Annual Report
August 31, 1998
INVESCO
Value Funds
Intermediate Government
Bond Fund
Total Return Fund
Value Equity Fund
INVESCO
YOU SHOULD KNOW WHAT INVESCO KNOWS. (TM)
<PAGE>
Market Overview September 1998
What a difference a year makes. In the summer of 1997, market pundits were
concerned that the Federal Reserve Board would have to raise interest rates to
cool an overheating economy. Now, speculation has intensified that the Fed will
continue to lower interest rates to address worldwide liquidity problems and
keep the U.S. economy growing in the face of a global slowdown brought about by
the emerging market currency crisis. But what has really changed in the last 12
months?
o Market psychology for equities has deteriorated. After more than seven
years of a bull market producing strong returns with limited volatility, equity
markets experienced two painful corrections in the last 12 months. In fact,
August 1998 was the worst month for equities since October 1987, as many equity
indexes experienced declines over 15%.
o Corporate earnings have slowed in 1998, as the strong dollar and slower
global growth have made it difficult for many U.S. companies to sell their
products overseas. In addition, intense global competition has kept prices in
check -- making it difficult for companies to enhance earnings by increasing
prices.
o Inflation appears to be comatose. Although real wages are starting to
increase, declining commodity prices and a flood of cheaper products from the
world's emerging markets have decreased consumer prices and reduced the threat
of inflation.
o Interest rates have declined significantly. The implied yield on a
30-year U.S. government bond reached 7.17% in April 1997, and the economy
appeared on the verge of overheating. But, as the Asian currency crisis
intensified, a flight to quality occurred in the fixed-income market in the fall
of 1997, and the yield on the 30-year bond dropped to 5.97% by year-end. As the
global currency turmoil continued in 1998, the yield on the 30-year bond
decreased and ended September at 4.95%. Interest rates are presently at levels
not seen in the last three decades.
The next six to 12 months may be difficult for equity investors. Although
the economy still appears to be in good shape fundamentally, the emerging market
turmoil has spread from Asia to Russia and is attempting to infect Latin America
- -- which is a large trade partner of the U.S. Investors should be prepared for
continued volatility for the rest of 1998. However, once the turmoil passes, it
could create enormous opportunities for U.S. companies to increase their global
presence.
<PAGE>
For fixed-income investors, global currency problems will continue to exert
deflationary pressures on the U.S. economy, increasing the potential for lower
interest rates. With inflation hibernating, the risks associated with owning
fixed-income securities have decreased -- especially for high quality
obligations.
Recent market volatility is not necessarily indicative of a long-term
downturn in the equity markets. For the patient investor with a long time
horizon, stocks have offered the best opportunities to accumulate wealth. But if
you are an investor who is uncomfortable with wide price swings, it may be a
good time to evaluate your financial goals and adjust your portfolio
accordingly. Remember that one of the best ways to reduce volatility is through
diversification.
INVESCO Value Funds
The line graphs below illustrate the value of a $10,000 investment in each
of the INVESCO Value Funds, plus reinvested dividends and capital gain
distributions, for the 10-year period ended 8/31/98. The charts and other total
return figures cited reflect the funds' operating expenses, but the indexes do
not have expenses, which would, of course, have lowered their performance. (2)
Intermediate Government Bond Fund
Average Annual Total Return
as of 8/31/98 (2)
1 Year 7.92%
----------------------------------
5 Years 5.47%
----------------------------------
10 Years 7.73%
----------------------------------
Graph:
This line graph represents a comparison of the value of a $10,000
investment in the INVESCO Intermediate Government Bond Fund to the
value of a $10,000 investment in the Lehman Government
Bond-Intermediate Index, assuming in each case reinvestment of all
dividends and capital gain distributions, for the ten year period ended
8/31/98.
Intermediate Government Bond Fund
For the one-year period ended 8/31/98, INVESCO Intermediate Government Bond
Fund had a total return of 7.92%, compared to a total return of 9.27% for the
Lehman Intermediate Government Bond Index. (Of course, past performance is not a
guarantee of future results.)(1),(2)
Review & Outlook
A Discussion with Portfolio Manager Jim Baker
What has changed over the past year?
During the last 12 months, the Asian currency crisis spread from the
Asian/Pacific Rim region to Russia and now appears to be heading towards Latin
America. This caused interest rates in the U.S. to decrease and a "flight to
quality" to occur in the fixed-income markets, where Treasury securities
produced substantial returns. Although we have a large allocation of the
portfolio exposed to Treasuries, we also increased the fund's weighting in
agency-backed securities over the last year as widening spreads made these
obligations more attractive.
<PAGE>
In addition, our analysis suggested lower interest rates, and we extended
the fund's duration over the last six months. (Duration is the weighted average
term-to-maturity of security's cash flows, generally used to measure the price
volatility of a bond.)
What's your near-term outlook?
The flight to quality in the fixed-income market has increased spreads
between Treasuries and other fixed-income obligations beyond their historical
norms. It appears that there may be investment opportunities in
intermediate-term corporate bonds and agency-backed securities, so we may adjust
the portfolio accordingly. We will continue to use our value-oriented bond
management style to actively manage the portfolio, and we believe the prospects
for lower interest rates remain good.
Fund Management
Intermediate Government Bond Fund is managed by James O. Baker. Before
joining INVESCO, Jim was associated with Willis Investment Counsel, Morgan
Keegan, and Drexel Burnham Lambert. A Chartered Financial Analyst, he holds a BA
from Mercer University. Ralph H. Jenkins, Jr., assists in managing the fund. He
began his investment career in 1969 and is both a Chartered Financial Analyst
and Chartered Investment Counselor. He earned his MA at the University of
Alabama and a BBC from Auburn University.
Total Return Fund
Average Annual Total Return
as of 8/31/99 (2)
1 Year 6.02%
---------------------------
5 Years 13.72%
---------------------------
10 Years 13.41%
---------------------------
Graph:
This line graph represents a comparison of the value of a $10,000
investment in the INVESCO Total Return 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 8/31/98.
Total Return Fund
For the one-year period ended 8/31/98, INVESCO Total Return Fund had a
total return of 6.02%, compared to a total return of 8.08% for the S&P 500, and
11.43% for the Lehman Government/Corporate Bond Index. However, the fund
outperformed its peer group for the same period, besting the average return of
2.56% as measured by the Lipper Flexible Portfolio objective. (Lipper Analytical
Services, Inc., is an independent mutual fund analyst, which tracks total return
unadjusted for commissions. Of course, past performance is not a guarantee of
future results.) (1),(2)
Review & Outlook
A Discussion with Portfolio Manager and Chairman of INVESCO Capital Management
Ed Mitchell
What has changed over the past year?
The fund seeks to add value in three ways: through asset allocation, stock
selection, and bond strategy. Asset allocation decisions are based on the
difference between returns on bonds and stocks. If this relationship is
out-of-line with the historical spread of three percent, then the fund's asset
mix is adjusted; 60% stocks and 40% bonds is considered a neutral position.
<PAGE>
During the last 12 months, declining interest rates have increased the
spread between the implied return on stocks and the yield-to-maturity on bonds.
With these widening spreads, we continue to favor stocks relative to bonds, as
they appear more attractive on a long-term basis. If this environment persists,
we will adjust the portfolio towards its maximum equity weighting of 70%.
In the equity portion of the portfolio, what industries or sectors are you
favoring?
We employ a bottom-up methodology when selecting securities, concentrating
on company fundamentals rather than sector or industry analysis. Our value bias
has the fund overweighted in consumer cyclicals, basic materials, and utilities.
We tend to avoid high-flying momentum stocks and instead concentrate investments
on more conservative, value-oriented securities.
What securities helped fund performance?
During the last year, some of the strongest returns were posted by British
Telecommunications PLC, Ford Motor, Schering-Plough Corp, and Southern New
England Telecommunications.
What changes have you made to the fixed-income portion of the portfolio?
As the currency crisis spread, the fixed-income market experienced a flight
to quality which Treasury securities outperformed all fixed-income obligations.
Although we remain heavily weighted in Treasuries, the widening of corporate
spreads enabled us to increase the fund's allocation to corporate bonds, as they
presently appear attractively valued. During this period, we also extended the
duration of the fund as the threat of inflation diminished. (Duration is the
weighted average term-to-maturity of a security's cash flows, generally used to
measure the price volatility of a bond.)
What's your outlook for the near future?
Although day-to-day volatility has increased in the equity markets, with
interest rates at historically low levels we feel that equities still represent
an attractive value compared to the potential returns on bonds. We have
positioned the portfolio accordingly.
Fund Management
Total Return Fund is managed by Edward C. Mitchell, chairman of INVESCO
Capital Management. He earned his MBA at the University of Colorado and a BA
from the University of Virginia. Ed began his investment career in 1969 and is a
Chartered Financial Analyst. He is assisted by David S. Griffin, who began his
investment career in 1982. A Chartered Financial Analyst, David holds an MBA
from the College of William & Mary, and a BA from Ohio Wesleyan University.
Value Equity Fund
For the one-year period ended 8/31/98, INVESCO Value Equity Fund had a
total return of -1.06%, compared to a total return of 8.08% for the S&P 500.
However, the fund outperformed its peer group for the same period, beating the
average return of 1.33% for funds in the Lipper Growth and Income objective.
