ANNUAL REPORT
June 30, 1998
INVESCO
TAX-FREE
INCOME
FUNDS
Tax-Free Long-Term
Bond Fund
Tax-Free Intermediate
Bond Fund
You should know
what INVESCO knows.
INVESCO FUNDS
<PAGE>
Economic Overview July 1998
The first half of 1998 produced strong gains for the equity markets, as lower
interest rates, low inflation, and robust consumer confidence lifted the markets
to euphoric levels. However, much like the latter half of 1997, these gains were
produced only with increased volatility as concerns about the Asian contagion
and its potential effect on the domestic economy continued to weigh on
investors. As negative sentiment intensified, investors sought safety in
large-capitalization stocks, producing severe sector rotation and
underperformance of many small- and mid-cap stock indexes. Nevertheless,
numerous financial pundits speculate that the current economic environment
represents investment nirvana.
How long will this situation last? The key to maintaining the current
economic backdrop and equity valuations may lie in the following variables:
o Consumer Confidence: American household optimism, as measured by the
Consumer Confidence Index, is riding a 29-year high. Concomitantly,
consumer willingness to spend money increases, benefiting the economy.
o Interest Rates: Interest rates are at historic low levels. A significant
increase would slow the domestic economy, decrease corporate earnings, and have
a negative effect on the financial markets.
o Productivity: Significant gains in productivity by American workers have
contributed strongly to the lengthy bull market; as productivity improves,
earnings accelerate, supporting company stock prices. Conversely, slower
productivity could have a negative effect on corporate earnings and stock
prices.
If these three variables remain positive, the economic expansion and
bull market in the U.S. should continue. But, as with most perfect scenarios, if
conditions in the economy change and create a negative backdrop for financial
markets, then the markets are likely to experience a contraction. Either way,
investors need to remember that short-term fluctuations in the markets should
not influence long-term financial plans, and presently the underpinnings for a
strong equity market remain intact.
For fixed-income investors, the outlook for bonds and interest rates remains
positive. Inflation remains subdued and the world's largest borrower, the U.S.
government, may have a budget surplus this year -- decreasing their need to
borrow funds. In addition, given the economic and currency problems elsewhere
around the world, our fixed-income market still looks quite attractive on a
risk/reward basis, causing many international investors to favor
dollar-denominated fixed-income obligations in the U.S.
Fund Management
As of April 1998, Ms. Dawn Daggy-Mangerson assumed the responsibilities of
portfolio manager for both INVESCO Tax-Free Long-Term and Tax-Free Intermediate
Bond funds. Dawn received her BS from DePaul University and began her investment
career in 1985. Formerly, she was a vice president and portfolio manager with
Nationsbank/Tradestreet Investment Associates, Inc., where she managed
approximately $800 million in municipal bond assets.
Strategic Overview of Municipal Investments
Over the last 12 months, interest rates have declined significantly as the
Asian financial crisis focused investors' attention on the possibility of slower
global growth and deflation. As pessimism intensified, a flight to quality
occurred in the fixed-income market. Treasury obligations -- viewed by many as
lower risk securities -- outperformed municipal securities by a wide margin.
From a historical perspective, the relative outperformance of Treasuries during
the last 12 months is unusual. Over longer periods of time, the performance gap
between the two asset classes should shrink.
<PAGE>
Within this environment of lower interest rates, INVESCO's tax-exempt funds
have produced strong absolute returns, but have lagged behind their peers. This
is primarily due to our conservative duration posture during the fall of 1997.
At that time, we were still concerned about overly strong employment numbers as
well as the possibility of inflation, and underestimated the potential
deflationary pressures produced by the Asian financial crisis. Since then, we
have restructured the portfolios to take advantage of current market trends, and
to give the funds a more value-oriented, conservative bias.
In the first half of 1998, we restructured the classic barbell structure of
the portfolios by reducing our cash balance and increasing our ownership in
higher coupon non-callable bonds and state government obligations. By using a
value-oriented strategy, we seek to help reduce the volatility of the funds and
make them somewhat less sensitive to movements in interest rates.
Looking Forward
We remain optimistic regarding interest rates, as the Asian financial crisis
should continue to produce deflationary pressures throughout the U.S. economy.
In addition, the potential for the first federal budget surplus in 18 years may
also put downward pressure on interest rates. Presently, municipal securities
look relatively cheap compared to Treasuries. As a result, we may enter a period
of relative outperformance for municipals. Regardless of interest rate
movements, we plan to employ a value orientation when analyzing investments,
looking for high quality securities that are attractively priced.
INVESCO Tax-Free Income Funds, Inc.
The line graphs on the following pages illustrate the value of a $10,000
investment, plus reinvested dividends and capital gain distributions, in
Tax-Free Long-Term Bond Fund for the 10-year period ended 6/30/98, and in
Tax-Free Intermediate Bond Fund for the period from inception (12/93) through
6/30/98.
At the end of these respective periods, the Tax-Free Long-Term Bond Fund
account would have had a value of $21,893 and Tax-Free Intermediate Bond Fund,
$12,200. The chart and other total return figures cited reflect the funds'
operating expenses, but the indexes do not have expenses, which would, of
course, have lowered their performance. (Of course, past performance is not a
guarantee of future results.)(1) (2)
Tax-Free Long-Term Bond Fund
Average Annualized Total Return
as of 6/30/98 (2)
1 year 6.87%
---------------------------------
5 years 5.14%
---------------------------------
10 years 8.15%
---------------------------------
Graph: Tax-Free Long-Term Bond Fund 10-Year Total Return
vs. Lehman Municipal Bond Index
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 10-year period ended 6/30/98.
<PAGE>
Graph: Tax-Free Long-Term Bond Fund
Geographical Diversification
by market value as of 6/30/98
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-23% Midwest-31%
Northeast-17% South Central-15% Southeast-14%
Composition of holdings is subject to change.
