KNOWLEDGE DISCIPLINE SERVICE CHOICE
Industrial Income
Fund
YOU SHOULD KNOW WHAT INVESCO KNOWS (R)
A no-load mutual fund seeking current income with capital growth
as an additional factor
SEMI-
ANN
UAL
INVESCO
SEMIANNUAL REPORT December 31, 1998
<PAGE>
INVESCO INDUSTRIAL
INCOME FUND
AVERAGE ANNUAL TOTAL RETURN
PERIOD ENDING 12/31/98*
1 year 14.13%
- -----------------------------------------------------
5 years 15.57%
- -----------------------------------------------------
10 years 16.82%
"THE COMING YEAR
MAY BRING
ITS OWN SET OF
SURPRISES - AND
SURPRISE
REMAINS THE
BEST ARGUMENT
FOR ASSET
DIVERSIFICATION" -
PAGE 4
The line graph illustrates the value of a $10,000 investment, plus reinvested
dividends and capital gain distributions, for the 10-year period ended 12/31/98.
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.)*
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 Lehman Government/Corporate Bond and S&P 500 Indexes,
assuming in each case reinvestment of all dividends and capital gain
distributions, for the ten year period ended 12/31/98.
*Total return figures include reinvested dividends and capital gain distribu-
tions. 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>
Your Fund's Performance: A Report from the Managers
- -------------------------------------------------------------------------------
Dear Shareholders:
We know that many of you, as long-term investors, try to look past short-term
swings in the market and focus on its longer-term movements. We're also sure
this became nearly impossible to do in late summer, when nearly every newscast
led off with the story of an impending global economic catastrophe.
The news turned considerably brighter, of course, later in the year. The run-up
in the markets from October 8th to just before Thanksgiving rivaled the plunge
from August to September. At the same time, the number of investors wondering
why they did not "get out" of stocks in July was soon dwarfed by the number
pondering why they did not "get in" in early October-- highlighting the extreme
difficulty of timing the market.
As an investor in INVESCO Industrial Income Fund, you had a total return of
4.00% over the six months ended December 31, 1998. The fund's return lagged
those of the S&P 500, which was up 9.22% over the same period, and of the Lehman
Government/Corporate Bond Index, which increased 5.09%. On the other hand, we
are pleased to report that your fund's returns for the year ending 12/31/98,
14.13% exceeded the average return of the equity-income funds tracked by
independent mutual fund analyst Lipper Analytical Services, Inc., which rose
10.89%. (Of course, past performance is not a guarantee of future results.)*
A New Nifty Fifty?
When comparing these returns to those of the S&P 500, many investors may wonder
why they did not concentrate their assets in the stocks of the large companies
found on that index. It is helpful to remember that the performance of many of
the largest companies' stocks over the past several years has been truly
extraordinary. This has been true not only on an absolute basis, but also on a
relative one: Large-capitalization stock indexes such as the S&P 500 and the Dow
have dramatically outperformed those for other classes of investments.
In part, INVESCO Industrial Income Fund has benefited from this remarkable
performance, and many of the fund's investments in leading companies have done
well in this unusual market. Technology holdings have continued to outperform
the broader indexes, as investors remain optimistic about the new frontiers
opened by the Internet and other recent advances. Health care stocks have also
done well, driven in large part by profits from new drugs and increasing demand
from an aging population. Some investment professionals have begun speaking of a
new "nifty fifty," a select group of high-flying stocks similar to the one that
drew admirers in the early 1970s.
On the other hand, many of the traditional, dividend-paying strongholds in our
portfolio have lagged these superstar stocks. Large multinational and financial
stocks especially suffered as a result of the global turmoil. The consumer and
industrial sectors also declined as many economists began to warn of slower
growth in the coming year. Favorable economic news late in the year helped these
stocks, but they did not manage to catch up with their favored peers. Other
holdings in our fund, such as those in energy companies, languished throughout
the last half of the year as world commodity prices remained at very low levels.
It is important to keep in mind, however, that many of the established companies
that did not appreciate as much as we might have hoped continued to pay us solid
dividends, helping the fund earn current income.
Bonds: A Premium on Risk
The panic that gripped financial markets in the late summer resulted in a
predictable "flight to quality," leading investors into Treasury securities and
other very secure bonds. Combined with the Federal Reserve's rate cuts, this
brought yields on such bonds to very low levels.
<PAGE>
These forces had a more unsettled effect on our fund's corporate bond holdings,
however. The same flight to quality discouraged investments in higher-yield
bonds. The "yield spread" between high- and low-risk bonds widened to levels not
seen in years, indicating that investors are extremely wary in this uncertain
global economic environment. On a longer-term basis, however, we believe this
has made higher-yield bonds very attractively priced.
We will continue to use our flexibility to invest in fixed-income securities
when market conditions necessitate a more cautious approach.
Preparing for Change
In short, because the fund's holdings were diversified across different asset
classes and investment strategies, its performance over the past six months was
quite good, but not extraordinary.
The coming year may well bring a duplication of the unusual patterns that marked
this past one. Certainly, many analysts have been proved wrong over the past few
years in their assertions that large-company stocks would soon end their
remarkable winning streak.
It is well to keep in mind, however, that the coming year may bring its own set
of surprises--and surprise remains the best argument for asset diversification.
While we will continue investing in the growth companies remaking the economy,
we also plan to maintain our focus on dividend-paying stocks and the flexible
use of fixed-income obligations. In the past, this strategy has served the fund
well during flat or declining markets, while also allowing us to profit from
growing ones.
We look forward to reporting to you on our progress in six months.
/s/ Charles P. Mayer /s/ Donovan J. Paul
- ------------------------ ------------------------------
CHARLES P. MAYER DONOVAN "JERRY" PAUL
SENIOR VICE PRESIDENT SENIOR VICE PRESIDENT
*Total return figures include reinvested dividends and capital gain
distributions. 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.
The S&P 500 is an unmanaged index that reflects performance of the broad stock
market, while the Lehman Government/Corporate Bond is an unmanaged index
considered representative of the broad fixed-income markets.
FUND MANAGERS
CHARLES P. MAYER (Equity) Senior Vice President, INVESCO Funds Group. BA,
St. Peter's College; MBA, St. John's University. Began investment career in
1969. Joined INVESCO in 1993. Has managed this fund since 1993.
Donovan J. (Jerry) Paul, CFA, CPA (Fixed-Income) Senior Vice President,
INVESCO Funds Group. BBA, University of Iowa; MBA, University of Northern Iowa.
