-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GwLSG/Ai4N9JOAc68lPM+/tUkH5Ogy8giHbVUhm1vUaZkChtY7OvbvxZ7nwiBYF9 x9E96KwUF57mRtxhFf1i/A== 0000110042-99-000003.txt : 19990430 0000110042-99-000003.hdr.sgml : 19990430 ACCESSION NUMBER: 0000110042-99-000003 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990228 FILED AS OF DATE: 19990429 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INVESCO GROWTH FUNDS INC CENTRAL INDEX KEY: 0000110042 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 840202353 STATE OF INCORPORATION: MD FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-00352 FILM NUMBER: 99603716 BUSINESS ADDRESS: STREET 1: 7800 E UNION AVE STREET 2: STE 800 CITY: DENVER STATE: CO ZIP: 80237 BUSINESS PHONE: 303-930-6300 MAIL ADDRESS: STREET 1: P.O. BOX 173706 CITY: DENVER STATE: CO ZIP: 80217-3706 FORMER COMPANY: FORMER CONFORMED NAME: INVESCO GROWTH FUND INC /CO/ DATE OF NAME CHANGE: 19950914 N-30D 1 KNOWLEDGE DISCIPLINE SERVICE CHOICE YOU SHOULD KNOW WHAT INVESCO KNOWS (TM) INVESCO BLUE CHIP GROWTH FUND (formerly, INVESCO Growth Fund) SEMI- ANNU AL INVESCO SEMIANNUAL REPORT / February 28, 1999 SHAREHOLDERS IN INVESCO BLUE CHIP GROWTH FUND RECENTLY RECEIVED IMPORTANT PROXY INFORMATION. PLEASE BE SURE TO READ THE PROXY CAREFULLY AND VOTE PROMPTLY ON ALL ISSUES. "WE OFTEN TELL CLIENTS THAT WE ARE INTERESTED, NOT IN FINDING STOCKS THAT WILL GROW FROM $10 PER SHARE TO $15 PER SHARE IN THE NEXT SIX MONTHS - BUT RATHER IN FINDING COMPANIES THAT WILL GROW FROM $10 BILLION IN MARKET CAPITALIZATION TO $100 BILLION." (PAGE 3) BLUE CHIP GROWTH FUND AVERAGE ANNUAL TOTAL RETURN, PERIODS ENDED 2/28/99 (2) 6 months 37.22% -------------------------------- 1 year 31.62% -------------------------------- 5 years 20.65% -------------------------------- 10 years 18.89% Graph: This line graph represents a comparison of the value of a $10,000 investment in the INVESCO Blue Chip Growth Fund to the value of a $10,000 investment in the S&P 500 Index, assuming in each case reinvestment of all dividends and capital gain distributions, for the ten year period ended 2/28/99. The line graph illustrates the value of a $10,000 investment, plus reinvested dividends and capital gain distributions, for the 10-year period ended 2/28/99. The chart and other total return figures cited reflect the fund's operating expenses, but the index does not have expenses, which would, of course, have lowered its performance. (Of course, past performance is not a guarantee of future results.) (1)(2) We are pleased to announce that Douglas J. McEldowney has jointed INVESCO Blue Chip Growth Fund as co-manager. Doug will work with lead manager Trent May in directing the portfolio. INVESCO / Semiannual Report / February 1999 Your Fund's Performance: A Report from the Managers - ----------------------------------------------------- Dear Shareholder: We are happy to report that the factors behind the strong performance of INVESCO Blue Chip Growth Fund over the past few years were still in place during these last six months. Low inflation and interest rates, accelerating technological change, and resilient consumer demand have continued to favor the large, leading companies in which we primarily invest. While the global financial turmoil of late last summer certainly affected the fund, most investors eventually determined it did not fundamentally alter these factors. Over the six months ended February 28, 1999, your shares in INVESCO Blue Chip Growth Fund rose 37.22%. This return exceeded that of the S&P 500 Index, which gained 30.27% over the same period. (Of course, past performance is not a guarantee of future results.)(1)(2) Recently, much attention has been focused on the performance of large "growth" company stocks versus those of "value" companies or small firms. Overall, stocks of the largest companies have dramatically outperformed the rest of the market. In some sense, this has reflected investors' concerns over a possible slowdown in the economy, which would leave only the largest, best-performing companies with healthy balance sheets. Indeed, earnings growth has increasingly become concentrated among the largest companies. This attention has also reflected an increasing tendency on the part of some to chase performance by investing in high-flying stocks. A STABLE SET OF IDEAS Neither of these explanations accounts for our strategy, of course. Our focus