(Lipper Analytical Services, Inc., is an independent mutual fund analyst, which
tracks total return unadjusted for commissions. Of course, past performance is
not a guarantee of future results.) (1),(2)
Review & Outlook A Discussion with Portfolio Manager Mike Harhai
What has changed over the past year?
Although market volatility increased in the last 12 months, we witnessed a
continuation of a pattern established almost three years ago, which a limited
number of large-capitalization growth companies supported the market. Because of
our value-oriented, conservative investment approach, we stayed away from these
high-flying momentum stocks and looked for value in other areas of the market.
It is important to remember that both growth and value investment styles go
through cycles of overperformance and underperformance. Value investing has
lagged growth since 1994; but with the market correction in August 1998, we may
be entering a period which value outperforms growth.
<PAGE>
Value Equity Fund
Average Annual Total Return
as of 8/31/98 (2)
1 Year -1.06%
---------------------------
5 Years 14.61%
---------------------------
10 Years 13.71%
---------------------------
Graph:
This line graph represents a comparison of the value of a $10,000
investment in the INVESCO Value Equity Fund to the value of a $10,000
investment in the S&P 500 Index, assuming in each case reinvestment of
all dividends and capital gain distributions, for the ten year period
ended 8/31/98.
What areas have helped performance?
The strongest returns for the fund over the last year have come from
large-capitalization pharmaceuticals, such as Merck & Co., Schering-Plough
Corp., and American Home Products. Large-capitalization pharmaceutical companies
are benefiting from an improved regulatory environment and strong new product
pipelines. The Federal Drug Administration (FDA) has dramatically cut the
approval time for new drugs. This has improved the profitability of large-cap
pharmaceuticals, since new drug sales typically drive their revenue and earnings
growth. Not only are new drugs coming to the market sooner, but a
better-educated consumer is increasing the demand for these new products.
Have there been any disappointments?
Being a value investor can be difficult at times, as value stocks often
remain cheap for years, until they come back in style with the market. Over the
last 12 months, the fund's exposure to both capital goods and basic materials
companies hindered performance. However, many companies in these two sectors are
selling at compelling valuations and may offer excellent long-term potential.
What's your near-term outlook?
The most recent market correction has created many value opportunities. We
are presently increasing the fund's investment positions in some financial
companies, as these stocks were decimated in August 1998. For the long-term
value investor, market volatility many times creates investment opportunities.
We will continue to use volatility as a way to improve the quality of the fund's
holdings.
After the most recent market correction, it appears the market is starting
to broaden out and become less infatuated with a limited number of stocks. This
bodes well for both the market and value investors.
Fund Management
Value Equity Fund is managed by Michael C. Harhai. Mike began his
investment career in 1972. Before joining INVESCO, he served as a portfolio
manager with Citizens & Southern Investment Advisors and later as head of the
equity/balanced group with Sovran Capital Management. He holds an MBA from the
University of Central Florida and a BA from the University of South Florida. He
is a Chartered Financial Analyst, as is Terrence Irrgang, who assists in
managing the fund. Terry is a 17-year veteran of the investment business, and
holds an MBA from Temple University, as well as a BA from Gettysburg College.
<PAGE>
(1) The S&P 500 is an unmanaged index of common stocks considered representative
of the broad U.S. equity market. The Lehman Government/Corporate Bond Index and
Lehman Intermediate Government Bond Index are unmanaged indexes of securities
considered to be representative of the overall domestic fixed-income and
intermediate-term government bond markets, respectively.
(2)Total return assumes reinvestment of dividends and capital gain distributions
for the periods indicated. Past performance is not a guarantee of future
results. Investment return and principal value will fluctuate so that, when
redeemed, an investor's shares may be
worth more or less than when purchased.
<PAGE>
Ten Largest Common Stock Holdings
August 31, 1998
Description Value
- -------------------------------------------------------
Total Return Fund
British Telecommunications PLC
Sponsored ADR Representing
10 Ord Shrs $ 38,381,250
Schering-Plough Corp 30,100,000
DTE Energy 29,487,500
Entergy Corp 28,812,500
Nucor Corp 28,750,000
Unicom Corp 28,500,000
Compaq Computer 27,937,500
Loews Corp 27,421,875
Bristol-Myers Squibb 24,468,750
Supervalu Inc 24,375,000
Value Equity Fund
Rite Aid $ 8,467,875
Fannie Mae 7,754,906
Schering-Plough Corp 7,224,000
Merck & Co 6,701,187
Torchmark Corp 6,613,750
American General 6,425,000
NationsBank Corp 6,347,748
Vulcan Materials 6,277,450
Lowe's Cos 6,248,137
Allergan Inc 6,142,500
Composition of holdings is subject to change.
<PAGE>
- ------------------------------------------------------------------------------
Statement of Investment Securities
August 31, 1998
- ------------------------------------------------------------------------------
Shares or
Principal
% Description Amount Value
- ------------------------------------------------------------------------------
Intermediate Government Bond Fund
85.12 FIXED INCOME SECURITIES
54.68 US Government Obligations
US Treasury Bonds
9.250%, 2/15/2016 $ 500,000 $ 715,312
7.625%, 2/15/2025 $ 500,000 651,406
US Treasury Notes
8.750%, 8/15/2000 $ 2,000,000 2,139,376
8.500%, 2/15/2000 $ 1,000,000 1,047,500
7.500%, 11/15/2001 $ 1,900,000 2,038,345
7.500%, 5/15/2002 $ 1,450,000 1,568,266
6.375%, 9/30/2001 $ 2,500,000 2,595,313
6.375%, 8/15/2002 $ 1,750,000 1,833,125
6.250%, 1/31/2002 $ 2,000,000 2,075,000
6.250%, 2/15/2003 $ 1,000,000 1,048,438
6.000%, 10/15/1999 $ 1,000,000 1,009,063
5.750%, 11/30/2002 $ 1,500,000 1,540,312
5.750%, 8/15/2003 $ 1,000,000 1,030,938
5.500%, 2/15/2008 $ 1,000,000 1,030,938
- ------------------------------------------------------------------------------
TOTAL US GOVERNMENT
OBLIGATIONS
(Cost $19,625,486) 20,323,332
- ------------------------------------------------------------------------------
30.44 US Government Agency Obligations
Fannie Mae, Gtd Mortgage
Pass-Through Certificates
7.000%, 1/1/2028 $ 980,110 998,114
6.500%, 2/1/2028 $ 977,822 981,694
6.000%, 5/15/2008 $2,000,000 2,056,344
6.000%, 5/1/2009 $ 766,708 768,901
Federal Farm Credit Bank
Medium-Term Notes
6.320%, 10/12/2010 $ 500,000 529,173
Federal Home Loan Bank
5.675%, 8/18/2003 $1,000,000 1,013,298
Freddie Mac, Gold
Participation Certificates
8.000%, 10/1/2010 $ 666,543 687,899
7.000%, 6/1/2028 $ 992,632 1,010,936
6.500%, 7/1/2001 $ 661,277 667,506
Government National Mortgage
Association I, Pass-Through
Certificates
7.500%, 3/15/2026 $ 959,898 988,368
7.000%, 10/15/2008 $ 505,470 519,542
6.500%, 10/15/2008 $ 504,442 513,800
6.000%, 11/15/2008 $ 572,061 575,979
- ------------------------------------------------------------------------------
TOTAL US GOVERNMENT
AGENCY OBLIGATIONS
(Cost $11,198,303) 11,311,554
- ------------------------------------------------------------------------------
TOTAL FIXED INCOME SECURITIES
(Cost $30,823,789) 31,634,886
- ------------------------------------------------------------------------------
14.88 SHORT-TERM INVESTMENTS
5.66 US Government Obligations
US Treasury Notes
8.000%, 8/15/1999 $ 2,000,000 2,051,876
<PAGE>
6.375%, 7/15/1999 $ 50,000 50,516
- ------------------------------------------------------------------------------
TOTAL US GOVERNMENT
OBLIGATIONS
(Cost $2,087,227) 2,102,392
- ------------------------------------------------------------------------------
9.22 Repurchase Agreements
Repurchase Agreement
with State Street dated
8/31/1998 due 9/1/1998 at
5.730%, repurchased at
$3,429,546 (Collaterized
by US Treasury Bonds
due 8/15/2026 at 6.750%,
value $3,533,809)
(Cost $3,429,000) $ 3,429,000 3,429,000
- ------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $5,516,227) 5,531,392
- ------------------------------------------------------------------------------
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $36,340,016)
(Cost for Income Tax Purposes
$36,426,802) $ 37,166,278
==============================================================================
Total Return Fund
61.93 COMMON STOCKS
2.38 AEROSPACE & DEFENSE
Boeing Co 450,000 $ 13,921,875
Lockheed Martin 175,000 15,301,563
Precision Castparts 350,000 13,190,625
Raytheon Co Class B 400,000 18,250,000
- ------------------------------------------------------------------------------
60,664,063
- ------------------------------------------------------------------------------
0.32 AIRLINES
Southwest Airlines 450,000 8,015,625
- ------------------------------------------------------------------------------
1.06 AUTO PARTS
Cooper Tire & Rubber 319,850 5,117,600
Genuine Parts 700,000 21,918,750
- ------------------------------------------------------------------------------
