Semiannual Report
October 31, 1998
INVESCO Stock Funds, Inc.
(Formerly known as INVESCO
Capital Appreciation Funds, Inc.)
Dynamics
Growth & Income
Endeavor
INVESCO
YOU SHOULD KNOW WHAT INVESCO KNOWS.(TM)
<PAGE>
Market Overview November 1998
"It was the best of times, it was the worst of times." For many investors,
the opening of Charles Dickens' A Tale of Two Cities best describes their
investments in 1998. On one hand, investments in many large, domestic blue chip
companies have performed well. However, for investors in emerging markets and
small-cap stocks, it has been a rather different story.
This has been a year that tested the skills of even the most experienced
investor, with the domestic equity markets reaching unprecedented heights in the
spring of '98, suffering a severe correction, and then rallying again. But what
has really changed in 1998?
Economy: The domestic economy continues to expand even though many
developing nations are enduring recessions. With U.S. unemployment at record low
levels and real wages accelerating, consumers have been willing to spend. It is
important to remember that consumer spending is responsible for approximately
two-thirds of Gross Domestic Product. In addition, lower interest rates on
mortgages have enticed homeowners to refinance, increasing their disposable
income.
Interest rates: As the global financial crisis intensified during the last
year, the threat of an overheating economy diminished, and interest rates
declined significantly -- with Treasury yields reaching levels not seen since
the 1960s. In addition, worries over the bailout of the hedge fund Long-Term
Capital Management combined with a global credit crunch caused the Federal
Reserve Board to lower the Fed funds rate by 25 basis points three times in a
seven-week period in the fall of '98. This was the first move by the Fed since
it increased the Fed funds rate in the spring of '97.
Corporate Earnings: The strong U.S. dollar, intense price competition
worldwide, and slowing global economies have decreased revenues for many
multinationals, squeezing corporate profits. Furthermore, increasing wages (due
to the tight labor market) are also putting pressure on profit margins, and the
growth rate in corporate earnings has slowed.
Market Volatility: The last four years have been rewarding for investors,
as domestic equity markets produced above-average returns with limited
volatility. However, this year volatility returned to the markets; August 1998
marked the worst month for equities since October 1987. For the long-term
investor, volatility is just part of the price of doing business when investing
in equities.
As we move into 1999, the market environment for domestic equities has
changed to an extent; yet, in many respects, it remains similar to the last four
years. Low inflation, declining interest rates, and positive domestic economic
growth lend support to the underlying fundamentals for equities. Granted, the
slowdown in many international economies may retard growth here at home, but it
appears that our economy is strong enough to weather the storm.
The U.S. remains the one global economic superpower. Compared to many
international firms, domestic companies are highly efficient, productive, and
profitable. The strong dollar and intense price competition have slowed the rate
of growth in earnings in 1998, but the earnings outlook for 1999 appears
brighter as many international economies start to recover. In addition, equity
markets are forward-looking in nature and seem to be telling us that the worst
of the global financial crisis may be over. However, investors should continue
to expect heavy day-to-day volatility in the equity markets and remain focused
on their long-term goals.
New Investment Opportunities
INVESCO is proud to announce the addition of two new stock funds for its
shareholders. INVESCO Growth & Income Fund (7/98) and Endeavor Fund (10/98) join
<PAGE>
INVESCO Dynamics Fund as part of INVESCO Stock Funds, Inc. If you have any
questions regarding these new funds, please feel free to call an INVESCO
representative at 1-800-525-8085.
INVESCO Stock Funds, Inc.
The line graphs on the following pages illustrate the value of a $10,000
investment in each of the INVESCO Stock Funds, Inc., plus reinvested dividends
and capital gain distributions, for the 10-year period ended 10/31/98 or since
inception through 10/31/98. The chart and other total return figures cited
reflect each fund's operating expenses, but the indexes do not have expenses,
which would, of course, have lowered their performance.(1),(2)
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STYLE Market Cap
VALUE Blend GROWTH RANGE MEDIAN
- --------------------------------------------------------------------------------
Large- INVESCO INVESCO INVESCO $10 $30 to
cap Value Growth & Blue Chip billion & up $60 billion
Equity Income Growth
- --------------------------------------------------------------------------------
Mid- INVESCO INVESCO $1 billion $1 to
cap Dynamics Endeavor to $10 billion 5 billion
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Small- INVESCO INVESCO below $1 $450 to
cap Small Small Company billion 800 billion
Company Growth Fund
Value
- --------------------------------------------------------------------------------
INVESCO Dynamics Fund
For the six-month period ended 10/31/98, INVESCO Dynamics Fund had a total
return of -13.47%, underperforming the S&P 500, which had a total return of -
0.37%, and the S&P MidCap 400, which had a total return of -10.46%. However, for
the one-year period ended 10/31/98, the fund's return of 4.29% significantly
outperformed the return of 0.86% for its peer group as defined by the average
fund return in the Lipper Capital Appreciation objective. (Lipper Analytical
Services, Inc., is an independent mutual fund analyst, which tracks total return
unadjusted for commissions. Of course, past performance is not a guarantee of
future results.)(1),(2)
Review & Outlook
A Conversation with Tim Miller, Senior Vice President, Growth Team Leader, and
Portfolio Manager
After a strong start to the year, the fund has struggled in
the last six months. Why?
As conditions in the global equity markets deteriorated over the spring and
summer, fears of a global recession intensified. This caused a significant
contraction in the security prices of small- to mid-capitalization companies. In
my two decades in the investment business, this was one of the quickest and most
severe corrections I have ever witnessed. Faster-growing industries and sectors
were hit particularly hard, as many of these types of companies experienced
losses in market value of greater than 40%. Why were small- and mid-cap stocks
hit so hard?
As investors become more nervous about their investments, they tend to sell
small- and mid-cap stocks in order to concentrate their holdings in large,
liquid companies with predictable earnings. Many times this defensive
over-reaction creates buying opportunities for the patient investor, and we were
able to upgrade the quality of the portfolio when the market corrected. What
sectors or industries have performed best during the last six months?
Some of the strongest returns for the fund have been produced by
investments in companies involved in cable TV, consumer staples, and health
care.
<PAGE>
What areas were disappointing?
The fund is heavily concentrated in some of the faster-growing sectors of
the economy, and investments in technology, computer services, communications,
and financial services companies hindered the fund's performance in the last six
months. However, over the longer-term, I remain confident that these holdings
could produce superior results compared to other areas of the market.
Dynamics Fund
Average Annualized Total Return
as of 10/31/98 (2)
1 year 4.29%
-------------------------------
5 years 14.70%
-------------------------------
10 years 17.72%
-------------------------------
Graph:
This line graph represents a comparison of the value of a $10,000
investment in INVESCO Dynamics Fund to the value of a $10,000 investment in
the S&P 500 Index and S&P MidCap Index, assuming in each case reinvestment
of all dividends and capital gain distributions, for the 10 year period
ended October 31, 1998.
Does the fund have investments in Internet companies?
Yes, I'm a firm believer that the Internet will be one of the crucial
engines of economic growth over the next three to five years. Traffic on the
Internet is doubling every 90 days. With the explosion of information and data
transmissions, the need for increased bandwidth from existing phone lines and
state-of-the-art telecommunications equipment has created enormous opportunities
for certain companies. Firms like America Online, Qwest Communications
International, Amazon.Com Inc., and Yahoo! Inc. have established market-leading
positions in their respective industries and have a bright future.
