ANNUAL REPORT
April 30, 1997
INVESCO
DYNAMICS
FUND,
INC.
A Smart Choice
For Seeking Maximum
Growth Potential
INVESCO FUNDS
<PAGE>
Market Overview May 1997
Over the last six months, indications of strong growth paired with signs of
subdued inflation have turned the market into a daily tug-of-war between the
bulls and the bears. Over the first four months of 1997, this increased
volatility took the market to both unprecedented heights and to a 9.8%
correction -- a breath away from the 10% level that defines a technical
correction.
Within this environment, two distinct views about the direction of the
economy and stock market have emerged. The bulls suggest that the current
economic environment is a perfect scenario for the stock market, as low
inflation, coupled with strong economic growth, has produced rising corporate
profits. To support their analysis, they point to the strength of the Gross
Domestic Product -- increasing at a 3.9% rate in the fourth quarter of 1996 and
at a revised rate of 5.8% in the first quarter of 1997. They also look at prices
across the economy as measured by the government's broadest inflation gauge, the
Gross Domestic Product price deflator, which rose only 1.8% in 1996 -- the
smallest advance since 1964. The bulls also suggest that 15 years of corporate
restructuring, downsizing, and investing in technology have produced, and will
continue to produce, dividends for American companies.
The bears paint a different picture. They suggest that strong economic
growth combined with unusually low unemployment (the unemployment rate for 1996
was 5.3% and decreased to 4.9% in March 1997, the lowest level since 1973) has
caused tightness in the labor market. They believe this will lead to inflation
and a reduction in corporate profits, with negative consequences for the
economy. Under their scenario, the market is overvalued and the current economic
expansion is about to end.
Within this turbulent environment, the Dow Jones Industrial Average
advanced to record highs in the fourth quarter of 1996 and the first two months
of 1997. (The Dow is an unmanaged index reflecting large-capitalization stock
performance.) However, small-capitalization equities did not participate in this
up trend. In fact, many smaller-cap stock sectors experienced a rolling
correction based on concerns over potential earnings and valuation levels.
<PAGE>
INVESCO Dynamics Fund
Average Annual Total Return as of 4/30/97(1)
1 year -2.34%
-----------------------------------
5 years 15.79%
-----------------------------------
10 years 12.41%
The investment environment changed in the middle of March as increased
consumer spending reignited fears of inflation. This culminated with the Federal
Reserve Board increasing the Fed Funds Rate by 0.25% on March 25, as a
preemptive strike against inflation -- the first rate increase in more than two
years. This action increased negative sentiment in the market and produced a
sharp 5% to 10% pullback in domestic stock markets in a short time span.
Nonetheless, the market recovered from the pullback, and eventually topped the
record highs set early in the year. However, any further rate increases by the
Federal Reserve Board may have negative consequences for corporate stock prices.
In conclusion, the strength and longevity of the bull market in the 1990s
lured many investors into a false sense of security. The last days of first
quarter 1997 proved a reminder that "past performance is not a guarantee of
future performance." U.S. equity markets do not consistently move in an upward
linear trend. Instead, equity markets are usually volatile, and swings of +10%
and -10% are common in the market. For many investors, the biggest concern
should be the potential erosion of savings by inflation and taxes. This
particular problem may be mitigated through long-term investments in equities as
their returns, historically, have outpaced the negative effects produced by
inflation and taxes -- if investors stick with them through short-term
volatility.
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 Index, assuming in each case reinvestment of all
dividends and capital gain distributions, for the ten year period ended
4/30/97.
INVESCO Dynamics Fund
According to independent fund analyst Lipper Analytical Services, Dynamics
Fund ranked #19 of 77 capital appreciation funds for the five-year period ended
4/30/97. Over the 10-year period, the fund was ranked #17 of 56 funds, and for
the one-year period, #139 of 204 funds.(3)
<PAGE>
For the six-month period ended 4/30/97, INVESCO Dynamics Fund had a total
return of -6.00%, compared to the S&P 500, which had a total return of 14.71%,
and the S&P MidCap 400, which had a total return of 6.91%. (Of course, past
performance is not a guarantee of future results.)(1),(2)
The line graph on page 1 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 4/30/97. 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.(1),(2)
Strategic Summary
Despite the fund's short-term underperformance, we have stayed true to our
investment philosophy. We continue to seek long-term capital appreciation
through investments in common stocks of mid- to smaller-capitalization companies
with rapidly accelerating earnings growth. We feel this investment style will
benefit the long-term, patient investor. However, to help reduce the fund's
volatility, we have increased diversification by adding stocks and taking a less
concentrated position in all sectors.
