-----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, Nzrrmf6ABkvcuA/Vz0GFnnlPcBtU3CKhlae3yoREO5W41VdixG8anlkIjVUAd0hh qEt/r0+dCGUtVe3tqmZfrg== 0000789940-99-000006.txt : 19990429 0000789940-99-000006.hdr.sgml : 19990429 ACCESSION NUMBER: 0000789940-99-000006 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990228 FILED AS OF DATE: 19990428 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INVESCO VALUE TRUST CENTRAL INDEX KEY: 0000789940 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MD FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-04595 FILM NUMBER: 99602815 BUSINESS ADDRESS: STREET 1: 7800 EAST UNION AVE CITY: DENVER STATE: CO ZIP: 80237 BUSINESS PHONE: 8005541156 MAIL ADDRESS: STREET 1: P.O. BOX 173706 CITY: DENVER STATE: CO ZIP: 80217-3706 FORMER COMPANY: FORMER CONFORMED NAME: FINANCIAL SERIES TRUST DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: INVESCO INSTITUTIONAL SERIES TRUST DATE OF NAME CHANGE: 19910117 FORMER COMPANY: FORMER CONFORMED NAME: SHEARWATER EQUITY INC DATE OF NAME CHANGE: 19870810 N-30D 1 KNOWLEDGE DISCIPLINE SERVICE CHOICE YOU SHOULD KNOW WHAT INVESCO KNOWS (TM) INVESCO Value Funds Intermediate Government Bond Fund Total Return Fund Value Equity Fund SEMI- ANNU AL INVESCO SEMIANNUAL REPORT / February 28, 1999 SHAREHOLDERS IN INVESCO INTERMEDIATE GOVERNMENT BOND FUND, TOTAL RETURN FUND AND VALUE EQUITY FUND RECENTLY RECEIVED IMPORTANT PROXY INFORMATION. PLEASE BE SURE TO READ THE PROXY CAREFULLY AND VOTE PROMPTLY ON ALL ISSUES. INTERMEDIATE GOVERNMENT BOND FUND (PAGE 3) AVERAGE ANNUAL TOTAL RETURN, PERIODS ENDED 2/28/99(1) 6 months 1.47% - ------------------------------ 1 year 5.56% - ------------------------------ 5 years 5.77% - ------------------------------ 10 years 7.61% TOTAL RETURN FUND AVERAGE ANNUAL TOTAL RETURN, PERIODS ENDED 2/28/99(1) 6 months 13.05% - ------------------------------- 1 year 6.53% - ------------------------------- 5 years 15.69% - ------------------------------- 10 years 13.89% VALUE EQUITY FUND AVERAGE ANNUAL TOTAL RETURN, PERIODS ENDED 2/28/99(1) 6 months 21.64% - ------------------------------- 1 year 4.55% - ------------------------------- 5 years 18.03% - ------------------------------- 10 years 14.87% Graph: This line graph represents a comparison of the value of a $10,000 investment in the Intermediate Government Bond Fund to the value of a $10,000 investment in the Lehman Government Bond-Intermediate Index, assuming in each case reinvestment of all dividends and capital gain distributions, for the ten year period ended 2/28/99. Graph: This line graph represents a comparison of the value of a $10,000 investment in the Total Return Fund to the value of a $10,000 investment in the Lehman Government/Corporate Bond Index and 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. Graph: This line graph represents a comparison of the value of a $10,000 investment in the Value Equity 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 graphs illustrate the value of a $10,000 investment, plus reinvested dividends and capital gain distributions, for the 10-year period ended 2/28/99. The charts and other total return figures cited reflect the funds' operating expenses, but the indexes do not have expenses, which would, of course, have lowered their performance. (Of course, past performance is not a guarantee of future results.) (1)(2) INTERMEDIATE GOVERNMENT BOND FUND Your Fund's Performance: A Report from the Manager - -------------------------------------------------------------------------------- Dear Shareholder: Our fund turned in a modest gain over the past six months, although it mirrored in reverse the performance of the equity markets. As investors sought haven in low-risk government securities late last summer, our fund moved up strongly. Falling interest rates as a result of monetary easing also helped us considerably. Early this year, however, we surrendered some of these gains as concerns about inflation briefly resurfaced. For the six months ended February 28, 1998, the value of your investment in Intermediate Government Bond Fund rose 1.47%. This can be compared to the Lehman Government Bond-Intermediate Index, which rose 1.63%. (Of course, past performance is not a guarantee of future results.)(1),(2) BETWEEN FLASHING YELLOW AND RED Of course, the largest question for intermediate government bond investors is what will happen with interest rates in the near future. We might say that our gauge for the future direction of rates is somewhere between flashing yellow and red. Although a tight labor market has yet to have an effect on producer prices, the question as to whether this can last becomes more urgent with each passing calendar quarter. Also, the seeming reversal in the world financial situation might well lead the Federal Reserve Board to reconsider its monetary easing last fall. Should these signals move fully into the red, we will seek to reposition the fund without compromising its intermediate-term focus. We will also continue to take advantage of other strategies to defend net asset value while boosting yields. Mortgage-backed securities, for example, have recently offered an attractive premium for the fund. /s/ James Baker James Baker Portfolio Manager - -------------------------------------------------------------------------------- FUND MANAGER JAMES BAKER, CFA JIM BAKER EARNED HIS BA FROM MERCER UNIVERSITY, AND BEFORE JOINING INVESCO WAS ASSOCIATED WITH WILLIS INVESTMENT COUNSEL, MORGAN KEENAN, AND DREXEL BURNHAM LAMBERT. JIM IS ASSISTED BY RALPH H. JENKINS, JR., WHO EARNED A BBC FROM AUBURN UNIVERSITY AND AN MA FROM THE UNIVERSITY OF ALABAMA. RALPH BEGAN HIS INVESTMENT CAREER IN 1969. TOTAL RETURN FUND Your Fund's Performance: A Report from the Manager - ------------------------------------------------------------------------------- Dear Shareholder: The avoidance of risk is the hallmark of our fund, and this past year many investors around the world followed suit. Some emerging markets and small-company investors were swamped by the tide of volatile global markets, while other technology and large-company investors rode the crest to new highs. Shares in Total Return Fund rose 13.05% over the past six months. This return fell in between those of the S&P 500 Index, which rose 30.27%, and the Lehman Government/ Corporate Bond Index, which rose 1.26%. (Of course, past performance is not a guarantee of future results.)(1),(2) THE FLIGHT TO QUALITY As balanced fund managers who invest in both bonds and equities, we hope to profit from upward movements in both asset classes, while using gains in one to offset occasional losses in the other. Usually, we expect our bond portfolio to have relatively modest yet stable returns, and to outperform our stock holdings in years when the major equity indexes move lower. This year, however, our bond portfolio enjoyed quite solid returns. We benefited substantially from the so-called "flight to quality" late last summer, when investors sought haven from financial crisis in secure government bonds. Continually falling interest rates, due to reduced inflationary concerns, also helped our holdings. (Although, again, past performance is no guarantee of future results.) Unfortunately, our stock portfolio did not match this performance, even though some of the most-watched indexes moved dramatically higher. In large part, this was due to our focus on value-oriented stocks in traditional sectors. Because these stocks have low price-to-earnings ratios, we view them as less risky, when chosen properly. Yet in recent months investors have tended to punish companies in industries such as chemicals, paper, and steel production, fearing that the problems abroad and a slowdown at home might hurt their profits. ENCOURAGING CONDITIONS FOR THE FUTURE Although equity performance was moderately disappointing, we see reasons to continue with our strategy for the future. First, value stocks often tend to perform better than growth stocks in declining markets. While no one can infallibly predict the future direction of stocks or bonds, a degree of caution appears warranted after several years of strong equity gains. Second, many stocks in our portfolio should benefit if calm returns to world markets. A turnaround in Asia, for example, would help many of the companies we invest in which export to that region. I will look forward to reporting to you in six months. /s/ Edward C. Mitchell, Jr. Edward Mitchell Portfolio Manager, Chairman, INVESCO Capital Management - -------------------------------------------------------------------------------- FUND MANAGER EDWARD C. MITCHELL, JR., CFA EDWARD C. MITCHELL, THE CHAIRMAN OF INVESCO CAPITAL MANAGEMENT, EARNED HIS BA FROM THE UNIVERSITY OF VIRGINIA, AND AN MBA FROM THE UNIVERSITY OF COLORADO. ED BEGAN HIS INVESTMENT CAREER IN 1969 AND IS A CHARTERED FINANCIAL ANALYST. HE IS ASSISTED BY DAVID S. GRIFFIN, WHO BEGAN HIS INVESTMENT CAREER IN 1982. A CHARTERED FINANCIAL ANALYST, DAVID HOLDS AN MBA FROM THE COLLEGE OF WILLIAM & MARY, AND A BA FROM OHIO WESLEYAN UNIVERSITY. VALUE EQUITY FUND Your Fund's Performance: A Report from the Manager - -------------------------------------------------------------------------------- Dear Shareholder: Generally, this has been a frustrating period for those of us who favor a "value" approach to stock selection. Despite strong gains on the broad indexes, the market has largely ignored companies with low price-to-earnings ratios. In general, we can talk about a "valuation gap" that has arisen between growth stocks and their value counterparts. While undeniably frustrating in the short term, we believe this gap actually creates encouraging signs for the future. Indeed, our performance over the past six months was quite strong. For the six-month period ending February 28, 1999, the value of your investment rose 21.64%. This can be compared to the S&P 500, which rose 30.27% over the same period. (Of course, past performance is not a guarantee of future results.)