65,000 65,000 65,894
-------------------------
624,917 637,944
-------------------------
WISCONSIN 1.15%
Saint Croix Cnty, Wisconsin, Gen Oblig
Govt Ctr Ref, Series 1994A,
4.650%, 10/1/2003 65,000 65,000 64,106
-------------------------
TOTAL MUNICIPAL BONDS 5,144,053 5,287,600
-------------------------
SHORT-TERM INVESTMENTS
MUNICIPAL NOTES 5.37%
CALIFORNIA 1.79%
Los Angeles Regl Airports Impt Auth,
California (American Airlines/Los Angeles
Intl Airport Proj), AR, Corp Lease Rev,
Issue A, 6.000%, 12/1/2024~ 100,000 100,000 100,000
-------------------------
TEXAS 3.58%
Grapevine Indl Dev, Texas (American
Airlines Proj), VR, Multi-Mode Rev,
Issue A3, 6.000%, 12/1/2024~ 200,000 200,000 200,000
-------------------------
TOTAL MUNICIPAL SHORT-TERM NOTES 300,000 300,000
-------------------------
TOTAL INVESTMENT SECURITIES 100.00% $5,444,053# $5,587,600
===========================
TAX-FREE LONG-TERM BOND Fund
MUNICIPAL BONDS 80.13%
ALABAMA 1.28%
Birmingham Special Care Facils Fing
Auth, Alabama (Daughters of Charity
Natl Hlth System), Rev, Series 1995,
5.000%, 11/1/2025 $4,000,000 $3,669,860 $3,680,000
-------------------------
ALASKA 0.26%
Alaska Hsg Fin Corp (Veterans Mtg Prog),
Collateralized Gen Oblig, 1990
First Series, 7.500%, 12/1/2030 715,000 712,319 755,219
-------------------------
ARIZONA 0.59%
Arizona Edl Ln Marketing, 1992 Edl Ln Rev,
Series B, 7.000%, 3/1/2005 1,000,000 988,750 1,086,250
Arizona State Univ Research Park, Dev Ref,
Series 1995, 5.000%, 7/1/2021 625,000 594,719 595,312
-------------------------
1,583,469 1,681,562
-------------------------
<PAGE>
CALIFORNIA 4.81%
Los Angeles Cnty Metro Transn Auth,
California, Proposition C, Sales
Tax Rev, 2nd Sr Bonds, Series A,
5.000%, 7/1/2025 3,000,000 2,647,348 2,853,750
San Diego Pub Facils Fing Auth,
California, Swr Rev, Series 1995,
5.000%, 5/15/2025>> 4,000,000 3,816,240 3,805,000
Southern California Pub Pwr Auth
(San Juan Unit 3 Pwr Proj), Rev,
1993 Series A, 5.000%, 1/1/2020>> 7,500,000 6,826,747 7,143,750
-------------------------
13,290,335 13,802,500
-------------------------
COLORADO 0.83%
Colorado Springs, Colorado, Utils
Systems Impt and Ref Rev, Series 1994A,
5.125%, 11/15/2019 1,000,000 894,739 976,250
Fountain Valley Auth, Colorado, Wtr
Treatment Ref Rev, Series 1991,
6.800%, 12/1/2019 1,140,000 1,166,574 1,244,025
Montrose Cnty, Colorado, Ctfs of
Participation, 6.350%, 6/15/2006 150,000 148,500 159,562
-------------------------
2,209,813 2,379,837
-------------------------
FLORIDA 4.61%
Greater Orlando Aviation Auth, Florida,
Airport Facils Rev, Series 1988,
8.375%, 10/1/2016+ 490,000 488,810 550,637
Orlando-Orange Cnty Expwy Auth, Florida,
Jr Lien Rev, Series of 1988,
5.000%, 7/1/2017+ 4,970,000 4,689,054 4,796,050
Orlando Utils Commn, Florida, Wtr
and Elec Rev, Series 1993,
5.000%, 10/1/2020 5,000,000 4,608,084 4,743,750
Saint Lucie Cnty, Florida, Sales Tax
Rev Ref, Series 1994,
5.000%, 10/1/2023+ 3,330,000 3,012,308 3,163,500
-------------------------
12,798,256 13,253,937
-------------------------
GEORGIA 2.83%
Atlanta, Georgia, Airport Facils Rev,
Series 1990, 7.250%, 1/1/2017 2,000,000 2,056,937 2,200,000
Atlanta, Georgia (Delta Air Lines Proj),
Special Purpose Facils Rev, Series
1989B, 7.900%, 12/1/2018 2,500,000 2,553,054 2,696,875
7.400%, 12/1/1999 3,000,000 3,088,362 3,240,000
-------------------------
7,698,353 8,136,875
-------------------------
