ANNUAL REPORT
April 30, 1995
INVESCO
DYNAMICS
FUND,
INC.
A Smart Choice
For Maximum
Growth Potential
INVESCO FUNDS
<PAGE>
Market Overview May 1995
March 1995 marked an important milestone -- the fourth anniversary of the
current U.S. economic expansion. Over the 12 calendar quarters ended 12/31/94,
Gross Domestic Product grew at an average rate of 3.6% (annualized real GDP
tracked quarterly, adjusted for inflation). Growth accelerated in the latter
half of 1993, and for all of 1994, the GDP advanced 4.1% -- hardly rampant, but
surprisingly vigorous for a developed market such as the U.S.
As a result, the Federal Reserve Board became increasingly concerned over
the potential of reigniting inflation. Between February 1994 and February 1995,
the Fed doubled short-term interest rates, which now stand at 6%. This
represents their attempt to strike a delicate balance _ slowing economic growth
down to a more sustainable 2.5% annual rate, while not triggering a recession.
The plan may be working. Estimated GDP for first quarter 1995 was a
moderate 2.7% -- a definite easing from the 5.1% recorded for the last three
months of 1994. If sustained, this represents the "soft landing" the Fed has
been working toward.
Since 1945, expansions have lasted an average of four and a half years.
Furthermore, according to an old rule of thumb, economists start watching for a
recession (two or more consecutive quarterly declines in the GDP) within 18 to
30 months of initial interest rate increases. By these two measures, the U.S.
economy is due to call it a night no later than mid-1996.
Looking at the previous economic cycle, however, we find a recovery
beginning in November 1982, followed by a broad but mild slow-down in the
mid-'80s. The next recession began only in July 1990, and lasted a scant nine
months. So deep recession does not inevitably follow expansion.
Obviously, it's tricky to generalize about anything as complex as economic
cycles. Still, we are clearly in the later stages of the current expansion. That
fact means different things for different market segments. And there will be
variation within each industry segment, as well.
Last year's outstanding growth in corporate earnings is not likely to be
repeated. While first quarter 1995 earnings gains were impressively robust, over
the longer haul consumer staples and basic materials, in particular, could see a
weakening in product pricing power _ a weakness that will lead to earnings
deceleration. U.S. manufacturers, on the other hand, have the potential for
continued earnings expansion; this is particularly true for firms with
significant export business, as recoveries now underway in Europe gain strength.
Volatility remains the key word. Stock performance was rotational in 1994,
and will probably remain that way _ sector swiftly replacing sector as leader or
laggard of the month
.
<PAGE>
Performance
Dynamics Fund
Average Annualized Total Return*
As of 4/30/95
1 year 13.57%
5 years 18.90%
10 years 14.87%
For the 12 months ended 4/30/95, INVESCO Dynamics Fund achieved a total
return of 13.57% compared to the following indexes: 17.38% for the Standard &
Poor's 500, 15.01% for the OTC/ NASDAQ Composite, 7.22% for the Russell 2000 and
9.77% for the S&P MidCap 400. (Of course, past performance is not a guarantee of
future results.)*
The results are consistent with the performance of growth stocks in
general in the past 12 months. During the market rally so far this year, the
largest companies and blue-chip stocks benefited more as investors sought
security in size and stability. Meanwhile, small- to medium-company growth
stocks weren't as strong.
Graph:
Dynamics Fund 10-Year Total Return
vs. S&P 500 and Russell 2000*
This line graph illustrates the value of a $10,000 investment in INVESCO
Dynamics Fund, plus reinvested dividends and capital gain distributions, for the
10-year period ended 4/30/95.
Among capital appreciation mutual funds, Dynamics was a strong performer,
finishing its fiscal year up 13.57%, while the average gain for the 141 capital
appreciation funds was 8.73%, according to independent fund analyst Lipper
Analytical Services. (Of course, past performance is no guarantee of future
results.)*
The fund's average annual total return also exceeded Lipper's category
average for the five- and 10-year periods ended 4/30/95. For the five years,
Dynamics earned an average annual total return of 18.90%, versus 11.79% for the
average capital appreciation fund. For the 10 years, Dynamics' average annual
total return was 14.87%, versus 12.15% for the average fund in this category.
