ANNUAL REPORT
July 31, 1998
INVESCO
Multiple Asset
Funds, Inc.
Balanced Fund
Multi-Asset Allocation Fund
No-load mutual funds
seeking capital appreciation
and current income.
You should know
what INVESCO knows.(TM)
INVESCO FUNDS
<PAGE>
Market Overview August 1998
For most of the 1990s, the U.S. equity markets have enjoyed high returns
with relatively limited volatility. In fact, many domestic equity investors have
come to expect returns of greater than 20% on an annual basis. So many were
shocked when the Asian financial crisis caused a market correction -- a decline
in value of more than 10% from the high -- in the fall of 1997. And when the
equity markets experienced another correction, especially in small- and mid-cap
stocks, in the summer of 1998, speculation intensified that the bull market for
equities might be over.
However, as volatile as the equity markets seem, investors need to remember:
o History has shown that market corrections are quite common, and that
the seven-year period in the 1990s without a correction was highly unusual.
o Over longer time periods, the average annual return on equities is between
10% to 12%.
o Most bull markets end as a result of deteriorating economic conditions,
increasing inflation, and rising interest rates.
The last bullet point is very important when analyzing recent market
volatility. Although economic growth, as measured by Gross Domestic Product
(GDP), slowed in the second quarter of 1998, the U.S. economy is still growing
at an above-average rate of more than 3%. Granted, the Asian financial crisis
has slowed growth here, but so far our economy has remained strong and consumer
confidence is high. In addition, the threat of inflation is not present even
though real wages are increasing; in many cases, both commodity and consumer
prices are falling. Within this environment, the chances for an increase in
interest rates are minimal and the likelihood of a continued expansion remains
good.
Although market volatility can be disconcerting to investors, it is a common
occurrence when investing in equities. 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 diversification.
INVESCO Multiple Asset Funds, Inc.
The line graphs below illustrate the value of a $10,000 investment in each
of the INVESCO Multiple Asset Funds, plus reinvested dividends and capital gain
distributions, from inception through 7/31/98. 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.(1,2)
Balanced Fund
The Fund received the prestigious 4-star risk-adjusted rating from
Morningstar, both overall and for the three-year period ended 7/31/98, among
2,572 equity funds.(3)
For the one-year period ended 7/31/98, INVESCO Balanced Fund had a total
return of 12.90%, compared to a total return of 19.26% for the S&P 500, and
8.06% for the Lehman Government/Corporate Bond Index. (Of course, past
performance is not a guarantee of future results.)(1,2)
Strategic Summary
Over the last 12 months, we have positioned the fund more defensively as a
result of the Asian financial crisis, which has heightened the potential for
slower corporate earnings domestically. As market volatility rose, we increased
the fund's allocation to fixed-income securities while decreasing the fund's
exposure to equities. 1998 is proving to be a more selective stock market, and
we plan to use short-term declines as a way to improve the quality of portfolio
holdings.
<PAGE>
In the equity portion of the portfolio, during the last 12 months we have
avoided companies that derive a significant amount of their revenues from Asian
economies. Thus, holdings in basic materials and capital goods companies have
been reduced, as their future growth is highly dependent on Pacific Rim
countries.
Instead, we have kept the fund focused on industries and sectors which can
benefit from strength in the domestic economy. Retailers have posted some of the
strongest returns for the fund over the last 12 months. As real wages increase
and domestic prices decline (on an inflation-adjusted basis), consumers'
willingness to spend money on discretionary items has increased. Our favorite
retailer remains Dayton Hudson. Mostly known for their Target stores, Dayton
Hudson is enhancing shareholder value by focusing on bottom-line results. This
firm generates substantial cash flows, which allows them to finance growth
internally. Their credit card operation, besides being highly profitable, is
also experiencing improving margins and earnings growth.
Another individual security which has enhanced fund returns over the last 12
months is AOL (American Online). AOL has been experiencing accelerating revenues
and sales as Internet usage doubles every 90 days. As the market leader in their
industry, AOL has established a dominant position, and the stock has been
rewarded accordingly.
Balanced Fund
Average Annual Total Return
as of 7/31/98(2)
1 Year 12.90%
-----------------------------------------
Since Inception (12/93) 19.14%
-----------------------------------------
Within the fixed-income portion of the portfolio, we continue to find
opportunities through our value-oriented investment process. Overall, bonds look
quite attractive on a risk/reward basis. During the last 12 months, fund returns
were enhanced by exposure to our "stranded cost" theme of electric utilities and
individual special situations. We reduced the fund's exposure to putable bonds,
as gains there had been realized and the market had fairly priced these
securities.
Fixed-income obligations of electric utilities remain a core holding.
Electric utilities are in a state of dynamic transition, as the industry moves
towards deregulation and increased competition, ultimately benefiting low-cost
providers. But deregulation has also created a problem, because many electric
utilities built power plants on the premise of restricted competition and
regulated prices set forth by the government. State legislatures are now
addressing this issue, allowing many utilities to securitize their stranded
costs. This may permit some companies to generate substantial cash flows, which
may reduce their debt levels and possibly improve their credit ratings. We will
continue to favor investments in states that are the furthest along in
addressing the issue of stranded costs -- California, Pennsylvania, and New
York.
<PAGE>
Graph:
This line graph represents a comparison of the value of a $10,000 investment
in INVESCO Balanced Fund to the value of a $10,000 investment in the S&P 500
Index and Lehman Government/Corporate Bond Index, assuming in each case
reinvestment of all dividends and capital gain distributions, for the period
from inception (12/93) through 7/31/98.
Special situations, on the other hand, are typically individual companies
in which we feel the market has mispriced the underlying security due to a
unique circumstance. In the last 12 months, significant gains were produced by
fixed-income obligations issued by McKesson Corp, Equitable Cos, and Atlantic
Richfield.
Looking Forward
The fund is designed to perform well over the entire market cycle, perhaps
lagging in extended bull rallies, but potentially outperforming the broad equity
market during declines. It appears that the Asian financial crisis will continue
to put pressure on domestic equity markets, with continued volatility likely.
Within this environment, we will remain somewhat conservative with the fund's
equity investments, focusing on market-leading companies with defensible
positions. We believe that stock selectivity will remain crucial for the rest of
the year. Stock dividends and fixed-income securities may play a crucial role in
determining portfolio performance in the near future, and the fund is positioned
accordingly.
Fund Management
Senior Vice President and Director of Investments Charles P. Mayer is
responsible for the equity side of the portfolio. An industry veteran with 28
years of professional experience, he earned an MBA from St. John's University
and a BA from St. Peter's College. Previously, Charlie was with Westinghouse
Pension.
Charlie is assisted by co-manager Peter Lovell. Pete joined INVESCO in
1994, and received his BA from Colorado State University and MBA from Regis
University. Previously, he was a financial consultant with Merrill Lynch.
Senior Vice President and Director of Fixed-Income Investments Donovan
"Jerry" Paul serves as co-portfolio manager of the fund, concentrating on
fixed-income securities since 1994. Jerry began his investment career in 1976;
before joining INVESCO, he worked for Stein, Roe & Farnham Inc., as well as
Quixote Investment Management. He earned an MBA from the University of Northern
Iowa, and a BBA from the University of Iowa. He is a Chartered Financial Analyst
and Certified Public Accountant.
Multi-Asset Allocation Fund
For the one-year period ended 7/31/98, INVESCO Multi-Asset Allocation Fund
had a total return of 8.15%, compared to a total return of 19.26% for the S&P
500 and 8.06% for the Lehman Government/Corporate Bond Index.
(Of course, past performance is not a guarantee of future results.)1,2
Strategic Summary
The fund allocates investments among the following asset classes:
large-capitalization stocks, small-cap stocks, real estate investment trusts
(REITs), fixed-income securities, foreign securities, and cash -- gradually
adjusting the mix depending on our assessment of their relative valuations.
During the last 12 months, the fund's returns were enhanced by large-cap stocks,
fixed-income securities, and foreign securities, while REITs and small-cap
stocks hindered performance.
<PAGE>
The Asian financial crisis has dominated the financial landscape for more
than a year. As instability in Asia increased, it spurred a "flight to quality"
in the bond market, producing strong returns for high-quality obligations --
especially for Treasuries. As domestic equity markets became more volatile,
investors placed a premium on liquidity and predictability of earnings, bidding
up the price of the 50 to 100 largest stocks in the domestic market, while
selling many small- and mid-cap companies. This created a two-tier market where
the largest, liquid domestic stocks significantly outperformed all other
equities -- and presently many appear overvalued compared to small-cap stocks.
Among the fund's foreign holdings, the strongest gains were produced by
equities in Europe, and this region remains a main focus of the fund's
international investments. Europe is in a state of transformation to a more
free, open economy. As the EMU (European Monetary Union) approaches, earnings
are starting to accelerate and equity ownership throughout Europe is increasing.
Multi-Asset Allocation Fund
Average Annual Total Return
as of 7/31/98(2)
1 Year 8.15%
------------------------------------------
Since Inception (12/93) 12.99%
------------------------------------------
The fund's REITs and small-cap stocks produced disappointing results in the
last 12 months. In January, legislation was passed to address the "paired-share"
structure of certain REITs, creating negative sentiment towards this sector. A
paired-share REIT combines a conventional corporation with a real-estate
investment trust. Although there are only five paired-share REITs operating in
the U.S., the new legislation created much uncertainty in this sector, and many
REIT investors left the REIT market to pursue high-flying large-capitalization
stocks. With demand temporarily diminished, many REITs were also trying to sell
additional equity -- putting further downward pressure on prices.
For the fund's small-cap stocks, disappointing returns were primarily a
result of investor fixation on large, liquid stocks. This is typical of a late
bull market, even though the technical underpinnings for small-cap stocks remain
strong. When the market environment changes, we may enter a prolonged period
where small-cap stocks significantly outperform large-caps.