<PAGE>
ILLINOIS 8.27%
Chicago, Illinois (Chicago-O'Hare Intl
Airport), Gen Airport Rev,
1990 Series A, 7.500%, 1/1/2016 3,000,000 2,880,000 3,307,500
Chicago, Illinois, Gen Oblig, Proj & Ref,
Series 1995A-1, 5.125%, 1/1/2025 3,000,000 2,786,460 2,846,250
Chicago, Illinois (Peoples Gas Light
& Coke), First & Ref Mtg, Series CC,
Medium Term Notes, 6.875%, 3/1/2015 2,875,000 2,974,405 3,187,656
Cook & DuPage Cntys, Illinois
(Lemont-Bromberek Combined School
Dist No 113A), Cap Appreciation,
School Bldg, Series 1995B, 12/1/2015 5,060,000 1,636,579 1,669,800
Cook Cnty, Illinois, Gen Oblig, Series
1993A, 5.000%, 11/15/2023+ 5,540,000 5,001,411 5,138,350
Illinois Dev Fin Auth (Catholic Charities),
Hsg Dev Rev, 6.350%, 1/1/2025 1,500,000 1,470,780 1,511,250
Illinois Hlth Facils Auth (Northwestern
Mem Hosp), Rev, Series 1991,
6.750%, 8/15/2011+ 5,000,000 4,950,000 5,425,000
Metro Pier and Exposition Auth, Illinois
(McCormick Place Expansion Proj),
Rev Ref, Series 1994A, Cap
Appreciation,
6/1/2025 1,200,000 218,194 231,000
6/1/2026 1,500,000 257,397 271,875
6/1/2027 1,000,000 161,951 171,250
-------------------------
22,337,177 23,759,931
-------------------------
INDIANA 9.85%
Dekalb Cnty Redev Auth, Indiana
(Mini-Mill Loc Pub Impt Proj), Rev,
Series A 1995, 6.500%, 1/15/2014 900,000 851,456 968,625
Indiana Bond Bank (State Revolving
Fund Prog), State Match Rev, Series
1993A, 6.000%, 2/1/2015 4,500,000 4,216,582 4,674,375
Indiana Transportation Fin Auth, Airport
Facils Lease Rev, Series A,
6.750%, 11/1/2011 1,500,000 1,479,940 1,614,375
Indianapolis Airport Auth, Indiana,
Airport Rev of 1988, 8.400%, 7/1/2008 2,000,000 2,083,096 2,212,500
Indianapolis Airport Auth, Indiana
(United Air Lines/Indianapolis
Maintenance Ctr Proj), Special Facil
Rev, Series 1995A, 6.500%, 11/15/2031 2,750,000 2,646,87 52,801,562
Indianapolis Local Pub Impt Bond Bank,
Indiana, Impt Rev, Series 1991C,
6.700%, 1/1/2017 3,750,000 3,578,437 4,200,000
Indianapolis Local Pub Impt Bond Bank,
Indiana, Rev Ref, Series 1995A,
5.000%, 1/1/2017~~ 10,000,000 9,263,700 9,312,500
Princeton, Indiana (PSI Energy Proj),
PCR, Series 1979, 6.625%, 3/1/2004 2,500,000 2,071,220 2,510,350
-------------------------
26,191,306 28,294,287
-------------------------
<PAGE>
MASSACHUSETTS 3.34%
Massachusetts Bay Transportation Auth,
Gen Transportation System, 1995
Series A, 5.600%, 3/1/2008 3,000,000 2,986,170 3,153,750
Massachusetts Wtr Resources Auth, Gen Rev,
1995 Series B 4.750%, 12/1/2021~~ 7,000,000 6,460,580 6,440,000
-------------------------
9,446,750 9,593,750
-------------------------
MICHIGAN 3.52%
Battle Creek Tax Increment Fin Auth,
Michigan, Rev, 1994 Dev,
7.300%, 5/1/2010 1,195,000 1,193,068 1,362,300
Ingham Cnty, Michigan (Okemos Pub
Schools), Gen Oblig Unlimited Tax
Ref, Cap Appreciation, 5/1/2014 1,625,000 585,149 599,219
5/1/2015 1,000,000 340,573 346,250
5/1/2016 3,500,000 1,127,376 1,146,250
Michigan State Hosp Fin Auth (Henry
Ford Hlth System), Hosp Rev Ref,
Series 1995A, 5.250%, 11/15/2020~~ 5,000,000 4,715,200 4,787,500
Michigan State Trunk Line Fund, Rev,
Series 1992A, Cap Appreciation,
10/1/2012 4,635,000 1,703,154 1,871,381
-------------------------
9,664,520 10,112,900
-------------------------
MISSISSIPPI 0.30%
Claiborne Cnty, Mississippi (System
Energy Resources Proj), A/FR, PCR,
Series A, 9.500%, 12/1/2013 750,000 750,000 860,625
