ANNUAL REPORT
August 31, 1995
INVESCO
INCOME
FUNDS,
INC.
Smart Choices
For Seeking
Current Income
INVESCO FUNDS
<PAGE>
Market Overview September 1995
The U.S. economy may be close to achieving the "soft landing" analysts have
hoped for.
Fearing the long-term, corrosive effects of inflation, the Federal Reserve
Board actively sought to slow the U.S. economy in 1994. Over a period of 12
months, they doubled short-term interest rates.
The plan may have worked. After impressive annualized growth rates of
6.3%, 3.3%, 3.8%, 3.4%, and 5.1% in consecutive quarters, GDP advanced just 2.7%
during the first three months of 1995, and was estimated at 1.3% in the second
quarter. Now that they've reined in the galloping expansion, the Fed will act to
keep it at a sustainable trot. In July, they cut short-term interest rates by
0.25%, and further cuts may be made if additional stimulus is required.
Given the advances in the U.S. equities markets in the first half of 1995,
we're likely to see a period when the market "digests" its gains -- as
technology stocks did in mid-July, for instance. However, we do not anticipate a
significant setback in prices over the fourth quarter.
In our opinion, it's possible interest rates will drop further in 1995.
That will ease inflationary pressure somewhat, as well as have a positive impact
on the bond market. Short-term rates could drop to 5.5% or less, compared to a
6% Fed funds rate as of late June. The benchmark 30-year Treasury bond is now
yielding around 6.6%; we may expect to see that gradually decrease. Overall,
bond prices have advanced strongly since the fourth quarter of 1994.
The line graphs on the following pages illustrate the value of a $10,000
investment in each fund, plus reinvested dividends and capital gains, for the
indicated periods ended 8/31/95. (Of course, past performance is not a guarantee
of future results.)*
The charts and other total return figures cited reflect each fund's
operating expenses, but the indexes do not have expenses, which would, of
course, have lowered their performance.
Select Income Fund
For the fiscal year ended 8/31/95, INVESCO Select Income Fund achieved a
total return of 14.01%. During this period, the fund substantially outperformed
the Lehman Government/Corporate Index, which returned 11.49% in the same period.
For the one-year period ended 8/31/95, Lipper Analytical Services ranked your
fund #8 of 78 corporate debt-BBB funds.** (Of course, past performance is not a
guarantee of future results.)*
Select Income fund
Average Annualized Total Return
as of 8/31/95*
1 year 14.01%
----------------------------------
5 years 10.88%
----------------------------------
10 years 10.12%
----------------------------------
The main factor behind the fund's superior performance was knowledgeable
credit selection. We seek securities that deliver high income, as well as have
the potential to appreciate in value. Select IncomeFund also benefited from a
bond market turnaround that started in November 1994, as interest rates started
to level off and then decline. Another plus was our ability to successfully
lengthen the duration of the portfolio to get stronger results from the market
rally.
Our strategy includes seeking out special situations which offer
opportunities for a company's debt obligations to increase in value. For
example, when we bought Viacom bonds in June 1994, they were poorly understood
by most bond investors and relatively inexpensive. They improved in
creditworthiness and price significantly after Viacom concluded a merger, sold
off assets and became a stronger company. We sold the bonds at a profit.
<PAGE>
Another source of value -- ironically -- is financial distress. For
example, we bought bonds of USG Corp., a wallboard manufacturer, shortly after
it emerged from bankruptcy. The value of our holdings increased significantly as
management fulfilled its promises to retire debt and build a healthy balance
sheet.
Graph:
This line graph represents a comparison of the value of a $10,000
investment in the Select Income Fund to the value of a $10,000 investment
in the Lehman Government/Corporate Index, assuming in each case
reinvestment of all dividends and capital gain distributions, for the ten
year period ended 8/31/95.
Graph: Bond Holdings Quality by Value
as of 8/31/95
This pie chart shows the allocation of Bond Holdings Quality by Value for
each of the following ratings categories: AAA/Government - 48.7%, AA -
6.9%, BBB - 11.7%, BB - 19.0%, B - 13.7%. Composition of holdings is
subject to change.
We also like to invest in companies with good prospects that have the
potential to be acquired by larger firms. At this time, we favor the debt of
cable television and broadcasting companies because they are likely to benefit
from an ongoing wave of industry consolidation.
Investments in corporate bonds typically make up about 50% of Select
Income Fund's holdings. The rest consists of U.S. government obligations and
cash. Currently, we find government mortgage-backed securities more attractive
than investment-grade corporate bonds; the latter offer minimal interest rate
advantages relative to the additional credit risk required.
High Yield Fund
Thanks in part to an attractive climate for bonds in general, INVESCO High
Yield Fund achieved a total return of 11.12% for the fiscal year ended 8/31/95.
That compares with a total return of 13.19% for the Merrill Lynch High Yield
Master Index over the same period. (Of course, past performance is no guarantee
of future results.)*
The fund lagged the index by slightly more than 1%, because the index has
a higher quality orientation than the mutual fund. During the first half of this
year, BB-rated securities outperformed B-rated ones. The fund also has expenses,
but the index does not. Unquestionably, however, INVESCO High Yield had an
excellent year compared to fiscal 1994 -- which coincided with one of the worst
bond markets in decades.
High Yield fund
Average Annualized Total Return
as of 8/31/95*
1 year 11.12%
----------------------------------
5 years 11.01%
----------------------------------
10 years 9.65%
----------------------------------
Graph:
This line graph represents a comparison of the value of a $10,000
investment in the High Yield Fund to the value of a $10,000 investment in
the Merrill Lynch High Yield Master Index, assuming in each case
reinvestment of all dividends and capital gain distributions, for the ten
year period ended 8/31/95.
<PAGE>
In fiscal 1995, our in-house expertise in credit-risk analysis has paid
off. In addition to seeking high income, our strategy is to identify bonds that
are likely to appreciate in value. We look for opportunities in industry
consolidations, post-bankruptcy turnaround situations, and firms likely to see
market-driven balance sheet improvements.
For example, HealthTrust Inc.-Hospital Co. was a good, medium-sized
operator of hospitals. The complicated bonds we bought were largely ignored by
investors. When HealthTrust was bought out by a larger firm, the value of our
investment soared. Another case in point is Card Establishment. The bonds of
this First Data takeover target moved up nicely when S&P upgraded them after the
acquisition.
Graph: Bond Holdings Quality by Value
as of 8/31/95
This pie chart shows the allocation of Bond Holdings Quality by Value for
each of the following ratings categories: A - 1.4%, BB - 19.3%, B - 73.3%,
CCC - 6.0%. Composition of holdings is subject to change.
We currently favor cable television and television broadcasting, and have
chosen companies that are likely to benefit from the ongoing trend of industry
consolidation. Special situations, like those described above, are another theme
we will continue to explore in the coming months.
U.S. Government Securities Fund
For the fiscal year ended 8/31/95, INVESCO U.S. Government Securities Fund
achieved a total return of 12.37%. This compares to a total return of 17.06% for
the Lehman Government Bond-Long Index. Relative to its competitors, the fund has
been a superior performer. Lipper Analytical Services ranked it #12 of 162 U.S.
government bond funds for the year ended 8/31/95.** (Of course, past performance
is not a guarantee of future results.)*
U.S. Government Securities Fund
Average Annualized Total Return
as of 8/31/95*
1 year 12.37%
----------------------------------
5 years 9.10%
----------------------------------
Since inception (1/86) 7.38%
----------------------------------
The fund's performance slightly trailed that of the index, because the
Lehman index tracks only the performance of Treasury bonds. In contrast, the
fund includes mortgage-backed securities and government agency issues. These
obligations have longer durations and different performance characteristics than
Treasury bonds. In general, due to its shorter duration, the fund will tend to
underperform the index in a rising interest rate environment and it will tend to
outperform the index in a declining interest-rate environment.
Graph:
This line graph represents a comparison of the value of a $10,000
investment in the U.S. Government Securities Fund to the value of a
$10,000 investment in the Lehman Long Government Bond Index, assuming in
each case reinvestment of all dividends and capital gain distributions,
for the period from inception (1/86) through 8/31/95.
Most of the fund's gains followed the bond market rally in November 1994.
Prices took off as interest rates began to stabilize and then decline. Going
forward, we have adopted a strategy of blending mortgage-backed securities --
primarily Ginnie Maes -- into the mix, along with U.S. Treasury notes and bonds,
as a means of obtaining higher yield with a lower risk.
<PAGE>
Over the near-term, we expect to maintain duration within a six- to
nine-year range, or shorter than the Treasury market in general, to reduce the
portfolio's vulnerability to potential increases in interest rates.
Short-Term Bond Fund
INVESCO Short-Term Bond Fund had a total return of 7.16% for the fiscal
year ended 8/31/95. During the same period, the Lehman Brothers Intermediate
Govern-ment/Corporate Index was up 9.45%. (Of course, past performance is not a
guarantee of future results.)*
Graph:
This line graph represents a comparison of the value of a $10,000
investment in the Short Term Bond Fund to the value of a $10,000
investment in the Lehman Intermediate Governmemt/Corporate Index, assuming
in each case reinvestment of all dividends and capital gain distributions,
for the period from inception (10/93) through 8/31/95.
While the fund's performance was up significantly for the fiscal year
ended 8/31/95, it trailed the benchmark. This is largely a function of the
difference in the durations of the fund and of the index.