Began investment career in 1976. Joined INVESCO in 1994. Has managed
<PAGE>
INVESCO Semiannual Report December 31, 1998
Moving Forward
- ------------------------------------------------------------------------------
Market Headlines:
July-December 1998
The latter half of 1998 was a period few market veterans will soon forget. Just
when the danger seemed to have passed, the tidal wave of the Asian economic
crisis finally pounded American shores in late summer, swamping financial
markets. Wall Street's sense of gloom deepened as the headlines warned of one
global economic calamity after another: Russian loan default, the ominous
near-collapse of a prominent hedge fund tumbling currencies in Latin America,
and a perilous banking situation in Japan.
Following the gut-wrenching declines, however, the markets began an equally
dizzying rebound in October. A series of three interest-rate cuts by the Fed,
along with those of other central banks, pumped liquidity and confidence into
the international financial system. Despite profit warnings from large
multinational corporations, investors began to focus on the many sectors of
strength within the American economy: robust consumer spending, low interest
rates and unemployment, and subdued inflation.
The mixed economic picture resulted in mixed market performance, as the
technology-and health care-heavy S&P 500 index outperformed the
industrial-oriented Dow, large-cap stocks continued to be favored over small-cap
issues, and yield spreads widened to favor low-risk bonds substantially. * By
the end of the year, many investors enjoyed another round of sizeable gains, but
few could avoid a sense of trepidation as 1999 approached.
*The S&P 500 is an unmanaged index that reflects performance of the broad stock
market, while the Dow Jones Industrial Average reflects performance of
large-capitalization stocks.
A REVIEW AND STRATEGY
SESSION WITH CHARLES MEYER
AND JERRY PAUL
Charlie, could you discuss a couple of stocks you've recently added to the
portfolio?
CM: We have concentrated much of our buying on the technology sector, which
helped us a good deal toward the end of the year. Semiconductor makers such as
Intel and Altera had some very attractive valuations after the late summer
selloff, as investors worried about their multinational exposure, especially to
Asia.
But their earnings have remained strong, and signs of life in Asian economies
should help these stocks rebound even further.
What have you sold?
CM: The flip-side of our technology buying has been the reduction in our
exposure to domestic-oriented stocks. These were attractive holdings last
summer, when the global economy appeared on the brink. As Asia seemed to gain a
foothold, and growth in the American economy threatened to slow in 1999, some
retail and financial stocks became less attractive to us.
What were some of the surprises last year--both good and bad ones?
CM: The depth of the doldrums in the energy sector took us by surprise--energy
stocks and commodity prices just have not responded to the early signs of
strength in the global economy. The positive surprise has been the continued
power of the consumer and health care sectors. Along with most economic
forecasters, we have been pleasantly surprised by the continued strength of the
consumer-driven American economy.
<PAGE>
Jerry, you use a "value-oriented bond management style." What is it, and how
does it affect your performance relative to other bond funds?
JP: Let me tell you first what it's not: I don't try to anticipate interest
rates. Some bond fund managers can have a great year, of course, when they
happen to guess the direction and magnitude of interest-rate changes
correctly--but they might have a horrible year the next time around. We try to
use a strategy that it consistent and repeatable.
Basically, that strategy relies on finding bonds that are undervalued, those
that buyers will look at more favorably in the future. Perhaps the issuer will
be merged into a larger, more profitable company, for example, instantly
improving its credit rating. We look for investment themes that will help us
identify these companies. When we find them, I think of it as throwing a long
bomb in a football game because the price of our bonds can increase
substantially. Of course, we also look for shorter-term trading opportunities,
which provide our short yardage.
The fund owns many utility industry bonds. Why are they attractive?
JP: Utility deregulation has been one of our more lucrative themes. As part of
the utility deregulation process, some states have enacted legislation that
helps power companies deal with underperforming assets. We find those companies
and watch as their balance sheets improve, boosting their credit rating and the
prices of their bonds.
Have you recently adjusted the mix between equities and bonds, and on what basis
do you make that decision?
CM: Our approach is fairly straightforward: We simply keep our eyes out for good
deals on stocks, and buy more when valuations appear attractive. At the same
time, we are conscious of our fixed-income holdings allow us to moderate the
risk in the portfolio when valuations appear excessive or when we anticipate
market volatility.
Keep in mind that we actively manage this fund, so allocations as well as
specific holdings will change over time.
Year 2000 Computer Issue.
Many computer systems in use today may not be able to recognize any date after
December 31, 1999. If these systems are not fixed by that date, it is possible
that they could generate erroneous information or fail altogether. INVESCO has
committed substantial resources in an effort to make sure that its own major
computer systems will continue to function on and after January 1, 2000. Of
course, INVESCO cannot fix systems that are beyond its control. If INVESCO's own
systems, or the systems of third parties upon which it relies, do not perform
properly after December 31, 1999, the Funds could be adversely affected.
In addition, the markets for, or values of, securities in which the Funds invest
may possibly be hurt by computer failures affecting portfolio investments or
trading of securities beginning January 1, 2000. For example, improperly
functioning computer systems could result in securities trade settlement
problems and liquidity issues, production issues for individual companies and
overall economic uncertainties. Individual issuers may incur increased costs in
making their own systems Year 2000 compliant. The combination of market
uncertainty and increased costs means that there is a possibility that Year 2000
computer issues may adversely affect the Funds' investments.
<PAGE>
TEN LARGEST COMMON STOCK HOLDINGS
INVESCO Industrial Income Fund, Inc.
December 31, 1998
UNAUDITED
DESCRIPTION VALUE
- -------------------------------------------------------------------------------
Kansas City Southern Industries $ 162,318,750
Bank of New York 161,000,000
General Electric 142,887,500
US WEST 129,250,000
Bell Atlantic 116,600,000
Merck & Co 103,381,250
International Business Machines 101,612,500
Dayton Hudson 100,677,150
Anheuser-Busch Cos 91,875,000
Texas Instruments 89,840,625
Composition of holdings is subject to change.
STATEMENT OF INVESTMENT SECURITIES
INVESCO Industrial Income Fund, Inc.
