Annual Report
July 31, 1995
INVESCO
SMALL
COMPANY
FUND
A no-load fund seeking long-term capital growth.
INVESCO FUNDS
<PAGE>
Market Overview August 1995
The U.S. economy may be close to achieving the "soft landing" analysts have
hoped for.
Fearing the long-term, corrosive effects of inflation, the Federal Reserve
Board actively sought to slow the U.S. economy in 1994. Over a period of 12
months, they doubled short-term interest rates.
The plan may have worked. After impressive annualized growth rates of 6.3%,
3.3%, 3.8%, 3.4%, and 5.1% in consecutive quarters, GDP advanced just 2.7%
during the first three months of 1995, and was estimated at 1.1% in the second
quarter. Now that they've reined in the galloping expansion, the Fed will act to
keep it at a sustainable trot. In July, they cut short-term interest rates by
0.25%, and further cuts may be made if additional stimulus is required.
Given the advances in the U.S. equities markets in the first half of 1995,
we're likely to see a period when the market "digests" its gains -- as
technology stocks did in mid-July, for instance. However, we do not anticipate a
significant setback in prices over the third and fourth quarters.
International Highlights. With the Japanese economy stuck in low gear, the
Nikkei Dow dropped severely in recent months. This proved to be a drag
throughout the Pacific Basin. Markets now appear to be stabilizing and have the
potential to move higher.
In U.S. dollar terms, most European markets have gained, including Belgium,
the Netherlands, Sweden, Switzerland, and the United Kingdom. Areas of strength
generally have been in consumer staples, energy, and technology. Manufacturers
of heavy equipment also have done well.
The devaluation of the Mexican peso on 12/20/94 caused market turmoil
throughout Latin America. Stock markets from Mexico City to Argentina declined
sharply, but recently have rallied as Mexico has stabilized and the peso has
rebounded from its lows.
Small Company Fund
INVESCO Small Company Fund finished its fiscal year ended 7/31/95 with a
total return of 21.64%. For comparison, the Russell 2000 Index of
smaller-capitalization companies was up 24.33%, and the S&P 500 Index was up
25.99% in the same period. (Of course, past performance is no guarantee of
future results.)*
<PAGE>
Small Company Fund
Average Annualized Total Return
as of 7/31/95*
1 year 21.64%
------------------------------------
Since inception (12/93) 10.97%
------------------------------------
Most of the fund's gains came in 1995, as the stock market enjoyed its
strongest first and second quarters in many years. Following the timing of this
general upturn, Small Company Fund was up 20.43% for the six-month period ended
7/31/95, compared to a total return of just 1.00% for the six-month period ended
1/31/95. (Of course, past performance is no guarantee of future results.)*
Graph:
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
7/31/95.
The underperformance of the fund compared to the S&P 500 Index for the fiscal
year ended 7/31/95 reflects the fact that large companies, such as those that
make up the S&P 500, dominated stock market advances during much of the period.
Stocks of small companies got off to a slower start, but by the end of July were
closing the gap with the surging broad market indexes. Some analysts are hoping
that small-cap stocks will lead a second rally to finish off the year.
The recent rally in Small Company Fund was fueled to a large extent by
finance and technology stocks, which comprised 19% and 13%, respectively, of the
total portfolio as of 7/31/95.
Graph: Small Company Fund Diversification
by Value of Total Net Assets as of 7/31/95
This bar 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, energy, finance, technology,
transportation and services, utilities and cash & equivalents for July 31,
1994, January 31, 1995 and July 31, 1995.
The fund's performance shortfall compared to the Russell 2000 is largely a
result of rapid asset growth. The fund's net assets more than tripled to $40.1
million as of 7/31/95, up from $13.6 million as of 1/31/95. Sudden growth can
lead to a high level of cash or cash equivalents as dollars flow into the fund
faster than the manager can invest them.
<PAGE>
During the second half of the fiscal year ended 7/31/95, the fund's cash
component varied from 20% as of 12/31/94 to 4% as of 3/31/95. In an advancing
market, a high level of cash in the fund lowers the performance of the fund
relative to the index, which has no cash. Going forward, we expect to be as
fully invested as possible.
The philosophy of Small Company Fund is to buy the best stocks in a wide
array of industries, as opposed to taking big stakes in selected sectors.