27,036,350
- ------------------------------------------------------------------------------
0.87 AUTOMOBILES
Ford Motor 500,000 22,000,000
- ------------------------------------------------------------------------------
3.26 BANKS
First Chicago NBD 300,000 19,012,500
First Union 300,000 14,550,000
National City 405,000 23,793,750
NationsBank Corp 250,000 14,250,000
Wachovia Corp 154,000 11,290,125
- ------------------------------------------------------------------------------
82,896,375
- ------------------------------------------------------------------------------
0.45 BEVERAGES
Anheuser-Busch Cos 250,000 11,531,250
- ------------------------------------------------------------------------------
0.56 BUILDING MATERIALS
Sherwin-Williams Co 600,000 14,325,000
- ------------------------------------------------------------------------------
<PAGE>
2.18 CHEMICALS
Dow Chemical 200,000 15,600,000
Great Lakes Chemical 600,000 23,475,000
Morton International 650,000 14,462,500
Octel Corp(a) 125,000 1,921,875
- ------------------------------------------------------------------------------
55,459,375
- ------------------------------------------------------------------------------
3.59 COMPUTER RELATED
Adaptec Inc(a) 500,000 5,750,000
Compaq Computer 1,000,000 27,937,500
Computer Associates
International 400,000 10,800,000
Hewlett-Packard Co 500,000 24,281,250
International Business Machines 200,000 22,525,000
- ------------------------------------------------------------------------------
91,293,750
- ------------------------------------------------------------------------------
1.26 CONGLOMERATES
Hanson PLC Sponsored ADR
Representing 5 Ord Shrs 900,000 22,162,500
National Service Industries 265,000 9,871,250
- ------------------------------------------------------------------------------
32,033,750
- ------------------------------------------------------------------------------
0.96 DISTRIBUTION
Supervalu Inc 1,200,000 24,375,000
- ------------------------------------------------------------------------------
4.53 ELECTRIC UTILITIES
DTE Energy 700,000 29,487,500
Edison International 600,000 17,062,500
Entergy Corp 1,000,000 28,812,500
GPU Inc 300,000 11,268,750
Unicom Corp 800,000 28,500,000
- ------------------------------------------------------------------------------
115,131,250
1.25 ELECTRICAL EQUIPMENT
General Electric 300,000 24,000,000
Grainger (W W) Inc 200,000 7,837,500
- ------------------------------------------------------------------------------
31,837,500
- ------------------------------------------------------------------------------
0.71 ELECTRONICS -- SEMICONDUCTOR
Rockwell International 500,000 18,125,000
- ------------------------------------------------------------------------------
0.49 FINANCIAL
MGIC Investment 300,000 12,450,000
- ------------------------------------------------------------------------------
1.69 FOODS
Archer-Daniels-Midland Co 892,500 13,387,500
Heinz (H J) Co 200,000 10,662,500
Unilever NV New York
Registered Shrs 300,000 19,012,500
- ------------------------------------------------------------------------------
43,062,500
- ------------------------------------------------------------------------------
0.57 HARDWARE & TOOLS
Snap-On Inc 550,000 14,437,500
- ------------------------------------------------------------------------------
4.92 HEALTH CARE DRUGS -- PHARMACEUTICALS
Abbott Laboratories 350,000 13,475,000
American Home Products 400,000 20,050,000
Bristol-Myers Squibb 250,000 24,468,750
Lilly (Eli) & Co 300,000 19,650,000
<PAGE>
Merck & Co 150,000 17,390,625
Schering-Plough Corp 350,000 30,100,000
- ------------------------------------------------------------------------------
125,134,375
- ------------------------------------------------------------------------------
0.71 HEALTH CARE RELATED
Columbia/HCA Healthcare 800,000 18,050,000
- ------------------------------------------------------------------------------
0.82 HOUSEHOLD FURNITURE & APPLIANCES
Shaw Industries 400,000 6,050,000
Whirlpool Corp 300,000 14,887,500
- ------------------------------------------------------------------------------
20,937,500
- ------------------------------------------------------------------------------
4.68 INSURANCE
American General 300,000 19,275,000
Lincoln National 200,000 17,200,000
Loews Corp 325,000 27,421,875
Ohio Casualty 600,000 22,500,000
Old Republic International 550,000 12,271,875
SAFECO Corp 500,000 20,312,500
- ------------------------------------------------------------------------------
118,981,250
- ------------------------------------------------------------------------------
0.63 INSURANCE BROKERS
Marsh & McLennan 330,000 16,005,000
- ------------------------------------------------------------------------------
0.91 INVESTMENT BANK/BROKER FIRM
Morgan Stanley Dean
Witter & Co 400,000 23,225,000
- ------------------------------------------------------------------------------
1.13 IRON & STEEL
Nucor Corp 800,000 28,750,000
- ------------------------------------------------------------------------------
1.18 MACHINERY
Caterpillar Inc 400,000 16,875,000
Deere & Co 400,000 13,175,000
- ------------------------------------------------------------------------------
30,050,000
- ------------------------------------------------------------------------------
1.70 MANUFACTURING
Federal Signal 350,000 7,131,250
Illinois Tool Works 200,000 9,687,500
Minnesota Mining &
Manufacturing 150,000 10,275,000
Textron Inc 120,000 7,530,000
York International 250,000 8,656,250
- ------------------------------------------------------------------------------
43,280,000
- ------------------------------------------------------------------------------
0.53 METALS MINING
Phelps Dodge 300,000 13,425,000
- ------------------------------------------------------------------------------
1.08 OFFICE EQUIPMENT & SUPPLIES
Ikon Office Solutions 1,000,000 5,562,500
Xerox Corp 250,000 21,953,125
- ------------------------------------------------------------------------------
27,515,625
- ------------------------------------------------------------------------------
4.27 OIL & GAS RELATED
Amoco Corp 500,000 22,656,250
Exxon Corp 300,000 19,631,250
Norsk Hydro A/SA Sponsored
ADR Representing Ord Shrs 600,000 20,625,000
Repsol SA Sponsored ADR
Representing Ord Shrs 450,000 19,771,875
<PAGE>
Royal Dutch Petroleum New
York Registry 1.25 Gldr Shrs 260,000 10,335,000
Yacimientos Petroliferos Fiscades
SA Sponsored ADR
Representing Class D Shrs 700,000 15,487,500
- ------------------------------------------------------------------------------
108,506,875
- ------------------------------------------------------------------------------
0.26 PAPER & FOREST PRODUCTS
Westvaco Corp 310,000 6,510,000
- ------------------------------------------------------------------------------
1.14 POLLUTION CONTROL
Browning-Ferris Industries 400,000 13,000,000
Waste Management (a) 362,500 15,995,312
- ------------------------------------------------------------------------------
28,995,312
- ------------------------------------------------------------------------------
0.65 PUBLISHING
Gannett Co 280,000 16,520,000
- ------------------------------------------------------------------------------
0.74 RAILROADS
CSX Corp 500,000 18,875,000
- ------------------------------------------------------------------------------
2.36 RETAIL
DillardOs Inc Class A 650,000 18,768,750
K mart Corp(a) 500,000 6,375,000
Penney (J C) Co 300,000 14,868,750
Rite Aid 350,000 12,665,625
Toys "R" Us(a) 400,000 7,425,000
- ------------------------------------------------------------------------------
60,103,125
- ------------------------------------------------------------------------------
1.69 SERVICES
Dun & Bradstreet 750,000 17,625,000
Electronic Data Systems 700,000 23,450,000
R H Donnelley 150,000 1,978,125
- ------------------------------------------------------------------------------
43,053,125
- ------------------------------------------------------------------------------
0.68 SPECIALTY PRINTING
Deluxe Corp 600,000 17,400,000
- ------------------------------------------------------------------------------
1.51 TELECOMMUNICATIONS -- LONG DISTANCE
British Telecommunications PLC
Sponsored ADR Representing
10 Ord Shrs 300,000 38,381,250
- ------------------------------------------------------------------------------
1.85 TELEPHONE
Bell Atlantic 300,000 13,237,500
Southern New England
Telecommunications 300,000 19,443,750
Telefonos de Mexico SA de
CV Sponsored ADR
Representing 20 Series L Shrs 400,000 14,275,000
- ------------------------------------------------------------------------------
46,956,250
- ------------------------------------------------------------------------------
1.04 TEXTILE -- APPAREL MANUFACTURING
Liz Claiborne 400,000 11,400,000
VF Corp 400,000 15,150,000
- ------------------------------------------------------------------------------
26,550,000
- ------------------------------------------------------------------------------
1.32 TOBACCO
Fortune Brands 250,000 6,890,625
<PAGE>
Gallaher Group PLC Sponsored
ADR Representing 4
Ord Shrs 250,000 5,875,000
Philip Morris 500,000 20,781,250
- ------------------------------------------------------------------------------
33,546,875
- ------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $1,295,341,524) 1,575,425,850
- ------------------------------------------------------------------------------
