KNOWLEDGE DISCIPLINE SERVICE CHOICE
- -----------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS (TM)
- -----------------------------------------------
INVESCO Combination Stock & Bond Funds, Inc.
BALANCED
INDUSTRIAL INCOME (AS OF 7/30/99, EQUITY INCOME)
TOTAL RETURN
ANNUAL
[INVESCO ICON]
INVESCO
ANNUAL REPORT May 31, 1999
<PAGE>
"THE RECENT CHANGES IN THE MARKETS SHOULD REMIND SHAREHOLDERS THAT BOTH SECTORS
AND THE COMPANIES WITHIN THEM MOVE IN AND OUT OF STYLE WITH INVESTORS." (PAGE 6)
"THE CONTINUING STRENGTH OF THE AMERICAN ECONOMY AND AN APPARENT REBOUND IN THE
GLOBAL ARENA LED INVESTORS BACK INTO THE STOCKS OF THE COMPANIES THAT ARE THE
ENGINES OF THE GLOBAL ECONOMY." (PAGE 8)
Graph: INVESCO Industrial Income Fund 10-Year Total Return vs.
Lehman Government/Corporate Bond and S&P 500
This line graph compares the value of a $10,000 investment in INVESCO
Industrial Income Fund to the value of a $10,000 investment in the
Lehman Government/Corporate Bond Index and the value of a $10,000
investment in the S&P 500 Index, assuming in each case reinvestment of
all dividends and capital gains distributions, for the 10-year period
ended 5/31/99.
Graph: INVESCO Balanced Fund Total Return from Inception (12/93) vs.
Lehman Government/Corporate Bond and S&P 500
This line graph compares the value of a $10,000 investment in INVESCO
Balanced Fund to the value of a $10,000 investment in the Lehman
Government/Corporate Bond Index and the value of a $10,000 investment
in the S&P 500 Index, assuming in each case reinvestment of all
dividends and capital gains distributions, for the period from
inception (12/93) through 5/31/99.
Graph: INVESCO Total Return Fund 10-Year Total Return vs.
Lehman Government/Corporate Bond and S&P 500
This line graph compares the value of a $10,000 investment in INVESCO
Total Return Fund to the value of a $10,000 investment in the Lehman
Government/Corporate Bond Index and the value of a $10,000 investment
in the S&P 500 Index, assuming in each case reinvestment of all
dividends and capital gains distributions, for the 10-year period ended
5/31/99.
TOTAL RETURN,
PERIODS ENDED 5/31/99(1)
6 MONTHS 1 YEAR 5 YEARS* 10 YEARS* PAGE NUMBER
- --------------------------------------------------------------------------------
BALANCED (12/93) 10.73% 14.46% 20.08% 18.66%** 3
- --------------------------------------------------------------------------------
INDUSTRIAL INCOME 8.91% 11.71% 17.36% 15.74% 5
- --------------------------------------------------------------------------------
TOTAL RETURN 5.70% 10.34% 17.22% 13.88% 7
- --------------------------------------------------------------------------------
*AVERAGE ANNUALIZED
** SINCE INCEPTION 12/93
The line graphs illustrate the value of a $10,000 investment, plus reinvested
dividends and capital gain distributions, for the 10-year period or since
inception through 5/31/99. The chart 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. (Of course, past
performance is not a guarantee of future results.)(1),(2)
<PAGE>
BALANCED FUND
Your Fund's Performance: A Report from the Manager
- --------------------------------------------------------------------------------
Dear Shareholder:
While it is always difficult to paint a market in broad strokes, this might well
be remembered as the "period of the American consumer." Defying the dire
predictions of many experts, strong domestic spending helped the American
economy barely pause in the face of a dramatic slowdown in world growth last
year.
As you may know, at the shareholder meeting in May, shareholders approved
reorganizing Industrial Income Fund and Total Return Fund. As a result, the
fiscal year-end for both these funds, as well as Balanced Fund, is now May 31.
That, in turn, changed the quarterly dividend payment schedule to February, May,
August, and November.
WHAT IS THE CONSUMER DOING?
Although our fund has not been immune to periodic setbacks, we have enjoyed
solid returns and limited volatility, in part by keeping a keen focus on
American consumers and their spending patterns. By constantly posing the
question, "What is the consumer doing?", we have been able to identify many
promising opportunities.
For the one-year period ended May 31, 1999, the value of your shares rose
14.46%. This return lagged that of the S&P 500 over the same period, which rose
21.03%. At the same time, it exceeded the return of the Lehman
Government/Corporate Bond Index, which increased 4.06%. (Of course, past
performance is not a guarantee of future results.) Remember, the fund has the
flexibility to help cushion its equity investments through the use of
fixed-income securities.(1),(2)
Many of the stocks contributing to the fund's performance were those directly
related to changing patterns in consumer spending. For example, we have
maintained a focus on companies benefiting from the "digital upgrade cycle,"
which has seen consumers trade in old phones, home electronics, and other
products for newer, digital versions. This cycle presents opportunities in a
variety of industries, from media to retailing to telecommunications. We are
optimistic that this cycle still has some way to go, and it should continue to
provide opportunities for investors.
- --------------------------------------------------------------------------------
FUND MANAGERS
CHARLES P. MAYER (EQUITY)
SENIOR VICE PRESIDENT, INVESCO FUNDS GROUP. BA, ST. PETER'S COLLEGE; MBA, ST.
JOHN'S UNIVERSITY. JOINED INVESCO IN 1993. BEGAN INVESTMENT CAREER IN 1969. HAS
MANAGED THIS FUND SINCE 1996.
DONOVAN J. (JERRY) PAUL, CFA, CPA (FIXED-INCOME)
SENIOR VICE PRESIDENT, INVESCO FUNDS GROUP. BBA, UNIVERSITY OF IOWA; MBA,
UNIVERSITY OF NORTHERN IOWA. JOINED INVESCO IN 1994. BEGAN INVESTMENT CAREER IN
1976. HAS MANAGED THIS FUND SINCE 1994.
PETER M. LOVELL (EQUITY)
VICE PRESIDENT, INVESCO FUNDS GROUP, INC. BA, COLORADO STATE UNIVERSITY; MBA,
REGIS UNIVERSITY. JOINED INVESCO IN 1994. BEGAN INVESTMENT CAREER IN 1992. HAS
MANAGED THIS FUND SINCE 1998.
<PAGE>
THE SUMMER OF '98
Another key positive contributor to our performance was our ability to adjust
the portfolio's relative weighting in stocks based on our view of valuations. At
the beginning of this period, in the early summer of 1998, we began to reduce
our equity weighting; this allowed us both to avoid in part the dramatic drop in
equity prices in late summer, while also providing us the cash to reinvest at
lower prices in the early fall.
Of course, not all of our stock selection or asset allocations were so
fortuitous. In particular, we have been disappointed recently by the performance
in the health care sector, which has slowed considerably over the past several
months. The recent problems in the bond market caused by higher interest rates
have also slowed performance over the last couple months -- but they are largely
unavoidable for a fund such as ours.
CYCLICAL ROTATION
Increasingly convinced that economic growth at home will not slow substantially,
investors have recently turned to so-called "value" stocks of companies
operating in traditional industries. We are optimistic that this trend holds
promise for our fund as well. Even within traditional industries such as basic
materials-processing and energy, investors can find companies using new
technologies or business models to create new growth potential. With our
experience across all sectors, we feel well-positioned to identify such
opportunities.
We look forward to reporting to you on our progress in six months.
/s/ Charles P. Mayer /s/ Donovan P. Paul /s/ Peter M. Lovell
Charles P. Mayer Donovan J. (Jerry) Paul Peter M. Lovell
Senior Vice President Senior Vice President Vice President
<PAGE>
INDUSTRIAL INCOME FUND
Your Fund's Performance: A Report from the Manager
- --------------------------------------------------------------------------------
Dear Shareholder:
"I'm a slow walker," Abraham Lincoln once remarked, "but I never walk back." We
cannot claim we never walk back--if that means suffering a loss in down markets.
Yet we try to adhere to the same philosophy, as we know many of you do as well.
The returns we enjoyed this year were solid, although they did not represent a
sprint forward of the kind enjoyed by many more aggressive funds. Still, we
covered some good distance, and we are hopeful that we will continue to head in
the right direction no matter what changes the market may throw at us.
For the one-year period ended May 31, 1999, the value of your shares rose
11.71%. This return lagged that of the S&P 500 over the same period, which rose
21.03%. At the same time, it exceeded the return of the Lehman
Government/Corporate Bond Index, which increased 4.06%. (Of course, past
performance is not a guarantee of future results.) Remember, the fund has the
flexibility to help cushion its equity investments through the use of
fixed-income securities.(1),(2)
A CHANGING STOCK ENVIRONMENT...
Our last report to you explained how some of the stocks in our portfolio
benefited late last year, as investors focused on a new "Nifty Fifty," a group
of large companies in favored, high-growth industries. Meanwhile other holdings
of ours were unable to participate in the market's very narrow advance.
Markets change, however. Lately, many of the traditional companies in our
portfolio have begun to outperform. Having seen their stocks pummeled as oil
prices sank in the face of the Asian financial crisis, energy companies enjoyed
an impressive rebound as investors determined that demand for natural gas and
other forms of energy might soon handily outstrip supply. The health care
sector, meanwhile, has stalled as investors began to question the very high
valuations attached to these companies, even though pharmaceutical makers and
others continue to enjoy very healthy profits. To our thinking, these changes
highlight the importance of diversification.
- --------------------------------------------------------------------------------
FUND MANAGERS
CHARLES P. MAYER (EQUITY)
SENIOR VICE PRESIDENT, INVESCO FUNDS GROUP. BA, ST. PETER'S COLLEGE; MBA, ST.
JOHN'S UNIVERSITY. JOINED INVESCO IN 1993. BEGAN INVESTMENT CAREER IN 1969. HAS
MANAGED THIS FUND SINCE 1996.
DONOVAN J. (JERRY) PAUL, CFA, CPA (FIXED-INCOME)
SENIOR VICE PRESIDENT, INVESCO FUNDS GROUP. BBA, UNIVERSITY OF IOWA; MBA,
UNIVERSITY OF NORTHERN IOWA. JOINED INVESCO IN 1994. BEGAN INVESTMENT CAREER IN
1976. HAS MANAGED THIS FUND SINCE 1994.
<PAGE>
....AND BOND ENVIRONMENT AS WELL.
The bond markets have also reversed course somewhat. As we predicted in our last
communication to you, the "yield spread" between corporate bonds and Treasury
securities has narrowed in response to improving global economic conditions.
Investors have demanded less of a premium this year from issuers of corporate
bonds, perceiving that the risk of default has been lower--although, in our
opinion, this risk had always been exaggerated for most companies.
Indeed, merger activity has continued to benefit holders of corporate bonds.
Higher-risk lenders have continued to be purchased by larger, higher-rated
firms, leading to an instant improvement in the target companies' credit
ratings--and an immediate windfall for our shareholders.
On a less fortuitous note, however, interest rates have begun to inch upwards
based on concerns that the economy may be overheating--to the detriment of
bondholders. Although the Federal Reserve resisted any interest rate increases
through the end of May, many investors worried that it would soon raise rates in
order to prevent the return of inflationary pressures on the economy. While we
anticipated some increase in interest rates, we were discouraged by the
magnitude of the backup on the bond markets.
As you may know, at the shareholder meeting in May, shareholders approved
reorganizing Industrial Income Fund and Total Return Fund. As a result, the
fiscal year-end for both these funds, as well as Balanced Fund, is now May 31.
That, in turn, changed the quarterly dividend payment schedule to February, May,
August, and November.
WITHIN THE FUND, SOME CHANGES...
Within the fund, we have instituted some changes as well. Effective July 30,
1999, the name of Industrial Income Fund is changing to Equity Income Fund. This
change will better reflect our long-standing objective and strategy: current
income and capital appreciation through investment in both equities and
fixed-income securities. It will also reflect our greater emphasis on equities
over bonds.
...BUT OUR BASIC APPROACH REMAINS THE SAME
The recent changes in the market should remind shareholders that both sectors
and the companies within them move in and out of style with investors. As many
investors in high-flying Internet stocks have discovered, gains can quickly be
transformed into losses.
We continue to believe that there are three primary ways to help mitigate risk
while enjoying the long-term benefits of stock appreciation: finding companies
that provide current income in the form of dividends, maintaining a meaningful
presence across the economic sectors, and allocating a portion of the portfolio
to fixed-income securities.
/s/ Charles P. Mayer /s/Donovan P. Paul
Charles P. Mayer Donovan J. (Jerry) Paul
Senior Vice President Senior Vice President
<PAGE>
TOTAL RETURN FUND
Your Fund's Performance: A Report from the Manager
- --------------------------------------------------------------------------------
Dear Shareholder:
The special effects spectacle of the summer of 1999 was the futuristic chariot
race in the new "Star Wars" film. In the scene, the young protagonist is pulled
on a high-tech chariot behind two large engines. One engine flames out, making
our hero fall behind, but he soon restarts the engine and surges back into the
race. This scene, we believe, provides an apt analogy to bear in mind when
considering our fund's performance this past year.
For the one-year period ended May 31, 1999, the value of your shares rose
10.34%. This return lagged that of the S&P 500 over the same period, which rose
21.03%. At the same time, it exceeded the return of the Lehman
Government/Corporate Bond Index, which increased 4.06%. (Of course, past
performance is not a guarantee of future results.) Remember, the fund has the
flexibility to help cushion its equity investments through the use of
fixed-income securities.(1),(2)
As you may know, at the shareholder meeting in May, shareholders approved
reorganizing Industrial Income Fund and Total Return Fund. As a result, the
fiscal year-end for both these funds, as well as Balanced Fund, is now May 31.
That, in turn, changed the quarterly dividend payment schedule to February, May,
August, and November.
SWITCHING ENGINES
This was a solid gain, but it came in fits and starts. As befits its design, the
fund "switched engines" in the face of the broad market declines of late last
year. As the stock market stalled and the world financial situation appeared
precarious, investors sought haven in U.S. Treasury securities. This helped our
portfolio of high-grade government securities, which rose in price as interest
rates fell.
In late fall, however, the fund's equity holdings stalled again with the
increased focus on high-growth stocks. Facing a still-uncertain economic
environment, investors flocked to the largest companies with the highest growth
rates (and the highest prices attached to their earnings). Given our focus on
value stocks, we did not participate in the rally which sent the closely watched
S&P 500 and Dow Jones Industrial Averages to record levels.(2)
- --------------------------------------------------------------------------------
FUND MANAGERS
EDWARD C. MITCHELL, JR., CFA, CIC
CHAIRMAN & PORTFOLIO MANAGER, INVESCO CAPITAL MANAGEMENT. BA, UNIVERSITY OF
VIRGINIA, MBA, UNIVERSITY OF COLORADO. JOINED INVESCO IN 1979. BEGAN INVESTMENT
CAREER IN 1969. HAS MANAGED THIS FUND SINCE 1987.
JAMES O. BAKER, CFA
PORTFOLIO MANAGER, INVESCO CAPITAL MANAGEMENT. BA, MERCER UNIVERSITY. JOINED
INVESCO IN 1992. BEGAN INVESTMENT CAREER IN 1977. HAS MANAGED THIS FUND SINCE
1993.
THEY ARE ASSISTED BY DAVID S. GRIFFIN, CFA, AND MARGARET DURKES, CFA.
<PAGE>
VALUE STOCKS REIGNITE
This spring, our stock portfolio engine reignited. The continuing strength of
the American economy and an apparent rebound in the global arena led investors
back into the stocks of the companies that are the engines of the global
economy. Higher interest rates also caused investors to place more emphasis on
present rather than future earnings, which also helped many of the companies in
our portfolio.