Short-Term Bond Fund
Average Annualized Total Return
as of 8/31/95*
1 year 7.16%
----------------------------------
Since inception (1/86) 3.28%
----------------------------------
Short-Term Bond Fund is not a typical bond fund, nor does it behave like a
money market fund. Short-Term Bond Fund was created to provide a competitive
yield advantage compared to money-market funds, with less volatility than
longer-term funds (which normally pay higher yields in return for the additional
risk).
During the first few months of the fiscal year, the fund was negatively
affected by a rising interest rate environment. But fund performance rallied
with the bond market beginning last November, as interest rates began to
stabilize and then decline.
As of 8/31/95, the fund consisted of 21.9% cash and repurchase agreements;
27.4% government agency obligations and 50.7% corporate bonds. The average
duration, including cash and equivalents, was under two years.
Going forward, we will move towards a slightly longer duration of between
1.75 and 2.25 years. We expect to increase our focus on government agency
obligations, while reducing the weighting of corporate bonds. Corporates are
currently offering a minimal yield advantage, given their additional credit
risk; we believe the fund is better positioned in higher quality issues.
Fund Management
INVESCO's Income funds are managed by two industry veterans. Richard
Hinderlie began his investment career in 1973 and has extensive experience in
all facets of fixed-income analysis. He earned an MBA from Arizona State
University and a BA in economics from Pacific Lutheran University. He previously
was associated with Bank Western. Dick joined INVESCO in 1993 and oversees both
Short-Term Bond Fund and U.S. Government Securities Fund.
Donovan "Jerry" Paul is portfolio manager of INVESCO High Yield Fund and
Select Income Fund. He earned his MBA from the University of Northern Iowa, as
well as a BBA from the University of Iowa. A Chartered Financial Analyst, Jerry
has more than 19 years of experience in the securities industry; he was the
director of fixed-income research for Stein, Roe & Farnham. He joined INVESCO in
1994 as head of our fixed-income investment management division.
<PAGE>
*Total return assumes reinvestment of dividends and capital gain
distributions. Past performance is not a guarantee of future results. Investment
return and principal value will vary so that, when redeemed, an investor's
shares may be worth more or less than when purchased. The Lehman
Government/Corporate Index is an unmanaged index illustrating the broad
fixed-income market; the Lehman Government/Corporate Intermediate Bond Index
reflects performance of bonds with maturities of 3-10 years. The Lehman Long
Government Bond Index reflects the long-term Treasury market. The Merrill Lynch
High Yield Master Index reflects performance of lower quality corporate debt.
**Lipper Analytical Services is an independent analyst ranking funds
according to their total return performance, disregarding sales charges. For the
5- and 10-year periods ended 8/31/95, Select Income was ranked #8 and #6 of 27
and 15 corporate debt-BBB funds, respectively. For the 5-year period ended
8/31/95, U.S. Government Securities Fund was ranked #21 of 78 general U.S.
government funds.
<PAGE>
INVESCO Income Funds, Inc.
Statement of Investment Securities
August 31, 1995
<TABLE>
<CAPTION>
Shares or
Principal
Description Amount Cost Value
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
HIGH YIELD Fund
FIXED INCOME SECURITIES 90.42%
Corporate Bonds 88.23%
ADVERTISING 1.36%
Outdoor Systems, Sr Notes, 10.750%,
8/15/2003 $3,900,000 $3,759,936 $3,773,250
------------ ------------
AUTOMOBILE RELATED 2.02%
Harvard Industries, Sr Notes^, 11.125%,
8/1/2005 $3,000,000 3,000,000 3,030,000
Venture Holdings Trust, Sr Sub Notes,
9.750%, 4/1/2004 $2,950,000 2,554,314 2,566,500
------------ ------------
5,554,314 5,596,500
------------ ------------
BROADCASTING 5.72%
Allbritton Communications, Sr Sub Deb,
11.500%, 8/15/2004 $6,185,000 6,508,706 6,525,175
Benedek Broadcasting, Sr Notes^, 11.875%,
3/1/2005 $4,000,000 4,005,000 4,180,000
Granite Broadcasting
Sr Sub Deb, 12.750%, 9/1/2002 $1,000,000 1,093,750 1,105,000
Sr Sub Notes, Series A^, 10.375%, 5/15/2005 $4,000,000 4,000,000 4,065,000
------------ ------------
15,607,456 15,875,175
------------ ------------
BUILDING & CONSTRUCTION PRODUCTS 2.20%
USG Corp, Deb, 8.750%, 3/1/2017 $6,160,000 5,805,806 6,098,400
------------ ------------
BUSINESS SERVICES 0.87%
Employee Benefit Plans, Conv Sub Deb, 6.750%,
7/31/2006 $2,495,000 2,417,702 2,423,269
------------ ------------
CABLE TELEVISION 19.23%
Cablevision Industries, Sr Deb, Series B,
9.250%, 4/1/2008 $3,500,000 3,185,173 3,648,750
Century Communications, Sr Notes, 9.500%,
3/1/2005 $4,975,000 4,866,048 4,975,000
Diamond Cable Communications PLC, Sr Step-Up
Notes Zero Coupon^^, 9/30/2004 $10,960,000 6,736,973 7,028,100
<PAGE>
Falcon Holding Group Ltd**, Sr Sub Notes,
Series B, 11.000%, 9/15/2003 $4,378,250 3,962,462 4,006,099
International CableTel, Sr Step-Up Notes,
Series A Zero Coupon^^, 4/15/2005 $4,650,000 2,711,978 2,697,000
Jones Intercable, Sr Sub Deb, 10.500%,
3/1/2008 $5,500,000 5,588,125 5,885,000
Marcus Cable LP/Marcus Cable Capital II, Sr
Sub Gtd Discount Step-Up Notes^,
Zero Coupon^^, 12/15/2005 $7,000,000 3,721,366 3,902,500
Marcus Cable Operating LP/Marcus Cable Capital
II, Sr Sub Gtd Discount Step-Up Notes, Zero
Coupon^^, 8/1/2004 $7,450,000 4,493,358 4,861,125
Rogers Cablesystems Ltd, Sr Secured 2nd Priority
Notes Series B, 10.000%, 3/15/2005 $4,000,000 3,980,000 4,100,000
Summit Communications Group, Sr Sub Deb,
10.500%, 4/15/2005 $4,000,000 4,177,500 4,400,000
Videotron Holdings PLC, Sr Discount Step-Up
Notes, Zero Coupon^^
7/1/2004 $5,260,000 3,324,017 3,392,700
8/15/2005 $8,000,000 4,707,239 4,470,000
------------ ------------
51,454,239 53,366,274
------------ ------------
CHEMICALS 5.78%
Borden Chemicals & Plastics Operating LP/BCP
Finance, Notes
9.500%, 5/1/2005 $2,000,000 2,000,000 2,020,000
Harris Chemical North America, Gtd Sr Secured
Step-Up Notes
Zero Coupon^^, 7/15/2001 $5,970,000 5,582,245 5,313,300
NL Industries, Sr Secured Step-Up Discount Notes
Zero Coupon^^, 10/15/2005 $6,950,000 5,204,416 5,038,750
Rexene Corp, Sr Notes, 11.750%, 12/1/2004 $3,415,000 3,583,100 3,671,125
------------ ------------
16,369,761 16,043,175
------------ ------------
CONTAINERS 0.30%
Anchor Glass Container, Sr Sub Deb, 9.875%,
12/15/2008 $1,000,000 $920,000 835,000
------------ ------------
COSMETICS & TOILETRIES 0.72%
JB Williams Holdings, Sr Notes, 12.000%,
3/1/2004 $2,000,000 1,924,453 2,000,000
------------ ------------
ELECTRONICS 0.77%
Zenith Electric, Conv Sub Notes, 6.250%,
4/1/2011 $2,930,000 2,135,187 2,138,900
------------ ------------
<PAGE>
FINANCE RELATED 0.42%
Comdata Network, Sr Sub Deb, 13.250%,
12/15/2002 $1,000,000 1,185,000 1,177,500
------------ ------------
HEALTH CARE RELATED 2.67%
Tenet Healthcare, Sr Sub Notes, 10.125%,
