KNOWLEDGE DISCIPLINE SERVICE CHOICE
YOU SHOULD KNOW WHAT INVESCO KNOWS(TM)
Small Company
Value Fund
A no-load mutual fund seeking long-term capital growth.
SEMIANNUAL
INVESCO
SEMIANNUAL REPORT/January 31, 1999
<PAGE>
SHAREHOLDERS IN SMALL COMPANY VALUE FUND WILL BE RECEIVING IMPORTANT PROXY
INFORMATION SHORTLY. PLEASE BE SURE TO READ THE PROXY CAREFULLY AND VOTE
PROMPTLY ON ALL ISSUES.
SMALL COMPANY VALUE FUND
AVERAGE ANNUALIZED TOTAL RETURN
PERIODS ENDED 1/31/99(2)
1 year -7.85%
-----------------------------------
5 years 9.42%
-----------------------------------
Since inception (12/93) 9.75%
-----------------------------------
Graph: Small Company Value Fund Total Return from Inception(12/93)
through 1/31/99
This line graph illustrates the value of a $10,000 investment in
INVESCO Small Company Value Fund to the value of a $10,000 investment
in the Russell 2000 Index, assuming in each case reinvestment of all
dividends and capital gain distributions, for the period from
inception (12/93) through 1/31/99.
The line graph illustrates the value of a $10,000 investment, plus reinvested
dividends and capital gain distributions, since inception through 1/31/99. The
chart and other total return figures cited reflect the fund's operating
expenses, but the index does not have expenses, which would, of course, have
lowered its performance. (Of course, past performance is not a guarantee of
future results.)(1)(2)
<PAGE>
SMALL COMPANY VALUE FUND: A SUMMARY
- --------------------------------------------------------------------------------
Dear Shareholder:
The past six months were difficult for Small Company Value Fund.
Unfortunately, investing in small companies with low price-to-earnings ratios
has recently meant throwing one's hat in with two of the most unpopular market
strategies.
For the six months ended January 31, 1999, investors in Small Company Value
Fund experienced a total return of -4.75%, compared to the Russell 2000, which
gained 2.40% over the same period. (Of course, past performance is no guarantee
of future results.(1),(2)
Several explanations exist for the market's continuing hostility to small
stocks with low valuations. Primary among them, perhaps, has been investors'
preference for stability given the late stage of the economic expansion in this
country, as well as persistent troubles overseas. Small value-oriented stocks
raise two concerns for many investors:
o Small company stocks are usually less liquid. That is, the number of
buyers and sellers interested in the stock at any given time is relatively
limited. Should an investor desire to sell in a market downdraft, finding a
buyer might be more challenging than if he or she owned a large company
stock.
o Companies with low valuations often have slower earnings growth and some
other less favorable indicators for their future performance on their
balance sheets. They may appear more fragile, and more prone to serious
problems in the event of a market downturn. While certain investors may see
strength where others see only weakness, their favorable opinion remains by
definition contrarian in the short-term.
Because Small Company Value Fund relies partially on a quantitative
approach and does not favor certain sectors of the economy, it has suffered
especially over the past six months. Its relatively modest weighting in
technology stocks, for example, has unfortunately excluded it from some of the
gains in that sector. Also hurting the fund's performance has been its focus on
companies with particularly low price-to-earnings ratios--in other words, its
strict value discipline.
Some market veterans point out that both of these factors tend to move in
cycles; that is, small stocks may again have their day, as may value companies.
Investors can take heart in the fact that stocks of this sort are now quite
inexpensive compared to the broader markets. While they may fall farther, the
potential for appreciation--the upside--is also quite substantial.
ROBERT SLOTPOLE
Senior Vice President and Director of Equities, INVESCO Management and Research,
Inc. BS, State University of New York at Buffalo, MBA, Stanford University.
Began investment career in 1975. Joined INVESCO in 1993.
(1)The Russell 2000 is an unmanaged index of common stocks considered
representative of the smaller-capitalization equity market.
(2)Total return assumes reinvestment of dividends and capital gain
distributions for the periods indicated. Past performance is not a guarantee of
future results. Investment return and principal value will fluctuate so that,
when redeemed, an investor's shares may be worth more or less than when
purchased.