December 31, 1998
UNAUDITED
SHARES
OR PRINCIPAL
DESCRIPTION AMOUNT VALUE
- -------------------------------------------------------------------------------
76.50 COMMON STOCKS
0.97 AEROSPACE & DEFENSE
Northrop Grumman 650,000 $ 47,531,250
===============================================================================
1.16 AUTOMOBILES
Ford Motor 800,000 46,950,000
General Motors Class H/(a)/ 250,000 9,921,875
===============================================================================
56,871,875
6.63 BANKS
Bank of New York 4,000,000 161,000,000
Chase Manhattan 500,000 34,031,250
Fleet Financial Group 1,376,000 61,490,000
Mellon Bank 1,000,000 68,750,000
===============================================================================
325,271,250
1.87 BEVERAGES
Anheuser-Busch Cos 1,400,000 91,875,000
===============================================================================
0.42 CHEMICALS
Olin Corp 725,000 20,526,562
===============================================================================
1.46 COMMUNICATIONS -- EQUIPMENT & MANUFACTURING
Motorola Inc 1,175,000 71,748,438
===============================================================================
5.14 COMPUTER RELATED
Compaq Computer 1,000,000 $ 41,937,500
EMC Corp(a) 300,000 25,500,000
International Business Machines 550,000 101,612,500
Microsoft Corp(a) 600,000 83,212,500
===============================================================================
252,262,500
<PAGE>
SHARES
OR PRINCIPAL
DESCRIPTION AMOUNT VALUE
- -------------------------------------------------------------------------------
0.89 CONGLOMERATES
Textron Inc 575,000 43,664,063
===============================================================================
3.83 ELECTRICAL EQUIPMENT
Emerson Electric 750,000 45,375,000
General Electric 1,400,000 142,887,500
===============================================================================
188,262,500
3.97 ELECTRONICS -- SEMICONDUCTOR
Altera Corp(a) 556,300 33,864,762
Intel Corp 600,000 71,137,500
Texas Instruments 1,050,000 89,840,625
===============================================================================
194,842,887
1.22 EQUIPMENT -- SEMICONDUCTOR
Applied Materials(a) 1,400,000 59,762,500
===============================================================================
5.16 FOODS
General Mills 1,000,000 77,750,000
Heinz (H J) Co 1,192,000 67,497,000
Kellogg Co 1,600,000 54,600,000
Quaker Oats 900,000 53,550,000
===============================================================================
253,397,000
0.29 GOLD & PRECIOUS METALS MINING
Newmont Mining 799,050 14,432,841
===============================================================================
7.77 HEALTH CARE DRUGS -- PHARMACEUTICALS
American Home Products 600,000 33,787,500
Bristol-Myers Squibb 450,000 60,215,625
Lilly (Eli) & Co 600,000 53,325,000
Merck & Co 700,000 103,381,250
SmithKline Beecham PLC Sponsored ADR
Representing 5 Ord Shrs 800,000 55,600,000
Warner-Lambert Co 1,000,000 75,187,500
===============================================================================
381,496,875
1.98 HEALTH CARE RELATED
Arterial Vascular Engineering(a) 450,000 23,625,000
Becton Dickinson 1,200,000 51,225,000
Medtronic Inc 300,000 22,275,000
===============================================================================
97,125,000
<PAGE>
SHARES
OR PRINCIPAL
DESCRIPTION AMOUNT VALUE
- -------------------------------------------------------------------------------
0.95 HOUSEHOLD PRODUCTS
Colgate-Palmolive Co 500,000 $ 46,437,500
===============================================================================
1.11 INSURANCE
Allmerica Financial 656,818 38,013,342
CIGNA Corp 212,100 16,397,981
===============================================================================
54,411,323
0.01 INVESTMENT BANK/BROKER FIRM
Omega Worldwide(a) 132,625 580,234
===============================================================================
1.17 LODGING -- HOTELS
Hilton Hotels 3,000,000 57,375,000
===============================================================================
1.78 MANUFACTURING
AlliedSignal Inc 1,970,000 87,295,625
===============================================================================
0.22 NATURAL GAS
K N Energy 300,000 10,912,500
===============================================================================
7.70 OIL & GAS RELATED
Apache Corp 900,000 22,781,250
Atlantic Richfield 750,000 48,937,500
Chevron Corp 600,000 49,762,500
Conoco Inc Class A(a) 700,000 14,612,500
Exxon Corp 1,200,000 87,750,000
Halliburton Co 898,500 26,618,062
Royal Dutch Petroleum New York
Registry 1.25 Gldr Shrs 1,000,000 47,875,000
Schlumberger Ltd 400,000 18,450,000
USX-Marathon Group 900,000 27,112,500
Union Pacific Resources Group 1,200,000 10,875,000
Unocal Corp 800,000 23,350,000
===============================================================================
378,124,312
0.74 PAPER & FOREST PRODUCTS
Champion International 500,000 20,250,000
Fort James 400,000 16,000,000
===============================================================================
36,250,000
0.59 PERSONAL CARE
Gillette Co 600,000 28,987,500
===============================================================================
3.89 RAILROADS
Kansas City Southern Industries 3,300,000 162,318,750
Norfolk Southern 900,000 28,518,750
===============================================================================
190,837,500
1.33 REAL ESTATE INVESTMENT TRUST
