SEMIANNUAL REPORT
October 31, 1997
INVESCO
DYNAMICS
FUND
A smart Choice for Seeking
Maximum Growth Potential
INVESCO FUNDS
<PAGE>
Market Overview November 1997
Despite some volatility, this has been a gratifying year for stock
investors. Broad market averages are approaching a third year of double-digit
returns, consumer confidence is running at historically high levels, the economy
has been expanding for 79 months, inflation measured at the consumer level is
non-existent, and interest rates remain low. Within this near-perfect economic
environment, corporate earnings have thrived, as downsizing and corporate
restructuring -- along with improved worker productivity -- helped make U.S.
companies the most efficient in the world. In fact, the S&P 500 Index operating
earnings have increased at a double-digit rate for an unprecedented fifth
consecutive year.(1)
With all the good news about the economy, financial markets have produced
euphoric results over the last 12 months. These strong returns, however, were
accompanied by increased volatility. In the early spring, fears of inflation and
an overheating economy caused the Federal Reserve Broad to increase short-term
interest rates by 25 basis points -- producing a sharp pullback in the equity
markets. In August, renewed inflation fears as well as concerns about corporate
earnings again dampened investors' returns. In both cases, the markets quickly
recovered and continued their upward trend.
However, in the fall, U.S. equity markets experienced their first correction
- -- a decline in value of more than 10% from their highs -- in more than seven
years. On October 27, the Dow Jones Industrial Average plunged 554.26 points
(the largest point decline in history, but small by percentage measures) as
fears of slowing economies in the Asia/Pacific Rim region reignited worries
about corporate earnings and the value of the domestic markets.1 However,
investors need to remember that, in times of volatility, emotions sway markets
more than fundamentals. Fears of a global recession and an international
currency meltdown were probably without warrant, and the market has already
recovered its losses.
Furthermore, the U.S. economy is still the dominant economy in the world,
and remains fundamentally sound. Granted, a slowdown in Asia/Pacific Rim
countries may reduce corporate earnings for selected multinational companies,
but it will probably not derail the expansion here at home. Continued low
interest rates, non-existent inflation, and a better-balanced equity market with
strong returns being posted across the capitalization spectrum bodes well for
the domestic economy and equity markets. Consequently, the health of the economy
and financial markets appears strong, although volatility is likely to continue.
As we approach the new year, it is a good time to re-evaluate your financial
goals. From a historical perspective, domestic equity indexes have averaged 10%
to 12% per year. When investors plan their strategies, such average results are
appropriate benchmarks -- not the 20% to 30% recently earned in financial
markets.
INVESCO Dynamics Fund
Average Annual Total Return as of 10/31/97(2)
1 year 22.00%
--------------------------------------
5 years 20.30%
--------------------------------------
10 years 18.56
--------------------------------------
INVESCO Dynamics Fund
According to independent fund analyst Lipper Analytical Services, Dynamics
Fund ranked #13 of 77 capital appreciation funds for the five-year period ended
10/31/97. Over the 10-year period, the fund was ranked #9 of 55 funds, and for
the one-year period, #117 of 203 funds.(3)
<PAGE>
Graph:
This line graph represents a comparison of the value of a $10,000
investment in the INVESCO Growth 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 2/28/95.
For the six-month period ended 10/31/97, Dynamics Fund achieved a total
return of 29.78%, dramatically outperforming the S&P 500, which had a total
return of 15.12%, and the S&P MidCap 400, with a return of 24.13%. (Of course,
past performance is a 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 10/31/97. 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)
Strategic Summary
The fund continues its disciplined approach by investing in a core group of
higher-quality, market-leading growth companies; the remaining holdings consist
of rapidly accelerating growth companies, which tend to experience higher
volatility. This strategy offers exposure to the fastest growing sectors of the
economy. Over the last six months, market leadership has passed to small- and
mid-cap stocks. As a result, the investment environment dramatically improved
for faster-growing companies which helped enhance the fund's returns in recent
months.
