Semiannual Report
November 30, 1997
INVESCO SMALL COMPANY
GROWTH FUND
INVESCO FUNDS
<PAGE>
Economic Overview December 1997
Despite some volatility, 1997 has been a gratifying year for stock
investors. Broad market averages are approaching a third year of double-digit
returns, consumer confidence is running at historically high levels, the economy
has been expanding for 80 months, inflation measured at the consumer level is
non-existent, and interest rates remain low. Within this near-perfect economic
environment, corporate earnings have thrived, as downsizing and corporate
restructuring - along with improved worker productivity - helped make U.S.
companies the most efficient in the world. In fact, the S&P 500 operating
earnings have increased at a double-digit rate for an unprecedented fifth
consecutive year.(2)
With all the good news about the economy, financial markets produced
euphoric results. These strong returns, however, were accompanied by increased
volatility. In the early spring of 1997, fears of inflation and an overheating
economy encouraged the Federal Reserve Board to increase the Fed Fund's rate by
25 basis points - causing a contraction in the equity markets. In August,
renewed inflation fears as well as concerns about corporate earnings again
dampened investors' returns. In both cases, the markets quickly recovered and
continued their upward trend.
However, in the fall, U.S. equity markets experienced their first
correction--a decline in value of more than 10% from their highs - in more than
seven years. On October 27, the Dow Jones Industrial Average plunged 554.26
points (the largest point decline in history, but smaller by percentage
measures), as fears of slowing economies in the Asia/Pacific Rim region
reignited worries about corporate earnings and the value of the domestic
markets. But, as the dust settled from the Asian currency crisis, U.S. stocks
again regained their lost momentum with many indexes testing their old highs.(2)
Investors need to remember that, in times of volatility, emotions sway
markets more than fundamentals. The U.S. economy is still dominant worldwide,
and remains fundamentally sound. Granted, a slowdown in Asia/Pacific Rim
economies may reduce corporate earnings for selected multinational companies,
but it will probably not derail the economic expansion here at home. Continued
low interest rates, non-existent inflation, and the trend towards freer
international trade bode well for the domestic economy and equity markets.
Consequently, the health of the economy and financial markets appears strong,
although volatility is likely to continue.
Graph:
This line graph represents a comparison of the value of a $10,000
investment in INVESCO Small Company Growth Fund to the value of a $10,000
investment in the Russell 2000 Index, assuming in each case reinvestment
of all dividends and capital gain distributions, for the period from
inception (12/91) through November 30, 1997.
The line graph illustrates the value of a $10,000 investment in INVESCO
Small Company Growth Fund, plus reinvested dividends and capital gain
<PAGE>
distributions, from inception through 11/30/97. The chart and other total
return figures cited reflect the fund's operating expenses, but the index does
not have expenses, which would, of course, have lowered its performance.(1),(2)
INVESCO Small Company Growth Fund
For the six-month period ended 11/30/97, INVESCO Small Company Growth Fund
had a total return of 14.74%. During the same period, the Russell 2000 had a
total return of 13.80%. (Of course, past performance is not a guarantee of
future results.)(1),(2)
During the last six months, we have stayed true to our investment
discipline. We continue to invest in small-cap companies with market
capitalization of $1 billion or less at purchase which have the potential to
grow their earnings faster than the small-cap market in general. Our strategy
focuses on faster-growing economic sectors: health care, technology, consumer
cyclicals - though fund performance is typically driven by individual stock
selection.
Small Company Growth Fund
Average Annualized Total Return
as of 11/30/97 (1)
1 year 15.62%
-------------------------------------
5 years 15.80%
-------------------------------------
Since inception (12/91) 17.65%
-------------------------------------
Strategic Summary
As mentioned in the annual report, small-capitalization stocks - especially
small-cap growth stocks - have underperformed the broad equity market for the
last three years. However, in the late spring and early summer of 1997, it
appeared that investor sentiment was changing towards these firms and small-cap
stocks were starting to gain momentum. But nervousness returned to the market in
the fall, as concerns over the "Asian flu" caused a flight to quality in which
investors placed a premium on liquidity and earnings stability. This occurrence
dampened some of the recent returns for small-cap growth investors, although the
investment landscape still appears favorable.