on large-capitalization companies is long-standing and premised on a relatively stable set of ideas about the nature of a strong investment. Indeed, many stocks have been part of the fund's portfolio for several years. If investing fashions change next year, that will not alter the fundamentals of our strategy. We often tell clients that we are interested, not in finding stocks that will grow from $10 per share to $15 per share in the next six months -- but rather in finding companies that will grow from $10 billion in market capitalization to $100 billion over the next three to five years. Of course, we will not always find them. And the markets may yet again determine that even earnings and revenue growth are not enough to justify a given share price. Yet our long-term track record, we believe, is evidence of the strength of this philosophy. (Of course, past performance is not a guarantee of future results.) A NEW NAME FOR AN OLD STRATEGY To better reflect this approach, as you may have noticed, we have recently changed the name of your fund to INVESCO Blue Chip Growth Fund. The name is indicative of our long-standing commitment to investing in large companies with established positions in their industries, a commitment that we believe will continue to serve shareholders well. We will look forward to reporting to you again in six months. /s/ Trent May Trent E. May Vice President INVESCO / Semiannual Report / January 31, 1999 MOVING FORWARD - -------------------------------------------------------------------------------- A REVIEW & STRATEGY SESSION WITH TRENT MAY Fortune RECENTLY CHARACTERIZED YOU AS A DIVERSIFIED MANAGER WHO IS ENTHUSIASTIC ABOUT TECHNOLOGY COMPANIES. WHAT'S THE SOURCE OF YOUR OPTIMISM? I wouldn't necessarily say that it stems from any particular faith in technology, but rather from a simple acknowledgement that technology is one of the leading growth sectors of the economy. Our approach has always been to identify the growing sectors, learn how the rules are played, and then invest in the companies that appear best equipped to succeed. Of course, technology presents its own particular challenges and opportunities. We're beginning to look at the Internet, for example, but we know we have to tread carefully, because we are just learning the rules. WHAT ARE SOME OF THOSE RULES? One rule that appears vitally important is that an Internet company must enjoy what we call "mindspace," which you might think of as brand equity. Consumers have to possess a strong sense of what the company does and that the firm can be trusted. For example, we have recently taken advantage of some price weakness in Amazon.com, the online bookseller, because it enjoys substantial mindspace. That said, a company like Amazon--as it stands now--cannot be a core position in our fund. It does not yet possess the financial stability of other technology companies like Microsoft, which have dependable, growing earnings. We consider Amazon only a potential growth company, and we'll pay special attention to it going forward because of the heightened downside risks. SPEAKING OF RISKS, WHAT HAZARDS ON THE INVESTMENT HORIZON CONCERN YOU? Primary among them would be any substantial and lasting rise in interest rates. This causes two concerns. First, growing companies are valuable in part because of the earnings they promise to deliver in future years. Inflation and interest rates serve as means of discounting those future earnings; higher interest rates, in other words, mean that future profits are worth less today. Second, growing firms often rely on borrowing to finance their growth. Higher interest rates mean higher debt-servicing costs, which hurt the bottom line. Let me add, though, that the whole market is to some degree reliant on the low rates we are enjoying. DO YOU PLAN TO ADJUST YOUR STRATEGY TO AVOID THESE RISKS? Not significantly, and that is a function of our faith in our core portfolio holdings. Clearly, if we were "momentum" investors trying to make short-term plays on popular stocks, we would be concerned about getting out while the going is good. The advantage of holding industry leaders with solid positions, however, is that they are likely to be doing well five or ten years from now. Interest in them may wane in the short-term, but we would often view that as an opportunity to add to our positions. ------------------------------------------------ Investors should keep in mind that, because the fund is actively managed, holdings will change over time. FUND MANAGEMENT TRENT E. MAY, CFA VICE PRESIDENT TRENT E. MAY IS THE LEAD MANAGER OF BLUE CHIP GROWTH FUND. HE RECEIVED A BA FROM THE FLORIDA INSTITUTE OF TECHNOLOGY AND AN MBA FROM ROLLINS COLLEGE. TRENT BEGAN HIS INVESTMENT CAREER IN 1991, AND JOINED INVESCO IN 1996. HE IS A CHARTERED FINANCIAL ANALYST. TRENT IS ASSISTED BY CO-MANAGER DOUG MCELDOWNEY; THEY ARE MEMBERS OF THE INVESCO GROWTH TEAM, WHICH IS HEADED BY SENIOR VICE PRESIDENT TIMOTHY J. MILLER. MARKET HEADLINES: SEPTEMBER 1998-FEBRUARY 1999 If the last few months of 1998 were a time of healing for financial markets, it was indeed a dramatic recovery--at least for some indexes. The worldwide financial crisis set off in the previous summer by the Russian loan default and other factors persisted through September. Given October's notorious reputation in financial circles, many feared for the worst as we entered that month. Yet beginning in early October, investors began to return to select domestic and overseas markets. Leading the way back were the Federal Reserve Board and other major central banks. A series of interest rate cuts by the banks of most of the industrialized Western nations restored confidence and liquidity to the markets. Many large-company stocks, led by those in sectors such as technology and health care, vaulted back to exceed the highs of the previous spring. Even some Asian markets, most notably South Korea, recovered as well. But had the markets truly healed? Many small-company stocks continued to languish well below their highs. Meanwhile, many foreign markets remained unable to make a clean break upward. Indeed, after experimenting with a recovery, Latin American markets plunged back to new lows following the currency crisis in Brazil. Other pockets of the market experienced nagging pain. The "flight to quality" and interest rate cuts helped the prices of low-risk bonds such as Treasuries, but the high-yield fixed-income market saw buyers evaporate. Commodity prices continued to slide lower, which provided a boon to American consumers while taking a toll on commodity producers such as energy firms. By the beginning of 1999, however, most investors' attention was focused on the remarkable performance of large technology stocks and other favored names. Continuing strong growth in the United States, rapid technological change, and the remarkable absence of inflation appeared an ideal environment for the best positioned firms. A cartoon in THE WALL STREET JOURNAL laid out the equation as many saw it: Alan Greenspan plus the personal computer equals continuing prosperity. 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. (1) THE S&P 500 IS AN UNMANAGED INDEX OF COMMON STOCKS CONSIDERED REPRESENTATIVE OF THE BROAD U.S. EQUITY MARKET, WHILE THE DOW JONES INDUSTRIAL AVERAGE REFLECTS THE PERFORMANCE OF LARGE-CAPITALIZATION STOCKS. (2) TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS FOR THE PERIODS INDICATED. PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT, WHEN REDEEMED, AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN WHEN PURCHASED. TEN LARGEST COMMON STOCK HOLDINGS BLUE CHIP GROWTH FUND FEBRUARY 28, 1999 UNAUDITED DESCRIPTION VALUE - -------------------------------------------------------------------- Microsoft Corp $60,227,148 Citigroup Inc 54,044,419 American International Group 53,723,810 Merck & Co 52,310,190 Pfizer Inc 50,734,587 Lilly (Eli) & Co 49,803,731 Wal-Mart Stores 49,691,538 General Electric 47,557,153 AT&T Corp 46,886,805 Warner-Lambert Co 45,822,969 COMPOSITION OF HOLDINGS IS SUBJECT TO CHANGE. STATEMENT OF INVESTMENT SECURITIES BLUE CHIP GROWTH FUND FEBRUARY 28, 1999 % DESCRIPTION SHARES VALUE UNAUDITED 100.00 COMMON STOCKS 1.15 AUTOMOBILES General Motors 161,925 $13,368,933 =============================================================================== 3.35 BANKS BB&T Corp 207,535 7,860,388 BankAmerica Corp 227,400 14,852,062 US Bancorp 506,075 16,352,548 =============================================================================== 39,064,998 4.72 BEVERAGES Coca-Cola Co 670,200 42,850,912 PepsiCo Inc 324,340 12,203,293 =============================================================================== 55,054,205 2.77 BROADCASTING Clear Channel Communications(a) 338,985 20,339,100 Infinity