Typically, the fund will hold more than 200 equities. As of 7/31/95, the fund
owned 235 equities; our largest single holding represented just 2.06% of total
net assets in the portfolio. Stocks are screened for certain characteristics
that we associate with superior performance, such as low ratio of price to
earnings. Candidates are subject to fundamental analysis first; industry sector
and economic factors are secondary.
Given our emphasis on diversification, we intend to keep industry allocations
roughly consistent with those of the Russell 2000 Index. That means we will
neither increase nor decrease significantly the weight given to technology,
banking or other sectors. For this particular fund, we believe this approach
will lower the risk of overweighting specific sectors and ultimately lead to
superior results.
As of 7/31/95, the fund's largest concentrations of equity holdings were in
finance (19%), consumer cyclical (17%), and technology (13%). The four largest
individual holdings were: Protective Life (insurance, 2.06%); J&L Specialty
Steel (steel, 1.97%); CCB Financial (banking, 1.94%); and Sovereign Bancorp
(savings & loan, 1.64%).
The line graph on the previous page illustrates the value of a $10,000
investment in INVESCO Small Company Fund, plus reinvested dividends and capital
gain distributions, for the period from inception (12/93) through 7/31/95.*
The chart and other total return figures cited on the previous page reflect
the fund's operating expenses, but the indexes do not have expenses, which would
of course have lowered their performance. INVESCO Small Company Fund is managed
by Bob Slotpole, senior vice president and director of equities, who has 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, Bob was associated with First Boston and Lehman Brothers.
*Total return assumes reinvestment of dividends and capital gain distributions.
Past performance is not a guarantee of future results. Investment return and
principal will vary 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
July 31, 1995
Description Value
--------------------------------------------------------------
Protective Life $826,500
J&L Specialty Steel 787,650
CCB Financial 778,650
Sovereign Bancorp 657,400
Sterling Chemicals 614,900
Harnischfeger Industries 551,025
Price Enterprises 545,200
Diamond Shamrock 520,000
Apple South 513,000
Smith International 494,700
Composition of holdings is subject to change.
<PAGE>
INVESCO Diversified Funds, Inc. - Small Company Fund
Statement of Investment Securities
July 31, 1995
Shares or
Principal
Description Amount Value
-------------------------------------------------------------------------------
COMMON STOCKS 86.16%
ADVERTISING 1.36%
Grey Advertising 700 $130,900
True North Communications 21,600 440,100
------------
571,000
------------
AEROSPACE & DEFENSE 0.88%
Kaman Corp Class A 6,100 73,962
Precision Castparts 6,600 235,125
Rohr Inc* 4,100 60,475
------------
369,562
------------
AGRICULTURAL 0.38%
DEKALB Genetics Class B 3,700 158,175
------------
AUTOMOBILE RELATED 1.03%
Borg-Warner Automotive 5,300 172,250
Citation Corp* 3,800 66,500
Detroit Diesel* 5,500 117,562
Wabash National 1,900 75,287
------------
431,599
------------
BANKING 5.58%
ALBANK Financial 600 16,650
CCB Financial 17,400 778,650
Centura Banks 2,500 77,187
City National 9,400 122,200
Deposit Guaranty 1,600 62,400
First Michigan Bank 5,733 147,625