With all the concern over the Asian currency crisis and its potential
impact on corporate earnings, small-cap investors need to remember that such
companies usually have limited exposure, if any, to Asia/Pacific Rim economies.
Instead, these firms are highly dependent on the domestic market and the
strength of the U.S. economy -- which still appears strong. We continue to
believe that small-cap growth stocks offer exciting opportunities compared to
the broad equity market.
<PAGE>
One of the advantages of investing in small-cap stocks is the ability,
through in-depth research, to identify companies with accelerating earnings in
industries not typically considered growth areas. In fact, one of our favorite
investments over the last six months, Simon Transportation Services, is in an
industry with only moderate growth prospects. Nevertheless, this regional
trucking company located in the west continues to increase its market share and
deliver strong earnings growth through superior services.
Another two stocks that performed well for the fund are Stage Stores and
Rowan Cos. Stage Stores is a retail merchandiser with an unique niche in smaller
markets that continues to experience accelerating revenues. Rowan Cos
specializes in contract drilling for oil and natural gas in the Gulf of Mexico,
benefiting from the increased emphasis on exploration for natural gas and oil.
Looking Forward
Small-cap growth stocks have had a difficult time during the last three
years compared to large-caps. However, it appears that the bottom of this cycle
is near, and we remain firmly confident in the long-term fundamentals of
small-cap growth stocks - although short-term volatility may well continue.
Fund Management
Stacie L. Cowell assumed the responsibilities of portfolio manager
effective February 1997. She earned her BA in Economics from Colgate University
and is a Chartered Financial Analyst. Prior to joining INVESCO, Stacie was a
senior equities analyst with Founders Asset Management, and a capital markets
and trading analyst with Chase Manhattan Bank. She is assisted by co-managers
Tim J. Miller and Trent E. May.
Tim, a senior vice president, heads up our growth investment team. He
received his MBA from the University of Missouri and a BSBA from St. Louis
University. An 18-year veteran of the investment business, he is a Chartered
Financial Analyst. Before joining INVESCO in 1992, Tim was an analyst and
portfolio manager with Mississippi Valley Advisors.
Trent received a BS from the Florida Institute of Technology and a MBA from
Rollins College. Before joining INVESCO in 1996, Trent was a senior equity
manager/equity analyst with Munder Capital Management. He is a Chartered
Financial Analyst.
(1)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.
(2)The Russell 2000 is an unmanaged index indicative of smaller capitalization
stocks. The S&P 500 is an unmanaged index considered representative of the broad
U.S. stock market, while the Dow Jones Industrial Average reflects performance
of large-capitalization stocks.
<PAGE>
INVESCO Emerging Opportunity Funds, Inc. -
Small Company Growth Fund
Ten Largest Common Stock Holdings
November 30, 1997
Description Value
- --------------------------------------------------------------------------------
Primark Corp $5,081,250
Registry Inc 4,318,125
ICG Communications 4,185,000
Graham-Field Health Products 3,958,437
Interim Services 3,912,787
Safeguard Scientifics 3,787,500
Simon Transportation Services 3,735,200
Orion Capital 3,523,888
Corrections Corp of America 3,462,500
Alternative Resources 3,430,000
Composition of holdings is subject to change.