Larger forces may also have been at work. Over the 10 years from 1989 to 1998,
growth stocks have outperformed value stocks by over 4.5% per year--by some
measures an unprecedented record. Of course, observers can draw one of two
conclusions about the implications of this divergence. The first would be that
the markets have passed a threshold, and that fast-growing companies will
continue to trade at a very high premium to those in mature industries or with
lower growth rates because of other factors. The second conclusion, one to which
we adhere, is that the pendulum is about to swing back.
Admittedly, seeing longer trends in short-term market movements is a perilous
exercise at best. We are thus reluctant to speculate that the recent period of
superior performance by value stocks represents a real reversal in the market's
direction. Still, after several years of outperformance by growth stocks, we are
optimistic that valuations might be playing a larger role in investors'
decisions.
/s/ Edward C. Mitchell /s/ James O. Baker
Edward C. Mitchell, Jr. James O. Baker
Chairman & Portfolio Manager Portfolio Manager
- --------------------------------------------------------------------------------
SINCE THE FUNDS ARE ACTIVELY MANAGED, HOLDINGS WILL CHANGE OVER TIME.
(1)TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
FOR THE PERIODS INDICATED. PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT, WHEN
REDEEMED, AND INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN WHEN PURCHASED.
(2)THE S&P 500 AND LEHMAN GOVERNEMENT/CORPORATE BOND INDEX ARE UNMANAGED INDEXES
SECURITIESCONSIDERED REPRESENTATIVE OF THE BROAD DOMESTIC EQUITY AND DOMESTIC
FIXED-INCOME MARKETS, RESPECTIVELY.
<PAGE>
INVESCO | Annual Report | May 31, 1999
Moving Forward
- --------------------------------------------------------------------------------
MOVING FORWARD: A REVIEW & STRATEGY SESSION WITH INVESCO'S COMBINATION STOCK AND
BOND FUND MANAGERS
NOT TOO LONG AGO, EVERYONE WAS TALKING ABOUT GLOBAL DEFLATION, AND NOW WE ARE
WORRYING ABOUT INFLATION AGAIN. HOW MIGHT RISING INTEREST RATES AFFECT THE
FUNDS?
JERRY PAUL: Rising interest rates are always a concern for bondholders, although
stable rates at higher levels can mean improved yields. Of course, investors'
main worry is that the Federal Reserve will act to raise official rates in an
effort to head off inflation. As of late May, the markets had already discounted
a quarter- to half-point increase, and yields on the 30-year Treasury bond had
not climbed much above 6 percent. Should rates climb above 6.5%, however, that
might cause more serious problems in the bond markets.
That said, we'll keep investing in corporate bonds based on our view of the
companies that issue them. In a strong economy, these companies are only getting
stronger. We have already seen some of our issuers get bought out, which
provides a quick boost to the price of our bonds.
ED MITCHELL: From a value investing standpoint, the movement upward in interest
rates is interesting. Over the past decade, while growth stocks generally
outperformed value stocks, long-term interest rates fell 4%. If we are seeing a
bottoming in the interest rate cycle, that might signal a trend favoring
slower-growing, conservatively priced stocks.
SO IS IT TIME FOR GROWTH FUNDS TO PAY MORE ATTENTION TO VALUATIONS?
CHARLIE MAYER: Growth investors should always pay attention to valuations--as
should all investors. It clearly does not make sense to pay too much for a
growing company that is overpriced, nor too much for a cheap company that is
overpriced. What may make sense for growth managers to do in this particular
environment, however, is to pay more attention to established companies in the
"sweet spot" of their earning cycles; that is, to the point at which their
earnings are about to accelerate because of changing economic conditions or
other market-specific factors.
COULD YOU IDENTIFY SOME OF THE COMPANIES ENTERING THAT CYCLE NOW?
CHARLIE MAYER: Some of the well-positioned semiconductor makers would fit in
that category. The market for DRAM chips, in particular, has taken a hammering
over the past years on concerns over overcapacity, but it is improving now--and
chips remain the building blocks of the information economy.
HOW WOULD YOUR APPROACH DIFFER, ED?
ED MITCHELL: As value managers, our first emphasis is on stocks that are
oversold. They may be oversold for systemic reasons, or because their sectors
are out of favor. Or simply because they have suffered a setback, and the
markets tend to overreact to bad news. That's when we try to pounce.
<PAGE>
INVESCO | Annual Report | May 31, 1999
Moving Forward (continued)
- --------------------------------------------------------------------------------
Adaptec would be a good example. They are the leading producer of input/output
technology, but they had some disappointing earnings in the last quarter of
1997--and many investors seemed to forget all the promise that the company had
exhibited. But Adaptec kept making controllers, software and other products, put
its business back in order, and the stock price has appreciated nicely for us.
DO YOU SEARCH FOR THESE TURNAROUND STORIES, PETE?
PETE LOVELL: INVESCO's growth-oriented managers certainly won't ignore companies
that are putting the pieces back in order, but we are mostly interested in
companies that are poised to take advantage of a growing market--if they are
turnarounds, fine. Tandy Corp., the parent company of Radio Shack, is an
excellent example of a company that has been around awhile, went through some
tough times, but is now a leader in a growing market--the so-called "last mile"
that will bring digital communications through a broadband connection into the
home. Right now, you can walk into some Radio Shacks and arrange to have your
house wired, subscribe to a digital satellite service, and buy all the equipment
you need. That's a far cry from selling batteries.
MARKET HEADLINES:
JUNE 1998 TO MAY 1999
The strong annual returns recorded at the end of 1998 by the large company stock
indexes masked a period of turmoil in the markets as dramatic as any in recent
memory. With investors already nervous about valuations, confidence evaporated
in late summer when the Asian financial crisis appeared ready to spread like
wildfire through the world's emerging markets.
The quick actions of the Federal Reserve Board, bargain-hunting by stoic
investors, and other factors helped the markets reverse their losses in the
early fall. Yet most important, perhaps, was the continuing strength of the
American economy -- and behind it, the American consumer. Low unemployment and
interest rates, strong wage gains, and a resilient level of consumer confidence
kept money flowing into housing and the auto industry, the two bellwether
industries for the economy. Technology stocks led the rebound, as investors
looked for the industries with the highest growth rates and the most pricing
leverage.
Throughout the fall and winter, the largest, fastest-growing companies left the
rest of the market behind as investors kept one eye on the continuing problems
overseas and another on the blossoming technological promise of the American
economy. First health care stocks and then telecommunications issues
outdistanced the pack. Meanwhile, cyclical issues suffered, as did many small or
slower-growing company stocks.
By the spring of 1999, however, the threat of economic overheating rather than
worldwide depression loomed largest in many investors' minds. Signs of renewed
economic strength abroad and remarkable growth figures at home led many to
believe that the Federal Reserve would soon reverse course and lead interest
<PAGE>
rates higher -- and indeed, market interest rates crept upward. Too much growth
- -- rather than too little --encouraged many to head for cyclical industries
poised to benefit from improving markets.
As the "cyclical rotation" continued, the market averages seemed to bounce
against a ceiling, putting an end to their dizzying ascent since the fall. With
the economic outlook almost too bright and the market near its record levels,
investors began to speak again of the importance of stock selection and asset
allocation in place of playing the averages.
YEAR 2000 COMPUTER ISSUE.
Many computer systems in use today may not be able to recognize any date after
December 31, 1999. If these systems are not fixed by that date, it is possible
that they could generate erroneous information or fail altogether. INVESCO has
committed substantial resources in an effort to make sure that its own major
computer systems will continue to function on and after January 1, 2000. Of
course, INVESCO cannot fix systems that are beyond its control. If INVESCO's own
systems, or the systems of third parties upon which it relies, do not perform
properly after December 31, 1999, the Funds could be adversely affected.
In addition, the markets for, or values of, securities in which the Funds invest
may possibly be hurt by computer failures affecting portfolio investments or
trading of securities beginning January 1, 2000. For example, improperly
functioning computer systems could result in securities trade settlement
problems and liquidity issues, production issues for individual companies and
overall economic uncertainties. Individual issuers may incur increased costs in
making their own systems Year 2000 compliant. The combination of market
uncertainty and increased costs means that there is a possibility that Year 2000
computer issues may adversely affect the Funds' investments. At this time, it is
generally believed that foreign issuers, particularly those in emerging and
other markets, may be more vulnerable to Year 2000 problems than will be issuers
in the U.S.
<PAGE>
TEN LARGEST COMMON STOCK HOLDINGS
INVESCO Combination Stock & Bond Funds, Inc.
May 31, 1999
<TABLE>
<CAPTION>
DESCRIPTION VALUE
- ------------------------------------------------------------------------------------------
<S> <C>
Balanced Fund
Tandy Corp $ 6,732,000
Morgan (J P) & Co 5,795,400
Dayton Hudson 5,770,800
Motorola Inc 5,415,938
Chase Manhattan 4,951,750
Kansas City Southern Industries 4,944,375
MediaOne Group 4,838,813
AlliedSignal Inc 4,528,875
General Electric 4,474,250
AT&T Corp-- Liberty Media Group Class A Shrs 4,424,737
Industrial Income Fund
Kansas City Southern Industries $ 151,875,000
Bank of New York 143,000,000
Tandy Corp 132,000,000
General Electric 116,940,625
AlliedSignal Inc 114,383,125
Dayton Hudson 111,875,400
Anheuser-Busch Cos 102,287,500
US WEST 97,312,500
Exxon Corp 95,850,000
Merck & Co 94,500,000
Total Return Fund
British Telecommunications PLC ADR Representing 10 Ord Shrs $ 50,400,000
International Business Machines 46,525,000
Nucor Corp 44,887,500
Hanson PLC Sponsored ADR Representing 5 Ord Shrs 40,781,250
Electronic Data Systems 39,375,000
Morgan Stanley Dean Witter & Co 38,600,000
Bristol-Myers Squibb 34,312,500
Unicom Corp 33,850,000
Yacimientos Petroliferos Fiscades SA Sponsored ADR Representing Class D Shrs 33,700,000
MGIC Investment 33,687,500
Composition of holdings is subject to change.
</TABLE>
<PAGE>
STATEMENT OF INVESTMENT SECURITIES
INVESCO Combination Stock & Bond Funds, Inc.
May 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
<S> <C> <C> <C>
Balanced Fund
64.84 COMMON STOCKS
0.95 AEROSPACE & DEFENSE
General Dynamics 47,500 $ 3,123,125
================================================================================================
0.67 ALUMINUM
Reynolds Metals 41,500 2,207,281
================================================================================================
1.12 AUTOMOBILES
General Motors Class H(a) 67,200 3,687,600
================================================================================================
6.07 BANKS
Bank of New York 98,800 3,532,100
Chase Manhattan 68,300 4,951,750
Fleet Financial Group 78,500 3,228,312
Morgan (J P) & Co 41,600 5,795,400
Summit Bancorp 60,000 2,456,250
================================================================================================
19,963,812
1.12 BEVERAGES
Anheuser-Busch Cos 50,300 3,675,044
================================================================================================
2.39 BROADCASTING
Clear Channel Communications(a) 52,000 3,435,250
AT&T Corp-- Liberty Media Group Class A Shrs(a) 66,600 4,424,737
================================================================================================
7,859,987
1.47 CABLE
MediaOne Group(a) 65,500 4,838,813
================================================================================================
2.68 COMMUNICATIONS -- EQUIPMENT & MANUFACTURING
Lucent Technologies 59,600 3,389,750
Motorola Inc 65,400 5,415,938
================================================================================================
8,805,688
3.44 COMPUTER RELATED
Galileo International 71,500 3,217,500
International Business Machines 37,200 4,326,825
Microsoft Corp(a) 46,500 3,751,969
================================================================================================
11,296,294
1.02 ELECTRIC UTILITIES
Unicom Corp 79,000 3,342,688
================================================================================================
1.36 ELECTRICAL EQUIPMENT
General Electric 44,000 4,474,250
================================================================================================
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
3.21 ELECTRONICS -- SEMICONDUCTOR
Intel Corp 56,000 $ 3,027,500
Maxim Integrated Products(a) 63,000 3,366,562
Texas Instruments 38,000 4,156,250
================================================================================================
10,550,312
1.12 ENTERTAINMENT
Time Warner 54,000 3,675,375
================================================================================================
1.11 FINANCIAL
Citigroup Inc 55,100 3,650,375
================================================================================================
0.38 FOODS
Tasty Baking 100,000 1,250,000
================================================================================================
1.05 GAMING
Harrah's Entertainment(a) 160,000 3,460,000
================================================================================================
5.93 HEALTH CARE DRUGS -- PHARMACEUTICALS
American Home Products 46,400 2,673,800
Lilly (Eli) & Co 51,600 3,686,175
Merck & Co 60,900 4,110,750
Pharmacia & Upjohn 56,200 3,115,588
SmithKline Beecham PLC Sponsored ADR
Representing 5 Ord Shrs 37,000 2,428,125
Warner-Lambert Co 56,200 3,484,400
================================================================================================
19,498,838
1.10 HOUSEHOLD FURNITURE & APPLIANCES
Maytag Corp 51,000 3,598,687
================================================================================================
2.10 HOUSEHOLD PRODUCTS
Colgate-Palmolive Co 36,500 3,645,437
Procter & Gamble 35,000 3,268,125
================================================================================================
6,913,562
1.32 INSURANCE
Allmerica Financial 74,300 4,351,194
================================================================================================
0.97 LODGING -- HOTELS
Marriott International Class A Shrs 84,000 3,197,250
================================================================================================
2.57 MANUFACTURING
AlliedSignal Inc 78,000 4,528,875
Tyco International Ltd 45,000 3,931,875
================================================================================================
8,460,750
5.24 OIL & GAS RELATED
Apache Corp 68,000 2,448,000
BP Amoco PLC Sponsored ADR Representing 6 Ord Shrs 29,100 3,117,338
Exxon Corp 52,200 4,169,475
Halliburton Co 63,100 2,610,762
Schlumberger Ltd 36,700 2,208,881
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
Unocal Corp 67,000 $ 2,663,250
================================================================================================
17,217,706
2.08 PAPER & FOREST PRODUCTS
Champion International 73,400 3,761,750
Weyerhaeuser Co 49,400 3,065,888