33.73 FIXED INCOME SECURITIES
20.94 US Government Obligations
US Treasury Bonds
11.250%, 2/15/2015 $ 12,950,000 21,318,937
9.375%, 2/15/2006 $ 38,750,000 48,934,002
9.250%, 2/15/2016 $ 20,800,000 29,757,000
8.125%, 8/15/2019 $ 20,800,000 27,670,510
7.625%, 2/15/2025 $ 45,000,000 58,626,583
7.250%, 8/15/2022 $ 36,800,000 45,517,000
US Treasury Notes
8.750%, 8/15/2000 $ 25,000,000 26,742,199
8.000%, 5/15/2001 $ 20,500,000 22,037,500
6.500%, 8/15/2005 $ 29,300,000 31,763,045
6.375%, 8/15/2002 $ 38,750,000 40,590,625
6.250%, 2/15/2003 $ 43,300,000 45,397,364
6.125%, 8/15/2007 $ 51,000,000 54,585,961
5.750%, 8/15/2003 $ 18,300,000 18,866,165
5.500%, 2/15/2008 $ 40,000,000 41,237,518
US Treasury Security
Stripped Interest
Payment, Generic Tint
Payment, Zero Coupon
8/15/2003 $ 25,250,000 19,741,712
- ------------------------------------------------------------------------------
TOTAL US GOVERNMENT OBLIGATIONS
(Cost $500,202,339) 532,786,121
- ------------------------------------------------------------------------------
4.54 US Government Agency Obligations
Fannie Mae
Gtd Mortgage Pass-Through
Certificates
8.500%, 3/1/2010 $ 4,589,903 4,785,479
8.000%, 7/1/2024 $ 5,666,647 5,866,169
7.500%, 8/1/2007 $ 1,241,021 1,276,750
7.500%, 7/1/2024 $ 10,442,404 10,726,436
7.000%, 12/1/2027 $ 9,507,899 9,682,559
6.500%, 5/1/2026 $ 6,823,328 6,872,523
6.000%, 5/1/2009 $ 7,680,708 7,702,675
Medium-Term Notes
6.060%, 10/8/2002 $ 20,000,000 20,507,339
Freddie Mac, Gold
Participation Certificates
8.000%, 10/1/2010 $ 3,110,535 3,210,197
8.000%, 5/1/2024 $ 4,986,575 5,158,512
7.500%, 12/1/2026 $ 7,492,535 7,697,305
7.000%, 4/1/2028 $ 11,624,078 11,838,425
<PAGE>
6.500%, 7/1/2001 $ 4,628,938 4,672,542
Government National Mortgage
Association, Pass-Through
Certificates
7.500%, 3/15/2026 $ 4,479,522 4,612,384
7.000%, 10/15/2008 $ 741,626 762,273
7.000%, 12/15/2025 $ 8,085,461 8,264,553
7.000%, 12/15/2022 $ 184,997 189,694
6.500%, 10/15/2008 $ 756,663 770,699
6.000%, 11/15/2008 $ 858,091 863,969
- ------------------------------------------------------------------------------
TOTAL US GOVERNMENT AGENCY OBLIGATIONS
(Cost $113,296,345) 115,460,483
- ------------------------------------------------------------------------------
8.24 Corporate Bonds
0.81 AUTOMOBILES
Ford Motor, Notes
6.500%, 8/1/2018 $ 15,000,000 14,787,419
General Motors
Acceptance, Notes
6.125%, 1/22/2008 $ 6,000,000 5,943,720
- ------------------------------------------------------------------------------
20,731,139
- ------------------------------------------------------------------------------
2.46 BANKS
ABN Amro Bank NV
Sub Notes
6.625%, 10/31/2001 $ 5,000,000 5,151,655
7.550%, 6/28/2006 $ 15,000,000 16,269,585
BankAmerica Corp
Sub Notes
6.875%, 6/1/2003 $ 4,000,000 4,170,348
National City, Sub Notes
7.200%, 5/15/2005 $ 2,000,000 2,154,308
SunTrust Banks, Sr Notes
6.250%, 6/1/2008 $ 17,250,000 17,372,939
Wachovia Bank
Medium-Term Notes
Series 3
7.000%, 10/17/2008 $ 7,000,000 7,463,750
Wachovia Corp, Sub Notes
6.250%, 8/4/2008 $ 10,000,000 10,070,180
- ------------------------------------------------------------------------------
62,652,765
- ------------------------------------------------------------------------------
0.24 CHEMICALS
Eastman Chemical, Notes
6.375%, 1/15/2004 $ 6,000,000 5,978,591
- ------------------------------------------------------------------------------
0.61 COMMUNICATIONS --
EQUIPMENT & MANUFACTURING
Motorola Inc, Notes
6.500%, 3/1/2008 $ 15,000,000 15,562,095
- ------------------------------------------------------------------------------
0.12 ELECTRIC UTILITIES
Duke Energy, Medium-Term
Notes
6.125%, 7/22/2003 $ 2,900,000 2,957,719
- ------------------------------------------------------------------------------
<PAGE>
0.36 FINANCIAL
Associates Corp of North
America, Sr Notes
6.375%, 10/15/2002 $ 5,000,000 5,123,524
Commercial Credit, Notes
6.375%, 9/15/2002 $ 4,000,000 4,080,540
- ------------------------------------------------------------------------------
9,204,064
- ------------------------------------------------------------------------------
0.94 FOODS
CPC International
Medium-Term Notes
Series D
6.875%, 10/15/2003 $ 3,000,000 3,176,547
Notes, Series C
6.150%, 1/15/2006 $ 15,000,000 15,275,894
Campbell Soup, Notes
6.900%, 10/15/2006 $ 5,000,000 5,373,244
- ------------------------------------------------------------------------------
23,825,685
- ------------------------------------------------------------------------------
0.21 INSURANCE
CNA Financial, Notes
6.450%, 1/15/2008 $ 5,300,000 5,258,231
- ------------------------------------------------------------------------------
0.31 LEISURE TIME
Carnival Corp, Notes
6.150%, 4/15/2008 $ 8,000,000 8,024,336
- ------------------------------------------------------------------------------
0.47 MACHINERY
Cooper Industries
Medium-Term Notes
Series 3
6.375%, 5/8/2008 $ 11,600,000 11,881,566
- ------------------------------------------------------------------------------
0.36 NATURAL GAS
Enron Corp, Notes
6.625%, 11/15/2005 $ 9,000,000 9,195,984
- ------------------------------------------------------------------------------
0.14 PUBLISHING
Gannett Co, Notes
5.850%, 5/1/2000 $ 3,500,000 3,514,220
- ------------------------------------------------------------------------------
0.38 RETAIL
May Department Stores, Deb
6.875%, 11/1/2005 $ 4,000,000 4,219,272
Wal-Mart Stores, Notes
8.625%, 4/1/2001 $ 5,000,000 5,379,614
- ------------------------------------------------------------------------------
9,598,886
- ------------------------------------------------------------------------------
0.68 TELEPHONE
Ameritech Capital
Funding, Notes
6.150%, 1/15/2008 $ 15,000,000 15,166,154
BellSouth
Telecommunications, Notes
6.500%, 6/15/2005 $ 2,000,000 2,087,244
- ------------------------------------------------------------------------------
17,253,398
- ------------------------------------------------------------------------------
<PAGE>
0.16 TOYS
Mattel Inc, Notes
6.750%, 5/15/2000 $ 4,000,000 4,063,655
- ------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost $206,938,107) 209,702,334
- ------------------------------------------------------------------------------
TOTAL FIXED INCOME SECURITIES
(Cost $820,436,791) 857,948,938
- ------------------------------------------------------------------------------
4.34 SHORT-TERM INVESTMENTS
0.79 US Government Obligations
US Treasury Notes
6.375%, 7/15/1999
(Cost $20,025,803) $ 20,000,000 20,206,259
- ------------------------------------------------------------------------------
0.10 Corporate Bonds
0.06 BEVERAGES
PepsiCo Inc, Deb
7.750%, 10/1/1998 $ 1,500,000 1,502,254
- ------------------------------------------------------------------------------
0.04 ELECTRIC UTILITIES
Duke Energy, 1st & Ref
Mortgage, Notes
7.500%, 4/1/1999 $ 1,000,000 1,009,765
- ------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost $2,508,363) 2,512,019
- ------------------------------------------------------------------------------
3.45 Repurchase Agreements
Repurchase Agreement with
State Street dated 8/31/1998
due 9/1/1998 at 5.730%,
repurchased at
$87,866,983 (Collateralized
by US Treasury Bonds, due
8/15/2021 at 8.125%, value
$90,366,478)
(Cost $87,853,000) $ 87,853,000 87,853,000
- ------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $110,387,166) 110,571,278
- ------------------------------------------------------------------------------
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $2,226,165,481)
(Cost for Income Tax Purposes
$2,227,278,800) $ 2,543,946,066
==============================================================================
Value Equity Fund
98.08 COMMON STOCKS
3.56 AEROSPACE & DEFENSE
Lockheed Martin 53,260 $ 4,656,921
Precision Castparts 62,000 2,336,625
Raytheon Co Class B 120,000 5,475,000
- ------------------------------------------------------------------------------
12,468,546
1.48 AIRLINES
Southwest Airlines 290,400 5,172,750
- ------------------------------------------------------------------------------
<PAGE>
1.62 AUTOMOBILES
Ford Motor 128,600 5,658,400
- ------------------------------------------------------------------------------
6.95 BANKS
Chase Manhattan 30,000 1,590,000
Commerce Bancshares 100,000 4,000,000
First Chicago NBD 80,000 5,070,000
First Union 60,000 2,910,000
NationsBank Corp 111,364 6,347,748
Wachovia Corp 60,000 4,398,750
- ------------------------------------------------------------------------------
24,316,498
- ------------------------------------------------------------------------------
0.92 BEVERAGES
PepsiCo Inc 116,000 3,211,750
- ------------------------------------------------------------------------------
4.95 BUILDING MATERIALS
Lowe's Cos 178,200 6,248,137
Sherwin-Williams Co 200,000 4,775,000
Vulcan Materials 56,300 6,277,450
- ------------------------------------------------------------------------------
17,300,587
0.68 CHEMICALS
Dow Chemical 30,600 2,386,800
- ------------------------------------------------------------------------------
5.34 COMPUTER RELATED
Compaq Computer 148,200 4,140,337
Computer Associates
International 113,225 3,057,075
International Business Machines 36,000 4,054,500
Oracle Corp(a) 174,400 3,477,100
Sun Microsystems(a) 99,900 3,958,538
- ------------------------------------------------------------------------------
18,687,550
- ------------------------------------------------------------------------------