3/1/2005 $5,200,000 5,278,094 5,460,000
Universal Health Services, Sr Notes,
8.750%, 8/15/2005 $2,000,000 1,940,230 1,947,500
------------ ------------
7,218,324 7,407,500
------------ ------------
MANUFACTURING 5.01%
American Standard, Sr Deb, 11.375%, 5/15/2004 $2,975,000 3,153,500 3,250,187
Calmar Inc, Sr Sub Notes^, 11.500%, 8/15/2005 $2,000,000 2,000,000 2,010,000
JB Poindexter, Sr Notes, 12.500%, 5/15/2004 $4,000,000 4,005,000 3,760,000
Plastic Specialties & Technologies,
Sr Secured Notes, 11.250%, 12/1/2003 $2,500,000 2,262,683 2,256,250
Rohr Inc, Sr Notes, 11.625%, 5/15/2003 $2,500,000 2,683,125 2,625,000
------------ ------------
14,104,308 13,901,437
------------ ------------
OFFICE EQUIPMENT 1.40%
Dictaphone Corp, Sr Sub Notes, 11.750%,
8/1/2005 $3,900,000 3,900,000 3,900,000
------------ ------------
OIL & GAS RELATED 3.31%
Gulf Canada Resources Ltd, Sr Sub Deb
9.625%, 7/1/2005 $2,300,000 2,281,968 2,337,005
9.250%, 1/15/2004 $4,550,000 4,552,000 4,604,186
NorAm Energy, Deb, 10.000%, 11/15/2019 $2,000,000 2,069,140 2,238,258
------------ ------------
8,903,108 9,179,449
------------ ------------
PAPER & PAPER PRODUCTS 8.87%
Crown Paper, Sr Sub Notes, 11.000%, 9/1/2005 $3,900,000 3,900,000 3,856,125
Fort Howard, Sr Sub Notes, 9.000%, 2/1/2006 $1,950,000 1,845,626 1,794,000
Gaylord Container, Sr Sub Discount Step-Up
Deb Zero Coupon^^, 5/15/2005 $5,950,000 5,752,478 5,897,937
Repap New Brunswick, 2nd Priority Sr Secured
Notes 10.625%, 4/15/2005 $6,450,000 6,509,250 6,514,500
Repap Wisconsin, 2nd Priority Sr Secured
Notes, 9.875%, 5/1/2006 $2,250,000 2,009,372 2,160,000
Riverwood International, Sr Sub Notes,
10.375%, 6/30/2004 $3,000,000 3,296,250 3,285,000
SD Warren, Sr Sub Notes, Series B,
12.000%, 12/15/2004 $980,000 980,000 1,082,900
------------ ------------
24,292,976 24,590,462
------------ ------------
<PAGE>
RECREATION PRODUCTS & SERVICES 5.71%
Bally's Grand, 1st Mortgage Notes, Series
B, 10.375%, 12/15/2003 $4,000,000 3,749,602 3,920,000
Bally's Park Place Funding, Gtd 1st Mortgage
Notes 9.250%, 3/15/2004 $2,900,000 2,651,321 2,726,000
Boomtown Inc, 1st Mortgage
Notes, 11.500%, 11/1/2003 $1,000,000 1,010,000 920,000
Casino America, 1st
Mortgage Notes, 11.500%, 11/15/2001 $1,000,000 1,050,000 1,047,500
Genmar Holdings, Sr Sub Notes, Series A,
13.500%, 7/15/2001 $1,000,000 1,045,000 1,000,000
Trump Hotels & Casino Resorts Holdings
LP/Trump Hotels & Casino Resorts Funding,
Sr Secured Notes, 15.500%, 6/15/2005 $4,200,000 4,245,000 4,242,000
Trump Taj Mahal Funding**, Deb, 11.350%,
11/15/1999 $2,450,000 2,017,584 1,976,122
------------ ------------
15,768,507 15,831,622
------------ ------------
RENTAL EQUIPMENT 1.42%
Primeco Inc, Sr Sub Notes, 12.750%, 3/1/2005 $3,900,000 3,975,250 3,948,750
------------ ------------
RETAIL 5.52%
Petro PSC Properties LP/Petro Financial,
Sr Notes, 12.500%, 6/1/2002 $4,000,000 $4,040,000 4,020,000
Petroleum Heat & Power, Sub Deb, 9.375%,
2/1/2006 $3,400,000 3,163,899 3,162,000
Smitty's Super Valu, Sr Sub Notes, Series B,
12.750%, 6/15/2004 $2,500,000 2,500,000 2,450,000
Southland Corp, 2nd Priority Sr Sub Deb,
Series A, 4.500%, 6/15/2004 $8,245,000 5,538,695 5,689,050
------------ ------------
15,242,594 15,321,050
------------ ------------
STEEL 1.25%
WCI Steel, Sr Notes, Series B, 10.500%,
3/1/2002 $3,500,000 3,541,250 3,465,000
------------ ------------
TELECOMMUNICATIONS 8.57%
Allnet Communication Services, Sr Sub Notes,
9.000%, 5/15/2003 $3,500,000 3,756,250 3,780,000
Centennial Cellular, Sr Notes, 8.875%,
11/1/2001 $5,500,000 4,997,020 5,176,875
Comcast Cellular, Sr Participating Redeemable
Notes, Series B Zero Coupon, 3/5/2000 $5,400,000 4,021,097 3,996,000
Paging Network, Sr Sub Notes, 10.125%,
8/1/2007 $5,350,000 5,350,000 5,416,875
Peoples Telephone, Sr Notes^, 12.250%,
7/15/2002 $2,000,000 2,000,000 2,030,000
USA Mobile Communications, Sr Notes,
9.500%, 2/1/2004 $3,700,000 3,746,250 3,367,000
------------ ------------
23,870,617 23,766,750
------------ ------------
<PAGE>
TEXTILES & APPAREL MANUFACTURERS 2.35%
Guess Inc, Sr Sub Notes, Series B, 9.500%,
8/15/2003 $4,000,000 3,826,146 3,980,000
PT Polysindo Eka Perkasa, Sr Notes, 13.000%,
6/15/2001 $2,475,000 2,312,650 2,543,062
------------ ------------
6,138,796 6,523,062
------------ ------------
TRANSPORTATION 2.76%
Burlington Motor Holdings, Sr Sub Notes,
11.500%, 11/1/2003 $4,300,000 4,238,88 53,483,000
Moran Transportation, 1st Preferred
Ship Mortgage Notes, 11.750%, 7/15/2004 $4,500,000 4,500,000 4,185,000
------------ ------------
8,738,885 7,668,000
------------ ------------
TOTAL CORPORATE BONDS 242,828,469 244,830,525
------------ ------------
Asset-Backed Securities 2.19%
RECREATION PRODUCTS & SERVICES 2.19%
Griffin Gaming & Entertainment,
Secured Non-Recourse Pass-Through
Notes**, Zero Coupon, 6/30/2000 $6,930,000 6,432,627 6,067,999
------------ ------------
TOTAL FIXED INCOME SECURITIES 249,261,096 250,898,524
------------ ------------
COMMON STOCKS 0.00%
RETAIL 0.00%
Smitty's Super Valu Class B*@ 2,500 0 0
------------ ------------
PREFERRED STOCKS 0.86%
COMPUTER RELATED 0.29%
Unisys Corp, $3.75, Series A, Conv Pfd 20,000 698,800 792,500
------------ ------------
ELECTRICAL EQUIPMENT 0.57%
BCP/Essex Holdings^, 15%, Series A, Cum Redeemable
Exchangable Pfd 60,175 1,524,820 1,594,638
------------ ------------
TOTAL PREFERRED STOCKS 2,223,620 2,387,138
------------ ------------
OTHER SECURITIES 4.38%
CABLE TELEVISION 1.75%
Australis Media Ltd, Units (Each unit
consists of one million Sr Sub Discount
Step-Up Notes, Zero Coupon^^, 5/15/2003
and one wrnt to buy 57.7721
shrs of cmn stock) 3,900,000 2,075,518 2,242,500
<PAGE>
Peoples Choice TV, Units (Each unit consists
of one million Sr Discount Step-Up
Notes, Zero Coupon^^, 6/1/2004 and one
wrnt to buy 1.427 shrs of cmn stock) 5,450,000 2,861,375 2,616,000
------------ ------------
4,936,893 4,858,500
------------ ------------
OIL & GAS RELATED 0.33%
WRT Energy, Units (Each unit consists of one
million Sr Notes 13.875%, 3/1/2002 and 8 wrnts
to buy 8 shrs of cmn stock) 1,000,000 1,010,671 900,000
------------ ------------
RECREATION PRODUCTS & SERVICES 0.93%
Casino America, Units (Each unit consists
of one million 1st Mortgage Notes,
11.500%, 11/15/2001 and 3.263 wrnts to buy
1.5 shrs of cmn stock) 2,475,000 $2,444,063 2,586,375
------------ ------------
STEEL 0.51%
Gulf States Steel Acquisition, Units^
(Each unit consists of one million 1st
Mortgage Notes, 13.500%, 4/15/2003, and
one wrnt to buy one shr of cmn stock) 1,475,000 1,475,000 1,416,000
------------ ------------
TELECOMMUNICATIONS 0.86%
IntelCom Group USA, Units^ (Each unit consists
of 10 Sr Discount Step-Up Notes,
Zero Coupon^^, 9/15/2005,
and 33 wrnts to buy 33 shrs of cmn stock) 4,400,000 2,279,026 2,398,000
------------ ------------
TOTAL OTHER SECURITIES 12,145,653 12,158,875
------------ ------------
SHORT-TERM INVESTMENTS --
COMMERCIAL PAPER 4.34%
FINANCE RELATED 4.34%
Associates Corp of North America,
5.840%, 9/1/1995 $12,035,000 12,035,000 12,035,000
------------ ------------