================================================================================================
6,827,638
1.50 RAILROADS
Kansas City Southern Industries 87,900 4,944,375
================================================================================================
6.61 RETAIL
AnnTaylor Stores(a) 75,000 3,239,062
Dayton Hudson 91,600 5,770,800
Safeway Inc(a) 62,000 2,883,000
Tandy Corp 81,600 6,732,000
Wal-Mart Stores 73,200 3,120,150
================================================================================================
21,745,012
2.05 SERVICES
America Online(a) 28,400 3,390,250
Omnicom Group 47,700 3,339,000
================================================================================================
6,729,250
1.23 TELECOMMUNICATIONS -- LONG DISTANCE
AT&T Corp 72,600 4,029,300
================================================================================================
2.98 TELEPHONE
Frontier Corp 64,000 3,368,000
GTE Corp 50,000 3,153,125
SBC Communications 64,000 3,272,000
================================================================================================
9,793,125
TOTAL COMMON STOCKS (Cost $168,811,696) 213,167,331
================================================================================================
30.17 FIXED INCOME SECURITIES
8.05 US GOVERNMENT OBLIGATIONS
US Treasury Notes, 5.625%, 5/15/2008
(Amortized Cost $27,780,005) $ 26,750,000 26,449,063
================================================================================================
4.32 US GOVERNMENT AGENCY OBLIGATIONS
Freddie Mac, Gold, Participation Certificates
6.500%, 6/1/2011 $ 7,044,558 7,040,754
6.500%, 9/1/2011 $ 6,662,749 6,659,151
Student Loan Marketing Association, Notes,
Series CQ
4.881%, 3/7/2001 $ 500,000 497,184
================================================================================================
TOTAL US GOVERNMENT AGENCY OBLIGATIONS
(Amortized Cost $13,853,522) 14,197,089
================================================================================================
17.80 CORPORATE BONDS
0.58 AIRLINES
Delta Air Lines, Deb, 10.375%, 12/15/2022 $ 1,500,000 1,911,352
================================================================================================
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
0.48 BUILDING MATERIALS
USG Corp, Sr Notes, 8.500%, 8/1/2005 $ 1,500,000 $ 1,590,000
================================================================================================
1.09 CABLE
TCI Communications, Sr Deb, 7.875%, 2/15/2026 $ 1,000,000 1,080,501
Tele-Communications Inc, Sr Deb, 9.800%, 2/1/2012 $ 2,000,000 2,486,672
================================================================================================
3,567,173
0.26 CHEMICALS
Equistar Chemicals LP, Deb, 7.550%, 2/15/2026 $ 1,000,000 867,981
================================================================================================
6.40 ELECTRIC UTILITIES
Boston Edison, Deb, 7.800%, 3/15/2023 $ 1,925,000 1,909,032
Commonwealth Edison, 1st Mortgage
Series 76, 8.250%, 10/1/2006 $ 1,000,000 1,076,643
7.000%, 7/1/2005 $ 2,000,000 2,027,340
Consumers Energy, 1st & Refunding Mortgage
7.375%, 9/15/2023 $ 2,000,000 1,964,020
DQU-II Funding, Collateral Lease, 8.700%, 6/1/2016 $ 1,989,000 2,167,055
Detroit Edison, Secured Medium-Term Notes, Series C
8.300%, 1/13/2023 $ 1,000,000 1,038,908
Gulf States Utilities, 1st Mortgage, 8.700%, 4/1/2024 $ 1,000,000 1,029,723
Metropolitan Edison, Secured Medium-Term Notes
Series B, 8.150%, 1/30/2023 $ 2,000,000 2,040,114
New York State Electric & Gas, 1st Mortgage
8.300%, 12/15/2022 $ 1,500,000 1,528,777
Niagara Mohawk Power, 1st Mortgage
9.750%, 11/1/2005 $ 1,000,000 1,147,723
Pennsylvania Power & Light, 1st Mortgage
7.700%, 10/1/2009 $ 3,400,000 3,774,418
Public Service Electric & Gas, 1st Mortgage
6.375%, 5/1/2008 $ 1,400,000 1,345,011
================================================================================================
21,048,764
1.07 ENTERTAINMENT
Paramount Communications, Sr Deb, 8.250%, 8/1/2022 $ 3,400,000 3,501,490
================================================================================================
0.63 FINANCIAL
Associates Corp of North America, Sr Unsecured Euro
Medium-Term Notes, Series 8, 7.375%, 6/11/2007(b) $ 2,000,000 2,068,872
================================================================================================
1.54 INSURANCE
Equitable Cos, Sr Notes, 9.000%, 12/15/2004 $ 2,500,000 2,721,272
Progressive Corp, Sr Notes, 6.625%, 3/1/2029 $ 2,500,000 2,341,457
================================================================================================
5,062,729
0.29 LODGING -- HOTELS
Hilton Hotels, Sr Notes, 7.200%, 12/15/2009 $ 1,000,000 962,119
================================================================================================
2.23 OIL & GAS RELATED
Atlantic Richfield, Deb, 10.875%, 7/15/2005 $ 1,500,000 1,805,011
NRG Energy, Sr Notes, 7.500%, 6/15/2007 $ 1,500,000 1,508,224
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
Panhandle Eastern Pipe Line, Sr Notes, 6.500%,
7/15/2009(c) $ 1,000,000 $ 959,342
Sun Inc, Deb, 9.375%, 6/1/2016 $ 1,000,000 1,082,000
Vastar Resources, Notes, 6.500%, 4/1/2009 $ 2,000,000 1,969,078
================================================================================================
7,323,655
1.05 PAPER & FOREST PRODUCTS
Chesapeake Corp, Deb, 7.200%, 3/15/2005 $ 3,500,000 3,445,953
================================================================================================
0.43 TELECOMMUNICATIONS -- LONG DISTANCE
AT&T Corp, Notes, 6.000%, 3/15/2009 $ 1,500,000 1,428,726
================================================================================================
1.75 TELEPHONE
Centel Capital, Deb, 9.000%, 10/15/2019 $ 2,500,000 2,875,315
Citizens Utilities, Deb, 7.000%, 11/1/2025 $ 675,000 641,361
GTE Corp, Deb, 7.900%, 2/1/2027 $ 1,250,000 1,280,304
US WEST Communications, Notes, 5.650%, 11/1/2004 $ 1,000,000 957,505
================================================================================================
5,754,485
TOTAL CORP0RATE BONDS (Amortized Cost $61,382,675) 58,533,299
================================================================================================
TOTAL FIXED INCOME SECURITIES (Amortized Cost $103,016,202) 99,179,451
================================================================================================
4.99 SHORT-TERM INVESTMENTS
4.56 COMMERCIAL PAPER
4.56 FINANCIAL
Associates Corp of North America, 4.900%, 6/1/1999
(Cost $15,000,000) $ 15,000,000 15,000,000
================================================================================================
0.43 REPURCHASE AGREEMENTS
Repurchase Agreement with State Street dated 5/28/1999
due 6/1/1999 at 4.720%, repurchased at $1,398,733
(Collateralized by US Treasury Bonds, due 4/15/2028
at 3.625%, value $1,436,384) (Cost $1,398,000) $ 1,398,000 1,398,000
================================================================================================
TOTAL SHORT-TERM INVESTMENTS (Cost $16,398,000) 16,398,000
================================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $288,225,898)
(Cost for Income Tax Purposes $288,262,470) $ 328,744,782
================================================================================================
Industrial Income Fund
84.80 COMMON STOCKS
1.71 AEROSPACE & DEFENSE
Northrop Grumman 450,000 $ 30,375,000
Raytheon Co Class B Shrs 780,000 53,088,750
================================================================================================
83,463,750
1.72 AUTOMOBILES
Ford Motor 800,000 45,650,000
General Motors Class H(a) 700,000 38,412,500
================================================================================================
84,062,500
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
6.99 BANKS
Bank of New York 4,000,000 $ 143,000,000
Chase Manhattan 800,000 58,000,000
Fleet Financial Group 1,376,000 56,588,000
Morgan (J P) & Co 600,000 83,587,500
================================================================================================
341,175,500
2.10 BEVERAGES
Anheuser-Busch Cos 1,400,000 102,287,500
================================================================================================
0.82 BROADCASTING
AT&T Corp-- Liberty Media Group Class A Shrs(a) 600,000 39,862,500
================================================================================================
0.43 CHEMICALS
Lyondell Chemical 1,090,000 20,778,125
================================================================================================
1.70 COMMUNICATIONS -- EQUIPMENT & MANUFACTURING
Motorola Inc 1,000,000 82,812,500
================================================================================================
4.34 COMPUTER RELATED
EMC Corp(a) 300,000 29,887,500
Galileo International 1,029,000 46,305,000
International Business Machines 750,000 87,234,375
Microsoft Corp(a) 600,000 48,412,500
================================================================================================
211,839,375
2.40 ELECTRICAL EQUIPMENT
General Electric 1,150,000 116,940,625
================================================================================================
3.22 ELECTRONICS -- SEMICONDUCTOR
Altera Corp(a) 1,000,000 34,812,500
Intel Corp 1,050,000 56,765,625
Texas Instruments 600,000 65,625,000
================================================================================================
157,203,125
0.81 FINANCIAL
Citigroup Inc 600,000 39,750,000
================================================================================================
5.83 FOODS
General Mills 1,000,000 80,375,000
Heinz (H J) Co 1,192,000 57,588,500
Hershey Foods 700,000 37,975,000
Kellogg Co 1,600,000 55,500,000
Quaker Oats 800,000 52,850,000
================================================================================================
284,288,500
0.52 GAMING
Park Place Entertainment(a) 2,400,000 25,200,000
================================================================================================
0.29 GOLD & PRECIOUS METALS MINING
Newmont Mining 799,050 14,233,078
================================================================================================
8.19 HEALTH CARE DRUGS -- PHARMACEUTICALS
American Home Products 600,000 34,575,000
Bristol-Myers Squibb 800,000 54,900,000
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
Lilly (Eli) & Co 600,000 $ 42,862,500
Merck & Co 1,400,000 94,500,000
Pharmacia & Upjohn 600,000 33,262,500
SmithKline Beecham PLC Sponsored ADR
Representing 5 Ord Shrs 800,000 52,500,000
Warner-Lambert Co 1,000,000 62,000,000
Watson Pharmaceuticals(a) 650,000 24,903,125
================================================================================================
399,503,125
1.89 HEALTH CARE RELATED
Becton Dickinson 1,000,000 38,750,000
Medtronic Inc 750,000 53,250,000
================================================================================================
92,000,000
0.94 HOUSEHOLD FURNITURE & APPLIANCES
Maytag Corp 650,000 45,865,625
================================================================================================
1.64 HOUSEHOLD PRODUCTS
Colgate-Palmolive Co 800,000 79,900,000
================================================================================================
1.03 INSURANCE
Allmerica Financial 856,818 50,177,404
================================================================================================
1.70 LODGING -- HOTELS
Hilton Hotels 3,000,000 41,250,000
Marriott International Class A Shrs 1,100,000 41,868,750
================================================================================================
83,118,750
3.97 MANUFACTURING
AlliedSignal Inc 1,970,000 114,383,125
Textron Inc 500,000 44,531,250
Tyco International Ltd 400,000 34,950,000
================================================================================================
193,864,375
0.20 NATURAL GAS
K N Energy 450,000 9,646,875
================================================================================================
7.48 OIL & GAS RELATED
Apache Corp 900,000 32,400,000
Atlantic Richfield 750,000 62,765,625
Exxon Corp 1,200,000 95,850,000
Halliburton Co 898,500 37,175,438
Royal Dutch Petroleum New York Registry 1.25 Gldr Shrs 1,000,000 56,562,500
Schlumberger Ltd 800,000 48,150,000
Unocal Corp 800,000 31,800,000
================================================================================================
364,703,563
1.91 PAPER & FOREST PRODUCTS
Champion International 800,000 41,000,000
Weyerhaeuser Co 840,500 52,163,531
================================================================================================
93,163,531
0.63 PERSONAL CARE
Gillette Co 600,000 30,600,000
================================================================================================
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
3.72 RAILROADS
Kansas City Southern Industries 2,700,000 $ 151,875,000
Norfolk Southern 900,000 29,475,000
================================================================================================
181,350,000
1.31 REAL ESTATE INVESTMENT TRUST
Health & Retirement Properties Trust SBI 1,200,000 18,375,000
Health Care Property Investors 550,000 16,671,875
Healthcare Realty Trust 400,000 8,650,000
Meditrust Corp Paired Certificates 500,800 6,948,600
OMEGA Healthcare Investors 500,000 13,125,000
================================================================================================
63,770,475
7.59 RETAIL
Dayton Hudson 1,775,800 111,875,400
Penney (J C) Co 1,000,000 51,687,500
Safeway Inc(a) 800,000 37,200,000
Tandy Corp 1,600,000 132,000,000
Wal-Mart Stores 875,000 37,296,875
================================================================================================
370,059,775
0.96 SAVINGS & LOAN
Charter One Financial 1,652,070 46,980,741
================================================================================================
1.19 TELECOMMUNICATIONS -- LONG DISTANCE
AT&T Corp 1,050,000 58,275,000
================================================================================================
6.78 TELEPHONE
Bell Atlantic 1,600,000 87,600,000
Frontier Corp 500,000 26,312,500
GTE Corp 600,000 37,837,500
SBC Communications 1,600,000 81,800,000
US WEST 1,800,000 97,312,500
================================================================================================
330,862,500
0.79 TOBACCO
Philip Morris 1,000,000 38,562,500
================================================================================================
TOTAL COMMON STOCKS (Cost $2,649,182,947) 4,136,301,317
================================================================================================
0.15 PREFERRED STOCKS
0.15 TELECOMMUNICATIONS -- LONG DISTANCE
Global Crossing Holdings Ltd, Sr Exchangeable Pfd
10.500%(d) (Cost $7,601,500) 66,000 7,260,000
================================================================================================
10.00 FIXED INCOME SECURITIES
10.00 CORPORATE BONDS
0.46 BUILDING MATERIALS
USG Corp, Sr Notes, 8.500%, 8/1/2005 $ 21,093,000 22,358,580
================================================================================================
0.45 CABLE
Comcast Cable Partners Ltd, Sr Discount
Step-Up Deb, Zero Coupon(e), 11/15/2007 $ 5,850,000 5,279,625
Continental Cablevision, Sr Deb, 9.500%, 8/1/2013 $ 6,925,000 8,069,654
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
TeleWest PLC, Sr Discount Step-Up Deb
Zero Coupon(e), 10/1/2007 $ 10,000,000 $ 8,850,000
================================================================================================
22,199,279
0.11 COMMUNICATIONS -- EQUIPMENT & MANUFACTURING
Worldwide Fiber, Sr Notes(c), 12.500%, 12/15/2005 $ 5,000,000 5,162,500
================================================================================================
0.13 COMPUTER RELATED
Rhythms NetConnections, Sr Notes(c)
12.750%, 4/15/2009 $ 7,000,000 6,545,000
================================================================================================
3.30 ELECTRIC UTILITIES
Cleveland Electric Illuminating
1st Mortgage, Series B, 9.500%, 5/15/2005 $ 16,000,000 17,079,087