Graph:
This line graph represents a comparison of the value of a $10,000 investment
in INVESCO Multi-Asset Allocation Fund to the value of a $10,000 investment
in the S&P 500 Index and Lehman Government/Corporate Bond Index, assuming in
each case reinvestment of all dividends and capital gain distributions, for
the period from inception (12/93) through 7/31/98.
<PAGE>
Looking Forward
In our opinion, small-cap stocks, REITs, and international securities
presently represent the best long-term values. We will continue to monitor the
investment climate, making slight adjustments to the portfolio's asset mix. The
remainder of 1998 may be a difficult year for investors with increased price
swings; the extra diversification of a multiple asset allocation approach to
investing may help limit volatility.
Fund Management
INVESCO Multi-Asset Allocation Fund is managed by a team led by Bob
Slotpole. He earned an MBA from Stanford University, as well as a BS from the
State University of New York-Buffalo. Now a senior vice president and director
of equities for INVESCO Management & Research, Inc., Bob began his investment
career in 1975. Previously, he was associated with First Boston and Lehman
Brothers.
(1) The S&P 500 and Lehman Government/Corporate Bond Index are unmanaged indexes
of securities considered to be representative of the broad domestic equity and
domestic fixed-income 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.
(3) Morningstar's proprietary rankings reflect historical risk-adjusted
performance and are subject to change every month. Ratings are calculated for
the fund's three-, five-, and 10-year average annual returns (based on available
track records) in excess of 90-day Treasury bill returns. The top 10% of funds
in an investment category receive 5 stars, the next 22.5%, 4 stars. As of
7/31/98, INVESCO Balanced Fund received 4 stars among 2,572 funds in the
domestic equity fund category for the three-year and overall period,
respectively.
<PAGE>
Ten Largest Common Stock Holdings
July 31, 1998
Description Value
- --------------------------------------------------------------------------------
Balanced Fund
Merck & Co $ 3,452,750
Anheuser-Busch Cos 3,364,856
Dayton Hudson 3,346,875
CIGNA Corp 3,237,062
International Business Machines 3,206,500
NationsBank Corp 3,174,050
Tandy Corp 3,170,137
General Electric 3,081,281
US WEST 2,989,000
America Online 2,960,100
Multi-Asset Allocation Fund
General Electric $ 294,731
Ameritech Corp 226,263
International Business Machines 225,250
Merck & Co 221,962
Microsoft Corp 209,237
Intel Corp 168,875
Chase Manhattan 155,485
Abbott Laboratories 141,313
Associates First Capital Class A 135,565
Phillips Petroleum 132,563
Composition of holdings is subject to change.
<PAGE>
---------------------------------------------------------------
Statement of Investment Securities
July 31, 1998
- --------------------------------------------------------------------------------
Shares, Units
or Principal
% Description Amount Value
- --------------------------------------------------------------------------------
Balanced Fund
59.43 COMMON STOCKS
0.74 AEROSPACE & DEFENSE
Northrop Grumman 20,000 $ 1,621,250
- --------------------------------------------------------------------------------
6.20 BANKS
Bank of New York 42,400 2,713,600
Citicorp 15,000 2,550,000
Fleet Financial Group 30,500 2,621,094
Mellon Bank 38,700 2,607,412
NationsBank Corp 39,800 $ 3,174,050
- --------------------------------------------------------------------------------
13,666,156
1.53 BEVERAGES
Anheuser-Busch Cos 65,100 3,364,856
- --------------------------------------------------------------------------------
0.94 BUILDING MATERIALS
General Cable 71,700 2,083,781
- --------------------------------------------------------------------------------
1.02 COMMUNICATIONS - EQUIPMENT
& MANUFACTURING
Motorola Inc 43,000 2,246,750
- --------------------------------------------------------------------------------
3.45 COMPUTER RELATED
Cisco Systems(a) 23,000 2,202,250
International Business Machines 24,200 3,206,500
Microsoft Corp(a) 20,000 2,202,500
- --------------------------------------------------------------------------------
7,611,250
<PAGE>
- --------------------------------------------------------------------------------
0.93 CONTAINERS
Owens-Illinois Inc(a) 46,400 2,047,400
- --------------------------------------------------------------------------------
0.78 ELECTRIC UTILITIES
Unicom Corp 50,000 1,728,125
- --------------------------------------------------------------------------------
1.40 ELECTRICAL EQUIPMENT
General Electric 34,500 3,081,281
- --------------------------------------------------------------------------------
2.83 ELECTRONICS N SEMICONDUCTOR
Applied Materials(a) 56,500 1,892,750
Intel Corp 29,000 2,448,687
Texas Instruments 32,000 1,898,000
- --------------------------------------------------------------------------------
6,239,437
0.66 FOODS
Tasty Baking 100,000 1,462,500
- --------------------------------------------------------------------------------
6.48 HEALTH CARE DRUGS N PHARMACEUTICALS
AmeriSource Health Class A(a) 21,300 1,621,463
Bristol-Myers Squibb 24,100 2,745,894
Merck & Co 28,000 3,452,750
Monsanto Co 37,000 2,095,125
SmithKline Beecham PLC
Sponsored ADR
Representing 5 Ord Shrs 37,000 2,118,250
Warner-Lambert Co 30,000 2,266,875
- --------------------------------------------------------------------------------
14,300,357
2.33 HOUSEHOLD PRODUCTS
Colgate-Palmolive Co 29,000 2,680,687
Procter & Gamble 31,000 2,460,625
- --------------------------------------------------------------------------------
5,141,312
2.79 INSURANCE
CIGNA Corp 49,000 3,237,062
Travelers Property Casualty
Class A 67,500 $ 2,919,375
- --------------------------------------------------------------------------------
6,156,437
0.93 MANUFACTURING
Textron Inc 27,700 2,046,338
- --------------------------------------------------------------------------------
0.74 NATURAL GAS
Coastal Corp 50,000 1,637,500
- --------------------------------------------------------------------------------
4.64 OIL & GAS RELATED
Chevron Corp 27,800 2,296,975
EEX Corp(a) 160,000 1,120,000
Exxon Corp 40,000 2,805,000
Schlumberger Ltd 36,000 2,180,250
Unocal Corp 56,000 1,834,000
- --------------------------------------------------------------------------------
10,236,225
<PAGE>
- --------------------------------------------------------------------------------
0.64 PAPER & FOREST PRODUCTS
Fort James 42,000 1,417,500
- --------------------------------------------------------------------------------
1.00 PERSONAL CARE
Gillette Co 42,000 2,199,750
- --------------------------------------------------------------------------------
1.21 POLLUTION CONTROL
Republic Services Class A(a) 107,100 2,677,500
- --------------------------------------------------------------------------------
9.04 RETAIL
Consolidated Stores(a) 71,500 2,404,188
Dayton Hudson 70,000 3,346,875
Dollar General 60,812 2,493,292
Federated Department Stores(a) 45,000 2,382,188
Penney (J C) Co 31,000 1,819,313
ProffittOs Inc(a) 72,300 2,277,450
Tandy Corp 55,800 3,170,137
Williams-Sonoma Inc(a) 61,600 2,036,650
- --------------------------------------------------------------------------------
19,930,093
0.77 SAVINGS & LOAN
Ahmanson (H F) & Co 25,800 1,704,413
- --------------------------------------------------------------------------------
3.48 SERVICES
America Online(a) 25,300 2,960,100
Ceridian Corp(a) 45,000 2,573,437
Xerox Corp 20,200 2,132,363
- --------------------------------------------------------------------------------
7,665,900
3.65 TELEPHONE
Bell Atlantic 51,600 2,341,350
GTE Corp 50,000 2,718,750
US WEST 56,000 2,989,000
- --------------------------------------------------------------------------------
8,049,100
1.25 TRUCKERS
CNF Transportation 63,500 2,746,375
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $109,999,866) $131,061,586
- --------------------------------------------------------------------------------
34.00 FIXED INCOME SECURITIES
4.79 US Government Obligations
US Treasury Notes
6.875%, 5/15/2006 $ 4,000,000 4,318,752
5.500%, 5/31/2003 $ 6,250,000 6,238,281
- --------------------------------------------------------------------------------
TOTAL US GOVERNMENT
OBLIGATIONS
(Cost $10,293,387) 10,557,033
<PAGE>
- --------------------------------------------------------------------------------
