ANNUAL REPORT
April 30, 1996
INVESCO
DYNAMICS
FUND,
INC.
A Smart Choice
For Maximum
Growth Potential
INVESCO FUNDS
<PAGE>
Economic Overview May 1996
The U.S. economy is sending mixed signals. In recent months, inflation
accelerated modestly and the U.S. trade deficit remained high. On the positive
side, figures for factory orders, inventories, and consumer confidence were
encouraging. Gains have also been seen for employment and personal income.
Overall, this mix of good and bad news has brightened the outlook for
gentle rises in Gross Domestic Product. First quarter GDP was estimated at an
annualized 2.8%.
The Federal Reserve Board is currently standing pat, and we do not
anticipate short-term rate changes during the next few months. The Fed is likely
to act, though, if the economy appears to falter -- GDP growth rate dropping
below 1%, for instance.
Taking all of the above and additional factors into account, the INVESCO
forecast remains consistent with our message for the past several months: The
soft landing for the economy appears intact.
This may well mean moderate inflation and long-term gains for stocks and
bonds, with short-term volatility. Political complications, the on-going budget
conflict, and major corporate earnings disappointments would, however, put
strain on the bull's legs.
While the stock market was extremely volatile during the first four months
of 1996, a number of sectors performed strongly. Of particular note were energy,
consumer cyclicals (including the previously weak retail sector), and basic
materials. Results for technology and transportation companies were mixed, while
health-care stocks generally underperformed.
/s/ R. Dalton Sim
- ----------------------
Dalton Sim
President & CEO, INVESCO Trust Company
Chief Investment Officer, INVESCO Funds
Performance
For the 12 months ended 4/30/96, INVESCO Dynamics Fund achieved a total
return of 36.32%, outperforming both the S&P 500, which had a total return of
30.10%, and the S&P MidCap 400, which had a total return of 29.80%.(1,2)
According to independent fund analyst Lipper Analytical Services, Dynamics
Fund ranked among the top ten capital appreciation funds for the five- and
10-year periods ended 4/30/96. (The fund was #10 of 82 funds for the 5-year
period, and #10 of 49 for the 10-year. For the one-year period, the fund was
ranked #54 of 163 funds. Of course, past performance is not a guarantee of
future results.)(3)
<PAGE>
Dynamics Fund
Average Annualized Total Return
as of 4/30/96(1)
1 year 36.32%
-----------------------------------
5 years 21.35%
-----------------------------------
10 years 14.90%
-----------------------------------
The line graph illustrates the value of a $10,000 investment in INVESCO
Dynamics Fund, plus reinvested dividends and capital gain distributions, for the
ten-year period ended 4/30/96. 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.(1,2)
Dynamics Fund 10-Year Total Return
vs. Russell 2000 and S&P 500 (1,2)
Graph:
This line graph represents a comparison of the value of a $10,000
investment in the INVESCO Dynamics Fund to the value of a $10,000
investment in the S&P 500 and Russell 2000 Indexes, assuming in each case
reinvestment of all dividends and capital gain distributions, for the ten
year period ended 4/30/96.
Strategic Summary
Dynamics Fund has benefited from the environment of moderate economic
growth and broadly rising stock prices prevalent over the past 12 months.
Particularly during the second half of 1995, growth stocks outperformed
value-oriented equities.
The fund's core investments are primarily classic growth stocks in
technology, health care, and consumer growth. These high quality companies
include Oracle Corp, Microsoft Corp, Cisco Systems, Disney (Walt) Co and Oxford
Health Plans. Over the past year, we have cut back substantially on technology,
which has proved a mine field for many investors. Our own investment in
Tektronix Inc fell victim to disappointing reports on earnings and orders.
However, the long-term outlook for technology stocks remains strong, and
we expect to selectively build up our holdings in this sector, taking advantage
of the temporary downturn to increase our present 15% weighting on a relatively
inexpensive basis. Avoiding hardware and semiconductors, we are instead
concentrating on software, as well as network equipment and services.
