SEMIANNUAL REPORT
December 31, 1997
INVESCO
TAX-FREE
INCOME
FUNDS
Tax-Free Long-Term
Bond Fund
Tax-Free Intermediate
Bond Fund
INVESCO FUNDS
<PAGE>
Economic Overview January 1998
After seven years of economic expansion, will 1998 be the year in which the
U.S. economy slows down? That's the question currently being pondered by
investment professionals. In 1997, near-perfect conditions contributed to
above-average economic growth as measured by the Gross Domestic Product. This
economic environment was appropriately named the "Goldilocks Economy," as low
inflation, declining interest rates, and increased worker productivity produced
double-digit gains in operating earnings for the fifth straight year for
companies in the S&P 500 - an unprecedented record. Also, consumer confidence in
1997 was riding a crest of optimism (the highest level in 28 years), as jobs
were plentiful and real wages improved for many Americans.(1)
Fixed-income markets produced above-average returns in 1997; however, these
returns exhibited a different performance pattern compared to equity markets. In
the spring of 1997, fears of inflation and an overheating economy encouraged the
Federal Reserve Board to increase the Fed Fund's rate by 25 basis points. This
action intensified speculation that the economy was expanding too fast, and
higher interest rates were needed to cool-off the economy. However, as inflation
remained subdued, fears of an overheating economy diminished. Investors focused
their attention on the potential deflationary pressure caused by the Asian
currency crisis on the U.S. economy - producing strong returns for fixed-income
investors over the last six months. In fact, the implied rate on the 30-year
U.S. government bond started off 1997 at 6.64%, moved to a high of 7.17% in
April, and experienced a steady decline throughout the second half of the year,
ending at a rate of 5.97%.
As we move into 1998, the investment landscape in the U.S. has changed
somewhat; yet, in many respects, the economy is still poised for growth with
benign inflation. Unemployment remains at historically low levels and real wages
are starting to increase. Intense price competition is keeping consumer prices
in check; and, in many cases, prices are declining due to the flood of cheap
goods from Asian countries. For many companies, the easy gains in earnings
produced over the last few years may be more difficult to replicate in 1998.
Thus, 1998 may be a year with increased volatility in the equity markets -
producing a more selective stock market.
For the fixed-income market, the fundamentals driving the rally in bond
prices remain intact (low inflation with moderate economic growth). A potential
positive for the fixed-income market is that the Asian currency crisis may
produce deflationary pressures on commodity prices and slow U.S. economic
growth. This may accelerate the rally in bond prices.
Strategic Overview Of Municipal Investments
In the spring and early summer of 1997, interest rates were stuck in a
fairly consolidated trading range. However, over the last six months, we
witnessed a significant decline in interest rates, producing strong price
returns for most fixed-income investors. The catalyst for lower rates has been
the Asian currency crisis, which focused investors' attention on the
possibility of slower global growth and deflation.
<PAGE>
Not only did the crisis contribute to lower interest rates in the U.S., but
nervousness about international currencies produced a flight to quality.
Investors favored Treasury obligations, which carry no credit risk and cannot be
refunded or called. In comparison, municipal securities many times are called or
refunded by their issuer in a declining interest rate environment. As a result,
municipal securities produced strong returns for investors over the last six
months, but significantly lagged gains produced by Treasuries.
Last summer, our duration position may have been too conservative, as we
were concerned about overly strong employment numbers and the possibility of
inflation. However, as the Asian currency crisis unfolded, we extended duration.
This change in strategy proved profitable for the funds as we were able to
participate in most of the interest rate rally in the fall and early winter.
Looking Forward
We are presently positive on interest rates, as the Asian currency crisis
should trigger slower economic growth in the U.S., and may cause a decrease in
consumer and producer prices. With the prospect of lower interest rates, we may
experience an increase in refunding activity and in the supply of municipal
bonds. This may provide the opportunity to improve the structure of both
portfolios.
One cautionary note: history has shown that, when the experts become overly
optimistic or pessimistic, the truth usually lies somewhere in the middle.
However, municipal securities look incredibly cheap compared to Treasuries, and
may have significant upside potential in the next year.
INVESCO Tax-Free Income Funds, Inc.
The line graphs on page 2 and page 3 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 12/31/97, and in
Tax-Free Intermediate Bond Fund for the period from inception (12/93) through
12/31/97.
At the end of these respective periods, the Tax-Free Long-Term Bond Fund
account would have had a value of $22,961 and Tax-Free Intermediate Bond Fund,
$11,967. 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)
<PAGE>
Tax-Free Long-Term Bond Fund
Average Annualized Total Return
as of 12/31/97(2)
1 year 8.6%
-----------------------------------------
5 years 6.38%
-----------------------------------------
10 years 8.67%
-----------------------------------------
INVESCO Tax-Free Long-Term Bond Fund
For the six-month period ended 12/31/97, the fund achieved a return of
5.35%. The Lehman Municipal Bond Index had a total return of 5.81% for the same
six-month period.(1)(2)
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 12/31/97.
Graph: Geographical Diversification
by market value as of 12/31/97
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 - 28% Midwest - 33% Northeast - 25%
South Central - 10% Southeast - 8% Net Cash and Short Term - 4%
Composition of holdings is subject to change.
INVESCO Tax-Free Intermediate Bond Fund
For the six-month period ended 12/31/97, the fund achieved a total return
of 4.00%. The Lehman Intermediate Municipal Bond Index had a total return of
5.77% for the same six-month period.(1)(2)
Graph:
This line graph represents a comparison of the value of a $10,000
investment in the 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 of inception (12/98) through 12/31/97.
<PAGE>
Graph: Geographical Diversification
by market value as of 12/31/97
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 - 36% Midwest - 16% Northeast - 20%
South Central - 13% Southeast - 9% Puerto Rico - 6%
Composition of holdings is subject to change.