-------------------------
NEW HAMPSHIRE 0.40%
New Hampshire Hsg Fin Auth, Single
Family Residential Mtg, 1994 Series D,
6.850%, 7/1/2006 1,080,000 1,080,000 1,162,350
-------------------------
NEW YORK 7.28%
New York (AMBAC Proj), Series B,
7.250%, 8/15/2007+ 2,500,000 2,841,766 3,015,625
New York Dorm Auth (State Univ Dorm
Facils Issue), Lease Rev, Series
1995A, 6.000%, 7/1/2010 1,550,000 1,652,078 1,683,687
New York Loc Govt Assistance Corp
(Pub Benefit of the State of New York),
Series 1993D, 5.000%, 4/1/2023+ 2,500,000 2,099,180 2,356,250
Port Auth of New York and New Jersey,
Consolidated, Ninety-Third Series,
6.125%, 6/1/2094 5,250,000 5,471,168 5,643,750
Triborough Bridge and Tunnel Auth,
New York, Gen Purpose Rev, Series
1993B, 5.000%, 1/1/2020 1,935,000 1,758,838 1,862,438
Series 1994A, 5.000%, 1/1/2024 3,565,000 3,100,024 3,368,925
Series Y, 5.500%, 1/1/2017 2,900,000 2,776,899 2,983,375
-------------------------
19,699,953 20,914,050
-------------------------
PENNSYLVANIA 2.92%
Allegheny Cnty Indl Dev Auth,
Pennsylvania (FHA Insured Mtg-Baldwin
Hlth Ctr), Specialized Enterprise
Rev, 8.350%, 2/1/2016 640,000 661,105 663,136
<PAGE>
Montgomery Cnty Higher Ed & Hlth Auth,
Pennsylvania (Northwestern Corp),
Rev, 1994 Series,
7.125%, 6/1/2018 2,050,000 2,020,992 2,075,625
7.000%, 6/1/2012 700,000 691,180 705,250
Philadelphia Hosps & Higher Ed Facils
Auth, Pennsylvania (Northwestern Corp),
Rev, 1994 Series, 7.000%, 6/1/2012 1,530,000 1,510,722 1,539,563
6.500%, 6/1/2004 1,080,000 1,072,148 1,108,350
Philadelphia, Pennsylvania, Wtr &
Wastewtr Rev, Series 1995,
6.250%, 8/1/2012 2,050,000 2,163,442 2,290,875
-------------------------
8,119,589 8,382,799
-------------------------
PUERTO RICO 3.71%
Commonwealth of Puerto Rico, Gen Oblig,
Pub Impt Ref, Series 1995,
6.250%, 7/1/2008+ 4,975,000 5,372,488 5,665,281
Puerto Rico Aqueduct and Swr Auth
(Gtd by the Commonwealth of Puerto
Rico), Rev Ref, Series 1995,
5.000%, 7/1/2019 1,500,000 1,397,981 1,410,000
Puerto Rico Elec Pwr Auth, Pwr Rev Ref,
Series X, 6.000%, 7/1/2015 1,000,000 977,250 1,030,000
Series Z, 5.250%, 7/1/2021 2,650,000 2,401,461 2,557,250
-------------------------
10,149,180 10,662,531
-------------------------
RHODE ISLAND 4.30%
Rhode Island Convention Ctr Auth, Rev
Ref, 1993 Series B, 5.000%,
5/15/2020 9,185,000 8,173,994 8,587,975
Rhode Island Depositors Econ Protection,
Special Oblig, 1992 Series A,
6.950%, 8/1/2022 1,500,000 1,500,000 1,734,375
1993 Series A, 5.750%, 8/1/2012 2,000,000 1,904,751 2,040,000
-------------------------
11,578,745 12,362,350
-------------------------
SOUTH CAROLINA 1.89%
South Carolina Pub Svc Auth, Rev Ref,
1993 Series C, 5.000%, 1/1/2025 2,250,000 2,041,888 2,134,688
South Carolina Sch Fing (School
District #2 of Sumter Cnty Proj),
Ctfs of Participation, Series 1990A,
8.125%, 4/1/2010 3,000,000 3,225,523 3,285,000
-------------------------
5,267,411 5,419,688
-------------------------
TEXAS 7.17%
Austin, Texas, Combined Util Systems,
Rev Ref, Series 1993A, Cap
Appreciation, 11/15/2009 3,300,000 1,604,562 1,592,250
Austin, Texas, Util Systems, Rev Ref,
Cap Appreciation, 11/15/2009 5,020,000 2,373,414 2,422,150
11/15/2011 1,400,000 604,112 598,500
Austin, Texas, Wtr, Swr & Elec Ref Rev,
Series 1982, 14.000%, 11/15/2001 500,000 499,063 687,300
<PAGE>
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 1,388,750
Harris Cnty, Texas, Road Rev, Series
