-----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, BrkcnIBJq2H6WxXeHfFmmtF1KUjjijA72fx63cotzSx3OqCqtXqMxVU7u+8/d1h+ xhkogc8V3Rgfr505/7RAIQ== 0000789940-98-000013.txt : 19981026 0000789940-98-000013.hdr.sgml : 19981026 ACCESSION NUMBER: 0000789940-98-000013 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980831 FILED AS OF DATE: 19981023 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INVESCO 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: 98729992 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 Annual Report August 31, 1998 INVESCO Value Funds Intermediate Government Bond Fund Total Return Fund Value Equity Fund INVESCO YOU SHOULD KNOW WHAT INVESCO KNOWS. (TM) Market Overview September 1998 What a difference a year makes. In the summer of 1997, market pundits were concerned that the Federal Reserve Board would have to raise interest rates to cool an overheating economy. Now, speculation has intensified that the Fed will continue to lower interest rates to address worldwide liquidity problems and keep the U.S. economy growing in the face of a global slowdown brought about by the emerging market currency crisis. But what has really changed in the last 12 months? o Market psychology for equities has deteriorated. After more than seven years of a bull market producing strong returns with limited volatility, equity markets experienced two painful corrections in the last 12 months. In fact, August 1998 was the worst month for equities since October 1987, as many equity indexes experienced declines over 15%. o Corporate earnings have slowed in 1998, as the strong dollar and slower global growth have made it difficult for many U.S. companies to sell their products overseas. In addition, intense global competition has kept prices in check -- making it difficult for companies to enhance earnings by increasing prices. o Inflation appears to be comatose. Although real wages are starting to increase, declining commodity prices and a flood of cheaper products from the world's emerging markets have decreased consumer prices and reduced the threat of inflation. o Interest rates have declined significantly. The implied yield on a 30-year U.S. government bond reached 7.17% in April 1997, and the economy appeared on the verge of overheating. But, as the Asian currency crisis intensified, a flight to quality occurred in the fixed-income market in the fall of 1997, and the yield on the 30-year bond dropped to 5.97% by year-end. As the global currency turmoil continued in 1998, the yield on the 30-year bond decreased and ended September at 4.95%. Interest rates are presently at levels not seen in the last three decades. The next six to 12 months may be difficult for equity investors. Although the economy still appears to be in good shape fundamentally, the emerging market turmoil has spread from Asia to Russia and is attempting to infect Latin America - -- which is a large trade partner of the U.S. Investors should be prepared for continued volatility for the rest of 1998. However, once the turmoil passes, it could create enormous opportunities for U.S. companies to increase their global presence. For fixed-income investors, global currency problems will continue to exert deflationary pressures on the U.S. economy, increasing the potential for lower interest rates. With inflation hibernating, the risks associated with owning fixed-income securities have decreased -- especially for high quality obligations. Recent market volatility is not necessarily indicative of a long-term downturn in the equity markets. For the patient investor with a long time horizon, stocks have offered the best opportunities to accumulate wealth. But if you are an investor who is uncomfortable with wide price swings, it may be a good time to evaluate your financial goals and adjust your portfolio accordingly. Remember that one of the best ways to reduce volatility is through diversification. INVESCO Value Funds The line graphs below illustrate the value of a $10,000 investment in each of the INVESCO Value Funds, plus reinvested dividends and capital gain distributions, for the 10-year period ended 8/31/98. The charts and other total return figures cited reflect the funds' operating expenses, but the indexes do not have expenses, which would, of course, have lowered their performance. (2) Intermediate Government Bond Fund Average Annual Total Return as of 8/31/98 (2) 1 Year 7.92% ---------------------------------- 5 Years 5.47% ---------------------------------- 10 Years 7.73% ---------------------------------- Graph: This line graph represents a comparison of the value of a $10,000 investment in the INVESCO 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 8/31/98. Intermediate Government Bond Fund For the one-year period ended 8/31/98, INVESCO Intermediate Government Bond Fund had a total return of 7.92%, compared to a total return of 9.27% for the Lehman Intermediate Government Bond Index. (Of course, past performance is not a guarantee of future results.)(1),(2) Review & Outlook A Discussion with Portfolio Manager Jim Baker What has changed over the past year? During the last 12 months, the Asian currency crisis spread from the Asian/Pacific Rim region to Russia and now appears to be heading towards Latin America. This caused interest rates in the U.S. to decrease and a "flight to quality" to occur in the fixed-income markets, where Treasury securities produced substantial returns. Although we have a large allocation of the portfolio exposed to Treasuries, we also increased the fund's weighting in agency-backed securities over the last year as widening spreads made these obligations more attractive. In addition, our analysis suggested lower interest rates, and we extended the fund's duration over the last six months. (Duration is the weighted average term-to-maturity of security's cash flows, generally used to measure the price volatility of a bond.) What's your near-term outlook? The flight to quality in the fixed-income market has increased spreads between Treasuries and other fixed-income obligations beyond their historical norms. It appears that there may be investment opportunities in intermediate-term corporate bonds and agency-backed securities, so we may adjust the portfolio accordingly. We will continue to use our value-oriented bond management style to actively manage the portfolio, and we believe the prospects for lower interest rates remain good. Fund Management Intermediate Government Bond Fund is managed by James O. Baker. Before joining INVESCO, Jim was associated with Willis Investment Counsel, Morgan Keegan, and Drexel Burnham Lambert. A Chartered Financial Analyst, he holds a BA from Mercer University. Ralph H. Jenkins, Jr., assists in managing the fund. He began his investment career in 1969 and is both a Chartered Financial Analyst and Chartered Investment Counselor. He earned his MA at the University of Alabama and a BBC from Auburn University. Total Return Fund Average Annual Total Return as of 8/31/99 (2) 1 Year 6.02% --------------------------- 5 Years 13.72% --------------------------- 10 Years 13.41% --------------------------- Graph: This line graph represents a comparison of the value of a $10,000 investment in the INVESCO Total Return Fund to the value of a $10,000 investment in the S&P 500 and Lehman Government/Corporate Bond Indexes, assuming in each case reinvestment of all dividends and capital gain distributions, for the ten year period ended 8/31/98. Total Return Fund For the one-year period ended 8/31/98, INVESCO Total Return Fund had a total return of 6.02%, compared to a total return of 8.08% for the S&P 500, and 11.43% for the Lehman Government/Corporate Bond Index. However, the fund outperformed its peer group for the same period, besting the average return of 2.56% as measured by the Lipper Flexible Portfolio objective. (Lipper Analytical Services, Inc., is an independent mutual fund analyst, which tracks total return unadjusted for commissions. Of course, past performance is not a guarantee of future results.) (1),(2) Review & Outlook A Discussion with Portfolio Manager and Chairman of INVESCO Capital Management Ed Mitchell What has changed over the past year? The fund seeks to add value in three ways: through asset allocation, stock selection, and bond strategy. Asset allocation decisions are based on the difference between returns on bonds and stocks. If this relationship is out-of-line with the historical spread of three percent, then the fund's asset mix is adjusted; 60% stocks and 40% bonds is considered a neutral position. During the last 12 months, declining interest rates have increased the spread between the implied return on stocks and the yield-to-maturity on bonds. With these widening spreads, we continue to favor stocks relative to bonds, as they appear more attractive on a long-term basis. If this environment persists, we will adjust the portfolio towards its maximum equity weighting of 70%. In the equity portion of the portfolio, what industries or sectors are you favoring? We employ a bottom-up methodology when selecting securities, concentrating on company fundamentals rather than sector or industry analysis. Our value bias has the fund overweighted in consumer cyclicals, basic materials, and utilities. We tend to avoid high-flying momentum stocks and instead concentrate investments on more conservative, value-oriented securities. What securities helped fund performance? During the last year, some of the strongest returns were posted by British Telecommunications PLC, Ford Motor, Schering-Plough Corp, and Southern New England Telecommunications. What changes have you made to the fixed-income portion of the portfolio? As the currency crisis spread, the fixed-income market experienced a flight to quality which Treasury securities outperformed all fixed-income obligations. Although we remain heavily weighted in Treasuries, the widening of corporate spreads enabled us to increase the fund's allocation to corporate bonds, as they presently appear attractively valued. During this period, we also extended the duration of the fund as the threat of inflation diminished. (Duration is the weighted average term-to-maturity of a security's cash flows, generally used to measure the price volatility of a bond.) What's your outlook for the near future? Although day-to-day volatility has increased in the equity markets, with interest rates at historically low levels we feel that equities still represent an attractive value compared to the potential returns on bonds. We have positioned the portfolio accordingly. Fund Management Total Return Fund is managed by Edward C. Mitchell, chairman of INVESCO Capital Management. He earned his MBA at the University of Colorado and a BA from the University of Virginia. 