As mentioned in the annual report, we were intrigued about the possibilities
of the energy and communications sectors. The fund's increased emphasis on these
industry groups proved profitable as both experienced strong price appreciation
in the last six months. In the energy sector, worldwide demand continues to
increase faster than production supply. This has led to positive pricing
fundamentals for both natural gas and oil, and strong gains were achieved by
Apache Corp and Cooper Cameron. Apache Corp is an exploration and production
company with numerous recent exploration successes, while Cooper Cameron is an
international designer, manufacturer, marketer, and servicer of oil and gas
equipment, specializing in deep water exploration. We continue to favor service
companies in the energy sector.
In the communications sector, deregulation has led to increased competition
in an industry with over $100 billion in revenue potential. This has created
enormous earnings growth opportunities for selected companies. For instances,
NEXTEL Communications and CIENA Corp have significantly contributed to the
fund's performance. NEXTEL Communications is an unique wireless company that has
developed an attractive niche, and CIENA Corp makes telecommunications equipment
for long-distance fiber-optic networks.
Health care remains a significant positive focus in the portfolio. As health
care systems throughout the world continue to focus on reducing medical
expenditures, exceptional opportunities exist for companies providing products
capable of enhancing patient care while reducing long-term costs. In this
regard, Guidant Corp was a strong contributor to performance, largely due to
innovative new products to treat potentially life threatening cardiovascular
conditions. We also increased the fund's position in the financial services
sector, where our investments are skewed towards mid-cap companies with high
growth rates. We believe this sector may continue to experience consolidation,
and many of these companies may be acquired, leading to potential price
appreciation.
Looking forward, the present economic environment bodes well for growth
companies. However, the Asian currency crisis may continue to increase
volatility in the domestic market. With this in mind, we have reduced the fund's
exposure to firms that derive a significant portion of their revenue from the
Asia/Pacific Rim region. Nevertheless, holdings will remain tilted towards the
fastest-growing sectors of the economy -- health care, technology,
communications, and selected consumer growth companies.
<PAGE>
Fund Management
INVESCO Dynamics Fund is managed by INVESCO Senior Vice President Timothy
J. Miller and Thomas R. Wald. Tim received his MBA from the University of
Missouri, and a BSBA from St. Louis University. An 18-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.
Thomas R. Wald assumed responsibilities of co-manager in October 1997. He
received his MBA from The Wharton School, University of Pennsylvania, and a BA
from Tulane University. Before joining INVESCO in 1997, Tom was the senior
health care analyst at Munder Capital Management.
(1)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, while the Dow
Jones Industrial Average reflects performance of large-capitalization stocks.
The Russell 2000 is an unmanaged index indicative of smaller-capitalization
stocks, and is used in this chart because the S&P MidCap 400 has not been in
existence for 10 years.
(2)Total return assumes reinvestment of dividends and capital gain distributions
for the periods indicated. Past performance is not a guarantee of future
results. Investment return and principal value will fluctuate so that, when
redeemed, an investor's shares may be worth more or less than when purchased.
(3)Rankings provided by Lipper Analytical Services, an independent fund analyst,
are based upon total return performance unadjusted for commissions.
<PAGE>
INVESCO Capital Appreciation Funds, Inc. -- Dynamics Fund
Ten Largest Common Stock Holdings
October 31,1997
Description Value
- --------------------------------------------------------------------------------
Cooper Cameron $24,839,550
Budget Group Class A 22,872,500
Eaton Corp 22,542,613
Apache Corp 21,000,000
Bay Networks 20,556,250
Watson Pharmaceuticals 19,050,000
Elan PLC Sponsored ADR 18,703,125
Electronic Arts 18,631,250
Nabors Industries 18,506,250
Nordstrom Inc 18,375,000
Composition of holdings is subject to change.