What's your near-term outlook?
I'm becoming cautiously more bullish, although stability in the global
financial markets needs to be restored. The reduction in short-term interest
rates by the Federal Reserve Board indicates that the Fed is willing to do what
is necessary to avoid a recession. Historically speaking, the recent market
correction was probably too quick and severe given current economic conditions,
and we have already witnessed a sharp bounce back. However, for equity indexes
to resume and maintain an upward path, global conditions must improve.
<PAGE>
Graph:
This graph reflects the allocation of the INVESCO Dynamics Fund's portfolio
by value of net assets in basic materials, capital goods, communications
services, consumer cyclicals, consumer staples, energy, finances, health
care, technology, transportation and cash and equivalent securities as of
10/31/97, 04/30/98 and 10/31/98.
Fund Management
INVESCO Dynamics Fund is managed by INVESCO Senior Vice President Timothy
J. Miller and Thomas R. Wald. Tim, INVESCO's Growth Team Leader, received his
MBA from the University of Missouri, and a BSBA from St. Louis University. A
19-year veteran of the investment business, he is a Chartered Financial Analyst.
Before joining INVESCO in 1992, Tim was an analyst and portfolio manager with
Mississippi Valley Advisors.
Thomas R. Wald, a Chartered Financial Analyst, assumed responsibilities of
co-manager in October 1997. He received his MBA from The Wharton School,
University of Pennsylvania, and a BA from Tulane University. Before joining
INVESCO in 1997, Tom was the senior health care analyst at Munder Capital
Management.
INVESCO Growth & Income Fund
Since inception on July 1, 1998, to 10/31/98, INVESCO Growth & Income Fund
achieved a return of 18.30%, compared to the figure of -2.57% for the S&P 500
broad market index.(1),(2)
Review & Outlook
A Conversation with Vice President and Portfolio Manager Trent May
Although the fund has only a short history at this point, what are the key
factors to its performance thus far?
I think the fund's strong relative performance can be attributed to our
strict investment discipline, which concentrates the portfolio on equity
securities of large-capitalization companies that offer excellent growth
potential plus current dividends. Since the fund's introduction last summer,
our core holdings within the portfolio provided most of the power. But exposure
to some of the fastest-growing sectors in the market also aided performance.
What are some of the market sectors that have improved performance?
<PAGE>
We use a bottom-up approach when selecting securities for the portfolio, so
we don't make sector calls. We try to keep the fund well-diversified. When I
analyze a stock, I look at the company fundamentals, potential growth prospects,
and the ability to grow dividends over time. This emphasis tends to concentrate
the portfolio in faster-growing sectors. It is much easier for a firm to
increase a dividend if the company's revenues and earnings are growing over
time.
Some of the fund's strongest returns have come from the following sectors
or industries:
o Communications: Regional Bell Operating Companies (RBOCs) like SBC
Communications, Bell Atlantic, and AT&T Corp.
o Pharmaceuticals: Merck & Co., Pfizer Inc., and Lilly Eli & Co.
o Technology: Lucent Technologies and International Business Machines
(IBM).
Has the fund experienced any disappointments?
The fund's holdings in the financial services sector hindered performance
during the first few months of operations. As the market contracted in late
summer and early fall, stock prices of financial services companies plummeted
since their revenues and earnings are correlated to the financial markets.
Nonetheless, I think our holdings in the financial services sector have
excellent long-term potential and in fact many have already started to recover.
Growth & Income Fund
Cumulative Total Return as of 10/31/98 (2)
Since inception (7/98) 18.30%
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Graph:
This line graph compares the value of a $10,000 investment in INVESCO
Growth & Income Fund to the value of a $10,000 investment in the S&P 500
Index, assuming in each case reinvestment of all dividends and capital gain
distributions, for the period from inception (7/1/98) through 10/31/98.
What's your near-term outlook?
The fund will remain consistent with its investment strategy, focusing on
high-quality, market-leading companies which have the ability to increase their
revenues, earnings, and dividends over the next three to five years. In regards
to the financial markets, I'm becoming more positive on the markets. Although
equities may have recovered a little too fast, it is apparent that Alan
Greenspan, Chairman of the Federal Reserve Board, will take the necessary
measures to stimulate the economy and avoid a recession. Furthermore, the
international community is starting to address some worldwide problems, which
may help stimulate demand globally. Overall, low inflation and strong domestic
demand provide a positive backdrop for stocks.
Graph:
This graph reflects the allocation of the INVESCO Growth & Income Fund's
portfolio by value of net assets in basic materials, capital goods,
communications services, consumer cyclicals, consumer staples, energy,
finances, health care, technology and cash and equivalent securities as of
10/31/98.
Fund Management
INVESCO Growth & Income Fund is managed by Vice President Trent E. May. He
received a BS from the Florida Institute of Technology and a MBA from Rollins
College. Before joining INVESCO in 1996, Trent was a senior equity
manager/equity analyst with Munder Capital Management. He is a Chartered
Financial Analyst.
Vice President Fritz Meyer is co-manager of the fund, and a 22-year veteran
of the investment business. He received his MBA from Amos Tuck School-Dartmouth
College, and a BA from Darthmouth. Before joining INVESCO in 1996, Fritz was an
executive vice president and portfolio manager with Nelson, Benson & Zellmer,
Inc.
<PAGE>
INVESCO Endeavor Fund
Review & Outlook
A Conversation about the new INVESCO Endeavor Fund with Senior Vice President,
Growth Team Leader, and Portfolio Manager Tim Miller
INVESCO Endeavor Fund started investment operations on October 28, 1998. What
distinguishes this fund from other INVESCO growth funds?
Endeavor Fund will be aggressively managed to seek long-term capital
appreciation. From a structural standpoint, the fund is more like an
old-fashioned mutual fund, investing in growth stocks across the capitalization
spectrum. In addition, the fund is able to invest up to 25% of its assets in
foreign securities. Although this fund may be more volatile than some pure
domestic stock funds on a day-to-day basis, I think it possesses excellent
long-term growth potential for the patient investor.
So the fund can invest in small-, mid-, and large-capitalization stocks, as well
as international equities?
Yes. We kept the investment restrictions fairly broad so that the fund can
take advantage of the best growth opportunities in all markets. However, we will
use the same growth investment discipline that has worked so well for us in the
past. We follow a three-step selection process:
First, we look for growth markets or special situations where we feel that
the industry or sector can generate above-average growth rates for the next
three to five years. We prefer markets and industries where market leadership is
in a few hands.
Next, within these growth markets or sectors, we try to identify
market-leading companies with strong, defensible positions. For instance, we
look for companies that can differentiate their products from their competitors.
Once we have isolated the best growth opportunities in these markets, we
analyze each company's financial data. At this step, we check the financial
numbers to see if our growth projections are consistent with the company's data.
Then we make our investment decisions from this pool of candidates.
What sectors or industries will the fund favor?
I think some of the best growth opportunities in the next three to five
years may be found in the following sectors:
o Financial Services
o Health Care
o Communications
o Technology
How will the fund allocate assets among small-, mid-, large-cap stocks?
We will look for the best investment opportunities in each capitalization range.