Sr Secured Notes, Series D
7.880%, 11/1/2017 $ 4,245,000 4,422,373
7.430%, 11/1/2009 $ 7,500,000 7,619,737
Consumers Energy, 1st Refunding Mortgage
7.375%, 9/15/2023 $ 10,700,000 10,507,506
DQU-II Funding, Collateral Lease, 8.700%, 6/1/2016 $ 17,403,000 18,960,916
Detroit Edison
1st Mortgage Medium-Term Notes, Series C
8.240%, 1/13/2023 $ 5,600,000 5,818,154
Secured Medium-Term Notes
Series 92-D, 8.300%, 8/1/2022 $ 11,000,000 11,376,628
Series C, 8.300%, 1/13/2023 $ 5,000,000 5,194,540
Series D, 8.310%, 8/1/2022 $ 3,000,000 3,120,969
El Paso Electric, 1st Mortgage
Series C, 8.250%, 2/1/2003 $ 5,000,000 5,188,225
Series D, 8.900%, 2/1/2006 $ 9,325,000 10,040,291
Gulf States Utilities, 1st Mortgage, 8.700%, 4/1/2024 $ 9,400,000 9,679,395
Massachusetts Electric, Medium-Term Notes, Series R
8.550%, 2/7/2022 $ 5,000,000 5,273,219
Metropolitan Edison, Secured Medium-Term Notes, Series B
8.150%, 1/30/2023 $ 19,950,000 20,350,136
New York State Electric & Gas, 1st Mortgage
8.300%, 12/15/2022 $ 8,250,000 8,408,275
Niagara Mohawk Power, Sr Notes, Series G
7.750%, 10/1/2008 $ 6,600,000 6,826,221
Pennsylvania Power, 1st Mortgage, 8.500%, 7/15/2022 $ 2,000,000 2,105,894
Public Service of New Mexico, Sr Notes
Series A, 7.100%, 8/1/2005 $ 6,125,000 6,059,156
Southwestern Public Service, 1st Mortgage
8.200%, 12/1/2022 $ 3,000,000 3,125,265
================================================================================================
161,155,987
0.09 ELECTRICAL EQUIPMENT
Alpine Group, Sr Secured Notes, Series B
12.250%, 7/15/2003 $ 4,249,000 4,376,470
================================================================================================
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
0.12 ENTERTAINMENT
Paramount Communications, Sr Deb
8.250%, 8/1/2022 $ 5,800,000 $ 5,973,129
================================================================================================
0.08 GAMING
Players International, Sr Notes
10.875%, 4/15/2005 $ 3,750,000 3,956,250
================================================================================================
0.13 HEALTH CARE RELATED
FHP International, Sr Notes
7.000%, 9/15/2003 $ 6,450,000 6,527,496
================================================================================================
0.05 HOUSEHOLD PRODUCTS
Home Products International, Sr Sub Notes
9.625%, 5/15/2008 $ 2,500,000 2,325,000
================================================================================================
0.53 INSURANCE
Equitable Cos, Sr Notes, 9.000%, 12/15/2004 $ 23,610,000 25,699,695
================================================================================================
0.16 IRON & STEEL
National Steel, 1st Mortgage, 8.375%, 8/1/2006 $ 8,000,000 7,730,000
================================================================================================
0.24 LODGING -- HOTELS
Hilton Hotels, Sr Notes, 7.200%, 12/15/2009 $ 12,270,000 11,805,200
================================================================================================
0.08 MANUFACTURING
Haynes International, Sr Notes, 11.625%, 9/1/2004 $ 4,175,000 3,757,500
================================================================================================
0.09 NATURAL GAS
NorAm Energy, Conv Sub Deb, 6.000%, 3/15/2012 $ 4,637,000 4,405,150
================================================================================================
1.95 OIL & GAS RELATED
Atlantic Richfield, Deb
10.875%, 7/15/2005 $ 9,030,000 10,866,168
9.125%, 8/1/2031 $ 2,757,000 3,428,169
9.000%, 4/1/2021 $ 22,460,000 27,429,429
9.000%, 5/1/2031 $ 2,353,000 2,887,764
8.750%, 3/1/2032 $ 2,326,000 2,793,888
Canadian Forest Oil Ltd, Gtd Sr Sub Notes
8.750%, 9/15/2007 $ 6,910,000 6,702,700
Cliffs Drilling, Gtd Sr Notes
Series B, 10.250%, 5/15/2003 $ 4,000,000 3,880,000
Series D, 10.250%, 5/15/2003 $ 4,060,000 3,938,200
Coda Energy, Gtd Sr Secured Sub Notes, Series B
10.500%, 4/1/2006 $ 5,000,000 5,162,500
Gulf Canada Resources Ltd, Sr Notes
8.350%, 8/1/2006 $ 3,750,000 3,721,875
8.250%, 3/15/2017 $ 5,000,000 4,599,750
Ocean Energy, Gtd Sr Sub Notes, 9.750%, 10/1/2006 $ 13,716,000 14,110,335
Panhandle Eastern Pipe Line, Sr Notes(c)
7.000%, 7/15/2029 $ 6,000,000 5,649,606
================================================================================================
95,170,384
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
0.14 SAVINGS & LOAN
Sovereign Bancorp, Medium-Term Notes
8.000%, 3/15/2003 $ 6,500,000 $ 6,656,468
================================================================================================
0.25 TELECOMMUNICATIONS -- CELLULAR & WIRELESS
Cencall Communications, Sr Discount Step-Up Notes
10.125%(e), 1/15/2004 $ 12,000,000 12,120,000
================================================================================================
0.54 TELECOMMUNICATIONS -- LONG DISTANCE
AT&T Corp, Notes, 6.500%, 3/15/2029 $ 12,500,000 11,597,662
Level 3 Communications, Sr Discount Step-Up Notes
Zero Coupon(e), 12/1/2008 $ 17,400,000 10,353,000
Qwest Communications International, Sr Discount
Step-Up Notes, Series B, Zero Coupon(e), 10/15/2007 $ 5,340,000 4,165,200
================================================================================================
26,115,862
1.10 TELEPHONE
Centel Capital, Deb, 9.000%, 10/15/2019 $ 5,000,000 5,750,629
Citizens Utilities, Deb, 7.000%, 11/1/2025 $ 4,950,000 4,703,316
McLeodUSA Inc, Sr Notes, 9.250%, 7/15/2007 $ 3,250,000 3,233,750
MetroNet Communications
Sr Discount Step-Up Notes
Zero Coupon(e), 11/1/2007 $ 8,250,000 6,641,250
Zero Coupon(e), 6/15/2008 $ 12,750,000 9,466,875
Sr Notes, 12.000%, 8/15/2007 $ 7,775,000 8,941,250
NEXTLINK Communications, Sr Notes
10.750%, 11/15/2008 $ 1,400,000 1,401,750
9.625%, 10/1/2007 $ 5,425,000 5,180,875
NEXTLINK Communications LLC/NEXTLINK Capital
Sr Notes, 12.500%, 4/15/2006 $ 3,750,000 3,928,125
RCN Corp, Sr Discount Step-Up Notes
Series B, Zero Coupon(e), 2/15/2008 $ 7,600,000 4,636,000
================================================================================================
53,883,820
TOTAL FIXED INCOME SECURITIES (Amortized Cost $503,749,637) 487,923,770
================================================================================================
5.05 SHORT-TERM INVESTMENTS
4.91 COMMERCIAL PAPER
2.36 CONSUMER FINANCE
American Express Credit, 4.880%, 6/4/1999 $ 40,000,000 40,000,000
General Motors Acceptance, 4.790%, 6/3/1999 $ 35,000,000 35,000,000
Sears Roebuck Acceptance, 4.830%, 6/2/1999 $ 40,000,000 40,000,000
================================================================================================
115,000,000
1.84 FINANCIAL
Associates Corp of North America, 4.900%, 6/1/1999 $ 40,000,000 40,000,000
General Electric Capital Services, 4.880%, 6/3/1999 $ 50,000,000 50,000,000
================================================================================================
90,000,000
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
0.71 SERVICES
Hertz Corp, 4.830%, 6/1/1999 $ 34,734,000 $ 34,734,000
================================================================================================
TOTAL COMMERCIAL PAPER (Cost $239,734,000) 239,734,000
================================================================================================
0.14 REPURCHASE AGREEMENTS
Repurchase Agreement with State Street dated 5/28/1999
due 6/1/1999 at 4.720%, repurchased at $6,619,470
(Collaterized by US Treasury Bonds due 4/15/2028 at
3.625%, value $6,753,528) (Cost $6,616,000) 6,616,000 6,616,000
================================================================================================
TOTAL SHORT-TERM INVESTMENTS (Cost $246,350,000) 246,350,000
================================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $3,406,884,084)
(Cost for Income Tax Purposes $3,415,975,437) $4,877,835,087
================================================================================================
Total Return Fund
69.75 COMMON STOCKS
2.21 AEROSPACE & DEFENSE
Boeing Co 450,000 $ 19,012,500
Lockheed Martin 700,000 28,306,250
Raytheon Co Class B Shrs 400,000 27,225,000
================================================================================================
74,543,750
0.57 AIRLINES
Southwest Airlines 600,000 19,237,500
================================================================================================
1.74 AUTO PARTS
Cooper Tire & Rubber 800,000 19,000,000
Genuine Parts 800,000 26,950,000
Johnson Controls 200,000 12,612,500
================================================================================================
58,562,500
0.85 AUTOMOBILES
Ford Motor 500,000 28,531,250
================================================================================================
3.06 BANKS
Bank of America 330,000 21,346,875
Bank One 486,000 27,489,375
First Union 300,000 13,818,750
National City 405,000 26,805,937
Wachovia Corp 154,000 13,590,500
================================================================================================
103,051,437
0.54 BEVERAGES
Anheuser-Busch Cos 250,000 18,265,625
================================================================================================
1.26 BUILDING MATERIALS
Lowe's Cos 400,000 20,775,000
Sherwin-Williams Co 700,000 21,568,750
================================================================================================
42,343,750
3.03 CHEMICALS
Dow Chemical 200,000 24,300,000
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
Great Lakes Chemical 600,000 $ 27,112,500
Morton International 700,000 27,300,000
Nalco Chemical 700,000 23,450,000
================================================================================================
102,162,500
4.31 COMPUTER RELATED
Adaptec Inc(a) 600,000 18,525,000
Compaq Computer 1,000,000 23,687,500
Computer Associates International 500,000 23,656,250
Hewlett-Packard Co 350,000 33,009,375
International Business Machines 400,000 46,525,000
================================================================================================
145,403,125
2.64 CONGLOMERATES
Fortune Brands 300,000 12,262,500
Hanson PLC Sponsored ADR Representing 5 Ord Shrs 900,000 40,781,250
National Service Industries 500,000 18,406,250
Unilever NV New York Registered Shrs 267,857 17,494,419
================================================================================================
88,944,419
0.33 CONTAINERS
Crown Cork & Seal 350,000 10,981,250
================================================================================================
0.90 DISTRIBUTION
Supervalu Inc 1,250,000 30,312,500
================================================================================================
4.07 ELECTRIC UTILITIES
DTE Energy 700,000 30,493,750
Edison International 600,000 16,500,000
Entergy Corp 1,000,000 32,437,500
GPU Inc 550,000 23,959,375
Unicom Corp 800,000 33,850,000
================================================================================================
137,240,625
2.51 ELECTRICAL EQUIPMENT
General Electric 300,000 30,506,250
Grainger (W W) Inc 500,000 26,531,250
Rockwell International 500,000 27,593,750
================================================================================================
84,631,250
0.68 FOODS
Archer-Daniels-Midland Co 892,500 13,387,500
Heinz (H J) Co 200,000 9,662,500
================================================================================================
23,050,000
0.64 HARDWARE & TOOLS
Snap-On Inc 600,000 21,712,500
================================================================================================
4.34 HEALTH CARE DRUGS -- PHARMACEUTICALS
Abbott Laboratories 350,000 15,815,625
American Home Products 400,000 23,050,000
Bristol-Myers Squibb 500,000 34,312,500
Lilly (Eli) & Co 300,000 21,431,250
Merck & Co 300,000 20,250,000
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
Schering-Plough Corp 700,000 $ 31,543,750
================================================================================================
146,403,125
0.95 HEALTH CARE RELATED
Columbia/HCA Healthcare 1,300,000 30,631,250
LifePoint Hospitals(a) 68,420 684,203
Triad Hospitals(a) 68,420 692,756
================================================================================================
32,008,209
0.87 HOUSEHOLD FURNITURE & APPLIANCES
Shaw Industries(a) 400,000 6,750,000
Whirlpool Corp 350,000 22,575,000
================================================================================================
29,325,000
4.97 INSURANCE
American General 300,000 21,675,000
Lincoln National 200,000 20,350,000
Loews Corp 400,000 32,525,000
MGIC Investment 700,000 33,687,500
Ohio Casualty 650,000 24,740,625
Old Republic International 700,000 12,731,250
SAFECO Corp 500,000 21,968,750
================================================================================================
167,678,125
0.71 INSURANCE BROKERS
Marsh & McLennan 330,000 24,007,500
================================================================================================
1.14 INVESTMENT BANK/BROKER FIRM
Morgan Stanley Dean Witter & Co 400,000 38,600,000
================================================================================================
1.33 IRON & STEEL
Nucor Corp 900,000 44,887,500
================================================================================================
1.88 MACHINERY
Caterpillar Inc 500,000 27,437,500
Deere & Co 500,000 19,031,250
Dover Corp 450,000 16,959,375
================================================================================================
63,428,125
3.33 MANUFACTURING
Federal Signal 750,000 17,953,125
Illinois Tool Works 350,000 26,862,500
Minnesota Mining & Manufacturing 200,000 17,150,000
Precision Castparts 454,100 18,391,050
Textron Inc 120,000 10,687,500
York International 500,000 21,093,750
================================================================================================
112,137,925
0.46 METALS MINING
Phelps Dodge 300,000 15,543,750
================================================================================================
1.33 OFFICE EQUIPMENT & SUPPLIES
Ikon Office Solutions 1,200,000 16,725,000
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
Xerox Corp 500,000 $ 28,093,750
================================================================================================
44,818,750
3.84 OIL & GAS RELATED
Exxon Corp 300,000 23,962,500
Norsk Hydro A/SA Sponsored ADR Representing Ord Shrs 750,000 30,046,875
Repsol SA Sponsored ADR Representing Ord Shrs 1,500,000 27,000,000
Royal Dutch Petroleum New York Registry 1.25 Gldr Shrs 260,000 14,706,250
Yacimientos Petroliferos Fiscades SA Sponsored ADR
Representing Class D Shrs 800,000 33,700,000
================================================================================================
129,415,625
0.82 PAPER & FOREST PRODUCTS
Kimberly-Clark Corp 300,000 17,606,250
Westvaco Corp 350,000 9,996,875
================================================================================================
27,603,125
1.18 POLLUTION CONTROL
Browning-Ferris Industries 500,000 20,750,000
Waste Management 362,500 19,167,187
================================================================================================
39,917,187
0.94 PUBLISHING
American Greetings Class A Shrs 400,000 11,450,000
Gannett Co 280,000 20,230,000
================================================================================================
31,680,000
0.84 RAILROADS
CSX Corp 600,000 28,162,500
================================================================================================
2.48 RETAIL
Dillard's Inc Class A Shrs 700,000 24,587,500
K mart Corp(a) 500,000 7,687,500
Penney (J C) Co 600,000 31,012,500
Rite Aid 450,000 11,250,000
Toys "R" Us(a) 400,000 9,225,000
================================================================================================
83,762,500
2.64 SERVICES
Deluxe Corp 650,000 23,440,625
Dun & Bradstreet 750,000 26,250,000
Electronic Data Systems 700,000 39,375,000
================================================================================================
89,065,625
3.73 TELEPHONE
Bell Atlantic 300,000 16,425,000
