SEMIANNUAL REPORT
January 31, 1995
INVESCO SMALL COMPANY FUND
A no-load fund seeking long-term capital growth
INVESCO FUNDS
<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, 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 an effective prospectus.
<PAGE>
Market Overview March 1995
Perversely, to the securities markets, strong economic growth can be viewed as
a negative, a harbinger of inflation. Some analysts are worried about the
figures for late 1994: Gross domestic product (GDP) rose 4.5% for the fourth
quarter. That was the sixth straight quarter in which the GDP growth rate was
2.7% or better, and current indications are that growth will be at least 3% in
the current quarter. Corporate earnings growth continued strong throughout the
fourth quarter for industries as diverse as airlines, entertainment, and
packaging. And 1994 showed the biggest leap in corporate profits for at least
two decades.
We are finally seeing signs that economic growth is slowing, though. For
instance, the unemployment rate rose in January after months of improvement.
Higher unemployment, while bad for the affected individuals and their families,
does ease the upward pressure for wages and expanded employee benefits. In fact,
a major employer cost -- health care -- actually decreased about 1% last year.
Another encouraging sign, relative to inflation, is industrial production. The
output at U.S. factories and mines grew at just 0.4% in January, half the rate
of each of the two preceding months.
There are still legitimate concerns regarding inflation. The most widely used
index, the CPI, rose 0.3% in January. As a result, the next few months may see
additional modest increases in the Fed Funds rate.
By increasing short-term rates, the Federal Reserve is attempting a "soft
landing" -- that is, to moderate the current economic expansion before inflation
heats up. Over the past twelve months, the Fed has raised short-term rates by a
total of 3.00%.
While inflation is not likely to approach the eight percent-plus levels seen
in the early 1980s, it will probably be higher than the 2.5% to 3% range seen
during recent years. The INVESCO economic forecast calls for steadily increasing
inflation. We anticipate that consumer prices will rise as much as 4.0%
year-over-year by the fourth quarter of 1995; that compares to an increase of
just 2.7% in 1993 and 2.8% for 1994.
In 1994, the stock market performance reflected concern that the Fed would
overshoot its goal, bringing growth lower than the 2.5% target -- or worse,
induce a recession. Now, however, investors appear to be gaining confidence that
interest rates are stabilizing. In light of that positive factor, the stock
market may well continue its present advance. However, any interest rate or
inflation surprises, or a spate of disappointing corporate earnings reports,
could easily set off another correction.
Graph: Small Company Fund Total Return from Inception(12/93) through
1/31/95
This line graph compares the value of a $10,000 investment in INVESCO Small
Company Fund to the value of a $10,000 investment in the S&P 500 Index and the
Russell 2000 Index, assuming in each case reinvestment of all dividends and
capital gain distributions, for the period from inception (12/93) through
1/31/95.
Small Company Fund
Average Annualized Total Return
as of January 31, 1995
1 Year -4.20%
Since Inception (12/93) -1.05%
The line graph illustrates the value of a $10,000 investment in INVESCO Small
Company Fund, plus reinvested dividends and capital gain distributions, for the
period since inception (12/93) through 1/31/95.*
The chart and other total return figures cited reflect the fund's operating
expenses, but the indices do not have expenses, which would of course have
lowered their performance.
Small Company Fund focuses on companies with equity capitalization under $1
billion. But recently, small company stocks as a group underperformed the broad
market stocks. For the six-month period ended 1/31/95, the fund achieved a total
return of 1.00%. This was below the total return of 2.00% provided by the
Russell 2000. During the same six-month period, the S&P 500 had a total return
of 4.12%. (Of course, past performance is not a guarantee of future results.)*
As the relative performance of the two indices show, large-capitalization
stocks advanced considerably more than smaller-cap equities during this period.
Fund performance was accordingly weak.
As we noted above, there are signs that the economy is slowing just enough to
temper the inflation threat. Small stocks might well benefit from such a
scenario, which increases the value of future earnings potential.
At 7/31/94, repurchase agreements represented 15.41% of fund holdings. Over
the past six months, the fund has become fully invested. We have been careful to
maintain extensive diversification; there are over 200 individual equity
holdings.