(Of course, past performance is no guarantee of future results.)*
The line graph on the previous page illustrates the value of a $10,000
investment in INVESCO Dynamics Fund, plus reinvested dividends and capital gain
distributions, for the 10-year period ended 4/30/95. (Of course, past
performance is no guarantee of future results.)*
The chart and other total return figures cited reflect the fund's
operating expenses, but the indexes do not have expenses, which would, of
course, have lowered their performance.
Strategy Summary
The eight-month period from May through December 1994 was a difficult one,
but we were able to hold losses to a minimum through diversification and a focus
on companies with positive earnings. We targeted stocks that met or exceeded
consensus earnings expectations and sold them as the risk/reward potential
became unattractive.
That strategy positioned the fund to take advantage of the strong economy
and market turn going into 1995. From 1/1/95 through 4/30/95, Dynamics was up
11.43%. (Of course, past performance is not a guarantee of future results.)*
While economic stability was an important factor, overall it was a less
significant contributor to performance than the presence of companies with
growth potential not yet recognized by the market.
A large part of the fund's total return came from select investments in
technology, capital goods, industrial, and entertainment stocks. In those
sectors, we profited from identifying restructured companies with reduced costs,
which were able to deliver positive earnings surprises in the first quarter of
1995.
<PAGE>
As a risk control measure, the fund has invested in somewhat larger
companies than we would have chosen a year ago. That's because we believe the
downside risk of owning smaller companies currently is much stronger. We prefer
mid- cap companies, meaning firms with $500 million to $2 billion in market
capitalization. The median market capitalization of the companies held by the
fund was $1.8 billion as of 4/30/95. (The median is the point at which half of
the companies are valued higher and half are lower.)
In addition to the mid-cap emphasis, the choice of sectors contributed
substantially to the fund's performance as follows:
Technology. Semiconductor, computer software and computer system companies
were responsible for a large share of the fund's total return in the 12 months
ended 4/30/95. Concluding that technology stocks have seen most of their upside
for the year, we reduced the value of these holdings in the total portfolio to
about 25% from a peak of 34% six months ago. We cut back on Aspect
Telecommunications and General Instrument, and purchased Apple Computer and Avid
Technology.
Capital Goods and Industrials. In addition to computer stocks, capital
goods and certain agricultural/industrial companies were exceptional performers
in the last three months, as they reaped the benefits of years of restructuring.
The combination of lower costs and positive sales growth produced significant
earnings surprises for choices such as Pioneer Hi-Bred International, American
Freightways, Honeywell Inc., Deere & Co., and Fluor Corp.
Health Care. A year ago, we added to our exposure to health maintenance
organizations by taking positions in Humana Inc. and United Healthcare. As the
potential in health care dwindled, we sold Humana and United, and shifted focus
to medical equipment and product companies, such as Biomet Inc. and Sofamor/
Danek Group.
Other Sectors. Energy holdings are about the same portfolio weighting as a
year ago. The emphasis is on faster- growing, small- to medium-sized producers
and service companies.
Financial stocks represent about the same proportion of the portfolio as a
year ago, and are under-weighted
Graph:
Portfolio Diversification by Value
This bar graph reflects the allocation of the Dynamics Fund's portfolio by
value of net assets in Basic Materials, Capital Goods & Construction, Consumer
Cyclical, Consumer Staples, Diversified, Energy, Finance, Technology,
Transportation & Services, Utilities, and Cash & Equivalents for the periods
ending 4/94, 10/94, and 4/95.
compared to the market as a whole. Our position reflects interest-rate concerns
and a limited number of growth vehicles in this sector.
<PAGE>
Portfolio Characteristics
The average price-earnings ratio of the stocks held by the fund was 16.45
as of 4/30/95, down from 23.41 a year ago, and closer to the estimated market
average P/E ratio of 15.32, as measured by the companies of the S&P 500 Index.
The difference reflects our belief that the best price appreciation
opportunities now tend to be in companies growing at a rate of 15% to 20% a
year, as opposed to companies with higher growth rates. These companies tend to
have lower prices relative to earnings. We believe the risk inherent to some of
the highest growth-rate companies is excessive. (The price-earnings ratio is the
price of one share of stock divided by the earnings per share and is a common
measurement of investor appeal.)