For the one-year period ended 6/30/98, INVESCO Tax-Free Long-Term Bond Fund
had a return of 6.87%. The Lehman Municipal Bond Index had a total return of
8.66% for the same one-year period.(1) (2)
Tax-Free Intermediate Bond Fund
Average Annualized Total Return
as of 6/30/98 (2)
1 year 6.02%
---------------------------------
Since inception (12/93) 4.43%
---------------------------------
Graph: Tax-Free Intermediate Bond Fund Total Return From Inception
vs. Lehman Intermediate Municipal Bond Index
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 period from inception (12/93)
through 6/30/98.
Graph: Tax-Free Intermediate Bond Fund
Geographical Diversification
by market value as of 6/30/98
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-41% Midwest-21%
Northeast-11% South Central-14% Southeast-13%.
Composition of holdings is subject to change.
For the one-year period ended 6/30/98, INVESCO Tax-Free Intermediate Bond
Fund had a total return of 6.02%. The Lehman Intermediate Municipal Bond Index
had a total return of 8.48% for the same one-year period.(1) (2)
(1) The Lehman Municipal Bond Index and Intermediate Municipal Bond Index are
unmanaged indexes indicative of the broad tax-exempt bond market.
(2) 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 fluctuate so that,
when redeemed, an investor's shares may be worth more or less than when
purchased.
<PAGE>
<TABLE>
<CAPTION>
INVESCO Tax-Free Income Funds, Inc.
Statement of Investment Securities
June 30, 1998
- ----------------------------------------------------------------------------------------------
Principal
Description Amount Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
TAX-FREE INTERMEDIATE BOND Fund
MUNICIPAL BONDS 97.79%
ALASKA 6.99%
Alaska Indl Dev & Export Auth, Ref Revolving Fund,
Series 1994A, Lots 1-29, 5.700%, 4/1/2004 $ 180,000 $ 192,451
Municipality of Anchorage, Alaska,
Gen Oblig Ref, Gen Purpose, 1993 Series B,
4.900%, 8/1/2003 25,000 25,759
Port Rev Ref, 1995, 6.000%, 2/1/2004 150,000 162,240
--------------
380,450
CALIFORNIA 5.11% --------------
California, Various Purpose Gen Oblig, Series 1992,
6.300%, 9/1/2008 150,000 172,936
Monterey Cnty Pub Wks Brd, California
(Dept of Corrections (Soledad II)),
Lease Rev Ref, 1996 Series D,
5.375%, 11/1/2011 100,000 105,337
--------------
278,273
--------------
COLORADO 6.88%
Arapahoe Cnty Pub Hwy Auth, Colorado (E-470 Proj),
Cap Impt Trust Fund, Hwy Rev, Veh Regn Fee,
5.300%, 8/31/2006 200,000 211,816
Montrose Cnty Bldg Auth, Colorado,
Ctfs of Participation, 6.350%, 6/15/2006 150,000 162,753
--------------
374,569
--------------
DISTRICT OF COLUMBIA 0.47%
District of Columbia, Gen Oblig Ref,
Series 1994A-3, 5.200%, 6/1/2003 25,000 25,588
FLORIDA 5.58% --------------
Dade Cnty, Florida, Solid Waste System Rev Ref,
Special Ltd Oblig, Series 1996, 6.000%,
10/1/2006 200,000 222,392
Miami Beach Redev Agency, Florida
(City Ctr/Historic Convention Village),
Tax Increment Rev,
Series 1993, 5.100%, 12/1/2003 80,000 81,448
--------------
303,840
--------------
<PAGE>
GEORGIA 0.56%
Muni Elec Auth of Georgia, Pwr Rev, Series CC,
4.500%, 1/1/2002 30,000 30,240
ILLINOIS 6.62% --------------
Illinois, Gen Oblig, Series 1995, 5.125%,
12/1/2005 125,000 131,155
Illinois Hlth Facils Auth (Ancilla Systems
Obligated Group), Rev Ref, Series 1997A,
4.900%, 7/1/2008 150,000 153,381
Illinois Hsg Dev Auth, Hsg Dev Rev,
1993 Series A, 5.000%, 1/1/2001 15,000 15,143
Illinois Toll Hwy Auth, Toll Hwy Ref Rev,
1993 Series A, 4.700%, 1/1/2001 60,000 60,757
-------------
360,436
-------------
LOUISIANA 3.16%
Louisiana Pub Facils Auth, Student Ln Rev,
Series 1992A-1, 6.200%, 3/1/2001 165,000 172,179
MASSACHUSETTS 2.29% -------------
Massachusetts Bay Transn Auth, Gen Transn System,
1997 Series B, 5.000%, 3/1/2007 100,000 103,710
Massachusetts Muni Wholesale Elec, Pwr Supply
System Rev, 1992 Series B, 6.375%, 7/1/2001 20,000 21,128
-------------
124,838
-------------
MICHIGAN 3.83%
Michigan, Comprehensive Transn Ref, Series 1992B,
5.750%, 5/15/2011 200,000 208,176
MONTANA 4.66% -------------
Forsyth, Montana (Portland Gen Elec Proj), VR,
PCR Ref, Series 1998B, 4.750%, 5/1/2033 250,000 253,325
NEVADA 6.66% -------------
Nevada Hsg Div (Single Family Prog),
Sr Rev, 1994 Issue B-1, 5.900%, 4/1/2003 120,000 127,469
Nevada (Nevada Muni Bank Proj #65 & #R-6),
Gen Oblig Ltd Tax, Series 1998, 6.750%,
5/15/2008 200,000 234,898
-------------
362,367
-------------
NEW HAMPSHIRE 3.79%
New Hampshire Hsg Fin Auth, Single Family
Residential Mtg, 1994 Series D, 5.850%,
1/1/2001 200,000 206,472
OHIO 3.99% --------------
Ohio Bldg Auth, State Correctional Facils Ref,