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 For the one-year period ended 8/31/98, INVESCO Value Equity Fund had a total return of -1.06%, compared to a total return of 8.08% for the S&P 500. However, the fund outperformed its peer group for the same period, beating the average return of 1.33% for funds in the Lipper Growth and Income objective. (Lipper Analytical Services, Inc., is an independent mutual fund analyst, which tracks total return unadjusted for commissions. Of course, past performance is not a guarantee of future results.) (1),(2) Review & Outlook A Discussion with Portfolio Manager Mike Harhai What has changed over the past year? Although market volatility increased in the last 12 months, we witnessed a continuation of a pattern established almost three years ago, which a limited number of large-capitalization growth companies supported the market. Because of our value-oriented, conservative investment approach, we stayed away from these high-flying momentum stocks and looked for value in other areas of the market. It is important to remember that both growth and value investment styles go through cycles of overperformance and underperformance. Value investing has lagged growth since 1994; but with the market correction in August 1998, we may be entering a period which value outperforms growth. Value Equity Fund Average Annual Total Return as of 8/31/98 (2) 1 Year -1.06% --------------------------- 5 Years 14.61% --------------------------- 10 Years 13.71% --------------------------- Graph: This line graph represents a comparison of the value of a $10,000 investment in the INVESCO 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 8/31/98. What areas have helped performance? The strongest returns for the fund over the last year have come from large-capitalization pharmaceuticals, such as Merck & Co., Schering-Plough Corp., and American Home Products. Large-capitalization pharmaceutical companies are benefiting from an improved regulatory environment and strong new product pipelines. The Federal Drug Administration (FDA) has dramatically cut the approval time for new drugs. This has improved the profitability of large-cap pharmaceuticals, since new drug sales typically drive their revenue and earnings growth. Not only are new drugs coming to the market sooner, but a better-educated consumer is increasing the demand for these new products. Have there been any disappointments? Being a value investor can be difficult at times, as value stocks often remain cheap for years, until they come back in style with the market. Over the last 12 months, the fund's exposure to both capital goods and basic materials companies hindered performance. However, many companies in these two sectors are selling at compelling valuations and may offer excellent long-term potential. What's your near-term outlook? The most recent market correction has created many value opportunities. We are presently increasing the fund's investment positions in some financial companies, as these stocks were decimated in August 1998. For the long-term value investor, market volatility many times creates investment opportunities. We will continue to use volatility as a way to improve the quality of the fund's holdings. After the most recent market correction, it appears the market is starting to broaden out and become less infatuated with a limited number of stocks. This bodes well for both the market and value investors. Fund Management Value Equity Fund is managed by Michael C. Harhai. Mike began his investment career in 1972. Before joining INVESCO, he served as a portfolio manager with Citizens & Southern Investment Advisors and later as head of the equity/balanced group with Sovran Capital Management. He holds an MBA from the University of Central Florida and a BA from the University of South Florida. He is a Chartered Financial Analyst, as is Terrence Irrgang, who assists in managing the fund. Terry is a 17-year veteran of the investment business, and holds an MBA from Temple University, as well as a BA from Gettysburg College. (1) The S&P 500 is an unmanaged index of common stocks considered representative of the broad U.S. equity market. 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. (2)Total return assumes reinvestment of dividends and capital gain distributions for the periods indicated. Past performance is not a guarantee of future results. Investment return and principal value will fluctuate so that, when redeemed, an investor's shares may be worth more or less than when purchased. Ten Largest Common Stock Holdings August 31, 1998 Description Value - ------------------------------------------------------- Total Return Fund British Telecommunications PLC Sponsored ADR Representing 10 Ord Shrs $ 38,381,250 Schering-Plough Corp 30,100,000 DTE Energy 29,487,500 Entergy Corp 28,812,500 Nucor Corp 28,750,000 Unicom Corp 28,500,000 Compaq Computer 27,937,500 Loews Corp 27,421,875 Bristol-Myers Squibb 24,468,750 Supervalu Inc 24,375,000 Value Equity Fund Rite Aid $ 8,467,875 Fannie Mae 7,754,906 Schering-Plough Corp 7,224,000 Merck & Co 6,701,187 Torchmark Corp 6,613,750 American General 6,425,000 NationsBank Corp 6,347,748 Vulcan Materials 6,277,450 Lowe's Cos 6,248,137 Allergan Inc 6,142,500 Composition of holdings is subject to change. - ------------------------------------------------------------------------------ Statement of Investment Securities August 31, 1998 - ------------------------------------------------------------------------------ Shares or Principal % Description Amount Value - ------------------------------------------------------------------------------ Intermediate Government Bond Fund 85.12 FIXED INCOME SECURITIES 54.68 US Government Obligations US Treasury Bonds 9.250%, 2/15/2016 $ 500,000 $ 715,312 7.625%, 2/15/2025 $ 500,000 651,406 US Treasury Notes 8.750%, 8/15/2000 $ 2,000,000 2,139,376 8.500%, 2/15/2000 $ 1,000,000 1,047,500 7.500%, 11/15/2001 $ 1,900,000 2,038,345 7.500%, 5/15/2002 $ 1,450,000 1,568,266 6.375%, 9/30/2001 $ 2,500,000 2,595,313 6.375%, 8/15/2002 $ 1,750,000 1,833,125 6.250%, 1/31/2002 $ 2,000,000 2,075,000 6.250%, 2/15/2003 $ 1,000,000 1,048,438 6.000%, 10/15/1999 $ 1,000,000 1,009,063 5.750%, 11/30/2002 $ 1,500,000 1,540,312 5.750%, 8/15/2003 $ 1,000,000 1,030,938 5.500%, 2/15/2008 $ 1,000,000 1,030,938 - ------------------------------------------------------------------------------ TOTAL US GOVERNMENT OBLIGATIONS (Cost $19,625,486) 20,323,332 - ------------------------------------------------------------------------------ 30.44 US Government Agency Obligations Fannie Mae, Gtd Mortgage Pass-Through Certificates 7.000%, 1/1/2028 $ 980,110 998,114 6.500%, 2/1/2028 $ 977,822 981,694 6.000%, 5/15/2008 $2,000,000 2,056,344 6.000%, 5/1/2009 $ 766,708 768,901 Federal Farm Credit Bank Medium-Term Notes 6.320%, 10/12/2010 $ 500,000 529,173 Federal Home Loan Bank 5.675%, 8/18/2003 $1,000,000 1,013,298 Freddie Mac, Gold Participation Certificates 8.000%, 10/1/2010 $ 666,543 687,899 7.000%, 6/1/2028 $ 992,632 1,010,936 6.500%, 7/1/2001 $ 661,277 667,506 Government National Mortgage Association I, Pass-Through Certificates 7.500%, 3/15/2026 $ 959,898 988,368 7.000%, 10/15/2008 $ 505,470 519,542 6.500%, 10/15/2008 $ 504,442 513,800 6.000%, 11/15/2008 $ 572,061 575,979 - ------------------------------------------------------------------------------ TOTAL US GOVERNMENT AGENCY OBLIGATIONS (Cost $11,198,303) 11,311,554 - ------------------------------------------------------------------------------ TOTAL FIXED INCOME SECURITIES (Cost $30,823,789) 31,634,886 - ------------------------------------------------------------------------------ 14.88 SHORT-TERM INVESTMENTS 5.66 US Government Obligations US Treasury Notes 8.000%, 8/15/1999 $ 2,000,000 2,051,876 6.375%, 7/15/1999 $ 50,000 50,516 - ------------------------------------------------------------------------------ TOTAL US GOVERNMENT OBLIGATIONS (Cost $2,087,227) 2,102,392 - ------------------------------------------------------------------------------ 9.22 Repurchase Agreements Repurchase Agreement with State Street dated 8/31/1998 