Over 12 months ended 4/30/97, investors' nervousness about rising interest
rates and the sustainability of corporate profits caused market leadership to
narrow. In an increasingly selective market, fewer and fewer stocks participated
in the upward climb. Many high-quality growth companies experienced a
compression in their price-to-earnings ratios, as they fell out of favor with
investors. In fact, sector rotation in this environment was volatile. Typical
growth sectors -- such as technology -- had severe adjustments in stock prices.
This has created a riskier investment landscape.
However, the current environment has also provided an opportunity for the
selective investor. Sectors such as energy and technology appear poised for a
rebound. Energy prices should improve due to a limited supply and an increased
demand for energy -- especially from emerging and developing nations. Companies
like Cooper Cameron, an international designer, manufacturer, marketer, and
servicer of oil and gas equipment, and Sonat Inc., an oil and natural gas
company, should benefit from these improving fundamentals.
The technology sector also appears undervalued as many high-growth
technology companies are selling at historically low valuation levels. We are
excited about the potential of firms like Ascend Communication -- purchased in
<PAGE>
May 1997 -- a leading developer of products that connect computers across
WANs (wide area networks), and Linear Technology, a leading designer,
manufacturer, and marketer of linear circuits. Both companies appear undervalued
and have tremendous growth potential; they should benefit from the increased
need for computers in the office and the increased use of the Internet. Looking
forward, it appears that for 1997 the market may revert to its historical
averages. We anticipate that day-to-day volatility in the market may be extreme.
However, as interest rates stabilize, the premiums historically enjoyed by
faster-growing companies should return to the market. It is imperative for
shareholders to remember that our investment strategy is geared toward seeking
long-term results, and short-term price swings are likely. But, for the patient
investor, market volatility is often just the price of doing business.
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 17-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.
(3)Rankings provided by Lipper Analytical Services, an independent mutual fund
analyst, are based upon total return performance unadjusted for commissions.
<PAGE>
INVESCO Dynamics Fund, Inc.
Ten Largest Common Stock Holdings
April 30, 1997
Description Value
- -----------------------------------------------------------------
Rite Aid $20,700,000
Guidant Corp 20,475,000
Doubletree Corp 16,800,000
TJX Cos 15,242,850
Stryker Corp 14,793,750
Costco Cos 14,437,500
Wet Seal Class A 13,649,625
Oxford Health Plans 13,339,688
Compaq Computer 13,233,125
NEXTEL Communications Class A 13,187,500
Composition of holdings is subject to change.
<PAGE>
INVESCO Dynamics Fund, Inc.
Statement of Investment Securities
April 30, 1997
Shares or
Principal
Description Amount Value
- ----------------------------------------------------------------------
COMMON STOCKS 92.00%
AEROSPACE & DEFENSE 1.28%
Sundstrand Corp 200,000 $9,750,000
------------
BANKS 2.93%
SouthTrust Corp 175,000 6,540,625
State Street 100,000 7,875,000
Summit Bancorp 170,000 7,905,000
------------
22,320,625
------------
BIOTECHNOLOGY 1.32%
Gilead Sciences* 224,000 4,956,000