TOTAL INVESTMENT SECURITIES AT VALUE 100.00% @
(Cost for Income Tax Purposes $275,716,469) $275,665,369 $277,479,537
============ ============
SELECT INCOME Fund
FIXED INCOME SECURITIES 96.71%
US Government Obligations 17.34%
US Treasury Bonds
7.625%, 2/15/2025 $5,000,000 $5,376,562 $5,576,555
US Treasury Notes
7.750%, 1/31/2000 $5,000,000 5,066,406 5,318,750
6.500%, 5/15/2005 $12,000,000 12,229,453 12,153,732
6.500%, 8/15/2005 $9,000,000 8,943,750 9,137,799
<PAGE>
US Treasury Security Stripped Interest Payment
Generic Tint Payment, Zero Coupon
5/15/2012 $5,000,000 1,669,522 1,604,945
8/15/2012 $5,000,000 1,687,498 1,575,295
11/15/2012 $5,000,000 1,582,417 1,546,095
------------ ------------
TOTAL US GOVERNMENT OBLIGATIONS 36,555,608 36,913,171
------------ ------------
US Government Agency Obligations 29.81%
Federal Home Loan Mortgage, Gold,
7.000%, 5/1/2024 $4,496,852 4,217,204 4,427,281
Federal Home Loan Mortgage, Gold Pool
8.000%, 12/1/2024 $2,939,204 2,825,310 2,999,367
7.500%, 10/1/2024 $3,020,881 2,880,221 3,034,260
7.000%, 4/1/2008 $5,654,598 5,504,397 5,672,234
7.000%, 4/1/2024 $4,964,869 4,675,510 4,888,057
7.000%, 5/1/2024 $4,978,998 4,683,370 4,901,968
7.000%, 6/1/2024 $4,744,729 4,457,821 4,671,323
6.500%, 6/1/2010 $2,952,395 2,930,252 2,917,731
Federal National Mortgage Association, Pool,
7.500%, 12/1/2024 $3,014,638 2,824,810 3,025,398
Government National Mortgage Association I
Modified Pass-Through Certificates
8.000%, 7/15/2024 $7,435,701 7,310,223 7,619,206
7.500%, 5/15/2022 $4,817,907 4,555,180 4,850,519
7.500%, 10/15/2023 $1,854,486 1,713,661 1,866,538
7.500%, 11/15/2023 $9,577,852 $9,063,196 9,640,098
7.500%, 5/15/2024 $2,902,057 2,694,832 2,918,770
------------ ------------
TOTAL US GOVERNMENT AGENCY OBLIGATIONS 60,335,987 63,432,750
------------ ------------
Foreign Government Obligations 1.65%
Newfoundland Province, Deb, 9.000%, 6/1/2019 $3,000,000 3,279,000 3,506,607
------------ ------------
Corporate Bonds 47.91%
AUTOMOBILE RELATED 2.07%
Auburn Hills Trust, Deb, Gtd Exchangable
Certificates 12.000%, 5/1/2020 $3,000,000 4,148,700 4,405,164
------------ ------------
BANKING 1.88%
National City Bank, Medium-Term Sub Bank
Notes, 7.250%, 7/15/2010 $2,000,000 1,969,640 1,997,936
Sovereign Bancorp, Medium-Term Sub Notes,
8.000%, 3/15/2003 $2,000,000 1,955,138 2,014,018
------------ ------------
3,924,778 4,011,954
------------ ------------
<PAGE>
BROADCASTING 5.59%
Allbritton Communications, Sr Sub Deb,
11.500%, 8/15/2004 $3,225,000 3,348,937 3,402,375
Benedek Broadcasting, Sr Notes^, 11.875%,
3/1/2005 $3,100,000 3,175,875 3,239,500
Granite Broadcasting, Sr Sub Notes, Series A^,
10.375%, 5/15/2005 $1,500,000 1,500,000 1,524,375
Paramount Communications, Sub Deb
Series A, 7.000%, 7/1/2003 $2,000,000 1,889,280 1,867,500
Series B, 7.000%, 7/1/2003 $2,000,000 1,876,978 1,867,484
------------ ------------
11,791,070 11,901,234
------------ ------------
BUILDING & CONSTRUCTION PRODUCTS 2.26%
USG Corp, Deb, 8.750%, 3/1/2017 $4,850,000 4,469,527 4,801,500
------------ ------------
BUSINESS SERVICES 1.01%
Employee Benefit Plans, Conv Sub Deb, 6.750%,
7/31/2006 $2,215,000 2,142,972 2,151,319
------------ ------------
CABLE TELEVISION 7.14%
Cablevision Industries, Sr Deb, Series B,
9.250%, 4/1/2008 $1,750,000 1,668,851 1,824,375
Century Communications, Sr Notes, 9.500%,
3/1/2005 $2,000,000 1,956,200 2,000,000
Diamond Cable Communications PLC, Sr
Step-Up Notes Zero Coupon^^, 9/30/2004 $4,000,000 2,589,602 2,565,000
Marcus Cable Operating LP/Marcus Cable
Capital II, Sr Sub Gtd Discount Step-Up
Notes, Zero Coupon ^^, 8/1/2004 $5,000,000 3,192,999 3,262,500
Summit Communications Group, Sr Sub Deb,
10.500%, 4/15/2005 $3,000,000 3,195,000 3,300,000
Videotron Holdings PLC, Sr Discount Step-Up
Notes Zero Coupon^^, 8/15/2005 $4,000,000 2,299,690 2,235,000
------------ ------------
14,902,342 15,186,875
------------ ------------
DIVERSIFIED COMPANIES 0.47%
Time Warner Entertainment LP, Sr Deb, 8.375%,
3/15/2023 $1,000,000 993,000 1,011,358
------------ ------------
FINANCE RELATED 1.49%
Westinghouse Credit, Notes, 8.875%, 6/14/2014 $3,000,000 3,115,910 3,161,853
------------ ------------
FOOD PRODUCTS & BEVERAGES 1.25%
Dr Pepper/Seven-Up Cos, Sr Sub Step-Up Notes
Zero Coupon^^, 11/1/2002 $2,950,000 2,561,224 2,655,000
------------ ------------
<PAGE>
HEALTH CARE RELATED 1.23%
Tenet Healthcare, Sr Notes, 9.625%, 9/1/2002 $2,500,000 2,500,000 2,625,000
------------ ------------
OIL & GAS RELATED 1.74%
Gulf Canada Resources Ltd, Sr Sub Deb,
9.625%, 7/1/2005 $1,050,000 1,041,768 1,066,894
Louis Dreyfus Natural Gas, Sr Sub Notes,
9.250%, 6/15/2004 $1,000,000 957,364 1,026,250
Oryx Energy, Deb, 10.375%, 9/15/2018 $1,500,000 1,537,500 1,599,738
------------ ------------
3,536,632 3,692,882
------------ ------------
PAPER & PAPER PRODUCTS 3.44%
James River VA, Notes, 7.750%, 11/15/2023 $2,000,000 1,924,940 1,984,008
Malette Inc, Sr Secured Notes, 12.250%,
7/15/2004 $1,200,000 1,341,000 1,338,000
QUNO Corp, Sr Notes, 9.125%, 5/15/2005 $2,000,000 $2,020,000 1,970,000
Repap New Brunswick, 2nd Priority Notes Sr
Secured, 10.625%, 4/15/2005 $2,000,000 2,000,000 2,020,000
------------ ------------
7,285,940 7,312,008
------------ ------------
PUBLISHING 2.92%
News America Holdings, Deb, 8.500%,
2/23/2025 $2,000,000 1,998,750 2,180,274
Valassis Communications, Sr Notes,
9.550%, 12/1/2003 $2,790,000 2,816,796 2,998,921
Valassis Inserts, Sr Sub Notes, 9.375%,
3/15/1999 $1,000,000 1,012,050 1,037,359
------------ ------------
5,827,596 6,216,554
------------ ------------
RECREATION PRODUCTS & SERVICES 3.05%
GNS Finance, Sr Sub Notes, Series B,
9.250%, 3/15/2003 $3,000,000 3,168,750 3,202,500
Outboard Marine, Deb, 9.125%, 4/15/2017 $3,500,000 3,283,606 3,290,000
------------ ------------
6,452,356 6,492,500
------------ ------------
RETAIL 1.37%
Kroger Co, Lease Certificates, 6.000%,
4/1/2003 $3,650,000 2,865,123 2,920,000
------------ ------------
SAVINGS & LOAN 0.94%
Western Financial Savings Bank, Sub Capital
Deb, 8.500%, 7/1/2003 $2,000,000 1,939,701 1,995,000
------------ ------------
TELECOMMUNICATIONS 4.31%
Allnet Communication Services, Sr Sub Notes,
9.000%, 5/15/2003 $4,700,000 4,991,300 5,076,000
Centennial Cellular, Sr Notes, 8.875%,
11/1/2001 $2,000,000 1,831,727 1,882,500
<PAGE>
Comcast Cellular, Sr Participating Redeemable
Notes, Series B Zero Coupon, 3/5/2000 $3,000,000 2,211,982 2,220,000
------------ ------------
9,035,009 9,178,500
------------ ------------
TOBACCO 1.44%
RJR Nabisco
Gtd Sr Notes, 8.750%, 4/15/2004 $2,000,000 2,053,140 2,044,068
Notes, 8.750%, 8/15/2005 $1,000,000 1,043,200 1,021,393
------------ ------------
3,096,340 3,065,461
------------ ------------
TRANSPORTATION 4.31%
Delta Air Lines, Equipment Trust Certificates
Series 1992C, 9.300%, 1/2/2010 $2,800,000 2,719,752 3,056,136
Series 1992D, 9.300%, 1/2/2010 $1,850,000 1,978,298 2,019,232
Series 1992F, 9.300%, 1/2/2011 $1,000,000 1,003,790 1,093,275
Overseas Shipholding Group
Deb, 8.750%, 12/1/2013 $2,000,000 2,024,260 1,998,438
Notes, 8.000%, 12/1/2003 $1,000,000 1,001,590 1,001,178
