SEMIANNUAL REPORT
February 29, 1996
INVESCO
INCOME
FUNDS,
INC.
Smart Choices
For Seeking
Current Income
INVESCO FUNDS
<PAGE>
Economic Overview March 1996
1995 will long stand out as a banner year for U.S. investors. The S&P 500
achieved a total return of 37.46% for the 12 months ended 12/31/95; only the
fourth time in fifteen years the broad market returned over 25%. Fixed-income
markets followed suit, with the Lehman Government/Corporate Bond Index gaining
19.24%.(1)
These spectacular results were influenced by a number of positive economic
factors. Inflation was low at a mere 2.8%, unemployment was down, and growth in
Gross Domestic Product slowed to apparently sustainable levels. In addition, the
Federal Reserve Board appeared to take a pro-growth stand, easing rates by .50%
during the second half of 1995.
In 1996, however, a repeat performance appears unlikely. During January
and February, the stock and bond markets whipsawed in the wake of stalled
federal budget negotiations. For the first two months of 1996, the Dow Jones
Industrial Average advanced 7.60%.(1) However, in response to political and
economic uncertainty, it had swung up and down more than 50 points 24 times by
the end of February, versus 29 times for all of 1995.
Bond markets also experienced the general political and economic
uncertainty. The Lehman Government/ Corporate Bond Index showed a negative 2.12%
return in February, despite a further short-term interest-rate reduction of .25%
on January 31.
It seems likely that, over the short-term, the securities markets will
continue to provide roller-coaster returns. However, while a budget settlement
in Washington remains uncertain, it is expected that the Federal Reserve Board
will continue to gradually ease short-term interest rates during the year. As a
result, we anticipate a slow growth trend for the economy, as well as the stock
and bond markets, during 1996.
/s/ R. Dalton Sim
- ---------------------
R. Dalton Sim
Chairman and President
INVESCO Trust Company
<PAGE>
INVESCO Income Funds
The line graphs on the following pages illustrate the value of a $10,000
investment in each fund, plus reinvested dividends and capital gains
distributions, if any, for the indicated periods ended 2/29/96.(2)
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
Average Annualized Total Return
as of 2/29/96(2)
1 year 15.07%
-----------------------------------
5 years 10.78%
-----------------------------------
10 years 8.89%
-----------------------------------
Select Income Fund
Based on risk-adjusted total return, independent mutual fund analyst
Morningstar awarded INVESCO Select Income Fund its highest rating, five stars,
for the three-, five- and 10-year periods ended 2/29/96 among 397 funds in the
General Corporate Fund category.(4) The fund had a total return of 5.38% for the
six-month period ended 2/29/96,(2) compared to a total return of 4.13% for the
Lehman Government/Corporate Index for the same period.(1)
Graph:
This line graph represents a comparison of the value of a
$10,000 investment in the INVESCO Select Income Fund to the
value of a $10,000 investment in the Lehman
Government/Corporate Bond Index, assuming in each case
reinvestment of all dividends and capital gain distributions,
for the ten year period ended 2/29/96.
Strategic Overview
Select Income Fund is managed to pursue a strong combination of income and
capital appreciation. We seek this goal through a unique "barbell" portfolio
structure. Almost 40% of the portfolio is invested in AAA-rated government
securities, in an effort to provide the portfolio with stability. The remainder
is invested primarily in below-investment grade corporate bonds, generating
higher current income with the potential for capital appreciation. Since recent
market conditions have left investment-grade corporate bonds offering relatively
unattractive returns, currently they are not prominent in the portfolio.
We focus on a variety of opportunities for price appreciation in the
fund's holdings. One has been cyclical companies with "near-death experiences."
Having survived bankruptcy and appearing to successfully restructure balance
sheets and reduce debt, companies such as USG Corp have seen ratings improvement
and subsequent price appreciation.
<PAGE>
Special situations provide another growth prospect. For example,
Cablevision Industries held a below investment-grade rating, even after its
acquisition by Time Warner. When the ratings caught up with the acquisition, the
bond realized significant appreciation.
In addition to growth potential in the broad fixed-income market, we have
found that conditions within certain sectors present opportunities as well.
Cable television, telecommunications and broadcasting are currently attractive,
due to improving creditworthiness and takeover activity.
The fund's average duration (excluding cash and equivalents) as of 2/29/96
was 6.5 years, at the long end of its normal range of four to seven years.
Though the bond market has been volatile in recent weeks, this lengthening has
allowed the fund to maximize capital appreciation during the longer-term general
bull market for bonds.
The success of this strategy can be seen when comparing Select Income Fund
to its peers in the Corporate Debt BBB category as measured by Lipper Analytical
Services. For the three months ended 2/29/96, Select Income achieved a positive
1.36% total return, compared to an average negative .16% for the category. These
returns are historically consistent, with the fund outperforming the average
total return over the various periods ended the same date, with 15.07% versus
13.47% (one year), 8.27% versus 7.03% (three years), and 10.78% versus 10.03%
(five years). For the ten-year period, Select Income returned 8.89%, tracking
closely with the peer group average of 8.97%.(2,3)
High Yield Fund
High Yield Fund
Average Annualized Total Return
as of 2/29/96(2)
1 year 17.82%
-----------------------------------
5 years 12.63%
-----------------------------------
10 years 9.24%
-----------------------------------
Independent mutual fund analyst Morningstar awarded INVESCO High Yield
Fund four out of five stars for the five-year period ended 2/29/96, among 145
funds in the Corporate High Yield Fund category. For the 10-year period, the
fund was also awarded four stars, and three stars for the three-year period.(4)
The fund had a total return of 8.81% for the six-month period ended 2/29/96,(2)
significantly outperforming a total return of 5.12% for the Merrill Lynch High
Yield Master Index for the same period.(1)
<PAGE>
Graph:
This line graph represents a comparison of the value of a $10,000
investment in the INVESCO 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 2/29/96.
Strategic Overview
High Yield Fund's strong total return over the past six months can be
attributed to its focus on below-investment grade corporate bonds, which have
presented significant potential for both growth and income in recent months.
While the portfolio is broadly diversified across a variety of sectors, we
have found particular opportunities within the cable television and broadcasting
industries, both in the U.S. and the United Kingdom. Recent telecommunications
legislation has relaxed ownership requirements in both regions, opening the door
to significant merger and acquisition potential. Other areas which provided
similar merger and acquisition opportunities included energy companies and
casinos.
These consolidations can potentially benefit the fund's performance. For
example, small, regional companies often have below-investment grade credit
ratings. However, these same companies are prime acquisition targets for major
national companies like AT&T. We select bonds from companies which are both
attractive on their own merit, and also likely takeover candidates. When a
takeover does occur, the company rating is typically upgraded to that of the new
parent, increasing the value of the bond and providing capital gains to the
fund.
Since fine-tuning our strategy in 1994, High Yield Fund has turned in
strong returns, achieving 17.82% versus an average 16.18% for High Current Yield
Funds for the 12 months ended 2/29/96, as measured by Lipper Analytical
Services. For the five-year period, the Lipper category averaged a 15.12%
return, and for 10-years, 9.24%.(3)
The fund's average duration (excluding cash and equivalents) as of 2/29/96
was 5.5 years. This relatively long period, compared to the typical category
range of four to seven years, provided maximum exposure to 1995's bull market
for bonds. While the market has been volatile so far in 1996, we continue to
believe that rates will trend downward throughout the year, and are not planning
to shorten the portfolio.
<PAGE>
U.S. Government Securities Fund
U.S. Government Securities Fund
Average Annualized Total Return
as of 2/29/96(2)
1 year 12.91%
-----------------------------------
5 years 7.81%
-----------------------------------
10 years 7.02%
-----------------------------------
INVESCO U.S. Government Securities Fund had a total return of
3.38% for the six-month period ended 2/29/96,(2) exceeding a total
return of 2.9% for the Lehman Long Government Bond Index for the
same period.(1)
Strategic Overview
With an average duration of 8.2 years (excluding cash and equivalents),
U.S. Government Securities Fund is structured to react strongly to interest rate
fluctuation. This relatively long duration makes the fund especially responsive
to the fluctuations in interest rates, with the result that, during falling rate
environments, the fund will typically achieve strong correlative returns.
Conversely, when rates rise, U.S. Government Securities Fund would be expected
to reflect this activity with a drop in value.
Graph:
This line graph represents a comparison of the value of a $10,000
investment in the INVESCO 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 ten year period ended 2/29/96.
As a result of this interest-sensitive structure, the fund significantly
outperformed its peers during 1995's bull bond market, with a total return of
12.91% for the 12 months ended 2/29/96, compared to the General U.S. Government
Fund average of 10.80% as reported by Lipper Analytical Services.(3) (The fund
returned 7.81% versus the 7.59% category average total return for the five-year
period, and 7.02% versus 7.57% average total return for the ten-year period.)
Short-Term Bond Fund
INVESCO Short-Term Bond Fund had a total return of 3.08% for the six-month
period ended 2/29/96,(2) compared to a total return of 3.1% for the Lehman
Intermediate Government/Corporate Bond Index for the same period.(1)
<PAGE>
Strategic Overview
As of 2/29/96, Short-Term Bond Fund had an average duration without cash
and equivalents of 2.3 years. This extremely low measure of volatility reflects
our philosophy of providing a vehicle with lower risk (and, as a result, lower
returns) than long-term income funds, with higher expected returns (and risk)
than money market funds (whose share price is expected, but cannot be
guaranteed, to remain stable).