Health & Retirement Properties
Trust SBI 1,200,000 16,875,000
Health Care Property Investors 550,000 16,912,500
Healthcare Realty Trust 400,000 8,925,000
<PAGE>
SHARES
OR PRINCIPAL
DESCRIPTION AMOUNT VALUE
- -------------------------------------------------------------------------------
Meditrust Corp Paired Certificates 500,800 $ 7,574,600
Omega Healthcare Investors 500,000 15,093,750
===============================================================================
65,380,850
4.64 RETAIL
CVS Corp 700,200 38,511,000
Dayton Hudson 1,855,800 100,677,150
Penney (J C) Co 700,000 32,812,500
Tandy Corp 1,350,000 55,603,125
===============================================================================
227,603,775
0.93 SAVINGS & LOAN
Charter One Financial 1,652,070 45,844,943
===============================================================================
7.81 TELEPHONE
Bell Atlantic 2,200,000 116,600,000
GTE Corp 800,000 52,000,000
SBC Communications 1,600,000 85,800,000
US WEST 2,000,000 129,250,000
===============================================================================
383,650,000
0.87 TOBACCO
Philip Morris 800,000 42,800,000
===============================================================================
TOTAL COMMON STOCKS (Cost $2,328,073,689) 3,755,561,603
===============================================================================
19.90 FIXED INCOME SECURITIES
0.71 US Government Obligations
US Treasury Notes
6.125%, 8/15/2007 $ 17,200,000 18,796,383
5.500%, 5/31/2003 $ 15,500,000 15,994,062
===============================================================================
TOTAL US GOVERNMENT OBLIGATIONS
(Cost $33,273,208) 34,790,445
===============================================================================
1.22 US Government Agency Obligations
Fannie Mae, Gtd Mortgage Pass-
Through Certificates, 6.500%,
7/1/2008 $ 23,672,214 24,014,514
Government National Mortgage
Association I Pass-Through
Certificates 7.000%, 12/15/2023 $ 35,048,591 35,878,188
===============================================================================
TOTAL US GOVERNMENT AGENCY OBLIGATIONS
(Cost $58,765,444) 59,892,702
===============================================================================
17.97 Corporate Bonds
0.30 BROADCASTING
EchoStar Communications, Gtd Sr
Secured Discount Step-Up Notes,
Zero Coupon(b) 6/1/2004 $ 5,000,000 5,125,000
JCAC Inc, Sr Sub Notes, 10.125%,
6/15/2006 $ 6,000,000 6,690,000
<PAGE>
SHARES
OR PRINCIPAL
DESCRIPTION AMOUNT VALUE
- -------------------------------------------------------------------------------
Telemundo Holdings, Sr Discount
Step-Up Notes, Zero Coupon(b)(c),
8/15/2008 $ 5,250,000 $ 2,887,500
===============================================================================
14,702,500
0.45 BUILDING MATERIALS
USG Corp, Sr Notes, 8.500%,
8/1/2005 $ 21,093,000 22,226,749
===============================================================================
0.73 CABLE
CF CABLE TV, Sr Secured 2nd
Priority Notes 11.625%, 2/15/2005 $ 2,750,000 3,052,500
Continental Cablevision, Sr Deb
9.500%, 8/1/2013 $ 6,925,000 8,245,361
International Cabletel, Series A
Sr Deferred Step-Up Notes Zero
Coupon(b), 4/15/2005 $ 19,500,000 17,647,500
NTL Inc, Sr Discount Step-Up Notes
Zero Coupon(b)(c), 10/1/2008 $ 11,150,000 6,982,688
===============================================================================
35,928,049
0.10 COMMUNICATIONS -- EQUIPMENT & MANUFACTURING
Worldwide Fiber, Sr Notes(c)
12.500%, 12/15/2005 $ 5,000,000 5,050,000
===============================================================================
4.88 ELECTRIC UTILITIES
Boston Edison, Deb
8.250%, 9/15/2022 $ 4,750,000 5,229,170
7.800%, 5/15/2010 $ 6,700,000 7,711,271
7.800%, 3/15/2023 $ 4,560,000 4,852,058
Carolina Power & Light, 1st Mortgage
8.625%, 9/15/2021 $ 6,650,000 8,347,771
8.200%, 7/1/2022 $ 2,000,000 2,166,114
Cleveland Electric Illuminating
1st Mortgage, Series B, 9.500%,
5/15/2005 $ 12,000,000 13,030,331
Sr Secured Notes, Series D, 7.430%
11/1/2009 $ 7,500,000 7,886,527
Commonwealth Edison, 1st Mortgage,
Series 86 8.375%, 9/15/2022 $ 2,000,000 2,158,760
Connecticut Light & Power,
1st Refunding Mortgage,
Series 94D, 7.875%, 10/1/2024 $ 10,850,000 11,354,806
Consumers Energy, 1st Refunding
Mortgage 7.375%, 9/15/2023 $ 10,700,000 11,192,467
DQU-II Funding, Collateral Lease
8.700%, 6/1/2016 $ 17,403,000 19,686,273
Detroit Edison
1st Mortgage Medium-Term Notes,
Series C 8.240%, 1/13/2023 $ 5,600,000 6,222,272
<PAGE>
SHARES
OR PRINCIPAL
DESCRIPTION AMOUNT VALUE
- -------------------------------------------------------------------------------
Secured Medium-Term Notes
Series 92-D, 8.300%, 8/1/2022 $ 11,000,000 $ 12,128,027
Series C, 8.300%, 1/13/2023 $ 5,000,000 5,551,550
Series D, 8.310%, 8/1/2022 $ 3,000,000 3,327,564
El Paso Electric, 1st Mortgage,
Series C 8.250%, 2/1/2003 $ 5,000,000 5,275,000
Gulf States Utilities, 1st
Mortgage 8.700%, 4/1/2024 $ 9,400,000 10,392,958
Jersey Central Power & Light,
1st Mortgage
7.500%, 5/1/2023 $ 7,160,000 7,480,746
6.750%, 11/1/2025 $ 7,750,000 7,730,198
Massachusetts Electric, Medium-
Term Notes Series R, 8.550%,
2/7/2022 $ 5,000,000 5,591,665
Metropolitan Edison, Secured
Medium-Term Notes, Series B,
8.150%, 1/30/2023 $ 19,950,000 21,769,737
New York State Electric & Gas,
1st Mortgage 8.300%, 12/15/2022 $ 8,250,000 8,952,562
Pacific Gas & Electric, 1st &
Refunding Mortgage
Series 92B, 8.375%, 5/1/2025 $ 3,905,000 4,325,416