7.64 US Government Agency Obligations
Freddie Mac, Gold
Participation Certificates
6.500%, 6/1/2011 $ 8,104,097 8,164,391
6.500%, 9/1/2011 $ 8,129,318 8,189,799
Student Loan Marketing
Association, Notes
Series CQ
5.313%, 3/7/2001 $ 500,000 496,289
- --------------------------------------------------------------------------------
TOTAL US GOVERNMENT
AGENCY OBLIGATIONS
(Cost $16,293,405) 16,850,479
21.57 Corporate Bonds
1.20 AUTOMOBILES
Auburn Hills Trust, Gtd
Exchangeable Deb
Certificates
12.000%, 5/1/2020 $ 1,000,000 1,624,759
General Motors Acceptance
Medium-Term Notes
6.700%, 4/25/2001 $ 1,000,000 1,015,937
- --------------------------------------------------------------------------------
2,640,696
0.76 BUILDING MATERIALS
USG Corp, Sr Notes
8.500%, 8/1/2005 $ 1,500,000 1,667,700
- --------------------------------------------------------------------------------
11.49 ELECTRIC UTILITIES
Boston Edison, Deb
7.800%, 3/15/2023 $ 1,925,000 2,028,018
Carolina Power & Light
1st Mortgage
8.625%, 9/15/2021 $ 1,000,000 1,252,648
6.875%, 8/15/2023 $ 1,000,000 1,006,240
Commonwealth Edison
1st Mortgage, Series 76
8.250%, 10/1/2006 $ 1,000,000 1,114,102
Consumers Energy, 1st &
Refunding Mortgage
7.375%, 9/15/2023 $ 2,000,000 2,072,862
DQU-II Funding
Collateral Lease
8.700%, 6/1/2016 $ 2,000,000 $ 2,232,040
Detroit Edison, Secured
Medium-Term
Notes, Series C
8.300%, 1/13/2023 $ 1,000,000 1,101,312
Jersey Central Power &
Light, 1st Mortgage
7.500%, 5/1/2023 $ 1,000,000 1,033,846
6.750%, 11/1/2025 $ 1,000,000 979,381
Metropolitan Edison
1st Mortgage Secured
Medium-Term Notes
Series B
8.150%, 1/30/2023 $ 2,000,000 2,166,888
<PAGE>
New York State Electric &
Gas, 1st Mortgage
8.300%, 12/15/2022 $ 1,500,000 1,617,318
Niagara Mohawk Power
1st Mortgage
9.750%, 11/1/2005 $ 1,000,000 1,175,911
Pacific Gas & Electric, 1st
& Refunding Mortgage
Series 91A
8.800%, 5/1/2024 $ 1,000,000 1,281,342
Series 92B
8.375%, 5/1/2025 $ 1,050,000 1,142,932
Pennsylvania Power &
Light, 1st Mortgage
8.500%, 5/1/2022 $ 1,500,000 1,683,315
Potomac Electric Power
1st Mortgage
6.250%, 10/15/2007 $ 1,500,000 1,532,418
South Carolina Electric &
Gas, 1st Mortgage
8.875%, 8/15/2021 $ 1,750,000 1,928,468
- --------------------------------------------------------------------------------
25,349,041
0.46 ENTERTAINMENT
Time Warner, Deb
6.850%, 1/15/2026 $ 1,000,000 1,014,423
- --------------------------------------------------------------------------------
0.63 HEALTH CARE DRUGS N PHARMACEUTICALS
McKesson Corp, Sub Deb
4.500%, 3/1/2004 $ 1,500,000 1,396,258
- --------------------------------------------------------------------------------
1.04 INSURANCE
Equitable Cos, Sr Notes
9.000%, 12/15/2004 $ 2,000,000 2,292,696
- --------------------------------------------------------------------------------
0.45 LODGING N HOTELS
Hilton Hotels, Sr Notes
7.200%, 12/15/2009 $ 1,000,000 995,109
- --------------------------------------------------------------------------------
2.84 OIL & GAS RELATED
Atlantic Richfield, Deb
10.875%, 7/15/2005 $ 1,500,000 $ 1,895,407
9.875%, 3/1/2016 $ 1,500,000 2,033,811
Sun Inc, Deb
9.375%, 6/1/2016 $ 2,000,000 2,326,580
- --------------------------------------------------------------------------------
6,255,798
0.73 PAPER & FOREST PRODUCTS
QUNO Corp, Sr Notes
9.125%, 5/15/2005 $ 1,500,000 1,605,000
- --------------------------------------------------------------------------------
0.69 TELECOMMUNICATIONS N CELLULAR
& WIRELESS
360 Communications
Sr Notes
6.650%, 1/15/2008 $ 1,500,000 1,514,503
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
1.28 TELEPHONE
Centel Capital, Deb
9.000%, 10/15/2019 $ 1,000,000 1,256,846
Frontier Corp, Notes
7.250%, 5/15/2004 $ 1,500,000 1,576,699
- --------------------------------------------------------------------------------
2,833,545
TOTAL CORPORATE BONDS
(Cost $46,500,184) 47,564,769
TOTAL FIXED INCOME
SECURITIES
(Cost $73,086,976) 74,972,281
1.14 OTHER SECURITIES
1.14 TOBACCO
Cie Financiere Richemont AG A
Units (Each unit consists of
one bearer shr at 100 Swiss
Francs par in the Company and
one bearer participation
certificate at no par
issued by Richemont SA,
Luxembourg)
(Cost $2,624,350) 1,800 2,505,871
- --------------------------------------------------------------------------------
5.43 SHORT-TERM INVESTMENTS N
REPURCHASE AGREEMENTS
Repurchase Agreement with
State Street dated
7/31/1998 due 8/3/1998
at 5.580%, repurchased at
$11,986,571
(Collateralized by US
Treasury Bonds, due
8/15/2020 at 8.750%,
value $12,232,908)
(Cost $11,981,000) $ 11,981,000 11,981,000
- --------------------------------------------------------------------------------
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $197,692,192)
(Cost for IncomeTax Purposes
$197,702,999) $220,520,738
- --------------------------------------------------------------------------------
Multi-Asset Allocation Fund
69.30 COMMON STOCKS & WARRANTS
0.73 AEROSPACE & DEFENSE
GenCorp Inc 500 $ 11,531
Lockheed Martin 700 69,781
United Technologies 700 67,069
- --------------------------------------------------------------------------------
148,381
<PAGE>
- --------------------------------------------------------------------------------
0.12 AIR FREIGHT
Airborne Freight 400 9,550
Expeditors International of
Washington 400 15,950
- --------------------------------------------------------------------------------
25,500
0.95 AIRLINES
AMR Corp 1,000 71,438
America West Holdings Class B(a) 400 9,625
British Airways PLC Sponsored
ADR Representing 10 Ord Shrs 500 50,875
Continental Airlines Class B(a) 600 32,100
Swire Pacific Ltd Sponsored ADR
Representing Class A Shrs 9,200 29,508
- --------------------------------------------------------------------------------
193,546
0.26 AUTO PARTS
Arvin Industries 800 31,100
Borg-Warner Automotive 300 14,119
Detroit Diesel(a) 400 8,550
- --------------------------------------------------------------------------------
53,769
1.07 AUTOMOBILES
Chrysler Corp 900 53,269
Ford Motor 2,100 119,569
Volvo AB Sponsored ADR
Representing Class B Shrs 1,500 46,031
- --------------------------------------------------------------------------------
218,869
5.22 BANKS
Banc One 2,200 113,712
BankAmerica Corp 1,000 89,750
Bankers Trust 600 67,237
Chase Manhattan 2,056 155,485
Commerce Bancorp 125 5,687
Den Danske Bank ADR Representing
Ord Shrs 500 66,027
Deutsche Bank AG Sponsored ADR
Representing Ord Shrs 700 55,101
- --------------------------------------------------------------------------------
<PAGE>
Development Bank of Singapore Ltd
Sponsored ADR Representing
4 Foreign Shrs 1,320 $ 28,289
First American 800 37,600
FirstBank Puerto Rico 500 13,594
Fleet Financial Group 200 17,187
HSBC Holdings PLC Sponsored ADR
Representing 10 Ord Shrs 200 48,790
HUBCO Inc 400 12,975
Imperial Bancorp(a) 1,400 39,725
Independent Bank 400 7,150
Istituto Mobiliare Italiano SpA
Sponsored ADR
Representing 3 Shrs 500 27,656
KeyCorp 1,200 40,800
Mellon Bank 500 33,687
National Australia Bank Ltd
Sponsored ADR Representing
5 Ord Shrs 800 55,700
NationsBank Corp 300 23,925
Riggs National 400 11,050
Silicon Valley Bancshares(a) 300 9,300
Societe Generale Sponsored ADR
Representing 1/5 Ord Shrs 1,200 57,827
TR Financial 400 15,100
Union Planters 291 15,837
US Trust 200 16,063
- --------------------------------------------------------------------------------
1,065,254
1.28 BEVERAGES
Canandaigua Brands Class A(a) 700 32,987
Coca-Cola Co 800 64,550
Coca-Cola Enterprises 2,000 65,875
Kirin Brewery Ltd ADR
Representing 10 Ord Shrs 400 36,400
PepsiCo Inc 1,600 62,100
- --------------------------------------------------------------------------------
261,912
0.13 BIOTECHNOLOGY
IDEC Pharmaceuticals(a) 400 9,475
MedImmune Inc(a) 300 17,634
- --------------------------------------------------------------------------------
27,109
<PAGE>
- --------------------------------------------------------------------------------
0.30 BROADCASTING
Carlton Communications PLC
Sponsored ADR Representing
5 Ord Shrs 1,500 61,500
- --------------------------------------------------------------------------------
0.91 BUILDING MATERIALS
Cemex SA de CV Sponsored ADR
Representing 2 Series B Shrs 3,000 25,490
Centex Construction Products 500 21,750
General Cable 1,600 46,500
Southdown Inc 400 $ 25,025
TJ International 300 6,975
Texas Industries 800 29,800
USG Corp(a) 600 30,825