Broadcasting Class A(a) 504,000 11,970,000 =============================================================================== 32,309,100 % DESCRIPTION SHARES VALUE 2.20 COMMUNICATIONS -- EQUIPMENT & MANUFACTURING Lucent Technologies 206,400 $20,962,500 Nokia Corp Sponsored ADR Representing A Shrs 34,400 4,665,500 =============================================================================== 25,628,000 11.61 COMPUTER RELATED Cisco Systems(a) 232,035 22,695,923 Compaq Computer 487,865 17,197,241 Dell Computer(a) 246,225 19,728,778 International Business Machines 90,550 15,393,500 Microsoft Corp(a) 401,180 60,227,148 =============================================================================== 135,242,590 4.71 ELECTRICAL EQUIPMENT General Electric 474,090 47,557,153 Solectron Corp(a) 163,400 7,301,938 =============================================================================== 54,859,091 5.92 ELECTRONICS -- SEMICONDUCTOR Altera Corp(a) 302,245 14,696,663 Intel Corp 243,510 29,205,981 Maxim Integrated Products(a) 352,775 14,706,308 Micron Technology(a) 179,200 10,326,400 =============================================================================== 68,935,352 1.99 ENTERTAINMENT Disney (Walt) Co 660,275 23,233,427 =============================================================================== 0.89 EQUIPMENT -- SEMICONDUCTOR Lam Research(a) 349,000 10,317,312 =============================================================================== 6.59 FINANCIAL Citigroup Inc 919,905 54,044,419 Fannie Mae 325,630 22,794,100 =============================================================================== 76,838,519 20.9 HEALTH CARE DRUGS-- PHARMACEUTICALS Bristol-Myers Squibb 356,065 44,841,936 Lilly (Eli) & Co 525,980 49,803,731 Merck & Co 639,880 52,310,190 Pfizer Inc 384,535 50,734,587 Warner-Lambert Co 663,500 45,822,969 =============================================================================== 243,513,413 2.98 HOUSEHOLD PRODUCTS Colgate-Palmolive Co 154,350 13,100,456 Procter & Gamble 241,900 21,650,050 =============================================================================== 34,750,506 4.61 INSURANCE American International Group 471,520 $ 53,723,810 =============================================================================== % DESCRIPTION SHARES VALUE 3.74 OIL & GAS RELATED Exxon Corp 472,740 31,466,756 Royal Dutch Petroleum New York Registry 1.25 Gldr Shrs 276,530 12,132,754 =============================================================================== 43,599,510 7.04 RETAIL Amazon.com Inc(a) 64,900 8,315,312 Dayton Hudson 194,095 12,143,068 Home Depot 199,155 11,887,064 Wal-Mart Stores 575,300 49,691,538 =============================================================================== 82,036,982 3.30 SERVICES America Online(a) 432,540 38,469,026 =============================================================================== 5.95 TELECOMMUNICATIONS -- LONG DISTANCE AT&T Corp 570,920 46,886,805 MCI WorldCom(a) 272,200 22,456,500 =============================================================================== 69,343,305 3.61 TELEPHONE SBC Communications 796,580 42,119,168 =============================================================================== 1.97 TOBACCO Philip Morris 585,550 22,909,644 =============================================================================== 100.00 TOTAL INVESTMENT SECURITIES AT VALUE (Cost $883,483,751) (Cost for Income Tax Purposes $890,480,675) $ 1,165,316,891 =============================================================================== (a) Security is non-income producing. See Notes to Financial Statements STATEMENT OF ASSETS AND LIABILITIES BLUE CHIP GROWTH FUND FEBRUARY 28, 1999 UNAUDITED ASSETS Investment Securities at Value (Cost $883,483,751) $ 1,165,316,891 Cash 4,622,003 Receivables: Investment Securities Sold 15,429,782 Fund Shares Sold 1,085,842 Dividends and Interest 956,774 Prepaid Expenses and Other Assets 173,640 =============================================================================== TOTAL ASSETS 1,187,584,932 =============================================================================== LIABILITIES Payables: Investment Securities Purchased 20,621,838 Fund Shares Repurchased 518,377 Accrued Distribution Expenses 231,685 Accrued Expenses and Other Payables 130,314 =============================================================================== TOTAL LIABILITIES 21,502,214 =============================================================================== NET ASSETS AT VALUE $ 1,166,082,718 =============================================================================== NET ASSETS Paid-in Capital(a) $ 837,587,213 Accumulated Undistributed Net Investment Income 458,372 Accumulated Undistributed Net Realized Gain on Investment Securities and Foreign Currency Transactions 46,203,993 Net Appreciation of Investment Securities 281,833,140 =============================================================================== NET ASSETS AT VALUE $ 1,166,082,718 =============================================================================== NET ASSET VALUE, Offering and Redemption Price per Share $6.52 =============================================================================== (a) The Fund has 200 million authorized shares of common stock, par value of $0.01 per share, of which 178,806,874 were outstanding at February 28, 1999. See Notes to Financial Statements STATEMENT OF OPERATIONS BLUE CHIP GROWTH FUND SIX MONTHS ENDED FEBRUARY 28, 1999 UNAUDITED INVESTMENT INCOME INCOME Dividends $ 5,510,572 Interest 194,364 Foreign Taxes Withheld (28,124) =================================================================== TOTAL INCOME 5,676,812 =================================================================== EXPENSES Investment Advisory Fees 2,837,564 Distribution Expenses 1,303,163 Transfer Agent Fees 737,792 Administrative Fees 82,317 Custodian Fees and Expenses 57,804 Directors' Fees and Expenses 27,868 Professional Fees and Expenses 30,551 Registration Fees and Expenses 52,436 Reports to Shareholders 125,404 Other Expenses 70,459 =================================================================== TOTAL EXPENSES 5,325,358 Fees and Expenses Paid Indirectly (72,147) =================================================================== NET EXPENSES 5,253,211 =================================================================== NET INVESTMENT INCOME 423,601 =================================================================== REALIZED AND UNREALIZED GAIN ON INVESTMENT SECURITIES Net Realized Gain on Investment Securities 48,854,516 Change in Net Appreciation of Investment Securities 253,946,728 =================================================================== NET GAIN ON INVESTMENT SECURITIES 302,801,244 =================================================================== NET INCREASE IN NET ASSETS FROM OPERATIONS $ 303,224,845 =================================================================== See Notes to Financial Statements STATEMENT OF CHANGES IN NET ASSETS BLUE CHIP GROWTH FUND Six Months Year Ended Ended February 28 August 31 - -------------------------------------------------------------------------------- 1999 1998 UNAUDITED OPERATIONS Net Investment Income $ 423,601 $ 2,968,238 Net Realized Gain on Investment Securities and Foreign Currency Transactions 48,854,516 104,101,420 Change in Net Appreciation of Investment Securities 253,946,728 (9,504,119) =============================================================================== NET INCREASE IN NET ASSETS FROM OPERATIONS 303,224,845 97,565,539 =============================================================================== DISTRIBUTIONS TO SHAREHOLDERS Net Investment Income 0 (2,912,112) Net Realized Gain on Investment Securities and Foreign Currency Transactions (84,852,738) (187,061,864) =============================================================================== TOTAL DISTRIBUTIONS (84,852,738) (189,973,976) =============================================================================== FUND SHARE TRANSACTIONS Proceeds from Sales of Shares 627,952,161 547,827,536 Reinvestment of Distributions 75,202,308 168,012,124 =============================================================================== 703,154,469 715,839,660 Amounts Paid for Repurchases of Shares (503,182,502) (584,913,034) =============================================================================== NET INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS 199,971,967 130,926,626 =============================================================================== Total Increase in Net Assets 418,344,074 38,518,189 NET ASSETS Beginning of Period 747,738,644 709,220,455 =============================================================================== End of Period (Including Accumulated Undistributed Net Investment