due 9/1/1998 at 5.730%, repurchased at $3,429,546 (Collaterized by US Treasury Bonds due 8/15/2026 at 6.750%, value $3,533,809) (Cost $3,429,000) $ 3,429,000 3,429,000 - ------------------------------------------------------------------------------ TOTAL SHORT-TERM INVESTMENTS (Cost $5,516,227) 5,531,392 - ------------------------------------------------------------------------------ 100.00 TOTAL INVESTMENT SECURITIES AT VALUE (Cost $36,340,016) (Cost for Income Tax Purposes $36,426,802) $ 37,166,278 ============================================================================== Total Return Fund 61.93 COMMON STOCKS 2.38 AEROSPACE & DEFENSE Boeing Co 450,000 $ 13,921,875 Lockheed Martin 175,000 15,301,563 Precision Castparts 350,000 13,190,625 Raytheon Co Class B 400,000 18,250,000 - ------------------------------------------------------------------------------ 60,664,063 - ------------------------------------------------------------------------------ 0.32 AIRLINES Southwest Airlines 450,000 8,015,625 - ------------------------------------------------------------------------------ 1.06 AUTO PARTS Cooper Tire & Rubber 319,850 5,117,600 Genuine Parts 700,000 21,918,750 - ------------------------------------------------------------------------------ 27,036,350 - ------------------------------------------------------------------------------ 0.87 AUTOMOBILES Ford Motor 500,000 22,000,000 - ------------------------------------------------------------------------------ 3.26 BANKS First Chicago NBD 300,000 19,012,500 First Union 300,000 14,550,000 National City 405,000 23,793,750 NationsBank Corp 250,000 14,250,000 Wachovia Corp 154,000 11,290,125 - ------------------------------------------------------------------------------ 82,896,375 - ------------------------------------------------------------------------------ 0.45 BEVERAGES Anheuser-Busch Cos 250,000 11,531,250 - ------------------------------------------------------------------------------ 0.56 BUILDING MATERIALS Sherwin-Williams Co 600,000 14,325,000 - ------------------------------------------------------------------------------ 2.18 CHEMICALS Dow Chemical 200,000 15,600,000 Great Lakes Chemical 600,000 23,475,000 Morton International 650,000 14,462,500 Octel Corp(a) 125,000 1,921,875 - ------------------------------------------------------------------------------ 55,459,375 - ------------------------------------------------------------------------------ 3.59 COMPUTER RELATED Adaptec Inc(a) 500,000 5,750,000 Compaq Computer 1,000,000 27,937,500 Computer Associates International 400,000 10,800,000 Hewlett-Packard Co 500,000 24,281,250 International Business Machines 200,000 22,525,000 - ------------------------------------------------------------------------------ 91,293,750 - ------------------------------------------------------------------------------ 1.26 CONGLOMERATES Hanson PLC Sponsored ADR Representing 5 Ord Shrs 900,000 22,162,500 National Service Industries 265,000 9,871,250 - ------------------------------------------------------------------------------ 32,033,750 - ------------------------------------------------------------------------------ 0.96 DISTRIBUTION Supervalu Inc 1,200,000 24,375,000 - ------------------------------------------------------------------------------ 4.53 ELECTRIC UTILITIES DTE Energy 700,000 29,487,500 Edison International 600,000 17,062,500 Entergy Corp 1,000,000 28,812,500 GPU Inc 300,000 11,268,750 Unicom Corp 800,000 28,500,000 - ------------------------------------------------------------------------------ 115,131,250 1.25 ELECTRICAL EQUIPMENT General Electric 300,000 24,000,000 Grainger (W W) Inc 200,000 7,837,500 - ------------------------------------------------------------------------------ 31,837,500 - ------------------------------------------------------------------------------ 0.71 ELECTRONICS -- SEMICONDUCTOR Rockwell International 500,000 18,125,000 - ------------------------------------------------------------------------------ 0.49 FINANCIAL MGIC Investment 300,000 12,450,000 - ------------------------------------------------------------------------------ 1.69 FOODS Archer-Daniels-Midland Co 892,500 13,387,500 Heinz (H J) Co 200,000 10,662,500 Unilever NV New York Registered Shrs 300,000 19,012,500 - ------------------------------------------------------------------------------ 43,062,500 - ------------------------------------------------------------------------------ 0.57 HARDWARE & TOOLS Snap-On Inc 550,000 14,437,500 - ------------------------------------------------------------------------------ 4.92 HEALTH CARE DRUGS -- PHARMACEUTICALS Abbott Laboratories 350,000 13,475,000 American Home Products 400,000 20,050,000 Bristol-Myers Squibb 250,000 24,468,750 Lilly (Eli) & Co 300,000 19,650,000 Merck & Co 150,000 17,390,625 Schering-Plough Corp 350,000 30,100,000 - ------------------------------------------------------------------------------ 125,134,375 - ------------------------------------------------------------------------------ 0.71 HEALTH CARE RELATED Columbia/HCA Healthcare 800,000 18,050,000 - ------------------------------------------------------------------------------ 0.82 HOUSEHOLD FURNITURE & APPLIANCES Shaw Industries 400,000 6,050,000 Whirlpool Corp 300,000 14,887,500 - ------------------------------------------------------------------------------ 20,937,500 - ------------------------------------------------------------------------------ 4.68 INSURANCE American General 300,000 19,275,000 Lincoln National 200,000 17,200,000 Loews Corp 325,000 27,421,875 Ohio Casualty 600,000 22,500,000 Old Republic International 550,000 12,271,875 SAFECO Corp 500,000 20,312,500 - ------------------------------------------------------------------------------ 118,981,250 - ------------------------------------------------------------------------------ 0.63 INSURANCE BROKERS Marsh & McLennan 330,000 16,005,000 - ------------------------------------------------------------------------------ 0.91 INVESTMENT BANK/BROKER FIRM Morgan Stanley Dean Witter & Co 400,000 23,225,000 - ------------------------------------------------------------------------------ 1.13 IRON & STEEL Nucor Corp 800,000 28,750,000 - ------------------------------------------------------------------------------ 1.18 MACHINERY Caterpillar Inc 400,000 16,875,000 Deere & Co 400,000 13,175,000 - ------------------------------------------------------------------------------ 30,050,000 - ------------------------------------------------------------------------------ 1.70 MANUFACTURING Federal Signal 350,000 7,131,250 Illinois Tool Works 200,000 9,687,500 Minnesota Mining & Manufacturing 150,000 10,275,000 Textron Inc 120,000 7,530,000 York International 250,000 8,656,250 - ------------------------------------------------------------------------------ 43,280,000 - ------------------------------------------------------------------------------ 0.53 METALS MINING Phelps Dodge 300,000 13,425,000 - ------------------------------------------------------------------------------ 1.08 OFFICE EQUIPMENT & SUPPLIES Ikon Office Solutions 1,000,000 5,562,500 Xerox Corp 250,000 21,953,125 - ------------------------------------------------------------------------------ 27,515,625 - ------------------------------------------------------------------------------ 4.27 OIL & GAS RELATED Amoco Corp 500,000 22,656,250 Exxon Corp 300,000 19,631,250 Norsk Hydro A/SA Sponsored ADR Representing Ord Shrs 600,000 20,625,000 Repsol SA Sponsored ADR Representing Ord Shrs 450,000 19,771,875 Royal Dutch Petroleum New York Registry 1.25 Gldr Shrs 260,000 10,335,000 Yacimientos Petroliferos Fiscades SA Sponsored ADR Representing Class D Shrs 700,000 15,487,500 - ------------------------------------------------------------------------------ 108,506,875 - ------------------------------------------------------------------------------ 0.26 PAPER & FOREST PRODUCTS Westvaco Corp 310,000 6,510,000 - ------------------------------------------------------------------------------ 1.14 POLLUTION CONTROL Browning-Ferris Industries 400,000 13,000,000 Waste Management (a) 362,500 15,995,312 - ------------------------------------------------------------------------------ 28,995,312 - ------------------------------------------------------------------------------ 0.65 PUBLISHING Gannett Co 280,000 16,520,000 - ------------------------------------------------------------------------------ 0.74 RAILROADS CSX Corp 500,000 18,875,000 - ------------------------------------------------------------------------------ 2.36 RETAIL DillardOs Inc Class A 650,000 18,768,750 K mart Corp(a) 500,000 6,375,000 Penney (J C) Co 300,000 14,868,750 Rite Aid 350,000 12,665,625 Toys "R" Us(a) 400,000 7,425,000 - ------------------------------------------------------------------------------ 60,103,125 - ------------------------------------------------------------------------------ 1.69 SERVICES Dun & Bradstreet 750,000 17,625,000 Electronic Data Systems 700,000 23,450,000 R H Donnelley 150,000 1,978,125 - ------------------------------------------------------------------------------ 43,053,125 - ------------------------------------------------------------------------------ 0.68 SPECIALTY PRINTING Deluxe Corp 600,000 17,400,000 - ------------------------------------------------------------------------------ 1.51 TELECOMMUNICATIONS -- LONG DISTANCE British Telecommunications PLC Sponsored ADR Representing 10 Ord Shrs 300,000 38,381,250 - ------------------------------------------------------------------------------ 1.85 TELEPHONE Bell Atlantic 300,000 13,237,500 Southern New England Telecommunications 300,000 19,443,750 Telefonos de Mexico SA de CV Sponsored ADR Representing 20 Series L Shrs 400,000 14,275,000 - ------------------------------------------------------------------------------ 46,956,250 - ------------------------------------------------------------------------------ 1.04 TEXTILE -- APPAREL MANUFACTURING Liz Claiborne 400,000 11,400,000 VF Corp 400,000 15,150,000 - ------------------------------------------------------------------------------ 26,550,000 - ------------------------------------------------------------------------------ 1.32 TOBACCO Fortune Brands 250,000 6,890,625 Gallaher Group PLC Sponsored ADR Representing 4 Ord Shrs 250,000 5,875,000 Philip Morris 500,000 20,781,250 - ------------------------------------------------------------------------------ 33,546,875 - ------------------------------------------------------------------------------ TOTAL COMMON STOCKS (Cost $1,295,341,524) 1,575,425,850 - ------------------------------------------------------------------------------ 33.73 FIXED INCOME SECURITIES 20.94 US Government Obligations US Treasury Bonds 11.250%, 2/15/2015 $ 12,950,000 21,318,937 9.375%, 2/15/2006 $ 38,750,000 48,934,002 9.250%, 2/15/2016 $ 20,800,000 29,757,000 8.125%, 8/15/2019 $ 20,800,000 27,670,510 7.625%, 2/15/2025 $ 45,000,000 58,626,583 7.250%, 8/15/2022 $ 36,800,000 45,517,000 US Treasury Notes 8.750%, 8/15/2000 $ 25,000,000 26,742,199 8.000%, 5/15/2001 $ 20,500,000 22,037,500 6.500%, 8/15/2005 $ 29,300,000 31,763,045 6.375%, 8/15/2002 $ 38,750,000 40,590,625 6.250%, 2/15/2003 $ 43,300,000 45,397,364 6.125%, 8/15/2007 $ 51,000,000 54,585,961 5.750%, 8/15/2003 $ 18,300,000 18,866,165 5.500%, 2/15/2008 $ 40,000,000 41,237,518 US Treasury Security Stripped Interest Payment, Generic Tint Payment, Zero Coupon 8/15/2003 $ 25,250,000 19,741,712 - ------------------------------------------------------------------------------ TOTAL US GOVERNMENT OBLIGATIONS (Cost $500,202,339) 532,786,121 - ------------------------------------------------------------------------------ 4.54 US Government Agency Obligations Fannie Mae Gtd Mortgage Pass-Through Certificates 8.500%, 3/1/2010 $ 4,589,903 4,785,479 8.000%, 7/1/2024 $ 5,666,647 5,866,169 7.500%, 8/1/2007 $ 1,241,021 1,276,750 7.500%, 7/1/2024 $ 10,442,404 10,726,436 7.000%, 12/1/2027 $ 9,507,899 9,682,559 6.500%, 5/1/2026 $ 6,823,328 6,872,523 6.000%, 5/1/2009 $ 7,680,708 7,702,675 Medium-Term Notes 6.060%, 10/8/2002 $ 20,000,000 20,507,339 Freddie Mac, Gold Participation Certificates 8.000%, 10/1/2010 $ 3,110,535 3,210,197 8.000%, 5/1/2024 $ 4,986,575 5,158,512 7.500%, 12/1/2026 $ 7,492,535 7,697,305 7.000%, 4/1/2028 $ 11,624,078 11,838,425 6.500%, 7/1/2001 $ 4,628,938 4,672,542 Government National Mortgage Association, Pass-Through Certificates 7.500%, 3/15/2026 $ 4,479,522 4,612,384 7.000%, 10/15/2008 $ 741,626 762,273 7.000%, 12/15/2025 $ 8,085,461 8,264,553 7.000%, 12/15/2022 $ 184,997 189,694 6.500%, 10/15/2008 $ 756,663 770,699 6.000%, 11/15/2008 $ 858,091 863,969 - ------------------------------------------------------------------------------ TOTAL US GOVERNMENT AGENCY OBLIGATIONS (Cost $113,296,345) 115,460,483 - ------------------------------------------------------------------------------ 8.24 Corporate Bonds 0.81 AUTOMOBILES Ford Motor, Notes 6.500%, 8/1/2018 $ 15,000,000 14,787,419 General Motors Acceptance, Notes 6.125%, 1/22/2008 $ 6,000,000 5,943,720 - ------------------------------------------------------------------------------ 20,731,139 - ------------------------------------------------------------------------------ 2.46 BANKS ABN Amro Bank NV Sub Notes 6.625%, 10/31/2001 $ 5,000,000 5,151,655 7.550%, 6/28/2006 $ 15,000,000 16,269,585 BankAmerica Corp Sub Notes 6.875%, 6/1/2003 $ 4,000,000 4,170,348 National City, Sub Notes 7.200%, 5/15/2005 $ 2,000,000 2,154,308 SunTrust Banks, Sr Notes 6.250%, 6/1/2008 $ 17,250,000 17,372,939 Wachovia Bank Medium-Term Notes Series 3 7.000%, 10/17/2008 $ 7,000,000 7,463,750 Wachovia Corp, Sub Notes 6.250%, 8/4/2008 $ 10,000,000 10,070,180 - ------------------------------------------------------------------------------ 62,652,765 - ------------------------------------------------------------------------------ 0.24 CHEMICALS Eastman Chemical, Notes 6.375%, 1/15/2004 $ 6,000,000 5,978,591 - ------------------------------------------------------------------------------ 0.61 COMMUNICATIONS -- EQUIPMENT & MANUFACTURING Motorola Inc, Notes 6.500%, 3/1/2008 $ 15,000,000 15,562,095 - ------------------------------------------------------------------------------ 0.12 ELECTRIC UTILITIES Duke Energy, Medium-Term Notes 6.125%, 7/22/2003 $ 2,900,000 2,957,719 - ------------------------------------------------------------------------------ 0.36 FINANCIAL Associates Corp of North America, Sr Notes 6.375%, 10/15/2002 $ 5,000,000 5,123,524 Commercial Credit, Notes 6.375%, 9/15/2002 $ 4,000,000 4,080,540 - ------------------------------------------------------------------------------ 9,204,064 - ------------------------------------------------------------------------------ 0.94 FOODS CPC International Medium-Term Notes Series D 6.875%, 10/15/2003 $ 3,000,000 3,176,547 Notes, Series C 6.150%, 1/15/2006 $ 15,000,000 15,275,894 Campbell Soup, Notes 6.900%, 10/15/2006 $ 5,000,000 5,373,244 - ------------------------------------------------------------------------------ 23,825,685 - ------------------------------------------------------------------------------ 0.21 INSURANCE CNA Financial, Notes 6.450%, 1/15/2008 $ 5,300,000 5,258,231 - ------------------------------------------------------------------------------ 0.31 LEISURE TIME Carnival Corp, Notes 6.150%, 4/15/2008 $ 8,000,000 8,024,336 - ------------------------------------------------------------------------------ 0.47 MACHINERY Cooper Industries Medium-Term Notes Series 3 6.375%, 5/8/2008 $ 11,600,000 11,881,566 - ------------------------------------------------------------------------------ 0.36 NATURAL GAS Enron Corp, Notes 6.625%, 11/15/2005 $ 9,000,000 9,195,984 - ------------------------------------------------------------------------------ 0.14 PUBLISHING Gannett Co, Notes 5.850%, 5/1/2000 $ 3,500,000 3,514,220 - ------------------------------------------------------------------------------ 0.38 RETAIL May Department Stores, Deb 6.875%, 11/1/2005 $ 4,000,000 4,219,272 Wal-Mart Stores, Notes 8.625%, 4/1/2001 $ 5,000,000 5,379,614 - ------------------------------------------------------------------------------ 9,598,886 - ------------------------------------------------------------------------------ 0.68 TELEPHONE Ameritech Capital Funding, Notes 6.150%, 1/15/2008 $ 15,000,000 15,166,154 BellSouth Telecommunications, Notes 6.500%, 6/15/2005 $ 2,000,000 2,087,244 - ------------------------------------------------------------------------------ 17,253,398 - ------------------------------------------------------------------------------ 0.16 TOYS Mattel Inc, Notes 6.750%, 5/15/2000 $ 4,000,000 4,063,655 - ------------------------------------------------------------------------------ TOTAL CORPORATE BONDS (Cost $206,938,107) 209,702,334 - ------------------------------------------------------------------------------ TOTAL FIXED INCOME SECURITIES (Cost $820,436,791) 857,948,938 - ------------------------------------------------------------------------------ 4.34 SHORT-TERM INVESTMENTS 0.79 US Government Obligations US Treasury Notes 6.375%, 7/15/1999 (Cost $20,025,803) $ 20,000,000 20,206,259 - ------------------------------------------------------------------------------ 0.10 Corporate Bonds 0.06 BEVERAGES PepsiCo Inc, Deb 7.750%, 10/1/1998 $ 1,500,000 1,502,254 - ------------------------------------------------------------------------------ 0.04 ELECTRIC UTILITIES Duke Energy, 1st & Ref Mortgage, Notes 7.500%, 4/1/1999 $ 1,000,000 1,009,765 - ------------------------------------------------------------------------------ TOTAL CORPORATE BONDS (Cost $2,508,363) 2,512,019 - ------------------------------------------------------------------------------ 3.45 Repurchase Agreements Repurchase Agreement with State Street dated 8/31/1998 due 9/1/1998 at 5.730%, repurchased at $87,866,983 (Collateralized by US Treasury Bonds, due 8/15/2021 at 8.125%, value $90,366,478) (Cost $87,853,000) $ 87,853,000 87,853,000 - ------------------------------------------------------------------------------ TOTAL SHORT-TERM INVESTMENTS (Cost $110,387,166) 110,571,278 - ------------------------------------------------------------------------------ 100.00 TOTAL INVESTMENT SECURITIES AT VALUE (Cost $2,226,165,481) (Cost for Income Tax Purposes $2,227,278,800) $ 2,543,946,066 ============================================================================== Value Equity Fund 98.08 COMMON STOCKS 3.56 AEROSPACE & DEFENSE Lockheed Martin 53,260 $ 4,656,921 Precision Castparts 62,000 2,336,625 Raytheon Co Class B 120,000 5,475,000 - ------------------------------------------------------------------------------ 12,468,546 1.48 AIRLINES Southwest Airlines 290,400 5,172,750 - ------------------------------------------------------------------------------ 1.62 AUTOMOBILES Ford Motor 128,600 5,658,400 - ------------------------------------------------------------------------------ 6.95 BANKS Chase Manhattan 30,000 1,590,000 