1.95 CONGLOMERATES
Hanson PLC Sponsored ADR
Representing 5 Ord Shrs 150,000 3,693,750
National Service Industries 84,400 3,143,900
- ------------------------------------------------------------------------------
6,837,650
- ------------------------------------------------------------------------------
1.39 DISTRIBUTION
Supervalu Inc 240,000 4,875,000
- ------------------------------------------------------------------------------
4.31 ELECTRIC UTILITIES
DTE Energy 137,000 5,771,125
Southern Co 135,000 3,796,875
Unicom Corp 155,000 5,521,875
- ------------------------------------------------------------------------------
15,089,875
- ------------------------------------------------------------------------------
1.66 ELECTRICAL EQUIPMENT
General Electric 72,500 5,800,000
- ------------------------------------------------------------------------------
4.00 FINANCIAL
Associates First Capital Class A 33,704 1,992,749
Fannie Mae 136,500 7,754,906
MGIC Investment 102,100 4,237,150
- ------------------------------------------------------------------------------
13,984,805
- ------------------------------------------------------------------------------
<PAGE>
11.31 HEALTH CARE DRUGS -- PHARMACEUTICALS
Abbott Laboratories 94,000 3,619,000
Allergan Inc 130,000 6,142,500
Allergan Specialty Therapeutics
Class A(a) 6,500 62,969
American Home Products 100,000 5,012,500
Bristol-Myers Squibb 60,000 5,872,500
Merck & Co 57,800 6,701,187
Schering-Plough Corp 84,000 7,224,000
Warner-Lambert Co 75,600 4,932,907
- ------------------------------------------------------------------------------
39,567,563
- ------------------------------------------------------------------------------
2.15 HEALTH CARE RELATED
Biomet Inc 168,900 4,539,187
Columbia/HCA Healthcare 132,000 2,978,250
- ------------------------------------------------------------------------------
7,517,437
- ------------------------------------------------------------------------------
1.28 HOUSEHOLD FURNITURE & APPLIANCES
Whirlpool Corp 90,100 4,471,213
- ------------------------------------------------------------------------------
11.40 INSURANCE
American General 100,000 6,425,000
American International Group 79,125 6,117,352
General Re 26,500 5,498,750
Jefferson-Pilot Corp 86,362 4,901,044
Loews Corp 50,000 4,218,750
Old Republic International 72,500 1,617,656
SAFECO Corp 110,000 4,468,750
Torchmark Corp 185,000 6,613,750
- ------------------------------------------------------------------------------
39,861,052
- ------------------------------------------------------------------------------
1.25 INSURANCE BROKERS
Marsh & McLennan 90,000 4,365,000
- ------------------------------------------------------------------------------
0.70 IRON & STEEL
Nucor Corp 68,200 2,450,937
- ------------------------------------------------------------------------------
2.47 MACHINERY
Caterpillar Inc 75,700 3,193,594
Dover Corp 200,000 5,450,000
- ------------------------------------------------------------------------------
8,643,594
- ------------------------------------------------------------------------------
2.96 MANUFACTURING
Federal Signal 178,500 3,636,937
Textron Inc 54,100 3,394,775
York International 96,000 3,324,000
- ------------------------------------------------------------------------------
10,355,712
- ------------------------------------------------------------------------------
0.73 METALS MINING
Phelps Dodge 57,200 2,559,700
- ------------------------------------------------------------------------------
2.76 OFFICE EQUIPMENT & SUPPLIES
Ikon Office Solutions 190,000 1,056,875
Pitney Bowes 69,100 3,429,088
Xerox Corp 58,700 5,154,594
- ------------------------------------------------------------------------------
9,640,557
- ------------------------------------------------------------------------------
6.60 OIL & GAS RELATED
Amoco Corp 101,000 4,576,562
<PAGE>
Exxon Corp 70,550 4,616,616
Norsk Hydro A/SA Sponsored
ADR Representing Ord Shrs 90,000 3,093,750
Repsol SA Sponsored ADR
Representing Ord Shrs 105,400 4,631,013
Royal Dutch Petroleum New
York Registry 1.25 Gldr Shrs 88,304 3,510,084
Yacimientos Petroliferos Fiscades
SA Sponsored ADR
Representing Class D Shrs 120,000 2,655,000
- ------------------------------------------------------------------------------
23,083,025
- ------------------------------------------------------------------------------
0.90 PAPER & FOREST PRODUCTS
Kimberly-Clark Corp 82,700 3,152,938
- ------------------------------------------------------------------------------
1.00 PUBLISHING
American Greetings Class A 95,900 3,512,337
- ------------------------------------------------------------------------------
2.42 RETAIL
Rite Aid 234,000 8,467,875
- ------------------------------------------------------------------------------
2.99 SERVICES
Dun & Bradstreet 230,000 5,405,000
Electronic Data Systems 116,600 3,906,100
GATX Corp 34,500 1,138,500
- ------------------------------------------------------------------------------
10,449,600
- ------------------------------------------------------------------------------
1.33 SPECIALTY PRINTING
Deluxe Corp 160,000 4,640,000
- ------------------------------------------------------------------------------
1.42 TELEPHONE
Ameritech Corp 50,000 2,356,250
US West 50,000 2,600,000
- ------------------------------------------------------------------------------
4,956,250
- ------------------------------------------------------------------------------
2.83 TEXTILE -- APPAREL MANUFACTURING
Liz Claiborne 186,000 5,301,000
VF Corp 121,200 4,590,450
- ------------------------------------------------------------------------------
9,891,450
- ------------------------------------------------------------------------------
1.29 TOBACCO
Philip Morris 108,200 4,497,063
- ------------------------------------------------------------------------------
1.48 TOYS
Mattel Inc 160,400 5,192,950
- ------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $286,409,462) 343,066,464
- ------------------------------------------------------------------------------
1.92 SHORT-TERM INVESTMENTS --
REPURCHASE AGREEMENTS
Repurchase Agreement with
State Street dated
8/31/1998 due 9/1/1998
at 5.730%, repurchased at
$6,725,070
(Collateralized by US
Treasury Bonds, due
8/15/2026 at 6.750%,
value $6,925,906)
(Cost $6,724,000) $ 6,724,000 6,724,000
- ------------------------------------------------------------------------------
<PAGE>
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $293,133,462)
(Cost for Income Tax Purposes
$293,144,232) 349,790,464
==============================================================================
(a) Security is non-income producing.
See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
August 31, 1998
Intermediate
Government Total Return Value Equity
Bond Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investment Securities:
At Cost(a) $36,340,016 $2,226,165,481 $293,133,462
==================================================================================================================
At Value(a) $37,166,278 $2,543,946,066 $349,790,464
Cash 292,024 0 540,937
Receivables:
Investment Securities Sold 0 21,776,393 896,533
Fund Shares Sold 2,208,169 3,076,362 206,600
Dividends and Interest 328,671 11,157,039 787,812
Prepaid Expenses and Other Assets 14,374 166,711 36,325
- ------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 40,009,516 2,580,122,571 352,258,671
- ------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payables:
Custodian 0 1,256 0
Distributions to Shareholders 4,780 214,743 4,011
Investment Securities Purchased 2,092,707 5,542,970 1,137,980
Fund Shares Repurchased 619,014 13,120,401 1,026,558
Accrued Distribution Expenses 4,814 54,926 79,421
Accrued Expenses and Other Payables 7,626 172,269 26,837
- ------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 2,728,941 19,106,565 2,274,807
- ------------------------------------------------------------------------------------------------------------------
Net Assets at Value $ 37,280,575 $2,561,016,006 $349,983,864
==================================================================================================================
NET ASSETS
Paid-in Capital $ 36,592,934 $2,174,161,220 $261,737,953
Accumulated Undistributed (Distributions in Excess of) Net
Investment Income 327 132,400 (10,836)
Accumulated Undistributed Net Realized Gain (Loss) on Investment
Securities and Foreign Currency Transactions (138,948) 68,941,801 31,599,745
Net Appreciation of Investment Securities and
Foreign Currency Transactions 826,262 317,780,585 56,657,002
- ------------------------------------------------------------------------------------------------------------------
Net Assets at Value $ 37,280,575 $2,561,016,006 $349,983,864
==================================================================================================================
Shares Outstanding(b) 2,922,427 90,949,075 13,627,619
Net Asset Value, Offering and Redemption Price per Share $ 12.76 $ 28.16 $ 25.68
==================================================================================================================
</TABLE>
(a) Investment securities at cost and value at August 31, 1998 include
repurchase agreements of $3,429,000, $87,853,000 and $6,724,000 for
Intermediate Government Bond, Total Return and Value Equity Funds,
respectively.