A neutral position for the fund will be 60% of the fund's assets in
<PAGE>
large-caps, 30% in mid-caps, and 10% in small-caps. Of course, the weightings
will change depending on prevailing conditions.
What's your near-term outlook?
I remain positive on both the market and the economy. For long-term growth
investors, recent market volatility has created excellent investment
opportunities, and we have positioned the fund to take advantage of these
situations.
Fund Management
INVESCO Endeavor Fund is managed by members of INVESCO's Growth Team, which
is headed by Timothy J. Miller, CFA. Tim received his MBA from the University of
Missouri, and a BSBA from St. Louis University. A 19-year veteran of the
investment business, he is a Chartered Financial Analyst. Before joining INVESCO
in 1992, Tim was an analyst and portfolio manager with Mississippi Valley
Advisors.
(1)The S&P 500 is an unmanaged index considered representative of the
performance of the broad U.S. stock market. The S&P MidCap 400 is an unmanaged
index indicative of domestic mid-capitalization stock prices.
(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>
INVESCO Fund Codes
These two-digit codes appear after your account number on Investment
Summaries and confirmations. You may also use them to request information about
specific funds on PAL(R), your Personal Account Line.
Money Market Funds
44 U.S. Government Money Fund
25 Cash Reserves
40 Tax-Free Money Fund
Tax-Exempt Funds
36 Tax-Free Intermediate Bond
35 Tax-Free Long-Term Bond
Bond Funds
33 Short-Term Bond
47 Intermediate Government Bond
32 U.S. Government Securities
30 Select Income
31 High Yield
Combination Stock & Bond Funds
15 Industrial Income
70 Multi-Asset Allocation
48 Total Return
71 Balanced
Stock Funds
21 Growth & Income
61 Endeavor
10 Growth
20 Dynamics
60 Small Company Growth
46 Value Equity
74 Small Company Value
23 S&P 500 Index Fund
Sector Funds
50 Energy
59 Environmental Services
57 Financial Services
51 Gold
52 Health Sciences
53 Leisure
42 Realty
55 Technology
58 Utilities
38 Worldwide Capital Goods
39 Worldwide Communications
International Funds
09 International Blue Chip
49 International Growth
<PAGE>
43 Emerging Markets
41 Asian Growth
54 Pacific Basin
56 European
37 European Small Company
34 Latin American Growth
For more information about any of the INVESCO Funds, including management fees
and expenses, please call us at 1-800-525-8085 for a prospectus. Read it
carefully before you invest or send money.
<PAGE>
Ten Largest Common Stock Holdings
October 31, 1998
Description Value
- --------------------------------------
Dynamics Fund
America Online $28,462,000
Sofamor/Danek Group 28,058,662
Watson Pharmaceuticals 19,774,688
Edwards (J D) & Co 19,650,000
Zions Bancorp 19,229,850
Tandy Corp 18,422,381
COLT Telecom Group PLC
Sponsored ADR Representing
4 Ord Shrs 17,981,250
Omnicom Group 17,797,500
Xilinx Inc 17,639,227
General Dynamics 17,282,750
Endeavor Fund
America Online $ 724,256
PepsiCo Inc 712,125
Microsoft Corp 709,362
Lilly (Eli) & Co 590,844
Texas Instruments 588,225
SBC Communications 588,169
Merck & Co 581,575
Pfizer Inc 568,756
Philip Morris 557,262
Citigroup Inc 489,450
Growth and Income Fund
Citigroup Inc $ 1,285,748
Pfizer Inc 1,121,416
General Electric 1,076,250
Microsoft Corp 1,037,575
SBC Communications 1,018,875
Bell Atlantic 1,014,687
Lilly (Eli) & Co 971,250
AT&T Corp 971,100
Bristol-Myers Squibb 956,366
Merck & Co 899,412
<PAGE>
Statement of Investment Securities
October 31, 1998
UNAUDITED
- --------------------------------------------------------------------------------
Shares or
Principal
% Description Amount Value
- --------------------------------------------------------------------------------
Dynamics Fund
90.44 COMMON STOCKS
2.36 AEROSPACE & DEFENSE
Alliant Techsystems(a) 181,500 $12,705,000
General Dynamics 292,000 17,282,750
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29,987,750
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0.85 AUTO PARTS
O'Reilly Automotive(a) 275,000 10,759,375
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0.47 AUTOMOBILES
General Motors Class H(a) 155,000 5,928,750
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4.99 BANKS
First Tennessee National 385,000 12,199,688
North Fork Bancorp 580,000 11,527,500
Star Banc 193,600 14,641,000
US Trust 93,000 5,922,938
Zions Bancorp 362,400 19,229,850
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63,520,976
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1.26 BROADCASTING
Clear Channel
Communications(a) 175,000 7,973,437
EchoStar Communications
Class A(a) 300,000 8,100,000
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16,073,437
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4.67 CABLE
Cablevision Systems Class A(a) 150,000 7,237,500
Cox Communications Class A(a) 139,700 7,666,037
Flextech PLC(a) 1,400,000 13,129,648
Jones Intercable Class A(a) 250,000 7,015,625
TCA Cable TV 502,500 13,912,969
Tele-Communications Inc
Liberty Media Group
Class A(a) 275,000 10,467,187
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59,428,966
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11.90 COMPUTER RELATED
3Com Corp(a) 350,000 12,621,875
Acxiom Corp(a) 500,000 12,562,500
Ascend Communications(a) 311,000 15,005,750
BEA Systems(a) 435,000 8,523,290
BMC Software(a) 250,000 12,015,625
Cadence Design Systems(a) 306,800 6,557,850
Citrix Systems(a) 100,000 7,087,500
Edwards (J D) & Co(a) 600,000 19,650,000
Electronic Arts(a) 100,000 4,112,500
FORE Systems(a) 500,000 7,812,500
Intuit Inc(a) 300,000 15,150,000
Keane Inc(a) 275,000 9,143,750
Legato Systems(a) 200,000 7,825,000
Wind River Systems(a) 307,500 13,472,344
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151,540,484
<PAGE>
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1.23 ELECTRONICS
Teradyne Inc(a) 269,600 8,762,000
Uniphase Corp(a) 140,000 6,930,000
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15,692,000
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5.73 ELECTRONICS -- SEMICONDUCTOR
Altera Corp(a) 200,000 8,325,000
KLA-Tencor Corp(a) 405,000 14,934,375
Linear Technology 170,000 10,136,250
Maxim Integrated Products(a) 325,000 11,598,437
Vitesse Semiconductor(a) 320,000 10,320,000
Xilinx Inc(a) 395,000 17,639,227
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72,953,289
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0.73 EQUIPMENT -- SEMICONDUCTOR
Broadcom Corp Class A(a) 111,400 9,239,238
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2.82 FINANCIAL
Capital One Financial 120,000 12,210,000
Northern Trust 155,000 11,431,250
Providian Financial 155,000 12,303,125
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35,944,375
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1.26 GAMING
Sun International Hotels Ltd(a) 400,000 16,000,000
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3.96 HEALTH CARE DRUGS -- PHARMACEUTICALS
ALZA Corp(a) 355,000 16,995,625
Elan Corp PLC Sponsored
ADR Representing
Ord Shrs(a) 195,000 13,662,188
Watson Pharmaceuticals 355,500 19,774,688
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50,432,501
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4.46 HEALTH CARE RELATED
Allegiance Corp 450,000 16,734,375
Becton Dickinson 285,000 12,005,625
Sofamor/Danek Group(a) 276,100 28,058,662
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56,798,662
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0.14 HOUSEHOLD FURNITURE & APPLIANCES
Furniture Brands International(a) 84,800 1,823,200
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0.98 HOUSEHOLD PRODUCTS
Clorox Co 114,000 12,454,500
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4.49 INSURANCE
AFLAC Inc 400,000 15,250,000
Hartford Life 124,940 5,778,475
Nationwide Financial Services
Class A 122,325 5,076,487
Provident Cos 197,500 5,739,844
Torchmark Corp 344,000 15,050,000
UNUM Corp 230,000 10,220,625
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57,115,431