In February 1996, Short-Term Bond Fund was authorized by your fund's Board
of Directors to begin allocating up to 15% of the portfolio to below-investment
grade bonds. Although this will increase credit and market risks, we believe
that careful selection of high yield issuers will enhance the fund's
performance, potentially generating greater monthly income, as well as increased
opportunity for capital appreciation.
Short-Term Bond Fund
Average Annualized Total Return
as of 2/29/96(2)
1 year 7.48%
-----------------------------------
Since inception (10/93) 3.89%
-----------------------------------
We have limited the fund's exposure to investment-grade corporate debt, in
recognition that current yields are not high enough relative to Treasury
certificates to offset their greater risk. However, our "barbell" structure is
again providing above-average stability, with more than 40% of the portfolio in
government obligations at period-end.
Looking Forward
Graph:
This line graph represents a comparison of the value of a $10,000
investment in the INVESCO Short-Term Bond Fund to the value of a $10,000
investment in the Lehman Intermediate Government/Corporate Bond Index,
assuming in each case reinvestment of all dividends and capital gain
distributions, for the ten year period from inception (10/93) through
2/29/96.
While political and economic concerns have driven rates up in recent
months, we continue to believe that the long-term trend is for Federal Reserve
Board easing. Therefore, we believe that bond markets may continue to provide
positive returns throughout 1996. However, in recognition of recent volatility,
we have taken steps to protect the longer-term portfolios, while seeking to
maximize returns.
In our U.S. Government Securities Fund, we have strengthened our defensive
posture by increasing exposure to mortgage-backed securities. These agency
obligations provide a return above Treasury certificates, better helping to
cushion the fund's NAV against sudden rate increases than would be the case with
positioning exclusively in Treasury bonds.
<PAGE>
In the Select Income and High Yield funds, we have been reducing our
exposure to bonds offering yields below 9%; should interest rates rise, higher
yielding securities would retain more of their value. In addition, we continue
to closely monitor the behavior of each company's stock, as this can be an
indicator of potential bond behavior -- both positive and negative.
These defensive measures left us in a strong relative position to
withstand February's market unrest, and we anticipate continuing these
strategies throughout this volatile market period.
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. Mr. Hinderlie 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, and co-manager of Short-Term Bond 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, Mr. Paul 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 management division.
(1) The S&P 500 and Dow Jones Industrial Average are unmanaged indexes
considered representative of the performance of the broad U.S. stock market. The
Lehman Government/Corporate Bond Index is an unmanaged index representative of
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.
(2) Total return assumes reinvestment of dividends and capital gain
distributions for the periods indicated. Investment return and principal value
will fluctuate so that, when redeemed, an investor's shares may be worth more or
less than when purchased. Of course, past performance is not a guarantee of
future results.
(3) Lipper Analytical Services is an independent analyst ranking funds according
to their total return performance, disregarding sales charges.
(4) Morningstar proprietary ratings reflect historical risk- adjusted
performance as of 2/29/96, and are subject to change each month. These ratings
are calculated from the fund's 3-, 5-, and 10-year average annual returns (based
on available track records) in excess of 90-day Treasury bill returns. The top
10% of funds in an investment category receive 5 stars; the next 22.5% receive 4
stars; the next 35%, 3 stars.
<PAGE>
INVESCO Income Funds, Inc.
Statement of Investment Securities
February 29, 1996
UNAUDITED
<TABLE>
<CAPTION>
Country Shares or
Code if Principal
Description Non US Amount Cost Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HIGH YIELD Fund
FIXED INCOME SECURITIES 92.41%
Corporate Bonds 92.41%
AEROSPACE & DEFENSE 1.63%
BE Aerospace, Sr Sub Notes^,
9.875%, 2/1/2006 $2,900,000 $2,900,000 $2,965,250
Rohr Inc, Sr Notes, 11.625%,
5/15/2003 2,500,000 2,683,125 2,737,500
--------------------------
5,583,125 5,702,750
--------------------------
AUTOMOBILE RELATED 1.53%
Harvard Industries, Sr Notes,
11.125%, 8/1/2005 2,000,000 2,000,000 2,120,000
Venture Holdings Trust, Sr Sub
Notes, 9.750%, 4/1/2004 $3,950,000 3,412,835 3,239,000
--------------------------
5,412,835 5,359,000
--------------------------
BROADCASTING 10.44%
Allbritton Communications,
Sr Sub Deb, 11.500%, 8/15/2004 5,185,000 5,462,456 5,522,025
Benedek Broadcasting, Sr Secured
Notes, 11.875%, 3/1/2005 6,950,000 7,191,875 7,436,500
Chancellor Radio Broadcasting,
Sr Exchangeable Pfd
12.250%, 2/15/2008**^ 3,900,000 3,900,000 3,894,692
Sr Sub Notes, 9.375%, 10/1/2004 5,900,000 5,900,000 5,767,250
EZ Communications, Sr Sub Notes,
9.750%, 12/1/2005 3,900,000 3,869,151 3,861,000
Granite Broadcasting, Sr Sub Notes,
Series A, 10.375%, 5/15/2005 3,900,000 4,017,000 4,007,250
Sullivan Broadcasting, Sr Sub Notes,
10.250%, 12/15/2005 3,400,000 3,400,000 3,485,000
Telemundo Group, Sr Discount
Step-Up Notes, 7.000%^^, 2/15/2006 2,900,000 2,647,653 2,642,625
--------------------------
36,388,135 36,616,342
--------------------------
BUILDING & CONSTRUCTION PRODUCTS 0.12%
USG Corp, Deb, 8.750%, 3/1/2017 400,000 407,000 406,000
BUSINESS SERVICES 2.27%
Alamo Rent-A-Car, Sr Notes,
11.750%, 1/31/2006 8,000,000 8,000,000 7,960,000
--------------------------
CABLE TELEVISION 17.52%
CF CABLE TV, Gtd Sr Secured
1st Priority Notes, 9.125%,
7/15/2007 CA 3,000,000 3,135,000 3,105,000
Cablevision Industries, Sr Deb,
Series B, 9.250%, 4/1/2008 7,027,000 7,088,743 7,703,349
<PAGE>
Cablevision Systems, Depositary
Shrs, Series L Pfd **^
11.125%, 4/1/2008 5,100,000 5,100,000 5,235,348
Comcast Cable Partners Ltd, Sr
Discount Step-Up Deb
Zero Coupon^^, 11/15/2007 UK 7,900,000 4,880,147 4,740,000
International CableTel, Sr Deferred
Step-Up Notes, Series A^
Zero Coupon^^, 2/1/2006 13,100,000 7,560,636 7,794,500
Jones Intercable, Sr Sub Deb,
10.500%, 3/1/2008 2,000,000 2,065,000 2,205,000
Marcus Cable LP/Marcus Cable
Capital II, Sr Sub Gtd Discount
Notes, 11.875%, 10/1/2005 8,230,000 8,956,220 8,980,988
Step-Up Notes, Zero Coupon^^,
12/15/2005 3,500,000 2,109,75 2,345,000
Rifkin Acquisition Partners LLLP,
Sr Sub Notes^, 11.125%, 1/15/2006 2,900,000 2,900,00 2,972,500
United International Holdings,
Sr Secured Discount Notes
Zero Coupon, 11/15/1999 6,145,000 4,007,278 3,994,250
Viacom Inc, Sub Deb, 8.000%,
7/7/2006 6,000,000 6,083,846 5,937,234
Videotron Holdings PLC, Sr Discount
Step-Up Notes, Zero Coupon^^
7/1/2004 UK 5,360,000 3,777,112 3,939,600
8/15/2005 UK 3,900,000 2,566,183 2,535,000
--------------------------
60,229,916 61,487,769
--------------------------
CHEMICALS 3.13%
NL Industries, Sr Secured Discount