- --------------------------------------------------------------------------------
186,365
0.50 CABLE
Cablevision Systems Class A(a) 200 17,125
MediaOne Group(a) 800 38,650
United Video Satellite Group
Class A(a) 1,300 45,338
- --------------------------------------------------------------------------------
101,113
1.83 CHEMICALS
AKZO Nobel NV Sponsored ADR
Representing Ord Shrs 800 40,400
BASF AG ADR Representing
Ord Shrs 1,000 45,964
Bayer AG Sponsored ADR
Representing Ord Shrs 1,000 45,374
Dexter Corp 500 13,687
Dow Chemical 600 54,450
du Pont (E I) de Nemours 1,100 68,200
NL Industries 400 8,300
RPM Inc 4,900 77,788
Rohm & Haas 200 19,475
- --------------------------------------------------------------------------------
373,638
<PAGE>
- --------------------------------------------------------------------------------
0.52 COMMUNICATIONS N EQUIPMENT
& MANUFACTURING
Comverse Technology(a) 260 13,276
Lucent Technologies 700 64,706
Tekelec(a) 1,400 28,000
- --------------------------------------------------------------------------------
105,982
4.35 COMPUTER RELATED
Avid Technology(a) 400 14,025
BancTec Inc(a) 1,000 16,062
CHS Electronics(a) 2,300 39,388
Cisco Systems(a) 400 38,300
Citrix Systems(a) 400 25,475
Computer Associates International 1,100 36,506
Dell Computer(a) 1,200 130,313
Hyperion Software(a) 1,000 26,750
Information Management
Resources(a) 400 10,600
Inter-Tel Inc 900 14,428
International Business Machines 1,700 225,250
Legato Systems(a) 300 13,050
Manugistics Group(a) 400 8,700
MICROS Systems(a) 300 $ 11,250
Microsoft Corp(a) 1,900 209,237
Quantum Corp(a) 800 14,000
Stratus Computer(a) 500 14,375
Symantec Corp(a) 400 9,700
Systems & Computer Technology(a) 1,400 30,800
- --------------------------------------------------------------------------------
888,209
0.65 CONSUMER FINANCE
American Express 1,100 121,413
FIRSTPLUS Financial Group(a) 300 11,700
- --------------------------------------------------------------------------------
133,113
0.32 CONTAINERS
Amcor Ltd Sponsored ADR
Representing 4 Ord Shrs 2,000 33,500
Owens-Illinois Inc(a) 700 30,888
- --------------------------------------------------------------------------------
64,388
<PAGE>
1.59 ELECTRIC UTILITIES
AES Corp(a) 600 27,488
CILCORP Inc 300 14,044
Cleco Corp 400 11,875
Commonwealth Energy System SBI 400 14,200
Endesa SA Sponsored ADR
Representing Ord Shrs 2,000 43,625
GPU Inc 1,100 39,325
Hawaiian Electric Industries 300 11,344
MidAmerican Energy Holdings 2,400 48,900
Minnesota Power 200 7,887
PacifiCorp 1,800 38,587
PowerGen PLC Sponsored ADR
Representing 4 Ord Shrs 1,000 53,500
SIGCORP Inc 450 13,613
- --------------------------------------------------------------------------------
324,388
1.83 ELECTRICAL EQUIPMENT
C&D Technologies 200 5,287
General Electric 3,300 294,731
Hitachi Ltd Sponsored ADR
Representing 10 Shrs 600 37,575
Kyocera Corp Sponsored ADR
Representing 2 Shrs 350 35,175
- --------------------------------------------------------------------------------
372,768
0.32 ELECTRONICS
SCI Systems(a) 1,300 51,188
Superior Telecom 400 13,800
- --------------------------------------------------------------------------------
64,988
1.11 ELECTRONICS N SEMICONDUCTOR
DII Group(a) 500 8,125
DSP Group(a) 700 $ 14,087
Dallas Semiconductor 800 25,700
Integrated Circuit Systems(a) 700 8,925
Intel Corp 2,000 168,875
- --------------------------------------------------------------------------------
225,712
<PAGE>
- --------------------------------------------------------------------------------
0.20 ENGINEERING & CONSTRUCTION
Jacobs Engineering Group(a) 600 17,625
NVR Inc(a) 600 23,625
- --------------------------------------------------------------------------------
41,250
0.22 ENTERTAINMENT
Disney (Walt) Co 1,300 44,769
- --------------------------------------------------------------------------------
0.78 FINANCIAL
Associates First Capital Class A 1,745 135,565
Doral Financial 300 5,587
Fannie Mae 300 18,600
- --------------------------------------------------------------------------------
159,752
2.16 FOODS
Associated British Foods PLC
ADR Representing Ord Shrs 6,000 56,589
Dean Foods 1,500 82,219
Dole Food 2,300 108,387
Groupe Danone Sponsored ADR
Representing 1/5 Shrs 400 23,850
Nestle SA Sponsored ADR
Representing 1/20
Registered Shrs 500 51,930
Sara Lee 500 25,063
Smithfield Foods(a) 500 11,875
Unigate PLC ADR Representing
Ord Shrs 2,500 24,642
Unilever NV New York Shrs 800 55,600
- --------------------------------------------------------------------------------
440,155
0.11 GAMING
Anchor Gaming(a) 300 20,400
Grand Casinos(a) 200 2,487
- --------------------------------------------------------------------------------
22,887
0.21 GOLD & PRECIOUS METALS MINING
Rio Tinto Ltd Sponsored ADR
Representing 4 Ord Shrs 1,000 43,772
- --------------------------------------------------------------------------------
4.85 HEALTH CARE DRUGS N PHARMACEUTICALS
Abbott Laboratories 3,400 141,313
ALPHARMA Inc Class A 1,300 32,175
Astra AB Sponsored ADR
Representing Series A Shrs 3,500 66,938
Bindley Western Industries 933 28,573
Bristol-Myers Squibb 400 45,575
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Shares, Units
or Principal
% Description Amount Value
- --------------------------------------------------------------------------------
General Nutrition(a) 600 $ 17,175
Glaxo Wellcome PLC Sponsored
ADR Representing 2 Ord Shrs 1,000 60,813
Herbalife International Class A 100 1,906
Johnson & Johnson 1,600 123,600
Lilly (Eli) & Co 1,700 114,325
Merck & Co 1,800 221,962
Novartis AG Sponsored ADR
Representing 1/20 Shrs 700 59,035
Novo-Nordisk A/S Sponsored ADR
Representing 1/2 Class B Shrs 700 46,200
Warner-Lambert Co 400 30,225
- --------------------------------------------------------------------------------
989,815
1.81 HEALTH CARE RELATED
ATL Ultrasound(a) 800 40,075
Arterial Vascular Engineering(a) 500 19,750
Assisted Living Concepts(a) 1,100 14,987
Baxter International 800 47,800
Express Scripts Class A(a) 400 29,413
Hanger Orthopedic Group(a) 500 8,500
Hooper Holmes 600 12,000
Integrated Health Services 400 12,400
NovaCare Inc(a) 2,100 21,000
Safeskin Corp(a) 1,200 45,075
SonoSight Inc(a) 1 8
STERIS Corp(a) 700 42,700
Sun Healthcare Group(a) 1,700 24,863
Theragenics Corp(a) 1,000 16,375
Trigon Healthcare(a) 1,100 34,444
- --------------------------------------------------------------------------------
369,390
0.35 HOMEBUILDING
MDC Holdings 1,200 24,675
Nortek Inc(a) 300 9,637
Pulte Corp 500 14,156
US Home(a) 600 22,463
- --------------------------------------------------------------------------------
70,931
0.20 HOUSEHOLD FURNITURE & APPLIANCES
Ethan Allen Interiors 700 28,919
Furniture Brands International(a) 400 11,300
- --------------------------------------------------------------------------------
40,219
<PAGE>
- --------------------------------------------------------------------------------
0.58 HOUSEHOLD PRODUCTS
Colgate-Palmolive Co 600 55,462
Procter & Gamble 800 63,500
- --------------------------------------------------------------------------------
118,962
2.22 INSURANCE
CIGNA Corp 1,200 $ 79,275
Delphi Financial Group(a) 400 22,450
Fidelity National Financial 1,000 37,687
Guarantee Life 600 12,712
ING Groep NV Sponsored ADR
Representing Ord Shrs 1,000 74,875
LandAmerica Financial Group 300 16,462
Life Re 200 18,237
Orion Capital 700 33,862
Presidential Life 700 14,788
Reliance Group Holdings 4,400 76,175
Travelers Group 1,000 67,000
- --------------------------------------------------------------------------------
453,523
0.78 INVESTMENT BANK/BROKER FIRM
Advest Group 700 18,681
Bear Stearns 1,700 95,625
Dain Rauscher 500 27,000
Morgan Stanley Dean Witter & Co 200 17,412
- --------------------------------------------------------------------------------
158,718
0.50 IRON & STEEL
AK Steel Holding 900 14,344
National Steel Class B 2,300 22,425
USX-US Steel Group 2,400 64,650
- --------------------------------------------------------------------------------
101,419
0.35 LODGING N HOTELS
Bristol Hotel & Resorts(a)(d) 150 1,041
Host Marriott(a) 1,700 28,794
Marriott International Class A 1,300 42,250
- --------------------------------------------------------------------------------
72,085
<PAGE>
- --------------------------------------------------------------------------------
0.63 MACHINERY
Asyst Technologies(a) 1,100 14,781
Caterpillar Inc 600 29,100
Cincinnati Milacron 500 10,937