Continued economic strength contributes to the long-term potential for
consumer-related stocks. Therefore, the fund's weightings in consumer cyclicals
and technology were expanded. New positions include three new advertising
companies, Heritage Media, Grey Advertising and True North Communications. We
presently hold three recreation-related stocks, Hollywood Casino, International
Gaming Manage-ment, and Video Lottery Technologies. Two publishers were added --
McClatchy Newspapers and Meredith Corp -- as well as broadcaster United Video
Satellite Group A.
Technology stocks were extremely volatile in 1994. Prospects look stronger for
these issues now, however. Accordingly, you'll find several new names among the
fund's holdings, including Microchip Technology, America Online, Mercury
Interactive, and two electronics firms: BMC Industries and DSP Group. We've also
built up our focus on semiconductors, taking positions in Credence Systems and
Cypress Semiconductor.
With the likelihood of increasing stability in interest rates, we have
cautiously added to financial stocks. New positions here include three banking
companies, City National, Summit Bancorporation (NJ), and West One Bancorp, plus
three savings & loans. We've also added Southwest Securities Group, an
investment broker.
INVESCO Small Company Fund is managed by Bob Slotpole. He is an industry
veteran with nearly two decades of investment experience. He earned an MBA from
Stanford University, as well as a BS from the State University of New York at
Buffalo. Before joining INVESCO in 1993, Mr. Slotpole was associated with First
Boston and Lehman Brothers.
Graph: Small Company Fund Diversification by Value of Total Net Assets
This graph reflects the diversification of the Small Company Fund by value
of total net assets in basic materials, capital goods and construction, consumer
cyclical, consumer staples, diversified, energy, finance, technology,
transportation and services, utilities and short-term debt securities, including
cash as of February 28, 1994, July 31, 1994 and January 31,1 995.
*Total return assumes reinvestment of dividends and capital gain distributions.
Investment return and principal value will fluctuate so that, when redeemed, an
investor's shares may be worth more or less than when purchased. The S&P 500 is
an unmanaged index of common stocks considered representative of the broad
market; the Russell 2000 is an unmanaged index representative of small- and
medium-cap stocks.
<PAGE>
INVESCO Diversified Funds, Inc. - Small Company Fund
Ten Largest Common Stock Holdings
January 31, 1995
Description Value
------------------------------------------------------------
Springs Industries Class A $ 363,750
West Co 272,700
Kaman Corp Class A 271,700
Piedmont Natural Gas 249,150
Vencor Inc 205,875
Medusa Corp 203,512
Stanhome Inc 187,200
Sterling Chemicals 186,550
Cabot Corp 180,687
Clear Channel Communications 177,625
<PAGE>
INVESCO Diversified Funds, Inc. - Small Company Fund
Statement of Investment Securities
January 31, 1995
UNAUDITED
Description Shares Value
COMMON STOCKS 100.00%
ADVERTISING 1.75%
Grey Advertising 600 $ 94,800
Heritage Media Class A* 2,400 61,800
True North Communication 2,000 76,500
------------------
233,100
------------------
AEROSPACE & DEFENSE 3.39%
Kaman Corp Class A 24,700 271,700
Precision Castparts 5,250 117,469
Rohr Inc* 4,100 44,075
UNC Inc* 3,500 18,812
------------------
452,056
------------------
AUTOMOBILE RELATED 1.95%
Borg-Warner Automotive 5,300 119,912
Gentex Corp* 2,400 53,400
Modine Manufacturing 2,200 65,175
Wabash National 600 20,850
------------------
259,337
------------------
BANKING 7.71%
ALBANK Financial 600 14,175