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2.45 INVESTMENT BANK/BROKER FIRM
Legg Mason 536,400 14,248,125
Price (T Rowe) Associates 475,000 16,892,187
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31,140,312
<PAGE>
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1.13 LEISURE TIME
International Game Technology 350,000 7,896,875
Royal Caribbean Cruises Ltd 235,000 6,550,625
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14,447,500
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0.65 OFFICE EQUIPMENT & SUPPLIES
Avery Dennison 200,000 8,287,500
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2.44 OIL & GAS RELATED
Coflexip SA Sponsored ADR
Representing 1/2 Ord Shr 73,000 3,513,125
Cooper Cameron(a) 113,300 3,937,175
Global Industries Ltd(a) 250,000 2,406,250
Kerr-McGee Corp 114,625 4,570,672
Oryx Energy(a) 330,000 4,620,000
Vastar Resources 150,000 7,171,875
Weatherford International(a) 180,000 4,893,750
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31,112,847
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0.82 PERSONAL CARE
Estee Lauder Class A 160,000 10,490,000
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0.54 PHOTOGRAPHY & IMAGING
Gemstar International
Group Ltd(a) 125,000 6,828,125
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0.45 PUBLISHING
Tribune Co 100,000 5,762,500
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1.24 RAILROADS
Kansas City Southern
Industries 409,000 15,797,625
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6.67 RETAIL
Abercrombie & Fitch
Class A(a) 288,000 11,430,000
Amazon.Com Inc(a) 60,000 7,586,250
Cash America International 568,000 7,100,000
Costco Cos(a) 100,000 5,675,000
Family Dollar Stores 432,500 7,839,062
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Koninklijke Ahold NV
Sponsored ADR
Representing Ord Shrs 300,000 10,031,250
Meyer (Fred) Inc(a) 316,200 16,857,412
Tandy Corp 371,700 18,422,381
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84,941,355
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13.58 SERVICES
America Online(a) 224,000 28,462,000
AXENT Technologies(a) 600,000 15,075,000
Block (H & R) Inc 200,000 8,962,500
Ceridian Corp(a) 290,000 16,638,750
CIBER Inc(a) 339,500 6,662,687
IMS Health 185,000 12,302,500
<PAGE>
Omnicom Group 360,000 17,797,500
Paychex Inc 315,000 15,671,250
Robert Half International(a) 375,000 15,046,875
Snyder Communications(a) 200,000 7,137,500
Sterling Commerce(a) 385,000 13,571,250
VERITAS Software(a) 90,000 4,511,250
WPP Group PLC(a) 2,230,000 11,091,706
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172,930,768
- --------------------------------------------------------------------------------
0.74 TELECOMMUNICATIONS -- CELLULAR
& WIRELESS
Western Wireless Class A(a) 465,000 9,416,250
- --------------------------------------------------------------------------------
3.47 TELECOMMUNICATIONS -- LONG DISTANCE
Level 3 Communications(a) 153,200 4,988,575
Pacific Gateway Exchange(a) 466,100 13,458,638
Qwest Communications
International(a) 340,000 13,302,500
Yahoo! Inc(a) 95,000 12,430,159
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44,179,872
- --------------------------------------------------------------------------------
2.82 TELEPHONE
Century Telephone Enterprises 247,500 14,061,094
COLT Telecom Group PLC
Sponsored ADR
Representing 4 Ord Shrs(a) 350,000 17,981,250
NEXTLINK Communications
Class A(a) 150,000 3,843,750
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35,886,094
- --------------------------------------------------------------------------------
0.58 TEXTILE -- APPAREL MANUFACTURING
Polo Ralph Lauren(a) 163,300 3,398,681
Warnaco Group Class A 156,000 3,987,750
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7,386,431
- --------------------------------------------------------------------------------
0.56 TOYS
Hasbro Inc 202,700 7,107,169
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TOTAL COMMON STOCKS
(Cost $1,029,594,284) $1,151,407,282
- --------------------------------------------------------------------------------
0.76 PREFERRED STOCKS
0.76 AUTOMOBILES
Porsche AG Non-Voting Pfd
(Cost $10,864,437) 5,500 9,730,105
- --------------------------------------------------------------------------------
8.80 SHORT-TERM INVESTMENTS --
COMMERCIAL PAPER
2.48 CONSUMER FINANCE
American Express Credit
5.350%, 11/3/1998 $ 31,551,000 31,551,000
- --------------------------------------------------------------------------------
3.14 FINANCIAL
Associates Corp of
North America
5.680%, 11/2/1998 $ 40,000,000 40,000,000
<PAGE>
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3.18 INSURANCE
CIGNA Corp
5.410%, 11/4/1998 $ 40,523,000 40,523,000
- --------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $112,074,000) 112,074,000
- --------------------------------------------------------------------------------
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $1,152,532,721)
(Cost for Income Tax Purposes
$1,159,230,330) $ 1,273,211,387
================================================================================
Endeavor Fund
42.61 COMMON STOCKS
1.76 BANKS
BankAmerica Corp 5,200 298,675
US Bancorp 8,100 295,650
- --------------------------------------------------------------------------------
594,325
- --------------------------------------------------------------------------------
2.11 BEVERAGES
PepsiCo Inc 21,100 712,125
- --------------------------------------------------------------------------------
0.85 CABLE
TCA Cable TV 10,400 287,950
- --------------------------------------------------------------------------------
0.89 COMMUNICATIONS -- EQUIPMENT &
MANUFACTURING
Comverse Technology(a) 6,500 299,000
- --------------------------------------------------------------------------------
6.90 COMPUTER RELATED
Dell Computer(a) 4,400 288,750
Edwards (J D) & Co(a) 9,600 314,400
International Business Machines 2,900 430,469
Intuit Inc(a) 3,000 151,500
Mercury Interactive(a) 3,500 145,250
Microsoft Corp(a) 6,700 709,362
USWeb Corp(a) 9,700 139,438
Wind River Systems(a) 3,400 148,963
- --------------------------------------------------------------------------------
2,328,132
- --------------------------------------------------------------------------------
0.43 ELECTRONICS
Level One Communications(a) 5,500 144,719
- --------------------------------------------------------------------------------
3.88 ELECTRONICS -- SEMICONDUCTOR
Altera Corp(a) 6,900 287,212
Applied Micro Circuits(a) 6,100 146,400
Photronics Inc(a) 6,600 143,962
SIPEX Corp(a) 5,200 144,300
Texas Instruments 9,200 588,225
- --------------------------------------------------------------------------------
1,310,099
<PAGE>
- --------------------------------------------------------------------------------
1.29 ENTERTAINMENT
Time Warner 4,700 436,219
- --------------------------------------------------------------------------------
2.37 FINANCIAL
Citigroup Inc 10,400 489,450
Providian Financial 3,900 309,563
- --------------------------------------------------------------------------------
799,013
- --------------------------------------------------------------------------------
0.85 GAMING
Sun International Hotels Ltd(a) 7,200 288,000
- --------------------------------------------------------------------------------
5.16 HEALTH CARE DRUGS -- PHARMACEUTICALS
Lilly (Eli) & Co 7,300 590,844
Merck & Co 4,300 581,575
Pfizer Inc 5,300 568,756
- --------------------------------------------------------------------------------
1,741,175
- --------------------------------------------------------------------------------
1.76 HEALTH CARE RELATED
Allegiance Corp 4,000 148,750
Sofamor/Danek Group(a) 4,400 447,150
- --------------------------------------------------------------------------------
595,900
- --------------------------------------------------------------------------------
0.86 INVESTMENT BANK/BROKER FIRM
Legg Mason 10,900 289,531