<PAGE>
INVESCO Semiannual Report January 1999
MOVING FORWARD
- --------------------------------------------------------------------------------
MARKET HEADLINES:
AUGUST 1998-JANUARY 1999
The latter half of 1998 was a period few market veterans will forget. Just
when the danger seemed to have passed, the tidal wave of the Asian economic
crisis finally pounded foreign shores in late summer, swamping financial
markets. The gloom over world financial markets deepened as the headlines warned
of one global economic calamity after another: Russian loan default, the ominous
near-collapse of a prominent hedge fund, tumbling currencies in Latin America,
and a perilous banking situation in Japan.
Following the gut-wrenching declines, however, markets in the United States
and Europe began an equally dizzying rebound in October. A series of three
interest rate cuts by the Federal Reserve Board, along with those of other
central banks, pumped liquidity and confidence into the international financial
system. Despite profit warnings from large multinational corporations, investors
began to focus on the many sectors of strength within the American and European
economies: robust consumer spending, low interest rates and unemployment, and
subdued inflation.
Other markets struggled to recover. Hoping the worst was behind them,
investors in some Asian nations, most notably South Korea, bid up their markets;
and indeed, the first small signs of recovery began to appear across the region.
Other Asian markets remained mired in the profound structural and financial
problems confronting this area, however. Although seemingly facing less
intractable problems than Asia, Latin America was unable to maintain a short
rally, and by winter, its markets had returned to the lows of the previous
summer.
In Europe and the United States, the optimists seemed to be vindicated as
the advanced Western economies continued strong in January, and stocks headed
higher. Yet the mixed economic picture resulted in mixed market performance for
the overall six-month period, as large-cap stocks in favored industries
continued to dramatically outperform the broader markets.
YEAR 2000 COMPUTER ISSUE.
Many computer systems in use today may not be able to recognize any date
after December 31, 1999. If these systems are not fixed by that date, it is
possible that they could generate erroneous information or fail altogether.
INVESCO has committed substantial resources in an effort to make sure that its
own major computer systems will continue to function on and after January 1,
2000. Of course, INVESCO cannot fix systems that are beyond its control. If
INVESCO's own systems, or the systems of third parties upon which it relies, do
not perform properly after December 31, 1999, the Funds could be adversely
affected.
In addition, the markets for, or values of, securities in which the Funds
invest may possibly be hurt by computer failures affecting portfolio investments
or trading of securities beginning January 1, 2000. For example, improperly
functioning computer systems could result in securities trade settlement
problems and liquidity issues, production issues for individual companies and
overall economic uncertainties. Individual issuers may incur increased costs in
making their own systems Year 2000 compliant. The combination of market
uncertainty and increased costs means that there is a possibility that Year 2000
computer issues may adversely affect the Funds' investments. At this time, it is
generally believed that foreign issuers, particularly those in emerging and
other markets, may be more vulnerable to Year 2000 problems than will be issuers
in the U.S.
<PAGE>
- --------------------------------------------------------------------------------
TEN LARGEST COMMON STOCK HOLDINGS
- --------------------------------------------------------------------------------
INVESCO Small Company Value Fund
January 31, 1999
UNAUDITED
DESCRIPTION VALUE
-----------------------------------------------------------------------------
Centex Construction Products $ 884,306
International Speedway Class A 833,000
Coors (Adolph) Co Class B 730,312
Zale Corp 715,312
Koger Equity 686,250
Shurgard Storage Centers Class A 666,463
NVR Inc 664,913
CBL & Associates Properties 657,487
Cullen/Frost Bankers 654,412
ResMed Inc 650,100
Composition of holdings is subject to change.