(1),(2) This gain, while substantial, resulted in only a modest advance for the year ended February 28, 1999. While large growth company stocks have rebounded strongly from the lows of late last summer, value stocks have come back in fits and starts. For all of 1998, the S&P/BARRA Value Index rose only 14.7%.(1) Overall, we might say that investors have been interested in these stocks only when they have been most optimistic about the economy. EXPLAINING THE VALUATION GAP To understand why, it may be helpful to clarify some of the characteristics of value stocks. Generally, the markets attach low valuations to companies when they appear to have only modest prospects for future earnings growth. Investors may determine that a company is not a leader in its industry, that it has some serious long-term problems, or that its market is not likely to grow much in the future. To some, these same factors mean that economic problems will hurt these firms more quickly and more drastically than others. Thus, troubles overseas, declines in commodity prices, or other negative economic news have quickly dampened enthusiasm for companies with apparently modest earning potential. This has been particularly true of companies in so-called traditional sectors such as utilities, energy, and industrial cyclicals. Instead, investors have focused on technology and other sectors that have seemed less vulnerable to global economic turmoil. CHALLENGING CONVENTIONAL WISDOM Successful value investing relies on challenging such conventional wisdom. We are investing in companies that appear to us to have stronger prospects than the market presently recognizes. This takes extensive research, of course. It also takes the patience to wait until the market recognizes those prospects. The market's recent relative disdain for value investing--the valuation gap--creates encouraging conditions for the patient investor. Over the past several months, we have been buying stocks that are quite inexpensive on a relative basis. While a broad market downturn could still hurt these stocks, the upside potential appears substantial. I look forward to reporting to you again in six months. /s/ Michael C. Harhai Michael C. Harhai Portfolio Manager - -------------------------------------------------------------------------------- FUND MANAGER MICHAEL C. HARHAI, CFA MICHAEL C. HARHAI MANAGES VALUE EQUITY FUND. MIKE HAS A BA FROM THE UNIVERSITY OF SOUTH FLORIDA AND AN MBA FROM THE UNIVERSITY OF CENTRAL FLORIDA. A CHARTERED FINANCIAL ANALYST, HE BEGAN HIS CAREER IN 1972. HE IS ASSISTED BY TERRENCE IRRGANG, A 17-YEAR VETERAN OF THE INVESTMENT BUSINESS. HE EARNED A BA FROM GETTYSBURG COLLEGE AND AN MBA FROM TEMPLE UNIVERSITY. INVESCO / SEMIANNUAL REPORT / FEBRUARY 1999 Moving Forward - -------------------------------------------------------------------------------- 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. INVESCO / SEMIANNUAL REPORT / FEBRUARY 1999 Moving Forward - -------------------------------------------------------------------------------- A REVIEW AND STRATEGY SESSION WITH INVESCO'S VALUE FUND MANAGERS ED, YOU USE A TOP-DOWN ASSET ALLOCATION APPROACH FOR TOTAL RETURN FUND. COULD YOU OUTLINE THIS STRATEGY? ED MITCHELL: Our approach starts with a mathematical model that we have been developing since the late 1970s. Basically, we analyze the spreads between effective yields on bonds and equities, and then adjust the portfolio accordingly. On an individual stock basis, however, we rely on bottom-up analysis; there are just too many factors that will slip through a stock screen. JIM USES ANOTHER MODEL, ONE BASED ON INFLATION-ADJUSTED YIELDS FOR INTERMEDIATE GOVERNMENT BOND FUND. WHAT IS THE ADVANTAGE OF SUCH MODELS? ED MITCHELL: For one thing, they impose discipline on your investing, which is a valuable tool in any fund--and especially one that shareholders are using to help moderate the swings in their portfolios. Clearly, over the past year the markets have behaved in unusual ways, and this has not been a friendly environment for our approach. Still, if you have faith in the long-term characteristics of the market, you have to assume that these characteristics will resurface. WHAT ARE SOME OF THOSE UNUSUAL BEHAVIORS? MIKE HARHAI: One unusual phenomenon would have to be the extremely low prices of most basic commodities in the midst of economic expansion. The twin forces of global overcapacity and recession in Asia have hammered energy prices, for example. Yet many energy companies appear to us to present valuable opportunities, and there is no doubt that the production of energy will remain a key component of the economy. In other words, I find it hard to believe that commodities producers will remain as small a part of the total market--both in dollar and investor psychology terms--as they are now. WHAT MIGHT BE AN EXAMPLE OF A GOOD ENERGY COMPANY THAT IS PREPARING FOR THE FUTURE? MIKE HARHAI: One stock we hold in both Total Return Fund and Value Equity Fund is Repsol SA, which is also Spain's largest industrial company. It is a fully integrated oil and gas enterprise that has produced some solid returns for us. ON A MORE NEGATIVE NOTE, ONE RECENT ANOMOLY MIGHT BE LOW INTEREST RATES. WILL THEY MIGRATE HIGHER? JAMES BAKER: They well might, although it does not yet make sense to be too pessimistic. Certainly, the continuing expansion in the U.S., the easing of conditions overseas, and other factors are pointing to the Federal Reserve's raising rates a bit. On the other hand, recent improvements in productivity have been quite impressive, which may mean that companies can absorb some production cost increases without raising prices. ---------------------------------- Investors should keep in mind that, because these 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, AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN WHEN PURCHASED. (2)THE S&P 500 IS AN UNMANAGED INDEX CONSIDERED ~INDICATIVE OF THE BROAD U.S. STOCK MARKET, WHILE THE S&P/BARRA VALUE INDEX REFLECTS VALUE STOCKS. THE LEHMAN GOVERNMENT/CORPORATE BOND INDEX AND LEHMAN INTERMEDIATE GOVERNMENT BOND INDEX ARE UNMANAGED INDEXES OF SECURITIES CONSIDERED TO BE REPRESENTATIVE OF THE OVERALL DOMESTIC FIXED-INCOME AND INTERMEDIATE-TERM GOVERNMENT BOND MARKETS, RESPECTIVELY. TEN LARGEST COMMON STOCK HOLDINGS INVESCO VALUE TRUST FUNDS, INC. FEBRUARY 28, 1999 UNAUDITED DESCRIPTION VALUE - ------------------------------------------------------------------------------- TOTAL RETURN FUND British Telecommunications PLC Sponsored ADR Representing 10 Ord Shrs $ 52,687,500 Nucor Corp 40,106,250 Schering-Plough Corp 39,156,250 Hanson PLC Sponsored ADR Representing 5 Ord Shrs 36,562,500 Morgan Stanley Dean Witter & Co 36,200,000 Compaq Computer 35,250,000 International Business Machines 34,000,000 Hewlett-Packard Co 33,218,750 Electronic Data Systems 32,550,000 Bristol-Myers Squibb 31,484,375 VALUE EQUITY FUND Lowe's Cos $ 10,569,487 Oracle Corp 9,744,600 Sun Microsystems 9,721,519 Rite Aid 9,681,750 Fannie Mae 9,555,000 Merck & Co 9,450,300 Schering-Plough Corp 9,397,500 Southwest Airlines 8,748,300 Dun & Bradstreet 7,877,500 Ford Motor 7,627,587 Composition of holdings is subject to change. STATEMENT OF INVESTMENT SECURITIES INVESCO VALUE TRUST FUNDS, INC. FEBRUARY 28, 1999 UNAUDITED SHARES OR PRINCIPAL % DESCRIPTION AMOUNT VALUE INTERMEDIATE GOVERNMENT BOND FUND 83.52 FIXED INCOME SECURITIES 48.67 US GOVERNMENT OBLIGATIONS US Treasury Bonds, 9.250%, 2/15/2016 $ 500,000 $ 684,219 US Treasury Notes 8.750%, 8/15/2000 $ 2,000,000 2,100,626 7.500%, 5/15/2002 $ 1,450,000 1,544,704 6.375%, 3/31/2001 $ 2,200,000 2,252,250 6.375%, 9/30/2001 $ 850,000 873,641 6.375%, 8/15/2002 $ 1,600,000 1,654,501 6.250%, 1/31/2002 $ 2,000,000 2,055,000 6.250%, 2/15/2003 $ 2,000,000 2,066,876 5.750%, 11/30/2002 $ 1,500,000 1,522,969 5.750%, 8/15/2003 $ 2,000,000 2,033,750 5.500%, 2/15/2008 $ 200,000 202,188 =============================================================================== TOTAL US GOVERNMENT OBLIGATIONS (Cost $16,813,805) 16,990,724 =============================================================================== 34.85 US GOVERNMENT AGENCY OBLIGATIONS Fannie Mae, Gtd Mortgage Pass-Through Certificates 7.000%, 1/1/2028 $ 831,506 842,632 6.500%, 2/1/2028 $ 852,070 846,566 6.000%, 5/15/2008 $ 2,000,000 2,021,714 6.000%, 5/1/2009 $ 684,001 681,805 Federal Farm Credit Bank, Medium-Term Notes 6.320%, 10/12/2010 $ 500,000 510,939 Federal Home Loan Bank 5.675%, 8/18/2003 $ 1,000,000 997,977 Freddie Mac Gold Participation Certificates 8.000%, 10/1/2010 $ 524,315 541,858 7.000%, 6/1/2028 $ 884,832 896,485 6.500%, 7/1/2001 $ 470,921 475,762 Notes 6.950%, 4/1/2004 $ 2,000,000 2,105,336 Government National Mortgage Association I Pass-Through Certificates 7.500%, 3/15/2026 $ 801,037 824,692 7.000%, 10/15/2008 $ 440,709 453,529 6.500%, 10/15/2008 $ 435,315 442,202 SHARES OR PRINCIPAL % DESCRIPTION AMOUNT VALUE 6.000%, 11/15/2008 $ 524,550 $ 525,709 =============================================================================== TOTAL US GOVERNMENT AGENCY OBLIGATIONS (Cost $12,203,777) 12,167,206 =============================================================================== TOTAL