IDEC Pharmaceuticals* 290,000 5,147,500
------------
10,103,500
------------
CABLE 1.11%
Tele-Communications Inc -
Liberty Media Group Class A* 450,000 8,465,625
------------
COMMUNICATIONS -
EQUIPMENT & MANUFACTURING 4.29%
Cascade Communications* 225,800 7,112,700
Lucent Technologies 75,000 4,434,375
Motorola Inc 200,000 11,450,000
Nokia Corp Sponsored ADR 150,000 9,693,750
------------
32,690,825
------------
COMPUTER RELATED 10.71%
America Online* 150,000 6,768,750
Cognos Inc* 430,000 10,911,250
Compaq Computer* 155,000 13,233,125
Electronic Arts* 500,000 12,062,500
FORE Systems* 450,000 6,862,500
International Network Services* 300,000 6,150,000
<PAGE>
Microsoft Corp* 100,000 12,150,000
Oracle Systems* 100,000 3,975,000
Remedy Corp* 294,800 9,544,150
------------
81,657,275
------------
ELECTRICAL EQUIPMENT 1.48%
Linear Technology 225,000 11,306,250
------------
ELECTRONICS 0.82%
Leitch Technology 300,000 6,280,417
------------
ELECTRONICS - SEMICONDUCTOR 7.14%
Altera Corp* 250,000 12,390,625
ASM Lithography Holding NV ADR* 65,000 5,167,500
Bearer Shrs* 140,000 10,456,349
Intel Corp 80,000 12,250,000
KLA Instruments* 200,000 8,900,000
Maxim Integrated Products* 100,000 5,287,500
------------
54,451,974
------------
ENGINEERING & CONSTRUCTION 2.17%
Chicago Bridge & Iron NV* 325,000 5,525,000
Fluor Corp 200,000 11,000,000
------------
16,525,000
------------
FINANCIAL 1.02%
Northern Trust 175,000 7,787,500
------------
FOOTWEAR 1.14%
Reebok International 227,400 8,698,050
------------
GAMING 1.47%
Midway Games* 400,000 7,200,000
Mirage Resorts* 200,000 4,025,000
------------
11,225,000
------------
GOLD & PRECIOUS METALS MINING 1.68%
DeBeers Consolidated Mines
Deferred ADR 250,000 8,996,100
Getchell Gold* 100,000 3,837,500
------------
12,833,600
------------
<PAGE>
HEALTH CARE DRUGS -
PHARMACEUTICALS 3.24%
Elan PLC Sponsored ADR* 375,000 12,750,000
Pfizer Inc 50,000 4,800,000
Watson Pharmaceuticals* 200,000 7,150,000
------------
24,700,000
------------
HEALTH CARE RELATED 6.37%
Guidant Corp 300,000 20,475,000
Oxford Health Plans* 202,500 13,339,688
Stryker Corp 450,000 14,793,750
------------
48,608,438
------------
HOUSEHOLD FURNITURE &
APPLIANCES 1.40%
Philips Electronics NV
New York Shrs 200,000 10,700,000
------------
INSURANCE 3.33%
Conseco Inc 200,000 8,275,000
Equitable Iowa 150,000 7,331,250
Provident Cos 175,700 9,817,237
------------
25,423,487
------------
INVESTMENT BANK/BROKER FIRM 3.15%
Lehman Brothers Holdings 300,000 10,162,500
Paine Webber Group 300,000 10,200,000
Schwab (Charles) Corp 100,000 3,662,500
------------
24,025,000
------------
LODGING - HOTELS 2.86%
Doubletree Corp* 400,000 16,800,000
Prime Hospitality* 300,000 4,987,500
------------
21,787,500
------------
<PAGE>
METALS MINING 1.05%
Titanium Metals* 310,000 8,021,250
------------
NATURAL GAS 2.15%
Sonat Inc 175,000 9,996,875
Tejas Gas* 153,750 6,380,625
------------
16,377,500
------------
OIL & GAS RELATED 8.07%
Abacan Resource Foreign Shrs* 300,000 1,931,250
Barrett Resources* 38,200 1,251,050
Chesapeake Energy* 420,300 6,357,037
Cooper Cameron* 150,000 10,687,500
Murphy Oil 150,000 6,525,000
Nabors Industries* 500,000 9,375,000
Noble Drilling* 250,000 4,343,750
Nuevo Energy* 125,000 4,296,875
Snyder Oil 250,000 3,968,750
Triton Energy Ltd* 350,000 12,862,500
------------
61,598,712
------------
PERSONAL CARE 0.60%
Estee Lauder Class A 100,000 4,575,000
------------
POLLUTION CONTROL 0.23%
USA Waste Services* 43,000 1,408,250