Step-Up Notes Zero Coupon^^,
10/15/2005 6,950,000 5,439,178 5,421,000
Rexene Corp, Sr Notes, 11.750%,
12/1/2004 5,365,000 5,693,975 5,579,600
--------------------------
11,133,153 11,000,600
--------------------------
CONTAINERS 2.79%
Stone Container, Sr Notes
11.500%, 10/1/2004 6,900,000 6,927,500 6,908,625
9.875%, 2/1/2001 3,000,000 2,911,157 2,898,750
--------------------------
9,838,657 9,807,375
--------------------------
COSMETICS & TOILETRIES 0.57%
JB Williams Holdings, Sr Notes,
12.000%, 3/1/2004 2,000,000 1,928,881 1,995,000
--------------------------
ELECTRONICS 0.80%
Zenith Electronics, Conv Sub Notes,
6.250%, 4/1/2011 4,159,000 3,069,945 2,817,723
--------------------------
MANUFACTURING 0.92%
JB Poindexter, Sr Notes,
12.500%, 5/15/2004 4,000,000 4,005,000 3,220,000
--------------------------
OFFICE EQUIPMENT 1.12%
Dictaphone Corp, Sr Sub Notes,
11.750%, 8/1/2005 3,900,000 3,900,000 3,919,500
--------------------------
<PAGE>
OIL & GAS RELATED 5.59%
Dual Drilling, Sr Sub Notes,
9.875%, 1/15/2004 4,575,000 5,048,375 5,043,937
Gulf Canada Resources Ltd,
Sr Sub Deb 9.625%, 7/1/2005 CA 2,300,000 2,281,968 2,432,317
9.250%, 1/15/2004 CA 4,550,000 4,552,000 4,777,500
TransTexas Gas, Sr Secured Notes,
11.500%, 6/15/2002 7,225,000 7,483,844 7,369,500
--------------------------
19,366,187 19,623,254
--------------------------
PAPER & PAPER PRODUCTS 11.75%
APP International Finance BV,
Gtd Secured Notes
11.750%, 10/1/2005 SN 5,850,000 5,842,750 5,820,750
Crown Paper, Sr Sub Notes,
11.000%, 9/1/2005 3,900,000 3,764,110 3,627,000
Gaylord Container, Sr Sub
Discount Step-Up Deb
Zero Coupon^^, 5/15/2005 6,950,000 6,873,115 7,210,625
RAPP International Finance BV,
Gtd Secured Notes
13.250%, 12/15/2005 ID 3,000,000 2,920,818 2,985,000
Repap New Brunswick, 2nd Priority
Sr Secured Notes
10.625%, 4/15/2005 CA 5,450,000 5,479,250 5,286,500
Repap Wisconsin, 2nd Priority Sr
Secured Notes, 9.875%, 5/1/2006 2,250,000 2,020,613 2,154,375
SD Warren, Sr Sub Notes, Series B,
12.000%, 12/15/2004 6,900,000 7,506,000 7,383,000
Tembec Finance, Gtd Sr Notes,
9.875%, 9/30/2005 CA 7,190,000 6,990,616 6,758,600
--------------------------
41,397,272 41,225,850
--------------------------
PRINTING & PUBLISHING 2.26%
American Media Operations,
Sr Sub Notes, 11.625%, 11/15/2004 2,900,000 3,023,250 3,030,500
Hollinger International Publishing,
Gtd Sr Sub Notes
9.250%, 2/1/2006 CA 4,900,000 4,900,000 4,912,250
--------------------------
7,923,250 7,942,750
--------------------------
RECREATION PRODUCTS & SERVICES 6.44%
Cobb Theatres, Sr Secured Notes^,
10.625%, 3/1/2003 1,500,000 1,500,000 1,500,000
Empress River Casino Finance,
Gtd Sr Notes, 10.750%, 4/1/2002 5,900,000 5,945,125 6,136,000
Hollywood Casino, Gtd Sr Secured
Notes, 12.750%, 11/1/2003 2,500,000 2,383,465 2,387,500
Plitt Theatres, Gtd Sr Sub Notes,
10.875%, 6/15/2004 2,000,000 1,885,301 2,040,000
Six Flags Theme Parks, Sr Sub
Discount Step-Up Notes, Series A
Zero Coupon^^, 6/15/2005 6,850,000 5,491,285 5,754,000
Trump Hotels & Casino Resorts
Holdings LP/Trump Hotels & Casino
Resorts Funding, Sr Secured Notes,
15.500%, 6/15/2005 4,245,000 4,254,000 4,786,237
--------------------------
21,459,176 22,603,737
--------------------------
<PAGE>
RENTAL EQUIPMENT 1.49%
Primeco Inc, Sr Sub Notes,
12.750%, 3/1/2005 4,900,000 5,030,250 5,243,000
--------------------------
RETAIL 4.13%
Pathmark Stores, Sr Sub Notes,
9.625%, 5/1/2003 2,000,000 1,952,771 1,935,000
Penn Traffic, Sr Notes,
8.625%, 12/15/2003 3,900,000 3,448,280 3,617,250
Samsonite Corp, Sr Sub Notes,
Series B, 11.125%, 7/15/2005 2,950,000 2,858,431 2,905,750
Smitty's Super Valu, Sr Sub Notes^,
12.750%, 6/15/2004 2,500,000 2,500,000 2,700,000
TPI Enterprises, Gtd Conv Sub Deb,
8.250%, 7/15/2002 3,758,000 3,625,930 3,344,620
--------------------------
14,385,412 14,502,620
--------------------------
STEEL 0.73%
WCI Steel, Sr Notes, Series B,
10.500%, 3/1/2002 2,500,000 2,528,750 2,550,000
--------------------------
TELECOMMUNICATIONS 13.36%
Brooks Fiber Properties,
Sr Discount Step-Up Notes^
Zero Coupon^^, 3/1/2006 3,750,000 2,206,204 2,235,937
Centennial Cellular, Sr Notes,
8.875%, 11/1/2001 5,500,000 5,037,632 5,424,375
Comcast Cellular, Sr Participation
Redeemable Notes Series A,
Zero Coupon, 3/5/2000 1,000,000 776,034 755,000
Series B, Zero Coupon, 3/5/2000 5,400,000 4,140,891 4,077,000
CommNet Cellular, Sr Sub Discount
Step-Up Notes Zero Coupon^^,
9/1/2003 8,000,000 6,536,421 6,440,000
IntelCom Group, Gtd Sr Discount
Step-Up Notes, Zero Coupon^^
9/15/2005 4,400,000 2,378,016 2,849,000
MFS Communications, Sr Discount
Step-Up Notes, Zero Coupon^^
1/15/2004 4,000,000 3,225,665 3,125,000
1/15/2006 15,000,000 9,825,802 9,768,750
Mobile Telecommunication
Technologies, Sr Sub Discount
Notes 13.500%, 12/15/2002 4,150,000 4,698,250 4,492,375
NEXTEL Communications, Sr
Redeemable Discount Step-Up
Notes Zero Coupon^^, 8/15/2004 7,900,000 4,230,201 4,680,750
Rogers Communications, Sr Notes,
9.125%, 1/15/2006 CA 3,000,000 2,988,750 3,015,000
--------------------------
46,043,866 46,863,187
--------------------------
TRANSPORTATION 2.99%
Stena AB, Sr Notes, 10.500%,
12/15/2005 SW 3,900,000 3,900,000 3,997,500
Teekay Shipping, Gtd 1st Pfd Ship
Mortgage Notes, 8.320%, 2/1/2008 2,000,000 2,000,000 1,992,500
Viking Star Shipping, Gtd 1st Pfd
Ship Mortgage Notes
9.625%, 7/15/2003 4,300,000 4,534,000 4,504,250
--------------------------
10,434,000 10,494,250
--------------------------
<PAGE>
UTILITIES 0.83%
Long Island Lighting, Deb, 9.000%,
11/1/2022 3,000,000 2,977,500 2,897,061
--------------------------
TOTAL FIXED INCOME SECURITIES 321,442,310 324,237,768
--------------------------
COMMON STOCKS 0.00%
RETAIL 0.00%
Smitty's Supermarkets Class B*@^ 2,500 0 0
--------------------------
PREFERRED STOCKS 0.81%
ELECTRICAL EQUIPMENT 0.81%
BCP/Essex Holdings, 15%, Series B,
Cum Redeemable Exchangable Pfd 110,049 2,648,550 2,861,280
--------------------------
OTHER SECURITIES 5.68%
CABLE TELEVISION 1.44%
Australis Media Ltd, Units (Each unit
consists of one $1,000 face amount
Sr Sub Discount Step-Up Note, Zero
Coupon^^, 5/15/2003 and 1 wrnt
to buy 57.721 shrs of cmn stock) AS 1,950 1,427,796 1,384,500
Wireless One, Units (Each unit consists
of one $1,000 face amount Sr Note
13.000%, 10/15/2003 and 3 wrnts to buy
equal number of shrs of cmn stock) 3,400 3,400,000 3,672,000
--------------------------
4,827,796 5,056,500
--------------------------
RECREATION PRODUCTS & SERVICES 0.69%
Casino America, Units (Each unit
consists of one $1,000 face amount
1st Mortgage Note,
11.500%, 11/15/2001 and 3.263
wrnts to buy 1.5 shrs of cmn stock) 2,475 2,444,063 2,400,750
--------------------------
TELECOMMUNICATIONS 3.55%
CS Wireless Systems, Units^
(Each unit consists of four $1,000
face amount Sr Discount Step-Up Notes,
Zero Coupon^^,
3/1/2006 and 1.1 shrs of cmn stock) 11,800 6,784,587 6,667,000
GST Telecommunications, Units^
(Each unit consists of eight $1,000 face
amount Sr Discount Step-Up Notes,
Zero Coupon^^, 12/15/2005 and one $1,000
face amount Conv Sr Sub Discount
Step-Up Note Zero Coupon^^,
12/15/2005) 4,950 2,604,995 3,245,002
InterCel Inc, Units (Each unit consists of
ten $1,000 face amount Sr Discount
Step-Up Notes, Zero Coupon^^, 2/1/2006 and 32
wrnts to buy 1 shr of cmn stock) 4,400 2,480,378 2,552,000