FIXED INCOME SECURITIES (Cost $29,017,582) 29,157,930 =============================================================================== 16.48 SHORT-TERM INVESTMENTS 8.87 US GOVERNMENT OBLIGATIONS US Treasury Notes, 8.500%, 2/15/2000 (Cost $3,085,287) $ 3,000,000 3,096,564 =============================================================================== 7.61 REPURCHASE AGREEMENTS Repurchase Agreement with State Street dated 2/26/1999 due 3/1/1999 at 4.720%, repurchased at $2,659,134 (Collaterized by US Treasury Bonds, due 1/15/2007 at 3.375%, value $2,711,887) (Cost $2,656,000) $ 2,656,000 2,656,000 =============================================================================== TOTAL SHORT-TERM INVESTMENTS (Cost $5,741,287) 5,752,564 =============================================================================== 100.00 TOTAL INVESTMENT SECURITIES AT VALUE (Cost $34,758,869)(a) $ 4,910,494 =============================================================================== TOTAL RETURN FUND 65.29 COMMON STOCKS 2.45 AEROSPACE & DEFENSE Boeing Co 450,000 $ 16,003,125 Lockheed Martin 650,000 24,496,875 Precision Castparts 454,100 16,858,462 Raytheon Co Class B 400,000 21,375,000 =============================================================================== 78,733,462 0.56 AIRLINES Southwest Airlines 600,000 18,075,000 =============================================================================== 1.20 AUTO PARTS Cooper Tire & Rubber 750,000 14,812,500 Genuine Parts 800,000 23,950,000 =============================================================================== 38,762,500 0.92 AUTOMOBILES Ford Motor 500,000 29,656,250 =============================================================================== 3.26 BANKS Bank One 486,000 26,122,500 BankAmerica Corp 330,000 21,553,125 First Union 300,000 15,993,750 National City 405,000 28,299,375 Wachovia Corp 154,000 13,099,625 =============================================================================== 105,068,375 0.60 BEVERAGES Anheuser-Busch Cos 250,000 19,171,875 =============================================================================== SHARES OR PRINCIPAL % DESCRIPTION AMOUNT VALUE 1.26 BUILDING MATERIALS Lowe's Cos 400,000 $ 23,725,000 Sherwin-Williams Co 700,000 16,843,750 =============================================================================== 40,568,750 2.65 CHEMICALS Dow Chemical 200,000 19,675,000 Great Lakes Chemical 600,000 23,362,500 Morton International 700,000 25,287,500 Nalco Chemical 600,000 16,875,000 =============================================================================== 85,200,000 4.14 COMPUTER RELATED Adaptec Inc(b) 600,000 11,962,500 Compaq Computer 1,000,000 35,250,000 Computer Associates International 450,000 18,900,000 Hewlett-Packard Co 500,000 33,218,750 International Business Machines 200,000 34,000,000 =============================================================================== 133,331,250 1.82 CONGLOMERATES Fortune Brands 300,000 9,037,500 Hanson PLC Sponsored ADR Representing 5 Ord Shrs 900,000 36,562,500 National Service Industries 400,000 12,850,000 =============================================================================== 58,450,000 0.90 DISTRIBUTION Supervalu Inc 1,200,000 28,875,000 =============================================================================== 3.72 ELECTRIC UTILITIES DTE Energy 700,000 27,650,000 Edison International 600,000 15,300,000 Entergy Corp 1,000,000 28,250,000 GPU Inc 500,000 19,937,500 Unicom Corp 800,000 28,450,000 =============================================================================== 119,587,500 1.63 ELECTRICAL EQUIPMENT General Electric 300,000 30,093,750 Grainger (W W) Inc 500,000 22,250,000 =============================================================================== 52,343,750 0.82 ELECTRONICS -- SEMICONDUCTOR Conexant Systems(b) 250,000 4,250,000 Rockwell International 500,000 22,218,750 =============================================================================== 26,468,750 1.43 FOODS Archer-Daniels-Midland Co 892,500 13,499,063 Heinz (H J) Co 200,000 10,887,500 Unilever NV New York Registered Shrs 300,000 21,731,250 =============================================================================== 46,117,813 SHARES OR PRINCIPAL % DESCRIPTION AMOUNT VALUE 0.53 HARDWARE & TOOLS Snap-On Inc 600,000 $ 16,950,000 =============================================================================== 5.80 HEALTH CARE DRUGS -- PHARMACEUTICALS Abbott Laboratories 350,000 16,253,125 American Home Products 400,000 23,800,000 Bristol-Myers Squibb 250,000 31,484,375 Columbia/HCA Healthcare 1,300,000 23,237,500 Lilly (Eli) & Co 300,000 28,406,250 Merck & Co 300,000 24,525,000 Schering-Plough Corp 700,000 39,156,250 =============================================================================== 186,862,500 0.75 HOUSEHOLD FURNTITURE & APPLIANCES Shaw Industries(b) 400,000 8,775,000 Whirlpool Corp 350,000 15,225,000 =============================================================================== 24,000,000 4.83 INSURANCE American General 300,000 21,975,000 Lincoln National 200,000 18,937,500 Loews Corp 400,000 31,275,000 MGIC Investment 700,000 23,843,750 Ohio Casualty 650,000 26,243,750 Old Republic International 700,000 13,168,750 SAFECO Corp 500,000 20,093,750 =============================================================================== 155,537,500 0.73 INSURANCE BROKERS Marsh & McLennan 330,000 23,368,125 =============================================================================== 1.12 INVESTMENT BANK/BROKER FIRM Morgan Stanley Dean Witter & Co 400,000 36,200,000 =============================================================================== 1.25 IRON & STEEL Nucor Corp 900,000 40,106,250 =============================================================================== 1.64 MACHINERY Caterpillar Inc 500,000 22,781,250 Deere & Co 500,000 16,343,750 Dover Corp 400,000 13,600,000 =============================================================================== 52,725,000 2.50 MANUFACTURING Federal Signal 600,000 14,062,500 Illinois Tool Works 350,000 24,062,500 Minnesota Mining & Manufacturing 200,000 14,812,500 Textron Inc 120,000 9,360,000 York International 500,000 18,125,000 =============================================================================== 80,422,500 0.45 METALS MINING Phelps Dodge 300,000 14,550,000 =============================================================================== SHARES OR PRINCIPAL % DESCRIPTION AMOUNT VALUE 1.38 OFFICE EQUIPMENT & SUPPLIES Ikon Office Solutions 1,200,000 $ 16,950,000 Xerox Corp 500,000 27,593,750 =============================================================================== 44,543,750 3.17 OIL & GAS RELATED Exxon Corp 300,000 19,968,750 Norsk Hydro A/SA Sponsored DR Representing Ord Shrs 750,000 25,453,125 Repsol SA Sponsored ADR Representing Ord Shrs 450,000 23,625,000 Royal Dutch Petroleum New York Registry 1.25 Gldr Shrs 260,000 11,407,500 Yacimientos Petroliferos Fiscades SA Sponsored ADR Representing Class D Shrs 750,000 21,750,000 =============================================================================== 102,204,375 0.61 PAPER & FOREST PRODUCTS Kimberly-Clark Corp 250,000 11,812,500 Westvaco Corp 350,000 7,831,250 =============================================================================== 19,643,750 1.04 POLLUTION CONTROL Browning-Ferris Industries 500,000 15,750,000 Waste Management 362,500 17,717,188 =============================================================================== 33,467,188 0.55 PUBLISHING Gannett Co 280,000 17,780,000 =============================================================================== 0.73 RAILROADS CSX Corp 600,000 23,550,000 =============================================================================== 2.07 RETAIL Dillard's Inc Class A 650,000 16,168,750 K mart Corp(b) 500,000 8,750,000 Penney (J C) Co 600,000 21,675,000 Rite Aid 350,000 14,481,250 Toys "R" Us(b) 400,000 5,650,000 =============================================================================== 66,725,000 1.81 SERVICES Dun & Bradstreet 750,000 25,687,500 Electronic Data Systems 700,000 32,550,000 =============================================================================== 58,237,500 0.68 SPECIALTY PRINTING Deluxe Corp 650,000 22,018,750 =============================================================================== 1.64 TELECOMMUNICATIONS -- LONG DISTANCE British Telecommunications PLC Sponsored ADR Representing 10 Ord Shrs 300,000 52,687,500 =============================================================================== 2.11 TELEPHONE Bell Atlantic 300,000 17,231,250 SBC Communications 527,040 27,867,240 SHARES OR PRINCIPAL % DESCRIPTION AMOUNT VALUE Telefonos de Mexico SA de CV Sponsored ADR Representing 20 Series L Shrs 400,000 $ 22,875,000 =============================================================================== 67,973,490 1.53 TEXTILE -- APPAREL MANUFACTURING Liz Claiborne 500,000 16,843,750 Unifi Inc 700,000 8,443,750 VF Corp 500,000 24,062,500 =============================================================================== 49,350,000 1.01 TOBACCO Gallaher Group PLC Sponsored ADR Representing 4 Ord Shrs 250,000 6,968,750 Philip Morris 650,000 25,431,250 =============================================================================== 32,400,000 TOTAL COMMON STOCKS (Cost $1,522,917,609) 2,101,713,453 =============================================================================== 29.51 FIXED INCOME SECURITIES 13.69 US GOVERNMENT OBLIGATIONS US Treasury Bonds 9.375%, 2/15/2006 $ 38,750,000 47,589,844 9.250%, 2/15/2016 $ 20,800,000 28,463,510 