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENT SECURITIES
- --------------------------------------------------------------------------------
INVESCO Small Company Value Fund
January 31, 1999
UNAUDITED
- --------------------------------------------------------------------------------
% DESCRIPTION SHARES VALUE
- --------------------------------------------------------------------------------
100.00 COMMON STOCKS
2.36 AEROSPACE & DEFENSE
Esterline Technologies(a) 32,300 $ 611,681
GenCorp Inc 15,500 362,313
Moog Inc Class A(a) 7,800 291,525
=============================================================================
1,265,519
0.32 AIR FREIGHT
Airborne Freight 4,900 171,500
=============================================================================
0.69 AIRLINES
Amtran Inc(a) 6,500 156,406
SkyWest Inc 6,000 216,375
=============================================================================
372,781
2.95 AUTO PARTS
Arvin Industries 15,100 597,394
Borg-Warner Automotive 5,000 240,625
Detroit Diesel(a) 15,000 310,312
Standard Products 22,700 438,394
=============================================================================
1,586,725
<PAGE>
- --------------------------------------------------------------------------------
% DESCRIPTION SHARES VALUE
- --------------------------------------------------------------------------------
5.52 BANKS
Banknorth Group 5,500 $ 164,312
Carolina First 19,600 429,975
Cullen/Frost Bankers 12,600 654,412
FNB Corp 6,100 150,975
Firstbank Corp 11,100 299,700
GBC Bancorp 6,800 151,300
Imperial Bancorp(a) 29,750 546,656
Independent Bank 9,600 148,800
Republic Bancorp 23,300 278,144
Trustmark Corp 6,700 140,700
=============================================================================
2.07 BEVERAGES
Canandaigua Brands Class A(a) 6,500 381,062
Coors (Adolph) Co Class B 11,400 730,312
=============================================================================
1,111,374
0.41 BIOTECHNOLOGY
MedImmune Inc(a) 4,400 217,800
=============================================================================
4.13 BUILDING MATERIALS
Cameron Ashley Building Products(a) 9,300 124,387
Centex Construction Products 23,700 884,306
Comfort Systems USA(a) 16,700 300,600
Elcor Corp 7,900 273,538
TJ International 11,500 277,438
Texas Industries 13,500 357,750
=============================================================================
2,218,019
1.30 CHEMICALS
Dexter Corp 8,600 252,088
Ferro Corp 10,000 218,749
NL Industries 18,600 230,175
=============================================================================
701,012
1.41 COMMUNICATIONS -- EQUIPMENT & MANUFACTURING
Metromedia Fiber Network Class A Shrs(a) 5,900 270,294
Superior TeleCom 7,400 327,450
Tekelec(a) 7,900 158,000
=============================================================================
755,744
5.00 COMPUTER RELATED
AVT Corp(a) 7,700 209,825
Acclaim Entertainment(a) 18,200 168,350
BancTec Inc(a) 11,050 143,650
BroadVision Inc(a) 5,000 209,375
GeoTel Communications(a) 11,700 457,031
Legato Systems(a) 4,200 253,575
<PAGE>
- --------------------------------------------------------------------------------
% DESCRIPTION SHARES VALUE
- --------------------------------------------------------------------------------
Macromedia Inc(a) 3,900 $ 136,744
Mercury Interactive(a) 4,100 258,813
MICROS Systems(a) 10,200 326,400
Network Appliance(a) 5,000 265,000
Xircom Inc(a) 5,700 257,925
=============================================================================
2,686,688
0.59 CONSUMER FINANCE
Resource Bancshares Mortgage Group 21,200 315,350
=============================================================================
1.33 CONSUMER -- JEWELRY, NOVELTIES & GIFTS
Zale Corp(a) 21,800 715,312
=============================================================================
0.88 CONTAINERS
AptarGroup Inc 17,400 475,237
=============================================================================
5.04 ELECTRIC UTILITIES
CMP Group 17,700 318,600
CILCORP Inc 6,000 345,750
Cleco Corp 6,100 192,150
Commonwealth Energy Systems SBI 14,000 549,500
Hawaiian Electric Industries 10,400 389,350
Minnesota Power 8,800 355,850
SIGCORP Inc 17,000 554,625
=============================================================================
2,705,825
1.17 ELECTRICAL EQUIPMENT
C&D Technologies 16,200 386,775
Technitrol Inc 9,800 240,100