1994 Series A, 4.600%, 10/1/2003 50,000 50,937
Ohio Bldg Auth (Admin Bldg Fund Proj),
State Facils, 1995 Series A, 6.000%,
10/1/2006 150,000 166,341
--------------
217,278
--------------
<PAGE>
PENNSYLVANIA 5.12%
Philadelphia, Pennsylvania, Wtr & Wastewtr Rev,
Series 1995, 6.750%, 8/1/2005 150,000 171,219
Univ of Pittsburgh -- Of the Commonwealth System
of Higher Ed, Pennsylvania, Univ Ref,
1997 Series B 1997, 5.500%, 6/1/2007 100,000 107,291
--------------
278,510
--------------
SOUTH DAKOTA 4.75%
South Dakota Student Ln Fin, Student Ln Rev,
Series 1994-A, 5.850%, 8/1/2000 250,000 258,335
TEXAS 8.04% --------------
Harris Cnty, Texas, Toll Road Unltd Tax &
Sub Lien Rev, Series 1994A, 6.500%, 8/15/2013 200,000 234,318
Katy Independent School Dist, Texas (Fort Bend,
Harris & Waller Counties), Limited Tax School Bldg,
Series 1996, 7.500%, 2/15/2006 150,000 177,721
Trinity River Indl Dev Auth, Texas (Intl Paper Proj),
Rev Ref, 1993 Series, 4.900%, 12/1/2002 25,000 25,604
--------------
437,643
--------------
VIRGINIA 6.26%
Rivanna Wtr & Swr Auth, Virginia, Regl Wtr &
Swr System Rev Ref, Series of 1993, 4.500%,
10/1/2000 50,000 50,677
Southeastern Pub Svc Auth, Virginia, Regl Solid
Waste System, Sr Rev Ref, Series 1993A,
5.150%, 7/1/2009 100,000 105,371
Virgina Pub School Auth, School Fing & Ref,
Series 1998A, 5.250%, 8/1/2009 175,000 184,555
--------------
340,603
--------------
WASHINGTON 7.10%
Thurston Cnty, Washington (North Thurston School
Dist #3), Unltd Tax Gen Oblig, 1992,
6.500%, 12/1/2009 200,000 217,384
Washington Hlth Care Facils (Catholic Hlth
Initiatives), Rev, Series 1997A, 5.100%,
12/1/2009 100,000 102,924
Wenatchee, Washington, Wtr & Swr Rev Ref,
1994, 4.600%, 12/1/2002 65,000 66,266
--------------
386,574
--------------
<PAGE>
WISCONSIN 2.10%
Merrill Area Common Pub School Dist, Wisconsin
(Lincoln, Langlande & Marathon Cntys),
Gen Oblig Ref, Series 1998, 6.500%, 4/1/2007 100,000 114,259
WYOMING 3.83% --------------
Platte Cnty, Wyoming (Basin Elec Power Cooperative
-- Laramie River Station Proj), PCR Ref,
Series 1994, 5.100%, 1/1/2008 200,000 208,146
TOTAL MUNICIPAL BONDS --------------
(Cost $5,165,401) 5,322,101
--------------
SHORT-TERM INVESTMENTS -- MUNICIPAL NOTES 2.21%
TENNESSEE 0.37% Knoxville,
Tennessee, Wtr Rev Ref & Impt,
Series M-1993, 4.500%, 3/1/1999 20,000 20,091
TEXAS 1.84%
Lone Star Airport Imp Auth, Texas (American
Airlines Proj), AR, Multi-Mode Demand Rev,
Series B-3, 4.000%, 12/1/2014 100,000 100,000
--------------
TOTAL MUNICIPAL SHORT-TERM NOTES
(Cost $120,011) 120,091
--------------
TOTAL INVESTMENT SECURITIES AT VALUE 100.00%
(Cost $5,285,412#) $ 5,442,192
==============
TAX-FREE LONG-TERM BOND Fund
MUNICIPAL BONDS 90.86%
ALASKA 0.19%
Alaska Hsg Fin (Veterans Mtg Prog),
Collateralized Gen Oblig, 1990 First Series,
7.500%, 12/1/2030 $ 400,000 $ 420,504
ARIZONA 0.47% --------------
Arizona Edl Ln Mktng, 1992 Edl Ln Rev, Series B,
7.000%, 3/1/2005 1,000,000 1,072,890
ARKANSAS 3.52% --------------
Little River Cnty, Arkansas (Georgia
- -Pacific Proj), Ref Rev, Series 1998, 5.600%,
10/1/2026 8,000,000 8,009,040
CALIFORNIA 0.99% --------------
Big Bear Lake Dept of Wtr & Pwr, California,
Wtr Rev Ref, Series 1996, 6.000%, 4/1/2022 2,000,000 2,249,400
COLORADO 3.48% --------------
Denver City & Cnty, Colorado, Gen Oblig Ref,
Series 1998A, 5.250%, 8/1/2006 5,000,000 5,286,600
Denver Hlth & Hosp Auth, Colorado, Hlthcare
Rev, Series 1998A, 5.125%, 12/1/2005 1,205,000 1,226,148
Fountain Valley Auth, Colorado, Wtr Treatment
Ref Rev, Series 1991, 6.800%, 12/1/2019 1,140,000 1,224,976
Montrose Cnty Bldg Auth, Colorado, Ctfs of
Participation, 6.350%, 6/15/2006 150,000 162,753
--------------
7,900,477
--------------
<PAGE>
FLORIDA 2.37%
Dade Cnty Pub Impt, Florida, Gen Oblig, Series H,
6.700%, 6/1/2003 3,000,000 3,332,820
Greater Orlando Aviation Auth, Florida, Airport
Facils Rev, Series 1988, 8.375%, 10/1/2016 490,000 504,979
Hillsborough Cnty Aviation Auth, Florida
(Tampa Intl Airport), Rev Ref,
1997 Series B, 5.125%, 10/1/2017 1,545,000 1,545,989
--------------
5,383,788
--------------
GEORGIA 2.32%
Atlanta, Georgia, Airport Facils Rev,
Series 1990, 7.250%, 1/1/2017 2,000,000 2,160,840
Atlanta, Georgia (Delta Air Lines Proj),
Special Purpose Facils Rev, Series 1989B,
7.400%, 12/1/1999 3,000,000 3,114,720
--------------
5,275,560
--------------
HAWAII 3.78%
Hawaii, Gen Oblig, 1998 Series CR, 5.500%,
4/1/2007+ 8,000,000 8,579,920
ILLINOIS 7.76% --------------
Boone, McHenry & DeKalb Cntys, Illinois
(Cmnty Unit School Dist #100 (Belvidere)),
Gen Oblig, Series 1997, Cap Appreciation,
12/1/2008 1,005,000 621,110