First Midwest Bancorp 1,200 31,800
FirsTier Financial 300 11,250
Mark Twain Bancshares 8,300 261,450
National Commerce Bancorp 6,000 147,000
People's Bank 2,800 50,750
Peoples Heritage Financial Group 5,000 93,125
Sumitomo Bank of California 2,400 54,600
Summit Bancorp 7,500 182,812
Union Planters 10,700 303,612
------------
2,341,111
------------
BIOTECHNOLOGY 0.96%
Collagen Corp 700 12,600
Cor Therapeutics* 800 8,100
Gilead Sciences* 4,900 93,100
Immunex Corp* 20,700 289,800
------------
403,600
------------
<PAGE>
BROADCASTING 0.53%
Clear Channel Communications* 2,700 180,563
United Video Satellite Group Class A* 1,300 43,225
------------
223,788
------------
BUILDING & CONSTRUCTION RELATED 1.21%
Champion Enterprises* 2,600 44,525
Granite Construction 1,000 22,875
Jacobs Engineering Group* 3,900 90,188
Medusa Corp 2,000 53,750
Oakwood Homes 5,900 178,475
Pulte Corp 4,400 118,250
------------
508,063
------------
BUSINESS SERVICES 0.34%
Franklin Quest* 5,900 143,812
------------
CHEMICALS 3.19%
Cytec Industries* 1,900 97,137
First Mississippi 2,300 78,487
Fuller (H B) Co 600 21,150
Geon Co 12,300 345,937
Rexene Corp* 1,000 13,000
Sterling Chemicals* 57,200 614,900
Synetic Inc* 5,500 130,625
Terra Industries 2,900 38,425
------------
1,339,661
------------
COMPUTER RELATED 5.50%
Acxiom Corp* 6,200 151,900
ALANTEC Corp* 300 10,800
America Online 3,000 165,375
Auspex Systems* 1,700 21,675
Continuum Co* 3,000 109,125
Control Data Systems* 1,500 14,437
Digital Link* 1,000 29,000
FTP Software* 600 17,400
Intergraph Corp* 10,500 119,437
MTS Systems 1,700 48,025
Madge NV* 2,600 62,725
Mercury Interactive* 3,100 77,500
Microchip Technology* 800 30,800
National Data 6,000 153,000
Progress Software* 3,200 180,000
Sequent Computer Systems* 12,300 270,600
Sierra On-Line* 9,500 346,750
Synopsys Inc* 3,200 206,400
VeriFone Inc* 8,000 222,000
Wonderware Corp* 100 3,775
Zebra Technologies Class A* 1,100 69,025
------------
2,309,749
------------
CONTAINERS 0.70%
West Co 10,100 292,900
------------
<PAGE>
CONTROL INSTRUMENTS 1.11%
Measurex Corp 9,000 272,250
Teleflex Inc 4,700 193,875
------------
466,125
------------
COSMETICS & TOILETRIES 0.93%
Alberto Culver Class B 1,900 57,475
Helene Curtis Industries 7,300 208,962
Hydron Technologies 31,400 121,675
------------
388,112
------------
DIVERSIFIED COMPANIES 0.90%
ACX Technologies* 2,800 139,650
Samsonite Corp* 9,000 238,500
------------
378,150
------------
ELECTRICAL EQUIPMENT 0.61%
Baldor Electric 2,100 68,512
Itron Inc* 5,400 124,200
Plantronics Inc* 2,100 64,050
------------
256,762
------------
ELECTRONICS 1.52%
Littelfuse Inc* 4,200 139,650
Mitel Corp* 25,700 147,775
Pioneer Standard Electronics 900 24,075
SCI Systems* 8,700 232,725
Thermedics Inc* 4,600 92,000
------------
636,225
------------
FINANCE RELATED 0.53%
Concord EFS 3,000 84,000
Robert Half International 5,000 138,125
------------
222,125
------------
FOOD PRODUCTS & BEVERAGES 0.73%
Cagle's Inc Class A 4,400 72,050
Canandaigua Wine Class A* 600 26,250
International Multifoods 7,500 171,562
Ralcorp Holdings* 1,600 36,800
------------
306,662
------------
HEALTH CARE RELATED 2.68%
Apria Healthcare Group 9,940 323,050
Community Psychiatric Centers 4,500 57,375
Medaphis Corp* 8,200 207,050
OrNda Healthcorp* 8,000 159,000
Surgical Care Affiliates 2,300 43,700
Universal Health Services Class B* 5,000 158,750
Vencor Inc* 5,500 178,062