=============================================================================
626,875
0.41 ELECTRONICS
General Cable 11,600 218,950
=============================================================================
1.13 ELECTRONICS -- SEMICONDUCTOR
Jabil Circuit(a) 2,200 157,163
Plexus Corp(a) 6,300 252,000
TranSwitch Corp(a) 5,000 196,250
=============================================================================
605,413
2.48 ENGINEERING & CONSTRUCTION
EMCOR Group(a) 12,000 198,750
Granite Construction 13,200 427,350
Insituform Technologies Class A(a) 32,200 483,000
Jacobs Engineering Group(a) 5,300 222,269
=============================================================================
1,331,369
1.55 ENTERTAINMENT
International Speedway Class A 19,600 833,000
=============================================================================
0.28 FINANCIAL
Doral Financial 7,600 152,238
=============================================================================
<PAGE>
- --------------------------------------------------------------------------------
% DESCRIPTION SHARES VALUE
- --------------------------------------------------------------------------------
0.71 FOODS
Pilgrim's Pride Class B 16,300 $ 381,013
=============================================================================
0.72 FOOTWEAR
Cole (Kenneth) Productions Class A(a) 10,000 226,250
Maxwell Shoe(a) 14,300 160,875
=============================================================================
387,125
0.41 GOLD & PRECIOUS METALS MINING
Stillwater Mining(a) 8,400 220,500
=============================================================================
1.84 HEALTH CARE DRUGS -- PHARMACEUTICALS
ALPHARMA Inc Class A 11,800 408,575
Bindley Western Industries 22,866 577,366
=============================================================================
985,941
6.18 HEALTH CARE RELATED
DVI Inc(a) 34,600 467,100
Datascope Corp(a) 9,400 191,525
Express Scripts Class A(a) 2,800 184,100
Hanger Orthopedic Group(a) 9,300 232,500
MiniMed Inc(a) 3,200 347,600
OEC Medical Systems(a) 9,400 264,375
Priority Healthcare Class B(a) 10,244 398,234
ResMed Inc(a) 13,200 650,100
VISX Inc(a) 3,800 231,800
Xomed Surgical Products(a) 9,750 349,781
=============================================================================
3,317,115
2.94 HOMEBUILDING
MDC Holdings 23,600 495,600
NVR Inc(a) 14,900 664,913
Nortek Inc(a) 2,300 63,825
Pulte Corp 11,800 356,213
=============================================================================
1,580,551
<PAGE>
- --------------------------------------------------------------------------------
% DESCRIPTION SHARES VALUE
- --------------------------------------------------------------------------------
0.56 HOUSEHOLD FURNITURE & APPLIANCES
Furniture Brands International(a) 12,800 300,800
=============================================================================
0.91 HOUSEHOLD PRODUCTS
Recoton Corp(a) 26,800 489,100
=============================================================================
5.08 INSURANCE
American Heritage Life Investment 10,200 248,625
Delphi Financial Group(a) 12,030 603,004
FBL Financial Group 12,200 263,825
Fidelity National Financial 18,480 492,030
First American Financial 10,500 320,906
LandAmerica Financial Group 6,800 339,575
<PAGE>
- --------------------------------------------------------------------------------
% DESCRIPTION SHARES VALUE
- --------------------------------------------------------------------------------
NAC Re 9,400 $ 459,425
=============================================================================
2,727,390
0.44 INVESTMENT BANK/BROKER FIRM
Advest Group 9,400 237,937
=============================================================================
1.71 IRON & STEEL
AK Steel Holding 14,000 291,375
Metals USA(a) 28,300 281,231
Reliance Steel & Aluminum 12,600 344,925
=============================================================================
917,531
0.83 MACHINERY
Manitowoc Co 7,200 286,200
NACCO Industries Class A 1,900 160,906
=============================================================================
447,106
0.78 MANUFACTURING
Johnstown America Industries(a) 26,100 420,863
=============================================================================
1.95 NATURAL GAS
Eastern Enterprises 9,000 362,250
NUI Corp 17,000 386,750
ONEOK Inc 10,200 298,350
=============================================================================