British Telecommunications PLC Sponsored ADR
Representing 10 Ord Shrs 300,000 50,400,000
SBC Communications 527,040 26,944,920
Telefonos de Mexico SA de CV Sponsored ADR Representing
20 Series L Shrs 400,000 31,975,000
================================================================================================
125,744,920
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
1.70 TEXTILE -- APPAREL MANUFACTURING
Liz Claiborne 500,000 $ 18,000,000
Unifi Inc(a) 1,000,000 16,500,000
VF Corp 500,000 23,000,000
================================================================================================
57,500,000
0.93 TOBACCO
Gallaher Group PLC Sponsored ADR Representing 4 Ord Shrs 250,000 6,250,000
Philip Morris 650,000 25,065,625
================================================================================================
31,315,625
TOTAL COMMON STOCKS (Cost $1,575,393,482) 2,351,979,097
================================================================================================
27.97 FIXED INCOME SECURITIES
12.92 US GOVERNMENT OBLIGATIONS
US Treasury Bonds
9.375%, 2/15/2006 $ 38,750,000 46,282,031
9.250%, 2/15/2016 $ 20,800,000 27,488,510
8.125%, 8/15/2019 $ 20,800,000 25,506,000
7.625%, 2/15/2025 $ 23,000,000 27,542,500
7.250%, 8/15/2022 $ 16,800,000 19,094,258
US Treasury Notes
8.750%, 8/15/2000 $ 25,000,000 26,000,000
8.000%, 5/15/2001 $ 20,500,000 21,448,125
6.500%, 8/15/2005 $ 29,300,000 30,334,670
6.375%, 8/15/2002 $ 23,750,000 24,247,277
6.250%, 2/15/2003 $ 43,300,000 44,098,364
6.125%, 8/15/2007 $ 51,000,000 51,988,125
5.750%, 8/15/2003 $ 27,300,000 27,351,187
5.500%, 2/15/2008 $ 45,300,000 44,549,740
US Treasury Security Stripped Interest Payment
Generic Tint Payment, Zero Coupon, 8/15/2003 $ 25,250,000 19,940,908
================================================================================================
TOTAL US GOVERNMENT OBLIGATIONS (Cost $428,915,191) 435,871,695
================================================================================================
3.94 US GOVERNMENT AGENCY OBLIGATIONS
Fannie Mae,
Benchmark Notes, 5.125%, 2/13/2004 $ 21,154,000 20,424,397
Gtd Mortgage Pass-Through Certificates
8.500%, 3/1/2010 $ 2,957,739 3,081,550
8.000%, 7/1/2024 $ 3,711,576 3,855,102
7.500%, 8/1/2007 $ 846,860 870,894
7.500%, 7/1/2024 $ 7,100,639 7,259,480
7.000%, 9/1/2027 $ 12,735,623 12,747,059
7.000%, 12/1/2027 $ 7,309,728 7,322,008
6.500%, 5/1/2026 $ 5,683,416 5,573,953
6.000%, 5/1/2009 $ 6,449,520 6,354,647
Freddie Mac, Gold, Participation Certificates
8.000%, 10/1/2010 $ 2,161,069 2,234,156
8.000%, 5/1/2024 $ 3,441,486 3,578,388
7.500%, 12/1/2026 $ 5,480,850 5,598,249
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
7.000%, 4/1/2028 $ 9,705,140 $ 9,730,567
6.500%, 7/1/2001 $ 2,888,630 2,922,455
6.500%, 1/1/2029 $ 14,770,035 14,452,478
Government National Mortgage Association I
Pass-Through Certificates
7.500%, 3/15/2026 $ 3,368,931 3,447,697
7.000%, 10/15/2008 $ 597,066 611,383
7.000%, 12/15/2022 $ 160,083 160,851
7.000%, 12/15/2025 $ 6,715,253 6,736,473
6.500%, 10/15/2008 $ 622,027 626,412
6.500%, 12/15/2028 $ 14,992,573 14,630,652
6.000%, 11/15/2008 $ 750,253 741,685
================================================================================================
TOTAL US GOVERNMENT AGENCY OBLIGATIONS
(Amortized Cost $133,217,762) 132,960,536
================================================================================================
0.98 ASSET-BACKED SECURITIES
0.98 CONSUMER FINANCE
Chase Manhattan Credit Card Master Trust
Series 1996-3, Class A, 7.040%, 2/15/2005 $ 18,000,000 18,385,200
Discover Card Master Trust I, Series 1998-7
Class A, 5.600%, 5/16/2006 $ 15,000,000 14,644,350
================================================================================================
TOTAL ASSET-BACKED SECURITIES (Amortized Cost $33,793,471) 33,029,550
================================================================================================
9.17 CORPORATE BONDS
0.88 AUTOMOBILES
Ford Motor, Bonds, 6.500%, 8/1/2018 $ 15,000,000 14,035,469
General Motors Acceptance
Global Bonds, 5.500%, 1/14/2002 $ 10,000,000 9,833,780
Notes, 6.125%, 1/22/2008 $ 6,000,000 5,806,890
================================================================================================
29,676,139
2.22 BANKS
ABN Amro Bank NV, Sub Notes
7.550%, 6/28/2006 $ 15,000,000 15,394,858
6.625%, 10/31/2001 $ 5,000,000 5,024,764
BankAmerica Corp, Sub Notes, 6.875%, 6/1/2003 $ 4,000,000 4,044,247
National City, Sub Notes, 7.200%, 5/15/2005 $ 2,000,000 2,027,264
Norwest Financial, Sr Notes, 5.625%, 2/3/2009 $ 16,000,000 14,801,118
SunTrust Banks, Sr Notes, 6.250%, 6/1/2008 $ 17,250,000 16,713,420
Wachovia Bank, Medium-Term Notes, Series 3
7.000%, 10/17/2008 $ 7,000,000 7,121,954
Wachovia Corp, Sub Notes, 6.250%, 8/4/2008 $ 10,000,000 9,687,740
================================================================================================
74,815,365
0.55 BEVERAGES
Anheuser-Busch Cos, Notes, 5.375%, 9/15/2008 $ 20,000,000 18,435,480
================================================================================================
0.42 BUILDING MATERIALS
Vulcan Materials, Notes, 6.000%, 4/1/2009 $ 15,000,000 14,277,974
================================================================================================
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
0.17 CHEMICALS
Eastman Chemical, Notes, 6.375%, 1/15/2004 $ 6,000,000 $ 5,877,198
================================================================================================
0.44 COMMUNICATIONS -- EQUIPMENT & MANUFACTURING
Motorola Inc, Notes, 6.500%, 3/1/2008 $ 15,000,000 14,879,294
================================================================================================
0.38 ELECTRIC UTILITIES
Duke Energy, Medium-Term Notes
6.125%, 7/22/2003 $ 2,900,000 2,863,245
National Rural Utilities, Secured Collateral Trust
6.550%, 11/1/2018 $ 10,500,000 9,943,846
================================================================================================
12,807,091
0.70 FINANCIAL
Associates Corp of North America, Sr Notes
6.375%, 10/15/2002 $ 5,000,000 5,002,154
5.500%, 2/15/2004 $ 15,000,000 14,420,865
Commercial Credit, Notes, 6.375%, 9/15/2002 $ 4,000,000 4,008,408
================================================================================================
23,431,427
0.52 FOODS
CPC International, Medium-Term Notes
Series C, 6.150%, 1/15/2006 $ 15,000,000 14,613,164
Series D, 6.875%, 10/15/2003 $ 3,000,000 3,057,465
================================================================================================
17,670,629
0.28 HEALTH CARE RELATED
Guidant Corp, Notes, 6.150%, 2/15/2006 $ 10,000,000 9,479,439
================================================================================================
0.34 LEISURE TIME
Carnival Corp, Notes, 6.150%, 4/15/2008 $ 12,000,000 11,484,983
================================================================================================
0.34 MACHINERY
Cooper Industries, Medium-Term Notes, Series 3
6.375%, 5/8/2008 $ 11,600,000 11,304,373
================================================================================================
0.34 MANUFACTURING
Tyco International Group SA, Gtd Notes
6.125%, 1/15/2009 $ 12,000,000 11,380,439
================================================================================================
0.26 NATURAL GAS
Enron Corp, Notes, 6.625%, 11/15/2005 $ 9,000,000 8,805,734
================================================================================================
0.56 RAILROADS
Norfolk Southern, Notes, 6.200%, 4/15/2009 $ 20,000,000 19,019,458
================================================================================================
0.28 RETAIL
May Department Stores, Deb, 6.875%, 11/1/2005 $ 4,000,000 4,039,836
Wal-Mart Stores, Notes, 8.625%, 4/1/2001 $ 5,000,000 5,226,910
================================================================================================
9,266,746
0.49 TELEPHONE
Ameritech Capital Funding, Notes
6.150%, 1/15/2008 $ 15,000,000 14,541,794
<PAGE>
SHARES OR
PRINCIPAL
% DESCRIPTION AMOUNT VALUE
BellSouth Telecommunications, Notes
6.500%, 6/15/2005 $ 2,000,000 $ 1,998,764
================================================================================================
16,540,558
TOTAL CORPORATE BONDS (Amortized Cost $321,575,329) 309,152,327
================================================================================================
0.96 FOREIGN GOVERNMENT OBLIGATIONS
Province of Manitoba, Unsecured Deb, 5.500%, 10/1/2008 $17,500,000 16,387,176
Province of Saskatchewan, Global Notes, 7.375%, 7/15/2013 $15,000,000 15,857,249
================================================================================================
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Amortized Cost $34,209,589) 32,244,425
================================================================================================
TOTAL FIXED INCOME SECURITIES (Amortized Cost $951,711,342) 943,258,533
================================================================================================
2.28 SHORT-TERM INVESTMENTS
0.59 US GOVERNMENT OBLIGATIONS
US Treasury Notes, 6.375%, 7/15/1999
(Amortized Cost $20,000,370) $ 20,000,000 20,043,759
================================================================================================
0.22 CORPORATE BONDS
0.10 PUBLISHING
Gannett Co, Notes, 5.850%, 5/1/2000 $ 3,500,000 3,502,968
================================================================================================
0.12 TOYS
Mattel Inc, Notes, 6.750%, 5/15/2000 $ 4,000,000 4,019,924
================================================================================================
TOTAL CORPORATE BONDS (Amortized Cost $7,492,046) 7,522,892
================================================================================================
1.47 REPURCHASE AGREEMENTS
Repurchase Agreement with State Street dated 5/28/1999
due 6/1/1999 at4.720%, repurchased at $49,462,927
(Collateralized by US Treasury Bills, Discount Notes,
due 5/25/2000, value $50,425,171) (Cost $49,437,000) $ 49,437,000 49,437,000
================================================================================================
TOTAL SHORT-TERM INVESTMENTS (Amortized Cost $76,929,416) 77,003,651
================================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $2,604,034,240)
(Cost for Income Tax Purposes $2,604,997,134) $3,372,241,281
</TABLE>
(a) Security is non-income producing.
(b) Security may be redenominated in euro, the currency of the European Economic
and Monetary Union (EMU).
(c) Securities acquired pursuant to Rule 144A. The Fund deems such securities to
be "liquid" because an institutional market exists.
(d) Security may make dividend payments in other types of securities or cash.
(e) Step-up bonds are obligations which increase the interest payment rate of a
specified point in time. Rate shown reflects current rate which may step up
at a future date.
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
Invesco Combination Stock & Bond Funds, Inc.
May 31, 1999
<TABLE>
<CAPTION>
INDUSTRIAL
BALANCED INCOME
FUND FUND
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investment Securities:
At Cost(a) $ 288,225,898 $ 3,406,884,084
==========================================================================================================
At Value(a) $ 328,744,782 $ 4,877,835,087
Cash 402,148 1,555,880
Receivables:
Investment Securities Sold 0 2,705,491
Fund Shares Sold 1,321,690 2,015,211
Dividends and Interest 1,791,775 16,196,580
Prepaid Expenses and Other Assets 42,462 463,974
==========================================================================================================
TOTAL ASSETS 332,302,857 4,900,772,223
==========================================================================================================
LIABILITIES
Payables:
Distributions to Shareholders 11,913 971,283
Investment Securities Purchased 6,988,562 47,985,937
Fund Shares Repurchased 370,800 5,136,273
Accrued Distribution Expenses 64,787 984,605
Accrued Expenses and Other Payables 28,328 657,816
==========================================================================================================
TOTAL LIABILITIES 7,464,390 55,735,914
==========================================================================================================
NET ASSETS AT VALUE $ 324,838,467 $ 4,845,036,309
==========================================================================================================
NET ASSETS
Paid-in Capital(b) $ 272,806,704 $ 3,103,454,195
Accumulated Undistributed Net Investment Income 41,340 169,190
Accumulated Undistributed Net Realized Gain on Investment
Securities and Foreign Currency Transactions 11,471,539 270,461,921
Net Appreciation of Investment Securities and Foreign
Currency Transactions 40,518,884 1,470,951,003
==========================================================================================================
NET ASSETS AT VALUE $ 324,838,467 $ 4,845,036,309
==========================================================================================================
Shares Outstanding 19,356,407 305,607,298
NET ASSET VALUE, Offering and Redemption
Price per Share $ 16.78 $ 15.85
==========================================================================================================
</TABLE>
(a) Investment securities at cost and value at May 31, 1999 include
repurchase agreements of $1,398,000 and $6,616,000 for Balanced and Industrial
Income Funds, respectively.
(b) The Fund has 1,600,000,000 authorized shares of common stock, par value
of $0.01 per share. Of such shares, 100 million and one billion have been
allocated to Balanced and Industrial Income Funds, respectively.
See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES (continued)
INVESCO Combination Stock & Bond Funds, Inc.
May 31, 1999
TOTAL RETURN
FUND
- -------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investment Securities:
At Cost(a) $ 2,604,034,240
=================================================================================================
At Value(a) $ 3,372,241,281
Receivables:
Fund Shares Sold 23,974,081
Dividends and Interest 23,479,696
Prepaid Expenses and Other Assets 321,998
=================================================================================================
TOTAL ASSETS 3,420,017,056
=================================================================================================
LIABILITIES
Payables:
Custodian 83,407
Distributions to Shareholders 265,738
Fund Shares Repurchased 432,300
Accrued Distribution Expenses 309,780
Accrued Expenses and Other Payables 180,269
=================================================================================================
TOTAL LIABILITIES 1,271,494
=================================================================================================
NET ASSETS AT VALUE $ 3,418,745,562
=================================================================================================
NET ASSETS
Paid-in Capital(b) $ 2,632,057,621
Accumulated Undistributed (Distributions in Excess of) Net Investment Income (24,737)
Accumulated Undistributed Net Realized Gain on Investment
Securities and Foreign Currency Transactions 18,505,637
Net Appreciation of Investment Securities and Foreign Currency Transactions 768,207,041
=================================================================================================
NET ASSETS AT VALUE $ 3,418,745,562
=================================================================================================
Shares Outstanding 105,599,020
NET ASSET VALUE, Offering and Redemption
Price per Share $ 32.37
=================================================================================================
</TABLE>
(a) Investment securities at cost and value at May 31, 1999 include a
repurchase agreement of $49,437,000 for Total Return Fund.
(b) The Fund has 1,600,000,000 authorized shares of common stock, par value
of $0.01 per share. Of such shares, 300 million have been allocated to Total
Return Fund.
