Semiannual Report
December 31, 1997
INVESCO
INDUSTRIAL
INCOME FUND
A no-load mutual fund seeking long-term growth and income.
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 reached the highest level in 28 years, as jobs were plentiful and real
wages improved for many Americans.(1)
Against this backdrop, equity markets produced euphoric returns for
investors - major equity market indexes (S&P 500 and Dow Jones Industrial
Average) returned over 20% for the third straight year, the first time in
history. However, most of the gains in 1997 were accumulated in the first eight
months of the year; doubts about the sustainability of corporate profits
increased market volatility over the latter half of 1997. In fact, the Dow Jones
Industrial Average experienced swings of greater than 100 points 52 times in
1997 (27 up days and 25 down). Fears of slowing economies in the Asia/Pacific
Rim region, and their effect on the U.S. economy, produced the first market
correction in more than seven years - a decline in value of more than 10% from
the indexes' highs.(1)
Fixed-income markets also produced above-average results in 1997; however,
these returns exhibited a different performance pattern. In the spring of 1997,
fears of inflation and an overheating economy encouraged the Federal Reserve
Board to increase short-term interest rates 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 diminished. Investors then focused on the potential
deflationary pressure exerted by the Asian currency crisis - 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 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 competition is keeping consumer prices in
check; 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. 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, with additional help from the Asian crisis.
<PAGE>
INVESCO Industrial Income Fund
INVESCO Industrial Income Fund
Average Annual Total Return as of 12/31/97 (2)
1 year 26.45%
----------------------------------------------
5 years 16.09%
----------------------------------------------
10 years 16.93%
----------------------------------------------
For the six-month period ended 12/31/97, INVESCO Industrial Income Fund
achieved a total return of 9.84%. During the same period, the S&P 500 had a
total return of 10.58%, and the Lehman Government/Corporate Bond index had a
total return of 6.83%. (Of course, past performance is not a guarantee of future
results.)(1),(2)
Graph:
This line graph represents a comparison of the value of a $10,000
investment in the INVESCO Industrial Income Fund to the value of a $10,000
investment in the S&P 500 and Lehman Government/Corporate Bond Indexes,
assuming in each case reinvestment of all dividends and capital gain
distributions, for the ten year period ended 12/31/97.
INVESCO Industrial Income Fund received the prestigious four-star rating
for risk-adjusted performance by Morningstar, for the three-year, five-year,
10-year, and overall periods ended 12/31/97.(3)
As the line graph on page 1 illustrates, for the 10-year period ended
12/31/97, the value of a $10,000 investment in Industrial Income Fund, plus
reinvested dividends and capital gain distributions, would have risen to
$47,774. The chart and other total return figures cited reflect the fund's
operating expenses, but the indexes do not have expenses, which would, of
course, have lowered their performance. (Of course, past performance is not a
guarantee of future results.)(1,2)
Equity Strategy
Over the last six months, we have witnessed a change in market sentiment
as the Asian currency crisis spread from a few isolated countries to the whole
Pacific Rim region. That meltdown changed the investment landscape for domestic
equities, as it will probably lead to slower U.S. economic growth. This
possibility, combined with the strong U.S. dollar, may put pressure on corporate
earnings for multinational corporations. We believe there is no quick fix for
the Asian currency crisis, and 1998 is likely to bring a more selective stock
market with increased volatility.
<PAGE>
In the fall of 1997, we started to reduce the fund's exposure to firms
that derive a significant portion of their revenues from Asian/Pacific Rim
economies. We feel that many of these companies may experience a contraction in
earnings in the first and second quarters of 1998, as much of their earnings
growth was predicated on strong demand overseas. Most of these firms were in the
capital goods, energy, and technology sectors. Conversely, we increased exposure
to institutions that import goods from the Asian/Pacific Rim region and sell
their products domestically, as they should benefit from cheaper imports, while
demand remains strong. This may allow these companies to grow their earnings
regardless of the market environment. One of our favorite names fitting this
criteria is Tandy Corp., a retailer (Radio Shack) which specializes in consumer
electronic goods. Tandy continues to improve fundamentally while generating
enormous cash flow per share. Their recent agreement to sell Sprint products in
Radio Shack stores may also prove profitable for years to come.
Some other stocks that we continue to favor are the Baby Bells, General
Electric, and Warner-Lambert Co. The Baby Bells (created from the breakup of
AT&T Corp. in 1984) continue to grow their earnings at a 10% clip, as the demand
increases for ancillary products such as call waiting, caller I.D. services, and
voice messaging. The Bells are also likely to enter the long-distance business
in the near future, which may increase future earnings. In addition, the fund
scored a major home run this summer when NYNEX Corp. merged with Bell Atlantic,
as both of these Baby Bell stocks experienced strong price appreciation before
and after the merger. An added bonus is that most of these stocks pay roughly a
4% dividend yield to the investor.
General Electric, a broadly diversified, market-leading corporation which
pays a solid dividend, is another attractive stock. Although it has some
exposure to Asian/Pacific Rim economies, a proven management team continues to
increase shareholder value. Warner-Lambert Co. is a large pharmaceutical firm
which experienced significant price appreciation as its new drugs, Lipitor and
Rezulin, were well received by the market. Over the next couple of years, we
believe that Lipitor (an anti-cholesterol drug) has the potential to be a
several billion dollar drug for Warner-Lambert Co. and should enhance the firm's
future earnings.