In an effort to diversify investments among growing companies worldwide,
the fund is increasing somewhat its holdings of foreign securities and ADR
holdings, which now represent 13.73% of total holdings compared to about 2% a
year ago. Cash and equivalents are at 13% as of 4/30/95 and varied from 7% to
20% over the last 12 months.
Looking Ahead
The fund has harvested the gains in the technology sector and
redistributed the proceeds into a variety of opportunities, such as
industrial/agricultural, media, entertainment, and energy.
In coming months we are likely to see a slowing in the economy, but
predicting the exact moment of the shift is difficult. Dynamics Fund does not
emphasize stocks that tend to move up and down with the economy. We prefer to
look for growth situations that do well even in a recession. Our goal is to
identify the accelerating growth trends and special situations that will deliver
superior results regardless of economic conditions.
Fund Manager
INVESCO Dynamics Fund is managed by INVESCO Senior Vice President Timothy
J. Miller. He received his MBA from the University of Missouri, and a BSBA from
St. Louis University. A 16-year veteran of the investment business, he is a
Chartered Financial Analyst. Mr. Miller joined INVESCO in 1992, and took over
management of Dynamics Fund at the beginning of 1994. He also manages INVESCO
Strategic Leisure Portfolio. Mr. Miller is assisted by Amy Selner, who joined
INVESCO in 1991. She is a graduate of Creighton University, Omaha, where she
earned a BSBA in finance and marketing.
*Total return assumes reinvestment of dividends and capital gain distributions
for the periods indicated. Investment return and principal value will fluctuate
so that, when redeemed an investor's shares may be worth more or less than when
purchased. The S&P 500 is considered representative of the performance of the
broad market of common stocks. The OTC/NASDAQ Composite, as well as the S&P
MidCap 400 Index, reflect the performance of medium-capitalization stocks. The
Russell 2000 Index is a benchmark for small- to medium-cap stocks. All are
unmanaged indexes.
<PAGE>
INVESCO Dynamics Fund, Inc.
Ten Largest Common Stock Holdings
April 30,1995
Description Value
- ---------------------------------------------------------------------
Viacom Inc Class B $12,400,012
Caterpillar Inc 8,775,000
Cominco Fertilizers Ltd 8,412,392
Hilton Hotels 8,401,250
Deere & Co 8,200,000
Avid Technology 8,062,500
E-Systems Inc 7,984,375
Informix Corp 7,875,000
Disney (Walt) Co 7,752,500
General Electric 7,560,000
Composition of holdings is subject to change.
<PAGE>
INVESCO Dynamics Fund, Inc.
Statement of Investment Securities
April 30, 1995
Shares or
Principal
Description Amount Value
COMMON STOCKS 86.38%
AEROSPACE & DEFENSE 1.89%
E-Systems Inch 125,000 $ 7,984,375
-------------
AGRICULTURAL 1.25%
Pioneer Hi-Bred International 140,000 5,250,000
-------------
BROADCASTING 4.32%
CBS Inch 45,000 2,885,625
Television Broadcasts Ltd 200,000 744,284
Television Broadcasts Ltd ADR+ 575,000 2,139,862
Turner Broadcasting Class B 2,500 44,688
Viacom Inch Class B* 270,300 12,400,012
-------------
18,214,471
-------------
BUILDING & CONSTRUCTION
RELATED 1.83%
Center Construction Products* 100,000 1,250,000
Fluor Corp 125,000 6,437,500
-------------
7,687,500
-------------
CABLE TELEVISION 1.66%
British Sky Broadcasting Group PLC
Sponsored ADR* 93,000 2,232,000
Tele-Communications Inch Class A* 250,000 4,781,250