Associated Banc-Corp 3,900 138,450
Banco Latinoamericano de
Exportaciones SA 800 24,900
Bank South 2,700 45,562
City National* 9,400 102,225
Deposit Guaranty 1,600 51,000
First Michigan Bank 5,460 125,580
First Midwest Bancorp 1,200 29,400
FirsTier Financial 5,300 $ 162,975
Glendale Federal Bank* 3,300 28,875
National Commerce Bancorp 6,000 139,500
Southern National 500 10,125
Summit Bancorporation 6,000 117,750
Union Planters 1,500 33,562
West One Bancorp 100 2,712
------------------
1,026,791
------------------
<PAGE>
BIOTECHNOLOGY 0.19%
Cor Therapeutics* 800 10,400
Gilead Sciences* 1,100 14,300
------------------
24,700
------------------
BROADCASTING 2.32%
Chris-Craft Industries* 2,709 89,736
Clear Channel Communications* 3,500 177,625
Jacor Communications* 1,000 13,000
United Video Satellite Group A* 1,300 28,600
-------------------
308,961
-------------------
BUILDING & CONSTRUCTION RELATED 3.90%
Drew Industries* 400 3,400
Granite Construction 800 15,800
Juno Lighting 5,800 102,950
Leslie Building Products* 400 660
Medusa Corp 8,100 203,512
Oakwood Homes 5,900 132,750
Schuler Homes* 1,900 22,800
Standard Pacific 6,800 37,400
-------------------
519,272
-------------------
CHEMICALS 3.03%
Cabot Corp 5,900 180,687
First Mississippi 1,100 25,300
Rexene Corp* 1,000 10,875
Sterling Chemicals* 16,400 186,550
-------------------
403,412
-------------------
COMPUTER RELATED 4.97%
Amdahl Corp 700 7,175
America Online* 1,800 98,100
Auspex Systems* 1,700 13,919
Broderbund Software* 1,400 64,750
Casino Data Systems* 300 4,125
Computer Data Systems 1,200 11,925
Continuum Inc* 3,000 91,125
Control Data Systems* 1,500 9,375
Cornerstone Imaging* 300 4,575
Intergraph Corp* 500 5,062
Intuit Inc* 800 52,800
Landmark Graphics* 1,700 32,725
MTS Systems 1,700 39,312
Mercury Interactive* 2,700 34,425
Microchip Technology* 2,700 60,412
Pinnacle Micro* 800 10,000
PLATINUM technology* 2,100 43,575
Ramtron International* 3,600 18,000
<PAGE>
Read-Rite Corp* 3,200 48,400
Xircom Inc* 800 12,600
-------------------
662,380
-------------------
CONTAINERS 2.05%
West Co 10,100 $ 272,700
-------------------
CONTROL INSTRUMENTS 0.20%
Roper Industries 1,200 26,100
-------------------
DIVERSIFIED COMPANIES 0.66%
American Biltrite 900 29,587
Noel Group* 5,000 29,375
Vista Resources* 1,400 29,050
-------------------
88,012
-------------------
ELECTRICAL EQUIPMENT 1.67%
Augat Inc 2,700 43,200
Baldor Electric 2,100 56,437
Plantronics Inc* 2,100 58,537
Union Switch & Signal* 4,400 63,800
-------------------
221,974
-------------------
ELECTRONICS 4.69%
Altron Inc* 1,500 33,375
Amphenol Corp Class A* 1,100 25,025
BMC Industries* 4,800 85,200
DSP Group* 400 7,700
Lattice Semiconductor* 2,700 58,387
Littelfuse Inc* 4,200 119,700
Maxim Integrated Products* 1,400 40,600
Methode Electronics Class A 6,200 91,450
Nam Tai Electronics 500 5,562
Symbol Technologies* 3,500 91,000
Zilog Inc* 2,300 66,700
-------------------
624,699
-------------------
ENGINES 0.69%
Briggs & Stratton 2,600 92,300
-------------------
FINANCE RELATED 2.53%
AutoFinance Group* 1,100 11,412
Data Broadcasting* 700 2,887
Foothill Group Class A 8,800 149,600
Insurance Auto Auctions* 900 27,000
Robert Half International* 5,000 116,250
<PAGE>
Roosevelt Financial 1,700 27,837
Search Capital Group* 900 1,800
-------------------
336,786
-------------------
FOOD PRODUCTS & BEVERAGES 2.99%
Cagle's Inc Class A 4,200 92,925
International Multifoods 7,500 135,938
Ralcorp Holdings* 2,400 56,700
Sanderson Farms 5,800 113,100
-------------------
398,663
-------------------
FURNITURE 0.17%
Haverty Furniture 1,200 12,600
Rowe Furniture 1,950 9,750
-------------------
22,350
-------------------