Fixed-Income Strategy
Fixed-income markets rallied over the last six months, producing strong
returns for investors as fears of inflation subsided. Within this environment,
we have stayed true to our investment philosophy which has been successful in
the past: using a value-oriented bond management style, we attempt to identify
corporate issues that are mispriced by the market. These securities often
provide investors the opportunity to enhance value in multiple ways. This
approach is somewhat unusual for the bond market, as we focus more on company
and industry fundamentals, and less on interest rates and Federal Reserve policy
- - although we remain sensitive to both.
Our disciplined approach continues to help us identify opportunities in the
communications and energy sectors, as well as the electric utilities industry.
<PAGE>
In the communications sector, deregulation has created a favorable environment
for competitive local exchange carriers (CLECs) and rural service providers. A
few years ago, when these firms needed enormous amounts of financing to develop
their networks, they issued debt to help cover their costs. However, due to
their relatively small sizes and, in many cases, limited operating histories,
many of these companies had much of their debt rated below investment grade. As
their cash flows become positive, that debt is likely to be upgraded - providing
potentially strong investment gains. Further, industry consolidation is
occurring at a rapid pace, and many of these firms may be acquired by stronger
credit-quality companies. A classic example of this investment "dual-win"
strategy was the acquisition of Brooks Fiber Properties by WorldCom Inc. in
1997.
The driving fundamentals in the energy sector are similar. These include
industry consolidation, which is in its infancy, and what appears to be the
mispriced corporate debt of relatively small companies. We feel that this sector
could produce strong returns for investors in 1998 and 1999, and is at the
beginning of its life cycle in the portfolio.
Stranded cost of electric utilities remains a dominant theme. Before
industry deregulation, many electric utilities built new power plants on the
premise of restricted competition, and regulated prices set forth by the
government. These costs are being addressed state-by-state by legislation which
allows many utilities to securitize their stranded cost. This may permit
selected utilities to generate substantial cash flows, allowing them to reduce
their debt and possibly improve their credit ratings. We have skewed our
investments towards California, Pennsylvania, and New York, as these states are
the furthest along in addressing the issue of stranded cost.
Finally, we have reduced the fund's exposure to the cable industry as
spreads tightened. However, the strong underpinnings remain intact, and we may
selectively re-enter this industry if prices subside. In terms of portfolio
structure, we will continue to use putable and yield-to-call bonds, as these
instruments could help provide performance and stability if the market becomes
volatile.
All-Weather Industrial Income Fund*
Average Annual Total Returns 1970-1997
INVESCO Industrial Income Fund achieved all of the positive annual returns and
suffered less than 1/3 of the negative annual returns of the S&P 500. (1),(2)
Graph:
This bar graph compares the average annual total returns of the INVESCO
Industrial Income Fund to those of the S&P 500 Index for the 28 years
ending December 31, 1997.
*The S&P 500 average annualized total returns were 33.35% for one year, 20.23%
for five years, and 18.00% for 10 years as of 12/31/97. Past performance is not
a guarantee of future results.
<PAGE>
Looking Forward
It appears that 1998 may be the year when equity markets finally produce
more "normal" returns. Dividends may play an important role in enhancing
shareholder returns, and the fund invests roughly 65% of its assets in
dividend-paying stocks. The fund also has approximately 20% of its assets in
bonds, which may help mitigate stock market volatility. We have designed this
fund as an appropriate core holding for most portfolios as it has historically
participated in market rallies, while limiting shareholders' exposure to market
declines (see bar chart above).
(1)The S&P 500 is an unmanaged index considered representative of the
performance of the broad U.S. stock market, while the Dow Jones Industrial
Average represents large-capitalization stocks. The Lehman Government/Corporate
Bond index is an unmanaged index indicative of the broad fixed-income 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.
(3)Morningstar proprietary rankings reflect historical risk-adjusted performance
and are subject to change every month. Ratings are calculated for the fund's
one-, three-, five-, and 10-year average annual returns (based on available
track records) in excess of 90 day Treasury bill returns. The top 10% of funds
in an investment category receive 5 stars; the next 22.5%, 4 stars; and the next
35%, 3 stars. As of 12/31/97, Industrial Income Fund received 4 stars among 2332
funds in the domestic equity fund category for the 3-year period, 4 stars among
1292 for the 5-year period, and 4 stars among 676 for the 10-year period.
Fund Management
Senior Vice President and Director of Investments Charles P. Mayer has
been responsible for the equity side of the portfolio since 1993. An industry
veteran with 28 years of professional experience, he earned an MBA from St.
John's University and a BA from St. Peter's College. Previously, Charlie was
with Westinghouse Pension.
Senior Vice President and Director of Fixed-Income Investments Donovan
"Jerry" Paul has served as co-portfolio manager of the fund since 1994,
concentrating on fixed-income securities. Jerry began his investment career in
1976; before joining INVESCO, he worked for Stein, Roe & Farnham Inc., as well
as Quixote Investment Management. He earned an MBA from the University of
Northern Iowa, and a BBA from the University of Iowa. He is a Chartered
Financial Analyst and Certified Public Accountant.
<PAGE>
INVESCO Industrial Income Fund, Inc.
Ten Largest Common Stock Holdings
December 31, 1997
Description Value
- -----------------------------------------------------------
Bank of New York $138,750,000
General Electric 117,400,000
Kansas City Southern Industries 114,300,000
Northrop Grumman 102,522,500
Bell Atlantic 100,100,000
Exxon Corp 97,900,000
Hilton Hotels 95,200,000
US WEST Communications Group 94,762,500
Warner-Lambert Co 80,600,000
Kellogg Co 79,400,000
Composition of holdings is subject to change.
<PAGE>
INVESCO Industrial Income Fund, Inc.