Commerce Bancshares 100,000 4,000,000 First Chicago NBD 80,000 5,070,000 First Union 60,000 2,910,000 NationsBank Corp 111,364 6,347,748 Wachovia Corp 60,000 4,398,750 - ------------------------------------------------------------------------------ 24,316,498 - ------------------------------------------------------------------------------ 0.92 BEVERAGES PepsiCo Inc 116,000 3,211,750 - ------------------------------------------------------------------------------ 4.95 BUILDING MATERIALS Lowe's Cos 178,200 6,248,137 Sherwin-Williams Co 200,000 4,775,000 Vulcan Materials 56,300 6,277,450 - ------------------------------------------------------------------------------ 17,300,587 0.68 CHEMICALS Dow Chemical 30,600 2,386,800 - ------------------------------------------------------------------------------ 5.34 COMPUTER RELATED Compaq Computer 148,200 4,140,337 Computer Associates International 113,225 3,057,075 International Business Machines 36,000 4,054,500 Oracle Corp(a) 174,400 3,477,100 Sun Microsystems(a) 99,900 3,958,538 - ------------------------------------------------------------------------------ 18,687,550 - ------------------------------------------------------------------------------ 1.95 CONGLOMERATES Hanson PLC Sponsored ADR Representing 5 Ord Shrs 150,000 3,693,750 National Service Industries 84,400 3,143,900 - ------------------------------------------------------------------------------ 6,837,650 - ------------------------------------------------------------------------------ 1.39 DISTRIBUTION Supervalu Inc 240,000 4,875,000 - ------------------------------------------------------------------------------ 4.31 ELECTRIC UTILITIES DTE Energy 137,000 5,771,125 Southern Co 135,000 3,796,875 Unicom Corp 155,000 5,521,875 - ------------------------------------------------------------------------------ 15,089,875 - ------------------------------------------------------------------------------ 1.66 ELECTRICAL EQUIPMENT General Electric 72,500 5,800,000 - ------------------------------------------------------------------------------ 4.00 FINANCIAL Associates First Capital Class A 33,704 1,992,749 Fannie Mae 136,500 7,754,906 MGIC Investment 102,100 4,237,150 - ------------------------------------------------------------------------------ 13,984,805 - ------------------------------------------------------------------------------ 11.31 HEALTH CARE DRUGS -- PHARMACEUTICALS Abbott Laboratories 94,000 3,619,000 Allergan Inc 130,000 6,142,500 Allergan Specialty Therapeutics Class A(a) 6,500 62,969 American Home Products 100,000 5,012,500 Bristol-Myers Squibb 60,000 5,872,500 Merck & Co 57,800 6,701,187 Schering-Plough Corp 84,000 7,224,000 Warner-Lambert Co 75,600 4,932,907 - ------------------------------------------------------------------------------ 39,567,563 - ------------------------------------------------------------------------------ 2.15 HEALTH CARE RELATED Biomet Inc 168,900 4,539,187 Columbia/HCA Healthcare 132,000 2,978,250 - ------------------------------------------------------------------------------ 7,517,437 - ------------------------------------------------------------------------------ 1.28 HOUSEHOLD FURNITURE & APPLIANCES Whirlpool Corp 90,100 4,471,213 - ------------------------------------------------------------------------------ 11.40 INSURANCE American General 100,000 6,425,000 American International Group 79,125 6,117,352 General Re 26,500 5,498,750 Jefferson-Pilot Corp 86,362 4,901,044 Loews Corp 50,000 4,218,750 Old Republic International 72,500 1,617,656 SAFECO Corp 110,000 4,468,750 Torchmark Corp 185,000 6,613,750 - ------------------------------------------------------------------------------ 39,861,052 - ------------------------------------------------------------------------------ 1.25 INSURANCE BROKERS Marsh & McLennan 90,000 4,365,000 - ------------------------------------------------------------------------------ 0.70 IRON & STEEL Nucor Corp 68,200 2,450,937 - ------------------------------------------------------------------------------ 2.47 MACHINERY Caterpillar Inc 75,700 3,193,594 Dover Corp 200,000 5,450,000 - ------------------------------------------------------------------------------ 8,643,594 - ------------------------------------------------------------------------------ 2.96 MANUFACTURING Federal Signal 178,500 3,636,937 Textron Inc 54,100 3,394,775 York International 96,000 3,324,000 - ------------------------------------------------------------------------------ 10,355,712 - ------------------------------------------------------------------------------ 0.73 METALS MINING Phelps Dodge 57,200 2,559,700 - ------------------------------------------------------------------------------ 2.76 OFFICE EQUIPMENT & SUPPLIES Ikon Office Solutions 190,000 1,056,875 Pitney Bowes 69,100 3,429,088 Xerox Corp 58,700 5,154,594 - ------------------------------------------------------------------------------ 9,640,557 - ------------------------------------------------------------------------------ 6.60 OIL & GAS RELATED Amoco Corp 101,000 4,576,562 Exxon Corp 70,550 4,616,616 Norsk Hydro A/SA Sponsored ADR Representing Ord Shrs 90,000 3,093,750 Repsol SA Sponsored ADR Representing Ord Shrs 105,400 4,631,013 Royal Dutch Petroleum New York Registry 1.25 Gldr Shrs 88,304 3,510,084 Yacimientos Petroliferos Fiscades SA Sponsored ADR Representing Class D Shrs 120,000 2,655,000 - ------------------------------------------------------------------------------ 23,083,025 - ------------------------------------------------------------------------------ 0.90 PAPER & FOREST PRODUCTS Kimberly-Clark Corp 82,700 3,152,938 - ------------------------------------------------------------------------------ 1.00 PUBLISHING American Greetings Class A 95,900 3,512,337 - ------------------------------------------------------------------------------ 2.42 RETAIL Rite Aid 234,000 8,467,875 - ------------------------------------------------------------------------------ 2.99 SERVICES Dun & Bradstreet 230,000 5,405,000 Electronic Data Systems 116,600 3,906,100 GATX Corp 34,500 1,138,500 - ------------------------------------------------------------------------------ 10,449,600 - ------------------------------------------------------------------------------ 1.33 SPECIALTY PRINTING Deluxe Corp 160,000 4,640,000 - ------------------------------------------------------------------------------ 1.42 TELEPHONE Ameritech Corp 50,000 2,356,250 US West 50,000 2,600,000 - ------------------------------------------------------------------------------ 4,956,250 - ------------------------------------------------------------------------------ 2.83 TEXTILE -- APPAREL MANUFACTURING Liz Claiborne 186,000 5,301,000 VF Corp 121,200 4,590,450 - ------------------------------------------------------------------------------ 9,891,450 - ------------------------------------------------------------------------------ 1.29 TOBACCO Philip Morris 108,200 4,497,063 - ------------------------------------------------------------------------------ 1.48 TOYS Mattel Inc 160,400 5,192,950 - ------------------------------------------------------------------------------ TOTAL COMMON STOCKS (Cost $286,409,462) 343,066,464 - ------------------------------------------------------------------------------ 1.92 SHORT-TERM INVESTMENTS -- REPURCHASE AGREEMENTS Repurchase Agreement with State Street dated 8/31/1998 due 9/1/1998 at 5.730%, repurchased at $6,725,070 (Collateralized by US Treasury Bonds, due 8/15/2026 at 6.750%, value $6,925,906) (Cost $6,724,000) $ 6,724,000 6,724,000 - ------------------------------------------------------------------------------ 100.00 TOTAL INVESTMENT SECURITIES AT VALUE (Cost $293,133,462) (Cost for Income Tax Purposes $293,144,232) 349,790,464 ============================================================================== (a) Security is non-income producing. See Notes to Financial Statements
Statement of Assets and Liabilities August 31, 1998 Intermediate Government Total Return Value Equity Bond Fund Fund Fund - ------------------------------------------------------------------------------------------------------------------ ASSETS Investment Securities: At Cost(a) $36,340,016 $2,226,165,481 $293,133,462 ================================================================================================================== At Value(a) $37,166,278 $2,543,946,066 $349,790,464 Cash 292,024 0 540,937 Receivables: Investment Securities Sold 0 21,776,393 896,533 Fund Shares Sold 2,208,169 3,076,362 206,600 Dividends and Interest 328,671 11,157,039 787,812 Prepaid Expenses and Other Assets 14,374 166,711 36,325 - ------------------------------------------------------------------------------------------------------------------ TOTAL ASSETS 40,009,516 2,580,122,571 352,258,671 - ------------------------------------------------------------------------------------------------------------------ LIABILITIES Payables: Custodian 0 1,256 0 Distributions to Shareholders 4,780 214,743 4,011 Investment Securities Purchased 2,092,707 5,542,970 1,137,980 Fund Shares Repurchased 619,014 13,120,401 1,026,558 Accrued Distribution Expenses 4,814 54,926 79,421 Accrued Expenses and Other Payables 7,626 172,269 26,837 - ------------------------------------------------------------------------------------------------------------------ TOTAL LIABILITIES 2,728,941 19,106,565 2,274,807 - ------------------------------------------------------------------------------------------------------------------ Net Assets at Value $ 37,280,575 $2,561,016,006 $349,983,864 ================================================================================================================== NET ASSETS Paid-in Capital $ 36,592,934 $2,174,161,220 $261,737,953 Accumulated Undistributed (Distributions in Excess of) Net Investment Income 327 132,400 (10,836) Accumulated Undistributed Net Realized Gain (Loss) on Investment Securities and Foreign Currency Transactions (138,948) 68,941,801 31,599,745 Net Appreciation of Investment Securities and Foreign Currency Transactions 826,262 317,780,585 56,657,002 - ------------------------------------------------------------------------------------------------------------------ Net Assets at Value $ 37,280,575 $2,561,016,006 $349,983,864 ================================================================================================================== Shares Outstanding(b) 2,922,427 90,949,075 13,627,619 Net Asset Value, Offering and Redemption Price per Share $ 12.76 $ 28.16 $ 25.68 ==================================================================================================================