--------------------------
11,869,960 12,464,002
--------------------------
TOTAL OTHER SECURITIES 19,141,819 19,921,252
--------------------------
<PAGE>
SHORT-TERM INVESTMENTS -
COMMERCIAL PAPER 1.10%
FINANCE RELATED 1.10%
Associates Corp of North America,
5.400%, 3/1/1996 3,865,000 3,865,000 3,865,000
--------------------------
TOTAL INVESTMENT SECURITIES 100.00%
(Cost for Income Tax Purposes
$347,162,679) 347,097,679 350,885,300
==========================
SELECT INCOME Fund
FIXED INCOME SECURITIES 96.86%
US Government Obligations 18.75%
US Treasury Bonds
7.625%, 2/15/2025 20,000,000 23,105,156 22,662,500
US Treasury Notes
6.500%, 5/15/2005 12,000,000 12,229,453 12,288,732
6.500%, 8/15/2005 14,000,000 14,100,000 14,328,104
--------------------------
TOTAL US GOVERNMENT OBLIGATIONS 49,434,609 49,279,336
--------------------------
US Government Agency Obligations 21.19%
Federal Home Loan Mortgage, Gold,
Participation Certificates
7.500%, 10/1/2024 2,994,854 2,855,406 3,022,973
7.000%, 4/1/2008 5,244,113 5,104,816 5,285,746
7.000%, 4/1/2024 4,824,554 4,543,373 4,771,093
7.000%, 5/1/2024 9,217,805 8,658,055 9,115,662
7.000%, 6/1/2024 4,559,824 4,284,097 4,509,297
6.500%, 6/1/2010 2,795,186 2,774,222 2,773,436
6.500%, 10/1/2010 4,825,513 4,774,996 4,774,020
Federal National Mortgage Association,
Gtd Pass-Through Certificates,
7.500%, 12/1/2024 2,894,282 2,712,032 2,918,822
Government National Mortgage
Association I Modified
Pass-Through Certificates
7.500%, 5/15/2022 4,690,162 4,434,40 4,751,130
7.500%, 10/15/2023 1,724,053 1,593,133 1,745,223
7.500%, 11/15/2023 9,088,739 8,601,749 9,200,340
7.500%, 5/15/2024 2,809,604 2,608,981 2,837,700
--------------------------
TOTAL US GOVERNMENT
AGENCY OBLIGATIONS 52,945,262 55,705,442
--------------------------
Corporate Bonds 56.92%
AEROSPACE & DEFENSE 1.02%
Howmet Corp, Sr Sub Notes^,
10.000%, 12/1/2003 2,500,000 2,600,625 2,675,000
--------------------------
BROADCASTING 7.44%
Allbritton Communications
Sr Sub Deb, 11.500%, 8/15/2004 3,225,000 3,348,937 3,434,625
Sr Sub Deb^, 9.750%, 11/30/2007 2,000,000 1,990,000 1,945,000
Benedek Broadcasting, Sr Secured
Notes, 11.875%, 3/1/2005 3,100,000 3,175,875 3,317,000
Granite Broadcasting, Sr Sub Notes,
Series A, 9.375%, 12/1/2005 2,500,000 2,487,500 2,406,250
Heritage Media, Sr Sub Notes,
8.750%, 2/15/2006 2,000,000 2,000,000 1,955,000
<PAGE>
Paramount Communications, Sub Deb
Series A, 7.000%, 7/1/2003 2,000,000 1,896,324 1,947,844
Series B, 7.000%, 7/1/2003 2,000,000 1,884,804 1,947,844
Young Broadcasting, Sr Sub Notes^,
9.000%, 1/15/2006 2,650,000 2,630,177 2,597,000
--------------------------
19,413,617 19,550,563
--------------------------
BUILDING & CONSTRUCTION PRODUCTS 3.14%
USG Corp
Deb, 8.750%, 3/1/2017 500,000 508,750 507,500
Sr Notes, 8.500%, 8/1/2005 7,440,000 7,688,000 7,737,600
--------------------------
8,196,750 8,245,100
--------------------------
CABLE TELEVISION 9.89%
CF CABLE TV, Gtd Sr Secured
1st Priority Notes,
9.125%, 7/15/2007 3,000,000 3,135,000 3,105,000
Cablevision Industries, Sr Deb,
Series B, 9.250%, 4/1/2008 9,860,000 10,373,171 10,809,025
Diamond Cable Communications PLC,
Sr Discount Step-Up Notes
Zero Coupon^^, 12/15/2005 1,750,000 1,067,500 1,071,875
International CableTel, Sr
Deferred Step-Up Notes, Series A^
Zero Coupon^^, 2/1/2006 5,200,000 3,001,169 3,094,000
Viacom Inc, Sub Deb, 8.000%,
7/7/2006 8,000,000 7,996,260 7,916,312
--------------------------
25,573,100 25,996,212
--------------------------
CHEMICALS 2.36%
Freeport-McMoRan Resource
Partners LP, Sr Sub Notes
8.750%, 2/15/2004 3,900,000 4,143,750 4,114,500
Rexene Corp, Sr Notes,
11.750%, 12/1/2004 2,000,000 2,165,000 2,080,000
--------------------------
6,308,750 6,194,500
--------------------------
HEALTH CARE RELATED 1.45%
Tenet Healthcare, Sr Notes
9.625%, 9/1/2002 2,500,000 2,500,000 2,762,500
8.625%, 12/1/2003 1,000,000 996,66 1,050,000
--------------------------
3,496,660 3,812,500
--------------------------
INSURANCE 1.08%
Berkley (W R) Corp, Notes,
6.250%, 1/15/2006 3,000,000 2,985,000 2,855,961
--------------------------
INVESTMENT BROKERS 1.10%
Donaldson Lufkin & Jenrette,
Medium-Term Notes
5.625%, 2/15/2016 3,000,000 2,994,180 2,897,079
--------------------------
OIL & GAS RELATED 3.28%
Dual Drilling, Sr Sub Notes,
9.875%, 1/15/2004 4,000,000 4,413,000 4,410,000
Gulf Canada Resources Ltd,
Sr Sub Deb, 9.250%, 1/15/2004 3,000,000 3,000,000 3,150,000
<PAGE>
Louis Dreyfus Natural Gas,
Sr Sub Notes, 9.250%, 6/15/2004 1,000,000 959,781 1,055,000
--------------------------
8,372,781 8,615,000
--------------------------
PAPER & PAPER PRODUCTS 2.59%
Bowater Inc, Deb, 9.000%, 8/1/2009 3,448,000 4,092,509 4,001,476
Tembec Finance, Gtd Sr Notes,
9.875%, 9/30/2005 3,000,000 2,983,750 2,820,000
--------------------------
7,076,259 6,821,476
--------------------------
PRINTING & PUBLISHING 2.63%
Hollinger International
Publishing, Gtd Sr Sub Notes
9.250%, 2/1/2006 2,000,000 2,000,000 2,005,000
News America Holdings
Deb, 8.500%, 2/23/2025 1,500,000 1,499,062 1,664,137
Sr Notes, 8.500%, 2/15/2005 3,000,000 3,287,880 3,252,693
--------------------------
6,786,942 6,921,830
--------------------------
RECREATION PRODUCTS & SERVICES 1.34%
Cobb Theatres, Sr Secured Notes^,
10.625%, 3/1/2003 400,000 400,000 400,000
Empress River Casino Finance,
Gtd Sr Notes, 10.750%, 4/1/2002 3,000,000 3,028,750 3,120,000
--------------------------
3,428,750 3,520,000
--------------------------
RETAIL 2.44%
Kroger Co, Lease Certificates,
6.000%, 4/1/2003 3,650,000 2,897,629 3,212,000
Revco (D S) Inc, Sr Notes,
9.125%, 1/15/2000 3,000,000 3,250,750 3,210,000
--------------------------
6,148,379 6,422,000
--------------------------
SAVINGS & LOAN 0.79%
Western Financial Savings Bank,
Sub Capital Deb, 8.500%, 7/1/2003 2,000,000 1,943,537 2,069,870
--------------------------
TELECOMMUNICATIONS 3.64%
Centennial Cellular,
Sr Notes, 8.875%, 11/1/2001 2,000,000 1,845,314 1,972,500
Comcast Cellular, Sr Participating
Redeemable Notes, Series B
Zero Coupon^^, 3/5/2000 3,000,000 2,280,961 2,265,000
MFS Communications, Sr Discount
Step-Up Notes, Zero Coupon^^
1/15/2004 1,000,000 806,424 781,250
1/15/2006 7,000,000 4,620,172 4,558,750
--------------------------
9,552,871 9,577,500
--------------------------
TOBACCO 1.14%
RJR Nabisco
Gtd Sr Notes, 8.750%, 4/15/2004 2,000,000 2,053,140 2,011,180
Notes, 8.750%, 8/15/2005 1,000,000 1,043,200 978,273
--------------------------
3,096,340 2,989,453
--------------------------
<PAGE>
TRANSPORTATION 6.85%
Delta Air Lines, Equipment
Trust Certificates
Series 1992C, 9.300%, 1/2/2010 2,800,000 2,719,752 3,152,248
Series 1992D, 9.300%, 1/2/2010 2,175,000 2,337,422 2,448,622
Overseas Shipholding Group
Deb, 8.750%, 12/1/2013 1,000,000 1,067,500 1,025,010
Notes, 8.000%, 12/1/2003 1,000,000 1,001,590 1,008,042
Southern Pacific Railroad,
Sr Notes, 9.375%, 8/15/2005 4,000,000 4,358,125 4,340,000
Stena AB, Sr Notes, 10.500%,
12/15/2005 2,000,000 2,000,000 2,050,000
Teekay Shipping, Gtd 1st
Preferred Ship Mortgage Notes
8.320%, 2/1/2008 4,000,000 4,000,000 3,985,000
--------------------------
17,484,389 18,008,922
--------------------------
UTILITIES 4.74%
Commonwealth Edison,
1st Mortgage, Series 78
8.375%, 10/15/2006 5,200,000 5,849,428 5,723,037
Long Island Lighting, Deb