United Waste Systems* 10,000 337,500
------------
1,745,750
------------
PUBLISHING 1.33%
Time Warner 225,000 10,125,000
------------
REAL ESTATE INVESTMENT TRUST 1.55%
Beacon Properties 382,600 11,812,775
------------
RETAIL 10.32%
Costco Cos* 500,000 14,437,500
Finish Line Class A 592,800 6,113,250
Rite Aid 450,000 20,700,000
TJX Cos 322,600 15,242,850
<PAGE>
Toys "R" Us* 300,000 8,550,000
Wet Seal Class A* 551,500 13,649,625
------------
78,693,225
------------
SAVINGS & LOAN 1.15%
Washington Mutual 177,000 8,739,375
------------
SERVICES 1.39%
Omnicom Group 150,000 7,950,000
TeleTech Holdings* 150,000 2,662,500
------------
10,612,500
------------
TELECOMMUNICATIONS -
CELLULAR & WIRELESS 1.73%
NEXTEL Communications Class A* 1,000,000 13,187,500
------------
TELECOMMUNICATIONS -
LONG DISTANCE 1.37%
WorldCom Inc* 435,000 10,440,000
------------
TEXTILE -
APPAREL MANUFACTURING 1.56%
Liz Claiborne 262,800 11,891,700
------------
TOBACCO 0.59%
RJR Nabisco Holdings 150,000 4,462,500
------------
TOTAL COMMON STOCKS
(Cost $684,711,445) 701,622,853
------------
SHORT-TERM INVESTMENTS -
COMMERCIAL PAPER 8.00%
AUTOMOBILES 4.42%
General Motors Acceptance
5.500%, 5/5/1997 33,680,000 33,680,000
------------
INSURANCE 3.58%
CIGNA Corp 5.450%, 5/1/1997 27,292,000 27,292,000
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $60,972,000) 60,972,000
------------
<PAGE>
TOTAL INVESTMENT
SECURITIES AT VALUE 100.00%
(Cost $745,683,445)
(Cost for Income Tax Purposes
$751,286,925) 762,594,853
============
* Security is non-income producing.
See Notes to Financial Statements
<PAGE>
INVESCO Dynamics Fund, Inc.
Statement of Assets and Liabilities
April 30, 1997
ASSETS
Investment Securities at Value
(Cost $745,683,445) ................................. $ 762,594,853
Receivables:
Investment Securities Sold .......................... 25,330,606
Fund Shares Sold .................................... 4,061,167
Dividends and Interest .............................. 378,749
Prepaid Expenses ..................................... 92,091
-------------
TOTAL ASSETS ......................................... 792,457,466
-------------
LIABILITIES
Payables:
Custodian ........................................... 227,464
Investment Securities Purchased ..................... 28,654,808
Fund Shares Repurchased ............................. 980,190
Accrued Distribution Expenses ........................ 153,027
Accrued Expenses ..................................... 46,358
-------------
TOTAL LIABILITIES .................................... 30,061,847
-------------
Net Assets at Value .................................. 762,395,619
=============
NET ASSETS
Paid-in Capital* ..................................... 713,749,397
Accumulated Undistributed Net
Investment Loss ..................................... (9,165)
Accumulated Undistributed Net Realized
Gain on Investment Securities and
Foreign Currency Transactions ....................... 31,744,567
Net Appreciation of Investment Securities
and Foreign Currency Transactions ................... 16,910,820
-------------
Net Assets at Value .................................. $ 762,395,619
=============
Net Asset Value, Offering and Redemption
Price per Share ..................................... $ 12.02
=============
* The Fund has 100 million authorized shares of common stock, par value of $0.01
per share, of which 63,412,679 were outstanding at April 30, 1997.
See Notes to Financial Statements
<PAGE>
INVESCO Dynamics Fund, Inc.