Chicago, Illinois, Gen Oblig, Ref, Series
1993B, 5.125%, 1/1/2022 2,465,000 2,460,218
Chicago, Illinois, Wastewtr Transmission Rev,
Series 1995, 5.125%, 1/1/2025+ 10,000,000 9,851,900
Chicago, Illinois (Peoples Gas Light & Coke),
1st & Ref Mtg, Series CC, Medium-Term Notes,
6.875%, 3/1/2015 2,875,000 3,150,252
Illinois Dev Fin Auth (Catholic Charities Hsg
Dev Proj), Rev, Series 1995, 6.350%, 1/1/2025 1,500,000 1,558,755
--------------
17,642,235
--------------
INDIANA 12.40%
DeKalb Cnty Redev Auth, Indiana (Mini-Mill Loc
Pub Impt Proj), Rev, Series A 1995,
6.500%, 1/15/2014 900,000 992,106
Hamilton Cnty Pub Bldg, Indiana (Hamilton Cnty),
1st Mtg Ref, Series B, 6.250%, 1/20/2013 4,300,000 4,694,912
Indiana Transn Fin Auth, Airport Facils Lease
Rev, Series A, 6.750%, 11/1/2011 1,500,000 1,679,685
Indianapolis Airport Auth, Indiana, Rev,
Series 1988, 8.400%, 7/1/2008 2,000,000 2,040,000
<PAGE>
Indianapolis Loc Pub Impt Bank, Indiana,
Impt Rev, Series 1991C, 6.700%, 1/1/2017 3,750,000 4,126,200
Petersburg, Indiana (Indianapolis Pwr & Light
Proj), PCR Ref, Series 1993B, 5.400%, 8/1/2017 9,850,000 10,280,839
Warren Township School Bldg, Indiana
(Marion Cnty), 1st Mtg Ref, Series 1998,
5.500%, 1/5/2006 2,020,000 2,156,734
5.500%, 7/5/2006 2,075,000 2,223,425
--------------
28,193,901
--------------
MARYLAND 1.57%
Maryland Transn Dept, Cons Transn Ref,
Series 1998, 5.500%, 9/1/2006 3,315,000 3,562,896
MASSACHUSETTS 7.19% --------------
Boston Wtr & Swr Commn, Massachusetts,
Gen Rev, 1993 Sr Series A, 5.250%,
11/1/2019+ 5,385,000 5,581,929
Commonwealth of Massachusetts, Gen Oblig,
Cons Ln of 1992, Series D, 8.000%, 5/1/2006+ 5,000,000 6,192,000
Massachusetts Hlth & Edl Facils Auth
(Cooley Dickinson & Mary Hitchcock Mem Hosps),
Rev, Series 1995B, 5.500%, 11/15/2018 3,500,000 3,595,900
Massachusetts Indl Fin Agency (Merrimack
College), Rev, Series 1997, 5.000%, 7/1/2027 1,000,000 971,880
--------------
16,341,709
--------------
MISSISSIPPI 3.13%
Claiborne Cnty, Mississippi (System Energy
Resources Proj), PCR, Series A, 9.500%,
12/1/2013 750,000 785,992
Mississippi (Mississippi Gaming Cntys Hwy
Impts Proj), Gen Oblig, Series A, 5.500%,
7/1/2008 5,865,000 6,330,094
--------------
7,116,086
--------------
MISSOURI 2.12%
Missouri Hlth & Edl Facils Auth (Christian
Hlth Svcs Dev-Christian Hosp Northeast-Northwest),
FDR, Series A 1989, 5.000%, 6/1/2005 4,670,000 4,826,398
MONTANA 4.35% --------------
Forsyth, Montana (Portland Gen Elec Proj),
VR, PCR Ref, Series 1998B, 4.750%, 5/1/2033 9,750,000 9,879,675
NEVADA 2.63% --------------
Nevada (Nevada Muni Bd Bank Projs #66 & #67),
Gen Oblig Ltd Tax, Series July 1, 1998A, 5.500%,
5/15/2007 5,580,000 5,984,996
NEW HAMPSHIRE 0.38% --------------
New Hampshire Hsg Fin Auth, Single Family
Residential Mtg, 1994 Series D, 6.850%,
7/1/2006 810,000 870,450
--------------
<PAGE>
NEW JERSEY 0.48%
New Jersey Hlth Care Facils Fing Auth
(Kennedy Hlth System Obligated Group),
Rev Ref, Series 1997B, 5.750%, 7/1/2008 1,000,000 1,099,240
NEW MEXICO 2.40% --------------
Los Alamos Cnty, New Mexico, Util System Rev,
Series 1994A, 6.000%, 7/1/2009 5,000,000 5,454,550
NEW YORK 6.96% --------------
New York, New York, Gen Oblig, Series F, 5.000%,
8/1/2023 2,000,000 1,922,760
New York & New Jersey Port Auth, Consolidated
Gen Oblig, Rev, Ninety-Third Series, 6.125%,
6/1/2094 5,250,000 6,020,280
New York Pwr Auth, Gen Purpose Ref, Series CC,
4.900%, 1/1/2006 2,760,000 2,884,034
Triborough Bridge & Tunnel Auth, New York,
Gen Purpose Rev, Series 1993B, 5.000%,
1/1/2020 1,935,000 1,924,977
Series Y, 5.500%, 1/1/2017 2,900,000 3,059,152
--------------
15,811,203
--------------
NORTH CAROLINA 0.22%
North Carolina Eastern Muni Pwr Agency,
Pwr System Rev Ref, Series 1993C, 5.000%,
1/1/2002 500,000 506,530
NORTH DAKOTA 0.77% --------------
Grand Forks, North Dakota (Altru Hlth System
Oblig Group), Hlth Care System Rev, Series 1997,
5.600%, 8/15/2017 1,675,000 1,744,596
OHIO 3.69% --------------
Ohio (Major New State Infrastructure Proj),
Rev, Series 1998-1, 5.000%, 12/15/2006 8,060,000 8,393,362
RHODE ISLAND 0.74% --------------
Rhode Island Depositors Econ Protection,
Special Oblig, 1992 Series A, 6.950%, 8/1/2022 1,500,000 1,682,895
SOUTH CAROLINA 2.25% --------------
South Carolina Ports Auth, Rev, Series 1998,
5.000%, 7/1/2017 5,250,000 5,105,258
TENNESSEE 1.92% --------------
Shelby Cnty Hlth, Edl, & Hsg Facil Brd,
Tennessee (Methodist Hlthcare), Hosp Rev,
Series 1998, 5.500%, 4/1/2008 4,075,000 4,354,790
TEXAS 3.66% --------------
Austin, Texas, Combined Util Systems, Rev Ref,
Series 1992, Cap Appreciation, 11/15/2011 1,400,000 726,782