(a) Investment securities at cost and value at August 31, 1998 include repurchase agreements of $3,429,000, $87,853,000 and $6,724,000 for Intermediate Government Bond, Total Return and Value Equity 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 August 31, 1998, there was an unlimited number of authorized Fund shares. See Notes to Financial Statements
Statement of Operations Year Ended August 31, 1998 Intermediate Government Total Return Value Equity Bond Fund Fund Fund - ------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME INCOME Dividends $ 0 $ 35,209,430 $ 7,314,414 Interest 2,309,958 51,559,742 987,978 Foreign Taxes Withheld 0 (725,548) (73,487) - ------------------------------------------------------------------------------------------------------------------ TOTAL INCOME 2,309,958 86,043,624 8,228,905 - ------------------------------------------------------------------------------------------------------------------ EXPENSES Investment Advisory Fees 226,874 13,926,522 3,080,351 Distribution Expenses 29,217 101,656 520,628 Transfer Agent Fees 204,187 3,767,444 918,694 Administrative Fees 15,672 367,796 71,607 Custodian Fees and Expenses 10,567 283,390 61,090 Professional Fees and Expenses 15,662 83,603 28,494 Registration Fees and Expenses 26,402 251,231 83,210 Reports to Shareholders 7,910 173,135 82,270 Trustees' Fees and Expenses 11,280 114,919 29,153 Other Expenses 11,814 76,138 15,529 - ------------------------------------------------------------------------------------------------------------------ TOTAL EXPENSES 559,585 19,145,834 4,891,026 Fees and Expenses Absorbed by Investment Adviser (176,551) (197,490) (164,235) Fees and Expenses Paid Indirectly (4,877) (302,628) (26,514) - ------------------------------------------------------------------------------------------------------------------ NET EXPENSES 378,157 18,645,716 4,700,277 - ------------------------------------------------------------------------------------------------------------------ NET INVESTMENT INCOME 1,931,801 67,397,908 3,528,628 - ------------------------------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES Net Realized Gain on Investment Securities and Foreign Currency Transactions 440,515 86,022,682 39,716,148 Change in Net Appreciation (Depreciation) of Investment Securities and Foreign Currency Transactions 519,048 (79,067,445) (45,560,535) - ------------------------------------------------------------------------------------------------------------------ NET GAIN (LOSS) ON INVESTMENT SECURITIES 959,563 6,955,237 (5,844,387) - ------------------------------------------------------------------------------------------------------------------ Net Increase (Decrease) in Net Assets from Operations $ 2,891,364 $ 74,353,145 $(2,315,759) ==================================================================================================================
See Notes to Financial Statements
Statement of Changes in Net Assets Year Ended August 31 Intermediate Government Bond Fund Total Return Fund - -------------------------------------------------------------------------------------------------------------------- 1998 1997 1998 1997 OPERATIONS Net Investment Income $ 1,931,801 $ 2,385,295 $ 67,397,908 $ 44,496,579 Net Realized Gain on Investment Securities and Foreign Currency Transactions 440,515 126,618 86,022,682 20,361,309 Change in Net Appreciation (Depreciation) of Investment Securities and Foreign Currency Transactions 519,048 348,594 (79,067,445) 269,713,544 - -------------------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS FROM OPERATIONS 2,891,364 2,860,507 74,353,145 334,571,432 - -------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS Net Investment Income (1,931,801) (2,385,295) (67,353,840) (44,405,999) Net Realized Gain on Investment Securities and Foreign Currency Transactions 0 0 (34,772,560) (4,314,901) - -------------------------------------------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS (1,931,801) (2,385,295) (102,126,400) (48,720,900) - -------------------------------------------------------------------------------------------------------------------- FUND SHARE TRANSACTIONS Proceeds from Sale of Shares 33,923,198 26,474,792 1,412,738,595 997,370,885 Reinvestment of Distributions 1,744,866 2,208,130 100,609,294 47,962,510 - -------------------------------------------------------------------------------------------------------------------- 35,668,064 28,682,922 1,513,347,889 1,045,333,395 Amount Paid for Repurchases of Shares (43,787,720) (24,665,970) (770,152,733) (517,740,980) - -------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE TRANSACTIONS (8,119,656) 4,016,952 743,195,156 527,592,415 - -------------------------------------------------------------------------------------------------------------------- Total Increase (Decrease) in Net Assets (7,160,093) 4,492,164 715,421,901 813,442,947 NET ASSETS Beginning of Period 44,440,668 39,948,504 1,845,594,105 1,032,151,158 - -------------------------------------------------------------------------------------------------------------------- End of Period $ 37,280,575 $ 44,440,668 $ 2,561,016,006 $ 1,845,594,105 ==================================================================================================================== Accumulated Undistributed Net Investment Income Included in Net Assets at End of Period $ 327 $ 0 $ 132,400 $ 106,017 - -------------------------------------------------------------------------------------------------------------------- FUND SHARE TRANSACTIONS Shares Sold 2,691,029 2,132,651 46,622,819 39,163,785 Shares Issued from Reinvestment of Distributions 139,204 178,829 3,448,941 1,844,859 - -------------------------------------------------------------------------------------------------------------------- 2,830,233 2,311,480 50,071,760 41,008,644 Shares Repurchased (3,480,710) (1,985,434) (25,589,174) (20,216,862) - -------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Fund Shares (650,477) 326,046 24,482,586 20,791,782 ====================================================================================================================
See Notes to Financial Statements
Statement of Changes in Net Assets (Continued) Year Ended August 31 Value Equity Fund - -------------------------------------------------------------------------------------------------------------------- 1998 1997 OPERATIONS Net Investment Income $ 3,528,628 $ 4,046,156 Net Realized Gain on Investment Securities and Foreign Currency Transactions 39,716,148 20,055,067 Change in Net Appreciation (Depreciation) of Investment Securities and Foreign Currency Transactions (45,560,535) 57,254,344 - -------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (2,315,759) 81,355,567 - -------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS Net Investment Income (3,546,111) (4,071,368) In Excess of Net Investment Income (11,054) 0 Net Realized Gain on Investment Securities (26,588,368) (5,507,949) - -------------------------------------------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS (30,145,533) (9,579,317) - -------------------------------------------------------------------------------------------------------------------- FUND SHARE TRANSACTIONS Proceeds from Sales of Shares 451,339,743 517,380,902 Reinvestment of Distributions 28,948,214 9,315,225 - -------------------------------------------------------------------------------------------------------------------- 480,287,957 526,696,127 Amounts Paid for Repurchases of Shares (467,608,421) (428,752,415) - -------------------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS 12,679,536 97,943,712 - -------------------------------------------------------------------------------------------------------------------- Total Increase (Decrease) in Net Assets (19,781,756) 169,719,962 NET ASSETS Beginning of Period 369,765,620 200,045,658 - -------------------------------------------------------------------------------------------------------------------- End of Period $ 349,983,864 $ 369,765,620 ==================================================================================================================== Accumulated Undistributed (Distributions In Excess of) Net Investment Income Included in Net Assets at End of Period $ (10,836) $ 17,483 - -------------------------------------------------------------------------------------------------------------------- FUND SHARE TRANSACTIONS Shares Sold 15,256,421 20,198,347 Shares Issued from Reinvestment of Distributions 1,058,632 378,067 - -------------------------------------------------------------------------------------------------------------------- 16,315,053 20,576,414 Shares Repurchased (15,751,418) (16,506,962) - -------------------------------------------------------------------------------------------------------------------- Net Increase in Fund Shares 563,635 4,069,452 ====================================================================================================================