Deere & Co 500 20,094
Gencor Industries 100 1,700
Graco Inc 500 14,062
Manitowoc Co 450 15,075
NACCO Industries Class A 100 11,531
Terex Corp(a) 600 12,563
- --------------------------------------------------------------------------------
129,843
1.17 MANUFACTURING
RWE AG Sponsored ADR
Representing Ord Shrs 1,000 54,258
Robbins & Myers 600 17,100
Textron Inc 500 36,938
Tyco International Ltd 2,100 $ 130,069
- --------------------------------------------------------------------------------
238,365
0.63 NATURAL GAS
Coastal Corp 1,800 58,950
MCN Energy Group 1,700 42,181
New Jersey Resources 400 13,700
ONEOK Inc 400 13,650
- --------------------------------------------------------------------------------
128,481
0.53 OFFICE EQUIPMENT & SUPPLIES
Canon Inc Sponsored ADR
Representing Ord Shrs 1,100 25,231
Knoll Inc(a) 800 28,300
United Stationers(a) 800 54,300
- --------------------------------------------------------------------------------
107,831
3.72 OIL & GAS RELATED
Cliffs Drilling(a) 400 8,225
Cooper Cameron(a) 1,600 56,100
Daniel Industries 1,400 23,975
Elf Aquitaine SA Sponsored ADR
Representing 1/2 Ord Shrs 600 38,925
Energen Corp 800 13,750
Exxon Corp 1,400 98,175
Marine Drilling(a) 1,300 14,462
Maverick Tube(a) 1,400 11,550
Mobil Corp 1,700 118,575
Newpark Resources(a) 900 8,325
Norsk Hydro A/S Sponsored ADR
Representing Ord Shrs 800 35,400
<PAGE>
- --------------------------------------------------------------------------------
Phillips Petroleum 3,000 132,563
Repsol SA Sponsored ADR
Representing Ord Shrs 1,000 53,688
Royal Dutch Petroleum New
York Shrs 900 45,900
Valero Energy 1,800 43,088
Veritas DGC(a) 900 29,925
Yacimientos Petroliferos
Fiscades SA Sponsored ADR
Representing Class D Shrs 900 26,325
- --------------------------------------------------------------------------------
758,951
0.06 PERSONAL CARE
Rexall Sundown(a) 400 12,075
- --------------------------------------------------------------------------------
0.27 PHOTOGRAPHY & IMAGING
Fuji Photo Film Ltd ADR
Representing Shrs 1,500 54,938
- --------------------------------------------------------------------------------
1.08 PUBLISHING
American Greetings Class A 1,800 83,138
Consolidated Graphics(a) 300 17,644
Gannett Co 1,300 $ 83,119
Media General Class A 400 18,625
Valassis Communications(a) 500 18,969
- --------------------------------------------------------------------------------
221,495
11.88 REAL ESTATE INVESTMENT TRUST
American General Hospitality 2,700 51,469
Apartment Investment &
Management Class A 1,400 53,200
Arden Realty 2,700 63,788
Avalon Bay Communities 900 32,287
Bedford Property Investors 2,400 44,850
CBL & Associates Properties 3,900 94,819
Cabot Industrial Trust 1,000 18,937
<PAGE>
Camden Property Trust SBI 1,034 29,792
CarrAmerica Realty 3,200 86,200
Catellus Development(a) 2,500 40,781
Chelsea GCA Realty 400 14,500
Crescent Real Estate Equities 800 23,500
EastGroup Properties SBI 1,400 26,250
Equity Office Properties Trust SBI 3,131 77,884
Equity Residential Properties
Trust SBI 1,500 63,000
Essex Property Trust 3,100 94,550
Excel Realty Trust 900 23,512
FelCor Lodging Trust 1,506 41,589
First Industrial Realty Trust 3,000 82,875
Gables Residential Trust SBI 2,300 61,669
General Growth Properties 1,000 36,375
Glenborough Realty Trust 1,700 41,862
Healthcare Realty Trust 1,100 31,075
Highwoods Properties 2,500 77,344
Hospitality Properties Trust 800 23,150
JDN Realty 1,800 38,700
JP Realty 600 13,275
Kimco Realty 1,050 38,850
Koger Equity 3,100 57,737
Liberty Property Trust SBI 3,500 87,719
MGI Properties 1,900 49,994
Macerich Co 300 8,194
Mack-Cali Realty 1,800 55,912
Pan Pacific Retail Properties 700 14,438
Patriot American Hospitality 4,798 91,162
Philips International Realty 2,000 32,500
Prentiss Properties Trust 4,700 111,919
Prime Group Realty Trust 700 12,863
Public Storage 1,700 45,050
SL Green Realty 2,200 48,400
Shurgard Storage Centers Class A 3,100 85,250
Simon DeBartolo Group 1,600 49,800
Smith (Charles E) Residential
Realty 1,300 40,300
- --------------------------------------------------------------------------------
<PAGE>
Shares, Units
or Principal
% Description Amount Value
- --------------------------------------------------------------------------------
Starwood Hotels & Resorts
Trust 2,300 $ 94,444
Sun Hung Kai Properties Ltd
Sponsored ADR
Representing Ord Shrs 5,500 20,374
Sunstone Hotel Investors 2,500 27,813
Tower Realty Trust 2,000 45,750
TriNet Corporate Realty Trust 800 26,350
Vornado Realty Trust SBI 1,700 61,413
Weeks Corp 1,100 31,763
- --------------------------------------------------------------------------------
2,425,228
0.41 REAL ESTATE RELATED
Excel Legacy(a) 900 4,162
Kilroy Realty 2,100 47,644
Parkway Properties 1,100 32,725
Security Capital Group Warrants
(Exp 9/1998)(a) 35 4
- --------------------------------------------------------------------------------
84,535
0.36 RESTAURANTS
Brinker International(a) 2,000 39,000
CEC Entertainment(a) 700 18,725
CKE Restaurants 235 8,783
Cheesecake Factory(a) 400 7,800
- --------------------------------------------------------------------------------
74,308
2.15 RETAIL
Abercrombie & Fitch Class A(a) 400 18,575
Ames Department Stores(a) 400 8,550
Costco Cos(a) 1,300 73,775
Dayton Hudson 2,400 114,750
Footstar Inc(a) 800 29,650
Penney (J C) Co 400 23,475
Pier 1 Imports 1,125 17,508
Safeway Inc(a) 2,500 110,781
Shopko Stores(a) 600 17,550
Wal-Mart Stores 400 25,250
- --------------------------------------------------------------------------------
439,864
0.52 SAVINGS & LOAN
Astoria Financial 300 15,037
Downey Financial 1,000 32,500
FirstFed Financial(a) 1,600 34,800
Flagstar Bancorp 400 9,950
Peoples Heritage Financial Group 600 13,575
- --------------------------------------------------------------------------------
105,862
<PAGE>
- --------------------------------------------------------------------------------
0.77 SERVICES
Budget Group Class A(a) 800 21,500
Gerber Scientific 1,300 36,237
Mastech Corp(a) 800 $ 19,100
Norrell Corp 500 9,594
Romac International(a) 800 20,600
StaffMark Inc(a) 300 8,025
Xerox Corp 400 42,225
- --------------------------------------------------------------------------------
157,281
0.19 SPECIALTY PRINTING
Dai Nippon Printing Ltd ADR
Representing 10 Ord Shrs 200 31,861
Mail-Well Inc(a) 400 7,400
- --------------------------------------------------------------------------------
39,261
0.19 TELECOMMUNICATIONS -- CELLULAR
& WIRELESS
Centennial Cellular Class A(a) 600 24,337
Powertel Inc(a) 400 7,100
WinStar Communications(a) 200 6,600
- --------------------------------------------------------------------------------
38,037
1.54 TELECOMMUNICATIONS -- LONG DISTANCE
AT&T Corp 2,000 121,250
British Telecommunications PLC
Sponsored ADR Representing
10 Ord Shrs 500 73,063
Dycom Industries(a) 700 24,062
Pacific Gateway Exchange(a) 200 8,000
SmarTalk TeleServices(a) 1,200 19,875
Telecom Italia SpA Sponsored
ADR Representing 10 Ord Shrs 800 68,550
- --------------------------------------------------------------------------------
314,800
2.35 TELEPHONE
Ameritech Corp 4,600 226,263
BellSouth Corp 300 20,494
e.spire Communications(a) 1,100 22,000
<PAGE>
Portugal Telecom SA Sponsored
ADR Representing Ord Shrs 1,000 56,000
SBC Communications 3,200 130,800
Telefonos de Mexico SA de CV
Class L Sponsored ADR
Representing 20 Series L Shrs 500 25,000
- --------------------------------------------------------------------------------
480,557
0.44 TEXTILE N APPAREL MANUFACTURING
Burlington Industries(a) 1,300 13,569
Jones Apparel Group(a) 2,600 67,925
Nautica Enterprises(a) 300 7,734
- --------------------------------------------------------------------------------
89,228
0.11 TEXTILE N HOME FURNISHINGS
Springs Industries Class A 600 22,988
- --------------------------------------------------------------------------------
0.58 TOBACCO
Philip Morris 2,700 $ 118,294
- --------------------------------------------------------------------------------
0.37 TOYS
Nintendo Ltd ADR Representing
1/8 Shrs 6,300 75,000
- --------------------------------------------------------------------------------
0.04 TRUCKERS
Johnstown America Industries(a) 500 8,375
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS &
WARRANTS
(Cost $12,879,000) 14,149,748
0.36 PREFERRED STOCKS
0.36 REAL ESTATE INVESTMENT TRUST
Home Ownership Funding
13.331%(b), Stepdown Pfd(c) 40 38,050
Kimco Realty, Class D