1995, 5.000%, 10/1/2017>> 6,400,000 5,958,125 6,104,000
San Antonio, Texas, Elec & Gas Systems
Rev Ref, Series 1991-B, Cap
Appreciation, 2/1/2010+ 10,000,000 4,308,482 4,737,500
Texas Muni Pwr Agency, Ref Rev, Series
1989, Cap Appreciation, 9/1/2010 6,650,000 2,774,077 3,050,688
-------------------------
19,496,835 20,581,138
-------------------------
UTAH 0.74%
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 2,118,825
-------------------------
VERMONT 0.37%
Vermont Hsg Fin Agency, Single Family
Hsg, Series 5, 6.875%, 11/1/2016 1,000,000 1,000,000 1,065,000
-------------------------
VIRGINIA 3.01%
Upper Occoquan Sewage Auth, Virginia,
Regl Sewerage System Rev, Series of
1995A, 4.750%, 7/1/2029~~ 9,500,000 8,657,995 8,656,875
-------------------------
WASHINGTON 6.13%
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 3,281,250
(Wanapum), 7.700%, 1/1/2018 1,050,000 1,036,875 1,161,563
Vancouver, Washington, Wtr & Swr Rev,
Series 1993, 5.500%, 6/1/2013 1,955,000 1,943,153 1,989,213
Washington, Gen Oblig, Motor Vehicle
Fuel Tax Rev, Series 1993B,
5.500%, 5/1/2018>> 5,205,000 5,056,882 5,289,581
Washington Pub Pwr Supply System Ref
Elec Rev, Nuclear Proj #2, Series
1990B, 7.000%, 7/1/2012>> 2,800,000 2,835,133 3,055,500
Nuclear Proj #3, Series 1990B,
7.250%, 7/1/2015 2,500,000 2,525,581 2,815,625
-------------------------
16,382,624 17,592,732
-------------------------
WISCONSIN 1.72%
Wisconsin Hlth & Edl Facils Auth
(Sisters of the Sorrowful
Mother-Ministry), Rev, Series 1993C,
5.500%, 8/15/2023 5,000,000 4,647,004 4,931,250
-------------------------
TOTAL MUNICIPAL BONDS 218,431,494 230,161,011
-------------------------
<PAGE>
SHORT-TERM INVESTMENTS
MUNICIPAL NOTES 19.87%
CALIFORNIA 0.94%
Los Angeles Regl Airports Impt Auth,
California (American Airlines/Los
Angeles Intl Airport Proj), AR, Corp
Lease Rev, 6.000%, 12/1/2024~ 1,000,000 1,000,000 1,000,000
Los Angeles, California (Sublease-LA
Intl Airport),VR, Regl Airports Impt
Corp Lease Rev, 6.000%, 12/1/2025~ 1,700,000 1,700,000 1,700,000
-------------------------
2,700,000 2,700,000
-------------------------
COLORADO 1.40%
Colorado Hlth Facils Auth (North
Colorado Med Ctr), VRD, Hosp Rev,
Series 1990, 5.000%, 5/15/2020~ 1,200,000 1,200,000 1,200,000
Colorado Student Oblig Auth, A/FR,
Student Ln Rev, 1993 Series C-2,
5.050%, 9/1/2002~ 2,825,000 2,825,000 2,825,000
-------------------------
4,025,000 4,025,000
-------------------------
GEORGIA 0.77%
DeKalb Private Hosp Auth, Georgia
(Egleston Children's Hosp at Emory
Univ Proj), VRD, RAC, Series 1994A,
5.050%, 3/1/2024~ 1,700,000 1,700,000 1,700,000
Hapeville Dev Auth, Georgia (Hapeville
Hotel Ltd Partnership Proj), ATS,
IDR, IDR, 1985 Series,
6.000%, 11/1/2015~ 500,000 500,000 500,000
-------------------------
2,200,000 2,200,000
-------------------------
ILLINOIS 1.32%
Illinois Dev Fin Auth, (AE Staley Mfg
Proj), AR, PCR, 5.050%, 12/1/2005~ 1,500,000 1,500,000 1,500,000
(Marriott Corp-Arlington Proj), AR,
IDR, 5.150%, 11/18/2014~ 1,000,000 1,000,000 1,000,000
(Marriott Corp-Oakbrook Territory),
AR, IDR, 5.150%, 12/1/2014~ 1,300,000 1,300,000 1,300,000
-------------------------
3,800,000 3,800,000
-------------------------
INDIANA 0.70%
Indiana Hlth Facil Fing Auth (Methodist
Hosp of Indiana), ACES, Hosp Rev,
Series 1992B, 5.150%, 9/1/2022~ 2,000,000 2,000,000 2,000,000
-------------------------
LOUISIANA 0.66%