HEALTH CARE RELATED 4.22%
Coastal Healthcare Group* 600 15,000
Continental Medical Systems* 3,500 17,500
CorVel Corp* 500 13,125
Health Management Associates
Class A* 3,800 104,500
Health Systems International
Class A* 1,600 43,200
NovaCare* 2,400 21,300
Surgical Care Affiliates 2,300 47,725
Universal Health Services Class B* 4,000 94,000
Vencor Inc* 6,750 205,875
-------------------
562,225
-------------------
HOTELS & MOTELS 1.11%
Marcus Corp 800 21,900
Prime Hospitality* 14,000 126,000
-------------------
147,900
-------------------
HOUSEHOLD APPLIANCES 0.42%
Ekco Group* 8,100 52,650
Royal Appliance Manufacturing* 1,200 3,900
-------------------
56,550
-------------------
INSURANCE 4.73%
Fidelity National Financial 1,650 18,563
NWNL Cos 3,200 101,200
Orion Capital 3,750 134,063
Protective Life 2,800 121,800
Reliance Group Holdings 3,200 17,200
<PAGE>
Selective Insurance Group 5,500 154,688
Washington National 4,200 82,950
-------------------
630,464
-------------------
INVESTMENT BROKERS 0.07%
Southwest Securities Group 1,400 9,800
-------------------
JEWELRY 0.83%
Tiffany & Co 3,800 110,675
-------------------
LEASING COMPANIES 0.27%
Rollins Truck Leasing 2,850 35,625
-------------------
LINEN SUPPLY & RELATED 0.46%
G & K Services Class A 3,900 61,425
-------------------
MACHINERY 1.15%
AGCO Corp 600 17,625
Regal-Beloit Corp 11,100 135,975
-------------------
153,600
-------------------
MEDICAL RELATED 3.65%
Acuson Corp* 8,500 136,000
Biomira Inc* 500 1,688
Heart Technology* 4,400 87,450
IDEXX Laboratories* 3,500 124,250
MAXXIM Medical* 2,600 36,400
Thermo Cardiosystems* 600 12,375
Vivra Inc* 2,600 78,650
Zoll Medical* 900 9,900
-------------------
486,713
-------------------
MEDICAL RELATED - DRUGS 0.85%
Cardinal Health 900 41,513
Copley Pharmaceutical* 2,800 42,700
Interneuron Pharmaceuticals* 3,300 19,800
MacroChem Corp* 1,100 1,856
TheraTech Inc* 800 7,050
-------------------
112,919
-------------------
METALS & MINING 0.87%
Glamis Gold 1,000 7,875
Magma Copper* 1,700 25,925
Pittston Minerals Group 1,800 40,500
Royal Gold* 100 575
SGI International* 18,500 15,609
TriMas Corp 1,300 25,513
-------------------
115,997
-------------------
<PAGE>
MOTION PICTURES 0.02%
Orion Pictures* 500 2,813
-------------------
NURSING HOMES 0.49%
Hillhaven Corp* 1,700 44,200
Living Centers of America* 600 21,600
-------------------
65,800
-------------------
OFFICE SUPPLIES 0.09%
Reynolds & Reynolds Class A 500 11,875
-------------------
OIL & GAS RELATED 3.36%
Apco Argentina 1,000 15,250
Camco International 7,100 125,138
Global Marine* 3,600 13,500
Pogo Producing 3,300 54,450
Smith International* 10,000 116,250
Tejas Gas* 1,100 45,925
Total Petroleum North America Ltd 4,900 55,125
Transco Energy 1,296 21,870
-------------------
447,508
-------------------
PAPER & PAPER PRODUCTS 0.51%
Chesapeake Corp 2,300 67,850
-------------------
POLLUTION CONTROL
EQUIPMENT & SERVICES 1.31%
Alanco Environmental Resources* 1,100 1,994
Envirotest Systems Class A* 3,600 21,600
Lydall Inc* 1,800 57,375
Sanifill Inc* 1,900 48,688
TETRA Tech* 2,500 44,375
-------------------
174,032
-------------------
PRINTING & PUBLISHING 2.94%
McClatchy Newspapers Class A 5,000 111,250
Meredith Corp 3,200 148,000
Merrill Corp 600 9,075
Pulitzer Publishing 3,625 122,797
-------------------
391,122
-------------------
REAL ESTATE RELATED 0.16%
Atlantic Gulf Communities* 2,400 20,700
-------------------
RECREATION PRODUCTS
& SERVICES 0.62%
Arctco Inc 2,850 41,325
Hollywood Casino Class A* 7,100 36,388
<PAGE>
International Gaming Management* 500 1
Video Lottery Technologies* 500 4,500
-------------------
82,214
-------------------
RETAIL 9.78%