----------------------------------
<PAGE>
INVESCO Emerging Opportunity Funds, Inc. -
Small Company Growth Fund
STATEMENT OF INVESTMENT SECURITIES
November 30,1997
UNAUDITED
<TABLE>
<CAPTION>
Shares or
Principal
Description Amount Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 84.47%
AIR FREIGHT 0.55%
Eagle USA Airfreight* 55,000 $1,705,000
--------------
AUTO PARTS 0.98%
O'Reilly Automotive* 130,000 3,071,250
--------------
BEVERAGES 0.52%
Beringer Wine Estates Holdings Class B* 50,000 1,625,000
--------------
COMMUNICATIONS -
EQUIPMENT & MANUFACTURING 5.08%
Aspect Telecommunications* 105,000 2,355,937
CIENA Corp* 37,000 1,998,000
GeoTel Communications* 105,000 1,903,125
Gilat Satellite Networks Ltd* 71,000 2,307,500
NICE-Systems Ltd Sponsored ADR
Representing Ord Shrs* 75,000 3,271,875
Premisys Communications* 67,000 1,846,688
REMEC Inc* 94,150 2,200,756
--------------
15,883,881
--------------
COMPUTER RELATED 4.98%
Advantage Learning Systems* 42,000 955,500
Aspen Technology* 58,000 2,211,250
CBT Group PLC Sponsored ADR
Representing 0.5 Ord Shrs* 24,400 1,723,250
HMT Technology* 175,000 2,296,875
Intelligroup Inc* 60,000 1,110,000
Peerless Systems* 115,000 1,710,625
Peregrine Systems* 110,000 1,320,000
Simulation Sciences* 155,000 2,799,688
Wind River Systems* 36,775 1,427,330
--------------
15,554,518
--------------
<PAGE>
DISTRIBUTION 2.31%
Brightpoint Inc* 150,000 2,409,375
Central Garden & Pet* 101,000 2,865,875
Weider Nutrition International 180,000 1,946,250
--------------
7,221,500
--------------
ELECTRONICS 4.31%
Aehr Test Systems* 180,000 1,642,500
ANADIGICS Inc* 65,700 2,184,525
Cerprobe Corp* 129,000 2,305,875
General Scanning* 100,000 2,625,000
SanDisk Corp* 52,500 1,286,250
Simac Techniek NV 30,000 3,418,007
--------------
13,462,157
--------------
ELECTRONICS - SEMICONDUCTOR 5.38%
Altron Inc* 140,000 2,205,000
Applied Micro Circuits* 134,500 1,479,500
Cypress Semiconductor* 194,000 2,121,875
DuPont Photomasks* 30,000 1,164,375
Flextronics International Ltd* 85,000 3,400,000
QLogic Corp* 60,700 2,010,688
Unitrode Corp* 56,400 1,061,025
VLSI Technology* 42,000 945,000
Xilinx Inc* 70,000 2,419,375
--------------
16,806,838
--------------
ENGINEERING & CONSTRUCTION 0.69%
Willbros Group* 124,000 2,170,000
--------------
FINANCIAL 4.05%
ACNielsen Corp* 140,000 3,141,250
AMRESCO Inc* 45,000 1,260,000
Primark Corp* 150,000 5,081,250
Warrantech Corp* 275,000 3,162,500
--------------
12,645,000
--------------
FOODS 0.76%
American Italian Pasta Class A* 101,000 2,386,125
--------------
<PAGE>
HEALTH CARE DRUGS -
PHARMACEUTICALS 1.19%
Algos Pharmaceutical* 36,000 936,000
Watson Pharmaceuticals* 94,000 2,796,500
--------------
3,732,500
--------------
HEALTH CARE RELATED 5.50%
ATL Ultrasound* 60,000 2,580,000
AmeriPath Inc* 130,000 2,177,500
Capital Senior Living* 167,800 2,170,912
Coventry Corp* 160,000 2,390,000
FPA Medical Management* 55,000 1,419,687
Graham-Field Health Products* 265,000 3,958,437
HealthCare Financial Partners* 75,500 2,491,500
--------------
17,188,036
--------------
INSURANCE 3.73%
HCC Insurance Holdings 141,200 2,647,500
Liberty Corp 65,000 2,925,000
Mercury General 51,200 2,560,000
Orion Capital 78,200 3,523,888
--------------
11,656,388
--------------
LEISURE TIME 0.69%
Bally Total Fitness Holding* 115,000 2,141,875
--------------
LODGING - HOTELS 1.29%
Extended Stay America* 185,000 2,127,500
Prime Hospitality* 99,400 1,901,025
--------------