Conv Depository Shrs
7.500% 216 5,549
Tier I Properties, 11.095%(b)
Stepdown Pfd(c) 30 30,525
- --------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS
(Cost $74,398) 74,124
<PAGE>
- --------------------------------------------------------------------------------
18.33 FIXED INCOME SECURITIES
6.18 US Government Obligations
US Treasury Bonds
7.875%, 2/15/2021(f) $ 375,000 470,859
US Treasury Notes
7.500%, 11/15/2001 $ 675,000 714,024
6.375%, 8/15/2002 $ 75,000 77,156
- --------------------------------------------------------------------------------
TOTAL US GOVERNMENT
OBLIGATIONS
(Cost $1,260,152) 1,262,039
4.52 US Government Agency Obligations
Fannie Mae, Gtd Pass-Through
Certificates
9.000%, 12/1/2006 $ 49,243 51,307
9.000%, 8/1/2007 40,471 42,167
7.000%, 1/1/2028 $ 191,584 194,362
7.000%,
9/25/2028(e) $ 125,000 126,680
6.500%, 9/1/2027 $ 66,992 66,689
6.000%, 4/1/2024 $ 40,566 39,664
Federal Home Loan Bank
5.700%, 2/22/2000 $ 100,000 99,607
Freddie Mac, Gold
Participation Certificates
9.000%, 1/1/2005 $ 17,354 17,949
9.000%, 1/1/2007 $ 19,136 19,843
8.000%, 8/1/2017 $ 24,598 25,323
6.000%, 3/1/2013 $ 97,462 96,459
Freddie Mac, Multiclass
Mortgage, Gtd
Participation Certificates
Series 1449, Class E
6.000%, 11/15/2005 $ 79,672 $ 79,582
Government National Mortgage
Association, REMIC
Pass-Through Certificates
Series 1996-13, Class G
7.000%, 1/16/2007 $ 62,529 62,954
- --------------------------------------------------------------------------------
TOTAL US GOVERNMENT
AGENCY OBLIGATIONS
(Cost $917,072) 922,586
<PAGE>
- --------------------------------------------------------------------------------
0.86 Mortgage-Backed Securities
0.86 CONSUMER FINANCE
Delta Funding Home Equity
Loan Trust, Series 1998-2
Class A4F, 6.380%
9/15/2026 $ 70,000 69,823
Green Tree Financial Home
Equity Loan Trust, Notes
Series 1998-C, Class A5
6.390%, 7/15/2029 $ 30,000 29,898
IMC Home Equity Loan Trust
Pass-Through Certificates
Series 1998-1, Class A3
6.410%, 4/20/2018 $ 75,000 75,425
- --------------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED
SECURITIES
(Cost $174,966) 175,146
6.77 Corporate Bonds
0.25 COMMUNICATIONS N EQUIPMENT
& MANUFACTURING
Motorola Inc, Deb
8.400%, 8/15/2031 $ 40,000 50,672
- --------------------------------------------------------------------------------
0.29 CONSUMER FINANCE
Beneficial Corp, Deb
8.400%, 5/15/2008 $ 50,000 58,449
- --------------------------------------------------------------------------------
1.28 FINANCIAL
American General Finance
Sr Notes
6.875%, 1/15/2000 $ 75,000 75,896
Associates Corp of North
America, Sr Notes
7.750%, 2/15/2005 $ 100,000 108,215
Commercial Credit, Notes
6.625%, 6/1/2015 $ 75,000 76,291
- --------------------------------------------------------------------------------
260,402
<PAGE>
- --------------------------------------------------------------------------------
0.62 INVESTMENT BANK/BROKER FIRM
Bear Stearns, Sr Notes
6.625%, 10/1/2004 $ 50,000 $ 50,938
Salomon Inc, Sr Notes
6.700%, 7/5/2000 $ 75,000 75,940
- --------------------------------------------------------------------------------
126,878
0.39 MANUFACTURING
Tyco International Group SA
Gtd Notes, 7.000%
6/15/2028 $ 80,000 80,290
- --------------------------------------------------------------------------------
1.00 REAL ESTATE INVESTMENT TRUST
Highwoods/Forsyth LP
Sr Notes
7.500%, 4/15/2018 $ 35,000 35,657
Kimko Realty
Medium-Term Notes
7.060%, 7/14/2009 $ 50,000 49,817
Spieker Properties LP, Notes
6.750%, 1/15/2008 $ 80,000 78,967
Weingarten Realty Investors
Medium-Term Notes
Series A
6.900%, 11/24/2008 $ 40,000 40,241
- --------------------------------------------------------------------------------
204,682
1.21 RETAIL
Dayton Hudson, Notes
7.500%, 7/15/2006 $ 75,000 80,840
Federated Department Stores
Deb, 7.000%
2/15/2028 $ 85,000 84,376
Neiman Marcus Group, Deb
7.125%, 6/1/2028 $ 80,000 80,902
- --------------------------------------------------------------------------------
246,118
0.36 SERVICES
Hertz Corp, Sr Notes
6.000%, 2/1/2001 $ 75,000 74,573
- --------------------------------------------------------------------------------
0.61 TELECOMMUNICATIONS -- LONG DISTANCE
BellSouth Telecommunications
Deb, 5.850%
11/15/2045 $ 50,000 50,329
MCI Communications, Notes
6.125%, 4/15/2002 $ 75,000 74,955
- --------------------------------------------------------------------------------
125,284
<PAGE>
- --------------------------------------------------------------------------------
0.76 TELEPHONE
GTE Corp, Deb
10.250%, 11/1/2020 $ 100,000 111,957
7.510%, 4/1/2009 $ 40,000 43,330
- --------------------------------------------------------------------------------
155,287
TOTAL CORPORATE BONDS
(Cost $1,369,214) 1,382,635
- --------------------------------------------------------------------------------
Shares, Units
or Principal
% Description Amount Value
- --------------------------------------------------------------------------------
TOTAL FIXED INCOME SECURITIES
(Cost $3,721,404) $ 3,742,406
- --------------------------------------------------------------------------------
12.01 SHORT-TERM INVESTMENTS --
REPURCHASE AGREEMENTS
Repurchase Agreement with
State Street dated
7/31/1998 due 8/3/1998
at 5.580%, repurchased
at $2,454,141
(Collateralized by US
Treasury Bonds due
8/15/2021 at 8.125%,
value $2,515,862)
(Cost $2,453,000) $2,453,000 2,453,000
- --------------------------------------------------------------------------------
100.00 TOTAL INVESTMENT
SECURITIES AT VALUE
(Cost $19,127,802)
(Cost for Income Tax Purposes
$19,165,786) $20,419,278
- --------------------------------------------------------------------------------
(a) Security is non-income producing.
(b) Security is a perpetual stepdown. Stepdown securities are obligations
which decrease the interest payment rate at a specific point in time.
Rate shown reflects current rate which will step down at a future date.
(c) Securities aquired pursuant to Rule 144A. The Fund deems such
securities to be liquid since an institutional market exists.
(d) Security is a When Issued security.
(e) Security is a To-Be-Announced (TBA) security.
(f) Security is partially designated as collateral for a TBA security.
See Notes to Financial Statements
<PAGE>
Statement of Assets and Liabilities
July 31, 1998
Balanced Multi-Asset
Fund Allocation Fund
- --------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a) $ 197,692,192 $ 19,127,802
- --------------------------------------------------------------------------------
At Value(a) $ 220,520,738 $ 20,419,278
Cash 366 94,084
Receivables:
Investment Securities Sold 0 355,601
Fund Shares Sold 279,974 149,450
Dividends and Interest 1,302,617 82,008
Prepaid Expenses and Other Assets 23,016 12,644
- --------------------------------------------------------------------------------
TOTAL ASSETS 222,126,711 21,113,065
LIABILITIES
Payables:
Distributions to Shareholders 37,957 1,766
Investment Securities Purchased 3,853,011 142,074
Fund Shares Repurchased 1,545,393 4,248
Accrued Distribution Expenses 46,538 4,581
Accrued Expenses and Other Payables 20,294 15,200
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 5,503,193 167,869
Net Assets at Value $ 216,623,518 $ 20,945,196
- --------------------------------------------------------------------------------
NET ASSETS
Paid-in Capital(b) $ 183,658,212 $ 18,108,174
Accumulated Undistributed
Net Investment Income 14,553 8,802
Accumulated Undistributed
Net Realized Gain on Investment Securities and
Foreign Currency Transactions 10,122,131 1,536,744
<PAGE>
Net Appreciation of Investment Securities
and Foreign Currency Transactions 22,828,622 1,291,476
- --------------------------------------------------------------------------------
Net Assets at Value $ 216,623,518 $ 20,945,196
- --------------------------------------------------------------------------------
Shares Outstanding 13,786,868 1,615,367
Net Asset Value, Offering and Redemption
Price per Share $ 15.71 $ 12.97
- --------------------------------------------------------------------------------
(a) Investment securities at cost and value at July 31, 1998 include repurchase
agreements of $11,981,000 and $2,453,000 for Balanced and Multi-Asset
Allocation Funds, respectively.
(b) The Fund has 500 million authorized shares of common stock, par value of
$0.01 per share. Of such shares, 100 million have been allocated to each
individual Fund.