DeSoto Parish, Louisiana (Central
Louisiana Elec Proj), ATS, PCR Ref,
Series 1991B, 5.050%, 7/1/2018~ 1,900,000 1,900,000 1,900,000
-------------------------
MAINE 1.04%
Maine Hlth & Higher Edl Facils Auth
(Bowdoin College), AR, Rev, Series
1995B, 5.000%, 7/1/2025~ 3,000,000 3,000,000 3,000,000
-------------------------
MISSISSIPPI 0.10%
Jackson Cnty, Mississippi
(Chevron USA Proj), AR, Indl
Sewage Facils Rev, Series 1994,
6.150%, 12/15/2024~ 300,000 300,000 300,000
-------------------------
<PAGE>
MISSOURI 4.67%
Columbia, Missouri, Special Oblig Ins
Reserve, VR, Series 1988A,
5.150%, 6/1/2008~ 1,900,000 1,900,000 1,900,000
Missouri Hlth & Edl Facils Auth
(Christian Htlh Svcs Dev-Christian
Hosp Northeast-Northwest Issue),
F/FR, Rev, Series A 1989,
4.900%, 11/1/2019~ 1,500,000 1,500,000 1,500,000
Missouri Hlth & Edl Facils Auth
(SSM Hlth Care Proj), VRD,
Hlth Facil Rev, Series 1995C,
4.500%, 6/1/2022~ 10,000,000 10,000,000 10,000,000
-------------------------
13,400,000 13,400,000
-------------------------
NEVADA 1.04%
Clark Cnty, Nevada, A/FR, Airport
System Rev Ref, Series 1993A,
5.150%, 7/1/2012~ 3,000,000 3,000,000 3,000,000
-------------------------
NEW YORK 1.19%
New York City Muni Wtr Fin Auth, New York,
AR, Wtr & Swr System Rev, 1993
Series C, 5.900%, 6/15/2022~ 200,000 200,000 200,000
1994 Series C, 5.900%, 6/15/2023~ 1,000,000 1,000,000 1,000,000
New York, VR, Gen Oblig, 1995 Series B,
5.900%, 8/15/2023~ 2,200,000 2,200,000 2,200,000
-------------------------
3,400,000 3,400,000
-------------------------
OREGON 0.35%
Port Portland, Oregon (Reynolds Metals),
DATES, PCR, 6.000%, 12/1/2009~ 1,000,000 1,000,000 1,000,000
-------------------------
TEXAS 2.34%
Calhoun Cnty, Nav Indl Dev Auth, Texas
(Alcoa Proj),VR, PCR, Ref
4.300%, 3/1/2001~ 3,375,000 3,375,000 3,375,000
South Texas Higher Ed Auth, VR, Student
Ln Rev, Series 1995,
5.050%, 6/1/2025~ 1,500,000 1,500,000 1,500,000
Texas Port Dev (Stolt Terminals Proj),
ATS, Marine Terminal Rev Ref,
5.050%, 1/15/2014~ 1,850,000 1,850,000 1,850,000
-------------------------
6,725,000 6,725,000
-------------------------
VIRGINIA 0.35%
Virginia Peninsula Ports Auth
(Dominion Term Proj), DATES,
Coal Term Rev Ref, Series C,
5.900%, 7/1/2016~ 1,000,000 1,000,000 1,000,000
-------------------------
WASHINGTON 2.90%
Seattle, Washington, AR, Wtr System Rev,
Series 1995, 5.000%, 9/1/2025~ 5,000,000 5,000,000 5,000,000
Washington Hlth Care Facils Auth
(Sisters of Providence), VRD, Rev,
Series 1985B, 5.900%, 10/1/2005~ 600,000 600,000 600,000
Series 1985D, 5.900%, 10/1/2005~ 1,500,000 1,500,000 1,500,000
Series 1985E, 5.900%, 10/1/2005~ 500,000 500,000 500,000
<PAGE>
Washington Hsg Fin Commn, (Inglenook
Court Proj), VR, Multi Family Mtg Rev,
6.350%, 7/1/2025~ 725,000 725,000 725,000
-------------------------
8,325,000 8,325,000
-------------------------
WYOMING 0.10%
Lincoln Cnty, Wyoming (Exxon Proj), AR,
PCR, Series C, 6.000%, 7/1/2017~ 300,000 300,000 300,000
-------------------------
TOTAL MUNICIPAL SHORT-TERM NOTES 57,075,000 57,075,000
-------------------------
TOTAL INVESTMENT SECURITIES 100.00% 275,506,494 287,236,011
===========================
<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
RAC -Revenue Anticipation Certificates
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 securites 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 futures contracts.