<PAGE>
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, Energy, Finance, Technology,
Transportation & Services, Utilities, and Cash & Equivalents for the
periods ending 4/95, 10/95, and 4/96.
Health care stocks have also contributed substantially to the fund's
positive returns. Large international pharmaceutical companies have done well.
(Shareholders should note that we generally hold foreign stocks only when we
find companies in desirable industries with more attractive valuations than are
available domestically; only 20.78% of the fund was invested abroad as of
4/30/96.) Companies in other health care industries have also outperformed --
for example, Oxford Health Plans.
Also within the area of consumer staples, we have built up a group of
supermarkets with accelerating earnings, including Vons Cos and Safeway Inc.
Like our holdings in retailers described below, these companies are
well-positioned to benefit from the on-going economic resurgence of California.
Stock prices for retailers such as Dayton Hudson and May Department Stores
have advanced in recent months; the market has recognized these companies for
stronger sales, consolidation, and management moves to close unprofitable
stores. Gap Inc, for instance, has succeeded in diversifying into children's
wear and other areas, broadening their customer base. We expect potential
positive earnings surprises here through the end of the year.
Casinos are once again raising our interest. We are focusing on growth in
Atlantic City, which is not as crowded a market as Las Vegas. Trump Hotels &
Casino Resorts and Harrah's Entertainment are current picks in this area.
Our strategy of enhanced diversification has led to a weighting of about
14% in energy companies with faster-growing earnings and/or revenues. We
particularly like smaller exploration and production companies. United Meridian
and numerous others have benefited from advances in exploration, which increases
their odds (and lowers their cost) of identifying promising wells. For smaller
and medium-sized companies, the impact on stock prices of a successful "hit" is
very strong. In addition, the macro-environment for energy stocks has improved,
based on the severe winter and historically low inventories.
In an "outer ring" from these core investments lie shorter-term (18-24
months) holdings. These are more cyclical-growth, thematic plays in areas such
as agriculture. In the short-term, seed, fertilizer and machinery stocks have
underperformed due to the unusually late planting season, but in our estimation,
numerous positive factors -- commodity inflation, planting intentions, and
rising demand for exports to China and other countries -- should lead to a
substantial rebound for these companies.
<PAGE>
Fund Management
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.
Before joining INVESCO in 1992, Tim was an analyst and portfolio
manager with Mississippi Valley Advisors.
(1) 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.
(2) The S&P 500 is an unmanaged index considered representative of
the performance of the broad U.S. stock market. The S&P MidCap
400 is an unmanaged index indicative of domestic
mid-capitalization stock prices. The Russell 2000 is an
unmanaged index of smaller-cap stocks.
(3) Rankings provided by Lipper Analytical Services, an
independent fund analyst, are based upon total return
performance unadjusted for commissions.
<PAGE>
INVESCO Dynamics Fund, Inc.
Ten Largest Common Stock Holdings
April 30, 1996
Description Value
- ------------------------------------------------------------------------
Safeway Inc $19,294,875
Agrium Inc 16,836,638
McDonald's Corp 16,756,250
Dayton Hudson 16,712,500
Conrail Inc 15,693,750
Heineken NV 15,674,003
May Department Stores 15,300,000
Corporate Express 14,950,000
United Meridian 14,725,000
Computer Associates International 14,675,000
Composition of holdings is subject to change.
<PAGE>
INVESCO Dynamics Fund, Inc.