Apple South 3,600 42,750
Caseys General Stores 3,300 48,675
Chefs International* 7,300 5,019
Department 56 Inc* 2,600 95,225
Fastenal Co 800 34,350
Gymboree Corp* 1,600 38,400
Luby's Cafeterias 2,800 63,000
Meyer (Fred) Inc* 4,600 149,500
Micro Warehouse* 1,000 27,250
Smith's Food & Drug Centers
Class B 5,800 149,350
Stanhome Inc 6,400 187,200
Strawbridge/ Clothier Class A 2,700 56,700
Sun Television & Appliances 600 5,775
Talbots Inc 3,700 112,388
Tech Data* 12,200 161,650
US Shoe 2,000 40,250
Waban Inc* 4,900 85,138
-------------------
1,302,620
-------------------
SAVINGS & LOAN 2.22%
Charter One Financial 1,200 23,700
Dime Bancorp* 4,425 37,059
Leader Financial* 3,400 81,600
TCF Financial 4,100 152,725
-------------------
295,084
-------------------
SCHOOLS 0.07%
Kinder-Care Learning Centers* 800 9,500
-------------------
SEMICONDUCTOR EQUIPMENT 1.92%
Credence Systems* 600 13,650
Cypress Semiconductor* 4,700 110,450
Ultratech Stepper* 2,100 77,175
VLSI Technology* 4,400 55,000
-------------------
256,275
-------------------
STEEL 0.63%
Armco Inc* 8,000 51,000
J&L Specialty Steel 1,000 19,500
National Steel Class B* 900 13,500
-------------------
84,000
-------------------
<PAGE>
TELECOMMUNICATIONS 0.87%
American Paging* 1,700 13,388
Glenayre Technologies* 900 32,625
LCI International* 3,100 70,138
-------------------
116,151
-------------------
TEXTILES & APPAREL
MANUFACTURERS 3.01%
Belding Heminway Series A* 877 6,797
Kellwood Co 1,400 26,600
Springs Industries Class A 10,000 363,750
WestPoint Stevens* 300 4,088
-------------------
401,235
-------------------
TRANSPORTATION 2.35%
Alaska Air Group* 3,800 56,525
American Freightways* 2,800 60,200
USA Truck 600 9,600
Werner Enterprises 1,700 42,500
Wisconsin Central Transportation* 3,600 144,000
-------------------
312,825
-------------------
UTILITIES 5.27%
Atmos Energy 2,700 44,213
Commonwealth Energy Systems 700 28,000
Iowa-Illinois Gas & Electric 4,800 96,000
New Jersey Resources 1,400 31,325
Northwest Natural Gas 1,700 51,638
ONEOK Inc 4,500 78,750
Piedmont Natural Gas 13,200 249,150
Public Service of New Mexico* 8,800 122,100
-------------------
701,176
-------------------
WHOLESALE 0.89%
Bindley Western Industries 5,300 79,500
Owens & Minor 2,850 38,831
-------------------
118,331
-------------------
TOTAL INVESTMENT
SECURITIES AT VALUE 100.00%
(Cost $13,474,285#) $ 13,318,597
===================
*Security is non-income producing.
#Also represents cost for income tax purposes.
See Notes to Financial Statements
<PAGE>
INVESCO Diversified Funds, Inc. - Small Company Fund
Statement of Assets and Liabilities
January 31, 1995
UNAUDITED
ASSETS
Investment Securities at Value
(Cost $13,474,285) $ 13,318,597
Receivables:
Investment Securities Sold 428,217
Fund Shares Sold 9,938
Dividends and Interest 12,024
Prepaid Expenses and Other Assets 61,675
--------------------
TOTAL ASSETS 13,830,451
--------------------
LIABILITIES
Payables:
Custodian 177,629
Fund Shares Repurchased 1,185
Accrued Expenses and Other Payables 11,951
--------------------
TOTAL LIABILITIES 190,765
--------------------
Net Assets at Value $ 13,639,686
====================
NET ASSETS
Paid-in Capital* $ 13,843,435
Accumulated Undistributed
Net Investment Income 4,182
Accumulated Undistributed Net Realized Loss
on Investment Securities (52,243)
Net Depreciation of Investment Securities (155,688)
--------------------
Net Assets at Value $ 13,639,686
====================
Net Asset Value, Offering and Redemption
Price per Share $ 9.80
====================
*The Fund has 100 million authorized shares of common stock, par value of $0.01
per share, of which 1,391,616 shares were outstanding at January 31, 1995.