4,028,525
--------------
MACHINERY 0.52%
OmniQuip International 85,000 1,625,625
--------------
MANUFACTURING 0.95%
Innovative Valve Technologies* 52,000 884,000
Robbins & Myers 54,000 2,079,000
--------------
2,963,000
--------------
OFFICE EQUIPMENT & SUPPLIES 0.72%
US Office Products* 112,500 2,235,938
--------------
<PAGE>
OIL & GAS RELATED 5.85%
Enserch Exploration* 345,000 2,889,375
Key Energy Group* 120,000 2,917,500
Newfield Exploration* 110,000 2,564,375
Patterson Energy* 40,000 1,470,000
Petsec Energy Ltd Sponsored ADR
Representing 5 Ord Shrs* 155,000 2,906,250
Precision Drilling* 118,000 3,038,500
Rowan Cos* 45,000 1,530,000
UTI Energy* 35,000 980,000
--------------
18,296,000
--------------
PERSONAL CARE 1.91%
Enamelon Inc* 100,000 1,687,500
Helen of Troy Ltd* 119,000 1,695,750
Playtex Products* 265,000 2,583,750
--------------
5,967,000
--------------
POLLUTION CONTROL 2.93%
Allied Waste Industries* 156,000 3,412,500
Philip Services* 170,000 2,688,125
TETRA Technologies* 130,000 3,046,875
--------------
9,147,500
--------------
PUBLISHING 0.59%
Petersen Cos Class A* 103,000 1,854,000
--------------
REAL ESTATE INVESTMENT TRUST 2.48%
CRIIMI MAE 165,000 2,444,062
FelCor Suite Hotels 63,000 2,287,687
Intrawest Corp 180,000 3,015,000
--------------
7,746,749
--------------
RESTAURANTS 1.68%
Schlotzsky's Inc* 166,250 2,888,594
ShowBiz Pizza Time* 110,000 2,365,000
--------------
5,253,594
--------------
<PAGE>
RETAIL 4.74%
DM Management* 130,000 2,291,250
Global DirectMail* 65,000 1,170,000
Men's Wearhouse* 85,000 2,985,625
Proffitt's Inc* 106,000 3,239,625
Stage Stores* 64,000 2,696,000
Whole Foods Market* 53,000 2,431,375
--------------
14,813,875
--------------
SAVINGS & LOAN 0.99%
FirstFed Financial* 85,000 3,102,500
--------------
SERVICES 12.58%
AHL Services* 107,525 2,231,144
Alternative Resources* 140,000 3,430,000
Boron LePore & Associates* 133,700 3,275,650
Concord EFS* 110,500 2,817,750
Corrections Corp of America* 100,000 3,462,500
Interim Services* 138,200 3,912,787
NCO Group* 81,200 3,075,450
NCS HealthCare Class A* 98,000 2,609,250
Registry Inc* 98,000 4,318,125
Rock of Ages* 45,000 832,500
Safeguard Scientifics* 120,000 3,787,500
Snyder Communications* 85,200 2,891,475
TMP Worldwide* 147,500 2,691,875
--------------
39,336,006
--------------
TELECOMMUNICATIONS -
CELLULAR & WIRELESS 0.45%
Microcell Telecommunications Class B* 219,500 1,399,313
--------------
TELECOMMUNICATIONS -
LONG DISTANCE 3.93%
Esat Telecom Group PLC Sponsored ADR* 75,000 1,064,063
ICG Communications* 180,000 4,185,000
IDT Corp* 150,000 3,225,000
P-COM Inc* 125,000 2,203,125
Teledata Communications Ltd* 57,500 1,610,000
--------------
12,287,188
--------------
TEXTILE - APPAREL MANUFACTURING 0.95%
Quiksilver Inc* 113,000 2,980,375
--------------
<PAGE>
TRUCKERS 1.19%
Simon Transportation Services* 162,400 3,735,200
--------------
TOTAL COMMON STOCKS
(Cost $251,983,127) 264,022,456
--------------
SHORT-TERM INVESTMENTS -
REPURCHASE AGREEMENTS 15.53%
Repurchase Agreement with
State Street Bank & Trust Co
dated 11/28/1997 due
12/1/1997 at 5.550%,
repurchased at $48,572,252
(Collateralized by US
Treasury Bonds due 2/15/2015
at 11.250%, value $49,502,941)
(Cost $48,550,000) $ 48,550,000 $ 48,550,000
--------------
TOTAL INVESTMENT SECURITIES AT VALUE 100.00%
(Cost $300,533,127)
(Cost for Income Tax Purposes
$300,603,279) $312,572,456
==============
* Security is non-income producing.