------------
1,126,987
------------
<PAGE>
HOTELS 0.27%
Doubletree Corp* 1,400 31,850
Prime Hospitality* 8,400 81,900
------------
113,750
------------
HOUSEHOLD APPLIANCES 0.01%
Royal Appliance Manufacturing* 1,200 4,200
------------
INSURANCE 7.11%
Berkley (W R) Corp 11,500 441,312
Liberty Financial 17,700 457,987
Mutual Risk Management 11,000 387,750
Orion Capital 3,750 156,094
Protective Life 28,500 826,500
Reliance Group Holdings 40,900 265,850
Selective Insurance Group 8,300 257,300
Vesta Insurance Group 3,000 102,000
Washington National 4,200 87,150
------------
2,981,943
------------
INVESTMENT BROKERS 0.15%
BHC Financial 3,500 63,875
------------
JEWELRY 0.67%
Tiffany & Co 7,300 280,137
------------
MACHINERY 3.98%
Duriron Co* 10,000 255,000
Giddings & Lewis 1,800 29,925
Harnischfeger Industries 14,694 551,025
Kennametal Inc 6,100 224,938
Lawson Products 14,200 381,625
Regal Beloit 11,100 227,550
------------
1,670,063
------------
MEDICAL RELATED 4.27%
Acuson Corp* 4,900 56,350
AMSCO International* 5,100 94,987
Ballard Medical Products 9,500 135,375
Heart Technology* 3,400 80,750
IDEXX Laboratories* 7,000 215,250
Invacare Corp 4,300 189,200
Kinetic Concepts 25,900 220,150
Nellcor Inc* 1,600 84,000
PhyCor Inc* 7,100 291,100
Quintiles Transnational* 3,900 219,375
Target Therapeutics* 2,100 105,000
Thermo Cardiosystems* 600 23,100
Vivra Inc* 2,600 77,350
------------
1,791,987
------------
MEDICAL RELATED - DRUGS 1.84%
A L Pharma Class A 1,700 31,450
Bergen Brunswig Class A 17,700 382,763
Copley Pharmaceutical* 2,100 39,113
Express Scripts Class A* 1,300 56,550
Watson Pharmaceuticals* 7,300 262,800
------------
772,676
------------
<PAGE>
METALS & MINING 0.62%
Agnico Eagle Mines 16,100 217,350
Pittston Minerals Group 1,500 15,750
TriMas Corp 1,300 26,650
------------
259,750
------------
NURSING HOMES 0.12%
Hillhaven Corp* 1,700 49,087
------------
OIL & GAS RELATED 4.52%
Cairn Energy USA* 3,500 40,688
Camco International 7,100 162,413
Castle Energy* 5,300 51,013
Chesapeake Energy* 2,000 45,750
Diamond Shamrock 20,000 520,000
Pogo Producing 1,300 28,763
Reading & Bates* 16,800 168,000
Smith International* 29,100 494,700
Sonat Offshore Drilling 7,900 264,650
Tejas Gas* 1,210 63,525
Total Petroleum North America Ltd 4,900 56,963
------------
1,896,465
------------
PAPER & PAPER PRODUCTS 0.91%
Chesapeake Corp 11,600 382,800
------------
POLLUTION CONTROL
EQUIPMENT & SERVICES 0.52%
Lydall Inc* 3,600 88,200
Sanifill Inc* 1,900 62,463
TETRA Tech* 3,125 67,969
------------
218,632
------------
PRINTING & PUBLISHING 2.57%
McClatchy Newspapers Class A 5,000 109,375
Media General Class A 8,300 282,200
Meredith Corp 6,600 189,750
Pulitzer Publishing 3,625 172,641
Scholastic Corp* 4,900 322,175
------------
1,076,141
------------
REAL ESTATE RELATED 1.30%
Price Enterprises* 37,600 545,200
------------
RECREATION PRODUCTS & SERVICES 0.69%
Arctco Inc 2,850 33,131
Cobra Golf* 1,500 47,063
Hollywood Casino Class A* 8,900 82,325
Scientific Games Holdings* 4,100 127,612
------------
290,131
------------
RETAIL 5.74%
Apple South 24,000 513,000
Applebee's International 4,800 135,600
Baby Superstore* 600 28,650
Caseys General Stores 3,500 70,438
Chefs International* 7,300 3,650
CompUSA Inc* 5,300 183,512
Consolidated Stores* 8,900 198,025
<PAGE>
Department 56* 2,500 107,813
Eckerd Corp* 600 19,875
Fastenal Co 2,000 67,000
Gymboree Corp* 1,600 49,400