------------ ------------
8,727,690 9,168,259
------------ ------------
TOTAL CORPORATE BONDS 99,315,910 101,952,421
------------ ------------
TOTAL FIXED INCOME SECURITIES 199,486,505 205,804,949
------------ ------------
SHORT-TERM INVESTMENTS -- COMMERCIAL PAPER 3.29%
FINANCE RELATED 3.29%
Associates Corp of North America, 5.840%,
9/1/1995 $7,000,000 7,000,000 7,000,000
------------ ------------
TOTAL INVESTMENT SECURITIES 100.00%@ $206,486,505# $212,804,949
============ ============
SHORT-TERM BOND Fund
FIXED INCOME SECURITIES 60.37%
US Government Agency Obligations 27.64%
Federal Home Loan Mortgage, Gold Pool
7.000%, 6/1/2009 $1,457,096 $1,445,712 $1,460,780
7.000%, 5/1/2010 $495,758 494,518 496,684
6.500%, 8/1/2010 $510,000 499,959 502,666
------------ ------------
TOTAL US GOVERNMENT AGENCY OBLIGATIONS 2,440,189 2,460,130
------------ ------------
<PAGE>
Corporate Bonds 32.73%
BUSINESS SERVICES 2.17%
Tenneco Credit, Sr Notes, 9.250%, 11/1/1996 $187,000 $206,111 192,854
------------ ------------
FINANCE RELATED 14.39%
AVCO Financial Services, Notes, 7.500%,
11/15/1996 $350,000 374,865 355,321
Chrysler Financial, Notes, 6.500%, 6/15/1998 $470,000 478,220 470,251
General Motors Acceptance, Notes, 7.750%,
4/15/1997 $450,000 462,537 455,611
------------ ------------
1,315,622 1,281,183
------------ ------------
FOOD PRODUCTS & BEVERAGES 3.03%
Dr Pepper/Seven-Up Cos, Sr Sub Step-Up Notes
Zero Coupon^^, 11/1/2002 $300,000 271,654 270,000
------------ ------------
INVESTMENT BROKERS 4.42%
Merrill Lynch & Co, Notes, 5.000%, 12/15/1996 $400,000 393,605 393,294
------------ ------------
LEASING COMPANIES 4.45%
United States Leasing International,
Medium-Term Notes, 6.087%, 11/16/1998 $400,000 399,940 396,219
------------ ------------
UTILITIES 4.27%
Detroit Edison, 1st Mortgage, 6.000%, 12/1/1996 $296,000 296,049 294,473
Public Service Electric & Gas, 1st Ref Mortgage,
Series GG, 7.125%, 11/1/1997 $85,000 90,877 86,062
------------ ------------
386,926 380,535
------------ ------------
TOTAL CORPORATE BONDS 2,973,858 2,914,085
------------ ------------
TOTAL FIXED INCOME SECURITIES 5,414,047 5,374,215
------------ ------------
SHORT-TERM INVESTMENTS 39.63%
Corporate Bonds 18.45%
BANKING 4.99%
NationsBank Corp, Sr Notes, 4.750%, 8/15/1996 $450,000 445,147 444,284
------------ ------------
BUSINESS SERVICES 3.20%
Associates Corp of North America, Notes,
4.750%, 8/1/1996 $200,000 197,626 197,731
CIT Group Holdings, Notes, 8.875%, 6/15/1996 $85,000 93,592 86,790
------------ ------------
291,218 284,521
------------ ------------
<PAGE>
OIL & GAS RELATED 0.80%
Tennessee Gas Pipeline, Notes, 9.250%,
5/15/1996 $70,000 76,292 71,457
------------ ------------
POLLUTION CONTROL EQUIPMENT & SERVICES 2.50%
WMX Technologies, Notes, 4.875%, 6/15/1996 $225,000 225,713 223,058
------------ ------------
UTILITIES 6.96%
Georgia Power, 1st Mortgage, 5.125%, 9/1/1995 $220,000 222,266 220,000
Jersey Central Power & Light, 1st Mortgage,
6.125%, 8/1/1996 $250,000 251,913 249,556
Pacific Power & Light, 1st Mortgage,
5.000%, 10/1/1995 $150,000 150,375 149,931
------------ ------------
624,554 619,487
------------ ------------
TOTAL CORPORATE BONDS 1,662,924 1,642,807
------------ ------------
Repurchase Agreements 21.18%
Repurchase Agreement with State Street Bank &
Trust Co dated 8/31/1995 due 9/1/1995 at
5.750%, repurchased at $1,885,301
(Collateralized by US Treasury Bonds due
5/15/2016 at 7.250%, value $1,928,091) $1,885,000 1,885,000 1,885,000
------------ ------------
TOTAL SHORT-TERM INVESTMENTS 3,547,924 3,527,807
------------ ------------
TOTAL INVESTMENT SECURITIES 100.00% @ $8,961,971# $8,902,022
============ ============
U.S. GOVERNMENT SECURITIES Fund
FIXED INCOME SECURITIES 89.41%
US Government Obligations 46.89%
US Treasury Bonds
8.500%, 2/15/2020 $3,000,000 $3,074,531 3,603,750
8.125%, 8/15/2019 $3,500,000 3,475,728 4,044,688
8.125%, 8/15/2021 $3,000,000 3,094,687 3,485,625
7.625%, 2/15/2025 $1,000,000 1,088,906 1,115,311
7.500%, 11/15/2024 $4,000,000 3,854,063 4,385,000
6.875%, 8/15/2025 $1,000,000 1,011,875 1,029,061
------------ ------------
TOTAL US GOVERNMENT OBLIGATIONS 15,599,790 17,663,435
------------ ------------
<PAGE>
US Government Agency Obligations 42.52%
Government National Mortgage Association I
Modified Pass-Through Certificates
7.500%, 5/15/2022 $9,744,628 9,657,945 9,810,589
7.500%, 7/15/2023 $956,240 902,451 962,454
7.500%, 11/15/2023 $966,791 914,071 973,074
7.000%, 5/15/2023 $1,436,734 1,329,877 1,414,233
7.000%, 2/15/2024 $2,905,672 2,608,749 2,857,493
------------ ------------
TOTAL US GOVERNMENT AGENCY OBLIGATIONS 15,413,093 16,017,843
------------ ------------
TOTAL FIXED INCOME SECURITIES 31,012,883 33,681,278
------------ ------------
SHORT-TERM INVESTMENTS --
REPURCHASE AGREEMENTS 10.59%
Repurchase Agreement with State Street Bank &
Trust Co dated 8/31/1995 due 9/1/1995 at
5.750%, repurchased at $3,990,637
(Collateralized by US Treasury Bonds due
5/15/2016 at 7.250%,
value $4,081,126) $3,990,000 3,990,000 3,990,000
------------ ------------
TOTAL INVESTMENT SECURITIES 100.00%@ $35,002,883# $37,671,278
============ ============
<FN>
^^ Step up bonds are obligations which increase the interest payment rate at a
specific point in time. Rate shown reflects current rate which may step up at
a future date.
** Security is a payment-in-kind (PIK) bond. PIK bonds may make interest payments in additional securities.
* Security is non-income producing.
@@ Security has no market value at August 31, 1995.
@ Percentages are expressed in relation to total investment value.
# Also represents cost for income tax purposes.
^ The following are restricted securities at August 31, 1995:
<PAGE>
Value as
Acquisition Acquisition % of
Description Dates Cost Net Assets
- -------------------------------------------------------------------------------------------------------------
High Yield Fund
BCP/Essex Holdings, 15%, Series A, Cum
Redeemable Exchangable Pfd 5/26/95 $1,524,820 0.55%
Benedek Broadcasting, Sr Notes, 11.875%,
3/1/2005 3/3/95 -
3/13/95 4,005,000 1.45
Calmar Inc, Sr Sub Notes, 11.500%, 8/15/2005 8/3/95 -
8/14/95 2,000,000 0.70
Granite Broadcasting, Sr Sub Notes, Series A 5/12/95 -
10.375%, 5/15/2005 7/31/95 $4,000,000 1.41
Gulf States Steel Acquisition, Units 4/12/95 -
4/13/95 1,475,000 0.49
Harvard Industries, Sr Notes, 11.125%,
8/1/2005 7/25/95 3,000,000 1.05
IntelCom Group USA, Units 5/25/95 2,279,026 0.83
Marcus Cable LP/Marcus Cable Capital II,
Sr Sub Gtd Discount Step-Up Notes, 6/2/95 -
Zero Coupon, 12/15/2005 7/31/95 3,721,366 1.35
Peoples Telephone, Sr Notes, 12.250%,
7/15/2002 7/12/95 -
7/14/95 2,000,000 0.70
----------
8.53%
==========
Select Income Fund
Benedek Broadcasting, Sr Notes, 11.875%,
3/1/2005 3/6/95 -
6/29/95 $3,175,875 1.50%
Granite Broadcasting, Sr Sub Notes, Series A
10.375%, 5/15/2005 5/15/95 1,500,000 0.70
----------
2.20%
==========
</FN>
</TABLE>
See Notes to Financial Statements
<PAGE>
INVESCO Income Funds, Inc.
Statement of Assets and Liabilities
August 31, 1995
<TABLE>
<CAPTION>
U.S.