Series 93D, 7.250%, 8/1/2026 $ 18,500,000 19,632,752
Pennsylvania Power,
1st Mortgage
8.500%, 7/15/2022 $ 2,000,000 2,224,768
Pennsylvania Power & Light,
1st Mortgage
8.500%, 5/1/2022 $ 6,600,000 7,254,178
7.875%, 2/1/2023 $ 3,750,000 4,085,546
Philadelphia Electric, 1st &
Refunding Mortgage, 7.250%,
11/1/2024 $ 7,972,000 8,284,980
South Carolina Electric & Gas,
1st Mortgage 8.875%, 8/15/2021 $ 2,000,000 2,220,880
Western Massachusetts Electric,
1st Mortgage Series V, 7.750%,
12/1/2002 $ 3,250,000 3,276,123
===============================================================================
239,342,470
0.09 ELECTRICAL EQUIPMENT
Alpine Group, Sr Secured Notes,
Series B 12.250%, 7/15/2003 $ 4,249,000 4,323,357
===============================================================================
0.13 ENTERTAINMENT
Paramount Communications, Sr Deb
8.250%, 8/1/2022 $ 5,800,000 6,161,003
===============================================================================
0.31 GAMING
Grand Casinos, Gtd 1st Mortgage
Notes 10.125%, 12/1/2003 $ 9,250,000 10,082,500
Players International, Sr Notes
10.875%, 4/15/2005 $ 4,750,000 5,094,375
===============================================================================
15,176,875
<PAGE>
SHARES
OR PRINCIPAL
DESCRIPTION AMOUNT VALUE
- -------------------------------------------------------------------------------
0.20 HEALTH CARE RELATED
FHP International, Sr Notes
7.000%, 9/15/2003 $ 6,450,000 $ 6,771,751
US Surgical, Sr Notes,
7.250%, 3/15/2008 $ 3,000,000 3,249,792
===============================================================================
10,021,543
0.05 HOUSEHOLD PRODUCTS
Home Products International, Sr
Sub Notes 9.625%, 5/15/2008 $ 2,500,000 2,450,000
===============================================================================
1.22 INSURANCE
Aetna Services, Gtd Deb,
6.970%, 8/15/2036 $ 5,650,000 5,992,649
Equitable Cos, Sr Notes,
9.000%, 12/15/2004 $ 43,610,000 49,785,217
Veritas Holdings
GmbH, Sr Notes 9.625%, 12/15/2003 $ 4,068,000 4,068,000
===============================================================================
59,845,866
0.08 INVESTMENT BANK/BROKER FIRM
Lehman Brothers Holdings, Sr Notes
8.800%, 3/1/2015 $ 3,475,000 3,989,425
===============================================================================
0.16 IRON & STEEL
National Steel, 1st Mortgage,
8.375%, 8/1/2006 $ 8,000,000 8,000,000
===============================================================================
0.26 LODGING -- HOTELS
Hilton Hotels, Sr Notes,
7.200%, 12/15/2009 $ 13,220,000 12,788,181
===============================================================================
0.14 MACHINERY
AGCO Corp, Sr Sub Notes,
8.500%, 3/15/2006 $ 7,100,000 6,887,000
===============================================================================
0.18 METALS MINING
Glencore Nickel Pty Ltd,
Sr Secured Notes 9.000%,
12/1/2014 $ 11,000,000 8,910,000
===============================================================================
0.25 NATURAL GAS
Consolidated Natural Gas, Deb
6.875%, 10/15/2026 $ 5,000,000 5,400,105
NoRam Energy, Conv Sub Deb
6.000%, 3/15/2012 $ 7,064,000 6,746,120
===============================================================================
12,146,225
2.94 OIL & GAS RELATED
Atlantic Richfield, Deb
10.875%, 7/15/2005 $ 9,030,000 11,523,074
9.875%, 3/1/2016 $ 2,035,000 2,767,121
9.125%, 8/1/2031 $ 2,757,000 3,689,412
9.000%, 4/1/2021 $ 23,410,000 30,157,274
9.000%, 5/1/2031 $ 2,353,000 3,107,261
8.750%, 3/1/2032 $ 2,326,000 2,997,265
Belco Oil & Gas, Sr Sub Notes,
Series B 8.875%, 9/15/2007 $ 7,000,000 6,352,500
<PAGE>
SHARES
OR PRINCIPAL
DESCRIPTION AMOUNT VALUE
- -------------------------------------------------------------------------------
Canadian Forest Oil Ltd, Gtd
Sr Sub Notes 8.750%, 9/15/2007 $ 6,910,000 $ 6,495,400
Cliffs Drilling, Gtd Sr Notes
Series B, 10.250%, 5/15/2003 $ 5,000,000 5,275,000
Series D, 10.250%, 5/15/2003 $ 4,060,000 4,283,300
Coda Energy, Gtd Sr Sub Notes,
Series B 10.500%, 4/1/2006 $ 8,000,000 7,920,000
DeepTech International, Sr Secured
Notes 12.000%, 12/15/2000 $ 10,110,000 10,817,700
Energy Corp of America, Sr Sub
Notes, Series A 9.500%, 5/15/2007 $ 9,750,000 9,018,750
Gulf Canada Resources Ltd, Sr Notes
8.350%, 8/1/2006 $ 8,750,000 8,531,250
8.250%, 3/15/2017 $ 5,000,000 4,969,050
Northern Offshore ASA, Sr Notes(c)
10.000%, 5/15/2005 $ 5,000,000 2,600,000
Ocean Energy, Gtd Sr Sub Notes
9.750%, 10/1/2006 $ 13,716,000 13,990,320
Series B, 8.875%, 7/15/2007 $ 5,000,000 4,850,000
SEACOR SMIT, Sr Notes, 7.200%,
9/15/2009 $ 5,000,000 5,137,605
===============================================================================
144,482,282
0.29 PAPER & FOREST PRODUCTS
QUNO Corp, Sr Notes, 9.125%,
5/15/2005 $ 13,050,000 13,963,500
===============================================================================
0.40 PUBLISHING
Affiliated Newspaper Investments,
Sr Discount Step-Up Notes, Zero
Coupon(b), 7/1/2006 $ 13,900,000 14,317,000
Quebecor Printing Capital,
Gtd Deb 6.500%, 8/1/2027 $ 5,000,000 5,222,220
===============================================================================
19,539,220
0.19 RETAIL
American Stores, Deb, 7.500%,
5/1/2037 $ 8,750,000 9,465,609
===============================================================================
0.37 SAVINGS & LOAN
Sovereign Bancorp, Medium-Term
Notes 8.000%, 3/15/2003 $ 6,500,000 6,889,960
Western Financial Savings Bank,