Income of $458,372 and $34,771, respectively) $ 1,166,082,718 $ 747,738,644 =============================================================================== ----------------------------------------------------------- FUND SHARE TRANSACTIONS Shares Sold 101,090,863 94,746,511 Shares Issued from Reinvestment of Distributions 12,450,572 34,540,804 =============================================================================== 113,541,435 129,287,315 Shares Repurchased (79,857,318) (101,276,736) =============================================================================== NET INCREASE IN FUND SHARES 33,684,117 28,010,579 =============================================================================== See Notes to Financial Statements INVESCO NOTES TO FINANCIAL STATEMENTS--BLUE CHIP GROWTH FUND UNAUDITED NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Growth Funds, Inc. is incorporated in Maryland and presently consists of Blue Chip Growth Fund (the "Fund") (formerly known as INVESCO Growth Fund, Inc.). The investment objective of the Fund is to seek long-term capital growth. The Fund is registered under the Investment Company Act of 1940 (the "Act") as a diversified, open-end management investment company. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. A. SECURITY VALUATION -- Equity securities traded on national securities exchanges or in the over-the-counter market are valued at the last sales price in the market where such securities are primarily traded. If last sales prices are not available, securities are valued at the highest closing bid price obtained from one or more dealers making a market for such securities or by a pricing service approved by the Fund's board of directors. Foreign securities are valued at the closing price on the principal stock exchange on which they are traded. In the event that closing prices are not available for foreign securities, prices will be obtained from the principal stock exchange at or prior to the close of the New York Stock Exchange. Foreign currency exchange rates are determined daily prior to the close of the New York Stock Exchange. If market quotations or pricing service valuations are not readily available, securities are valued at fair value as determined in good faith under procedures established by the Fund's board of directors. Short-term securities are stated at amortized cost (which approximates market value) if maturity is 60 days or less at the time of purchase, or market value if maturity is greater than 60 days. Assets and liabilities initially expressed in terms of foreign currencies are translated into U.S. dollars at the prevailing market rates as quoted by one or more banks or dealers on the date of valuation. B. 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 the rates of exchange prevailing when accrued. 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. C. FEDERAL AND STATE TAXES -- The Fund has complied, and continues to comply, with the provisions of the Internal Revenue Code applicable to regulated investment companies and, accordingly, has made or intends to make sufficient distributions of net investment income and net realized capital gains, if any, to relieve it from all federal and state income taxes and federal excise taxes. To the extent future capital gains are offset by capital loss carryovers, such gains will not be distributed to shareholders. Dividends paid by the Fund from net investment income and distributions of net realized short-term capital gains are, for federal income tax purposes, taxable as ordinary income to shareholders. Investment income received from foreign sources may be subject to foreign withholding taxes. Dividend and interest income is shown gross of foreign withholding taxes in the accompanying financial statements. D. 