+ Security has been designated as collateral for when-issued securities.
~~ Security is a when-issued security.
</FN>
</TABLE>
Tax-Free Long-Term Bond Fund Futures contracts open December 31, 1995:
Number of Unrealized
Type Contracts Long Gain
- --------------------------------------------------------------------------------
US Treasury Bond (Expires March, 1996) 200 $24,293,750 $423,496
See Notes to Financial Statements
<PAGE>
INVESCO Tax-Free Income Funds, Inc.
Statement of Assets and Liabilities
December 31, 1995
UNAUDITED
Tax-Free Tax-Free
Intermediate Long-Term
Bond Fund Bond Fund
----------------------------------
ASSETS
Investment Securities:
At Cost $5,444,053 $275,506,494
==================================
At Value 5,587,600 287,236,011
Cash 66,630 4,943
Receivables:
Investment Securities Sold 0 1,623,540
Fund Shares Sold 14,588 302,779
Interest 96,435 3,659,169
Prepaid Expenses and Other Assets 63,863 238,699
----------------------------------
TOTAL ASSETS 5,829,116 293,065,141
----------------------------------
LIABILITIES
Payables:
Distributions to Shareholders 1,418 747,048
Investment Securities Purchased 0 29,203,294
Fund Shares Repurchased 100,108 1,745,014
Accrued Distribution Expenses 1,268 127,811
Accrued Expenses and Other Payables 39 16,705
----------------------------------
TOTAL LIABILITIES 102,833 31,839,872
----------------------------------
Net Assets at Value $5,726,283 $261,225,269
==================================
NET ASSETS
Paid-in Capital* 5,702,045 244,264,380
Accumulated Undistributed Net
Realized Gain (Loss) on Investment
Securities and Futures Contracts (119,309) 4,807,876
Net Appreciation of Investment Securities
and Futures Contracts 143,547 12,153,013
----------------------------------
Net Assets at Value $5,726,283 $261,225,269
==================================
Shares Outstanding 571,886 16,576,766
Net Asset Value, Offering and Redemption
Price per Share 10.01 15.76
==================================
* 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>
INVESCO Tax-Free Income Funds, Inc.
Statement of Operations
Six Months Ended December 31, 1995
UNAUDITED
Tax-Free Tax-Free
Intermediate Long-Term
Bond Fund Bond Fund
----------------------------------
INVESTMENT INCOME
INTEREST INCOME $143,309 $7,633,967
----------------------------------
EXPENSES
Investment Advisory Fees 13,696 715,707
Distribution Expenses 6,848 325,322
Transfer Agent Fees 7,129 165,753
Administrative Fees 5,438 24,546
Custodian Fees and Expenses 1,077 22,507
Directors Fees and Expenses 4,145 11,363
Pricing Expenses 5,196 11,083
Professional Fees and Expenses 6,210 19,813
Registration Fees and Expenses 12,475 20,113
Reports to Shareholders 1,317 35,704
Other Expenses 367 12,183
----------------------------------
TOTAL EXPENSES 63,898 1,364,094
Fees and Expenses Absorbed by
Investment Adviser (43,650) (178,547)
----------------------------------
Fees and Expenses Paid Indirectly (1,077) (14,554)
NET EXPENSES 19,171 1,170,993
----------------------------------
NET INVESTMENT INCOME 124,138 6,462,97
----------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities 18,196 5,397,095
Futures Contracts 0 (589,144)
----------------------------------
Total Net Realized Gain 18,196 4,807,951
----------------------------------
Change in Net Appreciation of:
Investment Securities 158,006 9,583,022
Futures Contracts 0 423,496
----------------------------------
Total Net Appreciation 158,006 10,006,518
----------------------------------
NET GAIN ON INVESTMENT SECURITIES 176,202 14,814,469
----------------------------------
Net Increase in Net Assets
from Operations $300,340 $21,277,443
==================================
See Notes to Financial Statements
<PAGE>
INVESCO Tax-Free Income Funds, Inc.
