-----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, RpnzL95EpzJgl0MoN39d4nLs558XHg/9sdwApAe9WOV2vJ/R+ViWAzelBsreuQOQ 6ujLZpNHpnm+ROODTiAAcg== 0000789940-98-000014.txt : 19981026 0000789940-98-000014.hdr.sgml : 19981026 ACCESSION NUMBER: 0000789940-98-000014 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980831 FILED AS OF DATE: 19981023 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INVESCO GROWTH FUND INC /CO/ 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: 98729996 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 N-30D 1 ANNUAL REPORT August 31, 1998 INVESCO GROWTH FUND INVESCO YOU SHOULD KNOW WHAT INVESCO KNOWS. (TM) Market Overview September 1998 What a difference a year makes. In the summer of 1997, market pundits were concerned that the Federal Reserve Board would have to raise interest rates to cool an overheating economy. Now, speculation has intensified that the Fed will continue to lower interest rates to address worldwide liquidity problems and keep the U.S. economy growing in the face of a global slowdown brought about by the emerging market currency crisis. But what has really changed in the last 12 months? o Market psychology for equities has deteriorated. After more than seven years of a bull market producing strong returns with limited volatility, equity markets experienced two painful corrections in the last 12 months. In fact, August 1998 was the worst month for equities since October 1987, as many equity indexes experienced declines over 15%. o Corporate earnings have slowed in 1998, as the strong dollar and slower global growth have made it difficult for many U.S. companies to sell their products overseas. In addition, intense global competition has kept prices in check -- making it difficult for companies to enhance earnings by increasing prices. o Inflation appears to be comatose. Although real wages are starting to increase, declining commodity prices and a flood of cheaper products from the world's emerging markets have decreased consumer prices and reduced the threat of inflation. o Interest rates have declined significantly. The implied yield on a 30- year U.S. government bond reached 7.17% in April 1997, and the economy appeared on the verge of overheating. But, as the Asian currency crisis intensified, a flight to quality occurred in the fixed-income market in the fall of 1997, and the yield on the 30-year bond dropped to 5.97% by year-end. As the global currency turmoil continued in 1998, the yield on the 30-year bond decreased and ended September at 4.95%. Interest rates are presently at levels not seen in the last three decades. The next six to 12 months may be difficult for equity investors. Although the economy still appears to be in good shape fundamentally, the emerging market turmoil has spread from Asia to Russia and is attempting to infect Latin America - -- which is a large trade partner of the U.S. Investors should be prepared for continued volatility for the rest of 1998. However, once the turmoil passes, it could create enormous opportunities for U.S. companies to increase their global presence. For fixed-income investors, global currency problems will continue to exert deflationary pressures on the U.S. economy, increasing the potential for lower interest rates. With inflation hibernating, the risks associated with owning fixed-income securities have decreased -- especially for high quality obligations. Recent market volatility is not necessarily indicative of a long-term downturn in the equity markets. For the patient investor with a long time horizon, stocks have offered the best opportunities to accumulate wealth. But if you are an investor who is uncomfortable with wide price swings, it may be a good time to evaluate your financial goals and adjust your portfolio accordingly. Remember that one of the best ways to reduce volatility is through diversification. INVESCO Growth Fund INVESCO Growth Fund Average Annual Total Return as of 8/31/98(2) 1 Year 13.42% ----------------------------------- 5 Years 14.95% ----------------------------------- 10 Years 15.82% ----------------------------------- For the one-year period ended 8/31/98, INVESCO Growth Fund achieved a total return of 13.42%, outperforming the one-year figure of 8.08% for the S&P 500 broad market index. (Of course, past performance is not a guarantee of future results.)(1)(2) INVESCO Growth Fund received the prestigious five-star rating for risk-adjusted performance by Morningstar for the three-year period ended 8/31/98, among 2,603 domestic equity funds. For both the five-year and 10-year periods ended 8/31/98, the fund received four stars among 1,520 and 710 domestic equity funds, respectively.