See Notes to Financial Statements
<PAGE>
INVESCO Diversified Funds, Inc. - Small Company Fund
Statement of Operations
Six-Months Ended January 31, 1995
UNAUDITED
INVESTMENT INCOME
INCOME
Dividends $ 96,810
Interest 19,311
-------------------
TOTAL INCOME 116,121
-------------------
EXPENSES
Investment Advisory Fees 54,115
Transfer Agent Fees 6,237
Administrative Fees 6,082
Directors' Fees and Expenses 3,524
Professional Fees and Expenses 9,993
Registration Fees and Expenses 22,875
Reports to Shareholders 999
Other Expenses 1,559
-------------------
TOTAL EXPENSES 105,384
-------------------
Fees and Expenses Absorbed
by Investment Adviser (33,231)
-------------------
NET EXPENSES 72,153
-------------------
NET INVESTMENT INCOME 43,968
-------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Gain on Investment Securities 26,040
Change in Net Appreciation of
Investment Securities 139,078
-------------------
NET GAIN ON INVESTMENT SECURITIES 165,118
-------------------
Net Increase in Net Assets from Operations $ 209,086
===================
See Notes to Financial Statements
<PAGE>
INVESCO Diversified Funds, Inc. - Small Company Fund
Statement of Changes in Net Assets
Six-Months Period
Ended Ended
January 31 July 31
1995 1994
------------------------------
UNAUDITED (Note 1)
OPERATIONS
Net Investment Income $ 43,968 $ 83,687
Net Realized Gain (Loss) on
Investment Securities 26,040 (78,283)
Change in Net Appreciation
(Depreciaton) of Investment
Securities 139,078 (294,766)
--------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS 209,086 (289,362)
--------------------------------
DIVIDENDS TO SHAREHOLDERS FROM
NET INVESTMENT INCOME (97,394) (26,079)
--------------------------------
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 9,288,668 18,609,570
Reinvestment of Dividends 90,249 23,472
--------------------------------
9,378,917 18,633,042
Amounts Paid for Repurchases
of Shares (9,325,060) (4,943,464)
-------------------------------
NET INCREASE IN NET ASSETS
FROM FUND SHARE TRANSACTIONS 53,857 13,689,578
--------------------------------
Total Increase in Net Assets 165,549 13,374,137
NET ASSETS
Initial Subscription (Note 1) -- 100,000
Beginning of Period 13,474,137 0
-------------------------------
End of Period (Including
Accumulated Undistributed Net
Investment Income of $4,182 and
$57,608, respectively) $ 13,639,686 $ 13,474,137
================================
FUND SHARE TRANSACTIONS
Initial Subscription (Note 1) -- 10,000
Shares Sold 941,309 1,863,062
Shares Issued from Reinvestment
of Dividends 9,061 2,405
--------------------------------
950,370 1,875,467
<PAGE>
Shares Repurchased (940,003) (494,218)
--------------------------------
Net Increase in Fund Shares 10,367 1,381,249
================================
See Notes to Financial Statements
<PAGE>
INVESCO Diversified Funds, Inc. - Small Company Fund
Notes to Financial Statements
UNAUDITED
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES. INVESCO Diversified Funds, Inc. (the
"Fund"), a Maryland Corporation, was incorporated on April 2, 1993, and consists
of the Small Company Fund, which commenced operations on December 1, 1993. 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. A. SECURITY
VALUATION -- 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.
Short-term securities are stated at amortized cost (which approximates
market value) if maturity is 60 days or less, or at market value if maturity is
greater than 60 days. B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME --
Security transactions are accounted for on the trade date and dividend income is
recorded on the ex dividend date. Interest income, which may be comprised of
stated coupon rate, market discount and original issue discount is recorded on
the accrual basis. Cost is determined on the specific identification basis. C.