8.125%, 8/15/2019 $ 20,800,000 26,409,510 7.625%, 2/15/2025 $ 23,000,000 28,599,073 7.250%, 8/15/2022 $ 16,800,000 19,776,758 US Treasury Notes 8.750%, 8/15/2000 $ 25,000,000 26,257,824 8.000%, 5/15/2001 $ 20,500,000 21,691,562 6.500%, 8/15/2005 $ 29,300,000 31,030,545 6.375%, 8/15/2002 $ 23,750,000 24,558,995 6.250%, 2/15/2003 $ 43,300,000 44,747,864 6.125%, 8/15/2007 $ 51,000,000 53,374,711 5.750%, 8/15/2003 $ 27,300,000 27,760,687 5.500%, 2/15/2008 $ 40,000,000 40,437,518 US Treasury Security Stripped Interest Payment Generic Tint Payment, Zero Coupon, 8/15/2003 $ 25,250,000 20,029,284 =============================================================================== TOTAL US GOVERNMENT OBLIGATIONS (Cost $423,875,809) 440,727,685 =============================================================================== 4.42 US GOVERNMENT AGENCY OBLIGATIONS Fannie Mae Gtd Mortgage Pass-Through Certificates 8.500%, 3/1/2010 $ 3,486,321 3,641,183 8.000%, 7/1/2024 $ 4,248,848 4,421,776 7.500%, 8/1/2007 $ 1,011,749 1,043,264 7.500%, 7/1/2024 $ 7,983,986 8,214,084 7.000%, 9/1/2027 $ 13,889,973 14,062,875 7.000%, 12/1/2027 $ 7,912,829 8,018,702 6.500%, 5/1/2026 $ 6,058,183 6,023,893 6.000%, 5/1/2009 $ 6,852,167 6,830,170 SHARES OR PRINCIPAL % DESCRIPTION AMOUNT VALUE Medium-Term Notes 6.060%, 10/8/2002 $ 20,000,000 $ 20,260,559 Freddie Mac, Gold Participation Certificates 8.000%, 10/1/2010 $ 2,446,803 2,528,673 8.000%, 5/1/2024 $ 3,862,542 4,026,545 7.500%, 12/1/2026 $ 6,074,517 6,236,038 7.000%, 4/1/2028 $ 10,187,673 10,321,843 6.500%, 7/1/2001 $ 3,296,449 3,330,337 6.500%, 1/1/2029 $ 14,987,257 14,904,527 Government National Mortgage Association I Pass-Through Certificates 7.500%, 3/15/2026 $ 3,738,174 3,848,562 7.000%, 10/15/2008 $ 644,896 663,656 7.000%, 12/15/2022 $ 165,699 168,346 7.000%, 12/15/2025 $ 7,090,702 7,197,133 6.500%, 10/15/2008 $ 652,973 663,303 6.500%, 12/15/2028 $ 15,114,848 15,036,400 6.000%, 11/15/2008 $ 786,824 788,563 =============================================================================== TOTAL US GOVERNMENT AGENCY OBLIGATIONS (Cost $141,306,272) 142,230,432 =============================================================================== 1.03 ASSET-BACKED SECURITIES 1.03 CONSUMER FINANCE Chase Manhattan Credit Card Master Trust Series 1996-3, Class A, 7.040%, 2/15/2005 $ 18,000,000 18,519,480 Discover Card Master Trust I, Series 1998-7 Class A, 5.600%, 5/16/2006 $ 15,000,000 14,815,050 =============================================================================== TOTAL ASSET-BACKED SECURITIES (Cost $33,775,046) 33,334,530 =============================================================================== 9.84 CORPORATE BONDS 0.95 AUTOMOBILES Ford Motor Notes, 6.500%, 8/1/2018 $ 15,000,000 14,842,438 General Motors Acceptance Global Bonds, 5.500%, 1/14/2002 $ 10,000,000 9,909,270 Notes, 6.125%, 1/22/2008 $ 6,000,000 5,944,458 =============================================================================== 30,696,166 2.39 BANKS ABN Amro Bank NV, Sub Notes 7.550%, 6/28/2006 $ 15,000,000 15,896,894 6.625%, 10/31/2001 $ 5,000,000 5,064,754 BankAmerica Corp, Sub Notes, 6.875%, 6/1/2003 $ 4,000,000 4,111,332 National City, Sub Notes, 7.200%, 5/15/2005 $ 2,000,000 2,094,834 Norwest Financial, Sr Notes, 5.625%, 2/3/2009 $ 16,000,000 15,271,199 SunTrust Banks, Sr Notes, 6.250%, 6/1/2008 $ 17,250,000 17,247,618 Wachovia Bank, Medium-Term Notes, Series 3 7.000%, 10/17/2008 $ 7,000,000 7,389,375 Wachovia Corp, Sub Notes, 6.250%, 8/4/2008 $ 10,000,000 10,024,910 =============================================================================== 77,100,916 SHARES OR PRINCIPAL % DESCRIPTION AMOUNT VALUE 0.60 BEVERAGES Anheuser-Busch Cos, Notes, 5.375%, 9/15/2008 $ 20,000,000 $ 19,374,500 =============================================================================== 0.18 CHEMICALS Eastman Chemical, Notes, 6.375%, 1/15/2004 $ 6,000,000 5,904,509 =============================================================================== 0.47 COMMUNICATIONS -- EQUIPMENT & MANUFACTURING Motorola Inc, Notes, 6.500%, 3/1/2008 $ 15,000,000 15,293,278 =============================================================================== 0.42 ELECTRIC UTILITIES Duke Energy, Medium-Term Notes 6.125%, 7/22/2003 $ 2,900,000 2,910,602 National Rural Utilities, Secured Collateral Trust 6.550%, 11/1/2018 $ 10,500,000 10,478,106 =============================================================================== 13,388,708 0.74 FINANCIAL Associates Corp of North America, Sr Notes 6.375%, 10/15/2002 $ 5,000,000 5,036,414 5.500%, 2/15/2004 $ 15,000,000 14,673,269 Commercial Credit, Notes, 6.375%, 9/15/2002 $ 4,000,000 4,038,711 =============================================================================== 23,748,394 1.18 FOODS CPC International Medium-Term Notes, Series D 6.875%, 10/15/2003 $ 3,000,000 3,143,640 Notes, Series C, 6.150%, 1/15/2006 $ 15,000,000 15,103,798 Campbell Soup, Notes 6.900%, 10/15/2006 $ 5,000,000 5,326,395 4.750%, 10/1/2003 $ 15,000,000 14,476,618 =============================================================================== 38,050,451 0.31 HEALTH CARE RELATED Guidant Corp, Notes, 6.150%, 2/15/2006 $ 10,000,000 9,854,419 =============================================================================== 0.16 INSURANCE CNA Financial, Notes, 6.450%, 1/15/2008 $ 5,300,000 5,050,438 =============================================================================== 0.37 LEISURE TIME Carnival Corp, Notes, 6.150%, 4/15/2008 $ 12,000,000 11,755,104 =============================================================================== 0.36 MACHINERY Cooper Industries, Medium-Term Notes, Series 3 6.375%, 5/8/2008 $ 11,600,000 11,661,712 =============================================================================== 0.37 MANUFACTURING Tyco International Group SA, Gtd Notes 6.125%, 1/15/2009 $ 12,000,000 11,759,326 =============================================================================== 0.28 NATURAL GAS Enron Corp, Notes, 6.625%, 11/15/2005 $ 9,000,000 9,018,585 =============================================================================== 0.11 PUBLISHING Gannett Co, Notes, 5.850%, 5/1/2000 $ 3,500,000 3,511,784 =============================================================================== SHARES OR PRINCIPAL % DESCRIPTION AMOUNT VALUE 0.29 RETAIL May Department Stores, Deb, 6.875%, 11/1/2005 $ 4,000,000 $ 4,131,908 Wal-Mart Stores, Notes, 8.625%, 4/1/2001 $ 5,000,000 5,312,714 =============================================================================== 9,444,622 0.53 TELEPHONE Ameritech Capital Funding, Notes 6.150%, 1/15/2008 $ 15,000,000 15,124,063 BellSouth Telecommunications, Notes 6.500%, 6/15/2005 $ 2,000,000 2,071,072 =============================================================================== 17,195,135 0.13 TOYS Mattel Inc, Notes, 6.750%, 5/15/2000 $ 4,000,000 4,034,867 =============================================================================== TOTAL CORPORATE BONDS (Cost $319,869,402) 316,842,914 =============================================================================== 0.53 FOREIGN GOVERNMENT OBLIGATIONS Province of Manitoba, Unsecured Deb, 5.500%, 10/1/2008 (Cost $17,518,447) $ 17,500,000 16,966,250 =============================================================================== TOTAL FIXED INCOME SECURITIES (Cost $936,344,976) 950,101,811 =============================================================================== 5.20 SHORT-TERM INVESTMENTS 0.62 US GOVERNMENT OBLIGATIONS US Treasury Notes, 6.375%, 7/15/1999 (Cost $20,008,518) $ 20,000,000 20,118,759 =============================================================================== 0.03 CORPORATE BONDS 0.03 ELECTRIC UTILITES Duke Energy, 1st & Ref Mortgage, Notes 7.500%, 4/1/1999 (Cost $1,000,832) $ 1,000,000 1,001,587 =============================================================================== 4.55 REPURCHASE AGREEMENTS Repurchase Agreement with State Street dated 2/26/1999 due 3/1/1999 at 4.720%, repurchased at $146,290,518 (Collateralized by US Treasury Bonds, due 1/15/2007 at 3.375%, value $149,173,809) (Cost $146,233,000) $ 146,233,000 146,233,000 =============================================================================== TOTAL SHORT-TERM INVESTMENTS (Cost $167,242,350) 167,353,346 =============================================================================== 100.00 TOTAL INVESTMENT SECURITIES AT VALUE (Cost $2,626,504,935) (Cost for Income Tax Purposes $2,626,518,260) $ 3,219,168,610 =============================================================================== VALUE EQUITY FUND 98.02 COMMON STOCKS 2.62 AEROSPACE & DEFENSE Lockheed Martin 106,520 $ 4,014,473 Precision Castparts 10,000 371,250 Raytheon Co Class B 120,000 6,412,500 =============================================================================== 10,798,223 SHARES OR PRINCIPAL % DESCRIPTION AMOUNT VALUE 2.12 AIRLINES Southwest Airlines 290,400 $ 8,748,300 =============================================================================== 1.85 AUTOMOBILES Ford Motor 128,600 7,627,587 =============================================================================== 7.88 BANKS Bank One 129,600 6,966,000 BankAmerica Corp 111,364 7,273,461 Chase Manhattan 71,600 5,701,150 Commerce Bancshares 105,000 4,278,750 First Union 60,000 3,198,750 Wachovia Corp 60,000 5,103,750 =============================================================================== 32,521,861 5.56 BUILDING MATERIALS Lowe's Cos 178,200 10,569,487 Sherwin-Williams Co 200,000 4,812,500 Vulcan Materials 56,300 7,586,425 =============================================================================== 