(3) The following line graph illustrates the growth of the S&P 500 compared to the value of a $10,000 investment in INVESCO Growth Fund, plus reinvested dividends and capital gain distributions, for the ten years ended 8/31/98. The chart and other total return figures cited reflect the fund's operating expenses. However, the index does not have expenses, which would, of course, have lowered its performance.(2) Graph: This line graph represents a comparison of the value of a $10,000 investment in the INVESCO 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 8/31/98. Review & Outlook A Discussion with Portfolio Manager Trent May Have you made any major changes in the portfolio in the last 12 months? We have made only minor adjustments over the past year. We continue to keep the portfolio relatively concentrated, focusing on 30 to 40 names. In this investment environment, we feel it's crucial not to dilute our best investment ideas by having too many securities in the portfolio. What sectors have produced the strongest gains for the fund? Although we use a bottom-up approach to select securities for the portfolio, the fund focuses on sectors or industries that we feel can generate above-average growth rates for the next three to five years. We prefer markets or industries which leadership is in a few hands, with a bias toward market-leading companies with strong, defensible positions. Presently, we believe that some of the best investment opportunities are in the following areas: o Consumer cyclicals o Financial services o Health care o Technology During the last 12 months, pharmaceuticals and retailers produced the strongest returns for the fund. Large-capitalization pharmaceutical companies are benefiting from an improved regulatory environment and strong new product pipelines. The Federal Drug Administration (FDA) has dramatically cut the approval time for new drugs. This has improved the profitability of large-cap pharmaceuticals, since new drugs sales typically drive their revenue and earnings growth. Not only are new drugs coming to the market sooner, but a better-educated consumer is increasing the demand for these new products. One of our favorite investments in the pharmaceutical industry remains Pfizer Inc. Pfizer Inc. is a market-leading pharmaceutical with a strong new product pipeline. In addition, Pfizer's new drug for sexual dysfunction, Viagra, is one of the fastest-selling new drugs of all time, which should enhance earnings for years to come. Retailers who are benefiting from continued strength in the domestic economy also produced strong returns for the fund. Many retailers import goods from the world's emerging markets and sell these products domestically. As global currencies have devalued, many retailers' operating margins have improved. Wal-Mart remains one of our favorite retailers. Wal-Mart is the leading discount retailer in the world. Not only is it a great business, but management continues to enhance shareholder value, and the firm is increasing its presence in international markets as well. Any disappointments in the last 12 months? The technology sector experienced extreme volatility, as the currency crisis in the emerging markets dampened investors' enthusiasm towards these companies. However, we believe the long-term prospects for this sector are bright, and we will continue to invest in companies with proprietary technology and market-leading positions -- like Microsoft Corp. What's your outlook for the next six to 12 months? I think the equity markets will continue to experience extreme volatility on a day-to-day basis, as international problems influence the market. Within this environment, stock selectivity remains crucial and we will continue to concentrate the portfolio on 30 to 40 names. For long-term investors, I believe the outlook for market leading, large-capitalization growth com-panies is positive and the fund will stay fully invested. Graph: Portfolio Composition by Sector or Industry This bar chart refelects the allocation of the Growth Fund's portfolio by value of net assets in basic materials, capital goods, communications services, consumer cyclicals, consumer staples, energy, finance, health care, technology and transportation. Fund Management INVESCO Growth Fund is managed by Vice President Trent E. May. He received a BS from the Florida Institute of Technology and an MBA from Rollins College. Before joining INVESCO in 1996, Trent was a senior equity manager/equity analyst with Munder Capital Management. He is a Chartered Financial Analyst. Senior Vice President Timothy J. Miller is co-manager of the fund, and heads the INVESCO Growth Team. He received his MBA from the University of Missouri, and a BSBA from St. Louis University. A 20-year veteran of the investment business, he is a Chartered Financial Analyst. Before joining INVESCO in 1992, Tim was an analyst and portfolio manager with Mississippi Valley