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Tax-Free Tax-Free
Intermediate Long-Term
Bond Fund Bond Fund
Six Months Year Six Months Year
Ended Ended Ended Ended
December 31 June 30 December 31 June 30
--------------------------------- -------------------------------
1995 1995 1995 1995
UNAUDITED UNAUDITED
OPERATIONS
<S> <C> <C> <C> <C>
Net Investment Income $124,138 $217,051 $6,462,974 $14,194,473
Net Realized Gain (Loss) on Investment Securities
and Futures Contracts 18,196 (56,737) 4,807,951 4,076,999
Change in Net Appreciation (Depreciation) of
Investment Securities and Futures Contracts 158,006 136,725 10,006,518 (2,732,724)
--------------------------------- -------------------------------
NET INCREASE IN NET
ASSETS FROM OPERATIONS 300,340 297,039 21,277,443 15,538,748
--------------------------------- -------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (124,138) (217,051) (6,462,974) (14,194,473)
Net Realized Gain on Investment Securities 0 0 (3,155,981) (5,294,008)
--------------------------------- -------------------------------
TOTAL DISTRIBUTIONS (124,138) (217,051) (9,618,955) (19,488,481)
--------------------------------- -------------------------------
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 3,607,358 6,937,416 47,469,081 79,885,898
Reinvestment of Distributions 113,675 200,954 7,662,425 15,594,840
--------------------------------- -------------------------------
3,721,033 7,138,370 55,131,506 95,480,738
Amounts Paid for Repurchases of Shares (3,078,016) (7,394,573) (60,149,013) (119,353,364)
--------------------------------- -------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM FUND SHARE TRANSACTIONS 643,017 (256,203) (5,017,507) (23,872,626)
--------------------------------- -------------------------------
Total Increase (Decrease) in Net Assets 819,219 (176,215) 6,640,981 (27,822,359)
NET ASSETS
Beginning of Period 4,907,064 5,083,279 254,584,288 282,406,647
--------------------------------- -------------------------------
End of Period $5,726,283 $4,907,064 $261,225,269 $254,584,288
================================= ===============================
FUND SHARE TRANSACTIONS
Shares Sold 367,406 726,499 3,094,297 5,319,259
Shares Issued from Reinvestment of Distributions 11,499 21,115 493,217 1,046,647
--------------------------------- -------------------------------
378,905 747,614 3,587,514 6,365,906
Shares Repurchased (313,056) (775,587) (3,906,995) (7,938,397)
--------------------------------- -------------------------------
Net Increase (Decrease) in Fund Shares 65,849 (27,973) (319,481) (1,572,491)
================================= ===============================
</TABLE>
See Notes to Financial Statements
<PAGE>
INVESCO Tax-Free Income Funds, Inc.
Notes to Financial Statements
UNAUDITED
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 investment objectives of each Fund are to seek as high a level of
current income exempt from federal income taxes as is consistent with
preservation of capital. The Fund is registered under the Investment Company
Act of 1940 (the Act ) as a diversified, open-end management investment company.
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 generally accepted
accounting principles 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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
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 at the time of purchase, or market
value if maturity is greater than 60 days.
B. FUTURES CONTRACTS - Tax-Free Long-Term Bond Fund may enter into futures
contracts for hedging or other non-speculative purposes. Pursuant to the
contracts, the Fund agrees to receive from or pay to the broker an amount of
cash equal to the daily fluctuation in value of the contract. Such receipts or
payments are known as variation margin and are recorded by the Fund as
unrealized gain or loss. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed. The Fund's
use of futures contracts may subject it to certain risks as a result of
unanticipated movements in the market. A lack of correlation between the value
of an instrument underlying a futures contract and the asset being hedged, or
unexpected adverse price movements, could render the Fund's hedging strategy
unsuccessful and result in losses. In addition, there can be no assurance that a
liquid secondary market will exist for any contract purchased or sold.
C. WHEN-ISSUED SECURITIES - When-issued securities held by the Fund are
fully collateralized by other 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.
D. 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, which may be comprised of stated coupon rate,
market discount, amortized premium and original issue discount, is recorded on
the accrual basis. The Fund amortizes discounts and premiums paid on purchases
of securities as adjustments to interest income. Cost is determined on the
specific identification basis.
<PAGE>
E. 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.
F. 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.
G. 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.
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 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 twleve-month period
thereafter. For the six- months ended December 31, 1995, Tax-Free Intermediate
Bond and Tax-Free Long-Term Bond Funds paid the Distributor $6,613 and $251,060,
respectively, for reimbursement of expenses incurred.
<PAGE>
IFG has voluntarily agreed, in some instances, to absorb certain fees and
expenses incurred by the Tax-Free Long-Term Bond Fund. IFG and ITC have
voluntarily agreed, in some instances, to absorb certain fees and expenses
incurred by Tax- Free Intermediate Bond Fund.
NOTE 3 - PURCHASES AND SALES OF INVESTMENT SECURITIES. For the six months
ended December 31, 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 $1,762,824 $1,092,242
Tax-Free Long-Term Bond Fund 181,890,275 206,521,855
There were no purchases or sales of U.S. Government securities.