Statement of Investment Securities
April 30, 1996
- ------------------------------------------------------------------------------
Country Shares or
Code if Principal
Description Non US Amount Value
- ------------------------------------------------------------------------------
COMMON STOCKS 90.88%
AEROSPACE & DEFENSE 2.73%
Northrop Grumman 129,500 $8,012,813
Sundstrand Corp 375,000 13,781,250
------------
21,794,063
------------
AGRICULTURAL 0.70%
Pioneer Hi-Bred International 100,000 5,575,000
------------
AUDIO/VIDEO RELATED 0.66%
Granada Group PLC UK 425,000 5,255,101
------------
BANKING 0.56%
HSBC Holdings PLC UK 300,000 4,479,344
------------
BIOTECHNOLOGY 0.38%
Mycogen Corp* 177,500 3,061,875
------------
BROADCASTING 2.15%
Central European Media
Enterprises Ltd Class A* BD 150,000 4,293,750
Television Broadcasts Ltd HK 200,000 801,499
Television Broadcasts Ltd ADR^ HK 325,000 1,302,470
Turner Broadcasting Systems
Class B 400,000 10,800,000
------------
17,197,719
------------
CABLE TELEVISION 5.56%
CableVision Systems Class A* 100,000 4,987,500
Comcast UK Cable Partners Ltd
Class A* UK 450,000 5,962,500
Cox Communications Class A* 250,000 5,125,000
General Cable PLC Sponsored ADR* UK 350,000 5,162,500
Tele-Communications Inc -
Liberty Media Group Series A* 500,000 13,687,500
Videotron Holdings PLC
Sponsored ADR* UK 500,000 9,500,000
------------
44,425,000
------------
<PAGE>
CHEMICALS 4.58%
Agrium Inc CA 1,307,700 16,836,638
IMC Global 200,000 7,375,000
Potash Corp Saskatchewan CA 175,000 12,337,500
------------
36,549,138
------------
COMMERCIAL SERVICES 0.19%
SOS Staffing Services* 55,000 708,125
Western Staff Services* 50,000 793,750
------------
1,501,875
------------
COMPUTER LOCAL NETWORKS 0.65%
Cisco Systems* 100,000 5,187,500
------------
COMPUTER SOFTWARE 4.34%
Cognos Inc* CA 100,000 6,775,000
Computer Associates International 200,000 14,675,000
Hyperion Software* 200,000 2,500,000
Microsoft Corp* 50,000 5,668,750
Oracle Corp* 150,000 5,062,500
------------
34,681,250
------------
COMPUTER SYSTEMS 1.87%
Casino Data Systems* 480,700 8,532,425
Discreet Logic* CA 383,100 6,369,037
------------
14,901,462
------------
DIVERSIFIED COMPANIES 1.68%
Brambles Industries Ltd AS 250,000 3,430,234
Brierley Investments Ltd NZ 1,000,000 943,560
CITIC Pacific Ltd HK 750,000 2,947,448
Kansas City Southern Industries 125,000 6,062,500
------------
13,383,742
------------
ELECTRICAL EQUIPMENT 0.82%
Honeywell Inc 125,000 6,578,125
------------
ELECTRONICS 3.46%
Analog Devices* 200,000 5,150,000
LSI Logic* 200,000 7,200,000
Leitch Technology* CA 275,000 7,322,127
Tektronix Inc 200,000 7,925,000
------------
27,597,127
------------
FOOD PRODUCTS & BEVERAGES 1.96%
Heineken NV NL 75,000 15,674,003
------------
<PAGE>
HEALTH CARE RELATED 2.05%
Inphynet Medical Management* 200,000 3,750,000
Oxford Health Plans* 250,000 12,625,000
------------
16,375,000
------------
MACHINERY 2.89%
Deere & Co 325,000 12,634,375
Foster Wheeler 225,000 10,406,250
------------
23,040,625
------------
MEDICAL RELATED - DRUGS 3.76%
Astra AB Series B Shrs SW 310,000 13,659,078
Glaxo Wellcome PLC Sponsored ADR UK 500,000 12,062,500
Takeda Chemical Industries JA 250,000 4,319,565