---------------------------------------------------
INVESCO Capital Appreciation Funds, Inc. -- Dynamics Fund
Statement of Investment Securities
October 31,1997
UNAUDITED
Shares or
Principal
Description Amount Value
- --------------------------------------------------------------------------------
COMMON STOCKS 94.84%
AEROSPACE & DEFENSE 1.00%
Sundstrand Corp 200,000 $10,875,000
-------------
AUTOMOBILES 2.19%
Eaton Corp 233,300 22,542,613
Group 1 Automotive* 90,000 1,175,625
-------------
23,718,238
-------------
BANKS 3.07%
SouthTrust Corp 175,000 8,400,000
State Street 250,000 13,937,500
Summit Bancorp 255,000 10,885,312
-------------
33,222,812
-------------
BEVERAGES 1.17%
Coca-Cola Enterprises 450,000 12,656,250
-------------
BROADCASTING 1.92%
Clear Channel Communications* 150,000 9,900,000
Sinclair Broadcast Group Class A* 300,000 10,950,000
-------------
20,850,000
-------------
<PAGE>
COMMUNICATIONS -- EQUIPMENT
& MANUFACTURING 2.93%
CIENA Corp* 200,000 11,000,000
Nokia Corp Sponsored ADR
Representing A Shrs 150,000 13,237,500
PairGain Technologies* 265,000 7,486,250
-------------
31,723,750
-------------
COMPUTER RELATED 13.58%
America Online* 150,000 11,550,000
Autodesk Inc 350,000 12,950,000
Bay Networks* 650,000 20,556,250
Broderbund Software* 200,000 5,800,000
Cadence Design Systems* 85,000 4,526,250
Cisco Systems* 200,000 16,406,260
Cognos Inc* 300,000 6,862,500
Dell Computer* 125,000 10,015,625
Electronic Arts* 550,000 18,631,250
HMT Technology* 400,000 6,750,000
Microsoft Corp* 85,000 11,050,000
Parametric Technology* 275,000 12,134,375
Remedy Corp* 209,800 9,860,600
-------------
147,093,110
-------------
ELECTRICAL EQUIPMENT 1.02%
Linear Technology 175,000 11,003,125
-------------
ELECTRONICS 1.10%
Parker-Hannifin Corp 285,600 11,941,650
-------------
ELECTRONICS - SEMICONDUCTOR 2.51%
Analog Devices* 350,000 10,696,875
Maxim Integrated Products* 197,500 13,084,375
Xilinx Inc* 100,000 3,412,500
-------------
27,193,750
-------------
ENGINEERING & CONSTRUCTION 0.53%
Chicago Bridge & Iron NV New York Shrs 322,500 5,704,219
-------------
ENTERTAINMENT 0.93%
Time Warner 175,000 10,095,313
-------------
FINANCIAL 4.17%
Crestar Financial 225,000 10,645,312
Edwards (A G) Inc 252,500 8,285,156
Franklin Resources 165,000 14,829,375
Northern Trust 195,000 11,407,500
-------------
45,167,343
-------------
<PAGE>
GAMING 1.04%
Midway Games* 300,025 6,281,773
Mirage Resorts* 200,000 5,000,000
-------------
11,281,773
-------------
HEALTH CARE DRUGS - PHARMACEUTICALS 3.48%
Elan PLC Sponsored ADR* 375,000 18,703,125
Watson Pharmaceuticals* 600,000 19,050,000
-------------
37,753,125
-------------
HEALTH CARE RELATED 4.64%
Guidant Corp 275,000 15,812,500
HBO & Co 400,000 17,400,000
Stryker Corp 275,000 10,226,562
Tenet Healthcare* 222,500 6,800,156
-------------
50,239,218
-------------
INSURANCE 0.96%
Progressive Corp 100,000 10,425,000
-------------
INVESTMENT BANK/BROKER FIRM 1.30%
Lehman Brothers Holdings 300,000 14,118,750
-------------
LEISURE TIME 2.21%
International Game Technology 600,000 15,337,500
Royal Caribbean Cruises Ltd 185,000 8,590,938
-------------
23,928,438
-------------
MACHINERY 3.85%
Aeroquip-Vickers Inc 297,600 15,493,800
Case Corp 150,000 8,971,875
Cincinnati Milacron 198,900 5,519,475
Ingersoll-Rand Co 300,000 11,681,250
-------------
41,666,400
-------------
OFFICE EQUIPMENT& SUPPLIES 0.94%
US Office Products* 325,000 10,156,250
-------------
OIL & GAS RELATED 13.96%
Anadarko Petroleum 100,000 7,325,000
Apache Corp 500,000 21,000,000
Canadian Occidental Petroleum 700,000 17,937,500
Coflexip SA Sponsored ADR 250,000 13,750,000
Cooper Cameron* 343,800 24,839,550
Enserch Exploration* 1,000,000 9,000,000
Gulf Canada Resources Ltd* 1,000,000 8,375,000
NS Group* 135,000 3,611,250
<PAGE>
Nabors Industries* 450,000 18,506,250