High Select Short-Term Government
Yield Income Bond Securities
Fund Fund Fund Fund
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Investment Securities:
At Cost~ $275,665,369 $ 206,486,505 $ 8,961,971 $35,002,883
============== ============== ============== =============
At Value~ $277,479,537 $ 212,804,949 $ 8,902,022 $37,671,278
Cash 1,981,688 22,275 4,407 114,306
Receivables:
Investment Securities Sold 9,285,089 0 0 0
Fund Shares Sold 400,797 972,272 2,737 96,385
Dividends and Interest 6,661,405 3,156,530 77,172 230,508
Prepaid Expenses and Other Assets 44,705 24,978 9,424 12,786
-------------- -------------- -------------- -------------
TOTAL ASSETS 295,853,221 216,981,004 8,995,762 38,125,263
-------------- -------------- -------------- -------------
LIABILITIES
Payables:
Distributions to Shareholders 311,584 117,445 1,399 10,469
Investment Securities Purchased 5,993,899 97,687 0 0
Fund Shares Repurchased 508,626 113,643 4,213 15,386
Accrued Distribution Expenses 64,203 44,409 1,874 7,886
Accrued Expenses and Other Payables 16,314 10,627 8,777 4,285
-------------- -------------- -------------- -------------
TOTAL LIABILITIES 6,894,626 383,811 16,263 38,026
-------------- -------------- -------------- -------------
Net Assets at Value $288,958,595 $ 216,597,193 $ 8,979,499 $38,087,237
============== ============== ============== =============
NET ASSETS
Paid-in Capital* $299,532,777 $ 211,317,604 $9,327,275 $36,499,612
Accumulated Undistributed
Net Realized Loss on
Investment Securities (12,388,350) (1,038,855) (287,827) (1,080,770)
Net Appreciation (Depreciation)
of Investment Securities 1,814,168 6,318,444 (59,949) 2,668,395
-------------- -------------- -------------- -------------
Net Assets at Value $288,958,595 $ 216,597,193 $ 8,979,499 $38,087,237
============== ============== ============== =============
Shares Outstanding 42,906,084 33,114,062 940,823 5,087,622
Net Asset Value, Offering and
Redemption Price per Share $6.73 $6.54 $9.54 $ 7.49
-------------- -------------- -------------- -------------
<FN>
~ Investment securities at cost and value at August 31, 1995 include repurchase agreements
of $1,885,000 and $3,990,000 for the Short-Term Bond and U.S. Government Securities Funds,
respectively.
* The Fund has 600 million authorized shares of common stock, par value of $0.01 per share.
Of such shares, 100 million have been allocated to each individual Fund.
</FN>
</TABLE>
See Notes to Financial Statements
<PAGE>
INVESCO Income Funds, Inc.
Statement of Operations
Year Ended August 31, 1995
<TABLE>
<CAPTION>
U.S.
High Select Short-Term Government
Yield Income Bond Securities
Fund Fund Fund Fund
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME
Dividends $67,813 $0 $0 $0
Interest 28,370,823 14,412,190 563,400 2,893,185
-------------- -------------- -------------- -------------
TOTAL INCOME 28,438,636 14,412,190 563,400 2,893,185
-------------- -------------- -------------- -------------
EXPENSES
Investment Advisory Fees 1,290,879 946,146 43,277 219,925
Distribution Expenses 645,827 430,066 21,638 99,966
Transfer Agent Fees 555,664 518,379 47,595 177,310
Administrative Fees 48,750 35,804 11,298 15,998
Custodian Fees and Expenses 18,163 13,776 2,731 5,659
Directors' Fees and Expenses 23,505 17,051 6,870 9,343
Professional Fees and Expenses 28,948 24,519 12,417 17,588
Registration Fees and Expenses 69,364 40,414 23,081 30,375
Reports to Shareholders 74,154 57,394 7,517 21,624
Other Expenses 18,007 13,444 4,194 4,484
-------------- -------------- -------------- -------------
TOTAL EXPENSES 2,773,261 2,096,993 180,618 602,272
Fees and Expenses Absorbed by
Investment Adviser (190,198) (376,933) (140,964) (202,319)
-------------- -------------- -------------- -------------
NET EXPENSES 2,583,063 1,720,060 39,654 399,953
-------------- -------------- -------------- -------------
NET INVESTMENT INCOME 25,855,573 12,692,130 523,746 2,493,232
-------------- -------------- -------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Gain (Loss) on
Investment Securities (9,175,919) 1,099,163 (7,117) (408,402)
Change in Net Appreciation of
Investment Securities 13,064,414 10,684,511 89,746 3,021,667
-------------- -------------- -------------- -------------
NET GAIN ON INVESTMENT SECURITIES 3,888,495 11,783,674 82,629 2,613,265
-------------- -------------- -------------- -------------
Net Increase in Net Assets
from Operations $29,744,068 $ 24,475,804 $606,375 $ 5,106,497
============== ============== ============== =============
</TABLE>
See Notes to Financial Statements
<PAGE>
INVESCO Income Funds, Inc.
Statement of Changes in Net Assets
Year Ended August 31
<TABLE>
<CAPTION>
High Yield Fund Select Income Fund
1995 1994 1995 1994
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS
Net Investment Income $25,855,573 $23,854,164 $ 12,692,130 $10,499,197
Net Realized Gain (Loss) on
Investment Securities (9,175,919) (2,011,785) 1,099,163 (1,608,909)
Change in Net Appreciation
(Depreciation) of
Investment Securities 13,064,414 (20,602,555) 10,684,511 (7,715,299)
-------------- -------------- -------------- -------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS 29,744,068 1,239,824 24,475,804 1,174,989
-------------- -------------- -------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (25,855,573) (23,854,164) (12,692,130) (10,499,313)
In Excess of Net Investment Income 0 0 (120,083) 0
Net Realized Gain on Investment
Securities 0 0 0 (2,086,344)
In Excess of Net Realized Gain on
Investment Securities (1,057,760) 0 0 (2,283,516)
-------------- -------------- -------------- -------------
TOTAL DISTRIBUTIONS (26,913,333) (23,854,164) (12,812,213) (14,869,173)
-------------- -------------- -------------- -------------
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 369,650,883 393,566,409 168,255,492 89,568,106
Reinvestment of Distributions 22,047,381 17,297,182 11,346,504 12,731,158
-------------- -------------- -------------- -------------
391,698,264 410,863,591 179,601,996 102,299,264
Amounts Paid for Repurchases
of Shares (349,343,198) (453,421,671) (113,005,592) (109,048,165)
-------------- -------------- -------------- -------------
NET INCREASE (DECREASE) IN NET
ASSETS FROM FUND SHARE
TRANSACTIONS 42,355,066 (42,558,080) 66,596,404 (6,748,901)
-------------- -------------- -------------- -------------
Total Increase (Decrease)
in Net Assets 45,185,801 (65,172,420) 78,259,995 (20,443,085)
NET ASSETS
Beginning of Period 243,772,794 308,945,214 138,337,198 158,780,283
-------------- -------------- -------------- -------------
End of Period $288,958,595 $ 243,772,794 $ 216,597,193 $138,337,198
============== ============== ============== =============
Accumulated Undistributed Net
Investment Income Included in
Net Assets at End of Period $ 0 $0 $0 $0
-------------------------------------------------------------
<PAGE>
FUND SHARE TRANSACTIONS
Shares Sold 56,172,989 55,009,097 26,867,635 13,786,356
Shares Issued from Reinvestment
of Distributions 3,348,656 2,432,595 1,806,508 1,961,637
-------------- -------------- -------------- -------------
59,521,645 57,441,692 28,674,143 15,747,993
Shares Repurchased (52,832,960) (63,431,573) (17,930,852) (16,727,058)
-------------- -------------- -------------- -------------
Net Increase (Decrease)
in Fund Shares 6,688,685 (5,989,881) 10,743,291 (979,065)
============== ============== ============== =============
</TABLE>
See Notes to Financial Statements
<PAGE>
INVESCO Income Funds, Inc.
Statement of Changes in Net Assets (Continued)
<TABLE>
<CAPTION>
Short-Term U.S. Government
Bond Fund Securities Fund
Year Period
Ended Ended
August 31 August 31 Year Ended August 31
-------------- -------------- -------------- -------------
1995 1994 1995 1994
(Note 1)
<S> <C> <C> <C> <C>
OPERATIONS
Net Investment Income $523,746 $ 351,973 $2,493,232 $1,803,728
Net Realized Loss on Investment
Securities (7,117) (287,314) (408,402) (655,475)
Change in Net Appreciation
(Depreciation)
of Investment Securities 89,746 (149,695) 3,021,667 (3,406,957)
-------------- -------------- -------------- -------------
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS 606,375 (85,036) 5,106,497 (2,258,704)
-------------- -------------- -------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (523,746) (343,093) (2,493,232) (1,803,728)
In Excess of Net Investment Income (2,276) 0 (19,177) 0
Net Realized Gain on Investment
Securities 0 0 0 (689,815)
-------------- -------------- -------------- -------------
TOTAL DISTRIBUTIONS (526,022) (343,093) (2,512,409) (2,493,543)
-------------- -------------- -------------- -------------
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 14,790,698 23,726,787 75,656,494 58,224,960
Reinvestment of Distributions 487,634 309,681 2,314,765 2,221,390
-------------- -------------- -------------- -------------
15,278,332 24,036,468 77,971,259 60,446,350
Amounts Paid for Repurchases
of Shares (14,257,062) (15,730,463) (79,217,928) (55,344,956)
-------------- -------------- -------------- -------------
NET INCREASE (DECREASE) IN NET
ASSETS FROM FUND SHARE
TRANSACTIONS 1,021,270 8,306,005 (1,246,669) 5,101,394
-------------- -------------- -------------- -------------
Total Increase in Net Assets 1,101,623 7,877,876 1,347,419 349,147
NET ASSETS
Beginning of Period 7,877,876 0 36,739,818 36,390,671
-------------- -------------- -------------- -------------
End of Period $8,979,499 $7,877,876 $ 38,087,237 $36,739,818
============== ============== ============== =============
Accumulated Undistributed Net
Investment Income Included in
Net Assets at End of Period $ 0 $169 $0 $0
--------------------------------------------------------------
<PAGE>
FUND SHARE TRANSACTIONS
Shares Sold 1,565,933 2,419,269 10,741,553 7,747,289
Shares Issued from Reinvestment
of Distributions 51,720 32,201 323,737 291,897
-------------- -------------- -------------- -------------
1,617,653 2,451,470 11,065,290 8,039,186
Shares Repurchased (1,509,685) (1,618,615) (11,155,172) (7,306,328)
-------------- -------------- -------------- -------------
Net Increase (Decrease) in
Fund Shares 107,968 832,855 (89,882) 732,858
============== ============== ============== =============
</TABLE>
See Notes to Financial Statements
<PAGE>
INVESCO Income Funds, Inc.