Austin, Texas, Wtr, Swr & Elec Ref Rev,
Series 1982, 14.000%, 11/15/2001 455,000 537,479
Galena Park Independent School Dist, Texas
(Harris Cnty), Unltd Tax School Bldg & Ref,
Series 1996, Cap Appreciation, 8/15/2023 3,220,000 855,490
<PAGE>
Harris Cnty, Texas, Toll Road Unltd Tax & Sub
Lien Rev, Series 1994A, 6.500%, 8/15/2013 300,000 351,477
Texas Muni Pwr Agency, Ref Rev, Series 1989,
Cap Appreciation, 9/1/2010 6,650,000 3,706,112
Texas Pub Fin Auth, Gen Oblig Ref, Series 1997,
5.500%, 10/1/2006 2,000,000 2,147,960
--------------
8,325,300
--------------
UTAH 0.65%
Utah Hsg Fin Agency (Federally Insured or
Gtd Mtg Lns), Single Family Mtg, 1994 Issue
D-1 Term Mezzanine, 6.450%, 7/1/2011 1,375,000 1,465,860
--------------
VERMONT 0.48%
Vermont Hsg Fin Agency, Single Family Hsg Rev,
Series 5, 6.875%, 11/1/2016 1,000,000 1,085,830
VIRGINIA 4.84% --------------
Norfolk, Virginia, Gen Oblig Cap Impt & Ref,
Series 1998, 5.000%, 7/1/2008 8,585,000 8,895,434
Virginia Pub School Auth, School Fing & Ref,
Series 1998 A, 5.250%, 8/1/2007 2,000,000 2,108,120
--------------
11,003,554
--------------
WASHINGTON 2.46%
Grant Cnty Pub Util Dist #2, Washington,
Hydroelectric Dev Rev, Second Series 1990,
(Priest Rapids), 7.700%, 1/1/2018 3,000,000 3,182,340
(Wanapum), 7.700%, 1/1/2018 1,050,000 1,113,819
Thurston Cnty, Washington (North Thurston
School Dist #3), Unlimited Tax Gen Oblig,
6.500%, 12/1/2009 1,200,000 1,304,304
--------------
5,600,463
--------------
WISCONSIN 0.69%
Adams Cnty, Wisconsin (Adams-Friendship
School Dist), Gen Oblig Ref, 6.500%,
4/1/2015 1,340,000 1,577,743
TOTAL MUNICIPAL BONDS --------------
(Cost $197,604,453) 206,521,099
--------------
SHORT-TERM INVESTMENTS -- MUNICIPAL NOTES
9.14%
CALIFORNIA 1.02%
Los Angeles Regl Airports Impt, California
(American Airlines/Los Angeles Intl Airport),
AR, Facils Sublease FDR, Issue 1984, Series LAX 2,
4.000%, 12/1/2025 2,320,000 2,320,000
ILLINOIS 1.23% --------------
Chicago, Illinois (American Airlines Proj),
DATES, O'Hare Intl Airport Special Facil Rev,
Series 1983C, 4.000%, 12/1/2017 2,800,000 2,800,000
--------------
<PAGE>
INDIANA 0.44%
Sullivan Cnty Indl Dev Brd, Indiana (Mead Proj),
DATES, PCR Ref, Series 1986, 3.950%,
10/1/2016 1,000,000 1,000,000
IOWA 1.19% --------------
Iowa Fin Auth (Burlington Med Ctr), ARD, Rev,
Series 1997, 3.650%, 6/1/2027 2,700,000 2,700,000
LOUISIANA 1.17%
East Baton Rouge Parish, Louisiana
(Georgia-Pacific Proj), AR, 7&7 PCR, Series 1984,
4.000%, 11/1/2019 2,650,000 2,650,000
MICHIGAN 1.10% --------------
Delta Cnty Econ Dev, Michigan (Mead-Escanaba
Paper), ATS, Environmental Impt Rev Ref,
Series D, 4.000%, 12/1/2023 2,500,000 2,500,000
NEW YORK 0.84% --------------
New York Muni Wtr Fin Auth, New York, AR,
Wtr & Swr System Rev, 1994 Series C,
4.000%, 6/15/2022~ 1,900,000 1,900,000
NORTH CAROLINA 0.44% --------------
North Carolina Med Care Commn (Pooled Fing
Proj), ACES, Hosp Rev, Series 1991B,
4.100%, 10/1/2013~ 1,000,000 1,000,000
OREGON 0.18% --------------
Port Portland, Oregon (Reynolds Metals Proj),
DATES, PCR Ref, Series 1985, 4.000%, 12/1/2009 400,000 400,000
TEXAS 1.27% --------------
Lone Star Airport Impt Auth, Texas (American
Airlines Proj), MAVRIC, 4.000%, 12/1/2014
Series B-2 1,000,000 1,000,000
Series B-3 600,000 600,000
Series B-4 1,000,000 1,000,000
North Cent Texas Hlth Facils Dev (Presbyterian
Med Ctr Proj), DATES, Hosp Rev, Series 1985D,
4.000%, 12/1/2015 300,000 300,000
--------------
2,900,000
--------------
WASHINGTON 0.26%
Washington Hlth Care Facils Auth (Fred Hutchinson
Cancer Research Ctr, Seattle), VRD, Rev,
Series 1996, 3.750%, 1/1/2023~ 600,000 600,000
TOTAL MUNICIPAL SHORT-TERM NOTES
(Cost $20,770,000) 20,770,000
--------------
TOTAL INVESTMENT SECURITIES AT VALUE
100.00% (Cost $218,374,453#) $ 227,291,099
==============
</TABLE>
<PAGE>
The following abbreviations may be used in portfolio descriptions:
A/FR* -- Adjustable/Fixed Rate
ACES* -- Adjustable Convertible Extendable Securitites
AR* -- Adjustable Rate
ARD* -- Adjustable Rate Demand
ATS* -- Adjustable Tender Securities
DATES* -- Daily Adjustable Tax-Exempt Securities
FDR* -- Flexible Demand Revenue
FR -- Fixed Rate
F/FR -- Floating/Fixed Rate
FRD* -- Floating Rate Demand
IDR -- Industrial Development Revenue
MAVRIC* -- Multi-Mode and Variable Rate Investment Certificates
PCR -- Pollution Control Revenue
RAC -- Revenue Anticipaton Certificates
TEAMS* -- Tax-Exempt Adjustable Mode Securities
TECP -- Tax-Exempt Commercial Paper
TRAN -- Tax & Revenue Anticipation Notes
UPDATES* -- Unit Price Demand Tax-Exempt Securities
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.