See Notes to Financial Statements
<PAGE>
Statement of Operations
Year Ended July 31, 1998
Balanced Multi-Asset
Fund Allocation Fund
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 1,386,453 $ 282,189
Interest 4,951,420 322,981
Foreign Taxes Withheld (10,905) (7,548)
- --------------------------------------------------------------------------------
TOTAL INCOME 6,326,968 597,622
EXPENSES
Investment Advisory Fees 1,115,082 136,420
Distribution Expenses 464,902 45,473
Transfer Agent Fees 447,515 64,749
Administrative Fees 37,877 12,728
Custodian Fees and Expenses 23,003 18,097
DirectorsO Fees and Expenses 17,666 9,854
Professional Fees and Expenses 25,188 14,977
Registration Fees and Expenses 64,433 35,185
Reports to Shareholders 65,197 8,027
Other Expenses 14,940 4,228
- --------------------------------------------------------------------------------
TOTAL EXPENSES 2,275,803 349,738
Fees and Expenses Absorbed by Investment Adviser 0 (69,146)
Fees and Expenses Paid Indirectly (11,494) (7,734)
- --------------------------------------------------------------------------------
NET EXPENSES 2,264,309 272,858
NET INVESTMENT INCOME 4,062,659 324,764
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities 16,103,608 2,123,230
Foreign Currency Transactions (443,603) 39
- --------------------------------------------------------------------------------
Total Net Realized Gain 15,660,005 2,123,269
<PAGE>
- --------------------------------------------------------------------------------
Change in Net Appreciation (Depreciation)
Investment Securities 1,850,574 (1,205,641)
Foreign Currency Transactions 502,422 0
- --------------------------------------------------------------------------------
Total Net Appreciation (Depreciation) 2,352,996 (1,205,641)
NET GAIN ON INVESTMENT SECURITIES AND FOREIGN
CURRENCY TRANSACTIONS 18,013,001 917,628
- --------------------------------------------------------------------------------
Net Increase in Net Assets from Operations $ 22,075,660 $ 1,242,392
================================================================================
See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Year Ended July 31
Balanced Multi-Asset
Fund Allocation Fund
- ----------------------------------------------------------------------------------------------------------------------
1998 1997 1998 1997
<S> <C> <C> <C> <C>
OPERATIONS
Net Investment Income $ 4,062,659 $ 3,268,902 $ 324,764 $ 294,219
Net Realized Gain on Investment
Securities and Foreign Currency
Transactions 15,660,005 12,406,672 2,123,269 1,555,676
Change in Net Appreciation (Depreciation)
of Investment Securities and Foreign
Currency Transactions 2,352,996 19,416,347 (1,205,641) 1,745,166
- ----------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS 22,075,660 35,091,921 1,242,392 3,595,061
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (4,196,252) (3,256,031) (332,439) (292,965)
Net Realized Gain on Investment Securities
and Foreign Currency Transactions (17,002,689) (7,920,456) (1,829,971) (828,800)
- ----------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (21,198,941) (11,176,487) (2,162,410) (1,121,765)
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 158,521,941 157,332,062 20,967,276 42,685,783
Reinvestment of Distributions 20,128,818 10,886,903 2,099,585 1,101,635
- ----------------------------------------------------------------------------------------------------------------------
178,650,759 168,218,965 23,066,861 43,787,418
Amounts Paid for Repurchases of Shares (124,824,681) (145,279,529) (18,318,989) (38,716,952)
- ----------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 53,826,078 22,939,436 4,747,872 5,070,466
Total Increase in Net Assets 54,702,797 46,854,870 3,827,854 7,543,762
NET ASSETS
Beginning of Period 161,920,721 115,065,851 17,117,342 9,573,580
- ----------------------------------------------------------------------------------------------------------------------
End of Period $ 216,623,518 $ 161,920,721 $ 20,945,196 $ 17,117,342
- ----------------------------------------------------------------------------------------------------------------------
<PAGE>
Accumulated Undistributed Net
Investment Income Included in
Net Assets at End of Period $ 14,553 $ 148,050 $ 8,802 $ 10,855
- ----------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS
Shares Sold 10,124,221 10,958,657 1,548,553 3,446,561
Shares Issued from Reinvestment
of Distributions 1,391,923 779,085 169,072 91,434
- ----------------------------------------------------------------------------------------------------------------------
11,516,144 11,737,742 1,717,625 3,537,995
Shares Repurchased (7,941,260) (10,136,122) (1,347,587) (3,121,290)
- ----------------------------------------------------------------------------------------------------------------------
Net Increase in Fund Shares 3,574,884 1,601,620 370,038 416,705
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
<PAGE>
Notes to Financial Statements
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Flexible
Funds, Inc. (formerly known as INVESCO Multiple Asset Funds, Inc.) (the "Fund")
is incorporated in Maryland and presently consists of two separate Funds:
Balanced Fund and Multi-Asset Allocation Fund. On August 4, 1998, the board of
directors of the Fund approved a name change to INVESCO Flexible Funds, Inc. The
investment objectives of each Fund are to achieve a high total return on
investment through capital appreciation and current income. The Fund is
registered under the Investment Company Act of 1940 (the "Act") as a
diversified, open-end management investment company.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
A. SECURITY VALUATION -- Equity securities traded on national securities
exchanges or in the over-the-counter market are valued at the last sales
price in the market where such securities are primarily traded. If last
sales prices are not available, securities are valued at the highest
closing bid price obtained from one or more dealers making a market for
such securities or by a pricing service approved by the FundOs board of
directors.
Debt securities are valued at evaluated bid prices as determined by a
pricing service approved by the Funds board of directors. If evaluated bid
prices are not available, debt securities are valued by averaging the bid
prices obtained from one or more dealers making a market for such
securities.
Foreign securities are valued at the closing price on the principal
stock exchange on which they are traded. In the event that closing prices
are not available for foreign securities, prices will be obtained from the
principal stock exchange at or prior to the close of the New York Stock
Exchange. Foreign currency exchange rates are determined daily prior to the
close of the New York Stock Exchange.
If market quotations or pricing service valuations are not readily
available, securities are valued at fair value as determined in good faith
under procedures established by the Fund's board of directors.
Short-term securities are stated at amortized cost (which approximates
market value) if maturity is 60 days or less at the time of purchase, or
market value if maturity is greater than 60 days.
Assets and liablities initially expressed in terms of foreign
currencies are translated into U.S. dollars at the prevailing market rates
as quoted by one or more banks or dealers on the date of valuation. The
cost of securities is translated into U.S. dollars at the rates of
exchange prevailing when such securities are acquired. Income and
expenses are translated into U.S. dollars at rates of exchange prevailing
when accrued.
B. TO-BE-ANNOUNCED SECURITIES --To-Be-Announced ("TBA") securities held by the
Fund are fully collateralized by other securities and such collateral is in
the possession of the FundOs custodian. The collateral is evaluated daily
to ensure its market value exceeds the current market value of the TBA
securities.
C. 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 Funds 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.
<PAGE>
D. DOLLAR ROLL TRANSACTIONS --The Fund may enter into mortgage dollar rolls
in which it sells securities for delivery in the current month and
simultaneously contracts with the same counter party to repurchase similar
(same type, coupon and maturity) but not identical securities on a
specified future date. The Fund would benefit to the extent of any
difference between the price received for the securities sold and the lower
forward price for the future purchase plus any fee income received. These
amounts are included in interest income. The Fund maintains segregated
assets, the dollar value of which meets or exceeds its obligations with
respect to dollar rolls.
E. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME --Security transactions
are accounted for on the trade date and dividend income is recorded on the
ex dividend date. Certain dividends from foreign securities will be
recorded as soon as the Fund is informed of the dividend if such
information is obtained subsequent to the ex dividend date. Interest
income, which may be comprised of stated coupon rate, market discount,
original issue discount and amortized premium, is recorded on the accrual
basis. Discounts and premiums on debt securities purchased are amortized
over the life of the respective security as adjustments to interest income.
Cost is determined on the specific identification basis.
The Fund may have elements of risk due to investments in foreign issuers
located in a specific country. Such foreign investments may subject the
Fund to additional risks resulting from future political or
economic conditions and/or possible impositions of adverse foreign
governmental laws or currency exchange restrictions. Net realized and
unrealized gain or loss from investment securities includes fluctuations
from currency exchange rates and fluctuations in market value.
The Funds use of short-term forward foreign currency contracts may
subject it to certain risks as a result of unanticipated movements in
foreign exchange rates. The Fund does not hold short-term forward foreign
currency contracts for trading purposes. The Fund may hold foreign currency
in anticipation of settling foreign security transactions and not for
investment purposes.
Investments in securities of governmental agencies may only be
guaranteed by the respective agencys 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.
F. 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.
Balanced Fund incurred and elected to defer post-October 31 net capital
losses of $124 to the year ended July 31, 1999. To the extent future
capital gains are offset by capital loss carryovers, such gains will not be
distributed to shareholders.
Dividends paid by the Fund from net investment income and distributions
of net realized short-term capital gains are, for federal income tax
purposes, taxable as ordinary income to shareholders. Of the ordinary
income distributions declared for the year ended July 31, 1998, 7.02% for
Balanced Fund and 10.09% for Multi-Asset Allocation Fund qualified for the
dividends received deduction available to the FundOs 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.
<PAGE>
G. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS --Dividends and distributions
to shareholders are recorded by the Fund on the exdividend/distribution
date. The Fund distributes net realized capital gains, if any, to its
shareholders at least annually, if not offset by capital loss carryovers.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments for mortgage-backed securities, market discounts,
amortized premiums, foreign currency transactions, nontaxable dividends,
net operating losses and expired capital loss carryforwards. For the year
ended July 31, 1998, Balanced Fund reclassified $165 from accumulated
undistributed investment income to accumulated undistributed net realized
gain on investment securities and reclassified $261 from paid-in capital to
accumulated undistributed net investment income. For the year ended July
31, 1998, Multi-Asset Allocation Fund reclassified $5,622 from accumulated
undistributed net realized gain on investment securities to accumulated
undistributed net investment income. Net investment income, net realized
gains and net assets were not affected.
H. 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.
I. 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 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 and Distribution Expenses are reduced by credits earned by each 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 year ended July 31, 1998, Fees and Expenses Paid Indirectly
consisted of the following:
<TABLE>
<CAPTION>
Custodian Fees Transfer Distribution
Fund and Expenses Agent Fees
Expenses
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced Fund $ 11,166 $ 44 $ 284
Multi-Asset Allocation Fund 7,734 0 0
</TABLE>
NOTE 2-- INVESTMENT ADVISORY AND OTHER AGREEMENTS. INVESCO Funds Group, Inc.
("IFG") serves as the Funds investment adviser. As compensation for its
services to the Fund, IFG receives an investment advisory fee which is accrued
daily at the applicable rate and paid monthly. For Balanced Fund, the fee is
based on the annual rate of 0.60% on the first $350 million of average net
assets; reduced to 0.55% on the next $350 million of average net assets; and
0.50% on average net assets in excess of $700 million. For Multi-Asset
Allocation Fund, the fee is based on the annual rate of 0.75% on the first $500
million of average net assets; reduced to 0.65% on the next $500 million of
average net assets; and 0.50% on average net assets in excess of $1 billion.
<PAGE>
In accordance with a Sub-Advisory Agreement between IFG and INVESCO Trust
Company ("ITC"), a wholly owned subsidiary of IFG, investment decisions of
Balanced Fund were made by ITC. Fees for such sub-advisory services were paid by
IFG. Effective February 4, 1998, such responsibilities were transferred to IFG.
A separate Sub-Advisory Agreement between IFG and INVESCO Management & Research,
Inc. ("IMR"), an affiliate of IFG, provides that investment decisions of
Multi-Asset Allocation Fund are made by IMR. Fees for such sub-advisory services
were paid by IFG.