Tax-Free Intermediate Bond Fund
Average Annualized Total Return
as of 12/31/97(2)
1 year 6.41%
------------------------------------------
Since inception (12/93) 4.50%
------------------------------------------
Fund Management
INVESCO Tax-Free Income Funds have been managed by INVESCO Vice President
James S. Grabovac since 1995. An industry veteran with 16 years of investment
experience, he earned an MBA from the University of Michigan and a BA from
Lawrence University. He is a Chartered Financial Analyst. Previously, Jim was a
portfolio manager for Stein, Roe & Farnham Inc.
(1)The Lehman Municipal Bond Index and Intermediate Municipal Bond Index are
unmanaged indexes indicative of the broad tax-exempt bond market. The S&P 500 is
an unmanaged index considered representative of the performance of the broad
U.S. stock 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
December 31, 1997
UNAUDITED
- ----------------------------------------------------------------------------------------------
Principal
Description Amount Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
TAX-FREE INTERMEDIATE BOND Fund
MUNICIPAL BONDS 97.84%
ALASKA 8.51%
Alaska Indl Dev & Export Auth, Ref
Revolving Fund, Series 1994A, Lots 1-29,
5.700%, 4/1/2004 $ 190,000 $ 203,948
Municipality of Anchorage, Alaska,
Gen Oblig Ref, Gen Purpose, 1993 Series B,
4.900%, 8/1/2003 25,000 25,879
Municipality of Anchorage, Alaska,
Port Rev Ref, 1995, 6.000%, 2/1/2004 150,000 163,218
------------
393,045
------------
CALIFORNIA 6.00%
California Pub Wks Brd (Dept of
Corrections), Lease Rev Ref,
5.375%, 11/1/2011 100,000 104,247
California, Various Purpose Gen Oblig,
6.300%, 9/1/2008 150,000 173,140
------------
277,387
------------
COLORADO 8.13%
Arapahoe Cnty Pub Hwy Auth, Colorado
(E-470 Proj), Cap Impt Trust Fund, Hwy Rev,
Veh Regn Fee, 5.300%, 8/31/2006 200,000 213,912
Montrose Cnty Bldg Auth, Colorado,
Ctfs of Participation,
6.350%, 6/15/2006 150,000 161,761
------------
375,673
------------
DISTRICT OF COLUMBIA 0.55%
District of Columbia, Gen Oblig Ref,
Series 1994A, 5.200%, 6/1/2003 25,000 25,443
------------
FLORIDA 6.51%
<PAGE>
Dade Cnty, Florida, Solid Waste System
Rev Ref, Series 1996, 6.000%, 10/1/2006 $ 200,000 $ 220,294
Miami Beach Redev Agency, Florida
(City Ctr/Historic Convention Village),
Tax Increment Rev,
Series 1993, 5.100%, 12/1/2003 80,000 80,503
------------
300,797
------------
GEORGIA 0.65%
Muni Elec Auth of Georgia, Pwr Rev,
Series CC, 4.500%, 1/1/2002 30,000 30,174
------------
ILLINOIS 7.89%
Illinois, Gen Oblig, Series 1995,
5.125%, 12/1/2005 125,000 130,748
Illinois Hlth Facils Auth (Ancilla
Systems Obligated Group), Rev Ref,
Series 1997A,
4.900%, 7/1/2008 150,000 152,770
Illinois Hsg Dev Auth, Hsg Dev Rev,
1993 Series A, 5.000%, 1/1/2001 20,000 20,187
Illinois Toll Hwy Auth, Toll Hwy Ref Rev,
1993 Series A, 4.700%, 1/1/2001 60,000 60,833
------------
364,538
------------
LOUISIANA 3.75%
Louisiana Pub Facils Auth, Student Ln
Rev, Series 1992A-1, 6.200%, 3/1/2001 165,000 173,443
------------
MASSACHUSETTS 2.71%
Massachusetts Bay Transn Auth,
Massachusetts, Gen Transn System,
1997 Series B, 5.000%, 3/1/2007 100,000 103,738
Massachusetts Muni Wholesale Elec,
Pwr Supply System Rev, 1992 Series B,
6.375%, 7/1/2001 20,000 21,244
------------
124,982
------------
NEVADA 3.09%
Nevada Hsg Div (Single Family Prog),
Sr Rev, 1994 Issue B-1, 5.900%, 4/1/2003 135,000 142,864
------------
<PAGE>
NEW HAMPSHIRE 4.71%
New Hampshire Hsg Fin Auth, Single Family
Residential Mtg, 1994 Series D,
5.850%, 1/1/2001 $ 210,000 $ 217,659
------------
NEW YORK 6.94%
New York Muni Assistance, New York,
Rev, 1991 Gen Resolution Series E,
6.000%, 7/1/2003 200,000 217,838
New York, New York, Gen Oblig, 1998
Series F, 5.250%, 8/1/2004 100,000 103,063
------------
320,901
------------
NORTH DAKOTA 4.38%
City of Fargo Hlth System, North Dakota
(Meritcare Obligated Group), Rev, 1996
Series A, 4.600%, 6/1/2001 200,000 202,196
------------
OHIO 1.11%
Ohio Bldg Auth, State Correctional
Facils Rev Ref, 1994 Series A,
4.600%, 10/1/2003 50,000 51,098
------------
PENNSYLVANIA 6.07%
Philadelphia, Pennsylvania, Wtr &
Wastewtr Rev, Series 1995,
6.750%, 8/1/2005 150,000 172,709
Univ of Pittsburgh - Of the Commonwealth
System of Higher Ed, Pennsylvania,
Univ Ref, Series B of 1997,
5.500%, 6/1/2007 100,000 107,786