National Energy Group* 800,000 4,350,000
Olsen (Fred) Energy ASA*^ 93,000 2,338,087
Seagull Energy* 250,000 6,109,375
Vastar Resources 350,000 14,131,250
-------------
151,273,262
-------------
POLLUTION CONTROL 1.88%
Laidlaw Inc 500,000 7,062,500
USA Waste Services* 359,375 13,296,875
-------------
20,359,375
-------------
RAILROADS 0.84%
Kansas City Southern Industries 300,000 9,150,000
-------------
REAL ESTATE INVESTMENT TRUST 0.82%
Vornado Realty Trust 200,000 8,925,000
-------------
RETAIL 6.89%
Costco Cos* 300,000 11,550,000
Home Depot 300,000 16,687,500
Meyer (Fred) Inc* 441,200 12,601,775
Nordstrom Inc 300,000 18,375,000
Tandy Corp 450,000 15,468,750
-------------
74,683,025
-------------
SAVINGS & LOAN 2.26%
Charter One Financial 241,500 14,037,188
Washington Mutual 152,000 10,402,500
-------------
24,439,688
-------------
SERVICES 6.92%
Budget Group Class A* 653,500 22,872,500
Corrections Corp of America* 325,000 9,912,500
i2 Technologies* 235,000 10,677,813
Omnicom Group 150,000 10,593,750
Robert Half International* 145,000 5,935,937
Snyder Communications* 300,000 8,850,000
WPP Group PLC 1,330,000 6,077,896
-------------
74,920,396
-------------
TELECOMMUNICATIONS -
CELLULAR & WIRELESS 1.68%
NEXTEL Communications Class A* 600,000 15,750,000
NEXTLINK Communications Class A* 110,000 2,488,750
-------------
18,238,750
-------------
<PAGE>
TELECOMMUNICATIONS -
LONG DISTANCE 2.29%
Brooks Fiber Properties* 300,000 16,762,500
ICG Communications* 350,000 8,050,000
-------------
24,812,500
-------------
TELEPHONE 2.04%
Century Telephone Enterprises 290,900 12,345,069
Intermedia Communications* 215,000 9,755,625
-------------
22,100,694
-------------
TEXTILE - APPAREL MANUFACTURING 0.72%
Warnaco Group Class A 275,000 7,768,750
-------------
TOTAL COMMON STOCKS (Cost $881,397,906) 1,027,484,954
-------------
SHORT-TERM INVESTMENTS -
COMMERCIAL PAPER 5.16%
AUTOMOBILES 2.86%
Ford Motor Credit
5.570%, 11/4/1997 30,980,000 30,980,000
-------------
CONSUMER FINANCE 2.30%
Household Finance
5.680%, 11/3/1997 24,870,000 24,870,000
-------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $55,850,000) 55,850,000
-------------
TOTAL INVESTMENT SECURITIES
AT VALUE 100.00%
(Cost $937,247,906) (Cost for
Income Tax Purposes $938,366,386) $1,083,334,954
==============
* Security is non-income producing.
^ Security is registered pursuant to Rule 144A and may be deemed to be
restricted for resale to institutional investors.
See Notes to Financial Statements
<PAGE>
INVESCO Capital Appreciation Funds, Inc. -- Dynamics Fund
Statement of Assets and Liabilities
October 31, 1997
UNAUDITED
ASSETS
Investment Securities at Value
(Cost $937,247,906) $1,083,334,954
Receivables:
Investment Securities Sold 15,766,820
Fund Shares Sold 18,639,694
Dividends and Interest 421,202
Prepaid Expenses 148,493
---------------
TOTAL ASSETS 1,118,311,163
---------------
LIABILITIES
Payables:
Custodian 1,822,340
Investment Securities Purchased 25,108,407
Fund Shares Repurchased 1,521,511
Accrued Distribution Expenses 243,675
Accrued Expenses and Other Payables 15,082
---------------
TOTAL LIABILITIES 28,711,015
---------------
Net Assets at Value $1,089,600,148
===============
NET ASSETS
Paid-in Capital* 807,495,546
Accumulated Undistributed Net
Investment Loss (2,086,702)
Accumulated Undistributed Net
Realized Gain on Investment
Securities and Foreign Currency
Transactions 138,104,091
Net Appreciation of Investment
Securities and Foreign Currency
Transactions 146,087,213
---------------
Net Assets at Value $1,089,600,148
===============
Net Asset Value, Offering and
Redemption Price per Share $15.60
=======
* The Fund has 100 million authorized shares of common stock, par value of $0.01
per share, of which 69,844,456 were outstanding at October 31, 1997.
