INVESCO DIVERSIFIED FUNDS, INC.
INVESCO Small Company Value Fund
Supplement to Prospectus dated December 1, 1997
The Section of the INVESCO Small Company Value Fund's Prospectus entitled
"Annual Fund Expenses" is amended to (1) delete the first paragraph and, (2)
substitute the following paragraph in its place:
The Fund is 100% no-load; there are no fees to purchase, exchange or
redeem shares. Effective June 1, 1998, the Fund is authorized to pay a
Rule 12b-1 distribution fee of up to one quarter of one percent of the
Fund's average net assets each year. (See "How Shares Can Be
Purchased.")
The Section of the INVESCO Small Company Value Fund's Prospectus entitled
"How Shares Can Be Purchased" is amended to add the following information at the
end of the Section:
Distribution Expenses. The Fund is authorized under a Plan and
Agreement of Distribution pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the "Plan") to use its assets to finance certain
activities relating to the distribution of its shares to investors.
The Plan applies to New Assets (new sales of shares, exchanges into
the Fund and reinvestments of dividends and capital gains
distributions) of the Fund on or after June 1, 1998. Under the Plan,
monthly payments may be made by the Fund to IDI to permit IDI, at its
discretion, to engage in certain activities, and provide certain
services approved by the board of directors of the Company in
connection with the distribution of the Fund's shares to investors.
These activities and services may include the payment of compensation
(including incentive compensation and/or continuing compensation based
on the amount of customer assets maintained in the Fund) to securities
dealers and other financial institutions and organizations, which may
include IFG and IDI affiliated companies, to obtain various
distribution-related and/or administrative services for the Fund. Such
services may include, among other things, processing new shareholder
account applications, preparing and transmitting to the Fund's
Transfer Agent computer processable tapes of all transactions by
customers, and serving as the primary source of information to
customers in answering questions concerning the Fund and their
transactions with the Fund.
In addition, other permissible activities and services include
advertising, the preparation and distribution of sales literature,
printing and distributing prospectuses to prospective investors, and
such other services and promotional activities for the Fund as may
from time to time be agreed upon by the Company and its board of
directors, including public relations efforts and marketing programs
to communicate with investors and prospective investors. These
services and activities may be conducted by the staff of IFG, IDI or
their affiliates or by third parties.
Under the Plan, the Company's payments to IDI on behalf of the
Fund are limited to an amount computed at an annual rate of 0.25% of
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the Fund's average net New Assets during the month. IDI is not
entitled to payment for overhead expenses under the Plan, but may be
paid for all or a portion of the compensation paid for salaries and
other employee benefits for the personnel of IFG or IDI whose primary
responsibilities involve marketing shares of the INVESCO funds,
including the Fund. Payment amounts by the Fund under the Plan, for
any month, may be made to compensate IDI for permissible activities
engaged in and services provided by IDI during the rolling 12-month
period in which that month falls. Therefore, any obligations incurred
by IDI in excess of the limitations described above will not be paid
by the Fund under the Plan, and will be borne by IDI. In addition, IDI
and its affiliates may from time to time make additional payments from
its revenues to securities dealers, financial advisers and financial
institutions that provide distribution-related and/or administrative
services for the Fund. No further payments will be made by the Fund
under the Plan in the event of the Plan's termination. Payments made
by the Fund may not be used to finance directly the distribution of
shares of any other Fund of the Company or other mutual funds advised
by IFG or distributed by IDI. However, payments received by IDI which
are not used to finance the distribution of shares of the Fund become
part of IDI's revenues and may be used by IDI for activities that
promote distribution of any of the mutual funds advised by IFG.
Subject to review by the Fund's directors, payments made by the Fund
under the Plan for compensation of marketing personnel, as noted
above, are based on an allocation formula designed to ensure that all
such payments are appropriate. IDI will bear any distribution- and
service-related expenses in excess of the amounts which are
compensated pursuant to the Plan. The Plan also authorizes any
financing of distribution which may result from IDI's use of its own
resources, including profits from investment advisory fees received
from a Fund, provided that such fees are legitimate and not excessive.
For more information, see "How Shares Can Be Purchased - Distribution
Plan" in the Statement of Additional Information.
The date of this Supplement is May 8, 1998.
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INVESCO DIVERSIFIED FUNDS, INC.
Supplement to Statement of Additional Information
dated December 1, 1997
The Section of the Company's Statement of Additional Information entitled "How
Shares Can Be Purchased" is amended to add the following language after the
existing language in the Section:
Distribution Plan. As discussed in the Fund's prospectus, the Small
Company Value Fund has adopted a Plan and Agreement of Distribution (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act, which will be
implemented on June 1, 1998. The Plan was approved on February 3, 1998, at
a meeting called for such purpose by a majority of the directors of the
Company, including a majority of the directors who neither are "interested
persons" of the Company nor have any financial interest in the operation of
the Plan ("12b-1 directors"). The Plan was approved by the shareholders of
the Fund on May 6, 1998.
The Plan provides that the Fund may make monthly payments to IDI of
amounts computed at an annual rate no greater than 0.25% of the Fund's new
sales of shares, exchanges into the Fund and reinvestments of dividends and
capital gain distributions added on or after June 1, 1998, to permit IDI,
at its discretion, to engage in certain activities and provide certain
services in connection with the distribution of the Fund's shares to
investors. Payments by the Fund under the Plan, for any month, may only be
made to compensate IDI for permissible activities engaged in and services
provide by IDI during the rolling 12-month period in which that month
falls. As noted in the Prospectus, one type of expenditure permitted by the
Plan is the payment of compensation to securities companies, and other
financial institutions and organizations, which may include IDIaffiliated
companies, in order to obtain various distribution-related and/or
administrative services for the Fund. The Fund is authorized by the Plan to
use its assets to finance the payments made to obtain those services.