------------
280,495
------------
SOUTH DAKOTA 5.63%
South Dakota, Student Ln Fin Rev,
Series 1994-A, 5.850%, 8/1/2000 250,000 260,000
------------
TENNESSEE 0.44%
Knoxville, Tennessee, Wtr Rev Ref & Impt,
Series M-1993, 4.500%, 3/1/1999 20,000 20,135
------------
TEXAS 4.45%
Katy Independent School Dist, Texas,
<PAGE>
Limited Tax School Bldg, Series 1996,
7.500%, 2/15/2006 $ 150,000 $ 179,914
Trinity River Indl Dev Auth, Texas
(Intl Paper Proj), Rev Ref, 1993 Series,
4.900%, 12/1/2002 25,000 25,769
------------
205,683
------------
VIRGINIA 3.38%
Rivanna Wtr & Swr Auth, Virginia,
Regl Wtr & Swr System Rev Ref, Series
of 1993, 4.500%, 10/1/2000 50,000 50,691
Southeastern Pub Svc Auth, Virginia,
Regl Solid Waste System, Sr Ref Rev,
Series 1993A, 5.150%, 7/1/2009 100,000 105,470
------------
156,161
------------
WASHINGTON 8.40%
North Thurston School Dist #3, Washington
(Thurston Cnty), Unlimited Tax Gen Oblig,
1992, 6.500%, 12/1/2009 200,000 218,356
Washington Hlth Care Facils (Catholic
Hlth Initiatives), Rev, Series 1997A,
5.100%, 12/1/2009 100,000 102,932
Wenatchee, Washington, Wtr & Swr Rev Ref,
1994, 4.600%, 12/1/2002 65,000 66,929
------------
388,217
------------
WYOMING 4.54%
Platte Cnty, Wyoming (Basin Elec Power
Cooperative - Laramie River Station Proj),
PCR, Series 1994, 5.100%, 1/1/2008 200,000 209,808
------------
TOTAL MUNICIPAL BONDS
(Cost $4,361,550) 4,520,699
------------
SHORT-TERM INVESTMENTS -
MUNICIPAL NOTES 2.16%
CALIFORNIA 2.16%
Los Angeles Regl Airports Impt,
California (American Airlines/Los Angeles
Intl Airport Proj), AR, Corp Lease Rev,
Series B, 4.100%, 12/1/2024~
<PAGE>
(Cost $100,000) $ 100,000 $ 100,000
------------
TOTAL INVESTMENT SECURITIES
AT VALUE 100.00%
(Cost $4,461,550#) 4,620,699
============
TAX-FREE LONG-TERM BOND Fund
MUNICIPAL BONDS 85.14%
ALASKA 0.21%
Alaska Hsg Fin (Veterans Mtg Prog),
Collateralized Gen Oblig, 1990 First
Series, 7.500%, 12/1/2030 460,000 485,962
------------
ARIZONA 0.48%
Arizona Edl Ln Mktng, 1992 Edl Ln Rev,
Series B, 7.000%, 3/1/2005 1,000,000 1,081,360
------------
CALIFORNIA 1.69%
Anaheim Pub Fing Auth, California
(Anaheim Pub Impts Proj), Sub Lease
Rev, 1997 Series C,
Cap Appreciation, 9/1/2025 5,000,000 1,553,200
Big Bear Lake Dept of Wtr & Pwr,
California, Wtr Rev Ref, Series 1996,
6.000%, 4/1/2022 2,000,000 2,279,520
------------
3,832,720
------------
COLORADO 3.33%
E-470 Pub Hwy Auth, Colorado, Sr Rev,
Series 1997A, 5.000%, 9/1/2021+ 6,300,000 6,163,290
Fountain Valley Auth, Colorado, Wtr
Treatment Ref Rev, Series 1991,
6.800%, 12/1/2019 1,140,000 1,236,775
Montrose Cnty Bldg Auth, Colorado, Ctfs
of Participation, 6.350%, 6/15/2006 150,000 161,762
------------
7,561,827
------------
FLORIDA 2.80%
Dade Cnty Pub Impt, Florida, Gen Oblig,
Series H, 6.700%, 6/1/2003 3,000,000 3,353,700
Greater Orlando Aviation Auth, Florida,
Airport Facils Rev, Series 1988,
<PAGE>
8.375%, 10/1/2016 $ 490,000 $ 515,421
Hillsborough Cnty Aviation Auth, Florida
(Tampa Intl Airport), Rev Ref,
1997 Series B, 5.125%, 10/1/2017 1,545,000 1,549,913
Miami-Dade Cnty, Florida, Sub Special
Oblig, Series 1997B, Cap Appreciation,
10/1/2028 5,000,000 939,000
------------
6,358,034
------------
GEORGIA 5.00%
Atlanta, Georgia, Airport Facils Rev,
Series 1990, 7.250%, 1/1/2017 2,000,000 2,181,780
Atlanta, Georgia (Delta Air Lines Proj),
Special Purpose Facils Rev, Series
1989B, 7.400%, 12/1/1999 3,000,000 3,150,060
Cherokee Cnty School System, Georgia,
Gen Oblig, Series 1997, 4.250%,
2/1/2002 6,000,000 6,014,580
------------
11,346,420
------------
ILLINOIS 11.90%
Chicago, Illinois, Gen Oblig, Ref,
Series 1993B, 5.125%, 1/1/2022 2,465,000 2,477,177
Chicago, Illinois, Wastewtr Transmission
Rev, Series 1995, 5.125%, 1/1/2025+ 10,000,000 9,836,400
Chicago, Illinois (Peoples Gas Light &
Coke), 1st & Ref Mtg, Series CC,
Medium-Term Notes, 6.875%, 3/1/2015 2,875,000 3,179,606
Chicago School Reform Board of Ed
Trustees, Illinois, Unltd Tax Gen
Oblig, Dedicated Tax Rev, Series
1997A, 5.400%, 12/1/2017 3,000,000 3,048,840
Cook & DuPage Cntys, Illinois
(Lemont-Bromberek Combined School
Dist #113A), School Bldg Rev,
Series 1995B, Cap Appreciation,
12/1/2015 5,060,000 2,047,630
Illinois Dev Fin Auth (Catholic Charities
Hsg Dev Proj), Rev, Series 1995,
6.350%, 1/1/2025 1,500,000 1,554,120
Illinois Metro Pier & Exposition Auth
(McCormick Pl Expansion Proj),