See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS
Balanced Fund
<TABLE>
<CAPTION>
PERIOD YEAR
ENDED ENDED
MAY 31 JULY 31
- -------------------------------------------------------------------------------------------
1999 1998
(Note 1)
<S> <C> <C>
INVESTMENT INCOME
INCOME
Dividends $ 1,764,694 $ 1,386,453
Interest 4,915,416 4,951,420
Foreign Taxes Withheld (11,444) (10,905)
===========================================================================================
TOTAL INCOME 6,668,666 6,326,968
===========================================================================================
EXPENSES
Investment Advisory Fees 1,282,647 1,115,082
Distribution Expenses 534,436 464,902
Transfer Agent Fees 474,150 447,515
Administrative Fees 45,489 37,877
Custodian Fees and Expenses 32,209 23,003
Directors' Fees and Expenses 15,369 17,666
Professional Fees and Expenses 22,782 25,188
Registration Fees and Expenses 53,309 64,433
Reports to Shareholders 100,017 65,197
Other Expenses 11,598 14,940
===========================================================================================
TOTAL EXPENSES 2,572,006 2,275,803
Fees and Expenses Paid Indirectly (19,312) (11,494)
===========================================================================================
NET EXPENSES 2,552,694 2,264,309
===========================================================================================
NET INVESTMENT INCOME 4,115,972 4,062,659
===========================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities 11,521,099 16,103,608
Foreign Currency Transactions (36,322) (443,603)
===========================================================================================
Total Net Realized Gain 11,484,777 15,660,005
===========================================================================================
Change in Net Appreciation (Depreciation) of:
Investment Securities 17,694,385 1,850,574
Foreign Currency Transactions (4,123) 502,422
===========================================================================================
Total Net Appreciation 17,690,262 2,352,996
===========================================================================================
NET GAIN ON INVESTMENT SECURITIES AND
FOREIGN CURRENCY TRANSACTIONS 29,175,039 18,013,001
===========================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 33,291,011 $ 22,075,660
===========================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS (continued)
Industrial Income Fund
PERIOD YEAR
ENDED ENDED
MAY 31 JULY 31
- -------------------------------------------------------------------------------------------
1999 1998
(Note 1)
INVESTMENT INCOME
INCOME
Dividends $ 64,351,574 $ 74,376,469
Interest 68,888,161 85,307,820
Foreign Taxes Withheld (323,716) (412,846)
===========================================================================================
TOTAL INCOME 132,916,019 159,271,443
===========================================================================================
EXPENSES
Investment Advisory Fees 20,935,050 23,205,917
Distribution Expenses 11,062,360 12,301,096
Transfer Agent Fees 5,936,040 6,122,313
Administrative Fees 672,908 748,034
Custodian Fees and Expenses 472,521 587,418
Directors' Fees and Expenses 215,200 275,362
Professional Fees and Expenses 156,354 155,252
Registration Fees and Expenses 84,962 81,025
Reports to Shareholders 771,454 576,551
Other Expenses 163,433 246,709
===========================================================================================
TOTAL EXPENSES 40,470,282 44,299,677
Fees and Expenses Absorbed by Investment Adviser (2,813) (10,930)
Fees and Expenses Paid Indirectly (472,424) (440,841)
===========================================================================================
NET EXPENSES 39,995,045 43,847,906
===========================================================================================
NET INVESTMENT INCOME 92,920,974 115,423,537
===========================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities 329,753,499 563,831,147
Foreign Currency Transactions 13,913 6,583
===========================================================================================
Total Net Realized Gain 329,767,412 563,837,730
===========================================================================================
Change in Net Appreciation of Investment Securities 45,742,780 232,218,236
===========================================================================================
NET GAIN ON INVESTMENT SECURITIES AND
FOREIGN CURRENCY TRANSACTIONS 375,510,192 796,055,966
===========================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 468,431,166 911,479,503
===========================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS (continued)
Total Return Fund
PERIOD YEAR
ENDED ENDED
MAY 31 JULY 31
- -------------------------------------------------------------------------------------------
1999
(Note 1)
INVESTMENT INCOME
INCOME
Dividends $ 34,843,500 $ 35,209,430
Interest 45,227,801 51,559,742
Foreign Taxes Withheld (521,884) (725,548)
===========================================================================================
TOTAL INCOME 79,549,417 86,043,624
===========================================================================================
EXPENSES
Investment Advisory Fees 13,059,957 13,926,522
Distribution Expenses 1,862,388 101,656
Transfer Agent Fees 3,425,993 3,767,444
Administrative Fees 355,556 367,796
Custodian Fees and Expenses 261,034 283,390
Directors' Fees and Expenses 100,103 83,603
Professional Fees and Expenses 75,008 251,231
Registration Fees and Expenses 225,035 173,135
Reports to Shareholders 131,727 114,919
Other Expenses 85,180 76,138
===========================================================================================
TOTAL EXPENSES 19,581,981 19,145,834
===========================================================================================
Fees and Expenses Absorbed by Investment Adviser (374,435) (197,490)
Fees and Expenses Paid Indirectly (281,869) (302,628)
===========================================================================================
NET EXPENSES 18,925,677 18,645,716
===========================================================================================
NET INVESTMENT INCOME 60,623,740 67,397,908
===========================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES
Net Realized Gain on:
Investment Securities 26,815,297 86,019,724
Foreign Currency Transactions 1,475 2,958
===========================================================================================
Total Net Realized Gain 26,816,772 86,022,682
===========================================================================================
Change in Net Appreciation of Investment Securities 450,426,456 (79,067,445)
===========================================================================================
NET GAIN ON INVESTMENT SECURITIES AND
FOREIGN CURRENCY TRANSACTIONS 477,243,228 6,955,237
===========================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 537,866,968 $ 74,353,145
===========================================================================================
</TABLE>
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
Balanced Fund
<TABLE>
<CAPTION>
PERIOD YEAR YEAR
ENDED ENDED ENDED
MAY 31 JULY 31 JULY 31
- ------------------------------------------------------------------------------------------------------
1999 1998 1997
(Note 1)
<S> <C> <C> <C>
OPERATIONS
Net Investment Income $ 4,115,972 $ 4,062,659 $ 3,268,902
Net Realized Gain on Investment Securities and
Foreign Currency Transactions 11,484,777 15,660,005 12,406,672
Change in Net Appreciation of Investment Securities
and Foreign Currency Transactions 17,690,262 2,352,996 19,416,347
======================================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS 33,291,011 22,075,660 35,091,921
======================================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (4,105,886) (4,196,252) (3,256,031)
Net Realized Gain on Investment Securities and
Foreign Currency Transactions (10,135,428) (17,002,689) (7,920,456)
======================================================================================================
TOTAL DISTRIBUTIONS (14,241,314) (21,198,941) (11,176,487)
======================================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 225,239,324 158,521,941 157,332,062
Reinvestment of Distributions 13,792,246 20,128,818 10,886,903
======================================================================================================
239,031,570 178,650,759 168,218,965
Amounts Paid for Repurchases of Shares (149,866,318) (124,824,681) (145,279,529)
======================================================================================================
NET INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 89,165,252 53,826,078 22,939,436
======================================================================================================
TOTAL INCREASE IN NET ASSETS 108,214,949 54,702,797 46,854,870
NET ASSETS
Beginning of Period 216,623,518 161,920,721 115,065,851
======================================================================================================
End of Period (Including Accumulated
Undistributed Net Investment Income of
$41,340, $14,553 and $148,050, respectively) $ 324,838,467 $ 216,623,518 $ 161,920,721
======================================================================================================
-----------------------------------------------------
FUND SHARE TRANSACTIONS
Shares Sold 14,063,692 10,124,221 10,958,657
Shares Issued from Reinvestment of Distributions 888,456 1,391,923 779,085
======================================================================================================
14,952,148 11,516,144 11,737,742
Shares Repurchased (9,382,609) (7,941,260) (10,136,122)
======================================================================================================
NET INCREASE IN FUND SHARES 5,569,539 3,574,884 1,601,620
======================================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
Industrial Income Fund
PERIOD YEAR YEAR
ENDED ENDED ENDED
MAY 31 JUNE 30 JUNE 30
- ------------------------------------------------------------------------------------------------------
1999 1998 1997
(Note 1)
OPERATIONS
Net Investment Income $ 92,920,974 $ 115,423,537 $ 108,311,903
Net Realized Gain on Investment Securities
and Foreign Currency Transactions 329,767,412 563,837,730 372,025,901
Change in Net Appreciation of Investment Securities
and Foreign Currency Transactions 45,742,780 232,218,236 550,539,412
======================================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS 468,431,166 911,479,503 1,030,877,216
======================================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (93,998,246) (115,239,239) (108,045,224)
In Excess of Net Investment Income 0 (34,577) 0
Net Realized Gain on Investment Securities and
Foreign Currency Transactions (451,708,873) (487,553,284) (283,864,499)
======================================================================================================
TOTAL DISTRIBUTIONS (545,707,119) (602,827,100) (391,909,723)
======================================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 543,178,456 796,227,427 688,098,414
Reinvestment of Distributions 512,402,591 566,171,643 369,552,898
======================================================================================================
1,055,581,047 1,362,399,070 1,057,651,312
Amounts Paid for Repurchases of Shares (1,214,003,411) (1,164,991,454) (1,292,480,001)
======================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS FROM
FUND SHARE TRANSACTIONS (158,422,364) 197,407,616 (234,828,689)
======================================================================================================
TOTAL INCREASE (DECREASE) IN NET ASSETS (235,698,317) 506,060,019 404,138,804
NET ASSETS
Beginning of Period 5,080,734,626 4,574,674,607 4,170,535,803
======================================================================================================
End of Period (Including Accumulated
Undistributed Net Investment Income
(Distributions in Excess) of $169,190,
$1,232,549 and ($184,298), respectively) $ 4,845,036,309 $5,080,734,626 $4,574,674,607
======================================================================================================
----------------------------------------------
FUND SHARE TRANSACTIONS
Shares Sold 35,119,662 49,736,211 49,408,506
Shares Issued from Reinvestment of Distributions 35,057,399 38,238,701 27,312,058
======================================================================================================
70,177,061 87,974,912 76,720,564
Shares Repurchased (78,498,469) (72,818,140) (93,580,782)
======================================================================================================
NET INCREASE (DECREASE) IN FUND SHARES (8,321,408) 15,156,772 (16,820,218)
======================================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
Total Return Fund
PERIOD YEAR YEAR
ENDED ENDED ENDED
MAY 31 AUGUST 31 AUGUST 31
- ------------------------------------------------------------------------------------------------------
1999 1998 1997
(Note 1)
OPERATIONS
Net Investment Income $ 60,623,740 $ 67,397,908 $ 44,496,579
Net Realized Gain on Investment Securities and
Foreign Currency Transactions 26,816,772 86,022,682 20,361,309
Change in Net Appreciation of Investment Securities 450,426,456 (79,067,445) 269,713,544
======================================================================================================
NET INCREASE IN NET ASSETS FROM OPERATIONS 537,866,968 74,353,145 334,571,432
======================================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (60,756,140) (67,353,840) (44,405,999)
In Excess of Net Investment Income (18,228) 0 0
Net Realized Gain on Investment Securities and
Foreign Currency Transactions (77,274,029) (34,772,560) (4,314,901)
=====================================================================================================
TOTAL DISTRIBUTIONS (138,048,397) (102,126,400) (48,720,900)
======================================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 1,164,725,715 1,412,738,595 997,370,885
Reinvestment of Distributions 136,764,996 100,609,294 47,962,510
======================================================================================================
1,301,490,711 1,513,347,889 1,045,333,395
Amounts Paid for Repurchases of Shares (843,579,726) (770,152,733) (517,740,980)
======================================================================================================
NET INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 457,910,985 743,195,156 527,592,415
=====================================================================================================
TOTAL INCREASE IN NET ASSETS 857,729,556 715,421,901 813,442,947
NET ASSETS
Beginning of Period 2,561,016,006 1,845,594,105 1,032,151,158
======================================================================================================
End of Period (Including Accumulated Undistributed
(Distributions in Excess of) Net Investment
Income of ($24,737), $132,400 and $106,017,
respectively) $ 3,418,745,562 $ 2,561,016,006 $ 1,845,594,105
======================================================================================================
------------------------------------------------
FUND SHARE TRANSACTIONS
Shares Sold 37,304,581 46,622,819 39,163,785
Shares Issued from Reinvestment of Distributions 4,385,847 3,448,941 1,844,859
======================================================================================================
41,690,428 50,071,760 41,008,644
Shares Repurchased (27,040,483) (25,589,174) (20,216,862)
======================================================================================================
NET INCREASE IN FUND SHARES 14,649,945 24,482,586 20,791,782
======================================================================================================
</TABLE>
See Notes to Financial Statements
<PAGE>
INVESCO Notes to fiancial statements - INVESCO Combination Stock &
Bond Funds, Inc.
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Combination
Stock & Bond Funds, Inc. (formerly known as INVESCO Flexible Funds, Inc.,
formerly known as INVESCO Multiple Asset Funds, Inc.) (the "Fund") is
incorporated in Maryland and presently consists of three separate Funds:
Balanced Fund, Industrial Income Fund and Total Return Fund. On August 4, 1998,
the board of directors of the Fund approved a name change to INVESCO Combination
Stock & Bond Funds, Inc. The Fund's fiscal year-end was changed from July 31 to
May 31. Effective July 30, 1999, INVESCO Industrial Income Fund's name will
change to INVESCO Equity Income Fund.
On May 28, 1999, shareholders of the Industrial Income and Total Return Funds
approved an Agreement and Plan of Reorganization and Liquidation whereby
Industrial Income Fund, formerly INVESCO Industrial Income Fund, Inc., and Total
Return Fund, formerly part of INVESCO Value Trust, (collectively, the "Old
Funds"), were reorganized into the Fund, effective May 31, 1999.
The business and operations of the Old Funds were assumed and carried on by the
Fund without any change in investment objectives or policies. As part of the
reorganization, the Industrial Income Fund's and the Total Return Fund's fiscal
year-end were changed from June 30 and August 31, respectively, to May 31. The
investment objectives of the Fund's are: To achieve a high total return on
investment through capital appreciation and current income for Balanced and
Total Return Funds; and to seek the best possible current income for Industrial
Income Fund. The Fund is registered under the Investment Company Act of 1940
(the "Act") as a diversified, open-end management investment company.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
A. SECURITY VALUATION -- Equity securities traded on national securities
exchanges or in the over-the-counter market are valued at the last sales price
in the market where such securities are primarily traded. If last sales prices
are not available, securities are valued at the highest closing bid price
obtained from one or more dealers making a market for such securities or by a
pricing service approved by the Fund's board of directors.
Debt securities are valued at evaluated bid prices as determined by a pricing
service approved by the Fund's board of directors. If evaluated bid prices are
not available, debt securities are valued by averaging the bid prices obtained
from one or more dealers making a market for such securities.
Foreign securities are valued at the closing price on the principal stock
exchange on which they are traded. In the event that closing prices are not
available for foreign securities, prices will be obtained from the principal
stock exchange at or prior to the close of the New York Stock Exchange. Foreign
currency exchange rates are determined daily prior to the close of the New York
Stock Exchange.
If market quotations or pricing service valuations are not readily available,
securities are valued at fair value as determined in good faith under procedures
established by the Fund's board of directors.
Short-term securities are stated at amortized cost (which approximates market
value) if maturity is 60 days or less at the time of purchase, or market value
if maturity is greater than 60 days.
<PAGE>
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.
B. REPURCHASE AGREEMENTS -- Repurchase agreements held by the Fund are fully
collateralized by U.S. Government securities and such collateral is in the
possession of the Fund's custodian. The collateral is evaluated daily to ensure
its market value exceeds the current market value of the repurchase agreements
including accrued interest. In the event of default on the obligation to
repurchase, the Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. In the event of default or
bankruptcy by the other party to the agreement, realization and/or retention of
the collateral or proceeds may be subject to legal proceedings.
C. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Security transactions
are accounted for on the trade date and dividend income is recorded on the ex
dividend date. Certain dividends from foreign securities will be recorded as
soon as the Fund is informed of the dividend if such information is obtained
subsequent to the ex dividend date. Interest income, which may be comprised of
stated coupon rate, market discount, original issue discount and amortized
premium, is recorded on the accrual basis. Income and expenses on foreign
securities are translated into U.S. dollars at rates of exchange prevailing when
accrued. Discounts and premiums on debt securities purchased are amortized over
the life of the respective security as adjustments to interest income. Cost is
determined on the specific identification basis. The cost of foreign securities
is translated into U.S. dollars at the rates of exchange prevailing when such
securities are acquired.
The Fund may have elements of risk due to investments in foreign issuers located
in a specific country. Such investments may subject the Fund to additional risks
resulting from future political or economic conditions and/or possible
impositions of adverse foreign governmental laws or currency exchange
restrictions. Net realized and unrealized gain or loss from investment
securities includes fluctuations from currency exchange rates and fluctuations
in market value.
The Fund's use of short-term forward foreign currency contracts may subject it
to certain risks as a result of unanticipated movements in foreign exchange
rates. The Fund does not hold short-term forward foreign currency contracts for
trading purposes. The Fund may hold foreign currency in anticipation of settling
foreign security transactions and not for investment purposes.
Investments in securities of governmental agencies may only be guaranteed by the
respective agency's limited authority to borrow from the U.S. Government and may
not be guaranteed by the full faith and credit of the U.S. Government.