Statement of Operations
Year Ended April 30, 1997
INVESTMENT INCOME
INCOME
Dividends ............................................... $ 5,003,726
Interest ................................................ 1,943,404
Foreign Taxes Withheld ................................. (163,415)
------------
TOTAL INCOME ........................................... 6,783,715
------------
EXPENSES
Investment Advisory Fees ................................ 4,550,303
Distribution Expenses ................................... 2,013,695
Transfer Agent Fees ..................................... 1,964,970
Administrative Fees ..................................... 130,696
Custodian Fees and Expenses ............................. 216,278
Directors' Fees and Expenses ............................ 39,111
Professional Fees and Expenses .......................... 49,945
Registration Fees and Expenses .......................... 157,022
Reports to Shareholders ................................. 202,430
Other Expenses .......................................... 32,113
------------
TOTAL EXPENSES ......................................... 9,356,563
Fees and Expenses Paid Indirectly ...................... (108,700)
------------
NET EXPENSES ........................................... 9,247,863
------------
NET INVESTMENT LOSS ...................................... (2,464,148)
------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENT SECURITIES
Net Realized Gain on Investment Securities and
Foreign Currency Transactions ........................... 40,252,470
Change in Net Appreciation of Investment
Securities and Foreign Currency Transactions ............ (65,105,461)
------------
NET LOSS ON INVESTMENT SECURITIES ........................ (24,852,991)
------------
Net Decrease in Net Assets from Operations ............... (27,317,139)
============
See Notes to Financial Statements
<PAGE>
INVESCO Dynamics Fund, Inc.
Statement of Changes in Net Assets
Year Ended April 30
------------------------------
1997 1996
OPERATIONS
Net Investment Income (Loss) ... $ (2,464,148) $ 921,341
Net Realized Gain on
Investment Securities and
Foreign Currency Transactions 40,252,470 123,157,502
Change in Net Appreciation of
Investment Securities and
Foreign Currency Transactions (65,105,461) 54,919,111
--------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS ........ (27,317,139) 178,997,954
--------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income .......... 0 (923,230)
In Excess of Net Investment
Income ........................ 0 (49,570)
Net Realized Gain on
Investment Securities ......... (80,828,360) (76,317,721)
--------------------------------
TOTAL DISTRIBUTIONS ............ (80,828,360) (77,290,521)
--------------------------------
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares .. 822,575,123 702,306,362
Reinvestment of Distributions .. 78,801,267 75,476,587
--------------------------------
901,376,390 777,782,949
Amounts Paid for Repurchases
of Shares ..................... (809,251,030) (522,674,650)
--------------------------------
NET INCREASE IN NET
ASSETS FROM FUND
SHARE TRANSACTIONS ............ 92,125,360 255,108,299
--------------------------------
Total Increase (Decrease) in
Net Assets .................... (16,020,139) 356,815,732
NET ASSETS
Beginning of Period ............ 778,415,758 421,600,026
-------------------------------
End of Period (Including
Accumulated Undistributed Net
Investment Income (Loss) of
($9,165) and $430,
respectively)................. 762,395,619 778,415,758
===============================
----------------------------------------------
<PAGE>
FUND SHARE TRANSACTIONS
Shares Sold ................... 61,735,689 54,748,807
Shares Issued from Reinvestment
of Distributions ............. 6,127,628 6,109,290
--------------------------------
67,863,317 60,858,097
Shares Repurchased ............ (61,637,091) (40,733,273)
Net Increase in Fund Shares ... 6,226,226 20,124,824
=================================
See Notes to Financial Statements
<PAGE>
INVESCO Dynamics Fund, Inc.
Notes to Financial Statement
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 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.
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.
Short-term securities are stated at amortized cost (which approxi-
mates market value) if maturity is 60 days or less at the time of pur-
chase, or market value if maturity is greater than 60 days.
Assets and liabilities initially expressed in terms of foreign cur-
rencies are translated into U.S. dollars at the prevailing market rates as
quoted by one or more banks or dealers on the date of valuation. The cost
of securities is translated into U.S. dollars at the rates of exchange
prevailing when such securities are acquired. Income and expenses are
translated into U.S. dollars at the rates of exchange prevailing when
accrued.
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 securi-
ties will be recorded as soon as the Fund is informed of the dividend if
<PAGE>
such information is obtained subsequent to 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. 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.
The Fund's use of short-term forward foreign currency contracts may
subject it to certain risks as a result of unanticipated movements in
foreign exchange rates. The Fund does not hold short-term forward foreign
currency contracts for trading purposes. The Fund may hold foreign
currency in anticipation of settling foreign security transactions and not
for investment purposes.
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 suffi-
cient 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 distribu-
tions 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, 1997, 0.02%
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 distribu-
tions 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 transac-
tions, nontaxable dividends, net operating losses and expired capital
loss carryforwards. For the year ended April 30, 1997, the Fund
reclassified $4,410 from accumulated undistributed net investment income
to accumulated undistributed net realized gain on investment securities
and $2,458,963 from paid-in capital to accumulated net investment
income. Net investment income, net realized gains and net assets were
not affected.