See Notes to Financial Statements
<PAGE>
INVESCO Emerging Opportunity Funds, Inc. -
Small Company Growth Fund
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1997
UNAUDITED
ASSETS
Investment Securities at Value~
(Cost $300,533,127)~ $312,572,456
Receivables:
Investment Securities Sold 3,590,941
Fund Shares Sold 678,513
Dividends and Interest 30,053
Prepaid Expenses and Other Assets 89,528
------------------
TOTAL ASSETS 316,961,491
------------------
LIABILITIES
Payables:
Custodian 246,478
Investment Securities Purchased 3,021,338
Fund Shares Repurchased 608,725
Accrued Distribution Expenses 62,723
Accrued Expenses and Other Payables 22,749
------------------
TOTAL LIABILITIES 3,962,013
------------------
Net Assets at Value $312,999,478
==================
NET ASSETS
Paid-in Capital* $223,519,366
Accumulated Undistributed Net Investment Loss (578,460)
Accumulated Undistributed Net Realized Gain
on Investment Securities and Foreign
Currency Transactions 78,019,243
Net Appreciation of Investment Securities and
Foreign Currency Transactions 12,039,329
------------------
Net Assets at Value $312,999,478
------------------
Net Asset Value, Offering and Redemption
Price per Share $14.71
=========
~ Investment securities at cost and value at November 30, 1997 include a
repurchase agreement of $48,550,000.
* The Fund has 600 million authorized shares of common stock, par value of
$0.01 per share, of which 21,274,519 were outstanding at November 30, 1997.
See Notes to Financial Statements
<PAGE>
INVESCO Emerging Opportunity Funds, Inc. -
Small Company Growth Fund
STATEMENT OF OPERATIONS
Six Months Ended November 30, 1997
UNAUDITED
INVESTMENT INCOME
INCOME
Dividends $371,894
Interest 1,446,554
Foreign Taxes Withheld (1,571)
------------------
TOTAL INCOME 1,816,877
------------------
EXPENSES
Investment Advisory Fees 1,217,185
Distribution Expenses 406,449
Transfer Agent Fees 558,280
Administrative Fees 29,388
Custodian Fees and Expenses 38,200
Directors' Fees and Expenses 15,209
Professional Fees and Expenses 18,076
Registration Fees and Expenses 60,294
Reports to Shareholders 53,382
Other Expenses 10,305
------------------
TOTAL EXPENSES 2,406,768
Fees and Expenses Absorbed by Investment Adviser (6,070)
Fees and Expenses Paid Indirectly (15,218)
------------------
NET EXPENSES 2,385,480
------------------
NET INVESTMENT LOSS (568,603)
------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Gain on Investment Securities and
Foreign Currency Transactions 54,048,304
Change in Net Depreciation of Investment Securities
and Foreign Currency Transactions (11,728,036)
------------------
NET GAIN ON INVESTMENT SECURITIES 42,320,268
------------------
Net Increase in Net Assets from Operations $41,751,665
==================
See Notes to Financial Statements
</TABLE>
<PAGE>
INVESCO Emerging Opportunity Funds, Inc.-
Small Company Growth Fund
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
November 30 May 31
-------------------- ---------------
1997 1997
UNAUDITED
<S> <C> <C>
OPERATIONS
Net Investment Loss $(568,603) $(1,478,757)
Net Realized Gain on Investment
Securities and Foreign Currency
Transactions 54,048,304 29,515,644
Change in Net Depreciation of
Investment Securities and Foreign
Currency Transactions (11,728,036) (56,216,632)
---------------- ---------------
NET INCREASE (DECREASE)
IN NET ASSETS FROM OPERATIONS 41,751,665 (28,179,745)
---------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
NET REALIZED GAIN ON
INVESTMENT SECURITIES 0 (10,787,315)
---------------- ---------------
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 326,899,324 588,003,670
Reinvestment of Distributions 0 10,519,533
---------------- ---------------
326,899,324 598,523,203
Amounts Paid for Repurchases
of Shares (349,922,286) (635,314,480)
---------------- ---------------
NET DECREASE IN NET ASSETS FROM FUND
SHARE TRANSACTIONS (23,022,962) (36,791,277)
---------------- ---------------
Total Increase (Decrease) in
Net Assets 18,728,703 (75,758,337)
NET ASSETS
Beginning of Period 294,270,775 370,029,112
---------------- ---------------
End of Period (Including
Accumulated Undistributed
Net Investment Loss
of $578,460 and
$9,857, respectively) $ 312,999,478 $ 294,270,775
================ ===============
<PAGE>
FUND SHARE TRANSACTIONS
Shares Sold 22,347,163 46,136,498
Shares Issued from Reinvestment
of Distributions 0 836,877