(b) The Trust has one class of shares which may be divided into different
series, each representing an interest in a separate Fund. At August 31,
1998, there was an unlimited number of authorized Fund shares.
See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended August 31, 1998
Intermediate
Government Total Return Value Equity
Bond Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
INCOME
Dividends $ 0 $ 35,209,430 $ 7,314,414
Interest 2,309,958 51,559,742 987,978
Foreign Taxes Withheld 0 (725,548) (73,487)
- ------------------------------------------------------------------------------------------------------------------
TOTAL INCOME 2,309,958 86,043,624 8,228,905
- ------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees 226,874 13,926,522 3,080,351
Distribution Expenses 29,217 101,656 520,628
Transfer Agent Fees 204,187 3,767,444 918,694
Administrative Fees 15,672 367,796 71,607
Custodian Fees and Expenses 10,567 283,390 61,090
Professional Fees and Expenses 15,662 83,603 28,494
Registration Fees and Expenses 26,402 251,231 83,210
Reports to Shareholders 7,910 173,135 82,270
Trustees' Fees and Expenses 11,280 114,919 29,153
Other Expenses 11,814 76,138 15,529
- ------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 559,585 19,145,834 4,891,026
Fees and Expenses Absorbed by Investment Adviser (176,551) (197,490) (164,235)
Fees and Expenses Paid Indirectly (4,877) (302,628) (26,514)
- ------------------------------------------------------------------------------------------------------------------
NET EXPENSES 378,157 18,645,716 4,700,277
- ------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 1,931,801 67,397,908 3,528,628
- ------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Gain on Investment Securities and Foreign
Currency Transactions 440,515 86,022,682 39,716,148
Change in Net Appreciation (Depreciation) of Investment Securities and
Foreign Currency Transactions 519,048 (79,067,445) (45,560,535)
- ------------------------------------------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENT SECURITIES 959,563 6,955,237 (5,844,387)
- ------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets from Operations $ 2,891,364 $ 74,353,145 $(2,315,759)
==================================================================================================================
</TABLE>
See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Year Ended August 31
Intermediate Government
Bond Fund Total Return Fund
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1998 1997 1998 1997
OPERATIONS
Net Investment Income $ 1,931,801 $ 2,385,295 $ 67,397,908 $ 44,496,579
Net Realized Gain on Investment
Securities and Foreign Currency
Transactions 440,515 126,618 86,022,682 20,361,309
Change in Net Appreciation (Depreciation)
of Investment Securities and Foreign
Currency Transactions 519,048 348,594 (79,067,445) 269,713,544
- --------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS 2,891,364 2,860,507 74,353,145 334,571,432
- --------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (1,931,801) (2,385,295) (67,353,840) (44,405,999)
Net Realized Gain on Investment Securities and
Foreign Currency Transactions 0 0 (34,772,560) (4,314,901)
- --------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1,931,801) (2,385,295) (102,126,400) (48,720,900)
- --------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS
Proceeds from Sale of Shares 33,923,198 26,474,792 1,412,738,595 997,370,885
Reinvestment of Distributions 1,744,866 2,208,130 100,609,294 47,962,510
- --------------------------------------------------------------------------------------------------------------------
35,668,064 28,682,922 1,513,347,889 1,045,333,395
Amount Paid for Repurchases of Shares (43,787,720) (24,665,970) (770,152,733) (517,740,980)
- --------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS FROM FUND SHARE
TRANSACTIONS (8,119,656) 4,016,952 743,195,156 527,592,415
- --------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets (7,160,093) 4,492,164 715,421,901 813,442,947
NET ASSETS
Beginning of Period 44,440,668 39,948,504 1,845,594,105 1,032,151,158
- --------------------------------------------------------------------------------------------------------------------
End of Period $ 37,280,575 $ 44,440,668 $ 2,561,016,006 $ 1,845,594,105
====================================================================================================================
Accumulated Undistributed Net Investment
Income Included in Net Assets at
End of Period $ 327 $ 0 $ 132,400 $ 106,017
- --------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS
Shares Sold 2,691,029 2,132,651 46,622,819 39,163,785
Shares Issued from Reinvestment of
Distributions 139,204 178,829 3,448,941 1,844,859
- --------------------------------------------------------------------------------------------------------------------
2,830,233 2,311,480 50,071,760 41,008,644
Shares Repurchased (3,480,710) (1,985,434) (25,589,174) (20,216,862)
- --------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Fund Shares (650,477) 326,046 24,482,586 20,791,782
====================================================================================================================
</TABLE>
See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets (Continued)
Year Ended August 31
Value Equity Fund
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1998 1997
OPERATIONS
Net Investment Income $ 3,528,628 $ 4,046,156
Net Realized Gain on Investment Securities and Foreign Currency Transactions 39,716,148 20,055,067
Change in Net Appreciation (Depreciation) of Investment Securities
and Foreign Currency Transactions (45,560,535) 57,254,344
- --------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (2,315,759) 81,355,567
- --------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (3,546,111) (4,071,368)
In Excess of Net Investment Income (11,054) 0
Net Realized Gain on Investment Securities (26,588,368) (5,507,949)
- --------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (30,145,533) (9,579,317)
- --------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 451,339,743 517,380,902
Reinvestment of Distributions 28,948,214 9,315,225
- --------------------------------------------------------------------------------------------------------------------
480,287,957 526,696,127
Amounts Paid for Repurchases of Shares (467,608,421) (428,752,415)
- --------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS 12,679,536 97,943,712
- --------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets (19,781,756) 169,719,962
NET ASSETS
Beginning of Period 369,765,620 200,045,658
- --------------------------------------------------------------------------------------------------------------------
End of Period $ 349,983,864 $ 369,765,620
====================================================================================================================
Accumulated Undistributed (Distributions In Excess of) Net Investment Income
Included in Net Assets at End of Period $ (10,836) $ 17,483
- --------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS
Shares Sold 15,256,421 20,198,347
Shares Issued from Reinvestment of Distributions 1,058,632 378,067
- --------------------------------------------------------------------------------------------------------------------
16,315,053 20,576,414
Shares Repurchased (15,751,418) (16,506,962)
- --------------------------------------------------------------------------------------------------------------------
Net Increase in Fund Shares 563,635 4,069,452
====================================================================================================================
</TABLE>
See Notes to Financial Statements
<PAGE>
Notes to Financial Statements
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Value Trust
(the "Trust") is organized under the laws of the Commonwealth of Massachusetts
and presently consists of three separate Funds: Intermediate Government Bond
Fund, Total Return Fund and Value Equity Fund. The investment objective of each
Fund is to achieve a high total return on investments through capital
appreciation and current income. The Trust 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 Trust 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 Trust's trustees.
Debt securities are valued at evaluated bid prices as determined by a
pricing service approved by the Trust's trustees. 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 Trust's trustees. Short-term securities
are stated at amortized cost (which approximates market value) if maturity
is 60 days or less at the time of purchase, or market value if maturity is
greater than 60 days.
Assets and liabilities initially expressed in terms of foreign
currencies are translated into U.S. dollars at the prevailing market rates
as quoted by one or more banks or dealers on the date of valuation.
B. REPURCHASE AGREEMENTS -- Repurchase agreements held by the Trust are fully
collateralized by U.S. Government securities and such collateral is in the
possession of the Trust'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 Trust 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 Trust 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
<PAGE>
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 Trust may have elements of risk due to investments in foreign
issuers located in a specific country. Such foreign investments may subject
the Trust 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 Trust'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 Trust does not hold short-term forward foreign
currency contracts for trading purposes. The Trust 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 Trust has complied, and continues to comply,
with the provisions of the Internal Revenue Code applicable to regulated
investment companies and, accordingly, has made or intends to make
sufficient distributions of net investment income and net realized capital
gains, if any, to relieve it from all federal and state income taxes and
federal excise taxes. At August 31, 1998, Intermediate Government Bond Fund
had $27,745, $16,031 and $8,387 in net capital loss carryovers which expire
in the years 2003, 2004 and 2005, respectively.
Net capital loss carryovers utilized in 1998 by Intermediate
Government Bond Fund amounted to $384,251.
To the extent future capital gains are offset by capital loss
carryovers, such gains will not be distributed to shareholders.
Dividends paid by the Trust from net investment income and
distributions of net realized short-term capital gains are, for federal
income tax purposes, taxable as ordinary income to shareholders. Of the
ordinary income distributions declared for the year ended August 31, 1998,
40.64% for Total Return Fund and 41.08% for Value Equity Fund qualified for
the dividends received deduction available to the Trust's corporate
shareholders.
Investment income received from foreign sources may be subject to
foreign withholding taxes. Dividend and interest income is shown gross of
foreign withholding taxes in the accompanying financial statements.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- For Total Return and Value
Equity Funds, dividends and distributions to shareholders are recorded on
the ex dividend/distribution date. All of Intermediate Government Bond
Fund's net investment income is distributed to shareholders by dividends
declared daily and paid monthly. Income dividends are reinvested at the
month-end net asset value. The Trust 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.