-------------
7,013,250
-------------
CHEMICALS 4.07%
Cominco Fertilizers Ltd 275,000 8,412,392
Lawter International 200,000 2,750,000
Vigoro Corp 150,000 5,981,250
-------------
17,143,642
-------------
COMPUTER LOCAL NETWORKS 2.40%
cisco Systems* 120,000 4,785,000
Madge NV* 75,000 2,062,500
Novell Inc* 150,000 3,262,500
-------------
10,110,000
-------------
<PAGE>
COMPUTER PERIPHERALS
& SUPPLIES 1.43%
Digi International* 100,000 2,225,000
Microchip Technology* 135,000 3,813,750
-------------
6,038,750
-------------
COMPUTER SERVICES 2.77%
Ceridian Corp* 150,000 5,175,000
Fiserv Inc* 129,500 3,431,750
SPS Transaction Services* 100,000 3,062,500
-------------
11,669,250
-------------
COMPUTER SOFTWARE 8.28%
Banyan Systems* 100,000 1,456,250
Computer Associates International 70,000 4,506,250
Expert Software* 10,000 147,500
Hyperion Software* 57,500 2,472,500
Informix Corp* 200,000 7,875,000
LEGENT Corp* 154,000 4,196,500
Mentor Graphics* 150,000 2,531,250
Oracle Systems* 60,000 1,830,000
SAP AG 2,400 2,482,819
Spectrum Holobyte* 155,000 2,363,750
Structural Dynamics Research* 100,000 1,212,500
Synopsys Inc* 70,000 3,797,500
-------------
34,871,819
-------------
COMPUTER SYSTEMS 1.95%
Apple Computer 100,000 3,825,000
Digital Equipment* 95,000 4,381,875
-------------
8,206,875
-------------
CONTROL INSTRUMENTS 1.07%
Elsag Bailey Process Automation NV
ADR* 175,000 4,506,250
-------------
DIVERSIFIED COMPANIES 1.79%
General Electric 135,000 7,560,000
-------------
ELECTRICAL EQUIPMENT 1.59%
General Signal 50,000 1,856,250
Honeywell Inc 125,000 4,828,125
-------------
6,684,375
-------------
ELECTRONICS 4.04%
LSI Logic* 75,000 4,996,875
Leitch Technology* 40,000 661,417
Loral Corp 125,000 5,875,000
Zebra Technologies Class A* 119,600 5,486,650
-------------
17,019,942
-------------
<PAGE>
FINANCE RELATED 1.00%
Block (H & R) Inc 100,000 4,212,500
-------------
HEALTH CARE FACILITIES 1.06%
Columbia/HCA Healthcare 75,000 3,150,000
Physician Corp of America* 26,000 464,750
Regency Health Services* 69,400 850,150
-------------
4,464,900
-------------
HOTELS 2.90%
Hilton Hotels 110,000 8,401,250
Hospitality Franchise System* 125,000 3,796,875
-------------
12,198,125
-------------
INSURANCE 0.61 %
Mid Ocean Ltd 90,000 2,576,250
-------------
MACHINERY 5.78%
Caterpillar Inc 150,000 8,775,000
Deere & Co 100,000 8,200,000
Varity Corp* 175,000 7,393,750
-------------
24,368,750
-------------
MEDICAL RELATED X 98%
Biomet Inc* 250,000 4,375,000
Caremark International 225,000 3,937,500
Safamor/Danek Group* 175,000 4,243,750
-------------
12,556,250
-------------
MEDICAL RELATED--DRUGS 1.45%
Circa Pharmaceuticals* 250,000 6,093,750
-------------
MOTION PICTURES & TELEVISION 1.91%
Avid Technology* 200,000 8,062,500
-------------
OIL & GAS RELATED 5,71%
Columbia Gas System* 100,000 2,950,000
Devon Energy 200,000 4,150,000
Petroleum Geo-Services A/S
Sponsored ADR* 200,000 5,462,500
Schlumberger Ltd 100,000 6,287,500
Tejas Gas* 75,000 3,590,625
Union Texas Petroleum Holdings 75,000 1,603,125
-------------
24,043,750
-------------
<PAGE>
PUBLISHING 1.49%
Time Warner 100,000 3,662,500
Valassis Communications* 150,000 2,625,000
-------------
6,287,500
-------------
REAL ESTATE RELATED 0.13%
Hopewell Holdings 750,000 533,016
-------------
RECREATION SERVICES 2.65%
Disney (Walt) Co 140,000 7,752,500
Gaylord Entertainment Class A 145,000 3,425,625
-------------
11,178,125
-------------
RETAIL 7.20%