Dedicated Tax Rev Ref,
<PAGE>
Series 1994A, Cap Appreciation,
12/15/2012 $ 5,000,000 $ 2,377,350
6/15/2020 5,350,000 1,658,126
6/15/2025 1,200,000 286,392
6/15/2026 1,500,000 339,750
6/15/2027 1,000,000 214,960
------------
27,020,351
------------
INDIANA 8.92%
Dekalb Cnty Redev Auth, Indiana
(Mini-Mill Loc Pub Impt Proj), Rev,
Series A 1995 6.500%, 1/15/2014 900,000 981,198
Indiana Transn Fin Auth, Airport Facils
Lease Rev, Series A, 6.750%, 11/1/2011 1,500,000 1,682,745
Indiana Transn Fin Auth, Hwy Rev,
Series 1993A, Cap Appreciation,
12/1/2017 3,000,000 1,055,430
Indianapolis Airport Auth, Indiana,
Rev, Series 1988, 8.400%, 7/1/2008 2,000,000 2,078,160
Indianapolis Loc Pub Impt Bank, Indiana,
Impt Rev, Series 1991C, 6.700%, 1/1/2017 3,750,000 4,147,013
Petersburg, Indiana (Indianapolis Pwr &
Light Proj), PCR Ref, Series 1993B,
5.400%, 8/1/2017 9,850,000 10,300,243
------------
20,244,789
------------
IOWA 2.24%
Iowa Fin Auth (Genesis Med Ctr), Hlthcare
Rev, Series 1997, 5.200%, 7/1/2017 2,060,000 2,054,891
7/1/2022 3,050,000 3,021,117
------------
5,076,008
------------
MASSACHUSETTS 9.42%
Boston Wtr & Swr Commn, Massachusetts,
Gen Rev, 1993 Sr Series A, 5.250%,
11/1/2019 5,385,000 5,636,156
Commonwealth of Massachusetts, Gen Oblig,
Consolidated Ln of 1992, Series D,
8.000%, 5/1/2006 5,000,000 6,239,900
Massachusetts Hlth & Edl Facils Auth
(Cooley Dickinson & Mary Hitchcock
Mem Hosps), Rev, Series 1995 B,
<PAGE>
5.500%, 11/15/2018 $ 3,500,000 $ 3,608,255
Massachusetts Indl Fin Agency
(Merrimack College), Rev, Series 1997,
5.000%, 7/1/2027 1,000,000 980,580
Massachusetts Wtr Resources Auth,
Gen Rev, 1995 Series B, 4.750%,
12/1/2021 5,250,000 4,915,208
------------
21,380,099
------------
MINNESOTA 1.16%
Princeton Indpt School Dist #477,
Minnesota, Gen Oblig School Bldg,
Series 1997, 5.125%, 2/1/2024 2,640,000 2,643,221
------------
MISSISSIPPI 1.65%
Claiborne Cnty, Mississippi (System
Energy Resources Proj), PCR, Series A,
9.500%, 12/1/2013 750,000 805,343
Mississippi Dept of Corrections (East
Mississippi Correctional Facil Proj),
Ctfs of Participation,
Series 1997, 5.000%, 1/1/2018 3,000,000 2,936,790
------------
3,742,133
------------
NEW HAMPSHIRE 0.42%
New Hampshire Hsg Fin Auth, Single
Family Residential Mtg, 1994 Series D,
6.850%, 7/1/2006 890,000 955,433
------------
NEW MEXICO 2.40%
Los Alamos Cnty, New Mexico, Util System
Rev, Series 1994A, 6.000%, 7/1/2009 5,000,000 5,453,900
------------
NEW YORK 15.27%
New York, New York, Gen Oblig, 1997
Series L, 5.250%, 8/1/2009 2,500,000 2,613,850
New York, New York, Gen Oblig, Series F,
5.250%, 8/1/2004~~ 5,000,000 5,153,150
5.000%, 8/1/2023~~ 2,000,000 1,895,160
New York & New Jersey Port Auth,
Consolidated Gen Oblig, Rev,
Ninety-Third Series, 6.125%, 6/1/2094 5,250,000 6,044,272
One Hundred Fourth Series,
4.750%, 1/15/2026+ 2,500,000 2,359,975
<PAGE>
New York Dorm Auth (State Univ Dorm
Facils Issue), Lease Rev, Series 1995A,
6.000%, 7/1/2010 $ 1,550,000 $ 1,747,703
New York Loc Govt Assistance, Gen Oblig,
Rev, Series 1992B, 5.000%, 4/1/2021~~ 10,000,000 9,784,800
Triborough Bridge & Tunnel Auth, New York,
Gen Purpose Rev, Series 1993B,
5.000%, 1/1/2020 1,935,000 1,948,023
Series Y, 5.500%, 1/1/2017 2,900,000 3,106,074
------------
34,653,007
------------
OHIO 1.85%
Hamilton Cnty, Ohio (Metro Swr Dist
of Gtr Cincinnati), Swr System Impt
Rev, 1997 Series A,
5.000%, 12/1/2005 4,010,000 4,190,450
------------
PUERTO RICO 2.63%
Puerto Rico Infrastructure Fing Auth,
Special Tax Rev, Series 1997A,
5.000%, 7/1/2017 6,000,000 5,977,620
------------
RHODE ISLAND 0.75%
Rhode Island Depositors Econ Protection,
Special Oblig, 1992 Series A,
6.950%, 8/1/2022 1,500,000 1,691,280
------------
TEXAS 2.54%
Austin, Texas, Combined Util Systems,
Rev Ref, Series 1992, Cap Appreciation,
11/15/2011 1,400,000 705,348
Austin, Texas, Wtr, Swr & Elec Ref Rev,
Series 1982, 14.000%, 11/15/2001 500,000 608,520
Galena Park Indpt School Dist, Texas
(Harris Cnty) Unltd Tax School Bldg &
Ref, Series 1996,
Cap Appreciation, 8/15/2023 3,220,000 860,770
Texas Muni Pwr Agency, Ref Rev, Series
1989, Cap Appreciation, 9/1/2010 6,650,000 3,600,310
------------
5,774,948
------------
<PAGE>
UTAH 3.67%
Utah Cnty, Utah (IHC Hlth Svcs), Hosp Rev,
Series 1997, 5.250%, 8/15/2026~~ $ 6,680,000 $ 6,651,610
Utah Hsg Fin Agency (Federally Insured