Sub Capital Deb, 8.500%, 7/1/2003 $ 14,000,000 11,456,619
===============================================================================
18,346,579
0.12 SERVICES
Loewen Group International, Gtd
Sr Notes Series 4, 8.250%,
10/15/2003 $ 6,860,000 5,899,600
===============================================================================
1.14 TELECOMMUNICATIONS -- CELLULAR & WIRELESS
360 Communications, Notes 6.650%,
1/15/2008 $ 10,000,000 10,603,189
<PAGE>
SHARES
OR PRINCIPAL
DESCRIPTION AMOUNT VALUE
- -------------------------------------------------------------------------------
Cencall Communications, Sr
Discount Step-Up Notes,
Zero Coupon(b), 1/15/2004 $ 17,000,000 $ 16,660,000
Centennial Cellular, Sr Notes
8.875%, 11/1/2001 $ 3,587,000 3,793,253
Esat Holdings Ltd, Sr Deferred
Coupon Step-Up Notes, Series B,
Zero Coupon(b), 2/1/2007 $ 7,850,000 5,181,000
NEXTEL Communications, Sr Discount
Step-Up Notes, Zero Coupon(b),
8/15/2004 $ 5,000,000 4,850,000
Teligent Inc, Sr Discount Step-Up
Notes Series B, Zero Coupon(b),
3/1/2008 $ 14,750,000 7,301,250
Triton PCS, Sr Sub Discount
Step-Up Notes Zero Coupon(b),
5/1/2008 $ 16,300,000 7,620,250
===============================================================================
56,008,942
1.27 TELECOMMUNICATIONS -- LONG DISTANCE
Level 3 Communications
Sr Discount Step-Up Notes Zero
Coupon(b)(c), 12/1/2008 $ 32,650,000 19,018,625
Sr Notes, 9.125%, 5/1/2008 $ 9,950,000 9,825,625
Qwest Communications
International Sr Notes(c), 7.250%,
11/1/2008 $ 12,950,000 13,209,000
RSL Communications PLC Ltd
Sr Discount Step-Up Notes Zero
Coupon(b), 3/1/2008 $ 11,500,000 6,583,750
Sr Notes, 9.125%, 3/1/2008 $ 15,000,000 13,800,000
===============================================================================
62,437,000
1.59 TELEPHONE
Centel Capital, Deb, 9.000%,
10/15/2019 $ 5,000,000 6,265,784
Citizens Utilities, Deb,
7.000%, 11/1/2025 $ 4,950,000 5,196,718
Intermedia Communications,
Sr Notes Series B, 8.500%,
1/15/2008 $ 10,000,000 9,500,000
McLeodUSA Inc Sr Discount
Step-Up Notes Zero Coupon(b),
3/1/2007 $ 3,600,000 2,718,000
Sr Notes(c), 9.500%, 11/1/2008 $ 2,750,000 2,915,000
Sr Notes, 9.250%, 7/15/2007 $ 6,250,000 6,531,250
MetroNet Communications
Sr Discount Step-Up Notes
Zero Coupon(b), 11/1/2007 $ 8,250,000 5,403,750
Zero Coupon(b), 6/15/2008 $ 7,750,000 4,746,875
Sr Notes, 12.000%, 8/15/2007 $ 7,775,000 8,630,250
<PAGE>
SHARES
OR PRINCIPAL
DESCRIPTION AMOUNT VALUE
- -------------------------------------------------------------------------------
NEXTLINK Communications
Sr Discount Step-Up Notes Zero
Coupon(b), 4/15/2008 $ 5,500,000 $ 3,135,000
Sr Notes, 9.625%, 10/1/2007 $ 5,425,000 5,180,875
NEXTLINK Communications
LLC/NEXTLINK Capital, Sr Notes,
12.500%, 4/15/2006 $ 3,750,000 4,050,000
RCN Corp, Sr Discount Step-Up Notes
Series B, Zero Coupon(b),
2/15/2008 $ 21,600,000 11,772,000
Zero Coupon(b), 7/1/2008 $ 3,800,000 2,071,000
===============================================================================
78,116,502
0.13 TEXTILE -- APPAREL MANUFACTURING
Haynes International, Sr Notes
11.625%, 9/1/2004 $ 7,075,000 6,155,250
===============================================================================
TOTAL CORPORATE BONDS (Cost $901,372,171) 882,363,727
===============================================================================
TOTAL FIXED INCOME SECURITIES (Cost $993,410,823) 977,046,874
===============================================================================
3.60 SHORT-TERM INVESTMENTS
3.38 COMMERCIAL PAPER
0.67 AUTOMOBILES
General Motors Acceptance, 4.960%,
1/7/1999 $ 32,807,000 32,807,000
===============================================================================
0.65 CONSUMER FINANCE
American Express Credit, 5.750%,
1/4/1999 $ 31,796,000 31,796,000
===============================================================================
0.59 FINANCIAL
Heller Financial, 6.150%, 1/5/1999 $ 29,261,000 29,261,000
===============================================================================
0.87 INSURANCE
CIGNA Corp, 6.000%, 1/4/1999 $ 42,913,000 42,913,000
===============================================================================
0.60 RETAIL
Sears Roebuck Acceptance, 6.000%,
1/5/1999 $ 29,261,000 29,261,000
===============================================================================
TOTAL COMMERCIAL PAPER (Cost $166,038,000) 166,038,000
===============================================================================
0.22 REPURCHASE AGREEMENTS
Repurchase Agreement with State
Street dated 12/31/1998 due
1/4/1999 at 4.850%, repurchased
at $10,744,787 (Collateralized by
US Treasury Bills, Discount Note
due 12/9/1999, value $10,935,081)
(Cost $10,739,000) $ 10,739,000 10,739,000
===============================================================================
TOTAL SHORT-TERM INVESTMENTS (Cost $176,777,000) 176,777,000
===============================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $3,498,261,512)
(Cost for Income Tax Purposes
$3,498,261,981) $ 4,909,385,477
===============================================================================
<PAGE>
(a) Security is non-income producing.
(b) 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.
(c) Securities are acquired pursuant to Rule 144A. The Fund deems such
securities to be "liquid" since an institutional market exists.
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INVESCO Industrial Income Fund, Inc.