See Notes to Financial Statements
<PAGE>
INVESCO Capital Appreciation Funds, Inc. -- Dynamics Fund
Statement of Operations
Six Months Ended October 31, 1997
UNAUDITED
INVESTMENT INCOME
INCOME
Dividends $2,536,539
Interest 918,676
Foreign Taxes Withheld (61,815)
---------------
TOTAL INCOME 3,393,400
---------------
EXPENSES
Investment Advisory Fees 2,756,491
Distribution Expenses 1,245,916
Transfer Agent Fees 1,058,226
Administrative Fees 79,755
Custodian Fees and Expenses 100,227
Directors' Fees and Expenses 35,354
Professional Fees and Expenses 36,702
Registration Fees and Expenses 81,353
Reports to Shareholders 92,090
Other Expenses 32,115
---------------
TOTAL EXPENSES 5,518,229
Fees and Expenses Paid Indirectly (47,292)
---------------
NET EXPENSES 5,470,937
---------------
NET INVESTMENT LOSS (2,077,537)
---------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENT SECURITIES
Net Realized Gain on Investment
Securities and Foreign Currency
Transactions 106,359,524
Change in Net Appreciation of
Investment Securities and Foreign
Currency Transactions 129,176,393
---------------
NET GAIN ON INVESTMENT SECURITIES 235,535,917
---------------
Net Increase in Net Assets
from Operations $233,458,380
===============
See Notes to Financial Statements
<PAGE>
INVESCO Capital Appreciation Funds, Inc. -- Dynamics Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
October 31 April 30
------------ ------------
1997 1997
UNAUDITED
<S> <C> <C>
OPERATIONS
Net Investment Loss $(2,077,537) $(2,464,148)
Net Realized Gain on Investment
Securities and Foreign Currency
Transactions 106,359,524 40,252,470
Change in Net Appreciation
(Depreciation) of Investment
Securities and Foreign Currency
Transactions 129,176,393 (65,105,461)
------------ ------------
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS 233,458,380 (27,317,139)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM NET REALIZED GAIN ON
INVESTMENT SECURITIES 0 (80,828,360)
------------ ------------
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 663,664,226 822,575,123
Reinvestment of Distributions 0 78,801,267
------------ ------------
663,664,226 901,376,390
------------ ------------
Amounts Paid for Repurchases
of Shares (569,918,077) (809,251,030)
------------ ------------
NET INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 93,746,149 92,125,360
------------ ------------
Total Increase (Decrease)
in Net Assets 327,204,529 (16,020,139)
NET ASSETS
Beginning of Period 762,395,619 778,415,758
------------ ------------
<PAGE>
End of Period (Including
Accumulated Undistributed Net
Investment Loss of $2,086,702
and $9,165, respectively) $1,089,600,148 $762,395,619
============== ============
FUND SHARE TRANSACTIONS
Shares Sold 45,129,161 61,735,689
Shares Issued from Reinvestment
of Distributions 0 6,127,628
------------ ------------
45,129,161 67,863,317
Shares Repurchased (38,697,384) (61,637,091)
------------ ------------
Net Increase in Fund Shares 6,431,777 6,226,226
============ ============
See Notes to Financial Statements
</TABLE>
<PAGE>
INVESCO Capital Appreciation Funds, Inc. - Dynamics Fund
Notes to Financial Statements
UNAUDITED
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Capital
Appreciation Funds, Inc. is incorporated in Maryland and presently consists of
Dynamics Fund (the "Fund"). 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 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.
Assets and liabilities initially expressed in terms of foreign
currencies 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 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,
original issue discount and amortized premiums, 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.
<PAGE>
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
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.
To the extent future capital gains are offset by capital loss
carryovers, such gains will not be distributed to shareholders.