---------------- ---------------
22,347,163 46,973,375
Shares Repurchased (24,023,119) (49,747,852)
---------------- ---------------
Net Decrease in Fund Shares (1,675,956) (2,774,477)
================ ===============
See Notes to Financial Statements
</TABLE>
<PAGE>
INVESCO Emerging Opportunity Funds, Inc. - Small Company Growth Fund
NOTES TO FINANCIAL STATEMENTS
UNAUDITED
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Emerging
Opportunity Funds, Inc. (the "Fund") was incorporated in Maryland and presently
consists of the Small Company Growth Fund. The investment objective of the Fund
is to seek long-term capital growth. The Fund is registered under the
Investment Company Act of 1940 (the "Act") as a diversified, open-end
management investment company.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
A. SECURITY VALUATION - Equity securities traded on national securities
exchanges or in the over-the-counter market are valued at the last sales
price in the market where such securities are primarily traded. If last
sales prices are not available, securities are valued at the highest
closing bid price obtained from one or more dealers making a market for
such securities or by a pricing service approved by the Fund's board of
directors.
Foreign securities are valued at the closing price on the principal stock
exchange on which they are traded. In the event that closing prices are not
available for foreign securities, prices will be obtained from the
principal stock exchange at or prior to the close of the New York Stock
Exchange. Foreign currency exchange rates are determined daily prior to the
close of the New York Stock Exchange.
If market quotations or pricing service valuations are not readily
available, securities are valued at fair value as determined in good faith
by the Fund's board of directors.
Short-term securities are stated at amortized cost (which approximates
market value) if maturity is 60 days or less at the time of purchase, or
market value if maturity is greater than 60 days.
Assets and liabilities initially expressed in terms of foreign currencies
are translated into U.S. dollars at the prevailing market rates as quoted
by one or more banks or dealers on the date of valuation. The cost of
securities is translated into U.S. dollars at the rates of exchange
prevailing when such securities are acquired. Income and expenses are
translated into U.S. dollars at the rates of exchange prevailing when
accrued.
<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. Cost is determined on the specific identification basis.
The Fund may have elements of risk due to concentrated investments in
foreign issuers located in a specific country. Such concentrations may
subject the Fund to additional risks resulting from future political or
economic conditions and/or possible impositions of adverse foreign
governmental laws or currency exchange restrictions. Net realized and
unrealized gain or loss from investments includes fluctuations from
currency exchange rates and fluctuations in market value.
The Fund's use of short-term forward foreign currency contracts may
subject it to certain risks as a result of unanticipated movements in
foreign exchange rates. The Fund does not hold short-term forward foreign
currency contracts for trading purposes. The Fund may hold foreign
currency in anticipation of settling foreign security transactions and not
for investment purposes.
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.
Dividends paid by the Fund from net investment income and distributions of
net realized short-term capital gains are, for federal income tax purposes,
taxable as ordinary income to shareholders.
Investment income received from foreign sources may be subject to foreign
withholding taxes. Dividend and interest income is shown gross of foreign
withholding taxes in the accompanying financial statements.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and distributions
to shareholders are recorded by the Fund on the ex dividend/distribution
date. The Fund distributes net realized capital gains, if any, to its
shareholders at least annually, if not offset by capital loss carryovers.
<PAGE>
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments for foreign currency transactions, nontaxable
dividends, net operating losses and expired capital loss carryforwards.