22,968,412 0.73 CHEMICALS Dow Chemical 30,600 3,010,275 =============================================================================== 8.61 COMPUTER RELATED Compaq Computer 148,200 5,224,050 Computer Associates International 113,225 4,755,450 International Business Machines 36,000 6,120,000 Oracle Corp(b) 174,400 9,744,600 Sun Microsystems(b) 99,900 9,721,519 =============================================================================== 35,565,619 1.48 CONGLOMERATES Hanson PLC Sponsored ADR Representing 5 Ord Shrs 150,000 6,093,750 =============================================================================== 1.40 DISTRIBUTION Supervalu Inc 240,000 5,775,000 =============================================================================== 3.69 ELECTRIC UTILITIES DTE Energy 137,000 5,411,500 GPU Inc 45,000 1,794,375 Southern Co 135,000 3,383,438 TECO Energy 215,600 4,662,350 =============================================================================== 15,251,663 1.76 ELECTRICAL EQUIPMENT General Electric 72,500 7,272,656 =============================================================================== 1.49 ELECTRONICS -- SEMICONDUCTOR Conexant Systems(b) 40,000 680,000 Intel Corp 16,000 1,919,000 Rockwell International 80,000 3,555,000 =============================================================================== 6,154,000 SHARES OR PRINCIPAL % DESCRIPTION AMOUNT VALUE 3.52 FINANCIAL Associates First Capital Class A 67,408 $ 2,738,450 Berkshire Hathaway Class B(b) 945 2,248,155 Fannie Mae 136,500 9,555,000 =============================================================================== 14,541,605 12.35 HEALTH CARE DRUGS-- PHARMACEUTICALS Abbott Laboratories 94,000 4,365,125 Allergan Inc 65,000 5,297,500 American Home Products 100,000 5,950,000 Bristol-Myers Squibb 60,000 7,556,250 Merck & Co 115,600 9,450,300 Mylan Laboratories 138,000 3,769,125 Schering-Plough Corp 168,000 9,397,500 Warner-Lambert Co 75,600 5,221,125 =============================================================================== 51,006,925 1.50 HEALTH CARE RELATED Biomet Inc 168,900 6,196,519 =============================================================================== 0.17 HOUSEHOLD FURNITURE & APPLIANCES Whirlpool Corp 16,300 709,050 =============================================================================== 9.33 INSURANCE American General 100,000 7,325,000 American International Group 44,225 5,038,886 Jefferson-Pilot Corp 86,362 5,856,423 Loews Corp 50,000 3,909,375 MGIC Investment 110,000 3,746,875 Old Republic International 109,400 2,058,087 SAFECO Corp 110,000 4,420,625 Torchmark Corp 185,000 6,151,250 =============================================================================== 38,506,521 1.54 INSURANCE BROKERS Marsh & McLennan 90,000 6,373,125 =============================================================================== 0.74 IRON & STEEL Nucor Corp 68,200 3,039,163 =============================================================================== 0.99 MACHINERY Dover Corp 120,600 4,100,400 =============================================================================== 3.45 MANUFACTURING Federal Signal 178,500 4,183,594 Illinois Tool Works 30,000 2,062,500 Textron Inc 54,100 4,219,800 York International 103,700 3,759,125 =============================================================================== 14,225,019 0.67 METALS MINING Phelps Dodge 57,200 2,774,200 =============================================================================== SHARES OR PRINCIPAL % DESCRIPTION AMOUNT VALUE 2.63 OFFICE EQUIPMENT & SUPPLIES Pitney Bowes 69,100 $ 4,366,256 Xerox Corp 117,400 6,479,013 =============================================================================== 10,845,269 5.17 OIL & GAS RELATED Exxon Corp 70,550 4,695,984 Norsk Hydro A/SA Sponsored ADR Representing Ord Shrs 90,000 3,054,375 Repsol SA Sponsored ADR Representing Ord Shrs 105,400 5,533,500 Royal Dutch Petroleum New York Registry 1.25 Gldr Shrs 88,304 3,874,338 Yacimientos Petroliferos Fiscades SA Sponsored ADR Representing Class D Shrs 144,700 4,196,300 =============================================================================== 21,354,497 0.95 PAPER & FOREST PRODUCTS Kimberly-Clark Corp 82,700 3,907,575 =============================================================================== 0.51 POLLUTION CONTROL Browning-Ferris Industries 67,100 2,113,650 =============================================================================== 1.39 PUBLISHING American Greetings Class A 108,900 2,579,569 Gannett Co 50,000 3,175,000 =============================================================================== 5,754,569 2.34 RETAIL Rite Aid 234,000 9,681,750 =============================================================================== 3.69 SERVICES Dun & Bradstreet 230,000 7,877,500 Electronic Data Systems 116,600 5,421,900 GATX Corp 55,800 1,928,587 =============================================================================== 15,227,987 1.31 SPECIALTY PRINTING Deluxe Corp 160,000 5,420,000 =============================================================================== 3.13 TELEPHONE Ameritech Corp 75,000 4,903,125 Bell Atlantic 93,100 5,347,431 US WEST 50,000 2,665,625 =============================================================================== 12,916,181 1.40 TEXTILE -- APPAREL MANUFACTURING VF Corp 120,000 5,775,000 =============================================================================== 1.03 TOBACCO Philip Morris 108,200 4,233,325 =============================================================================== 1.02 TOYS Mattel Inc 160,400 4,230,550 =============================================================================== TOTAL COMMON STOCKS (Cost $264,032,476) 404,720,226 =============================================================================== SHARES OR PRINCIPAL % DESCRIPTION AMOUNT VALUE 1.98 SHORT-TERM INVESTMENTS -- REPURCHASE AGREEMENTS Repurchase Agreement with State Street dated 2/26/1999 due 3/1/1999 at 4.720%, repurchased at $8,181,217 (Collateralized by US Treasury Notes, due 1/15/2007 at 3.375%, value $8,346,194) (Cost $8,178,000) $ 8,178,000 $ 8,178,000 =============================================================================== 100.00 TOTAL INVESTMENT SECURITIES AT VALUE (Cost $272,210,476) (Cost for Income Tax Purposes $272,221,246) $ 412,898,226 =============================================================================== (a) Also represents cost for income tax purposes. (b) Security is non-income producing. See Notes to Financial Statements STATEMENT OF ASSETS AND LIABILITIES INVESCO Value Trust Funds, Inc. February 28, 1999 UNAUDITED Intermediate Total Government Return Bond Fund Fund - ------------------------------------------------------------------------------- ASSETS Investment Securities: At Cost(a) $34,758,869 $ 2,626,504,935 =============================================================================== At Value(a) $34,910,494 $ 3,219,168,610 Cash 0 346,707 Receivables: Investment Securities Sold 0 345,873 Fund Shares Sold 192,165 7,783,625 Dividends and Interest 321,881 12,267,765 Prepaid Expenses and Other Assets 114,198 351,340 =============================================================================== TOTAL ASSETS 35,538,738 3,240,263,920 =============================================================================== LIABILITIES Payables: Custodian 12,947 0 Distributions to Shareholders 6,118 179,730 Fund Shares Repurchased 46,308 2,769,547 Accrued Distribution Expenses 6,660 228,491 Accrued Expenses and Other Payables 8,350 160,270 =============================================================================== TOTAL LIABILITIES 80,383 3,338,038 =============================================================================== NET ASSETS AT VALUE $35,458,355 $ 3,236,925,882 =============================================================================== NET ASSETS Paid-in Capital $35,349,291 $ 2,633,463,435 Accumulated Undistributed (Distributions in Excess of) Net Investment Income 327 (20,492) Accumulated Undistributed Net Realized Gain (Loss) on Investment Securities and Foreign Currency Transactions (42,888) 10,819,264 Net Appreciation of Investment Securities and Foreign Currency Transactions 151,625 592,663,675 =============================================================================== NET ASSETS AT VALUE $35,458,355 $ 3,236,925,882 =============================================================================== Shares Outstanding(b) 2,820,230 105,642,128 Net Asset Value, Offering and Redemption Price per Share $ 12.57 $ 30.64 =============================================================================== (a)Investment securities at cost and value at February 28, 1999 include repurchase agreements of $2,656,000 and $146,233,000 for Intermediate Government Bond and Total Return Funds, respectively. (b)The Trust has one class of shares which may be divided into different series, each representing an interest in a separate Fund. At February 28, 1999, there was an unlimited number of authorized Fund shares. See Notes to Financial Statements STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) INVESCO Value Trust Funds, Inc. FEBRUARY 28, 1999 UNAUDITED Value Equity Fund - ------------------------------------------------------------------------------- ASSETS Investment Securities: At Cost(a) $272,210,476 =============================================================================== At Value(a) $412,898,226 Cash 26,395 Receivables: Fund Shares Sold 551,178 Dividends and Interest 686,757 Prepaid Expenses and Other Assets 276,269 =============================================================================== TOTAL ASSETS 414,438,825 =============================================================================== LIABILITIES Payables: Distributions to Shareholders 2,902 Fund Shares Repurchased 338,789 Accrued Distribution Expenses 80,709 Accrued Expenses and Other Payables 33,112 =============================================================================== TOTAL LIABILITIES 455,512 =============================================================================== NET ASSETS AT VALUE $413,983,313 =============================================================================== NET ASSETS Paid-in Capital $282,933,649 Accumulated Undistributed (Distributions in excess of) Net Investment Income (1,266) Accumulated Undistributed Net Realized Loss on Investment Securities and Foreign Currency Transactions (9,636,820) Net Appreciation of Investment Securities 140,687,750 =============================================================================== NET ASSETS AT VALUE $413,983,313 =============================================================================== Shares Outstanding(b) 14,378,199 Net Asset Value, Offering and Redemption Price per Share $ 28.79 =============================================================================== (a)Investment securities at cost and value at February 28, 1999 include a repurchase agreement of $8,178,000. (b)The Trust has one class of shares which may be divided into different series, each representing an interest in a separate Fund. At February 28, 1999, there was an unlimited number of authorized Fund shares. See Notes to Financial Statements STATEMENT OF OPERATIONS INVESCO Value Trust Funds, Inc. SIX MONTHS ENDED FEBRUARY 28, 1999 UNAUDITED Intermediate Total Government Return Bond Fund Fund INVESTMENT INCOME INCOME Dividends $ 0 $ 19,933,490 Interest 985,389 29,159,075 Foreign Taxes Withheld 0 (246,300) =============================================================================== TOTAL INCOME 985,389 48,846,265 =============================================================================== EXPENSES Investment Advisory Fees 106,651 8,364,170 Distribution Expenses 43,866 952,947 Transfer Agent Fees 67,505 2,460,956 Administrative Fees 7,666 226,172 Custodian Fees and Expenses 5,054 167,194 Professional Fees and Expenses 7,324 53,712 Registration Fees and Expenses 12,804 133,106 Reports to Shareholders 9,049 68,458 Trustees' Fees and Expenses 5,143 74,363 Other Expenses 2,179 65,999 =============================================================================== TOTAL EXPENSES 267,241 12,567,077 Fees and Expenses Absorbed by Investment Adviser (86,363) (241,349) Fees and Expenses Paid Indirectly (2,902) (204,708) =============================================================================== NET EXPENSES 177,976 12,121,020 =============================================================================== NET INVESTMENT INCOME 807,413 36,725,245 =============================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES Net Realized Gain on: Investment Securities 346,070 19,125,915 Foreign Currency Transactions 0 19,608 =============================================================================== Total Net Realized Gain 346,070 19,145,523 =============================================================================== Change in Net Appreciation of Investment Securities (674,637) 274,883,090 =============================================================================== NET GAIN (LOSS) ON INVESTMENT SECURITIES AND FOREIGN CURRENCY TRANSACTIONS (328,567) 294,028,613 =============================================================================== NET INCREASE IN NET ASSETS FROM OPERATIONS $ 478,846 $ 330,753,858 =============================================================================== See Notes to Financial Statements STATEMENT OF OPERATIONS (CONTINUED) INVESCO Value Trust Funds, Inc. SIX MONTHS ENDED FEBRUARY 28, 1999 UNAUDITED Value Equity Fund - ------------------------------------------------------------------------------- INVESTMENT INCOME INCOME Dividends $ 3,390,036 Interest 438,738 Foreign Taxes Withheld (29,348) =============================================================================== TOTAL INCOME 3,799,426 =============================================================================== EXPENSES Investment Advisory Fees 1,510,071 Distribution Expenses 503,357 Transfer Agent Fees 568,482 Administrative Fees 35,202 Custodian Fees and Expenses 28,410 Professional Fees and Expenses 14,678 Registration Fees and Expenses 27,800 Reports to Shareholders 48,809 Trustees' Fees and Expenses 14,955 Other Expenses 9,450 =============================================================================== TOTAL EXPENSES 2,761,214 Fees and Expenses Absorbed by Investment Adviser (225,987) Fees and Expenses Paid Indirectly (14,535) =============================================================================== NET EXPENSES 2,520,692 =============================================================================== NET INVESTMENT INCOME 1,278,734 =============================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES Net Realized Loss on Investment Securities and Foreign Currency Transactions (9,601,816) =============================================================================== Change in Net Appreciation of Investment Securities 84,030,748 =============================================================================== NET GAIN ON INVESTMENT SECURITIES AND FOREIGN CURRENCY TRANSACTIONS 74,428,932 =============================================================================== NET INCREASE IN NET ASSETS FROM OPERATIONS $75,707,666 =============================================================================== See Notes to Financial Statements STATEMENT OF CHANGES IN NET ASSETS INVESCO Value Trust Funds, Inc. INTERMEDIATE GOVERNMENT BOND FUND Six Months Year Ended Ended February 28 August 31 - ------------------------------------------------------------------------------- 1999 1998 UNAUDITED OPERATIONS Net Investment Income $ 807,413 $ 1,931,801 Net Realized Gain on Investment Securities 346,070 440,515 Change in Net Appreciation of Investment Securities (674,637) 519,048 =============================================================================== NET INCREASE IN NET ASSETS FROM OPERATIONS 478,846 2,891,364 =============================================================================== DISTRIBUTIONS TO SHAREHOLDERS Net Investment Income (807,413) (1,931,801) Net Realized Gain on Investment Securities (250,010) 0 =============================================================================== TOTAL DISTRIBUTIONS (1,057,423) (1,931,801) =============================================================================== FUND SHARE TRANSACTIONS Proceeds from Sales of Shares 40,719,232 33,923,198 Reinvestment of Distributions 982,824 1,744,866 =============================================================================== 41,702,056 35,668,064 Amounts Paid for Repurchases of Shares (42,945,699) (43,787,720) =============================================================================== NET DECREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS (1,243,643) (8,119,656) =============================================================================== TOTAL DECREASE IN NET ASSETS (1,822,220) (7,160,093) NET ASSETS Beginning of Period 37,280,575 44,440,668 =============================================================================== End of Period (Including Accumulated Undistributed Net Investment Income of $327 and $327, respectively) $ 35,458,355 $ 37,280,575 =============================================================================== ------------------------------------------------- FUND SHARE TRANSACTIONS Shares Sold 3,161,447 2,691,029 Shares Issued from Reinvestment of Distributions 76,635 139,204 =============================================================================== 3,238,082 2,830,233 Shares Repurchased (3,340,279) (3,480,710) =============================================================================== NET DECREASE IN FUND SHARES (102,197) (650,477) =============================================================================== See Notes to Financial Statements INVESCO Value Trust Funds, Inc. TOTAL RETURN FUND Six Months Year Ended Ended February 28 August 31 - ------------------------------------------------------------------------------- 1999 1998 UNAUDITED OPERATIONS Net Investment Income $ 36,725,245 $ 67,397,908 Net Realized Gain on Investment Securities and Foreign Currency Transactions 19,145,523 86,022,682 Change in Net Appreciation of Investment Securities and Foreign Currency Transactions 274,883,090 (79,067,445) =============================================================================== NET INCREASE IN NET ASSETS FROM OPERATIONS 330,753,858 74,353,145 =============================================================================== DISTRIBUTIONS TO SHAREHOLDERS Net Investment Income (36,878,137) (67,353,840) Net Currency Transactions Realized Gain on Investment Securities and Foreign Currency Transactions (77,268,060) (34,772,560) =============================================================================== TOTAL DISTRIBUTIONS (114,146,197) (102,126,400) =============================================================================== FUND SHARE TRANSACTIONS Proceeds from Sales of Shares 800,901,184 1,412,738,595 Reinvestment of Distributions 113,143,852 100,609,294 =============================================================================== 