December 31, 1998
UNAUDITED
ASSETS
Investment Securities at Value (Cost $3,498,261,512)(a) $ 4,909,385,477
Cash 117
Receivables:
Fund Shares Sold 5,266,004
Dividends and Interest 19,096,618
Prepaid Expenses 327,297
===============================================================================
TOTAL ASSETS 4,934,075,513
===============================================================================
LIABILITIES
Payables:
Distributions to Shareholders 3,751
Fund Shares Repurchased 30,790,245
Accrued Distribution Expenses 1,032,247
Accrued Expenses 316,102
===============================================================================
TOTAL LIABILITIES 32,142,345
===============================================================================
Net Assets at Value $ 4,901,933,168
===============================================================================
NET ASSETS
Paid-in Capital(b) $ 3,412,366,737
Accumulated Undistributed Net Investment Income 2,139,837
Accumulated Undistributed Net Realized Gain on Investment
Securities and Foreign Currency Transactions 76,302,629
Net Appreciation of Investment Securities and Foreign
Currency Transactions 1,411,123,965
===============================================================================
Net Assets at Value $ 4,901,933,168
===============================================================================
Net Asset Value, Offering and Redemption Price per Share $ 15.06
===============================================================================
(a) Investment securities at cost and value at December 31, 1998 include a
repurchase agreement of $10,739,000.
(b) The Fund has one billion authorized shares of common stock, par value of
$1.00 per share, of which 325,524,553 were outstanding at December 31, 1998.
See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS
INVESCO Industrial Income Fund, Inc.
Six Months Ended December 31, 1998
UNAUDITED
INVESTMENT INCOME
INCOME
Dividends $ 34,338,684
Interest 43,857,509
Foreign Taxes Withheld (146,151)
===============================================================================
TOTAL INCOME 78,050,042
===============================================================================
EXPENSES
Investment Advisory Fees 11,379,885
Distribution Expenses 6,001,811
Transfer Agent Fees 3,174,679
Administrative Fees 365,108
Custodian Fees and Expenses 261,268
Directors' Fees and Expenses 140,134
Professional Fees and Expenses 110,976
Registration Fees and Expenses 48,326
Reports to Shareholders 249,974
Other Expenses 112,587
===============================================================================
TOTAL EXPENSES 21,844,748
Fees and Expenses Absorbed by Investment Adviser (2,384)
Fees and Expenses Paid Indirectly (261,171)
===============================================================================
NET EXPENSES 21,581,193
===============================================================================
NET INVESTMENT INCOME 56,468,849
===============================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Gain on Investment Securities and Foreign
Currency Transactions 135,585,727
Change in Net Appreciation of Investment Securities and
Foreign Currency Transactions (14,084,258)
===============================================================================
NET GAIN ON INVESTMENT SECURITIES AND
FOREIGN CURRENCY TRANSACTIONS 121,501,469
===============================================================================
Net Increase in Net Assets from Operations $ 177,970,318
===============================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
INVESCO Industrial Income Fund, Inc.
Six Months Year
Ended Ended
December 31 June 30
-----------------------------------------------------------------------------
1998 1998
UNAUDITED
OPERATIONS
Net Investment Income $ 56,468,849 $ 115,423,537
Net Realized Gain on Investment Securities
and Foreign Currency Transactions 135,585,727 563,837,730
Change in Net Appreciation of Investment
Securities and Foreign Currency
Transactions (14,084,258) 232,218,236
===============================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS 177,970,318 911,479,503
===============================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (55,561,561) (115,239,239)
In Excess of Net Investment Income 0 (34,577)
Net Realized Gain on Investment Securities
and Foreign Currency Transactions (451,700,393) (487,553,284)
===============================================================================
TOTAL DISTRIBUTIONS (507,261,954) (602,827,100)
===============================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 293,760,017 796,227,427
Reinvestment of Distributions 476,889,992 566,171,643
===============================================================================
770,650,009 1,362,399,070
Amounts Paid for Repurchases of Shares (620,159,831) (1,164,991,454)
===============================================================================
NET INCREASE IN NET ASSETS
FROM FUND SHARE TRANSACTIONS 150,490,178 197,407,616
===============================================================================
Total Increase (Decrease) in Net Assets (178,801,458) 506,060,019
NET ASSETS
Beginning of Period 5,080,734,626 4,574,674,607
===============================================================================
End of Period (Including Accumulated
Undistributed Net Investment Income of
$2,139,837 and $1,232,549, respectively) $4,901,933,168 $ 5,080,734,626
===============================================================================
-----------------------------------------------------------
FUND SHARE TRANSACTIONS
Shares Sold 19,138,925 49,736,211
Shares Issued from Reinvestment of
Distributions 32,775,211 38,238,701
===============================================================================
51,914,136 87,974,912
Shares Repurchased (40,318,289) (72,818,140)
===============================================================================
Net Increase in Fund Shares 11,595,847 15,156,772
===============================================================================
See Notes to Financial Statements
<PAGE>
Notes to financial statements - INVESCO Industrial
Income Fund, Inc.
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 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.
<PAGE>
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. 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 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 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.
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 U.S. Government.
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.
<PAGE>
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 mortgage-backed securities, market discounts, amortized premiums,
foreign currency transactions, nontaxable dividends, net operating losses and
expired capital loss carryforwards.
F. 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 are reduced by credits earned by the Fund from
security brokerage transactions under a broker/service arrangement. Such credits
are included in Fees and Expenses Paid Indirectly in the Statement of
Operations.
NOTE 2 -- Investment Advisory And Other Agreements. INVESCO Funds Group,
Inc. ("IFG") serves as the Fund's investment adviser. As compensation for its
services to the Fund, IFG receives an investment advisory fee which is accrued
daily at the applicable rate and paid monthly. The fee is based on the annual
rate of the Fund's average net assets as follows:
AVERAGE NET ASSETS
- -------------------------------------------------------------------------------
$0 $350 to $700 Million $2 Billion $4 Billion $5 Billion Over
$350 $700 to $2 to $4 to $5 to $6 $6
Million Million Billion Billion Billion Billion Billion
- --------------------------------------------------------------------------------
0.60% 0.55% 0.50% 0.45% 0.40% 0.375%* 0.35%*
*Efffective May 15, 1997, IFG voluntarily agreed to waive the portion of its
fee which exceeds 0.40% of average net assets in excess of $5 billion. Such
waiver may be discontinued in the future.
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 six months ended December
31, 1998, the Fund paid the Distributor $6,007,687 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, 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.
NOTE 3-- Purchases And Sales Of Investment Securities. For the six months
ended December 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 $915,736,759 and $1,078,273,835, respectively.
For the six months ended December 31, 1998, the aggregate cost of purchases
and proceeds from sales of U.S. Government securities were $28,281,406 and
$52,962,964, respectively.