Statement of Investment Securities
December 31, 1997
UNAUDITED
Shares or
Principal
Description Amount Value
- --------------------------------------------------------------------------------
COMMON STOCKS 77.07%
AEROSPACE & DEFENSE 2.90%
Lockheed Martin 300,000 $ 29,550,000
Northrop Grumman 891,500 102,522,500
Raytheon Co Class A 172,485 8,505,667
---------------
140,578,167
---------------
AIR FREIGHT 0.14%
Overseas Shipholding Group 300,000 6,543,750
---------------
AUTO PARTS 0.92%
Borg-Warner Automotive 400,600 20,831,200
Cummins Engine 400,000 23,625,000
---------------
44,456,200
---------------
AUTOMOBILES 1.94%
Chrysler Corp 500,000 17,593,750
Ford Motor 750,000 36,515,625
General Motors 500,000 30,312,500
General Motors Class H 250,000 9,234,375
---------------
93,656,250
---------------
BANKS 4.93%
Bank of New York 2,400,000 138,750,000
Fleet Financial Group 688,000 51,557,000
Mellon Bank 800,000 48,500,000
---------------
238,807,000
---------------
BEVERAGES 1.46%
Anheuser-Busch Cos 1,600,000 $ 70,400,000
---------------
<PAGE>
CHEMICALS 1.32%
du Pont (E I) de Nemours & Co 500,000 30,031,250
Olin Corp 725,000 33,984,375
---------------
64,015,625
---------------
COMMUNICATIONS -
EQUIPMENT & MANUFACTURING 0.94%
Motorola Inc 800,000 45,650,000
---------------
COMPUTER RELATED 1.51%
International Business Machines 700,000 73,193,750
---------------
CONGLOMERATES 0.41%
Tenneco Inc 500,000 19,750,000
---------------
ELECTRIC UTILITIES 0.47%
Endesa SA Sponsored ADR
Representing One Shr 1,260,000 22,916,250
---------------
ELECTRICAL EQUIPMENT 3.58%
Emerson Electric 750,000 42,328,125
General Electric 1,600,000 117,400,000
Honeywell Inc 200,000 13,700,000
---------------
173,428,125
---------------
ELECTRONICS - SEMICONDUCTOR 1.27%
Analog Devices* 1,400,000 38,762,500
Texas Instruments 500,000 22,500,000
---------------
61,262,500
---------------
FOODS 5.70%
General Mills 900,000 64,462,500
Heinz (H J) Co 1,167,000 59,298,188
Kellogg Co 1,600,000 79,400,000
Quaker Oats 500,000 26,375,000
Ralston-Purina Group 500,000 46,468,750
---------------
276,004,438
---------------
GOLD & PRECIOUS METALS MINING 0.49%
Newmont Mining 799,050 23,472,094
---------------
<PAGE>
HEALTH CARE DRUGS -
PHARMACEUTICALS 6.04%
American Home Products 1,000,000 76,500,000
Merck & Co 300,000 31,875,000
Novo-Nordisk A/S ADR 859,172 62,182,573
SmithKline Beecham PLC ADR
Representing Ord A Shrs 800,000 41,150,000
Warner-Lambert Co 650,000 80,600,000
---------------
292,307,573
---------------
HEALTH CARE RELATED 1.20%
Becton Dickinson & Co 700,000 35,000,000
Tenet Healthcare* 700,000 23,187,500
---------------
58,187,500
---------------
INSURANCE 3.34%
Allmerica Financial 606,818 30,302,974
Chubb Corp 900,000 68,062,500
Lincoln National 600,000 46,875,000
St Paul Cos 200,000 16,412,500
---------------
161,652,974
---------------
LODGING - HOTELS 1.97%
Hilton Hotels 3,200,000 $ 95,200,000
---------------
MACHINERY 0.94%
Ingersoll-Rand Co 1,125,000 45,562,500
---------------
MANUFACTURING 1.59%
AlliedSignal Inc 1,970,000 76,706,875
---------------
NATURAL GAS 0.62%
K N Energy 558,000 30,132,000
---------------
OIL & GAS RELATED 10.81%
Apache Corp 900,000 31,556,250
Atlantic Richfield 750,000 60,093,750
Baker Hughes 1,000,000 43,625,000
Chevron Corp 600,000 46,200,000
Exxon Corp 1,600,000 97,900,000
Phillips Petroleum 500,000 24,312,500
Royal Dutch Petroleum New York
Registry 1.25 Gldr Shrs 1,200,000 65,025,000
Schlumberger Ltd 800,000 64,400,000
Sonat Inc 600,000 27,450,000
USX-Marathon Group 1,000,000 33,750,000
Union Pacific Resources Group 1,200,000 29,100,000
---------------
523,412,500
---------------
<PAGE>
PAPER & FOREST PRODUCTS 0.78%
Champion International 500,000 22,656,250
Fort James 400,000 15,300,000
---------------
37,956,250
---------------
RAILROADS 2.93%
Kansas City Southern Industries 3,600,000 114,300,000
Norfolk Southern 900,000 27,731,250
---------------
142,031,250
---------------