or Gtd Mtg Lns), Single Family Mtg,
1994 Issue D-1 Term
Mezzanine, 6.450%, 7/1/2011 1,560,000 1,681,056
------------
8,332,666
------------
VERMONT 0.48%
Vermont Hsg Fin Agency, Single Family
Hsg Rev, Series 5, 6.875%, 11/1/2016 1,000,000 1,084,350
------------
WASHINGTON 5.63%
Chelan Cnty Pub Util Dist #1, Washington,
Columbia River-Rock Island Hydro-Elec
System Rev Ref,
Series 1997A, Cap Appreciation, 6/1/2023 22,685,000 6,144,005
Grant Cnty Pub Util Dist #2, Washington,
Hydroelectric Dev Rev,
Second Series 1990,
(Priest Rapids), 7.700%, 1/1/2018 3,000,000 3,219,300
(Wanapum), 7.700%, 1/1/2018 1,050,000 1,126,755
North Thurston School Dist #3, Washington
(Thurston Cnty), Unltd Tax Gen
Oblig, 1992, 6.500%, 12/1/2009 1,200,000 1,310,136
Washington Pub Pwr Supply System
(Nuclear Proj #1), Rev Ref, Series
1998A, 5.125%, 7/1/2017~~ 1,000,000 980,010
------------
12,780,206
------------
WISCONSIN 0.70%
Adams Cnty,Wisconsin (Adams-Friendship
School Dist), Wisconsin, Gen Oblig
Ref, 6.500%, 4/1/2015 1,340,000 1,592,737
------------
TOTAL MUNICIPAL BONDS
(Cost $180,340,538) 193,259,521
------------
SHORT-TERM INVESTMENTS -
MUNICIPAL NOTES 14.86%
ARIZONA 0.66%
Maricopa Cnty Pollution Ctl, Arizona
(El Paso Elec Palo Verde Proj), ATS,
PCR Ref, 1984 Series E,
3.700%, 12/1/2014~+ 1,500,000 1,500,000
------------
<PAGE>
CALIFORNIA 2.11%
Los Angeles Regl Airports Impt, California
(American Airlines/Los Angeles Intl
Airport), Facils Sublease FDR,
Issue 1984, Series C, 5.000%, 12/1/2024~ $ 700,000 $ 700,000
Series D, 5.000%, 12/1/2024~ 400,000 400,000
Series LAX 2, 5.000%, 12/1/2025~ 3,700,000 3,700,000
------------
4,800,000
------------
COLORADO 0.53%
Colorado Student Oblig Auth, A/FR,
Student Ln Rev, 1993 Series C-2,
3.650%, 9/1/2002~+ 1,200,000 1,200,000
------------
ILLINOIS 0.48%
Illinois Hlth Facils Auth (Hlthcorp
Affiliates Proj), VRD, Rev, Series 1985B,
3.700%, 11/1/2015~+ 1,100,000 1,100,000
------------
INDIANA 1.50%
Indiana Dev Fin Auth (Mid-America Energy
Resources Proj), AR, Exmp Facil Rev,
Series 1995, 3.850%, 9/1/2030~ 1,800,000 1,800,000
Indianapolis, Indiana (Jewish Cmnty
Campus Proj), VR, Econ Dev Rev,
Series 1995, 3.750%, 4/1/2005~+ 1,300,000 1,300,000
Sullivan Cnty Indl Dev Brd, Indiana
(Mead Corp Proj), DATES, PCR Ref,
Series 1986, 5.000%, 10/1/2016~ 300,000 300,000
------------
3,400,000
------------
LOUISIANA 0.44%
Louisiana Pub Facils Auth (GNMA Coll-Les
Deux Chene Apts Proj), AR, Multifamily
Hsg Rev, Series 1985, 5.100%, 12/1/2015~ 1,000,000 1,000,000
------------
MISSOURI 1.76%
Columbia, Missouri, AR, Special Oblig
Ins Reserve, Series 1988A,
3.700%, 6/1/2008~ 2,500,000 2,500,000
<PAGE>
Missouri Hlth & Edl Facils Auth
(Christian Hlth Svcs Dev-Christian
Hosp Northeast-Northwest),
F/FR, Rev, Series 1989A,
3.600%, 11/1/2019~ $ 1,500,000 $ 1,500,000
------------
4,000,000
------------
NEVADA 0.44%
Clark Cnty, Nevada, AR, Airport System
Ref Rev, Series 1993A,
3.650%, 7/1/2012~+ 1,000,000 1,000,000
------------
NEW MEXICO 0.27%
New Mexico Univ Regents, New Mexico,
ATS, Sub Lien, System Rev Ref,
Series 1996, 3.650%, 6/1/2006~ 625,000 625,000
------------
NEW YORK 0.18%
New York Muni Wtr Fin Auth, New York,
AR, Wtr & Swr System Rev, 1994 Series C,
5.100%, 6/15/2023~ 400,000 400,000
------------
PENNSYLVANIA 1.76%
Delaware Valley Regl Fin Auth,
Pennsylvania (Bucks, Chester, Delaware
& Montgomery Cntys), AR, Loc Govt Rev,
Series 1985D, 3.650%, 12/1/2020~+ 4,000,000 4,000,000
------------
TENNESSEE 1.41%
Clarksville Pub Bldg Auth, Tennessee
(Tennessee Muni Fund), AR, Pooled Fing
Rev, Series 1990, 3.650%, 7/1/2013~+ 3,191,000 3,191,000
------------
TEXAS 2.16%
Crawford Indl Dev, Texas (Franklin Inds),
VR, IDR, 4.350%, 10/1/2012~ 2,200,000 2,200,000
Grapevine, Texas (American Airlines Proj),
MAVRIC, Rev, Series A2, 5.000%, 12/1/2024~ 400,000 400,000
Lone Star Airport Impt Auth , Texas
(American Airlines Proj), MAVRIC,
5.000%, 12/1/2014~ Series A-2 900,000 900,000
Series A-5 200,000 200,000
Series B-3 400,000 400,000
Series B-4 800,000 800,000
------------
4,900,000
------------
<PAGE>
WASHINGTON 1.16%
Seattle Muni Light & Pwr, Washington,
AR, Rev, Series 1993, 3.700%, 11/1/2018~ $ 1,000,000 $ 1,000,000
Washington Hlth Care Facils Auth
(Sisters of Providence), DATES, Rev,
Series 1985B, 5.000%, 10/1/2005~ 900,000 900,000
Washington Hsg Fin Commn (Inglenook