9.000%, 11/1/2022 5,000,000 4,962,500 4,828,435
7.500%, 3/1/2007 2,000,000 1,920,337 1,905,294
--------------------------
12,732,265 12,456,766
--------------------------
TOTAL CORPORATE BONDS 148,191,195 149,629,732
--------------------------
TOTAL FIXED INCOME SECURITIES 250,571,066 254,614,510
--------------------------
SHORT-TERM INVESTMENTS -
COMMERCIAL PAPER 3.14%
FINANCE RELATED 3.14%
American Express Credit,
5.430%, 3/1/1996 8,242,000 8,242,000 8,242,000
--------------------------
TOTAL INVESTMENT SECURITIES 100.00% 258,813,066# 262,856,510
===========================
SHORT-TERM BOND Fund
FIXED INCOME SECURITIES 63.70%
US Government Agency Obligations 43.45%
Federal Home Loan Mortgage,
Gold, Participation Certificates
7.000%, 6/1/2009 1,384,813 1,373,994 1,395,959
6.500%, 9/1/2010 1,464,516 1,450,786 1,448,888
6.500%, 1/1/2011 993,745 993,745 983,141
--------------------------
TOTAL US GOVERNMENT AGENCY OBLIGATIONS 3,818,525 3,827,988
--------------------------
Corporate Bonds 20.25%
FINANCE RELATED 15.73%
Chrysler Financial, Notes, 6.500%,
6/15/1998 470,000 478,482 476,069
Ford Motor Credit, Medium-Term
Notes, 5.675%, 2/1/1999 450,000 449,820 449,503
General Motors Acceptance, Notes,
7.750%, 4/15/1997 450,000 462,537 460,387
--------------------------
1,390,839 1,385,959
--------------------------
<PAGE>
LEASING COMPANIES 4.52%
United States Leasing International,
Medium-Term Notes
4.847%, 11/16/1998 400,000 399,940 397,545
--------------------------
TOTAL CORPORATE BONDS 1,790,779 1,783,505
--------------------------
TOTAL FIXED INCOME SECURITIES 5,609,304 5,611,492
--------------------------
SHORT-TERM INVESTMENTS 36.30%
Corporate Bonds 16.91%
BUSINESS SERVICES 2.17%
Tenneco Credit, Sr Notes, 9.250%,
11/1/1996 187,000 206,111 191,076
--------------------------
FINANCE RELATED 4.02%
AVCO Financial Services, Notes,
7.500%, 11/15/1996 350,000 374,865 354,649
--------------------------
INVESTMENT BROKERS 4.52%
Merrill Lynch & Co, Notes,
5.000%, 12/15/1996 400,000 396,071 398,357
--------------------------
UTILITIES 6.20%
Detroit Edison, 1st Mortgage,
6.000%, 12/1/1996 296,000 296,369 295,990
Jersey Central Power & Light,
1st Mortgage, 6.125%, 8/1/1996 250,000 251,912 249,994
--------------------------
548,281 545,984
--------------------------
TOTAL CORPORATE BONDS 1,525,328 1,490,066
--------------------------
Repurchase Agreements 19.39%
Repurchase Agreement with State
Street Bank & Trust Co dated 2/29/1996
due 3/1/1996 at 5.300%, repurchased at
$1,708,251 (Collateralized by US
Treasury Bonds due 2/15/2015 at 11.250%,
value $1,755,528) 1,708,000 1,708,000 1,708,000
--------------------------
TOTAL SHORT-TERM INVESTMENTS 3,233,328 3,198,066
--------------------------
TOTAL INVESTMENT SECURITIES 100.00% 8,842,632# 8,809,558
==========================
U.S. GOVERNMENT SECURITIES Fund
FIXED INCOME SECURITIES 88.19%
US Government Obligations 34.37%
US Treasury Bonds
8.500%, 2/15/2020 3,000,000 3,074,531 3,660,000
8.125%, 8/15/2019 3,500,000 3,475,728 4,113,589
8.125%, 8/15/2021 3,000,000 3,094,687 3,535,308
7.500%, 11/15/2024+ 2,000,000 1,931,563 2,227,500
6.875%, 8/15/2025+ 3,000,000 3,275,156 3,126,558
--------------------------
TOTAL US GOVERNMENT OBLIGATIONS 14,851,665 16,662,955
--------------------------
<PAGE>
US Government Agency Obligations 53.82%
Federal Home Loan Mortgage,
Gold, Participation Certificates
7.500%, 9/1/2025 2,004,726 2,019,448 2,023,107
7.000%, 10/1/2025 1,996,953 1,986,345 1,973,827
6.500%, 12/31/1999~~ 5,000,000 4,961,719 4,832,812
6.500%, 1/1/2011 2,000,657 2,000,657 1,979,308
Government National Mortgage
Association I
Modified Pass-Through Certificates
7.500%, 5/15/2022 9,215,818 9,135,166 9,335,615
7.500%, 7/15/2023 904,363 853,492 915,467
7.500%, 11/15/2023 917,420 867,392 928,685
7.000%, 5/15/2023 1,383,511 1,280,612 1,369,605
7.000%, 2/15/2024 2,765,462 2,482,866 2,734,707
--------------------------
TOTAL US GOVERNMENT AGENCY OBLIGATIONS 25,587,697 26,093,133
--------------------------
TOTAL FIXED INCOME SECURITIES 40,439,362 42,756,088
--------------------------
SHORT-TERM INVESTMENTS -
REPURCHASE AGREEMENTS 11.81%
Repurchase Agreement with State Street
Bank & Trust Co dated 2/29/1996 due
3/1/1996 at 5.300%, repurchased at
$5,725,843 (Collateralized by US Treasury
Bonds due 2/15/2015 at 11.250%,
value $5,870,425) 5,725,000 5,725,000 5,725,000
--------------------------
TOTAL INVESTMENT SECURITIES 100.00% 46,164,362# 48,481,088
==========================
<FN>
** Security is a payment-in-kind (PIK) bond. PIK bonds may make interest
payments in additional securities.
^^ 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 non-income producing.
@ Security has no market value at February 29, 1996.
< Percentages are expressed in relation to total investment value.
# Also represents cost for income tax purposes.
+ Security has been designated as collateral for To-Be-Announced (TBA)
securities.
~~ Security is a To-Be-Announced (TBA) security.
^ The following are restricted securities at February 29, 1996:
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
The following are restricted securities at February 29, 1996:
Value as
Acquisition Acquisition % of
Description Date(s) Cost Net Assets
- ----------------------------------------------------------------------------------------------
High Yield Fund
<S> <C> <C>
Brooks Fiber Properties, Sr Discount
Step-Up Notes Zero Coupon, 3/1/2006 2/16/1996 6,909,470 0.61
CS Wireless Systems, Units 2/16/1996 6,769,778 1.81
Cablevision Systems, Depositary Shrs,
Series L Pfd, 11.125%, 4/1/2008 2/8/1996 7,000,000 1.42
Chancellor Radio Broadcasting, Sr
Exchangeable Pfd 12.250%, 2/15/2008 2/21/1996 3,900,000 1.06
Cobb Theatres, Sr Secured Notes, 10.625%,
3/1/2003 2/29/1996 1,500,000 0.41
GST Telecommunications, Units 12/14/1995 3,917,489 0.88
International CableTel, Sr Deferred Step-Up
Notes, Series A Zero Coupon, 2/1/2006 1/25/1996 9,716,350 2.12
Rifkin Acquisition Partners LLLP, Sr Sub
Notes, 11.125%, 1/15/2006 1/26/1996 4,900,000 0.81
Smitty's Super Value, Sr Sub Notes,
12.750%, 6/15/2004 2/27/1995 2,500,000 0.73
Smitty's Supermarkets Class B 1/27/1995 0 0.00
--------
10.66%
========
Select Income Fund
Allbritton Communications, Sr Sub Deb,
9.750%, 11/30/2007 2/1/1996 $1,990,000 0.72%
Cobb Theatres, Sr Secured Notes,
10.625%, 3/1/2003 2/29/1996 400,000 0.15
Granite Broadcasting, Sr Sub Notes, Series A
9.375%, 12/1/2005 2/13/1996 2,487,500 0.89
Howmet Corp, Sr Sub Notes, 10.000%, 12/1/2003 11/29/1995-
12/21/1995 2,600,625 0.99
International CableTel, Sr Deferred Step-Up
Notes, Series A Zero Coupon, 2/1/2006 1/25/1996 3,001,169 1.15
Young Broadcasting, Sr Sub Notes,
9.000%, 1/15/2006 2/12/1996 2,630,177 0.97
--------
4.87%
========
</TABLE>
<TABLE>
Summary of Investments by Country
<CAPTION>
% of
Country Investment
Country Code Securities Value
- ----------------------------------------------------------------------------------------------
High Yield Fund
<S> <C> <C>
Australia AS 0.39% $1,384,500
Canada CA 8.63 30,287,167
Indonesia ID 0.85 2,985,000
Singapore SN 1.66 5,820,750
Sweden SW 1.14 3,997,500
United Kingdom UK 3.20 11,214,600
United States US 84.13 295,195,783
-----------------------
100.00% $350,885,300
=======================
</TABLE>
See Notes to Financial Statements
<PAGE>
INVESCO Income Funds, Inc.