A plan of distribution pursuant to Rule 12b-1 of the Act provided for
compensation of marketing and advertising expenditures to IFG (the
Distributor) to a maximum of 0.25% of annual average net assets. For the year
ended July 31, 1998, Balanced and Multi-Asset Allocation Funds paid the
Distributor $451,807 and $44,552, respectively, under the plan of distribution.
Effective September 29, 1997, INVESCO Distributors, Inc. ("IDI"), a wholly owned
subsidiary of IFG, replaced IFG as Distributor.
IFG receives a transfer agent fee at an annual rate of $20.00 per
shareholder account, or, where applicable, per participant in an omnibus
account, per year. IFG may pay such fee for participants in omnibus accounts to
affiliates or third parties. The fee is paid monthly at one-twelfth of the
annual fee and is based upon the actual number of accounts in existence during
each month.
In accordance with an Administrative Agreement, each Fund pays IFG an
annual fee of $10,000, plus an additional amount computed at an annual rate of
0.015% of average net assets to provide administrative, accounting and clerical
services. The fee is accrued daily and paid monthly.
IFG has voluntarily agreed, in some instances, to absorb certain fees and
expenses incurred by Balanced Fund and IFG and IMR have voluntarily agreed, in
some instances, to absorb certain fees and expenses incurred by Multi-Asset
Allocation Fund.
NOTE 3 --PURCHASES AND SALES OF INVESTMENT SECURITIES. For the year ended July
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:
<TABLE>
<CAPTION>
Fund Purchases
Sales
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balanced Fund $ 217,863,060 $ 181,604,146
Multi-Asset Allocation Fund 12,756,218 10,424,805
For the year ended July 31, 1998, the aggregate cost of purchases and
proceeds from sales of U.S. Government securities were as follows:
Fund Purchases Sales
- -------------------------------------------------------------------------------------------------------------------
Balanced Fund $ 11,250,801 $ 7,155,781
Multi-Asset Allocation Fund 5,249,392 5,775,627
</TABLE>
NOTE 4-- APPRECIATION AND DEPRECIATION. At July 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:
<PAGE>
<TABLE>
<CAPTION>
Gross Gross Net
Fund Appreciation Depreciation Appreciation
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced Fund $ 26,165,026 $ 3,347,287 $ 22,817,739
Multi-Asset Allocation Fund 2,130,552 877,060 1,253,492
</TABLE>
NOTE 5 - TRANSACTIONS WITH AFFILIATES. Certain of the Fund's officers and
directors are also officers and directors of IFG, IDI or IMR.
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 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 July 31, 1998, included in Directors'
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>
Balanced Fund $ 2,685 $ 3,239 $ 8,067
Multi-Asset Allocation Fund 258 238 925
</TABLE>
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 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 July
31, 1998, there were no such borrowings.
----------------------------------------------------------
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of INVESCO Flexible Funds, Inc.
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 Balanced Fund and INVESCO
Multi-Asset Allocation Fund (constituting INVESCO Flexible Funds, Inc., formerly
INVESCO Multiple Asset Funds, Inc., hereafter referred to as the Fund) at July
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 periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as financial
statements) are the responsibility of the Funds 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 July 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
- -------------------------------
PricewaterhouseCoopers LLP
Denver, Colorado
September 4, 1998
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights -- Balanced Fund
(For a Fund Share Outstanding Throughout Each Period)
Period
Ended
Year Ended July 31 July 31
- -------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C>
Net Asset Value - Beginning of Period $15.86 $13.36 $12.08 $10.30 $10.00
- -------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.33 0.34 0.37 0.29 0.12
Net Gains on Securities
(Both Realized and Unrealized) 1.50 3.37 2.12 2.03 0.30
- -------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 1.83 3.71 2.49 2.32 0.42
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.35 0.34 0.37 0.29 0.12
Distributions from Capital Gains 1.63 0.87 0.84 0.25 0.00
- -------------------------------------------------------------------------------------------------------------------
Total Distributions 1.98 1.21 1.21 0.54 0.12
Net Asset Value - End of Period $15.71 $15.86 $13.36 $12.08 $10.30
- -------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 12.90% 29.27% 20.93% 23.18% 4.16%
(b)
RATIOS
Net Assets - End of Period
($000 Omitted) $216,624 $161,921 $115,066 $37,224 $4,252
Ratio of Expenses to Average
Net Assets(c) 1.22%(d) 1.29%(d) 1.29%(d) 1.25% 1.25%
(e)
Ratio of Net Investment Income to
Average Net Assets(c) 2.18% 2.46% 3.03% 3.12% 2.87%(e)
Portfolio Turnover Rate 108% 155% 259% 255% 61%(b)
</TABLE>
<PAGE>
(a) From December 1, 1993, commencement of investment operations, to July 31,
1994.
(b) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(c) Various expenses of the Fund were voluntarily absorbed by IFG for the years
ended July 31, 1997, 1996 and 1995 and the period ended July 31, 1994. If
such expenses had not been voluntarily absorbed, ratio of expenses to
average net assets would have been 1.34%, 1.29%, 1.59% and 4.37%
(annualized), respectively, and ratio of net investment income (loss) to
average net assets would have been 2.41%, 3.03%, 2.77% and (0.25%)
(annualized), respectively.
(d) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
(e) Annualized
<TABLE>
<CAPTION>
Financial Highlights (Continued) -- Multi-Asset Allocation Fund
(For a Fund Share Outstanding Throughout Each Period)
Period
Ended
Year Ended July 31 July 31
- -------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value - Beginning of Period $13.75 $11.55 $10.84 $ 9.68 $10.00
- -------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.24 0.25 0.28 0.28 0.06
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 0.77 3.18 0.89 1.16 (0.32)
- -------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 1.01 3.43 1.17 1.44 (0.26)
LESS DISTRIBUTIONS
<PAGE>
Dividends from Net Investment Income 0.25 0.25 0.28 0.28 0.06
Distributions from Capital Gains 1.54 0.98 0.18 0.00 0.00
- -------------------------------------------------------------------------------------------------------------------
Total Distributions 1.79 1.23 0.46 0.28 0.06
Net Asset Value - End of Period $12.97 $13.75 $11.55 $10.84 $ 9.68
- -------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 8.15% 31.41% 10.96% 15.11% (2.60%)
(b)
RATIOS
Net Assets - End of Period
($000 Omitted) $20,945 $17,117 $9,574 $7,778 $4,958
Ratio of Expenses to Average
Net Assets(c) 1.54%(d) 1.55%(d) 1.62%(d) 1.50% 1.50%
(e)
Ratio of Net Investment Income to
Average Net Assets(c) 1.78% 2.19% 2.43% 2.99% 2.23%
(e)
Portfolio Turnover Rate 101% 98% 92% 79% 42%(b)
</TABLE>
(a) From December 1, 1993, commencement of investment operations, to July 31,
1994.
(b) Based on operations for the period shown, and accordingly, are not
representative of a full year.
(c) Various expenses of the Fund were voluntarily absorbed by IFG and IMR for
the years ended July 31, 1998, 1997, 1996 and 1995 and the period ended
July 31, 1994. If such expenses had not been voluntarily absorbed, ratio of
expenses to average net assets would have been 1.92%, 1.97%, 2.24%, 2.47%
and 5.14% (annualized), respectively, and ratio of net investment income
(loss) to average net assets would have been 1.40%, 1.77%, 1.81%, 2.02% and
(1.41%) (annualized), respectively.
(d) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
(e) Annualized
<PAGE>
FAMILY OF FUNDS
Newspaper
Fund Name Fund Code Ticker Symbol Abbreviation
- --------------------------------------------------------------------------------
International
International Growth 49 FSIGX IntlGr
Emerging Markets 43 * *
Asian Growth 41 IVAGX AsianGr
Pacific Basin 54 FPBSX PcBas
European 56 FEURX Europ
European Small Company 37 IVECX EuroSmCo
Latin American Growth 34 IVSLX LatinAmGr
- --------------------------------------------------------------------------------
Sector
Energy 50 FSTEX Enrgy
Environmental Services 59 FSEVX Envirn
Financial Services 57 FSFSX FinSvc
Gold 51 FGLDX Gold
Health Sciences 52 FHLSX HlthSc
Leisure 53 FLISX Leisur
Realty 42 IVSRX Realty
Technology 55 FTCHX Tech
Utilities 58 FSTUX Util
Worldwide Capital Goods 38 ISWGX WldCap
Worldwide Communications 39 ISWCX WldCom
- --------------------------------------------------------------------------------
Equity
Growth & Income 21 IVGIX GRI
Growth 10 FLRFX Grwth
Dynamics 20 FIDYX Dynm
Small Company Growth 60 FIEGX SmCoGth
Value Equity 46 FSEQX ValEq
Small Company Value 74 IDSCX SmCoVal
S&P 500 Index
Fund Class II 23 * *
- --------------------------------------------------------------------------------
All-Weather
Industrial Income 15 FIIIX IndInc
Multi-Asset Allocation 70 IMAAX MulAstAl
Total Return 48 FSFLX TotRtn
Balanced 71 IMABX Bal
- --------------------------------------------------------------------------------
Bond
Short-Term Bond 33 INIBX ShTrBd
Intermediate
Government Bond 47 FIGBX IntGov
U.S. Government Securities 32 FBDGX USGvt
Select Income 30 FBDSX SelInc
High Yield 31 FHYPX HiYld
- --------------------------------------------------------------------------------
Tax-Exempt
Tax-Free Intermediate Bond 36 IVTIX *
Tax-Free Long-Term Bond 35 FTIFX TxFre
- --------------------------------------------------------------------------------
Money Market
U.S. Government Money Fund 44 FUGXX InvGvtMF
Cash Reserves 25 FDSXX InvCshR
Tax-Free Money Fund 40 FFRXX InvTaxFree
* This fund does not meet size requirements to be assigned a ticker symbol in
newspaper listings.
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>
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 on 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>
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.