D. FEDERAL AND STATE TAXES -- The Fund has complied, and continues to comply,
with the provisions of the Internal Revenue Code applicable to regulated
investment companies and, accordingly, has made or intends to make sufficient
distributions of net investment income and net realized capital gains, if any,
to relieve it from all federal and state income taxes and federal excise taxes.
Balanced and Total Return Funds incurred and elected to defer post-October 31
currency losses of $33 and $15,770, respectively, to the year ended May 31,
2000. 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 period ended May 31, 1999, 18.17% for Balanced Fund, 34.47% for
Industrial Income Fund and 42.78% for Total Return Fund qualified for the
dividends received deduction available to the Fund's corporate shareholders.
Investment income received from foreign sources may be subject to foreign
withholding taxes. Dividend and interest income is shown gross of foreign
withholding taxes in the accompanying financial statements.
<PAGE>
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions
to shareholders are recorded by the Fund on the ex dividend/distribution date.
The Fund distributes net realized capital gains, if any, to its shareholders at
least annually, if not offset by capital loss carryovers. Income distributions
and capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for mortgage-backed
securities, market discounts, amortized premiums, foreign currency transactions,
nontaxable dividends, net operating losses and expired capital loss
carryforwards.
For the period ended May 31, 1999, the effects of such differences were as
follows:
ACCUMULATED
ACCUMULATED UNDISTRIBUTED
UNDISTRIBUTED NET REALIZED
NET GAIN ON
INVESTMENT INVESTMENT PAID-IN
FUND INCOME SECURITIES CAPITAL
- --------------------------------------------------------------------------------
Balanced Fund $ 16,701 $ 59 $ (16,760)
Industrial Income Fund 13,913 (13,913) 0
Total Return Fund (6,509) 21,093 (14,584)
Net investment income, net realized gains and net assets were not affected.
F. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund enters into short-term
forward foreign currency contracts in connection with planned purchases or sales
of securities as a hedge against fluctuations in foreign exchange rates pending
the settlement of transactions in foreign securities. A forward foreign currency
contract is an agreement between contracting parties to exchange an amount of
currency at some future time at an agreed upon rate. These contracts are
marked-to-market daily and the related appreciation or depreciation of the
contracts is presented in the Statement of Assets and Liabilities. Any realized
gain or loss incurred by the Fund upon the sale of securities is included in the
Statement of Operations.
G. EXPENSES -- Each of the Funds bears expenses incurred specifically on its
behalf and, in addition, each Fund bears a portion of general expenses, based on
the relative net assets of each Fund.
Under an agreement between each Fund and the Fund's Custodian, agreed upon
Custodian Fees and Expenses are reduced by credits granted by the Custodian from
any temporarily uninvested cash. Similarly, Distribution Fees and Transfer Agent
Fees may be 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 period ended May 31, 1999, Fees and Expenses Paid Indirectly consisted
of the following:
CUSTODIAN FEES DISTRIBUTION TRANSFER
FUND AND EXPENSES FEES AGENT FEES
- --------------------------------------------------------------------------------
Balanced Fund $ 19,312 $ 0 $ 0
Industrial Income Fund 472,424 0 0
Total Return Fund 160,277 64,979 56,613
<PAGE>
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 Funds, IFG receives an investment advisory fee which is accrued
daily at the applicable rate and paid monthly. The fee is based on the annual
rate of each Fund's average net assets as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------------------------------
$700 $2 $4 $6
$0 TO $350 TO MILLION BILLION BILLION BILLION OVER
$350 $700 TO $2 TO $4 $6 $8 $8
MILLION MILLION BILLION BILLION BILLION BILLION BILLION
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balanced Fund(b) 0.60% 0.55% 0.50% 0.45%(a) 0.40%(a) 0.375%(a) 0.35%(a)
Industrial Income Fund(c) 0.60% 0.55% 0.50% 0.45% 0.40%(a) 0.375%(a) 0.35%(a)
AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------------------------------
$500 $1 $2 $4 $6
$0 TO MILLION BILLION BILLION BILLION BILLION OVER
$500 TO $1 TO $2 TO $4 TO $6 TO $8 $8
MILLION BILLION BILLION BILLION BILLION BILLION BILLION
- -------------------------------------------------------------------------------------------------------------
Total Return Fund(d) 0.75% 0.65% 0.50% 0.45%(a) 0.40%(a) 0.375%(a) 0.35%(a)
</TABLE>
(a) Effective May 13, 1999, these breakpoints became contractual.
(b) Prior to May 13, 1999, IFG voluntarily agreed to waive the portion of its
fee which exceeded 0.45% of average net assets from $2 billion to $4
billion, 0.40% of average net assets from $4 billion to $5 billion, 0.375%
on average net assets from $5 billion to $6 billion and 0.35% on average net
assets in excess of $6 billion.
(c) Prior to May 13, 1999, IFG agreed to waive the portion of its fee which
exceeded 0.40% of average net assets from $4 billion to $5 billion, and
voluntarily agreed to waive the portion of its fees which exceeded 0.375% on
average net assets from $5 billion to $6 billion and 0.35% on average net
assets in excess of $6 billion.
(d) Prior to May 13, 1999, IFG voluntarily agreed to waive the portion of its
fee which exceeded 0.45% of average net assets in excess of $2 billion.
In accordance with a Sub-Advisory Agreement between IFG and INVESCO Capital
Management, Inc. ("ICM"), an affiliate of IFG, investment decisions of Total
Return Fund are made by ICM. Fees for such sub-advisory services are paid by
IFG.
A plan of distribution pursuant to Rule 12b-1 of the Act (the "Plan") provides
for compensation of marketing and advertising expenditures to INVESCO
Distributors, Inc. ("IDI" or the "Distributor"), a wholly owned subsidiary of
IFG, to a maximum of 0.25% of annual average net assets. For the period ended
May 31, 1999, Balanced, Industrial Income and Total Return Funds paid the
Distributor $516,187, $11,115,878 and $1,542,554, respectively, under the plan
of distribution.
IFG receives a transfer agent fee from each Fund 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 paid 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. Effective May 13, 1999, each Fund
pays IFG an annual fee of $10,000, plus an additional amount computed at an
annual rate of 0.045% of average net assets.
IFG has voluntarily agreed to absorb certain fees and expenses incurred by each
Fund.
<PAGE>
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the period ended May
31, 1999, the aggregate cost of purchases and proceeds from sales of investment
securities (excluding all U.S. Government securities and short-term securities)
were as follows:
FUND PURCHASES SALES
- --------------------------------------------------------------------------------
Balanced Fund $ 294,030,238 $ 233,649,690
Industrial Income Fund 2,122,437,636 2,546,728,655
Total Return Fund 530,998,495 82,035,471
For the period ended May 31, 1999, the aggregate cost of purchases and proceeds
from sales of U.S. Government securities were as follows:
FUND PURCHASES SALES
- --------------------------------------------------------------------------------
Balanced Fund $ 29,395,000 $ 12,468,516
Industrial Income Fund 40,451,641 158,139,059
Total Return Fund 80,703,558 113,125,597
NOTE 4 -- APPRECIATION AND DEPRECIATION. At May 31, 1999, 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:
GROSS GROSS NET
FUND APPRECIATION DEPRECIATION APPRECIATION
- --------------------------------------------------------------------------------
Balanced Fund $ 47,389,321 $ 6,907,009 $ 40,482,312
Industrial Income Fund 1,526,992,065 65,132,415 1,461,859,650
Total Return Fund 822,763,941 55,519,794 767,244,147
NOTE 5-- TRANSACTIONS WITH AFFILIATES. Certain of the Funds' officers and
directors are also officers and directors of IFG, IDI or ICM.
Each Fund has adopted an unfunded defined benefit deferred compensation plan
covering all independent directors of the Fund who will have served as an
independent director for at least five years at the time of retirement. Benefits
under this plan are based on an annual rate equal to 50% of the sum of the
retainer fee at the time of retirement plus the annual meeting fee.
Pension expenses for the period ended May 31, 1999, 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:
UNFUNDED
PENSION ACCRUED PENSION
FUND EXPENSES PENSION COSTS LIABILITY
- --------------------------------------------------------------------------------
Balanced Fund $ 3,575 $ 5,089 $ 13,332
Industrial Income Fund 94,144 229,412 580,422
Total Return Fund 42,195 65,424 161,411
The independent directors have contributed to a deferred fee agreement plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of selected INVESCO
Funds. The deferred amounts may be invested in the shares of any of the INVESCO
Funds.
<PAGE>
NOTE 6 -- LINE OF CREDIT. The Fund has available a Redemption Line of Credit
Facility ("LOC"), from a consortium of national banks, to be used for temporary
or emergency purposes to fund redemptions of investor shares. The LOC permits
borrowings to a maximum of 5% of the Net Assets at Value for Industrial Income
Fund and 10% of the Net Assets at Value for Balanced and Total Return Funds.
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 May 31, 1999,
there were no such borrowings.
NOTE 7 -- ACQUISITION OF INVESCO COMBINATION STOCK & BOND FUNDS, INC. --
MULTI-ASSET ALLOCATION FUND ("TARGET FUND"). On June 11, 1999, Balanced Fund
acquired all the net assets of the Target Fund pursuant to an Agreement and Plan
of Reorganization and Termination approved by the Target Fund shareholders on
May 20, 1999. The acquisition was accomplished by a tax-free exchange of 669,846
shares of Balanced Fund (valued at $11,140,475) for the 989,950 shares of the
Target Fund outstanding on June 11, 1999. The Target Fund's net assets at that
date ($11,140,475) including $866,856 of unrealized appreciation, were combined
with those of Balanced Fund. The aggregate net assets of Balanced Fund and the
Target Fund immediately before the acquisition were $327,886,557 and
$11,140,475, respectively. The net assets of Balanced Fund after the acquisition
were $339,027,032.
----------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
INVESCO Combination Stock and Bond 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 (formerly one
of the portfolios constituting INVESCO Flexible Funds, Inc. which was formerly
known as INVESCO Multiple Asset Funds, Inc.), INVESCO Industrial Income Fund
(formerly INVESCO Industrial Income Fund, Inc.) and INVESCO Total Return Fund
(formerly one of the portfolios constituting INVESCO Value Trust, Inc.),
collectively constituting INVESCO Combination Stock and Bond Funds, Inc.
(hereafter referred to as the "Fund") at May 31, 1999, the results of each of
their operations for each of the periods indicated, the changes in each of their
net assets for each of the periods indicated 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 Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at May 31, 1999 by correspondence with the custodian,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Denver, Colorado
July 6, 1999
<PAGE>
FINANCIAL HIGHLIGHTS
Balanced Fund
(For a Fund Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
PERIOD PERIOD
ENDED ENDED
MAY 31 YEAR ENDED JULY 31 JULY 31
- --------------------------------------------------------------------------------------------------------
1999(a) 1998 1997 1996 1995 1994(b)
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value --
Beginning of Period $ 15.71 $ 15.86 $ 13.36 $ 12.08 $ 10.30 $ 10.00
========================================================================================================
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.24 0.33 0.34 0.37 0.29 0.12
Net Gains on Securities (Both
Realized and Unrealized) 1.73 1.50 3.37 2.12 2.03 0.30
========================================================================================================
TOTAL FROM INVESTMENT
OPERATIONS 1.97 1.83 3.71 2.49 2.32 0.42
========================================================================================================
LESS DISTRIBUTIONS
Dividends from Net
Investment Income 0.24 0.35 0.34 0.37 0.29 0.12
Distributions from Capital
Gains 0.66 1.63 0.87 0.84 0.25 0.00
========================================================================================================
TOTAL DISTRIBUTIONS 0.90 1.98 1.21 1.21 0.54 0.12
========================================================================================================
Net Asset Value --
End of Period $ 16.78 $ 15.71 $ 15.86 $ 13.36 $ 12.08 $ 10.30
========================================================================================================
TOTAL RETURN 13.12%(c) 12.90% 29.27% 20.93% 23.18% 4.16%(c)
RATIOS
Net Assets -- End of Period
($000 Omitted) $324,838 $216,624 $161,921 $115,066 $ 37,224 $ 4,252
Ratio of Expenses to
Average Net Assets(d) 1.21%(e)(f) 1.22%(f) 1.29%(f) 1.29%(f) 1.25% 1.25%(e)
Ratio of Net Investment Income
to Average Net Assets(d) 1.94%(e) 2.18% 2.46% 3.03% 3.12% 2.87%(e)
Portfolio Turnover Rate 100%(c) 108% 155% 259% 255% 61%(c)
</TABLE>
(a) From August 1, 1998 to May 31, 1999, the Fund's current fiscal year end.
(b) From December 1, 1993, commencement of investment operations, to July 31,
1994.
(c) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(d) 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 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 to average net assets would have been
2.41%, 3.03%, 2.77% and (0.25%) (annualized), respectively.
(e) Annualized
(f) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by the
Investment Adviser, which is before any expense offset arrangements.
<PAGE>
FINANCIAL HIGHLIGHTS
Industrial Income Fund
(For a Fund Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
PERIOD
ENDED
MAY 31 YEAR ENDED JULY 30
- ----------------------------------------------------------------------------------------------------------------
1999(a) 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value --
Beginning of Period $ 16.18 $ 15.31 $ 13.21 $ 11.92 $ 11.32 $ 11.53
================================================================================================================
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.30 0.38 0.35 0.41 0.42 0.36
Net Gains on Securities (Both
Realized and Unrealized) 1.19 2.54 3.05 1.53 1.14 0.02
================================================================================================================
TOTAL FROM INVESTMENT
OPERATIONS 1.49 2.92 3.40 1.94 1.56 0.38
================================================================================================================
LESS DISTRIBUTIONS
Dividends from Net
Investment Income(b) 0.31 0.38 0.35 0.41 0.42 0.36
In Excess of Net Investment
Income 0.00 0.00 0.00 0.00 0.00 0.11
Distributions from Capital Gains 1.51 1.67 0.95 0.24 0.54 0.12
================================================================================================================
TOTAL DISTRIBUTIONS 1.82 2.05 1.30 0.65 0.96 0.59
================================================================================================================
Net Asset Value --
End of Period $ 15.85 $ 16.18 $ 15.31 $ 13.21 $ 11.92 $ 11.32
================================================================================================================
TOTAL RETURN 10.31%(d) 20.55% 27.33% 16.54% 14.79% 3.24%
RATIOS
Net Assets -- End of Period
($000 Omitted) $4,845,036 $5,080,735 $4,574,675 $4,170,536 $4,009,609 $3,913,322
Ratio of Expenses to Average
Net Assets(c) 0.90%(e)(f) 0.90%(e) 0.95%(e) 0.93%(e) 0.94% 0.92%
Ratio of Net Investment Income
to Average Net Assets(c) 2.10%(f) 2.35% 2.54% 3.17% 3.61% 3.11%
Portfolio Turnover Rate 47%(d) 58% 47% 63% 54% 56%
</TABLE>
(a) From July 1, 1998 to May 31, 1999, the Fund's current fiscal year end.
(b) Distributions in excess of net investment income for the year ended June
30, 1998 aggregated less than $0.01 on a per share basis.
(c) Various expenses of the Fund were voluntarily absorbed by IFG for the
period ended May 31, 1999 and for the years ended June 30, 1998, 1997,1996,
1995 and 1994. If such expenses had not been voluntarily absorbed, ratio of
expenses to average net assets would have been 0.91% (annualized), 0.90%,
0.98%, 0.96%, 0.97% and 0.95%, respectively, and ratio of net investment
income to average net assets would have been 2.09% (annualized), 2.35%,
2.51%, 3.14%, 3.58% and 3.08%, respectively.