Haverty Furniture 900 10,575
Meyer (Fred) Inc* 2,600 64,350
Musicland Stores* 5,900 57,525
Pier 1 Imports 15,800 154,050
Smith's Food & Drug Centers Class B 5,800 112,375
Sports Authority* 1,000 26,375
Stanhome Inc 6,400 205,600
Strawbridge & Clothier Class A 400 7,500
Sun Television & Appliances 600 4,313
Sunglass Hut International* 3,400 137,700
Tech Data* 12,200 167,750
Waban Inc* 4,900 81,463
------------
2,406,539
------------
SAVINGS & LOAN 3.09%
California Federal Bank 1,900 26,362
Charter One Financial 1,200 31,050
Glendale Federal Bank FSB* 17,700 243,375
Roosevelt Financial Group 2,000 30,813
St Paul Bancorp 4,100 100,963
Sovereign Bancorp 69,200 657,400
TCF Financial 4,100 208,075
------------
1,298,038
------------
SCHOOLS 0.03%
Kinder-Care Learning Centers* 800 10,300
------------
SEMICONDUCTOR EQUIPMENT 2.99%
Altron Inc* 2,250 61,312
Credence Systems* 4,000 140,000
International Rectifier* 6,600 264,000
Lattice Semiconductor* 8,800 363,000
Silicon Valley Group* 1,500 69,937
Ultratech Stepper* 4,200 156,450
VLSI Technology* 2,900 85,913
Zilog Inc* 2,500 115,000
------------
1,255,612
------------
STEEL 3.25%
AK Steel Holding* 3,300 100,238
Armco Inc* 10,000 66,250
J&L Specialty Steel 35,600 787,650
Lukens Inc 13,100 411,013
------------
1,365,151
------------
TELECOMMUNICATIONS 2.66%
Allen Group 1,000 35,500
American Mobile Satellite* 14,400 352,800
Interdigital Communications* 65,700 451,687
LCI International* 1,200 41,100
PictureTel Corp* 4,000 236,000
------------
1,117,087
------------
<PAGE>
TEXTILES & APPAREL MANUFACTURERS 2.02%
Authentic Fitness* 4,500 88,313
Belding Heminway Series A* 877 4,714
Kellwood Co 1,400 27,300
Springs Industries Class A 10,800 423,900
Warnaco Group Class A 13,400 294,800
Westpoint Stevens* 400 8,550
------------
847,577
------------
TRANSPORTATION 1.80%
Alaska Air Group* 3,800 73,150
American Freightways* 2,800 60,200
USA Truck* 600 $9,000
ValuJet Airlines* 12,500 385,938
Wisconsin Central Transportation* 3,600 228,600
------------
756,888
------------
UTILITIES 4.14%
Atmos Energy 1,900 38,000
Commonwealth Energy Systems 700 25,813
MidAmerican Energy* 7,056 102,312
New Jersey Resources 1,400 33,250
Northwest Natural Gas 1,700 53,550
ONEOK Inc 4,500 104,625
Piedmont Natural Gas 13,200 262,350
Public Service of New Mexico* 32,500 467,188
Rochester Gas & Electric 21,300 431,325
Southwest Gas 12,000 177,000
Washington Gas Light 2,400 43,800
------------
1,739,213
------------
WHOLESALE 0.22%
Bindley Western Industries 3,400 53,125
Owens & Minor Holding 2,850 40,613
------------
93,738
------------
TOTAL COMMON STOCKS
(Cost $32,694,055) 36,161,148
------------
OTHER SECURITIES 0.00%
SAVINGS & LOAN 0.00%
California Federal Bank Goodwill Certificates
(Contingent litigation recovery participation
interest shrs which entitles the holder to receive
25.377745% of the net litigation recovery)*
(Cost $0) 190 950
------------
SHORT-TERM INVESTMENTS --
REPURCHASE AGREEMENTS 13.84%
Repurchase Agreement with State Street
Bank & Trust Co dated 7/31/1995 due 8/1/1995
at 5.250%, repurchased at $5,810,847
(Collateralized by US Treasury
Notes due 6/30/1996 at 6.000%,
value $5,928,578)
(Cost $5,810,000) $5,810,000 5,810,000
------------
TOTAL INVESTMENT
SECURITIES AT VALUE 100.00%
(Cost $38,504,055)
(Cost for Income Tax Purposes
$38,525,185) $ 41,972,098
============
* Security is non-income producing.