1,047,350
1.26 OFFICE EQUIPMENT & SUPPLIES
Knoll Inc(a) 13,800 324,300
Polycom Inc(a) 5,100 129,413
United Stationers(a) 9,600 225,600
=============================================================================
679,313
3.84 OIL & GAS RELATED
Atwood Oceanics(a) 13,600 270,300
Barrett Resources(a) 18,300 317,962
Basin Exploration(a) 11,500 135,125
Energen Corp 19,700 336,131
Evergreen Resources(a) 20,400 316,200
HS Resources(a) 21,700 141,050
SEACOR Smit(a) 6,100 271,450
Tesoro Petroleum(a) 25,000 271,875
=============================================================================
2,060,093
0.43 PAPER & FOREST PRODUCTS
Rock-Tenn Co Class A 12,800 230,400
=============================================================================
2.09 PUBLISHING
Hollinger International 35,800 469,875
McClatchy Co Class A 12,900 377,325
Media General Class A 5,500 275,000
=============================================================================
1,122,200
<PAGE>
- --------------------------------------------------------------------------------
% DESCRIPTION SHARES VALUE
- --------------------------------------------------------------------------------
9.98 REAL ESTATE INVESTMENT TRUST
Bedford Property Investors 21,700 $ 337,706
CBL & Associates Properties 26,700 657,487
Essex Property Trust 9,300 266,213
FelCor Lodging Trust 13,056 284,784
Gables Residential Trust SBI 13,200 302,775
Kilroy Realty 14,900 325,006
Koger Equity 45,000 686,250
MGI Properties 11,800 324,500
Macerich Co 13,600 334,900
Prentiss Properties Trust 16,400 347,475
SL Green Realty 16,100 326,025
Shurgard Storage Centers Class A 26,200 666,463
Smith (Charles E) Residential Realty 8,600 259,075
Sunstone Hotel Investors 29,100 241,894
=============================================================================
5,360,553
2.17 RESTAURANTS
CEC Entertainment(a) 11,400 340,575
Cheesecake Factory(a) 9,800 222,950
Ruby Tuesday 30,300 604,106
=============================================================================
1,167,631
1.92 RETAIL
AnnTaylor Stores(a) 5,900 228,625
Footstar Inc(a) 13,100 331,594
Musicland Stores(a) 13,000 158,438
Shopko Stores(a) 9,900 314,325
=============================================================================
1,032,982
3.67 SAVINGS & LOAN
Anchor Bancorp Wisconsin 7,500 140,156
Commercial Federal 19,100 436,912
Downey Financial 21,020 463,754
FirstFed Financial(a) 22,600 360,188
Flagstar Bancorp 13,200 394,350
WSFS Financial 10,700 176,550
=============================================================================
1,971,910
5.05 SERVICES
ADVO Inc(a) 9,700 244,925
Copart Inc(a) 14,600 226,300
HA-LO Industries(a) 8,100 175,163
InaCom Corp(a) 7,900 103,194
InterVoice Inc(a) 8,700 95,156
Labor Ready(a) 9,000 207,563
Lason Inc(a) 4,900 314,825
Mastech Corp(a) 9,900 240,694
<PAGE>
- --------------------------------------------------------------------------------
% DESCRIPTION SHARES VALUE
- --------------------------------------------------------------------------------
META Group(a) 19,500 $ 492,375
ProBusiness Services(a) 1,000 36,125
RemedyTemp Inc Class A(a) 10,100 184,325
Sapient Corp(a) 5,300 391,538
=============================================================================
2,712,183
0.77 SPECIALTY PRINTING
Bowne & Co 26,900 413,587
=============================================================================
0.31 TELECOMMUNICATIONS -- LONG DISTANCE
Pacific Gateway Exchange(a) 5,100 168,938
=============================================================================
0.63 TEXTILE -- APPAREL MANUFACTURING
Burlington Industries(a) 50,900 337,212
=============================================================================
0.87 TEXTILE -- HOME FURNISHINGS
Springs Industries Class A 11,200 467,600
=============================================================================
0.34 TOBACCO
Universal Corp 6,100 184,906
=============================================================================
0.20 TRUCKS & PARTS
Oshkosh Truck 3,100 110,050
=============================================================================
0.39 UTILITIES WATER
E'Town Corp 5,000 207,187
=============================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $52,068,872)
(Cost for Income Tax Purposes $52,073,794) $53,718,772
=============================================================================
(a)Security is non-income producing.