Court Proj), VRD, Multifamily Mtg Rev,
Series 1995, 5.250%, 7/1/2025~ 725,000 725,000
------------
2,625,000
------------
TOTAL MUNICIPAL SHORT-TERM NOTES
(Cost $33,741,000) 33,741,000
------------
TOTAL INVESTMENT SECURITIES
AT VALUE 100.00%
(Cost $214,081,538#) 227,000,521
============
The following abbreviations may be used in portfolio descriptions: A/FR* -
Adjustable/Fixed Rate ACES* - Adjustable Convertible Extendable Securities AR* -
Adjustable Rate ATS* - Adjustable Tender Securities DATES* - Daily Adjustable
Tax-Exempt Securities FDR* - Flexible Demand Revenue 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 Anticipation 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.
<PAGE>
~ 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 of 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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INVESCO Tax-Free Income Funds, Inc.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
UNAUDITED
Tax-Free Tax-Free
Intermediate Long-Term
Bond Fund Bond Fund
-------------------------------------
<S> <C> <C>
ASSETS
Investment Securities:
At Cost $ 4,461,550$ $ 214,081,538
====================================
At Value 4,620,699 227,000,521
Cash 0 12,543
Receivables:
Investment Securities Sold 0 20,629,578
Fund Shares Sold 150 723,768
Interest 73,889 2,733,086
Prepaid Expenses and Other Assets 60,279 200,186
------------------------------------
TOTAL ASSETS 4,755,017 251,299,682
------------------------------------
LIABILITIES
Payables:
Custodian 13,737 0
Distributions to Shareholders 1,304 173,967
Investment Securities Purchased 0 30,121,871
Fund Shares Repurchased 0 173,968
Accrued Distribution Expenses 995 46,596
Accrued Expenses and Other Payables 812 28,982
------------------------------------
TOTAL LIABILITIES 16,848 30,545,384
------------------------------------
Net Assets at Value $ 4,738,169 $ 220,754,298
====================================
NET ASSETS
Paid-in Capital* $ 4,702,943 $ 206,262,141
Accumulated Undistributed Net
Realized Gain (Loss) on
Investment Securities and
Futures Contracts (123,923) 1,573,174
Net Appreciation of Investment
Securities and Futures Contracts 159,149 12,918,983
<PAGE>
------------------------------------
Net Assets at Value $ 4,738,169 $ 220,754,298
====================================
Shares Outstanding 469,471 14,084,619
Net Asset Value, Offering and
Redemption Price per Share $ 10.09 $ 15.67
====================================
* 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>
<TABLE>
<CAPTION>
INVESCO Tax-Free Income Funds, Inc.
STATEMENT OF OPERATIONS
Six Months Ended December 31, 1997
UNAUDITED
Tax-Free Tax-Free
Intermediate Long-Term
Bond Fund Bond Fund
------------------------------------
<S> <C> <C>
INVESTMENT INCOME
INTEREST INCOME $ 114,340 $ 5,506,981
------------------------------------
EXPENSES
Investment Advisory Fees 11,723 609,283
Distribution Expenses 5,861 276,038
Transfer Agent Fees 7,006 138,858
Administrative Fees 5,352 21,562
Custodian Fees and Expenses 1,138 15,942
Directors' Fees and Expenses 4,679 13,187
Pricing Expenses 4,227 11,302
Professional Fees and Expenses 6,108 18,565
Registration Fees and Expenses 11,786 23,052
Reports to Shareholders 588 18,845
Other Expenses 431 5,355
------------------------------------
TOTAL EXPENSES 58,899 1,151,989
Fees and Expenses Absorbed by
Investment Adviser (36,626) (148,998)
Fees and Expenses Paid Indirectly (1,138) (6,368)
------------------------------------
NET EXPENSES 21,135 996,623
------------------------------------
NET INVESTMENT INCOME 93,205 4,510,358
------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities 20,836 3,601,365
Futures Contracts (21,106) (2,508,195)
------------------------------------
Total Net Realized Gain (Loss) (270) 1,093,170
------------------------------------
Change in Net Appreciation of:
Investment Securities 88,459 5,370,125
<PAGE>
Futures Contracts 2,528 575,375
------------------------------------
Total Net Appreciation 90,987 5,945,500
------------------------------------
NET GAIN ON INVESTMENT SECURITIES 90,717 7,038,670
------------------------------------
Net Increase in Net Assets
from Operations $ 183,922 $ 11,549,028
====================================
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INVESCO Tax-Free Income Funds, Inc.