<PAGE>
E. FORWARD FOREIGN CURRENCY CONTRACTS - The Fund enters into short-term
forward foreign currency contracts in connection with planned purchases or
sales of securities as a hedge against fluctuations in foreign exchange
rates pending the settlement of transactions in foreign securities. A
forward foreign currency contract is an agreement between contracting
parties to exchange an amount of currency at some future time at an agreed
upon rate. These contracts are marked-to-market daily and the related
appreciation or depreciation of the contracts is presented in the State-
ment of Assets and Liabilities.
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. Similarly, Transfer
Agent Fees and 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 Opera-
tions.
For the year ended April 30, 1997, Fees and Expenses Paid Indirectly
consisted of $107,790, $699 and $211 included in Custodian Fees and
Expenses, Transfer Agent Fees and Other Expenses, respectively.
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 $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.
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
<PAGE>
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, 1997, the Fund paid the Distributor $2,012,429 for reimbursement of
expenses incurred.
Effective January 1, 1997, the Rule 12b-1 distribution plan was modified by
action of the Board of Directors so that the Fund compensates IFG for
permissable activities and services in connection with the distribution of the
Fund's shares. Accordingly, the above amount reflects reimbursements under the
plan for the eight months ended December 31, 1996 and compensation under the
plan for the four months ended in April 30, 1997.
NOTE 3 - PURCHASES AND SALES OF INVESTMENT SECURITIES. For the year ended
April 30, 1997, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were $1,559,489,451 and $1,561,460,694, respectively. There were no
purchases or sales of U.S. Government securities.
NOTE 4 - APPRECIATION AND DEPRECIATION. At April 30, 1997, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $58,136,923 and the gross depreciation of securities in which there
was an excess of tax cost over value amounted to $46,828,995, resulting in net
appreciation of $11,307,928.
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 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 of
40% of the retainer fee at the time of retirement.
Pension expenses for the year ended April 30, 1997, included in Directors'
Fees and Expenses in the Statement of Operations were $9,596. Unfunded accrued
pension costs of $20,784 and pension liability of $42,122 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. At April 30, 1997, there
were no such borrowings.
<PAGE>
Other Information
UNAUDITED
On January 31, 1997, a special meeting of the shareholders of the Fund was held
at which the eleven directors identified below were elected, the selection of
Price Waterhouse LLP as independent accountants (Proposal 1), the approval of a
new investment advisory agreement with IFG, (Proposal 2) and a new sub-advisory
agreement between IFG and ITC (Proposal 3) were ratified. The following is a
report of the votes cast:
<TABLE>
<CAPTION>
Withheld/
Nominee/Proposal For Against Abstain Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Charles W. Brady ............................. 40,772,538 0 1,330,371 42,102,909
Dan J. Hesser ................................ 40,829,345 0 1,273,564 42,102,909
Fred A. Deering .............................. 40,824,334 0 1,278,575 42,102,909
Victor L. Andrews ............................ 40,772,366 0 1,330,543 42,102,909
Bob R. Baker ................................. 40,771,276 0 1,331,663 42,102,909
Lawrence H. Budner ........................... 40,777,778 0 1,325,131 42,102,909
Daniel D. Chabris ............................ 40,814,077 0 1,288,832 42,102,909
A.D. Frazier, Jr ............................. 40,823,101 0 1,279,808 42,102,909
Hubert L. Harris, Jr ......................... 40,779,693 0 1,323,216 42,102,909
Kenneth T. King .............................. 40,757,969 0 1,344,940 42,102,909
John W. McIntyre ............................. 40,778,346 0 1,324,563 42,102,909
Proposal 1 ................................... 40,206,118 824,606 1,072,185 42,102,909
Proposal 2 ................................... 39,920,582 976,783 1,205,544 42,102,909
Proposal 3 ................................... 39,834,450 1,008,220 1,260,239 42,102,909
</TABLE>
<PAGE>
INVESCO Dynamics Fund, Inc.