NOTE 4 - APPRECIATION AND DEPRECIATION. At December 31, 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 by Fund were as follows:
Gross Gross Net
Fund Appreciation Depreciation Appreciation
- --------------------------------------------------------------------------------
Tax-Free Intermediate Bond Fund $153,112 $9,565 $143,547
Tax-Free Long-Term Bond Fund 11,780,381 50,864 11,729,517
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 the six months ended December 31, 1995, included in
Director's 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
- --------------------------------------------------------------------------------
Tax-Free Intermediate Bond Fund $10 $(43) $(33)
Tax-Free Long-Term Bond Fund 1,597 7,814 14,963
NOTE 6 - LINE OF CREDIT. The 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 redeem 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. For the six months ended
December 31, 1995, there were no such borrowings.
<PAGE>
INVESCO Tax-Free Income Funds, Inc.
Financial Highlights
(For a Fund Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
Six Months Year Period
Ended Ended Ended
December 31 June 30 June 30
------------ ------------ -------------
1995 1995 1994^
UNAUDITED
Tax-Free Intermediate Bond Fund
<S> <C> <C> <C>
PER SHARE DATA
Net Asset Value -
Beginning of Period $9.70 $9.52 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.22 0.44 0.19
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 0.31 0.18 (0.48)
------------ ------------ -------------
Total from Investment Operations 0.53 0.62 (0.29)
------------ ------------ -------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.22 0.44 0.19
Net Asset Value - End of Period $10.01 $9.70 $9.52
============ ============ =============
TOTAL RETURN 5.55%* 6.67% (2.93%)*
RATIOS
Net Assets -End of Period
($000 Omitted) $5,726 $4,907 $5,083
Ratio of Expenses to Average
Net Assets# 0.40%*@ 0.70% 0.70%~
Ratio of Net Investment Income to
Average Net Assets# 2.30%* 4.56% 3.75%~
Portfolio Turnover Rate 22%* 23% 55%*
<FN>
^ 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 and ITC for the
six months ended December 31, 1995, the year ended June 30, 1995 and the
period ended June 30, 1994. If such expenses had not been voluntarily
absorbed, ratio of expenses to average net assets would have been 1.21% (not
annualized), 2.45% and 3.09%, respectively, and ratio of net investment income
to average net assets would have been 1.49% (not annualized), 2.81% and 1.36%,
respectively.
@ Ratio reflects Total Expenses, less absorbed expenses by the investment
adviser.
~ Annualized
</FN>
</TABLE>
<PAGE>
INVESCO Tax-Free Income Funds, Inc.
Financial Highlights (Continued)
(For a Fund Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
Six Months
Ended
December 31 Year Ended June 30
----------- ---------------------------------------------------------
1995 1995 1994 1993 1992 1991
UNAUDITED
Tax-Free Long-Term Bond Fund
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value - Beginning of Period $15.07 $15.29 $16.35 $15.69 $15.05 $14.90
----------- ---------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.38 0.80 0.83 0.87 0.92 0.96
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 0.88 0.09 (1.00) 1.04 0.95 0.27
----------- ---------------------------------------------------------
Total from Investment Operations 1.26 0.89 (0.17) 1.91 1.87 1.23
----------- ---------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.38 0.80 0.83 0.87 0.92 0.96
Distributions from Capital Gains 0.19 0.31 0.06 0.38 0.31 0.12
----------- ---------------------------------------------------------
Total Distributions 0.57 1.11 0.89 1.25 1.23 1.08
----------- ---------------------------------------------------------
Net Asset Value - End of Period $15.76 $15.07 $15.29 $16.35 $15.69 $15.05
=========== =========================================================
TOTAL RETURN 8.50%* 6.16% (1.16%) 12.57% 12.79% 8.55%
RATIOS
Net Assets - End of Period
($000 Omitted) $261,225 $254,584 $282,407 $332,239 $272,382 $208,100
Ratio of Expenses to Average Net Assets# 0.46%*@ 0.92% 1.00% 1.03% 1.02% 0.93%
Ratio of Net Investment Income to
Average Net Assets# 2.52%* 5.31% 5.14% 5.43% 5.90% 6.39%
Portfolio Turnover Rate 77%* 99% 28% 30% 28% 25%
<FN>
* 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 six
months ended December 31, 1995 and 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 0.53% (not annualized) and 1.05%, respectively, and
ratio of net investment income to average net assets would have been 2.45%
(not annualized) and 5.18%, respectively.
@ Ratio reflects Total Expenses, less absorbed expenses by the investment
adviser.
</FN>
</TABLE>
<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.,(sm) Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
If you're in Denver, pleas visit one of our
convenient Investor Centers:
Cherry Creek, 155-B Fillmore Street;
Denver Tech Center,
7800 East Union Avenue, Lobby Level
This information must be preceded or
accompanied by an effective prospectus.