914,045,036 1,513,347,889 Amounts Paid for Repurchases of Shares (454,742,821) (770,152,733) =============================================================================== NET INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS 459,302,215 743,195,156 =============================================================================== TOTAL INCREASE IN NET ASSETS 675,909,876 715,421,901 NET ASSETS Beginning of Period 2,561,016,006 1,845,594,105 =============================================================================== End of Period (Including Accumulated Undistributed (Distributions in Excess of) Net Investment Income of ($20,492) and $132,400, respectively) $ 3,236,925,882 $ 2,561,016,006 =============================================================================== ---------------------------------------------------- FUND SHARE TRANSACTIONS Shares Sold 25,858,880 46,622,819 Shares Issued from Reinvestment of Distributions 3,656,082 3,448,941 =============================================================================== 29,514,962 50,071,760 Shares Repurchased (14,821,909) (25,589,174) =============================================================================== NET INCREASE IN FUND SHARES 14,693,053 24,482,586 =============================================================================== See Notes to Financial Statements STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) INVESCO Value Trust Funds, Inc. VALUE EQUITY FUND Six Months Year Ended Ended February 28 August 31 - ------------------------------------------------------------------------------- 1999 1998 UNAUDITED OPERATIONS Net Investment Income $ 1,278,734 $ 3,528,628 Net Realized Gain (Loss) on Investment Securities and Foreign Currency Transactions (9,601,816) 39,716,148 Change in Net Appreciation of Investment Securities 84,030,748 (45,560,535) =============================================================================== NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 75,707,666 (2,315,759) =============================================================================== DISTRIBUTIONS TO SHAREHOLDERS Net Investment Income (1,269,164) (3,546,111) In Excess of Net Investment Income 0 (11,054) Net Realized Gain on Investment Securities and Foreign Currency Transactions (31,634,749) (26,588,368) =============================================================================== TOTAL DISTRIBUTIONS (32,903,913) (30,145,533) =============================================================================== FUND SHARE TRANSACTIONS Proceeds from Sales of Shares 149,441,850 451,339,743 Reinvestment of Distributions 32,679,027 28,948,214 =============================================================================== 182,120,877 480,287,957 Amounts Paid for Repurchases of Shares (160,925,181) (467,608,421) =============================================================================== NET INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS 21,195,696 12,679,536 =============================================================================== TOTAL INCREASE (DECREASE) IN NET ASSETS 63,999,449 (19,781,756) NET ASSETS Beginning of Period 349,983,864 369,765,620 =============================================================================== End of Period (Including Accumulated Undistributed (Distributions in Excess of) Net Investment Income of ($1,266) and ($10,836), respectively $ 413,983,313 $ 349,983,864 =============================================================================== ------------------------------------------------------- FUND SHARE TRANSACTIONS Shares Sold 5,163,895 15,256,421 Shares Issued from Reinvestment of Distributions 1,150,958 1,058,632 =============================================================================== 6,314,853 16,315,053 Shares Repurchased (5,564,273) (15,751,418) =============================================================================== NET INCREASE IN FUND SHARES 750,580 563,635 =============================================================================== See Notes to Financial Statements INVESCO Notes to financial statements -- INVESCO Value Trust Funds, Inc. NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Value Trust Funds, Inc. (the "Trust") is organized under the laws of the Commonwealth of Massachusetts and presently consists of three separate Funds: Intermediate Government Bond Fund, Total Return Fund and Value Equity Fund. The investment objective of each Fund is to achieve a high total return on investments through capital appreciation and current income. The Trust 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 Trust 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 Trust's trustees. Debt securities are valued at evaluated bid prices as determined by a pricing service approved by the Trust's trustees. 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 Trust's trustees. 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. REPURCHASE AGREEMENTS -- Repurchase agreements held by the Trust are fully collateralized by U.S. Government securities and such collateral is in the possession of the Trust'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 Trust 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 Trust 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 Trust may have elements of risk due to investments in foreign issuers located in a specific country. Such investments may subject the Trust 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 Trust'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 Trust does not hold short-term forward foreign currency contracts for trading purposes. The Trust 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 Trust 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. At August 31, 1998, Intermediate Government Bond Fund had $27,745, $16,031 and $8,387 in net capital loss carryovers which expire in the years 2003, 2004 and 2005, respectively. To the extent future capital gains are offset by capital loss carryovers, such gains will not be distributed to shareholders. Dividends paid by the Trust from net investment income and distributions of net realized short-term capital gains are, for federal income tax purposes, taxable as ordinary income to shareholders. Investment income received from foreign sources may be subject to foreign withholding taxes. Dividend and interest income is shown gross of foreign withholding taxes in the accompanying financial statements. E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- For Total Return and Value Equity Funds, dividends and distributions to shareholders are recorded on the ex dividend/distribution date. All of Intermediate Government Bond Fund's net investment income is distributed to shareholders by dividends declared daily and paid monthly. Income dividends are reinvested at the month-end net asset value. The Trust 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. F. FORWARD FOREIGN CURRENCY CONTRACTS -- The Trust 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 agreeement 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 Trust'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 agreements 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 the following: CUSTODIAN FEES DISTRIBUTION TRANSFER FUND AND EXPENSES FEES AGENT FEES - ------------------------------------------------------------------------------- Intermediate Government Bond Fund $ 2,902 $ 0 $ 0 Total Return Fund 89,643 58,452 56,613 Value Equity Fund 14,535 0 0 NOTE 2 -- INVESTMENT ADVISORY AND OTHER AGREEMENTS. INVESCO Funds Group, Inc. ("IFG") serves as the Trust's investment adviser. As compensation for its services to the Trust, 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:
AVERAGE NET ASSETS - ------------------------------------------------------------------------------- $500 $0 to Million Over $1 Billion $2 Billion $4 Billion $5 Billion Over $500 to $1 $1 to $2 to $4 to $5 to $6 $6 Million Billion Billion Billion Billion Billion Billion Billion - ----------------------------------------------------------------------------------------------------------------------------------- Intermediate Government Bond Fund 0.60% 0.50% 0.40% -- -- -- -- -- Total Return Fund 0.75% 0.65% -- 0.50% 0.45%(a) 0.40%(a) 0.375%(a) 0.35%(a) Value Equity Fund 0.75% 0.65% 0.50% -- -- -- -- -- (a) Effective May 1, 1996, IFG voluntarily agreed to waive the portion of its fee which exceeds 0.50% of average net assets in excess of $2 Billion for Total Return Fund. Such wavier may be discontinued in the future.