Payments will be made by IDI to broker-dealers who sell shares of the Fund
and may be made to banks, savings and loan associations and other
depository institutions. Although the Glass-Steagall Act limits the ability
of certain banks to act as underwriters of mutual fund shares, the Fund
does not believe that these limitations would affect the ability of such
banks to enter into arrangements with IDI, but can give no assurance in
this regard. However, to the extent it is determined otherwise in the
future, arrangements with banks might have to be modified or terminated,
and, in that case, the size of the Fund possibly could decrease to the
extent that the banks would no longer invest customer assets in the Fund.
Neither the Company nor its investment adviser will give any preference to
banks or other depository institutions which enter into such arrangements
when selecting investments to be made by the Fund.
The Plan will not be implemented until June 1, 1998. Therefore, for
the fiscal year ended July 31, 1997, no 12b-1 amounts were paid by the
Fund.
The nature and scope of services which are provided by securities
dealers and other organizations may vary by dealer but include, among other
things, processing new stockholder account applications, preparing and
transmitting to the Company's Transfer Agent computer-processable tapes of
the Fund's transactions by customers, serving as the primary source of
information to customers in answering questions concerning the Fund, and
assisting in other customer transactions with the Fund.
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The Plan provides that it shall continue in effect with respect to the
Fund for so long as such continuance is approved at least annually by the
vote of the board of directors cast in person at a meeting called for the
purpose of voting on such continuance. The Plan can also be terminated at
any time with respect to the Fund, without penalty, if a majority of the
12b-1 directors, or shareholders of the Fund, vote to terminate the Plan.
The Company may, in its absolute discretion, suspend, discontinue or limit
the offering of its shares of the Fund at any time. In determining whether
any such action should be taken, the board of directors intends to consider
all relevant factors including, without limitation, the size of the Fund,
the investment climate for the Fund, general market conditions, and the
volume of sales and redemptions of the Fund's shares. The Plan may continue
in effect and payments may be made under the Plan following any such
temporary suspension or limitation of the offering of the Fund's shares;
however, the Fund is not contractually obligated to continue the Plan for
any particular period of time. Suspension of the offering of the Fund's
shares would not, of course, affect a shareholder's ability to redeem his
shares. So long as the Plan is in effect, the selection and nomination of
persons to serve as independent directors of the Company shall be committed
to the independent directors then in office at the time of such selection
or nomination. The Plan may not be amended to increase materially the
amount of the Fund's payments thereunder without approval of the
shareholders of the Fund, and all material amendments to the Plan must be
approved by the board of directors, including a majority of the 12b-1
directors. Under the agreement implementing the Plan, IDI or the Fund, the
latter by vote of a majority of the 12b-1 directors, or of the holders of a
majority of the Fund's outstanding voting securities, may terminate such
agreement as to the Fund without penalty upon 30 days' written notice to
the other party. No further payments will be made by the Fund under the
Plan in the event of the Plan's termination as to the Fund.
To the extent that the Plan constitutes a plan of distribution adopted
pursuant to Rule 12b-1 under the 1940 Act, it shall remain in effect as
such, so as to authorize the use of each Fund's assets in the amounts and
for the purposes set forth therein, notwithstanding the occurrence of an
assignment, as defined by the 1940 Act, and rules thereunder. To the extent
it constitutes an agreement pursuant to a plan, the Fund's obligation to
make payments to IDI shall terminate automatically, in the event of such
"assignment," in which case the Fund may continue to make payments pursuant
to the Plan to IDI or another organization only upon the approval of new
arrangements, which may or may not be with IDI, regarding the use of the
amounts authorized to be paid by it under the Plan, by the directors,
including a majority of the 12b-1 directors, by a vote cast in person at a
meeting called for such purpose.
Information regarding the services rendered under the Plan and the
amounts paid therefor by the Fund are provided to, and reviewed by, the
directors on a quarterly basis. On an annual basis, the directors consider
the continued appropriateness of the Plan and the level of compensation
provided therein.
The only members of the board of directors or officers of the Fund who
are interested persons, as that term is defined in Section 2(a)(19) of the
1940 Act, of the Company who have a direct or indirect financial interest
in the operation of the Plan are the officers and directors of the Company
listed herein under the section entitled "The Fund And Its
Management--Officers and Directors of the Company" who are also officers
either of IFG or companies affiliated with IFG. The benefits which the
Company believes will be reasonably likely to flow to it and its
shareholders under the Plan include the following:
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(1) Enhanced marketing efforts, if successful, should result in an
increase in net assets through the sale of additional shares and
afford greater resources with which to pursue the investment
objectives of the Fund;
(2) The sale of additional shares reduces the likelihood that
redemption of shares will require the liquidation of securities
of the Funds in amounts and at times that are disadvantageous
for investment purposes;
(3) The positive effect which increased Fund assets will have on its
revenues could allow IFG and its affiliated companies:
(a) To have greater resources to make the financial commitments
necessary to improve the quality and level of the Fund's
shareholder services (in both systems and personnel),
(b) To increase the number and type of mutual funds available to
investors from IFG and its affiliated companies (and support
them in their infancy), and thereby expand the investment
choices available to all shareholders, and
(c) To acquire and retain talented employees who desire to be
associated with a growing organization; and
(4) Increased Fund assets may result in reducing each investor's share
of certain expenses through economies of scale (e.g., exceeding
established breakpoints in the advisory fee schedule and
allocating fixed expenses over a larger asset base), thereby
partially offsetting the costs of the Plan.
The date of this Supplement is May 8, 1998.