F. FORWARD FOREIGN CURRENCY CONTRACTS - The Fund enters into short-term
forward foreign 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 agreement between contracting
parties to exchange an amount of currency at some future time at an agreed
upon rate. These contracts are marked-to-market daily and the related
appreciation or depreciation of the contracts is presented in the Statement
of Assets and Liabilities.
G. 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, Transfer
Agent Fees are reduced by credits earned by the Fund from security
brokerage transactions under certain broker/service arrangements with third
parties. Such credits are included in Fees and Expenses Paid Indirectly in
the Statement of Operations.
For the six months ended November 30, 1997, Fees and Expenses Paid
Indirectly consisted of $15,069 and $149 included in Custodian Fees and
Expenses and Transfer Agent Fees, respectively.
NOTE 2 - INVESTMENT ADVISORY AND OTHER AGREEMENTS. INVESCO Funds Group, Inc.
("IFG") serves as the Fund's investment adviser. As compensation for its
services to the Fund, IFG receives an investment advisory fee which is accrued
daily at the applicable rate and paid monthly. The fee is based on the annual
rate of 0.75% on the first $350 million of average net assets; reduced to 0.65%
on the next $350 million of average net assets; and 0.55% on average net assets
in excess of $700 million.
In accordance with a Sub-Advisory Agreement between IFG and INVESCO Trust
Company ("ITC"), a wholly owned subsidiary of IFG, investment decisions of the
Fund are made by ITC. Fees for such sub-advisory services are paid by IFG.
In accordance with an Administrative Agreement, the Fund pays IFG an annual
fee of $10,000, plus an additional amount computed at an annual rate of 0.015%
of average net assets to provide administrative, accounting and clerical
services. The fee is accrued daily and paid monthly.
IFG receives a transfer agent fee at an annual rate of $20.00 per shareholder
account, or, where applicable, per participant in an omnibus account, per year.
IFG may pay such fees for participants in omnibus accounts to affiliates or
third parties. The fee is paid monthly at one-twelfth of the annual fee and is
based upon the actual number of accounts in existence during each month.
A plan of distribution pursuant to Rule 12b-1 of the Act provides for
compensation of marketing and advertising expenditures to IFG (the
"Distributor") to a maximum of 0.25% of annual average net assets. For the six
months ended November 30, 1997, the Fund paid the Distributor $399,031 under the
plan of distribution. Effective September 29, 1997, INVESCO Distributors, Inc.,
a wholly owned subsidiary of IFG, replaced IFG as Distributor.
<PAGE>
IFG has voluntarily agreed, in some instances, to absorb certain fees and
expenses incurred by the Fund.
NOTE 3 - PURCHASES AND SALES OF INVESTMENT SECURITIES. For the six months
ended November 30, 1997, the aggregate cost of purchases and proceeds from sales
of investment securities (excluding all U.S. Government securities and
short-term securities) were $271,962,147 and $291,299,513, respectively.
There were no purchases or sales of U.S. Government securities.
NOTE 4 - APPRECIATION AND DEPRECIATION. At November 30, 1997, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $30,335,792 and the gross depreciation of securities in which there
was an excess of tax cost over value amounted to $18,366,615, resulting in net
appreciation of $11,969,177.
NOTE 5 - TRANSACTIONS WITH AFFILIATES. Certain of the Fund's officers and
directors are also officers and directors of IFG or ITC.
The Fund has adopted an unfunded deferred compensation plan covering all
independent directors of the Fund who will have served as an independent
director for at least five years at the time of retirement. Benefits under this
plan are based on an annual rate of 40% of the retainer fee at the time of
retirement.
Pension expenses for the six months ended November 30, 1997, included in
Directors' Fees and Expenses in the Statement of Operations were $1,695.
Unfunded accrued pension costs of $10,493 and pension liability of $22,043 are
included in Prepaid Expenses and Accrued Expenses, respectively, in the
Statement of Assets and Liabilities.
NOTE 6 - LINE OF CREDIT. The Fund has available a Redemption Line of Credit
Facility ("LOC"), from a consortium of national banks, to be used for temporary
or emergency purposes to fund redemptions of investor shares. The LOC permits
borrowings to a maximum of 10% 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 November 30, 1997, there
were no such borrowings.