FEDERAL AND STATE TAXES -- The Fund has complied 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. D. DIVIDENDS AND
DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions to shareholders are
recorded by the Fund on the ex dividend/distribution date. The Fund distributes
net realized capital gains, if any, to its shareholders at least annually, if
not offset by capital loss carryovers. Income distributions and capital gain
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing treatments for nontaxable dividends, net operating
losses, expiring capital loss carryforwards and deferral of wash sales. NOTE 2
-- INVESTMENT ADVISORY AND OTHER AGREEMENTS. INVESCO Funds Group, Inc. ("IFG")
serves as the Fund's investment adviser. As compensation for its services to the
Fund, IFG receives an investment advisory fee which is accrued daily at the
applicable rate and paid monthly. The fee is based on the annual rate of 0.75%
on average net assets.
<PAGE>
In accordance with a Sub-Advisory Agreement between IFG and INVESCO
Management & Research, Inc. ("IMR"), an affiliate of IFG, investment decisions
of the Fund are made by IMR. Fees for such sub-advisory services are paid by
IFG.
In accordance with an Administrative Agreement, the Fund pays IFG an
annual fee of $10,000, plus an additional amount computed at an annual rate of
0.015% of average net assets to provide administrative, accounting and clerical
services. The fee is accrued daily and paid monthly.
IFG receives a transfer agent fee at an annual rate of $14.00 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.
IFG has voluntarily agreed, in some instances, to absorb certain fees and
expenses incurred by the Fund. NOTE 3 -- PURCHASES AND SALES OF INVESTMENT
SECURITIES. For the six-months ended January 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 $5,003,232 and $4,579,328,
respectively.
There were no purchases or sales of U.S. Government securities. NOTE 4 --
APPRECIATION AND DEPRECIATION. At January 31, 1995, the gross appreciation of
securities in which there was an excess of value over tax cost amounted to
$1,036,670 and the gross depreciation of securities in which there was an excess
of tax cost over value amounted to $1,192,358 resulting in net depreciation of
$155,688. NOTE 5 -- TRANSACTIONS WITH AFFILIATES. Certain of the Fund's officers
and directors are also officers and directors of IFG or IMR.
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 January 31,
1995, included in Directors' Fees and Expenses in the Statement of Operations
were $726. Prepaid pension costs of $15 and accrued pension liability of $741
are included in prepaid expenses and accrued expenses, respectively, in the
Statement of Assets and Liabilities.
<PAGE>
INVESCO Diversified Funds, Inc. - Small Company Fund
Financial Highlights
(For a Fund Share Outstanding throughout Each Period)
Six Months Period
Ended Ended
January 31 July 31
------------------------------
1995 1994
UNAUDITED (Note 1)
PER SHARE DATA
Net Asset Value -- Beginning
of Period $ 9.76 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.02 0.06
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 0.08 (0.28)
Total from Investment Operations 0.10 (0.22)
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.06 0.02
Net Asset Value-- End of Period $ 9.80 $ 9.76
============== ===============
TOTAL RETURN 1.00%* (2.21%)*
RATIOS
Net Assets -- End of Period
($000 Omitted) $ 13,640 $ 13,474
Ratio of Expenses to Average
Net Assets# 0.50%* 1.00%~
Ratio of Net Investment
Income to Average Net Assets# 0.31%* 1.20%~
Portfolio Turnover Rate 34%* 55%*
*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
six-months ended January 31, 1995 and the period ended July 31, 1994. If such
expenses had not been voluntarily absorbed, ratio of expenses to average net
assets would have been 0.74%, (not annualized) and 1.64%, respectively, and
ratio of net investment income to average net assets would have been 0.08%, (not
annualized) and 0.56%, respectively.
~Annualized
<PAGE>
FAMILY OF FUNDS
Newspaper
Fund Name Fund Code Ticker Symbol Abbreviation
International
Latin American Growth 34 * *
European Small Company 37 * *
European 56 FEURX Europ
Pacific Basin 54 FPBSX PcBas
International Growth 49 FSIGX IntlGr
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
Emerging Growth 60 FIEGX Emgrth
Small Company 74 * *
Dynamics 20 FIDYX Dynm
Growth 10 FLRFX Grwth
Equity-Income
Industrial Income 15 FIIIX IndInc
Utilities 58 FSTUX Util
Multiple-Asset
Multi-Asset Allocation 70 IMAAX MulAstAl
Balanced 71 IMABX Bal
Bond
High Yield 31 FHYPX HiYld
Select Income 30 FBDSX SelInc
U.S. Government Securities 32 FBDGX USGvt
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 or
appear 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.