See Notes to Financial Statements Notes to Financial Statements NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Value Trust (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 foreign 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. Net capital loss carryovers utilized in 1998 by Intermediate Government Bond Fund amounted to $384,251. 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. Of the ordinary income distributions declared for the year ended August 31, 1998, 40.64% for Total Return Fund and 41.08% for Value Equity Fund qualified for the dividends received deduction available to the Trust's corporate shareholders. Investment income received from foreign sources may be subject to foreign withholding taxes. Dividend and interest income is shown gross of foreign withholding taxes in the accompanying financial statements. 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. For the year ended August 31, 1998, the effects of such differences were as follows: Accumulated Accumulated Undistributed Undistributed Net Realized Net Gain on Investment Investment Paid-In Fund Income Securities Capital - -------------------------------------------------------------------------------- Intermediate Government Bond Fund $ 327 $ (7,167) $ 6,840 Total Return Fund (17,685) 12,206 5,479 Value Equity Fund 218 (218) 0 Net investment income, net realized gains and net assets were not affected. 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. 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, Transfer Agent Fees are 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 year ended August 31, 1998, Fees and Expenses Paid Indirectly consisted of the following: Custodian Fees Transfer Fund and Expenses Agent Fees - -------------------------------------------------------------------------------- Intermediate Government Bond Fund $ 4,877 $ 0 Total Return Fund 132,918 169,710 Value Equity Fund 26,514 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 Fund 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 were made by ICM. Fees for such sub-advisory services were paid by IFG. A plan of distribution pursuant to Rule 12b-1 of the Act (the "Plan") became effective November 1, 1997 for Intermediate Government Bond and Value Equity Funds and June 1, 1998 for Total Return Fund. 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 net assets. For the year ended August 31, 1998, Intermediate Government Bond, Total Return and Value Equity Funds paid the Distributor $24,404, $46,730 and $441,207, 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 year ended August 31, 1998, the aggregate cost of purchases and proceeds from sales of investment securities (excluding all U.S. Government securities and short-term securities) were as follows: Fund Purchases Sales - -------------------------------------------------------------------------------- Total Return Fund $ 772,525,780 $ 187,652,626 Value Equity Fund 185,239,228 204,715,145 For the year ended August 31, 1998, the aggregate cost of purchases and proceeds from sales of U.S. Government securities were as follows: Fund Purchases Sales - -------------------------------------------------------------------------------- Intermediate Government Bond Fund $ 20,419,860 $ 27,079,777 Total Return Fund 395,374,324 245,372,102 NOTE 4 -- APPRECIATION AND DEPRECIATION. At August 31, 1998, the gross appreciation of securities in which there was an excess of value over tax cost, 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 $ 750,099 $ 10,623 $ 739,476 Total Return Fund 444,066,771 127,399,505 316,667,266 Value Equity Fund 89,878,865 33,232,633 56,646,232
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 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 were based on an annual rate equal to 40% of the retainer fee at the time of retirement. As of July 1, 1998, benefits are based on an annual rate of 50% of the sum of the retainer fee at the time of retirement plus the annual meeting fee. Pension expenses for the year ended August 31, 1998, 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 $ 813 $ 1,865 $ 4,392 Total Return Fund 29,936 38,653 94,494 Value Equity Fund 6,032 9,615 22,832
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 August 31, 1998, there were no such borrowings. - -------------------------------------------------------------------------------- Other Information UNAUDITED On May 6, 1998, a special meeting of the shareholders of the INVESCO Total Return Fund (the "Total Return Fund" or the "Fund") was held at which the approval to change the investment policies of Total Return Fund to permit more than five percent of the Fund's assets to be invested in a single issuer, provided that such purchases do not exceed twenty-five percent of the Fund's assets (Proposal 1) was ratified and the approval of a Plan and Agreement of Distirbutions (the "Plan") for the Fund (Proposal 2) was ratified. The following is a report on the votes cast: Proposal For Against Abstain Total - ------------------------------------------------------------------------------- Total Return Fund Proposal 1 35,278,372 3,561,055 2,964,897 41,804,324 Proposal 2 34,319,085 4,263,842 3,221,397 41,804,324 Financial Highlights -- Intermediate Government Bond Fund (For a Fund Share Outstanding Throughout Each Period)
Year Ended August 31 - ---------------------------------------------------------------------------------------------------------- 1998 1997 1996 1995 1994 PER SHARE DATA Net Asset Value -- Beginning of Period $12.44 $12.30 $12.64 $12.16 $13.25 - ---------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS Net Investment Income 0.64 0.66 0.73 0.73 0.70 Net Gains or (Losses) on Securities (Both Realized and Unrealized) 0.32 0.14 (0.34) 0.48 (0.75) - ---------------------------------------------------------------------------------------------------------- Total from Investment Operations 0.96 0.80 0.39 1.21 (0.05) - ---------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS Dividends from Net Investment Income(a) 0.64 0.66 0.73 0.73 0.70 Distributions from Capital Gains 0.00 0.00 0.00 0.00 0.34 - ---------------------------------------------------------------------------------------------------------- Total Distributions 0.64 0.66 0.73 0.73 1.04 - ---------------------------------------------------------------------------------------------------------- Net Asset Value -- End of Period $12.76 $12.44 $12.30 $12.64 $12.16 ========================================================================================================== TOTAL RETURN 7.92% 6.64% 3.12% 10.36% (0.37%) RATIOS Net Assets -- End of Period ($000 Omitted) $37,281 $44,441 $39,949 $37,339 $31,861 Ratio of Expenses to Average Net Assets(b) 1.01%(c) 1.02%(c) 1.15%(c) 1.20% 1.07% Ratio of Net Investment Income to Average Net Assets(b) 5.11% 5.32% 5.81% 6.04% 5.58% Portfolio Turnover Rate 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) Various expenses of the Fund were voluntarily absorbed by IFG for 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 1.48%, 1.37% and 1.24%, respectively, and ratio of net investment income to average net assets would have been 4.64%, 4.97% and 5.72%, respectively. (c) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by Investment Adviser, which is before any expense offset arrangements. Financial Highlights (Continued) -- Total Return Fund (For a Fund Share Outstanding Throughout Each Period)
Year Ended August 31 - ---------------------------------------------------------------------------------------------------------- 1998 1997 1996 1995 1994 PER SHARE DATA Net Asset Value -- Beginning of Period $27.77 $22.60 $20.95 $18.54 $18.27 - ---------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS Net Investment Income 0.83 0.77 0.73 0.72 0.69 Net Gains on Securities (Both Realized and Unrealized) 0.87 5.26 1.78 2.46 0.60 - ---------------------------------------------------------------------------------------------------------- Total from Investment Operations 1.70 6.03 2.51 3.18 1.29 - ---------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS Dividends from Net Investment Income 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 0.09 Distributions from Capital Gains 0.48 0.09 0.13 0.05 0.17 In Excess of Capital Gains 0.00 0.00 0.00 0.00 0.16 - ---------------------------------------------------------------------------------------------------------- Total Distributions 1.31 0.86 0.86 0.77 1.02 - ---------------------------------------------------------------------------------------------------------- Net Asset Value -- End of Period $28.16 $27.77 $22.60 $20.95 $18.54 ========================================================================================================== TOTAL RETURN 6.02% 27.01% 12.06% 17.54% 7.22% RATIOS Net Assets -- End of Period ($000 Omitted) $2,561,016 $1,845,594 $1,032,151 $563,468 $292,765 Ratio of Expenses to Average Net Assets(b) 0 .79%(c) 0.86%(c) 0.89%(c) 0.95% 0.96% Ratio of Net Investment Income to Average Net Assets(b) 2.82% 3.11% 3.44% 3.97% 3.31% Portfolio Turnover Rate 17% 4% 10% 30% 12%