- --------------------------------------------------------------------------------
0.42 MANUFACTURING
Tyco International Ltd 2,300 142,456
- --------------------------------------------------------------------------------
0.44 PERSONAL CARE
Gillette Co 3,300 148,294
- --------------------------------------------------------------------------------
0.91 POLLUTION CONTROL
Waste Management 6,800 306,850
- --------------------------------------------------------------------------------
0.86 RETAIL
Home Depot 6,700 291,450
- --------------------------------------------------------------------------------
4.79 SERVICES
America Online(a) 5,700 724,256
AXENT Technologies(a) 6,200 155,775
Ceridian Corp(a) 5,200 298,350
Robert Half International(a) 10,900 437,363
- --------------------------------------------------------------------------------
1,615,744
- --------------------------------------------------------------------------------
0.88 TELECOMMUNICATIONS -- LONG DISTANCE
Lycos Inc(a) 7,300 296,562
- --------------------------------------------------------------------------------
3.55 TELEPHONE
COLT Telecom Group PLC
Sponsored ADR
Representing 4 Ord Shrs(a) 5,900 303,113
MetroNet Communications
Class B Non-Voting Shrs(a) 13,400 308,200
SBC Communications 12,700 588,169
- --------------------------------------------------------------------------------
1,199,482
- --------------------------------------------------------------------------------
<PAGE>
1.65 TOBACCO
Philip Morris 10,900 557,262
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $14,018,617) 14,384,288
- --------------------------------------------------------------------------------
1.05 PREFERRED STOCKS
1.05 AUTOMOBILES
Porsche AG Non-Voting Pfd
(Cost $353,646) 200 353,822
- --------------------------------------------------------------------------------
56.34 SHORT-TERM INVESTMENTS --
REPURCHASE AGREEMENTS
Repurchase Agreement with
State Street dated 10/30/1998
due 11/2/1998 at 5.350%,
repurchased at $19,025,478
(Collateralized by US
Treasury Bonds due
5/15/2017 at 8.750%,
value $19,361,065)
(Cost $19,017,000) 19,017,000 19,017,000
- --------------------------------------------------------------------------------
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $33,389,263)(b) 33,755,110
================================================================================
Growth and Income Fund
97.10 COMMON STOCKS
0.98 AUTOMOBILES
Ford Motor 5,050 273,963
- --------------------------------------------------------------------------------
1.48 BANKS
State Street 3,335 208,021
US Bancorp 5,690 207,685
- --------------------------------------------------------------------------------
415,706
- --------------------------------------------------------------------------------
3.85 BEVERAGES
Coca-Cola Co 12,100 818,262
PepsiCo Inc 7,700 259,875
- --------------------------------------------------------------------------------
1,078,137
- --------------------------------------------------------------------------------
1.34 CHEMICALS
du Pont (E I) de Nemours 6,540 376,050
- --------------------------------------------------------------------------------
2.03 COMMUNICATIONS -- EQUIPMENT &
MANUFACTURING
Lucent Technologies 7,100 569,331
- --------------------------------------------------------------------------------
10.99 COMPUTER RELATED
Cisco Systems(a) 5,400 340,200
Compaq Computer 9,490 300,121
Dell Computer(a) 8,375 549,609
International Business Machines 3,800 564,063
Microsoft Corp(a) 9,800 1,037,575
Oracle Corp(a) 9,750 288,234
- --------------------------------------------------------------------------------
3,079,802
- --------------------------------------------------------------------------------
<PAGE>
0.88 CONSUMER FINANCE
American Express 2,800 247,450
- --------------------------------------------------------------------------------
3.84 ELECTRICAL EQUIPMENT
General Electric 12,300 1,076,250
- --------------------------------------------------------------------------------
2.72 ELECTRONICS -- SEMICONDUCTOR
Altera Corp(a) 5,135 213,744
Intel Corp 6,150 548,503
- --------------------------------------------------------------------------------
762,247
- --------------------------------------------------------------------------------
3.73 ENTERTAINMENT
Disney (Walt) Co 32,600 878,163
Time Warner 1,800 167,063
- --------------------------------------------------------------------------------
1,045,226
- --------------------------------------------------------------------------------
8.52 FINANCIAL
Associates First Capital Class A 3,700 260,850
Citigroup Inc 27,320 1,285,748
Fannie Mae 11,850 839,128
- --------------------------------------------------------------------------------
2,385,726
- --------------------------------------------------------------------------------
19.22 HEALTH CARE DRUGS -- PHARMACEUTICALS
Bristol-Myers Squibb 8,650 956,366
Johnson & Johnson 10,900 888,350
Lilly (Eli) & Co 12,000 971,250
Merck & Co 6,650 899,412
Pfizer Inc 10,450 1,121,416
Schering-Plough Corp 2,650 272,619
Warner-Lambert Co 3,500 274,313
- --------------------------------------------------------------------------------
5,383,726
- --------------------------------------------------------------------------------
4.13 HOUSEHOLD PRODUCTS
Colgate-Palmolive Co 3,000 265,125
Procter & Gamble 10,050 893,194
- --------------------------------------------------------------------------------
1,158,319
- --------------------------------------------------------------------------------
2.69 INSURANCE
American International Group 8,825 752,331
- --------------------------------------------------------------------------------
1.03 MANUFACTURING
Tyco International Ltd 4,650 288,009
- --------------------------------------------------------------------------------
8.23 OIL & GAS RELATED
Chevron Corp 8,900 725,350
Conoco Inc Class A(a) 24,255 603,343
Exxon Corp 10,150 723,187
Schlumberger Ltd 4,850 254,625
- --------------------------------------------------------------------------------
2,306,505
- --------------------------------------------------------------------------------
0.93 PERSONAL CARE
Gillette Co 5,800 260,638
- --------------------------------------------------------------------------------
6.59 RETAIL
CVS Corp 5,550 253,566
Dayton Hudson 6,000 254,250
Home Depot 6,050 263,175
Safeway Inc(a) 5,750 274,922
<PAGE>
Wal-Mart Stores 11,600 800,400
- --------------------------------------------------------------------------------
1,846,313
- --------------------------------------------------------------------------------
3.47 TELECOMMUNCIATIONS -- LONG DISTANCE
AT&T Corp 15,600 971,100
- --------------------------------------------------------------------------------
7.26 TELEPHONE
Bell Atlantic 19,100 1,014,687
SBC Communications 22,000 1,018,875
- --------------------------------------------------------------------------------
2,033,562
- --------------------------------------------------------------------------------
3.19 TOBACCO
Philip Morris 17,500 894,687
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $26,233,017) 27,205,078
- --------------------------------------------------------------------------------
0.48 PREFERRED STOCKS
0.48 COMPUTER RELATED
SAP AG Sponsored ADR
Representing 1/12 Pfd Shr
(Cost $176,628) 3,180 134,156
- --------------------------------------------------------------------------------
2.42 SHORT-TERM INVESTMENTS --
REPURCHASE AGREEMENTS
Repurchase Agreement with
State Street dated 10/30/1998
due 11/2/1998 at 5.350%,
repurchased at $679,303
(Collateralized by US
Treasury Bonds due
5/15/2017 at 8.750%,
value $697,798)
(Cost $679,000) 679,000 679,000
- --------------------------------------------------------------------------------
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $27,088,645)
(Cost for Income Tax Purposes
$27,201,015) 28,018,234
================================================================================
(a) Security is non-income producing.