Dividends paid by the Fund from net investment income and distributions
of net realized short-term capital gains are, for federal income tax
purposes, taxable as ordinary income to shareholders.
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.
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, Transfer
Agent Fees 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 six months ended October 31, 1997, Fees and Expenses Paid
Indirectly consisted of $46,839 included in Custodian Fees and Expenses and
$453 included in Transfer Agent Fees, 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.
<PAGE>
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
compensation of marketing and advertising expenditures to IFG (the
"Distributor") to a maximum of 0.25% of annual average net assets. For the six
months ended October 31, 1997, the Fund paid the Distributor $1,155,268 under
the plan of distribution. Effective September 29, 1997, INVESCO Distributors,
Inc., a wholly owned subsidiary of IFG, replaced IFG as Distributor.
NOTE 3 - PURCHASES AND SALES OF INVESTMENT SECURITIES. For the six months
ended October 31, 1997, the aggregate cost of purchases and proceeds from sales
of investment securities (excluding all U.S. Government securities and
short-term securities) were $1,027,008,039 and $936,703,032, respectively.
There were no purchases or sales of U.S. Government securities.
NOTE 4 - APPRECIATION AND DEPRECIATION. At October 31, 1997, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $158,055,321 and the gross depreciation of securities in which there
was an excess of tax cost over value amounted to $13,086,753, resulting in net
appreciation of $144,968,568.
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 equal to 40% of the retainer fee at the time of
retirement.
Pension expenses for the six months ended October 31, 1997, included in
Directors' Fees and Expenses in the Statement of Operations were $4,779.
Unfunded accrued pension costs of $20,784 and pension liability of $46,901 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 October 31, 1997, there were no such borrowings.
<PAGE>
INVESCO Capital Appreciation Funds, Inc. -- Dynamics Fund
Financial Highlights
(For a Fund Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
Six Months
Ended
October 31 Year Ended April 30
------------ ------------------------------------------------------
1997 1997 1996 1995 1994 1993
UNAUDITED
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value - Beginning of Period $12.02 $13.61 $11.38 $10.15 $10.89 $9.57
------ ------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.03) (0.04) 0.02 0.03 (0.02) (0.03)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 3.61 (0.19) 3.94 1.34 1.99 1.64
------- ------------------------------------------------------
Total from Investment Operations 3.58 (0.23) 3.96 1.37 1.97 1.61
------ ------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income+ 0.00 0.00 0.02 0.03 0.00 0.00
Distributions from Capital Gains 0.00 1.36 1.71 0.11 2.71 0.29
------ ------------------------------------------------------
Total Distributions 0.00 1.36 1.73 0.14 2.71 0.29
------ ------------------------------------------------------
Net Asset Value - End of Period $15.60 $12.02 $13.61 $11.38 $10.15 $10.89
====== ======================================================
TOTAL RETURN 29.78%* (2.34%) 36.32% 13.57% 17.86% 16.80%
RATIOS
Net Assets - End of Period
($000 Omitted) $1,089,600 $762,396 $778,416 $421,600 $287,293 $231,100
Ratio of Expenses to Average
Net Assets# 0.56%*@ 1.16%@ 1.14%@ 1.20% 1.17% 1.20%
Ratio of Net Investment Income
(Loss) to Average Net Assets# (0.21%)* (0.31%) 0.16% 0.33% (0.37%) (0.38%)
Portfolio Turnover Rate 100%* 204% 196% 176% 169% 144%
<PAGE>
Average Commission Rate Paid^^ $0.0797* $0.0784 - - - -
+ Distributions in excess of net investment income for the year ended April 30,
1996, aggregated less than $0.01 on a per share basis.
* Based on operations for the period shown and, accordingly, are not
representative of a full year.
# 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.
</TABLE>
<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 Value 74 IDSCX DivSmCo
Small Capital 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>
INVESCO FUNDS
INVESCO Distributors, Inc. (SM)
Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
1-800-525-8085
PAL (R): 1-800-424-8085
http://www.invesco.com
In Denver, visit one of our
convenient Investor Centers:
Cherry Creek,
155-B Fillmore Street
Denver Tech Center,
7800 East Union Avenue,
Lobby Level
This information must be
preceded or accompanied
by a current prospectus.