See Notes to Financial Statements
<PAGE>
INVESCO Diversified Funds, Inc. - Small Company Fund
Statement of Assets and Liabilities
July 31, 1995
ASSETS
Investment Securities at Value~
(Cost $38,504,055~) $41,972,098
Cash 2,178
Receivables:
Investment Securities Sold 919,683
Fund Shares Sold 55,751
Dividends and Interest 12,832
Prepaid Expenses and Other Assets 16,575
------------
TOTAL ASSETS 42,979,117
------------
LIABILITIES
Payables:
Distributions to Shareholders 4,229
Investment Securities Purchased 2,726,226
Fund Shares Repurchased 149,529
Accrued Expenses and Other Payables 28,065
------------
TOTAL LIABILITIES 2,908,049
------------
Net Assets at Value $40,071,068
============
NET ASSETS
Paid-in Capital* $35,878,276
Accumulated Undistributed Net
Investment Income 2,309
Accumulated Undistributed Net Realized Gain
on Investment Securities 722,440
Net Appreciation of Investment Securities 3,468,043
------------
Net Assets at Value $40,071,068
============
Net Asset Value, Offering and Redemption
Price per Share $11.77
=======
~ Investment securities at cost and value at July 31, 1995 include a repurchase
agreement of $5,810,000.
* The Fund has 100 million authorized shares of common stock, par value of
$0.01 per share, of which 3,403,624 were outstanding at July 31, 1995.
See Notes to Financial Statements
<PAGE>
INVESCO Diversified Funds, Inc. - Small Company Fund
Statement of Operations
Year Ended July 31, 1995
INVESTMENT INCOME
INCOME
Dividends $219,618
Interest 111,749
------------
TOTAL INCOME 331,367
------------
EXPENSES
Investment Advisory Fees 135,262
Transfer Agent Fees 14,764
Administrative Fees 12,705
Custodian Fees and Expenses 2,443
Directors' Fees and Expenses 7,637
Professional Fees and Expenses 17,647
Registration Fees and Expenses 40,641
Reports to Shareholders 3,283
Other Expenses 2,720
------------
TOTAL EXPENSES 237,102
Fees and Expenses Absorbed
by Investment Adviser (56,752)
------------
NET EXPENSES 180,350
------------
NET INVESTMENT INCOME 151,017
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Gain on Investment Securities 800,723
Change in Net Appreciation
of Investment Securities 3,762,809
------------
NET GAIN ON INVESTMENT SECURITIES 4,563,532
------------
Net Increase in Net Assets from Operations $4,714,549
============
See Notes to Financial Statements
<PAGE>
INVESCO Diversified Funds, Inc. - Small Company Fund
Statement of Changes in Net Assets
Year Period
Ended Ended
July 31 July 31
------------ ------------
1995 1994
(NOTE 1)
OPERATIONS
Net Investment Income $151,017 $ 83,687
Net Realized Gain (Loss) on
Investment Securities 800,723 (78,283)
Change in Net Appreciation
(Depreciation) of Investment
Securities 3,762,809 (294,766)
------------ ------------
NET INCREASE (DECREASE)
IN NET ASSETS FROM
OPERATIONS 4,714,549 (289,362)
------------ ------------
DIVIDENDS TO SHAREHOLDERS
FROM NET INVESTMENT INCOME (206,316) (26,079)
------------ ------------
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 42,475,361 18,609,570
Reinvestment of Distributions 182,674 23,472
------------ ------------
42,658,035 18,633,042
Amounts Paid for Repurchases
of Shares (20,569,337) (4,943,464)
------------ ------------
NET INCREASE IN NET ASSETS
FROM FUND SHARE TRANSACTIONS 22,088,698 13,689,578
------------ ------------
Total Increase in Net Assets 26,596,931 13,374,137
NET ASSETS
Initial Subscription (Note 1) 0 100,000
Beginning of Period 13,474,137 0
------------ ------------
End of Period (Including
Accumulated Undistributed
Net Investment Income of
$2,309 and $57,608, respectively) $ 40,071,068 $ 13,474,137
============ ============
FUND SHARE TRANSACTIONS
Initial Subscription (Note 1) 0 10,000
Shares Sold 3,982,583 1,863,062
Shares Issued from Reinvestment
of Distributions 16,914 2,405
------------ ------------
3,999,497 1,875,467
Shares Repurchased (1,977,122) (494,218)
------------ ------------
Net Increase in Fund Shares 2,022,375 1,381,249
============ ============
See Notes to Financial Statements
<PAGE>
INVESCO Diversified Funds, Inc.- Small Company Fund
Notes to Financial Statements
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Diversified
Funds, Inc. (the "Fund"), a Maryland Corporation, was incorporated on April 2,
1993, and consists of Small Company Fund, which commenced operations on December
1, 1993. The Fund is registered under the Investment Company Act of 1940 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 at the time of purchase, or at
market value if maturity is greater than 60 days.