<PAGE>
INVESCO Emerging Opportunity Funds, Inc. -
Small Company Growth Fund
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
Six Months
Ended
November 30 Year Ended May 31
-------------- ----------------------------------------------------
1997 1997 1996 1995 1994 1993
UNAUDITED
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value - Beginning of Period $12.82 $14.38 $9.37 $11.40 $9.89 $7.55
-------------- ------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.03) (0.07) (0.06) 0.04 (0.01) (0.04)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 1.92 (0.96) 5.25 0.46 1.53 2.38
-------------- ------------------------------------------------------
Total from Investment Operations 1.89 (1.03) 5.19 0.50 1.52 2.34
-------------- ------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.00 0.00 0.00 0.04 0.00 0.00
Distributions from Capital Gains 0.00 0.53 0.18 2.49 0.01 0.00
-------------- ------------------------------------------------------
Total Distributions 0.00 0.53 0.18 2.53 0.01 0.00
-------------- ------------------------------------------------------
Net Asset Value - End of Period $14.71 $12.82 $14.38 $9.37 $11.40 $9.89
============== ======================================================
TOTAL RETURN 14.74%* (7.08%) 55.78% 4.98% 15.34% 30.95%
<PAGE>
RATIOS
Net Assets - End of Period
($000 Omitted) $312,999 $294,259 $370,029 $153,727 $176,510 $103,029
Ratio of Expenses to Average
Net Assets# 0.74%*@ 1.52%@ 1.48%@ 1.49% 1.37% 1.54%
Ratio of Net Investment Income
(Loss) to Average Net Assets# (0.18%)* (0.55%) (0.78%) 0.41% (0.26%) 0.70%
Portfolio Turnover Rate 101%* 216% 221% 228% 196% 153%
Average Commission Rate Paid^^ $0.1194* $0.0935 - - - -
* Based on operations for the period shown and, accordingly, are not
representative of a full year.
# Various expenses of the Fund were voluntarily absorbed by IFG for the six
months ended November 30, 1997 and the years ended May 31, 1997 and 1995.
If such expenses had not been voluntarily absorbed, ratio of expenses to
average net assets would have been 0.74%, 1.54% and 1.52%, respectively,
and ratio of net investment income (loss) to average net assets would have
been (0.18%), (0.57%), and 0.38%, respectively.
@ Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
^^ The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased or sold which is required to be
disclosed for fiscal years beginning September 1, 1995 and thereafter.
</TABLE>
<PAGE>
FAMILY OF FUNDS
Newspaper
Fund Name Fund Code Ticker Symbol Abbreviation
- --------------------------------------------------------------------------------
International
International Growth 49 FSIGX IntlGr
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 55 FTCHX Tech
Utilities 58 FSTUX Util
Worldwide Capital Goods 38 ISWGX WldCap
Worldwide Communications 39 ISWCX WldCom
- --------------------------------------------------------------------------------
Equity
Growth 10 FLRFX GrwthSmall Compa
Dynamics 20 FIDYX Dynm
Small Company Growth 60 FIEGX Emgrth
Value Equity 46 FSEQX ValEq
Small Company Value 74 IDSCX SmCoVal
- --------------------------------------------------------------------------------
All-Weather
Industrial Income 15 FIIIX IndInc
Multi-Asset Allocation 70 IMAAX MulAstAl
Total Return 48 FSFLX TotRtn
Balanced 71 IMABX Bal
- --------------------------------------------------------------------------------
<PAGE>
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
* This fund does not meet size requirements to be assigned a newspaper
listing.
For more information about any of the INVESCO Funds, including management fees
and expenses, please call us at 1-800-525-8085 for a prospectus. Read it
carefully before you invest or send money.
<PAGE>
INVESCO FUNDS
INVESCO Distributors, Inc.,(SM)
Distributor
Post Office Box 173706
Denver, CO 80217-3706
1-800-525-8085
PAL(R): 1-800-424-8085
http://www.invesco.com
In Denver, visit one of our
convenient Investor Centers:
Cherry Creek,
155-B Fillmore Street
Denver Tech Center,
7800 East Union Avenue,
Lobby Level
This information must be
preceded or accompanied
by a current prospectus.