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 foreign currency transactions, nontaxable dividends, net operating losses and expired capital loss carryforwards. E. EXPENSES -- Under an agreement between the Fund and the Fund's Custodian, agreed upon Custodian Fees and Expenses are reduced by credits granted by the Custodian from any temporarily uninvested cash. Similarly, Custodian Fees and Expenses and Distribution Expenses are reduced by credits earned by the Fund from security brokerage transactions under a broker/service arrangements with third parties. Such credits are included in Fees and Expenses Paid Indirectly in the Statement of Operations. For the six months ended February 28, 1999, Fees and Expenses Paid Indirectly consisted of $57,595 included in Custodain Fees and Expenses and $14,552 included in Distribution Expenses. NOTE 2 -- INVESTMENT ADVISORY AND OTHER AGREEMENTS. INVESCO Funds Group, Inc. ("IFG") serves as the Fund's investment adviser. As compensation for its services to the Fund, IFG receives an investment advisory fee which is accrued daily at the applicable rate and paid monthly. The fee is based on the annual rate of 0.60% on the first $350 million of average net assets; reduced to 0.55% on the next $350 million of average net assets; and 0.50% on average net assets in excess of $700 million. A plan of distribution pursuant to Rule 12b-1 of the Act provides for compensation of marketing and advertising expenditures to INVESCO Distributors, Inc. ("IDI" or the "Distributor"), a wholly owned subsidiary of IFG, to a maximum of 0.25% of annual average net assets. For the six months ended February 28, 1999, the Fund paid the Distributor $1,225,606 under the plan of distribution. IFG receives a transfer agent fee at an annual rate of $20.00 per shareholder account, or, where applicable, per participant in an omnibus account, per year. IFG may pay such fee for participants in omnibus accounts to affiliates or third parties. The fee is paid monthly at one-twelfth of the annual fee and is based upon the actual number of accounts in existence during each month. In accordance with an Administrative Agreement, the Fund pays IFG an annual fee of $10,000, plus an additional amount computed at an annual rate of 0.015% of average net assets to provide administrative, accounting and clerical services. The fee is accrued daily and paid monthly. NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the six months ended February 28, 1999, the aggregate cost of purchases and proceeds from sales of investment securities (excluding all U.S. Government securities and short-term securities) were $844,869,064 and $730,201,883, respectively. There were no purchases or sales of U.S. Government securities. NOTE 4 -- APPRECIATION AND DEPRECIATION. At February 28, 1999, the gross appreciation of securities in which there was an excess of value over tax cost amounted to $289,389,147 and the gross depreciation of securities in which there was an excess of tax cost over value amounted to $14,552,931, resulting in net appreciation of $274,836,216. NOTE 5 -- TRANSACTIONS WITH AFFILIATES. Certain of the Fund's officers and directors are also officers and directors of IFG or IDI. The Fund has adopted an unfunded defined benefit deferred compensation plan covering all independent directors of the Fund who will have served as an independent director for at least five years at the time of retirement. Benefits under this plan are based on an annual rate equal to 50% of the sum of the retainer fee at the time of retirement plus the annual meeting fee. Pension expenses for the six months ended February 28, 1999, included in Directors' Fees and Expenses in the Statement of Operations were $10,363. Unfunded accrued pension costs of $33,980 and pension liability of $81,464 are included in Prepaid Expenses and Accrued Expenses, respectively, in the Statement of Assets and Liabilities. The independent directors have contributed to a deferred compensation plan, pursuant to which they have deferred receipt of a portion of the compensation which they would otherwise have been paid as directors of selected INVESCO Funds. The deferred amounts may be invested in the shares of any of the INVESCO or Treasurer's Series Trust Funds. NOTE 6 -- LINE OF CREDIT. The Fund has available a Redemption Line of Credit Facility ("LOC"), from a consortium of national banks, to be used for temporary or emergency purposes to fund redemptions of investor shares. The LOC permits borrowings to a maximum of 5% of the Net Assets at Value of the Fund. The Fund agrees to pay annual fees and interest on the unpaid principal balance based on prevailing market rates as defined in the agreement. At February 28, 1999, there were no such borrowings. FINANCIAL HIGHLIGHTS BLUE CHIP GROWTH FUND (FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD) SIX MONTHS ENDED FEBRUARY 28 YEAR ENDED AUGUST 31 - -------------------------------------------------------------------------------- 