(b) Also represents cost for income tax purposes.
See Notes to Financial Statements
<PAGE>
Statement of Assets and Liabilities
October 31, 1998
UNAUDITED
<TABLE>
<CAPTION>
Growth and
Dynamics Endeavor Income
Fund Fund Fund
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investment Securities:
At Cost(a) $1,152,532,721 $ 33,389,263 $ 27,088,645
============================================================================================
At Value(a) $1,273,211,387 $ 33,755,110 $ 28,018,234
Cash 2,607,903 0 51
Receivables:
Investment Securities Sold 26,481,854 0 370,052
Fund Shares Sold 10,154,565 3,615,306 1,191,907
Dividends and Interest 372,727 5,652 31,431
Prepaid Expenses and Other Asset 128,693 0 80,224
- --------------------------------------------------------------------------------------------
TOTAL ASSETS 1,312,957,129 37,376,068 29,691,899
- --------------------------------------------------------------------------------------------
LIABILITIES
Payables:
Custodian 0 3,930,006 0
Investment Securities Purchased 44,275,740 14,371,078 632,243
Fund Shares Repurchased 8,649,848 38,225 627,120
Depreciation on Forward Foreign Currency Contracts 0 1,185 0
Accrued Distribution Expenses 237,605 197 5,077
Accrued Expenses and Other Payables 42,476 576 2,824
- --------------------------------------------------------------------------------------------
TOTAL LIABILITIES 53,205,669 18,341,267 1,267,264
- --------------------------------------------------------------------------------------------
Net Assets at Value $1,259,751,460 $ 19,034,801 $ 28,424,635
============================================================================================
NET ASSETS
Paid-in Capital(b) $1,081,204,325 $ 18,662,386 $ 25,761,356
Accumulated Undistributed Net Investment
Income (Loss) (2,676,796) 6,568 14,839
Accumulated Undistributed Net Realized Gain on Investment
Securities and Foreign Currency
Transactions 60,545,828 0 1,718,851
Net Appreciation of Investment Securities and Foreign
Currency Transactions 120,678,103 365,847 929,589
- -------------------------------------------------------------------------------------------
Net Assets at Value $1,259,751,460 $ 19,034,801 $ 28,424,635
===========================================================================================
Shares Outstanding 88,723,371 1,859,364 2,403,046
Net Asset Value, Offering and Redemption
Price per Share $ 14.20 $ 10.24 $ 11.83
===========================================================================================
</TABLE>
(a) Investment securities at cost and value at October 31, 1998 include
repurchase agreements of $19,017,000 and $679,000 for Endeavor and Growth
and Income Funds, respectively.
(b) The Fund has 450 million authorized shares of common stock, par value of
$0.01 per share. Of such shares, 200 million have been allocated to
Dynamics Fund, 100 million have been allocated to Endeavor Fund and 150
million have been allocated to Growth and Income Fund.
See Notes to Financial Statements
<PAGE>
Statement of Operations
Period Ended October 31, 1998 (Note 1)
UNAUDITED
Growth and
Dynamics Endeavor Income
Fund Fund Fund
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $2,472,483 $ 0 $ 77,448
Interest 1,530,128 7,449 24,826
Foreign Taxes Withheld (25,019) 0 (527)
- --------------------------------------------------------------------------------
TOTAL INCOME 3,977,592 7,449 101,747
- --------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees 3,477,548 591 43,078
Distribution Expenses 1,606,445 197 14,359
Transfer Agent Fees 1,210,293 0 12,407
Administrative Fees 101,387 93 4,195
Custodian Fees and Expenses 126,413 0 6,093
Directors' Fees and Expenses 30,363 0 705
Professional Fees and Expenses 30,540 0 8,785
Registration Fees and Expenses 73,500 0 19,229
Reports to Shareholders 61,372 0 639
Other Expenses 16,309 0 254
- --------------------------------------------------------------------------------
TOTAL EXPENSES 6,734,170 881 109,744
Fees and Expenses Absorbed by
Investment Adviser 0 0 (19,929)
Fees and Expenses Paid Indirectly (117,781) 0 (2,907)
- --------------------------------------------------------------------------------
NET EXPENSES 6,616,389 881 86,908
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (2,638,797) 6,568 14,839
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities (53,089,893) 0 1,718,851
Foreign Currency Transactions (66,304) 0 0
- --------------------------------------------------------------------------------
Total Net Realized Gain (Loss) (53,156,197) 0 1,718,851
- --------------------------------------------------------------------------------
Change in Net Appreciation (Depreciation) of:
Investment Securities (133,494,296) 367,032 929,589
Foreign Currency Transactions 884,291 (1,185) 0
- --------------------------------------------------------------------------------
Total Net Appreciation
(Depreciation) (132,610,005) 365,847 929,589
- --------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENT SECURITIES AND
FOREIGN CURRENCY TRANSACTIONS (185,766,202) 365,847 2,648,440
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
from Operations $(188,404,999) $ 372,415 $2,663,279
================================================================================
See Notes to Financial Statements
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Growth and
Dynamics Endeavor Income
Fund Fund Fund
Six Months Year Period Period
Ended Ended Ended Ended
October 31 April 30 October 31 October 31
- ----------------------------------------------------------------------------------------------
1998 1998 1998 1998
<S> <C> <C> <C> <C>
(Note 1) (Note 1)
UNAUDITED UNAUDITED UNAUDITED
OPERATIONS
Net Investment Income (Loss) $(2,638,797) $(4,623,573) $ 6,568 $ 14,839
Net Realized Gain (Loss) on Investment
Securities and Foreign Currency
Transactions (53,156,197) 220,083,978 0 1,718,851
Change in Net Appreciation (Depreciation)
of Investment Securities and Foreign
Currency Transactions (132,610,005) 236,377,288 365,847 929,589
- ----------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS (188,404,999) 451,837,693 372,415 2,663,279
DISTRIBUTIONS TO SHAREHOLDERS
Net Realized Gain on Investment Securities
and Foreign Currency Transactions 0 (133,519,730) 0 0
- ----------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 855,988,867 1,320,495,638 18,716,823 38,824,333
Reinvestment of Distributions 0 130,727,993 0 0
- ----------------------------------------------------------------------------------------------
855,988,867 1,451,223,631 18,716,823 38,824,333
Amounts Paid for Repurchases of Shares (748,131,252) (1,191,638,369) (54,437) (13,312,977)
- ----------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
FROM FUND SHARE TRANSACTIONS 107,857,615 259,585,262 18,662,386 25,511,356
- ----------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets (80,547,384) 577,903,225 19,034,801 28,174,635
NET ASSETS
Initial Subscription (Note 1) 0 0 0 250,000
Beginning of Period 1,340,298,844 762,395,619 0 0
- ----------------------------------------------------------------------------------------------
End of Period $1,259,751,460 $ 1,340,298,844 $19,034,801 $28,424,635
==============================================================================================
Accumulated Undistributed Net
Investment Income (Loss) Included
in Net Assets at End of Period $ (2,676,796) $ (37,999) $ 6,568 $ 14,839
- ----------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS
Initial Subscription (Note 1) 0 0 0 25,000
Shares Sold 57,045,159 88,367,135 1,864,689 3,600,203