# Also represents cost for income tax purposes.
+ Security has been designated as collateral for when-issued securities.
~~ Security is a when-issued security.
See Notes to Financial Statements
<PAGE>
INVESCO Tax-Free Income Funds, Inc.
Statement of Assets and Liabilities
June 30, 1998
<TABLE>
<CAPTION>
Tax-Free Tax-Free
Intermediate Long-Term
Bond Fund Bond Fund
-------------------------------------
<S> <C> <C>
ASSETS
Investment Securities:
At Cost $ 5,285,412 $ 218,374,453
====================================
At Value $ 5,442,192 $ 227,291,099
Cash 91,630 26,896
Receivables:
Investment Securities Sold 0 41,362
Fund Shares Sold 350 14,603
Interest 85,244 2,906,073
Prepaid Expenses and Other Assets 83,817 311,434
------------------------------------
TOTAL ASSETS 5,703,233 230,591,467
------------------------------------
LIABILITIES
Payables:
Distributions to Shareholders 2,440 190,566
Investment Securities Purchased 0 18,701,023
Fund Shares Repurchased 20,467 33,447
Accrued Distribution Expenses 1,160 43,752
Accrued Expenses and Other Payables 5,063 151,533
------------------------------------
TOTAL LIABILITIES 29,130 19,120,321
------------------------------------
Net Assets at Value $ 5,674,103 $ 211,471,146
====================================
NET ASSETS
Paid-in Capital* $ 5,639,248 $ 198,338,509
Accumulated Undistributed Net Investment Income 0 2,750
Accumulated Undistributed Net Realized Gain
(Loss) on Investment
Securities and Futures Contracts (121,925) 4,213,241
Net Appreciation of Investment Securities 156,780 8,916,646
------------------------------------
Net Assets at Value $ 5,674,103 $ 211,471,146
====================================
Shares Outstanding 562,481 13,585,358
Net Asset Value, Offering and Redemption
Price per Share $ 10.09 $15.57
====================================
* 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
</TABLE>
<PAGE>
INVESCO Tax-Free Income Funds, Inc.
Statement of Operations
Year Ended June 30, 1998
<TABLE>
<CAPTION>
Tax-Free Tax-Free
Intermediate Long-Term
Bond Fund Bond Fund
-------------------------------------
<S> <C> <C>
INVESTMENT INCOME
INTEREST INCOME $ 238,028 $ 10,794,307
-------------------------------------
EXPENSES
Investment Advisory Fees 24,470 1,195,773
Distribution Expenses 12,235 543,533
Transfer Agent Fees 13,636 266,096
Administrative Fees 10,734 42,612
Custodian Fees and Expenses 2,247 31,241
Directors' Fees and Expenses 9,262 21,545
Pricing Expenses 6,705 22,707
Professional Fees and Expenses 12,144 33,468
Registration Fees and Expenses 25,909 46,453
Reports to Shareholders 1,397 33,149
Other Expenses 840 19,448
-------------------------------------
TOTAL EXPENSES 119,579 2,256,025
Fees and Expenses Absorbed by Investment Adviser (73,213)
(282,742)
Fees and Expenses Paid Indirectly (2,247) (15,801)
-------------------------------------
NET EXPENSES 44,119 1,957,482
-------------------------------------
NET INVESTMENT INCOME 193,909 8,836,825
-------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities 26,299 6,530,889
Futures Contracts (24,571) (2,797,579)
------------------------------------
Total Net Realized Gain 1,728 3,733,310
------------------------------------
Change in Net Appreciation of:
Investment Securities 86,090 1,367,788
Futures Contracts 2,528 575,375
-------------------------------------
Total Net Appreciation 88,618 1,943,163
-------------------------------------
NET GAIN ON INVESTMENT SECURITIES 90,346 5,676,473
-------------------------------------
Net Increase in Net Assets from Operations $ 284,255 $ 14,513,298
=====================================
See Notes to Financial Statements
</TABLE>
<PAGE>
INVESCO Tax-Free Income Funds, Inc.