REAL ESTATE INVESTMENT TRUST 2.33%
Boston Properties 455,000 15,043,437
Health & Retirement Properties
Trust SBI 1,200,000 24,000,000
Health Care Property Investors 550,000 20,796,875
Healthcare Realty Trust 400,000 11,575,000
Meditrust Corp Paired Certificate 600,800 22,004,300
Omega Healthcare Investors 500,000 19,312,500
---------------
112,732,112
---------------
RETAIL 4.96%
Dayton Hudson 975,000 65,812,500
Federated Department Stores* 800,000 34,450,000
May Department Stores 500,000 26,343,750
Penney (J C) Co 600,000 36,187,500
Tandy Corp 2,000,000 77,125,000
---------------
239,918,750
---------------
SAVINGS & LOAN 2.13%
Ahmanson (H F) & Co 800,000 53,550,000
Charter One Financial 786,700 49,660,437
---------------
103,210,437
---------------
SERVICES 0.61%
Service Corp International 800,000 29,550,000
---------------
TELECOMMUNICATIONS -
LONG DISTANCE 4.10%
AT&T Corp 800,000 $ 49,000,000
Teleport Communications Group
Class A* 1,000,000 54,875,000
US WEST Communications Group 2,100,000 94,762,500
---------------
198,637,500
---------------
<PAGE>
TELEPHONE 3.99%
Bell Atlantic 1,100,000 100,100,000
GTE Corp 800,000 41,800,000
SBC Communications 700,000 51,275,000
---------------
193,175,000
---------------
TOBACCO 0.75%
Philip Morris 800,000 36,250,000
---------------
TOTAL COMMON STOCKS
(Cost $2,384,155,988) 3,730,757,370
---------------
FIXED INCOME SECURITIES 18.00%
US Government Agency Obligations 1.48%
Fannie Mae, Gtd Mortgage
Pass-Through Certificates
6.500%, 7/1/2008 $ 29,914,276 30,030,942
Government National Mortgage
Association I, Pass-Through
Certificates, 7.000%,
12/15/2023 $ 41,113,415 41,569,360
---------------
TOTAL US GOVERNMENT
AGENCY OBLIGATIONS
(Cost $71,147,096) 71,600,302
---------------
Corporate Bonds 16.52%
ALUMINUM 0.09%
Kaiser Aluminum & Chemical
Sr Sub Notes, 12.750%,
2/1/2003 $ 4,000,000 4,270,000
---------------
BROADCASTING 0.74%
Allbritton Communications
Sr Sub Deb 11.500%,
8/15/2004 $ 8,933,000 9,357,317
<PAGE>
Series B, 9.750%,
11/30/2007 $ 4,900,000 5,022,500
Chancellor Media-Los Angeles, Sr
Sub Notes^, 8.125%,
12/15/2007 $ 15,000,000 14,681,250
SFX Broadcasting, Sr Sub Notes
Series B, 10.750%,
5/15/2006 $ 5,975,000 6,542,625
---------------
35,603,692
---------------
BUILDING MATERIALS 0.45%
Congoleum Corp, Sr Notes
9.000%, 2/1/2001 $ 8,040,000 8,140,500
USG Corp, Sr Notes
8.500%, 8/1/2005 $ 12,750,000 13,738,125
---------------
21,878,625
---------------
CABLE 0.33%
CF Cable TV, Sr Secured 2nd
Priority Notes, 11.625%
2/15/2005 $ 2,750,000 3,107,500
Fox/Liberty Networks LLC/FLN Finance
Sr Discount Step-Up Notes^
Zero Coupon^^, 8/15/2007 $ 4,000,000 2,560,000
International CableTel
Conv Sub Notes, 7.000%
6/15/2008 $ 5,000,000 4,968,750
Sr Deferred Step-Up Notes
Series B, Zero Coupon^^
2/1/2006 $ 6,850,000 5,317,313
---------------
15,953,563
---------------
COMPUTER RELATED 0.18%
International Business Machines
Deb, 6.220%, 8/1/2027 $ 8,500,000 8,645,911
---------------
CONTAINERS 0.40%
Gaylord Container, Sr Sub
Discount Step-Up Deb
Zero Coupon^^, 5/15/2005 $ 18,120,000 19,388,400
---------------
ELECTRIC UTILITIES 5.63%
Boston Edison, Deb
7.800%, 5/15/2010 $ 6,700,000 7,253,574
Carolina Power & Light 1st Mortgage
8.625%, 9/15/2021 $ 6,650,000 8,149,821
6.875%, 8/15/2023 $ 10,250,000 10,147,663
<PAGE>
Cleveland Electric Illuminating, 1st
Mortgage, Series B, 9.500%
5/15/2005 $ 12,000,000 13,200,000
Consolidated Edison, Deb
8.050%, 12/15/2027 $ 4,050,000 4,286,459
DQU-II Funding, Collateral Lease
8.700%, 6/1/2016 $ 17,500,000 19,542,773
Detroit Edison
1st Mortgage Medium-Term Notes,
Series C, 8.240% 1/13/2023 $ 5,600,000 6,169,783
Secured Medium-Term Notes
8.300%, 8/1/2022 $ 11,000,000 12,127,235
Series D, 8.310%, 8/1/2022 $ 3,000,000 3,309,414
Series C, 8.300%, 1/13/2023$ 5,000,000 5,505,365
El Paso Electric, 1st Mortgage
Series C, 8.250%, 2/1/2003 $ 3,000,000 3,157,500
Jersey Central Power & Light
1st Mortgage