See Notes to Financial Statements
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
INVESCO Small Company Value Fund
January 31, 1999
UNAUDITED
ASSETS
Investment Securities at Value (Cost $52,068,872) $ 53,718,772
Receivables:
Investment Securities Sold 846,558
Fund Shares Sold 456,596
Dividends and Interest 36,491
Prepaid Expenses and Other Assets 166,037
=============================================================================
TOTAL ASSETS 55,224,454
=============================================================================
LIABILITIES
Payables:
Custodian 778,814
Fund Shares Repurchased 95,561
Accrued Distribution Expenses 11,039
Accrued Expenses and Other Payables 20,990
=============================================================================
TOTAL LIABILITIES 906,404
=============================================================================
Net Assets at Value $ 54,318,050
=============================================================================
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
NET ASSETS
Paid-in Capital(a) $ 57,127,353
Accumulated Undistributed Net Investment Income 166,545
Accumulated Undistributed Net Realized Loss on
Investment Securities (4,625,748)
Net Appreciation of Investment Securities 1,649,900
=============================================================================
Net Assets at Value $ 54,318,050
=============================================================================
Net Asset Value, Offering and Redemption Price per Share $ 9.92
=============================================================================
(a)The Fund has 100 million authorized shares of common stock, par value of
$0.01 per share, of which 5,476,687 were outstanding at January 31, 1999.
See Notes to Financial Statements
STATEMENT OF OPERATIONS
INVESCO Small Company Value Fund
Six Months Ended January 31, 1999
UNAUDITED
INVESTMENT INCOME
INCOME
Dividends $ 434,506
Interest 38,421
=============================================================================
TOTAL INCOME 472,927
=============================================================================
EXPENSES
Investment Advisory Fees 202,459
Distribution Expenses 56,294
Transfer Agent Fees 117,657
Administrative Fees 9,049
Custodian Fees and Expenses 9,702
Directors' Fees and Expenses 5,939
Professional Fees and Expenses 12,968
Registration Fees and Expenses 29,337
Reports to Shareholders 24,353
Other Expenses 4,368
=============================================================================
TOTAL EXPENSES 472,126
Fees and Expenses Absorbed by Investment Adviser (130,831)
Fees and Expenses Paid Indirectly (3,947)
=============================================================================
NET EXPENSES 337,348
=============================================================================
NET INVESTMENT INCOME 135,579
=============================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Loss on Investment Securities (4,587,382)
Change in Net Appreciation of Investment Securities 2,905,379
=============================================================================
NET LOSS ON INVESTMENT SECURITIES (1,682,003)
=============================================================================
Net Decrease in Net Assets from Operations $ (1,546,424)
=============================================================================
See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------------------------------------
INVESCO Small Company Value Fund
Six Months Year
Ended Ended
January 31 July 31
- ----------------------------------------------------------------------------------------------------
1999 1998
UNAUDITED
<S> <C> <C>
OPERATIONS
Net Investment Income $ 135,579 $ 237,710
Net Realized Gain (Loss) on Investment Securities (4,587,382) 8,225,785
Change in Net Appreciation (Depreciation) of
Investment Securities 2,905,379 (8,104,057)
=================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS (1,546,424) 359,438
=================================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income 0 (239,736)
Net Realized Gain on Investment Securities (3,146,459) (14,101,863)
=================================================================================================
TOTAL DISTRIBUTIONS (3,146,459 ) (14,341,599)
=================================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 61,328,693 249,127,951
Reinvestment of Distributions 2,996,618 12,956,406
=================================================================================================
64,325,311 262,084,357
Amounts Paid for Repurchases of Shares (58,811,463) (253,154,064)
=================================================================================================
NET INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 5,513,848 8,930,293
=================================================================================================
Total Increase (Decrease) in Net Assets 820,965 (5,051,868)
NET ASSETS
Beginning of Period 53,497,085 58,548,953
=================================================================================================
End of Period (Including Accumulated Undistributed
Net Investment Income of $166,545 and $30,966,
respectively) $ 54,318,050 $ 53,497,085
=================================================================================================
-------------------------------------------------
FUND SHARE TRANSACTIONS
Shares Sold 6,181,490 18,287,646
Shares Issued from Reinvestment of Distributions 308,612 1,148,058
=================================================================================================
6,490,102 19,435,704
Shares Repurchased (5,869,841) (18,497,657)
=================================================================================================
Net Increase in Fund Shares 620,261 938,047
=================================================================================================
See Notes to Financial Statements
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
INVESCO Notes to Financial Statements - INVESCO Small Company
Value Fund
- --------------------------------------------------------------------------------
UNAUDITED
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO
Diversified Funds, Inc. is incorporated in Maryland and presently consists of
Small Company Value Fund (the "Fund"). The investment objective of the Fund is
to seek long-term capital growth. 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 liabilites and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
A. SECURITY VALUATION -- 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.
If market quotations or pricing service valuations are not readily
available, securities are valued at fair value as determined in good faith under
procedures established by the Fund's board of directors.