Notes to Financial Statements
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Income
Funds, Inc. (the "Fund"), a Maryland Corporation, consists of four separate
funds: High Yield Fund, Select Income Fund, Short-Term Bond Fund and U.S.
Government Securities Fund. The Fund is registered under the Investment Company
Act of 1940 (the "Act") as a diversified, open-end management investment
company. Investment operations of Short-Term Bond Fund commenced on September
30, 1993. The High Yield, Select Income and U.S. Government Securities Funds'
fiscal year-ends were changed from December 31 to August 31 in 1993.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
A. SECURITY VALUATION -Debt securities are valued at evaluated bid prices as
determined by a pricing service approved by the Fund's board of directors. If
evaluated bid prices are not available, debt securities are valued by
averaging the bid prices obtained from dealers making a market for such
securities.
Equity securities traded on national securities exchanges or in the
over-the-counter market are valued at the last sale price in the market where
such securities are primarily traded. If last sale prices are not available,
securities are valued at the highest closing bid price obtained from one or
more dealers making a market for such securities or by a pricing service
approved by the Fund's board of directors.
If market quotations or pricing service valuations are not readily
available, securities are valued at fair value as determined in good faith by
the Fund's board of directors. Restricted securities are valued in accordance
with procedures established by the Fund's board of directors.
Short-term securities are stated at amortized cost (which approximates
market value) if maturity is 60 days or less at the time of purchase, or
market value if maturity is greater than 60 days.
B. REPURCHASE AGREEMENTS -- Repurchase agreements held by the Fund are fully
collateralized by U.S. Government securities and such collateral is in the
possession of the Fund's custodian. The collateral is evaluated daily to
ensure its market value exceeds the current market value of the repurchase
agreements including accrued interest.
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. Interest income, which may be comprised of stated coupon rate,
market discount and original issue discount, is recorded on the accrual
basis. Discounts 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.
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
United States.
The High Yield Fund invests primarily in high yield bonds, some of which
may be rated below investment grade. These high yield bonds may be more
susceptible than higher grade bonds to real or perceived adverse economic or
industry conditions. The secondary market, on which high yield bonds are
traded, may also be less liquid than the market for higher grade bonds.
Restricted securities held by the High Yield and Select Income Funds may
not be sold except in exempt transactions or in a public offering registered
under the Securities Act of 1933. The risk of investing in such securities is
generally greater than the risk of investing in the securities of widely
held, publicly traded companies. Lack of a secondary market and resale
restrictions may result in the inability of the Funds to sell a security at a
fair price and may substantially delay the sale of a security which the Funds
seek to sell. In addition, these securities may exhibit greater price
volatility than securities for which secondary markets exist.
D. FEDERAL AND STATE TAXES -- The Fund has complied and continues to comply with
the provisions of the Internal Revenue Code applicable to regulated
investment companies and, accordingly, has made or intends to make sufficient
distributions of net investment income and net realized capital gains, if
any, to relieve it from all federal and state income taxes and federal excise
taxes. At August 31, 1995, Short-Term Bond and U.S. Government Securities
Funds had $64 and $72,920, respectively, in net capital loss carryovers which
expire in the year 2002. At August 31, 1995, High Yield, Short-Term Bond and
U.S. Government Securities Funds had $6,030,690, $285,487 and $1,007,850,
respectively, in net capital loss carryovers which expire in the year 2003.
High Yield, Select Income and Short-Term Bond Funds incurred and elected
to defer post-October 31 net capital losses of $6,306,551, $2,019,088 and
$2,340, respectively, to the year ended August 31, 1996. To the extent future
capital gains are offset by capital loss carryovers and deferred post-October
31 losses, such gains will not be distributed to shareholders.
<PAGE>
Dividends paid by the Fund from net investment income and distributions of
net realized short-term capital gains are, for federal income tax purposes,
taxable as ordinary income to shareholders.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- All the Fund's net investment
income is distributed to shareholders by dividends declared daily and paid
monthly. Reinvestment of dividends is effected at the month-end net asset
value. The Fund distributes net realized capital gains, if any, to its
shareholders at least annually, if not offset by capital loss carryovers.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments for mortgage-backed securities, market discounts,
foreign currency transactions, nontaxable dividends, net operating losses and
expiring capital loss carryforwards.
During the year ended August 31, 1995, the effect of such differences on
accumulated undistributed net investment income, accumulated undistributed
net realized gain on investment securities and paid-in-capital were as
follows:
Accumulated
Accumulated Undistributed
Undistributed Net Realized
Net Gain on
Investment Investment Paid-in
Fund Income Securities Capital
- -------------------------------------------------------------------------------
Select Income Fund $120,083 $(120,083) $0
Short-Term Bond Fund 2,107 (2,107) 0
U.S. Government Securities Fund 19,177 (9,072) (10,105)
Net investment income and net assets were not affected.
F. 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.
NOTE 2 -- INVESTMENT ADVISORY AND OTHER AGREEMENTS. INVESCO Funds Group, Inc.
("IFG") serves as the Fund's investment adviser. As compensation for its
services to the Fund, IFG receives an investment advisory fee which is accrued
daily at the applicable rate and paid monthly. The fee is based on the annual
rate of each Fund's average net assets as follows:
AVERAGE NET ASSETS
------------------------------------------------------
$0 to $300 Million Over
$300 to $500 $500
Fund Million Million Million
- -------------------------------------------------------------------------
High Yield Fund 0.50% 0.40% 0.30%
Select Income Fund 0.55% 0.45% 0.35%
Short-Term Bond Fund 0.50% 0.40% 0.30%
U.S. Government Securities Fund 0.55% 0.45% 0.35%
In accordance with a Sub-Advisory Agreement between IFG and INVESCO Trust
Company ("ITC"), a wholly owned subsidiary of IFG, investment decisions of each
Fund are made by ITC. Fees for such sub-advisory services are paid by IFG.
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 receives a transfer agent fee at an annual rate of $20.00 per shareholder
account, or per participant in an omnibus account. 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.
<PAGE>
A plan of distribution pursuant to Rule 12b-1 of the Act provides for
reimbursement of marketing and advertising expenditures to IFG (the
"Distributor") to a maximum of 0.25% of average annual net assets. Amounts
accrued by High Yield, Select Income and U.S. Government Securities Funds are
available to reimburse the Distributor for actual expenditures incurred within a
rolling twelve-month period. Amounts accrued by the Short-Term Bond Fund are
available to reimburse the Distributor for actual expenditures incurred within a
rolling twenty-four-month period ending September 30, 1995, and for a rolling
twelve-month period thereafter. For the year ended August 31, 1995, High Yield,
Select Income, Short-Term Bond and U.S. Government Securities Funds paid the
Distributor $632,966, $414,844, $21,481, and $100,084, respectively, for
reimbursement of expenses incurred.
IFG has voluntarily agreed, in some instances, to absorb certain fees and
expenses incurred by each Fund. NOTE 3 -- PURCHASES AND SALES OF INVESTMENT
SECURITIES. For the year ended August 31, 1995, 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
- ---------------------------------------------------------------
High Yield Fund $515,240,541 $483,536,430
Select Income Fund 279,945,151 264,923,865
Short-Term Bond Fund 269,250 1,547,775
For the year ended August 31, 1995, the aggregate cost of purchases and
proceeds from sales of U.S. Government securities were as follows:
Fund Purchases Sales
- ---------------------------------------------------------------
High Yield Fund $3,039,844 $3,059,063
Select Income Fund 80,956,786 29,715,160
Short-Term Bond Fund 4,483,474 3,022,620
U.S. Government Securities Fund 34,593,811 38,496,908
NOTE 4 -- APPRECIATION AND DEPRECIATION. At August 31, 1995, 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 (depreciation) by Fund were as
follows:
Net
Gross Gross Appreciation
Fund Appreciation Depreciation (Depreciation)
- ------------------------------------------------------------------------
High Yield Fund $5,570,222 $3,807,154 $1,763,668
Select Income Fund 6,850,467 532,023 6,318,444
Short-Term Bond Fund 20,046 79,995 (59,949)
U.S. Government Securities Fund 2,668,395 0 2,668,395
<PAGE>
NOTE 5 -- TRANSACTIONS WITH AFFILIATES. Certain of the Fund's officers and
directors are also officers and directors of IFG or ITC.
The Fund has adopted an unfunded noncontributory defined benefit pension plan
covering all independent directors of the Fund who will have served as an
independent director for at least five years at the time of retirement. Benefits
under this plan are based on an annual rate equal to 25% of the retainer fee at
the time of retirement.
Pension expenses for the year ended August 31, 1995, included in Directors'
Fees and Expenses in the Statement of Operations, and unfunded accrued pension
costs and pension liability included in prepaid expenses and accrued expenses,
respectively, in the Statement of Assets and Liabilities were as follows:
Unfunded
Pension Accrued Pension
Fund Expenses Pension Costs Liability
- -------------------------------------------------------------------------------
High Yield Fund $5,438 $8,725 $14,163
Select Income Fund 3,056 4,903 7,959
Short-Term Bond Fund 182 293 475
U.S. Government Securities Fund 785 1,260 2,045
<PAGE>
INVESCO Income Funds, Inc.