Statement of Assets and Liabilities
February 29, 1996
UNAUDITED
<TABLE>
<CAPTION>
U.S.
High Select Short-Term Government
Yield Income Bond Securities
Fund Fund Fund Fund
-------------------------------------------------------------------
ASSETS
<S> <C> <C> <C> <C>
Investment Securities:
At Cost~ $347,097,679 $258,813,066 $8,842,632 $46,164,362
===================================================================
At Value~ 350,885,300 262,856,510 8,809,558 48,481,088
Cash 637,318 32,706 1,023 0
Receivables:
Investment Securities Sold 12,665,586 3,699,446 0 0
Fund Shares Sold 981,554 1,291,315 22,323 146,936
Dividends and Interest 7,474,395 3,170,881 67,626 225,646
Prepaid Expenses and Other Assets 58,546 192,320 74,995 105,968
-------------------------------------------------------------------
TOTAL ASSETS 372,702,699 271,243,178 8,975,525 48,959,638
-------------------------------------------------------------------
LIABILITIES
Payables:
Custodian 0 0 0 485
Distributions to Shareholders 403,423 144,022 1,117 11,081
Investment Securities Purchased 2,500,000 1,467,500 0 4,973,455
Fund Shares Repurchased 1,850,483 496,795 10,069 121,709
Accrued Distribution Expenses 75,702 54,454 1,782 8,502
Accrued Expenses and Other Payables 19,008 12,463 10,125 5,702
-------------------------------------------------------------------
TOTAL LIABILITIES 4,848,616 2,175,234 23,093 5,120,934
-------------------------------------------------------------------
Net Assets at Value 367,854,083 269,067,944 8,952,432 $43,838,704
===================================================================
NET ASSETS
Paid-in Capital* 365,823,400 261,024,728 9,283,920 42,140,042
Accumulated Undistributed Net Realized Gain (Loss)
on Investment Securities and Foreign Currency
Transactions (1,756,938) 3,999,772 (298,414) (618,064)
Net Appreciation (Depreciation) of Investment
Securities and Foreign Currency Transactions 3,787,621 4,043,444 (33,074) 2,316,726
-------------------------------------------------------------------
Net Assets at Value 367,854,083 269,067,944 8,952,432 838,704
===================================================================
Shares Outstanding 52,662,446 40,603,610 936,770 5,827,532
Net Asset Value, Offering and Redemption
Price per Share $6.99 $6.63 $9.56 $7.52
===================================================================
<FN>
~ Investment securities at cost and value at February 29, 1996 include
repurchase agreements of $1,708,000 and $5,725,000 for 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
Six Months Ended February 29, 1996
UNAUDITED
<TABLE>
<CAPTION>
U.S.
High Select Short-Term Government
Yield Income Bond Securities
Fund Fund Fund Fund
-------------------------------------------------------------------
INVESTMENT INCOME
INCOME
<S> <C> <C> <C> <C>
Interest $17,262,174 $10,097,349 $293,531 $1,442,362
Dividends 18,750 0 0 0
-------------------------------------------------------------------
TOTAL INCOME 17,280,924 10,097,349 293,531 1,442,362
-------------------------------------------------------------------
EXPENSES
Investment Advisory Fees 816,843 694,785 22,826 117,852
Distribution Expenses 417,424 315,811 11,413 53,569
Transfer Agent Fees 247,005 273,140 24,908 84,649
Administrative Fees 30,045 23,949 5,685 8,214
Custodian Fees and Expenses 19,871 32,840 3,062 7,642
Directors' Fees and Expenses 11,794 9,698 4,228 5,155
Professional Fees and Expenses 12,654 11,310 6,070 8,386
Registration Fees and Expenses 33,842 27,448 11,785 12,653
Reports to Shareholders 24,173 28,447 3,671 9,986
Other Expenses 17,135 13,177 989 2,511
-------------------------------------------------------------------
TOTAL EXPENSES 1,630,786 1,430,605 94,637 310,617
Fees and Expenses Absorbed by Investment Adviser (521) (145,788) (58,980) (92,246)
Fees and Expenses Paid Indirectly (14,997) (21,704) (1,407) (4,128)
-------------------------------------------------------------------
NET EXPENSES 1,615,268 1,263,113 34,250 214,243
-------------------------------------------------------------------
NET INVESTMENT INCOME 15,665,656 8,834,236 259,281 1,228,119
-------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Gain (Loss) on Investment Securities
and Foreign Currency Transactions 10,631,412 5,966,655 (10,587) 462,706
Change in Net Appreciation (Depreciation)
of Investment Securities and Foreign
Currency Transactions 1,973,453 (2,275,000) 26,875 (351,669)
-------------------------------------------------------------------
NET GAIN ON INVESTMENT SECURITIES 12,604,865 3,691,655 16,288 111,037
-------------------------------------------------------------------
Net Increase in Net Assets from Operations 28,270,521 12,525,891 275,569 1,339,156
===================================================================
See Notes to Financial Statements
</TABLE>
<PAGE>
INVESCO Income Funds, Inc.
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
High Yield Fund Select Income Fund
Six Months Year Six Months Year
Ended Ended Ended Ended
February 29 August 31 February 29 August 31
-------------------------------- --------------------------------
1996 1995 1996 1995
UNAUDITED UNAUDITED
OPERATIONS
<S> <C> <C> <C> <C>
Net Investment Income $15,665,656 $25,855,573 $8,834,236 $12,692,130
Net Realized Gain (Loss) on Investment Securities
and Foreign Currency Transactions 10,631,412 (9,175,919) 5,966,655 1,099,163
Change in Net Appreciation (Depreciation)
of Investment Securities and
Foreign Currency Transactions 1,973,453 13,064,414 (2,275,000) 10,684,511
-------------------------------- --------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS 28,270,521 29,744,068 12,525,891 24,475,804
-------------------------------- --------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (15,665,656) (25,855,573) (8,834,236) (12,692,130)
In Excess of Net Investment Income 0 0 0 (120,083)
Net Realized Gain on Investment Securities 0 0 (928,028) 0
In Excess of Net Realized Gain on
Investment Securities 0 (1,057,760) 0 0
-------------------------------- --------------------------------
TOTAL DISTRIBUTIONS (15,665,656) (26,913,333) (9,762,264) (12,812,213)
-------------------------------- --------------------------------
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 262,951,127 369,650,883 109,546,664 168,255,492
Reinvestment of Distributions 13,140,695 22,047,381 8,914,480 11,346,504
-------------------------------- --------------------------------
276,091,822 391,698,264 118,461,144 179,601,996
Amounts Paid for Repurchases of Shares (209,801,199) (349,343,198) (68,754,020) (113,005,592)
-------------------------------- --------------------------------
NET INCREASE IN NET ASSETS
FROM FUND SHARE TRANSACTIONS 66,290,623 42,355,066 49,707,124 66,596,404
-------------------------------- --------------------------------
Total Increase in Net Assets 78,895,488 45,185,801 52,470,751 78,259,995
NET ASSETS
Beginning of Period 288,958,595 243,772,794 216,597,193 138,337,198
-------------------------------- --------------------------------
End of Period 367,854,083 288,958,595 269,067,944 216,597,193
================================ ================================
FUND SHARE TRANSACTIONS
Shares Sold 38,409,725 56,172,989 16,448,351 26,867,635
Shares Issued from Reinvestment of Distributions 1,921,242 3,348,656 1,335,093 1,806,508
-------------------------------- --------------------------------
40,330,967 59,521,645 17,783,444 28,674,143
Shares Repurchased (30,574,605) (52,832,960) (10,293,896) (17,930,852)
-------------------------------- --------------------------------
Net Increase in Fund Shares 9,756,362 6,688,685 7,489,548 10,743,291
================================ ================================
See Notes to Financial Statements
</TABLE>
<PAGE>
INVESCO Income Funds, Inc.
Statement of Changes in Net Assets (Continued)
<TABLE>
<CAPTION>
Short-Term U.S. Government
Bond Fund Securities Fund
Six Months Year Six Months Year
Ended Ended Ended Ended
February 29 August 31 February 29 August 31
-------------------------------- --------------------------------
1996 1995 1996 1995
UNAUDITED UNAUDITED
OPERATIONS
<S> <C> <C> <C> <C>
Net Investment Income $259,281 $523,746 $1,228,119 $2,493,232
Net Realized Gain (Loss) on Investment Securities
and Foreign Currency Transactions (10,587) (7,117) 462,706 (408,402)
Change in Net Appreciation (Depreciation)
of Investment Securities and Foreign
Currency Transactions 26,875 89,746 (351,669) 3,021,667
-------------------------------- --------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS 275,569 606,375 1,339,156 5,106,497
-------------------------------- --------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (259,281) (523,746) (1,228,119) (2,493,232)
In Excess of Net Investment Income 0 (2,276) 0 (19,177)
-------------------------------- --------------------------------
TOTAL DISTRIBUTIONS (259,281) (526,022) (1,228,119) (2,512,409)
-------------------------------- --------------------------------
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 9,734,065 14,790,698 31,974,687 75,656,494
Reinvestment of Distributions 241,360 487,634 1,165,839 2,314,765
-------------------------------- --------------------------------
9,975,425 15,278,332 33,140,526 77,971,259
Amounts Paid for Repurchases of Shares (10,018,780) (14,257,062) (27,500,096) (79,217,928)
-------------------------------- --------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM FUND SHARE TRANSACTIONS (43,355) 1,021,270 5,640,430 (1,246,669)
-------------------------------- --------------------------------
Total Increase (Decrease) in Net Assets (27,067) 1,101,623 5,751,467 1,347,419
NET ASSETS
Beginning of Period 8,979,499 7,877,876 38,087,237 36,739,818
-------------------------------- --------------------------------
End of Period 8,952,432 8,979,499 43,838,704 38,087,237
================================ ================================
FUND SHARE TRANSACTIONS
Shares Sold 1,015,519 1,565,933 4,169,868 10,741,553
Shares Issued from Reinvestment of Distributions 25,176 51,720 151,853 323,737
-------------------------------- --------------------------------
1,040,695 1,617,653 4,321,721 11,065,290
Shares Repurchased (1,044,748) (1,509,685) (3,581,811) (11,155,172)
-------------------------------- --------------------------------
Net Increase (Decrease) in Fund Shares (4,053) 107,968 739,910 (89,882)
================================ ================================
See Notes to Financial Statements
</TABLE>
<PAGE>
INVESCO Income Funds, Inc.