Shares Issued from Reinvestment of Distributions 0 9,785,039 0 0
- ----------------------------------------------------------------------------------------------
57,045,159 98,152,174 1,864,689 3,625,203
Shares Repurchased (50,018,216) (79,868,425) (5,325) (1,222,157)
- ----------------------------------------------------------------------------------------------
Net Increase in Fund Shares 7,026,943 18,283,749 1,859,364 2,403,046
==============================================================================================
</TABLE>
See Notes to Financial Statements
<PAGE>
Notes to Financial Statements
UNAUDITED
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Stock Funds,
Inc. (formerly known as INVESCO Equity Funds, Inc. which were formerly known as
INVESCO Capital Appreciation Funds, Inc.) (the "Fund") is incorporated in
Maryland and presently consists of three seperate Funds: Dynamics Fund, Endeavor
Fund and Growth and Income Fund. The investment objectives of each Fund is to
seek appreciation of capital. Endeavor and Growth and Income Funds commenced
investment operations on October 28, 1998 and July 1, 1998, respectively. 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 -- Equity securities traded on national securities
exchanges or in the over-the-counter market are valued at the last sales
price in the market where such securities are primarily traded. If last sales
prices are not available, securities are valued at the highest closing bid
price obtained from one or more dealers making a market for such securities
or by a pricing service approved by the Fund's board of directors.
Foreign securities are valued at the closing price on the principal stock
exchange on which they are traded. In the event that closing prices are not
available for foreign securities, prices will be obtained from the principal
stock exchange at or prior to the close of the New York Stock Exchange.
Foreign currency exchange rates are determined daily prior to the close of
the New York Stock Exchange.
If market quotations or pricing service valuations are not readily
available, securities are valued at fair value as determined in good faith
under procedures established by the Fund's board of directors.
Short-term securities are stated at amortized cost (which approximates
market value) if maturity is 60 days or less at the time of purchase, or
market value if maturity is greater than 60 days.
Assets and liabilities initially expressed in terms of foreign currencies
are translated into U.S. dollars at the prevailing market rates as quoted by
one or more banks or dealers on the date of valuation.
B. REPURCHASE AGREEMENTS -- Repurchase agreements held by the Fund are fully
collateralized by U.S. Government securities and such collateral is in the
possession of the Fund's custodian. The collateral is evaluated daily to
ensure its market value exceeds the current market value of the repurchase
agreements including accrued interest. In the event of default on the
obligation to repurchase, the Fund has the right to liquidate the collateral
and apply the proceeds in satisfaction of the obligation. In the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral or proceeds may be subject to legal proceedings.
C. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME-- Security transactions
are accounted for on the trade date and dividend income is recorded on the ex
dividend date. Certain dividends from foreign securities will be recorded as
soon as the Fund is informed of the dividend if such information is obtained
subsequent to the ex dividend date. Interest income, which may be comprised
of stated coupon rate, market discount, original issue discount and amortized
premium, is recorded on the accrual basis. Income and expenses on foreign
securities are translated into U.S. dollars at rates of exchange prevailing
when accrued. Cost is determined on the specific identification basis. The
<PAGE>
cost of foreign securities is translated into U.S. dollars at the rates of
exchange prevailing when such securities are acquired. The Fund may have
elements of risk due to investments in foreign issuers located in a
specific country. Such foreign investments may subject the Fund to
additional risks resulting from future political or economic conditions
and/or possible impositions of adverse foreign governmental laws or
currency exchange restrictions. Net realized and unrealized gain or loss
from investment securities includes fluctuations from currency exchange
rates and fluctuations in market value.
The Fund's use of short-term forward foreign currency contracts may
subject it to certain risks as a result of unanticipated movements in
foreign exchange rates. The Fund does not hold short-term forward foreign
currency contracts for trading purposes. The Fund may hold foreign currency
in anticipation of settling foreign security transactions and not for
investment purposes.
D. FEDERAL AND STATE TAXES-- The Fund has complied, and continues to comply,
with the provisions of the Internal Revenue Code applicable to regulated
investment companies and, accordingly, has made or intends to make sufficient
distributions of net investment income and net realized capital gains, if
any, to relieve it from all federal and state income taxes and federal excise
taxes.
To the extent future capital gains are offset by capital loss carryovers,
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.
Investment income received from foreign sources may be subject to foreign
withholding taxes. Dividend and interest income is shown gross of foreign
withholding taxes in the accompanying financial statements.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS-- Dividends and distributions to
shareholders are recorded by the Fund on the ex dividend/distribution date.
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 foreign currency transactions, nontaxable dividends, net
operating losses and expired capital loss carryforwards.
F. FORWARD FOREIGN CURRENCY CONTRACTS-- The Fund enters into short-term forward
foreign currecy contracts in connection with planned purchases or sales of
securities as a hedge against fluctuations in foreign exchange rates pending
the settlement of transactions in foreign securities. A forward foreign
currency contract is an agreement between contracting parties to exchange an
amount of currency at some future time at an agreed upon rate. These
contracts are marked-to-market daily and the related appreciation or
depreciation of the contracts is presented in the Statement of Assets and
Liabilities. Any realized gain or loss incurred by the Fund upon the sale of
securities is included in the Statement of Operations.
G. EXPENSES-- Each 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 agreeement 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. Similarly, Custodian Fees and
Expenses for Dynamics Fund are reduced by credits earned by the Fund from
security brokerage transactions under certain broker/service arrangements
with third parties. Such credits are included in Fees and Expenses Paid
Indirectly in the Statement of Operations. Fees and Expenses Paid Indirectly
were insignificant for Endeavor Fund.
<PAGE>
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. For Dynamics Fund, the fee is
based on the annual rate of 0.60% on the first $350 million of average net
assets; reduced to 0.55% on the next $350 million of average net assets; and
0.50% on average net assets in excess of $700 million. For Endeavor and Growth
and Income Funds the fee is based on the annual rate of 0.75% of each Fund's
average net assets.