1999 1998 1997 1996 1995 1994 UNAUDITED PER SHARE DATA Net Asset Value -- Beginning of Period $ 5.15 $6.06 $5.44 $5.33 $5.34 $5.28 ================================================================================ INCOME FROM INVESTMENT OPERATIONS Net Investment Income(a) 0.00 0.02 0.01 0.03 0.05 0.03 Net Gains on Securities (Both Realized and Unrealized) 1.88 0.69 1.39 0.95 0.49 0.11 ================================================================================ Total from Investment Operations 1.88 0.71 1.40 0.98 0.54 0.14 ================================================================================ LESS DISTRIBUTIONS Dividends from Net InvestmentIncome(b) 0.00 0.02 0.01 0.03 0.05 0.03 Distributions from Capital Gains 0.51 1.60 0.77 0.84 0.50 0.05 ================================================================================ TOTAL DISTRIBUTIONS 0.51 1.62 0.78 0.87 0.55 0.08 ================================================================================ Net Asset Value-- End of Period $ 6.52 $5.15 $6.06 $5.44 $5.33 $5.34 ================================================================================ TOTAL RETURN 37.22%(c) 13.42% 28.14% 20.23% 12.05% 2.52% RATIOS Net Assets -- End of Period($000 Omitted) $1,166,083 $747,739 $709,220 $596,726 $501,285 $488,411 Ratio of Expenses to Average Net Assets 0.51%(c)(d) 1.04%(d) 1.07%(d) 1.05%(d) 1.06% 1.03% Ratio of Net Investment Income to Average Net Assets 0.04%(c) 0.37% 0.22% 0.64% 1.07% 0.47% Portfolio Turnover Rate 71%(c) 153% 286% 207% 111% 63% (a)Net Investment Income aggregated less than $0.01 on a per share basis for the six months ended February 28, 1999. (b)Distributions in excess of net investment income for 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)Ratio is based on Total Expenses of the Fund, which is before any expense offset arrangements. INVESCO FAMILY OF FUNDS Newspaper Fund Name Fund Code Ticker Symbol Abbreviation - ------------------------------------------------------------------------------ INTERNATIONAL International Blue Chip 09 IIBCX ItlBlChp International Growth 49 FSIGX IntlGr Emerging Markets 43 * * Asian Growth 41 IVAGX AsianGr Pacific Basin 54 FPBSX PcBas European 56 FEURX Europ European Small Company 37 IVECX EuroSmCo Latin American Growth 34 IVSLX LatinAmGr - ------------------------------------------------------------------------------ SECTOR Energy 50 FSTEX Enrgy Environmental Services 59 FSEVX Envirn Financial Services 57 FSFSX FinSvc Gold 51 FGLDX Gold Health Sciences 52 FHLSX HlthSc Leisure 53 FLISX Leisur Realty 42 IVSRX Realty Technology 55 FTCHX Tech Utilities 58 FSTUX Util Worldwide Capital Goods 38 ISWGX WldCap Worldwide Communications 39 ISWCX WldCom - ------------------------------------------------------------------------------ STOCK Growth & Income 21 IVGIX GRI Growth 10 FLRFX Grwth Dynamics 20 FIDYX Dynm Small Company Growth 60 FIEGX SmCoGth Value Equity 46 FSEQX ValEq Small Company Value 74 IDSCX SmCoVal S&P 500 Index Fund Class II 23 ISPIX SP500II - ------------------------------------------------------------------------------ COMBINATION STOCK & BOND Industrial Income 15 FIIIX IndInc Multi-Asset Allocation 70 IMAAX MulAstAl Total Return 48 FSFLX TotRtn Balanced 71 IMABX Bal - ------------------------------------------------------------------------------ BOND Short-Term Bond 33 INIBX ShTrBd Intermediate Government Bond 47 FIGBX IntGov U.S. Government Securities 32 FBDGX USGvt Select Income 30 FBDSX SelInc High Yield 31 FHYPX HiYld - ------------------------------------------------------------------------------ TAX-EXEMPT Tax-Free Intermediate Bond 36 IVTIX * Tax-Free Long-Term Bond 35 FTIFX TxFre - ------------------------------------------------------------------------------ MONEY MARKET U.S. Government Money Fund 44 FUGXX InvGvtMF Cash Reserves 25 FDSXX InvCshR Tax-Free Money Fund 40 FFRXX InvTaxFree * Not yet available For more complete information, including management fees, expenses, and risks, call or write for a free prospectus. Read it carefully before you invest or send money. 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, 155-B Fillmore Street Denver Tech Center, 7800 East Union Avenue, Lobby Level INVESCO Distributors, Inc.(SM), Distributor Post Office Box 173706 Denver, Colorado 80217-3706 This information must be preceded or accompanied by a current prospectus -----END PRIVACY-ENHANCED MESSAGE-----