Notes to Financial Statements
UNAUDITED
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Income
Funds, Inc. (the "Fund"), was incorporated in Maryland and presently consists
of four separate Funds: High Yield Fund, Select Income Fund, Short-Term Bond
Fund and U.S. Government Securities Fund. The investment objectives of the
respective Funds are: to seek a high level of current income for the High Yield
and Select Income Funds; to seek a high level of current income with minimum
fluctuation in principal value while maintaining liquidity for the Short-Term
Bond Fund; and to seek a high level of current income by investing in debt
obligations issued by the U.S. Government or its agencies for the 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.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
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 one or more 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 sales price in the market
where such securities are primarily traded. If last sales prices are not
available, securities are valued at the highest closing bid price obtained
from one or more dealers making a market for such securities or by a
pricing service approved by the Fund's board of directors.
Foreign securities are valued at the closing price on the principal
stock exchange on which they are traded. In the event that closing prices
are not available for foreign securities, prices will be obtained from the
principal stock exchange at or prior to the close of the New York Stock
Exchange. Foreign currency exchange rates are determined daily prior to
the close of the New York Stock Exchange.
If market quotations or pricing service valuations are not readily
available, securities are valued at fair value as determined in good faith
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. TO-BE-ANNOUNCED SECURITIES - To-be-announced (TBA) securities held by the
Fund are fully collateralized by other 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
to-be-announced (TBA) securities.
C. 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.
<PAGE>
D. 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.
The Fund may have elements of risk due to concentrated investments
in foreign issuers located in a specific country. Such concentrations may
subject the Fund to additional risks resulting from future political or
economic conditions and/or possible impositions of adverse foreign
governmental laws or currency exchange restrictions. Net realized and
unrealized gain or loss from investments includes fluctuations from
currency exchange rates and fluctuations in market value.
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 Fund 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 each Fund to sell a security
at a fair price and may substantially delay the sale of the security which
each Fund seeks to sell. In addition, these securities may exhibit greater
price volatility than securities for which secondary markets exist.
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.
E. 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, U.S. Government Securities Fund
had $72,920, 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.
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.
F. 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
<PAGE>
securities, market discounts, foreign currency transactions, nontaxable
dividends, net operating losses and expired capital loss carryforwards.
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 Fund's Custodian,
agreed upon Custodian Fees and Expenses are reduced by credits granted by
the Custodian from any temporarily uninvested cash. Similarly, Other
Expenses, which include Pricing Expenses, are reduced by credits earned by
each Fund from security brokerage transactions under certain
broker/services arrangements with third parties. Such credits are included
in Fees and Expenses Paid Indirectly in the Statement of Operations.
For the six months ended February 29, 1996, Fees and Expenses Paid
Indirectly consisted of the following:
Custodian Fees Other
Fund and Expenses Expenses
------------------------------------------------------------
High Yield Fund $14,930 $67
Select Income Fund 21,704 0
Short-Term Bond Fund 1,407 0
U.S. Government Securities Fund 4,128 0
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.
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 the Fund are available to reimburse the Distributor for actual
expenditures incurred within a rolling twelve-month period. For the six months
ended February 29, 1996, High Yield, Select Income, Short-Term Bond and U.S.
Government Securities Funds paid the Distributor $405,925, $305,766, $11,505 and
$52,953, respectively, for reimbursement of expenses incurred.
<PAGE>
IFG has voluntarily agreed, in some instances, to absorb certain
fees and expenses incurred by High Yield, Select Income, U.S. Government
Securities Funds and IFG and ITC have voluntarily agreed, in some instances, to
absorb certain fees and expenses incurred by Short-Term Bond Fund.
NOTE 3 - PURCHASES AND SALES OF INVESTMENT SECURITIES. For the six months ended
February 29, 1996, 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 $571,092,466 $505,724,999
Select Income Fund 275,983,310 235,981,715
Short-Term Bond Fund 449,820 1,754,426
The aggregate cost of purchases and proceeds from sales of U.S. Government
securities were as follows:
Fund Purchases Sales
- ----------------------------------------------------------------------------
Select Income Fund $31,294,172 $26,827,261
Short-Term Bond Fund 4,512,268 3,144,606
U.S. Government Securities Fund 25,722,809 16,788,652
NOTE 4 - APPRECIATION AND DEPRECIATION. At February 29, 1996, 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 $7,717,032 $3,994,411 $3,722,621
Select Income Fund 6,038,155 1,994,711 4,043,444
Short-Term Bond Fund 24,251 57,325 (33,074)
U.S. Government Securities Fund 2,628,098 311,372 2,316,726
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 six months ended February 29, 1996,
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 $1,589 $6,386 $13,412
Select Income Fund 1,138 3,055 7,249
Short-Term Bond Fund 47 228 457
U.S. Government Securities Fund 221 941 1,947
<PAGE>
NOTE 6 - LINE OF CREDIT. The Fund has available a Redemption Line of Credit
Facility ("LOC"), from a consortium of national banks to be used for temporary
or emergency purposes to fund redemptions of investor shares. The LOC permits
borrowings to a maximum of 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. For the
six months ended February 29, 1996, there were no such borrowings.
<PAGE>
INVESCO Income Funds, Inc.
Financial Highlights
(For a Fund Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
Six Months Period
Ended Year Ended Ended
February 29 August 31 August 31 Year Ended December 31
------------ -------------------- ---------- --------------------------------
1996 1995 1994 1993^ 1992 1991 1990
UNAUDITED
High Yield Fund
PER SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value -
Beginning of Period $6.73 $6.73 $7.32 $6.97 $6.66 $6.00 $7.16
------------ -------------------- ---------- --------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.32 0.66 0.62 0.39 0.64 0.70 0.83
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 0.26 0.03 (0.59) 0.36 0.30 0.64 (1.14)
------------ -------------------- ---------- --------------------------------
Total from Investment Operations 0.58 0.69 0.03 0.75 0.94 1.34 (0.31)
------------ -------------------- ---------- --------------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.32 0.66 0.62 0.40 0.63 0.68 0.85
Distributions In Excess of
Capital Gains 0.00 0.03 0.00 0.00 0.00 0.00 0.00
------------ -------------------- ---------- --------------------------------
Total Distributions 0.32 0.69 0.62 0.40 0.63 0.68 0.85
------------ -------------------- ---------- --------------------------------
Net Asset Value - End of Period $6.99 $6.73 $ 6.73 $7.32 $6.97 $6.66 $6.00
============ ==================== ========== ================================
TOTAL RETURN 8.81%* 11.12% 0.37% 11.01%* 14.53% 23.51% (4.57%)
RATIOS
Net Assets -End of Period
($000 Omitted) $367,854 $288,959 $243,773 $308,945 $212,172 $99,103 $40,380
Ratio of Expenses to Average
Net Assets# 0.49%*@ 1.00% 0.97% 0.97%~ 1.00% 1.05% 0.94%
Ratio of Net Investment Income to
Average Net Assets# 4.67%* 10.01% 8.70% 8.28%~ 9.29% 10.57% 12.57%
Portfolio Turnover Rate 164%* 201% 195% 45%* 120% 64% 28%
<FN>
^ From January 1, 1993 to August 31, 1993, the Fund's new fiscal year-end.
* 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 six
months ended February 29, 1996 and 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 0.49% (not annualized), 1.07% and 0.98%,
respectively, and ratio of net investment income to average net assets would
have been 4.67% (not annualized), 9.94% and 8.69%, respectively.
@ Ratio is based on Total Expenses, less Expenses Absorbed by Investment
Adviser, but is before any expense offset arrangements.
~ Annualized
</FN>
</TABLE>
<PAGE>
INVESCO Income Funds, Inc.