------------
30,041,143
------------
MINING 2.78%
Barrick Gold CA 150,000 4,593,750
FirstMiss Gold* 100,000 3,075,000
Newmont Mining 200,000 11,575,000
Santa Fe Pacific Gold 200,000 2,975,000
------------
22,218,750
------------
MOTION PICTURES & TELEVISION 0.46%
Disney (Walt) Co 60,000 3,720,000
------------
OFFICE EQUIPMENT 1.87%
Corporate Express* 400,000 14,950,000
------------
OIL & GAS RELATED 14.17%
Abacan Resource Foreign Shrs* CA 500,000 2,781,250
Anadarko Petroleum 90,000 5,242,500
Baker Hughes 250,000 7,937,500
Enron Oil & Gas 10,100 267,650
ENSCO International* 250,000 7,500,000
Noble Affiliates 130,500 4,583,812
Nuevo Energy* 250,000 7,062,500
Petroleum Geo-Services A/S
Sponsored ADR* NO 250,000 7,906,250
Smith International* 400,000 11,900,000
Sonat Inc 250,000 10,906,250
Tejas Gas* 82,500 4,125,000
TransTexas Gas* 416,800 4,220,100
USX-Marathon Group 350,000 7,700,000
Union Pacific Resources Group 300,000 8,250,000
United Meridian* 475,000 14,725,000
Unocal Corp 250,000 8,031,250
------------
113,139,062
------------
<PAGE>
REAL ESTATE RELATED 0.17%
Filinvest Development*^ RP 1,500,000 1,318,797
------------
RECREATION PRODUCTS & SERVICES 4.73%
Ascent Entertainment Group* 250,000 4,562,500
Gaylord Entertainment Class A 207,250 5,492,125
Harrah's Entertainment* 350,000 12,075,000
Scientific Games Holdings* 248,200 8,128,550
Trump Hotels & Casino Resorts* 231,800 7,504,525
------------
37,762,700
------------
RETAIL 17.68%
American Stores 400,000 13,350,000
Dayton Hudson 175,000 16,712,500
Dillard Department Stores Class A 150,000 6,018,750
Gap Inc 400,000 12,050,000
May Department Stores 300,000 15,300,000
McDonald's Corp 350,000 16,756,250
Nordstrom Inc 200,000 10,175,000
Price/Costco Inc* 500,000 9,500,000
Rite Aid 350,000 10,368,750
Safeway Inc* 571,700 19,294,875
Vons Cos* 365,000 11,680,000
------------
141,206,125
------------
TELECOMMUNICATIONS 4.71%
Digicall Group Ltd* AS 1,000,000 809,889
General Instrument* 150,000 4,912,500
International CableTel* 290,000 8,482,500
Lucent Technologies* 49,900 1,752,737
MFS Communications* 150,600 5,223,937
Newbridge Networks* CA 100,000 6,437,500
PanAmSat Corp* 300,000 9,975,000
------------
37,594,063
------------
TRANSPORTATION 3.32%
Conrail Inc 225,000 15,693,750
Illinois Central Series A 150,000 4,500,000
Wisconsin Central Transportation* 75,000 6,337,500
------------
26,531,250
------------
TOTAL COMMON STOCKS
(Cost $643,988,696) 725,739,839
------------
PREFERRED STOCKS 0.33%
FOOD PRODUCTS & BEVERAGES 0.33%
Quilmes Industrial Quinsa SA
ADR Representing Non-Voting
Pfd Shrs* (Cost $2,406,000) LU 225,000 2,671,875
------------
<PAGE>
SHORT-TERM INVESTMENTS -
COMMERCIAL PAPER 8.79%
FINANCE RELATED 7.61%
Associates Corp of North America
5.340%, 5/1/1996 38,592,000 38,592,000
Chevron Oil Finance
5.210%, 5/2/1996 22,188,000 22,188,000
------------
60,780,000
------------
INSURANCE 1.18%
American General
5.270%, 5/1/1996 9,400,000 9,400,000
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $70,180,000) 70,180,000
------------
TOTAL INVESTMENT SECURITIES AT VALUE 100.00%
(Cost $716,574,696)
(Cost for Income Tax Purposes
$716,587,096) $798,591,714
============
* Security is non-income producing.