7.500%, 5/1/2023 $ 7,160,000 7,514,791
6.750%, 11/1/2025 $ 1,800,000 1,758,299
Long Island Lighting, Deb
9.000%, 11/1/2022 $ 32,521,000 36,201,854
8.200%, 3/15/2023 $ 15,800,000 16,881,809
Massachusetts Electric, Medium-
Term Notes, Series R
8.550%, 2/7/2022 $ 5,000,000 5,542,474
Metropolitan Edison, Secured
Medium-Term Notes, Series B
8.150%, 1/30/2023 $ 19,950,000 21,785,677
New York State Electric & Gas
1st Mortgage, 8.300%
12/15/2022 $ 6,250,000 6,703,199
Pacific Gas & Electric
1st & Refunding Mortgage
Series 92D, 8.250%,
11/1/2022 $ 35,650,000 38,992,079
Series 93D, 7.250%,
8/1/2026 $ 3,500,000 3,610,075
Pennsylvania Power, 1st Mortgage
8.500%, 7/15/2022 $ 2,000,000 2,195,580
Pennsylvania Power & Light
1st Mortgage
8.500%, 5/1/2022 $ 6,600,000 7,391,346
7.875%, 2/1/2023 $ 3,750,000 4,011,079
Philadelphia Electric
1st & Refunding Mortgage
7.750%, 3/1/2023 $ 536,000 558,725
7.250%, 11/1/2024 $ 7,202,000 7,278,838
Potomac Electric Power, 1st
Mortgage, 6.250%,
10/15/2007 $ 10,000,000 10,020,540
<PAGE>
South Carolina Electric & Gas
1st Mortgage, 8.875%,
8/15/2021 $ 2,000,000 2,247,602
Utilicorp United, Sr Notes
9.000%, 11/15/2021 $ 6,250,000 6,943,100
---------------
272,486,654
---------------
ELECTRICAL EQUIPMENT 0.10%
Alpine Group, Sr Secured Notes
Series B, 12.250%,
7/15/2003 $ 4,249,000 4,684,522
---------------
ENTERTAINMENT 0.85%
Fox Kids Worldwide
Sr Notes^, 9.250%,
11/1/2007 $ 4,000,000 3,870,000
Sub Discount Step-Up Notes^
Zero Coupon^^, 11/1/2007 $ 9,000,000 5,355,000
Production Resource Group LLC/
Program Finance, Sr Sub Notes^
11.500%, 1/15/2008 $ 4,000,000 4,010,000
Time Warner, Deb
6.850%, 1/15/2026 $ 7,500,000 7,578,892
Time Warner Entertainment LP
Sr Deb, 8.375%, 3/15/2023 $ 8,840,000 10,084,715
Viacom International, Sub Deb
Series A, 7.000%, 7/1/2003 $ 7,500,000 7,307,459
Series B, 7.000%, 7/1/2003 $ 3,140,000 3,059,389
---------------
41,265,455
---------------
GAMING 0.20%
Aztar Corp, Sr Sub Notes
13.750%, 10/1/2004 $ 8,250,000 9,446,250
---------------
HEALTH CARE DRUGS -
PHARMACEUTICALS 0.37%
McKesson Corp, Sub Deb
4.500%, 3/1/2004 $ 19,857,000 18,057,141
---------------
HEALTH CARE RELATED 0.22%
FHP International, Sr Notes
7.000%, 9/15/2003 $ 6,450,000 6,577,684
Tenet Healthcare, Sr Sub Notes
10.125%, 3/1/2005 $ 3,780,000 4,124,925
---------------
10,702,609
---------------
<PAGE>
INSURANCE 0.87%
Equitable Cos, Sr Notes
9.000%, 12/15/2004 $ 35,470,000 40,126,390
Veritas Holdings GmbH, Sr Notes
9.625%, 12/15/2003 $ 2,000,000 2,140,000
---------------
42,266,390
---------------
INVESTMENT BANK/BROKER FIRM 0.21%
Donaldson Lufkin & Jenrette
Medium-Term Notes
5.625%, 2/15/2016 $ 6,000,000 5,926,427
Lehman Brothers Holdings, Sr Notes
8.800%, 3/1/2015 $ 3,475,000 4,043,618
---------------
9,970,045
---------------
MACHINERY 0.15%
AGCO Corp, Sr Sub Notes
8.500%, 3/15/2006 $ 7,100,000 7,242,000
---------------
METALS MINING 0.43%
Glencore Nickel Pty Ltd, Sr Secured^
9.000%, 12/1/2014 $ 11,000,000 10,917,500
Haynes International, Sr Notes
11.625%, 9/1/2004 $ 4,000,000 4,580,000
Westmin Resources Ltd
Sr Secured Notes
11.000%, 3/15/2007 $ 5,000,000 5,475,000
---------------
20,972,500
---------------
NATURAL GAS 0.12%
Noram Energy, Conv Sub Deb
6.000%, 3/15/2012 $ 6,566,000 5,975,060
---------------
OIL & GAS RELATED 0.82% Belco Oil & Gas, Sr Sub Notes
Series B, 8.875%,
9/15/2007 $ 7,000,000 7,122,500
Cliffs Drilling, Sr Notes
Series B, 10.250%,
5/15/2003 $ 5,000,000 5,443,750
Series D, 10.250%,
5/15/2003 $ 4,060,000 4,420,325
Cross Timbers Oil, Sr Sub Notes
Series B, 9.250%, 4/1/2007 $ 2,800,000 2,912,000
<PAGE>
Energy Corp of America, Sr Sub
Notes, Series A, 9.500%
5/15/2007 $ 9,750,000 9,725,625
Magnum Hunter Resources, Sr
Notes, 10.000%, 6/1/2007 $ 2,800,000 2,856,000
SEACOR SMIT, Sr Notes
7.200%, 9/15/2009 $ 5,000,000 5,108,880
Snyder Oil, Sr Sub Notes
8.750%, 6/15/2007 $ 2,000,000 2,030,000
---------------
39,619,080
---------------
PAPER & FOREST PRODUCTS 0.36%