Financial Highlights (Continued)
(For a Fund Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
Six Months Period
Ended Year Ended Ended
February 29 August 31 August 31 Year Ended December 31
------------ -------------------- ---------- --------------------------------
1996 1995 1994 1993^ 1992 1991 1990
UNAUDITED
Select Income Fund
PER SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value - Beginning of Period $6.54 $6.18 $6.80 $6.53 $6.50 $5.96 $6.26
------------ -------------------- ---------- --------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.24 0.47 0.47 0.33 0.52 0.53 0.59
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 0.11 0.36 (0.43) 0.27 0.13 0.53 (0.30)
------------ -------------------- ---------- --------------------------------
Total from Investment Operations 0.35 0.83 0.04 0.60 0.65 1.06 0.29
------------ -------------------- ---------- --------------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income+ 0.24 0.47 0.47 0.33 0.52 0.52 0.59
Distributions from Capital Gains 0.02 0.00 0.09 0.00 0.10 0.00 0.00
In Excess of Capital Gains 0.00 0.00 0.10 0.00 0.00 0.00 0.00
------------ -------------------- ---------- --------------------------------
Total Distributions 0.26 0.47 0.66 0.33 0.62 0.52 0.59
------------ -------------------- ---------- --------------------------------
Net Asset Value - End of Period $6.63 $6.54 $6.18 $6.80 $6.53 $6.50 $5.96
============ ==================== ========== ================================
TOTAL RETURN 5.38%* 14.01% 0.47% 9.42%* 10.38% 18.57% 4.86%
RATIOS
Net Assets - End of Period
($000 Omitted) $269,068 $216,597 $138,337 $158,780 $123,036 $93,827 $46,423
Ratio of Expenses to Average
Net Assets# 0.51%*@ 1.00% 1.11% 1.15%~ 1.14% 1.15% 1.01%
Ratio of Net Investment Income to
Average Net Assets# 3.48%* 7.38% 7.22% 7.40%~ 7.97% 8.57% 9.67%
Portfolio Turnover Rate 110%* 181% 135% 105%* 178% 117% 38%
<FN>
^ From January 1, 1993 to August 31, 1993, the Fund's new fiscal year-end.
+ Distributions in excess of net investment income for the year ended August
31, 1995, aggregated less than $0.01 on a per share basis.
* 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 six
months ended February 29, 1996 and 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 0.56% (not annualized), 1.22% and 1.15%,
respectively, and ratio of net investment income to average net assets would
have been 3.43% (not annualized), 7.16% and 7.18%, respectively.
@ Ratio is based on Total Expenses, less Expenses Absorbed by Investment
Adviser, but is before any expense offset arrangements.
~ Annualized
</FN>
</TABLE>
<PAGE>
INVESCO Income Funds, Inc.
Financial Highlights (Continued)
(For a Fund Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
Six Months Year Period
Ended Ended Ended
February 29 August 31 August 31
-------------- -------------- --------------
1996 1995 1994^
UNAUDITED
Short-Term Bond Fund
PER SHARE DATA
<S> <C> <C> <C>
Net Asset Value - Beginning of Period $9.54 $9.46 $ 10.00
-------------- -------------- --------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.27 0.57 0.47
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 0.02 0.08 (0.54)
-------------- -------------- --------------
Total from Investment Operations 0.29 0.65 (0.07)
-------------- -------------- --------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income+ 0.27 0.57 0.47
-------------- -------------- --------------
Net Asset Value - End of Period $9.56 $9.54 $9.46
============== ============== ==============
TOTAL RETURN 3.08%* 7.16% (0.72%)*
RATIOS
Net Assets - End of Period ($000 Omitted) $8,952 $8,979 $7,878
Ratio of Expenses to Average Net Assets# 0.39%*@ 0.46% 0.46%~
Ratio of Net Investment Income to Average Net Assets# 2.83%* 6.05% 5.50%~
Portfolio Turnover Rate 70%* 68% 169%*
<FN>
^ From September 30, 1993, commencement of operations, to August 31, 1994.
+ Distributions in excess of net investment income for the year ended August
31, 1995, aggregated less than $0.01 on a per share basis.
* 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 and ITC for the
six months ended February 29, 1996, 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
1.03% (not annualized), 2.09% and 2.04% (annualized), respectively, and ratio
of net investment income to average net assets would have been 2.19% (not
annualized), 4.42% and 3.92% (annualized), respectively.
@ Ratio is based on Total Expenses, less Expenses Absorbed by Investment
Adviser, but is before any expense offset arrangements.
~ Annualized
</FN>
</TABLE>
<PAGE>
INVESCO Income Funds, Inc.
Financial Highlights (Continued)
(For a Fund Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
Six Months Period
Ended Year Ended Ended
February 29 August 31 August 31 Year Ended December 31
------------ -------------------- ---------- --------------------------------
1996 1995 1994 1993^ 1992 1991 1990
UNAUDITED
U.S. Government Securities Fund
PER SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value - Beginning of Period $7.49 $7.10 $8.19 $7.61 $7.65 $7.09 $7.14
------------ -------------------- ---------- --------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.22 0.45 0.41 0.28 0.46 0.48 0.53
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 0.03 0.39 (0.93) 0.58 (0.04) 0.57 (0.05)
------------ -------------------- ---------- --------------------------------
Total from Investment Operations 0.25 0.84 (0.52) 0.86 0.42 1.05 0.48
------------ -------------------- ---------- --------------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income+ 0.22 0.45 0.41 0.28 0.46 0.49 0.53
Distributions from Capital Gains 0.00 0.00 0.16 0.00 0.00 0.00 0.00
------------ -------------------- ---------- --------------------------------
Total Distributions 0.22 0.45 0.57 0.28 0.46 0.49 0.53
------------ -------------------- ---------- --------------------------------
Net Asset Value - End of Period $7.52 $7.49 $7.10 $8.19 $7.61 $7.65 $7.09
============ ==================== ========== ================================
TOTAL RETURN 3.38%* 12.37% (6.53%) 11.61%* 5.68% 15.56% 7.23%
RATIOS
Net Assets -End of Period
($000 Omitted) $43,839 $38,087 $36,740 $36,391 $35,799 $29,229 $21,247
Ratio of Expenses to Average
Net Assets# 0.51%*@ 1.00% 1.32% 1.40%~ 1.27% 1.27% 1.07%
Ratio of Net Investment Income
to Average Net Assets# 2.85%* 6.24% 5.46% 5.36%~ 6.08% 6.78% 7.58%
Portfolio Turnover Rate 43%* 99% 95% 100%* 115% 67% 38%
<FN>
^ From January 1, 1993 to August 31, 1993, the Fund's new fiscal year-end.
+ Distributions in excess of net investment income for the year ended August
31, 1995, aggregated less than $0.01 on a per share basis.
* 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 six
months ended February 29, 1996 and 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 0.72% (not annualized), 1.51% and 1.42%,
respectively, and ratio of net investment income to average net assets would
have been 2.64% (not annualized), 5.73% and 5.36%, respectively.
@ Ratio is based on Total Expenses, less Expenses Absorbed by Investment
Adviser, but is before any expense offset arrangements.
~ Annualized
</FN>
</TABLE>
<PAGE>
FAMILY OF FUNDS
Newspaper
Fund Name Fund Code Ticker Symbol Abbreviation
- --------------------------------------------------------------------------------
International
Latin American Growth 34 IVSLX LatinAmGr
European Small Company 37 IVECX EuroSmCo
European 56 FEURX Europ
Pacific Basin 54 FPBSX PcBas
International Growth 49 FSIGX IntlGr
Asian Growth 41 * *
- --------------------------------------------------------------------------------
Sector
Energy 50 FSTEX Enrgy
Environmental Services 59 FSEVX Envirn
Financial Services 57 FSFSX FinSvc
Gold 51 FGLDX Gold
Health Sciences 52 FHLSX HlthSc
Leisure 53 FLISX Leisur
Technology 55 FTCHX Tech
Worldwide Capital Goods 38 ISWGX WldCap
Worldwide Communications 39 ISWCX WldCom
- --------------------------------------------------------------------------------
Growth, Value
Emerging Growth 60 FIEGX Emgrth
Value Equity 46 FSEQX ValEq
Small Company 74 IDSCX DivSmCo
Dynamics 20 FIDYX Dynm
Growth 10 FLRFX Grwth
- --------------------------------------------------------------------------------
Equity-Income
Industrial Income 15 FIIIX IndInc
Utilities 58 FSTUX Util
- --------------------------------------------------------------------------------
Balanced/Multiple-Asset
Multi-Asset Allocation 70 IMAAX MulAstAl
Balanced 71 IMABX Bal
Total Return 48 FSFLX TotRtn
- --------------------------------------------------------------------------------
Bond
High Yield 31 FHYPX HiYld
Select Income 30 FBDSX SelInc
U.S. Government Securities 32 FBDGX USGvt
Intermediate Government Bond 47 FIGBX IntGov
Short-Term Bond 33 INIBX ShTrBd
- --------------------------------------------------------------------------------
Tax-Exempt
Tax-Free Long-Term Bond 35 FTIFX TxFre
Tax-Free Intermediate Bond 36 * *
- --------------------------------------------------------------------------------
Money Market
Tax-Free Money Fund 40 FFRXX N/A
Cash Reserves 25 FDSXX N/A
U.S. Government Money Fund 44 FUGXX N/A
* This fund does not meet size requirements to be assigned a ticker symbol in
newspaper listings.
For more information about any of the INVESCO Funds, including management fees
and expenses, please call us at 1-800-525-8085 for a prospectus. Read it
carefully before you invest or send money.
<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.,(SM) Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
If you're in Denver, pleas 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 an effective prospectus.