Financial Highlights
(For a Fund Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
Year Ended April 30
---------------------------------------------------------------------------------
1997 1996 1995 1994 1993
<S>
PER SHARE DATA
Net Asset Value - <C> <C> <C> <C> <C>
Beginning of Period ............ $ 13.61 $ 11.38 $ 10.15 $ 10.89 $ 9.57
---------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss) ......................... (0.04) 0.02 0.03 (0.02) (0.03)
Net Gains or (Losses)
on Securities
(Both Realized and
Unrealized) .................... (0.19) 3.94 1.34 1.99 1.64
----------------------------------------------------------------------------------
Total from Investment
Operations ..................... (0.23) 3.96 1.37 1.97 1.61
----------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net
Investment Income+ ............. 0.00 0.02 0.03 0.00 0.00
Distributions from
Capital Gains .................. 1.36 1.71 0.11 2.71 0.29
----------------------------------------------------------------------------------
Total Distributions ............. 1.36 1.73 0.14 2.71 0.29
----------------------------------------------------------------------------------
Net Asset Value -
End of Period .................. $ 12.02 13.61 11.38 10.15 10.89
==================================================================================
TOTAL RETURN .................... (2.34%) 36.32% 13.57% 17.86% 16.80%
RATIOS
Net Assets -
End of Period
($000 Omitted) ................. $ 762,396 778,416 421,600 287,293 231,100
Ratio of Expenses to
Average Net Assets# ............ 1.16%@ 1.14%@ 1.20% 1.17% 1.20%
<PAGE>
Ratio of Net Investment
Income (Loss) to
Average Net Assets# ............ (0.31%) 0.16% 0.33% (0.37%) (0.38%)
Portfolio Turnover
Rate ........................... 204% 196% 176% 169% 144%
Average Commission
Rate Paid^^ .................... 0.0784 -- -- -- --
</TABLE>
+ 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.
^^ The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the total
number of related shares purchased or sold which is required to be disclosed for
fiscal years beginning September 1, 1995 and thereafter.
<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, 1997, 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, 1997 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 30, 1997
<PAGE>
FAMILY OF FUNDS
Newspaper
Fund Name Fund Code Ticker Symbol Abbreviation
- -------------------------------------------------------------------------------
International
International Growth .............. 49 FSIGX IntlGr
Asian Growth ...................... 41 IVAGX AsianGr
European .......................... 56 FEURX Europ
European Small Company ............ 37 IVECX EuroSmCo
Latin American Growth ............. 34 IVSLX LatinAmGr
Pacific Basin ..................... 54 FPBSX PcBas
- -------------------------------------------------------------------------------
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 ........................ 55 FTCHX Tech
Utilities ......................... 58 FSTUX Util
Worldwide Capital Goods ........... 38 ISWGX WldCap
Worldwide Communications .......... 39 ISWCX WldCom
- -------------------------------------------------------------------------------
Capital Appreciation
Growth ............................ 10 FLRFX Grwth
Dynamics .......................... 20 FIDYX Dynm
Small Company ..................... 74 IDSCX DivSmCo
Emerging Growth ................... 60 FIEGX Emgrth
- -------------------------------------------------------------------------------
Growth & Income
Industrial Income ................. 15 FIIIX IndInc
Value Equity ...................... 46 FSEQX ValEq
Multi-Asset Allocation ............ 70 IMAAX MulAstAl
Balanced .......................... 71 IMABX Bal
Total Return ...................... 48 FSFLX TotRtn
- -------------------------------------------------------------------------------
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-Exempt
Tax-Free Intermediate Bond ........ 36 IVTIX *
Tax-Free Long-Term Bond ........... 35 FTIFX TxFre
- -------------------------------------------------------------------------------
Money Market
U.S. Government Money Fund ........ 44 FUGXX InvGvtMF
<PAGE>
Cash Reserves ..................... 25 FDSXX InvCshR
Tax-Free Money Fund ............... 40 FFRXX InvTaxFree
* This fund does not meet size requirements to be assigned a ticker symbol in
newspaper listings.
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>
EasiVest makes it easy to pay yourself first.
It seems that for most of us the hardest part of investing at regular
intervals comes down to simply writing the check, finding the stamp, and putting
it in the mail. But with INVESCO's EasiVest it's so easy that we'll do almost
all the work for you.
After you fill out the authorization and return it with a voided check, the
exact dollar amount you specify will be electronically transferred from your
bank account to your designated fund on the same day each month.