Statement of Changes in Net Assets
Year Ended June 30
<TABLE>
<CAPTION>
Tax-Free Tax-Free
Intermediate Long-Term
Bond Fund Bond Fund
----------------------- ----------------------------
1998 1997 1998 1997
<S> <C> <C> <C> <C>
OPERATIONS
Net Investment Income $ 193,909 $ 197,614 $ 8,836,825 $ 10,134,067
Net Realized Gain on Investment
Securities and Futures Contracts 1,728 13,442 3,733,310 2,193,157
Change in Net Appreciation of
Investment Securities
and Futures Contracts 88,618 58,250 1,943,163 3,362,194
----------------------- ----------------------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS 284,255 269,306 14,513,298 15,689,418
----------------------- ----------------------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (193,909) (196,923) (8,836,825) (10,134,067)
In Excess of Net Investment
Income 0 0 0 (162,831)
Net Realized Gain on Investment
Securities and Futures Contracts 0 0 (2,405,462) (3,483,894)
----------------------- -----------------------------
TOTAL DISTRIBUTIONS (193,909) (196,923) (11,242,287) (13,780,792)
----------------------- -----------------------------
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 5,522,747 2,844,291 73,871,498 43,699,898
Reinvestment of Distributions 168,131 177,460 8,527,627 10,702,228
----------------------- ----------------------------
5,690,878 3,021,751 82,399,125 54,402,126
Amounts Paid for Repurchases
of Shares (4,752,570) (3,445,709) (94,609,312) (86,790,488)
------------------------- ----------------------------
NET INCREASE (DECREASE)
IN NET ASSETS
FROM FUND SHARE TRANSACTIONS 938,308 (423,958) (12,210,187) (32,388,362)
------------------------- ----------------------------
Total Increase (Decrease)
in Net Assets 1,028,654 (351,575) (8,939,176) (30,479,736)
NET ASSETS
Beginning of Period 4,645,449 4,997,024 220,410,322 250,890,058
------------------------- ----------------------------
End of Period $5,674,103 $4,645,449 $ 211,471,146 $220,410,322
========================= =============================
Accumulated Undistributed Net
Investment Income Included in
Net Assets at End of Period 0 0 2,750 0
-------------------------------------------------------------
<PAGE>
FUND SHARE TRANSACTIONS
Shares Sold 549,380 288,509 4,748,107 2,869,165
Shares Issued from Reinvestment
of Distributions 16,728 18,030 546,335 703,719
------------------------- -----------------------------
566,108 306,539 5,294,442 3,572,884
Shares Repurchased (472,908) (350,074) (6,077,593) (5,711,420)
------------------------- -----------------------------
Net Increase (Decrease) in
Fund Shares 93,200 (43,535) (783,151) (2,138,536)
========================= =============================
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") is incorporated in Maryland and presently
consists of two separate Funds: Tax-Free Intermediate Bond Fund and Tax-Free
Long-Term Bond Fund. The investment objective of each Fund is 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 income 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.
If market quotations or pricing service valuations are not readily
available, securities are valued at fair value as determined in good faith
under procedures established by the Fund's board of directors.
Short-term securities are stated at amortized cost (which approximates
market value) if maturity is 60 days or less at the time of purchase, or
market value if maturity is greater than 60 days.
B. FUTURES CONTRACTS -- The Fund may enter into futures contracts for hedging
or other non-speculative purposes. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as may be required
by the exchanges on which the transaction is affected. 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 variation margin receivable or payable on futures contracts.
During the period the futures contracts are open, changes in the value of
the contracts are recognized on a daily basis to reflect the market value
of the contracts at the end of each day's trading and are recorded 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.
<PAGE>
C. WHEN-ISSUED SECURITIES -- When-issued securities held by the Fund are fully
collateralized by other securities which are notated in the 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.
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.
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, 1998, Tax-Free Intermediate Bond Fund had
$121,925 in net capital loss carryovers which expire in the year 2003.
Net capital loss carryovers utilized in 1998 by Tax-Free Intermediate
Bond Fund amounted to $4,256.
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, 1998, 99.83% and
91.34% were exempt from federal income taxes for Tax-Free Intermediate
Bond and Tax- Free Long-Term Bond Funds, respectively.
F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- All of the Fund's net
investment income is distributed to shareholders by dividends declared
daily and paid monthly. Income dividends are reinvested at the month-end
net asset value. The Fund distributes net realized capital gains, if any,
to its shareholders at least annually, if not offset by capital loss
carryovers. Income distributions and capital gain distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily
due to differing treatments for market discounts, amortized premiums, net
operating losses and expired capital loss carryforwards. For the year ended
June 30, 1998, Tax-Free Long-Term Bond Fund reclassified $2,750 from
paid-in capital to accumulated undistributed net investment income. Net
investment income, net realized gains and net assets were not affected.
<PAGE>
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 were made by ITC. Fees for such sub-advisory services were paid by IFG.
Effective February 4, 1998, such responsibilities were transfered to 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 $26.00 per shareholder
account, or, where applicable, per participant in an omnibus account, per year.
IFG may pay such fee for participants in omnibus accounts to affiliates or third
parties. The fee is paid monthly at one-twelfth of the annual fee and is based
upon the actual number of accounts in existence during each month.
A plan of distribution pursuant to Rule 12b-1 of the Act provides for
compensation of marketing and advertising expenditures to IFG (the
"Distributor") to a maximum of 0.25% of annual average net assets. For the year
ended June 30, 1998, Tax-Free Intermediate Bond and Tax-Free Long-Term Bond
Funds paid the Distributor $11,981 and $543,760, respectively, under the plan of
distribution. Effective September 29, 1997, INVESCO Distributors, Inc., ("IDI")
a wholly owned subsidiary of IFG, replaced IFG as distributor.
IFG has voluntarily agreed, in some instances, to absorb certain fees and
expenses incurred by each Fund.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the year ended
June 30, 1998, 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:
<PAGE>
Fund Purchases Sales
- --------------------------------------------------------------------------------
Tax-Free Intermediate Bond Fund $ 2,468,996 $ 1,451,275
Tax-Free Long-Term Bond Fund 331,866,941 311,115,154
There were no purchases or sales of U.S. Government securities.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At June 30, 1998, 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 $ 158,731 $ 1,951 $ 156,780
Tax-Free Long-Term Bond Fund 8,995,876 79,230 8,916,646
NOTE 5 -- TRANSACTIONS WITH AFFILIATES. Certain of the Fund's officers and
directors are also officers and directors of IFG or IDI.