<PAGE>
NOTE 4 -- Appreciation And Depreciation. At December 31, 1998, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $1,520,829,313 and the gross depreciation of securities in which
there was an excess of tax cost over value amounted to $109,705,817, resulting
in net appreciation of $1,411,123,496.
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 are based on an annual rate equal to 50% of the sum of the
retainer fee at the time of retirement plus the annual meeting fee.
Pension expenses for the six months ended December 31, 1998, included in
Directors' Fees and Expenses in the Statement of Operations were $60,747.
Unfunded accrued pension costs of $229,412 and pension liability of $552,573 are
included in Prepaid Expenses and Accrued Expenses, respectively, in the
Statement of Assets and Liabilities.
The independent directors have contributed to a deferred compensation 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 certain of the
INVESCO and Treasurer's Series Trust Funds.
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,
1998, there were no such borrowings.
<PAGE>
INVESCO Industrial Income Fund, Inc.
(For a Fund Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31 YEAR ENDED JUNE 30
- -------------------------------------------------------------------------------
1998 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
UNAUDITED
PER SHARE DATA
Net Asset Value -- Beginning
of Period $16.18 $15.31 $ 13.21 $ 11.92 $ 11.32 $ 11.53
==============================================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.19 0.38 0.35 0.41 0.42 0.36
Net Gains on Securities
(Both Realized and Unrealized) 0.38 2.54 3.05 1.53 1.14 0.02
===============================================================================================================================
Total from Investment Operations 0.57 2.92 3.40 1.94 1.56 0.38
===============================================================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment Income(a) 0.18 0.38 0.35 0.41 0.42 0.36
In Excess of Net Investment Income 0.00 0.00 0.00 0.00 0.00 0.11
Distributions from Capital Gains 1.51 1.67 0.95 0.24 0.54 0.12
===============================================================================================================================
Total Distributions 1.69 2.05 1.30 0.65 0.96 0.59
==============================================================================================================================
Net Asset Value -- End of Period $15.06 $16.18 $15.31 $ 13.21 $ 11.92 $ 11.32
===============================================================================================================================
TOTAL RETURN 4.00%(b) 20.55% 27.33% 16.54% 14.79% 3.24%
RATIOS
Net Assets -- End of Period ($000 Omitted) $4,901,933 $5,080,735 $4,574,675 $4,170,536 $4,009,609 $3,913,322
Ratio of Expenses to Average Net Assets(c) 0.46%(b)(d) 0.90%(d) 0.95%(d) 0.93%(d) 0.94% 0.92%
Ratio of Net Investment Income to Average
Net Assets(c) 1.19%(b) 2.35% 2.54% 3.17% 3.61% 3.11%
Portfolio Turnover Rate 21%(b) 58% 47% 63% 54% 56%
(a) Distributions in excess of net investment income for the year ended June
30, 1998 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) Various expenses of the Fund were voluntarily absorbed by IFG for the six
months ended December 31, 1998 and for the years ended June 30, 1998,
1997, 1996, 1995 and 1994. If such expenses had not been voluntarily
absorbed, ratio of expenses to average net assets would have been
0.46% (not annualized), 0.90%, 0.98%, 0.96%, 0.97% and 0.95%, respectively,
and ratio of net investment income to average net assets would have been
1.19% (not annualized) 2.35%, 2.51%, 3.14%, 3.58% and 3.08%, respectively.
(d) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
FAMILY OF FUNDS
Newspaper
Fund Name Fund Code Ticker Symbol Abbreviation
- -------------------------------------------------------------------------------
International
International Blue Chip 09 IIBCX ItlBlChp
Iternational Growth 49 FSIGX IntlGr
Emerging Markets 43 * *
Asian Growth 41 IVAGX AsianGr
Pacific Basin 54 FPBSX PcBas
European 56 FEURX Europ
European Small Company 37 IVECX EuroSmCo
Latin American Growth 34 IVSLX LatinAmGr
- -------------------------------------------------------------------------------
Sector
Energy 50 FSTEX Enrgy
Environmental Services 59 FSEVX Envirn
Financial Services 57 FSFSX FinSvc
Gold 51 FGLDX Gold
Health Sciences 52 FHLSX HlthSc
Leisure 53 FLISX Leisur
Realty 42 IVSRX Realty
Technology-Class II 55 FTCHX Tech
Utilities 58 FSTUX Util
Worldwide Capital Goods 38 ISWGX WldCap
Worldwide Communications 39 ISWCX WldCom
- -------------------------------------------------------------------------------
Stock
Growth & Income 21 IVGIX Gro&Inc
INVESCO Endeavor 61 IVENX Endeavor
Blue Chip Growth 10 FLRFX Grwth
Dynamics 20 FIDYX Dynm
Small Company Growth 60 FIEGX SmCoGth
Value Equity 46 FSEQX ValEq
Small Company Value 74 IDSCX SmCoVal
S&P 500 Index Fund Class II 23 ISPIX SP500II
- -------------------------------------------------------------------------------
Combination
Industrial Income 15 FIIIX IndInc
Multi-Asset Allocation 70 IMAAX MulAstAl
Total Return 48 FSFLX TotRtn
Balanced 71 IMABX Bal
- -------------------------------------------------------------------------------
Bond
Short-Term Bond 33 INIBX ShTrBd
Intermediate Government Bond 47 FIGBX IntGov
U.S. Government Securities 32 FBDGX USGvt
Select Income 30 FBDSX SelInc
High Yield 31 FHYPX HiYld
- -------------------------------------------------------------------------------
Tax-Exempt
Tax-Free Intermediate Bond 36 IVTIX *
Tax-Free Long-Term Bond 35 FTIFX TxFre
- -------------------------------------------------------------------------------
Money Market
U.S. Government Money Fund 44 FUGXX InvGvtMF
Cash Reserves 25 FDSXX InvCshR
Tax-Free Money Fund 40 FFRXX InvTaxFree
*Not yet available
For more information, including management fees, expenses and risks, please
call or write for a free prospectus. Read it carefully before you invest or
send money.
<PAGE>
INVESCO
YOU SHOULD
KNOW WHAT
INVESCO KNOWS
We're easy to stay in touch with:
Investor Services: 1-800-525-8085
PAL(R), your Personal Account Line: 1-800-424-8085
On the World Wide Web: 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
INVESCO Distributors, Inc. (SM), Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
This information must be preceded or accompanied
by a current prospectus.
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