Advisors. (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 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. (3)Morningstar proprietary rankings reflect historical risk-adjusted performance and are subject to change every month. Ratings are calculated for the fund's three-, five-, and 10-year average annual returns (based on available track records) in excess of 90 day Treasury bill returns. The top 10% of funds in an investment category receive 5 stars; the next 22.5%, 4 stars; and the next 35%, 3 stars. Ten Largest Common Stock Holdings -- Growth Fund August 31, 1998 Description Value - ------------------------------------------------------------------------------- Philip Morris $ 34,449,078 Lilly (Eli) & Co 34,105,850 Wal-Mart Stores 33,540,375 SBC Communications 33,096,100 Fannie Mae 32,401,305 Johnson & Johnson 32,098,800 Microsoft Corp 31,851,250 Bell Atlantic 30,503,612 Procter & Gamble 30,209,850 Merck & Co 29,865,500 Composition of holdings is subject to change. ----------------------------------- Statement of Investment Securities--Growth Fund August 31, 1998 - ------------------------------------------------------------------------------- % Description Shares Value - ------------------------------------------------------------------------------- 99.57 COMMON STOCKS 1.84 AUTOMOBILES Ford Motor 312,850 $13,765,400 - ------------------------------------------------------------------------------- 0.86 BANKS BankAmerica Corp 100,300 6,425,469 - ------------------------------------------------------------------------------- 3.51 BEVERAGES Coca-Cola Co 402,800 26,232,350 - ------------------------------------------------------------------------------- 0.96 BROADCASTING CBS Corp 276,400 7,186,400 - ------------------------------------------------------------------------------- 2.49 CHEMICALS du Pont (E I) de Nemours 322,400 18,598,450 - ------------------------------------------------------------------------------- 12.09 COMPUTER RELATED Cisco Systems(a) 55,700 4,560,437 Compaq Computer 463,740 12,955,736 Dell Computer(a) 69,800 6,980,000 EMC Corp(a) 118,250 5,343,422 Edwards (J D) & Co(a) 116,000 4,698,000 International Business Machines 130,550 14,703,194 Microsoft Corp(a) 332,000 31,851,250 Wind River Systems(a) 248,660 9,324,750 - ------------------------------------------------------------------------------- 90,416,789 - ------------------------------------------------------------------------------- 3.79 ELECTRICAL EQUIPMENT General Electric 354,100 28,328,000 - ------------------------------------------------------------------------------- 3.53 ELECTRONICS -- SEMICONDUCTOR Intel Corp 244,000 17,369,750 Maxim Integrated Products(a) 327,550 9,007,625 - ------------------------------------------------------------------------------- 26,377,375 - ------------------------------------------------------------------------------- 3.03 ENTERTAINMENT Disney (Walt) Co 826,200 22,668,862 - ------------------------------------------------------------------------------- 5.54 FINANCIAL Associates First Capital Class A 152,503 9,016,740 Fannie Mae 570,320 32,401,305 - ------------------------------------------------------------------------------- 41,418,045 - ------------------------------------------------------------------------------- 20.72 HEALTH CARE DRUGS -- PHARMACEUTICALS Bristol-Myers Squibb 300,000 29,362,500 Johnson & Johnson 465,200 32,098,800 Lilly (Eli) & Co 520,700 34,105,850 Merck & Co 257,600 29,865,500 Pfizer Inc 317,250 29,504,250 - ------------------------------------------------------------------------------- 154,936,900 - ------------------------------------------------------------------------------- 4.98 HOUSEHOLD PRODUCTS Colgate-Palmolive Co 97,400 7,024,975 Procter & Gamble 394,900 30,209,850 - ------------------------------------------------------------------------------- 37,234,825 - ------------------------------------------------------------------------------- 7.08 INSURANCE American International Group 356,200 27,538,713 Travelers Group 572,650 25,411,344 - ------------------------------------------------------------------------------- 52,950,057 - ------------------------------------------------------------------------------- 4.64 OIL & GAS RELATED Exxon Corp 379,900 24,859,706 Royal Dutch Petroleum New York Registry 1.25 Gldr Shrs 247,400 9,834,150 - ------------------------------------------------------------------------------- 34,693,856 - ------------------------------------------------------------------------------- 0.63 PERSONAL CARE Gillette Co 114,500 4,708,813 - ------------------------------------------------------------------------------- 1.51 RAILROADS Kansas City Southern Industries 343,900 11,305,713 - ------------------------------------------------------------------------------- 4.48 RETAIL Wal-Mart Stores 570,900 33,540,375 - ------------------------------------------------------------------------------- 0.84 SERVICES America Online(a) 77,200 6,325,575 - ------------------------------------------------------------------------------- 3.94 TELECOMMUNICATIONS -- LONG DISTANCE AT&T Corp 587,500 29,448,438 - ------------------------------------------------------------------------------- 8.50 TELEPHONE Bell Atlantic 691,300 30,503,612 SBC Communications 870,950 33,096,100 - ------------------------------------------------------------------------------- 63,599,712 - ------------------------------------------------------------------------------- 4.61 TOBACCO Philip Morris 828,850 34,449,078 - ------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $715,720,295) 744,610,482 - ------------------------------------------------------------------------------- 0.43 PREFERRED STOCKS 0.43 COMPUTER RELATED SAP AG Sponsored ADR Representing 1/12 Pfd Shrs (Cost $4,241,759) 77,325 3,237,984 - ------------------------------------------------------------------------------- 100.00 TOTAL INVESTMENT SECURITIES AT VALUE (Cost $719,962,054) (Cost for Income Tax Purposes $722,606,357) $ 747,848,466 =============================================================================== (a) Security is non-income producing. See Notes to Financial Statements Statement of Assets and Liabilities -- Growth Fund August 31, 1998 ASSETS Investment Securities at Value (Cost $719,962,054) $ 747,848,466 Receivables: Investment Securities Sold 11,051,332 Fund Shares Sold 1,603,336 Dividends 783,017 Prepaid Expenses and Other Assets 82,306 - ------------------------------------------------------------------------------- TOTAL ASSETS 761,368,457 - ------------------------------------------------------------------------------- LIABILITIES Payables: Custodian 5,625,483 Distributions to Shareholders 336,459 Investment Securities Purchased 5,004,015 Fund Shares Repurchased 2,408,873 Accrued Distribution Expenses 168,680 Accrued Expenses and Other Payables 86,303 - ------------------------------------------------------------------------------- TOTAL LIABILITIES 13,629,813 - ------------------------------------------------------------------------------- Net Assets at Value $ 747,738,644 =============================================================================== NET ASSETS Paid-in Capital(a) $ 637,615,246 Accumulated Undistributed Net Investment Income 34,771 Accumulated Undistributed Net Realized Gain on Investment Securities and Foreign Currency Transactions 82,202,215 Net Appreciation of Investment Securities 27,886,412 - ------------------------------------------------------------------------------- Net Assets at Value $ 747,738,644 =============================================================================== Net Asset Value, Offering and Redemption Price per Share $ 5.15 =============================================================================== (a) The Fund has 200 million authorized shares of common stock, par value of $0.01 per share, of which 145,122,757 were outstanding at August 31, 1998. See Notes to Financial Statements Statement of Operations -- Growth Fund Year Ended August 31, 1998 INVESTMENT INCOME INCOME Dividends $ 11,263,873 Interest 148,388 Foreign Taxes Withheld (108,534) - -------------------------------------------------------------------------------- TOTAL INCOME 11,303,727 - -------------------------------------------------------------------------------- EXPENSES Investment Advisory Fees 4,561,574 Distribution Expenses 2,027,117 Transfer Agent Fees 1,160,513 Administrative Fees 131,098 Custodian Fees and Expenses 108,512 Directors' Fees and Expenses 49,585 Professional Fees and Expenses 59,734 Registration Fees and Expenses 100,310 Reports to Shareholders 180,511 Other Expenses 49,665 - -------------------------------------------------------------------------------- TOTAL EXPENSES 8,428,619 Fees and Expenses Paid Indirectly (93,130) - -------------------------------------------------------------------------------- NET EXPENSES 8,335,489 - -------------------------------------------------------------------------------- NET INVESTMENT INCOME 2,968,238 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net Realized Gain on: Investment Securities 104,055,439 Foreign Currency Transactions 45,981 - -------------------------------------------------------------------------------- Total Net Realized Gain 104,101,420 - -------------------------------------------------------------------------------- Change in Net Appreciation of Investment Securities (9,504,119) - -------------------------------------------------------------------------------- NET GAIN ON INVESTMENTS 94,597,301 - -------------------------------------------------------------------------------- Net Increase in Net Assets from Operations $ 97,565,539 ================================================================================ See Notes to Financial Statements Statement of Changes in Net Assets -- Growth Fund Year Ended August 31 - -------------------------------------------------------------------------------- 1998 1997 OPERATIONS Net Investment Income $ 2,968,238 $ 1,584,172 Net Realized Gain on Investment Securities and Foreign Currency Transactions 104,101,420 185,903,395 Change in Net Appreciation of Investment Securities (9,504,119) (23,243,958) - -------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS FROM OPERATIONS 97,565,539 164,243,609 - -------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS Net Investment Income (2,912,112) (1,500,483) Net Realized Gain on Investment Securities and Foreign Currency Transactions (187,061,864) (84,751,427) - -------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS (189,973,976) (86,251,910) - -------------------------------------------------------------------------------- FUND SHARE TRANSACTIONS Proceeds from Sales of Shares 547,827,536 647,469,283 Reinvestment of Distributions 168,012,124 77,405,695 - -------------------------------------------------------------------------------- 715,839,660 724,874,978 Amounts Paid for Repurchases of Shares (584,913,034) (690,372,256) - -------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS 130,926,626 34,502,722 - -------------------------------------------------------------------------------- Total Increase in Net Assets 38,518,189 112,494,421 NET ASSETS Beginning of Period 709,220,455 596,726,034 - -------------------------------------------------------------------------------- End of Period (Including Accumulated Undistributed (Distributions in Excess of) Net Investment Income of $34,771 and ($24,778), respectively) $ 747,738,644 $ 709,220,455 ================================================================================ ----------------------------------------- FUND SHARE TRANSACTIONS Shares Sold 94,746,511 113,639,331 Shares Issued from Reinvestment of Distributions 34,540,804 14,903,327 - -------------------------------------------------------------------------------- 129,287,315 128,542,658 Shares Repurchased (101,276,736) (121,110,949) - -------------------------------------------------------------------------------- Net Increase in Fund Shares 28,010,579 7,431,709 ================================================================================ See Notes to Financial Statements Notes to Financial Statements -- Growth Fund NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Growth Fund, Inc. (the "Fund") is incorporated in Maryland. 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 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 foreign investments may subject the Fund to additional risks resulting from future political or economic conditions and/or possible impositions of adverse foreign governmental laws or currency exchange restrictions. Net realized and unrealized gain or loss from investment securities includes fluctuations from currency exchange rates and fluctuations in market value. The 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. Of the ordinary income distributions declared for the year ended August 31, 1998, 2.18% 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. 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. For the year ended August 31, 1998, the Fund reclassified $841 from accumulated undistributed net realized gain on investment securities to accumulated undistributed net investment income and reclassified $2,582 from paid-in capital to accumulated undistributed net investment income. Net investment income, net realized gains and net assets were not affected. 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, Distribution Expenses and Transfer Agent Fees are reduced by credits earned by the Fund from security brokerage transactions under certain broker/service arrangements with third parties. Such credits are included in Fees and Expenses Paid Indirectly in the Statement of Operations. For the year ended August 31, 1998, Fees and Expenses Paid Indirectly consisted of $84,119 included in Custodian Fees and Expenses, $8,818 included in Distribution Expenses and $193 included in Transfer Agent Fees. 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. 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 a Sub-Advisory Agreement between IFG and INVESCO Trust Company ("ITC"), a wholly owned subsidiary of IFG, investment decisions of the Fund were made by ITC. Fees for such sub-advisory services are paid by IFG. Effective February 4, 1998, such responsibilities were transferred to IFG. A plan of distribution pursuant to Rule 12b-1 of the Act provided for compensation of marketing and advertising expenditures to IFG (the "Distributor") to a maximum of 0.25% of annual average net assets. For the year ended August 31, 1998, the Fund paid the Distributor $2,009,378 under the plan of distribution. Effective September 29,1997, INVESCO Distributors, Inc. ("IDI"), a wholly owned subsidiary of IFG, replaced IFG as Distributor. 