Short-term securities are stated at amortized cost (which approximates
market value) if maturity is 60 days or less at the time of purchase, or market
value if maturity is greater than 60 days.
B. REPURCHASE AGREEMENTs -- Repurchase agreements held by the Fund are
fully collateralized by U.S. Government securities and such collateral is in the
possession of the Fund's custodian. The collateral is evaluated daily to ensure
its market value exceeds the current market value of the repurchase agreements
including accrued interest. In the event of default on the obligation to
repurchase, the Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. In the event of default or
bankruptcy by the other party to the agreement, realization and/or retention of
the collateral or proceeds may be subject to legal proceedings.
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, original issue discount and amortized premium 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.
<PAGE>
To the extent future capital gains are offset by capital loss carryovers,
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.
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 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 and expired capital
loss carryforwards.
F. EXPENSES -- Under an agreement between the 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. Such credits are
included in Fees and Expenses Paid Indirectly in the Statement of Operations.
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.
A plan of distribution pursuant to Rule 12b-1 of the Act provides for
compensation of marketing and advertising expenditures to INVESCO Distributors,
Inc. ("IDI" or the "Distributor"), a wholly owned subsidiary of IFG, to a
maximum of 0.25% of annual average net assets. For the six months ended January
31, 1999, the Fund paid the Distributor $49,321 under the plan of distribution.
IFG receives a transfer agent fee at an annual rate of $20.00 per
shareholder account, or, where applicable, per participant in an omnibus
account, per year. 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.
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 and IMR have 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, 1999, the aggregate cost of purchases and proceeds from sales
of investment securities (excluding all U.S. Government securities and
short-term securities) were $34,010,984 and $31,408,474, respectively.
There were no purchases or sales of U.S. Government Securities.
<PAGE>
NOTE 4 -- APPRECIATION AND DEPRECIATION. At January 31, 1999, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $6,715,934 and the gross depreciation of securities in which there
was an excess of tax cost over value amounted to $5,070,956, resulting in net
appreciation of $1,644,978.
NOTE 5 -- TRANSACTIONS WITH AFFILIATES. Certain of the Fund's officers and
directors are also officers and directors of IFG, IDI or IMR.
The Fund has adopted an unfunded defined benefit deferred compensation 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 50% of the sum of the
retainer fee at the time of retirement plus the annual meeting fee.
Pension expenses for the six months ended January 31, 1999, included in
Directors' Fees and Expenses in the Statement of Operations were $896. Unfunded
accrued pension costs of $1,309 and pension liability of $4,726 are included in
Prepaid Expenses and Accrued Expenses, respectively, in the Statement of Assets
and Liabilities.
The independent directors have contributed to a deferred compensation plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of selected INVESCO
Funds. The deferred amounts may be invested in the shares of any of the INVESCO
or Treasurer's Series Trust Funds.
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 the Fund.
The Fund agrees to pay annual fees and interest on the unpaid principal balance
based on prevailing market rates as defined in the agreement. At January 31,
1999, there were no such borrowings.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------
INVESCO Small Company Value Fund
(For a Fund Share Outstanding Throughout Each Period)
SIX MONTHS PERIOD
ENDED ENDED
JANUARY 31 YEAR ENDED JULY 31 JULY 31
- ------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994(a)
UNAUDITED
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value -- Beginning
of Period $ 11.02 $ 14.94 $ 12.19 $ 11.77 $ 9.76 $ 10.00
===========================================================================================================================
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.02 0.06 0.09 0.08 0.05 0.06
Net Gains or (Losses) on
Securities (Both Realized
and Unrealized) (0.56) (0.30) 4.10 0.68 2.05 (0.28)
===========================================================================================================================
Total from Investment
Operations (0.54) (0.24) 4.19 0.76 2.10 (0.22)
============================================================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment
Income 0.00 0.05 0.09 0.08 0.09 0.02
Distributions from Capital Gains 0.56 3.63 1.35 0.26 0.00 0.00
===========================================================================================================================
Total Distributions 0.56 3.68 1.44 0.34 0.09 0.02
===========================================================================================================================
Net Asset Value--End
of Period $ 9.92 $ 11.02 $ 14.94 $ 12.19 $ 11.77 $ 9.76
===========================================================================================================================
TOTAL RETURN (4.75%)(b) (2.12%) 36.97% 6.47% 21.64% (2.21%)(b)
RATIOS
Net Assets -- End of Period
($000 Omitted) $ 54,318 $ 53,497 $ 58,549 $ 46,693 $ 40,071 $ 13,474
Ratio of Expenses to Average
Net Assets(c) 0.64%(b)(d) 1,26%(d) 1.25%(d) 1.09%(d) 1.00% 1.00%(e)
Ratio of Net Investment
Income to Average
Net Assets(c) 0.25%(b) 0.36% 0.75% 0.61% 0.84% 1.20%(e)
Portfolio Turnover Rate 60%(b) 132% 147% 156% 73% 55%(b)
</TABLE>
<PAGE>
(a) From December 1, 1993, commencement of investment operations, to July 31,
1994.