B. REPURCHASE AGREEMENTS -- Repurchase agreements held by the Fund are fully
collateralized by U.S. Government securities and such collateral is in the
possession of the Fund's custodian. The collateral is evaluated daily to
ensure its market value exceeds the current market value of the repurchase
agreements including accrued interest.
C. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Security transactions
are accounted for on the trade date and dividend income is recorded on the ex
dividend date. Interest income, which may be comprised of stated coupon rate,
market discount and original issue discount is recorded on the accrual basis.
Cost is determined on the specific identification basis.
D. FEDERAL AND STATE TAXES -- The Fund has complied and continues to comply with
the provisions of the Internal Revenue Code applicable to regulated
investment companies and, accordingly, has made or intends to make sufficient
distributions of net investment income and net realized capital gains, if
any, to relieve it from all federal and state income taxes and federal excise
taxes.
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. Of the ordinary income
distributions declared for the year ended July 31, 1995, 100.00% qualified
for the dividends received deduction available to the Fund's corporate
shareholders.
E. 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 captital 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. As of July 31, 1995, there were no such differences.
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% of average net assets.
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.
<PAGE>
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 their 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 year ended July 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 $31,286,667 and $12,417,676,
respectively. There were no purchases or sales of U.S. Government Securities.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At July 31, 1995, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $4,274,904 and the gross depreciation of securities in which there
was an excess of tax cost over value amounted to $827,991 resulting in net
appreciation of $3,446,913. 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 year ended July 31, 1995,
included in Director's Fees and Expenses in the Statement of Operations were
$310. Unfunded accrued pension costs of $520 and pension liability of $830 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)
Year Period
Ended Ended
July 31 July 31
------------ ------------
1995 1994^
(NOTE 1)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 9.76 $10.00
------------ ------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.05 0.06
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 2.05 (0.28)
------------ ------------
Total from Investment Operations 2.10 (0.22)
------------ ------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.09 0.02
------------ ------------
Net Asset Value -- End of Period $ 11.77 $9.76
============ ============
TOTAL RETURN 21.64% (2.21%)*
RATIOS
Net Assets -- End of Period ($000 Omitted) $40,071 $13,474
Ratio of Expenses to Average Net Assets# 1.00% 1.00%~
Ratio of Net Investment Income to
Average Net Assets# 0.84% 1.20%~
Portfolio Turnover Rate 73% 55% *
^ From December 1, 1993, commencement of operations, to July 31, 1994.
* These amounts are based on operations for the period shown and, accordingly,
are not representative of a full year.
# Various expenses of the Fund were voluntarily absorbed by IFG for the year
ended July 31, 1995 and for the period ended July 31, 1994. If such expenses
had not been voluntarily absorbed, ratio of expenses to average net assets
would have been 1.32% and 1.64% (annualized), respectively, and ratio of net
investment income to average net assets would have been 0.52% and 0.56%
(annualized), respectively.
~ Annualized
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of
INVESCO Diversified Funds, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investment securities, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of INVESCO Small Company Fund
(constituting the INVESCO Diversified Funds, Inc., hereafter referred to as the
"Fund") at July 31, 1995, the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at July 31, 1995 by
correspondence with the custodian and the application of alternative auditing
procedures for unsettled security transactions, provide a reasonable basis for
the opinion expressed above.
Price Waterhouse LLP
Denver, Colorado
September 1, 1995
<PAGE>
INVESCO FUNDS
To receive general information and prospectuses on any of INVESCO's funds or
retirement plans, or to obtain current account or price information,
Call toll-free: 1-800-525-8085
To reach PAL(R), your 24-hour Personal
Account Line, call: 1-800-424-8085
Or write to:
INVESCO Funds Group, Inc., Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
This information must be preceded or accompanied by an effective prospectus.