AnnTaylor Stores* 143,400 3,602,925
Gymboree Corp* 175,000 4,112,500
Limited Inc 125,000 2,671,875
Melville Carp 150,000 5,362,500
Nine West Group* 125,000 4,062,500
Rite-Aid Corp 250,000 5,812,500
Williams-Sonoma Inc* 250,000 4,703,125
-------------
30,327,925
-------------
TELECOMMUNICATIONS 10.01%
Aspect Telecommunications* 75,000 3,131,250
Belden Inc 200,000 4,500,000
Cable & Wireless PLC
Sponsored ADR 150,000 2,906,250
DSC Communications* 175,000 6,475,000
Ericsson (L M) Telephone ADR
Representing Class B Shrs 100,000 6,706,250
General Instrument* 50,000 1,706,250
Nokia Corp Sponsored ADR
Representing Class A Shrs 100,000 4,100,000
Northern Telecom Ltd 150,000 5,456,250
Rogers Cantel Mobile
Communications Class B* 100,000 2,390,625
Vodafone Group PLC
Sponsored ADR 150,000 4,781,250
-------------
42,153,125
-------------
TRANSPORTATION 10.01%
American Freightways* 100,000 2,337,500
Wisconsin Central Transportation* 45,000 2,567,812
-------------
4,905,312
-------------
TOTAL COMMON STOCKS
(Cost $337,271,900) 363,922,277
-------------
<PAGE>
PREFERRED STOCKS 0.54%
COMPUTER SOFTWARE 0.54%
SAP AG, Pfd Shrs
(Cost $1,832,741) 2,300 2,279,534
-------------
SHORT-TERM INVESTMENTS --
COMMERCIAL PAPER 13.08%
DIVERSIFIED COMPANIES 1.94%
General Electric
5.850%, 5/5/1995 $8,162,000 8,162,000
-------------
FINANCE RELATED 11.14%
Ford Motor Credit
5.930%, 5/4/1995 $11,200,000 11,200,000
5.930%, 5/5/1995 $10,000,000 10,000,000
General Electric Capital
5.900%,5/2/1995 $7,564,000 7,564,000
Sears Roebuck Acceptance
5.930%, 5/3/1995 $18,162,000 18,162,000
-------------
46,926,000
-------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $55,088,000) 55,088,000
-------------
TOTAL INVESTMENT
SECURITIES AT VALUE 100.00%
(Cost $394,192,641)
(Cost for Income Tax Purposes
$394,719,338) $421,289,811
=============
* Security is non-income producing.
+ The following is a restricted security at April 30, 1995:
Value as
Acquisition Acquisition % of
Security Name Dates Cost Net Assets
- --------------------------------------------------------------------------------
Television Broadcasts 2/25/94 -
Ltd. ADR 3/21/94 $2,111,880 0.51%
========
See Notes to Financial Statements
<PAGE>
INVESCO Dynamics Fund, Inc.
Statement of Assets and Liabilities
April 30, 1995
ASSETS
Investment Securities a Value
(Cost $394,192,641) $421,289,811
Cash 16,398
Receivables
Investment Securities Sold 12,179,024
Fund Shares Sold 1,014,599
Dividends and Interest 271,271
Prepaid Expenses 58,599
---------------
TOTAL ASSETS 434,829,702
---------------
LIABILITIES
Payables:
Distributions to Shareholders 26,899
Investment Securities Purchased 12,629,445
Fund Shares Repurchased 467,736
Accrued Distribution Expenses 83,806
Accrued Expenses and Other Payables 21,790
---------------
TOTAL LIABILITES 13,229,676
---------------
Net Assets at Value $421,600,026
===============
NET ASSETS
Paid-in Capital* $369,266,633
Accumulated Undistributed
Net Investment Income 1,889
Accumulated Undistributed Net Realized
Gain on Investment Securities 25,234,334
Net Appreciation of Investment Securities 27,097,170
---------------
Net Assets at Value $421,600,026
===============
Net Asset Value, Offering and Redemption
Priced per Share $ 11.38
=======
* The Fund has 100 million authorized shares of common stock par value of $0.01
per share, of which 37,061,629 were outstanding at April 30, 1995.
See Notes to Financial Statements
<PAGE>
INVESCO Dynamics Fund, Inc.