(b) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(c) Various expenses of the Fund were voluntarily absorbed by IFG and IMR for
the six months ended January 31, 1999, the years ended July 31, 1998, 1997,
1996 and 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 0.88% (not annualized), 1.38%, 1.35%, 1.09%, 1.32% and 1.64%
(annualized), respectively, and ratio of net investment income to average
net assets would have been 0.01% (not annualized), 0.24%, 0.65%, 0.61%,
0.52% and 0.56% (annualized), respectively.
(d) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
(e) Annualized
<PAGE>
INVESCO FAMILY OF FUNDS
Newspaper
Fund Name Fund Code Ticker Symbol Abbreviation
- --------------------------------------------------------------------------------
International
International Blue Chip 09 IIBCX ItlBlChp
International Growth 49 FSIGX IntlGr
Emerging Markets 43 * *
Asian Growth 41 IVAGX AsianGr
Pacific Basin 54 FPBSX PcBas
European 56 FEURX Europ
European Small Company 37 IVECX EuroSmCo
Latin American Growth 34 IVSLX LatinAmGr
- --------------------------------------------------------------------------------
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
Realty 42 IVSRX Realty
Technology - Class II 55 FTCHX Tech
Utilities 58 FSTUX Util
Worldwide Capital Goods 38 ISWGX WldCap
Worldwide Communications 39 ISWCX WldCom
- --------------------------------------------------------------------------------
Stock
Growth & Income 21 IVGIX Gro&Inc
Blue Chip Growth 10 FLRFX Grwth
Dynamics 20 FIDYX Dynm
Small Company Growth 60 FIEGX SmCoGth
INVESCO Endeavor 61 IVENX Endeavor
Value Equity 46 FSEQX ValEq
Small Company Value 74 IDSCX SmCoVal
S&P 500 Index Fund Class II 23 ISPIX SP500II
- --------------------------------------------------------------------------------
Combination Stock & Bond
Industrial Income 15 FIIIX IndInc
Multi-Asset Allocation 70 IMAAX MulAstAl
Total Return 48 FSFLX TotRtn
Balanced 71 IMABX Bal
- --------------------------------------------------------------------------------
Bond
Short-Term Bond 33 INIBX ShTrBd
Intermediate Government Bond 47 FIGBX IntGov
U.S. Government Securities 32 FBDGX USGvt
Select Income 30 FBDSX SelInc
High Yield 31 FHYPX HiYld
Tax-Free Intermediate Bond 36 IVTIX *
Tax-Free Long-Term Bond 35 FTIFX TxFre
- --------------------------------------------------------------------------------
Money Market
U.S. Government Money Fund 44 FUGXX InvGvtMF
Cash Reserves 25 FDSXX InvCshR
Tax-Free Money Fund 40 FFRXX InvTaxFree
*This fund does not yet meet size requirements to be assigned a newspaper
listing and/or ticker symbol.
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
YOU SHOULD
KNOW WHAT
INVESCO KNOWS(TM)
We're easy to stay in touch with:
Investor Services: 1-800-525-8085
PAL(R), your Personal Account Line: 1-800-424-8085
On the World Wide Web: www.invesco.com
In Denver, visit one of our convenient Investor Centers:
Cherry Creek, 155-B Fillmore Street
Denver Tech Center, 7800 East Union Avenue, Lobby Level
INVESCO Distributors, Inc. (SM), Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
This information must be preceded or accompanied
by a current prospectus.