^ The following are restricted securities at April 30, 1996:
Value as
Acquisition Acquisition % of
Description Date(s) Cost Net Assets
- ------------------------------------------------------------------------------
Filinvest Development 10/4/95 $1,514,684 0.17%
Television Broadcasts
2/25/94 - Ltd ADR 3/21/94 1,161,825 0.17
------------
0.34%
============
<PAGE>
Summary of Investments by Country
% of
Country Investment
Country Code Securities Value
- ------------------------------------------------------------------------------
Australia AS 0.53% $4,240,123
Bermuda BD 0.54 4,293,750
Canada CA 7.95 63,452,802
Hong Kong HK 0.63 5,051,417
Japan JA 0.54 4,319,565
Luxembourg LU 0.33 2,671,875
Netherlands NL 1.96 15,674,003
New Zealand NZ 0.12 943,560
Norway NO 0.99 7,906,250
Philippines RP 0.17 1,318,797
Sweden SW 1.71 13,659,078
United Kingdom UK 5.31 42,421,945
United States US 79.22 632,638,549
----------------------
100.00% $798,591,714
======================
See Notes to Financial Statements
<PAGE>
INVESCO Dynamics Fund, Inc.
Statement of Assets and Liabilities
April 30, 1996
ASSETS
Investment Securities at Value
(Cost $716,574,696) $798,591,714
Cash 82,400
Receivables:
Investment Securities Sold 9,340,418
Fund Shares Sold 2,741,862
Dividends and Interest 663,622
Prepaid Expenses and Other Assets 46,649
------------
TOTAL ASSETS 811,466,665
------------
LIABILITIES
Payables:
Distributions to Shareholders 25,484
Investment Securities Purchased 29,819,539
Fund Shares Repurchased 3,021,678
Accrued Distribution Expenses 151,761
Accrued Expenses and Other Payables 32,445
------------
TOTAL LIABILITIES 33,050,907
------------
Net Assets at Value $778,415,758
============
NET ASSETS
Paid-in Capital* $624,083,000
Accumulated Undistributed
Net Investment Income 430
Accumulated Undistributed Net Realized
Gain on Investment Securities and
Foreign Currency Transactions 72,316,047
Net Appreciation of Investment Securities
and Foreign Currency Transactions 82,016,281
------------
Net Assets at Value $778,415,758
============
Net Asset Value, Offering and Redemption
Price per Share $13.61
============
* The Fund has 100 million authorized shares of common stock, par value of $0.01
per share, of which 57,186,453 were outstanding at April 30, 1996.
See Notes to Financial Statements
<PAGE>
INVESCO Dynamics Fund, Inc.
Statement of Operations
Year Ended April 30, 1996
INVESTMENT INCOME
INCOME
Dividends $4,425,369
Interest 3,146,635
Foreign Taxes Withheld (112,579)
------------
TOTAL INCOME 7,459,425
------------
EXPENSES
Investment Advisory Fees 3,382,286
Distribution Expenses 1,458,479
Transfer Agent Fees 1,108,321
Administrative Fees 97,509
Custodian Fees and Expenses 195,121
Directors' Fees and Expenses 34,743
Professional Fees and Expenses 46,108
Registration Fees And Expenses 107,157
Reports to Shareholders 171,237
Other Expenses 34,844
------------
TOTAL EXPENSES 6,635,805
Fees and Expenses Paid Indirectly (97,721)
------------
NET EXPENSES 6,538,084
------------
NET INVESTMENT INCOME 921,341
------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENT SECURITIES
Net Realized Gain on Investment Securities and
Foreign Currency Transactions 123,157,502
Change in Net Appreciation of Investment
Securities and Foreign Currency Transactions 54,919,111
------------
NET GAIN ON INVESTMENT SECURITIES 178,076,613
------------
Net Increase in Net Assets from Operations $178,997,954
============
See Notes to Financial Statements
<PAGE>
INVESCO Dynamics Fund, Inc.