Statement of Changes in Net Assets
Tax-Free Tax-Free
Intermediate Long-Term
Bond Fund Bond Fund
------------------------------ ------------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
December 31 June 30 December 31 June 30
------------ ------------ ------------ ------------
1997 1997 1997 1997
<S> <C> <C> <C> <C>
UNAUDITED UNAUDITED
OPERATIONS
Net Investment Income $ 93,205 $ 197,614 $ 4,510,358 $ 10,134,067
Net Realized Gain (Loss) on Investment
Securities and Futures Contracts (270) 13,442 1,093,170 2,193,157
Change in Net Appreciation of Investment
Securities and Futures Contracts 90,987 58,250 5,945,500 3,362,194
------------ ------------ ------------ ------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS 183,922 269,306 11,549,028 15,689,418
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (93,205) (196,923) (4,510,358) (10,134,067)
In Excess of Net Investment Income 0 0 0 (162,831)
Net Realized Gain on Investment Securities
and Future Contracts 0 0 (2,405,389) (3,483,894)
------------ ------------ ------------ ------------
TOTAL DISTRIBUTIONS (93,205) (196,923) (6,915,747) (13,780,792)
------------ ------------ ------------ ------------
FUND SHARE TRANSACTIONS
<PAGE>
Proceeds from Sales of Shares 1,994,617 2,844,291 44,542,954 43,699,898
Reinvestment of Distributions 81,213 177,460 5,198,979 10,702,228
------------ ------------ ------------ ------------
2,075,830 3,021,751 49,741,933 54,402,126
Amounts Paid for Repurchases of Shares (2,073,827) (3,445,709) (54,031,238) (86,790,488)
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM FUND SHARE TRANSACTIONS 2,003 (423,958) (4,289,305) (32,388,362)
------------ ------------ ------------ ------------
Total Increase (Decrease) in Net Assets 92,720 (351,575) 343,976 (30,479,736)
NET ASSETS
Beginning of Period 4,645,449 4,997,024 220,410,322 250,890,058
------------ ------------ ------------ ------------
End of Period 4,738,169 4,645,449 220,754,298 220,410,322
============ ============ ============ ============
-----------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS
Shares Sold 199,437 288,509 2,857,652 2,869,165
Shares Issued from Reinvestment of
Distributions 8,170 18,030 332,546 703,719
------------ ------------ ------------ ------------
207,607 306,539 3,190,198 3,572,884
Shares Repurchased (207,417) (350,074) (3,474,088) (5,711,420)
------------ ------------ ------------ ------------
Net Increase (Decrease) in Fund Shares 190 (43,535) (283,890) (2,138,536)
============ ============ ============ ============
See Notes to Financial Statements
</TABLE>
<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") 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 objectives 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 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 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 intitial 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
<PAGE>
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 securties 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, 1997, Tax-Free Intermediate Bond Fund had
$126,181 in net capital loss carryovers which expire in the year 2003. Net
capital loss carryovers utilized in 1997 by the Tax-Free Intermediate Bond
Fund amounted to $6,259. 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 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.
<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:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS
---------------------------------------------
<S> <C> <C> <C>
$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%
</TABLE>
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 $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. Amounts
accrued by the Fund are available to reimburse the Distributor for actual
expenditures incurred within a rolling twelve-month period. For the six months
ended December 31, 1997, Tax- Free Intermediate Bond and Tax-Free Long-Term Bond
Funds paid the Distributor $5,772 and $273,421, respectively, under the plan of
distribution. Effective September 29, 1997, INVESCO Distributors, Inc., 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 Tax-Free Long-Term Bond Fund. IFG and ITC have voluntarily
<PAGE>
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, 1997, 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 $ 2,882,607 $ 2,890,412
Tax-Free Long-Term Bond Fund 170,427,326 163,643,340
There were no purchases or sales of U.S. Government securities.
NOTE 4 - APPRECIATION AND DEPRECIATION. At December 31, 1997, 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 $ 159,149 $ 0 $ 159,149
Tax-Free Long-Term Bond Fund 12,918,983 0 12,918,983
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 deferred compensation plan covering all
independent directors of the Fund who will have served as an independent
director for at least five years at the time of retirement. Benefits under this
plan are based on an annual rate equal to 40% of the retainer fee at the time of
retirement.
Pension expenses for the six months ended December 31, 1997, 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 $ 52 $ 67 $ 232
Tax-Free Long-Term Bond Fund 2,582 13,207 27,852
<PAGE>
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 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
December 31, 1997, 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 Period
Ended Ended
December 31 Year Ended June 30 June 30
----------- ------------------------------------ ---------
1997 1997 1996 1995 1994^
<S> <C> <C> <C> <C> <C>
UNAUDITED
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 0.20 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 0.39 0.57 0.47 0.62 (0.29)
----------- ------------------------------------ ---------
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.20 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 4.00%* 5.96% 4.89% 6.67% (2.93%)*
<PAGE>
RATIOS
Net Assets - End of Period
($000 Omitted) 4,738 4,645 4,997 4,907 5,083
Ratio of Expenses to Average
Net Assets# 0.48%*@ 0.84%@ 0.76%@ 0.70% 0.70%~
Ratio of Net Investment Income to
Average Net Assets# 2.01%* 4.18% 4.40% 4.56% 3.75%~
Portfolio Turnover Rate 63%* 41% 49% 23% 55%*
^ 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 and ITC for the
six months ended December 31, 1997, the years ended June 30, 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
1.27% (not annualized), 2.43%, 2.34%, 2.45% and 3.09%, respectively, and
ratio of net investment income to average net assets would have been 1.22%
(not annualized), 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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INVESCO Tax-Free Income Funds, Inc.