In accordance with a Sub-Advisory Agreement between IFG and INVESCO Capital Management,Inc. ("ICM"), an affiliate of IFG, investment decisions of the Trust 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 six months ended February 28, 1999, Intermediate Government Bond, Total Return and Value Equity Funds paid the Distributor $42,020, $720,929 and $502,069, respectively, under the plan of distribution. IFG receives a transfer agent fee at an annual rate of $20.00 for Total Return and Value Equity Funds and $26.00 for Intermediate Government Bond Fund per shareholder account, or, where applicable, per participant in an omnibus account, per year. IFG may pay such fee for participants in omnibus accounts to affiliates or third parties. The fee is paid monthly at one-twelfth of the annual fee and is based upon the actual number of accounts in existence during each month. In accordance with an Administrative Agreement, each Fund pays IFG an annual fee of $10,000, plus an additional amount computed at an annual rate of 0.015% of average net assets to provide administrative, accounting and clerical services. The fee is accrued daily and paid monthly. IFG has voluntarily agreed, in some instances, to absorb certain fees and expenses incurred by Intermediate Government Bond and Value Equity Funds. 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 as follows: FUND PURCHASES SALES - ------------------------------------------------------------------------------- Total Return Fund $ 414,164,433 $ 34,960,473 Value Equity Fund 58,790,805 71,565,380 For the six months ended February 28, 1999, the aggregate cost of purchases and proceeds from sales of U.S. Government securities were as follows: FUND PURCHASES SALES - ------------------------------------------------------------------------------- Intermediate Government Bond Fund $ 14,215,469 $ 14,097,453 Total Return Fund 55,311,093 93,101,008 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, 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 Intermediate Government Bond Fund $ 336,092 $ 184,467 $ 151,625 Total Return Fund 698,281,447 105,631,097 592,650,350 Value Equity Fund 153,201,582 12,524,602 140,676,980 NOTE 5 -- TRANSACTIONS WITH AFFILIATES. Certain of the Trust's officers and trustees are also officers and directors of IFG, IDI or ICM. The Trust has adopted an unfunded defined benefit deferred compensation plan covering all independent trustees of the Trust who will have served as an independent trustee 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 Trustees' 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 - ------------------------------------------------------------------------------- Intermediate Government Bond Fund $ 554 $ 1,943 $ 4,973 Total Return Fund 30,307 65,424 150,270 Value Equity Fund 5,118 11,070 29,123 The independent trustees 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 trustees 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 Trust has available a Redemption Line of Credit Facility ("LOC"), from a consortium of national banks, to be used for temporary or emergency purposes to fund redemptions of investor shares. The LOC permits borrowings to a maximum of 10% of the Net Assets at Value of each respective Fund. Each Fund agrees to pay annual fees and interest on the unpaid principal balance based on prevailing market rates as defined in the agreement. At February 28, 1999, there were no such borrowings. FINANCIAL HIGHLIGHTS Intermediate Government Bond 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 $ 12.76 $12.44 $12.30 $12.64 $12.16 $13.25 =============================================================================== INCOME FROM INVESTMENT OPERATIONS Net Investment Income 0.29 0.64 0.66 0.73 0.73 0.70 Net Gains or (Losses) on Securities (Both Realized and Unrealized) (0.10) 0.32 0.14 (0.34) 0.48 (0.75) =============================================================================== TOTAL FROM INVESTMENT OPERATIONS 0.19 0.96 0.80 0.39 1.21 (0.05) =============================================================================== LESS DISTRIBUTIONS Dividends from Net Investment Income(a) 0.29 0.64 0.66 0.73 0.73 0.70 Distributions from Capital Gains 0.09 0.00 0.00 0.00 0.00 0.34 =============================================================================== TOTAL DISTRIBUTIONS 0.38 0.64 0.66 0.73 0.73 1.04 =============================================================================== Net Asset Value-- End of Period $ 12.57 $12.76 $12.44 $12.30 $12.64 $12.16 =============================================================================== TOTAL RETURN 1.47%(b) 7.92% 6.64% 3.12% 10.36% (0.37%) RATIOS Net Assets -- End of Period ($000 Omitted) $35,458 $37,281 $44,441 $39,949 $37,339 $31,861 Ratio of Expenses to Average Net Assets(c) 0.50%(b)(d) 1.01%(d) 1.02%(d) 1.15%(d) 1.20% 1.07% Ratio of Net Investment Income to Average Net Assets(c) 2.25%(b) 5.11% 5.32% 5.81% 6.04% 5.58% Portfolio Turnover Rate 42% (b) 57% 37% 63% 92% 49% (a)Distributions in excess of net investment income for the year ended August 31, 1994, aggregated less than $0.01 on a per share basis. (b)Based on operations for the period shown and, accordingly, are not representative of a full year. (c)Various expenses of the Fund were voluntarily absorbed by IFG for the six months ended February 28, 1999 and the years ended August 31, 1998, 1997 and 1996. If such expenses had not been voluntarily absorbed, ratio of expenses to average net assets would have been 0.74% (not annualized), 1.48%, 1.37% and 1.24%, respectively, and ratio of net investment income to average net assets would have been 2.01% (not annualized), 4.64%, 4.97% and 5.72%, respectively. (d)Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by Investment Adviser, which is before any expense offset arrangements. FINANCIAL HIGHLIGHTS Total Return 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 $ 28.16 $27.77 $22.60 $20.95 $18.54 $18.27 =================================================================================================== INCOME FROM INVESTMENT OPERATIONS Net Investment Income 0.37 0.83 0.77 0.73 0.72 0.69 Net Gains on Securities (Both Realized and Unrealized) 3.30 0.87 5.26 1.78 2.46 0.60 =================================================================================================== TOTAL FROM INVESTMENT OPERATIONS 3.67 1.70 6.03 2.51 3.18 1.29 =================================================================================================== LESS DISTRIBUTIONS Dividends from Net Investment Income 0.37 0.83 0.77 0.73 0.72 0.60 In Excess of Net Investment Income(a) 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 1.19 1.31 0.86 0.86 0.77 1.02 =================================================================================================== Net Asset Value-- End of Period $30.64 $28.16 $27.77 $22.60 $20.95 $18.54 =================================================================================================== TOTAL RETURN 13.05%(b) 6.02% 27.01% 12.06% 17.54% 7.22% RATIOS Net Assets -- End of Period ($000 Omitted) $3,236,926 $2,561,016 $1,845,594 $1,032,151 $563,468 $292,765 Ratio of Expenses to Average Net Assets(c) 0.41%(b)(d) 0.79%(d) 0.86%(d) 0.89%(d) 0.95% 0.96% Ratio of Net Investment Income to Average Net Assets(c) 1.24%(b) 2.82% 3.11% 3.44% 3.97% 3.31% Portfolio Turnover Rate 5% (b) 17% 4% 10% 30% 12% (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)Based on operations for the period shown, and accordingly, are not representative of a full year. (c)Various expenses of the Fund were voluntarily absorbed by IFG for the six months ended February 28, 1999 and the year ended August 31, 1998. If such expenses had not been voluntarily absorbed, ratio of expenses to average net assets would have been 0.42% (not annualized) and 0.80%, respectively, and ratio of net investment income to average net assets would have been 1.23% (not annualized) and 2.81%, repectively. (d)Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by Investment Adviser, if applicable, which is before any expense offset arrangements.
FINANCIAL HIGHLIGHTS Value Equity 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 $ 25.68 $28.30 $22.24 $19.53 $18.12 $17.79 ==================================================================================================== INCOME FROM INVESTMENT OPERATIONS Net Investment Income 0.09 0.26 0.35 0.35 0.39 0.36 Net Gains or (Losses) on Securities (Both Realized and Unrealized) 5.43 (0.43) 6.62 3.09 2.58 1.20 ==================================================================================================== TOTAL FROM INVESTMENT OPERATIONS 5.52 (0.17) 6.97 3.44 2.97 1.56 ==================================================================================================== LESS DISTRIBUTIONS Dividends from Net Investment Income 0.09 0.26 0.35 0.35 0.39 0.31 In Excess of Net Investment Income(a) 0.00 0.00 0.00 0.00 0.00 0.04 Distributions from Capital Gains 2.32 2.19 0.56 0.38 1.17 0.88 ==================================================================================================== Total Distributions 2.41 2.45 0.91 0.73 1.56 1.23 ==================================================================================================== Net Asset Value-- End of Period $ 28.79 $25.68 $28.30 $22.24 $19.53 $18.12 ==================================================================================================== TOTAL RETURN 21.64%(b) (1.06%) 32.04% 17.77% 17.84% 9.09% RATIOS Net Assets -- End of Period ($000 Omitted) $413,983 $349,984 $369,766 $200,046 $153,171 $111,850 Ratio of Expenses to Average Net Assets(c) 0.62%(b)(d) 1.15%(d) 1.04%(d) 1.01%(d) 0.97% 1.01% Ratio of Net Investment Income to Average Net Assets(c) 0.32%(b) 0.86% 1.35% 1.64% 2.17% 1.80% Portfolio Turnover Rate 15% (b) 48% 37% 27% 34% 53% (a)Distributions in excess of net investment income for the year ended August 31, 1998, aggregated less than $0.01 on a per share basis. (b)Based on operations for the period shown and, accordingly, are not representative of a full year. (c)Various expenses of the Fund were voluntarily absorbed by IFG for the six months ended February 28, 1999 and the year ended August 31, 1998. If such expenses had not be voluntarily absorbed, ratio of expenses to average net assets would have been 0.68% (not annualized) and 1.19%, respectively, and ratio of net investment income to average net assets would have been 0.26% (not annualized) and 0.82%, respectively. (d)Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by Investment Adviser, if applicable, 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-----