Statement of Changes in Net Assets
Year Ended April 30
------------ ------------
1996 1995
OPERATIONS
Net Investment Income $921,341 $1,109,817
Net Realized Gain on
Investment Securities and
Foreign Currency Transactions 123,157,502 29,136,854
Change in Net Appreciation
of Investment Securities and
Foreign Currency Transactions 54,919,111 15,196,055
------------ ------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS 178,997,954 45,442,726
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (923,230) (1,107,928)
In Excess of Net Investment Income (49,570) 0
Net Realized Gain on
Investment Securities (76,317,721) (3,485,672)
------------ ------------
TOTAL DISTRIBUTIONS (77,290,521) (4,593,600)
------------ ------------
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 702,306,362 527,496,500
Reinvestment of Distributions 75,476,587 4,474,773
------------ ------------
777,782,949 531,971,273
Amounts Paid for Repurchases
of Shares (522,674,650) (438,513,747)
------------ ------------
NET INCREASE IN NET
ASSETS FROM FUND
SHARE TRANSACTIONS 255,108,299 93,457,526
------------ ------------
Total Increase in Net Assets 356,815,732 134,306,652
NET ASSETS
Beginning of Period 421,600,026 287,293,374
------------ ------------
End of Period (Including
Accumulated Undistributed
Net Investment Income
of $430 and $1,889, respectively) $778,415,758 $421,600,026
============ ============
FUND SHARE TRANSACTIONS
Shares Sold 54,748,807 50,821,354
Shares Issued from Reinvestment
of Distributions 6,109,290 426,507
------------ ------------
60,858,097 51,247,861
Shares Repurchased (40,733,273) (42,496,240)
------------ ------------
Net Increase in Fund Shares 20,124,824 8,751,621
============ ============
See Notes to Financial Statements
<PAGE>
INVESCO Dynamics Fund, Inc.
Notes to Financial Statements
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Dynamics
Fund, Inc. (the "Fund"), was incorporated in Maryland. The investment objective
of the Fund is to seek appreciation of capital. 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 liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues 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.
Foreign securities are valued at the closing price on the principal
stock exchange on which they are traded. In the event that closing prices
are not available for foreign securities, prices will be obtained from the
principal stock exchange at or prior to the close of the New York Stock
Exchange. Foreign currency exchange rates are determined daily prior to
the close of the New York Stock Exchange.
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 at the time of
purchase, or 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. Certain dividends from foreign
securities will be recorded as soon as the Fund is informed of the
dividend if such information is obtained subsequent to 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.
<PAGE>
The Fund may have elements of risk due to concentrated investments
in foreign issuers located in a specific country. Such concentrations may
subject the Fund to additional risks resulting from future political or
economic conditions and/or possible impositions of adverse foreign
governmental laws or currency exchange restrictions. Net realized and
unrealized gain or loss from investments includes fluctuations from
currency exchange rates and fluctuations in market value.
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, 1996,
1.66% qualified for the dividends received deduction available to the
Fund's corporate shareholders.
Investment income received from foreign sources may be subject to
foreign withholding taxes. Dividend and interest income is shown gross of
foreign withholding taxes in the accompanying financial statements.
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 foreign currency transactions, nontaxable
dividends, net operating losses and expired capital loss carryforwards.
For the year ended April 30, 1996, the Fund reclassified $50,000 from
accumulated undistributed net realized gain on investment securities to
accumulated undistributed net investment income, and reclassified
$291,932, from paid-in capital to accumulated undistributed net realized
gain on investment securities.
<PAGE>
E. 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. Similarly, Other
Expenses, which include Pricing Expenses, are reduced by credits earned
by the Fund from security brokerage transactions under certain
broker/service arrangements with third parties. Such credits are included
in Fees and Expenses Paid Indirectly in the Statement of Operations.
For the year ended April 30, 1996, Fees and Expenses Paid Indirectly
consisted of $95,183 included in Custodian Fees and Expenses and $2,538
included in Other Expenses.