(a) Distributions in excess of net income for the year ended August 31, 1995, aggregated less than $0.01 on a per share basis. (b) Various expenses of the Fund were voluntarily absorbed by IFG for the year ended August 31, 1998. If such expenses had not been voluntarily absorbed, ratio of expenses to average net assets would have been 0.80% and ratio of net investment income to average net assets would have been 2.81%. (c) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by Investment Advisor, if applicable, which is before any offset arrangements. Financial Highlights (Continued) -- Value Equity Fund (For a Fund Share Outstanding Throughout Each Period)
Year Ended August 31 - ------------------------------------------------------------------------------------------------------------ 1998 1997 1996 1995 1994 PER SHARE DATA Net Asset Value -- Beginning of Period $28.30 $22.24 $19.53 $18.12 $17.79 - ------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS Net Investment Income 0.26 0.35 0.35 0.39 0.36 Net Gains or (Losses) on Securities (Both Realized and Unrealized) (0.43) 6.62 3.09 2.58 1.20 - ------------------------------------------------------------------------------------------------------------ Total from Investment Operations (0.17) 6.97 3.44 2.97 1.56 - ------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS Dividends from Net Investment Income 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 0.04 Distributions from Capital Gains 2.19 0.56 0.38 1.17 0.88 - ------------------------------------------------------------------------------------------------------------ Total Distributions 2.45 0.91 0.73 1.56 1.23 - ------------------------------------------------------------------------------------------------------------ Net Asset Value -- End of Period $25.68 $28.30 $22.24 $19.53 $18.12 ============================================================================================================ TOTAL RETURN (1.06%) 32.04% 17.77% 17.84% 9.09% RATIOS Net Assets -- End of Period ($000 Omitted) $349,984 $369,766 $200,046 $153,171 $111,850 Ratio of Expenses to Average Net Assets(b) 1.15%(c) 1.04%(c) 1.01%(c) 0.97% 1.01% Ratio of Net Investment Income to Average Net Assets(b) 0.86% 1.35% 1.64% 2.17% 1.80% Portfolio Turnover Rate 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) Various expenses of the Fund were voluntarily absorbed by IFG for the year ended August 31, 1998. If such expenses had not been voluntarily absorbed, ratio of expenses to average net assets would have been 1.19% and ratio of net investment income to average net assets would have been 0.82%. (c) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by Investment Advisor, if applicable, which is before any expense offset arrangements. Report of Independent Accountants To the Board of Directors and Shareholders of INVESCO Value Trust In our opinion, the accompanying statement of assets and liabilities, including the statement of investment securities, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of INVESCO Intermediate Government Bond Fund, INVESCO Total Return Fund and INVESCO Value Equity Fund (constituting INVESCO Value Trust, hereafter to as the "Fund") at August 31, 1998, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 1998 by correspondence with the custodian, provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Denver, Colorado September 30, 1998 EasiVest makes it easy to pay yourself first. It seems that for most of us the hardest part of investing at regular intervals comes down to simply writing the check, finding the stamp, and putting it in the mail. But with INVESCO's EasiVest it's so easy that we'll do almost all the work for you. After you fill out the authorization and return it with a voided check, the exact dollar amount you specify will be electronically transferred from your bank account to your designated fund on the same day each month. Using EasiVest is one of the few time when you'll find the easy way may also be one of the best. For years smart investors have used an investment strategy known as dollar-cost averaging. It only makes sense that when prices are high an investor will want to buy fewer shares, and when prices are low he will want to buy more. By investing a fixed amount at regular intervals with INVESCO's EasiVest, you can take advantage of these market fluctuations. Over a sufficient period of time, dollar-cost averaging may make the average price you pay per share less than the actual average price per share. So follow the lead of successful investors and take advantage of dollar-cost averaging with INVESCO's EasiVest. Like other investment systems, periodic investment plans to not insure a profit, nor do they protect against loss in a falling market. Since these plans involve continuous investment in securities regardless of fluctuating price levels in the market, you should consider your financial ability to continue purchases through low price levels. Finally, be aware that you will incur a loss under the plan if you decide to liquidate your account when the market value of accumulated shares is less than their cost. Just follow these simple authorization instructions and let INVESCO's EasiVest help you build for your future. 1. Call your bank for their ABA and account numbers. Then complete the EasiVest authorization and sign it the same way you would your personal checks. 2. Enclose an unsigned, personal check or savings deposit slip marked "Void." 3. Place a voided check or savings deposit slip and signed authorization form in an envelope; then mail it to us. It's that easy to start building your mutual fund portfolio. And you can take advantage of INVESCO's EasiVest with as little as $50 a month. Questions? Call us at 1-800-525-8085. Start building for your future today. EASIVEST AUTHORIZATION FOR AUTOMATIC INVESTMENTS Before returning this Authorization, please be sure to contact your bank for the correct ABA number and account number. I authorize INVESCO Funds Group to transfer money from my checking or savings account on or about the 7th or 21st (check one) day of each month for the amounts and funds indicated below: Fund___________________________________ Acct.#_______________________________ $__________________________ ($50 minimum) ___ 7th ___21st - ---------------------------------------------------------------------------- Bank Name - ---------------------------------------------------------------------------- Bank Street Address - ---------------------------------------------------------------------------- City, State, Zip - ---------------------------------------------------------------------------- ABA Number (available from your bank) Bank Phone Number _______________________________ This is a __Checking Account __ Savings Account Bank Account Number - ---------------------------------------------------------------------------- Owner's Name (First, Middle Initial, Last) - ---------------------------------------------------------------------------- Joint Owner's Name (First, Middle Initial, Last) - ---------------------------------------------------------------------------- Owner Street Address - ---------------------------------------------------------------------------- City, State, Zip - ---------------------------------------------------------------------------- Signature Date - ---------------------------------------------------------------------------- Signature Date - ---------------------------------------------------------------------------- Daytime Telephone Number Evening Telephone Number Don't forget to attach a voided check or deposit slip. This authority is to remain in effect until I revoke it in writing and, until INVESCO receives such notification, I agree INVESCO will be fully protected in honoring any such electronic debit. I further agree that if any such electronic debit is not honored, whether with cause or without cause and whether intentionally or unintentionally, INVESCO will not be liable whatsoever. This authorization will become a part of the fund application subject to the terms, representations and conditions thereof. Like other investment systems, period investment plans do not insure a profit, nor do they protect against loss in a falling market. Since these plans involve continuous investment in securities regardless of fluctuating price levels in the market, you should consider your financial ability to continue purchases through low price levels. Finally, be aware that you will incur a loss under the plan if you decide to liquidate your account when the market value of accumulated shares is less than their cost. Annual Report INVESCO INVESCO Distributors, Inc., (SM) Distributor Post Office Box 173706 Denver, CO 80217-3706 1-800-525-8085 PAL(R): 1-800-424-8085 http://www.invesco.com In Denver, visit one of our convenient Investor Centers: Cherry Creek, 155-B Fillmore Street Denver Tech Center, 7800 East Union Avenue, Lobby Level This information must be preceded or accompanied by a current prospectus. -----END PRIVACY-ENHANCED MESSAGE-----