Quno Corp, Sr Notes
9.125%, 5/15/2005 $ 13,050,000 14,355,000
Tembec Finance, Sr Notes
9.875%, 9/30/2005 $ 3,000,000 3,082,500
---------------
17,437,500
---------------
PUBLISHING 0.26%
Affiliated Newspaper Investments
Sr Discount Step-Up Deb
Zero Coupon^^, 7/1/2006 $ 8,000,000 7,560,000
Quebecor Printing, Capital Deb
6.500%, 8/1/2027 $ 5,000,000 4,859,174
---------------
12,419,174
---------------
REAL ESTATE INVESTMENT TRUST 0.21%
Saul (B F) REIT, Sr Secured Notes
11.625%, 4/1/2002 $ 4,300,000 4,601,000
Spieker Properties LP, Notes
7.350%, 12/1/2017 $ 5,500,000 5,540,755
---------------
10,141,755
---------------
SAVINGS & LOAN 0.47%
Dime Bancorp, Sr Notes
10.500%, 11/15/2005 $ 2,150,000 2,316,625
Sovereign Bancorp, Medium-Term
Sub Notes, 8.000%,
3/15/2003 $ 6,500,000 6,754,890
Western Financial Savings Bank
Sub Capital Deb
8.500%, 7/1/2003 $ 14,000,000 13,511,861
---------------
22,583,376
---------------
<PAGE>
TELECOMMUNICATIONS -
CELLULAR & WIRELESS 1.57%
CommNet Cellular
Sr Sub Discount Step-Up Notes
Zero Coupon^^, 9/1/2003 $ 14,500,000 14,536,250
Sub Notes, 11.250%,
7/1/2005 $ 7,425,000 8,501,625
NEXTEL Communications, Sr
Discount Step-Up Notes^
Zero Coupon^^, 10/31/2007 $ 17,000,000 10,370,000
NEXTLINK Communications, Sr
Notes, 9.625%, 10/1/2007 $ 12,425,000 12,859,875
PriCellular Wireless
Sr Discount Notes, Series B
14.000%, 11/15/2001 $ 13,500,000 14,985,000
Sr Discount Step-Up Notes
Zero Coupon^^, 10/1/2003 $ 14,250,000 14,606,250
---------------
75,859,000
---------------
TELECOMMUNICATIONS -
LONG DISTANCE 0.56%
GCI Inc, Sr Notes
9.750%, 8/1/2007 $ 4,895,000 5,078,562
McLeodUSA Inc
Sr Discount Step-Up Notes
Zero Coupon^^, 3/1/2007 $ 4,895,000 3,524,400
Sr Notes^, 9.250%,
7/15/2007 $ 8,250,000 8,641,875
Teligent Inc, Sr Notes
11.500%, 12/1/2007 $ 10,000,000 10,025,000
---------------
27,269,837
---------------
TELEPHONE 0.85%
Frontier Corp, Notes
7.250%, 5/15/2004 $ 5,150,000 5,372,567
Intermedia Communications
Sr Discount Step-Up Notes, Series
B, Zero Coupon^^,
7/15/2007 $ 6,125,000 4,364,063
Sr Notes^
8.875%, 11/1/2007 $ 3,000,000 3,075,000
8.500%, 1/15/2008 $ 15,000,000 15,000,000
MetroNet Communications
Sr Discount Step-Up Notes^
Zero Coupon^^, 11/1/2007 $ 5,000,000 3,062,500
<PAGE>
US WEST Capital Funding, Notes
7.300%, 1/15/2007 $ 10,000,000 10,371,179
---------------
41,245,309
---------------
UTILITIES - GAS 0.08%
Camuzzi Gas Pampeana SA/
Camuzzi Gas del Sur, Medium-
Term Notes, 9.250%,
12/15/2001 $ 4,000,000 4,050,000
---------------
TOTAL CORPORATE BONDS
(Cost $788,481,134) 799,433,848
---------------
TOTAL FIXED INCOME SECURITIES
(Cost $859,628,230) 871,034,150
---------------
SHORT-TERM INVESTMENTS -
COMMERCIAL PAPER 4.93%
AUTOMOBILES 1.66%
Ford Motor Credit
5.800%, 1/7/1998 $ 38,890,000 38,890,000
General Motors Acceptance
6.190%, 1/5/1998 $ 41,452,000 41,452,000
---------------
80,342,000
---------------
CONSUMER FINANCE 1.28%
American Express Credit
6.200%, 1/6/1998 $ 35,053,000 35,053,000
6.100%, 1/2/1998 $ 26,871,000 26,871,000
---------------
61,924,000
---------------
FINANCIAL 0.62%
General Electric Capital
6.100%, 1/5/1998 $ 30,000,000 30,000,000
---------------
INSURANCE 1.37%
CIGNA Corp
6.160%, 1/2/1998 $ 31,500,000 31,500,000
6.020%, 1/8/1998 $ 35,054,000 35,054,000
---------------
66,554,000
---------------
<PAGE>
TOTAL SHORT-TERM INVESTMENTS
(Cost $238,820,000) 238,820,000
---------------
TOTAL INVESTMENT
SECURITIES AT VALUE 100.00%
(Cost $3,482,604,218)
(Cost for Income Tax Purposes
$3,482,770,164) $ 4,840,611,520
===============
* Security is non-income producing.
^ Securities are registered pursuant to Rule 144A and may be deemed to be
restricted for resale to institutional investors.
^^ Step up bonds are obligations which increase the interest payment rate at a
specified point in time. Rate shown reflects current rate which may step up at a
future date.
See Notes to Financial Statements
<PAGE>
INVESCO Industrial Income Fund, Inc.