<PAGE>
For the year ended August 31, 1998, the effects of such differences were
as follows:
Accumulated
Accumulated Undistributed
Undistributed Net Realized
Net Gain on
Investment Investment Paid-In
Fund Income Securities Capital
- --------------------------------------------------------------------------------
Intermediate Government Bond Fund $ 327 $ (7,167) $ 6,840
Total Return Fund (17,685) 12,206 5,479
Value Equity Fund 218 (218) 0
Net investment income, net realized gains and net assets were not
affected.
F. FORWARD FOREIGN CURRENCY CONTRACTS -- The Trust enters into short-term
forward foreign currency contracts in connection with planned purchases or
sales of securities as a hedge against fluctuations in foreign exchange
rates pending the settlement of transactions in foreign securities. A
forward foreign currency contract is an agreeement between contracting
parties to exchange an amount of currency at some future time at an agreed
upon rate. These contracts are marked-to-market daily and the related
appreciation or depreciation of the contracts is presented in the Statement
of Assets and Liabilities.
G. EXPENSES -- Each of the Funds bears expenses incurred specifically on its
behalf and, in addition, each Fund bears a portion of general expenses,
based on the relative net assets of each Fund. Under an agreement between
each Fund and the Trust's Custodian, agreed upon Custodian Fees and
Expenses are reduced by credits granted by the Custodian from any
temporarily uninvested cash. Similarly, Transfer Agent Fees are reduced by
credits earned by each Fund from security brokerage transactions under
certain broker/service agreements with third parties. Such credits are
included in Fees and Expenses Paid Indirectly in the Statement of
Operations. For the year ended August 31, 1998, Fees and Expenses Paid
Indirectly consisted of the following:
Custodian Fees Transfer
Fund and Expenses Agent Fees
- --------------------------------------------------------------------------------
Intermediate Government Bond Fund $ 4,877 $ 0
Total Return Fund 132,918 169,710
Value Equity Fund 26,514 0
<PAGE>
NOTE 2 -- INVESTMENT ADVISORY AND OTHER AGREEMENTS. INVESCO Funds Group, Inc.
("IFG") serves as the Trust's investment adviser. As compensation for its
services to the Trust, IFG receives an investment advisory fee which is accrued
daily at the applicable rate and paid monthly. The fee is based on the annual
rate of each Fund's average net assets as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$500
$0 to Million Over $1 Billion $2 Billion $4 Billion $5 Billion Over
$500 to $1 $1 to $2 to $4 to $5 to $6 $6
Fund Million Billion Billion Billion Billion Billion Billion Billion
- ------------------------------------------------------------------------------------------------------------------------
Intermediate Government Bond Fund 0.60% 0.50% 0.40% -- -- -- -- --
Total Return Fund 0.75% 0.65% -- 0.50% 0.45%(a) 0.40%(a) 0.375%(a) 0.35%(a)
Value Equity Fund 0.75% 0.65% 0.50% -- -- -- -- --
</TABLE>
(a) Effective May 1, 1996, IFG voluntarily agreed to waive the portion of its
fee which exceeds 0.50% of average net assets in excess of $2 Billion for
Total Return Fund. Such wavier may be discontinued in the future.
In accordance with a Sub-Advisory Agreement between IFG and INVESCO Capital
Management, Inc. ("ICM"), an affiliate of IFG, investment decisions of the Trust
were made by ICM. Fees for such sub-advisory services were paid by IFG.
A plan of distribution pursuant to Rule 12b-1 of the Act (the "Plan")
became effective November 1, 1997 for Intermediate Government Bond and Value
Equity Funds and June 1, 1998 for Total Return Fund. The Plan 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 net assets. For the year ended August 31, 1998, Intermediate
Government Bond, Total Return and Value Equity Funds paid the Distributor
$24,404, $46,730 and $441,207, respectively, under the plan of distribution.
IFG receives a transfer agent fee at an annual rate of $20.00 for Total
Return and Value Equity Funds, and $26.00 for Intermediate Government Bond Fund
per shareholder account, or, where applicable, per participant in an omnibus
account, per year. IFG may pay such fee for participants in omnibus accounts to
affiliates or third parties. The fee is paid monthly at one-twelfth of the
annual fee and is based upon the actual number of accounts in existence during
each month.
In accordance with an Administrative Agreement, each Fund pays IFG an
annual fee of $10,000, plus an additional amount computed at an annual rate of
0.015% of average net assets to provide administrative, accounting and clerical
services. The fee is accrued daily and paid monthly.
IFG has voluntarily agreed, in some instances, to absorb certain fees and
expenses incurred by Intermediate Government Bond and Value Equity Funds.
<PAGE>
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the year ended
August 31, 1998, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were as follows:
Fund Purchases Sales
- --------------------------------------------------------------------------------
Total Return Fund $ 772,525,780 $ 187,652,626
Value Equity Fund 185,239,228 204,715,145
For the year ended August 31, 1998, the aggregate cost of purchases and
proceeds from sales of U.S. Government securities were as follows:
Fund Purchases Sales
- --------------------------------------------------------------------------------
Intermediate Government Bond Fund $ 20,419,860 $ 27,079,777
Total Return Fund 395,374,324 245,372,102
NOTE 4 -- APPRECIATION AND DEPRECIATION. At August 31, 1998, the gross
appreciation of securities in which there was an excess of value over tax cost,
the gross depreciation of securities in which there was an excess of tax cost
over value and the resulting net appreciation by Fund were as follows:
<TABLE>
<CAPTION>
Gross Gross Net
Fund Appreciation Depreciation Appreciation
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Intermediate Government Bond Fund $ 750,099 $ 10,623 $ 739,476
Total Return Fund 444,066,771 127,399,505 316,667,266
Value Equity Fund 89,878,865 33,232,633 56,646,232
</TABLE>
NOTE 5 -- TRANSACTIONS WITH AFFILIATES. Certain of the Trust's officers and
trustees are also officers and directors of IFG, IDI or ICM.
The Trust has adopted an unfunded deferred compensation plan covering all
independent trustees of the Trust who will have served as an independent trustee
for at least five years at the time of retirement. Benefits under this plan were
based on an annual rate equal to 40% of the retainer fee at the time of
retirement. As of July 1, 1998, benefits are based on an annual rate of 50% of
the sum of the retainer fee at the time of retirement plus the annual meeting
fee.
Pension expenses for the year ended August 31, 1998, included in Trustees'
Fees and Expenses in the Statement of Operations, and unfunded accrued pension
costs and pension liability included in Prepaid Expenses and Accrued Expenses,
respectively, in the Statement of Assets and Liabilities were as follows:
<TABLE>
<CAPTION>
Unfunded
Pension Accrued Pension
Fund Expenses Pension Costs Liability
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Intermediate Government Bond Fund $ 813 $ 1,865 $ 4,392
Total Return Fund 29,936 38,653 94,494
Value Equity Fund 6,032 9,615 22,832
</TABLE>
<PAGE>
NOTE 6 -- LINE OF CREDIT. The Trust has available a Redemption Line of Credit
Facility ("LOC"), from a consortium of national banks, to be used for temporary
or emergency purposes to fund redemptions of investor shares. The LOC permits
borrowings to a maximum of 10% of the Net Assets at Value of each respective
Fund. Each Fund agrees to pay annual fees and interest on the unpaid principal
balance based on prevailing market rates as defined in the agreement. At August
31, 1998, there were no such borrowings.
- --------------------------------------------------------------------------------
Other Information
UNAUDITED
On May 6, 1998, a special meeting of the shareholders of the INVESCO Total
Return Fund (the "Total Return Fund" or the "Fund") was held at which the
approval to change the investment policies of Total Return Fund to permit more
than five percent of the Fund's assets to be invested in a single issuer,
provided that such purchases do not exceed twenty-five percent of the Fund's
assets (Proposal 1) was ratified and the approval of a Plan and Agreement of
Distirbutions (the "Plan") for the Fund (Proposal 2) was ratified. The following
is a report on the votes cast:
Proposal For Against Abstain Total
- -------------------------------------------------------------------------------
Total Return Fund
Proposal 1 35,278,372 3,561,055 2,964,897 41,804,324
Proposal 2 34,319,085 4,263,842 3,221,397 41,804,324
<PAGE>
Financial Highlights
-- Intermediate Government Bond Fund
(For a Fund Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
Year Ended August 31
- ----------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value -- Beginning of Period $12.44 $12.30 $12.64 $12.16 $13.25
- ----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.64 0.66 0.73 0.73 0.70
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 0.32 0.14 (0.34) 0.48 (0.75)
- ----------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.96 0.80 0.39 1.21 (0.05)
- ----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income(a) 0.64 0.66 0.73 0.73 0.70
Distributions from Capital Gains 0.00 0.00 0.00 0.00 0.34
- ----------------------------------------------------------------------------------------------------------
Total Distributions 0.64 0.66 0.73 0.73 1.04
- ----------------------------------------------------------------------------------------------------------
Net Asset Value -- End of Period $12.76 $12.44 $12.30 $12.64 $12.16
==========================================================================================================
TOTAL RETURN 7.92% 6.64% 3.12% 10.36% (0.37%)
RATIOS
Net Assets -- End of Period ($000 Omitted) $37,281 $44,441 $39,949 $37,339 $31,861
Ratio of Expenses to Average Net Assets(b) 1.01%(c) 1.02%(c) 1.15%(c) 1.20% 1.07%
Ratio of Net Investment Income to
Average Net Assets(b) 5.11% 5.32% 5.81% 6.04% 5.58%
Portfolio Turnover Rate 57% 37% 63% 92% 49%
</TABLE>
(a) Distributions in excess of net investment income for the year ended August
31, 1994 aggregated less than $0.01 on a per share basis.