A plan of distribution pursuant to Rule 12b-1 of the Act provides for
compensation of marketing and advertising expenditures to INVESCO Distributors,
Inc. ("IDI" or the "Distributor"), a wholly owned subsidiary of IFG, to a
maximum of 0.25% of annual average net assets. For the period ended October 31,
1998, Dynamics, Endeavor and Growth and Income Funds paid the Distributor
$1,638,531, $0 and $9,283, respectively, under the plan of distribution.
IFG receives a transfer agent fee at an annual rate of $20.00 per shareholder
account, or, where applicable, per participant in an omnibus account, per year.
IFG may pay such fee for participants in omnibus accounts to affiliates or third
parties. The fee is paid monthly at one-twelfth of the annual fee and is based
upon the actual number of accounts in existence during each month.
In accordance with an Administrative 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 has voluntarily agreed, in some instances, to absorb certain fees and
expenses incurred by Growth and Income Fund.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the period ended
October 31, 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:
Fund Purchases Sales
- --------------------------------------------------------------------------------
Dynamics Fund $931,926,699 $886,842,749
Endeavor Fund 14,372,263 0
Growth and Income Fund 33,234,705 8,543,911
There were no purchases or sales of U.S. Government securities.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At October 31, 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 in net appreciation (depreciation) by Fund were as
follows:
Gross Gross Net
Fund Appreciation Depreciation Appreciation
- --------------------------------------------------------------------------------
Dynamics Fund $159,621,619 $45,640,562 $113,981,057
Endeavor Fund 380,036 14,189 365,847
Growth and Income Fund 1,528,745 711,526 817,219
<PAGE>
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 defined benefit deferred compensation plan
covering all independent directors of the Fund who will have served as an
independent director for at least five years at the time of retirement. Benefits
under this plan were based on an annual rate equal to 40% of the retainer fee at
the time of retirement. As of July 1, 1998 benefits are based on an annual rate
of 50% of the sum of the retainer fee at the time of retirement plus the annual
meeting fee.
The independent directors have contributed to a deferred compesnation plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of selected INVESCO
Funds. The deferred amounts are being invested in the shares of all of the
INVESCO and Treasurer's Series Trust Funds.
Pension expenses for the Dynamics Fund for six months ended October 31, 1998,
included in Directors' Fees and Expenses in the Statement of Operations were
$7,750. Unfunded accrued pension costs of $11,095 and pension liability of
$56,832 are included in Prepaid Expenses and Accrued Expenses, respectively, in
the Statement of Assets and Liabilities for Dynamics Fund.
Pension expenses, unfunded accrued pension costs and pension liabilities were
insignificant for the period ended October 31, 1998 for Endeavor and Growth and
Income Funds.
NOTE 6 --LINE OF CREDIT. Dynamics 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 October
31, 1998, there were no such borrowings.
<PAGE>
Financial Highlights
-- Dynamics Fund
(For a Fund Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
Six Months
Ended
October 31 Year Ended April 30
- -----------------------------------------------------------------------------------------------------
1998 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
UNAUDITED
PER SHARE DATA
Net Asset Value -- Beginning of Period $16.41 $12.02 $13.61 $11.38 $ 10.15 $ 10.89
- -----------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income (Loss) (0.03) (0.05) (0.04) 0.02 0.03 (0.02)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (2.18) 6.39 (0.19) 3.94 1.34 1.99
- -----------------------------------------------------------------------------------------------------
Total from Investment Operations (2.21) 6.34 (0.23) 3.96 1.37 1.97
- -----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income(a) 0.00 0.00 0.00 0.02 0.03 0.00
Distributions from Capital Gains 0.00 1.95 1.36 1.71 0.11 2.71
- -----------------------------------------------------------------------------------------------------
Total Distributions 0.00 1.95 1.36 1.73 0.14 2.71
Net Asset Value -- End of Period $ 14.20 $16.41 $12.02 $13.61 $ 11.38 $ 10.15
- -----------------------------------------------------------------------------------------------------
TOTAL RETURN (13.47%)(b) 56.42% (2.34%) 36.32% 13.57% 17.86%
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 1,259,751 $1,340,299 $762,396 $778,416 $421,600 $287,293
Ratio of Expenses to Average Net Assets 0.53%(b)(c) 1.08%(c) 1.16%(c) 1.14%(c) 1.20%(d) 1.17%
Ratio of Net Investment Income (Loss)
to Average Net Assets (0.21%)(b) (0.43%) (0.31%) 0.16% 0.33%(d) (0.37%)
Portfolio Turnover Rate 73%(b) 178% 204% 196% 176% 169%
</TABLE>
(a) Distributions in excess of net investment income for the year ended April
30, 1996, aggregated less than $0.01 on a per share basis.
(b) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(c) Ratio is based on Total Expenses of the Fund, which is before any expense
offset arrangements.
(d) Various expenses of the Fund were voluntarily absorbed by IFG for the year
ended April 30, 1995. If such expenses had not been voluntarily absorbed,
ratio of expenses to average net assets would have been 1.22% and ratio of
net investment income to average net assets would have been 0.31%.
<PAGE>
Financial Highlights (Continued)
-- Endeavor Fund
(For a Fund Share Outstanding Throughout the Period)
Period
Ended
October 31
- --------------------------------------------------------------------------------
1998(a)
UNAUDITED
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 10.00
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.00
Net Gains on Securities (Both Realized and Unrealized) 0.24
- --------------------------------------------------------------------------------
Total from Investment Operations 0.24
Net Asset Value -- End of Period $ 10.24
================================================================================
TOTAL RETURN 2.40% (b)
RATIOS
Net Assets -- End of Period ($000 Omitted) $19,035
Ratio of Expenses to Average Net Assets 0.01% (b)
Ratio of Net Investment Income to Average Net Assets 0.07% (b)
Portfolio Turnover Rate 0% (b)
(a) From October 28, 1998, commencement of operations, to October 31, 1998.
(b) Based on operations for the period shown and, accordingly, are not
representative of a full year.
<PAGE>
Financial Highlights (Continued)
-- Growth and Income Fund
(For a Fund Share Outstanding Throughout the Period)
Period
Ended
October 31
- --------------------------------------------------------------------------------
1998(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 10.00
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.01
Net Gains on Securities (Both Realized and Unrealized) 1.82
- --------------------------------------------------------------------------------
Total from Investment Operations 1.83
Net Asset Value -- End of Period $ 11.83
================================================================================
TOTAL RETURN 18.30% (b)
RATIOS
Net Assets -- End of Period ($000 Omitted) $28,425
Ratio of Expenses to Average Net Assets(c)(d) 0.52% (b)
Ratio of Net Investment Income to Average Net Assets(d) 0.09% (b)
Portfolio Turnover Rate 44% (b)
(a) From July 1, 1998, commencement of investment operations, to October 31,
1998.
(b) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(c) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any offset arrangements.
(d) Various expenses of the Fund were voluntarily absorbed by IFG for the
period ended October 31, 1998. If such expenses had not been voluntarily
absorbed, ratio of expenses to average net assets would have been 0.64%
(not annualized) and the ratio of net investment loss to average net assets
would have been (0.03%)(not annualized).
<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 time 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 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.
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.
<PAGE>
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 Distributors, Inc.,(SM)
Distributor
Post Office Box 173706
Denver, CO 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.