FINANCIAL HIGHLIGHTS (Continued)
(For a Fund Share Outstanding Throughout Each Period)
Six Months
Ended
December 31 Year Ended June 30
------------ ------------------------------------------------------
1997 1997 1996 1995 1994 1993
UNAUDITED
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 $ 15.69
------------ --------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.31 0.66 0.73 0.80 0.83 0.87
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 0.50 0.38 0.32 0.09 (1.00) 1.04
------------ --------------------------------------------------------
Total from Investment Operations 0.81 1.04 1.05 0.89 (0.17) 1.91
------------ --------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.31 0.66 0.73 0.80 0.83 0.87
In Excess of Net Investment Income 0.00 0.01 0.00 0.00 0.00 0.00
Distributions from Capital Gains 0.17 0.23 0.19 0.31 0.06 0.38
------------ --------------------------------------------------------
Total Distributions 0.48 0.90 0.92 1.11 0.89 1.25
------------ --------------------------------------------------------
<PAGE>
Net Asset Value - End of Period 15.67 15.34 15.20 15.07 15.29 16.35
============ ========================================================
TOTAL RETURN 5.35%* 7.05% 7.01% 6.16% (1.16%) 12.57%
RATIOS
Net Assets - End of Period
($000 Omitted) 220,754 220,410 250,890 254,584 282,407 332,239
Ratio of Expenses to Average Net Assets# 0.46%*@ 0.90%@ 0.91%@ 0.92% 1.00% 1.03%
Ratio of Net Investment Income to
Average Net Assets# 2.07%* 4.36% 4.76% 5.31% 5.14% 5.43%
Portfolio Turnover Rate 93%* 123% 146% 99% 28% 30%
</TABLE>
* 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, 1997 and for the years ended June 30 1997, 1996 and
1995. If such expenses had not been voluntarily absorbed, ratio of expenses
to average net assets would have been 0.53% (not annualized), 1.05%, 1.04%,
and 1.05% respectively, and ratio of net investment income to average net
assets would have been 1.99%, 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>
EasiVest makes it easy to pay yourself first.
It seems that for most of us the hardest part of investing at regular
intervals comes down to simply writing the check, finding the stamp, and putting
it in the mail. But with INVESCO's EasiVest it's so easy that we'll do almost
all the work for you.
After you fill out the authorization and return it with a voided check, the
exact dollar amount you specify will be electronically transferred from your
bank account to your designated fund on the same day each month.
Using EasiVest is one of the few times when you'll find the easy way may also
be one of the best.
For years smart investors have used an investment strategy known as
dollar-cost averaging. It only makes sense that when prices are high an investor
will want to buy fewer shares, and when prices are low he will want to buy more.
By investing a fixed amount at regular intervals with INVESCO's EasiVest, you
can take advantage of these market fluctuations.
Over a sufficient period of time, dollar-cost averaging may make the average
price you pay per share less than the actual average price per share. So follow
the lead of successful investors and take advantage of dollar-cost averaging
with INVESCO's EasiVest.
Like other investment systems, periodic investment plans to not insure a
profit, nor do they protect against loss in a falling market. Since these plans
involve continuous investment in securities regardless of fluctuating price
levels in the market, you should consider your financial ability to continue
purchases through low price levels. Finally, be aware that you will incur a loss
under the plan if you decide to liquidate your account when the market value of
accumulated shares is less than their cost.
Just follow these simple authorization instructions and let INVESCO's
EasiVest help you build for your future.
1. Call your bank for their ABA and account numbers. Then complete the
EasiVest authorization and sign it the same way you would your personal
checks.
2. Enclose an unsigned, personal check or savings deposit slip marked
"Void."
3. Place a voided check or savings deposit slip and signed authorization
form in an envelope; then mail it to us.
It's that easy to start building your mutual fund portfolio. And you can
take advantage of INVESCO's EasiVest with as little as $50 a month.
Questions? Call us at 1-800-525-8085.
Start building for your future today.
<PAGE>
EASIVEST AUTHORIZATION FOR AUTOMATIC INVESTMENTS
Before returning this Authorization, please be sure to contact your bank for
the correct ABA number and account number.
I authorize INVESCO Funds Group to transfer money from my checking or savings
account on or about the 7th or 21st (check one) day of each month for the
amounts and funds indicated below:
Fund----------------------------------Acct.#------------------------------------
$-------------------------- ($50 minimum) --- 7th ---21st
- ----------------------------------------------------------------------------
Bank Name
- ----------------------------------------------------------------------------
Bank Street Address
- ----------------------------------------------------------------------------
City, State, Zip
- ----------------------------------------------------------------------------
ABA Number (available from your bank) Bank Phone Number
- ---------------------- ---------This is a --Checking Account-- Savings Account
Bank Account Number-------------------------------------------------------------
Owner's Name (First, Middle Initial, Last)
- --------------------------------------------------------------------------------
Joint Owner's Name (First, Middle Initial, Last)
- --------------------------------------------------------------------------------
Owner Street Address
- --------------------------------------------------------------------------------
City, State, Zip
- --------------------------------------------------------------------------------
Signature Date
- --------------------------------------------------------------------------------
Signature Date
- --------------------------------------------------------------------------------
Daytime Telephone Number Evening Telephone Number
Don't forget to attach a voided check or deposit slip.
This authority is to remain in effect until I revoke it in writing and, until
INVESCO receives such notification, I agree INVESCO will be fully protected in
honoring any such electronic debit. I further agree that if any such electronic
debit is not honored, whether with cause or without cause and whether
intentionally or unintentionally, INVESCO will not be liable whatsoever. This
authorization will become a part of the fund application subject to the terms,
representations and conditions thereof.
Like other investment systems, period investment plans do not insure a profit,
nor do they protect against loss in a falling market. Since these plans involve
continuous investment in securities regardless of fluctuating price levels in
the market, you should consider your financial ability to continue purchases
through low price levels. Finally, be aware that you will incur a loss under the
plan if you decide to liquidate your account when the market value of
accumulated shares is less than their cost.
<PAGE>
INVESCO FUNDS
INVESCO Disributors, 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.