(b) Various expenses of the Fund were voluntarily absorbed by IFG for the years
ended August 31, 1998, 1997 and 1996. If such expenses had not been
voluntarily absorbed, ratio of expenses to average net assets would have
been 1.48%, 1.37% and 1.24%, respectively, and ratio of net investment
income to average net assets would have been 4.64%, 4.97% and 5.72%,
respectively.
(c) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
<PAGE>
Financial Highlights (Continued)
-- Total Return Fund
(For a Fund Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
Year Ended August 31
- ----------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value -- Beginning of Period $27.77 $22.60 $20.95 $18.54 $18.27
- ----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.83 0.77 0.73 0.72 0.69
Net Gains on Securities
(Both Realized and Unrealized) 0.87 5.26 1.78 2.46 0.60
- ----------------------------------------------------------------------------------------------------------
Total from Investment Operations 1.70 6.03 2.51 3.18 1.29
- ----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.83 0.77 0.73 0.72 0.60
In Excess of Net Investment Income(a) 0.00 0.00 0.00 0.00 0.09
Distributions from Capital Gains 0.48 0.09 0.13 0.05 0.17
In Excess of Capital Gains 0.00 0.00 0.00 0.00 0.16
- ----------------------------------------------------------------------------------------------------------
Total Distributions 1.31 0.86 0.86 0.77 1.02
- ----------------------------------------------------------------------------------------------------------
Net Asset Value -- End of Period $28.16 $27.77 $22.60 $20.95 $18.54
==========================================================================================================
TOTAL RETURN 6.02% 27.01% 12.06% 17.54% 7.22%
RATIOS
Net Assets -- End of Period ($000 Omitted) $2,561,016 $1,845,594 $1,032,151 $563,468 $292,765
Ratio of Expenses to Average Net Assets(b) 0 .79%(c) 0.86%(c) 0.89%(c) 0.95% 0.96%
Ratio of Net Investment Income to
Average Net Assets(b) 2.82% 3.11% 3.44% 3.97% 3.31%
Portfolio Turnover Rate 17% 4% 10% 30% 12%
</TABLE>
(a) Distributions in excess of net income for the year ended August 31, 1995,
aggregated less than $0.01 on a per share basis.
(b) Various expenses of the Fund were voluntarily absorbed by IFG for the year
ended August 31, 1998. If such expenses had not been voluntarily absorbed,
ratio of expenses to average net assets would have been 0.80% and ratio of
net investment income to average net assets would have been 2.81%.
(c) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Advisor, if applicable, which is before any offset arrangements.
<PAGE>
Financial Highlights (Continued)
-- Value Equity Fund
(For a Fund Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
Year Ended August 31
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
PER SHARE DATA
Net Asset Value -- Beginning of Period $28.30 $22.24 $19.53 $18.12 $17.79
- ------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.26 0.35 0.35 0.39 0.36
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (0.43) 6.62 3.09 2.58 1.20
- ------------------------------------------------------------------------------------------------------------
Total from Investment Operations (0.17) 6.97 3.44 2.97 1.56
- ------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.26 0.35 0.35 0.39 0.31
In Excess of Net Investment Income (a) 0.00 0.00 0.00 0.00 0.04
Distributions from Capital Gains 2.19 0.56 0.38 1.17 0.88
- ------------------------------------------------------------------------------------------------------------
Total Distributions 2.45 0.91 0.73 1.56 1.23
- ------------------------------------------------------------------------------------------------------------
Net Asset Value -- End of Period $25.68 $28.30 $22.24 $19.53 $18.12
============================================================================================================
TOTAL RETURN (1.06%) 32.04% 17.77% 17.84% 9.09%
RATIOS
Net Assets -- End of Period ($000 Omitted) $349,984 $369,766 $200,046 $153,171 $111,850
Ratio of Expenses to Average Net Assets(b) 1.15%(c) 1.04%(c) 1.01%(c) 0.97% 1.01%
Ratio of Net Investment Income to
Average Net Assets(b) 0.86% 1.35% 1.64% 2.17% 1.80%
Portfolio Turnover Rate 48% 37% 27% 34% 53%
</TABLE>
(a) Distributions in excess of net investment income for the year ended August
31, 1998, aggregated less than $0.01 on a per share basis.
(b) Various expenses of the Fund were voluntarily absorbed by IFG for the year
ended August 31, 1998. If such expenses had not been voluntarily absorbed,
ratio of expenses to average net assets would have been 1.19% and ratio of
net investment income to average net assets would have been 0.82%.
(c) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Advisor, if applicable, which is before any expense offset
arrangements.
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of
INVESCO Value Trust
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investment securities, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of INVESCO Intermediate Government
Bond Fund, INVESCO Total Return Fund and INVESCO Value Equity Fund (constituting
INVESCO Value Trust, hereafter to as the "Fund") at August 31, 1998, the results
of each of their operations for the year then ended, the changes in each of
their net assets for each of the two years in the period then ended and the
financial highlights for each of the five years in the period then ended, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at August 31, 1998 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Denver, Colorado
September 30, 1998
<PAGE>
EasiVest makes it easy to pay yourself first.
It seems that for most of us the hardest part of investing at regular
intervals comes down to simply writing the check, finding the stamp, and putting
it in the mail. But with INVESCO's EasiVest it's so easy that we'll do almost
all the work for you.
After you fill out the authorization and return it with a voided check, the
exact dollar amount you specify will be electronically transferred from your
bank account to your designated fund on the same day each month.
Using EasiVest is one of the few time when you'll find the easy way may also be
one of the best.
For years smart investors have used an investment strategy known as
dollar-cost averaging. It only makes sense that when prices are high an investor
will want to buy fewer shares, and when prices are low he will want to buy more.
By investing a fixed amount at regular intervals with INVESCO's EasiVest, you
can take advantage of these market fluctuations.
Over a sufficient period of time, dollar-cost averaging may make the
average price you pay per share less than the actual average price per share. So
follow the lead of successful investors and take advantage of dollar-cost
averaging with INVESCO's EasiVest.
Like other investment systems, periodic investment plans to not insure a
profit, nor do they protect against loss in a falling market. Since these plans
involve continuous investment in securities regardless of fluctuating price
levels in the market, you should consider your financial ability to continue
purchases through low price levels. Finally, be aware that you will incur a loss
under the plan if you decide to liquidate your account when the market value of
accumulated shares is less than their cost.
Just follow these simple authorization instructions and let INVESCO's
EasiVest help you build for your future.
1. Call your bank for their ABA and account numbers. Then complete the
EasiVest authorization and sign it the same way you would your
personal checks.
2. Enclose an unsigned, personal check or savings deposit slip marked
"Void."
3. Place a voided check or savings deposit slip and signed authorization
form in an envelope; then mail it to us.
It's that easy to start building your mutual fund portfolio. And you can
take advantage of INVESCO's EasiVest with as little as $50 a month.
Questions? Call us at 1-800-525-8085.
Start building for your future today.
<PAGE>
EASIVEST AUTHORIZATION FOR AUTOMATIC INVESTMENTS
Before returning this Authorization, please be sure to contact your
bank for the correct ABA number and account number.
I authorize INVESCO Funds Group to transfer money from my checking or savings
account on or about the 7th or 21st (check one) day of each month for the
amounts and funds indicated below:
Fund___________________________________ Acct.#_______________________________
$__________________________ ($50 minimum) ___ 7th ___21st
- ----------------------------------------------------------------------------
Bank Name
- ----------------------------------------------------------------------------
Bank Street Address
- ----------------------------------------------------------------------------
City, State, Zip
- ----------------------------------------------------------------------------
ABA Number (available from your bank) Bank Phone Number
_______________________________ This is a __Checking Account __ Savings Account
Bank Account Number
- ----------------------------------------------------------------------------
Owner's Name (First, Middle Initial, Last)
- ----------------------------------------------------------------------------
Joint Owner's Name (First, Middle Initial, Last)
- ----------------------------------------------------------------------------
Owner Street Address
- ----------------------------------------------------------------------------
City, State, Zip
- ----------------------------------------------------------------------------
Signature Date
- ----------------------------------------------------------------------------
Signature Date
- ----------------------------------------------------------------------------
Daytime Telephone Number Evening Telephone Number
Don't forget to attach a voided check or deposit slip.
This authority is to remain in effect until I revoke it in writing and, until
INVESCO receives such notification, I agree INVESCO will be fully protected in
honoring any such electronic debit. I further agree that if any such electronic
debit is not honored, whether with cause or without cause and whether
intentionally or unintentionally, INVESCO will not be liable whatsoever. This
authorization will become a part of the fund application subject to the terms,
representations and conditions thereof.
Like other investment systems, period investment plans do not insure a profit,
nor do they protect against loss in a falling market. Since these plans involve
continuous investment in securities regardless of fluctuating price levels in
the market, you should consider your financial ability to continue purchases
through low price levels. Finally, be aware that you will incur a loss under the
plan if you decide to liquidate your account when the market value of
accumulated shares is less than their cost.
<PAGE>
Annual Report
INVESCO
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.