Financial Highlights
(For a Fund Share Outstanding throughout Each Period)
<TABLE>
<CAPTION>
Period
Ended
Year Ended August 31 August 31 Year Ended December 31
----------------------- --------- -----------------------------
1995 1994 1993 1992 1991 1990
(Note 1)
High Yield Fund
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value --
Beginning of Period $ 6.73 $7.32 $6.97 $6.66 $6.00 $7.16
----------------------- --------- ---------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.66 0.62 0.39 0.64 0.70 0.83
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 0.03 (0.59) 0.36 0.30 0.64 (1.14)
----------------------- --------- ---------------------------------
Total from Investment Operations 0.69 0.03 0.75 0.94 1.34 (0.31)
----------------------- --------- ---------------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.66 0.62 0.40 0.63 0.68 0.85
Distributions from Capital Gains 0.00 0.00 0.00 0.00 0.00 0.00
In Excess of Capital Gains 0.03 0.00 0.00 0.00 0.00 0.00
----------------------- --------- ---------------------------------
Total Distributions 0.69 0.62 0.40 0.63 0.68 0.85
----------------------- --------- ---------------------------------
Net Asset Value -- End of Period $6.73 $6.73 $ 7.32 $6.97 $6.66 $6.00
======================= ========= =================================
TOTAL RETURN 11.12% 0.37% 11.01%* 14.53% 23.51% (4.57%)
RATIOS
Net Assets -- End of Period
($000 Omitted) $288,959 $243,773 $308,945 $212,172 $99,103 $40,380
Ratio of Expenses to Average
Net Assets# 1.00% 0.97% 0.97%~ 1.00% 1.05% 0.94%
Ratio of Net Investment Income
to Average Net Assets# 10.01% 8.70% 8.28%~ 9.29% 10.57% 12.57%
Portfolio Turnover Rate 201% 195% 45%* 120% 64% 28%
<FN>
* These amounts are based on operations for the period shown and, accordingly,
are not representative of a full year.
# Various expenses of the Fund were voluntarily absorbed by IFG for the years
ended August 31, 1995 and 1994. If such expenses had not been voluntarily
absorbed, ratio of expenses to average net assets would have been 1.07% and
0.98%, respectively, and ratio of net investment income to average net assets
would have been 9.94% and 8.69%, respectively.
~ Annualized
</FN>
</TABLE>
<PAGE>
INVESCO Income Funds, Inc.
Financial Highlights (Continued)
(For a Fund Share Outstanding throughout Each Period)
<TABLE>
<CAPTION>
Period
Ended
Year Ended August 31 August 31 Year Ended December 31
----------------------- --------- -----------------------------
1995 1994 1993 1992 1991 1990
(Note 1)
Select Income Fund
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value --
Beginning of Period $6.18 $6.80 $6.53 $6.50 $5.96 $6.26
----------------------- --------- -----------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.47 0.47 0.33 0.52 0.53 0.59
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 0.36 (0.43) 0.27 0.13 0.53 (0.30)
----------------------- --------- -----------------------------
Total from Investment Operations 0.83 0.04 0.60 0.65 1.06 0.29
----------------------- --------- -----------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income+ 0.47 0.47 0.33 0.52 0.52 0.59
Distributions from Capital Gains 0.00 0.09 0.00 0.10 0.00 0.00
In Excess of Capital Gains 0.00 0.10 0.00 0.00 0.00 0.00
----------------------- --------- -----------------------------
Total Distributions 0.47 0.66 0.33 0.62 0.52 0.59
----------------------- --------- -----------------------------
Net Asset Value -- End of Period $6.54 $6.18 $ 6.80 $6.53 $6.50 $5.96
======================= ========= =============================
TOTAL RETURN 14.01% 0.47% 9.42%* 10.38% 18.57% 4.86%
RATIOS
Net Assets -- End of Period
($000 Omitted) $216,597 $138,337 $158,780 $123,036 $93,827 $46,423
Ratio of Expenses to
Average Net Assets# 1.00% 1.11% 1.15%~ 1.14% 1.15% 1.01%
Ratio of Net Investment Income to
Average Net Assets# 7.38% 7.22% 7.40%~ 7.97% 8.57% 9.67%
Portfolio Turnover Rate 181% 135% 105%* 178% 117% 38%
<FN>
+ Distributions in excess of net investment income for the year ended August
31, 1995, aggregated less than $0.01 on a per share basis.
* These amounts are based on operations for the period shown and, accordingly,
are not representative of a full year.
# Various expenses of the Fund were voluntarily absorbed by IFG for the years
ended August 31, 1995 and 1994. If such expenses had not been voluntarily
absorbed, ratio of expenses to average net assets would have been 1.22% and
1.15%, respectively, and ratio of net investment income to average net assets
would have been 7.16% and 7.18%, respectively.
~ Annualized
</FN>
</TABLE>
<PAGE>
INVESCO Income Funds, Inc.
Financial Highlights (Continued)
(For a Fund Share Outstanding throughout Each Period)
<TABLE>
<CAPTION>
Year Period
Ended Ended
August 31 August 31
------------ ------------
1995 1994
(Note 1)
Short-Term Bond Fund
<S> <C> <C> <C>
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 9.46 $10.00
------------ ------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.57 0.47
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 0.08 (0.54)
------------ ------------
Total from Investment Operations 0.65 (0.07)
------------ ------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income+ 0.57 0.47
------------ ------------
Net Asset Value -- End of Period $9.54 $9.46
============ ============
TOTAL RETURN 7.16% (0.72%)*
RATIOS
Net Assets -- End of Period ($000 Omitted) $8,979 $7,878
Ratio of Expenses to Average Net Assets# 0.46% 0.46%~
Ratio of Net Investment Income to
Average Net Assets# 6.05% 5.50%~
Portfolio Turnover Rate 68% 169%*
<FN>
+ Distributions in excess of net investment income for the year ended August
31, 1995, aggregated less than $0.01 on a per share basis.
* These amounts are based on operations for the period shown and, accordingly,
are not representative of a full year.
# Various expenses of the Fund were voluntarily absorbed by IFG for the year
ended August 31, 1995 and for the period ended August 31, 1994. If such
expenses had not been voluntarily absorbed, ratio of expenses to average net
assets would have been 2.09% and 2.04% (annualized), respectively, and ratio
of net investment income to average net assets would have been 4.42% and
3.92% (annualized), respectively.
~ Annualized
</FN>
</TABLE>
<PAGE>
INVESCO Income Funds, Inc.
Financial Highlights (Continued)
(For a Fund Share Outstanding throughout Each Period)
<TABLE>
<CAPTION>
Period
Ended
Year Ended August 31 August 31 Year Ended December 31
----------------------- --------- -----------------------------
1995 1994 1993 1992 1991 1990
(Note 1)
U.S. Government Securities Portfolio
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value --
Beginning of Period $7.10 $8.19 $7.61 $7.65 $7.09 $7.14
----------------------- --------- -----------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.45 0.41 0.28 0.46 0.48 0.53
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 0.39 (0.93) 0.58 (0.04) 0.57 (0.05)
----------------------- --------- -----------------------------
Total from Investment Operations 0.84 (0.52) 0.86 0.42 1.05 0.48
----------------------- --------- -----------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income+ 0.45 0.41 0.28 0.46 0.49 0.53
Distributions from Capital Gains 0.00 0.16 0.00 0.00 0.00 0.00
----------------------- --------- -----------------------------
Total Distributions 0.45 0.57 0.28 0.46 0.49 0.53
----------------------- --------- -----------------------------
Net Asset Value -- End of Period $7.49 $7.10 $ 8.19 $7.61 $7.65 $7.09
======================= ========= =============================
TOTAL RETURN 12.37% (6.53%) 11.61%* 5.68% 15.56% 7.23%
RATIOS
Net Assets -- End of Period
($000 Omitted) $38,087 $36,740 $36,391 $35,799 $29,229 $21,247
Ratio of Expenses to Average
Net Assets# 1.00% 1.32% 1.40%~ 1.27% 1.27% 1.07%
Ratio of Net Investment Income to
Average Net Assets# 6.24% 5.46% 5.36%~ 6.08% 6.78% 7.58%
Portfolio Turnover Rate 99% 95% 100%* 115% 67% 38%
<FN>
+ Distributions in excess of net investment income for the year ended August
31, 1995, aggregated less than $0.01 on a per share basis.
* These amounts are based on operations for the period shown and, accordingly,
are not representative of a full year.
# Various expenses of the Fund were voluntarily absorbed by IFG for the years
ended August 31, 1995 and 1994. If such expenses had not been voluntarily
absorbed, ratio of expenses to average net assets would have been
1.51% and 1.42%, respectively, and ratio of net investment income to average
net assets would have been 5.73% and 5.36%, respectively.
~ Annualized
</FN>
</TABLE>
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of
INVESCO Income Funds, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investment securities, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of High Yield Fund, Select Income
Fund, Short-Term Bond Fund and U.S. Government Securities Fund (constituting
INVESCO Income Funds, Inc., hereafter referred to as the "Fund") at August 31,
1995, 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 the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at August 31, 1995 by
correspondence with the custodian and the application of alternative auditing
procedures for unsettled security transactions, provide a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE LLP
Denver, Colorado
October 2, 1995
<PAGE>
INVESCO FUNDS
To receive general information and prospectuses on any of INVESCO's funds or
retirement plans, or to obtain current account or price information,
Call toll-free: 1-800-525-8085
To reach PAL(r):, your 24-hour Personal Account
Line, call: 1-800-424-8085
Or write to:
INVESCO Funds Group, Inc., Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
This information must be preceded or accompanied by a current prospectus.