Statement of Assets and Liabilities
December 31, 1997
UNAUDITED
ASSETS
Investment Securities at Value
(Cost $3,482,604,218) $ 4,840,611,520
Receivables:
Investment Securities Sold 1,348,455
Fund Shares Sold 5,561,020
Dividends and Interest 18,150,489
Prepaid Expenses and Other Assets 320,557
----------------
TOTAL ASSETS 4,865,992,041
----------------
LIABILITIES
Payables:
Custodian 67,586
Fund Shares Repurchased 27,781,477
Accrued Distribution Expenses 1,024,833
Accrued Expenses and Other Payables 381,484
----------------
TOTAL LIABILITIES 29,255,380
----------------
Net Assets at Value $ 4,836,736,661
================
NET ASSETS
Paid-in Capital* $ 3,428,002,596
Accumulated Undistributed Net
Investment Income 238,149
Accumulated Undistributed Net Realized Gain
on Investment Securities and Foreign
Currency Transactions 50,488,614
Net Appreciation of Investment Securities and
Foreign Currency Transactions 1,358,007,302
----------------
Net Assets at Value $ 4,836,736,661
================
Net Asset Value, Offering and Redemption
Price per Share $ 14.91
========
* The Fund has one billion authorized shares of common stock, par value of $1.00
per share, of which 324,483,459 were outstanding at December 31, 1997.
See Notes to Financial Statements
<PAGE>
INVESCO Industrial Income Fund, Inc.
Statement of Operations
Six Months Ended December 31, 1997
UNAUDITED
INVESTMENT INCOME
INCOME
Dividends $ 39,425,437
Interest 40,505,864
Foreign Taxes Withheld (174,740)
----------------
TOTAL INCOME 79,756,561
----------------
EXPENSES
Investment Advisory Fees 11,449,342
Distribution Expenses 6,045,745
Transfer Agent Fees 3,066,099
Administrative Fees 367,713
Custodian Fees and Expenses 303,213
Directors' Fees and Expenses 182,765
Professional Fees and Expenses 91,237
Registration Fees and Expenses 39,977
Reports to Shareholders 281,933
Other Expenses 126,669
----------------
TOTAL EXPENSES 21,954,693
Fees and Expenses Paid Indirectly (171,833)
----------------
NET EXPENSES 21,782,860
----------------
NET INVESTMENT INCOME 57,973,701
----------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENT SECURITIES
Net Realized Gain on Investment Securities
and Foreign Currency Transactions 220,626,941
Change in Net Appreciation of Investment
Securities and Foreign Currency Transactions 165,017,315
----------------
NET GAIN ON INVESTMENT SECURITIES 385,644,256
----------------
Net Increase in Net Assets from Operations 443,617,957
================
See Notes to Financial Statements
<PAGE>
INVESCO Industrial Income Fund, Inc.
Statement of Changes in Net Assets
Six Months Year
Ended Ended
December 31 June 30
-------------- --------------
1997 1997
UNAUDITED
OPERATIONS
Net Investment Income $ 57,973,701 $108,311,903
Net Realized Gain on
Investment Securities and
Foreign Currency Transactions 220,626,941 372,025,901
Change in Net Appreciation
of Investment Securities and
Foreign Currency Transactions 165,017,315 550,539,412
-------------- --------------
NET INCREASE IN NET
ASSETS FROM
OPERATIONS 443,617,957 1,030,877,216
-------------- --------------
DISTRIBUTIONS TO
SHAREHOLDERS
Net Investment Income (57,551,254) (108,045,224)
Net Realized Gain on
Investment Securities (487,538,302) (283,864,499)
-------------- --------------
TOTAL DISTRIBUTIONS (545,089,556) (391,909,723)
-------------- --------------
FUND SHARE
TRANSACTIONS
Proceeds from Sales of Shares 453,880,227 688,098,414
Reinvestment of Distributions 512,739,620 369,552,898
-------------- --------------
966,619,847 1,057,651,312
Amounts Paid for Repurchases
of Shares (603,086,194) (1,292,480,001)
-------------- --------------
NET INCREASE (DECREASE)
IN NET ASSETS FROM FUND
SHARE TRANSACTIONS 363,533,653 (234,828,689)
-------------- --------------
Total Increase in Net Assets 262,062,054 404,138,804
<PAGE>
NET ASSETS
Beginning of Period 4,574,674,607 4,170,535,803
-------------- --------------
End of Period (Including
Accumulated Undistributed
(Distributions in Excess of)
Net Investment Income of
$238,149 and ($184,298)
respectively) $4,836,736,661 $4,574,674,607
============== ==============
FUND SHARE TRANSACTIONS
Shares Sold 28,092,433 49,408,506
Shares Issued from Reinvestment
of Distributions 34,947,308 27,312,058
-------------- --------------
63,039,741 76,720,564
Shares Repurchased (37,328,216) (93,580,782)
-------------- --------------
Net Increase (Decrease) in
Fund Shares 25,711,525 (16,860,218)
============== ==============
<PAGE>
INVESCO Industrial Income Fund, Inc.
Notes to Financial Statements
UNAUDITED
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Industrial
Income Fund, Inc. (the "Fund"), is incorporated in Maryland. The Fund is an
equity income fund that seeks the best possible current income. 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.
Debt securities are valued at evaluated bid prices as determined by
a pricing service approved by the Fund's board of directors. If evaluated
bid prices are not available, debt securities are valued by averaging the
bid prices obtained from one or more dealers making a market for such
securities.
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
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. The
cost of securities is translated into U.S. dollars at the rates of
exchange prevailing when such securities are acquired. Income and expenses
are translated into U.S. dollars at rates of exchange prevailing when
accrued.