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% on 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 ITC. 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. As of May 1, 1996, the
transfer agent fee became $20.00 per shareholder account, or per participant in
an omnibus account, per year, computed in a manner similar to the previous fee.
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 average annual 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, 1996, the Fund paid the Distributor $1,390,524 for reimbursement of
expenses incurred.
NOTE 3 - PURCHASES AND SALES OF INVESTMENT SECURITIES. For the year ended April
30, 1996, the aggregate cost of purchases and proceeds from sales of investment
securities (excluding all U.S. Government securities and short-term securities)
were $1,227,968,507 and $1,043,836,221, respectively.
There were no purchases or sales of U.S. Government securities.
<PAGE>
NOTE 4 - APPRECIATION AND DEPRECIATION. At April 30, 1996, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $96,449,934 and the gross depreciation of securities in which there
was an excess of tax cost over value amounted to $14,445,316, resulting in net
appreciation of $82,004,618.
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. As of July 1, 1996, benefits will be based on an annual
rate of 40% of the retainer fee at the time of retirement.
Pension expenses for the year ended April 30, 1996, included in Directors'
Fees and Expenses in the Statement of Operations were $5,209. Unfunded accrued
pension costs of $8,454 and pension liability of $20,196 are included in Prepaid
Expenses and Accrued Expenses, respectively, in the Statement of Assets and
Liabilities.
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 5% 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. For the year ended April
30, 1996, there were no such borrowings.
<PAGE>
INVESCO Dynamics Fund, Inc.
Financial Highlights
(For a Fund Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
Year Ended April 30
--------------------------------------------------------
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value - Beginning of Period $11.38 $10.15 $10.89 $9.57 $8.50
--------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.02 0.03 (0.02) (0.03) (0.02)
Net Gains on Securities
(Both Realized and Unrealized) 3.94 1.34 1.99 1.64 2.05
--------------------------------------------------------
Total from Investment Operations 3.96 1.37 1.97 1.61 2.03
--------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income+ 0.02 0.03 0.00 0.00 0.00
Distributions from Capital Gains 1.71 0.11 2.71 0.29 0.96
--------------------------------------------------------
Total Distributions 1.73 0.14 2.71 0.29 0.96
--------------------------------------------------------
Net Asset Value - End of Period $13.61 $11.38 $10.15 $10.89 $9.57
========================================================
TOTAL RETURN 36.32% 13.57% 17.86% 16.80% 23.47%
RATIOS
Net Assets - End of Period ($000 Omitted) $778,416 $421,600 $287,293 $231,100 $153,956
Ratio of Expenses to Average Net Assets# 1.14%@ 1.20% 1.17% 1.20% 1.18%
Ratio of Net Investment Income (Loss)
to Average Net Assets# 0.16% 0.33% (0.37%) (0.38%) (0.17%)
Portfolio Turnover Rate 196% 176% 169% 144% 174%
<FN>
+ Distributions in excess of net investment income for the year ended April 30,
1996, aggregated less than $0.01 on a per share basis.
# 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%.
@ Ratio is based on Total Expenses of the Fund, which is before any expense
offset arrangements.
</FN>
</TABLE>
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of
INVESCO Dynamics Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investment securities, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of INVESCO Dynamics Fund, Inc. (the
"Fund") at April 30, 1996, 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, 1996 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 17, 1996
<PAGE>
INVESCO FUNDS
To receive general information and prospectuses
on any of INVESCO's funds or retirement plans,
or to obtain current account or price information,
call toll-free:
1-800-525-8085
To reach PAL(R), your 24-hour Personal
Account Line call: 1-800-424-8085
Or write to:
INVESCO Funds Group, Inc.,(SM) Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
If you're in Denver, please visit one of our
convenient Investor Centers:
Cherry Creek, 155-B Fillmore Street;
Denver Tech Center
7800 East Union Avenue, Lobby Level
This information must be preceded or accompanied by an effective prospectus.