The Fund has adopted an unfunded deferred compensation plan covering all
independent directors of the Fund who will have served as an independent
director for at least five years at the time of retirement. Benefits under this
plan are based on an annual rate of 40% of the retainer fee at the time of
retirement. As of July 1, 1998, benefits will be based on an annual rate of 50%
of the sum of the retainer fee at the time of retirement plus the annual meeting
fee.
Pension expenses for the year ended June 30, 1998, included in Directors'
Fees and Expenses in the Statement of Operations, and unfunded accrued pension
costs and pension liability included in Prepaid Expenses and Accrued Expenses,
respectively, in the Statement of Assets and Liabilities were as follows:
Unfunded
Pension Accrued Pension
Fund Expenses Pension Costs Liability
- --------------------------------------------------------------------------------
Tax-Free Intermediate Bond Fund $ 83 $ 67 $ 263
Tax-Free Long-Term Bond Fund 4,088 13,207 29,358
NOTE 6 -- LINE OF CREDIT. Each Fund has available a Redemption Line of Credit
Facility ("LOC"), from a consortium of national banks, to be used for temporary
or emergency purposes to fund redemptions of investor shares. The LOC permits
borrowings to a maximum of 10% of the Net Assets at Value of each respective
Fund. Each Fund agrees to pay annual fees and interest on the unpaid principal
balance based on prevailing market rates as defined in the agreement. At June
30, 1998, there were no such borrowings.
<PAGE>
INVESCO Tax-Free Income Funds, Inc.
Financial Highlights
(For a Fund Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
Period
Ended
Year Ended June 30 June 30
---------------------------------------- ---------
1998 1997 1996 1995 1994^
<S> <C> <C> <C> <C> <C>
Tax-Free Intermediate Bond Fund
PER SHARE DATA
Net Asset Value --
Beginning of Period $ 9.90 $9.74 $9.70 $9.52 $10.00
----------------------------------------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.40 0.41 0.43 0.44 0.19
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 0.19 0.16 0.04 0.18 (0.48)
----------------------------------------- ---------
Total from Investment Operations 0.59 0.57 0.47 0.62 (0.29)
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.40 0.41 0.43 0.44 0.19
----------------------------------------- ---------
Net Asset Value-- End of Period $10.09 $9.90 $ 9.74 $9.70 $9.52
========================================= =========
TOTAL RETURN 6.02% 5.96% 4.89% 6.67% (2.93%)*
RATIOS
Net Assets -- End of Period
($000 Omitted) $5,674 $4,645 $4,997 $4,907 $5,083
Ratio of Expenses to Average Net
Assets# 0.95%@ 0.84%@ 0.76%@ 0.70% 0.70%~
Ratio of Net Investment Income to
Average Net Assets# 3.96% 4.18% 4.40% 4.56% 3.75%~
Portfolio Turnover Rate 32% 41% 49% 23% 55%*
</TABLE>
^ From December 1, 1993, commencement of investment operations, to June 30,
1994.
* 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 years
ended June 30, 1998, 1997, 1996 and 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 2.44%, 2.43%, 2.34%, 2.45% and 3.09%,
respectively, and ratio of net investment income to average net assets would
have been 2.47%, 2.59%, 2.82%, 2.81% and 1.36%, respectively.
@ Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
~ Annualized
<PAGE>
INVESCO Tax-Free Income Funds, Inc.
Financial Highlights (Continued)
(For a Fund Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
Year Ended June 30
--------------------------------------------------
1998 1997 1996 1995 1994
Tax-Free Long-Term Bond Fund
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value --
Beginning of Period $ 15.34 $ 15.20 $ 15.07 $ 15.29 $ 16.35
--------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.63 0.66 0.73 0.80 0.83
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 0.40 0.38 0.32 0.09 (1.00)
--------------------------------------------------
Total from Investment Operations 1.03 1.04 1.05 0.89 (0.17)
--------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment
Income 0.63 0.66 0.73 0.80 0.83
In Excess of Net Investment
Income 0.00 0.01 0.00 0.00 0.00
Distributions from Capital Gains 0.17 0.23 0.19 0.31 0.06
--------------------------------------------------
Total Distributions 0.80 0.90 0.92 1.11 0.89
--------------------------------------------------
Net Asset Value-- End of Period $ 15.57 $ 15.34 $ 15.20 $ 15.07 $ 15.29
==================================================
TOTAL RETURN 6.87% 7.05% 7.01% 6.16% (1.16%)
RATIOS
Net Assets -- End of Period
($000 Omitted) $211,471 $220,410 $250,890 $254,584 $282,407
Ratio of Expenses to Average Net Assets# 0.91%@ 0.90%@ 0.91%@ 0.92% 1.00%
Ratio of Net Investment Income to
Average Net Assets# 4.06% 4.36% 4.76% 5.31% 5.14%
Portfolio Turnover Rate 173% 123% 146% 99% 28%
</TABLE>
# Various expenses of the Fund were voluntarily absorbed by IFG for the years
ended June 30, 1998, 1997, 1996 and 1995. If such expenses had not been
voluntarily absorbed, ratio of expenses to average net assets would have been
1.04%, 1.05%, 1.04% and 1.05%, respectively, and ratio of net investment
income to average net assets would have been 3.93%, 4.21%, 4.63% and 5.18%,
respectively.
@ Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
<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 Tax-Free Intermediate Bond Fund and
Tax-Free Long-Term Bond Fund (constituting INVESCO Tax-Free Income Funds, Inc.,
hereafter referred to as the "Fund") at June 30, 1998, the results of each of
their operations for the year then ended, the changes in each of their net
assets for each of the two years in the period then ended and the financial
highlights for each of the five years in the period then ended, 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, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Denver, Colorado
July 31, 1998
<PAGE>
INVESCO FUNDS
INVESCO Distributors, Inc.(SM)
Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
1-800-525-8085
PAL(r): 1-800-424-8085
http://www.invesco.com
In Denver, 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 a current prospectus.
Printed on recycled paper.