<PAGE>
B. 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. Discounts and premiums on
debt securities purchased are amortized over the life of the respective
security as adjustments to interest income. Cost is determined on the
specific identification basis.
The Fund may have elements of risk due to concentrated investments
in foreign issuers located in a specific country. Such concentrations 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 investments 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.
Investments in securities of governmental agencies may only be
guaranteed by the respective agency's limited authority to borrow from the
U.S. Government and may not be guaranteed by the full faith and credit of
the United States.
C. 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.
D. 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
<PAGE>
accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments for mortgage-backed securities, market discounts,
amortized premiums, foreign currency transactions, nontaxable dividends,
net operating losses and expired capital loss carryforwards.
E. EXPENSES - Under an agreement between the 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, Distribution Expenses and Transfer Agent Fees 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.
For the six months ended December 31, 1997, Fees and Expenses Paid
Indirectly consisted of $170,662 included in Custodian Fees and Expenses,
$523 included in Distribution Expenses and $648 included in Transfer Agent
Fees.
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 0.60% on the first $350 million of average net assets; reduced to 0.55%
on the next $350 million of average net assets; reduced to 0.50% on average net
assets to $2 billion; reduced to 0.45% on average net assets to $4 billion; and
0.40% on average net assets in excess of $4 billion. Effective May 15, 1997, IFG
voluntarily agreed to waive a portion of its fee which exceeds 0.35% of average
net assets in excess of $5 billion.
In accordance with a Sub-Advisory Agreement between IFG and INVESCO Trust
Company ("ITC"), a wholly owned subsidiary of IFG, investment decisions of the
Fund are made by ITC. Fees for such sub-advisory services are paid by IFG.
In accordance with an Administrative Agreement, the Fund pays IFG an
annual fee of $10,000, plus an additional amount computed at an annual rate of
0.015% of average net assets to provide administrative, accounting and clerical
services. The fee is accrued daily and paid monthly.
IFG receives a transfer agent fee at an annual rate of $20.00 per
shareholder account, or, 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 average annual net assets. For the six
months ended December 31, 1997, the Fund paid the Distributor $5,920,033 under
the plan of distribution. Effective September 29, 1997, INVESCO Distributors,
Inc., a wholly owned subsidiary of IFG, replaced IFG as Distributor.
<PAGE>
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 $1,353,605,165 and $1,240,102,261, respectively.
The aggregate cost of purchases and proceeds from sales of U.S. Government
securities were $0 and $233,981,584, respectively.
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
amounted to $1,386,390,121 and the gross depreciation of securities in which
there was an excess of tax cost over value amounted to $28,548,765, resulting in
net appreciation of $1,357,841,356.
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 were $47,231.
Unfunded accrued pension costs of $211,800 and pension liability of $443,330 are
included in Prepaid Expenses and Accrued Expenses, respectively, in the
Statement of Assets and Liabilities.
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 5% of the Net Assets at Value of the Fund. The 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>
<TABLE>
INVESCO Industrial Income Fund, Inc.
Financial Highlights
(For a Fund Share Outstanding Throughout Each Period)
<CAPTION>
Six Months
Ended
December 31 Year Ended June 30
------------- ------------------------------------------------------------------------
1997 1997 1996 1995 1994 1993
UNAUDITED
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value -
Beginning of Period $15.31 $13.21 $11.92 $11.32 $11.53 $10.67
------------- ------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.20 0.35 0.41 0.42 0.36 0.31
Net Gains on Securities
(Both Realized and Unrealized) 1.27 3.05 1.53 1.14 0.02 1.33
------------- ------------------------------------------------------------------------
Total from Investment
Operations 1.47 3.40 1.94 1.56 0.38 1.64
------------- ------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment
Income 0.20 0.35 0.41 0.42 0.36 0.32
In Excess of Net Investment
Income 0.00 0.00 0.00 0.00 0.11 0.00
Distributions from Capital
Gains 1.67 0.95 0.24 0.54 0.12 0.46
------------- ------------------------------------------------------------------------
Total Distributions 1.87 1.30 0.65 0.96 0.59 0.78
------------- ------------------------------------------------------------------------
Net Asset Value -
End of Period $14.91 15.31 13.21 11.92 11.32 11.53
============= ========================================================================
TOTAL RETURN 9.84%* 27.33% 16.54% 14.79% 3.24% 15.66%
<PAGE>
RATIOS
Net Assets - End of Period
($000 Omitted) $4,836,737 $4,574,675 $4,170,536 $4,009,609 $3,913,322 $3,412,527
Ratio of Expenses to Average
Net Assets# 0.46%*@ 0.95%@ 0.93%@ 0.94% 0.92% 0.96%
Ratio of Net Investment Income
to Average Net Assets# 1.21%* 2.54% 3.17% 3.61% 3.11% 2.94%
Portfolio Turnover Rate 30%* 47% 63% 54% 56% 121%
Average Commission Rate Paid^^ $0.0966* $0.0370 - - - -
</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 years
ended June 30, 1997, 1996, 1995, 1994 and 1993. If such expenses had not been
voluntarily absorbed, ratio of expenses to average net assets would have been
0.98%, 0.96%, 0.97%, 0.95% and 0.98%, respectively, and ratio of net investment
income to average net assets would have been 2.51%, 3.14%, 3.58%, 3.08% and
2.92%, respectively.
@ Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
^^ The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales securities for the period divided by the total
number of related shares purchased or sold which is required to be disclosed for
fiscal years beginning September 1, 1995 and thereafter.
<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.