Statement of Operations
Year Ended April 30, 1995
INVESTMENT INCOME
INCOME
Dividends $ 2,197,246
Interest 2,957,126
---------------
TOTAL INCOME 5,154,372
---------------
EXPENSES
Investment Advisory Fees 2,012,861
Distribution Expenses 841,104
Transfer Agent Fees 838,096
Administrative Fees 60,466
Custodian Fees and Expenses 32,103
Directors' Fees and Expenses 26,591
Professional Fees and Expenses 35,773
Registration Fees and Expenses 88,453
Reports to Shareholders 154,133
Other Expenses 12,125
---------------
TOTAL EXPENSES 4,101,705
---------------
Fees and Expenses Absorbed
by Investment Adviser (57,150)
---------------
NET EXPENSES 4,044,555
---------------
NET INVESTMENT INCOME 1,109,817
---------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENT SECURITIES
Net Realized Gain on Investment Securities 29,136,854
Change in Net Appreciation
of Investment Securities 15,196,055
---------------
NET GAIN ON INVESTMENT SECURITIES 44,332,909
---------------
Net Increase in Net Assets from Operations $45,442,726
===============
See Notes to Financial Statements
<PAGE>
INVESCO Dynamics Fund, Inc.
Statement of Changes in Net Assets
Year Ended April 30
--------------------------
1995 1994
OPERATIONS
Net Investment Income (Loss) $ 1,109,817 $ (1,077,797)
Net Realized Gain on
Investment Securities 29,136,854 64,705,395
Change in Net Appreciation
(Depreciation) of
Investment Securities 15,196,055 (22,704,914)
------------ -------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS 45,442,726 40,922,684
------------ -------------
DISTRIBUTIONS TO
SHAREHOLDERS
Net Investment Income (1,107,928) 0
Net Realized Gain on Investment
Securities (3,485,672) (63,542,200)
------------ -------------
TOTAL DISTRIBUTIONS (4,593,600) (63,542,200)
------------ -------------
FUND SHARE
TRANSACTIONS
Proceeds from Sale of Shares 527,496,500 565,152,853
Reinvestment of Distributions 4,474,773 61,444,073
------------ -------------
531,971,273 626,596,926
Amounts Paid for Repurchases
of Shares (438,513,747) (547,784,307)
------------ -------------
NET INCREASE IN NET
ASSETS FROM FUND
SHARE TRANSACTIONS 93,457,526 78,812,619
------------ -------------
Total Increase in Net Assets 134,306,652 56,193,103
NET ASSETS
Beginning of Period 287,293,374 231,100,271
------------ -------------
End of Period (Including
Accumulated Undistributed
Net Investment Income of
$1,889 and $0, respectively) $421,600,026 $287,293,374
============ =============
FUND SHARE
TRANSACTIONS
Shares Sold 50,821,354 44,831,215
Shares Issued from Reinvestment
of Distributions 426,507 5,811,559
------------ -------------
51,247,861 50,642,774
Shares Repurchased (42,496,240) (43,551,409)
------------ -------------
Net Increase in Fund Shares 8,751,621 7,091,365
============ =============
See Notes to Financial Statements
<PAGE>
INVESCO Dynamics Fund, Inc.
Notes to Financial Statements
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICES. INVESCO Dynamics
Fund, Inc. (the "Fund"), a Maryland Corporation, 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. Restricted securities are valued in
accordance with procedures established by the Fund's board of directors.
Short-term securities are stated at amortized cost (which
approximates market value) if maturity is 60 days or less, 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.
Restricted securities held by the Fund may not be sold except in
exempt transactions or in a public offering registered under the
Securities Act of 1933. The risk of investing in such securities is
generally greater than the risk of investing in the securities of widely
held, publicly traded companies. Lack of a secondary market and resale
restrictions may result in the inability of the Fund to sell a security at
a fair price and may substantially delay the sale of the security which
the Fund seeks to sell. In addition, these securities may exhibit greater
price volatility than securities for which secondary markets exist.
C. 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 April 30, 1995,
60.20% qualified for the dividends received deduction available to the
Fund's corporate shareholders.
<PAGE>
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 carry forwards and deferral of wash sales.
As of April 30, 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 0.60% on the first $350 million of average net assets; reduced to 0.55%
on the next $350 million of average net assets; and 0.50% of average net assets
in excess of $700 million.
In accordance with a Sub-Advisory Agreement between IFG and INVESCO Trust
Company ("ITC'), a wholly owned subsidiary of IFG, investment decisions of the
Fund are made by lTC.
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.