Using EasiVest is one of the few time when you'll find the easy way may also be
one of the best.
For years smart investors have used an investment strategy known as
dollar-cost averaging. It only makes sense that when prices are high an investor
will want to buy fewer shares, and when prices are low he will want to buy more.
By investing a fixed amount at regular intervals with INVESCO's EasiVest, you
can take advantage of these market fluctuations.
Over a sufficient period of time, dollar-cost averaging may make the
average price you pay per share less than the actual average price per share. So
follow the lead of successful investors and take advantage of dollar-cost
averaging with INVESCO's EasiVest.
Like other investment systems, periodic investment plans do not insure a
profit, nor do they protect against loss in a falling market. Since these plans
involve continuous investment in securities regardless of fluctuating price
levels in the market, you should consider your financial ability to continue
purchases through low price levels. Finally, be aware that you will incur a loss
under the plan if you decide to liquidate your account when the market value of
accumulated shares is less than their cost.
Just follow these simple authorization instructions and let INVESCO's
EasiVest help you build for your future.
1. Call your bank for their ABA and account numbers. Then complete the
EasiVest authorization and sign it the same way you would your personal checks.
2. Enclose an unsigned, personal check or savings deposit slip marked
"Void."
3. Place a voided check or savings deposit slip and signed authorization
form in an envelope; then mail it to us.
It's that easy to start building your mutual fund portfolio. And you can
take advantage of INVESCO's EasiVest with as little as $50 a month.
Questions? Call us at 1-800-525-8085.
Start building for your future today.
<PAGE>
EASIVEST AUTHORIZATION FOR AUTOMATIC INVESTMENTS
Before returning this Authorization, please be sure to contact your bank
for the correct ABA number and account number.
I authorize INVESCO Funds Group to transfer money from my checking or savings
account on or about the 7th or 21st (check one) day of each month for the
amounts and funds indicated below:
Fund___________________________________ Acct.#_______________________________
$__________________________ ($50 minimum) ___ 7th ___21st
- ----------------------------------------------------------------------------
Bank Name
- ----------------------------------------------------------------------------
Bank Street Address
- ----------------------------------------------------------------------------
City, State, Zip
- ----------------------------------------------------------------------------
ABA Number (available from your bank)
Bank Phone Number
___________________ This is a __ Checking Account __ Savings Account
Bank Account Number
- ----------------------------------------------------------------------------
Owner's Name (First, Middle Initial, Last)
- ----------------------------------------------------------------------------
Joint Owner's Name (First, Middle Initial, Last)
- ----------------------------------------------------------------------------
Owner Street Address
- ----------------------------------------------------------------------------
City, State, Zip
- ----------------------------------------------------------------------------
Signature Date
- ----------------------------------------------------------------------------
Signature Date
- ----------------------------------------------------------------------------
Daytime Telephone Number Evening Telephone Number
Don't forget to attach a voided check or deposit slip.
This authority is to remain in effect until I revoke it in writing and, until
INVESCO receives such notification, I agree INVESCO will be fully protected in
honoring any such electronic debit. I further agree that if any such electronic
debit is not honored, whether with cause or without cause and whether
intentionally or unintentionally, INVESCO will not be liable whatsoever. This
authorization will become a part of the fund application subject to the terms,
representations and conditions thereof.
Like other investment systems, periodic investment plans do not insure a
profit, nor do they protect against loss in a falling market. Since these plans
involve
<PAGE>
continuous investment in securities regardless of fluctuating price levels in
the market, you should consider your financial ability to continue purchases
through low price levels. Finally, be aware that you will incur a loss under the
plan if you decide to liquidate your account when the market value of
accumulated shares is less than their cost.
<PAGE>
INVESCO FUNDS
INVESCO Funds Group, Inc.,(SM) Distributor
Post Office Box 173706
Denver, CO 80217-3706
1-800-525-8085
PAL(R): 1-800-424-8085
http://www.invesco.com
If you're in Denver, visit one of our convenient Investor Centers:
Denver Tech Center,
7800 East Union Avenue, Lobby Level;
Cherry Creek, 155-B Fillmore Street, Fillmore Plaza
This information must be preceded or accompanied by a current prospectus.