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 year ended August 31, 1998, the aggregate cost of purchases and proceeds from sales of investment securities (excluding all U.S. Government securities and short-term securities) were $1,212,888,644 and $1,269,513,941, respectively. There were no purchases or sales of U.S. Government securities. NOTE 4 -- APPRECIATION AND DEPRECIATION. At August 31, 1998, the gross appreciation of securities in which there was an excess of value over tax cost amounted to $65,931,427 and the gross depreciation of securities in which there was an excess of tax cost over value amounted to $40,689,318, resulting in net appreciation of $25,242,109. 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 deferred compensation plan covering all independent directors of the Fund who will have served as an independent director for at least five years at the time of retirement. Benefits under this plan were based on an annual rate of 40% of the retainer fee at the time of retirement. As of July 1, 1998, benefits are based on an annual rate of 50% of the sum of the retainer fee at the time of retirement plus the annual meeting fee. Pension expenses for the year ended August 31, 1998, included in Directors' Fees and Expenses in the Statement of Operations were $13,129. Unfunded accrued pension costs of $28,806 and pension liability of $66,734 are included in Prepaid Expenses and Accrued Expenses, respectively, in the Statement of Assets and Liabilities. NOTE 6 -- LINE OF CREDIT. The Fund has available a Redemption Line of Credit Facility ("LOC"), from a consortium of national banks, to be used for temporary or emergency purposes to fund redemptions of investor shares. The LOC permits borrowings to a maximum of 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 August 31, 1998, there were no such borrowings. Financial Highlights -- Growth Fund (For a Fund Share Outstanding Throughout Each Period)
Year Ended August 31 - ----------------------------------------------------------------------------------------------------------- 1998 1997 1996 1995 1994 PER SHARE DATA Net Asset Value-- Beginning of Period $ 6.06 $ 5.44 $ 5.33 $ 5.34 $ 5.28 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS Net Investment Income 0.02 0.01 0.03 0.05 0.03 Net Gains on Securities (Both Realized and Unrealized) 0.69 1.39 0.95 0.49 0.11 - ----------------------------------------------------------------------------------------------------------- Total from Investment Operations 0.71 1.40 0.98 0.54 0.14 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS Dividends from Net Investment Income(a) 0.02 0.01 0.03 0.05 0.03 Distributions from Capital Gains 1.60 0.77 0.84 0.50 0.05 - ----------------------------------------------------------------------------------------------------------- Total Distributions 1.62 0.78 0.87 0.55 0.08 - ----------------------------------------------------------------------------------------------------------- Net Asset Value-- End of Period $ 5.15 $ 6.06 $ 5.44 $ 5.33 $ 5.34 =========================================================================================================== TOTAL RETURN 13.42% 28.14% 20.23% 12.05% 2.52% RATIOS Net Assets-- End of Period ($000 Omitted) $747,739 $ 709,220 $ 596,726 $ 501,285 $ 488,411 Ratio of Expenses to Average Net Assets 1.04%(b) 1.07%(b) 1.05%(b) 1.06% 1.03% Ratio of Net Investment Income to Average Net Assets 0.37% 0.22% 0.64% 1.07% 0.47% Portfolio Turnover Rate 153% 286% 207% 111% 63% (a) Distributions in excess of net investment income for the year ended August 31, 1995, aggregated less than $0.01 on a per share basis. (b) Ratio is based on Total Expenses of the Fund, which is before any expense offset arrangements.
Report of Independent Accountants To the Board of Directors and Shareholders of INVESCO Growth Fund, 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 Growth Fund, Inc. (the "Fund") at August 31, 1998, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 1998 by correspondence with the custodian, provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Denver, Colorado September 30, 1998 INVESCO INVESCO Distributors, Inc. Distributor Post Office Box 173706 Denver, Colorado 80217-3706 1-800-525-8085 PAL(R): 1-800-424-8085 www.invesco.com In Denver, visit one of our convenient Investor Centers: Cherry Creek, 155-B Fillmore Street Denver Tech Center, 7800 East Union Avenue, Lobby Level This information must be preceded or accompanied by a current prospectus. -----END PRIVACY-ENHANCED MESSAGE-----