A plan of distribution pursuant to Rule 12b-1 of the Act provides for
reimbursement of marketing and advertising expenditures to IFG (the
"Distributor") to a maximum of 0.25% of annual average net assets. Amounts
accrued by the Fund are available to reimburse the Distributor for actual
expenditures incurred within a rolling twelve-month period. For the year ended
April 30, 1995, the Fund paid the Distributor $813,823 for reimbursement of
expenses incurred.
IFG has voluntarily agreed, in some instances, to absorb certain fees and
expenses incurred by the Fund commencing September 1,1994. NOTE 3 -- PURCHASES
AND SALES OF INVESTMENT SECURITIES. For the year ended April 30, 1995, the
aggregate cost of purchases and proceeds from sales of investment securities
(excluding all U.S. Government securities and short-term securities) were
$573,344,721 and $497,850,529, respectively.
There were no purchases or sales of U.S. Government securities.
<PAGE>
NOTE 4 -- APPRECIATION AND DEPRECIATION.
At April 30, 1995, the gross appreciation of securities in which there was
an excess of value over tax cost amounted to $35,209,328, and the gross
depreciation of securities in which there was an excess of tax cost over value
amounted to $8,638,855, resulting in net appreciation of $26,570,473.
NOTE 5 -- TRANSACTIONS WITH AFFILIATES.
Certain of the Fund's officers and directors are also officers and
directors of IFG or ITC.
The Fund has adopted an unfunded noncontributory defined benefit pension
plan covering all independent directors of the Fund who will have served as an
independent director for at least five years at the time of retirement Benefits
under this plan are based on an annual rate equal to 25% of the retainer fee at
the time of retirement Pension expenses for the year ended April 30, 1995,
included in Directors' Fees and Expenses in the Statement of Operations were
$6,533. Prepaid pension costs of $12,813 and accrued pension liability of
$19,346 are included in prepaid expenses and accrued expenses, respectively, in
the Statement of Assets and Liabilities.
<PAGE>
INVESCO Dynamics Fund, Inc.
Financial Highlights
(For a Fund Share Outstanding throughout Each Period)
<TABLE>
Year Ended April 30
<CAPTION>
<S> <C> <C> <C> <C> <C>
----------------------------------------------------------
1995 1994 1993 1992 1991
PER SHARE DATA
Net Asset Value -- Beginning of Period $10.15 $10.89 $ 9.57 $ 8.50 $7.39
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.03 (0.02) (0.03) (0.02) 0.05
Net Gain on Securities
(Both Realized and Unrealized) 1.34 1.99 1.64 2.05 1.64
---------- ---------- ---------- ---------- ----------
Total from Investment Operations 1.37 1.97 1.61 2.03 1.69
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.03 0.00 0.00 0.00 0.05
Distributions from Capital Gains 0.11 2.71 0.29 0.96 0.53
---------- ---------- ---------- ---------- ----------
Total Distributions 0.14 2.71 0.29 0.96 0.58
---------- ---------- ---------- ---------- ----------
Net Asset Value -- End of Period $11.38 $10.15 $10.89 $9.57 $8.50
========== ========== ========== ========== ==========
TOTAL RETURN 13.57% 17.86% 16.80% 23.47% 23.11%
RATIOS
Net Assets -- End of Period ($000 Omitted) $421,600 $287,293 $231,100 $153,956 $100,860
Ratio of Expenses to Average Net Assets# 1.20% 1.17% 1.20% 1.18% 1.15%
Ratio of Net Investment Income (Loss)
to Average Net Assets# 0.33% (0.37%) (0.38%) (0.17%) 0.59%
Portfolio Turnover Rate 176% 169% 144% 174% 243%
<FN>
# Various expenses of the Fund were voluntarily absorbed by IFG for the year
ended April 30, 1995. If such expenses had not been voluntarily absorbed, ratio
of expenses to average net assets would have been 1.22% and ratio of net
investment income to average net assets would have been 0.31%.
</FN>
</TABLE>
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of
INVESCO Dynamics Fund, Inc.
In our opinion, the accompanying statements 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 Dynamics Fund, Inc. (the
"Fund") at April 30, 1995, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the period
then ended, 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 April
30, 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
May 24, 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, your 24-hour Personal Account Line, call:
1-800-4248085
Or write to:
INVESCO Funds Croup, Inc., Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
This information must be preceded or accompanied by an effective prospectus