(d) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(e) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
(f) Annualized
<PAGE>
FINANCIAL HIGHLIGHTS
Total Return Fund
(For a Fund Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
PERIOD
ENDED
MAY 31 YEAR ENDED AUGUST 31
- --------------------------------------------------------------------------------------------------------
1999(a) 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value --
Beginning of Period $ 28.16 $ 27.77 $ 22.60 $ 20.95 $ 18.54 $ 18.27
========================================================================================================
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.60 0.83 0.77 0.73 0.72 0.69
Net Gains on Securities (Both
Realized and Unrealized) 5.03 0.87 5.26 1.78 2.46 0.60
========================================================================================================
TOTAL FROM INVESTMENT
OPERATIONS 5.63 1.70 6.03 2.51 3.18 1.29
========================================================================================================
LESS DISTRIBUTIONS
Dividends from Net
Investment Income 0.60 0.83 0.77 0.73 0.72 0.60
In Excess of Net Investment
Income(b) 0.00 0.00 0.00 0.00 0.00 0.09
Distributions from Capital Gains 0.82 0.48 0.09 0.13 0.05 0.17
In Excess of Capital Gains 0.00 0.00 0.00 0.00 0.00 0.16
========================================================================================================
TOTAL DISTRIBUTIONS 1.42 1.31 0.86 0.86 0.77 1.02
========================================================================================================
Net Asset Value --
End of Period $ 32.37 $ 28.16 $ 27.77 $ 22.60 $ 20.95 $ 18.54
========================================================================================================
TOTAL RETURN 20.27%(c) 6.02% 27.01% 12.06% 17.54% 7.22%
RATIOS
Net Assets -- End of Period
($000 Omitted) $3,418,746 $2,561,016 $1,845,594 $1,032,151 $ 563,468 $ 292,765
Ratio of Expenses to Average
Net Assets(d) 0.83%(e)(f) 0.79%(e) 0.86%(e) 0.89%(e) 0.95% 0.96%
Ratio of Net Investment Income
to Average Net Assets(d) 2.61%(f) 2.82% 3.11% 3.44% 3.97% 3.31%
Portfolio Turnover Rate 7%(c) 17% 4% 10% 30% 12%
</TABLE>
(a) From September 1, 1998 to May 31, 1999, the Fund's current fiscal year end.
(b) Distributions in excess of net income for the period ended May 31, 1999 and
the year ended August 31, 1995, aggregated less than $0.01 on a per share
basis.
(c) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(d) Various expenses of the Fund were voluntarily absorbed by IFG from
September 1, 1998 to May 12, 1999 and for the year ended August 31, 1998.
If such expenses had not be voluntarily absorbed, ratio of expenses to
average net assets would have been 0.84% (annualized) and 0.80%,
respectively, and ratio of net investment income to average net assets
would have been 2.60% (annualized) and 2.81%, respectively.
(e) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Advisor, if applicable, which is before any expense offset
arrangements.
(f) Annualized
<PAGE>
OTHER INFORMATION
UNAUDITED
Balanced Fund
On May 20, 1999, a special meeting of the shareholders of the Fund was held at
which the ten directors identified below were elected. The selection of
PricewaterhouseCoopers LLP as independent accountants (Proposal 1) and the
approval of changes to the fundamental investment restrictions identified below
(Proposal 2) were ratified. The following is a report of the votes cast:
<TABLE>
<CAPTION>
WITHHELD/
NOMINEE/PROPOSAL FOR AGAINST ABSTAIN TOTAL
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Charles W. Brady 8,591,598 0 223,165 8,814,763
Fred A. Deering 8,593,898 0 220,865 8,814,763
Mark H. Williamson 8,596,817 0 217,946 8,814,763
Dr. Victor L. Andrews 8,596,817 0 217,946 8,814,763
Bob R. Baker 8,596,817 0 217,946 8,814,763
Lawrence H. Budner 8,598,057 0 216,706 8,814,763
Dr. Wendy Lee Gramm 8,598,057 0 216,706 8,814,763
Kenneth T. King 8,598,057 0 216,706 8,814,763
John W. McIntyre 8,598,057 0 216,706 8,814,763
Dr. Larry Soll 8,598,057 0 216,706 8,814,763
Proposal 1 8,504,078 58,318 252,366 8,814,762
Proposal 2
Modification of Fundamental
Investment Restrictions on:
a --Issuer diversification 7,160,769 372,050 1,281,944 8,814,763
b --Borrowing and adoption
of non-fundamental restriction
on borrowing 7,160,769 372,050 1,281,944 8,814,763
c --Industry concentration and
adoption of non-fundamental
restriction in industry
concentration 7,160,769 372,050 1,281,944 8,814,763
d --Real estate investments 7,160,769 372,050 1,281,944 8,814,763
e --Investing in commodities 7,160,769 372,050 1,281,944 8,814,763
f --Loans 7,160,769 372,050 1,281,944 8,814,763
g --Underwriting 7,160,769 372,050 1,281,944 8,814,763
h --Investing in another
investment company and
adoption of non-fundamental
policy regarding investing in
securities issued by other
investment companies 7,160,769 372,050 1,281,944 8,814,763
Adoption of Fundamental
Investment Restrictions on:
i --Issuance of senior securities 7,160,769 372,050 1,281,944 8,814,763
</TABLE>
<PAGE>
OTHER INFORMATION (CONTINUED)
UNAUDITED
Industrial Income Fund
On May 28, 1999, a special meeting of the shareholders of the Fund was held at
which the ten directors identified below were elected. The selection of
PricewaterhouseCoopers LLP as independent accountants (Proposal 1), the approval
of changes to the fundamental investment restrictions identified below (Proposal
2), the approval of an Agreement and Plan of Conversion and Termination
providing for the conversion of INVESCO Industrial Income Fund, formerly INVESCO
Industrial Income Fund, Inc. (the "Company"), to a separate series of INVESCO
Combination Stock & Bond Funds, Inc. (Proposal 3) and the amendment to the
Articles of Restatement of the Articles of Incorporation of the Company
(Proposal 4) were ratified. On July 9, 1999, a special meeting of the
shareholders of the Fund will be held at which the amendment to the Bylaws of
the Company will be voted on. The following is a report of the votes cast:
<TABLE>
<CAPTION>
WITHHELD/
NOMINEE/PROPOSAL FOR AGAINST ABSTAIN TOTAL
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Charles W. Brady 192,383,631 0 11,638,081 204,021,712
Fred A. Deering 192,600,717 0 11,420,995 204,021,712
Mark H. Williamson 192,423,642 0 11,598,070 204,021,712
Dr. Victor L. Andrews 192,653,310 0 11,368,402 204,021,712
Bob R. Baker 192,698,104 0 11,323,608 204,021,712
Lawrence H. Budner 192,850,552 0 11,171,160 204,021,712
Dr. Wendy Lee Gramm 192,771,989 0 11,249,723 204,021,712
Kenneth T. King 192,611,501 0 11,410,211 204,021,712
John W. McIntyre 192,649,042 0 11,372,670 204,021,712
Dr. Larry Soll 192,724,997 0 11,296,715 204,021,712
Proposal 1 192,540,280 2,276,660 9,204,771 204,021,711
Proposal 2
Modification of Fundamental
Investment Restrictions on:
a -- Issuance of senior
securities 168,231,973 14,880,580 20,909,159 204,021,712
b --Investing in commodities 168,078,954 15,033,599 20,909,159 204,021,712
c --Real estate investments 168,302,318 14,810,235 20,909,159 204,021,712
d --Investing in another
investment company 168,158,066 14,954,487 20,909,159 204,021,712
e --Issuer diversification 168,216,610 14,895,943 20,909,159 204,021,712
f --Underwriting 168,292,626 14,819,927 20,909,159 204,021,712
g --Loans 168,166,636 14,945,917 20,909,159 204,021,712
h --Industry concentration and
adoption of non-fundamental
restriction on industry
concentration 168,283,786 14,828,767 20,909,159 204,021,712
Elimination of Fundamental
Investment Restrictions on:
i -- Investing in companies for
the purpose of exercising
control or management 168,256,167 14,856,386 20,909,159 204,021,712
<PAGE>
OTHER INFORMATION (CONTINUED)
WITHHELD/
NOMINEE/PROPOSAL FOR AGAINST ABSTAIN TOTAL
- ------------------------------------------------------------------------------------------------------
Industrial Income Fund (continued)
j -- Investing in illiquid securities
and adoption of non-
fundamental restriction on
investing in illiquid securities 168,070,479 15,042,074 20,909,159 204,021,712
k -- Fund ownership of securities
also owned by directors and
officers of Industrial Income
Fund or its investment adviser 168,187,975 14,924,578 20,909,159 204,021,712
Proposal 3 173,392,285 11,906,188 18,723,239 204,021,712
Proposal 4
Elimination from Articles of
Fundamental Investment
Restrictions on:
a -- Short sales and margin
purchases and adoption of
non-fundamental restriction
on short sales and margin
purchases 169,548,429 13,451,199 21,022,084 204,021,712
b --Borrowing, modification of
fundamental restriction on
borrowing, and adoption of
non-fundamental restriction
on borrowing 169,503,838 13,495,790 21,022,084 204,021,712
c --Joint trading activities 169,665,303 13,334,325 21,022,084 204,021,712
</TABLE>
<PAGE>
OTHER INFORMATION (CONTINUED)
UNAUDITED
Total Return Fund
On May 28, 1999, a special meeting of the shareholders of the Fund was held at
which the ten directors identified below were elected. The selection of
PricewaterhouseCoopers LLP as independent accountants (Proposal 1), the approval
of changes to the fundamental investment restrictions identified below (Proposal
2) and the approval of an Agreement and Plan of Conversion and Termination
providing for the conversion of Total Return Fund from a separate series of
INVESCO Value Trust to a separate series of INVESCO Combination Stock & Bond
Funds, Inc. (Proposal 3) were ratified. The following is a report of the votes
cast:
<TABLE>
<CAPTION>
WITHHELD/
NOMINEE/PROPOSAL FOR AGAINST ABSTAIN TOTAL
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Charles W. Brady 57,957,786 0 2,154,843 60,112,629
Fred A. Deering 57,957,061 0 2,155,568 60,112,629
Mark H. Williamson 57,962,748 0 2,149,881 60,112,629
Dr. Victor L. Andrews 57,962,145 0 2,150,484 60,112,629
Bob R. Baker 57,964,069 0 2,148,560 60,112,629
Lawrence H. Budner 57,963,282 0 2,149,347 60,112,629
Dr. Wendy Lee Gramm 57,965,605 0 2,147,024 60,112,629
Kenneth T. King 57,961,278 0 2,151,351 60,112,629
John W. McIntyre 57,967,202 0 2,145,427 60,112,629
Dr. Larry Soll 57,967,686 0 2,144,943 60,112,629
Proposal 1 58,063,212 145,773 1,903,642 60,112,627
Proposal 2
Modification of Fundamental
Investment Restrictions on:
a -- Industry concentration and
adoption of certain non-
fundamental restrictions 40,713,435 11,013,579 8,385,615 60,112,629
b --Issuer diversification 40,713,435 11,013,579 8,385,615 60,112,629
c --Underwriting securities 40,715,228 11,011,786 8,385,615 60,112,629
d --Borrowing and adoption of
non-fundamental policy on
borrowing 40,713,435 11,013,579 8,385,615 60,112,629
e --Issuance of senior securities 40,715,228 11,011,786 8,385,615 60,112,629
f --Real estate investments 40,715,228 11,011,786 8,385,615 60,112,629
g --Investing in commodities 40,713,692 11,013,322 8,385,615 60,112,629
h --Loans 40,712,896 11,014,118 8,385,615 60,112,629
i --Investing in another
investment company and
adoption of non-fundamental
investment policy regarding
investment in securities issued
by other investment companies 40,714,690 11,012,324 8,385,615 60,112,629
<PAGE>
OTHER INFORMATION (CONTINUED)
WITHHELD/
NOMINEE/PROPOSAL FOR AGAINST ABSTAIN TOTAL
- ------------------------------------------------------------------------------------------------------
Total Return Fund (continued)
Elimination of Fundamental
Investment Restrictions on:
j -- Investing in companies for
the purpose of exercising
control or management 40,713,435 11,013,579 8,385,615 60,112,629
k --Mortgaging, pledging or
hypothecating securities 40,715,228 11,011,786 8,385,615 60,112,629
l --Short sales and margin
purchases and adoption of
non-fundamental restriction
on short sales and margin
purchases 40,713,153 11,013,861 8,385,615 60,112,629
m --Investing in illiquid securities
and adoption of non-
fundamental restriction on
investing in illiquid securities 40,712,896 11,014,118 8,385,615 60,112,629
Proposal 3 53,661,749 589,115 5,861,765 60,112,629
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INVESCO Family of Funds
Newspaper
Fund Name Fund Code Ticker Symbol Abbreviation
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
International
International Blue Chip 09 IIBCX ItlBlChp
Pacific Basin 54 FPBSX PcBas
European 56 FEURX Europ
Latin American Growth 34 IVSLX LtnAmerGr
- --------------------------------------------------------------------------------------------------------------------
Sector
Energy 50 FSTEX Enrgy
Financial Services 57 FSFSX FinSvc
Gold 51 FGLDX Gold
Health Sciences 52 FHLSX HlthSc
Leisure 53 FLISX Leisur
Realty 42 IVSRX Realty
Technology-Class II 55 FTCHX Tech
Utilities 58 FSTUX Util
Worldwide Communications 39 ISWCX WldCom
(as of 7/30/99, Telecommunications) (as of 8/1/99 Telecomm)
- --------------------------------------------------------------------------------------------------------------------
Stock
Growth & Income 21 IVGIX Gro&Inc
INVESCO Endeavor 61 IVENX Endeavor
Blue Chip Growth 10 FLRFX BlChpGro
Dynamics 20 FIDYX Dynm
Small Company Growth 60 FIEGX SmCoGth
Value Equity 46 FSEQX ValEq
S&P 500 Index Fund-Class II 23 ISPIX SP500II
- --------------------------------------------------------------------------------------------------------------------
Combination Stock & Bond
Industrial Income 15 FIIIX IndInc
(as of 7/30/99, Equity Income) (as of 8/1/99, EquityInc)
Total Return 48 FSFLX TotRtn
Balanced 71 IMABX Bal
- --------------------------------------------------------------------------------------------------------------------
Bond
U.S. Government Securities 32 FBDGX USGvt
Select Income 30 FBDSX SelInc
High Yield 31 FHYPX HiYld
Tax-Free Bond (formerly,
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
Money Market Reserve 96 IMRXX INVESCOMMR
Tax-Exempt Reserve 95 ITTXX INVESCOTTE
</TABLE>
FOR MORE INFORMATION ABOUT ANY OF THE INVESCO FUNDS, INCLUDING MANAGEMENT FEES
AND EXPENSES, PLEASE CALL US AT 1-800-525-8085 FOR A PROSPECTUS. READ IT
CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
<PAGE>
[INVESCO ICON]
INVESCO
YOU SHOULD
KNOW WHAT
INVESCO KNOWS(TM)
We're easy to stay in touch with:
Investor Services: 1-800-525-8085
PAL(R), your personal account line: 1-800-424-8085
On the World Wide Web: www.invesco.com
In Denver, visit one of our convenient Investor Centers:
Cherry Creek,
3003 East Third Avenue, Suite 1
Denver Tech Center,
7800 East Union Avenue,
Lobby Level
INVESCO Distributors, Inc.,(SM) Distributor
Post Office Box 173706
Denver, CO 80217-3706
This information must be preceded or accompanied by a current prospectus.
AAW 9012 7/99
